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BOARD OF TRADE JOURNAL ·
30 JULY 1969-*
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Tariff on imports of cotton textiles from Commonwealth to replace
quotas in 1972
IN THE HOUSE OF COMMONS on July 22, Mr. Anthony Crosland, President of the Board of Trade, made the following statement:
'The Government have now completed their examination of the Textile Council's Report on Cotton and Allied Textiles.
'The report addressed a number of recommendations to both the Government and the industry, and these have been the subject of continuing consultations with the council.
'The recommendations to the industry concerned in particular the need to increase the rate of re-equipment, to extend multi-shift working, and to develop closer technical and commercial links be- tween the different stages of production and marketing. I attach great importance to these three requirements, and I am working closely with the Textile Council on their implementation.
"The main recommendations to the Government concerned future policy on imports and financial assistance to equipment.
encourage
re-
I turn to the question of financial assistance to the industry. The Textile Council proposed that firms in the traditional textile i areas should be offered the 40 per cent rate of investment grant which is payable in the development areas. The Government have: decided against this both on general grounds of regional policy and because in present circumstances, including in particular the! position on public expenditure, we would not be justified in singling out this industry for financial assistance on such a scale.
'The council also proposed that plant worked on a multi-shift basis should qualify for a higher than normal annual allowance for depreciation. The Government attach importance to any pro- posal which might increase the ultilization of new machinery, and they are prepared to consider an application by the Textile Council for an increase in the depreciation allowances.on textile machinery......
In addition, the two consultants whom I have appointed to advise me on mergers between medium and small sized firms in the industry are in close touch with the IRC. They have seen more than 70 firms, and enough progress has been made to enable the IRC to begin discussions on prospective mergers.
'The proposal to replace quotas by a tariff forms an essential part of a developing policy designed to help this industry to survive and compete in an international environment. I have already announced decisions on the structure of the industry which should give the large firms the stability they need to proceed with their
'On import policy, the council recommended that the present quota system should be replaced by a tariff on imports of cotton textiles from the Commonwealth preference area at a rate not less than 85 per cent of the most-favoured-nation duties. Of cotton cloth, the main item of trade, this would mean a duty of 15 per cent. The council believe that a tariff would be a better solution both for the industry and the country than a continuation of quotas. It would offer a margin of protection that was both stable and predictable, so enabling the industry to plan ahead with con-internal reorganization and integration, while encouraging a much- fidence. A continuation of quotas, on the other hand, would not give the industry the confidence or the incentive to undertake the investment needed to make it more competitive.
'Imports of cotton textiles into Britain, the greater part of which enter duty-free, have now reached 53 per cent of total domestic consumption. This is a far higher proportion than in any other major developed country. In these circumstances we have the alter- native of re-negotiating the present unsatisfactory quota arrange- ments, or adopting a tariff which would be broadly in line with those of other developed countries. The Government have decided that the right course is to introduce, as from January 1, 1972 a tariff on imports from the Commonwealth preference area on the Mines proposed by the Textile Council. From that date the existing general quota system would be terminated; and the Government would consider the use of quotas only on particular products under the Long Term Cotton Arrangement of the GATT, and only if total imports of cotton textiles rose significantly above the present level and caused disruption to the market in those particular products. These decisions would, of course, be subject to any modifications that might be required if we joined the EEC. 'In reaching this decision I have taken account of the fact that a number of countries in the Commonwealth have rights to duty-free entry into the United Kingdom market; and I shall now initiate the necessary discussions with the Governments concerned. I am equally conscious. on the other hand, that cotton textiles have long been treated internationally as a special case; and this decision will not create a precedent for further departures from our tradi- tional policy on Commonwealth trade in advance of any general change of system which may be required by our entry into the EEC.
"The effect of the new arrangement should be to reduce imports from the developed countries which have benefited markedly from the existence of quota restrictions on imports from the develop- ing countries. There is no reason to think that, with the possible exception of India, the developing countries of the Commonwealth generally will be able to export less to Britain over a tariff of this amount than they would under a continuation of the quota system. So far as India is concerned, the Government will, when the time comes to determine the level of aid to India after 1972, take into account, against the background of India's general aid requirements at that time, any adverse effects on her exports arising from the tariff:
needed process of amalgamation amongst the small and medium firms. Today's decisions carry the policy a crucial stage further. Successive Governments have failed to come to grips with the industry's basic problems; and the industry itself has failed to adapt sufficiently to changing circumstances. I hope that the de- cisions that I have announced, provided they are accompanied by a clear determination on the part of both sides of the industry, to carry out the changes recommended by the Textile Council, will enable the Lancashire textile industry once again to take its place in the forefront of British industry.'
Notes:
Quotas were imposed on imports of cotton textiles from the developing countries (India, Hong Kong, and the global countries) for the five-year period ending on December 31. 1970. The quotas are based on average imports in the three years 1962-64 and in- crease by 1 per cent per annum. India and Hong Kong have separ- ate bilateral quotas: the global quota covers all other countries except Japan and Eastern Area countries (whose colton textile exports are limited under the respective trade agreements), EEC, EFTA, North America and Australasia.
In 1968, United Kingdom imports of -cotton textiles from all sources supplied 53 per cent of consumption in this country; im- ports from restricted countries supplied 34 per cent. These propor- tions are much higher than in other major developed countries. 59 per cent of all imports, and 93 per cent of imports from restricted countries, entered duty-free from the Commonwealth.
The most-favoured-nation duties on cotton textiles are 7 per cent on yarn, 17 per cent on cloth, and 20 per cent on most garments. These rates will not be reduced under the Kennedy Round. Imports from the Commonwealth preference area (which includes South Africa, Burma and the Trucial States) EFTA and the Irish Republic are admitted free of duty.
The proposed rates for the Commonwealth preference area. to come into effect on January 1, 1972, are approximately 64 per cent on yarn, 15 per cent on cloth and 17 per cent on most garments. This is 85 per cent of the mfn rate. The margin of Commonwealth preference on cotton textiles would then be the same as on man- made fibre textiles. The Government will be discussing the proposal with the countries concerned in the Commonwealth preference area, some of whom have contractual rights to duty-free, entry into
20 AUGINA
HIK6/548/8