CONFIDENTIAL
or import restrictions and/or voluntary restraint on the part of
the Hong Kong industries concerned. They have alleged that Hong
Kong, by the low cost at which she can supply, is disrupting their
markets. Much of the pressure for restriction on Hong Kong's
exports arises from an exaggerated fear of the threat posed by Hong
Kong. There is a limit to what a community of less than four million
people can produce. Wages have risen rapidly in recent years
(by 41% over 1965-68) and already Hong Kong textile exporters are
mecting stiff price competition from industries in other less
developed countries, e.g. Korea, the Philippines, in which wages are
lower, as well as those in developed countries which have introduced
new and more efficient methods of producing cloth. To a large
extent the expansion in Hong Kong trade in recent years has been achieved by "trading up" (i,e. producing higher quality goods).
19. The first field in which this pressure developed was in cotton
textiles and in consequence, exports of such producis to the U.
S.,
Canada, Norway, Federal Republic of Germany, France, Sweden, Benelux
countries and Australia, are restricted by agreements negotiated
under the provisions of the GATT Long-Term Cotton Textiles Arrange-
ment. Voluntary restraint arrangements on exports of cotton
textiles to Britain have been in force since 1959. These are
governed by quantitative restrictions under a document called "The
Heads of Agreement", negotiated in 1966.
20.
Resistance to Hong Kong's developing exports of other products
is also beginning to grow. This has taken the form of negotiated
restraints on the exports of certain items e.g. woollen outer wear
by Australia and synthetic fibres by Canada, Norway and Sweden, or
the imposition of "anti-dumping" duties and similar restrictive measures by a number of countries, (e.g. Austria) despite the fact
that, because of its free competitive market, Hong Kong cannot be
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