CONFIDENTIAL
2
•Langer
• Langse than Congerland & Denmark?
?
cost structure. Our position differs from that for example of the United Kingdom in that even in the short term the cost of our industrial products can never rise aboye competitive levels abroad, for we have virtually no home market; while, if we can ensure full employment and the pressure it brings on the labour supply, we can keep our export prices at optimum level.
6.
The rapid improvement in wages and other labour conditions in recent years has indeed largely been the consequence of success in the export field. The most effective safeguard of, and stimulant of improvements in, these conditions has been and remains full employment in the context of rapid export-led growth. This is true not only of freely bargained conditions but also of much of our labour legislation itself; for it is the rapidly rising trend of wages which has made it possible to introduce statutory non-wage benefits without labour realising too acutely the depressing effect of these on cash wages, both as a consequence of additional costs of production and of physical production foregone.
7.
On the other hand, an increase in the proportion of non- wage benefits (particularly statutory benefits) to cash wages reduces the flexibility of our cost structure in the face of any worsening of our competitive position, such as the growth of com- petition from low-wage countries like Korea and Taiwan or the imposition by the United Kingdom in 1972 of tariffs on cotton textiles. It must be confessed, however, that employees are now beginning to evince to some limited extent a preference for leisure over gainful employment. This is of course a welcome development, both in itself and as evidence that labour now believes that it can afford this, so long at least as it does not create illusions about the basis of our present relative prosperity.
8.
It would be interesting to learn whether you would assess the trade unionists' views as stemming from ignorance of the economic realities in Hong Kong or from self-interest.
9.
Non-Communist Trade Unions. The suggestion that the Hong Kong Government should do more to encourage the growth of non- Communist trade unions is frequently made but it is not, in my view, one which, if adopted, would offer any prospect of success. As Lord Shepherd has rightly said the initiative must come from the trade unions themselves (I assume he was referring to Hong Kong unions), and not from the United Kingdom Government or the Hong Kong Government. Existing legislation does nothing to inhibit the formation of larger and more powerful trade unions by amalgamation or the formation of federations of trade unions within any given trade or industry. There has only been one case of amalgamation between unions to date and no federations within the same trade or
CONFIDENTIAL