Hong Kong and the Generalized Preferences Schemo
(1)
Hong Kong having no resources, is totally dependent on its earnings of foreign exchange, Exports constituto virtually its whole economy, and are still insufficient to pay for its imports. So it is uniquely vulnerable to any barrier that would discriminate against its exports.
(2)
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If Hong Kong is excluded from the Generalized Preferences scheme by the United States, the E.E.C and other donor countries, (and if its close competitors are included,) the economic effects will predictably be as follows:
(i) An inmediate loss of exports, to all Hong Kong's major markets, of the many products in which other developing countries are already so competitive that a tariff difference would put Hong Kong at a disadvantage. This could even affect exports of those Hong Kong products (e.g. radio receiving sets) which would at present not be eligible for tariff preference under the origin rules, if similar products of Hong Kong's competitors were or became eligible for preference.
(11) It would be difficult or impossible for Hong Kong to develop exports in new product lines i.e. to diversify its industry, as it is frequently exhorted to do if these faced a discriminatory tariff barrier,
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(111) Many manufacturers in Hong Kong, both foreign and indigenous,
would find it expedient to transfer their capital and activities to neighbouring countries enjoying a tariff advantage. (These countries already enjoy many natural advantages over Hong Kong, such as availability and cheapness of both land and labour.) This would cause further drop in Hong Kong's exports.
3.
It is perhaps not fully realised that many of the exports of tong Kong's competitors are already growing at a far higher rate than Hong Kong's, which suggests that they are competing favourably even without a tariff advantage. For example, the following figures show increases between 1967 and 1969 of exports to the U.5. of certain products:
Radio sets: Hong Kong 150%, Korea 300%
Transistors and semi-conductors: Hong Kong 70%, Taiwan 220%, Korea 500%, Mexico 580%
Wigs Hong Kong 90%, Korea 150%
Dolls and Toys: Hong Kong 70%, Taiwan 315%, Mexico 1300%
4.
It is not possible to estimate the quantitative effect undar (11) and (iii) of paragraph 2 above, And it is difficult
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