CONFIDENTIAL
in 1957, who were associated under Part 4 of the Treaty of
Rome, Hong Kong will be treated by the enlarged Community as
an outside country and have to face the full Common External
Tariff on her exports. In the United Kingdom market, she
will lose very little on man-made fibre textiles where there
is already a UK tariff, nor on cotton textiles since we
shall have replaced our duty-free quotas controls with a
simple tariff in January 1972. On her other trade, however,
she will not only lose duty-free entry into the UK but will
also lose preference against all her foreign competitors
and face a preference against her in favour of Western
European suppliers. However, we do not regard this as
likely to have any serious effect on the volume of Hong
Kong's exports to Britain, though it will reduce the prices
they can charge and hence the profitability of their
industries.
D.
The Generalised Preferences Scheme
14. Though we are making representations to the United States
and the EEC for the inclusion of Hong Kong as a beneficiary
of the UNCTAD Generalised Preferences Scheme, and this would
follow from the principle of "self-election" agreed in OECD
some time ago, we have little hope that our representations
will be successful. As stated above, Hong Kong is
sufficiently competitive not to need preferential free entry
for her manufactured goods. What is more disturbing is
that the benefit of the scheme is likely to be extended
to her main competitors, Taiwan and South Korea. This
competition will be limited to the extent that the exports
of Taiwan and Korea which compete with those of Hong Kong
are on the EEC sensitive list and are limited by small
/duty