CONFIDENTIAL
her trade, possibly with trade in fabrics decreasing but that
in garments and made-ups increasing.
Hong Kong's Reactions to the Prospect of a Tariff on
Cotton Textiles from the Commonwealth Preference Area (CPA)
5. Although Hong Kong has taken every opportunity to express
its opposition to the introduction of a duty on C.P.A. cotton
textiles, we expect, see paragraph 4 above, that it will maintain
or even increase its exports to Britain. The abandonment of the
categorised quotas will enable Hong Kong increasingly to con-
centrate on garments and other nade-ups, rather than on the
less profitable cloths. The making-up industry is, and is
likely to remain labour-intensive where the low-cost producers
will maintain their advantage over the developed countries.
6. Hong Kong has recently taken the line that it makes no sense
for the United Kingdom to proceed with the implementation of the
tariff decision, now that our entry into the Common Market seems
more assured than it did a year ago. From Hong Kong's point of
view, the decision neant in effect that the common external
tariff was being introduced as much as 7 years earlier than
necessary, without decalage. We are told that an assessment of
the effect of the tariff on Hong Kong (which the Governor originally hoped to forward to us last March) is being considered by the
Hong Kong Textile Advisory Board. The Assessment is said to
show that exporters are now more doubtful about their ability to
compete over the tariff than they had been at first. But
contradictorily, Hong Kong has also hinted that from the
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CONFIDENTIAL