DRAFT
HONG KONG'S REACTIONS TO THE PROSPECT OF A TARIFF ON C.P.A. COTTON TEXTILES
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Although Hong Kong has taken every opportunity to express its
opposition to the introduction of a duty on C.P.A. cotton
textiles, our expectation is, as mentioned in paragraph 4 above,
that she will maintain or even increase her exports to the
United Kingdom. The abandonment of the categorised quotas
will enable her to concentrate increasingly on garments and
th
other made-ups,, rather than the less profitable cloth s
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Making up in, and is likely to remain, a labour-intensive
industry where the low-cost producers will maintain their
advantage over the developed countries.
Hong Kong has recently taken the line that it makes no sense
for the UK to press ahead with the implementation of the tariff
decision, now that our entry into the Common Market seems so
much more of a certainty than it did a year ago. From Hong Kong's
point of view, the decision meant in effect that the common
as my in they suggested) os
$17
external tariff was being introduced 17 years earlier than
necessary, and without declage. 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; and it is
said to show that exporters are now much 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 beginning of 1972, Hong Kong, Taiwan and South Korea
would flood this market at unprofitable prices if necessary
on a consignment basis to build up performance against the
possible re-introduction of quotas (whether or not the UK
went into the EEC). Hong Kong representatives are therefore
likely to argue that, bearing all these factors in mind,
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it would be in everyone's interest to postpone the introduction
of the tariff, implementing it only if and when it became
clear that the UK was not going to get into the Common Kurkel,