*
aris: Year of Decision
By Malcolm Subhan
HE evolution of Hongkong's exports to Western Europe
Tw volation of to Western
for this year. The first is the implementation by the indus- trialised countries of their offers to set up a system of gener alised preferences, the second the ending of the negotiations over Britain's entry into the EEC.
Just what effect these developments will have is still un- clear: the industrialised countries have not yet decided which developing countries are entitled to duty free entry under the new preferential arrangements, nor have the British negotia- tors in Brussels found a solution to the problem represented by Hongkong. It is already clear, however, that Britain will have to begin applying on entry the common external tariff on imports from the commonwealth, even while eliminating tariffs on imports from other Common Market countries. Of course it can be argued that the importance of common- wealth preferences will be sharply reduced from next Jan- uary anyway, when Britain imposes customs duties on all 'imported textiles, whatever their origin; but the fact remains that even after the loss of duty free entry for textiles the British market will be more accessible to Hongkong's ex- porters than the European.
Entry into the EEC will change all this, however. As re- gards cotton textiles, for example, the Six will almost cer- tainly insist that the UK follow their example and impose quotas on imports from Hongkong (and other Asian mem- bers of the commonwealth). Membership in fact will mean that the British will have to align their import policy to that of the Six, especially on products considered "sensitive" by ¡the latter.
To safeguard Hongkong's export interests (and to get the Six to share part of the burden) the British at first proposed that the crown colony be granted associated status under Part IV of the Rome Treaty along with the UK's other de- pendent territories. When the Six turned this down, the Bri- tish proposed that Hongkong be included in the EEC's offer on generalised preferences.
The Six's initial reaction was negative. They take the view that Hongkong, far from being a developing territory, is a highly industrialised one and extremely competitive to boot. This is borne out by trade statistics; as the accompanying table shows, there has been a sharp rise in exports to the EEC, despite the licensing and other restraints imposed by some member governments. While Hongkong's export of cot- ton fabrics and bed-linen have not done well in recent years, the picture is very different for a wide range of other manu- factured products (the selected imports table illustrates this).
In the last two months or so the Six have begun to have second thoughts about the British proposal to include Hong- kong in their scheme of generalised preferences. A report prepared by officials from the member governments and the commission has suggested that Hongkong be included among the beneficiary countries - except for textiles and shoes. For other sensitive products, the experts feel duty free imports from the colony should be limited to a 'relatively small proportion of the total imports under the preferential scheme.
REBIVED IN
REGISTRY Nɔ.51
HKK6);
107
ceilings calculated for each product. However, to give the less competitive developing countries a chance, the Six have re- stricted imports from any one country to a fixed proportion of each ceiling. For most products the cut-off point has been fixed at 50%, but it could be reduced in the case of products for which Hongkong is felt to be exceptionally competitive and this in fact is the solution favoured by the commission's experts.
This change in the Six's attitude is dictated not by a desire to encourage imports from Hongkong, but a fear that if both the US and Japan restrict their imports from the colony the latter will concentrate its efforts on the com- munity market. The Six obviously hope that an offer to include Hongkong among the beneficiaries of their own scheme will encourage the Americans and Japanese to follow suit.
if
If the member governments, therefore, accept the sugges tion of their officials and include Hongkong in the preferen-, tial system it clearly will be on condition that the other industrialised countries do likewise. But so far the indus- trialised OECD countries have been unable to agree on just which developing countries should benefit from the various schemes to be set up under the aegis of UNCTAD. Inevitably, there are differences of opinion on the desirability of includ- ! ing Hongkong, although the Americans appear to have in-
FAXODO-
800
TOTAL
USA
BRITAIN
WEST GERMANY
lus
JAPAN
AUSTRALIA
CANADA
65/66
€66/67
67/68
68/69
69/70
Major markets for Hongkong exports for financial years 1965-66 to
1969-70. Source: Hongkong Trade Development Council.
There are a number of ways this could be done. Under the community's scheme, imports are limited by means of
KAR EASTERN ECONOMIC REVIEW: HONGKONG THE EXPORTER **
JANUARY-23;*1971*
Page 60Page 61