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Equally, we would not be entirely confident that a comparison of present landed prices was an accurate guide to future performance, particulary as we note that this part of the survey does not cover cotton garments.
5. In paragraph 7 of your Saving Despatch you set out your reasons for believing that a postponement of the introduction of the tariff would be justified. Before replying to the points you make, I feel bound to say that whilst we remained mindful of Hong Kong's trading interests in the considerations leading up to the tariff decision, we had also to give due weight to our other legitimate interests, in particular those of the UK domestic cotton textile industry. One of the chief conclusions of the Report of the Textile Council published in March 1969 was that the existing system of quantitative restrictions had failed to provide a frame- work of stable and predictable conditions in the UK market within which the UK industry could operate and plan confidently for the future. We know of no changed circumstance which has invalidated this central and widely accepted finding and we cannot therefore view favourably suggestions that the existing system of quota restrictions should be extended beyond the end of this year. deciding to rely thereafter solely on the proaction afforded by a moderate tariff, HMG believed and still believes that it will be pursuing a policy which is basically more liberal and more in the interests of the developing countries among our suppliers than our present system combining both a quota and (for some) a tariff restriction. The tariff that we are imposing will still incorporate some element of Commonwealth Preference, and, with the removal of categorised quota ceilings, we believe that developing countries, and in particular one with the competitive enterprise of Hong Kong, will enjoy greater opportunities for diversification of their trade in textiles with this country. As you know, sections of our own industry are claiming that the substitution of tariffs for quotas will leave them with too little protection.
In
4.
In (a) and (b) of your paragraph 7 you make the point that much of the time since the announcement was made in mid-1969 has been taken up by the completion of the survey and that an insufficient interval now remains for the necessary adjustment by the Hong Kong industry to be carried out without severe disruption. We were and are equally concerned, of course, that our own industry should bring about the necessary changes in its operations as smoothly and rapidly as possible in order to meet the changed conditions of trade effectively. But the early announcement of the date of the change in policy was intended to stimulate our own industry into rationalising its operations and those firms which have increased their rate of re-equipment and other investments on the strength of the impending change in import policy may reasonably expect to derive some advantage over any of their competitors which have not. A postponement of the change would reintroduce uncertainties about future policy on cotton textiles which the 1969 announcement was
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