4. In his saving despatch No. 237 of 24 February 1970 the Governor stated that an Advisory Committee had been set up by the Hong Kong Textiles Advisory Board to assess the likely effects of the imposition of the tariff on Hong Kong's cotton textiles exports to Britain. This Committee has now reported and, as the result of the survey it carried out on manufacturers and exporters in Hong Kong covering 416 companies, it found that some 27,000 workers in 294 of these companies manufacture textiles for the United Kingdom market. In view of the reduction in profit margins occasioned by imports from Hong Kong having to pay the import duty, it is estimated by the Committee that, while the cotton spinning sector could continue to export yarn to Britain at a profit of about 21% on cost, the cotton weaving, made-ups and woven garments sectors could only sell at under cost and would therefore lose the trade with Britain altogether, with an adverse effect on employment in Hong Kong.
5. Hong Kong also believe that if Britain joins the EEC, the Community will insist on the application of the Common Commercial Policy on cotton textiles which will involve quota restrictions and that it may well be that Britain will find it necessary to impose new quota restrictions as well as the tariff before the EEC's Common Commercial Policy is applied. Hong Kong therefore would like to have the implementation of the tariff postponed until the outcome of Britain's application to join the EEC is known.
6. The Hong Kong Government officials were told at the consul- tations in November 1970 that the present Government had reaffirmed the previous Government's policy and it also accepted the imple- mentation date of 1 January 1972 for the tariff on cotton textiles. It is unlikely that any change in this decision could be made to assist Hong Kong, especially as the tariff affects also imports from other Commonwealth countries who would naturally expect any delay in imposition of the tariff to be applied to them also.
14 January 1971
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G F Kinnear
Hong Kong Department