Reference..
with
Flag A
Mr Laird
In Kinneen
We spoke EX. 13.
UK TEXTILE POLICY - Hong Kong.
1.
During the third session of consultations with Hong Kong Government officials on 24 November 1970 the Governor raised the question of the application of the new tariff on imports of Commonwealth cotton textiles in the UK which is due to be implemented with effect from 1 January 1971 and he asked whether some decalage in regard to the implementation could be arranged.
It was agreed that consultations would be held with Hong Kong Government officials if they requested this and the Gover- nor has now asked for this in his saving despatch no 28 of 8 January.
2.
The Governor suggests consultations might be held in London in either late January or early February.
3. The items which he wishes to discuss are listed by the Governor in paragraph 2 of his saving despatch.
4.
The results of the investigation by the Hong Kong Textiles Advisory Board to assess the likely effects of the tariff on Hong Kong's cotton textile exports to Britain, which was referred to in Hong Kong Saving despatch 273 of 24 February 1970,show that some 27,000 workers are employed in factories producing cotton textiles for Britain and, as the result of the imposition of import duty by Britain, the profit margins on the goods produced by them would be either much reduced or else disappear altogether, the assumption being that the factories would havetto close down with resultant unemployment. According to the Advisory Committee, average profit margins in 1968 were over 10% for yarns, down to around 5% for finished piece goods and the application of the tariff would, according to the Committee, result in the spinning sector continuing to make a slight profit while the remainder could only continue at a loss. These profit figures seem surprisingly low.
5. The Governor considers that it would be in the interests of both Britain and Hong Kong if the implemen- tation of the 1972 tariff were postponed until the out- come of Britain's application to join the EEC is known. In view of the difficulties which have been experienced with India andI Pakistan over the imposition of the tariff, it seems most unlikely that DTI could agree to exempt Hong Kong unilaterally from the effects of the tariff and as appeared from what Mr Carey said during consul- tations with Hong Kong Government officials, it seems unlikely that Hong Kong's request will be agreed to.
6. I propose to send copies of the Hong Kong saving despatch to Mr Ridley and Mr Gray in Chemicals and Textiles Division and CRE2 in DTI and to Sloman in Commodities Department of FCO to enable them to study th Hong Kong's proposal.
7. Mr Bottomley will be away from the office on his