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While Mr Davies' strong statement in Brussels in November 1973 is appreciated, nevertheless HMG does not intend to do anything to remove discrimination against us in 1974. We note however that the UK has agreed to the inclusion in 1974 of new countries into the EEC's generalised system of preferences for textiles: why not Hong Kong as well?
We have been told that HMG will 'press resolutely' for inclusion of HK textiles in the GSP in 1975 which is all very well but facts are facts and we would like to ask what is to happen if that attempt fails? Will HMG 'press resolutely' again for inclusion in 1976? And what is to happen in the 'meanwhile? And if this too fails?
We think that HMG has failed to understand the full economic repercussions likely to be felt in HK, besides the loss of confidence which is already being expressed about HMG's ability to protect our interests, which is not limited only to this sector of our economy.
Our main fear is the permanent diversion of trade from HK. The petition which was sent to the Secretary of State made clear that over the past two years, orders for textiles and footwear were being diverted from HK to the sixteen suppliers with duty free access to the markets of the EEC. This process is accelerating and, if nothing is done, will continue throughout 1974. What is perhaps not fully understood is that even if the discrimination against HK is removed in 1975, it will, in practice, continue to apply. This is because in the textile, industry we book orders some nine months ahead of delivery dates to allow us, in turn, to order our raw materials and to manu- facture the goods. Since the annual review of the EEC GSP is not held until late in the year, buyers will not know whether or not HK textiles will be granted duty free entry, at the time they place their orders. They will continue therefore to turn to our competitors for supplies. This means, assuming we do get GSP treatment in 1975, that we will not be on a truly equal footing with our competitors until 1976. By this time orders will have been diverted for some 4 years, and new trading links established with our competitors will have been consolidated. We will thus have a very difficult job to recapture our customers after this time lapse, who will also be able to turn to alternative developed country suppliers in Europe for their needs since these too will have virtually duty free and unlimited entry into the EEC through the various trade agreements which have recently been signed.
We are particularly alarmed that this discrimination against HK by the UK and EEC has already been followed by some other countries and could lead to further such discriminatory measures against HK. A very unfavourable and dangerous precedent has been set, one which could well have wider repercussions elsewhere unless quickly redressed.
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