CONFIDENTIAL
There
could lead to deliveries during the remainder of this year. will therefore be no immediate effect on the supply position in the UK market, but next year, when home production will increase but demand will almost certainly slacken, the restraints will act as effective and necessary safeguards against disruption
G.
The restraint arrangements we concluded last year covered the period up to 1976 so as to establish a climate in which UK firms could expand production capacity and improve their competitiveness. Delivery delays on new plant are long (up to 3 years for weaving machines) so that most expansion plans still remain to be realised. UK production in 1973 is expected to be about 25 per cent higher than last year but this is mainly the result of better use of existing capacity rather than new investment. Courtaulds have announced their intention of setting up new plant in N Ireland and North West England to produce an additional 50-60 sq yd of polyester/cotton and polyester/viscose fabrics, with the prospect of a further large new plant in W Cumberland. Other companies are making smaller but significent additions to their capacity. It is not too late for firms to revise their plans and cancel projects if they concluded that imports from sources which have been brought under restraint were simply being replace by shipments from other developing countries. lieanwhile, import penetration from all sources of the UK polyester/cotton market has reached the level of 80 per cent.
10.
Further restraints should not have any significant short-term effect on prices. The high level of demand in other markets, coupled with price restraints in the UK, have led to the situation where for the present UK cloth is comparably priced or even a littl cheaper than imported cloth. While import prices will probably case to some extent with the slackening; of world demand, the continuing high cost of raw fibre will prevent this effect from being marked. Thus, it is unlikely that introducing now but relatively minor restrictions on cloth supplies to the UK will cause UK prices to get appreciably out of line with world prices.
Consultations with the EEO
11. There is at present no common policy on imports of polyester/ cotton textiles into the Community and we are free to take
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