Mr LWR Mills
Commerce & Industry Dept Fire Brigade Building Connaught koad
Central, Hong Kong
(W/8)
暅
DEPARTMENT OF TRADE AND INDUSTRY
Millbank Tower
Millbank London
SW1
6 November 1973
3
Carry-over of unused 1973 quota to 1974
It was a pleasure seeing you in Hong Kong and I much enjoyed our lunch together. My visit to Bangkok was not a wild success, since the government I wanted to talk to was no longer in existence by the time it agreed to get its officials round a table!
You will remember that I mentioned the question of the 18 month quota and unlimited carry-over when I was with you. I have now seen your Notice to Exporters of 19 September and looked again at the relevant perts of Liz Lowne's letter of 21 August and Bill worward's reply of 4 September. The reasons he gave for preferring an 18 month quota are interesting, but do not seem to us incompatible with a limitation on carry-over. And we must, l'm afraid, insist that there be such a limit.
The whole edifice of our textile restrictions is based on the concept of stability of tra e, and there are provisions for the spread of shipments throughout the year (as opposed to disruptive bunching), as well as clear breaks between each quota period. The provisions for carry-over or anticipation, where they exist, are concessions to the exporting country which enable it to benefit from price and demand fluctuations in the market, and allow a margin of under-utilisation without definitive loss of quota. If carry-over allowances were unlimited, and anti-bunching provisions removed, an exporting country could (theoretically) export the whole of two years' quota at one
moment.
What has happened in the current period of exceptionally strong demand is that UK importers have been buying all they can, from all sources, for delivery as soon as possible, but Hong Kong suppliers have been hampered by raw material shorta es and the competition of orders for other customers from satisfying the whole of this demand. We have gained the impression that the quota restrictions themselves, in the short run, are not a factor limiting supplies.
However that may be,
the latest figures we have show an estimated under-utilisation at 31 December 1973 of about 90 million square yards as against a notional permitted carry-over of about 31 million square yards.