Mr Stuart
mimate
Н
Reference
FUTURE IMPORT RESTRICTIONS ON COTTON YARN
1. You asked me to look at the attached draft DTI paper on this problem. I have done so and discussed it with TR & ED and with DTI (CRE 2). Without consulting Hong Kong it is not possible to judge exactly what the effect of continuing quotas as compared with liberalising them completely will be. Whilst, as a matter of principle Hong Kong would almost certainly wish to see these restrictions removed it is not a matter of prime importance particularly in the present world shortage of raw cotton which is severely restricting the amount of raw cotton available to Hong Kong for spinning.
Firstly, if we
2. There are two considerations. retain the quotas we shall in effect be restricting Hong Kong's exports of cotton yarn to United Kingdom whilst those from the Mediterranean associates are already liberalised (from April 1973). The latter
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already provide a very large proportion of the United Kingdom market. On the other hand Hong Kong might well suffer if we liberalised since she has a good quota (6.6 million lbs as compared with India 13 million and Pakistan .3 million) She was unable to fulfill this quota in 1972 but quotas of course do give privileges in a restricted market. All the indications are that Hong Kong exports are not well priced at this initial end of the market where low cost producers particularly raw cotton growers (Pakistan) have an inbuilt advantage. Whilst Pakistan and other primary producers are restricted Hong Kong can still enjoy a sizeable share of the UK market.
3. CRE 2 and TRED would prefer full liberalisation. I think we can support them in principle but I suggest we allow others to take the lead because as far as Hong Kong is concerned the issue appears to be finely balanced.
25 October 1973
M A Goodfellow
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