RESTRICTED
Reference....
tipy placed
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+
nominal wages (though labour productivity has apparently been rising still faster) suggest that serious labour and social pro- blems could be building up. In paragraph 6 of his report" of 21 March 1974 the Overseas Labour Adviser, Mr Foggon, states that real wages fell by 9% in the six-month period to September 1973.
22. Perhaps these trends would be less disturbing if comparable figures were provided for the (expanding ?) services sector i.e.
The informa- for banking, insurance, shipping, tourism and so on. tion gap here parallels the absence of any figures or comments on Hongkong's trade in services. As already noted, Chapter 2 on "Overseas Trade" deals only with merchandise and ignores the
'invisibles'.
23. Even so, since half the labour force is engaged in manufac- turing, the figures quoted above might well justify a quick reap- praisal of UK aid/trade measures towards Hongkong. It is not clear
how far the polyester/cotton quotas imposed by the UK from October 1972 may have added to Hongkong's troubles. But Table 9(c) shows some sharp cutbacks in 1973 textile exports to the UK, with a quantitative fall of 22% for fabrics, 19% for yarn and thread, and 42% for made-ups.
24. Of course other countries apply restrictions too. Paragraph 24 states that 50% of Hongkong's exports of clothing and textiles are now subject to quantitative restrictions. Since these cate- gories make up 50% of total exports, the consequences for Hongkong's economic growth are critical. Some further apprehen- sion is expressed in paragraph 33 at the effect of UK entry into the EEC. This is because the UK changeover to the EEC scheme of generalised preferences takes effect from 1 January 1974, and this scheme discriminates against Hongkong in respect of textiles (including clothing) and footwear.
Textile trade and investment
25. A striking feature of textile exports in 1973 (9 months) is that, while total clothing exports showed, no change (0.0) by quantity, Ilongkong's clothing exports to Japan increased by no less than 137% in quantity terms. Paragraph 36 also mentions a very large quantitative increase in exports of textile fabrics and of textile yarn and thread to Japan although no figures are given.
26. This trend seems to illustrate in a remarkable way Japanese industrial policy to export her traditional labour-intensive indus- tries to neighbouring developing countries (mainly Hongkong, Taiwan and South Korea), while shifting and retraining Japanese domestic labour for more capital-intensive and knowledge-intensive industries. Japanese traditional knowhow and management thereby continues to be exercised abroad while continuing gains in productivity and wages are maintained at home. This forward looking strategy of industrial reorganisation, overseas investment and trade contrasts with the protectionist approach still evident in the UK.
27. To follow up this line of thought it would be interesting to have information of recent trends in Japan's manufacturing invest- ment in Hongkong, as compared with British and other foreign investment. How far, for example, are the increased clothing and textile exports to Japan generated by Japanese-controlled subsi- diaries in Hongkong?
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