CODE 18-77
SS 10/76
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Mr Mito
uu. Dully
Reference
AKK12/616), (162) I Many thanks. Thang ved Worly
Милош all of this is a winke to her. Murray
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Aday (uper Mached)
HONG KONG: MULTI-FIBRE ARRANGEMENT
1.
The Governor's letter of 3 September and the accompanying memoranda contained some emotive language and spurious logic.
Para 7:
2. I do not think that the businessmen of Hong Kong are so naive as to hold the UK responsible for the EEC's action. Certainly the Department of Commerce and Industry is well aware that the French have been taking the lead in imposing further restrictions (although, I admit, we have not been far behind them).
Para 10:
3. The reference to "wild and very damaging ideas" is inexplicable. The Commission are seeking to restrict imports from Hong Kong and other more developed countries in order to protect the textile industries of the EEC and in order to allow greater access to the lesser developed countries.
4.
It may well be, as the Governor suggests, that our chances of obtaining the CLP project may be diminished if restrictions are placed on Hong Kong textile exports but we are not certain that we are going to get the CLP contract and the margin between the Japanese price and our own is still great. Further- more, Hong Kong has given major contracts to other members of the EEC. Do they propose to cease trading with the EEC altogether if they do not get their way over textiles.
Unlikely.
5. The Governor also intimates that social progress will be deferred if there is a cut-back on Hong Kong textiles. This does not follow. The amount of money spent on social welfare could be increased by increasing the rate of taxation. The standard rate of taxation in Taiwan for example is 20% and Taiwan is comparable to Hong Kong both in its growth rate (higher) and in its general philosophy although I understand that provision for social welfare is made by the majority of firms in Taiwan, eg medical and old age benefits.
Summary of the Hong Kong Government's Memorandum
majority
Para 5:
6. The EEC has already lost 500,000 jobs (15%) in the textile industry between 1973 and 1976 and would lose a further 1,600,000 if the MFA was renewed unchanged. (See paper dated 5 July attached to EID letter of 22 August to Delhi: para 2). 7. The same paragraph refers to the difficulties of moving labour into other industries. This has never previously been quoted as an argument by Hong Kong where mobility of labour can be high when required.
Para 6:
8. The proposed cut-back would not reduce growth by 11 percentage points. This is based on the promise that the size of the Hong Kong domestic exports roughly equal to the size of the GDP (see para 5 of the memorandum on renegotiation.) The size of Hong Kong domestic exports is only 70% and the GDP
/GDP
155