Reference
CODE 18-77
SS 8/78
2
Mr Nightingale commented that he found it surprising that there were no lining finishing factories in HK, Mr Schoonhoven explained that this was mainly because cheap and adequate supplies could be obtained from Korea and Japan. Moreover, the demand for linings had only recently increased as a result of the industry's move upmarket. Mr Tsu added that the economies of scale meant that it was cheaper to import finished linings from Korea and Japan than to finish them in HK: indeed, for this very reason a finishing plant had closed down in 1978. Mr Nightingale asked about the possibility of supplying HK with grey cloth for finishing into linings, accompanied by the transfer of the necessary finishing technology. Mr Tsu said that unless the license covered, say, the whole of SE Asia the potential market would be too small. Mr Nightingale replied that the main advantage of local manufacture quicker service, a crucial feature in the linings trade would be dissipated if the market was larger. Mr Tsu pointed out that the HK industry could generally plan far enough ahead to cope quite adequately on imported linings.
3
Mr Wilson asked why the UK had been less successful than other European producers in exporting to HK. Mr Sousa suggested that UK companies needed to approach the market more positively and to establish a local presence. Mr Newbigging confirmed this, and said that Japanese companies did well not only because of geographical proximity but also because of their high-profile market presence. Mr Marden suggested that the strength of sterling was a key factor, although Mr Wilson pointed out that German and Swiss manufacturers managed perfectly well with a strong currency. Mr Newbigging said that in the longer term the exchange rate was less significant; over the last four years sterling had varied between US$1.50 and US$2.40 with no noticeable effect on textile exports to HK.
Mr Nightingale commented that his company had certainly lost business in HK in the past year, in the course of which sterling had appreciated by as much as 20% against the HK dollar. Dr Wong said that it was noticeable that German retailers tended to specify the use of German cloth in garments purchased from HK, although the FRG had no origin marking regulations. Mr Harrison commented that in a previous meeting some local agents had suggested selling UK fabrics to HK for incorporation in goods going else- where after make-up; he wondered whether the trading houses could play a part in this sort of trade. Mr Sousa said that he was sure that the trading houses would be ready to consider business of this sort. Mr Newbigging added that the UK should not under-estimate the potential of the HK home market as well as the reexport market. Mr Marden said that Lane Crawford, for example, imported some £2m worth of British textile products per year (details attached); he saw scope, however, for expansion of UK sales of household textiles a sector of the market currently dominated by the USA. Mr Tsu asked why sales of Tootal-branded goods in the Far East had declined so much.
4
Mr Schoonhoven suggested that outward processing duty relief could be significant enough to make the UK price-competitive with a number of non-European surpliers. Mr Wilson added that it was essential to simplify the regulations so that more use was made of them. Mr Schoonhoven said that German manufacturers and retailers made much greater use of outward processing relief than their UK counterparts. Mr Parkinson suggested that the introduction soon in the UK of origin marking regulations might well encourage greater use of British cloth; Mr Nightingale added that this would be particularly so if the origin of the cloth as well as the place of manufacture of the garment had to be specified. Mr Koo commented that a number of British retailers already stipulated that garments should be marked as to origin. Mr Sousa added that a number of other countries already insisted on origin marking. Mr Nightingale noted that, in their analysis of the reasons for the UK's poor performance in the HK textile market, no-one had mentioned lack of quality and poor service - two criticisms often levelled at British industry. Mr Sousa commented that