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HONG KONG ANNUAL REPORT
million square yards. The undertaking does not apply to cotton yarn and thread, articles made from United Kingdom cloth, sacks and bags, knitted garments, gloves, plimsolls and canvas shoes, nor to any cotton textiles imported into the United Kingdom for re- export with or without processing.
Agreement between the Hong Kong Textile Negotiating Com- mittee and the United Kingdom Cotton Board was only reached after protracted negotiations by both sides and with considerable misgivings on the part of the Colony's textile industry. The under- taking was not conditional on similar undertakings being given by other Commonwealth countries. In the event the Indian and Pakistani industries did not ratify their earlier provisional agree- ments, which had been conditional on a Hong Kong agreement, until September. They come into effect on 1st January 1960.
Various aspects of the operation of the undertaking gave rise to dissatisfaction on the part of the Colony's industry. They were taken up with the Cotton Board, so far without result.
Although textile exports to the United Kingdom are thus now limited, the effect on the industry as a whole has not yet been as serious as was feared owing to the high world demand and the development of other markets. But not all these outlets can be regarded as reliable. In February, Mr. Kearns, Assistant Secretary for International Affairs in the United States Department of Com- merce, visited the Colony to urge the Hong Kong garment manu- facturers to limit their penetration into the United States market and to diversify their products into other lines. There were no immediate results from this visit, but in November Mr. Kearns returned to the Colony for continued discussions with representa- tives of the trade, in which opinion was sharply divided. After Mr. Kearns had left Hong Kong, certain manufacturers represent- ing a very substantial section of the trade in cotton garments with the United States formed themselves into a new association and by the end of the year had offered a voluntary undertaking to the American industry. This offer, which Government supported although reserving the right to consult other sections of Hong Kong's trade and industry which might be affected, proposed that ceilings be set on the quantities of five types of garments exported to the United States during each of the three years from 1st July 1960. The ceilings allowed for a reasonable rate of growth during