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INDUSTRY AND TRADE
The successful development of one of the Colony's new in- dustries the part manufacture and assembly of transistor radios -led to some further difficulties in trade with Japan during the year. On 25th May the Japanese Government, without prior notification, imposed a ban on the export of transistors and diodes to Hong Kong. The reason for this action was stated to be that the rapid increase in the Colony's exports of transistor radios to the United States might lead the United States Government to take action to restrain imports so as to prevent possible disruption of the American market. This would affect Japanese radio exports to that country and nullify the effects of Japanese voluntary restraint. It was maintained in Hong Kong that there was no evidence that imports were affecting the American market as claimed and that the unilateral action taken by Japan was mainly due to increased competition from the Hong Kong industry.
The Japanese Government was informed that a serious view was taken in Hong Kong of the lack of prior consultation on a matter which Japan knew must affect an important and developing local industry. The Japanese Government for its part made it clear that the ban would be lifted if similar restraint to that of Japan were exercised by Hong Kong, at a level to be agreed in bilateral dis- cussions. It was not possible to accede to this request.-
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On 21st July, Japan announced that the ban was to be partially lifted on condition that the transistors exported would not be used in sets exported to North America. Meanwhile local manufacturers had been looking for, and finding, alternative sources of supply, principally in America and Britain. It appears that the modified ban proved unenforceable, and on 20th September the Japanese Government announced the substitution for the ban of a general quota of approximately 600,000 transistors a month for the re- mainder of 1962. This quantity proved sufficient for the Colony's needs during the period for exports of radios to all territories.
Britain's negotiations with members of the European Economic Community were closely followed throughout the year. It was generally expected in Hong Kong that Britain would be admitted to full membership of the Community and that this would have profound effects on the system of Commonwealth Preference and