HONG KONG MANUFACTURING INDUSTRY IN THE SIXTIES
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This trend gathered impetus from its own success, and resulting pressures overseas manifested themselves first in extension of restraints on cotton textile exports to Britain to include garments; and second, in a multilateral agreement negotiated on United States initiative (but with which other countries were not slow to fall in), under a waiver from the contracting parties to the General Agreement on Tariffs and Trade. This agreement, to the content of which Hong Kong made a significant contribution, had three provisions of great practical importance to the textile and clothing industries of exporting countries. That is to say, the exporting country enjoyed a right to administer its restraints within any ceiling agreed with the importing country; it had the right to increase its exports annually by not less than five per cent; and it had a right to some degree of latitude in exchanging one item of cotton goods for another. These concessions partially mitigated the effect of the straight-jacket imposed on growth and development of the cotton textile and garment industries. Arrangements of considerable complexity worked out by the Commerce and Industry Department with the aid of the Cotton Advisory Board, an off- spring of the agreement with Britain, eventually had a number of side-effects of far-reaching importance for these industries.
The first was that while restriction of supplies in a sense stimulated textile production in buying countries, its immediate effect in Hong Kong was to convert a buyer's into a seller's market, with beneficial results to the business of those manufacturers and traders who had developed the trade. Secondary effects flowed from this. Manufacturers were encouraged to plough back more profits into their enterprises in the knowledge that they were in some degree protected from immediate resumption of internal competition, and they were able to 'trade up' in the sense of making more sophisticated and expensive goods with a higher rate of profit on a smaller turnover. Finally, there were several less tangible benefits such as development of much closer working arrangements between the Government and textile interests; more detailed understanding within the Government of the problems and aspira- tions of manufacturers; greater appreciation by manufacturers of the realities of international commercial relations in the textile field; and within official circles, wider knowledge of the machinery of international negotiations.