XN000022-1977-10-05 — Page 7

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WEDNESDAY, OCTOBER 5, 1977

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+HONG KONG HAS NOT BEEN THE CULPRIT, IF THAT IS THE RIGHT WORD, IN SURGE OF IMPORTS INTO EUROPE IN THE LAST TWO YEARS- THIS HAS COME FROM OTHER COUNTRIES. INDEED, IMPORTS FROM HONG KONG OF THESE ITEMS SINCE 1975 HAVE SIGNIFICANTLY DECLINED, HE SAID.

SIR MURRAY ADDED: +WHILE ONE MIGHT UNDERSTAND THE EEC'S WISH TO GIVE THEIR OWN INDUSTRY A RESPITE THROUGH STABILIZING

IMPORTS, THEIR PROPOSAL TO CREATE A POOL OF QUOTA FOR SO-CALLED +NEWCOMERS+ AND COUNTRIES WITH PREFERENTIAL ARRANGEMENTS, AND TO DO SO AT THE EXPENSE OF HONG KONG AND A FEW OTHER ESTABLISHED SUPPLIERS, IS GROSSLY DISCRIMINATORY.+

+STABILISATION WOULD BE BAD ENOUGH, SIR MURRAY SAID, +BUT THESE DISCRIMINATORY IDEAS SEEM TO ME TO TAKE THE WHOLE INTERNATIONAL TEXTILE TRADING SYSTEM DANGEROUSLY NEAR THE BRINK OF A PROGRESSIVE SLIDE INTO PROTECTIONISM, ALTHOUGH THE COMMISSION PROFESS THAT THIS IS PRECISELY WHAT THEY WISH TO AVOID.

+THE DISCRIMINATORY PART OF THE EEC'S PROPOSALS IS NOT DESIGNED TO PROTECT DOMESTIC INDUSTRY SO MUCH AS TO REDISTRIBUTE TRADE BY GIVING A LARGE PART OF THE PRINCIPAL SUPPLIERS' EXISTING TRADE TO OTHER EXPORTING COUNTRIES,+ SIR MURRAY POINTED OUT.

BUT SIR MURRAY URGED THAT WHILE WE WATCHED THE COURSE OF THE NEGOTIATIONS WITH ACUTE ANXIETY +WE SHOULD NOT BE CARRIED AWAY BY THE DRAMA OR INDIGNATION OF THE MOMENT INTO BELIEVING THAT HONG KONG'S ECONOMIC FUTURE, OR EVEN HONG KONG'S TEXTILE INDUSTRY AS A WHOLE, IS IMMEDIATELY AT STAKE.

+WE COULD SUFFER A BLOW, PERHAPS EVEN A HEAVY BLOW, HE CONTINUED, BUT CERTAINLY NOT A MORTAL ONE. AT THE WORST IT WILL CONFRONT US-WITH' A SERIOUS CHALLENGE.+

IN A TOTAL ASSESSMENT OF THE SITUATION, THE GOVERNOR REFERRED TO TWO PROBLEMS THAT HONG KONG GENERALLY FACES.

THE FIRST IS +DOMESTIC CONSUMPTION HAS BEEN GROWING FASTER THAN EXPORTS BECAUSE OF THE RAPID GROWTH IN CONSTRUCTION AND OTHER DOMESTIC CONSUMPTION, AND ALSO BECAUSE OF SLUGGISH DEMAND FOR SOME OF OUR PRODUCTS IN OVERSEAS MARKETS.

+THE PROBLEM COULD BE RESOLVED IN VARIOUS WAYS FOR INSTANCE BY A REVIVAL IN DEMAND FOR OUR EXPORTS, AND ALSO .... BY A DROP NEXT YEAR IN THE DEMAND THAT PRIVATE REAL ESTATE DEVELOPERS ARE MAKING ON THE CONSTRUCTION INDUSTRY.

+AND IF NEITHER OF THESE FACTORS DEVELOP SUFFICIENTLY TO CORRECT THE SITUATION, SIR MURRAY WENT ON, THERE IS STILL THE INEVITABLE MECHANISM OF MARKET FORCES OPERATING IN THIS INSTANCE THROUGH THE EXCHANGE RATE, INTEREST RATES, AND THE MONEY SUPPLY,+ HE SAID.

/+THE OTHER POINT