TNAG-0046-FCO40-82-Britain-s-entry-into-EEC-effect-on-trade-with-Hong-Kong-1967 — Page 210

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8. Returning to the question of the effect of loss of

Commonwealth preferences in Britain on Hong Kong's exports,

Mr. Haddon-Cave pointed out that the Territory might suffer for

a further reason in as much as her position vis-a-vis Japan.

could deteriorate;

Commonwealth preferences at present protected

Hong Kong from the liberal policy which Britain adopted towards

trade with Japan.

9. On reverse preferences in Britain in favour of the Six,

Mr. Haddon-Cave said that the Hong Kong Government were studying

the question as to how competitive Hong Kong would be in the

face of reverse preferences; clothing and knitwear would be

likely targets for competition from certain Community countries.

SEVERE ORIGIN CRITERIA

10. The problem of severe origin criteria was dealt with next.

Sir A.Snelling said that he understood that the argument was that

if Britain sought special treatment for Hong Kong, the E.E.C,

would create problems over origin criteria.

HONG KONG TRADE WITH PAKISTAN AND CANADA

11.

71

Specifically, for

Mr. Haddon-Cave said that for imports into the British market

from Hong Kong, depending on the product, 15%, 25% or 50% of the

cost-content had to be of Commonwealth origin.

textiles 25% of the f.o.b. value had to be of Commonwealth content;

labour costs alone were generally not sufficient to provide this

and as a matter of policy and convenience Hong Kong always used

"formula yarn even when the 25% Commonwealth content could

be achieved without. Hong Kong therefore brought her raw cotton

for export to Britain from Commonwealth countries and principally

from Pakistan. Once Britain entered the E.E.C. the Hong Kong

market for Pakistan raw cotton would be in jeopardy as Hong Kong would be free to buy her raw material wherever she chose and at the lowest prices; the Pakistanis had already expressed concern as the Territory had been buying about 50% of Pakistan's exports of yarn and raw cotton in recent years. A similar problem would

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/arise

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