TNAG-0046-FCO40-82-Britain-s-entry-into-EEC-effect-on-trade-with-Hong-Kong-1967 — Page 215

CONFIDENTIAL

3. It was nevertheless recognised that the rescinding of preference might damage Pakistan exports of raw cotton to Hong Kong which took some 28% of her cotton requirements from

Pakistan, representing about half of Pakistan's total raw

cotton and yarn exports. Similarly, the Hong Kong demand for

Canadian raw plastics might diminish if the advantages to be

gained from using them were removed.

4. Hong Kong would wish to be informed immediately, if in

the course of negotiations the U.K. learned that the Six were

deviring stricter origin rules governing the importation of

textiles. In particular, they would wish to know of any desire to alter the present criterion of origin which deemed

a product to have originated in the country in which it had

undergone an essential change in its character. At present,

the E.E.C. conformed to standard certificate of origin requirements based on essential change or a 25% cost uplift;

however, it was feared that for Hong Kong the Community might

opt for a higher content rule, possibly as much as 40%-50%,

because they believed that Japan or China might use Hong Kong as an entrepot through which to tranship low-cost textiles to

the E.E.C.

5. In reply to a question from the U.K. Delegation, it was

pointed out that all Hong Kong's exports to the U.K. were

based on Commonwealth cloth. This was done to raise the unit

value of exports and consequently Hong Kong's earnings of

foreign exchange. Hong Kong's imports of Chinese loomstate

cloth were now very small (about 6m. square yards) and finished

fabrics based on that material were exported largely to Germany

where Hong Kong loomstate was not competitive with domestic

production.

The E.E.C. countries knew that Hong Kong exported

to them finished fabric of Chinese origin and accepted

printing and bleaching as constituting an essential change in

the fabric.

CONFIDENTIAL

/Trade in textiles