TNAG-0046-FCO40-82-Britain-s-entry-into-EEC-effect-on-trade-with-Hong-Kong-1967 — Page 57

CONFIDENTIAL

attempt in any way to forecast their decision.

THE EFFECT OF UK. ENTRY INTO THE E E C. ON HONG KONG'S

PREFERENTIAL ARRANGEMENTS WITH HER COMMONWEALTH TRADING PARTNERS OTHER THAN BRITAIN

39.

There were two points here:

(a) Hong Kong is worried about the implications

of U.K. entry to the B.E.C., and the change

in the pattern of Commonwealth trading

arrangements which this implies, on the

preferences which she now enjoys in New

Zealand, Malaysia, Singapore, Jamaica and

Trinidad.

(b) Hong Kong drew attention to the side-effects

on Pakistan and Canada of the removal of pre-

ference for Hong Kong exports in the U.K.

market. At present, exports to Britain had

to contain a guaranteed Commonwealth content

to quality for preferential treatment. For

cotton textiles the figure was 25%. All yarn

had to be spun largely from Commonwealth

cotton. For fabrics the weaving process

normally conferred the requisite cost-uplift.

But, as a matter of policy and convenience,

Hong Kong always used "formula-yarn", even

when the 25% content figure would be achieved

without. As a result Hong Kong took 28% of

her cotton requirements from Pakistan,

representing half the latter's total raw

cotton and yarn exports. An analogous

situation obtained in respect of plastics,

where Canada was the main supplier. Once

Commonwealth content requirements no longer

applied, Hong Kong was likely to shop

olsewhere.

CONFIDENTIAL

/40.