TNAG-0046-FCO40-82-Britain-s-entry-into-EEC-effect-on-trade-with-Hong-Kong-1967 — Page 62

0003230

G.F. 323

Ref.: CR/EIC.230/5/4/311

CONFIDENTIAL

61

T.I.A.B. Inf/55/67

MEMORANDUM FOR THE TRADE AND INDUSTRY ADVISORY BOARD

United Kingdom and the E.E.C.: Effects of

Loss of Preference in the United Kingdom

RECEIVED IN ARCHIVES N: 311 24 OCT1967

HWB 6/18

P/A

26/10

(This memorandum is developed from T.I.A.B. Inf/37/67 which

isolated those items for which Hong Kong is particularly

dependent on the United Kingdom preference market, and

T.I.A.B. Inf/49/67 which was a preliminary report on the

comments of the industrial and commercial associations.

The general effects of loss of preference are summarised

and an attempt is made to assess the trade which is

likely to be seriously affected by loss of preference and

to identify the industries which will be in particular

danger.)

General effects of loss of preference on Hong Kong's competitive position with suppliers outside the E.E.C.

Manufacturers and exporters, commenting on the statistical exercise in T.I.A.B. Inf/37/67 through the advisory boards and through the trade and industrial associations, confirm that loss of preference may weaken Hong Kong's ability to compete with other suppliers in the United Kingdom. On the other hand, exporters point also to Hong Kong's success in selling to other markets over tariffs and suggest that provided the common external tariff is not applied too abruptly, Hong Kong should continue to compete successfully.

2.

Manufacturers are more cautious. They claim that success in selling elsewhere does not necessarily mean that Hong Kong will be able to scale the common external tariff into the United Kingdom. Variations in quality and other market factors must be taken into consideration. In some cases (particularly textiles) Hong Kong has been able to sell over tariffs only because of the larger profits realised in the United Kingdom preference market. But generally speaking, they think Hong Kong should maintain a competitive edge. Costs may well rise more rapidly for other established suppliers to the United Kingdom with the result that Hong Kong manufacturers will be able to absorb the tariff without decreasing net earnings, although without the increase that would otherwise be realised. This view may now be somewhat optimistic if Hong Kong is to experience demands for wage increases as a result of the disturbances.

3.

Both manufacturers and exporters are looking over their shoulders at growing competition from other countries in East Asia. The effect of such competition in the United Kingdom is, however, likely to be dampened by the quantitative restrictions the United Kingdom maintains against most of these suppliers. Exporters add that Hong Kong's advantage in skill, experience and availability of capital should also help them to maintain Hong Kong's position in the United Kingdom.

CONFIDENTIAL

/General