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8. There was also some discussion of the degree of free movement within the Community now enjoyed by low cost cotton textiles. Mr. Haddon-Cave said that the development of a Common Commercial Policy on textiles was in his view not dependent on the achieve- ment of a unified administration system. As far as he knew, there were now no formal barriers against the flow of low-cost textiles between members of the Community except, naturally, in the case of imports which were not in "libre pratique" because they had not been counted for tariff and quota purposes in the country which they first entered. There was no longer any loop- hole whereby Hong Kong textiles could be exported to the Netherlands "for re-export", - and therefore not come against Hong Kong's quota and from there be exported to Germany. Sir A. Snelling suggested that intra-Community trade in tcxtiles might become regulated by cartel arrangements between the industries, in which case the Six might agree that access for Hong Kong's exports to Britain could remain a matter to be fixed between Hong Kong and the British Government. Mr. Ord-Johnstone
said that inter-industry arrangements already existed in the Six, but were not working particularly well. Mr. Audland pointed out that Article 85 of the Treaty of Rome regulated and, in certain cases, prohibited cartels, though it was not yet clear how much effect this Article would have on industry in the Community.
9.
Sir A. Snelling said he understood the United States was by now a more important market than Britain for Hong Kong's groy cloth and asked what the position was. Mr. Haddon-Cave said this was difficult to tell from the way the United States classified its imports. Hong Kong was moving towards higher quality exports to the United States.
The Impact on Hong Kong's Exports of British Adoption of the c.e.t.
10. The Hong Kong delegation circulated copies of a memorandum prepared for the Hong Kong Trade and Industry Advisory Board entitled 'United Kingdom and the E.E.C.: Effects of Loss of Preference in the United Kingdom'. This dealt with the subject both generally and with reference to particular industries, and served as the basic document for a general discussion.
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11.
Mr. Gildea said that one could isolate three separate effects which British adoption of the c.c.t. would have on Hong Kong's exports. Hong Kong suppliers would lose their equality of treatment with British industry and instead would have to compete with it over the tariff; they would lose their preference over the tariff; they would lose their preference over other non- Community suppliers and have to compete with them on equal terms; and so far as they wore in competition with Community suppliers, they would both lose their preferences and face reverse preferences. Could the Hong Kong delegation say which of these effects particularly concerned them?
12. Mr. Cowperthwaite replied that there would be some adverse effect on Hong Kong in each case. Probably the least worrying was the prospect of having to compete with British industry on worse terms. To have to compete on equal terms with other low cost third country producers, notably Japan, could be serious. It was more difficult to assess the effect of reverso preferences in favour of producers in the rest of the Community. In general, the greater Hong Kong's depondence on the British market for a particular product, the more she stood to lose from British entry. Where the effect of the application of the c.e.t. to Hong Kong's exports was such as to undermine the economics of production in Hong Kong, exports to other markets besides Britain could be
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