TNAG-0153-FCO40-189-Exports-of-cotton-textiles-to-Canada-1969 — Page 49

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Canadian imports of blended fibre shirts from Hong Kong.

Background

We are aware that, since 1962 if not earlier, the Canadian authorities have been concerned about imports of low-cost man-made fibre textiles. Canada first attempted to take action against Hong Kong woven synthetic shirts in 1965; she argued that the increased trade in these shirts was a deliberate circumvention of the controls on Hong Kong woven cotton shirts, and should therefore be dealt with under Article 6(b) of the Long Term Arrangement for Cotton Textiles. The Hong Kongers retorted that since their quota for cotton shirts was under-utilised, substitution as defined in the L.T.A. could hardly be taking place; they therefore had no case to answer.

No more was heard until autumn of 1966, when the Canadians suggested, at their annual cotton textile negotiations with Hong Kong, that the cotton garment

The Hong quotas should be grossed up to include garments of synthetic fibres. Kongers rejected this idea, but agreed to hold further consultations on the man-made fibre question in the spring of 1967, or earlier if trigger points for certain polyester/cotton garments were reached.

At the talks in April and May 1967, the Hong Kong negotiators concluded that an Article XIX situation existed on polyester cotton shirts, blouses and slacks "as a result of the present level and growth trend of exports from Hong Kong in circumstances of severe price competition". They estimated that at that time Hong Kong shipments accounted for 67% of Canadian polyester/cotton shirt imports and 16% of her consumption; and were equivalent to 21% of Canadian production. The Canadians maintained that the alternative to voluntary restraint by Hong Kong would be the application of the re-valuation provisions of the Customs Act on a discriminatory basis.

Whitehall had grave misgivings about allowing Hong Kong to set a precedent by entering into a restraint agreement; and obtained a month's grace to consider the various policy issues involved. At the end of this period, we agreed reluctantly, because we saw no other way out of the impasse, that Hong Kong should announce that she had decided unilaterally to restrict exports to Canada of the three types of polyester/cotton garment. The restraint level for shirts was 75,000 dozen; that is a cutback of 25% on the potential level (100,000 dozen) of Hong Kong exports in 1967. At our insistence, in informing the Canadians that restraints would be in operation for the year commencing 1st October 1967, the Hong Kongers stipulated that the decision would be reviewed

(1) if it came to be regarded as establishing a precedent for other

counties to follow; and

(2) if as a result of the decision, Hong Kong was thereby penalised

in relation to her competitors in the trade.

The restraint levels remained unchanged for the year commencing 1st October, 1968. Apparently the Canadians withdrew a request for restraint on polyester/polynosic shirts as a quid pro quo for not according growth on polyester/cotton shirts.

Restrictions on other suppliers

The

At the time of the Hong Kong / Canada negotiations in 1967, several other suppliers of man-made fibre shirts - Japan, Taiwan, Korea etc. were already under restraint. Japan had exercised voluntary export control on exports to Canada of all synthetic shirts since 1959 or 1960. The 1966 ceiling was 46,200 dozens. In 1967 the Japanese persuaded the Canadians to reduce the area of control to polyester/cotton shirts only, to give parity with Hong Kong. Japanese restraint level for polyester cotton shirts in 1968 was 77,140 dozen, showing an increase of 67% on the 1966 quota which covered a wider range of shirts. Other suppliers too have increased ther experts to Canada; the quota

In the first restrictions now (or recently) in force are summarised in Annex A. five months of this year, Canadian import statistics showed that Hong Kong's share of the import market for polyester/cotton shirts had fallen to 30% (as compared with 67% at the time of the May 1967 consultations). Her dominant position amongst exporters of this type of shirt has therefore been seriously

/eroded;