TNAG-0153-FCO40-189-Exports-of-cotton-textiles-to-Canada-1969 — Page 51

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apparently confined to Korea (both knitted cotton and man-made fibre) and Taiwan (knitted cotton only).

The analysis of Canadian woven shirt consumption at Annex D shows that the Canadian industry's present difficulties stem, to a considerable extent, from its slowness in responding to the swing in demand away from pure cotton shirts and into man-made fibre shirts - in particular, into blends of man-made fibre and cotton. This demand was generated, to a considerable degree, by Hong Kong's pioneering efforts in the blended shirt field. Canadian consumption of woven shirts increased from 2,672,000 in 1966 to 3,074,000 dozen in 1968. But within this total, cotton shirts fell from 2,070,000 dozen to 1,014,000 dozen, while man-made fibre shirts rose from 611,000 dozen to 2,076,000 dozen. Between these two years, Canadian production of cotton shirts fell much more heavily than imports; but imports of man-made fibre shirts rose much more rapidly than production. Canadian producers have laboured under two handicaps inflicted by their fellow-countrymen - firstly, the penal duty imported polyester/cloth (this duty is now under review); and secondly, the high price which Dominion Textiles has, by virtue of its monopoly position, been able to charge for terylene products. (This problem too is now being examined by the Canadian authorities).

In 1968, roughly 47% of Canadian woven shirt consumption was supplied by imports. (The comparable figure for Sweden was 70%. and for the U.K. 33%). Annex D shows, however, that the share of the Canadian market accounted for by imports from Hong Kong shrank from 14% in 1967 to 10% in 1968, and the volume of Hong Kong's trade fell by some 21%. Within that total, Canadian imports of woven man-made fibre shirts from Hong Kong fell between the two years (although imports from all sources almost doubled); and Hong Kong's share of Canadian consumption of these man-made fibre shirts fell sharply from 26% to 11%.

Annex B shows that in the first five months of this year, Hong Kong supplied a higher proportion of total Canadian imports of woven shirts than was the case last year; but nevertheless she was still 7 percentage points below her 1967 share of the import market.

Conclusions

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Is this an Article XIX-type situation; that is, are goods being imported/ in such increased quantities as to cause or threaten injury to domestic producers of like or directly competitive products? It could be argued that

(i) the proportion of Canadian woven shirt consumption supplied by imports certainly rose significantly between 1967 and 1968. But this was not the fault of Hong Kong, whose trade (both in terms of volume and of share of consumption) fell by a quarter in 1968. In the first five months of this year, imports of woven shirts from other sources rose much more rapidly than imports from Hong Kong.

(ii) when the Swedes sought restrictions on Hong Kong polyester/cotton shirts, they were able to use the "last brick in the wall" argument (i.e. that all other major low cost sources of the principal types of both woven and knitted shirts had been brought under control). The Canadian restrictions, on the other hand, are a piecemeal collection which probably cover well under half her total volume of imports.

(iii) Piecemeal controls invite attempts to circumvent them. It is clear, for instance, that since Canada has limited imports of Japanese and Hong Kong shirts of polyester/cotton (that is, major wieght polyester), both countries have begun to build up trade in shirts of the same two fibres, but in which cotton predominates. Polyester/polynosic shirts are another new development; but were they bottled up, no doubt low-cost producers would turn their attention to some other hitherto unrestricted blend or type.

(iv) the difficulties of the Canadian industry stem at least in part from its own failure to adapt sufficiently quickly to changing public demand; and from its inability to obtain competitively priced blended cloth.

(v) although it is debatable whether Canda has a case at the present time for extending the scope of her restrictions on Hong Kong it is possible that she might be able to make out a case in the G.A.T.T. for non-discriminatory restrictions on all shirt imports, under the Article XIX procedure. the measures she has so far taken to limit shirt imports have in her view proved inadequate, it might be in her interests to regularise the controls under

Given that