TNAG-0172-FCO40-208-United-Kingdom-Productivity-and-Efficiency-Study-effect-on-H-1969 — Page 141

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Mr. Whitehead,

Commodities Dept.

Reference..

36

U.K. Textile Council Report

I have been brooding on the effects on Hong Kong of the proposed switch from q.rs, to a tariff in the field of cotton textiles,

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In his telegram No.511 the Governor has given his tentative assessment that Hong Kong's trade in cotton textiles might hold up overall, but that there would be changes of pattern (probably towards, increased trade in garments and away from fabrics). From our discussions with the Director of Commerce and Industry (Mr. Jordan) during his recent visit, we juäge it unlikely that detailed consultation with the Hong Kong industry would produce a very different assessment. Mr. Jordan implied that, short of a very thorough comparison of the landed unit cost of the whole range of cotton textile exports of all countries to the U.K., it would be impossible to judge with any degree of confidence how Hong Kong's competitive position might be affected. He said that this was information Hong Kong did not possess; if it was not readily available here (e.g. in the Board of Trade) it would take a long time to compile and to study. The great threats to Hong Kong's trade yould be, as we expected, from duty free EFTA products (particularly from Portugal) and from South Korea.

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Notwithstanding their hope that behind the tariff barrier British industry will hold its ground, the industry argues (with Board of Trade support) the need to ret n the right to reimpose quotas in cases where imports continue to rise and cause serious injury. Hong Kong's Tear (and it could be well based) is that, as it readjusts its trade, rising exports in those categories where its industry retains a strong competitive, edge will lead to a situation in which particular sections of the British industry will suffer, or claim to suffer, serious injury and quotas will be reimposed to contain Hong Kong's gains in trade in these sectors without regard to her losses in other sectors.

让 A further source of concern to Hong Kong is the proposed transitional period in which both tariff and quotas will be in operation. This is necessary because the U.K. cotton textile industry considers it needs a 30% swing in its favour to be competitive achieved as to 15% through the tariff and 15% through improved efficiency and productivity as a result of continuing rationalisation. The latter element will take time to achieve (1971 is mentioned as a possible terminal date) and during this period some quantita- tive control of imports will be necessary. But in this period Hong Kong will be in a strait-jacket, its trade affected by the tariff with quotas preventing any adjustment of pattern.

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5* What in the circumstances can we do in Hong Kong's interests? No 'negotiations" are apparently envisaged, only "discussions" after a decision to adopt the Textile Council's recommendation has been taken. At this stage it does not seem possible to sustain an

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