TNAG-0172-FCO40-208-United-Kingdom-Productivity-and-Efficiency-Study-effect-on-H-1969 — Page 153

CONFIDENTIAL

HONG KONG TELEGRAM NO. 51 202 200

-3-

8. HONG KONG'S COTTON TEXTILE EXPORTS TO BRITAIN AMOUNT TO THE FOLLOWING PERCENTAGES OF OUR TOTAL COTTON TEXTILE EXPORTS BY VOLUME : YARNS 25.9, PIECEGOODS 22.8, MADE-UPS 69.6, GARMENTS (VALUE) 19. ASSUMING THAT THE QUOTAS WERE REMOVED

AND THAT COSTS IN THE BRITISH INDUSTRY WERE REDUCED TO THE LEVEL ASSUMED IN THE REPORT OUR TENTATIVE GUESSES WOULD BE:

(A) EXPORTS OF YARN AND FABRICS, ESPECIALLY GREYS, WOULD PROB ABLY FALL AS HONG KONG'S PRESENT COST ADVANTAGE IS NOT GREAT, INCREASED COMPETITION IN THE BRITISH MARKET WOULD REDUCE PRICES, THE TARRIF WOULD HAVE TO BE PAID AND PORTUGAL WOULD RETAIN FREE

ENTRY SEMI COLON

(B) MADE-UPS ARE NOT NOW A VERY PROFITABLE SECTOR AND, IN VIEW OF THE HIGH PROPORTION GOING TO BRITAIN, WOULD PROBABLY AL SO

DECLINE SEMI COLON

(C) EXPORTS OF GARMENTS WOULD PROBABLY INCREASE

*

WITH THE REMOVAL OF THE QUOTA, BUT PRICES RECEIVED IN HONG KONG WOULD BE LOWER. THE GARMENT INDUSTRY IS MORE LABOUR INTENSIVE AND COULD PROBABLY COMPETE MORE EASILY, ESPECIALLY AS IT IS MORE ADVANCED IN TERMS OF FASHION AND QUALITY THAN OUR COMPETITIORS (D) BUT THE REMOVAL OF THE QUOTA AND THE CHANGE TO MARGINAL COMMONWEALTH PREFERENCE FROM DUTY FREE ENTRY WOULD REMOVE THE REQUIREMENT TO USE HONG KONG YARN AND CLOTH MADE FROM COMMONWEALTH RAW COTTON. HONG KONG GARMENT MAKERS WOULD BUY THEIR CLOTH FROM · THE CHEAPEST SOURCE, WHETHER THIS WAS FROM HONG KONG OR ELSEWHERE. THIS WOULD HAVE FURTHER DEPRESSING EFFECTS ON THE HONG KONG

SPINNING AND WEAVING INDUSTRY, WHICH IS MORE DEPENDENT ON THE

BRITISH MARKET THAN THE GARMENT INDUSTRY AND WOULD ALSO AFFECT

HONG KONG PURCHASES OF COMMONWEALTH COTTON SEMI COLON

(E) KNITWEAR EXPORTS ALREADY HAVE DUTY FREE UNRESTRICTED ENTRY

/AND

CONFIDENTIAL