TNAG-0172-FCO40-208-United-Kingdom-Productivity-and-Efficiency-Study-effect-on-H-1969 — Page 75

CONFIDENTIAL

HONG KONG TELNO 567 TO FCO

(6) HONG KONG'S GARMENT EXPORTS WOULD PROBABLY HOLD UP BUT, AS OUR

HARE OF U.K. IMPORTS IS ALREADY 60%, FURTHER GAINS COULD ONLY BE

MADE LARGELY AT EXPENSE OF U.K. PRODUCTION AND AT COST OF LOWER

PRICES AND WITH REDUCED OVERALL VALUE, BUT ANY TENDENCY FOR OUR

EXPORTS TO INCREASE AT THE EXPENSE OF HOME PRODUCTION WOULD

UNDOUBTEDLY BE FRUSTRATED BY THE USE OF THE C.T.A. THE SAME WOULD

APPLY TO PARTICULAR CATEGORIES WHERE HONG KONG MIGHT GAIN SEMICOLON

(H) END RESULT WILL BE THAT HONG KONG'S EXPORTS TO U.K. OF YARN

AND FABRICS, INCLUDING USE IN GARMENTS AND MADE-UPS, WILL ALMOST

CERTAINLY FALL IN VOLUME AND EVEN MORE IN VALUE, AND THAT SHE WILL

BE PREVENTED FROM INCREASING HER EXPORTS OF GARMENTS WHOSE VALUE

WILL ALSO DROP. OVERALL VOLUME WOULD PROBABLY DROP AND TOTAL VALUE

FALL CONSIDERABLY SEMICOLON

1) KNITWEAR EXPORTS (NOW QUOTA FREE) WOULD ALSO BE ADVERSELY

AFFECTED BY TARIFF SEMICOLON

(J) U.K. IS ONE OF THE MAJOR MARKETS FOR HONG KONG COTTON TEXTILES

AND TEXTILES ACCOUNT FOR A HALF OF ALL-HONG KONG'S EXPORTS. EFFECTS

COULD BRING ABOUT A RECESSION WITH PRESSURE ON WAGES AND ADVERSE

SOCIAL CONSEQUENCES.

3. IN SHORT, TEXTILE INTERESTS HERE BELIEVE THAT THE REPLACEMENT OF

QUOTAS BY TARIFF WOULD NOT LEAD TO ANY SIGNIFICANT FALL IN TOTAL

IMPORTS INTO U.K., BUT THAT AN INCREASE IN VOLUME (AT LOWER PRICES)

WOULD BE MORE LIKELY, WITHIN THIS INCREASE EFTA COUNTRIES AND IRELAND

WOULD GAIN AT EXPENSE OF COMMONWEALTH COUNTRIES. QUOTAS WOULD THEN

BE RE-IMPOSED IN SECTORS WHERE OUR EXPORTS WERE INCREASING SO THAT

WE SHOULD BE PREVENTED FROM MAKING UP ON GARMENTS WHAT WE SHOULD

LOSE ON YARNS AND FABRICS.

CONFIDENTIAL

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