TNAG-0240-FCO40-276-Entitlement-of-Hong-Kong-to-generalised-tariffs-preferences--1970 — Page 116

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NOVEMBER

1970

low-grade coats, suits and dresses. But some chain store operators have gone in for long-term contracting for steady now of goods from designated suppliers. Mention was made of Daiei's purchasing of 20 per cent of its private-label shirts from the LDC. Seiyu Stores, too, is having shirts made in South Korea, with Mitsubishi Shoji acting as agent.

More recently, however, overseas procurement has gone beyond apparel and sundry goods, with essays made in electrical home appliances. In the summer of 1969, Daiei brought in small electric fans from Taiwan, offoring them at ¥3,480 as against ¥4,280 charged for comparable products made in Japan.

There will, doubtless, be repetition of this sort of thing. As the Japanese distributors become adept at the selling of imported goods, the effect may become too big to be ignored.

Another point that cannot be overlooked is the fact that the developing countries such as South Korea, Taiwan, Thailand, etc. all tend to buy more from Japan than vice versa. It could be that, with preferences in effect, these countries will attempt vigorously to correct their trade imbalances. If this happens, the upping of imports of increasingly better quality from the LDC is likely to have a repressive effect on local manaufacturing.

Collisions in Third-Nation Markets

But the biggest blow to Japan will fall in third-nation markets, particularly the United States, where competing with the developing countries will be no easy matter.

Japan's pattern of export trade has shifted in recent years to predominance of heavy industrial and chemical items. But the importance of sundries and textile goods, in competition with the LDC, remains high. Furthermore, Taiwan and other countries are rapidly catching up in the production of such items as radio and televisión sets.

It can be seen from Table 2, showing the state of

1. Preferences Systems of the Leading Nations

Japan

Formula Ceilings

Excepted items

Petroleum & petroleum derivatives

Leather clothing, animal glüc & gelatine, rubber & plastic footwear, silk fabrics, ply- wood, Fick yarn. Petroleum & petroleum derivatives

Tariff Reduction

Duty-Free (except for 57 items, for which tariff rates will bc halved)

Duty-Fice

UL.S.A.

Escape Clause

Textile fibers (excluding fax and sik)

Shoes

ERC

Ceilings

Certain primary products Primary products Ceriam processed farm

Duly-Free

produce

Petroleum & petroleum

derivatives

Escape Clause

Cotton, wani & synthetic

tales produek

14.

Great Britain

Scandinavian Countries

Escape Clause

Piscal total dema

Duty-Free

None (but if excluded by other Duty-Free leading nations, texime products, glas producis)

competition between Japan and the LDC, that the variety of products covers an extensive range. There are such sundry goods as toys, footwear, metal flatware, pottery and porcelain goods, baseball gloves and mitts, wigs, and apparel accessories; secondary textile manufactures such as cotton fabrics, knitwear, and shirts; and lumber products such as plywood. In addition, there are such electrical home appliances as radio and television sets.

With baseball gloves and mitts, for example, Japanese manufacturers produced in 1969 a total of 6,260,000 pieces, of which 18 per cent went to the local market, and 62 per cent went overseas. Of the quantity exported, the American market took 92 per cent. Although the Japa- nese product predominates, Taiwan and South Korea are making notable inroads. With this product, requiring much hand labor, the labor cost differential is a decisive factor. If the United States import duty, now at 15 per cent, is cut back to zero, Taiwan and South Korca will surge ahead in no time. Consequently, the Japanese manufacturers are working to have the United States. exclude baseball equipment from the preference arrange-

ment.

While in the case of toys there is not much worry about competition in the Japanese market, our toy manufacturers cannot win in the United States with medium- and low-grade products. Big United States toy makers such as Mattel, Stanton, Ruth Marks, and Ideal are manufacturing in Hong Kong, and are extremely strong. H the United States removes the 15 to 18 per cent duty on the Hong Kong toys, there will be no way of fighting back. Our toy makers, dependent almost 60 per cent on export sales for their livelihood, are understandably frightened. However, the United States, despite pressure from Great Britain, appears to be in favor of excluding Hong Kong from its list of preference recipients. Develop- ments bear watching.

With metal flatware, the problem is compounded by the United States moves to revive the import quota system for this item. So the city of Tsubame is on tenterhooks. In the past two or three years, the inroads made by Taiwan and South Korca have been big. So, if the preferences and quota systems come together as one-two punches, Japan's share of the American market may decline sharply. Industry representatives are now in the United States, presenting their woeful case.

South Korea Now Leads in Plywood

The plywood industry is where a fatal blow is most feared. Japan's share in the American market is already smaller than that of South Korea, while Taiwan is pressing hard. Evans, the big American firm is in business in South Korea, with facilities reportedly better than any in Japan. Rermier Hime me still many molbom skool stul samall opiators in Japan, dhe mendgė unipaik joor plant lo trus than half that of South Korea. The capability gap is big. So if South Korea and Talwan get the benefit of a

THE ORIENTAL ECONOMIST