TNAG-0240-FCO40-276-Entitlement-of-Hong-Kong-to-generalised-tariffs-preferences--1970 — Page 180

Further Note on Hong Kong in relation to a Generalised

System of Preferences (G.S.P.)

It seems probable that Hong Kong's position in relation to the

Generalised System of Preferences is not sufficiently understood in

Community circles and that, because of this, her case could go by default.

The purpose of this note is to try to demonstrate that it would not only

be in Hong Kong's interest, but in the Community's as well, for Hong Kong

to be included as a beneficiary in the EEC's preferences scheme. (General

background information and arguments in favour of Hong Kong being considered

"developing" were given in an earlier paper "Apercu sur Hong-Kong". These

arguments will not be repeated here).

2. The first point to bear in mind is that in 1969 as much as 42% of Hong

Kong's total domestic exports were sold in the United States, as compared with

about 11.5% in the present Community and about 11.6% in the United Kingdom.

Of the 42% going to the United States approximately 25% consisted of non-

textile, non-footwear products which fall within the scope of the U.S.

preferences offer. On the other hand, only about 3% of Hong Kong's total

exports are accounted for by non-textile, non-footwear products sold in the

Community, and about the same percentage in the United Kingdom. Roughly

speaking, therefore, the United States' market for products on which the

U.S. is considering granting preferences is over three times as important for

Hong Kong than is the market of even the enlarged Community for the same

products.

3. The second point is the effect of discrimination against Hong Kong and

in favour of her closest competitors, if this were to happen. Already,

under a system of MFN tariffs, Hong Kong is facing strong and growing

competition across the whole range of her exports to the United States from,

especially, Taiwan, South Korea, Singapore and Mexico. If Hong Kong were to

be denied preferences in the U.S. market and these competitor countries were

granted preferences, Hong Kong would continue to face tariffs of between 10

and.40%. while her competitors would receive duty free entry. Furthermore,

the effective tariff on the value added, as compared with the nominal tariff,

would be considerably greater, probably on average as much as twice these

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