TNAG-0250-FCO40-286-Discussions-on-EEC-negotiations-between-officials-of-Hong-Ko-1970 — Page 192

DRAFT

HONG KONG'S REACTIONS TO THE PROSPECT OF A TARIFF ON C.P.A. COTTON TEXTILES

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Although Hong Kong has taken every opportunity to express its

opposition to the introduction of a duty on C.P.A. cotton

textiles, our expectation is, as mentioned in paragraph 4 above,

that she will maintain or even increase her exports to the

United Kingdom. The abandonment of the categorised quotas

will enable her to concentrate increasingly on garments and

th

other made-ups,, rather than the less profitable cloth s

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Making up in, and is likely to remain, a labour-intensive

industry where the low-cost producers will maintain their

advantage over the developed countries.

Hong Kong has recently taken the line that it makes no sense

for the UK to press ahead with the implementation of the tariff

decision, now that our entry into the Common Market seems so

much more of a certainty than it did a year ago. From Hong Kong's

point of view, the decision meant in effect that the common

as my in they suggested) os

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external tariff was being introduced 17 years earlier than

necessary, and without declage. We are told that an assessment

of the effect of the tariff on Hong Kong (which the Governor

originally hoped to forward to us last March) is being

considered by the Hong Kong Textile Advisory Board; and it is

said to show that exporters are now much more doubtful about

their ability to compete over the tariff than they had been at

first. But contradictorily, Hong Kong has also hinted that

from the beginning of 1972, Hong Kong, Taiwan and South Korea

would flood this market at unprofitable prices if necessary

on a consignment basis to build up performance against the

possible re-introduction of quotas (whether or not the UK

went into the EEC). Hong Kong representatives are therefore

likely to argue that, bearing all these factors in mind,

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it would be in everyone's interest to postpone the introduction

of the tariff, implementing it only if and when it became

clear that the UK was not going to get into the Common Kurkel,