3. Mr. Cater referred to the Governor's Saving Despatch of 8th January 1971 which set out Hong Kong's views on the effects that the imposition of a tariff on her trade in cotton textiles with the U.K. would have.
A survey had been undertaken by an Advisory Committee to the Hong Kong Textiles Advisory Board oovering 416 companies which accounted for 96% of the Cotton Textiles trade with
Britain in 1969. This survey had shown that a large number of firms were dependent on the U.K. market and would need time to adjust to conditions after the imposition of the tariff. In yarns and piece goods the trade was dominated by a small number of firms, but in garments and made-ups there was a large number of small businesses which would be placed at risk. A copy of the report of the survey would be made available to the U.K. Government. Hong Kong considered that the improved prospects of U.K. entry into the E.E.C. represented a change in the circumstances in which the original decision to impose a tariff had been taken in 1969 and that this decision should now be reconsidered and postponed at least until the position on E.E.C. entry was resolved.
4. The D.T.I. replied that the decision to impose a tariff had been carefully weighed in 1969 and reaffirmed by the new Government last year in full knowledge of the impending negotiations for E.E.C. entry. The policy was designed to encourage the Lancashire industry to improve its own performance and any postponement of the tariff or continuation of the present ineffective quota restrictions would create further difficulties particularly for those sections of the industry whose investment and forward planning had been geared to the change. The effect would be to reintroduce uncertainties about future policy which the early announcement of the decision had been designed to remove. It was recognised that some opinion within the Lancashire industry favoured both tariff and quota protection and that this situation might arise after UK. entry in the E.E.C.. but until that time the Government fully intended to avoid it and to rely on tariff protection alone from 1st January 1972..
5. Hong Kong took the view that the U.K. would be forced to reimpose quotas either on entry to the E.E.C. or because of a massive influx of low-cost cotton textiles soon after the removal of restrictions. The E.E.C. had recently concluded a new series of three year restraint arrangements with low-cost suppliers and a copy of the agreement with Hong Kong would be made available to the U.K. Sources within the E.E.C. doubted whether free circulation of cotton goods within the Community would be achieved in this period which implied a further extension of quota restrictions to which the U.K. would be expected to conform on entry. The D.T.I. accepted that the U.K. would have to adopt the Common Commercial Policy at that stage although it was still not possible to be certain, what form it would then take. The U.K. hoped to be able to influence this after entry. But this was not an argument for continuing to accept duty free entry of cotton textiles from the Commonwealth up to that date. U.K. entry into the E.E.C. not certain and in any case duty-free entry in the meantime would continue to weaken the efficiency of the U.K. industry which in or out of the E.E.C. was a matter of great importance.
6.
was
On the question of the reimposition of quotas in the short term in the face of a sudden influx of low-cost imports after liberalisation, the D.T.I. replied that any suppliers which set out to disrupt the U.K. market knew that they ran the risk of retaliation under the L.T.A. The President's statement of July 1969, however, laid down that the U.K. would only reimpose quotas on particular products if there was a rise in total imports of cotton textiles as well as disruption in the particular sector. These represented stricter conditions than were laid down in Article III of the L.T.A. and meant that the U.K. would tolerate increased import penetration in one sector detrimental to the U.K. industry if this was balanced by relief for.K. industry in other sectors.
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