TNAG-0301-FCO40-337-Effects-of-tariffs-on-imports-of-cotton-textiles-to-UK-from--1971 — Page 156

T/OF

CONFIDENTIAL

HONG KONG COTTON TEXTILES

BRIEFING FOR KEETING WITH MR CARTER ON 1 FEBRUARY 1971.

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The Governor has proposed, and we have agreed, the following items for discussion:

(a) the probable effects on Hong Kong of implementation from 1 January 1972 of the policy regarding imports of Commonwealth cotton textiles which was announced by the then President of the Board of Trade on 22 July 1969;

(b) the further implication for Hong Kong of this policy in the light of Britain's application to join the European Economic Community;

(c) the case for reconsideration of the implementation of this policy in view of the uncertainties surrounding trading conditions as a result of the E.E.C. application;

(ă) other measures which might alleviate the adverse effects on Hong Kong trade which are anticipated.

We shall wish to make it clear at the beginning of the talks that, while we welcome the opportunity to hear Hong Kong's views on these matters, our rôle will be mainly a listening one. The Hong Kong side should not take it that, because we are very willing to have an exchange of views on the tariff decision, we are in any position to modify that decision. As Hong Kong knows, the present Administration has fully endorsed the policy laid down in the Crosland statement of July, 1969.

The Hong Kong side will no doubt wish to give us a fuller account of the survey undertaken amongst their manufacturers and exporters, in an attempt to assess the effect of the tariff. If time had permitted, we should have liked to have asked Hong Kong to have let us see the full survey, in time to analyse it before the meeting. As it is, all we have is the Governor's brief summary of the number of factories and workers dependent on cotton textile exports to Britain; and the comparatively low profit margins earned in the industry:

REGISTRY

"You will recall that in paragraph 2 of my Saving Despatch 237 of 24 February 1970 I informed you that the Hong Kong Textiles Advisory Board had set up an Advisory Committee to assess the likely effects of the new policy on Hong Hong's cotton textile exports to. Britain and in paragraph 3 you were notified of a survey of manufacturers and exporters then in progress. This survey covered 416 companies (manufacturers, manufacturers-cum-exporters and exporters) which accounted for 96% of the cotton textiles trade with Britain in 1969.

Some 294 of these companies were manufacturers, 169 of whom depended for over 70% of their business on Britain; and 60 of these for more than 90%. The 294 factories employ some 62,000 workers (31% of the work force in the textile industry as a whole) some 27,000 of whom are employed on work for Britain. All these manufacturers and their workers will be affected adversely to a greater or lesser extent by the decision to institute a tariff. Although exact figures are difficult to establish because of the variety and range of textile products, the survey indicated that whereas average profit margins in 1968 (the period covered by the survey) on goods entering duty free ranged from over 10% for yarns to around 5% for finished piecegoods, the application of the tariff, assuming the same 1968 costs and prices, would mean that the

NB Extracts from the Governor's Saving Despatch of 8 January 1971.

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