We shall wish to remind Hong Kong gently that, in making the tariff decision, we were motivated by much wider policy objectives than, for instance, the interests of individual Commonwealth countries. Nevertheless, in making the decision, we had it very much in mind that, according to our best projections, the trade of the developing Commonwealth, taken as a group, should not be adversely affected. It remains our view that within that group, Hong Kong should (as the Hong Kong industry itself appeared earlier to think probable) be in a position to increase the quantity it exports to the U.K. considerably.
Fisons
We should refuse to be drawn into compan' of landed prices
(a) because they are not strictly relevant to the basis on which the tariff decision was made. Even if (which we doubt) Hong Kong prices prove to be uncompetitive after the application of the tariff, we could not regard that as a reason for reversing the decision. Hitherto, Hong Kong has (with abilaterial quota of 190m sq.yds a year) commanded (with India) a dominating position in the UK market for low-cost cotton textiles. But she has no prescriptive right to insist that we should continue indefinitely to protect her from any dange in the pattern of our imports.
(b) in any event, we do not consider that comparisons of landed prices are meaningful - the import statistics group together ranges of products in many instances, and give no indication of the quality of the goods.
If we were indulgin in such comparisons however, it would be possible to show that Hong Kong prices would still be competitive in a rumber of sectors, even if she did not absorb the tariff, Men's and boys' trousers are a case in point. In Jan/Hov 1970, Hong Kong supplied us with 9.3m pairs (out of total UK imports of 13.2m pairs). The average import prices were
Hong Kong
+ 17% duty
India + 17% duty Pakistan 12
tt
Portugal (no duty)
S Korea Taiwan
$
9
11
11
26
22
No imports No imports
d
4/6
Hong Kong's position looks pretty unassailable here, But, as mentioned above, it would be a mistake to be drawn into detailed arguments on figures of this sort, which are open to many different interpretations
(c) also we have had complaints from importers and seen documentary evidence that Hong Kon exporters change a quota premium of several pence a square yard as compared with prices for process and re-export cloth. This premium is commonly in the range 4d 8d, but may rise as high as 11d. This represents additional profit, on top of the margin of profit which must be included in the process and re-export price. It is difficult to believe, in views of this, that Hong Kong exporters could not absorb the tariff and still make a reasonable margin of profit
(a) · it should also be remembered that our expectation is that Hong Kong will take advantage of the removal of the categorised quotas to move increasingly out of yarn and cloth into the more profitable made-ups sector. The Governor ducks this by saying "it was not possible to obtain information about landed prices for cotton garments." It is also significant that, whereas he quotes average profit margins for yarn and piecegoods, he gives none for garments
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