TNAG-0302-FCO40-338-Effects-of-tariffs-on-imports-of-cotton-textiles-to-UK-from--1971 — Page 119

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5. In explaining the increase in imports of woven cotton cloth this

year, there are special factors to be taken into account. Late

shipments against 1970 quotas arriving in 1971 swelled the import

figures at the beginning of the year while the ending of duty free

imports from the Commonwealth at the end of this year must be

encouraging traders to make the maximum possible use of this year's

quotas. Nevertheless there is evidence to suggest that in the period

since devaluation in 1967, which put up the price of imported cloth and

may have contributed to the fall in imports in 1969 and 1970, overseas

suppliers have held their prices much steadier than UK producers whose

prices rose by about 20% between 1968 and 1970. Since the rise in the

price of raw cotton has probably been much the same for all suppliers,

this must reflect increased costs of production in the UK compared with

overseas. If this is a cause of the present situation, the new tariff

on imports from the Commonwealth next year should provide some relief

although in the longer term the problem might recur if UK production

costs again got out of line. UK manufacturers, however, voice an

additional short term fear that imports are quicker to respond to

increases in home demand and may therefore be expected to increase

further when the expected economic recovery eventually works through

to the textile industry.. We believe that price/volume relationships

may lend some substance to this fear and the tariff could be less

effective in correcting this type of situation if it arose after the

removal of quotas. (We would hitherto have proposed to meet such a

situation by invoking the 'formula' for considering reimposition of

quotas contained in the original statement announcing the new policy.)

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6. The increase in imports of woven man-made fibre fabrics in 1971 is

substantial but comes mainly from EFTA and the EEC rather than from low

cost sources. Demand on home production of woven mmf cloth has declined

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