TNAG-0302-FCO40-338-Effects-of-tariffs-on-imports-of-cotton-textiles-to-UK-from--1971 — Page 88

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. Revertheless there is evidence to suggest that in the period since devaluation in 1967, which put up t e 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 nearly 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 UN compared with overseas. (Imports are tending to leave Lancashire with relatively short-run orders; this raises the cost of production, since there is a direct relationship between price and volume of output.) If price differentials are a cause of the present situation, the new tariff on imports from the Commonwealth next. year should provide some relief although in the longer ton the problem might recur if UK production costs again got out of line. UK manufacturers, however, voice an additional short term feer that imports are quicker to respond to increases in home denund and may therefore be expected to increase further when the expected economic recovery eventually works through to the textile industry,

6. The increase in imports of woven man-made fibre falmics in 1971 is substantial but (apart from a sharp increase from Hong Kong) comes mainly from EFTA and the FC rather than from low cost sources. Demand on home production of woven mm2 cloth has declined less than demand on home production of woven cotton cloth perhaps protected to some extent by the continuing trend from increasinly expensive raw cotton to man-made fibres. Tic situation on this front is therefore at present somewhat different from that on imports of woven cotton textiles (although some new problems for the future are anticipated in the next section of this submission).

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