TNAG-0304-FCO40-340-Effects-of-tariffs-on-imports-of-cotton-textiles-to-UK-from--1971 — Page 144

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Note for the Record

NOTE ON TALKS WITH HONG KONG ABOUT COTTON TEXTILES

6/8 DECEMBER 1971

1. In brief the Hong Kong case, as developed by Mr Haddon-Cave, was -

(a) HMG had found themselves in a 'peculiar"

position; so had Hong Kong. The Hong Kong industry had made plans for future production on the firm assumption that while they would have to overcome the tariff there would be no quantitative restrictions on imports into the British market during 1972.

(b)

(c)

(a)

Sir Murray MacLehose was in a most awkward position. He had only just assumed office as Governor. In his address at the time he took the oath of office he had made a point of saying that it would be his special purpose to do everything possible to maintain and indeed strengthen the prosperity of Hong Kong. This statement had already been picked up by the press in Hong Kong in connection with the rumoured retention of quotas in the British market.

The trade in cotton textiles between Hong Kong and the UK had been restrained for many years. A firm pattern had developed and certain firms in Hong Kong paid particular attention to the British market. These were the firms to which quotas were issued. The only way in which a firm without a quota could obtain a quota was by purchase in the market. The premium for quotas went up and down according to the state of the UK market for textiles.

When it was announced nearly two and a

half years ago that a tariff would replace the quotas from the beginning of 1972, the industry in Hong Kong began to adjust itself to the new conditions foreseen in the UK market, More recently contracts had been entered into for the supply of goods to British importers during the spring and summer of 1972. Many of the firms producing these goods did not have quotas or at least the right kind of quotas. It followed therefore that HMG's action in retaining quotas would frustrate a large number of business contracts. The Hong Kong delegation argued that to take care of this situation there should be additional yardage.

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