TNAG-0304-FCO40-340-Effects-of-tariffs-on-imports-of-cotton-textiles-to-UK-from--1971 — Page 58

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because some garment manufacturers, in anticipation of the cancellation of quotas, will have ordered and taken delivery of cheaper fabrics from non-Hong Kong suppliers;

smaller factories, without the widely diversified export outlets of the larger companies, will be par- ticularly vulnerable;

pricing policy will have been decided on the assump- tion of no quotas. These prices will have been pitched at a level designed to reduce the impact of the tariff and, at the same time, to make Hong Kong goods competitive in the face of the new competitive situation expected in the British market.

On the other hand, there will be the following offsetting ad-

the British decision will mean that Hong Kong's Asian competitors (principally Taiwan, South Korea and Singapore) will continue to be limited to rela- tively small amounts under the global quota system. On the other hand, Hong Kong will have its access rights totalling some 200 million square yards;

with the dismantling of quotas, there was a strong possibility that the harmonisation of British policy on cotton textiles with the EEC's common commer cial policy would entail not only the reimposition of quotas, but also at significantly lower levels than at present. Negotiations relating to the harmonisation of British and EEC policies are likely to take place during the course of next year and it will now be much more difficult for HMG to agree to reduce the Hong Kong quota;

the raising of the tariff on woven cotton textiles to a rate which closely equates with the tariff on man- made fibre textiles should mean that, within the quota, supply will now follow more closely market demand. Up to now, the large cotton quota, the incentives established for its utilisation and the zero tariff on pure cotton goods, has meant that British buyers have bought 100% cotton goods from Hong Kong and cotton/man-made fibre blends from other sources, The result has been that Hong Kong's past performance in man-made fibre textiles in the British market has been relatively poor. Hong Kong can now be expected to ship more cotton/man-made fibre and pure man-made fibre textiles to Britain and thus attain better man-made fibre performance figures. This will be of assistance should it be necessary to negotiate with HMG on quotas for man- made fibre textiles;

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