TNAG-0334-FCO40-370-Visits-of-Secretary-of-State-for-Foreign-and-Commonwealth-Af-1972 — Page 23

CONFIDENTIAL

SECRETARY OF STATE'S VISIT TO HONG KONG

FEBRUARY 1972

COTTON TEXTILES

(DEFENSIVE)

Brief No 7

1. British imports of cotton yarn and woven cotton textiles from

developing countries have been subject to quota restrictions for a

number of years. India and Hong Kong have bilateral quotas and there

is a global quota for all other developing producers. In 1969 HMG

accepted a recommendation of the Textile Council to discontinue these

quotas with effect from 1 January 1972 and to impose a tariff on

imports from the Commonwealth Preference area. It was made clear at

the time, however, that recourse to quotas might be resumed if total

imports rose above present levels to the extent of causing disruption

of our own production of particular products.

2. On 8 December 1971 (overseas governments were informed on

1 December) Ministers announced that we should have both tariffs and

quotas in 1972. The reasons were the unemployment situation in

Lancashire; the realisation that the UK would be required to

operate quota restraints immediately on joining the EEC; the risk

of diversion of textiles to Britain as a result of American agreements

with Asian suppliers of non-cotton textiles; and the evidence of a

large build-up of orders already in the pipeline for 1972 (our current estimate is that this is at least the equivalent of 30% of the yardage

allocation for all the restricted countries).

3. We expected that Hong Kong would react strongly to the British Government's decision; and so it proved. The Colony's trade

associations in particular have criticised our action as being a

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CONFIDENTIAL