b Similarly, if she were deprived of her large quota allocation (194 m sq yds in 1971) and of most of her CPA preference, Hong Kong would face increasing competition from aggressive competitors such as S Korea and Taiwan, both of whom have much lower labour costs and were limited under the 1966-71 scheme to very small quotas (1971 country quotas of 5.2 m sq yds and 2.6 m sq yds respectively).
On the other hand however,
j2
she recognised that liberalisation would mean that her exporters could move increasingly out of fabrics into the more profitable made-ups sector.
At Hong Kong's request, we had talks with her about the 1969 tariff decision in November 1970 and February 1971, but we made it clear we were not prepared to modify the decision or to compensate Hong Kong for any adverse effects it might have on her export trade. The recent decision however to have both tariffs and quota in 1972 actually improves Hong Kong' position by removing the difficulties at (a) and (b) above. India, who is similarly placed, has acknowledged this. In addition we have evidence from a number of sources that Hong Kong exporters are now insisting on re- negotiation of their prices for 1972; the Greycloth Merchant Importers' Association (who represent the interests of UK importers) are urging HMG to take over administration of the Hong Kong quota, or at least to make it a condition of continued administration by Hong Kong that existing contract prices should be maintained.
Hong Kong's case for special treatment
3 In judging whether it would be appropriate to make concessions at this stage to Hong Kong we should therefore bear in mind that the tariff and quota decision in fact presents certain advantages to Hong Kong (and to India); Hong Kong's case for concessions is to that extent less strong than that of the smaller Commonwealth restricted countries, some of whom are likely to be hard hit.
6
III NOTES ON THE PROVISIONS OF THE HONG KONG HEADS OF AGREEMENT
(see ANNEX II)
1
Levels
a
Cloth & made ups
185 m sq yda in 1966
(194 m sq yds in 1971)
based on trade in 1963 - 1965.
Extra yardage was allocated for newly-restrained products based on average trade in 1962
1964 (the present Group V)
2.3 m sq yds in 1966
b
Yarn
Bedade de valid
2
Growth
(2.5 m sq yds in 1971)
6.3
lbs in 1966
(6.6 m lbs in 1971)
1% per annum fro, 1967 onwards on the previous year's overall level, and for each Group and Category level.
3
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Private notes are available after approval.