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HK's success in the UK market. addition Hong Kong reaped the bene- fits of Commonwealth Preference. This was intended to grant preference to articles produced in and consigned from a Commonwealth country. Pre- ference was given to all Hong Kong manufacturers of which "at least 25 per cent of their value (the cost of the manufacture at the factory or works including the value of containers and other forms of interior packing or- dinarily sold with the article when it is sold in retail) is derived from materials grown or produced or from work done within a part of the British Empire.'
By 1965 domestic exports to the United States were virtually double those to the UK, and America was firmly into the top slot as HK's largest market. In terms of size and popula- tion, it was almost inevitable that the US would overtake the United King- dom, or very likely any other nation, as Hong Kong's chief source of income from exports.
Yet it might never have done so had HK industry remained static and con- fined its trade largely to traditional textile items. But by 1965, Hong Kong industry was approaching maturity. It had already diversified be- yond textiles, and was about to enter the era of vast expansion that charac- terised the latter half of the 'sixties. For ten years prior to this the UK had been the market in which Hong Kong had, as it were, cut its industrial teeth. Ironically, it was a restrictive move by the UK that in part helped HK to develop industrially.
To the
The Lancashire textile industry, in common with similar industries in most developed countries, was con- tracting at the time when Hong Kong's cotton textile exports to the United Kingdom were booming. During the decade 1958-68, the industry's labour force declined by 50 per cent. home industry, imports understandably were a threat. Although Hong Kong's exports of cotton cloth to the United Kingdom were estimated to be equivalent to only about eight per cent of total UK production, total exports of cotton goods were considerably larger and Parliament listened to the Lancashire industry's case. 1959 was the start of the quota era.
The initial agreement was for the limitation of shipments to the UK to an overall effective ceiling of 168 million square yards, of which 118 million would be piecegoods while not less than 45 million would be gar- ments. Today polyester cotton and cotton textiles are still exported to the UK under voluntary restraint, an agreement which through the years has undergone a number of modifica- tions. The quota system, despite its frustrations, has allowed for growth. And textiles is still the only item of trade subject to restrictions in the UK market.
Development
The restraint on cotton textiles was an impetus for the Hong Kong indus- try to develop into the garment busi- ness, which now accounts for half of Hong Kong's total domestic exports. Since quotas were measured by yard- age rather than value, the most
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