UK COTTON YARN IMPORTS
A CASE FOR THE RETENTION OF QUOTAS
BTEA COMM/196
1.
Although the industry's immediate concern is with the arguments for the retention of existing quotas on imports of cotton yarn after 1973, it is important to emphasise from the beginning that the UK cotton spinning industry is one part of an integrated multi-fibre, multi-process industry in which any one section is affected by adverse conditions in any other section.
2.
The adoption of EEC policies towards associate members and harmonisation with the Community's GSP policy will open the UK cotton yarn market to substantially increased imports, in particular as a result of the liberalisation of cotton yarn imports from the Mediterranean Associates. This measure took effect on 1 April 1973. The result is unlikely to be reflected in increased imports before 1974, when these countries will also have begun to benefit from reduced tariff barriers, with limited duty-free access. It is significant also that Turkey, the leading exporter of cotton yarns to the EEC Six, has planned substantial additional spinning capacity, to come on stream in 1974. The experience of the Six gives some indication of what may be expected - their imports of cotton yarn from the Mediterranean Associates were 15 658 tonnes in 1968, 41 418 in 1971 and 52 724 (30% of total imports) in 1972.
3. Any further immediate measures of liberalisation beyond those already announced would impose a severe additional strain on the yarn market in the form of price disruption as well as increased volume. India and Pakistan would be two of the principal beneficiaries of further liberalisation and would strive to retain their share of the UK market. In both these countries export prices are more influenced by political pricing policies than by any necessity to reflect production costs in export business. So long as such artificial practices continue to characterise export policies only quotas will serve to prevent intensified exploitation at unrealistic prices of the UK mark. There are indications that even in Hong Kong spinners have been unable to compete with Pakistan cotton yarn imports which have been landed there at prices barely covering the raw cotton cost.
4. The marked improvement in productivity in the UK in recent years has improved the relative competitive position of the UK industry even vis a vis Japan and Hong Kong. This success owes a great deal to the investments made by individual firms in the industry and to the co-operation of the Trades Unions in allowing investment to be used to full capacity. The current rate of technological progress requires continuing investment if the recent improvement is to be maintained. It is known that a resurgence of price disruption would force many companies to review their investment programmes. Any increase in imports from currently restricted sources would endanger the advances already made. On the other hand, if current investment plans can be brought to fruition, the effect of the present apparently inherent labour cost advantages of Asian suppliers such as India and Pakistan can be reduced. During the three years or so needed for the benefits of new investments to be realised, other factors may help to erode these cost advantages, as has happened in recent years with the narrowing of the gap in production costs as between the UK and Hong Kong and Japan.
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