TNAG-0462-FCO40-527-Entitlement-of-Hong-Kong-to-EEC-Generalised-Scheme-of-Prefer-1974 — Page 39

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WHILE IT IS THE VIEW OF THE HONG KONG GOVERNMENT THAT THE PRES

STATE OF THE HONG KONG FOOTWEAR INDUSTRY DERIVES FROM INTERNAL

WEAKNESSES AND THE REDUCTION IN COMMONWEALTH PREFERENCE IN THE UNITED KINGDOM MARKET (CP WILL CEASE TO EXIST BY 1 JULY 1977)

AND CANNOT BE DIRECTLY ATTRIBUTED TO THE DISCRIMINATORY MEASURES

MAINTAINED AGAINST IT IN THE COMMUNITY'S GSP, THE HONG KONG

GOVERNMENT BELIVES THAT THE INTRODUCTION AND CONTINUATION OF

THIS DISCRIMINATION IS A CONTRIBUTING FACTOR TO THE INDUSTRY'S

DECLINE.

AS FOR EXPORTS OF HONG KONG TEXTILES TO THE COMMUNITY, THE.... COVERNMENT WILL HAVE ALREADY NOTED THAT EXCEPT IN A SMALL NUMBER OF ITEMS HONG KONG'S TEXTILE EXPORTS TO THE COMMUNITY HAVE DECLINED

IN THE PAST TWO YEARS. THE HONG KONG GOVERNMENT BELIEVES THAT THIS

IS DUE IN PART TO THE EXCLUSION OF HONG KONG TEXTILES FROM THE

COMMISSION'S SCHEME AND IN PART DUE TO RISING PRODUCTION COSTS.

THE DISCRIMINATION HAS CAUSED BUYERS INCREASINGLY TO DIVERT

THEIR ORDERS AWAY FROM HONG KONG TO SUPPLIERS IN COUNTRIES WHICH ARE

BENEFICIARIES UNDER THE SCHEME, ALTHOUGH THE TARIFF QUOTA AND

BUTIOR SYSTEMS LIMIT THE EXTENT TO WHICH IMPORTS FROM EACH BENEFI-

CIARY WILL BE ADMITTED FREE OF DUTY, NONETHELESS WHEN ORDER ARE PLACED IN A BENEFICIARY COUNTRY THERE EXISTS FOR THE IMPORTER

THE POSSIBILITY THAT THE GOODS WILL BE ADMITTED FREE OF DUTY,

WHEN ORDERS ARE PLACED IN HONG KONG, THIS POSSIBILITY DOES NOT EXIST AND, INDEED, IS REPLACED BY THE CERTAINTY THAT THE FULL DUTY WILL HAVE TO BE PAID ON ALL CONSIGNMENTS. THE EFFECT OF THIS HAS BEEN TO

DIVERT ORDERS AWAY FROM HONG KONG AS NEW TRADE CONTACTS IN OTHER

DENEFICIARY COUNTRIES ARE ESTABLISHED, AND AT A TIME WHEN HONG KONG'S

COMPETITIVE POSITION IN TEXTILES IS ALREADY BEING STEADILY

ERODED THROUGH RISING UNIT COSTS. THAT THIS IS SO IS BORN OUT BY UNDER-UTILISATION OF EXISTING EXPORT RESTRAINT QUOTAS AND DECLIN-

IG VOLUME OF EXPORTS IN MOST TEXTILE ITEMS THAT ARE NOT SUBJECT TO

QUANTITATIVE LIMITATION.

IN VIEW OF THIS DOWNWARD TREND, IT IS SUGGESTED THAT THE SPECIAL SAFEGUARDS WHICH ALREADY APPLY TO TEXTILES UNDER THE COMM-

UNITY'S SCHEME WOULD BE SUFFICIENT TO CONTAIN ANY EXTRAORDINARY

MOVEMENT IN TEXTILE EXPORTS FROM HONG KONG.

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