TNAG-0462-FCO40-527-Entitlement-of-Hong-Kong-to-EEC-Generalised-Scheme-of-Prefer-1974 — Page 51

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19. Behind this view lies the fact that Hong Kong (as does Yugoslavia) accounts for a very high proportion of GSP trade perhaps 20% of the totel. It also has a very large min trado in most of its CSP exports, very often 2, 3 or 4 times the proferential trado. Thic demonstrates beyond doubt in Community eyes that Hong Kong is well able to export over the tariff.

20. It would be worth esking Er Jordan what he means by the statement that Hong Kong is not supercompetitive according to the trade figures.

21. Er Jordan is right to state that in most cases where the butoir has been applied the overall quota has not been exceeded. The quotas or ceiling were exceeded in 1973 only on 9 items, in only 3 of widch Hong Kong is a major cupplier.. Hong Kong's imports therefore cannot be said to block the access of zinor suppliers. we accept this so far.

22. Against this, Hong Kong's imports may offectively exhaust the quote share of a particular importing country. And the Commission says that it has had complaints from some developing countries about the difficulties anused to them by the most competitive exhausting the quotas..

23. Er Jordan expresses fear of trade diversion in products where Hong Kong has hit the butcir in 1972 and 1973. Against this one can point to the very high levels of ofn trade in mest of these products. On the 29 producta whore cho is a major supplier (over 20 of all boneficiary imports) the supplied S over half the Six's imports in 7 casos, over threo-quarters in 9 cases and

over 90% in 5 cases. It is not likely that trade of this magnitude could be diverted that easily, not least because of capacity problems.

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24.. Kr Jorĉan arguss that for most of Hong Kong'ɛ products there are alternative supplicis, who would benefit from any lowering of the butoir applied to Hong Kong, but that this does not apply to Yugoslavia. This is partly trust Yugoslavia supplies chemicals, kraft paper, bricks, flass products, iron arid sino rods, generators ca fiich there is no other Čeveloping country competition and to which they are not likely to diversify. But on many other products of which che is a prominent supplier, other ldo's supply substantial amounts as leather apparel, wood, basketwork, glasstare, sowing machines, batteries do. Hong Kong does face competition from other ldo's on cost of her CSP products. However, only in 7 sensitive products does competition from any one supplier exceed 10% of the Six's imports from bencficiaries.

Hong Kong'a remorandum

25. Hong Kong has since asked for our views on a memorandum they are proposing to deliver to the Commission and EEC governments supporting their case for better GSP treatment. (See the telegrams of 29 Karch at Amexes E and F).

26. Their note covers much the seme ground es ir Jordan's letter of 25 March. Again, the factual case set out is broadly correct. It is unlikely however that the note will help their cauce. Ao donomibod above, the climate in the Community is deeply unsympathetic towards Hong Kong and other highly competitive beneficiaries. Its aggressive tone may even prove counter- productivo, particularly with EEC governments.

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