TNAG-0464-FCO40-529-Entitlement-of-Hong-Kong-to-EEC-Generalised-Scheme-of-Prefer-1974 — Page 182

same range of products as our competitors. In the 15 items

where Hong Kong is being classified as super-competitive,

our competitors, notably Yugoslavia and South Korea, have

significant trade in 12 items. For the 18 items which

Yugoslavia is being classified as super-competitive Hong

Kong only has significant trade in 2 items (leather clothing

and glassware).

9. As pointed out in the Memorandum, reports from the trade indicate that the discriminatory treatment has already caused

diversion of trade in textiles and footwear to other

beneficiaries. It is not new trade which has been so

affected. Orders which EEC importers had previously placed

in Hong Kong have been diverted to other beneficiaries.

other words, the EEC has 'given' some preferences at the

expense of Hong Kong.

10.

In

This discrimination has not only affected export perfor-

mance in textiles (in 1973 we only used 67% of our EEC(9) textile quotas as compared with 94% in 1972), but it has also

had an apparently adverse effect on foreign and local invest-

ments in this sector. There has been no significant increase in textile productive capacity, and some expansion which might have taken place in Hong Kong has been diverted over-

seas. In other words, whilst one of the objectives of the

GSP is to. stimulate investment, the effect of GSP discrimina-

tion on Hong Kong has been to turn it away.

11. Hong Kong is totally dependent on its exports;

but as

a result of increases in the cost of its imported. (and duty

free) raw materials and of its labour, it is becoming less

competitive vis-a-vis its neighbours.

1

Employment in the

textile sector in the 1st quarter of 1974 was the lowest since

1972. The footwear industry has all but disappeared. Exports

5-

/of