TNAG-0464-FCO40-529-Entitlement-of-Hong-Kong-to-EEC-Generalised-Scheme-of-Prefer-1974 — Page 64

is questionable and it is probably best not to get involved in

discussion of figures.

ii Trade Diversion

We doubt whether Hong Kong's total trade on GSF products will

be much affected. She already exports very large quantities of most of the products affected at the full duty rate, sometimes

4 or 5 times as much as the quota.

lished trade would be deflected.

It is doubtful if this estab-

Hong Kong also does not acknow-

ledge the opportunities that the 50 butoir - the rule for the

non-super competitive that will be open to her on other products will afford. We think that she could expand her exports in some

of these.

iii Non-exhaustion of Quotas to date

We share the Hong Kong view that the present level of butoir already

does its „ob. But so far quotas have not been exhausted more

because of "sterilisation" (some herber States do not use their quota shares at all) than by the inability of smaller developing countries to use then. Ending the qutoa sub division should we calculate bring a measurable though not large improvement in

smaller countries use of GSP,

Other Hong Kong Points

6

The Hong Kong Government argues against the proposals on the

grounds that they will reduce the stimulus effect of GSP on invest-

ment in developing countries. Our economists' view is that the stim-

in advantes as ulus effect of GF on investment is much less than offered by the

developing countries. But the investment stimulus of GGP probably

lies in the initial grant of preference rather than its continuance

at a fixed level.