TNAG-0629-FCO40-777-Effect-of-GATT-Multi-Fibre-Arrangement-on-Hong-Kong-negotiat-1988 — Page 107

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5.

5.1

CONFIDENTIAL ##

13

Effects of a cut-back in trade potential

on the gross domestic product-

As the size of Hong Kong's domestic exports

is roughly equal to the size of the gross domestic product, the initial impact of the limits proposed by Mr. Tran, apart from lowering the growth in exports by almost one and a half percentage points (paragraph 2.3.1 above), would be to lower the growth in Hong Kong's

gross domestic product by the same amount. Again, this

has to be seen in the context of the possible cut-backs

in quota levels in agreements with other countries

following the example of the EEC (section 3 above).

5.2

Although lower imports of textile materials

and textile machinery could compensate for some of the effects the decline in exports would have on the gross

domestic product, growth of the gross domestic product would also be affected (the "multiplier effects" by consequential lower investment and lower consumption

(because of lower incomes).

5.3

Performance of the economy so far in 1977

As the

provides a misleading view of the possible impact a cut in textile exports would have on the economy. growth in private consumption expenditure tends to lag behind the growth in incomes, a fairly rapid growth in consumption in 1977 generated by the rapid increase in

incomes in 1976 is providing the impetus behind the

forecast growth of 7% in the gross domestic product in

/1977

CONFIRANTI P. 429 ma