CONFIDENTIAL #
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All this could mean an increase in the unemployment rate
of almost two percentage points. In addition, there would
certainly be secondary effects on employment in related
manufacturing and commercial sectors. The move of labour
into other industries would be hampered by the need to acquire
different skills. In any case, to keep unemployment down to
the 1976 level exports other than clothing and textiles in
such circumstances would need to expand twice as fast as
they did between 1973 and 1976.
6.
The consequences of a cut-back such as the EEC
is apparently envisaging, would be to reduce the growth of
the gross domestic product by almost one and a half
percentage points. This consequence would be accentuated
by the "multiplier effects" working through the other'
sectors of the economy.
7.
The effects on unemployment and on the growth
of the gross domestic product would, of course, be
increased to the extent that, as suggested in paragraph 4,
other countries took the EEC's action as a precedent.
8.
The consequences of the cut-back indicated by
the Special Representative must be treated as long term.
In spite of the Hong Kong Government's efforts to encourage
diversification into other manufacturing industry, the
manufacture of textiles and clothing continues to dominate
Hong Kong's industry. Nor would it be easy to find
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