1
economies would have on European demand. Consequently their warehouses were bulging by February 1977 and imports have been slack ever since. It follows that 1976 is a very good year for Hong Kong to use as a base year, no matter how miserly the subsequent growth rates from that base.
6. I have not had sufficient time yet to work out the full quota utilisation rates for 1977 and to compare these with the propsed 1978 'worst' limits but I think it relevant to mention, for instance, that in the "knitted underwear etc!! category Hong Kong exports so far this year are 16.6%* below the same period for last year while the EEC's initial offer was for a 22.5% cut (below 1976 levels). EEC imports of "outerware" (most of the rest of "clothes") are down by 24.9%* so far this year while the initial EEC proposal stipulate cuts ranging from 5.5% (for trousers by far the biggest market) to 28% for Jerseys (but see later for the EEC's likely best offer). As for textiles Hong Kong exports of cotton fabrics to the EEC are roughly
30% below last year's half-way '
figure while the EEC initial proposals call for a 28% cut.
7.
To summarise the worst position: most if not all, unemployment and reduction in output that would occur by the imposition of EEC quotas has already occurred due to the stagnation of European economies. If things become worse it will not be because of Brussels bureaucrats but because of free market forces.
8. The best. Mr Stern of EID(E) has confidentially revealed an outline of the EEC's likely best offer for 1978. These figures (which should on no account be revealed to Hong Kong) show that if Hong Kong could utilise its quotas fully exports of textiles and clothing would decline by only about HK$ 364,000 - approximately 1.5% of the 1976 production, giving a maximum of 5,800 people unemployed (0.3% of the total labour force).
C
9. Caution may be necessary in advancing these arguments too strongly since Hong Kong might contend that the concessions offered by the EEC are in categories where they cannot take advantage of the increase in quotas the above arguments assume that Hong Kong will be able to take full advantage of the EEC's quota for synthetic fabrics which at 10,000 tonnes for 1978 is considerably above the 1976 level of 6,678 tonnes. (This is a typical negotiating ploy, which might, in that case backfire on the EEC if Hong Kong actually can increase its production - however synthetic fabrics are only 7% of the total imports being considered here.)
10. Whence Hong Kong's extravagent claims? We cannot deny that the potential for growth of exports to the EEC is limited; the initial proposals give an average annual growth rate of 1.3% from 1978 to 1981. But the EEC's proposals will not positively create unemployment. How then did Hong Kong arrive at its '2% unemployment', a reduction of 1.5% in GDP etc? It seems these figures arose
*
Source: Table, 13 Hong Kong External Trade August 1977
CONFIDENTIAL
די
/by
No comments yet.
Private notes are available after approval.