TNAG-0938-FCO40-1157-Visit-of-John-Nott--Secretary-of-State-for-Trade--to-Hong-Ko-1980 — Page 28

BRIEF 3 PART I

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While manpower has fallen, productivity in the industry has improved significantly over the years, through technological changes and good industrial relations. As well as the rapid growth in manmade fibre production, the last thirty years have seen the introduction of many new techniques to spinning, weaving and knitting as well as the development of non-woven fabrics. Much of the textiles industry is now highly capital intensive, investment in the years 1973 to 1977 having reached nearly £1,000m. The industry has had to keep up with frequent and often unpredictable changes in the high volume fashion markets.

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The industry attributes its difficulties mainly to continuing pressure from imports from not only low cost but also certain developed countries; the slackness of demand in conditions of recession; the strength of sterling; and high interest rates. Attention tends to be focusses mainly on growing imports which have led to a strong deterioration in the overall balance of trade, from minus £4m in 1977 to minus £692m in 1979. Trade with low cost countries accounts for the bulk in deficit. The industry does not consider that the EC's Multi-Fibre Arrangement (MFA) has been as effective in limiting imports from low. cost sources as it had expected. The enlargement of the EC to include Greece, Spain and Portugal will further increase, access to the UK market for low cost textiles and clothing. As for developed countries, the increasing competitiveness of the US industry is of considerable concern in some sectors, as US producers benefit from controlled feedstock and process energy prices.

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There is substantial pressure on the Government to adopt a more protective stance on textile import controls. While new restraints are continually being introduced under the MFA regime, and two quotas have been imposed on distruptive synthetic fibre imports (notably from the USA), the scope for more widescale action is limited by the need to work via EC channels and the need to avoid putting our exports at risk. The major representative bodies in the industry are pressing for the renewal of the MFA (which expires at the end of 1981) on terms at least as strict and with clauses