ENG-1963 — Page 114

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INDUSTRY AND TRADE

apparently taken with the intention of controlling possible tran- shipment of Japanese goods to Nigeria through the Colony. Repre- sentations were made through the British Government, and these pointed out that adequate safeguards against such transhipment existed in the local system of certification of Hong Kong origin. Assurances were received that licences would be issued without restriction for Hong Kong goods, but the position remains unsatis- factory because of its discriminatory nature.

Turning to the very special problem of cotton textiles; following negotiations between the British and Hong Kong industries in 1958, Hong Kong entered into an undertaking, effective from 1st February 1959 and to apply for three years, to limit annual exports of cotton textiles to Britain to an equivalent of 164 million square yards. This undertaking was subsequently renewed for an 11 month interim period from 1st February to 31st December 1962 and later was extended again for a further three years from 1st January 1963 with an increased annual maximum equivalent of 185 million square yards. Within this overall quota level, there is a broad sub- division into two categories, namely, piecegoods and made-ups (including garments). Hong Kong voluntarily introduced further sub-divisions in the piecegoods category, separating loomstate (grey) cloth and finished materials and in the made-ups category by providing separate quotas for towels, pillowcases, other made- ups and garments. During 1962 agreement was also reached on the inclusion in the undertaking of cotton yarn and exports of this commodity were brought under quantitative control during the second half of 1962. This was the position at the beginning of 1963, with all cotton textile exports to Britain under restraint and subject to an overall yardage ceiling, allowing for no annual growth, but within which there was considerable scope for quota holders to adjust their production to meet changing British con- sumer demand. There was also provision for a six months carry- over each year to allow maximum utilization of quota.

The Hong Kong/United Kingdom Cotton Undertaking has un- doubtedly contributed to slowing down the expansion in productive capacity which characterized the development of the textile in- dustry between 1953 and 1962. Whilst this is unfortunate from Hong Kong's point of view, it has been recognized by the Hong Kong Government and by the textile industry, whose views are made