ENG-1965 — Page 83

INDUSTRY AND TRADE

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The Canadian Government again raised the question of an overall restraint on exports of all categories of fabrics for the 4th Long Term Year. This approach was rejected and subsequent con- sultations resulted in agreement to restrain exports of only seven further groups of cotton fabrics not previously subject to restraint. Restrictions on cotton nightwear exported to the Federal Republic of Germany remained in force with the minimum annual growth factor of 5 per cent being added to the previous year's level.

At the request of the Italian Government, restraints on exports were introduced in March in five categories of fabrics. Hong Kong, however, had shipped only about 5 per cent of the quota set by the end of the year, and it was therefore agreed that the restraints should be discontinued in 1966.

Outside the Long-Term Cotton arrangement, Hong Kong's exports of cotton yarn, cotton piecegoods and clothing to Britain were limited under an undertaking-originally entered into in 1959, but revised in 1962 and extended to 31st December 1965-to an annual equivalent of 185 million square yards in terms of cloth and 6.3 million pounds of yarn. Within this overall quota there were four broad divisions, later subdivided into 34 product cate- gories. Exports under 19 of these categories were limited to specified maximum export levels in 1965. The undertaking provided for carry-over of un-utilized quota balance for shipment during the first six months of the subsequent year. The uncertainty arising from the import surcharge, coupled with slack trading con- ditions in Britain, resulted in only half of the 1965 quota being shipped by the beginning of October. The Board of Trade then announced that, in its view, the carry-over provision ceased to operate upon the expiry of the 1963-5 cotton undertaking. This announcement caused dismay in Hong Kong and the Governor flew to London to hold discussions with the Board of Trade. The Board of Trade refused to alter its stand. This denial of carry-over led to increased emphasis being placed in Hong Kong on produc- tion for Britain, in order to ship goods before the termination of the undertaking at the end of the year. In fact, the full quota was shipped in time-although this was only accomplished by some switch of trade from garments to piecegoods, which resulted in lower export earnings than would otherwise have been realized.