ENG-1979 — Page 45

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INDUSTRY AND TRADE

precious and semi-precious stones; watches and clocks; electrical machinery, apparatus and appliances; and clothing. The main countries of origin of these re-exports were China, Japan and the United States. Japan continued to be the largest re-export market, followed by the United States, Singapore, Taiwan and Indonesia.

International Commercial Relations

Hong Kong's external commercial relations are conducted by the Trade Industry and Customs Department within the framework of a basically free trade policy. Hong Kong practises, to the full, the rules of the General Agreement on Tariffs and Trade (GATT), and virtually the only restrictions maintained on trade are those required by international obligations. Most prominent among these are restraints on textile exports to most major trading partners. All these restraint arrangements come under the umbrella of the Arrange- ment Regarding International Trade in Textiles, commonly known as the Multi-Fibre Arrangement (MFA). A feature of the MFA is the Textiles Surveillance Body (TSB) which supervises its implementation. A Hong Kong representative sat on the TSB as a full member in 1979.

As a result of negotiations under the MFA, bilateral agreements were concluded during the year with Austria, Sweden and Switzerland, while the agreement concluded with Finland in 1978 is effective until July, 1980. Under the terms of the agreements, exports of certain textiles from Hong Kong to these countries were placed under restraint or surveillance. A textile agreement between Hong Kong and Canada came into effect on January 1, 1979. The three-year agreement covers most of Hong Kong's exports of cotton, man-made fibres and wool textiles to Canada.

The current bilateral agreement with the European Economic Community has a duration of five years from January, 1978, and covers all of Hong Kong's exports of cotton, man- made fibres and wool textiles to the EEC. Exports in 42 categories of textile products are under specific restraint, while exports in the remaining categories are subject to the Export Authorisation System operated by the Trade Industry and Customs Department.

During the first half of the year, three rounds of textile consultations were held with the United States in accordance with the terms of the Hong Kong/United States Textile Agreement. As a result of these consultations, Hong Kong decided that in 1979 it would not use the carryforward provisions of the agreement for most of the apparel and wool product categories, and that it would not need to use the 1978 carryover of unshipped quantities of fabrics and yarns. Several specific categories of apparel had restraints lifted from them, and an improved consultation clause concerning products not subject to a specific restraint limit was secured.

During the second half of the year, further textile consultations were held with the United States, at which the United States sought certain concessions from Hong Kong regarding the use of flexibility provisions contained in the bilateral agreement. No agreement was reached and consultations were scheduled to resume in January, 1980.

The Hong Kong/United States administrative arrangement on trade in certain non- rubber footwear, which came into effect in October, 1978, provided for a review of the arrangement not later than June, 1979. During the review, Hong Kong declined the United States' request that Hong Kong should consider specific mechanisms to limit the volume of its exports of non-rubber footwear to the United States, but agreed to take additional administrative action.

Norway introduced global import quotas on various textile items on January 1, 1979, under Article XIX of the GATT. Hong Kong had examined the Norwegian action, and

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