ENG-1985 — Page 86

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INDUSTRY AND TRADE

The current textiles agreement between Hong Kong and the EEC governs Hong Kong's exports of cotton, man-made fibre and wool textile products to the 10 member states of the EEC for the period 1983-6. To take into account the accession of Spain and Portugal to the EEC on January 1, 1986, consultations were held between Hong Kong and the EEC Commission in November on adjustments to the HK/EEC Textiles Agreement concerning Hong Kong's exports of textile products to the two countries.

The Hong Kong/Switzerland agreement which provided for an export authorisation arrangement for Hong Kong's exports of certain clothing items to Switzerland was extended in June for six months until December. The agreement was further extended in December for three months until March 1986.

In 1985, two major developments initiated by the United States threatened to disrupt and curtail textile trade from Hong Kong. Firstly, on March 19, the Textile and Apparel Enforce- ment Bill was introduced into the US Congress.--The Bill proposed substantial unilateral cut- backs in the export potential of most third world suppliers of textiles and apparel, while leaving the EEC and Canada unscathed. In the case of Hong Kong, the Bill would reduce MFA exports made under the United States/Hong Kong bilateral textiles agreement by about 13 per cent and non-MFA exports by an uncertain amount, possibly as much as 70 per cent. The Bill violated the spirit and letter of the Multi-Fibre Arrangement and would abrogate 34 bilateral agreements between the United States and developing exporting coun- tries. Hong Kong co-operated with the developing exporting countries in taking concerted action on a multilateral front to counter the Bill, and also made direct representations to United States legislators and officials. The Bill was passed by both the House of Representa- tives and the Senate, but, in December, it was vetoed by the President of the United States. The Bill typified the strong protectionist pressures at work in the United States during 1985. Secondly, following the interim regulations published in August 1984 on determination of origin for textile imports subject to bilateral agreements, the United States Government published the final regulations in March. Despite several rounds of consultations between the United States and Hong Kong, and a subsequent ruling by the Textiles Surveillance Body in Geneva favourable to the territory, the final regulations were not substantially moderated to address Hong Kong's concern. The sector most seriously affected by the regulations was the knitwear industry which had yet to adjust fully to the new rules on origin by investing in new knitting machinery and training new workers.

In addition, the United States/Hong Kong Textiles Agreement (1982-7) imposes specific quantitative limits on 49 categories of textile products. It also subjects all other categories to an export authorisation (EA) system. Under the EA system, the United States may seek consultations with Hong Kong with a view to establishing an appropriate level of restraint where it considers that imports from Hong Kong in respect of a particular category are causing disruption to the domestic market. During the year, the United States made four calls on Hong Kong, and consultations were held on all of them. Following consultations, limits on two calls were imposed and the other two calls were withdrawn.

The MFA is due to expire at the end of July 1986. In July, parties to the MFA began consideration of whether it should be extended, modified or discontinued. No decision emerged and discussions on the future of the MFA were continuing at year's end. Hong Kong participated fully in these discussions in close co-ordination with other developing exporting members - less developed countries (LDCs) of the MFA.

The year saw the establishment of the International Textiles and Clothing Bureau whose objective is to advance LDC interests in international textiles trade. Hong Kong is a founder member.