ENG-1986 — Page 96

INDUSTRY AND TRADE

External Commercial Relations

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Hong Kong believes in free trade. The aims of Hong Kong's external commercial relations policy are thus to safeguard its rights and to discharge its obligations in the pursuit of free trade. The most important of these rights and obligations are contained in the General Agreement on Tariffs and Trade (GATT) and the Multi-Fibre Arrange- ment (MFA).

Textiles

Textiles trade is the major sector that has been hardest hit by restraints. Bilateral agreements negotiated under the MFA govern Hong Kong's textiles exports to Austria, Canada, the European Economic Community (EEC), Finland, Norway, Sweden and the United States.

The 1983-6 textiles agreement between Hong Kong and the EEC which governed Hong Kong's exports of cotton, wool and man-made fibre textile products to the 12 member states of the EEC expired at the end of 1986. Following several rounds of intensive consultations with the EEC during the year, a new five-year agreement was reached covering 1987 to 1991. It contained some useful if modest requirements over the previous agreement.

The bilateral textiles agreement between Hong Kong and Switzerland which provided for an export authorisation arrangement for Hong Kong's exports of certain clothing items to Switzerland was terminated on April 1. The agreement was first concluded in 1975 and had since been renewed on an annual basis. The termination was secured after bilateral consultations with the Swiss Government.

The agreement between Hong Kong and Finland expired in December 1986. Negotia- tions in September led to a new agreement of five years' duration.

The bilateral agreement with Austria is due to expire in January 1987. Negotiations with Austria in November resulted in the extension of the agreement with some improvements for a further period of three years.

In February 1986, the United States requested Hong Kong to hold bilateral discussions concerning Hong Kong's textile exports to the United States, despite the fact that the existing agreement was not due to expire until December 1987. Following three rounds of negotiations, a new United States/Hong Kong Textiles Agreement was concluded on June 30, 1986. The new agreement, which modifies and extends the 1982-7 bilateral textiles agreement, covers a period of six years with retroactive effect from January 1, 1986. The main features of the agreement are the extension of coverage to silk blends and other vegetable fibres and the introduction of a group structure with individual group limits. The agreement further tightens restraints on Hong Kong's exports of textile products to the United States.

The Textile and Apparel Trade Enforcement Bill (generally known as the Jenkins Bill) which posed a serious threat not only to Hong Kong, but to world trade in textiles, was vetoed by the US President on December 17, 1985. Subsequently, a vote by the US House of Representatives on August 6, 1986 failed by a narrow margin to override President Reagan's veto. The bill, if enacted, would have reduced Hong Kong's textile exports of cotton, wool and man-made fibre to the United States by about 13 per cent and other fibre textile exports by possibly as much as 70 per cent. The closeness of the vote demonstrated the strength of protectionist feeling in the United States Congress.

The bilateral textiles agreement between Hong Kong and Canada covering the five years commencing 1982 expired at the end of 1986. Four rounds of consultations were held in