President Reagan, going along with a Cabinet-level recommendation, agreed Friday to remove Singapore, Hong Kong, Taiwan and South Korea from the list of developing nations eligible to export a wide variety of goods to the United States without paying duties.
The move, which goes into effect in about a year, is expected to have only a relatively minor effect on consumers, since it would add less than $500 million in cost to products from the four rapidly growing Asian countries.
The decision would impose tariffs averaging about 5% on products that previously escaped any duties, with toys and computer parts among the products that would be affected by the action.
The White House, attempting to portray the decision in a positive light, said it was not aimed at punishing the countries for their swollen trade surpluses with the United States.
Wants Currencies Boosted
“This move should not be interpreted as penalizing any of the beneficiaries being graduated from the program,” presidential spokesman Marlin Fitzwater said in a statement. “On the contrary, it reflects the great economic successes they have had.”
But Administration officials acknowledged privately that the action was initiated by Treasury Secretary James A. Baker III largely because South Korea, Hong Kong and Taiwan have resisted U.S. pressure to allow their currencies to rise significantly in value against the dollar.
The Administration wants the East Asian countries--called the “four tigers” because of their rapid economic growth--to boost the value of their currencies at least 10% to 15% to help stem the flow of exports to the United States by making their goods more expensive in world markets.
$35 Billion Deficit
U.S. officials hope that the action, which they acknowledge is largely symbolic, will encourage the four nations to alter their economic policies in ways that will lessen their reliance on the U.S. market.
Although Singapore and Hong Kong have followed free trade policies and Singapore has not pegged its currency as closely to the U.S. dollar as the other nations, Administration officials decided to treat all the countries alike in ending their trade preferences.
During the first 11 months of 1987, the United States imported $52.5 billion in goods from the four Asian nations, chalking up a trade deficit with them totaling about $35 billion. Roughly one-fifth of the value of those nations’ U.S. exports entered the country duty-free as part of the Generalized System of Preferences program.
Under the GSP program, which began in 1976, imports of about 3,000 products from 141 developing nations can be brought into the United States without paying any tariff. Last year, the four Asian countries received about 60% of the benefits from the program, according to the White House.
“I’m not aware of any (of the four) that are enthusiastic about the decision,” said a senior Administration official, who admitted that they “expressed disappointment” with the move. Much of the opposition to the action came from U.S. companies, such as Apple Computer, that import parts and other goods from East Asia.
It was the first time that any nations have been removed from the GSP program by a specific Administration decision that they no longer deserve the trade benefits because of their economic performance.
Some nations, such as Chile and Romania, have lost such trade advantages because of human rights violations. Under the rules, countries are also dropped from the program when living standards rise to a relatively high level. But none of the four Asian nations has reached that point yet and South Korea and Taiwan are far below the standard.
TEETH OF THE ‘TIGERS’
Exported $11.1 billion in clothing, plastic goods, textiles, electrical goods, footwear and metal products to the U.S. in 1986.
Exported $10.8 billion in manufactured goods, petroleum, rubber and electronic goods to the U.S. in 1986.
Exported $13.7 billion in textiles, clothing, electrical machinery, footwear, steel, autos, ships and fish to the U.S. in 1986.
Exported $14.7 billion in textiles, electrical machinery, general machinery, metal products, foods, plywood and wood products and telecommunications equipment to the U.S. in 1985.
Sources: Direction of Trade Statistics; World Fact Book; Republic of China Reference.