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White House Panel: End Trade Privileges for Four Asian Nations

January 29, 1988

WASHINGTON (AP) _ The White House Economic Policy Council is recommending that President Reagan withdraw special privileges enjoyed by Hong Kong, Singapore, South Korea and Taiwan that contributed to soaring trade deficits, The Washington Post reported Friday.

The newspaper, citing sources that it did not identify, said Reagan is expected to approve the recommendation made by the panel Tuesday and supported by Treasury Secretary James A. Baker III.

Liz Murphy, a White House spokeswoman, said late Thursday that she did not know about the recommendation or what Reagan might do about it.

A telephone call to the White House press duty officer late Thursday was not immediately returned.

The total U.S. trade deficit with the four countries grew from $30.7 billion in 1986 to $37.2 billion last year, and now exceeds the U.S. deficit with Western Europe, which dropped from $32.7 billion in 1986 to about $30 billion last year.

Taiwan has the third largest trade surplus with the United States, behind Japan and Canada.

Under the recommendation, the four countries would be removed from the list of 140 less developed countries eligible to import many products into the United States free of duty under the Generalized System of Preferences, the Post said.

The duty-free status enables the countries to sell their products in the United States at lower prices, giving them a competitive edge. The four countires received a total of $5.3 billion in benefits under the program, U.S. Trade Representative Clayton K. Yeutter said a year ago.

The Post said its sources said Baker led the move after Hong Kong, South Korea and Taiwan resisted pressure to let their currencies increase in value against the dollar as the Japanese yen and currencies of other major trading partners have.

Although Singapore’s currency has risen in line with the dollar’s fall, it was included because its trade surplus also has grown, the paper said.

Earlier this month, Yeutter met with South Korean Deputy Prime Minister Chung In-Yong for two hours in Washington but failed to resolve a threatening crisis in trade relations.

The discussion produced some Korean proposals but no decisions except agreement to continue consultations, said Yeutter’s spokeswoman, Kelly Winkler. The U.S. trade deficit with Korea last year ran more than $9 billion.

At the time, Peter Allgeier, assistant trade representative for Asia and the Pacific, said the United States would be unlikely to exercise its options under U.S. trade law as long as talks continued.

Regarding Taiwan, a report last November from the congressional Joint Economic Committee said that nation must refocus efforts to cut its lopsided trade surplus. The United States imported $15.7 billion more from Taiwan than it sold there in 1986 and accounted for 80 percent of Taiwan’s trade surplus.

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