Reagan decides Asia's `four tigers' can fend for themselves. Ends trade privileges for Pacific dynamos
The United States has decided that Asia's ``four tigers'' should no longer be treated as pets. In a move that could signal a tougher trade stance by President Reagan, the White House announced that the President is ending special trade privileges enjoyed by Taiwan, South Korea, Hong Kong, and Singapore, effective Jan. 2, 1989. The result of Mr. Reagan's actions will be to raise tariffs on a wide range of imports, including Care Bears, pistachio nuts, wooden picture frames, jewelry, telephone parts, and small electrical components.
The actual economic impact of raising tariffs for these industrial dynamos is expected to be limited, however. A senior administration official estimated it would add about $400 million to $500 million in additional tariffs on about $10 billion worth of goods from these four nations. ``The impact on consumer prices will be very, very small if it can be measured at all,'' the official said.
The impact on the four countries should be relatively small, as well, says Penelope Hartland-Thunberg, an analyst with the Center for Strategic and International Studies. ``These countries will be able to absorb the extra tariff burden,'' she argues.
But Albert Lin, a spokesman for the Coordination Council for North American Affairs, a Taiwan organization, complained that a lot of small companies would be hurt by the action. Such Taiwanese exports as furniture, golf clubs, tennis rackets, and small batteries will be subject to higher tariffs.
Washington trade analysts pointed to the move as a political signal. ``I see this as a significant change in policy direction,'' says Clyde Prestowitz, a senior associate at the Carnegie Endowment for International Peace and a former trade negotiator at the Commerce Department.
The US, Mr. Prestowitz says, is frustrated by the reluctance of the Four Tigers to let their currencies appreciate as their trade balances have swollen. Last year, these four countries had a $35 billion collective trade surplus with the US.
Administration officials have also tired of shuttling across the Pacific trying to get Korea and Taiwan to open their markets still further to US goods. Last December, David Mulford, assistant secretary of the Treasury, went to Southeast Asia and complained that the currencies of South Korea and Taiwan were valued too low. Hong Kong and Singapore are considered ``free traders'' without significant restrictions on imports.
The trade action comes at a time when Congress is drafting a far-reaching trade bill, which would handcuff countries that do not admit US goods.
The White House immediately denied that the move was any form of punishment because of trade frustrations. Instead, administration officials said the decision was made because the four countries had ``outgrown'' what are termed the Generalized System of Preferences (GSP) which gave them lower tariffs than such industrialized powers as Germany and Japan.
The GSP program was begun in 1975 to help developing nations' trade. Once a country's per capita income reaches $8,500 per year, it automatically loses GSP benefits. This has happened to Bermuda, Bahrain, Brunei, and Nauru. But none of the ``four tigers'' currently have that level of income.
The GSP program, which totaled about $13 billion in 1986, gives lower tariffs to about 3,100 items made in 141 countries. It does not cover such key items as textiles, footwear, or many agricultural items.
Trade specialists were not surprised by the move. ``The pressure has been building for several years. This was not something where we got up and said let's hit these guys,'' explains Jeffery Schott, a former trade official and a research fellow at the Institute for International Economics.
In fact, in 1984 the US began a two-year review of which countries were sufficiently competitive to warrant removal of their GSP privileges. According to Mr. Prestowitz, the Office of the US Trade Representative and the Commerce Department pressed to remove the ``four tigers'' at that point.
However, the State Department pointed out that if these countries were graduated from the GSP, the US would also have to remove Israel from GSP status, which presented political obstacles. This problem was resolved last year when the US signed a free-trade agreement that removed GSP privileges from Israel but gave it low tariffs.
Many US business interests lobbied hard to keep the GSP for the Asian countries because many US manufacturers import components for electrical appliances that are assembled in the US. The administration, on the other hand, is determined to reduce the trade deficit, which swelled to about $165 billion in 1987. About a third of the deficit is the result of parts acquired from foreign suppliers.
The US trade representative's office received 400 letters - almost all opposed to the change. Ambassador Clayton Yeutter met with representatives of toy manufacturers and an import-export association. Even so, Christine Bliss, a lawyer for the GSP Coalition of US Businesses, complained, ``The administration has decided overnight to gut the GSP program without a single hearing on the issue.''
The action could presage a tougher US stance in the General Agreement on Tariffs and Trade (GATT) negotiations going on in Geneva. ``It could mark a signal to the GATT representatives,'' says Mrs. Hartland-Thunberg. The GATT is a treaty which governs a significant portion of the trade in the free world.
``We have always fudged the question of when a developing country becomes a developed one. Maybe it is time some of these countries met the obligations of a developed country,'' she says. Such obligations include the elimination of most trade barriers and the end of export subsidies.