Feb 4, 1988


GENEVA, FEBRUARY 2 (IFDA)— Singapore, South Korea and Hong Kong complained in the GATT Council Tuesday about the U.S. decision to "graduate" these countries out of its scheme for generalised system of preference benefits to third world countries.

All three argued that among other things the U.S. actions violated part IV of GATT and the enabling clause, and the requirement that GSP schemes should be generalised, non-reciprocal and non-discriminatory vis-à-vis the third world countries.

The exclusion of these three, along with Taiwan, was announced by the United States last week.

According to the announcement, it is to take effect from January 1, 1989.

The subject was brought up in the GATT Council under any other business.

The Council took note of the statements but took no action.

It is open to any of the countries concerned to take up the issue more formally, as a dispute or in any other way, if they seek any formal action.

In raising the issue Tuesday, Amb. Chak Mun See of Singapore regretted that the U.S. action came at a time when the U.S. was making efforts "to encourage its trading partners to open up their markets and to reduce or eliminate their unfair trade practices".

The U.S. action would hence be sending "the wrong signal by the accelerated graduation of a free trading nation such as Singapore".

Ninety percent of U.S. exports to Singapore, he said, entered duty-free compared to 76 percent of Singapore’s exports to U.S..

Removal of U.S. GSP benefits would reduce Singapore’s duty-free exports to 45 percent.

"This imbalance of market access needs to be corrected not made worse", he said.

See noted that Singapore had been promised "a favourable package of GSP benefits" from July 1, if Singapore undertook specified actions with respect to copyright protection.

Singapore had implemented the actions requested, and received the favourable package of benefits on July 1. But now, less than seven months later, the U.S. was not only rescinding the more favourable GSP package Singapore had bargained for, but also removing Singapore’s GSP status altogether.

The reference by Singapore is apparently to section 301 of the U.S. trade and tariff act, under which the administration can continue GSP benefits to countries providing higher protection for intellectual property rights of U.S. nationals and enterprises, as well as for U.S. investments and service industries.

See noted that Singapore had a trade surplus with U.S. only since 1984, and in 1986 the U.S. trade deficit with Singapore was only 1.6 billion or one percent of total U.S. trade deficit. Also, 52 percent of Singapore’s exports to U.S. were from U.S. corporations and a major part of this were components to make more competitive final U.S. products for the world market.

Hong Kong made a similar point, adding that U.S. products entering. Hong Kong at zero tariffs, at three billion, was roughly double Hong Kong products entering U.S. at zero tariff.

Far from removal of GSP benefits of the four countries benefing other third world countries, past experience had shown that the lost market share had been filled, not by other third world beneficiaries, but mainly by industrialised countries.

Amb. Sang Okk Lee of South Korea said the U.S. unilateral action would exert "negative influence" on the ongoing Uruguay round negotiations "dampening the enthusiasm for the multilateral negotiations on the part of not only affected countries but other developing countries, which may well be subject to similar measures sooner or later".

South Korea also negotiated last year with the U.S. under section 301 of the U.S. tariff law, and agreed to provide greater patents and trade marks protection as well as opening the South Korean market to U.S. service industries like insurance, in order to gain continued GSP benefits for its exports on the U.S. market.

The U.S. had announced its decision to graduate its four Asian trading partners, citing their remarkable advancements in economic development and recent improvements in competitiveness, Lee noted.

But the criteria for graduation had not been "clearly or convincingly" spelt out.

The U.S. decisions, based on non-objective criteria, would adversely affect development of other third world countries and their trade expansion, Lee argued.

Seventy-five percent of the l236 exports items of his country benefiting from GSP were product by small and medium-sized enterprises, which had limited competitiveness.

The U.S. delegate, Amb. Samuels said the graduation was fully in accord with GATT and the 1979 enabling clause, and the temporary and autonomous nature of the GSP schemes.

The action had been taken after consultations with the countries concerned and their economic situation no longer justified GSP, he added.