TNAG-2750-FCO40-3965-Most-favoured-nation-status-for-China-Hong-Kong-interests-1993 — Page 243

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US/China Trade

14.

The US trade deficit with China as increased from $3

billion in 1987 to $16 billion in 1992 (year to October)

www

more

than one sixth of the total US trade deficit. By contrast

during 1987-1992 the total US trade deficit fell from $160

billion to $90 billion.

15. The worsening trade balance with China has been balanced

by improvements against Hong Kong and Taiwan, mainly because Hong Kong and Taiwanese companies have relocated production to China's coastal provinces. The combined US trade deficit with China, Hong Kong and Taiwan showed no trend deterioration

between 1987 and 1992, starting and ending the period at a

deficit of $27 billion.

16. In October 1992 China and the US reached a wide ranging agreement on market access ("Special 301"). China agreed to

phase out three quarters of its import licences, quota and non-tariff barriers within two years. In the US, the agreement

was seen as a stepping stone for Chinese reaccession to the GATT

as well as a means to cutting the bilateral trade deficit.

TABLE: US TRADE BALANCES WITH CHINA AND HONG KONG/TAIWAN

(US $ billions)

1987

1988

1989

1990

1991

1992

CHINA

-3.0

-3.6

-6.2

-10.4

-12.7

-16.2

CHINA/HK/ -26.7 -21.3

TAIWAN

-22.8

-24.3

-23.7

-27.1

Sources: IMF and US Dept of Commerce

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CONFIDENTIAL