By the 1980s, the United States had become Singapore's most important trading partner and, as such, crucial to the country's welfare. Singaporean officials often stated that a 1 percent drop in the United States economy had a 1.4 percent effect on Singapore's gross national product ( GNP--see Glossary). Consequently, in the 1980s Singapore was critically concerned about protectionist policies and budget deficits in the United States. In 1988 Singapore's total exports to the United States amounted to S$18.8 billion, up 28 percent over the previous year, and accounted for 24 percent of the nation's total exports. Of that total, about 80 percent were Singaporean manufactures, including disk drives, integrated circuits, semiconductors, parts for data processing machines, television sets, radios and radio cassette players, and clothing. Reexports to the United States also were an important part of the trade. Singapore's exports to the United States outstripped its imports from there, although the United States was, after Japan, Singapore's second largest supplier.

Until 1989 Singapore and the three other NIEs enjoyed trade preferences with the United States under the United States Generalized System of Preferences ( GSP--see Glossary). This system was originally instituted to aid developing economies, but in 1989, the four Asian NIEs were removed from the program because of what some observers have seen as their major advances in economic development and improvements in trade competitiveness. The United States had been trying for some time to wrest trade and currency concessions from all four countries (but primarily South Korea), which had not been forthcoming. Although Washington presented the decision more as an economic graduation ceremony, observers noted that the move reflected United States frustration over its continuing trade deficit despite considerable devaluation in the United States dollar.

The removal of the GSP affected less than 15 percent of Singapore's exports to the United States, among them telephones, office machines, wood furniture, and medical instruments, which faced duties of 5 to 10 percent. Ironically, United States firms based in Singapore were among the hardest hit. More than 50 percent of Singapore's exports to the United States came from American firms with operations there, such as ATandT, Digital Equipment, Hewlett-Packard, Rockwell International, and Travenol Laboratories. Singaporean companies, as well as Japanese and European firms with operations in Singapore, were also affected by the removal of the GSP. In early 1988, some 4,000 NTUC members gathered outside the United States Embassy in Singapore to protest the decision, and the Singaporean government expressed regret.

Data as of December 1989