LEAD: The nation's trade deficit narrowed modestly in October to $10.3 billion, as imports declined twice as much as exports, the Commerce Department reported today.

U.S. Trade Gap Narrows Again As Imports Fall

LEAD: The ability to alter a video image -to place a beard on a face that is really cleanshaven or plant shrubs in front of a house that has none - was once so difficult that only the television networks and Hollywood studios could afford it.

Uses Grow for Video Alterations

LEAD: Mayor Koch, saying he now believes corruption is almost certainly rampant throughout the city's school system, called on Governor Cuomo yesterday to create an independent investigative panel similar to the Knapp Commission, which exposed widespread corruption in the Police Department in the early 1970's.

Koch Urges Cuomo to Name Panel To Investigate School Corruption

LEAD: President Reagan today authorized the start of a ''substantive dialogue'' with the Palestine Liberation Organization, which he said had finally met the American conditions for direct talks after more than a decade.

U.S. AGREES TO TALKS WITH P.L.O., SAYING ARAFAT ACCEPTS ISRAEL AND RENOUNCES ALL TERRORISM

LEAD: New York State officials are discussing a retrenchment of the State University and City University systems that may include the closing of several campuses, officials of both systems said.

Shutdowns Of Campuses Considered

LEAD: As more than a dozen politicians gird for a tumultuous race for Governor next year, New Jerseyans are beginning to contemplate what life will be like after Thomas H. Kean, whose buoyant smile, patrician's diction and unabashed boosterism have come to personify New Jersey in resurgence.

Jersey After Kean: Problems Persist

LEAD: A staff member at the new five-star Hilton International Hotel was officially detained and made to apologize publicly after slapping a guest. Sanitation inspectors imposed fines on the hotel for dirt in its kitchen. And the hotel got into a battle over butter with the Shanghai Tourism Bureau.

At China Hilton, Subject Was Butter

LEAD: Governor Cuomo and legislators say they have agreed on a bill for an authority to oversee construction of New York City schools. Page B19.

Agency for Building Schools

LEAD: Drexel Burnham Lambert Inc. and Michael R. Milken, the head of its ''junk bond'' department, have decided that Mr. Milken will leave the firm if his presence stands in the way of a settlement of the expected criminal charges against the investment house, people at Drexel and close to Mr. Milken said yesterday.

Milken's Departure Said to Be Considered

LEAD: CBS won the auction to televise major league baseball yesterday with a bid that will pay the 26 teams nearly $1.1 billion for four years starting in 1990.

A Billion-Dollar Bid By CBS Wins Rights To Baseball Games

LEAD: The chairman of the Nippon Telegraph and Telephone Corporation resigned today as evidence emerged that he had secretly received about $80,000 from a company seeking favors from the communications giant.

Chief Quits At Nippon Telegraph

LEAD: The American decision to initiate a dialogue with the Palestine Liberation Organization met with surprise and dismay from Israeli envoys tonight.

ISRAELIS EXPRESS SHOCK AND DISMAY

LEAD: WHEN Merna was 9 years old and first heard she was getting a Big Sister she was very excited. ''I thought it meant a sister to live with,'' said Merna, now a 14-year-old eighth grader. ''Then suddenly I met this big lady. 'That's my sister?' I said. 'She could be my mother.' That probably wasn't the best thing to say but she liked me anyway.

Not Quite Sisters, but More Than Friends

LEAD: President-elect Bush said today that there was ''no way'' his administration could meet the mid-February starting date set by the Reagan Administration for resuming strategic arms talks with the Soviet Union.

BUSH SAYS TALKS ON STRATEGIC ARMS MUST BE DELAYED

LEAD:  THE ECONOMY  The U.S. trade deficit narrowed modestly in October to $10.3 billion, as imports declined twice as much as exports. The $400 million improvement, though about as expected, was far less than in September, and economists were divided on its significance.  [ Page A1. ]  Business inventories in October rose at the slowest rate in five months, while sales surged a strong 1.2 percent.

NEWS SUMMARY

LEAD: Two police officers have been indicted on assault charges for kicking a man during a wild police confrontation with hundreds of people in Tompkins Square Park on the Lower East Side last August, the Manhattan District Attorney said yesterday.

2 Policemen Are Indicted In Park Melee

LEAD: President-elect Bush's economic team wants to have a seven-nation meeting ''early in the new year'' to set goals for the dollar and to coordinate economic policies, Treasury officials said today.

Bush Aides Seek Talks By Group of 7

LEAD: Baltazar Morales pointed to the empty bottle of Cool Breeze, 18 percent alcohol and orange flavored, that marked the spot where Daniel Betford Burgos died.

Metro Matters; 22 Degrees, A Chevrolet Bed And No Embers

LEAD: One week after the mountains convulsed here in an earthquake of heartbreaking dimensions, the authorities laid plans today for a vast and probably forced evacuation of survivors who show little willingness to leave.

Soviets Plan Quake Evacuation But the Survivors Seem Unwilling

LEAD: A privately held company for the last two years, R. H. Macy & Company is grappling with uncertain sales, pressure to cut prices and the costs of a recent acquisition of two California fashion retailers.

Macy's, Loaded With Debt, Loses $19 Million in Quarter

LEAD: THE turnaround time for revivals is shrinking with each passing year. So compressed has the time frame become that it probably will not be long before artifacts from the 1980's will be considered collectible and historic. People will look back wistfully at the age of Ronald Reagan, oat bran muffins and the V

Collecting the Eighties: Stash the Swatch; Keep the Kettle

LEAD:  Nationwide Strike in Spain  Most of the labor force observed a one-day strike, underscoring discontent over the Socialist Government's economic policies. Page A3.  Two Police Officers Indicted  Aided by a videotape, a grand jury in Manhattan charged two officers with assault in the Tompkins Square Park melee last August.

INSIDE

LEAD: IT is understood, especially at this time of year, that glossy books on design and decoration make superior gifts. If the recipients are living in splendor, a book about the more splendiferous will add luster to their rooms. If the household is on the casual side, the right book will at least upgrade the coffee-table area.

Any Coffee Table Would Be Uplifted

LEAD: Shares of the First Fidelity Bancorporation lost nearly a quarter of their value yesterday after the company's announcement that it expected to post a loss of $145 million to $190 million for the current quarter because of bad loans and that several top officers had resigned or been dismissed.

News by First Fidelity Sends Shares Plunging

LEAD: IT was a year ago almost to this day, and my daughter and I were heading uptown. There was a green corduroy jumper marked down at Macy's, and since her profession, though noble, is ill paid she wanted another eye on the purchase. This is not a woman who drops $40 lightly.

Close to Home

Erik Gustafsson is a Swedish professional ice hockey defenceman and captain for Luleå HF of the Swedish Hockey League (SHL).

Erik Gustafsson, Swedish ice hockey player

Erik_Gustafsson_(ice_hockey,_born_1988)

Emily Head is an English actress. Her breakout role was as Carli D'Amato in E4's sitcom The Inbetweeners and she later played Rebecca White in ITV soap opera Emmerdale and Colette Andrews in BBC drama, The Syndicate.

Emily Head, English actress

Emily_Head

Steven Nkemboanza Mike Christopher Nzonzi is a French professional footballer who plays as a defensive midfielder for Persian Gulf Pro League club Sepahan.

December 15, 1988

Headlines from December 15, 1988

U.S. Trade Gap Narrows Again As Imports Fall

Uses Grow for Video Alterations

Koch Urges Cuomo to Name Panel To Investigate School Corruption

U.S. AGREES TO TALKS WITH P.L.O., SAYING ARAFAT ACCEPTS ISRAEL AND RENOUNCES ALL TERRORISM

Shutdowns Of Campuses Considered

Billboard 200

Rattle And Hum (Soundtrack)

Giving You The Best That I Got

Cocktail

Appetite For Destruction

New Jersey

Notable Births

Historical Context for December 15, 1988