Trade Deficit Falls to Lowest Point in Nearly a DecadeBy Stuart Auerbach
The Washington Post
Pushed by record growth in overseas sales of American-made computers, planes, and machinery, the government reported Thursday that the U.S. trade deficit dropped 35 percent last year to $66.2 billion, its lowest level since 1983.
Although the improvement was welcomed, the report sent a mixed message on the state of the U.S. economy.
The record level of exports, up 7.2 percent over the year to $421.9 billion, provided the only real bright spot in the economy last year. Also on the plus side, exports of manufactured goods jumped 9.3 percent, which acting Commerce Secretary Rockwell Schnabel hailed as a sign on "improved U.S. competitiveness." But the drop-off in U.S. purchases of foreign-made products was seen as a further indication that the recession was continuing.
While the United States still had a sizable merchandise trade deficit last year, most of that red ink was offset by a surplus in sales of services such as banking, insurance, and engineering estimated by Commerce at $44 billion last year. In addition, last year earnings on Americans' investments abroad exceeded those earned by foreigners on their investments in this country by roughly $10 billion, offsetting most of the remainder of the merchandise deficit.
Some economists and business executives Thursday questioned whether the favorable trend on merchandise trade would continue through 1992. They said a slowdown in the economies of America's major markets in Europe and Asia means the export boom probably will tail off this year. Moreover, they said a stronger U.S. economy would further worsen the trade deficit by drawing in more imports.
The pessimistic view was fueled by the worsening of the monthly U.S. trade deficit for December, to a higher-than-expected $5.9 billion, up $1.2 billion from November.
The future course of exports could have a bearing on the current election campaign as well as the economy's future.
With President Bush being criticized both by Democratic presidential contenders and his Republican challenger on the loss of American jobs, trade has emerged as a major political issue this year. Many economists say that exports, which have increased 66 percent since 1987, have kept the recession from growing worse and their continued growth remains a major hope of the Bush administration for a mid-year recovery.
Despite the year-end tail-off in exports, some companies, big and small, predicted further export growth this year. Air Products Inc., an Allentown, Pa., company, reported a 15 percent increase in overseas sales of chemical products in 1991 and higher growth in equipment exports. The company said it expects foreign sales to jump by 3 percent to 5 percent this year.
The nation's largest exporter, Boeing Co., predicted overseas sales would increase next year, with about two-thirds of its 444 orders going to foreign airlines. Last year, 68 percent of its 421 planes were exported.
While the United States continues to run an overall deficit in electronics goods, exports of American-made high-tech electronics items such as communications equipment, computers, and measuring devices grew 6.9 percent last year to $71.6 billion. "There's very very good news in the export area," said Mark V. Rosenker, vice president of the Electronic Industries Association.
And Lil' Orbits Inc. of Minneapolis, which started exporting in 1987, made 70 percent of its $2.5 million in sales of automatic mini-donut machines and mixes in Asia, Europe, and Latin America.
"We are looking for 20 percent growth in exports this year, and so far it is holding true," said company vice-president Charlie Anderson.
There were other expressions of uncertainty over exports. The export index of the National Association of Purchasing Management, for example, dropped in January to 51.3 , its lowest level since the group began projecting overseas sales four years ago.
Nevertheless, the man who runs the survey, Robert J. Bretz, director of corporate procurement for Pitney Bowes Inc., forecasts a continuation of " relatively strong growth in export orders."
Lawrence A. Kudlow, chief economist of the New York investment firm of Bear, Stearns & Co. Inc., predicted continued growth of U.S. exports of capital goods -- the machines used in manufacture -- and high technology equipment.
"Despite the European and Japanese recessions," he said, "the U.S. is picking up market share as a result of improving manufacturing competitiveness." Further, he noted that the global recession has not hit major American markets in Latin America. As an indication of American export strength south of the border, sales to Mexico jumped 18 percent last year.
The value of currency also has played a role in the shifting trade picture. Economists attribute much of the big increase in the U.S. trade deficit in the 1980s to a huge run-up in the value of the dollar between 1980 and early 1985. Because of lags in the impact of changes in exchange rates on trade, the merchandise trade deficit peaked in 1987, about two years after the dollar's top.
In comparison to 40 other currencies, by early 1988 the dollar was almost back to its 1980 levels, and the trade deficit dropped accordingly.
The United States improved its trade balance with all major trading partners with the exceptions of Japan and China. The trade deficit with Japan grew by 5.6 percent, to $43.4 billion as U.S. exports decreased 1 percent and imports grew 2 percent.
The trade deficit with Germany dropped by 48 percent, to $4.9 billion, as U.S. exports grew 13 percent.
Overall, the U.S. surplus with Western Europe tripled to $16.1 billion and a $1.9 billion deficit with Mexico in 1990 swung into a $2.1 billion surplus last year. The trade deficit with China grew 22 percent, to $12.7 billion.