Trade Deficit Cut $4 Billion : Cheaper Oil, Exports Help Narrow Imbalance

The Commerce Department reported Thursday that the nation’s monthly trade deficit shrank to $12.5 billion in February, helped by falling oil prices and increased merchandise exports, but economists warned that it may take years to achieve any major reductions in the gap between imports and exports.

The deficit dropped sharply from January’s monthly record of $16.5 billion.

Spending for imported petroleum dropped by $1.4 billion during February. The United States bought less foreign oil, and each barrel was cheaper than the month before.

Cheaper oil was the biggest single factor in the improved trade figure for February but any significant gains in U.S. sales abroad will come much more slowly, the experts say.

“It took us five years to get in this hole, and things won’t turn around overnight,” said Lawrence Fox, vice president of international affairs for the National Assn. of Manufacturers.

Imports are becoming more costly in this country because the falling dollar buys less in relation to foreign currencies such as the Japanese yen and the West German mark. Eventually, U.S. consumers are expected to curtail their purchases of foreign merchandise. At the same time, American-made goods are becoming cheaper for foreign buyers, and U.S. export sales should rise.

However, foreign producers, who have enjoyed burgeoning sales here, will “fight to hold onto their market share,” Fox said.

Imports totaled $30.2 billion in February, a decline of $3.3 billion from the previous month and the lowest level since October.

The nation’s major imports were oil, automobiles, clothing, electrical machinery, telecommunications equipment, office machines and computers and steel.

Exports Up $700 Million

Exports rose to $17.7 billion, a gain of $700 million and the best sales figure in nine months. The biggest gains came from increased sales of aircraft and aircraft parts. The prime categories of exports included aircraft and parts, office machines and computers, electrical machinery and power generating machinery.

The February trade report “should signal the start of a fairly steady decline in the trade deficit,” White House spokesman Larry Speakes said. “The rising level of exports will mean more jobs for workers, meaning further expansion of the U.S. economy. The accompanying drop in inflation and the sharp rise in personal income means only one thing: increasing prosperity for a growing number of Americans.”

The U.S. suffered its worst yearly trade deficit last year, $148.5 billion. The deficit is expected to be somewhat smaller this year, but it will still be very high by historical standards, economists believe.

‘Stability Is Key Word’

“I don’t have any solid evidence things are getting better,” said Brian Wynne, manager of international trade affairs for the American Electronics Assn. The U.S. electronics industry should improve its export sales if the dollar remains at its current exchange rate compared with other currencies, Wynne said, adding: “Stability is the key word.”

The economies of Western Europe and Japan have been growing at a modest pace recently, but Reagan Administration officials believe that the pace of activity will accelerate, offering an expanded market for American-made goods. This could bring a further reduction in the U.S. trade deficit later this year, or in 1987.

But it will take at least four to five years to achieve a substantial reduction in the trade deficit, predicted Michael Czinkota, president of the National Center for Export-Import Studies at Georgetown University.

Giant multinational firms such as Mercedes-Benz, Honda and Sony are determined to stay in the lucrative American market, Czinkota said. These firms give up some profits because of altered exchange rates because they want to keep their share of the market, he said.

But medium- and small-sized foreign firms, with fewer financial resources, may be forced to increase prices significantly and will lose business in the United States to American companies, he said.

American firms also should gain a competitive advantage in foreign markets because their product prices are coming down after the change in the value of the dollar.