Higher Exports Won’t Solve Trade Problem, Experts Contend : Analysts See Need for Further Cuts in Imports
Americans, who have been on a voracious binge of import buying since the early 1980s, cut back sharply in November, according to the Commerce Department trade report released Friday. But the nation will have to go much further in doing without highly popular foreign goods before its vast trade imbalance is corrected, economists said.
A sharp change in behavior by consumers is needed to close the trade gap because foreign products have become so pervasive a part of American life, dwarfing the amount of money that people in other countries spend on U.S.-made goods. As a consequence, gains in U.S. export sales--while helpful--are not expected to solve the trade problem, analysts said.
“Exports need to improve, unquestionably,” said Kathleen B. Cooper, chief economist for Security Pacific National Bank. “But it’s the imports that are so enormous that they’ve got to be cut back. That’s the only way we’re going to get the trade deficit down in the long run.”
It is easy to see why U.S. manufacturing gains alone cannot solve the trade problem. In the first 11 months of 1987, people in other countries bought $228 billion worth of U.S. products. But Americans have continued to buy a much larger amount from other countries. Indeed, the $228-billion export figure pales in comparison to the $387 billion worth of goods imported to the United States during the same period.
The imbalance remains in the new figures released by the Commerce Department. The United States exported $23.8 billion worth of products in November, its highest total ever and a clear indication of growing U.S. competitiveness. But at the same time, the nation imported $37 billion worth of goods. The monthly $2-billion rise in U.S. exports--even coupled with the $2.4-billion decline in imports--is not the sort of change that will transform the imbalance overnight.
“There are areas in which it’s going to be a long, drawn-out process to convince the American consumer that American products have better quality and design,” cautioned John O. Wilson, chief economist at Bank of America in San Francisco.
The nation spent less in November than in October for imported clothing, office equipment, electrical machinery, telecommunications equipment and cars from Japan, according to the new government trade report. It spent more, however, on steel and imported cars from other countries.
Yet for all America’s devotion to goods made abroad, this is a relatively recent phenomenon. It was only in the early 1980s, a time of a much stronger dollar, that imported automobiles, stereos and a long list of industrial equipment gained in popularity as inexpensive and reliable alternatives to U.S. goods. This huge increase in imports--to $383 billion last year from $255 billion in the recession year of 1982--is what caused the trade deficit to balloon.
Thus, even on a day when investors reacted joyfully to the Commerce Department’s trade report, some specialists saw a far more ambiguous situation. A key to their perspective is the declining value of the dollar--a large cause of enhanced U.S. competitiveness that has made foreign products more expensive in this country and American products less expensive abroad.
But a weaker dollar ultimately could force the price of imports out of the reach of many Americans. So the needed slowdown in imports will mean that Americans must do without things they have grown accustomed to.
“The export number that came out today was totally tremendous,” said Bruce Steinberg, an economist with the Merrill Lynch investment firm in New York. “But the import side is an unpleasant story. For imports to . . . (stop growing) our standard of living has to stagnate. And if we continue to spend money on imports, our trade deficit won’t improve.”
Security Pacific’s Cooper, who noted that recessions are the classic--if painful--solution to trade deficits because they cause consumers to cut back their import purchases, maintained: “We’ve just got to live through several years of sluggish growth to get back on the track of being a creditor nation again.
Broad Pattern of Cutbacks
Because the monthly trade statistics tend to bounce around, analysts cautioned against reading too much into the November figure. In addition, the November decrease in imports comes after a report for October in which imports were swollen by Christmas orders. Some observers were nonetheless impressed by growing evidence that U.S. producers were replacing foreign ones in key markets.
“It’s good news,” said Bank of America’s Wilson of the November import decline, which followed smaller drops in April, August and September. The November figures showed a broad pattern of cutbacks from countries with which the United States has run chronic deficits, including Japan, South Korea, Taiwan and Hong Kong. Nonetheless, the report of one encouraging month is not enough to declare America’s trade problems solved, experts said.
“Our competitors overseas aren’t just sitting there and watching us regain our market shares,” warned Gilbert F. Benz, an economist with the firm of A. Gary Shilling in New York. “They’re cutting their costs drastically.”
THE TRADE GAP, COUNTRY-BY-COUNTRY
The following is a country-by-country breakdown of November’s $13.22-billion trade deficit, including comparisons with October levels.
COUNTRY NOVEMBER DEFICIT OCTOBER DEFICIT Canada $1.25 billion $1.33 billion Western Europe (total) $2.41 billion $3.00 billion Britain $272.8 million $393.7 million West Germany $1.48 billion $1.33 billion France $274.4 million $347.7 million Italy $529.8 million $634.0 million Japan $4.85 billion $5.86 billion Taiwan $1.21 billion $1.78 billion South Korea $760.2 million $1.02 billion OPEC $1.12 billion $1.3 billion Hong Kong $468 million $724.3 million Mexico $389.2 million $633.5 million Brazil $374.9 million $492.0 million All others $388.3 million $1.05 billion
Source: Associated Press
