Investment Profit Tide Turns, Flows Out of U.S.

For the first time since the 1950s, foreign investors are earning more from their assets in the United States than Americans are receiving on their investments abroad, the government reported Tuesday.

The figures for the second quarter of 1989, published by the Commerce Department, were taken as another indicator of the continuing erosion of the United States’ international economic position in the face of growing competition from abroad.

Ben E. Laden, a Washington economist who tracks investment flows, called the development “a watershed.”

He said the report provides “additional evidence that our economic position is deteriorating. We’re now showing a negative.”

Until recently, the nation has been able to count on the “services” component of its trade and balance-of-payments figures to help offset any further worsening of the trade deficit in manufactured goods and other areas.

The services component primarily measures the difference between what Americans earn on their investments overseas--in the form of interest, dividends, rents, royalties and other payments--and what foreigners earn here.

But the latest figures--part of a report on the current account measuring overall trade and investment flows--show that the trade deficit continued to improve while the services component slid into a slight deficit of $176 million, down from a $1.5 billion surplus in the first quarter.

The services deficit underscores another benchmark reached in 1985, when the United States technically became a “debtor” nation--meaning that the value of foreign investment here exceeded that of Americans’ purchases of assets abroad.

Resources Could Be Drained

That calculation has been questioned by some analysts because U.S. investments abroad, which generally are older than foreigners’ investments here, are calculated at their original value instead of at their current value, which has been increased by inflation.

Nevertheless, it is widely accepted that the trend has been worsening.

Economists say neither figure should cause a panic at this point.

But the situation could become burdensome within a few years, draining available resources as the nation struggles to pay interest on the money it is borrowing from abroad.

To rectify the situation, analysts say Americans must begin saving and investing more and working to improve productivity and increase production capacity, so the nation can export more.

To many, that means cutting the federal budget deficit to reduce the proportion of available resources that goes to the federal government.

The current account deficit--the broadest measure of trade and investment flows recorded by the government--dipped to $126.5 billion last year after peaking at a record $143.7 billion in 1987. This year it is expected to edge down slightly further.

For the April-June quarter, the merchandise trade deficit fell 2.3% to $27.7 billion. It was the measure’s best three-month performance in more than four years.

Overall, though, the current account deficit for the second quarter was $30.99 billion, a slight widening from the $30.39 billion deficit recorded for the previous quarter.