US trade winds
From the time of the great sailing ships of pre-revolutionary America right down to the 1980s, with the export of jet aircraft and nuclear power plants, the United States has been a vigorous trading nation. Foreign trade may now be more important than ever. By one measurement, 4 out of 5 new jobs are export related. Washington must take all appropriate steps to ensure that US goods and services remain competitive with their foreign counterparts - while rejecting any new moves toward world protectionism.
In this regard, this week's figures indicating that the US merchandise trade deficit reached a record $8.97 billion in October - and will probably exceed $70 billion for the year as a whole - need to be seen in a careful perspective.
The trade gap is a challenge to the US to bolster its exports. Clearly, US firms will have to work harder to carve out markets abroad. That means working to hold current markets. And working to regain traditional markets that have been lost to others.
At the same time, the trade deficit, ironically enough, underscores the very economic strength of the US at this particular moment. After all, one nation's trade deficit is another nation's surplus - or, at least, sale. The US economy has been growing at 7 percent to 8 percent this year, compared to a 1 percent to 2 percent growth rate in Europe. That means that Americans, by buying more goods from abroad, are helping to lead other nations out of recession. Moreover, current high US interest rates - stemming in part from the large federal deficits - make the US attractive to overseas investors. Billions of dollars in foreign capital are entering the US. Given a still-modest US savings rate compared to many other nations, investments from abroad are helping to fuel economic expansion within the US.
Another factor evident in the latest figures warrants attention. US exports were weak across the board; imports were strong. But it should be noted that US exports to a number of Latin American nations are down sharply. For example: Mexico, US exports down; Brazil, US exports down. But those downturns took place in part because those nations are enacting severe austerity measures imposed by the International Monetary Fund to help bring huge debt imbalances under control and avert a world debt and banking crisis. So in that sense, the reductions in trade to Latin American nations are most likely temporary. Considered in an international setting, they are perhaps essential.
That does not mean, however, that US business and political officials should take the growing trade deficit lightly. As noted by Commerce Secretary Malcolm Baldrige in a meeting with reporters yesterday, the US needs to take stronger steps to reduce the federal deficit. And it needs to reduce currency fluctuations, through such bilateral agreements as the one recently worked out with Japan.
US firms would also seem wise in refashioning their organizational structures to be more competitive abroad. A dash of grittiness - it used to be called ''risk taking'' - seems in order. This week, interestingly enough, a number of European and Asian computer firms launched major marketing promotions in the US. One firm, for example, Fujitsu Inc., is starting an aggressive $4 million advertising campaign for its products. In other words, are US firms as willing to take on entrenched overseas firms in their home markets as overseas firms are willing to take on giant US firms - like IBM?
Many trade experts believe the answer is no.
One solution for the US would be a more coordinated national trade posture, such as might be achieved by consolidating all federal trade departments into one cabinet-level agency. Currently, trade offices are spread all over Washington. Consolidation of vital US trade-related offices would promote the more vigorous leadership that is essential if the US is to remain competitive abroad.
