Seattle Shipments Hint at Trade Imbalance
Cutting US budget deficit and boosting private savings would ease trade deficit with Japan, one economist says
ALMOST half the goods being handled by the Port of Seattle's gargantuan cranes are bound either to or from Japan. But lately, the balance of imports and exports has not been very good.
The latest figures, for 1992, show $10.5 billion in imports and $1.8 billion in exports. It is unlikely that the picture has improved since then, economists say. A recession in Japan has curtailed United States exports even as imports surge in a recovering US economy.
This Pacific Rim port is happy to get business from all quarters, whether goods are inbound or outbound. But its ledger suggests why, when President Clinton meets with Japanese Prime Minister Morihiro Hosokawa tomorrow, the trade balance will be priority No. 1.
What goods are going where
The issue goes beyond raw numbers. Consider the types of goods the two nations are exchanging by ship through Seattle.
* Headed to Japan (ranked by dollar value): fish; wood; beef, pork, and poultry; hides; grains; and paper.
* Arriving in the US: office machines and parts; automobile parts; video and other games; electronic equipment; telecommunications equipment; and motor vehicles.
The obvious pattern - raw materials out, finished goods in - is mitigated by two factors: Japan's island-bound economy is looking for the kind of natural resources that are abundant in the Pacific Northwest; and the Boeing Company, the nation's largest exporter, did send several billion dollars worth of jetliners to Japan - but not by ship.
Still, Seattle's waterborne trade hints at why Japan's $50 billion trade surplus with the US is such a rancorous political issue. The gap with Japan accounted for roughly 40 percent of America's total trade deficit last year.
White House negotiators are pressing Japan to open its market to US imports by setting goals for specific sectors, including insurance and government contracts, and for Japanese carmakers to use more US-made parts. As of this writing, the two sides were still far from any significant accord. Yet, even if these talks succeed, there will be little noticeable impact on the trade deficit, says David Hale, chief economist with Kemper Securities in Chicago. Progress will be ``very much incremental over the long term.''
Indeed, economists see the trade gap widening further in the near term, at least for much of this year.
Solving bigger problems
To wipe away this deficit, broader issues must be resolved in both the US and the world economy.
First, economic recoveries are needed in Japan and Europe; US exports to those important trade partners have declined over the last three years. This pickup in export demand could begin by the end of the year, Mr. Hale says, although the American economy will outpace the rest of the world for the next 12 to 18 months.
Two positive signs this week: Britain cut interest rates, and Mr. Hosokawa won approval for a $55 billion tax cut that promises to stimulate Japanese consumption.
Second, the US needs to get its own economic house in order, says Richard Rippe, chief economist with Prudential Securities Inc. in New York. The US is ``spending more than it produces,'' he says. Though the trade deficit is a small fraction of the overall $6 trillion economy, this is a long-term trend that can't continue indefinitely.
The answer, Mr. Rippe says, is to slash the federal budget deficit and boost private savings. This would reduce consumption (lowering imports) and debt (keeping interest rates low for US producers).
With such policies, Rippe says the US has the potential to become a net exporter of goods over the next five to 10 years. (The nation has not posted a trade surplus since the mid-1970s.) In fact, he cites several factors that make the US look ``highly competitive:'' favorable exchange rates; low labor costs, relative to some other industrial nations; and recent restructuring that puts much of US industry ahead of Japan and Germany.
Rippe sees a danger on the import side: More oil from abroad will be needed to replace diminishing domestic production, and per-barrel prices are likely to rise.