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Trade Deficit Aids Economy, Report Asserts

November 06, 1986|Associated Press

WASHINGTON — The nation's huge trade deficit, although blamed for the loss of many U.S. manufacturing jobs, so far has helped more than hurt the overall U.S. economy, a Commerce Department study concluded Wednesday.

The report said the trade deficit, expected to swell to a record $170 billion this year, has helped keep inflation and interest rates in check--thus contributing to economic growth.

"Though some workers were displaced by imports, strong economic growth has raised total U.S. employment substantially," the report said.

It said inflows of foreign funds and goods "corresponding to the trade deficits of recent years have played a vital, positive role in U.S. economic recovery."

While the study noted that continued high trade deficits would be disruptive to both the U.S. economy and the world trading system, it said the effects so far have been exaggerated.

"Simplistic 'job destroyed' analyses ignore the stellar U.S. job creation performance record during the period of rising trade deficits. In fact, over 7 million jobs were created from the beginning of the U.S. economic recovery in November, 1982, through 1985," it said.

The 152-page report, titled "United States Trade: Performance and Outlook," was written by staff members of the department's International Trade Administration.

Bruce Smart, undersecretary of commerce for international trade, conceded in a foreword to the report that increased imports have brought "painful adjustment . . . for some industries and their workers."

But, he added, "there have been some compensating benefits. Increased exports to the United States have helped to rekindle world economic growth and world trade. . . . Consumers have benefited from a wide selection of favorably priced imports."

The study said the trade imbalance will eventually have to be reduced, and that some improvements could be expected in 1987 due to the drop of the value of the dollar against other major currencies.

However, it said, even at best, the trade deficit will remain above the $100-billion mark at least through 1987.

The report said more aggressive marketing by U.S. industries would help narrow the trade gap.

In other major conclusions, the study said major improvements in the $50-billion U.S. trade deficit with Japan appeared unlikely over the next year, even in light of the 40% decline of the dollar against the Japanese yen during the past 18 months.

And it said it seems doubtful that the $22-billion trade deficit with Canada would improve in the near future.

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