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Trade Deficit Grows, Dealing Setback to GATT

November 19, 1994|JAMES GERSTENZANG | TIMES STAFF WRITER

WASHINGTON — The United States trade deficit grew ominously in September, according to figures released Friday, and the widening gap seems certain to give opponents new ammunition in their fight against approval of an expanded global trade accord.

The shortfall between U.S. purchases of imported goods and sales of American-made products overseas reached $10.1 billion in September, figures show, raising the prospect of an annual deficit that will rival the record $152 billion recorded in 1987. The September deficit was $400 million greater than the August deficit of $9.7 billion.

The numbers reflect imports that continue to flow into the country at stunningly high levels, a record volume of oil purchases from overseas, a near-record deficit in the balance of trade involving manufactured goods and the largest ever one-month deficit with China.

The report quickly became an element in the debate on Capitol Hill over the plan to rewrite the rules of global trade, which is scheduled for votes in Congress later this month.

The plan would create a new World Trade Organization as a successor to the General Agreement on Tariffs and Trade, which now governs global commerce. President Clinton and his allies have embarked on a feverish campaign to win congressional approval of the pact.

"They (the figures) play into the GATT debate because the GATT is seen by the opposition as a continuation of Cold War trade policy," said economist Charles McMillion, president of MBG information services, a business information analysis and forecasting firm.

"Now there is a strong belief on the Hill--and it is bipartisan--that it is time for a major re-examination of how we do international economic policy. These are the results of the old policies and seven rounds of Cold War-GATT negotiations, which lowered tariffs."

The House and Senate are scheduled to vote on the trade pact in less than two weeks, during a special session that has shaped up as an important test not only of Clinton's leadership but of Republican willingness to address foreign policy issues in a bipartisan manner as they prepare to move into leadership positions in the House and Senate.

The trade agreement, negotiated by 123 nations, would cut tariffs on manufactured goods by an average of 40% around the world and extend copyright and other protections to such diverse areas as the production of pharmaceuticals and musical recordings. In addition, the pact would make it easier for banks, insurance companies and other financial service firms to operate in foreign countries.

Overall, it would bring down import taxes globally by $744 billion, the Clinton Administration says.

The Administration is seeking support among Republicans, traditional allies of proposals that bring down trade barriers, to offset some Democratic opposition. Both sides are increasingly digging in as they fight to woo the undecided members of the House and Senate.

Sen. Bob Dole of Kansas, the Republican leader to whom others in his party will look for guidance and political cover, has expressed reservations about the agreement, forcing the White House into unresolved negotiations over one of the most sensitive elements in the pact--the clout that the World Trade Organization would have over U.S. laws and regulations.

White House Chief of Staff Leon E. Panetta said that the Administration's talks with Dole are "making good progress." Dole reportedly wants a commission created to monitor operation of the new trade organization so the Unites States can determine whether the new rules are in the nation's best interest.

The monthly trade figures published by the Commerce Department showed a 4.6% jump in the trade imbalance over August. Imports fell slightly, by 0.1%, but the United States' exports fell much more rapidly, at a pace of 1.3%, worsening the deficit.

While the amount spent on imported oil declined, reflecting a drop in prices, the volume of imported crude oil reached 260.8 million barrels in September. Combined with higher prices, the record-high volume would have made the deficit even greater.

The deficit with Japan, a perpetual trouble spot, dipped to $5.4 billion, from $5.8 billion in August. But the United States' difficult trade deficit with China continued to grow, to $3.5 billion from $3.2 billion the month before.

In addition, imports of foreign-made high-technology products reached an all-time level of $9.26 billion, in a segment of the economy in which the United States has been judged highly competitive.

Economist Barry P. Bosworth of the Brookings Institution said that the large monthly trade deficit is continuing unabated "because the United States' economy is still stronger than (that of) its major trading partners," a fact which creates a lag in foreign purchases of U.S. goods.

But, said Sen. Byron L. Dorgan (D-N.D.), the numbers are "a powerful argument against the approval of the General Agreement on Tariffs and Trade."

He said that the current trade strategy, which is based on lowering tariffs--the taxes paid on imports--and reducing other barriers to boost global commerce "is producing lost jobs and lower incomes for American workers. That conclusion is clear from the burgeoning trade deficit."

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