Trade Deficit Dips to $7.9 Billion

THE US trade deficit narrowed in September to its lowest in almost five years. The improvement, reported by the Commerce Department Thursday, was better than expected and helped the US dollar. According the government, the United States imported $7.94 billion more goods than it exported. At the same time, the government revised downward the August trade deficit which was quite high.

``This month the news is on the encouraging side,'' says Bob Dederick, chief economist at Northern Trust Company in Chicago. Mr. Dederick notes the vigorous European economy helped US exports of capital goods.

Despite the improvement in the trade numbers, economists point to some disturbing trends.

The gain in US exports is slowing. One reason for this deterioration is weak prices for agricultural exports. Over the past six months, food prices have dropped as farmers recovered from the drought which cut last year's crops.

Exports of US consumer goods slowed this summer. Helen Hotchkiss, a senior economist at Drexel Burnham Lambert Inc., says the slowdown is partly due to weaker energy prices which depressed demand from oil producing countries.

Mexico, a major trading partner, has been forced to cut down on US goods because of the nation's need to save cash. At the same time, Canada and the United Kingdom - two other major export markets for US companies - are moving closer to recessions.

Only capital goods exports - led by the shipment of aircraft - are rising. In future months, however, the export of planes will fade as the strike at Boeing Company cuts down on aircraft deliveries. In addition, the price of chemicals and pulp, two major US exports, is falling as the world economic pace moderates.

While export growth is slowing, imports are on a fast track stimulated by strong consumer demand and a relatively robust US dollar. The WEFA Group in Philadelphia, an economic consulting firm, is now projecting the volume of imports will grow 5.9 percent this year compared with 6 percent last year.

Foreign firms are willing to cut prices to keep customers. ``Share of market is the magic word,'' says John Hagens, an economist at the WEFA Group.

Among the imports surging into the country are computers, semiconductors, and electronics. Capital goods imports are growing faster than capital goods exports. ``That is really worrisome,'' says Howard Lewis, a vice president at the National Association of Manufacturers. ``The export of capital goods has been the linchpin in getting a handle on the trade deficit,'' he says.

Auto analysts are expecting even stronger competition from Japanese cars as more advanced designs are produced on Tokyo drawing boards. At a hearing held this week by the Senate Committee on Banking, Housing, and Urban Affairs, author and specialist on Japanese economy Daniel Burstein noted, ``The reportage of the Tokyo auto show this year was that everybody who went to it said the Japanese are moving into every area of leadership where we have had some influence in the auto industry.''

The prospect of a worsening trade deficit has spurred Rep. Toby Roth (R) of Wisconsin to introduce two new trade bills. On Wednesday Mr. Roth proposed the Trade Relations Assessment Act, which requires the US International Trade Commission to make annual assessments of world trade barriers and rank each nation's openness to US exports. Any nation that blocked the exports would face US sanctions. ``In today's world, markets open only in response to forceful action and leverage,'' Roth says.

Roth also proposed a reorganization of US trade policy under a single department called the Commerce and Trade Department which would include the US Trade Representative, the Foreign Agriculture Service, and various other trade agencies. ``This is the legislation America must have if is to remain in the ball game,'' said Roth in an interview.

Former Rep. Don Bonker (D) of Washington believes, however, that the timing is wrong for the legislation. ``It should happen when a new president comes in. Once the new Cabinet officers are in place, you can't change the rules,'' says Mr. Bonker, who submitted similar legislation with Roth five years ago.