US trade ledger opens to 'Page 1981' amid hopes for a black ink year
In the great flow of people, goods, and services across oceans and national frontiers, the United States does better than some of its celebrated trading partners.
And, it might be added, better than many Americans -- accustomed to gloomy news about their economy -- give themselves credit for.
In 1981, the US -- almost alone among industrial powers -- is expected to show a surplus in its balance of payments, or overall transactions with other nations.
Which powers will write the greatest amount of red ink? Answer: those mighty trading nations, West Germany and Japan.
How can this be, when the US Commerce Department reports that through November 1980, The US racked up a whopping $29.49 billion trade deficit?
A country's balance of trade records the value of merchandise -- cars, radios , machinery, grains, and the like -- which that nation sells abroad and measures this value against how much money had to be spent to buy goods from overseas.
By this yardstick the us does poorly, simply because Americans import so much oil-- about $76 billion worth in 1980, perhaps more in 1981.
Japan and West Germany, by contrast, do very well indeed, selling vast amounts of high-quality goods to other nations, including the United States.
But the story doesn't end there. Nations also sell services -- shipping, insurance, and so on. They spend tourists overseas and play host to foreign travelers.
And most important from the standpoint of the US, they earn money on investments overseas, money that substantially flows back to the home country.
All this comprises a nation's balance of payments on current account -- a broader indicator than simply the flow of merchandise measured by the balance of trade.
In this broader category the United States, blessed by cornucopian farms selling up to one-third of their crops overseas and by huge income-earning industrial investments in other lands, looks good.
Just the opposite is true for West Germany and Japan. With large populations squeezed into comparatively little land, both nations import the bulk of their fuel and many other raw materials.
"While [Germany and Japan] recorded enormouse gains in their surpluses on manufactures," notes the Morgan Guaranty Trust Company of New York, "they were not enough to offset their oil bills and deficits in other areas."
In 1980, says Morgan Guaranty, Japan's balance-of-paymenets shortfall was about $12 billion, while that of West Germany was $16 billion. The US overcame its huge trade deficit and emerged about even on a balance-of-payments basis.
In 1981, the bank projects, the US payments balance will move into the black by about $3 billion, while Germany and Japan will suffer deficits of $18 billion and $10 billion respectively.
"In those terms alone, the current account figures," says Lawrence B. Krause, senior fellow of the Brookings Institution, "the US is fairly strong."
But he adds a cautionary note. "The Japanese current account deficit is based upon an economy that is growing, whereas the US economy is not."
This means, says Mr. Krause, that Japan's growing economy demands a high level of imports, which runs up the deficit. When the United States economy is stagnant, as it now is, the American demand for imports shirnks.
"In the 1974-75 recession," says Krause, "The US built up a substantial current account surplus, because of the drop in imports."
A briskly growing US economy, with factories near capacity, would tend to balloon costly imports, including the demand for foreign oil. Prosperity also whets the appetites of American families for goods, sometimes foreign, that they forego during slow times.
Nonetheless, the vast US economy possesses built-in advantages lacking to Japan and West Germany, notably huge farm exports, domestic energy resources, and tremendous profits on the service account.
Between 1979 and 1980, reports Morgan Guaranty, the US enjoyed a $32 billion "surge in net income from service transactions, principally through investment income earned on US-owned assets and enterprises abroad."
Net trade in agricultural and other raw materials also improved for the US, with steadily growing farm exports offsetting a substantial part of the oil import bill.