America's ability to trade successfully with the rest of the world sank to an all-time low in 1985. A turnaround is not expected until the end of 1986 at the earliest, analysts say. The US foreign trade deficit, the gap between what the United States sells abroad and what Americans buy from foreign manufacturers, set a new record of $124.3 billion in 1985, new figures indicate. The $39.5 billion deficit in the final quarter was also a new high.
Surging imports and lackluster exports are felt most directly by workers at firms unsuccessfully trying to compete with imported goods. The domestic economy also grows less rapidly than it otherwise would, providing fewer jobs for new workers and smaller income gains for those already at work.
The persistent bad trade news and the coming election are fueling congressional desire to act on trade. The House Ways and Means Committee is heading off on a Florida retreat this weekend to discuss trade issues and potential trade legislation with US Trade Representative Clayton K. Yeutter.
US trade figures are expected to remain gloomy for most of 1986 for two major reasons. First, the 1985 drop in value of the dollar will help the trade picture but only on a delayed basis, experts say. And some of the nation's key trading partners, including Korea and Canada, have currencies that dropped in value vs. the dollar last year, thus widening their competitive advantage.
House Democratic leaders say they want to have a trade bill on the House floor by mid-May. If the House succeeds in passing a trade bill, that could put pressure for preelection action on the Republican-controlled Senate.
The current push in Congress is for trade legislation that will force other nations to open their markets to US goods as opposed to offering special protection to US goods in the domestic market. President Reagan has warned Congress he will not accept protectionist legislation.
Such legislation could also damage the world economy. ``If you want to produce a recession on a worldwide basis, that might be a good way to go about it,'' Federal Reserve Board chairman Paul A. Volcker said recently when asked about a bill that would put a surcharge on selected imported goods.
While some of the steam has gone out of the drive for protectionist legislation, Congress is taking a hard look at the trading practices of even the nation's closest neighbors. For example, the Joint Economic Committee Wednesday held hearings on US trade with Canada, the nation's largest trading partner.
``Our trading relations have become strained by the one-way flood of Canadian timber, beef, hogs and other other items,'' said Sen. Steven D. Symms (R) of Idaho, who chaired the hearing.
In 1985 the trade deficit with Canada increased $1.1 billion, to $17.2 billion, the Commerce Department said. The deficit with Japan surged $6.5 billion to $43.5 billion; the gap with Western Europe grew $6.2 billion, to $21.4 billion.
Any trade legislation emerging from Congress is likely to beef up protection for US firms against unfair trading practices by other nations. Legislators say the need for such measures was emphasized again this week when the Commerce Departent issued a preliminary ruling on a major US-Japan trade dispute.
The department said eight Japanese electronics companies had been dumping sophisticated computer memory chips which can be erased and reprogrammed in the US at far below their cost of production. As a result, the Japanese companies will be required to post a bond based on the dumping margin, before additional chips will be admitted to the US.
The US trade outlook will not turn around quickly, despite various government-related trade actions and sharp drop in the dollar against the Japanese, German and British currencies. ``The dollar isn't low enough to make US goods fully competitive'' in overseas markets, says David Wyss of Data Resources, a forecasting firm.
In addition, buying patterns react to changed currency values with a time lag, and foreign firms will fight to preserve the market share they have gained in the US, he says.
If exchange rates stay at their current levels, the US trade deficit in 1990 will be $150 billion, according to a computer simulation by Laura Knoy of the Institute for International Economics.
The new Commerce Department figures confirm parallel data released two weeks ago showing a 1985 trade deficit of $148.5 billion. The latest report is used in calculating the US balance of payments and omits items such as military sales and the cost of shipping and insurance.