Current international trade position of the United States

Business America, Dec, 1997

Growth of U.S. exports slowed markedly in the third quarter of 1997, but foreign sales still reached a record $937 billion annual rate. Meanwhile, imports continued their steady increase (which has carried them past the trillion-dollar annual threshold in 1997) and, consequently. the trade deficit widened.

These figures encompass trade in both goods and services; it is the goods component, however, which accounts for the overall deficit. The substantial surplus which the United States enjoys in services trade offsets only a fraction of the goods deficit. The deficit in manufactures in the third quarter was above its level in the corresponding period of 1996, and that was reinforced by a decline in the agricultural surplus' as farm exports were below their year-earlier pace.

In the context of the broad end-use categories, the surplus in foods and beverages held steady, as both exports and imports were only marginally higher than in the previous quarter. Meanwhile, the deficits in industrial materials, autos, and consumer goods all widened. The surplus in capital goods shrank during the July-September quarter, as a dip in aircraft sales held exports below the $300 billion mark.

Due to data limitations, the following geographically oriented discussion, like the tables and charts on which it is based, does not encompass services trade or reflect seasonal adjustment.

In a geographic frame of reference, the U.S. trade position with the NAFTA partners. Canada and Mexico, strengthened during the latest quarter. Although the United States continues to run deficits with both countries, each was below its year-earlier level. Exports to Mexico were 30 percent above their rate of July-September 1996. The U.S. deficit with the European Union was unchanged from a year earlier, while deficits with major Asian trading partners widened. In the Japanese market, U.S. exports were less than they were in the third quarter of last year.

The U.S. global merchandise trade deficit (defined in a fashion consistent with figures from the other countries shown in the table) rose in the third quarter of 1997. At the same time, Japan's surplus, in dollar teems, dropped slightly. The German surplus continued to grow, and in magnitude now approaches that of Japan.

U.S. industrial production remained strong during the July September period, while the comparable index for the Japanese economy did not match its performance of the two preceding quarters. The German index continued to display ongoing recovery from a protracted slump; meanwhile, productivity gains in the United Kingdom were again smaller than those in the other economies.

Global inflation remained constrained. In this country, wholesale prices for manufactures were unchanged from their level of a year earlier. At the same time, comparable price increases remained moderate in the other countries.

The value of the U.S. dollar continued to rise during the third quarter of 1997, from a low reached in early 1995. The significant strengthening relative to the German and French currencies was particularly notable.

The U.S. share of world exports (as aggregated in dollar teems) increased in 1996, after two years of decline. The corresponding share for Japan dropped a full percentage point; those for the other major exporters changed less.

The United States continued to record strong and steady productivity gains in 1996. Germany and Japan had even higher rates of improvement for the year, as they recovered from slumps earlier in the decade; in contrast, the U.K. index, which had risen sharply during these earlier years, continued to slide.