Trade Deficit Hits All-Time High Gap Widens To $166.3 Billion Despite Record Exports

America’s deficit in merchandise trade climbed to an all-time high in 1994 as a flood of cars, computers and other foreign imports swamped a record level of U.S. exports. The trade gap with both Japan and China set records.

Nevertheless, the Clinton administration insisted that its aggressive campaign for big trade agreements to lower barriers to American products around the world was bearing fruit as reflected by the record exports.

The Commerce Department reported Friday that the merchandise deficit soared by 25.4 percent last year to $166.29 billion, compared to a 1993 deficit of $132.58 billion.

U.S. goods exports rose 10 percent to a record $502.8 billion. But this improvement was outpaced by a 13.5 percent surge in imports, which also set a record of $669.09 billion.

While a slowing U.S. economy and faster growth overseas had been expected to start lowering the deficit this year, many private economists have begun to express concerns about this forecast in light of the recent economic turmoil in Mexico, America’s third-biggest export market.

“1994 was a bummer when it came to the trade deficit and the fact that we have just lost much of our export market in Mexico will probably make 1995 worse,” said Robert Dederick, an economist at Northern Trust Co. in Chicago.

Dederick predicted a 1995 goods deficit of $175 billion.

“There is no way our deficit will improve until we get serious about addressing the underlying problems including barriers in Japan and China,” said Lawrence Chimerine of the Economic Strategy Institute in Washington.

America’s deficit with Japan was up 11 percent to $65.7 billion while the imbalance with China surged by 30 percent to $29.5 billion. Together, those two countries accounted for 57 percent of the total goods deficit.

The deficit in both goods and services for 1994 totaled $108.11 billion for 1994, a 42.8 percent increase from the $75.73 billion imbalance in 1993. A record $58.18 billion surplus in U.S. exports of services such as tourism helped to offset somewhat the huge goods imbalance.

For December, the goods and services deficit shrank to $7.34 billion, lowest level in nine months, but economists said it was likely to widen again in coming months.

The administration sought to emphasize the export performance while blaming much of the worsening of the overall deficit to the fact that the U.S. economy was growing so much faster than those of major trading partners.

U.S. Trade Representative Mickey Kantor said President Clinton was convinced that his strategy of promoting market-opening trade deals such as the North American Free Trade Agreement and the General Agreement on Tariffs and Trade was correct.

“Are our policies working? The answer to that is yes,” Kantor said, insisting it was crucial to push American exports in Latin America and other fast-growing economies.

“The two countries that we have the biggest trade deficits with are the two most closed markets in the world,” he said, referring to Japan and China.

Kantor told reporters that the administration believed it was making progress in Japan. He conceded it was critical to achieve a breakthrough in current talks on opening Japan’s auto and auto parts markets, which account for two-thirds of the trade gap between the two countries.

He said the huge surge in China’s surplus with the United States showed how essential it was for negotiators to reach agreement in current talks on halting piracy of American copyrights and patents.

But opponents noted that America’s once huge surplus with Mexico continued to shrink last year, the first full year that NAFTA began lowering trade barriers with Mexico. The U.S. surplus with Mexico, which had hit $5.38 billion in 1992, shrank to $1.34 billion last year.

Sen. Byron Dorgan, D-N.D., who opposed NAFTA and GATT, said that the administration’s “strategy is one that cripples our country. It means loss of opportunity, jobs and income.”

The $166.29 billion merchandise deficit for last year surpassed the old mark for goods on a balance-ofpayments basis of $159.6 billion set in 1987.

The combined deficit of $108.11 billion in merchandise and services was the largest since a 1988 deficit of $114.8 billion.

The trade figures would have looked even worse except for the fact that oil prices fell in 1994, with the average per-barrel price dropping to $14.22, the lowest level since 1988. The 1994 foreign oil bill was $49.58 billion even though the volume of oil imports was up 5 percent.

Other import figures included a $16.2 billion increase in foreign autos and auto parts, a $15 billion rise in imports of computers and computer chips, a $2.7 billion rise in clothing imports and a $2.3 billion increase in imports of televisions, VCRs and stereos.