Trade deficit in Feb. soars to $9.71 billion

April 20, 1994|By New York Times News Service

WASHINGTON -- The nation's trade deficit soared in February to its worst level in six years as the strong U.S. economy went on a worldwide buying binge while its economically weaker trading partners bought less merchandise from U.S. producers.

The Commerce Department reported yesterday that the trade deficit in goods and services was $9.71 billion in February, up sharply from January's imbalance of $6.64 billion. The deficit in goods alone rose by one-fifth, to $13.89 billion, while the traditional U.S. surplus in services like tourism, brokerage, investment banking, insurance and film rentals dipped about 11 percent, to $4.18 billion.

As has become the pattern, the United States ran up its its largest deficits with Japan and China, of $4.63 billion and $1.65 billion respectively.

But in the first two months of 1994, the sale of U.S. goods to Mexico rose 15 percent from the same period last year, and exports to Canada were up almost 8 percent, spurred in part by the North American Free Trade Agreement, which took effect in 1994.

The widening U.S. trade imbalance with Japan and Europe underscores the failure of the Clinton administration's efforts to spur its leading economic allies to cut taxes and reduce their interest rates enough to stimulate consumer spending in Japan, Germany and Western Europe.

The Clinton administration came into office vowing to reinvigorate the Group of Seven industrial democracies -- Germany, Japan, Canada, Britain, France, Italy and the United States -- in part to make it a more effective instrument for coordinating economic growth. But thus far it has little to show for its efforts, and yesterday's trade figures underline that point.

The Group of Seven, whose finance ministers will meet in Washington this weekend, has focused on aid to Russia and securing the global trade agreement signed in Morocco on Friday, but it has accomplished nothing on its primary mission of promoting economic growth among the industrial democracies. One of the results is that the United States continues to expand much faster than its allies. While the U.S. economy grew at a 7 percent clip in the final quarter of last year, Japan and Europe were either in recession or just beginning to climb out of it.

"The G-7 is dead in the water,"said C. Fred Bergsten, director of the Institute for International Economics. "It has become totally ineffectual in achieving its primary purpose of maintaining a growing and stable world economy. The administration has nothing to show for its policy of trying to reinvigorate the G-7 with quiet, behind-the-scenes coaxing.

"I would lay most of the blame on the Japanese and Europeans for their recalcitrance," Mr. Bergsten said. "Japan is in its third year of recession, has a budget surplus, its growth prospects are flat but its government will not cut taxes without an offsetting tax increase."

There is slow growth everywhere in the Group of Seven, except in the United States. U.S. exports dropped 3.5 percent, to $37.17 billion, while imports jumped 2.4 percent to $51.05 billion, the second highest level on record. U.S. imports of foreign cars were also up sharply, rising 4.2 percent, to $8.82 billion in February, while foreigners bought fewer U.S. aircraft, data processing equipment and industrial engines.

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