U.S. trade gap in 1995 widened to 7-year high Deficit hits $111 billion as imports overtake strong gain in exports

Report underlines worries

Record imbalance set with Mexico, but gap narrowed with Japan

Commerce

February 29, 1996|By LOS ANGELES TIMES

WASHINGTON -- The U.S. trade deficit ballooned to $111.04 billion in 1995, the worst performance in seven years, the Commerce Department reported yesterday, underscoring job anxieties that are resounding from the factory floor to the presidential campaign trail.

Despite a marked, overall improvement late in the year -- highlighted by long-awaited trade gains with Japan and a general pattern of export growth -- the U.S. trade balance deteriorated with China, Mexico and other nations.

The trade gap for goods alone hit an all-time high.

Administration critics immediately accused the White House of pushing trade accords, such as the North American Free Trade Agreement, that have cost thousands of jobs. And analysts debated whether the deficit would shrink much this year, given economic problems affecting key U.S. customers in Western Europe, Japan and Mexico.

The trade gap may "have bottomed out," said Jeffrey J. Schott, a research fellow at the Institute for International Economics in Washington, "but I wouldn't be very bullish about dramatic change for U.S. trade prospects in 1996."

The new government report showed that:

* The annual deficit obscured an underlying trend of improvement that became obvious around August.

* Substantial gains in U.S. exports reflect favorably on U.S. competitiveness, economists agree, but they were not sufficient to offset the nation's vast appetite for imports and the unusually large trade gap.

* The United States last year bought far more goods from its North American neighbors than it sold to them, although the effect that NAFTA has had on U.S. jobs remains a source of argument.

"Exports are rising but manufacturing jobs aren't," said Thea Lee, an economist and trade specialist at the Economic Policy Institute, a liberal think-tank in Washington. "You have to say that some jobs are being displaced by imports."

Progress in narrowing the trade gap seemed to stall in December, as the deficit widened a bit to $6.78 billion, slightly up from November. The 1995 deficit, which was 4.5 percent larger than the prior year's, would have been substantially worse except for a trade surplus in services, such as tourism, transportation, royalties and license fees.

Administration officials said yesterday that export gains of 14.4 percent for the year provided a much-needed boost to economic growth and would help narrow the trade gap in 1996.

The December monthly deficit of $6.78 billion, although up slightly from November, reflected a pronounced trend downward from earlier in the year, when the monthly deficit figures were exceeding $11 billion.

The report showed that the U.S. trade deficit with Japan shrunk for the first time in four years, narrowing by 9.7 percent to $59.28 billion.

The pattern remained apparent in December, with the monthly deficit sinking to $3.47 billion from $4.13 billion the month before.

But Mexico and China were minuses in the trade picture. The U.S. trade surplus with Mexico in 1994 turned into a 1995 deficit of $15.4 billion, reflecting Mexico's severe downturn, after its monetary crisis in late 1994.

At the same time, the U.S. trade gap with China also set a record, widening dramatically -- up 14.6 percent to $33.81 billion.

U.S. officials say that the trade picture with China is not what it appears to be because of trade disputes over the piracy of U.S. movies and computer programs. The United States has raised the possibility of imposing trade sanctions on Chinese goods unless the situation is resolved.

The trade gap also widened with Canada to $18.2 billion, the biggest deficit there since 1986.

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