
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: TUESDAY, March 13, 1990                   TAG: 9003133470
SECTION: BUSINESS                    PAGE: A7   EDITION: EVENING 
SOURCE: Associated Press
DATELINE: WASHINGTON                                 LENGTH: Medium

1989 TRADE DEFICIT DOWN TO 1984 LEVEL

The deficit in the broadest measure of U.S. trade declined to $105.89 billion last year, the smallest in five years, as higher merchandise exports and increased foreign travel helped to trim the deficit, the government said today.

The Commerce Department said the current account deficit shrank 16.3 percent from a $126.55 billion imbalance in 1988.

However, even with the improvement, the current account deficit remained above $100 billion for the sixth consecutive year. The 1989 total was the lowest since a $104.19 billion deficit in 1984.

The year ended on a positive note as the October-December deficit declined to $20.57 billion, down 10.2 percent from the third quarter, and the smallest quarterly imbalance in almost six years.

The current account, also known as the balance of payments, is the most important trade statistic because it measures not only the flow of merchandise across borders but also trade in services and investments.

The United States ended the 1980s in a far different position than it began the decade. In 1980, there was a small surplus in the nation's current account. America was the world's largest creditor country and its earnings on overseas investments were enough to offset perennial deficits in merchandise trade.

However, as Americans transferred billions of dollars into foreign hands to pay for merchandise imports, the investment cushion shrank rapidly and disappeared altogether in 1985, when the United States became a net debtor for the first time in 71 years.

America's debtor position stood at $532.5 billion at the end of 1988 and today's report indicates that it grew to around $630 billion last year. The exact figure will not be released until later in the year.

The growing foreign ownership in America has triggered a heated debate over whether America is losing control of its economic destiny to foreigners.

Some economists predict that the current account deficit could actually begin rising again this year, reflecting a higher dependence on foreign oil and more sluggish sales of U.S. exports.

That development would spell bad news for the Bush administration, which is counting on further improvements in trade to bolster America's flagging industrial sector.

Also causing problems is the drop in the value of the dollar, which boosted the foreign earnings of American companies operating abroad when that income was translated back into dollars.

by CNB