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

DATE: WEDNESDAY, March 13, 1991                   TAG: 9103130111
SECTION: BUSINESS                    PAGE: C-5   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

U.S. TRADE DEFICIT HITS SIX-YEAR LOW

The Commerce Department said Tuesday the broadest measure of trade, called the current account, narrowed by 9.8 percent from a trade gap of $110 billion in 1989, as U.S. merchandise exports climbed to an all-time high and a record number of foreign tourists visited America.

The current account, also known as the balance of payments, is considered the most important trade statistic because it measures not only trade in merchandise but also investment flows between countries and earnings on tourism and other services.

The 1990 deficit was the smallest since a $99.01 billion deficit in 1984, and it marked the third consecutive year of improvement since hitting a record of $162.31 billion in 1987.

David Wyss, an economist with DRI-McGraw Hill, said that this year's current account deficit could be cut by more than half, falling to around $40 billion.

The bulk of that improvement will come from the $53.5 billion in contributions pledged by American allies to defray the costs of the Persian Gulf War, much of which will be counted as a kind of reverse foreign aid and directly will reduce the current account deficit.

Wyss and other economists said the improvement this year would be a one-time phenomenon with the deficit for 1992 returning to a level of around $75 billion to $80 billion.

In addition to the allied contributions, the 1991 deficit will be cut by a modest amount by continued improvements in U.S. export sales abroad, analysts said.

Strong demand for merchandise exports has helped cushion the severity of the current recession, and the Bush administration is counting on continued demand this year to help pull the country out of the downturn.

However, private analysts said that the administration may be pinning too much hope on this sector, given spreading weakness in overseas markets.

"We will continue to get export growth this year, but it will not be as rapid as the past two years," said Bruce Steinberg, an economist with Merrill Lynch. "Exports by themselves are not enough to pull the country out of recession."

At the beginning of the 1980s, the United States enjoyed annual surpluses in its current account as perennial deficits in merchandise trade were offset by overseas investment earnings.

But as Americans handed over billions of dollars to foreigners to pay for a flood of imported cars and television sets, the investment cushion eroded. It disappeared altogether in 1985, when the United States became a net debtor for the first time in 71 years.

Simply stated, that means foreigners now own more in U.S. assets than Americans own overseas, a development that has triggered heated debate over whether the United States is losing control of its economic destiny.

After posting a rare deficit of $913 million in investment earnings in 1989, this sector returned to a surplus of $7.5 billion in 1990. Receipts on Americans' overseas earnings rose slightly while foreigners' earnings in the United States fell, reflecting the slowdown in the U.S. economy.

The surplus in the services category increased to $22.9 billion last year, up 11.7 percent from the previous year, boosted primarily by a record level of foreign tourists in the United States.