THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Thursday, June 22, 1995 TAG: 9506220441
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: ASSOCIATED PRESS
DATELINE: WASHINGTON LENGTH: Medium: 85 lines
America's trade deficit surged to a monthly record $11.37 billion as Japanese cars flooded the U.S. market ahead of possible punitive tariffs.
The Clinton administration said the sharp trade deterioration only stiffened its resolve to impose record sanctions against Japan next week if no deal is reached in the meantime to boost purchases of American-made cars and parts.
``It is critical that we have a meaningful and concrete solution,'' U.S. Trade Representative Mickey Kantor said as negotiators prepared to go back to the bargaining table today in Geneva. ``Japan is the second largest economy in the world. They have a responsibility to open their markets.''
The Commerce Department report showed that the U.S. deficit in goods and services hit an all-time high in April, up 16.2 percent from a revised March deficit of $9.79 billion. The deterioration reflected a $738 million rise in imports, which set a record, and an $882 million drop in exports.
Half the import surge came in autos and auto parts, led by a $210 million increase in imports from Japan, which climbed 9.5 percent to $2.4 billion, the second highest monthly total on record.
Analysts said it appeared that Japanese car companies were rushing to get shipments into the country this spring in advance of any possible trade retaliation.
While Tokyo newspapers have been full of stories in recent days suggesting that Japanese automakers were offering to compromise in order to escape trade sanctions, Kantor would make no prediction on the outcome of the dispute.
``You should ask the Japanese negotiators and officials,'' Kantor said. ``It is up to them. It is their problem and they have the solution to it.''
The United States is making three demands of Japan - ``voluntary plans'' from Japanese automakers to increase purchases of American-made auto parts; expansion of Japanese dealerships stocking U.S. cars; and liberalization of safety regulations that block sale of American-made replacement parts.
The administration is threatening to effectively ban Japanese luxury cars from the American market by imposing 100 percent tariffs on 13 models, including such popular sellers as the Toyota Lexus and Honda Acura.
The surprising jump in April's deficit was the largest imbalance since the government began tracking goods and services on a monthly basis in 1992. It was likely to push overall economic growth, as measured by the gross domestic product, close to zero for the current spring quarter, economists said.
In unusually candid comments Wednesday night, Federal Reserve Chairman Alan Greenspan said there was an increased risk of a ``modest, near-term recession.''
``This should strongly encourage the Fed to get on top of this weak data and lower interest rates,'' said Lawrence Chimerine, chief economist at the Economic Strategy Institute in Washington.
In addition to the monthly report, the government also released Wednesday the first-quarter report on the broadest measure of trade, the current account. For the January-March period this deficit totaled $40.5 billion, the sixth worst showing on record although down from the all-time high of $43.3 billion set in the last three months of 1994.
The current account measures trade in goods and services like the monthly report, and it also tracks investment flows and foreign aid.
The increase in imports of cars and parts came not only from Japan but also Germany, whose auto shipments to the United States were up by $172 million. If Japanese luxury cars were eliminated from the U.S. market by the punitive tariffs, the German-made BMW and Mercedes would be expected to be the prime beneficiaries.
For the year so far, the deficit in goods and services is running at an annual rate of $124 billion, up sharply from last year's deficit of $106.21 billion.
Despite the rise in imported cars, the overall deficit with Japan narrowed slightly to $5.87 billion in April, but was still running $1 billion higher for the first four months of this year.
America's second biggest deficit was with China, a gap of $2.52 billion in April, up 22 percent from the previous month.
Adding to America's trade woes has been the economic turmoil in Mexico, America's third largest export market. The U.S. deficit with Mexico in April was $1.48 billion as the weak peso and financial crisis cut sharply into American exports.
America's foreign-oil bill showed an improvement of 8.9 percent in April to $4.53 billion on a seasonally adjusted basis even though the price per barrel of crude oil jumped to $16.71, the highest monthly level since November 1992. by CNB