U.S. Trade Deficit Hangs In a Delicate Imbalance

Like Yin and Yang, the Saving in Asia Complements the Spending in America

AGOURA HILLS, Calif. -- The most breathtaking moment came in the master bedroom.

Bob Miller, a stocky 60-year-old who imports motorcycle helmets, was giving a tour of his Southern California home to Scott Hong, an executive of a South Korean helmet manufacturer. The back yard, which features a swimming pool, Jacuzzi and tennis court, elicited murmurs of awe from Hong. But an even greater marvel materialized at Miller's bed, where at the touch of a button, a video screen descended from the canopy.

"TV!" Miller said. "We have it in case we get bored."

That's the kind of guy Miller is -- unabashedly acquisitive. Hong is his opposite number. One is an American importer, the other an Asian exporter. Together they epitomize an enormous imbalance in the global economy, in which the United States imports, consumes and borrows while Asian nations export, save and lend.

Miller indulges in quickie trips to Las Vegas and boasts a collection of classic cars. His firm, Helmet House, buys helmets in large quantities from Asia for distribution in the United States.

Hong, also 60, is renowned among family and colleagues for frugality -- he drives a three-year-old Volkswagen Passat, for example, despite the millions of dollars he has accumulated through his stake in his family's company, HJC Helmets. That company produces the No. 1-selling motorcycle helmet in the U.S. market, from factories in Korea and China.

Spread across millions of Miller's and Hong's fellow citizens, this behavior adds up. In the United States, imports exceeded exports last year by $617.6 billion, a record gap equal to 5.3 percent of gross domestic product. The U.S. trade deficit has swelled even further in the first nine months of this year compared with the corresponding period in 2004.

South Korea, by contrast, ran a $29.4 billion trade surplus last year, or 4.3 percent of its GDP, and even that paled by comparison with Japan's $132 billion surplus or the $100 billion-plus surplus China is expected to post this year.

For now, the imbalance between the United States and Asia benefits the economies on both sides. Asians get jobs in export firms such as HJC Helmets, and their American customers get high-quality, inexpensive goods including clothing, cars and appliances. The United States also gets cheap capital from Asia because the dollars that Asians earn for their exports often end up invested in the bonds of the U.S. Treasury and mortgage-finance companies such as Fannie Mae and Freddie Mac. These purchases of U.S. securities help keep interest rates low, which in turn helps fuel the housing boom and create new U.S. jobs that replace the ones lost to imports.

"We get cheap goods in exchange for pieces of paper, which we can print at a great rate," said Allan H. Meltzer, an economist at Carnegie Mellon University.

However, the mountain of U.S. bonds that foreigners are accumulating means the United States is going deeper into debt to fund its import binge, to the tune of about $3 trillion as of this year.

"Sooner or later, the rest of the world will decide that the United States is no longer a safe bet for lending more money," said William R. Cline, a scholar at the Institute for International Economics and author of a new book titled "The United States as a Debtor Nation."