A Commerce Department official yesterday said that "the U.S. trade deficit problem could get out of hand if not effectively addressed," and called for a concerted drive to boost American exports.
In a speech in Chicago, Frank A. Weil, assistant Secretary of Commerce for domestic and international business, took direct issue with recent assurances by the Treasury that the growing trade deficit was no cause for concern.
Treasury Secretary W. Michael Blumenthal estimated two weeks ago that the U.S. trade deficit might run as high as $23 to $25 billion, and that the current account - which includes income on investments and from services - would be in deficit by $10 to $12 billion this year.
The U.S. trade deficit was $9.2 billion last year. For the first quarter of this year, it was $6.9 billion, an annual rate of $28 billion.
In a speech last month in New York, assistant Treasury Secretary C. Fred Bergsten admitted that "these are stark numbers . . . (causing) doubts about the competitive strength of the U.S. in the world economy. In my view, such doubts are largely unwarranted."
Weil agreed that "we must not be alarmist and over react to the deficit." But he added, "Nor can we afford to underreact."
According to Blumenthal, the trade deficit is caused by heavy oil payments, which will run $41 billion this year, meaning that except for oil, the U.S. is running a large trade surplus. The shift to a current account deficit from a surplus in recent years, Treasury officials say, is "a contribution to the stability of the international monetary system."
But Weil pointed out that the non-oil surplus had dropped by $8 billion between this year and last, with the decline concentrated in manufactured goods.
"This is a real problem," the Commerce official said. "I believe the trade deficit problem could get out of hand if not effectively addressed. Some have suggested that the appropriate action is simply to let the floating dollar handle matters. I do not agree. Neither does the Bank for International Settlements.
Treasury officials have not suggested a "floating dollar" in the sense of a general depreciation, as a solution to trade deficits. But they have pressed other countries in surplus, notably Japan, to allow their currencies to appreciate. A higher-valued Japanese yen would mean lower dollar rate against the yen, but not against other major currencies.
Weil noted that the U.S. share of manufactured goods in world trade peaked at 21.2 pe cent in 1975 and dropped to 20.3 per cent in 1976. The difference, Weil said, represents $4 billion is potential exports of manufactured goods.
He suggested that the nation needs "a plan of action" to stimulate export activity," because "floating exchange rate alone . . . cannot be counted upon to resolve our trade problems."
His suggestions included trade promotion, efforts to conclude a new round of trade negotiations and resistance to dropping the special export tax incentive given through the Domestic International Sales Corp. (DISC).