A high Treasury official predicted yesterday that the massive U.S. trade deficit would shrink by about $10 billion next year, in part because U.S. manufacturers "are beginning to regain some of their recently lost market shares."
C. Fred Bergsten, Assistant Secretary of Treasury for International Affairs, said that the U.S. trade dificit next year would be about $25 billion, or about $27 billion if oil prices rise 5 per cent.
In general, he portrayed an optimistic outlook for the U.S. balance of payments in a speech to the National Foreign Trade Council in New York.
The U.S. trade balance hit a record annual deficit rate of $45 billion in the first quarter. Combined with the large U.S. surplus in services, that created a current account deficit at a rate of $27 billion.
These box-car sized deficit have been a major factor in the pressure on the U.S. Dollar.
Bergsten said that in the second and third quarters, the trade deficit had dropped to a $31 billion deficit average, reducing the current account deficit rate to $13 billion.
Although much of the improvement represented a big jump in agricultural exports, which is not likely to be sustained, Bergsten said that after two and one-half years of sluggish growth, non-agricultural export also had begun to pick up after March.
The official said that another sign of improved competitiveness by American manufacturers was that third quarter imports in money terms were up only 15 percent from the first quarter, compared with a 40 percent gain in the prior nine-month period. Taking out inflation, the gain was only 5 percent, compared with 26 percent.
Bergsten's forecast that the trade deficit would be under $35 billion for calendar 1978, declining by about one-third in the second half to an annual rate of $30 billion-plus from the first quarter $45 billion peak. That would produce a current account deficit for 1978 of about $17 billion.
Excluding agriculture and oil, he predicted that by the 4th quarter of 1979, the U.S. trade balance in other areas would be less than $10 billion, a swing for the better of more than $20 billion within two years' time.
Bergsten said that a successful Multilateral Trade Negotiation (MTN) would also help reduce the U.S. trade deficit.