For the first time in three years, the American balance of payments on combined trade in goods and services slipped into deficit in 1982, the result of a record $36 billion merchandise trade deficit, up nearly $10 billion from 1981, Secretary of Commerce Malcolm Baldrige announced yesterday.
The department said that the bulge in the trade deficit last year was accounted for by a $25.1 billion drop in exports across the board, while imports fell only $16.9 billion, almost all of that in imports of petroleum products.
The so-called "current account" balance, which incorporates both the balance on merchandise trade and the balance on services (which includes interest payments on investments abroad) will be in deficit by about $6 billion, after recording a surplus of $4.47 billion in 1981 and $1.52 billion in 1980, Baldrige said.
Basically, the slide of the current account into minus numbers represents a steady--and predicted--increase in the merchandise trade deficit to a point where it now outweighs the traditional U.S. surplus on its trade in services.
On the balance-of-payments basis of accounting used by the Commerce Department (which excludes military trade and makes certain other adjustments), the trade deficit soared to $36.11 billion in 1982, compared with a deficit of $27.89 billion in 1981. The prior record-high trade deficit was $33.76 billion in 1981, which resulted in a record current account deficit of $14.8 billion.
But that record current account deficit is almost sure to substantially exceeded. Administration officials have predicted that the strength of the U.S. dollar, combined with the impact of recession in other industrial countries and a liquidity crisis in the Third World, will result in new record deficits for both trade and current accounts in 1983.
In testimony this week, Martin S. Feldstein, chairman of the President's Council of Economic Advisers, predicted that the trade deficit would swell to $75 billion this year. Assuming that the surplus on services remained at approximately $30 billion in 1983, that would put the current account deficit at a staggering $45 billion level. If interest rates go down, reducing the income on American investments abroad, the services' surplus could be less than $30 billion, and the current account deficit even more.
Normally, many economists believe, a U.S. current account deficit of such a magnitude would weaken the dollar, which most consider to be overvalued. In that case, after some lag in time, a cheaper dollar would tend to spur exports and reduce the trade deficit. But Feldstein and some other analysts contend that so long as huge federal budget deficits continue, interest rates will remain too high, thus keeping the dollar at an overvalued level.
And to some degree, the United States is regarded as a haven for investments in a politically unstable world, which tends to keep the dollar strong regardless of interest rates or current account deficit considerations.
The Commerce report showed that for the fourth quarter of last year, the merchandise trade deficit was $11.9 billion, down a bit from a revised $12.5 billion in the 3rd quarter.