The Commerce Department yesterday reported a worsening international trade position for the country, with the merchandise trade deficit climbing to new highs for the third quarter of 1984 and the surplus in the overseas sales of U.S. services expected to drop sharply this year.
As a result, Commerce Secretary Malcolm Baldrige said the U.S. current account deficit -- the broadest measure of overseas trade in goods, services and some government transfers -- will soar to more than $100 billion this year. That will be more than twice as high as last year's current account deficit of $41.6 billion.
The three-month, $33.3 billion merchandise trade deficit, moreover, is almost as high as the entire 12-month $36.4 billion trade deficit at the start of the Reagan administration.
The soaring trade deficits occured despite sluggish demand for oil at a time during the year when companies traditionally increase petroleum stocks for the winter. Oil imports actually declined 3 percent during the quarter, which helped hold down the deficit.
"Deficits are one of the weak spots" of the economy, said the Commerce Department's chief economist, Robert Ortner, and the declining surplus in services reflects "the gradual erosion of our net investment position."
Purchases of American services, the only strong spot in the trade picture recently, are declining as the strong dollar makes them more expensive than similar services sold by other nations. The surplus in services has been reduced further by the payment of interest on large foreign investment in the United States, which is helping to finance the budget deficit.
"The weak trade performance reflects the overly strong dollar. It's a basic distortion in the economy that is closely associated with the distortion in the fiscal deficit," added William R. Cline of the Institute for International Economics.
"The trade and current account balances will improve with a lowered budget deficit, lower interest rates and a lower dollar," Baldrige said.
The quarterly merchandise trade figures are seasonally adjusted and are reported on a balance-of-payments basis, which excludes military trade and the cost of shipping and insurance. Economists consider it a more accurate measure than the monthly figures, which last week placed the third-quarter merchandise deficit even higher, at $36.6 billion.
Based on the first nine months' figures using that measure, the merchandise trade deficit for the year is expected to reach $113.2 billion -- almost twice as high as the 1983 deficit of $61.1 billion. Using the monthly figures, however, the government estimates the trade deficit will reach as high as $130 billion.
The $33.3 billion third-quarter deficit compares with a deficit of $25.7 billion for the second three-month period of the year. During the third quarter, imports jumped $7.9 billion, or 10 percent, to $88.3 billion. Exports, however, increased far less, by $400 million, or 1 percent, to $55 billion.
The one bright spot in an otherwise dismal export picture was an 11 percent increase in sales to Latin America, once one of the best customers for U.S. products. Countries south of the border have been limited in their ability to increase imports by the debt crisis, which left many of them short of hard currency.
The high import figures show that the rapid increase in demand here, fueled by the economic recovery, is being supplied by lower-priced goods from overseas instead of American products. This is likely to cost jobs and dampen production increases in the United States, possibly slowing the recovery.
Cline said purchases of overseas goods were not as noticeable when the economy was steaming ahead earlier this year at a 10 percent growth rate. They will become more apparent now that growth has slowed to slightly under 3 percent.
On the plus side, lower-priced imports are helping to tamp down inflationary trends in the economy.
The Commerce Department blamed the increasing trade deficit on a growth in imports from three geographic areas: Japan; Western Europe, and the newly industrialized Pacific rim nations of Hong Kong, Singapore, South Korea and Taiwan, where the merchandise deficit jumped to $7.2 billion in the third quarter from $4.1 billion in the second quarter.
The American trade deficit with Japan, the largest with any country, continued climbing -- reaching $10.4 billion from $7.9 billion in the second quarter. Western Europe, which until this year had a trade deficit with the United States, increased its surplus to $5.7 billion in the third quarter from $3.3 billion.