The sharp decline in the value of the U.S. dollar on foreign exchange markets has been almost a non-event as far as the nation's bleak trade picture is concerned.
Some U.S. companies trying to sell goods abroad, where the competition is Japanese, West German or French -- against whose currencies the dollar has come down the most -- are finding they again have something to talk about, according to analysts surveying the trade scene.
So far, however, there has been no surge of export orders, according to these analysts. And meanwhile, the pace of imports is expected to pick up as the result of an apparent pickup in economic growth.
One reason for the lack of response to date might be that the value of the dollar -- adjusted for inflation differentials and according to the amount of trade between each country and the United States -- now is about 2.5 percent below its 1984 average.
But the dollar, when measured this way, is well above its value for several years prior to 1984.
In January, nearly a year after the dollar peaked against the yen, deutsche mark and several other prominent currencies, the U.S. merchandise trade deficit hit a record $16.5 billion, the Commerce Department said last week.
With the cost of insurance and freight charges included in the value of imports, the United States imported almost twice as many goods as it exported.
Nor is the bad trade news a one-month blip. During the past three months, the merchandise trade deficit has run at an annual rate of about $180 billion, compared with the $148.5 billion deficit for all of 1985.
Economist Rimmer de Vries of Morgan Guaranty Trust Co. recently told the Joint Economic Committee that if there were no further depreciation of the dollar, the nation's merchandise trade balance would improve slowly.
It would decline to about $105 billion by 1988 but then start to rise again, he said. A substantial part of the improvement would be the result of lower oil prices, not the fall of the dollar to date.
C. Fred Bergsten of the Institute for International Economics is less optimistic than de Vries. Bergsten estimates the dollar's drop so far is only about enough to stabilize the non-oil trade deficit, not improve it.
Economists and government policymakers have warned all along that it could take up to two years for the dollar's decline to have a substantial impact on trade flows. In fact, in the short-run, the decline of a currency can make a trade deficit appear worse.
That phenomenon -- called the "J-curve" effect -- occurs because it will take more dollars to buy a given quantity of imported goods unless foreign producers lower their prices as calculated in terms of their own currencies.
Eventually, export markets are supposed to be stimulated because U.S. producers would be able to sell their goods more cheaply abroad than before, while importers would have to charge higher prices, in terms of dollars, when they sell in the United States. This shift in relative prices should encourage export sales and discourage purchases of imported goods, and thus improve the trade balance.
For all that to occur, two things have to happen. First, the value of the dollar must come down compared with the currencies of the countries with which the United States trades, or against whose products U.S. producers compete in so-called third-country markets -- that is, in countries other than the United States or the home country of the competing producer.
Second, foreign producers have to set their prices so they reflect a significant portion of the change in exchange rates. If a foreign producer is willing to accept a much smaller profit margin on his sales, he might be able to absorb the impact of a cheaper dollar and hold onto his share of the market for his products.
There is strong evidence that neither of these two necessary changes have taken place.
For one thing, the value of the U.S. dollar has fallen far less than might be supposed from the daily news stories about its decline against the yen, the mark and a few other currencies. Compared with currencies of some countries important to U.S. trade, the dollar has fallen little, or, in some cases, it has even gone risen.
Meanwhile, the dollar prices of many imported goods are rising only modestly. At the end of 1985, a Labor Department index of imported goods prices stood lower than it had at the beginning of the year.
The index did go up 1.8 percent in the fourth quarter, but that only retraced part of the declines earlier in the year.
Furthermore, there has been little upward movement in the dollar cost of raw commodities traded in auction markets around the world, one of the first places most analysts had expected the dollar's decline to be felt.
How one measures the extent of the dollar's decline depends of several factors, including the point from which the change is measured.
Take the yen, for example. The dollar peaked against the yen in February 1985. As of last week, the dollar's value had dropped more than 30 percent compared with the Japanese currency.
However, many analysts regard the February peak as a sort of speculative bubble that had little impact on trade flows. Instead of the peak, they prefer to use as a base the average yen-dollar exchange rate over a longer period, often 1984. From that average, the dollar's value has fallen only about 24 percent.
And many analysts believe such comparisons are substantially improved if the exchange rates are adjusted for any differential in inflation between the countries involved. In this case, Japanese inflation has been running at about half the rate of inflation in the United States. Thus, the real yen-dollar exchange rate has come down about 20 percent compared with 1984 rather than 24 percent.
But Japan is not the most important country for U.S. trade. Canada has had that position for years, and in 1985 accounted for more than 20 percent of U.S. trade -- that is, imports and exports. Japan was not far behind with 16.5 percent.
The increase in the value of the yen eventually ought to lead to a reduction in the huge $49.7 billion trade deficit the United States had with that nation last year.
On the other hand, the 6.4 percent rise in the real value of the dollar since 1984 compared with the Canadian dollar also has important implications for trade.
The Canadian dollar is not a widely used international currency and its movements have not made the headlines. Nor has the fact that the U.S. dollar is up in real value by nearly 20 percent compared with the Mexican peso, the United States' third largest trading partner. (See table.)
The U.S. dollar's value also was higher in real terms last week than it was, on average, in 1984, when compared with the currencies of South Korea, Taiwan, Hong Kong, Brazil, Venezuela and Australia. (See chart.)
If the change in the dollar's value against each of the currencies of the 14 countries shown in the table -- which together encompass nearly three-fourths of all U.S. trade -- is averaged using the volume of bilateral trade as weights, the dollar has declined only about 2.5 percent from its 1984 average.
A different weighting process using various countries' share of total world trade -- in which the German mark and the French franc, for instance, have much greater importance -- shows a considerably greater decline in the value of the dollar.
An in-between sort of approach, that uses elements of bilateral and multilateral trade weights, shows a decline of about 10 percent since 1984, according to Bergsten of the Institute of International Economics.
Some relief on the trade front should be on the way soon as a result of plunging oil prices.
Many oil experts expect the cost of imported oil to be down by at least one-third from last year's average of about $27 for each 42-gallon barrel -- and the price drop could be greater. With net imports of about How one measures the extent of the dollar's decline depends of several factors, including the point from which the change is measured. 1.6 billion barrels, last year's net oil bill of about $43 billion could be lowered by $14 billion or more.
But the big drop in oil prices has little or nothing to do with what has happened to the value of the dollar.
Since oil is priced in dollars worldwide, a shift in the dollar's value can have a significant impact on the local cost of oil in, say, West Germany or Japan, but not in the United States.
The fastest route to improvement of the trade balance, in the opinion of a number of economists, would be faster economic growth in other industrial nations, particularly West Germany and Japan.
However, governments of both countries have resisted suggestions by the United States that their economies could be given a boost by lowering interest rates -- though Japanese rates were reduced slightly a few weeks ago.
Meanwhile, significant reduction in the record trade deficits apparently will require a continued decline in the value of the dollar, however it is measured.