Heightened imports of cars and consumer goods helped push the United States' trade deficit to a record in November, the Commerce Department reported yesterday. The total rang up at $26.5 billion, a 3.5 percent rise from October's number.
Exports grew during the period, also setting a record, as U.S. companies shipped abroad more gold products, capital equipment and consumer goods. But imports grew faster, resulting in a larger deficit, the gap between what the United States sells to the world and what it buys from it.
The figure has been rising with hardly an interruption for more than two years. Many economists attribute the trend to the combined effects of the booming U.S. economy, where consumers with money to spend are drawing in foreign goods, and to the lingering loss of buying power caused by financial panics that hit many countries starting in 1997.
Though politicians generally view deficits with concern, economists have mixed views of them. Some say the deficits reflect access to cheap foreign goods that keeps inflation low and broadens consumer choice. Others see them as eroding the country's industrial base by moving certain jobs abroad, transferring economic dynamism to other countries.
Dan Griswold, an economist at the Cato Institute, said the numbers are good news all around: "record imports, which is good for U.S. consumers and import-using industries, and record exports, which is good for farmers and manufacturers."
But Peter Morici, senior fellow at the Economic Strategy Institute, said that despite the recent strong performance of the U.S. economy, deficits keep it from reaching its true potential.
"If you have persistent deficits of $200 billion a year, you'll take 1 percentage point off the trend rate of growth of the economy," Morici said. "It has a very long-term corrosive effect on the growth of high-tech activities. . . . I know we're doing well, but we could be doing a lot better."
Whatever their view, many economists see the trade deficit continuing to trend upward in coming months. It will begin to decline, the thinking goes, only when the world moves toward balance, either by the U.S. economy slowing down, the rest of the world speeding up, or a combination of the two.
To finance its deficit, the United States pays interest to the outside world. Many economists see the level of those payments at present as being nowhere near big enough to cause economic trouble for a $9 trillion-a-year economy.
Others, however, worry that as more and more dollars pile up in foreign hands, financial markets will bid down the currency's value. That could stoke inflation in this country by making imports more expensive and slow down the current expansion.
The deficit with China, at present the most politically sensitive in Washington, declined to $6.5 billion from $7.2 billion. That appeared to be a routine fluctuation normally seen late in the year, not reflecting any structural change in the trade relationship.
It was caused mostly by falloffs in imports of Chinese-made toys, games and sporting goods, as importing companies neared the end of their buying of those goods for the holiday gift season. U.S. exports to China held steady during the month.
The Clinton administration contends that a market-opening deal that it negotiated with China late last year in connection with its pending entry into the World Trade Organization would bring the deficit down. China pledged to give U.S. companies new access in such fields as consumer finance and telecommunications, provided that Congress grants it a permanent trading status known as "normal trading relations."
Japan's deficit was also down, to $6.4 billion from $7.2 billion, as Americans cut back on their imports of Japanese cars and car parts. Exports to Japan rose by about $200 million, primarily reflecting bigger sales of telecommunications equipment.
The deficit with Western Europe rose to $5.5 billion in November from $5 billion in October, mainly because of an increase in imports of car and car parts from Europe.
CAPTION: BIGGER GAP (This chart was not available)