AT LAST the American economy seems to be swinging toward lower trade deficits. But the general reaction here in Washington seems to be less often joy than alarm. Everybody (or nearly everybody) is in favor of balanced trade (in principle). But the path to it is both uncertain and uncomfortable. The transition to a trade balance will certainly mean a temporary drop in American standards of living. Unless the country is both skillful and lucky, it will mean a recession. Avoiding a recession depends on more than American leadership. It depends crucially on European and Asian leadership as well -- an unmentionable thought for American politicians in an election year.

Exports have been rising for some time, and now it's apparent that last fall Americans began to consume less. Both higher exports and lower personal consumption are essential to reduce the trade deficit, and to reduce it significantly, both trends will have to go a lot farther than they have yet gone.

You should not assume that American exports will rise automatically just because the dollar's exchange rate has fallen. Throughout this decade, labor and other resources have shifted from manufacturing to the service industries. Now it is urgent to shift them back and to build up the industrial capacity to take advantage of the opportunities that the cheap dollar has opened. But whether the manufacturing corporations will decide to launch themselves on that kind of expansion is very much an open question. Having seen the speed with which the dollar fell, then rose wildly, then fell again over the past 10 years, businessmen have good reason to think twice before betting their futures on the prospect that it will now remain magically stable over the several years that it takes to bring new plants into production.

The second requirement for a smooth transition is not in Americans' hands at all. It's up to the other industrial democracies, chiefly Japan and Germany. If the world's economy is to remain stable, lower consumption in this country will have to be offset by higher consumption in the other rich countries. Consumption has in fact begun to rise rapidly in Japan. But Europe's response is less reassuring. Germany sets the pace for Western Europe, and the German economy has slowed sharply over the past year. Germany is going to have a powerful influence over the rate of economic growth -- or decline -- on both sides of the Atlantic over the coming year. That's an awkward truth for candidates to explain to voters here.