"THERE ARE reasons to be optimistic about our economy," said President Bush in his State of the Union messaage last week, pointing to single-digit inflation, low business inventories -- and exports. "Exports," he noted, "are running solid and strong."

Exports are, indeed, a welcome bright spot in an economy that has been extremely sluggish for two years. The present recession is the culmination of that downturn. Whatever happens in the Persian Gulf, the outlook on the basis of current policy is for continued "slugflation" -- sluggish growth with rising prices -- for some time to come.

Fortunately, there is an "out": export-led growth. There is no world recession. Most of Asia and Continental Europe continue to expand and thus provide growing markets for American products. The exchange rate of the dollar is low enough to make U.S. industry price-competitive in most world markets. The internal slowdown should push companies to look abroad to boost sales and profits.

We have already glimpsed the potential benefits from trade improvement. The decline in the economy in the last three months of 1990, the first quarter of the recession, would have been fully twice as great -- an annual rate of more than 4 percent instead of the "unexpectedly mild" 2.1 percent -- in the absence of a dramatic increase in the volume of exports relative to imports. (The trade deficit rose in dollar terms, because of the sharp increase in oil prices, but it is trade volume that determines levels of output and jobs and hence growth of the economy.) Trade improvement provided almost half of our entire growth for 1990. A concentrated effort by U.S. industry to exploit our present trade opportunities, supported by new government initiatives, could brighten the economic outlook considerably.

After six years of consistently rapid growth, a pause in the economy is natural. The present turndown, however, has two unusual characteristics. One is very bad news: the unavailability of the usual policy instruments to restart the economy. The fiscal deficit will rise further for a year or two as lower tax payments and higher welfare spending result from the economic turndown, but new fiscal stimulus is obviously out of the question in light of the massive budget deficit.

Neither should we expect the Federal Reserve to rescue the economy with easy money, despite Friday's further drop in interest rates. The Fed must worry not only about underlying inflation but also the dollar. To cover our large external deficit we must borrow about $10 billion monthly in new money from the rest of the world -- and avoid any net withdrawals from the $1.5 trillion stock of liquid foreign assets already here. Yet our interest rates have already dropped below those in every key money center abroad and a further sharp reduction could produce a free fall of the dollar. Markets would then push interest rates up sharply to attract the essential capital inflow as in 1978 and 1987 -- worsening the recession and intensifying the fragility of our financial system. Moreover, cheaper money from the Fed cannot do much to stimulate the economy as long as the banks are (understandably) preoccupied with strengthening their balance sheets and reserves and loathe to lend.

The other unique characteristic of the present situation, however, is fortuitously good news: that the world business cycle is unsynchronized for the first time since the 1960s. For the past two decades, industrialized countries largely experienced expansions, inflationary blowoffs and recessions in tandem. As the U.S. economy began to flag at the end of the 1980s, however, Germany and Japan actually accelerated. Growth in Asia, Continental Europe and perhaps the oil-exporting countries will continue to boost trade prospects, even with countries such as Canada experiencing their own difficulties. This is partly because the major countries in Asia and Europe, unlike the United States, have kept their powder dry and can stimulate via both fiscal and monetary policy if necessary (as Germany is already doing in connection with unification).

So the market is there -- if we have the wit to sell to it. And despite all the gloom and doom about U.S. competitiveness, the evidence is that we do. The external deficit in real GNP terms has already declined by 80 percent, or almost $120 billion, from its peak in 1986. Exports expanded at a rate of more than 14 percent during 1987-89, while imports grew only half as fast. The export surge slowed in 1990 but was still twice as fast as the rise in imports.

Moreover, the export boom of the past four years has ranged across virtually the entire spectrum of manufacturing industries, suggesting a sharp recovery of American competitiveness. Exports of capital goods, which account for almost half of all U.S. manufactured exports, rose by a further 11 percent in the first three quarters of 1990. Consumer goods, admittedly from a much lower base, expanded by almost 20 percent.

Let's look at some of the things that America is shipping abroad. Sizable increases have been recorded in electrical equipment, specialized industrial machinery such as forklift trucks and compressors, telecommunications products, photographic and optical equipment, computers, and scientific instruments. There have been impressive gains in such "surprise" sectors as furniture, textile yarn, apparel, auto parts, musical instruments and minivans as well as in traditional sources of strength such as aircraft and chemicals.

A sustained trade boom could contribute about $50 billion annually in real economic growth for America for the next three years. This would boost total output by more than a full percentage point per year, providing half or more of the maximum real growth of between 2 and 2.5 percent per year that is attainable for the United States without added inflation.

The domestic economy is clearly able to provide such an export expansion. Our economy generated trade gains of this dimension in 1979-80 and 1988. But can the world economy accept such improvement in the U.S. trade balance? Again, recent history suggests it can. From 1987 through 1990, America's share of world manufactured exports rose by about 0.6 percentage points annually and its share of world imports of manufactures dropped by about 1 percentage point annually. The other industrial countries not only survived but most experienced a pickup in their economies as they shifted to domestic-led expansion. Three more years of similar recovery of market share would still leave America's share of world markets for manufactured exports below the 1980-81 level.

The key is whether firms producing in the United States, including those headquartered abroad, will be sufficiently agile to achieve such a shift, even with the incentive of a sluggish home market and a cheap dollar. U.S. firms did achieve export-led growth in 1979-80. Unfortunately, the soaring dollar and governmental indifference to trade in the first half of the 1980s snuffed out much of this new trade focus. But data for the past four years, noted above, suggest that an export orientation is being restored.

The potential for further export expansion is enormous. Currently 85 percent of all American exports are still accounted for by only 15 percent of U.S. companies. Half the firms that do export are active in only one market. Only 20 percent of the exporters -- 3 percent of U.S. industry -- sell in more than five countries abroad.

The government can help in several ways. First, it must ensure that the dollar does not rebound in the short run and prematurely undermine American price competitiveness. Indeed, a modest further decline in the dollar is not only likely, given continuing higher growth, profit opportunities and interest rates abroad, but acceptable as long as the drop is not precipitate.

Second, many U.S. firms are reluctant to invest in export capacity out of fear that the dollar might soar again over the longer run and make their products uncompetitive by the time the new plants come on line. To reduce that concern, the United States must make a clear commitment to avoid a repeat of the 1981-85 neglect of the dollar that so damaged U.S. exports and should negotiate with the Group of Seven industrial nations to produce a predictable, sustained level for the dollar and other currencies.

On the domestic front, the U.S. government should sharply increase the size and scope of the Export-Import Bank and its other export promotion programs. Export credit is crucial for sales to many markets, especially for medium-sized and smaller firms, but private banks have largely withdrawn from such activity. Yet the Eximbank literally ran out of funds in mid-1988 and its program remains grossly inadequate. A 10-fold expansion in Exim's direct lending in the late 1970s contributed substantially to the export-led growth of that period. Similar increases are called for now.

The administration and Congress should also jointly develop new legislation to eliminate, or at least modify, numerous policies (including excessive national security, foreign policy and short supply controls) that block billions of dollars in potential sales abroad. For the longer run, the entire government must place higher priority on improving U.S. competitiveness in global markets as it is affected by all components of economic policy including the budget, taxes, antitrust, education and regulations.

Finally, export-led growth should become the focus of U.S. trade policy. The United States needs increased market access in the sectors where it is most competitive: agriculture, many services, high-technology goods and capital equipment. It is thus essential to conclude a successful Uruguay Round of international trade negotiations and for the U.S. government to maintain its aggressive efforts elsewhere to reduce foreign barriers to U.S. exports. Failure in these efforts would unleash protectionist tendencies that would deter American corporate efforts to penetrate foreign markets and prompt firms to invest abroad to circumvent possible new barriers rather than build new capacity at home.

The fundamental requirement is the adoption of a new mindset of export orientation by U.S. industry and government -- for both the immediate future and the long term. Such attitudes are second nature in virtually all other countries. If America can successfully focus on selling abroad, economic recovery can come more promptly and smoothly. If it cannot, slugflation may persist and we will fall steadily behind our global competition.

Fred Bergsten, a member of the new Competitiveness Policy Council appointed by the president and Congress, is director of the Institute for International Economics, from whose periodical, International Economic Insights, this article is adapted.