A LOT OF THE OLD mercantilist vocabulary is still stitched into the language of international trade. When a county - like this one, last month - imports more goods than it exports, that is described pejoratively as an unfavorable, or negative, trade balance. For the past year the American trade deficit has been growing steadily larger, and in February it was the biggest in history. You might wonder whether that downward lurch signals the imminent decline and fall of the republic. The answer is that it does not. The statistics are, in fact, just about what they ought to be.
Those huge deficits are partly the result of a very hard winter, for they reflect the stupendous increases in oil imports during the cold weather. But, more important, they also show the resilience of this country's economy compared with the rest of the world. In the recession year 1975, American businesses and consumers sharply cut their buying abroad. The balance of trade that year was strongly favorable, as the mercantilists would say - the result of a miserably bad year for American prosperity. Last year things began to pick up in this country and the balance began to swing. It's still swinging because business in this country is recovering from 1975 faster than business in Europe. Demand for foreign goods is accelerating faster here than in most of the countries that buy from us.
But that trade deficit isn't only good luck. It's also good policy. The Carter administration doesn't have any particular target on which it is trying to hold the trade deficits. But is recognizes that the United States is making a valuable contribution to world stability when it permits imports to rise faster than exports. The logic runs this way: The oil-exporting countries are heaping up huge surpluses these days by selling oil faster than they can spend the revenues. As long as they have big surpluses, the rest of the world together will have equally big deficits. The policy question is how to allocate those deficits. If the strong contries continue to push them off onto the weak ones - those already deeply in debt, and increasingly unable to raise more loans - that could threaten massive defaults and serious disruptions. But the United States can afford to carry a big trade deficit with no effect on its finanical health.
If you run your eye down the tables of international accounts, the merchandise trade balance is only the beginning. Last year, for this country, it was a big deficit. But if you keep going down the list you will find tht it was more than offset by the enormous stream of profits coming home from American investments abroad. Then come a lot of other items - money spent abroad by tourists, money sent here as royalties or insurance premiums and so forth. Taken all together, last year's balance on all goods and services was positive.
Then you have to subtract the money that goes abroad as government aid, or as pensions - now a very large figure - paid to retired Americans living in other countries. That brings you to the current account balance, which was negative last year but not by very much. The point here is that the country's international bookkeeping tracks a great variety of flows, and the trade deficit is not necessarily the largest or most significant among them. As long as the United States enjoys a very large inflow of foreign earnings, it can afford those trade deficits. In fact, the United States can't afford anything else unless it wants to risk bankrupting some of its trading partners and foreign customers.
There's plenty of reason for real concern, in current American economic performance. There is high unemployment, persistent inflation and low investment. But one thing you really don't have to worry about, and that's this year's big foreign trade deficits.