U.S. Trade Deficit Hits Record

Wednesday, September 13th 2000, 12:00 am
By: News On 6

WASHINGTON (AP) — America's deficit in the broadest measure of trade climbed to a record $106.1 billion in the second quarter of this year as the sizzling economy allowed U.S. consumers to buy more from abroad than American exporters were able to sell.

The Commerce Department reported Wednesday that the deficit in the current account was up 4.6 percent from the previous quarter, which showed an imbalance of $101.5 billion.

While setting a record, the deficit in the second quarter was slightly better than the $108 billion shortfall many analysts had feared.

The current account is considered the best measurement of a country's international economic standing because it measures not just the goods and services reflected in the government's monthly trade reports but also investment flows between countries and unilateral transfers, including U.S. foreign aid payments.

A soaring trade deficit has been the main flaw in an otherwise remarkable U.S. economy. The Clinton administration insists that the trade deficit is a sign of strength because the U.S. economy has been growing at far faster rates than have its trading partners'. However, critics say the rising deficits have cost thousands of American jobs, especially in manufacturing, and indicate the failings of the administration's trade policy.

While the U.S. economy has continued to prosper in spite of the huge trade deficits, Federal Reserve Chairman Alan Greenspan and other economists have expressed concerns that the rate of increase in the deficit is unsustainable and could cause problems down the road if foreign investors become fearful.

Such a development could cause the dollar to weaken seriously, triggering inflation pressures in the United States as imports became more expensive, and set off a stampede by investors out of U.S. stocks and bonds.

On Monday, the International Monetary Fund called the soaring U.S. current-account deficit one of the primary threats to global prosperity.

In the April-June quarter, America's deficit in goods widened to a record $110.2 billion. In the services category, which measures such things as airline travel, the United States is running a surplus, which grew to $21 billion in the second quarter.

The deficit in investment earnings widened to $4.5 billion in the second quarter, up from $4.3 billion in the first quarter.

The category of unilateral transfers climbed to $12.3 billion in the second quarter. This category adds to the overall current-account deficit because it represents payments that the U.S. government makes in foreign aid to other countries.

The current account hit an all-time high of $331.5 billion in 1999 and is forecast to set another record of around $425 billion this year.