<p>International Economist, International Trade Administration
</p>
<p>Since 1987, U.S. merchandise trade performance has greatly
improved. The trade deficit has fallen rapidly, from $152.1
billion in 1987 to only $66.3 billion in 1991, the lowest
deficit since 1983. Relative to GDP the deficit dropped from
nearly 3.5 percent in 1987 to 1.3 percent in 1991.
</p>
<p>U.S. world exports 1991--$421.6 billion U.S. world imports
1991--$488.1 billion
</p>
<p> In the last four years exports have increased by 66 percent,
from $254.1 billion in 1987 to $421.6 billion in 1991. Until
1991, rapid increases in exports overwhelmed regular but
moderate increases in imports, leading to the improvement in
the deficit. In 1991, exports continued to grow, but the U.S.
recession resulted in a small reduction in imports, and the
decrease in imports accounted for around 20 percent of the $35
billion drop in the deficit.
</p>
<p> Prospects for a continuation of the improvement in the trade
deficit during 1992 are uncertain and depend greatly on the
relative rates of growth in the United States and in the
economies of the country's major trading partners. Over much of
the last four years economic growth in our major foreign markets
has exceeded growth in the United States. Together with very
competitive relative prices of U.S. exports, the expansion of
these markets provided the basis for the good trade performance.
</p>
<p>Foreign Economic Growth Outlook
</p>
<p> Recent trends, and the forecasts of many economists, point to
a narrowing of the growth differential between the United States
and our foreign markets during 1992. While the United States
emerges from its recession, the economies of some foreign
industrialized countries, particularly Germany and Japan, have
slowed significantly in recent months. Other economies--notably those of Canada, the United Kingdom and Australia--remain mired in economic slowdowns that began over a year ago.
</p>
<p> The Industrial Countries--The slowdown in the foreign
industrial economies began to hurt U.S. export growth in 1991.
U.S. merchandise exports to the industrialized economies
increased by only $6.8 billion in 1991, well below the $30
billion per year average increase in the 1987-90 period.
Developing countries accounted for nearly 70 percent of U.S.
export growth in 1991. Mexico, countries in South America, the
four Asian NICs (Hong Kong, Singapore, South Korea and Taiwan),
and countries in the Middle East accounted for virtually all of
this increase. The outlook for continued strong growth in these
regions in 1992 is bright. They provide the best hope that U.S.
exports will continue to expand rapidly this year.
</p>
<p> In 1991, U.S. exports to Canada, our largest export market,
grew from $83.7 billion to $85.1 billion, only 1.7 percent and
less than one-third as fast as in 1990. There has been
virtually no growth in the Canadian economy the last three
years, leading to weak Canadian demand for U.S. exports.
Recovery in Canada is expected during 1992, but recent data
indicate that significant growth may not occur until mid-year.
</p>
<p> Japan's economy grew by 3.2 percent during 1991, well below
the 5 percent increase in 1990. Most of the 1991 growth occurred
during the first quarter as the economy slowed throughout the
year, with GNP actually decreasing from the third to the fourth
quarter. Recent statistics indicate that growth resumed during
the first quarter of 1992, but the rise in GNP was small and the
outlook for the year is uncertain. Some analysts are predicting
that Japan's 1992 economic growth may be below 2 percent. Not
since the oil crisis of 1974 has Japan's economic growth been
as low. U.S. exports to Japan fell slightly, from $48.6 billion
in 1990 to $48.1 billion in 1991, and the trade deficit with
Japan widened from $41.1 billion to $43.4 billion. Given the
outlook for Japan's economic growth in 1992, it is unlikely that
the U.S. trade deficit with Japan will improve during the year.
</p>
<p> The European Community (EC) grew by an estimated 1.5 percent
in 1991, and in 1992 the outlook is for economic growth that
will be only slightly higher, perhaps 2 percent. U.S. shipments
to the EC grew by 5.2 percent, from $98.1 billion in 1990 to
$103.2 billion in 1991, 2 percentage points below the increase
in total U.S. exports for the year and well below the 13
percent rate of growth that was registered in 1990. During 1991
exports to Germany and France improved by 13.6 percent and 12.4
percent respectively, but shipments to the United Kingdom fell
by 6.1 percent. Tight monetary policy and high interest rates,
instigated by Germany's efforts to cool increases in the
country's inflation rate, are largely responsible for the slow
growth in Europe. Higher-than-anticipated costs of the German
reunification, which led to large budget deficits and rapid
increases in domestic consumption, are blamed for the increase
in German inflation. As in the case of Canada and Japan, U.S.
exports to Europe are unlikely to show much growth until more
solid rates of economic expansion occur.
</p>
<p> The Developing Countries--Latin America, the Middle East,
and Southeast Asia (including China) show the most promise for
economic growth in 1992, and the most promise for U.S. exports.
In Latin America economic restructuring that includes
privatization, better fiscal control with lower price inflation,
and increased foreign direct investment is giving this region
its best outlook in several years. Economic growth in 1991 was
an estimated 2 to 3 percent, and the outlook for 1992 is for
even faster growth. These growth rates are some of the best in
years and are giving U.S. exports to the region a real boost for
the first time since the debt crises of the 1980s. In 1991, U.S.
exports to Mexico grew by nearly 18 percent. There was a 27
percent increase in exports to South America, compared to an
average annual growth rate of less than 6 percent in the 1987-90
period. Rapid increases of U.S. exports to Argentina, Brazil,
Ecuador, and Venezuela led the way.
</p>
<p> In the Middle East, reconstruction following the Gulf War is
the primary reason for rapid rates of growth that are generating
large increases in U.S. exports to the region. U.S. exports to
the Middle East grew by 36 percent in 1991 to $15.3 billion and
should continue to increase substantially in 1992. The IMF has
projected real GDP growth in the region at around 11 percent in
1992.
</p>
<p> During 1991, the growth rates of the four Asian NICs, plus
Thailand, Indonesia and Malaysia, were between 4.5 and 8.5
percent. A slightly higher rate of growth is expected in 1992
for most of these economies. In 1991 the U.S. exported $45.6
billion to the four NICs alone and another $15.3 billion to the
other Asian countries, other than Japan and China. Recently a
greater share of economic growth in the region has come as the
result of greater domestic investment, particularly in the
public sector, rather than from exports. In China the booming
"special economic zones" of China's south coastal area are a
major source of China's growth. In 1991, China's economy grew
by an estimated 6.5 percent. Growth of around 7 percent is
expected in 1992. U.S. exports to China climbed 31 percent in
1991, to $6.3 billion.
</p>
<p> East Europe and the Republics of the Former Soviet Union--In the last three years there has been a sharp decline in the
economies of East Europe and the former Soviet Union, reflecting
the unsettling effects of economic restructuring programs in
that area. A few of the East European economies may have
bottomed out in 1991 and may show some positive growth in 1992.
In the now independent republics of the former Soviet Union,
however, at least another year of economic decline in expected,
although the rate of decline should slow. Since U.S. trade with
