Trade deficit declines as exports climb and oil prices drop

WASHINGTON - America's trade deficit declined to $29.4 billion, the lowest level in six months, as U.S. exports hit an all-time high, bolstered by strong overseas sales of autos, computer products and farm goods, the Commerce Department reported Thursday.

The better-than-expected improvement in the August trade balance represented a 7.1 percent decline from a record high deficit of $31.7 billion set in July.

The narrowing in the trade gap resulted from a 3.6 percent increase in exports, which climbed to a record $93.02 billion, outpacing a smaller 0.8 percent rise in imports, which also set a record at $122.46 billion. The rise in imports would have been higher if not for the brief retreat of oil prices during the month.

Even with the improvement, America's deficit through the first nine months of this year is running at an annual rate of $353 billion, far above last year's $265 billion imbalance.

While the trade deficit has ballooned under President Clinton, his chief trade negotiator on Thursday defended the administration's trade record as one of major successes in tearing down barriers faced by American exporters.

In a speech at the National Press Club, U.S. Trade Representative Charlene Barshefsky said the press focused too much on the trade deficit, which she said was governed by broader economic forces.

While the overall deficit has soared, Barshefsky said U.S. exporters have done well, with sales rising by 74 percent over the past eight years, accounting for one-fifth of U.S. economic growth.

Some private economists said the August narrowing of the deficit may be a sign that the huge imbalances the country has endured since the Asian crisis began in 1997 may be abating as overseas economies recover and U.S. growth and domestic demand slow.

''What we are seeing here is an example of very good timing,'' said Jerry Jasinowski, president of the National Association of Manufacturers. ''Just as domestic demand appears to be slowing, demand abroad is picking up.''

The August deficit was the lowest imbalance since a $27.5 billion deficit in February.

Christopher Wiegand, an economist at Citibank, said the better-than-expected August trade performance acted as less of a drag on the overall economy. He now believes the gross domestic product probably expanded by close to 3 percent in the July-September quarter, up from a previous estimate of 2.5 percent GDP growth.

The United States saw improvements in the trade imbalances with Japan, Canada, Mexico and Western Europe. The deficit with China set a new all-time high for any country, a gap of $8.6 billion as imports of Chinese toys flooded into the United States in advance of the Christmas sales season.

Clinton last week signed into law legislation to normalize trade relations with China in return for Chinese promises to lower trade barriers as part of its bid to enter the World Trade Organization.

Barshefsky, who was dispatched to China last week in an effort to clear up last-minute glitches in the membership negotiations in Geneva, said she still believed China and Taiwan could become WTO members this year.

But Rep. Sherrod Brown, D-Ohio, a leading congressional critic of closer trade ties with China, said the negotiations have stalled because China is trying to back out of its commitments.

''This is just the beginning,'' he said. ''China has never adhered to a trade deal. They are unlikely to start now.''

For August, big gains were recorded in American exports of autos and auto parts, up $669 million, and sales of capital goods, led by computer products, which rose by $1.2 billion. Sales of American farm products also posted an increase of $219 million, with big gains recorded in sales of fish, beef, poultry and corn.

The smaller rise in imports was led by higher shipments of capital goods including computers and telecommunications equipment and in consumer goods, including pharmaceutical products and televisions. Imports of cars were down.

The trade gap was also helped by the fact that while the volume of crude oil shipments rose, the price fell. The average price per barrel dropped from a 10-year high of $27.76 in July to $26.59 in August, allowing the total crude oil bill to decline to $8.2 billion.

However, oil prices have climbed above $30 per barrel since that time and economists are predicting that will push the overall trade deficit back to record levels.

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