Optimism for Exports

For weeks past the gloomier chroniclers of U.S. business had been warning of the danger of another sharp rise in the U.S. balance of payments deficit and, with it, another damaging outflow of U.S. gold. Last week the pessimists had fresh ammunition: Commerce Department figures showing that U.S. exports, after dropping 3% in August, fell another 2% in September. Surprisingly enough, neither Washington nor Wall Street seemed as concerned as might be expected.

U.S. balance-of-payments troubles are partly a condition of the cold war. The U.S. spends some $5 billion a year on foreign aid and for the support of its own and allied armies overseas. To overcome a payments gap so large as to threaten international confidence in the value of the dollar, U.S. traders must sell far more than they buy abroad.

Lately they have been doing that. The payments gap has narrowed from last year's $3.9 billion to an anticipated $2.3 billion this year (see chart). But in very recent months the gap has begun to widen again. Economic expansion in the U.S. has brought on a new demand for imports at a time when exports are declining. The Administration hopes to reverse this trend by spurring an energetic export drive. Last week some 2,000 businessmen who gathered in Manhattan for the annual convention of the National Foreign Trade Council expressed confidence that the export drive would succeed.

A Time for Recouping. One big lift to U.S. exports will be provided by federal sponsorship of a new pool of private insurance companies to cover an exporter if one of his foreign customers goes broke or simply refuses to pay. Washington is also prodding its allies to buy more of their defense materials in the U.S. Major success so far: a recent West German promise to buy enough arms and ammunition in the U.S. to offset U.S. defense costs in Germany--some $600 million a year.

Still another powerful spur, so the Administration believes, would be a radical reduction in tariffs and import quotas around the free world (see THE NATION). Most U.S. businessmen agree--but stress that tariff reduction has to be a two-way street. In a speech to the Foreign Trade convention. Henry Clay Alexander, chairman of the Morgan Guaranty Trust Co., declared: "We must drop our historic stance of giving a little more than we get. Without moving away from trade liberalism, we should be trying to get back some of the edge we have given away over the years."

On to the Breakeven. Uppermost in Alexander's mind is the rapid rise of Europe's Common Market, which already has a fat payments surplus and is now in the process of erecting a single external-tariff system. But while the emergence of the Common Market may bring short-term losses for the U.S., it should also bring long-run gains. Hundreds of U.S. firms have exported dollars to Europe to build factories within the Common Market, but these investments ultimately should be returned with interest in the form of repatriated profits. Similarly, the increase in trade between the Common Market partners may well begin by reducing U.S. sales to Europe, but it will also speed Europe's economic growth--to the ultimate benefit of the U.S. State Department economists reckon that an increase of anything over 1/4 of 1% in the growth rate of the Market nations would lead to a notable upsurge in their demand for U.S. goods.

Balancing all these pluses and minuses, the Kennedy Administration currently has high hopes of reducing the U.S. payments deficit to $1 billion next year. And in 1963 Administration economists dream of achieving a goal that the U.S. has managed to attain only once in the past decade: no payments deficit at all.

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