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Summary

In 2001 the United States incurred a trade deficit in goods of $411.3 billion on a Census basis and $426.6 billion on a balanceof-payments basis (BoP). A surplus in services trade of $80.3 billion gave a deficit of 346.2 billion on goods and services (BoP) for the year. For October 2002, the trade deficit in goods and services dropped to $35 billion from $37 billion in September. Overall U.S. trade deficits reflect a shortage of savings in the domestic economy and a reliance on capital imports to finance that shortfall. They are a concern for Congress for several reasons. Financial, budgetary and other policies may affect the size of the trade deficit, while trade and capital flows affect the exchange value of the U.S. dollar. A large overall trade deficit may also indicate that certain U.S. industries are having difficulty competing with imports at home and in markets abroad. This may generate trade friction and pressures for the government to do more to open foreign markets, shield U.S. producers from foreign competition, or assist U.S. industries to become more competitive. Since 1976, the United States has incurred continual merchandise trade deficits. They increased dramatically from $36.5 billion in 1982 to a peak in 1987 at $159.6 billion. The deficit dropped to $74.1 billion in 1991 but rose to $436.1 billion in 2000. It fell to $411.3 billion in 2001 (Census basis). Much of the improvement in the U.S. trade deficit between 1987 and 1991 resulted from a depreciation of the dollar and the recession in 1990-1991. The multilateral trade-weighted real value of the U.S. dollar reached a high in 1985, then dropped sharply from 1986 through 1988. The worsening of the deficit in 1993-95 can be attributed primarily to the faster recovery from recession in the United States than in Europe or Japan. In 1997-99, the Asian financial crisis caused a sizable fall in U.S. exports to Asia and a marked increase in U.S. imports from Asia as well as rising U.S. imports of capital. In 2001, total U.S. goods trade reached $1.87 trillion, compared to $2.0 trillion in 2000, with exports of $731 billion and imports of $1.142 trillion (Census basis). In 2001, U.S. exports decreased by 6.6%, while imports decreased by 6.2% primarily because of the U.S. and global recession. The broadest measure of U.S. international economic transactions is the balance on current account. In addition to merchandise trade, it includes trade in services and unilateral transfers. In 2001, the current account deficit fell to $417.4 billion from a record $444.7 billion in 2000. After reaching a peak of $160.7 billion in 1987, the current account deficit had fallen steadily through 1991 when it reached a surplus of $3.8 billion. Economic projections indicate that the current account deficit may rise to about $468.6 billion in 2002. In trade in advanced technology products, the U.S. surplus dropped from $19.1 billion in 1999 to $4.8 billion in 2001. In trade in passenger automobiles, the United States has been running a deficit, particularly with Canada, Japan, Mexico, and Germany.

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