A TRADE BALANCING ACT IN THE NEW MILLENNIUM

A TRADE BALANCING ACT IN THE NEW MILLENNIUM

Flash!! Y2K notwithstanding, U.S. exports will generally rebound next year after two years of little, if any, overall gain.

That's the consensus of such diverse authorities as the Organization for Economic Cooperation and Development, the World Bank, Standard & Poor's DRI, and the National Association of Manufacturers.The forecast export advance won't be explosive - probably in the 6 percent to 7 percent range - but that looks pretty good after a decline in 1998 and a gain of no more than 2 percent likely this year.

And the 2000 gain, analysts predict, will be broad-based, in contrast to this year's up-and-down mix in which capital goods exports grew but farm products and industrial-material shipments dwindled.

For the first time, annual goods and services exports are likely to hit $1 trillion.

The improving U.S. export prospects mirror a much larger picture: a relatively upbeat global economic outlook as the new millennium gets under way.

Both the Paris-based OECD, a think tank of industrialized democracies, and the Washington-based World Bank predict markedly stronger world economic growth next year, though they differ on detail.

The more optimistic OECD projects a 3.5 percent growth rate, despite the widespread expectation of a slowing U.S. economy. An accelerating European economy will offset any U.S. downturn, it believes. As for Japan, it is expected to post another year of growth, but only in the 1 percent range.

Developing countries will contribute to the relatively rosy global scenario, says the World Bank. It puts their average growth next year at more than 4 percent, compared with an estimated 2.7 percent this year.

East Asian nations that were hit by the 1997-98 financial crisis will stage a further recovery, while Latin America, led by Brazil, is expected to climb out of recession. Higher oil prices will render a big boost to the major oil-exporting nations, enabling them to step up their imports, says the bank.

Even Russia is given a chance to consolidate its recent modest gains; its corporate profit is up, tax collections are improving, inflation is falling, consumer confidence is growing and there is even a primary budget surplus in prospect, the OECD reports.

And China, though burdened with weak consumer demand, banking problems and high restructuring costs, probably will keep growing at about 6 percent - low for China but high for almost any other country.

Faster global growth translates into more international trade, which, estimates the World Bank, will rise by nearly 6.5 percent in 2000, compared with about 5 percent this year.

U.S. exporters are expected to cash in, at least modestly. They had a disappointing 1999, when shipments to Western Europe were essentially flat, exports to Japan and China declined slightly and sales to Latin America and to most major oil producing countries plummeted.

Surprisingly, the biggest U.S. gains this year have come in trade with East Asian countries emerging from the recent crisis. South Korea's purchases soared by 50 percent. Further U.S. sales advances to the region seem likely.

Underpinning the U.S. export outlook are Canada and Mexico, which together take more than one-third of all U.S. exports. Their economies are forecast to keep rising next year, though perhaps slightly less than in 1999.

Nonetheless, possible trade troubles lurk on the other side of the trade equation. U.S. imports are up more than 10 percent this year, a pace that Standard & Poor's DRI projects will continue into next year as the U.S. economy keeps rolling along and high-priced oil inflates the import tab.

This year's U.S. goods-and-services trade deficit, it estimates, will hit $260 billion, the biggest ever by far, and next year it foresees a $335 billion deficit. The U.S. current-account deficit, which largely reflects trade flows, next year will exceed 4 percent of gross domestic product, the first time ever, asserts the OECD.

More and more economists are sounding warnings. Those huge deficits and the accompanying increases in U.S. foreign debt could signal big trouble, caution World Bank and OECD as well as International Monetary Fund analysts. (The warnings carry a bit of irony since the U.S. deficits helped contain the recent Asian financial crisis.)

The perceived problem is that those growing deficits, especially if U.S. inflation starts to rise, could substantially weaken the dollar, thereby creating more inflation, which would rev up interest rates and badly undercut the economy. The downside risks are significant, says the OECD. And, notes the World Bank, much of the rest of the world could be seriously affected, too.

But the National Association of Manufacturers, for one, seems hardly worried. It expects, as do others, that the dollar will weaken moderately in the months ahead. But, says the NAM, it is ''unlikely to collapse'' because, after all, it remains the world's premier reserve currency.

The moderately cheaper dollar, it reasons, will help generate a better U.S. trade balance after next year, thereby reducing the deficit/dollar problem. Meanwhile, it predicts, the Federal Reserve Board and other key central banks will manage the dollar's devaluation, similar to what they did in the 1980s, when trade deficits also mounted.

But, hey, wasn't that followed by a stock-market crash in 1987?

Sure, but that was the old millennium. We're about to get a new one.