Agriculture and U.S.
Goods and Services Trade Balance -- 1998 Update
Despite Declining Exports, Agriculture Still
Ranks #2
Among 11 Key Industries
| Introduction | View Images |
The U.S. goods and services trade deficit deteriorated significantly in calendar 1998. Slowing global demand, especially in Asia, adversely affected U.S. exports of manufactured products. At the same time, at home the U.S. economy passed the benchmark for the longest peacetime economic expansion. The strong domestic economy supported the continued rise of imports.
Goods & Services Highlights
The U.S. goods and services trade deficit rose 54% from the previous year to $169 billion in 1998 (Graph #1). This was the first substantial increase in the deficit in five years. Exports were $931 billion, down 1% from 1997 levels; imports rose 5% to $1.1 trillion.
Manufactured Goods Although agriculture’s trade surplus shrank to $15 billion in 1998, agriculture still ranked as the second largest positive contributor to the U.S. trade balance, second only to the aircraft/ship/train industry (Graph #2). After aircraft and agriculture, the only other two industries that achieve trade surpluses are chemicals and industrial machinery. Seven of the 11 key industries suffer chronic trade deficits, with mineral fuels and road vehicles ranking as the two with the largest trade deficits typically in the $50-60 billion range.
How has each industry’s trade balance changed since 1996? We choose this period (1996-98) to see how agriculture, which suffered a substantial downturn in its trade surplus (falling from $27 billion to $15 billion in just two short years), stacks up to the other key industries. What we find is that all industries (with two important exceptions) suffered substantial declines in their trade balance; many were more severe than the decline suffered by agriculture (Graph #3). What were the two exceptions?
First, the trade balance for the mineral fuels (primarily oil and natural gas) and energy products industry actually improved, as the deficit shrank $16 billion over the two-year period to $44.8 billion. What was the reason? Answer: The price of imported petroleum (and natural gas) fell sharply in 1997-98 (Graph #4), more than offsetting any volume increases.
In fact, import prices for all manufactured goods fell on average 11% from January 1997 to the end of 1998, or about 9% from the 1995 base year. For comparison purposes, export prices fell 5% (Graph #5). Lower energy prices had much to do with the general decline in import prices, but prices for most consumer goods (computers, assorted retail products) weaken as well.
As to the second exception, the aircraft/ship/train industry’s surplus rose $14.3 billion in two years to $38.8 billion. The reason was simple: Boeing had a great year with commercial plane deliveries rising to a near record 563 (Graphs #3, Graph #6) .
Services With long-term export expansion outpacing import growth, the services industry has long enjoyed a large and growing trade surplus which reached nearly $90 billion in 1997. However, in 1998, services suffered their first year-over-year decline as export growth came to a halt due to a drop in foreign tourist spending.
Market Highlights
Asia The U.S. goods and services trade deficit with Asia rose 27% to $180 billion from 1997 to 1998. This was largely due to 14-15% increases in our trade deficits with Japan and China, rising to $64 billion and $57 billion respectively (Graphs #8, Graph #/9). Our trade deficit with the Asian financial crisis countries grew 107% to $38 billion! (Graph #10) This figure would have been larger still had U.S. exports to Korea not strengthened substantially in the 4th quarter.
Situation for Agriculture: Although there has been some decline recently, we continue to enjoy a hefty trade surplus with this region of around $10 billion. Most of this surplus is with Japan ($8.8 billion), but China/Hong Kong and Korea are also large at $2 billion to $2+ billion annually. With some groups, namely ASEAN-4 and Aust/New Zealand, we run a trade deficit.
Western Hemisphere The U.S. goods and services trade deficit with Western Hemisphere countries remained largely unchanged at $21 billion in 1998 (Graph #11). The United States continues to run large deficits with Canada and Mexico of $14-18 billion annually (Graphs #12, Graph #3), but we enjoy a trade surplus with South America which rose to $9 billion in 1998.
Situation for Agriculture: Overall, for the region, the United States ran a $500 million deficit in 1998, despite a $1.5 billion trade surplus with Mexico.
Europe The U.S. goods and services trade deficit with the EU-15 rose 60% to $27 billion in 1998 (Graph #14). Slower economic growth in Europe (especially Germany) was to blame.
Situation for Agriculture: The United States has long enjoyed a trade surplus with Europe. This surplus ran as high as $6-8 billion in the late 1970s, but more recently it has been running at $2 billion annually (Graph #15). However, this situation is about to change. In 1998, our trade surplus fell to $500 million and a first ever TRADE DEFICIT looms in 1999! An analysis of our trade balance history and the impending deficit with the European Union will soon be available.
For more information, contact Ernest Carter at (202) 720-2922 or carterew@fas.usda.gov
 |
|
