Foreign Growth Would Do Little to Cut Trade Deficit, Study Says

WASHINGTON — A government study released Saturday disputes the Reagan Administration’s claim that the U.S. trade deficit would shrink substantially if other countries allowed their economies to grow faster.

The Administration, which has agreed to cooperate with Congress on drafting a trade bill this year, has argued that growth abroad, stabilizing international currency rates and reducing the domestic budget deficit would do more to improve the nation’s trade imbalance than any congressionally mandated sanctions against unfair trade practices.

But a Library of Congress study released Saturday suggests that the impact of faster economic growth abroad may not be so substantial.

Small Improvement Seen

“While faster growth in the economies of some of our principal trading partners will certainly help improve our trade deficit, the improvement will most likely be quite small,” the study said.

It estimated that if Japan, Canada and Europe increased their gross national product--the measure of all the goods and services produced--by 2%, it would reduce the U.S. trade deficit only by about $8 billion. It also noted that a 2% growth rate was twice as fast as currently projected and would be at the “upper bound of what is realistically possible.”

Last year, the United States posted a record $170-billion trade deficit, the fifth record deficit in a row.

Sen. Lloyd Bentsen (D-Tex.), chairman of the Senate Finance Committee, requested the study. His panel will take the lead in drafting a Senate trade bill to deal with the causes and consequences of the nation’s record trade deficit.

The solution to the deficit, the senator said in reaction to the study’s findings, lies in knocking down trade barriers. “If they have full access to our markets, we should have full access to their markets,” he said.