Coupon System Proposed to Cut the Trade Deficit

ANAHEIM — The chairman of the Chase Manhattan Corp. on Tuesday proposed eliminating the U.S. trade deficit of $100 billion plus in just three to four years through a program that would essentially require foreign nations to buy a dollar’s worth of U.S. goods for each dollar’s worth they wanted to sell here.

In a speech prepared for the World Trade Council of Orange County, Willard C. Butcher called his secret weapon to fight the trade imbalance a “U.S. Trade Certificate Program,” SCRIP for short.

“Basically anyone in any other country who imported U.S.-made goods would receive a trade certificate with a face value corresponding--dollar for dollar--with the value of the purchased goods,” Butcher said. “And anyone shipping foreign-made goods to the United States would be required to supply trade certificates having the face value of the goods.”

Japan and other nations that export more than they import would have to buy trade certificates from countries with a surplus of such vouchers. The Japanese would probably have to pay a premium for these SCRIPs.

Therefore--the logic goes--the Japanese would start to buy more U.S. goods rather

than paying extra for these certificates.

SCRIP didn’t go over very big with several economists at California’s leading banks.

“It’s just another artificial means to try and reduce our trade deficit,” said Steven Hess, senior international economist with First Interstate Bancorp in Los Angeles. “My initial impression is that it could be inflationary for the United States.”

The reason is that a country like Japan could decide to sell fewer VCRs or compact disc players to avoid having to buy SCRIPs. Fewer stereos could result in a price increase. Or Japan could play the SCRIP game but pass on the price of the premium paid for the certificates to purchasers of stereos or VCRs.

“I see a lot of potential problems with it,” said Robert Skinkle, economist with Wells Fargo Bank in San Francisco.

Besides inflation, there is a problem with just how these certificates would work in the service industry--paying for legal advice for instance.

Butcher admitted in his prepared text that “some new difficulties will turn up in implementation.”

“It is not,” he added, “an economic cure all.”