European Stars And Stripes (Newspaper) - February 27, 1987, Darmstadt, Hesse                                Friday. February 27, 1987 the stars and stripes Page 3 deficit forcing Buck s fall expert says Low Dollar not seen As beef solution to Trade woes by Chuck Vinci i  Bureau Washington the Dollar s drop overseas in t driven by a desire for a weaker Dollar but a need to Correct the United slates $170 billion Trade deficit according to the administration s top Trade representative. Nobody in the administration wants to Sec the Dollar fall 1 Clarion Yeutter Slid. Bui everyone in inc administration wants to see inc Trade deficit  and while in i not inc Best solution a Cutler said a weakened Greenback helps improve that deficit by raisins the Price or foreign goods in the United slates while making . Produces cheaper Over seas. The administration has used a weak Dollar to Deal with the Trade deficit because until recently other countries with Trade surpluses notably Germany and Japan have resisted . Urgings to stimulate their economies and make imported goods More accessible to their Consumers he said that can t go on because it comes Al inc expense of the United slates to a considerable de Gree he said. They pour products into our mar eel Don t buy nearly As much from us or the third world and thai throws everything off. We re Sug Gesting thai Japan West Germany and others Stim ulate Domestic growth because the world needs buy ers of goods importers.1 such Steps might include a cuts for he citizens of those countries a reduction in social spending by governments or a change in wage structures. The idea a Cutler said is to put More Money in the pockets of those countries Consumers so they can buy More imported goods. Unless countries with Trade surpluses become More receptive to imports Exchange rates will Cor rect Trade imbalances by driving up the value of their currencies while driving Down the value of currencies of countries with Trade deficits such As the United slates he said. That s what s happened recently he said. Governments Haven t taken action the Market place has reacted to inc Gigantic Trade imbalances and the Dollar has fallen i has t come Down be cause the administration is talking ii Down or forc ing it Down. It s come Down because of conditions in the  As a result of inaction by other countries Many lawmakers in Congress have called for protectionist Trade legislation As a Means of fighting what they perceive to be unfair Trade policies. The administration has staunchly resisted such a move Cutter 5 s photo tit l. Emma a twin or. Clayton Yeutter. We re a consumer society that likes to  said arguing that it would make the situation worse. But foreign countries spurred by inflationary pressures brought about by the appreciation in their currencies arc showing a new willingness to address Trade imbalance. Last weekend Al a meeting of lop finance officials of the United states and five other major nations Germany and Japan pledged to take Steps to stimulate their economies. That agreement coupled with the administration s program to enhance competitive Trade May be enough to Stem the current protectionist tide in Congress Yeutter said although he predicted a very difficult legislative Battle. The thrust of the administration plan is an competitiveness he said. It s not about parochial kinds of Trade issues which Are More Likely to Lead to a protectionist response he said we re trying to make people recognize that if you Cut off imports you also Cut Oft exports he said. We can t build a Wall around our country and keep imports out. In the Lone haul we have to be Able to compete on the basis of Price and  while Trade balance Between nations is desirable Culter said hat Trade restrictions arc Only one aspect of the Trade deficit problem. Most estimates by economists arc that unfair Trade practices probably Don t account for very much of the 1170 billion deficit he said. Unfair Trade practices Are Worth correcting be cause we ought to have a sound system for the con duct of International Trade he said. But at the same Lime we should recognize thai this in t going to solve our Trade  the problem is that the Trade deficit is almost inevitably caused by the Large . Budget deficit Cutter said. We re not financing our budget deficit internally that is from savings generated in the . Econ omy he said. We re just not very Good savers. We re a consumer society thai likes to spend. We have much lower savings than other countries and when we run a Large budget deficit we Don t finance it ourselves it s financed by foreign capital from to reign nations. Somebody has to buy he Treasury notes Bills and Bonds that arc used to finance the deficit he said. And foreigners arc the ones that have been buying them How do we gel them to do that we have to pay a High enough interest Rale to make them want to convert their currencies Inlo  the mechanism to get dollars to those foreigners is to have them sell goods and services in the uni cd states for dollars which they then use to buy t Bonds Bills and notes. Alt of that forces a deficit in i he Trade of goods and services he said unless Congress takes substantial action to re Duce the budget deficit there is Little Hope that the Trade deficit can be erased Yeti ice said. For the near term Culter said he believes a sub Stantial Dent will be made in the Trade deficit this year As a result of the Dollar s fall. I believe the Trade deficit certainly could come Down $20 billion to $40 billion in i9s7 if All goes Well he said but i want to reiterate that none of us Are fans of a weak Dollar. We Don t Sec that As a preferred solution to the Trade deficit. I d much rather solve the deficit through policies thai keep the Dollar Strong. But a weakened Doliar is  if nations do not follow the right kinds of fiscal policies. And regrettably too Many nations including ours have had shortcomings in the policy area in recent  americans overseas not Factor in . Fiscal policy continued from Page 1 Dollar through Market forces. And on the feb. 9 today show Baker said a Long awaited meeting of the group of five Industrial countries to Dis Cus ways to stabilize currencies had still not been scheduled. He added he did t think such a meeting would be successful anyway. The meeting took place last weekend and resulted in an agreement to keep currencies at their current level. Market analysis said Baker s today comments were directly responsible for a 4 percent drop in inc Dollar s value against the German Mark the Day the show aired. However far the Doliar has fallen. Many experts agree a weakened Dollar will not solve he Trade deficit by itself and a further decline would have Hurt other areas of the . Economy. Paul Volcker chairman of he Federal Reserve Board testified before Congress that inc Dollar is about As Low As it can be without causing negative Side effects such As higher inflation and interest rates. At this Point after the very Large adjustment thai we be had in the Dollar s value m not sure that any further adjustment is necessary Volcker told