MISSOURI WATCH: UNCLE SAM: WORLD-CLASS DEBTOR

Nations, even as star athletes and corporate CEOs, are sensitive to how their performance is ranked-. They are touchy about where they stand relative to competitors. Today's America comes out pretty well in international rivalries, especially in economic contests. We have the world's highest Gross Domestic Product, we're big in international trade volume and even boast of the citizenship of the world's richest man.

According to data published recently, Bill Gates with his Microsoft holding of $36 billion outranks the Walton family and Warren Buffet of our country in private wealth, and is well ahead of Hong Kong's Lee Shau Kee. No Japanese comes even close.

One of our top rankings, though, gives no cause for pride. According to data released recently, the United States has not lost its standing as the world's biggest debtor. On the contrary, it has enhanced it---its debt position worsened 27 percent last year.

The term debtor or debt position calls for an explanation. It refers to the difference between the values of our holdings of the commercial paper of other countries and other countries' holding of ours. The Associated Press puts it that the United States is a net debtor in the amount of $871 billion, inasmuch as our citizens held, at the close of 1996, $3.72 trillion in the corporations, real estate, stocks and bonds of other countries, whereas foreigners owned $4.59 trillion in the same categories of U.S. assets.

What, it may be asked, explains the widening of the debt position of a country, in this case America? The arithmetic is simple enough. In the international monetary flow, we take in fewer dollars than we pay out. More specifically, we collect less income from exports plus dividends and interest received from our financial holdings abroad than we spend for imports and disburse as dividends and interest to foreigners.

In all such international comparisons the statistics can be distorted by fluctuating exchange rates. The Associated Press reports that an eighth of last year's widening of our debt position can be attributed to adjustments in currency values. The recent failure of so many Far Eastern monetary markets in past weeks and their effect on local currencies may very soon add to that one-eighth percentage.

The big underlying issue---let's make no mistake about it---is our persistent trade deficit. Last year's deficit in the current account increased by $148 billion, the largest shortfall in nine years.

Well over half that deficit is accounted for in our trade with two countries: Japan and China. For many years we have run an annual deficit of about $60 billion with Japan. Our recent deficits with China have annually hovered around $20 billion but last year it was almost $40 billion.

Our trade relations with China are a huge enigma. China has begged for, and received, "most favored nation" trade status from us . She wants to be accepted into the World Trade Organization (WTO). Yet by no stretch of the imagination can China's trade practices be regarded as anything close to "free." China's government is essentially authoritarian and likely will remain so. It's doubtful that Beijing can bring itself to conduct trade in harmony with other terms set by other countries, particularly when China disregards well-founded concerns about its under-the-counter arms trade with such rogue governments as Iraq, Iran, North Korea and Libya.

It is often said the dollars China accumulates from her sales of cheap labor products to us will find their way back in expanded buying from us. U.S. agricultural interests beat the drum for much larger farm product sales. Spokesmen for that point of view disregard two uncomfortable facts: (1.) China's long-standing policy is to achieve food self-sufficiency, and (2.) China's current buying of $2 billion of our farm products is only a sixth of Japan's nearly $12 billion.

As though to top it all off, the latest ploy for getting China to buy more U.S. goods is to promote more U.S. Export-Import Bank lending to that country. It's an interesting twist when a trade deficit with a country is to be narrowed by making loan funds available at low interest rates.

This is supposed to pass for free trade?

It's closer to Medieval Mercantilism.

~Jack Stapleton of Kennett is the editor of Missouri News and Editorial Service.