LEADING ECONOMISTS CALL FOR MORE GROWTH ABROAD

  A panel of four leading economists
  told a congressional hearing today that foreign economies will
  need to expand to avoid recession as the U.S. trade deficit
  declines.
      C. Fred Bergsten, a former senior Treasury Department
  official, and Robert Solomon of the Brookings Institution told
  the Senate Foreign Relations Committee, the major exporting
  countries risk recession if they do not expand because U.S.
  demand for imports is expected to fall.
      "They need to beef up domestic demand as their trade
  surplus falls," or unemployment will keep growing, Bergsten
  said.
      Bergsten predicted the U.S. trade deficit, which hit 169
  billion dlrs last year, will fall 30-40 billion dlrs a year for
  the next two years as a result of the dollar's 35-40 pct
  decline since September 1985.
      The government should intervene to push the dollar down
  further if the previous declines do not lead to an improvement
  in the trade picture, if the U.S. budget deficit is not reduced
  and if foreign expansion does not occur, he added.
      Solomon said the dollar must fall further to compensate for
  the huge interest payments required on U.S. foreign debt. The
  Paris agreement between the major industrialized countries
  provided only for a pause in its decline, he said.
      Rimmer de Vries, senior vice president of Morgan Guaranty
  Trust Co., said the U.S. trade deficit problem is a problem of
  lagging growth in industrial economies, prolonged currency
  misalignment, debt problems of the developing countries, and
  unbalanced growth in the Asian industrializing countries.
      John Makin of the American Enterprise Institute, suggested
  foreign tax cuts to increase demand and pick up the slack from
  the U.S. trade deficit fall.
  

