Mounting Trade Deficits in the United States

Mounting trade deficits reduced political support in the U.S. Congress for trade liberalization in the 1980s and 1990s. Lawmakers considered a wide range of protectionist proposals during these years, many of them from American industries that faced increasingly effective competition from other countries. Congress also grew reluctant to give the president a free hand to negotiate new trade liberalization agreements with other countries. On top of that, the end of the Cold War saw Americans impose a number of trade sanctions against nations that it believed were violating acceptable norms of behavior concerning human rights, terrorism, narcotics trafficking, and the development of weapons of mass destruction.

Despite these setbacks to free trade, the United States continued to advance trade liberalization in international negotiations in the 1990s, ratifying a North American Free Trade Agreement (NAFTA), completing the so-called Uruguay Round of multilateral trade negotiations, and joining in multilateral agreements that established international rules for protecting intellectual property and for trade in financial and basic telecommunications services.

Still, at the end of the 1990s, the future direction of U.S. trade policy was uncertain. Officially, the nation remained committed to free trade as it pursued a new round of multilateral trade negotiations; worked to develop regional trade liberalization agreements involving Europe, Latin America, and Asia; and sought to resolve bilateral trade disputes with various other nations. But political support for such policies appeared questionable. That did not mean, however, that the United States was about to withdraw from the global economy. Several financial crises, especially one that rocked Asia in the late 1990s, demonstrated the increased interdependence of global financial markets. As the United States and other nations worked to develop tools for addressing or preventing such crises, they found themselves looking at reform ideas that would require increased international coordination and cooperation in the years ahead.

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This article is adapted from the book "Outline of the U.S. Economy" by Conte and Carr and has been adapted with permission from the U.S. Department of State.