United States Balance of Trade and Payments Statement Announcing Measures To Improve the U.S. Trade Position.

The United States balance of trade and payments has shifted this year to a large deficit position. The two main causes appear to be large oil imports by the United States and relatively slow economic growth in Japan, Germany, and other nations.

These deficits have contributed to some disorder in the exchange markets and rapid movements in exchange rates. Heightened uncertainty and increased exchange market pressure in recent weeks have coincided with the delay in congressional action on our energy legislation. A mistaken belief that the United States is not prepared to adopt an effective energy program has been partly responsible for recent, unsettled conditions in the exchange markets. We have a responsibility to protect the integrity of the dollar. Prompt action is needed in energy and other fields to reduce our deficits.

Last April, I submitted to the Congress a comprehensive conservation and conversion program to reduce our dependence on foreign oil. I am confident that the Congress will not allow this situation to continue to deteriorate through inaction. I am equally confident that the American people will fully support this critically important program. When enacted, the measures now under consideration will have increasingly beneficial effect in coming years and exert their main impact by 1985.

The United States is currently importing petroleum at a cost of about 45 billion a year. In 1978, taking account of planned production of Alaskan oil, our oil imports will be stable, despite substantial purchases for our Strategic Petroleum Reserve. Nevertheless, it is essential that we take further steps to curtail these imports in order to reduce both our excessive dependence on imported oil and the burden on our balance of payments. The energy measures I am now proposing are designed to serve these ends.

I have instructed the Department of Energy to pursue efforts to:

--expand production of oil at the Elk Hills Naval Petroleum Reserve;

--encourage an expansion of production at Prudhoe Bay above the 1.2 million barrels a day planned for early 1978;

--maintain production of California crude at a high level;

--work with appropriate governmental and private interests in expediting provision of adequate pipeline capacity for transport of Alaskan and Californian oil east of the Rocky Mountains.

Combined with conservation measures, these efforts offer good promise.

The new measures will take effect in the period immediately ahead and serve as a bridge until the implementation of the more comprehensive legislative program begins to exert fundamental changes in our energy balance in the years ahead.

I have also instituted measures to expand U.S. exports:

--We have doubled Commodity Credit Corporation credits to support agricultural exports.

--In 1978, we will increase sharply lending activity by the Export-Import Bank to support exports generally.

We will not engage in unfair competition for export markets; we will fully respect our understandings with other Governments regarding export credit terms. But within these understandings, there is room for a more active effort to expand our exports. Through such an effort, I believe we can achieve substantial increases in exports in 1978, as well as in subsequent years.

With these measures, the prospects for an improvement in our trade position will be good. Some of these measures will begin to take effect in 1978. When fully implemented, these measures, energy and non-energy, should produce an annual improvement in our trade position of several billion dollars and will improve the U.S. balance of payments.

There has been a great deal of public discussion in recent weeks about the large U.S. trade and payments deficits and the movement of rates in the exchange markets, mainly between the dollar and the German mark and Japanese yen. The American economy and the dollar are fundamentally sound; U.S. products on the whole are competitive. While some exchange rate adjustment has been understandable in light of economic developments in Germany, Japan, and the United States, recent exchange market disorders are not justified.

The new energy measures strike directly at a key part of the balance of trade problem. The export measures will enable us to respond effectively to expanding export opportunities. Together, the energy and export measures represent action to strengthen our balance of payments and deal with our trade deficit in a substantive way, by improving the underlying conditions upon which the value of the dollar fundamentally depends.

Furthermore, next month I shall be presenting to the Congress a comprehensive economic program designed to ensure a healthy and growing economy, to increase business capital investment, to expand industrial capacity and productivity, and to maintain prudent budgetary policies while counteracting inflationary pressures. These and related measures will promote economic progress and underscore our commitment to a strong and sound U.S. economy.

In the discharge of our responsibilities, we will, in close consultation with our friends abroad, intervene to the extent necessary to counter disorderly conditions in the exchange markets. The measures I have enumerated will deal with the root causes of these market disturbances in a more direct and fundamental way.