	gatt warns u s on federal budget protectionism the united states emphasis on its foreign  deficit is misplaced and the country s real problem lies in its large federal budget deficit the general agreeement on tariffs and  gatt said by stressing its record  deficit of billion dlrs last year the u s was fuelling protectionist pressure which threatens the world trading system it said in an annual report the fundamental problem the size of the u s federal budget deficit could be remedied only by cutting government spending or encouraging personal savings to finance the debt it said gatt also predicted world  would grow by only pct in a full percentage point lower than in each of the previous two years gatt experts urged washington to resist protectionism and instead seek macroeconomic changes to reduce the current account payments deficit higher private savings lower investment and a smaller federal budget deficit raising u s  barriers would result in little or no reduction in the current account deficit it would however increase inflation and reduce world  it said the basic cause some combination of insufficient domestic savings and an excessive budget deficit would remain the report said gatt economists said  expansion would slow this year because of slower growth forecasts in japan and some west european nations as they adjust production and workforces to a low dollar risk of higher u s inflation concerns over third world debt management and looming protectionism the report also said imbalances in the current accounts of japan west germany and the u s had increased in the most likely explanation was that exchange rate changes were not backed by changes in macroeconomic policies it added thus the prediction that these imbalances would be reduced as a result of the major realignment of exchange rates was not borne out last year the report said gatt warned there was a risk of a sizeable increase in the u s inflation rate under the combined impact of a rapidly expanding money supply and low dollar such a development could worsen the business climate by increasing uncertainty and pushing up interest rates which in turn would adversely affect world  but the report noted a surprising rise in imports to the united states despite the dollar s depreciation which makes foreign products more expensive it suggested that resources idle in the u s both human and in underutilised factories were not geared to produce the goods and services sought from abroad world  in manufactures grew by only three pct in about half of the rate of the previous year  in agricultural goods expanded by just one pct continuing a stagnant pattern in that sector this decade gatt said developing countries exports declined significantly while their imports increased moderately although full statistics are not available yet gatt said the combined export earnings of major indebted nations were sharply lower and only five of them chile colombia philippines south korea and thailand had higher exports reuter 
