Outlook, Here and There : Prospects for Foreign Trade Hailed, but Those U.S. Deficits Loom. . . .

Opportunity awaits Orange County companies making the plunge into international trade as their domestic markets stabilize and mature, but fallout from America’s budget and trade deficits may block many doors, especially for technology firms, panelists in an international trade seminar warned Thursday.

And although business generally has seen the election of George Bush as a sign that the economic boom of the Reagan years will continue, several hundred local business executives attending the annual Economic Outlook Conference sponsored by the Orange County Chamber of Commerce heard more caution than jubilation as speakers scored the federal government’s freewheeling spending habits.

Leslie McCraw, president of Fluor Corp. in Irvine, delivered the strongest message for local businesses looking overseas.

McCraw said the international engineering and construction company is just now emerging from severe financial problems that were brought about in large part by “being financially extended while trying to compete in an international market” that is rapidly changing.

The lesson that Fluor learned, he said, is a lesson for the debt-ridden federal government.

“I should be a great optimist” because of Fluor’s turnaround, he said, “but unless we get the U.S. financial house in order,” it is hard to talk optimistically about international competitiveness.

The annual interest on federal borrowing is $500 billion a year, money that could be better spent “improving the competitiveness of U.S. industry,” McCraw said.

Ticking off the major problems he sees coming if the budget deficit is not trimmed, McCraw warned that the nation will have less money available for research and development, education and personal savings and will face high interest rates that discourage industrial expansion and a currency “that swings wildly” and affords little economic stability.

The United States is falling behind in high-technology development, he said, “because 50% of our R & D money is spent on defense. . . . (But) all the warheads in the world are worthless without something to protect.”

Earlier in the daylong conference, two influential economists sounded the same warning.

“Dangerous structural imbalances” have developed in the economy during the current economic expansion, said Robert T. Parry, president of the Federal Reserve Bank of San Francisco. “The combination of strong spending in the private sector and unprecedented deficits in the federal government’s budget have outstripped our nation’s saving and productive capacity.”

The federal budget deficit, said Boston Co. economist Alan Sinai, is close to $3 trillion and is the single biggest trouble spot for the economic future.

Both said that the new Administration is not expected to wipe out a deficit that has been growing for years, but that Bush must begin trimming it to send a positive signal. Bush’s so-called “flexible freeze” deficit-reduction plan “is not a credible plan,” Sinai said.

Even the Australian ambassador to the United States, F. Rawdon Dalrymple, devoted a chunk of his speech to worries about the U.S. trade and budget deficits, arguing that domestic economic problems like an unbalanced budget affect the nation’s conduct of its international economic affairs.

Australians, he said, are concerned that the United States will emulate Japan in building barriers to foreign trade in order to protect domestic industry and in “dumping” goods and setting artificially low prices to protect its place in the international market.

Already, he said, the United States effectively bars many Australian products. “We have problems entering your markets similar to the problems the U.S. has entering Japan,” Dalrymple said.

McCraw said that Fluor has found “after painful squeezing and debt reduction” that the way to be competitive internationally is to abandon nationalism.

“We had been an American company with international offices. Now we are a global company whose headquarters just happens to be in California,” he said. “We made a conscious effort to do this. . . . We want nationality to be a non-issue. . . . We belong to the world.”

Times Staff Writer James S. Granelli contributed to this report.