When a nation generates a high trade deficit there is no reason to panic, according to a new study by Dan Griswold of the Cato Institute.

• Although it is commonly assumed that a trade deficit means that American companies are "uncompetitive," industrial production in the U.S. grew 24 percent between 1992 and 1997, at the same time the U.S. trade deficit was increasing from $39 billion to $114 billion.

• In Japan, on the other hand, industrial production grew just 8 percent and in Germany by less than 1 percent -- while both countries were running big trade surpluses with the U.S.

• It is sometimes inferred that if one country is running a trade deficit, its trading partner must be protectionist -- but the countries the U.S. is running a trade deficit with typically aren't any more protectionist than those we run a surplus with.

• Trade deficits don't affect the number of American jobs -- which are influenced primarily by labor supply and monetary growth

Griswold explains that when the trade deficit expanded in the 1980s, unemployment fell. And when it shrank during the 1990-91 recession, the unemployment rate rose.

Since 1980, economic growth has averaged 3.1 percent in years during which the trade deficit increased. Meanwhile growth averaged only 2 percent in years in which the trade deficit declined from the previous year.

Sources: Daniel T. Griswold, "America's Maligned and Misunderstood Trade Deficit," Trade Policy Analysis No. 2, April 20, 1998, Cato Institute, 1000 Massachusetts Avenue, N.W., Washington, D.C. 20001, (202) 842-0200, and Perspective, "More Myths About Trade," Investor's Business Daily, August 27, 1998.