(FORTUNE Magazine) – BEHIND THE NEWS of cyclically rebounding profits shines a larger truth: U.S. economic preeminence looks more secure than it has in a generation. ''What's amazing,'' says President Jerry Jasinowski of the National Association of Manufacturers, ''is that we're already the best in the world in an enormous range of industrial products.'' Sounds like the old American braggadocio, which seemed to have gone the way of cars with tail fins. But a little tub- thumping is in order. Recall that only a few years ago, juggernaut Japan was winning just about everywhere it went head-to-head with the Yanks and, as if to rub it in, was buying up trophies like Rockefeller Center and Pebble Beach. Now American companies are pushing Japanese rivals back in such key industries as motor vehicles, semiconductors, and computers. Critical made-in-U.S.A. products that were on the endangered list -- machine tools, for example, and high-tech devices for making semiconductors -- are vibrantly alive. The appropriate mood, however, is not euphoria but relief that America is not becoming an economic colony turning out second-rate products. CEO Joseph Gorman of TRW, who a few years ago rented a Japanese-made Lexus so his top executives could see a superior product firsthand, is glad that he no longer finds this necessary. In American factories, he says, ''there's been a good deal of catching up in quality.'' But the progress is not impressive enough to satisfy William Wheeler, a partner at Coopers & Lybrand who tramps through plants around the world. Says Wheeler: ''I think we are still behind Japan in terms of manufacturing excellence.'' Here's another reason to stay sober. Since the late Eighties, U.S. exports have enjoyed the lift of a cheap dollar. NAM chief Jasinowski says this explains ''less than half'' of America's new trade competitiveness, but that's still a lot. The economic resurgence, moreover, is far from uniform across industries. In some, such as computer manufacturing, success for American companies hasn't translated into success for the country: In just three years a growing dependency on Asian parts has moved the U.S. from a small trade surplus in computers and peripherals to a $12 billion deficit.

Despite such concerns, the big picture of how the U.S. stacks up against the world is generally sunny: -- When it comes to living standard, the bottom line in international comparisons, America is still on top. Figures from Philadelphia's WEFA Group show that rivals like Germany and Japan, which for decades kept drawing closer to the U.S. in GDP per capita adjusted for local purchasing power, have slipped. Japan's output of goods and services per citizen, which reached 83.5% of America's in 1992, fell back last year to 82.2%. -- Recessions in those countries might explain this retreat except for one fact. In productivity, which powers living standards, America has been hard to catch for some time. Economists Bart van Ark and Dirk Pilat at the University of Groningen in the Netherlands, reporting their findings in the Brookings Papers, have calculated that in 1990 West Germany's manufacturing productivity was just 86% of America's -- a retreat from a decade earlier. Japan had kept advancing, but only to 78% of the American figure. Director William Lewis of the McKinsey Global Institute, which has compared international productivity in a wide range of manufacturing and service industries, explains that laggard industries drag down the country's overall efficiency: ''Japan leads the U.S. in heavy manufacturing and electronics -- but these account for only 12% of its GDP.'' -- American products have held their own in the global fray. That is if you take a broad definition of the home team's performance to include everything sold by U.S.-based companies, including goods manufactured and services performed by overseas branches. Foreign operations create few jobs for Americans, but the profits bolster the parent companies and help the national balance of payments. Queens College economist Robert Lipsey has calculated that between 1966 and 1990, when other economies were growing faster than America's, U.S. multinationals' share of global manufactured exports -- counting what they produced outside the homeland -- declined only slightly, from 17.6% to 16.1%. Meanwhile, their country's share of global manufactured exports, including products shipped by small companies as well as by big multinationals, sank from 17.1% to 12.1%. That's not as bad as it looks, though, for U.S. exports have grown in absolute terms. -- Nevertheless, the U.S. is still writing IOUs to the world. The good news is that America's surplus on its trade in services -- from lodging foreigners at the Grand Canyon to marketing an issue of French stock on Wall Street -- has grown nearly fivefold since 1981, to $55.7 billion in 1993. ''Here the U.S. is king of the hill,'' says Lehman Brothers chief economist Allen Sinai, who believes the services surplus could double by 2000. But it is swamped by a deficit in merchandise trade -- $132.5 billion last year, including $50 billion in imported oil. When all other inflows and outflows were cranked in -- foreign aid, interest payments, and the like -- that left the U.S. with an ^ overall current account deficit of $109.2 billion. The red ink in America's international transactions no longer gushes profusely enough to cause alarm. Last year's current account deficit represented 1.7% of GDP, far below the 3.7% of 1987. Economist William Cline of Washington's Institute for International Economics says the deficit will probably fall as other countries recover and step up their imports from the U.S. Says Cline: ''If we could get the figure down to 1%, we could declare victory.'' Some economists wonder whether the trade deficit is worth even the attention it gets. Since foreign commerce involves barely a tenth of America's GDP, they argue, it has little effect on living standards. In a new study for the National Bureau of Economic Research, economists Paul Krugman of MIT and Robert Lawrence of Harvard figure that in 1990 the trade deficit represented some 700,000 jobs that might have survived in U.S. manufacturing, where the main reason for shrinking headcounts is soaring productivity. Even so, the way America conducts business with the rest of the world tells a great deal about its vulnerabilities and strengths. Most basically, a deficit in the foreign accounts traces ultimately to a shortfall in America's savings rate; the country consumes more than it produces, so it has to buy more from abroad than it sells. The WEFA Group consulting firm says public and private savings totaled 12.4% of GDP in the U.S. last year, vs. 33.7% in Japan. That disturbs President Daniel Burton Jr. of the Council on Competitiveness, a private group in Washington, who says, ''You have to ask where the assets are being piled up to stoke growth in the future.'' Economist Stephen Roach of Morgan Stanley would like to see more stoking by U.S. industry, which he finds too preoccupied with ''job compression and plant closings.'' Why the preoccupation? ''The financial markets reward it,'' Roach says. ''It's trendy. It's macho.'' Another critic, Michael Porter of the Harvard business school, notes that ''our profits are going up and up and up, yet companies feel they've got to be even more profitable.'' Thus, Porter says, they do things like cutting back on corporate research labs. The prevailing mentality in executive suites, in his view, is ''hunkering down, streamlining, focusing -- not building, pioneering, innovating.'' Whether America runs a trade surplus or deficit, the mix of what it buys and sells internationally matters greatly because it reflects the country's standing in important skills and technologies. Yes, it's true that countries don't literally engage in economic competition, companies do -- but true also that countries whose companies excel in high-tech and information-based industries live far better than those that produce raw materials and perform low-end services. Do we want to square our accounts solely by exporting logs and caddying for foreign golfers? Fortunately, American exports have tended over the years to bunch increasingly at the middle and top of the technology spectrum. But perennial fat surpluses from such exports as aircraft and chemicals are trending down. The question is whether other high- and medium- technology industries can take up the slack. America's ''terms of trade'' with the rest of the world are another yardstick of how it's faring. What physical quantity of exports must be shipped abroad to pay for a given volume of imports? The answer these days: more than in the past, because of dollar devaluation, and perhaps more than seems justified in light of improved U.S. efficiency and product quality. Observes economist Martin Baily of the Brookings Institution, the Washington research organization: ''It is a puzzle that our manufacturing industries need such an assist from the exchange rate to be able to sell competitively.'' One reason, Baily says, may be that some much-improved American products still have a bad reputation: ''I bought a Citation in 1980, and it will be a long time before I buy another Chevy.'' America's competitive prospects vary greatly by industry. Here is a look at eight industries that make a big difference in America's living standard and its ability to slug it out internationally:

-- FOOD PROCESSING. Next time you roam the supermarket, reflect on the enormity of America's seemingly mundane processed food and beverage industry. With 1993 production of more than $404 billion, as estimated by the Commerce Department, it is 16 times larger than the glamorous consumer electronics equipment industry, including all the camcorders, VCRs, television sets, and audio systems that pour in from Japan and elsewhere. The efficient U.S. food industry not only enables the country to live well but also raises overall productivity. It's a different tale in Germany and Japan. In a recent study, McKinsey found workers in the former West Germany to be only 76% as efficient in food production in 1990 as America's, while Japan's workers turned out only a third as much. A different mix of products accounts for only a small part of Japan's lag; its food industry, says McKinsey, is fragmented and ''isolated from competition.'' Because food processing in Japan employs more people than the country's world-beating steel, auto, auto parts, and metalworking industries combined, it pulls down the country's average productivity like a sumo-size sinker. Relatively little processed food crosses international borders, though America earns a trade surplus. Far more impressive are the ways American multinationals are spreading their marketing and production know-how around the world. Kellogg, with more than half the cereal market outside the U.S., is building plants in India and China. Philip Morris, whose Kraft General Foods is top Yankee victualer on the global scene, recorded $9.4 billion in food sales abroad last year. Its Jacobs coffee, tops in Germany, is widening its market share there.

-- MOTOR VEHICLES. Only yesterday, Detroit's Big Three seemed helpless in the face of Japan's unrelenting gains in the U.S. market. Yet American companies have gunned their share of car and light-truck sales by three percentage points in the past two years, to 73%, mostly at the expense of Japanese nameplates. Worldwide, because of growing penetration in Europe and other markets served by overseas plants, Japanese makers never lost much ground. Yet in spite of Detroit's catchy new models, the U.S. trade deficit in motor vehicles deepened in 1993 to $44 billion. Main reason: The Japanese still command legions of loyal buyers in the wide- open U.S. car market. The devalued dollar means that cars imported from Japan -- which enjoyed a $1,000-per-car cost advantage in the mid-Eighties -- now must overcome a cost handicap of at least $1,500. All the more impressive, then, that if one ignores light trucks -- where the Japanese are weak -- their cars, including those from American transplants, have lost a mere point of market share from their 1991 peak of 30.3%. Though the gap has narrowed greatly, Japanese cars set the standard for quality. In the latest J.D. Power rankings, eight of the ten models with the fewest initial problems are Japanese. Auto parts from Japanese companies are still generally superior. Pleased as he is with American progress, Gorman of TRW allows that ''if you look at defects on a parts-per-million basis, Japan is still the world's best.'' As for that production-cost handicap, McKinsey automotive consultant Glenn Mercer says that if the dollar rose 15% against the yen, plants in Japan could come ''roaring back'' in competitiveness. Meanwhile, Toyota has just expanded capacity at its plant in Georgetown, Kentucky. No wonder Ford CEO Alex Trotman still considers the Japanese his most formidable rivals.

-- PRODUCTION MACHINERY. America rivals Japan and Germany when it comes to many types of industrial equipment and controls. Even when its trade deficits hit record levels in the Eighties, the U.S. ran a surplus in quite a few categories -- but not all. A net exporter in the Seventies of machine tools that cut and bend metal on the factory floor, the U.S. became hooked on imports in the Eighties as its share of world production collapsed from 20% to 6%. Things have turned around. Partly as a result of what security analyst Eli Lustgarten of PaineWebber calls a ''dramatic improvement in the technology, quality, and deliverability of American machines,'' U.S. toolmakers have displaced Italy's in the world's No. 3 spot with a 9% share in 1992, behind Japan and Germany. Cincinnati Milacron is shipping its new low-cost Maxim machining centers to such unlikely places as Taiwan. And while the U.S. still has a trade deficit, it's half as big as four years ago. America is also showing prowess in electronic brains that direct machines. By spending $500,000 on new Milacron controls, Deere avoided spending $2 million to replace ten big turning centers. At a highly automated factory in Milwaukee, Allen-Bradley, a unit of Rockwell International, produces circuitboards for a host of industrial control devices that are shipped in growing quantities around the world. Boards of different sizes move down the line intermixed, each imprinted with a bar code indicating what's to be inserted and soldered into it. The biggest export bucks are in a disparate array of medium-technology contraptions. These range from big chillers that cool commercial buildings, exported from Syracuse, New York, by Carrier Corp., a division of United Technologies, to huge Caterpillar mining trucks that can cost more than $1 million apiece. Caterpillar, a resurgent company that supplies the world mainly from dramatically upgraded plants in Peoria, Illinois, and elsewhere in the U.S., generated a $1.9 billion trade surplus last year all by itself. ''When you get into big equipment,'' says vice chairman James Wogsland, ''you can't justify more than one factory in the world.'' Wogsland derides Ross Perot's suggestion that NAFTA will prompt companies like his to flee to Mexico. ''In Mexico, even assuming you had all the efficiencies you have here, you might be able to reduce your costs by 8% to 9%. That's not something you're going to move a whole plant for. Perot's 'sucking sound' is ridiculous.''

-- INSTRUMENTS. The U.S. never lost its lead in a whole class of sophisticated analytical and industrial devices, ranging from mass spectrometers that help researchers identify elements to flow meters for the plumbing in giant chemical plants. This category runs a perennially plump trade surplus -- about $5 billion last year, when medical instruments and supplies generated another $3.5 billion. An important U.S. expertise is sniffing pollution. Other countries are patterning their environmental regulations after America's and need advanced detection gear from U.S. companies. Busily accommodating them is Thermo Electron of Waltham, Massachusetts, which last year exported $169 million more in instruments than it imported. The total includes bomb detectors, medical instruments, and devices to monitor pollution and safety in the workplace. Thermo Electron manufactures in Japan and Europe, but CEO George Hatsopoulos says that for some time the company's American workers have more than matched their colleagues elsewhere in productivity. If anything, he adds, ''I think the disparity is bigger now.''

-- SEMICONDUCTORS. Call it an underdog's triumph. In 1989 the head of an advisory committee established by Congress warned President Bush that the U.S. semiconductor industry, which had fallen far behind Japan's in revenues, was ''in serious trouble'' and should not be allowed to ''wither away.'' What a difference four years make. In 1993, U.S. chipmakers regained the lead from Japan, which has been clobbered by South Korea in memory chips while failing to overcome America's dominant position in pricey microprocessors that embody logic. Says the author who wrote the warning, Ian Ross, former president of Bell Labs: ''We can now say the industry will survive.''

Less widely noticed is a related comeback. If chips are the lifeblood of the information age, chipmaking equipment is the jugular. Between 1983 and 1990, says VLSI Research of San Jose, a market research firm, American equipment makers' share of the world market plunged from 66% to 44% as Japan captured the No. 1 position. Now the equipment suppliers are back on top, and not just ^ because America's semiconductor industry is spending heavily while Japan's retrenches. ''The reliability of American equipment is higher, and the technology is higher,'' says G. Dan Hutcheson, president of VLSI Research. Proof of superior quality, Hutcheson says, is the U.S. companies' growing market share in Japan, which rose without any prodding by U.S. trade negotiators from 15% in 1990 to 20% last year. A company that's winning customers there as well as in South Korea is Lam Research of Fremont, California. Lam, whose sales leaped 54% to $265 million in its last fiscal year, has one-third of the world market in equipment that etches away what's unwanted on a semiconductor's circuitry. ''The U.S. equipment industry has the real momentum today, and it's Japan that has the problem,'' says Roger Emerick, Lam's CEO.

-- COMPUTERS. The U.S. is winning, but it's a hollow victory. In the personal computer market, where the action centers, figures from Dataquest, a market research firm in San Jose, make clear that the American players are far out front. Their share of global shipments climbed from 59% in 1985 to 70% in 1992 and probably moved still higher last year. Yet the gap yawns wide between the showing of American companies -- whose sales include those from foreign transplants -- and that of the U.S. as a computer maker. Computers produced in the U.S. increasingly come with imported peripherals -- disk drives, printers, monitors, and flat-panel displays -- from Japan and elsewhere in Asia. The Commerce Department expects last year's $12 billion trade deficit in computers and peripherals to deepen to $16 billion in 1994. Observes Philippe de Marcillac, director of Dataquest's worldwide PC group: ''U.S. companies are strong marketeers, but they have not built a very strong U.S. industry around them.'' The irony is that stateside production is rising. Fast-selling machines like Compaq's Presario desktop and others are pouring out of a plant, 200 yards from the Houston headquarters offices, that could have become an industrial relic. In late 1991, when Greg Petsch took over as senior VP for corporate operations, shifting production offshore was seriously considered. Petsch threw down the challenge: ''If we don't change the rules of manufacturing, what we see outside this window will be four-foot-high weeds.'' Today, Petsch says, half the company's surging volume comes from the Houston plant. So drastically has the assembly process been revamped that the production cost per machine -- direct labor plus overhead -- is only a fourth as great as two years ago. But that excludes purchased parts and materials, which Petsch puts at an overwhelming 85% to 90% of a computer's total cost. Compaq computers have plenty of Asian components, though in Houston's case the average imported content per machine has not changed in the past several years. Overall, government sources estimate, the foreign content of U.S.-made computers has tripled from 10% in 1986 to 30% in 1992. Does it matter? Michael Borrus of California's Berkeley Roundtable on the International Economy sees ''a danger signal'' in those numbers. Borrus says that computers could go the way of consumer electronics, which America largely lost after it relinquished control of components manufacturing. Computer consultant Charles Ferguson of Cambridge, Massachusetts, is also concerned, though less so than a few years ago. Ferguson, co-author of the recent Computer Wars, once called for the formation of a transatlantic keiretsu of U.S. and European electronics companies to hold back the Japanese. His worst fears of a cartelistic threat from Japan in critical components have not materialized, he says. The Japanese now face growing competition from South Korea, Taiwan, and other parts of Asia, Ferguson explains. Meanwhile, the U.S. continues to hold a strong position in the high-value innovation and design end of the computer business, where the Japanese are ''extremely third-rate by American standards.'' Still, Ferguson observes, the Asians have invested heavily in making some key computer parts and are very good at it. ''We don't have to lose it all,'' he says, ''but it looks as though the bulk of the manufacturing of those products will be done elsewhere.'' Is this bad for the U.S. economy? Hard to prove, answers Ferguson, though it clearly affects jobs and skills. ''And I don't see that trade deficit going away. Quite the contrary.''

-- COMPUTER SOFTWARE, SERVICES. Now for the upbeat side of the same story. America dominates the worldwide computer software market, estimated at $72 billion in 1993 by International Data Corp. (IDC), a research firm in Framingham, Massachusetts. In the previous year, IDC says, the Yanks had three-fourths of the business, compared with only 20% for the Europeans and a mere 4.3% for Japan. Enough software was shipped from the U.S., IDC estimates, to generate a $17 billion trade surplus that exceeds the red-ink figure in hardware. ''The U.S. has a great head start in software,'' says Jennifer Scholze, a senior IDC analyst, ''and other countries face enormous barriers to entry in the complex U.S. market.'' One reason why Japan lags, says Michael Braude, research chief at the Gartner Group in Stamford, Connecticut, is that its team approach doesn't work in software writing. ''It's still a wizard's game,'' Braude says. Nonetheless, other foreign suppliers could one day cut American companies' lead. Capers Jones, chairman of Software Productivity Research in Burlington, Massachusetts, points out that production costs are only a fourth as high in countries like India and Malaysia.

Together with software, computer services make up a worldwide industry estimated by IDC at $204 billion in 1993 -- bigger than the hardware business and growing faster. The Yanks, led by such outfits as IBM and EDS, owned by General Motors, have a narrower lead in computer services and must battle for foreign business against able local rivals. ''There's no secret, no magic,'' says security analyst Charles Phillips of Kidder Peabody. ''It's how many bodies you are going to throw in and what price you offer.'' EDS, which got 17% of its revenue in Europe last year, landed 54% of its new contracts there. It's expecting to sign a $1.5 billion, ten-year contract with Britain's tax- collecting Inland Revenue agency.

-- FINANCIAL SERVICES. Here, says William Lewis of McKinsey, ''the U.S. has a massive lead in productivity and know-how.'' By comparing the sizes of staffs performing key functions, McKinsey has found productivity in German and British retail banks to be only two-thirds as high as in the U.S. Wall Street securities firms, which are generally more efficient and innovative than foreign peers, have a growing international presence. U.S. firms, says Chairman Richard Fisher of Morgan Stanley, have been steeled for foreign combat by tough domestic competition. Says he: ''Our home market is the largest and the most sophisticated.'' Morgan Stanley recently opened offices in Bombay, Moscow, and Shanghai. Merrill Lynch, the first U.S. securities firm allowed to set up shop in China, has co-managed nearly $4 billion in financings there. The firm already operates in Shanghai and has announced plans for an office in Beijing. Merrill Lynch, says executive vice president Winthrop Smith Jr., its international chief, has beaten rivals to market with products like its LYONs zero-coupon ) convertible bonds. The acronym stands for liquid yield option notes. The firm prides itself on a $1.4 billion LYONs issue it handled for Switzerland's Roche pharmaceutical company. WHAT'S striking about America's economic comeback is how little help it received from government. If all those competitive new products were developed under the laissez-faire policies of Reagan and Bush, can the country benefit from the interventionist technology policy of Bill Clinton? Answer: Yes, provided the scope is limited and industry is required to match government outlays. Even Bush went along with government-aided consortiums like Sematech, which hastened the chipmaking equipment industry's comeback. A good candidate for limited taxpayer support is the U.S. Display Consortium, which aims at creating an American-based, next-generation manufacturing capability for screens, the most expensive component in a notebook computer. Worth up to $1,000 each, they now come entirely from Japan, and the military truly needs better ones. But no one should forget that in the economy overall, government probably hinders U.S. competitiveness more than it helps. Business people cry for relief from perennial lush blooms of new regulation and from a tax code so complex no one can understand it. In a survey by the Grant Thornton consulting firm of how companies wanted government to help them, respondents preferred less regulation to industrial policy by more than 2 to 1. Selected high-tech projects, even when worthwhile, grab too much attention in the competitiveness debate: Washington's biggest job is to get out of the way.

CHART: NOT AVAILABLE CREDIT: SOURCE: WEFA GROUP CAPTION: THE BIG PICTURE The U.S. still leads in living standard. . .

CHART: NOT AVAILABLE CREDIT: FORTUNE CHART CAPTION: THE BIG PICTURE but runs a deficit with the world despite booming services

CHART: NOT AVAILABLE CREDIT: FORTUNE CHART/SOURCE: AMERICAN AUTOMOBILE MANUFACTURERS ASSN. CAPTION: A MIXED RECORD IN MOTOR VEHICLES The Big Three remain a mighty force. . . but America's huge trade gap persists

CHART: NOT AVAILABLE CREDIT: FORTUNE CHART/SOURCES: VLSI RESEARCH, SEMICONDUCTOR INDUSTRY ASSN. CAPTION: U.S. CHIPMAKING REBOUNDS American leads again in semiconductors. . . and in chipmaking equipment

CHART: NOT AVAILABLE CREDIT: SOURCE DATAQUEST CAPTION: THE COMPUTER PARADOX American companies are globally strong. . .

CHART: NOT AVAILABLE CREDIT: FORTUNE CHART CAPTION: THE COMPUTER PARADOX but America has slipped as a manufacturing location