Foreign oil sends US trade deficit soaring
WASHINGTON (AP) - January 11, 2008 The Commerce Department reported that the trade deficit, the gap
between imports and exports, jumped by 9.3 percent, to $63.1
billion. The imbalance was much larger than the $60 billion that
had been expected.
The increase was driven by a 16.3 percent increase in America's
foreign oil bill, which climbed to an all-time high of $34.4
billion as the per barrel price of imported crude reached new
records while the volume of shipments declined slightly. With oil
prices last week touching $100 per barrel, analysts are forecasting
higher oil bills in future months.
Ian Shepherdson, an analyst at High Frequency Economics, noted
that the deficit was also pushed higher by a big drop in exports of
commercial aircraft. He said that setback is likely to be only
temporary given the orders backlog that Boeing must fill to meet
global demand.
The big jump in oil prices pushed total imports of goods and
services up by 3 percent to a record $205.4 billion. Exports also
set another record, rising by a smaller 0.4 percent to $142.3
billion. Export demand has been growing significantly over the past
two years as U.S. manufacturers and farmers have gotten a boost
from a weaker dollar against many other currencies. That makes U.S.
goods cheaper on overseas markets.
Through the first 11 months of 2007, the deficit is running at
an annual rate of $709.1 billion, down 6.5 percent from last year's
all-time high of $758.5 billion. Analysts believe that the export
boom will finally result in a drop in the trade deficit in 2007
after it set consecutive records for five years.
Critics of President Bush's trade policies, however, say the
declining deficits will still leave the imbalance at a painfully
high level, which they contend reflects unfair trade practices of
other nations that have contributed to the loss of more than 3
million U.S. manufacturing jobs since 2000. Trade is expected to be
a key issue in this year's presidential campaign.
"Manufacturing jobs continue to disappear at an alarming rate.
Voters understand the urgent need to fix the problem," said Scott
Paul, director of the Alliance for American Manufacturing.
Much of the Democratic unhappiness is focused on China, where
the U.S. trade deficit through the first 11 months of this year
totals $237.5 billion, the highest annual imbalance ever recorded
with a single country - with December still left to tally. The
November deficit with China dipped slightly to $24 billion, but
that was down from a record high of $25.9 billion set in October,
when retailers were boosting orders for toys, games and video
equipment to stock their shelves for Christmas.
Analysts predict further increases in the deficit with China in
the months to come as U.S. demand has been unfazed by a string of
high-profile recalls of a number of Chinese products. China
reported Thursday that its trade surplus through December with the
world rose by 47.7 percent to a record of $262.2 billion with the
December surplus coming in at $22.7 billion, up 9.5 percent from a
year ago.
Congress is considering bills that would clear the way for
economic sanctions on China if it does not allow its currency to
rise in value more rapidly against the U.S. dollar. American
manufacturers contend the Chinese are manipulating their currency
by keeping it undervalued by as much as 40 percent to gain price
advantages against U.S. firms.
The Chinese warned last month during high-level economic talks
that U.S. sanctions could spark retaliation by China. Commerce
Secretary Carlos Gutierrez said Friday that the administration
continues to believe that its strategy of emphasizing dialogue
along with filing selected trade cases against China at the World
Trade Organization represents a better chance of addressing the
deficit.
He said the best thing that Congress can do is pass the three
pending free trade agreements with Colombia, Panama and South Korea
as a way to expand U.S. export opportunities.
"Right now the best idea that is in front of us is passing
those three free trade agreements," Gutierrez said in an interview
with The Associated Press. "That is the single biggest thing that
we can do to help our exporters."
The growth in exports has been a major factor cushioning the
blow to the economy from the slump in housing and a severe credit
crunch. However, with oil pushing imports up sharply, analysts
believe the help from trade in the final three months of last year
will be shown to have been significantly smaller.
Many economists believe overall economic growth slowed to a
barely discernible 1 percent annual rate in the October-December
period and will likely weaken even further in the current quarter,
raising fears of a possible recession.
The administration and Democrats in Congress are considering
putting forward economic stimulus packages to ward off a downturn,
and on Thursday Federal Reserve Chairman Ben Bernanke said the Fed
was prepared to act in a "decisive" manner to protect the
economy, comments viewed as a strong signal of further Fed rate
cuts.
By country, the deficit with Canada, America's largest trading
partner, dropped by 12.1 percent to $4.7 billion in November while
the imbalance with Mexico rose by 1.4 percent to $7.6 billion. The
imbalance with the European Union fell by 12.6 percent to $10.4
billion.