updated 1/12/2006 12:44:21 PM ET 2006-01-12T17:44:21

The trade deficit improved slightly in November but was still the third highest on record as imports of foreign cars hit an all-time high and America’s foreign oil bill remained near record levels. The politically sensitive deficit with China narrowed modestly as shipments of Chinese toys, clothing and other consumer products fell.

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The Commerce Department reported Thursday that the deficit declined by 5.7 percent in November to $64.2 billion after hitting a record of $68.1 billion in October.

But even with the improvement, the trade deficit for the first 11 months of 2005 totaled $661.8 billion, surpassing the previous annual record of $617.6 billion set in 2004. Economists believe that when December figures are included, the final deficit for 2005 will top $710 billion.

In other economic news, the Labor Department reported Thursday that the number of Americans filing new claims for unemployment benefits rose by 17,000 last week to total 309,000. That was lower than the increase of 24,000 that Wall Street had been expecting and left weekly claims at a level indicating continued strength in the labor market.

The soaring trade deficits are being used by Democrats as evidence that President Bush’s policies of striking free trade agreements around the world have failed to protect American workers from unfair competition from low-wage countries such as China. They blame the loss of 3 million U.S. manufacturing jobs since mid-2000 on trade liberalization policies that have allowed U.S. companies to move factories overseas.

For November, the U.S. deficit with China declined by 9.9 percent to $18.5 billion after rising for seven consecutive months. Even with the improvement, the deficit with China was the third highest on record and the 11-month deficit total with China rose to $185.3, surpassing last year’s record of $162 billion mark with one month left in 2005.

The overall improvement in November’s deficit reflected a 1.8 percent increase in U.S. exports of goods and services, which rose to a record $109.3 billion in November. Shipments of American cars, consumer goods and capital goods all set records.

Imports fell by 1.1 percent to $173.5 billion, still the second highest level on record. The decline was led by a fall in imports of petroleum products, which dropped by 3.1 percent to $24.6 billion, still the second highest level on record. Petroleum imports had surged to record levels in September and October as oil companies scrambled to replace lost domestic production with foreign supplies following the Gulf Coast hurricanes.

The small narrowing in the deficit with China in November reflected lower shipments of toys and games, clothing and other household items, all categories that had surged in recent months as American retailers stocked their shelves for Christmas.

Chinese imports of clothing and textiles fell by 25.2 percent in November but are still 44.6 percent higher through the first 11 months of 2005, reflecting a surge in shipments following the lifting of global textile quotas. However, the administration has struck a comprehensive agreement with China to re-impose quotas across a number of areas, a deal the U.S. textile industry said was critical to save American jobs.

The deficit with China is expected to surpass $200 billion for all of 2005, providing ammunition to critics who are pushing legislation in Congress to impose across-the-board tariffs on Chinese products unless the country does more to allow its currency to rise in value against the dollar.

American manufacturers contend that China is unfairly depressing the value of its currency by as much as 40 percent to gain unfair trade advantages against American producers.

The administration is resisting pressure to brand China as a currency manipulator in a report it must make twice a year to Congress, despite the fact that the yuan has risen only slightly in value since last summer when the Chinese government announced it was dropping its decade-old tight link between its currency and the dollar.

China announced on Wednesday that its overall trade surplus with the world surged to $101.9 billion in 2005, more than triple the $32 billion surplus recorded in 2004. Sen. Max Baucus, D-Mont., warned during a visit to China that the country was facing the risk of a backlash in the U.S. Congress unless it did more to narrow the trade gap with the United States.

“It is a major irritant in U.S.-China relations,” Baucus said.

America’s deficit with Canada declined to $7.5 billion in November while the deficit with Mexico narrowed to $4.6 billion. The deficit with the 25-nation European Union dropped to $12.6 billion as U.S. exports to the EU rose to the highest level since last April.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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