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U.S. trade deficit at lowest level in 16 months

The trade deficit fell for a third straight month as the U.S. bill for foreign oil declined to the lowest level in 16 months and American exports hit an all-time high.
/ Source: The Associated Press

The trade deficit fell for a third straight month as the U.S. bill for foreign oil declined to the lowest level in 16 months and American exports hit an all-time high.

The deficit for November declined by 1 percent to $58.2 billion, the lowest since July 2005, the Commerce Department reported Wednesday. The trade gap hadn’t fallen for three consecutive months since early 2003.

The Bush administration hailed the improvement as a sign that its efforts to pry open foreign markets were working. “When we open overseas markets, American companies, consumers and workers benefit,” said Commerce Secretary Carlos Gutierrez.

But administration critics said even with the recent improvement, the 2006 deficit will still be significantly higher than in 2005 with much of the deterioration coming from China.

“Our trade deficit is still out of control. Unless the administration takes action to end China’s unfair currency manipulation, we will continue to see the problem get worse,” said Sen. Charles Schumer, D-N.Y. and the new chairman of the Joint Economic Committee.

He said his panel would hold hearings into the administration’s planned response to China’s reluctance to allow its currency to rise further in value against the dollar. Treasury Secretary Henry Paulson led a delegation of seven Cabinet members to Beijing in December for two days of talks on trade but came away with no new commitments from the Chinese.

American manufacturers contend the yuan is undervalued by as much as 40 percent against the dollar, making Chinese goods cheaper and more attractive to American consumers and U.S. products more expensive in China.

For November, the U.S. deficit with China declined 5.9 percent to $22.9 billion. But for the first 11 months of 2006, the deficit with China now totals an all-time high of $213.5 billion, surpassing the old record of $202 billion set in 2005 with the December figure yet to be added.

China reported that its trade surplus with the world jumped nearly 75 percent to total a record $177.5 billion last year. That is smaller than the surplus with the United States because China computes the figure differently and it also runs deficits with some countries.

U.S. industry and labor groups are pushing for Congress to pass legislation that would penalize China unless it allows a faster appreciation of its currency.

“America’s trade problems with China will never be solved unless the U.S. government and Congress demonstrate to the Chinese that China’s unlimited access to the U.S. market will not remain open unless China changes its way,” said Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition, a textile company lobbying group.

The overall deficit for 2006 is running at an annual rate of $765.4 billion, putting the country on track to see a record imbalance for the fifth consecutive year. The deficit for all of 2005 was $716.7 billion.

While American consumers benefit from cheaper goods imported from abroad, critics contend that the deficit represents the loss of manufacturing jobs to foreign nations that compete unfairly against American workers.

Since President Bush took office in 2001, the country has seen one in five manufacturing jobs disappear, a total of 2.96 million lost jobs with U.S. automakers and textile companies particularly hardhit.

Democrats have pledged to step up pressure on the administration to deal with unfair trade practices after campaigning successfully to win back control of both the House and Senate last fall.

For November, U.S. exports of goods and services rose 0.9 percent to a record high of $124.8 billion, reflecting a big jump in sales of commercial aircraft and aircraft parts.

Imports were also up, rising by 0.3 percent to $183 billion. This increase came even though America’s bill for foreign oil fell 0.4 percent to $21.5 billion, the third straight decline after petroleum imports hit an all-time high of $29.3 billion in August when global oil prices were surging.

Analysts believe oil imports will continue to moderate with oil now trading around $55 per barrel, compared to the all-time high above $78 per barrel set last summer.

Analysts said the string of declines in the overall deficit were providing a signal that the imbalance may have peaked and could improve further in 2007, helped by stronger growth overseas, a weaker value of the dollar against many currencies and slower U.S. growth, which translates into lower demand for exports.

Nigel Gault, chief U.S. economist at Global Insight, a private forecasting firm, said that trade probably added more than 1 percentage point to growth in the just-completed October-December quarter.

After China, the largest U.S. deficits were incurred with the European Union, an imbalance of $9.5 billion and Japan at $7.9 billion.