Trade deficit narrows slightly

Published: Friday, January 13, 2006 at 6:01 a.m.
Last Modified: Thursday, January 12, 2006 at 11:22 p.m.
The U.S. trade deficit narrowed slightly in November as the price of foreign oil fell and U.S. exports hit an all-time high. Some economists predicted the country may soon start to see sustained improvements in its trade performance.
The Commerce Department reported Thursday that November's deficit declined by 5.7 percent to $64.2 billion.
That was a bigger improvement than analysts had been forecasting, although the imbalance was still the third highest after the all-time record of $68.1 billion set in October, which had surpassed the previous record of $66 billion in September.
The November improvement reflected a 1.8 percent rise in exports, which climbed to an all-time high of $109.3 billion, led by a 27.4 percent surge in shipments of commercial aircraft, reflecting strong sales by Boeing Co.
Imports fell by 1.1 percent to $173.5 billion as the price of foreign petroleum retreated further from record levels that had been hit after hurricane-related shutdowns of Gulf Coast production.
Analysts were encouraged by the fact that U.S. exports posted their biggest increase in seven months, with strength shown not just in aircraft sales but also in consumer goods and autos, which both set records.
David Huether, chief economist for the National Association of Manufacturers, said adjusting for inflation, exports rose 7 percent through the first 11 months of 2005 while imports increased by a slightly slower 6.6 percent. He said this showed the dollar's decline from its most recent peak in early 2002 was helping to make U.S. goods more competitive on world markets.
Mark Zandi, chief economist at Moody's, said if oil prices keep retreating and Japan and Europe continue to show a rebound in economic growth, the U.S. trade deficit may finally start to show sustained improvement.
"I am guardedly optimistic that we may be seeing the worst of our trade problems," he said.
Even with November's 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.
The deficit with China narrowed by 9.9 percent to $18.5 billion. It was the first drop after seven consecutive monthly increases and reflected declines in imports of toys and games, clothing and other consumer products after a surge in those categories as U.S. retailers stocked their shelves for Christmas.
Democrats point to the soaring trade deficits to bolster their arguments 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 nearly 3 million U.S. manufacturing jobs since mid-2000 on trade liberalization policies that have allowed U.S. companies to move factories overseas and a failure of the U.S. government to crack down on other countries' unfair trade practices.
"The United States can no longer allow China to use predatory trade practices to destroy U.S. jobs and factories," said Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition.
His group, which represents U.S. textile manufacturers, prodded the Bush administration to reach a comprehensive deal with China last year to limit a flood of Chinese imports of clothing and textiles.
The deficit with China is expected to surpass $200 billion for all of 2005, far above last year's record of $162 billion, adding to the pressure on Congress to pass legislation imposing across-the-board tariffs on Chinese products unless China does more to allow its currency to rise in value against the dollar.
American manufacturers contend China is unfairly depressing the value of its currency by as much as 40 percent to gain unfair trade advantage against American producers.
China announced 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., on a visit to China this week, called the U.S.-China trade gap a "major irritant" in relations between the nations and urged China's government to do more to address the problem.
America's deficit with Canada declined to $7.5 billion in November, down 8.3 percent from October, while the deficit with Europe dropped 13 percent to $12.6 billion.
--- On the Net: Trade report:

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