Posted on 12/14/2005 9:35:14 AM PST by Willie Green
For education and discussion only. Not for commercial use.
WASHINGTON - The U.S. trade deficit unexpectedly rose to an all-time high in October as oil shipments soared and the United States set deficit records with China, Europe, Canada and Mexico.
The Commerce Department reported that the gap between what America sells overseas and what it imports rose by 4.4 percent in October to $68.9 billion, surpassing the old record of $66 billion set in September.
So far this year, the trade deficit is running at an annual rate of $718 billion, far surpassing last year's $617.6 billion imbalance. Critics say the soaring deficit is evidence that President Bush's policy of pursuing free trade deals around the world is not working.
To counter the attacks, the administration has stepped up pressure on Europe and Japan to boost economic growth as a way of increasing demand for U.S. exports. It is also pressuring China on a number of trade issues, from textile imports to the country's currency, which American manufacturers say is being manipulated to give Chinese producers unfair trade advantages.
But lawmakers from both parties criticized the administration's approach as too tentative, saying the new deficit figure highlighted the threat to American jobs.
"Small business owners in Maine and across the nation are fighting to remain competitive with countries such as China that flagrantly disregard fair trade practices," Sen. Olympia Snowe, R-Maine, said in a statement.
Rep. Benjamin Cardin of Maryland, the top Democrat on the House Ways and Means trade subcommittee, said the administration had "failed to craft an effective strategy to deal with China's unfair trading practices."
Presidential spokesman Scott McClellan told reporters at the White House that the administration believed the best approach was to tear down barriers to American exports through free trade agreements and global trade negotiations under way this week in Hong Kong.
The deterioration of the deficit in October caught analysts by surprise. They had been forecasting that the imbalance would improve, reflecting a fall in global oil prices.
The average price per barrel of imported oil did decline slightly to $56.29, down from an average of $57.32 in September, but the volume of shipments shot up to 9.8 million barrels per day. The total bill for imports in October hit a record of $25.8 billion, up 7.8 percent from September.
A surge of Chinese shipments of televisions, toys and computers pushed America's deficit with China to a new monthly record of $20.5 billion. Through October, the deficit with China is running at an annual rate of $200 billion, far exceeding last year's imbalance of $162 billion, which had been the biggest deficit ever recorded with a single country.
On recent trips to China, both Bush and Treasury Secretary John Snow have lobbied Chinese officials to provide greater flexibility for their currency, the yuan, to find its proper value in relation to the U.S. dollar. American manufacturers contend that the Chinese are artificially depressing the yuan's value by as much as 40 percent as a way to make Chinese goods cheaper in relation to U.S. products.
While the Chinese did allow the yuan to rise by 2.1 percent this past summer, the currency has been essentially unchanged since that time.
The administration did reach an agreement recently to re-impose quotas on a wide range of clothing and textile products to stem what had been a flood of imports this year since global quotas were lifted last January. For October, imports of Chinese clothing and textiles declined by 10.9 percent from September but for the first 10 months of this year, Chinese imports are up by 47.6 percent compared to the same period in 2004.
For October, imports of goods and services rose by 2.7 percent to an all-time high of $176.4 billion, led by the surge in oil shipments. U.S. exports also rose by a slower 1.7 percent to $107.5 billion.
Critics blame the soaring trade deficits for a loss of 3 million manufacturing jobs since mid-2000 and they argue that Bush's push to strike free trade agreements eliminating all trade barriers between the United States and other nations has opened American workers to unfair competition from low-wage countries.
The United States set deficit records with most of its major trading partners including a $12.1 billion imbalance with the 25-nation European Union, a $8.1 billion imbalance with Canada, the country's largest trading partner, and a record $4.8 billion deficit with Mexico.
TRADE DEFICIT: Formally termed a balance of trade deficit, a condition in which a nation's imports are greater than exports. In other words, a country is buying more stuff for foreigners than foreigners are buying from domestic producers. A trade deficit is usually thought to be bad for a country. For this reason, some countries seek to reduce their trade deficit by--
- establishing trade barriers on imports,
- reducing the exchange rate (termed devaluation) such that exports are less expensive and imports more expensive, or
- invading foreign countries with sizable armies.
ping
Patience my friend. One day when we are really into them, we'll attack. Or maybe not.
I see no problem with a large trade deficit? We still have infrastructure, we still have manufacturing capabilities, we just enjoy a more wealthy national lifestyle than countries like India and China who are experiencing the equivalent of turn-of-the-century America.
more good economic news masquerading as bad news.
I hope the deficit goes higher.
If trade deficits are so great, why don't we double them each year?
Give it time, we're trying the best we can.
Was your Nissan built in the U.S.?
The basic facts about international trade are not difficult to understand. What is difficult to untangle are all the misconceptions and jargon which so often clutter up the discussion ...
For example, the terminology used to describe an export surplus as a "favorable" balance of trade and an import surplus as an "unfavorable" balance of trade goes back for centuries. At one time, it was widely believed that an import surplus improverished a nation because the difference between imports and exports had to be paidin gold, and the loss of gold was seen as a loss of national wealth. However, as early as 1776, Adam Smith's classic, The Wealth of Nations argued that the real wealth of a nation consists of its good and services, not in its gold supply. Too many people have yet to grasp this, even in the 21st century.
If the goods and services available to the American people are greater as a result of international trade, then Americans are wealthier, not poorer, regardless of trade. As for gold, India had the world's largest supply of gold in 2003, but no one considered it the world's richest nation. Indeed it is one of the poorest.
Incidentally, during the Great Depression of the 1930's, the United States had an export surpluse - a "favorable" balance of trade - in every year of that disasterous decade ...
Or you could keep your money and listen to the rustle of bills in your wallet. That's if you think its better to have gold than goods.
Economists from Adam Smith to Milton Friedman have taught us that any decision to reduce imports involves a corresponding decision to reduce exports. We could reduce imports, but it would involve the economy falling into a recession.
Japan and Germany both have large trade surpluses. Would you prefer 15 years of Japanese deflation or Germany's 11% unemployment rate?
"Let London manufacture those fine fabrics of hers to her heart's content; let Holland her chambrays; Florence her cloth; the Indies their beaver and vicuna; Milan her brocade, Italy and Flanders their linens...so long as our capital can enjoy them; the only thing it proves is that all nations train their journeymen for Madrid, and that Madrid is the queen of Parliaments, for all the world serves her and she serves nobody."
(Prominent Spanish official - Alfonso Nunez de Castro in 1675)
I take it you work in something like finance.
"WASHINGTON - The U.S. trade deficit unexpectedly rose to an all-time high in October as oil shipments soared and the United States set deficit records with China, Europe, Canada and Mexico."
Anyone who calls an October increase in the dollar value of the trade defecit "unexpected" is a liar or a complete fool.
When do these morons think retailers are buying the goods they sell during the Christmas season?
A trade deficit is in general not something you want to have. We'd rather be having other people buy things from us. However, since we're by far the richest country on earth we're going to have a trade deficit.
The size of the trade deficit is a problem. It's a serious problem. However when the article starts off with an comment as stupid as an increase in the trade deficit in October being "unexpected", there's not likely much by the way of sueful or credible commentary to follow.
At this rate the deficit is running at an annual rate of 800 billion a year. That is too much. We are trading our future for spending now.
How about equal access to the Chinese market as they have here? Heck I'd settle to the same access to our own market as they have.
I take it you know little about manufacturing.
I think you meant to say that "A persistend multi year trade deficit that is an appreciable fraction of GNP is definitely not something you want to have.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.