Trade deficit narrows slightly
WASHINGTON (AP) – The United States recorded a $38.03 billion trade deficit in September, the second highest on record, reflecting a surge in demand for foreign cars and airplanes. The Commerce Department said the September deficit was down $254 million from the all-time high of $38.28 billion set in August, disappointing economists who had been looking for a bigger decline in the deficit of around $1 billion.
The 0.7 percent decline in the overall deficit from the August record reflected the fact that imports dropped by 0.5 percent, mainly because the volume of oil shipments was down sharply. This decline helped to offset a 0.4 percent drop in U.S. exports, which suffered from weaker demand for U.S. autos and auto parts and computer chips. Even with the small improvement, the deficit for the first nine months of this year is running at an annual rate of $423 billion, on track for the worst trade performance in U.S. history, surpassing the previous record of $378.68 billion. Last year, the deficit had improved slightly as the country’s first recession in a decade dampened demand for imports.
The Bush administration, like the Clinton administration before it, had insisted that the way to attack the trade deficit is to tear down foreign barriers that are preventing sales of American farm products and manufactured goods on overseas markets.
President Bush won a large victory in this area in August when Congress passed the authority he will need to negotiate new trade deals, including an agreement to create the world’s largest free trade zone, covering 34 nations in the Western Hemisphere.
Bush has also embarked on an ambitious schedule to negotiate individual free trade agreements with countries stretching from Central America to Australia.
A breakthrough in this effort was announced Tuesday with trade negotiators representing the United States and Singapore saying they had completed the bulk of a free trade agreement between the two countries and hoped to sign the deal early next year.
Critics of the administration’s trade policies contend that U.S. workers need to be protected from unfair foreign competition from countries with lax environmental laws and pay scales far below the wages earned by American workers.
“The United States continues to lose ground in the global marketplace – just ask the workers who used to hold some of the 2 million jobs we’ve lost in the last two years,” said Rep. Sherrod Brown, D-Ohio.
American manufacturers, who have seen employment fall every month for more than two years, said that the new figures showed that exports, which have fallen for two straight months, are now being hurt not only by an over-valued dollar but by a slowdown in global growth. “Today’s trade numbers show that one of the main ingredients needed for a sustained manufacturing recovery, significant export growth, is not in the mix right now,” said David Huether, chief economist for the National Association of Manufacturers.
Analysts have attributed the big surge in the trade deficit in the past two months to the impact of the West Coast dock shutdown, which prompted many importers to speed up orders in an effort to get goods into the country in advance of the work stoppages.
For September, imports of foreign goods and services fell by 0.5 percent to $120.19 billion. This improvement reflected a big decline of 12.3 percent in shipments of imported oil, which totaled $5.76 billion in September.
Partially offsetting the drop in the foreign oil bill was an increase in shipments of foreign autos and auto parts which rose by 1.8 percent to $17.9 billion. Demand for foreign-made aircraft was up by a sharp $249 million to $951 million in September.
U.S. exports of goods and services dropped by 0.4 percent in September to $82.16 billion. U.S. exports of American cars and auto parts were off by 1.8 percent while sales of American farm products rose by 0.6 percent to $4.06 billion, reflecting higher shipments of nuts, animal feed and oilseeds.
For September, the largest U.S. trade imbalance was with China, a deficit of $10.27 billion, the second highest on record, followed by a $5.85 billion deficit with Japan.
The deficit with Canada, America’s largest trading partner, rose 11.7 percent to $4.6 billion, the highest level since February 2001.
The deficit with Mexico, the other member of the North American Free Trade Agreement, declined by 15.2 percent to $2.95 billion.