- The Washington Times - Friday, December 17, 1999

World finance ministers Thursday urged a resumption of trade talks to ensure continued growth in the global economy amid news that the U.S. trade deficit ballooned to yet another monthly record in October.
Ministers of the new Group of 20 nations, which includes the world’s economic powerhouses and most populous countries, met in Berlin to discuss ways of preventing another global financial crisis like the one that threatened to plunge the world economy into recession a year ago.
But their focus turned to the trade talks that failed in Seattle on Dec. 3 as domestic politics and long-standing trade grievances overwhelmed attempts to widen trade in what some regard as potent a threat to globalization as any encountered during the financial crisis.
“People have concerns that globalization means governments won’t be able to protect them. These are legitimate concerns,” Canadian Finance Minister Paul Martin, chairman of the meeting, told a news conference. But he stressed that globalization “creates opportunities that will make people’s lives better.”
The group issued a statement underscoring “the importance of continued progress by the World Trade Organization toward multilateral liberalization of trade in goods and services,” which it said “would bring broad-based benefits to the global economy.”
Even as the group met, the Commerce Department reported that the U.S. trade deficit exploded to a monthly record of $25.9 billion and the politically sensitive deficits with both Japan and China both registered new highs of $7.2 billion.
Exports fell for a second month in a row, while imports from nearly every region of the world surged.
“The booming economy is sucking in goods from all over the world,” as it has since the global crisis knocked down the economies of most trading partners and made the United States the importer of last resort, said Joel Naroff of Naroff Economic Advisers in Holland, Pa.
While the U.S. economy has been able to sustain “unimaginably” high trade deficits so far because of its robust health, they are creating bigger political problems by the month, analysts say.
China and Japan appear to be “battling it out to see who can run the largest surplus with the United States,” Mr. Naroff said, only helping to fuel the critics of open-trade policies who thwarted the Seattle talks with angry street demonstrations.
International Brotherhood of Teamsters President James P. Hoffa cited the trade imbalances earlier this week as proof that the open-trade system has failed. He vowed that unions would “march on Washington” as they did in Seattle to defeat attempts to open up trade further with China this year.
“The U.S. trade deficit risks arming protectionists with another weapon to sway American public opinion against freer trade,” said Clyde Prestowitz, president of the Economic Strategy Institute. “But the reality is that a large part of the trade deficit is a result of structural barriers to trade across the globe,” which only trade talks can remedy.
“Rather than urging the dismantling of the World Trade Organization, we should be arguing for strengthening its institutional role to eliminate unfair trade practices,” he said.
Like many analysts, Mr. Prestowitz warned that the deficits cannot keep mounting indefinitely.
“No one can say with any level of certainty how long Americans can serve as consumers of last resort and absorb the world’s excess capacity,” he said. “At some point, this pattern must reverse and the ensuing adjustment may have a damaging effect on the global economy.”
Dan Griswold, associate director of the Cato Institute, said the huge trade deficits reflect the strength of the U.S. economy.
“We can run these enormous deficits because our consumers are flush with wealth and our economy is brimming with investment opportunities,” he said. “The coalition of anti-trade groups harping about the trade deficit should tell us just what it is they object to. Real wages are rising across the board. Unemployment is at a 30-year low. Inflation is dormant.”

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