Oil prices, imports spur trade deficit to a record

ASSOCIATED PRESS

Rising oil prices and Americans' seemingly insatiable appetite for foreign goods -- from Chinese clothing to French wine and Japanese cars -- pushed the trade deficit to another record.

The Commerce Department reported yesterday that the deficit jumped to $68.5 billion in January, 5.3 percent more than in December. Analysts had expected the trade gap to worsen, given the surge in world oil prices, but the increase caught them by surprise.

"[Americans] shopped the world's markets until we dropped," said Joel Naroff, chief economist at Naroff Economic Advisors. "We bought a lot more of everything, including capital and consumer goods, foods and motor vehicles."

Analysts said that unless demand for imported goods slows, the United States could reach a record annual deficit for the fifth year in a row, topping last year's imbalance of $723.6 billion.

Critics contended the January deficit showed the failure of President Bush's free-trade policy that has contributed to the loss of nearly 3 million U.S. manufacturing jobs.

"The American people need a Congress and an administration that will get tough on trade policy to rein in these runaway deficits," said Rep. Benjamin L. Cardin of Maryland, the top Democrat on the House Ways and Means subcommittee on trade.

The Clinton administration filed on average 11 unfair-trade cases per year before the World Trade Organization, he said, while the Bush administration has filed only 13 cases in more than five years in office.

The trade report showed that the deficit with China jumped by 9.9 percent, to $17.9 billion, in January. The increase reflected a big rise in shipments of Chinese cell phones, clothing, textiles and shoes to the United States.

America's $202 billion deficit with China last year was a record for a single country. Many members of Congress want to penalize Chinese imports unless Beijing stops what the critics believe are violations of global trade rules.

"China has been trading unfairly since it joined the World Trade Organization in 2002 and the administration has done nothing about it," said Sen. Byron L. Dorgan, North Dakota Democrat.

The overall deficit in January surpassed the record of $67.8 billion set in October.

U.S. exports of goods and services rose 2.5 percent to an all-time high of $114.4 billion. But this increase was swamped by a 3.5 percent rise in imports, which also set a record at $182.9 billion.

U.S. exports of industrial supplies, capital goods and autos all set records in January as American producers benefited from a rebound in economic growth in Europe and Japan.

Japan yesterday dropped its five-year policy of keeping interest rates at rock-bottom levels. The move was seen as dramatic evidence that Japan finally has defeated the deflationary pressures that had severely depressed growth.

The rise in imports to the United States reflected a 4.3 percent increase in America's foreign oil bill. It climbed to $24.6 billion as an increase in crude oil prices to $51.93 per barrel offset a drop in the volume of shipments in January.

Imports of foreign cars and auto parts rose by 5.6 percent to $22.7 billion. Imports of foreign food products rose by 6.2 percent to $6.4 billion, reflecting increased demand for imported wine and other foods.

Some analysts worried about the sizable and widespread increases in imports of manufactured goods and what that might be saying about America's competitive standing.

"The January trends spotlight the continued decline of national competitiveness in industries of the future such as high tech," said Alan Tonelson, a research fellow with the U.S. Business and Industry Council, a manufacturing trade group.

America's deficit with Canada, its largest trading partner, jumped 11.1 percent, to a record $8.9 billion. The deficit with Mexico was up 8.8 percent, to $4.6 billion. The deficit with the 25-nation European Union declined by 3.8 percent, to $9.7 billion.

America's deficit with India shot up by 61.3 percent in January to $1.26 billion. Seeking to address growing anxiety about the loss of service-sector jobs to India, Mr. Bush said on a visit to that country last week that the answer was not new protectionist barriers but better education to train Americans for 21st-century jobs.

The administration has continued to pursue free-trade agreements as a way of lowering barriers to U.S. exports, announcing this week that it will soon start talks with Malaysia.