- The Washington Times - Tuesday, February 13, 2007

ASSOCIATED PRESS

The U.S. trade deficit set a record for the fifth straight year in 2006, reflecting a huge jump in America’s foreign oil bill and a record imbalance with China. The year ended with the December deficit increasing more than had been expected.

The Commerce Department reported today that the gap between what the U.S. sells abroad and what it imports rose to a record $763.6 billion last year, a 6.5 percent increase from the previous record of $716.7 billion set in 2005. For December, the deficit rose a bigger-than-expected 5.3 percent to $61.2 billion.

The Bush administration attributed the string of deficits to the United States outpacing other countries in terms of economic growth. Officials said President Bush would continue to pursue a strategy of opening foreign markets to U.S. goods rather than erecting protectionist barriers to keep out imports.

“Our focus is on growing our exports, growing our economy, reducing our unemployment and keeping inflation in check,” Commerce Secretary Carlos Gutierrez said.

But House Speaker Nancy Pelosi of California and other top Democrats sent Mr. Bush a letter urging him to work with Democrats to craft a new trade strategy to deal with the exploding deficits.

“The consequences of these persistent and massive trade deficits include not only failed businesses, displaced workers, lower real wages and rising inequality, but also permanent devastation of our communities,” the Democrats said in their letter to Mr. Bush.

The Democrats noted that more than 3 million manufacturing jobs have been lost since Mr. Bush took office with about one-third of those losses attributed to the rising deficit in manufactured goods.

The latest trade gap comes at a critical time for Mr. Bush, who faces the challenge of convincing Congress to extend the authority he needs to strike new free-trade agreements with individual countries and pursue a global trade pact.

The current fast-track trade promotion authority expires July 1, and Democrats say it will not be renewed without greater protections for U.S. workers in the area of labor rights and the environment.

The new trade report showed that the deficit with China shot up 15.4 percent last year to total $232.5 billion, the largest imbalance ever recorded with any country. China surpassed Japan as the country with the largest trade gap with the United States in 2000 and has held the top spot since.

China reported this week that its surplus with the world increased in January by 67 percent from the same month a year ago.

American manufacturers contend China is unfairly manipulating its currency to keep it undervalued against the dollar by as much as 40 percent, which makes Chinese goods cheaper in the United States and U.S. products more expensive in China.

Treasury Secretary Henry M. Paulson Jr. has told Congress that a new high-level dialogue with China holds the best prospects for convincing the Chinese to move more quickly to revalue their currency. Today he announced that he has appointed a new deputy to oversee high-level talks and would set up a telephone hot line connecting him with Chinese Vice Premier Wu Yi.

However, critics charge that tougher action, including the threat of economic sanctions, will be needed to force China to move.

Economists believe that the worst may be over in terms of a deteriorating trade deficit. The 6.5 percent rise in the deficit for 2006 followed much larger percentage gains of 17.3 percent in 2005 and 23.5 percent in 2004.

The biggest factor in last year’s increase was a surge in America’s foreign oil bill, which rose to a record $302.5 billion as the average price of a barrel of crude oil rose to an annual high of $58, reflecting a big jump last summer that pushed oil briefly above $77 per barrel.

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