- The Washington Times - Saturday, March 14, 2009

U.S. exports and imports both fell for the sixth month in a row in January, narrowing the trade deficit. That trend intensified concerns over the collapse of world trade as finance ministers convened in London ahead of the April 2 global economic summit there.

Paced by a 25 percent plunge in the price of oil, imports plummeted 6.7 percent in January. U.S. monthly imports now have declined 30 percent to $161 billion from a July peak of $230 billion. Over the same period, exports have fallen $43 billion, or 25 percent, to $125 billion.

Because imports have been falling faster than exports, the U.S. trade deficit has narrowed for a record sixth consecutive month. January’s trade deficit of $36 billion was the lowest in six years. It was $26.5 billion below the $62.5 billion deficit in July, when the average cost of imported oil was $125 a barrel. Crude-oil imports in January cost less than $40 per barrel.

“The key takeaway from January’s trade report is not that the deficit narrowed but that world trade activity continues to plunge,” said Nigel Gault, chief U.S. economist for IHS Global Insight.

Earlier this week, the World Bank forecast that global trade this year will fall for the first time since 1982 and by the steepest amount in 80 years. Worldwide economic output will decline in 2009 for the first time since World War II, the bank projected.

The Institute of International Finance, a global association of large financial institutions, projected Friday that in 2009 “global growth will be close to negative 2 percent - a remarkable swing from solid growth of over 3.5 percent in 2006-07.”

“Many foreign economies have been hit even harder by the recession than the U.S., and we are seeing severe consequences for U.S. exporters,” Mr. Gault said. In recent weeks, both Boeing and Caterpillar, two major U.S. manufacturing exporters, announced layoffs as foreign demand continued to shrink.

The U.S. manufacturing industry shed 3.4 million jobs during the 2001-2007 period, and it has lost an additional 1.3 million jobs since the recession began in December 2007. That has exacerbated U.S. protectionist pressures, which are especially aimed at China.

But China has concerns of its own. It holds an estimated $1 trillion of U.S. government debt and is expected to finance part of America’s trillion-dollar annual budget deficits over the next few years, including the $787 billion economic stimulus.

“Of course we are concerned about the safety of our assets. To be honest, I am a little bit worried,” Chinese Premier Wen Jiabao said in Beijing Friday. Fearing that America’s soaring budget deficit and still-sizable trade deficit could drive down the value of the dollar, Mr. Wen said, “I would like to call on the United States to honor its words, stay a credible nation and ensure the safety of Chinese assets.”

Chinese President Hu Jintao will meet in early April with President Obama at the upcoming Group of 20 summit in London, where protectionism and global trade imbalances will be major topics.

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