- The Washington Times - Friday, February 21, 2003

The United States recorded the largest trade deficit in its history during 2002 as the American economy continued to demand foreign goods while U.S. exporters found weak overseas markets, according to figures released yesterday.
The U.S. trade deficit for goods and services reached $435.2 billion for 2002, up 21.5 percent from 2001, the U.S. Commerce Department said yesterday.
The record-breaking trade deficit reflects stronger growth in the United States than overseas.
The United States' major trade partners, with the exception of China, have seen poor economic growth. But they are still sending goods to the United States, even though they are buying less.
The U.S. trade deficit with the 15-nation European Union grew by 34 percent. And while Japan sent $5 billion less in goods to America last year, it bought $6 billion less.
U.S. Treasury Secretary John W. Snow said he would raise concerns about the lack of growth in Europe and Japan this weekend when he meets in Paris with finance ministers from the Group of Seven industrialized countries.
The Bush administration contends that trade spurs growth in overseas markets for U.S. goods and services, enhances opportunities for higher-paying American jobs, expands choices for American consumers, and promotes U.S. security interests.
Opponents of the free-trade policy contend it costs jobs.
U.S. sales of capital goods, mainly computer accessories, telecommunications equipment and semiconductors, fell by $31.1 billion from 2001. Exports of industrial supplies and consumer goods also tailed off, while those of vehicles increased.
"If you look at details, virtually all of the decline was attributable to the export of capital goods. What that could mean is the global economies are weak and business investment worldwide is soft," said said Mickey D. Levy, chief economist for Bank of America.
U.S. imports of consumer goods, primarily pharmaceuticals, household goods, televisions, VCRs, furniture and apparel, increased the most. Food and beverage, and vehicle imports also jumped.
The U.S. recorded its biggest trade deficit with China. The gap reached $103.1 billion, even as U.S. exports to that country grew. U.S. firms sold more aircraft, semiconductors, fertilizers, industrial machines and chemicals to China, while China registered a surge in sales of computer accessories, toys, games, electronics and furniture.
The next biggest trade deficits were with Japan and Western Europe.
The figures are likely to worsen if the U.S. economy recovers or at least continues to grow more quickly than those of our major trading partners, said Charles Pearson, head of the economics department at the Johns Hopkins School of School of Advanced International Studies.
"I think we're in a particularly vulnerable position with regard to foreign trade. We're at the bottom of the [economic] cycle and when recovery comes, that means sucking in more imports," he said.
While China's economy is growing steadily, Japan and Europe are faring poorly.
The U.S. economy grew slowly during the past three months of 2002, according to preliminary Commerce Department figures. The projected 0.7 percent annual growth rate for the fourth quarter is likely to be revised down because of the trade numbers, Mr. Levy said.
The United States pays for the trade deficit by importing capital; that is, foreigners have to invest in the United States.
Economists do not agree whether the trade gap is bad news or unimportant. Mr. Levy said that overseas capital financing the trade deficit is not "destabilizing or bad."
Mr. Pearson said that if overseas investors lose interest in the United States and stop funding the deficit, the value of the dollar would spike and interest rates would rise, hurting the economy.

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