- The Washington Times - Sunday, February 23, 2003

Amid efforts to resolve differences over the foreign-policy crises in Iraq and North Korea, the finance ministers from the G7 countries have been meeting this weekend in Paris. Beyond the major foreign-policy splits, there are more than enough problems on the economic front for these money mavens to address.
America's trade report, released Thursday, revealed that the United States incurred a record monthly trade deficit for December and a record annual deficit for 2002 much of it with America's G7 allies. In his debut, newly confirmed U.S. Treasury Secretary John Snow would do well to review the details with his G7 colleagues.
Germany's economy likely crawled forward at a minuscule pace of 0.2 percent last year, and it now may be in recession, a development that would move its 10.3 percent unemployment rate in the wrong direction. France probably grew by no more than 1 percent in 2002, a rate expected to increase by an equally paltry 0.5 percent this year. Italy's economy expanded by 0.4 percent last year, a rate that is projected to accelerate to a feeble 1.2 percent in 2003. The expected growth rates in France and Italy, if they come to fruition, will unlikely prevent their unemployment rates from piercing the double-digit level.
Meanwhile, against widespread expectations to the contrary, deflation-afflicted Japan managed last quarter to avoid falling into its fourth recession in 10 years. Nevertheless, the outlook for Japan's economy still has recession written all over it. Among the G7, Canada had the best year in 2002, as its economy grew by an estimated 3.3 percent. And its growth rate is expected to remain above 3 percent this year.
The euro-area economy, were it so inclined, is big enough to act as locomotive to the world economy, as is the mostly overlapping European Union. But the estimated growth of the euro-area last year was a mere 0.7 percent. And it will almost certainly grow by less than 1.5 percent this year. No traction there.
Traditionally, the United States has assumed the role of locomotive. Not only is it big enough to do the job, but its massive market is one of the most open in the world. At no time has this been more evident than now. In fact as the latest trade report demonstrates and as Mr. Snow should emphasize the U.S. economy has been shouldering the lion's share of responsibility for keeping the economies of its trading partners above water. In 2002, the U.S. trade deficit in goods and services totaled a record $435 billion, reflecting a 21.5 percent increase over the previous year. The annual increase in the goods deficit alone $90 billion, adjusted to 1996 constant dollars reduced the U.S. economic growth rate by a full percentage point last year, from a potential 3.4 percent to a realized 2.4 percent.
The beneficiaries of the U.S. open market were as varied as they were numerous. Last year: China enjoyed a $103 billion trade surplus with the United States; Japan, $70 billion; Canada, $50 billion; Mexico, $37 billion; Germany, $35 billion; South Korea, $13 billion; France, $9 billion; United Kingdom, $8 billion. Also: NATO allies, $136 billion; European Union, $82 billion; 20 selected Latin American countries, $57 billion; Pacific Rim nations, $215 billion; North America (Canada and Mexico), $87 billion.
In short, the recent poor performances by the economies of America's geopolitical allies and many of its other trading partners would have been far worse were it not for America's role as marketplace for the world. Surely, that counts for a lot.

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