- The Washington Times - Friday, November 18, 2005

The U.S. trade deficit has steadily increased in recent years. In 2004 it totaled $618 billion (5.3 percent of GDP), which reflected an increase of more than $500 billion per year from its 1997 level of $108 billion (1.2 percent of GDP). Throughout this period, observers have become accustomed to record-breaking figures. But even the most trade-data-jaded among us had to take a step back and simply marvel at the sheer magnitude of the numbers in the Commerce Department’s recent international-trade report for September. Here’s why.

The trade deficit in September reached the once-unfathomable level of $66.1 billion. Yes, oil prices soared that month, and America imports a lot of petroleum. But consider this: Oil prices were high in 1979, 1980 and 1981; yet, for that entire three-year period, America’s cumulative trade deficit was $6 billion less than September’s $66.1 billion deficit.

The September trade imbalance shattered the previous monthly record ($60.1 billion in February) by nearly 10 percent. Commentators cited several unique factors — a Boeing strike which reduced aircraft exports, hurricane-related shipping problems which affected exports from Gulf Coast ports — that contributed to the deficit’s explosion. In the grand scheme of trade, however, these factors are nickels and dimes. As recently as November 2003, the trade deficit was less than $40 billion. Overwhelmed by the underlying trends, these supposedly unique factors will be soon forgotten as September’s record is overtaken by yet another. The trade deficit moves by leaps and bounds in only one direction.

September’s $66.1 billion deficit represented the difference between total exports of $105.2 billion and total imports of $171.3 billion. The September imbalance also represents the difference between a $71.1 billion deficit in goods — oil, vehicles, capital goods, consumer products and the like — and a $5 billion surplus in services.

The September and year-to-date trade deficits with China were $20.1 billion and $146.3 billion, respectively. Comparable trade-deficit figures with other nations are as follows: Japan ($6.4 billion in September, $61.2 billion year-to-date); Canada ($7.4, $52.6); Germany ($3.5, $37); Mexico ($4.3, $36.5); Venezuela ($2.7, $20.8). September and year-to-date deficits by organization or region, some of which overlap with one another and with previous figures, are as follows: OPEC ($9.1, $67.9); NATO allies ($15.1, $119.8); Euro area ($7.2, $67.4); Europe ($12, $105.2); Asia-Pacific Economic Cooperation/APEC ($45.5, $352); South/Central America ($5, $37.2).

For the first nine months of 2005, the U.S. trade deficit has been running at an annual rate of $730 billion, which is 18 percent higher than the 2004 deficit ($618 billion), which was 25 percent higher than the 2003 deficit ($495 billion), which was 17 percent higher than the 2002 deficit ($421 billion), which was 16 percent higher than the 2001 deficit ($363 billion), which was … nearly 250 percent higher than the 1997 deficit ($108 billion).

For the January-September 2005 period, total imports ($1,473 billion) exceeded total exports ($943 billion) by 56 percent. Thus, in order to prevent the trade deficit from expanding from its current annual rate of $730 billion (5.9 percent of GDP), exports will have to grow 56 percent faster than imports. Not likely.

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