- The Washington Times - Friday, June 9, 2006


The trade deficit is rising again after two months of declines, pushed by surging oil prices and a flood of imports from China. Analysts warned that global oil prices above $70 per barrel will swell the deficit more in coming months.

The Commerce Department reported yesterday that the gap between what the United States sells abroad and what it imports rose to $63.4 billion in April, 2.5 percent higher than the March imbalance of $61.9 billion.

The trade deficit fell in both February and March after hitting a record high of $66.2 billion in January.

While economists noted that the April deficit was smaller than the $65 billion that had been expected, it was still the sixth-largest imbalance on record. They said deficits in coming months were likely to be worse, given the jump in global crude oil prices.

The April deterioration in the deficit came from a $1.44 billion increase in the U.S. foreign oil bill, which rose to $23.8 billion. That reflected a big jump in crude oil prices that overwhelmed a drop in volume. Oil traded yesterday at $71.45 per barrel in New York, up $1.10 from the previous day. Oil hit a record high of $75.17 in late April.

Through the first four months of this year, the trade deficit is running 12.9 percent above a year go, putting the country on track to run up a record trade deficit for a fifth straight year. Last year’s deficit was $716.7 billion.

Critics of the Bush administration’s trade policies seized on the new imbalance as further evidence that President Bush’s strategy of striking free-trade deals with countries around the world was not working and was contributing to the loss of nearly 3 million manufacturing jobs since he took office.

“These figures are a jarring reminder that our nation needs a new approach to its trade policy,” said Rep. Benjamin L. Cardin of Maryland, the top Democrat on the House Ways and Means trade subcommittee.

Sen. Byron L. Dorgan, North Dakota Democrat, said that the new deficit figure highlighted the “total failure of U.S. trade policy” and showed that the country was handing over $2 billion a day to foreigners to cover the trade gap.

But new U.S. Trade Representative Susan Schwab said the country’s trade picture was “much less dire” than critics were contending. She noted that the overall economy is performing strongly with unemployment dropping to 4.6 percent in May, the lowest jobless rate in nearly five years.

The increase in the April trade deficit reflected a 0.7 percent rise in imports, which climbed to $179.1 billion, the second-highest level on record.

In addition to a higher oil bill, imports of autos and auto parts were up and shipments of consumer goods from China of such items as furniture, televisions, video recorders and toys rose.

That helped to push America’s total deficit with China to $17 billion in April, up a hefty 9.4 percent from March. That was likely to add to pressure in Congress to force China to revalue its currency as a way of helping narrow the deficit.

American manufacturers contend China’s currency is undervalued by as much as 40 percent, making Chinese goods cheaper for U.S. consumers and American products more expensive in China.

Some analysts said Treasury Secretary nominee Henry M. Paulson Jr. likely will face tough questioning on the administration’s approach to China during his upcoming Senate confirmation hearings.

U.S. exports of goods and services slipped 0.2 percent to $115.7 billion, just slightly below the record high set in October, reflecting a $310 million drop in commercial aircraft shipments and smaller declines in sales of farm products and consumer goods.

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