- The Washington Times - Friday, May 12, 2006

ASSOCIATED PRESS

The U.S. trade deficit has declined for two months in a row for the first time in more than two years. The main reasons: record U.S. exports and a big drop in the country’s foreign oil bill.

The trade gap narrowed to $62 billion in March, the smallest deficit in seven months, the Commerce Department reported yesterday. It was down from a $65.6 billion imbalance in February and an all-time high of $68.6 billion in January.

It marked the first consecutive monthly improvements in the deficit since October-November 2003 and offered hope that the country’s trade deficits, which have set records for four straight years, may be on the verge of improving.

But private economists, who had expected the March deficit to rise to $67 billion, cautioned that the change will not come overnight. They said the monthly deficit numbers were likely to worsen again in coming months, reflecting the recent surge in oil prices, before steady improvements start at the end of the year.

“Oil prices are likely to remain high and move up during the summer. But after that, we may see some sustained declines in the trade deficit,” said Nariman Behravesh, chief economist at Global Insight, a private forecasting firm.

Through the first three months of this year, the trade deficit was still running at an annual rate of $785 billion, up 8.4 percent from last year’s record high of $723.6 billion.

The politically charged deficit with China rose by 12.5 percent in March to $15.6 billion even though U.S. exports to China hit an all-time high, led by a big jump in sales of commercial airplanes.

The March deficit, the lowest monthly imbalance since a gap of $58.5 billion last August, reflected a 1.9 percent rise in U.S. exports of goods and services, which hit a record of $114.7 billion.

The increase in exports was attributed to stronger overseas growth, which has boosted demand for American exports, and a weaker dollar versus other currencies, which makes U.S. goods cheaper and more competitive on foreign markets.

In March, some of the biggest export gains were recorded for generators, industrial machinery, computers and farm products including corn and soybeans.

Imports of goods and services fell for a second straight month, dropping by 0.8 percent to $176.7 billion. Imports of foreign cars fell by $751 million and petroleum imports dropped an even larger $2.1 billion to $22.5 billion, the lowest level since July, as crude oil prices dropped.

However, the oil bill is expected to rise again in coming months, reflecting crude oil prices that hit a record above $75 per barrel in late April.

Administration critics contend the president has not done enough to fight unfair foreign trade practices in China and other countries, which they say have contributed to the loss of nearly 3 million manufacturing jobs since President Bush has been in office and heightened anxiety among white collar workers about the outsourcing of service jobs.

Administration officials contend that globalization cannot be stopped without erecting costly protectionist trade barriers that would raise prices for American consumers and harm the U.S. economy.

The administration refused this week to brand China a “currency manipulator” in a semiannual report to Congress, disappointing American manufacturers who argue that China is keeping its currency unfairly low against the dollar to make Chinese goods cheaper in the United States and U.S. goods more expensive in China.


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