Trade Deficit Hits Record and Fans Debate on China
Just in time to bolster arguments on both sides of the China trade debate, the Commerce Department reported Friday that the overall U.S. trade deficit hit an all-time high of $30.2 billion in March while the chronic deficit with China ran 22.8% higher in the first three months of 2000 than it had a year ago.
The overall figures showed a surge in two-way trade, with both exports and imports setting records in March. The bill for foreign oil, pushed up by soaring prices, swamped increases in U.S. exports of farm products and automobiles.
In trade with China, imports topped exports by $5.1 billion. While that monthly deficit was down 9.3% from February, the deficit for the first quarter of the year was far above the level a year earlier.
Backers of the Clinton administration’s legislation to give China permanent normal trade relations argue that passage of the bill will require Beijing to open its markets to more imports from the United States, something they say will eventually shrink the overall U.S. trade deficit.
Opponents of the bill maintain that China already is taking unfair advantage of U.S. markets, and could only be expected to further exploit its trade relationship with permanent normal status.
In Beijing on Friday, China and the European Union signed a bilateral agreement intended to lower trade barriers on both sides.
A similar trade pact between China and the United States is conditional on Congress approving the permanent normal trade relations bill. Supporters of the legislation argue that if the measure fails, the U.S. would be at a strong disadvantage in terms of exports to China.
Although many have traditionally viewed exports as a favorable factor and imports as an unfavorable one for a nation, some economists say the current import boom has insulated the United States from the sort of inflation that might otherwise be expected at this stage of the business cycle.
“A lot of this works to our benefit,” said Claude E. Barfield, coordinator of trade policy studies at American Enterprise Institute, a Washington-based libertarian think tank. “The United States is still seen as the prime place to invest.”
The influx of foreign money into the U.S. stock markets has driven up the value of the dollar.
A strong dollar in turn encourages imports by making them less expensive for American consumers while slowing U.S. exports by making them more costly to other nations.
“The strong dollar has kept inflation down,” Barfield said. “The imports have kept inflation down. We are at more or less full employment,” he noted, a condition usually accompanied by sharply rising prices.
In March, U.S. exports rose 2.9% to $87.3 billion, the highest level on record. The increase included big gains in sales of autos and parts, computer chips, telecom equipment and industrial machinery.
But imports grew by an even greater amount--3.5%--to a record $117.4 billion. The increase was led by large gains in imported oil, foreign autos and auto parts, and aircraft.
Crude oil accounted for $7.6 billion of the import tab, as the average price rose to $26.38 a barrel, the highest level since November 1990 during the Persian Gulf crisis.
At $6.8 billion, the U.S. trade deficit with Japan was higher than with any other country. The figure was 1.4% higher than the February total and the largest deficit since December, when imports from Japan topped U.S. exports by $7 billion. For the first three months of the year, the gap was 16.5% above the same period last year.
The deficit with Canada, the largest U.S. trading partner, hit $3.85 billion, while the gap with Mexico was $1.9 billion, with both exports and imports at record levels.
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CHINA-EU ACCORD
China and the EU struck a landmark trade pact, encouraging backers of a similar bill in the U.S. A1
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U.S. Trade Deficit
The U.S. trade report for March reflects the difference between $117.4 billion in imports and $87.3 billion in exports. Monthly deficits, in billions:
March:
--$30.2 billion
Source: Commerce Department
