U.S. trade deficit report prompts calls for reforms

WASHINGTON -- The annual U.S. trade deficit soared to its fifth consecutive record last year, the Commerce Department announced Tuesday, adding fuel to a movement in Congress to remake U.S. trade policy.

The Democrats who control Congress, particularly those who campaigned against free trade, called on the Bush administration to remedy a trade deficit that they blame for “failed businesses, displaced workers, lower real wages and rising inequality.”

They said the trade deficit, which rose by $47 billion last year to $764 billion, had destroyed one-third of the 3 million U.S. manufacturing jobs that had disappeared since 2000. For December, the deficit rose 5.3%, to $61.2 billion.

Members of the administration found themselves on the defensive despite the strong domestic economy, saying their policies and in particular free trade pacts had stimulated exports and foreign investment.

Commerce Secretary Carlos M. Gutierrez, traveling in India, issued a statement noting that despite the ever-widening trade gap, U.S. companies sold more goods and services abroad last year than ever before thanks to trade agreements dating back to the North American Free Trade Agreement.

Rep. Jim Saxton of New Jersey, the top Republican member of the Joint Economic Committee, attributed the U.S. trade gap to strong economic growth, which lets the United States consume more than most of its trading partners.

Saxton supports the administration’s request that Congress extend the administration’s authority to negotiate trade agreements beyond June 30, when it is due to expire.

But leading Democrats have vowed to block the trade authority, as well as individual free trade pacts. Speaker Nancy Pelosi of San Francisco and Ways and Means Committee Chairman Charles B. Rangel of New York were among 15 House Democrats who called on the administration Tuesday to instead enforce existing trade agreements designed to guarantee fair treatment to U.S. companies.

In particular, they called on the administration to stop China and Japan from maintaining artificially low currency values, thus allowing their goods and services to sell for bargain prices on international markets. They also urged the administration to complain to the World Trade Organization about China’s violations of the rights of U.S. patent and copyright holders.

In the Senate, Finance Committee Chairman Max Baucus (D-Mont.) issued a statement urging “tough action to open markets and make sure our trading partners play by the rules.” The Finance Committee has jurisdiction over most trade legislation.

Rep. Byron Dorgan (D-N.D.), chairman of the Senate Commerce subcommittee on trade, will hold hearings today on his legislation that would bar the sale in the United States of goods made in foreign “sweatshops.” He and two other senators, Sherrod Brown (D-Ohio) and Lindsey Graham (R-S.C.), introduced legislation that would withdraw China’s “permanent normal trade relations” status.

“What do you tell the company in Toledo that’s closing because of competition with China? What do you tell the worker in Toledo who’s losing their job?” Brown said.

The biggest legislative donnybrook this year is likely to be over Bush’s request that Congress extend his “trade promotion authority,” which prevents Congress from amending trade agreements with foreign countries and allows only up-or-down votes. If Congress had the power to amend trade pacts, the administration argues, other countries would refuse to negotiate.

Susan C. Schwab, Bush’s chief trade negotiator, said Monday she had had encouraging preliminary talks with leading congressional Democrats, including Rangel and Baucus, about extending Bush’s authority beyond June 30.

The biggest and most vocal segment of the business community lines up with the administration in favor of open trade. More international trade means more markets for U.S.-based multinational companies.

Jonathan A. Huneke, vice president of the U.S. Council for International Business, said American companies were well-positioned to capture some of their expanding markets, if only new trade agreements would give them the opportunity.

joel.havemann@latimes.com

molly.hennessy-fiske@ latimes.com

Times staff writer Marla Dickerson contributed to this report.

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Trade deficits with selected countries

Here are the trade deficit totals the United States racked up in 2006 with 12 major trading partners. A deficit is the difference between the value of goods and commodities the U.S. bought from a country and the value of U.S. goods and commodities sold to the country. Imports and exports of services are excluded from these totals.

U.S. trade deficit, 2006 (In billions)

*--* Country China $232.5 Japan 88.4 Canada 72.8 Mexico 64.1 Germany 47.8 Ireland 20.1 Taiwan 15.2 Russia 15.1 S. Korea 13.4 France 12.9 India 11.7 Brazil 7.2

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Note: List excludes some large deficits, such as with certain oil-exporting nations.

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Source: Commerce Department