there still are cranks out there that say free trade works, we just
have not gone far enough yet, Second Month of Increase in Trade
Deficit Raises New Worries for US Economy
http://biz.yahoo.com/ap/080410/economy.html
Increase in Trade Deficit Raises Concern
Thursday April 10, 9:04 pm ET
By Martin Crutsinger, AP Economics Writer
Second Month of Increase in Trade Deficit Raises New Worries for US
Economy
WA****NGTON (AP) -- The U.S. trade deficit unexpectedly increased for a
second straight month in February, raising concerns that the economy's
one standout performer could be starting to flag.
The Commerce Department re****ted Thursday that the deficit between
what the U.S. im****ts and what it sells abroad rose 5.7 percent to
$62.3 billion in February, the highest level since November.
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Im****ts of goods and services shot up 3.1 percent to an all-time high
of $213.7 billion, reflecting a big surge in im****ts of foreign cars.
Ex****ts also set a record, rising by 2 percent to $151.4 billion,
reflecting strong gains in the sale of American-made heavy machinery,
computers and farm goods.
Critics claimed that the sharp rise in the trade deficit showed the
continued failure of President Bush's policies emphasizing negotiating
free trade agreements as a way to promote U.S. jobs by boosting
ex****ts.
With businesses cutting 80,000 jobs last month, the most in five
years, and the country likely in a recession, the debate over trade is
expected to intensify in this election year. Republicans contend
Bush's policies reflect the reality of the new global economy, while
Democrats argue that the president has contributed to the loss of more
than 3 million manufacturing jobs since he took office.
"Wages are falling and the middle class is shrinking because of trade
deficits," James Hoffa, president of the International Brotherhood of
Teamsters, said Thursday at the end of a three-day convoy across
Pennsylvania aimed at highlighting the failings of Bush's trade
policies.
Trade is shaping up as a key issue in the presidential campaign and in
the fight for control of Congress. In an early showdown, the
Democratic-led House voted 224-195 on Thursday to reject Bush's effort
to force Congress to vote within the next 90 legislative days on a
free trade agreement with Colombia.
The administration charged that Democrats were forsaking a key South
American ally while Democrats said Colombia needed to do more to halt
the violence against union organizers before they would consider the
trade pact. The vote also calls into question pending free trade deals
with South Korea and Panama.
In other economic news, the number of newly laid off workers filing
claims for unemployment benefits fell sharply last week after having
hit the highest level in more than two years in the previous week. The
Labor Department said applications for jobless benefits totaled
357,000 last week, down by 53,000 from the previous week. Economists
said the wide swings reflected in part the trouble the government is
having in seasonally adjusting the figures.
Meanwhile, the nation's retailers re****ted mixed results in March. Wal-
Mart and Costco Wholesale Corp. were among the best performers. Other
retailers said their sales suffered from the weak economy and an early
Easter that dampened clothing sales.
On Wall Street, investors were encouraged by the big drop in weekly
applications for jobless benefits and the better-than-expected
performance for some big retailers. The Dow Jones industrial average
rose 54.72 points to close at 12,581.98.
For the first two months of this year, the trade deficit is running at
an annual rate of $727.6 billion. Last year, the deficit declined to
$708.5 billion for the entire year, fueled by a boom in ex****ts. It
marked the first decline in the trade deficit after five straight
years of records.
With the economy battered by a prolonged slump in housing and a severe
credit crunch, trade has been one of the few sources of strength.
However, analysts said based on the rising deficit in the first two
months, trade will likely provide less of a boost in the first three
months of this year, making it more likely that the overall gross
domestic product turned negative.
Brian Bethune, chief U.S. financial economist for Global Insight, said
he expected GDP would decline at an annual rate of 0.1 percent to 0.2
percent in the first quarter. The classic definition of a recession is
two consecutive quarters of declining GDP.
Bethune said the big jump in auto im****ts in February may be
reflecting a move by American consumers toward more fuel-efficient
foreign cars, which would be another blow for struggling U.S.
automakers.
Many analysts believe the two-month jump in the deficit will be
reversed in coming months because they think a recession in the United
States will cut into demand for foreign goods as well as U.S.-made
products.
For April, the politically sensitive deficit with China dropped by 9.6
percent to $18.4 billion, the lowest imbalance in a year. The
improvement reflected big declines in im****ts of computers, cell
phones and other telecommunications equipment as well as clothing.
Even with the decline, the U.S. deficit with China remained the
largest with any country. The next highest deficit was an imbalance of
$6.9 billion with Japan.
America's foreign oil bill fell 5.7 percent to $37.7 billion in
February, marking the first monthly decline in a year. It occurred
even though the average price for im****ted crude oil hit a record of
$84.76 in February. With crude oil prices hitting new records above
$110 per barrel, analysts believe the petroleum bill will resume
rising in coming months.
The deficit with the European Union rose to $6.9 billion in February,
up 13.5 percent from January, even though U.S. ex****ts to Europe hit
an all-time high, reflecting the fact that a decline in the dollar to
record lows against the euro has boosted the price competitiveness of
American products.
(This version CORRECTS the deficit figure to $62.3 billion, not $63.2
billion.)
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