U.S. TRADE DEFICIT SETS RECORD

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U.S. TRADE DEFICIT SETS RECORD

 user 2007-03-14 at 10:34:00 am Views: 42
  • #17370

    U.S.Trade Deficit Sets Record for Fifth Year
    WASHINGTON
    (March 07) – The deficit in the broadest measure of trade set a record
    for the fifth consecutive year even though the imbalance in the final
    three months of 2006 shrank, reflecting a lower foreign oil bill.The
    Commerce Department reported that the imbalance in the current account
    jumped by 8.2 percent to $856.7 billion, representing a record 6.5
    percent of the total economy. For the fourth quarter, the deficit
    shrank by 14.6 percent to $195.8 billion, the smallest quarterly
    imbalance since the summer of 2005.Even with the fourth quarter
    improvement, administration critics say the soaring deficit for the
    whole year shows the failure of President Bush’s trade policies to
    protect American workers. They contend that America is going into hock
    to foreigners at an alarming rate even though they have been more than
    willing so far to hold American assets in return for sales of
    televisions, cars and other goods to U.S. consumers.The current account
    is the broadest measure of trade because it covers not only trade in
    goods and services but also investment flows between countries. It also
    represents the amount of U.S. assets that have been transferred into
    foreign hands to cover the gap between American exports and imports.A
    deficit of $856.7 billion in 2006 meant that the United States was
    borrowing more than $2 billion daily to finance its trade gap. So far
    foreigners have been quite happy to sell to the United States and hold
    dollars in return, money that has been invested in U.S. Treasury
    securities, the stocks of American companies and other assets.However,
    the concern is that if foreigners lose their appetite for U.S.
    investments, it could cause a big plunge in the value of the dollar,
    send stock prices crashing and interest rates soaring. If the
    adjustment were large enough, it could push the country into a
    recession.While believing that the current account will have to come
    down in coming years, many economists also think the adjustment can be
    made at a more gradual pace that will not seriously disrupt the U.S.
    economy.The $195.8 billion deficit in the fourth quarter was down from
    a third quarter deficit of $229.4 billion. The drop reflected a big
    decline in oil prices during the period compared to record oil prices
    hit last summer.Many economists believe that America’s trade deficit
    will start to show gradual improvement this year as long as oil prices
    do not surge again. Part of the optimism reflects growth in U.S.
    exports, which are being spurred by stronger economic growth in many of
    America’s major markets and also a weaker dollar against such
    currencies as the euro.A lower value for the dollar makes foreign trips
    for American tourists more expensive but it lowers the price of U.S.
    products on overseas markets, boosting exports.The Bush administration
    has warned against a protectionist backlash in this country from the
    huge trade deficits. But Democrats, who gained control of both the
    House and Senate for the first time in 12 years, contend that the
    administration needs to do more to protect American workers from unfair
    competition from low-wage countries with lax labor and environmental
    regulations.