From Deseret News archives:
Drop in oil imports helps shrink trade deficit
The Commerce Department said Friday the trade deficit declined by 3.5 percent in August to $59.1 billion, the smallest imbalance since June.
The deficit is expected to shrink even further in coming months as a severe economic slump in the U.S. depresses demand for oil and other imported goods. But exports also are expected to slow as economic weakness in the U.S. spreads to other countries. Exports had been the one bright light in an otherwise dismal U.S. economy this year.
America's foreign oil bill declined to $43.7 billion in August, down a record $7.3 billion from the all-time high of $51 billion in July. The drop reflected both lower shipments and oil prices.
The big decline in oil cut total imports to $223.9 billion, still the second highest level on record, but down by 2.4 percent from the record high set in July.
U.S. exports totaled $164.7 billion, also the second highest level on record, but down 2 percent from the July record. Exports have been the standout performer this year keeping economic growth positive.
"With global credit markets now frozen and stock markets crashing, the United States can no longer look to foreign trade to prevent what is shaping up as a severe recession," said Nigel Gault, chief U.S. economist at Global Insight, a Lexington, Mass., forecasting firm.
For August, the deficit with China edged up by 1.8 percent to $25.3 billion, the second-highest imbalance on record, as imports from that country rose to an all-time high. The import gain reflected big increases in shipments of toys and games, cell phones and clothing as U.S. retailers stocked up for the holiday sales season.
So far this year, the trade deficit is running at an annual rate of $717.1 billion, up slightly from last year's deficit of $700.3 billion, which had represented the first decline after five straight years of setting records.
Even though the deficit is off its all-time highs, critics say the imbalances are still too high and are putting the country's economic future in jeopardy as the U.S. has to borrow billions of dollars from China and other nations to balance its books, and domestic companies close American factories to move overseas to take advantage of lower wages.
"The U.S. economy is facing its greatest financial crisis since the Great Depression because we've taken on too much debt," said Auggie Tantillo, executive director of the American Manufacturing Trade Action Council. He said the solution to the current financial crisis was to find ways to boost domestic manufacturing rather than depending on imports.
The Bush administration contends its free-trade policies are the only way to move forward in an increasingly global economy. Democrats argue that the administration has not done enough to protect American workers from unfair competition from China and other nations that they contend are not abiding by global trade rules in such areas as worker rights.
For August, the deficit with Canada, America's biggest trading partner, fell by 10 percent to $7.4 billion. The deficit with the European Union dropped 38.5 percent to $6.8 billion.
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