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June 12, 2007 > US trade deficit drops in April

US trade deficit drops in April

By Martin Crutsinger, AP Economics Writer

WASHINGTON (AP), Jun 08 _ The U.S. trade deficit dropped sharply in April as strong overseas demand pushed American exports to an all-time high.

While President George W. Bush's administration hailed the unexpectedly large improvement as a sign that an export boom was continuing, critics noted the imbalance with China rose in April, underscoring what they said was an urgent need for the U.S. Congress to take action to punish China for unfair trade practices.

The Commerce Department reported Friday that the gap between what America sells abroad and what it imports totaled $58.5 billion (euro43.8 billion) in April, a 6.2 percent decline from the March deficit.

Exports edged up 0.2 percent to a record $129.5 billion (euro97 billion), reflecting strong sales of soybeans and other farm products, commercial aircraft and industrial machinery. Imports fell 1.9 percent to $188 billion (euro140.8 billion), reflecting big declines in imports of foreign cars, televisions and clothing and a small dip in America's foreign oil bill.

``With each new trade agreement reached and implemented, barriers around the world to U.S. exports fall and opportunities for export growth are enhanced,'' said U.S. Trade Representative Susan Schwab, who is leading the administration's effort to win congressional support for new free trade deals with South Korea and three Latin American nations.

On Wall Street, the Dow Jones industrial average surged 157.66 points to close at 13,424.39, snapping a three-day losing streak and allowing investors to recoup losses incurred during a week when interest-rate worries overtook the markets.

The overall improvement in the trade deficit was larger than had been expected and was a hopeful sign, analysts said, that the deficit for all of 2007 should narrow after posting records for five consecutive years.

They attributed the improvement to stronger growth overseas and the weaker value of the dollar against many currencies, which makes American products more competitive in overseas markets.

Trade subtracted a full percentage point from economic growth in the first three months of this year, when the economy slowed to a barely discernible 0.6 percent growth rate.

Analysts said the new trade report, which showed slightly improved deficit figures in previous months, should help boost economic growth as measured by the gross domestic product to closer to 1 percent in the first quarter while the big narrowing in the April deficit should help support a rebound in GDP growth to around 2.5 percent or better in the second quarter.

Through the first four months of this year, the deficit is running at an annual rate of $705.9 billion (euro528.8 billion), a drop of 6.9 percent from last year's record $758.5 billion (euro568.2 billion) imbalance.

However, the deficit with China widened to $19.4 billion (euro14.5 billion) in April, the worst showing since January, and through the first four months of the year is running 11.9 percent higher than the pace of a year ago when the gap with China set a record at $232.6 billion (euro174.2 billion).

The deficit with China has gotten increasing attention in the U.S. Congress, where critics are pushing various bills that would impose economic sanctions to punish China for what they contend are unfair trading practices such as currency manipulation and copyright piracy.

Democratic Senator Sherrod Brown said the failure to crack down on China and other countries had led to ``out of control trade deficits'' and a resulting loss of well-paying manufacturing jobs.

He said a recent report by the Economic Policy Institute, a liberal think tank, found that America's soaring trade deficit with China from 1997 through 2006 had displaced production that could have supported 2.17 million U.S. jobs.

The Bush administration, trying to head off a protectionist backlash, has launched a new series of high-level talks with the Chinese. The latest round of those discussions two weeks ago failed to yield any breakthroughs in the main area of contention, China's undervalued currency, but Treasury Secretary Henry Paulson said this week that he remained committed to the discussions.

For April, exports of American agricultural products set a record at $6.7 billion (euro5 billion), reflecting strong increases in shipments of soybeans, nuts and meat. Exports of industrial materials and consumer goods also set records.

On the import side, the foreign oil bill edged down a slight 0.2 percent to$24.9 billion (euro18.6 billion) on a seasonally adjusted basis even though the average price of a barrel of crude oil rose to $57.28, the highest level since last September.

The deficit with Canada, America's largest trading partner, rose by 7.4 percent to $5.8 billion (euro4.3 billion) but the imbalance with Mexico, the other partner in the North American Free Trade Agreement, fell by 22.3 percent to $5.3 billion (euro3.9 billion). The imbalance with the European Union was up 17.1 percent to $9 billion (euro6.7 billion).


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