Posted on: Saturday, October 20, 2001
Trade deficit narrows in August
By Martin Crutsinger
Associated Press
WASHINGTON — The U.S. trade deficit shrank to $27.1 billion in August, the smallest imbalance in nearly two years, as the weak economy depressed Americans' demand for computers, televisions and other foreign goods.
The Commerce Department reported yesterday that the August deficit was 7 percent lower than the revised July deficit of $29.2 billion as imports fell for a fifth consecutive month while U.S. exports, which had plunged by a record amount in July, managed a small rebound.
America's deficit with China surged to $8.1 billion, the highest level since last October, but the imbalance with the 15-nation European Union showed a dramatic improvement.
The total deficit through the first eight months of this year is running at an annual rate of $360 billion, putting the country on track to record its first improvement in the trade balance since 1995. The deficit last year was a record $375.8 billion.
While the Bush administration had hoped to narrow the deficit by boosting overseas demand for exports, the improvement has occurred from a weak U.S. economy that has depressed demand for foreign goods. U.S. export sales are actually below last year's level as weakness in the United States has spread globally.
Given that many economists believe that the Sept. 11 terrorist attacks have pushed the country into a recession, they are forecasting that the trade deficit will shrink further in coming months.
"The events of Sept. 11 and the ongoing war against terrorism are likely to take a toll on domestic consumer confidence," said David Huether, chief economist at the National Association of Manufacturers.
The administration contends that in the face of a global slowdown, it is imperative for Congress to grant President Bush the authority he needs to pursue new trade liberalization efforts, including the launch of a new round of global trade talks next month under the auspices of the World Trade Organization.
Treasury Secretary Paul O'Neill said yesterday that passage of the trade negotiating authority as well as the administration's economic stimulus proposals "are an effective battle plan to assure that our economy can support our efforts to engage an enemy the like of which we have never seen before."
Bush was in Shanghai, China, yesterday, hoping to win support for his trade liberalization agenda from the other leaders at the Asia-Pacific Economic Cooperation summit.
However, the administration faces a tough vote in the House, where many Democrats believe the GOP-sponsored bill doesn't sufficiently address concerns that American workers are at a competitive disadvantage by countries with lax labor and environmental standards.
The $27.1 billion deficit in goods and services for August was the lowest imbalance in nearly two years, since a $26.4 billion gap in January 2000.
Imports of goods and services fell by 1.1 percent to $111.6 billion as demand for foreign-made consumer goods such as televisions and clothing fell. Oil demand was also off by a slight 0.1 percent to $8.54 billion while demand for foreign cars and auto parts rose by $597 million.
U.S. exports rose by 1 percent to $84.5 billion, but the small rebound came after a record drop in exports in July. Sales of U.S. agriculture products rose by $249 million while exports of American-made cars and auto parts were up by $459 million.
America's deficit with China remained the largest for any country, climbing by 8.2 percent to $8.1 billion even though U.S. exports to China hit an all-time record of $1.9 billion.
The deficit with Japan shrank by 9.8 percent to $5.4 billion in August while the imbalance with the European Union plunged by 30 percent to $4.9 billion.
America's deficit with Canada, its biggest trading partner, narrowed slightly to $4.4 billion in August. The imbalance with Mexico also was down slightly, to $2.5 billion.
