Trade Gap Exceeds $43 Billion
By Paul Blustein
Washington Post Staff Writer
Thursday, March 11, 2004; Page E02
The U.S. trade deficit widened to a record $43.1 billion in January, indicating
that the trade gap will remain high during the presidential campaign.
The January trade figure, reported by the Commerce Department yesterday,
reflected a decline in exports partly attributable to a 40 percent drop in
shipments of meat and poultry to foreign markets, many of which barred U.S. beef
after the detection of mad cow disease in Washington state. Exports fell 1.2
percent, to $89 billion, while imports dipped 0.5 percent, to $132.1 billion.
Exports are almost sure to rise as the cheap dollar makes U.S. goods more
attractive overseas, economists said. But yesterday's data underscore how long
it is likely to take before the trade deficit begins to narrow substantially,
they said. Even though the weak dollar is starting to help, imports are so much
greater than exports that the gap will stay wide for the foreseeable future and
may well increase in the coming year, according to a number of forecasters.
"The U.S. is still sucking in a lot of stuff from abroad, so it's hard to
keep the trade deficit stable" even if exports rise, said Robert Mellman,
senior economist at J.P. Morgan Inc. in New York. "This is sort of a
warning about that."
The report provided political fodder for Democrats looking for opportunities to
criticize the administration's trade policies and job record. Rep. Sherrod Brown
(D-Ohio), noting that the trade gap in 2003 was a record $489.4 billion, said in
a written statement: "We're starting this year right where we ended last
year, with a growing trade deficit that adds to American workers' anxiety."
Administration officials reject the suggestion that the trade deficit undermines
the case for their free trade policies. Yesterday U.S. Trade Representative
Robert B. Zoellick argued that the most important factor driving the imbalance
is the faster growth in the United States compared with that in many other major
trading partners. That means Americans are buying foreign goods at a fast pace,
compared with the sale of U.S. goods overseas.
Economists generally agree that growth rates at home and abroad weigh heavily on
the trade deficit. "The last time we saw a balance in the deficit, which
was in the early 1990s, the U.S. economy was still in recession, the rest of the
world was booming, and the dollar was weak," said Diane Swonk, an economist
at Bank One in Chicago. "You needed all of those factors operating at
That helps explain why the trade deficit will probably continue to mount this
year, Swonk said, despite the beneficial effect of the falling dollar on the
competitiveness of U.S. goods. The greenback has fallen about 9 percent over the
past year against other major currencies, and notwithstanding the mad-cow
problem in January, the currency effect has helped boost exports, which rose in
the fourth quarter by a 21 percent annual rate on inflation-adjusted terms. But
"we're an economy that continues to spend a lot, and continues to grow
faster than a lot of other economies. So exports are picking up but that just
can't compensate" for the flood of imports, Swonk said.
The U.S. trade deficit with China, a politically sensitive figure, rose to $11.5
billion in January, up from $9.9 billion in December. China's overall trade is
roughly in balance, but the enormous gap with the United States has become a
lightning rod for complaints about Washington's economic relations with Beijing.
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