Latest trade deficit numbers should be cause for concern
The U.S. trade deficit is on track to increase by 20 percent in 2004 over that of 2003. That's a 20 percent increase in a year, and the Bush administration -- which is quick to label as a crisis a Social Security shortfall that is decades in the future -- apparently sees no cause for alarm.
Indeed, according to The New York Times, Treasury Secretary John Snow reacted to the latest monthly deficit numbers as if they were good economic news. The U.S. trade deficit exceeded $60 billion in November, the Commerce Department reported, which was a record high in a month in which the deficit had been expected to drop.
A happy face
And what did Snow say? He sees the deficit as a sign that the American economy "is growing faster than those of our trading partners in the Eurozone and in Japan. The economy is growing, expanding, creating jobs and disposable income and that shows up in the demand for imports."
When even a combination of the falling dollar and falling oil prices don't put a damper on the trade deficit, it is folly to pretend that everything is just fine. It wasn't just that imports increased; exports decreased, from agricultural products to semiconductors to aircraft.
While the dollar was falling, which should have made American products more attractive in foreign markets, U.S. exports dropped from $97.8 billion in October to $95.6 billion in November. Meanwhile we bought $155.9 billion worth of products from other countries.
With November's figures, the 2004 trade deficit rose to $561 billion, meaning the year-end total is certain to top $600 billion, a record high. The 2003 figure was $496 billion.
The November figures showed deficits of $7.3 billion each with Canada and Japan, but the deficit with China exceeded those countries combined, at $16.6 billion.
Meanwhile, Secretary of Commerce Donald Evans was in China Wednesday hoping to persuade the Chinese to get tougher on its scandalous piracy of American intellectual property, and maybe even get some recognition from China that it is undervaluing its currency, the yuan, against the dollar by about 40 percent. China has frozen the exchange rate at 8.28 yuan to the dollar for a decade.
What Evans got instead was a complaint by Commerce Minister Bo Xilai that Washington hasn't granted China market economy status during Evans' term in office. Such a designation would make it harder for American companies to win claims that Chinese competitors are setting unfairly low prices on goods sold in U.S. market.
China has enjoyed overall trade surpluses for a decade, including a surplus of almost $32 billion in 2004. It's maintaining that surplus with all its trading partners at the expense of the United States -- and yet it wants more.
Last month President Bush dismissed the trade balance with China as a problem that was easy to fix -- all Americans have to do is stop buying so many Chinese products, he said.
We agree that Americans should be more discriminating buyers. But individual Americans can't fight unfair trade practices and can't demand that China stop its currency manipulation. That battle must be waged by the government, and this government obviously doesn't have the stomach for it.