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Record exports help reduce U.S. trade deficit in July

The gap narrows 0.3% to $59.2 billion. But the imbalance with China grows to an annual rate of $242 billion.

September 12, 2007|From the Associated Press

WASHINGTON — The U.S. trade deficit declined slightly in July, helped by record exports that offset the biggest foreign oil bill in nearly a year. But even a spate of recalls did not stop the deficit with China from climbing to the second-highest level on record.

The trade deficit edged down 0.3% in July to $59.2 billion from $59.4 billion the month before, the Commerce Department reported Tuesday. It was the lowest monthly imbalance since April.

This year the deficit, which hit $758.5 billion last year, is running at an annual rate of $711 billion. Many private economists believe stronger economic growth overseas, a weaker dollar that makes American exports more competitive and slower growth at home will help lower the deficit after five consecutive years of record imbalances.

The narrowing of the deficit, however, has not satisfied critics of President Bush's trade policies. They are pushing legislation that could impose economic sanctions on China and vowing to block free-trade agreements with Colombia, Panama, Peru and South Korea that the administration hopes Congress will pass this year.

The administration, however, said the latest trade figures showed that Bush's policies are working and American companies would be helped even more if the pending free-trade deals were approved.

"Today's numbers clearly show the positive impact of exports and trade on the American economy," said Commerce Secretary Carlos M. Gutierrez, who today will head a congressional delegation on a four-day trip to Panama, Peru and Colombia to build support for passage of the trade deals.

The administration agreed to include provisions sought by Democrats to bolster worker rights and environmental protections, but some opponents say the changes don't satisfy their concerns that U.S. workers are facing unfair competition from low-wage countries with lax environmental laws. The United States has lost more than 3 million manufacturing jobs since 2000.

In July, U.S. exports rose 2.7% to an all-time high of $137.7 billion as sales of American farm goods, autos and auto parts and U.S.-made capital goods all set record highs.

Imports also rose to a record in July, climbing 1.8% to $196.9 billion. The increase was led by a 2.3% jump in petroleum imports, which hit $27.2 billion, the highest level in 11 months. The average price of a barrel of crude oil jumped to $65.56, surpassed only by a $66.13-a-barrel price set in August 2006.

The boom in exports is helping cushion the U.S. economy from the adverse effects of the worst downturn in housing in 16 years and a serious credit crunch stemming from growing losses in sub-prime mortgages. Without continued export gains, some analysts worry that the country could be pushed into a recession.

The improving trade performance added more than a percentage point to the 4% overall economic growth in the April-June quarter, and many analysts predicted further positive contributions in the final half of this year.

The U.S. deficit with China jumped 12.5% in July to $23.8 billion, the second-highest level on record, surpassed only by a $24.4-billion imbalance in October.

This year the deficit with China is running at an annual rate of $242 billion, putting the U.S. on track to surpass last year's record deficit with China of $233 billion, the highest ever recorded with a single country.

The July imbalance reflected a 19% plunge in exports to China, as sales of commercial airplanes fell, and a 5.6% jump in imports, including higher shipments of cellphones, toys and clothing.

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