WASHINGTON, Feb. 10 (UPI) -- The U.S. trade deficit increased for the fourth consecutive year Friday reaching an all-time record high of $725.8 billion, the U.S. Department of Commerce reported.
With record imports of oil, food, cars and other consumer goods the trade deficit increased by 17.5 percent from the previous year's figures of $617.6 billion in 2004. Exports in 2005 reached $1,271.1 billion with imports reaching $1,966.9 billion. Oil exports, which made up the preponderance of the trade deficit, increased just over 40 percent from $163.4 billion in 2004 to $229.2 billion in 2005.
The consecutive increase in the trade deficit -- widely anticipated -- has sparked a heated debate in Washington over the administration's handling of its economic policy with critics calling for the White House to expand U.S. exports to foreign markets to balance the trade deficit and to pursue a more stringent trade policy with China.
While trade deficits with major trading partners worsened noticeably, China recorded the largest trade imbalance in history at $201.6 billion, up from $40 billion in 2004.
The Bush administration has argued that it has been "very tough" on China in pushing Beijing to make further market openings to U.S. exports of goods and services and has been forceful in enforcing intellectual property rights to protect U.S. businesses.
"We think those issues would result in more exports of China and would help with regard to the trade balance," Rob Portman, told reporters on Capitol Hill Thursday. However, Portman cautioned that exports and imports alone do not solely determine deficits, but larger-macro-economic factors like differing savings rates and levels of economic growth.
While the administration indicated concern over the burgeoning trade deficit, there was some good news in overall U.S. export numbers which increased by 10 percent and U.S. exports to China were up 20.4 percent in 2005.
In recent weeks the Bush administration has been seeking to counter growing anxiety over the U.S. trade deficit and its economic prowess by pushing a new American Competitiveness Agenda announced by President George W. Bush during his State of Union address at the end of January. The competitiveness agenda calls for doubling the government's spending on basic research, extending tax breaks for company research and hiring thousands of new math and science high school teachers.
Speaking before the House government reform committee U.S. Secretary Carlos Gutierrez highlighted U.S. competitiveness by pointing to the U.S. low unemployment rate of 4.7 percent, which dropped from last year's 5.2 percent figure, the highest gross domestic product per capita in the world and a growth rate of 1.8 percent, twice as fast as that of the European Union.
The administration argues that the surging trade deficit is not the most vital figure in which to track economic growth and prosperity. Economic indicators like growth of GDP, unemployment, inflation and productivity must be taken into consideration.
"Part of what we need to do to address our trade deficit is to ensure that other countries take steps to increase the growth rate of their economies and open their markets to American exporters," Gutierrez said earlier this month.
But analysts say that despite the push by the Bush administration to put a positive spin on the trade deficit, the figures are a major sign of future trouble looming for American competition and the economy.
"The Bush administration clearly doesn't want to talk about America's trade situation in any economically realistic way," said Alan Tonelson, research fellow at U.S. Business & Industry Council, in a telephone interview. "They see a growing flood of absolutely terrible numbers coming there way and they've decided we're going to spin them positively as best as they can."
According to Tonelson, growth figures like U.S. GDP per capita or unemployment cannot be viewed in isolation.
"These trade deficits are a major sign of future trouble looming for American competitiveness and by extension for the U.S. economy. Anybody doubting that simply does not believe free-market economies," said Tonelson. "Those who say that the trade deficit doesn't matter are economically ignorant."
The U.S. manufacturing industry which has suffered a loss of 2.9 million jobs over the last five years was critical of the trade deficit which totaled $506 million in 2005 for U.S. manufactured goods. The industry blames China for its worsened trade deficit and job loss.
"U.S. manufacturing jobs and market share losses will not be replaced until the trade deficit comes down," said Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition. "The fastest way to rein in the job-destroying trade deficit is for the U.S. government to demonstrate to the Chinese that they will not get unlimited access to our market when they use unfair trade practices to run U.S. industry out of business."
In a report expected to be released next week by the U.S. Business & Industry Council, market share for 112 high-tech to low-tech companies have significantly decreased from 1997 to 2004, which has helped to contribute to the surge of the U.S. trade deficit.
Congress indicated this week that legislation maybe introduced to strip China of its trade status with the United States. While the Bush administration has been cautious to instigate a trade row with Beijing, it has also said that it is prepared to take legal action if China refuses to live up to its requirements, according to Christin Baker, spokeswoman for the U.S. Trade Representative Rob Portman.
