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U.S. trade deficit continues to widen

By SHIHOKO GOTO, UPI Senior Business Correspondent

WASHINGTON, Dec. 12 (UPI) -- As the economy shows signs of regaining strength, the U.S. appetite for overseas goods swelled with imports reaching their highest level in 31 months, the Department of Commerce reported Friday.

The trade deficit expanded to $41.8 billion in October, with total imports hitting the $129.7 billion mark after rising 2.1 percent for the month. But that's not to say U.S. businesses and consumers were simply buying up products made overseas. Exports from the United States to global markets rose too, increasing as much as 2.6 percent to reach a total of $88.0 billion for the month, its highest level since March 2001.

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Robust demand for foreign goods came as no surprise to Wall Street analysts, given the unexpected pace of economic recovery in recent months, most notably the third quarter gross domestic product growth rate coming in at 8.2 percent, according to the Commerce Department.

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At the same time, however, there remain concerns that the latest economic expansion is a jobless recovery, whereby companies are becoming more profitable either by cutting jobs as well as costs in order to remain lean and competitive, or outsourcing jobs overseas where they can secure laborers who will work longer hours for less. The latter is certainly the impression China has given to many policymakers as well as voters, who are increasingly worried that jobs as well as businesses are being exported offshore.

In light of such fears, the politically sensitive deficit with China renewed its record by hitting $13.6 billion, as imports of $16.4 billion far outpaced the level of U.S. exports to the country totaling $2.9 billion. So far this year, the trade gap with China has reached $103.3 billion.

But China wasn't alone in exporting more to the United States than it imported from U.S. shores. Deficits were also recorded with most other major trading partners, as the gap with Japan reached $6.4 billion, and $9.4 billion with western Europe. Meanwhile, imports from Mexico outpaced exports to the country by $3.5 billion, while the figure reached $1.6 billion with South Korea.

Still, not everyone is in agreement that a widening trade deficit is problematic in itself. Granted, some policymakers from both the Democratic and Republican sides have argued vehemently that China, as well as many other countries in the region, is exporting itself to growth, and the United States is losing out both jobs and businesses in the meantime.

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Yet Federal Reserve Chairman Alan Greenspan said Thursday that while China is exporting far more to the United States than it is importing U.S. goods, the country is actually in a trade balance with the global market at large, especially as it has become a major importer of raw materials and other goods from across the Asian region.

Such sentiment has not, however, stopped the White House from imposing quotas on Chinese textiles from last month, capping imports of Chinese-made brassieres and other intimate apparel at 7.5 percent above shipments from last year.

Indeed, the trade deficit with China has become such a hot topic for many economic policymakers that it was regarded as a key issue for discussion during Chinese Premier Wen Jiabao's four-day U.S. visit that concluded Wednesday. There was, however, no public discussion of the subject during his stay.

"The U.S. wanted movement on trade (during Wen's visit) ... that was simply not realistic," said Charlene Barshefsky, former head of the U.S. Trade Representative's Office under the Clinton administration. She added that the Chinese premier wanted to reassure Americans that the country was not a threat, and that he came to the United States "in peace" to emphasize that China's rapid economic expansion was good not only for the populous nation, but for the world at large.

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