U.S. Trade Deficit Soars as Imports Increase Sharply
By DAVID E. SANGER -- March 19, 1999
WASHINGTON -- As American exports continued to fall, the
United States trade deficit jumped to a monthly record
of nearly $17 billion in January, fueled by a flood of
imports from China that could stir further
protectionist sentiments in Congress.
Among the imports flowing into the United States, Chinese-made
steel surged 65 percent from December. On Wednesday, the House
of Representatives overwhelmingly passed a bill that would
sharply limit steel imports, a movement that may gain momentum
now that China is joining Japan, Brazil and Russia on the list
of nations pouring inexpensive steel into the American market.
The figures were released Thursday just as China and the
United States entered a critical phase in negotiations over
China's push to enter the World Trade Organization, which sets
the rules for international trade. China wants the
international prestige that comes from joining the trade
organization and would also get a measure of protection
against trade barriers to its exports.
Intense talks are under way in Geneva over the terms of
China's entry in hopes of reaching an agreement before the
Prime Minister of China, Zhu Rongji, visits Washington in
early April. The deadline has breathed life into talks that
have sputtered for a decade.
One American negotiator said this week that "we've made more
progress with the Chinese in the last three weeks than in the
last three years," and this morning President Clinton's top
economic advisers met at the White House to assess China's
intentions.
But they emerged uncertain -- both about the prospects of
getting China to dismantle huge barriers and the prospects of
getting any deal though Capitol Hill, where it would become
instantly wrapped up in the politics of nuclear espionage,
human rights violations and growing anti-China sentiment.
"Altogether, we have a mounting series of problems that are
going to be difficult to manage, to say the least," Commerce
Secretary William M. Daley said Thursday.
The soaring monthly trade deficit -- after a record $170
billion deficit for all of 1998 -- considerably exceeded
analysts' expectations of $14.9 billion. The $16.99 billion
deficit in goods and services was the highest since monthly
statistics began being reported in 1992.
The deficit in manufactured goods rose to a record $23.42
billion in January from $20.5 billion in December. The United
States, however, ran a $6.4 billion surplus in services, from
consulting to insurance.
But the deficit also reflected the continued strength of the
American economy, which has created an enormous demand for
imported consumer goods. The sharp increase occurred even
though there was no rise in the value of imported gasoline and
other petroleum products, now selling at prices lower than at
any point in the last quarter-century.
Perhaps the most worrisome part of the report was not the rise
in imports but the falloff in exports. They decreased to $76.8
billion, from $79.5 billion in the month a year earlier, led
by falling demand for farm goods including corn, oil seeds and
cotton and manufactured products including oilfield drilling
equipment, farm machinery, aircraft and autos. Imports of
goods and services rose to $93.8 billion, compared with $89.6
billion in January 1998, led by shipments of foreign autos,
food and consumer goods.
So far the decline in exports has had little effect on the
unemployment rate or the growth of the economy, which expanded
6 percent in the fourth quarter of last year. Except in
hard-hit steel towns, booming domestic consumer demand has
made up for the falloff in exports. But the numbers suggest
that the United States will not have export markets to fall
back on if the domestic economy cools this year.
The export figures are particularly troublesome for the White
House, where officials who once proclaimed that America's
surging exports were creating jobs and fueling the economy are
now arguing that rising imports can be healthy, too. On
Thursday, officials cautioned about reading too much into the
January numbers.
"I don't worry much about the monthly numbers of any kind,"
Treasury Secretary Robert E. Rubin said today. "We are the
only major economy that is growing at a robust rate." At the
same time, Rubin and other Administration officials have begun
explicitly warning Europe that the United States cannot be
expected to continue to absorb such a huge share of the goods
the rest of the world produces.
But so far, the United States remains the world's only real
engine of growth -- meaning that the trade deficit will likely
swell further this year. Despite hints that a modest revival
may be in the offing, Japan remains in deep recession, and
American exports to Japan fell 10 percent compared with those
in January 1998. Perhaps more politically important, exports
to China for the month were down to $779 million from $1.35
billion in December, a tiny figure compared with imports of
$5.56 billion. Put another way, the ratio of United States
imports to exports with China is 7 to 1. With Japan it is
roughly 2 to 1, suggesting that the problems of access to the
Chinese market are far worse.
The Administration argues that a deal to get China into the
World Trade Organization would solve some of those problems
over the long run. It would force China to sharply reduce its
protective tariffs, and it would include access to the Chinese
market for American food producers, banks, insurance companies
and other businesses. American computer makers are pushing
hard for a deal and wrote to Congress this week urging a
relaxing of export restrictions of American technology there
-- something that stands little chance of happening given the
politics of relations between China and the United States this
week.
The combination of allegations about spying at American
weapons laboratories and the rising deficit with China combine
into a sense that China is intent on playing outside the rules
-- and many members of Congress think that W.T.O. membership
would be a reward to Beijing.
That belief could hinder any chances for a deal, a senior
Chinese diplomat, He Yafei, said at a news conference
Thursday.
"I believe the political atmosphere will have a bearing on any
negotiation between our two countries," he said. "Especially
when some members or senators are saying, 'Even if you have a
deal, even if that deal is good for the U.S. business
community, we will not give China permanent normal trade
relations.'"
He concluded, "That is absurd."
Copyright 1999 The New York Times Company |
