Today the Census Bureau released its estimates for U.S. imports and exports in December. Thus, we now have complete data for last year. The trade deficit reached a record high of $617.7 billion in 2004. This is an increase of $121.2 billion over 2003. Exports grew less than half the rate of increase of imports. The U.S. imported $246.9 billion more in 2004 than in 2003, but exported only $125.6 billion more.
The data once again show that the U.S. is losing ground in important areas where the U.S. should have a competitive advantage. Over the past decade the U.S. has enjoyed a productivity advantage due to its boom in new technologies. Yet it has steadily lost ground in advanced technology products. From 1997 to 2004, the U.S. trade balance in these products has turned from a surplus of $32 billion to a deficit of $37 billion.
Trade Balance in Select Areas, 1995 to 2004
Due to the decline of the dollar against the euro, the U.S. should have seen a shrinking trade deficit with much of the European Union (EU). However, the trade deficit with the EU, most of which stems from countries that use the euro, increased by another $11 billion in 2004 to $104 billion.
For a while it looked like the salvation of the U.S. trade deficit lay in the trade of services, such as financial services. Over the past eight years, though, the surplus in service trade has been cut in half. In 2004, it fell below $50 billion for the first time in thirteen years.
Today's trade numbers are a sobering note since they show that the U.S. is steadily losing ground in the international trade arena. This is especially troubling since large losses are also felt in areas where the U.S. should enjoy a competitive advantage.
Christian E. Weller is a senior economist at the Center for American Progress.