Dealing with the Trade Deficit
Jonathan Jacoby and Amanda Logan examine new import-export numbers showing why China’s currency and our oil dependence require attention.
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Congressional moves this week to boost fuel efficiency in our automobiles and pressure the Bush administration to press China to boost the value of its currency could not be more timely given the latest trade deficit figures released today by the Census Bureau.
The new figures show that
Despite digging a deeper trade hole with
This jump is due in large part to a jump in
Congress is keenly aware of the trade problems associated with foreign oil imports and our nation’s trade imbalance with
Still, the year-over-year decline in first quarter trade deficit, while quite modest, is an encouraging development. American exports have grown steadily; in fact, they grew faster than imports last year (12.8 percent versus 10.5 percent) for the first time since 1997. The current
Despite slower growth in the U.S., the global economy is growing faster than at any point in the last quarter-century, thereby generating greater overseas demand for U.S. exports, especially services. The U.S. had a services trading surplus of $18.8 billion in the first quarter of 2007—an improvement of 13.3 percent over the first quarter of 2006. While there is much focus on the robust expansion of the Chinese and Indian economies, the International Monetary Fund projects that developed-world trading partners such as the European Union and Japan will grow faster than the United States this year.
The trade deficit, however, is still at very high levels. One of the main culprits: our nation’s addiction to imported oil. The
Even if exports were to outstrip imports in absolute terms, not just in terms of growth rates, it would take many more years of sustained export growth to reduce the
Jonathan Jacoby is Associate Director for International Economic Policy at the Center for American Progress. Amanda Logan is the Special Assistant for Economic Policy at the Center for American Progress.
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