AmerCon : Free Trade Imbalance

Economics / Free Trade Imbalance

The way America exercises free trade is incomprehensible.

America prides herself on a productive capacity she really doesn't have. She lives in an
illusion that hasn't been true for decades.

And what she does make isn't wanted very much by the rest of the world.

So she imports $50 billion a month of trade goods more than she exports.

That's $600 billion a year of buying more than she sells.

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The oil component of the trade deficit is worth noting.

When oil is priced at $40/barrel, 20 million barrels a day costs:

                    $ 800.0 million/day, or
                    $    24.0 billion/month, or
                    $ 288.0 billion/year

When oil is priced at $50/barrel, 20 million barrels a day costs:

                    $      1.0 billion/day, or
                    $    30.0 billion/month, or
                    $ 360.0 billion/year

Every $10/barrel rise in price equates to $72 billion a year in increased costs.

Instead of waiting for the price of oil to rise to $60 or $80/barrel, let's pretend like it's there
now via taxes, and take the money and invest in nuclear power plants and solar farms and all
the prudent alternatives. This will have the dual benefit of beginning to get us accustomed
to what will in fact soon be the price of oil (encouraging conservation before it is imposed on
us), and it will begin the process of financing an alternative infrastructure for power
generation -- without which we are literally in the dark.

ehj2

Forbes
AP feed
2004.12.14

Associated Press
U.S. Trade Deficit Swells to Record $55.5B

America's trade deficit swelled to an all-time high of $55.5 billion in October as imports -
including those from China - surged to the loftiest levels on record. Skyrocketing crude-oil
prices also contributed to the yawning trade gap.

The latest snapshot of trade activity, reported by the Commerce Department on Tuesday,
showed the country's trade imbalance widening by a sizable 8.9 percent in October from
the previous month - despite the fact that U.S. exports registered their best month ever on
record.

The growth in imports, however, dwarfed the pace of exports in October, producing
another bloated trade gap. The trade deficit was much bigger than the $52.4 billion
imbalance economists were forecasting.

Imports of goods and services climbed to a record high of $153.5 billion in October,
representing a 3.4 percent increase from September.

The United States' politically sensitive trade deficit with China clocked a record $16.8 billion
as imports flowing from the country posted all-time highs.

The Bush administration has been pressing China to let its currency, the yuan, be set in
open markets. U.S. manufacturers claims Beijing's currency policies give Chinese
companies a big competitive advantage over U.S. companies.

Another factor in October's trade deficit was surging prices for imported crude oil. The
average price of crude oil soared to a record $41.79 a barrel - a whopping 11.1 percent
increase from September's price.

U.S. exports, meanwhile, rose by 0.6 percent in October from the previous month to a
record $98.1 billion. Sales of U.S.-made industrial supplies to other countries totaled a
record high of $18 billion. Exports of capital goods, including drilling equipment and
airplanes, also gained ground.

The Bush administration believes the best way to handle the mushrooming trade deficits is
by getting other countries to remove trade barriers and open their markets to U.S.
businesses.

But Democrats and trade unions argue that the president's free-trade policies aren't
working and have contributed to the migration of jobs overseas. Critics contend that trade
deals ought to include stronger protections for workers and to protect the environment.

The previous record high U.S. trade deficit of $55.3 billion was recorded in June.

Federal Reserve Chairman Alan Greenspan, in a speech last month, warned that swollen
trade deficits eventually could threaten the economy by souring foreign appetites to invest
in the United States. Thus far, that hasn't happened, but policy-makers can't be
complacent, he said.

Persistent concerns in Europe over the U.S. trade and budget deficits has been a key
factor in the U.S. dollar's recent slid - on several occasions to record lows - against the
euro, the currency used by 12 countries.

The value of the dollar, which had already been weakening, helps U.S. exporters and
manufacturers because it makes their goods and services cheaper and more competitive
to foreign buyers.

Although the administration espouses a "strong dollar" policy, it hasn't taken specific action
to break the dollar's decline. Private economists say that's because the administration is
fine with what has so far been a relatively orderly decline in the dollar.

America's trade deficit with Canada grew to $5.6 billion in October, a 7.8 percent increase
from September. The United State's trade imbalance with Mexico surged by 15.4 percent to
$4.4 billion in October as imports from the country hit record highs.

The United State's trade deficit with oil-producing nations, including Saudi Arabia and
Venezuela, clocked a record $7.2 billion in October as imports from these countries hit
all-time highs.

America's deficit with Japan, however, narrowed in October to $5.9 billion as U.S. exports
to Japan were the highest since March 2001.

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