...Trade deficit widens

Sunday, February 12, 2012

WASHINGTON (AFP) - On the eve of a visit by China's vice president and heir-apparent, the Commerce Department reported Friday that the US trade deficit widened to a six month high, thanks in large part to imports from China.

Official data showed that the deficit deepened to US$48.8 billion in December, the most since June 2011, as President Barack Obama prepared to welcome Xi Jinping, widely tipped as China's next president, in Washington next week.

Amid stronger US demand — spurred by the improving economy — goods imports grew by US$2.7 billion, outpacing export growth.

"Thanks to a weak greenback, exports rose for the first time in a few months, up 0.7 percent in December or nine percent from a year ago. Imports also gained ground however," said economist Jennifer Lee of BMO Capital Markets.

That took the full 2011 shortfall to US$558 billion.

More than half that figure was thanks to the politically sensitive trade deficit with China, prompting more handwringing about Beijing's huge advantage in the bilateral economic relationship.

"The US-China trade deficit reached a record high of US$295.5 billion in 2011, which will add fuel to the fire of political trade debate," said David Resler of Nomura bank.

The response from the US industry lobby, which accuses China of stealing US business and jobs, was swift.

"From an economic point of view, the trade deficit with China shows just how strong the headwinds are against 'insourcing' jobs back to the United States," the Alliance for American Manufacturing said.

"From a political point of view, the trade deficit with China shows just how little leadership Congress and the president are providing on international economic matters."

As the United States approaches November's presidential elections, the calls for China to be punished for allegedly unfair trade practices has become ever more shrill.

In his State of the Union address last month Obama announced the formation of a trade enforcement unit that would look into unfair trade — training his sights squarely on Beijing.

"I will not stand by when our competitors don't play by the rules," he told lawmakers.

Tit-for-tat trade actions have been building since the Obama administration levied sanctions against allegedly subsidized Chinese tires in 2009.

The US has now levied counter-veiling and anti-dumping duties against some two dozen Chinese products, from steel bars to frozen shrimp, and has lodged WTO complaints over Chinese solar panels, wind turbines and other products.

China has responded with its own punitive duties on imported US chicken and luxury cars and WTO counter-complaints.

Xi arrives on Tuesday for a get-to-know-you visit with Obama, with a full range of political issues on the agenda.

"It will be an opportunity to lay out many issues forthrightly, but to leave partisan politics out," said Douglas Paal of the Carnegie Endowment.