Global Financial Slump Sweeps US Goods off World's Shelves
View From US Point man on trade
The US trade deficit, already at record levels, will be far worse next year.
One of the nation's top trade officials, David Aaron, the undersecretary of Commerce for international trade, warns that imports, such as textiles from Thailand or footwear from China, will continue to grow, while US exports, such as construction equipment, will shrink. The main reason the trade chasm will widen is a decline in exports - particularly to Latin America.
"We're looking at a situation where basically the only part of the world that is growing is the United States and Europe," said Mr. Aaron, who is responsible for formulating US trade policy, in an interview.
The administration, however, is also concerned that US exporters are now starting to face protectionism in Asia, where the US already has a gigantic trade deficit.
"We see signs of protectionism in China and we are concerned about it and will be dealing very directly about it," he says. Next month, US trade negotiators plan to meet with Chinese officials to try to halt the practices.
Although the trade deficit is huge this year, it has not been a problem since the US economy has been running at full speed.
But nearly 30 percent of US growth is the result of exports.
And the declining exports will come at a time when the US economy is already losing steam.
"It's all a negative," says economist Bob Brusca, chief economist at Nikko Securities International Co. in New York.
The Commerce Department is estimating a trade deficit in goods and services this year of $165 billion, up from $110 billion last year. There are some government estimates that the deficit could blow up to $300 billion by the end of next year. Aaron, however, does not think the trade gap will be that high. The all-time record for the trade deficit was in 1987, when imports exceeded exports by $153 billion.
Back in 1987, however, the economy was smaller, so the trade deficit had a larger impact. "Now, the economy has grown and we are at full employment," says Aaron.
No matter what the deficit turns out to be next year, it is bound to get the attention of Congress as business begins to grumble. The grumbling usually takes the form of an official trade complaint about dumping - the sale of goods at below market value or the price in the home market.
Last week, the semiconductor industry filed an antidumping complaint. But, the most visible involves steel. The steel industry and the steel unions are running ads complaining about imports. It too has filed an antidumping suit.
"We will do everything we can to expedite consideration of those cases," says Aaron, who as head of the International Trade Administration (ITA) is also responsible for enforcing laws against unfair trade and ensuring compliance with US trade agreements.
Already, the Commerce Department is monitoring steel imports and prices. So far this year, Japanese imports in the first six months have doubled, and Russian imports have tripled.
Some of Aaron's biggest concerns are in Asia. Commerce Secretary William Daley was supposed to meet with the Chinese last week in Washington to discuss trade issues. But the meeting was rescheduled for next month.
Among the items under discussion: The Chinese wanted to rule out foreign bidding on 11 different power projects. After the US complained, the Chinese opened up the bidding on seven of the power plants. "As far as we are concerned, any [restriction] is too many," says Aaron.
In addition, Aaron says the Chinese have announced steps to preclude foreign firms from bidding on the modernization of the Chinese telecommunications network. And he says there are issues regarding tariffs and other restrictions on doing trade with the country. Because the Chinese trade gap is more than $1 billion per week, these issues are taking on greater importance.
"Our political relationship with China has improved enormously, and we think it has improved enough so that we can be frank about our trade concerns," says Aaron.
The US also has trade issues with Europe. The Commerce official says that soon the US will also announce a trade mission to Europe to try to smooth out some technical barriers to trade. Over the next few years, Aaron anticipates greater US exports across the Atlantic. "It's likely to be our most rapidly growing export market in the next couple of years."