U.S. trade deficits continue, though at a slower pace

U.S. trade deficits continue, though at a slower pace

Use less oil. Sell more of our stuff. Buy less of theirs.

That’s a three-point program for what the United States and individual Americans can do to rein in the U.S. trade deficit, which shrank last year, but remains dangerously high.

Of course, any three-point program is more difficult than it sounds. And there are always many more points to be added, most of which are also easier to say than to accomplish.

And while the trade deficit is not the most important or difficult issue facing Washington, D.C., these days, it is one of the most important, and it must be a part of any comprehensive plan to right the national economy.

The release of December’s trade figures by the U.S. Census Bureau showed that the United States sold $142.7 billion worth of goods and services, and bought $182.9 billion, for a monthly trade deficit of $40.2 billion. That’s about $1.7 billion less than the same month a year earlier.

The even better news was that for all of 2009, the deficit totaled $380.6 billion, the smallest imbalance in eight years and a whopping $315 billion less than the annual deficit in 2008. The bad news is that the improvement was attributable to the deep recession’s cut into imports — and economists predict the deficit will rise in 2010 as U.S. demand for imports outpaces U.S. export sales. In other words, American consumers tightened their belts out of necessity, but can’t wait to return to their profligate ways.

The big winner

Even in a year that saw imports decrease, our trading “partner,” China, remained far and away the largest beneficiary of America’s lopsided buying and selling patterns.

We continue to spend four times as much on Chinese goods and services than the Chinese spend on American goods and services. We bought $296 billion from them; they bought $69 billion from us, for a deficit of $226 billion. That’s almost 60 percent of the deficit. Our next nine highest deficits, in descending order, were with Mexico, Japan, Germany, Ireland, Canada, Venezuela, Nigeria, Italy and Malaysia.

Venezuela, whose president since 1998, Hugo Chavez, has delighted in demonizing the United States and undercutting its influence in Latin America in every way that he can, is the beneficiary of the U.S. insatiable thirst for imported oil.

Conserving energy and being more careful consumers are steps that Americans can take to reduce the trade deficit, but the most meaningful action must come as part of U.S. trade policy. The Obama administration has taken some encouraging action, but, frankly, no U.S. president is going to be recklessly confrontational at a time when China holds about $800 billion in U.S. debt and a combination of trade deficits and deficit spending continues to add to the amount of debt China holds.

But any president must be realize that China has shown little interest in leveling the playing field. It continues to maintain an artificially low value on its currency, thus making what it exports to the United States cheaper and what the U.S. sends to China more expensive. And it has not been aggressive in cracking down on intellectual piracy that robs United States innovators of income they should receive.

An instructive tale

A snapshot into how China intends to operate in matters of world trade can be seen in an Associated Press story about how China, the world’s biggest steel producer, is cracking down on unauthorized steel mills. These mills produced about 45 percent of the country’s 568 million tons of crude steel. China plans to shut down the independents, or merge them into the big, authorized steelmakers.

And why are they doing this? Because the authorized mills were willing to pay more on the world market for iron ore than the Chinese government wants to see its mills pay. The largest maker of steel in the world wants to be able to drive down the price it pays for ore. The ore sellers will either be forced to take a loss or to pass on their costs to buyers from other countries with less clout.

It’s that kind of hard ball that allowed China to surpass Germany last year as the world’s largest exporting nation. And it’s that kind of hard ball that free traders are willing to condone or ignore, to the detriment of everyone except China.