U.S. trade deficit narrows slightly

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Posted 8:11AM on Saturday, May 18, 2002

WASHINGTON - America's trade deficit improved slightly in March as growth in exports, led by a big jump in sales of commercial aircraft, outpaced growth in imports. The Commerce Department reported Friday that the March deficit narrowed to $31.6 billion, 0.4 percent lower than the February gap of $31.8 billion, which had represented the biggest imbalance in nearly a year. The gap was narrowed by a 0.6 percent rise in exports of goods and services, led by gains in foreign demand for commercial aircraft, American-made autos and auto parts and computers. Imports were also up, at a slower rate of 0.3 percent, led by a 15.7 percent increase in America's foreign oil bill. The average price of imported crude oil rose by $2.62 per barrel, the biggest one-month jump in nearly 12 years. For all of 2001, America's trade deficit shrank by 7.5 percent to $347.5 billion, down from an all-time high of $375.7 billion in 2000. In the first three months of this year, the deficit was running at an annual rate of $367 billion. Many economists are predicting that the deficit will widen again this year as an improving U.S. economy sucks in imports at a faster rate while American exporters face troubles from weaker recoveries overseas and an overvalued dollar. Joel Naroff, head of a Pennsylvania forecasting firm, said he was encouraged by the rise in U.S. exports, the third consecutive monthly gain, and an increase in imports of high-tech products. ``Strong gains in exports and imports of advanced technology products point to a rebound in investment and a stirring in the world economy,'' he said. Merrill Lynch economist Gerald Cohen said the small improvement in the March trade deficit would probably boost overall economic growth in the January-March quarter to 6 percent at an annual rate, even stronger than the 5.8 percent growth first reported. For March, the United States registered its biggest deficit with Japan, an imbalance of $5.7 billion. The U.S. deficit with China declined in March to $5.6 billion, a drop of 13.4 percent. The overall deficit of $31.6 billion reflected export sales of $79.19 billion, up 0.6 percent from the February level. Exports of civilian aircraft climbed by $635 million, while sales of autos and auto parts were up by $149 million. These gains helped offset a $368 million decline in sales of agriculture products, which dipped to $3.93 billion, led by a drop of $227 million in soybean shipments. Imports rose by 0.3 percent to $110.8 billion. In addition to the $928 million increase in oil imports, shipments of industrial machinery were up $143 million and purchases of foreign aircraft rose by $95 million. Those increases were offset somewhat by a $634 million decline in imports of foreign autos and auto parts. The U.S. deficit with Mexico, the country's second-biggest trading partner, surged 27.2 percent to a record $3.46 billion. The deficit with Canada, America's other partner in the North American Free Trade Agreement, declined by 1.1 percent to $3.9 billion. Rep. Sherrod Brown, D-Ohio, a staunch opponent of administration trade policy, said that the big increase in the deficit with Mexico showed the failure of the NAFTA agreement to help American workers. He said U.S. automakers are shipping parts down to Mexico, where they are assembled into cars by lower-paid Mexican workers for shipment back to the United States. ``It is a classic example of the negative effects NAFTA has perpetrated on our domestic manufacturing sector and American workers,'' Brown said.