Trade Deficit at all time high

[GeorgiaMiddie2]

This is what we mean when those opposed to Iraq say we need to worry about what's goin on here, rather than starting an unnecessary war overseas...

Trade Deficit at All-Time High of $61.04B
By MARTIN CRUTSINGER
AP Economics Writer
WASHINGTON — The U.S. trade deficit, aggravated by surging imports of oil and textiles, soared to an all-time high of $61.04 billion in February.

The Commerce Department said Tuesday that the February imbalance was up 4.3 percent from a $58.5 billion trade gap in January as a small $50 million rise in U.S. exports of goods and services was swamped by a $2.58 billion increase in imports.
Containers move on and off a ship at the APL terminal at the Port of Los Angeles Wednesday, March 16, 2005. The U.S. trade deficit, exacerbated by surging imports of oil and textiles, soared to an all-time high of $61.04 billion in February, the Commerce Department said Tuesday, April 12, 2005. (AP Photo/Reed Saxon)
The surging trade deficit is leading to an increase in protectionist pressures as American textile and clothing manufacturers are lobbying the administration to limit imports of Chinese textile and clothing goods to ward off a flood of products now that global quotas have expired.

For February, imports of textiles and clothing from China rose by 9.8 percent even though America's overall trade gap with China actually narrowed to $13.9 billion, down by 9.2 percent from a January deficit of $15.3 billion. The improvement reflected an increase in U.S. exports to China and declines in other import categories outside of textiles.

For the first two months of this year, the trade deficit is running at an annual rate of $717.2 billion, a full $100 billion above the record imbalance of $617.1 billion set for all of 2004.

Wall Street was jolted by February's record deficit, which was worse than had been expected. The Dow Jones industrial average was down 70 points in late-morning trading.

Economists said the sharp deterioration in the trade deficit would trim economic growth in the January-March quarter, reflecting the fact that so much consumer demand is being met with foreign goods.

"Oil prices are surging and it is likely that we will see more trade deficit records set," said Joel Naroff, chief economist at Naroff Economic Advisors.

Trade deficits of this magnitude have raised worries among economists about America's ability to continue to attract the foreign financing needed to cover the shortfall between exports and imports. If foreigners decided to hold fewer dollar-denominated investments such as stocks and bonds, it could trigger steep declines in U.S. stock prices and a sharp increase in interest rates.

Critics point to the soaring deficits as evidence that President Bush's free trade policies are not working and have instead contributed to the loss of 3 million American manufacturing jobs since 2000.

The Bush administration argues that the deficit primarily reflects the fact that the U.S. economy has been growing at a much faster pace than the economies of its major trading partners, pushing up imports while dampening demand for U.S. exports. Treasury Secretary John Snow was expected to use a Saturday meeting of finance officials from the Group of Seven major industrial countries to once again lobby for Europe and Japan to pursue more growth-oriented policies.

The U.S. dollar has been declining for three years, a fact that should help narrow the trade deficit by making imports more expensive to American consumers while making U.S. exports cheaper. However, economists say the dollar needs to fall further to deal with the widening trade deficit, and they are predicting a further increase in the trade gap this year.

The record February deficit of $61.04 billion surpassed the old record of $59.4 billion set last November.
Imports of goods and services rose by 1.6 percent to an all-time high of $161.5 billion.
Demand for foreign petroleum products shot up 10.3 percent to $18.2 billion, the second highest level on record, surpassed only by $19.6 billion in imports of petroleum last November.

The February increase reflected higher prices as crude oil climbed to $36.85 per barrel, compared to $35.25 in January, offsetting a drop in the volume of oil imports. Analysts said America's foreign oil bill is likely to climb even further in months ahead, reflecting further increases in global oil prices.

Exports were up by $50 million to a record $100.48 billion in February, reflecting increases in shipments of drilling and oilfield equipment, civilian aircraft and pharmaceutical products. These gains offset declines in sales of U.S.-made cars and auto parts and food.

The administration, at the urging of U.S. textile and clothing manufacturers, has begun investigations into whether to re-impose quotas on Chinese imports of various products to protect the domestic industry from market disruptions following the removal of global quotas that had restricted shipments to the United States for more than three decades.

___
April 12, 2005 - 1:11 p.m. EDT
Copyright 2005, The Associated Press. The information contained in the AP Online news report may not be published, broadcast or redistributed without the prior written authority of The Associated Press.

[culbrethlax10]

did u copy and paste all that or did u really type it

i was jw

[stegmakk]

Funny...I am taking international economics now, and this is a hot debate. I got into an argument with my teacher (not a good thing).
The US has lost millions of manufacturing jobs throughout the country, and while I despise Bush, it aint all his fault. NAFTA was a big problem. Free trade is a farce. There are barriers however big or small to help keep a balance. When you leave no barrier to moving production of goods to Mexico that can sell be sold to a US company and then in turn sold to anyone else, rather than produce in the US, it will. It costs MUCH less to produce something in Mexico. I have seen at least 4 plants close between US and Canada in favor of plants in Mexico, and that is just in 4 years at my current employment. This has a ripple affect, as current production facilities in the US that have unions to try and fight for raises, and better benefits, the companies tell them flat out no. That if they do not want the plant to close, they wil accept whatever pittance the company gives them, otherwise, they will just either purchase goods from Mexico or start a new facility there, and the US workers would then have no jobs.

[Longest]

What about the US consumers? They are profiting from lower-priced goods. If company X cuts the cost of widget production by 80%, they can and will cut the price of the widget. More consumers can buy said widgets. So my sympathy for laid off workers is tempered by a great many more consumers being able to afford more goods.

Dan

[GeorgiaMiddie2]

the problem here is, though dan, that whether prices go down or not, if Mr Consumer doesnt have a job in the first place because the jobs have been shipped off to mexico, he cant buy that lower priced widget anyhow. Realistically, Mr Consumer will just take a lower paying job, but in comparison to his new, lower wage job, that lower priced which will still cost him the same percent of his paycheck. Then, also, Mr Teenage Consumer wont be able to get that job at the car wash because Mr Consumer had to take a job at the car wash that he is over qualified for. To be honest with you, i'd like to see if widgets are cheaper now. I'd like to see if inflation has gone down or not... even though oil isnt factored into the equation for inflation, according to the bush administration...

[The Chariot]

did u copy and paste all that or did u really type it

i was jw

Trade Deficit at All-Time High of $61.04B
By MARTIN CRUTSINGER
AP Economics Writer
WASHINGTON — The U.S. trade deficit, aggravated by surging imports of oil and textiles, soared to an all-time high of $61.04 billion in February.

[stegmakk]

I agree with GM2...A lower cost of a good, will not neccassarily be good for the consumer if his new job pays less than before.
I was reading it is leading (slowly) to a bigger difference between the rich and the middle class.

[TheKOB]

The key isn't to put up protectionist barriers. You've gotta let business be business. If we can't compete, it'll only hurt the nation in the long run. The key is to do it slowly and wean us off of industries that we're being undercut in. Think about soccer balls. Say we had a soccer ball industry back in the early 1900's. If we just put up protectionist barriers, soccer balls would be at least $100, and we'd only be able to sell in the US, since all the other countries would buy from countries where the kids get paid pennies a day.

If you really want to help out heavy industry like factories etc, then drop the minimum wage and start paying american workers the same as 3rd world country workers. That's the only long term way to sustain industries.

Putting up trade barriers wouldn't really help our trade deficit either, since we'd just find other stuff to import, and wouldn't export anything. They'd hurt the importers, wouldn't help the exporters shipping american goods overseas. The idea is to bring up the exports, not lower the imports.

You guys probably said all that already though...

[stegmakk]

KOB...I am not talking about barriers in an isolationist sense...
I am talking about keeping small leveling barriers...
Just like the fed messes with the interest rate to try and keep the overall economy healthy (inflation of about 3% is actually a GOOD thing in theory)...a complete free trade system is not good...

[RockStar]

..... I have seen at least 4 plants close between US and Canada in favor of plants in Mexico, and that is just in 4 years at my current employment......

Letting Mexico into NAFTA was among the stupidest things either of our governments ever did.

[Longest]

KOB...I am not talking about barriers in an isolationist sense...
I am talking about keeping small leveling barriers...
Just like the fed messes with the interest rate to try and keep the overall economy healthy (inflation of about 3% is actually a GOOD thing in theory)...a complete free trade system is not good...

Blame that on the fiat money. Who decided that letting our money have no real discernible value was a good idea?

Complete free trade is not good? Well what is the right mix of free trade and unfree trade? How much socialism do we need to mix into it to find the "right" concoction?

Dan

[Longest]

I agree with GM2...A lower cost of a good, will not neccassarily be good for the consumer if his new job pays less than before.
I was reading it is leading (slowly) to a bigger difference between the rich and the middle class.

If his job pays less BUT goods are cheaper.... do you see where I'm going with this at all? :-)

Since we're on the topic of manufacturing, who decided that it's the right solution for one person to keep one job for 40 years? Too often, the people who complain in those industries are those that do not want to have to develop any new skills to compete in a rapidly evolving system of technological manufacturing. It is the responsibility of the individual to ensure he is marketable and competitive in the job market, not of government or to blame the economic system for it.

Trade unions were a fine idea a hundred years ago. And now the unions get a helluva deal for the employees. But let's consider just one union: the teacher's union. Possibly we should discuss the pros and cons of a union environment in that ONE field, that of public education, and we can possibly see if unions have begun to be harmful or not. I could be wrong and unions are keeping Big Business from raping the common man. But as fewer and fewer "common men" are working in jobs where unions were necessary in the first place, you might begin to see where I'm going with this.

Dan

[Longest]

the problem here is, though dan, that whether prices go down or not, if Mr Consumer doesnt have a job in the first place because the jobs have been shipped off to mexico, he cant buy that lower priced widget anyhow. Realistically, Mr Consumer will just take a lower paying job, but in comparison to his new, lower wage job, that lower priced which will still cost him the same percent of his paycheck. Then, also, Mr Teenage Consumer wont be able to get that job at the car wash because Mr Consumer had to take a job at the car wash that he is over qualified for. To be honest with you, i'd like to see if widgets are cheaper now. I'd like to see if inflation has gone down or not... even though oil isnt factored into the equation for inflation, according to the bush administration...

Tom works at Widgets R Us. He manufactures widgets. He has done so for 30 years. Than WRU decides to either a) outsource his job and others like it to Mexico; or b) they invent technology that will triple the manufacturing output while saving them the cost of paying 10 workers. Are you saying (a) should be illegal? What about (b), also illegal? Is unemployment THE most important factor an economy needs to be concerned with?

Whose fault is it that Tom has developed no further marketable or competitive skill while manufacturing widgets? Is it the fault of WRU? The "government"? Capitalism? The laws of supply and demand govern wages just as they govern all pricing. A glut of people with manufacturing experience and NOTHING else to fall back on means wages are going to go down. Same as if a glut of fruit hits the shelves. Is the plan now to ignore this most basic of economic laws because 100% employment is the holy grail? I just want to be clear on what goal the economic system in question should be pursuing before we move on to how each one can do it. Btw, I am really enjoying this debate.

Regards
Dan

[stegmakk]

Complete free trade is not good? Well what is the right mix of free trade and unfree trade? How much socialism do we need to mix into it to find the "right" concoction?
Dan
That ain't for you or me to decide...I'd leave that to an outside source.

[RockStar]

.....Since we're on the topic of manufacturing, who decided that it's the right solution for one person to keep one job for 40 years? Too often, the people who complain in those industries are those that do not want to have to develop any new skills to compete in a rapidly evolving system of technological manufacturing........

Dan

This is also an extremely valid point. When a trade union can fix it so some guy who spins four screws every minute and a half is worth $30 per hour plus overtime, and his answer to every request from the foreman is:

"That's not in my job description"

Well, it's really tough to competitively price your products!

[stegmakk]

If his job pays less BUT goods are cheaper.... do you see where I'm going with this at all? :-)

Since we're on the topic of manufacturing, who decided that it's the right solution for one person to keep one job for 40 years? Too often, the people who complain in those industries are those that do not want to have to develop any new skills to compete in a rapidly evolving system of technological manufacturing. It is the responsibility of the individual to ensure he is marketable and competitive in the job market, not of government or to blame the economic system for it.

Trade unions were a fine idea a hundred years ago. And now the unions get a helluva deal for the employees. But let's consider just one union: the teacher's union. Possibly we should discuss the pros and cons of a union environment in that ONE field, that of public education, and we can possibly see if unions have begun to be harmful or not. I could be wrong and unions are keeping Big Business from raping the common man. But as fewer and fewer "common men" are working in jobs where unions were necessary in the first place, you might begin to see where I'm going with this.

Dan
I see where you are going with the top part...Not the second part...
Let me give you a little example why the first part wont work.
Say a VHS tape, used to cost a manufacturer $0.80. They might sell to a retailer (WalMart for $0.90). WalMart has an everyday price of $1.00. Over the next two years the RETAILER has demanded a cost of $.70, and so has other retailers. In order to stay competative that manufacturer must outsource their product now, and are paying $0.60 (doesn't include warehousing, or transportation, or overhead, etc...just payment). The retail price to the consumer stays at $1.00 throughout. In order to lower the PERCEIVED cost, they make it a 10 pack and lower the price marginally. (10 pack at old cost would be $7.00 with retail price of $10.00...new cost would be $6.00 (about 14% decrease) with a retail of $9.00 (about 10% decrease))Note that the cost continually decreased through the 2 years, while retail stayed the same, and then eventually was lowered but not as much as the cost.
This HAS happened (not the specific customers and prices to protect them and me).This is where I am coming from where costs are decreasing quicker than retail. And if it happens all over in my business, I imagine the same goes for most.

[Thrillhouse]

http://www.fastcompany.com/magazine/77/walmart.html

Here’s a good article that illustrates, among other things, the problem with Wal-Mart and pickles. It’s a really interesting read. (I think I may have posted it before.)

I personally would argue that it’s not the government’s responsibility to keep this in check; however the people who would keep this in check, the consumers, are almost always going to go for cheaper prices and the argument could be made that they can’t be trusted with the responsibility.
The most interesting thing is Wal-Mart drives down prices at the expense of profits for not only the manufactures of the products they sell, but themselves as well. I’m not saying Wal-Mart doesn’t make money, we all know they do; but Wal-Mart forces manufactures to lower their prices so much they have to find ways to cut costs, which is usually found in cheaper labor outside the US, but even when they do that, Wal-Mart demands the prices drop even more because so much money is being saved in manufacturing. However, like Stegmakk pointed out, the retailer probably won’t drop the price as much as they forced the manufacture to. Nonetheless, the consumer still benefits.

A by-product of any tariffs or quotas on imports would result in higher prices for consumers, which is going to go over about as well as a turd in a punch bowl for those of us that buy stuff.

[GeorgiaMiddie2]

Tom works at Widgets R Us. He manufactures widgets. He has done so for 30 years. Than WRU decides to either a) outsource his job and others like it to Mexico; or b) they invent technology that will triple the manufacturing output while saving them the cost of paying 10 workers. Are you saying (a) should be illegal? What about (b), also illegal? Is unemployment THE most important factor an economy needs to be concerned with?

Whose fault is it that Tom has developed no further marketable or competitive skill while manufacturing widgets? Is it the fault of WRU? The "government"? Capitalism? The laws of supply and demand govern wages just as they govern all pricing. A glut of people with manufacturing experience and NOTHING else to fall back on means wages are going to go down. Same as if a glut of fruit hits the shelves. Is the plan now to ignore this most basic of economic laws because 100% employment is the holy grail? I just want to be clear on what goal the economic system in question should be pursuing before we move on to how each one can do it. Btw, I am really enjoying this debate.

Regards
Dan

Neither should be illegal, but you have to think about ethics and morals in business. America has always been run on the fact that we take care of our own people. now, when we start outourcing jobs to mexico, it screws over the american worker, who still has the skills for the job, but just demands a dollar more/hr in his paycheck. as for situation B, that's just Tom's fault for not keeping up with the market and technology. I have no pity for Tom here.

[Longest]

Neither should be illegal, but you have to think about ethics and morals in business. America has always been run on the fact that we take care of our own people. now, when we start outourcing jobs to mexico, it screws over the american worker, who still has the skills for the job, but just demands a dollar more/hr in his paycheck. as for situation B, that's just Tom's fault for not keeping up with the market and technology. I have no pity for Tom here.

Is it unethical and immoral for an employer to want to make money? If I read between the lines of your post, I think you are saying it is ethical for an employer to make money off of technological advancements that cost people jobs but it is unethical to make money by outsourcing, even though the end result in both is some US citizen is unemployed. Is that what you are saying?

Dan

[Longest]

I see where you are going with the top part...Not the second part...
Let me give you a little example why the first part wont work.
Say a VHS tape, used to cost a manufacturer $0.80. They might sell to a retailer (WalMart for $0.90). WalMart has an everyday price of $1.00. Over the next two years the RETAILER has demanded a cost of $.70, and so has other retailers. In order to stay competative that manufacturer must outsource their product now, and are paying $0.60 (doesn't include warehousing, or transportation, or overhead, etc...just payment). The retail price to the consumer stays at $1.00 throughout. In order to lower the PERCEIVED cost, they make it a 10 pack and lower the price marginally. (10 pack at old cost would be $7.00 with retail price of $10.00...new cost would be $6.00 (about 14% decrease) with a retail of $9.00 (about 10% decrease))Note that the cost continually decreased through the 2 years, while retail stayed the same, and then eventually was lowered but not as much as the cost.
This HAS happened (not the specific customers and prices to protect them and me).This is where I am coming from where costs are decreasing quicker than retail. And if it happens all over in my business, I imagine the same goes for most.

Is WalMart controlling more than 50% of all spending in this country? There are still plenty of other places where goods are available and to my knowledge, only WalMart has been continually documented as aggressively forcing manufacturers to their will. Maybe there are others but so far I have not heard about them; that does not mean they don't exist which is why we're having this discussion. More and more people are buying online, direct from manufacturers in some cases, and those prices ARE down.

So the question appears to have become: Which is more important, full employment or low prices? IS full employment the holy grail silver bullet of an economic system?

Dan

[Longest]

That ain't for you or me to decide...I'd leave that to an outside source.

You and I vote every 4 years or 6 years, it is most certainly for you and I to decide. What makes you think an "outside source" i.e. the Congress, knows any better than you or I?

Dan

[stegmakk]

Is WalMart controlling more than 50% of all spending in this country?
Its not just WalMart...trust me...they are the easiest and biggest target ...but other giants Target, BestBuy, even CVS/Walgreens...and by 1 getting the lower cost, all retailers then of course demand us the same or even lower.

[stegmakk]

You and I vote every 4 years or 6 years, it is most certainly for you and I to decide. What makes you think an "outside source" i.e. the Congress, knows any better than you or I?

Dan
Oh heck no...no one in government that can be corrupted is what i meant by outside source...something like the Fed, or an economic institute or something like that...

[stegmakk]

http://www.epinet.org/content.cfm/briefingpapers_nafta01_index
http://www.cepr.net/publications/NAFTA_at_Ten.pdf
http://www.citizen.org/trade/nafta/

The economy is a VERY tough subject to tackle as there are many sides to both issues, not to mention the thousands of factors that go into "the economy". I have seen evidence on both sides, but due to my first hand experiences all being negative, plus most of the positives coming from government sites, I'm a little leary.

[GeorgiaMiddie2]

Is it unethical and immoral for an employer to want to make money? If I read between the lines of your post, I think you are saying it is ethical for an employer to make money off of technological advancements that cost people jobs but it is unethical to make money by outsourcing, even though the end result in both is some US citizen is unemployed. Is that what you are saying?

Dan

No, the difference is that, with case b, the employer is now paying another company for their inventions, which, in turn creates more jobs with the company creating the new technology. So, American jobs are lost, but new american jobs are also created. by outsourcing, American jobs are lost, and only the Mexican economy benefits from the outsourcing. The american economy is actually hurt because the business owner will not spend the little bit of extra money he makes like those 10 workers who lost their jobs would have.

[Longest]

No, the difference is that, with case b, the employer is now paying another company for their inventions, which, in turn creates more jobs with the company creating the new technology. So, American jobs are lost, but new american jobs are also created. by outsourcing, American jobs are lost, and only the Mexican economy benefits from the outsourcing.


I do not see an immorality in (a) and not in (b). You are now suggesting that the real sought-after moral goal is spending money into the economy. Btw, outsourcing WILL create American jobs, positions the employer can afford to create during expansion and growth, positions that will create a more sizeable payoff in the bottom line. Not to mention we have not discussed how many jobs are actually being outsourced.
http://www.economist.com/agenda/displayStory.cfm?story_id=2454530
http://www.blogsource.org/unemployment/
http://www.keralanext.com/news/indexread.asp?id=107051
http://www.careerjournal.com/columnists/managersjournal/20040512-managersjournal.html
http://www.heritage.org/Research/Labor/bg1773.cfm


The american economy is actually hurt because the business owner will not spend the little bit of extra money he makes like those 10 workers who lost their jobs would have.

What will the business owner do with the money, hide it in his mattress? Plenty of business owners use the money to grow their business (an expenditure) or to increase their personal accumulations (another expenditure) or to buy shares of stock (an investment in other businesses). What proof can you offer that the business owner will not spend the money in any way?

Dan

[Longest]

Oh heck no...no one in government that can be corrupted is what i meant by outside source...something like the Fed, or an economic institute or something like that...

You trust the Fed to run it? The same geniuses behind fiat money? Riiiiiiiiiight. :-) WHICH economic institute? I doubt you and I can even agree on that :-)

Dan

[Longest]

http://www.epinet.org/content.cfm/briefingpapers_nafta01_index
http://www.cepr.net/publications/NAFTA_at_Ten.pdf
http://www.citizen.org/trade/nafta/

The economy is a VERY tough subject to tackle as there are many sides to both issues, not to mention the thousands of factors that go into "the economy". I have seen evidence on both sides, but due to my first hand experiences all being negative, plus most of the positives coming from government sites, I'm a little leary.

I don't trust the government to tell us the truth. I wish I had more faith in our elected officials but I don't. Their one constant goal is to continue to be reelected therefore the truth is quite expendable to achieve those ends.

Outsourcing is one situation, NAFTA is another. Your links are very interesting but I thought we were arguing the former. If we're switching gears that's fine, just want to be sure. If you're linking the arguments together, also fine, I just missed where that link was formed.

Regards
Dan

[GeorgiaMiddie2]

What will the business owner do with the money, hide it in his mattress? Plenty of business owners use the money to grow their business (an expenditure) or to increase their personal accumulations (another expenditure) or to buy shares of stock (an investment in other businesses). What proof can you offer that the business owner will not spend the money in any way?
Dan

Sorry, you misunderstood me. What I'm tryin to say is, that the money the business owner saves wont be nearly as much as the money the 10 workers lose. so, therefore, less money is pumped into the economy. even if the business owner does invest the money, which also helps the economy, it wont be as much money as the workers would have spent.