U.S. trade deficit in October soared

AP Economics WriterWASHINGTON (AP) -- America's trade deficit, returning to more normal patterns after the disruptions caused by the terrorist attacks, soared to $29.4 billion in October, the biggest one-month jump in more than eight years.

The Commerce Department said Wednesday that the trade gap was 54.8 percent higher than a revised deficit of $19 billion in September, which had been the smallest deficit in more than two years.

America's deficit with China surged to an all-time high for the imbalance with any country while the deficit with Japan rose to the highest level in a year.

The huge swing in the two months occurred because of the way the government accounted for payments foreign insurance companies will make on damage claims from the Sept. 11 attacks.

Those claims payments charged to foreign insurance companies, under the government's accounting system, reduced the overall September trade deficit by $11 billion. However, since all the claims were treated as if they were paid in a single month, the October deficit returned to the high levels of the past two years.

So far this year, the trade deficit is running at an annual rate of $351 billion, slightly below the record $375.7 billion set last year.

The Bush administration had hoped to make progress narrowing America's huge trade deficit, which had soared to historic highs during the Clinton administration, by boosting U.S. exports.

However, exports of goods and services are down by 4.2 percent this year. That puts the country on track for the first annual decline in exports since 1998, a year in which the Asian currency crisis sharply cut into the ability of American companies to sell overseas.

The reason the deficit has narrowed slightly this year even though exports are down is that imports have fallen at a slightly faster rate, dropping 4.5 percent in the first 10 months of this year, compared to the same period in 2000.

The fall in imports is attributed to America's first recession in a decade. The recession, which officially began in March, has depressed the demand by consumers and companies for foreign goods as well as domestic products.

For October, America's deficit with China shot up to $9.15 billion, a 7.6 percent increase over September, and the biggest one-month shortfall for any country on record.

After 14 years of trying, China gained entrance into the World Trade Organization this fall. The Bush administration is hoping that China's WTO membership, which requires it to lower its high barriers against foreign goods, will boost U.S. export sales and help lower the U.S. deficit.

The U.S. deficit with Japan, which in the past had been the greatest imbalance, was up by 29.8 percent to $6.96 billion, highest in a year.

President Bush scored a big trade victory earlier this month when the House passed by the margin of a single vote his request for legislative authority to negotiate sweeping new trade agreements.

He hopes to use the negotiating authority in a new round of WTO global trade talks and in an agreement to create the world's largest free- trade zone covering all democratic countries in the Western Hemisphere. The trade authority, formally known as fast track, is expected to win Senate approval early next year.

The $29.4 billion October trade deficit was the largest since a $30.2 billion deficit in July. The 54.8 percent surge in October's deficit was the biggest one-month increase since a 63.5 percent jump in June 1993.

Exports of goods and services in October were up 0.7 percent to $77.3 billion, reflecting increased sales of U.S. farm products, industrial supplies, civilian aircraft and computer chips. Those gains helped to offset declines in exports of U.S. autos and auto parts.

Imports of goods and services were up 11.2 percent to $106.8 billion, reflecting the big drop in foreign insurance claims payments.

The deficit in goods alone actually dropped by a small 1.5 percent from $35.53 billion in September to $34.9 billion in October.

Imports of foreign cars and auto parts, computers, civilian aircraft and consumer goods such as televisions were up in October although America's foreign oil bill fell by 7.1 percent to $7.9 billion. The volume of imported crude oil rose in October but the price per barrel fell to an average $19.94, down from September's level of $22.99.

The U.S. deficit with the 15-nation European Union rose by 16.1 percent in October to $6.96 billion but the imbalance with Canada, America's biggest single trading partner, fell by 10.7 percent to $3.79 billion. The deficit with Mexico declined by 12.8 percent to $2.59 billion.

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Commerce's trade report: http://www.census.gov/foreign-trade/www/