For three straight months ending in November the trade deficit improved slightly to help the American economy. In November the trade deficit fell1% to approximately $58.2 billion which is the lowest monthly total since July of 2005. Likewise the deficit hasn’t declined for three months in a row since 2003.
The declining trade deficit is good news for American businesses and workers. It means that the U.S. is reducing its imports and improving its exports. Yet these three months don’t give a complete and accurate picture of the situation. The total 2006 deficit was $765.4 billion which was worse than the $716.7 billion in 2005. For five straight years the American trade deficit was worsening.
However, some positive things also happened which include the decreasing of items for the holiday season, improved airplane sales (including parts), and a reduction in oil prices. These three items account for most of the reduction. Cheap oil had an added benefit it terms of decrease production costs of materials, reducing imports of oil, and increasing the profitability of businesses.
Some major concerns still loom with the Chinese still dumping products on American ports. The imbalance with China climbed from $202 billion in 2005 to $213 billion in 2006. China has been growing and is set to surpass the U.S. in terms of GNP somewhere around 2015. Thus, China will be a major world power and force for the United States to deal with.
The United States imports have been raising since the 1960’s where we the U.S. was the world’s leading manufacturer of goods. During this period the U.S. ran a trade surplus of around 1% of our Gross National Product. Since this time these European countries and Japan have rebuilt their empires and are competing directly with the U.S. for customers.
Exports are a major concern for the now mature United States. Despite what analysts and politicians say, exports and profit are as necessary for a country as they are for an individual business. If a business doesn’t make money because it buys everyone else’s products, it is likely that great economic hardship will happen in the future. In terms of national economics it may be decades for this trade deficit to catch up to us but it will someday.
Murad Ali is a two-time published author, a human resource management professional, and a ph.d. candidate. For more articles please visit http://www.thenewbusinessworld.blogspot.com | | Author Info: Murad Ali is a two-time book author, a human resource management professional, and a Ph.D. candidate. Please visit http://www.thenewbusinessworld.blogspot.com for more articles.
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