EPI’s International Picture for February 11, 2010
By Robert E. Scott, EPI Senior International Economist and Director of International Programs
The U.S. Census Bureau reported recently that the U.S. goods and services trade deficit fell from $695.9 billion in 2008 to $380.7 billion in 2009, a decline of $315.3 billion (45.3%). The historic collapse in global trade reflects the effects of the recession and financial crisis on both the demand for goods and services, and the impact of widespread shortages of loans needed to finance trade. Recent increases in monthly trade deficits reflect improving market conditions. The monthly goods and services trade deficit increased from $36.4 billion in November to $40.2 billion in December.
Goods trade deficit falls at a slower rate1
The goods trade deficit fell from $840.3 billion in 2008 to $517.0 billion in 2009, a decline of $323.4 billion (38.5%). A decline in net oil imports was responsible for slightly more than half (56%) of the fall in the goods trade deficit in 2009. Falling petroleum imports were largely explained, in turn, by a 40.2% decline in the average price per barrel of petroleum imports in 2009. The U.S. non-oil goods trade deficit, which is dominated by manufactured products, fell from $387.8 billion in 2008 to $283.0 billion in 2009, a decline of 27%. China’s share of the U.S. non-oil goods trade deficit jumped from 68.6% in 2008 to 80.2% in 2009. China’s share of the non-oil goods trade deficit has tripled since 2000, as shown in the Figure below.
China has captured a growing share of U.S. and world markets for manufactured products through a wide array of unfair trade practices including currency manipulation, export subsidies, widespread suppression of worker rights and wages, and tariff and non-tariff barriers to exports. It has purchased massive volumes of foreign exchange over the past decade in order to suppress the value of its currency. China’s total foreign exchange reserves increased $453 billion to a total of $2.4 trillion in 2009. China took advantage of the rest of the world during the financial crisis by increasing its share of U.S. markets for manufactured products. The United States should take a leadership role in organizing an effort to end China’s currency manipulation and other unfair trade practices.
1. At this date, detailed information on trade by country and product in 2009 is only available for goods trade.