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The trade problem

In February, the U.S. trade deficit jumped to $12.11 billion. Coupled with January’s $11.62 billion gap, the latest figure puts the deficit on a trajectory to produce the worst annual gap in nearly a decade.
Release of the February numbers came at a particularly awkward time for the White House. They were made public as President Bill Clinton was in Chile for the second Summit of the Americas.
A key focus at the summit: creation of a free-trade zone spanning the Western Hemisphere–a proposal broadly supported by the leaders of the 34 nations taking part in the summit but strongly opposed by many Capitol Hill lawmakers.
The yawning trade deficit will make these free-trade foes even less inclined to give President Clinton the fast-track negotiating authority he needs to pursue a hemispheric accord. But free trade is not the problem for U.S. business: Lack of it is the problem.
The sore spots for American exporters are Japan and the rest of Asia, where a severe financial crisis is taking its toll. The deficit with Japan alone rose in February to $5.29 billion from $4.36 billion the month before.
The U.S. trade with Japan is many things, but unfettered is not one of them.
Another point that leaps out from the February numbers: One area of clear progress is trade with Mexico, a partner in the North American Free Trade Agreement. With Mexico’s economy gaining strength, the U.S. deficit with our southern neighbor narrowed by nearly one-third.
But here’s the real point about the global push toward free trade: The United States cannot afford to stay on the sidelines as other nations move to tear down barriers to cross-border business. When President Clinton’s bid to win renewed fast-track authority stalled last fall, Canada–which has inked a free-trade pact with Chile and is eyeing similar deals with other South American countries–noted the opening this created.
Many foes claim free trade ignores or aggravates social ills. The Summit of the Americas specifically addressed this concern, approving an agenda of reforms focused on improving education and human rights, and reducing poverty.
These goals are not incompatible with free trade. In fact, economic growth is needed to achieve them.
–Rochester Business Journal


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