The overall U.S. trade deficit is down 7 percent through the first five months of 2007, but the gap between what the country buys from and sells to China grew by $14.1 billion, according to Commerce Department figures.
The January-to-May U.S. trade deficit with China totals $96.34 billion, up from $82.23 billion for the same time period last year — an increase of 17.16 percent. At its current pace, the U.S. trade deficit with China will exceed $270 billion in 2007, up from last year’s record of $232 billion.
“With the U.S. dollar hitting rock bottom against the Euro and other currencies, the U.S. trade deficit should be falling much faster,” said American Manufacturing Trade Action Coalition Executive Director Auggie Tantillo.
“The reason why the U.S. trade deficit remains sky high is because the U.S. government shirks from confronting the predatory trade practices of other countries,” he said. “The playing field has been tilted against U.S. producers for too long. The predictable disastrous result has been the loss of more than three million middle-class manufacturing jobs.”
Tantillo says foreign border-adjusted taxes, mostly value-added (VAT) taxes, rebated on exports and imposed on imports disadvantaged U.S. producers by $294 billion and service providers by $85 billion in 2005.
“That’s an estimated $379 billion disadvantage for just a single year. As for individual countries, the estimated disadvantage with China was almost $48 billion. All of those numbers have only grown since then. VAT fairness critically is needed.”
To address this problem, AMTAC has been urging Congress to take up H.R. 2600, the Border Tax Equity Act, introduced by Congressmen Bill Pascrell, D-N.J., Duncan Hunter, R-Calif., Mike Michaud, D-Maine, and Walter Jones, R-N.C.
“This legislation would negate the price advantage gained by foreign competitors from VAT rebates and assessments,” said Tantillo.
“Currency misalignment, especially as blatantly practiced by China, must be stopped now. While the dollar has been tanking against the Euro and other currencies, China persistently maintains its peg. Between this advantage and the VAT advantage, it is no wonder that China has accumulated more than $1.3 trillion in foreign currency reserves and is running record trade surpluses.”
The currency issue has been debated long enough, he said, adding Congress should pass H.R. 2942, the Fair Currency Act of 2007 introduced by Congressmen Tim Ryan, D-Ohio, Hunter.