US trade deficit up on oil price

 11 May 2011 Last updated at 14:38 ET  Oil prices rose sharply in March due to the conflict in Libya, and rose further in April The US saw a widening trade deficit in March thanks largely to the increasing cost of the country's oil imports.

The $48.2bn (￡29.5bn) shortfall was up from $45.4bn a month earlier, data from the Commerce Department showed, and beat expectations of just $47bn.

However, excluding trade in petroleum products, the deficit was only $16.9bn and had fallen since the month before on a seasonally-adjusted basis.

Exports grew 4.6% to $173bn - surpassing their pre-recession high.

The country's exports saw their biggest monthly gain in 17 years, led by food and beverages, and industrial supplies.

Crude oil prices increased sharply at the end of February thanks to the conflict in Libya, and this has been reflected in the rising cost of imports for the US.

They rose even further in April, and despite the recent sharp sell-off in commodity markets, remain close to the levels seen in March.

The news pushed the dollar sharply higher against most currencies, as the strong export performance brought forward expectations for when the US Fed will start raising interest rates.

The trade figures were released at the same time as positive jobs data from the Labor Department that showed a rise in the number of job openings in March.

The stronger dollar helped to bring the price of US sweet light oil - which is measured in dollars - down 4.5%.

Trade Deal With Panama Clears Hurdle Over Taxes

WASHINGTON — The White House announced on Tuesday that Panama had satisfied a final condition for a free-trade pact with the United States, smoothing the way for President Obama to seek Congressional approval for three trade agreements inherited from the Bush administration and now central to his own job-creation agenda.

“We view this agreement as creating a more level playing field for U.S. exporters and also for U.S. investors,” Miriam Sapiro, the deputy United States trade representative, said in a conference call with reporters.

Michael Froman, Mr. Obama’s deputy national security adviser for international economics, said the White House had begun discussions with Congressional leaders to schedule action soon on the agreement with Panama and those with Colombia and South Korea. While Republicans were receptive and business groups applauded the development, Mr. Obama faces opposition from his Democratic Party and its union allies.

The last hurdle for the Panama deal was cleared on Monday when the two countries agreed to exchange tax information; the United States has complained in the past that Panama was a haven for income-tax evasion.

The end to the Panama negotiations followed the administration’s tentative agreement earlier this month with Colombia, after that country made concessions on labor rights and protections, and its deal late last year with South Korea after it made concessions on trade in beef and autos.

Republican leaders had said the Obama administration needed to propose legislation adopting all three trade agreements before they would consider any of them. Senate Republicans are also blocking confirmation of nominees for commerce secretary or trade-related posts until then.

Representative Dave Camp, a Republican of Michigan who is chairman of the House Ways and Means Committee, which handles trade legislation, said in a statement that the Obama administration should send Congress the paperwork for legislation on the trade agreements in time for action by July 1.

“U.S. job creators and workers are every day put at a disadvantage to foreign competitors from countries that have already concluded trade agreements without us,” Mr. Camp said. “The more we delay, the more we lose.”

As on most trade legislation, the Republicans enjoy maximum leverage because Mr. Obama will not be able to rely on Democrats’ support in Congress. This week the head of the A.F.L.-C.I.O., Richard Trumka, warned that the union would include the three trade votes on its influential “scorecard” of members of Congress, subtracting points for free-trade votes.

Mr. Obama, as a candidate for president, opposed all three Bush-era trade accords and Congress, then controlled by Democrats, refused to approve them. Since then, however, his administration has negotiated side agreements with all three countries to satisfy Mr. Obama’s criticisms, especially on labor rights. He also has made the trade pacts a priority as he seeks to improve relations with business and to reach his goal of doubling exports by 2014 to create jobs in export industries like agriculture, manufacturing and financial services.

But the Colombia deal holds a final wrinkle for pushing ahead on the three trade agreements, administration officials acknowledged. Colombia agreed to an “action plan” for protecting labor unionists from the violence and abuse many have suffered. The action plan sets a timetable for compliance, though Mr. Froman said the administration would not insist that Colombia reach every goal before it sends legislation to Congress.

According to the White House, the deal with Panama, whose economy is one of the fastest growing in Latin America, will eliminate many tariffs on American agricultural, consumer and industrial goods at a time when trade rivals like Canada and the European Union nations are making inroads in the region.

It also would open opportunities for heavy equipment manufacturers on $15 billion in Panamanian infrastructure projects, including an expansion of the Panama Canal. A representative of Caterpillar joined the White House call with reporters, taking the chance to thank the administration officials and tell them the news was “playing well in Peoria” — where Caterpillar is based.

 

Slow Payers Hinder Trade in Europe

ZARAGOZA, SPAIN — In 2001, an agricultural co-op here was supplying truckloads of wheat to an Italian pasta maker. At first, no one at the Spanish co-op, Arento, was much alarmed when the pasta factory in Milan fell behind in its payments.

The co-op did not cut off the credit until the pasta company owed €1 million, or more than $1.4 million today, never realizing how hard it might be to collect a debt in another country in the European Union. But now, a decade later, having spent years in the courts and tens of thousands of euros on legal bills, Arento has recovered only half of what was owed.

“We came face to face with the Italian legal system,” said Luis Navarro Olivares, Arento’s director general. “The trips to Milan were Kafkaesque. Really, Italy is too far away on a cultural level, a legal level and an administrative level.”

In theory, the European Union is one gigantic economic zone of about 500 million consumers all integrated into the world’s biggest trading bloc. But the ideal is still far ahead of the reality, particularly for businesses that end up trying to collect debts across the Union’s many borders. There are still 27 different national legal systems at work in the bloc, each with its own procedures for handling claims, property attachment and bankruptcies.

European officials say at least €55 billion a year in debt is simply being written off, much of it because businesses find it too daunting to press expensive, confusing lawsuits in foreign countries.

Officials and business leaders say they believe that debt collection problems are a profound deterrent to commerce within the European Union and one of the reasons that job creation and wealth generation falls consistently behind the United States, where pursuing debts across state lines is a comparatively easy task.

With much of Europe still caught in an economic slump and several countries weighing down the bloc’s growth prospects because of huge sovereign debt problems of their own, E.U. officials are starting to circulate proposals for fixing this comparatively simple problem, in hopes of yielding a quick, cost-free stimulus to Europe’s financial health.

Debt collection is just one example of the shortcomings of a market which, for legal, linguistic and cultural issues, rarely functions as a single space. Professional qualifications in one country often are not recognized in another, for example, and local business regulations frequently make it hard for Europeans to set up shop in another E.U. country.

A more effective single market, the Union officials say, could generate €60 billion to €140 billion in additional trade — the equivalent of an additional 0.6 percent to 1.5 percent of the bloc’s gross domestic product.

But individual E.U. countries still jealously guard the right to control many regulations covering business, and to operate independent civil and commercial legal systems.

Valle García de Novales, a lawyer here in Zaragoza who specializes in international commerce, tells her clients that any debt of less than €100,000 is not even worth pursuing in court.

“You let it go because it is just too costly,” she said.

What is worse, many companies have been so discouraged that they have given up on doing business across borders. Meanwhile, fewer than 10 percent of European consumers buy anything from a Web site outside their home country.

In an effort to improve the situation, the European Commission, the bloc’s executive arm in Brussels, is working on a series of proposals to improve the single market. They include 12 priority changes to help reinvigorate the single market, from an agreement to recognize one another’s educational qualifications to an E.U.-wide system for registering patents.

This year, it is expected to propose a standardized Europe-wide system to freeze the amount of money owed to a company in the debtor’s bank account. That would prevent it from being moved to another country — often as easy as a mouse click — while providing an incentive to settle the claim quickly.

 

Inflation in China Poses Big Threat to Global Trade

The latest sign that things were moving too fast came on Sunday, when China’s central bank ordered the biggest banks to set aside more cash reserves.

The move essentially reduces the amount of money available for loans, and is an attempt to cool down the economy. It follows the government announcement on Friday that China’s economy was growing at an annual rate of 9.7 percent, by far the strongest performance by any of the world’s biggest economies.

Because China is now the world’s second largest economy, after the United States, and because the country has been a leading source of global growth during the last two years, money problems here can reverberate from Wal-Mart to Wall Street and the world beyond.

High inflation endangers China’s status as the low-cost workshop for the world. And if the government’s efforts to fight inflation cause the economy to stumble, that will cloud the outlook for international businesses — whether multinationals like General Electric or copper miners in Chile — that have been counting on China for growth.

Inside China, inflation also poses a threat to social stability, a particular worry for Beijing, especially since authoritarian governments in North Africa and the Middle East have become the focus of popular uprisings.

“China’s inflation is a big concern, and actual numbers are worse than officially reported,” said Carmen M. Reinhart, an economist at the Peterson Institute for International Economics in Washington.

She says Beijing is engaged in an economic tug of war, trying to encourage sustainable growth while struggling to control inflation.

Food prices are soaring, and the government said on Friday that the consumer price index in March had risen 5.4 percent, its sharpest increase in nearly three years. Hoping to tame inflation, in the last six months Beijing has tightened restrictions on bank lending and raised interest rates on loans (to discourage borrowing) and deposits (to encourage savings).

The decision on Sunday to raise the capital reserve ratio for banks, to 20.5 percent of their cash, was the fourth such increase this year.

The government has also increased agricultural subsidies to curb food prices, and tried to forbid some Chinese companies from raising consumer prices. These efforts stand in contrast to those in the United States, where inflation is low (the underlying annual inflation rate was 1.2 percent last month) and where the debate centers on how much to stimulate the economy given the size of the deficit. Inflation is also running low in Europe, where some countries are imposing harsh austerity measures to pare their budget gaps.

But analysts say the results of this economic management have been mixed. Growth has begun to moderate from its torrid pace of about 10 percent annual growth but inflation has become worse.

For example, housing prices continue to climb even though Beijing has long promised to curb the property market and to spend billions of dollars over the next few years on affordable housing.

The average apartment in central Shanghai now costs more than $500,000. Even in second-tier cities like Chengdu, in central China, the price of a typical home costs about 25 times the average annual income of residents.

Analysts say too much of the country’s growth continues to be tied to inflationary spending on real estate development and government investment in roads, railways and other multibillion-dollar infrastructure projects.

In the first quarter of 2011, fixed asset investment — a broad measure of building activity — jumped 25 percent from the period a year earlier, and real estate investment soared 37 percent, the government said on Friday.

Some of the inflationary factors, like global commodity and food prices, may be beyond Beijing’s ability to influence. Gasoline prices have also jumped sharply, in line with global oil prices. As the world’s largest car market, China’s demand for fuel is soaring, and gasoline prices are close to $4.50 a gallon, up from $3.82 a gallon in late 2009.

Rising food prices, meanwhile, are showing up in various ways — including higher prices at fast-food chains, like Master Kong, which in January raised the price of its popular instant noodles by about 10 percent.

China’s current supercharged boom began in early 2009, during the global financial crisis, when Beijing moved aggressively to increase growth with a $586 billion stimulus package and record lending by state-run banks.

The loose monetary policy, and big investments in local government projects, did revive economic growth. But even at the time there were already concerns about soaring property prices, undisciplined bank lending and the huge debts being amassed by local governments.

Xu Yan contributed research from Shanghai.

 

Obama: Free Trade Agreement a 'Win-Win' for US, Colombia

 Kent Klein | White House ?April 07, 2011

President Barack Obama shakes hands with Colombian President Juan Manuel Santos, Thursday, April 7, 2011, in the White House

President Barack Obama says a free trade agreement reached between the United States and Colombia will benefit both countries’ economies.? Obama met with Colombian President Juan Manuel Santos on Thursday.? ?

After the meeting President Obama said the new trade deal will help protect workers’ rights in Colombia and boost the U.S. economy. ?

"This represents a potential $1 billion of exports and it could mean thousands of jobs for workers here in the United States.? And so I believe that we can structure a trade agreement that is a 'win-win' for both our countries," Obama said.

White House officials announced the agreement on Wednesday, after Colombia agreed to do more to ensure workers’ rights and protect union organizers from violence.

President Santos said the breakthrough on the free trade pact will help boost Colombia’s economy and strengthen its democracy.

"We have been working on getting a green light for this to go to Congress for five years, and we got that green light today.? This is a very important event for Colombia," Santos said.

The U.S. Congress must approve the agreement before it can take effect. ?

Democratic and Republican lawmakers have expressed support for the agreement, as have major U.S. business leaders.? The top Republican in the U.S. Senate, Minority Leader Mitch McConnell, said Thursday that his party has been urging Mr. Obama to advance this and other free trade agreements for more than two years.

"The U.S. Chamber of Commerce estimates that trade deals with Colombia, Panama and South Korea could provide up to 380,000 U.S. jobs.? And we know that this deal alone would create tens of thousands of new jobs here in this country," McConnell said.

The U.S. signed free trade deals with Colombia, Panama and South Korea in 2007.? But lawmakers have not voted on them, and the Obama administration renegotiated some parts of the agreements.

Officials in Washington were especially concerned that Colombia was not protecting workers’ rights or the safety of union leaders.

President Obama said Thursday that those concerns are being addressed.

"We are going to continue to engage with President Santos and his administration in an active process to ensure good working conditions, to make sure that trade unionists are protected, to make sure that we are creating a level playing field for business and workers, here and around the world," he said.

Obama also said he looks forward to visiting Colombia for next year’s Summit of the Americas.

[All VOA blogs...]

Now You Know
Watch Todd Grosshan's report - "What is Radioactivity?"