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US Trade Deficit with China Increasingly Source of Friction - 2004-01-15

Figures released Wednesday by the U.S. Commerce Department show a slight narrowing in November of what is still a record U.S. trade deficit with the rest of the world. VOA's Barry Wood reports on U.S. trade with China, which is now the third biggest trading partner of the United States.

In November the United States imported Chinese products worth nearly $11 billion more than what it sold to China. For all of 2003, the U.S. deficit with China will be approximately $125 billion, which is easily its biggest bilateral deficit. Overall, the 2003 U.S. trade deficit is certain to exceed last year's record of $418 billion, an amount equal to four percent of U.S. gross domestic product.

The mushrooming U.S. trade deficit with China has become a major issue in this year's presidential election campaign. Critics say U.S. jobs are increasingly being lost to China, which has emerged in just a few years as a major supplier to the U.S. market.

Economist Hugh Peyman, a British consultant resident in Shanghai, expects U.S.-China trade will continue to grow. He expects increasing trade friction as the Chinese boost their product quality. Mr. Peyman told a conference in Washington Tuesday that already Chinese furniture is beginning to exceed American products in quality.

"J.C. Penney [the big U.S. retailer] was recently giving testimony on Capitol Hill about why they opposed restrictions on furniture imports into the U.S.," he explained. "Look, they said, we'd love to buy from U.S. manufacturers but there is only one problem: Over the past two years the average number of defects from American-made furniture was, I think, 26 percent. From China it was 1.6 percent. Sort of hard to compete with that."

Mr. Peyman says Chinese exports to the United States will increase steadily as U.S. restrictions on imports of Chinese textiles and apparel are gradually lifted beginning at the end of this year.

The U.S. trade figures show that while U.S. exports to the rest of the world fell during the last three years, U.S. exports to China rose by 66 percent. China has become a major consumer of some U.S. manufactured goods, including electrical machinery. Despite those gains, the trade balance is hugely in China's favor as U.S. exports to China in November while a record high totaled only $3.3 billion.