Balance of Trade with Canada, Mexico: Think Oil

By January 13, 2008Economy, Trade

Here and elsewhere in the blogosphere (here and here, for example), NAM VP Frank Vargo’s post on CAFTA elicited some comment. Included was the expected deflection, “Well, yeah, yeah, but what about NAFTA? Deficits with Mexico and Canada are up!”

Why is that? Read the news release from David Huether, chief economist with the National Association of Manufacturers:

“The spike in the cost of oil accounted for 80 percent of the November rise in imports,” Huether said. “Our country’s increasing dependence on overseas energy supplies is made clear by the fact that nearly half of the November trade deficit was in petroleum products. It’s time for Congress to address this problem is by expanding access to domestic energy resources, a critical oversight in last year’s energy legislation.”

And from BusinessWeek:

The surge in oil prices continues to reverberate through key U.S. economic reports. Case in point: The U.S. trade deficit in November surged to the highest level in 14 months, reflecting record imports of foreign oil. The deficit with China declined slightly, while the weak dollar boosted exports to another record high….[snip]

The increase was driven by a 16.3% surge in America’s foreign oil bill, which climbed to an all-time high of $34.4 billion as the per barrel price of imported crude reached new records. With prices last week touching $100 per barrel, analysts are forecasting higher oil bills in future months.

“The trade data are slightly negative for fourth-quarter real [adjusted for inflation] GDP growth (oil prices don’t affect the real data), but perhaps more negative for the dollar,” wrote S&P Economics in a Jan. 11 note.

The big surge in oil pushed total imports of goods and services up by 3% to a record $205.4 billion.

The growing U.S. economy’s demand for energy means we would still would have needed the increasingly expensive oil (and natural gas) from Canada and Mexico — our first and third largest sources of foreign oil, respectively — whether NAFTA had been approved or not. Attributing bilateral trade deficits to NAFTA is a clever polemical touch, but it hardly proves that the trade agreements with Canada or Mexico destroy jobs.

Join the discussion 3 Comments

  • John B says:

    ..while we are on a mild rant here, let’s explain the following to your readers..one of the more accepted economic theories for the recent tremendous spike in global oil prices along with the ongoing devaluation of the US dollar, is the HUGE US trade deficit… even more to the point, China’s rising demand for energy, which still today continues to be subsidized by the communist government, along with the increased energy demand of India, continues to be MAJOR reasons why global oil prices continue to skyrocket..another widely accepted fact? NAM is about multinational corporate profits at any and all costs, especially and specifically, the cost of American,middle class jobs.. how disconnected can one organization be? ..to continue to spew this type of rhetoric in light of and in spite of an obvious populist consensus that our trade policy is destroying our country is simply mind boggling..

  • Joe Dragon says:

    Here are a few facts that should make every multinational corporation and NAM smile:

    Much of the Democratic unhappiness is focused on China, where the U.S. trade deficit through the first 11 months of this year totals $237.5 billion, the highest annual imbalance ever recorded with a single country.

    According to a government report released last week, the Unites States lost more than 31,000 manufacturing jobs in December 2007. The total number of manufacturing jobs lost in 2007 surpassed 210,000.

    As long as CEOs are making millions- who cares?

  • John B says:

    Carter,
    ..stop already..explain the deficits prior to the spike in oil ……in the first 10 years of NAFTA, way before astronomical oil prices became a factor, the trade defict increased by over 300% with Canada and Mexico…please, do me and others like me a favor..contune to paint a picture that NAFTA has been an overwhelming success story…In fact, allow me to help you out.. for those reading this, NAM says that NAFTA has been a WONDERFULLY SUCCESSFUL TRADE AGREEMENT…!!!

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