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TRADE WARS
Oil, Chinese imports swell US trade gap
by Staff Writers
Washington (AFP) July 12, 2011

British official trade deficit worsens in May
London (AFP) July 12, 2011 - Britain's trade-in-goods deficit widened in May from the level in April, official data showed on Tuesday.

The deficit grew to �8.5 billion ($13.5 billion, 9.6 billion euros) in May, the Office for National Statistics (ONS) said in a statement.

It stood at an upwardly-revised �7.6 billion in April, while analysts had forecast a deficit of �7.2 billion in May according to a survey by Dow Jones Newswires.

Total exports rose by 4.2 percent and imports increased by 5.8 percent in May, the ONS added.

However, car exports plunged by almost ten percent, as British-based car manufacturers were unable to source vital components from Japan, which was ravaged by a devastating earthquake and tsunami in March.

The US trade deficit ballooned in May to the widest level in more than two and a half years as the world's largest economy sucked in foreign oil and Chinese imports while exports fell.

The trade gap expanded to $50.2 billion from $43.6 billion in April, the Commerce Department said.

The higher cost of oil drove imports up 2.6 percent, while exports slipped 0.5 percent. Exports however still were at the second-highest monthly level on record.

The sharp rise in the trade deficit, the highest since October 2008, was unexpected. Most analysts estimated only a marginal widening of the gap in May, to around $44.0 billion.

"It's the worst of all worlds on the trade balance. The deficit will siphon off domestic demand," said Robert Brusca, chief economist at FAO Economics.

Economists generally lowered their estimates for US economic growth in the second quarter following the report.

Macroeconomic Advisers said it shaved its gross domestic product (GDP) growth figure to 1.6 percent from 2.0 percent, after a feeble 1.9 percent rate in the first quarter.

FT Advisors economists suggested though that the data showed signs of economic strength -- that they showed trade had found its footing after the slump that resulted from the 2008-2009 global financial crisis.

"Beneath the headlines, the total volume of international trade in and out of the US... hit an all-time high in May, finally fully recovering from the financial panic," FT Advisors's Brian Wesbury and Robert Stein said in a client note.

The May trade report also showed a winding down of the impact from Japan's March earthquake and tsunami disaster on US supply chains, especially in the automotive sector, said Aaron Smith of Moody's Analytics.

The Japan disruptions had narrowed the US trade deficit in April to the lowest level of the year.

Mostly, the May import surge came as the US guzzled nine percent more worth of imported oil than in the prior month, due to rising crude prices.

The US paid an average $108.70 a barrel for foreign oil, the highest price since August 2008.

The trade gap on petroleum products reached the biggest shortfall since October 2008, at $30.4 billion.

Apart from petroleum products, US demand for foreign goods edged up only 0.5 percent, suggesting sluggish domestic demand as the economy braked in the second quarter. Imports of consumer goods fell 2.3 percent.

However, imports of industrial equipment rose 2.6 percent and Americans snapped up 4.9 percent more foreign automotive sector goods.

US exports eased back from April's record high, to $174.9 billion.

But exports still grew at a strong 16.3 percent pace over the first five months of the year, keeping pace with President Barack Obama's goal of doubling exports over the five years to 2015.

Still, the United States saw significant widening in trade shortfalls in May with its two largest trading partners, Canada and China.

The gap with Canada rose to $2.7 billion -- again, mainly due to the rise in the price of oil, Canada's leading export to its southern neighbor.

The politically sensitive gap with China hit $25.0 billion in May and appeared well on the way to beating the 2010 record.

The Obama administration has been pressing Beijing to allow its yuan currency to appreciate, arguing that the government unfairly keeps it undervalued against the dollar to gain a trade advantage.

"Longer term, the combination of expensive oil imports and China's currency policies reduce US growth by one percentage point a year," warned Peter Morici, an economist at the University of Maryland.

"Diplomacy has failed, and President Obama should impose a tax on dollar-yuan conversions ... (of) about 35 percent," he said.

"For imports, at least, that would offset China's subsidies that harm US businesses and workers."




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Iraqi premier to visit China next week: spokesman
Baghdad (AFP) July 12, 2011 - Iraq's Prime Minister Nuri al-Maliki will arrive in China on Monday for a three-day visit focusing on energy, investment and other economic issues, his spokesman said Tuesday.

Maliki "will head a large delegation that will include ministers and will meet Chinese President Hu Jintao and Premier Wen Jiabao," spokesman Ali al-Dabbagh said.

Discussions will focus on "improvement of bilateral relations in the fields of energy, transportation, agriculture, services and investment," he added.

China is a leading player in Iraq's oil sector.

In 2009, China National Petroleum Corp sealed a deal along with Britain's BP to ramp up production at Iraq's biggest oil field, Rumaila, which has estimated reserves of 17.7 billion barrels.

In December of that year, a consortium led by CNPC won the right to develop Halfaya oil field in southern Iraq, whose reserves are estimated at 4.09 billion barrels.

This month, the Al-Ahdab oil field in central Iraq, which is operated by CNPC, began production with 60,000 barrels per day.

In 2008, CNPC signed a $3 billion contract to develop the Al-Ahdab oil field with another Chinese company, Zhenhua Oil, in the province of Wasit for 23 years.

Iraq sits on one of the world's largest oil reserves -- 143 billion barrels by Baghdad's own estimates.





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TRADE WARS
Australia's Fortescue hints at HK, Shanghai listing
Sydney (AFP) July 12, 2011
Australian iron ore miner Fortescue Metals is considering a listing in Hong Kong or Shanghai in a bid to get closer to its Chinese clients, the company's founder Andrew Forrest said Tuesday. The comments from Forrest come a month after fellow Australian miner Resourcehouse abandoned plans for a US$3.6 billion float on the Hong Kong stock exchange citing unfavourable global conditions. "W ... read more


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