Sunday, January 30, 2005


Trade Gap Only To Widen: Moodys

The credit ratings group Moodys issued a report on January 28th entitled "Global Credit Trends" which concluded that narrowing the trade deficit is "all but impossible". The trade gap widened in the final quarter of 2004, as US exports fell and imports rose. "The US' position in international trade has also suffered from a widening of the deficit in the global trade of advanced technology products. As recently as 1998, the US showed a +$29.7 billion surplus for the international trade of advanced technology products. As of the year-ended November 2004, that surplus had been supplanted by a -$36.9 billion deficit".

The dollar can expect to be under continued pressure as a result of this deficit combined with the massive borrowing in the public and private sector of the US economy. The report pins a slim hope for the US on advanced technology. "Only through the introduction of substantially advanced technologies can the US offset the outflow of high-tech production". Even so, those new technologies will "ultimately" move offshore.

"The US may be locked in a Sisyphean task where continuous innovation is needed just to prevent a widening of the trade deficit. To maintain its high standard of living relative to the rest of the world, US businesses must be leaders in the areas of product development and innovation".

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