February 5, 2015 / 10:18 PM / 3 years ago

U.S. trade deficit fans calls on currency, but data mixed

WASHINGTON, Feb 5 (Reuters) - A widening in the U.S. trade deficit coupled with a strong dollar has lent fresh impetus to calls for the United States to tackle currency cheats, although data show a mixed impact.

The greenback rose nearly 13 percent against a basket of major currencies in 2014, the most since 1997, while data released on Thursday showed the goods trade deficit for the year widened 5 percent to top $730 billion.

The United States logged a record trade deficit with South Korea, just two years into a bilateral trade pact, along with Europe, and China. Critics have long pointed to China's managed currency as a factor in the trade deficit.

"When you can devalue your currency and use that tool you are dealing with ... unfair trade," said Democratic Representative Rosa DeLauro of Connecticut, one of many on Capitol Hill who want trade pacts to punish currency manipulators.

U.S. Federal Reserve modeling assumes that a 10 percent appreciation in the dollar against a broad range of trading partners will cut real exports by 6 percent over three or more years.

But although a strong currency makes a country's exports more expensive, the impact may not be visible due to other factors such as changes in domestic demand, lower oil prices or interruptions to shipping, such as a threatened dockworkers' strike at U.S. West Coast ports.

Although the broad trade-weighted dollar index has appreciated 12 percent since mid-2011, U.S. exports are up 10 percent since 2011 amid a rebound from the financial crisis.

Similarly, despite the yen weakening one-third against the dollar since late 2011, the trade deficit with Japan is now on a downward track.

Still, imports of Japanese cars have risen 13 percent since 2011. The American Automotive Policy Council, which represents Chrysler, Ford and General Motors <GM.N >, said the weak yen allowed Japanese competitors to load up on extras.

"The navigation system that might be in a luxury vehicle can suddenly be in more of a family sedan-class vehicle," said AAPC President Matt Blunt, who wants currency rules in the Trans-Pacific Partnership trade pact, which includes Japan.

However, the Japan Automobile Manufacturers Association said 71 percent of Japanese-brand vehicles sold in the United States are built in North America.

Commerce Under Secretary Stefan Selig said the strong dollar would likely continue and only boosted the case for trade deals to lower export barriers.

"The question is: What are we going to do to help American companies export in that environment?" he said at a seminar hosted by the Atlantic Council in Washington.

Negotiators are close to finalizing the Pacific trade pact. Treasury Secretary Jack Lew on Thursday warned senators against injecting currency provisions into trade deals. (Reporting by Krista Hughes)

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