America's trade deficit showed a bigger-than-expected improvement in February as the politically sensitive imbalance with China dropped to the lowest level in nearly a year.

The Commerce Department reported Wednesday that the deficit fell to $65.7 billion, a 4.2 percent decline from January's record imbalance of $68.7 billion.

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Even with the improvement, the February trade gap was the third highest on record and the deficit for the first two months of this year is running 13.5 percent above the pace in early 2005, a year when the U.S. deficit hit an all-time high of $723.6 billion.

Critics of President Bush's trade policies contend that the administration has failed to aggressively pursue unfair trade practices in other countries which have contributed to the loss of nearly 3 million manufacturing jobs since Bush took office in January 2001.

Seeking to counteract these attacks, the administration has taken a get-tough approach with China, the country with the biggest trade gap with the United States.

U.S. trade negotiators struck a number agreements on Tuesday with China designed to boost U.S. exports, and President Bush has said he will raise one of the thorniest trade issues, China's undervalued currency, when he meets next week at the White House with Chinese President Hu Jintao.

The overall improvement in February's trade deficit reflected a 2.3 percent drop in imports which fell to $178.7 billion, the second highest level on record but below the all-time high set in January.

There were declines in imports of new cars and auto parts and various consumer goods including cell phones, furniture, stereo equipment and televisions. America's foreign oil bill edged up a slight 0.2 percent to $24.6 billion as the price of crude oil rose.

U.S. exports fell by 1.2 percent in February to $112.99 billion, still the second highest level on record after an all-time high of $114.33 billion in January. Sales of computers, industrial machinery and American farm products were all down while exports of civilian aircraft rose.

For February, the deficit with China narrowed by 22.7 percent to $13.8 billion, the smallest imbalance since March 2005. The improvement reflected a sizable 19.9 percent jump in U.S. exports to China to $4.1 billion, the second highest level on record, led by big gains in exports of American cotton, soybeans and semiconductors.

Chinese imports to this country fell by 16.2 percent, led by declines in shipments of cell phones and computers.

On Tuesday, U.S. and Chinese trade officials announced agreements aimed at narrowing the deficit by cracking down on Chinese copyright piracy, lifting a ban on U.S. beef shipments and increasing market access for U.S. products and services.

The administration hopes these deals and others yet to come will blunt a drive in Congress to take more punitive actions against China. One measure would impose punitive 27.5 percent tariffs on all Chinese imports unless the country allows its currency to rise further in value against the dollar.

American manufacturers contend that the Chinese currency is undervalued by as much as 40 percent, making Chinese goods cheaper for American consumers and American products more expensive in China.

The deficit with Japan rose by 10.3 percent in February to $7.1 billion while America's deficit with the 25-nation European Union dropped by 15.1 percent to $8.27 billion, the lowest level since January 2005. U.S. exports to Germany, Europe's biggest economy, hit an all-time high in February.

The U.S. deficit with Canada, America's biggest trading partner, fell by 19.1 percent to $7.2 billion while the imbalance with Mexico rose by 1.9 percent to $4.7 billion.

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