Plus: U.S. Trade Gap Increases, FDA Aims to Speed Medical Device Approval and New Trade Disputes Presented to the WTO.

U.S. Trade Gap Widens
The United States trade deficit expanded to $40.6 billion in December 2010, a 6 percent increase over the revised $38.3 billion total in November, due largely to a rapid increase in the pace of imports, according to the U.S. Department of Commerce on Friday. December exports rose to $163 billion, while imports climbed to $203.5 billion.

In December, the goods deficit grew to $53.6 billion, a $2.3 billion increase over November, while the services surplus remained unchanged at $13 billion. Goods exports increased $2.8 billion to $116.6 billion, while goods imports surged $5.1 billion to $170.1 billion, reflecting increases in industrial supplies and materials. Services exports were unchanged at $46.4 billion, as were services imports, which stood at $33.4 billion.

For 2010 as a whole, the annual trade deficit grew to $497.8 billion, 32.8 percent higher than the 2009 deficit of $374.9 billion and marking the largest percentage gain in a decade. Last year, U.S. exports increased 16.6 percent to $1.83 trillion, on track to achieve the White House’s goal of doubling exports by 2015, while imports rose 19.7 percent to $2.33 trillion.

“With developed economies growing slowly, U.S. companies are recognizing that expansion lies in selling to other foreign markets — some that were long seen as competitors. The Obama administration is pushing that perspective to achieve its goal of doubling U.S. exports by 2014,” the Wall Street Journal reports. “The 2010 data show China holding its place as the top source of imports into the U.S., after having jumped ahead of Canada, Japan and Mexico in the past decade. China also rose to become the No. 3 market for U.S. exports last year, up from No. 18 in 1990.”

China Surpasses Japan as No. 2 Economy
China surpassed Japan in 2010 to become the world’s second-largest economy after the U.S., according to new data that shows a contraction in Japan in the last quarter.

Japan’s real gross domestic product (GDP) slipped an annualized 1.1 percent in the final quarter of 2010, while China grew nearly 10 percent in the same period. Although Japan’s economy expanded 3.9 percent in the calendar year, its first annual growth in three years, it wasn’t enough to offset China’s advance, the Associated Press reports.

Japan’s nominal GDP last year totaled $5.47 trillion, while China’s came to $5.88 trillion, the Cabinet Office said.

“Both still remain considerably smaller than the American economy. Japan and China combined are still worth less than the U.S.’s 2010 GDP of $14.66 trillion,” the Wall Street Journal explains. “But the news marks the end of era. For nearly two generations, since overtaking West Germany in 1967, Japan stood solidly as the world’s No. 2 economy. The new rankings symbolize China’s rise and Japan’s decline as global growth engines.”

FDA Aims to Speed Medical Device Approval
The Food and Drug Administration (FDA) last week proposed the Innovation Pathway, a priority review program for new, breakthrough medical devices.

Still subject to public comment, the new proposed measures include the following features:

• Products eligible for faster approval would have to be truly pioneering technologies with the potential to revolutionize patient care or health care delivery;
• Selected products would receive an Innovation Pathway memorandum from CDRH containing a proposed roadmap and timeline for device development, clinical assessment and regulatory review; and
• Products would be assigned a case manager, their important scientific issues would be identified and addressed earlier in the development process, and they might be able to qualify for flexible clinical trial protocols.

The FDA has already accepted its first submission: a brain-controlled, upper-extremity prosthetic that will serve as a pilot for the program.

The Innovation Pathway program for pioneering medical devices is part of a broader effort under way in the FDA’s Center for Devices and Radiological Health designed to encourage cutting-edge technologies among medical device manufacturers. The initiative will also seek to strengthen the nation’s research infrastructure for developing breakthrough technologies and advancing quality regulatory science.

U.S. Levels New Trade Disputes Against China
The U.S. last week petitioned the World Trade Organization (WTO) to establish dispute settlement panels in two trade cases against China, involving restrictions on U.S. specialty steel exports and access to China’s credit and debit card market, according to the Office of the U.S. Trade Representative.

“We are troubled by the procedures and decision-making employed by China in its trade remedy investigations, which have now led to serious restrictions on exports of American steel,” U.S. Trade Representative Ron Kirk said in an announcement on Friday. “We also remain deeply concerned about China’s continuing efforts to reserve its domestic payment card market for one state-owned enterprise, to the exclusion of American credit and debit card companies.”

The U.S. is alleging that China has sidestepped WTO regulations by applying additional duties on electrical steel imports, which is commonly used in transformers, reactors and other large electric machines. In addition, it claims that China practices discriminatory treatment in barring U.S. suppliers of electronic payment services from participating in the lucrative credit and debit card market.

“China declined a U.S. request for formal negotiations in China in September. If, as expected, it accepts the case, the WTO will take 12 to 18 months to rule,” the Wall Street Journal reports. “If the WTO rules in favor of the U.S., it could then force China to get rid of the monopoly.”

This new WTO action marks the latest in a long-running series of trade conflicts between the U.S. and China, including previous disputes on tire tariffs, raw materials exports and steel dumping.