WASHINGTON (AP) – The American trade deficit set a record for the fifth straight year in 2006, reflecting a huge jump in America’s foreign oil bill and a record imbalance with China. The year ended with the December deficit increasing more than had been expected.

The Commerce Department reported Tuesday that the gap between what America sells abroad and what it imports rose to a record $763.6 billion last year, a 6.5 percent increase from the previous record of $716.7 billion set in 2005. For December, the deficit rose a bigger-than-expected 5.3 percent to $61.2 billion.

The Bush administration attributed the string of deficits to the United States outpacing other countries in terms of economic growth. Officials said that President Bush would continue to pursue a strategy of opening foreign markets to U.S. goods rather than erecting protectionist barriers to keep out imports.

“Our focus is on growing our exports, growing our economy, reducing our unemployment and keeping inflation in check,” Commerce Secretary Carlos Gutierrez said in an interview from New Delhi, India.

But House Speaker Nancy Pelosi and other top Democrats sent Mr. Bush a letter urging him to work with Democrats to craft a new trade strategy to deal with the exploding deficits.

“The consequences of these persistent and massive trade deficits include not only failed businesses, displaced workers, lower real wages and rising inequality, but also permanent devastation of our communities,” the Democrats said in their letter to Mr. Bush.

The Democrats noted that more than 3 million manufacturing jobs have been lost since Bush took office with about one-third of those losses attributed to the rising deficit in manufactured goods.

Growing unhappiness over the trade deficit and lost manufacturing jobs played a role in a number of congressional campaigns last fall, helping Democrats win control of both the House and Senate for the first time in 12 years.

The latest trade gap comes at a critical time for Mr. Bush, who faces the challenge of convincing Congress to extend the authority he needs to strike new free trade agreements with individual countries and pursue a global trade pact.

The current fast-track trade promotion authority expires on July 1 and Democrats say it will not be renewed without greater protections for U.S. workers in the area of labor rights and the environment.

The new trade report showed that the deficit with China shot up 15.4 percent last year to total $232.5 billion, the largest imbalance ever recorded with any country. China surpassed Japan as the country with the largest trade gap with America in 2000 and has held the top spot since that time.

China reported this week that its surplus with the world increased in January by 67 percent from the same month a year ago.

American manufacturers contend China is unfairly manipulating its currency to keep it undervalued against the dollar by as much as 40 percent, which makes Chinese goods cheaper in the United States and U.S. products more expensive in China.

Treasury Secretary Henry Paulson has told Congress that a new high-level dialogue with China holds the best prospects for convincing the Chinese to move more quickly to revalue their currency, but critics charge that tougher action including the threat of economic sanctions will be needed to force China to move.

Economists believe that the worst may be over in terms of a deteriorating trade deficit. The 6.5 percent rise in the deficit for 2006 followed much larger percentage gains of 17.3 percent in 2005 and 23.5 percent in 2004.

The biggest factor in last year’s increase was a surge in America’s foreign oil bill, which rose to a record $302.5 billion as the average price of a barrel of crude oil rose to an annual high of $58, reflecting a big jump last summer that pushed oil briefly above $77 per barrel.

The $763.6 billion deficit for the total year reflected a $836.1 billion deficit in goods trade and a $72.5 billion surplus in trade in services, such as banking and insurance, where the United States has a competitive advantage over other countries.

Total exports of goods and services jumped 12.8 percent last year to an all-time high of $1.44 trillion. Imports, however, also set a record, rising by 10.4 percent to an all-time high of $2.20 trillion.

In addition to China, other countries which set record trade gaps with the United States last year were Japan, an imbalance of $88.4 billion and Mexico, at $64.1 billion.

The deficit with Canada, America’s largest trading partner, was $72.8 billion while the deficit with the European Union was $138.5 billion.