New Portrait of Pacific Economies

“The Mediterranean is the ocean of the past, the Atlantic the ocean of the present, the Pacific the ocean of the future.”

--John Hay, Secretary of State, 1898-1905

Few will argue that John Hay’s prediction about the Pacific is coming to pass with the emergence and rising economic clout of Asian and other Pacific Rim countries. Now a new study of the area by the California Department of Commerce lends more statistical weight to that trend.

Countries in the Pacific Basin form a $3-trillion-a-year market and are expected to command nearly half of the gross world product by 1995, according to the study, entitled “Facts on the Pacific Rim.”

“The Pacific Basin market is an awakening giant growing at the rate of $3 billion a week,” Commerce Director Christy Campbell Walters said. “California’s economic strengths, traditional ties with Pacific Rim countries and strategic location place us in an excellent position as an international center serving this important market.”

The study focuses on the economies of California, the United States and 27 other countries that border the Pacific Ocean. The Soviet Union, however, was excluded because of lack of information and because “it is essentially a European country,” with its population concentrated on the western side of the country, according to Tony Quinn, director of the Commerce Department’s office of economic research.

California Perspective

While the Pacific Rim is generally thought to be Asian, Quinn said the study was expanded to include other large Pacific-area trading partners of California, such as Canada, the western Central and Latin American countries, Australia and New Zealand.

“We did the report from our state’s perspective,” he said.

The report first provides a global perspective of the Pacific Rim area, showing, for example, that the area is home for 43% of the world’s population. The Pacific Rim countries, including the United States, are expected to account for 46.7% of the world gross product by 1995, compared to 44.4% in 1980 and 43.7% in 1970, according to the report. Excluding the United States, the 27 Pacific Basin countries are projected to account for 27.5% of the gross world product by 1995, versus 24.1% in 1980 and 21.3% in 1970.

The report says that “California cities have replaced New York, Boston and Philadelphia as the growth centers for international trade, just as Tokyo and Hong Kong are replacing London and Paris as trading centers.”

California, with just 1% of the region’s population, now accounts for 7% of its gross product. In the region, the state’s economy is third largest, smaller than only those of Japan and China.

$65 Billion of Business

Californians did more than $65 billion worth of business with Pacific Rim countries and accounted for more than one-third of the U.S. trade with Japan, it says. About 78% of exports and 85% of imports flowing through California customs districts go to or from Pacific Rim countries.

Foreign investment in the state totaled more than $25 billion in 1982, the latest for which data is available. Although European countries accounted for most of that, “the percentage of Canadian and Asian foreign investment has been rising while the percentage of European investment has fallen slightly,” Quinn said.

Foreign direct investment transactions in California rose to $2.3 billion in 1983 from $2.12 billion the year before. Over that same period, foreign direct investment in all of the United States fell to $9.8 billion from $13.9 billion.