Many Major Trading Partners Are Far From Pacific Rim : State’s Export Image Is Distorted, Study Shows
Early last month, the Los Angeles Area Chamber of Commerce met with officials of Swissair to try to persuade the airline to start service between Los Angeles and Europe. The initial Swiss response was lukewarm, to say the least.
“They had a very definite impression that our eyes were only on the Far East,” said chamber economist Jack Kyser. “It’s a common misconception.
“They don’t understand that the United Kingdom, (West) Germany and France are (among) the top 10 trading partners with Los Angeles County,” Kyser said. After explaining those facts, the Swiss became much more receptive, although they are still considering the offer.
It’s hard to argue the fact that California has important ties to Europe--along with other parts of the globe--when even U.S. statistics show that nearly two-thirds of the state’s exports head for the Pacific Rim. But a recent study pokes a hole in the belief that trade with the Far East is all-important to the state.
Europe and Canada are much larger buyers of California’s goods than previously reported by government statistics, according to a report on exports conducted by the California State World Trade Commission. The Pacific Rim still remains the biggest market for California goods, but not as overwhelmingly as once thought.
“We would hope that the exporters and policy-makers that have been riding the crest of Pacific Rim mania would give a look at Europe and Canada,” said Gregory Mignano, executive director of state World Trade Commission.
Officials point out that Europe and other regions are important markets for many key California industries. “Europe is our largest market,” said Susan Valdez, spokeswoman for Blue Diamond Growers, a cooperative of California almond growers. Almonds are California’s top agricultural export--West Germany is usually the biggest buyer.
But some trade experts say that the attention received by the Pacific Rim in recent years has blinded many California companies to opportunities elsewhere. “It’s lovely to talk about the Pacific Rim--it’s a very important trade area,” said Fargo Wells, head of the California Export Finance Office. “But it is being overplayed a little bit at the expense of other important export areas.”
Many firms might not be taking advantage of the cheaper dollar, which makes American-made goods less expensive in many nations. “A lot of us in California lost our European business when the dollar” increased in value, said Charles Nevil, who heads an export management company. “But that didn’t mean the market in Europe wouldn’t come back up. We have given up that market to Eastern suppliers.”
Many of the misconceptions surrounding California trade is centered around statistics gathered by the U.S. Census Bureau.
For example, California is widely reported to have exported $32.8 billion worth of goods during 1986. But, in fact, that figure represents the value of all exports--regardless where they were made--leaving through the three U.S. Customs districts that include California and Nevada.
Under this method, the state gets credit for Michigan-made automobiles or Nebraska-grown wheat because these goods are shipped overseas from California ports. On the other hand, New York might get credit for a load of California computers bound for Europe.
“It’s a major problem to (figure) out the California product figures” from the statistics, said Robert Churney, who wrote the commission report.
To get around the limitations of Census Bureau figures, commission researchers used other government statistics and information gathered during a pilot study conducted during the first three months of 1986. That Census Bureau study was aimed at tracing exports to the state where they were produced.
By using these sources of trade information, the commission report found:
- California firms during 1986 exported $24 billion worth of goods--about 25% less than government estimates.
- Exports to Pacific Rim nations accounted for 46% of the state’s total exports.
- Goods destined toward Europe accounted for 31.5% of California exports. That compares to the 23.3% recorded by the Census Bureau.
- Canada is the destination for 8.8% of the state’s exports. Census figures place exports to Canada at 2.1%
Other findings:
- Nearly one-third of exports from San Diego are destined toward Mexico. That compares to 5.8% for Los Angeles and 2.1% for Northern California.
- Los Angeles ships 23% of its exports to Japan, compared to 18.4% for Northern California and 8.7% for San Diego.
- The value of exports leaving California by air is greater than the value of exports shipped by sea.
The findings--besides being used by government policy-makers--can have some practical businesses uses. “You can go to your entire sales staff and say ‘see there is business there,’ ” Nevil said. “You have to rethink sales strategy. Europe is really one of our hottest markets.”
The finding might persuade more companies to look toward other markets besides Japan and the rest of the Pacific Rim, Wells said. “Japan is a tough market, a complicated market--It’s not necessarily the best place to begin,” he said. “It might be better to look to Spain or to Canada where it is easier to get started.”
Still, many trade experts say the fascination with the Pacific Rim has been beneficial. “It has encouraged a lot of businesses to take a look beyond their traditional domestic markets,” Mignano said.
But, he said, “They forgot there was a bigger world out there.”
