Afloat on Exports : Growth in Southland Companies’ Sales Overseas Is Strong Despite Recession
Exports were supposed to be an engine that would help drive the U.S. economy out of recession. Since February, however, U.S. export growth has slumped as major trading partners--particularly Japan and Europe--have been plagued by weakening economies.
But in Southern California, export growth has remained relatively strong, providing a rare gleam in the local economic gloom and helping to offset poor domestic sales.
Take the example of Stonefish Inc. In an industry so dominated by imports that consumers are routinely begged to buy from U.S. manufacturers, the small Santa Barbara-based clothing maker is finding success peddling its California Proline women’s sportswear and swimwear in foreign countries.
Export sales more than doubled in the last two years as the company added Japan and Europe to its original export markets of Canada and Mexico, said Scott Westgaard, co-owner of Stonefish. Exports may account for 25% of revenue from Stonefish’s next spring/summer selling season, he said.
“We’re just selling the California promise--sun, sand and surf,” Westgaard said. “It’s been this success that’s helped us weather the lack of success in sales domestically” due to the recession and fading of the 1980s surf-wear boom.
To be sure, local exporting is not revisiting the heady days late in the last decade, when annual increases of 20% or more were recorded. But for the first five months of the year, exports through the Los Angeles Customs District--including the ports of Los Angeles, Long Beach and Hueneme, Los Angeles International Airport and an oil facility in El Segundo--rose 9.7% to $20.6 billion. Exports through all California ports rose 12.6% during the same period.
Nationwide, exports grew only 5.5%--a weak showing given this year’s free fall in the dollar, which has made U.S. goods cheaper in foreign markets.
“I know everyone talks about the fizzling out in exports, but so far we haven’t seen that much of a fizzle” in California, said Jack Kyser, chief economist for the nonprofit Economic Development Corp. of Los Angeles County.
“So far, the exports are holding surprisingly well,” Kyser said. “If there’s a bright light in the local economic picture, it’s the international trade situation.”
Southern California and the state as a whole are benefiting from exports more than the nation largely because California exports a higher proportion of goods to Pacific Rim and Latin American countries, said Ted Gibson, an economist with the state Department of Finance. Although Japan’s economy is slumping, the economies in the rest of Asia and much of Latin America are enjoying stronger growth than Europe’s.
“The problem with the (U.S.) exports in the last several months has basically been because of Europe,” Gibson said. “The bright spots have been Latin America and Asia, excluding Japan, and that reflects the varying healths of those economies.”
Four of California’s top 10 export markets are Pacific Rim countries, accounting for 32% of the $63.1 billion that the state exported last year. Exports to Mexico made up another 8.7%. In contrast, three of the top U.S. export markets are in Asia, accounting for only 18.2% of 1991 exports. Sales to Mexico stood at 7.9% of the U.S. total.
Strong export figures through local ports don’t necessarily say a lot about the state of California’s manufacturing because a large and unknown percentage of exports are “pass-through” goods that originate somewhere else and are simply shipped through the Los Angeles Customs District, said David Hensley, director of the UCLA Business Forecasting Project. Some estimates put the percentage of pass-through goods at 20%.
Still, exports of goods originating in California grew 10.2% in the first three months of the year compared to the same period of 1991, according to the Massachusetts Institute of Social and Economic Research at the University of Massachusetts at Amherst. That compared to an 8% rise in overall U.S. exports over the same period. (Such figures are not available for goods originating in Southern California.)
International trade in Southern California is “one of the few bright spots in the entire country,” said Michael White, who heads the trade research department for the Greater Los Angeles World Trade Center Assn. “The Los Angeles area has over the last decade consistently been the most rapidly growing area in the United States in international business.”
“I know of company after company after company whose export sales literally saved them when the domestic market dropped out for their products,” he said.
At Reed Manufacturing of Walnut, exports have “been a godsend,” said Suzen K. Green, export manager for the manufacturer of construction equipment. “California is deader than a doornail, construction-wise.”
Reed exports machines that spray or pump concrete used in the construction of swimming pools, bridges, skyscrapers and tunnels. In the last four years, exports have grown 25%. They will account for about half of the company’s more than $5 million in sales this year, she said.
“There isn’t anyplace in the world that I haven’t exported to in the last four years,” Green said.
American Racing Equipment experimented with exporting its high-performance car wheels several years ago and “lost their shirts on it,” said Anthony F. Munoz, director of the Rancho Dominguez-based firm’s international operations.
The company re-entered the international market in 1989 with better results. This time, it found the right distributors and, among other things, began with an export program that packaged American Racing wheels with U.S.-made tires.
“This is the fastest-growing area in our company,” Munoz said. “The long-term potential is far greater than the domestic market. . . . The U.S. market is a mature market for our product.”
U.S. Top Export Markets for 1991 Figures in billions Canada: $85.1 Japan: 48.2 Mexico: 33.3 United Kingdom: 22.1 Germany: 21.3 South Korea: 15.5 France: 15.4 Netherlands: 13.5 Taiwan: 13.2 Belgium/Luxembourg: 10.8 Total exports: 421.7 Source: Commerce Department
California’s Top Export Markets for 1991 Figures in billions Japan: $10.1 Canada: 6.5 Mexico: 5.5 South Korea: 3.9 Germany: 3.6 United Kingdom: 3.5 Taiwan: 3.5 Singapore: 2.7 France: 2.2 Netherlands: 2.0 Total exports: 63.1 Source: Commerce Department
