Asia-Pacific Pact Expected to Give State’s Exporters a Welcome Boost : Trade: California executives and economists also view the 18-nation APEC accord as a boon for consumers.
The beneficiaries range from Stac Electronics, a San Diego maker of data-compression software, to Harris Ranch Beef Co. in Selma.
In fact, just about every California company that exports goods and services to the Pacific Rim stands to benefit from the Asia-Pacific Economic Cooperation trade agreement signed Tuesday in Indonesia by the United States and 17 other Pacific Rim nations.
Most of the signatory countries to APEC, as the agreement is called, have more restrictive trade policies than the United States. Thus lower tariffs will help U.S. exports the most.
Even more important, California executives and economists expect that by stimulating trade, the pact will ultimately raise Pacific Rim nations’ income levels and spending power, which in turn will create more demand for California exports.
“For Stac, it means computer infrastructure will grow in developing countries, and that will result in more investment and growth in software in general,” said John Witzel, vice president of finance at Stac Electronics, a maker of software that enables personal computer users to cram more data onto hard disks.
California consumers should also benefit. Asian-made textiles, apparel, sporting goods and machine tools will be cheaper as the United States eases tariffs on those items to hold up its end of the bargain. The APEC accord could set up the world’s single-largest trade zone.
The agreement will also help open up China’s market, the world’s largest in terms of sheer population and one that California producers, compared to those in other states, would have a leg up on by virtue of geographic proximity. Until now, the Chinese have been much more receptive to foreign plants and capital than they have been to imported consumer goods.
“We have no presence in China right now. That’s a huge market,” Witzel said.
But observers cautioned that it may take years for California companies and consumers to feel the positive effects: Tariffs are to be eliminated over 25 years.
The major signatories include the United States, Japan, Australia, South Korea, New Zealand, China and Canada.
Harris Ranch Vice President John Isadore said some Pacific Rim economies, even potential powerhouse China, still have some growing up to do before markets will develop for some U.S. commodities.
“Mainland China’s economy can’t afford our (beef) products,” he said. “As of now, the only business we’re doing there is to hotels and restaurants that cater to foreigners.”
Skeptics such as UC San Diego economics professor Stephan Haggard also wondered whether the final agreement would effectively deal with non-tariff barriers and powerful political interests in countries such as Japan.
Despite the reservations, most economists and industry officials hailed the agreement as a positive step toward global free trade and one sure to benefit California over the long haul. The state already enjoys massive trade throughout the Pacific Rim, exporting about $56 billion in goods and services a year to the trade zone, including Canada and Mexico. That amounts to 80% of the state’s $69 billion in total exports.
Even without the agreement, California companies have a disproportionate 25% share of total U.S. exports to Pacific Rim countries, compared to 15% of the nation’s overall exports, according to the California Trade and Commerce Agency. California’s largest exports are machinery and computers, electronic components, transportation products (including aircraft), scientific instruments and agriculture products.
California’s exports would rise even higher once all Pacific Rim countries even their playing fields, said Haggard, an economist specializing in trade issues.
“Basically, every company that exports to the region is likely to gain from this,” Haggard said.
The elimination of tariffs will especially help California manufacturers and service providers involved in high technology, software, medical equipment, telecommunications and auto parts, said Michael Liikala, regional director for international trade at the Commerce Department’s San Francisco office.
“The Pacific Rim is the fastest-growing market and population base in the world,” said Bill Krist, a spokesman for the American Electronics Assn., a high-technology trade group. “The doing away with tariff barriers is going to help our companies compete better.”
But the most significant trade opportunities may be for California agriculture interests. China, for example, in effect bans imports of citrus, table grapes and cherries, all big California crops. And Taiwan now imposes very high tariffs, often 40% or more, on fruits, vegetables and beef, according to Anne Chadwick, trade policy adviser to the California Department of Food and Agriculture.
“My impression is that anything that will liberalize our access to Asian markets, particularly to Southeast Asia and China, will help California growers,” Chadwick said.
Jay Goold, executive vice president of the Western United Dairymen, a Modesto-based trade organization of 1,400 California dairy producers, said his members currently export only about 2% of their annual production totaling $2.5 billion, a percentage that is sure to grow if APEC is effective.
The Pacific Rim “market is not very good right now, but it’s a potential sleeping giant for us,” Goold said.
