Trade Slump Seen for Southland
Asia’s financial crisis will slow Southern California’s dynamic international business sector, with two-way trade projected to expand a mere 2.3% this year to $190 billion, according to a forecast released Friday by the Los Angeles Economic Development Corp.
That is a sharp slowdown from last year, when trade through the Los Angeles Customs District jumped 9.3% over the previous year. This year’s moderate growth will come entirely from imports, which are expected to expand 8.5% to $121.3 billion. Asian economies, aided by sharp devaluations in their currencies and desperate for cash, have already cranked up their export machines.
The other side of the picture is much grimmer, as Asia’s strapped consumers curtail their purchases of U.S. and other foreign goods. Exports from the ports of Los Angeles and Long Beach are expected to plummet 7.5% to $68.7 billion in 1998, only the third year-to-year decline since 1980.
In a speech Friday in Los Angeles marking the opening of World Trade Week in Southern California, Jack Kyser, chief economist for the Economic Development Corp., warned against being lulled into a false sense of security by Wall Street’s predictions that the U.S. economy has weathered the worst of Asia’s problems.
He predicted the ripple effect of the crisis will be felt throughout the Southern California economy until at least 1999, as governments in Japan, South Korea and Southeast Asia restructure their banking systems, close down bankrupt companies and deal with rising unemployment and political unrest.
“This is unfolding in a slow-motion fashion,” he said.
Despite the problems in Asia, home to Southern California’s top five trading partners, Los Angeles retained its No. 1 ranking among the nation’s U.S. Customs districts for the fourth year in a row in 1997, with two-way trade of $185.9 billion. Next in line were New York, with $171 billion, and Detroit, with $142.5 billion.
Japan remained the region’s top trading partner, showing a modest 2.2% increase in two-way trade, to $46.6 billion. But China, No. 2, strengthened its position with a 22.6% increase to just under $26 billion. China and Taiwan have escaped most of the region’s turmoil.
While Canada and Mexico contributed to last year’s trade dynamism, both economies will be constrained this year by a slowdown in the U.S. economy and a cutback in demand from Asia, Kyser said.
One bright spot for Southern California should be stronger growth in Europe, fueled by the advent in January of the Continent’s economic and monetary union. Kyser said the 11 EMU nations will post a regional growth rate of 3% in 1998, creating trading opportunities that will help offset losses in Asia.
Five European countries led by Britain and Germany conducted $15.69 billion in two-way trade with Southern California in 1997.
Traders are watching closely for signs that the import surge from Asia will strain the region’s logistics capabilities during the peak Christmas shipping season that traditionally begins in early summer.
Kyser said the region’s image took a beating last fall when Union Pacific Railroad’s troubled expansion, combined with a labor shortage, resulted in gridlock at the ports. For weeks, ships from Asia were backed up in the harbor, and containers stacked up on the docks.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Trading Down
The Los Angeles Customs District* is expected to feel the aftereffects of Asia’s financial woes this year. Percent change in total exports and imports traveling through the district since 1983:
1998 estimate: $2.3%
*Includes the ports of Long Beach and Los Angeles, Los Angeles International Airport Port Port Hueneme (Ventura County) and McCarran Field (Las Vegas).
Source: Jack Kyser, Los Angeles Economic Development Corp.
Researched by JENNIFER OLDHAM / Los Angeles Times
