State’s Merchandise Exports Decline--1st Since Early ‘90s

Marking the first decline since the early 1990s, California’s exports of manufactured goods dropped significantly in the second quarter of this year, as sales to Asia deteriorated badly and shipments to Latin America and Europe slowed from their previously exceptional growth rates, according to data released Thursday.

The value of the state’s merchandise exports totaled $25.8 billion in the April-June quarter, down 5.8% from the same period in 1997. That decline, which affected a broad spectrum of industries from electronics makers to exporters of waste paper, contrasted with a 6% increase in exports in the first quarter as well as for all of last year.

California’s exports have accounted for about 10% of the state’s gross product and were a principal factor in the state’s recovery from recession. But with the state’s heavy exposure to the Pacific Rim--which receives about half of California’s international shipments--the Asian crisis was expected to hit the state much harder than the rest of the nation. Total U.S. exports declined by 2.7% in the second quarter.

The news from Japan--California’s top export market--was particularly grim. California exports to Japan plunged by 18%, to $3.7 billion, progressively worse than the 12% decline in the first quarter and 7.5% for all of 1997.

Also significant was the 26% skid in exports to Taiwan, which until the second quarter had held up very nicely amid turmoil all around it. But Tom Chung, president of Tri-Net Technology Inc., a computer products maker in Walnut who has an office in Taipei, Taiwan, said it was inevitable that Taiwan would feel the competitive effects of Asia’s currency devaluation and swooning economies.

“My exports to Taiwan are almost down to zero,” he said glumly, adding that it’s the same for many of the other Chinese American high-tech exporters in the San Gabriel Valley.

Exports to South Korea and Singapore also fell dramatically. Mainland China provided the only bit of relief in Asia, as California’s exports there rose by 30.9%, making that country now the state’s 11th-largest export market.

Despite Asia’s worsening problems, California had until now maintained its export increases behind unusually strong demand from Mexico and Europe.

California’s exports to Mexico increased by a robust 15% in the second quarter, but that was only half the growth rate of the first quarter and for all of last year. And concern is growing that the turbulence in Latin America’s financial markets may take further steam out of California’s shipments to Mexico.

Europe also was a disappointment in the second quarter. For all of Western Europe, California’s exports grew by 8.6% in the second quarter, down from 21% in the first quarter, said G.U. Krueger, an economist at the California Assn. of Realtors, who tracks trade data.

Krueger said California exports may have further trouble in Europe because of Russia’s current problems. Germany is especially vulnerable because its banks have large outstanding loans to Russia.

By product type, California shipments of most manufactured goods were down in the second quarter. Electronics dropped by 7%, as did computer equipment. Oil and gas extraction products plunged by 40%, and transportation goods, which are very volatile, declined by 18%. Agricultural crops and food-processing goods, however, showed small increases in the quarter, and furniture and primary metal exports rose by double digits.

Howard Roth, a Bank of America economist, said the last time California’s exports fell in a quarter was in 1993. “By historical standards, it’s a sharp decline,” he said. “We’re going to see more declines.”

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California’s Top Export Countries

Exports, in millions of dollars

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2nd-qtr. 2nd-qtr. Pct. 1997 1998 change Japan $4,496 $3,687 --18.0% Mexico 2,828 3,254 +15.1 Canada 2,735 3,184 +16.4 Britain 1,290 1,502 +16.4 Taiwan 1,722 1,274 --26.0 Singapore 1,452 1,178 --18.9 S. Korea 1,896 1,162 --38.7 Germany 993 1,157 +16.5 Hong Kong 1,083 894 --17.5 Netherlands 892 861 --3.5 China 556 728 +30.9 Australia 651 658 +1.1 France 617 622 +0.8 Malaysia 712 622 --12.6

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Source: Massachusetts Institute of Social and Economic Research