2012 Focus on International Trade

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2012 Focus On International Trade Long Beach Business Journal

Although risk factors continue to linger, “Asian economies are once again expected to lead the way with higher rates of growth compared with the economies of Europe and North America, which bodes well for trade volumes at the local ports,� the report said.

China Comeback

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everal months of positive employment and industry growth show a more “solid� U.S. economic landscape, Hackett said. As a result, retailers will likely start building up inventories this year due to excess capacity, bringing a rise in market share to the West Coast ports, with more consumer products coming in from China, primarily. “We believe economic patterns [have been] going in the right direction long enough to suggest that we’re going to see growth and expansion in the U.S. economy,� Hackett said. “We may see one or two bumps along the way, but it’s growing as opposed to shrinking . . . The capacity is available, the boxes are available, so I would imagine that we’ll see the return of the normal peak season.�

He added that rising gas prices, although a concern for some consumers, shouldn’t have any dramatic impact on overall consumer confidence.

After the industry saw slight market shifts last year – such as more demand from India that channeled imports through the Suez Canal to East Coast ports – a rebound in trade with China should bring the majority of import trade back to the West Coast this year. “This year, we’re expecting more growth on the West Coast as opposed to the East Coast,� Hackett said.

John Husing, a regional economist based in the Inland Empire, agreed that China should continue to be San Pedro Bay ports’ top trade partner. But, he cautioned about competition from other routes through the East Coast as products from China have become more expensive than in the past. “That’s a bit of an issue for us,� he said. “What that will do is dampen the growth.�

Additionally, port officials said competition from expanding ports in Mexico and Canada looking to capture discretionary cargo bound for the Midwest region may also continue to threaten cargo growth through the local twin ports this year.

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turing, healthcare and business management. Logistics jobs, in particular, are tied to international trade through San Pedro Bay, he said.

The Inland Empire, known for its sprawling warehouses and massive distribution centers, added some 7,800 jobs from January to February compared to the same time last year, increasing more than any other county in the Southland, Husing said. He said the rise was surprising considering the region’s perceived economic struggles with an overbuilt housing inventory. “Some of our very important sectors out here are trucking, warehousing and wholesale trade, and those sectors are very closely related to port trade,� Husing said. “They’re the major driver.�

Free Trade Pacts

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ecently approved free trade agreements (FTAs) should also be a bonus for both export and import trade markets this year, according to local economists.

Last October, Congress approved plans for three new FTAs with Korea, Colombia and Panama, all expected to open up markets for U.S. firms and increase exports by lowering or eliminating trade tariffs and other barriers either immediately or over the next decade.

President Barack Obama quickly signed the legislation, lauding the agreements as tools to produce more jobs and further his initiative to double exports by 2014.

The U.S.-Korea trade agreement, which went into effect on March 15, is considered

the largest bilateral trade agreement since the North American Free Trade Agreement, which was passed nearly two decades ago.

Under the new agreement, almost 80 percent of U.S. exports to Korea immediately became void of any tariffs, while nearly 95 percent of bilateral trade in consumer and industrial products are to become tariff-free within five years and most remaining tariffs are to be eliminated in the next 10 years.

The U.S. International Trade Commission (ITC) estimates the reduction of Korean tariffs and “tariff-rate quotas� on goods will add $10 billion to $12 billion to annual U.S. gross domestic product.

Ferdinando Guerra, an international trade economist for the LAEDC, is providing a full report on the local effects of the U.S.Korea agreement during an international trade outlook event on May 16 at the Hyatt Regency in Long Beach. The LAEDC and the World Trade Center Association are organizing the event.

Although he said it’s still too early to calculate the overall net impact on job growth, the new agreement should undoubtedly bring benefits to improve “twoway trade� with Korea, which is North America’s third largest trading partner.

New professional business services should also start picking up in the Los Angeles County and Southern California region, which will likely be the greatest beneficiary of the new agreement, Guerra said, adding that about 30 percent of all

U.S. trade with South Korea moves through the L.A. region. “Whether or not we see a higher increase in imports versus exports, or vice versa, is something that’s very hard to quantify,� he said. “But, we’ll definitely see an increase in two-way trade and goods movement, which will be a big plus for international trade-related employment any way you look at it.�

The trade agreement is particularly important since it puts the United States on a level playing field with competing foreign partners, particularly the European Union, which enacted a free trade agreement with Korea just last July, Guerra said. “The fact that we were already at a disadvantage because another region in the world had a free trade agreement with Korea, the agreement now has even more meaning for us,� he said.

The U.S.-Colombia Free Trade Agreement, meanwhile, is expected to enter into force on May 15. The tariff reductions and eliminations are expected to expand the growth of U.S. exports, such as agriculture and construction equipment, by more than $1.1 billion, while supporting thousands of U.S. jobs, according to the ITC. President Obama said during a recent press conference that the new trade agreement is a “win-winâ€? for businesses in Colombia and the United States. He added that the agreement also comes with labor rights commitments and environmental protections. â–

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n terms of exports, Husing said the San Pedro Bay ports should continue to experience a “boom,� partially related to the low value of the U.S. dollar, which has declined by about 35 percent over the last 10 years. “If I’m a foreigner buying American goods, today they’re . . . cheaper than they were a decade ago,� he said.

Last year, the L.A.-Long Beach port complex set a new national export record, handling a combined 3.3 million outbound TEUs, Husing said. Whether the U.S. dollar will continue to decline this year depends mostly on the Federal Reserve’s decision to keep interest rates low, he added.

A boost in trade, however, should continue to lift the job market throughout Southern California this year, Husing said. The main industry sectors driving the economy this year are logistics, manufac-

Stacey Jones, P.E. 4EL ch2mhill.com/ports