California Exports Robust…For Now

California's trade picture has been brightening of late and should maintain its current course at least through the first part of 2017, says Robert Kleinhenz, economist and executive director at Beacon Economics. He adds that despite the uncertainty about the future direction of U.S. trade policy with the incoming Administration, there are plenty of reasons to remain bullish on the future.

That said, however, he cautions that continuation of “harmonious relations” with California's principal trading partners may have been dealt further setbacks by the recent Trump administration appointments of Peter Navarro to head a new National Trade Council and by the nomination of Robert Lighthizer as U.S. Trade Representative.

“Both Navarro and Lighthizer have exhibited a peculiar animus toward China, and neither is likely to restrain President Donald Trump from pursuing aggressive measures aimed at slashing U.S. merchandise trade deficits with China and Mexico,” says Kleinhenz.

Along with several other regional think tanks, Beacon Economics believes the incoming administration's focus on the trade deficit with China is misconstrued and over-wrought. A large portion of what is reported as a deficit with China is really an artifact of economic accounting practices that ignore the foreign content in many goods the U.S. imports from China.

Apart from depriving American consumers of a vast array of goods essential to modern lifestyles, Beacon maintains that slamming the door on Chinese imports would increase our trade imbalances with other nations.

“The fact is the United States has not consistently run a surplus in its merchandise trade since 1970, and the last surplus was recorded in 1975,” observes Jock O'Connell, Beacon Economics' International Trade Advisor. “The country seems to have done rather well since.”

Indeed, analysis of U.S. trade statistics released last month by the U.S. Census Bureau, indicates that exports to California's major Pacific Rim trading partners saw a healthy 17.4% jump in November.

The gains were reflected in the increased volume of outbound traffic at the state's principal international trade gateways. Export tonnage at Los Angeles International Airport and San Francisco International Airport were up a combined 11.1%. Meanwhile, the number of outbound loaded containers sailing from the Ports of Los Angeles, Long Beach, and Oakland grew by an almost identical margin (11.2%) over November year-to-date.

California's largest export ocean cargo gateway – The Port of Oakland – has been especially bullish in its forecast for 2017, if political headwinds do not diminish trade opportunities.

Port spokesmen say its total 2016 volume equaled 2.37 million twenty-foot equivalent (TEU) containers, up 4 percent from a year ago. Total volume includes full and empty containers.

Containerized export volume jumped 10.5 percent in 2016, say port spokesmen. In December, exports were up 13.5 percent. It was the fourth straight month of double-digit export growth.

“This is a gratifying outcome,” says Port of Oakland Maritime Director John Driscoll. “The job now is clear – build on the momentum we created in 2016.”

The San Pedro Bay ports of Los Angeles and Long Beach are less reliant on exports, but remain focused on retaining and building balanced inbound and outbound trade.

Cargo volumes at the Port of Los Angeles reached 8,856,782 TEUs in 2016, marking the busiest year ever for a Western Hemisphere Port. And last year started on a high note in Long Beach, with shipments rising in early 2016 compared to the same period a year earlier.

“Last year was turbulent, with numerous ocean carrier mergers and other changes,” admits Harbor Commission President Lori Ann Guzmán. “Now we have some of the largest ocean carriers in the world as major partners and we're well positioned to rebound in 2017.”

Beacon Economics posits that Trump's “hardball tactics” could produce a salutary outcome, but only if our trading partners appreciate the extent to which their economic fortunes depend on ready access to U.S. consumers.

“China, as we pointed out, remains an export-driven economy that has more at stake than the United States does in any trade dispute,” conclude analysts.

Susanne Stirling, vice president, International Affairs for the California Chamber of Commerce agrees, noting that international trade is a two way street.

“Exports create higher paying jobs here, and imports help our consumers save money,” she says. “It's all about balance.”

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