Pacific Northwest Supply Chain Managers Watching U.S.-China Trade Talks Closely

With the postponement of a meeting between President Donald Trump and President Xi Jinping to sign an agreement to end their trade war, shippers may be able to buy a little more time to realign their supply chains.

Any agreement that will ease tensions between the two countries, will be welcomed by the Washington Council on International Trade (WCIT). Indeed, the group recently released a new report that details the many industries and regions in Washington state that have a major stake in the outcome.

Washington state has a long history of close trade relations with China that have benefited both sides. In virtually every county and congressional district, Washington workers and businesses rely on China as a market for their exports and as a supplier of products and raw materials.

The study provides county-by-county and district-by-district analysis of Washington's trade ties with China.

Washington state is among the largest exporting states, especially to China. Washington accounts for 5% of U.S. goods exports to the world, and 14% of U.S. exports to China. Over the past five years, Washington state overall exports have dropped slightly, but exports to China have grown by 3% (in 2017 $). Controlling for oilseeds exports, which are only consolidated in Washington state, China's tariffs affect roughly $2.7 billion of Washington state exports in 2017. Export products included in China's tariff list supported an estimated 28,700 jobs in Washington in 2017.

While a few industries, such as lumber and aerospace, have been relatively isolated from U.S.-China tariffs, the overall effect on Washington trade could be damaging. Iconic and important exports like apples, cherries and seafood have all been targeted. In addition, two of the products at the center of the conflict are soybeans and autos, which pass through Washington's ports in large amounts and support various shipping and logistics jobs. As tariffs continue, exporters lose market share and importers are forced to make suboptimal sourcing decisions.

“From cherry growers in the Yakima Valley to cargo handlers at the Port of Olympia, hundreds of employers in Washington state are anxious to see a successful resolution to the trade negotiations with China,” says WCIT President Lori Otto Punke.

“The on-going trade dispute has presented a unique opportunity to encourage the Chinese to make much needed reforms in areas such as market access and intellectual property,” adds Punke. “At the same time, high tariffs carry hefty costs for Washington consumers and businesses, so we hope an agreement is reached soon.”

According to prominent trade analysts, however, such an agreement is still many weeks away, with further speculation that China will insist on a formal state visit rather than a simple trade deal signing.

Washington port authorities should also be concerned that trade tensions may drive more oceanborne cargo away from U.S. Pacific Northwest to Canada, where trade contretemps with Asia do not exist.

A recent economic impact report put out by The Northwest Seaport Alliance outlines the benefits of marine cargo to the state of Washington. The combined ports of Seattle and Tacoma make up the fourth-largest container gateway in North America, and directly support 20,100 jobs and $1.9 billion in labor income. The marine cargo industry produced an average annual wage of $95,000 and directly supported $5.9 billion in business output.

The Northwest Seaport Alliance represents one of the largest marine cargo gateways in the U.S. In 2017, more than 3.7 million twenty-foot equivalent units (TEUs) carrying 26.1 million metric tons of containerized cargo were handled at The Northwest Seaport Alliance across facilities at the ports of Seattle and Tacoma.
Factoring in upstream business-to-business transactions (indirect) and worker earned income household consumption expenditures (induced), the NWSA activities supported 58,400 jobs across the state economy—the equivalent of a job multiplier of 2.9.

In other words, for every direct job, marine cargo activities through the NWSA support an additional 1.9 jobs throughout the Washington state economy. These impressive numbers could suddenly fade away if a U.S.-China trade deal is not achieved by late April, however.

As all Pacific Rim shippers know, the irrepressible Peak Season waits for no man.

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