California’s Reliance on Pacific Rim Trade Partners Falters

By Patrick Burnson, Executive Editor
August 26, 2013 - SCMR Editorial

While it may seem “counter-intuitive,” California’s merchandise export trade with Europe has been up nearly 13% over the latest three months while the state’s exports to the Far East declined by 3.2% during the same period. Further complicating this picture is that this occurred despite a 16.9% jump in the value of shipments to China.

According to Christopher Thornberg, Beacon Economics’ Founding Partner, this statistical aberration has yet to run its course.

“As has been the case since late last summer, a substantial decline in exports of personal computer components has been the primary factor in restraining California’s outbound trade,” he says. “In the latest three months, the state’s exports of those items fell 21% from the same period a year earlier.”

Thornberg is one of California’s most widely reknowned economists, who is on record as being the first forecaster on the West Coast (and one of the earliest in the nation) to predict the subprime mortgage market meltdown that began in 2007, and the global economic recession that followed.

He now maintains that consumer preference for smartphones and tablets over PCs has prompted a thorough restructuring of global supply chains in the electronics components sector. The decline hasn’t dramatically affected the tech-heavy San Francisco Bay Area economy, however.

Thornberg observes that it is “re-exports” –  products that are shipped in from one nation and then shipped back out to another nation in essentially the same form – that make up the bulk of the decline.  For example, U.S. companies often import computer components from Asia and then ship them to Mexico for assembly.

“Re-exports are typically goods in transit, and their contribution to the state’s economy is comparatively negligible,” Thronberg says.

“They may support a very small number of jobs in the transportation and warehousing sector and they may profit the firms that orchestrate these transactions, but that’s about it.”

Beacon Economics’ current outlook for the state’s exporters is for modest rather than robust growth. The new U.S. competitiveness has allowed exports to remain stable despite grim news on the global front. However, in the short term the United States and California will have to look internally for growth, which is being helped by a resurgent housing market and rising worker incomes.

“It does appear that Europe has found a bottom, and with Japan continuing to stimulate their economy and better numbers on consumer spending from China, we hope that export growth will return by next year,” Thornberg says.

Finally, it’s import to note that California exporters are still heavily reliant on Pacific Rim trading partners.

Mexico remains the state’s top export market, despite a 15.4% drop in shipments. Canada retained its rank as the state’s second largest customer, although China is quickly closing the gap. Japan and South Korea continue to round out the list of the top five foreign customers for California products.



About the Author

image
Patrick Burnson
Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at .(JavaScript must be enabled to view this email address).

Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

The questions for the most recent Semiannual Economic Forecast, which was released last week, included: 1-has the strength of the U.S. dollar had a negative, negligible or positive impact on their organization’s profits?; 2-has the net impact of the depressed prices of oil and related commodities been negative, negligible, or positive for their organization’s profits; and 3-how would they characterize the combined impact of their organization’s profits on the strength of the U.S. dollar and the depressed prices of oil and related commodities.

The Department of Transportation’s Bureau of Transportation Statistics (BTS) reported this week that that U.S. trade with its North America Free Trade Agreement (NAFTA) partners Canada and Mexico dropped 5.8 percent on an annual basis in March to $90.5 billion.

Shippers sourcing their goods out the Port of Oakland’s largest marine terminal will soon need to make an appointment drayage providers before their cargo is released.

U.S. Carloads fell 10.6 percent at 244,290, and intermodal containers and trailers were off 6.5 percent at 262,693.

Now that the deal, which had to clear several regulatory hurdles in multiple countries, is official, FedEx executives were able to speak a little bit more freely, albeit being somewhat guarded in regards to certain integration specifics at the same time.

Article Topics

News · Supply Chain · Economy · Trade · All topics

About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]

Comments

Post a comment
Commenting is not available in this channel entry.