With the House of Representatives giving most favored nation trading status for China the big thumbs-up, a long-term commercial relationship with the colossus of the east seems almost certain. The stakes for L.A., the oft-touted “Capital of the Pacific Rim,” could eventually be huge. To assess the possible L.A. implications of normalized trade relations with China, the Business Journal turned to a handful of local leaders with a primary stake in the matter.
Larry Keller
Executive Director
Port of Los Angeles
I think it’s really exciting, by taking away the annual question mark. It represents stability, which is essential in any trading relationship. In some cases, carriers are reporting 35 to 40 percent increases in flow coming from China. It’s the place where people want to be whether they’re sourcing or selling exports. It takes a whole point of tension out of that trading relationship and it can only benefit the port in terms of volume, jobs, opportunities and exports, which have been lagging for the last three years. It could jumpstart a lot of our industries that export to Asia because we have the beginning of a true long-term dialogue with China.
We’ve seen an increase this year of between 12 and 15 percent 45 percent of that is coming from China, which is the hot market right now.
In terms of specific industries benefiting, there is shipping, terminal operation, distribution and retailing. In the global economy, many of the parts that are going into products we make and assemble here are imported. A lot of them are now sourced in China because people are comfortable doing business with them. Car parts, computer parts, airplane parts all go into the industrial assembly base in our area and the benefits will be enormous.
Tom Lieser
UCLA Anderson Business Forecast
China doesn’t show up as a large trading partner, especially with what we export to the Asian market, as compared to South Korea for example. I’m sure there’s lots in the works in terms of port facilities, so it’s got to be a good thing. Right now our No. 1 trading partners are Mexico, Japan, Canada which may be a reflection of the easier relationships we’ve had with those nations thanks to the North American Free Trade Agreement. The same political issues you had with NAFTA were part of the China trade debate. Most notably, we’ve lost some apparel jobs, but we’ve kept them in North America. I’m not sure what the implications for employment would be.
Jay Winter
Executive Secretary
Foreign Trade Association
It brings some stability in that we don’t have to go through this circus we’ve been going through every year with congressional certification votes. It ensures consumers that they have a competitively priced, wide selection of goods. It’s going to lead to an expansion of our products in the citrus, aviation, high-tech and entertainment industries into that part of the world.
Miguel Contreras
Secretary-Treasurer
Los Angeles County Federation of Labor
This has always been a question of how the global economy will affect workers locally, and we’ll have to monitor the effectiveness of certain amendments that provide for the monitoring of workers. This is not about products because the Chinese, no matter how big the market, have no purchasing power. The question is how many jobs will be relocated? The question is, are local manufacturing, metal fabrication plants and garment contractors willing to move there and pay pennies on the wage dollar? I think there will be a lot of interest. There is a basic infrastructure for these sectors in China, and American companies can come in and beef it up for them.
Jack Kyser
Chief Economist
L.A. County Economic Development Corp.
Trade with China is already an important component of the local economy. In 1999, two-way trade between China and the L.A. Customs District was $34.3 billion. If you go back to 1990, it was $5.5 billion, so there has been dramatic growth, mostly in imports. Import value for 1999 was $30.6 billion and export value was $3.7 billion. So it’s an inbound market.
With the passage of permanent normal trade relations, many think there will be a dramatic change in the relationship, but I would have to say no, it will be very slow. You’re not going to reap the bonanza anytime soon, but agriculture sees potential, so does technology. The engineering and construction sector is optimistic because they are so woefully short on infrastructure in China. Of course, there’s aerospace. Boeing, the largest private employer in Southern California, is eyeing the Chinese airline market.
One of the key issues for the entertainment, software, and music industries is intellectual property rights and, hopefully, as China moves into the World Trade Organization, it will provide a better vehicle to deal with these issues.
