Why L.A. May Get More Seoul

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The fact that Los Angeles is a capital of the Pacific Rim is old news. After all, America’s business relationship with Japan has peaked and the one with China is pretty mature.

But wait. L.A.’s status in the Pacific Rim may get a jolt soon.

That’s because a U.S.-South Korea Free Trade Agreement, long and dull though the process has been, finally appears to be nearing a successful conclusion. If approved, the treaty will result in a higher level of business between the United States and Korea because it will eliminate 95 percent of tariffs in five years.

This could be a big deal. And Los Angeles stands to be the prime beneficiary.

That’s partly because Los Angeles is where Koreans land when they enter the United States. There are an estimated 450,000 ethnic Koreans here, more than anywhere outside of Korea, and there’s a thriving business community in the Koreatown area west of downtown Los Angeles. So any increase in business between the two countries will at least partly be done in and through Koreatown.

If a Korean business decides the eliminated tariffs will make it profitable to sell its goods in the United States, it will need a beachhead in this country. And that will likely be in Los Angeles.

Likewise, the lack of tariffs will mean more U.S. companies will be able to sell in Korea. A whole new market will open up.

A free-trade agreement will particularly help L.A.’s big apparel industry. As reported in last week’s Business Journal, many local clothing companies are owned by Koreans and Korean-Americans, so a quick expansion of business in Korea would be natural for them.

Beyond all that, of course, any increase in trade with Korea will benefit the L.A. and Long Beach ports along with the warehouses, truckers, freight forwarders and others that depend on shipping to make their living.

If approved, the free-trade agreement will be America’s first with a major Asian economy, and it will be the largest trade deal since the North American Free Trade Agreement in 1993. It will definitely be a boost for L.A.’s economy.

Actually, it’s not just Asia that L.A. companies are venturing to.

As a notable example, DirecTV, already America’s biggest satellite TV provider, has targeted Central and South America for expansion. It doubled its number of subscribers last year in Latin America, and operations there now account for 15 percent of its operating earnings. (DirecTV, by the way, is the third biggest public company headquartered in Los Angeles County measured by market capitalization.)

The U.S. market is pretty well saturated with more than 90 percent of homes already equipped with cable or satellite TV. But given the rising middle class and the generally strengthening economies in Latin America, DirecTV sees that area as its best opportunity for growth.

As trade expands in Asia and South America, Los Angeles stands to get re-energized as a Pacific Rim capital. And that means the port complex and the airport – although they are not the most glamorous – remain among this region’s most important economic assets.

Charles Crumpley is editor of the Business Journal. He can be reached at [email protected].

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