Trade/22″/mike1st/mark2nd

By JASON BOOTH

Staff Reporter

The outlook for L.A.’s trade sector has rarely been so uncertain.

Asia, which accounts for more than 50 percent of the exports leaving the L.A. Customs District, remains in the midst of a deep recession. With overseas demand down, local exporters of aerospace equipment, electronics, office equipment and business services are expected to face tough times for several more years.

Mexico and Canada will take up some of the slack, although economic difficulties in Latin America threaten some of that export trade.

Imports, meanwhile, are surging as foreign currency devaluations have made Asian goods more affordable for American consumers. While that’s good for Los Angeles in that it creates new jobs in the transportation and warehousing sectors, such lower-paying occupations can hardly make up for some of the higher-end jobs put at risk.

Added to the equation is the threat of a longshoremen’s strike next summer, which could bring trade to a virtual standstill.

If there is any consensus among economists on L.A.’s confused trade situation it is this: the sector cannot be counted on to be the engine of growth it once was.

The Economic Development Corp. of Los Angeles County projects that two-way trade for the Los Angeles Customs District will grow by 4.1 percent in 1999, to $189.3 billion, the majority of that being imports. While that’s an improvement from the 2.2 percent decline in trade forecast for all of 1998, it is anemic compared with the 10 percent average annual growth registered between 1994 and 1997, when trade helped fuel L.A.’s economic recovery.

Though the Asian financial markets rebounded a bit in the fourth quarter, fallout from the region’s economic problems is expected to affect L.A. for years. Even as Thailand and Korea show early signs of rejuvenation, the more important L.A. trading partners such as Japan and China continue to contract.

“My belief is that the worst of the Asian crisis is over on a financial basis, but the effect on the wider economy has not yet been fully felt. The biggest effect will be in the first half of 1999,” said Ross DeVol, an economist at the Milken Institute in Santa Monica.

It is L.A.’s long-beleaguered aerospace sector that appears most threatened.

Weakness in Asia has already resulted in numerous delays and cancellations of defense-related orders. Boeing Co., meanwhile, has announced major cutbacks in commercial jet production as Asian airlines have cancelled orders due to a dropoff in travel in the region.

While only one major aerospace manufacturer is still headquartered in Los Angeles, there are thousands of smaller local subcontractors that serve the industry. Some of them are expected to become casualties.

As a result, the slight recovery in L.A. County aerospace employment could be reversed. This year, local aerospace employment is estimated to total 143,500, up from a low of 137,800 in 1995, according to the EDC. However, that figure is projected to fall to 141,500 next year, and to 134,500 in 2000.

Entertainment will continue to be hit by the Asian downturn as well. As soon as Asian financial markets started to fall in late 1997, so did film attendance in the region, by some accounts as much as 40 percent.

“It depends on the territory, but the situation looks pretty stable at zero (growth from depressed levels),” said Morgan Rector, president of Imperial Entertainment Group, a division of Imperial Bancorp, and a leading film-industry lender.

Countries such as Malaysia and Indonesia are still effectively off the map in terms of buying U.S. films. Korea is slowly making a comeback, but the emphasis is on higher-quality productions, and the distribution deals getting done are now usually transacted in cash, up front, to avoid the currency-related difficulties than plagued the industry this year.

Until Asia recovers, there is little hope of L.A.’s trade situation returning to the levels of a few years ago. The Milken Institute projects that Asia will slow economic growth in Southern California by a full percentage point in 1999.

Then there’s the real wild card: a threatened labor dispute at the ports of Los Angeles and Long Beach.

The contracts of the International Longshore and Warehouse Union expire on July 1. Negotiations on a new contract are expected to be tense, with some anticipating a full-scale strike. If that were to occur, the ports of Los Angeles and Long Beach would be crippled, along with all other U.S. West Coast ports.

Already, some trade consultants are urging shipping lines to consider transferring some of their business to Mexican and Canadian ports in order to avoid any disruption.