With the annual battle over extending preferential trade status to China shaping up as the most contentious in recent memory, the stakes for L.A.’s economy are higher than ever.
It’s still considered unlikely that Congressional opponents can muster the two-thirds majority needed to overturn President Clinton’s recommendation to renew “most-favored-nation” status. But the very idea of a trade war with China which would result in higher tariffs is a cause for concern throughout L.A.’s international trade community.
“The impact on our harbor would be mind-boggling,” said Jay Winter, executive secretary of the Foreign Trade Association.
Added Jack Kyser, chief economist of the Economic Development Corp. of L.A. County:
“If most-favored-nation status is turned down, there will be pain all over the U.S. But our pain will be more exquisite.”
That pain would be spread throughout the region, but would be acute among L.A.’s manufacturers particularly in the apparel and toy industries, which rely to a great extent on Chinese suppliers.
“The vast majority of toys in the world come from China,” said Charlie Woo, chief executive officer of Megatoys. “If we get into a trade war with China, we would take the brunt of the damage.”
Woo estimates that 80 percent of his toys are made in Chinese factories. The higher tariffs resulting from the loss of preferential trading status would double Woo’s manufacturing costs costs that would probably be passed on to retailers and consumers.
Some $18 billion in two-way trade moved between Southern California and China last year, making China the region’s second largest trading partner. Commerce between the two areas has surged almost 300 percent since 1991.
Nationwide, altering China’s trade status would cost consumers $600 million a year in higher prices on consumer goods, according to Clinton Administration officials.
Clinton last week announced his intention to renew normal trading status for China, arguing that strong trade ties remain the best way for the U.S. to influence China on issues such as human rights.
The annual exercise almost always sparks a lively debate in Congress. But this year, backers of renewing China’s trade status face particularly fierce opposition from an unlikely coalition ranging from labor unions on the left to members of the Christian right.
The arguments generally center on China’s repressive internal policies.
“This administration raises no human rights concerns with Beijing,” said Rep. Christopher Cox, R-Newport Beach, who is leading the California delegation in the fight against renewing normal trade ties with China.
Cox said he opposes the move on economic grounds as well, citing China’s history of copyright and intellectual property violations and the country’s barriers to U.S. goods.
“We have a gigantic trade deficit with China,” said Cox. “Right now, there is no such thing as free trade with China.”
The Port of Los Angeles estimates that revoking MFN status would cost as much as $45 million in lost wharfage fees, said Al Fierstine, the port’s director of business development.
And local small businesses would be affected in smaller but equally as meaningful ways.
“If tariffs went up dramatically, it would very negatively affect our business,” said John Weems, chief opertating officer of Corinthian Marketing Inc., an El Segundo toy company that does all of its manufacturing in China. “It would lead to a dramatic jump in prices.
“Every year it comes up and every year you worry,” Weems added, “but being a small company, there’s not a lot you can do about it. You just keep your fingers crossed.”
