THE KYSER CENTER FOR ECONOMIC RESEARCH

Transcription

1 THE KYSER CENTER FOR ECONOMIC RESEARCH INTERNATIONAL TRADE OUTLOOK The Southern California Region,

2 THE LAEDC THANKS THE FOLLOWING BUSINESS LEADERS FOR THEIR GENEROUS SUPPORT: For information about LAEDC membership, contact Justin Goodkind (213)

3 THE 2013 INTERNATIONAL TRADE OUTLOOK IS SPONSORED BY: TITLE SPONSORS: EVENT SPONSOR:

4 International Trade Outlook Southern California Los Angeles County Economic Development Corporation The Kyser Center for Economic Research 444 S. Flower St., 37 th Floor, Los Angeles, CA Tel: LAEDC-1 Fax: Web:

5 The LAEDC, the region's premier business leadership organization, is a private, non-profit 501(c)3 organization established in As Southern California s premier business leadership organization, the mission of the LAEDC is to attract, retain, and grow businesses and jobs for the regions of Los Angeles County. Since 1996, the LAEDC has helped retain or attract nearly 180,000 jobs, providing $11.0 billion in direct economic impact from salaries and an estimated $850 million in property and sales tax revenues to the County of Los Angeles. Regional Leadership The members of the LAEDC are civic leaders and ranking executives of the region s leading public and private organizations. Through financial support and direct participation in the mission, programs, and public policy initiatives of the LAEDC, the members are committed to playing a decisive role in shaping the region s economic future. Business Services The LAEDC s Business Development and Assistance Program provides essential services to L.A. County businesses at no cost, including coordinating site searches, securing incentives and permits, and identifying traditional and nontraditional financing including industrial development bonds. The LAEDC also works with workforce training, transportation, and utility providers. Economic Information Through our public information and for-fee research, the LAEDC provides critical economic analysis to business decision makers, education, media, and government. We publish a wide variety of industry focused and regional analysis, and our Economic Forecast report, produced by the Kyser Center for Economic Research, has been ranked #1 by the Wall Street Journal. Economic and Policy Analysis Group The LAEDC Economic and Policy Analysis Group offers thoughtful, highly-regarded economic and policy expertise to private- and public-sector clients. The group focuses on economic impact studies, regional industry analyses and economic issue studies, particularly in water, transportation, infrastructure and workforce development policy. Leveraging our Leadership The LAEDC operates the World Trade Center Association Los Angeles-Long Beach (WTCA LA-LB), which facilitates trade expansion and foreign investment, and the LAEDC Center for Economic Development partners with the Southern California Leadership Council to help enable public sector officials, policy makers, and other civic leaders to address and solve public policy issues critical to the region s economic vitality and quality of life. Global Connections The World Trade Center Association Los Angeles-Long Beach works to support the development of international trade and business opportunities for Southern California companies as the leading international trade association, trade service organization and trade resource in Los Angeles County. It also promotes the Los Angeles region as a destination for foreign investment. The WTCA LA-LB is a subsidiary of the Los Angeles County Economic Development Corporation. For more information, please visit

6 Table of Contents Executive Summary World Economic and Trade Outlook... 3 Trade Results for Trade Values by Customs District Trade Values by Port West Coast Port Trends Container Activity Alameda Corridor Airport Cargo Trends Product Trade Trends Trade in Services International Trade Employment Special Report: Los Angeles Metropolitan Area: The Largest Exporter in the U.S Los Angeles Customs District's Top Five Trading Partners China Japan South Korea Taiwan Thailand Trade-Related Infrastructure Projects Industrial Real Estate and International Trade Challenges and Opportunities Statistical Appendix Report Researched and Prepared By: Robert A. Kleinhenz Ph.D Chief Economist Ferdinando Guerra Associate Economist Kimberly Ritter-Martinez Associate Economist With Special Thanks To: George Entis, Kyser Center Intern Kaili Liu, Kyser Center Intern

7 Executive Summary Executive Summary Driven by slow economic growth in the U.S. and elsewhere, global trade activity showed modest improvement at best last year. Trade trends have generally mirrored economic conditions in the United States and other nations around the globe in the last few years, contracting sharply during the worst of the recession in 2008 and 2009, recovering much of that lost ground in 2010, and showing more muted progress last year. With the global economy not yet fully on the mend, global trade this year and next is expected to grow at a subdued pace of 3% to 4%, as developed nations work through weak growth, euro zone debt problems, a slowdown in China and other emerging economies, and the ever present wild card, oil prices. Nationally, total trade in goods and services rose last year by 2.9%, following a 5.6% increase in With the U.S. economy expected to grow at just two percent this year and facing a mixed bag from its major trading partners, total trade should continue to grow by 2% to 3% annually. However, faster growth globally and in the U.S. in 2014 should accelerate growth in trade, with total trade, exports, and imports all expected to grow by 4% to 6%. Los Angeles County is a major node in the global goods trading network, with the two largest container shipping ports in the U.S. and with one of the nation s largest air cargo ports. Trade trends at the region s ports and airports resemble recent trends in the U.S. and across the globe, with steep declines in exports and imports during the recession, sharp gains immediately following the worst of the recession, and slow improvement since then. Imports coming through the ports have increased over the past three years as the U.S. consumer sector has recovered. Meanwhile, U.S. goods exports have increased by nearly a quarter since the recession-era low of 2009, driven by changes in the value of the dollar, export initiatives, and a shift of emerging economies to a more balanced mix of investment and consumer spending. Exports hit a record level last year, but still accounted for just 30% of two-way trade through the ports. The Ports of Los Angeles and Long Beach retained their status as the nation s largest container ports, with the number of TEUs (twenty-foot equivalent units) edging up from 14.0 million TEUs in 2011 to 14.1 million TEUs in Small but meaningful increases of approximately two percent are expected this year and next. Significantly, both ports remain committed to growth over the long run with significant infrastructure investments that will upgrade their facilities in an increasingly competitive environment. Investments in infrastructure and industrial real estate throughout the region will contribute to the long-term success of this very important sector of the local economy. LAEDC Kyser Center for Economic Research 1 International Trade Outlook

8 Executive Summary Los Angeles International Airport (LAX) is the West Coast s largest port for airborne cargo. Like sea cargo, air cargo shipments grew last year, but air cargo was more balanced, with exports making up just under half of total trade activity. This was due in part to strong demand for U.S.-made lightweight, high value products such as electronics and the like. Shipment by air also enables companies to fine-tune their just-in-time inventory management practices to better match near-term changes in the demand for their products, especially when product and selling cycles are short. The value of two-way trade coming through the Los Angeles Customs District (LACD) was $403.5 billion last year, a new record high that enabled the LACD to overtake the New York-New Jersey Customs District and regain its top ranking in With a gain of 4.3%, two-way trade through the LACD grew somewhat faster than the U.S. as a whole. Total LACD two-way trade value is forecast to increase by 2.4% in 2013 to $413 billion, with a 4.7% gain to $433 billion expected in The largest export product categories last year were: computers, peripherals, machinery, appliances and parts; electrical equipment, TVs and electronic parts; medical, surgical and dental instruments machinery, and aircraft, spacecraft, and parts. The largest import categories were: computers, peripherals, machinery, appliances and parts; motor vehicles and parts; refined oil products; and apparel and accessories (knit or crochet). The LACD s top trading partners were unchanged from last year. China was by far the largest with two-way trade hitting $211.8 billion, followed by Japan ($68.4 billion), South Korea ($28.1 billion), Taiwan ($20.5 billion), and Thailand ($12.9 billion). For each of the top trading partners, the dollar volume of imports exceeded that of exports. International trade is one of the most important economic engines in the Los Angeles region. According to the LAEDC s recent analysis of industry clusters, there were 176,900 international trade-oriented jobs in Los Angeles County in 2011, equivalent to 4.7% of total nonfarm payroll jobs. Across the 5-county area, there were 268,300 jobs, with 44,700 in Orange County, 39,000 in the Inland Empire, and 7,700 in Ventura County. While the general outlook for international trade calls for modest growth, there are concerns about the momentum of the global economy, competition from other ports around the country, and the widening of the Panama Canal. On the other hand, Los Angeles County remains a preferred point of access to U.S. markets, while free-trade agreements and the National Export Initiative will create new opportunities to expand trade through the region in the coming years. LAEDC Kyser Center for Economic Research 2 International Trade Outlook

9 World Economic and Trade Outlook World Economic and Trade Outlook U.S. Outlook The U.S. will be front and center as a driving force in the global economy in 2013 and The private sector will gather momentum in 2013 and the situation in the public sector will become more stable, resulting in economic growth of about 2.0% this year and faster growth next year. Where will economic growth come from in 2013 and 2014? Capital spending by businesses will grow this year and next by mid-single digit percentages, as companies continue to invest in IT infrastructure, other equipment, and structures. Businesses are poised to expand, having cut costs during the recession and gaining efficiencies through the adoption of new technologies. Companies also have access to substantial cash reserves and low-cost borrowed funds. However, businesses will only expand production and hiring if the other sectors of the economy increase spending. The international sector offers some promise of growth this year and next. Export growth depends on the nation s major trading partners. Europe continues to struggle with recession as countries in the region proceed with fiscal-tightening efforts. China should show some improvement this year, but its economy is undergoing a transformation to a more consumer-driven economy. The impact of this is already visible with U.S. exports to China. Meanwhile, emerging economies in the Asia Pacific region, Latin America, and Sub-Saharan Africa present opportunities not only this year, but for many years to come as growth in the emerging markets accelerates in the decades ahead. Above all else, acceleration of U.S. economic growth depends on the consumer sector. Households have benefitted from slow but steady gains in the labor market over the last two years, increases in household wealth, and some improvement in access to consumer credit. Improvements in household wealth thus far have mainly come from gains in the financial markets, but real estate should contribute more this year and next. As the consumer sector heals, confidence will improve and consumer spending will grow. Increases in consumer spending (which makes up about 70% of U.S. economic activity) will not supercharge growth, but it will act like a flywheel to the engine of the economy by lending it the momentum necessary to sustain growth in the years ahead. Altogether, the U.S. economy will grow by 1.8% to 2.0% this year and will accelerate to 2.3% to 2.8% growth in The private sector will make progress LAEDC Kyser Center for Economic Research 3 International Trade Outlook

10 World Economic and Trade Outlook regardless of what happens in the public sector. The threat of recession remains low, and both households and businesses should be able to proceed through this year and next with an eye on the future rather than looking backwards and harboring concerns about the past. Southern California Outlook The five counties that make up the greater Los Angeles region generally carried forward momentum from 2012 into the first quarter of this year despite concerns over the economic drag caused by Sequestration budget cuts and the now expired payroll tax rate cut. As of March, Los Angeles County, Orange County, and the Inland Empire experienced year-to-year growth in nonfarm jobs of just over two percent, with Ventura County not far behind with a growth rate of 1.9%. All major industry sectors experienced year-to-year job gains in early 2013, except for manufacturing and government. The monthly unemployment rates of the individual counties in the five-county area have trended down on a year-to-year basis over the past year, although the pace of improvement continues to be disappointing. Personal income and taxable sales are generally on the rise across the region. The Southern California housing market demonstrated the start-of-peak-season bounce that is typical of March. Supply constraints have boosted median prices while limiting sales growth. New home construction is increasing, as is construction-related employment. Additional job gains are expected through the rest of the year across the private sector, with the exception of manufacturing, which will see further declines in employment. Government sector jobs will also be under pressure. Unemployment rates will edge down this year and next, but total nonfarm employment will not reach pre-recession peak levels until late 2014 or sometime in Large percentage gains in residential construction are expected, but are coming off a relatively low base. Regarding commercial real estate, office space vacancy rates remain quite high and lease rates low with very little new construction in the pipeline. Industrial space, on the other hand, is recovering much faster. Lease rates are still low, but vacancy rates have come down substantially. Demand for industrial space, especially large distribution centers, has been strong enough to encourage new construction, particularly in the Inland Empire. Personal income will show low single digit growth as will taxable retail sales, signs that the consumer sector is healing, albeit slowly. LAEDC Kyser Center for Economic Research 4 International Trade Outlook

11 World Economic and Trade Outlook Los Angeles County Outlook Nonfarm jobs in Los Angeles County are expected to grow by 1.7% this year, with another 1.8% gain to come in Even with these improvements, nonfarm employment will fall shy of prerecession levels in The largest gains are expected to be in leisure and hospitality (8,600 jobs), health care (5,000 jobs), construction (4,900 jobs), and professional, scientific and technical services (4,400 jobs). Job losses will continue in manufacturing and government, but the magnitude of the losses will be much smaller than in recent years. Los Angeles County is experiencing a broad-based recovery it is just slower than anyone would like to see. The unemployment rate will decline from 11.1% in 2012 to 10.0% this year and drop below 10.0% in Personal income, which fell sharply during the worst of the recession, will register steady percentage gains in the low single digits this year and next, contributing to a healthier consumer sector. International Outlook The on-going sovereign debt crisis and recession in Europe, and the slowdown of the Chinese economy both figured prominently in the performance of the global economy last year. Closer to home, because the Southern California economy is closely linked to the international economy through trade, foreign direct investment (FDI), and capital flows, developments in Europe and China had a significant impact on the local economy. The largest risk for 2013 is the European sovereign debt crisis. Actions taken by European policymakers and the European Central Bank (ECB) have substantially improved the economic environment and outlook. The probability of a Greek exit from the euro zone has decreased due to the 2012 bailouts that were rewarded to Greece after the positive outcome of the Greek elections and subsequent reforms. The actions of the new technocratic government that has just been formed in Italy and political turmoil in Spain will go a long way in determining what happens as well. Finally, German elections will greatly affect the euro zone. Chancellor Merkel and Germany s ruling government will seek to prevent further deterioration of the euro zone financial situation before the election. More pointedly, forthcoming elections in Germany likely mean that any potential crisis will be postponed until As for China, the big debate in 2012 was not about whether China s economy would slowdown, but instead by how much. China s economy grew at doubledigit rates for years before slowing to single digit growth in Many experts projected that the Chinese economy would experience a hard landing with growth slowing to 5% to 6% in However, as the Kyser Center correctly projected, China experienced a consistent deceleration of economic growth in 2012 without a severe drop-off (or hard landing) in economic output. LAEDC Kyser Center for Economic Research 5 International Trade Outlook

12 World Economic and Trade Outlook The Chinese economy appeared to have had turned the corner at the end of 2012, posting a growth rate of 7.9%. However, the slowdown returned in the first quarter of 2013 with GDP expanding by 7.7%. The continuation of this slowdown could be just as detrimental to the global economy in 2013 as it was in Look for only a slight improvement in the Chinese economy over the rest of this year. The Iranian nuclear standoff and a potential North Korean crisis will be the Xfactors this year. A conflict with either Iran or North Korea would directly impact the entire global economy, particularly those nations heavily dependent upon petroleum imports (if with Iran) and South Korea/Asia Pacific trade (if with North Korea). A resurgence of instability in North Africa and the Middle East would also have consequences for the global economy; particularly if problems arise in Egypt, potentially impacting trade flows through the Suez canal. All the major currencies will be subject to more volatile exchange rate movements in 2013 as the advanced economies central banks continue to print money. The euro will remain very volatile this year with any flare up of the debt crisis leading to a sharp decline of the single currency. However, the most significant currency story of 2013 will likely be the depreciation of the Japanese Yen with the advent of Abenomics, a term used to describe the recent monumental shift in Japanese monetary policy. The yen has already fallen to 100 yen per U.S. Dollar and is expected to further depreciate over the course of this year and next. This will have a substantial impact on two-way trade between the U.S./Los Angeles Customs District and Japan in It will also have an impact on two-way trade between the U.S./LACD and all of our top trading partners as the Japanese, Koreans, and Taiwanese produce and demand similar goods. Finally, higher commodity prices could become an issue again. The period of relatively low prices over the past two years could reverse if the emerging economies (particularly China) experience faster than expected growth. Metals, food and minerals could all see an uptick in the second half of the year due to potential increases in demand from China and other emerging markets. The developing nations of Asia are expected to experience the fastest growth rates once again this year. They have met those expectations for the most part in the first quarter of A higher pace of growth is expected later this year and into next year, mainly due to expectations that China will regain some steam and demand from the advanced economies will be stronger, especially in Europe. According to the latest IMF World Economic Outlook (WEO) published in April 2013, the global economy is expected to grow by about 3.3% in 2013 and 4.0% in 2014 after experiencing growth of 3.2% in China, Indonesia, and India will be the strongest performers in 2013 and 2014, along with the rest of the LAEDC Kyser Center for Economic Research 6 International Trade Outlook

13 World Economic and Trade Outlook Association of Southeast Asian Nations-5 (ASEAN-5, which includes Indonesia, Thailand, Vietnam, Malaysia and the Philippines). Once again, the advanced economies will grow at slower rates beginning with the euro zone and the United Kingdom. The euro zone (particularly Greece, Spain, Portugal and Italy) will be the weakest of the advanced economies in 2013 and Greece, Spain, Portugal, and Italy all registered declines in output during the first quarter of In fact, all three economies, and now even France, are expected to see declines in GDP during 2013 before returning to minimal growth in World Trade Outlook In general, world trade in goods grew at a sluggish pace in 2012 after experiencing a solid year in This was primarily attributable to slow economic growth in the advanced economies and the recession in Europe. Total global trade in both goods and services grew by 2.5%, after expanding by nearly 6.0% in Total trade volume will expand again in 2013 and the rate of growth will be slightly higher than last year due to improved prospects for the U.S., Japan, and China. Trade in goods alone (excluding services), increased by 2.0% last year. In the advanced economies, growth rates for both imports and exports (goods only) will increase by 1.4% this year. Taken as a whole, developing economies are expected to grow by 5.9% on the import side and 5.3% on the export side. Trans-Pacific westbound trade offers the best prospects for growth with Developing Asia demanding greater amounts of U.S. goods and services. In fact, Trans-Pacific westbound trade (goods only) is expected to rise by 3.7% this year. The Los Angeles region s twin ports offered up a mixed bag of results in The combined total loaded cargo for both ports was only up by 0.3%. This was mainly attributed to the recession in Europe. The drop in demand from Europe had a significant impact on the region s exports to China, Japan, South Korea, and Taiwan because those countries import products that are inputs to the production of final goods that are then exported to Europe and other advanced economies. Total loaded cargo volume at the Port of Los Angeles was down by 0.7%, while total loaded volume at the Port of Long Beach was up by 1.5%. A new trend is emerging in the industry whereby shippers form alliances to allow cargo volumes to move more fluidly between the Ports of Los Angeles and Long Beach, which explains the large fluctuations in container volumes at the ports. The Ports of Los Angeles and Long Beach maintained their top two rankings in the U.S. during 2012, handling a total of 14.1 million containers. In addition, the Los Angeles Customs District (LACD) regained its number one position in the U.S. in 2012 with a two-way trade value of $403.4 billion (ahead of New York- New Jersey at $381.3 billion). In 2012, the value of total two-way trade at the LACD increased by 4.3% on a year-over-year basis. LAEDC Kyser Center for Economic Research 7 International Trade Outlook

14 World Economic and Trade Outlook The Obama administration s National Export Initiative (NEI) has boosted U.S. exports over the past three years. The goal of the initiative is to double U.S. exports by the end of Since 2009, exports have risen from $1.6 trillion to $2.2 trillion in Still, even after setting export records for three consecutive years, the NEI is behind target. In order for the NEI to meet its goal, exports would have to grow to roughly $3.16 trillion by the end of 2014, an increase of nearly $1 trillion or 44% over the next two years. The LACD has already benefitted from the NEI. In addition to looking at the increase in the value of exports, one can also get a sense of this benefit by analyzing changes in container volumes shipping through the San Pedro Bay Ports. The Port of Los Angeles (POLA) set a record in 2010 with 1,841,274 TEUs exported and then surpassed that record in 2011 with exports of 2,109,394 TEUs. The number of TEUs declined by 3.1% in 2012 to 2,043,076 TEUs exported, but that was still the second highest total recorded for the port. Exports, particularly to China (up by over 50%) and the rest of Developing Asia, have been especially robust over the last three years and would have reduced bilateral trade deficits between the LACD and most of its major trading partners if not for recent increases in imports. U.S. exports have slowly undergone a transformation over the past few years from serving mostly advanced economies (particularly Europe and Japan) to serving faster growing emerging markets in Asia (mainly China and Southeast Asia). This change in focus has resulted in substantial growth for U.S. exports since the end of the Great Recession. All of this translates into higher economic output and more jobs. Since 2009, the nation has created 6.1 million private sector jobs with a number of those gains occurring in California and Southern California. The short- and long-term outlooks for LACD and Los Angeles Metropolitan Area exports is bright as Developing Asia will experience strong growth rates over the course of the next four decades. A recently released study by the Brookings Institution, titled Export Nation found that the Los Angeles Metropolitan Area (Los Angeles and Orange counties) is the top exporting metropolitan region in the U.S. with roughly $80 billion in goods and services exports in 2010 (please see the text box on page 18). The report also shows that the region has the largest number of total exportsupported jobs (both direct and indirect) of any metro area with over 540,000 total jobs and that exports contributed roughly 11% to the Los Angeles Metro Area s gross regional product. The Brookings report is unique because it estimates the value of exports by where they are produced rather than their point of export. That is, Department of Commerce figures show that $105.2 billion (in 2010) of exports were shipped out of the LACD (which also includes Las Vegas, NV) but does not indicate where the goods were produced. The Brookings report estimates that $80 billion of LAEDC Kyser Center for Economic Research 8 International Trade Outlook

15 World Economic and Trade Outlook exports were produced here in the Los Angeles Metro Area. The Los Angeles region is well positioned in terms of both its geography and its goods movement infrastructure to expand regional exports in the coming years. The Los Angeles Metro Area also encompasses the largest manufacturing sector of any metropolitan area in the nation. The Korea-US Free Trade Agreement (KORUS FTA) is one of three free trade agreements that went into effect in The other two are the Colombia and Panama Free Trade Agreements. The KORUS FTA is by far the most critical in terms of its economic impact, and the most commercially significant FTA since the North American Free Trade Agreement (NAFTA) was completed in The KORUS FTA eliminates tariffs and duties on over 95% of consumer and industrial products within three to five years of its implementation date of March 15, Nearly 80% of consumer and industrial goods became duty free immediately. The majority of the remaining tariffs (5%) will be eliminated within 10 years from the FTA s implementation date. Negotiators predict U.S. exports to South Korea will grow by $11 billion annually solely from the elimination of tariffs. The free trade agreement will also eliminate existing non-tariff barriers (e.g. quotas) and prevent the creation of future non-tariff barriers. Two of the biggest beneficiaries of the free trade agreement with South Korea will be the POLA and the POLB, which handle the majority of U.S.-South Korea trade. On a value basis, total two-way trade between the LACD and South Korea represents almost 30% of total U.S.-South Korea trade. South Korea is the LACD s third largest trading partner, while the LACD is South Korea s largest trading partner among U.S. customs districts. In addition to increased port activity, downstream local trade-related industries and foreign direct investment from South Korea will benefit as well. As expected, the KORUS FTA increased LACD exports in the areas where the FTA went into effect immediately. Equipment and machinery greatly benefitted, particularly semiconductor manufacturing equipment and medical equipment. In addition, shipments of both aerospace-related products and chemicals increased as a direct result of the drop in tariffs. Similarly, the local entertainment industry is already benefiting from the FTA due to the greater intellectual property protections for film, software, music, and videos. The agreement will help manufactured goods exports (particularly machinery and equipment) originating in and coming through the region and, over the long term, will support increased exports of local professional and business services including finance, accounting and legal services with the elimination of non-tariff barriers. Over time, the FTA will only become more utilized as additional tariffs are eliminated or lowered and as supply chains adapt. LAEDC Kyser Center for Economic Research 9 International Trade Outlook

16 World Economic and Trade Outlook As the first free trade agreement between the U.S. and a large Asian economy, the KORUS FTA created the framework for a larger trade agreement, called the Trans-Pacific Partnership (TPP) Agreement, between the U.S. and potentially twelve other Pacific nations. Negotiations were completed in March 2013 in Singapore with the next (17th) round to commence in May 2013 in Lima, Peru. Currently, the TPP includes 11 nations: the U.S., Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. In addition, Japan has joined the negotiations and could formally be admitted to the partnership in July The LACD will undoubtedly benefit from the increase in Trans-Pacific trade that is expected to occur in the wake of the implementation of this agreement, which could come as soon as the end of this year. U.S./LACD trade might also benefit from successful completion of the Doha Round (the current trade negotiation round of the World Trade Organization) or an amended version. The outlook for LACD exports heavily depends upon demand from its top trading partners. With the exception of Japan and Germany, nearly all of the LACD s top trading partners should experience modest to robust economic growth in the forecast period. These nations include China (8.0% in 2013 and 8.2% in 2014), South Korea (2.8% in 2013 and 3.9% in 2014), Taiwan (3.0% in 2013 and 3.9% in 2014), Thailand (5.9% in 2013 and 4.2% in 2014), Vietnam (5.2% in 2013 and 5.2% in 2014), Australia (3.0% in 2013 and 3.3% in 2014), Malaysia (5.1% in 2013 and 5.2% in 2014), and Indonesia (6.3% in 2013 and 6.4% in 2014). Growth of LACD imports depends upon the strength of the U.S. economy through the remainder of this year and into Having expanded by 2.5% in the first quarter of 2013, GDP growth in the U.S. appears to be on track to achieve an annual growth rate 2.0% this year with stronger growth to follow in These developments will ultimately determine world trade and LACD trade outcomes for 2013 and Total LACD two-way trade value is forecast to increase by 2.4% in 2013 to $413 billion, with a 4.7% gain to $433 billion expected in Total container traffic at the San Pedro ports is expected to expand in 2013 to 14.4 million TEUs, a rise of 1.6%. Total traffic in 2014 is expected to see a higher increase of 2.0% in 2014, bringing total TEUs to 14.6 million. LAEDC Kyser Center for Economic Research 10 International Trade Outlook

17 Trade Results for 2012 Trade Results for 2012 Trade Values by Customs District The value of two-way trade that flowed through the Los Angeles Customs District (LACD) in 2012 was $403.5 billion, an increase of 4.3% compared with After slipping to second place behind New York in 2011, the LACD regained its top ranking last year. Two-way trade in the LACD also grew at a faster pace than the nation as a whole in The U.S. posted a 3.5% gain with a total two-way trade value of nearly $3.8 trillion. As usual, LACD international trade activity was dominated by imports. In 2012, total general imports (cargo unloaded in the LACD, but not necessarily clearing customs in the LACD) increased by 6.2% to $282.1 billion, a new high. Exports also hit a record level, but edged up by just 0.3% to $121.3 billion. Two-way trade through all three of California s customs districts (Los Angeles, San Francisco and San Diego) increased by 3.5% to $578.2 billion in Value of International Trade at Nation s Leading Customs Districts $400 Billions of U.S.$ New York Los Angeles Houston Detroit New Orleans $300 $200 $100 $ Source: U.S. Dept. of Commerce, U.S. Bureau of the Census Trade Values by Port International trade data allow the analysis of trade values moving through individual seaports and airports around the nation. For imports, the general imports data reflect the value of the merchandise unloaded at the various ports. Merchandise could enter through one port but clear customs at another for a number of reasons, such as the use of free trade zones for further processing. In Los Angeles, the value of unloaded merchandise is significantly higher than the value of goods that clear customs. LAEDC Kyser Center for Economic Research 11 International Trade Outlook

18 Trade Results for 2012 The Port of Los Angeles remained number one in the nation with a 2012 total two-way trade value of $284.1 billion. The bulk of this cargo was imported goods with a value of $241.3 billion. JFK International Airport was second with a total value of $184.3 billion. Exports totaled $95.8 billion versus $88.5 billion in imports. Houston, Texas was third with a 2012 two-way trade value of $176.8 billion. Imports accounted $83.4 billion of port activity, while exports were $93.4 billion. The Port of Long Beach ranked 9 th with a two-way trade value of $101.0 billion, of which, $65.3 billion was imported goods. Los Angeles International Airport was 12 th, with a two-way trade value of $86.9 billion. Activity was almost balanced here, with imports at $45.4 billion and exports at $41.6 billion. San Francisco International Airport moved up one spot to 20th place in 2012, with a total value of $49.3 billion. Exports accounted for $26.2 billion of the total. Rounding out the major California ports was Oakland at $44.3 billion and San Diego s Otay Mesa Station at $34.9 billion. West Coast Port Trends The Pacific Maritime Association compiles tonnage-based measures of activity at West Coast ports. In 2012, total tonnage moving though all West Coast ports combined dipped by 0.3% to million short tons (2,000 lbs.). The decline was attributable to lower volumes shipping through ports of the Pacific Northwest where total tonnage fell by 4.8% to 97.3 million tons. Tonnage moving through Southern California s ports increased by 1.5% to reach million tons. Gains at the region s ports ranged from 12.5% at the Port of San Diego and 10.4% at Port Hueneme to 2.3% at the Port of Long Beach and 0.1% at the Port of Los Angeles. Ports in Northern California recorded a marginally higher regional increase in tonnage, rising by 1.6% to nearly 37.6 million short tons. Southern California s share of West Coast tonnage in 2012 edged up slightly to 61.0% from 59.9% the previous year. Northern California s ports also saw a small increase in share, moving from 10.7% in 2011 to 10.9% in Container Activity The number of containers handled by a port or throughput is another commonly used measure of international trade activity. Containers are measured LAEDC Kyser Center for Economic Research 12 International Trade Outlook

19 Trade Results for 2012 in 20-foot equivalent units or TEUs. The most commonly used containers for international shipping are 40 feet, which equates to two TEUs. There was little change in the top ten U.S. port rankings for TEU counts in The ports of Los Angeles and Long Beach retained their status as the nation s largest ports in terms of container throughput. Norfolk and Seattle exchanged places: Norfolk moved up one place from number seven in 2011 to number six in 2012, while Seattle dropped one place to number seven. The Port of Los Angeles held the top slot, handling nearly 8.1 million TEUs last year, an increase of 1.7% from The Port of Long Beach held on to the number two spot although total container throughput edged lower last year by 0.3% to just over 6.0 million TEUs. International Container Traffic at Nation s Major Ports Millions of TEUs New York Los Angeles Long Beach Savannah Oakland Los Angeles Oakland Savannah Source: Port Statistical Releases How do the San Pedro Bay ports stack up against ports elsewhere in the world? The roster of the world s top container ports did not change in 2011 (latest data available), but there were some changes in ranking: Shanghai retained its position at the top of the list, handling 31.7 million TEUs, while number two Singapore reported 29.9 million TEUs. Hong Kong was third at 24.4 million TEUs, with Shenzhen right behind at 22.6 million. Busan (Korea), which held on to fifth place, recorded 16.2 million TEUs in 2011, followed by Ningbo (14.7 million) and Guangzhou (14.4 million). LAEDC Kyser Center for Economic Research 13 International Trade Outlook

20 Trade Results for 2012 Los Angeles/Long Beach fell two places to number eight with 14.0 million TEUs and was the only port on the list to post a year-over-year decline in Chinese ports are growing in size and global importance. In 2011, China occupied six of the top ten spots in the world port ranking. Alameda Corridor Another indicator of international trade activity is the number of trains running on the Alameda Corridor. The Alameda corridor is a dedicated below-grade rail line running from the San Pedro Bay ports 20 miles north to the BNSF and Union Pacific intermodal yards located east of downtown Los Angeles. In 2012, the average daily number of trains transiting through the corridor was 42, which was unchanged from This equates to an annual total of 15,332 trains moving through the corridor. Moving on those trains from the ports to the downtown rail yards were 4.2 million containers, while another 615,000 made the trip around the corridor by truck. The Alameda Corridor was designed to accommodate growth in port activity far into the future with a capacity of over 150 trains per day. Airport Cargo Trends Air cargo tends to be a more costly mode of transportation. It is used primarily for smaller (less-than-container load shipments); for lightweight, high-value products or in instances where expediting is necessary. There are two ways by which goods are transported by air. In addition to the specialized international air cargo carriers, a large amount of freight moves alongside luggage in the cargo holds of international passenger flights. At LAX, more than half of all cargo that arrives and departs does so in the bellies of passenger planes. By volume, international air cargo tonnage moving through LAX increased by 4.6% in 2012, to 1.1 million tons. This followed a decline of 4.4% in The increase in total cargo tonnage passing through LAX in 2012 was the result of gains in both imports and exports. Export volume was up by 2.3% last year, while import volume rose by 6.5%. In 2012, the value of imports arriving in the LACD by air totaled $45.0 billion, while $320.3 billion moved by sea. Exports moving by air were valued at $40.9 billion in 2012, while waterborne exports totaled $79.3 billion. 1 1 Import figures refer to General Imports: cargo that unloaded in the LACD but did not necessarily clear customs in the LACD LAEDC Kyser Center for Economic Research 14 International Trade Outlook

21 Trade Results for 2012 International cargo operations at Los Angeles/Ontario International Airport (ONT) are much smaller than at regional giant LAX. However, the volume of ONT s international airfreight activity climbed by 15.9% in 2012 to 38.4 tons. This follows a jump of 39.0% in Import activity at ONT in 2012 increased by 10.4%, while export volume expanded by 26.3%. Product Trade Trends The top export commodities moving out of the Los Angeles Customs District in 2012 were: Computers, peripherals, machinery, appliances and parts with a value of $17.1 billion with 66.7% of these items leaving by ship. Electrical equipment, TVs and electronic parts with a value of $13.4 billion with 68.6% of these products moving by air. Medical, surgical and dental instruments had a value of $9.1 billion, with 76.1% of these products shipped by air. Next were aircraft, spacecraft and parts, with a value of $6.9 billion, of which, 78.1% moved by water. Other commodities that were exported through the Los Angeles Customers District in significant quantities included: Plastics ($6.9 billion); motor vehicles, ($6.0 billion); natural pearls, precious stones and metals, ($5.3 billion); and miscellaneous chemical products, ($3.6 billion) Exports Through The L.A.C.D. (Share of Total) Total Exports: $121.3 Bn Other, 38.6% Computers, Peripherals, Machinery, Appliances, Parts, 14.1% Electrical Equipment, TVs, Elecontric Parts, 11.1% Medical, Surgical, Dental Instruments, 7.5% Organic Chemicals, 2.2% Cotton, Cotton Yarn, Woven Fabric, 2.7% Miscellaneous Chemical Products, 3.0% Natural Pearls, Precious Stones, Metals, 4.4% Motor Vehicles, Parts, 5.0% Plastics, Items Made of Plastic, 5.7% Aircraft, Spacecraft, Parts, 5.7% Source: U.S. Bureau of the Census LAEDC Kyser Center for Economic Research 15 International Trade Outlook

22 Trade Results for 2012 The top import (general) commodities moving into the Los Angeles Customs District in 2012 were: Computers, peripherals, machinery, appliances and parts with a value of $71.5 billion. The bulk of these goods (79.3%) arrived by ship. Electrical Equipment, TVs and electronic parts with a value of $64.3 billion. Motor vehicles and parts at $34.3 billion, followed by refined oil products with a 2012 value of $22.6 billion. Further down the roster was apparel and accessories (knit or crochet), at $17.1 billion. Note that many of the top import categories are also top export categories. It is quite common for a country to both import and export the same categories of goods. Product differentiation is one reason. For example, countries may specialize in manufacturing different grades of a product based on available technologies and workforce skills and then trade to satisfy domestic demand for several levels of quality. Variations in transportation cost and seasonal factors may also play a role Imports Entering the L.A.C.D. Toys, Games, Sports Equipment, 3.1% Furniture, Bedding, Lamps, 3.5% Plastics, Plastic Items, 2.5% (Share of Total) Other, 26.2% Total Imports: $282.6 Bn Computers, Peripherals, Machinery, Appliances, Parts, 19.5% Footwear, Parts, 3.7% Apparel, Accessories, Not Knit or Crochet, 3.7% Apparel, Accessories (Knit or Crochet), 4.7% Refined Oil Products, Natural Gas, 6.2% Electrical Equipment, TVs, Electronic Parts, 17.5% Motor Vehicles, Parts, 9.4% Source: U.S. Bureau of the Census Trade in Services Most of the information in this report covers trade in goods and does not include international trade in services. Traditionally, it has been difficult to track and measure trade in services. Information is available at the national level but not at the state or local level. Even so, exports of services from the Los Angeles area are significant. One well-known example is the international distribution of motion picture films and other forms of entertainment. A second important local activity generating service exports is international tourism. Many Los Angeles-based professional services firms are also active in foreign markets including architecture and engineering firms, and legal and accounting firms. Local LAEDC Kyser Center for Economic Research 16 International Trade Outlook

23 Trade Results for 2012 universities and colleges export services when they enroll foreign students as do hospitals that admit foreign patients. New to this year s International Trade Report are findings from a recent report from the Brookings Institution that attempts to measure trade in goods and services at the county and metropolitan area levels. (See page 18 for figures and a more detailed discussion.) International Trade Employment: International trade is one of the most important economic engines in Southern California. Industry-related employment is one gauge of an industry s importance to the regional economy. Because a large number of industries are tied to international trade, the LAEDC measures trade-related employment in terms of industry clusters. Industry clusters are determined by identifying relationships or linkages across detailed industry categories. Clusters are mostly divided into two broad categories: local serving and traded. 2 Local-serving clusters provide goods and services to the local population, such as restaurants and local medical services. Traded clusters are highly concentrated in the region and provide the potential to generate jobs and income through trade with regions outside of Southern California including neighboring counties, other states or foreign countries. International trade is one of several traded clusters in Southern California along with others ranging from aerospace manufacturing to business services and entertainment. Based on the LAEDC s most recent analysis, there were 176,900 international trade-oriented jobs in Los Angeles County in 2011, an increase of 12.5% compared with International trade employment accounted for nearly 4.7% of total nonfarm payroll jobs in Los Angeles County. During the years 2002 to 2010, the average was 4.1%. (See Table 5 in the appendix) Across the 5-County region, there were a total of 268,300 international traderelated jobs in Los Angeles County has the largest number of jobs, followed in order by Orange County (44,700 jobs), the Inland Empire (39,000 jobs), and Ventura County (7,700 jobs). 2 Additional industry cluster categories are: natural resources, government and other. LAEDC Kyser Center for Economic Research 17 International Trade Outlook

24 Trade Results for 2012 Special Report: Los Angeles Metropolitan Area: The Largest Exporter in the U.S. The Brookings Institution s recently released report entitled Export Nation makes two important contributions to how trade is measured. The first was the inclusion of services and the second was to estimate the value of exports by point-of-production as opposed to origin-of-movement. This contrasts with other export databases that are based on origin-of-movement data for goods only, including the U.S. Census Bureau s USA Trade Online data, from which most of this report s statistics are drawn. The Brookings report provides data for both the Los Angeles Metropolitan Area (which includes Orange County) and for Los Angeles County. It is now possible to estimate the value of total exports produced in the region and to include the value of services, which provides a much more complete account of the region s export-related economic output. Moreover, this data is important because it quantifies the contributions of sectors such as entertainment (particularly royalties from motion pictures) and tourism to the region s export trade. At both the metropolitan and county levels, Los Angeles was the largest exporting region in the U.S. in The Los Angeles Metro Area exported approximately $80 billion in goods and services, of which, roughly $60 billion originated in Los Angeles County. About $47 billion of the Los Angeles Metro Area total was in goods (59%) and $33 billion was in services (41%). The Los Angeles Metro Area s top five export markets were Canada, Mexico, China, Japan, and the United Kingdom. The top five exports were royalties (from motion pictures), transportation equipment (aircraft products and parts), computers and electronics (precision instruments and semiconductors), tourism, and chemicals (pharmaceuticals). Additionally, export-related activities created nearly 541,000 total exportsupported jobs (direct and indirect), which was the largest of any metropolitan area in the U.S. Total exports accounted for about 11% of the Los Angeles Metro Area s gross regional product, a clear indicator of how significant exports are to the regional economy. Finally, with Mexico, China, Brazil, and India among the region s top 20 export markets, the data reveal great potential for export growth to these emerging economies in the coming years. LAEDC Kyser Center for Economic Research 18 International Trade Outlook