California's trade picture has recently brightened and should maintain its current course at least through the first part of 2017, said Robert Kleinhenz, economist and executive director at Beacon Economics.
By Patrick Burnson
Published: February, 2017
California’s trade picture has recently brightened and should maintain its current course at least through the first part of 2017, said Robert Kleinhenz, economist and executive director at Beacon Economics. He added that despite the uncertainty about the future direction of U.S. trade policy with the incoming administration, there are plenty of reasons to remain bullish on the future.
That said, however, he cautioned that continuation of “harmonious relations” with California’s principal trading partners may have been dealt further setbacks by the recent Trump administration appointments of Peter Navarro to head a new National Trade Council and by the nomination of Robert Lighthizer as U.S. Trade Representative.
“Both Navarro and Lighthizer have exhibited a peculiar animus toward China, and neither is likely to restrain President Trump from pursuing aggressive measures aimed at slashing U.S. merchandise trade deficits with China and Mexico,” said Kleinhenz.
Along with several other regional think tanks, Beacon Economics believes the incoming administration’s focus on the trade deficit with China is misplaced. A large portion of what is reported as a deficit with China is really an artifact of economic accounting practices that ignore the foreign content in many goods the U.S. imports from China.
Apart from depriving American consumers of a vast array of goods essential to modern lifestyles, Beacon maintains that slamming the door on Chinese imports would increase our trade imbalances with other nations.
“The fact is the United States has not consistently run a surplus in its merchandise trade since 1970, and the last surplus was recorded in 1975,” said Jock O’Connell, Beacon Economics’ international trade advisor. “The country seems to have done rather well since.”
Indeed, analysis of U.S. trade statistics released last month by the U.S. Census Bureau indicates that exports to California’s major Pacific Rim trading partners saw a healthy 17.4 percent jump in November.
The gains were reflected in the increased volume of outbound traffic at the state’s principal international trade gateways. Export tonnage at San Francisco International Airport was up by 11.1 percent. Meanwhile, the number of outbound loaded containers sailing from the Port Oakland grew by an almost identical margin (11.2 percent) over November year-to-date.
California’s largest export ocean cargo gateway, the Port of Oakland, has been especially bullish in its forecast for 2017, if political headwinds do not diminish trade opportunities. Port spokespeople said its total 2016 volume equaled 2.37 million twenty-foot equivalent (TEU) containers, up four percent from a year ago. Total volume includes full and empty containers.
Containerized export volume jumped 10.5 percent in 2016, say port spokespeople. In December, exports were up 13.5 percent. It was the fourth straight month of double-digit export growth. “This is a gratifying outcome,” said Port of Oakland Maritime Director John Driscoll. “The job now is clear—build on the momentum we created in 2016.”
Ag Exports Surge in Oakland
Agricultural export tonnage has grown a stunning 233 percent at the Port of Oakland in the last five years. The result has transformed the port’s trade profile, making Oakland a leading gateway to Asia—especially for California growers.
“Agricultural commodities now account for 53 percent of our total export tonnage,” Business Development Manager Beth Frisher told California Trucking Association members at their annual meeting last month in Monterey. “And California growers are producing the lion’s share of that amount.”
Frisher said that in 2016, farm exports shipped from Oakland totaled 3.9 million metric tons. That was up from 1.2 million metric tons in 2012. She added that California producers accounted for 70 percent of agricultural exports last year. Frisher listed three reasons for the surge in farm exports:
Asia’s growing middle class is clamoring for high-quality U.S. farm products.
Oakland is the last West Coast port of call before ships head back to Asia. That means perishables spend less time on the ocean if they’re loaded in Oakland, which extends shelf life.
Oakland is the closest port for growers in the Sacramento, San Joaquin, Salinas and Napa valleys who export to Asia.
Fruits and nuts are the leading agricultural commodities shipped from Oakland, Frisher said. Next come meats, and beverages and spirits. The latter category includes California wines. Japan, China and South Korea are the top three trading partners for Oakland’s agricultural exports.
Oakland reported a 10.5 percent increase in total export volume last year. Exports accounted for 53 percent of the port’s overall containerized cargo volume. Imports made up the rest. Oakland is one of the few U.S. ports weighted more heavily toward exports.
Frisher said 2017 could be another year of export growth—especially in agricultural commodities. Heavy rains this winter have eased five years of drought, she said, and the result should be bountiful harvests next fall.
Patrick Burnson is the Executive Editor of Logistics Management. (www.logisticsmgmt.com)