Shipping to shore-up local economy.

As Los Angeles County continues to scramble for a new economic identity to replace its defense manufacturing character, arguably no single industry holds as much promise to fuel L.A.'s future growth as international trade.

Local traders, buoyed by the passage of the North American Free Trade Agreement and the conclusion of the Uruguay Round of the General Agreement on Tariffs and Trade in 1993, said they are optimistic about the coming year.

Further encouraging the international trade community in L.A. was the Los Angeles City Council's unanimous decision in late December to move forward with the $1.8 billion Alameda Corridor project, a 20-mile rail and truck corridor connecting the massive L.A./Long Beach port complex with downtown Los Angeles.

Both the ports of Los Angeles and Long Beach are predicting respectable growth in activity in 1994. The Port of Long Beach anticipates 5 percent growth in 1994, according to Port spokeswoman Yvonne Avila. Likewise, the Port of Los Angeles expects 4 to 5 percent growth, according to Port of L.A. spokesman Bill Grindrod.

These developments add up to good news for the local trading community. Nevertheless, local trade experts warned that not all of the battles have been won.

Negotiations over China's "most favored nation" status should commence next May or June, and local trade experts said renewing the MFN status will be no easy task. That promises to be an important issue, given that China is a major trading partner for the Los Angeles area and that renewal of its MFN status is crucial to local businesses that trade with the Chinese. Also, given the explosive growth of the Chinese economy, it promises to be an even more important trading partner in the years to come.

Denying China its MFN status "would create major problems with respect to trade in this area," said Jay Winter, executive secretary of the Foreign Trade Association of Southern California.

Also up for renewal during 1994 is a program which helps developing countries export certain products and raw materials into the United States duty free. Leslie Browne-Cazas, director of the international trade customs group of the accounting firm of Arthur Andersen, called the program, the Generalized System of Preferences, a "trade-not-aid" type of foreign policy that is meant to encourage developing countries to build their manufacturing sectors.

Local companies benefit from this policy because they pay less for certain goods from GSP countries since there are no tariffs attached.

Political fights aside, international trade as an industry will grow as a result of the liberalization achieved in 1993, experts say.

Mexico does not rank as one of Los Angeles' largest trading partners now, with Japan, Hong Kong, Korea, China, Taiwan and Thailand ranking above it in terms of trade with the Port of Long Beach. But local experts say passage of Nafta will boost trade with Mexico and increase the possibility that other free trade agreements will be negotiated with other Latin American countries. On a country-by-country basis, Latin American nations are small trading partners, but taken as a whole the region represents a huge potential market for American goods.

As Nafta goes into effect Jan. 1, its effects will be seen almost immediately. Beginning that day, a full 50 percent of all American products entering Mexico will travel duty free, according to Browne-Cazas.

According to Susan Kohn Ross, a lawyer with the Los Angeles-based international trade law firm Kohn & Associates, the main beneficiaries in California will be the agricultural industries. In the Los Angeles area, some beneficiaries, according to Kohn Ross, will be small businesses, high-tech firms and environmental firms.

Small business has been damaged both by high tariffs and non-tariff barriers to trade with Mexico, according to Kohn Ross. Quotas are one type of a non-tariff barrier which prevents companies from exporting the number of products that they might be able to sell in a country, she explained. Kohn Ross explained that large companies have historically been able to evade non-tariff barriers better than can small ones by establishing subsidiaries in foreign countries.

Environmental firms should also see a boost in their sales coming from the Mexican market, according to Kohn Ross. "As I understand it, all the environmental clean-up equipment used in Mexico comes from United States," she said. "That equipment comes only from two pockets in the United States -- Texas and Southern California."

Both Kohn Ross and Browne-Cazas warned that although they believe the benefits of Nafta will clearly outweigh problems for local business, there will definitely be some short-term pain. "The lesson that we learned from the Canada-U.S. Free Trade Agreement was that both countries enhanced those industries in which they excel," said Kohn Ross.

Browne-Cazas agreed that there is likely to be some short-term pain from Nafta due to increased competition. Businesses in which the United States is not competitive -- such as apparel -- may fold or be forced to go through reorganization to compete, she said.

Nevertheless, Browne-Cazas insisted that the agreement is good for the economy. "It is a matter of it happening now or it happening in three to five years," she said.

Kohn Ross pointed out that one benefit of increased trade is job creation. The rule of thumb in the trade industry is that for every $1 billion worth of trade, 20,000 new jobs are created. Those jobs also pay about 17 percent more than average wages, she said. "You are not only creating jobs, but you are creating higher paying jobs," said Kohn Ross.

Several experts pointed out that Mexico is not the only burgeoning market for local traders. Many Southlanders are excited about the possibilities of trading not only with Russia, but also with former Soviet republics and Eastern European countries.

Early in 1993, President Clinton granted Russia GSP status and a host of other countries in that region are applying for Most Favored Nation status, Generalized System of Preference status or both. MFN status means that the United States government has negotiated a trade agreement with a specific country. That sets tariff levels at a lower rate than for countries with which the U.S. has no trade pact. GSP is a provision that allows for the importation of specified goods from third and fourth world countries to help promote development in those countries.

Tim Bruinsma, head of the international practice group of the law firm of Fulbright & Jaworsky, said trade with Russia is growing. Growth is not as rapid as with the Asian countries, he noted, but it is definitely on the rise. Most of the trade is focused around Moscow, he said, but he expects that to change in coming years.

"Not only Los Angeles, but the rest of the western United States is going to recognize the trade potential with the Russian Far East," said Bruinsma. The area's wealth of natural resources and its proximity to both Asian countries and the West Coast of the United States make it a fertile ground for trade, he said.

This situation, should it come to fruition, will benefit Los Angeles' high-technology companies with expertise in communications, oil and gas production, housing and transportation. "We've got a lot of the technology that they can use to develop those industries," said Bruinsma.

All this means that both the ports of Los Angeles and Long Beach are going to get busier. They anticipate the growth in international trade will demand more efficient and larger operations at both ports, according to sources at both ports.

In response to this projected need, the ports are developing plans to foster the efficient movement of cargo from the port area. The most well-known of such plans is the Alameda Corridor project.

On Dec. 9, the ports and Southern Pacific Transportation Co. reached a purchasing agreement for the right of way between the ports and South Los Angeles. The plan is to provide for speedy transportation of goods to and from the ports to warehouse and manufacturing plants in the downtown Los Angeles area via an 18-mile expressway, which includes a rail corridor and expanded highway.

Now that the right of way issue has been settled, financing will be the next big hurdle.

Gill Hicks, general manager of the Alameda Corridor Transportation Authority, said that the agency will apply for federal financing in January.

"The final amount is still floating around, but it is in the hundreds of millions of dollars," he said. If the agency doesn't win funding in 1994, it won't be able to apply again until 1997 because the reauthorization process for federal transportation funding occurs only every couple of years, Hicks said.

The Port of Los Angeles also has several projects in the works to accommodate the growth in trade. According to L.A. port spokesman Grindrod, work is being done on a new container terminal and a new coal terminal. Neither of those projects will be completed in 1994.

What is looming on the horizon for the Port of Los Angeles is approval or denial of its application for foreign trade zone status. It applied for that last August and the public comment period ended in December.

According to Karen Tozer, marketing manager for the Port of Los Angeles, the application process takes on average between 10 and 14 months, so a response is expected some time in 1994. The Port of Long Beach, she said, presents the only opposition to approval of its foreign trade zone status.

"Their claim is that the Long Beach foreign trade zone serves the community sufficiently and that an additional zone would be a duplication of services," said Tozer. "We feel that, although Long Beach has done a good job, the greater Los Angeles area could use more foreign trade zone operations."