Trading with China rises by 22 percent.

China bolted ahead of Japan as the No. I trading partner with the Los Angeles Customs District in 2002, setting a new pecking order of nations even in the midst of growing concerns about SARS.

Trade with China increased last year by 22.5 percent, to $55 billion, while trade with Japan fell by 8.1 percent, to $41.9 billion, according to a report being released this week by the Economic Development Corp. of Los Angeles County.

China's surge helped Los Angeles regain from New York the title of nation's largest customs district. Overall trade coming through the district rose 0.8 percent, to $214.3 billion. New York, which overtook L.A. last year after trailing for seven years, saw its trade value slip by 2 percent to $209.8 billion.

China is expected to spearhead an 8.7 percent increase in cargo traffic in L.A. this year, to a projected $232.9 billion, according to the EDC.

Those projections are somewhat clouded by SARS, or severe acute respiratory syndrome, terrorism and other hurdles.

"If these problems are not solved in a coherent and strategic fashion, what you could see is trade growth start to slow down in a couple of years," said Jack Kyser, chief economist for the EDC.

The gains noted in the report took place well before the SARS crisis in China. Through March, the epidemic does not appear to have had a significant impact on overall trade activity in L.A., although the effects may not be fully felt until later in the year.

"Because of SARS, people are rethinking their strategy," said George Huang, an EDC economist. "If the government can't be honest about something related to life and death, can we trust their economic data or whatever else they tell American businessmen?"

Trade deficit

The largest members of the L.A. Customs District are the twin ports of Los Angeles and Long Beach and Los Angeles International Airport. The ports, already the busiest in the U.S., saw trade volume surge by 6.2 percent to 152.2 million tons in 2002 despite a 10-day lockout last summer that temporarily ground West Coast port traffic to a halt.

L.A. gained ground on Seattle and San Francisco to take a 57.9 percent share of West Coast volume, up 1.7 percent from 2001.

The L.A. Customs District includes cargo moving in and out of Los Angeles, Orange, Riverside, San Bernardino and Ventura counties.

The top imports last year were electronic machinery, motor vehicles, radio recording and playback devices, apparel, electric machinery, toys, electrical components, furniture, raw fuel and measuring devices.

Exports included electrical components, electronic machinery, aerospace parts, measuring devices, plastics, engines and pumps, electric machinery, chemical compounds, recording equipment and motor vehicles.

The lure of inexpensive labor in Asia has added to the growing trade deficit. Last year's $24.4 billion increase in imports from China compared with a mere $500 million hike in exports to the world's most populated country.

At $42.8 billion, the trade deficit with China was the largest among the district's top 10 trading partners, with Japan coming in a distant second at $17.9 billion. Trade with Australia created the largest surplus at only $3.5 billion.

"Cost efficiency is what's on their minds," said Robin Lanier, executive director of the Waterfront Coalition, which represents shippers. "Every (port) that is doing trade with Asia right now is growing."

Nationwide, China accounted for 17.7 percent of the record $43.5 billion U.S. trade deficit set in March, the Department of Commerce reported last week.

Lanier warned that some importers are diversifying their cargo routes to the East Coast and Mexico in the wake of labor unrest that resulted in a 10-day closure of West Coast ports last fall, as well as ongoing truck congestion coming in and out of the local ports.

However, there are drawbacks to each of those alternative locations, the report notes, and ultimately many shippers will opt for West Coast ports in the U.S.

The high level of imports has been linked to job losses locally and nationwide, particularly in manufacturing. But economists point out that imports help save businesses that otherwise could not afford American labor. Investors benefit when cost-efficient companies make money and gain on the stock market.

Locally, the increased levels of trade created 2,200 port, freight forwarding, longshore and other jobs related to international trade in the five-county region in 2002, according to the report. Since 1990, the number of trade-related jobs has risen to 443,400 from 282,600, according to the EDC.

"(The deficit) can be a good thing for us even though it might create downside problems for the U.S. as a whole," said Daniel Mitchell, professor of management and public policy at the UCLA Anderson Graduate School of Management. "The more activity there is, the better off we are."

Cloudy outlook

Factors that could ultimately have a negative impact on further trade growth include:

* Lack of progress in future negotiations involving the World Trade Organization.

* Terrorism -- LAX has been deemed by state officials as California's top potential target -- and sparse federal funding to implement safety measures.

* The spread of SARS, which has led importers to cancel flights to Asia and consider starting operations in Mexico and elsewhere.

* The perception of continuing labor unrest on West Coast ports.

* Environmental problems that will be costly for single-hull oil tankers, steamships, railroads and trucks to eradicate.

* Latin Americas s worsening economic problems, which could have a negative impact on imports such as raw mineral products, vegetables, textiles and apparel.

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