May 12, 2006

Commentary
World Trade a Mainstay of State Economy

It’s no accident that what is now a national observance — World Trade Month — began in California 80 years ago as World Trade Week, celebrated during the third week of May.

International-related commerce accounts for approximately one-quarter of the state’s economy and California ranks among the 10 largest economies in the world with a gross state product of more than $1.5 trillion. California trade and exports translate into high-paying jobs for more than 1 million Californians.

In 2005, California exported to 224 foreign markets. California exports topped $116 billion, according to the U.S. Department of Commerce. This was an increase from 2004, with California maintaining its perennial position as a top exporting state.

Exports from California accounted for more than 14 percent of total U.S. exports, with Mexico, Japan, Canada, China and South Korea being the state’s top trading partners.

California is the number one exporter in the nation of computers, electronic products, food and kindred products. Computers and electronic products are California’s top export, accounting for 36 percent of all the state’s exports. California’s agricultural exports grew to $8.2 billion in 2005 — 14 percent of all U.S. agricultural exports.

Free Trade Agreements Critical

Because trade is so essential to California, the status of ongoing discussions for free trade agreements (FTA) is of high importance.

The continuing multilateral trade negotiations under the auspices of the World Trade Organization are just a backdrop for numerous bilateral discussions. Since 2002, the United States has completed bilateral FTAs with 14 countries, in addition to the previously signed agreements with Israel, Canada and Mexico (North America FTA).

The more recent additions are: Australia, Bahrain, Chile, Dominican Republic/Central America FTA (Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua), Jordan, Morocco and Singapore. Financially, these agreements will translate to the removal of more than $6.4 billion in tariffs for U.S. exports.

Pending FTAs

More agreements are awaiting congressional approval. There’s the U.S.-Oman FTA, which upon approval will become the fourth U.S. agreement with an Arab country.

Also pending approval by Congress is the U.S.-Peru FTA, the topic of an international breakfast with Peruvian Ambassador Eduardo Ferrero, hosted by the California Chamber in February as part of a national campaign to build support.

The U.S.-Peru FTA would be a building block for a possible broader U.S.-Andean FTA with Peru, Colombia, Ecuador and Bolivia. Bilateral trade between the United States and the Andean region was nearly $30 billion in 2005.

California State Programs

Although trade policies are determined at the national level, the state can be a positive force to keep California open for business through continued economic growth and development, and support for trade and investment promotion.

The Chamber supports establishing a strategic plan for coordinating and conducting international trade and investment programs and activities in the state, including the establishment of California state trade and investment offices under the auspices of the Business, Transportation and Housing Agency.

Such a program can promote exports and foreign investment by matching California products and services with foreign buyers; collecting trade leads; offering counseling on market penetration strategies; advertising and promoting California as a supplier and location for investment; organizing foreign investment and buying missions to California; and supporting businesses in foreign trade shows throughout the world. At one time, California supported America’s premier export finance program (California Export Finance Office), which boosted the ability of the state’s small business exporters to secure financing for international transactions that the federal programs couldn’t support.

State trade and investment offices are an important symbolic statement to our major trading partners. An official representative for the state of California can lend credence to a business transaction. Moreover, face-to-face representation still has recognized value. Protocol is a significant part of the business culture of many of our trading partners and enables us to build government-to-government relationships that can lead to trade and investment flows and measurable success of these offices.

As the California Legislature considers (re)establishing trade and investment promotion support on behalf of the state, it is crucial that it do so with an eye toward putting in place a continuing process — beyond the current administration and current legislators who will be “termed out.” Globalization is here to stay and our Golden State must continue to be engaged.

For our part, the Chamber remains dedicated to continuing our efforts to enhance California’s international trade abilities in support of the state’s economic prosperity.

Susan Corrales-Diaz, chair of the California Chamber International Trade Committee, is president of Systems Integrated in Orange.