REALITY CHECK:US CARGO EXECS: TRADE IMBALANCE GREW IN JAN/FEB
--US Ports Report Continuing, Modest Progress on Export Volumes
--But Expensive Imports Still Outpace Cheaper Outgoing Commodities
By Gary Rosenberger
NEW YORK (MktNews) - The U.S. trade deficit continued to grow in January and February as imports solidly outpaced outbound flows, say port and transportation officials.
They note that while the export picture continues to improve when measured in volume terms, outbound cargos tend to consist primarily of cheap commodities with few, if any, value-added consumer goods bound for Asia.
January and February are generally considered to be slow months in trade circles, so the strong volumes during this time suggest a much bigger surge under way -- ready to reach U.S. shores as early as March.
The only possible damper is that continued high fuel prices may eventually slow consumer spending for retail goods, they add.
While the still-growing tide of imports suggests consumption and the overall economy remains robust, a growing number of industry players worry that the true driver of the deficit is the loss of the nation's manufacturing base.
"All the manufacturing has moved off-shore because of cheap labor -- and we've been put into a position of importing because basically we have no choice," said Guy Fox, chairman of Global Transportation Service, which is based in Seattle.
"If production had remained in the U.S., people would now be buying American goods and the deficit would be smaller," Fox added.
The import tide is broad-based, with all ports contacted reporting modest to very strong year-over-year gains.
The Port of Los Angeles, for instance, reported a busiest-ever January and February, fueled mainly by stronger-than-expected imports.
February imports into Los Angeles were up 25% year-to-year (they were up 40% in January), according to spokesman Jeff Leong.
Leong attributes the sharp rise in part to new business from seven steamship lines that did not dock at the port a year ago.
"Although that helped boost volumes to a certain degree, the bulk of the increase happened for economic reasons," Leong said.
"The port was very surprised by the strength of cargo volumes during January and February," Leong said.
"Those are usually slow periods" that mark time between the holiday and spring shopping seasons, he said. "That amount of activity suggests a continued momentum for the U.S. economy."
Furthermore, he believes that this is only the beginning.
"We're anticipating that imports probably will increase to an even greater degree in the spring months this year," Leong said.
He added that exports were also up strongly on a year-to-year comparison basis, the consequence of a continuing recovery in Asia.
Byron Miller, a spokesman for the Port of Charleston, said imports during January and February also surpassed expectations.
"Overall volumes continued to be very strong, but most notably in imports," Miller said.
He observed that while 1999 ended with a strong recovery for exports, "over the past two months, imports were exceptionally strong."
He said raw rubber (used by regional tire-makers to supply the auto industry) was "key" to the volume increase for imports.
"We're also we're seeing a big increase in consumer goods," he said. He also suspects that part of that increase may be market share yanked away from West Coast ports.
Miller said the biggest growing export for Charleston is the BMW X-5 built in nearby Spartanburg for consumption in Northern European markets.
Miller observed that higher fuel prices are having a marginal effect on trade. He said steamship companies are charging fuel surcharges that, as yet, are "a very small percent" of the overall cost of a container.
He also noted that independent truck drivers who carry goods from ports to points inland are feeling increasingly disgruntled because their fuel surcharges don't adequately compensate their costs.
Don Wylie, a spokesman for the Port of Long Beach, said the dual trend of modest growth for exports and quantum leaps for imports continue.
But Wylie worries that recent bad news about Japan's return to recession could throw a monkey wrench into hopes for continued progress on outbound cargos.
Wylie also reports that shipping companies are pushing for a $400 price increase containers beginning May 1st and an additional peak-season surcharge of $300 effective in July on inbound cargo. The current base rate is estimated to be around $3,000 for a 40-foot container, sources say.
Global Transportation's Fox said it is not yet clear whether steamship companies will actually get that increase.
Fox also holds contrarian views on other issues -- among them, exports, where he sees no progress.
"Japan is still setting the pace for the economy in Asia -- and their consumers aren't buying from us," he said. "When they do buy, it's from other Asian countries."
He said Japanese people are still wealthy -- but with all the uncertainty surrounding economic restructuring and the end of such practices as lifetime jobs, "people are keeping their money in the bank and not buying consumer goods."
And while exports will likely stay stalled, he envisions imports "will be 20% bigger this year" if his own order sheets are any indication.
Fox also believes that Y2K-inventory buildups in November and December may have forestalled an even bigger surge of imports during the first months of this year.
Fox observed "no fuel surcharges" by steamship companies operating in the West Coast -- and he doubts they will materialize.
"With the other pending increases, people can only take so much before they have a Tea Party," he said.
Trade with Mexico appears to be in near balance, according to one steamship company specializing in trade between the U.S., Mexico and the Caribbean.
A huge influx of Mexican goods last year has evened out the trade balance that was once heavily in the U.S.'s favor, according to Mark Miller, a spokesman for Crowley Maritime Corp., based in Oakland.
"There was a significant upturn of stuff coming in from Mexico last year -- southbound we also saw an increase but it wasn't as dramatic," Miller said.
For all of 1999, Crowley shipped into Mexico 43,231 TEUs (twenty-foot equivalent units, a standard measure of container traffic) versus 36,709 TEUs in 1998, or an 18% increase, he said.
Northbound, Crowley moved 42,511 TEUs versus 26,049 TEUs in 1998, a whopping 63% increase, Miller said.
He added that the U.S. tends to ship lower value goods into Mexico such as fabrics, paperboard, synthetic resins, along with general cargo and electronics, but imports higher value goods like apparel, automobiles, furniture, beer and ale and coffee.
The U.S. Commerce Department is scheduled to release international trade data for January on Tuesday at 8:30 a.m. EST. December's trade deficit rose by $25.5 billion, versus a rise of $27.1 billion in November.
Editor's Note: Reality Check stories survey sentiment among business people and their trade associations. They are intended to complement and anticipate economic data and to provide a sounding into specific sectors of the U.S. economy. |
