International connections with NorthWestern businesses are powerful

At Columbia Machine in Vancouver, Wash., the company’s concrete-products division is having a solid year. Orders for its custom-masonry machines are up; deliveries, especially for the export market, are high.

Stephen Dunphy / Seattle Times staff columnist

"We’ve had a very strong year on orders shipped," said Ted Yeigh, Columbia’s marketing manager. "Mexico, the Ukraine, Peru all have been good markets for us this year."

With the U.S. dollar weakening, the export business could get even better, because a weaker dollar makes U.S. exports more competitive on world markets.

"With the exchange rate going the way it has, we’re 15 to 20 percent more competitive than we were," Yeigh said. "It is starting to come into play."

Exports are an important part of the overall economy here, with one job in every three dependent either directly or indirectly on exports. At Columbia Machine, Yeigh estimates that 180 to 200 of the 475 employees rely on the export market for their jobs.

Columbia is privately held and does not release figures. But Yeigh estimates exports to Asia in a good year would total $3 million to $4 million, and total exports would be $10 million to $15 million.

While companies such as Columbia Machine are cementing their position in the export market, others are struggling — particularly the top exporter in the state and often the nation: Boeing.

Overall exports from Washington state are down through July, off 5.9 percent from a year ago. For the first seven months, they totaled $19.5 billion compared with $20.7 billion a year earlier.

A big part of that decline is from the slump in Boeing sales, which account for 60 percent of all exports. Aircraft exports are down $2.4 billion through July compared with the same period in 2002.

The Ports of Seattle and Tacoma also are major players in trade. More than 2 million TEUs — 20-foot equivalent units, the standard measure in the container industry — moved through the two ports last year.

Through August, Port of Seattle TEUs are running 6 percent ahead of the same period in 2002, totaling 988,000 units. Meanwhile, Tacoma is projecting total volume in 2003 will be a record 1.7 million TEUs.

The Port of Tacoma estimates about 4,700 direct jobs stem from Port activities such as longshoremen and freight forwarders. The Port of Seattle estimates about 89,000 direct jobs comes from Port activities, including jobs with airlines and retail concessions at Seattle-Tacoma International Airport, which it operates.

Despite its importance, trade data can be confusing. The trade figures most often reported deal with "pass through" trade. That includes anything exported from the state, no matter where it originates.

For example, soybeans were the second-largest export item for the state under that measurement last year. But few soybeans are grown in Washington.

The most important trade figures for the state are exports that originate here. Those are the activities that create the jobs.

Export figures compiled by the Massachusetts Institute of Social and Economic Research, also known as the Miser data, paint a much more accurate picture of the importance of trade to the Washington economy.

ANDREW MALANA / BLOOMBERG NEWS
All Nippon Airways Boeing 747s taxi on the tarmac at Tokyo International Airport Haneda. While Boeing aircraft sales have slumped in the past two years, 72 percent of the 210 total deliveries through September have been to non-U.S. customers.
The top five countries for Washington exports during the January-to-July period were Japan, Canada, China, Singapore and Australia.

Boeing sales can create unusual situations. For example, the United Arab Emirates shows up as the 10th-largest customer this year, almost exclusively because of aircraft sales. Meanwhile, Germany, France, Hong Kong and Mexico — all traditionally among the top 10 — slipped down the list.

Boeing said 72 percent of its 210 total deliveries through September have been to non-U.S. customers. Through early October, Boeing has delivered airplanes to Jet Airways in India, Uzbekistan Airways, Thai Airways, Japan Airlines, Copa Airlines of Panama, AeroMexico and other foreign carriers.

International, but not exports

Some local companies are heavily involved in international business but not exports. Costco, for example, has extensive sales overseas but few exports. About $6.5 billion of Costco’s $32.2 billion in sales in 2002 was outside the United States.

Microsoft is another example, with international sales totaling $10.1 billion of $22.1 billion in revenue in 2002.

Shifts in the business mix of a company can change exports. Canada jumped to the top of the list among Oregon export destinations after Freightliner, a maker of heavy trucks, began shipping more vehicles there after closing a plant in Canada and moving production to Portland.

Agriculture also is a key area for exports. They totaled about $4 billion in 2002, with apples, wheat and potatoes among the top exports. Processed foods such as frozen French fries also are big export items.

Politicians and trade advocates have often wrestled with trade issues. There was Japan-bashing in 1980s and H. Ross Perot’s famous "giant sucking sound" of U.S. jobs going to Mexico in the early 1990s as part of the debate over the North American Free Trade Agreement.

Anxiety is focused now on U.S. jobs shifting to China, India, eastern Europe and other low-cost havens. Boeing and Microsoft are among local companies moving production and other jobs offshore.

It is one thing for U.S. companies with high-cost labor at home to buy labor-intensive parts or products from Third World producers. But now there is an emerging trend to send higher-end jobs in engineering, value-added manufacturing and information technology offshore.

Here comes Japan

AXEL SEIDEMANN / BLOOMBERG NEWS
The SmartDisplay monitor by Microsoft is displayed at a German trade show. Microsoft’s international sales totaled $10.1 billion of the company’s $22.1 billion in revenue in 2002.
Japan is the state’s top export destination, with $3.3 billion in sales from January to July — almost double the No. 2 customer, Canada. Exports to Japan have averaged more than $4 billion annually for the past few years.

Japan could be one of the bright spots for Washington exporters as the decade-long malaise in its economy appears nearing an end.

"Nothing has gone wrong in the past 12 months," said Richard Hoey, chief economist for the Mellon-Dreyfus organization. The demographics of an aging population may limit growth in Japan, Hoey said, but the up-cycle is real.

"There’s also a boom in the neighborhood," Hoey said. "Japan exports two times more to the rest of Asia than it does to the U.S."

Jesper Koll, chief Japan analyst for Merrill Lynch, said a new structural up-cycle is starting to emerge in Japan, and "this time the cycle is for real."

On top of strong exports, Japan’s domestic demand is now kicking in as a growth engine. Business investment is up and the consumer outlook is improving: For the first time in more than three years, incomes are rising and unemployment is falling.

Hoey said the international outlook is good worldwide, adding he could not name "a major region of the world that is likely to have below-trend economic growth in 2004."

Estimated growth rates are roughly 7 to 8 percent in China, 4 percent in other developing Asian countries, 3 percent or a bit higher in the United States, 2 percent in Europe and 1 percent in Japan.

With growth rates that strong — especially for the Pacific Rim — exports could provide a needed boost to the Northwest economy next year.

Stephen H. Dunphy’s phone: 206-464-2365. Fax: 206-382-8879. E-mail: [email protected]. More columns at http://www.seattletimes.com/columnists

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