Maryland trade can escape Asian flu

The Economy

March 30, 1998|By Jay Hancock

HAND IT TO the flacks in the Commerce Department. Anxious to curry press for Clinton's support of the International Monetary Fund, they hauled some stale statistics from the cooler last week, microwaved them, sprinkled parsley on top and served them as fresh.

State-by-state export data from 1996, available a year ago, show that "the financial crisis in Asia is likely to impact the lives and residents and businesses in states across the country," said Treasury Secretary Robert E. Rubin's canned quote, dutifully related by the Associated Press and other services.

Political motive aside, the figures do reveal details of regional vulnerability that aren't available from national export accounts.

But, despite what the government implies, dependence on Asian trade varies sharply among states. And many economists believe that, by focusing only on goods exports, the Commerce Department announcement actually underplays the Asian threat.

Maryland, for example, is not exactly being supercharged by Asian trade.

We sold about $700 million in merchandise and commodities to the region in 1996, an impressive figure only before you remember that the state has a $150 billion economy. Maryland's Asian sales could evaporate entirely -- which they won't -- and shave only half a percent from state income.

We sold only $75 million in goods to Indonesia, the most troubled Asian country. Bethlehem Steel's Sparrows Point mill in Baltimore County rings up that much revenue in a couple of weeks. The biggest piece of Maryland-Asia exports went to more stable places such as Japan and China, and Australia.

Pennsylvania's vulnerability to Asia is a little greater, and Virginia's greater still.

Asian exports made up 1.3 percent of Pennsylvania's economy and 1.6 percent of Virginia's.

California, not surprisingly, has the biggest, plumpest Asian underbelly. At $51 billion, Asian sales contributed almost 6 percent to California's output and made up more than half of its exports. Washington, New York and Texas also are big Asian vendors.

The Asian crisis hasn't abated. Foreign debt in South Korea and other places has been repackaged and rescheduled, but billions in soured domestic loans still litter the Eastern Hemisphere. Thousands of Asian companies are insolvent, and governments remain under pressure to continue to devalue their currencies.

"There's definitely more moaning and groaning" among Maryland companies that export to Asia, said Penelope Menzies, executive director of the World Trade Center Institute of Maryland. "There've been some hits."

Even so, private economists predict that Asian trauma will pare only half a percent from national economic growth this year.

And the Asian effect hasn't been all bad. Asian problems have helped U.S. commerce by forcing down gas prices and interest rates.

After being shut out of Asia, increasingly savvy Maryland exporters "have immediately turned to look at other markets," Menzies said.

"Before, people might have stopped exporting altogether. Now they're shifting to Latin America or Europe."

But Asian peril can't be gauged by a zoom lens. Examining isolated firms, states, countries or even continents for the Asian contagion leaves out important parts of the picture.

The Commerce Department's pointillist export account ignores the threat of cheap Asian imports, which threaten to wipe out U.S. jobs as much as falling exports. It misses the interconnectedness of the global economy as well as U.S. service exports such as tourism, banking and engineering.

It makes no mention of insolvent Asian banking systems or global deflation -- the declining value of the assets the world has bought in the late, 15-year boom.

Asian pain is indeed "likely to impact the lives and residents and businesses" of this country. But the threat to state exports isn't the half of it.

Pub Date: 3/30/98

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