1. Trade: The Global Recession and Future Prospects Jon Haveman Founder and Principal, Beacon Economics

2. Global trade Global trade US trade US trade Trade through California Trade through California Future prospects for trade Future prospects for trade – US – California Competitive Pressures Competitive Pressures Summary Summary

3. World Trade Experienced an Unprecedented Collapse

4. Trade Decline in Historical Perspective

5. Exports Have Declined for ALL Countries

6. …and Relative to Recent Recessions

7. Four Major Traders w/Major Trade Contractions

8. Trade fell for all countries Trade fell for all countries Trade fell across all commodities Trade fell across all commodities Trade fell by about 4.8 times more than world GDP Trade fell by about 4.8 times more than world GDP – Integrated supply chains: same value added crosses multiple borders before delivery Why? Why? – Commodity prices tumbled – Consumers and producers in US and elsewhere came to a standstill in late 2008

9. 08-II 09-IIChCont. GDP1341512901-3.8% Personal consumption93519189-1.7%-1.2% Durable goods11751071-8.8%-0.8% Nondurable goods20812025-2.7%-0.4% Services60926078-0.2%-0.1% Gross investment20261456-28.1%-4.2% Structures493400-18.9%-0.7% Equipment software1097876-20.2%-1.6% Residential462344-25.6%-0.9% Net exports-476-3301.1% Exports16701419-15.0%-1.9% Imports21461749-18.5%-3.0% Government250625682.5%0.5% National defense6456957.7%0.4% Nondefense3153283.9%0.1% State and local154615480.1%0.0% Total Inventories1835.51750.2-4.6% 2009-II-3.8% 1958-I-3.0% 1982-III-2.7% 1954-II-2.5% 1975-I-2.3% 1980-III-1.6% 1961-I-1.0% 1991-I-1.0% 1970-IV-0.2% Worst 4 Quarter Contractions

14. Consumers

16. 30% of all imports 30% of all imports Categories: Categories: – Vehicles – Toys – Furniture – Apparel – Footwear

19. 92-IV 08-I 09-IV Savings6.5%1.0%4.2% Spending79.2%83.1%84.0% Taxes11.6%12.6%8.8% Spending as Percent of Income

20. Forecast

21. Year of Return to 2006 Peak `07-09 Decline:-20% Subsequent Growth Rate: 3%2020 5%2016 10%2014

22. Prolonged global economic downturn will exert significant downward pressure on trade for some time Prolonged global economic downturn will exert significant downward pressure on trade for some time The death of the American consumer will affect U.S. imports going forward The death of the American consumer will affect U.S. imports going forward – Growth will be slower and from a lower level Ports that were pushing their capacity in 2006 have 3 to 6 years of breathing room Ports that were pushing their capacity in 2006 have 3 to 6 years of breathing room

23. Reduced competitiveness v.v. EC ports Reduced competitiveness v.v. EC ports Increased competition on WC Increased competition on WC – Canada – Mexico – Panama Canal

25. Loss of jobs Loss of jobs Loss of local revenues Loss of local revenues Reduction in emissions Reduction in emissions Lower infrastructure obligations Lower infrastructure obligations Better service for local shipments Better service for local shipments

26. Ports and Employment Ports and Employment – Goods movement seen as wave of employment future – Logistics jobs taking over for manufacturers as source of good jobs for unskilled workers Conventional wisdom Conventional wisdom – Port activity creates jobs with high wages and upward mobility

27. Wages: Wages: – MEAN wages for logistics: $47,000 – MEDIAN wages for logistics: $32,000 – Bottom quartile:$18,000 Upward mobility is limited Upward mobility is limited – Job prospects 18-1 in favor of low skilled Quantity Quantity – Not high in LA region relative to other cities

28. Trade will not stage a dramatic comeback Trade will not stage a dramatic comeback Imports through California will be particularly slow Imports through California will be particularly slow There are threats to the continued dominance of the SoCal ports, but is that a “problem”? There are threats to the continued dominance of the SoCal ports, but is that a “problem”? California will always have important global gateways California will always have important global gateways

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