Economists: Revenue, Trade with Japan to Be Hit Hard in Short Term


City New Service

SAN PEDRO — Trade with Japan through the Port of Los Angeles and LAX will begin taking a major hit this month, as will tourism from Japan and foreign investments, officials with the Los Angeles Economic Development Corporation told a pair of City Council committees Monday.

“The city itself has a very large amount at stake in this trade,” LAEDC Chief Economist Nancy Sidhu told a special joint meeting of the Trade, Commerce and Tourism and the Jobs and Business Development committees at the port.

According to the City Administrative Office, the city’s hotel and sales tax revenue projections in the mayor’s 2011-12 proposed budget, scheduled to be released later this month, may have to be reduced as a result.

Kathryn McDermott, the port’s deputy executive director for business development, told the committees the largest declines would not be felt until mid- to late-April, because American businesses are just now making adjustments to inventory that will affect imports from earthquake- and tsunami-ravaged Japan.

About $35.3 billion in trade between Japan and the U.S. passed through the Port of Los Angeles in 2010, according to port officials. Japan is the port’s No. 2 trading partner, second to China, and accounts for 15 percent of the port’s total of $236 billion in annual trade. McDermott said trade with Japan accounts for about 800 jobs at the ports of Los Angeles and Long Beach.

Sidhu said the declines in imports from Japan would likely include automotive parts, computers, medical equipment and other hi-tech components.

Sidhu and others who testified before the council committees predicted an unknown decline in the number of tourists who visit Los Angeles from Japan. About 305,000 Japanese tourists typically visit the city each year. They provide a significant chunk of revenue for the city’s general fund in the form of hotel and sales taxes, according to Rexford Olliff, a revenue projection analyst in the CAO’s finance department.

“Even though we’re in a rising economy and looking for the sales tax to grow next year, we’re just going to get less growth,” Olliff said. “There’s just no way you can take that kind of travel out and say, ‘Well, we’re big so it won’t matter.’ ”

Councilwoman Janice Hahn asked the CAO to report back to the committee with regular updates on the hotel occupancy tax and how it might affect the city’s general fund.

Sidhu also reminded the committee members that foreign direct investment from Japan is an important part of the local economy and will decline as a result of the earthquake and tsunami.

Los Angeles-area businesses owned and operated by Japanese companies account for about $2.6 billion in income for nearly 50,000 workers, Sidhu said.


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