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State's Exports Post 22% Jump in 2nd Quarter


Boosted by economic recoveries in Mexico and Asia and the growing overseas appetite for the state's technology, California's exports continued their surge with a 22% jump in the second quarter.

The export growth--which far outpaced the nation's 13% increase in foreign shipments--is welcome news because it gives the state an extra growth catalyst as the domestic economy cools.

"This looks like it's going to be the best year for export growth since 1995, and it's coming at a very opportune time with the U.S. economy slowing a bit and the froth coming off the Internet boom," said Ted Gibson, chief economist for the state Department of Finance. "We couldn't ask for a better time for Mexico and Asia to come roaring back."

The export figures, which include only manufactured goods and exclude services, were made available Monday by the University of Massachusetts, which compiles state-by-state export figures for the federal government.

Shipments of computers, machinery and instruments all rose by 20% or more. Agricultural, metals and textiles shipments showed healthy gains as well.

Exports grew by a steep 36% to Mexico, which is now California's largest foreign market, and 53% to fourth-ranked South Korea, which has emerged rapidly from its economic meltdown of 1997.

Shipments to Japan, California's second most-important market, increased by 18%, reflecting a tentative uptick in that country's long-stagnant economy.

The state's high-technology products--hardware, systems and software--account for two-thirds of all California's exports in value. Sales are booming, despite a strong dollar that makes the cost of U.S. goods steep for foreign customers.

"These countries need our equipment, systems and our raw materials," said Rajeev Dhawan, director of econometric forecasting at the UCLA Anderson Forecast Project. "Much of this stuff can't be replaced or substituted and they will buy it no matter what."

The second-quarter exports were valued at $31.7 billion. For the first half of the year, the total value of California exports was $60.8 billion, up 21% from a year earlier.

"What makes a regional economy is its ability to export because it brings in money from outside the area," Gibson said. "It means we're not just taking in each other's laundry, so to speak. It's new capital."

Philip Martin, professor of agricultural economics at UC Davis, said the export growth shows the state's economy is diversified and adept at producing an array of value-added goods from Internet routers to wine. That's good, he said, because the state cannot hope to compete in "routine manufacturing chores."

"The remarkable thing is that we are doing it despite the high value of the dollar," Martin said. "But with the Hong Kong and Korean economies growing at over 9%, demand for our high value-added products is much stronger than it has been."

Ranked by destination, Mexico led all trading partners by taking in $8.8 billion in exports, followed by Japan with $8 billion, Canada with $7.1 billion and South Korea with $4.7 billion.


On a Fast Pace

The value of California exports was up 21% over the first half of the year. In billions:

2000: $60.8

Source: University of Massachusetts

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