A shutdown at US West Coast ports threatens to throw many Asian exporters out of business and push East Asia into recession, some economists say.
The US is the biggest consumer of Asian-made exports, buying US$300 billion of products a year. Imports from East Asian countries such as China, South Korea, Singapore and Malaysia equal a tenth of the world's biggest economy.
PHOTO: AFP
"If the shutdown lasts for more than a month, East Asia would be in recession," Morgan Stanley economist Andy Xie said in a research note. "The consequences for the global economy are horrendous." The weeklong port lockout over dock workers' pay is disrupting shipments of Nintendo Co, Toyota Motor Corp and other Asian exporters at a time US consumer demand is already showing signs of flagging. It threatens to halt a rebound in Asian economic growth from the global slowdown in 2001.
Asian suppliers of goods are already battling prices "as low as one could bear," said Xie. If US companies push even a part of any increase in dock-worker wages on to their suppliers, many might have to close down.
"Further squeezing Asian producers will drive them out of business," Xie said.
The Asian Development Bank forecast last month that the 41 economies in Asia outside of Japan, Australia and New Zealand will grow an average of 5 percent this year, which is higher than its original forecast of 4.8 percent and last year's 3.7 percent expansion.
That growth may be in jeopardy. Hong Kong, Singapore and Malaysia are the most vulnerable, said Rajeev Malik, a regional economist at J.P. Morgan Chase & Co in Singapore. He estimates a monthlong port strike would lower Asia's export receipts by up to 0.4 percent of its gross domestic product.
A repeat of the previous 104-day stoppage of 1971 "would cripple world trade," UBS Warburg Asia Ltd shipping analyst David Lepper wrote in a research report.
China and South Korea, two of Asia's fastest-growing economies, may also slow if the ports don't open for business soon. US imports from China grew 24 percent in the second quarter, while shipments from South Korea rose 5 percent in the same period, ending four quarters of decline.
"If the US ports closure is prolonged, it will reduce exports from Korea and elsewhere in Asia," said Oh Suktae, an economist at Citibank N.A. in Seoul.
A US federal mediator began talks Thursday to end the closure of 29 ports in California, Oregon and Washington state.
Singapore, which is counting on exporting its way out of the worst recession in 38 years, may have avoided the shock so far because the island's exporters hastened deliveries of disk drives, memory chips and other products in anticipation of the port closures, said Song Seng Wun, an economist at G.K. Goh Research Pte.
Still, exports and industrial production may be affected in October, threatening the city-state's plan to expand the economy by as much as 4 percent this year, Song said.
Japan's Nintendo Co, the world's No. 2 video game maker, has said its products bound for US stores for Christmas may be delayed.
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