Editor’s Note: During the launch event for a new report on U.S. exports, Bruce Katz delivered a presentation highlighting the report’s major findings. Additional data can be found using the report's interactive map.
Introduction: Why Exports?
Thank you for that introduction Antoine, your leadership at Brookings and your continued guidance to Brookings Metro.
For the past three years, the Brookings Metro Program has been boringly consistent about the economic challenges facing our country and the metropolitan areas that drive the national economy.
At the most basic level, the U.S. needs more jobs — 12.1 million by one estimate — to recover the jobs lost during the downturn and keep pace with population growth and labor market dynamics. Beyond pure job growth, we need better jobs to grow wages and incomes for lower and middle class workers and reverse the troubling decades-long rise in inequality. There is no easy fix to achieve these twin goals. Our economy must be purposefully restructured from one focused inward and characterized by excessive consumption and debt to one globally engaged and driven by production and innovation.
Or, in our formulation, we must now move towards an economy driven by exports, powered by low carbon, fueled by innovation, rich with opportunity and … led by metropolitan areas.
Our primary focus on exports and trade and investment more broadly is driven by both cyclical and structural concerns.
In the rubble of the Great Recession, household wealth has plummeted with the collapse of the housing market. Constraints at home contrast sharply with growth abroad as rising nations and their rapidly growing cities and metros come on line. In 2009, Brazil, India, and China … the BICs … accounted for about a fifth of global GDP, surpassing the United States for the first time. By 2015, the BIC share will grow to more than 25 percent.
These nations are growing because they are urbanizing and industrializing. The locus of economic power in the world is shifting. The top 30 metro performers today are almost exclusively located in Asia and Latin America. The 30 worst metro performers are nearly all located in Europe, the United States, and earthquake-ravaged Japan.
This is not a rocket science. In the near term and over the long haul, the U.S. … our firms, our states, our cities and metropolitan areas, NGOs like hospitals and universities … must trade more goods and services seamlessly with the New World … this new Metro world … and, by so doing, grow more jobs and better jobs.
Today, we will take a bottom up look at how well we are doing by examining export growth in each of the top 100 metropolitan areas. This is both an update and expansion of a report and an interactive data platform we developed two years ago and I want to commend the co-authors of this report, Emilia Istrate and Nicholas Marchio, for their superb work.
Today, we make three main findings:
First, exports are leading the national economic recovery and having an outsized impact on job creation. As you will see, the U.S. not only remains a manufacturing powerhouse but is the world’s leading provider of advanced services. But as the locus of economic power shifts in the world, the geography of exports is also shifting towards the rising nations, particularly Brazil, India and China.
Second, metros are leading national exports because they concentrate and agglomerate many of the leading trade-able sectors in the economy. Taken together, the top 100 metropolitan areas dominate U.S. exports — in general and with regard to the rising economies in particular. But, unlike retail or housing, these are not cookie-cutter economies. Each metropolitan area has a distinctive export profile and a special set of trading partners.
Finally, metros are driving innovation — in practice, in policy, in the formation of global trade links. They are, in essence, building an export economy from the bottom up by: innovating locally, advocating nationally, and networking globally.
In short, metros are beginning to act like the economic engines they are.
So let me begin with our first macro finding: Exports are leading the national recovery and having an outsized impact on job creation in the United States.
With consumer demand depressed at home, U.S. companies are looking to global demand for growth. Export sales grew by more than 11 percent in 2010 in real terms, the fastest growth logged since 1997. Exports were responsible for 46 percent of GDP growth between 2009 and 2011 … which is remarkable since exports make up only 13 percent of the GDP of the U.S. … compared to 30 percent in China, 29 percent in Canada, and higher levels in India, Japan, and the entire EU.
The result of fast export growth at home has been fast job growth: the U.S. added nearly 600,000 new export-supported jobs in 2010. About a third of those coming from exporting firms and industries, and the remainder in supporting positions in suppliers, servicers to the exporters, and transportation and wholesale traders hauling merchandise and goods across the country.
These are not just more jobs … but better jobs. Export-intense industries are more likely to provide health and retirement benefits, and wages are on average roughly 11 percent higher in firms that export, for both production and non-production workers. In fact, wages in many of the top exporting industries — machinery and transportation equipment manufacturing, business and professional services, chemical and computer, and electronic product manufacturing — far exceed the national average wage.
What’s happening here?
For all the talk of a post-industrial economy, the U.S. remains a manufacturing powerhouse, exporting more than one-and-a-quarter trillion dollars in manufactured goods in 2010. This made us the second largest merchandise exporter in the world, behind China but surpassing Germany.
Manufacturing comprises 61 percent of U.S. exports, but has driven the export resurgence in 2010, contributing 75 percent of U.S. export growth in the first year of economic recovery. Over 64 percent of that manufacturing growth came from four sectors: transportation equipment, chemicals, machinery and computer and electronic products.
To paraphrase the old motto for Trenton: What the U.S. makes, the world takes.
But this is not just about the advanced manufacturing of high value goods. America is the #1 exporter of private services in the world, exporting $518 billion in services abroad in 2010, which gave us a $153 billion trade surplus in services. In 2010, U.S. exports of private services represented 14 percent of global exports, more than double the share of Germany, the second ranking country.
Three service export sectors — education, telecommunication services and business services — grew both in 2009 and 2010 and represented 30 percent of all service exports in 2010. The education sector — expenditures of foreign students in the U.S. — is growing by leaps and bounds. We now have more than 720,000 international students studying in the United States, led by those from China, India and Korea. That sector represents $21.2 billion in U.S. service exports.
U.S. exports are not only growing, they are shifting to the economic powers in the world.
Our North American Trade Partners remain the largest export markets: Canada and Mexico are the destination for a quarter of U.S. goods and service exports in 2010. Japan, China, and the U.K. round out the top five destinations for U.S. goods and service exports in 2010, and taken together these countries account for 43 percent of U.S. exports.
But we are seeing a major shift in the sources of U.S. export growth, both concentrating and shifting to rising powers. Pre-recession between 200 and 2008, five nations — Canada, China, Mexico, the UK and Germany — contributed 32 percent of U.S. export growth. Post-recession, from 2009 to 2010, these 5 nations — Canada, China, Mexico, Korea, and Brazil — accounted for a staggering 58 percent of U.S. export growth.
We have entered a new world economic order.
This leads to my second point: Metros are leading national exports.
Any discussion of exports must begin with our large metropolitan areas: Here is the real heart of the American economy… 100 metropolitan areas that after decades of growth take up only 12 percent of our land mass, but harbor 2/3 of our population and generate 75 percent of our gross domestic product. These communities form a new economic geography — enveloping cities and suburbs, exurbs and rural towns.
Our report shows the extent to which these top 100 metros, in the aggregate, drive state and national exports. In 2010, they produced an estimated 65 percent of U.S. exports, including 63 percent of manufactured goods exports, and 75 percent of services that are sold abroad. They produced a majority of state exports in 30 states in 2010, with a supermajority (more than 60 percent) in 20 states.
In addition, they are our export job centers, reflecting their position not only as the producers of goods and services sent abroad, but the hubs of supply chains and export logistics, supporting 64 percent of total export jobs in 2010, including 61 percent of jobs supported by manufacturing exports, and 75 percent of jobs related to service exports.
Metro economies, of course, do not exist in the aggregate; they have distinctive starting points and distinctive assets, attributes and advantages. Our research digs deep to unveil the export profile of each of the top 100 metro areas.
Here you see our super-sized export performers: Los Angeles and New York, which both exported nearly $80 billion in 2010, and Chicago and Houston, which topped $48 billion that year.
The top 10 metro exporters — including Dallas, San Francisco, Seattle, Philadelphia, Boston and Detroit — all exceeded $26 billion in exports. Taken together, these metros account for 28 percent of U.S. exports.
But this is not just about the large, diversified economies. These 10 metropolitan areas saw the fastest manufacturing-driven export growth, all having more than 88 percent of their 2009-2010 export expansion coming from goods production.
A completely different set of metropolitan areas, mostly in the Northeast, are implicated by the rapid rise in education exports. Boston leads with education providing 4.8 percent of total exports.
The varied spatial geography of our export economy comes through all these graphics … and is a critical point for national policymakers and state and metropolitan leaders alike. The export economy, unlike the consumption economy, is highly differentiated.
A Wal-Mart outside Phoenix is the same as a Wal-Mart outside Pittsburgh. Same design. Same footprint. Same goods. A housing subdivision outside of Denver is the same as one outside Detroit. But what Phoenix exports is different from what Pittsburgh sells to the world. And what makes Denver a special global metropolis is different from what drives Detroit. Every U.S. metro presents a different economic face to the world.
One group of metropolitan areas, largely in the Midwest, benefits from the growing trade of cars and trucks to China. Another group, very regionally diverse, drives the growing trade of basic chemicals and pharmaceuticals to Brazil. And still another group, also regionally diverse, dominates the nonferrous metal products trade with India.
This leads to our final point, namely that metros are starting to drive innovation — in practice, in policy, in the formation of global trade links and networks.
This is a major structural shift. Setting and stewarding a strong export economy has traditionally been almost the exclusive role of the federal government, given its powers over trade, taxes and currency and investments in innovation, human capital, infrastructure and export promotion and finance.
Yet with partisan gridlock, even the easy stuff — reauthorizing the Ex-Im Bank, modernizing freight infrastructure — has become extraordinarily difficult. In this polarized environment, metros, already the engines of the national economy, are doing double duty and helping set a strong pro-trade platform for an “Export Nation.”
Three things are happening.
First, metros are innovating locally with export plans that exploit their distinctive competitive advantages in the global economy.
Over the past year, Brookings has worked closely with leaders in four metropolitan areas — Portland, Los Angeles, Minneapolis-Saint Paul and Syracuse — to invent and pilot actionable export plans. This activity has been done in close partnership with the International Trade Administration, and supported at the local level by the U.S. Commercial Services, the SBA and Ex-Im Bank.
The elements of export planning and action are fairly simple and straightforward. Each metropolis does a market assessment of their unique export profile and potential … what goods and services they trade, which, which nations they trade with, where trade trends are likely to head given market dynamics here and abroad. Armed with this information, metros then set exporting goals and objectives that build on their distinct advantages, devise strategies to meet those goals and establish metrics to gauge progress. All these efforts are undertaken by a consortium of corporate, government, university and civic institutions that cut across jurisdictions, sectors and disciplines and “collaborate to compete” globally.
The elements of export plans are not new; they merely adapt the lessons of private sector business planning — evidence-based, solution-oriented, performance-measured — to the task of revitalizing and restructuring metropolitan economies in a globalizing era.
Let’s take a quick look at the four plans; you might focus especially on the distinctive industry focus of each plan and the remarkable collaborations built in each community.
Portland is "Export Central" with enviable strengths in computer electronics, clean technology, and innovation. It doubled exports in the past decade. Its goal: double them again in the coming five years, by bolstering the computer and electronics supply chain and increasing the export orientation of its “green cities” expertise to serve an urbanizing world.
L.A. is the nation’s largest exporter, with 80 percent if its exports concentrated not only in film and television but also aerospace, computer and electronics, pharmaceuticals, and professional services. Its goal: create a new Los Angeles Regional Export Council to identify and proactively support export-ready firms in its leading sectors.
Minneapolis-Saint Paul has core global advantages, starting with the health and medical technologies. Its goal: Also double exports in five years by expanding export reach among small businesses and building off its distinctive base.
And, finally, Syracuse, NY, a small, highly diversified economy. Its focus: Maximize its proximity to Canada, expand the sales of top goods and services exporters in the region, and build the export capacity of smaller firms.
These export plans are not an anomaly. They are, in fact, the beginning of a new wave of local and metropolitan economic development. Several months ago, Antonio Villaraigosa, the mayor of Los Angeles and head of the U.S. Conference of Mayors, put out an export challenge to America’s cities and metros. The goal is ambitious: 25 cities designing and beginning to implement export strategies within the next year. We will get there.
Having innovated at home, metros are starting to advocate nationally for federal and state policies and practices that boost metropolitan exports.
What do metros want? On one level, they want the federal government and the states to set a solid platform for export growth generally. At the same time, they want federal and state policies to be nimble enough to align with the distinctive visions and strategies of disparate metros.
Let’s start with platform setting.
For metros to realize their export potential, the federal government needs to ensure that American companies compete on a level playing field. That means:
- A new round of trade agreements that open foreign markets to U.S. goods and services;
- Fierce protection of intellectual property rights of American businesses around the world, particularly in China; and
- A stable, steady supply of ready capital and market advice so that companies, particularly small ones, can overcome the financial regulatory, language and cultural barriers that impede trade and job creation.
Platform setting also requires the federal government and the states to work together to:
- Design and implement a national freight strategy that modernizes our air, rail, sea and land hubs and corridors so goods can move quickly and efficiently through the nation, with the least environmental impact;
- Invest in advanced research and development at scale over a sustained period of time, and then support efforts to commercialize innovation in a way that spurs advanced manufacturing and advanced services, that is, the stuff that actually gets sold abroad.
- Help provide a steady stream of skilled workers to export oriented industries via strong support for community colleges and STEM education that focuses on science, technology, engineering and mathematics.
Yet in today’s competitive environment, merely setting a general platform for enhanced trade is not sufficient. To maximize exports, federal and state policies and investments need to closely align with metropolitan visions, goals and strategies.
What will that mean?
In Minnesota, as discussed before, the state trade office is a lead organization in the metro export initiative. State leadership is critical because it brings real resources, programs and tools to the table, serves as a unified voice for a metropolitan area that is deeply fragmented and helps coordinate overseas marketing and trade trips for all in-state metros.
Alignment is also an imperative for the federal government. President Obama, for example, has proposed consolidating six agencies involved in trade activities — the U.S. Department of Commerce’s core business and trade functions, the Small Business Administration, the Office of the U.S. Trade Representative, the Export-Import Bank, and the Overseas Private Investment Corporation. Yet consolidation would be a failure if it just moved agency boxes around in Washington, D.C.
The key to success is to integrate activities on the ground so that local representatives of the federal export agencies such as the U.S. Export Assistance Centers and the Small Business Development Centers operate as a unified team with metropolitan organizations — with one set of export objectives, one set of performance metrics and a clear system of referring clients and sharing information.
There is one more piece to the export puzzle.
Beyond innovating locally and advocating nationally, U.S. metros are starting to network globally — creating and stewarding close working relationships with trading partners in both mature economies and rising nations.
Strong connections already exist:
Metros with concentrations in financial services, like New York, are forming tight, interlocking networks with similarly focused metros around the world. Metros with concentrations in advanced manufacturing, like Detroit, are similarly linking with metros in both developed and rising nations. And port metros like Los Angeles are making key connections with the world’s air, rail and sea hubs.
These networks obviously start with firms that do business with each other. But, over time, they extend to supporting institutions — governments, universities, business associations — that provide support for companies at the leading edge of metropolitan economies.
In Northern California, for example, the Bay Area Council has become a foundation of respected, actionable, up-to-date information about its global connections and networks — focusing on emerging markets like China and India, as well as mature economies like Canada and the United Kingdom. This platform is supplemented by the activities of private/public organizations like China SF, which acts as a matchmaker between firms wanting to sell goods and provide services to China, and Chinese investors looking for investment opportunities in the Bay Area. The Bay Area story provides an insight into how the global economy is evolving at the metropolitan scale.
In many respects, these 21st century networks are not new. They harken back to the way the global economy evolved before the rise of nation states, when historical trade routes flowed through cities … and deep trading relationships were forged between cities.
Between the dawn of the Common Era and the 15th Century, a flourishing Silk Road connected cities in East, South and Western Asia with their counterparts in the Mediterranean and European world as well as parts of North and East Africa. Like today, each city had distinctive concentrations and specialties.
Cities in China traded silk, teas and porcelain. Cities in India traded spices, ivory, textiles and pepper. Cities in the Roman Empire exported gold, silver, glassware, wine, carpets, and jewels.
You get the lesson: Like today, the city economies of the ancient and medieval worlds were distinct economies and places grew and flourished as they built on their special strengths and distinctive locations.
Let me end with this tantalizing prospect.
A “New Silk Road” is emerging as we enter what is clearly an urban age and metropolitan century. Cities and metropolitan areas not only the economic engines of nations … but the spatial backbone of global trade and exchange. In a world where people and societies now live, operate, communicate, and engage through networks … the New Silk Road is emerging as a super network of trading cities and metros … economically collaborative, and globally fluent.
For the United States, the New Silk Road is a path back to shared prosperity … sane and sensible growth that works for companies, cities, and consumers.
For the world, it is a path towards reducing poverty and generating wealth.
Let us build it, nurture, and extend it to all corners of the earth.