San Diego: Linking Up Innovation and Local Manufacturing

As part of Brookings’ Metro Freight research series, the Metropolitan Policy Program solicited commentaries from civic leaders around the nation. The purpose of these blog posts is to provide a more detailed look into the unique trading and goods movement relationships within several metros.

San Diego may have a reputation as a sunny tourist destination, but it’s also a major economic power with a strong and interconnected set of assets. There’s a robust biotech sector driven by UC San Diego, high-tech manufacturing anchored by Qualcomm, and shipbuilding and defense industries largely supported by the Navy. At the same time, the Port of San Diego and nearby border crossings with Mexico provide easy access to markets in Latin America and Asia, allowing the metro area to operate as one of the world’s busiest centers of trade.

New research from Brookings’ Metropolitan Policy Program shows how important the integration of R&D, manufacturing, and exports is to San Diego’s economy. Total trade volumes in the region amount to almost $147 billion per year, placing San Diego 27th in the nation. Digging even deeper into this goods trade, though, highlights the metro’s significant economic specialties.

The traded goods that flow in and out of San Diego have the highest average value in the nation at $3,445 per ton. That’s 12 percent higher than San Diego’s nearest competitors—such as Silicon Valley—and due in large part to the high value of wireless telecommunications products manufactured by Qualcomm as well as medical equipment and precision instruments from companies like Illumina. Indeed, San Diego provides the nation with a wide range of products in advanced industries that produce goods based on innovation and research breakthroughs.

Still, San Diego is extremely dependent on importing commodities it does not produce locally, including energy, chemicals, and other general consumer products, categorized as mixed freight. Indeed, the metro area imports more than 80 percent of all the energy it consumes, similar to many other metro areas. The region’s continued dependence on external water supplies similarly calls for more strategic long term planning efforts.

The Brookings data also clarifies a few high priorities and big moves that San Diego must pay attention to. For example, while the success of our advanced industries positions the metro area well in the national and international economy, staying ahead of the curve requires the region to nurture our big innovation clusters – and, in particular, strengthen the linkages between them because these clusters are often more distant from one another than in other U.S. metros.

Because San Diego is one of the nation’s most important exporters of high-value manufactured goods, we must understand and strengthen our freight and logistics sector in the context of global supply chains. Put simply, we must make sure that our manufactured goods can get through our metro area and to distant destinations as quickly and easily as possible.

We must recognize the growing importance of traded goods with both Mexico and the rest of the world. Our R&D and manufacturing sector is increasingly intermeshed with manufacturing in Baja California, as supply chains move back and forth across the border. And our high-end manufactured goods must find more markets in the rest of the world, not just the United States.

And San Diego must reduce its reliance on imports for basic commodities, especially water and energy. By using more reclaimed water—especially in manufacturing—and taking advantage of local power generation opportunities, we can ensure that our prosperity is more sustainable and less vulnerable to disruption.

San Diego’s success in advanced industries and our close connection between innovation and manufacturing gives us great advantages in the national and global economy. The Brookings data offers a useful guide for the direction we must take to strengthen those advantages.