Export West: A Report by The Brookings Institution
How Intermountain Metros Can Lead National Export Growth and Boost Competitiveness
Published by The Brookings Institution 7/26/10: http://www.brookings.edu/research/reports/2010/07/26-mountain-exports-muro
By Emilia Istrate, Mark Muro and Jonathan Rothwell
In the beginning of 2010, with U.S. output growth modest and job growth nonexistent, President Obama devoted a portion of his State of the Union Address to “fixing the problems that are hampering our growth.” One of these problems, according to the president, was a lack of international export sales. The president linked an increase in exports to an increase in jobs, and pledged to double the nation’s exports over the next five years.
Doubling exports, whether or not it happens in the next five years, would be a major boon to the Intermountain West’s largest metropolitan areas. Such a doubling would bring the West’s large metros thousands of good jobs and see them expand on their existing strengths in the world economy. The prospect of such gains is especially attractive in the Mountain zone, moreover, given the present moment of self-reflection in a region that appears faced with the partial breakdown of its traditional migration- and real estate-driven growth machine.
An analysis of export activity in the 10 largest metros of the Intermountain West for the years 2003 to 2008 reveals that:
- Exports are an important source of good jobs in the Mountain West and export growth has the potential to generate significant and much-needed job creation in the region. In 2008 fully 454,000 workers in the 10 largest Intermountain region metros were employed in export-related jobs, with thousands of other local jobs dependent on the spending on local services that those earnings generate. What is more, export jobs are good jobs: The typical Mountain metro worker employed in his or her metro’s top export industry earns nearly 1.5 times the wage of the average American worker.
- The major Mountain region metropolitan areas are not exceptionally large exporters in dollar terms but a number of them export a significant portion of their overall output. Seven out of 10 of the Intermountain West’s large metros depend on exports for larger shares of their gross metropolitan product (GMP) than the nation’s largest 100 metros taken together. Mountain metros, moreover, not only expanded their export sales but also grew more export intensive from 2003 to 2008. Only in Phoenix did export intensity decline.
- Services constitute a greater share of export activity in the Intermountain West metros than they do in the average large metro nationally. Service exports—ranging from architecture and engineering to consulting, education, and tourism—represent a strength of the Mountain region. Service sales comprise a much larger share of Mountain metro exports, at 45 percent, than they do for the country’s largest 100 metros as a group In two Mountain metros—Las Vegas and Denver—services account for the majority of all regional exports. In fact, Las Vegas generated a larger share of its GMP from service exports in 2008 than any other major metro.
- The Mountain region’s large metros are quite varied in their export specializations. Computer and electronic product manufacturing stands out as one of the region’s clear specializations, as well as transportation equipment (frequently related to defense); service production, including tourism; and metal manufacturing. Across metros, however, the export bases of some economies appear far more diversified. However, export earnings in the prominent computer and electronics industry actually fell in seven metros over the five-year period studied, pointing to the need to maintain constant vigilance in the face of changing global markets.
- Strengths in manufacturing and innovation tend to drive metropolitan export power. Manufacturing industries nationally are the most export oriented and tend to be more innovative, defined by patent production. Exemplifying this in the West is Boise, the region’s patent leader and number two metro on manufacturing and export intensity indicators.
- Canada and Mexico remain the region’s leading export markets but major growth opportunities reside in large emerging markets like Brazil, India, and China (the “BICs”). With years of potentially tepid domestic sales ahead, companies need to redouble their search for new sources of demand. Despite the region’s close proximity, exports from the large Mountain metros are no more likely to be destined for Mexico than the average large metropolitan area’s. And while five of the Mountain metros capitalized on opportunities farther afield—in the BICs, for example—five stood on the sidelines with below average growth in exports to these markets.
Confronted by a malfunction of the region’s real estate-driven long boom, the Mountain West metros need to locate new sources of demand to power sustainable growth. Exports of goods and services to international markets can provide one such source. For that reason, metropolitan leaders and their federal, state, and private sector partners need to engage in exports to create good-paying jobs at home.