Exports Will Help Define America's Next Economy

One of the defining characteristics of the Next Economy is the essential role played by exports. If the United States is to fully benefit from the transformational changes taking place in world markets, we must re-orient our economy and the policies that shape it towards increasing our exports.

One could look at the fact that the U.S. is still the largest exporter of goods and services in the world and feel comfortable, even complacent. That would be a serious mistake.

Over the last 30 years, our economy has been increasingly driven by consumption, much of it fueled by consumer debt. Three years ago, that consumption drove our economy over a cliff. In other large economies -- those of our partners and competitors -- the story has been different. They have been busy creating networks and taking advantage of market opportunities around the world, while we have been content mainly to sell to one another or buy from abroad. Witness the fact that only 1 percent of American businesses export, and more than half of those export to only one market.

Exports account for less than 13 percent of our economy, much smaller, in relative terms, than in the economies of other nations. Germany came out of the Great Recession through the force of an export sector that constitutes half of its economy. The Canadian economy derives 30 percent of its GDP from exports. In China, now the second-largest economy in the world, right behind ours, exports amount to 28 percent of GDP. In fast-rising India, exports account for 22 percent. A substantial share of those nations' exports is sold in the U.S., which has created a persistent trade imbalance.

Meanwhile, the recession has reshaped the global economic geography. As my colleague, Bruce Katz, has noted, the top 30 performing metropolitan areas in the world are almost all located in the emerging markets of Asia and South America, while the 30 poorest performers were nearly all located in Europe and the U.S. This means that, as nations around the world urbanize and accelerate their growth, they are creating markets for our products, or for products made in other countries if we do not seize these opportunities.

The U.S. makes plenty of things people around the world want to purchase, particularly high-value products like transportation equipment, pharmaceuticals, and machinery. To an even greater extent, the U.S. is the world leader in private services exports, such as educating foreign students, designing buildings abroad, or earning royalties from the use of American-made music, movies, and software. The industries that export these products and services tend to pay higher wages and offer better benefits to their workers.

It's clear we must compete, and it's clear we can compete. The question is: how do we re-focus our economy on production for export?

President Obama set an ambitious goal last year of doubling American exports in the next five years. To achieve this, he created the National Export Initiative. His FY 2012 budget supports this export strategy through items such as increased funding for trade agencies and programs, the creation of a National Infrastructure Bank, and investments in innovation and workforce development.

These are all positive, and greatly-needed, steps; however, the success of our export strategy, like the success in the Next Economy overall, will be determined in our metropolitan areas. When we talk about "the economy," we're really talking about a network of metro economies, since that is where most of our economic activity takes place. For example, nearly two-thirds of our exports originate in our metros. The four largest exporters -- New York, Los Angeles, Chicago, and Houston -- account for more than $50 billion in annual exports apiece. Smaller metros, like Wichita, Kansas, and Portland, Oregon, are strong performers in their own rights, with exports representing a significant share of their regional economies.

So we need a Metropolitan Export Initiative, an effort that would bring federal, state, and local leadership and resources together to take advantage of the natural strengths of our metros. This is a different kind of economic strategy that gets beyond old-style business relocation into supporting local firms to expand through exports. If we leverage the existing advantages in our metros with the right strategies, we will create jobs and a more sustainable economic future.

Presented by

Emilia Istrate is a senior research analyst with the Metropolitan Infrastructure Initiative. She works on domestic and international infrastructure financing, transportation and energy, within the field of metropolitan economic development.

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