America's Ocean-Powered Economy

By Svati Kirsten Narula

The area of the sea within an invisible border 200 miles out from every U.S. shore isn't called the "exclusive economic zone" for nothing: Countries have property rights at sea just as they do on land. The fact that every nation with a coast also has an EEZ—which extends far beyond a country's "territorial" waters—reflects the importance of the ocean as a source of wealth. But when it comes to analyzing our economy, we hardly ever single out the activity in the EEZ as a special slice of national employment or productivity. 

The National Ocean Economics Program, which started at MIT and is now based at the Monterey Institute of International Studies, is home to a group of academics who would like to change that. NOEP has been tracking economic activity in U.S. coastal zones (both on and offshore) since 1999. It released the first comprehensive report on the American maritime economy in 2009, covering time-series data through 2005. This month NOEP published a new analysis of the ocean economy with data from 2007-2012.

Among the findings from this report: The number of Americans going on cruises has grown by more than a third since 2000; Louisiana residents say they are willing to pay thousands of dollars to restore their disappearing wetlands; and seafood harvesting accounts for fewer jobs and less money in this country than ever before. 

Unlike what NOEP calls "the coastal economy," which is defined solely by geography (and is also pretty much a reflection of the national economy as a whole), the ocean economy represents a range of goods produced and services performed all over the country. It includes 21 industries in six sectors.

Certain industries, like commercial fishing, obviously depend on the sea and are wholly included. But only portions of other industries qualify; the tourism & recreation sector, especially, is full of these cases: There are many luxury hotels in America, for example, but only the ones in shore-adjacent zip codes can be said to depend on the sea. 

Here, below, are 7 more big-picture things to know about the ocean's ties to American jobs, money, and well-being. Most of the values are reported in 2005 dollars. 


1. In 2010, the ocean economy employed about 2.8 million people and produced $258 billion worth of goods and services. But, according to NOEP, an additional 2.6 million jobs and $375 billion were indirectly associated with or induced by ocean industries. Taking this multiplier effect into account, NOEP says that the ocean economy contributes roughly 4.4 percent of total U.S. GDP. That's not huge, but it is more than America's creative industries (recently estimated to contribute 3.2 percent of U.S. GDP) or agriculture.  

2. Its two pillars are the mineral extraction and tourism & recreation sectors. It's not really surprising that these are the two most productive sectors of the ocean economy. The minerals sector includes offshore drilling and exploration of oil and natural gas—a business that, catastrophic explosions and spills notwithstanding, is booming. And there remains a solid American tradition of flocking to the seashore for vacations. But these two sectors dominate the ocean economy in different ways. Nearly three out of every four ocean economy jobs are in tourism & recreation, but 65 percent of the ocean economy's GDP comes from other sectors. The workers in the minerals sector, who account for only 5 percent of ocean-related employment, contribute over six times that to the total ocean-related GDP.

 

In 2011, reports NOAA, the minerals sector actually surpassed tourism & recreation on the GDP measure—accounting for 37 percent of the ocean economy's productivity. 

Tourism & recreation is a service-oriented sector; the minerals sector is about producing high-value goods. The workers' wages reflect this. 

3. But a third sector is growing rapidly: marine transportation. This includes the deep sea freight, warehousing, navigational equipment, marine transportation services, and marine passenger industries. The production of search and navigation equipment contributes more to GDP than the other four industries in this sector. The freight industry is becoming more productive with fewer workers (and a case in point here is the coming fleet of drone ships, as The Atlantic's Megan Garber recently reported): the total value of freight coming through U.S. ports nearly doubled between 2002 and 2012, while employment of people moving that freight dropped by 2.5 percent.

Transportation of cargo at sea—encompassed by four out of five industries in this sector—is huge, but what's really growing is the transportation of humans at sea. The cruise industry just keeps getting richer, and though it's a global industry, it's dominated by the U.S. The number of global cruise ship passengers doubled between 2000 and 2010, and in 2010, 3 out of every 4 of those passengers embarked from a U.S. port.  

4. People stopped buying boats during the recession. Ship building in the U.S. primarily revolves around construction and maintenance of naval vessels. That industry has had its ups and downs, but the boat builders, who serve fishermen and recreational boaters, were hit particularly hard by the recession. Sales of recreational boats dropped by more than half in 2009-2010, and the boat building industry lost more than half of its 2005 employment.

5. The fishing industry is of declining importance, but it's also not accurately represented by the available data. The living-resources sector, which includes fishing, seafood markets, and seafood processing, makes up only 2 percent of ocean economy GDP and employment. This was the only sector that did not see employment growth between 2005 and 2008. U.S. fisheries are not as productive as they used to be, for various reasons, but what's also happened is that many American jobs in this sector have either been replaced by technology or sent overseas. For example, says NOEP researcher Matthew Nichols, "Much of our shrimp used to be harvested by Vietnamese-Americans in Louisiana. Ironically, they've been put out of a job by shrimp farming (aquaculture) in Vietnam." America imports a lot more seafood than it harvests. Another thing, though, is that the majority of commercial fishermen in America are technically self-employed and thus left out of standard federal employment data. 

6. Measuring GDP output, employment, and wages doesn't tell us everything. The NOEP report devotes a full chapter to the emphasis of non-market data, which can only be captured by individual studies. Wildlife viewing, surfing, snorkeling, diving, and recreational fishing are popular leisure activities that attract millions of Americans to the ocean each year, but their economic effects are not totally apparent. For example, the amount of money spent by tourists on fishing gear can be observed, but that does not capture the full value of the fishing area as a tourist attraction—we have to know how much people would be willing to pay to access the fishing area if such a charge existed. 

Non-market research has played a crucial, if controversial, role in assessing the aftermath of the BP Deepwater Horizon explosion. The federal Oil Pollution Act, which was passed after the 1989 Exxon Valdez spill, actually dictates that companies are responsible for lost non-market values to society when an ecosystem is damaged. 

Check out this brief video from NOAA explaining the importance of non-market values when considering ocean resources:

7. Current efforts to understand the U.S. ocean economy foreshadow the gradual recognition of the global ocean economy. Roughly 15 countries explicitly track some measure of their ocean economies, but there are no standardized accounting methods. NOEP researchers Jason Scorse and Matt Nichols point to a handful of trends that "are pushing the world toward the need for standardized ocean accounts": Global growth in ocean-dependent industries like marine aquaculture, cargo shipping, and deep sea mining is one thing, but countries are also starting to realize that climate-related impacts to coastal regions—intensifying hurricane seasons, sea level rise—necessitate economic analysis for policy-making purposes. 

This article available online at:

http://www.theatlantic.com/business/archive/2014/03/americas-ocean-powered-economy/284516/