The Export Opportunity and Imperative
For a region with such considerable economic strengths and advantages, Greater Philadelphia’s persistently lagging job growth numbers remain deeply troubling. Greater Philadelphia has been stuck as the slowest-growing economy among the 10 largest U.S. metros, increasing its job base by only 4.5% since 2010. This stubbornly sluggish growth has kept the region from realizing its greatest potential and left its communities with fewer resources to ensure prosperity and opportunity for all. The region is urgently in need of effective strategies to spur economic growth over the long run.
EMPLOYMENT GROWTH BY 10 LARGEST U.S. METROS (2010–2015)
EXPORTS DRIVE SUSTAINABLE GROWTH
As Greater Philadelphia seeks sustainable growth strategies, broad economic trends point toward the importance and promise of global business and exports. With more than 70% of the world’s purchasing power currently located overseas and 86 percent of global economic growth between 2015 and 2020 expected to occur outside the United States, exporting is more critical than ever to national and regional economic success. Even with the strengthening dollar and slower growth in Asia and Europe suppressing recent U.S. export sales, exports have been a sustained source of growth for the U.S., accounting for 27% of overall economic growth between 2008 and 2014. This activity translates into substantial employment, with every $1 billion in new exports creating approximately 5,600 additional jobs.
As export finance, technology and trade agreements have made global markets easier than ever to reach, federal, state and local leaders across the country are exploring ways to help firms sell their goods and services abroad to grow jobs at home. A rising number of metros, in particular, are focusing on exports as a critical way to grow their tradable sectors—the specialized industries that drive wealth, boost productivity, and maintain a region’s competitive advantage in the global economy.
STRENGTHENING LOCAL FIRMS BY GOING GLOBAL
While going global has become a regional economic imperative, the arguments in favor of exporting are even more compelling for individual businesses. On average, manufacturing and services firms that export enjoy higher revenues, faster growth, a stronger labor pool, and higher profitability than non-exporters. Exposure to additional markets can also help spur innovation while bolstering firms’ competitiveness via diversification—a strategy that can help companies weather year-to-year economic fluctuations and navigate recessions. Yet despite all of these clear benefits, only one percent of U.S. companies export and, among those that do, 58 percent export to only one market. These numbers underscore the significant opportunity for Greater Philadelphia and other U.S. metros to grow by going global.
EXPANDING OUR ECONOMY BY SELLING TO THE WORLD
The good news is that Greater Philadelphia has significant global business assets to build upon. In 2014, the region had almost $32 billion in export sales from area firms—a level of activity that sustained 201,000 jobs. An extensive array of trade services has contributed to this export activity, including federal agencies such as the U.S. Export Assistance Center; state programs like Pennsylvania’s award-winning Office of International Business Development, which maintains a network of 15 foreign-based contractors to support trade and investment; nonprofits such as the World Trade Center of Greater Philadelphia and DVIRC; and local economic development organizations.
In recent years, the region has seen an increased focus on strengthening connections to foreign markets. In addition to the everyday work of local firms and education and health care institutions connecting abroad, the region’s global orientation has been bolstered by the Welcoming Center for New Pennsylvanians’ focus on Greater Philadelphia’s diverse and growing immigrant communities, international marketing led by the Philadelphia Convention & Visitors Bureau, global conferences and meetings, successful trade missions, Philadelphia’s designation as a World Heritage City, and the Global Philadelphia Association’s work to support the region’s many international efforts.
A useful indicator to gauge the overall health and performance of Greater Philadelphia’s export economy is its export intensity, or the share of regional economic output represented by goods and services exports. The region’s export intensity has increased steadily over the past decade and reached 9.1% last year, as one out of every 11 dollars spent on goods and services produced by area firms came from abroad. This represents a significant increase from an export intensity of 6.8% in 2003. However, other metros have been increasing their export activity at a faster rate, as Greater Philadelphia’s export intensity ranking among the 100 largest metros fell from 56th in 2003 to 62nd in 2014.
EXPORT INTENSITY BY 10 LARGEST U.S. METROS (2014)
A MAJOR POTENTIAL PAYOFF FOR GREATER PHILADELPHIA
The potential payoff for taking Greater Philadelphia’s export activity to the next level is notable—especially in light of the region’s ongoing slow-growth challenges. Estimates indicate that raising the region’s export intensity to the average for the 100 largest U.S. metros—an ambitious but realistic goal—would translate into $6.3 billion in new economic activity every year and 35,000 additional jobs. This represents enormous untapped potential to strengthen our economy. However, this potential will only be realized if our region’s leaders understand Greater Philadelphia’s export growth opportunities and collaborate around shared strategies.