Ship 'em out: Exports can cure what ails local economy, study urges
April 10, 2016
Diane Mastrull, Philadelphia Inquirer
The products aren't especially noteworthy: ice cream and cheesecake, steak and actuators.
But where they're sold is: China and South Korea, Russia, India, and the Middle East.
Those are some of the faraway destinations that Bassetts Ice Cream, Classic Cake, Harold Beck & Sons Inc., and Rastelli Foods Group have turned to for customers. In doing so, these businesses are contributing to the Philadelphia region's $32 billion in annual exports, making it the 10th-largest U.S. export economy.
Yet the annual rate of export growth here over the last decade, 2.5 percent, puts the Philadelphia region (Southeastern Pennsylvania, South Jersey, and northern Delaware) in 82nd place among the 100 largest U.S. metropolitan areas, and last among the 10 largest since 2003, says a new report on area export activity that is believed to be unprecedented in its scope.
Such laggard performance is contributing to another troubling status for the region, warns the Greater Philadelphia Metro Export Initiative Market Assessment.
"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 percent since 2010," two-thirds the rate of the next closest, Washington, at 6.4 percent, says the report by the Economy League of Greater Philadelphia and the World Trade Center of Greater Philadelphia. "The region is urgently in need of winning strategies to spur economic growth over the long run."
Exporting is just such a strategy, the report and its authors assert.
"I've never been as excited about one initiative's potential," said Josh Sevin, managing director, regional engagement, at the Economy League.
The Metro Export study, compiled with help from Drexel University's LeBow College of Business and new data from the Brookings Institution, is to be posted Sunday at economyleague.org/exports. It is the basis of a 28-page plan to get more companies to take the exporting plunge, titled "Selling to the World," that is to be unveiled Wednesday in Philadelphia at a World Class Business Growth Forum at WHYY.
In a timely development, the city of Philadelphia last week hired a new director of international business investment, Lauren Swartz, to, in part, urge more exporting.
Though no reliable data on its size is available, the region's exporting pool is thought to be about 1 percent of all businesses, the national rate, according to federal estimates.
Economy League and World Trade Center officials are emphasizing the upside of such a dismal statistic: opportunity.
"With more than 70 percent 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," the report says.
Put in terms that the Metro Export study's authors hope will trigger more local buy-in: Every $1 billion in new exports creates about 5,600 jobs.
Consequently, if local export intensity - the share of regional economic output represented by goods and services exports - increased to the average for the 100 largest U.S. metro areas, about $6.3 billion in annual export value and 35,000 jobs would be added to the Philadelphia area's economy, the Metro Export report estimates.
Actually boosting exporting will depend on a broad effort, said Linda Mysliwy Conlin, president of the World Trade Center, a Philadelphia-based nonprofit that has helped companies in Southeastern Pennsylvania and South Jersey generate $1.5 billion in export sales since 2002.
"It's going to take coordination of existing infrastructure and support from corporations and nonprofits and federal and state trade officials," she said.
Though preferring not to disclose details of the action plan until Wednesday, Conlin said it would be responsive to the five primary conclusions of the market assessment:
The region's export economy is large and diverse, but its growth has been slow relative to other metros.
Despite an overall decline in manufacturing, the region has maintained a competitive advantage in several specialized goods-producing industries, including medical devices and equipment, precision instruments, and aircraft parts.
Recent export growth has been in service sectors, including professional services, research and development, and software/IT, with potential for further expansion.
Many small- and mid-sized companies have limited awareness of their global growth potential or of existing export services.
The region has a comprehensive export-support ecosystem (trade-assistance nonprofits such as World Trade Center and government agencies such as U.S. Commercial Service, along with trade shows and conferences). But gaps and weak links exist.
Efforts to quantify local exporting participation, and stimulate more, began in 2013, when the Economy League released "World Class Greater Philadelphia Agenda," a long-range business-growth strategy.
The exporting push gathered more momentum in 2015, when Philadelphia was selected as part of the final group of metro areas included in the Global Cities Initiative, launched in 2012 by Brookings and JPMorgan Chase to help metropolitan areas use global trade for economic growth. Developing a metro export plan is one of the main goals for each participating city.
"Learning from other regions represented a really important opportunity for us," Conlin said.
Brookings' "Export Nation" data set helped provide the most complete picture of this region's export economy yet, Conlin and Sevin said, including previously unavailable estimates of services exports.
Those yielded what Sevin and Conlin saw as the most surprising finding: that in 2013, for the first time, the total value of the region's services exports - such as technology, or financial and legal help - surpassed that of goods exports. People coming here for medical treatment or education count as services exports, too.
Services represent a 52 percent share of the Philadelphia region's total export value, up from 36 percent 10 years ago, the Metro Export report says.
That's intriguing to Steven Bradley, owner of Bradley & Bradley Associates Inc., a three-person commercial insurance company in Old City and chairman of the African American Chamber of Commerce of Pennsylvania, New Jersey & Delaware. He was on the 40-member steering committee that met throughout 2015 to help guide Metro Export plan development.
"The growth opportunity is what really surprised me," Bradley said. "We're just so focused on our region, and, really, we need to be broader."
Newtown-based Harold Beck & Sons came to that realization 12 years ago. Now, export sales of its actuators - motors primarily serving power plants, steel companies, and cement operations - account for nearly one-quarter of the 80-year-old company's revenue, which it does not disclose as a privately held business, said Bob Kritzer, director of finance and administration.
"People should not underestimate the complexity and the amount of time and resources that need to go into it," Kritzer said of exporting. "The upside is the U.S. economy is a very, very mature economy. Many industries are very mature and stagnant to a degree. Exporting is a natural and very essential activity for a business to grow revenue and to become profitable and add employees."
To register for Wednesday's Business Growth Forum, go to http://goo.gl/zd3nPf.