Boosting Exports as an Economic Development Strategy

Jonathan Morgan is a School of Government faculty member. One of the most fundamental theories of economic development is the idea that certain industry sectors will have a greater economic impact on a community or region because they sell goods and services outside the local economy thereby bringing new dollars in.  We refer to these sectors as “basic”, “traded”, or “export” industries.  Such export-based industries will have national and global markets for their goods and services and will typically pay higher wages and generate more income for a region than “non-basic” or “non-traded” industries that primarily serve the local economy.  The classic export industry is manufacturing, which has been a central focus of economic development for many years as a result.  Many service industries and retail establishments are considered to be non-basic/non-traded since what they sell tends to be consumed locally.  Export industries are thought to generate a significant multiplier “ripple” effect on other sectors in a regional economy.  For example, one job created by an export-based firm will tend to support many additional jobs in various other industries.  Knowingly and unknowingly, many communities and regions pursue economic development strategies that are built on this underlying theory of the economic base: promote basic, export industries, which in turn will support non-basic, local-serving industries.

In an increasingly globalized economy, there are considerable opportunities to broaden export strategies beyond firms that serve national markets to include those that operate on an international scale.  With huge emerging markets abroad in China, India, and Latin America, we need to pay more attention to the economic development potential of strategies that help key industries increase their international exports.  A recent Brookings Institution report titled Export Nation underscores the importance of this approach.  Among its findings, the report indicates that: 1)      boosting international exports can create significant numbers of good-paying jobs in the U.S.; 2)      international export industries pay higher wages than domestic-oriented industries in large metro areas; 3)      international exports are highest in manufacturing-based metro areas and where innovation (measured by patent rates) is stronger; and 4)      the prospects for export growth are most promising in the “BIC” countries of Brazil, India, and China.  A noteworthy finding for North Carolina is that the Greensboro-High Point region ranks seventh out of the 100 largest U.S. metro areas based on total exports as a share of gross metropolitan product in 2008.  The chemicals industry was the single largest export industry for Greensboro-High Point in 2008. To what extent are North Carolina’s communities and regions gearing up to take advantage of the potentially significant job creation that can come from boosting international exports among key industry sectors?  Are there examples of best practice within the state from which we can learn?