Topic Category: U.S.

Many Republican and Democratic politicians fear offshoring will result in fewer good jobs for American workers. This is understandable since some activities include the movement of knowledge-intensive services to India and other countries with educated, less expensive, English-speaking labor pools.

But careful analysis reveals that worldwide sourcing — made possible by new technologies that digitize and cheaply transmit information around the world — provides real benefits.

History tells us that new technologies and improved business strategies displace jobs. For example, automobile workers replaced buggy makers, and ATMs, voice mail and voice recognition software eliminated bank teller, receptionist and medical transcription jobs.

Consider this. The U.S. economy loses an average of 31 million jobs annually. But new jobs are created even faster. The proof: America generated 60 million net jobs since 1970. And according to the Labor Department, the U.S. will generate another 21.3 million net jobs from 2002 through 2012.

New technologies, innovation and higher productivity, the primary causes of job churn, increase wages and improve living standards. In turn, new industries and higher-skilled jobs emerge. Thus, Forrester Research’s estimate of 3.3 million service jobs moving offshore by 2015 represents a fraction of job churn.

Higher-tech jobs most likely to be outsourced, like computer programming and software design, are projected actually to increase here at home, according to the Labor Department. What’s more, by 2012, all U.S. computer-related occupations are estimated to grow by 15 to 57 percent. Lower-tech jobs prone to outsourcing, such as bookkeeping and customer service, also are projected to increase in the U.S.

How does offshoring lead to better jobs? The McKinsey Global Institute estimates two-thirds of economic benefits from outsourcing services to India flow back here. Firms that outsource generate higher profits, have more capital to invest in R&D, become more globally competitive and are better positioned to expand sales worldwide — creating higher-paid jobs.

Catherine Mann of the Institute for International Economics says offshoring of computer manufacturing resulted in a 10 to 30 percent drop in computer costs. In turn, sales of PCs soared. This led to a rapid rise in U.S. productivity and added $230 billion in cumulative GDP from 1995 through 2002. The result: Many new jobs emerged, far exceeding those lost to outsourcing.

If applied to select medical services and other fields, offshoring could reduce costs and generate new waves of innovation, resulting in better jobs not yet imagined.

Fear of a "giant sucking sound" is unfounded. In reality, the U.S. service sector will significantly expand. And since the industry has become more sophisticated, average hourly earnings for service production workers have already caught up to those in manufacturing.

In 1940, 9.5 million U.S. workers were employed on farms. By 2003, new technologies reduced this number to 2.3 million. And U.S. agricultural output is tremendously higher. America did not "lose" 7.2 million farm jobs; they shifted to emerging industries.

Job losses, which should not be taken lightly, cause anxiety and provoke various responses. In the early 19th century, the English Luddites attempted to destroy textile machines because they replaced weavers. Something similar is happening today. Numerous pieces of federal and state legislation have emerged that, if enacted, will penalize companies that outsource.

Although our policymakers have good intentions, their protectionist actions could disrupt Joseph Schumpeter’s process of "creative destruction": where the new destroys the old. This process, which promotes job creation, produced almost 1.2 million net jobs from January through May 2004, albeit slowly due to recovery from recession, terrorism and war.

The American workforce is the most productive and flexible in the world. As new knowledge industries and job opportunities emerge, it’s important to give our workers the tools they need to be competitive. Policies supporting life-long learning, not protectionism, will help prepare our workers for the challenges ahead.

This article was syndicated by Knight Ridder/Tribune Information Service and appeared in the Miami Herald, Atlanta Journal-Constitution, Buffalo News, Wichita Eagle, Fort Wayne Sentinel, Akron Sunday Beacon Journal, Pueblo Chieftain, and The Daily Herald in June 2004.
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For many Hudson Valley-based businesses, a U.S. economic slowdown will mean fewer domestic sales, hurting local companies and workers. However, through an effective export strategy, local firms and workers can shelter themselves from economic hardship.

Additionally, this will generate high-paying jobs, strengthen local companies and farms, and improve the region’s tax base — while sending export revenue to local restaurants, retail stores, etc. However, in order for Hudson Valley exporters to sell more goods and services abroad, Congress needs to forge new trade agreements that further open foreign markets.

U.S. exports account for almost one-third of real U.S. economic growth and a very large portion of New York’s economic development. Consequently, the income of local workers and farmers, and the growth prospects of New York-based businesses are pegged to international trade.

These are the key findings released on March 9th in a new Business Roundtable report, "International Trade Benefits New York," that I authored. Plus, the report reveals:

  • International trade is a primary generator of business and job growth in the New York City region.
  • From 1993 - 1998, New York City metro area’s merchandise exports to Canada and Mexico, our NAFTA partners, rose by 38%, while decreasing 6% to the rest of the world.
  • NAFTA has created a net increase in jobs in New York.
  • Less than 2% of non-farm workers are at risk from imports, which offer consumers greater choices at attractive prices. Imports allow families to purchase more goods with more disposable income available for education, healthcare, home mortgages, etc. And lower-cost imported components help local producers to be more competitive worldwide.

The New York City metro area ranked within the top 1% of largest U.S. metro areas. Stated by Governor George E. Pataki, "New York has created a business-friendly environment by cutting taxes, controlling spending and eliminating red tape. This strategy puts New York companies in a very strong position to compete globally, as well as positions New York State as an attractive location for international investment. Our aggressive economic agenda reinforces the Empire State as the center of global business marketplace.”

Numerous local businesses are succeeding internationally, but more needs to be done. For almost three decades, the U.S. service trade surplus has consistently reduced the trade deficit. In 1999 alone, it decreased the trade deficit by 25%. And since 1980, U.S. exports of services have grown 130% faster than exports of goods.

New York’s private service-producing industries accounted for 75% of total gross state product in 1998, a larger percentage than any other state. And in the New York City metro area, 90% of non-farm workers are employed in the service sector — a higher percentage than any other state area. To improve the local economy, Hudson Valley-based companies need greater access to both foreign goods and service markets. To achieve this, we need Congress to forge new trade agreements that further open foreign markets.

This article appeared in the Hudson Valley Business Journal, April 2001.
Topic: U.S.
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Under the North American Free Trade Agreement (NAFTA), Mexican and Canadian markets have become much more important to New York State producers and workers.

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Compared to other states, New York ranks fourth from the bottom in terms of economic growth. Measured in gross state product (GSP), the average economic growth rose only 2.7% annually from 1992 through 1998, well below the nation’s average annual growth rate of 3.9%, according to the U.S. Department of Commerce.

In the manufacturing sector, New York’s growth registered 0.7%, significantly lower than the national rate of 4.9%. However, in New York’s finance, insurance and real estate industry, average annual gains during the period of 1992 through 1998 were 4.6%, higher than the national rate of 3.6%.

Although the state as a whole has performed poorly in terms of economic growth, the downstate region has performed well. In fact, in September 2000, the New York-New Jersey Port Authority said their region was “one of the world’s most vibrant economies,” and predicted that economic growth would continue.

Port Authority Executive Director Robert E. Boyle said, “The New York-New Jersey region closed out the 20th century with an economic boom. Not only did regional employment reach an historic high, but for the first time in nearly 20 years the region outpaced the gains of the national economy.” And the agency forecasts that over the next few years, economic growth in the region will match national growth for the first time in recent memory.

From December 1998 through December 1999, the number of New York State jobs increased by 1.8%, according to the Public Policy Institute. Broken down: New York City’s job count grew by 1.9%, while Long Island and northern New York City suburbs grew by 1.9% and 2.2%, respectively. However, Upstate jobs grew by only 1.6%, with the Buffalo-Niagara, Rochester, and Syracuse regions registering 0.2%, 0.7%, and 2.4% growth, respectively.

How can New York State, especially Upstate, generate additional economic growth that results in higher-paying jobs? A sound strategy is to seize opportunities presented by globalization through exports of goods and services. Since New York State is extremely competitive internationally, it makes sense to promote overseas sales to a greater extent. Since fully 96% of the world’s customers for goods and services live outside the United States, and many domestic industries now are saturated, New Yorkers need to find new customers in order to maintain existing jobs and create new ones.

A Look at the Buffalo-Niagara Metropolitan Area

From 1993 through 1998, the Buffalo-Niagara metropolitan area was well within the top quarter of fastest growing and largest merchandise export metro areas in the country. Not surprisingly, the prosperity of the Buffalo-Niagara area, like other regions in New York State, is closely tied to exports. And the highest employment sectors in the Buffalo-Niagara area in 1999 were also among the state’s top merchandise export industries.

As of June 2000, the electronic industry employed 11,300 workers in the Buffalo-Niagara metro area (defined by the New York State Department of Labor as Erie and Niagara counties). This represented 13% of area manufacturing workers — comprising the area’s largest manufacturing sector. This high-tech industry is also very competitive internationally, and as such, is New York’s fifth largest merchandise export industry. Industrial machinery, transportation equipment, and the food and kindred product sectors also are among the largest manufacturing employers in the Buffalo-Niagara metro area — and not surprisingly are New York State’s top merchandise export sectors. As one can see, the export growth of these Buffalo-Niagara metro area industries is vital to local employment.

Buffalo-Niagara Metro Area

(Industry Rank by Employment: Industry: New York State Merchandise Export Rank)

  • 1st: Electronic: 5
  • 2nd: Fabricated Metals: 10
  • 3rd: Industrial Machinery: 1
  • 4th: Transportation Equipment: 3
  • 5th:  Food & Kindred Products: 7

Source: U.S. Dept. of Commerce

In July 2000, the Buffalo-Niagara metro area’s unemployment rate was 4.9%, higher than New York State’s overall rate of 4.4% and the nation’s rate of 4.2%, according to the New York State Department of Labor. And when it came to personal income, the region lagged well behind the state. From 1997 through 1998, personal income per capita rose by 4.1% in Erie County and 3.1% in Niagara County, but increased 5.2% state-wide, and 5.9% nationally, according to the Bureau of Economic Analysis.

In order to increase employment in large and higher technology manufacturing sectors (which will lead to higher revenues, benefiting local workers and companies, and the tax base) policies need to be implemented to encourage local electronic, industrial machinery, and transportation equipment manufacturers to further increase exports. Importantly, this will help the Buffalo-Niagara metro area catch up and enjoy the levels of growth achieved state-wide and nationally.

A Look at the Rochester Metropolitan Area

In 1998, the Rochester metropolitan area ranked in the top 12% of the largest merchandise export communities in the country, but 146th out of 253 in terms of merchandise export growth during the period of 1993 through 1998. (Note: export growth is likely to be slower for the largest exporting communities since significant additional growth requires exceptionally large increases in exports.)

Like the Buffalo-Niagara region, employment in the Rochester metro area (defined by the New York State Department of Labor as Genesee, Livingston, Monroe, Ontario, Orleans, and Wayne counties) is tied to the state’s largest export sectors. As of June 2000, the Rochester area’s scientific and measuring instruments sector was the area’s largest manufacturing employer, representing 40% of area workers. This was followed by the industrial machinery and electronic sectors. Interestingly, these sectors also produce the state’s top exports. It is clear that the export success of these sectors will have a direct impact on local employment.

Rochester Metro Area

(Industry Rank by Employment: Industry: New York State Merchandise Export Rank)

  • 1st: Instruments: 4
  • 2nd: Industrial Machinery: 1
  • 3rd: Electronic: 5
  • 4th: Rubber & Misc. Plastics: 11
  • 5th: Primary & Fabricated Metals: 2

Source: U.S. Dept. of Commerce

The Rochester region’s unemployment rate was 3.5% in July 2000, lower than the state and national averages, according to the New York State Department of Labor. However, the counties comprising the region all registered lower personal income growth rates on a per capita basis than the state, 5.2%, and the nation, 5.9%, during the period 1997 – 1998. According to the Bureau of Economic Analysis, Genesee County registered a 2.4% increase in personal income growth, Livingston, 2.8%, Monroe, 3.9%, Ontario, 3%, Orleans, 1.5%, and Wayne, 2.6%. Although unemployment is a bright spot, personal income can be improved. Since export-related jobs pay higher wages than the national average, more focus needs to be placed on local companies achieving export success.

A Look at the Syracuse Metropolitan Area

In 1998, the Syracuse metropolitan area ranked in the top 31% of the largest merchandise export communities in the country. Its merchandise export growth rate, however, has been poor, ranking 219th out of 253 U.S. metro areas from 1993 through 1998.

A look at the Syracuse metro area (defined by the New York State Department of Labor to include Cayuga, Madison, Onondaga, and Oswego counties) reveals a similar correlation between the largest employment sectors and top manufacturing export industries as seen in the Buffalo-Niagara and Rochester regions. As of June 2000, the industrial machinery sector was the largest regional manufacturing employer, representing 16% of manufacturing employees. This was followed by the electronic equipment, transportation equipment, and food and kindred products sectors.

Syracuse Metro Area

(Industry Rank by Employment: Industry: New York State Merchandise Export Rank)

  • 1st: Industrial Machinery: 1
  • 2nd: Electronic: 5
  • 3rd: Transportation Equipment: 3
  • 4th: Food and Kindred Products: 7
  • 5th: Primary metals: 2

Source: U.S. Dept. of Commerce

The Syracuse region’s unemployment rate was 3.5% in July 2000, lower than the state and national average, according to the New York State Department of Labor. However, the region’s counties registered per capita personal income growth lower than the state and nation during the period of 1997 – 1998. The county of Cayuga registered 3.3%, Madison, 4%, Onondaga, 4.7%, and Oswego, 2.8%, according to the Bureau of Economic Analysis. Like the Buffalo-Niagara and Rochester areas, to increase personal income for workers, more emphasis should be placed on the international success of local companies.

A Look at the New York City Region

The New York City metropolitan area ranked as the third largest metro merchandise exporter out of 253 U.S. metro areas in 1998. If unavailable local service export data were included, the New York City region likely would rank as the largest U.S. metro area exporter.

The employment composition in the New York City metro area is somewhat different than the rest of the state due to the high concentration of service industries and the international level of competitiveness it maintains. According to the New York State Labor Department, the New York metro area includes the Bronx, Kings, New York (Manhattan), Queens, and Richmond counties.

As of June 2000, the New York metro area’s third (chemicals), fourth (food and kindred products), and fifth (electronic) largest manufacturing employment sectors ranked among the state’s top seven export categories. However, the area’s largest manufacturing employment sector, printing and publishing, represented 30% of area manufacturing workers. This sector was followed by apparel products, which represented 25% of manufacturing workers.

New York City Metro Area

(Industry Rank by Employment: Industry : New York State Merchandise Export Rank)

  • 1st:  Printing and Publishing: 9
  • 2nd:  Apparel: 12
  • 3rd:  Chemicals: 6
  • 4th:  Food and Kindred Products: 7
  • 5th:  Electronic: 5

Source: U.S. Dept. of Commerce

As a center for the nation’s leading book and magazine publishers, as well as the entertainment industry, New York City benefits significantly from royalties and license fees, categorized under service exports, not merchandise. For example, AOL Time Warner’s New York City headquarters employs 12,700 people, ranking sixth among the city’s top employers, according to Crain’s New York Business. The company owns the rights to tens of thousands of movies, television shows, magazines, and books. In 1999, this contributed to U.S. royalties and licensing fees, which accounted for U.S. exports of $36.5 billion and imports of $13.2 billion, according to U.S. International Services: Cross-Border Trade in 1999 and Sales Through Affiliates in 1998.

Expanded to include the New York primary metropolitan statistical area (PMSA), which comprises the metro area plus Putnam, Rockland, and Westchester counties, the export picture looks very similar to the New York City metro area. As of July 2000, the unemployment rate for the New York City metro area was 5.8%. Expanded to include the entire eight-county PMSA, the rate edged down to 5.4%, still higher than the state and national rate, according to the New York State Department of Labor.

In terms of per capita personal income growth, the Bronx registered an increase of 3.4%, Kings, 3.5%, New York, 7.5%, Queens, 5.9%, Richmond, 4.4%, Putnam, 5.8%, Rockland, 7.5%, and Westchester, 5.1%, during the 1997 -1998 period, according to the Bureau of Economic Analysis.

A Look at Long Island

Long Island, which comprises Nassau and Suffolk counties, ranked in the top 12% of the largest metro merchandise exporters, one place after Rochester, New York. In terms of merchandise export growth, Long Island came in at 113th.

In the counties of Nassau and Suffolk, as of June 2000, the electronic sector employed the most manufacturing workers, 15%, followed by printing and publishing, chemicals and allied products, and instruments and related products. Long Island has created an attractive environment for numerous small and mid-size high-tech firms that employ thousands of engineers and scientists. As a result, a shift has occurred from a mixed manufacturing economy to a primarily high-value added services economy.

Long Island

(Industry Rank by Employment: Industry: New York State Merchandise Export Rank)

1st:  Electronic: 5

2nd:  Printing and Publishing: 9

3rd:  Chemicals: 6

4th:  Instruments: 4

5th:  Fabricated Metals: 10

Source: U.S. Dept. of Commerce

As of July 2000, the unemployment rate of Long Island was 3.1%, lower than the state and national rate. And, in terms of per capita personal income growth, Nassau and Suffolk registered increases of 4.3% and 5.2%, respectively, during the 1997 -1998 period, according to the Bureau of Economic Analysis.

A Look at the New York City Service Industry

The Port Authority of New York and New Jersey reported in September 2000 that “the service sector has been the ‘star performer’ in the regional economy. Growth in service jobs has averaged 3.9% in each of the past three years. The sector is responsible for more than 600,000 regional jobs since 1992.”

It is no surprise that the New York City metro area and the expanded New York City PMSA region employ a larger percentage of workers in the service sector than Upstate areas. As of June 2000, the New York City PMSA employed 90% of its nonagricultural workforce in the service sector. This was followed by Long Island, 86%, Syracuse, 81%, Buffalo-Niagara, 80%, and Rochester, 76%.

When it comes to finance, no region in the United States plays a larger role than New York City’s financial district. The sector provides a large number of jobs to New Yorkers — from Long Island to the five boroughs to the northern suburbs. Of the top 25 employers in New York City, 12 are in the financial services sector. This not only significantly contributes to the region’s economic success, it also helped drive the U.S. service trade surplus of which $10.3 billion (exports less imports) is derived from financial service trade, and $16.6 billion (exports less imports) is generated from business, professional, and technical service sectors.

U.S. financial service exports increased 24% from 1998 through 1999, and much of this was produced in the New York City region, indicating that Wall Street exports are up.

New York City Service Industry

(Firm Rank by Employment: Firm: No. of Employees)

  • 1st: Chase Manhattan: 25,743
  • 2nd: Citigroup: 24,610
  • 8th: Morgan, Stanley, Dean Witter & Co.: 11,700
  • 9th: Merill Lynch & Co.: 11,600
  • 13th: Deutsche Bank AG: 9,600
  • 14th: Bank of New York: 9,434
  • 19th: Goldman Sachs & Co.: 7,872
  • 20th: Marsh & McLennan Cos.: 7,000
  • 21st: AXA Financial: 6,431
  • 22nd: J.P. Morgan Co.: 6,279
  • 23rd: Bear Stearns Cos.: 6,087
  • 25th: Prudential Securities: 5,836

Source: Crain’s New York Business, 3/27/00

It is no surprise that the New York City metro area has a higher percentage of its local nonagricultural workforce employed in the finance, insurance and real estate sector than other metro areas covered in this report. In June 2000, the New York City metro area employed 13.3% of its nonagricultural workers in finance, insurance and real estate. This was followed by Long Island, 6.9%; Buffalo-Niagara, 5.5%; Syracuse, 5.2%; and Rochester, 3.8%.

The nation’s “Big Five” management consulting and accounting firms also maintain a major presence in New York City. PricewaterhouseCoopers, Deloitte & Touche, Ernst and Young, KPMG, and Arthur Anderson, for example, employ a combined total of 19,000 people in New York City, according to Crain’s New York Business. This broad export sector also includes industries such as advertising and legal services. As more services are exported, the New York City region will continue to prosper.

This section appeared in the report International Trade Benefits New York, published on behalf of goTRADE New York and the Business Roundtable, 2001.
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New York has seized many of the challenges presented by globalization. However, in order to generate greater economic growth, much more needs to be done.

New York is the third largest merchandise exporting state in the United States. In 1999, New York exported $43.3 billion of goods worldwide — a significant source of economic growth. Based on the U.S. Trade Representative’s calculation of 10,917 jobs supported by $1 billion in merchandise exports (multiplier does not include service exports), this supported 473,000 jobs in New York. And if state service export data were available from the U.S. Department of Commerce and added, total exports would be considerably higher.

Export-related production is the primary source of new jobs in New York State’s manufacturing sector, according to The Public Policy Institute of New York State, Inc., the research affiliate of the Business Council of New York State, Inc. This is very important since New York’s exports support one out of every five manufacturing jobs, according to Export-Related Employment and Wages Estimates for Eight States, 1992 to 1996, a report published by the Indiana University Kelley School of Business.

Plus, on a national basis, the average hourly earnings in manufacturing were $14.38 (August 2000, Bureau of Labor Statistics). To generate more well-paying manufacturing jobs, exports need to become a priority.

New York Exports of Services Are Growing

The services sector is probably more important to the economic health of New York than to any other state in the nation. In 1998, private service-producing industries contributed $533 billion to New York’s gross state product (GSP), according to the Bureau of Economic Analysis’ Survey of Current Business. This accounted for 75% of the total GSP, a larger percentage than any other state. How much of this was exported?

According to testimony by David Catalfamo of the Empire State Development Corporation to the New York State Assembly, based on 1997 data, “A conservative estimate would attribute about 10% of national service exports to New York State.” Applied to 1999, this would translate into an additional $27.2 billion in New York State exports. Based on the U.S. Trade Representative’s calculation of 14,679 jobs sustained by $1 billion in service exports, this supported approximately 400,000 jobs in New York State.

New York State’s “non-merchandise exports of key industry clusters within the service sectors are at least as significant as are merchandise exports,” Catalfamo said. In his testimony he stated that, in 1997, New York exports of financial services were estimated to exceed $8 billion annually, distribution services accounted for $7 billion, and communications and media services accounted for more than $2 billion.

Financial, business, professional, and technical services are each an important element of the United States’ trade service surplus and extremely important to the New York economy. In 1999, U.S. financial services registered $13.9 billion in exports, compared with $3.6 billion in imports, and $24.3 billion in business, professional, and technical service exports, compared with $7.7 in imports, according to the report, U.S. International Services: Cross-Border Trade in 1999 and Sales Through Affiliates in 1998.

Service exports are anticipated to become a much larger generator of state economic growth — especially in the New York City region, the financial capital of the world. Trade agreements that open foreign service and financial markets will generate greater New York State employment and produce more revenue, laying the foundation for a stronger tax base.

This section appeared in the report International Trade Benefits New York, published on behalf of goTRADE New York and the Business Roundtable, 2001.
Topic: U.S.
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U.S. Service export opportunities are booming. In fact, since 1980, U.S. exports of services have grown 130% faster than exports of goods. As a result, every year for almost three decades, the U.S. service sector has enjoyed a trade surplus that has consistently reduced the U.S. deficit.

The U.S. Dominates Trade in World Services

In 1999, the United States captured a world marketshare of service exports and imports of 18.8% and 13.4%, respectively. The next largest share was held by the United Kingdom, with 7.5% and 9.9%, respectively — considerably less than the United States.

According to the U.S. Commerce Department, strength in business services, which includes software development, data processing, communications, and multimedia services has been identified with the “new economy,” and has contributed to rapid growth in many U.S. states. The U.S. service-producing sector has grown so large it now accounts for 80.5% of U.S. nonfarm employment, according to the U.S. Department of Labor.

There is no doubt that the benefits currently derived from services and the huge potential offered by the service sector in terms of economic growth, personal income, employment, and exports are tremendous. And, as the sector continues to grow, companies will increasingly develop new and innovative ways to sell services abroad.

Trade Services Broken Down

Trade in services is conducted through two principal channels: cross-border trade (which entails sending individuals, information, or money across national borders) and U.S.-owned affiliate transactions (entailing U.S.-owned companies located abroad selling services abroad).

Cross-Border Trade

According to Recent Trends in U.S. Services Trade published by the U.S. International Trade Commission, a large share of cross-border trade in 1998 was the exports of intangible intellectual property (reported as royalties and license fees). This was followed by business, professional, and technical services; maritime and air freight transportation services; and passenger fares.

U.S.-Owned Affiliate Transactions

Since the sale of some services requires the service provider to be close to the customer or to sidestep foreign country trade barriers, the best way to sell the service is through a U.S.-owned affiliate abroad. For example, U.S.-owned employment agencies operating in Europe interview hundreds of European candidates each day for local jobs. Thus, this service could not be delivered without daily face-to-face meetings.

In 1997, sales by U.S.-owned insurance affiliates in foreign markets accounted for the largest share of total U.S.-owned affiliate transactions. Following were computer and data processing; wholesale; financial services; transportation; communication; architectural, engineering, and surveying services; accounting, research, and management services; and motion pictures.

U.S. Service Exports to Accelerate

The U.S. service sector is extremely advanced and internationally competitive. And, with the recent introduction and availability of new and inexpensive technology — led by telecommunications, computers, and the internet — millions of people and companies worldwide are obtaining the ability to purchase services from the United States.

As a result, it is anticipated that the export of business, professional and technical services (accounting, advertising, engineering, franchising, consulting, public relations, testing and training) will increase rapidly.

This article appeared in January 2001. (CB)
Topic: U.S.
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The United States plays a major role in international trade. In fact, it’s the largest world exporter and importer. And for many nations, it’s both the largest supplier and buyer.

In 1998, Canada, Japan, and Mexico were the United States’ largest export destinations, as well as suppliers of merchandise. Combining both exports and imports, Canada was the United States’ largest merchandise trading partner, with $330 billion changing hands.

Second place went to Japan at $180 billion, followed by Mexico at $173 billion. United States trade with China, including Hong Kong, totaled $109 billion, and with Germany, $76 billion.

Export Product Leaders

In 1998, machinery and computers (Harmonized System two-digit category 84) ranked as the number-one United States export category, accounting for $136 billion. Second in line was electronic equipment (HS 85), valued at $108 billion.

In third place at $59 billion came motor vehicles (HS 87), with air and spacecraft taking the fourth slot (HS 88) at $52 billion. The number-five category (HS 90), which covers optical, photo, and medical equipment, generated $36 billion in U.S. exports worldwide.

Export Destinations

The United States shipped $157 billion in exports to Canada and $79 billion to Mexico. Japan was in third place at $58 billion, followed by the United Kingdom with $39 billion. China, including Hong Kong, was the destination for $27 billion in American exports.

Canada and Mexico took the top two spots in buying American machinery and computers, followed by the United Kingdom. America’s next-door neighbors also led in electronic equipment, with Japan taking third place. The same order prevailed for motor vehicles.

The United Kingdom took the largest share of America’s air and spacecraft exports, edging out Japan and Saudi Arabia. Japan was the largest importer of American optical, photo, and medical equipment, ahead of Canada and Germany.

Fastest-Paced Destinations

Not unexpectedly, the two largest destinations for United States exports in 1998 accounted for the highest percentage increases since 1991.

U.S. exports to Mexico increased by 136 percent and to Canada by 84 percent. In third place was China/Hong Kong at almost 89 percent, followed by the United Kingdom at 77 percent.

The United States as Customer

America’s largest international supplier in 1998 was Canada, accounting for $173 billion in United States imports.

Japan placed second with $122 billion. Occupying the third rank was Mexico at $95 billion. Following was China, including Hong Kong, at $82 billion, and Germany, accounting for $50 billion.

The leading import product was machinery and computers valued at $154 billion, with Japan leading the pack, followed by Canada and Singapore. The electronic equipment category, worth $127 billion, came in second, paced by Mexico ahead of Japan and China.

Vehicles placed third, accounting for $124 billion, with Canada leading, and Japan and Mexico in the next two spots. The category including petroleum fuels was the fourth-leading import sector, at $58 billion, headed by Canada, Venezuela, Saudi Arabia, and Mexico.

Rounding out the top five was optical, photo and medical equipment, accounting for $28 billion in imports, as Japan led the list, with Mexico, Germany, and China as runners-up.

Import Pacesetters

America’s fastest-growing supplier in 1998 was Mexico, registering an increase of more than 200 percent since 1991, followed by China/Hong Kong at nearly 190 percent, Germany at 91 percent, Canada at 90 percent, and the United Kingdom at 89 percent.

This article appeared in March 2000. (BA)
Topic: U.S.
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A comparative analysis reveals that the leading U.S. exporting states tend to export the same types of products to the same foreign markets.

For example, California and Texas, the two largest exporting states, both rank electrical products and industrial machinery as their top two exports, and they both sell these products to Canada, Japan, Mexico and the United Kingdom.

What Products Are the Top Exporting States Selling Abroad?

In 1997, the eight leading U.S. exporting states were California, Texas, New York, Michigan, Illinois, Washington, Ohio and Florida. Companies located in these states sold slightly more than half of all U.S. exports.

Not surprisingly, industrial machinery, computers, electrical products, transportation equipment, and chemical products ranked among each state’s top seven exports.

In addition, scientific and measuring instruments, food products, refined petroleum, primary metals, fabricated metal products, agricultural goods, and livestock were often found at the top of the list of several leading exporting states.

What Foreign Markets Are Targeted?

All eight leading exporting states reported Japan, Canada and the United Kingdom to be among their 10 best export destinations. Six of the eight states also included Mexico and Germany in this list.

Florida was the only state whose top eight export destinations were in Latin America.

Exporters Will Benefit from Asian Economic Recovery

Based on first quarter 1998 statistics of the eight top exporting states, California was the largest exporter to the Asian 10. The Asian 10 consists of: China, Hong Kong, Indonesia, Japan, Malaysia, the Philippines, Singapore, South Korea, Taiwan, and Thailand.

Washington ranked second, followed by New York, Texas, Illinois, Ohio, Michigan, and Florida, respectively. As Asia recovers from its financial crisis, exporters in these states stand to benefit a great deal.

Consider the Performance of Other States

Smaller exporting states share many similarities with the leading exporting states. For example, North Carolina, the 14th largest exporter, also lists Canada, Mexico, Japan, the United Kingdom, and Germany as its five best performing markets.

Additionally, North Carolina’s four largest exports include electric and electrical products, transportation equipment, industrial machinery, and chemical products.

But unlike the top performers, North Carolina is a major producer and exporter of textile mill products, and rubber and plastic products.

What Does This Mean for Your Business?

Depending on your company’s level of global competitiveness, it could mean a great deal. For example, if you’re willing to go head-to-head with the most competitive U.S. exporters, you may choose to follow the leading exporting states and target the same foreign markets.

On the other hand, if you’re not willing to do this, you may consider pursuing smaller, less popular foreign markets that may not be attractive to larger exporters, but just right for you.

As industries become more export savvy, the domestic demand for components — for use in products for export — will continue to increase. Thus, if you’re a small manufacturer without international experience, you might choose a third course: selling components to exporters in larger exporting states.

Information Is Key to Choosing a Strategy that Works for You

Depending on which strategy you choose — following the lead of successful exporting states, targeting smaller foreign markets or pursuing the domestic component market — you need to know the states and industries which are the most export active.

This article appeared in April 1999. (BA)
Topic: U.S.
Comment (0) Hits: 2190



Most politicians, scholars and business people agree that exports are good for the United States and participating companies. But just how good has been difficult to determine. And the impact on U.S. workers has been questionable for some time.

Over the past few years, however, more data has been collected and analyzed. And the quantifiable results are very positive.

The Benefits Are Vast

It stands to reason that selling your products in more markets, located throughout the world, will not only raise your corporate sales figures, but spread the risk, should a particular country or region experience a period of slow or negative economic growth. But that’s not all.

According to the report, Why Exports Matter: More!, published by the Institute for International Economics and The Manufacturing Institute, “in U.S. plants that export, worker productivity is higher, jobs are compensated better and technologies are adopted more aggressively than among non-exporters.”

Exporting Plants Perform Better

The report contends that since the late 1980s, plants and firms that have sustained an export commitment, or that have initiated exports, experienced almost 20% faster employment growth than those that never exported or stopped exporting. Additionally, these plants and firms were 9% less likely to go out of business in an average year.

During the period of 1987 through 1992 (latest available statistics), employment at a typical plant fell 2.5%, while employment at exporting plants grew approximately 18%, indicating better corporate performance. In fact, the report states communities that hosted exporters benefited from a stable, growing high-performance workforce and tax base.

How Much More Do Workers Earn?

According to the Office of the Chief Economist at the Department of Commerce, workers in jobs supported directly by exports earn 20% more than the average national wage. Workers in high-technology jobs supported directly by exports receive 34% more. And workers in jobs supported both directly and indirectly by exports are paid 13% more.

This article appeared in October 1998. (NB)
Topic: U.S.
Comment (0) Hits: 1937



To the benefit of Western New York, Congress recently decided to grant China Most Favored Nation (MFN) trade status for another year. But this year the stakes are higher.

In 1996, New York State ranked 41 out of 50 states in private-sector job growth. Even as New York's manufacturing sector has declined, exports sustained approximately 650,000 jobs in 1997. And compared to other U.S. states, New York ranked as the third largest merchandise exporter to the world, with shipments of approximately $50 billion.

According to a report published by the Business Council of New York State, Inc., export-related production is the primary source of new jobs in New York's manufacturing sector. The report also indicates that merchandise exports from New York have grown more than twice as fast as the state's economy since 1994, clearly indicating a strength that needs to be nurtured.

Exports also are essential to our country's prosperity. During the past decade, U.S. exports of goods and services accounted for one-third of U.S. economic growth. In 1997, exports reached $930 billion, rising 74 percent since the decade's beginning. According to the U.S. Trade Representative Office of Economic Affairs, U.S. exports of goods and services supported approximately 12 million jobs in 1997. And many of these jobs are in high-tech sectors.

The Office of the Chief Economist, Department of Commerce, estimates that high-technology industry jobs supported directly by exports pay 34 percent more than the average national wage; jobs supported directly by exports pay 20 percent more; and workers in jobs supported both directly and indirectly by exports are paid 13 percent more.

Furthermore, companies that export expand their employment base approximately 20 percent faster than others, and are 10 percent less likely to fail. Thus, exports are very important to the prosperity of New York companies and workers.

As the relationship between exports and our national and local economies becomes more entwined, China becomes a more important export destination. In 1997, the United States exported $13 billion in exports to China. This sustained approximately 170,000 American jobs. In relation to other states, New York was the fourth largest exporter to China, shipping $776 million there. And New York's primary exports to China are high-technology products — manufactured by highly-paid skilled workers.

But that's not all. The six largest New York State export industries, responsible for 84 percent of all manufactured goods shipped to China, also employ roughly half of all manufacturing workers in New York State. These goods include industrial machinery and computers, food products, transportation equipment, electric and electronic equipment, chemical products, and scientific and measuring instruments. Consequently, the Chinese market has become very important to the welfare of state and local workers.

This year, the Asian financial crisis has elevated China's importance to the United States. According to Federal Reserve Chairman Alan Greenspan, “With the crisis curtailing the financing available in foreign currencies, many Asian economies have no choice but to cut back their imports sharply. Disruptions to their financial systems and economies more generally will further dampen demands for our exports of goods and services."

Certain U.S. regions that are more dependent on exports to East Asia will be affected to a greater extent than less dependent regions. Western states are expected to be affected the most; Northeastern states are anticipated to be affected the least. Nevertheless, New York is not out of the woods.

In 1997, approximately 25 percent of New York's exports were destined for the "Asian 10," which is comprised of China, Hong Kong, Indonesia, Japan, Malaysia, Philippines, Singapore, South Korea, Taiwan, and Thailand. Most of these countries have been severely impacted by the crisis. And primarily for other reasons, Japan is undergoing one of its worst economic slumps in recent history.

China, however, has emerged relatively unscathed by the Asian financial crisis. Its economy, currently the world's third largest, is still anticipated to continue growing at one of the fastest rates in the world to become the world's largest early in the 21st century. As New York exports to other East Asian countries drop as a result of the Asian crisis, more exports could be redirected to China, home to 1.2 billion consumers with fast-growing incomes.

Now, U.S.-Chinese relations are even more important as a result of heightened tensions between Pakistan and India. As those two countries attempt to flex their military muscle and display their new nuclear capabilities, China and the U.S. need to cooperate as never before in order to check the increasing probability of a military miscalculation.

How does MFN trading status impact U.S.-China trade and relations? Despite its name, MFN is granted to 220 of our 228 trading partners. When a foreign country has this status, its goods enter the United States at a normal duty rate. If not, its goods are assessed duty rates exceeding 50 percent, making them noncompetitive here. Denial of MFN for China would result in the United States imposing such high tariffs on Chinese products that their access to our market would virtually cease. Those who believe our global trade deficit would decrease are mistaken. The import gap would quickly be filled by other Asian suppliers.

In response, the Chinese would retaliate and severely restrict or totally eliminate our access to their market. This greatly would hurt New York companies and workers. Additionally, denying China MFN trade status would inevitably lead to deteriorated U.S.-Chinese relations, fostering an environment of alienation and suspicion. Any U.S.-Chinese cooperation for the purpose of reducing Chinese trade barriers on U.S. goods and services, eliminating tension between Pakistan and India, or maintaining stability of China's currency — which is under competitive pressure to devalue as a result of fallen currencies in other East Asian countries — would be highly unlikely.

If MFN is not granted, our access to the Chinese market would undoubtedly come to an end. On the other hand, granting China MFN trade status will give U.S. and New York State companies secure access to that tremendous market. The United States, which accounts for only 4% of the world’s population, needs to sell to the other 96%. Passing MFN legislation will help us to achieve this. And although trade is not a panacea, it is one of the best tools we have to influence foreign government policies with which we don't always agree.

This article appeared in The Buffalo News, August 1998.
Topic: U.S.
Comment (0) Hits: 4855



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