EDA Office of Foreign Trade • Riverside County, California • USA
August 2012
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EXPORT
12
By Jock O’Connell
G
lobal Trade magazine recently
ranked America’s Top 50 Cities for Global
Trade. The Riverside metropolitan area
reportedly came in 38th with $6.2 billion
in exports, just behind San Antonio, Texas
and just ahead of Louisville. Kentucky.
That’s clearly a proud accomplishment.
But at Beacon Economics, we’re
sticklers for statistical accuracy, and
we believe the magazine’s rankings
not only misstate but also significantly
understate the region’s participation
in the nation’s foreign trade.
For one thing, the Global Trade figures
are a bit moldy. They are, in fact, 2010
numbers that were published by the
U.S. International Trade Administration
(
USITA) several months ago. While
metropolitan area merchandise export
data are not yet available for 2011, it is
worth noting that California’s export
trade grew by 11.2 percent from 2010
to 2011 and by nearly another
six
percent
since the start of the year.
Undoubtedly, a portion of this growth
can be attributed to Southern California.
Notice that we added the modifier
“
merchandise” in the preceding
paragraph? That’s because the USITA
export statistics used by the editors at
Global Trade refer only the shipment
of tangible goods. That hardly tells the
full story of how an advanced economy
participates in world trade, because the
Global Trade rankings completely ignore
the region’s vibrant service export trade.
Service exports include the work that
architects, engineers, lawyers, business
management consultants, financiers,
and insurers do for overseas clients. They
also cover the fees and royalties earned
by the entertainment industry and, to an
ever-increasing extent, the sale via the
Internet of computer software. Even the
local expenditures of foreign tourists and
business travelers as well as the tuition
paid by foreign students enrolled in
U.S. universities are considered service
exports because they entail a transfer
of foreign capital to our economy.
Collectively, service exports earned the
U.S. just over $600 billion in 2011. But
calculating the value of service exports
by each individual state or metropolitan
area is methodologically daunting and
has been eschewed by trade economists.
Recently, though, analysts at the
Brookings Institution in Washington,
D.C. took a crack at determining the
value of service exports by the nation’s
100
largest metropolitan areas. And
for the Riverside area, Brookings
found that the region’s service exports
amounted to $4.0 billion in 2010.
Brookings also calculated the value of
the region’s merchandise export trade
that same year to be $6.9 billion.
Interestingly, this is $700 million
more than the USITA figure cited
by Global Trade for 2010.
Why the difference? The answer is
that Brookings and USITA use very
different methodologies to assign
exports to a point-of-origin.
USITA allocates exports according to the
zip code of the exporter. Yet an exporter
is frequently an intermediary who is
uninvolved in the physical production
of the goods being shipped abroad.
Not surprisingly, USITA often attributes
exports to office buildings that may be
a considerable distance from where
the goods were actually manufactured,
farmed, or otherwise produced.
Brookings justifiably objected that this
practice could easily yield misleading
results about where the economic
benefits of exporting fell. So Brookings›
analysts devised their own (but, in
Beacon Economic’s view, equally
dubious) way of apportioning exports
to specific metropolitan areas.
Beacon Economics is currently refining
a new model for gauging the export
performance of California’s major
metropolitan areas. Among our
preliminary conclusions is that both
the Brookings and USITA numbers
are too low. Indeed, we believe the
Inland Empire counties more likely
generated a merchandise export trade
valued at over $7.5 billion in 2010.
Global Trade Rankings
Need Higher Dose of
Statistical Accuracy
Jock O’Connell is International Trade
Advisor at Beacon Economics, LLC. Find
out more at
