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The Gems in the Expanding U.S. Export Market22 Mar 07Robust export growth at U.S. ports has been beneficial to their local economies, but their expansion hinges on a strong transportation infrastructure. At a time when the downturn in the housing market has put a damper on the United States' economic momentum, strong growth in U.S. exports has helped to fill the hole that residential investment has dug. But increasing trade volumes have also strained some of the nation's larger ports, and this congestion has induced the development of new coastal and inland ports farther away from densely populated metro areas, and has placed more importance on inland network connections such as rail and truck. Indeed, a large volume of trade can lead to bottlenecks like the one that occurred at the ports of Los Angeles and Long Beach in 2004, when ships were sitting idle, waiting for crews to offload cargo. The small but fast-growing export markets—in places like Jacksonville and Savannah—have been a boon to both the national and the local economies, where they employ thousands of workers in the transportation sector. The growth of regional economies is not only spurred by the activity that occurs within its area, but also by engagement in business with other regions and trade with foreign countries. Transportation is the "gateway" to this activity—allowing goods to flow and people to conduct business. The export market is supported by five transportation sectors: air, pipeline, rail, truck, and water, and U.S. metro areas contribute at least 81% of total national employment in each of those five modes. Thus, transportation employment is an important component of metro area payrolls, and growth in new export markets swells these rolls even further.
With U.S. economic output (GDP) poised to decelerate this year, growth in exports will be an even more important factor in the national economy. In 2006, real exports increased almost 9%, while GDP grew by less than half that rate. Studies have concluded that long-run movements in exports positively influence GDP; the chart below illustrates the correlation between these two indicators. Last year, real exports as a share of GDP increased by 0.6 percentage point—the largest annual gain this decade. Meanwhile, residential investment's share declined for the first time this decade (by 0.4 percentage point), a trend we also expect to continue into next year.
So which metro areas are the gems in the U.S. export market? Jacksonville floats to the top of the list, followed by Philadelphia. This reflects the shift in shipping traffic from West Coast to East Coast ports. The table below demonstrates this shift. These smaller ports still have a ways to go before catching up to the largest U.S. ports (in terms of value)—of the fastest-growing ports, only Houston ranks among the top 10.
When trade volumes increase beyond the capacity of the larger ports, trade is diverted to the smaller ports, thus benefiting the smaller export markets. While this is a positive for smaller ports, it reinforces the fact that the larger ports need to anticipate infrastructure and labor-supply needs. In fact, while the share of exports as a percentage of U.S. GDP has increased since 2004, government spending on infrastructure declined in both 2004 and 2005. The continued expansion of all U.S. export markets hinges on a strong transportation infrastructure. by Sophie Parker
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