GLOBAL CONNECT. A Global Trade and Investment Strategy for the Columbus Region. Part I: Metropolitan Export Initiative

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1 GLOBAL CONNECT A Global Trade and Investment Strategy for the Columbus Region Part I: Metropolitan Export Initiative

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3 GLOBAL CONNECT A Global Trade and Investment Strategy for the Columbus Region Part I: Metropolitan Export Initiative COLUMBUS GLOBAL The Global Trade and Investment Strategy is a series of initiatives that focus on a complete global strategy, including exports and foreign direct investment for the Columbus Region. CONNECT: METROPOLITAN EXPORT INITIATIVE 1

4 COLUMBUS GLOBAL CONNECT Ametropolitan region s ability to compete globally by leveraging the international relationships of its private sector enterprises, academic institutions, and state and local governments is more important than ever before. Eighty three percent of global economic growth is expected to occur outside the U.S. from 2013 to 2018, and 75 percent of the world s purchasing power is outside the U.S. The Brookings Global Cities Exchange (GCX) consists of 20 metro areas and is supported by JPMorgan Chase. The collaborative effort aims to develop customized action strategies for metropolitan areas to accelerate exports, increase trade and increase investment in their cities and suburbs. Through a collaborative effort led by the Brookings Institution with support from the U.S. Department of Commerce, the Columbus Region has developed a plan to accelerate the growth of both products and services exported from the 11-county Region and to attract foreign investment from abroad. 2

5 THE COLUMBUS METROPOLITAN EXPORT INITIATIVE The Columbus Region is part of a select group of U.S. metro areas participating in the development of a metropolitan export initiative with Brookings. For every $1 billion in exports, 4000 jobs are created and exporting companies also pay higher wages. Therefore, it is critically important that the Columbus Region expand its strategy to include a focus on exports. The initiative to increase exports is designed to become an integral part of the Columbus Region s existing regional growth strategy, Columbus The four main goals outlined in the Columbus 2020 regional growth strategy were developed by a coalition of private and public sector leaders in 2010, with each goal to be achieved by the year The tactics required to acheive these goals will be greatly enhanced through Columbus Global Connect, and specifically the Metropolitan Export Initiative, as described below. GOAL I: ADD 150,000 NET NEW JOBS HOW EXPORTS SUPPORT THIS GOAL: Growing exports will grow jobs Jobs supported by export activity accounted for 70 percent of the net job growth in the Columbus Region from 2003 to With increasing globalization and the potential for reshoring manufacturing and services, an increase in exports will support job growth and be vital to reaching this goal. GOAL II: INCREASE PER CAPITA INCOME BY 30 PERCENT HOW EXPORTS SUPPORT THIS GOAL: Growing exports will grow high-paying jobs Economic base industry jobs 1 targeted by Columbus 2020, JobsOhio and others have an average wage of $62,599, 51 percent higher than the overall regional average of $41,376 (EMSI 2012). Export-oriented jobs wages are even higher at $69,722, 69 percent higher than the Columbus Region average. GOAL III: ATTRACT $8 BILLION IN CAPITAL INVESTMENT HOW EXPORTS SUPPORT THIS GOAL: Growing exports will attract investment by both foreign and domestic firms, and vice versa There is an important connection between exports and foreign direct investment. According to SelectUSA, 20.5 percent of all U.S. exports in 2011 came from U.S. subsidiaries of foreign firms. Six of the 10 foreign countries whose companies have the most firms in the Columbus Region are also among the Regions top 10 export markets: Canada, France, Germany, Japan, Netherlands and the United Kingdom. Futhermore, added demand from the domestic firms in the Columbus Region will likely spur the need for additional capacity. GOAL IV: BE RECOGNIZED AS A NATIONAL LEADER IN ECONOMIC DEVELOPMENT HOW EXPORTS SUPPORT THIS GOAL: Helping companies grow into international markets is a unique practice that will strengthen the Columbus 2020 regional growth strategy Integrating the export initiative with traditional regional growth strategy efforts will provide a platform that will allow the Columbus Region to increase engagement with internationallyfocused companies and civic organizations focused on global affairs. COLUMBUS GLOBAL CONNECT: METROPOLITAN EXPORT 1 Economic base industries export goods or services out of the region and thereby bring in wealth from outside. As an example, a headquarters operation or manufacturing facility generates wealth for the local economy by serving businesses or consumers in external markets, as opposed to a local grocery store that primarily sells goods to its local market. INITIATIVE 3

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7 Four key activities were identified to achieve these goals and will also form the basis for action of Columbus Global Connect: Increase outreach to existing businesses in an effort to gather business intelligence and help companies to connect and strengthen their competitiveness. Attract new economic base businesses by educating business leaders, location advisors and industry thought leaders. Accelerate high-growth enterprises by connecting them with customers, financial resources and the broader business community. Continuously improve civic infrastructure and the business environment through regional collaboration and dialogue. COLUMBUS GLOBAL CONNECT: METROPOLITAN EXPORT INITIATIVE 5

8 MARKET ASSESSMENT A 6 detailed market assessment was done for the 11-county Columbus Region to get a clear picture of the Region s current export performance and assets, including export output, understanding of barriers and opportunities for private sector companies, and the current state of services offered by federal, state and local programs.

9 Through a series of surveys and meetings with companies that currently export, companies likely to export in the near future, and companies that service the export industry, it is clear that the Columbus Region is performing below its potential and below peer economic regions. There are opportunities for the economic development community to assist in improving these conditions. KEY FINDING The Columbus Region s export economy is performing well below similarly sized communities and the U.S. average, suggesting that the Region has potential for significant growth. Columbus export share of output was nearly 10 percent in 2012, where other metros have seen export value as a much larger percentage. EXPORT VALUE AS SHARE OF OUTPUT, PEER METRO AREAS, % 20.0% 15.0% 10.0% 20.8% 18.9% 16.9% 15.0% U.S. Average: 13.2% 14.7% 14.4% 14.4% 12.8% 10.8% 10.2% 5.0% 0.0% Detroit Toledo Indianapolis Louisville Cincinnati Akron Cleveland Dayton Pittsburgh Columbus COLUMBUS GLOBAL CONNECT: METROPOLITAN EXPORT INITIATIVE 7

10 KEY FINDING Both goods and services are important parts of growing the export economy in the Columbus Region. Goods represent more than two-thirds (69 percent) of export value. However, the value of exported services has increased in greater proportion. From 2003 to 2012, there was a 59 percent increase in exported services, compared to a 43 percent increase in exported goods. COLUMBUS REGION EXPORT VALUE ($ MILLION, 2012 DOLLARS), ,000 12,000 10,000 3,632 8,000 6,000 4,000 2,277 5,533 7,929 Services Goods 2, As illustrated in the chart below, the regional export economy is driven by a mix of exported goods and services. COLUMBUS REGION VALUE OF EXPORTS ($ MILLION, 2012 DOLLARS) BY INDUSTRY, Major Industry 2012 Chg Transportation Equipment 2, % Machinery 1, % Chemicals % Travel & Tourism % Royalties % Financial Services % Electrical Equipment % Food Products % Freight & Port Services % Primary Metal % 8

11 KEY FINDING Increasing exported goods and services produced in the Columbus Region creates good jobs. Wages for export-oriented economic base industry jobs in the Columbus Region are 69 percent higher than the regional average. Source: EMSI 2012 COLUMBUS REGION WAGES $80,000 $70,000 $60,000 $62,599 $69,722 $50,000 $40,000 $41,376 $30,000 $20,000 $10,000 $ 0 Columbus Region Average Economic Base Export-oriented Base COLUMBUS GLOBAL CONNECT: METROPOLITAN EXPORT INITIATIVE 9

12 KEY FINDING Many companies with high potential to export are either accidental exporters or have not tried to export their services or products. The data suggests that many companies are entering international markets, suggesting that market conditions are ripe for growth. However, companies are entering few markets or only those similar to the U.S., and are doing so passively through customer requests. Due to fragmented and perhaps under-resourced assistance from federal, state, or private sector programming, and lack of company awareness or intent related to overall global opportunities, many companies with high potential to export have not tried to export their services or products. Many others are accidental exporters that have not sought to secure global customers beyond those that have reached out to them. The following charts reflect responses from companies asked about their export experiences. 10

13 RESPONDENTS REASONS FOR EXPORTING TO SELECTED COUNTRIES OR MARKETS Buyer reached out to us 34 Distributors in countries 25 Previous experience/relationships 24 Supply to a subsidiary or parent 18 Established partnership with company in country 12 Similar business environment to U.S. 11 Stable political/economic environment Proximity to U.S. 8 8 English language market Currency exchange rates 5 5 Results from the market assessment indicated that 41 percent of current exporters had not used export assistance. However, among companies that had used export assistance, ratings of services from government agencies, nonprofit organizations and the private sector were generally positive, averaging between good and very good. This data highlights the need for greater outreach and awareness of the availability and ease of use of export-related services. PERCENTAGE OF RESPONDENTS THAT HAVE USED EXPORT ASSISTANCE RESPONDENTS RATINGS OF EXPORT-RELATED ASSISTANCE SERVICES No 41% Yes 59% State government agency Federal government agency Nonprofit association or organization Private Sector Excellent Very Good Good Poor Survey respondents noted three major areas of assistance desired to improve export activity: 1. High-level activities such as trade shows, missions, export promotion and more free trade deals. 2. Streamlined procedures, especially for entering a foreign market. 3. Business mentorships and training. COLUMBUS GLOBAL CONNECT: METROPOLITAN EXPORT INITIATIVE 11

14 PLAN OF ACTION T he Columbus Region has tremendous opportunity to improve its export position among major metropolitan areas. This is evidenced by below average standings in both export value and intensity. By achieving the objectives that follow, the Columbus Region will generate growth and increase its capacity to compete globally. 12

15 OBJECTIVES Become one of the top 25 metropolitan areas in export value by Generate 50 referrals annually to introduce current exporters and ready-to-export companies to export-related services. STRATEGIES The following strategies were identified and developed based on the key findings that were surfaced in the market assessment. The tactics required to execute each strategy will help achieve both export objectives and the Columbus 2020 regional growth strategy. 1 Commit to strong execution by fully integrating the planning, outreach to local companies and advocacy for programs and policies of the Columbus Global Connect initiative with traditional business attraction and retention efforts. A key insight gained from the market assessment is that a successful regional export effort will require a commitment to integrating international programs into traditional economic development activities. Few regions around the country have export initiatives fully integrated into business retention and expansion (BRE) activities. Most initiatives are either controlled or executed at the federal or state level with little depth on the local level, or they are siloed within a local World Trade Center or similar organization. They are not focused on the entire well-being of a company nor have the entire picture that BRE activity provides. This type of outreach by federal and state agencies is severely limited due to lack of dedicated resources. By integrating this outreach into the existing Columbus 2020 regional BRE strategy, which touches nearly 500 companies a year, more opportunities to assist companies with exporting will be uncovered. Integrating Columbus Global Connect into the existing BRE program will yield a greater understanding of the needs of exporters, which results in better service for continued business growth. Required activities: a. Develop an advisory steering committee to increase the visibility and accountability of the Global Cities Exchange. b. Through BRE efforts, identify companies likely to export and current exporters, better understand their needs, and connect them to appropriate resources that will accelerate their development. c. Introduce federal, state, local and private sector resources to local economic development officials and provide tools to help them direct exporters to existing service offerings. d. Support the expansion of The Ohio State University s Fisher College of Business Export Internship Program to provide workforce resources to qualifying companies seeking to increase exports. COLUMBUS GLOBAL CONNECT: METROPOLITAN EXPORT INITIATIVE 13

16 2 Build awareness of global market opportunities and existing international relationships As many exporters are only focused on one or two markets, revealing additional global opportunities is one way to increase growth. Whether that exposure is through local speakers, mentors, trade shows, business missions or media coverage, increased awareness is important. Required activities: a. Work with public and private allies to develop an ongoing discussion about the realities of doing business in particular countries and regions. b. Engage successful exporters to act as mentors to entrepreneurs and high-growth companies in order to raise their awareness of international opportunities. c. Promote trade show and business missions being executed by local, state and federal partners to identify better connections and opportunities abroad. d. Develop a media relations strategy to increase the awareness of successful exporters and their direct impact on the regional economy. 3 Attract exporting companies to the Columbus Region through business attraction activities Attracting exporting companies to the Columbus Region is crucial. As noted in the market assessment, exporting companies and foreign-owned firms pay competitive wages and help achieve the Columbus 2020 s regional goals. Required activities: a. Develop a clear value proposition targeted to companies not presently operating in or exporting from the Columbus Region. For example, the Columbus Region boasts outstanding access to worldwide markets due to its infrastructure that includes an air cargo dedicated airport with direct service abroad and an inland port with direct rail service to East Coast ports. b. Expand Columbus 2020 s international outreach to include the development of key trade relationships with Europe, East Asia, Canada and Mexico. 4 Elevate policy and remove barriers to success for exporting companies In the market assessment, exporting companies indicated that barriers to success include complex procedures, insufficient free trade agreements and too many restrictions on exports. In order to best overcome such barriers, an policy memorandum through the advisory steering committee must be developed annually, detailing key areas of policy that impact the growth of local companies in international markets. Required activities: a. Convene stakeholders including congressional representatives, business leaders, exporters, service providers and government agencies to formulate a policy agenda. b. Develop an annual policy memorandum through the advisory steering committee that details key areas of policy that impact growth of local companies in international markets. c. Utilize information gathered in BRE interviews to uncover common areas of concern. 14

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18 PARTNERS AND RESOURCES T he implementation of Columbus Global Connect will be led by Columbus 2020 with engagement from the following groups: The local office of the United States Export Assistance Center (USEAC) Export-Import Bank of the United States U.S. Small Business Administration Ohio Development Services Agency Export Assistance Section Ohio Small Business Development Center and International Trade Assistance Center Ohio colleges and universities Columbus Region economic development organizations Franklin County The City of Columbus Private sector organizations 16

19 Globalization presents tremendous business opportunity in Columbus. When we export products and services made in Columbus to countries around the globe, we create good jobs and investment in our community. Mayor Michael B. Coleman City of Columbus Achieving net exporter status is a natural result of our commitment and investment in the U.S. and North America. The achievement of this tremendous milestone is a result of the efforts of the tens of thousands of associates in America who develop and produce our vehicles and those who manage the export of these products to customers in global markets. Tetsuo Iwamura President and CEO Honda North America As the Chair of the International Economic Development Task Force for all of the nation s counties, I have become keenly aware that we must increase U.S. exports to sustain the recovery. Here in Central Ohio, we have seen a substantial export increase in certain sectors. The strategic focus of the Metropolitan Export Initiative affords us a clear plan and opportunity to build on that momentum, and significantly increase Central Ohio exports and the good jobs that can follow from that. Paula Brooks Franklin County Commissioner COLUMBUS GLOBAL CONNECT: METROPOLITAN EXPORT INITIATIVE 17

20 GLOBAL CONNECT A Global Trade and Investment Strategy for the Columbus Region Part I: Metropolitan Export Initiative Columbus 2020 thanks the Metropolitan Policy Program at Brookings and the Brookings Rockefeller Project on State and Metropolitan Innovation for informing this work. From these initiatives, Brad McDearman and Amy Liu helped guide our planning as we followed their insightful and practical Ten Steps to Delivering a Successful Metro Export Plan columbusregion.com Columbus 2020 also thanks the leadership from the four pilot metros and seven cohort metros, as well as the International Trade Administration, Census Bureau and Economic Development Administration who convened in support of the Metropolitan Export Initiative. The MEI, organized and guided by the leadership of Brookings, was instrumental in developing our plan as Brookings provided additional research and best practices for trade development.