States Agree on Exports

Column first appeared on The Huffington Post

In a nation divided between red and blue, states increasingly agree on green. Not the much discussed “green jobs” that draw cheers or jeers depending on the audience, but on the greenbacks that are flowing through states from one of the few things that appears to be working in our economy—exports. With the president’s submission of three pending trade agreements to Congress, exports might also be one of the few areas where both ends of Pennsylvania Avenue can reach agreement.

To the extent that our nation has an economic development strategy, it is defined as much by the statehouse as the White House. With the growth of the global economy, and the rise of important new sources of trade and commerce in China, Brazil and other emerging economies, states have broadened their horizons from simply recruiting businesses from other states to promoting exports around the world.

State economic development departments maintain almost 200 offices in more than 30 countries worldwide that work day-in and day-out to help American small businesses create jobs at home by selling products abroad. These offices also provide a vital platform for recruiting international firms eager to invest in the U.S. The growing focus of state economic development agencies on trade and investment is not surprising given that exports accounted for more than half of American economic growth in 2010 and U.S. subsidiaries of international companies employ 5.6 million Americans. In a telling statement of where state leaders see their economic future, more governors today have an office in China than in Washington, D.C.

While state support for the president’s newest jobs initiative, the American Jobs Act, has split along party lines, his trade initiatives are winning bipartisan support. In September, the Small Business Administration announced the winners of the State Trade and Export Promotion (STEP) program, a pilot grant initiative funded by the Small Business Jobs Act of 2010 that is designed to leverage state spending on export promotion and strengthen cooperation between state economic development agencies and their federal counterparts. While many governors have made news in recent months by turning down federal funding for high-speed rail, health reform implementation and other controversial initiatives, 47 states applied for and received STEP funding, with some of the biggest awards going to red states.

The wide interest in the program is not surprising given that a 2006 study by the World Bank showed that every dollar spent on export promotion generates $40 on average in new export sales. Governors from both parties are doubling down on what works and are willing to partner with the federal government to do it.

The three pending trade agreements, while not without controversy, have also attracted substantial state support. South Korea is already a popular destination for governor-led trade missions and many state economic development departments are looking to build on their successes in the NAFTA and CAFTA markets by pursuing new export opportunities in Columbia and Panama. All three agreements have been endorsed by a wide variety of state government associations, including The Council of State Governments.

However, some state officials have raised important concerns about the potential impact of “least trade restrictive” regulatory standards and other requirements in these and other proposed agreements on the ability of states to pursue their traditional responsibilities in protecting the public good. While there is clearly a need for closer state-federal cooperation in trade negotiations, for now at least, the opportunities for export-driven jobs seem to be outweighing policy concerns in state capitols.

Just as it was visionary state leaders who built the public universities that helped spawn a generation of American entrepreneurs in the last century, it will take visionary state leaders working with entrepreneurs to get us through the current jobs crisis. Fortunately, state leaders are well aware that today’s entrepreneurs operate in a global economy and are working hand-in-hand with the next generation of job creators to succeed in markets around the world.

 

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