Academic journal article Economic Perspectives

Estimating U.S. Metropolitan Area Export and Import Competition

Academic journal article Economic Perspectives

Estimating U.S. Metropolitan Area Export and Import Competition

Article excerpt

This article calculates estimates of the extent to which U.S. cities' manufacturers face competition from foreign producers. Foreign and U.S production can compete in the U.S. domestic market, foreign markets, or both. Accordingly, this article examines measures of metropolitan-area (MSA) level import competition, based on each city's industrial composition and industry-level data on import competition, as well as measures of metro-level export competition, based on U.S. export data. With these measures, we evaluate whether the growth experience of U.S. cities that face high competition from foreign producers substantially differs from that of cities with low competition. Measures of import and export competition at the MSA level may be helpful to metropolitan area residents and policymakers in evaluating their own actions in various arenas such as household movements, investment, and local development.

The International Trade Administration (ITA) tracks exports from U.S. metropolitan areas. However, there are no comparable statistics of actual imports into particular metropolitan areas. Nor, even if they existed, would such figures be particularly useful in measuring the degree to which metropolitan area economies (and their local industries) are impacted by import competition. To the extent that the manufacturing sector of a metropolitan area sells much of its output to markets located outside of its own metropolitan area, own-industry imports at the metropolitan area level would not fully measure the degree of competition to this metropolitan area's producers. As an alternative to such a hypothetical measure of local imports, we construct measures of metropolitan areas' exposure to national or U.S. market import competition.

In examining trends in imports into the U.S. market over time, we find robust growth in imports of manufactured goods during the 1990s. As one measure, we allocate such imports--good by good--to each metropolitan area based on its own size and mix of manufacturing industries. In constructing these estimates, we find a wide variation across U.S. metropolitan areas in import market share and in the growth of such imports from 1989 to 1999. A rapidly growing share of imports, however, does not necessarily accompany local production decline or stagnation, because rising imports may also be associated with a rising domestic demand for these products. For example, imagine the rapidly rising U.S. imports for pharmaceuticals not necessarily displacing domestic production, but simply serving a growing market (perhaps fueled by an aging U.S. population).

A separate and different accounting of import behavior over time, the degree of "import penetration," measures the extent to which the domestic U.S. market for goods is served by foreign sources rather than domestic producers. Here again, we find a wide regional variation, both for the current period and across time. Such evidence of market penetration does not, of course, measure changes in the economic well-being of workers and firms. Imports of capital goods and technology also assist domestic industry to improve and stay competitive in its production and export activity. Indeed, imports are often not final goods but intermediate products used in the production of other goods, which are ultimately sold both domestically and abroad. (1) And importantly, imports of consumer goods presumably improve well-being and quality of life for U.S. individuals and households. Even on its production side, displacement of manufacturing by imports may result in reallocation of workers and capital to higher-valued production, for example, in exports, non-traded goods, or in the service sector. In these ways, enhanced imports can lift domestic production and income rather than retard them.

On the export side, we analyze data gathered by the International Trade Administration for large metropolitan areas. These data are reported with several user cautions, the most important of which is that the production locale of exported goods often remains unknown or is misleading, with the reported geography perhaps attributed to the place of final shipment of goods by an intermediary or perhaps to an affiliate of the manufacturer, rather than to its origin of production. …

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