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WASHINGTON STATE DEPARTMENT OF COMMERCE Spencer Cohen Research Manager 8 February 2011 Washington State Export Trends Update through November 2010 YTD

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Page 1: Export Council Feb 8 New

WASHINGTON STATE DEPARTMENT OF COMMERCE

Spencer CohenResearch Manager

8 February 2011

Washington State Export TrendsUpdate through November 2010 YTD

Page 2: Export Council Feb 8 New

Data Issues

• We use data provided by WISER Trade, a wholesale distributor of U.S. Census Bureau data.

• Today we’ll review data through November 2010.

• Data is pretty reliable, but some issues we need to correct for.

• Services exports not trackable at state level.

Page 3: Export Council Feb 8 New

Merchandise and Commodities Exports by Segment1996 to November 2010 YTD

0

10

20

30

40

50

60

Bill

ion

s U

SD

TOTAL, no corrections

TOTAL, corrected

Aerospace

Non-aerospace, non-agricultureAgriculture and food

Correction of $5.7 billion

Largely driven by Chinese soy bean consumption.

Data source: WISER Trade

Page 4: Export Council Feb 8 New

0

2

4

6

8

10

12

14

16

18

Bill

ion

s U

SD

Total

Total, corrected

Aerospace

Non-aerospace, non-agriculture

AGR and FOOD

Washington Quarterly ExportsBy segment • Total Washington exports

dropped at tail-end of “official” U.S. recession and have since recovered. However, much of this drop due to decline in aerospace exports.

Data source: WISER Trade

Official period of recession

Page 5: Export Council Feb 8 New

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

Washington U.S. Washington non-aerospace exports

Year-over-Year (YoY) Changes

Data sources: WISER Trade; World Trade Organization.

• Washington total exports have been outpaced by the U.S. the past three quarters, but this primarily driven by declines in aerospace exports.

• Non-aerospace exports have performed much better.

The “Great Contraction”—global trade in manufacturing declined 15.5% in 2009, agriculture trade down 3%

Page 6: Export Council Feb 8 New

Composition of ExportsBy quarter

Data source: WISER Trade

50.6%

14.6%

11.9%

0%

10%

20%

30%

40%

50%

60%

70%

Q1

20

06

Q2

20

06

Q3

20

06

Q4

20

06

Q1

20

07

Q2

20

07

Q3

20

07

Q4

20

07

Q1

20

08

Q2

20

08

Q3

20

08

Q4

20

08

Q1

20

09

Q2

20

09

Q3

20

09

Q4

20

09

Q1

20

10

Q2

20

10

Q3

20

10

Aerospace Top 10 non-aerospace exports, by 6-digit HS Agriculture and food

• Washington’s distribution of exports by product has been fairly consistent, with aerospace constituting more than 50% of total exports by quarter (excluding 2008 strike period)

Boeing strike

Page 7: Export Council Feb 8 New

Exports through November 2010Changes and contributions to net change, by 10 largest export products for Nov 2010 YTD

Major Product Category(2-digit HS Codes)

NOV 2009 YTD NOV 2010 YTD CHANGE Contribution to Change*

TOTAL 41,141,985,563 41,779,993,916 638,008,353 --Aircraft, Spacecraft, and Parts Thereof 23,373,694,941 20,820,804,810 -2,552,890,131 -85.4%

Industrial Machinery, Including Computers 1,469,824,935 1,855,088,797 385,263,862 10.6%

Electric Machinery; Sound Equip; TV Equip; Parts 1,460,519,122 1,681,152,670 220,633,548 6.1%

Mineral Fuel, Oil; Bitumin Substances; Mineral Wax 1,612,606,793 1,644,675,972 32,069,179 0.9%

Optic, Photo; Medical or Surgical Instruments 1,327,782,458 1,489,185,900 161,403,442 4.4%

Wood and Articles of Wood; Wood Charcoal 782,103,320 1,176,349,380 394,246,060 10.9%

Cereals (Wheat and Meslin) 1,070,782,859 1,165,722,723 94,939,864 2.6%

Inorganic Chemicals; Precious & Rare-Earth Metals & Radioactive Compounds

751,524,408 1,116,416,203 364,891,795 10.1%

Edible Fruit & Nuts; Citrus Fruit or Melon Peel 819,021,202 850,004,478 30,983,276 0.9%

Iron and Steel 516,960,189 805,803,359 288,843,170 8.0%

*Based on share of gross, year-to-year gains or losses, depending on direction of year-to-year change. Data source: WISER Trade

Page 8: Export Council Feb 8 New

Aerospace ExportsTop Markets

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

Qatar

Indonesia

Ireland

Japan

China

Billions USD

Largest Markets, Nov 2010 YTD

November 2010 YTD

November 2009 YTD

0 500 1,000 1,500

China

Egypt

Norway

Ethiopia (New)

Japan

Malaysia

Germany

Qatar

Turkey

Indonesia

Millions USD

Largest Absolute Increases, November 2010 YTD

Data source: WISER Trade

• Overall aerospace exports down 10.9%, driven by declines of 69.2% UAE (21.5% of total decline) and 92.3% to France (17.1% of total decline).• Sales to Indonesia grew 236.2%.

Page 9: Export Council Feb 8 New

Five Largest Markets for Washington ExportsTotal exports

$1.8

$1.8

$4.9

$5.9

$6.3

$0.7

$1.4

$4.2

$5.1

$6.1

Indonesia

Korea, Republic of

Japan

China

Canada

November 2009 YTD November 2010 YTD

• In any given year, Washington’s top 10 largest markets combined have averaged roughly 2/3 of all state goods exports.

• All top five markets have shown growth over 2009, though some of these mainly due to aerospace (e.g. Indonesia)

• Exports to China grew at per annum rate of 14.0% from 2000-2009.

Data source: WISER Trade

Billions USD

Page 10: Export Council Feb 8 New

Non-aerospace, Non-agriculture ExportsNOV 2010 YTD compared with NOV 2009 YTD

• 46% of ALL GROWTH from three countries: Canada (contributed 16.7%), China (16.6%), and Japan (12.7%).

• Exports to China grew at per annum rate of 14.0% from 2000-2009.

• Exports to China have grown more than 500% from 2000 to 2009—an average annual rate of 22%.

$0.7

$0.7

$1.6

$1.9

$4.8

$0.4

$0.6

$1.2

$1.4

$4.3

Taiwan

Korea, Republic of

Japan

China

Canada

November 2009 YTD November 2010 YTD

Data source: WISER Trade

Billions USD

Page 11: Export Council Feb 8 New

Washington’s Top Five Agriculture and Food Export Markets

• Overall food and agriculture exports grew 12.5% through November 2010 over same period in 2009, and 8.0% per year from 2000-2009.

• Among top five markets, Philippines led with 27.7% growth , followed by Mexico (11.1%).

• China was sixth largest market, and grew 41.9% (averaged 15.8% growth per year 2000-2009).

$274

$283

$288

$1,012

$1,251

$246

$276

$225

$944

$1,138

Mexico

Taiwan

Philippines

Canada

Japan

November 2009 YTD November 2010 YTD

Billions USD

Data source: WISER Trade

Page 12: Export Council Feb 8 New

Non-Aerospace Exports by Product and MarketLargest absolute increases, NOV 2010 YTD compared with NOV 2009 YTD

Country Product (6-digit HS Code) Change, 2010-2011 Absolute Increase

CHINA Coniferous Wood in the Rough, Not Treated 831.9% 233,293,828

CHINA Silicon Contain by Weight Nt < 99.99% Of Silicon 357.9% 112,888,315

JAPAN Medicaments Nesoi, Measured Doses, Retail Packaged Nesoi No Exports in 2010 105,844,876

SINGAPORE Silicon Contain By Wt Nt < 99.99% Of Silicon 6481.4% 90,221,702

CHINA Copper Ores and Concentrates 74.7% 87,493,877

TAIWAN Ferrous Waste & Scrap Nesoi 581.6% 81,704,378

JAPAN Uranium Enriched in U235; Plutonium 42.4% 66,679,440

CAN Light Oils& Prep (Not Crude) from Petrol & Bitum 49.8% 66,394,060

TAIWAN Machines for Man. Semicondutor Devices/Elec IC 371.4% 58,580,554

CHINA Mink Furskins, Raw, Whole 63.4% 56,696,018

Data source: WISER Trade

• Of Washington’s top 50 non-aerospace product-markets, 14 were in Canada.

• Ultrasound equipment sales to China grew 22% over first 11 months of 2009 ($90.2 million YTD)

Page 13: Export Council Feb 8 New

State ExportsYear-over-year change (YoY)

Data sources: WISER Trade; U.S. Census Bureau.

• November 2010 YTD (RHS)

• Note: Washington exports are corrected here, but Illinois data is raw and undercounts exports of soy.

21.3%

1.6%

15.5%

17.9%

19.3%

19.8%

27.0%

TOTAL ALL STATES

Washington …

New York

Florida

Illinois

California

Texas

20.1%

17.1%

19.2%

22.4%

23.0%

24.5%

28.3%

11.5%

19.1%

22.9%

21.0%

27.0%

22.5%

23.6%

Washington

New York

Florida

California

Illinois

TOTAL ALL STATES

Texas

Q3 2010 YoY

November 2010 YTD YoY change

• Non-aerospace, non-agriculture (LHS)

• Top 5 states (by total exports), plus U.S. and Washington.

Page 14: Export Council Feb 8 New

Role of Exports in WashingtonAs percentage of gross business revenue

• The long-term trend is a continuing and growing reliance on exports in the manufacturing sector.

Data sources: WISER Trade; Washington State Dept. of Revenue.

28.8%

38.8%

15.4%

22.7%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

20

05

Q1

20

05

Q2

20

05

Q3

20

05

Q4

20

06

Q1

20

06

Q2

20

06

Q3

20

06

Q4

20

07

Q1

20

07

Q2

20

07

Q3

20

07

Q4

20

08

Q1

20

08

Q2

20

08

Q3

20

08

Q4

20

09

Q1

20

09

Q2

20

09

Q3

20

09

Q4

20

10

Q1

20

10

Q2

GOODS SECTOR

MFG SECTOR

MFG minus aerospace

Linear (MFG SECTOR)

Page 15: Export Council Feb 8 New

Possible Future Scenarios That Could Impact Washington Exports

• China allows the RMB to float (+, but unlikely)

• Though the government could still counteract this measure by lowering domestic interest rates to support tradable goods sector, and maintain under pricing of many other inputs, e.g. land and energy (-)

• U.S.-South Korea FTA (+, though not clear yet to what extent)

• Fed slow to contract U.S. money supply post-recovery, lets dollar depreciate, boon to exporters (+)

• Series of “trade wars” and wave of currency depreciations (especially if China continues to keep RMB undervalued), pushing adjustment from one country to the next (“beggar they neighbor” scenario) (-)

• More 787 delays (-)

Page 16: Export Council Feb 8 New

Commerce Quarterly Trade Bulletin

• Quarterly publication that reviews most recent export trends, downloadable from Commerce website.

• Interviews with companies and stakeholders, e.g. CEO of Expeditors International (December/January issue), exporting SMEs (all issues), and CEOs of Ports of Seattle and Tacoma (March 2011 issue).

• More than 8,000 direct recipients, and growing.

Page 17: Export Council Feb 8 New

Appendix

Page 18: Export Council Feb 8 New

Overview of Data

• We use data provided by WISER Trade, a wholesale distributor of U.S. Census Bureau data.

• Full 2010 not yet available, so today we’ll work with November year-to-date data.

• Data is state-of-origin, based on filing of exporter in customs declaration form.

• In theory, above definition excludes all goods that originate elsewhere in the U.S. and only pass through Washington, and includes goods from Washington that ship from ports outside the state.

• But, definition of “state-of-origin” includes where product is consolidated prior to export, so includes soy beans, corn, and rice, which are not grown in Washington

• Magnitude of distortion: Washington was credited with $3.7 billion in soy bean exports in 2009, equal to 34% of total agriculture exports, and more than ten times amount credited to Iowa and three times Illinois.

• In the Commerce Quarterly Trade Bulletin, and throughout this presentation, we attempt to correct for this distortion

Page 19: Export Council Feb 8 New

Services Exports

• Data is only for merchandise and commodities—it does not include services (e.g. Microsoft products, online sales, legal services, royalties, expenditures by foreign nationals, foreign students, architecture services, etc.).

• 2002 Input-Output Model estimates state services exports of $16.9 billion, but we think this number has increased since then.

• Problem—no method/data that enables us to track services exports annually

• Input-Output Model every five years, with significant time lag (e.g. 2002 model not released until 2008, due to breadth of survey, data source triangulation, and timing of U.S. Economic Census).

• U.S. national services exports data not very good right now (only simple breakdown by type)

• Nonetheless, services exports critical to state economy.