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 TRADE TOPICS
 Agriculture |  China | Corporate Sustainability | Import  | Poverty |  Security |  TPA/Fast Track

Foreign Imports and the Washington State Economy
EXECUTIVE SUMMARY

Robert A. Chase
CHASE ECONOMICS 
Tacoma, WA 98402 

and 

Glenn Pascall
INSTITUTE FOR PUBLIC POLICY AND MANAGEMENT 
UNIVERSITY OF WASHINGTON 
Seattle, WA 98195 

Prepared for: 
Washington State Community, Trade & Economic Development 
July, 1999 

THE GROWING ROLE OF TRADE 

The two most significant trends in post-war U.S. economic development have been the rapid expansion of the services sector and the growing importance of international trade. 

Between 1970 and 1998, U.S. gross domestic product grew at an average annual rate of 2.9 percent while U.S. exports and imports grew at annual rates of 6.9 percent and 6.5 percent, respectively (all numbers adjusted for inflation). 

Washington State leads the nation in per capita exports, and the export trade directly or indirectly supports one out of every four jobs in the state, according to 1997 research by economist Dick Conway. 

Washington State handles 6 percent of America's trade flows (exports and imports) although the state accounts for only 2 percent of U.S. population. 

The largest single category of trade through Washington's marine ports and airports is not exports produced in this state but foreign imports that are landed here and then shipped from Washington to purchasers elsewhere in the U.S. and Canada. 

Similarly, while Washington ports handle a large volume of exports from other states destined for foreign markets, a greater trade is in foreign imports for purchase within the state of Washington.

EXPORTS AND IMPORTS: THE LINKED EQUATION 

Since 1960, growth in U.S. exports and imports has been comparable. Exports have risen from 4 to 13 percent of national product, while imports have climbed from 5 to 16 percent. 

Trade is founded on comparative advantage: each nation's focus on production of goods and services in which it enjoys a cost and/or quality edge, and use of income from sales of these products to purchase exports from other nations in their areas of comparative advantage. 

Wide variation exists in the ratio of dollars spent by Americans on imports versus dollars we receive through exports to our trading partners. The ratio ranges from a 20 percent return with China and a 54 percent return with Japan, to a 259 percent return with The Netherlands and a 244 percent return with Australia. The overall ratio is a 77 percent return on exports per dollar of imports. 

The capacity of Washington's large import-handling infrastructure also serves the state's exporters. Even the excess of imports over exports creates a specific benefit: lower backhaul rates on westbound containers, which are estimated to save agricultural and other exporters $150 to $500 in fees per container. 

The annual percentage change in imports to Washington has shown wide swings in the last fifteen years. Growth rates in pass-through imports have ranged from 1.1 percent to 11.2 percent while imports purchased in-state have ranged from 3.4 percent to 17.2 percent. 

Despite these swings, overall trends have carried totals steadily upward. Pass- through imports rose from $23 billion in 1984 to $42 billion in 1998, while in-state imports climbed from $5 billion to $14 billion in the same period. 

The most valuable categories of imports in 1998 were industrial machinery and computer equipment ($10 billion), electronic and electrical equipment ($7 billion), textile and apparel products ($6 billion), and motor vehicles ($5.8 billion). 

Washington State imports are heavily Asia-oriented, with Japan and China providing more than half the total. When the East Asian "tigers" and Canada are added, these four sources account for almost 85 percent of the total. 

IMPORTS: A HIDDEN ASSET IN THE WASHINGTON STATE ECONOMY  

43,220 jobs are created in Washington State by pass-through foreign imports: cargoes that are landed here and shipped to final users elsewhere in North America. Direct jobs are concentrated in import-handling-largely, transportation services. Because import-handling constitutes a Washington export to other domestic states and Canada, it creates indirect jobs in other sectors within the state. 

The 43,220 jobs total from handling imports exceeds the jobs base in such employment centers as Kent, Bremerton, Renton, Redmond, Kirkland, and Auburn-many of whose jobs are in the import trade. 

Another 117,900 jobs are supported by foreign imports that stay in Washington State to be used as inputs to production or as consumer goods for final sale here. Most of the jobs supported by imports to the state are in wholesale and retail trade. These 117,900 jobs exceed the employment base in Tacoma and almost equal the Bellevue jobs base. 

The pass-through import trade plus foreign imports whose final destination is Washington account for a total of 161,120-about 7 percent of the total employment in the state. Washington State's role in the import trade-handling volume that is three times its share of U.S. population-is comparable to its leadership in exports per capita. 

When both parts of the trade equation are combined, the 25 percent share of state jobs that are export-linked and the 7 percent of jobs that are import-linked generate trade-related employment equal to about 32 percent of Washington State jobs. 

In the future, trade policies and decisions on infrastructure investments at marine ports and airports must be made in a context that is fully informed on the role of imports. Absent this piece, a balanced picture of the role of trade cannot be formed, even given the state's outstanding export performance.