Economic Development Policy Part 2b: Trade and foreign investment ECON 4480 State and Local Economies 1

Trade and investment International trade has become an important source of output and employment for the United States economy. Foreign direct investment (FDI) has also become important 2

Trade policy International trade has become an important source of output and employment for the United States economy. 3

Exports

Exports Exports from Tennessee were $20.5 billion in 2009, compared with $3.7 billion in Some top exports: – Surgical instruments: $1.4 billion – Civilian aircraft: $1 billion – Portable computers: $620 million – Whiskey: $482 million 5

Exports Exports from Tennessee were $20.5 billion in 2009, compared with $3.7 billion in Some top exports: – Surgical instruments: $1.4 billion – Civilian aircraft: $1 billion – Portable computers: $620 million – Whiskey: $482 million 6

Foreign Direct Investment 2006 Presence of foreign-owned employers: – United States: $1,188 billion capital investment, 5.3 million jobs (4.5%) – Tennessee: $21.5 billion capital investment, ranked 19 th highest; 140,000 jobs (5.7%). – Foreign-owned auto assembly and auto parts becoming much more prevalent in the South. 7

Role for State Governments Two potential roles for state governments: – 1) technical assistance for firms, and – 2) market-development efforts. 8

Role for State Governments Technical assistance: consists of seminars, handbooks, directories, and one-on-one counseling for potential exporters. Small businesses not well equipped to deal with the many issues including pricing, documentation, insurance, language translations, and obtaining export financing. Usually designed to assist small businesses. 9

Role for State Governments Market development: consists of acting as a sales agent for local firms overseas; governor or other high-ranking official acts as publicist and broker for state firms. Also makes contacts with firms interested in investing in the state. Many governors travel abroad to develop these contacts. 10

State Governments and Globalization Observations: most of these efforts a small scale, and the task seems daunting for small businesses even with assistance. 11