FSC-BENEFITED EXPORTS AND JOBS IN 1999: Estimates for Every Congressional District Prepared for National Foreign Trade Council July 2, 2002 National Economic Consulting
FSC-BENEFITED EXPORTS AND JOBS IN 1999 Table of Contents I. EXECUTIVE SUMMARY...1 Page II. III. IV. DATA AND METHODOLOGY...3 NATIONAL RESULTS...6 STATE RESULTS...9 APPENDICES A. Results Sorted By State and By Congressional District...61 B. Results Sorted By Export Level...72 PricewaterhouseCoopers LLP
I. EXECUTIVE SUMMARY Since 1971, the United States has provided tax incentives to encourage U.S. exports first through Domestic International Sales Corporations (DISCs), then Foreign Sales Corporations (FSCs), and currently through the Extraterritorial Income (ETI) regime. These export incentives are intended to promote high-quality job opportunities in the United States. U.S. workers at plants that export have historically earned substantially more than other domestic workers. Over the 1976-1987 period, export workers wages and benefits were 14.5 percent and 32.7 percent higher, respectively, than for other domestic workers. 1 The U.S. export incentives are also intended to offset the reliance by all major U.S. trading partners on value-added taxes to finance national government expenditures. Unlike the corporate income tax, which is imposed on exports but not imports, World Trade Organization (WTO) rules allow value-added taxes to be adjusted at the border such that exports are exempt and imports are taxable. This report finds that over $310 billion of the nation s $990 billion of exports of goods and services benefited from the FSC tax incentive in 1999 (see Table 1). These FSC-benefited exports accounted for 3.4 percent of the nation s Gross Domestic Product (GDP) in 1999. Over one million U.S. jobs were directly attributable to FSC-benefited exports and another 2.5 million jobs were indirectly attributable to these exports as a result of intermediate goods and services used in the production and distribution processes. In all, 3.5 million U.S. jobs were attributable to exports that benefited from FSC tax incentives in 1999, and average of 8,000 jobs per Congressional District (see Table 1). FSC Exports ($ millions) Table 1. FSC Benefited Exports and Jobs in the United States, 1999 Jobs Supported by FSC-Benefited Exports Per Congressional District* Direct Indirect Total FSC exports FSC-related ($ million) jobs $314,208 1,022,000 2,458,000 3,480,000 $721 8,000 *Includes 435 Congressional Districts and the District of Columbia. Source: PricewaterhouseCoopers LLP estimates. The five states with the largest dollar value of FSC-benefited exports in 1999 are, in order: California, Texas, Michigan, New York, and Washington (see Table 2). These top five states account for 44 percent of all FSC-benefited exports and 39 percent of all FSC-related jobs in 1999. 1 A. Bernard and J. B. Jensen, Brookings Papers on Economic Activity, 1995, pp. 67-1112. PricewaterhouseCoopers LLP
Table 2. FSC-Benefited Exports Ranked by State, 1999 State FSC-Benefited Exports FSC-Related Jobs, Total ($ millions) Percent of U.S. Amount Percent of U.S. California $50,174 16% 150,000 15% Texas $28,866 9% 87,000 8% Michigan $22,965 7% 62,000 6% New York $19,443 6% 56,000 5% Washington $18,806 6% 54,000 5% U.S., Total $314,208 100% 1,022,000 100% Source: PricewaterhouseCoopers LLP estimates. The top ten Congressional Districts for FSC-benefited exports in 1999 are listed in Table 3, below. The 1st District of Washington, which includes portions of Bellevue, Redmond and Seattle, among others, was the largest source of FSC-benefited exports, and is estimated to have had 21,000 jobs supported by FSC in 1999. The 7th District of Washington, located in King county (including North Seattle and Kirkland), was the second largest source of FSC-benefited exports in 1999. California has four Congressional Districts among the top ten ranked by FSCbenefited exports: the 13 th, 14 th, 15 th, and 16 th, which include Fremont, Hayward, Palo Alto, Sunnyvale, San Jose, Santa Clara, Los Gatos, and Santa Cruz. Washington s 9 th, Michigan s 11 th, Colorado s 2 nd and Texas 23 rd District are also in the top ten Congressional Districts ranked by FSC-benefited exports in 1999. Table 3. Top 10 Congressional Districts for Total FSC-Benefited Exports, 1999 Rank Congressional FSC Exports FSC-Related Jobs District ($ millions) Direct Indirect Total 1 Washington 1 $5,405 14,900 6,200 21,100 2 Washington 7 $5,317 14,600 6,300 20,900 3 California 14 $5,194 13,500 6,100 19,600 4 Washington 9 $5,100 14,300 5,800 20,100 5 California 13 $4,025 10,400 6,200 16,500 6 California 15 $3,475 9,100 6,100 15,300 7 Michigan 11 $3,455 7,900 6,200 14,100 8 Colorado 2 $3,319 12,200 7,300 19,400 9 Texas 23 $3,033 11,600 5,500 17,100 10 California 16 $2,983 7,600 6,100 13,700 Source: PricewaterhouseCoopers LLP estimates. PricewaterhouseCoopers LLP 2
II. DATA AND METHODOLOGY A. Merchandise Exports The source of data on merchandise exports is the 1999 Exporter Location ( EL ) from the U.S. Bureau of the Census, as published by the International Trade Administration ( ITA ) of the U.S. Department of Commerce. The EL series assigns values of merchandise exports to local geographical areas based on the physical location of exporters, as determined by ZIP codes reported on U.S. export declarations. The export data reported by the Census Bureau are limited to those merchandise goods that are directly exported by the exporter of record, as defined on shippers export declarations ( SED ). In some cases, locations from which firms export their products may not coincide with the locations where export goods are produced. Also, this method of identifying the location of exports does not represent the locations of firms that supply parts that go into export production. For example, suppose Company M manufactures a computer in Texas valued at $1,000 and ships the computer for export through a port in Louisiana. In manufacturing the computer, suppose Company M buys a hard drive for $200 from Company X in Massachusetts. The Bureau of the Census would attribute a $1,000 export from Texas and no export from Massachusetts or Louisiana, because the Bureau typically would not know about the existence or extent of the contribution from Company X in Massachusetts. Taking a slight variation of the example, if Company M had sold the computer to Company Q a Louisiana wholesaler who exports the computer for $1,100 the Bureau would count a $1,100 export from Louisiana and no export from Texas or Massachusetts. The export data from the Bureau of the Census modestly understate the level of exports for many states, because about 7 percent of the value of exports cannot be assigned to a location. The Massachusetts Institute of Social Economic Research ( MISER ), at the University of Massachusetts at Amherst, addresses this problem by reassigning the unallocated data back to the states. Using 1999 MISER data, PwC recalibrated the 1999 EL data for this study. B. Jobs Directly Attributable to Exports The Census Bureau does not measure export-related jobs directly. The 1997 Census of Manufactures and Census of Wholesale Trade report detailed data on shipments and jobs for each county. With the aid of commercial and propriety software, we mapped these data from counties into 3-digit ZIP code areas and calculated the job-to-shipment ratio within each 3-digit ZIP code. We estimated export-related jobs by 3-digit ZIP code from the job-to-shipment ratio and the export location data (both at a 3-digit ZIP code level). C. Identification by Congressional District With the aid of commercial and proprietary software, PwC mapped 3-digit ZIP code areas into the 435 Congressional Districts plus the District of Columbia. Because 3-digit ZIP codes often lie in more than one Congressional District, we developed a set of algorithms to apportion 3-digit PricewaterhouseCoopers LLP 3
ZIP codes among Congressional Districts based on 1999 employment data for both 3-digit Zip code areas and Congressional Districts (from the Census Bureau). D. FSC-Benefited Exports and FSC-Related Direct Jobs The FSC share of total merchandise exports was calculated by state based on 1996 IRS tabulations of FSC returns (the most recent information currently available) by major product and MISER data on exports by state and industry. 2 The FSC share of 1999 merchandise exports and export-related jobs at the Congressional District level was determined from the statewide estimates. FSC-benefited service exports from 1996 IRS data were allocated across the states according to each state s share of total service value-added in 1996. Using the 1996 ratio of FSC-benefited service to merchandise exports at the State level and 1999 FSC-benefited merchandise exports by Congressional District, we estimated FSC-benefited service exports at the Congressional District level. Using the state level sales-to-jobs ratio for services from the 1997 Economic Census, we calculated the number of direct jobs supported by FSC service exports for each Congressional District. E. Indirect Jobs Attributable to FSC-Benefited Exports Jobs directly attributable to FSC-benefited exports exclude both upstream jobs associated with energy, materials, and inputs required to manufacture exports and downstream jobs required to distribute exports. Total jobs associated with FSC-benefited exports include both direct and indirect jobs. The ratio of total jobs to direct jobs is referred to as the export job multiplier. A recent study by the International Trade Administration (ITA) of the U.S. Department of Commerce estimated the export job multiplier in 1997. 3 The ITA study focused on the exports of manufactured goods. An earlier study by the U.S. Department of Commerce Economics and Statistics Administration (ESA) estimated the export job multiplier for both goods and services for 1994. 4 In this study, indirect jobs are estimated using a weighted average of the export job 2 The major product and service categories broken out by IRS loosely mirror the 3 digit SIC codes for industry groups. In any given major group, if there is an omission of a particular industry group, this could mean that there were no returns for that industry group or there were so few that these were combined into a "miscellaneous" category under the major group (for disclosure purposes). 3 U.S. Dept of Commerce, International Trade Administration, U.S. Jobs from Exports, A 1997 Benchmark Study of Employment Generated by Exports of Manufactured Goods, February 2001. 4 U.S. Dept of Commerce, Economics and Statistics Administration, "U.S. Jobs Supported by Goods and Services Exports, 1983-94," Research Series OMA-1-96, November 1996. PricewaterhouseCoopers LLP 4
multiplier for manufacturing from the ITA study and the export job multipliers for nonmanufacturing sectors from the ESA study. Indirect jobs are apportioned to Congressional Districts based on their share of total employment using Census Bureau information on employment by Congressional District from the 2000 census. PricewaterhouseCoopers LLP 5
III. NATIONAL RESULTS PricewaterhouseCoopers LLP 6
FSC-BENEFITED EXPORTS AND EMPLOYMENT BY STATE, 1999 SORTED ALPHABETICALLY State Exports Export Employment (000s) ($ mill) Direct Indirect Total 1 AK 429.1 1.4 5.3 6.7 2 AL 2,413.5 11.9 36.4 48.3 3 AR 1,196.0 4.9 22.2 27.1 4 AZ 4,881.1 16.7 42.3 59.0 5 CA 50,173.6 149.7 278.9 428.6 6 CO 5,555.3 19.7 41.8 61.5 7 CT 5,444.3 15.5 31.5 47.1 8 DC 2,542.6 5.4 5.0 10.3 9 DE 2,442.8 6.5 7.1 13.7 10 FL 11,647.4 52.0 132.6 184.5 11 GA 5,402.9 16.5 72.8 89.2 12 HI 171.0 1.0 10.2 11.2 13 IA 1,612.1 6.6 28.2 34.8 14 ID 1,126.3 3.8 11.4 15.2 15 IL 15,733.4 45.3 110.5 155.9 16 IN 7,475.8 30.6 56.2 86.8 17 KS 2,650.6 9.3 24.9 34.2 18 KY 3,998.6 14.7 34.1 48.8 19 LA 2,189.6 5.9 35.1 41.0 20 MA 8,130.4 27.6 59.9 87.5 21 MD 2,211.9 9.1 49.4 58.6 22 ME 1,076.4 5.3 11.8 17.1 23 MI 22,964.8 62.3 87.9 150.1 24 MN 7,653.9 24.6 48.9 73.5 25 MO 4,020.1 12.2 50.4 62.6 26 MS 760.0 4.5 22.2 26.7 27 MT 230.5 1.2 8.1 9.2 28 NC 5,977.1 22.7 72.5 95.1 29 ND 382.9 1.5 6.0 7.5 30 NE 1,240.1 4.2 16.6 20.8 31 NH 1,119.9 4.9 12.3 17.2 32 NJ 10,472.9 27.0 74.9 101.8 33 NM 1,587.1 6.7 14.5 21.1 34 NV 775.1 4.4 17.7 22.1 35 NY 19,443.1 56.3 158.9 215.2 36 OH 13,002.5 44.9 102.4 147.2 37 OK 1,175.5 4.8 29.3 34.1 38 OR 5,645.6 16.4 30.8 47.3 39 PA 9,195.5 34.8 107.1 141.9 40 RI 478.3 2.8 9.5 12.3 41 SC 3,055.6 12.6 34.6 47.1 42 SD 608.7 3.0 7.1 10.1 43 TN 4,878.6 18.7 50.3 69.0 44 TX 28,865.6 86.9 175.0 261.9 45 UT 1,359.4 5.6 19.8 25.4 46 VA 5,332.1 17.9 64.7 82.6 47 VT 1,370.3 5.8 6.0 11.8 48 WA 18,805.7 53.9 52.9 106.8 49 WI 4,822.5 20.5 51.8 72.3 50 WV 380.6 1.8 13.9 15.7 51 WY 99.1 0.5 4.6 5.1 Totals 314,208.0 1,022.3 2,458.4 3,480.7 PricewaterhouseCoopers LLP 7
FSC-BENEFITED EXPORTS AND EMPLOYMENT BY STATE, 1999 SORTED BY EXPORTS State Exports Export Employment (000s) ($ mill) Direct Indirect Total 1 CA 50,173.6 149.7 278.9 428.6 2 TX 28,865.6 86.9 175.0 261.9 3 MI 22,964.8 62.3 87.9 150.1 4 NY 19,443.1 56.3 158.9 215.2 5 WA 18,805.7 53.9 52.9 106.8 6 IL 15,733.4 45.3 110.5 155.9 7 OH 13,002.5 44.9 102.4 147.2 8 FL 11,647.4 52.0 132.6 184.5 9 NJ 10,472.9 27.0 74.9 101.8 10 PA 9,195.5 34.8 107.1 141.9 11 MA 8,130.4 27.6 59.9 87.5 12 MN 7,653.9 24.6 48.9 73.5 13 IN 7,475.8 30.6 56.2 86.8 14 NC 5,977.1 22.7 72.5 95.1 15 OR 5,645.6 16.4 30.8 47.3 16 CO 5,555.3 19.7 41.8 61.5 17 CT 5,444.3 15.5 31.5 47.1 18 GA 5,402.9 16.5 72.8 89.2 19 VA 5,332.1 17.9 64.7 82.6 20 AZ 4,881.1 16.7 42.3 59.0 21 TN 4,878.6 18.7 50.3 69.0 22 WI 4,822.5 20.5 51.8 72.3 23 MO 4,020.1 12.2 50.4 62.6 24 KY 3,998.6 14.7 34.1 48.8 25 SC 3,055.6 12.6 34.6 47.1 26 KS 2,650.6 9.3 24.9 34.2 27 DC 2,542.6 5.4 5.0 10.3 28 DE 2,442.8 6.5 7.1 13.7 29 AL 2,413.5 11.9 36.4 48.3 30 MD 2,211.9 9.1 49.4 58.6 31 LA 2,189.6 5.9 35.1 41.0 32 IA 1,612.1 6.6 28.2 34.8 33 NM 1,587.1 6.7 14.5 21.1 34 VT 1,370.3 5.8 6.0 11.8 35 UT 1,359.4 5.6 19.8 25.4 36 NE 1,240.1 4.2 16.6 20.8 37 AR 1,196.0 4.9 22.2 27.1 38 OK 1,175.5 4.8 29.3 34.1 39 ID 1,126.3 3.8 11.4 15.2 40 NH 1,119.9 4.9 12.3 17.2 41 ME 1,076.4 5.3 11.8 17.1 42 NV 775.1 4.4 17.7 22.1 43 MS 760.0 4.5 22.2 26.7 44 SD 608.7 3.0 7.1 10.1 45 RI 478.3 2.8 9.5 12.3 46 AK 429.1 1.4 5.3 6.7 47 ND 382.9 1.5 6.0 7.5 48 WV 380.6 1.8 13.9 15.7 49 MT 230.5 1.2 8.1 9.2 50 HI 171.0 1.0 10.2 11.2 51 WY 99.1 0.5 4.6 5.1 Totals 314,208.0 1,022.3 2,458.4 3,480.7 PricewaterhouseCoopers LLP 8