Framing International Trade Opportunities through the

Regional Economies Project

Barry R. Sedlik

Business, Transportation and Housing Agency

International Trade Partnership Meeting

October 4, 2006

California is not just one economy but is the beneficiary of the diversity of its nine regional economies.

California’s diversity of world class industries provides a platform for economic growth and stability.

• Computers & Electronic Products• Bioscience and Biotechnology• Machinery (except electrical)• Transportation Equipment• Chemicals• Agricultural & Food Manufacturing Products• Electrical Equipment Appliances & Components• Tourism• Logistics• Motion Picture/Television Production• Business and Professional Services• Textile and Apparel

Source: Regional Economies Project

California’s industries concentrate within regions to leverage specialized

resources, institutions, and skills. •Tourism

•Computers & Electronic Products

•Computers & Electronic Products•Bioscience and Biotechnology•Tourism•Logistics

•Agricultural & Food Manufacturing Products•Chemicals•Logistics

•Computers & Electronic Products•Machinery (except electrical)•Transportation Equipment•Chemicals•Electrical Equipment Appliances & Components•Tourism•Motion Picture/Television Production•Textiles and Apparel

•Bioscience and Biotechnology•Tourism

•Tourism

Legislature Cabinet

LW&D BT&H CDFA

Cabinet

LW&D BT&H CDFA

CaliforniaEconomic Strategy

Panel

Technical AdvisoryGroup

CaliforniaWorkforce Investment

Board

California RegionalEconomies Project

California Economic Development Partnership

California Partnership for the San Joaquin Valley

Proposed Network of Regional and Economic Development

Organizations (Local leaders representing business, community and civic interests)

Economic Vitality Conversation Partners

California Partnership for International Trade

March, 2006

The State of California is organizing its resources to better identify its key industries by region and work with local organizations to help businesses increase awareness of international opportunities.

The state’s economic development activities are based upon the building blocks of comparative advantage.

Business, Transportation and Housing Agency

Building Blocks of California’sEconomic Comparative Advantage

Research Excellence and K nowledge Base

Magnet for Innovation

Competitive-Advantage Industry Clusters

Drivers of Economic Growth

Infrastructure and Smart Growth

Quality of Life

Efficient Government and Regulations

Culture of Accountability

Effective Governanceand Civic Leadership

Stability for Economic Development

Business, Transportation and Housing AgencyBusiness, Transportation and Housing Agency

Building Blocks of California’sEconomic Comparative Advantage

Research Excellence and K nowledge Base

Magnet for Innovation

Competitive-Advantage Industry Clusters

Drivers of Economic Growth

Infrastructure and Smart Growth

Quality of Life

Efficient Government and Regulations

Culture of Accountability

Effective Governanceand Civic Leadership

Stability for Economic Development

Business, Transportation and Housing Agency

Infrastructure is a building block of competitive advantage and an industry cluster.

Source: California Economic Strategy Panel

The infrastructure cluster is comprised of major sub-sectors, industries, and occupations.

SUB-SECTOR INDUSTRIES (Examples)

OCCUPATIONS(Examples)

Planning & Design

Engineering ServicesEnvironmental Consulting ServicesSurveying & Mapping (except Geophysical) ServicesRegulation & Administration of Transportation Program

Civil EngineerCost EstimatorFinancial SpecialistLandscape ArchitectsGeodetic SurveyorMapping Technician

Equipment & Materials

Construction Equipment Construction Machinery ManufacturingAsphalt Paving Mixture & Block ManufacturingConstruction Sand & Gravel Mining

Blow Torch OperatorWelding Machine OperatorTeam AssemblerMachine BuilderMotor Installer

Highway & Other Heavy Construction

Highway Street & Bridge ConstructionHeavy & Civil Engineering Construction

Construction LaborerLandscaping WorkerGeneral ContractorConcrete Finisher

Maintenance & Operations

Urban Transit SystemsAirport OperationsSupport Activities for Water TransportationSupport Activities for Rail Transportation

Operations ManagerMachine Operator Mobile Heavy Equipment MechanicCargo Supervisor

Each sub-sector has a range of high-paying jobs.

Infrastructure Value Chain Wage Growth (Adjusted for Inflation)

Sub-sector & Driving Industries 1990 2004 % Change

Planning & Design $56,622 $65,141 15%

Engineering Services $62,916 $74,957 19%

Environmental Consulting Services $53,096 $61,301 15%

Highway & Other Heavy Construction $54,690 $61,442 12%

Other Heavy & Civil Engineering $53,152 $63,549 20%

Highway, Street & Bridge Construction $55,358 $60,900 10%

Equipment & Materials $51,241 $52,501 2%

Construction Machinery Manufacturing $42,149 $48,084 14%

Construction & Mining (except Oil Well) Machinery & Equipment Merchant Wholesalers

$53,455 $57,972 8%

Maintenance & Operations $55,466 $56,657 2%

Support Activities for Water Transportation $71,921 $81,994 14%

All Other Support Activities for Transportation $32,470 $35,619 10%

Infrastructure Total $55,448 $61,012 10%

Source: Bureau of Labor Statistics, Quarterly Census of Employment and Wages

The concentration of each cluster sub-sector varies by region.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Bay Area Central Coast Central Sierra Greater

Sacramento

Northern

California

Northern

Sacramento

Valley

San Joaquin

Valley

Southern

Border Region

Southern

California

Highway & Other Heavy Construction Equipment & Materials Maintenance & Operations Planning & Design

Source: EDD/LMID, California Regional Economies Employment Series

Each sub-sector has innovation components which form the basis for new industries and international trade and investment opportunities.

California Statewide

Highway & Other Heavy

Construction, 49,389

Equipment & Materials,

7,349

Maintenance & Operations,

68,441

Planning & Design, 82,203

0.10

0.30

0.50

0.70

0.90

1.10

1.30

1.50

-4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0%

Average Annual Growth Rate 2000-2004

200

4 Em

ploym

ent C

onc

entr

atio

n Rel

ativ

e to

US E

mpl

oym

ent

Highway & Other Heavy Construction Equipment & Materials Maintenance & Operations Planning & Design

Source: Bureau of Labor Statistics, Quarterly Census of Employment and Wages

Southern California Region

Highway & Other Heavy

Construction, 13,800

Equipment & Materials,

4,300

Maintenance & Operations,

23,700

Planning & Design, 13,500

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

-4.00% -3.00% -2.00% -1.00% 0.00% 1.00% 2.00% 3.00%

Average Annual Growth Rate 2001-04

2004

Em

ploy

men

t C

once

ntra

tion

Rel

ativ

e to

Cal

iforn

ia E

mpl

oym

ent

Highway & Other Heavy Construction Equipment & Materials Maintenance & Operations Planning & Design

Source: EDD/LMID, California Regional Economies Employment Series

Southern Border Region

Highway & Other Heavy

Construction, 4,900

Equipment & Materials, 900

Maintenance & Operations,

2,400

Planning & Design, 5,600

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

2.00

-3.00% -1.00% 1.00% 3.00% 5.00% 7.00% 9.00% 11.00% 13.00% 15.00%

Average Annual Growth Rate 2001-04

2004

Em

ploy

men

t C

once

ntra

tion

Rel

ativ

e to

Cal

iforn

ia E

mpl

oym

ent

Highway & Other Heavy Construction Equipment & Materials Maintenance & Operations Planning & Design

Source: EDD/LMID, California Regional Economies Employment Series

Mining the analyses of the Economic Strategy Panel and Regional Economies Project can focus international trade and investment targets.

• International trade– Targeted trade shows and missions– Sub-regional specialization

• Foreign direct investment– Sub-regions– Industries– Technologies– Strategic alliances– Joint ventures

Leveraging the building blocks of comparative advantage provides a means to grow and sustain California’s economic prosperity.

DIVERSITY

INNOVATIONCOMPETITIVENESS

PROSPERITY

Export-orientated value chain that leverages its specialization in

the development & operation of advanced infrastructure systems

A global model foran innovative and integrated goods &

people movement transportation system

Sustainable & secure infrastructure system that maximizes life-cycles,

preserves the environment, and protects human health

A skilled and diverse workforce that can meet the demands of an advanced

infrastructure system

A WORLD CLASS INFRASTRUCTURE VALUE CHAIN

.

California’s diversity of people, regions, and industries coupled with the state’s world-class research institutions provides an environment for leadership in innovation.

Innovation Measure Amount U.S. RankingNumber of High tech Workers 905,000 1st

Average High Tech Annual Salary $90,600 1st

Statewide High Tech Payroll $81.9 Billion 1st

Number of High Tech Establishments 41, 900 1st

High Tech Exports $47.8 Billion 1st

Venture Capital Investment $10.4 Billion 1st

Research and Development Expenditures $59.7 Billion 1st

Semiconductor Manufacturing Employment 66,800 1st

Computer and Peripheral Equipment Employment 60,200 1st

Electronic Component Manufacturing Employment 49,300 1st

Source: American Electronics Association. Cyberstates 2006

Innovation is driven by California’s small and mid-sized businesses which employ nearly 80 percent of the state’s workforce.

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

0-4 5-9 10-19 20-49 50-99 100-249 250-499 500-999 1000+

Size of Firm

Employees by Size of Firm

Employees

Source: Employment Development Department

InboundLogistics Operations

OutboundLogistics

Marketingand Sales Services

The Value Chain

Primary Activities

Support Activities

Procurement Human Resource Management

Infrastructure Technological Development

Source: Michael Porter

Innovation and productivity gains among California’s industries result from redefining the processes and the inter-relationships among the components of the value chain.

1,4371,437

6,1656,165

(TEUs in thousands)

20202020

20042004HoustonHouston

1,0101,010 2,1522,152

MiamiMiami

2,0432,043 3,3823,382

OaklandOakland

4,4784,478

15,83515,835

NY/NJNY/NJ

1,8091,8095,5665,566

VirginiaVirginia

1,8601,860

6,6396,639

CharlestonCharleston

1,6621,662

9,4209,420

SavannahSavannah

1,7981,7984,3964,396

TacomaTacoma

1,7761,776 2,5572,557

SeattleSeattle

Global trends will force all industries to rethink their contribution to the value chain and how best to sustain competitive advantage.

Source: U.S. Department of Transportation

LA/LBLA/LB

59,42059,420

13,10113,101

Volume of Trade: 2004 and 2020

Working with the Consular Corps, the State of California and its local partners will be better positioned to provide information that improves the likelihood of mutual job creation.

• Trade shows

• Trade missions

• Trade transactions

• Collaborative efforts

• Strategic alliances

• Joint ventures

• Direct investment

Working together, the virtuous cycle for growing mutual prosperity is within reach.

DIVERSITY

INNOVATIONCOMPETITIVENESS

PROSPERITY

World Leader in Innovation

• California has more than twice as many technology jobs as second-place Texas.*

• $10.43 billion of venture capital in 2005, 48% of United States total.*

• Over 63,000 students in science and engineering graduate programs**

• Ranked #1 in patents awarded (703) to academic institutions in 2003.**

• 102,202 new business incorporations in 2004.***

* American Electronics Association.

** National Science Foundation.

*** California Department of Finance.

To Take Away

• California is a global market force.

• California’s diversity means mutual economic prosperity

• California is a leader in innovation.

• California is an integrated system of several diverse regional economies.

• California is open for business.

California is a Global Player

CA Gross Domestic Product as Percent of US Total

12.37%

12.52%

12.86%

13.24%

13.00%13.10%

13.17%

13.29%

11.80%

12.00%

12.20%

12.40%

12.60%

12.80%

13.00%

13.20%

13.40%

1997 1998 1999 2000 2001 2002 2003 2004

Year

Per

cen

tag

eIn 2004, California’s gross domestic product was over

$1.55 trillion

California is Global PlayerCalifornia is the world’s 8th largest economy.

Country GDP*United States 11,668

Japan 4,623

Germany 2,714

United Kingdom 2,141

France 2,003

Italy 1,672

China 1,649

California 1,551

Spain 991

Canada 980

Source: World Bank. World Development Indicators. 2004 GDP.

* billions of US dollars

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

11000

12000

Bill

ion

s o

f U

S $