The Brookings Institution report that ranks Honolulu 84th in export performance among U.S. metropolitan areas should give us pause about what we are doing in our local economy. The study understates Hawaii’s exports, but is still a call to do better.
Brookings’ findings are based on export statistics compiled by the U.S. Bureau of the Census from the millions of export declarations filed as products leave the country.
This data measures physical exports from a particular port or airport, but ignores where the products were made. That’s not a problem when you look at the whole country, but it skews things when you look at a city.
If Boeing exports a 787 and Honolulu is its last stop on the way to an Asian customer, that may count as a Honolulu export.
If our anthurium exporters ship to Germany, the official port of export may be New York—and we don’t get the credit.
Census export data also doesn’t catch shipments valued under $2,500, which eliminates some exports by Hawaii companies. We have companies sending party supplies to Germany, aloha wear to Singapore, sauces to Hong Kong and jewelry to Romania. We also have software exporters, but if it’s downloaded, it isn’t counted.
Service exports are even harder to calculate. We have a good handle on Hawaii’s tourism exports, and Brookings got it right that this is our biggest export (though I’m puzzled that they think Japan is only our third largest export market).
Hawaii’s other service exports were probably undercounted.
Our architects do business globally, but I have not seen a good estimate of their overseas billings.
I know several accountants who have clients in Hong Kong, but they probably don’t even think of this as an export.
Education (every foreign student in Hawaii is an export sale) feeds $160 million into our economy every year.
We have ocean engineering companies working for foreign clients, environmental engineering firms spreading through Asia, and hotel companies winning management contracts overseas.
All of these are exports—and all provide higher paying jobs than tourism gives us—so Brookings’ estimate of our average earnings from exporting is skewed to the low side.
Brookings does raise a good question about us. The report draws attention to a correlation between patent filings and export performance. Cities that have a high number of patent filings also do well in the national export rankings. Honolulu is one of the lowest patent-filing cities in the study, so it should not be surprising that we rank low in exporting.
Our relative lack of exports may be a symptom of a lack of technology development, which bears on the Act 221 debate.
But I think we have a bigger problem. When you live on an island, too often you don’t look outside. Your world stops at the shoreline. We need to push for more globally focused education and explore the world ourselves.
Our firms need to diversify their customer bases and face up to international competition before our competitors come here. Too much of our exporting is accidental, perhaps responding to an overseas customer who happens upon a website, or selling to family contacts in one other market. We are not unique in that; the majority of American exporters sell to one customer in one foreign market. But we need to overcome it and systematically build overseas markets.
The Hawaii Pacific Export Council, working with the U.S. Export Assistance Center down at the Foreign Trade Zone, can help Hawaii’s companies do that. We have decades of success in helping to take small Hawaii companies into foreign markets. It’s not too late for Honolulu to become an exporting powerhouse.