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Press Release · June 17, 2003

California’s Economy Going Global

Although street protests may be more headline grabbing, there is other important news for California’s global economy in current efforts by the World Trade Organization (WTO) and the Bush administration to relax international trade barriers. As efforts to encourage international economic cooperation heat up, the Public Policy Institute of California (PPIC) is releasing two studies that assess the state’s current globalization and estimate what more liberal trade agreements could mean for California businesses.

In his report, Business Without Borders? The Globalization of the California Economy, PPIC research fellow Howard Shatz compares California’s global economic activity to that of the rest of the nation and finds the state is on the cutting edge of some emerging trends. Key examples are California’s comparatively high level of services trade, participation in production-sharing ventures — where components are assembled in different locations — and the state’s tendency to transport goods by air (55 percent compared to 30 percent in the rest of the United States). Indeed, the study finds California’s two most valuable export gateways are San Francisco and Los Angeles International Airports. “Although some aspects of globalization – such as foreign direct investment – are actually less prevalent in California, firms here tend to be more active in the parts of economic globalization that are growing the fastest,” says Shatz.

PPIC research fellow Jon Haveman looks at each of the trade agreements currently on the world agenda and finds the Asia-Pacific Economic Cooperation Forum (APEC) is most critical for California — with the potential to increase the state’s annual manufacturing exports by $19 billion. His study, Foreign Tariff Reductions and California Exports, also estimates that California’s export growth would be $27 billion annually (a 24 percent increase) if our trading partners eliminated tariffs altogether, the ostensible goal of the WTO. “California firms have much more to gain from efforts to open up trade than firms in other states because California businesses rely far more heavily on exports,” says Haveman.

Both studies cite the unique importance of Asian and Pacific Rim countries to California’s economy today and in the future. Both reports also reveal that California exports are high compared to the rest of the nation, making trade a vital part of the state’s economy and conferring upon policymakers in Washington and Sacramento an important role in facilitating the state’s global economic interests.

Please call Victoria Pike Bond at 415/291-4412 or Abby Cook at 415/291-4436 for assistance.

The Public Policy Institute of California is a private, nonprofit organization dedicated to improving public policy in California through independent, objective, nonpartisan research on major economic, social, and political issues. The institute was established in 1994 with an endowment from William R. Hewlett.