Chapter 3-3: Economic Context of Freight

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Chapter 3-3: Economic Context of Freight
In 2013, California was one of the ten largest economies in the world with the State’s gross domestic product1 (GDP) at $2.0 trillion. California, with 12 percent of the United States (U.S.) population, accounts for 13 percent of the nation's economic output. The U.S. is the largest economy in the world with a GDP of $16.2 trillion (World Bank, 2013), followed by China at half of the U.S total. International trade and investment is a major economic engine for the State that broadly benefits business, communities, consumers, state and local governments. California has a diversified economy and its prosperity is tied to export and import of both goods and services by California-based companies moving through the State’s transportation gateways.

Source: Center for Continuing Study of the California Economy, July 2013
At the core of the California Freight Mobility Plan (CFMP) is the vision developed by the California Freight Advisory Committee (CFAC): “As the national gateway for international trade and domestic commerce, California enhances economic competiveness by collaboratively developing and operating an integrated, multimodal freight transportation system that provides safe, sustainable freight mobility. This system facilitates the reliable and efficient movement of freight and people while ensuring a prosperous economy, social equity, and human and environmental health.”
The CFAC established goals of economic competiveness, congestion relief, safety and security, freight system infrastructure preservation, innovative technology practices and environmental stewardship – all of which support sound, well-reasoned, and responsible investment and decision making. The CFAC sees these goals as interconnected, interdependent, and a high priority for freight transportation investment.
California’s trade is both domestic and global. At the domestic level, California’s population grew by almost 298,000 residents in 2012 to 37,966,000 as of January 1, 2013 (California Department of Finance). California is home to the second largest consumer market in the U.S, the Los Angeles-Inland Empire region; the first is the Greater Hudson Valley region of New York. While consumer goods pass through the State to other parts of the U.S. such as Chicago, Memphis, Kansas City, and New Orleans, many goods stay within the State and are purchased by California consumers. While California has historically received 40 percent or more of Asian trade, (48.8 percent in 2012 at Port of Long Beach/ Port of Los Angeles) of the U.S. containerized imports, roughly 40 percent to 60 percent of that cargo is destined for the California consumer market, primarily the Los Angeles Basin.

Source: USA Trade Online, US Census Bureau, Foreign Trade Division
In 2012, the top goods exported from California were computer equipment ($13.3 billion), semiconductor and components, ($11.0 billion), navigation and control instruments ($9.7 billion), fruits and tree nuts ($8.3 billion), and communications equipment ($8.2 billion). Computers and electronics (including semiconductors and navigation equipment) alone accounted for 28.2 percent of total merchandise exports. One of California’s fastest growing exports is dairy products with exports in 2012 reaching $1.9 billion.
The economic competiveness goal “to improve the contribution of the California freight transportation system to support economic efficiency, productivity, and competitiveness” is the foundation of this section. Globalization of production and trade is dependent on a highly complex network of freight transport. For the State to remain competitive, it must meet the demand for an efficient, reliable, and flexible transportation network. In order to achieve this goal, the transportation system must be able to sustain, adapt, and keep pace in a highly competitive, global economy. Unfortunately, transportation investments have not kept pace with demand. California’s roads, highways, bridges, seaports, rail, and the international borders are invaluable assets that need to keep pace for our future. Most of the highways and bridges were built in the 1950s and 1960s, at a time of major public investment in California. We have not kept pace with the maintenance, preservation and upgrades needed to this system. California is an attractive global gateway because of its geographic position and its robust network and transportation is a leading factor in the State’s economic strength. The State must continue to improve the network and marginalize costs in order to stay ahead of its competitors and to support the State’s economic growth. Failure to invest will put the State and the nation, which is dependent on our gateways, at a competitive disadvantage at a time when production and freight transport is most fluid. Production and freight movement will follow the path of least resistance for transport, putting cost and reliability at the forefront.
Congestion costs affect shippers, carriers, manufacturers, and ultimately, consumers through higher costs. In 2005, the Federal Highway Administration, in the Economic Costs of Freight Transportation said that delay costs $26.60 per hour to truckers. But beyond labor costs, truck operating costs are directly connected to fuel costs and damaged equipment caused by deteriorating roads and higher insurance costs. Bottlenecks and delay make reliability difficult, particularly in California’s urban areas. According to a Texas Transportation Institute (TTI) study, 2012 Mobility Report, congestion in 498 metropolitan areas, in 2011, caused urban Americans to travel 5.5 billion hours more to purchase an extra 2.9 billion gallons of fuel for a congestion cost of $121 billion.
In Transportation, Jobs, and Economic Growth, Martin Wachs, in a discussion about economic productivity, said that “sound transportation investments lower the costs of moving people and goods” and stated that “high-productivity transportation investments increase connectivity and reduce congestion, by doing so they improve economic well-being.” However, he cautioned that transportation investments should be well-chosen, sound, and should improve productivity, “because productivity is a central component of economic growth, it should be of major concern when assessing the value of transportation expenditures.”
California’s ports are faced with competition from Canada, Mexico, East Coast and Gulf Coast ports which have gained substantial import volume. The West Coast ports have made major investments knowing that it is critical to respond to competitive challenges. Although container volumes in North America have slightly risen, the West Coast ports have seen their sharedrop as compared to their competitors. A Panama Canal expansion project consisting of two new sets of locks (one on the Pacific and one on the Atlantic side of the canal) that would support the transition from 5,000 twenty-foot equivalent unit (TEU) vessels to 13,000 TEU (but cannot accommodate the Post-Panamax vessels of 18,000 TEUs) is currently underway. With its anticipated opening in 2015, discretionary cargo (cargo that could go through another port) could intensify the trend of lost market share with larger ships going directly to the East Coast ports in order to eliminate cross-country land transport. The West Coast is usually the most efficient route for goods exported from China and Japan; however, manufacturers in other parts of Asia may gain efficiencies by accessing East Coast ports via the Suez Canal.
Canada and Mexico are investing in their ports and supporting infrastructure. In 2005, the World Economic Forum ranked the “U.S. as number one in infrastructure competitiveness.” Today, Canada ranks eleventh and the U.S. is ranked sixteenth. In a Journal of Commerce article (October 2013) on maritime shipping it stated that, “productivity, rather than loyalty to a particular port or terminal operator, directs the maritime industry today.” Along with modernizing terminal operations and intermodal connectors, California’s ports may have to automate more terminal operations in order to remain competitive.
Freight Gateways and Regions

California has four key freight gateway regions: the San Diego-Mexico Border region, Los Angeles-Inland Empire region, San Francisco Bay Area, and Sacramento-San Joaquin Valley region. Two other regions in California also play critical roles in the State’s economy but are not major freight gateways – the North State Super Region and the Central Coast.

San Diego-Mexico Border

Cross-border commerce between California and Mexico continues to increase to record levels. California shares a 130-mile border with Mexico. The San Diego-Mexico Border Region includes the counties of San Diego and Imperial and five municipalities in Mexico: Tijuana, Playas de Rosarito, Ensenada, Tecate, and Mexicali. Cross-border trade continues to increase significantly since the North American Free Trade Agreement (NAFTA) passed in 1993. The Southern California Association of Governments (SCAG) reported in their 2012-2035 Regional Transportation Plan and Sustainable Communities Strategy that in 2010, $10.4 billion of trade passed through the international ports of entry between the U.S. and Mexico in Imperial County alone.

Trade with Mexico contributes to six million U.S. jobs. Mexico is California’s largest export market at $62.3 billion in total trade. According to the U.S. Chamber of Commerce2, U.S. trade in goods and services with Canada and Mexico rose from $337 billion in 1993 to $1.182 trillion in 2011. Mexico and Canada make up the two largest markets for U.S. exports, purchasing nearly one-third of U.S. merchandise. Economic trade through California border gateways has strained the State Highway System, which carries the majority of freight by truck. Border transportation infrastructure is inadequate for current and projected growth in binational trade. Poor border infrastructure and border crossing delays have generated economic, health, and environmental impacts. The California-Mexico international border has six points of entries (POEs): San Ysidro, Otay Mesa, Tecate, Calexico West, Calexico East, and Andrade (see Map 1). The Otay Mesa POE in San Diego County and the Calexico East POE in Imperial County are the two main California-Mexico freight gateways. The Otay Mesa POE is the second busiest commercial POE on the U.S.-Mexico border by number of truck crossings and the busiest commercial land port in California. In 2012, the Otay Mesa POE handled approximately 1.5 million trucks and close to $35 billion worth of goods in both directions. The Calexico East POE serves nearly all of the international truck traffic crossings in Imperial County with a total trade value of over $12 billion dollars in 2012. The most transported commodities entering the United States by truck through California POEs include pulp, paper, or allied products3; electrical machinery, equipment, and supplies; and food and farm products.
Los Angeles-Inland Empire (Los Angeles Basin)

The Los Angeles Basin includes Los Angeles, Riverside, San Bernardino, Orange, and Ventura counties and is the home to over 18 million people. This region is the largest manufacturing center of any metropolitan area in the nation. The Los Angeles Basin is the nation’s premier international gateway supporting international trade through its seaports, international airports, and international land border crossings. These facilities are a critical link between the U.S. economy and the Pacific Rim, one of the world’s fastest growing trade lanes. A world class transportation system and access to a large consumer market, both within the region and in nearby Western states, has made this region a logical location for national and regional distribution of a wide variety of products. Growth in logistics-based businesses has created a new and diverse source of employment and economic growth.

The value of two-way trade coming through the Los Angeles Customs District (LACD) was $403.5 billion in 2012, a new record high that enabled the LACD to overtake the New York-New Jersey Customs District and regain its top ranking in 2012. With a gain of 4.3 percent, two-way trade through the LACD grew somewhat faster than the U.S. as a whole. Total LACD two-way trade value is forecast to increase by 2.4 percent in 2013 to $413 billion, with a 4.7 percent gain to $433 billion expected in 2014.
The Ports of Los Angeles (POLA) and Long Beach (POLB) are the largest container ports in North America in terms of the number of containers that are shipped, with Oakland being the nation’s fifth largest container port. These ports, while taking in significant international import volumes, are also gateways for California global agricultural exports, particularly the Port of Oakland. Despite the recession, the POLA and POLB retained their status as the nation’s largest container ports, with the number of TEUs (twenty-foot equivalent units) edging up from 14.0 million TEUs in 2011 to 14.1 million TEUs in 2012.

The POLA supports 896,000 jobs throughout the region, 1.2 million jobs throughout California and 3.6 million jobs throughout the U.S. The POLA value to the California economy is $63 billion, and throughout the U.S. is $260 billion. Currently, the POLA exports 20 percent of the nation’s dairy products.

The POLB supports 371,000 jobs in California and 1.4 million jobs nationally. The Port of Long Beach’s impacts on the local, regional and national economies are substantial. More than $100 billion worth of cargo moves through the Port every year, creating jobs, supporting retail and manufacturing businesses, and generating tax revenues.
Economic growth in the Inland Empire areas of Riverside and San Bernardino counties was consistent throughout 2012 as a result of job growth, particularly over the second half of the year. The outlook for the regional economy has improved due to gains in the labor market, housing, construction, and manufacturing. This increase in activity along with substantial growth in e-commerce will positively impact the Inland Empire warehouse and distribution system network. Recently, logistics has been the region’s fastest growing sector; however, manufacturing has shown minimal growth. Construction, one of the Inland Empire’s job creators, is up but not at pre-recession levels.
San Francisco Bay Area

The San Francisco Bay Area is home to approximately 7.3 million people. Goods movement-dependent industries account for $490 billion in total output (50 percent of total regional output) and provide over 1.2 million jobs (28 percent of total regional employment). The explanation for the large difference between the shares of industrial output that goods movement-dependent industries provide as compared to their share of employment is related to the nature of manufacturing in the Bay Area. Manufacturing comprises 37.7 percent of total regional output, but only 7.5 percent of total regional employment. This is the result of two factors: 1) manufacturing in the Bay Area has shifted increasingly towards high-value products that are not labor intensive in their production processes (such as biotechnology products); and 2) many high-technology product manufacturers have shifted their production activities off-shore, but have kept their high value-added design and development activities in the Bay Area.

Major manufacturing industries in the Bay Area include biotechnology, electronic and precision instruments, wine production, and petroleum refining and chemical production. With the exception of petroleum and chemical products, these industries rely on expedited delivery services, reliable trucking, and air cargo, which place major demands on transportation system performance. Petroleum and chemical products also contribute significantly to the regional economy and are experiencing shifts in their modal usage from water and pipeline transport to rail.
Neither Transportation and Warehousing sectors nor Wholesale Trade sectors have high concentrations relative to national averages, even in the Bay Area sub regions where goods movement hubs are located, such as the Port of Oakland and Oakland International Airport. To the extent that goods movement industries, particularly value-added logistics services and warehousing, can provide good paying jobs to replace lost manufacturing jobs, the region may not be realizing the full economic benefits of its goods movement hub status in terms of regional job diversity.

In 2010, the Port of Oakland provided direct, indirect, and induced employment to almost 29,000 people; and paid over $2.2 billion in wages to employees. It paid over $56 million in taxes, which had a ripple impact to the economy of over $230 million. Transportation sectors (truck, rail, and other) were responsible for creating more than 76 percent of 10,900 direct jobs created at the Port, with warehousing and storage, government, and construction industries making up the rest of the employment. Indirect and induced jobs created, on the other hand, are mostly services sector and government jobs.

San Joaquin Central Valley

Despite the recent national economic downturn, the population of the San Joaquin Valley (SJV) has grown over 20 percent in the last 10 years, gaining nearly 700,000 residents since 2000 (which would rank it as the sixth fastest growing region in the United States). The current population in the SJV is nearly 4 million people, accounting for about 11 percent of the total statewide population. Fresno, Kern, and San Joaquin counties account for over 50 percent of the population. By 2040, the San Joaquin Valley’s population is expected to grow to nearly 8 million people, more than doubling the existing population.

According to the United State Bureau of Labor Statistics, the Gross Domestic Product (GDP) for goods movement-dependent industries in the 8-County region in 2010 was approximately $56 billion dollars. This is an increase of about 6 percent from 2009. The industries that contribute the most to regional GDP include wholesale and retail trade ($14 billion or 26 percent of the total), agriculture ($13 billion or 24 percent of the total), and manufacturing ($12 billion or 21 percent of the total).
In 2010, there were approximately 1.2 million people employed across all sectors in the SJV. Of this total, over 44 percent (564,000 jobs) are associated with goods movement-dependent industries, including agriculture (187,000), wholesale and retail trade (170,000), manufacturing (102,000), and transportation and utilities (48,000). By 2040, goods movement-dependent jobs are expected to increase by over 45 percent (nearly 250,000 jobs). This growth will be lead by industries, including transportation and warehousing, wholesale, and retail trade.
There are over 100,000 distinct firms in the SJV across all sectors and over 30,000 from goods movement-dependent industries. The majority of businesses (between 80 and 90 percent) are small in size, with less than 20 employees. The largest goods movement-dependent businesses within the SJV include: food growing and production (including raw fruits and vegetables, nuts, milk and other dairy products), food processing and packaging, oil refineries and mineral mining operations in the southern part of the SJV, and trucking and transportation and warehousing and distribution services throughout.
The SJV produces a very large share of California’s exports, especially agricultural products, with Canada as the leading destination of agricultural exports. In 2010, Canada took in 20.8 percent of California’s fresh fruits and nut exports and 64.9 percent of the exports of edible vegetables and seeds. According to recent statistics from the California Department of Food and Agriculture, the SJV accounts for over half the value of the State’s agricultural commodities, underscoring the region’s importance in the export market. The SJV has gained many distribution and production facilities in recent years partly due to relatively inexpensive land, available labor, and the relocation of many transloading, warehousing, and distribution facilities from the Bay Area to the Valley due to competing land use demands in the Bay Area.
Sacramento Region

As of January 2013, the six counties that make up the Sacramento Region had a population of just over 2.3 million people. In this region, manufacturing employment has been hovering just above 50,000 jobs. Long-term forecasts indicate that manufacturing’s share of the regional employment market will shrink. By contrast, jobs within the logistics sector are expected to increase. The logistics sector is made up of a variety of industry groups that involve the shipping, receiving, processing, and storage of goods. These sectors combined accounted for 53,000 jobs in the region in 2004, or 5.8 percent of the region’s total employment.

Employment in the wholesale sector accounts for 45 percent of the logistics sector total, with truck transportation the next largest group with more than 6,000 employees or approximately 11 percent. Logistics employment in Sacramento County is a relatively low share of the total, due to the higher share of government and office sector employment in Sacramento itself. Logistics employment in Yolo County is a much higher share, reflecting the concentration of logistics activity in West Sacramento, Woodland, and adjacent areas.
In 2005, the Sacramento Area Council of Governments (SACOG) region produced some $1.2 billion worth of agricultural products, all of which traveled by truck over rural roads to shipping or packing points. Sacramento County by itself produced nearly $350 million in crops and livestock in 2005. Wine grapes alone accounted for over 200,000 tons and over $100 million in gross value.
The heaviest use of rural roads for goods movement is usually during the harvest season from mid-summer through fall. Agricultural products tend to move in bulk, with truckloads approaching the 80,000 pound gross vehicle weight limit. The heaviest products tend to be liquids (fluid milk, fruit juices, wine) and field crops (tomatoes, rice, corn). Inbound chemical fertilizers, pesticides, and animal feed are also very heavy.

Central California Coastal Region

Population trends are a key driver of freight demand in a region, since the rate of growth or decline of the population impacts the volume of goods shipments required for consumption by local residents. The population of the five-county Central Coast region of California was approximately 1.4 million in 2010. In total, the population of region grew by 5.1 percent from 2000 to 2010, or by nearly 70,000 people, which is about one-half the rate of the State’s overall population growth. By 2040, the population of the region is expected to grow approximately 30 percent above 2010’s levels.

Gross Regional Product (GRP) is one way to measure the size of regional economic production, as it takes regional production, investment, and spending into account. Santa Barbara and Monterey counties are the largest economic engines in the Central Coast region at about $17.7 billion and $16.0 billion, respectively. The Central Coast regional GRP was nearly $54 billion in 2009.
The region’s key freight-dependent industries of agriculture, manufacturing, and truck transportation/warehousing, are critical to the region in terms of jobs and contributions to the regional economy. They also are critical to one another. With the region’s Salinas Valley and other intensively farmed areas serving as nationally significant producers of row crops, often produced on a year-round basis, that are highly perishable and have a high value, reliable trucking is particularly important so that crops are quickly and reliably transported to their final destinations – neighborhood supermarkets and local restaurants throughout the State and the nation.
Overall, the region experienced a positive growth trajectory, expanding from about $48 billion in 2001 to $53.8 billion in 2009. The region’s population and economic trends will impact freight demand in several ways. For example, there is a connection between GRP and freight volumes on regional roads. In 1980 through 2004, Freight volumes have followed GRP growth in the U.S. and are anticipated to continue this trend. As a result of this expected increase in regional GRP, additional freight tonnage moving to, from, and within the Central Coast region is expected.

North State Super Region (NSSR)

As of January 2013, the population of the NSSR was just over 1.1 million people. The size of the population varies considerably among the North State’s counties. Of the 16 counties in the NSSR, ones with the largest population are Butte, Shasta, and Humboldt. Together, these three counties house more than half of the North State’s population. If the population of the next three counties is added, the top six counties account for about three-fourths of the North State’s population.

In general, the North State is more dependent than California as a whole on resource-based industries, such as agriculture, timber, fishing, and nature-related tourism. This reliance on resource-based industries suppresses the income levels of the region because the dominant industries are not highly value-added.
Due to a combination of overharvesting and restrictions on production, counties that rely on the timber and fishing industries need to attract new industries to reverse declines in incomes and increases in poverty rates. The reliance on the extraction of natural resources has not in recent years been a viable economic development strategy. However, value-added agriculture has proven to be a viable option to generate more revenue from the region’s production.
Areas with institutes of higher learning, such as Butte and Humboldt counties, have fared better than other North State counties. These counties are better positioned to attract new, diverse industries because they can provide training opportunities through the colleges, as well as providing a better educated workforce for technical, professional and managerial positions. College towns also often offer a wider array of cultural and quality of life amenities that can help to attract residents and new industry. Growth in Chico provides an example of such development. Tourism continues to be a viable economic development strategy for many North State counties, despite seasonal limitations. Visitors spend roughly $2.4 billion per year in the North State and tourism-based employment accounts for nearly 33,000 jobs. Tourism-based employment has declined recently, but it had fared better in the North State than the rest of California prior to the Great Recession.
Agricultural and food products account for $7.0 billion in value to the North State, representing nearly 57 percent of all commodity values in the region. This group includes several types of commodities: tree nuts; canned, pickled, and dried fruits and vegetables; flour and malt; beer, wine, and other alcoholic products; grains; fruit; and other crop farming products.
Wood products account for $1.5 billion in North State production, which along with machinery and metal products is second to the nearly $7 billion produced by agriculture and related industries. This commodity group includes the following products: dimension lumber and preserved wood products; logs and roundwood; wood windows, doors, and millwork; forest, timber, and forest nursery products; paperboard containers; and miscellaneous wood products.
The North State has experienced employment losses in many existing industries, such as wood products, construction, and retail trade. These findings are consistent with trends in the timber harvest, housing prices, and retails sales. However, several burgeoning sectors show promise at the state and national level. For example, crop production is growing faster in the North State than in the nation and agricultural support is also growing. Higher, value-added agricultural production, such as canning, processing, and brewing, is a promising opportunity for the North State.
In 2011, California timber production by the top five counties totaled $183.3 million. All of these counties are in rural Northern California: Humboldt, Shasta, Lassen, Siskiyou, and Mendocino. Most of these areas are only accessible by highway. Demand from China is the major reason for increased log exports. In the second quarter of 2013, China imported 349 million board feet of West Coast logs, compared to 243 million board feet earlier in the year. At West Coast ports, 65 percent of outgoing logs and 35 percent of outgoing lumber were destined for China. Total U.S. log exports in the first half of 2013 increased by more than 20 percent compared to the same period in 2012, while the value increased by more than 27 percent.
Goods Movement Dependent Economic Sectors

Although California has a diverse economy, the State has several industrial sectors that drive its economic growth and contribute to its economic success. Goods movement-dependent industries – including manufacturing, wholesale and retail trade, construction, and transportation/warehousing – employ over 2.9 million people in Southern California and contributed $249 billion to the Gross Regional Product. Some of these businesses, particularly national manufacturing firms and consumer products distributors (who maintain large import warehouses and national distribution centers in the region), form much of Southern California’s “export base.” These businesses consider many factors in making location and expansion decisions with transportation cost and reliability among those factors.

Agricultural, Food, and Beverages

California continues to set the pace for the rest of the nation as the country’s largest agricultural producer and exporter and “leads all other states in farm income.”4 The world’s food supply chain has become increasingly global and connected. California is one of only five agricultural regions in world that has a Mediterranean growing climate. The great diversity of our agriculture allows us to produce more agricultural commodities than any other State. In 2011, California’s farmers and ranchers exported about 25 percent of the State’s agricultural production. In dollar terms, California’s agricultural exports reached a record-breaking $16.87 billion for 2011. California agricultural exports have grown significantly and are in high demand globally, particularly in Asia, Europe, Mexico, and Canada and include more than 400 commodities.5 The State produces nearly half of U.S. grown fruits, nuts and vegetables and leads the nation in milk production.6 California almonds were the leading export with $2.3 billion in international sales; dairy products were second at $1.1 billion in sales. The top 10 agricultural commodities by value for 2011 were milk and cream, almonds (shelled), grapes, cattle and calves, nursery, berries and strawberries, hay, lettuce, walnuts, and tomatoes.

California makes 90 percent of all U.S. wine and is the world’s 4th leading wine producer after France, Italy and Spain. In 2010, the U.S. became the leading wine consuming nation at 330 million cases (Wine Institute, 2011). Based on the U.S. Department of Agriculture statistics, the highest price per ton of wine grapes in the U.S. is Napa County with an average of $3,389 per ton paid in 2011. The majority of wine exports are going to the European Union, Canada, Hong Kong, Japan, and China.

Transportation Services, Heavy Manufacturing and Resource-Based Manufacturing

Transportation services are a vital component of California’s economy. In California, goods movement-dependent sectors accounted for about $1.52 trillion in output in 2008, led by manufacturing ($770 billion), construction ($179 billion), and retail trade ($175 billion). Industry output is projected to grow at a rate of about 2.5 percent annually, reaching an output of almost $3.4 trillion in 2040. Manufacturing output will account for $1.7 trillion; of this, wholesale trade will account for $517 billion and retail trade will account for $461 billion. The Milken Institute estimates that for every job created in manufacturing, 2.5 jobs are created in other sectors. In some industry sectors, such as electronic computer manufacturing, the multiplier is 16 to one. Manufacturing is California’s most export-intensive activity contributing significantly to California's $159 billion in exports in 2011.  Overall, manufacturing exports represent 9.4 percent ($120 billion in goods) of California’s GDP, and computers and electronic products constitute 29.3 percent of the state’s total manufacturing exports.  More than one-fifth (21.9 percent) of all manufacturing workers in California directly depend on exports for their jobs. 

Information Technology and Electronics

Stephen Levy, Director of the Center for Continuing Study of the California Economy” said that “California’s job growth is largely fueled by the three T’s – tech, trade and tourism.” The Bay Area, particularly the South Bay portion of the San Francisco Bay Area known as Silicon Valley, has been leader to the world’s largest technology corporations and start-ups. In the San Jose-Sunnyvale-Santa Clara areas, tech jobs contributed nearly 29 percent of the jobs7. Typically, salaries are higher in this sector “earn(ing) a substantial wage premium of between 17 and 27 percent. In 2010, California was first in employment for computer systems and design, internet and telecommunications, research and development, and engineering services employment.8 According to the Public Policy Institute of California, in 2011 “high-tech employment represents 4.3 percent of the total employment in California, but only 2.9 percent in the nation.” The report also states that employment is distributed among four broad industries with “computer and electronic product manufacturing accounts(ing) for 46 percent of high tech jobs in California, (compared to 29 percent nationally), while 33 percent of the State’s high-tech workers are employed in computer system design, 18 percent in telecommunications, and 3 percent in Internet service” related support. Additionally, 33 percent of the state’s high-tech workers are in computer system design, 18 percent in telecommunication, and 3 percent in Internet service provision, portals and data processing.

Electronic Commerce (E-commerce) and Electronic Freight

Electronic commerce also known as e-commerce has changed the retail industry. Electronic commerce spending in the United States was projected to reach $262 billion in 2013, a 14 percent increase from 2012, and $370 billion by 2017, accounting for 10 percent of all retail sales, according to Forrester Research. A number of major retailers in the market developing mega-fulfillment centers of more than 2 million square feet near large population centers — especially in the major logistics markets in Pennsylvania, New Jersey, Atlanta, Chicago and the Inland Empire. Newly-built omni-channel (evolution of multi-channel retailing with the goal of creating a seamless consumer experience including brick-and-mortar, internet, direct mail, catalogue, etc.) fulfillment centers are differentiated from traditional distribution centers by specialized features including greater building depth, with wider column spacing to accommodate a new generation of warehouse management systems. They also have a higher density of truck and trailer parking, at least 300 trailer stalls and a 185-foot secured truck court. Truck and trailer density for omni-channel facilities is three times that of traditional warehouses and distribution centers. As sales continue to exceed expectations, companies will be placing greater demand on the distribution infrastructure.

E-Freight replaces paper with digital documents throughout the supply chain. The benefits include standardization of letters of instruction, commercial invoices, bill of landing, certificates, etcetera that can be sent to a freight forwarder. Other benefits include lower costs, faster supply chain transit, greater accuracy, regulatory compliance, increased security and it is environmental friendliness. However, along with all of the benefits, comes the expectation that order fulfillment and delivery time will speed up, putting greater strain on already congested highways and local roads and further challenging pavement maintenance efforts, particularly on roadways not designed and constructed for frequent truck traffic.

International trade is an economic driver for both the state and the nation’s economy. Trade supports and creates jobs (direct, induced, indirect and related jobs), fuels economic growth, creates personal and business income, and revenue that contributes to federal, state and local taxes. Throughout the entire supply chain, jobs are created in manufacturing, retailing, wholesaling, construction, transportation and warehousing sectors. In a globally competitive environment, addressing freight infrastructure and operations needs must be a priority, but it must be done in balance while also meeting safety, security, community, and environmental needs.

1 State’s Gross Domestic Product (GDP) is the value of all goods and services produced in a state.)

2 United States Chamber of Commerce, 20 Years, NAFTA Triumphant, Assessing Two Decades in Trade, Growth, and Jobs, 2012.

3 This group includes the manufacture of pulp (wood and other fiber), of paper and paperboard, and in the manufacture of paper and paperboard into commodities such as boxes, bags, etc.

4 Netstate, California Economy,

5 California Agricultural Statistics Review, 2012-2013, California Department of Food and Agricultural,

6 Ibid.

7 Technology Works: High-Tech Employment and Wages in the United States, Bay Area Council Economic Institute Report, December 2012.

8 California High-Tech Workers Earn Highest Wage in Nation - $110,600, Tech America Foundation, October 2011.

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