International Trade and the Golden Triangle

Amir MirabiManager - International BusinessOffice of the Governor - State of Texas

Port Arthur Small Business SummitPort Arthur, Texas28 Oct 2009

Texas – Leader in the Global Economy

The Global Economy – Turmoil ?

The Bad & Ugly

Global economy has taken a severe hit - worst since WWII World trade down 10 percent US exports down 18 percent Texas exports down 17 percent

“Economic Flu” has hit all sectors & all nations in varying strains

Demand contraction has dealt a harsh blow Unemployment plagues many Credit is tight - limits spending

Lessons Contagion validates integrated economies Globalization is here to stay & more critical than ever

Sources: WorldBank / Texas State Comptroller of Public Accounts / Federal Reserve Bank (Dallas)

The Global Economy – or Turnaround ?

Sources: Kauffmann Foundation / Federal Reserve Bank (Dallas) / Moody’s Economy

The Good

Massive/unorthodox US & foreign monetary stimulus has spurred growth Financial markets have stabilized Wage and price inflation are subdued Timing & speed of recovery is varying

Asia leading recovery US in first stages of recovery Europe lagging

Some nations & states more resilient than others Texas has a strong economic umbrella Driven largely by exports

Among US states, Texas has been at the forefront of globalization

Ranked #2 most globalized state Houston & Dallas top 10 most international cities Beaumont & Austin top 25

Issue Old NewMarkets Stable DynamicScope of

CompetitionNational Global

Organizational Form

Hierarchal Networked

Production System Mass Production Flexible ProductionKey Factor of Production

Capital/Labor Innovation/Ideas

Key Technology Driver

Mechanization Digitization

Competitive Advantage

Economies of scale Innovation/Quality

Relations Between Firms

Go it alone Collaborative

Skills Job-Specific Broad and ChangingWorkforce Organization Man “Intrapreneur”Nature of

EmploymentSecure Risky

Source: Atkinson, Robert D. and Daniel K. Correa. “The 2007 State New Economy Index: Benchmarking Economic Transformation in the States.” Kauffman Foundation and The Information Technology &Innovation Foundation

The Global Economy – A Paradigm Shift

Texas Ports Facts

Realities Texas port activity has grown 2x as fast as US in last 10 years 317 million metric tons of cargo annually 17% of total US tonnage 50% of all US foreign imports & exports

Benefits Nearly 1 million jobs in Texas $30+ billion in personal income for Texans Business sales of $178 billion Texas marine & intermodal transport account for $65 billion

Sources: Texas Ports Association / Federal Reserve Bank (Dallas)

Texas Ports – Creating Statewide Strength

A Key Economic Component

Texas is the largest exporting state in US - 7th year in a row - $192 billion Compared to US, Texas exports larger share of its output: 15% TX vs. 8% US Compared to US, Texas jobs are more export-reliant and related:

Overall - 6.7% TX vs. 5.1% US Manufacturing jobs - 23% TX vs. 20% US Computer & Electronics jobs – 48% TX vs. 35% US

Diverse & Dynamic

Chemicals – S38.3 billion Computers & Electronics – $35.2 billion Machinery Manufactures - $27.3 billion Petrochemicals & Coal-related products – $25.3 billion

Source: Federal Reserve Bank (Dallas)

Texas Exports – Making Texas Strong


Texas Exports – Output Levels


Texas Exports - Composition


Texas Exports - Destination

Texas: The Business Capital

Texas has most Fortune 500 & 1000 HQ’s of any state - 64 & 113 companies Texas ranked #1 for Corporate Site Selectors by Site Selector Magazine - 2008 Texas ranked as “Number One Place for Business” by CNBC – 2008 Texas home to most 2008 Hispanic Business 100 of any state – 23 companies Texas won Forbes Magazine “Best Cities for Jobs” - Houston, Austin, Ft. Worth Texas won Fortune Magazine’s Nation’s 2008 100 Fastest-Growing Firms list

25 companies in Texas vs. 18 in California

Texas chosen by Chief Executive Magazine as “Best Place for Business” –

4th year in a row (2005-2008)

Texas picked as 2007 “State of the Year” by Business Facilities Magazine

Texas home to 3 Major US Airlines – Continental, American and Southwest Texas produced 1.29 million jobs in the last 5 years – #1 in US

Source: Texas State Comptroller of Public Accounts

“Texas has established a worldwide reputation for its open, positive attitude toward the business community. With a low tax burden, low living costs and government programs designed to help rather than hinder business, Texas is

the perfect location for international companies.” – Gov. Perry

Texas: The Investment Capital

Texas leads US in total FDI with ~$85+ billion invested in last 5 years (2003-2008) 2007 FDI into Texas was $11.8 billion creating nearly 5,500+ new jobs Texas leads US in EU Commercial Property Investments ~$51 billion Texas ranked 49th among states in its per capita state tax burden

No State Income Tax / No Corporate Tax

Texas had 3rd lowest cost of living among states in 2008 Texas Ports handle nearly 51% of all US foreign imports & exports Texas has largest US rail system (23,337 km) and largest road system (671,594 km)

More than 2x the size of California with 11,774 km in rail / 374,638 km in roads

Texas has most Ports of Entry than any other state – 28 total Florida & N. Dakota tied for #2 with 22; California #3 with 21


Texas top 3 in nation for total business & academic R&D - $15.86 billion

Texas top 3 in nation for science Ph.D.’s awarded – 1,930 doctorates

Between 2000-2008, Texas’ population grew more than 2x the US rate 14.6 percent (Texas) versus 7.2 percent (US)

Texas has 5th-youngest workforce in the US, with a median age of 39.4 years

45,000+ college-graduate workers moved from other states to Texas in 2007-8

Texas has 2x the US average of fully bilingual professionals in the workforce

Texas: The Human Capital


Texas ranks 2nd for semiconductor manufacturing

Texas firms attracted $1.4 billion in venture capital for 2007 Nearly half - $684.3 million – allocated to Austin-based firms

Texas ranked 3rd for number of investments into venture-backed companies

Texas ranked 2nd for number of patents issued – 6,016 awarded

Texas has 900+ biotech and biomed firms representing nearly 29,000 workers

The world’s largest Medical Center is in Houston 46 hospitals and universities – 12,000+ doctors - 75,000+ employees

Texas: The Innovation Capital


“Texas is blessed with an abundance of technical, legal, financial and research expertise that can be deployed to meet the challenges of

providing energy for a growing population and economy.”

Energy industry accounts for ~17% of the Gross State Product

Texas is the nation’s largest producer of energy Accounts for 21.3% of total oil and 27.8% of total US gas production

Texas has ~24% of all US oil reserves and ~32% of all US gas reserves

Texas’ 23 refineries account for ~26% of all US refining capacity

Texas leads US in all renewable energies with largest wind generation capacity

Currently producing 27% of the national total renewable energy capacity Enough renewable energy to power over 1.5 million Texas homes

Texas: The Energy Capital


Texas leads US with largest solar, wind and renewable energy capacity Produces almost 2x the amount of California as a whole #1 in Wind - producing nearly 3x as much wind energy as #2 Iowa and #3 California

Texas leads US with biomass, landfill and plant-derived fuel production 75+ trillion BTU of biomass energy

Texas is the nation’s largest producer of “biodiesel”

187 million gallon capacity per annum / 73 million produced in 2007

Recent Renewable Energy Generation Statistics (Megawatt Hours)

Wind 7,907,000 MWh Wood & Derived Fuels 900,888 MWh Hydropower 661,971 MWh Landfill Mass 218,813 MWh Biomass 43,516 MWh

Texas: The Renewables Capital


“Texas is a hub for world trade, linking North, South, East and West – an ideal location for international commerce”

2008 Texas GSP is $1.245 Trillion - Up 4.2% from 2007 vs. 1.9% for US Represents 12th largest economy in the world

Texas is the leading exporter in the USA - 7th year in a row

Texas exports swelled from $168.2 billion in FY07 to $192.14 billion in FY08

California a distant second with $144.8 billion

Chemicals were Texas’ most important export - $38 billion Computers and Electronics 2nd most important export - $35 billion

Foreign-owned firms directly employ 368,200 Texans EU countries directly employ 198,000 Texans

Texas: The Trade Capital

Source: Texas State Comptroller of Public Accounts / US Department of Commerce

Bi-Lateral trade between Texas and the World ~ $522 billion

Export trade with the following countries:

2007 2008

Mexico $56.0 billion $62.1 billion Canada $16.9 billion $19.2 billion China $8.27 billion $8.45 billion South Korea $5.56 billion $5.16 billion Netherlands $5.29 billion $7.06 billion Taiwan $5.08 billion $3.88 billion Singapore $4.52 billion $5.46 billion Brazil $3.90 billion $5.96 billion Japan $3.44 billion $3.63 billion U.K. $3.27 billion $3.54 billion

Texas: Trade with the World

Source: US Department of Commerce

“Bi-Lateral trade is an essential part of our national and local economies”

Did you know:

International trade generates nearly 30% of US GDP

95% of retail and commercial consumers live outside of the US

97% of US exporters are SMEs, and exports directly support over 12 million jobs in the US and support millions more indirectly

Imports keep inflation low and expand consumer choice and quality

Foreign companies in the US directly employ 5.1 million Americans and support millions more indirectly

Benefits of International Trade

Source: US Chamber of Commerce

Trade Means Jobs

Global demand for $192+ billion in Texas-produced goods directly generates nearly 500,000 jobs

Export-supported employment related to manufactured goods accounts for nearly 1 of every 18 private sector jobs in Texas

Over 30,000 businesses in Texas sell their products overseas - and they all employ Texans !

92% of Texas businesses that export are SME’s

There are over 350,000 Texans employed by foreign companies

EU-Affiliated firms alone employ nearly 200,000 Texans

What International Trade Means to Texas


Trade Means Revenue

Sales revenue generates jobs and supplements the state tax base, which funds community assets like roads and schools

$128.8 billion in Texas manufactured goods - representing ~15% of the total state economy - are exports

FDI into Texas in 2007 was $11.8 billion directly creating nearly 5,000+ new jobs

Total FDI into Texas over the past five years ~$85+ billion

Texas leads US in EU Commercial Prop. Investments ~$51 billion

What International Trade Means to Texas


“As a hub for world trade, Texas links North and South, East and West serving as an ideal location for international commerce and a major

center for foreign investment”

From 2001-2007, Texas exports to Latin America rose by 49.2 percent to $73.2 billion in 2007

Texas imported $245.2 billion in products from other nations in 2006

Mexico accounted for more than half of that amount, at $124.0 billion

U.S. affiliates of Latin American companies employed 50,000+ Texans, including 15,000 Texas manufacturing jobs

LatAm accounted for 9 percent of total Texas FDI or ~$7.5 billion

$346 million in commercial properties

Texas: Gateway to Latin America


“As a hub for world trade, Texas links North and South, East and West serving as an ideal location for international commerce and a

major center for foreign investment.”

From 2001-2007, Texas exports to China rose by 424.3 percent to $8.3 billion in 2007

Texas imported $245.2 billion in products from other nations in 2006

China ranked second as importer with $15.9 billion in imports

U.S. affiliates of Asia-Pac companies employed 42.000+ Texans

Asia-Pac accounted for 14 percent of total Texas FDI or ~$11.8 billion

$1.9 billion in commercial properties

Texas: Gateway to Asia


Common Misconceptions

Company has to be large

Company must have an in-house legal , marketing & export dept’s

Company must have substantial trade volume

Company officials must be fluent in foreign languages

What are the Common Exporter Mistakes?

Making the Export Decision

Obtain qualified export counseling and develop a master international strategy and marketing plan

Sufficient commitment by top management Concentrate on one or two geographical areas and

establishing a basis for profitable operations and orderly growth

Sufficient care in selecting overseas sales and public relations representatives and distributors

Do Not Assume that a given market technique and product will be successful in all countries

Must be willing to modify products to meet regulations or cultural preferences of other countries

Consider the possibility of appointing an export and marketing management company

The ‘How’ of Exporting

Best Practices of Successful Exporters

Select Attractive Markets

Leverage US Customer Relationships

Select Partners (Distributors, Reps, Agents, etc.)

Understand Culture and Invest in Personal Relationships

Protect Intellectual Property

Reduce Payment Risk

How Texas Companies Achieve Success

The Governor’s Office of Economic Development & Tourism functions as the lead state agency for economic development working in partnership with businesses and local communities to promote economic prosperity and job growth for Texas

Our customers are the citizens of Texas, economic development and tourism organizations, businesses, communities, gov’t entities and elected officials

Financial incentive packages are custom-designed to meet the needs of both the company and community

CEOs and top-level executives work with Governor’s Office to negotiate future business expansion and relocation prospects

Texas Governor’s Office - EDT

The Office of International Business provides the following:

Trade Shows, Events and Missions

Export Counseling & Advocacy

Collection and Dissemination of Trade Leads

Trade-Related Market Research and Analysis

State of Texas - Mexico Office

How the Governor’s Office Assists

US Commercial Service

Mission is to promote the export of goods & services from the US to foreign markets

158 Offices worldwide / 108 Export Assistance Centers in US – 7 in Texas

Assistance with:

Market Research & AdvocacyExport Licensing & DocumentationProduct Standards & ComplianceTariffs, Taxes & Rate Schedules

Who Texas Partners With

Other Partners

DECs (District Export Councils) – 4 in Texas

USDA Foreign Agricultural Service

EXIM (Export-Import) Bank

OPIC (Overseas Private Investment Corporation)

SBDC Network (Small Business Development Centers)

ITC (International Trade Centers)

Local Chambers of Commerce / City Offices

Congressional Offices / Consulates

Who Texas Partners With

EXIM Bank http://www.exim.gov

Small Business Administration http://www.sba.gov

US Customs http://www.customs.ustreas.gov

US Dept. of State http://www.state.gov

Overseas Private Investment Corporation http://www.opic.gov

Helpful Websites

http://www.exim.gov/

http://www.exim.gov/

http://www.sba.gov/

http://www.sba.gov/

http://www.customs.ustreas.gov/

http://www.customs.ustreas.gov/

http://www.state.gov/

http://www.state.gov/

http://www.opic.gov/

http://www.opic.gov/

United States Department of Commerce http://www.us-doc.gov

US Commercial Service http://www.buyusa.gov

District Export Councils http://www.exporttexas.com

Office of the Governor http://www.texasone.us

Helpful Websites

http://www.us-doc.gov/

http://www.buyusa.gov/

http://www.buyusa.gov/

http://www.exporttexas.com/

http://www.exporttexas.com/

http://www.texasone.us/

http://www.texasone.us/

• Texas Enterprise Fund• Emerging Technology Fund• Texas Enterprise Zone Program• Texas Capital Fund Infrastructure Program• Texas Capital Fund Real Estate Development Program• Rural Municipal Finance Program• State Sales and Use Tax Exemptions• Texas Industry Development Program• Texas Leverage Fund• Texas Economic Development Act• Ad Valorem/Property Tax Exemption• Economic Development Refund• Renewable Energy Incentives• Moving Image Industry Incentive Program

State Incentives & Programs

$377+ million in funds appropriated

Deal closing fund Jobs driven - Wages should exceed county average salary Repayment formula based on sales tax generated from wage expenditures Substantial job creation and high wages (usually 100+ jobs) Significant capital investment Financial participation from the city, county and/or school district; in the

form of incentives & abatements Secure financing in place Used when there’s competition with another state Requires unanimous approval of the Governor, Lt. Governor and Speaker

TEF has generated 53,950 new jobs and $14+ billion in capital investments

MARTIFER (Portugal) awarded ~$1 million (Sep 2008) $40 million Wind Tower Plant investment / 225 jobs in San Angelo, TX

Texas Enterprise Fund (TEF)

Expedites development and commercialization of new technologies

Created in 2005 and re-appropriated in 2007

Commercialization Grants:

Provides elected early-stage investment in new, technology-based, companies that collaborate with public or private institutions of higher education in Texas

Matching Research Superiority Grants:

For acquisition of top talent for companies collaborating with Texas higher education institutions

Grants:

Assists companies in leveraging State funds to match Federal grants

ETF has allotted $140 million to 90+ projects

Emerging Technology Fund (ETF)

Texas unemployment rate consistently lower than the US rate 33 months of lower unemployment than US - currently 8.2% TX vs.

9.8% US

According to 2008 FDIC Report, Texas banks are the healthiest in nation

Texas foreclosures one of lowest in the US with 1 in every 838 homes

Comparable foreclosure rates in other states include:

Nevada - 1 in 62 homes Florida - 1 in 140 homes California - 1 in 144 homes

Texas: Positive Economic Outlook


In FY08, Texas gained 93,500 jobs – #1 in US This represents over 59% of all job gains in US More than all 49 other states combined Houston 22,500 jobs - Austin 9,900 jobs - San Antonio 4,800 jobs

Texas: Positive Economic Outlook

State Job Growth – Top 10 StatesState Net JobsTexas 93,500

Oklahoma 19,600

Louisiana 12,400

Wyoming 9,000

Washington, DC 6,400

North Dakota 6,200

Alabama 4,800

Kansas 3,300


As stated by The Economist magazine:

“ The future is Texas. If you want to see where America should be heading, start by studying Texas. ”

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As recently stated by Governor Rick Perry:

“ By reaching across borders, Texas’ entrepreneurs have made the Lone Star State a lynchpin of international trade, creating new opportunities for Texans and their worldwide

partners alike.”

What It All Means

Texas is Number One

C:\Users\MirabiMD\Videos\RealPlayer Downloads\TexasOne.us.flv

Amir Mirabi Manager - International BusinessOffice of the Governor - State of Texas221 East 11th Street, 4th FloorAustin, TX 78702

Tel 512.936.0213Fax [email protected]

Contact Information

mailto:[email protected]

International Trade and the Golden Triangle

Investor Relations

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