U.S. exports are booming, due in large part to a combination of dollar weakness and massive gains in American productivity. While the U.S. economy has been struggling to generate anything approaching a normal pace of growth in recent quarters, exports from the United States expanded more than 8 percent last year and may grow even faster in 2008 and 2009.
For obvious reasons, construction is not generally thought to be part of this story. Unlike goods and certain services such as software development and online education, construction tends to be anchored in local economies and not easily traded between nations. Certain construction-related services do not fit this profile, including engineering, design and architectural services, because these services are more transportable.
In actuality, construction is more closely associated with growth in imports than expansion in exports, due mainly to the importation of construction materials.
As an example, according to the U.S. Geological Survey, in 1986 the United States imported 502,000 metric tons of copper. By 2006, this more than doubled to 1,070,000 metric tons. This growth in volume persisted despite dramatic increases in unit prices. In 1986, the unit value of copper was $2,165/ton. By 2006, copper rose to $5,610/ton.
Similarly, between 1974 and 2004, the last year for which the U.S. Geological Survey provides data, imports of cement rose from 3.5 million metric tons to more than 9 million metric tons, though admittedly cement prices have not risen as steeply. The increase in the imports of materials has been partially offset by massive increases in construction equipment exports by Caterpillar, John Deere and other companies.
Rather than exporting construction services, the more common practice has been to utilize foreign direct investment to access international construction demand. The United States is known for its massive, integrated general contractors that operate worldwide. Rather than export their services, these companies establish themselves in foreign markets through wholly or partially owned subsidiaries or through other organizational structures.
Also, foreign investors have entered the domestic U.S. market en masse. According to the International Trade Administration (ITA), for non-U.S. investors, entry into the U.S. construction market primarily is achieved through the acquisition of existing U.S. firms. For both operational and regulatory reasons, foreign construction firms typically must establish or purchase U.S. entities, hire U.S. subcontractors or be represented by U.S. joint venture partners in order to operate here.
U.S. contractors frequently are required to operate in a similar fashion in foreign markets. According to the ITA, some major U.S. contractors are either U.S. corporate subsidiaries of foreign firms or domestic-origin contractors in which foreign firms have acquired a majority share.
Of the 10 largest U.S. general contractors by revenue in 2003, foreign parents owned three. Moroever, of the world’s 10 largest construction firms in 2005, seven own U.S. operations (VINCI, Bouygues, Hochtief, Skanska, AB, Kajima, Taisei and China State Construction Engineering Corporation). This is also true of 22 of the 40 largest global contractors.
The Time to Grow Construction Exports is NowForeign interest in the United States is not surprising. Until the slump in residential construction took hold in 2006, the United States’ share of global construction was rising, from 23 percent during the mid-1990s to 27 percent 10 years later. Going forward, it is likely the United States’ share of global construction will decline—perhaps dramatically—as China, India, Russia, Brazil, South Africa, Mexico, the United Arab Emirates and many other developing nations continue to emerge.
While this doesn’t sound particularly benign from the perspective of domestic contractors, this shift in construction volumes will create new opportunities for exporters and for those seeking to gain a foothold in global markets through acquisition or other mechanisms. Opportunities for exporting construction services abound.
In fact, the U.S. government is a client for overseas work. As a prime example, the U.S. Department of State claims its overseas building projects are open to all qualified firms. The department’s Bureau of Overseas Buildings Operations is responsible for more than 15,000 facilities worldwide.
But the United States’ success in growing construction exports has seen only limited success thus far. According to a recent Government Accountability Office analysis, U.S. exports of construction, architectural and engineering services declined between 1995 and 2004 even as other service categories experienced noteworthy expansions.
China, with which the United States runs its single largest trade deficit, represents a logical starting point. During its current five-year planning period (2006–2010), the plan for total construction in China is estimated to reach 2 billion square meters per year (one square meter equals nearly 10.8 square feet). Overall construction spending in China rose 165 percent during a recent four-year period, according to China’s National Bureau of Statistics, and is still expanding 25 percent annually. China and India offer some of the biggest opportunities for infrastructure work as their governments race to address inadequacies that threaten to impede their booming economies.
![]()
Wednesday, February 8, 2012