Exports Bolster Local Economies
Much of the world may be struggling with the economic downturn, but life has been getting better in Columbus, Ind., Kingsport, Tenn., and Waterloo, Iowa.
These out-of-the-way places have become trade hot spots as U.S. exports, fueled by the dollar's fall, continue to provide a rare spark in an otherwise gloomy economy.
While many economists expect a recent snapback in the value of the dollar and a spreading global slowdown to soften that growth, exports have become a key to greater local prosperity more than at any time in decades.
Columbus, population 40,000, is an export powerhouse thanks largely to diesel-engine maker Cummins Inc., which has added 1,000 jobs there since 2003. Kingsport, population 44,000, is home to Eastman Chemical Co., which is spending $1.3 billion to upgrade its sprawling chemical plant there on the strength of its global sales of plastics and fibers. And Waterloo, population 68,000, owes its healthy export economy to Deere & Co., which has announced its second major investment this year of its tractor plant there.
'Exports are impacting, in a positive manner, virtually every industry and every state,' says Daniel J. Meckstroth, an economist at the Manufacturers Alliance/MAPI, an Arlington, Va.-based public-policy and research group that represents mostly large manufacturers.
Foreign buyers are scouring the U.S. for everything from guitar strings and wine corks to used dump trucks and newsprint. The volume is so great that some inland trade hubs can't find enough metal shipping containers to load products headed overseas.
Dramatic Shift
Export-driven growth marks a dramatic shift in an economy that has relied heavily on consumer spending. That has slowed in recent months as Americans, nervous about job losses, teetering banks, falling home values, and rising gasoline and food prices, have tightened spending. Against that background, exports have emerged as a powerful motor.
Over the past year, real-goods exports have risen $115 billion, or 12%, and are up across every major category. They now make up nearly 13.5% of gross domestic product, the highest percentage since World War II. Critics often grumble that the U.S. exports masses of scrap steel and other waste materials to recyclers in China and elsewhere, which is true, but exports of manufactured goods, commodities and services are also growing. Consumer products, from sporting goods to art supplies, have risen 12%, and even autos, which are languishing on showroom floors in the U.S., saw a 4% bump up in exports.
Service exports -- which include media, entertainment, financial services, computer software and foreign tourism in the U.S. -- have grown strongly right along with the larger goods side of the trade ledger. Through the second quarter of 2008, real-service exports are up nearly 10% over the past year.
It's a badly needed tonic for the beleaguered U.S. economy. A smaller trade gap, due to growing exports and slowing imports, combined to add 3.1 percentage points to the GDP's growth rate in the second quarter. The latest report from the Institute for Supply Management also showed that while manufacturing as a whole shrank slightly in August, the index for export orders, an indicator of future export business, rose to 57 from 54. ISM readings above 50 indicate expansion.
Key to this growth has been the weaker dollar, which has made American goods more competitive in global markets and prompted many manufacturers to expand production inside the U.S.
Dollar Edges Up
The dollar has recently begun edging back up against key currencies, but it remains far below the levels it hit earlier in this decade, when a strong dollar was widely blamed for suppressing U.S. exports.
'It's getting increasingly likely that the pace of growth will slow, but to say the boom is over is too strong,' says Nigel Gault, an economist at Global Insight, an economic-forecasting firm in Lexington, Mass. One reason is that many big U.S. exporters, such as heavy-equipment manufacturer Caterpillar Inc. and airplane maker Boeing Co., have huge backlogs of orders that will take a long time to work through.
Mr. Gault says sooner or later, though, slower growth in the rest of the world -- now visible in Japan and Europe -- will translate into slower growth in foreign demand for U.S. goods. This, combined with a stronger or at least stable dollar, should damp the torrid pace of export growth.
But for now, exports will continue creating pockets of relative strength amid the larger slowdown. The farming, energy and aerospace sectors, in particular, have helped fuel export growth throughout the country.
The ripples from the export economy reach far and wide. Growing exports of farm products have meant work for everyone from truck drivers who haul pigs to slaughterhouses to thousands of businesses that broker and process grains, produce cheese or package frozen meat.
And more products to ship have meant jobs for construction workers expanding ports: Crews began work last fall on a $660 million terminal at the former Navy base in North Charleston, S.C., which will be capable of handling up to one million containers.
Impact Varies
An analysis of government real-goods export figures done for The Wall Street Journal by Moody's Economy.com, an economic research and consulting firm, shows that the degree of export-dependence varies widely from one metropolitan area to another, depending on the mix of businesses, the relative size of the local economy and geography. Many bigger cities, including New York and Boston, have hefty exports in dollar terms, but their shipments to foreign customers are dwarfed by their domestic-oriented economies.
Local export numbers are also maddeningly imprecise. In an economy as vast and complex as the U.S.'s, it is impossible to pinpoint the origins of some products, such as corn and milk, which originate in a wide swath of the countryside. In many cases, items get counted as exports based on where they are processed or loaded onto ships for export.
The globalization of industries, which rely on production networks that often stretch across borders, means that products often ping-pong among countries, getting counted as exports, imports and exports again at various stages.
Some communities that have a long tradition of strong export economies -- either through simple geography or as the long-time home to industries with global reach -- are also seeing growth from unexpected corners.
Timothy Aeppel
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