Export growth lags here, study finds

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Cincinnati Enquirer Article

Goods sent abroard make up one-eighth of local economy

By James Pilcher • jpilcher@enquirer.com

Greater Cincinnati and Northern Kentucky more than pulls its own weight when it comes to exporting goods outside the country, according to a new study released Monday. But those exports may be slowing down, a possible warning to local business and political leaders, officials with the Brookings Institution say.

The metropolitan region ranks 22nd in exports among the nation's 100 biggest cities with $11.8 billion worth of goods sold outside the U.S. in 2008, the Washington-based non-partisan think tank reported today.

In addition, Cincinnati ranks 21st in the number of jobs associated with exports, as well as the share of our total economy at 12.9 percent. The region ranks 24th in total population with more than 2.17 million residents, according to the most recent estimates from the Census Department.

But the report also said the region is one of the slowest growing when it comes to exports. Cincinnati ranked 59th with an annual growth rate of just 8.0 between 2003-2008, compared with 8.7 percent for other large cities and 9.2 percent nationally.

"This is definitely a wake-up call ... what we find in many of the Great Lakes area metros is that they have a really good volume of exports and it accounts for a really good share of the total GMP (gross metro product)," said Jennifer Bradley, fellow and co-director of Brookings' Great Lakes Economic Initiative. "But they are losing their competitive edge and are kind of living off of some of their legacy industries."

To that point, Cincinnati ranked 50th when it came to average salaries associated with exports at $63,549, well below the US city average of $68,270 but still above the national average of $45,563. Still, experts say that lower labor could be a draw for more companies seeking to create export businesses here.

And local economists say that the relatively high wages for export jobs as well as the share of the local output mean exports have an even bigger impact on the regional economy than $11.8 billion as reported in 2008.

"We may not be as high as the other cities, but the percentages and high wages is overall very good news," said George Vredeveld, economics professor at the University of Cincinnati and director of UC's Economics Center for Education & Research. "The relatively high wages in Cincinnati reflect the high value-added nature of the businesses here.

"And if we were to lose 10 percent of that business, the exponential and multiplied impact would be much bigger than just $1.8 billion ... as a community, we ought to be certain that we have business conditions that allow these companies to be as competitive as possibly can."

The region's top exporting industry is transportation equipment and aviation, primarily from Evendale-based jet engine maker GE Aviation, while chemicals also take up a big share. GE Aviation made $18.7 billion in revenue in 2009, and 58 percent of that went outside the U.S. and 30 percent went to Asia alone.

Canada and Mexico remain the region's top two export destinations, with area companies sending nearly $3.3 billion in goods and services to those two countries alone.

"This report is also meant to shows that a city or region can't stay still," Bradley said. "Anyplace that looks at these numbers at a glance and says we're fine and we don't need to do anything - that's the wrong message to take.

"Instead, it should be that you have some strengths and you should build on them. The global economy is relentlessly competitive and rewards innovations."

The Washington-based non-partisan think tank did the report of the nation's 100 largest cities to show the importance of exports, and how growing exports can lead to more jobs and better paying jobs.

One big surprise: financial services is the Cincinnati region's fastest growing export industry, nearly doubling in the study period of 2003-2008. The sector grew 96 percent during that span, and accounted for 3.1 percent of the area's total exports by 2008 and 4.7 of the area's total gross metro product. In addition, 5.3 percent of the area's total increase in exports can be attributed to financial services.

Northern Kentucky University economist Janet Harrah said that exports aren't just for large companies either - she cited Census Bureau statistics 30 percent of all exports nationally came from firms with fewer than 500 workers.

"And we follow those trends in this region demographically, so I look at this as a major potential growth sector," said Harrah, director of NKU's Center for Economic Analysis and Development. "Besides, overseas markets are where the growth is and will be over the next few years. This is how small companies become medium-sized companies."