In today's global economy, it is important to know one's position in the international marketplace. Exports are a key ingredient for business success in an increasingly interconnected world and the new opportunities created through market globalization have resulted in new gains for exporters. This is especially true for Connecticut exporters whose product sales reached new highs in 2005. To describe the State's 2005 export story, a review of several export categories follows.
Annual Export Figures
Between 2004-2005, Connecticut's annual exports grew a remarkable 13.2%, from $8.56 billion in 2004 to $9.69 billion in 2005. State export data collected across industry sectors from 2003 to the present indicate a steady and healthy upward trend. By comparison, for the same period total U.S. exports grew by 10.6%.
Connecticut's exports in 2005 represented roughly the same percentage of total U.S. exports as they did in 2004, 1.0%. Among the 50 states, Connecticut ranks 28th. Its rank has remained relatively stable throughout the past few years. Among the New England states, only Massachusetts' exports rank higher than Connecticut's as a percentage of total U.S. exports. Although Connecticut is a small state geographically, the State's export sector is sizable, and outperforms national export figures. According to a recent report prepared for the Eastern Trade Council, an organization in which Connecticut is a member state, Connecticut's trade value in dollars increased 40.0% between 1996-2004, while the U.S. figure increased 31.0% over the same time period. Connecticut's continued growth in exports is a positive sign for the State's economy.
State Export Partners
Connecticut's core export partners have remained unchanged for the past several years. In 2005, the State's top ten export destinations, as expected, were Canada, France, Germany, the United Kingdom, Mexico, Japan, the Netherlands, China, Belgium, and Singapore. Connecticut increased trade with its top ten trade partners in 2005, with the exception of Mexico, Japan and Singapore. As a reference, mix of top trade partners for the U.S. and the New England states are similar in composition to Connecticut's. The U.S.'s top five export destinations in 2005 were Canada, Mexico, Japan, China, and the United Kingdom, while the top export markets for the New England region were Canada, the Netherlands, Germany, Japan and the United Kingdom.
Connecticut Exports by Country
The China Factor & Canadian Popularity
Not surprising is the fact that among its top partners, Connecticut's trade increased most substantially with China. Between 2004-2005, Connecticut's annual exports to China grew 65.9% to $337 million. In comparison, U.S. exports to China increased 20.5%, from $34.72 billion in 2004 to $41.84 billion in 2005.
With much recent discussion of China's tremendous economic growth and its rising position in the world economy, there is often much confusion as to the country's status and rank as one of Connecticut's trade partners. Despite China's growth, it is not the State's-nor New England's, nor the U.S.'s-number one trade partner. That export distinction belongs to Canada, and holds true for New England and U.S. exports as well. China ranked 8th among Connecticut's trade partners in 2005.
Canada's popularity as an export market owes to the lack of a language barrier for trade dealings and, for Connecticut businesses, its proximity; a large geographic portion of the Canadian market is accessible within several hours' drive. For those companies who are new to exporting and the intricacies of such transactions, it is often recommended to first explore the Canadian market before investigating more challenging markets around the world. Connecticut's exports to Canada increased 14.1% in 2005 to $1.68 billion, up from $1.47 billion in 2004. In 2005, 17.0% of Connecticut's exports were destined for Canada. U.S. exports to Canada increased 11.8%, up from $189.10 billion in 2004 to $211.42 billion in 2005. Canada claimed close to one quarter, 23.0%, of all U.S. exports in 2005. These figures are similar for the New England states as well. Twenty percent of all New England exports went to Canada in 2005. Among the six New England states, trade with Canada was up 11.9% in 2005 to $8.61 billion. Canada is a steadfast trading partner.
Potential Future Export Partners For Connecticut
Free trade agreements, both newly enacted and proposed, with the Central American Free Trade Agreement member countries (Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and the Dominican Republic) and others such as Thailand, South Korea and the United Arab Emirates are worth watching. The impact of such agreements and their effects on duties and tariffs could boost future export figures. Other potential markets to watch include Belgium, Brazil, China, Malaysia and the Netherlands.
Composition of Connecticut's Exports
Connecticut's top exports mirror the State's historic strengths. As with Connecticut's top export partners, there is a demonstrated consistency among the State's top export industries. In 2005, the State's top five export sectors were transportation equipment, machinery, computers and electronic products, chemicals and miscellaneous manufactured commodities. Electrical equipment, fabricated metal products and paper also ranked high among the State's export industries.
Transportation equipment led all exports in 2005. This sector increased 23.9%, growing from $3.18 billion in 2004 to $3.94 billion in 2005. Volatility in sales in the aircraft and spacecraft sector, however, makes the transportation sector an industry to continuously monitor. This sector's growth in 2005 followed decreased exports in 2003 and 2004, after a peak in 2002. In 2005, large growth was also experienced in the computer and electronic sector. Between 2004-2005, this industry grew 10.2%, with State exports increasing from $8.03 million to $8.85 million. According to the Eastern Trade Council report, future industry sectors to watch include pharmaceuticals, organic chemicals, medical devices, integrated circuits, iron and steel, and plastics.
|Table B: Connecticut Exports by Industry
EQUIPMENT, APPLIANCES, AND COMPONENT
CLASSIFICATION PROVISIONS, NESOI
By means of background, the top export industries for the U.S. and the New England states in 2005 were again similar to Connecticut's. The top five U.S. exports included computer and electronic products, transportation equipment, chemicals, machinery, and miscellaneous manufactured commodities. The top five export sectors for New England in 2005 were nearly identical, although chemicals ranked higher than transportation equipment for the region.
The volatility and unpredictability of global issues in the future, will undoubtedly impact trade relations and exports. Issues to monitor include the national trade deficit, future bilateral trade agreement negotiations, Chinese currency valuation issues, the war in Iraq and the continued fallout from energy imports as a result of the Gulf Coast hurricanes. Enforcement of intellectual property right protections in key offender countries (i.e., China, Russia) may also play a potential factor and impact trade. Will companies shy away from trade with countries that fail to protect copyright, trademark and patent laws? While all this remains to be seen, what is known is that exports will continue to be a sizable component in the State's economic future. In today's economy, globalization is a reality; international market opportunities must be explored.
Exports will continue to be an engine of growth for Connecticut and, as such, the importance of exports to the State's economy cannot be understated. For help in reaching new markets and to learn more about Connecticut's international trade programs and services, businesses can contact Laura Jaworski at (860) 270-8068.
Data appearing in this article comes from the World Institute for Social and Economic Research unless otherwise noted.