In a global economy, the role of exports is of increasing significance. Exports to other states or countries serve as an economic growth engine and are key to business success. Connecticut's exports had a record high in 2006 and the importance of this sector cannot be overstated. Exports are a boon for the State's economy and highlight the competitiveness of Connecticut companies on the international stage. To illustrate the State's 2006 export story, a review of export categories follows. Please note that reported dollar figures are not adjusted for inflation.
Annual Export Figures
Connecticut's annual commodity exports (exclusive of services) hit an all-time high in 2006. State exports tallied an impressive $12.24 billion in 2006, an astounding 26.3% increase from the $9.69 billion recorded in 2005. This tremendous percentage increase follows a 13.2% jump between 2004-2005, an indication of the strength and vitality of this sector. State export data from 2003 to the present reveals a steady, healthy trend upward. With U.S. exports topping $1.03 trillion in 2006, a 14.7% increase over 2005, Connecticut's export growth easily outperformed the nation in this area last year.
Between 2005-2006, Connecticut's commodity exports as a percentage of total U.S. commodity exports ticked up slightly, from 1.07% in 2005 to 1.18% in 2006. Connecticut's export ranking among the states held steady between 2005-2006 at 28th. Connecticut actually ranks 26th if Puerto Rico and various export sales attributed to "unknown state" are removed from the rankings.
In the New England region, only Massachusetts' exports ranked higher than Connecticut's as a percentage of total U.S. exports, as was the case in 2005. However, among the New England states, Connecticut recorded the largest percentage increase in exports between 2005-2006. With the exception of Vermont, all of the New England states increased trade with their international partners in 2006.
State Export Partners
In 2006, the State's top five export partners were Canada, France, Germany, the United Kingdom and Singapore. Among these top markets, changes occurred between 2005 and 2006. Mexico dropped from 5th to 6th, and Singapore jumped from 10th to 5th. In 2006, Connecticut's other top export partners were Japan, Switzerland, the Netherlands and Korea, ranked 7-10, respectively (Table A).
|Table A: Connecticut Exports by Country
Among its top ten trade partners, Connecticut's trade increased most substantially with Singapore. Between 2005 and 2006, Connecticut's annual exports to Singapore grew a significant 240.6% to over $839 million. Each of Connecticut's top five industries in terms of exports to Singapore experienced significant growth in 2006, notably transportation equipment, which increased 381%, and fabricated metal products, which increased 848%. It is unclear whether such exports are sustainable or if the rapid growth of Connecticut's exports to Singapore is a temporary occurrence.
Upon examination of Connecticut's trade partners in 2006, there are two items of interest. First, China fell out of Connecticut's top ten export destinations, dropping from 8th in 2005 to 11th position in 2006 despite a 9.6% increase in the State's exports to that country. Exports to China will be an interesting subject to monitor in 2007 as the U.S. recently filed a request for World Trade Organization dispute settlement consultations with China regarding export subsidies. The case involves Chinese government incentives for foreign investors in China and their Chinese partners to export to the U.S. and other markets. Other Chinese subsidy programs at issue provide incentives for companies in China to purchase domestic equipment and accessories instead of buying U.S. exports. China applies a series of measures that allow for refunds, reductions or exemptions from taxes owed to the government designed to support the purchase of domestic over imported equipment.1
In 2006, Connecticut's exports to France declined 24%, from $1.6 billion in 2005 to $1.22 billion in 2006. France was the only country among Connecticut's top ten export partners to experience a decline in State exports. State industry sectors that declined included transportation equipment, miscellaneous manufactured commodities and plastics/rubber products. State transportation equipment exports to France are an area to watch in 2007, especially given the volatility of sales in the aircraft and spacecraft industry, as well as the significant delays in production of the new Airbus A380. The EADS group, which has major operations in France, includes aircraft manufacturer Airbus.
Canada retained its position as the number one export destination for Connecticut, the U.S. and the New England states, showing Canada's popularity as a steadfast trading partner continues. Connecticut's exports to Canada increased by almost 15% in 2006 to $1.93 billion, up from $1.68 billion in 2005. As a whole, 15.6% of Connecticut's exports were destined for Canada in 2006, while 22.2% of all U.S. exports headed to Canada. Once again, Canada claimed virtually one quarter of U.S. exports in 2006, $230.3 billion out of $1.03 trillion. Eighteen percent of New England exports went to Canada in 2006 amounting to $8.83 billion.
The U.S. and the New England states' mix of top trade partners were similar in composition to Connecticut's. The top five U.S. export destinations in 2006 were Canada, Mexico, Japan, China and the United Kingdom. The top export markets for the New England states were Canada, Germany, Japan, the Netherlands and the United Kingdom.
Given the Netherlands' reputation as a logistics center and cargo hub, it will be interesting to see whether Bradley Airport's new nonstop service to Amsterdam's Schiphol Airport, beginning July 1, 2007, will impact State exports.
Composition of Connecticut's Exports
As was the case in 2005, Connecticut's top export industries were transportation equipment, machinery, computers/electronic products, chemicals, and primary metal manufacturing. Electrical equipment/appliances/components, miscellaneous manufactured commodities and paper were also among the State's top ten industries (Table B).
|Table B: Connecticut Exports by Industry
EQUIPMENT, APPLIANCES, AND COMPONENT
CLASSIFICATION PROVISIONS, NESOI
Once again, and not surprising given Connecticut's historic strength in this industry, transportation equipment led all export sectors in 2006. This sector's exports grew a remarkable 35.6%, from $3.94 billion in 2005 to $5.34 billion in 2006, placing Connecticut 11th among the 50 states. Again, this is a volatile sector, greatly affected by the peaks and valleys of commercial aircraft procurement cycles. Following a dip in Connecticut transportation equipment exports in 2004, they increased in both 2005 and 2006.
Within the State's top ten export industries, all but miscellaneous manufactured commodities and special classification provisions posted increased sales. In 2006, the primary metal manufacturing sector experienced exceptional growth. Between 2005 and 2006, this industry grew 96.3%, with State exports increasing from roughly $325 million to over $639 million. Petroleum/coal products, prepackaged software and food/kindred products had impressive gains in 2006 as well.
For reference, the U.S. and New England states' top export industries were similar to Connecticut's in 2006. The top five U.S. exports included transportation equipment, computers/electronic products, chemicals, machinery and miscellaneous manufactured commodities. The top five export sectors for New England included the top U.S. industries, but ranked differently: computers/electronic products, chemicals, transportation equipment, machinery and miscellaneous manufactured commodities.
Challenges and Opportunities
Although exporting may present challenges to the business community with respect to logistics, financial transactions and legal and cultural issues, these matters are not insurmountable. Other more unpredictable issues that affect trade relations and require monitoring include currency valuation and the relative strength/weakness of the U.S. dollar, the protection of intellectual property rights, trade agreement negotiations, the national trade deficit and the cost of energy. That said, these results clearly demonstrate that exports are a powerful driver for the State's economy and international markets must continue to be researched and explored for their business and job growth potential.
(Data source: World Institute for Strategic Economic Research)
The Connecticut Department of Economic and Community Development's (DECD) International Affairs Division is committed to assisting local companies compete in the global marketplace, whether it is helping a company reach new markets or raising awareness of the many export opportunities that may help a business thrive and grow. For more information about DECD's international programs and services, please call Laura Jaworski at 860/270-8068.
1 Source: Office of the U.S. Trade Representative