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Export Innovation Called Competitive Key
By Matt Glynn
July 27, 2010
Great Lakes metro areas such as the Buffalo Niagara region are effectively using exports to bolster their economies, but their manufacturers need to become more innovative to make the most of foreign sales and create jobs, a new study says.
The report, prepared by the Metropolitan Policy Program at the Brookings Institution in Washington, D.C., also found that Buffalo Niagara performs well in exporting services, a category expected to grow.
The Brookings study looked at the 21 largest Great Lakes metro areas from 2003 to 2008 and found that exports were significant to Buffalo Niagara's employment and economic output.
While exporting holds the promise of additional job growth, the study warned that Great Lakes metro areas should not take anything for granted.
"A legacy of success in exports does not guarantee further dominance, a lesson that Great Lakes metros should have learned through rough experience," the study says.
About 8.6 percent of Buffalo Niagara's jobs were export-related in 2008, ranking 45th in the nation's 100 largest metro areas. Its percentage was higher than the U.S. average of 8.3 percent but below the 9.7 percent average for Great Lakes metro areas.
The study defines export-related jobs as not only employees at companies that export, but at domestic companies that sell to the exporters, as well. In 2008, Buffalo Niagara had about 48,000 jobs connected to exporting, the study said.
Transportation equipment manufacturing accounted for 14.6 percent of the total, reflecting Buffalo Niagara's ties to automotive manufacturing.
Great Lakes metro areas tend to generate more of their gross metropolitan product -- the value of goods and services produced by a metro area -- from exporting than most large metro areas of the country, the study says.
Buffalo Niagara's exporting, as a percentage of gross metropolitan product, was 11.6 percent, just ahead of the U.S. average of 11.4 percent. The region's exports were valued at $7.18 billion, led by chemical manufacturing, which contributed nearly 25 percent of the total.
Buffalo Niagara is home to numerous companies involved in exporting, from Rich Products and Delaware North Cos. to Eastman Machine and Applied Fabric Technologies.
The Brookings study says Great Lakes economies heavily reliant on manufacturing need to push innovation to help offset the loss of traditional production jobs. In the report's measure of patents per 1,000 workers, Buffalo Niagara's rate was 2.43, ranking 45th among the nation's top 100 metro areas and trailing the national rate of 3.59.
" 'Innovate or die' is not just a mantra for Silicon Valley and other high-tech economies -- it applies with equal or greater force to manufacturing," the study says.
That innovation might take the form of altering product lines to suit emerging markets, such as wind turbines and solar technology, the study says.
The Brookings study found that Buffalo Niagara fared well in exports of services, a category that includes money spent by foreign residents to be educated at area colleges and universities and to receive medical care at institutions here.
Buffalo Niagara's exporting of services increased by 56 percent from 2003 to 2008, tying for the highest rate among the 21 Great Lakes metro areas researched. That would seem to position Buffalo Niagara well for the future, based on the report.
"Long-term trends suggest that services are a better bet for export growth for advanced economies than traditional manufacturing," the report says.
The Brookings report says Brazil, India and China will be vital growth markets for products and services from the Great Lakes metro areas. About 9 percent of Buffalo Niagara's exports were to those three markets, ranking 18th among the top 100 metro areas. Chemical manufacturing accounted for 33 percent of the region's exports to the three countries.
President Obama earlier this year set the ambitious goal of doubling U.S. exports in the next five years.
In the Buffalo area, organizations such as World Trade Center Buffalo Niagara and the Erie County Industrial Development Agency have promoted exporting, including by smaller companies.
The ECIDA helps with issues such as export credit insurance, which might pose a barrier for businesses, said cqMaryann K. Stein, the ECIDA's director of international trade programs.
Stein said the region is well-positioned for exporting because of its proximity to Canada and its binational outlook. "We are lucky," she said, "because we have a lot of people who are export-savvy."
The regional office of Empire State Development Corp. is looking at ways to help universities tap even more into the foreign market to increase exports of services, she said.
Through exporting, companies are exposed to "best practices" around the world and must stay on the cutting edge to remain competitive, the Brookings study says.
"Even if companies initially struggle in foreign markets, there is evidence that this intense competition forces them to improve over time," the study says.
Exporting also allows companies to spread the costs of developing a particular product over a much larger number of consumers, the study says.