‘Export-rich’ Midwest still relies heavily on ability of its companies to sell goods and services overseas

Stateline Midwest Volume 20, No 6: June 2011

In the 1930s, exports accounted for just 3 percent of the nation’s GDP.

Eighty years later, the goods and services sold to other countries made up 12 percent of GDP, note Bruce Katz and Emilia Istrate in a recent report for Export Nation, a research project of the Brookings Institution’s Metropolitan Policy Program.

And over that time period, no region came to rely on the power of exports as an economic engine more than the Midwest.

Today, for example, exports support 398,000 jobs in Chicago and 20,000 jobs in Des Moines, according to Export Nation. Chicago and Detroit rank in the top 10 metropolitan areas in the nation for highest dollar volume of exports (and greatest reliance on exports as well). Minneapolis and Indianapolis are in the top 20.

“The Midwest has been a particularly export-rich region,” says Jennifer Bradley, co-director of the Great Lakes Economic Initiative at the Metropolitan Policy Program, noting the region’s strength as both an agricultural producer and a manufacturing hub.

But the region’s status as an export powerhouse has been questioned in recent years, and retaining or regaining it will be critical to the overall economic recovery of states, Bradley says.

Nurturing growth in innovation, research and development, and technology firms is one overarching strategy for states to take. Another is to encourage more businesses to export.

Currently, only 1 percent of all firms in the United States export; most are content to sell domestically, viewing this country as having a big enough pool of customers. But not only do 95 percent of the world’s consumers live outside of the U.S., Bradley says, the middle class in Asian and Latin American countries is growing rapidly. And these areas have been much quicker to come out of the global recession than have Europe and U.S. regions such as the Midwest.

Laura Baughman, an economist with Trade Partnership Worldwide, notes, too, that U.S. exports are much more than the goods made by manufacturers or commodities produced by farmers.

Services are important as well. According to the Brookings Institution, U.S. exports of commercial services, including business and technical services, exceeded $500 billion in 2008.

In a recent report for the Business Roundtable, Baughman and her colleague estimated that more than 38 million U.S. jobs — 6.3 million in the Midwest — were dependent on trade in 2008.