North American trade key for Chattanooga

North American trade key for Chattanooga

November 10th, 2013 by Dave Flessner in Business Around the Region

By the numbers

• $1.08 billion - Trade with Canada in metropolitan Chattanooga

• $751 million - Trade with Mexico in metropolitan Chattanooga

• 32 percent - North American share of global trade in metropolitan Chattanooga

• $885 billion - Total international trade between the United States and Canada or Mexico

Source: 2010 trade data compiled by Metropolitan Policy Program at Brookings and the Global Cities Initiative

Top trading commodities

Chattanooga's top trading commodities in North America during 2010, including imports and exports between Chattanooga and Mexico and Canada.

1) Motor vehicles and parts, $535 million

2) Machinery and tools, $334 ,million

3) Chemicals and plastics $223 million

4) Electronics, $155 million

5) Metals, $88 million

Source: 2010 trade data compiled by Metropolitan Policy Program at Brookings and the Global Cities Initiative

Despite the influx of German and Japanese investment in Tennessee over the past two decades, nearly a third of Chattanooga's international trade is much closer to home.

Aided by the duty-free North American Free Trade Agreement, Canada and Mexico remain the biggest trading partners for many U.S. companies.

"When people think of new export markets in recent years they've almost been overly thrilled about China, India, Brazil and other emerging markets and they've almost forgot that there are still a ton of opportunities here in our continent," said Joseph Parilla, research analyst at the Brookings Institution's Metropolitan Policy Program.

A new Brookings Institution study shows trade between Chattanooga and cities in Canada or Mexico totaled more than $1.8 billion in 2010, the last year in which such data exists. Canada is the No. 1 trading partner, and Mexico is No. 3. Trade with such countries has tripled since the NAFTA pact among the nations became effective 20 years ago in January.

"The world is emerging as a network of cites that link together through trade and learn from each other about how to best urbanize," said Bruce Katz, a Brookings vice president. "Nowhere is that more clear than in North America, given the integrated nature of the U.S., Mexican and Canadian economies."

The biggest new investments in the Chattanooga region over the past five years have come from Europe, including the $2 billion polysilicon plant being built in Charleston, Tenn., by German-based Wacker Chemical, the $1 billion assembly plant erected in Chattanooga by the German automaker Volkswagen and the $300 million expansion by the French-based Alstom Power. But much of that investment has fueled trade relations among advanced manufacturers in North America, Parilla said.

"In Chattanooga, there is a lot of specialization in the automotive industry which has built strong trading relationships with cites in both Canada and Mexico," he said.

The top metro trading partners with Chattanooga, according to the Brookings study, are Toronto ($217 million), Mexico City ($118 million), Montreal ($95 million) and Monterrey, Mexico ($86 million).

Although Chattanooga is competing with cities in Mexico to land production of a new sports utility vehicle planned by Volkswagen, Brookings experts suggest that cities like Chattanooga also need to do more to cooperate and promote North American trade relations.

"With new opportunities emerging to increase domestic manufacturing, metropolitan leaders in the United States, Canada and Mexico should work with their federal partners to strengthen trade relationships and grow jobs and exports across the continent," said Alan Berube, the Brookings senior fellow who authored the report on North American trade.

NAFTA eliminated most tariff and other trade barriers between the United States, Canada and Mexico when it became effective on Jan. 1, 1994. The volume of international trade among the U.S. and its North American counterparts has since tripled to more than $885 billion, Brookings reported.

Parilla said the importance of such trade is even more important in metro areas like Chattanooga, which ranked 15th among the 100 biggest U.S. metro areas in the share of its trade coming from North America.

"We tend to think of trade on the national level, but production tends to be at the regional and metropolitan area where firms cluster and critical assets like workforce, innovation and infrastructure are concentrated," Parilla said. "The leadership in each community needs to set their own global trade strategy."

Contact Dave Flessner at dflessner@timesfreepress.com or at 757-6340