4th Quarter 2010

Graphs link to larger view.

tennessee trade-weighted dollar index graph

tennessee monthly exports graph

tennessee monthly imports graph

tennessee's leading trade partners graph

Tennessee International Trade Report

by Steven G. Livingston

The state saw the largest absolute gain in annual exports in its history.

A strong international economy propelled Tennessee exports to new highs. The state shipped just under $7 billion in goods to foreign markets this past quarter, 15% higher than in the fourth quarter of 2009. For the year, exports crossed the $25 billion threshold, $5.5 billion dollars ahead of 2009. This is the largest absolute gain in annual exports in the state's history. In only two global regions did exports not increase. A huge drop in car and SUV exports to Saudi Arabia led sales to the nations of the Middle East to fall 14% for the quarter. Sales were also off to Africa, though this is more the result of several large, one-time purchases of aircraft parts and foodstuffs in 2009 that were not repeated this year. Elsewhere, foreign shipments were up strongly.

As might be expected, some of the biggest gains were to the emerging markets. Exports to Southeast Asia grew by more than 50% over last year's fourth quarter. Aircraft (to Singapore), cellular phone products (to the Philippines), and cotton (to Thailand and Indonesia) were the major growth items in Tennessee's $382 million of exports to that region. South America was not far behind, with the state's exports up 39% (to $428 million) to that region. Brazil and Chile each purchased an additional $30 million of Tennessee goods during the quarter, but exports were strong to just about every Latin American nation. Laptops, chemicals, auto parts, and medical equipment were at the heart of these gains. Indeed, total Tennessee exports to the somewhat artificial poster child of the emerging markets, the BRICs (Brazil, Russia, India and China), rose 20% to $699 million last quarter. (In Tennessee's case, though, the BRIC might be more accurately termed "China + the rest," because two-thirds of its BRIC exports went to that one nation.)

Though the emerging markets grew most rapidly, there were substantial increases to developed markets as well. Japan was the site of the biggest gains among the mature markets last quarter. Tennessee exports were up a third. Perhaps consistent with Japan's aging population, the state greatly increased shipments of medical instruments, orthopedics, and pharmaceuticals! Here it might be useful to remember that, for all the excitement about the newer markets, Japan still imports as much Tennessee production by itself as does all of Southeast Asia. Exports to Europe were also strong, despite a very large drop in shipments of medicaments to the U.K and solar panel products to Germany. Exports to Europe gained more than $100 million (12%) this past quarter. About half of this gain was in the medical equipment sector. It is perhaps surprising that there were not large declines in those countries afflicted with recent sovereign debt woes, such as Ireland or Greece.

Tennessee's shipments were similarly strong to the NAFTA nations. Exports to Mexico stood at $789 million (a 20% increase), while those to Canada grew to $1.971 billion (10%) for the quarter. The growth in Mexico resulted from large increases in auto parts and compression-ignition engine shipments. Engines and auto parts were also the backbone of the gains in Canada, though they were joined by significantly higher sales of video games and aircraft parts.

As this survey suggests, most Tennessee industries had a very good quarter. The state's exports of engines and chemicals each increased by around $100 million, while medical equipment shipments gained $140 million. Cotton exports surged by over $100 million; thanks in part to record global cotton prices. Most of this cotton went to China. Only a few sectors didn't share in the fun. The pharmaceutical industry, thanks to the above-mentioned drop in Great Britain along with a similar decline in Canada, suffered a $22 million loss in exports for the quarter. Heavy machinery shipments were off $10 million, and the aluminum industry was down $35 million (all to two countries, Mexico and China). The toughest quarter, though, was that of the automobile industry. Most auto part exports had a very solid quarter, but shipments of cars and SUVs dropped by nearly $170 million. These losses came primarily in Canada, where exports fell $125 million, and in the Middle East, where they declined $50 million.

The breadth of the export gains suggest that the state's recent performance has more to do with a rising tide lifting all boats than with any factors relating to Tennessee or its particular export sectors. This means that the fragility of the global economic recovery probably remains the single biggest cloud on the state's export horizon.

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