3rd Quarter 2011

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Tennessee International Trade Report

State exports topped $7 billion for the third consecutive quarter.

by Steven G. Livingston

The value of Tennessee's exports increased $661 million this past quarter to $7.456 billion, a gain of nearly 10% from a year ago. It was the third consecutive quarter topping the $7 billion mark. However, the state's foreign sales growth lagged the country's substantially. Total U.S. exports grew nearly 14% for the quarter. Tennessee's slower growth resulted from a very large drop in its cotton exports. The value of overseas cotton sales fell by more than half, from $456 to $194 million, one of the steeper drops in recent memory. It was a sign of strength among the state's other export industries that the state was able to shrug off such a sizable drop: non-cotton exports actually surged more than $900 million from a year ago.

The state's export growth, though, was a bit narrower in scope than it has been for the past several quarters. Two-thirds of Tennessee's export gains were in the nearby North American market. Shipments to Mexico grew nearly $300 million for the quarter, a 35% increase, as quarterly exports to Mexico crossed the billion-dollar mark. This was the single best performance among the state's larger trade partners. Half of that gain was in the automotive sector, reflecting signs of life in the American auto market as much as anything going on in Mexico. Canada nearly became the state's first quarterly two-billion-dollar market, with Tennessee exports north of the border valued at $1.99 billion for the third quarter. The 8% gain in Canadian shipments was also concentrated in the motor-vehicle industry. In fact, sales were flat outside of the auto sector because exports of computer equipment, appliances, printed matter, and electrical equipment all declined from last year.

East Asia also performed well, despite the loss in the value of cotton exports. The drop in cotton sales made for some very poor numbers coming out of China. Tennessee exports to China, overall, dropped more than $100 million for the quarter. However, if we subtract cotton from these figures, exports of all other Tennessee goods were up 12%. Sales of medical equipment, computer equipment, and scrap metals were all particularly strong. Exports to the rest of East Asia, where cotton is not a significantly traded good, exhibited strong growth. In spite (or perhaps because?) of Japan's difficulties, that nation purchased an additional $114 million of Tennessee goods during the third quarter, a robust 35% gain. Tennessee's recent growth in Japan has been due to a large expansion in medical sales, and this quarter continued the trend. Medical-equipment sales accounted for half of the new Tennessee shipments to Japan. Hong Kong (up 42%), Korea (up 23%), and Taiwan (up 9%) all saw significant increases in state shipments.

Thanks to continent-wide increases in medical equipment and chemical sales, the state's exports to South America increased 16% to $495 million. The gains were not equally shared. The Chilean market was extremely strong, with Tennessee exports gaining just under 60%. Sales to Venezuela doubled. Ecuador and Colombia were also very strong, but exports to the rest of the continent were stagnant, in part due to declines in computer shipments.

Elsewhere in the world, the picture was shakier. It is clear that the global economic slowdown, and Europe's crisis in particular, is weighing on the state's foreign sales. Though exports to the Eurozone gained 8% for the quarter to $950 million, thanks to chemicals, whiskey, and technical instruments, it was almost all due to increased shipments to France and the Low Countries. The nations embroiled in the euro crisis, Greece, Italy, and Spain, all substantially reduced their purchases of Tennessee goods. Most of these cuts were in medical products. Exports to Germany dropped 7%. Outside the euro area, though, sales to the U.K. were quite strong due to several aircraft-industry sales.