Experts say Connecticut exporters, led by a burgeoning aerospace industry, are well positioned to reap the benefits of what is being projected as the largest bilateral trade agreement ever reached.
As the U.S. and the European Union begin drafting a framework to expand trade through the reduction of tariffs and the alignment of regulatory systems, however, data suggest Connecticut firms that are involved in exporting have begun to shift their focus toward Southeast Asia and the Middle East.
The U.S. and E.U. formally kicked off negotiations over the proposed trade deal, known as the Transatlantic Trade and Investment Partnership, at last week”™s Group of Eight meeting in Northern Ireland.
“Clearly, on balance, it looks like this really would be a boost for Connecticut firms,” said Fred V. Carstensen, director of the Connecticut Center for Economic Analysis at the University of Connecticut. “We”™re already selling into those markets, so insofar as the barriers come down, it”™ll improve our competitive position and we ought to be able to increase our market share.”
While products originating in Connecticut represented just 1 percent of all U.S. exports in 2012, the state ranks eighth in exports per capita and fourth in exports to the E.U., according to a recent report by the Connecticut Business & Industry Association (CBIA).
Connecticut firms exported nearly $16 billion in goods and services in 2012, which represented a 1.5 percent decline from 2011 but a 14 percent increase from 2009, according to the U.S. Census Bureau. Of the goods and services exported in 2012, 32 percent went to countries in the E.U. (If Turkey, an E.U. candidate country, is included, that number rises to 34 percent).
However, with the European economy slow to break through the credit crisis, Connecticut firms have increasingly looked to countries like Canada, Mexico, the United Arab Emirates, South Korea and Singapore, Census data show.
Canada is the state”™s largest trading partner, edging out France with a 12 percent share of all Connecticut exports to France”™s 11.9 percent in 2012.
From 2011 to 2012, exports to Canada increased 11.6 percent, according to the Census Bureau. During the same period, exports to Mexico rose 3.9 percent, exports to the U.A.E. rose 101 percent, exports to China rose 3 percent, exports to South Korea rose 13.3 percent and exports to Singapore rose 53.3 percent.
While exports to Germany were up 8.2 percent from 2011 to 2012, exports to France fell 3.3 percent, exports to the United Kingdom fell 7.3 percent, exports to the Netherlands fell 6.3 percent and exports to Belgium fell 46.2 percent.
Anne S. Evans, director of the U.S. Department of Commerce”™s Export Assistance Center in Middletown, said companies have felt the impacts of the European economic slowdown.
“We”™ve seen that,” Evans said. “Aerospace actually has been doing reasonably well, but we”™ve seen that in manufactured goods.”
She said the office has planned a September trip to Australia for representatives of Connecticut exporters. “One of the reasons we”™re off to Australia is the Australian economy did not suffer as much,” Evans said, noting that this particular trip has filled up faster than any others the office has assembled.
If a U.S.-E.U. trade agreement is reached over the next several months, it could boost exports from the U.S. to Europe by 10 percent to 12 percent, Peter A.S. Pfeiffer, of McGladrey L.L.P., predicted.
“I see this as a great opportunity for the state of Connecticut if they do their diligence,” said Pfeiffer, regional managing business development director for the Northeast region. “Despite the challenges in Europe, people are looking to the United States for leadership. Europe as a whole, I think, is in better shape than it was a year or two ago.”
The CBIA surveyed about 1,200 businesses in March, finding that 71 percent were engaged in international trade.
While some, including Gov. Dannel P. Malloy, have suggested that Connecticut firms”™ exposure to Europe have been a factor in the state”™s negative economic growth the past two years, Pfeiffer said Connecticut”™s gross state output “could”™ve been lower if it weren”™t for exporting.”
Now, Pfeiffer said, the biggest risk to companies looking to export their products to Europe is not the European economy but compliance, tax and regulatory issues ”” which the trans-Atlantic treaty is seeking to address.
“The biggest risk ”” global compliance ”” is also the opportunity here,” Pfeiffer said. “Every country has different regulations and cultural norms and what may be accepted here may not be accepted in a particular country.”
In that respect, Pfeiffer said this treaty could be a major breakthrough for Connecticut exporters. The companies themselves still must do the legwork, he said, comparing a trade agreement to a law legalizing hunting or fishing. “You still have to fish and hunt,” he said.
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