Support MI up for updates Subscribe up for updates
About Research Events Centers Newsroom Currency of Ideas
Milken Institute | Newsroom | Currency of Ideas - European debt crisis contagion hits U.S. states Currency of Ideas: European debt crisis contagion hits U.S. states
June 19, 2012 at 03:00 PM
European debt crisis contagion hits U.S. states
  Europe Regional Economics U.S. Economy
  Posted by
Armen Bedroussian
Armen Bedroussian
 
With less than one-fifth of all U.S. exports of goods and services heading to the EU, the U.S. isn't nearly as reliant on exports to the euro zone as it was several decades ago. In fact, according to Milken Institute research, a 10 percent decline in U.S. exports to the EU would result in a 2 percent decline in total exports and subsequently only a 0.2 percent hit to GDP growth. However, while at the national level the contagion effects of a EU recession on U.S. exports appear relatively mild, the impact on some states doesn't appear as rosy.

Chemicals, transportation equipment, computers and electronic products make up the largest component of U.S. sales to the EU. It is no surprise that states whose exports constitute a large share of these products are likely to be most affected by the EU crisis. So which states are most vulnerable? Utah, South Carolina, Louisiana, Indiana, and Washington fill the top five - as these are the leading exporters of various commodities and auto and aviation products.

Roughly speaking, Utah's and South Carolina's exports to the EU comprise 4.2 and 3.5 percent of their state's gross domestic product (GDP), respectively. As a benchmark, U.S. exports to the EU represent less than 2.0 percent of GDP. What in particular do Utah and South Carolina sell?

Utah is a big gold mining state, and the EU is a large importer of its gold and silver commodities.

Similarly, South Carolina's auto production cluster has significant ties to the EU economy, with big players like BMW and Michelin. Many U.S. auto makers, including Ford and GM, have already witnessed declines in sales from the EU.

MilkenInstitute

Utah's and South Carolina's shares of exports to the EU declined in dramatic fashion between 2010 and 2011 -- plummeting by 9 and 7 percent, respectively. Michigan’s share of exports to the EU took the highest tumble, at 13 percent.

In California, computer and electronics represent nearly a third (or 29%) of all California's exports to the EU, but only 16% of the state’s exports head to the EU to begin with. That represents less than 1.5 percent of California GDP. However, California's export growth has been largely tied to growth in emerging countries. And because the BRICs acquire a large portion of their financing with European banks, California's growth is indirectly exposed and is likely to experience a slowdown in exports.

So while exports on a national level aren’t as dependent on the EU as they once were, its indirect impacts, namely experienced through a further slowdown in emerging nations, like China could present more challenges for U.S. states. Perhaps now is the best time for our congressional leaders to rethink some of our export strategies. The good news is that the U.S. has made strides in reducing our trade barriers Trade Barriers, but there is plenty more the nation can capitalize on, such as modernizing exports controls on commercially available technology products (outlined in the January 2010 Milken Institute study, Jobs for America This would allow U.S. firms access to new markets, producing higher export growth across the high-tech segments of the economy, areas where the U.S. already holds firm competitive advantages. Other advanced and NATO member nations have taken the lead in this particular area, taking away from U.S. market share.

Your Comment:






Please help protect our site from spammers, type the following number into the field below.

4 1 8 2 3  
      


Members of the press may direct inquiries to:

Conrad Kiechel
Director of Communications
Phone: (310) 570-4668
ckiechel@milkeninstitute.org


Jeff Monford
Communications Consultant
Phone (310) 570.4623
jmonford@milkeninstitute.org

About MI
About Us
  Careers
  Contact
  Download Annual Report
  FAQs
  Locations
  Our Team

Blog


Topics

Events
  Associates
  Conferences
  Global Conference
  Partnering for Cures
  State of the State
  Summits
  Asia / California / London
  Forums
  Labs
  Young Leaders

Experts
Newsroom
  Latest News
  News Videos
  Press Releases

Research
  Centers
    Asia
    California
    FasterCures
    Financial Markets
    Israel Center
    Public Health

Initiatives

Publications
  Books
  Financial Innovations Labs
  Milken Institute Review
   Amazon Apps
   App Store
  Research Reports
  Viewpoints
  Search All Publications
Support MI
  Associates
  Donate
  Sponsorships
  Strategic Partners

Follow Us
  @Twitter
  Facebook
  YouTube
  Google+
  LinkedIn
  iTunes U

Related Sites
  Partnering For Cures
  Celebration of Science
  Chairman's Corner
  Melanoma Research Alliance
  FasterCures

©2014 Milken Institute