Chicago: Manufacturing and Freight Co-location to Drive Economic Growth

As part of Brookings’ Metro Freight research series, the Metropolitan Policy Program solicited commentaries from civic leaders around the nation. The purpose of these blog posts is to provide a more detailed look into the unique trading and goods movement relationships within several metros.

When it comes to moving goods, Metropolitan Chicago is a freight powerhouse. Six of the seven largest U.S. railroads operate in the region, handling 50 percent of all rail movement in the country. O’Hare airport is the nation’s fifth busiest cargo mover, fed by an extensive network of roads and waterways. However, new Brookings analyses of global and domestic goods trade show that Chicago doesn’t just move goods, it makes them. The region’s locational advantage for freight helps drive a strong manufacturing sector that gained jobs faster than the national average over the last two years.

Part of the Brookings/JPMorgan Chase Global Cities Initiative, the new report shows Chicago’s market is fairly balanced—in contrast to the country’s international trade deficit. More than any other metro area, Chicago optimizes a vast network of local supply chains to source raw materials to support a strong advanced manufacturing sector that requires immediate access to transportation channels.

The region imports 183 million tons of heavy commodities like wood, stone, agricultural products, and energy that fuel the production of $206 billion in high-value exports of machinery, chemicals, electronics, transportation equipment, and precision instruments. This strong advanced manufacturing sector helped contribute over $65 billion annually to the gross regional product and supports the fifth highest domestic trade surplus among all U.S. metros ($25.3 billion.)

Despite these strengths, the region needs to further capitalize on its unique manufacturing and locational assets by taking advantage of growing consumer bases in Asia, Africa, and South America. In addition, investments to eliminate freight congestion and increase workforce skills are still needed to secure ties to global markets and drive economic growth.

For example, Chicago must continue to support the Chicago Region Environmental and Transportation Efficiency Program (CREATE), a partnership between federal, state, and local governments, metropolitan transportation agencies, and the nation’s freight railroads. Today, bottlenecks on Chicagoland’s 893 miles of track means freight trains are often backed up as far west as Iowa waiting for their turn to enter the city’s rail yards. This means goods take longer to get to their destinations, exacerbating traffic on already congested roads and hindering productivity. The completion of 19 of the 70 elements of CREATE has already reduced the time it takes goods to pass through Chicago by 25 percent, but billions of dollars in additional funding are still needed to finish other projects.

Chicago also needs to invest in training so that workers have the skills demanded by advanced manufacturing industries. Mayor Rahm Emanuel recently committed $1.25 million to a new state-of-the-art program at Austin Polytechnic Academy, a college and career prep high school with a focus on manufacturing and engineering. Growth in this sector—with jobs offering wages 16 percent higher than other industries—will have the added benefits of stabilizing communities and supporting bustling retail corridors that attract private investment.

Further, the region must continue to expand its position in markets abroad. Formerly empty rail containers leaving Chicago heading east now haul almost $800 million worth of grain to Singapore, China, Japan, and African markets annually, strengthening connections to new global markets that can boost exports of other products. Chicago’s Plan for Economic Growth and Jobs, developed in collaboration with some of the region’s key business, political, university, and non-profit leaders, recognizes the need to make Chicago a leading exporter. Those efforts should be accelerated.

In particular, Chicago has an opportunity to create a comprehensive economic partnership with Mexico City that would boost growth in the priority advanced industry sectors. Chicago is home to a large foreign-born Mexican population, and new Brookings’ data shows Chicago already has a $160 million goods trade surplus with Mexico City. The two metros have robust trade in electronics, machinery, chemicals, motor vehicles and a significant trade surplus in metals and plastics. Chicago’s existing export plans line up well with these existing trade patterns and will be explored further at a Global Cities Initiative convening in Mexico City next week focusing on North American trade.

To continue growing the metropolitan economy, it is essential that Chicago build from these strengths and continue to make strategic investments in its freight assets and advanced industries, while strengthening its trading relationships abroad. Fortunately, the new Brookings analyses show that there is a lot to build on.