The Cleveland metro is an export powerhouse. Exporting industries employed more than 110,000 of the region’s workers as of 2008 (over 10 percent), and its economy is among the nation’s most export intensive.
So, if exports will be, and must be, a critical component of economic growth in the future (which is one of the messages of the new Export Nation report), Cleveland, and the other Great Lakes metros that are also intensely export oriented, are pretty well positioned, right?
Yes and no. A closer examination of Cleveland and other large metros in the Great Lakes shows the challenges they face in a global marketplace, and suggests what they need to do to compete on the world stage.
While the Great Lakes metros are generally quite strong on exports, their export growth has been lackluster. Only two Great Lakes metros (Des Moines and Madison) had better-than-middling export growth between 2003 and 2008. True, it’s harder to post big gains when your base is high, but growth rates of between 5 and 7 percent (or zero in the case of Detroit), when U.S. exports as a whole are growing at more than 9 percent, don’t bode well for future export strength.
Essentially, a lot of Great Lakes metros—and I picked on Cleveland in the title for alliterative purposes, but this post could just as easily been called the Toledo, Dayton, Grand Rapids, or Great Lakes conundrum—are exporting things for which global demand is dropping or being met by other countries. Or, demand is fairly steady, but the number of workers it takes to meet that demand has taken a nose dive, which is what happened with Youngstown and the steel industry. And these metros aren’t coming up with new things (or services) for which demand is growing to export instead.
This, I think, is at the heart of the Cleveland, or Great Lakes, conundrum: Cleveland and most Great Lakes metros have unimpressive rates of innovation. Metros that are manufacturing-oriented or export intensive (or both) tend to generate patents at much higher rates than other metros. But most Great Lakes metros underperform on innovation, given their high degree of manufacturing employment. Fifteen metros in the Great Lakes are manufacturing-intensive, meaning that they have more than 10 percent of their workers employed in manufacturing. Of these 15, only Detroit, Minneapolis, and Rochester exceeded the 5.15 patents-per-thousand-workers average of manufacturing-intensive metros nationwide. And only six of the Great Lakes metros had patent rates above the average for large metropolitan areas, regardless of their degree of manufacturing intensity.
“Innovate or die” is not just a mantra for Silicon Valley and other high-tech economies—it applies with equal or greater force to manufacturing. The region needs to ramp up its innovations within the manufacturing sector to fully realize the promise of a global-oriented export economy. The exporting industries that made them strong in the past, like autos or steel or appliances, are not necessarily the ones that will carry them to a strong future.