Ohio's Dependence on Foreign Trade
Walk through any large department store in Ohio and you'll find goods produced from around the world. The shelves of our stores are full of goods shipped from Mexico, Canada, Japan, China, Malaysia, Italy and numerous other countries. It seems that everything we buy is produced somewhere other than here at home, and that all our jobs will eventually go to foreign workers. However, a closer look reveals Ohio is fully integrated into the global economy and is a major beneficiary of the growth in global trade that has taken place over the past three decades.
Ohio is the sixth largest exporter in the country, according to the state's Department of Development (ODOD), exporting nearly $30 billion of goods around the world to more than 200 countries with an increase of nearly 7.5 percent over the previous year [1]. Ohio's biggest trading partner is Canada, which buys nearly $17 billion of our goods followed by Mexico buying over $2 billion. European countries bought over $5 billion of our goods while Asian and Middle Eastern nations purchased $3.5 billion and $655 million, respectively [2].
These foreign countries are buying from us everything from aircraft engines and vacuum cleaners to pet food and soybeans. In fact, agricultural exports totaled more than $1 billion in 2000 and supported about 15,700 jobs in the industry [3]. For example, Honda, GM, DaimlerChrysler, and Ford ship their cars, trucks and motorcycles around the world. The Whirlpool Corp. sells its washing machines, dryers, and dishwashers worldwide. Timkin ships roller bearings and Lincoln Electric and ITW Hobart export welding equipment. JM Smucker sends its jams and jellies to the far corners of the planet, and items are weighed on Mettler-Toledo scales anywhere in the world that goods are sold. People worldwide bathe and make themselves look good with the products made by Procter & Gamble and Avon. All of these exports bring billions of dollars into the state along with thousands of jobs.
Ohio's economy is also heavily dependent on foreign investment. There are about 1,000 foreign firms operating in the state employing nearly 200,000 workers, according to ODOD [4]. European and Asian firms operate 442 establishments in the state and employ nearly 115,000 workers. Japan is the largest investor in Ohio with 264 firms providing 32 percent of Ohio's foreign investment. Eighty-two percent of foreign firm employment in the state comes in the form of investments in manufacturing. Foreign firms producing transportation equipment employ 43,000 Ohioans. Honda, DailmerChrysler and Bridgestone employ 28,000 workers [5].
What this means to the citizens of Ohio is that international trade supports thousands of jobs in the state and plays an extremely important role in Ohio's economic health. This further implies it is extremely important for the state to pursue policies that attract foreign investments and encourage both foreign and domestic businesses to invest in the state. This means attention must be paid to the effects of fiscal and regulatory policies such as tax policy, government spending, tort reform, occupational licensing, environmental regulations, and the number of government regulatory agencies. Any policy changes at the state level should take into consideration the effects of the policy on the state's foreign investment and export industries.
In recent years, however, the state has not been doing well in the area of fiscal policy and regulation. Ohio ranks 43rd in the country in the U.S. Economic Freedom Index, according to a study by the Pacific Research Institute for Public Policy. Indiana, Kentucky, West Virginia, Michigan and Wisconsin all ranked higher than Ohio as good places to start a business [6].
This implies that for workers in Ohio, trade is not the enemy of job creation. The real problem is the ill-conceived government policies that discourage capital investment and job creation and drive businesses out of the state. If Ohio is to be a leader in this century, it must do a better job of dealing with taxation and spending policies. Within the global economy, capital flow is extremely mobile. That is, it tends to seek the highest return wherever that return may be located.
In order for the state to survive in the new century, our political leaders must be aware of the increasing competitiveness of the world economy and that the state's future lies in its ability to create an economic environment conducive to attracting business investment both domestic and foreign. Any attempt by our political leaders either at the national or local levels to restrict foreign trade will most certainly do harm to Ohio's economy and its workers.
Notes
[1] "Ohio Exports 2003, Origin of Movement Series." Prepared and distributed by the Office of Strategic Research, Ohio Department of Development, April 2004. p. ii.
[2] Ibid.
[3] "Trade and Agriculture: What's at Stake for Ohio? U.S. Department of Agriculture Foreign Agricultural Service, October 2001.
[4] "Foreign Corporations With Investment in Ohio" Office of Strategic Research, Ohio Department of Development, June 2002. http://www.odod.state.oh.us/osr/data.htm.
[5] Ibid.
[6] Lawrence J. McQuillan, Ph.D., "Live Free or Move", Forbes, May 24, 2004, p. 164.
Joseph Zoric is an academic advisor at The Buckeye Institute of Public Policy Solutions and is an associate professor of economics at Franciscan University in Steubenville, Ohio.
