Chicago has long been a gateway to and from the United States Midwest. This heartland of the world’s top economy has grown in significance in our increasingly global world, as it’s a big target market for trans-Pacific goods. Access to its buying power is coveted, and the ability to efficiently interact with this zone has attracted lots of attention in the past two decades. It seems that Chicago’s role in U.S. connectedness with the rest of the world will only grow–which makes its choice as a photo-finish, second-by-a-hair Export Development Canada representation in the U.S. a no-brainer.
The attributes of the Chicago-area economy are well-known. It has a unique competitive position as a transportation crossroads for multiple transportation modes. O’Hare International is one of the world’s busiest airports. Rail systems for the Midwest have long since converged in Chicago. It’s also a pipeline hub for oil and gas. Waterway access is part of its natural advantage, and of course, it’s strategically located on key highways to the rest of the nation.
Much of the historic infrastructure was built to take regional produce to other markets, but over time, the market blossomed into a hive of two-way trade flows that vastly increased and broadened its industrial capability. It’s a significant manufacturing zone, has made a name for itself in nation-wide retail management, but also has a highly developed financial sector, specializing in global commodities trade, and generates impressive professional, scientific and technical employment.
Chicago now finds itself home to more than 400 major corporations, 36 of which are in the Fortune 500. Clearly it’s a place where a lot of key decisions are being made. But will the prosperity this hub of the Midwest has enjoyed continue into the future? It’s a good question, and it depends a lot on the strategic decisions of its business cluster. Without a doubt, the opportunities are evident. The wealthy domestic market is its mainstay, but growth in export markets is much more promising. As Asian per capita incomes rise, consumer tastes are shifting toward higher-valued products. As a gathering-point for a wide array of U.S. goods and services, the Chicago area has the potential to develop into a channel for meeting Asian demand.
The fortunes of the Chicago and Midwest markets are critical for Canada’s export outlook. Illinois is the second-largest initial U.S. destination for Canadian merchandise, or 13% of total traffic, just a hair behind Michigan. Growth is also impressive, especially for a large-volume market: between 2000 and 2018, average annual growth of exports to this state alone reached 6%, well ahead of the U.S. average of just 1.1%. That superior pace was maintained in the past five years, although the growth margin narrowed.
Much of what makes its way from Canada through the Illinois marketplace is oil and gas. As such, it rides the ups and downs of North American prices, and is currently in an excess-supply funk. But peel back the initial layer and there are some pretty dynamic stories to tell. The region is a funnel for Canada’s auto sector, which was the first industrial category to recover from the Great Recession, and remains at elevated U.S. sales levels to date. But growth in these two powerhouses will be limited over the future; what are the areas of greatest growth?
With industrial capacity constraints looming, the U.S. is increasingly tapping into Canadian machinery and equipment solutions. Although volumes are small, growth is impressive, consistently hitting a scorching double-digit pace in the past four to five years. Certain elements of the auto sector–heavy trucks and tires, particularly–have done consistently well. Aerospace exports have also racked up torrid increases. Keeping U.S. growth going is going to increasingly depend on exports like these, that essentially get more out of each unit of ever-more-scarce labour.
The bottom line?
The U.S. Midwest zone promises to be a dynamic solution-provider for an increasingly tight U.S. market, and over time, it has great potential to service the fast-growing emerging market space. Canada’s presence in the market opens up the potential to capitalize on the dynamism, and to expand our footprint beyond our traditional product offering. EDC is now there to help with a permanent representation. Go for it!
This commentary is presented for informational purposes only. It’s not intended to be a comprehensive or detailed statement on any subject and no representations or warranties, express or implied, are made as to its accuracy, timeliness or completeness. Nothing in this commentary is intended to provide financial, legal, accounting or tax advice nor should it be relied upon. EDC nor the author is liable whatsoever for any loss or damage caused by, or resulting from, any use of or any inaccuracies, errors or omissions in the information provided.