Ray Charles needed this song to remind him of Georgia. Maybe years ago that was necessary, but today, this part of the U.S. economy is singing for itself. The extensive infrastructure it boasts has enabled the economic zone to broaden its reach globally and provide access to and from the U.S. market when other parts of the lower 48 were not able to do so. Is the future for Georgia and the surrounding states as bright in the future as in the past, and are there opportunities for Canadian exporters?
A key eye-catching moment in Georgia’s recent economic story was 2004. During that memorable year, there was a West Coast ports crisis: extensive traffic on the seaboard ran into an infrastructure wall. At the time, lease rates on container and bulk ships were sky-high, as economic flows had outstripped shipping capacity. As such, the inability to offload at Los Angeles-Long Beach and other key West Coast ports became extremely expensive—so much so that shipping lines were diverting through the Panama Canal, and locking in U.S. Gulf Coast and eastern seaboard capacity.
The Port of Savannah was at the ready, and for the next three years, container traffic rose at a compound annual growth rate of 16%. This is an impressive number for at least two reasons: first, it was well ahead of economic growth, or even growth in foreign trade, or any other significant economic aggregate; and second, this was before accounting for inflation; this was just the number of physical containers that were moving. Since then, the port has managed an annual average growth path of 5% in spite of the Great Recession, and has more recently averaged 7.5%—things are still going strong.
There are a lot of features that go in to creating this capability. Key to this are not only visionary port facilities, but road and rail networks that efficiently and reliably move goods quickly to either distribution centres or final destinations. Speaking of which, Georgia hosts key regional distribution facilities for giants like Walmart, UPS, Amazon, DHL, Home Depot and others. There’s also the renowned, world-class international airport in Atlanta, from where anyone can reach more than 80% of the US in just two hours.
Corporations seem to like this. Atlanta alone is home to the headquarters of no less than 16 Fortune 500 companies, including, in order of 2018 revenues, Home Depot, UPS, Coca-Cola, Delta Airlines and Southern Company. Firms with a global reach are operating here, indicative of the competitiveness of this region and its future prospects.
For these reasons and more besides, it should come as no surprise that Canadian exporters do well here. Total export growth to the entire U.S. market grew at a 3.6% annual pace in the past five years, but to this region, the number was 6.4%. Roll in contiguous states that are within a 500-kilometre radius, and the growth is upped to a near-doubling at 6.9%.
It gets better. Among the top 25 goods that we ship to this zone, there are a significant number that are consistently up by double digits. The 14 fastest-growing merchandise exports to Georgia are rising at a sustained 18% annual pace in the past five years. Throw in Alabama, Tennessee, Kentucky, North and South Carolina, and the 10 export sectors that are growing by double digits, and average five-year growth rises to over 20%. This is a dynamo that, if sustained in the future, could yield very promising results for Canadian exporters.
These are among the reasons that EDC opened its first-ever U.S. office in Atlanta at a gala celebration last night. This is a place that is not only a hot trading zone in the U.S., but an access point to businesses and supply chains with a significant global reach. While Canadian exporters are diversifying, there are still great prospects in key pockets of our top export market that are worth giving a good hard thought to.
The bottom line?
Strong growth is usually attached to the emerging market space. But look a little below the surface, and in our traditional market there are still numbers that are as impressive. Given that the U.S. market is a key global engine, with the capacity for a good few more years of solid growth, this particular zone is looking good.
This commentary is presented for informational purposes only. It is 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. Neither 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.