Study Suggests More Indiana Trade Targets
A study by the Indiana Business Research Center is offering up alternatives to the state's traditional emerging market trading partners. The research suggests countries including Chile, Saudi Arabia and Malaysia could rival the more well-known “BRICS” nations. October 10, 2013
BLOOMINGTON, Ind. – While the emerging markets commonly known as BRICS countries are seen collectively as an economic powerhouse, a new Indiana University report found wide variation in Indiana exports to these countries over the past decade.
For example, while China imported $1.3 billion from Indiana companies in 2012, state exports to Russia totaled only $100 million last year. Other emerging markets that IU researchers feel are in the mix — Chile, Colombia, Malaysia, Saudi Arabia and South Korea — all imported more Indiana goods than Russia did in 2012.
The acronym “BRIC” was coined in 2001 to define four large emerging economies: Brazil, Russia, India and China. Many are now suggesting the inclusion of South Africa to the group and the new acronym “BRICS.”
Indiana's average annual growth rate to BRICS countries over the past 10 years has exceeded the nation's — particularly for Russia and South Africa — but in recent years exports have slowed considerably.
“Despite all of the hype about the growth and importance of the BRICS, there are several other emerging markets that import a greater volume of goods from Indiana and the United States,” said Timothy Slaper, director of economic analysis at the Indiana Business Research Center and a co-author of the report.
Mexico is an important export market for Indiana, accounting for 11.3 percent of all state exports last year. Trade to South Korea and Saudi Arabia exceeds state export activity to India. Colombia, Thailand and Chile surpass South Africa in terms of Indiana and U.S. product imports.
The report, “U.S. and Indiana Trade Patterns with the BRICS Countries and Other (Often Overlooked) Emerging Markets,” was prepared by the IBRC, which is based in IU's Kelley School of Business. The IU Center for International Business Education and Research provided financial support for the research.
IBRC analysts added a set of “Plus” emerging markets that they believe may rival the BRICS in terms of export growth potential.
A key finding by the IBRC analysts is that Indiana's ranking among the states increased and the average rate of export growth outperformed the nation at large for all the BRICS. This could not be said of the “Plus” countries.
“Given their cultural and resource endowments, it would be foolish to consider the BRICS a homogenous market block,” added co-author Tanya J. Hall, an economic research analyst at the IBRC. “Indeed, rates of economic growth and import growth varied greatly, as did the absolute level of imports.
“China could be considered the economic and import tiger, but India's economic growth rate put in a middling performance,” Hall added. “Russia's rate of growth and rate of import growth from Indiana were impressive, but the starting point was so low that Russian imports from Indiana barely topped $100 million in 2012 – less than Chile, Colombia, Malaysia, Saudi Arabia and Thailand, to name a few.
“Brazil's imports from Indiana topped $800 million, second only to China among the emerging markets, but its economic growth has moderated recently.”
This isn't to say that the Hoosier state's exports to BRICS countries haven't been significant.
“Indiana has expanded its influence and increased its status as an exporter,” the report said. “Across the more dominant Indiana industries – transportation equipment, industrial machinery and life science product manufacturing – the state's average rate of increase has, for the most part, surpassed that of the nation for both the 'traditional' BRICS as well as the 'Plus' emerging markets.”
When looking at the top 10 Indiana-produced exports to the 18 countries studied, industrial machinery was in the top spot for most of them. Life sciences products ranked highly as well, making up almost 60 percent of Indiana exports to South Korea, for example.
Regions had slightly different import profiles. Eastern Europe, for example, while importing Indiana medical devices and optical instruments, did not import Indiana pharmaceutical products in large quantities. Latin American countries imported life science products, but for Mexico that product category was eclipsed by transportation equipment.
IU Bloomington is the flagship residential, research-intensive campus of Indiana University. Its academic excellence is grounded in the humanities, arts and sciences, and a range of highly ranked professional programs. Founded in 1820, the campus serves more than 42,000 undergraduate and graduate students pursuing degrees in more than 300 disciplines. Widely recognized for its global and international programs, outstanding technology and historic limestone campus, IU Bloomington serves as a global gateway for students and faculty members pursuing issues of worldwide significance.
Source: Indiana University