Exports offer Poughkeepsie Area an Aconomic Edge

Poughkeepsie Journal – August 1, 2010 – Sarah Bradshaw

A Washington , D.C., public policy institute is urging businesses in metro areas such as Poughkeepsie to look for their next customers around the globe and for business leaders to help them.

Selling more goods and services to foreign markets would create jobs, close the wage gap and reset the country’s economic trajectory, The Brookings Institution said recently in a special report.

“In the U.S. until now, local economic development has been about attracting Starbucks, building stadiums and stealing businesses from neighboring jurisdictions,” Brookings senior research analyst Emilia Istrate said. “This report says you have an opportunity for growth. You need to create an export strategy and include the strategy in your local development.”

She said the Poughkeepsie-Newburgh-Middletown metropolitan statistical area, or MSA, is “very well positioned to take advantage” of the growing opportunity in exports.

Charles North, CEO of the Dutchess County Regional Chamber of Commerce, said there’s potential for export growth.The Brookings report shows that the types of products and services produced locally — including chemicals, computers and equipment — match the needs of the fastest-growing importing countries.

The Poughkeepsie MSA had exports of $2.6 billion in 2008; the MSA ranked 80th out of the 100 metropolitan areas Brookings analyzed.

But the Poughkeepsie MSA exports’ share of the total economy in 2008 was 10.1 percent — ranking the region 55th of the metros.

Where the region stands out is in the percentage of exports sold to Brazil, India and China, which was 9.5 percent versus the U.S. average of 8.8 percent, giving the region a metro rank of 12th out of 100.

Brookings identified this area’s top export industries as chemical manufacturing and computer and electrical product manufacturing.

Chemicals were the second-largest U.S. export in 2008.

U.S. chemical exports to Brazil, India and China combined almost doubled between 2003 and 2008, in real terms, Istrate said, while noting those are markets in which Dutchess and Orange had a large presence compared with other metros.

“Chemicals will continue to grow rapidly, and Poughkeepsie (the MSA) is in a position to take advantage of this opportunity,” she said.

“With the advent of Stewart (International Airport) becoming a cargo type of airport, export could become a bigger part of our economy . Stewart is a good foundation for our companies to work with,” North said. “Our world has changed. Right now, plenty of our jobs have been taken away. They are in other countries. Export is a chance for us to regain those jobs, especially in the manufacturing area.”

Computer and electrical product manufacturing supported the highest number of exporting-related jobs locally in 2008, the report found. The same year, the Dutchess-Orange export sector supported almost 22,500 jobs.

To grow those jobs and the local economy, Istrate said, the main question is, “How can we encourage businesses that are already in Poughkeepsie to export more?”

“This is not only about attracting new business, but what are your exporting businesses and what are their issues, their barriers to create more exports,” she said.

The Brookings report identified some example exporting companies as MPI Systems, Vantage Manufacturing & Assembly, and IBM Corp. — all Dutchess businesses.

The City of Poughkeepsie’s MPI Systems manufactures equipment for the casting industry, specifically for Wax-Room automation.

“We export 73 percent of our product,” MPI controller Jim Faulkner said.

MPI has machines in 38 countries while its “hottest market is China,” he said.

Faulkner said federal research and development grants are essential to what they do, and advised those grants should continue.

Across the river, in New Paltz, Chuck Andola of United Apple Sales knows a lot about exporting agricultural products. He was a founder of the U.S. Apple Export Council, a trade association representing 11 apple-producing states. He’s also growing his export business in Russia, India and Malaysia.

Andola said the potential for apple export growth is significant. Growers are planting higher-yield orchards, resulting in more apples than New Yorkers can eat.

“New York state could see a 20 to 25 percent increase of apples in the next few years based on trees in the ground and investment in agriculture,” he said.

Also, the industry has improved the process of shipping and extending the life of the apples with cold storage.

“We can get to India in less time than Washington state can. It takes 23 days to India. Mexico, that’s going to be a four- to five-day journey by truck,” he said.

But Andola said the barriers are very real. For Israel , Mexico and Brazil, there are strenuous and costly regulations for cold treatment monitoring and pest management — rules Andola said are in place to keep his apples out.

Then there are tariffs, including 9 percent in the European Union (his No. 1 export market) and 20 percent in Mexico, Andola said.

He’d like to see government assistance to counter tariff barriers.

“If we put up a million dollars and the government puts up a million to overcome that 9 percent duty so that we could promote the fruit, that’s not corporate welfare, that’s aiding the exporters here right at the farm level. We don’t have the kind of assistance to fight the foreign governments,” he said.

Strengthening existing business is one focus of the Brookings report.

But there’s also potential to create start-ups. Locally, new developments in the export market could be announced within a few weeks.

The president of Dutchess County Economic Development Corp., John MacEnroe, said, “They are a manufacturer. Most of their market looks like it will be overseas.”

As far as Brookings’ statistics go, MacEnroe thought the numbers were “diluted ” because Orange County was included. Orange County Chamber of Commerce CEO John D’Ambrosio called his county’s exports “one of our biggest frustrations at the chamber.”

“I think there’s a lot of money to be made through exporting, and I really wish that more of our companies would get into that business,” he said. In the fall, his chamber will have seminars on the topic.

One business incubator in Orange County has had luck. The Orange County Partnership of Goshen helped secure a chemical manufacturer of fragrance and flavors for food companies, but couldn’t disclose the name yet.

The $12 million investment will create 82 to 100 jobs, partnership President and CEO Maureen Halahan said.

Another related Orange County chemical exporting company is Bell Flavors and Fragrances , with a manufacturing plant in Middletown and a global presence.

Istrate said the U.S. economy has been based on private consumption for three decades, and that has created bubble economies, including the recent housing balloon.

“The shift from a consumption-driven economy to exports is going to be led by Poughkeepsie,” she said.

“Local economic development and policymakers need to connect and decide how to take advantage of what’s going on in metros and create national export strategies.”

North agrees that international markets need U.S. goods, but sees another problem down the road.

“The problem is, once we make it and export it, other countries find a way to make it cheaper,” he said.