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OPINION: U.S. Trade Policy and Its Impact on Urban Economies

The United States has consistently run a trade deficit since the 1980s. In 2013, the trade deficit averaged a staggering $40 billion per month. While much of this deficit has to do with oil imports (which will be offset in coming years), the nature of the U.S. trade deficit is astounding.

The nations with whom the United States runs trade deficits, and in which products it runs them, defeats common sense and makes one severely question what, if any, trade strategy the United States is pursuing.

Take the United States’ trade relations with Mexico. Although the United States has a highly developed economy at the forefront of industrialized nations, America ran an almost $64 billion trade deficit with Mexico in 2012, and has consistently run a trade deficit with Mexico since 1995.

Looking closer is even more eye-opening. The three most-imported products from Mexico include electrical equipment, vehicles, and machinery. While our most-exported products to Mexico include machinery, electrical equipment, and mineral fuels – with vehicles in fourth – the U.S. still runs a deficit in every one of those products. The value of vehicles exported to the U.S. from Mexico ($54 billion) is more than double what the United States sends in vehicles to Mexico ($20 billion).

Of America’s 15 largest trading partners, the United States runs a trade deficit with all but two. Even if you remove states from which America’s trade deficit is skewed by oil imports (Canada, Saudi Arabia, Venezuela), the vast majority of trading partners enjoy a trade surplus in their relationship with the United States.

Overall, America runs trade deficits in peculiar industries such as machinery, electrical equipment, mineral fuels, vehicles (excluding rail), pharmaceutical products, and steel. In fact, some of the few heavy industries in which the United States runs surpluses are in aircraft and plastics.

Heavily industrialized and mature economies like that of the United States should be successful in the export of heavy manufactured items like those stated above. While competition with other industrialized nations like Germany is understandable, large trade deficits in manufactured products with economies much less-developed than America’s is perplexing, at best.

For cities with a history and a base in heavy manufacturing, like Chicago, Cincinnati and St. Louis, policies like these only continue to chip away at the economic health of large sectors of these urban areas.

While it is imperative for industrial cities like these to diversify, unnecessary degradation of well-paying, already-established industries is detrimental to the creation of metropolitan economies steeped not only in new-age tech industries but also in a healthy industrial sector.

Business News

Upstart Garment Manufacturer Looking to Find Its Place in Cincinnati’s Economy

Noble Denim Co. started its garment operations in Cincinnati’s Camp Washington neighborhood in 2012. Since starting, the company has experienced growth and is taking a look at how their product manufacturing fits into the region’s economy.

The company operates out of the Anchor Building on Spring Grove Avenue, but much of its current manufacturing takes place in a small town in Tennessee. Noble Denim’s founder and creative director, Chris Sutton, and his colleagues made the decision to contract work out to a textiles company in Milledgeville, Tennessee that, despite employing 150 workers at its height, was on its last limb.

Those behind Noble Denim wanted to contribute to this struggling town in Tennessee and they were happy to bring jobs to this area. As Chris put it, “more jeans mean more jobs for the workers at that factory.” In addition to this, Sutton says that capacity and prior experience was more plentiful in the South.

Expanding beyond solely making jeans, Noble Denim has recently contracted out work to make sweaters in Toronto and work shirts through a mom-and-pop textile company in New York City’s once-bustling Garment District. While enthusiastic about the return of Made in America, Sutton refuses to manufacture in the U.S. out of pure sentiment. Instead, he says his focus is on his products being of the utmost quality.

Sutton says that their two-person operation made 200 pairs of jeans in their first year – almost all of which were sold in the Cincinnati area.

Cincinnati, he says, is important due to its support of new businesses and its budding design industry, which make it the natural fit to be the brains of the Noble Denim operation. The manufacturing, meanwhile, will continue to be pursued elsewhere where there is a stronger history of garment-making and readily available labor.

While Cincinnati’s manufacturing history does not seem well-positioned to take advantage of an American textile boom currently dominated by the South, Massachusetts, New York City and Los Angeles, Cincinnati does seem suited for heavier industries. And Sutton believes that Cincinnati’s manufacturing neighborhoods, and many of those around the nation, can be revived.

Many view the incredible amount of manufacturing space in the city as an untapped asset. But in order to make manufacturing in the U.S. more attractive, Sutton suggests looking across the pond.

In the United Kingdom, for example, the first six months of rent are paid for by the government and there are generally fewer risks when it comes to starting a new business. In the United States, the risks tend to be much higher and business owners are, more or less, left to their own devices in order to survive.

Going forward, Sutton says he hopes to continue to grow Noble Denim, but does not want to sacrifice quality or care along the way. “I would be willing to be the next Levi’s, as long as we could maintain the quality.”

While the reshoring narrative continues from big manufacturers like General Electric, Masterlock or Ford, it is important to remember that a new generation of small businesses and manufacturing entrepreneurs are also making their mark on the American economy. Companies like Noble Denim are helping to revive industrial towns all across the country and take advantage of the many assets that cities like Cincinnati have.

One pair of jeans at a time, Noble Denim is creating good jobs for the middle class.

Anchor Building photographs by Jacob Fessler for UrbanCincy; Noble Denim workshop photographs provided.

Business News Politics Transportation

President Obama Shifts Attention Toward Economy, Cities in 2013 State of the Union Address

President Barack Obama (D) delivered the annual State of the Union address last evening. The hour-long speech covered a wide range of topics including gun control, military policy, immigration reform, voting rights, domestic economic programs, education reform, and energy policy.

One of the most-discussed topics of the evening was when the President announced his aspirations to see the national minimum wage raised to $9 an hour. The current minimum wage of $7.25 an hour results in an annual income of $14,500 – a number the President says keeps families with two minimum wage earners below the poverty line.

In 2006, Ohioans voted to raise the state’s minimum wage from $5.15 an hour to $6.85 an hour, with an annual cost-of-living escalator.

“This single step would raise the incomes of millions of working families,” President Obama stated. “It could mean the difference between groceries or the food bank; rent or eviction; scraping by or finally getting ahead. For businesses across the country, it would mean customers with more money in their pockets.”

Brent Spence Bridge Alternative 1

Brent Spence Bridge Alternative 2
The President called for a “Fix-It-First” program during his State of the Union address, but will it make a difference for Cincinnati’s Brent Spence Bridge Rehabilitation/Replacement project? Brent Spence Bridge replacement Alternative 1 (TOP) and Alternative 2 (BOTTOM) renderings provided.

Since the last time Congress voted to increase the federal minimum wage, which is effective for all states that have a minimum wage lower than the federal level, 19 different states have voted to raise their respective rates. The President’s $9 an hour proposal with an annual cost-of-living escalator would place it above every state in the union with the exception of Washington which pays its lowest earning workers $9.19 an hour.

In addition to raising the pay for the nation’s lowest earners, the President also pushed for new programs meant to spur job growth in a new economy. He called for the reform of high school education to more effectively train graduates to be able to fill high-tech jobs.

He also asked Congress to create a network of 15 manufacturing innovation hubs, modeled after the National Additive Manufacturing Innovation Institute (NAMII) established in Youngstown, OH in August 2012. Those cities selected, the President says, would work to partner businesses with the Department of Defense and Energy.

The President stated that the goal is to transform “regions left behind by globalization into global centers of high-tech jobs” in an effort to jumpstart the next revolution in manufacturing.

The advanced manufacturing policy proposal is one that should certainly catch the attention of local policy leaders as they work to transform Cincinnati’s Mill Creek Valley into a productive economic engine for the 21st century, as laid out in the Growth & Opportunities Cincinnati Plan published in 2008.

Another point of emphasis during the President’s first State of the Union address of his second term revolved around repairing the nation’s existing built environment.

To that end, he discussed retrofitting buildings to become more energy efficient, and announced a goal to cut energy wasted by homes and businesses in half over the next 20 years. President Obama continued by calling for a program that would prioritize infrastructure spending on existing assets in need of repair, like Ohio and Kentucky’s combined 4,054 deficient bridges.

“I propose a ‘Fix-It-First’ program to put people to work as soon as possible on our most urgent repairs,” said President Obama. “And to make sure taxpayers don’t shoulder the whole burden, I’m also proposing a Partnership to Rebuild America that attracts private capital to upgrade what our businesses need most: modern ports to move our goods; modern pipelines to withstand a storm; modern schools worthy of our children.”

Perhaps the biggest bi-partisan applause of the night went to the President’s condemnation of gun violence and call for action to prevent further atrocities like those at Sandy Hook Elementary School, and those that occur on the streets of America’s cities every day.

“Our actions will not prevent every senseless act of violence in this country. Indeed, no laws, no initiatives, no administrative acts will perfectly solve all the challenges I’ve outlined tonight,” President Obama clarified. “But we were never sent here to be perfect. We were sent here to make what difference we can, to secure this nation, expand opportunity, and uphold our ideals through the hard, often frustrating, but absolutely necessary work of self-government.”

Business News

EACC conference aims to jumpstart region’s skilled labor workforce

The European-American Chamber of Commerce (EACC) will host its annual conference at the Hilton Netherland Plaza in downtown Cincinnati today. The goal of this year’s conference is to examine the best practices for recapitalizing America’s skilled workforce for global competitiveness.

While the discussion will be aimed at large economic trends, local business leaders see the conference as an opportunity to better position the Cincinnati region for additional foreign investment.

“While this conversation has been ongoing in our region, we are providing a platform for community stakeholders to connect and discuss how we can work to grow our skilled labor work force on both sides of the Atlantic,” EACC executive director Anne Capel stated.

Sites like the former Newport Steel property offer land for potential expansion of the region’s skilled labor workforce. Photograph by Randy A. Simes for UrbanCincy.

According to local business leaders, one of the ways in which the United States in general, and the Cincinnati region specifically, could improve is through better training and coordination between academic institutions and businesses.

“There is a great need for skilled manufactures like machinists and mechatronics,” explained HAHN Automation CEO, and EACC President, John Baines. “And a common complaint from European business leaders is that they can’t find this kind of talent.”

Baines went on to say that a key difference between Europe and the United States is the prevalence of apprenticeship programs. Such programs, he says, give Europeans a leg up in skilled manufacturing since, in some cases, people have been working in the fields since they were 13-years-old. Cincinnati-area business and community leaders are hoping that this year’s EACC conference will help change all that and close the gap between workforces.

“Skilled trade is a great way to go,” said Baines whose company opened its North American headquarters in Hebron, KY in 2001 and currently employs 50 people. “You are able to avoid debt by working while you study, and get both theoretical and practical experience.”

He says that the EACC is trying to encourage skilled manufacturing companies throughout the region to develop apprenticeship programs of their own, and hopes that academic institutions will stay up-to-date with technological advances and skills training needed by the industry.

The issue is so important to Baines and HANH Automation’s North American operations based out of Hebron, KY that he says the company is working on its own apprenticeship program that will hopefully be in place in no more than one to two years.

“I hope business leaders will walk away [from the conference] seeing the value in these apprenticeship programs,” Baines concluded. “It is important that community leaders appreciate the value of skilled labor and see it as a good career path. It’s a very respectable career with good pay, and an almost guaranteed job should you have the right training.”

The 2012 EACC Skilled Labor Workforce Conference will host more than 200 attendees today and will feature speakers from academic, public and private sectors. Keynote addresses will be given by Karen Eizey, director of the Skills for America’s Future program at The Aspen Institute, and Joerg Ernst, executive vice president of global business at Siemens AG.