WorldCity Business Magazine

A cautionary tale

by Mary Dempsey

South Florida saw double-digit trade growth in 2005, but it needs to work on protecting its key markets.

South Florida’s trade passed an unprecedented $65 billion mark in 2005 and its logistics infrastructure counts among the best in the country, but Miami could lose markets to other ports and airports if it is not vigilant, experts told participants at a TransWorld TradeLinks seminar.

Perry Trunick, executive editor at Cleveland-based Logistics Today, said his publication does an annual analysis that identifies the most logistics-friendly areas of the United States. The latest research concludes that Miami-Fort Lauderdale is the third-best spot for logistics in the southeast region of the country and No. 16 nationwide.

“Being ranked in the Top 50 is a very good place to be,” Trunick explained, adding that it is more important for a trade center to rank high within its geographic region than to sit at the top of the list nationally. “Logistics decisions happen to be regional in nature,” he explained.

Texas’s Houston-Baytown-Sugarland area ranked first in the southeast region and Jacksonville was second. Virginia Beach-Norfolk-Newport News, Virginia, was fourth and the Washington, D.C. and Arlington-Alexandria, Virginia, area ranked fifth regionally.

The ranking takes into consideration warehouse costs, the skill level of the logistics-industry workers, highway infrastructure, road conditions, traffic congestion, taxes and fees, railroads and port commerce.

“Infrastructure is a key factor,” Trunick told participants at the late December seminar organized by WorldCity. South Florida’s infrastructure received high marks in the logistics survey, but the area lost points because of its traffic congestion. In the study of 362 locations, Miami also had one of the worst ratings when it came to traffic tie-ups and roadway safety, both indicators of efficiency. Only seven places including Tampa-St. Petersburg received worse grades in that category.

Miami also was listed as having burdensome taxes and state fees.

Solid year

South Florida had a strong 2005 when it came to imports and exports, holding tight to its No. 13 spot nationwide and accounting for nearly 2.6 percent of all U.S. trade. It is one of three Customs districts with a trade surplus. The other two are Pembina, North Dakota, and Washington, D.C. Since 1997,when WorldCity began tracking trade statistics, Miami has been the only Customs district to post an annual surplus.

“South Florida’s trade is increasing at the same rate as the U.S. average after a couple years of lagging behind the average,” WorldCity President Ken Roberts told seminar participants. “Through the first nine months of 2005, U.S. trade is up 12.6 percent while South Florida trade is up 12.9 percent.”

Roberts said a record 19 nations posted at least $1 billion in exports and imports with South Florida in 2005. But other Customs districts, such as Houston, are making competitive inroads with Latin America, which is Miami’s top trade region. Following Hurricane Katrina’s devastation of the port of New Orleans, for example, Houston has become the exchange point for handling coffee, much of which comes from Latin America. On overall trade growth, Houston is outperforming Miami, according to U.S. Department of Commerce statistics.

In 2005, Miami clocked up nearly 17 percent of Chile’s trade with the United States, but that was a drop of more than 25 percent when compared to 2001. Houston’s share of trade with Chile rose to 17.1 percent last year, compared to just 12.6 percent in 2006. Much of the increase stemmed from non-crude oil exports from Houston to the South American country.

Miami’s trade with Costa Rica also fell, dropping 20 percent in the first nine months of 2005.

Roberts noted that South Florida still has three times as much trade with Brazil as Houston does. However, he added: “We’ve lost a considerable amount of trade in Brazil.” In 2001, South Florida accounted for 22.7 percent of Brazil’s trade with the United States. By 2005, that had fallen for 31.4 percent.

John Price, president of research company InfoAmericas, noted that Miami saw strong growth in exports to Latin America but did not fare as well when it came to imports from Latin America. Many Latin American nations have entered a commodity-export frenzy, and Miami is more adept at handling value-added goods than commodities such as copper and oil.

Price provided a note of caution in saying that Miami should keep an eye on the energy sector. “A year ago, we would have been talking about the fact that China and Taiwan and Japan had reserve surpluses. The current account surplus today is now in the hands of the oil exporters.”

Price said U.S. dependency on imported energy will affect trade relationships. In the case of the Middle East, he added that it will boost the region’s ability to affect the U.S. economy. Canada will also see its already prominent trade position strengthened.

“It’s easier to deal with Ottawa than to deal with a lot of Mideast capitals,” Price said. “Canada is the largest U.S. energy supplier, counting oil and natural gas. And Canada has a record current account surplus.”