SENATE, No. 2377
Report of the Senate committee on Post Audit and Oversight (under the provisions of Section 63 of Chapter 3 of the General Laws, as most recently amended by Chapter 557 of the Acts of 1986) entitled "Getting in the Game: Increasing Massachusetts's Presence in a globalized world" (Senate, No. 2377). |
The Commonwealth of Massachusetts
In the Year Two Thousand and Seven.
GETTING IN THE GAME:
INCREASING MASSACHUSETTS’S
PRESENCE IN A GLOBALIZED WORLD
Massachusetts Senate
The Honorable Therese Murray
Senate President
Senator Marc R. Pacheco, Chair
Senator Susan C. Fargo, Vice Chair
Senator Steven A. Baddour
Senator Michael W. Morrissey
Senator Richard T. Moore
Senator Benjamin B. Downing
Senator Robert L. Hedlund
Senate Post Audit & Oversight Committee
Senator Marc R. Pacheco, Chairman
It shall be the duty of the Senate Committee on Post Audit and Oversight (established under Section 63 of Chapter 3 of the General Laws) to oversee the development and implementation of legislative auditing programs conducted by the Legislative Post Audit and Oversight Bureau with particular emphasis on performance auditing. The Committee shall have the power to summon witnesses, administer oaths, take testimony and compel the production of books, papers, documents and other evidence in connection with any authorized examination or review. If the Committee shall deem special studies or investigations to be necessary, they may direct their legislative auditors to undertake such studies or investigations.
Senate Post Audit and Oversight Bureau
Sridevi Reddy
Director
Russell Weinstein
Principal Author
The Committee would like to acknowledge the contributions from Senator Pacheco's office, including Mary Wasylyk, Chief of Staff; Natalia Pelayo, Communications Director; Jessica Nordstrom, Assistant Director; Ilda Marques, Executive Assistant; Kate Garrett, General Counsel; Ryan Colton, Director of District Affairs, and Charles Basler, Director of Constituent Services.
The Committee would also like to acknowledge the assistance of the Massachusetts Export Center; the U.S. Department of Commerce, U.S. Commercial Service; the Massachusetts Office of International Trade & Investment (MOITI); the Executive Office of Housing and Economic Development; Lawrence Summers, Charles W. Eliot University Professor, Harvard University, and Robert Mahoney, Executive Vice Chairman of Citizens Financial Group.
· Executive Summary ·
Globalization has dramatically
altered the world economy. If
Massachusetts
is to realize its potential in this changing global environment, it must adapt
and respond. While the Dukakis
administration concentrated heavily on economic development and job creation in
the 1980’s, the world became increasingly globalized in the 1990’s. Responding to the
changing global economy, in the early 1990’s the Weld-Cellucci administration implemented a strategic plan that prioritized international
trade. The subsequent Cellucci administration continued to recognize the
importance of the international economy to the Commonwealth’s well-being. However, the events of
September 11, 2001
necessarily turned
Massachusetts
’s attention to
safety, security, and other highly pressing concerns of the time. The first administration after
September 11, 2001
that
had the opportunity to revive the Commonwealth’s strategic international plan
was Governor Romney; however, the Romney administration neglected this
important piece of the policy agenda. The number of trade missions declined, as did the state-allocated budget
for governmental agencies addressing international trade. While one competitor state allocated 23
million dollars to their state trade agency,
Massachusetts
allocated less than 2 million in fiscal year 2007.
[1]
The absence of a strategic global
economic plan has been accompanied by a decline in various economic indicators
in the Commonwealth. Over the period
from 2004 to 2006, the Commonwealth’s rank among the states, in terms of
exports as a percentage of gross state product, fell from 14 to 20.
[2]
While the total dollar value of the
Commonwealth’s exports has increased in recent years, over the period from 1999
to 2006, the Commonwealth’s rank, in terms of the total dollar value of its
exports, fell from nine to eleven. In
2006, the difference between the total dollar value of exports of the 9th ranked state (
New Jersey
) and the
11th ranked state (
Massachusetts
)
was approximately 3 billion dollars. While
the total value of chemical exports increased relative to other states, the
total value of manufacturing exports declined relative to other states.
[3]
The Commonwealth should not be satisfied by
simply seeing the total dollar value of its exports increase every year. Today’s global marketplace brings with it
many new opportunities. The fact that
other states have surged in front of
Massachusetts
in terms of the total dollar value of their exports means that they are taking
advantage of those opportunities more successfully than the Commonwealth.
Further, while many states were
hurt by the recession in 2001, employment in various
Massachusetts
sectors fell by a greater amount than in states which exported more in terms of
total dollar value. Multiple sectors
that have been traditionally robust in the Commonwealth, such as Financial
Services and Higher Education, have also experienced a loss of competitiveness
on the national and global levels. While
a decade ago there were 17 Fortune 500 companies with headquarters in
Massachusetts
,
today only nine remain.
[4]
The number of foreign students in
Massachusetts
declined by 2,000 in recent years, or approximately 7%; this percentage decline
was the largest among the five most popular destinations for foreign students.
[5]
This decrease represents an estimated 63
million dollars of lost tuition, fees, and living expenses from foreign
students and their families.
The Senate Committee on Post
Audit and Oversight has examined multiple issues that are crucial for ensuring
the Commonwealth’s ability to become a leader in the global economy. The following report is a culmination of
statistical research and historical analysis. This research and analysis is coupled with recommendations for better
prioritizing the Commonwealth’s international economic policy within the new
administration’s economic development strategies. One key recommendation is the
creation of a global competitiveness advisory board which would continue
studying issues examined in the report and outline a strategic plan that can be
implemented by state agencies. The
Committee further recommends increasing the number of governor-led trade missions
that also include educational institutions, conducting reverse trade missions
in which foreign leaders and businesses come to Massachusetts to meet with the
Commonwealth’s leaders and businesses, evaluating strategic locations for
foreign offices, increasing the budget for state trade agencies, examining the
possibilities for creating a more defined relationship with the Department of
Commerce’s US Commercial Service to assist in export promotion, and developing
strategies for ensuring that various sectors of the Massachusetts economy
remain competitive in a globalized age. Without leadership and a commitment to
strengthening the Commonwealth’s position in the global economy,
Massachusetts
will fail to realize its full potential and its economy will trail behind those
of other leading competitor states.
The Senate Committee on Post Audit and Oversight presents the following findings and recommendations:
FINDING ONE: Massachusetts has fallen behind in today’s global economy.
RECOMMENDATION:
- Create a Global Competitiveness Advisory Board to develop a plan for increasing the Commonwealth’s competitiveness.
FINDING TWO: International trade policy has been neglected and exports have declined relative to other states.
RECOMMENDATION:
- Develop a plan for increasing the Commonwealth’s exports by creating an export promotion committee within the Global Competitiveness Advisory Board.
- Conduct an assessment of the Commonwealth’s current trade promotion structure to ensure that it maximizes effectiveness and efficiency.
- Increase the budgets of state trade agencies that assist in export promotion, such as the Massachusetts Export Center and the Massachusetts Office of International Trade and Investment (MOITI), to a level at which they are efficiently realizing their potential to increase exports.
- Increase the number of Governor-led trade missions to improve the Commonwealth’s “brand” on the global stage and to connect Massachusetts companies with foreign buyers.
- Increase the number of reverse trade missions, in which foreign businesses and political leaders are invited to Massachusetts to meet with the Commonwealth’s businesses and political leaders.
- Conduct an evaluation of the effectiveness of the Commonwealth’s foreign offices and consider other strategic locations for foreign offices.
- Consider establishing a stronger relationship with the US Commercial Service to assist Massachusetts companies exporting to countries without a foreign office.
FINDING THREE: Jobs in the manufacturing sectors have sharply declined; durable goods manufacturing exports have fallen relative to other states.
RECOMMENDATION:
- Develop a plan for improving the competitiveness of the Commonwealth’s manufacturing sector by creating a manufacturing committee within the Global Competitiveness Advisory Board. The plan should also target the manufacturing sectors in which the Commonwealth has the potential to be highly competitive.
- Strengthen and develop the “green” manufacturing industry to realize the potential of this sector in which Massachusetts should have a competitive advantage.
- Develop programs, through the collaboration of industry, academia, and the public sector, that provide students with the skills and knowledge they need to be competitive and innovative in the advanced, high-technology manufacturing sector, in which the Commonwealth should have a competitive advantage.
FINDING FOUR: The Commonwealth is losing ground as a leading destination for foreign students.
RECOMMENDATION:
- Develop a plan for attracting international students to the Commonwealth’s colleges and universities by creating a higher education committee within the Global Competitiveness Advisory Board.
- Conduct governor-led trade missions that include officials from institutions of higher education in the Commonwealth.
- Develop academic programs that help students (both domestic and international) acquire the skills and knowledge they need to be competitive and innovative in the global economy.
FINDING FIVE: The traditionally robust financial services sector is falling behind other states and countries.
RECOMMENDATION:
- Develop a plan for increasing the competitiveness of the Commonwealth’s financial services sector by creating a financial services committee within the Global Competitiveness Advisory Board.
- Develop programs, through the collaboration of industry and institutions of higher education, which help students acquire the skills and knowledge they need to be competitive and innovative in the financial services sector.
· Introduction ·
Improved technology, travel, and
communication have dramatically altered the modern economy.
Massachusetts
businesses are now competing against businesses on multiple continents;
Massachusetts
colleges and universities find themselves in a world with an increasing number
of well-funded, high-quality universities and research institutions. However, this age of increased competition
also has the potential to bring many benefits to the
Commonwealth
of
Massachusetts
. A globalized world,
one in which the distance between continents is quickly erased, offers the
opportunity for
Massachusetts
to
build new partnerships. For businesses
in
Massachusetts
, globalization
must result in an expansion of the markets to which they export their
goods. Increasing competitiveness within
various sectors of the Commonwealth’s economy and increasing the Commonwealth’s
export capability will ultimately increase jobs and stimulate economic growth in
today’s globalized age.
If
Massachusetts
is to reap the benefits presented by the globalized economy, then it must design a strategic plan for its small and medium-sized
businesses. This need has been
recognized by a wide range of organizations and constituents in the
Commonwealth. Specifically, the presence
of
Massachusetts
businesses in
foreign markets has recently received attention. In November 2006, Global Massachusetts 2015,
a leadership initiative, wrote a letter to Governor Patrick urging the
Commonwealth to develop an economic strategy specifically related to
India
and
China
. The letter encouraged the Governor to forge
partnerships and attract business from these two countries.
[6]
Regarding the study conducted by Global
Massachusetts 2015, Jack Wilson, the President of the University of
Massachusetts said, “Massachusetts isn’t doing enough in positioning itself in
the two fastest-growing economies in the world…We need to get out in front of
them and to tell their businesses that, when you come to the United States,
Massachusetts is the right place to come.”
[7]
However, Lawrence Summers, former US
Secretary of the Treasury, President of Harvard University and current
Professor of Economics at Harvard, argued that there is a tendency to
romanticize the Pacific, stating that Boston is the closest city in the United
States to Europe and the farthest from the Pacific. Summers recommended that
Massachusetts
should work to make itself a gateway to
Europe
, stating
that it should utilize its unique connections to
Europe
to increase transatlantic partnerships.
[8]
While there is discussion on which markets
Massachusetts
should build stronger connections with, there is widespread agreement that
Massachusetts
must increase its presence in foreign markets. By increasing exports, strengthening foreign direct investment, and
creating partnerships with other countries,
Massachusetts
can maximize its global potential. The
weakened dollar relative to other currencies, including the Euro, makes the
opportunities for increasing exports and foreign direct investment even more
promising.
In addition to enhancing export
promotion for small-and medium-sized businesses,
Massachusetts
must develop new strategies for various sectors of the Commonwealth’s economy
that are suffering from a lack of competitiveness. Two such sectors are financial services and
higher education. A recent report by
Mass Insight and the Greater Boston Chamber of Commerce found that the
financial services sector is becoming less competitive in the national and
global economy.
[9]
Further, a report by Mass Insight and Collegia found that
Massachusetts
has witnessed a decrease in the number of foreign students
attending its institutions of higher education.
[10]
The report below examines certain
issues that are causing
Massachusetts
to lose momentum in the global playing field. The report further emphasizes the need to develop an integrated plan
that will help
Massachusetts
to
remain competitive in the modern economy. Integrating
Massachusetts
into the international marketplace of goods and ideas and remaining competitive
in that marketplace must be a significant piece of the policy agenda. The
Senate Committee on Post Audit and Oversight recommends the creation of a
Global Competitiveness Advisory Board to further study the issues presented
below. The Board will help the
Commonwealth to achieve the immediate need of prioritizing global
competitiveness within the overall economic strategy
· Creating a Global Competitiveness Advisory Board ·
The Committee recommends the
creation of a Global Competitiveness Advisory Board, similar to the
International Trade Advisory Board formed by Governor Weld in 1993. This board should consist of government
policymakers, businesspeople, and representatives of academic
institutions. It is important that the
Global Competitiveness Advisory Board not only consists of government
officials, but also has representation from businesses and academia; these
representatives will have unique insight on how to increase the competitiveness
of their own organizations in the global economy. The main objective of the Board should be to
design a strategic plan for how
Massachusetts
will achieve its potential in the international
economy. Effectively increasing the
Commonwealth’s competitiveness in the globalized market cannot be done on an ad-hoc basis, making such a plan necessary. This
plan would aim to increase the Commonwealth’s competitiveness in a variety of
sectors, including manufacturing, the “green” economy, higher education,
financial services, and the life sciences.
Multiple government and
community groups have also called for the development of a strategic plan to
increase the Commonwealth’s competitiveness in the international arena.
[11]
In 1994, the Senate Post Audit and Oversight Committee wrote a policy brief
which reviewed the Commonwealth’s economic development policies. The report included a recommendation that an
economic performance evaluation should be written in the first year of every
governor’s administration, similar to the report written under the Weld-Cellucci Administration, “Choosing to Compete: A Statewide Economic Strategy for Job
Creation and Economic Growth”. The
policy brief from 1994 calls for this plan to be updated each year and to be
included as a part of the governor’s budget submission.
[12]
The Commonwealth would benefit from the new gubernatorial administration
following the recommendation of that report and creating economic strategies
that prioritize increasing competitiveness in the global economy.
Furthermore, a report by the Mass
Insight Corporation and Collegia which cited the
decline in foreign students in the Commonwealth recommended that
Massachusetts
develop a strategy for attracting foreign students, specifically from
China
,
India
, and
Asia
.
[13]
A recent report by the Greater Boston Chamber
of Commerce and the Mass Insight Corporation cited the lack of competitiveness
of the Commonwealth’s financial services sector; the report recommended the
development of a strategy designed by public, private, and academic sectors to
increase the competitiveness of the industry in the global marketplace.
[14]
The 2006 INDEX of the
Massachusetts Innovation Economy stated that, “
Massachusetts
is at risk of being ill-equipped to ride building economic waves and realize
their benefits. This confluence of
anemic cluster growth, population loss, and a workforce stretched by declining
numbers in key age cohorts endangers the Massachusetts Innovation Economy and
prosperity in the state more broadly.”
[15]
Among the competitiveness issues cited by the report were the conversion of
research and development to new technologies, products, and businesses and also
the availability of capital and high quality investment opportunities in the
Commonwealth.
[16]
The call for a strategic plan by multiple groups emphasizes the importance of creating a Global Competitiveness Advisory Board aimed at increasing the competitiveness of the Commonwealth in a globalized era.
· A Neglect of International Trade Policy Accompanied by a Lack of Competitiveness of Massachusetts Exports ·
A Strategic Plan Created and then Neglected
Examining previous
administrations’ approaches to international trade policy is crucial to
understanding the present need for an international strategic plan. The Commonwealth’s position in the
international economy cannot be sustained without a clear agenda and strategy
like those proposed under the Weld-Cellucci administration. The Weld-Cellucci administration and
the subsequent Cellucci administration prioritized
international trade in their policy agendas. The work of Governors Weld and Cellucci to
better integrate the Commonwealth into the global economy was recognized on a
national level, most prominently through Governor Weld’s nomination to serve as
Ambassador to Mexico and Governor Cellucci’s appointment to serve as Ambassador to Canada.
Early in his administration,
Governor Weld formed an International Trade Advisory Board which consisted of
representation from state and federal government, small and large businesses,
and public and private academic institutions. The objective of the board was “to recommend specific, and achievable
ways in which the State can exploit its competitive advantages and
significantly expand the international sector of the
Massachusetts
economy.”
[17]
The Board was organized into four task forces
focusing on Education, Export Promotion, Trade Missions, and Reverse
Investment. Each area of focus remains
an indispensable element in the Commonwealth’s continued expansion and
participation in the global economic community.
[18]
In May 1993, the Board compiled a detailed
report on the Commonwealth’s role in the global economy.
[19]
The report outlined a strategy for enhancing the competitiveness of the
Massachusetts
economy in the global marketplace. In
addition to the board, the Weld-Cellucci administration created the
Massachusetts
Export
Center
,
conducted trade missions, and implemented other policies to support
international trade in the Commonwealth. Much of the strategic planning came from the recommendations of the
International Trade Advisory Board.
After the departure of Governors
Weld and Cellucci, international trade policy went
through various changes. These changes have been concurrent with a
decline in multiple economic indicators. In addition, the events of
September 11, 2001
significantly impacted foreign trade policy. After
September 11,
2001
, the Massachusetts Port Authority (Massport)
closed its international marketing department to necessarily refocus its
efforts and budget on security.
[20]
By the end of 2001, the
Massachusetts
Export
Center
was the only state-funded international trade resource available to help
businesses, despite the fact that the
Export
Center
had also experienced budget
and staffing cuts. In 2002, The Massachusetts Office of International Trade and
Investment (MOITI) reorganized and began focusing on Foreign Direct Investment
promotion and international trade shows.
[21]
These
changes had a dramatic effect on the budgets of
Massachusetts
trade agencies. In 1999, the total
funding of the
Massachusetts
Export
Center
was $587,082, while in 2007
that had dropped to $467,580 and in 2008 is projected to be $524,370 (see
Figure 1).
[22]
Massport had been providing the
Massachusetts
Export
Center
with an average $177,600 in the eight years before it ceased funding the center
in 2001. In 2001, the Massport contribution of $138,600 represented more than 23%
of the total funds available to the
Massachusetts
Export
Center.
[23]
This dramatic loss in funding was never fully restored by the state. Furthermore, the funding cuts that occurred
post-
September 11, 2001
had
a severe effect on
Massachusetts
overseas trade offices, as the majority of these offices were being funded by Massport through its Boston-based trade development
department.
[24]
When Massport was
involved in the operation of foreign offices, the Commonwealth had
significantly more offices abroad than the four it has today.
[25]
The Commonwealth’s foreign offices are
currently located in
Brazil
,
China
,
Germany
and
Mexico
(see
Figure 3).
[26]
Of the ten states that surpassed
Massachusetts
in the total value of their exports, six states had more overseas trade offices
than
Massachusetts
.
[27]
On average, these six states have approximately
11 overseas offices, compared to the four that
Massachusetts
currently has.
[28]
[29]
Figure 1

The loss of multiple foreign
offices is captured by the experiences of leaders who have participated in
trade missions in recent years. For example, a 1995 trade mission to
Taiwan
,
conducted by the Commonwealth, visited the Massport office located there. Twelve years
later, the Taipei Economic and Cultural Office in
Boston
led a mission to
Taiwan
which included members of the Massachusetts General Court. Upon arriving in
Taiwan
,
the mission was told that the Commonwealth no longer had an office there to
promote trade and economic partnerships; yet, 15 other states do have an office
in
Taiwan
.
[30]
The closing of
Massachusetts
foreign offices in recent years has left the Commonwealth without
representation in potentially strategic markets where other states do have
representation.
The budget for MOITI in fiscal year 2006 was $960,000 and
in 2007 was $1,745,000. The proposed budget for MOITI in fiscal year 2008 is $1,460,000.
[31]
[32]
[33]
The fiscal year 2008 budget further called
for opening two more foreign offices, creating a foreign direct investment
foundation, conducting two trade missions, and hiring a trade mission
coordinator. Comparing MOITI’s budget to that of other states’ trade agencies
helps convey the Commonwealth’s commitment to international trade and
exporting. In 2006, twenty-one states
had export promotion budgets greater than MOITI’s,
while twelve states had export promotion budgets less than MOITI’s. Of the ten states which were ranked above
Massachusetts
in terms of the total value of exports in 2006, five had
export promotion budgets greater than MOITI’s, two
had budgets less than MOITI’s, and three did not
provide the data.
[34]
On average, these states had a budget of
approximately 5.5 million dollars in 2006, substantially larger than the
$960,000 budget of MOITI in 2006 (see Figure 2).
[35]
The data for other states’ budgets cannot be
perfectly compared to
Massachusetts
as in some states the export promotion offices work only
on export promotion. MOITI is involved
in both export promotion, foreign direct investment, and protocol. However, MOITI is not the only state agency
engaged in export promotion. Export
promotion is the objective of the
Massachusetts
Export
Center
as well. Thus,
comparing only MOITI’s budget, and not the
Massachusetts
Export
Center
’s budget, to other states’ agencies may not be sufficient.
Figure 2

Comparing
MOITI with specific trade agencies in competitor states, such as
Pennsylvania
and
Illinois
, exemplifies their stronger commitment to international
trade. MOITI has a staff of seven (plus
one vacant position) in
Massachusetts
, four international offices, and has conducted eight trade
shows in 2007.
[36]
The trade missions that were an important
component of trade policy in the past decade are no longer being organized in
Massachusetts
. In fact, there
have not been any state organized trade missions in the Commonwealth since
2000.
[37]
In comparison, the
export promotion office in
Illinois
has
a staff of 17, nine international offices, and 17 international trade missions
planned for the next year.
[38]
Pennsylvania’s export promotion office has a
staff of 23, 16 international offices, its fiscal year 2007 budget is 23 million
dollars, and it has 23 trade missions scheduled for fiscal year 2008 (see
Figures 2 and 3).
[39]
[40]
Pennsylvania
surpasses
Massachusetts
in terms of the total dollar value of exports at precisely
the same time, 2004-2007, that
Pennsylvania
implements various initiatives that promote and highly
prioritize international trade (See Figure 4). It would be difficult to argue that these two are not related.
Figure 3

Location of Overseas Trade Offices:
Massachusetts
: 2007
Source: SIDO
[41]

Location of Overseas
Trade Offices:
Pennsylvania
: 2007
Source: SIDO
[42]
Location of Overseas Trade Offices:
Massachusetts vs. States with Higher Export Ranking
Source: SIDO
[43]

Figure 4

Enthusiasm
and interest in international trade has tapered and waned in the past
decade. The events of
September
11, 2001
necessarily resulted in a
higher priority given to safety, security, and other highly pressing concerns
of the time. The first governor with the
opportunity to revive the Commonwealth’s policies aimed at remaining
competitive in the international economy was Governor Romney, and he neglected
this important piece of the policy agenda. Evidence of this neglect is the significant decrease in trade missions,
decreased budgets for state trade agencies, and multiple reorganizations of
trade offices and policies. As a result,
Massachusetts
is left without a clear plan to ensure its competitive
place in the global economy. This
neglect of international trade by
Massachusetts
policymakers has been accompanied by a decline in
Massachusetts
exports relative to other states (see below). It is clear
today that
Massachusetts
businesses, and the Commonwealth as a whole, would benefit
from the development of a strategic plan for increasing the competitiveness of
Massachusetts
in a globalized economy. Although
Massachusetts
did in fact “choose to compete”
[44]
in the global economy, the question now is whether
Massachusetts
will continue to compete.
Lack of Competitiveness of Massachusetts Exports
The
state of the
Massachusetts
economy signals the importance of increasing the
competitiveness of the Commonwealth in the global economy. A report by The Greater Boston Chamber of
Commerce and Mass Insight stated, “The past five years have generally been
challenging for the
Massachusetts
economy. The
2000-2001 downturn hurt the Commonwealth disproportionately and though
Massachusetts
has recovered in some respects, weaker long-term
fundamentals remain an issue.”
[45]
Evidence of reduced competitiveness
can be seen in an examination of
Massachusetts
exports. While the total dollar value of
Massachusetts
exports has
increased in recent years, over the period from 1999 to 2006, the total dollar value
of
Massachusetts
exports has
fallen relative to other states (see Figure 5). In 1999,
Massachusetts
’s
rank, in terms of the total dollar value of exports, was nine in the nation,
while in 2006 it had fallen to eleven. In 2006, the difference between the total dollar value of exports of the
9th ranked state (
New Jersey
)
and the 11th ranked state (
Massachusetts
)
was approximately 3 billion dollars. Furthermore,
Massachusetts
ranked 43 out of 53 (the data also includes
Washington
,
DC
,
Puerto Rico
, and
the US Virgin Islands) in terms of the percentage change in total exports from
1999-2006. Over this period, the dollar
value of exports grew 43.1% (see Figure 6). After considering exports of specific sectors of the economy, the
decreased competitiveness is most notable in the durable goods sector. The rank of
Massachusetts
in terms of the total value of exports of durable goods fell from nine to
eleven. Over the period from 1999-2006,
exports of durable goods grew only 17.3%; this percentage change ranked 50 out
of 53. There has been a significant
increase in the export of chemicals in
Massachusetts
relative to other states. While in 1999
the rank of
Massachusetts
in
terms of the total value of its chemical exports was 15, by 2006 it had jumped
to six. Exports of chemicals grew 282.4%
in this period, ranking third in the country.
[46]
These statistics convey that while the chemical sector is experiencing
significant growth, the durable goods manufacturing sector is not.
Figure 5: Rank of Dollar Value of Exports from Massachusetts
|
Total Exports |
Durable Goods |
Non-Durable Goods (Including Chemicals) |
Chemicals |
1999 |
9 |
9 |
19 |
15 |
2000 |
9 |
9 |
19 |
15 |
2001 |
10 |
9 |
19 |
16 |
2002 |
11 |
9 |
16 |
14 |
2003 |
9 |
9 |
13 |
8 |
2004 |
9 |
9 |
11 |
5 |
2005 |
10 |
10 |
12 |
6 |
2006 |
11 |
11 |
12 |
6 |
Source: TradeStats Express (http://tse.export.gov)
Note: The rank is out of 53, as the data includes the US Virgin Islands, Puerto Rico, and Washington, DC.
Figure 6: Rank of Percent Change in Exports from Massachusetts during the period 1999-2006.
Source: TradeStats Express
(http://tse.export.gov)
Note: Percent change is in parentheses after the rank. The rank is out of 53, as the data includes
the
US
Virgin
Islands
,
Puerto Rico
, and
Washington
,
DC
.
The Associated Industries of
Massachusetts (A.I.M.) recently reported that its Business Confidence Index had
fallen 1.4 points in August to 56.2. This decline in the index resulted in a Business Confidence level
slightly below that from a year ago, 57.1. Raymond G. Torto, co-chair of A.I.M.’s Board of Economic Advisors and principal of CBRE Torto Wheaton attributes this to the manufacturing
sector. He stated, “The manufacturing
sector accounted for the overall decline in confidence among
Massachusetts
employers, with particular concern over current conditions for their respective
operations and prospective national business conditions.”
[47]
In addition to looking at a
state’s national rank in terms of the total value of its exports, the degree to
which a state is exporting can also be measured by the total value of a state’s
exports divided by the Gross State Product (GSP). This measure assists in the comparison of big
and small economies. As was shown above, the rank of
Massachusetts
in terms of the total value of its exports, declined over time. A similar downward trend can be seen when
looking at the total value of exports per GSP. The Commonwealth’s rank fell
from 14th place in 1999 to 20th place in 2006 (see Figure
7).
[48]
This statistic further conveys that export
activity in
Massachusetts
has
declined relative to other states in recent years.
Figure 7: Rank of Exports as a Percent of GDP, during the period 1999-2006
Source: Gross State Product data from the US Department of Commerce: Bureau of Economic Analysis; total value of exports data from TradeStats Express. The rank is out of 51, as the District of Columbia is included in the data.
The Commonwealth should not be satisfied by simply seeing the total dollar value of its exports increase every year. Today’s global marketplace brings with it many new opportunities. The fact that other states have surged in front of Massachusetts in terms of the total dollar value of their exports means that they are taking advantage of those opportunities better than the Commonwealth is.
A Decline in Exports Accompanied by a Decline in Employment
Over the period from 1999-2006,
the period in which
Massachusetts
experienced a loss of competitiveness in exports, the Commonwealth also
experienced a decline in employment. As
the nation underwent an economic recession during this period as well, the loss
of these jobs cannot fully be attributed to decreased exports. However, increasing exports would certainly
be one way in which the state could increase jobs in the coming years. Over the period from 1994 to 2001,
manufacturing jobs in
Massachusetts
remained relatively stable, though declining slightly.
[49]
However, in 2001, jobs in manufacturing
declined significantly (see Figure 8).
[50]
Over the period from 1990 to 2007,
approximately 186,900 manufacturing jobs have been lost in the Commonwealth.
[51]
Durable goods manufacturing jobs remained
steady from 1997 through 2001, and declined substantially in 2001 (see Figure 9).
[52]
Manufacturing jobs for non-durable goods have
been in steady decline since 1997 (see Figure 10).
[53]
The total number of non-farm jobs has
increased overall in the period from 1990 through 2007.
[54]
42 However, there was a decline in 1990
and 2001 (see Figure 11). This indicates
that the manufacturing sector has underperformed the economy as a whole.
[55]
Since 2001, the total number of non-farm jobs has increased, but not yet
reached the pre-2001 levels.
[56]
Again, this conveys that export growth could
help employment to reach its pre-recession levels.
Figure 8

Figure 9

Figure 10

Figure 11

While there was a nationwide
recession in 2001, the Commonwealth’s employment has not reached 2001 levels in
the last five years despite national gains.
[57]
Growth in the Commonwealth’s employment and output has not yet reached national
levels.
[58]
In particular, as a result of the 2001
economic downturn, states with larger export activity experienced smaller
declines in various employment sectors than did
Massachusetts
.
Again, exporting is not necessarily the reason that some states were affected
less than others.
Massachusetts
,
the 11th largest exporter, experienced a decrease in total non-farm
employment of approximately 2.5% from 2001 to 2007 and a decline in
manufacturing employment of approximately 24.81% during that same period.
[59]
Of the ten states that had a total dollar
value of exports greater than Massachusetts in 2006, all experienced smaller
declines or even increases in total employment and manufacturing employment
over that time period, with the exception of Michigan.
[60]
This very basic analysis suggests that larger
exporters experienced smaller declines in employment following the 2001
recession than did
Massachusetts
. Though there are many factors that may have
caused larger exporters to experience smaller declines in employment during the
recession, one reason may have been export activity. Furthermore, on an intuitive level, if the
Commonwealth’s businesses can increase the number of markets to which they sell
their goods, then they will increase production, which will require a larger
workforce. Thus, increasing exports
should intuitively lead to increased jobs. The Massachusetts Technology Collaborative’s “2006 INDEX of the Massachusetts Innovation Economy” also states that
increasing foreign exports could help the Commonwealth’s industries that are
not performing well.
[61]
· Making
Massachusetts
a
More Competitive Player in International Trade ·
Utilizing
the Commonwealth’s Unique Relationships to Increase Economic and Business
Partnerships
The Commonwealth has
a unique connection to
Europe
given
its geographic proximity relative to other states and the large European
immigrant communities that have settled here. This connection has manifested itself in a variety of ways in recent
years. For example, within the past few
months a number of legislators and state officials have met with foreign
leaders from a variety of countries including
Portugal
, the
United Kingdom
, and
Bulgaria
. In
addition, state leaders have recently met with officials from countries that
have strong connections to
Europe
,
including
Russia
and
Cape Verde
. These relationships already exist and should be developed further as
they have the potential to create strategic partnerships which could increase
business with foreign markets. Research
suggests that the home-country information which immigrants have, such as
market information, the language, people’s preferences, and business contacts,
serve to increase bilateral trade between the immigrants’ new home countries
and their original home countries.
[62]
Efforts could be taken to organize business
groups with strong ties to other countries. These groups could help develop dynamic relationships between the
Commonwealth’s business communities and the business communities in foreign
countries. An example of such a group is the newly formed
Cape Verdean American Business Organization (CABO)
which strives to create links with Cape Verde-based businesses and to create
investment opportunities for American businesses.
[63]
In addition,
Massachusetts
has one of the largest Portuguese immigrant
populations in the country and it is the only state where Portuguese is more
prevalent than Spanish.
[64]
Because of its large Portuguese-speaking
community,
Massachusetts
has a very unique position relative to its
relationship with
Portugal
and other Portuguese-speaking countries. Developing this relationship presents the potential of numerous economic
advantages for
Massachusetts
on the global level. There are already Portuguese companies seizing on
opportunities to collaborate with
Massachusetts
. For
example, Millennium bcp Bank, an international bank
based in
Portugal
, has recently opened branches in
Massachusetts
.
[65]
The bank also has branches in
New York
,
New Jersey
,
Angola
, and
Mozambique
. Because
Portugal
has many strong connections to
Africa
, developing the Commonwealth’s relationship
with
Portugal
could help
Massachusetts
expand into African economies.
Portugal
can also be seen as a gateway to
Europe
as the President of the European Commission,
Jose Manuel Barroso, is the former prime minister of
Portugal
. By utilizing and developing its existing
cultural and political relationship with
Portugal
,
Massachusetts
has the opportunity to expand its presence
in the European and African economies.
Ensuring State Trade Agencies Achieve Their
Potential to Promote Exports and Attract Foreign Direct Investment
Export assistance is one of the most important functions a
state can support in order to help increase exports. The
Massachusetts
Export
Center
,
which is part of the Massachusetts Small Business Development Center (MSBDC),
provides export development services to businesses in
Massachusetts
through its multiple state offices. These services are aimed at helping businesses to increase their
presence in global markets and thus increase economic growth in the
Commonwealth. The
Massachusetts
Export
Center
was formed in 1994, in response to recommendations from the International Trade
Advisory Board report to Governor Weld. While many
Massachusetts
businesses have unique products that are marketable around
the world, the prospect of exporting can be very daunting for a small
business. Helping the
Massachusetts
Export
Center
to assist more small businesses in a substantive way is an important step for increasing the presence of the Commonwealth in the international marketplace. From
October 1, 2006
through
March 30, 2007
, the
Massachusetts
Export
Center
assisted 417 companies and individuals in the
Commonwealth. The Center has organized
13 export seminars throughout
Massachusetts
which were attended by 470 people. As a result of the
Massachusetts
Export
Center
’s assistance in 2006, 2400 jobs have been created or retained in the Commonwealth and the center’s clients reported 120 million dollars in export sales. Further, between 2005 and 2006, export sales of the center’s clients increased by 27%; this was three times the average increase of 9% in export sales experienced by all of the Commonwealth’s businesses during the same period (see Figure 12).
[66]
Figure 12
Source:
Massachusetts
Export
Center
[67]
[68]
[69]
Currently, MOITI is involved in export promotion through its
foreign offices in
Mexico
,
Germany
,
Brazil
,
and
China
. The office is also responsible for foreign
direct investment and protocol, which includes meeting