Senate, No. 2377

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.

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.

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 9^th ranked state ( New Jersey ) and the 11^th 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.

FINDING TWO: International trade policy has been neglected and exports have declined relative to other states.

FINDING THREE: Jobs in the manufacturing sectors have sharply declined; durable goods manufacturing exports have fallen relative to other states.

FINDING FOUR: The Commonwealth is losing ground as a leading destination for foreign students.

FINDING FIVE: The traditionally robust financial services sector is falling behind other states and countries.

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

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 ·

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]

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.

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.

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.

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 9^th ranked state ( New Jersey ) and the 11^th 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.

	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.

	Total Exports	Durable Goods	Non-Durable Goods (Including Chemicals)	Chemicals
Rank	43 (43.10%)	50 (17.30%)	5 (149.6%)	3 (282.4%)

Note: Percent change is in parentheses after the rank. The rank is out of 53, as the data includes the

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 14^th place in 1999 to 20^th 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

	1999	2000	2001	2002	2003	2004	2005	2006
MA Rank	14	14	17	17	15	14	17	20

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.

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.

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 11^th 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]

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

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

A Report of the
Senate Committee on Post Audit and Oversight
October 2007

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

A Report of the Senate Committee on Post Audit and Oversight October 2007

GETTING IN THE GAME:
INCREASING MASSACHUSETTS’S
PRESENCE IN A GLOBALIZED WORLD

A Report of the
Senate Committee on Post Audit and Oversight
October 2007