Center Maryland: Unlocking export potential in Baltimore area a key to economy of the future

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Editor’s note: The following commentary appeared on CenterMaryland.org on October 30, 2015.

By Donald C. Fry

If you follow business sectors and the economy in Maryland, you likely know that Maryland lagged the nation when it came to economic growth in 2014.

In fact, the growth in the state’s gross domestic product (GDP) in 2014 grew by just 0.8 percent, to $321.3 billion, according to the U.S. Department of Commerce. That was well below the national average of 2.2 percent. All this raised questions about the state’s lackluster emergence from the recession and caused economists and business experts to wonder if the flat growth was a signal that Maryland’s economy needs retooling.

One of the key reasons for the flat growth is the state’s reliance on federal government employment and spending. About 5 percent of the jobs in Maryland are federal government positions, while another 10 percent are tied indirectly to federal spending in the state.

Maryland’s economy does well when the federal government and defense spending remain stable. But with partisan bickering over federal government spending, including the recent budget sequestration, and little evidence of a break in the gridlock among the Democrats and Republicans in Congress regarding spending principles, uncertainty prevails.

Also when the federal government pulls back on spending and budget debates dominate, it ripples through the Maryland economy.

Maryland’s proximity to the nation’s capital ensures that federal government spending and contracting will remain an important part of our ecosystem. However, the political volatility and uncertainty that reigns over that segment of our economy calls out for the need to further diversify our economy.

One segment of the state economy – in the Baltimore metro region in particular – that could be leveraged to spur growth and create jobs is the expansion of the number of small and mid-size businesses that take advantage of exporting.

An estimated $12 billion in goods and services combined were exported last year. That’s a sizeable figure, but there’s a rub.

The $12 billion represented only 6.9 percent of the Baltimore Metro GDP, as noted in “Exporting to the Global Economy: Baltimore Metro Export Market Assessment,” a report issued earlier this month by the Greater Baltimore Committee and four partners collaborating in the Global Cities Initiative (GCI).

Launched by the Brookings Institution and JPMorgan Chase, the GCI was created to help metropolitan economies grow by developing export plans and strategies.

That 6.9 percent figure served to place the Baltimore metro area 90th among 100 metros in the percent of GDP in exports, according to Brookings.

One might think an economically diverse metro area like Baltimore with its world class Port of Baltimore, nearby international airport, and dynamic information technology, education and health care industries would be much higher on that list.

But even annualized growth in exports in the post-recession period of 2010 to 2014 was anemic in the Baltimore metro region: 1.6 percent.

That is unfortunate as U.S. Department of Commerce economists note that 70 percent of the world’s purchasing power lies outside the United States and only will grow as markets in South America, Asia and the Far East expand.

If the Baltimore region doesn’t go after these opportunities other competing regions will.

Despite this big global trend, the GCI market assessment, consisting of data analysis and surveys/interviews with local companies, found that small and mid-size businesses in the Baltimore metro area perceive a number of challenges when it comes to exporting their company’s goods or services and choose not to pursue expanding to overseas markets.

High among the concerns: transportation costs, customs clearances and unfamiliarity with foreign markets. The report further revealed that more than three quarters of survey respondents said they were unaware of export-related assistance programs from government or the private sector. Others worry that they lack staff expertise or resources to expand into new markets overseas.

According to Brookings Export Monitor 2015 data, the industry sector defined as education, healthcare and tourism is the third largest exporter in the Baltimore region. But even the strong education and healthcare anchor institutions in the Baltimore region could benefit from increased awareness of exportable goods and services, the assessment found.

The market assessment reveals that the Baltimore metro region enjoys significant untapped potential to expand its export trade but real challenges must be overcome if the region is to realize its full potential in the global economy and to diversify its economy to ensure economic growth and job creation.

The key for the Greater Baltimore Committee and its partners in the GCI project – and the area’s business community as a whole – will be the development and implementation of an effective strategic plan that assists metro area businesses with overcoming their reluctance to expand into the global market and to chase the many opportunities opening up in the far corners of the world.

As global trends are telling us, the strength and diversification of the region’s future economy and its job growth may depend on our success to accomplish that goal.

Read the Exporting to the Global Economy market assessment.

Don Fry is President and CEO of the Greater Baltimore Committee and a regular contributor to Center Maryland.

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