Maryland economy could use more exports

The Economy

November 14, 1999|By William Patalon III

AS A STATE, economically speaking, Maryland has come a long way since the recession of 1991.

Its companies -- particularly its finance and manufacturing companies -- are leaner and better-focused than they were early in the decade, though it took painful layoffs and consolidations to get them there.

Maryland added such crucial "New Economy" industries as telecommunications and biotechnology. Both are growing nicely.

And it's even made some progress shedding its reputation as a state that's hostile to business.

However, the decade-long economic makeover failed to transform Maryland into an export machine, Maryland business experts say.

"Given its [prime] location on the Eastern Seaboard, well-defined port and distribution facilities, and proximity to the nation's capital, one would think Maryland would be a leading exporting state," says Anirban Basu, director of applied economics and the senior economist for the Regional Economic Studies Institute, Towson University's economic-forecasting unit. "In fact, it is anything but that."

And, at least according to the recent export statistics, Maryland may be backsliding.

Whether it's a country, state or company, it's important to be an exporter.

Just as an investor does within a pension account, corporations must diversify. Just how: By selling to many different markets so that, when one has a problem, or falls into recession, the other markets can pick up the slack.

Maryland made progress between 1987 and 1997, with exports growing an aggregate 152 percent.

Even so, the $6 billion in goods Maryland sent abroad in 1997 was only 28th among the 50 states, according to statistics from the Massachusetts Institute for Social and Economic Research (MISER), which collates federal data on state exports.

Unfortunately, that 1997 total has been its recent pinnacle: The $5.3 billion in exports recorded in 1998 was 12 percent less than 1997, and dropped Maryland into the 30th spot among U.S. states. The first half of this year was even worse: Exports dropped 22 percent, to $2.14 billion through this year's first six months, from $2.74 billion during the comparable period in 1998, according to MISER.

The hardest-hit sectors included electronics and electrical products (down 10 percent); printing and publishing items (down 17 percent); industrial machinery (down 29 percent); and transportation equipment and components (down 55 percent).

Transportation items -- which include car and truck parts as well as aircraft components -- represent 55 percent of the state economy, while the electronics sector accounts for about 14 percent, the MISER statistics show.

Maryland's exporting sector "appears to be dropping off," says George D. Mickalonis, chief operating officer for the World Trade Center Institute Inc., a Baltimore-based public/private partnership that helps companies become exporters.

Mickalonis used the term "appears" because the MISER statistics contradict the anecdotal evidence that he and other World Trade Center staffers are gathering in their work with individual companies.

"What I hear, anecdotally, is not symptomatic" of a big falloff in exports, Mickalonis said. "Asia is picking up; Latin America sales are good; and European sales are good."

There are several possible explanations for the discrepancy. And these reasons paint a telling portrait of Maryland's international economy.

First, since Maryland is a small exporter, it takes only one or two unusual events -- for instance, a customer of one of Maryland's bigger companies delaying or canceling an order -- to significantly skew the data, experts say.

As an example, consider a big company such as Northrop Grumman Corp., which calls Maryland home for its electronics businesses.

Hypothetically speaking, if Northrop had landed a big, one-time order in the first half of 1998, but didn't win another this year, the company's performance would appear to have tailed off -- even though, with its existing contracts, its core business would still be quite sound, says Mickalonis of the World Trade Center Institute.

Such things do occur and, at times, squeeze Maryland's export totals, Mickalonis says. But they're aberrations, he contends. Even so, these aberrations make it tough to ferret out the long-term trend, he says.

Real obstacles exist, too. Would-be exporters are sometimes hampered by the businesses they are in -- particularly in the computer and defense sectors, since it's against the law to send some of this technology abroad.

In other sectors, Maryland doesn't get credit for all of its exports.

Take services, where Maryland is particularly strong. The MISER export data only accounts for actual products sold in foreign countries -- and not services. That's where Maryland is a big exporter, Mickalonis said.

While statistics hint at a slowdown, area experts say Maryland's export engine is gaining power. State government leaders are working to revamp Maryland's image as a lackluster environment for businesses and to give companies the whys and wherefores of exporting.

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