Why do Mass. exports lag rest of U.S.? Experts point to product mix, stronger dollar
Before the bottom fell out of the global economy in 2008, sales of Massachusetts products to other countries — like exports from the U.S. as a whole — were growing fast, rising from $16.7 billion in 2002 to $28.4 billion in 2008. But, since the economy began to recover in 2010, the state's export growth has lagged the national numbers. Massachusetts generates only about 6 percent of its gross state product from exports, compared with 9.5 percent for the country.
Those are some of the findings of a report released in December by the UMass Donahue Institute that looked at exports through 2013. One of the authors, Daniel Hodge, said the state's exports in the last year have also grown more slowly than the national average. That's somewhat puzzling, especially since the Massachusetts economy is growing just as fast as the country's.
The paper notes that part of the gap between the state and U.S. numbers has to do with the kinds of things that are made in Massachusetts. Some of the country's fastest-growing exports are energy and automobiles, things the Bay State is not known for. Another possible explanation is the economic slowdown in European countries, which are natural trading partners for Massachusetts and other East Coast states.
But Hodge, the Donahue's director of economic and public policy research, said those factors don't explain the entire gap.
“I think there is sometimes kind of a knee-jerk reaction when looking at our exports: 'Europe and energy,'” he said. “It's more complex than that.”
Strong dollar, weaker sales
Jack Healy, director of the Massachusetts Manufacturing Extension Partnership in Worcester, said a number of issues could be slowing the growth of Massachusetts exports. One current problem for manufacturers anywhere in the country is a strong dollar, which makes U.S. exports more expensive for customers elsewhere. A longer-term issue for the Bay State, in particular, is the loss of large-scale manufacturers.
“It's really challenging for a smaller company to export goods,” he said.
For some companies that make goods for customers in other countries, things seem to be going fine. Dick Wilson, warehouse manager for plastics maker Pexco's Athol location, said the company doesn't export its products directly, but sells goods to companies with international operations that ship them to Mexico, Europe or Asia.
“I would say it's increased over the past year,” he said.
David Callahan, corporate logistics manager for Leominster plastics company AlphaGary Corp., said the company sends most of its exports to China.
“We're doing more exports than we have in the past,” he said. “I've got four containers going out this week. It seems like it's increased over the past three to four months.”
Chris Geehern, spokesman for the Associated Industries of Massachusetts, which helps Bay State companies with their exporting operations, said he's heard similar things anecdotally from other manufacturers.
Geehern said the strong dollar hasn't necessarily made a big difference in the choices local manufacturers make since they know exchange rates are always changing. The big question in setting up an international sales operation is about the long-term market opportunities, he said.
All this raises an obvious question: If companies that want to export goods can find ways to do it, and if the state economy is growing on pace with the rest of the country, does the sluggish export growth matter?
Hodge said it may not matter much. One possible reason that Massachusetts isn't sending as much stuff to other countries is that high-tech companies in such areas as life sciences are doing research and development in the state but making more of their products elsewhere. Another is that the state may be shifting toward more services, in fields such as IT and law, which may involve international deals but don't get counted in most export numbers. Since the state's economic growth and employment level are doing at least as well as those of the rest of the nation, those areas may be fine substitutes for actual exports.
On the other hand, Hodge noted that having diverse sources of income is important for any state.
Ultimately, Hodge said, the point of reports such as the Donahue Institute's is to shed light on just one of the issues to consider when we think about boosting the state's economy.
“We hope it provides a lens on helping Massachusetts companies' access (to) global markets,” he said.
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