Montgomery Businesses Export $5 Billion per Year, Supporting 35,000 Jobs

From The Sentinel:

Montgomery County exporters brought in more than $5 billion in 2015, supporting 35,000 jobs and comprising 6.5 percent of the county’s overall economy, according to data jointly produced by the Brookings Institution and the Stephen S. Fuller Institute at George Mason University in Virginia.

Much of the county’s – and Maryland’s – economy is “knowledge-based,” said Signe Pringle, director of the state Commerce Department’s Office of International Investment and Trade, which assists businesses with exports and helps to attract foreign companies to invest in Maryland. That’s reflected in high-tech exports in fields such as life sciences (mainly drugs and medical equipment), information technology and defense equipment, Pringle noted.

Jeannette Chapman, deputy director of the Fuller Institute, a top source of information on the regional economy, said, “Because our [metropolitan Washington] region specializes in services, we export relatively few shippable items.” The Brookings/Fuller data in Tables 1 and 2 are “the best available estimates” for service exports, which “are somewhat harder to track” than shipments, Chapman explained. Table 2 shows the importance of service products in Montgomery’s exports, she noted.

Some services, such as hospitality and travel for foreign visitors, are rendered in the United States but sometimes are viewed as exports because they bring money into the country as exports do. The U.S. Chamber of Commerce estimates travel services to foreign visitors at about $6 billion for Maryland in 2013, the most recent year of its data.

U.S. Commerce Department data on state and county exports track shipments only and are based on “point of movement” – where the goods leave the country, in particular the Port of Baltimore – rather than the “point of production,” like the Brookings county-level data, Chapman said. Goods produced in many states leave the country through Baltimore, so the Commerce Department data is not comparable to the Brookings county data, she added.

Export executives at county companies agreed that Montgomery County is an excellent place for their businesses, most of all because of the high-skilled, specialized and diverse workforce, including speakers of the languages of countries to which they sell. Rick Lober, vice president and general manager of Hughes Defense and Intelligence Systems Division in Germantown (one of several Hughes divisions in the county), noted that many engineering and tech people with security clearances are available in Montgomery and surrounding counties. CEO Bobby Patton of Patton Electronics Company in Gaithersburg, a manufacturer of commercial and industrial telecommunication equipment, said, “We also value the pipeline of students from local and regional universities [and] having a strong [local] base of employees in cyber security.”

The high-skilled labor force extends beyond the technological side to the business side, said several exporters. Jim Datovech, president of LKC Technologies Inc., in Gaithersburg, a maker of ophthalmic medical devices, noted the range of “biotech knowledgeable employees including programming, engineering, sales, marketing, and regulatory” specialists. President Elio Oliva of Hi-G-Tek Inc. in Rockville, which builds and operates wireless monitoring systems to secure cargo containers and other assets in severe outdoor environments, said, “It is wonderful to live in a county where you can find experienced engineers, program managers and marketing professionals from different cultures and backgrounds. Our employees speak six languages and do business in 13 countries, … so having a diverse workforce … is essential to our success.”

Proximity to transportation, especially three major airports, is another major benefit of the county. “We find this location gives us great access to the Port of Baltimore, BWI, and the airports in Northern Virginia,” said Yem Maru, senior vice president of American General Supplies Inc. (AGS) of Gaithersburg, a supplier of aircraft spare parts and repair services. Datovech of LKC added, “The proximity of the three major airports also makes international air freight fast, easy, and more affordable.”

The sheer number of high-tech firms with sales both domestic and foreign helps businesses here as well. Washington Laboratories Ltd., an electronics testing service and engineering firm in Gaithersburg, is not an exporter itself, said CEO Mike Violette, but tests equipment for many exporters. It has about 300 customer firms in Maryland, about 80 of them in the county. “We try to be a global provider” of electronic testing, Violette noted. The company has authority through reciprocal arrangements between the U.S. and the European Union, Australia, Japan, Taiwan and other countries, to certify compliance with foreign technical specifications, he explained. For countries that have no such agreement, WLL has branches abroad that conduct testing. China, in particular, has no such agreement, and WLL has branches in Shanghai, Beijing, and Hong Kong, he said.

Another local advantage is proximity to federal agencies. For instance, Datovech noted, the county “is home to the National Eye Institute of the National Institutes of Health,” which helps LKC. Hughes DISD benefits from closeness to the Pentagon for domestic sales.

The stability of the county as a business environment aids its exporters. Hughes and LKC have been in the county for more than 40 years, AGS and Patton Electronics for 30 years or more, and WLL and Hi-G-Tek for 20 years or more. Patton has sales in 120 countries, which comprise 70 percent of its revenues. AGS sells to most African countries, and international customers supply 95 percent of its annual revenues, Maru said. LKC “has shipped products to over 54 countries,” and foreign sales are “approximately 50 percent of LKC’s business,” Datovech said. “Over 75 percent are to international customers,” said Oliva of Hi-G-Tek.

While the county is not known for manufacturing, Hughes and Patton have highly automated, robotic production facilities in Rockville and Gaithersburg, respectively. The Hughes plant makes products for all Hughes divisions, not just DISD, Lober noted. It employs about 180 people, said Michelle Pearre, senior vice president for human resources.

Problems with location in the county? “The drawbacks are pretty obvious,” Patton said. “Montgomery County has a high cost of living, including taxes, and employees are paid high rates compared to our international competitors.” Lober added that traffic is a vexing issue, particularly for Hughes employees residing in Virginia.

As for changes in policy initiated by the Trump administration, most of these executives agreed with AGS marketing director Kenneth Connor, who said, “So far we have experienced no negative impacts [from such] changes in policies. Until these new policies are finalized, we’d have to say it’s too early to tell” what impact the new administration will have on AGS’s business. Several executives also reflected Patton’s view that “free and fair trade [is] essential,” and noted specific unfair actions by other countries.

However, some executives made specific points on Trump administration policies. Oliva of Hi-G-Tek said, “We are hopeful that the new administration will work to better equip the Department of Homeland Security to deal with the wave of narcotics, contraband, and other dangerous materials threatening our nation. … We feel that this greater focus on improved security for our ports and land borders will create new opportunities for us.”

Datovech of LKC said that “Trump’s message of streamlining the FDA approval process would help increase international business with countries that require home country regulatory approval before they will consider granting regulatory approval.”

Both the federal and Maryland Commerce Departments provide significant help to exporters. On the federal side, the aid comes from the U.S. Commercial Service of the International Trade Administration. According to Derrick Small of the Commercial Service, it offers four basic services: trade counseling on other nations’ legal, regulatory, customs, and tax issues, as well as on pricing and finance matters; business matchmaking, including contact lists, partner searches, trade missions and shows; market intelligence such as country and industry reports and customized market research; and commercial diplomacy – contacting foreign governments for particular exporters on specific problems. The Commercial Service has offices in 100 U.S. cities, including Baltimore, and employees working in 75 embassies around the world to help exporters.

On March 16, the Trump administration proposed, in its outline budget for federal “discretionary” spending, substantial – though as yet unspecified – cuts to Commercial Service export promotion work.

Exporters are likely to oppose such cuts. “There are a lot of good folks in the [federal] Department of Commerce, particularly in the ITA, working hard to support the U.S. manufacturing base,” said WLL’s Mike Violette. An October 2016 Customer Experience Report taken by ITA claimed that responding business clients of the agency reported an extra $622,000 in foreign trade over 12 months, aided by ITA’s services.

Also on the federal level, the Small Business Administration funds Small Business Development Centers in every state, which assist exporters mainly with finances and helping to assure that they are paid. The Maryland center is on the University of Maryland College Park campus.

The Maryland Commerce Department OIIT has active programs to take Maryland businesses to major foreign trade shows and assist exporters in ways similar to the U.S. Commercial Service (other than commercial diplomacy), said its director, Signe Pringle. The federal and state agencies “have a common goal” and often “customize [their efforts] based on what a particular company needs” and the efficiencies and capabilities of each agency.

Jessica Reynolds, manager at OIIT for Europe and the Middle East, said this year, the agency is taking companies to Milipol Asia-Pacific (a homeland security trade fair in Singapore April 4-6), the Paris Air Show June 19-25, and the MEDICA Trade Fair in Dusseldorf, Nov. 13-16. The state’s group at Milipol is sold out, though there still is room for its space at the air and health shows, she added. AGS’s Ken Connor noted that Lt. Gov. Boyd Rutherford and Commerce Department Secretary Mike Gill attended the Farnborough Air Show in London in July 2016.

OIIT has representation in 16 countries abroad through contract commercial firms. The countries are Canada, Mexico, Brazil, Peru, Colombia, Chile, France, Nigeria, Israel, Dubai, India, Singapore, China, Taiwan, Korea and Australia.

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