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O’Malley trade trip heads for China, South Korea, Vietnam

Governors log a lot of frequent flyer miles on foreign trade missions. What’s the point?

Mike Violette has visited China since 1999, nurturing relationships in the country that makes most of the electronics his Gaithersburg-based laboratory tests for compliance with U.S. regulations.

The president of Washington Laboratories Ltd. will return Tuesday as part of a 10-day trade mission led by Gov. Martin O’Malley, who Violette hopes will lend his business some cachet, publicity and access to high-ranking officials to open “opportunities I haven’t even thought about yet.”

“In China,” he said, “showing up is critical.”

O’Malley will follow a long line of governors who have shown up in China and countless other countries around the globe in the name of economic development. The value of the trips is difficult to assess, but experts say the costs are low enough and risks of not going high enough, that the taxpayer-funded expeditions likely pay off.

“If they sit back for too long, they’re going to miss out,” said Lucas McMillan, an assistant professor at Lander University in South Carolina who studies the impact governors have on foreign trade and investment. “This is a huge competition between U.S. states.

“Governors can open doors that nobody else can,” he said. “In Asia particularly, where the export arena is wide open, it may take a governor to open doors because the Asian business culture is so formal.”

Jock O’Connell, a California international trade consultant, said trade missions are often worth the investment but can serve other purposes, too.

“There are multiple agendas going on here,” he said. “One is to burnish the résumé. One is to improve relations with the business community. This is a good opportunity to mend some fences.”

Indeed, the Asian trade mission is the latest in a recent series of overtures the governor has made to the business community. Since the legislature adjourned in April, he has promoted plans to grow the cyber security and space sectors of the economy and to cut down on red tape in business regulation. He also has publicly appealed to the Maryland Chamber of Commerce to work with him to solve the state’s transportation funding crisis.

O’Malley’s trip will take him and 73 others to Shanghai, Beijing and Nanjing in China; Seoul, South Korea; and Hanoi, Vietnam. The Department of Business and Economic Development, which organized the trip, said it could not provide a cost estimate beforehand, but the expense is expected to exceed the $80,000 spent on a week-long mission to Israel in 2008.

Click here to see a list of those headed to Asia with Gov. O’Malley (.pdf).

Virginia Gov. Bob McDonnell spent 10 days this month in Tokyo, Shanghai, Beijing and Seoul. That trip cost $278,000, according to a spokesman for McDonnell.

China is the third-largest market for goods exported from Maryland, and South Korea is the sixth-largest. Together, those two Asian nations imported $1.05 billion worth of goods from Maryland in 2010, and state officials hope there is an appetite for even more.

“It is critical that our state leads the way by exploring opportunities for trade and investment — especially in the growing fields of science and technology — to help us compete and win in an ever-changing global economy,” O’Malley said.

Maryland has to work harder

Maryland’s last four governors led a total of 28 trade missions from 1987 through O’Malley’s first term, according to news reports.

DBED does not keep a list of trade missions and their costs, nor does it attempt to gauge the impact of these trips on the state’s economy.

All four governors visited booming economies in Asia and Israel, where state officials see the potential for lucrative connections in biotechnology, a sector consistently targeted by Maryland economic development efforts.

David S. Iannucci, who served as DBED secretary from 2000 to 2003, said Maryland often has to work harder overseas than other states.

Iannucci, now an economic development official in Prince George’s County, led a four-day trade mission to China in 2001.

He said people on the trip handed out business cards that showed a U.S. map with Maryland marked by a gold star, and talked up the state as home of the Food and Drug Administration, the National Institutes of Health and Air Force One.

“This is kind of tough on our egos,” he said. “People know New York. They know Boston and they know Washington, but they don’t always know Baltimore.”

William Donald Schaefer was the most prolific of the globe-trotting governors, racking up 14 trips and filling his passport with stamps from 25 countries. Schaefer was the first U.S. governor to visit Kuwait after the Gulf War, made four trips to Asia and visited countries across Europe, from the Balkans to Scandinavia.

Schaefer served at the time when international gubernatorial travel peaked, McMillan said. According to data he collected, U.S. governors made 87 overseas trips in 1987, but just 45 in 1995. Easier and better global communication and the spread of foreign trade offices have made it easier for governors to stay home, McMillan said.

Percolating deals

The deals most commonly linked to trade missions were often in the works long before the governor left Annapolis.

On the final day of his Asian mission, Gov. Robert L. Ehrlich Jr. presided over a ceremony where five Maryland companies signed deals the governor’s office acknowledged were the culmination of months, and in some cases years of relationship building.”

“It’s just that they can lay their hands on the document, be seen there, and take a picture,” O’Connell said.

DBED Secretary Christian Johansson, who will travel with O’Malley, said “we have a few really significant foreign direct investment [deals to announce], companies bringing money into Maryland.”

University of Maryland, College Park, President Wallace D. Loh said he will be signing contracts to bring five new companies to the University of Maryland-China Research Park in College Park.

They are “high tech companies that will establish themselves here,” Loh said. “Hopefully they’ll do more than just R&D. Hopefully, one day, they’ll start a manufacturing plant here.”

McMillan, the Lander University professor, said such deals do indeed take time. His study of trade missions found that they’re worth the cost, with most yielding foreign direct investments into the state that sponsored the trip within a year.

O’Connell, the international trade consultant, said those investments can lead to trade as a company and its subsidiary ship goods back and forth, but he said those arrangements take years to develop and are often difficult to tie to one trade mission.

“You’re going to have to wait for these things to percolate,” he said.

Connections but not dollars

Eric Richman, president and CEO of PharmAthene Inc., an Annapolis bio-defense firm, traveled with O’Malley to Israel in 2008. The trip has paid dividends in well-placed connections, but not yet in dollars, he said.

“Traveling with the governor provides access you wouldn’t have if you were traveling alone,” Richman said.

For example, he said the group had dinner at the house of Benjamin Netanyahu, now the prime minister, one evening. There, he met top executives of Teva Pharmaceuticals, an Israeli company that had just spent $400 million to acquire another Maryland biotech firm.

Richman would not discuss his relationship with the company, but he did say he has quarterly calls with Israeli military and defense agencies interested in products PharmAthene has developed to counter chemical and biological attacks.

Likewise, the trip gave him the opportunity to inspect Israeli products that complement the work he does in Annapolis, that he could one day license to sell in the United States.

“There are two or three that I still look at today … and as those develop and as those pan out, those might fit very nicely with our portfolio,” he said.