F Improving the Washington Region’s Global Competitiveness Prepared for The 2030 Group By David Versel, Senior Research Associate Jeannette Chapman, Research Associate Lokesh Dani, Research Assistant Lauren McCarthy, Research Assistant Center for Regional Analysis School of Policy, Government, and International Affairs George Mason University November 2014 Table of Contents Introduction: the Importance of a Globally Fluent Region........................................................... 1 Part I: Evaluation of Metro Washington Relative to the 10 Traits ............................................... 3 Trait 1. Leadership with a Worldview ............................................................................................. 3 Trait 2. Legacy of Global Orientation .............................................................................................. 8 Trait 3. Specializations with Global Reach .................................................................................... 16 Trait 4. Adaptability to Global Dynamics ...................................................................................... 25 Trait 5. Culture of Knowledge and Innovation .............................................................................. 31 Trait 6. Opportunity and Appeal to the World ............................................................................. 41 Trait 7. International Connectivity ................................................................................................ 47 Trait 8. Ability to Secure Investment for Strategic Priorities ........................................................ 51 Trait 9. Government as Global Enabler ......................................................................................... 59 Trait 10. Compelling Global Identity ............................................................................................. 66 The Washington Metro Area: A Global Fluency Scorecard .......................................................... 69 Part II: Best Practices in Global Competitiveness Initiatives ...................................................... 72 Part III: The Washington Region’s Competitive Position ............................................................ 76 Overview and Purpose .................................................................................................................. 76 Benchmarks: Washington vs. Top 20 Metros ............................................................................... 77 Summary of Findings..................................................................................................................... 79 Part IV: An Agenda for Global Fluency ........................................................................................ 82 Bibliography .................................................................................................................................. 87 Appendix A: Global Competiveness Case Studies Appendix B: Benchmark Indicators for Top 20 Metro Areas Introduction: the Importance of a Globally Fluent Region The Washington DC Metropolitan Area (WMA) boasts many inherent advantages relative to its competitiveness in the global marketplace. The region is the seat of power of the wealthiest and most powerful nation in the world. It has one of the best educated and most highly skilled workforces of any metro area. It is a leading destination for tourists from all over the world. It is home to the headquarters of many international corporations. It has a substantial population of foreign-born residents and nonstop air service to dozens of international destinations. It has a wealth of cultural resources and amenities. All of these advantages are rooted in Washington’s historical role as a company town for the Federal government. During the second half of the 20th Century the Federal government increased its presence in the region in terms of both direct employment and procurement spending. The expansion of the Federal government fueled a trend of sustained economic growth and prosperity in the region for more than 60 years. Since 2010, though, the Federal government has reduced both its workforce and spending on procurement in the region, leading to a slowdown in the region’s economic growth. This trend has done harm to the Washington metro area’s economy: the rate of job growth in the region has slowed considerably in recent years, and most job gains have been in lower-wage sectors and occupations. With additional Federal cutbacks expected in the future, these trends will likely continue unless action is taken to alter the structure of the regional economy. The Washington metro area faces a new imperative: it must activate the private side of its economy. Doing so will likely mean increasing the region’s competitiveness in the global economy, as the domestic economy is simply not expected to grow at a very strong rate in the near future. According to the IMF’s World Economic Outlook1 the United States’ GDP is expected to grow at an annual rate of less than 3.0 percent between 2014 and 2019, compared with a global GDP growth rate of 3.6 to 3.9 percent. In order to grow its economy the Washington region will therefore need to expand its appeal to investors and trade partners from around the globe. In 2013 the Brookings Institution released a study called, “The 10 Traits of Globally Fluent Metro Areas,” which documented the characteristics of metropolitan areas that are succeeding in the global economy. This research effort assembled background information and benchmark data on the 100 largest U.S. metro areas, as well as leading international metro areas. The study identified recurring themes that related to what it termed, “globally fluent” regions. In Brookings’ view a globally fluent region is ideally positioned to increase exports, attract more foreign investment, improve its workforce, and promote innovation.2 The commonalities of such regions include: 1 http://www.imf.org/external/pubs/ft/weo/2014/01/ 2 Ibid., p. 13 1 A coordinated regional vision and leadership structure A clear global identity that highlights distinct areas of economic specialization A culture of openness, connectivity, and innovation Sources of funding for strategic investments As part of its report Brookings published profiles on 42 metro areas from around the world, including Washington.1 Though Washington’s profile highlighted the region’s advantages, it also identified some of the region’s shortcomings as an aspiring global center of commerce. Several challenges were identified: Perception as a government town. Washington’s identity to the global marketplaces is as the seat of government power, but not as a business hub. Lack of corporate engagement. According to Brookings: “companies are now in the region, but are not focused on the region or philanthropy, just operating in the market for strategic reasons.” Multiple state level governments. The political and cultural differences among the District of Columbia, Maryland, Virginia, and West Virginia, make it very difficult to have a unified vision. The transiency of the region’s population also hinders its ability to build a regional identity. Weak base of export activity. The Washington metro area ranked 99th out of the 100 largest U.S. metros in terms of the share of its GRP comprised of exports, and 70 percent of its export activity was of services; nationally, services represent only 33 percent of exports. The region got to where it is by accident. The region’s global profile is largely an incidental byproduct of the Federal government, and is not the result of any sort of coherent regional growth strategy. The report characterized Washington as “a global city, but not…a global marketplace.”2 The conclusion from the Brookings study is that, in spite of its many natural advantages, the Washington region has a long way to go in order to maximize its competitive position in the global marketplace. This report begins with a deeper examination of the Washington region’s status relative to Brookings’ 10 traits, evaluates Washington’s competitive position relative to other major U.S. metros, discusses what other regions in the U.S. are doing to compete at a global scale, and puts forth an agenda for the Washington region to improve its global fluency. 1 http://www.brookings.edu/~/media/Multimedia/Interactives/2013/tentraits/Washington_DC.pdf 2 Ibid., quoting Tom Morr, former CEO of the Greater Washington Initiative 2 Part I Evaluation of Metro Washington Relative to the 10 Traits Trait 1. Leadership with a Worldview “Local leadership networks with a global outlook have arguably the greatest potential for impact on the global fluency of a metro area.”1 Local Political Leadership: A Legacy of Federal Control Over the past 200 years the characteristics of the Washington metropolitan region’s leadership and power structure have primarily been shaped by the Federal government. In addition to being the seat of Federal power, the District of Columbia was under direct Federal rule for most of its history, with municipal affairs under the management a commission whose members were appointed by the President and supervised by Congress.2 As a result, not only did the District lack the ability to govern itself, there was no impetus for collaboration with the neighboring states of Maryland or Virginia. As the District had no control over its local affairs until the 1973 passage of the District of Columbia Home Rule Act, a local political leadership structure