D. Dowd Muska


Foreigners Avoid Blue States, Too

September 25, 2014

America must be doing something right.

Despite the disincentives generated by Obamacare’s carnage, an absurdly high tax on corporate income, and the threat-inflation industry’s scaremongering about impending terrorist attacks, the U.S. continues to draw foreign direct investment (FDI). Pharmaceuticals, automobiles, chemicals, airplanes, plastics, real estate -- enterprises abroad still see The Land of the Free as an promising place to put their money.

Last year, an issue brief compiled by the Department of Commerce and the president’s Council of Economic Advisers featured a fact that “deindustrialization” myth-spreaders probably can’t handle: Since 2006, the U.S. has been “the largest recipient of FDI.” In 2012, the market value of foreign ownership here topped $3.9 trillion.

Mergers and acquisitions represent the bulk of FDI. (Russia’s Oasis Beverages recently co-purchased the brewer that makes Pabst Blue Ribbon, Colt 45, and Old Milwaukee.) But articles about new factories, as well as plant expansions/renovations, appear regularly in local media’s business coverage.

Airbus, for example, is establishing an A320 assembly line in Mobile, Alabama. (Hiring has already begun -- mechanics, engineers, test pilots, and quality inspectors, take note.) And high-visibility, multinational behemoths aren’t the only companies coming to America. Most FDI arrives via firms that are far from household names. Let’s look at some investments made since the start of the year.

German corporations have been busy:

• KWS SAAT, a specialist in seeds, made public its intention to construct a $13.7 research-and-development park in St. Louis, Missouri.

• ISA TanTec announced that it will build its first U.S.-based tannery in Vicksburg, Mississippi.

• Dr. Schneider Automotive Systems, whose customers include BMW, Audi, and Ford, commenced operations at a renovated factory in Russell Springs, Kentucky.

• Evonik chose Birmingham, Alabama, to host its American “Innovation Center.”

Investors from other EU members share Deutschlanders’ interest:

• Norcross, Georgia celebrated the arrival of Denmark’s Power Stow, which will operate a complex for “sales and after-market support services, as well as the manufacturing of [its] patented Rollertrack baggage conveyor system.”

• Genan, also based in Denmark, opened “its $140 million U.S. headquarters and state-of-the-art tire recycling facility in Houston, Texas.”

• Italy’s Meter Bearings Group disclosed that its initial U.S. footprint, a $4.5 million, 48,000-square-foot factory, will be in Walterboro, South Carolina.

• KONE, a Finnish elevator and escalator manufacturer, announced plans to expand in Allen, Texas.

• Zuidberg, based in the Netherlands, opened a distribution warehouse for agricultural equipment in Cedar Falls, Iowa.

Japan, with more FDI in the U.S. than any nation except the U.K., remains a player:

• In Mesa, Arizona, Bridgestone cut the ribbon on its “10-acre research and innovation campus,” which will investigate methods “to extract natural rubber from guayule, a shrub native to the southwestern U.S.”

• Asahi Kasei Plastics announced a new, $30 million plant in Athens, Alabama.

• Otsuka Chemical, “a leading manufacturer of titanate friction material,” chose to establish its North American headquarters in an industrial park near Atlanta, Georgia.

And South Korea’s holdings are growing:

• Haier Group picked Evansville, Indiana for a technology center to support and develop “appliances, home comfort products and home entertainment products.”

• Auto-parts manufacturer KMIN announced a $17.3 million commitment to build a factory in Chambers County, Alabama.

Notice anything about the locations of these facilities? Occasionally, FDI gambles on California or New York. But in liberal havens, it’s rare to spot shovel-turning ceremonies attended by CEOs with foreign accents. Investments from offshore are flowing toward low-cost, low-tax, right-to-work states.

“Organized labor,” an executive with the SSOE Group recently told The Birmingham News, offers a strong instigation to avoid the Northeast and the Pacific Coast: “In Germany, there is a huge union influence, so when German companies are looking at the U.S., that’s not something they want to deal with. They’re trying to get away from union influence, so that’s a big plus for Alabama.”

The plurality of FDI is in manufacturing, and since it takes energy to make things, “eschew the blue” is smart strategy. States that ban fracking, and/or block the construction of infrastructure to move natural gas, win plenty of praise from the environmental left. But they don’t create favorable ecosystems for foreign businesses.

Moonbat America’s intensifying failure to attract domestic investment is matched by its inability to lure capital from abroad. Behind in the race for FDI from Europe, Japan, and South Korea, unlimited-government confines are likely to lose out on the trillions of dollars soon to flow out of Brazil, China, and India.

FDI is another reason why job creation in blue states is DOA.

D. Dowd Muska (www.dowdmuska.com) writes about government, economics, and technology. Follow him on Twitter @dowdmuska.

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