‘Bad’ for­eign firms drive US man­u­fac­tur­ing jobs re­vival

Kuwait Times - - BUSINESS -

SPARTANBURG/CHARLESTON: Years be­fore Don­ald Trump be­gan promis­ing to bring back good man­u­fac­tur­ing jobs by get­ting tough with US trade part­ners, such jobs have al­ready been on the rise, largely thanks to for­eign com­pa­nies now cast as vil­lains in Trump’s nar­ra­tive.

Reuters anal­y­sis of fed­eral jobs data shows that out of 656,000 new man­u­fac­tur­ing jobs cre­ated be­tween 2010 and 2014, two thirds can be at­trib­uted to for­eign di­rect in­vest­ment. More re­cent jobs num­bers are not yet avail­able, but over $700 bil­lion in for­eign cap­i­tal has poured in over the last two years bring­ing to­tal for­eign in­vest­ment to $3.7 tril­lion at the end of 2016, a world record. (Graphic: http://tm­snrt.rs/2sWkzTB)

Now for­eign com­pa­nies that have spent bil­lions of dol­lars on US fac­to­ries and lo­cal lead­ers who host them worry that global sup­ply net­works that back those in­vest­ments will fray if Trump makes good on his pledge to roll back trade lib­er­al­iza­tion. The US pres­i­dent has threat­ened to tear up North Amer­i­can Free Trade Agree­ment with Canada and Mex­ico and slap higher tar­iffs on na­tions that run trade sur­pluses with the United States, such as Ger­many or China. The ad­min­is­tra­tion is also dis­cussing tighter im­mi­gra­tion rules and more se­cu­rity screen­ing of in­vest­ment.

The tough mes­sage helped sway swing north­east­ern and Mid­west­ern Rust Belt states Trump’s way in the 2016 elec­tion, but puts him at odds with com­pa­nies and lo­cal lead­ers in the south, which has driven the re­cent growth in man­u­fac­tur­ing jobs. The south­ern states have voted for Trump, but have also spent decades woo­ing for­eign com­pa­nies with flex­i­ble la­bor laws, fi­nan­cial in­cen­tives and in­vest­ment in ports, roads and other in­fra­struc­ture.

Poster child and whip­ping boy

The courtship has spawned new auto plants from Ken­tucky to Ge­or­gia, and a new Air­bus plant in Mo­bile, Alabama. Few places high­light the gap be­tween Trump’s rhetoric and lo­cal as­pi­ra­tions bet­ter than Spartanburg in South Carolina. Ger­man car­maker BMW has in­vested here $8 bil­lion in a 1.2 mil­lion square foot (11.15 hectares) as­sem­bly plant, which has be­come the largest sin­gle ex­porter of cars by value from the United States. South Carolina Gov­er­nor Henry McMaster, a Repub­li­can and Trump sup­porter, cred­its the Ger­man au­tomaker for putting his state on the global in­vest­ment map.

“The pres­ence of this com­pany changed ev­ery­thing in the tra­jec­tory of our state,” McMaster said on Mon­day at an event un­veil­ing BMW’s new­est X3 sports util­ity ve­hi­cle. Its Chief Ex­ec­u­tive Har­ald Krueger said the car­maker would in­vest ad­di­tional $600 mil­lion in Spartanburg over the next four years, adding 1,000 jobs to the 9,000-strong work­force, and spend fur­ther $200 mil­lion on em­ployee train­ing and ed­u­ca­tion. But the poster child of South Carolina’s suc­cess also dou­bles as a whip­ping boy. In Jan­uary, BMW’s plans to build a plant in Mex­ico drew Trump’s ire and last month the US Pres­i­dent was quoted as say­ing Ger­many was “very bad” on trade and sell­ing too many cars in the United States. And even as the com­pany highlights its con­tri­bu­tion to the US econ­omy and the ben­e­fits of free trade, it is hedg­ing its bets by pre­par­ing for a pos­si­ble pro­tec­tion­ist back­lash.

Out­side of the spot­light, BMW is re­tool­ing fac­to­ries in­South Africa and China to build vol­ume mod­els like the X3 SUV, re­duc­ing its de­pen­dence on Spartanburg. “We have a big foot­print here, and we are flex­i­ble enough,” Oliver Zipse, BMW’s board mem­ber re­spon­si­ble for man­u­fac­tur­ing, told Reuters. “We will build the X3 not only in Spartanburg, we will split it into South Africa and then to China, so we will have some flex­i­bil­ity to pro­duce cars some­where else,” he said. “If some­thing hap­pens at the po­lit­i­cal level which we don’t know yet - we are able to have a flex­i­ble re­sponse.”

The Trump ad­min­is­tra­tion has said it wel­comes for­eign in­vest­ment and Sec­re­tary of Com­merce Wil­bur Ross, who spoke at an open­ing of a new Sam­sung Elec­tron­ics plant in South Carolina, said such projects showed that “Amer­ica is becoming an even stronger des­ti­na­tion for global busi­nesses look­ing to grow.” The south­ern US states owe much of their suc­cess to coastal port author­i­ties and cities that have in­vested heav­ily to make their chan­nels and docks fit for ship­ments to and from China and Mex­ico. Se­na­tor Lind­sey Gra­ham, a Repub­li­can from South Carolina who has of­ten clashed with Trump, said pro­tec­tion­ism would un­der­mine those ac­com­plish­ments and hurt Amer­i­can work­ers.

Dooms­day sce­nario

“Ne­go­ti­ate a trade agree­ment with Europe, mod­ern­ize NAFTA, don’t tear it up,” Gra­ham told Reuters at the BMW fac­tory. “We’re go­ing in the wrong direction. We need more trade agree­ments, not less.” Gra­ham noted how low-cost com­pe­ti­tion from China and Mex­ico de­stroyed South Carolina’s once thriv­ing tex­tile in­dus­try and how the state rein­vented it­self as a man­u­fac­tur­ing hub, bring­ing the likes of BMW or French tire maker Miche­lin.

The now hum­ming port city of Charleston has a sim­i­lar story to tell. When a ma­jor navy base shut down in the 1990s wiping out 20,000 jobs, lo­cal of­fi­cials worked to bring for­eign man­u­fac­tur­ers, which now em­ploy around 10,000 in the three coun­ties around the city and more is set to come. MercedesBenz, part of Daim­ler AG, is adding 1,300 jobs so it can make its Sprinter van here rather than merely as­sem­ble it with im­ported parts, which also means more busi­ness for lo­cal sup­pli­ers.

Up the road, Volvo Car Group, part of Chi­nese con­glom­er­ate Geely, is due to open its first North Amer­i­can plant next year with a tar­get work­force of 2,000. Lo­cal de­vel­op­ment of­fi­cials ex­pect more jobs and in­vest­ment to come, but worry that some steps dis­cussed by the Trump ad­min­is­tra­tion could have a chilling ef­fect. – Reuters

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