Tailwinds From Europe – Huffington Post (blog)

Co-authored with Laura Noren, Fellow, NYU’s Center for Law & Public Finance

Graphical Profiles Below Produced with the Generous Support of the Rockefeller Foundation

In 2008, Rahm Emanuel admonished us not to let a serious crisis go to waste. President Barack Obama is heeding this warning when it comes to the Eurozone crisis with support from Republican and Democratic allies. Overseas investors seek safe haven and opportunities in the United States. There’s been a lot of talk about headwinds from Europe slowing down our economy. However, by forging innovative public-private partnerships with these investors, America is also enjoying tailwinds from Europe.

Bipartisanship Buoyed Our Economy During Crisis

The financial crisis took a heavy toll on foreign direct investment into the United States. In 2009, with the American economy in free fall, foreign direct investment fell by 50 percent. However, as the Eurozone crisis took hold, the U.S. economy became a safe haven and also the jurisdiction of opportunity. The administration along with its bipartisan allies in statehouses across the country leveraged this status. Not only did they arrest gravity in buoying up the economy, but in 2010 foreign direct investment into the U.S. rebounded, increasing by 49 percent.

With the Eurozone in crisis, over 84 percent of that investment came from eight countries: Switzerland, the United Kingdom, Japan, France, Germany, Luxembourg, the Netherlands, and Canada. Importantly, in 2010 41 percent of this foreign investment went into U.S. manufacturing. In fact, 13 percent of all U.S. manufacturing is undertaken by foreign investors. Foreign affiliates pay on average 30 percent higher wages, proved more resilient than their domestic counterparts during the crisis, and make up 19 percent of our total exports.

Overseas Investors Are Betting on America

Why are the overseas affiliates of our allies so bullish on the U.S. economy? After all, some American firms are demanding special tax incentives in order to repatriate overseas holdings.

The fact is, despite a preoccupation among economists with anemic growth, much is working in this country. One of the brightest spots is bipartisan public-private partnerships happening in every state within the manufacturing, infrastructure, and energy sectors. Some of the highest impact manufacturing projects involve overseas investors. They aren’t investing out of patriotism; firms are making hardnosed market calculations and betting on America.

Our land values are lower than in much of Europe. We have strong transportation infrastructure and a well-educated workforce. America has long been a site of overseas investment, so newcomers are able to assess risks and old hands know when to expand. Investments often feed into existing supply chains and networks of firms with longstanding commercial ties or shared nationality.

Scaling Innovative Federal-State-Private Partnerships

Frequently new investors note how the federal, state and local governments work hand in hand to cut through red tape and put in place locally tailored incentive packages. In fact, Governor Andrew Cuomo has created New York Works to make certain that the state is a catalyst for investment not an obstacle. California Governor Jerry Brown has done the same through his recently created Governor’s Office of Business and Economic Development. The day after Mayor Rahm Emanuel announced his Chicago Infrastructure Trust, the City of Chicago had nonstop inquiries from interested foreign investors.

Our government support for these partnerships is truly bipartisan. In 2011 by Executive Order, the Obama administration created the SelectUSA initiative within the Department of Commerce to encourage greater investment into the country. The Republican House of Representatives budget for 2013 proposes to increase the SelectUSA budget from $2,700,000 to $6,125,000. The Democratic Senate would defund SelectUSA.

Through economic diplomacy and cross-agency coordination, Secretary of State Hillary Rodham Clinton and Treasury Secretary Timothy Geithner are taking the lead. America has signed agreements with China, Brazil and India to increase investments in the United States and launched an initiative that promotes investments between American cities and their overseas counterparts.

Innovative partnerships are driving growth, while advancing resiliency and broad opportunity. According to a recent Rockefeller Foundation survey, Americans of all political stripes overwhelmingly favor greater partnerships within U.S. infrastructure. They are a bipartisan foundation to build upon going forward.

German Investment Into the Innovative Bipartisan Southern Partnerships

The firms of one of our most commercially sophisticated exporting allies — Germany — are making important investments into the United States. Many of these investments are the product of collaboration between the Obama administration and Republican governors in the South.

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Germany is the fourth-largest direct investor into the U.S. behind the UK, Japan, and the Netherlands. Its inward investment has increased seven-fold since 1989. The Trans-Atlantic economy represents over half the world’s trade and investment.

BMW has decided to produce its entire line of sport utility vehicles within its Spartanburg, South Carolina plant. In 2010, it exported $4.2 billion worth of cars and parts from that plant. Dissatisfied with the pace of healthcare reform, BMW is creating its own health delivery plan. It is much like what the American industrialist Henry Kaiser did during the Second World War when he built Liberty Ships in the Oakland shipyard and wanted his workers to remain healthy through preventative care.

Another firm, Wacker Chemie, is opening a new plant in Bradley County, Tennessee to produce the polysillicon used in semiconductors and advanced solar panels. Faced with a shortage of skilled workers, Wacker has created an institute dedicated to training them in partnership with Chattanooga State Community College. A group of German firms in Charlotte, North Carolina has come together to fund an apprenticeship program. With community colleges facing flat or decreasing funding and greater demand, these German firms are investing in long term growth benefiting entire communities.

One of the Charlotte members, Siemens, invests $170,000 in every worker going through the program. It produces energy efficiency inducing gas turbines for the electricity sector cutting costs by 15 percent. The Siemens’ parent company creates investment opportunities for its American subsidiary plugged the plant into its global manufacturing network. As a result, the Charlotte operation exports 40 percent of its goods — some in partnership with the U.S. Export-Import Bank.

A Bipartisan Way Forward – Scaling Success

These examples are illustrative of a broader trend touching upon every state in the country and involving overseas enterprises from Europe, Asia, and the Americas. What more can we do?

First, we need to raise the bar on our politics and punditry. Our obsessive preoccupation with a broken Washington is overshadowing the reality that much is working in the United States. There is little to gain, politically, from working across the aisle. Republican members of the House won’t win points for funding Mr. Obama’s SelectUSA at higher levels. Likewise, the president is not going to win reelection by working together with Republican governors in the South to attract plants and jobs. However, in both cases Americans will.

We must move past the stale debate over the proper mix of cuts and revenues needed to balance our budget. Time is better spent doing the things that responsibly increase business activity in the country and attract sound overseas partnerships.

Investors into the South and elsewhere are attracted by the public-private infrastructure and energy packages being put together for them. We are lowering the cost of doing business through targeted merit-based incentives such as improved rail facilities, modernized ports, renewable energy plants producing cheaper more resilient power, and new wastewater treatment plants.

Even in a heated election year, we need to start focusing on what is working in America. Much more must be done to capitalize on the thirst for U.S. investment opportunities among our allies.

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