Beebe: Wal-Mart onshoring push ‘has a lot of legs’

On the opening day of a Wal-Mart-sponsored manufacturing summit, Gov. Mike Beebe met with officials from two Asian-based electronics manufacturing companies who are likely to locate a plant in the U.S.

Beebe and other officials attending the summit said the effort by Bentonville-based Wal-Mart Stores to bring manufacturing back – often referred to as “onshoring” – to the U.S. would be assisted if the federal government would either act or get out of the way.

Beebe was one of eight state governors to attend the “U.S. Manufacturing Summit” in Orlando, Fla., that began Thursday (Aug. 22) and will conclude Friday with a trade show connecting economic development officials from 36 states with about 600 Wal-Mart suppliers and retail vendors.

The summit is the first high-profile public event held by Wal-Mart following the Jan. 15, 2013, company pledge to purchase in the next 10 years an additional $50 billion in U.S.-made goods. Company officials have said they hope to boost U.S. manufacturing by purchasing more sporting goods, apparel basics, storage products, paper products, textiles, furniture and higher-end appliances. (Link here for The City Wire report on the summit’s opening events.)

Some cynics have said the Wal-Mart effort is pure publicity, with company officials seeking to ride the coattails of a resurgence in U.S. manufacturing. There is also concern that the global companies who place facilities in the U.S. will – possibly to appease large retailers – only place a small portion of their overall manufacturing volume in the U.S.

WAL-MART COMMITMENT
But Beebe and Mike Harvey, chief operating officer for the Northwest Arkansas Council, are confident Wal-Mart is serious about being a leader in the onshoring effort. Harvey, along with Council President Mike Malone, and Tim Allen, president of the Fort Smith Regional Chamber of Commerce, are attending the summit.

“I think they are going to follow through. First of all, they don’t have any choice. … Once they announce this bold initiative … and put someone as high up as Bill Simon (president and CEO of Walmart U.S.) in charge of it, it has a lot of legs,” Beebe said.

What’s more, Beebe said that prior to the summit, his office had already worked to arrange meetings between Wal-Mart and officials with foreign-based manufacturers. One of the meetings was from a lead generated during Beebe’s April 2012 trip to China.

Harvey said he is “100% certain” that Wal-Mart will remain committed to the 10-year effort. He also said the effort could cause the trend of U.S. manufacturing job losses to reverse course.

“I’m not saying all those jobs will return, but this may be a tipping point going to the other direction,” Harvey said.

U.S., ARKANSAS MANUFACTURING LOSSES
Historically, U.S. manufacturing sector employment has ranged between 17 million and 19 million. It reached a high of 19.553 million jobs in June 1979. Sector employment has been stuck below 12 million since May 2009. Prior to May 2009, the last time sector employment was below 12 million was May 1941.

The U.S. Bureau of Labor Statistics estimated there were 154,300 manufacturing jobs in Arkansas during June 2013. Employment in the sector is down 24.6% compared to June 2003, and is down almost 38% compared to the sector high of 247,300 set in February 1995.

Harvey said Arkansas has a competitive advantage with other states because it is the home state of Wal-Mart.

“Certainly with the foreign manufacturers, being in the home state, being in Arkansas is appealing to them,” Harvey said.

Harvey also said interest in Arkansas resulted in the state having two exhibit booths – one from the Arkansas Economic Development Commission and another staffed by the Northwest Arkansas Council – in the Friday (Aug. 23) trade show and 20 appointments set with companies interested in learning more about Arkansas.

“The fact that we’ve had 20 companies express an interest in being in Arkansas, I’m just thrilled with that. … Arkansas is one of just a handful of states to have two booths because there was so much demand,” he said.

Beebe said geography also is an advantage.

“Our geographic proximity to the center (of the U.S.) is a huge advantage,” Beebe said.

FORT SMITH ADVANTAGE?
Of Arkansas’ three largest metro areas, the Fort Smith region has been the hardest hit in the past decade in terms of losing manufacturing jobs. Between June 2003 and June 2013, jobs in the sector are down 23% in central Arkansas, down 34.16% in the Fort Smith region, and down 20.8% in Northwest Arkansas.

Beebe said his office and the AEDC does not pick and choose where projects go, but instead focus on what is the best fit for the company being recruited. However, Beebe noted that the Fort Smith area does have an advantage with potential manufacturing prospects.

“Mainly because of Fort Smith’s history, I tout Fort Smith’s manufacturing culture,” Beebe said, adding that the region’s “trained and trainable manufacturing workforce” is an attractive asset.

Harvey said the unfortunate fact that Fort Smith has lost so many manufacturing jobs could be an advantage if the onshoring resurgence gains momentum.

“Fort Smith has a lot of available buildings on market for manufacturing … and this could be very good for them,” he said.

‘STAYING PATRIOTIC’
Beebe is optimistic that manufacturing jobs will return to the U.S. and Arkansas, with part of the optimism driven by what he sees as a change in consumer habits. According to Beebe, U.S. consumers are willing to buy a U.S. made item if the value is good and the price is reasonable.

“I think Americans are staying patriotic about this (willingness to buy American),” he said.

Possibly holding back a resurgence in manufacturing jobs are outdated federal laws, Beebe said. For example, the U.S. has a tariff on certain electronic components that is no longer needed. The tariff was established decades ago when global trade realities were different. But with the components no longer made in the U.S., the tariff does not make sense, and in some cases makes it financially impossible for foreign companies to build electronic component assembly operations in the U.S.

“It’s an impediment to bringing jobs back to America from overseas,” Beebe said of outdated federal laws.

U.S. Commerce Secretary Penny Pritzker also attended the Wal-Mart summit, and Beebe said he “emphasized with her” the need to quickly convince Congress to address the specific rules that no longer make sense and are potential deal-killers with some of the Asian companies that have expressed an interest in locating in Arkansas.

“I will follow up on this (with Pritzker) and our people will follow up on this specific issue,” Beebe said.

Mike Harvey, chief operating council for the Northwest Arkansas Council, attended the summit and agreed that Wal-Mart’s push could be a game changer.

“If Wal-Mart says it is going to do something, they can move the needle faster than any government initiative,” Harvey said.