Hutchinson highlights foreign investment in Arkansas amid U.S. free trade concerns

As Gov. Asa Hutchinson takes further steps to highlight the message to overseas companies Arkansas is open for business, a new report by the U.S. Department of Commerce shows that spending by foreign direct investors saw double-digit declines over the past year amid concerns about the Trump administration trade policy.

On Tuesday (July 18), Hutchinson issued the state’s first “open investment policy” statement at L’Oréal USA’s manufacturing facility in North Little Rock, acknowledging the importance of foreign investment to Arkansas’ economy and promising to treat overseas employers in a fair and equitable manner.

“Arkansas’ economy and workers have benefited from foreign direct investment (FDI) as we are a national leader in FDI job growth,” Hutchinson said. “Today’s proclamation will help expand Arkansas’ brand to employers around the world. L’Oréal has become part of our community and provides an example of the manufacturing jobs in which our state excels.”

Nancy McLernon, president and CEO of Organization for International Investment (OFII), said Hutchinson is the first governor in state history to issue an open investment policy statement. Governors in other states and U.S. trade groups, such as the U.S. Chamber of Commerce, have also issued similar statements amid concerns about free trade as the Trump administration enters talks on the North American Free Trade Agreement (NAFTA) and other U.S. trade agreements.

“Part of my job is to track state-level policies so that global companies looking to invest in the United States know where they have the best opportunity to succeed. I am pleased to announce that Gov. Hutchinson gets it,” McLernon said. “The governor’s action today serves as a powerful signal to potential employers around the globe that Arkansas is ‘open for business’ and will welcome them as an equal and important part of the community.”

ARKANSAS TOP STATE FOR FOREIGN INVESTMENT
Two months ago, OFFI tabbed Arkansas as the nation’s top state for foreign direct investment by employment growth, improving by 41.5% over the past five years. Since then, Gov. Hutchinson and Arkansas Economic Development Commission Director Mike Preston have been spreading the message that Arkansas is seeking foreign investment at nearly every public event that either attends.

During a conference call with reporters during his foreign trade mission to Europe and Israel last month, Hutchinson said he and Preston held meetings in Cologne and Frankfurt, Germany, to allay growing concerns about U.S. trade policy under President Donald Trump.

“There have been some concerns expressed in Europe about the United States commitment to global trade and whenever we are telling them what we are doing in Arkansas – both by the fact that we are leading in the growth of foreign-direct investment plus what specific companies in Arkansas have invested in Arkansas – it is quite impressive to the European audience,” the governor said.

Last week, Hutchinson made similar comments when speaking at the Little Rock Rotary Club’s annual meeting at the Clinton Presidential Library.

“In my conversations, those in Europe and across the globe want U.S. leadership. They yearn for it, they respect, they understand our role on the world stage and they do not want the United States to withdraw from that,” the governor said.

Preston, speaking with Talk Business & Politics after Tuesday’s L’Oreal announcement, reiterated that Hutchinson and the Arkansas Economic Development Commission is taking a proactive stance on free trade and letting companies that operate in Arkansas know that they welcome.

Preston said during the National Governors Association meeting in Providence, R.I., last week, he and the governor met with corporate executives who expressed concerns about President Donald Trump’s trade policy to revamp the North American Free Trade Agreement (NAFTA) with Canada and Mexico.

“They are all trying to see what plays out with NAFTA before they decide to make their next investment in the U.S., Mexico or Canada or are they going to look elsewhere,” Preston said. “I think that kind of pumps the brakes a little bit for some companies along (with) some global and national factors that will slow things down.”

‘PUSHING THE MESSAGE’
When asked if state economic development officials were concerned about the Commerce Department’s Bureau of Economic Analysis’ (BEA) recent report that U.S. foreign investment declined in 2016, Preston said 2015 was a record year and spending levels were improving again in 2017.

“As long as the governor and I are out there pushing the message of Arkansas and saying ‘hey look we welcome this investment, we are open to it and we have over 46,000 workers that are employed as a result of foreign direct investment,’ Preston said. “We know it, we get it, we understand it, and we want to expand it.”

According to the BEA, expenditures by foreign direct investors to acquire, establish or expand U.S. businesses totaled $373.4 billion in 2016, down 15% from $439.6 billion in 2015. Despite the 2016 swoon, BEA data shows that the annual spending average of $350 billion for 2014-2015 was well above the annual average of $226.0 billion for 2006-2008. As in previous years, expenditures to acquire existing businesses accounted for a large majority of the total.

Overall, spending for acquisitions in 2016 were $365.7 billion, expenditures to establish new U.S. businesses were $5.6 billion, and investments to expand existing foreign-owned businesses were $2.2 billion. Planned total expenditures, which include both first-year (2016) and planned future expenditures, were $387.7 billion.

At Tuesday’s announcement, Hutchinson said more than 60% of the employment growth from foreign-based companies like ABB (parent company of Fort Smith-based Baldor Electric Co.), Denso, Nestlé and L’Oréal employment in Arkansas over the past five years have added to the state’s manufacturing sector. According to OFII, these globally-connected jobs provide compensation that is 44% higher than the state’s private-sector average.

More than a year ago, Hutchinson signed a similar memorandum of understanding with Sun Paper to invest more than $1 billion to build a bio-products mill in South Arkansas that will create 250 new jobs at an average salary of $52,000 a year. In March, the Chinese paper giant’s Arkansas subsidiary, Sun Bio, filed its initial application for a Title V air permit with the state Department of Environment Quality, jumpstarting the countdown for construction to begin on one of the largest economic development projects ever in south Arkansas.