Dear Friends,
Happy new year! I hope that you and your respective organizations had a successful 2018 and that 2019 is off to a good start.
All too often, in the process of balancing professional and personal commitments and completing work for clients in a timely manner, I fail to stop and think about the big picture. Thankfully, over the last two weeks, I had a couple of opportunities to do just that. In no particular order, I want to share some of my key take-aways from the last week on a variety of subjects.
1. The impact of tariffs is real and significant. According to the Rhodium Group, Chinese foreign direct investment in the United States totaled over $46 billion in 2016. That number dropped to approximately $30 billion in 2017 and a mere $4.8 billion in 2018.
These observations are not intended as a political statement. Balancing the short-term consequences of a trade war with the perceived long-term benefits of fairer trade with China is tough business. I hope that the U.S. administration is carefully considering the short-term consequences and perceived long-term benefits in crafting policy, because South Carolina's tremendous success in attracting foreign direct investment puts the Palmetto State squarely in the cross-hairs of any fallout.
2. The food industry will continue to play a huge role in the economic development arena. Companies in this industry will focus on three key points (which, to some extent, have broader application): an intense focus on profitability given the industry's tight profit margins; minimizing delivery and operational risk; and maximizing innovation. The war on plastics will have an outsized impact on this industry as food companies and their suppliers are forced to innovate quickly to produce packaging solutions that keep the global food supply safe and fresh while placating environmentalists and regulators worldwide.
3.
As Mike Randle of Southern Business & Development has rightly lamented, for decades, the United States economy depended on 200,000 workers per month entering the workforce, but within ten years, that number is projected to drop to 50,000 workers per month. We have a looming labor crisis, if it has not already arrived.
Minneapolis Federal Reserve Bank President Neel Kashkari has observed that
we have three choices as a country: subsidizing fertility, embracing a significantly expanded immigration policy, or accepting slower growth. Perhaps artificial intelligence will provide at least a partial solution. Be on the lookout for robots soon in a community near you.
4. Leaders in the Virginia economic development community that landed half of the highly publicized Amazon HQ2 project were very concerned about losing their project to another location with a large population but significantly lower labor costs. More specifically, the labor costs associated with the alternative location were $1 billion (yes, billion with a B) cheaper on an annual basis. Nevertheless, Amazon chose Northern Virginia. Among a number of other key factors including a vast array of reliable public transportation, Virginia offered the promise of doubling the number of computer science/technology graduates of its colleges and universities in the short term. My takeaway is that bottom-line costs are important, but in most if not all cases, other concerns are a higher priority, and educating a talented, 21st century workforce is absolutely critical to our efforts to make South Carolina the best place in the world to do business.
My observations draw primarily from discussions at a recent investor luncheon sponsored by the Upstate Alliance as well as the Southern Economic Development Review, presented by
Southern Business & Development. Thanks to John Lummus and the Upstate Alliance as well as Mike and Stacy Randle and the
Southern Business & Development staff for hosting two great events. As to the discussion points, I relied on insights from Mike Randle, Scott Kupperman of Kupperman Location Solutions, Jim Newsome of the South Carolina Ports Authority, Mac Holladay of Market Street Services, and Stephen Moret of the Virginia Economic Development Partnership, among others.
We at Haynsworth Sinkler Boyd would love to hear about your thoughts and experiences on these and other important issues. We appreciate our relationships with state and local leaders in the economic development community as well as our service-provider allies, and we look forward to seeing you and working with you in 2019.
