Charlotte Douglas International Airport (CLT) is as large as it is primarily because of our partnership with US Airways, now American Airlines, and its need for a hub in the southeast region of the United States. About 44 million people will use our airport this year. Of that number, fewer than 20 percent originate and depart from Charlotte. So, our asset is “at risk” if ever American Airlines determines that using CLT is no longer in their best interest.
Since deregulation of the airline industry in 1978 and the ensuing consolidation of airlines, the top four airlines—American, Delta, United and Southwest—now control more than 80 percent of passenger traffic. They each use “hub and spoke” strategies. Currently, CLT is the second largest hub for American Airlines and is recognized as a “fortress hub.” Together, CLT and American Airlines make CLT the eighth largest airport in the U.S. and 24th in the world.
The disruption of 9/11 caused airlines to rethink their strategies. For US Airways, that meant a restructuring of their routes, effectively dehubbing Pittsburgh. US Airways flights sank from 500+ per day down to an average of about 40 per day. CLT presently operates over 700 flights per day. To lose this hub would be tragic. We need to make sure it is not at-risk.
It turns out that the same industry shifts and consolidation in the shipping industry can have a similar impact on ports. This spring, both Hanjin Shipping Co. and Hapag-Lloyd withdrew service to the Port of Portland, Oregon, because of poor productivity and conflicts with the International Longshore and Warehouse Union (ILWU).
These two lines accounted for 99 percent of Portland’s container volume. The immediate impact was the elimination of 650 trade and transportation jobs, but long term they take with them hundreds of jobs and a loss of stability for other businesses in the region. Additionally, other ports will become more expensive to ship out of, without Portland competing for the same business.
Our container port, the Port of Wilmington (in this issue) , under the very capable leadership of Paul Cozza, has been improving access and service in an attempt to develop a niche market that appreciates a smaller port with a targeted mission that performs well.
It is equally important to acknowledge the significant changes occurring in the shipping industry itself that affect the future of business in the Carolinas. The most dramatic change is the expansion of the Panama Canal scheduled for completion in 2016, increasing shipping traffic using much larger ships. Current ships traversing the Panama Canal carry about 5,000 twenty-foot equivalent units (TEUs); the larger ships carry 10,000 to 12,000 TEUs.
In a recent Seaport Outlook 2015 by JLL (formerly known as Jones, Lang, LaSalle), they show that overall growth in TEU container volume is growing at 3.3 percent higher in 2013 than in 2007. Significantly, the West Coast volume is 6.8 percent below their 2007 peak levels, while East Coast is up by 19.1 percent. The percentage split between West and East Coast volumes has changed from 61-39 percent in 2007 to 55-45 in 2013, with East Coast volume only expected to increase.
JLL also reports that the Southeast has lagged other U.S. regions in its recovery from the recession, but this outlook is changing given the absorption gains in Atlanta which it credits to a specifically targeted strategy by the Georgia Department of Commerce and the GA Ports.
One lesson that is being learned by supply chain executives as trade routes worldwide change, shipping companies consolidate, and labor strikes and other disruptions are a factor, is the value of being able to shift their flow of goods strategies toward multiple ports, putting their “eggs in multiple baskets.”
JLL also notes that, “Charlotte is evolving as a hub market thanks to a new inland port (NS Intermodal)” with connections to Charleston and Savannah. They also point out that CSX has built a new near-dock intermodal in Baltimore as part of its National Gateway double-stack network.
A consequence of this increased traffic was discussed in a The Wall Street Journal piece entitled “Bigger Ships Snarl U.S. Ports,” describing the dilemma of bigger ships and ports that cannot offload and reload ships quickly enough, and truckers delivering loads only able to make one or two runs per day when they need at least three to make a living.
With transportation costs being approximately 50 percent of a distributor’s overhead according to JLL, they are ideally seeking space within a 15-mile radius of the primary ports. JLL indicates that vacancy rates are down and lease rates are up for space near ports.
All of these facts lead to the conclusion that the new NS Intermodal facility at the airport will become increasingly valuable to our economic development opportunities. Since this facility opened over one year ago, little has been done to create a logistics and distribution center plan for the open acreage around the combined facilities. Yet its central location with ready access to not one but two major railroads, and not one but four container ports, virtually screams out for attention.
CLT airport has a detailed plan for further expansion of passenger traffic, but no apparent plan for expansion of air cargo, commercial and freight traffic. CLT is ranked 33rd in the nation for air cargo. It would be prudent to get on that now, given the expanding international trade activity.
By working to expand both CLT and NS Intermodal transportation facilities in a unified and cohesive plan, we will diversify and protect our economic base from disruptions like Portland and Pittsburgh and occupy an important space for an ever-expanding future. We are the perfect location for access to many baskets!
One of the most frequently overlooked attributes of the Charlotte region is its central location on the East Coast and proximity to Southeastern shipping ports that carry goods around the world. Many may overlook this advantage simply because Charlotte is not located right on the ocean, but Charlotte is very definitely an inland port with access to the world, and we ought to start branding ourselves as such.
The Global Vision Leaders Group has made bold steps in the past two years to get to know our neighboring seaports. We have had face-to-face visits with representatives from the NC Ports Authority, the SC Ports Authority, the GA Ports Authority, and plans are in place to meet with the Virginia Port Authority.
In meeting with these representatives, we wanted to learn about their interest in working with companies located in this region and what we could do to support their efforts. Their interest in the Charlotte region is especially high given the expected increase in shipping demand to and from the East Coast with the expansion of the Panama Canal scheduled to be completed in 2016.
Norfolk, Charleston and Savannah are dredging their ports to the necessary 50-foot depth to accommodate the larger ships that will be traversing the Panama Canal once its expanded locks are completed. Current locks will allow ships that are no longer than 965 feet long by 106 feet wide. Ships this size carry a maximum of 4,800 TEUs. (TEUs are 20-foot equivalent units or containers.)
The larger ships can be up to 1200 feet long by 160 feet wide and carry a maximum of 12,600 TEU containers. These ships require ports that are at least 50 feet deep. The Port of Wilmington will not be dredged to a 50-foot depth. It will not become a deep water port; however, it will be maintained as an important supplementary port.
Larger ships will carry more containers for less money per container. It is expected that more ships will be delivering to the East Coast as a result. Large shipping companies will be consolidating shipments and docking at ports that can off-load their containers as well as reload them with shipments going in the opposite direction. Shippers will seek shipments that will occupy their space and match their schedules so that they can operate more efficiently. Therein is the key to the Charlotte advantage.
Having a location that allows businesses to negotiate with shippers at multiple ports gives them some leverage over the prices being charged at any particular port. If a company has no choices, they will have to pay the going rate at the port to which they are most proximate.
The distance and time to a port can substantially boost the shipping costs per container. Delivery of shipments to the ports is most often by truck (80 percent) or by railroad (20 percent). In the Southeast, Norfolk Southern and CSX railroads are working hard to take business away from the trucking industry, so they are very competitive. Charlotte businesses have access to both.
Consider the difference in miles from Atlanta, Charlotte and Greensboro to their closest ports. From Atlanta to the Port of Savannah is 257 miles and to the Port of Charleston is 305 miles. From the Charlotte to the Port of Savannah is 253 miles, to the Port of Charleston is 210 miles, to the Port of Wilmington is 207 miles, and to the Port of Norfolk is 332 miles. From the Greensboro to the Port of Savannah is 326 miles, to the Port of Charleston is 282 miles, to the Port of Wilmington is 214 miles and to the Port of Norfolk is 246 miles.
When you examine the distances to deep water ports from Charlotte versus Atlanta and Greensboro—and even Greer—Charlotte is the least distance from the ports of Savannah, Charleston and Wilmington of any of them. (Greer is roughly the same distance to Charleston, and slightly more to Savannah. Greensboro has the advantage for Norfolk.)
That makes Charlotte the advantaged location for advanced manufacturing distributing its goods around the globe. That key factor will help to shape the future of economic development for this region. There is no reason why Charlotte should not compete for businesses relocating to the Southeast USA region. In fact, we should become more aggressively competitive for these businesses types.
As a matter of fact, Charlotte should be more successful than ever in recruiting advanced manufacturing for this very reason. And this stands alongside our strong community college and technical school workforce training, our already diverse business base of over 1,000 foreign-owned business entities, our extremely low-cost natural gas and electricity advantage, our moderate cost of living, our high quality of life, our access to the I-85 manufacturing corridor, our cost-competitive Charlotte Douglas International Airport, and our newly completed intermodal facility.
What other requirements can we meet to attract businesses to this region? Let us know and we will go to work on those requirements as well!
Charlotte ranks among the World’s Most Competitive Cities in a report released by IBM and Site Selection magazine. Of the top 100 global cities, including New York, London, Paris, Hong Kong, Singapore, Dubai and like, Charlotte ranks 40th or higher across the board.
It is great to get this recognition, but what does it really mean? By what standards is it being judged, and who is doing the judging? These considerations are essential to knowing how we really compare.
Every metropolitan area needs to view itself as a product in the global market, to define and distinguish itself among other cities seeking to do the same. Unfortunately, the word “global” gets bandied about as an adjective in front of nearly every business plan or activity. Recognizing that our economy is no longer simply driven by our domestic U.S. economy, we do need to learn about our standing in the world marketplace.
In business matters, businesses have collectively established ISO requirements—requirements, specifications, guidelines and characteristics promulgated by the International Organization for Standadization (ISO) that are used consistently to ensure that materials, products, processes and services are fit for their purpose.
ISO standards ensure that products and services are safe, reliable and of good quality. For business, they are strategic tools that reduce costs by minimizing waste and errors, and increasing productivity. They help companies to access new markets, level the playing field for developing countries and facilitate free and fair global trade.
Just last year, a landmark ISO standard outlining key measurements for evaluating a city’s service delivery and quality of life has just been published. Its use will help city managers, politicians, researchers, business leaders, planners, designers and other professionals to focus on key issues, and put in place policies for more livable, tolerant, sustainable, resilient, economically attractive and prosperous cities.
The indicators included in ISO 37120:2014 will help cities to assess their performance and measure progress over time, with the ultimate goal of improving quality of life and sustainability. The standard’s uniform approach will enable cities to seamlessly compare where they stand in relation to other cities. This information can in turn be used to identify best practices and learn from one another.
Relative rankings from year to year will add another dimension to the information being presented. For example, those cities more anxious to improve their status may indicate a more favorable business climate relative to others. It will certainly be helpful and valuable that this is, in fact, a global index. Investigating cities that rank more favorably than Charlotte may open new thinking about ways for us to improve our ranking.
ISO 37120 standards address, economy, education, energy, environment, finance, fire and emergency response, governance, health and safety, solid waste, telecommunications, innovation, transportation, urban planning, wastewater, water and sanitation. Within these categories are the measurements that will be taken.
For instance, under education, the measurements will include (1) the percentage of female school-aged population enrolled in school, (2) the percentage of students completing primary education, (3) the percentage of students completing secondary education and (4) the primary education student/teacher ratio.
This is by no means an exhaustive list of criteria. It has been identified, selected and approved by the Board of ISO for introduction across the continents. It is, however, a beginning that will allow cities to begin to understand their ranking and how they compare with other cities of their size and what they might expect to accomplish or maintain as their cities grow or decline.
When a city enrolls in the ISO 37120, they will establish a baseline of data that will identify their status on the criteria that has been collected.
There is no obligation for a city to participate in the collection and publication of this data. It will be up to the citizens, the businesses, the academics and community groups to apply pressure for cities to take part. The value of this information can provide a perspective on the progress or the lack thereof progress for any participating unit. It can also help cities set objectives and priorities about the spending of public dollars and the value of those expenditures.
We would be most pleased to see the City of Charlotte enroll in the ISO standard. We urge you to let your city representatives and officials know about these standards and why and how they may be valuable to our community.
If we really want to become a global city of tomorrow or a global hub of international commerce, we need to participate and to evaluate our collective performance so that we are effectively competing with the competition for trade and business activity that grows every day.
One of the most clairvoyant articles I have gleaned in the past month was an interview in Wired magazine with a man named Vaclav Smil. Bill Gates has said of Smil: “There is no author whose books I look forward to more than Vaclav Smil.” High praise indeed.
Smil is a Distinguished Professor Emeritus at the University of Manitoba and is a specialist, a polymath more accurately, on the world’s biggest challenges including the future of energy, food production and manufacturing. Having written three dozen data-heavy books, he has expertise in many areas and a remarkable way of framing basic facts.
In one of those books, Made in the USA, Smil powerfully rebuts the notion that manufacturing is a relic of predigital history and that the loss of American manufacturing is a desirable evolutionary step toward a pure service economy. Smil argues that no advanced economy can prosper without a strong, innovative manufacturing sector and the jobs it creates.
According to Smil, the history of manufacturing in America is a story of nation-building. Manufacturing became a fundamental force behind America’s economic, strategic and social dominance.
Smil believes that innovation is tied to the process of making things. He fears for the future of the U.S. given the demise of American manufacturing in recent years, believing it will doom the country intellectually and creatively: “In every society, manufacturing builds the lower middle class. If you give up on manufacturing, you end up with the haves and have-nots and you get social polarization. The whole lower middle class sinks.”
Restoring manufacturing, Smil argues, would mean training Americans again to build things. He points out that only two countries, Germany and Switzerland, have done this well, principally because they have apprenticeship programs and younger trainees learn from the more senior. Smil cites the production of BMWs as an example; we can illustrate with Siemens here in Charlotte and BMWs in Greer, S.C.
While manufacturing jobs in the U.S. have suffered massive casualties over the last two decades, unless you’ve been living under a rock, you’ve heard the buzzwords “additive manufacturing,” also known as “3D manufacturing” bandied about as the next big thing.
Using materials like titanium, stainless steel, and everyday plastic to make everything from cars to meat (yes, food) to guns (yes, guns), a 3D printing machine can manufacture the most intricate of designs and personalize product design in unprecedented ways. Already, successful implementation includes custom-made medical implants, prosthetics, and even organs.
The technology, which involves layering three-dimensional materials on top of one another and adhering them together, has been around for more than three decades. Chuck Hull was one of the first developers of the technology used and also the file format for translating computer-aided design software into 3D-printing-friendly modules. Hull founded and is presently CTO of 3D Systems, headquartered in Rock Hill. We are privileged this month to profile Avi Reichental, CEO of 3D Systems, who describes how they have become an industry leader.
Additive manufacturing is presenting new opportunities for innovative companies, much as the digital music revolution empowered startup technology even as legacy firms suffered. Fortunately, the rise of additive manufacturing will also increase the demand for more skilled and better trained workers than ever before.
Combined with the increase in advanced manufacturing (the use of innovative technology to improve products or processes), it is predicted that the demand for highly capable labor force will reach an all-time high.
We are already beginning to see new manufacturing opportunities developing in and returning to the U.S. American workers are perceived to have a strong work ethic, and there is a sensitivity to the training programs necessary to equip the workforce.
Here in the Carolinas, we are fortunate to have Tony Zeiss and Central Piedmont Community College, along with many other technical schools and colleges, that are stepping up and establishing training programs and developing apprenticeships.
CNN has a great videoclip on CPCC Apprenticeship 2000 program, an initiative that equips CPCC students with today’s manufacturing skills, helps them graduate with no debt, and guarantees them a job after graduation. Every student and parent should see this video before they make up their minds about their future education and training.
3D or additive manufacturing is predicted to bring advanced manufacturing “hyperlocal,” with a concordant “democratization” of technology, the process by which access to technology rapidly continues to become more accessible to more people.
These are exciting times. We are living in an age of innovation and customization that seems magical, with machines as marvelous as the extraordinary creatures in any Harry Potter movie. We are serving up a future for the next generations that invite creativity and big ideas.
We must adjust our mindsets and prepare our students for a future in manufacturing as a means of support and advancement. And we need to be attentive to and explore developing opportunities in the ever-changing world of technology.
By recognizing and embracing the processes and possibilities brought about by advanced manufacturing and additive manufacturing processes, we can rebuild the middle class and increase our productivity to the benefit of our communities and our nation. In the process, we will open doors to international trade and commerce and business growth that will be the next great economic wave.
“We have the opportunity to build a
For the past two decades, businesses have been relocating around the globe for less expensive labor. As those labor costs push toward an equilibrium, businesses—especially manufacturing entities—are working to reduce their next most expensive costs of doing business…shipping and delivery.
Combined Logistical Assets Offer New Opportunities
In order to reduce those costs, advanced manufacturing, adaptive manufacturing and distribution firms will locate their facilities close to global hubs for domestic and international commerce. With the Charlotte Douglas International Airport providing non-stop flights to most major domestic population centers with over 44 million passengers a year, and the Norfolk Southern Intermodal Center with its potential capacity of nearly 600,000 containers a year, the Charlotte region provides a premier location for global businesses.
One year ago, in December 2013,
Norfolk Southern (NS) leased this land from CDIA with the option to purchase it and adjacent land for expanding intermodal activities from domestic as well as international trade.
Crescent Corridor Initiative
NS has targeted major resources toward a Crescent Corridor Initiative serving manufactured freight along the I-85, I-77, I-485, I-40 and I-81 corridors from
This manufacturing output is expected to double or even triple in the next 50 years. More specifically, experts expect roughly 40 percent of initial containers transiting through our intermodal center will be from international trade, while the remaining 60 percent will result from its Crescent Corridor Initiative.
Location, Location, Location
According to Brookings researcher Adie Tomer, “Along the U.S. Atlantic Coast, there is a veritable arms race between ports to dredge their harbors, roll out new cranes and obtain a bigger slice of American logistics business. Ports from
To make the most of its location at the logistical center of the Carolinas along the East Coast,
By locating in
The Need for an Integrated Strategy
CDIA and the city of
In addition, the area needs expanded electrical service and other utilities. An additional 6,000 acres adjacent to the airport property is also largely undeveloped and could be improved. CDIA should also seek to expand air freight traffic. Ranked 33rd in air cargo among
We Need to Learn from Other Communities
When considering options for further development around CDIA and the NS Intermodal Center, there are prime examples of similar developments that ought to be studied. Three such models for development are the Alliance Global Logistics Hub in
Its highway connections lead to both
The land around CDIA and the NS Intermodal Center can be developed into the best inland port in the
Leadership in a Changing World
Gaining competitive advantage is so incredibly difficult in this age of disruption, when business survival trumps business growth. But it makes it that much more important to take full advantage of our assets and to be prepared for and take advantage of any opportunities as they arise.
Disruption has shown us, if nothing else, that where one entity does not step up, there are many others that will. What are we doing with our assets?
We benefited mightily from business leaders in the
Although the region’s corporate citizens and leadership may have changed complexion, economic experts continue to believe that the true path to economic enrichment for any community—the way to raise the productivity and prosperity for all—continues to be providing access to and promoting manufacturing and those commercial flows that stimulate economic activity.
Global Vision Leaders Group
In the absence of leadership from other sectors, a grass roots group of business leaders has come together under the leadership of Tony Zeiss, Chase Saunders, Michael Gallis, and John Galles to form the Global Vision Leaders Group which has already held four major global summit meetings as well as conducted its own research and findings from meetings with each of the southeast ports and representatives of the N.C. and S.C. Departments of Commerce.
Two expert analyses in the economic development arena were also drawn upon: The Metropolitan Revolution by Bruce Katz and Jennifer Bradley, and The Coming Jobs War by Jim Clifton.
Hopefully, as the new Economic Development Partnership of North Carolina gets established, they will also be engaged with
Collectively, the Carolinas can become a major relocation region for three targeted groups that should be recruited: (1) Advanced and Adaptive Manufacturing that will seek to operate closer to major distribution centers; (2) International companies seeking to establish operations inside the domestic markets in the U.S.; and (3) Re-shoring companies that will return to the U.S. as wages reach a great equilibrium and as fewer workers are required.
We have the opportunity and the responsibility to exhibit a NEW Advantage Carolinas plan for businesses seeking the best location near a logistical center with great distribution capacities.
That plan can be even more successful if developed for the entire Carolinas region—one that is inclusive and integrates assets with manufacturing facilities in addition to grain, livestock and raw materials—and fully utilizes the region’s assets in a truly integrated fashion for the benefit and prosperity of all.
For the Charlotte region, being situated essentially on the edges of both North Carolina and South Carolina presents a paradox. While we frequently feel like a distant cousin of state government in Raleigh, unempowered to coordinate economic development across the state border, our location central within the Carolinas is logically integral to emerging corridors of commerce and absolutely essential to our region’s economic growth.
While that is an obvious and inevitable truth, unfortunately the Charlotte region is stuck in a state of limbo; we are seemingly unable to help ourselves.
From the perspective of economic development, we are just marginally competitive. We have made some progress in recruiting MetLife, Sealed Air and Spectra Group among others to our fair city, but we can do so much more if we stop standing in our own way.
We have yet to resolve fundamental differences over our most major asset, our airport. And our economic development organizations are at loggerheads, being functionally supplanted at least in part by the reorganization of the state’s economic development unit.
Consider the dispute over who will run Charlotte’s airport, described as “mess” by former mayor and now Secretary of Transportation Anthony Foxx. We have accumulated over $1 million in legal fees already, where the judge has said he needs the FAA to rule before he can, and the FAA has responded that they will not act without a request from the City of Charlotte to move the airport management, and the City of Charlotte is determined to maintain ownership and management control over the airport and is not budging.
Amidst this turmoil, is anyone fretting about the amount of energies not being spent in a forward direction? Is it eerily disturbing that successful economic development seems to be occurring around us—on both local and national/international fronts? What is the real cost of doing nothing??
Land use around the airport and intermodal center is critical to our region’s economic growth and needs to be thoughtfully planned for our collective futures. We have nearly 12,000 acres that is prime for development.
Who should be out in front on this? Our two economic development groups—the Chamber and the Charlotte Regional Partnership (CRP)—are stymied by inevitable coattail snipping of the newly debuted Economic Development Partnership of North Carolina, a public/private entity that can seek corporate and private contributions as well as state funds, but that has just begun operations and is still without legislative support for incentives for new and expanding business opportunities.
As a consequence, the business community, normally the bulwark of support for our economic expansion, is hesitant and perplexed about where to direct their limited resources.
The resulting quagmire has been thrown on the doorstep of the Foundation for the Carolinas, whose Economic Development Task Force has been tasked with “figuring it out,” ironically funded with the balance of Advantage Carolinas monies—the very initiative which brought the Charlotte region to presence on the world stage. This group is expected to report its results in January 2015.
Given increasing competition for global business growth and development, and Charlotte’s location (i) as the commercial center of the Carolinas (ii) along the highly productive I-85 manufacturing corridor, it is incredibly important that Charlotte get organized quickly and aggressively.
With Charlotte’s most valuable assets—our airport and new intermodal center—Charlotte should be leading, or at least facilitating and integrating economic development efforts across the Carolinas.
Economic growth is the result of business planning and decision-making. It is not the result of politics or political boundaries. While taxes and regulations affect business decisions, they may not be the primary driver of those decisions.
uLook at the corridors of commerce—look at the expansive growth that has taken place along the I-85 corridor between Richmond, Va., traveling south through Raleigh, Durham, Greensboro, Winston Salem, Charlotte, Spartanburg, Greenville, Atlanta and all the way to Birmingham, Alabama. Some call this “Char-Lanta.” Others call it the Piedmont Atlantic Megaregion or PAM.
uLook at the competition that has developed among Southeast ports including Norfolk, Wilmington, Charleston, Savannah and Brunswick. Together, the ports and our corridors of commerce operate substantially in tandem in the global marketplace. Together, they define a rapidly growing region that is expecting huge growth by 2060.
uLook at our neighbors in South Carolina whose economic development map includes the Charlotte region, with an I-77 Alliance formed to attract investment and quality jobs to the I-77 corridor from Columbia to Charlotte, as well as the recent proposal to deepen the Port of Charleston shipping channels from 45 feet to 52 feet to accommodate bigger post-Panamax ships.
Others are acting in our void. Charlotte is well-positioned geographically and has the assets to promote and encourage greater cooperation and integration of economic development efforts, but we are stuck in our own state of limbo for now. We cannot compete globally when we are fighting locally.
We need leadership that capitalizes on our location, our assets, our people and our position within these economic regions that offer us endless possibilities. And we need it NOW!
On the surface, it would appear that our regional economic development strategies are working well. In the past year, we have added several exceptional companies to our region including MetLife, Sealed Air, Keer America and Giti Tires.
However, beneath the surface, our economic development efforts are being scrutinized by a study group organized by the Foundation for the Carolinas. This group is made up of business representatives that were recommended by the chairs of the Chamber of Commerce and the Charlotte Regional Partnership.
Their mission is to examine the roles and functions of those two organizations with regard to economic development, as well as to learn the role of the new NC Partnership for Economic Development recently established by our Governor and the NC General Assembly.
Basically, the Foundation group is to make recommendations in January 2015 that will “clarify” economic development efforts and demonstrate how best to target private contributions for the greatest benefit to our region. In other words, businesses may give to one or two groups, but giving to three entities seems a bit much.
This region is also suffering because of indecision about long-term governance of the Charlotte Douglas Airport. While the operation remains under the governance of the City Council and the management of the City Manager, the longer term oversight and planning of airport assets is on hold.
Perhaps taking a step back, we might see the big picture more clearly. Because of Charlotte’s strategic location on the North Carolina border with South Carolina, it is essential that we examine the economic development efforts of both North Carolina (NC) and South Carolina (SC). Urban strategist Michael Gallis suggests that we view economic assets and regions geographically to see how unique assets are linked to economic regions.
While politicians frequently take credit for the role of government in economic development, they often create more interference than cooperation. We witness that disruption every time NC and SC pass along incentives to businesses to merely cross the state line with no corresponding boon to the region as a whole.
What is most important is to examine the potential relationships and capacities of NC and SC to work together and to understand the dynamics of our economic regions in relation to global markets. We need to recognize and promote our economic assets and capabilities that can be readily linked with economic regions to facilitate new opportunities for growth.
To be more specific, we have direct access to three major, deep-water ports—Norfolk, Charleston & Savannah—for distribution of goods anywhere in the world. We have two very important airports—Charlotte and Atlanta—that provide direct connections to U.S. domestic markets as well as international connections.
Our manufacturing and industrial facilities along the I-85 corridor are already pumping products totaling $1.3 trillion dollars per year. These plants can become even more advanced and efficient when linked with our intellectual and technological talent and insights.
We can also expand our agricultural capabilities to support world populations needing food, grain and livestock. We can also leverage our commercial and financial strength in support of broader participation in the growth of our combined, regional community.
And we have an abundance of smaller companies and a substantial workforce that are flexible and adaptive to new innovations and niches that support the larger business growth. Our colleges and universities provide a diverse mix of disciplines that will also contribute to our futures, educating the next generation of talent and training our workers with the skills that will be required in the new economy.
Just look at a map of the two Carolinas and mark the assets including the shipping ports and the airports. Then circle the economic regions. There is one long region along the I-85 corridor. There is an agricultural region along the I-95 corridor. Another is a technology grouping in the Research Triangle Park.
Then, identify the pockets of business activity like the Asheville region and the tourist communities. When you put NC and SC together with Charlotte at its commercial center supported by our excellent schools, colleges and universities, you will see that our potential to develop economically is substantially greater together than when our two states work independently.
The keys to linking our two states are economic development strategies that logistically connect the resources and the assets with the output, innovation and creativity of our citizens for greater participation in the world marketplace. We can do that. We must do that to successfully compete in our global economy.
The tidal wave of Chinese investment in the U.S. predicted by some and feared by others as a result of the record high number of transactions in the 3rd quarter of 2013 (and the over $14 billion record high Chinese investment in the U.S. for the year overall) has not materialized and is unlikely to, according to industry experts. In fact, China’s investment in the U.S. and around the world contracted in the first half of 2014.
Chinese investment trends are closely monitored by the Rhodium Group, which reports that China’s economic reform program is beginning to impact the country’s global investment profile, and while interest in U.S. assets continues to be strong, the industry focus is shifting towards real estate, advanced services and manufacturing.
According to their recent report, “Chinese companies spent $2.1 billion in the second quarter on investments in the U.S., and more than $10 billion worth of deals are currently pending. Notable is the recent increase in greenfield investments (foreign direct investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up) and growing average capital expenditures for such projects.
“Investment in U.S. real estate continues to boom as investors and developers are looking for risk diversification and new opportunities abroad. Economic reforms are also changing price structures for Chinese manufacturers, incentivizing greater investment in overseas R&D facilities, brands and local manufacturing capacity.”
While China accounts for only a tiny share of total foreign direct investment in the United States, the upward trend is clearly underway. Chinese firms, according to the Rhodium Group, operate in at least 37 of the 50 states and have investments across a wide range of U.S. industries.
The growth in Chinese FDI is met with mixed responses. Some are anxious about those investments stimulating job creation opportunities. Others are concerned about the real motive behind those investments. An IPO by the Chinese company, Alibaba, is expected on the New York Stock Exchange in the coming months. Alibaba is already bigger than Amazon and Ebay combined. What will their entrance into the domestic U.S. economy mean? Will they be competitive? Will they play “fair” and follow U.S. laws?
Should the U.S. be wary of FDI from China like Alibaba? Well, yes, to a very large degree. According the Heritage Institute, it is important to understand “state owned entities” (SOEs). It is unclear how much state equity participates in Chinese companies or the level of participation by China in their success.
The history of the rule of law in the People’s Republic of China (PRC) is very weak. While the private role of Chinese companies has surged since the spring of 2012, the bulk of large transactions still involve SOEs. Under Chinese law, while private firms exist, they exist to serve the PRC. If the central government orders a firm to break American law, that firm has no recourse.
It is estimated that 90 percent of investment in private firms in China comes from the state’s account. Protected from competition, SOEs receive substantial subsidies, free land and other advantages. Whether those foreign firms can compete in the U.S. is still to be determined. We do not know if they can adjust to a competitive marketplace and its rules and regulations.
It is incumbent on the U.S. to clearly and precisely maintain the rule of law for all American transactions and require that all enterprises obey American laws. The U.S. must constantly monitor the practices of these companies so that American security is not jeopardized. And, the U.S. must ensure that the Food and Drug Administration, the Securities and Exchange Commission, and other regulatory bodies closely monitor the behavior of Chinese firms that do business in the United States.
A Committee of Foreign Investment in the United States (CFIUS) has been established to monitor and protect U.S. interests. Operating under the Treasury Department, CFIUS is an inter-agency committee authorized to review transactions that could result in control of a U.S. business by a foreign person (“covered transactions”), in order to determine the effect of such transactions on the national security of the United States.
If we are to maintain our status as the most attractive marketplace in the world, we must expect, as well as seek, FDI in the United States. At the same time, we need to make sure the rules for economic activity are clear and that American interests are protected for the long-term success of our nation.