U.S. Governors’ Strategies to Attract FDI
There’s an emerging trend among the individual states to encourage and support international investment, realizing all the economic and social benefits it brings to their regions.
Q2 2019
![Denyo Manufacturing Corporation, in Danville, Kentucky, recently completed an $8.7 million expansion and currently employs approximately 150. Denyo
is part of Itochu Corporation, which employs more than 1,700 at its various Kentucky locations.](https://cdn9.areadevelopment.com/article_images/id38391_USStates500.jpg)
With international companies employing more than seven million Americans, including 20 percent of our nation’s manufacturing workforce, courting international investment is a top economic priority for most states. In fact, America’s governors are on the frontline in attracting these job-creating companies.
That said, some states understand the unique challenges that international companies face when entering a new market better than others. For instance, international companies must analyze the unique regulatory and tax frameworks within all 50 states when deciding where to invest and create jobs. Many states provide great aftercare to companies once they’ve made the decision to invest in the region.
All too often, however, policymakers knowingly or unknowingly violate our international trade agreements and tax treaties. Whether it be procurement policies that preclude state agencies from buying American-made products that include imported parts or tax policies that double tax corporate income by ignoring America’s tax treaties, state policymakers run the risk of losing out in the global race for jobs. Savvy economic developers know what their legislatures and regulatory agencies are pursuing and help connect the dots between those proposed policies and their impact on the state’s overall attractiveness to major employers.
Open Investment Policy Statements
Thankfully, there is an emerging trend among America’s governors to show support for international companies. Current governors in Arkansas, Indiana, Kentucky, Louisiana, Missouri, New Hampshire, North Carolina, and Pennsylvania have joined former governors in Florida and Michigan in issuing Open Investment Policy Statements (OIPS). These declarations proclaim that their state is “open for business” and will help international companies succeed by treating them fairly.
In addition to proactively connecting with international firms, many states are taking important steps to strengthen their business environments. When signing Indiana’s OIPS in late 2018, Governor Eric Holcomb said, “I’m committed to taking Indiana to the world and bringing the world back to Indiana. We’re home to over 950 international companies, employing over 190,000 Hoosiers. In the last five years alone, foreign investment jobs in Indiana have grown by over 40 percent. We’re going to keep that going, which is why I’m proud to reaffirm Indiana’s commitment to being open for international investment.”
Governor John Bel Edwards echoed these remarks, highlighting the great contributions that international companies have made in Louisiana by “pumping many billions of dollars in capital projects alone into our economy in recent years…The 500 foreign-owned companies operating in Louisiana are directly responsible for 74,300 jobs in our state. In an era of increasing globalization, it’s essential for us to show leadership and support of foreign direct investment in Louisiana in a positive, open, and fair manner.”
Proactive Measures
In addition to proactively connecting with international companies, many states are taking important steps to strengthen their business environments for these firms.
For example, several states are ensuring that the new federal tax reform law doesn’t result in a big tax hike on employers that have borrowed capital to invest and create jobs in the United States. Specifically, they have deliberately decoupled from this regulation that is part of the new federal law.
And states have good reason to stay competitive — nationwide, international firms produce 23 percent of U.S. exports, fund 16 percent of U.S. innovation efforts, and pay their workers 26 percent higher compensation than the economy-wide average. Connecticut, Georgia, Indiana, South Carolina, and Wisconsin have led the way in preventing this unintended tax increase on companies growing operations in their states. Tennessee’s full “decoupling” takes effect in 2020, and Virginia has partially decoupled from the new federal rules. States still considering decoupling legislation include Massachusetts, Missouri, and New York.
Preventing this tax hike sends a strong message to the international business community — and contrasts with those states that fail to prevent these new taxes on growing companies in their state. And states have good reason to stay competitive — nationwide, international firms produce 23 percent of U.S. exports, fund 16 percent of U.S. innovation efforts, and pay their workers 26 percent higher compensation than the economy-wide average. Moreover, they are leaders in workforce training and development.
Further Benefits of FDI
In addition to offering economic benefits, these companies strengthen the fabric of the U.S. communities in which they operate, accomplishing a tremendous amount of social good. They are global leaders in environmental sustainability, scoring notably higher than the U.S. average in reducing their products’ carbon footprint and launching successful initiatives focused on protecting the environment.
These companies are also very active in their charitable support that includes healthcare, education, the environment, and others, donating billions of dollars toward positive change. Over the past decade, international companies in the United States have increased their charitable contributions by 123 percent.
States are doing a great job in attracting and retaining these valuable employers. Most U.S. governors are thinking about ways they can keep their business environment competitive and their state economy growing through investment from global companies, and I applaud those efforts and [those states that are making] foreign direct investment a top priority.