FDI and Charlotte September 7, 2017 Aaron Brickman, abrickman@ofii.org
Educate Advocate Connect What We Do
About Me More than 20 years in FDI Currently Senior Vice President, Strategy & Development, at OFII Founding Deputy Executive Director of SelectUSA U.S. Department of Commerce
What I m Going to Discuss FDI and the U.S. Economy Changing Nature of the Global Economy and FDI Charlotte & the Global Economy Keys for Charlotte s Success Globally What Economic Developers and Community Leaders Can Do
Foreign Direct Investment in the U.S. 6,800,000 +24% 23% $57 B $895 B Number of Americans who work for an insourcing company. Wage premium insourcing workers earn over economy-wide average. Percentage of U.S. exports produced by insourcing companies, valued at $353 billion In R&D spending In added value to US GDP
Foreign Direct Investment in the U.S. Cumulative FDI $3.7 T Manufacturing Investment Average annual growth rate between 2006-2015 Equity grew in 6 major industry groups manufacturing, mining, wholesale trade, retail trade information and professional and technical services 53% past 5 years 2x past 5 years 6.7% 9.3% Source: US Bureau of Economic Analysis, 2016 Source: FDI in the US, OFII 2017 report
FDI in the U.S. $600 FDI in the U.S. Flow, 2006-2017 Q1 $500 $477 $468 $400 Billions, USD $300 $200 $247 $228 $318 $158 $211 $242 $211 $217 $212 $100 $84 $- Source: US Bureau of Economic Analysis 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 (Q1)
FDI Has an Outsized Impact U.S. inbound firms employ 5% of U.S. workers and contribute: 26% of U.S. exports 17% of R&D spending 17% 20% of federal corporate income tax of U.S. manufacturing jobs
FDI in the U.S. Top 8 investing countries by FDI stock accounted for three quarters of the overall FDI stock in the U.S. 1. United Kingdom 2. Canada 3. Japan 4. Germany 5. Ireland 6. France 7. Switzerland 8. The Netherlands Source: US Bureau of Economic Analysis, 2016
Global FDI 50 U.S. FDI Inflow as a Percentage of Global FDI, 1980-2016 40 30 20 10 35 30 25 0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 World versus U.S. FDI Stock, 1980-2016 U.S. (trillions) World (trillions) 20 U.S. trillions 15 10 5 0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Global FDI However $30 trillion 86% Of global economic growth will occur outside the US from 2015 to 2020 $5 trillion Source: Brookings Metropolitan Policy Program, Joseph Parilla 2016 Source: James Manyika and others, Digital globalization, McKinsey & Co., 2016 Source: World Economic Outlook, International Monetary Fund, 2015 1990 2014
FDI In a Changing World Brexit NAFTA Renegotiation Buy American Rhetoric
Brexit April 2016: "With no agreement, we know that WTO rules would oblige the EU to charge 10% tariffs on UK car exports, in line with the tariffs they impose on Japan and the United States. They would be required to do the same for all other goods upon which they impose tariffs. Not all of these tariffs are as high as 10%, but some are considerably higher." January 2017: While I am sure a positive agreement can be reached I am equally clear that no deal for Britain is better than a bad deal for Britain we would still be able to trade across the world we would have the freedom to set the competitive tax rates and embrace the policies that would attract the world's best companies and biggest investors to Britain."
NAFTA Renegotiation
Buy America Rhetoric
America is Changing Too SelectUSA was created by Executive Order under former President Obama in June 2011. The Executive Order outlines: 1. The Administration s policy on business investment 2. The establishment and functions of the SelectUSA initiative 3. The establishment of the Federal Interagency Investment Working Group
America is Changing Too Mission: Promote business investment in the United States Geographically neutral in the United States Housed in the U.S. Department of Commerce; Represented by the Commercial Service at U.S. Embassies and Consulates around the World Clients: Firms and U.S. Economic Development Organizations (EDOs) SelectUSA: 1. Facilitate Business Inquiries 2. Connect Investors with State/Local EDOs and Provide Guidance to EDOs 3. Conduct Investor Outreach and Educate Investors 4. Act as Ombudsman and Advocate 5. Lead and Coordinate an Interagency Working Group
CFO Insourcing Survey (2017)
How Does this Impact Charlotte? Jobs Economic Growth More?
ARE THE CAROLINAS GLOBAL? North Carolina 7% of private sector workforce employed by foreign affiliates 8 th in the U.S. FDI accounts for 251,800 FDI jobs 119,600 (47.5%) manufacturing South Carolina 8.2% of private sector workforce employed by foreign affiliates 1 st in the U.S. FDI accounts for 119,600 FDI jobs 74,900 (62.6%) manufacturing
Is Charlotte a Global City? Charlotte, 1975 Charlotte, 2017 Source: Charlotte-Mecklenburg Historical Landmarks Commission
Charlotte Today 2.47 million people 107 th largest metro in the world $126.6 B GDP 61 st wealthiest metro in the world $53,142 per capita Source: Brookings Metropolitan Policy Program, 2016
Charlotte Economic Overview Export- & FDI-intensive Exports Account for 14% of GDP Charlotte #1 in exports amongst top 11 US metropolitan cities Creates 110,00 jobs Foreign Direct Investment 6.8% of workforce employed by foreign firms 48,810 jobs Greenfield investment makes up 1/3 of Charlotte FDI Source: Brookings Metropolitan Policy Program, 2016 23
Charlotte s Global Standing Source: Brookings Metropolitan Policy Program, 2016
Charlotte s Global Standing Among peer metro areas, Charlotte is the most export-intensive and FDI-intensive Greater Charlotte above average in global competition for Greenfield FDI Charlotte growth in GDP 18 th in top metros 2004-2014 7 th largest FDI region in the US Site Selection magazine, 2014 Out of 100 global cities Charlotte ranks #31 Site Selection Magazine, 2013 Of all regional economic projects 45% are international Source: Strategy for the Greater Charlotte Global Initiative 2016-2018, Greater Charlotte Region GVLG Steering
Charlotte Workforce Overview Workforce is well-educated 35% of workforce has a postsecondary degree, compared to national average of 30% The demand for STEM jobs is not being met Labor force participation rate is falling by large margin CPCC s good work in workforce and STEM development will only become more important in the future Source: Brookings Metropolitan Policy Program, 2016
Charlotte Workforce Development Siemens gas turbine factory: 10,000 applications for 800 jobs still couldn t fill CPCC identified a regional talent pipeline that provides talent for industry demand as a key CPCC oversaw the founding of the Charlotte Regional Collaborative for a Global Economy, bringing all 16 CCs in 31 counties in 2 states together to serve 4 million people 27
FDI Attraction: The U.S. versus the Rest of the World Competition between U.S. states and cities is quite fierce when it comes to investment attraction In the U.S. and Asia, economic development agencies can be remarkably flexible and creative in structuring an attractive incentives package (Site Selection magazine) This is not the case in the E.U. Stronger constraints on incentives The European Commission sets ceilings for maximum aid intensity, limiting how much EDOs can give companies Varies by economic strength of the host region Few tax incentives (EC limits fiscal state aid )
What matters most between competing regions? - Proximity to customers - Having the right workforce - State/local incentives
Drivers of Global Investment Figures based on responses to the OFII/PwC 2016 CFO Insourcing Survey, available at OFII.org/CFOsurvey.
FDI Frontlines Coalition To join: http://www.fdifrontlines.org/user/register
Key State FDI Recruitment Strategies Understanding current and future industry clusters Mapping out international assets, worldwide connections, workforce capabilities, and educational networks Creating effective aftercare for existing investors Understanding and responding appropriately to mergers and acquisitions Ensuring nondiscrimination in policy and regulation
North Carolina Open Investment Statement More than 240,000 North Carolina jobs exist thanks to international companies investing here We welcome global companies to put down roots in North Carolina and grow with us Governor Roy Cooper July 2017, Governor Roy Cooper issued an Open Investment Policy Proclamation 5 th Governor in US history to issue such a statement 34
Please keep in touch Aaron Brickman Organization for International Investment abrickman@ofii.org 202.659.1903 OFII.org