Dean Barber

Get Off My Lawn is Not the Best Message

In Corporate Site Selection and Economic Development on April 2, 2017 at 10:21 am

My friend, Andy Levine, president of Development Counsellors International, got me thinking when I read an article that he wrote for Forbes entitled, “Is Brand America Tanking?”

Levine points to U.S. News and World Report’s 2017 “Best Countries Ranking,” showing that the United States slipped from #4 in the previous ranking to #7 in the current report. The report is based on a survey of 21,362 people from 36 countries, who rank countries on 65 attributes ranging from “most business friendly” to “best to visit” to “richest traditions.”

My first thought was to hell with this. I don’t care what these people say or think. Keep in mind that I am an older guy.

Human Resources Manager during a job interview: What is your biggest weakness?

Old Man: Honesty.

Human Resources Manager: I don’t think honesty is a weakness.

Old Man: I don’t give a s**t what you think.

And that’s why a lot of old men don’t get hired.

But being that I want to get hired as an open-minded (if not honest) consultant, I grudgingly posed the question to myself, sort of: Should we care what the rest of the world thinks of us, meaning the U.S.?

Almost regretfully, I came to the conclusion that, yes, we should care, especially if we want to lead and influence events in the world to our benefit.

The Top Choice

To that end, it is very much in our interest that the U.S. remains the No. 1 recipient of foreign direct investment, which has a big economic impact on many communities, large and small, in this country.

European and Asian countries, as well as our two neighbors to the north and south, have demonstrated for a long time now their faith in the U.S. economy through high levels of FDI.

And while the U.S. remains the top choice for international investment, its share of worldwide investment has dropped to 21 percent in 2014 from 39 percent in 2000 because of increased competition from other countries, according to a 2016 report by the Organization for International Investment.

World’s Largest Consumer Market

Whether the U.S. retains its status as the world’s most attractive investment location depends largely on world macroeconomics and how we behave. When I say “we,” I’m referring to policies of the federal government. More on that later.

Most countries want to attract foreign investment, but the U.S. has a distinct advantage by having the world’s largest consumer market with a GDP of $18 trillion and 325 million people.

FDI into the U.S. in 2015 totaled a record $348 billion, led by the United Kingdom, Japan, and Germany, according to the U.S. Commerce Department. Some more factoids:

  • Majority-owned U.S. affiliates of foreign entities produced $360 billion in goods exports in 2013.
  • Majority-owned U.S. affiliates of foreign entities employed 6.1 million U.S. workers in 2013, up from 5.8 million in 2011. These firms generally provide compensation at higher levels than the U.S. average, at nearly $80,000 per U.S. employee in 2013, as compared to average earnings of $60,000 for workers in the economy as a whole.
  •  “Greenfield” investment expenditures by foreigners totaled $16.6 billion in 2014, with expenditures on establishing new businesses totaling $13.8 billion and expenditures on expanding existing businesses totaling $2.8 billion.
  • In 2014, foreign investors spent $224.7 billion acquiring U.S. companies; therefore, total first-year expenditures by foreign entities (acquisitions plus expansions plus establishment of new businesses) were $241.3 billion.

China Watch

According to the consulting firm Baker McKenzie, Chinese investments in the U.S. rose by almost 200 percent from 2015 to 2016 to $45.6 billion.

The main recipients of Chinese investment in 2016 were real estate and hospitality ($17.4 billion); transport, utilities and infrastructure ($6.0 billion); consumer products and services ($5.7 billion); and entertainment ($4.8 billion).

Together these accounted for nearly 70 percent of Chinese investment in the region. California received the most Chinese capital, with more than $16 billion in 2016.

But a slowdown in Chinese investment in the U.S. in 2017 could be in the works, according to Baker McKenzie, largely because of the political uncertainties posed by the Trump administration regarding trade.

A Great Revival?

President Donald Trump on Friday directed his administration to review U.S. trade deficits and clamp down on countries that abuse trade rules in two executive orders he said would start a new chapter for U.S. workers and businesses.

“Today I’m signing two executive orders that send this message loud and clear, and that set the stage for a great revival of American manufacturing,” Trump said in the Oval Office. “We’re going to get these bad trade deals straightened out.”

My guess is the president’s remarks, while they will play just fine in Akron and Birmingham, creates distinct nervousness in capital cities around the world. Will that necessarily come back to bite us?

Heck, I don’t know. (Take note this is the second week in a row that you have seen a consultant, this consultant, say he doesn’t know. That should be a record.)

Not Open for Business?

But it is clear the president has much of the world wondering about the U.S. role in the world, as he is parting greatly from past administrations on matters of trade, immigration, and defense.

These policy changes and America first rhetoric has created a growing perception that the U.S. is less welcoming to foreigners, according to the World Travel and Tourism Council. Some of this is based on President Trump’s revised executive order banning citizens from six Muslim-majority nations from traveling to the United States.

“The travel ban is not having a material impact yet. But we are seeing the unintended consequences of this now because the message has gone around the world that the U.S. is not open for business,” the WTTC’s President David Scowsill told Reuters.

Precipitous declines in airline bookings followed the Jan. 27 and March 6 travel ban announcements, and hotels reported less traffic in February.

An Unwelcome Mat?

Tourism Economics of Wayne, Pa., estimates that about 4.3 million fewer international travelers will visit the U.S. this year because of the bans, creating a revenue loss of $7.4 billion. Another 6.3 million visitors and $10.8 billion that they would have spent will be lost in 2018, it said.

“The U.S. has put an unwelcome mat at our front door,” Henry Harteveldt, president of Atmosphere Research Group, told USA Today.

Enhanced vetting procedures for all foreign visitors could further discourage not only foreign tourists but people coming to the U.S. for business and school.

Discouraging Students?

Nearly 600 colleges and universities wrote Feb. 3 to Homeland Security Secretary John Kelly to express concerns about discouraging international students, a major revenue source for universities.

About 1 million international students spend $32 billion a year in the U.S., according to the American Council on Education. And while only about 15,000 students are affected by the travel ban, critics contend that the Trump administration policies are having a chilling effect on foreign students coming to the U.S.

“Anecdotal evidence shows that many schools are seeing declines in international applications for the coming year, and other countries are seeing increases,” Terry Hartle, a senior vice president for the American Council on Education, told USA Today.

Many Silicon Valley companies, including Apple, Microsoft, Google, Facebook, Twitter, Yelp and Netflix, contend in lawsuits against the government that Trump’s travel ban would make it more difficult to “attract talent, business and investment to the United States.”

No Hard Evidence But …

I have really offered no evidence that Trump administration policies will in fact discourage FDI in this country, or will discourage foreign tourists from coming here, or from foreign students studying here.

But there are a litany of voices, industry voices, saying that these things might actually happen. If their warnings are correct, this could have meaningful economic impact on companies, institutions of higher learning, and communities as a whole and not in a good way.

Let’s Keep the Mat Out and the Light On

I have never liked or cared for this notion of “brand.” Maybe for corn flakes and deodorant. Rather, what matters to me, is reputation, sometimes deserved, sometimes not, of a place, of a person, of a company and its products or services.

I truly hope that our reputation as a country does not suffer because of poorly thought out, “Get Off My Lawn” policies that are perceived to be unwelcoming to foreign people. That’s not what America is or has been about.

Security and trade are important to the American people, as they should be. Indeed, there is convincing evidence, which I wrote about in an earlier blog, that enacted trade policies with China did in fact destroy U.S. manufacturing jobs, more so than even automation (although that train is clearly out of the station.)

But that doesn’t mean we shut ourselves off and snub the rest of the world. That’s not who we are. The welcome mat needs to stay on the front porch and the light needs to stay on.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com.

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