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Are the U.S. and S.C. still good places for foreign investment?

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Thanks to the low cost of energy and the size of the U.S. market, Didi Caldwell said the U.S. and South Carolina are good places for foreign investment.

Caldwell, founding principal of Global Location Strategies — a site location and incentive negotiating firm based in Greenville — said the exploration of shale has driven the cost of natural gas down so low in the United States, it has become tough for other counties to match the price when companies are seeking new locations for expansion or relocation.

She said the 5 cents per kilowatt-hour cost of electricity in the United States is significantly lower than the average 15 cents per kWh in Europe. She said it has led to a resurgence in the number of foreign companies looking to locate on U.S. soil, especially companies that use petrochemical feedstock for end products.

“Chinese companies, and from other parts of the world, are taking advantage of that feedstock here,” Caldwell said. “They will do something like create a methanol production facility, make the product and ship it back because it is actually cheaper to do it that way than mine and refine the product there.”

Another factor Caldwell said makes the U.S. more and more attractive to foreign investment is the size and stability of the U.S. market. Even with a large baby-boomer population, the U.S. has a growing millennial population. According to the Kaiser Family Foundation, 28% of the U.S. population is 55 and older while 35% is under the age of 25.

On the other hand, countries like Germany, Russia and China have a growing older population with a much lower younger one. According to Eurostat, half of the European population is over 42 and in Italy, Germany and Greece, over 20% of the population is 65 or older.

“Think about who is buying cars and other goods,” Caldwell said. “It really isn’t those retiring. They are downsizing.”

She added that countries like Germany rely heavily on their exports because “they make a lot of things but, they don’t really sell a lot of those things there.”

Another benefit the U.S. has in attracting more foreign investment is the fact that the cost of labor in many sectors has balanced out with labor costs in countries that were once much lower than American labor.

“If you told me 10 years ago that companies would start making things like TVs and appliances here in the U.S., I would have laughed,” Caldwell said. “Those are things that just wouldn’t have been considered then, but companies are starting to look here to make those things.”

In March, South Korea-based LG announced a new manufacturing facility near Clarksville, Tenn. that will make the company’s washing machines. The expansion is expected to add 600 new jobs to the area and have the potential to expand to other home appliance production. Additionally, the company recently started constructing a North American headquarters in New Jersey.

Public policy may seem to put a crimp on foreign investment, especially in South Carolina where more than 1,200 international firms have located operations, according to the South Carolina Department of Commerce.

Caldwell said a border adjustment tax, which has been discussed by the Trump administration, but because there is so little detail on a proposal, she said it brings up different potentials for businesses looking to invest in South Carolina or the United States.

“There are two reactions to this and one is companies moving very quickly to the U.S. to avoid any potential tax and the other is to wait and see,” Caldwell said.

She added that, in her experience, neither is a good option as moving too quickly could lead to problems if the move is based on “flawed logic” forcing a plant to close. She said waiting too long would mean potentially missing the boat on a possible opportunity.

The best bet for companies looking to move but hesitant about the potential for increased tariffs or taxes would be to “look at all the angles,” Caldwell said.

“If you can stand the risk, it may be worth taking,” she added.

Even with the amount of foreign investment already in South Carolina, Caldwell said maintaining a strong capital investment from companies is a way to ensure little risk for the state and for employees.

“The more capital-intensive an investment is from a foreign company in South Carolina, the safer it is,” Caldwell said. “If a company invests millions in equipment, even if they find labor cheaper in another state, it still won’t make economic sense for them to move.”

Looking ahead, Caldwell said that there is the potential for another recession, but “I think the U.S. can weather that.”

Reach Matthew Clark at 864-235-5677, ext. 107.

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