Look for strong job growth, construction and strong local industries to help the Seattle area economy perform better than the rest of the country this coming year. But when it comes to Foreign Direct Investment (or FDI), the Seattle area “punches below its weight.” A new program has been developed to turn that performance around.
In fact, that program was the top line from the 43rd Annual Economic Forecast Conference, held last Thursday at the Washington State Trade and Convention Center. The conference, sponsored by the Economic Development Council of Seattle and King County, attracted more than 700 attendees, including most of the region’s major political figures.
FDI references instances where foreign companies invest in U.S. companies or foreign capital is invested in U.S. projects or real estate. FDI is an important part of the U.S. economy, accounting for 5.8 million jobs nationally and 98,000 here in Washington state in 2012. More than 66,000 of those jobs are the Seattle area.
According to the Global Trade and Investment Plan, which was introduced at the conference, FDI accounts for only 4.5 percent of the Northwest’s private-industry employment. This despite the fact that Washington is “an exporting powerhouse” with 12,677 companies engaged in some form of exportation and $81.9 billion in products and services sold internationally in 2013.
The Global Trade and Investment Plan found few links between the state’s top trade partners and FDI. China, for example, our number one trading partner is notably absent from top foreign investors in the Greater Seattle area. But if the Global Trade and Investment Plan is successful, all that will change.
The region needs a united vision, a united program if it hopes to make progress on FDI, said Amy Liu of the Brookings Institution. Brookings is helping the region through its Global Cities Initiative, a joint project with JP Morgan Chase that helps metro areas strengthen international connections and competitiveness through exports, foreign investment and other strategies. Chase has awarded the region a $150,000 grant to implement the plan.
The approach is different from past FDI efforts in that it has a broad cooperative public-private base. It was jointly developed by the Economic Development Council of Seattle and King County, Trade Development Alliance of Greater Seattle, Washington State Department of Commerce, Puget Sound Regional Council, King County and the Economic Development Councils in Snohomish, Pierce and Kitsap Counties.
Top political leaders agree that the region has to “go global” to be economically successful in the future. Mayor Ed Murray noted that Seattle ranks 57th among the top 100 metro areas when it comes to FDI, not a good position for the 20th largest city in country, by population. San Francisco has an entire office working on relations with China, Murray told the conference crowd, saying he would appoint a representative to work directly on FDI. “I asked my staff when I should go to China,” said the mayor. “They told me I should go every year.”
Gov. Jay Inslee believes FDI is important to the state’s economy. "We have a unique opportunity to capitalize on the increasingly globalized world economy and position Washington as a global hub of international trade and investment,” the governor told conference attendees, pointing to several new international projects such as the plan by Tacoma-based NW Innovation Works, LLC to build a gas-to-methanol plant at the Port of Kalama. The methanol would be exported to China. The project’s major investor is Clean Energy Technology, a joint venture between the China Academy of Sciences (a government ministry) and BP, the global oil company (formerly known as British Petroleum). Inslee said this joint venture would involve 250 jobs and a total investment of $3 billion.
Inslee also said the state will partner with the Trade Development Alliance of Greater Seattle to create a permanent presence in China, essentially re-establishing a state office; Washington maintained an office in Shanghai until around 2006 when the state Department of Commerce closed it for budgetary reasons.
King County Executive Dow Constantine also wants to get bullish on FDI, believing such efforts could help attract family-wage jobs to the region. Constantine said job growth in the county has been happening either at the very top or the very bottom of the wage scale, noting that of the 95,000 households added to the county in the past few years, only 5 percent fell into the middle-class wage bracket.
To some extent FDI is already on the rise — though under the radar — in the Northwest. Kristi Heim, Executive Director of the Washington State China Relations Council, called attention to a number of recent Chinese investments, including the Chinese e-commerce giant, Alibaba, which opened a recruiting office in Seattle, and the Chinese smart phone manufacturer, ZTE USA, in Bellevue.
The Global Trade and Investment Plan debuted at last week’s conference highlights some of the strengths in the Seattle market, including its highly educated work force, easy proximity to global markets, high quality of life and existing “clusters” of global businesses and organizations, such as aerospace, biotech, medical research, IT and professional services. It also lays out four main objectives:
- Increase FDI in advanced industries, measured by employment, number of firms and number of investment transactions;
- Increase by 25 percent the number of firms investing in the region from traditional FDI source countries, including Canada, Japan, Germany, England, and France;
- Increase by 25 percent the number of firms investing in the region from new source markets, including China, Korea, India and the United Arab Emirates;
- Increase the number of companies exporting from the Greater Seattle region by at least 10 percent.
“Expanding trade and attracting more foreign direct investment are sound economic strategies that bring good-paying jobs to the region,” said conference keynote speaker Stefan Selig, Undersecretary of Commerce for International Trade. “This plan, with its emphasis on collaboration, global investment, and innovation opportunities, is a true game-changer for the Greater Seattle region.”
To turn Greater Seattle into the most globally competitive region in the country, the plan recommends steps such as boosting regional economic collaboration, converting export partners to investors, giving small- and medium-sized enterprises access to new capital and export markets, and developing the potential investor pipeline.
The U.S. economy as a whole should to continue to perk along in 2015 with some expected movement — finally — on workers’ wages. Chris Mefford of Community Attributes, had a sunny outlook for the regional economy too. The state, said Mefford, has added jobs for five years in a row. If that trend continues for a few months, “it will be the longest string of job growth — ever.”
Ken Goldstein, economist with the Conference Board, echoed Mefford’s optimism, predicting a strong 2015, owing to positive momentum in labor markets. But he had a caution: “The problem for the future is not where the jobs are, but where are the people for the jobs.”
Since this was, after all, a “forecast” meeting, many attendees took to predicting the outcome of Sunday's championship game between the Seahawks and Packers. Gov. Inslee went so far as to foretell the score: Seahawks, 27-17. We’ll soon find out if the governor has a career in sports forecasting . . .