• WisBusiness

Monday, October 25, 2010

Healthy trade climate is essential to Wisconsin’s economic growth


By Tom Still
MILWAUKEE – During a recent meeting at Manpower Inc.’s World Headquarters, a gleaming symbol of Wisconsin’s connections to global business, a European trade counselor asked his local hosts about public perceptions of trade. In essence, he wondered, do people in Wisconsin want more trade – or do they mistrust it?

In an election year such as 2010, the answer is more complicated than not.

The rules governing trade have once again become a campaign issue in Wisconsin, especially in the state’s hotly contested races for U.S. Senate and Congress. In large part, that’s because trade has become an emblem of the larger debate over job losses.

Some candidates insist that recent trade agreements – or their enforcement by federal and world trade officials – have hurt Wisconsin workers. Others say Wisconsin must face up to the reality of competition abroad and resist protectionist policies that would make it harder to ship Wisconsin goods and services overseas.

Political arguments aside, recent data suggests trade and foreign direct investment are integral to the Wisconsin economy.

Until the Great Recession ended a long growth streak, Wisconsin’s exports were expanding at a rate that exceeded the U.S. average for this decade. In 1999, according to figures charted by the Wisconsin Department of Commerce, Wisconsin exported nearly $9.7 billion in goods and services. By 2008, that number had more than doubled to $20.6 billion before slipping to $16.7 billion in 2009. Even the 2009 total was still good for 18th among the 50 states.

The numbers confirm that Wisconsin grows, manufactures and produces a lot of things the world needs and wants. That’s fortunate, because one in 13 Wisconsin private-sector jobs are tied to the state’s ability to sell abroad.

While the North American Free Trade Agreement is once again the topic of political debate, it’s worth noting that Wisconsin’s biggest trade partners are the two largest NAFTA trade partners – Canada and Mexico. In fact, those two nations alone buy more than a third of all Wisconsin exports in any given year.

There was a time when U.S. manufacturers moved operations across the border to Mexico, but that trend appears to have slowed and even reversed itself as Mexico’s drug wars have become more violent. Today, if a Wisconsin manufacturer decides to expand elsewhere, it’s more likely to be South Carolina or Kentucky than Mexico.

China is now Wisconsin’s No. 3 trading partner, buying about $1.2 billion in goods and services in 2008 and $1.1 billion in 2009. When a Wisconsin company opens a facility in China, the primary business goals are to get closer to the world’s fastest-growing market and hold down transportation expenses, not to cut labor costs.

China’s thirst for imported goods and materials matches with some of the state’s historic and emerging strengths. Electrical machinery and equipment, medical devices, power generation equipment, oilseeds, plastics, “clean” technologies and wood products are high on China’s shopping list. If not for China, there would be no market for some recycled materials that are now commanding decent prices.

As one Wisconsin business owner who just returned from China remarked: “In 10 years, no one will be able to call it a developing country.” China is well on its way to being fully developed, and many Wisconsin companies don’t want to miss that upswing.

The state also makes gains when it attracts foreign investment, as was the case again this month when Seda International Packaging Group SpA of Naples, Italy, announced it will locate its new North American facility and 189 jobs in Racine County. Of course, some foreign investment is acquisition of existing domestic firms, which sometimes means the loss of state corporate headquarters.

While the rules of engagement over trade are far from perfect, voters should bear this fact in mind: Wisconsin cannot consume all of its goods and services within its own borders – nor can they be consumed within U.S. borders alone. Trade policies deserve careful scrutiny, but Wisconsin farmers, manufacturers and technologists must continue to produce locally and compete globally. Too many jobs depend on it.

-- Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal in Madison.

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