Daniels outlines Asian trade mission

Discussion in 'Economics' started by curis, Jun 11, 2006.

  1. curis



    Officials see high likelihood of landing new economic projects

    Gov. Mitch Daniels is at it again.

    He’ll jet to Asia this week — for the second time in less than a year — to hunt for jobs for Hoosiers. And this time, Daniels’ staff is making bolder predictions about the chances of coming home with a few deals.

    Indiana officials might be able to announce new economic development projects during or shortly after the trade mission, said Daniels’ Secretary of Commerce Mickey Maurer.

    That’s because they established relationships on last year’s mission and spent time the past 10 months talking to Japanese firms and other Asian companies already in Indiana.

    “All in all, this trip will be a little bit more power-packed,” Maurer promised.

    State leaders won’t, however, meet with Honda Motor Co. officials, who are considering Indiana as the location for a new, 1,500-person assembly plant. Daniels withdrew his months-old meeting request last week after Honda officials said they preferred not to meet with any state’s officials during the late stages of their deliberation.

    Daniels chose to visit Asia again, he said, because the recent economic recovery there offers the best shot for Indiana to attract the jobs it needs to finally recover from losses it suffered five years ago.
    The governor leaves for Japan and South Korea on Saturday. Last year, he hit Japan and Taiwan.

    Daniels’ focus on Asian countries — particularly Japan — points to a shift in orientation for the state’s auto-heavy economy. After past recessions, Hoosier leaders looked to Detroit, trusting General Motors and Ford to resume hiring and restart the state’s economy.

    But now Detroit automakers are reeling, cutting capacity no longer needed since sales cooled in the 2001 recession. Meanwhile, Asian automakers are growing aggressively. Toyota plans to build 10 new factories and become the world’s largest automaker by 2010. Honda and Hyundai are hustling to keep up.

    In this environment, cities such as Tokyo and Nagoya in Japan and Seoul, South Korea, are more influential on Hoosier job growth than Detroit, Chicago, New York.

    “It’s just where investment comes from now. It’s more and more offshore,” said Pat Barkey, an economist at Ball State University. “You might as well go after what’s growing.”

    Jobs in manufacturing are not growing in Indiana, but jobs at Japanese-owned manufacturers are — mainly due to market-share gains by Japanese automakers.

    Since 2000, the number of manufacturing jobs at Indiana’s more-than-200 Japanese-owned facilities has risen 4 percent. That is modest growth, but it looks good next to the 13 percent statewide loss in manufacturing jobs over the same period.

    “The Asian economies tend to concentrate their dollars and their U.S. investments in this (manufacturing) area,” Daniels said. “So let’s go get ‘em.”

    Taking the long viewWhile Daniels wants to come home with jobs, he stressed that his primary goal is to build relationships that could yield job growth for years, not just in the short term. Specifically, Daniels said, he wants to build the kind of relationship Honda has with Ohio, where Honda has operated since 1982 and employs more than 10,000.

    Honda is considering sites in Ohio, Indiana and Illinois for a $400 million, 1,500-person auto assembly plant — a plum project for any of those states. Honda officials are expected to make a decision on the plant this summer, and Daniels suggested it even could come this month.

    “They’ve got a very deep, 25-year relationship with the state of Ohio. That’s what we’re up against,” Daniels said. “I want to deepen our
    relationships with the companies that are here (in Indiana), so that we have an advantage each time they have another $100 million to invest.”

    Daniels’ biggest win from last year’s trip followed that model.
    Toyota Motor Corp., which already employs 4,600 at a plant near Evansville, decided to produce Camry sedans in Lafayette and employ 1,000 workers there. Daniels’ face-to-face meetings with Toyota executives helped those negotiations along, administration officials said.

    He also met with one of Toyota’s main suppliers, Aisin Seiki Co. Since then, Aisin vowed to add 200 jobs to its facilities in Terre Haute and Tell City.

    In addition, Taiwan officials bought wheat, wine and soybeans from Indiana firms last year. Agriculture will be a significant part of this year’s mission, too, with a focus on hardwoods and pork products.

    But Daniels needs more jobs announcements. He swept to victory in 2004 on confident promises to turn around Indiana’s sluggish economy. But the state still has 41,000 fewer people employed now than it did in May 2000, the peak of the previous decade’s boom.

    Barkey, the Ball State economist, said economic cycles and policies would have a more lasting impact on Indiana’s economy than a string of economic announcements from the governor that Barkey dubbed “job growth by press conference.”

    But, he said, “the reality of elected politics is you’ve got to have something to show.”

    China is the future

    For such short-term considerations, Japan and South Korea are good places to visit, said economists and economic development experts.

    Some, however, said Daniels ought to focus on China, one of the world’s fastest-growing economies where firms are just beginning to locate factories in the United States.

    “Everybody’s excited about China, I understand that,” Daniels said. “But my criterion is, ‘Where is the likelihood highest of dollars invested in our state to put our people to work?’ The Chinese, in my opinion, are a few years from that point.”

    Neither Japan nor South Korea is growing as fast as China, but both economies are strong again. Japan finally shook off its 15-year recession, and South Korea is largely back on its feet from a 1997 financial crisis.

    Meanwhile, auto companies in both countries are aggressively trying to capture customers in countries worldwide, largely by building local plants in those areas.

    As the automakers grow, many of their Asian-owned parts suppliers will follow them with new plants of their own. Both trends bode well for Indiana, experts said.

    “Asia looms large there, and auto looms large,” said Thomas Klier, senior economist at the Federal Reserve Bank of Chicago. “You put the two together, and I think your governor’s going in the right direction.”