Re-shoring, foreign investment focus of House panel

Staff Report
Published March 19, 2014

WASHINGTON, D.C. — S.C. Commerce Secretary Bobby Hitt went to Washington last week to tell Congress about the revival of manufacturing in the Palmetto State and how it’s helping grow small businesses.

Testifying before a U.S. House of Representatives panel chaired by Rep. Tom Rice, a Horry County Republican, Hitt cited a raft of statistics showing how South Carolina was regaining manufacturing jobs and attracting foreign investment.

S.C. Commerce Secretary Bobby Hitt talks to a U.S. House panel about South Carolina’s success in luring domestic and foreign companies to the Palmetto State. (Photo provided by U.S. Rep. Tom Rice’s office)
S.C. Commerce Secretary Bobby Hitt talks to a U.S. House panel about South Carolina’s success in luring domestic and foreign companies to the Palmetto State. (Photo provided by U.S. Rep. Tom Rice’s office)
“We are known as a heavyweight in the aerospace and automotive sectors, with the highest per capita employment by foreign-owned companies,” Hitt said. “For these reasons, the national trade press has given us the moniker ‘Beast of the Southeast,’ and we’re very proud of that.”

Hitt participated on a panel that offered ideas to the Subcommittee on Economic Growth, Tax and Capital Access of the U.S. House Small Business Committee about how the U.S. government can draw American companies to bring manufacturing jobs back to America’s shores while also attracting foreign investment.

Rice said the hearing would help Congress learn what factors are influencing the revival of manufacturing in the United States and what policies are necessary to help it reach its full potential and what growth in American manufacturing means for small businesses.

“Many companies are finding that re-shoring their manufacturing domestically allows them to enjoy benefits that are not often readily apparent or are difficult to quantify on a financial spreadsheet,” Rice said. “This is good for small business and good for America’s global competitiveness. Washington must provide certainty and embrace policies that promote manufacturing growth in the United States to ensure that this re-shoring trend continues.”

A number of factors are prompting companies to either re-shore or expand manufacturing operations to South Carolina, Hitt said.

“Logistics is a driving force, as companies seek savings in transportation costs,” Hitt said. “Companies are moving back to the U.S. to get products to market faster and respond rapidly to customer orders in a just-in-time manufacturing environment.”

Other factors include manufacturers’ desire to have more control over the quality of finished products, lower energy costs in the United States and land costs.

Hitt cited a number of examples of on-shoring, including announcements of three Wal-Mart suppliers opening facilities in South Carolina as part of the retailer’s U.S. manufacturing initiative.

Collectively, the three companies represent 800 new jobs and about $14 million in investment, Hitt said.

“Where the small business typically reaps benefits from manufacturing in our state is either by providing a value-added service in direct support of the manufacturing operation, such as machining or repair, or by providing other services such as janitorial, staffing or subcontracting on construction,” Hitt said.

South Carolina is benefitting from manufacturing investment, Hitt said, adding that he thinks “there will continue to be opportunities for our small-business community to profit from the manufacturing renaissance. The adage ‘a rising tide floats all boats’ certainly fits.”

Another panel member, Shirley Mills, a senior analyst with The Boston Co., a global investment firm, said she thinks small businesses such as component suppliers, transportation companies, railways, construction companies, raw-material producers, and utilities will be beneficiaries of the return of manufacturing to the United States.

Public policy, though, impacts decisions of companies to either return manufacturing back to the U.S. or attract foreign investment, Mills said. Some ideas she offered Rice’s panel included:

· Develop consistent policies affecting regulations, taxes and environmental control.
· Focus on an energy export policy.
· Pay attention to success not just one area, such as costs. In the 1980s and 1990s some firms decided to off-shore manufacturing, thinking that lower labor costs would mean lower total costs, Mills said. For many companies, having a narrow focus on labor costs has backfired because of quality-control difficulties, transport costs, working capital needs, intellectual property risks and even eminent domain, she said.

Mills also stressed the need for workforce development that provides manufacturers with a highly skilled and educated labor pool.

“Access to a flexible, skilled labor force has become a barrier to U.S. manufacturing, as offshoring caused a generation to miss out on on-the-job apprenticeship training,” Mills said. “More formal job-training support should be a key focus area, again building on pockets of existing expertise and incentivizing companies rather than setting up inflexible centralized training programs.”

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