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RPT-INSIGHT-US South, not just Mexico, stands in way of Rust Belt jobs revival
April 7, 2017 / 11:02 AM / 8 months ago

RPT-INSIGHT-US South, not just Mexico, stands in way of Rust Belt jobs revival

 (Repeats for wider distribution)
    By Howard Schneider
    MOBILE, Ala., April 7 (Reuters) - In the years since the
2008 financial crisis, this southern U.S. port city has
attracted a new Airbus          factory, seen its steel industry
retool, and gained thousands of jobs building the Navy's new
combat vessel.
    Some 300 miles north in Huntsville, new businesses sprout in
farm fields drawn by readily available land, low taxes, 
flexible labor rules and improving infrastructure.
    As President Trump faces pressure to deliver on his promise
to revive manufacturing in the northern "rust belt" states that
put him in the White House, his biggest challenge may not be
Mexico or China, but the southern U.S. states that form the
other pillar of his political base. 
    States like Alabama have built a presence in the global
supply chain in direct competition with the country's Midwestern
industrial heartland, and even if Trump coaxes jobs back to the
United States they may well head south rather than north.
    Whether the "rust belt's" expectations are met will be
central to 2018 U.S. mid-term elections and likely frame the
presidential race in 2020. 
    The southern states are reliably Republican, but the party's
ability to repeat its success in Midwestern swing states, such
as Michigan, Ohio and Wisconsin, may hinge on whether the Trump
administration delivers on its economic promises.   
    For a decade now, nine southern states - North Carolina,
South Carolina, Georgia, Tennessee, Kentucky, Alabama,
Mississippi, Louisiana, and Texas - together have accounted for
a larger share of the U.S. economy than nine northern states
that defined America as the 20th century's industrial
superpower, according to a Reuters analysis of federal data.
    The analysis compared gross domestic product, population and
other factors among northern and Midwestern states that played a
key role in Trump's victory or are typically considered part of
the industrial heartland, with those in the south and along the
Gulf Coast that have become an emerging destination for auto and
other investment. (Graphic: tmsnrt.rs/2nHSda5)   
    Florida, a state whose population has boomed under an influx
of retirees, many of them from the north, was excluded.
    
    FREE LAND AND DEGREES
    Economists and industrial site consultants say the reasons
behind the trend have moved beyond lower wages and lower levels
of unionization. Per capita income in the south has now almost
caught up with that in the Midwest, and its skilled workforce
continues to grow as college graduates move in.
    "Labor? Perceived advantages. Taxes? Some of these are
fairly low (tax) states. Real estate? For big projects that are
going to employ three, four, five thousand people, you can find
free land - zero cost land," said Darin Buelow, an industrial
site specialist with Deloitte Consulting.  
    In the south, business executives and development officials
interviewed by Reuters were less likely to call for new tariffs
and trade deals than to worry about how any new regime may
disrupt a system they have learned to work with.
    David Fernandes, president of Toyota Motor Manufacturing
Alabama, said that of the roughly 700,000 engines the factory
made last year, half went to Mexico and Canada. The facility
also makes engines for cars assembled at a Toyota plant in
Georgetown, Kentucky. "Anything that hinders the opportunity to
provide product to a customer is what is concerning," he said. 
    Plants in Kentucky and Indiana gave Toyota a U.S. foothold
in the 1980s and 1990s, but in this century the Japanese
carmaker turned to Alabama, Texas and Mississippi for expansion.
    Located on former cotton fields, the company's Huntsville,
Alabama, plant now employs more than 1,400 people and churns out
about 3,000 engines a day. 
    Gunmaker Remington Outdoor            came to Huntsville
lured by $110 million in tax and other concessions. Its factory
here is expected to eventually employ 2,000, and it has already
begun shifting employees from elsewhere, including 100 from the
town in upstate New York where the company was founded two
centuries ago.
   Jeremy Littlejohn moved his cloud computing start-up RISC
Networks from Chicago to Asheville, NC, in 2012 for the less
hectic pace, but has found the location a selling point as he
grew from 6 to 33 employees.
    Many of those new workers came from out of state,
contributing to North Carolina's net annual influx of about
46,000 college degree holders. That migration of educated
workers is the norm among the southern states. The rust belt by
contrast saw a net outflow of more than 400,000 residents with
college degrees between 2007 and 2014.
    The customers are heading south too. From 1990 to 2015,
population in the nine southern and gulf states grew 43 percent,
to more than 76 million, and passed that of the rust belt states
in the late 1990s. Population in the rust belt grew 13 percent,
to 63 million, over the same period.
    When the Minnesota-based Polaris Industries Inc.        
began planning a new facility for its line of outdoor vehicles,
"there was no Minnesota play," said Eric Blackwell, director of
operations at the company's new factory outside Huntsville. 
    The market for Polaris' machines, popular for farm work,
hunting and sport riding, was growing in the south. Open land
was available, and Alabama had programs to help recruit and
train a workforce expected to rise to 1,500.     
    
    FROM LAGGARD TO A RISING TIDE
    Globalization hit both the north and the south hard. Between
2000 and 2010 each lost about a third of their manufacturing
jobs. But employment rebounded faster and more broadly in the
south.
    Between 2000 and 2015, combined private sector employment in
nine southern and gulf coast states still grew 13.5 percent. In
the nine northern states total private sector jobs as of 2015
remained 1.3 percent below their 2000 level, according to
federal data.
    The transition dates back to the 1980s, when German and
Japanese automakers began investing in what has become a
sprawling, regional industry.
    Supplier networks followed, creating even stiffer
competition in an industry already changing due to passage of
the North American Free Trade Agreement (NAFTA) and the growth
of automaking in Mexico.
    New industries, such as aerospace, followed. Boeing opened a
new factory in Charleston, South Carolina, while decades of
federal spending on space and defense programs created a pool of
engineers in Alabama. A surge in energy and locally important
industries like wood products added to the employment gains.
    Judith Adams, vice president at the Alabama State Port
Authority, speeds visitors through warehouses of wood fiber
products, steel ingots and other goods ready to ship abroad. The
port is spending $47 million to boost its capacity to 500,000
containers a year from 300,000. The longer-term the goal is to
triple that to 1.5 million.  
    "The vessel sizes are getting bigger. The market is getting
bigger. The cargo is here," Adams said. 
    When European aircraft maker Airbus          scouted sites
for its $600 million North American plant more than a decade ago
it settled on a former Air Force base in Mobile. 
    As it ramps up production, local officials say 20 suppliers
have already arrived in Airbus' wake, with firms like Ireland's
Maas Aviation looking to put 150 people to work painting planes.
 
    "We looked at transportation costs, labor costs,
productivity, and it made sense," said Allan McArtor, chief
executive of Airbus Group Inc. "We will be building single aisle
airplanes (in Mobile) for a long, long time."  

    
 (Reporting by Howard Schneider; Additional reporting by
Jonathan Spicer in Cleveland; Editing by David Chance and Tomasz
Janowski)
  

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