When choosing international trade and foreign direct investment in March 2019 as the theme for the Shenandoah Valley Partnership annual meeting in July, I had little idea of how topical the subject matter would be. Staying clear of the political and policy implications, let us consider the current impact of international markets in the Shenandoah Valley.
The stark reality of our economic life is that business is a global affair. Countries and city-states as diverse as Ireland and Singapore compete for the capital of many of the same companies as do we in the U.S. While we collectively embrace our quality of life in the Valley, in Virginia and the U.S., this does not directly translate into profits. Companies will go where there are markets for their products, and where capital is both appreciated and rewarded. The factors in business location decisions are as they were more than 30 years ago in the ascendency of the majority of U.S. states and localities entering the business of economic development:
- Proximity to markets and transportation
- Workforce
- Quality of life
- Business climate
- Sites and buildings
However, there are changes occurring in demographics of the workforce, technological change across all business sectors, global market sophistication and growth, transportation, energy costs and resource availability. These changes are driving a reordering of the location factors in a manner that is conducive to the Shenandoah Valley.
The Shenandoah Valley is renowned for its beauty and quality of life. For more than 300 years, the Shenandoah Valley has attracted immigrants searching for a better quality of life. Their hard work and the bounty of the land imbued residents with a deep appreciation of our environment and instilled a strong work ethic among the workforce whose reputation transcends far beyond the region. The Shenandoah Valley not only embraces its quality of life and work ethic, but it is also part of the regional ethos. These attributes are the same that attracted many of our international companies to the Shenandoah Valley and once again are becoming the most important for companies, both existing and new, in location decisions.
Workforce and quality-of-life factors are on the rise. Companies are now in the unenviable position of competing for workers, and younger workers are more likely to choose where they live before choosing their occupation. This is a worldwide phenomenon. No longer is the Shenandoah Valley competing with other Virginia regions, or a neighboring state. More likely we are competing for capital from companies considering broad global geographic locations. Fortunately, the Shenandoah Valley has a broad collection of well-established international companies that operate within the region and illustrate that foreign investment is welcome and can thrive.
Foreign direct investment has been critical in the long-term business growth and success of the Shenandoah Valley. Companies such as Ariake (Kerry Foods), Pilgrim’s Pride, Neuman Aluminum, Speyside Bourbon Cooperage, Lehigh Cement, Munters, Daikin, Mercury Paper and Serco represent a broad spectrum of business sectors. These companies operate in metal extrusion, food processing, lumber and wood, construction, air handling and energy efficiency, large industrial and commercial HVAC products, paper manufacturing and patent processing; manufacturing and business sectors. These sectors provide economic wealth and high-paying jobs.
The listed companies are representative of more than 20 international companies in the Shenandoah Valley. They are headquartered in Ireland, Brazil, Canada, Germany, Italy, Japan, Netherlands, Sweden, Switzerland, China and the United Kingdom. The jobs and investment created, just through recent expansions, total more than 3,000 and $415 million as reported by the Virginia Economic Development Partnership and the Shenandoah Valley Partnership. Moreover, these jobs and investments do not take into account the original jobs created and investment made when the facilities were established.
Positive implications from foreign direct investment are that the Valley has several substantial business clusters and international investment tends to agglomerate close to these clusters. This is particularly true if existing foreign national companies are already successfully operating in the region. The Shenandoah Valley Partnership is working with our Virginia Economic Development Partnership counterparts to extend our reach in international markets via Virginia’s in-market representatives. We have great potential to expand our international presence through additional international company investment and job creation and are working diligently to do so.
Somewhat aligned in terms of business is growth is international trade in which exporting goods and services diversifies the customer base and creates new jobs. More than 70% of consumer consumption is outside of the United States. Although the U.S. is still the single largest consumer market, we comprise $16 trillion, or about a quarter, of total consumer-driven demand for goods in all markets. In other words, there is a very large and growing market beyond the U.S. borders. Fortunately, there are a number of programs to help companies enter the appropriate markets.
The impact of exporting to foreign markets can be seen here in the Shenandoah Valley. Using the Virginia Economic Development Partnership’s data derived from the Brookings Institution Export Nation for 2012 and 2013, the Shenandoah Valley’s two metropolitan areas of Harrisonburg – Rockingham County and their neighbors to the south, Augusta – Waynesboro – Staunton, created $2.24 billion in total export value and employed almost 8,000 direct jobs. While manufacturing was the predominance of the value and jobs, nearly 20% of total was derived from the service sector.
Agriculture in the Valley brings into perspective the importance of international trade and its impact upon the Shenandoah Valley cannot be understated. In 2016, agriculture and forestry exports were valued at $2.77 billion and by volume accounted for more than half of containerized exports moving through the Port of Virginia (VDACS, 2019). A tremendous percentage of these exports come from the Shenandoah Valley region. China imported more than $691 million in agricultural purchases, while Canada totaled more than $296 million and Switzerland imported more than $191 million in 2016. These and many other countries are purchasing a variety of Virginia agricultural commodities, wood products, seafood and specialty food and beverage items. These items and others are promoted in the international marketplace by the Virginia Department of Agriculture and Consumer Services through its global network of trade representatives in Canada, Mexico and Latin America, Europe, the Middle East, India, China, Hong Kong and Southeast Asia (Global Trade Information Services). While national trade tariffs imposed by the U.S. and countered by other nations have hurt agricultural commodities exports in 2018 (Brookings Institute, Export Trade Monitor, 2019), other markets have opened compensating for total production output.
The narrative for the Shenandoah Valley is simple. While we have been competing successfully in the global marketplace for many years, our quality of life and quality of workforce are no longer well-kept secrets. National and global access via United Airlines, thru SkyWest out of the Shenandoah Valley Regional Airport gives business and leisure travels a broad reach with local convenience. The Interstate system along with rail and truck transport provides convenient east coast and international connectivity for area manufacturers and distributors. More than most people realize, the health of our economy is strengthened via foreign trade and direct investment.
By Dr. Jay Langston, Executive Director of the Shenandoah Valley Partnership