Why Foreign Businesses Dig Mississippi

Courtesy Nissan Motor Co. Ltd.

Nissan is only one of the many foreign companies doing business in Mississippi.

by Adam Lynch
November 11, 2009

The state of Mississippi currently has 30,231 businesses that count as foreign-owned, or are owned by corporations, LLCs, unlimited liability partners or other business organizations. The list includes companies such as Calgon Carbon from New Zealand, Rolls-Royce and BP America Production from Britain, and MG Industries from Germany, among many others.

The popular Nissan plant in Canton, is a well-known international company out of Japan that made a positive impact on job creation in and around the city of Jackson. Gov. Haley Barbour is also working hard to cement an agreement with an as-of-yet unnamed German-owned company that would manufacture steel pipes. The governor only recently called off a special session planned for last month to assemble an incentive package to draw the new $300 million plant to the state.

Barbour still will not reveal the name of the company or even confirm the potential location of the project, which many legislators believe is slated for the Delta area. The governor has been tight-lipped about details, but he has told legislators that the incentive package will not surpass $30 million.

Historically, U.S. citizens got nervous when countries like Great Britain took an active role in owning U.S. land, but today few state politicians are ready to admit to the awkwardness of having so much revenue generation stemming from across the sea.

'We Need the Jobs'

Sen. David Baria, D-Bay St. Louis, said he wasn't about to spit in the hand of any movement to increase jobs in his part of the state.

"The economy is doing terrible things to the state of Mississippi, especially down here on the Coast. How could I complain if a business wants to come to Mississippi, open its doors and employ Mississippians? We need the jobs," Baria said.

The nation's unemployed now number about 15 million since the national recession kicked in around late 2007, according to the U.S. Bureau of Labor Statistics. That number isn't exactly bouncing back, says Baria and many others who welcome the new jobs that foreign-owned companies bring to the U.S.

Author Micheline Maynard, who wrote "The Selling of the American Economy: How Foreign Companies are Remaking the American Dream," published by Broadway Business, says foreign companies have reinvigorated entire towns, adding 5 million jobs to the U.S. economy, and they offer jobs that pay on average about $66,000 per year—though these numbers vary drastically in Mississippi where the median average income hovers around $25,000 a year.

More than 5 million Americans owe their jobs to companies whose assets are owned by an offshore source. In an Oct. 19 Newsweek article, Maynard referenced the town of Georgetown, Ky., where Toyota built its first assembly plant about two decades ago, "I went back a year ago, and the comparison is stunning. Before, you had literally one highway exit with a McDonald's and no place to stay. Now, there are new high schools, new parks, tons of restaurants and tons of hotels," Maynard told Newsweek. "If you're a community leader in Mississippi, you want to replicate what Georgetown did."

Alan Tonelson, research fellow at the U.S. Business and Industry Council, has a myriad of arguments to hurl at the country's growing habit of selling off its assets, however.

"We see lots of headlines about new Japanese and German automobile factories opening up, but those kinds of investments are very much the exception," Tonelson said. "Most incoming direct investment takes control of or invests in existing companies, so it's quite questionable from that standpoint how much new wealth most foreign investment really creates."

Tonelson points out that the U.S. followed a similar trend of allowing considerable foreign investment in the late 1800s, but adopted a more protectionist stance soon after due to economic difficulties.

"The salary may be appreciated by local workers, but nobody's talking about how the profits tend to go offshore. They tend to go back to the home country rather than staying here," Tonelson said. "We have no record of how much the U.S. stands to lose from this trend, but we do know that foreign-owned companies are more likely to run up bigger trade deficits than U.S.-owned companies. They tend to import more than they export and they add to U.S. trade debt. They are magnets for foreign imports from their own companies."

'A Dismal Record'

Unions have their own reasons for disliking foreign ownership, arguing that companies are drawn to Mississippi and other southern states primarily because those states have such a dismal record regarding employee treatment, including wages.

"Mississippi has always had a dismal record regarding the rights of employees that goes all the way back to the days of slavery," said Jaribu Hill, executive director of the Mississippi Worker's Center for Human Rights. "Historically, wages are lower in the South because at one time there was that peculiar institution when people weren't paid at all. It's like we've retained some kind of attitude that if you're getting paid at all you should be thankful, because there was one time when you weren't paid at all."

United Auto Workers claim that the wages an employee at the Nissan Plant in Canton makes, compared to wages an employee at the Nissan Plant in Tennessee makes, is an example of the state's comparatively low pay.

United Auto Workers conducted a 2006 survey suggesting that employees at Nissan's Tennessee production plants make about 20 percent under the pay scale for Nissan workers in the company's plant in Smyrna, Tenn. Nissan USA could not be reached to confirm reports on average wages in their Mississippi and Tennessee factories.

Damon Silvers, an associate general counsel for the AFL-CIO, said any state that is looking to entice business by low-balling wages is in a heated race to the bottom.

"If Mississippi's strategy is to be a source of low-wage labor, then they've picked a losing economic strategy. It won't work," Silvers said. "You'll be at the mercy of folks who will ratchet you down. What's low enough today will not be low enough later."

Mississippi Development Authority Deputy Director Whit Hughes disagreed that low wages were the main attraction for out-of-country companies.

"These are world-class names, and they'll tell you they're doing some of their most sophisticated work in Mississippi. They're looking for strong minds and a capable, skilled work force," Hughes said, adding that the weak U.S. dollar is having a heavy influence on the state economy. "From 2004 there was about $6 million in international trade (involving Mississippi). In 2009 there are about $200 million in trade pertaining to Mississippi exports to Chile."

Silvers pointed out, however, that the lack of worker organization is a big draw. If the new companies were following the examples set by their home office, they would be working hand-in-hand with unionization endeavors. In fact, many companies opening their doors in the non-union Mississippi are deeply involved with unions in their home countries, Silvers said.

"The AFL-CIO thinks it's fine for foreign investors to invest in the U.S. We have no problem with companies buying in the U.S., but there should not be a double standard. Businesses that respect workers' rights in their own country should respect that right in this country as well," Silvers said. "We think that there's something particularly wrong with a company that respects their workers' rights in their home country, but then comes to the U.S. and feels they do not have to respect their workers' rights in our country."

'No Easy Fight'

Companies in places like Germany and Britain exist in an extremely labor-friendly environment. Germany, in particular, is renowned for its willingness to accommodate worker organizations. Mississippi, in comparison, frequently pits union and anti-union employees against one another and has no state laws conducive to union organizing. The union presence in the state is mostly limited to food preparation and government workers—jobs that cannot be exported overseas.

But Silvers said unions are already working with sister organizations in places like Germany, France and Britain to lobby companies to allow organization from the corporate offices in Europe.

"Unions in the U.S. routinely talk to unions in other countries. Just as companies manage themselves worldwide, unions look at companies worldwide. We have counsel with unions representing firms in different parts of the world, and there's increasing coordination for bargaining and organization," Silvers said. "Right now, I'm calling you from a meeting of the British Trade Union Congress where I'm speaking. Believe it or not, they're meeting here in the U.S., not in Europe."

It is no surprise that the British Trade Union Congress is meeting in America. It probably saves on flight costs, because many of the CEOs already work here.

In fact, union organizers in America are increasingly learning that the bridge between Europe and America is getting shorter every year, which is convenient, considering the heavily unionized atmosphere of Europe. Occasionally, the result is that a multinational company in Europe ends up reaching an agreement with a union while the executives at the U.S. branch are hammering out a less union-friendly agreement.

Silvers said worker organizing has a long way to go in Mississippi, however. "There's often coordination with workers bargaining both here and there, but workers in America have to bargain for themselves. It's no easy fight for you, and it probably never will be," he said.

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