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"GATEWAY TO THE EAST"
ST. LOUIS SEEKS TO BE CHINA'S
FREIGHT AND COMMERCIAL HUB


Work on a deal to establish St. Louis as a freight and commercial hub for China could turn the Gateway to the West into the Gateway to the East as well.

Feasibility studies on the prospects for establishing the freight and commercial hub for the Midwest began in earnest after Missouri and St. Louis area officials signed two memoranda of understanding with Chinese aviation and government officials in Beijing in late March during the six-day trade mission led by U.S. Senators Kit Bond and Claire McCaskill.

The first agreement, signed with the Investment Promotion Agency and
the Trade Development Bureau on behalf of the Chinese Ministry of Commerce, outlines ways to strengthen the relationship between China and Missouri through new initiatives in trade and economic development.


Gov. Matt Blunt signs joint agreement in Beijing. (Standing, left to right): Former Gov. Bob Holden; Stephen Perry of London Export Company Ltd.; St. Louis County Executive Charlie Dooley; Sen. Kit Bond; Sen. Claire McCaskill; Ma Xiuhong, Vice Minister, Ministry of Commerce; Congressman Russ Carnahan; Mayor Francis Slay. (Seated): Gov. Matt Blunt.

It also calls for a delegation from China's Ministry of Commerce to visit Missouri to review and assess the opportunities for expanding trade and investments in agriculture, high-tech equipment, goods, financial services, manufacturing, parts, assembly and real estate. It also urges continuing efforts to "foster a long-term, friendly and cooperative relationship and to develop a healthy partnership between China, Missouri and the Midwest."

The second memorandum of understanding was signed by Missouri Gov. Matt Blunt, St. Louis Mayor Francis Slay, St. Louis County Executive Charlie Dooley and Wang Changshun, vice minister of general administration of Civil Aviation of China (CAAC). The pact would promote establishing an air-freight and commercial hub at Lambert.

"To remain competitive in the global economy, we must aggressively pursue opportunities like this one to create jobs for our workers, new markets for our products and economic growth for our state," Blunt says.

State and local officials—as well as the Chinese—are eager to establish the hub because of the immense trade opportunities with one of its largest trading partners.

"It is hoped that the U.S. side will take measures to increase exports to China and, especially, abandon trade protectionist practices and relax the export control against China. We hope the U.S. will work with us to safeguard our mutually beneficial and win-win economic and trade ties," Chinese Ambassador Zhou Wenzhong told an audience in St. Louis at an introductory meeting Feb. 20.


Forbidden City
Beijing, China

China is already the third largest market for American goods, after Canada and Mexico, and the fourth largest export market for Missouri, calculates the U.S.-China Business Council. The U.S. sold $65.2 billion in goods last year to China, up 301 percent since 2000. Missouri exported $1.015 billion in goods to China last year, up more than 1,200 percent over 2000.

Waste and scrap make up the single largest component of Missouri exports at $168 million last year, followed by chemicals at $139 million and minerals/ores at $133 million.

Illinois exported $1.959 billion in goods last year to China, up nearly three-fold from 2000. Machinery at $445 million was the single largest export, followed by waste/ scrap worth $406 million and computers/ electronics at $269 million.

Those markets, along with agriculture, hold great promise to boost Missouri exports even more, officials say.

"There's a broader trend going on here in terms of foreign direct investment coming to the United States," says Christopher Chung, CEO of the public-private Missouri Partnership in Clayton.

"With the weakening U.S. dollar, a lot of European and Asian companies are contemplating putting operations in the United States. The Chinese investment represents a potentially great investment in years to come."

Chinese direct investment in the U.S. amounted to $1.1 billion in 2001, but grew to $16 billion in 2006 and could easily top $60 billion by 2010.

The key to beginning the process was forging relationships with the Chinese— an integral part of their business culture, officials say.

The trade mission to China in March impressed Chinese officials because it was attended by bipartisan government participation as well as business leaders. Attendees included Missouri Sens. Claire McCaskill, Democrat; Christopher "Kit" Bond, Republican; Democrat Congressman Russ Carnahan; St. Louis Mayor Francis Slay; St. Louis County Executive Charlie Dooley; former Missouri Gov. Bob Holden, who is vice chairman of the Midwest U.S.-China Association; RCGA President and CEO Richard Fleming; RCGA Senior Vice President of Economic Development Steve Johnson; World Wide Technologies Chairman and CEO David L. Steward; and executives from Pfizer Inc.; Peabody Energy; UniGroup; McEagle Properties LLC; the World Trade Center St. Louis and Lambert Field.

"The City of St. Louis is known as the Gateway to the American West and we believe it can one day become known as the Gateway to the East, especially China," said Sen. Kit Bond. "This historic agreement will mean jobs for Missouri workers and the start of an important and strategic relationship between the City of St. Louis and China."

The idea for establishing a Chinese air hub at Lambert originated four years ago with developer Paul McKee, owner of McEagle Properties. But the idea really began to move forward two years ago.

McKee is developing the 150-acre Hazelwood Logistics Center and, with Clayco, the 550-acre North Park, east of the airport. Although a freight hub would benefit both developments, McKee says the vision he has is grander than that—a nexus of commerce with the Chinese that includes cultural and educational exchanges between China and the entire region.

McKee discussed the idea with his attorney and partner Steve Stone of Stone Leyton and Gershman. Stone's cousin and long-time
collegue, Stephen Perry, is the CEO of the British-Chinese trade group that helped open trade with China after World War II. Perry urged the two to provide data on goods available regionally, distribution, weather patterns, and cost advantages of St. Louis over competing markets that already receive large shipments of Chinese goods.

St. Louis offers advantages over more northern cities with less expensive trucking costs, less severe weather (19 inches of snow on average annually versus 38 inches in Chicago) and dramatically more on-time airport arrivals/departures, RCGA studies show. The new $1.1 billion runway at Lambert provides plenty of capacity and major adjacent developable sites at the airport (slated to receive foreign trade zone status). In addition to Lambert, MidAmerica Airport, adjacent to Scott Airforce Base in the eastern portion of the St. Louis region, offers significant additional shipping and storage capacity to solidify the region's prospective role as the multi-state commercial hub of the Heart of the Heartland of America. MidAmerica also has the benefit of FTZ status.

Beyond cargo shipping, the trade trip to Hong Kong, Shanghai and Beijing awed some members of the delegation and impressed them with the opportunities available.

"Previously, many of us saw China as just a cheap producer of goods," McKee says. "But they are six times the (population) size of America. Their buying power is increasing dramatically and they have more and more need for Western goods. You have to see China as a market that we can export to."

Delegation members say the discussions have gone well and, in particular, they have never seen such cooperation among business and elected officials on a bipartisan basis on a project of such magnitude, notes RCGA President and CEO Dick Fleming.

"Everything is going very fast. It's going much faster than we ever would have expected," says Steve Johnson, senior vice president of economic development for the RCGA. "It tells you that (the Chinese) are serious about this. We see this as a tremendous opportunity for St. Louis."

The question that must be answered for the Chinese is if there are enough American goods to fill the Chinese aircraft on their return trip to China. A study of those prospects with Air China Cargo as the carrier should be complete later this year. It is being funded by the Chinese government, Lambert, the Missouri Partnership, RCGA and World Trade Center-St. Louis.

And finding that answer urgently is important, as air cargo traffic in the U.S. is projected to triple over the next 20 years. Air cargo growth between China and the U.S. is predicted to accelerate even faster—quadrupling over the next two decades, according to Boeing Co.'s World Air Cargo Forecast.

Midwestern meat, dairy products and processed foods that must ship quickly are export prospects, Johnson says.

"St. Louis is the ideal location for this hub," he says.

THE GOODS ON
Midwest Goods

 

America's Heartland is the hub of agricultural production and industrial manufacturing for the nation. The region accounts for 43 percent of gross ag production and 53 percent of total U.S. gross manufacturing production.

The 20-state region's 130 million residents comprise 43 percent of the total U.S. population and 40 percent of U.S. personal and disposable income. Nearly half of the Fortune 500 companies call the Heartland home.

In fact the population center of the nation is in Edgar Springs, Mo. (about 100 miles west of St. Louis) compared with Baltimore two centuries ago.

A substantial percentage of goods flowing into China comes from the Midwest. Those goods account for nearly 30 percent of the total value and 45 percent of total weight.

The top categories of goods by air value are:

  • Industrial machinery, including computers
  • Electrical machinery and sound/TV equipment
  • Optic, photo, medical or surgical instruments
  • Aircraft, spacecraft and related parts
  • Inorganic chemicals, precious and rare earth metals, radioactive compounds
  • Vehicles and parts
    (except rail and tramways)

While 43 percent of gross agriculture production comes from the Heartland, a small amount ships to China by air. Those exports valued $3.5 million in 2000, lead by live animals and $180 million in industrial machinery in 2007. The potential to increase agricultural shipments to China is enormous, especially considering the sheer production of ag production that comes from the region.

That includes:

  • 92 percent of soybeans
  • 89 percent of corn
  • 87 percent of cotton
  • 78 percent hogs and pigs
  • 78 percent rice
  • 75 percent chickens
  • 67 percent cattle/calves
  • 67 percent wheat

 

 

 

 


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