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
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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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