New Jersey international trade has been the subject of several foreign missions by Gov. Chris Christie, including the recent one to London, as well as legislation that the governor vetoed on Friday. Those “buy American” bills called for more U.S. products in public projects, such as bids to the Port Authority, but Christie vetoed it saying the state and the country would fare best by being open to foreign ideas and exports.
And while Christie’s visits to the United Kingdom, Canada, Israel, and Mexico seem to have a second agenda — presumably his bid for the Republican presidential nomination — his stated objective is to bring more business to New Jersey, a welcome prospect regardless of the recent economic uptick.
It sounds good, but when asked, Christie’s staff could not elaborate on the strategy and goals of the administration when it comes to foreign trade.
Meanwhile, the reaction to the vetoes showed that trade and jobs can be a tricky combination, with more pitfalls than most political issues. While some business groups lined up with Republicans in support of the governor, others sided with Democrats and labor in opposition. State Senate President Stephen Sweeney (D-Gloucester) and other prominent Democrats passed the “buy-American” package of bills that the governor shot down.
Whatever the governor’s intentions, outside experts offered a variety of prescriptions for what the state could do to strengthen its trading prospects. Some praised past steps by Christie, others offered pointed comments about the state’s trading prospects.
The Trade Imbalance
The debate comes in an era when New Jersey and the nation chronically buy far more goods from foreign countries than they are able to sell abroad, while high-profile trade agreements have had some controversial side effects.
Nothing illustrated the changing politics more than the leading voice in support of Christie’s decision to reject the Democrats’ bills. It came from Canada, in the person of John Prato, that country’s New York-based consul general. In December, he took the unusual step of warning a state Assembly hearing in Trenton of “dire consequences” for trade if the state adopted requirements in the bills.
The measures would have extended existing procurement preferences for American goods beyond government agencies and schools to the Port Authority of New York and New Jersey, other authorities and commissions, and state universities. They would have required publicly purchased goods to be made in United States, with at least 50 percent of the value of their component parts also being made in America. The legislation included waivers allowing foreign alternatives for goods unavailable or too expensive here.
North of the border, the vetoes were greeted with satisfaction. Canada’s trade minister Ed Fast said Christie’s actions “protects our shared North American economy and competitiveness.” The Globe and Mail of Toronto said the governor had given Canada another “small victory” in ongoing trade disputes with American states.
Two weeks earlier, Alaska Gov. Bill Walker, an independent, shelved plans to renovate a ferry terminal on Prince Rupert Island, British Columbia, that the American state operates as part of its transportation network. The work was to have been partially paid for by the U.S. Federal Highway Administration, which has “buy American” requirements, so the Canadian government threatened to sue.
Climbing Trade Deficits
The veto came as U.S. Commerce Secretary Penny Pritzker released annual trade data, showing the trade deficits of the United States and New Jersey rose dramatically last year, outpacing a rise in exports.
Last year, New Jersey sold $36.8 billion worth of goods and services abroad, but bought $126.3 billion, according to the report.
A country-by-country breakdown of the state’s 2014 trade is not yet available. But for 2013, data from the U.S. Census Bureau shows New Jersey businesses sold almost $6.8 billion worth of goods to Canada, but bought $9 billion.
That looked good compared to the state’s 2013 trade balance with its leading partner, China: $1.6 billion in exports compared to $16.8 billion in imports. Overall, the new national figures show the United States sold $124 billion in goods to China last year, while buying $466.7 billion.
Those trade numbers left supporters of the “buy American” bills even more disconsolate.
Sweeney, an official of the International Association of Ironworkers, developed the bills after the Port Authority of New York and New Jersey awarded the contract for structural steel for the Bayonne Bridge-raising project to an Italian firm rather than New Jersey manufacturers. The governor missed an opportunity “to help create jobs and to support domestic businesses,” he said.
“I feel betrayed,” said David Floyd, president of Harris Steel of South Plainfield, which competed for the contract along with an associated management firm. “I don’t think it’s too much to ask that when a government is spending tax dollars, it gives some preference to businesses in that state or region who will provide a return to the taxpayers by spending money in those communities and hiring their residents.”
“Steel plants in Italy and Spain have very low-cost loans provided by their governments, and tax incentives to export,” he added. “For a long time, they had work in Dubai, but all those skyscrapers got built and Europe has its own problems, so they’re looking for work here.”
That is exacerbated by Chinese firms looking for work after their domestic markets got “overbuilt,” Floyd said. “They are state-owned or controlled, pay very low wages, don’t have to worry about labor laws or environmental regulations.”
American politicians may talk about free markets, he said, “but they set us up, competing against foreign firms that are being subsidized by their governments,” Floyd said.
Floyd has gotten some substantial contracts from the Port Authority, including work rebuilding the World Trade Center complex and the underground portion of its transit hub. But in October 2013, it essentially shut down for three months, “the first time in 104 years,” Floyd said. It and his management firm, MRP, are each operating with a small fraction of their former staff, he said.
“Fabricating steel on this scale is not something that a lot of companies can do,” Floyd said. “As we see them shutting down across America, that’s industrial manufacturing that is not coming back. Sure, there will be companies that do local projects, shopping centers and so forth, but we won’t be able to do the big jobs.”
Questions about New Jersey’s trade deficits and strategy went unanswered by the governor’s office and the state international business and trade office, which reports to Lt. Gov. Kim Guadagno.
At Choose New Jersey, the Christie-linked business group that helps fund his trips and uses “Highly educated, perfectly located” as its slogan, an official professed to be “stumped” by a query about whether New Jersey’s location poses a challenge for business with Asia.
“I’m not sure we’re the shop to answer that,” she wrote in an email.
“There is a disadvantage because so much of the opportunity today is in Asia,” not New Jersey’s traditional and closer foreign markets, said Herbert Ouida, a former Port Authority official who directs the Global Enterprise Network at Fairleigh Dickinson University.
“But New Jersey has lots to offer,” not least through cultural connections to booming markets like Brazil and potential ones like Cuba, Ouida said. Part of the problem has been fear of the unknown, particularly for smaller firms, he said.
“U.S. people tend to look inwards,” Ouida said. “We are a very large market,” and in the past, American and New Jersey companies did not have to look far for customers, he said.
More businesses should take advantage of state assistance, including financing, available through the state’s international business and trade office, headed up by Eddy Mayen, according to Ouida. He also mentioned programs such as the roundtables on particular markets held at FDU.
“We have companies that are doing $1 million a year in sales, and they’re exporting,” so the sector is not just for multinational corporations, Ouida said.
Overseas Trade Offices
One of the best steps Christie has taken was reestablishing some overseas trade offices, according to Michele Siekerka, president of the New Jersey Business and Industry Council, and until recently a deputy commissioner in the state Department of Environmental Protection.
Over the “free trade” era of the past two decades, the state generally has operated a handful of such promotional offices. But they often have lasted just a few years, tied to particular perceived economic opportunities and limited by budget constraints. Christie’s predecessor, former Gov. Jon Corzine, closed the last in order to cut spending.
But Ouida is right, Siekerka said, companies often do need a helping hand when venturing into foreign markets. In 2010, Christie opened offices in Singapore and London, two significant trading partners for New Jersey.
“Actually having a presence in other countries enables us to understand the markets and advise our companies about what the appropriate products and opportunities are,” Siekerka said.
“What we make and build here has quality that is head and shoulders above, particularly any products made in Asia,” she said.
Farok Contractor, professor of management and global business at Rutgers Business School, is not buying the feel-good message.
“I don’t think New Jersey is well positioned to be an exporter,” he said.
Besides geography and capacity, the state faces the common American problem of insufficient technical education to provide the export goods and services most valued in the global market, technology and engineering, Contractor said.
If anything, New Jerseyans may be overeducated for the kind of jobs being created under current conditions, he said.
“You don’t need a B.A. to work in retail,” Contractor said.
America “is already one of the biggest exporters in the world,” so simply increasing them is not enough to reverse the trade deficit or create high-paying jobs, he said. State and national trade policies can concede low-paying jobs to other countries as long as they develop high-paying replacements here, he said.
“The shift of high-tech industries to China is not a good thing for the United States, but it’s different for something like a screwdriver assembly plant,” Contractor said.
But it is unclear whether national and state policymakers are looking at trade from that perspective.
“There’s nothing wrong with adding more jobs to the New York and New Jersey ports,” wherever the products may be going to or coming from, Contractor said. But if it wants to improve its economic outlook, the state needs to get smart about where it invests, he said.
As public policy, New Jersey should improve its technical education programs, and concentrate on building those sectors where it still has a strong manufacturing base, such as chemicals, or one that could be quickly restored, like pharmaceuticals, Contractor said.
“Fragrances is another area where New Jersey already has significant production,” and should seek to expand that sector, encouraging related new businesses and promoting itself to foreign ones, he said.
In the meantime, New Jersey is hemorrhaging manufacturing jobs. The Alliance for American Manufacturing, a Washington-based trade group, noted New Jersey’s current estimate of 243,100 manufacturing jobs is down 63,000 from its prerecession level, and off a “staggering” 180,000 since 2001, an analysis supported by census data.
Brian Lombardozzi, an AAM vice president, sought to convince Christie that the “buy American” bills would “provide a valuable incentive for foreign manufacturers to consider New Jersey as a site of a future facility in order to better compete for the state’s business.”
“The temptation to retreat to isolationism and fear will always be powerful,” the governor responded in his veto.