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China Hub incentives grounded for now, but may fly later

This article first appeared in the St. Louis Beacon, Oct. 19, 2011 - Mike Jones, chairman of the region's China Hub Commission, says the effort to persuade China to locate a cargo hub at Lambert-St. Louis International Airport remains alive despite the General Assembly's failure to pass related tax incentives.

But he acknowledges that the legislature did inflict a wound.

"By not getting anything done, you put your future in the hands of other people,'' Jones said. "We did not do ourselves any favors."

By that, Jones was referring to how the General Assembly's inaction might be perceived by Chinese officials who will determine where a regional hub will be situated -- and by the other Midwestern cities jockeying for the project.

The state Senate and House had each approved $60 million in tax credits to encourage freight-forwarders to direct international cargo to Lambert. But the credits were part of a larger economic development bill that appears to be dead, as a result of disagreements on unrelated provisions. The Senate, in effect, killed the package Monday.

Lambert has a two-year contract for one China cargo shipment a week, but Jones said more cargo traffic is needed for the hub project to take shape.

A key part of that effort had been the tax incentives, particularly to encourage needed infrastructure development around Lambert. Both chambers had stripped out a proposed $300 million in additional tax credits for such construction, but state economic-development officials had indicated that there may be administrative routes to obtaining some of that aid.

Such alternate avenues remain, Jones said, but the lack of legislative action could send the wrong signal to the Chinese and other countries looking at Lambert.

"A fair reading of this is that you put in a 'question mark,' " Jones said. "Those doing business are making judgments about you based on the behavior they see."

Missouri delegation flies to China

Jones expects to address such questions when he flies to China later this week, as part of a Missouri delegation headed Gov. Jay Nixon.

Nixon, who has never visited China before, told reporters Wednesday that the General Assembly's failure to approve incentives shouldn't affect the purpose of the trip.

He noted that, earlier Wednesday, he had visited a business in Springfield, Mo., that already exports 20 percent of its business.

In a statement issued Tuesday, the governor had said the eight-day trip to China should culminate in "a series of agreements to sell billions of dollars of Missouri goods to China over the next three years."

Several Missouri businesses also are sending along representatives "to close deals with Chinese customers during the trade mission."

Noting that China is the state's third-largest trading partner, the governor's office said, "In 2010, Missouri exported a total of $987.4 million in goods to China. Through August 2011, Missouri exports to China totaled nearly $773 million, an increase of more than 25 percent over the same period in 2010."

The Missouri Republican Party has been jabbing at Nixon about the trip, by resurrecting numerous quotes from Nixon, when he ran for governor in 2008, in which he appeared to be critical of more trade with China. Nixon said he was targeting "outsourcing jobs," not "exporting Missouri products."

"I've always been critical of outsourcing Missouri jobs in what I mentioned in that," Nixon said. "But as far as exporting Missouri products and hiring Missourians to make those products and sell them, I'vealways been for that. This trip is about doing that … expanding markets for Missouri-made goods, expanding agricultural markets for Missourians. Not exporting their jobs, exporting our goods. And that is the exact same position I had before and one that we're going to move forward with a solid trade trip that adds significant economic advantages to the Show Me State."

In any case, the governor has played down any link between his trip and the China Hub effort. 

Jones and Dan Mehan, chief executive of the Missouri Chamber of Commerce and Industry, said Nixon was highlighting his aim to broaden the trip's economic goals.

Opposition to Hub has various roots

But Nixon's decision also might reflect some of the touchy regional divisions over the China Hub ;project that became evident during the special session.

Kansas City legislators, particularly in the Senate, had been upfront in debates about their belief that the Kansas City airport was better suited as an international cargo hub, although Kansas City officials had not been as active as St. Louis in pursuing the idea.

Some outstate legislators also observed privately that they had been hearing from Missouri manufacturers who feared that rival Chinese goods might be cheaper, and thus more of a threat, if they were flown directly into St. Louis, as opposed to being trucked in from Chicago, as most are now.

Questions about St. Louis' China Hub effort also got caught up, in the minds of some legislators, in the otherwise unrelated controversy over the defunct plan of a Chinese-American company, Mamtek, to build a plant in Moberly, Mo., to produce an artificial sweetener.

Moberly now is on the hook for close to $40 million in bonds issued to build the plant. The state also had granted tax credits, but none was awarded because the jobs didn't come to pass.

In any case, many legislators appeared less supportive of the China Hub effort as the Mamtek controversy took on a higher profile.

Mehan said he was aware of the regional rivalries, but that he hoped -- then and now -- that they would not become a major roadblock to the China Hub effort.

Mehan cited previous legislative efforts to help Kansas City, such as the 2010 special session that approved tax breaks to retain a Ford auto plant.

"We need more of a 'culture of Missouri,' " Mehan said, instead of regional splits within the state on economic issues.

Importance for St. Louis

The credit for the success of the China Hub campaign so far, he continued, belongs chiefly to an unusual partnership of St. Louis area officials in both parties, along with business and labor.

"The St. Louis region really pulled together for this," Mehan said. "They've been at it for three years."

Mehan also will be part of the Missouri delegation headed to China, as will state Sen. Eric Schmitt, R-Glendale, who was the Hub effort's chief driver in the General Assembly.

Schmitt said he remained "committed to make it work," because he viewed the proposal as one of the ways for the St. Louis region to re-emerge as an international trading center, as it had been more than a century ago.

Schmitt also believes that Lambert's air traffic must be increased to protect and grow the region's economy. He hears complaints from major employers, such as Anheuser-Busch InBev, about the difficulty in getting direct flights in and out of St. Louis since Lambert lost its status as an airline hub.

In any case, Schmitt said he was going to wait a few weeks before assessing whether to try again to pass the China Hub tax incentives when the General Assembly reconvenes in January for its regular session.

Schmitt also will be making his first trip to China as part of the Missouri delegation. He hopes that his experiences might help him bolster his arguments in support of an international cargo hub at Lambert.

What some in the General Assembly need to understand, said Schmitt, is that the Hub effort is "bigger than China."

He joined Mehan and Jones in emphasizing that the Chinese will locate a cargo hub somewhere in the Midwest. The only question is whether St. Louis remains in the running.

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