Wisconsin governor out amid Foxconn backlash

After three successive terms as Wisconsin Governor, Republican Scott Walker lost his campaign for re-election in the November 6 elections. Despite strong economic indicators, such as the state’s 3% unemployment rate, Mr Walker’s responsibility for recruiting Foxconn – a Taiwanese electronics manufacturing company – to build its new $10bn research and development facility in Wisconsin, proved controversial among pockets of moderate voters in the state.

Presidential approval

In July, Mr Walker attended the ground-breaking ceremony for Foxconn’s new facility in the Milwaukee suburb of Racine County, alongside Foxconn chairman, Terry Guo, and US president Donald Trump. At the ceremony, President Trump referred to the project as the “eighth wonder of the world” and praised the facility’s expected creation of 13,000 jobs.

Foxconn’s investment in Wisconsin represented its first major investment in the US since 2013, according to foreign investment monitoring service fDi Markets. China has served as Foxconn’s top destination market with 76 FDI projects, including manufacturing factories in Shenzhen and Nanjing, which are responsible for the production of LCD screens, as per data from fDi Markets. After China, the Czech Republic (13 projects) and India (13 projects) represent Foxconn’s second and third largest FDI destination markets.

Given the US-China trade war, Foxconn’s investment in Wisconsin signalled that the US could compete against China as a destination market for manufacturing jobs. While speaking at the ground-breaking ceremony, President Trump proclaimed: “If I didn’t get elected, [Foxconn] definitely would not be spending $10b in Wisconsin”. In an interview with Magazine, a representative from Foxconn affirmed the importance of President Trump, claiming: “[Foxconn] made [this] decision…at this time due to the positive pro-business environment that President Trump has created since his election.”

Besides Mr Trump, Foxconn told fDi Magazine that Wisconsin’s “talented and hardworking workforce and pro-business environment [were] major competitive advantages” against other global markets. In part, the state’s competitive advantage was strengthened by Governor Walker’s decision to offer Foxconn a generous package of state tax credits to build its factory in Wisconsin.

State support

While individual estimates vary, Good Jobs First – a watchdog organisation – calculates that Foxconn received nearly $4.8bn in state and local tax credits.

In an interview with fDi Magazine, Governor Walker acknowledged the tax-credits, yet downplayed their significance. “Wisconsin competed against several other states for this once-in-a-generation economic development opportunity, including a couple that offered larger incentives than we did,” he said.

In many ways, this incentive package turned into a political rallying cry for Democratic lawmakers, including Mr Walker’s eventual challenger, Tony Evers, who ran repeated attack advertisements against the deal throughout his campaign. One advertisement ended with: “It’s time Wisconsin invests in its people again, not foreign corporations.”

Rather than tax credits, Mr Walker told fDi Magazine that Foxconn’s decision was rooted in “the strong business climate in [Wisconsin], the outstanding education system, and the dedicated workforce”. Another key aspect of the Foxconn facility for Mr Walker was its potential appeal to local university graduates. In May, he told fDi Magazine: “We are proactively working on talent attraction efforts beyond Wisconsin’s borders with a new marketing campaign that focuses on attracting millennials from Chicago and other Midwest cities, alumni of Wisconsin universities who now live out of state and veterans transitioning to civilian life.”

False promises?

While Governor Walker expressed confidence in the deal, local residents and activists continued to voice concerns about the environmental repercussions associated with the Foxconn facility. Most notably, Wisconsin approved Foxconn’s request “to divert up to 7 million gallons” of water from Lake Michigan and authorised air pollution permits for the facility, according to the Wisconsin Department of Natural Resources. In response, Mr Walker told fDi Magazine that “all existing state and federal air, water quality, solid and hazardous waste standards must be met, and any impact on wetlands must be properly mitigated.”

Many lawmakers and citizens also challenged Foxconn’s ability to deliver its promised creation of manufacturing jobs for US workers. “Foxconn has a history of breaking promises to communities, which governor Scott Walker ignored as he forced Wisconsin into a shady Foxconn deal at lightning speed,” said Democratic Party of Wisconsin spokeswoman Melanie Conklin in a May press release.

Throughout the campaign, Mr Walker affirmed his faith in the deal’s framework. “Foxconn must create jobs and invest capital in Wisconsin before they are eligible for any credits, and the company can only earn the maximum amount of tax benefits after it has created and maintained 13,000 jobs and invested $9bn,” he told fDi Magazine.

Election & Beyond

Although the Foxconn deal does not fully explain Mr Walker’s loss, it may have impacted his favourability among some voters.  According to a Marquette Law School poll conducted a week before election day, 40% of registered voters believed that “the state is paying more than the Foxconn plant is worth”. The poll, which surveyed 1200 registered voters, found that 33% of respondents believed “businesses [would] benefit directly from the Foxconn plant”, while a majority of 55% “[said] their local businesses would not benefit”.

Meanwhile, Mr Walker’s affiliation with President Trump’s economic agenda proved harmful, according to an NBC exit poll. Only 29% of voters believed that Mr Trump’s trade policies “helped” their community, while a majority found that these policies had no impact (30%), or hurt (34%) their local economy.

With Mr Walker’s departure, Mr Evers will be responsible for overseeing Foxconn’s adherence to the deal. This responsibility could become complicated, especially given a November Wall Street Journal article, which reported that Foxconn has considered bringing “Chinese engineers through internal transfers” to help staff the Wisconsin facility. Foxconn has since denied the report and reaffirmed their plan to hire US workers.

In addition, Mr Evers will be expected to maintain Wisconsin’s strong FDI performance, which has approached record-levels in 2018, according to fDi Markets. So far, Wisconsin has attracted 14 FDI projects, which is tied for the second-most annual projects in the US since 2003. Besides Foxconn, the Japan-based, Komatsu Mining Corp, and Swiss office space provider, Spaces, have invested in Wisconsin.

The Governor-Elect will assume office on January 9, 2019.