Foreign investment cited as boon to Pittsburgh-region economy

Sign up for one of our email newsletters.Updated 2 hours ago They came in 1975, a German engineered-plastics seller and his wife looking to tap an underserved North American market. Then, Tony Pauly's company exported by the containerload to a few U.S....

Foreign investment cited as boon to Pittsburgh-region economy

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They came in 1975, a German engineered-plastics seller and his wife looking to tap an underserved North American market.

Then, Tony Pauly's company exported by the containerload to a few U.S. customers. Today, he is vice president and general manager of Ventana USA — a spinoff of Solidur Plastics that manufactures and sells speciality vinyl windows, doors and similar products. The company has 90 employees and operates out of a 70,000-square-foot industrial space in Penn Township.

Ventana USA reports to a German headquarters.

“The warmth of the people in Western Pennsylvania is fantastic,” Pauly said. “The area that we're in reminds us of the area not far from our hometown in Germany.”

He grew up near the German Ruhr Valley, a region like southwestern Pennsylvania that has been forced to forge a new economic destiny after the collapse of once-powerful coal and steel industries.

Stories like Pauly's are common in Westmoreland County and the region — where, as in the nation as a whole, prosperity is inextricably tied to an increasingly globalized economy, experts said.

A Chinese pork producer, a Spanish amusement park company and Canadian hair salons all operate here. Elliott Co. and Westinghouse, two businesses with deep local ties, are owned by companies based in Japan.

“When you start looking at what (foreign investment) means for this region and the U.S., you realize how important it is for business infrastructure and job creation,” said Suzi Pegg, vice president of global business development for the Allegheny Conference, a Pittsburgh-based economic development agency.

‘Active,' ‘fluid' sector

About 350 foreign-owned firms operate in Southwestern Pennsylvania and employ about 50,000, said Jim Futrell, vice president of market research with the Allegheny Conference.

A 2014 survey by affiliate Pittsburgh Regional Alliance counted about 50 foreign-owned companies in Westmoreland County, though officials cautioned it can be difficult to track international companies moving into the region.

Futrell called the region's international business sector “active” and “fluid,” with acquisitions, consolidations and expansions constantly affecting the landscape. In 2015, for example, 16 foreign companies moved into the Pittsburgh region, while four local companies were acquired by foreign ownership. Similarly, companies headquartered in Pittsburgh acquired 20 foreign firms that year.

A Tribune-Review analysis of data provided by the state Department of Community and Economic Development counted about 70 international companies with majority foreign ownership in Westmoreland County in 2016.

Among the top countries represented: England, Germany, Japan, Canada and France.

In many cases, single global entities operate a number of subsidiaries here or maintain multiple physical locations. In other cases, countries like the United Arab Emirates, New Zealand and South Africa are home to a single business interest in Westmoreland County.

Foreign investment ripples across the greater economy through the supply chain, transportation needs and other services, said David Briel, executive director of DCED's Foreign Direct Investment Team.

“You look at Westmoreland County alone, you have 6,000 employed (by foreign-owned companies), and then when you do the multiplier effect … you're talking about over 10,000 jobs, probably,” Briel said. “That's a huge piece of the economic pie.”

Globalization, localization

A strong labor market, low cost of living and status as a transportation hub make Westmoreland County and the Pittsburgh region attractive to foreign firms looking to locate in the United States, companies and experts said.

Philips, a Dutch company, acquired Respironics Inc. in 2008. Today, Philips runs its sleep and respiratory business from the greater Pittsburgh area, employing more than 1,700 people in the region. More than 1,000 of those are in Westmoreland County, according to state data.

Spreadshirt, a German company that pioneered customized T-shirt and merchandise e-commerce, opened its first North American office in Louisville, Ky., in 2004. A year later, it relocated to Greensburg and since has moved from a basement office on Main Street to a sprawling Roseytown Road facility. Its 110 employees produce customized shirts, hats, coffee mugs, phone cases and more before shipping products to all parts of the country east of the Rockies. A separate facility serves the West Coast.

E-commerce customers expect to receive orders quickly, said Hugo Smoter, Spreadshirt's chief commercial officer. Meeting expectations requires a centralized shipping hub like the Greensburg facility plus a U.S.-based staff that includes everything from IT workers to sales and marketing specialists.

“There is a difference in culture and language that needs to be supported, especially in such a large market,” he said. “With globalization, there's a certain amount of localization that comes along with it as well. One doesn't exist without the other.”

Politics at play

President Trump during his campaign and since taking office has slammed international trade deals, called for China to be labeled a currency manipulator and threatened to impose a 35 percent tariff on products made by companies that move jobs overseas.

Lee Branstetter, a professor of economics and public policy at Carnegie Mellon University's Heinz College, said Trump's rhetoric should concern any foreign companies that operate as part of a globalized supply chain. For example, tariffs created in an effort to protect domestic businesses from foreign import competition could cause foreign countries to retaliate by taxing American exports. Singling out and bullying companies for decisions they make while trying to serve a global market is unprecedented for an American president, Branstetter said.

“We generally think of this kind of executive-level meddling in private business as something that would happen in a banana republic,” he said. “If I was a German CEO with operations in the United States, I would start to worry.”

Branstetter was part of the White House's Council of Economic Advisers staff in 2011 and 2012 while the council worked on the Trans-Pacific Partnership, or TPP — a global trade agreement among the United States and 11 Pacific nations that deals with tariffs, environmental protections, intellectual property rights and other matters.

Trump has called TPP a “potential disaster” and signed an early executive order formally ending U.S. participation.

Pauly, now a U.S. citizen, said in December that he was looking forward to Trump assuming the Oval Office. Then and now, he hopes much of Trump's tough talk is part of a negotiating strategy. And it never hurts to revisit and try to improve longstanding agreements, like NATO, he said.

“We can't live without the rest of the world, and they can't live without us,” Pauly said, “so let's find ways to make things work for everyone.”

Smoter called Trump's election and Britain's decision to leave the European Union “hiccups” that ultimately will have little impact on consumer demand, which serves as a stabilizing force in the world. He pointed out that the collapse of the U.S.S.R. largely stemmed from consumer and economic pressure and said his own life — born in communist Poland, a graduate of a Midwestern high school and college, now living in Boston and working for a German company — demonstrates how the global economy makes the world more, not less, intertwined.

“It's not just about companies. It's about personal lives,” Smoter said. “It's about who we are, where we came from and where we work, and how those lines blur personally as well as commercially.”

Michael Walton is a Tribune-Review staff writer. Reach him at 724-850-1290 or mwalton@tribweb.com.

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