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Gateway to the East: St. Louis looks to become a hub for trade with China

This article first appeared in the St. Louis Beacon, Feb. 10, 2009 - Boston had its "Big Dig." Some call the Interstate 64-Highway 40 reconstruction the "Big Fix."

Now comes the "Big Idea."

That's what Mike Jones, senior adviser to County Executive Charlie Dooley, says that "we and the Chinese are calling" an idea to turn St. Louis into a hub for China's Midwestern trade.

"This could be a game-changer for St. Louis and the entire Midwest," said Jones, the head of the newly formed Midwest-China Hub Commission.

A new trade relationship with China could encourage existing companies to ship more products to China and stimulate the creation of new companies producing new products, he said.

Seung Kim, director of the Boeing Institute of International Business at Saint Louis University's John Cook School of Business, is optimistic about the project's prospects. He thinks creation of the hub has a "more than 60 percent chance of success," and like proponents of the plan, he thinks it would stimulate growth here.

Kim called the visit by Zhou Wenzhong, China's ambassador to the United States, last month during the Chinese New Year a "good sign," adding: "Culturally, if the Chinese attend such a cultural event, that implies it's a good indication and something positive is coming."

Still, everything is very much in the beginning stages. "I'm getting calls and letters like I'm the rhinestone cowboy here, but the bottom line is we don't have this deal done," Jones said. "This is an idea. We're working to figure out how you actually deploy it into an operational model." 

Why St. Louis and Not Chicago

The Chinese "think there are opportunities particularly if they were doing the air freight themselves," Jones said. "Right now there is no concentrated organized air operation targeted at the Midwest.

"Most things come to America on boats ... and have to be trucked elsewhere. There is substantial air freight activity from Chicago, but if you're in northern Texas or Oklahoma or Alabama, Chicago is a long way by truck."

If the idea progresses, St. Louis could become the "third point of entry" into the U.S. between the coasts, said Richard Fleming, president and CEO of the St. Louis Regional Chamber and Growth Association. "The middle part of the U.S. is not nearly as well served as it could be if you served it from internally in the Midwest instead of shipping through overcrowded ports on the coasts and then trucking into the middle of the country."

He discounted Chicago's role as an entry point, citing weather and crowded conditions. "Chicago is terribly overcrowded," he said. "There are all kind of reasons Chicago is not ideal for Midwestern distribution."

SLU's Kim agrees: "China has been looking for a cargo airport hub. St. Louis is centrally located, we have a lot of space in the terminal, and we have space for a warehouse distribution center. It makes sense. Chicago is so congested, and Memphis is a little remote." 

There's another advantage for China. The Chinese use third-party carriers in their shipments to Chicago, Fleming said. They are very interested in using their own planes and a hub in St. Louis could give them that option, he added.

New products for a new middle class

The Midwest, with 255 of the Fortune 500 companies and 42 percent of the gross domestic product, would be a big market for trade for China, Fleming said.

Products that make air shipment worthwhile are "usually time sensitive and have high value," Jones said. "If it's a T-shirt or a toy, you can put it on a boat."

China seemingly has lots of goods to export, but what does the Midwest produce that would interest Chinese consumers?

That's what studies over the next year will show, Jones said. "Our challenge in the next 12 to 15 months is to prove a business case. The Chinese know what they can bring over. We have to prove that there's enough stuff that would go back on an airplane to justify the expensive because trade is always two ways."

Actually, Midwest companies do ship a lot of goods to China, Fleming said. As part of the effort to make St. Louis a hub for Chinese trade, the RCGA surveyed 509 companies in Missouri and surrounding states that already ship to China -- and found the potential to ship more.

"An incredible amount of commodities from this portion of the country from raw products to finished products" could be shipped to China, Fleming said.

Jones added that the Midwest could export pharmaceuticals, biotech products, agricultural and food products and high-end manufactured goods.

Kim agrees that the Chinese would be drawn to high-tech, environmentally safe products related especially to energy production.

At the heart of the drive for increased trade with China is a burgeoning Chinese middle class -- 200 million to 250 million strong -- demanding things we take for granted, he added.

"There are all kinds of consumer products that could easily be shipped by plane from the center of the United States to China that would directly respond to the growing demand of their middle-class consumers," said Fleming.

The commission will form industry councils to determine whether companies would ship to China if there were a "more available and cost effective platform" from which to do that, he said.

Would companies already sending good to China ship more if it was more convenient? he asked. "Nobody really knows the answer to that. But we think the effort is definitely worth pursuing and can have profound impact on the Midwest in general and St. Louis in particular if we can pull it off."

Getting down to business

The Big Idea idea was reportedly hatched during a conversation about ways to hasten development of the NorthPark, 550 acres located along the eastern perimeter of Lambert-St. Louis International Airport, Jones said.

As chairman of the NorthPark Development Commission, Jones got involved as did Missouri's senators who "thought the idea had merit," Jones said. "We started a dialogue with people in the upper reaches of the Chinese government about this idea."

Visits by the Chinese ambassador to the U.S., China's vice premier and airport and trade officials followed.

Eventually the idea evolved into more than an airfreight operation, he said. "This notion of what we and the Chinese are calling the 'Big Idea' is that the Chinese establish a base in the Midwest that reaches the heartland of the country. That's a big area between the Alleghenies and the Rockies."

Officials announced the new partnership -- aptly announced on the first day of the Chinese New Year last month -- at an event attended by Zhou Wenzhong, China's ambassador to the U.S. and Sen. Christopher Bond. (Sen. Claire McCaskill was unable to attend because of illness.)

Officials also announced the creation of the commission composed of Missouri, St. Louis, St. Louis County and several private entities, including the RCGA; the World Trade Center of St. Louis; the Missouri Partnership, a non-profit that supports state economic development; the Missouri Chamber of Commerce and Industry and the St. Louis County Economic Council. Other members could be added later, Jones said.

Jones stressed this is an opportunity for the Midwest, not just St. Louis. "If all we were talking about is St. Louis, we wouldn't even be having this conversation," he said. "In fact, if all we were talking about was Missouri, we wouldn't be having this conversation. "

Jones said he's hopeful his commission will find many products that would sell in China.

"If there's not enough to trade, you will find this will be an idea that goes away," he said.

Kathie Sutin is a freelance writer in St. Louis.