Picture this scenario: Toyota, the Japanese auto giant that has already goggled up an impressive share of the U.S. auto market wants to build a spare parts plant in Newark, N.J., or some other northern city. The U.S. government steps in and gives the city $3 million to clear a site complete with access roads, water and sewer lines, all at no cost to the company.
Then the United States gives Toyota a loan of $4 million to $5 million or more at subsidized interest rates to start up the plant.
Although no such plans involving Toyota are underway, the White House is preparing an aggressive campaign to tell foreign investors that they can get U.S. government subsidies for opening a business in this country.
The foreign business has to agree to put the business in an economically "depressed area" of the United States, put up a reasonable amount of its own money and create permanent new jobs for workers in the area.
Locating in a "depressed area" is not very hard to do. Under one subsidy program, the Public Works and Economic Development Act run by the Commerce Department, about 85 percent of the country is classified as a depressed area (high unemployment, poverty, etc),
Under another subsidy program, the Urban Development Action Grant Program, run by the Housing and Urban Development Department, about a quarter of the country is classified as depressed.
A foreign firm can't just walk in and automatically bag the money. It must meet additional tests involving reciprocal rights, excess capacity and the like for certain types of subsidies.
But assuming it qualifies -- and officials say it is entirely conceivable a firm like Toyota would qualify under one of the programs -- it can get an impressive array of direct or indirect financial aid from the government.
The aid includes grants to local community from either HUD or the Economic Development Administration (EDA) to clear an industrial park site, build sewer, water and port facilities and access roads to make the area suitable for the foreign business at no cost to it.
In addition, below-market rate loans or commercial loan guarantees from the government are available.
Politically, programs that give federal aid to foreign businesses obviously have some strange spins on them. Unions and U.S. companies for years have complained of unfair competition from abroad, and periodically asked the government to take actions against foreign companies. Unions have also bitterly complained about "runaway" U.S. companies that relocate factories abroad to save money -- and thereby jobs -- or for other reasons of convenience.
Recently, auto and some other unions have been pressing foreign companies to locate plants in the United States. The federal aid programs would help in this, so the unions might not object much, either, since a foreign company doing business here would become subject to the same labor costs and government regulations as U.S. firms.
Dick Breault of the Chamber of Commerce of the U.S.A. said that "to a lot of people" the idea of giving subsidies to foreign businessmen to invest here is repugnant and "an emotional question," although the Chamber believes in free business access and probably wouldn't object.
But HUD and Commerce officials said it will help create new jobs and revive poor and decaying communities.
Actually, both the HUD and EDA subsidy programs exist and already are open to domestic and foreign investors if they agree to locate in a depressed area.
Some foreign investors have taken advantage of the subsidies HUD Secretary Moon Landrieu recently cited three such uses of HUD "action grants" to aid foreign investors locating in economically distressed communities.
One was used to lend $1.75 million to the Westmoreland, Pa., Glass Co., partially owned by a West German firm, to finance equipment and plant renovation, creating 226 jobs, with interest at 5 percent the first three years and 11 percent the next 12.
Another grant, $4.5 million to the city of Breckenridge, Minn., was used by the city for a loan to National Sun Industries, partially owned by an Argentinian firm, for a sunflower seed processing plant creating 100 new jobs. The interest rate was 9 percent.
In still another, New Bedford, Mass., got $1.6 million to build a bulkhead and create landfill for expansion of a Norwegian-owned fish-processsing plant, at no cost to the company.
Similarly, since the Economic Development Act (depressed areas law) was passed 15 years ago, at least 18 foreign investors have received subsidies in one form or another for locating in depressed areas. For example, the EDA guaranteed $9 million in loans for a Canadian firm to build a steel mill in Raritan, N.J. It provided $2.5 million in "infrastructure" (community facility) development in Portland, Ore., where a West Germnay firm located a silicon wafer plant.
Other subsidies have helped firms from Mexico, Japan, England and Belgium, for such industries as aluminum pistons, TV receivers or tubes (Sanyo and Daiwa), frozen french-fried potato processing, cobalt for missile nosecones, and roller skates.
What is new now is a decision, from an interagency group headed by presidential aide Jack Watson, to publicize the available subsidies through U.S. embassies and trade missions overseas, to work with state governors in getting them to steer foreign investment headed for their states into the depressed areas, and to focus on technical studies to locate the places where the foreign investment will do the most good.
Marshall Kaplan, deputy assistant HUD secretary, contended in an interview that the aim isn't to have the U.S. government go out directly and lure foreign businesses here. Instead, he claimed, the idea is to channel them into depressed areas once they have become interested in locating in the United States, perhaps through requests by local and state agencies which shop around overseas for foreign investors (most of the states have such agencies).
Both Landrieu and Commerce Secretary Philip Klutznick, in published statements on the new campaign, said, in effect, that money knows no nationality: Foreign money as well as U.S. money can help stimulate business and create jobs in depressed areas of the United States.
Breault said the Chamber has very little confidence in either the HUD or the EDA program as a means of creating new business and genuine new overall job opportunities in the economy, and this is so whether the beneficiaries are domestic or foreign investors. "I think the idea of subsidizing even American firms is highly questionable," he said.
But he said if you already have the program, it is probably best to make foreign investors eligible on an equal basis with domestic, based on the principle of free access for businesses everywhere.
The administration, which is pushing a huge expansion of the entire EDA program for both domestic and foreign investors, has a more upbeat view: As Landrieu put it, the new initiative will help funnel more money and jobs to distressed communities with virtually "no increase in budget."