American towns question the opacity of Foxconns $10 billion plant: a big factory suddenly arrives

 American towns question the opacity of Foxconns $10 billion plant: a big factory suddenly arrives

Foxconn plans to build factories here, with a population of 26,000 in Mount Pleasant. There, politicians spent a lot of money to please the technology giant and were criticized by regulators for reaching a secret agreement that would have a huge impact on society. Meanwhile, Foxconn supporters and critics live in the same community, arguing on Village Board Meeting and Facebook.

In the well-known podcast Reply All, journalist Sruthi Pinnamaneni talks about what happened after Munter Pleasant received a $10 billion investment commitment from Foxconn and the resulting uproar. The summary is as follows:

Question: Can you tell me something about Munter Pleasant? What kind of city is this?

Sruthi Pinnamaneni: This is a surprising place, as I can see from my first conversation with people there. I had imagined what the place would look like and thought it might be a post-industrial, somewhat desolate town. However, when I got there, everything was different from what I had imagined. Its very beautiful. Its a huge suburb of Racine County that spreads outward. The huge village has no heart (that is, the core area), it is like a series of enclave communities separated by highways, large tracts of cabbage fields and shopping malls. Here, you can see the miniature of all the other groups and characters you see at the national level. For example, Kelly Gallaher, a local activist, is a representative of the local Progressive Democratic Party, while Dave DeGroot, the village chief, is a typical example of the Tea Party, a grass-roots politician whose political views tend to be Republican.

Q: A lot of reports about Foxconns U.S. plant construction are concentrated at the national and state levels, including Trump and Walker. Similar subsidies agreements and conflicts exist in the small town of Mount Pleasant. De Grout is a local leader in supporting Foxconns plant. What do you think the deal will appeal to him?

Sruthi Pinnamaneni: I think the term belief-based economics can be used to describe people like Degrott. They think that the place they live in is great and you have to believe that it will succeed. Just a few weeks before last years Foxconn deal rumors came out, Degrott became village chief, so he was a political novice, but what he needed to face was the biggest thing for the region and the state as a whole. When discussing the financial impact of the Foxconn deal with people, not only at the village level, but also at the state level, people reacted the same way: Weve never seen anything like this before. They were puzzled and wondered if it was right.

Photo: President Trump attends the founding ceremony of Foxconn factory in Wisconsin

Q: You mentioned that even for Wisconsin, its an unprecedented deal, especially for small towns like Munter Pleasant. In the process of reviewing the transaction, how to determine its potential impact and how to approve its basic procedures, which brings pressure to local governments?

Sruthi Pinnamaneni: I think the pressure they are facing is unimaginable, and thats why it really attracts me to see it for myself. I thought the project would stagnate like many other countries, but it made significant progress in less than six months from the moment the agreement was announced in July. Wisconsin signed an agreement with Foxconn and helped relocate the locals. I listened to the minutes of the village council meetings, which I had never heard before. Its absolutely unusual for me to listen to all kinds of recordings when I work in a radio station because they try to talk about it when nobody admits its happening. So I dont think they can handle such a big deal.

Q: Is the transaction transparent? When did people realize the arrival of Foxconn?

Sruthi Pinnamaneni: The rumor started last summer. If you look at Kellys Facebook group, youll find that the first rumor about Foxconns coming came in July, when President Trump and Paul Ryan, Scott Walker and Gou Taiming made major statements at the White House. As soon as that happened, all the people in the village who were concerned about it immediately understood. They said, Oh, they just announced a big deal in Wisconsin. Everyone here knows from hearsay and gossip from the local government that theres a giant coming to us, so it must be Foxconn.

Question: Is there no public announcement?

Sruthi Pinnamaneni: No, thats the craziest part, right? President Trump issued a statement in July, and the Village Council did not officially mention the word Foxconn until December, so nearly six months have passed. By the time they confirmed that Foxconn was coming, most of the deals had been completed. They already know that 15.5 square kilometers of land will be allocated to Foxconn, and they know the approximate size of the subsidy scheme. But I think they may have been negotiating for two months before they signed the final agreement. So it was nearly eight months after Trump announced the agreement that Muntplesent knew what he had promised and how much land he had to allocate.

Q: How do local people react?

Sruthi Pinnamaneni: People react very differently. The saddest thing is people like Kelly, who say, This is not the way to do things. We should work together to find a way to solve this problem. Moreover, it seems to them that Muntplesent did not negotiate on his behalf on such a large scale and did not gain enough benefits. The terms of the deal stipulate that Muntplesent needs to buy a large piece of land, which it needs to borrow money to buy, and then hand it over to Foxconn, Kelly and others are very surprised about. So, there are things that they think sound unfair. However, for many people who have witnessed the demise of old manufacturing industries, technology gives us a shining and eternal feeling. So for them, the idea of Foxconns coming is obviously very exciting.

Q: De Grout is optimistic about this, but Kelly is skeptical. Kelly is also worried about the transparency of the approval process?

Sruthi Pinnamaneni: Before the Foxconn deal, Kelly said she had started politics about five years ago. At that time, the village council tried to put aside public opinion. Previously, people could go to the Village Council and explain their ideas in three minutes. But Kelly never did that, or even attended those meetings, but her friends told her, Hey, they want to take that right away. We think its an important part of our local democracy. So Kelly started fighting for it. They had to stick to tradition, and then she started attending meetings. I think ensuring transparency is an important reason for her involvement.

Picture: Workers drive their construction vehicles at a Foxconn construction site in Mount Pleasant, Wisconsin

Q: The negotiation process of the Foxconn deal is extremely opaque, especially in Mount Pleasant?

Sruthi Pinnamaneni: Its worse than that!

Q: What are your views on the negotiation process? Munter Pleasant had to pay a lot of money and promised to buy land for Foxconn. Do you know how this happened? How does the village evaluate the factory?

Sruthi Pinnamaneni: I think they signed agreements based largely on assumptions. When you ask the local people, This subsidy scheme is so large that the budget of Muntplesent is usually between $18 million and $20 million, but you have to provide a subsidy of $76 million. You also need to change state laws to allow Muntplesent to deliver on its promises, because it is considered to exceed prudent lending ratios. Their answer is that this is reasonable because the scale of the transaction is so large. That is to say, Foxconn gave them $10 billion, which is a lot of money, so obviously they have to attract Foxconn here with the same good deal.

So Im not sure if their basic assumptions are correct, but thats the basis of their negotiations. County governments have signed secret agreements, so they dont know what conditions other states or other towns will offer. This is a typical blind beauty contest. Everyone blindly gives the maximum concessions within the limits allowed by their states. Walker, Wisconsin, really wants to sign the deal, so many laws have been changed, from financial regulation laws to environmental laws, to facilitate the deal.

Q: What kind of impact does this have on the local community?

Sruthi Pinnamaneni: Ive talked to a lot of people who live on the land allocated to Foxconn factories. Theyve all been relocated and they support the deal. As they say, they are willing to accept the money and make way for progress. But they felt that the way Muntplesent handled the deal was very strange and chaotic, and they took on a lot of things that were beyond their limits. They promised Foxconn that they would move 60 households from this very large land in a few months, which obviously could not work very smoothly. Therefore, I think that for this reason, people may be dissatisfied with the leadership of the village council.

Q: Overall, are critics uneasy about the signing of the agreement or about the implementation of the municipal government?

Sruthi Pinnamaneni: Both. Some people think the deal is not good for the community. In fact, they think it will be a disaster. They were very dissatisfied with the way Muntplesent handled the deal. They should have gotten more information and had better publicity.

Photo: Foxconn Chairman Terry Guo delivers a speech at the foundation-laying ceremony in Monte Placente, Wisconsin

Question: What do you think Foxconn wants from Munter Pleasant? Why did they choose Wisconsin and this town, not other places?

Sruthi Pinnamaneni: I think Foxconns presence in the United States makes sense because Im sure Trump is putting pressure on it. The Trump camp met with different investors and others at Foxconn. I asked what conditions are needed to start a factory in the United States, but the U.S. government refused to do so. In fact, the statement they sent me was: Its against our policy to talk to anyone about any ongoing project.

To my confusion, when I talked to De Grout, I had the impression that many other towns were also bidding. In particular, he wanted to defeat Kenosha, who had defeated Munter Pleasant on various other development projects, so he might think, We will never let Kenosha get this project. But Kenosha withdrew himself. In the end, only Munter Pleasant was bidding. The head of the local government in Kenosha said Foxconns request was not economically viable. They said, We will not offer these concessions. As a result, Muntplesent has paid more for the Foxconn deal.

Q: So its not just states competing against each other in the bidding process, but cities competing equally fiercely?

Sruthi Pinnamaneni: Yes. Later, I interviewed a historian who studied economic development and trading. He called it bottom-to-bottom competition. He said the situation was getting worse and worse, and I dont understand why it hasnt changed. Its a very strange, very cruel way of competing, with States and local governments competing against each other, and it doesnt do any taxpayers the best. I dont know how we got into this mode.

Question: People have made way for factories, and some buildings have begun to be built. What has happened to Munter Pleasant?

Sruthi Pinnamaneni: I went there last October and kept in touch with many people by telephone. Of course, Im also an enthusiastic reader of Better Mount Pleasant magazine and a frequent guest of Kellys Facebook group discussions. The Wall Street Times covered everything that happened in Foxconn and the village. It seems that the first phase of Foxconns project has already been built. They built the first building, although the scene was far from that of five to seven years later. The first building is a warehouse where they assemble TV components for Sharp. Villagers want to start getting some property tax from Foxconn because they have to pay huge interest on all municipal bonds issued, which are used to buy land for Foxconn. I think they will assemble the TV set next year.

As far as local politics is concerned, Degrott is about to take part in the election, and Kelly is trying to change the local government. I think theyre very excited about the change at the state level, and they want the new governor to change at least some of the environmental regulations Foxconn has bypassed. No one answered this question. If Foxconn were to produce LCD screens there, it would produce a lot of toxic sludge. Because factories are situated on wetlands, people have never planned how to treat the sludge. It is hoped that with the coming of the new government, things will improve.

Question: Do you think that Munter Pleasant will eventually have a huge factory like Foxconn initially promised?

Sruthi Pinnamaneni: Analysts I interviewed said he thought Foxconn would definitely build something. Whatever they build, it makes economic sense for them. But he felt that it would leave a bad impression on everyone. I dont think its the kind of future that people imagine when they offer huge subsidies, he said. (small)

Source: Responsible Editor of Netease Science and Technology Report: Wang Fengzhi_NT2541