A recent article in USA Today described the breakneck competition going on among a dozen states over "one of the biggest potential job-creating bonanzas in the country, a giant new auto plant proposed by Toyota and Mazda."
Arkansas is one of the states trying to land this $1.6 billion influx of jobs and capital.
How will Toyota and Mazda decide which state will receive this extraordinary bounty? Although the final outcome is uncertain, there is no doubt that a state's lawsuit environment weighs heavily on investors' minds.
Consider the experience of Arkansas' eastern neighbor. In 2003, Haley Barbour had just been elected governor of Mississippi; he immediately focused on attracting and creating jobs and capital.
Texas had beaten out Mississippi for a new Toyota plant the year before, and that failure was on his mind. Gov. Barbour asked investors what Mississippi could do better in economic development.
In response, he received letters from both Toyota and Caterpillar officials detailing their concerns over what they considered Mississippi's hostile legal environment.
There was little indication that Mississippi public officials paid much attention to those concerns. As Tupelo's Daily Journal explained, Gov. Barbour then shared these letters with the public:
"The litigation climate in Mississippi is unfavorable, and negatively impacts the state's business climate," wrote Dennis Cuneo, a senior vice president of Toyota North America Inc. In fact, the U.S. Chamber of Commerce ranks Mississippi as having one of the the worst legal systems in the country.
Gov. Barbour also presented a letter in which Caterpillar Chief Executive Officer Jim Owens wrote that "Mississippi's current lawsuit environment makes us very reluctant to consider expanding our activities in the state."
Lawsuit reform appeared to be improving Texas' business climate, and Gov. Barbour wanted similar reforms to spur Mississippi's economic development. In 2004 he pushed the state legislature to advance lawsuit reform, then signed those reforms into law. That change fostered a helpful business climate--not just for big corporations and large interests, but for all the citizens of Mississippi.
This is perhaps best understood by what happened a few years later when the opportunity for a new Toyota plant came to Mississippi. Toyota had asked multiple states for proposals for a new $900 million auto plant. At that time, Arkansas was on the short list of four states for the plant. Gov. Barbour's efforts on tort reform advanced Mississippi's prospects; Mississippi successfully captured the new Toyota plant in 2007, which created 2,000 direct local jobs. That Toyota plant has brought numerous benefits to Mississippi.
For instance, in addition to the 2,100 people directly employed by Toyota in Mississippi, the plant supports 1,500 jobs at automotive suppliers.
Combined with supported spin-off jobs in other industries, it's estimated that Toyota is the foundation for 6,700 jobs in Mississippi. That economic activity contributes $235 million to the state's economy via disposable personal income.
Furthermore, in 2015 alone Toyota donated $5.6 million to local Mississippi charities. Employees donated thousands of hours of volunteer time. In short, a new investment of this size can change lots of people's lives for the better.
Mississippi's actions on tort reform in 2004 mirrored political shifts that had already occurred in Texas, where the legislature and Gov. Rick Perry had been aggressively moving ahead on lawsuit reform.
At the time of the 2003 Toyota plant announcement, Gov. Perry's campaign to support a wide-ranging tort reform amendment was in full swing in Texas. Gov. Perry had campaigned on and publicly supported an amendment to the state Constitution. In a 2003 special election, Texas voters approved changes to the state's legal system via a state constitutional amendment. The results demonstrated that Texas was ready to outpace other states in lawsuit reform, helping to create a better legal climate for its successful bid for the Toyota plant.
The Arkansas state legislature also passed significant bipartisan tort reform in 2003; regrettably, the bipartisan legislative consensus that produced it met with substantial judicial resistance, and over the next decade our state Supreme Court whittled away one part after another.
Currently, Arkansas is surrounded by other states with significantly more favorable investment climates, including but not limited to the state's lawsuit climate.
I'd love to see Toyota and Mazda invest in south Arkansas. Winning this new auto plant would improve the lives of people in our state for decades.
What incentives can Arkansas offer car manufacturers? I would hope that we could offer lawsuit reform. History suggests that lawsuit reform creates a competitive advantage. Toyota wasn't shy about informing Mississippi about the need for lawsuit reform. Arkansas policymakers need to follow through and make sure that our business climate is just as job- and investment-friendly.
It's important to note that although super-projects are nice, they're supposed to be the icing on the cake. The fundamental argument for economic development that stems from tort reform should not be limited to its effectiveness in recruiting a super-project. Remember that the overall economic growth stemming from legal reforms also benefits everyday Arkansas citizens who own or work in a small business. They are as valuable to our state's future.
Let's learn from Texas; one analysis found that tort reform created nearly a half-million new jobs there and brought over $100 billion into its economy every year.
Tort reform is a big step forward when it comes to economic growth, capital attraction and job creation.
State Senator Trent Garner represents about 90,000 citizens in southwest Arkansas.
Editorial on 08/27/2017