Taiwan passes Canada and China to become Arizona's No. 2 trading partner

Exports from Arizona businesses to other countries increased 37% last year — more than $44 billion worth.

That’s among the findings of a new report from the Arizona Commerce Authority. The data also shows that Taiwan has overtaken Canada and China to become the state’s second-biggest trading partner, after Mexico.

Sandra Watson is president and CEO of the Arizona Commerce Authority. She sat down with The Show to talk about the new numbers, beginning with the significance of the changes she’s seeing.

Full conversation

SANDRA WATSON: The new trade numbers are so significant for Arizona. It really demonstrates that Arizona has really become a global powerhouse. We're seeing significant increases in exports as well as imports. Our trade numbers have exponentially grown year over year. We've seen a 37% increase just in the last year for exports. That's really driven by a lot of our advanced manufacturing projects that we've landed over the last five years. So a tremendous opportunity for Arizona.

MARK BRODIE: One of the things that stood out to me was that in terms of the countries with whom Arizona does business, Taiwan is now No. 2 behind Mexico. How much of that is TSMC and how much of it might be other things unrelated to that?

WATSON: Yeah ... a significant portion of that is going to be TSMC. With their $165 billion investment in Arizona, we're seeing a lot of imports for computer equipment and electron components coming in, but we're also seeing a tremendous amount of exports back to Taiwan.

So having a massive project like TSMC, as I mentioned, $165 billion investment that includes six new fabs, two advanced packaging facilities and a [research and development] center. So as we continue to see the ramp up of those production facilities, we're going to continue to see our exports grow substantially as well as our imports.

BRODIE: Can you foresee a time when Taiwan would overtake Mexico to become Arizona's biggest trading partner?

WATSON: Well, I do think that the rapid growth that we're seeing in Taiwan, that we could potentially see that kind of growth. What's interesting about Taiwan is not only do we have a significant investment from TSMC, but we've seen over a dozen new companies from Taiwan land in Arizona. And we've got over, you know, 30, 40 new projects that we're working with companies in Taiwan.

So we're going to continue to see this rapid growth from Taiwan — but not just Taiwan. I mean, we're seeing a tremendous amount of activity from Japan as well, and also foreign direct investment from Canada. So if you think about the foreign direct investment that we're seeing in our state just over the last year, we've won 55 new international expansion projects. That has represented over $107 billion worth of and potentially 25,000 new jobs.

Over the last five years, those numbers from a foreign direct investment standpoint have been 250 new international projects in the state of Arizona. That represents about $195 billion and close to 55,000 new jobs. So as we start to think about Arizona's international footprint, it's growing across all countries that ...we've got several foreign offices. So Taiwan continues to grow at an exponential rate.

But we're also seeing tremendous opportunities in Japan, South Korea, Europe, Canada, Mexico. So, overall, I think what we've done is we've diversified our international footprint, which is great news for Arizona, because we'll continue to see all of those markets grow.

BRODIE: I want to ask you about Canada, which you mentioned a couple times, which for the longest time had been the second-biggest trading partner behind Mexico. It's moved down a little bit. And we've seen some reporting that Canadians, for example, aren't coming here as much given the current political situation and to some extent the economic situations.

Is that at play here or are there other factors that maybe led Canada to slide down the list a little bit?

WATSON: No, I think that truly we saw exponential growth in Taiwan, so they overtook that position because of the amount of activity. We're still seeing a tremendous amount of activity in Canada. Foreign direct investment there, they represent the second highest country for foreign direct investment in in Arizona, along with obviously Japan and Taiwan.

So we're seeing a tremendous amount of activity from Canada as well. They're our strong trading partners. So I think we'll continue to see a very robust relationship with Canada.

BRODIE: Obviously when it comes to Taiwan, the semiconductor industry is a really big component, I would imagine, of a lot of that foreign direct investment. Some of the imports and exports. Are there other industries that either to Taiwan and or other countries that are particularly strong here?

WATSON: Absolutely. So we're seeing, as you mentioned, semiconductor industry along with electronics components continue to be a very, very strong opportunity for Arizona. But we're also seeing tremendous opportunities in aerospace products and parts, along with just high-tech industries. And that is happening across the globe. Arizona truly has become North America's semiconductor headquarters. And with that now brings a number of other industries, suppliers to the semiconductor industry.

But that also creates opportunities in a lot of other industries like bioscience and there's a lot of med-tech devices that we're focused on. So when we're in Taiwan, not only are we talking to companies in the semiconductor industry, we're also having conversations with companies in other industries.

BRODIE: Do you find that that sort of clustering is happening intentionally? That because a company, for example, like TSMC is investing so much in Arizona that other companies in Taiwan — and this probably would apply to other say, "Oh, it seems to be going well, we should go there, too."

WATSON: Absolutely. I think what it demonstrated over the last five years is that Arizona is a top market for global companies. And other companies within Taiwan, and other markets there, we're seeing a lot of activity in South Korea and Japan as well. This has signaled to them that Arizona's got a great business environment and great high quality workforce. And an opportunity for businesses to expand into the U.S. Arizona becomes a great landing spot for them.

TSMC has really, I think, signaled to the world how competitive Arizona really is compared to other states. And we're seeing a tremendous amount of activity as a result of that.

BRODIE: What does all this mean for the average Arizonan? Like, why should people who live here care about foreign direct investment and where we are exporting things and from where we are importing things?

WATSON: Absolutely. Export-based industries really provide additional wealth to the state. So, it comes in the form of jobs — so new job creation, higher quality jobs, as well as investment. And because of that investment tax, revenue is generated. So Arizonans are feeling that not only in the ability to access a great job market, but also in the revenue that is generated from these projects.

So, all the way around, exports-based industries provide added wealth to our state economy, which ultimately filters through the entire economy. As you're seeing, with a number of these significant investments, a number of local-serving businesses are benefiting. So you're seeing more restaurants, you're seeing more service companies, and it's really providing a lot of economic momentum for the entire state.