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Updated: July 13, 2020

CT could benefit from global supply chain reshuffling

It’s tough under normal conditions for a state government and its economic development apparatus to pursue a coordinated strategy, but COVID-19’s uncertainties make it especially difficult.

However, Connecticut — which has strengths in health care, biotech and defense — could benefit from the reshuffling of global supply chains now underway as companies broaden their trading partners amid fears of future disruption, including a potential second wave of coronavirus.

“Corporations around the country are realizing they need alternative sources to their pre-pandemic supply chains,” said Fred McKinney, professor of entrepreneurship and strategy at Quinnipiac University.

Such changes are already happening for some local companies, such as Tolland-based Gerber and Manchester-based Lydall, which have shifted some of their focus to the production of masks and other personal protective equipment, which were in dire shortage at the onset of COVID-19.

“It’s not going to happen easily and it’s not going to happen automatically. It’s not easy, for instance, to have a supplier to Sikorsky helicopters switch and become a supplier to Ford, but these types of transitions have happened and can happen and this is probably about the best opportunity we’ve had in years for companies to think about that change,” McKinney said.

UConn economist Fred Carstensen agreed that the state could be a more dominant supplier in the years to come. One disadvantage for Connecticut is that the cost to build new facilities here is much higher than it is in some other states, including in the south.

The answer to that problem, Carstensen posits, is the state should allow companies building new facilities to make use of stranded corporate tax credits — whether generated by themselves or acquired from another company — as incentives.

Connecticut enticed Pratt & Whitney to build a new headquarters in East Hartford with that very strategy, and Carstensen argues it should be a standard policy for any company. He estimates there are $1.5 billion in state credits that corporations cannot currently apply to their tax liabilities due to annual caps set by the legislature.

“Companies have to [build the facility] before they can collect the credit,” he said. ”If you made those stranded tax credits available … then we become competitive for that whole supply chain development.”

Carstensen offered several other policy ideas to help spur Connecticut’s economy out of the current crisis, including:

• Making tax incentives for data center developers automatic, rather than case-by-case, to spur development of high-tech businesses and jobs here.

• Redeveloping Sikorsky Memorial Airport in Bridgeport as a regional hub.

• Beefing up tax-collection enforcement and auditing manpower at the Department of Revenue Services to ensure the state is collecting owed revenues.

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