Last week international electronics mega-manufacturer Foxconn announced plans to invest $30 million in a new robotics plant in Harrisburg, PA. Foxconn, the notorious Chinese low-wage manufacturer of Apple’s iPhone, has become the poster child of U.S. outsourcing in the face of ruinous global labor cost competition. The calculus of manufacturing supremacy is seemingly simple: Low labor costs and taxes, proximity to a large consumer base, and manageable corruption levels equal a sure strategy to attract global firms.

So what’s going on in Harrisburg? Foxconn is beginning to realize what a number of global manufacturers have come to realize: Production sites that can leverage university, government, and private R&D, a market-ready STEM workforce, and a vibrant cluster of global manufacturing supply chains trump cheap labor and tax breaks. In this regard the Harrisburg region is a big win for Pennsylvania as well as Foxconn—a company trying to move away from a legacy of poor working conditions to one of high-value, high-skilled production.   

Harrisburg and the larger Rust Belt Pittsburgh-Youngstown region to the west are hotbeds of advanced manufacturing. Youngstown is home to the National Additive Manufacturing Innovation Institute—an internationally recognized hub for so-called “3D printing” that draws together public- and private-sector resources. Pittsburgh—with the University of Pittsburgh, Carnegie Mellon University, and firms like Google—has redefined itself from a gilded-era steel town to a modern technology leader in software and robotics. Indeed, Foxconn is investing $10 million in Carnegie Mellon’s world class advanced robotics R&D. Finally, also in the Rust Belt and including Harrisburg, Akron and Cleveland, cheap natural gas has helped push manufacturing job and firm growth in a region that was hit extremely hard by the recession.

While Foxconn may be one of the highest profile foreign firm to relocate to the United States it is certainly not, as we’ve discussed, the first. Again and again, global firms interested in high-end manufacturing are putting a renewed premium on geographic clusters of intensive innovation. To be sure, countries with low labor costs still maintain solid advantages in a number manufacturing industries that will help their economies grow—this is the benefit and reality of a global economy. But when it comes to advanced manufacturing, U.S. metro areas and regions that foster synergies between research, skills, and production will likely continue to be highly sought after from firms looking to move up the global value chain.

In July 2013, the World Bank decided to phase-out lending for new coal-fired power plants in middle-income countries, except in rare circumstances where no financially feasible alternatives to coal exist. This decision was made for a combination of reasons including concerns about local air pollution and global climate change, as well as evidence that these projects have little trouble attracting private capital without World Bank involvement. Now, policymakers are considering whether the World Bank’s policy should also cover projects designed to retrofit existing coal-fired power plants in middle-income countries by adding scrubbers and other technologies that increase efficiency and reduce air pollution. 

There are several fundamental questions underlying this debate: Is financing coal power plant retrofits a good use of World Bank resources? If so, should the World Bank insist on the use of best available technologies when it finances these retrofits? These questions are vitally important, as retrofit technologies are designed to minimize toxic air pollutants, including soot and smog, which are both dangerous for human health and the world’s climate. Older coal plants without retrofit technologies are less efficient, and emit more pollutants per unit of coal burned than those with retrofits applied. Evidence shows that soot and smog can cause respiratory illness and asthma, especially in children and elderly people, and can diminish local agricultural production by reducing sunlight. Furthermore, in many countries coal plants are the single largest source of carbon dioxide emissions driving climate change. 

To help inform the policy debate, this analysis surveys the technologies in use in more than 2,000 coal-fired power plants currently in operation, under construction, or planned in middle-income countries. The findings reveal that roughly 70 percent of these power plants rely on old, inefficient technologies. Retrofitting these plants would reduce pollution, increase efficiency and save lives. In middle-income countries that do not mandate coal retrofits, the World Bank could play a helpful role in financing those improvements, particularly as part of broader policy reforms designed to reduce climate pollution and increase efficiency across the power sector.

Importantly, however, the data also show that important qualifications should be made. First, because coal is a major source of greenhouse gas emissions and retrofits are likely to keep coal plants operating longer, the World Bank should insist that retrofit projects occur within a context of national and local policy reforms designed to abate greenhouse gas pollution. Toward this end, the World Bank should continue to help countries build capacity to adopt and enforce climate pollution controls and other offsetting actions and policies. Second, the World Bank should insist that projects it finances use best available pollution control technologies. Already, the substantial majority of coal retrofits completed to date in middle-income countries have used best available technologies. These retrofits were almost universally financed exclusively by private capital. The World Bank should not use its capital to support inferior retrofit technologies that are below the standards already adopted by the private sector in middle-income countries.

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