Stafford is a privately held company that produces a length of specialty chemicals. Currently, its most important product line is paint pigments used by the automobile industry. Stafford Chemical was founded more than 60 years ago by Phillip Stafford in a small town north of Cincinnati, Ohio, and is currently run by Phhillip's grandson, George Stafford. Stafford has more than 250 employees, and approximately 3 quarters of them work on the shp floor. Stafford Chemicals operates out of the same plant Phillip built when he founded the company.; however, it has undergone several expansion over the years. Recently, a Japanese competitor of Stafford Chemical by the name of Osawa Industries announced plans to expand its operations to the United States. Osawa, a subsidiary of a large industrial Japanese company,decided to locate to new facility in the United States to better serve some of its customers:automobile manufacturers who have built assembly plants here. The governor of the state in which Stafford Chemical operates has been particularly aggressive in trying to persuade Osawa industries to locate in a new industrial park located about 30 miles from Stafford's current plant. She has expressed a willingn ess to negotiate special tax rates, to subsidize worker's training,and to expand the existing highway to meet Osawa's needs. In a recent newspaper article, she was quoted as saying : " Making the concessions I have proposed to get Osawa to locate within our state is a good business decision and a good investment in our state. The plant will provide high-paying jobs for 400 of our citizens. Furthermore, over the long run, the income taxes that these 400 individuals will pay will more than offset the concessions I have proposed. Sinc several other states have indicated a willingness to make similar concessions, it is unlikely that Osawa would choose out state without them." George Stafford was outraged after being shown the governor's comments. "I can't believe this. Stafford Chemicals has operated in this state for over 60 years. I am the thir generation of Stafford's to run this business. Many of our employees' parent and grandparents worked here. We have taken pride in being an exemplary corporate citizen. And now our governor wants to help one of our major competitors drice us out of business. How are we suppose to compete with such an industrial giant?We should be the ones who should be getting the tax break and help with worker's training. Doesn't 60 years of paying taxes and employing workers count for something? Where is the governor's loyalty? It seems to me that the state should be loyal to its long-term citizens, the ones who care about the state and community they operate in - not some large industrial giant looking to save a buck." QUESTION: 1.) How valid is George Stafford's srgument? How valid is the governor's argument? Is Stafford Chemical being punished because it was already located within the state? Explain. 2.) How ethical is it for states and local governments to offer incentives to attract new businesses to their localities? Are federal laws needed to keep states from competing with one another? Explain.

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