2005 Jackson County International Economic Impact Study 

Prepared by:

Kevin Riegle

Summer Intern

U.S. Dept. of Commerce

Ypsilanti Export Assistance Center

 For more information please contact:

Paul Litton, Director

U.S. Department of Commerce

Ypsilanti Export Assistance Center

College of Business

Eastern Michigan University

473 Owen Building

Ypsilanti MI 48197

Voice (734) 487-0259

Fax (734) 485-2396

 Summary:

With improved communications systems and the advent of the internet, as well as the erosion of barriers to trade through agreements such as NAFTA and GATT, firms of all sizes are entering the international market.  The world truly is becoming a global marketplace.   International business continues to play a significant role in the economy of Jackson County.  

Annually, the Ypsilanti Export Assistance Center (U.S. Dept. of Commerce) conducts an International Economic Impact study, with the purpose of gauging the role of international business within Jackson County.   The current international economic climate, as well as future trends in international business are looked at. The study focuses on both the traditional exporting of goods/services, while also including the export of education via local institutions. This report does not account for international service from the county because of the difficulty in tracking such transactions. The study also does not attempt to evaluate the impact of foreign subsidiaries or franchises abroad.

Jackson County Overview

Jackson County covers 707 square miles in the south central part of Michigan, and is the thirteenth largest county in the state. As of July 2003, the U.S. Census Bureau estimates that Jackson County has a population of 162,321. The City of Jackson is the largest city in the county with a total population of 36,700 as of  2002. The population increased by 5.8% from 1990 to 2000. [1]

For 2003, the per capita income in Jackson County was $20,171, just below the state average of $22,168.

As of March 2005, Jackson County had an unemployment rate of 6.9 %, slightly lower than the state average of 7.0%. [2]

In 2003 there were approximately 10,200 employees in the manufacturing industry, down from approximately 12,400 in 1999.  [2]  The U.S. Census Bureau defines the manufacturing sector as  "comprised establishments engaged in the mechanical, physical, or chemical transformation of materials, substances, or components into new products." Establishments in the manufacturing sector are described as "plants, factories, or mills, and characteristically use power-driven machines and materials-handling equipment." 

Out of a total of 351 manufacturers surveyed in the most recent study, the 1997 U.S. Economic Census, 30% or 102 firms were known exporters. [3] This is higher than the average for both Michigan (21%) and all firms nationally (8%). The high level of exporting comes from the unique pull through effect of the large automotive presence in the area. 

As of 2005, the number of exporting firms had increased to 112, with 98 in the City of Jackson, 4 in Grass Lake, 5 in Spring Arbor, 2 in Concord, and 3 in Brooklyn.

The Ypsilanti U.S. Export Assistance Center wishes to recognize the efforts of exporting firms in Jackson County.  The President's "E" Award was created by executive order in 1961 as the nation's highest award to honor American exporters. Companies in Jackson County that have received the award include Dawn Products, which makes donut manufacturing equipment, and Aeroquip Engineered Systems Group, which makes products for the commercial aerospace industry.

Export Markets and Industries:

Traditional industrial manufacturing sectors, such as automotive parts, machine tools, and general industrial equipment make up the top Jackson County export markets.  Currently, there are 32 firms exporting machine tools, 23 exporting automotive parts, and 12 exporters of general industrial equipment. 

The top export markets for Jackson County tend to reflect countries in which U.S. automotive manufactures and suppliers have active operations.  Thus exports from Jackson County go overwhelmingly to Canada and Mexico, however, recent expansion into Brazil and China has created new markets for the county.  

Jackson County and World Markets

The following countries represent the best markets for exports from Jackson County:

Brazil

Brazil has the 11th largest economy in the world, and is a strong market for U.S. exporters.  In 2004, estimated U.S. exports to Brazil reached nearly $14 billion (a 12% increase from 2003), with US imports reaching an estimated $21 billion.[4] As of April 2005, U.S. exports for the year totaled $4.6 billion already.

Brazil is also one of the top three locations for U.S. foreign direct investment.  Since the United States is Brazil’s largest single trading partner, nearly one-quarter of its products are exported to the U.S.  [5]

Brazil is one of the most attractive markets in the world for automotive parts, which is the number two export sector in Jackson County, and the 13th leading sector nationally. In 2004, U.S. auto part exports to Brazil totaled $418 million, an increase of 21% from the $343 million exported in 2003. [6] Total sales in Brazil of machine tools in 2004 were $52 million, down from the $57 million in exports for 2003.

However, obstacles to trade, such as high tariff barriers, a difficult customs system, and high taxes persist.  Also, the legal system has become overwhelmed, making it difficult to enforce contract law. For a U.S. firm to successfully export to Brazil, they must have intimate knowledge of the local environment. [7]

• For an overview of the Brazilian market, please see Brazil WebGuide

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Canada

The bilateral relationship between the United States and Canada is the largest economic relationship that has ever existed between two nations. [8]   

In 2002, two-way trade in goods and services between the United States and Canada amounted to $432 billion, or over $1 billion a day. In fields ranging from environmental cooperation to free trade, the two countries have set the standard by which many other countries measure their own progress. In 2003, over 85% of Canadian exports came to the United States and over 72% of Canadian imports came from the United States.

For 2004, U.S. exports into Canada (goods and services) totaled approximately $160.5 billion, up from $145.4 billion in 2003. On a local level, Michigan leads all states in exports to Canada, totaling over $21 billion in 2004; Michigan is Canada’s 2nd largest trading partner, next to the United States, with nearly 8% of U.S. exports to Canada coming from Michigan. [9]

Jackson County exporters find a robust market in Canada. Automotive parts are the number one potential market in Canada for U.S. exports. According to industry experts, the auto parts industry is expected to expand by over 10% per annum by the end of the decade. Canadian imports of automotive parts from the U.S. totaled $20.4 billion in 2004, with $7.9 billion coming from Michigan.  [10]

The prospect for continued growth of trade between Canada and The United States looks positive due to prevailing factors such as longstanding business relationships, cultural ties, and the reduction of trade barriers through NAFTA. 

All figures in US dollars $

• For an overview of the Canadian market, please see Canada WebGuide

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Mexico

The relationship between the United States and Mexico is of the utmost importance for both countries. A mixture of mutual interests, shared problems, economic disparities, and a 2,000-mile border, shape the relationship between the U.S. and Mexico. [11] The Mexican economy, after facing a recession, has shown positive growth in recent years and Mexico’s recovery will continue to be inextricably linked to U.S. economic performance.

Mexico is now the second most important U.S. trading partner after Canada.   The United States exports more to Mexico than to the rest of Latin America combined. NAFTA, coupled with their commitment to economic integration, makes Mexico a great destination for Jackson County exports. 

The automotive part industry is considered one of the top three leading sectors for U.S. exports in Mexico. Total U.S. exports in 2004 reached $8.1 billion, up 6.9% from 2003 ($7.6 billion exported). [12]

•  For an overview of the Mexican market, please see Mexico WebGuide.

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< China 

In 2001 China was admitted to the WTO, allowing for integration into the world economy, and creating a large demand for inexpensive Chinese textiles. China is currently transitioning from a planned economy to a market based economy.

U.S. exports to China have steadily increased in recent years, reaching $35 billion in 2004, up 22.2% from 2003 ($28 billion imported from U.S.)  [13]  The Chinese market represents great potential for U.S. firms, however, it remains medium-sized and unpredictable due to an inconsistent body of laws. Membership in the WTO may continue to help open Chinese markets to foreign firms, lower tariffs, and provide for stronger protection of intellectually property rights.

Currently, many Chinese firms remain relatively small, under-capitalized, and poorly managed. Furthermore, with a population of 1.3 billion and a GDP of $1.24 trillion, many Chinese citizens remain impoverished, with a large income disparity between rural and urban households. While the ratio of average per capita income between rural and urban households was 133.6 to 343.4 (1: 2.57) in 1978, it only slightly declined to 2,090.1 to 5,160.3 (1: 2.47) as of 1997.  [14]

In 2004, China imported approximately $650 million in U.S. automotive parts. [15] Jackson County automotive part exporters can look forward to reductions in automotive tariffs, making it much more cost effective to export.

Further, U.S. automotive part suppliers have a good reputation for quality and reasonable prices and many U.S. firms are well known in China.

• For an overview of the Chinese market, please see China WebGuide.

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Future and Current Trends in Local Exports - The Survey:

As part of the annual International Economic Impact Study, the Ypsilanti U.S. Export  Assistance Center surveys a number of firms within Jackson County that are known exporters.  The sampled firms were asked to respond to a 15-question survey pertaining to the impact of international business on their firm.  The three main exporting industries in Jackson County include Machine Tools, General Industrial Equipment, and Automotive Parts.  Thus the firms surveyed were those involved in the above industries.

 The questions were as follows:

 1. As a percentage, how much of your business comes from international sales?   

The typical answer was between 7% and 12%, however, several firms export significantly more.  One firm surveyed exported 100% of their goods.  Taking all firms into account, the average for the county was 31.75%.

2. Are you primarily an exporter of Goods, Services, or Both? 

Reflecting the typical industry of Jackson County (General Industrial Equipment, Automotive, and Machine Tools) all surveyed firms were exporters of goods.  One firm did classify themselves as both an exporter of goods and services.

3. Has your company entered any new markets in the past year? If yes, which?    

Of all of the survey participants, only one firm had entered any new markets in 2005.  The new market countries were Ecuador and Australia.

4.  Has your company added channels of distribution in existing markets during the past year?  If yes, which country/channel?   

Only one firm had added additional channels of distribution in 2005, in both Venezuela and Columbia.

5.  Is your company planning on entering any additional markets internationally in 2005?   

Only one survey participant planned to enter additional new markets during the remainder of the year, though they did not specify which market(s).

6.  Please estimate the number of employees in your firm with duties directly related to exporting or international trade.    

The range of answers was between 3 and 8 employees, with the average answer being 4.

7.  On a scale of 1 – 10 (1 low, 10 high) please rate your optimism about future growth of international sales for your firm.    

Typical optimism ratings were between 3 and 9, with an average response of 6.

8. On a scale of 1 – 10 (1 low, 10 high), please evaluate the effect (or ongoing effects) of the following on your business, both domestically and abroad (in 2005):

The War in Iraq - Answers ranged between 2 – 5, with an average of 2.5.                                     

The War in Afghanistan  - Responses indicated this war has had little effect, with an average response of 1.25.    

Political unrest in the Middle East  - Answers ranged between 2 – 5, with an average of 2.5.

9. Has the news of potential threats to American interests abroad influenced or inhibited international business travel by your firm (trade show attendance, meetings, etc.)?

Most firms responded with a solid No, however, one firm indicated that they do business with countries in the Middle East, and have subsequently had to alter travel arrangements.

10. Have any foreign clients/trading partners experienced difficulty in obtaining visas for visits to the U.S.?

All surveyed firms responded No.   

11. Please estimate the total number of days that foreign guests have spent locally, while conducting business with your firm. If there was more than one visitor on any given day, please take that into consideration.  (Example: 4 visitors for 2 days = 4 x 2 = 8 days)

Many firms surveyed have not hosted visitors this year.  Of the surveyed firms, the largest answer was 20 days, and the county average was 5 days.                                           

12. On a scale of 1 – 10 (1 low, 10 high), how much of an impact has NAFTA had on your sales internationally?   Was the impact positive or negative?

Of the firms indicating an impact from NAFTA, all answered the impact had been positive.  Typical ratings ranged between 3 – 7, with an average for the county of 3.75.

13. Do you support additional Free Trade Agreements such as FTAA (Free Trade Area of the Americas) or CAFTA (Central American Free Trade Agreement)?

Of all of the firms surveyed, only one firm indicated lack of support for CAFTA/FTAA.  Another firm indicated that they were unsure of what the effects would be.  The majority of firms supported the above agreements, believing their implementation would result in additional sales to Latin America.

14. Does your firm have an e-commerce enabled website?

Reflective of the dominance of manufacturing among Jackson County Exporters, none of the surveyed firms had a website through which orders could be placed. 

15.  On a scale of 1 – 10 (1 low, 10 high), please rate the impact the following items would have on your ability to significantly increase export sales:

• Better assistance from federal sources in the U.S. - The average answer was 5.                                

• Better assistance from local/state sources in the U.S. - The average answer was 4.33.              

• Better assistance from U.S. trade and/or business associations. - The average answer was 5.

• Assistance with locating/qualifying potential foreign customers.  - The average answer was 7.66.      

Education as an Export:

Although we tend to focus on traditional exports, such as automotive parts, when determining the impact of exporting on Jackson County, educational institutions also contribute to the local economy. The U.S. Department of Commerce, International Trade Administration ranks international education as the United States fifth largest service sector export bringing in over $12 billion to the U.S. economy.

Michigan ranks number eight in international students hosting 22,873 students for the 2002/3 school year and they added an estimated $430.8 million to Michigan’s economy. Asian students comprise 51% of international students studying in the U.S. and the top countries of origin are India, China, and South Korea.  [16]

Jackson Community College and Spring Arbor University are both institutions of higher learning with admitted international students, located within Jackson County. The international students studying at the above schools impact the local economy by spending money that typically did not originate locally within Jackson County.  Thus firms involved in retail trade, real estate, accommodation and food services, entertainment, and recreation all profit from this unique form of exporting. 

The large number of international students also has a positive effect on Jackson County employment. Although the number of workers dedicated to international business is difficult to pinpoint due to role-sharing in a within departments and the fact that many workers devote only part of their time to international business, the U.S. Department of Commerce estimates that every $35,000 worth of exports creates one job. Thus, ignoring expenses outside of tuition/housing, the level of total impact is still substantial, and suggests international students support a number of workers in fields that conventionally do not benefit from exporting. 

Significance of International Students: Educational Export Economic Impact

According to the 2003 Open Doors Report, produced by the Institute of International Education, financial support from Government for international students must be taken into account, an important notation that if disregarded, could seriously inflate the net contribution to the U.S. economy. International students in Michigan received financial support from the Federal and State Governments for almost 1/3 of their tuition and living expenses. Open Doors also takes into account the living expenses for dependents of international students. 14% of international students in Michigan were married with 85% of their spouses living in the U.S. during the 2002/2003 school year.

Spring Arbor University currently has 22 (18 undergraduate, 4 graduate) international students, down from 29 last year.  The available figures for Jackson Community College show 25 international students enrolled.  The country with the most significant representation turned out to be Canada, followed by Japan, Kenya, and Ukraine. 

Spring Arbor estimates the total economic impact of one international student to be $11,932 for a graduate student, and $23,605 for an undergraduate.  Thus the total economic impact from international students at Spring Arbor University would be $472,618.  For Jackson Community College the estimated cost is $12,800 creating an economic impact of $320,000.  This means international students add a total of $792,618 to the Jackson County Economy.  Thus, based on the U.S. Department of Commerce estimates that every $35,000 worth of exports creates one job, international students studying in Jackson County create nearly 23 additional jobs.

Future Trends in International Student Enrollment and Educational Exporting

For more than 50 years, U.S. educational institutions have been required to maintain data about their foreign students and exchange visitors. Government records of the data was previously inefficient and paper driven. Due to heightened security in the U.S., however, Congress mandated that by August 1, 2003, all foreign students and exchange visitors be entered into a central and automated system called the Student and Exchange Visitor Information System (SEVIS). Under SEVIS, schools are required to submit basic information about their international students such as address, degree program, and expected date of graduation.

Another registration program that affects international students in Michigan is the National Security Entry-Exit Registration System (NSEERS). The Department of Homeland Security describes NSEERS as “…a national registry for temporary foreign visitors (non-immigrant aliens) arriving from certain countries, or who meet a combination of intelligence-based criteria, and are identified as presenting an elevated national security concern.” Students from the following countries are subjected to special registration, fingerprinting & photographing upon entering the U.S.: Afghanistan, Algeria, Bahrain, Bangladesh, Egypt, Eritrea, Indonesia, Iran, Iraq, Jordan, Kuwait, Libya, Lebanon, Morocco, North Korea, Oman, Pakistan, Qatar, Somalia, Saudi Arabia, Sudan, Syria, Tunisia, United Arab Emirates, and Yemen.

SEVIS: One Year Of Success

The Student and Exchange Visitor Information System (SEVIS) is a web-based system for maintaining information on international students and exchange visitors in the United States. Administered by U.S. Immigration and Customs Enforcement (ICE) and U.S. Customs and Border Protection (CBP), the two Department of Homeland Security (DHS) agencies with primary responsibility for border security. SEVIS is designed to keep our nation safe while facilitating the entry and exit process for foreign students in the United States and for students seeking to study in the United States.

In the SEVIS program’s first year, 8,737 schools and exchange visitor programs, representing more than 9,500 campuses, have been certified to participate in the program. As of July 2004, there are more than 770,000 students and exchange visitors (F-1, M-1, and J-1 visa categories) approved to study in the United States whose data is being managed by SEVIS. In addition, SEVIS maintains records on more than 100,000 dependents of students and exchange visitors.

The process for ensuring compliance once individuals have arrived in the United States is streamlined and timely. Of those foreign students and exchange visitors studying in the United States, there were 36,600 potential student violators reported to the ICE Compliance Enforcement Unit (CEU). Reasons for an individual being considered in violation include a school reporting an individual a ‘no show’ (more than 2,900 students were reported as ‘no-shows’), expulsion, suspension, and failure to maintain a full course of study. The CEU examined the violations using law enforcement databases and referred 1,591 to the field for further investigation. These investigations resulted in 155 arrests. [17]

 Conclusion

The world truly is becoming a global marketplace.  Countries like China and the Eastern Block countries of the former Soviet Union, once closed to Western countries, are increasingly becoming valuable trade partners. 

Though trade agreements such as NAFTA, CAFTA, FTAA are often demonized in the media, our survey results indicate that firms within the county generally are supportive of these agreements, and reap the benefits of lower trade barriers through increased sales via exports. 

Though the largest exporting markets for the county tend to reflect the manufacturing sector, and the growing global demand for automobiles, exports of education via local institutions also plays a role in the economy of the county.

With the growth of communications systems such as the Internet, reaching greater numbers of individuals globally is becoming a reality for U.S. companies.  Reduced barriers to trade along with growing popularity of U.S. products abroad should help to ensure a healthy export market for years to come.

Footnotes:

* This study has benefited from previous County International Economic Impact Studies 

[1] http://quickfacts.census.gov/qfd/states/26/26075.html -The U.S. Census Bureau

[2] http://data.bls.gov/cgi-bin/surveymost - The Bureau of Labor Statistics

[3] The 1997 U.S. Economic Census

[4] http://www.census.gov/foreign-trade/balance/c3510.html#2005 -The U.S. Census Bureau

[5] Strategis Trade Data Online. http://strategis.ic.gc.ca.

[6]  http://dataweb.usitc.gov/scripts/user_set.asp  U.S. International Trade Admin.

[7] 2004 Brazil Country Commercial Guide. U.S. Foreign Commercial Service and U.S. Department of State.

[8] U.S. Dept. of Commerce

[9] Strategis Trade Data Online. http://strategis.ic.gc.ca

[10] Ibid

[11] 2004 Mexico Country Commercial Guide. U.S. & Foreign Commercial Service and U.S. Department of State.

[12]  http://dataweb.usitc.gov/scripts/user_set.asp  U.S. International Trade Admin.

[13] Ibid

[14] http://www.iiasa.ac.at/Research/LUC/ChinaFood/data/urban/urban_6.htm

[15] http://dataweb.usitc.gov/scripts/user_set.asp  U.S. International Trade Admin.

[16] 2003 Open Doors Report- Institute of International Education "Open Doors" http://www.opendoorsweb.org/

[17] U.S. Immigration and Customs Enforcement http://www.ice.gov/graphics/index.htm

Date Updated: March 20, 2007