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2002 Washtenaw County 

International Economic Impact Study


Prepared by:

Rachel Cooper
Eastern Michigan University Masters Candidate

 

Executive Summary

As Washtenaw County increases in its size and capacity, so does the county’s impact on the global economy. While most people assume that United States international business transactions take place in highly developed, urban areas, such an assessment does not account for the strong connections that smaller economic areas have the capability to produce and connect with the global marketplace. Washtenaw County is highly involved with international business, and various characteristics of the area make Washtenaw’s international economic impact even stronger. The success of Washtenaw County is believed to be related to the access of an educated workforce, proximity to major transportation centers, and a strong business community 1.

This study attempts to gage Washtenaw County’s current international economic impact and predict future trends in international business that will impact the county. The study focuses on both exports and 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 gage the impact of foreign subsidiaries or franchises abroad.

Washtenaw County is currently experiencing an economic slowdown. Since September 11, 2001 firms in the county have seen a decrease in sales from a lagging economy due to a current recession, however international student enrollment has not been effected in any way and continues to stay strong. Although as export markets and the need for technology continue to grow regardless of the economy, exports from the county will continue and businesses will regain lost sales. Local firms who are flexible, versatile, and able to leverage past export experience across a range of markets are likely to succeed in the international marketplace.

Washtenaw County Overview

Located 40 miles outside of Detroit, Michigan and covering 710 square miles, Washtenaw County is the sixth largest county in Michigan. As of June 2002, the U.S. Census Bureau estimates that the population of Washtenaw County totals 326,627 and the county’s largest city Ann Arbor, has a population of 108,758. From the years 1990 until 2000 the county grew 14.1 percent in size1. More than half of Washtenaw County’s total population lives within the City of Ann Arbor and Ypsilanti Township. Nearly 70 percent of the population lives within four jurisdictions including the City of Ann Arbor, the City of Ypsilanti, Ypsilanti Township, and Pittsfield Township.

As of March 2002, Washtenaw County has a civilian labor force of 316,500 with 304,300 people currently employed. This gives an unemployment rate of 3.8 percent. That is considerably lower than that of Michigan’s, which is 6.6 percent. As for the city of Ann Arbor, the civilian labor force totals 70,650 with 68,875 currently employed and an unemployment rate of 2.5 percent. According to the 2000 Metropolitan Area Exports Study, U.S. Department of Washtenaw County.gif (10811 bytes) Commerce, Ann Arbor is the 4th largest exporting area in Michigan and within the top 100 in the United States with the export value totaling over 1.17 billion. However, these statistics do not include the value of software or services exported from the county, and if included with the Census Bureau figures, the value would be substantially greater. Due to the manner in which the Census Bureau records software shipments, they are underreported by an estimated 92 percent.

According to the U.S. Census Bureau, there are a total of 555 manufacturers and/or software publishers in Washtenaw County. In Ann Arbor alone there are 225 exporting firms, followed by 28 in Dexter, and 19 in Ypsilanti. Saline hosts 17 exporting firms, and Chelsea has a total of 7, all of which make a total of 316 exporting firms in Washtenaw County (data from the Ypsilanti U.S. Export Assistance Center). For the state of Michigan, manufactures account for 9.2 percent of exports and computer and electronic products account for 6.5 percent of all international trade exported from Michigan2. Part of Washtenaw County’s high level of exporting comes from the unique, pull-through effect of the large automotive presence in the area.

The Ypsilanti U.S. Export Assistance Center wishes to recognize the efforts of Washtenaw County exporters. The Presidents "E" Award was created in December of 1961 by Executive Order, to afford suitable recognition to persons, firms, or organizations which contribute significantly in the effort to increase United States exports. The Presidents "E Star" Award, which began in August 1969 by the Secretary of Commerce, affords continuing recognition of noteworthy promotion efforts. There have been several Washtenaw County firms who have received one of both of these awards. Mechanical Dynamics (currently MSC software) has received both The Presidents "E" Award and The Presidents "E Star" Award, as well as Pahl Sciences (now Gelman), Terumo Cardiovascular Systems (previously Sarns) and Sycor (purchased by Nortel Networks). Firms awarded The Presidents "E" Award include American Broach and Machine Company, Whatman (previously Arbor Technologies), and Buhr Machine Tool Company.

Export Markets and Industries

The top five Washtenaw County export segments are computer software, computer hardware, machine tools, laboratory equipment, and medical equipment. According to the Ypsilanti U.S. Export Assistance Center, Department of Commerce data base, software firms have the largest number of exporters by far with a total of 116 firms, computer hardware comes in second with 41 exporting firms, the medical equipment sector hosts 27 firms exporting in the county followed by machine tools with 19 firms, and laboratory equipment with a total of 16 firms. More than 55 percent of the exporters are technology related.

The top export markets for Washtenaw County differ slightly than that of the export markets for the U.S. and Michigan. Exports from the U.S. and Michigan go overwhelmingly to Canada, Mexico, Japan, and other technologically rich countries of the European Union. While this holds true for Washtenaw County, other less traditional countries are involved as well, including Australia, China, and India. The reason for this difference in export markets is the high level of computer technology products from Washtenaw County, particularly from Ann Arbor.

Canada

The bilateral relationship between the United States and Canada is perhaps the closest and most extensive in the world. It is reflected in the staggering volume of trade (over $1 billion a day) crossing the U.S. Canadian border. 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. Over 80% of 1998 Canadian exports went to the United States and over 75% of 1998 Canadian imports came from the United States.3 The U.S. exported more to Canada in 2000 ($22,046,144 billion) than to its number two and three export markets combined (Mexico $16,491,118 billion, and Japan $1,393,223 billion).4 Canada’s importance to the United States is not just a border-state phenomenon: Canada is the leading export market for 35 of our 50 states.5 This coupled with the decrease in tariffs due to the North American Free Trade Agreement (NAFTA), the increasing openness to foreign investment, deep cultural and historical ties, and strong awareness of business and technological developments in the United States, makes it clear as to why it is the primary host for Washtenaw County Exports as well as the rest of the United States.

Mexico

The relationship of the United States with Mexico is of utmost importance for both countries. A mixture of mutual interests coupled with shared problems, growing interdependence, and different national perspectives shape the relationship between the U.S. and Mexico.6 In 1999, the United States accounted for 88 percent of Mexico’s exports and provided 74 percent of Mexico’s imports. Mexico has experienced an astonishing increase of 37.11% of U.S. exports.6 The United States exports more goods and services to Mexico than it does to all other countries in Latin America combined.6 Due to NAFTA and the fact the Mexico remains committed to the path of economic integration, Mexico is increasingly the destination for Washtenaw County exports. Mexico’s characteristics combined with a growing demand for computer software and other technology-based products suggest a continuing market for the county. Computer hardware, software, and services are in the top five leading sectors for U.S. non-agricultural exports for the fiscal year of 2001. The Computer software, hardware, and services sector is expected to grow at an average rate of 10 percent. 6

China

China is a market with immense potential. Foreign trade has grown from $38 billion in 1980 to over $361 billion in 19997. For over two hundred years foreign firms have been entranced by this vast potential of the Chinese Market, yet it remains largely unfulfilled. China is the world’s most populous nation, however the Chinese market is small and concentrated in a few areas. Not only is this country overpopulated it is technology-poor as well, although China’s increased economic development has positive effects for Washtenaw County exporters. While the thrust toward modernization and privatization over the past two decades has increased the opportunities for Washtenaw County business, China remains a difficult market to work with. Chinese people can be extremely hospitable and kind, yet everyday discourse in China is rude and confrontational and the China market is full of cheats and swindlers.7 Although most Chinese firms remain relatively small, under-capitalized and poorly managed, there are pockets of excellence. Chinas recent entrance into the World Trade organization will allow for more open domestic markets to foreign firms and lower tariffs, as well as provide for a stronger protection for intellectual property rights. The entrance into the WTO is also believed to help with foreign firms earning the same rights and privileges to domestic firms.

Australia

Australia finished the last decade as the world’s second-fastest growing developed economy averaging a growth of 4 percent a year8. American company names are commonplace in the Australian market, and U.S. companies are Australia’s largest source of investment. Australia is currently the 15th largest destination for U.S. exports8 as well as one of Washtenaw County’s top destinations. American companies are drawn to the Australian market because of its’ familiar institutions and quality infrastructure: a stable legal and political system, a common language, excellent communications and transportation infrastructure, a high living standard, and a sophisticated financial system8. Because Australia is quick to adapt high-tech products and services, coupled with their extensive use of the Internet, may be just one of the reasons that Australia is a prime target for Washtenaw County exports. Being that Computer Software and Medical Equipment are in the top five sectors exported by the county coincides with the two being number two and three in Australia’s leading export sectors for the United States. The Australian software market has grown in excess of 20 percent in the last year alone. Above all, American companies will always find Australia a welcoming and attractive place to do business. Barriers are far and few, and innovation and new products are always welcomed.

France

France is our ninth largest trading partner and one of Washtenaw County’s top three. The impressive recent growth and continued expected expansion can be associated to the fact that France is a member of the G-8, The European Union, The World Trade Organization and the OECD. The United States is the largest foreign investor in France. The economic impact of France and Washtenaw County can be related to the idea that France is currently "digitizing" it’s economy, embracing the Internet with accelerating rapidity and the so called internet "revolution" is expected to drive further economic growth and establish even stronger commercial linkages with the U.S. economy. 9 Computer Software is the number one "best prospect" for U.S. business in France which coincides with France being the number one country for software exports in Washtenaw County totaling 12,304 billion in exports per year with 32 firms exporting to France in Washtenaw County alone. Over half of all software products in France are American made. Laboratory Equipment and Medical Equipment is ranked 9th and 10th for "best prospects" in France which is number 3 and 4 sectors exported in Washtenaw County. The forecast for the scientific laboratory equipment remains positive and is expected to grow by 15 to 20 percent over the next several years.9 France is also considered the best country in Europe for biotech capital investment. France offers a plethora of opportunities for U.S. scientific laboratory and medical equipment.

Future and Current Trends in Local Exports

Firms participating in the Washtenaw County International Economic Impact Study were asked to respond to a series of 10 questions pertaining to international sales and trade. The sectors were then divided into the five largest industries in the County, which included Computer Software, Computer Hardware, Medical Equipment, Laboratory Equipment, and Machine Tools. The U.S. Department of Commerce, Ypsilanti U.S. Export Assistance Center then compiled the necessary research and development and came up with the corresponding responses. Where applicable, firms were asked to respond on a sliding scale, with 1 being the weakest and 10 being the strongest.

The first of the series of questions asked "Are you optimistic about the future of your firms international exports?" Firms participating in the Ann Arbor Metropolitan Area averaged a 7.3 out of a maximum of 10, meaning that firms are very much optimistic about the future outlook of their international exports despite the current economic slowdown.

The firms were then asked, "Has September 11, 2001 caused a significant decrease in your firms businesses domestically and internationally?" On a scale of 1-10 the firms averaged 4.7 for domestic business and a 3.7 for international business meaning that September 11, 2001 had little impact on the economy of Washtenaw County. Although when looking at individual sectors, responses varied depending on the industry. Software and Hardware averaged 4.3 for domestic and 3.8 for international business, implicating that this significant date had little if any impact on the industry. The Machine Tools industry however, was greatly impacted averaging a 9 (domestically) and 6.5 (internationally) on a scale of 1-10, 10 being the strongest. Medical Supplies totaled 4 for domestic and 6 for international, and Laboratory equipment totaled 3 for both domestic and international, meaning there was little impact from September 11, 2001.

When studying the impact of international business travel after the tragedy of September 11, 2001, firms were asked, "Has September 11, 2001 inhibited international business travel with your firm such as trade shows, meeting, etc?" Surprisingly the average response was a 3.5 meaning that date did have some effect although it was minor, however the responses varied greatly. Some businesses seemed to be greatly affected while others virtually had no set backs whatsoever due to the terrorist attacks on the United States.

The preceding question asked "Have you exported to new markets within the past year?" Nearly half of the participating firms in the Washtenaw County International Economic Impact Study responded yes, giving the exact percentage of 54 percent who exported to new countries. Yet again, responses varied according to industry. Software firms partook in 46 percent who exported to new countries, whereas 75 percent of the firms in the Hardware industry exported to new countries. Machine Tools and Medical Equipment both account for 50 percent of firms in their industry. Firms exported to new markets such as Brazil, South Africa, India, The European Union, Abu Dhabi, Japan, Kuwait, Poland, and the Czech Republic.

When asked, "Do you have an e-commerce enabled website?" Firms’ responses accounted for exactly 50 percent. For all the companies responding with a yes, they were then asked "If so, are your international customers able to do business easily on your website?" Of those who answered yes, 100 percent of the respondents who had an e-commerce enable website were able to do business easily with international customers..

Question number 7 asked "As a percentage, how much of your business comes from international sales?" The average response was 15 percent of all sales accounted for international sales. Again, answers varied according to sector. The Software sector reported an average of 17 percent of their sales came directly from international sales, whereas hardware averaged 23 percent, and machine tools reported 18 percent of their sales related to international sales. On the other hand, Medical equipment had an average response of only 5 percent of their sales being related to overseas, and Laboratory equipment with only 4 percent being related to international sales.

The following question asked, "What is the number of business visitors from overseas who visit yearly and what is the average length of stay?" The average of all industries combined totaled nine visitors per year, staying for approximately 4 days long, although when broken down into industries the software and hardware firms had slightly higher numbers with 11.8 and 13 international visitors a year respectively staying for four days long. Machine tool firms averaged 6 guests a year staying 3.5 days, Medical equipment firms and Laboratory equipment firms both with only 2.5 visitors a year staying 2.5 days and 1.5 days respectively. It is estimated that each international visitor had $200 per day economic impact in Washtenaw County.

The firms were then asked to "estimate a number of employees whose employment was solely related to international business." These numbers turned out to be seemingly low with an average of only 3.3 percent of all employees whose sole purpose was related to international business. Once again, these numbers varied with sector but all had extremely low numbers with a number no higher than 8 percent. To sum up the Washtenaw County International Impact Study, it is safe to stay that given our recent economic slowdown and the tragedy of September 11, 2001, Washtenaw County has proven that their economy is strong and almost immune to economic trends. The county has experienced a slight decrease in international business, but it has proven to be much less than that of many others. This can be coupled with the University playing such an immense role in the economy of Washtenaw County, as well as the number of computer software and hardware firms in the area in the midst of a technology based era.

Finally a strong U.S. dollar will continue to have a negative impact on exports. While the U.S. consumers benefit from a strong dollar, goods and services are more expensive for foreign consumers and businesses, therefor they tend to buy fewer U.S. products. Still, the value of U.S. goods and an appreciation for the quality of characteristics of American goods outweighs the negative effects of a strong dollar, and that is probable for exports from Washtenaw County. Since a large number of the county’s exports are technology related and a large number of these exports go to technology poor countries, the increased price caused by a strong dollar may not have as large an impact. Often buyers from technologically poor countries lack a suitable domestic alternative for a technology product, and seek exports like those from Washtenaw County with less regard to price. While there are a limited number of statistics to track the effect of dollar value on exports, the National Association of Purchasing Management’s New Export Orders Index showed little or no growth in the exports for the beginning of 2001. This index combined with the dollars 15-year peak in value in 2001, suggests that exporters are feeling the effects of the strong dollar, at least in non-technology related industries. In a study done by the U.S. State Department, 2001 exports from Michigan to the World in the Machinery Manufactures industry accounted for 9.2 percent of all exports from Michigan and Computers and Electronic Products accounted for 6.5 percent.

For further information

For additional information on the top five market segments for Washtenaw County products and services please see the Industry Sector Analysis portion of this report.

Educational Institutions

Education as a Reverse Export

Although focusing solely on traditional exports like manufacturing when accessing Washtenaw County’s international economic impact is standard, educational institutions also contribute to the county’s global influence and local economy. The U.S. Department of Commerce’s International Trade Administration ranks international education as the United States fifth largest service sector export bringing in $11 billion to the U.S. economy. Universities and colleges in Washtenaw County bring in a considerable amount of economic revenue through international students, which in turn benefits businesses that would not normally profit from international sales. Industries such as retail trade, real estate, accommodation and food services, and entertainment and recreation all profit from the unique form of exporting.

Overview of International Students in Washtenaw County

In Washtenaw County there are a total of six universities. Eastern Michigan University and the University of Michigan which are public, three small, private universities that include Ave Maria, Cleary College and Concordia College, and one community college, Washtenaw County Community College. According to the 2002 survey conducted by the Ypsilanti U.S. Export Assistance Center, Washtenaw County has a total of 6,944 currently enrolled international undergraduate and graduate students.11 The University of Michigan tops out with the most international students with a count of 4,149. Washtenaw County Community College comes in second with an international student population of 1,460. Eastern Michigan is not far behind with 1,305. Concordia College, Cleary College and Ave Maria have a combined population of 30 international students. As of 2001 The University of Michigan had the seventh largest enrollment of international students in the nation and Washtenaw County ranked 16th in the nation for the average number of international students in any one county.

The total money spent by each international student (including tuition, books, room and board and spending money) at all educational institutions in Washtenaw County accounts for an estimated $163,839,531. The average cost of one-year total spent at the University of Michigan totals 32,243.20 per student, making it the most expensive university in the county. This figure gives a total of 133,777,036 spent at the University of Michigan with international students alone. Concordia College comes in second with the most money spent per student with 21,750 but because of the larger population of international students attending Eastern Michigan University, the total money spent by all international students combined is considerably larger with a total of 16,366,331.25 at 12,541.25 per student. While the bulk of that money goes directly to the educational institutions in the form of tuition, an average of 40 percent goes into the local economy. The University of Michigan has the highest economic impact from international students in Michigan.

The majority of the international students attending educational institutions in Washtenaw County comes from China with a total of 910 Chinese international students and India with 908, although there is an overwhelmingly count of students coming from Asian countries. The top six most popular countries participating in foreign exchange in descending order include China 910, India 908, Korea 711, Taiwan 342, Canada 285, and Japan 225. Note that none of these countries are represented at Ave Maria. The international student population attending this university includes a Western European population. The top countries of origin for international students in Washtenaw County correspond with the top countries of origin for the entire U.S.

Significance of International students/Educational Export Economic Impact

The economic impact of international students is significant in Washtenaw County because it connects businesses that would not normally have international perspective to the global economy. International sales can be difficult if not impossible to small retailers and service providers. Yet, the substantial number of international students enrolled in Washtenaw County educational institutions provides an opportunity for increased business through existing sales channels. Additionally, most money coming from international students into the county comes from offshore, which means the money spent was not generated inside of Washtenaw County.

The large number of international students also has a positive effect on Washtenaw County employment. The U.S. Department of Commerce estimates that every $35,000 worth of exports creates one job. Since the University of Michigan is the county’s largest employer with over 25,000 employees, it is likely that a number of jobs in the educational field are supported directly by international students. While it is difficult to estimate the impact of international students’ additional expenses outside of tuition on employment, the high level of total economic impact suggests international students support a number of workers in fields that conventionally do not benefit from exporting.

Future Trends in International Student Enrollment/Educational Exporting

International student enrollment in Washtenaw County is expected to remain high and increase slowly over time, although the two smaller colleges (Concordia and Cleary) expect to remain constant and see no change with the population of their international students. While statistics on Washtenaw County are not available, international student enrollment has increased nationwide by a record total of 547,867 international students on U.S. campuses and enrollment rose at a rate of 6.4% which is the largest increase since 1980 according to Open Doors 2001, the annual report on international education published by the Institute of International Education with the support from the State Department’s Bureau of Educational and Cultural Affairs.11 While, a number of colleges nationwide have experienced a dramatic increase in the enrollment of domestic students due to a decrease in jobs and our current recession, the population of international students have seen no change other than the average yearly increase of students with the exception of Eastern Michigan University experiencing a drop of 68 students. Concordia and Cleary have seen no increase and have remained close to constant with past years, while Washtenaw County, University of Michigan, and Ave Maria have all had average increases. When asked to respond to the question "Are you optimistic about the future enrollment of international students?" three colleges replied with a yes (UM, EMU, Washtenaw Community College) while the other three are not expecting to see much of a change. The Department of Commerce also surveyed the effects that September 11, 2001 may have had on the enrollment with international students. In spite of recent tragedies, September 11 seemed to make no impact on the number of international students attending Washtenaw County universities with the exception of Eastern Michigan with a slight decrease. Even though there was not a large impact due to September 11, paperwork and documentation have been reinforced and have become stricter. Surprisingly, for the most part it seems as if international student enrollment in Washtenaw County appears to be immune to either domestic or international economic crisis. While the Asian financial crises did effect the countries of origin of international students in Washtenaw County, it did not effect the overall number of international students enrolled. Still the perceived value of an education in the United States outweighs many considerations international students might face at home.

Finally, developments in the largest countries of origin for international students in Washtenaw County suggest increase enrollment in the future. For instance, in August 2000, the Bank of China opened a loan program for students to study overseas, which should mean easier access to education. Similarly, the Federal Bank of India, which had not previously allowed foreign exchange to be remitted for educational expenses, now allows sponsors to remit expenses toward educational cost, making it easier for Indian students to study in the United States. Likewise, actions recently taken by the U.S. Department of Commerce through the "Study USA Program" encourage international students to study in the United States by offering several programs in all 50 states for undergraduate, graduate and high school international students. This program will promote a positive effect on enrollment in Washtenaw County due to a gain of new cultural perspectives for the county and a sense of stronger bonds within the county and the country of origin. Foreign exchange also believed to promote a better knowledge of other societies along with building better relationships between countries, governments, and peoples.


 
1 U.S. Census Bureau, Census 2000 Redistricting Data (P.L. 94-171)
 
2 Export.gov http://ese.export.gov
 
3 Background notes: Canada, August 1999, http://www.state.gov/r/pa/ei/bgn/ 
 
4 Michigan’s Role in International Trade, http://www.exportmichigan.com/michigan.htm 
 
5 Background notes: August 1999, http://www.state.gov/r/pa/ei/bgn/ 
 
6 Country Commercial Guide Mexico, U.S. & Foreign Commercial Service and U.S. Department of State 2001.
 
7 Country Commercial Guide China, U.S. & Foreign Commercial Service and U.S. Department of State 2001
 
8 Country Commercial Guide Australia, U.S. & Foreign Commercial Service and U.S. Department of State
 
9 Country Commercial Guide France - Fiscal Year 2002, U.S. & Foreign Commercial Service and U.S. Department of State
 
10 All educational institutions were contacted in Washtenaw County and asked a series of questions pertaining to the population of international students attending each school and average money spent by each of those students for tuition and yearly expenses.
 
11 Institute of International Education "Open Doors" http://www.opendoorsweb.org/

 

 

Date Updated: March 20, 2007


 

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