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2006 Washtenaw County

International Economic Impact Study 

 Prepared by:
 
Joseph Novell
Summer Intern
Ypsilanti U.S. Export Assistance Center
U.S. Department of Commerce

For more information please contact:

Ypsilanti U.S. Export Assistance Center
U.S. Department of Commerce
300 W. Michigan Ave, S306G
EMU – College of Business
Ypsilanti, MI 48197
Voice (734) 487-0259
Fax (734) 485-2396

Summary: 

Firms of all sizes are finding it easier to enter the international market as communication systems improve and the Internet matures. In addition, the erosion of barriers to trade through agreements such as NAFTA and the development of the WTO has truly transformed the world into a global marketplace.

International business continues to play a significant role in the economy of Washtenaw County. The global success of Washtenaw County can be attributed to its educated workforce, proximity to major transportation centers, and its strong business community. The Ypsilanti U.S. Export Assistance Center (U.S. Department of Commerce) conducts an annual International Economic Impact Study with the purpose of measuring the influence of international business within Washtenaw County. This study looks at Washtenaw County’s current international economic impact and attempts to predict how future international economic trends will impact the county. The study focuses on the export of goods and education via local institutions. This report does not reflect international services originating within the county due to the difficulty in tracking such transactions. The study also does not attempt to evaluate the impact of foreign subsidiaries or franchises abroad.

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 July 2005, the US Census Bureau estimates that the population of Washtenaw County totals 341,847. [1] The largest city in the county, Ann Arbor, has an estimated population of 113,271. [2] From 2000 to 2005, the population of Washtenaw County grew by 5.4%. [3] However, nearly 70% of the total population remains concentrated within the Ann Arbor-Ypsilanti area. 

As of 2005, Washtenaw County had a civilian labor force of 191,845 with 183,805 people currently employed. [4] According to the Bureau of Labor Statistics, as of May 2006, Ann Arbor had an unemployment rate of 4.0%, lower than that of both the State of Michigan at 6.0% and the entire United States at 4.9%. [5] According to the 2000 Metropolitan Area Exports Study conducted by the U.S. Department of Commerce, Ann Arbor is the 4th largest exporting area in Michigan and within the top 100 in the United States with an export value totaling over $1.746 billion in 1999. [6]

Currently, there are 349 known exporting firms in Washtenaw County, with 242 located in Ann Arbor, followed by 29 in Dexter, and 22 in Ypsilanti. Saline hosts 22 exporting firms, and Chelsea has a total of 9. [7] 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 exporting firms in Washtenaw County. 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 a number of Washtenaw County firms who have received both of these awards, including: Mechanical Dynamics (currently MSC software), 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 / out of business), and Buhr Machine Tool Company (out of business).

Export Markets and Industries:

The top five Washtenaw County export sectors are: computer software, computer hardware, medical equipment, machine tools, and laboratory equipment.  As of 2006, there are 116 Washtenaw County firms exporting computer software, 38 exporting computer hardware, 30 exporting medical equipment, 23 exporting machine tools, and 17 exporting laboratory equipment. [8]  We invite you to click on any of the links for a detailed analysis of Washtenaw County's top export markets.

The top export markets for Washtenaw County expand on the typical markets for the United States and Michigan: Canada, Mexico, Japan, and the technologically rich countries of the European Union.  Washtenaw County exports to these nations, as well as nations such Australia and China. The explanation lies in the high level of computer technology products exported from Washtenaw County, particularly from Ann Arbor.                                     

Washtenaw County and World Markets

The following markets represent the best markets for exports from Washtenaw County:

Canada

Ninety percent of the Canadian population lives within 100 miles of the border with the United States. This results in an extensive economic relationship unique in the world. In 2005, total merchandise trade between the United States and Canada amounted to US$479 billion, up 12% from US$428 billion in 2004, representing over US$1.3 billion a day. In fields ranging from environmental cooperation to free trade, the two countries work closely on many levels from federal to local. U.S. exports to Canada have exceeded exports to the entire European Union for the past five years, despite the EU having over 15 times the population of Canada. [9] 

For 2005, U.S. exports into Canada (goods and services) totaled approximately US$177.5 billion, up from US$160.5 billion in 2004. On a local level, Michigan leads all states in exports to Canada, totaling almost US$22 billion in 2005; Michigan is Canada’s 2nd largest trading partner, next to the United States, with over 12% of U.S. exports to Canada coming from Michigan. [10] 

Top exports from Washtenaw County such as computer software and computer hardware, rank number three and five respectively for most potential in exporting to Canada, as U.S. companies are the dominant suppliers of these technologies to Canada. In 2005, the U.S. exported to Canada approximately US$481 million in computer software and approximately US$8.5 billion in computer hardware. [11]   

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

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

  • For an overview of the Canadian ICT market, please click here.

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 this relationship. 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. Since the introduction of NAFTA in 1994, exports to Mexico have grown exponentially, totaling over $107 billion in 2005. [12] 

NAFTA coupled with a commitment to economic integration, makes Mexico a destination for Washtenaw County exports. Mexico also has a growing demand for computer software and other technology-based products, suggesting a promising market for Washtenaw County firms.  Currently, Mexico is the number two export market for both U.S computer hardware and software. 

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

  • For an overview of the Mexican ICT market, please see click here.

 Japan

With the world’s second largest economy, Japan is one of the largest overseas markets for U.S. exporters. Imports from the U.S. totaled just over $55 billion in 2005. Japanese consumers spend hundreds of billions of dollars on food, clothing, travel, entertainment and a wide variety of other consumer goods and services. Japan’s consumers buy American products ranging from music to furniture. Japanese firms are major purchasers of U.S. computers, machinery, medical devices, pharmaceuticals, chemicals and services. With the Japanese economy experiencing weakness in the past decade, Japanese consumers have become more willing to buy imported products and work for foreign firms and Japanese firms have become more willing to accept foreign investment and cooperate with foreign partners. Market barriers have fallen across the board, and Japan has never been more open to foreign goods and services than it is today.

The Japanese medical equipment and supplies sector ranks second in the world with a value of $18 billion and continues to be an extremely successful market for American firms. Japan has become a promising market for Washtenaw County software exporters as Japan’s investment in IT has shifted from hardware and network infrastructure to software and services. [13]

  • For an overview of the Japanese market, please see Japan WebGuide.

  • For an overview of the Japanese ICT market, please click here.

Germany

The German economy is the world's third largest and is the sixth largest market for U.S. exports. Germany is the largest consumer market in the European Union with over 82 million people in Germany. The number of consumers and Germany’s geographic location at the heart of a 25-member European Union make it a starting point around which many U.S. firms seek to build their European expansion strategies. While U.S. investors must reckon with a relatively high cost of doing business in Germany, they can count on high levels of productivity, a highly skilled labor force, quality engineering, a first-class infrastructure and a location in the heart of Europe.

The German market for software is the largest in Europe and ranks second in the world, after the United States. U.S. computer products are viewed as innovative products of superior quality and leading edge technology. The German market for medical devices is estimated at $14 billion, approximately 11 percent of total health expenditures. Because of a substantive investment backlog, the medical device market is considered a growth market and will continue to provide excellent potential for U.S. suppliers of innovative and price-competitive products. [14] 

  • For an overview of the German market, please see Germany WebGuide.

  • For an overview of the German ICT market, please click here

United Kingdom

The United Kingdom, with the world’s fourth largest economy, attracts U.S. exporters and investors as a place to do business due to the common language, similar legal and business practices, protection of intellectual property rights and relatively low rates of taxation and inflation. The UK is very receptive to U.S. goods and services. With its $1.8 trillion GDP, the UK remains the United States' largest European export market and fifth largest export market worldwide, after Canada, Mexico Japan, and China. In 2005, the United States exported $38.6 billion of goods to the UK, an increase of 7.4% from the previous year.

The $5 billion UK medical equipment market ranks as the world’s sixth largest with the United States as the largest import supplier. As increasing use of broadband services and imaging technologies drive growth in the PC sector, Washtenaw County computer software and hardware exporters will find this market attractive. [15]

  • For an overview of the United Kingdom market, please see United Kingdom WebGuide.

  • For an overview of the United Kingdom ICT market, please click here.

China

Since acceding to the WTO five years ago, China has experienced extraordinary economic growth. Many American companies have benefited from this expansion as evidenced by sustained growth in U.S. exports to China. In 2005, U.S. exports to China increased by 19 percent allowing China to surpass the U.K. to become the fourth largest export market of the United States. Merchandise exports from the United States to China in 2005 equaled approximately $41.8 billion.

Despite remarkable progress and immense potential, China remains a developing country. With a population of 1.3 billion and a GDP of $2 trillion, many Chinese citizens remain impoverished, with a large income disparity between rural and urban households. [16]

Computer software is a leading sector in China for U.S. exports.  In 2005, China imported almost $40 million in U.S. computer software. As of 2003, all tariffs on computer software have been eliminated.  However, the concern over intellectual property rights remains, as the rampant spread of piracy continues to trouble U.S. software manufacturers.

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

  • For an overview of the Chinese ICT market, please click here.

Australia

Recently, Australia has experienced the second fastest growth rate for a developed economy, averaging growth of 4% a year. American companies have strong penetration into the Australian market, and represent Australia’s largest source of investment. Total goods exported from the U.S. to Australia totaled almost $15.8 billion in 2005 and Australia is one of Washtenaw County’s top export destinations. The signing of the Australia-U.S. Free Trade Agreement on May 18, 2004 eliminated tariffs on almost all manufactured and agricultural goods, helping to strengthen the long and successful trading relationship between the two countries. [17] 

Quality communication and transportation infrastructure, stability in the legal and political systems, and the use of English create a positive environment for U.S. firms. Australia also has a high standard of living, as well as a sophisticated financial system. 

Since Australia is an early adapter to technology, and makes wide use of the Internet, Australia is a prime target for Washtenaw County exports. Computer software, computer hardware, and medical equipment are number two, three, and four respectively for leading sectors in Australia for U.S. exports and investment. The Australian software market has grown at approximately 8% in recent years. 

  • For an overview of the Australian market, please see Australia WebGuide

  • For an overview of the Australian ICT market, please click here.

 France

France is the world’s sixth largest economy and the ninth largest trading partner for the United States. U.S. exports of goods to France in 2005 totaled $22.4 billion, up more than 5 percent from 2004. [18]

Along with Germany and the United Kingdom, France is a common destination for software exports from Washtenaw County. As France continues to update its technology infrastructure, demand for computer hardware will also increase. The computer hardware market in France has grown by 8 percent in 2005 and is expected to grow by 10 percent in 2006.

Laboratory Equipment and Medical Equipment are also large markets in France. The forecast for medical equipment remains positive and is expected to grow about 4 percent annually for the next several years.  France is also considered a promising country for biotech capital investment. [19] 

  • For an overview of the French market, please see France WebGuide.

  • For an overview of the French ICT market, please click here.

  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 Washtenaw County that are known exporters. The sampled firms were asked to respond to a 16-question survey pertaining to the impact of international business on their firm. The firms surveyed were those involved in the top five industries of Washtenaw County: computer software, computer hardware, medical equipment, machine tools, and laboratory equipment.

 The questions were as follows:

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

The average for Washtenaw County was 28.8%.  Answers ranged from a low of 5% to a high of 70%. 

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

67% of firms answered goods, with the remaining 33% exporting both goods and services.  None to the surveyed firms were solely service based.

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

45% of the surveyed firms had entered a new market in the past year.  Some of the destination countries were: Belgium, Brazil, China, Italy, Spain, Sweden, and Vietnam.

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

About 42% of the surveyed firms had added a channel of distribution in the past year. Some of the countries included: Belgium, Brazil, Canada, Mexico, United Kingdom, and Vietnam.

5.  Is your company planning on entering any additional markets internationally in 2006? If yes, which?

About 33% of the firms answered yes, naming destinations such as India, Germany, and Europe.

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

Answers ranged from 1 to 500 employees, with a median of 5 employees with duties directly related to exporting or international trade.

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

The average response was 7.6.

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 2006):

The War in Iraq                                                                             

The average response was 3.1.

The War in Afghanistan                                                    

The average response was 2.9.

Political unrest in the Middle East                                           

The average response was 3.8. 

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.)?     If yes, how so?    

Of the surveyed firms, 25% indicated that travel had been disrupted, primarily to high-risk areas.

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

About 17% of the firms had experienced some difficulty with obtaining visas, with the problems focused on Chinese business associates.

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)

The average answer was 62 days.  Although it is typical for local firms to pay for accommodation of International business travelers, business trips to Washtenaw County still provide a boost to the local economy with the “trickle down” of money not originated locally being spent on lodging, entertainment, food/hospitality, etc.                                                                    

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?                                                       

The average answer was 3.2 with firms reporting either a positive or insignificant impact.

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

A majority of firms (81%) answered in support of the above agreements due to their potential to open up new markets in Latin America.

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

About 25% of the surveyed firms had an e-commerce enabled website, with an average amongst those firms of 10 – 25% of sales coming from the Internet.  

15. Will you be attending a foreign trade show this year? If so, which show and country.

About 42% of the firms surveyed responded that they would attend a foreign trade show this year. Responses indicated attending shows in Germany, Italy, Canada, and Japan.

16.  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 5.6.            

Better assistance from local/state sources in the U.S.   

The average answer was 5.4.                

Better assistance from U.S. trade and/or business associations.

The average answer was 5.4.                

Assistance with locating/qualifying potential foreign customers.      

The average answer was 6.9.                

Increased international traffic for your website (if applicable).   

The average answer was 7.7. 

Education as an Export:

Although focusing on traditional exports, such as machine tools, when assessing Washtenaw County’s international economic impact is customary, educational institutions also contribute to the county’s global influence and 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 $13 billion to the U.S. economy. Michigan ranks number eight in international students hosting 20,879 students for the 2004/05 school year, adding an estimated $427 million to Michigan’s economy. The leading country of origin for international students in Michigan was India, followed by Canada, China, Republic of Korea, and Japan. [20]

The University of Michigan, Eastern Michigan University, Washtenaw Community College, Ave Maria School of Law, and Concordia University are all institutions of higher learning within Washtenaw County.  The international students studying at these schools impact the local economy by spending money that typically did not originate locally within Washtenaw County.  Therefore, 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 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.

Significance of International Students: Educational Export Economic Impact

The economic impact of an international student in Washtenaw County is important because it attracts international dollars that local retailers typically cannot access.  Most of the money spent by international students in the county comes from sources outside of United States and Washtenaw County. International students enrolled in educational institutions within Washtenaw County provide opportunities for increased business through existing sales channels.

According to the 2005 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. 11% of international students were married with 85% of their spouses living in the U.S. during the 2004/05 school year. [21]

Ave Maria School of Law

Ave Maria had 12 international students, all graduate students.  Ten came from Canada, and the other two were unspecified.  Each had an estimated impact of  $33,330 adding $400,000 to the local economy. 

Concordia University 

Cleary had 9 international students for the previous academic year. They hailed from nations such as Canada, Turkey, France, Taiwan, and India. The estimated total economic impact of each student is $100,000. Thus, the international students at Concordia added $900,000 to the local economy.                                                                                                                         

Washtenaw Community College 

Washtenaw Community College has long served as a building block for international students wishing to study at the U of M, and has earned a reputation abroad accordingly.  Washtenaw Community College had 486 international students from countries such as Korea, Japan, China, India, Mexico, Turkey, Canada, and Indonesia.  The average economic impact of each student is estimated to be $12,800.  Thus, international students at WCC added $6,220,800 to the economy of Washtenaw County. 

Eastern Michigan University 

According to the January, 2006 figures, EMU had 914 international undergraduate students and 631 international graduate students, representing various different countries.  The top 10 countries represented were: India (262), China (88), Canada (60), South Korea (54), Taiwan (51), Japan (46), Thailand (27), Saudi Arabia (26), Germany (22), and Turkey (20). The average economic impact for an international undergraduate student was $8,860 and for an international graduate student the figure was $19,770.  Thus, international students at EMU added $20,575,000 to the local economy.  

University of Michigan 

During the previous school year, the University of Michigan had 1,345 undergraduate international students and 2,871 international graduate students.  The estimated total economic impact of an undergraduate is $39,240, and $44,280 for a graduate student. The total economic impact of international students at the U of M is $179,905,680.  That means international students at the U of M added nearly $180 million to the economy of Washtenaw County.

Total for all Universities

The total impact of international students on the economy of Washtenaw County is quite substantial at over $208 million.  If we assume that the U.S. Department of Commerce estimates that every $35,000 worth of exports creates one job are correct, international students create nearly 6,000 jobs for Washtenaw County.  

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).

The Student and Exchange Visitor Information System (SEVIS) has been created by the Department of Homeland Security (DHS) to maintain information on nonimmigrant students and exchange visitors and their dependents, and also on their associated schools and sponsors. SEVIS enables schools and sponsors to transmit information, via the Internet, to the appropriate government agencies throughout a student or exchange visitor's stay in the United States.

SEVIS receives electronic updates to SEVIS records and maintains up-to-date information about events involving nonimmigrant students and exchange visitors. The information collected includes the nonimmigrant's name, country of birth, date of birth, country of citizenship, educational background, information on the education/program activity for which the individual is seeking admittance, and passport and visa information.

SEVIS also maintains information on each of the certified schools and designated sponsors and the SEVIS officials administering their programs. Certified schools must provide specific information regarding the school, the nature and requirements of the educational program, location and contact information, and costs to attend. Designated sponsors must provide similar information regarding their exchange visitor programs. [22]  

Conclusion

As the world becomes a global marketplace, countries such as China and members of the former Eastern Bloc, once closed to the West, are increasingly becoming valuable trade partners. Though free trade agreements and the WTO 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 computer sector, and the growing global demand for high-tech solutions, 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://www.census.gov/popest/counties/tables/CO-EST2005-01-26.xls Population Division, U.S. Census Bureau
[2] http://www.census.gov/popest/cities/tables/SUB-EST2005-04-26.xls Population Division, U.S. Census Bureau
[3] http://www.census.gov/popest/counties/files/CO-EST2005-ALLDATA.csv Population Division, U.S. Census Bureau
[4] ftp://ftp.bls.gov/pub/special.requests/la/laucnty05.txt U.S. Department of Labor, Bureau of Labor Statistics
[5] http://www.bls.gov/web/laummtrk.htm U.S. Department of Labor, Bureau of Labor Statistics
[6] Trade Promotion Authority, International Trade Administration, U.S. Dept. of
Commerce. (http://www.tpa.gov/statetpa/MItpa.pdf)
[7] U.S. Department of Commerce
[8] Ibid.
[9] http://www.buyusainfo.net/docs/x_6432153.pdf 2006 Canada County Commercial Guide
[10] http://strategis.ic.gc.ca  Strategis Trade Data Online
[11] http://tse.export.gov/ TradeStats Express
[12] http://www.buyusainfo.net/docs/x_5300470.pdf 2005 Mexico Country Commercial Guide
[13] http://www.buyusainfo.net/docs/x_5818157.pdf 2006 Japan Country Commercial Guide
[14] http://www.buyusainfo.net/docs/x_7251536.pdf 2005 Germany Country Commercial Guide
[15] http://www.buyusainfo.net/docs/x_8210372.pdf 2006 United Kingdom Country Commercial Guide
[16] http://www.buyusainfo.net/docs/x_3265405.pdf 2006 China Country Commercial Guide
[17] http://www.buyusainfo.net/docs/x_9495090.pdf 2006 Australia Country Commercial Guide
[18] http://tse.export.gov/  TradeStats Express
[19] http://www.buyusainfo.net/docs/x_9246980.pdf 2006 France Country Commercial Guide
[20] http://opendoors.iienetwork.org/ Open Doors 2005 
[21] Ibid.
[22] http://www.ice.gov/ U.S. Immigration and Customs Enforcement

Date Updated: March 20, 2007


 
 

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