More State Economic Development Plays

Foreign companies are often competitors for American businesses, at home and in the global market. They are also often employers of American workers and investors in American communities: financial services from Britain and the Netherlands, auto companies from Japan, Korea, and Germany, Swiss pharmaceutical companies, and many other foreign firms employ about 10 million Americans. The jobs created by this 'insourcing' trend, often requiring sophisticated skills and providing good salaries, appear in such areas as management consulting, high-tech manufacturing, and research and development. In fact, in 2006, foreign manufacturers invested $68 billion in American operations -- more than the $60 billion U.S. manufacturers invested abroad.

Michigan ranks ninth in the nation in the number of workers hired by foreign companies, hosting 1,000 companies from more than 20 countries which support more than 205,000 jobs -- about one in every 15 of Michigan's private-sector jobs, and an especially high proportion of manufacturing jobs. Gov. Jennifer Granholm thus sees foreign companies as a major source of state economic development as well as an opportunity for their further expansion.

"Hyundai's decision to make Michigan home for its North American R & D headquarters will bolster our global position as a high-tech automotive research leader." -- Gov. Jennifer Granholm, Michigan

Gov. Granholm identified three major sectors that dovetail America's national goals with its -- and Michigan's -- business advantages. In collaboration with the Michigan Economic Development Corporation (MEDC), she set up a "Technology Tri-Corridor," which better positions the state's three most promising sectors -- autos, life sciences, and homeland security -- to drive growth. An early focus was Germany, whose emerging technology firms were therefore particularly encouraged to begin or expand operations in Michigan and take advantage of the state's scientific and engineering talent. Targets are now broader -- early in 2007, for example, auto parts firm RSB Group made the largest-ever Indian investment in Michigan, with an acquisition that will add 100 tool-and-die jobs.

Don Jakeway, former president of MEDC, commented, "We see [the mission] as one of the most important things we can do right now -- and our governor is stepping out and showing that Michigan is ready to be back out there." The MEDC's unique effort of internally merging their business development and tourism marketing arms has also made it simpler to sell Michigan abroad.

During the governor's trip to Germany, several announcements were made of new jobs in Michigan. As a result of meetings held during the mission, Detroit Diesel Corporation agreed to invest $275 million to transform its Redford, Mich., plant into a "manufacturing center" to service the DaimlerChrysler Commercial Vehicle division. Along with an incentive package from the MEDC, the expansion is expected to create and retain a total of 2,400 jobs -- and create 500 new ones by 2007.

The governor's interest in welcoming foreign businesses has encouraged other companies to expand their presence in Michigan. The South Korean automaker Hyundai is building its new North American R&D headquarters in Superior Charter Township, Mich., and will create 400 new jobs by next year. Mitsubishi Heavy Industries Climate Control, Inc., a subsidiary of Japan's Mitsubishi Heavy Industries, plans to invest $7.4 million in a technical center located in Sterling Heights, Mich.

Michigan has showed that active and internationally-minded state governments can take advantage of the opportunities to attract foreign companies that provide good jobs. Work at U.S. subsidiaries of foreign firms is often complex, highly paid, and involves specialized technical talent and skill. Insourcing companies account for over 21 percent of all U.S. exports. They pay taxes to the government, bring in foreign direct investment, and contribute to research and development activities. This helps narrow the trade gap while giving a boost to the market, innovation, and jobs.

Resources For Action

Office of Michigan Gov. Jennifer Granholm
www.michigan.gov/

The Michigan Economic Development Corporation
medc.michigan.org/ttc/

Technology Tri-Corridor
http://medc.michigan.org/ttc/tricorridor/?m=14;1

Additional Reading

The Organization for International Investment represents international business investors in the United States:
www.ofii.org/

Tennessee joins Kentucky with the highest FDI employment ratios among inland states. Governor Bredesen's Economic Development Department has a rundown of the 694 foreign-owned companies operating in Tennessee: Brazilian-owned Gerdau AmeriSteel, Belgium's General Shale, Australia's Fleischman's Yeast, etc. As of 2008, they represent 29 countries from Brazil and Israel to China, Ireland and the United Kingdom, and employ 112,300 Tennesseeans: http://www.tennessee.gov/ecd/bizdev_idg.htm

Contacts

John Burchett
Chief of Staff
Office of the Governor
Jennifer M. Granholm
George Romney Building
P.O. Box 30013
Lansing, MI 48909
(517) 373-3400
(517) 241-3039 (fax)

Ed Gresser
Trade and Global Markets Project
Progressive Policy Institute
600 Pennsylvania Avenue, SE, #400
Washington, D.C. 20003
(202) 547-0001
egresser@ppionline.org