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Backbone of the American economy

By Angelo Romualdez
-    Dec 29, 2014
Credit : GMI Post

With their agricultural goods, automotive products, and innovative technology, the twelve states of the Midwest lay the bedrock of the American economy

Made up of 12 states with a combined population of more than 65 million, the U.S. Midwest is the traditional heart of the country’s agriculture and heavy industry sectors, while being at the forefront in pharmaceuticals, medical devices, finance, and insurance.

Some of the companies based in those states remain synonymous with the industries they dominate: Ford and Procter & Gamble are arguably the best examples.

The Midwest would not have maintained its status and increased prosperity were it not for efforts of state governments and companies, began more than 40 years ago, to build closer relationships with and lure investment from the world’s third-largest economy, Japan. Each year, both sides get together to discuss ways to strengthen that mutually beneficial partnership.

“In the Midwest, all the states welcome Japanese investment. The business development team of each state is great. They extend good support to both existing companies and newcomers. We hope to see more business exchange in the future,” said Ichiro Sone, Executive Director of the Japan External Organization (JETRO) in Chicago, which oversees the Midwest states of Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin.

Aside from several government groups that bring American and Japanese business closer, there are numerous other private sector initiatives in the Midwest contributing to that shared mission, with the Midwest U.S.-Japan Association being one of the most prominent.

“The Midwest U.S.-Japan Association has met for the past 46 years, and we bring together leading public and private sector global leaders to foster an atmosphere of business exchange. As a result of this annual gathering, our Midwest states have recruited considerable Japanese investment and forged global technology partnerships,” explained Executive Director Marie Gaudette.

With the economy on the rise again and confidence in every industry growing each year, Japan will stay the Midwest’s most important partner. Currently, the country is the third-largest foreign investor in the region, enticed by its central location, developed transportation infrastructure, highly skilled workforce, business-friendly policies and balanced lifestyle.

Masaharu Yoshida, Consul General of Japan in Chicago

“Midwesterners are well educated and highly skilled due to the region’s leading universities and strong focus on education. They have made the Midwest a key center for business and finance, as well as manufacturing, including vehicle assembly,” said Consul General of Japan in Chicago Masaharu Yoshida.

“The people of the Midwest reflect the heart of America with its strong work ethic, sincerity, and integrity and they share a similar professionalism with the Japanese people. I have seen this firsthand as I’ve met as many people as possible across the Midwest,” Yoshida added.

IL: The Land of Lincoln

As the top destination for foreign direct investment (FDI) in the Midwest, Illinois has developed strong ties with Japan, its second largest source of FDI. Attracted by its central location and high-caliber workforce, the subsidiaries of Japanese companies, such as Takeda Pharmaceuticals and Nippon Sharyo, chose the state as the base for their American operations.

“Chicago is geographically the center and hub for transportation and logistics in the United States with a very strong transportation network across the nation. It also has very highly skilled workers with a long history of manufacturing experience,” said Mitsukuni Baba, executive director of the Japan America Society of Chicago.

Several homegrown companies like safety consulting and certification company UL also boast a long history with Japanese subsidiaries in the region, aside from setting up their regional headquarters in Japan.

“We can help Japanese manufacturers access a global market. Japan will continue to be a world leader in various types of technology. For this reason, Japan is an important market for us,” said UL Chief Executive Officer Keith Williams.

With their agricultural goods, automotive products, and innovative technology, the twelve states of the Midwest lay the bedrock of the American economy.

While manufacturing has been the main industry of Illinois, technology and life sciences have also shown rapid growth in recent years.

“This city [Chicago] is now becoming an even more important entrepreneurial hub, particularly with its new incubator for startups,” Yoshida said.

IN: The Crossroads of America

Dubbed the “Crossroads of America,” Indiana is traditional center of the American automotive industry, which has grown on the back of the state’s geographic and logistical advantage and huge wage-competitive and highly skilled workforce.

With the global emergence of Japanese carmakers in the 1980s and expansion in the United States, the state’s government worked hard to bring in these new players.  Today, there are more than 240 Japanese firms dominated by automotive and automotive-related companies — operating in Indiana, making Japan the largest foreign direct investor by employment in the state.

For more than 30 years now, the Indiana Economic Development Corp. (IEDC) has remained steadfast in promoting trade and business ties with the world’s third-largest economy.

“Indiana and Japan are stronger together, with nearly 44,000 Hoosiers at work for Japanese companies throughout our state. In Indiana, Japanese companies gain the competitive advantage of an economy built on manufacturing skill and afford-ability. Today, Indiana’s relationship with Japan is flourishing like cherry blossoms in spring, which strengthens our economies, our businesses and our futures,” said IEDC President Eric Doden.

Japanese car giant Subaru operates a sprawling manufacturing plant in Lafayette, Indiana, which is also one of the company’s most sophisticated facilities in North America.

“Like many Japanese automotive companies, Subaru chose Indiana as the location of our manufacturing plant because of the favorable business climate provided by the state government, the logistical advantage of being in the ‘center’ of the United States, and the host of suppliers that have set up in the state,” said recently appointed Subaru of America President Toshiaki Tamegai.

KY: The Bluegrass State

With manufacturing being the top industry in Kentucky, Japanese companies such as Toyota, Kobe Aluminum Automotive Products and International Crankshaft have found it easy to establish their operations in the state.

“Foreign direct investment plays a very significant role in the economy of Kentucky. We have more than 430 foreign-owned companies employing 85,000 Kentuckians. The beginning of that FDI can be traced to the growing relationship with the Japanese community,” said Kentucky Gov. Steve Beshear.

Because of the support from the state government, more companies have moved to Kentucky, which has enjoyed a strong reputation for its hardworking people, convenient location and excellent infrastructure.

Beginning with Mazak Corporation four decades ago, Japanese investment in Kentucky has grown steadily and now accounts for 42 percent of total FDI.

“Kentucky is a business-friendly state. We consider our relationship with the businesses as a partnership. We meet with them periodically to listen. We work with them to be successful,” Beshear also said.

And as Japanese companies expand and increase their investments, Toyota is gearing up to start rolling out its new Lexus line from Kentucky, the Japanese carmakers first plant in North America to produce the flagship model.

“The people in Kentucky are very productive. They are loyal and they have a good work ethic. You are able to recruit employees for all types of positions,” said Mazak Corp. Chief Executive Officer Brian Papke.

MI: The Motor Capital

The birthplace of the world’s first mass-produced car, Michigan, for more than a century now, has maintained its position as the world’s automobile assembly line.

The state has naturally attracted Japanese carmakers and stimulated the growth of related industries, including OEM, R&D, technology and others.

Despite the recent global recession, Japanese companies stuck it out with Michigan and Japan remained the state’s No. 1 foreign investor.

“With a relationship spanning more than 40 years, Japan has stood alongside the state of Michigan through the successes and the challenges and we will continue to do so,” said Kazuyuki Katayama, consul general of Japan in Detroit.

The state has adopted the needed measures to diversify the economy and strengthen its economic fundamentals. So, Michigan has witnessed a resurgence, as the government applies the difficult lessons of the past and improves the attractiveness of the business environment.

The Michigan Economic Development Corporation (MEDC) is preparing for the upsurge in business as a rising number of companies return to the state.

“As the economy grows ever rapidly, our workforce will be the deciding factor in attracting more companies into the state. The diversification of Michigan’s workforce is an area we are focused on,” said MEDC Chief Operating Officer Steve Arwood.

“In the Midwest, all the states welcome Japanese investment. The business development team of each state is great. They extend good support to both existing companies and newcomers. We hope to see more business exchange in the future,” - Ichiro Sone, Executive Director, JETRO Chicago

MN: The North Star State

2015 marks the 60th anniversary of twin ties between St. Paul and Nagasaki, the oldest such relationship between an American and Japanese city. This long history only highlights the common historical thread that binds Japan and Minnesota.

“For over 100 years, Minnesota has been emphasizing the international dimensions of our business. We are a state that welcomes international investments and our educational system welcomes international students. We have a lot of high technology here that is of interest to the world, particularly in healthcare,” said former U.S. Vice President Walter Mondale, who also served as ambassador to Japan during the Clinton administration.

The Minneapolis-St. Paul area is home to 19 Fortune 500 company headquarters, including those of General Mills, United Health Group, 3M and Medtronic, one of the world’s leading medical device companies.

“Minnesota’s economy, first and foremost, is homegrown. If you look at the Fortune 500 companies that are located here, all of them have their roots in Minnesota and grew here. That’s been a constant. These business are diverse, reflecting the overall diversity of Minnesota’s economy, which is also one of our great strengths,” said Minnesota Chamber of Commerce Interim President Bill Blazar.

The state’s success is widely credited to the highly skilled labor force, paired with an outstanding support infrastructure that is conducive to economic growth.

“This state in particular has always invested heavily in education and workforce development, boasting world-class systems that engage all stakeholders,” explained Shaye Mandle, president of LifeScience Alley, the largest state-based life sciences trade association in the United States.

“The modern medical device industry as we know it can be traced back to Medtronic forming. Having that here gave us that initial seed. In fact, Medtronic’s founder Earl Bakken played a significant role in building Life-Science Alley, which is now celebrating 30 years leading Minnesota’s Medical Alley,” added Mandle.

As both the public and private sectors continue to heavily invest in improving on Minnesota’s already formidable assets, Japanese companies have not lagged in seeing the opportunity here.

“Because of this infrastructure, we’ve been able to attract some big names from Japan. Daikin, Olympus, Toray, Sanken, Matsuura, and Taiyo are just a few of the Japanese businesses operating from here. These companies realized that we have the infrastructure to support not only their R&D, but also manufacturing,” said Minnesota Trade Office Executive Director Kathleen Motzenbecker.

“Now that we have a few solid Japanese household names, we hope the word will spread,” she added.

With two Japanese schools and a vibrant Japanese-American community, Minnesotans are confident that Japanese businesses and families would integrate rather easily.

“While we have a small Japanese population, it’s a very active one. It’s one that really feels committed to spreading the word and making Japan important to the community,” said Japan America Society of Minnesota Executive Director Bernard van Lierop.

NE: The Cornhusker State

Showing undeniable commitment to its relationship with Japan, Nebraska opened its own trade promotion office in the country.

“We consider our relationship with Japan a unique and special partnership. It is important that when I took over as governor in 2005, we established our first Nebraska overseas trade office in Tokyo in 2006. Opening the Nebraska Center in Japan sent a very powerful message that we were going to invest in this relationship in a way that had never been done before. We are very proud of our Nebraska-Japan relationship,” said outgoing Nebraska Gov. Dave Heineman.

Back in 1974, Kawasaki Manufacturing Corp. inaugurated its plant in Lincoln, the first major Japanese motorcycle or automobile manufacturer to do so. Four decades after, the factory has consistently raised production, generating valuable jobs for Nebraskans.

Meanwhile, Nebraska has played an important role in supplying the food that Japan enjoys, particularly corn, soybeans, beef and pork.

“Japan seems to love American pork. It has always been an extremely important market to us. Pork is one of the dietary preferences over there and a lot of work has been done to meet the Japanese demands on cuts and products. The nation of Japan has, for many years, been very important to the United States and the State of Nebraska’s economy,” said Nebraska Pork Producers Association Executive Director Larry Sitzman.

As the relationship flourishes, opportunities for collaboration in non-agricultural sectors have also grown, with information technology displaying robust growth.

Solutionary Inc., a provider of managed security services, is a testament to the expanding partnership. Acquired by NTT Group in 2012, the Omaha-based firm continues to make significant contributions to the Japanese telecom giant’s products and services.

OH: The Buckeye State

If Ohio were a separate country, according to a World Bank report, the state would be the 25th-largest economy in the world. Known as the Industrial Capital of the United States, Ohio is home to the global headquarters of Procter & Gamble and more than a dozen Fortune 1000 companies.

With its long-standing connection to manufacturing and finance, Ohio has drawn in dozens of companies from around the world, including those in energy, bioscience, healthcare, agriculture, iron and steel, aerospace and defense, as well as nanotechnology and robotics.

The state’s success is attributed to its friendly tax regime and business climate, both for big business and small startups. In fact, Ohio has consistently scored highly among various rankings conducted by business groups and media.

No wonder then that Honda — one of Japan’s “big three” carmakers — selected Ohio for its base in the United States. And where carmakers go, component and accessory makers follow.

“Japan is no doubt the largest contributor of foreign capital in the central region of Ohio,” said Akisa Fukuzawa, the executive director of Japan American Society of Central Ohio.

Another organization that promotes investment and economic growth in Central Ohio is Columbus 2020, which works closely with state and local partners in its territory of 11 counties.

“There is a network here to support a very quick and efficient transition into this market place, and we are a cost-effective and friendly solution for Japanese businesses,” said Deborah Scherer, director of Global Markets for Columbus 2020.

WI: America’s Dairyland

While Wisconsin is widely known for its agricultural products, its strength lies in its advanced manufacturing industry. It is also seeing growth in new industries such as food and beverage, information technology and water technology.

“As Wisconsin is traditionally viewed as part of the world’s breadbasket, we now want to help nourish the world further through our innovations in water technology,” said Wisconsin Economic Development Corp. Chief Executive Officer Reed Hall.

Unknown to many, Wisconsin is home to several Fortune 500 companies that do business with Japan.

“Japan is very important to us. It is our fifth-largest operation in the world,” said ManpowerGroup Chief Operating Officer Darryl Green.

Initially drawn to Wisconsin because of its abundant water supply, Kikkoman has been present in the state for more than four decades and is proud of its growth in and contributions to the state.

“Our challenge now is to educate the Pacific Rim about the opportunities here. Wisconsin has an excellent working environment due to its highly skilled workforce as well as its good transportation system and infrastructure,” said Hall.

With the vast opportunities that exist in the state, Wisconsin is working to attract more Japanese investment. Sharing a strict work ethic, Japanese and the Midwesterners will certainly achieve much in business.

“There are a number of values shared by the Midwesterners and the Japanese. Top of mind are respect for traditional values, strong sense of community and a spirit of cooperation and collaboration,” said Green. 

- Originally prepared by Global Media for The Japan Times Special Report on the U.S. Midwest 2014 (Credit: Philippe Le Saux, Angelo Romualdez, Elizabeth Arcega and Brian Banta)

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