A Comprehensive Look at Wisconsin’s Place in the World and Why it Pays to Make Things in the Badger State
By Nick Novak
WMC Director of Communications & Marketing
From London to Shanghai to Rio de Janeiro, there is no doubt what Wisconsin’s number one export is: the Green Bay Packers. If you are sporting an Aaron Rodgers jersey on a trip abroad, it would not be out of the ordinary to hear a stranger yell “Go Pack Go” in your direction.
While it is true the Packers might be the first thing people think of when someone asks them about Wisconsin, this state is known for a lot more than just championships. Though, Lombardi is likely to come up more than a few times in conversation.
Sports-talk aside, Wisconsin is known around the world for making things. Not only is Wisconsin known for making things, the state is known for making high-quality things.
According to Katy Sinnott, Vice President of the International Business Development Division at the Wisconsin Economic Development Corporation (WEDC), there are several markets around the world that look to the Badger State and the U.S. because they want quality.
“Japan is a very interesting market,” Sinnott said in a recent interview. “It is a very demanding market, similar to Germany, in that they want very high quality equipment, and that is why they come to Wisconsin.”
The data proves her point. In 2016 alone, exporting accounted for $21 billion in economic activity, according to the U.S. Census Bureau. Some of the top products exported from the state seem logical.
Coming in at number five on the list last year was marine outboard motors. It makes sense that $231 million worth of boat motors were exported from Wisconsin when one of the top manufacturers of outboard motors in the world – Mercury Marine – is located in Fond du Lac.
Another top product exported from the state is tractors. Thanks to manufacturing facilities for John Deere, CNH Industrial – owner of Case and New Holland – and others, Wisconsin exported $174 million worth in 2016.
Other top exports might be more surprising. In fact, Wisconsin exported $574 million worth of civilian aircraft, engines and parts in 2016 – making it the most exported product from the state last year. Another one near the top of the list was mink furs, which accounted for $145 million in exports.
Countries that are buying Wisconsin goods may be more obvious. Canada accounted for 31 percent of total exports from Wisconsin, valuing $6.6 billion. Mexico followed with $3.1 billion in value, and China rounded out the top three with $1.4 billion worth of export value.
Japan and the United Kingdom were the next largest purchasers of Wisconsin products at just under $1 billion each.
Aaron Jagdfeld, President and CEO of Generac Power Systems based in Waukesha, says in addition to manufacturing high-quality products, there is something different about doing business with a Wisconsin company.
“A handshake deal in Wisconsin means a lot more to people,” Jagdfeld said. “A handshake means lot more to people here than in other parts of the country, and certainly more than other parts of the world, for that matter.”
His argument is that there is a higher level of trust thanks to the Midwestern business approach many companies take. Jagdfeld says there is a better relationship that is created, and it is something that is valued by customers. In essence, manufacturers are doing more than selling their product, they are selling Wisconsin.
The Impact of Trade
Since the 2016 presidential campaign, the North American Free Trade Agreement (NAFTA) has come under quite a bit of scrutiny. If there was any doubt where President Trump stands, he made it clear during a visit to Wisconsin this past April.
“We’re going to make some very big changes or we’re going to get rid of NAFTA for once and for all,” the president said.
However, according to data, NAFTA has not been a bad agreement for Wisconsin. Last year, the state’s top two trading partners – Canada and Mexico – actually purchased more goods from Wisconsin than Wisconsinites purchased from them.
That means thanks to NAFTA, Wisconsin has a trade surplus with both countries.
The state had a $299 million trade surplus with Mexico and a $2.5 billion trade surplus with Canada.
“I think the U.S. needs more agreements like that, rather than fewer agreements like that,” Jagdfeld commented about NAFTA. “They need to promote free trade on a global basis and on a regional basis. That is going to ensure you have capital markets that work the way they were intended, which is to work as efficient as possible.”
He explained that trade agreements have actually helped the Mexican economy, which is one of the things that excites him about that market. In 2012, Generac purchased two facilities near Mexico City to manufacture products for the Mexican market.
He said Mexico has a good manufacturing base and a workforce that is eager to learn new skills and better their lives. This is leading to a growing economy and more opportunity for companies like Generac to sell products to Mexico.
In addition to Mexico, WEDC highlighted two other emerging markets for Wisconsin companies. One is China, which with a population of more than 1.3 billion, it should not be surprising. The other is the region of southern Africa – specifically Tanzania.
China is a go-to importer of Wisconsin goods for scientific and medical instruments, industrial machinery and electrical machinery. However, a growing industry that does not get the press it deserves is water filtration, pipes and pumps. According to WEDC, Wisconsin is an international leader in this industry.
The state is such a leader that WEDC is working to raise awareness about Wisconsin’s growing water industry.
“We are going to create a consortium made up of our current companies that are in China like A.O. Smith and Rockwell,” Sinnott said. “By doing this, we are hoping to expand the market size of Wisconsin companies in China.”
Sinnott also added that places like Tanzania could be a new market for Wisconsin companies – specifically food processors because most of southern Africa has very few companies in that industry. Since food processors are more plentiful in Wisconsin, it could be an opening for new business potential.
Wisconsin’s Exporting Future
Without trade, Wisconsin’s economy would face numerous challenges. Nineteen out of 20 consumers live outside the United States. That number shrinks even more when looking at consumers living outside of Wisconsin.
But numbers like those do not worry folks like Generac’s Jagdfeld. He is excited about the growth of foreign markets and thinks exporting can offer great potential for Wisconsin business.
“We continue to become a more global company,” he said. “Twenty-five percent of our revenues in the first quarter came from outside the U.S. and Canada. That is up from one percent five years ago. So it has moved pretty dramatically.”
Now, Generac is a $1.5 billion company with facilities across the globe – including Mexico, China, Brazil, Spain and Italy. Of course a company of that size can make exporting a large part of its business. WEDC’s Sinnott argues it is not just big companies, however, that can take advantage of new markets.
“Many manufacturers feel hesitant to go into exporting. Maybe they don’t speak the language, they don’t know what forms are supposed to be filled out to get there. Maybe they don’t even know how to get paid,” she said. “That can feel like a very daunting task when you are a small to medium-sized enterprise. What we try to do to belay that fear is encourage them to participate in our ExporTech program.”
ExporTech is run by the Wisconsin Manufacturing Extension Partnership. It offers participants three, eight-hour days of customized training for export expansion strategy development. A company can enroll for $7,000, but some of that cost can be covered by a WEDC scholarship, Sinnott says.
“On average, our manufacturers see an impact of nearly $1 million in less than 12 months after going through this program,” Sinnott explained. “Plus, they will see increased revenues of $450,000 on average after 12 months.”
This program is run throughout the country, and Sinnott said that Wisconsin companies’ results are twice as good as the national average.
Leading not Lagging
For decades, states have relied on historical information to determine where their next step should be for trade missions. If a country has historically purchased large amounts of automotive parts, then states with more automotive part manufacturers would look to that market.
Over the coming months, WEDC is changing the game. Instead of using lagging indicators to determine where they market Wisconsin’s companies, they are researching where new growth markets are.
“What WEDC is going to do over the next three to six months is to look at the expected future growth worldwide for our industries that are driving the economy of Wisconsin today,” Sinnott said. “That will help us better target our trade ventures and point companies in those industry clusters to specific countries where there will be growth movement over the next three to five years.”
By looking toward the future instead of the past, companies can be at the forefront of growing economies and growing markets. And that is what Wisconsin companies need. They need to be able to compete on a global scale, because competition no longer comes from the business down the street. It comes from someone in Indiana and someone in India.
But, Wisconsin businesses have a distinct advantage. Their products are made in a state known for quality. Their products are made by a skilled workforce. And if a business doesn’t know how to break the ice with a new buyer in another country, they can likely start by highlighting the Green Bay Packers.
There are certainly industries and topics that were not covered in this article, but it is safe to say that exporting is not going away anytime soon. Trade will continue to have a big impact on the state’s economy, and several companies serve as proof that it pays to make things in Wisconsin.
See the full issue of Wisconsin Business Voice.
A Comprehensive Look at Wisconsin’s Place in the World and Why it Pays to Make Things in the Badger State
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