State by State: ASEAN and Michigan Trade

By Chris Devonshire-Ellis, Dezan Shira & Associates

The American State of Michigan has a small but dynamic trade relationship with ASEAN, with the Asian bloc purchasing 2 percent of Michigan’s total exports in trade worth some US$1.28 billion. That includes US$965 million in goods, of which the following industries dominated:

• Transportation Equipment
• Machinery
• Chemicals
• Agricultural Products
• Computers & electronic products

ASEAN’s trade with Michigan directly supports some 4,556 American jobs.

Within ASEAN, the most important trade partners for Michigan are:

Indonesia

In 2014, Michigan exported US$95 million in merchandise to Indonesia, growing significantly from 2013’s US$83 million (14.5% growth). Michigan’s export trade with Indonesia is growing faster than Michigan’s own GDP growth rate of 2% per annum.

The top 5 merchandise exports from Michigan to Indonesia are:

• Agricultural products
• Chemicals
• Non-Electrical Machinery
• Beverages & tobacco products
• Foodstuffs

In 2014, Michigan imported US$207 million from Indonesia, up 19.4 percent from 2013 and ranking 23rd in imports to the state. Indonesia therefore sells twice as much to Michigan, meaning there is some room for improvement by Michigan exporters in this market.

 RELATED: Pre-Investment Services from Dezan Shira & Associates

Malaysia

In 2014, Michigan exported US$89.7 million in merchandise to Malaysia, growing from US$77 million a decade ago (16.5 percent growth) and US$85 million in 2013 (5.5 percent growth).

The top 5 merchandise exports from Michigan to Malaysia are:

• Non-Electrical Machinery
• Chemicals
• Food manufactures
• Primary metal manufacturing
• Computer & electronic products

In 2014, Malaysia exported goods worth US$325 million to Michigan, up 3.2 percent from 2013 and ranking 18th overall, meaning Malaysian trade is about three times that of Michigan’s exports. However, there are opportunities to redress this imbalance due to the pending TPP deal, which affects and will reduce the following important tariffs:

• Michigan exports of centrifugal pumps into Malaysia, which faced a tariff rate of up to 20 percent in 2012
• Malaysia exports of women’s cotton blouses into Michigan, which faced a tariff rate of 19.7 percent in 2013
• Malaysia exports of cotton t-shirts into Michigan, which faced a tariff rate of 16.5 percent in 2013

Philippines

Michigan exported US$64 million in merchandise to the Philippines in 2014, up from US$58.9 million in 2013 (8.7 percent growth).

The top 5 merchandise exports from Michigan to the Philippines are:

• Transportation equipment
• Chemicals
• Electrical equipment, appliances & components
• Food manufactures
• Plastics & rubber products

The Philippines exported US$173 million to Michigan in 2014, up from USD160 million in 2013, an 8.1 percent increase. This represents a 2.5 multiplier of Philippines trade over Michigan in exports.

State by State: China and Illinois Trade

Singapore

Michigan exported US$215 million of merchandise to Singapore in 2014, up from US$190 million in 2013 (13.2 percent growth).

The top 5 merchandise exports from Michigan to Singapore are:

• Chemicals
• Transportation equipment
• Machinery, except electrical
• Special classification provisions
• Computer & electronic products

Singapore exported US$60 million to Michigan in 2014, down from US$94.7 million in 2013 (36.6 percent shrinkage). Singapore will also see some tariff reductions as part of the TPP trade deal.

Michigan’s trade balance with Singapore is positive, with the state selling three times as much produce from Singapore as it buys. This is not surprising given that Singapore is a trans-shipment hub for ASEAN. Many of the goods sold will ultimately be passed onto other regional markets.

Thailand

Thailand is an important market for Michigan, with the state exporting US$350 million in merchandise to Thailand in 2014 – up 30.9 percent from 2013 and ranking 11th overall in exports from Michigan.

The top 5 merchandise exports from Michigan to Thailand are:

• Transportation equipment
• Food manufactures
• Chemicals
• Non-Electrical Machinery
• Fabricated metal products

Thailand exported goods worth US$748 million to Michigan in 2014, up 42.3 percent from 2013 and ranking 24th in imports to Michigan. Thailand’s balance of trade with Michigan is about double in terms of volume.

Summary

Michigan has a burgeoning trade relationship with ASEAN, although for the most part trade is in ASEAN’s favor. The state is purchasing cheaper Asian products for its own consumer market, suggesting that sourcing businesses are busy in this trade space. However, as ASEAN becomes wealthier, there are trade opportunities for Michigan businesses as well. For example, it should be noted that the average annual income in Michigan is US$25,135, while in Singapore it is US$39,319.

While the state has reached out to other Asian countries and has established good trade links with numerous cities in China and Japan, only Sorsogon City in the Philippines, a small town of just 155,000 people, has twin city status with any Michigan town (in this case, Sterling Heights). This is surprising, as much of Michigan’s trade with ASEAN nations centers around products from the auto components industry, which is now gathering steam across the region. There must be opportunities for Michigan companies to explore ASEAN’s own auto industry. We have previously discussed the auto industry opening up in ASEAN, most recently here. Of these, both Malaysia and Thailand look especially bright for foreign manufacturers. Michigan based companies may well be encouraged to start looking more deeply at the ASEAN region and to evaluate the opportunities that are undoubtedly there.

Further Support from Dezan Shira & Associates

Dezan Shira & Associates can service Michigan-based companies that are looking to further develop their operation in ASEAN. The firm can help companies establish a direct office in the country and can guide them through the affiliated tax, legal and HR issues that come with doing so. To arrange a free consultation, please contact our U.S. office at usa@dezshira.com.

For further Michigan-Asia trade data, please see our articles on trade with India, China and Vietnam.

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