Economic Evolution in the Great Lakes State
11:32 pm
Mon December 26, 2011

reWorking Michigan: State offers reimbursements to exporting companies

Lansing, MI – ReWorking Michigan examines our evolving economy, as the people of the Great Lake State explore new ways to make a living and build a future.

This reWorking Michigan report looks at Michigan's State Trade and Export Promotion (STEP) program. The initiative uses federal dollars to help Michigan companies with fewer than 500 employees enter or expand into the export market. The funding helps businesses pay for things like overseas trade missions and foreign language translation services.

A bleak outlook for 2012

Richard Yamarone likes to joke that he works for "the dark side." He's a senior economist with Bloomberg News in New York. Every day he analyzes data that could make Darth Vader cringe; job creation is down, home prices are down, personal income - down.

So when he came to East Lansing this month to present Bloomberg's economic outlook for 2012, you could almost hear the theme music cueing up. Yamarone's bottom line? He thinks the nation is heading for a second recession.

"It is indeed bleak," laments Yamarone. "I just don't see a way out. We don't have a fiscal stimulus; in fact, we have a restrictive fiscal stimulus, we have a monetary policy that's impotent. So really, we're like a plane flying on no engines."

Now, if you're looking for a George Lucas-style tale of redemption, maybe it's this: Michigan's two largest industries - autos and agriculture - are looking up. But nationally, exports are starting to fall off.

STEP encourages exporters

That's where Michigan's State Trade and Export Promotion program comes in.

"Basically, anything that you can sell in Michigan or in the United States should be able to be sold anywhere in the world," says Laura Deierlein. She's the International Trade Development Manager for the Michigan Economic Development Corporation.

She oversees the STEP program, which was officially launched in October. Using a grant from the U.S. Small Business Administration, the state reimburses small employers up to $25,000 for what they spend to grow their export operations.

It can be more than a little intimidating for any company to cross borders and leap oceans. Deierlein says STEP can help them understand the markets that have a demand for their products.

"Our road map will help them put their feet on ground in those countries, actually visit and meet with potential distributors and buyers through trade shows and trade missions," Deierlein says.

Deierlein says the state can help so-called "reactionary" exporters, and experts who've been around the globe a time or two. That includes companies like KTM Industries in Lansing.

Even established companies could benefit

KTM makes packing foam. This isn't the polystyrene peanuts you're always stuck with after you open your delivery box. KTM processes corn starch to make sheets of foam. It's 100 percent biodegradable.

"Compost it; just bury it into your backyard," says KTM president and CEO Tim Colonnese. "If you're in a big city and you don't have a garden or a backyard, put it in the sink, dissolve it down the drain."

Colonnese is convinced he's got a niche product whose global demand will continue to rise. For the last 10 of its 15 years in operation, KTM has exported around the world, mostly to China. Colonnese expects 2011 to be their best year ever.

He says their success comes in part from very targeted research that tells them where to ship and where not to. Take India, for example. On the surface, it looks perfect: a billion plus people, lots of air pollution and a demand for all things green. But Colonnese says his foam just won't work in India.

"The climate over there is very moist, that doesn't suit our products well; the transportation from the United States over to India does not fit well," explains Colonnese. "So, you have to be able to understand, is there a basic fit? No, we'll stay out, yes we'll go in."

Here's another benefit of research: Colonnese can say with certainty that his is the only company in the world that makes packing foam in biodegradable sheets. That's a selling point worth trumpeting, and Colonnese looks forward to state incentives that can help him do that.

"I'm going to need to get out there, do trade shows and take advantage of these opportunities," Colonnese says. "And if I can get my out of pocket, that up front cost subsidized, even to a small way, it just helps."

Doubling export sales within four years

State officials have mapped an ambitious plan. They believe through intensive marketing, training and better access to capital, the STEP program could almost double Michigan's export sales in four years.

It's unclear, though, whether it will be enough to shield the state against another recession experts say may be brewing on the horizon.

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