Tuscaloosa in the US state of Alabama is a small city better known as the home of the University of Alabama’s (UA's) formidable American football team, the Crimson Tide, than it is for foreign connections, despite it hosting Mercedes-Benz US International’s only manufacturing plant in the US. Yet this town on the banks of the Black Warrior River can now boast one of the fastest growing foreign student populations in the country, increasing 145% between 2008 and 2012, according to a recent study by Washington think-tank the Brookings Institution. 

This growth, originally spontaneous, is now being actively courted. “Recently, UA has taken a much more focused interest in active recruitment in specific geographic areas. This is both to encourage a greater diversity in our international student population and to ensure continued growth,” says Charter Morris, the director of the university’s Capstone International Services programme. This programme has seen the university hiring additional staff to promote international admissions and recruitment, and working with the state government to create a consortium for international education in the state. Other states have followed this model.

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Alabama is not alone in reaching out to students studying outside of their home country. Indeed, the number of such students reached 4.5 million in 2014 – up from just 2.1 million in 2001, according to the Institute of International Education. The share of foreign students as a percentage of total enrolment ranged from 1% in China and 4% in the US and Japan to 20% in Australia and the UK. 

Welcome strangers

Across much of the Western world, and even in China, foreign students – who usually pay full tuition fees – are now seen as saviours of strained university budgets, consumers of services, contributors to local employment, cultural ambassadors and sources of innovation.

In the 2013-14 academic year, 886,052 foreign students – graduate and undergraduate – attended US colleges, according to the Washington, DC-based Association of International Educators (Nafsa). These students supported 340,000 jobs – up 8.5% from the previous academic year – and contributed $26.8bn – up 12% – to the US economy, according to Nafsa.

In addition, international students are good for the host country’s trade balance because their education counts as an export. A July 2015 report from the US Department of Commerce’s International Trade Administration (ITA) stated: “In 2013, the US exported $27.2bn in education services (revenue from foreign students coming to the US) and imported $6.5bn (US students studying abroad). Thus the US enjoyed a trade surplus in education of $20.7bn.”  

Worldwide benefits

While the US remains the top destination for students from other countries to pursue their studies, its share has declined as competition from other countries has intensified. “In 2002, the US hosted roughly 585,000 students, accounting for 28% of all internationally mobile students. By 2014, the US hosted only 20% of the total,” the ITA report noted. “Key competitors for international students include the UK (11% of all international students), China (8%), France (7%), Germany (6%) and Australia (6%).” 

Graduate students are especially prized because almost half want to study in in-demand fields: engineering, mathematics and computer science. In 2015, continuing a 10-year trend, there was a 2% increase in foreign student applications for graduate study in the US, according to the Council of Graduate Schools. Almost 40% came from Chinese students – a lower figure than in previous years – and 28% from India – an increase. 

Foreign students are also increasingly valued because of the contacts, networks and home country expertise they bring with them, a knowledge base and alumni network that states can exploit to attract FDI and expand trade by building on relationships, trust and goodwill developed during the student years. Foreign alumni can also facilitate trade missions by hosting receptions for visiting delegations or introducing prospective business partners.

It is advantages, then, that just over half of foreign students in the US come from fast-growing developing countries, where FDI is most likely to originate and flow. China accounts for 31% of overseas students in the US, followed by India (12%), South Korea (8%) and Saudi Arabia (6%), according to the Institute for International Education.

Cities and states

There is also evidence that countries that send their students abroad are themselves likely to benefit from FDI from the host country. Specifically, FDI from the US is influenced by educational ties with Arab and south-east Asian economies, while FDI from the UK benefits from educational ties with countries belonging to the Commonwealth, according to a 2014 paper by Marina Murat, professor of economics at the University of Modena and Reggio Emilia in Italy.

States and cities are beginning to catch on to the power of foreign student networks. Established by the state of Massachusetts, the Massachusetts Global Student and Alumni Network aims to leverage the power of present and former students at Harvard, the Massachusetts Institute of Technology and other notable institutions to enhance the state’s exports and encourage FDI. San Diego's new economic development strategy calls for alumni events to promote trade and investment in countries that send students and researchers to the city’s institutions.

Some universities are also lending their foreign students’ expertise to the cause of helping local companies reach new markets and attracting FDI. At Syracuse University in New York state, the Kiebach Center for International Business founded a programme in 1998 to help businesses in the area enter foreign markets. “The advantage of having foreign students on the team is that they understand the importance of culture, the regulatory environment, foreign exchange and other issues that transcend countries,” says Kiebach Center director Peter Koveos. “They provide a different perspective.” 

Network building

Across the country, MBA programmes at two top universities – the Anderson School of Management’s global access programme at the University of California, Los Angeles, and the University of Southern California’s (USC's) Marshall School of Business international business education and research MBA – have similar aims but a tighter focus, with experienced MBA students assisting mainly foreign companies to expand internationally. 

“The deep friendships and networks with classmates lead to future business activities,” says USC programme director Richard Drobnick, though not all of this activity results in foreign investment in the US – some is between alumni from other countries. 

Still, the US may reap other benefits, such as investment in residential real estate, the purchase of American products – or foreign distributors for these products – as well as revenue from spending on travel and tourism by students and their families, according to Mr Drobnick. 

And beyond any measurable benefits, foreign students promote mutual understanding that in turn promotes stronger relations and potential economic ties between countries. “Only a small percentage of domestic students will ever study abroad, but almost every domestic student will share a classroom with an international student at UA,” says Mr Morris. “Our simple goal is growing the international population to open the students of UA to a diverse international experience.”