Legislature(2013 - 2014)BARNES 124
02/12/2013 11:15 AM Senate WORLD TRADE
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ALASKA STATE LEGISLATURE
JOINT MEETING
SENATE SPECIAL COMMITTEE ON WORLD TRADE
HOUSE SPECIAL COMMITTEE ON ECONOMIC DEVELOPMENT, TRADE AND
TOURISM
February 12, 2013
11:18 a.m.
MEMBERS PRESENT
SENATE SPECIAL COMMITTEE ON WORLD TRADE
Senator Gary Stevens, Chair
Senator Lesil McGuire, Vice Chair
Senator Peter Micciche
Senator Berta Gardner
HOUSE SPECIAL COMMITTEE ON ECONOMIC DEVELOPMENT, TRADE AND
TOURISM
Representative Shelley Hughes, Chair
Representative Pete Higgins
Representative Harriet Drummond
Representative Lynn Gattis
Representative Geran Tarr
MEMBERS ABSENT
SENATE SPECIAL COMMITTEE ON WORLD TRADE
Senator Charlie Huggins
Senator Mike Dunleavy
Senator Lyman Hoffman
HOUSE SPECIAL COMMITTEE ON ECONOMIC DEVELOPMENT, TRADE AND
TOURISM
Representative Bob Herron
Representative Craig Johnson
Representative Kurt Olson
Representative Lance Pruitt
COMMITTEE CALENDAR
PRESENTATION: WORLD TRADE CENTER ALASKA
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
GREG WOLF, Executive Director
World Trade Center Alaska (WTCAK)
Anchorage, AK
POSITION STATEMENT: Delivered a PowerPoint presentation
entitled, "A World of Opportunity: An Update on Alaska's
International Trade. Trends and Outlook Moving Forward," dated
2/12/13.
ACTION NARRATIVE
11:18:51 AM
CHAIR GARY STEVENS called the joint meeting of the Senate
Special Committee on World Trade and the House Special Committee
on Economic Development, Trade and Tourism to order at 11:18
a.m. Present at the call to order were Senators Micciche,
Gardner, McGuire, and Chair Stevens; and Representatives
Higgins, Drummond and Chair Hughes.
^Presentation: World Trade Center Alaska
Presentation: International Trade Update, World Trade Center
Alaska
11:19:35 AM
CHAIR STEVENS announced the business before the committees would
be a presentation from World Trade Center Alaska.
11:19:42 AM
GREG WOLF, Executive Director, World Trade Center Alaska
(WTCAK), introduced himself and informed the committees that
this was the fifteenth consecutive year that he had the
privilege of briefing the legislature on international trade
with Alaska.
He explained that the World Trade Center was established in 1987
by the University of Alaska. In 1998, it transitioned to a
private, non-profit corporation that is governed by an 18-member
board of directors. Since 1998, the Trade Center has had a
partnership relationship with the State of Alaska; since 2008,
it has represented the U.S. Department of Commerce in Alaska by
running the U.S. Export Assistance Center in Alaska; and since
2009, it has had a formal partnership with the University of
Alaska. WTCAK has about 100 member companies and entrepreneurs
from across the state.
CHAIR HUGHES asked if both federal and state funds come with the
aforementioned partnerships.
MR. WOLF answered yes; some funding has come from the state for
the past 15 years and they have a contractual relationship with
the U.S. Department of Commerce to provide certain services
according to a work plan that is approved by both parties.
CHAIR HUGHES asked the amount of the state funding and if it has
increased or decreased over the 15 years.
MR. WOLF replied that it has gone up and down; the last grant
was $300,000 and the request this year is for $150,000.
MR. WOLF said he would talk about four things: the trade and
export numbers, the trends influencing success, the outlook for
the future, and the functions of the Trade Center.
He stated that international trade is big business for Alaska.
Based on the first nine months, exports to overseas markets are
estimated to total $4.5 billion in 2012. This is about 10
percent lower than the all-time record year in 2011, but 2012
will still go on record as the second highest year of all time
for Alaskan exports.
CHAIR HUGHES asked how he would explain the 10 percent decline
from 2011 to 2012.
MR. WOLF replied that in some years production is down, in some
years value is down, and in some years it's a combination of
both. For example, the same amount of gold can be shipped this
year as last, but the value may be up or down some $400 an
ounce. That would have a marked effect on the total for that
export category.
11:25:12 AM
SENATOR MICCICHE asked what the top three products were
according to export value.
MR. WOLF deferred the question until the next slide. He
continued to point out that exports represent about 10 percent
of the state's gross state product (GSP), which in 2012 was
about $52 billion. Exports represent new money into the Alaskan
economy and it supports thousands of direct and indirect jobs.
The overall result is a stronger and more diversified economy.
th
Based on total export value, Alaska ranks 40 among all states;
as a percentage of GSP, it ranks 14th; and on a per capita
basis, it ranks 4th.
CHAIR HUGHES highlighted another strength; what Alaska has
accomplished as such a young state.
11:27:42 AM
MR. WOLF stated that trade matters because it is a substantial
component of Alaska's economy and typically accounts for
approximately 10 percent of the GSP. The numbers reported
typically are the export values for commodities, but this isn't
a complete picture because the U.S. Department of Commerce does
not report the export of services from Alaska such as
construction, engineering, oil and gas, and environmental
services. This is substantial and could $0.5 billion to $1
billion per year.
In addition to the $4 billion to $5 billion in export revenues,
a study by Northern Economics estimated that export activities
generate another $2 billion in induced and indirect economic
benefits. Exports allow companies to become larger through
expanded markets and customer base; for some Alaska companies,
the best bet for growth is overseas markets.
11:30:30 AM
MR. WOLF said the same study by Northern Economics reported that
exports support nearly 15,000 direct jobs in Alaska, and 10,000
indirect and induced jobs. These are typically high-paying jobs
and pay 13 to 16 percent more than jobs tied solely to the
domestic economy. There is ample evidence of this in the state.
According to the U.S. Department of Commerce, approximately 300
companies report they are exporting from locations in Alaska.
Seventy five percent of these companies are considered by the
U.S. Department of Commerce to be small and medium size
enterprises of 500 employees or fewer.
11:32:20 AM
MR. WOLF displayed a graph showing Alaska's top export
commodities for January through September 2012 are as follows:
seafood - 55 percent, which is the state's largest single export
commodity; minerals - 28 percent, the second largest commodity
is primarily zinc and lead; precious metals - 2 percent; forest
products - 3 percent, tend to be round logs; and fishmeal - 1
percent. Alaska is a natural resource exporting state, he said.
11:32:56 AM
CHAIR HUGHES asked if there was interest in value-added
production in the state, because that brings more bang for the
buck.
MR. WOLF answered that World Trade is working with some
companies that are doing value-added processing and he wishes
there were more. A good example was the AGRIUM fertilizer plant.
That enterprise took gas, converted it to fertilizer, and
exported more than 99 percent of the production.
REPRESENTATIVE DRUMMOND commented that it's a red flag for
value-added production in Alaska when a company like Yummy
Chummies moves to Arizona because of shipping issues. She asked
if he had any ideas about how to avoid losing valuable
businesses like that.
MR. WOLF said that in the 1990s, he was able to negotiate a
back-haul rate for a company, and there was some effort to see
if that is possible today.
SENATOR MICCICHE asked if the energy exports included more
commodities than coal and LNG.
MR. WOLF explained that the energy category includes coal, LNG,
and some years it includes refined fuel products, too. Alaska
does not export petroleum.
11:37:34 AM
SENATOR MICCICHE asked if WTCAK was working to improve the
outlook for exporting Alaskan timber in the future.
MR. WOLF responded that over the years, the forest products
sector has been declining in terms of export value. In large
part, the problems relate to access or supply rather than
demand. He noted that the companies that are exporting forest
products tend to be on private lands. He relayed that in the
last year, WTCAK has worked with several value added processers
of forest products such as for musical instruments.
SENATOR MICCICHE requested guidance on improving access,
identifying obstacles, and developing solutions for what was
once a thriving industry in Southeast Alaska.
11:38:37 AM
REPRESENTATIVE GATTIS joined the committee.
REPRESENTATIVE HIGGINS noted that Puerto Rico ranked above
Alaska in terms of total value of exports. He asked why Alaska
ranked so low.
MR. WOLF explained that many states that rank higher than Alaska
have large manufacturing and agricultural sectors. Alaska lacks
both and still ranks 40th by shipping essentially raw
commodities, which is respectable.
CHAIR STEVENS asked members to hold further questions and allow
Mr. Wolf to finish the presentation.
11:41:25 AM
MR. WOLF displayed a graph showing Alaska's top ten world export
partners as follows: China - 27 percent; Japan - 18 percent;
South Korea - 15 percent; Canada - 10 percent; Germany - 7
percent; Spain - 4 percent; Netherlands - 3 percent; Australia -
2 percent; Switzerland - 2 percent; Singapore - 1 percent; and
Other - 11 percent. He noted that in 2011, for the first time
since statehood, China surpassed Japan to become Alaska's
largest trading partner. The Pacific Rim countries tend to be
the largest partners while the European countries are smaller in
volume. In some cases, they are a single commodity customer; for
example, exports to Switzerland are almost exclusively precious
metals. The large Asian markets tend to be big customers for
Alaska in all categories.
He directed attention to a graph depicting Alaska worldwide
exports from 1994 - 2012 and noted that it shows down periods in
just two years. In 1998, exports dropped almost $0.75 billion
due to the Asian economic crisis, which affected Alaska exports
to Korea. Exports dropped again in 2008 - 2009 due to the
worldwide economic crisis. Other than that, exports for the past
20 years have been stable or upwards.
11:44:14 AM
MR. WOLF said Alaska's exports to China continue to be robust.
In 2000, Alaska's exports were $103 million and in 2011, they
reached $1.4 billion, which is unprecedented. He opined that the
next phase of this relationship is for China to come to Alaska
and partner on development projects. China is already doing this
elsewhere in the world.
Alaska's commodity exports to China for the first nine months of
2012 are as follows: seafood - 58.1 percent; minerals - 19.3
percent; forest products - 6.6 percent; and fishmeal - 2.4
percent. He noted that precious metals will show next year; for
example, about 50 percent of the production from the Kennicott
mine goes directly to China.
MR. WOLF described the "Three Rights" that benefit Alaska:
Alaska is in the right place geographically; it is located on
the Pacific Rim alongside the fastest growing economies in the
world and among the fastest growing populations in the world.
This is also the right time in history; economic liberalization
and modernization is changing the economic picture and causing
migration to cities and growth of the middle class. The
international consulting firm, McKinsey & Company, has projected
that by 2025, 400 million people in China will move from rural
areas to urban centers. New cities are being created. They
estimate that India will see about 215 million to 220 million
people move from rural parts of the country into the cities.
This has never happened before in recorded history, but it plays
to Alaska's favor. Alaska also has the right commodities. It has
world-class reserves of natural resources, which are the
building blocks of economic development. These are what people
need versus what they want.
11:49:24 AM
MR. WOLF said he is optimistic because Alaska has what the world
needs, it has the fast growing economies and populations in its
backyard, and commercial development of the Arctic presents
significant new opportunities for Alaska. Other reasons for
optimism are that many resources, including metals and minerals,
remain untapped. He reviewed the following:
· Coal - 17 percent of the world's coal is in Alaska, the 2nd
most in the world.
· Copper - 6 percent of the world's copper is in Alaska, the
3rd in the world.
· Lead - 2 percent of the world's lead is in Alaska, the 6th
most in the world.
· Gold - 3 percent of the world's gold is in Alaska, the 7th
most in the world.
· Zinc - 3 percent of the world's zinc is in Alaska, the 8th
most in the world.
· Silver - 2 percent of the world's silver is in Alaska, the
8th most in the world.
Alaska also has an abundant supply of North Slope natural gas,
none of which has been exported.
The 2013 trade forecast is about the same as 2012. Exports will
be $4.5 billion to $4.7 billion, dependent mainly on the price
of commodities. The dollar bears watching because a weaker
dollar makes U.S. exports relatively cheaper. It's also
important to watch the Pacific Rim economies, primarily China,
Japan, and Korea for strength or weakness. The better they do,
the better Alaska does.
11:52:07 AM
MR. WOLF reviewed the facts about the World Trade Center Alaska.
This private, non-profit membership corporation provides
international business services to members and community
partners statewide. The mission is to assist Alaskans to compete
successfully for trade and investment in the global marketplace.
It is part of a global network of over 300 world trade centers
around the world.
The core functions of the World Trade Center Alaska include the
following:
· Helping Alaska companies become export ready through
information, seminars, conferences, and other technical
assistance.
· Research foreign markets and identify trade opportunities
for Alaska companies.
· Support Alaska companies with the information and hands-on
assistance needed to make trade happen. Connect Alaska
sellers with overseas buyers.
· Make office and conference rooms available to facilitate
business meetings and events.
· Provide members with access to facilities and support in
more than 300 cities around the world.
MR. WOLF said that WTCAK works with the private sector and
community partners utilizing its "Boots on the Ground" strategy.
In the past ten years, they have taken groups to China, Korea,
India, Taiwan, Singapore, and others to foster a better
understanding of overseas markets and to make business contacts.
He then described five major programs, four of which are
country-specific: Japan Focus, China Calling, Canada
Opportunities Next Door, and Korea Connection. The fifth program
called "New Markets, New Customers" looks at emerging markets in
countries such as India. Finally, he listed WTCAK's three long-
term strategic partners: the State of Alaska; the University of
Alaska; and the U.S. Commercial Service, an arm of the U.S.
Department of Commerce. He also noted the help of the
legislature.
11:54:04 AM
CHAIR HUGHES asked if there was demand for products in other
countries that Alaska could potentially fill. She also asked if
WTCAK has a long-range plan for increasing exports.
MR. WOLF said there is demand worldwide for potable water, which
is an untapped opportunity in Alaska. The state provided funding
last year to inventory rare earth elements, and private sector
companies are pursuing that opportunity as well. There also is
an overseas market for high-value specialty seafood products.
There is also opportunity to expand markets in the existing
categories. He opined that if Alaska is able to develop the
resources it knows about, the $5 billion export level will seem
small in a few years. He reiterated his optimism for the future.
11:58:17 AM
SENATOR MCGUIRE asked if India had followed up after the most
recent trade mission on their interest in coal and LNG.
MR. WOLF said there has been some follow up. He added that the
India market generally offers great opportunity. It has an
economy that is growing slightly slower than China and has an
enormous need for natural resources and infrastructure build
out.
SENATOR MCGUIRE emphasized Mr. Wolf's good work and value to all
administrations over the years. She highlighted that WTCAK is
independent but complimentary to the Department of Commerce,
Community and Economic Development (DCCED). She encouraged
committee members to advocate for all things that promote trade
and support partnering.
12:01:03 PM
At ease
12:01:57 PM
CHAIR HUGHES reconvened the meeting.
SENATOR GARDNER asked if China would bring things like capital
and enhanced access to markets if it were to partner on
development projects in Alaska.
MR. WOLF responded that they would bring both those things. When
China has invested in other natural resource jurisdictions, the
relationship has taken form on a case-by-case basis. He
continued to say that Alaska is a natural fit with China and
other Asian countries that are resource poor and have burgeoning
growth.
CHAIR HUGHES asked Mr. Wolf to address her earlier question
about whether WTCAK has a long-range plan for increasing
exports.
MR. WOLF explained that approach their approach is twofold.
First, the board of directors is in the process of developing an
internal ten-year plan. In terms of WTCAK's work, it is looking
at emerging markets in Southeast Asia as well as the well-
established markets in Japan, Korea, and Canada. He noted that
the February edition of "Alaska Business Monthly" has an article
on international trade and the opportunities for new markets and
new customers in Southeast Asia. The idea is to identify new
markets in growth economies, analyze their import needs, and
match that with Alaska's export capabilities.
12:08:55 PM
CHAIR HUGHES asked if WTCAK has a plan that looks at where
Alaska could be in 50 years. For example, the timber industry
could be further developed.
MR. WOLF answered that WTCAK has many ideas but they haven't
necessarily been formalized into a document. However, they would
be willing to work with their long-term strategic partners on
that type of plan.
CHAIR HUGHES encouraged him to take that step. She then asked if
he was able to contribute formally in conversations about
developing infrastructure to help with world trade.
MR. WOLF said yes; WTCAK offers input when asked and in forums
like this. He confirmed the importance of developing
infrastructure to provide access and commercialize Alaska's
resources. He noted that because Alaska is a young state it has
a lot of catching up to do.
12:11:43 PM
CHAIR HUGHES asked if he had heard anything as to whether the
proposal to designate the Susitna area as the Susitna Forest
would help timber exports.
MR. WOLF said he wasn't familiar enough with the issue to
comment, but would follow up.
REPRESENTATIVE DRUMMOND - noting that a prime purpose of the
Port MacKenzie rail extension is to get coal to the port - asked
if the project was funded and proceeding.
CHAIR HUGHES relayed that it is moving forward.
MR. WOLF offered his understanding that the rail extension could
play a large role in a number of resource development projects
in addition to coal. He highlighted that most Greenfield
projects in Alaska require two critical things - power and
transportation.
12:14:19 PM
REPRESENTATIVE TARR joined the meeting.
REPRESENTATIVE DRUMMOND suggested that China could help Alaska
build the spur line.
CHAIR HUGHES asked Mr. Wolf if he had any comment on that idea.
MR. WOLF highlighted that Alaska has been very successful in
attracting foreign direct investment (FDI), which is investment
in the U.S. from subsidiaries of foreign companies. Alaska ranks
in the top 10 in the nation for attracting FDI and cumulatively
has attracted about $34 billion from a variety of countries.
This investment has been almost exclusively in the area of
natural resource development. However, much of this investment
occurred 20-30 years ago so it's a reminder that Alaska needs to
remain competitive as a destination for capital.
REPRESENTATIVE GATTIS asked what projects stood out 20 years
ago.
MR. WOLF replied the largest is the investment by British
Petroleum (BP) in the Trans-Alaska Pipeline System. In addition,
Canada is a big player in mining exploration and operates some
of Alaska's largest mines, and Japan has invested in mining and
seafood processing plants.
He said that when these multi-national companies choose to
invest in Alaska, it is a vote of confidence in the quality of
the business environment and workforce in Alaska.
12:20:40 PM
CHAIR HUGHES asked if any statutes or regulations inhibit the
ability of WTCAK to further international economic development
in Alaska.
MR. WOLF said he would like to give that some thought and come
back with a response.
CHAIR HUGHES talked about the importance of infrastructure
development and affordable power.
12:22:37 PM
There being no further business to come before the committees,
Chair Hughes adjourned the joint meeting of the Senate Special
Committee on World Trade and the House Special Committee on
Economic Development, Trade and Tourism at 12:22 p.m.
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