Legislature(2013 - 2014)BARNES 124
02/06/2014 11:15 AM House ECON. DEV., TRADE & TOURISM
| Audio | Topic |
|---|---|
| Start | |
| Presentation: World Trade Center Alaska | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ECONOMIC DEVELOPMENT, TRADE, AND
TOURISM
February 6, 2014
11:21 a.m.
MEMBERS PRESENT
Representative Shelley Hughes, Chair
Representative Pete Higgins
Representative Geran Tarr
MEMBERS ABSENT
Representative Lynn Gattis
Representative Bob Herron
Representative Craig Johnson
Representative Kurt Olson
Representative Lance Pruitt
Representative Harriet Drummond
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
Anchorage, Alaska
POSITION STATEMENT: Provided a PowerPoint presentation
entitled, "All the Right Stuff."
ACTION NARRATIVE
11:21:14 AM
CHAIR SHELLEY HUGHES called the House Special Committee on
Economic Development, Trade, and Tourism meeting to order at
11:21 a.m. Representatives Tarr and Hughes were present at the
call to order. Representative Higgins arrived as the meeting
was in progress.
^PRESENTATION: WORLD TRADE CENTER ALASKA
PRESENTATION: WORLD TRADE CENTER ALASKA
11:21:56 AM
CHAIR HUGHES announced that the only order of business would be
a presentation by Greg Wolf, Executive Director, World Trade
Center Alaska.
11:22:12 AM
GREG WOLF, Executive Director, World Trade Center Alaska
(WTCAK), provided a PowerPoint presentation entitled, "All the
Right Stuff." Mr. Wolf informed the committee that
international trade is big business for Alaska, and estimated
that overseas exports from Alaska will total $4.5-$4.6 billion
in 2013 - the second highest level ever recorded - following
$5.2 billion recorded in 2011. At this level, exports represent
about 10 percent of the state's gross product, which is the sum
of all goods and services produced in the state in a given year.
Exports bring new money into the economy, generate and sustain
thousands of direct and indirect jobs, and make a stronger and
more diversified economy [slide 2]. Trade matters because it is
a substantial component of Alaska's economy, even though the
figures do not include the export of technical and professional
services. Trade also brings in about $5 billion from overseas
markets, which is new - not recycled - money.
11:24:50 AM
CHAIR HUGHES asked for an estimate of the value of technical and
professional services.
MR. WOLF estimated the export of services adds approximately $1
billion, a figure that is derived anecdotally from industry
publications and informal reporting. Examples of services that
are exported are architectural design, construction,
engineering, environmental services, and transportation. In
response to Chair Hughes, he clarified that exports are products
going from one country to another, not products shipped to the
Lower 48. Mr. Wolf continued, noting that exports allow
companies to grow through expanded markets and customer base,
which is not possible in Alaska's small domestic market [slide
3]. A study revealed that exports support nearly 15,000 direct
and 10,000 indirect and induced jobs in Alaska; moreover,
according to the U.S. Census Bureau, U.S. Department of
Commerce, export-related jobs pay from 13-16 percent more than
jobs tied solely to the domestic economy [slide 4]. Alaska
ranks 40th among all states by the value of its exports, which
is "impressive" considering its small population and the lack of
major manufacturing and agricultural sectors; Alaska achieves
this level exclusively with the sale of natural resources.
Exports as a percentage of gross state product put Alaska 14th
of all states, and ranking on a per capita basis puts Alaska
4th. Finally, according to the U.S. Department of Commerce,
there are approximately 300 companies that export from Alaska,
75 percent of which are small- and medium-sized enterprises
(SMEs) [slide 5]. He said "So there's a lot of opportunities
... for the small- and medium-sized players ... and they're
having success." Mr. Wolf stated in his 26 years of experience
there has not been much change in the products exported from
Alaska: seafood remains its single largest export commodity at
50 percent; in 2013, with fish meal included, the percentage was
51 percent. Minerals, predominately zinc and lead, are the
second largest commodity. The energy category includes the
export of liquefied natural gas (LNG), coal, and refined fuel
products. Forest products consist of mainly whole, round logs
and wood chips, and precious metals are gold and silver [slide
6]. On the other hand, the customers for export products have
changed since 2011, when China, not Japan, became Alaska's
largest trading partner. China accounts for 28 percent of
Alaska's total exports, Japan purchases 16 percent, South Korea
purchases 15 percent, and Canada purchases 13 percent. European
customers tend to purchase one commodity, unlike the large and
important Asian markets [slide 7]. Mr. Wolf stressed that
Alaska's economic ties are with Asia for the foreseeable future
[slide 8].
11:36:25 AM
CHAIR HUGHES asked for a breakdown of the products that are
exported to Asian markets.
MR. WOLF said the bulk of Asia's imports are seafood, but
countries there also purchase minerals, metals, and forest
products. He reminded the committee the only exports of LNG
have been to Japan and exports of coal have been to Korea, thus
the Asian markets are multi-product buyers. In further response
to Chair Hughes, he said seafood makes up 50-60 percent of
exports to China, and Asian buyers are first in each product
category.
CHAIR HUGHES inquired as to whether WTCAK has projected the
impact of exporting LNG from a large diameter gas line.
MR. WOLF expressed his understanding that countries in Asia pay
the highest prices for LNG and are the largest buyers of LNG.
In further response to Chair Hughes, he presumed most of the LNG
would be exported, but he needed further information on volumes
and pricing to estimate its worth. Returning to specific
information regarding China, Mr. Wolf described the years
between 2000 and 2011 as "The Dragon Decade" during which
exports to China increased from about $100 million to a peak of
$1.4 billion; this growth was unprecedented, although not
surprising. Total exports to China for 2013 are expected to be
$1.3 billion, the second highest level, and China will continue
to be Alaska's most important buyer. In addition, China is
expected to invest in the state and become a partner in natural
resource projects, as evidenced by its interest in natural
resources around the world. In fact, Chinese investors are
involved in two mining projects and offshore leases in the
Chukchi Sea [slide 9]. Historically, exports have been a
consistent growth industry for Alaska in the past twenty years
with only [three] periods of decline, in 1998, 2008, and 2009
[slide 10].
11:44:25 AM
CHAIR HUGHES asked whether the aforementioned decade of growth
is more attributable to China's expanding middle class, or to
Alaska's marketing strategy.
MR. WOLF said both are correct: Alaska was one of the first ten
states to open an office in Beijing, and the Alaska Seafood
Marketing Institute (ASMI) is actively promoting wild-caught
seafood; the expanding middle class in China means more of a
market for the consumption of seafood instead of just for
processing and re-export. Some of the factors that explain the
growing success of Alaska's exports are three "rights." First
is Alaska's right geography, well-located on the Pacific Rim
with its fast-growing population. Second, this is the right
time in history because of the emerging markets and migration to
the cities; for example, an estimated 400 million Chinese will
have migrated from rural areas to cities in China by 2025 and at
the same time, in India, about 250 million residents are
expected to migrate from rural areas to cities. Furthermore,
worldwide, people are rising out of poverty into the consuming
class. Third, Alaska has the right commodities - natural
resources - the building blocks of economic development and the
"must haves" of energy, fuel, and construction materials.
11:51:33 AM
CHAIR HUGHES questioned whether India is currently a market for
Alaska's exports.
MR. WOLF responded that India is not a significant customer for
Alaska at this time. However, in 2010, a trade mission to
Southeast Asia found that India has the same import needs as
China. India's population is 1.2 billion and it is behind China
in terms of its economic development and modernization. He
acknowledged that China is more aggressive in securing
agreements for the natural resources it seeks. There is a
possibility that India could be a huge new area of growth.
REPRESENTATIVE HIGGINS asked whether the window of opportunity
for exporting gas to Asian markets is closing rapidly.
MR. WOLF recalled that Alaska produced the first LNG imported
into Japan and did so for 30 years. Presently, China and India
are using over 70 percent coal for power generation, but they
would like to have cleaner sources of fuel, and are searching
for supplies of LNG. By 2010, China had built one LNG receiving
station for LNG imported from Qatar, and was building two more.
Producers of LNG are familiar with market opportunities and
Alaska is close enough to supply natural gas and huge quantities
of coal. Mr. Wolf continued, saying that there may be a fourth
"right," which is that the world is heading north, and Alaska
makes the U.S. an Arctic nation. Commercial developments in the
Arctic will create transportation links to natural resources in
Alaska that have been previously stranded. Further,
infrastructure will be needed for onshore and offshore
development and maritime shipping [slide 12]. For the last
three years WTCAK has sponsored an event called "Arctic
Ambitions" in order to explore business and investment
opportunities arising from activities in the Arctic. Government
and private sector representatives from Russia, Canada, Finland,
Norway, and other countries will participate, in addition to
Alaska companies. Mr. Wolf concluded that he is optimistic
[about business opportunities in Alaska] because of the
following: Alaska has the resources the world needs; fast-
growing economies and populations are nearby; and commercial
development in the Arctic will present new opportunities [slide
13]. Moreover, traditional industries, like mining, have many
resources that remain untapped, in fact, Alaska has vast
supplies of resources that can be compared to those of
countries: the second highest supply of the world's coal; the
third highest supply of the world's copper; the sixth highest
supply of the world's lead; the seventh highest supply of the
world's gold; the eighth highest supplies of the world's zinc
and silver [slide 14]. He posited that with a vast supply of
coal and one coal mine in Alaska, that one mine can grow, and
there is room for new entrants into the market. Although the
coal industry does not have a long history, there is a long
history of "doing things right in Alaska, doing development
right." Other reasons to be optimistic are the possibilities
for future exports of gas from the North Slope and of Rare Earth
Elements (REEs). Technology metals are found in computers,
cars, cell phones, airplanes, and many other products. China
controls 90 percent of this market, which makes "modern
economies of America, Japan, and Europe kind of nervous."
Therefore, a search is underway in Alaska to inventory these
elements because they must be found in quantities economic for a
large mining operation. As discussed earlier, service sector
exports present another opportunity for companies to grow by
exporting technical services such as construction,
transportation, engineering, architectural, and environmental.
Mr. Wolf directed attention to a new business model for Alaska
which allows new and long-time companies to go beyond the
700,000 customer base of Alaska to 3,000,000,000 customers found
in Asia, thereby changing the economic viability of projects and
companies [slide 15]. He highlighted six WTCAK member companies
engaged in business outside of Alaska: ADS-B Technologies,
leading technology in air traffic control systems; Dowland-Bach,
manufacturing oil and gas field control systems; Usibelli Coal
Mine, Inc., a coal mining operation with overseas customers;
Alaska Brands Group, a bottled water company doing business in
Asia; RIM Architects, doing business in Asia; and NANA
Development Corporation, a Native corporation doing contracting
work in eight countries and Alaska [slides 16 and 17]. Finally,
Mr. Wolf described four WTCAK trade development programs:
JapanFocus; China Calling; Canada: Opportunities Next Door;
Korea Connection; and New Markets/New Customers [slide 18].
12:09:14 PM
CHAIR HUGHES told the committee that there is about 40 percent
empty cargo space on planes returning to Asia from Anchorage.
MR. WOLF agreed there is a freight imbalance, as completely full
planes arrive from Asia on their way to the Lower 48, and return
with empty cargo capacity. This creates an opportunity to fill
planes on their last stop in Anchorage with seafood and other
high-value products from Alaska. He announced that Cathay
Pacific airline has inaugurated a new cargo route, Hong
Kong/Anchorage/LosAngeles/Mexico City/Guadalajara/Anchorage/Hong
Kong. This route has the potential to transport fresh Alaska
seafood to Latin American and Asian markets.
12:12:05 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Economic Development, Trade, and Tourism
meeting was adjourned at 12:12 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| WTCAK Presentation - House Special Committee (February 6, 2014).pdf |
HEDT 2/6/2014 11:15:00 AM |
Arctic Policy |