Legislature(1995 - 1996)
02/21/1996 04:12 PM Senate TRD
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* first hearing in first committee of referral
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JOINT INTERIM TASK FORCE ON INTERNATIONAL TRADE POLICY
February 21, 1996
4:12 p.m.
MEMBERS PRESENT
Senator Steve Rieger, Co-chair
Representative Beverly Masek, Co-chair
Representative Alan Austerman
Representative Brian Porter
Representative Caren Robinson
MEMBERS ABSENT
Representative Jeannette James
Representative Irene Nicholia
Representative Pete Kott
TASK FORCE AGENDA
-- DISCUSSION OF INTERNATIONAL TRADE RECOMMENDATIONS TO BE MADE BY
TASK FORCE
WITNESS REGISTER
Ms. 'Pete' Nelson, Chairman
World Trade Center Alaska Advisory Board
421 W. 1st Ave.
Anchorage, AK 99501
James Burns
Petro Marine Alaska
3111 C St., #500
Anchorage, AK 99503
Ben Barrett
P.O. Box 100600
Anchorage, AK 99510
Ms. Debby Sedwick, Assistant Commissioner
Division of Trade & Development
Department of Commerce & Economic Development
3601 C St., Suite 700
Anchorage, AK 99503-5934
Dan Rowley
2515 A St.
Anchorage, AK 99503
Lee Wareham
24865 Teal Loop
Chugiak, AK 99567
Mark Wilson
1400 W. Benson, #150
Anchorage, AK 99503
Ron Sheardown
717 L St., #7
Anchorage, AK 99504
Bob Stiles
711 H St., #600
Anchorage, AK 99501
Patrick Burden
421 W. 1st Ave., #310
Anchorage, AK 99501
Patrick Rumley
405 W. 36th St., Suite 203
Anchorage, AK 99503
Tim Lane
International Trade Consultant
North Carolina
Ms. Robin Zerbel
World Trade Center Alaska
421 W. 1st Ave., Suite 300
Anchorage, AK 99501
Ron Noel
3230 C St.
Anchorage, AK 99503
Kevin Krauklis
3253 Riverview Drive
Fairbanks, AK 99709
Charles Neff
University of Alaska, Anchorage
3211 Providence Drive
Anchorage, AK 99508
David Heatwile
421 W. 1st Ave., Suite 300
Anchorage, AK 99508
ACTION NARRATIVE
TAPE 96-3, SIDE A
Number 001
SENATOR RIEGER , Co-chair, called the meeting to order at 4:12 p.m.
He stated the purpose of the meeting was to consider a draft
resolution summarizing the recommendations of the task force
regarding the state's international trade and focusing on the
budgetary aspects. He then opened the meeting to public testimony.
Number 015
'PETE' NELSON , Chairman, World Trade Center Alaska, commended the
task force on the draft resolution, which, she said, does a good
job of balancing the current needs of the international business
community with available resources. While it does not include
everything for everyone, it is a good start.
However, Ms. Nelson pointed out the draft resolution does not
address one of the top priorities of industry, which is a provision
for an export finance specialist. She also referred to the second
paragraph of the resolution, which speaks to providing a government
"presence" on trade missions to countries, and suggested after
"presence" adding the language "and protocol assistance," because
protocol is very badly needed in this issue as well.
Number 112
SENATOR RIEGER said the task force could certainly consider adding
an export finance specialist to the resolution, but he questioned
the appropriateness and the practicality for the state to be doing
that kind of a function, as opposed to using the actual financial
entities already available. MS. NELSON responded there is a need
for an expert knowledgeable in international finance issues, and
the state's financial institutions don't have that expertise
available. She pointed out that places like Seattle, New York and
Houston have international financing divisions or departments
within their banks to handle the international finance issues.
SENATOR RIEGER asked Ms. Nelson if she thinks this is something the
state should pay for. MS. NELSON acknowledged she does, because
she likens it to the people the state is already paying for to
assist international trade in the state of Alaska.
Number 188
JIM BURNS , Senior Vice President of Marketing, Petro Marine
Services, testifying from Anchorage, said he has been involved for
a number of years in exporting finished petroleum products out of
Alaska to Japan, Korea and, more recently, Russia. He spoke of the
assistance he has received through the years from the World Trade
Center Alaska, which he sees as a very good mix between private and
public funds working towards a common goal. His experience with
the other agencies and groups that are supposed to assist in
exporting Alaska products or services overseas has been more on the
negative side. He suggested the state of Alaska needs to have a
more coordinated effort with both a combination of public and
private sector money, and the World Trade Center should be funded
and supported by both the state and by private enterprise.
Number 282
REPRESENTATIVE AUSTERMAN asked Mr. Burns for his comments on having
a export finance specialist in the state MR. BURNS said he sees
that as a positive move and a good beginning point for addressing
the question of how to create a Seattle-type model in the state for
Alaska companies.
REPRESENTATIVE AUSTERMAN pointed out that with most banks, if they
have a housing specialist or real estate specialist, the
specialist usually covers his own salary by charging a fee, and he
asked Mr. Burns if he would be willing to pay a fee for the
services of an export finance specialist. MR. BURNS answered that
he thought he would, but he also added that perhaps something could
be modeled after the World Trade Center where public and private
sector funds go into a pool for services.
Number 335
BEN BARRETT , Vice President & Manager, Corporate Relations
Department, National Bank of Alaska, testifying from Anchorage,
said he is leading the bank's efforts in looking at the Russian Far
East for business opportunities. The bank's mission is to assist
in facilitating trade financing, letters of credit, transfers, etc.
for customers that are attempting to do business in Russia. The
best way he has found to do that is networking with the people,
finding out who in the private sector is doing business in Russia,
meeting with them, and the most helpful source of that information
has been the World Trade Center. He stated he is very supportive
of what the World Trade Center is doing.
Number 403
SENATOR RIEGER asked Mr. Barrett for his comments on a state-funded
finance specialist, or a user fee supported state employee who is
an export finance specialist. BEN BARRETT related that with
emerging markets such as Russia, it is a different situation than
it was a few years ago, and, as of right now, NBA does not have
that expertise. They do not know of everything that is available
to help one of their customers, so he thinks it is something that
at this time is necessary and would be very helpful. To fund an
export finance specialist, he suggested there could be some type of
membership structure, and it would have to be a private/public
partnership.
Number 475
REPRESENTATIVE AUSTERMAN asked Mr. Barrett how important he thinks
it is for legislators to participate in visits to different
countries to initiate contacts and explore the trade markets. BEN
BARRETT replied he believes it very important, especially when
talking about Russia where the culture is that government is the
final word. Having high level trade missions will open doors for
the business person to meet with the proper officials in that part
of the world, and the participation of high level officials is very
important.
Number 511
DEBBY SEDWICK , Assistant Commissioner, Division of Trade &
Development, Department of Commerce & Economic Development, said
the recently completed survey offered some important insights and
suggestions. The department agrees that there is a need for a more
coordinated effort with one point of contact, a need for the state
to take the lead in setting a strategic trade policy and vision,
and a need for the state to create a more business friendly
climate.
Ms. Sedwick referred to the last resolve clause of the draft
resolution which recommends a continued reduction of general fund
support for the fixed costs of overseas locations. She said the
division has been working hard to reduce costs in their overseas
offices. She said international trade is big business in Alaska.
Alaska's expertise lies in resource development and the natural
markets are in countries where they are undergoing resource and
industrial development and they can make use of Alaska's expertise,
technology and techniques. The primary activity and demands for
Alaska's exports now rests in Asia and will continue to do so in
the distant future. She questioned if this is the time to pack our
bags and tell our cash paying companies and the Alaska companies
that Asia is not a priority and that our overseas presence is
expendable.
Ms. Sedwick stated she is deeply troubled by some of the
recommendations that have been placed before the task force because
they do not reflect comments in the survey nor actions already
taken within their divisions. She cautioned that slashing the
operations in Japan and Korea without careful planning will
seriously undermine decades of effort spent securing Alaska's
position in the most important Asian markets. To be most effective
in the international market, industry needs government leadership
and trade promotion opening the door.
In her closing comments, Ms. Sedwick said it important to remember
the reality of our already strong trading partners in Asia without
closing the doors to new markets for Alaska's goods and services.
Number 617
SENATOR RIEGER asked Ms. Sedwick if she thought the industries her
office has worked with would contribute user support to keep the
overseas offices open as the general fund support is reduced.
MS. SEDWICK responded that the department hopes to leverage more
private sector dollars into the program. If it reaches a point
where those offices overseas can't be maintained because of
finances, she hopes that they will have the ability to go to the
private sector to ask for their help. She has been in discussions
with ACVB and others about combining their Korea office with
private offices that are already there in an effort to not have an
overhead figure for rent and utilities. She is hopeful something
can be firmed up before the end of the fiscal year.
Number 640
Responding to a request from Representative Robinson, Ms. Sedwick
explained the operation of their overseas offices.
Number 675
REPRESENTATIVE ROBINSON asked if after being on the job for six
months, Ms. Sedwick was requesting time to work with all the
industry people on where the dollars should come from to keep these
overseas offices going. MS. SEDWICK said when she came on the job
in September, it was very important that they reduce costs. For
instance, in Tokyo, Japan, the tourism office and the trade office
have been consolidated, which will amount to a $40,000 to $50,000
savings during this year. They are hoping to do the same thing in
Korea.
TAPE 96-3, SIDE B
Number 758
REPRESENTATIVE MASEK asked aside from the natural resources in our
state, why the Asian Pacific Rim markets are significant to Alaska.
MS. SEDWICK answered that the natural resources is the most
important thing.
Number 737
DAN ROWLEY , director of business development for an architectural
engineering firm in Anchorage, said as a member of the Governor's
Task Force for Marketing Alaska, he had the opportunity to observe
the activities of the Division of Trade & Development, the World
Trade Center, etc., and the fact there is the need for a
comprehensive strategic plan with respect to international trade is
very obvious. Equally obvious is the need for a coordinated
implementation program. He observed that the multiple trade
organizations each have some very talented and dedicated people
trying to do the job as they best perceive it, however, he has the
clear impression that there is no overall plan for a coordinated
approach. He believes the private sector has the ability to
provide the structure and it is an approach that is needed to focus
Alaska's international trade activities. In closing, he said he
believes redefining the Division of Trade & Development's role to
be the state leader in foreign investment in Alaska is a step in
the right direction.
Number 855
LEE WAREHAM of Chugiak said he, in his work, has been involved in
the relationship between Alaska and the Russian Far East since its
very beginning in 1988. He advised that the relationship between
the governments be maintained on a warm and friendly basis. Since
he has been involved in international trade, he has watched to see
what works, and he has observed that the World Trade Center
consistently does very well with their limited resources. He
recommended in considering how to consolidate and focus, as well as
to aim in a particular direction to carry out a defined trade
policy, to look closely at the World Trade Center and emulate the
successes that they've been able to achieve. He also recommended
taking a close look at contracting functions that are probably
transitory with regard to trade because of the lack of inherent
stability over time in a lot of the requirements.
Number 960
MARK WILSON , testifying from Anchorage, echoed earlier comments
made in support of the World Trade Center. He is looking forward
to the opportunity to work on these issues, and he expressed his
hope that the economy of the state of Alaska and the issue of
export trade from Alaska will continue to grow.
Number 080
RON SHEARDOWN , testifying from Anchorage, said he has made
approximately 50 trips through Russia mainly dealing in mining
activities, and the World Trade Center and the Troika centers in
Russia have been very helpful and very vital. He stressed the
importance of having someone from government along on trade
delegations and having a working relationship in the emerging
markets. He also pointed out that the smaller business community
is getting very little help, financially, or loan support, or trade
support, which is very vital for the smaller companies working in
these countries. He believes continuing trade missions are very
vital and export assistance is very vital.
An area that Mr. Sheardown finds is negative and problematic,
especially in Russia, is with the university and some of the other
associated relationships there where staff people are running their
own businesses. He said a major problem, especially in Russia, is
conflicts of interest right up to the highest levels, crime, the
graft and everything else that goes with it. He asserted people
are running their own business and also representing both the
university and other areas. He suggested some of those areas
really need to be looked at.
Number 156
REPRESENTATIVE PORTER asked Mr. Sheardown if he was speaking about
university officials in Russia. MR. SHEARDOWN responded that he
thinks there are problems here, too, with people running their own
businesses that are doing business in Russia. REPRESENTATIVE
PORTER requested that Mr. Sheardown send any specifics he has to
the task force.
BOB STILES , testifying from Anchorage, said over a 15-year period
most of his trade activity has been in the marketing of steam coal.
His corporation has worked with the Office of International Trade,
primarily in Anchorage, with very limited involvement with the
office in Japan. They have also worked with the World Trade Center
and U.S. Foreign Commercial Service and have found both of their
services extremely useful. His corporation has found there is a
very definite need for a coordinated and cooperative strategic plan
to pull together the public/private sector work. In the areas
where they've have contacted the Office of International Trade, it
has been responsive to their requests, but he believes that
particular division has suffered from lack of leadership, mission
and direction for an extended period of time. He suggested the
task force should try to come up with some way to eliminate some of
the political football characteristics of that office. Concluding,
Mr. Stiles voiced support for the draft resolution.
Number 226
PATRICK BURDEN , Northern Economics, testifying from Anchorage,
requested expansion of the international trade program within the
state. He believes there is a need for an international finance
specialist or an export finance assistance center to provide direct
export finance counseling to businesses. He also thinks it is
necessary for the state to participate financially in this program,
more at the beginning, and then the level of support could
diminish. It is also important that people who use a service pay
for it to offset some of the costs.
Number 273
PATRICK RUMLEY , testifying from Anchorage, stated he was testifying
as a private individual although he is a member of the World Trade
Center Alaska. He noted he has had six years of educational and
work experience in Japan. He stated his support for comments made
by Ms. Sedwick, especially her remarks concerning the importance of
government's role in contacts with the Asian market, as well as the
importance of the Asian market, in general. He attributes part of
the problem with the present office in Japan to the need for a
clear definition of what is expected of the people who run those
offices instead of setting up too broad a mission for these people,
or not defining any mission at all. He also believes there is a
need for a public and a private sector partnership, and that
continuity is critical, particularly in Asia.
Number 320
TIM LANE , International Trade Consultant, testifying from North
Carolina, speaking to the issue of foreign offices, explained that
the correlation between the perceived need to maintain foreign
offices in the actual export of Alaska's natural resources in the
Asian Pacific Rim is very weak. For example, a substantial amount
of Alaska seafood is exported to Japan and Korea, however, the
primary transactions themselves aren't handled in Alaska. The
primary export of Alaska seafood, with the exception of marginal
producers and specialty products producers, takes place via
intermediaries in Seattle. Also, the demand for Alaska timber well
exceeds the supply, its customers are well established, and primary
timber exported at the lowest level use either intermediaries or
specialized trade techniques with well-established partners. In
the mineral industry there are only a handful of Alaskan large
mineral producers who conduct exports, and most of the companies
have in-house expertise already in place and are among the last
people who need assistance with the establishment of an export
marketing strategy. He reiterated that while Japan and Korea are
the primary recipients for natural resources, the natural
resources, which are actually exporting, have among the lowest
export assistance needs of any industry classification in the
state.
Mr. Lane said foreign offices are appropriate in some conditions
for some states. Research that he has been doing reveals that
manufacturing companies can benefit from foreign offices in many
ways because the export marketing strategies for manufacturing
companies are substantially different than those for natural
resource companies. However, these are usually more appropriate
for manufacturing states like California, New York and Kentucky.
Mr. Lane said for natural resource states' economies, the approach
which is necessary is a more global flexible approach. The market
essential for companies in the highly technologically competitive
Korean and Japanese markets is very low. The opportunities lie in
emerging markets such as Indonesia, Malaysia, etc.
Number 414
ROBIN ZERBEL , Director, World Trade Center, Anchorage, stated she
would like to see the issue of export finance assistance as part of
the draft resolution. The export finance assistance program is a
very clear-cut project, with an investment of $200,000 per year.
She said the trade center has been trying to get a program like
this going for four years.
TAPE 96-4, SIDE A
Number 001
Ms. Zerbel noted that numerous financial institutions support an
export finance assistance program, and she urged it be included in
the resolution, because it is the highest and best use of state
dollars.
Number 035
RON NOEL , General Counsel, Tesoro Alaska Petroleum Co. in
Anchorage, has been involved in activities of various types in
Russia since 1991, representing clients, and, most recently,
Tesoro. Throughout that five-year period, he has been associated
in one way or another with the people at the World Trade Center and
it has been an invaluable service to him and his clients.
Mr. Noel echoed previous statements about the need for export
finance assistance expertise and further assistance to find ways to
allow Alaska banks to get involved in the process.
Number 124
KEVIN KRAUKLIS , a Fairbanks businessman testifying from Fairbanks,
supports active state participation in trade missions where the
private sector participation is of sufficient strength to finance
the state's participation. He believes it is also a more
appropriate way of financing offices in Japan and Korea. He said
if the private sector is not willing to step up to the plate and
pay for those offices, or a significant portion of those offices,
then one has to wonder why they are there. He also voiced his
support for an export finance assistance program.
Number 227
CHARLES NEFF , representing the University of Alaska Anchorage and
testifying from Anchorage, said he is director of the American
Russian Center, as well as director of the Alaska Center for
International Business in the Office of Russian Affairs. He said
in the development of foreign markets, much of what is done within
the state of Alaska is to help businesses establish new activities
in foreign markets and to support the activities. The American
Russian Center has been involved in training Russians and has so
far involved more than 6,000 Russians in various kinds of training
programs. As the market in the Russian Far East begins to develop,
it is a resource that is going to be very valuable to Alaskan
businesses.
Addressing the draft resolution, Mr. Neff said behind that
resolution is a report that suggests changes that require a lot
more examination. One is the transfer of the endowment of the
Alaska Center for International Business to the Department of
Revenue, and he believes that it is premature to close down the
Alaska Center for International Business without a thorough review
of its work and its current services to the state.
REPRESENTATIVE MASEK asked Mr. Neff if he would describe the
operation of the American Russian Center and how he thinks it is
going to help the state of Alaska. MR. NEFF explained the American
Russian Center programs are sponsored by three separate grants. He
added that these are not funds that are designated to directly help
Alaskan businesses except to the extent that they have tried to
provide connections between potential Russian businesses and
Alaskan businesses. They are responsible through the university
contract to the federal agencies to achieve the goals they have
promised to address during the course of the contracts.
Number 366
DAVID HEALTWILE , President of the Alaska Russia Company, testifying
from Anchorage, related that in the three years his small company
has been in business, they have sold a little over $15 million
worth of goods to Russia. He said their competition is the "big
boys" down south who are closer to manufacturers; they are better
financed and they have some focused government programs working for
them. Although he receives very meaningful help from the World
Trade Center's Troika program, he said the state could help in two
ways: one is to continue to provide him with the trade leads
similar to what he is receiving from the World Trade Center, and
the second is to provide some means of export financing.
Number 418
There being no further witnesses to testify, SENATOR RIEGER stated
it was his intent to have one more meeting after the task force
takes the comments it has received under advisement and has another
draft resolution prepared. He then adjourned the meeting at 6:05
p.m.
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