Legislature(2009 - 2010)CAPITOL 106
02/10/2009 05:15 PM Senate WORLD TRADE, TECH, INNOVATIONS
| Audio | Topic |
|---|---|
| Start | |
| World Trade Center Alaska | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
JOINT MEETING
SENATE SPECIAL COMMITTEE ON WORLD TRADE, TECHNOLOGY AND
INNOVATION
HOUSE SPECIAL COMMITTEE ON ECONOMIC DEVELOPMENT, INTERNATIONAL
February 10, 2009
5:19 p.m.
MEMBERS PRESENT
SENATE MEMBERS
Senator Lesil McGuire, Chair
Senator Hollis French
Senator Gary Stevens
HOUSE MEMBERS
Representative Jay Ramras, Chair
Representative Mike Chenault
Representative Nancy Dahlstrom
Representative Mike Doogan
MEMBERS ABSENT
SENATE MEMBERS
Senator Lyman Hoffman
Senator Bill Wielechowski
HOUSE MEMBERS
Representative Kyle Johansen
Representative Mark Neuman
Representative Chris Tuck
COMMITTEE CALENDAR
Presentation and Overview: World Trade Center Alaska
HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record.
WITNESS REGISTER
Greg Wolf, Executive Director
World Trade Center Alaska
Anchorage, AK
POSITION STATEMENT: Delivered World Trade Center Alaska
Overview.
ACTION NARRATIVE
5:19:17 PM
CO-CHAIR JAY RAMRAS called the joint meeting of the Senate
Special Committee on World Trade, Technology and Innovation and
the House Special Committee on Economic Development,
International Trade and Tourism to order at 5:19 p.m. Present at
the call to order were Senators Stevens, McGuire and
Representatives Chenault, Doogan, Dahlstrom, and Ramras. Senator
French arrived during the course of the meeting.
^World Trade Center Alaska
5:19:46 PM
CO-CHAIR RAMRAS announced the business before the committee is
to hear a PowerPoint presentation by Mr. Wolf with World Trade
Center Alaska.
GREG WOLF, Executive Director, World Trade Center Alaska,
thanked the committee for inviting him to talk about Alaska's
international trade economy. He said he will talk about the size
and scope of these activities and provide an overview of what
Alaska exports to which markets and why it matters.
He explained that World Trade Center Alaska (WTCAK) is a private
nonprofit corporation with about 100 members that share an
interest in international business. WTCAK partners with the
State of Alaska and the U.S. Department of Commerce to provide
information and assistance to Alaskans seeking to do
international business. In Alaska that is primarily export
business and that will be the focus today.
MR. WOLF said international trade is big business for Alaska.
The figures aren't final but estimates are that 2008 exports
will total some $3.7 billion. This represents about 10 percent
of Alaska's gross state product. Exports bring about $4 billion
in new money into the Alaska economy and support thousands of
jobs directly and indirectly. This results in a stronger and
more diversified state economy. He noted that the numbers he is
talking about today do not include the export of services like
construction, engineering, oil and gas field services, and
environmental services. The U.S. Department of Commerce doesn't
yet have a way to capture, record, and report that data. Export
jobs typically pay 13 to 16 percent more than jobs tied solely
to the domestic economy.
5:23:13 PM
Senator French joined the meeting.
CO-CHAIR RAMRAS asked Mr. Wolf to be more specific about where
these jobs are coming from.
MR. WOLF replied these are jobs in mining, the seafood industry,
and transportation that are tied directly or indirectly to
trade. He added that it's the existence of export markets that
dictate the size of some industries or enable them to operate in
the state at all. For example, virtually all mine output is
exported to markets overseas. He cited zinc and lead from the
Red Dog Mine and coal that is shipped to Korea and Latin
America. Prior to Agrium's closure, 99.9 percent of the
fertilizer output went to overseas markets. Also, about 50
percent of Alaska's annual seafood catch is sent to overseas
customers. What all this suggests is that but for international
markets, these industries either wouldn't be here at all or
they'd be much smaller than they are now.
Another benefit of trade is that it allows companies to grow
through expanded markets and customer base. Alaska itself is a
very small market with about 700,000 people so for a company to
grow beyond its market share the options are to take customers
from competitors here, expand into the Lower 48 states, or
expand into markets overseas. The seafood industry, for example,
has some products that don't have a large market in the U.S. but
are highly prized in Asia. Depending on the company and whether
it is marketing a product or a service or a commodity, the best
bet to grow beyond their current size may be to look to markets
overseas.
MR. WOLF said according to 2007 data and with $4 billion in
exports, Alaska's trade ranking is 42nd among the 50 states. On
a per-capita basis it ranks 4th and when exports are viewed as a
percentage of gross state product it ranks 8th in the nation.
What this shows is that compared to states with other industries
like manufacturing or agriculture, Alaska is a trading state
that is developing its natural resources and finding customers
overseas. Also worth mention is that Alaska ranks 8th in the
nation in attracting overseas investment. Cumulatively, $31
billion from overseas companies has been invested in Alaska.
Much of that investment has been on the North Slope. British
Petroleum (BP), for example, has invested over $20 billion in
Alaska. But other companies have invested heavily in Alaska also
including: Japanese companies in seafood, British companies in
mining and tourism, and Canadian companies that are investing
heavily looking for minerals and metals. In fact, over the past
20 years about 75 percent of the exploration dollars spent in
Alaska comes from Canadian companies. This shouldn't be a worry
because the overseas companies that tend to come to Alaska are
large multi-nationals. This is good because the projects in
Alaska are usually large-scale and need lots of capital. Not
only do they bring money, they also tend to bring new skill sets
and new technologies. When these multi-national companies invest
here it says something positive about the Alaska business
environment and is a vote of confidence in the Alaska workforce.
5:30:54 PM
MR. WOLF displayed a bar graph showing Alaska worldwide exports
from 1994 to 2007 with estimates for 2008. He noted that in the
last several years the value of exports has increased but that
doesn't necessarily represent an increase in volume. The
increase can largely be attributed to the higher prices that
Alaskans have received for their exports. He used the increased
price of gold as an example and said the growth in the last
several years has to do with the increase in global prices of
the commodities that are exported.
CO-CHAIR RAMRAS observed that former Governor Murkowski did an
exceptional job of looking outside the state to build trade. He
asked Mr. Wolf to talk about the influence that a chief
executive can have when he or she looks outside the state.
MR. WOLF said not only Governor Murkowski but also Governor
Hickel and Governor Knowles. Governor Hickel was a strong
proponent of international trade and to this day is very active.
Governor Knowles also was involved in efforts to expand Alaska
trade and open new markets. It's important that the governor and
legislative leaders take an active role in recognizing the
importance of trade. Whoever is governor, the leadership that he
or she provides in bringing attention to the role that trade
plays in the economy is helpful. He noted that WTCAK has had a
good working relationship with Governor Palin and the Governor's
Office of International Trade. Whenever our leaders are engaged
we are well served, he said.
CO-CHAIR MCGUIRE asked what the Legislature can do to support
his activities.
5:36:21 PM
MR. WOLF replied he didn't come to make a funding request but
they do have a partnership with the state. WTCAK receives a
modest grant from the state each year and also works with the
U.S. Department of Commerce to pool resources. Alaska has long
been a leader, he said, and cited opening the first state trade
office in Tokyo in 1965 and in Korea in 1985. In 1989, along
with a handful of states, it entered that Taiwan market and in
2002 was among the first to establish a trade representative in
China. He recalled that when he was the international trade
director for Alaska it wasn't uncommon to advise other states on
trade. He expressed the view that Alaska has had to be a leader
and it's paid off. Alaska has old-friend status in those markets
and it means a lot, particularly when times are tough. For
example, when the Japanese economy turned down Alaska didn't
pull out as some states did. We can be proud of our leadership
role, he said.
CO-CHAIR RAMRAS mentioned the potential for the two committees
to travel for the purpose of enhancing an existing trade
relationship or targeting a new one and asked for suggestions on
getting the biggest bang for the buck.
MR. WOLF said WTCAK has five focused trade development programs
and one is called "New markets new customers." Now they are
starting to look at India, which has some characteristics that
are similar to China including: a population of over 1 billion;
a growing middle class; a growing economy; a need for
infrastructure; and a need for natural resources. Other markets
that could offer opportunity are Vietnam for oil and gas and
Singapore for seafood.
5:42:04 PM
SENATOR STEVENS commented that as an ex officio member of the
Alaska Seafood Marketing Institute (ASMI) board of directors his
ears perk up when seafood is mentioned. He noted that seafood
markets are opening in Europe because Alaska is one of the few
sustainable seafood producers. He asked how WTCAK works with
ASMI.
MR. WOLF described ASMI as a sister organization in terms of
economic development. ASMI focuses only on seafood while WTCAK
has other interests as well, but whenever possible they work in
partnership. He added that he has seen ASMI in action in
overseas markets competing with nations. Their job is tough but
they are doing good work and getting good results.
SENATOR STEVENS added that he's really proud to see that in
these European tradeshows Alaska is competing successfully
against Norway, Iceland, and Spain.
CO-CHAIR RAMRAS mentioned Singapore, India, and Vietnam and
asked the mechanism for moving Alaskan products into a country
where there is no established trade route.
5:47:52 PM
MR. WOLF explained that WTCAK takes a top down approach and
looks at whether Alaskan companies export capabilities can match
a country's import needs and whether the country can afford the
product. Transportation, either within the state or overseas,
usually is an issue. In fact, transportation and energy are
typically the greatest barriers to the success of a new
development going forward. He cited seafood exports as an
example and said his interest was piqued when he noticed a 747
cargo freighter operated by Singapore Air that was going from
Anchorage to Singapore without much seafood on board. He knew
this was an opportunity and the niche they identified initially
was the high-end hotel market. Because Alaska is part of the
Pacific Rim, the shipping routes for getting Alaska resources to
market in Asia are fairly direct.
Again referencing the bar graph, Mr. Wolf pointed out that in
1998 Alaska exports dropped [$0.7 billion] from 1997 because of
the Asian economic crisis started. It started in Thailand,
Indonesia and Malaysia in the fall of 1997 and then moved north
to Korea. At that time Alaska was only doing business with
Korea, but it was a large amount of business. He said he brings
that up to remind everyone that even though those places may
seem far away, what happens in those markets directly affects
Alaskan jobs, industry and revenue coming into the state.
MR. WOLF displayed a pie chart of Alaska's top ten export
markets for January to September 2008 and noted that close to 70
percent is focused in Asia with Japan continuing to be the
number one partner at 28 percent. Seven or eight years ago that
would have been 50 percent and reflects the economic decline
Japan has suffered in the last nearly two decades. The reason
Alaska has grown its exports overall is due largely to business
with China. Six years ago Alaska exported to China about $100
million in commodities and last year the figure was $700
million.
CO-CHAIR RAMRAS said if there is a ready market if Alaska were
to increase overseas exports by 50 percent.
MR. WOLF replied a lot of the growth in exports has been driven
by demand from China and India. Their demand is pushing prices
up so Alaska benefits whether it is selling to them or not.
Alaska does compete with other nations so it will be constrained
by what the market will bear, but if global growth continues
Alaska is well positioned.
5:56:14 PM
SENATOR FRENCH said he jumped ahead several slides and he
expects a greater contraction in world markets than the
presentation indicates. But you're the expert here and I
appreciate the analysis, he added.
MR. WOLF said he would respond to that later.
Continuing, Mr. Wolf summarized that some of the countries that
Alaska exports to are single-commodity markets including
Switzerland for precious metals and Belgium for zinc. Asian
markets are more multi-dimensional.
He displayed a bar graph of Alaska's steady growth in exports to
China for January through September, 2006 to 2008 and remarked
that if it continues to grow, it is conceivable that China could
surpass Japan to become Alaska's number one trading partner.
That country is an increasingly important customer and he would
suggest that the next phase is for China to want to become a
partner in natural resource development projects in Alaska. He
suspects this because wherever you find resources in abundance,
you find the Chinese and Chinese investment. I see no reason
that Alaska would be any different; during the AGIA process one
Chinese company did put in an application, Mr. Wolf said.
6:00:42 PM
MR. WOLF displayed a slide showing economic growth projections
for 2009 and noted that according to the International Monetary
Fund, U.S. growth will decline about 2 percent. Asian markets
also will decline but not as much so it's in these markets that
Alaskans may find their next opportunities. He noted that the
most pessimistic analysis of China was from the Royal Bank of
Scotland. They projected just 5 percent growth, but different
Chinese government agencies are holding projections to at least
8 percent.
CO-CHAIR RAMRAS said he'd like to invite Mr. Wolf to come back
and focus on suggested trade missions, market sectors and
strategies for China, India, Vietnam, and Singapore.
MR. WOLF said he will be happy to do so in consultation with
colleagues at the State of Alaska and the U.S. Department of
Commerce.
6:05:18 PM
MR. WOLF displayed a slide showing that seafood remains Alaska's
single largest export commodity at more than 50 percent.
Minerals, zinc and lead primarily, represent the second largest
category at 20 percent; energy, which includes LNG, coal and
refined fuel represents 13 percent. He noted that Alaska has not
exported overseas any crude oil for a number of years.
CO-CHAIR RAMRAS asked which of the categories have value added
and which would be dominant in value added.
MR. WOLF replied most of the products are raw or unprocessed so
there's work to be done in capturing more value before the
product is exported. A successful example of value added was
Agrium that took gas and turned it into urea and ammonia-related
fertilizer products. LNG is another way of adding value, but by
and large someone else along the line is capturing the value of
those jobs and additional revenues, he said.
6:08:41 PM
SENATOR FRENCH asked for an example of a specific governmental
policy that would help to diversify the economy and encourage
value-added industries in Alaska. He added that a caveat to his
question is that the Alaska seafood plant is in his district and
doesn't operate as such any longer. It's now a successful church
that isn't generating much money for the state of Alaska.
MR. WOLF said he would like to address that at a future
presentation, but any value-added product will have to have a
market in either the Lower-48 or overseas. Alaska itself doesn't
have the population to be a very large customer. He noted that
Agrium's market was overseas.
6:11:17 PM
CO-CHAIR MCGUIRE asked if there's been any effort to track
intellectual property.
MR. WOLF replied it's difficult to track but they are attempting
to track the export of services and some service companies are
driven by their intellectual property. He acknowledged that it
is a growth area.
CO-CHAIR MCGUIRE said it would be interesting to see if WTCAK
could look for a model for that. A lot more intellectual
property will come out of the renewable energy field.
MR. WOLF said WTCAK estimates that the value of Alaska's service
sector exports represents about $500 million to $750 million
annually. He noted that a fairly well-known oil and gas field
service company in Alaska was doing $250 million in annual sales
overseas so those numbers are likely conservative. Alaskan
companies that are exporting services overseas include:
logistics for oil and gas field services in Russia, installing
air traffic control management systems, construction,
transportation, architecture, and environmental services. They
are providing these services in Canada, Russia, Taiwan, China,
Korea, and the Middle East.
6:14:38 PM
Alaskan companies have developed world-class capabilities and
are finding customers overseas. Firms have gained experience and
expertise in carrying out projects in remote locations, with
extended supply chain challenges, often in harsh weather
conditions, under the strictest environmental regimes, and often
in places where local labor is untrained or not readily
available. These skill sets and experience can be applied in
other parts of the world and increasingly it is.
The trade outlook for 2009 will depend heavily on commodity
prices. The value of the seafood catch will greatly determine
success. Today the value of zinc is $0.51 per pound; a year ago
it was $1.10 per pound and in January 2007 it was $2.00 per
pound. WTCAK is also looking at the effect of the U.S. slowdown
on Asia's exporting countries because many of them are Alaska's
best customers. Something else to watch is the dollar. A weaker
dollar makes U.S. exports appear cheaper to overseas buyers. The
ideal customer for Alaska is a country with a strong currency
and economy. He noted that the Agrium closure represented a $3
million loss in exports. Overall exports are expected to be
about $3.5 billion to $3.6 billion, which is down compared to
the last couple of years but relatively high historically.
6:18:14 PM
CO-CHAIR RAMRAS said news articles statewide have said that with
the loss of Agrium the cost of fertilizer for the green belts in
Mat-Su and Delta will go up 400 percent. He asked if any value
added exports bring down the cost of living to Alaskans the same
way that Agrium's export of fertilizer did.
MR. WOLF said to the extent that we are doing value added
processing or manufacturing of commodities it may be beneficial
to Alaskans, but the price of a lot of what Alaska has to offer
is set globally. One of the challenges to any value-added
manufacturing that's been attempted here is producing on a scale
large enough to get the per unit cost low enough to compete. He
cited bottled water as an example.
6:21:47 PM
CO-CHAIR MCGUIRE asked what we're doing in Alaska to get cruise
ships to market our products.
MR. WOLF said the Alaska Brewing Company has had success in
getting its product on Alaska Airlines flights and local bottled
water has from time to time been on different carriers. It might
be possible to get some Alaskan food and beverages on cruise
ships but when those customers sample Alaska products when
they're here, they may become long-term customers by requesting
those products when they are home.
CO-CHAIR RAMRAS asked him to talk about the strategic importance
of the Ted Stevens International Airport and how it, as the
fourth busiest cargo airport in the world, can be exploited.
MR. WOLF said that airport and in some cases the Fairbanks
International Airport make possible the movement of low weight
high value products. They open the door in terms of shipping
value added manufacturing products worldwide. The airport is an
asset that could make a lot of things possible for the community
including moving cargo and growing domestic and international
passenger operations. Asian companies could save time by coming
to Alaska to have conferences, conventions and trade shows.
While they're here they could visit all parts of the state.
6:26:20 PM
CO-CHAIR RAMRAS thanked Mr. Wolf and said if we invite you again
we might task you with the dual objective of surveying market
sectors in China, India, Vietnam, and Singapore and looking at
ways to leverage the Ted Stevens International Airport as a key
infrastructure asset of the state.
MR. WOLF thanked the members for their leadership in the areas
of economic development, trade, and tourism. The rewards
associated with this diversification can be significant.
6:28:24 PM
CO-CHAIR RAMRAS adjourned the joint meeting of the Senate
Special Committee on World Trade, Technology and Innovation and
the House Special Committee on Economic Development,
International Trade and Tourism at 6:28 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Overview on Alaska's Role in the Global Marketplace by Greg Wolf.ppt |
SWTI 2/10/2009 5:15:00 PM |