JOINT HOUSE SPECIAL COMMITTEES ON WORLD TRADE AND STATE/FEDERAL RELATIONS AND INTERNATIONAL TRADE AND TROURISM February 9, 1994 5:10 p.m. WORLD TRADE AND STATE/FEDERAL RELATIONS MEMBERS PRESENT Representative Ramona Barnes, Chairman Representative Gail Phillips, Vice Chairman Representative Bill Williams Representative Eldon Mulder Representative Gary Davis Representative Jerry Mackie Representative Gene Kubina INTERNATIONAL TRADE AND TOURISM MEMBERS PRESENT Representative Beverly Masek, Chairman Representative Alan Austerman, Vice Chairman Representative Jeannette James Representative Irene Nicholia Representative Caren Robinson WORLD TRADE AND STATE/FEDERAL RELATIONS MEMBERS ABSENT None INTERNATIONAL TRADE AND TOURISM MEMBERS ABSENT Representative Brian Porter Representative Pete Kott COMMITTEE CALENDAR Department Overview from Willie Hensley, Commissioner-Designate, Commerce and Economic Development. WITNESS REGISTER WILLIE HENSLEY, Commissioner-Designate Department of Commerce and Economic Development Post Office Box 110800 Juneau, Alaska 99811-0800 Telephone: 465-2500 POSITION STATEMENT: Gave overview of the Department of Commerce  and Economic Development JOHN SIBERT, Executive Director Alaska Science and Technology Foundation 4500 Diplomacy Drive, Suite 515 Anchorage, Alaska 99508-5918 Telephone: 272-4333 POSITION STATEMENT: Participated in overview of agency ROBERT HARRIS, Director Technology Alaska Science and Technology Foundation 4500 Diplomacy Drive, Suite 515 Anchorage, Alaska 99508-5918 Telephone: 272-4333 POSITION STATEMENT: Participated in overview of office LAURIE CUNNINGHAM, Acting Director Office of International Trade and Development Department of Commerce and Economic Development 3601 C Street, Suite 798 Anchorage, Alaska 99503-5934 Telephone: 561-5585 POSITION STATEMENT: Participated in overview of the Department  of Commerce and Economic Development MARY PIGNALBERI, Director Division of Tourism Department of Commerce and Economic Development Post Office Box 110801 9th Floor State Office Building Juneau, Alaska 99811-0801 Telephone: 465-2012 POSITION STATEMENT: Gave overview of the Division of Tourism ACTION NARRATIVE TAPE 95-3, SIDE A Number 000 The Joint Meeting of the House Special Committees on World Trade and State/Federal Relations and International Trade and Tourism was called to order by Chairman Ramona Barnes at 5:10 p.m. Members present at the call to order were Representatives Barnes, Mulder, Williams, Kubina, Mackie, Masek, Austerman, James, Robinson and Nicholia. Members absent were Phillips, G. Davis, Kott and Porter. Number 007 WILLIE HENSLEY, Commissioner-Designate, Department of Commerce and Economic Development, said he was pleased to come before the joint committees. He introduced his staff and people within the department. REPRESENTATIVE G. DAVIS arrived at 5:14 p.m. Number 047 COMMISSIONER HENSLEY stated that the international trading activity is a very critical portion of Alaska's economic health. In 1993, the total value of Alaska's overseas exports was $2.6 billion. A very high percentage of our non-oil products is destined for overseas markets. The top exports include fish and seafood which amounted to a billion-and-a-half dollars; timber and forest products, $646 million; mineral, such as lead, zinc and coal, $126 million. Our most important foreign markets in terms of value are Japan with $1.9 billion, of which $1.4 billion of that in fish and seafood products; South Korea with $230 million; Canada, $73.9 million; Taiwan $65 million; and China $58 million. They foresee great growth potential and some serious threats to our existing markets. Commissioner Hensley cited the export of Alaska products to Japan has declined by $180 million between 1991 and 1993. It is partially attributed to the decline in value in salmon in the Japanese market. The decline can also be blamed partially on the rising markets of China and Taiwan. COMMISSIONER HENSLEY said that we need to have people in state government who are familiar with the laws and customs of these countries who can help Alaska business persons connect with potential customers. It also involves working with businesses to develop product forms which meet the needs of our customers in these markets as well as working with their governments to insure we have a positive government-to-government relationship. These markets offer opportunities for the sale of oil, gas, forest products and seafood. Number 127 COMMISSIONER HENSLEY briefly touched on the Office of International Trade, saying that it presently operates in some capacity in the foreign countries of Japan, Korea, Taiwan and Russia. It has two distinct roles, as an industrial match-maker and as an advocate. COMMISSIONER HENSLEY conveyed that the tourism promotion programs are managed by the Division of Tourism and Alaska Tourism Marketing Council (ATMC). The ATMC folks are the generic marketing of Alaska in the United States and Canada. The Tourism Division manages the state's international tourism marketing effort, highway tourism, local tourism development and operates the state's film office. The office is largely responsible for increased foreign visitors to Alaska from approximately 27,000 in 1986, to 65,000 in 1994. It has foreign contractors in Japan, Germany, Australia and the United Kingdom. COMMISSIONER HENSLEY said the Division of Economic Development focuses on the domestic side of the Alaska-international trade equation. The division works with Alaskans on the processing of Alaska's natural resources and the production of goods and services. Other state divisions and offices market these products internationally. The division has close working relations and expertise in mining, forest products and commercial fishing industries. He then addressed the function of the Alaska Seafood Marketing Institute (ASMI). It represents an excellent working model of a state industry partnership. Almost all of its funding is derived from federal grants or program receipts from the seafood industry. They have a relatively small budget. In FY 95, the unrestricted general fund budget for economic development programs is about $11.5 million. ATMC gets about $3.4 million and $1 million to ASMI. Number 173 COMMISSIONER HENSLEY briefly described a new initiative being discussed which includes performance-based budgeting; streamlining services in a program called "Marketing Alaska". REPRESENTATIVE GAIL PHILLIPS arrived at 5:20 p.m. Number 200 COMMISSIONER HENSLEY pointed out that this is a cabinet-member group, whose mission is to develop or coordinate the effort to "market" Alaska. The state needs to assert itself as a contributing member of a competitive global economy so that investments in Alaska compete with projects around the globe. It will be a program that develops as many of our industry sectors as possible. For instance, in our film marketing effort, he sees some real potential. We should develop Alaska as a research place, because much of Arctic research is done in Antarctica, Canada, and Colorado and there's an opportunity to promote as well. It's envisioned to be a four year program. Number 225 COMMISSIONER HENSLEY noted that part of the World Trade Committee's responsibility is with federal/state relations. He pointed out that when the department made its contacts with the heads of ARCO, British Petroleum, Exxon and UNOCAL and talked specifically about the oil export ban, interestingly enough, each company had a different point of view. They also talked about the Arctic National Wildlife Refuge to see that there is responsible oil drilling there and they have potential in renewing the Magnuson Act in working with our delegation in the area of fisheries and they support the notion of Community Development Quota (CDQ) Program, which provides capital in an area of the state that is in real need. Number 260 CHAIRMAN BARNES said this committee looks forward to having a partnership with the commissioner and his department. Chairman Barnes introduced John Sibert. Number 270 JOHN SIBERT, Executive Director, Alaska Science and Technology Foundation (ASTF), testified via teleconference from Anchorage, that one of the problems they frequently run into is, that people who come to them for funding, this belief that in the better "mousetrap" or "a field of dreams", the idea that if we build it they will come. He hopes they have learned that lesson. It's very important to understand that in order to develop or diversify an economy, one has to understand that economy. Number 300 MR. SIBERT said it's very important to develop partnerships or strategical alliances, not only between the people of Alaska and those outside, but also partnerships within the state. For example, ASFT has many fisheries projects. It's connecting people who know how to use the technology. One of the problems is the lack of cold storage to pack fish products in the frozen North during the summer time in Kotzebue. They worked with the Department of Energy and the Energy Authority. The technology (ice maker) worked well and is now operating in the Gulf of Alaska and Southeast. REPRESENTATIVES MACKIE and KUBINA left at 5:25 p.m. Number 360 MR. SIBERT mentioned that there is a great deal of federal technology that needs to be developed in the state. He introduced Mr. Robert Harris. Number 399 ROBERT HARRIS, Director, Technology, ASTF, testified via teleconference from Anchorage, stating that part of the effort with the National Governor's Association is to give the state a voice in what's happening in terms of design of federal programs, how decisions are made on what to fund, and where the funding goes. The ice-maker is a good example of something that was created in a federal lab and would not have come to fruition if it weren't for people talking on the state and federal levels. Number 418 CHAIRMAN BARNES introduced Laura Cunningham. LAURA CUNNINGHAM, Acting Director, International Trade and Development, Department of Commerce and Economic Development, stated that she was not prepared to address the committee. CHAIRMAN BARNES asked Ms. Cunningham, if the division was in "competition or in partnership" with the legislative branch of government. Ms. Cunningham answered "in partnership." Number 435 CHAIRMAN BARNES quizzed Ms. Cunningham about how she felt if one of Ms. Cunningham's employees called one of the heads of an oil company and said that the governor would find it highly offensive if that company were to invite a legislator to the Sakhalin Islands, for example. She asked if she thought it would be appropriate for her to ask anyone in a foreign country to have a legislative delegation "watched" and reported on. MS. CUNNINGHAM responded by saying absolutely not. They arrange all work with the foreign government, the itinerary, and we make sure that a delegation is taken care of from beginning to end. We are a support agency. Number 465 CHAIRMAN BARNES inquired about a seafood delegation from Taipei that visited Southeast Alaska in the summer of 1994. MS. CUNNINGHAM stated that we have three companies in Southeast Alaska that are selling salmon to Taipei, as well as a company from Bristol Bay that is selling. She said there is another Alaska seafood delegation going out. Number 474 REPRESENTATIVE PHILLIPS recalled her trip that she made with Chairman Barnes in October of 1994, that was very productive, but said that one of the greatest complaints they heard from the president to the congressional delegation and from people in the fish industry is that the ONLY fish product they received from Alaska was "fishmeal" which was from Dutch Harbor. They are crying, begging, pleading for salmon, crab or whatever we have from our state. Representative Phillips found it very distressing that since we have a direct flight to Taiwan and we have one of the richest fish resources in the world, that the only thing we ship to them is fishmeal. They told Representative Phillips that Japanese brokers are "tying up" these products. Number 495 MS. CUNNINGHAM said she would provide both committees with details of our export and that we do have salmon and crab going into that market and it's increasing every year. Most of the salmon which goes to that region is Norwegian. REPRESENTATIVE MACKIE returned to the meeting at 5:55 p.m. CHAIRMAN BARNES echoed the feelings of Representative Phillips. Chairman Barnes also understood that there is a large conglomerate there that wanted to buy Alaskan coal. COMMISSIONER HENSLEY remarked that his department felt an obligation to look into Taiwan's demands for coal. COMMISSIONER HENSLEY told of a trip to Seoul and mentioned that it is an entirely different kind of environment to function in contrast to American style of marketing. REPRESENTATIVE PHILLIPS stated that she was totally shocked and mortified that the President of Taiwan would have to be in a position to beg Alaska to export seafood to their country. Number 545 COMMISSIONER HENSLEY would like to see a trade delegation of seafood producers go to Taipei within the year. CHAIRMAN BARNES said that her and Representative Phillips also met with Taiwan's National Petroleum Institute and they were very interested helping to co-fund the building of a gas pipeline. TAPE 95-3, SIDE B Number 000 COMMISSIONER HENSLEY remarked that there should be a good opportunity for the production of that gas. CHAIRMAN BARNES said not only would they help fund building of the line, but also would buy as much of the gas that Alaska wanted to sell. Number 019 MARY PIGNALBERI, Director, Division of Tourism, Department of Commerce and Economic Development, handed out to committee members an overview of the division. She said the film program is alive and well. In the first month of this year, they had three national television commercials filming in the state. We have been successful in attracting a Canadian production company to shoot a beer commercial. REPRESENTATIVE BEVERLY MASEK wanted to know what kind of new Alaskan programs were discussed in a trip to Germany. Number 080 MS. PIGNALBERI will furnish that information, but said that it's mostly trade shows, tour operators and travel agents. REPRESENTATIVE MASEK mentioned that during a trade show to Florida by the division, the focus was that of tour passages and wanted to know if there were any other "messages" getting out to the rest of the nation. MS. PIGNALBERI said they try to promote the entire state as a package. Number 150 REPRESENTATIVE ALAN AUSTERMAN noted a concern he has heard that these trade shows overemphasize these big "POWWOW" shows. REPRESENTATIVE JERRY MACKIE was perplexed about the misperception about how Alaska was seen, not only internationally, but in the Lower 49 as well. Number 209 REPRESENTATIVE PHILLIPS reflected that on her trip to Taiwan, most of the people there understood Alaska to be much too cold with ice and snow year round to travel to. We need to have all the agencies pulling together in order for us to change the world's perception. Representative Phillips wanted to know what the division was doing to rectify a situation that would attract more frequent and more countries to more direct air service in to Alaska. MS. PIGNALBERI said they have tried to work closely with the Anchorage International Airport and with the Alaska Industrial Economic Development Corporation (AIEDC). The division has been working more in a support capacity. Number 248 COMMISSIONER HENSLEY said the Anchorage International Airport itself is responsible for its own marketing. The convention and visitors bureaus have a function. The Anchorage bureau has a plan to spend a substantial amount of money just in Taiwan. REPRESENTATIVE PHILLIPS found it appalling that the Anchorage International Airport to be one of the most uncomfortable, people unfriendly international terminals that she had ever been in and if we are going to be using that facility for attracting tourism, we're going to have to do some major re-thinking about that facility. Number 280 REPRESENTATIVE MACKIE was irritated by the fact that a few years ago our own State Department in the U.S. government issued a travel warning advisory and they listed the ALCAN Highway as one of the most dangerous places to be due to lack of facilities. He hoped somehow they could become educated that it was not primitive land anymore. Representative Mackie said it was ranked up there with Iraq and other places as the worst spots to go and that was definitely the wrong message to send. We should work with the Department of Transportation and other agencies in how to improve services. He also pointed out that the previous Administration, it seemed was at odds with the visitor's industry and he would like to see this adverse relationship between agencies turn into a more positive one. Number 309 MS. PIGNALBERI informed the committees that the department, along with the U.S. Forest Service, was going to be hosting a two-day conference at the end of March, a symposium on tourism on public lands in which one of the purposes is to bring together all of the federal and state land users, land owners, et cetera, to meet with the providers of tourism products and try to resolve some of the issues revolving around permits and other visitor functions on state and federal land. REPRESENTATIVE PHILLIPS took note that "ECO-tourism" is a growing phenomenon in the Lower 48 and would like to know if it was catching on in Alaska. MS. PIGNALBERI said that they had already been doing that and had been on the "cutting edge" before it became a buzzword. COMMISSIONER HENSLEY referred back to a comment of Representative Phillips about the level of ignorance concerning Alaska. It's not only a national phenomenon, it's an international one. It's still broad and deep. So when compounding that with a foreign language, it amounts to a large barrier. Number 330 CHAIRMAN BARNES addressed the fact that in spite of spending hundreds and hundreds of millions of dollars to promote Alaska, people still see us as a frozen iceberg. COMMISSIONER HENSLEY countered by saying that globally, it is very competitive and that other states spend a lot more promotional money then we do. He pointed out that the diminishing number of international stopovers is due in part to better aircraft being able to make longer flights and not being required to stop in Alaska. Commissioner Hensley said they are working with an airline that proposes to stop in Anchorage. Number 374 REPRESENTATIVE ELDON MULDER inquired about how Alaska ranks with the other 49 states in terms of money spent on tourism. MS. PIGNALBERI said that at one time we ranked in the top five and now were somewhere around 15-16, maybe even lower, in the country. We have dropped significantly. She added that the city of Las Vegas alone has a $98 million marketing budget. Number 390 REPRESENTATIVE JEANNETTE JAMES felt that it's not just spending the money on promoting, but we have to have the facilities in place and things for the visitors to do in order to attract more of them. She cited the example of people that come to see Mt. McKinley. It takes a "total" park experience in order for people to spread the word about having a good time. We have to address the expense side of the ledger when we talk about tourism. REPRESENTATIVE AUSTERMAN commented that friends of his from Kodiak who made a trip to California, had been told several times that they don't eat salmon anymore because they are an endangered species and this related directly back to the perception problem of Alaska. REPRESENTATIVE MACKIE cited a problem within the industry in Alaska, using the example of advertisement in which a seiner pulled in crabs with a net, and suggested that we take a hard look at ourselves before we try to convince those abroad about some of those things. He also said he would like to see something more of a concerted effort in creativity. Number 470 REPRESENTATIVE CAREN ROBINSON noted many people are coming to Alaska and spending a tremendous amount of money to go Extreme Skiing and skiing at lodges and taking helicopter rides. She wondered what the state had been doing in terms of winter marketing. MS. PIGNALBERI said that's probably where the international marketing comes into play. A lot of the appeal for the foreign visitor is the winter season. The ATMC has fall, winter, spring committee that addresses through the public relations contract and has helped the Iditarod Race. Number 480 REPRESENTATIVE ROBINSON felt that many people up north have never been to the southern parts of Alaska and vice-versa. She asked if the state was doing anything as far as "interstate promoting." MS. PIGNALBERI said that since 1975, when the convention and visitors bureaus and other regional marketing groups came on board, the division has somewhat turned that end of the business over to them to market their own regions. The focus of the division now is really out of state. CHAIRMAN BARNES announced that the next World Trade Committee meeting will be held on Tuesday, February 14, 1995, at 5 p.m. in Room 408. We will to hear HJR 12, HJR 22 and HJR 26. ADJOURNMENT There being no further business to come before the House Special Committees on World Trade and State/Federal Relations and International Trade and Tourism, CHAIRMAN BARNES adjourned the meeting at 6:35 p.m.