Lt. Governor Brad Owen
“Impact of Trade on the Regional Economy”
National Forum on Trade Policy
UW Global Business Center/Center for International Business & Research
Seattle, Washington
December 7, 2006

 

LISTEN (MP3 format) | WATCH (As "Netcast" on TVW)

With introduction by Bill Center, president, Washington Council on International Trade

Thank you. It’s good to see so many of you here from our state, and a big Washington welcome to all of you who have traveled to Seattle from other parts of the country this week to learn more about trade and regional prosperity, especially as practiced here in the state of Washington.

Today I am going to tell you a little about the trade climate in Washington state, both as it exists now and how I see things progressing in the years ahead.

Washington, as you may have already heard today, is the nation’s most trade-dependent state. If international trade were an earthquake, you are now practically in the epicenter.

And to continue with that analogy it is a very large rumble that is being felt not only in Seattle and Tacoma, but across our entire state. It’s been calculated that one of every three jobs here is somehow reliant on trade, probably higher in the Puget Sound region.

Just look around –signs of international trade are everywhere. If you happened to have a water view from your hotel room this morning you no doubt saw the huge cranes operated by the Port of Seattle loading and unloading container cargo onto ships that come from all over the world.

Perhaps you were doing this while sipping a cup of Starbucks coffee. Starbucks is one of the many prominent worldwide companies that are based right here.
Starbucks is the largest specialty coffee retailer in the world, with more than 12,000 stores in almost 40 countries. Starbucks employs more than 120,000 people worldwide. It also works to partner with local suppliers around the world. These efforts are the key to how Starbucks does business globally. So, decisions that are made just a mile or two away from this hotel are impacting the world economy.

And those of you who are from out of state more than likely flew in on a Boeing commercial airplane. Of course the Boeing company was founded and grew to epic size here, but a few years ago, for reasons many of us still can’t quite appreciate, the company moved its headquarters to Chicago! Even so, they still make most of their commercial airplanes in the Puget Sound region and employee many thousands of people.

Boeing remains a critical component of our regional economy and even if Boeing corporate wouldn’t agree, many of us still think of Boeing as a Washington-based company. By the way, the Boeing company alone accounts for some 50 percent of the total of this state’s exports.

Boeing and Starbucks are both examples of world economies being intertwined. We have areas of our state that have long been reliant on one or two industries, such as timber and fishing … yet with the changing world markets over the past two decades they are now forced to look at diversifying their economic base and continue to refine their existing markets.

Our ports, air and sea, our beehives of activity. We have 76 port districts in this state. Thirty three of our thirty-nine counties have port districts. Our latest trade numbers show that Washington has already posted a 37 percent increase in exports this year over last. More than $110 billion in goods were imported and exported though Washington state ports in 2004, and that figure has no doubt expanded significantly since that year. In fact we are on track to export an estimated $46 billion in Washington-originated products this year.

There are very few countries in this world that don’t receive shipments of Washington products of some kind. Our top six export destinations from Washington are Japan, Canada, mainland China, Taiwan, Ireland and the Republic of Korea. You should not be surprised that four out of six of those countries are in Asia, as these are longstanding destinations for Washington products.

But there is far more than Asia in the picture. Europe, S. America and places you may have never heard of like Montserrat, Saint Kitts and Nevis in the Caribbean or Gabon and Burkina Faso in West Africa all get exports from Washington. Yes, Washington exports products to nearly every country in the world, large and small.

Washington state has a diverse portfolio of businesses that includes information technology, aviation, advanced manufacturing, agriculture and food processing, fishing, forestry, clean energy and biotechnology.

There have been many times in recent years when changes in the world’s economy have caused setbacks in Washington’s economy.

In 1998 you may recall this thing called the Asian Economic Flu, which of course had worldwide ramifications and hit certain sectors of our economy especially hard. The fall of the Twin Towers in 2001 subsequently caused our economy to fall, as fewer airplanes were being sold and tourism travel came to a practical standstill. The spilling of apple juice imports from China into U.S. market at prices well below production reaped much havoc here with our apple industry.
But each and every time this region has faced adversity it has not been for very long. Our location as the closest port to the Far East practically ensures our economic prosperity.

As long as policies, practices and market demand rely on moving people and things across the water, over rails and high through the air, Washington is positioned in a place that most others could only dream to be.
And the opportunities can only grow with our imagination.
Earlier this week I was in the Eastern Washington town of Prosser and had a chance to reflect on our burgeoning wine industry.

This is an industry that really only began in the early 1980s. A man named Walter Clore, a horticulturist from Washington State University, is credited with being the father of Washington wine.

Dr. Clore spent 40 years trying to convince area farmers of the potential of growing wine in the Yakima Valley and in the late 70s they finally started listening to him. Dr. Clore actually predicted in 1972 that U.S. wine consumption would triple by 1999. I think, if anything, he underestimated.

The rest, as they say, is history. Thanks in no small part to Dr. Clore’s pioneering research, Washington now has 400 wineries producing about 18 million gallons a year. The economic impact of the wine industry is now estimated at about $3 billion dollars.

If you go a little to the south of here, in the Kent area, you can find huge warehouses filled to the top with pallets loaded with wine boxes awaiting shipment across the country and around the world.

Now, wherever I travel, I often promote the Washington wine industry. I tell them that Washington is the second largest producer of premium wines in the United States – but number one in quality. And I have met with several foreign delegations who are visiting Washington state specifically to learn more about the success of our wine industry in hopes of replicating it in their own country.

Long before the wine industry flourished Washington was known for its apples. Our apple industry has marketed itself as the Apple Capital of the World for more than a century now.

We also grow and process a lot of potatoes here and we have some of the most productive potato growing country in the world. In fact we produce more than 18 percent of all of the country’s potatoes in Eastern Washington and ship to markets around the world. Washington is considered the world’s largest producer of processed potato products. In fact, 40 percent of the nation’s fries come from Washington potatoes.

But perhaps the most striking example of trade on the regional economy has to do with asparagus.

Washington state for a long time has been considered the nation’s second largest producer of asparagus, behind California. But a few years ago the asparagus industry in this country was severely crippled, partly by changes in market demand from canned to fresh asparagus, partly by higher wages, but also by a change in federal policies that removed the tax on imported asparagus.

The reason for the federal trade policy was based on good intentions: It meant farmers in places like Peru, where asparagus yields are very high, received great new incentives to grow crops that were legal rather than illicit.

But for the hard-working Washington asparagus farmer it was devastating, with many hundreds of year-round jobs and thousands of seasonal jobs lost. Finally, the industry downfall forced the Seneca "Green Giant" and Del Monte canneries in southeast Washington to close their doors last year. In fact Seneca didn’t just close the plant, they disassembled it and shipped it to Peru!

Now researchers and farmers are scrambling to find ways to give the asparagus industry some new life in our state, and Congress is studying whether to re-impose the tariff. I should add here that, asparagus aside, Peru is a good friend and important trading partner with our state and I have visited there several times – in fact there is even a fire station in Trujillo called the Washington State Fire Station.

Trade factors that may cause devastation in one industry may be a boon to others. Not unlike the tides of Puget Sound, there is quite a bit of ebb and flood. Yes, we took a hit on asparagus but CAFTA, the Central American Trade Agreement, has helped Washington exporters open new opportunities in Central America.

Mexico and Korea are now open to the import of potatoes from the United States. Obviously there is an equilibrium to be achieved.

China is fast becoming one of our state’s most important trading partners. When it comes to trade with China, we are the only state in the country to maintain an actual trade surplus with that nation of 3 billion people.

When China President Hu Jintao visited our state earlier this year he had nothing but praise and at the same time announced the purchase of more than 80 Boeing aircraft. We know there is even more huge potential with China ahead.

We are looking forward to the 2008 Olympic games in Beijing because they will bring more worldwide attention to China and could result in more positive trade for Washington state.

In fact we received word just last week that no fewer than five Chinese cities plan to open offices in Washington state next year. These offices are expected to further increase business ties between our two regions.

There are many examples in Washington of people who have seized on opportunity and started businesses larger that the gross domestic products of many countries. Perhaps our best example is a little software company over across the lake, in Redmond, founded by Bill Gates and Paul Allen. Microsoft today employs about 71,000 people not only in Washington, but in locations around the world because their products are sold around the world.

Even as successful as Microsoft has become, global issues remain that challenge their bottom line. Software piracy remains rampant in China and other parts of Asia despite efforts by governments there to curb it. Why pay $300 for a copy of MS Office when you can get the same thing on the street for under five bucks?

In countries where wages are still significantly lower than they are in the United States, buying illegal software for many seems to be more of a necessity than a choice. We need to continue to work with those countries on forging practical solutions to this issue.

In our economy, examples of entrepreneurship, often fueled by the proximity and importance of all this world trade, abound everywhere.
 
My friend Irl Davis, a Gig Harbor-based electronics entrepreneur and international businessman who traveled with us on a previous trip to China, wrote a great book on international trade.

Irl says in his book that, quote, “As we can clearly see, the world is changing and the accessibility of the new world markets is becoming available to small business owners.

“Not only are these markets becoming accessible, but they are also becoming necessary to our own survival, and we must participate if we are to survive and, indeed, flourish. Never before have we seen such an expanding market, and never before have we seen so many competitors try to capture it.” Unquote.
While much of the electronics components produced by Irl’s company, A/D Electronics, are made in China they are brought to Washington state for assembly.

Irl and his business partner saw that much of what was happening with manufacturing was taking place outside of the US. They came up with a plan to help us deal with it and benefit their customers and themselves as well.
They have convinced some of their customers that they supply to let them be the entity that finds, buys the parts for their products and in some cases even assemble the product for their customer.

At the same time, they are expanding and growing their business operations in Washington state as well as abroad. It is that kind of innovative thinking that will help keep us competitive.
 
I believe it is very important to Washington state to seize upon the new market opportunities that are being presented by this changing economy. Many of our Washington communities are also finding themselves as new “players” in the world economy.

With changing world markets no longer are communities as reliant on one or two industries. The Grays Harbor area on our coast, long reliant on timber and fishing, will soon be the home for a major new biodiesel facility that will turn vegetable oil, waste oil and fats into 100 million gallons of fuel a year.

I was pleased to learn on my recent visit to Grant County in eastern Washington that they are far less reliant on agriculture, their historical base, and moving into new opportunities like the production of ethanol, the manufacture of materials for solar cell production and the opening of server farms and data centers. These are stimulating new kinds of economy and attracting new kinds of workers.

Forced to diversify in light of changes and world competitiveness, we need to continually refine our economic base and existing markets. At the same time we need to ensure that our own citizens do not lose out in the process.

We want to build here what is known as a sustainable economy.

I’ve seen sustainable business development defined as "meeting the needs of the present without compromising the ability of future generations to meet their own needs." In other words, finding measures of self-reliance and support. It is a way to ensure that what we have today will be there for our children and for our grandchildren.

As we find ways to stimulate our economy through global markets, we need to ensure that our environment and our lifestyle that we so enjoy here in Washington state are not compromised.

On a recent trade trip to Brazil we saw examples of sustainability in practice. Brazil has managed to achieve stability in energy resources by weaning itself from foreign oil.

They drill a lot of their own oil offshore, but also supplement it with ethanol produced from sugar cane. In the Brazilian city of Curitiba we saw one of the world’s most advanced mass transportation systems – they actually have dedicated lanes to buses and have achieved enormous ridership figures. Something like 85 percent of all citizens there use mass transit as their primary means of getting around.

We are in a great position, here in Washington, to learn from other countries and engage in trade at every level.

Like Freidman relates in the World is Flat, new partnerships and relationships are being formed rapidly around the world, sped along by the extensive installation of fiber optic and wireless networks, the Internet and other technologies, and a rapidly expanding and increasingly accessible brain trust in places like India and China.

Have a computer and a fast Internet connection and you can do almost anything, service-wise, in our rural areas as you can in the big city – and do it around the world! Please trust me, a lot of rural Washington is now wired for speed and there are many, many people working out of these rural and highly livable areas.

Advances in technologies – many of them being made right here in Washington state, as well as excellent research institutions like the UW and WSU to put this region in an excellent position to not only survive but excel in the global economy.

Places like the Henry Jackson School of International Studies and the Global Business Center at the UW are preparing future policy makers and business leaders. It is these people who will make the delicate dance of globalization a much easier step.

In my mind, based on my travels and discussions with people from Asia, south America and other parts of the world, our region needs to expand on what we’re doing well and diversify into new areas, like Brazil, where there is vast opportunity for new trade.

We cannot have tunnel vision on just one part of the world. We need to look for new, innovative ways to forge business relationships around the globe.

The possibilities are endless if we give ourselves opportunity to dream, endeavor to make dreams realities.

Thank you.