$26 million is pocket change, but I have to wonder where it will come from. What I hope is that it will simply be transferred from current enforcement offices that will be combined to create the new Trade Enforcement Center. What scares me is that it will come out of the hide of our already deficient trade promotion agencies. There is a myth in Washington that, if only other countries would play fair, our companies would have no problem selling whatever they wish anyplace in the world. This is complete bunk, of course. Rather than increasing “enforcement”, our tax dollars would be better spent helping our small companies get into trade or to build the trade they already have. But doing something positive is just not part of the political psyche in an election year. Any difficulties must be the fault of others – and they must be punished. It can’t be ourselves that have screwed up, can it?

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Hawaii's Sino-Centric Legislature

SB 2400 is not ready for prime time and should not be passed in its present form.

Why China? Sure, there is a media frenzy about China, but China is not the only source of money and markets out there. It is easier for Hawaii’s small companies to do business almost anywhere else in the world. Does the state have a strategy for doing business with, say, Canada, Australia, Chile, Singapore, Germany or any place else? All of these markets have plenty of willing buyers and potential investors – and all rank higher than China for ease of doing business. The World Bank ranks China as 91st in the world for overall ease of doing business, and 60th for doing business across borders. That means there are at least 59 markets out there that Hawaii’s companies should look to before they even think about China. Does the state have a strategy for helping our companies find and pick the lowhanging fruit? I don’t think so.

The bill’s focus on film and digital media; culture and the arts; education; health and medical services and research; and tourism is old-style thinking. We tried pushing those industries for eight years and have little to show for it except some increase in tourist traffic. Any strategy needs to look at what the market wants, not what we think we want to sell. We can succeed in China, but not by ignoring what China wants from us.

Hawaii needs to look at the profound difficulties that confront any small company attempting to do business in China. Can we responsibly encourage local companies to go to China when there are so many easier markets to enter in which we have a chance of competing successfully? Yes, China has a lot of money, but the same can be said of Hong Kong, Taiwan, Mexico, Brazil, Malaysia and many, many more. You don’t want to be responsible for sending neophytes into one of the toughest markets in the world.

The bill also makes no mention of a strategy for attracting investment. Trade and investment go hand-in-hand, so any economic strategy needs to examine what investment we seek. Do we know what industries we want investors for? That would be worth looking at, but it need not be restricted to investment from China. Our state needs investment from diverse sources. It doesn’t much matter if it comes from China, Canada, India, the United States or Saudi Arabia as long as it comes.

The intent of SB 2400 is laudable, but the bill lacks vision. Hawaii needs a global strategy – not just a China strategy.

What role does Hawaii’s unique culture play in attracting Chinese visitors to our islands? While sun, sea and surf are part of the equation, Hawaiian culture and history are not. The fact that Chinese officialdom has come to Hawaii (e.g., for APEC last fall) counts for something, but so does Hawaii’s relative isolation. It’s almost humorous, but Johnson tells me that China’s super rich come to Hawaii because they know they won’t attract any press while they are here. He suggests they can walk the beaches with their girlfriends and no one will recognize them. Probably true.

Five-O's HQ doesn't translate.

What do they want to see more of in Hawaii? Salespeople, hotel staff or others who speak Mandarin. To be fair, Hawaii is working on this. Sheraton has been in the forefront, and more and more of Waikiki’s high-end stores are looking for Mandarin speakers. It seems particularly frustrating at the airport. Hawaii had the same problem when Japanese visitors first came, managed to catch up and turned catering to Japanese into a very profitable business. These aren’t languages picked up quickly. (I know, it took me quite a while to learn to order lunch or give taxi instructions as an expat in Taipei.)

What is missing in Hawaii? Good Chinese food. Hawaii has some decent Chinese restaurants, but most are old-style Cantonese – and they are not in Waikiki or in major hotels where rich Chinese visitors will find them. We need top-of-the-line restaurants in Waikiki that feature the rest of China’s cuisines. And I defy you to find a decent Chinese breakfast in our hotels. Chinese visitors will try other foods, but, like most people, they want their own comfort foods.

We have plenty of Korean bars, but little other late-night entertainment. Chinese visitors tend to fly in from the west, so jet lag leads them to be up late. And they expect Vegas-style, big-name shows. Most of Hawaii’s entertainment is geared to travelers from North America who go to bed early. We have had the same complaints for years from our Japanese and Australian visitors, but little has been done about it.

As a final question, Johnson asks his Chinese friends what they think of the idea of doing business in Hawaii. He says they try to be polite, but their comments and facial expressions boil down to “Are you kidding me?”.

Seems like Hawaii has some work to do.

Washington's playbook

Here is Washington’s “new” playbook:

#1 – Appeal to the Commissioner: Aggressively use the WTO disputes process. President Obama must have read an advance copy of the Third Way report because he said much the same thing when he proposed a new Trade Enforcement Unit in the State of the Union address. Both ignore the fact that Washington has a whole passle of trade enforcement units. The United States has relied on this staple play for 65 years now. It works pretty well.

#2 – Build a stronger league: Work with other trading partners. Third Way wants Washington to conclude and implement the Trans Pacific Partnership quickly. OK. More important may be their plea for Congress to give the Administration new trade promotion authority (the current euphemism for voting up or down on trade agreements, no amendments). Good luck.

#3 – Put points on the board: Use a “Rules Plus” approach to achieve results. This one is less than clear. Third Way seems to say that Washington should unilaterally establish performance goals for China on trade restrictions and intellectual property enforcement. Good luck with that. Not sure how they think that will improve relations, but perhaps good relations isn’t their goal.

#4 – Choose the right formation: Pursue an array of results-oriented dialogue. Third Way appears to say that we should pare down the number of trade issues we raise with Beijing to reduce any scope for China to pick the low-hanging fruit and delay on the really important problems. There is also an assumption that current dialogs with China are somehow skewed in favor of China. Not sure about this.

#5 – Change the rulebook: Write new rules for current and emerging issues. Use the WTO to develop new international rules on state-owned-enterprises (SOEs) and currency manipulation. Easy to say, but any such rules could easily come back to bite you. Not to mention that currency manipulation is a question for the IMF, outside the WTO’s purview. This approach could take the rest of our lives to negotiate.

#6 – Spend more on our players: Spend wisely on new trade resources. Provide more China-specific funding for federal agencies to work on enforcement of American rights or promotion of U.S. products in China. Hard to disagree.

#7 – Promote benefits of sportsmanship: Focus on what’s important to China. Convince Beijing that it is in China’s long-term interest to play according to the WTO’s rules.

China’s leaders have … recently announced that they intend to use the WTO process to maintain China’s exports in the face of trade barriers imposed by other countries. The United States should certainly encourage China to bring its legitimate trade complaints to the WTO. But we should also stress the benefits to China of assuming a greater leadership role in the WTO. The power of China’s example in eliminating its own trade barriers, as well as a more constructive role for China in global trade negotiations, would do much to bolster the system of open trade that has helped China perhaps more than any other nation over the last decade.

Hardly a new playbook for Washington. For the most part it is decent advice to continue doing what we are doing, though it is odd that the President’s proposal for a new trade ministry isn’t mentioned.

We don’t know how the China-United States Superbowl comes out, You see, the game never ends and it is not a zero-sum game. The football analogy can only be stretched so far.