$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.

Ad without a difference

Hawaii is overwhelmingly Democratic, has been for decades. So local and national Republicans are very excited that they have a viable candidate to take a Senate seat out here, something that has been only a dream for them since Hiram Fong left the Senate in 1977. Linda Lingle, a former two-term governor, earned good marks for supporting business and Hawaii’s economy. She is opposed in the primary by John Carroll, a former state senator, airline pilot and businessman. I know them both slightly. John is a nice guy, and I agree with his views on shipping, but Linda will be the Republican candidate. I am not sure her support for Sarah Palin four years ago will help in the general election, but Linda is a very strong campaigner with impressive financial backing.

The two main Democratic contenders are Mazie Hirono, former Lt. Governor and present Congresswoman, and Ed Case, a former Congressman. Again, I know both of them, Mazie slightly, and Ed better. It is fair to say that Mazie is the Democratic establishment candidate, which makes her rather liberal from a mainland perspective. Ed is more of a centrist, and so is viewed with suspicion by the left-leaning establishment out here. That said, they are both strong campaigners. Case vs. Lingle, or Hirono vs. Lingle, it’s going to be vicious in the fall.

There are strong, polarizing differences on economic issues among these four. Mazie Hirono, like her mentor Senator Daniel Inouye, tends to vote the party line on trade issues. (For you trade policy junkies, Hirono voted against all three free trade agreements last fall.) John Carroll and Ed Case, though in opposing parties, both want to repeal the Jones Act (or its application to Hawaii) because it raises shipping costs for anything moving into or out of the state via the U.S. West Coast (which is almost everything). Hirono supports the Jones Act and I don’t recall that Lingle did anything about it during her time as governor. Lingle was a strong supporter of trade and investment with China. Case has broader trade interests. I’m not sure about Carroll and Hirono. [Full disclosure: Ed Case is a former member of the Hawaii Pacific Export Council, which I chair, so I know his views on trade issues better than I do the others.]

There is one trade issue on which all four candidates agree, regardless of party affiliation and political spectrum. No politician in Hawaii can ignore or diss tourism – and all support Hawaii’s #1 industry and leading export earner. All have done so in state office, and both Case and Hirono have done so in Congress. If there is any topic that wins bipartisan support in Hawaii, it is tourism. Lingle, Case and Hirono have each endorsed President Obama’s new national plan to support tourism. Carroll probably has, too. Tourism is NOT a differentiating issue.

So the U.S. Chamber of Commerce decided to endorse Lingle and yesterday began fielding TV ads in her favor. What issue did they pick to emphasize? Her support for tourism! Nice flashy ad. No substance, and no suggestion of how Lingle’s support for tourism is different from her opponents, but the photography is good. There must be another agenda at work, since this is perhaps the only issue on which all the candidates can agree.

I suspect the Chamber’s support for Lingle will backfire, as she was already being accused of relying too much on financing from outside Hawaii. The Chamber ad will tend to reinforce that whether the charge is true or not. That’s not a problem for her in the primary, but could be a big issue come November. If there is an impact in the primaries, it may be to foster a suspicion of business, which would tend to favor Mazie Hirono over Ed Case. And that could put Mazie Hirono in the U.S. Senate – probably not the U.S. Chamber’s objective.

I enjoy a good steak or burger, but I don’t think about the beef trade a whole lot. I was reminded of it, however, when I saw Senator Max Baucus’ announcement last week that the United Arab Emirates is eliminating its ban on U.S. beef. The senator took appropriate credit, of course, and may have actually had something to do with it. It made me wonder where we stand on other countries’ beef restrictions.

Unfounded, unscientific restrictions on beef hurt hardworking ranchers in Montana and across the U.S. and create an unlevel playing field for U.S. beef. Simply put, American beef is 100 percent safe and the best in the world, and there is no reason for it to be banned on scientific grounds. The UAE’s decision to recognize sound science and lift its ban on U.S. beef means millions of dollars in new export opportunities for our ranchers.
- Senator Max Baucus

I recall the bad old days when Japanese negotiators kept their faces straight as they told us that American beef just couldn’t be digested by delicate Japanese stomachs – their justification for keeping U.S. steaks out of the market. The world has changed little since then, though Japan may loosen its restrictions later this year. We have heard that before. If it should happen, that’s bad news for our Australian friends who inherited the Japanese market when we were booted out over one stray Canadian dairy cow that crossed the border.

Who you calling "mad"?

The ITC did not catalog all the BSE-related restrictions in the world, but highlighted those of Japan, South Korea, the European Union, China, Russia and Mexico – all of whom exceeded the recommended restriction level established by the World Organization for Animal Health (OIE). Each had different sorts of restrictions. You can check them out in the ITC report. But are they still in place?

We have been pushing Japan to ease its BSE restrictions for several years, but to no avail so far. The current thinking is that Tokyo may relent later this year, but we have been led to believe that since at least 2009. I’m not holding my breath, though this could be a major boon to Hawaii’s cattle ranchers. The same holds true of South Korea, but here we seem to be well on the way to getting rid of the BSE trade restrictions since they were included in the U.S.-South Korea FTA. I’m not sure of the implementation schedule.

Europe‘s BSE restrictions have been hopelessly commingled with opposition to hormone-fed beef and genetically-modified beef, so it is nearly impossible to separate them out. In fact, Brussels seized on the presence of the one cow with BSE in 2003 to impose new restrictions on hormone-fed beef (hunh?). These restrictions have not been removed, though there is some hope. There is a new report to the European Parliament urging liberalized rules on beef imports from countries that have had BSE cases in the distant past, as well as a proposal that would expand U.S. sales of hormone-free beef in Europe.

China still bans U.S. beef outright, much to the joy of Australian ranchers who have enjoyed a near-monopoly in the Chinese market. Russia‘s restrictions appear to still be in place, though I have not been able to confirm this. There seems to be clear progress in Mexico. Mexican BSE restrictions remain in place, but their application to U.S. beef products has been progressively reduced to a smaller number of products. U.S. beef exports to Mexico topped $818 million in the first ten months of 2011, a 25% increase over the same period in 2010. Who says NAFTA wasn’t worth it?