I look at the budget proposal for Commerce’s International Trade Administration (ITA) for clues about trade promotion, the National Export Initiative, the “new” trade enforcement center, and the much-hyped trade re-organization. Is there any “there”, there? Yes – and no.

We begin with a document called “The Department of Commerce Budget In Brief, Fiscal Year 2013“, a 154-page tome that proves bureaucrats have a sense of humor. One wonders how long the “Budget In Full” might be. Mercifully, we only need to look at six of those pages. The 2013 budget proposal for the entire International Trade Administration is $517 million, roughly 6% of Commerce’s $8 billion total. ITA employs a bit more than 1,800 people, fewer than 4% of the whole department. No wonder the Secretary of Commerce doesn’t pay the most attention to international trade.

But that $517 million, if it materializes, would be a 13.5% increase over what ITA has to play with in 2012. This weekend’s “leak” that $26 million is being devoted to a new Trade Enforcement Center is partially borne out. A bit less than $24 million in new money is scheduled to go into the parts of ITA known as Market Access & Compliance (MAC) and Import Administration (IA). Some of that would likely go to the new center. But watch out, that only represents a net increase of ten employees, not the 50-60 projected for the new organization.

The biggest part of ITA’s budget is marked for Trade Promotion & U.S. Foreign Commercial Service, roughly 62% of the amount asked for in 2013 or a bit more than $318 million. That would be a whopping $50.5 million increase and 38 new positions if it actually happens. Such things almost never actually happen by the time Congress is through with it, but it is a move in the right direction. Should they ever get the money, FCS wants to use it to place 21 additional commercial officers and about 90 new local staff in “hot markets” such as China, India and Brazil.

Another $18 million would go to recreating export.gov as a modern trade portal: export.gov 2.0. A mere $12.3 million would go into encouraging foreign direct investment in the United States.

Why does Stafford Springs get money from Commerce?

$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.