Opening Trade borders makes sense

Nobel laureate economist Vernon Smith recently gave a lecture at UAA about the evolution of economic systems. One of the most timeless economic beliefs he shared is that when goods don’t cross borders, trouble will.

North Korea and China are two examples of this theory.

North Korea is a nation surrounded by economic sanctions and barbwire. Its people are starving, unemployment is high and their political leader is acting increasingly aggressive. Neighboring China is a nation surrounded by the benefits of access to the global marketplace. Commerce is thriving and new investments in Chinese communities are coming from all directions.

According to the U.S. Commerce Department, Chinese exports to the United States have tripled since 1994. And despite concerns about the way the Yuan is valued, some of their biggest investors and largest customers are the same recognizable brands that dot commerce on the American landscape.

The same names that have been mentioned as potential Alaska investors like Intel and Microsoft are investing in capital projects, while Wal-Mart imported $12 billion dollars worth of goods from China last year. This is truly a different world.

The fall of the Berlin wall was a powerful metaphor about the elimination of barriers in this new global economy. The investment and marketing decisions that are made today are made in a whole new environment compared to fifteen years ago. Companies including those in the petroleum industry couldn’t imagine making some of the investments they’re making today.

Today there is both the political and economic stability to protect those investments. Because with the absence of walls comes full market accountability. That’s important, as financial rating services like Moody’s that monitor economic health, don’t like surprises. One negative report card can cripple your economy by chasing the investment community into the hills.  

So what have countries done to compete on the global stage?

Many nations have gotten their financial house in order, created a set of rules for their marketplace and have enforced them in order to attract foreign investment. This competition for investment has opened access to less expensive labor markets, funded new industries and created wealth in nations that never before knew the taste of free market economics.

Fifteen years ago when Alaska had 90% of the salmon market, there weren’t too many fishermen thinking about farmed salmon from Chile showing up in Alaskan grocery stores. Welcome to global competition.

And with dramatic improvements in access to technology and information, foreign countries have increased investments in education and are now producing a new generation of workers. These well-educated labor forces are providing a cost effective alternative for Fortune 500 companies who continue to source jobs offshore.  

The new age of global competition can be summed up as a well-known tale with a twist. It’s the tortoise and the hare. Except today the hare never stops to take a nap. The recent liquid natural gas partnership between Exxon Mobil and Qatar Petroleum proves that every country is now a competitor.

This means that Alaska - where our economic success rests in our ability to export our natural resources – shouldn’t fall behind while waiting for the phone to ring. And since natural gas is our next opportunity for job and wealth creation, we shouldn’t allow big donor politics get in the way of clearly identifying all of the options to get our reserves to market.

Last November there was a statewide election where voters were asked to create the Alaska Gas Line Authority. This October there was a mayoral election in Fairbanks where the question came down to doing it ourselves or giving tax breaks and waiting for others to decide. In both elections Alaskans responded overwhelmingly in favor of moving forward.

With both the White House and the Canadian government voicing opposition to key pipeline provisions contained in the federal energy bill. Now is a good time to ensure that our independent gas line authority has the necessary resources to complete its task.  

It’s time to see if it makes good economic sense for us to carry our own goods across the border.