Asia Now, Asia the Future for Alaska’s International Trade
DATA SOURCE: Office of Trade and Economic Analysis, International Trade Administration, US Department of Commerce
What happens across the Pacific Ocean has always been important to Alaska’s export industries. For many decades, Alaska’s main international trade partners have been the major markets in Asia. As the late Alaska Governor Walter Hickel put it, “our political ties are with the United States, but our economic ties are with Asia.” Last year was no exception. In 2016, total exports from Alaska to Asian nations amounted to almost $2.7 billion (January–October data). This accounts for nearly 70 percent of the state’s total worldwide exports.
The state’s top trading partners have remained consistent for the past ten years: China, Japan, and South Korea, in that order. Alaska has trade relations with other Asian countries, of course, but at present they are considerably smaller markets for the state’s exports and they are not typically ranked in the top ten of Alaska export markets. In the future, these now smaller markets may play a larger role as their economies continue an upward trajectory and their demand for natural resources grows accordingly.
There are several factors that account for Alaska’s concentration of exports to Asia.
First, Alaska enjoys geographic proximity to Asia Pacific. There are well-established transportation lanes both by sea and air connecting Alaska to its Pacific Rim neighbors. Often, shipping distances from Alaska to Asian destinations are shorter and, thus, less expensive than those shipments originating from alternative suppliers elsewhere in the world.
Second, Alaska is resource-rich while many Asian countries are resource-poor. In some cases, these countries may lack certain vital resources altogether or may not have them in sufficient quantities to meet their needs. Indeed, Alaska, if looked at as a nation unto itself, would rank in the in the top ten worldwide for its reserves of coal, copper, zinc, lead, gold, and silver.
Third, as a part of the United States, Alaska offers political stability and minimal security risks for conducting business or making financial investments. This is an important consideration for countries relying on imports of vital natural resources. Some of Alaska’s competitors are arguably less stable.
In Asia, Alaska pioneered the concept, later adopted by dozens of other states, to establish trade offices in key markets to promote trade and investment. Alaska has the distinction of being the first American state to open a trade office in Tokyo, Japan, having done so in 1969. Alaska was also the first American state to open a trade office in Seoul, South Korea, in 1985.
Several years later, in 1989, the state established a trade presence in Taipei, Taiwan. In 2002, Alaska opened a trade office in Beijing, China. While not the first state to open such an office in China, Alaska was among the first dozen to do so, recognizing the growing importance of China as a market for Alaska natural resources and seafood.
Since statehood, Japan had been Alaska’s number one trading partner. That changed, however, in 2011 when China surpassed Japan to claim the top spot. Exports to the Middle Kingdom currently represent 25 to 30 percent of Alaska’s total overseas exports. The growth of these exports has been unprecedented in the state’s history. During the period between 2000 and 2011, what we have dubbed “The Dragon Decade,” Alaska trade with China increased from approximately $100 million to almost $1.5 billion annually. Reflecting the recent slowdown of China’s economy, it is anticipated that by the end of 2016 exports to China will have totalled approximately $1.3 billion and will continue to stay in this range for the near future.
Japan is currently the state’s second largest export market. In 2016, exports from the state reached $752 million (January-October data) followed by Korea, ranked third, at $689 million (January-October data). Other significant markets in Asia for Alaska include Thailand, Taiwan, Hong Kong, and Singapore.
In addition to being important export markets for Alaska’s natural resources and seafood, companies from Asian countries have made significant investments in Alaska over the years in a variety of different sectors, including tourism, seafood, and mining. There are more opportunities for these win-win partnerships, especially in the areas of an LNG (liquefied natural gas) project, infrastructure projects, and major tourism resort development, among others.
As Alaska looks to the future, building upon a strong foundation of mutually beneficial commercial ties with its Pacific Rim neighbors and fostering its “old friend” status with the leading economies in the region will help sustain and grow a more diversified and resilient Alaska economy.
Greg Wolf has been the Executive Director of the World Trade Center in Anchorage since 2002. Prior to joining the Center, he served as the State of Alaska’s Director of International Trade and Market Development and was the Vice President of Overseas Projects for the Anchorage Economic Development Corporation.
This article first appeared in the February 2017 print edition of Alaska Business Monthly.