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Alaska's trade with Canada: overlooking the obvious.

Judging by the most recent statistics, trade between Alaska and Canada is small -- and dropping. But listening to Alaskans Donna Logan, Wayne Lofgren or Jim Kohler, you get the distinct impression that Canada is a sleeping trade giant offering numerous untapped markets for Alaskan entrepreneurs.

Reconciling the reality and the potential for more trade with Alaska's strapping next door neighbor is difficult. Because very few Alaskan businesses are currently profiting from a Canadian connection, there is little in the way of practical experience or expertise to inspire and inform others.

On the other hand, because today's Alaska-Canada trade volumes are low, anomalies are exaggerated. The statistical abnormalities make certain figures unreliable and misrepresent several important areas ripe for development by Alaskan entrepreneurs who have adequate capital and stamina to develop new markets.

"Canada's a very difficult market for us to analyze because there's a lot of interchange of product. There's a lot of interaction. How much of the export is for the end-consumer is difficult to determine," says Bill Aberle, who tracks trade statistics at the Alaska Center for International Business.

Alaska and Canada export similar commodities and tracing their destinations and economic impact as they move through the international marketplace is nearly impossible, Aberle explains. He acknowledges that because trade traffic with Canada is so light, deeper analysis has not been much of a priority. "Canada's just not a significant trading partner. It's of minor importance," says Aberle.

This situation persists despite approval a couple of years ago of the Free Trade Agreement between Canada and the United States. Effective Jan. 1, 1989, the agreement was intended to remove tariff and other trade barriers that time, proximity and natural affinity had not already erased.

Those who strive to keep their fingers on the pulse of Alaska-Canada trade charge that Alaska is throwing away the conspicuous virtues of increasing commerce with Canada to flirt with another less reliable potential partner, the Soviet Union. Or, that the state has put too many of its commercial eggs in the safe Asian basket, rather than take a reasonable risk in a new arena.

Wayne Lofgren, who's been developing connections across the border through family-owned Alaska Direct Transport, an Anchorage-based freight firm, calls neglect of Canadian opportunities a "disaster." Noting a strong affinity between Alaskans and residents of Northwest Territories, Yukon Territory and northern British Columbia, Loffren, says, "It's a prime area for Alaska; there's no competitive factor."

According to Ron Sheardown, Canada's honorary commercial representative in Alaska and president of Greatland Exploration, a mining consulting firm in Anchorage, Canadians have done a better job cultivating opportunities in Alaska than Alaskans have of cultivating opportunities in Canada.

"Generally, people overlook their neighbor. There hasn't been a real push on this end. I think generally the Canadians keep the flag out there," says Sheardown.

Donna Logan, an international-trade analyst and consultant, says, "I would characterize trade between Alaska and Canada as being almost embarrassing, almost non-existent." Logan is a Canadian who recently won her permanent U.S. resident status. In early August, she joined the Alaska Department of Commerce and Economic Development as an international trade specialist.

Logan estimates that Canada accounts for only 3 percent of Alaska's foreign trade and blames this state of affairs on ignorance and a tendency to focus on glamorous fad markets such as the Soviety Union. She says, "They don't look at it if it isn't sexy. Certainly the potential is there, but it's not being exploited. It's not been a priority to promote trade with Canada, but it make a lot of sense."

According to state and U.S. Department of Commerce trade statistics, Alaska exported $36 million worth of goods to Canada in 1990, a drop of $17.5 million from the year before. While mineral exports were up - and will climb dramatically this year with the Red Dog Mine in full production - fish, timber and petroleum exports all were down substantially.

Aberle says the numbers exclude re-exports - goods arriving in Alaska from foreign countries that are transhipped through Alaska to Canada. The figures do include a substantial volume of trade goods originating in the Lower 48 that pass through Alaska on their way to Canadian markets. Aberle estimates that of the $5 million worth of Canadian-bound goods credited to Alaska in the first quarter of 1991, $3 million worth of goods simply transited Alaskan ports or airports.

Figures for the state's other trading partners contain these same anomalies. But volumes and values describing Alaska's trade with Asian nations are so much larger that the transit portions don't substantially distort the picture of the trading relationships and how they have grown over time.

Ironically, Alaska's closest - and arguably most accessible - trading partner is one of the most difficult to understand. For example, Aberle points out that when Alaskan canneries are running at capacity, fishermen sell their fish to Canadian processors farther down the coast in British Columbia. That courts as an export.

On the other hand, Bob Waldrop of Silver Lining Seafoods in Ketchikan explains that when Canadians buy fish from Alaskans out on the fishing grouds, many of those transactions never make it into the statistical reporting system. Waldrop notes that some of his company's product also finds its way into the canadian market through Seattle, a route that's difficult to trace. He points out that the Canadian market more often is regarded as a competitor than as a trading partner in international fish sales.

Laurie Gray, Alaska agent for Canadian National Railroad's Aquatrain barge line, which carries freight between Whittier and Prince Rupert,

Alaska's Exports of Canada,

in thousands of dollars
Exports 1986 1987 1988 1989 1990
Fish 12,560 10,156 6,273 18,821 7,461
Timber 4,108 8,111 11,421 9,423 3,527
Petrol products 0 817 785 8,282 4,560
Minerals 27 12 32 32 100
Other 16,499 15,318 7,570 17,066 20,323
Total 33,194 34,414 26,101 53,624 35,970

Source: U.S. Census; compiled by Alaska Center for International Business. Totals may vary due to rounding.

says his manifests provide a snapshot of Alaska's current trade with Canada. While the company brings chemicals, pipe, propane, lumber, newsprint and wood products from Canada to Alaska, its backhaul generally is limited to 10 to 15 railcars of frozen fish, military munitions and machinery.

When compared with Alaska's exports to primary trading partners -- Japan ($2.4 billion in 1990), Korea ($383 million), Taiwan ($100 million) and China ($86.5 million) -- one might well ask: Why bother with Canada?

Provinces' Promise. Alaska's experts on trade development with Canada insist there are several good reasons. For example, although Canadian trade may be only a blip on the state's economic radar screen, several communities in Southeast and Interior Alaska benefit substantially from cross-border connections.

These communities receive the majority of the 47,600 summer visitors from Canada logged by the Alaska Visitor Statistics Program. While most of these travelers are vacationing, Logan says many travel to Fairbanks and other commerical centers to stock up on various commodities at favorable American prices.

"Believe you me, they're buying stuff while they're in the U.S. -- liquor, ammunition, cigarettes -- because they can get them cheaper here. They're can get them cheaper here. They're loading up with tanks of gasoline before they cross the border again," Logan says.

In Southeast, this local economic benefit is magnified by Canada-based mineral development activities that utilize Alaskan coastal towns, chiefly Juneau, Skagway and Wrangell, as support and supply bases.

According to Jim Kohler, executive director of both the Juneau Economic Development Council and the regional Southeast Conference, area businesses have barely begun to tap the benefits of a Canadian connection. "I think the potential is tremendous, but most businesses in Southeast Alaska suffer from a mental block in terms of perception of a border," says Kohler. He contends the border is much more permeable than many believe, agreeing with Login that ignorance is a bigger barrier to expanded trade than the international boundary itself.

Mining likely is Alaska's most important economic tie with Canada. Canadian companies are figuring prominently in Southeast's current mining boom, which has generated substantial new exploration and development.

Cominco, operator of the Red Dog zinc mine in northwest Alaska, and Echo Bay Exploration, whichis attempting to reopen the A-J and Kensington mines near Juneau, are two of the larger Canadian players. It's estimated that as many as 40 Alaskan mines may be controlled by Canadian interests.

Some experts note that because many Canadian mining companies are controlled by American corporate giants, Alaska's current mining surge is not being capitalized by Canadian money. But, as Sheardown points out, a key element in mining is the technical expertise to successfully develop deposits in Alaska's demanding environment, where the Canadians are in their own element. "There's a sort of natural affinity. It's a lot easier for the Canadians than for somebody from Arizona," says sheardown.

Lofgren, a consultant to Alaska Direct Transport, an Anchorage freight company delivering goods to Canada, and vice president of Alaska Direct Bus Line, which provides passenger service to Canada, feels this affinity is the key to building a more substantial relationship with Canada. Stamina is required, too. Lofgren says even with the Free Trade Agreement, dealing across the border can be challenging. He hopes his efforts at forging transport links will make it easier for others.

"The cost of doing business in the Yukon is tremendous," says Lofgren. "(But) Yukon and Alaska are very close. We put together the only link that's consistent. There's never an easy way, but we do it everyday. We're trying to make it as simple as we can, take away the hassle."

Lofgren is working to create a bonded warehouse at Beaver Creek, on the canadian side. With bonding, duties won't have to be paid until the goods are sold. Lofgren notes that Alaskan businesses could use the warehouse to ship larger loads into Canada, which would reduce transport and customs costs, and to stockpile goods closer to markets in the Yukon, Northwest Territories and northern British Columbia.

Lofgren presently is dealing in small volumes, hauling fuel, dog food, batteries and insulation. He sees opportunities in attracting Canadian visitors to Alaska, noting that many of Alaska Direct Bus Line's Alaska-bound passengers are Canadians heading for a shopping spree.

Donna Logan agrees that the potential for developing the Canadian tourist market is high. Although the recent recession has put a temporary crimp in Canadian travel spending, Logan says Canadians generally have a high level of disposable income and a disposition to travel.

"Alaska holds the same mystique to Canadians as it does to other Americans," Logan explains. "It's still the Last Frontier. It's seen as very beautiful, very clean, majestic. People save up retirement to come here. The mystique of Alaska sells very well in Canada."

Advancing Alliances. Bill Noll, Alaska's deputy commissioner for International Trade, sees expanded air links between Canada and Alaska as a critical step in the process of expanding tourist traffic. "Direct airlines from Canada would be wonderful. We have them in minimal form now to Juneau, but Anchorage-Vancouver would be dynamite," he adds.

Noll points out that the airspace and landing rights issues must be resolved in the federal arena and are chronically slow to evolve. He predicts the state's role in promoting new Canadian initiatives will be limited to providing information and networking.

Canadian trade observers such as Logan, Lofgren and Kohler say the government's role could be more substantial and more throughtful than in the past. Lofgren complains that periodic trade missions to Canada from Alaska are at best premature and often Alaska are at best premature and often are an excuse for politicians to party. He suggests there should be greater emphasis on realistic measures, such as developing the basic infrastructure that would facilitate trade.

Lofgren also criticizens trade officials for failing to consult with the few who have practical knowledge of the Canadian market. "I have yet to have one of those politicians call me and ask how they can help, or how I can help them," he adds.

Southeast economic development professional Kohler says Alaska businesses need to show more entrepreneurial zeal. He feels more "hustle" is demanded to overcome what he calls the "counter approach" to running a business, in which vendors open up and wait for the trade to come to them. "Even when they perceive markets to be there, they feel that dealing with markets in another country is too much trouble," Kohler says.

A few business people who have tried to cultivate Canadian sales have been discouraged, not realizing that adherence to a few simple precepts could have made a world of difference, he notes. Kohler says doing it alone is like trying to buy insurance without an agent. He suggests would-be traders should secure an agent to assist in networking and trouble-shooting.

"So they have a bad experience and they run away from it," Kohler says. "But it can be easy. The less homework you do, the greater the risk appears."

Kohler and others who monitor cross-border trade opportunities see Canadians as eager to do business in Alaska. Making it happen is sometimes as simple as getting the word out. He notes Canadian companies providing logistical and technical support have been willing "to shift the focus of their operation to Juneau once they know it's there, even with the same season of being invited."

While some have advocated that the best hope for boosting Alaskan exports to Canada is in value-added manufacturing, Kohler warns that it will be tough to compete with the Canadians in areas such as timber and fish processing until both the government and private sectors in Alaska and the United States match the Canadian commitment to product and market development. "We're going to lose in a head-to-head because they're ahead of the game in learning what to do with their raw resources. They've gone a long way; we're behind the curve," says Kohler.

He feels that bugs must be worked out of the Free Trade Agreement so goods and people can move efficiently and cost-effectively. "I'd maximize the Free Trade Agreement to reach as unrestricted an infrastructure for transport as possible; transportation is still severely limited and we have severely locked up the marine side," Kohler says.

According to Logan, it's critical to look beyond Alaska's closest Canadian neighbors to the nation as a whole. While in agreement that transportation infrastructure needs work, Logan says obvious immediate opportunities are going begging.

"We're not taking advantage of the opportunities for technology transfer, strategic alliances and joint ventures," she adds. Logan notes that technical innovations developed by Alaskans in logging, mineral development, fisheries, cold weather construction and oil and gas could be licensed for application in Canada.

Logan says the ease of converting cash, strong similarities in consumer tastes, a common language and similar business practices should motivate Alaskans to increase trade with Canada. But she warns that, as with any trading partner, similarities shouldn't preclude careful attention to detail and to the sensitivities of the partner. She urges Alaskan entrepreneurs to take the time to know Canadians as people and potential customers, beyond the stereotypes we hold even of people who seem like us.

"Canadians are very sensitive about their large neighbor next door. Often Americans assume that Canadians are Americans. They're not. They have a different system of government. Their politics are very different," says Logan.

While the Free Trade Agreement has yet to produce a substantial increase in business between Alaska and Canada, most experts agree its benefits will slowly be realized and eventually will lead to more commerce. Says Gray of CN Aquatrain, "It's going to have a positive impact for us and I think it'll open up a lot of opportunities for Alaskan companies."

The pioneers of Alaska-Canada trade don't yet feel the hot breath of other entrepreneurs on their backs, but they are convinced there's money to be made just next door. Says Lofgren of alaska Direct Transport, "Canada is one somebody better take a look at."
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Author:Richardson, Jeffrey
Publication:Alaska Business Monthly
Date:Sep 1, 1991
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