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Heeding Europe's call.

Heeding Europe's Call

In 1992, the 12 nations of the European Economic Community will dismantle their remaining internal regulatory barriers and form a true common market. Though the media hype is heralding the milestone, the Western Europeans have moved diligently in this direction for decades.

Now, as the global implications of European economic union begin to dawn on entrepreneurs and policy makers from New York to Seattle, from Tokyo to Seoul, a growing number of American, Asian and European businesses are frantically positioning themselves to cash in on the anticipated opportunities.

This historic development does not create a new market as much as it makes access to 350 million Western European consumers a lot easier, and cheaper.

More specifically, benefits to American companies operating in Europe will include: increased enforcement of fair competition laws, quicker movement of new products into the marketplace, more effective deployment of human resources, freer competition in public procurement, standardization of business taxation, more competitive interest rates, an opportunity for companies with an existing presence to consolidate operations.

The economic marriage of sovereign nations from Britain to Greece probably surpasses any of the alliance-building vows taken by the crowned heads of Western Europe in bygone days (in economic implication, if not in glamour). But there's even more unfolding on the old continent.

Consider the parallel developments in the neighboring nations of Central Europe, basking and stretching in the bright sun of democracy for the first time in 40 years. Though not nearly as ready as their western neighbors to consider membership in such a union, a number have expressed interest in associate, and eventually full, membership in the European Community (EC). Add another 400 million consumers.

If the rest of the world is sitting up and taking notice of economically virile and newly awakened Europe, Alaska seems to be entirely absorbed with, some would say controlled by, the huge Asian marketplace. Any energy or resources left over for cultivating new international trading partnerships seems to be channeled almost exclusively across the Bering Straits to the economically beleaguered Soviet Union.

In fact, if you call the state's Office of International Trade and ask what it can tell you about the Alaska-Europe connection, you're bound to be told, in a nutshell, not too much. Recent inquiries to the trade office produced referral to a number of magazines with articles about the eC/1992; a copy of Alaska-Europe trade volume statistics covering the last three years; and material on the third Northern Regions Conference held in September.

Of the 250 Alaskan companies listed in the 1988-89 Alaska Trade Directory as doing some form of export business, less than 20 percent indicate they do business, or aspire to do business, in the European market. Of these, the vast majority are seafood processors for whom Europe is a distant second in importance after Asian markets.

A number of expert observers say Alaska is missing a golden opportunity by not pursuing closer ties with the Old World, especially given its newly emerging form. Donna Anderson, an international trade consultant specializing in Europe and Canada, says she finds Alaskans deeply apathetic about developments on the European continent and warns that the state could be shut out of new trade possibilities just through inertia.

"It's been very, very frustrating. I've run into walls constantly," Anderson says. "What's going on in Europe is going to have tremendous importance for the world economy. If they ignore it, it's going to cost them. It's a very exciting, very dynamic market, a very large and wealthy market."

Anderson notes that Japan has been surprisingly slow to catch on to the European phenomenon, but this is shifting radically. Now, Japan, Korea and other aggressive Asian traders, as well as other states in the Pacific Northwest, are beginning to refocus from trade strategies that emphasize the Pacific Rim perspective to look more closely at Europe.

Anderson's sense of urgency about cultivating trade with the EC is based on her perception that the new order there, second only to the United States and far ahead of Japan in overall clout, is going to drive the increasingly complex, interconnected global economy. European nations have much the same commodities to offer the world market as Alaska: fish, timber, minerals and petroleum.

"Because Europe is freeing up markets within the European Community, it gives them a competitive edge," Anderson says. "They can rationalize industry, lower prices. If American products can't be competitive in Europe, they can't be competitive worldwide. If our fish aren't competitive in Europe, are we going to be competitive in Japan?"

Charles Becker, who heads the U.S. Department of Commerce's International Trade Administration office in Alaska, notes that the state's trade statistics are revealing when it comes to the European question. Of a total trade volume of $2.6 billion last year, Alaska sold $2.4 billion worth of commodities to Asian markets. "That doesn't leave a helluva lot for Canada and the European Community," says Becker. Actually, the Euro portion was about $85 million in exports originating in Alaska.

Becker says Alaskans have demonstrated an affinity for Asian markets. "Those are easy to work. They appear to be closer and we work them. We don't work the markets in Europe, and those markets aren't going to come to us. It's a market that needs working. It will pay off, it's enormous and affluent," he adds.

Forging Links. Alaska has at least two commodities that Europeans want -- fish and timber. The problem is that Japanese and other Asian demand for the same products is so high, it keeps prices higher than Europeans want to pay. In the same process, profit margins for Alaskan businesses get squeezed and they remain largely captive to Asian, particularly Japanese, markets. (See Alaska Business Monthly, August 1990, "Trade with Japan: A Question of Balance.")

Though there is reluctance to discuss it publicly, some traders have attempted to push prices up by playing the Japanese off the Europeans. The results have been generally higher prices from the Japanese at the cost of goodwill with the Europeans. The long-term limitations of this strategy are that truly diversifying the seafood industry through value-added products sought by the European palates -- already daunting because of such costly issues as research, marketing and quality control -- will be all the harder because of the lingering concerns in Europe about Alaskan reliability.

There is another major factor in a dramatic loss of Alaska's market share in fish products bound for Europe, even as demand on the Continent has been exploding: two decades of worldwide growth in the pen-reared salmon industry.

"Production on salmon farms has skyrocketed over the last 10 years. In 1980, there was no idea farms would become so dominant," says Kim Elton of the Alaska Seafood Marketing Institute. Thanks to salmon pen-rearing in Norway, Scotland, Venezuela and other nations, estimates of Alaska's market share loss range from 20-50 percent.

Efforts are under way at ASMI to reverse this decline, and Becker sees hope for selling Alaskan fish to Europe, provided marketing is aggressive and dedicated and is backed by a stable supply of product. "A market niche still exists for our fisheries over there for what we have to sell as natural, wholesome, untainted and wild," he says.

Becker points out that pen-reared fish are chemically treated with preservatives. "There's a group of consumers who are sensitive to that, that can be milked for all it's worth. Clearly we have a market, targeted at uniquely cultured taste and people with fat pocketbooks." Attracting European tourists to Alaska is another area receiving some serious attention from Alaskan businesses. In fact, according to Anderson, dollar for dollar, tourism has the highest potential for high economic yield of any possible trade activity with the Europeans.

Anderson and others note that adventurers from many European countries, especially Germany, are attracted by the pristine wilderness and abundance of outdoor activities. Many indicate a desire to return, and statistics indicate this market is growing. Although still tiny compared to Alaska's overall visitor volume, the trickle of Europeans doubled in the last three years. In the summer of 1989, Alaska hosted 19,000 European tourists, compared to 6,900 Asian tourists.

Despite the trend and the potential, though, Anderson says state trade policy is still fixated on the Pacific Rim. She's concerned that small entrepreneurs who can't afford the high costs of marketing their attractions in Europe are being overlooked.

"to me, the policy has been misdirected. What Alaska has to offer in terms of fishing lodges and rustic wilderness appeals much more to the European mentality than to the Asian mentality," Anderson says.

Emphasizing that tourism dollars taken in by locally owned attractions and facilities stay in the state and multiply in their economic impact, Anderson says few Alaskans have noted the number of fishing lodges being purchased by German interests to serve a growing German and European market. "It's very myopic. There's a larger market over there nin Europe), and Alaska hasn't really been paying much attention to much else besides the Asian market. It's just not a priority," she adds.

Czech Challenge. While little seems to be known about Alaska's hopeful and realistic trading opportunities with Western Europe, a new Alaskan company with special entree to Central Europe is learning lessons that may pique the interest and pave the way of other entrepreneurs.

It was late last year when Jan Masek, Czech expatriate, businessman and Willow-based racer and breeder of sled dogs, looked up Anchorage attorney Frank Nosek as the pulse of democracy began to beat more strongly in Czechoslovakia and other Soviet bloc countries. Masek's ties wit the Czech resistance, which assumed the mantle of government for leading the country into a new free-market era, were close and long-standing,a nd he wanted to help. Along with Nosek, of Czech descent, he formed Masek Group International Inc., and the two traveled to Prague to see what the new government needed.

"After that trip it became obvious there were enormous needs on the part of the country and simply extraordinary markets to be filled by someone," Nosek explains. "In a sense, the proof was in the pudding, because there are foreign agents, legions of them, thousands, everybody with a briefcase from all over the world. Some American, but mostly European and Asian."

Nosek says Americans seem to sense a distant opportunity in Central Europe, but have been slow to realize the extent of immediate business prospects. By contrast, representatives of Western European, Japanese and Korean companies are there with plans and money, but seem to be stymied, he adds.

According to Nosek, eager as the government and the agents are to meet each other, business protocols have not yet developed for bringing off the connections. Also, for their part, the Czechs have been preoccupied with rebuilding civil government.

Enter two Alaskans who can literally go the head of any line forming outside Czech ministerial offices, walk in and address decision-makers as old friends. Not a bad way to do market research.

One of the first lessons this research produced, Nosek explains, is that Alaskan natural resources are too costly, at least for now, to move in Czechoslovokia or other Central European markets.

"That was an eye-opener," Nosek says. "We went from there to thinking that it made more sense for us to identify other needs of the Czech government and try to see what we could do to fill them."

Among those needs are environmental cleanup and pollution control technologies and the specialized planning and management systems to go with them, also computer hardware and software.

The Masek Group already has nurtured promising partnerships between the government and two Alaskan companies, Martech USA and Veco, to clean up old Soviet military sites. Masek is also talking with Kootznoowoo Government Services Inc., a subsidiary in Angoon that assembles IBM-compatible computers, about possible computer exports.

Though Czechoslovakia, to a certain extent, mirrors both the problems and possibilities of trading in other parts of Central Europe, nations in the West find it more attractive for a number of reasons. The country has had experience with democracy, albeit pre-dating World War II, and the Czechs have also enjoyed relative wealth and are not as basically needy as some of their neighbors.

According to Nosek, Czechoslovakia has a highly skilled work force and a generally well-educated population. He adds that many companies are being privatized and are receptive to Western business ideas.

Even better, the Czechs are fond of Americans. They have a soft spot for Alaskans, for which Nosek feels Masek Group can claim some credit. He says, "They were especially delighted to deal with Americans. They would prefer to deal with Americans over any other country. It is their view that American technology is the best in the world in almost all things. Their perception is that Alaska is sort of the purest of the United States."

Of course Masek Group's formula for European trade success is unique and as yet untested by time. But the connection with Czechoslovakia has also offered Alaskan traders in general a useful model for pursuing opportunities in a new Europe. Would-be exporters to Europe can benefit from thoughtful research into the needs and desires of potential consumers and from a willingness to consider export products often thought unconventional by many Alaskans -- services and technology.

By linking businesses not only in Alaska but also in the Lower 48 with the eager Czech market, Masek and Nosek are demonstrating that Alaska's presumed isolation need not be a barrier to profiting from global economic developments.

According to trade consultant Anderson, the challenge for Alaskan entrepreneurs is to get moving while there's still time for effective positioning in the huge European marketplace. Otherwise, she says, the Europeans themselves are going to "walk onto the global market and eat it up."
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Title Annotation:Alaska businesses are not aggressively seeking trade with Europe
Author:Richardson, Jeffrey
Publication:Alaska Business Monthly
Date:Oct 1, 1990
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