> INDEPENDENCE ISSUE PAPER Independence Institute * 14142 Denver West Parkway #101 * Golden, CO 80401 « (303) 279-6536 No. 3-89 February 28, 1988 GAME PLAN FOR THE DENVER WORLD TRADE CENTER Corporate Welfare or Market Reality? By M. Gene Aldridge with John Vanderveen and Bill Artist CAUTION LIGHT FOR THE BULLET TRAIN WHY A WORLD TRADE CENTER? Introduction by the Editors Analysis by the Authors Sma11_ and midsize Colorado companies The 1980s have produced some of the seeking to export in international mar- slowest economic gains for Colorado in kets are being offered help by a glamor- several decades. A U.S. Commerce De- ous new neighbor, the Denver World Trade partment report released in October 1988 Center. The idea holds obvious allure in indicated that Colorado's income growth the state's economic doldrums. It de- rate was 5.3 percent, while the national serves to succeed. growth rate was 7.7 percent. In compari- son, the years 1974-79 saw the growth The World Trade Center has yet to prove rate for the Mountain West at 12 per- —~ it speaks the language of the customer, cent per year. Most observers agree however. Its five promoters, though com- that the boom days are over; the state mendably energetic, all tend toward the and region must get on with market big and bureaucratic; they include a state college, a state agency, @ (Continued on Page 2) federally-sponsored group, the metro chamber of commerce, and a major devel- oper. When DWTC opened three months ago with a ribbon-cutting by the Governor, RECOMMENDATIONS: FROM PAGE 11 it had no business plan, no market | studies, no membership structure, no One: Widen the trade center board | budget or permanent staff. with private-sector members. Today most of these question marks re- ‘Two: Publish a market analysis and main. And the head of the leading or- Business plan. ganization for exporters and related businesses in this part of the country Three: Aim to replace the State has now gone public with complaints Trade Office by 1992. that sponsors of the World Trade Center are freezing her group out. Four: Focus more on small and mid- ‘Size businesses; heal rivalries. DTC, touted as a “bullet train" in its early image-making phase, may derail Five: Coordinate education pro- over doubts of its substance unless the grams; end inter-campus feuds. engine can be slowed while more track is laid. Independence Institute asked three Six: Raise $200,000 for the first- > Colorado consultants, widely experienced | Year budget, project five-year in the economics and politics of inter- | needs, build an endowment. national trade, to analyze the DWTC | situation. Here is their report. See a Se Note: The Independence Issue Papers are published for educational purposes only, and the authors speak for themselves. Nothing written here is to be construed as necessarily representing the views of the Independence Institute or as an attemot to influence anv alactian ar lanisiative actinnexpansion and economic growth. But relief is not in sight. A recent survey by the Denver Association of Business Economists (Rocky Mountain News, December 10, 1988) speculates that the next three to six years will witness continued Se of Colorado's economy, despite recent efforts by the state ey cite deficiencies in the labor force, lack of growth in the Colorado base economy, and poorer quality of life as key factors contributing to the state's weak economic outlook. What should Colorado do to offset these dismal predictions? Selling overseas can be part of the answer. In a 1986 international trade pilot study, the U.S. Commerce Department ranked Colorado 29th among all states for total output of ex- ports. The newly formed Denver World Trade Center might well be a tool to improve this ranking, gain better access to world markets, and move the state toward stabi- lized and sustained growth in the coming years. But what principles should guide DWTC's development in order to give investors and taxpayers a good return on investment? For the answer, we'll need sone back- ground on two aspects of international trade. First, where are the world markets and what has been occurring within them? Second, what is the role of world trade centers generically, and the World Trade Centers Association specifically, in an effort to foster economic growth? Colorado's Export Challenge Wider markets definitely exist for Colorado products, both new and old, if help can be provided (perhaps by DMTC) in targeting international trade activities for small, medium, and large businesses in the state. New markets, both traditional and non-traditional, await our state's exports in South and Central America, the Pacific Rim and Asia, Europe, the Caribbean, and Africa. Traditional markets include Europe and other Western trade economies. The other, non-traditional markets are equally attractive, but they must be shrewedly analyzed by exporters in order to have a powerful impact on the state economy. For example, in 1987 Colorado agricultural exports were about $483 million. In that ‘sane yea? Texas agricultural: exports tothe target markets of Algeria, Mexico, Nigeria, Saudi Arabia, and Venezuela alone were $312.5 million. This may include dollars from other states because of transhipment through Gulf ports, but it is still an impressive example of what international target marketing can accom- plish in non-traditional markets. In 1987 Colorado manufacturing exports were valued just under $1.4 billion, a figure that has remained relatively static for several years. He believe that targeted marketing activities could provide a substantial increase in manufactured export activity for Colorado in the 1990s. Colorado's Governor Roy Romer is to be commended for his action in the inter- national arena. His work in Taiwan and Japan has already paid some dividends to the Colorado economy. The legislature should likewise be commended for creating the International Trade Office and for supporting the Governor in his efforts to reach beyond the traditional borders of economic development in Colorado.What seems to be missing is the extra advantage of coordination achieved when both the public and private sectors work together to develop a marketing and busi- ness plan for the state that will produce measurable results. Setting goals and priorities would help maximize the impact of scarce resources, and would provide an objective standard to answer the fundamental questions: What should be the expected return on investment and why should the taxpayer invest? Nhat are the benchmarks by which the legislature and taxpayer can judge? While export-mindedness may be new in some U.S. businesses, it is not new to Europeans and the tiger nations of Asia. They seldom design a product without first considering the international market aspects for product growth and decay. Around the world, centralized command economies are giving way to less centralized and more market-oriented economies. China has produced the Everbright Corporation in Hong Kong to act as its capital-joint venture program for international trade. This year, Ghana, West Africa, has opened bidding to the private sector for over 400 companies which were previously government-owned and controlled. Europe is opening borders for free international trade among the EEC countries, and the Soviet Union is experimenting with econonic liberation. Now is the time for Colorado to work constructively toward a common effort for international trade in the areas of agriculture, high technology, communications, manufacturing, tourisn, and mining. The key to economic growth today is to create new markets and new products in the indivisible global marketplace. Alert entrepreneurs in the Rockies already know how the game is played. One Colorado company, recognizing that money chases cheaper labor, has formed a venture in Central Anerica that provides data processing on a daily basis via satellite and express mail for businesses in Colorado. The Denver World Trade Center potential ly holds a key role in multiplying such success stories for our state and region. The World Trade Centers and Their Association The World Trade Centers Association (WTCA) is an international, non-political organization, whose stated aim, according to its handbook, is "to féster inter- national trade through the concept of world trade centers." The first three world trade centers were located in Houston, New Orleans, and Tokyo. The association was formed in 1968, and now has 128 members representing 53 countries. In 1987, 16 new world trade centers were in formation. Mutual assistance, cooperation, and the Promotion of international business relationships are the prime goals of the WICA. WICA has two major categories of membership: regular and affiliate. Within the regular membership there are four distinct groups. Operating members are those which have actual trade centers. Nenbers who have buildings under construction are classifed in the under development group. Organizations which have begun the planning phase for a world trade center and have shown sufficient resources to develop @ center are planned members. And a member which specializes in a single commodity or industry can also seek regular membership under the catagory of a commodity group. Affiliates are those groups which sponsor world trade services ire cacubsqalae arte evades ime tlccencisey ax sitarceani/Creneroion ccmerees (Text Continues on Page 6)