AUGUST 2007: ECONOMIX
Driving trade with a go-kart
By John
Mitchell
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On a Horizon Airlines shuttle recently, I was seated next to a
young man who works as the parts manager for J and J Amusements
of Salem, a company of which I had never heard. During the
trip, Dan Hansen filled me in on the business that was started
a half-century ago by two brothers, Jim and John.
Their company initially operated miniature golf, go-kart and
bumperboat parks, and was based in Southern California. Unable
to find satisfactory go-karts, the brothers got into the
manufacturing business and a search for lower costs brought
them to Salem in 1990. Since then, J and J has grown into the
largest commercial go-kart manufacturer in the world: The
company exports 10% to 15% of its output to places such
as Saudi Arabia, China, Singapore, Japan and Australia, along
with providing its customers with parts, service and assistance
in establishing parks. In 10 years, the company has grown from
15 to 25 employees (many are small-engine enthusiasts), and
they currently are buying the company in an employee stock
ownership program.
This small, growing firm is entrepreneurial and globally
successful. It’s a great example of the possibilities for
Oregon business.
The interconnectedness of the world is made obvious by the
exports and imports of goods and services; the foreign
purchases of U.S. stocks, bonds and real estate; and
Americans’ purchases of the same. But globalization is
not just about goods, services and capital. In 2007, it’s
a business concept and an emotion, as the flows of labor
— legal and illegal — continue to be a hot
political issue this summer.
It’s also an academic, political and economic issue that
is not going away. The president’s Trade Promotion
Authority expired on June 30 with the latest round of world
trade negotiations unresolved. Domestically, uneasy
beneficiaries and vocal losers pose a conundrum for politicians
as elections draw near. And the nation has not done a
particularly good job in helping people to adjust to new global
forces, technological change or simply outdated skills.
The United States uses more than it produces. Our output in
the first quarter of 2007 was $13.6 trillion annualized and
what we used (output less exports but including imports) was
$14.34 trillion. Over time, exports of goods and services
(things we do not use) are the price that we pay for imports of
goods and services (things we do use). Differences between the
value of imports and exports of goods and services are offset
by flows of investment into such things as stocks, bonds and
real estate. U.S. exports have rapidly increased over the past
few years amid strong growth overseas and weakness in the
dollar. Changes in trade-related activity this year are
anticipated to support a continued economic expansion in the
face of housing’s ongoing weakness.
When you think of trade and Oregon, what first comes to mind
are exporters such as Intel, grass-seed growers, wheat farmers,
Nike, Columbia Sportswear, and port operations from Coos Bay to
Astoria to Portland. Oregon actively sought foreign direct
investment under former governors Atiyeh and Goldschmidt, and
in a one-day legislative session in 1984, Oregon became the
first state to repeal the worldwide unitary method of taxing
multinational firms, which signaled that the state was open for
foreign direct investment.
Freightliner, Hyundai Semiconductor, Vestas and Oregon Steel
are but a few of the foreign-owned firms with operations in the
state. These firms are now household words.
But there are other businesses in the state, such as J and J
Amusements, that operate below the radar and are competitive
and successful on the national and global stage.
In a world where millions of people are experiencing rising
incomes, the demands for goods and services that are
commonplace here will continue to grow and offer chances for
Oregon firms to contribute to the economic health of the
country.
Go-karts and bumperboats are not part of the biotech,
sustainable or nanotech worlds currently in vogue in
economic-development circles, but they illustrate the
opportunities that are out there. The notion of exporting cars
and boats from Salem to China defies the conventional
perception. And it means that for some people in the world,
their first driving experience is an Oregon-made vehicle.
John Mitchell is a
contributing columnist for Oregon Business and former chief economist for US
Bancorp.
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