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Economix: John Mitchell on global trade

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Wednesday, August 01, 2007

Driving trade with a go-kart

{safe_alt_text} By John Mitchell

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has not done a particularly good job in helping people to adjust to new global forces, technological change or simply outdated skills.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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