Speech: Taking The Oregon Trail Abroad

Speech to the Prineville-Crook County
Chamber of Commerce Economic Development Committee
August 4, 2006, Meadowlakes Restaurant
Crook County Judge Scott R. Cooper

International Trade Offers Dividends For All of Oregon

(Note: This speech was preceded by an introduction by Roger Lee, Executive Director,
Economic Development for Central Oregon, regarding the participants, purpose and details
surrounding the Governor’s Trade Mission to Korea. Mr. Lee also provided brief background
information related to the relative positions of Korea and Japan as Oregon trading partners.)

Good afternoon, and thank you for asking me here today to discuss with you the recent success
of the Governor’s Trade Mission to Korea and Japan, which occurred June 24-29, 2006. It was
my privilege to accompany the Governor, senior members of the administration and leading
citizens of Oregon’s business community on this trip. As the only representative of Oregon
counties in attendance, I felt an awesome responsibility to represent all my peers in local
government as well as to represent to potential future trade partners the tremendous economic
potential of our region and state.

Let’s examine to start the question, “Why do we care about foreign investment with Japan and
Korea?”

Import and export trade with Korea in the first 5 months of 2006 accounted for a few million
dollars short of $32 billion, Oregon to federal trade statistics. Trade with Japan accounted for
more than $83 billion. Trade with the two countries in all of 2005 accounted for $257 billion.
The portion of U.S. international trade accounted for by shipments of Oregon exports to all
countries has consistently been only about 1.4 percent of the national total since 2000. Yet,
Oregon accounts for 10.0 percent of all U.S trade with Korea and 10.9 percent of all U.S. trade
with Japan.

To put those numbers in perspective, compare California’s exports to Japan, which accounted for 12 percent of the U.S. total last year while California exports to Korea accounted for 5.4 percent of the U.S. total.

Although the fact doesn’t get much coverage, it is obvious these two countries are big, big
players in Oregon’s economy and in Oregon’s continuing economic prosperity. If you removed
Japan and Korea from the Oregon equation or if you relocated the companies that supply those
markets from Oregon, you would see an instant change in the Oregon economic landscape.

So what is Oregon sending overseas?

Not surprisingly, the number one export from this state is microchips. Wheat is the second
largest export and tractor trailers are third. Somewhat surprisingly, Oregon also shipped $83
million worth of hay abroad last year as well as $73 million worth of raw lumber.

From such numbers, anyone can see that the overseas market is an important customer to this
state. And as we think about that, we should remember some key truths that any businessperson
knows:

• First, we can all agree that retaining existing businesses and business relationships is far
easier than developing and recruiting new business.
• Second, we all know that tending to your customers and maintaining your business
relationships is a constant thing. If you wait until things go south to start paying attention
to your important accounts, it’s generally too late to save the situation.
• Third, we know that the best source of new business is to draw on the relationships you
already have to expand business relationships and mutually profitable ventures.

The basic principles of business are also the basic principles of economic development. As
businesspeople, if you stop and think about it, I believe you will appreciate that the business
logic behind the Governor’s trade mission:

• By undertaking the mission, the Governor made an important effort to reach out to very
important customers of Oregon.
• Because the economic climate is good and there is a general good feeling between the
state and these two major trade partners, the Governor used this “window in time” to
strengthen ties between the Pacific Rim and Oregon.
• Finally, the Governor through this mission laid good groundwork to build upon the
existing relationship between Oregon and Korea and Japan and opened the door to the
possibility of additional business.

So, with that background, what exactly does one do on a trade mission?

Basically, you do the same thing you do when cultivating business at home: you have a lot of
lunch and dinner. You go to a lot of receptions. You exchange pleasantries and hand out a lot of
business cards. In Korea and Japan, you use chopsticks, you eat raw fish, you try to avoid the
live baby octopus, and you try hard not to think about exactly what it is you might be putting in
your mouth. You talk up the strategic and business advantages of your state, region and locality.
You try to get your customer to express his or her reservations or concerns about your area so
that you can get accurate information to the customer allaying those concerns. Most importantly, you “set the table” for future discussions and relationships that you hope will evolve eventually into productive lines of business.

In the United States and Europe, there is less of a role for government in cultivating business
relationships. We don’t see trade missions from Oregon to Nebraska or Oregon to New York or
Oregon to France because business leaders themselves initiate and manage those relationships. A governor’s delegation doesn’t add a lot of value. But Asia is different. In Asian culture, status is everything. Asians elevate high-level government officials to near reverence. In Asia, no
individual would dream of driving around a flatbed truck with a hand-painted sign criticizing the
chief elected officials. Such an individual would likely be jailed—an idea perhaps we should
adopt!

In Asia when a Governor of even a relatively small state like ours shows up at a reception to mix
and mingle, it is sufficient cause for the very top echelon of decision-makers to turn. That is what we experienced in Korea, when major media and 150 of South Korea’s top business leaders
attended the mission’s closing dinner. In Japan, the turnout was even more impressive. Some 450 people crowded into the ballroom at a top-notch hotel adjacent to the Imperial Palace to hear Governor Kulongoski’s message of welcome. It was astonishing and incredibly successful event.

For Crook County and Central Oregon, the trip was successful as well, although we were there
for a much more specific reason than to generally show the flag. For us, the signal event of the
mission took place at a luncheon the day after we arrived in Seoul.

At the luncheon, the Governor met with the chairman and top executives of TYM tractor. For
this meeting, he was joined by me, Roger and Bud Prince of Redmond Economic Development
as well as the Oregon chief of staff, the Director of Oregon Economic Development and the
Executive Director of the Port of Portland.

Here’s the scoop on TYM. The company operates in 28 countries around the world. Recently, it
consolidated U.S. operations in Redmond. The company’s bread and butter is the manufacture of flatware and cigarette filters. It also makes tractors, rice transplanters and various other farm
equipment. With distribution operations based in Redmond, the company’s long-term plans call
for construction of a future manufacturing facility in the United States. The company’s interest in the U.S. has to do with political and economic dynamics in Korea itself.

I won’t even try and explain the political side of the equation, but on the economic side, the cost
of labor in a highly educated, highly unionized environment is of increasing concern to Korean
business leaders. While we were in-country, Seoul itself was named the second-most expensive
capital in the world to live in, an indicator of the cost of doing business there. In addition, Korea
is heavily dependent on foreign oil as the main source of generating electricity. The escalating
price of oil is causing Korean companies to reconsider how to manage the cost of operations. In
doing so, the ready availability of inexpensive hydropower in this country is not lost on anyone
over there.

While none of us can say exactly what TYM’s long–term plans are, we do know that Central
Oregon is on the short list of sites where the company would like to build a future plant. Both
Redmond and Prineville are under active consideration. The company recently invested in the
purchase of 25 acres in the Tom McCall Industrial Park right outside of town. One of the reasons I wanted to go on this mission was to put Prineville squarely in front of the chairman of TYM as being very interested in pursuing an additional relationship. The company’s ultimate decision about when and where to build a 500-job manufacturing facility will roll out according to its own internal plans on its own time frame, but as an elected representative of my county, I am certainly not willing to cede the opportunity to compete for this project to Redmond, simply
because it got the distribution center. Trust me, it was not lost on the chairman of TYM that the
highest elected official in Prineville was seated next to the Governor during our hour and half
lunch. Whether the chairman noticed Redmond’s economic development director was seated in
the corner, I can’t say.

The chairman of TYM turned out to be a very pleasant fellow—a Purdue-educated renaissance
man of many talents. In addition to being chairman of multi-national company, he is also chair of
the South Korean Chamber of Commerce. And he is president of the Korean cartoonists
association. He loves the United States. He particularly loves the wide open spaces of eastern
Oregon, and for that reason, he has been here several times already. With some amusement we
learned at lunch that he, like many Koreans, is a big fan of Oregon cherries. We were astonished
to learn they cost 60 cents apiece in Korea and to which this multi-billionaire rations to his
family in units of four, three and two stems! We also learned from him about the burgeoning
Korean interest in Oregon wines. Both of these are clear opportunities which the Governor
capitalized upon with a generous offer to send both cherries and wine as gifts of the state upon
his return to Salem.

After sealing relationships with the chairman, the Central Oregon delegation left the main group
to travel to Chang Won City near Pusan to tour the TYM plant and meet with the leadership of
the company there. It was amusing to us that the Koreans kept apologizing for taking us to such a small place. The “small” city had 500,000 residents, but in their eyes it might as well have been Powell Butte.

At the plant more opportunities for our area emerged. For one thing, in discussing transportation logistics within the state, we learned about a problem on the trunk rail line coming into Central Oregon. We learned that due to limited tunnel height in two places, containers can’t be doublestacked on flatbed cars. That vastly increases the cost of shipping into Central Oregon. Fixing this is a top priority for both regional officials and for Port of Portland representatives. A meeting is scheduled with the Class One rail folks sometime in the next month to begin discussion on how to lower the floor of the tunnels involved by 12 inches to allow us to double potential container traffic into the region without having to add cars.

As we toured the plant we also learned how TYM assembles and containerizes its tractors for
shipment from ChangWon City to the Redmond TYM distribution center. One of the things I
discovered is that TYM currently ships the tractors with wheels and tire on. As a result, the
number of tractors that can go in a container is reduced, which has the effect of increasing the
ultimate cost of shipping because more containers have to be used to get the same number of
tractors here. Now, being from the home of the state’s largest tire distributor, I know that
shipping tires and wheels to Prineville is like shipping ice to Eskimos. You can bet that upon my
return home, my first call was to the vice president of sales for Les Schwab to discuss putting a
meeting together between TYM’s U.S.-based leadership and Les Schwab to talk about the
potential of putting Schwab-supplied wheels and tires on TYM tractors once they arrive
stateside. Considering that TYM plans to expand shipments of tractors to the United States to
10,000 units a year in the short term, that little bit of information alone could make the trip
worthwhile to my community’s largest employer.

While forging the relationship with TYM was my principle economic goal on this trip, it was far
from the only benefit this mission produced.

While I was off in ChangWon City touring plants and soaking up local culture with TYM
executives in the karaoke club, the Governor was engaged in numerous meetings with other
Korean and Japanese companies with business interests in Oregon. One of the first of his
meeting was with Hynix Semiconductor. Hynix is the leading manufacturer in the world of a
type of semiconductor. Its revenues in the second quarter of 2006 were about $1.67 billion. The
company recently completed a $350 million expansion in Eugene. The Governor’s meeting with
the company chairman and his offer of state assistance with workforce training helped cement
the company’s presence here—an important thing to do considering that at some point in the
future the company already has announced plans to built a second $5 billion facility somewhere
in the United States.

Another important meeting for the Governor was the opportunity to meet Hanjin Shipping
Company’s leadership. Hanjin is the largest user of shipping containers in the world. Its 2005
sales were $2.3 billion. Its commitment to use the Port of Portland is critical to the Port’s
continuing success, and make no mistake: it is a choice to use Portland instead of Seattle or San
Francisco or Long Beach or some other West Coast Port to import and export merchandise.
Hanjin’s use of Portland has significant advantages for brand-name Oregon companies like Fred
Meyer, Columbia Sportswear, Nike, Dollar Tree and Kroger. The Governor used the occasion of
his meeting to deliver the news in person to Hanjin executive that the state will soon supply
another post-panamax crane at the Port of Portland to ensure the continuing global
competitiveness of that facility.

In Japan, the Governor took time to drop in on a company called IMEX which manufactures
carbon toner in Salem. There, it was the turn of Oregonians to get a surprise. The IMEX folks
were so pleased to receive the Governor that they used the opportunity to thank him and the state with a surprise announcement of plans to invest an additional $5 million in their Oregon facility.

These were just three of something like 27 meetings the Governor conducted while the mission
was in Asia. It was an incredibly grueling schedule and really something to watch. And when he
wasn’t in meetings, he was on various cell phones back to Oregon trying to run the state.
Whatever your political opinion of the Governor, I’m here to tell you that he deserves kudos as
somebody who that week worked very hard for Oregon and for Oregonians. There is no doubt in my mind as I saw him stagger exhausted down the hall every night that he earned every nickel and then some of his $93,600 annual paycheck!

Let me conclude by suggesting to you that I think we as a state need to do more of this sort of thing. We live in a global economy. Worse yet, we share the southern border with the sixth largest economy in the world, and the world economic position of the state to the north of us is such that the President of China stops off to pay respects to Boeing, Microsoft and Gov. Gregoire
BEFORE he takes time to pay his respects to George Bush! The risk of not being competitive in
the global economy is the risk that that Oregon will simply become what many people think of
us as already: the place you fly over to get from Seattle to San Francisco.

That’s not my vision for Oregon. It’s certainly not the Governor’s and just as I want Oregon to
be profitable, I want Crook County and Central Oregon to share in that prosperity. I am pretty
sure you will agree with me that it not acceptable to live in a community where our idea of
business recruitment is to take whatever is leftover after Bend and Redmond cherry pick the list.

To ensure that doesn’t happen, have to get out there and promote ourselves. And let’s not kid
ourselves. We have a lot to offer:

• Affordable land
• Great utility rates.
• A dependable workforce.
• A reputation as a great place to live and work.

This trip was paid for out of my own
pocket. It cost me personally about $3,500, but the personal education I received in the dynamics of economic development and the value of harnessing government and the private sector in pursuit of international opportunity was invaluable.

I found the people of Korea to be warm and friendly and far more Americanized than I had ever
understood before. While this was my first trip to Korea, it was my third to Japan, yet I was
reminded once again in forceful terms of just what a dynamic and powerful economy that
country has and why it is in our national interest, politically and financially, to maintain strong
ties to that country.

Sometimes I think we in this state are victims of our own ignorance about our history. We
shouldn’t forget that the reason we are all here today is because of a global competition to
dominate trade in a particular commodity. The British, Americans, Russians and Spaniards all
tried at different times to assert their dominance over the Oregon country in order to control the lucrative fur trade. Ultimately, it was Thomas Jefferson’s decision to send a trade mission
disguised as a scientific expedition and led by Lewis and Clark that decided who would
ultimately control the Oregon country. That we are here today was because a political leader,
President Jefferson, had the foresight to boldly venture to foreign territory to explore new
economic opportunities and to seize economic advantage for our fledgling nation.
I do not think it is a far cry to suggest that the Corps of Discovery and the Governor’s Trade
Mission to Korea and Japan may each in hindsight be seen to have produced dividends. Lewis
and Clark had to portage whitewater, brave hostile conditions and nearly freeze to death while
the biggest challenges we faced were the discomfort of an airplane ride and the problem of
keeping our food balanced on unfamiliar chopsticks.

Still, each mission returned imbued with a sense of discovery and with optimism about the
possibility of new economic opportunity. For 200 plus years, Oregon has been leading edge of
charting trails into the wilderness. The work is no less important today than it was when Lewis
and Clark came this way. Oregonians of the future will be well served if future governors,
business and community leaders continue in this fine tradition of trailblazing for Oregon.