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Free Trade Zone clouding the real issue

By: Kenny Ehman

Date Posted: 1998-05-09

Okinawa has approached a critical phase in its economic development. Recent talk of moving the United States Military Facility at Naha Port to a new site in Urasoe has prompted further anticipation over the Free Trade Zone issue . The new facility would be built on reclaimed land outside of Camp Kinser. The proposal was made by Akira Sakima of the Naha Chamber of Commerce, marking the first time a concrete plan for relocation has been proposed by the chamber. The proposal brings the Naha Free Trade Zone issue to the forefront of Okinawa's development plan once again.

A Free Trade Zone is expected to create many new jobs by bringing in manufacturing to the island. The zone would cut out expensive tariffs and import taxes, lowering the cost to bring products to the zone. The area would then act as a hub for parts to be assembled and shipped to other markets in mainland Japan and Asia. The anticipated increase in trade has many government officials banking on new investment into the island to help build the manufacturing centers that would be needed for product assembly lines.

The idea has spurred new interest in Okinawa by potential entrepreneurs, but there are many that feel the Free Trade Zone would not be able to meet the expectations of the Prefectural Government. One of the foreseeable problems would be trying to compete with Singapore and Hong Kong, each of whom have some of the best Free Trade Zone facilities and management systems in the world. The ports of Singapore and Hong Kong have helped those countries to develop some of the strongest economies in Asia. However, cheap labor, high tech facilities, and little government regulation have enabled those ports to act effectively as Free Trade Zones. Okinawa has no experience in dealing with such a zone, and the cost of labor would not be able to compete with other Asian countries. Government bureaucracy and strict regulations also make investment in Okinawa less appealing than in other Free Trade Zone ports, such as the one built at former Subic Bay Naval Base in the Philippines.

Charles McDermott, Vice President of the American Chamber of Commerce, along with many other businessmen on the island, believes that the real obstacle to proper economic development on the island is with the cost of outbound freight. "The cost of shipping a container from Okinawa to Tokyo is more than shipping it all the way to L.A.," explained McDermott. This high cost would further impede the potential of a Free Trade Zone by limiting the market for manufactured goods to only Okinawa. McDermott and the growing number of people that are questioning the Prefecture's plan for a Free Trade Zone believe that the high cost of shipping freight from Okinawa to other destinations would stagnate any chance of making manufacturing and assembly plants here profitable.

What McDermott and others are calling for is not a Free Trade Zone, but a "Free Port". A Free Port would allow other shipping companies outside of Japan to carry freight from Okinawa to other destinations. "Right now only Japanese Shipping Companies are allowed to carry goods from Okinawa to mainland Japan, making it extremely expensive to ship anything to other markets. A Free Trade Zone is geared only to the 1.3 million people on Okinawa, but a Free Port would be geared to about 250 million people," explained McDermott. The 250 million consumers McDermott referred to are the markets in mainland Japan, nearby Asian countries, and Okinawa. "No matter how streamlined the manufacturing process on Okinawa becomes, if the cost of outbound freight is not lowered, Okinawa will not be able to ship anything made within the Free Trade Zone off the island and still be cost effective," McDermott stated. He also emphasized that the American Chamber of Commerce is not against a Free Trade Zone completely, but that the current plans make no mention of the "Free Port" issue, making it difficult to support the Free Trade Zone. "The only issue is that outbound freight from Okinawa must be made cheaper. The Free Trade Zone is clouding the real problem," said McDermott.

A Free Port would also enable Okinawa to take full advantage of its location within Asia. "Okinawa is located right on the edge of the continental shelf, making it an excellent place for a deep water port. 60,000 ton freighters could come into Okinawa via the east coast, and products could be shipped out regionally from the west coast. Okinawa could become a depot station, and its cheap cost for storage would enable it to become a regional ware house," said McDermott. The deep water port would give Okinawa a strategic advantage over other countries lacking one. Storing and moving products to and from Okinawa would also create jobs and facilitate trade and investment.

This idea seems much more economically sound and viable for Okinawa. The growing population will only continue to make the problem of unemployment worse, and without any natural resources or major manufacturing on the island the Prefecture will find it harder to stimulate the economy outside of tourism. It is time the Prefecture begin to put realistic proposals forward and bring in more outside experts in the field of international trade.

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