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Cashing in on Sovereignty

Honolulu Weekly
September 27, 1995, p. 5

By Ian Hodges

August 1995 was a watershed month for Hawaii. In the economic arena, layoffsof 600 state workers went into effect, record numbers of visitors from Asiawere reported and Hawaii's banks enjoyed their last month of safety from thethreat of interstate banking. In events of significance to sovereignty, theState Supreme Court reaffirmed the right of access by Native Hawaiians toprivate property, the deadline passed for filing individual claims forbreaches of the Hawaiian Homes trust and Nation of Hawaii leader BumpyKanahele was arrested by the federal government for allegedly "harboring atax fugitive" and then denied bail -- twice.

Although economics and sovereignty may sometimes seem only peripherallyrelated, they are actually fundamentally connected. Amidst the controversyover Kanahele's arrest, Maui Mayor Linda Lingle expressed her concerns thatthe sovereignty movement is creating a level of uncertainty that may behurting Hawaii's economy. While blaming Hawaii's economic problems on thesovereignty movement is definitely an exaggeration, it is true that questionsraised by sovereignty are inextricably linked to the economic future ofHawaii.

Hawaii is certainly not unique in facing the issue of sovereignty. Quebechas been considering secession from Canada for some time now. The currentuncertainty over sovereignty there is cited as a major reason that Quebeclost out to Salt Lake city in its bid to host the 2002 Winter Olympics. Areferendum on the issue is expected this fall and recent polls show that itwill pass if provisions for economic association with the rest of Canada areincluded.

Uncertainty comes into play in various questions about sovereignty around theworld. This is due to concerns regarding heritage, property rights, legalsystems, control over natural resources, citizenship status and sovereignimmunity.

On August 16 voters in Bermuda, fearing the loss of offshore investment,rejected independence and chose to remain a British crown colony by a marginof nearly 3-to-1. Their uncertainty, however, was minor compared to theanxiety that is occurring in Hong Kong. Many Hong Kong investors are nowinserting clauses in new partnership contracts declaring that the agreementswill not be subject to Hong Kong court jurisdiction after sovereignty istransferred to China in 1997. By June, close to half of the companies listedon the Hong Kong stock exchange had shifted their legal domiciles to Bermudain order to take of advantage of the island's corporate attractions.

The link between sovereignty and economics is perhaps most vividlydemonstrated by the current situation in the Falklands. It seems that afterlosing a brief but bloody war with Britain over the Falkland Islands in 1982,Argentina is still eager to claim the islands as its own. Earlier this yearthe Argentine government went so far as to consider paying each of theFalkland Islands' 2,000 residents $100,000 if they would vote to transfersovereignty from Britain to Argentina.

What makes control over the desolate Falklands worth some $200 million? Theanswer lies in the waters surrounding the Falklands where geologists haverecently discovered the existence of late Jurassic/Early Cretaceous anoxicmarine claystones -- certain signs of oil. So far Falkland residents haverejected the idea that their sovereignty is for sale and their localgovernment announced last month that it would open bidding for oilexploration rights on October 3. Argentina has threatened to hold acompeting bidding round, also claiming rights to the Falkland's coastalwaters.

Back home in Hawaii, another sovereignty dispute is scheduled for a showdownon October 3 -- Bumpy Kanahele's trial for "harboring a tax fugitive." Giventhe extraordinary decision to hold him without bail, the validity ofKanhele's claim that he's a political prisoner has been recognized by personsranging from the managing editor of the Star-Bulletin to the director of thenational Interfaith Prisoners of Conscience Project.

In order to maintain its sovereignty, a government needs to be the "supremelegitimate authority within a territory," and the actions of Mr. Kanahele andthe Nation of Hawaii have certainly challenged the supremacy and authority ofboth the state and federal governments in Hawaii. Challenges such as thesetend to undermine confidence that the current government is capable ofsecuring and protecting property rights. Whether or not one agrees withKanahele and the Nation of Hawaii is almost irrelevant. The questions raisedby their assertions of sovereignty will not just go away and it is the lackof satisfactory answers to these questions that poses the greatest threat toeconomic stability.

Whether one is looking at Hong Kong, the Falklands, Bermuda, Quebec orHawaii, the eventual resolution of sovereignty questions can have immediateeconomic benefits. A prime example of this can be found in South Africa. Foreign investment in property there has gone up dramatically since thecountry held its first all race elections in April of 1994. In the monthleading up to the elections, agreements were reached to protect the right toself-determination of white Afrikaners and to assure a level of sovereignstatus for the Zulu monarchy. Since a model of sovereignty for all SouthAfricans has been established, uncertainty has decreased and the pattern ofdivestment has been reversed.

In the United States, a recently resolved sovereignty dispute has led topredictions by both sides of future economic benefits. In 1991 the ChickasawNation sued the state of Oklahoma over the state's gasoline tax. Threemonths ago, on June 14, the U.S. Supreme Court ruled unanimously that a fueltax imposed on gas stations located in the Chickasaw Nation improperlyinterfered with the tribe's sovereign right to self-government. Within weeksof the supreme court's decision, both the president of the Oklahoma StateChamber of Commerce and the governor of the Chickasaw Nation were pointing tothe potential competitive economic benefits of having a sovereign nation inOklahoma. Among the advantages highlighted were the opportunity for companies to "move offshore while staying at home" and the Chickasaw Nation's abilityto create a regulatory environment from scratch -- one that would be friendlyto businesses, people and the natural surroundings.

Although the Chamber of Commerce here in Hawaii remains somewhat apprehensiveabout sovereignty, both the Hawaii Hotel Association and the Hawaii VisitorsBureau claim to be sovereignty supporters who view the creation of a Hawaiiannation as economically beneficial. In the interests of its own economicsurvival, Hawaii's business community is beginning to learn aboutsovereignty. From a purely economic point of view, supporting the creationof a sovereign nation is a strategy that is certainly preferable to jailingthe movement's leaders.

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