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Unfair Trade Advantage: Stadium Subsidies (Part 1 of 4)

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Unfair Trade Advantage: Stadium Subsidies (Part 1 of 4)

by Robert Whiting (April 2008)

MLB enjoys certain benefits under U.S. law and custom that give it a decided advantage over the NPB in competition for the international market for players and for fans. NPB teams may be poor at making money through baseball, but the gap between them and MLB teams would not be so great if the MLB did not have what could reasonably be called "unfair trade perks."

One advantage is, of course, the stadium subsidies. Most NPB teams must pay hundreds of thousands of dollars per game in rental fees, while most MLB teams get their stadiums for free or at very little cost. Consider the Texas Rangers. When managing partner George Bush (later U.S. president) asked the city of Arlington Texas for a new ballpark to replace the minor league facility the team had been using for more than a decade, the city obligingly raised taxes to build a new $191 million dollar stadium. Had city officials refused, the implied threat was that the Rangers would be moved to another state. When the gleaming new retro ballpark was finished, it quickly became the most profitable stadium in North America, in terms of revenue stream (according to Forbes Magazine). The city of Arlington got to keep whatever economic advantages ensued from related baseball tourism as well as its identity as the home of an MLB club. The Rangers, in addition to getting a stadium to play in at no cost, were given the right to all revenue from the ballpark as well.

Consider also the Minnesota Twins. The owner of the Twins, a businessman named Carol Pohlad, has three billion dollars, and is one of the richest men in America. He could have easily paid for a new stadium all by himself, but instead insisted on getting it from Minneapolis taxpayers -- for the same reasons that the Texas Rangers got one from Arlington taxpayers, free of charge. He will get use of the new stadium at little or no rent (in itself a major revenue windfall). On top of that, he will get a major new influx of cash by charging fans higher prices to see his team play in the new park, even though it was the fans' tax money which paid for the new park. The new park will also allow Pohlad to charge more for tickets, parking, concessions and souvenirs and anything else he can think of, including of course, luxury suites. Due to all of this, the value of the Twins will increase substantially, along the same lines as the Texas Rangers who are now worth $400,000,000, or about 5 times what the team was worth before the new stadium was built. The Twins are now worth roughly $280 million, but that is set to explode when the new ballpark opens.

Most MLB teams have arrangements similar to that of the Twins and the Rangers. The municipal government of the city the team plays in helps them pay, in full or in part, because of fear of losing the team. This frees up extra money to pay for ballplayers -- be they free agent players in North America, or players from Japan. The Cleveland Indians' extra spending money helped them buy Kobayashi. Kansas City bought Yabuta. The Cubs were able to spend millions on Kosuke Fukudome, and so on. That's millions of dollars that Japanese teams did not have.

In the eyes of some analysts, this represents a substantial unfair trade practice. Says one veteran observer of MLB and NPB, "If I were the commissioner of Japanese baseball, I would file a suit with the World Trade Organization."

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