Hawaii’s major pillars of economic support are tourism and U.S. defense activity. Hawaii has had a strong competitive advantage in these sectors thanks to its environmental beauty, historical sites and strategic location near the middle of the Pacific Ocean. A third pillar of support, agriculture, has faded in recent years. Both Sugar and Pineapple growing were strong contributors to the economy in the first three quarters of the 20th century, but have since declined sharply as low‐wage foreign competition has overcome Hawaii’s productivity and quality advantages in these crops

Tourism emerged as the major growth industry in the early 1970s, surpassing the income generating power of defense spending. Tourism’s size and share of the economy continued to increase over the subsequent two decades, making Hawaii one of the strongest and fastest growing economies in the U.S. However, in the 1990s, overcapacity in hotels and other visitor related businesses, coupled with several years of declining visitor arrivals, resulted in nearly a decade of overall economic stagnation in the regional economy. The industry recovered between 2003 and 2006 but entered another decline in 2007 as the most recent U.S. recession sapped the vitality of the state’s tourism markets.

Federal military is the second largest source of economic activity in the region. This sector still spends over $5 billion per year to maintain the nation’s strategic presence in the Pacific Region. Despite annual growth in this sector and emerging defense programs of a more technological nature in the islands, the military’s share of GDP has declined over the years.

The major declining sector has been plantation agriculture, namely sugar and pineapple growing and processing. For instance in 1970, Hawaii produced about 10.5 million tons of raw sugar valued at about $451 million adjusted to 2006‐valued dollars. By 2006, sugar production had fallen to 1.6 million tons with a value of about $50 million. Likewise the pineapple industry produced 954,000 tons of fruit in 1970 worth about $161 million when converted to 2006 dollars. By 2006 production had fallen to 185,000 tons with a value of $74 million.

Over the last several years cut backs and closures have continued in both sugar and pineapple growing. Today the largest growing activity in Hawaii agriculture is biotech oriented, seed corn research. A handful of operations have found Hawaii to be an ideal site for the development of new varieties of corn. The Hawaii Department of Agriculture estimates the value of seed corn growing at $169 million in the 2008/09 growing season, more than double the value from the 2005/06. It represented about one‐third the value of all crops grown in the state in 2008/09.

Source: 2010 the Hawaii Statewide Comprehensive Economic Development Strategy (CEDS) – Prefinal