BILL ANALYSIS ----------------------------------------------------------------------- |Hearing Date:August 9, 2010 |Bill No:AJR | | |27 | ----------------------------------------------------------------------- SENATE COMMITTEE ON BU.S.INESS, PROFESSIONS AND ECONOMIC DEVELOPMENT Senator Gloria Negrete McLeod, Chair Bill No: AJR 27Author:Torrico As Amended:May 3, 2010 Fiscal: No SUBJECT: Colombia-United States free trade agreement. SUMMARY: Memorializes Congress that the California Legislature opposes the United States-Colombia Trade Promotion Agreement (Colombia Agreement). Existing law: 1)The United States Constitution gives the federal government the power to enter into trade agreements. Federal law requires Congress to approve international agreements. 2)Specifies that the Governor is the primary state officer representing California's interest in international affairs. 3)Specifies the Business, Transportation and Housing Agency (BT&H) as the primary state agency authorized to attract foreign investments, cooperate in international public infrastructure projects, and support California businesses, not otherwise assisted by California Department of Food and Agriculture (CDFA), in accessing markets, and requires the Secretary of BT&H to develop an international trade and investment policy. 4)Specifies that the State's Single Point of Contact (SPOC), within the executive branch, acts, in compliance with federal practice, as the liaison between the state and the Office of the United States Trade Representative (USTR) on trade-related matters. 5)Clarifies that the SPOC is often provided the opportunity to review and comment on ongoing trade negotiations and requires the SPOC, in addition to other duties assigned by the Governor, to do all of the AJR 27 Page 2 following: a) Promptly disseminate information from the USTR to the appropriate state agencies, departments, and legislative committees. b) Work with the Legislature and appropriate state agencies to review the effects of any proposed or enacted trade agreement provisions on California environment, businesses, workers, and general lawmaking authority and to communicate those findings to the USTR. c) Serve as the liaison to the Legislature on matters of trade policy oversight. 1)Requires the Office of Planning and Research (OPR) to maintain and update, a full and comprehensive list of all state agreements made with foreign governments, updated within 30 days of the effective date of each new agreement. This bill declares that: 1) Violence against trade unionists persists to this day, with over 500 unionists having been murdered during the administration of current Colombian President Alvaro Uribe. 2) The Office of the Attorney General of Colombia has secured convictions in only about 5% of the over 2,700 cases of murder of trade unionists, and in the vast majority of cases, the person convicted of the crime is not the originator of the crime, but rather carried out the order to kill. 3) Defamatory remarks regarding trade unionists and human rights defenders in Colombia delegitimize the important and valued work of human rights defenders and place individuals and entire organizations at the grave risk of physical retaliation. 4) According to a 2008 Human Rights Watch report, numerous politicians, including members of the Colombian Congress, have come under criminal investigation for collaborating with paramilitaries; the groups responsible for the majority of crimes against trade unionists. 5) According to Human Rights Watch, there is overwhelming evidence of broad, systematic, and illegal surveillance conducted by the government of Colombia against hundreds of members of human rights AJR 27 Page 3 organizations, political opposition parties and unions, as well as journalists, and even clergy. 6) The United Nations Special Rapporteur on Extrajudicial Executions, Phillip Alston, recently found that killings of innocent civilians by the armed forces have occurred throughout the country. 7) According to the International Labor Organization, the labor laws of Colombia fall short of minimum international labor standards. FISCAL EFFECT: None COMMENTS: 1. Purpose. This measure is sponsored by the California Labor Federation . According to the Author, "In Colombia, those who advocate for workers rights literally must fear for their lives. In 2009 alone there were 48 unionists murdered in Colombia. Over 500 unionists have been murdered during the administration of out-going Colombian President Alvaro Uribe. The Office of the Attorney General of Colombia has secured convictions in just 5 percent of the murder cases involving trade unionists and only after international pressure to do so. Paramilitary organizations associated with powerful local and regional economic and political interests make the threat of death all too real for workers who are simply exercising their right to organize, bargain collectively, and, if necessary, to strike. Human rights violations frequently occur and there is widespread, systematic, illegal surveillance conducted by the national intelligence of Colombia. The International Labor Organization says Colombia's labor laws fall far short of minimum labor standards." 2. Office of the U.S. Trade Representative (U.S.T.R). Created in 1962 by Executive Order as an agency within the Executive Office of the President, the USTR negotiates directly with foreign governments on internal trade agreements. The USTR consults states on provisions of a trade agreement through: direct consultation with a state Governor; a state SPOC and Intergovernmental Policy Advisory Committee (IGPAC). Currently, when a trade agreement is under negotiation, the USTR sends all correspondence and requests to Governors. If a Governor agrees to bind the state or state agency to the provisions or a procurement agreement, the USTR includes the state or state agency as a bound party in the appendix to the specific trade agreement. Past California governors have bound the state to the terms of specific government procurement provisions via the USTR directly. AJR 27 Page 4 3. U.S. Trade Agreements. The U.S. Constitution grants the federal government the power to enter into treaties and trade agreements. The power, however, is vested in the U.S. Congress to ratify trade agreements with a two-thirds vote of approval. Throughout the trade agreement negotiation process, the U.S. has potential to influence policy reforms, using a relationship with the U.S. as leverage and incentive to bring about potential and positive change. The U.S. has trade agreements in force with 17 countries including Australia, Bahrain, Canada, Chile, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Israel, Jordan, Mexico, Morocco, Nicaragua, Oman, Peru, and Singapore. Congressional approval has not been provided for trade agreements with Colombia, Korea, and Panama. Canada has also negotiated, but not ratified, a trade agreement with Colombia. Besides trade agreements, the U.S. has a number of trade preference programs that allow special access to U.S. markets for countries that are considered developing markets and/or where the U.S. wants to develop a stronger relationship. Colombia currently has access to U.S. markets through the nation's general preference provisions and the Andean Trade Preference Act (ATPA). The ATPA (enacted in 1991) is designed to assist Bolivia, Colombia, Ecuador, and Peru in their fight against drug production and trafficking by expanding their economic alternatives. In addition to trade support, the U.S. funds Plan Colombia, a multi-year initiative to reduce drug trafficking and promote development. According to the Congressional Research Bureau, more than $7 billion has been provided to Colombia (2000 to 2009) pursuant to this initiative. 4. The Columbia Agreement. According to the USTR, the Colombia Agreement was signed on November 22, 2006. When the Agreement takes effect, Colombia will immediately eliminate most of its tariffs on U.S. exports, with all remaining tariffs phased out over defined time periods. The Colombia Agreement also includes standards relating to customs administration and trade facilitation, technical barriers to trade, government procurement, investment, telecommunications, electronic commerce, intellectual property rights, and labor and environmental protection. The USTR states that U.S. firms will have better access to Colombia's services sector than other WTO Members have under the General Agreement on Tariffs and Trade. AJR 27 Page 5 Colombia's Congress approved the Agreement and a protocol of amendment in 2007. Colombia's Constitutional Court completed its review in July 2008, and concluded that the Agreement conforms to Colombia's Constitution. President Obama tasked the USTR with seeking a path to address outstanding issues surrounding the Agreement. 5. Human Rights Violations in Columbia. The United Nations' Office of the High Commissioner for Human Rights (OHCHR) has had an official presence in Colombia since 1997. The Colombia OHCHR office plays a number of roles, including serving as an observer and reporter on human rights and international humanitarian law violations. In addition to the country level-efforts of the OHCHR, the Human Rights Council of the General Assembly of the United Nations has sent representatives to Colombia to assess conditions. Most recently, the Special Rapporteur on the situation of human rights defenders, i.e. people who advocate for human rights, released a summary report on her September 2009 onsite review. During the trip, she met with senior government officials, human rights defenders and people in the communities. In her findings, she acknowledges that Colombia has made significant progress in improving the overall security of the country between 2002, when President Uribe took office, and 2008, including having a measurable decrease in the number of homicides. She also states, however, that she is deeply concerned about the widespread phenomenon of threats being made against human rights defenders (including unionists) and their families, often through pamphlets, obituaries, emails, phone calls and text messages. She states that she received numerous accounts of threats in all places she visited in the country. This phenomenon has reportedly worsened since the beginning of 2009 and this fact was corroborated to her by the Head of the National Police. The report specially addresses the plight of trade unionists and the increased threats and especially the continued practice of "enforced disappearance and execution." Also included in the report are concerns raised about the treatment of indigenous leaders; Afro-Colombian leaders; activists for displaced persons; women human rights defenders; journalists; youth activists; church workers; lesbian, gay, bisexual and transgender; and magistrates. Her recommendation to the international community is that it should continue monitoring the situation of human rights defenders, in particular the most targeted and vulnerable ones, and to express support for the work of the human rights defenders, among other AJR 27 Page 6 venues, before international and regional human rights compliance mechanisms. 6. Colombia's Workers. International labor leaders and those in the U.S. and California have repeatedly raised concerns that the Colombian government does not have sufficient laws, nor does it systematically enforce the laws it does have, in order to protect the rights and lives of trade unionists. In addition to the 48 trade unionists murdered in 2009, 29 trade unionists have been murdered in 2010. Labor leaders have stated that the Colombian government has been extremely slow to arrest and bring to trial the people who were responsible for the more than 2,700 murders of Colombian trade unionists since 1986. Many of those that have been tried have been tried in abstentia, resulting in no real justice for those who have suffered at their hands. 7. California's Trade Economy. International trade is a key component of California's $1.8 billion economy. If California were a country, it would be the 11th largest exporter in the world. Mexico is California's top trading partner, receiving $17.4 billion in goods in 2009. The state's second and third largest trading partners are Canada and Japan with $14.2 billion and $10.9 billion, respectively. Other top-ranking export destinations include China, South Korea, Taiwan, the United Kingdom, Hong Kong, Germany, and Singapore. In 2008, 2.7 million people were employed by business related to trade, transportation and utilities. Colombia's $400 billion economy supported the importation of $11.3 billion of U.S. products in 2008. Top imports from all countries to Colombia include industrial equipment, transportation equipment, consumer goods, chemicals, paper, and fuels. In 2009, $319.8 million in goods from California were exported to Colombia. ---------------------------------------------------------- | California Exports to Colombia in 2009 | ---------------------------------------------------------- |------------------------+------------------+--------------| | Product | Value ($) | Percent | |------------------------+------------------+--------------| |334 _Computers & | | 30.3 %| |Electronic Prod. | | | | |96,813,070 | | |------------------------+------------------+--------------| |325 _Chemical | 41,425,146| 13 %| AJR 27 Page 7 |Manufactures | | | |------------------------+------------------+--------------| |336 _Transportation | 38,276,120| 12 %| |Equipment | | | |------------------------+------------------+--------------| |324 Petroleum & Coal | 31,884,175| 10 %| |Products | | | |------------------------+------------------+--------------| |All Others | 111,402,388| 34 %| |------------------------+------------------+--------------| |Total | 319,800,899| 100%| ---------------------------------------------------------- ---------------------------------------------------------- |Source: TradeStats Express | | | ---------------------------------------------------------- Supporters of the Colombia Agreement state that it offers tremendous opportunities for California exporters. Most significantly, they cite a number of tariffs, which will be immediately eliminated (80%); the remaining tariffs will be phased out over 10 years. Based on information from the U.S. Department of Commerce, the following are examples of current tariffs and their proposed reductions under the Colombia Agreement: a) Computers and Electronic Products : Current tariffs are between 8 and 15%. The Colombia Agreement covers 100% of U.S. exports under the Information Technology Agreement, which will receive 100% duty free treatment immediately upon the effective date of the Colombia Agreement. b) Chemical Manufacturers : Current tariffs are between 8 and 20%. Upon the effective date of the Colombia Agreement, 82% of U.S. chemical exports will receive duty free treatment, with the remaining tariffs being phased out over 10 years. Examples of chemical and related products include pharmaceuticals, cosmetics, fertilizers, and agrochemicals. Strong economic opportunities cited in the literature include chloride, styrene, and polyethylene. c) Agricultural Products : Upon the effective date of the Colombia Agreement, 53% of tariffs on agricultural products will receive duty free treatment. As an example, this includes 100% elimination of the price band system that results in tariffs as high as 159% on U.S. dairy products. All Colombian duties on U.S. dairy products will be eliminated in 15 years. AJR 27 Page 8 8. Related Legislation. AB 2443 (Perez) requires the SPOC to provide specified Legislative committees with copies of any official position taken or comments, that any entity within the executive branch of state government provided to the USTR relating to a pending trade agreement. The measure is currently on Senate Third Reading. AB 1276 (Skinner) of 2009, would have prohibited a state official, including the Governor, from binding the state, or giving consent to the federal government to bind the state, to provisions of a proposed International Trade Agreement, including the government procurement rules, unless a statute is enacted that explicitly authorizes a state official to bind the state or to give consent to bind the state to that trade agreement. The measure was vetoed by the Governor. AJR 55 (Villines) of 2008, memorialized Congress that the California Legislature supports the Colombia Agreement. The measure was refused adoption in the Assembly Committee on Jobs, Economic Development, and the Economy. AB 3021 (Nu?ez, Chapter 621, Statutes of 2006). This bill established the six-member California-Mexico Border Relations Council (Border Council) comprised of all Agency Secretaries and the Director of the Office of Emergency Services for the purpose of coordinating activities of state agencies. The Border Council is required to report to the Legislature on its activities annually. AJR 14 (Jeffries, Chapter 73, Statutes of 2007). This resolution memorialized the President of the U.S. and Congress to enact legislation to ensure that a substantial increment of new revenues derived from customs duties and importation fees be dedicated to mitigating the economic, mobility, security, and environmental impacts of trade in California and other trade-affected states across the U.S. SB 1513 (Romero, Chapter 663, Statutes of 2006) established the California Trade and Investment Act of 2008. This bill gave authority to BTH to undertake international trade and investment activities and directed the development of a comprehensive state trade policy, implemented through a trade strategy that engages California's business community in a meaningful way. SB 1762 (Figueroa, 2006) This bill would have prohibited the Governor from binding California to provisions of international AJR 27 Page 9 trade agreements without consent from the Legislature. The measure was held in the Assembly Committee on Jobs, Economic Development and the Economy. SB 348 (Figueroa, 2005). This bill would have prohibited a state official, including the Governor, from binding the state, or giving consent to the federal government to bind the state, to provisions of a proposed International Trade Agreement, including the government procurement rules, unless a statute is enacted that explicitly authorizes a state official to bind the state or to give consent to bind the state to that trade agreement. The bill was vetoed by the Governor. 9. Arguments in Support. Supporters argue that trade agreements can provide great economic benefits to all impacted nations, or "they can create a race to the bottom, increasing unemployment and lowering wages for all workers. For an international trade agreement to generate real economic development, it must be premised upon enforceable labor standards." Supporters also note that free trade agreements can work when good paying jobs and enforceable standards are in place. 10.Arguments in Opposition. Opponents believe that current tariffs prohibit successful trading in the Colombian market and elimination of duties will create new opportunities for California exporters. Opponents also note that this resolution is not legally binding and would cast Colombia, an important trading partner, in an unproductive light and believe that the Colombia Agreement is "a critical element of the U.S. strategy to liberalize trade through multilateral, regional and bilateral initiatives." They additionally cite the rapid growth of exports to Colombia by small and medium sized U.S. firms. SUPPORT AND OPPOSITION: Support: California Labor Federation (Sponsor) American Federation State, County, Municipal Employees, AFL-CIO California Conference Board of the Amalgamated Transit Union California Conference of Machinists California Federation of Teachers California Nurses Association California Teamsters Public Affairs Council Central Labor Council, AFL-CIO, of San Bernardino and Riverside Counties AJR 27 Page 10 Engineers and Scientists of California International Longshore & Warehouse Union - AFL-CIO National Lawyers Guild, Labor & Employment Committee National Nurses Organizing Committee North Bay Labor Council - AFL-CIO Northern California District Council of the International Longshore and Warehouse Union Professional & Technical Engineers, Local 21 San Diego-Imperial Counties Labor Council AFL-CIO San Joaquin Calaveras Central Labor Council StanislaU.S. and Tuolomne Counties Central Labor Council AFL-CIO UNITE HERE! United Food and Commercial Workers Union, Western States Council Opposition: California Chamber of Commerce California Farm Bureau Federation Embassy of Colombia in Washington D.C. Gathers Strategies Palm Desert Chamber of Commerce U.S.S-POSCO Industries W.J. Byrnes and Co. Consultant:Sarah Mason