BILL ANALYSIS
AB 1276
Page 1
ASSEMBLY THIRD READING
AB 1276 (Skinner)
As Introduced February 27, 2009
Majority vote
ECONOMIC DEVELOPMENT 5-2
APPROPRIATIONS 11-5
------------------------------------------------------------------
|Ayes:|V. Manuel Perez, Beall, |Ayes:|De Leon, Ammiano, Charles |
| |Block, Huber, Salas | |Calderon, Davis, Fuentes, |
| | | |Hall, John A. Perez, |
| | | |Price, Skinner, Solorio, |
| | | |Torlakson |
| | | | |
|-----+--------------------------+-----+---------------------------|
|Nays:|Logue, Bill Berryhill |Nays:|Nielsen, Duvall, Harkey, |
| | | |Miller, |
| | | |Audra Strickland |
------------------------------------------------------------------
SUMMARY : Prohibits a state official, including the Governor,
from binding the state to provisions of a Proposed International
Trade Agreement without specified statutory authorization.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, no direct fiscal impact. (If a governor was unable
to get subsequent legislative authority to bind the state to a
future international trade agreement, there would be unknown
fiscal implications.)
COMMENTS :
1)Author's purpose: According to the author, international
trade agreements delve deeply into matters of state law. Past
California governors have unilaterally granted their consent
for the state to be bound to the rules regarding government
procurement contained in trade agreements even though there is
no process for this in state law and even though the
California legislative branch is charged with setting the
state's procurement policy. California has experienced the
unintended consequences associated with trade-related
preemption of state regulatory authority. AB 1276 is needed
to prevent future trade challenges against California law, and
AB 1276
Page 2
to grant the Legislature a formal role in federal-state
consultations regarding trade.
2)Distinct roles for separate branches of government: The
California Constitution provides for three distinct powers -
the legislative, executive, and judicial powers of government.
The California Constitution further states that "persons
charged with the exercise of one power may not exercise either
of the others except as permitted by this Constitution."
Legislative power is specifically vested with the California
Legislature and the executive power is vested with the
Governor.
The proponents of AB 1276 state that the decision to bind the
state to the rules of an international trade agreement is a
legislative function as it has the potential of altering the
legal rights and duties of the state, as well as setting state
policies. In making the decision, a state must evaluate its
principles and priorities, weighing environmental, labor,
human rights, foreign relations, business, and budget
consideration against the opportunities and limitations of
being bound to an agreement. This level of review is
necessary because once the state is bound to an agreement, the
state is constrained from implementing or enforcing
legislation that falls outside of the rules set forth in the
trade agreement. Further, the state is open to challenges in
foreign trade tribunals of its laws and regulations brought by
foreign businesses seeking preferential treatments as
guaranteed by the trade agreements.
As an example, California has a number of state policies and
laws relating to procurement which direct state resources to
small businesses, business located in enterprise zones, and
disabled veteran-owned business enterprises. Potentially,
these types of laws could be found to be trade barriers to
foreign businesses who want to compete for state contracts.
Proponents believe that the Governor, in his exercise of
executive powers, cannot unilaterally undertake a legislative
function.
3)Federal and state level parity: Federal law and practice
reflect the separate, yet related powers of the executive and
legislative branches. As an example, while the Administration
negotiates international trade agreements, approval from both
AB 1276
Page 3
houses of Congress is required for the agreement to be placed
in service. Treaties, which the President is empowered by the
U.S. Constitution to make, also require the advice and consent
of the Senate, which must approve the treaty by a two-thirds
majority for it to become law.
AB 1276 would seek to codify a specific role for the
California Legislature in binding the state to trade
agreements, as mirrored at the federal level. Lawmakers in
Rhode Island, Hawaii, Minnesota, and Iowa have already enacted
legislation to increase their role in decisions that would
bind their state to certain international trade agreement
provisions.
4)Undue barriers to state trade program: The California
Business, Transportation and Housing Agency (BT&H) is opposing
AB 1276, states that the bill places an unnecessary hurdle on
international trade and unnecessarily complicates processes.
BT&H also raises concerns that the bill would defy current
agreements with the WTO and existing trade agreements. A
similar bill, SB 348 (Figueroa), was vetoed by Governor
Schwarzenegger in 2005. The Governor's veto message stated:
"This bill will not accomplish its intended goal because,
under the Supremacy Clause of the U.S. Constitution,
international trade agreements are treaties that preempt state
law. However, for advice from states and local entities on
trade policy matters, the federal government has established
the Intergovernmental Policy Advisory Committee (IGPAC) which
is comprised entirely of state and local officials...The IGPAC
provides the appropriate venue for the Legislature to express
its views on international trade agreements." BTH further
emphasizes that given our current economic situation,
international trade presents a unique economic development
opportunity for California.
5)California's experience in binding its self to trade
agreements: In September of 2003, the United States Trade
Representative (USTR) sent letters to the governors of all 50
states, asking the governors to commit their states to be
covered by procurement provisions in an array of pending trade
agreements, including agreements with Morocco, Australia, five
Central American countries, five nations of the South African
Customs Union, and 34 countries in the Western Hemisphere.
AB 1276
Page 4
Governor Schwarzenegger agreed in May 2004 to bind California
to the terms of the U.S. - Australia Free Trade Agreement.
Subsequently, 21 California Legislators sent a letter to
Governor Schwarzenegger expressing concern over his commitment
of California to the procurement chapter of the U.S.-
Australia Free Trade Agreement, and asked that the Governor
not commit California to the procurement chapter of the
Dominican Republic - Central America Free Trade Agreement.
In January 2005, the USTR again requested state governors to
commit their states to trade agreements with Panama and the
Andean countries of Columbia, Ecuador, and Peru. In November
2005, Senators Figueroa and Perata wrote the Governor asking
that California not be committed to any trade agreement that
could affect California laws or lawmaking authority. Staff
understands that Governor Schwarzenegger has not agreed to
bind the state to any further agreements.
6)Checks and balances in existing trade program: In 2003, as
the result of poor economy and significant management issues
within the state's international trade program, the
Technology, Trade and Commerce Agency was eliminated,
including all authority for the state to undertake
international trade and investment activities. After years of
debate, in 2006, the Legislature and the Governor agreed to a
new international trade and investment program, SB 1513
(Romero and Figueroa), Chapter 663, Statutes of 2006.
Under the terms of the new trade program, the Legislature and
the Governor agreed that future trade activities would be
governed by certain checks and balances that were missing
during the state's earlier ill-fated efforts in trade
development. These agreements included requiring prior
legislative approval before establishing a foreign trade
office. AB 1276 is consistent with the policies and
requirements of the 2006 trade program agreement.
7)Additional information: Additional background information on
California's $1.8 trillion dollar economy, the $144.8 billion
in goods that were exported in 2008, and the state's
international trade and foreign investment program may be
found in the policy committee analysis.
AB 1276
Page 5
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916)
319-2090
FN: 0000628