BILL ANALYSIS                                                                                                                                                                                                    





                                                                  AB 1276

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          GOVERNOR'S VETO
          AB 1276 (Skinner)
          As Introduced  February 27, 2009
          2/3 vote

           ECONOMIC DEVELOPMENT     5-2             APPROPRIATIONS 11-5

           
           ----------------------------------------------------------------- 
          |Ayes:|V. Perez, Beall, Block,   |Ayes:|De Leon, Ammiano, C.      |
          |     |Huber, Salas              |     |Calderon, Davis, Fuentes, |
          |     |                          |     |Hall, J. Perez, Price,    |
          |     |                          |     |Skinner, Solorio,         |
          |     |                          |     |Torlakson                 |
          |-----+--------------------------+-----+--------------------------|
          |Nays:|Logue, B. Berryhill       |Nays:|Nielsen, Duvall, Harkey,  |
          |     |                          |     |Miller, A. Strickland     |
           ----------------------------------------------------------------- 

           ASSEMBLY:      50-29      (May 28, 2009)     SENATE:   23-13      
          (September 9, 2009)      
           
          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  










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            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  
            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  










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            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  
            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  










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            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.

            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  










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            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.
           
          GOVERNOR'S VETO MESSAGE  :

          "This bill places unnecessary hurdles on international trade and  
          unnecessarily complicates processes.  Additionally, the bill  
          would defy current agreements with the World Trade Organization  
          and existing trade agreements.  The Governor's authority very  
          clearly extends to both international and administrative  
          matters, so he is well suited to represent the ideas of the  
          California population on matters of trade."


           Analysis Prepared by  :    Toni Symonds / J., E.D. & E. / (916)  
          319-2090 

                                                                FN: 0003424