BILL ANALYSIS Ó
AJR 12
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ASSEMBLY THIRD READING
AJR 12 (Gatto)
As Amended August 15, 2013
Majority vote
ECONOMIC DEVELOPMENT 5-2
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|Ayes:|Medina, Campos, Daly, | | |
| |Fong, Fox | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Mansoor, Linder | | |
| | | | |
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SUMMARY : Memorializes the California Legislature's request to
the United States (U.S.) President and the U.S. Trade
Representative (USTR) to include a provision within future
international treaties, trade agreements, and other
international protocols relating to the raising of foreign
minimum wages. The resolution further calls for the U.S.
Senate to decline ratification of these agreements should they
fail to include such provisions.
FISCAL EFFECT : None
COMMENTS : This resolution expresses the California
Legislature's position that the U.S. should pursue an
international trade policy that advantages U.S. workers and
businesses and more accurately reflects current global economic
conditions by mandating higher foreign minimum wages.
As the global leader in trade, foreign investment, and business
development, the U.S.'s position on employment compensation,
especially in emerging markets, could play a significant role in
improving workers' quality of life, hastening the development of
their middle class, helping to develop a new consumer-base of
U.S. products, and reducing the flow of industries fleeing the
U.S. and other industrialized nations in search of cheaper
labor.
The policy analysis includes additional information on the
state's role in setting U.S. trade policy, the importance of
trade within the California economy, and trends in global
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development standards that could be positively affected by the
policy espoused in this resolution.
Fast Track and Calls to Update U.S. Trade Framework : The
California Legislature's opinion on U.S. trade policy is
particularly relevant as the U.S. Congress is currently
considering the granting of Presidential Trade Promotion
Authority (also known as Fast Track). Fast Track trade
authority was last passed by the U.S. Congress in 2002 and
expired in 2007. In granting Fast Track authority, it is
envisioned that the U.S. Congress will condition that authority
on a set of policy objectives. This resolution would help
inform the U.S. Congress on the priorities of the California
Legislature.
U.S. Trade Policy and the State Consultation Process : In
recognition of the difficulty and in some cases inability to
modify specific elements of already negotiated trade agreements,
Congress has directed the USTR to seek advice from states during
the negotiation process through a Governor appointed State Point
of Contract. Further, the USTR maintains nearly 30
trade-related advisory committees, including the
Intergovernmental Policy Advisory Committee on Trade (IGPAC).
The IGPAC is currently comprised of 24 state and local
officials, including members of state legislatures, state trade
directors, and related national associations. Former State
Senator and now Los Angeles City Councilmember Curren Price and
Carlos J. Valderrama, who represents the Los Angeles Area
Chamber of Commerce, are members of IGPAC.
The U.S. has trade agreements in force with 20 countries
including Australia, Bahrain, Canada, Chile, Colombia, Costa
Rica, Dominican Republic, El Salvador, Guatemala, Honduras,
Israel, Jordan, Korea, Mexico, Morocco, Nicaragua, Oman, Panama,
Peru, and Singapore. In addition, the U.S. is negotiating the
Trans-Pacific Partnership, which includes 12 countries, and has
recently (July 2013) initiated discussions on an agreement with
the European Union.
In addition to trade agreements, the U.S. maintains 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 cultivate a stronger
relationship. The Andean Trade Preference Act (ATPA) and the
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Andean Trade Promotion and Drug Eradication Act (ATPDEA) are
examples of two such trade programs which assist Bolivia,
Colombia, Ecuador, and Peru in promoting "broad-based economic
development, diversification of exports, consolidation of
democracy, and to help defeat the scourge of drug trafficking by
providing sustainable economic alternatives to drug-crop
production in beneficiary countries." This resolution proposes
that these types of trade agreements and trade preference
programs include policies that require the development and
continuing increase of minimum wages within their broader
economic development framework.
California's Role in Foreign Trade Agreements : The relevance of
individual state engagement on trade issues has increased over
the past decade as foreign trade agreements have expanded beyond
the direct import or export of a ready-for-sale product and now
include rules on issues within the traditional purview of states
including public procurement, professional licensing, and
investor rights. Under reciprocity standards, state laws
relating to environmental standards, hiring local workers,
investment practices, and buying local products, can and, in
some cases have, been challenged by foreign companies.
In the last few years, California legislative Members and
stakeholder groups have emphasized the importance of
California's engagement on trade agreements in order to ensure
California communities are not disadvantaged. As an example, in
2011 the Legislature adopted AJR 15 (Alejo), which urged the
U.S. government to consider the potential negative economic
impact of the Colombian Free Trade Agreement on the California
economy, especially as it related to the California floriculture
industry. The issue was raised, not from a protectionist
perspective, but based on the U.S.'s significant involvement
under the ATPA and the ATPDEA in the development of the
Colombian cut flower industry. Today, the Colombian cut flower
industry, with its U.S. subsidized infrastructure and $333
(589,500 pesos) per month minimum wage, competes directly with
California producers.
As illustrated in the Colombian example, the U.S. economy is
increasingly entwined with business and consumer markets in
other counties and that trade agreements and other trade
policies can have direct economic impacts on domestic workers
and businesses. This resolution proposes that the U.S. take a
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more comprehensive view of the policies and practices of other
countries in order to ensure not just a better quality of life
for their workers, but to also provide the economic foundation
for the long-term development of consumers of California and
U.S. products and services.
Wage Rates around the World : In January 2013, U.S. President
Barack Obama called for the raising of the U.S. minimum wage
from $7.25 to $9.00 per hour by 2015. Compared to other
industrialized nations, the Organization for Economic
Co-operation and Development (OECD) ranks the U.S. as ninth
behind Canada ($8.04), United Kingdom ($8.53), New Zealand
($8.63), Belgium ($9.52), Australia ($9.54), France ($10.02),
Ireland ($10.81), and Luxembourg ($11.36).
In viewing the minimum wage rates for these developed counties,
it is important to also consider the highly integrated global
economy whereby raw materials, research, production, assembly,
and distribution networks often cross a variety of national
boundaries within both industrialized and developing nations.
Product origin labels are based on percentages of where labor
and materials are sourced, reflecting the reality of
multiple-sourced products. For many workers who are employed in
countries with lesser developed commercial and industrial
sectors there are no minimum wage rate and the recession has
worsened their economic conditions. In the 2012-13 study by the
International Labor Organization (ILO), wage growth is reported
to have remained significantly below pre-recession levels and
has especially dropped in developing countries and among certain
regions. As an example the ILO reports that "a worker in the
manufacturing sector in the Philippines took home $1.40 for
every hour worked, compared to less than $5.50 in Brazil, $13.00
in Greece, $23.00 in the U.S., and $35 in Denmark."
Economic progress among the least developed countries remains
the most significant challenge. Since 1990, the United Nations
estimates that 233 million people gained employment allowing
them to move above the global extreme poverty rate ($1.25 a
day). Much of the progress (58%), however, has been in
industries that provide little long-term job security and pay
very low wages. These working environments can lead workers to
accept substandard wages and unhealthy working conditions. A
recent example of this can be found in the collapse of the
Bangladeshi Rana Plaza factory building which resulted in 1,129
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people being killed and the Tazreen factory fire in November
2012 that killed 112 people. As a result of these instances,
the U.S. suspended Bangladesh's trade privileges until certain
specific steps were taken to address the labor and public safety
deficiencies. The United Nations estimates that there are still
over a billion people in the world having an inability to obtain
basic food, shelter, health care, and education. This
resolution would incorporate the raising of minimum wage rates
into future U.S. trade agreements and treaties.
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916)
319-2090
FN: 0001725