BILL ANALYSIS Ó
AB 337
Page 1
Date of Hearing: January 7, 2014
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT AND THE ECONOMY
Jose Medina, Chair
AB 337 (Allen) - As Amended: January 6, 2014
SUBJECT : International Trade Strategy for California
SUMMARY : Adds a required element to the state's international trade
and investment strategy (ITI Strategy). The new requirement is an
evaluation of the ports of entry to the state and their capacity for
handling international trade, including industrial and postconsumer
secondary materials, originated in or destined for other states. This
new required element would be included in the second update of the
strategy, which should occur no later than February 1, 2019.
EXISTING LAW :
1)Requires the Governor's Office of Business and Economic Development
(GO-Biz) to provide the Legislature with an ITI Strategy by February
2014 and updated at least once every five years.
2)Requires the ITI Strategy to, at a minimum, include the following:
a) Policy, goals, objectives and recommendations;
b) Measurable outcomes and timelines for meeting the ITI Strategy
goals, objectives, and actions;
c) Identification of key stakeholder partnerships that will be
used to implement the goals and objectives;
d) Identification of impediments for achieving the goals and
objectives;
e) Identification of options for funding recommended actions; and
f) Identification of an international trade and investment
organizational structure.
3)Makes findings and declarations that developing markets for
recyclable materials creates opportunities that will reindustrialize
California and has the capability of creating over 20,000 jobs in
California's manufacturing sector, an additional 25,000 jobs in the
sorting and processing fields, and an unestimated number of jobs in
other fields. Market development includes activities that
strengthen demand by manufacturers and end-use consumers for
recyclable materials collected by municipalities, nonprofit
organizations, and private entities.
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4)Defines "postconsumer waste material" as any product generated by a
business or a consumer which has served its intended end use, and
which has been separated from solid waste for the purposes of
collection, recycling, and disposal, and which does not include
secondary waste material.
5)Defines "secondary waste material" as industrial byproducts which
would otherwise go to disposal facilities and wastes generated after
completion of a manufacturing process, but does not include
internally generated scrap commonly returned to industrial or
manufacturing processes, such as home scrap and mill broke.
FISCAL EFFECT : Unknown
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COMMENTS :
1)Central Policy Question : This measure proposes expanding the ITI
Strategy to include an evaluation of the state's port of entry
capacity for handling import and export of products into and through
California. In doing so, the author is structurally changing the
strategy mandate by including specific economic components, namely
infrastructure. The current statutory construction is not specific
relative to the economic elements of the strategy and, instead,
defines organizational elements, i.e. goals, timelines, and funding
options.
To the extent that infrastructure related issues are addressed, it
may also be appropriate to include the other drivers of the economy
in order to ensure the strategy undertakes a comprehensive view of
state support for trade and foreign investment. It should be noted
that the current ITI Strategy does not include infrastructure,
although few would argue the two issues are not related. Below are
additional details about the state's trade economy, the existing ITI
Strategy, background on ports of entry and recycled materials, and a
description of how the ITI Strategy is connected to other planning
documents.
2)California's Trade Economy : California's $2 trillion economy
naturally functions as an independent nation and is highly dependent
on industry sectors that participate within the larger global
economy. In fact, compared to other nations, California has one of
the 10 largest economies in the world, due to it being a top-tier
trade partner, a best-in-class investment location, a high quality
producer of goods and services, and the home and key access point
for a massive consumer-base. In 2012, California exported $162
billion in products to over 220 foreign countries. While California
has been significantly impacted by the recession, exports continued
to increase in almost every quarter from 2010 through 2012.
It is estimated that one in five manufacturing jobs in California is
related to trade. Goods movement supports employment, business
profit, and state and local tax revenue. The logistics industry is
responsible for hiring 73,000 workers. California businesses rely
heavily on the state's ports and their related transportation
systems to move manufactured goods. Firms rely on fast, flexible,
and reliable shipping to link national and global supply chains and
bring products to the retail market. Transportation breakdowns and
congestion can idle entire global production networks.
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Changes in U.S. and global trade patterns and the continuing
development of foreign markets place challenges on California's
goods movement and IT systems. These challenges are only expected
to become greater as the rate of innovation within manufacturing,
transportation, and communication technologies gets faster and the
ability of multiple geographic locations to successfully use these
technologies expands. California's historic and singular dominance
is diminishing as the state's infrastructure, particularly as our
ports of entry, fail to keep pace.
3)Export of Industrial and Post-Consumer Secondary Materials : Among
other issues related to the workings and competitiveness of
California ports of entry, AB 337 singles out the study of how
industrial and post-consumer secondary materials are imported and
exported through these ports. The California Department of
Resources, Recycling and Recovery (CalRecycle) has been tracking the
export of recycled materials for nearly a decade. While there is
not an exact match between what is currently tracked and analyzed,
CalRecycle's work does serve as a basis for further research.
For discussion purposes, it may be helpful to define industrial and
post-consumer secondary materials. Industrial materials include
anything having to do with the business of manufacturing products.
Post-consumer materials refer to materials or finished products that
have served their intended use and have been diverted or recovered
from waste destined for disposal. Secondary materials are
manufactured materials that have been used at least once and could
be used again. Examples of these materials include high-grade
paper, mixed paper, plastics, glass, tire and rubber scrap, used oil
and grease, batteries, copper wire, ferrous and nonferrous metals.
The recovery and use of industrial and post-consumer secondary
materials have become significant business between countries and
California serves as a major hub within the movement of recycled
materials from U.S. states (including California) to foreign
markets.
Sea-borne exports of all commodities shipped from California were
valued at $103 billion (71 million tons) in 2012 and over $8 billion
(nearly 20 million tons) of that was recycled materials. This
reflects an 11% decrease in volume from 2011. Approximately 42% of
the U.S. recycle exports by weight (37% by value) passed through
California ports of entry in 2012. China, Taiwan, and Korea receive
87% of California's sea-borne recycles.
The author may wish to add language that reflects the existence of
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one or more reports on ports including CalRecycle's California
Exports of Recycled Materials and the Transportation Agency's Goods
Movement Action Plan (GMAP), which is discussed below. It may also
be helpful to add definitions for industrial and post-consumer
secondary materials.
4)U.S. and California Ports : Nationally, the Port of Los Angeles
continued to hold the top rank in terms of two-way trade in 2010
(valued at $237 billion). It is followed by JFK International
Airport ($162 billion) and the port of Chicago ($135 billion). Data
on California's other major ports are as follows: Long Beach ($89
billion, ranked 9th); LAX ($77 billion, ranked 12th); San Francisco
International Airport ($50 billion, ranked 18th); Port of Oakland
($40 billion, ranked 25th); Otay Mesa Station ($31 billion); and
Calexico-East ($10 billion).
In terms of container activity, the Los Angeles-Long Beach container
port ranked 6th globally, behind Shanghai, Singapore, Hong Kong,
Shenzhen and Busan. Dollar value is just one way to look at goods
movement in assessing trends; it is also important to look at
growth. The chart below - Growth at Largest North American
Container Ports, 2006-2010, shows that California ports are actually
losing market share.
---------------------------------------------------------------------
| Growth at Largest North American Container Ports (2006-2010) |
---------------------------------------------------------------------
|-----------------------------------------------------+--------------|
| Port of Entry | Percent |
| | Change |
|-----------------------------------------------------+--------------|
|Houston, Texas | 12.8% |
|-----------------------------------------------------+--------------|
|Los Angeles, California | -7.5% |
|-----------------------------------------------------+--------------|
|Long Beach, California | -14% |
|-----------------------------------------------------+--------------|
|Manzanillo, Mexico | 20.8% |
|-----------------------------------------------------+--------------|
|New York/New Jersey | 3.9% |
|-----------------------------------------------------+--------------|
|Oakland, California | 2.5% |
|-----------------------------------------------------+--------------|
|Savannah. Georgia | 30.8% |
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|-----------------------------------------------------+--------------|
|Seattle, Washington | 7.4% |
|-----------------------------------------------------+--------------|
|Vancouver, Canada | 9.2% |
|-----------------------------------------------------+--------------|
|Virginia (reflects 2010 acquisition of APMT Norfolk) | |
--------------------------------------------------------------------
---------------------------------------------------------------------
|Source: The California Trade |
|Coalition |
---------------------------------------------------------------------
5)Doubling Exports in Five Years : In January 2010, the President
announced a national goal of doubling U.S. exports within five
years, setting a 2015 target for U.S. exports of $3.14 trillion. In
accomplishing this goal, the federal government has and will
continue to implement new programs, targeting existing trade related
activities, and increasing funding and technical assistance within
its current programs.
For California, the second largest exporter of products in the U.S.
and the largest receiver of foreign direct investment in the nation,
this federal goal could result in significant new trade and
investment opportunities. California has already received nearly $4
million in federal funds to administer a state export assistance
program for small businesses. Since the announcement of the new
national goal, exports from California were up $41 billion.
Further, with two new broad-based trade agreements being negotiated
and implemented (the Trans-Pacific Partnership and the Transatlantic
Trade and Investment Agreement), California ports will face even
greater pressure to perform.
6)The Current ITI Strategy : Between 2003 and 2006, California had no
trade and international marketing authority. After years of debate,
the Legislature and the Governor began an unprecedented
collaboration on the development of a new international trade and
investment program. Agreements on the new program were codified in
SB 1513 (Romero/Figueroa), Chapter 663, Statutes of 2006 and further
refined in AB 2012 (John A. Pérez), Chapter 294, Statutes of 2012.
Under California's new trade and foreign investment framework, state
activities are required to be directed through the development and
implementation of the ITI Strategy. The ITI Strategy is prepared
every five years based on current state and regional economic
research and a public vetting with the Legislature to ensure the
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inclusion of jointly agreed upon goals and measurable objectives.
The current ITI Strategy was finalized in August 2008 and the next
strategy is due in February 2014.
The ITI Strategy takes an industry sector approach based on the
state's core and emerging industries. By emphasizing the
development of deeper relationships within core and emerging
industry sectors and their trade associations, the strategy more
closely aligns with other economic development activities at the
local level and increases the impact of the state activities and
investments. Further, key industry clusters were identified
including the following dominant industries of (a) professional
business and information services; (b) diversified manufacturing;
(c) wholesale trade and transportation; and (d) high-tech
manufacturing; and the emerging industries of (a) life science and
services; (b) value-added supply chain manufacturing and logistics;
(c) cleantech and renewable energy; and (d) nanotechnology.
Based on the 2008 industry clusters, the ITI Strategy identifies the
following program objective:
a) Leverage existing services to provide export assistance to
companies by the state's primary and emerging clusters;
b) Develop a foreign direct investment program prioritized by the
state's primary and emerging clusters;
c) Promote and leverage the California brand;
d) Monitor and engage the federal government in regards to U.S.
trade policy; and
e) Integrate international trade and investment into the state's
overall economic development strategy.
Under each of the program objectives, the ITI Strategy includes a
set of specific actions, including timelines, priority levels, and
measurable outcomes. Examples of ITI recommended actions include:
(1) building a web-based directory of international, federal, state
and local resources to assist small and medium size businesses in
their import and export activities; and (2) facilitating export
trade promotion through participation in key industry trade shows
and business match-making activities during trade delegation visits.
The ITI Strategy also strongly relies on coordinated efforts with
existing federal and local public and private stakeholders.
AB 337 would add a new focus to the ITI Strategy related to the
infrastructure needs of the state in order to adequately support
trade, including industrial and postconsumer secondary materials.
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7)State Planning and Funding : California's community and economic
development policy has historically been driven by a number of
statutory mandates including the Environmental Goals and Policy
Report (EGPR), Five-Year Infrastructure Plan (Infrastructure Plan),
the ITI Strategy, and the Economic Development Strategic Plan.
Collectively, these four policy mandates form the foundation for the
state's short-, middle-, and long-term economic success. The EGPR
sets the overall long-term framework in which individual departments
and agencies develop more detailed plans, including elements of the
state transportation and state housing plans. The Infrastructure
Plan allows the state to keep track of its infrastructure needs and
set a rational infrastructure development agenda that supports the
long-term economic and population growth assessments outlined in the
EGPR.
The ITI Strategy sets measureable economic objectives relative to
the state's position within the global economy. Finally, the
development of the state Economic Development Strategic Plan is
built on the information and policies provided in the EGPR, the
Infrastructure Plan, and the ITI Strategy.
Currently the EGPR and Infrastructure Plan are out of date. The
requirement for an Economic Development Strategic Plan was removed
in a 2010 budget action. Governor Brown has, however, committed to
preparing a Strategic Growth Plan, which could serve as a partial
Infrastructure Plan.
8)Goods Movement Planning : As noted above, California is missing key
elements of a comprehensive guide that can be used to assess and
invest in major community and economic development facilities and
programs. In order to draw down federal moneys, the California
Transportation Department is, however, undertaking a substantial
review and update to the GMAP. The GMAP was originally issued by
the Business, Transportation, and Housing Agency and the California
Environmental Protection Agency in two phases in 2005 and 2007. The
GMAP was a comprehensive plan to address economic and environmental
issues associated with moving goods via the state's highways,
railways, and ports. It also provided guidance for allocating $3.1
billion of the $19.9 billion approved by voters in Proposition 1B,
the Highway Safety, Traffic Reduction, Air Quality and Port Security
Bond Act of 2006.
The new plan, known as the Freight Mobility Plan, will expand beyond
the GMAP to address additional issues such as greenhouse gas
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emissions goals, as well as to meet the parameters outlined in
MAP-21. The Freight Mobility Plan, [AB 14 (Lowenthal), Chapter 223,
Statutes of 2013], will focus more attention on community impact
issues, take a more in-depth look at trucking, and more thoroughly
identify the freight needs of portions of California that did not
receive sufficient attention during implementation of the GMAP. In
addition to AB 14, the Legislature also considered AB 1081 (Medina),
which would have included goods movement related infrastructure
identified in the Freight Mobility Plan and the ITI Strategy on the
state's five-year infrastructure plan. The five-year infrastructure
plan provides the basis for that Legislature and the Governor to
make mid- and long-term financing commitments. While AB 337 calls
for actions related to the use of California ports of entry to
support trade and foreign investment that may be coved in one or
more other studies, none of those studies or strategies specifically
calls out the increasing use of California ports to move industrial
and post-consumer secondary waste.
9)Related Legislation : Below is a list of related legislation.
a) AB 1081 (Medina) Goods Movement and the 5-Year Infrastructure
Plan : This bill would have expanded the scope of the state
five-year infrastructure plan to include the need for goods
movement related infrastructure including rail, highways, and
air, land, and sea POE facilities. Status: Held on the Suspense
File of the Senate Committee on Appropriations, 2013.
b) AB 1545 (V. Manuel Pérez) Bi-National Infrastructure and
Economic Development Bank : This bill would have expanded the
role of the California Infrastructure and Economic Development
Bank to include facilitating infrastructure and economic
development financing activities within the California and Mexico
border region. Status: Held on the Suspense File of the Senate
Committee on Appropriations, 2012.
c) AB 2012 (John A. Pérez) Economic Development Reorganization :
This bill transfers the authority for undertaking international
trade and foreign investment activities from the Business,
Transportation and Housing Agency to the Governor's Office of
Business and Economic Development. In addition, the bill
transfers the responsibility for establishing an Internet-based
permit assistance center from the Secretary of the California
Environmental Protection Agency to GO-Biz. Status: Signed by
the Governor, Chapter 294, Statutes of 2012.
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d) SB 822 (Evans) Five-Year Infrastructure Plan : Existing law
requires the Governor, in conjunction with the Governor's Budget,
to submit annually to the Legislature a proposed 5-year
infrastructure plan containing specified information concerning
infrastructure needed by state agencies, public schools, and
public postsecondary educational institutions and a proposal for
funding the needed infrastructure. This bill would have made
technical, nonsubstantive changes to this provision. Status:
Retained with the Assembly Committee on Budget, 2012.
e) SB 907 (Evans) 20-Year Infrastructure Master Plan : This bill
would have established an 11-member Master Plan for
Infrastructure Financing and Development Commission. The
Commission is required to submit to the Governor and Legislature,
by December 1, 2013, a long-term plan and strategy for the
state's infrastructure needs and a prioritized plan to meet those
needs. The Commission is also required to submit periodic
progress reports. Status: Retained by the Assembly Committee on
Jobs, Economic Development, and the Economy, 2012.
REGISTERED SUPPORT / OPPOSITION :
Support
None received
Opposition
None received
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916) 319-2090