BILL ANALYSIS Ó ----------------------------------------------------------------------- |Hearing Date:June 16, 2014 |Bill No:AB | | |337 | ----------------------------------------------------------------------- SENATE COMMITTEE ON BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT Senator Ted W. Lieu, Chair Bill No: AB 337Author:Allen As Amended:May 19, 2014 Fiscal: Yes SUBJECT: Economic development: international trade and investment strategy. SUMMARY: Updates requirements for the international trade strategy prepared by the Governor's Office of Business and Economic Development (GO-Biz) to be based on current and emerging market conditions and the needs of investors, businesses, and workers to be competitive in global markets. Existing law: 1)Establishes GO-Biz within the Governor's Office for the purpose of serving as the lead state entity for economic strategy and marketing of California on issues relating to business development, private sector investment and economic growth. GO-Biz also serves as the administrative oversight for the California Business Investment Service and the Office of the Small Business Advocate. (GC §§ 12096 - 12098.5) 2)Specifies that GO-Biz is the primary state agency authorized to attract foreign investments, cooperate in international public infrastructure projects, and support California businesses in accessing markets, and requires the Director of GO-Biz to develop an international trade and investment program (Program) attracting employment-producing direct foreign investment to the state and provides support for California businesses in accessing international markets and increasing exports. (GC § 13996.41) 3)Authorizes GO-Biz to establish international trade and investment (ITI) offices outside of the U.S. according to certain requirements. AB 337 Page 2 (GC § 13996.42) 4)Requires GO-Biz to prepare an international trade and investment strategy (Strategy) and provide a report to the Legislature on or before February 1, 2014, updated once every five years that includes: (GC § 13996.55) a) Policy goals, objectives and recommendations necessary to implement a comprehensive international trade and investment program. b) Measurable outcomes and timelines for the goals, objectives and actions for the program. c) Impediments to achieving goals and objectives. d) Key stakeholder partnerships that will be used to implement the strategy. e) Options for funding. f) An organizational structure for state administration of international trade and investment policies, programs and services. 1)Requires the Director of GO-Biz to prepare the following: (GC § 13996.65) a) A budget for the Program and a separately stated budget for each ITI office, with specified information. b) A strategy and business plan for the Program, with specified information, that is developed with input from California businesses that shall include, but not be limited to, measurable goals, objectives, and outcomes and timelines necessary to attract employment-producing direct foreign investment to the state and increase California exports. c) A written review of the implementation of the prior year's strategy and business plan for the Program that addresses the performance of the program and each ITI Office. 1)Provides that the Controller shall not allocate any state funds to GO-Biz for international trade and investment activities unless the strategy for international trade and investment has been submitted to the Legislature by May 1, 2014. (GC § 13996.75) AB 337 Page 3 2)Establishes processes and accountability measures for GO-Biz to accept private monies to fund, establish and operate international trade offices. Authorizes GO-Biz to accept private sector moneys in an amount not in excess of ten thousand dollars ($10,000) per donation made to the state for the purpose of promoting international trade and investment, subject to the Political Reform Act requirements, and not in excess of a total of ten thousand dollars ($10,000) per quarter per donor, and specifies the purposes for which moneys may be used. (GC § 13997) 3)Creates the California Economic Development Fund (Fund) in the State Treasury for the purpose of receiving federal, state, local and private economic development funds, and receiving repayment of loans or grant proceeds and interest on those loans and grants, and provides that upon appropriation by the Legislature, moneys in the Fund may be expended by the GO-Biz to provide matching funds for loans or grants to public agencies, nonprofit organizations, and private entities, and for other economic development purposes, consistent with the purposes for which moneys were received. 4)Specifies that GO-Biz is the primary state agency responsible for international trade and investment activities in areas other than those covered by the Department of Food and Agriculture. This bill: Requires the next Strategy, on or before February 1, 2019, to be based on current and emerging market conditions and the needs of investors, businesses, and workers to be competitive in markets as reflected in a framework that enables GO-Biz to evaluate current workforce, capital, marketing, infrastructure, research and development, and other needs of small and large firms, including, but not limited to, highways, airports, and rail that link businesses with the state's ports of entry and foreign and domestic markets. Authorizes GO-Biz to base the Strategy, to the extent relevant and feasible, on existing studies and reports, including, but not limited to, the Goods Movement Action Plan, the California Strategic Workforce Development Plan, the California Export of Recycled Materials Report, the California Five-Year Infrastructure Plan, and the Environmental Goals and Policy Report. FISCAL EFFECT: This bill is keyed fiscal . According to the Assembly Committee on Appropriations analysis dated January 24, 2014, this bill will result in General Fund costs to GO-Biz of approximately $50,000. COMMENTS: AB 337 Page 4 1. Purpose. The Author is the Sponsor of this measure. According to the Author, "California has not fully studied our current trade infrastructure system and the capacity needs that can promote our International Trade abilities, yet the state continues to try and push forward with policies that may not be addressing the actual needs of our trade infrastructure throughout the state." The Author believes that while it is necessary to begin to look for economic development opportunities and set goals to achieve those, including the crucial role international trade should play, the current criteria required to be a part of the Strategy do not go far enough. In response, the Author intends for this bill to require a full analysis of the transportation infrastructure and physical capacity necessary to meet the import and export needs of California's land, sea and air ports of entry. 2. Governor's Office of Business and Economic Development (GO-Biz) and International Trade Efforts in California. In February 2010, the Little Hoover Commission undertook a review of the state's economic and workforce development programs. In its final report, Making up for Lost Ground: Creating a Governor's Office of Economic Development, it analyzed the status and effectiveness of current programs since the 2003 demise of the Technology, Trade and Commerce Agency and recommended the creation of a new governmental entity to fill the void left by the dismantled agency. The report called for a single entity that would promote greater economic development, foster job creation, serve as a policy advisor and deliver specific services (i.e., permitting, tax, regulatory, and other information) directly to the California business community. In April 2010, Governor Schwarzenegger issued Executive Order S-05-10 as a means to operationalize the report recommendations including the creation of the Governor's Office of Economic Development (GOED). In October 2011, the Governor signed AB 29 (cited and described below), which effectively codified GOED and changed its name to GO-Biz, effective January 1, 2012. Since its inception, the office has served over 3,000 businesses, 95% of which are small. The most frequent types of assistance include help with permit streamlining, starting a businesses, relocation and expansion of businesses, and regulatory challenges. When the Technology Trade and Commerce Agency (TTCA) was eliminated in 2004 due to its poor administrative performance, the authority for all state trade activity was also eliminated and the few remaining programs came under the umbrella of the Business, AB 337 Page 5 Transportation and Housing Agency (BT&H). The former International Investment Division under TTCA had 91 employees and a budget of $43 million, allowing it to engage in activities like formal marketing. Beginning in the 2005-06 Session, several legislative measures were introduced to reinstate the state's trade authority. SB 1530 (Romero, 2006) addressed these concerns by requiring BT&H to undertake a trade study to determine what role the state should play in international trade and foreign investment activities and required them to establish a business advisory committee, and development of a trade strategy consistent with the study and acts as the vehicle for implementing the state's trade policy. The first strategy was published in February 2008 and most recent was issued in February 2014. The strategy highlighted strategic objectives intended to implement an overall policy of creating jobs, increasing revenues for California enterprises, and improving California's international competitiveness by expanding the export of California goods and services and by increasing foreign direct investment into the state. The objectives include: Developing a comprehensive, coordinated and cohesive strategy development framework with a clear vision to expand trade and investment, which includes other relevant state agencies, with input from private and public sector stakeholders. Implementing more proactive outreach, awareness, education and engagement programs both within the state for California-based companies and through foreign partners and trade office(s). Maximizing China Trade Office resources and opportunities to expand exports and investment. Developing an action plan to address key challenges facing California's ports and related infrastructure to ensure their competitiveness. Re-engaging and strengthening working relationships with the Office of the U.S. Trade Representative and the state's Congressional delegation to advocate California interests related to international trade and investment. Developing and implementing a more user-friendly, comprehensive, interactive and useful website to assist AB 337 Page 6 California companies wanting to export and to attract foreign investment. In the report, GO-Biz advised it will reevaluate, when appropriate or necessary, the recommended objectives and actions in order to achieve the state's overall international trade and investment policy goals. In February 2014, Governor Brown announced the creation of a California International Trade and Investment Advisory Council (Council) which will advise GO-Biz on strategies to expand international trade and investment for California businesses. Specifically, in announcing its creation, the Governor noted that the Council "will assist GO-Biz in identifying foreign markets with the greatest potential for export expansion and in developing specific export strategies for those markets - including the state's top trading partners, Canada, Mexico and China, and emerging markets such as Brazil and India." Until the creation of GO-Biz there were only a very small number of former International Investment Division staff working on trade related issues and activities for the state. GO-Biz now has authority for undertaking international trade and foreign investment activities, including establishing any international trade and investment office ( AB 2012 , Perez, Statutes of 2012). GO-Biz has partnered with the Bay Area Council to open a California-China Trade and Investment office in Shanghai's downtown Yangpu district. In a March 2013 report to the Legislature on the status of this effort, GO-Biz described the office's goals "to drive increased employment, revenues at California enterprises, tax revenues, and international competitiveness in California" which will be accomplished through promoting investment in California; facilitating two-way international business growth, with an emphasis on expanding foreign sales by California employers, including not only manufacturers, agricultural enterprises, and commodity producers, but also service providers such as universities, banks, consulting companies, and the like; supporting continued growth of California's role as a gateway state for goods movement and passenger travel; and identifying and addressing barriers to international expansion by California employers. 1. Infrastructure Needs and Prior Evaluations. This bill allows GO-Biz to base the state's trade and investment strategy on existing studies and reports like the Goods Movement Action Plan, the California Strategic Workforce Development Plan, the California Export of Recycled Materials Report, the California Five-Year AB 337 Page 7 Infrastructure Plan, and the Environmental Goals and Policy Report. a) Goods Movement Action Plan. In 2006, California voters approved Proposition 1B, the Highway Safety, Traffic Reduction, Air Quality, and Port Security Bond Act of 2006 to authorize $19.925 billion of state general obligation bonds for specified purposes, including high-priority transportation corridor improvements, State Route 99 corridor enhancements, trade infrastructure and port security projects, school bus retrofit and replacement purposes, state transportation improvement program augmentation, transit and passenger rail improvements, state-local partnership transportation projects, transit security projects, local bridge seismic retrofit projects, highway-railroad grade separation and crossing improvement projects, state highway safety and rehabilitation projects, and local street and road improvement, congestion relief, and traffic safety. Prop 1B required the California Transportation Commission to consult a "trade infrastructure and goods movement plan submitted to CTC by the Secretary of the former Business, Transportation and Housing Agency (BT&H) and California Environmental Protection Agency (Cal-EPA) in determining the allocation of around $3 billion of the over $19 billion authorized by the bond. The Goods Movement Action Plan (GMAP) was issued in 2007 as a comprehensive plan to address economic and environmental issues associated with moving goods via the state's highways, railways, and ports. Last year, AB 14 (Lowenthal, Chapter 223, Statutes of 2013) created a new plan, the Freight Mobility Plan, to comply with the federally enacted Moving Ahead for Progress in the 21st Century Act, known as MAP-21 which authorizes federal transportation funding to states through September 30, 2014. The new California plan is intended to provide a comprehensive plan to govern the state's short- and long-term planning activities and capital investments relating to freight movement. b) California Strategic Workforce Development Plan. The federal Workforce Investment Act (WIA) requires the Governor to submit a WIA/Wagner-Peyser Act (WPA) State Plan to the United States Department of Labor (DOL). This plan outlines a five-year strategy for the investment of federal workforce training and employment services dollars. SB 293 (Ducheny, Chapter 630, Statutes of 2006) required the California Workforce Investment Board (CWIB) to collaborate with the Chancellor of the California Community Colleges, the State Department of Education, other appropriate state agencies, and local workforce investment boards to develop a comprehensive state plan that serves as a framework AB 337 Page 8 for public policy, fiscal investment, and operation of all state labor exchange, workforce education, and training programs. The current plan prepared by the CWIB for 2013-2017, Shared Strategy for Shared Prosperity, states that public and private institutions, including education, training, unemployment, and re-employment systems, must support a "retraining economy" for California to maintain its status as a place of innovation and shared prosperity and that workers must be learners who can traverse a labor market landscape that is less about "jobs" and more about a set of marketable skills broadly relevant to industry sectors within regional economies. c) California Export of Recycled Materials Report. Issued in July 2013, the report contains information about the types of recyclables exported from California's ports, the amount shipped, and their value. The report found that overall, recyclables exported by sea made up over one quarter of the total weight (28%) shipped from California ports in 2012 and these recyclables accounted for approximately 8% of the total value of all exports shipped from California. The report also noted that China continues to be the largest market for recycled materials, receiving over half of the total weight shipped out from California by sea. d) California Five-Year Infrastructure Plan. The California Infrastructure Planning Act requires the Governor to submit a five-year infrastructure plan to the Legislature for consideration with the annual budget bill. According to the 2014 plan, it evaluates the state's infrastructure needs in the overall context of available funding sources, what the state can afford, and how the state can grow in the most sustainable way possible. The plan states that the preservation of the state's long-term fiscal stability means the General Fund cannot afford to shoulder the cost of all potential infrastructure investments and instead, the state must focus its limited infrastructure dollars on core state responsibilities. The plan proposes to invest $56.7 billion in capital funding to renovate and augment California's aging infrastructure over the next five years. e) Environmental Goals and Policy Report. AB 2070 , passed in 1970, created the Governor's Office of Planning and Research (OPR) and called for OPR to prepare and maintain an Environmental Goals and Policy Report (EGPR). The EGPR aims to provide an overview of the state's environmental goals, keys steps to achieving these goals, and develop a framework of metrics and indicators to help inform decision making, at all levels, to help AB 337 Page 9 track progress toward reaching these goals. The 2013 draft EGPR, "California's Climate Future," states that "as the state continues to grow, we must do so in a way that is in harmony with the state's environment and natural resources." The report also seeks to consider growth in the context of climate change, "undoubtedly the biggest environmental challenge of our time. Climate change and the state's efforts to confront it will touch nearly every aspect of the state's planning and investment for the future." 1. Related Legislation This Year. SB 511 (Lieu) of 2014 would require GO-Biz to convene a statewide business partnership for port trade promotion and would create an export finance office to provide export assistance to small and medium sized companies. ( Status: The bill is currently pending in the Assembly Committee on Jobs, Economic Development and the Economy.) SB 928 (Correa) of 2014 requires GO-Biz to establish an international trade and investment office in Mexico City, Mexico by January 1, 2016. ( Status: The bill is pending in the Assembly.) AB 2713 (Quirk-Silva) of 2014 authorizes GO-Biz to establish public-private partnerships to help guide state activities related to the export of California products and requires GO-Biz to establish the South Korean Trade Promotion Advisory Committee to help guide state activities related to the export of California products to South Korea and the attraction of employment-producing direct foreign investment by South Korean investors. ( Status: The bill is also up in this Committee on June 9) 2. Prior Related Legislation. SB 592 (Lieu) of 2013 was identical to SB 511 and also would have required GO-Biz to provide a port trade promotion strategy to the Legislature on or before April 1, 2014. ( Status: The bill was held in the Assembly Committee on Appropriations.) SB 810 (Price, 2013) would have authorized the California Transportation Financing Authority to award $500 million in tax credit certificates to exporters and importers, as defined, for the specified increases in cargo tonnage or value, net increases in the number of qualified full-time employees hired in California, or capital investment in a cargo facility. ( Status: The bill is pending in the Senate Committee on Governance and Finance.) AB 412 (Allen) of 2013 stated the intent of the Legislature to enact legislation to enhance and expand opportunities for AB 337 Page 10 California businesses to engage in international trade. ( Status: The bill was held in the Assembly Committee on Appropriations.) AB 886 (Allen) of 2013 stated the intent of the Legislature to enact legislation that would address issues that enhance and expand opportunities for California business to engage in international trade with Latin America and other nations. ( Status: The bill was held in the Assembly Committee on Appropriations.) AB 1081 (Medina) of 2013 would have required the international trade and investment strategy prepared by GO-Biz to include the identification of trade-related infrastructure enhancements to support the state's international trade policies, programs, and services and requires the interregional transportation improvement program prepared by the Department of Transportation to include projects to improve international movement of goods through air, land, and water ports. ( Status: The bill was held in the Assembly Committee on Appropriations.) AB 1088 (Muratsuchi) would have required GO-Biz, no later than January 1, 2016, to establish an overseas trade office in Tokyo, Japan. ( Status : This bill was never heard in a policy committee.) AB 1201 (Allen) of 2013 stated the intent of the Legislature to enact legislation that would address issues that enhance and expand opportunities for California business to engage in international trade with the European Union and other nations. ( Status: The bill was never heard in a policy committee.) AJR 4 (Hueso, Pérez, Res. Chapter 24, Statutes of 2013) urges the federal government to fund necessary improvements at the San Ysidro, Calexico, and Otay Mesa Ports of Entry. AB 2012 (Perez, Chapter 294, Statutes of 2012) transferred the authority for undertaking international trade and foreign investment activities from BTH to GO-Biz, including establishing any international trade and investment office. SB 460 (Price) of 2011 included similar language as contained in SB 511 and SB 592 above, ( Status : The bill was held in the Assembly Committee on Appropriations.) SB 830 (Wright, 2011) is virtually identical SB 810 of 2013. ( Status: This measure failed passage in the Senate Committee on Revenue and Taxation.) AB 337 Page 11 SCR 33 (Price, Resolution Chapter 60, Statutes of 2011) expressed the sentiment of the Legislature that the EB-5 visa program is beneficial to the state's economic development and provides important opportunities for foreign direct investment to California. AB 29 (John A. Pérez, Chapter 475, Statutes of 2011) established GO-Biz within the Governor's Office for the purpose of serving as the lead entity for economic strategy and marketing of California on issues relating to business development, private sector investment and economic growth. AB 1137 (V. Manuel Pérez, 2011) would have facilitated local economic development and job creation by assisting small business to access new export markets for their goods and services, updating the law relating to free trade zones, and authorizing the use of new federal funds under the Small Business Jobs Act of 2010. ( Status: This measure was held in the Senate Committee on Appropriations.) AB 2656 (Calderon, 2011) is virtually identical to SB 810 of 2013. ( Status: This measure was held in the Assembly Committee on Appropriations.) SB 1175 (Price, 2010) would have required the Secretary of BTH to direct the California Travel and Tourism Commission to conduct a review of its principal mission and core competencies in order to determine if the commission should include trade promotion in its strategic marketing plan or other future plans of the commission and provide a report to the Legislature. ( Status: This measure was held in the Senate Committee on Rules.) AB 2443 (Perez, 2010) required the state point of contact for trade agreements 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 U.S. Trade Representative relating to a pending trade agreement. The bill also created a new process for the establishment of Sister State relationships with a purpose of promoting economic growth and trade and investment opportunities. ( Status: This measure was vetoed by the Governor.) AB 1409 (Jobs, Economic Development and the Economy Committee) of 2011 would have required that the next update by BTH of the international trade and investment strategy to include policy goals, objectives and recommendations from the state Goods Movement AB 337 Page 12 Action Plan. ( Status : The bill was amended to deal with another subject matter and held in the Senate Committee on Rules in 2012.) AB 1558 (Assembly Committee on Jobs, 2009) aimed to recodify and reorganize sections of the Government Code to create one comprehensive code for the state's international trade activities and programs. ( Status: The measure was amended to deal with reorganization of the state's economic development programs. This measure was held in the Senate Committee on Appropriations in 2010.) AB 1722 (Committee on Jobs, Economic Development, and the Economy, 2008) would have required BT&H to provide the Legislature with a copy of the international trade and investment policy, which is a result of its work on the required international trade study and strategy. ( Status: This measure was vetoed by the Governor.) AJR 14 (Jeffries, Resolution Chapter 73, Statutes of 2007) 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) provided new authority for BT&H to undertake international trade and investment activities, and as a condition of that new authority, directs the development of a comprehensive international trade and investment policy for California. 3. Arguments in Support. The California Asian Pacific Chamber of Commerce believes that "it is important to ensure there is a clear understanding of foreign investment and trade and that it should include the role that the ports of entry in California have on the overall economy of the state." According to the Harbor Association of Industry and Commerce, "the twin ports of Los Angeles-Long Beach are the driving economic force in Southern California and we need to help not only Los Angeles-Long Beach ports but all California ports to keep their leading edge". SUPPORT AND OPPOSITION: Support: AB 337 Page 13 California Asian Pacific Chamber of Commerce Harbor Association of Industry and Commerce Opposition: None on file as of June 11, 2014. Consultant:Sarah Mason