BILL ANALYSIS �
AB 412
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Date of Hearing: April 9, 2013
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT AND THE ECONOMY
Jose Medina, Chair
AB 412 (Allen) - As Amended: March 19, 2013
SUBJECT : International trade
SUMMARY : Requires the Governor's Office of Business and Economic
Development (GO-Biz) to undertake a study of the potential roles for
the state in global markets. Specifically, this bill :
1)Requires GO-Biz to submit a study to the Legislature by October 1,
2015 on the state's role in supporting international trade and
foreign investment including issues related to infrastructure,
workforce development, investor incentives, and business
development.
2)Requires the study to include, at a minimum, the following:
a) A discussion of California's economy and its relationship to
global markets, including, but not limited to, identification of
current and emerging trends, industries, services, and areas of
comparative advantage.
b) An inventory and gap analysis of existing programs and
services provided by local, state, federal, and private entities,
that serve, or could serve, businesses in opening new foreign
markets for their products, attracting foreign investment to
their businesses, or generally assisting California businesses in
global markets;
c) An assessment and gap analysis of the current and future
physical and human infrastructure related to foreign trade and
investment markets.
d) The results of a survey of businesses on their needs and
priorities related to foreign trade and investment.
e) An examination of how best to coordinate and leverage existing
local, state, and federal organizations, programs, and services
related to international trade and investment.
f) An assessment of unique opportunities and challenges in
developing businesses and attracting investment along the border
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and in historically underserved urban and rural areas.
3)Requires the study to make recommendations on policies, programs,
and funding needs for the next three years, seven years, and over
the long term.
4)Authorizes the study to make general recommendations on the
administration, oversight, and mission or missions of those kinds of
offices.
5)Requires the study to recommend priorities for state activities and
funding related to international trade and investment based on an
assessment of current and emerging market trends, the inventory and
gap analysis of programs and services, the assessment of current and
future infrastructure and workforce needs, and input by the business
community.
6)Requires the study to recommend an organizational structure for the
state administration of international trade and investment policies,
programs, and services.
7)Requires the study to review relevant prior research and reports on
the state's role in global markets.
8)Requires GO-Biz to consult with other relevant agencies, boards, and
commissions that have statutory responsibilities related to
workforce development, infrastructure, business, and international
trade and investment.
EXISTING LAW
1)Requires GO-Biz to provide the Legislature with an International
Trade and Investment Strategy (ITI Strategy) by February 2014.
2)Requires the ITI Strategy to, at a minimum, include the following:
a) Policy, goals and objectives;
b) Measurable outcomes and timelines for meeting the goals and
objectives;
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 action; and
f) Identification of an international trade and investment
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organizational structure.
FISCAL EFFECT : Unknown
COMMENTS :
1)Author's Purpose : According to the author, "California's economy
has slipped from ranking 5th in the world to now barely clinging to
a spot in the top 10 economies based on GDP. With unemployment
above the national average and hovering around 10%, we need to begin
to take legitimate proactive steps to provide economic growth
opportunities in California.
Our state is poised to expand its crucial role in global trade with
the recent Free Trade Agreements and other pending Agreements that
will open up market access to the United States in the Pacific. We
need to not only focus on marketing and business development, but
the necessary infrastructure improvements to facilitate the economic
growth available to California. This bill will start the
conversation to review what, if anything, the state has actually
done to foster more economic developments through international
trade in California."
2)Framing the Policy Issue : The measure proposes the state undertake
a comprehensive study of California's position within the global
marketplace and consider the state's strengths, weaknesses, and
possibly economic opportunities. At its core, the bill addresses
the importance of economic analysis when setting goals and
objectives for future expenditures and activities. The analysis
includes a discussion of the role of the trade study, a summary of
the current ITI Strategy, and highlights of California's trade
economy.
3)The Role of a Trade Study : AB 412 proposes to reinstate the
statutory requirement for the bifurcated development of the ITI
Strategy. First, an analysis and assessment would be undertaken and
then goals and actions would be set for state funds and actions.
The current ITI Strategy statute is silent as to whether an economic
assessment is necessary. It should be noted that some state plans
are simply a collection of projects deemed worthy by the state
agency.
AB 412 would require that a comprehensive study be undertaken and
outlines specific areas to be addressed. Among other things, there
would be an inventory of existing resources and an assessment of
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workforce, infrastructure, and existing state programs. The study
is designed to serve as the foundation to the state's overall trade
program providing a platform to examine regional competencies and
unique industry sector needs. By emphasizing the understanding of
these deeper economic relationships within core and emerging
industry sectors, the ITI Strategy can better align with economic
development activities at the local and regional levels. This
tighter alignment should also result in increasing the impact of the
state activities and investments.
This is the same approach taken in the development of the 2009 ITI
Strategy. In the prior study, the University of California
committed its Sacramento Semester Program and coordinated the
participation of leading researchers from around the state. Much
public policy at the state level is still based on this initial
work.
4)The 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, Chapter
663, Statutes of 2006 and further refined in AB 2012, Chapter 294,
Statutes of 2012. The first ITI Strategy under the new rules was
completed in 2008 and the next strategy is due in February of 2014.
Based on a trade and investment study, like the one proposed in AB
412, the current ITI Strategy takes an industry sector approach
based on the state's core and emerging industries. Below is the
list of dominant and emerging industries from the 2008 ITI Study.
-----------------------------------------------------------------
|Dominant industry clusters |Emerging industry clusters |
|include: |include: |
| Professional business and | Life science and services |
| information services | Value-added supply chain |
| Diversified manufacturing | manufacturing and logistics |
| Wholesale trade and | Cleantech and renewable |
| transportation | energy |
| High-tech manufacturing | |
| |Nanotechnology |
-----------------------------------------------------------------
Using the lessons learned in the study, the ITI Strategy identified
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the following five program objectives:
Leverage existing services to provide export assistance to
companies by the state's primary and emerging clusters;
Develop a foreign direct investment program prioritized by the
state's primary and emerging clusters;
Promote and leverage the California brand;
Monitor and engage the federal government in regard to U.S.
trade policy; and
Integrate international trade and investment into the state's
overall economic development strategy.
The ITI Strategy includes a set of specific actions, including
timelines, priority levels, and measurable outcomes under each of
the program objectives. One example of a recommended action
includes facilitating export trade promotion through participation
in key industry trade shows and encouraging business match-making
activities during visits of foreign trade delegations. The ITI
Strategy also strongly relies on coordinated efforts with existing
federal and local public and private stakeholders.
1)California's Global Economy : International trade and foreign
investment are very important components of California's $1.9
trillion economy. California receives more foreign direct
investment (FDI) than any other state in the U.S., which is
significant since the U.S. is the largest receiver of FDI in the
world. The California economy benefits from FDI in many ways, some
of which include assisting in the creation of jobs, boosting worker
wages, increasing exports, bringing in new technology and skills,
and generally strengthening the state's manufacturing base.
The federal International Trade Administration estimates that over
562,700 California workers benefit from jobs with foreign-owned
firms, which accounts for 5.1% of all private sector jobs in the
state. Approximately 11% of all U.S. workers at foreign-owned firms
are located in California, which has had the highest level of
employment in foreign-owned firms since at least 1997. Along with
employment, foreign-owned firms own more property, plants, and
equipment in California than in any other state.
If California were a country, it would be the 11th largest exporter
in the world. Exports from California accounted for over 10.5% of
total U.S. exports in goods, shipping to over 220 foreign
destinations in 2012.
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California's land, sea, and air ports of entry serve as key
international commercial gateways for products entering the country.
California exported $161 billion in goods in 2012 (up from $159
billion in 2011), ranking only second to Texas with $265.3 billion
in export goods. Computers and electronic products were
California's top exports in 2012, accounting for 27.6% of all state
exports, or $44.5 billion.
--------------------------------------------------------
| 2012 Exports From California to the World |
--------------------------------------------------------
|-----------------------+-----------------+---------------|
| Product | Value ($ |Percent |
| | billions) | |
|-----------------------+-----------------+---------------|
|334 Computers & | 44.5 | 27.6 % |
|Electronic Prod. | | |
|-----------------------+-----------------+---------------|
|333 Machinery (except | 14.8 | 9.2 % |
|electrical) | | |
|-----------------------+-----------------+---------------|
|336 Transportation | 16.1 | 10.0 % |
|Equipment | | |
|-----------------------+-----------------+---------------|
|325 Chemical | 12.7 | 7.9 % |
|Manufactures | | |
|-----------------------+-----------------+---------------|
|339 Misc. Manufacture | 13.8 | 8.6 % |
|Commodities | | |
|-----------------------+-----------------+---------------|
|111 Agricultural | 11.9 | 7.4 % |
|Products | | |
|-----------------------+-----------------+---------------|
|All Others | 47.2 | 29.3 |
| | | % |
|-----------------------+-----------------+---------------|
|Total | | 100 |
| | $161 |% |
---------------------------------------------------------
--------------------------------------------------------
|Source: |
|Tradestates.com |
| |
--------------------------------------------------------
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Manufacturing is California's most export-intensive activity.
Overall, manufacturing exports represent 9.4% of California's gross
domestic product. More than one-fifth (21.9%) of all manufacturing
workers in California directly depend on exports for their jobs.
Small- and medium-sized firms generated more than two-fifths (43%)
of California's total exports of merchandise. This represents the
seventh highest percentage among states and is well above the 29%
national average export share for these firms.
Mexico is California's top trading partner, receiving $26.3 billion
(16%) in goods in 2012. The state's second and third largest
trading partners are Canada and China with $17.3 billion (10.7%) and
$13.9 billion (8.6%), respectively. Other top-ranking export
destinations include Japan, South Korea, Taiwan, the United Kingdom,
Hong Kong, Germany, and Singapore.
2)Federal Actions : Since being elected as President of the United
State in 2008, President Obama has implemented significant trade
initiatives including gaining U.S. Congressional support for three
pending international trade agreements and announcing a national
goal of doubling U.S. exports within five years. By 2015, U.S.
exports are proposed to increase to $3.14 trillion. In
accomplishing this goal, the federal government will be proposing
new programs, targeting existing trade related activities, and
increasing funding and technical assistance within current programs.
Since the announcement of the new national goal at the start of
2010, exports from California were up $ 41 billion over 2009. 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 economic
opportunities. California has already received nearly $4 million is
federal funds to administer a state export assistance program for
small businesses and in the President's 2013 State of the Union
address he announced a trade agreement with the European Union. The
author may want to consider reflecting key federal actions as part
of the trade analysis.
3)Technical Amendments : AB 412 requires a one-time study to be
completed in 2015. The author may want to offer amendments to more
closely align the timing of the report with the five-year ITI
Strategy. Further, it may be appropriate to be more specific on the
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importance the economic assessment plays in developing the ITI
Strategy.
4)Related Legislation : Below is a list of related legislation.
a) AB 337 (Allen) ITI Strategy and Ports : This bill adds a
required element to the state's 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. Status: Pending in the Assembly
Committee on Jobs, Economic Development and the Economy.
b) AB 1081(Medina) Moving Goods to Market : This bill integrates
goods movement within the states infrastructure planning
including the Five-year Infrastructure Plan, the ITI Strategy,
and State's interregional planning. Status: Pending in the
Assembly Committee on Jobs, Economic Development and the Economy.
c) AB 1409 (Jobs, Economic Development and the Economy Committee)
International Trade and Investment Strategy : This bill, as it
passed JEDE, would have required that the next update by
Business, Transportation and Housing Agency, of the international
trade and investment strategy to include policy goals, objectives
and recommendations from the state Goods Movement Action Plan.
The measure was amended in the Senate related another subject
matter. Status: Held in Senate Rules Committee in 2012.
d) AB 2012 (John A. P�rez) Economic Development Reorganization :
This bill transferred the authority for undertaking international
trade and foreign investment activities from the Business,
Transportation and Housing Agency to the GO-Biz. 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.
REGISTERED SUPPORT / OPPOSITION :
Support
California Asian Pacific Chamber of Commerce
Opposition
AB 412
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None received
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916)
319-2090