BILL ANALYSIS Ó
SCR 103
Page 1
Date of Hearing: June 10, 2014
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT AND THE ECONOMY
Jose Medina, Chair
SCR 103 (De León) - As Amended: March 27, 2014
SENATE VOTE : 33-0
SUBJECT : California and El Salvador: partnership
SUMMARY : Memorializes the Legislature's invitation to the government
of El Salvador to partner with California to promote democratic
institutions, the rule of law, and economic opportunity, and to foster
international understanding through increased trade and investment.
Specifically, this bill :
1)Makes declarations, which among other things, state:
a) The 12-year Salvadoran Civil War took the lives of over 75,000
Salvadorans and resulted in a massive influx of refugees to the
U.S.;
b) Of the 1.6 million Salvadorans residing in the U.S., more than
500,000 live in California, making Salvadorans the second largest
Latino population in the state;
c) March 24, 2014 is the 34th anniversary of the martyrdom of
Monsignor Óscar Romero, who is a cultural icon to the people of
El Salvador and whose life and teachings millions of people
around the world pay tribute;
d) El Salvador held a presidential election on March 9, 2014,
which was considered by expert observers to be administered under
a free and democratic process and was praised for its
transparency and professionalism;
e) California joins with the United Nations, the Organization of
American States and many civil and religious groups in calling
upon the two major parties to respect the will of the people and
the final outcome announced by the Supreme Electoral Tribunal;
and
f) California will work closely with the newly democratically
elected government of El Salvador, and President-Elect Salvador
Sánchez Cerén, to promote private investment in both El Salvador
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and California.
2)Resolves that the Legislature, on behalf of the people of
California, hereby extends an invitation to the government of El
Salvador to partner with California to promote democratic
institutions, the rule of law, economic opportunity and growth, and
to foster international understanding through increased trade and
investment, as well as mutually beneficial educational, economic,
and cultural exchanges between California and El Salvador's
institutions.
EXISTING LAW establishes the Office of Business and Economic
Development (GO-Biz) within the Governor's Office and designates it as
the state's lead entity on international trade and foreign investment
activities, excluding agricultural trade.
FISCAL EFFECT : None
COMMENTS :
1)Author's Purpose : According to the author, "El Salvador and
California have a shared history grounded on common interests and
goals. In the 1980's, El Salvador was embroiled in more than a
decades long civil war that took the lives of over 75,000
Salvadorans and resulted in a massive influx of refugees to
California.
Today, two million Salvadorans live in the United States, and more
than 500,000 call California home. Los Angeles-a sister city to San
Salvador, the capital of El Salvador-is home to the largest
concentration of Salvadorans in the United States, living in the
neighborhoods of Pico-Union and Westlake. Thus, our state is
intimately linked to El Salvador.
The historic cultural relations between our people represent an
important opportunity to promote economic, commercial, and cultural
relations. For example, just last year the United States prospered
from a $692.6 million trade surplus with El Salvador. Each stand to
benefit from increased trade, investment, tourism, cultural, and
educational exchanges.
SCR 103 will encourage fellowship and collaboration for mutual
prosperity. This resolution is a symbol of California's commitment
to work closely with the newly elected government of El Salvador,
and President-elect Salvador Sánchez Cerén, and promote democratic
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institutions, the rule of law and economic opportunity for both El
Salvador and California."
2)Framing the Policy Issue : This resolution extends an invitation to
the government of El Salvador to partner with California to promote
democratic institutions, the rule of law, and economic opportunity,
and to foster international understanding through increased trade
and investment.
According to the Author's Office, the purpose of the resolution is
to promote the peaceful transition of governments following the
March 2014 election. The analysis includes background on U.S. trade
agreements, the Country of El Salvador, and California's
globally-linked economy. Amendments will be taken in committee to
update SCR 103 to reflect the recent inauguration of the Salvadoran
president.
3)U.S. Trade Agreements : Within a globally connected economy, trade
agreements create the framework by which a significant number of
businesses and workers must compete, collaborate, and create
economic value. The U.S. is currently negotiating two major trade
promotion agreements, the Trans-Pacific Partnership and the
Transatlantic Trade and Investment Partnership. In their current
iterations, these trade agreements will cover 21% of the world's
population, with the U.S. at the nexus. These agreements are
especially important to local and regional governments which have
been proactive in using trade promotion activities as a springboard
for their own economic agenda.
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.
El Salvador is covered under the Dominican Republic-Central
America-United States Free Trade Agreement (CAFTA-DR) which also
includes Guatemala, Honduras, Nicaragua, the Dominican Republic, and
Costa Rica. As a result of this agreement, 100% of U.S. exports of
consumer and industrial goods to the CAFTA-DR countries will be
tariff-free by 2015. Tariffs on nearly all U.S. agricultural
products will be phased out by 2020. The CAFTA-DR region was the
14th largest U.S. export market in the world in 2013, and the third
largest in Latin America behind Mexico and Brazil.
4)Background on El Salvador : El Salvador is the smallest and most
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densely populated country in Central America. Located on the
Pacific Ocean side of Central America, between Guatemala and
Honduras, this 21,000 square km country is slightly smaller than the
State of Massachusetts. El Salvador is also known as the Land of
Volcanoes, due to frequent and sometimes destructive earthquakes and
volcanic activity.
The population of El Salvador is 6.4 million with nearly half
(48.9%) of the population under the age of 24. The Country is led
by President Salvador Sanchez Cerén and a Council of Ministers
selected by the president. They have a unicameral 84-seat
Legislative Assembly, which is elected to serve three-year terms.
President Sanchez Cerén, who took office on June 1, 2014, was a
rural school teach and leader in the teacher's union in his youth,
fought with the rebels during El Salvador's 12-year civil war (1980
to 1992) and served as a negotiator in the 1992 peace accords.
Immediately prior to his election, he served as Vice President of El
Salvador.
In 2013, El Salvador's GDP was $47.4 billion, making it the 99th
largest economy in the world. Since the economic contraction due to
the global recession, growth is averaged less than 2% from 2010 to
2013. Remittances accounted for 16% of GDP in 2013 and were
received by about a third of all households.
In 2006, El Salvador was the first country to ratify the CAFTA-DR
which increased the export of processed foods, sugar, and ethanol,
and supported investment in the apparel sector. El Salvador's
external debt has been growing over the last several years,
amounting to some 57% of GDP in 2013. In September 2013, El
Salvador was awarded a $277 million grant by the U.S to improve El
Salvador's competitiveness and productivity in international
markets.
Key natural resources include hydropower, geothermal power,
petroleum, and arable land. There are 2.7 million people in the
workforce with 21% working in agriculture, 20% in industry, and 58%
in services. Top performing industries include: food processing,
beverages, petroleum, chemicals, fertilizer, textiles, furniture,
and light metals. The U.S. dollar is used as a medium of exchange,
which encourages U.S. import and export of goods and services.
Businesses in El Salvador exported $5.6 billion in products in 2013,
making it the 115th largest exporter in the world with 47.3% of
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products going to the U.S., 13.8% to Guatemala, 9.6% to Honduras,
and 5.4% to Nicaragua in 2012. Top export commodities include
offshore assembly exports, coffee, sugar, textiles and apparel,
gold, ethanol, chemicals, electricity, iron and steel manufactures.
El Salvador was the 64th largest supplier of goods to the U.S. in
2013.
Over $10 billion in products were imported to El Salvador in 2012
from the U.S. (35.4%), Guatemala (12.7%), Mexico (7%), China (5.6%),
and Germany (4.2%). Top imported products included raw materials,
consumer goods, capital goods, fuels, foodstuffs, petroleum, and
electricity.
5)Civil War in El Salvador : Tensions in El Salvador among the
indigenous, the poor, and the working class had been simmering for
decades due to their poor economic and social circumstances,
especially as compared to the growing prosperity of a select few.
In the 1970s the struggles continued with escalating acts of
violence between the military and the rebels often including
civilian causalities. The public assassination of an out-spoken
priest and human rights activist provided the final spark that led
to a 12-year civil war which displaced half a million people and
resulted in the death of 75,000, according to documentation from the
United Nations.
On March 24, 1980, Archbishop Óscar A. Romero, a former Nobel Peace
Prize nominee for his advocacy for the poor, was assassinated while
serving mass. Only days after the murder, a peaceful rally in front
of the National Cathedral commemorating the Monsignor's death was
broken up by a bomb blast and bursts of gunfire leaving 27 to 40
dead and 200 wounded, according to the Report of the U.N. Truth
Commission. Later that same year, four U.S. church women working
with refugees in El Salvador were abducted, raped and murdered.
While several investigations were initiated, none were effective in
identifying who were responsible and several, according to reports
by the U.S. Public Broadcasting Service, appear to have covered-up
the fact that the order to kill the churchwomen came from higher
levels in the Salvadoran military.
Throughout the duration of the civil war, news correspondents
continued to report on the extreme conditions in El Salvador
including the 1981 massacre at El Mozote, which left 1,000 civilians
dead and the 1989 murder of six Jesuit priests, their housekeeper
and her daughter, to name just a few. As the violence grew and the
attacks on both sides escalated, refugees swarmed into U.S. and
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Canada, as well as neighboring countries including Mexico,
Guatemala, Honduras, Nicaragua, and Costa Rica.
Further complicating the war was the involvement of foreign
countries and the perceived regional significance of the civil war
as a challenge to democracy in the Western hemisphere. U.S.
involvement shifted between being concerned over violent acts and
human right abuses of civilians to apprehension that the fall of El
Salvador to leftists would have a domino effect on other areas of
Central and South America. One BBC report described the U.S.
involvement in El Salvador as being the largest counter-insurgency
war against left-wing guerrillas since Vietnam. During the height
of the civil war, some sources reported that U.S. aid averaged $1.5
million dollars a day. U.S. support only ceased in 1990 after the
United Nations became involved to help forge an armistice, and U.S.
Congressman Joe Moakley published a Congressionally-mandated report
that confirmed the prior reports of human rights violations in El
Salvador.
The civil war officially ended in 1992 when the government and
leftist rebels signed a treaty, the Chapultepec Peace Accords, which
provided for military and political reforms. More specifically, a
report by the U.S. Institute of Peace describes the Chapultepec
Peace Accords as providing, in addition to a cease-fire; the
demobilization of military and guerrilla forces; and the
establishment of the rebel Farabundo Martí National Liberation Front
(FMLN) as a political party and the reintegration of its combatants
into society. Further, the Chapultepec Peace Accord committed the
government to making changes in the nature, responsibilities, and
size of the country's armed forces; creating a new national civilian
police force and an intelligence service separate from the military;
implementing human rights measures; adopting electoral and judicial
reforms; and providing limited social and economic programs
primarily benefiting members of the demobilized forces and
war-ravaged communities.
SCR 103 commemorates the important role Archbishop Romero continues
to play for the El Salvadoran people, as well as acknowledging the
significance of the recent democratic election of President Sánchez
Cerén, which is a symbol of the country's own transition from civil
war to a modern democracy and economic partner.
6)California's Trade Economy : International trade and foreign
investment serve as critical components of California's $2.0
trillion economy. If California were a country, it would be the
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17th largest exporter and the 14th largest importer in the world.
Merchandise exports from California ($168 billion) accounted for
over 10.6% of total U.S. exports in goods, shipping to over 220
foreign destinations in 2013. California's land, sea, and air ports
of entry served as key international commercial gateways for the
$538 billion in products entering and exiting the U.S. in 2012.
Statewide, 4.4 million California jobs are dependent on foreign
trade. 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.
California's significance in the global marketplace results from a
variety of factors, including: its strategic southwest and coastal
location offering direct access to growing foreign markets in
Mexico, Latin America, and Asia; its nine diverse regional
economies; its large, ethnically diverse population, representing
both a ready workforce and significant consumer base; its access to
a wide variety of venture and other private capital; its broad base
of small- and medium-sized businesses; and its culture of innovation
and entrepreneurship, particularly in the area of high technology.
Mexico is California's top trading partner, receiving $23.9 billion
(14%) in goods in 2013. The chart below shows export data on the
state's top five trade partners. Other top-ranking export
destinations not shown on the chart include Hong Kong, Taiwan,
Germany, the Netherlands, and the United Kingdom.
--------------------------------------------------------------------
| California Export based on Movement of Goods 2012 and 2013 |
--------------------------------------------------------------------
|--------------+--------------+--------------+--------------+--------------+--------------+--------------|
| Rank | Country | 2012 Value | 2013 Value | 2012 % Share | 2013 % Share | % Change, |
| | | | | | | 2012 - 2013 |
|--------------+--------------+--------------+--------------+--------------+--------------+--------------|
| --- |Total | 161,880| 168,128| 10.5| 10.6| 3.9|
| |CALIFORNIA | | | | | |
| |Exports and % | | | | | |
| |Share of U.S. | | | | | |
| |Total | | | | | |
|--------------+--------------+--------------+--------------+--------------+--------------+--------------|
| --- |Total, Top 25 | 143,671| 149,020| 88.8| 88.6| 3.7|
| |Countries and | | | | | |
| |% Share of | | | | | |
| |State Total | | | | | |
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|--------------+--------------+--------------+--------------+--------------+--------------+--------------|
| 1 |Mexico | 26,370| 23,933| 16.3| 14.2| -9.2|
|--------------+--------------+--------------+--------------+--------------+--------------+--------------|
| 2 |Canada | 17,424| 18,819| 10.8| 11.2| 8.0|
|--------------+--------------+--------------+--------------+--------------+--------------+--------------|
| 3 |China | 13,970| 16,359| 8.6| 9.7| 17.1|
|--------------+--------------+--------------+--------------+--------------+--------------+--------------|
| 4 |Japan | 13,033| 12,711| 8.1| 7.6| -2.5|
|--------------+--------------+--------------+--------------+--------------+--------------+--------------|
| 5 |South Korea | 8,246| 8,394| 5.1| 5.0| 1.8|
--------------------------------------------------------------------------------------------------------
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|Source: tradeport.org |
| |
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California's largest industry sector by employment is Trade,
Transportation, and Utilities, which encompasses everything from
major retail outlets, to import-export businesses, to transportation
and warehousing. California leads the nation in export-related
jobs. The U.S. Department of Commerce estimates that for every one
million dollars of increased trade activity, 11 new jobs are
supported. Workers in trade-related jobs earn on average 13% to 28%
higher wages than the national average.
In today's globally linked economy, manufacturing utilizes products
from across the U.S., as well as from other nations. In 2012, 61%
($1.3 trillion) of the products imported into the U.S. were inputs
and components intended for use by American producers. In addition,
U.S. imports often include components or benefits from services
provided by U.S. firms, including many California companies. The
Wilson Center estimates that Mexican imports and Canadian imports
contain 40% and 20% U.S. components, respectively.
Trade and foreign investment support new job creation, bring new
technologies and skills to California workers, generate local and
state revenues, and generally strengthen the state's economic base.
In the future, California's economy will become increasingly reliant
on accessing foreign markets where a majority of global economic
growth is expected to occur.
7)Related Legislation : Below is a list of legislation from the
current and prior legislative sessions.
a) AB 2012 (John A. Pérez) Economic Development Reorganization:
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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 Governor's Office of Business
and Economic Development. Status: Signed by the Governor,
Chapter 294, Statutes of 2012.
b) AB 2443 (V. Manuel Pérez) International Trade Program and
Sister State Relationships:
This bill would have required the State Point of Contact to
provide the Legislature with copies of any official position
taken or comments to the U.S. Trade Representative relating to a
pending trade agreement and would have authorized the
establishment of sister state relationships for the purpose of
promoting economic growth and trade and investment opportunities.
Status: Vetoed by the Governor, September 2010.
c) AB 2713 (Quick-Silva) Public Private Partnerships to Promote
Trade: This bill authorizes the Governor's Office of Business
and Economic Development to establish public-private partnerships
to help guide state activities related to the export of
California products and the attraction of employment-producing
foreign investment. The bill requires the establishment of a
subaccount to hold private donation for county and
industry-specific marketing activities. The bill also requires
the establishment of a partnership to support California trade
and investment within South Korea. Status: Pending in the
Senate.
d) ACR 100 (Alejo) El Salvador and California Partnership: This
resolution memorializes the Legislature's recognition of the
special relationship between California and the country of El
Salvador. In furthering this special relationship, the
Legislature, extends an invitation to the people of El Salvador
to partner with California to commit to the development of
programs to foster social, economic, educational, scientific, and
cultural programs in order to strengthen the democratization
process and economic development of El Salvador and to promote
economic ties and improve international understanding and
goodwill. Status: Scheduled to be heard in JEDE on June 10,
2014.
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e) SCR 82 (Hueso) Sister State with Jalisco: This bill
establishes a sister state relationship between California and
the State of Jalisco, Mexico, for the purpose of promoting
economic growth and well-being of small, medium, and large
corporations and by increasing their potential trade and
investment within the State of Jalisco. Status: Scheduled to be
heard in JEDE on June 10, 2014.
REGISTERED SUPPORT / OPPOSITION :
Support
The Central American Resource Center
Clinica Monsenor Oscar A. Romero
El Rescate
The National Network of Salvadorans Living Abroad-Los Angeles
The Salvadoran-American Leadership an Education Fund
The Salvadoran American National Association
The SHARE El Salvador Foundation
United Salvadoran Communities-USA
Opposition
None received
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916) 319-2090