BILL ANALYSIS                                                                                                                                                                                                    Ó







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        |Hearing Date:January 13, 2013      |Bill No:SB                         |
        |                                   |511                                |
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                      SENATE COMMITTEE ON BUSINESS, PROFESSIONS 
                               AND ECONOMIC DEVELOPMENT
                              Senator Ted W. Lieu, Chair
                                           

                           Bill No:        SB 511Author:Lieu
                   As Amended:January 6, 2014         Fiscal:  Yes 

        
        SUBJECT:  Trade promotion of California ports. 
        
        SUMMARY:  Requires GO-Biz to convene a statewide business partnership  
        for port trade promotion.

        Existing law, The Government Code (GC):
        
        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)The California Tourism Marketing Act establishes the California  
          Travel and Tourism Commission (Commission) as a separate,  
          independent California nonprofit mutual benefit corporation with the  
          purpose of increasing the number of persons traveling to and within  
          California and requires the Commission to prepare a written  
          marketing plan.  
        (GC §§ 13995.40 - 13995.45.)

        3)Sets forth findings and declarations detailing: (1) The importance  
          of strengthening collaborative linkages among remaining  
          California-based international trade and investment promotion  
          programs operated at federal, state, regional and local levels in  
          light of the repeal of the statutory authority for the Technology,  
          Trade and Commerce Agency (TTCA) in 2003; 
        (2) Data from 2000 shows that international trade and investment  





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          activity in the state supports one in every seven jobs; (3) Public  
          Policy Institute of California (PPIC) data as to the productivity of  
          export business; (4) California has elements to form the foundation  
          for a global market-related economy; (5) California's multicultural  
          and ethnic populations offer unique opportunities for international  
          trade and investment; (6) High numbers of California workers are  
          employed by subsidiaries of foreign companies; and, (7) California's  
          trade and investment policy is a living document that should be  
          regularly updated to reflect emerging business trends and the  
          changing needs of California businesses and workers. (GC § 13996.4)

        4)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) 

        5)Authorizes GO-Biz to establish international trade and investment  
          (ITI) offices outside of the U.S. according to certain requirements.  
           (GC § 13996.42)

        6)Requires GO-Biz to prepare an international trade and investment  
          strategy and provide a report to the Legislature on or before  
          February 1, 2014, updated once every five years that includes:

             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.  (GC § 13996.55)

        1)Requires the Director of GO-Biz to prepare the following:

             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  





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               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.  
             (GC § 13996.65)

        2)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)

        3)Establishes processes and accountability measures for GO-Biz to  
          accept private monies to fund, establish and operate international  
          trade offices.  (GC § 13997)

        This bill:

        1) Requires GO-Biz to convene a statewide business partnership that  
           advises GO-Biz on the port trade promotion strategy on or before  
           February 1, 2015 that includes, but is not limited to  
           representatives from:

              a)      Ports of entry.
              b)      Ocean carriers.
              c)      Marine terminal operators.
              d)      Warehouse operators.
              e)      Railroads.
              f)      Trucking companies.
              g)      Labor representatives.
              h)      Foreign trade zones.
              i)      Environmental group representatives.
              j)      Shippers, including agricultural exporters,  
                manufacturers, postconsumer secondary material handlers and  
                retailers.

        FISCAL EFFECT:  Unknown.  This bill is keyed "fiscal" by Legislative  
        Counsel.

        COMMENTS:
        
        1. Purpose.  The  Author  is the Sponsor of this bill.  According to the  
           Author, international trade accounts for nearly 25 percent of the  





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           state's economy and relies on land ports of entry and the largest  
           seaport facilities in the United States to maintain California's  
           status as a major gateway for products entering and leaving the  
           United States, including many goods moving through California  
           ports, such as industrial, technology and postconsumer secondary  
           materials originated in, or destined for other states.  The state  
           has a compelling interest in the success of ports because of the  
           significant economic benefit in terms of jobs, personal income,  
           business revenue, and taxes.  Ports are the vital interface between  
           water and land transportation for trade with the Pacific Rim  
           countries and other trade.  

        2. Background.  Ports are local government agencies governed by port  
           commissions that are responsible for developing, maintaining, and  
           overseeing the operation of shoreside facilities for the intermodal  
           transfer of cargo between ships, trucks, and railroads.  In some  
           cases, certain ports have jurisdiction over affiliated airports,  
           build and maintain terminals for the passenger cruise ship  
           industry, or manage marinas and other public facilities.  Existing  
           law establishes 11 ports in the state:  Hueneme, Humboldt Bay, Long  
           Beach, Los Angeles, Oakland, Redwood City, Richmond, Sacramento,  
           San Diego, San Francisco, and Stockton.  The law allows each port  
           to establish a general plan and port system improvements and  
           prescribe the specifications for such improvements.  

           According to the California Marine and Intermodal Transportation  
           System Advisory Council, more than 40 percent of the total  
           containerized cargo entering the United States arrived at  
           California ports, and almost 30 percent of the nation's exports  
           flowed through ports in the Golden State.  Port activities employ  
           more than 500,000 people in California and generate an estimated  
           seven billion dollars in state and local taxes annually.  It is  
           estimated that nationwide, more than two million jobs are linked to  
           California's public ports.

           According to data from the Department of Commerce, California  
           exported $159 billion in products in 2011, up from 143.1 billion in  
           2010.  California's largest export market is Mexico, where the  
           value of exports totals close to $26 billion in 2011.  After  
           Mexico, California's top export markets in 2011 were: Canada  
           ($17.1billion), China ($14.1 billion), Japan ($13 billion), and  
           South Korea ($8.4 billion).  California's top five exports in 2011  
           were: Computer & Electronic Products ($46 billion); Transportation  
           Equipment ($14.9 billion); Machinery, Except Electrical ($14.7  
           billion); Miscellaneous Manufactured Commodities ($13 billion)  
           Chemicals ($12.4 billion).  China is the largest source of imports  





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           into California; the 2011 value of Chinese imports was $120  
           billion.  China is followed by Japan ($39.7 billion); Mexico ($33.6  
           billion); Canada ($20.4 billion); and South Korea ($11.7 billion).   
           California's top five imports in 2011 were: Computer & Electronic  
           Products ($107.6 billion); Transportation Equipment ($48.8  
           billion); Oil & Gas ($30 billion); Miscellaneous Manufactured  
           Commodities ($19.1 billion); and Apparel & Accessories ($18.9  
           billion).
        
        3. The Threat of Expansion of the Panama Canal.  Panama is currently  
           underway with an over $5 billion project to greatly expand the  
           Panama Canal making it deeper and wider, raising the possibility of  
           a significant impact on the flow of goods coming into California's  
           ports.  The project will double the capacity of the existing canal  
           by adding wider, deeper and longer locks on both the Atlantic and  
           Pacific sides.  The project also includes digging a new access  
           channel on the Pacific side, deepening and widening the entrance to  
           the new locks and the navigational channels in Lake Gatun and in  
           the Culebra Cut, and elevating Lake Gatun's maximum operating  
           level.  The expanded Panama Canal will be able to accommodate  
           larger cargo ships, called Post Panamax vessels, which could result  
           in large freighters loaded with goods from Asia destined for the  
           Eastern United States, thus bypassing California all-together and  
           instead using the canal to reach the other side of the country.   
           There is some concern that California ports now have to compete  
           against one another and expansion of the canal holds the potential  
           for California ports to lose as much as 25 percent of their cargo  
           business, by some estimates, which may in turn result in an impact  
           of millions of dollars to local economies and over 100,000 jobs. 

           The Panama Canal Authority, which runs the canal, has entered into  
           memorandums of understandings (MOUs) with 20 ports on the Gulf and  
           East coasts, including New Orleans, Miami and Baltimore that are  
           intended to promote freight passage through the canal to those  
           ports.  In the absence of a California effort to market  
           opportunities throughout the state, ports themselves, like the Port  
           of Long Beach, are approaching the Panama Canal Authority  
           individually to enter into their own MOU.  

           This Committee held a hearing on February 22, 2013 entitled "What  
           Does the Expansion of the Panama Canal Mean for Economic  
           Development and Jobs in California?"  Testimony focused on efforts  
           the state of California should take to remain competitive with  
           other states and other seaports, including intermodal connection  
           improvements, streamlined approval for infrastructure and port  
           improvement projects and promoting trade at California ports  





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           through a comprehensive, collaborative trade promotion strategy. 

        4. International Trade Efforts in California.  Between 1986 and 2004,  
           the Technology, Trade and Commerce Agency (TTCA) was the  
           responsible government entity for promoting economic development,  
           international trade, and foreign investment in California.  When  
           the agency was eliminated 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, 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 the next update is required in February 2014.  
           
           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.    
             
        5. Federal Trade and Export Activity.  Created in 1962 by Executive  





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           Order as an agency within the Executive Office of the President,  
           the United States Trade Representative (USTR) negotiates directly  
           with foreign governments on internal trade agreements.  The USTR  
           consults states on provisions of a trade agreement through: direct  
           consultation with a state Governor; a state point of contact (SPOC)  
           and Intergovernmental Policy Advisory Committee (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 to trade agreements, the U.S. has 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 develop a stronger relationship.   
           The U.S. is also in negotiations for a regional, Asia-Pacific trade  
           agreement, known as the Trans-Pacific Partnership (TPP) Agreement  
           with the objective of shaping a high-standard, broad-based regional  
           pact.  
           
           On March 11, 2010, President Barack Obama signed an Executive Order  
           creating a National Export Initiative (NEI) with a goal of doubling  
           exports over the next 5 years by working to remove trade barriers  
           abroad and helping firms, especially small business, overcome  
           hurdles to entering new export markets.  The NEI stated a need to  
           enhance and coordinate Federal efforts to facilitate the creation  
           of jobs in the United States through the promotion of exports, and  
           to ensure the effective use of Federal resources in support of  
           these goals.  The NEI recognized that "a critical component of  
           stimulating economic growth in the U.S is ensuring that U.S.  
           businesses can actively participate in international markets by  
           increasing their exports of goods, services, and agricultural  
           products."  The NEI sets forth that improved export performance  
           will, in turn, create good high-paying jobs.  

        6. Related Legislation.    SB 592  (Lieu, 2013) was identical to this  
           bill but also 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) 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  





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           pending in the Senate Committee on Governance and Finance.) 

            AB 337  (Allen, 2013) makes various findings about the importance of  
           California's network of ports to the continued economic vibrancy of  
           the state and role in job creation.  (  Status:   The bill is  
           currently pending in the Assembly Committee on Jobs, Economic  
           Development and the Economy.)    

            AB 412  (Allen, 2013) states the intent of the Legislature to enact  
           legislation to enhance and expand opportunities for California  
           businesses to engage in international trade.  (  Status:   The bill  
           was held in the Assembly Committee on Appropriations.) 

            AB 886  (Allen, 2013) states 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, 2013) requires 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 1201  (Allen, 2013) states 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 is currently pending in the Assembly.)  

            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 1545  (Pérez, 2012) 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:   This measure was held in the Senate Committee on  
           Appropriations.)
            





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           AB 2012  (Perez, Chapter 294, Statutes of 2012) transferred the  
           authority for undertaking international trade and foreign  
           investment activities from BT&H to GO-Biz, including establishing  
           any international trade and investment office.  
           
            SB 460  (Price, 2011) required the Secretary of BT&H to convene a  
           statewide business partnership for international trade marketing  
           and promotion that includes, but is not limited to, representatives  
           of public airports, land ports of entry, seaports, ocean carriers,  
           marine terminal operators, air carriers, warehouse operators,  
           railroads, trucking companies, foreign trade zones, and shippers,  
           specifically including agricultural exporters, manufacturers,  
           post-consumer secondary material handlers, and retailers.  Required  
           the partnership to advise the Secretary of the BT&H on what role  
           the state should play in international trade marketing and  
           promotion, as specified.  (  Status:   This measure 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.) 

            SJR 4  (Harmon, 2011) would have memorialized Congress to approve  
           and enact the United States-Korea Free Trade Agreement.  (  Status:   
           The measure failed passage in this Committee.)  

            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 BT&H to  
           direct the California Travel and Tourism Commission to conduct a  





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           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 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.)

            AJR 27  (Torrico, Resolution Chapter 145, Statutes of 2010)  
           memorialized Congress that the California Legislature opposes the  
           United States-Colombia Trade Promotion Agreement.  

            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 55  (Villines, 2008) memorialized Congress that the California  
           Legislature supports the United States-Colombia Trade Promotion  
           Agreement.  (  Status:   This measure failed passage in the Assembly  
           Committee on Jobs, Economic Development, and the Economy.)

            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.  





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            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.   

        
        SUPPORT AND OPPOSITION:
        
         Support:  

        None received as of January 8, 2013

         Opposition:  

        None received as of January 8, 2013



        Consultant: Sarah Mason