BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 592|
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THIRD READING
Bill No: SB 592
Author: Price (D)
Amended: As introduced
Vote: 27 - Urgency
SENATE BUSINESS, PROF. & ECON. DEV. COMM. : 10-0, 4/1/13
AYES: Price, Emmerson, Block, Corbett, Galgiani, Hernandez,
Hill, Padilla, Wyland, Yee
SENATE APPROPRIATIONS COMMITTEE : 7-0, 4/15/13
AYES: De León, Walters, Gaines, Hill, Lara, Padilla, Steinberg
SUBJECT : Trade promotion of California ports
SOURCE : Author
DIGEST : This bill requires the Governors Office of Business
and Economic Development (GO-Biz) to provide a port trade
promotion strategy to the Legislature on or before April 1,
2014; requires GO-Biz to convene a statewide business
partnership for port trade promotion; and makes various findings
and declarations about the economic impact of California's ports
and possible threats to ports from the expansion of the Panama
Canal.
ANALYSIS :
Existing law:
1. Establishes GO-Biz within the Governor's Office for the
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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.
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 (ITI)
program (Program) attracting employment-producing direct
foreign investment to the state and provides support for
California businesses in accessing international markets and
increasing exports.
3. Requires GO-Biz to prepare an ITI 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 ITI 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; and (f) an
organizational structure for state administration of ITI
policies, programs and services.
4. Requires the Director of GO-Biz to prepare (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; and (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.
5. Provides that the State Controller shall not allocate any
state funds to GO-Biz for ITI activities unless the strategy
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for ITI has been submitted to the Legislature by May 1, 2014.
6. Establishes processes and accountability measures for GO-Biz
to accept private monies to fund, establish and operate
international trade offices.
This bill:
1. Sets forth findings and declarations detailing (a) the
importance of California ports of entry and seaport
facilities in the state's economy and status as a gateway for
good movement; (b) more than 40% of cargo entering the United
States arrived at California ports, almost 30% of exports
moved through California ports and port activities employ
more than 500,000 people and generate close to $7 billion;
(c) the compelling interest of the state in the success of
California ports; (d) the significant impact of the expansion
of the Panama Canal; (e) the possibility that California
ports may lose as much as 25% of cargo business; (f) the need
for an ITI strategy to reflect port utilization; and (g) the
need to resolve ongoing issues related to ports and promote
greater use of ports through an ITI strategy.
2. Requires GO-Biz to provide a port trade promotion strategy
for California ports to the Legislature on or before April 1,
2014, that includes (a) policy goals, objectives and
recommendations necessary to implement a comprehensive port
trade promotion strategy; (b) measurable outcomes and
timelines for the goals, objectives and actions for promoting
trade at ports; (c) impediments to achieving goals and
objectives; (d) key stakeholder partnerships that will be
used to implement the strategy; and (e) options for funding.
3. Requires GO-Biz to convene a statewide business partnership
that advises GO-Biz on the port trade promotion strategy, on
or before February 1, 2014, that includes, but is not limited
to, representatives from ports of entry; ocean carriers;
marine terminal operators; warehouse operators; railroads;
trucking companies; labor representatives; foreign trade
zones; environmental group representatives; and shippers,
including agricultural exporters, manufacturers, postconsumer
secondary material handlers and retailers.
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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% of the total
containerized cargo entering the U.S. arrived at California
ports, and almost 30% 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 $7
billion 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 ($17.1 billion), China ($14.1 billion), Japan ($13
billion), and South Korea ($8.4 billion). California's top five
exports in 2011 were Computer and Electronic Products ($46
billion); Transportation Equipment ($14.9 billion); Machinery,
Except Electrical ($14.7 billion); Miscellaneous Manufactured
Commodities ($13 billion); and Chemicals ($12.4 billion). China
is the largest source of imports 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 and Electronic Products ($107.6 billion);
Transportation Equipment ($48.8 billion); Oil & Gas ($30
billion); Miscellaneous Manufactured Commodities ($19.1
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billion); and Apparel and Accessories ($18.9 billion).
Expansion of the Panama Canal . Panama is currently increasing
the shipping capacity of the Panama Canal. Specifically, the
project will reportedly double the capacity of the Canal, such
that it will be able to accommodate larger cargo ships than is
the case currently. Consequently, shipping from Asia that
currently utilizes California ports could bypass them and
instead move through the canal destined for ports in the eastern
U.S. To the extent that this occurs, California would lose
cargo business, which could, in turn, negatively impact the
state's economy and employment, particularly in communities
located near the ports.
The Senate Business, Professions, and Economic Development
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 through a comprehensive, collaborative trade
promotion strategy.
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 TTCA 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
1513 (Romero, Chapter 663, Statutes of 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
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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 ITI office (AB
2012 (Perez), Chapter 294, 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.
Federal trade and export activity . The U.S. Trade
Representative negotiates directly with foreign governments on
internal trade agreements and consults states on provisions of a
trade agreement through direct consultation with a state
Governor, a state point of contact and Intergovernmental Policy
Advisory Committee.
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
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Trans-Pacific Partnership 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 five 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 U.S. 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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee, GO-Biz
estimates that it will require $150,000 (General Fund) to fund
one position for six months to implement the provisions of this
bill.
SUPPORT : (Verified 5/23/13)
Pacific Merchant Shipping Association
OPPOSITION : (Verified 5/23/13)
Department of Finance
ARGUMENTS IN SUPPORT : According to the author's office,
international trade accounts for nearly 25% of the state's
economy and relies on land ports of entry and the largest
seaport facilities in the U.S. to maintain California's status
as a major gateway for products entering and leaving the U.S.,
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
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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.
ARGUMENTS IN OPPOSITION : The Department of Finance is opposed
to this bill because it will result in General Fund costs which
GO-Biz will be unable to absorb.
MW:k 5/24/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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