BILL ANALYSIS Ó
SB 592
Page 1
Date of Hearing: August 12, 2013
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT AND THE ECONOMY
Jose Medina, Chair
SB 592 (Price/Lieu) - As Amended: June 25, 2013
SENATE VOTE : 38-0
SUBJECT : Trade promotion and California ports of entry.
SUMMARY : Requires the Governor's Office of Business and Economic
Development (GO-Biz) to convene a statewide business partnership to
discuss the promotion of California ports and to provide the
Legislature with a port trade promotion strategy (Port Strategy) on or
before January 1, 2014. Specifically, this bill :
1)Sets forth findings and declarations detailing the importance of
California ports of entry and seaport facilities in the state's
economy and status as a gateway for goods movement including, but
not limited to the following statements:
a) More than 40% of containerized cargo entering the United
States arrived at California ports, almost 30% of total U.S.
exports moved through California ports and port activities employ
more than 500,000 people and generate close to $7 billion in
state and local taxes annually;
b) The completion of the expansion of the Panama Canal in 2014
could possibly result in California ports losing as much as 25%
of cargo business and 100,000 jobs; and
c) There is a need for a Port Strategy to reflect greater port
utilization and address ongoing issues related to ports and
promote greater use of ports through an International Trade and
Investment Strategy.
2)Requires GO-Biz to provide a Port 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.
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3)Requires GO-Biz to convene a statewide business partnership that
advises on the Port 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.
4)Provides for its immediate implementation so that the state can
assess and address the potential impact of the 2014 Panama Canal
expansion on California ports and port-related jobs.
EXISTING LAW:
1)Establishes GO-Biz for the purpose of serving as the lead state
entity for economic strategy and marketing of California on issues
related to business development, private sector investment and
economic growth.
2)Specifies that GO-Biz is the primary state agency responsible for
the attraction of foreign investment support, so California
businesses can access foreign markets. In implementing these
duties, GO-Biz is required to provide the Legislature with an ITI
Strategy by February 2014.
FISCAL EFFECT : According to the Senate fiscal analysis,
implementation of this bill would require $150,000 to fund one
position for six months.
COMMENTS :
1)Author's Purpose : "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. 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, over two million jobs
are linked to California's ports.
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
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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. There is 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% of their cargo business, which may in turn result in an impact
of millions of dollars to local economies and over 100,000 jobs."
2)Framing the Policy Issue : This measure requires the development of
a Port Strategy in consultation with key stakeholders including
marine terminal operators, labor representations and shippers, to
name a few. Given the significance of global logistical networks to
efficiently support expanded supply chains, California is
potentially at an infrastructure disadvantage with the expansion of
the Panama Canal in 2014.
In February 2013 the Senate Committee on Business, Professions, and
Economic Development held a hearing at the Port of Los Angeles
entitled "What Does the Expansion of the Panama Canal mean for
Economic Development and Jobs in California." Testimony focused on
efforts California should make as other states and nations upgrade
their ports including intermodal connectivity, streamlined approval
of infrastructure improvements, and trade promotion. In proposing a
heightened priority for promoting California ports, the author noted
the expanding global economy, competitiveness of other U.S. and
foreign ports, and the pending update of the ITI Strategy. These
issues are discussed in greater depth below.
3)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 (Romero and
Figueroa), Chapter 663, Statutes of 2006 and further refined in AB
2012 (John A. Pérez), 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 the research found in the trade and investment study, 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 |
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|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
five program objectives including the promotion of the California
brand and integrating international trade and investment into the
state's overall economic development strategy. The 2008 strategy
did not address ports of entry or the logistical network to move
products along the supply chain or within global markets. AB 592
would require that these issues be addressed in a separate trade
promotion strategy to encourage greater utilization of California's
ports of entry. The author may want to consider allowing GO-Biz to
include the Port Strategy as a component of the 2014 update to the
ITI Strategy.
1)Trade Promotion through Market Orders : Marketing orders and
marketing agreements are two types of legal structures designed to
help stabilize market conditions and increase an industry's
comparative advantage to similar companies in other regions of the
U.S. and around the world. Industries voluntarily enter into these
types of agreements, which are sometimes structured within federal
and/or state statute.
The advantages of marketing orders and agreements can help to (1)
maintain the high quality of products or services within the market;
(2) standardize practices; (3) regulate the flow of products and
services within the market; and (4) authorize production research,
marketing research and development, and advertising.
Marketing orders differ from marketing agreements in that they are
binding on all individuals and businesses that are classified as
"handlers" in a geographic area covered by the order. Marketing
agreements are binding only on handlers who are voluntary
signatories of the agreement. These agreements and orders are
generally directed through advisory committees, the membership of
which is nominated by the industry and appointed by a government
official, such as a secretary of an agency. The advisory committee
works to develop regulations that are then voted on by the entire
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industry. Regulations become binding on the entire targeted group
if approved by at least two-thirds of the producers by number or
volume.
While most commonly associated with the agriculture industry, market
orders and agreements are used in a range of industries. As an
example, the California Tourism Marketing Act establishes the
California Travel and Tourism Commission (Tourism Commission) as a
separate, independent California nonprofit mutual benefit
corporation with the purpose of increasing the number of persons
traveling to and within California. The Tourism Commission uses a
form of a market order to fund promotional activities. Effective
July 1, 2013, pursuant to the 2012 Governor's Reorganization Plan,
the Tourism Commission will come under the auspices of GO-Biz. This
new administrative responsibility will provide GO-Biz with firsthand
information on market orders and market agreements, which could be
useful when proposing funding options for the Port Strategy.
2)State Freight Plan : Caltrans is currently updating the Goods
Movement Action Plan (GMAP), which was originally issued by the
Business, Transportation, and Housing Agency and the California
Environmental Protection Agency in two phases in 2005 and 2007. The
GMAP was a comprehensive plan to address economic and environmental
issues associated with moving goods via the state's highways,
railways, and ports. It also provided guidance for allocating $3.1
billion of the $19.9 billion approved by voters in Proposition 1B,
the Highway Safety, Traffic Reduction, Air Quality and Port Security
Bond Act of 2006.
The new plan, known as the Freight Mobility Plan, will expand beyond
the GMAP to address additional issues such as greenhouse gas
emissions goals, as well as to meet the parameters outlined in
MAP-21. The Freight Mobility Plan, proposed in AB 14 (Lowenthal),
will focus more attention on community impact issues, take a more
in-depth look at trucking, and more thoroughly identify the freight
needs of portions of California that did not receive sufficient
attention during implementation of the GMAP. In addition to AB 14,
the Legislature is also considering AB 1081 (Medina), which would
include goods movement related infrastructure identified in the
Freight Mobility Plan, the ITI Strategy, or the Port Strategy on the
state's five-year infrastructure plan. The five-year infrastructure
plan provides the basis for that Legislature and the Governor to
make mid- and long-term financing commitments.
3)California's Trade Economy : California's $1.9 trillion economy
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naturally functions as an independent nation and is highly dependent
on industry sectors that participate within the larger global
economy. In fact, compared to other nations, California has one of
the 10 largest economies in the world, due to it having a strategic
west coast location and border with Mexico, as well as the advantage
of being a top-tier trade partner, a best-in-class investment
location, a high quality producer of goods and services, and the
home and key access point for a massive consumer-base.
In 2012, California exported $162 billion in products and imported
$376 billion. 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. While California has been
significantly impacted by the recession, exports continued to
increase in almost every quarter from 2010 through 2012.
Mexico is California's top trading partner, receiving $26 billion
(16%) in goods in 2012. The state's second and third largest
trading partners are Canada and China with $17.3 billion (11%) and
$14 billion (9%), respectively. Other top-ranking export
destinations include Japan, South Korea, Hong Kong, Taiwan, Germany,
the Netherlands and the United Kingdom. Below is a chart of
California's top exports in 2012.
------------------------------------------------------------------
| 2012 Exports From California to the World |
------------------------------------------------------------------
|-----------------------+-----------------+------------------------|
| Product | Value ($ | Percent |
| | billions) | |
|-----------------------+-----------------+------------------------|
|334 Computers & | 44.5 | 27.6 % |
|Electronic Prod. | | |
|-----------------------+-----------------+------------------------|
|333 Machinery (except | 14.8| 9.2 % |
|electrical) | | |
|-----------------------+-----------------+------------------------|
|336 Transportation | 16.1| 10 % |
|Equipment | | |
|-----------------------+-----------------+------------------------|
|325 Chemical | 12.7 | 7.9 % |
|Manufactures | | |
|-----------------------+-----------------+------------------------|
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|339 Misc. Manufacture | 13.8 | 8.6 % |
|Commodities | | |
|-----------------------+-----------------+------------------------|
|111 Agricultural | 11.9 | 7.4 % |
|Products | | |
|-----------------------+-----------------+------------------------|
|All Others | 27.2 | 29.3 % |
|-----------------------+-----------------+------------------------|
|Total | $162 (rounded) | |
| | | 100 % |
------------------------------------------------------------------
------------------------------------------------------------------
|Source: |
|Tradestates.com |
| |
------------------------------------------------------------------
It is estimated that one in five manufacturing jobs in California is
related to trade. Goods movement supports employment, business
profit, and state and local tax revenue. The logistics industry is
responsible for hiring 73,000 workers. California businesses rely
heavily on the state's ports and their related transportation
systems to move manufactured goods. Firms rely on fast, flexible,
and reliable shipping to link national and global supply chains and
bring products to the retail market. Transportation breakdowns and
congestion can idle entire global production networks.
Changes in U.S. and global trade patterns since the enactment of
NAFTA and the continuing development of foreign markets place
challenges on California's goods movement and IT systems. These
challenges are only expected to become greater as the rate of
innovation within manufacturing, transportation, the communication
technology sectors gets faster and the ability of multiple
geographic locations to successfully use these technologies expands.
Remaining competitive in this new global marketplace will require
California to be more aggressive about marketing, attracting, and
retaining business activities at the ports.
4)National Export Goal and California Ports : In January 2010,
President Barack Obama announced the National Export Initiative
(NEI) which proposes to double the country's total exports by the
end of 2014. The initiative also calls for improvements to the
U.S.'s transportation and supply chain infrastructure to enable
exporters to transport their goods to ports quickly and
inexpensively. Most recent data suggests that U.S. exports are
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progressing. In 2012, U.S. exports hit an all-time record of $2.2
trillion, a 40% increase from 2009, supporting 9.8 million U.S.
jobs. Additionally, in 2012, California's export shipments of
merchandise represented a 35% increase ($162 billion) over 2009.
Moving these products requires a highly integrated infrastructure
and logistical networks that links raw materials with manufacturers
and distribution systems. Ports are key hubs within these networks.
The Port of Los Angeles continues to hold the top rank in terms of
two-way trade in 2011 (valued at $273.6 billion). It is followed by
JFK International Airport ($192.3 billion) and the Port of Houston
($168.8 billion). Data on California's other major ports are as
follows: Long Beach ($94.7 billion, ranked 9th); LAX ($84.6 billion,
ranked 12th); San Francisco International Airport ($50.5 billion,
ranked 21st); Port of Oakland ($45.8 billion, ranked 24th); Otay
Mesa Station ($34.2 billion, ranked 30th).
In terms of container activity, the Los Angeles-Long Beach container
port ranked 8th globally, behind Shanghai, China; Singapore, The
Republic of Singapore; Hong Kong, China; Shenzhen, China; Busan,
South Korea; Ningbo, China; and Guangzhou, China.
5)Related Legislation : Below is a list of related legislation.
a) AB 14 (Lowenthal) State Freight Plan : This bill requires the
state's Transportation Agency to prepare a state freight plan and
establish a freight advisory committee. Status: Pending in the
Senate Committee on Appropriations.
b) AB 311 (V. Manuel Perez) Bi-National Infrastructure and
Economic Development Bank : This bill would have expanded the
role of the I-Bank to include facilitating infrastructure and
economic development financing activities within the California
and Mexico border region. Status: Held in Assembly Committee on
Appropriations in 2013.
c) 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.
d) AB 886 (Allen) Export and Import Credit : This bill would have
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established a capped and allocated tax credit for importers and
exporters that increase cargo through California air and sea
ports, hire additional staff, or incur capital costs at a
California cargo facility. Status: Held in the Assembly
Committee on Appropriations in 2013.
e) AB 1081(Medina) Moving Goods to Market : This bill integrates
goods movement within the states infrastructure planning
including the Five-Year Infrastructure Plan and the ITI Strategy.
Status: Pending in the Senate Committee on Transportation and
Housing Committee.
f) AB 2012 (John A. Pérez) Economic Development Reorganization :
This bill transferred the authority for undertaking international
trade and foreign investment activities from the Business,
Transportation and Housing Agency to 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.
g) SB 460 (Price) International Trade and Marketing and
Promotion : This bill would have required the Secretary of the
Business, Transportation and Housing Agency to convene a
statewide business partnership for international trade marketing
and promotion. Status: Held in the Assembly Committee on
Appropriations in 2012.
REGISTERED SUPPORT / OPPOSITION :
Support
None Received
Opposition
None Received
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916) 319-2090