BILL ANALYSIS
AB 2443
Page 1
Date of Hearing: April 20, 2010
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT AND THE ECONOMY
V. Manuel Perez, Chair
AB 2443 (V Manuel Perez) - As Introduced: February 19, 2010
SUBJECT : International relations
SUMMARY : Requires the state point of contact (SPOC) to provide
the Legislature with copies of any formal position taken or
comments made to the U.S. Trade Representative relating to a
pending trade agreement.
EXISTING LAW :
1)State law recognizes the Governor as the primary state officer
representing California's interest in international affairs,
to the extent that representation is not in conflict with
federal law or the California Constitution. Further, this
recognition is declaratory of existing law and does not in and
of its self confer any new authority.
2)State law specifies that the SPOC acts, in compliance with
federal practice, as the liaison between the state and the
Office of the United States Trade Representative (USTR) on
trade-related matters. State law recognizes that the SPOC
receives updates from the federal government on trade policies
and is often provided the opportunity to review and comment on
ongoing trade negotiations.
3)State law requires the SPOC, in addition to any other duties
assigned by the Governor, to do both of the following:
a) Promptly disseminate information from the USTR to the
appropriate state agencies, departments, and legislative
committees.
b) Work with the Legislature and appropriate state agencies
to review the effects of any proposed or enacted trade
agreement provisions on California environment, businesses,
workers, and general lawmaking authority and to communicate
those findings to the USTR.
FISCAL EFFECT : Unknown
AB 2443
Page 2
COMMENTS :
1)Author's purpose : In California the SPOC serves, by statute,
as the official liaison between the USTR, the Administration,
and the Legislature. As the liaison, the SPOC is required to
share key correspondence from the USTR to the relevant state
agencies, departments, and legislative policy committees and
to work with the Administration and Legislature to review and
comment to the USTR on the effects of proposed and enacted
trade agreements.
The SPOC, however, is not currently required to share a copy
of the Administration's comments to the USTR. This includes
when the Governor takes a formal position and/or comments on a
pending trade agreement. Given the importance of
international trade and foreign investment in the California
economy, the free exchange of information between the state's
executive and legislative branches is imperative.
2)U.S. Trade Policy : The U.S. Constitution grants the federal
government the power to enter into treaties and trade
agreements and provides that these treaties and agreements are
laws of the U.S. and, as such, are supreme over the laws of
states. By Executive Order, the Office of the U. S. Trade
Representative (USTR) is created as an agency within the
Executive Office of the President and is responsible for
international trade negotiations.
By Congressional directive, the USTR is required to secure
advice from states on trade negotiations through the
Intergovernmental Policy Advisory Committee (IGPAC). IGPAC is
one of six policy advisory committees established in the Trade
Act of 1974. IGPAC is comprised of state and local officials,
including members of state legislatures, state trade
directors, and related national associations. One Californian
serves on IGPAC being selected by the USTR and having no
formal relationship to the state government.
The USTR also maintains a SPOC system in which the governor of
each state designates a single point of contact within the
state that is responsible for transmitting information to the
USTR and disseminating information from the USTR to state
officials.
In California the SPOC serves as the official liaison between
AB 2443
Page 3
the USTR, the Administration, and the Legislature. As the
liaison, the SPOC is required to "promptly disseminate
correspondence or information" from the USTR to the relevant
state agencies, departments, and legislative policy committees
in the Senate and the Assembly. The SPOC is also required to
work with the Administration and the relevant state committees
to review and comment to the USTR on the effects of proposed
and enacted trade agreements.
3)Development of the state's new trade program : In 2003, as a
result of poor economy and significant management issues
within the state's international trade program, the
Technology, Trade and Commerce Agency was eliminated,
including all authority for the state to undertake
international trade and investment activities. After years of
debate, in 2006, 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 including the designation and role of the SPOC
were codified in SB 1513, Chapter 663, Statutes of 2006.
Since 2008, the Governor has designated two individuals as the
SPOC, however, since the last individual left for another
position in August 2009, the position has been vacant.
4)Checks and balances : Under the terms of the new trade program
agreement, the Legislature and the Governor also agreed that
the state's future activities must have certain checks and
balances were missing during the state's first efforts in
trade development. Some, but not all, of the key provisions
are listed below:
a) Requiring BTH to annually report to the Joint Budget
Committee funding related to the implementation of the
international trade and investment Strategy (ITI Strategy);
b) Requiring benchmarks and measurable objectives be
included in the ITI Strategy to assist the Administration
and Legislature in overseeing the program;
c) Requiring that the SPOC promptly disseminate USTR
provided trade agreement information to the Legislature and
relevant agencies;
d) Requiring approval by the Legislature before
AB 2443
Page 4
establishing any foreign trade office; and,
e) Prohibiting further state funding to the BTH for trade-
and foreign investment-related activities should certain
statutorily defined oversight requirements fail to be met.
Collectively, the requirements enacted through SB 1513 for
establishing state priorities and implementing the state's
trade and foreign relations activities set forth a dual role
for the Legislature and the Administration in advancing the
state's trade activities. AB 2443 furthers this
statutorily-defined relationship by detailing how the
Legislature and the Administration should inform and consult
on trade agreements pending before Congress.
5)Protecting California's rights under U.S. Trade agreements:
Existing law requires the development of an International
Trade and Investment Study (ITI Study) to help guide the trade
and foreign investment actions of the state. Among other
issues, the 2008 ITI Study found that California faces
significant challenges from offshoring, the global
redistribution of manufacturing and services, and growing
talent pools in other countries.
In addition, the ITI Study raised concerns regarding the
impact of global trade arrangements on California businesses.
More specifically, the ITI Study identified five key shifts in
U.S. and global international trade policy and practice that
would likely affect California, including that:
a) Progress on further multilateral trade negotiations is
likely to be limited with the WTO being so fractured by the
three distinct interests of the U.S., the European Union,
and the developing countries.
b) The U.S. and other countries will likely accelerate
efforts on bilateral and regional trade-related agreements
resulting in an increase in one-off trade agreements. This
stems, partly, from the lack of progress on multilateral
negotiations.
c) International trade issues will be litigated
increasingly in dispute settlement format with the WTO and
all U.S. bilateral trade agreements containing mandatory
dispute settlement mechanisms. This has already resulted,
AB 2443
Page 5
and will continue to result, in California policies coming
under attack in foreign trade tribunals.
d) Domestic laws and regulations will increasingly be a
target of negotiations and disputes. The term used to
describe these policies is "behind the border" domestic
regulations, which includes such things as environmental
protections, labor and human rights, competition policy,
investment, consumer rights and product standards.
e) Trade "leakage" issues such as homeland security, crime,
drugs, and illegal immigration will become increasingly
salient and linked to trade liberalization.
In response to these issues and other global competitiveness
concerns, the follow-up strategy to the ITI Study provided
several specific recommendations for advancing California's
interests in international trade policies. Several
recommendations include, but are not limited to, sharing trade
information with the Legislature, participating in IGPAC, and
regularly making public reports on pending and enacted U.S.
trade agreements.
6)California's trade-based economy : International trade is a
very important component of California's $1.8 trillion
economy. If California were a country, it would be the 11th
largest exporter in the world. Exports from California
accounted for over 11% of total U.S. exports in goods,
shipping to over 220 foreign destinations in 2009.
California's land, sea, and air ports of entry serve as key
international commercial gateways for products entering the
country. California exported $120 billion in goods in 2009,
ranking only second to Texas with $163 billion in export
goods. Computers and electronic products were California's
top exports in 2009, accounting for 29.3% of all state
exports, or $35 billion.
-------------------------------------------------------------
| 2009 Exports From California to the World |
-------------------------------------------------------------
|------------------------+------------------+------------------|
| Product | Value ($ in | Percent |
| | thousands) | |
AB 2443
Page 6
|------------------------+------------------+------------------|
|334 _Computers & | 35,182,767,377| 29.3 % |
|Electronic Prod. | | |
|------------------------+------------------+------------------|
|36 _Transportation | 12,826,967,941| 10.7 % |
|Equipment | | |
|------------------------+------------------+------------------|
|333 _Machinery | 10,709,240,936| 8.9 % |
|Manufactures | | |
|------------------------+------------------+------------------|
|325 _Chemical | 10,233,994,524| 8.5 % |
|Manufactures | | |
|------------------------+------------------+------------------|
|339 _Misc. Manufactures | 9,130,040,605| 7.6 % |
|------------------------+------------------+------------------|
|111 _Crop Production | 7,848,804,565| 6.5 % |
|------------------------+------------------+------------------|
|All Others | 34,210,404,051| 28.5 % |
|------------------------+------------------+------------------|
|Total | 120,142,219,999|100% |
--------------------------------------------------------------
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 $17.4
billion in goods in 2009. The state's second and third
largest trading partners are Canada and Japan with $14.2
billion and $10.9 billion, respectively. Other top-ranking
export destinations include China, South Korea, Taiwan, the
United Kingdom, Hong Kong, Germany, and Singapore. In 2008,
2.7 million people were employed by business related to trade,
transportation and utilities.
The economic crisis has had significant effects on top
California trading partners. According to the International
AB 2443
Page 7
Monetary Fund's draft 2010 World Economic Outlook, global GDP
is expected to be down from earlier estimates in January.
Global GDP is forecast to be 4.1%, the US at 3.0%, Euro Area
at 0.8% and China at 10.0%.
Overall, the export of California products to other counties
was down in 2009 by $24.8 billion from 2008 ($120 billion v.
$144.8 billion). Exports to the state's top trading partners
were down as follows: Mexico $3.1 billion, Canada $3.6
billion, Japan $2.1 billion and China $1.2 billion less than
the prior year.
The most recent trade numbers coming from the US Department of
Commerce, however, indicate that California trade (exports
and imports) is continuing to move in a positive direction.
In February 2010, $10.38 billion in products was exported from
California. This was a 13.7% increase over the previous year
and the fourth straight month increases were reported based on
year-to-year gains. Imports through California ports also
rose faster in February reporting a 38.3% increase ($22.53)
over the previous year. The number of loaded shipping
containers leaving Long Beach, Los Angeles and Oakland was up
by 27% from last year and similar increases were reported for
outbound cargo tonnage.
7)Related legislation : Below is a list of related legislation,
some of which are discussed earlier in the analysis.
a) AB 1276 (Skinner) - Process for State Binding Itself to
Trade Agreements 3 : This bill would have prohibited a
state official, including the Governor, from binding the
state, or giving consent to the federal government to bind
the state, to provisions of a proposed International Trade
Agreement, including the government procurement rules,
unless a statute is enacted that explicitly authorizes a
state official to bind the state or to give consent to bind
the state to that trade agreement. Status: Vetoed by the
Governor in 2009.
b) AB 3021 (Nu?ez) - California-Mexico Border Relations
Council : This bill establishes the six-member
California-Mexico Border Relations Council (Border Council)
comprised of all Agency Secretaries and the Director of the
Office of Emergency Services for the purpose of
coordinating activities of state agencies. The Border
AB 2443
Page 8
Council is required to report to the Legislature on its
activities annually. Status: Signed by the Governor -
Chapter 621, Statutes of 2006.
c) AJR 14 (Jeffries) - Customs Duties : This resolution
memorializes 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. Status:
Approved by both Houses, Resolution Chapter 73, Statutes of
2007.
d) AJR 27 (Torrico) - Support U.S.-Colombia Trade Promotion
Agreement : This resolution memorializes Congress that the
California Legislature opposes the United States-Colombia
Trade Promotion Agreement. Status: Pending in the
Assembly Committee on Jobs, Economic Development, and the
Economy.
e) AJR 55 (Villines) - Support U.S.-Colombia Trade
Promotion Agreement : This resolution would have
memorialized Congress that the California Legislature
supports the United States-Colombia Trade Promotion
Agreement. Status: Refused adoption in the Assembly
Committee on Jobs, Economic Development, and the Economy in
2008.
f) SB 348 (Figueroa) - Process for State Binding Itself to
Trade Agreements 1 : This bill would have prohibited a
state official, including the Governor, from binding the
state, or giving consent to the federal government to bind
the state, to provisions of a proposed International Trade
Agreement, including the government procurement rules,
unless a statute is enacted that explicitly authorizes a
state official to bind the state or to give consent to bind
the state to that trade agreement. Status: Vetoed by the
Governor in 2005.
g) SB 1513 (Romero) - New International Trade Program :
Final Compromise - California International Trade and
Investment Act. This bill provides new authority for the
BTH to undertake international trade and investment
activities, and as a condition of that new authority,
AB 2443
Page 9
directs the development of a comprehensive international
trade and investment policy for California. This bill
reflects extended bi-partisan discussions between the
Senate and the Assembly. Status: Signed by the Governor -
Chapter 663, Statutes of 2006.
h) SB 1762 (Figueroa) - Process for State Binding Itself to
Trade Agreements 2: This bill would have prohibited the
Governor from binding California to provisions of
international trade agreements without consent from the
Legislature. Based on bi-partisan discussions with all
authors of international trade related legislation, the
provisions of this bill were modified and amended by JEDE
into SB 1513. Status: Held in the Assembly Committee on
Jobs, Economic Development and the Economy in 2006.
REGISTERED SUPPORT / OPPOSITION :
Support
Assembly Committee on Jobs, Economic Development and the Economy
(Sponsor)
Opposition
None known
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916)
319-2090