BILL ANALYSIS �
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|Hearing Date:September 8, 2011 |Bill No:AJR |
| |15 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Curren D. Price, Jr., Chair
Bill No: AJR 15Author:Alejo
As Amended:August 31, 2011 Fiscal: No
SUBJECT: California cut flowers.
SUMMARY: Urges the United States (U.S.) Government to consider the
California jobs and economic stimulus provided by the California
floriculture industry when advancing free trade agreements,
specifically the pending Colombia Trade Promotion Agreement (Colombia
Agreement).
Existing law:
1)Provides, under the United States Constitution, that the federal
government has the power to enter into trade agreements. Federal
law requires Congress to approve international agreements.
2)Specifies that the Governor is the primary state officer
representing California's interest in international affairs.
3)Specifies the Business, Transportation and Housing Agency (BT&H) as
the primary state agency authorized to attract foreign investments,
cooperate in international public infrastructure projects, and
support California businesses, not otherwise assisted by California
Department of Food and Agriculture, in accessing markets, and
requires the Secretary of BT&H to develop an international trade and
investment policy.
This resolution declares that:
1) California produces some of the finest fresh cut flowers in the
world and that over 75 percent of domestically grown flowers are
grown in California, accounting for almost 20 percent of all
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flowers sold in the U.S., directly supporting more than 10,000 jobs
in the state, and having a $10.3 billion economic impact on the
economy.
2) The number of California's flower farms is shrinking rapidly due to
federal trade policies specifically with countries like Colombia
that have benefitted from the Andean Trade Preference Act (ATPA),
and Colombian and United States government subsidies for the past
two decades.
3) The Colombian government gave roughly $210 million in subsidies and
support to its cut flower industry from 2005 to 2009, and the U.S.
Agency for International Development has given Colombia millions of
dollars to assist in the development of its flower industry.
4) Colombian exports to the U.S. increased 89 percent between 2002 and
2010 and have resulted in a steep and rapid decline in the number
of domestic flower farmers; and the number of acres dedicated to
cut flower production in the U.S. declined by 22 percent from 2002
to 2010.
5) The 2010 Agriculture, Rural Development, Food and Drug
Administration, and Related Agencies Appropriations Conference
Report included language urging the Secretary of Agriculture to
"use all available resources to support domestic flower farmers in
their efforts to develop an efficient and environmentally friendly
transportation, storage, and distribution system to better compete
with foreign producers."
6) California farmers are working aggressively to overcome trade
challenges through innovation, diversification, and sheer
determination. Working with the California Cut Flower Commission,
the state agricultural commission that advocates on behalf of
California flower farmers, California floriculture, has worked to
remain competitive by offering higher end products produced in an
increasingly environmentally sustainable manner.
7) California flower farmers use the latest in horticultural science
to increase yields and develop new varieties for the market, while
also meeting California labor and environmental standards that are
much higher than their foreign competitors.
8) California flower farmers are also in the final phase of developing
a new transportation, logistics, shipping system, and center that
would reduce California floriculture shipping costs by 30 to 40
percent, and floriculture is an important California industry that
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must be considered as the U.S. works to advance the pending
Colombia Agreement.
FISCAL EFFECT: None
COMMENTS:
1. Purpose. The California Cut Flower Commission (Commission) is the
Sponsor of this resolution. According to the Commission, as
Congress considers the negotiated Colombia Agreement, it is
important that California puts on record the importance of
California's floriculture industry. This resolution is necessary
to ensure that information about California jobs and economy are
considered when decisions that could impact them are made.
2. Background. According to the United States Department of
Agriculture (USDA), California leads the nation in 2010
floriculture production, with a total value of $999 million in
sales, comprising 25.1% of the U.S. total wholesale value. Sales
increased 8% from 2009 total in spite of a decrease in the number
of California producers from 437 in 2009 to 408 in 2010.
Additionally, the USDA specifies that California accounted for
almost 15.6 percent of the total value of annual bedding and garden
plants, the highest-valued crop category in the 15-state program.
The wholesale value of California-grown bedding and garden plants
increased just over 15 percent from $260 million in 2009 to $299
million in 2010. California also leads the country in potted
flowering plant value for 2010, with a total value of $244 million
wholesale, up over 17 percent from the 2009 valuation. California
accounted for nearly 36.5 percent of the 15-state total wholesale
value reported. California was the dominant state in cut flower
production, accounting for about 76.3 percent of the total cut
flower wholesale value. The $286 million in value for 2010 was up
6 percent from the 2009 valuation of $271 million.
The Office of the United States Trade Representative (USTR) negotiates
directly with foreign governments to create trade agreements, to
resolve disputes, and to participate in global trade policy
organizations. The USTR also meet with governments, business
groups, legislators, and public interest groups to gather input on
trade issues and to discuss the President's trade policy positions.
The U.S. Constitution grants the federal government the power to
enter into treaties and trade agreements. The power, however, is
vested in the U.S. Congress to ratify trade agreements with a
two-thirds vote of approval. Throughout the trade agreement
negotiation process, the U.S. has potential to influence policy
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reforms, using a relationship with the U.S. as leverage and
incentive to bring about potential and positive change. The U.S.
has trade agreements in force with 17 countries including
Australia, Bahrain, Canada, Chile, Costa Rica, Dominican Republic,
El Salvador, Guatemala, Honduras, Israel, Jordan, Mexico, Morocco,
Nicaragua, Oman, Peru, and Singapore.
In December 1991, the Andean Trade Preference Act (ATPA) was
enacted to help four Andean countries (Bolivia, Colombia, Ecuador,
and Peru) in their fight against drug production and trafficking by
expanding their economic alternatives. Flower imports from
Colombia receive duty-free treatment under the ATPA. By law, the
ATPA is supposed to condition these trade benefits on improvements
in worker rights in these countries. The last extension of ATPA
expired on February 12, 2011, and another extension is pending
because of concerns relating to Colombia and Panama.
According to the USTR official website, Congress has not yet
ratified trade agreements the U.S. has signed with three individual
nations; Columbia, South Korea, and Panama. The USTR website also
reports the U.S. is in negotiations of 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.
3. The Columbia Agreement. According to the USTR, the Colombia
Agreement was signed on November 22, 2006. When the Agreement
takes effect, Colombia will immediately eliminate most of its
tariffs on U.S. exports, with all remaining tariffs phased out over
defined time periods. The Colombia Agreement also includes
standards relating to customs administration and trade
facilitation, technical barriers to trade, government procurement,
investment, telecommunications, electronic commerce, intellectual
property rights, and labor and environmental protection. The USTR
states that U.S. firms will have better access to Colombia's
services sector than other WTO Members have under the General
Agreement on Tariffs and Trade.
Colombia's Congress approved the Agreement and a protocol of
amendment in 2007. Colombia's Constitutional Court completed its
review in July 2008, and concluded that the Agreement conforms to
Colombia's Constitution. President Obama tasked the USTR with
seeking a path to address outstanding issues surrounding the
Agreement.
4. California's Trade Economy. International trade is a key component
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of California's $1.8 billion economy. If California were a
country, it would be the 11th largest exporter in the world.
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.
Colombia's $400 billion economy supported the importation of $11.3
billion of U.S. products in 2008. Top imports from all countries
to Colombia include industrial equipment, transportation equipment,
consumer goods, chemicals, paper, and fuels. In 2009, $319.8
million in goods from California were exported to Colombia.
----------------------------------------------------------
| California Exports to Colombia in 2009 |
----------------------------------------------------------
|------------------------+------------------+--------------|
| Product | Value ($) | Percent |
|------------------------+------------------+--------------|
| | | |
|334 Computers & | | 30.3 %|
|Electronic Prod. | 96,813,070| |
|------------------------+------------------+--------------|
|325 Chemical | 41,425,146| 13 %|
|Manufactures | | |
|------------------------+------------------+--------------|
|336 Transportation | 38,276,120| 12 %|
|Equipment | | |
|------------------------+------------------+--------------|
|324 Petroleum & Coal | 31,884,175| 10 %|
|Products | | |
|------------------------+------------------+--------------|
|All Others | 111,402,388| 34 %|
|------------------------+------------------+--------------|
|Total | 319,800,899| 100%|
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|Source: TradeStats Express |
| |
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Supporters of the Colombia Agreement state that it offers tremendous
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opportunities for California exporters. Most significantly, they
cite a number of tariffs, which will be immediately eliminated
(80%); the remaining tariffs will be phased out over 10 years.
Based on information from the U.S. Department of Commerce, the
following are examples of current tariffs and their proposed
reductions under the Colombia Agreement:
a) Computers and Electronic Products : Current tariffs are
between 8 and 15%. The Colombia Agreement covers 100% of U.S.
exports under the Information Technology Agreement, which will
receive 100% duty free treatment immediately upon the effective
date of the Colombia Agreement.
b) Chemical Manufacturers : Current tariffs are between 8 and
20%. Upon the effective date of the Colombia Agreement, 82% of
U.S. chemical exports will receive duty free treatment, with the
remaining tariffs being phased out over 10 years. Examples of
chemical and related products include pharmaceuticals, cosmetics,
fertilizers, and agrochemicals. Strong economic opportunities
cited in the literature include chloride, styrene, and
polyethylene.
c) Agricultural Products : Upon the effective date of the
Colombia Agreement, 53% of tariffs on agricultural products will
receive duty free treatment. As an example, this includes 100%
elimination of the price band system that results in tariffs as
high as 159% on U.S. dairy products. All Colombian duties on
U.S. dairy products will be eliminated in 15 years.
5. Similar and Related Legislation. SB 460 (Price) of 2011 requires
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. The bill also requires the
partnership to advise the Secretary on what role the state should
play in international trade marketing and promotion, as specified.
The bill was held under submission in the Assembly Committee on
Appropriations.
SCR 33 (Price, Resolution Chapter 60, Statutes of 2011) expresses
the sentiment of the Legislature that the federal EB-5 visa program
is beneficial to California's economic development and provides
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important opportunities for foreign direct investment to
California.
AB 1409 (Assembly Committee on Jobs) of 2011 requires that the
next update of the international trade and investment strategy by
BT&H include policy goals, objectives and recommendations from the
state Goods Movement Plan (GMAP), as well as related measurable
outcomes and timelines. The bill is pending in the Senate
Committee on Appropriations.
AB 1410 (Assembly Committee on Jobs) of 2011 reorganizes the
statutory placement of the California-Mexico Affairs Office and the
California-Mexico Border Relations Council from a general title
within state government to a more specific title on foreign
relations within the Government Code, but does not make any changes
to the content of sections. The bill is pending in the Senate.
AB 2443 (Perez, 2010) required the SPOC 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 USTR relating to a pending trade
agreement. The measure was vetoed by the Governor. In his veto
message, the Governor wrote that the "bill would not only cause
confusion but also undermine the strength of California's position
by allowing the Legislature to insert itself into international
trade agreement discussions and negotiations."
AJR 27 (Torrico, Resolution Chapter 145, Statutes of 2010)
memorializes Congress that the California Legislature opposes the
United States-Colombia Trade Promotion Agreement. The primary
basis for this position, as documented through bill analyses, was
Colombia's record on human rights, particularly as it related to
trade unionists. This resolution proposes that the Legislature
transmit additional information to the U.S. Government and the
President relative to the Colombia Agreement. In the case of AJR
15, the new information focuses on the potential negative impact to
the domestic cut flower industry, its workers, and the communities
in which they are located stemming from the Colombia Agreement.
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. The measure was amended to deal with reorganization
of the state's economic development programs. The measure was held
in the Senate Committee on Appropriations in 2010.
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AB 1276 (Skinner, 2009) 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. The measure was vetoed by
the Governor. In his veto message, the Governor wrote that the
bill "places unnecessary hurdles on international trade and
unnecessarily complicates processes. Additionally, the bill would
defy current agreements with the World Trade Organization and
existing trade agreements."
AJR 55 (Villines, 2008) would have memorialized Congress that the
California Legislature supports the United States-Colombia Trade
Promotion Agreement. The measure was refused adoption in the
Assembly Committee on Jobs, Economic Development, and the Economy.
SJR 29 (Ackerman, 2008) would have memorialized Congress that the
California Legislature supports the United States-Colombia Trade
Promotion Agreement. The measure was refused adoption in this
Committee.
AB 3021 (Nu�ez, Chapter 621, Statutes of 2006) 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 Council is required to
report to the Legislature on its activities annually.
AJR 14 (Jeffries, Chapter 73, Statutes of 2007) 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.
SB 1513 (Romero, Chapter 663, Statutes of 2006) establishes the
California Trade and Investment Act of 2008. This bill gave
authority to BTH to undertake international trade and investment
activities and directed the development of a comprehensive state
trade policy, implemented through a trade strategy that engages
California's business community in a meaningful way.
SB 1762 (Figueroa, 2006) would have prohibited the Governor from
binding California to provisions of international trade agreements
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without consent from the Legislature. The measure was held in the
Assembly Committee on Jobs, Economic Development and the Economy.
SB 348 (Figueroa, 2005) 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. The bill was vetoed by the
Governor. In his veto message, the Governor wrote that "the IGPAC
provides the appropriate venue for the Legislature to express its
views on international trade agreements".
6. Arguments in Support. The California Farm Bureau Federation states
that it is concerned that foreign policy programs administered by
the U.S. in Colombia over the past decade have had a significant
negative impact on California's cut flower growers and there is a
need to restore the competitiveness of cut flower growers in an
international market and ensure that they are not harmed by our own
nation's foreign policy objectives.
SUPPORT AND OPPOSITION:
Support:
California Cut Flower Commission (Sponsor)
California Farm Bureau Federation
Opposition:
None on file as of September 7, 2011
Consultant:Rosielyn Pulmano and Sarah Mason