BILL ANALYSIS �
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|Hearing Date:April 11, 2011 |Bill No:SB |
| |460 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Curren D. Price, Jr., Chair
Bill No: SB 460Author:Price
As Introduced: February 16, 2011 Fiscal:Yes
SUBJECT: International trade marketing and promotion.
SUMMARY: Requires the Secretary of the Business, Transportation and
Housing Agency (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. Requires the partnership to advise the Secretary of the
BT&H (Secretary) on what role the state should play in international
trade marketing and promotion, as specified.
Existing law, The Government Code (GC):
1)Specifies that BT&H 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 Secretary to develop an
international trade and investment policy.
2)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
activity in the state supports one in every seven jobs; (3) Public
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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)
3)Requires the Secretary to complete a study on the potential roles of
the state in global markets and a strategy for international trade
and investment. (GC �� 13996.5 and 13996.55)
4)Requires the Secretary to convene a statewide business partnership
for international trade and investment. (GC � 13996.6)
5)Sets forth criteria by which the Secretary can establish
international trade and investment offices and the Controller can
allocate funds for those offices. (GC �� 13996.65-3996.75)
6)Specifies that the Governor is the primary state officer
representing California's interest in international affairs; the
Lieutenant Governor is the Chair of the California Commission for
Economic Development to improve trade opportunities for California;
the Attorney General assists the federal government in defending
against international challenges to California law; the Secretary
of State oversees the International Business Relations Program which
assists foreign business entities with the various filing processes;
the Department of Food and Agriculture (Food and Ag) is the primary
agency for the promotion of California agriculture, fish and forest
exports and; BT&H is the agency responsible for international trade
and investment activities other than those covered by Food and Ag .
(GC � 99500)
7)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.)
This bill:
1) Sets forth two new findings and declarations detailing: (1)
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International trade, which accounts for nearly 25 percent of the
state's economy, relies on airports, 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
United States, including such as industrial and postconsumer
secondary materials, originated in or destined for other states;
and,
(2) According to the California Marine and Intermodal Transportation
System Advisory Council, more than 40 percent of the total
containerized cargo entering the U.S. arrived at California ports,
and almost 30 percent of the nation's exports flowed through ports
in this state which employ more than 500,000 people in California
and generate an estimated
$7 billion dollars in state and local taxes annually while nationwide,
more than two million jobs are linked to California's public ports.
2) Assigns BT&H as the primary state agency to coordinate, engage in,
and provide support for international trade marketing and promotion
strategies.
FISCAL EFFECT: Unknown. Legislative Counsel has keyed this bill
"fiscal."
COMMENTS:
1. Purpose. This bill is sponsored by the Pacific Merchant Shipping
Association (PMSA). According to the Author, port activity is
vital to California's economy but there is no comprehensive
strategy to protect and promote this activity. The Author notes
that "due to lack of a state economic strategy, collaboration is
key to oversight, promotion and the success of California's
international trade program". The Author also cites the planned
expansion of the Panama Canal as a threat to California's economy
and as evidence for the importance of regularly updating the
state's international trade and investment policy.
2. The California Landscape. California is the eighth largest economy
in the world, with a gross state product of over $1.8 trillion.
The state's significance in the global marketplace results from a
variety of factors, including: its strategic west coast location,
providing direct access to the growing markets in Asia; its diverse
regional economies; its large, ethnically diverse population,
representing both a ready workforce and significant consumer base;
its access to a wide variety of venture and other private capital;
its broad base of small- and medium-sized businesses; and, its
culture of innovation and entrepreneurship, particularly in the
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area of high technology.
The state's economy is not dominated by a single industry; rather
it is comprised of a variety of industry clusters throughout the
state. The state is among the largest exporters in the U.S. and
its largest industries sectors include retail and wholesale trade
and related transportation and warehousing as well as
manufacturing, health care and social assistance, professional,
technical and scientific services as well as leisure and
hospitality.
While agriculture is no longer among the top three industry sectors
in California, it is still a significant component of the state's
economy. In 2008, total cash receipts from California agricultural
products totaled $36.2 billion, of which almost $12.9 billion was
exported internationally, an all-time high for the state.
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.
California's formal trade and trade promotion activities within
state government are currently quite limited. With the demise of
TTCA in 2003, numerous trade related programs and services were
eliminated, and the few remaining came under the umbrella of the
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. There is now only a very small number of former
International Investment Division staff working on trade related
issues and activities for the state.
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Today, California still offers some assistance to businesses
interested in opening new markets for their products; however the
state has no comprehensive economic strategy, nor a specific
strategy for attracting private capital from other areas in the
world that is funded and operational. In general, business
services are provided through broader focused business assistance
programs administered through an array of government entities.
3. Federal Trade and Export Activity. Created in 1962 by Executive
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 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 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. Colombia currently has access to
U.S. markets through the nation's general preference provisions and
the Andean Trade Preference Act (ATPA). The ATPA (enacted in 1991)
is designed to assist Bolivia, Colombia, Ecuador, and Peru in their
fight against drug production and trafficking by expanding their
economic alternatives. 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.
According to the United States Trade Representative (USTR) official
Website, Congress has not yet ratified trade agreements the U.S.
has signed with three individual nations: Columbia, South Korea,
and Panama. Canada has also negotiated, but not ratified, a trade
agreement with Colombia.
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
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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.
4. California's Ports. Ports are local government agencies governed
by port commission 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.
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
2008, accounting for 29.3% of all state exports, or $35 billion.
Prior to the economic downturn of the past two years, California
ports were projected to experience tremendous growth, with some
estimating that cargo volumes would triple by 2020.
According to information from a December 2010 article in the Los
Angeles Business Journal, officials at the ports of Los Angeles and
Long Beach are worried about the impact a massive expansion of the
Panama Canal could have on their business. The $5 billion project
aims to widen the Panama Canal by 2014 to accommodate larger cargo
ships, called Post Panamax vessels which could result in large
freighters loaded with goods from Asia destined for the Eastern
U.S. bypassing California all-together and instead using the canal
to reach the other side of the country. The Panama Canal
Authority, which runs the canal, has entered into memorandums of
understandings 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
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state, ports themselves, like the Port of Long Beach, are
approaching the Panama Canal Authority individually to enter into
their own memorandum. There is some concern that California ports
now have to compete against one another since there is no
coordinated strategy at the state level to promote all resources in
California for international trade.
5. Arguments in Support. According to the bill's Sponsor, PMSA ,
California serves as the gateway to the Pacific Rim, with its ports
handling over 40 percent of containerized cargo for the U.S. PMSA
notes that port activity plays a critical role in the state's
economy yet there is no strategy to protect and promote it.
The California Trade Coalition , a collection of trade and freight
industries operating throughout the state writes in support of SB
460, noting that without the support of an active business
community, there will not be a strategy on how best to promote the
port and supply chain infrastructure in this state. The Coalition
believes that this bill will set the stage to explore options to
change missed opportunities for trade promotion.
6. Related Legislation. SB 1175 (Price, 2010) Would have required the
Secretary to direct the Commission to conduct a 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. 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. 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. 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.
AB 1276 (Skinner, 2009) Would have prohibited a state official,
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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. This measure was vetoed by
the Governor.
AJR 27 (Torrico, Chapter 145, Statutes of 2010) Memorializes
Congress that the California Legislature opposes the United
States-Colombia Trade Promotion Agreement. This resolution is
pending in the Assembly Committee on Jobs, Economic Development,
and the Economy.
AB 89 (Garcia, 2008) Would have required BT&H to prepare a study by
January 1, 2010, regarding infrastructure development along the
California/Mexico border, including an assessment of whether
alternative financing mechanisms may be necessary to meet the
development needs of the bi-national region. This measure was
vetoed by the Governor.
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. This measure was vetoed by the Governor.
AJR 55 (Villines, 2008) Memoralized Congress that the California
Legislature supports the United States-Colombia Trade Promotion
Agreement. This measure failed passage in the Assembly Committee
on Jobs, Economic Development, and the Economy.
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) Provides 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:
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Support:
Pacific Merchant Shipping Association (Sponsor)
The California Trade Coalition
Opposition: None on file as of April 5, 2011
Consultant:Sarah Mason