BILL ANALYSIS �
SB 460
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Date of Hearing: July 6, 2011
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT AND THE ECONOMY
V. Manuel P�rez, Chair
SB 460 (Price) - As Amended: May 31, 2011
SENATE VOTE : 39-0
SUBJECT : International Trade Marketing and promotion
SUMMARY : Requires the Secretary of the Business, Transportation
and Housing Agency (BTH) to convene a statewide business
partnership for international trade marketing and promotion.
Specifically, this bill :
1)Expresses legislative intent that international trade-related
businesses represent 25% of the state's economy and that this
economic advantage relies on the quality and capacity of the
state's air, land and sea ports of entry. More than 40% of
the nation's containerized cargo and 30% of all U.S. exports
flow through California ports. More than 500,000 people (two
million indirectly) are employed in trade related work and an
estimated $7 billion in state and local taxes are generated
though trade.
2)Expands BTH's trade-related authority to include coordinating
international trade marketing and promotion strategies.
3)Requires the Secretary of BTH to convene a statewide business
partnership for international trade marketing and promotion no
later than March 1, 2012, including, but not limited to,
representatives of public airports, land ports of entry,
seaports, ocean carriers, marine terminal operators, air
carriers, warehouse operators, trucking companies, foreign
trade zones and shippers (agricultural exporters,
post-consumer secondary material handlers and retailers).
EXISTING LAW :
1)Specifies that BTH 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.
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2)Authorizes BTH to undertake international trade and investment
activities and, as a condition of that authority, directs the
development and implementation of a comprehensive
international trade and investment strategy (ITI Strategy.)
All international trade and foreign investment activities and
funding are required to be consistent with the ITI strategy.
FISCAL EFFECT : According to the Senate Committee on
Appropriations' analysis, establishment of the business
partnership would result in minor absorbable costs to BTH.
COMMENTS :
1)Purpose : According to the author, "This bill is necessary to
protect and promote California's status as a major gateway for
products entering and leaving the U.S. The statutory
authority for the Technology, Trade, and Commerce Agency,
including the agency's international trade and investment
promotion programs, was repealed in 2003, which significantly
reduced the government's capacity to assist California firms
in developing global business opportunities. As a result,
there is great concern that California lacks a comprehensive
economic strategy to protect and promote its port activity. SB
460 would make the Business, Transportation and Housing Agency
(BTH) the primary state agency to coordinate the marketing and
promotional strategies for international trade of California's
various ports."
2)Doubling exports in five years : In January 2010, President
Obama announced a national goal of doubling U.S. exports
within five years, setting a 2015 target for U.S. exports of
$3.14 trillion. In accomplishing this goal, the federal
government will be proposing new programs, targeting existing
trade related activities, and increasing funding and technical
assistance within current programs.
Since the announcement of the new national goal in early 2010,
exports from California were up $20 billion over 2009. For
California, the second largest exporter of products in the
U.S. and the largest receiver of foreign direct investment in
the nation, this federal goal could result in significant new
economic opportunities.
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The National Export Initiative (NEI), the mechanism by which
the federal Administration is managing activities and funds
related to increasing U.S. exports, has identified eight
priority areas, as follows:
o Increasing exports among small- and medium-sized
enterprises including support for trade promotion and
export financing;
o Creating more opportunities for U.S. sellers to meet
with foreign buyers, especially in the area of green
technologies;
o Increasing the number of U.S. trade missions abroad and
those coming to the U.S., as well as improving
coordination with state government trade offices and
national trade associations;
o Leveraging multiple federal agencies in the foreign
trade advocacy and extending outreach efforts to more U.S.
companies;
o Making more credit available through existing credit
programs, developing of new financial products, and
streamlining applications and processes;
o Working to sustain a global economic recovery to support
expanding markets for U.S. products;
o Removing of trade barriers through the successful
conclusion of Word Trade Organization (WTO) Doha Rounds,
the Trans-Pacific Partnership Agreement, resolving the
remaining issues related to the U.S.-Korea Free trade
Agreement, and robust monitoring and enforcement of WTO
trade rules; and
o Enhancing advocacy and trade promotion services,
including providing better economic data for decision
making and increasing coordination among existing export
promotion efforts.
The first $30 million round of funding to assist states in
achieving NEI goal is available through the Small Business
Administration. BTH has chosen not to apply for the funding
and, instead, the Community College System is applying under
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the auspices of the Centers for International Trade
Development (CITD). It is anticipated that a successful
California application could result in $3 million for local
and state collaborative trade promotion efforts.
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 are 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 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
as a separate, independent California nonprofit mutual benefit
corporation with the purpose of increasing the number of
persons traveling to and within California. The committee may
wish to consider whether the promotion-focused business
partnership should, among other priorities, research and make
a recommendation on how the broader California business and
transportation community could participate in a market order
targeted at California trade promotion activities.
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2)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 in developing a new international
trade and investment program. Agreements on the new program
were codified in SB 1513, Chapter 663, Statutes of 2006.
Under California's new trade and foreign investment framework,
state activities are required to be directed through the
development and implementation of the ITI Strategy. The ITI
Strategy is prepared every five years based on current state
and regional economic research and a public vetting with the
Legislature to ensure the inclusion of jointly agreed upon
goals and measurable objectives. The current International
Trade and Investment (ITI) Strategy was finalized in August
2008, and the next strategy is due in August 2013.
The ITI Strategy takes an industry sector approach based on
the state's core and emerging industries. By emphasizing the
development of deeper relationships within core and emerging
industry sectors and their trade associations, the strategy
better aligns with other economic development activities at
the local level and increases the impact of the state
activities and investments. Below is the list of dominant and
emerging industries from the 2008 ITI Strategy research.
Dominant industry clusters include :
a) Professional business and information services
b) Diversified manufacturing
c) Wholesale trade and transportation
d) High-tech manufacturing
Emerging industry clusters include :
a) Life science and services
b) Value-added supply chain manufacturing and logistics
c) Cleantech and renewable energy
d) Nanotechnology
Based on the 2008 industry clusters, the ITI Strategy
identifies the following program objectives:
a) Leverage existing services to provide export assistance
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to companies by the state's primary and emerging clusters;
b) Develop a foreign direct investment program prioritized
by the state's primary and emerging clusters;
c) Promote and leverage the California brand;
d) Monitor and engage the federal government in regards to
U.S. trade policy; and
e) Integrate international trade and investment into the
state's overall economic development strategy.
Under each of the program objectives, the ITI Strategy
includes a set of specific actions, including timelines,
priority levels, and measurable outcomes. Examples of ITI
recommended actions include: (1) building a web-based
directory of international, federal, state and local resources
to assist small and medium size businesses in their import and
export activities; and (2) facilitating export trade promotion
through participation in key industry trade shows and business
match-making activities during trade delegations visits. The
ITI Strategy also strongly relies on coordinated efforts with
existing federal and local public and private stakeholders.
SB 460 would statutorily enhance those provisions by requiring
the establishment of a goods movement focused trade
partnership. Existing law only requires consultation with
business leaders. Both are important stakeholder groups.
3)California's trade economy : International trade is a very
important component of California's $1.9 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 226
foreign destinations in 2010.
California's land, sea, and air ports of entry serve as key
international commercial gateways for products entering the
country. California exported $143 billion in goods in 2010
(up from $120 billion in 2009), ranking second only to Texas
with $163 billion in export goods. Computers and electronic
products were California's top exports in 2010, accounting for
30.1% of all state exports, or $43 billion.
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--------------------------------------------------------
| 2010 Exports From California to the World |
--------------------------------------------------------
|-----------------------+-----------------+---------------|
| Product | Value ($) |Percent |
|-----------------------+-----------------+---------------|
|334 Computers & | 43,075,351,414| 30.1 % |
|Electronic Prod. | | |
|-----------------------+-----------------+---------------|
|333 Machinery (except | 14,486,638,626| 10.1 % |
|electrical) | | |
|-----------------------+-----------------+---------------|
|336 Transportation | 12,957,683,521| 9 % |
|Equipment | | |
|-----------------------+-----------------+---------------|
|325 Chemical | 11,590,683,001 | 8.1 % |
|Manufactures | | |
|-----------------------+-----------------+---------------|
|339 Misc. Manufactures | 11,502,854,621 | 8 % |
|-----------------------+-----------------+---------------|
|111 Agricultural | 9,353,709,931 | 6.5 % |
|Products | | |
|-----------------------+-----------------+---------------|
|All Others | 40,301,943,159 | 28.1 % |
|-----------------------+-----------------+---------------|
|Total | 143,268,864,273 | 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 $21
billion (15%) in goods in 2010. The state's second and third
largest trading partners are Canada and China with $16.1
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billion (11%) and $12.4 billion (8.6%), respectively. Other
top-ranking export destinations include Japan, South Korea,
Taiwan, the United Kingdom, Hong Kong, Germany, and Singapore.
Relative to last year, the value of California products
exported to other counties increased significantly in 2010
($143 billion v. $120 billion). In California's highest
export category, computer and electronic products, exports in
2010 almost reached their 2006 high ($43 billion v. $44.3
billion).
4)State Trade and Foreign Investment Infrastructure: In
support of local and private sector trade and investment
activities, the state has several ongoing programs, including
the Foreign Trade Zones (FTZ), the EB5 Program and the Centers
for International Trade Development.
FTZs are areas within the state where goods may be imported
without adhering to all U.S. Customs rules or tariffs. The
program is designed to promote foreign trade and global supply
chains while retaining domestic employment that might
otherwise go to foreign countries. Merchandise admitted into
a zone may, among other things, be stored, exhibited,
repacked, assembled, graded, cleaned, processed, tested,
labeled, and mixed with foreign merchandise. There are two
types of FTZs - General Purpose and Subzone Purpose Zones.
Subzones, sponsored by a General Purpose Zone, are generally
located within an industrial park or port complex whose
facilities are also used by the general public. These zones
are established by the federal government with companion state
statute authorization. California has 17 out of the 234
general purpose FTZs in the U.S., including zones located in
Eureka, Imperial, Long Beach, Los Angeles, March JPA, Merced,
Oakland, Palmdale, Palm Springs, Sacramento, San Diego, San
Francisco, Port Hueneme, San Jose, Santa Maria, Southern
California Logistics Airport, and Stockton.
Another key geographically targeted program is the EB5
investment visa program administered under the federal
Immigration Act of 1990, which authorizes the issuance of
10,000 new green cards a year based on new foreign investment
made in the U.S. Persons applying to this program must
demonstrate that they have invested a minimum of $1 million
and that later they have created at least 10 direct jobs, or
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have invested $500,000 in certain targeted high unemployment
areas and that later they have created 10 direct or indirect
jobs.
Based on 2010 state figures and a high unemployment rate
defined as 14.4% or greater, 56 cities, 13 counties, 21 rural
areas, and 11 metropolitan statistical areas in California
have been identified as eligible target areas. Some states,
such as South Dakota, have specific programs that target
foreign investment by people who want to apply for visas under
the investment provisions.
The California Community College System administers the
state's Centers for International Trade Development. These 8
Centers for International Trade Development, located in a
majority of the urban areas of the state, offer technical
assistance and consultation to firms doing business, or
seeking to do business, globally. The northern most areas of
the state are serviced through offices in Community Colleges
located in Sacramento and San Bruno, and the most southern
center is located in Chula Vista.
Services provided through the Centers for International Trade
Development include, but are not limited to: free or low cost
import and export education programs; one-on-one counseling;
access to international trade shows; opportunities to join
trade missions; a "Help Desk" for advising on international
business transaction challenges; and access to an trade
information database ( www.citd.org/trade_info/index.cfm ) on
its Web site. The Centers for International Trade Development
serve over 2,500 businesses and entrepreneurs in California
each year.
5)Current session related legislation: : Below is a list of
related legislation from the current session:
a) AB 1137 (V. Manuel P�rez) - Trade Promotion and Export
Finance : This bill makes a number of changes to programs
designed to assist local communities and businesses,
enhance the local business climate, and create jobs by
increasing foreign trade and investment including providing
authorizing the establishment of the California Trade
Promotion and Export Finance Program, codifying the state's
role in the EB-5 Program, and making technical corrections
to the international free trade zone program. Status:
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Pending in the Senate Appropriations Committee.
b) AB 1409 (JEDE) - Goods Movement Update to the State
Economic Strategy : This bill requires that the next update
of the international trade and investment strategy include
policy goals, objectives and recommendations from the state
Goods Movement Plan (GMAP), as well as related measurable
outcomes and timelines. Status: Pending in Senate
Appropriations Committee.
c) AB 1410 (JEDE Committee) - Trade Omnibus Bill : This
bill makes technical, non-substantive amendments to the
codes relating to international trade and foreign
investment. Specifically, this bill reorganizes the
statutory placement of the Office of California-Mexico
Affairs 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. Status: Pending on the Senate Floor.
6)Related legislation from prior sessions : Below is a list of
related legislation, some of which are discussed earlier in
the analysis.
a) AB 3021 (Nu�ez) - California-Mexico Border Relations
Council : This bill established 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. Status: Signed by the Governor -
Chapter 621, Statutes of 2006.
b) AJR 14 (Jeffries) - Customs Duties : This resolution
memorialized 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.
c) AJR 27 (Torrico) - Support U.S.-Colombia Trade Promotion
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Agreement : This resolution memorialized Congress that the
California Legislature opposes the United States-Colombia
Trade Promotion Agreement. Status: Approved by both
Houses, Resolution Chapter 145, Statutes of 2010.
d) 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.
e) SB 1513 (Romero) - New International Trade Program :
Final Compromise - California International Trade and
Investment Act. This bill provided new authority for the
BTH 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. This bill
reflects extended bi-partisan discussions between the
Senate and the Assembly. Status: Signed by the Governor -
Chapter 663, Statutes of 2006.
REGISTERED SUPPORT / OPPOSITION :
Support
Pacific Merchant Shipping Association (sponsor)
California Chamber of Commerce
The California Trade Coalition
Opposition
None received
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916)
319-2090