BILL ANALYSIS �
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Date of Hearing: June 10, 2014
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT AND THE ECONOMY
Jose Medina, Chair
ACR 100 (Alejo) - As Amended: June 4, 2014
SUBJECT : Relations with El Salvador
SUMMARY : Memorializes the Legislature's commitment to work
cooperatively with the Governor's Office of Business and Economic
Development (GO-Biz) on trade promotion and foreign investment
activities that enhance the state's economic relations with El
Salvador, as specified. Specifically, this resolution :
1)Makes statements regarding California and El Salvador's cultural and
economic ties. Among other things:
a) Salvadoran-Americans represent the second largest Latino
community in California, numbering over 1 million people;
b) The U.S. enjoyed a trade surplus with El Salvador of $731
million in 2013;
c) President Barack Obama initiated a policy directive on global
development in 2010, which identified El Salvador as one of four
select countries chosen for increased foreign investment based on
their track record for partnering with the U.S., past policy
performance, and the potential for continued economic growth; and
d) The California Legislature recognizes the potential for
mutually beneficial economic gains resulting from increased trade
and foreign investment with Salvadoran businesses and encourages
trade-related exchanges, including, but not limited to:
i) Supporting economic development activities of the
Salvadoran foreign consulate in California to establish new
business and investment partnerships;
ii) The value of developing a series of export-related
seminars/webinars on best exporting practices and utilizing
GO-Biz to undertake and facilitate these activities;
iii) Hosting incoming Salvadoran delegations in order to
promote California products and services;
iv) Facilitating trade missions to El Salvador to promote
California products and services within prioritized industries.
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2)Resolves that the Legislature of the State of California, in
coordination with GO-Biz, shall work to develop and implement trade
promotion and foreign investment activities that enhance trade
relations with the Country of El Salvador. These trade and
investment promotion activities shall be undertaken in partnership
with the government of El Salvador and the Salvadoran business
community.
EXISTING LAW establishes GO-Biz within the Governor's Office and
designates it as the state's lead entity on international trade and
foreign investment activities, excluding agricultural trade.
FISCAL EFFECT : None
COMMENTS :
1)Author's Purpose : According to the author, "There are over one
million Salvadoran-Americans living in California, making them the
second largest Latino community in the state. The labor they
provide generates millions of dollars for our economy and their
presence provides a unique opportunity to help facilitate a positive
trade relationship with El Salvador.
El Salvador has been identified as having strong global economic
potential. Together, the United States and World Bank have invested
over half a billion dollars in El Salvador to increase
competitiveness and productivity in international markets. ACR 100
is a step to develop and implement comprehensive trade promotion and
foreign investment activities that will encourage stronger economic
ties with El Salvador. "
2)Framing the Policy Issue : This resolution highlights the economic
opportunities of a stronger trade relationship between California
and El Salvador. The resolution further expresses the Legislature's
interest in supporting Administration lead activities, as well as
taking its own actions to increase trade and foreign investment
between the state and El Salvador. The resolution is consistent
with the 2014 California Trade and Foreign Investment Strategy
released by GO-Biz in February 2014.
The analysis includes information on U.S. trade agreements, the
Country of El Salvador, and California's trade economy.
3)U.S. Trade Agreements : Within a globally connected economy, trade
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agreements create the framework by which a significant number of
businesses and workers must compete, collaborate, and create
economic value. The U.S. is currently negotiating two major trade
promotion agreements, the Trans-Pacific Partnership and the
Transatlantic Trade and Investment Partnership. In their current
iterations, these trade agreements will cover 21% of the world's
population, with the U.S. at the nexus. These agreements are
especially important to local and regional governments which have
been proactive in using trade promotion activities as a springboard
for their own economic program.
The U.S. has trade agreements in force with 20 countries, including
Australia, Bahrain, Canada, Chile, Colombia, Costa Rica, Dominican
Republic, El Salvador, Guatemala, Honduras, Israel, Jordan, Korea,
Mexico, Morocco, Nicaragua, Oman, Panama, Peru, and Singapore. In
addition to trade agreements, the U.S. maintains 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 cultivate a stronger relationship. The Andean Trade
Preference Act (ATPA) and the Andean Trade Promotion and Drug
Eradication Act (ATPDEA) are examples of two such trade programs.
4)Background on El Salvador : El Salvador is the smallest and most
densely populated country in Central America. It is located on the
Pacific Ocean side of Central America, between Guatemala and
Honduras, this 21,000 square km country is slightly smaller than the
State of Massachusetts. El Salvador is also known as the Land of
Volcanoes, due to frequent and sometimes destructive earthquakes and
volcanic activity.
The population of El Salvador is 6.4 million with nearly half
(48.9%) of the population under the age of 24. The Country is led
by President Salvador Sanchez Cer�n and a Council of Ministers
selected by the president. They have a unicameral 84-seat
Legislative Assembly, which is elected to serve three-year terms.
In 2013, El Salvador's GDP was $47.4 billion, making it the 99th
largest economy in the world. Since the economic contraction due to
the global recession, growth has been averaging less than 2% from
2010 to 2013. Remittances accounted for 16% of GDP in 2013 and were
received by about a third of all households.
In 2006, El Salvador was the first country to ratify the Dominican
Republic-Central American Free Trade Agreement with the U.S., which
increased the export of processed foods, sugar, and ethanol, and
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supported investment in the apparel sector. El Salvador's external
debt has been growing over the last several years, amounting to some
57% of GDP in 2013. In September 2013, El Salvador was awarded a
$277 million grant by the U.S to improve El Salvador's
competitiveness and productivity in international markets.
Key natural resources include hydropower, geothermal power,
petroleum, and arable land. There are 2.7 million people in the
workforce with 21% working in agriculture, 20% in industry, and 58%
in services. Top preforming industries include: food processing,
beverages, petroleum, chemicals, fertilizer, textiles, furniture,
and light metals. The U.S. dollar is used as a medium of exchange,
which encourages U.S. import and export of goods and services.
Businesses in El Salvador exported $5.6 billion in products in 2013,
making it the 115th largest exporter in the world with 47.3% of
products going to the U.S., 13.8% to Guatemala, 9.6% to Honduras,
and 5.4% to Nicaragua in 2012. Top export commodities include
offshore assembly exports, coffee, sugar, textiles and apparel,
gold, ethanol, chemicals, electricity, iron and steel manufactures.
El Salvador was the 64th largest supplier of goods to the U.S. in
2013.
Over $10 billion in products were imported to El Salvador in 2012
from the U.S. (35.4%), Guatemala (12.7%), Mexico (7%), China (5.6%),
and Germany (4.2%). Top imported products included raw materials,
consumer goods, capital goods, fuels, foodstuffs, petroleum, and
electricity.
5)California's Trade Economy : International trade and foreign
investment serve as critical components of California's $2.0
trillion economy. If California were a country, it would be the
17th largest exporter and the 14th largest importer in the world.
Merchandise exports from California ($168 billion) accounted for
over 10.6% of total U.S. exports in goods, shipping to over 220
foreign destinations in 2013. California's land, sea, and air ports
of entry served as key international commercial gateways for the
$538 billion in products entering and exiting the U.S. in 2012.
Statewide, 4.4 million California jobs are dependent on foreign
trade. Over 562,700 California workers benefit from jobs with
foreign-owned firms, which accounts for 5.1% of all private sector
jobs in the state.
California's significance in the global marketplace results from a
variety of factors, including: its strategic southwest and coastal
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location offering direct access to growing foreign markets in
Mexico, Latin America, and Asia; its nine 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 area of high technology.
Mexico is California's top trading partner, receiving $23.9 billion
(14%) in goods in 2013. The chart below illustrates export data on
the state's top five trade partners. Other top-ranking export
destinations not shown on the chart include Hong Kong, Taiwan,
Germany, the Netherlands, and the United Kingdom.
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| California Export based on Movement of Goods 2012 and 2013 |
--------------------------------------------------------------------
|--------------+--------------+--------------+--------------+--------------+--------------+--------------|
| Rank | Country | 2012 Value | 2013 Value | 2012 % Share | 2013 % Share | % Change, |
| | | | | | | 2012 - 2013 |
|--------------+--------------+--------------+--------------+--------------+--------------+--------------|
| --- |Total | 161,880| 168,128| 10.5| 10.6| 3.9|
| |California | | | | | |
| |Exports and % | | | | | |
| |Share of U.S. | | | | | |
| |Total | | | | | |
|--------------+--------------+--------------+--------------+--------------+--------------+--------------|
| --- |Total, Top 25 | 143,671| 149,020| 88.8| 88.6| 3.7|
| |Countries and | | | | | |
| |% Share of | | | | | |
| |State Total | | | | | |
|--------------+--------------+--------------+--------------+--------------+--------------+--------------|
| 1 |Mexico | 26,370| 23,933| 16.3| 14.2| -9.2|
|--------------+--------------+--------------+--------------+--------------+--------------+--------------|
| 2 |Canada | 17,424| 18,819| 10.8| 11.2| 8.0|
|--------------+--------------+--------------+--------------+--------------+--------------+--------------|
| 3 |China | 13,970| 16,359| 8.6| 9.7| 17.1|
|--------------+--------------+--------------+--------------+--------------+--------------+--------------|
| 4 |Japan | 13,033| 12,711| 8.1| 7.6| -2.5|
|--------------+--------------+--------------+--------------+--------------+--------------+--------------|
| 5 |South Korea | 8,246| 8,394| 5.1| 5.0| 1.8|
--------------------------------------------------------------------------------------------------------
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|Source: tradeport.org |
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| |
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California's largest industry sector by employment is Trade,
Transportation, and Utilities, which encompasses everything from
major retail outlets, to import-export businesses, to transportation
and warehousing. California leads the nation in export-related
jobs. The U.S. Department of Commerce estimates that for every one
million dollars of increased trade activity, 11 new jobs are
supported. Workers in trade-related jobs earn on average 13% to 28%
higher wages than the national average.
In today's globally linked economy, manufacturing utilizes products
from across the U.S., as well as from other nations. In 2012, 61%
($1.3 trillion) of the products imported into the U.S. were inputs
and components intended for use by American producers. In addition,
U.S. imports often include components or benefits from services
provided by U.S. firms, including many California companies. The
Wilson Center estimates that Mexican imports and Canadian imports
contain 40% and 20% U.S. components, respectively.
Trade and foreign investment support new job creation, bring new
technologies and skills to California workers, generate local and
state revenues, and generally strengthen the state's economic base.
In the future, California's economy will become increasingly reliant
on accessing foreign markets where a majority of global economic
growth is expected to occur.
6)Related Legislation : Below is a list of legislation from the
current and prior legislative sessions.
a) AB 2012 (John A. P�rez) Economic Development Reorganization:
This bill transfers the authority for undertaking international
trade and foreign investment activities from the Business,
Transportation and Housing Agency to the Governor's Office of
Business and Economic Development (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.
b) AB 2443 (V. Manuel P�rez) International Trade Program and
Sister State Relationships:
This bill would have required the State Point of Contact to
provide the Legislature with copies of any official position
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taken or comments to the U.S. Trade Representative relating to a
pending trade agreement and would have authorized the
establishment of sister state relationships for the purpose of
promoting economic growth and trade and investment opportunities.
Status: Vetoed by the Governor, September 2010.
c) AB 2713 (Quirk-Silva) Public Private Partnerships to Promote
Trade: This bill authorizes the Governor's Office of Business
and Economic Development to establish public-private partnerships
to help guide state activities related to the export of
California products and the attraction of employment-producing
foreign investment. The bill requires the establishment of a
subaccount to hold private donation for county and
industry-specific marketing activities. The bill also requires
the establishment of a partnership to support California trade
and investment within South Korea. Status: Pending in the
Senate.
d) SCR 82 (Hueso) Sister State with Jalisco: This resolution
memorializes the Legislature's establishment of a sister state
relationship between California and the State of Jalisco, Mexico,
for the purpose of promoting economic growth and well-being of
small, medium, and large corporations and by increasing their
potential trade and investment within the State of Jalisco.
Status: Scheduled to be heard in JEDE on June 10, 2014.
e) SCR 103 (De Le�n) El Salvador and California Partnership:
This resolution memorializes the Legislature's recognition of the
special relationship between California and the country of El
Salvador. In furthering this special relationship, the
Legislature, on behalf of the people of the State of California,
extends an invitation to the government of El Salvador to partner
with California to promote democratic institutions, the rule of
law, and economic opportunity and growth, and to foster
international understanding through increased trade and
investment and mutually beneficial educational, economic, and
cultural exchanges between California's and El Salvador's
institutions. Status: Scheduled to be heard in JEDE on June 10,
2014.
REGISTERED SUPPORT / OPPOSITION :
Support
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Government of El Salvador
Opposition
None received
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916) 319-2090