BILL ANALYSIS �
AB 690
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Date of Hearing: January 15, 2014
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT AND THE ECONOMY
Jose Medina, Chair
AB 690 (Campos and Medina) - As Amended: January 6, 2014
SUBJECT : International Relations
SUMMARY : Repeals and recasts statutory provisions within the
Government Code relating to international trade and foreign relations
with Mexico. Specifically, this bill:
1)Adds the Director of the Governor's Office of Business and Economic
Development (GO-Biz) to the membership of the California-Mexico
Border Relations Council (Border Relations Council).
2)Transfers the statutorily designated chair from the Secretary of the
Environmental Protection Agency (EPA) to the Director of GO-Biz.
3)Reorganizes the statutory placement of the Office of
California-Mexico Affairs (Mexico Affairs Office) and the Border
Relations Council from a general title within state government to a
more specific title on foreign relations within the Government Code.
EXISTING LAW :
1)Establishes a separate Government Code title for issues relating to
foreign relations, which includes the assignment of responsibilities
to specific government entities. GO-Biz is designated as the
primary state agency responsible for international trade and foreign
investment activities, excluding agriculture. The Natural Resources
(NRA) and Environmental Protection (EPA) Agencies are designated as
the primary state agencies responsible for the international
exchange of environmental protection and alternative energy
technologies.
2)Establishes the Mexico Affairs Office for the purpose of furthering
and developing favorable economic, educational, and cultural
relations with bordering Mexican and U.S. states. The Mexico
Affairs Office is the successor entity to the California Office of
the Southwest Border Regional Conference and the Commission of the
Californias. The members of the Southwest Border Regional
Conference are the Governors of the four American border states:
California, Arizona, New Mexico, and Texas.
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3)Establishes the Border Relations Council consisting of the
California state agency Secretaries of EPA (chair), NRA, Health and
Human Services, Transportation, Food and Agriculture, and the
Director of the Governor's Office of Emergency Services.
FISCAL EFFECT : None
COMMENTS :
1)Author's Intent : According to the author, "Existing law does not
provide a formal structure within state government for comprehensive
trade promotion with Mexico. Existing programs on California-Mexico
relations do not maximize the potential opportunity to improve the
state's economy; to maximize the amount of exports, and create more
California jobs."
2)Framing the Policy Issue : International trade and foreign
investment play an important role within the California economy.
Given its significance, it is unfortunate that several of the
state's key forums for engaging in foreign relations activities have
been shifted and reorganized to the extent that the state's top
economic and business development organization, GO-Biz, holds no
seat on any California-Mexico related council, committee,
commission, or board.
AB 690 addresses this policy oversight by adding GO-Biz to the
Border Relations Council and designates the Director of GO-Biz as
Chair. The analysis includes additional information on the recent
history of the California-Mexico coordinating bodies, international
trade's contribution to the California economy, and a list of
related legislation. Suggested technical amendments are discussed
in Comment 7.
3)History of the Mexico Affairs Office and the Border Relations
Council : In 1964, California and Baja California formed the
Commission of the Californias, and in 1982 these duties were assumed
by the Trade and Commerce Agency. During the next decade, the role
of the Trade and Commerce Agency expanded and became the Technology,
Trade and Commerce Agency (TTCA), while retaining its role as the
state's lead agency for international trade and foreign relations
activities.
With the termination of the TTCA in 2003, the Mexico Affairs Office
was also dissolved leaving no state entity specifically responsible
for the coordination of the numerous and diverse programs concerning
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California and Mexico relations. A 2004 report by the California
Research Bureau identified over 100 programs, initiatives, projects,
and partnerships within state government, which were administered
through 12 departments and agencies, eight boards and commissions,
and various campuses of the University of California, the California
State University, and the California Community Colleges.
Almost immediately following the closure of TTCA, Legislators began
introducing bills to address gaps and other weaknesses in the
state's economic development programs. The loss of direct statutory
authority to engage in trade and foreign relations activities were
among the state's chief challenges. After three active, but
unsuccessful years, trade authority was finally restored and
assigned to the Business, Transportation and Housing Agency (BTH)
[SB 1513 (Romero) Chapter 663, Statutes of 2006], and the Border
Relations Council was established and assigned the responsibility to
coordinate programs, set related policies, and make recommendations
to the Legislature on California and Mexico relations [AB 2031
(Nu�ez), Chapter 621, statutes of 2006]. The Secretary of BTH was
also placed on the Border Relations Council and the EPA Secretary
was designated as the Chair.
After the establishment of GO-Biz in 2011, Mr. Speaker authored
legislation to transfer international trade authority from BTH to
GO-Biz in order to strengthen its position as the state's lead
business economic development entity [AB 2012, Chapter 294, Statutes
of 2012].
GO-Biz' position was further strengthened through the Governor's
Reorganization Plan 2 (GRP 2), which dissolved BTH and transferred
several additional economic development programs from BTH to GO-Biz
including the Small Business Loan Guarantee Program, tourism
programs, and the California Infrastructure and Economic Development
Bank. However, when removing the defunct BTH from the Border
Relations Council, a GRP 2 implementing bill replaced BTH's seat
with only the Transportation Agency and omitted GO-Biz [AB 1317,
Chapter 352, Statutes of 2013]. AB 690 would add GO-Biz to the
Border Relations Council.
4)Current Activities of the Border Relations Council : The Council is
currently operated under auspicious of EPA's California-Baja
California Border Environmental Program. The Border Relations
Council first convened in February 2008, and held additional
meetings in subsequent years.
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According to the agency website, the "Council has the potential to
identify new Border priorities and fundable projects in the areas of
infrastructure, trade, environment, health and security while
supporting current and ongoing activities such as the Border
Governors Conference, trade missions, border workgroups, and
coordinating specific future projects with Mexico." Key activities
identified in the 2010 and 2011 Report include:
The Border Relations Council developed a strategic plan
referred to as the New River Improvement Project to study,
monitor, remediate and enhance the New River's water quality to
protect human health and develop a river parkway suitable for
public use and enjoyment [AB 1079 (V.M. P�rez), Chapter 382,
Statutes of 2009] .
The Tijuana River Valley Project was created as an informal
collaboration of more than 30 federal, state and local agencies
and non-governmental organizations from both the U.S. and Mexico
to reduce the amount of sewage and garbage flowing into the
Tijuana River Valley and the Pacific Ocean.
The San Diego Regional Water Quality Control Board, in
partnership with the California Natural Resources Agency and
counterparts in Mexico, has established the Tijuana River Valley
Recovery Team and developed a Recovery Strategy in 2011 to clean
up the valley and restore its beneficial uses.
At the January 2014 meeting, the Border Relations Council is
scheduled to review its 2012 annual report to the Legislature.
1)California's Trade Economy : International trade is an important
component of California's $2.0 trillion economy supporting 4.4
million California jobs. The importance of trade to the California
economy is increasing as a percentage of California jobs tied to
trade more than doubled from 1992 to 2011, 10.6% v. 22.0%. If
California were a country, its $162 billion in exports would place
the state as the 11th largest exporter in the world. Exports from
California accounted for over 10.5% ($162 billion) of total U.S.
exports in goods, shipping to over 220 foreign destinations in 2012.
California's significance in the global marketplace results from a
variety of factors, including: its strategic southwest and coastal
location offering direct access to growing foreign markets in Mexico
and Latin America and Asia; its nine diverse regional economies; its
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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.
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.
Manufacturing is California's most export-intensive activity,
contributing significantly to the value of California's $162 billion
in exports in 2012. Overall, manufacturing exports represent 9.4%
($120 billion in goods) of California's GDP, and computers and
electronic products constitute 27.6% of the state's total
manufacturing exports. More than one-fifth (21.9%) of all
manufacturing workers in California directly depend on exports for
their jobs.
Besides the production and/or manufacturing of the product being
exported, foreign trade results in numerous jobs related to port
activity, wholesale trade, warehousing, and transportation. Small
businesses played a key role in the state's export market by both
exporting themselves and in selling goods and services to other
companies that ultimately export. The chart below includes
information on the major goods California exported in 2012.
-----------------------------------------------------------------
| 2012 Exports From California to the World |
-----------------------------------------------------------------
|---------------------------------------+-----------+------------|
| Product | Value ($ | Percent |
| | billions) | |
|---------------------------------------+-----------+------------|
|334 Computers & Electronic Prod. | 44.5 | 27.6 % |
|---------------------------------------+-----------+------------|
|333 Machinery (except electrical) | 14.8 | 9.2 % |
|---------------------------------------+-----------+------------|
|336 Transportation Equipment | 16.1 | 10 % |
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|---------------------------------------+-----------+------------|
|325 Chemical Manufactures | 12.7 | 7.9 % |
|---------------------------------------+-----------+------------|
|339 Misc. Manufacture Commodities | 13.8 | 8.6 % |
|---------------------------------------+-----------+------------|
|111 Agricultural Products | 11.9 | 7.4 % |
|---------------------------------------+-----------+------------|
|All Others | 27.2 | 29.3 % |
|---------------------------------------+-----------+------------|
|Total | $162 | |
| | (rounded) | 100 % |
----------------------------------------------------------------
-----------------------------------------------------------------
|Source: |
|Tradestates.com |
-----------------------------------------------------------------
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 used by American producers. In addition, U.S.
imports often include components and required services provided by
U.S. firms, including California semiconductors and design.
Mexico is California's top trading partner, receiving $26 billion
(16%) in goods in 2012. The state's second and third largest
trading partners are Canada and China with $17.3 billion (11%) and
$14 billion (9%) in exports respectively. Other top-ranking export
destinations include Japan, South Korea, Hong Kong, Taiwan, Germany,
the Netherlands and the United Kingdom.
2)California and Mexico Relations : The United States and Mexican
economies have become increasingly integrated, particularly since
the 1994 North American Free Trade Agreement. This integration has
brought California and Mexico both opportunities and challenges,
most notably in the areas of economic development, labor relations,
health care, and environmental protection.
Beginning in 1999, Mexico became California's number one trade
partner. California's top five exports to Mexico in 2012 were:
Computer and Electronic Products ($8.3 billion); Transportation
Equipment ($2.4 billion); Machinery, except Electrical ($2 billion);
Petroleum and Coal Products ($1.8 billion); and Chemicals ($1.5
billion).
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According to a 2004 Public Policy Institute study, much of the
California-Mexico trade is two-way within the same commodity class,
suggesting extensive production sharing. Components made in
California are assembled or further processed in Mexico, and shipped
back to California. One estimate is that Mexican exports include
over 20% U.S. components. Top commodities for this type of trade
include: machinery, vehicles, instruments, and electronics and
electronic equipment.
3)Amendments : The author is proposing to add legislative intent to AB
690. The committee may wish to discuss an amendment with the author
to specifically affiliate the Mexico Affairs Office within GO-Biz or
some other state entity that can be responsible for its operations.
Committee staff also suggest a technical correction in Government
Code Section 8702 to clarify that the membership of the Southwest
Border Regional Conference now applies to related duties of the
Mexico Affairs Office. According to existing law, the Mexico
Affairs Office is the official successor entity to the Southwest
Border Regional Conference.
The Committee may wish to consider allowing the author to make one
or more of these amendments in the Senate given the tight January
legislative schedule.
4)Related legislation : Below is a list of related legislation from
previous legislative sessions:
a) AB 1370 (Frazier) State Agency Reorganization : This bill
implements major portions of the GRP 2 including makes changes to
the California-Mexico Border Relations Council. Status: Signed
by the Governor, Chapter 352, Statutes of 2013.
b) AB 1395 (Nu�ez) Master Plan for California and Mexico Affairs :
This bill would have required the Secretaries for the Business,
Transportation, and Housing and the Environmental Protection to
develop and implement a 10-year master plan on California-Mexico
relations. Status: Vetoed by the Governor
c) AB 1410 (JEDE) International Trade Omnibus Bill : This bill,
among other things, would have reorganized 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: JEDE-related
content removed in the Senate and held in the Senate Rules
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Committee.
d) AB 1719 (JEDE) International Trade Omnibus Bill: This bill,
as passed by the committee, would have made technical and
non-substantive changes to codes relating to the state's
international trade activities. JEDE-related content was later
removed. Status: Held in the Assembly Committee on Rules in
2008.
e) AB 2012 (John A. P�rez) GO-Biz trade Authority : This bill
transfer the authority for undertaking international trade and
foreign relations activities from BTH to GO-Biz. The bill also
makes a number of related changes. Status: Signed by the
Governor, Chapter 294, Statutes of 2012.
f) AB 3021 (Nu�ez) Creation of the Border Council : This bill
establishes the California-Mexico Border Relations Council for
the purpose of coordinating activities of state agencies.
Status: Signed by the Governor, Chapter 621, Statutes of 2006.
g) SB 772 (Ducheny) Border region: waste and used tires: This
bill requires the California Integrated Waste Management Board to
include in the waste tire recycling program five-year plan
information pertaining to border region activities. Status:
Signed by the Governor, Chapter 214, Statutes of 2005.
h) SB 1513 (Romero) Final Compromise - California International
Trade and Investment Act: This bill re-establishes statutory
authority for the Business, Transportation, and Housing (BTH)
Agency to conduct international trade and foreign investment
activities. Status: Signed by the Governor, Chapter 663,
Statutes of 2006.
REGISTERED SUPPORT / OPPOSITION :
Support
Los Angeles Business Federation
Opposition
None received
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916) 319-2090
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