BILL ANALYSIS �
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|Hearing Date:June 16, 2014 |Bill No:AB |
| |2713 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Ted W. Lieu, Chair
Bill No: AB 2713Author:Quirk-Silva
As Amended:May 5, 2014 Fiscal: Yes
SUBJECT: Governor's Office of Business and Economic Development:
South Korea.
SUMMARY: Authorizes the Governor's Office of Business and Economic
Development (GO-Biz) to establish public-private partnerships to help
guide state activities related to the export of California products.
Requires GO-Biz to establish the South Korean Trade Promotion Advisory
Committee to help guide state activities related to the export of
California products to South Korea and the attraction of
employment-producing direct foreign investment by South Korean
investors.
Existing law:
1)Establishes GO-Biz within the Governor's Office for the purpose of
serving as the lead state entity for economic strategy and marketing
of California on issues relating to business development, private
sector investment and economic growth. GO-Biz also serves as the
administrative oversight for the California Business Investment
Service and the Office of the Small Business Advocate. (GC �� 12096
- 12098.5)
2)Specifies that GO-Biz 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 Director of GO-Biz to develop an
international trade and investment program (Program) attracting
employment-producing direct foreign investment to the state and
provides support for California businesses in accessing
international markets and increasing exports. (GC � 13996.41)
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3)Authorizes GO-Biz to establish international trade and investment
(ITI) offices outside of the U.S. according to certain requirements.
(GC � 13996.42)
4)Requires GO-Biz to prepare an international trade and investment
strategy (Strategy) and provide a report to the Legislature on or
before February 1, 2014, updated once every five years that
includes: (GC � 13996.55)
a) Policy goals, objectives and recommendations necessary to
implement a comprehensive international trade and investment
program.
b) Measurable outcomes and timelines for the goals, objectives
and actions for the program.
c) Impediments to achieving goals and objectives.
d) Key stakeholder partnerships that will be used to implement
the strategy.
e) Options for funding.
f) An organizational structure for state administration of
international trade and investment policies, programs and
services.
1)Requires the Director of GO-Biz to prepare the following: (GC �
13996.65)
a) A budget for the Program and a separately stated budget for
each ITI office, with specified information.
b) A strategy and business plan for the Program, with specified
information, that is developed with input from California
businesses that shall include, but not be limited to, measurable
goals, objectives, and outcomes and timelines necessary to
attract employment-producing direct foreign investment to the
state and increase California exports.
c) A written review of the implementation of the prior year's
strategy and business plan for the Program that addresses the
performance of the program and each ITI Office.
1)Provides that the Controller shall not allocate any state funds to
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GO-Biz for international trade and investment activities unless the
strategy for international trade and investment has been submitted
to the Legislature by May 1, 2014. (GC � 13996.75)
2)Establishes processes and accountability measures for GO-Biz to
accept private monies to fund, establish and operate international
trade offices. Authorizes GO-Biz to accept private sector moneys in
an amount not in excess of ten thousand dollars ($10,000) per
donation made to the state for the purpose of promoting
international trade and investment, subject to the Political Reform
Act requirements, and not in excess of a total of ten thousand
dollars ($10,000) per quarter per donor, and specifies the purposes
for which moneys may be used.
(GC � 13997)
3)Creates the California Economic Development Fund (Fund) in the State
Treasury for the purpose of receiving federal, state, local and
private economic development funds, and receiving repayment of loans
or grant proceeds and interest on those loans and grants, and
provides that upon appropriation by the Legislature, moneys in the
Fund may be expended by the GO-Biz to provide matching funds for
loans or grants to public agencies, nonprofit organizations, and
private entities, and for other economic development purposes,
consistent with the purposes for which moneys were received. (GC �
13997.6)
4)Specifies that GO-Biz shall serve as the lead state entity for
overseeing the state's participation with the U.S. Citizenship and
Immigration Services' EB-5 Investment Program (EB-5 Program). (GC �
6315)
This bill:
1)States Legislative intent for a public private partnership
established to help guide state activities related to the export of
California products to: 1) guide GO-Biz on trade and investment
activities and strengthen the collaboration between activities taken
by business, industry, foundations and nonprofits, and the public
sector; and, 2) discuss, among other things, the implementation of
the state goals and objectives of the Strategy and opportunities to
attract private sector funds.
2)Authorizes GO-Biz to establish one or more public-private
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partnership partnerships to help guide state activities related to
the export of California products and the attraction of
employment-producing direct foreign investment with key country and
industry partners.
3)Specifies that members of a public-private partnership shall meet at
least three times in a calendar year, which may occur as in-person
meetings or through some electronic means, subject to a quorum if
recommendations are related to allocation of monies.
4)Provides that each public-private partnership shall consider, among
other tools, the use of a market order to help interested parties
collectively contribute to marketing and promotion activities
related to California exports and foreign investment.
5)Authorizes GO-Biz, for each public-private partnership, to accept
nonstate moneys, including, but not limited to, private sector
consistent with current processes and accountability measures for
GO-Biz to accept private monies to fund, establish and operate
international trade offices. Requires private sector contributions
to be deposited in the Public-Private Partnership Subaccount,
established by this bill, within the Economic Development and Trade
Promotion Account.
6)Provides that in addition any public-private partnerships
established, GO-Biz shall establish a South Korean Trade Promotion
Advisory Committee to help guide state activities related to the
export of California products to South Korea and the attraction of
employment-producing direct foreign investment by South Korean
investors.
FISCAL EFFECT: This bill is keyed "fiscal" by Legislative Counsel.
According to the Assembly Committee on Appropriations analysis dated
May 14, 2014, this bill will result in ongoing General Fund
administrative costs to GO-Biz of approximately $100,000 to establish
a public-private partnership.
COMMENTS:
1. Purpose. The Author is the sponsor of this measure. According to
the Author, current law fails to provide the proper framework to
guide GO-Biz and the state of California to properly increase the
amount of goods and services exported from California to major
trading partners such as South Korea. The Author believes that
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this bill will assist in expanding California's foreign trade and
investment by having direct input from stakeholders in key
industries and sectors with the establishment of the South Korean
Trade Promotion and Advisory Committee. The Author states that "in
recent years, South Korea has achieved remarkable growth in their
economy making them a major competitor of international trade and
investment in the region and globally." According to the Author,
since the passage of the U.S. and Korea Free Trade Agreement
(USKFTA) trade between the United States and Korea has grown over
the past two years, particularly in the state of California with
noted growth in the past four years. The Author notes that South
Korea has become the state's fifth largest major trading partner in
recent years making them a critical element of California's
economy.
2. Background.
a) Governor's Office of Business and Economic Development
(GO-Biz) and International Trade Efforts in California. In
February 2010, the Little Hoover Commission undertook a review of
the state's economic and workforce development programs. In its
final report, Making up for Lost Ground: Creating a Governor's
Office of Economic Development, it analyzed the status and
effectiveness of current programs since the 2003 demise of the
Technology, Trade and Commerce Agency and recommended the
creation of a new governmental entity to fill the void left by
the dismantled agency.
The report called for a single entity that would promote greater
economic development, foster job creation, serve as a policy
advisor and deliver specific services (i.e., permitting, tax,
regulatory, and other information) directly to the California
business community. In April 2010, Governor Schwarzenegger
issued Executive Order S-05-10 as a means to operationalize the
report recommendations including the creation of the Governor's
Office of Economic Development (GOED).
In October 2011, the Governor signed AB 29 (cited and described
below), which effectively codified GOED and changed its name to
GO-Biz, effective January 1, 2012. Since its inception, the
office has served over 3,000 businesses, 95% of which are small.
The most frequent types of assistance include help with permit
streamlining, starting a businesses, relocation and expansion of
businesses, and regulatory challenges.
When the Technology Trade and Commerce Agency (TTCA) was
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eliminated in 2004 due to its poor administrative performance,
the authority for all state trade activity was also eliminated
and the few remaining programs came under the umbrella of the
Business, Transportation and Housing Agency (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. Beginning in the 2005-06 Session, several
legislative measures were introduced to reinstate the state's
trade authority. SB 1530 (Romero, 2006) addressed these concerns
by requiring BT&H to undertake a trade study to determine what
role the state should play in international trade and foreign
investment activities and required them to establish a business
advisory committee, and development of a trade strategy
consistent with the study and acts as the vehicle for
implementing the state's trade policy. The first strategy was
published in February 2008 and most recent was issued in February
2014.
The strategy highlighted strategic objectives intended to
implement an overall policy of creating jobs, increasing revenues
for California enterprises, and improving California's
international competitiveness by expanding the export of
California goods and services and by increasing foreign direct
investment into the state. The objectives include:
Developing a comprehensive, coordinated and cohesive
strategy development framework with a clear vision to expand
trade and investment, which includes other relevant state
agencies, with input from private and public sector
stakeholders.
Implementing more proactive outreach, awareness,
education and engagement programs both within the state for
California-based companies and through foreign partners and
trade office(s).
Maximizing China Trade Office resources and
opportunities to expand exports and investment.
Developing an action plan to address key challenges
facing California's ports and related infrastructure to ensure
their competitiveness.
Re-engaging and strengthening working relationships with
the Office of the U.S. Trade Representative and the state's
Congressional delegation to advocate California interests
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related to international trade and investment.
Developing and implementing a more user-friendly,
comprehensive, interactive and useful website to assist
California companies wanting to export and to attract foreign
investment.
In the report, GO-Biz advised it will reevaluate, when
appropriate or necessary, the recommended objectives and actions
in order to achieve the state's overall international trade and
investment policy goals.
In February 2014, Governor Brown announced the creation of a
California International Trade and Investment Advisory Council
(Council) which will advise GO-Biz on strategies to expand
international trade and investment for California businesses.
Specifically, in announcing its creation, the Governor noted that
the Council "will assist GO-Biz in identifying foreign markets
with the greatest potential for export expansion and in
developing specific export strategies for those markets -
including the state's top trading partners, Canada, Mexico and
China, and emerging markets such as Brazil and India."
Until the creation of GO-Biz there were only a very small number
of former International Investment Division staff working on
trade related issues and activities for the state. GO-Biz now
has authority for undertaking international trade and foreign
investment activities, including establishing any international
trade and investment office ( AB 2012 , Perez, Statutes of 2012).
GO-Biz has partnered with the Bay Area Council to open a
California-China Trade and Investment office in Shanghai's
downtown Yangpu district. In a March 2013 report to the
Legislature on the status of this effort, GO-Biz described the
office's goals "to drive increased employment, revenues at
California enterprises, tax revenues, and international
competitiveness in California" which will be accomplished through
promoting investment in California; facilitating two-way
international business growth, with an emphasis on expanding
foreign sales by California employers, including not only
manufacturers, agricultural enterprises, and commodity producers,
but also service providers such as universities, banks,
consulting companies, and the like; supporting continued growth
of California's role as a gateway state for goods movement and
passenger travel; and identifying and addressing barriers to
international expansion by California employers.
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a) Trade With South Korea. According to the Office of the United
States Trade Representative (USITR), the United States and the
Republic of Korea signed the United States-Korea Free Trade
Agreement (KORUS FTA) on June 30, 2007, and the agreement came
into force on March 15, 2012. The U.S. International Trade
Commission estimated that the reduction of Korean tariffs and
tariff-rate quotas on goods alone will add $10 billion to $12
billion to annual U.S. Gross Domestic Product and around $10
billion to annual merchandise exports to Korea. USITR notes that
in the two years that the agreement has been in effect, Korea has
become the U.S.' sixth-largest trading partner, exports of U.S.
manufactured goods to Korea have increased; Koreans are buying
more U.S. services than ever and U.S. exports of a wide range of
agricultural products have seen significant gains.
Korea is California's fifth largest export destination.
According to the Foreign Trade Division of the U.S. Census
Bureau, in 2013, California exported nearly $8.4 billion to
Korea.
1. Related Legislation This Year. AB 337 (Allen) would add a required
element to the state's international trade and investment strategy,
an evaluation of the ports of entry to the state and their capacity
for handling international trade, including industrial and
postconsumer secondary materials, originated in or destined for
other states. The bill provides that this new required element be
included in the second update of the strategy, which should occur
no later than February 1, 2019. ( Status : The bill is also set for
hearing before this Committee on June 9.)
AB 1088 (Muratsuchi) would have required GO-Biz, no later than
January 1, 2016, to establish an overseas trade office in Tokyo,
Japan. ( Status : This bill was never heard in a policy committee.)
SB 511 (Lieu) requires GO-Biz to convene a statewide business
partnership for port trade promotion. ( Status : This bill is
currently pending in the Assembly Committee on Jobs, Economic
Development and the Economy.)
2. Prior Related Legislation. SB 592 (Price) of 2013 included the
same language as SB 511, but also required GO-Biz to provide a port
trade promotion strategy to the Legislature on or before April 1,
2014. ( Status : The bill was held in the Assembly Committee on
Appropriations.)
AB 1067 (Medina, Chapter 535, Statutes of 2013) established the
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California Foreign Investment Program within the Governor's Office
of Business and Economic Development (GO-Biz) as the lead entity
for overseeing the state's participation in the United States
(U.S.) Citizenship Immigration Services' EB-5 Investment Program
(EB-5 Program).
AB 2012 (Perez, Chapter 294, Statutes of 2012) transferred the
authority for undertaking international trade and foreign
investment activities from BT&H to GO-Biz, including establishing
any international trade and investment office.
SB 460 (Price) of 2011 included similar language as contained in SB
511 and SB 592 above. ( Status : The bill was held in the
Assembly Committee on Appropriations.)
SCR 33 (Price, Resolution Chapter 60, Statutes of 2011) expressed
the sentiment of the Legislature that the EB-5 visa program is
beneficial to the state's economic development and provides
important opportunities for foreign direct investment to
California.
AB 1137 (V. Manuel P�rez) of 2011 would have facilitated local
economic development and job creation by assisting small businesses
to access new export markets for their goods and services,
codifying the EB-5 investment visa program, updating the law
relating to free trade zones, and authorizing the use of new
federal funds under the Small Business Jobs Act of 2010. ( Status :
The bill was held in Senate Committee on Appropriations in 2012.)
AB 1409 (Jobs, Economic Development and the Economy Committee) of
2011 would have required that the next update of the international
trade and investment strategy prepared by the Business,
Transportation and Housing Agency to include policy goals,
objectives and recommendations from the state Goods Movement Action
Plan. ( Status : The bill was amended to deal with another subject
matter and held in the Senate Committee on Rules in 2012.)
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. ( Status : The bill
was held in the Senate Committee on Appropriations in 2010.)
SB 1513 (Romero, Chapter 663, Statutes of 2006) provided new
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authority for BT&H to undertake international trade and investment
activities, and as a condition of that new authority, directed the
development of a comprehensive international trade and investment
policy for California.
SB 1657 (Scott, Chapter 863, Statutes of 2002) required the
Secretary of the Technology, Trade and Commerce Agency to establish
an international trade and investment office in Yerevan, in the
Republic of Armenia, to serve the region of Eastern Europe and
Western Asia. This bill authorized the office to remain open for
three years to allow California to invest in a current emerging
market.
3. Arguments in Support. The California Asian Pacific Chamber of
Commerce writes in support of this bill, noting that adding South
Korea to the scope of GO-Biz's current international trade and
investment activities is "appropriate in helping to foster a
relationship with South Korea and bring additional export
opportunities to California businesses."
According to the Los Angeles-Busan Sister City Committee , the bill
would "allow for new and emerging California and Korean businesses
to create greater transparency for economic growth, trade and
people-to-people ties."
SUPPORT AND OPPOSITION:
Support:
California Asian Pacific Chamber of Commerce
Los Angeles-Busan Sister City Committee
Opposition:
None on file as of June 11, 2014.
Consultant:Sarah Mason
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