BILL ANALYSIS �
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|Hearing Date:April 21, 2014 |Bill No:SB |
| |928 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Ted W. Lieu, Chair
Bill No: SB 928Author:Correa
As Amended:April 10, 2014 Fiscal: Yes
SUBJECT: International trade and investment office: Mexico.
SUMMARY: Requires GO-Biz to establish an international trade and
investment office in Mexico City, Mexico by January 1, 2016.
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. (Government
Code (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)
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 and provide a report to the Legislature on or before
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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
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. (GC � 13997)
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This bill:
1) Requires the Director of GO-Biz to establish an international trade
and investment office in Mexico City, Mexico (Mexico office) by
January 1, 2016.
2) Requires the Mexico office to do all of the following:
a) Facilitate access to educational exchange programs between
California and Mexico.
b) Promote the export of California goods and services into
Mexico.
c) Encourage and facilitate capital investment from Mexico into
California.
1) Designates GO-Biz to operate the Mexico office.
2) Requires GO-Biz to include information regarding the Mexico office
in its reports.
3) Specifies that GO-Biz need only perform duties related to the
Mexico office to the extent private funds are available for these
purposes.
FISCAL EFFECT: Unknown. This bill is keyed "fiscal" by Legislative
Counsel.
COMMENTS:
1. Purpose. The Author is the Sponsor of this bill. According to the
Author, existing law authorizes GO-Biz to open international trade
offices, however GO-Biz has not established an office in Mexico -
California's number one economic trading partner.
2. Governor's Office of Business and Economic Development (GO-Biz).
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
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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.
Among other programs, GO-Biz administers the Innovation Hub (iHub)
program in partnership with the statewide network of Small Business
Development Centers. There are currently 12 regional iHubs located
throughout the state. The iHub program is designed to improve the
state's national and global competitiveness by stimulating
partnerships, economic development, and job creation around
specific research clusters. Key assets and partners of the
initiative include technology incubators, research parks,
universities, federal laboratories, economic development
organizations, business groups, and venture capitalists.
Another key initiative of GO-Biz is the "strike teams" which can be
mobilized to help attract and/or retain specific businesses.
Strike teams are especially well suited to engage with major
employers and have been successfully activated to assist Bayer
Healthcare, Jazz Semiconductor, and Baxter Pharmaceutical to locate
and/or expand in California.
3. International Trade Efforts in California. Between 1986 and 2004,
the Technology, Trade and Commerce Agency (TTCA) was the
responsible government entity for promoting economic development,
international trade, and foreign investment in California. When
the agency was eliminated 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
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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 the next update is required in February 2014.
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.
4. Trade with Mexico. According to information provided by United
States International Trade Commission (USITC), Mexico is the United
States' third-largest trading partner. Since the implementation of
the North American Free Trade Agreement (NAFTA), Mexico and the
United States have significantly strengthened their economic ties.
Mexico ranks third as a source of U.S. imports ($285.4 billion in
2011) and second as an export market for U.S. goods and services
($174.4 billion in 2011).
Beginning in 1999, Mexico became California's number one trade
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partner. The Public Policy Institute released a study in 2004 that
highlighted how California and Mexico's 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 states 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. 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).
5. Related Legislation This Year. AB 337 (Allen) adds 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 currently
pending in this Committee.)
AB 690 (Campos) repeals and recasts statutory provisions relating
to California and Mexico relations including adding the Director of
the GO-Biz to the membership of the California-Mexico Border
Relations Council and designating him or her as Chair. ( Status :
The bill is currently pending in this committee.)
AB 1088 (Muratsuchi) would require 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.)
6. 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
California Foreign Investment Program within the Governor's Office
of Business and Economic Development (GO-Biz) as the lead entity
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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
authority for BT&H to undertake international trade and investment
activities, and as a condition of that new authority, directed the
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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.
SUPPORT AND OPPOSITION:
Support: None on file as of April 15, 2014.
Opposition: None on file as of April 15, 2014.
Consultants: Mark Mendoza and Sarah Mason