BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 928|
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THIRD READING
Bill No: SB 928
Author: Correa (D) and Huff (R)
Amended: 4/10/14
Vote: 21
SENATE BUSINESS, PROF. & ECON. DEV. COMM. : 9-0, 4/21/14
AYES: Lieu, Wyland, Berryhill, Block, Corbett, Galgiani,
Hernandez, Hill, Padilla
SENATE APPROPRIATIONS COMMITTEE : 7-0, 5/23/14
AYES: De Le�n, Walters, Gaines, Hill, Lara, Padilla, Steinberg
SUBJECT : International trade and investment office: Mexico
SOURCE : Author
DIGEST : This bill requires the Governor's Office of Business
and Economic Development (GO-Biz) to establish an international
trade and investment office in Mexico City, Mexico by January 1,
2016.
ANALYSIS :
Existing law:
1.Establishes GO-Biz 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
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Investment Service and the Office of the Small Business
Advocate.
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 (ITI)
program attracting employment-producing direct foreign
investment to the state and provides support for California
businesses in accessing international markets and increasing
exports.
3.Authorizes GO-Biz to establish ITI offices outside of the U.S.
according to certain requirements.
4.Requires GO-Biz to prepare an ITI strategy and provide a
report to the Legislature on or before February 1, 2014,
updated once every five years that includes (a) policy goals,
objectives and recommendations necessary to implement a
comprehensive ITI program; (b) measurable outcomes and
timelines for the goals, objectives and actions for the ITI
program; (c) impediments to achieving goals and objectives;
(d) key stakeholder partnerships that will be used to
implement the ITI strategy; (e) options for funding; and (f)
an organizational structure for state administration of ITI
policies, programs and services.
5.Requires the Director of GO-Biz to prepare (a) a budget for
the ITI program and a separately stated budget for each ITI
office, with specified information; (b) a strategy and
business plan for the ITI 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; and (c) a written review of
the implementation of the prior year's strategy and business
plan for the ITI program that addresses the performance of the
ITI program and each ITI office.
6.Provides that the State Controller shall not allocate any
state funds to GO-Biz for ITI activities unless the ITI
strategy has been submitted to the Legislature by May 1, 2014.
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7.Establishes processes and accountability measures for GO-Biz
to accept private monies to fund, establish, and operate
international trade offices.
This bill:
1.Requires the Director of GO-Biz to establish an ITI 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.
Background
Trade with Mexico . According to information provided by the
United States International Trade Commission, Mexico is the
United States' third-largest trading partner. Since the
implementation of the North American Free Trade Agreement,
Mexico and the U.S. 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).
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Beginning in 1999, Mexico became California's number one trade
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).
Comments
According to the author's office, 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. The author states, "Currently, 23
states have trade offices in Mexico. We can and should do more
to encourage California exports, foreign direct investment and
economic growth."
Related Legislation
AB 337 (Allen) adds a required element to the state's ITI
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.
AB 690 (Campos) repeals and recasts statutory provisions
relating to California and Mexico relations including adding the
Director of GO-Biz to the membership of the California-Mexico
Border Relations Council and designating him/her as Chair.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee, GO-Biz
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indicates that this bill requires four positions and roughly
$700,000 annually to staff the trade office. While this bill
stipulates that GO-Biz need only perform the duties related to
the trade office to the extent that private funds are available,
this bill results in a General Fund cost pressure to offset any
shortfall in private monies raised.
The cost of operating a foreign trade office varies
significantly, and is driven by a number of factors including,
but not limited to, number of staff, level of service provided,
number of state business trips to and from California, and the
cost of living in the given country/region.
As late as 2003-04, the state operated trade offices in 12
locations around the world. Seven foreign trade offices were
staffed by state employees, while five other offices were
staffed by contracted consultants. According to the Legislative
Analyst's Office, these offices did not demonstrate a clear
impact on state exports or foreign investment in California.
All of the trade offices were soon closed, though an office in
Shanghai reopened in 2012.
SUPPORT : (Verified 5/23/14)
American GI Forum of California
California Farm Labor Contractor Association
Central California SCORE
Cien Amigos
Council for Economic Development of Sinaloa
Fresno Area Hispanic Foundation
Greater Corona Hispanic Chamber of Commerce
Hayward Chamber of Commerce
Hispanic Inland Empire Chamber of Commerce
Latino Policy Coalition
Mountain View Chamber of Commerce
Orange County Business Council
Orange County Hispanic Chamber of Commerce
Orton Development Inc.
Regional Hispanic Chamber of Commerce
S.T. Johnson Company LLC
San Diego Regional Chamber of Commerce
Women in International Trade-Los Angeles
ARGUMENTS IN SUPPORT : According to the author, "Establishing
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a California trade office in Mexico would provide better
coordination and marketing for California's numerous
commodities, and help boost California's exports to Mexico.
Having a visible higher educational component as part of this
trade office that would represent a wide range of private and
public higher educational institutions would ensure that the
foundation of our future leaders is built on mutual
understanding and cooperation."
MW:e 5/23/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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