Existing law requires the Director of the Governors Office of Business and Economic Development to prepare a description of how a newly proposed international trade and investment office will facilitate an increase of direct foreign investment in California or an increase in California exports, or both. Development, not later than February 1, 2019, to provide to the Legislature a strategy for international trade and investment that includes, at minimum, certain specified information, including, among other things, policy goals, objectives, and recommendations necessary to implement a comprehensive international trade and investment program for the state. Existing law requires that this strategy be updated as specified every 5 years.

This bill would require the Governors Office of Business and Economic Development to include within that description an analysis of emerging markets, that this strategy additionally include an analysis and identification of dominant and emerging foreign markets for California goods and services, including, but not limited to to, the states top trade partners of Mexico and Canada and potential new markets located in Africa and Caribbean countries. the Caribbean.

Existing law requires the Director of the Governors Office of Business and Economic Development to provide to the Legislature, not later than February 1, 2019, a strategy for international trade and investment that, at a minimum, includes specified information, goals, objectives, and actions related to the promotion of trade. prepare a description of how a newly proposed international trade and investment office will facilitate an increase of direct foreign investment in California or an increase in California exports, or both.

This bill would declare the intent of the Legislature to enact legislation that would require the Governors Office of Business and Economic Development to engage in trade agreements and memorandums of understanding with specified nations include within that description an analysis of emerging markets, including, but not limited to markets in Africa and the Caribbean. Caribbean countries.

Existing law requires the Director of the Governors Office of Business and Economic Development to provide to the Legislature, not later than February 1, 2019, a strategy for international trade and investment that, at a minimum, includes specified information, goals, objectives, and actions related to the promotion of trade.

This bill would declare the intent of the Legislature to enact legislation that would require the Governors Office of Business and Economic Development to engage in trade agreements and memorandums of understanding with specified nations in Africa and the Caribbean.

SENATE COMMITTEE ON

Senator Ricardo Lara, Chair

2017 - 2018 Regular Session

AB 923 (Ridley-Thomas) - State government: international trade and investment strategy

This bill meets the criteria for referral to the Suspense File.

Bill Summary:

AB 923 would require the currently-mandated International Trade and Investment Strategy (ITI Strategy) prepared by the Governor’s Office of Business and Economic Development (GO-Biz) to also include an analysis and identification of dominant and emerging foreign markets for California goods and services, including, but not limited to, (1) Mexico and Canada, and (2) potential new markets located in Africa and the Caribbean.

Fiscal Impact:

GO Biz would incur one-time General Fund costs of $220,000 to $330,000, and on-going costs of $115,000 to $230,000, to collect data, analyze and identify dominant and emerging markets for California goods and services.

Background:

GO-Biz is the primary state agency responsible for trade and foreign investment activity, other than agriculture. Initially established in 2011, GO-Biz took on international trade responsibility from the Business, Transportation, and Housing Agency in 2012. Current law (1) authorizes GO-Biz to undertake ITI activities and, as a condition of that authority, (2) directs the development and implementation of a comprehensive ITI strategy. All international trade and foreign investment activities and funding are required to be consistent with the ITI strategy. Additionally, existing law requires the ITI Strategy to, at a minimum, include the following: 1) policy, goals, objectives and recommendations, (2) measurable outcomes and timelines for meeting the ITI Strategy goals, objectives, and actions, (3) identification of key stakeholder partnerships that will be used to implement the goals and objectives, (4) identification of impediments for achieving the goals and objectives, (5) identification of options for funding recommended actions, and (6) identification of an international trade and investment organizational structure.

Proposed Law:

This bill would require the ITI Strategy to include an analysis and identification of dominant and emerging foreign markets for California goods and services, including, but not limited to, Mexico and Canada and potential new markets located in Africa and the Caribbean.

Related Legislation:

AB 337 (Allen, Chapter 776, Statutes of 2014) updated requirements for the Strategy to be based on current and emerging market conditions and the needs of investors, businesses, and workers to be competitive in global markets.

Staff Comments:

International trade and foreign investment support 4.4 million jobs in California, and thus are key components of the State’s $2.4 trillion economy. Trade as a share of the State’s economy doubled between 1992 and 2011, rising from 11 percent to 22 percent. Based on 2015 trade figures, if it were a country, California would be the 28st largest exporter and the 12th largest importer in the world, based on 2015 trade numbers.

-- END --

SENATE COMMITTEE ON

BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT

Senator Jerry Hill, Chair

2017 - 2018 Regular

Bill No: AB 923 Hearing Date: July 3, 2017

Subject: State government: international trade and investment strategy

SUMMARY:

Requires the International Trade and Investment Strategy (Strategy) prepared by GO-Biz to also include an analysis and identification of dominant and emerging foreign markets for California goods and services, including, but not limited to, Mexico and Canada and potential new markets located in Africa and the Caribbean.

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.
   (Government Code (GC) §§ 12096 – 12098.5)
2. 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 providing 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 the Director of GO-Biz to prepare a Strategy and provide a report to the Legislature on or before February 1, 2019 that includes: (GC § 13996.55)
5. Policy goals, objectives and recommendations necessary to implement a comprehensive international trade and investment program.
6. Measurable outcomes and timelines for the goals, objectives and actions for the program.
7. Impediments to achieving goals and objectives.
8. Key stakeholder partnerships that will be used to implement the Strategy.
9. Options for funding.
10. An organizational structure for state administration of international trade and investment policies, programs and services.
11. Requires the Strategy to be based on current and emerging market conditions and the needs of investors, businesses, and workers to be competitive in global markets and requires the strategy to include a framework that enables GO-Biz to evaluate, on an ongoing basis, as appropriate, current workforce, infrastructure, research and development and other needs of small and large firms, including, but not limited to, highways, airports, and rail that link businesses with the state’s ports of entry and foreign and domestic markets. (Id.)

This bill requires the Strategy to also include an analysis and identification of dominant and emerging foreign markets for California goods and services, including, but not limited to, Mexico and Canada and potential new markets located in Africa and the Caribbean.

FISCAL EFFECT:

This bill is keyed fiscal by Legislative Counsel. According to the Assembly Committee on Appropriations analysis dated May 10, 2017, this bill will result in approximately $220,000 in one-time General Fund (GF) costs and on-going cost of $115,000 GF to GOBiz.

COMMENTS:

1. Purpose. The Author is the sponsor of this bill. According to the Author, this bill is needed in order to place greater attention to expanding international markets like those in African and Caribbean countries.
2. Background.
3. Governor's Office of Business and Economic Development (GO-Biz) and Current International Trade Activities. 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 (TTCA) 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 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, which included the creation of the Governor's Office of Economic Development (GOED).

In October 2011, the Governor signed AB 29 (John A. Pérez, Chapter 475, Statutes of 2011), which effectively codified GOED and changed its name to GO-Biz. Since its inception, the office has served thousands of businesses, 95 percent of which are small businesses. The most frequent types of assistance include help with permit streamlining, starting a business, relocation and expansion of businesses, and regulatory challenges.

In March 2012, Governor Brown initiated a reorganization process to realign the state's administrative structure. Key changes include dismantling of the Business, Transportation and Housing Agency and the shifting of a number of key programs to GO-Biz including the Small Business Loan Guarantee Program, the California Travel and Tourism Commission, the California Film Commission, the Film California First Program, and the Infrastructure and Economic Development Bank (I-Bank). GO-Biz also administers the “Made In California” program for the purpose of encouraging consumer product awareness and to foster the purchases of products manufactured in California. A key initiative of GO-Biz is the "strike teams" which can be mobilized to help attract and/or retain specific businesses. Among these other programs, GO-Biz also administers the Innovation Hub (iHub) program, an effort to harness and enhance California's innovative spirit. The iHubs aim to improve the state's national and global competitiveness by stimulating partnerships, economic development, and job creation around specific research clusters through state-designated iHubs.

GO-Biz has authority for undertaking international trade and foreign investment activities, including establishing any international trade and investment office. GO-Biz has partnered with the Bay Area Council to open a California-China Trade and Investment office (CCTO) in Shanghai's downtown Yangpu district. The 2015 CCTO Annual Report noted that “In fulfilling this mission the CCTO engages with California companies seeking to enter into or expand in the Chinese market as well as with Chinese entities looking to invest in California. The CCTO has had direct engagement with 69 entities between January 2014 and October 2015.” The report outlined efforts to expand opportunities and to increase the state’s presence in China to other cities and provide a broader representation of regions in California.

In July 2014, Governor Brown entered into a Memorandum of Understanding for Strengthening Trade and Investment Cooperation (MOU) with Mexico's Ministry of Economy to expand trade between businesses in Mexico and California. The agreement is designed to boost economic, cultural and academic cooperation between California and Mexico, with an emphasis on advanced manufacturing, alternative energy, health and biotechnology, education, agricultural technology and tourism. The agreement also enables Mexican companies to access California's iHubs. The MOU outlined objectives to, among other efforts, promote the organization of trade and investment missions, and facilitate the identification of economic opportunities. The MOU also established a working group to oversee the agreement’s objectives and specifically authorized other governmental agencies, chambers of commerce or business associations to participate in the working group and/or other initiatives undertaken pursuant to the agreement.

The International Trade and Investment Strategy prepared by GO-Biz in 2014 notes that as part of meeting its strategic objective to “develop a comprehensive, coordinated and cohesive strategy development framework with a clear vision to expand trade and investment which includes other relevant state agencies”, GO-Biz engaged in ongoing efforts to “identify foreign markets with the greatest potential for export expansion including our top trading partners such as Canada, Mexico and China…[and] utilize the public-private sector trade and investment working group to identify and target new foreign sources of investment with likely potential to invest in California.”

In recent years, legislative efforts have focused on trade promotion with specific entities, including Israel (AB 1166, Blumenfield of 2013 was never heard in a policy committee); South Korea (AB 2713 Quirk-Silva of 2014 was held in the Senate Appropriations Committee); Japan (AB 1088 Muratsuchi of 2013 was never heard in a policy committee); and Mexico (SB 357, Hueso which is currently pending in the Assembly Committee on Jobs, Economic Development and the Economy and SB 928, Correa of 2014 which was almost identical to SB 357 but was vetoed by Governor Brown who wrote in his veto message that “We are working directly with the Mexican government and the business community on increasing bilateral trade and other initiatives. I am not convinced we need a legislatively-mandated trade office to continue our growing partnership with Mexico.”)

1. Trade with African Markets. According to the Office of the United States Trade Representative (USTR), USTR's Office of African Affairs develops and coordinates U.S. trade and investment policy for the 49 countries of sub-Saharan Africa (African countries excluded from the SubSaharan categorization include Algeria, Djibouti, Egypt, Libya, Morocco, Somalia, Sudan and Tunisia). The Africa Office oversees implementation of the African Growth and Opportunity Act (AGOA), a trade preference program enacted in 2000 that is at the center of U.S.-African engagement on trade and investment. USTR notes that by providing duty-free entry into the United States for almost all African products, AGOA has helped expand and diversify African exports to the United States, while at the same time fostering an improved business environment in many African countries through eligibility requirements.

According to USTR, the U.S. had $37 billion in total (two ways) goods trade with SubSaharan Africa countries during 2015. Goods exports totaled $18 billion; goods imports totaled $19 billion. According to the Department of Commerce, U.S. exports of goods to SubSaharan Africa countries supported an estimated 121 thousand jobs in 2014. U.S. exports to SubSaharan Africa in 2015 were $17.8 billion, down 30.0 percent ($7.7 billion) from 2014, accounting for 1.2 percent of total U.S. exports in 2015. The top export categories in 2015 were: machinery, aircraft, vehicles, mineral fuel (oil) and electrical machinery. U.S. domestic exports of agricultural products to SubSaharan Africa totaled $1.8 billion in 2015.

In 2012, the Obama Administration launched the “Doing Business in Africa Campaign” (DBIA) designed to make U.S. government resources more easily available to private sector partners. As of 2016, the U.S. Department of Commerce had assisted more than 1,500 U.S. clients under the DBIA seeking to export to African countries. The Trade Africa initiative, launched in 2013, seeks to increase internal and regional trade within Africa and expand economic ties between Africa, the U.S. and other global markets, with an initial focus on the member states of the East African Community (EAC) and goals to double intra-regional trade in the EAC and increase EAC exports to the U.S. by 40 percent.

1. Trade with Caribbean Markets. According to the USTR, the Caribbean Basin Initiative (CBI) is “intended to facilitate the development of stable Caribbean Basin economies by providing beneficiary countries with duty-free access to the U.S. market for most goods. The CBI was launched in 1983 through the Caribbean Basin Economic Recovery Act (CBERA) and expanded in 2000 by the U.S.-Caribbean Basin Trade Partnership Act (CBTPA) and again by the in the Trade Act of 2002. CBERA was implemented on January 1, 1984 and has no set expiration date. The CBTPA is scheduled to expire on September 30, 2020.” CBERA was amended to expand opportunities to Haiti through the Haitian Hemispheric Opportunity through Partnership Encouragement Act of 2006 (HOPE), the Haitian Hemispheric Opportunity through Partnership Encouragement Act of 2008 (HOPE II), and the Haiti Economic Lift Program of 2010 (HELP). HOPE established special new rules of origin that make Haiti eligible for new trade benefits for apparel imports, and that enhance sourcing flexibility for apparel producers in Haiti. HOPE II modified the existing trade preference programs under HOPE, and HELP provided duty-free treatment for additional textile and apparel products from Haiti. These preferences are scheduled to expire on September 30, 2025.

The 2015 CBERA report to Congress cites the total value of U.S. imports from beneficiary countries in 2014 at $8.2 billion, a decrease of $687.7 million from the previous year and of $3.6 billion from 2012. According to the report, the decline in U.S. imports from CBI beneficiaries in both 2013 and 2014 was mostly due to a sharp decrease in U.S. imports of crude petroleum and refined petroleum products, reflecting falling U.S. consumption, coupled with increased U.S. production of crude petroleum. According to the report, the CBI’s share of total U.S. imports was 0.4 percent in 2014 and 2013 and he total value of U.S. exports to beneficiary countries was $12.8 billion in 2014, up $314.6 million from 2013, but down $6.5 billion from 2012, due primarily to the U.S.-Panama Trade Promotion Agreement. The CBI’s share of total U.S. exports was 0.9 percent in 2014 and 2013 and the CBI region as a whole ranked as the 23rd largest market for U.S. exports.

1. Prior Related Legislation. AB 337 (Allen, Chapter 776, Statutes of 2014) updated requirements for the Strategy to be based on current and emerging market conditions and the needs of investors, businesses, and workers to be competitive in global markets.

AB 690 (Campos, Chapter 716, Statutes of 2014) repealed and recast 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.

AB 412 (Allen) of 2013 would have required GO-Biz to undertake a study of the potential roles for the state in global markets. (Status: This bill was held in the Assembly Committee on Appropriations.)

AB 1067 (Medina, Chapter 535, Statutes of 2013) established the California Foreign Investment Program within GO-Biz as the lead entity for overseeing the state’s participation in the 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.

AB 1409 (Jobs, Economic Development and the Economy Committee) of 2011 would have required that the next update of the Strategy prepared by BTH 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 BTH to undertake international trade and investment activities, and as a condition of that new authority, directed the development of a comprehensive ITI policy for California.

SUPPORT AND OPPOSITION:

Support:

None on file as of June 27, 2017.

Opposition:

None on file as of June 27, 2017.

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 923

Author:(Ridley-Thomas)

As Amended Ver:April 19, 2017

Majority vote

SUMMARY: Requires the Governor's Office of Business and Economic Development to include an analysis of dominant and emerging foreign markets within the already mandated state international trade and investment strategy (ITI Strategy). More specifically, the bill requires an analysis and identification of dominant and emerging foreign markets for California goods and services, including, but not limited to, the state's top trade partners of Mexico and Canada and potential new markets in countries located in Africa and the Caribbean.

EXISTING LAW:

1. Authorizes GO-Biz to undertake international trade and investment activities and, as a condition of that authority, directs the development and implementation of a comprehensive international trade and investment strategy (ITI Strategy). All international trade and foreign investment activities and funding are required to be consistent with the ITI strategy.
2. Requires the ITI Strategy to, at a minimum, include the following:
   1. Policy, goals, objectives and recommendations;
   2. Measurable outcomes and timelines for meeting the ITI Strategy goals, objectives, and actions;
   3. Identification of key stakeholder partnerships that will be used to implement the goals and objectives;
   4. Identification of impediments for achieving the goals and objectives;
   5. Identification of options for funding recommended actions; and
   6. Identification of an international trade and investment organizational structure.

FISCAL EFFECT: According to the Assembly Appropriations Committee, implementation of this bill will result in approximately $220,000 in one-time GF cost and on-going cost of $115,000 GF to GO-Biz. GO-Biz will be required to collect data, analyze and identify dominant and emerging markets for California goods and services.

COMMENTS: International trade and foreign investment are important components of California's $2.4 trillion economy supporting 4.4 million California jobs. 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.

This measure proposes expanding the statutory framework of the ITI Strategy to include an evaluation of the dominant and emerging foreign markets. Below are additional details about the state's trade economy, the existing ITI Strategy, and current economic growth within Africa and the Caribbean nations.

The Current ITI Strategy: Between 2003 and 2006, California had no trade and international marketing authority. After years of debate, the Legislature and the Governor began an unprecedented collaboration on the development of a new international trade and investment program. Agreements on the new program were codified in SB 1513 (Romero and Figueroa), Chapter 663, Statutes of 2006 and further refined in AB 2012 (John A. Pérez), Chapter 294, Statutes of 2012.

Under California's new trade and foreign investment framework, state activities are required to be directed through the development and implementation of the ITI Strategy. The ITI Strategy is prepared every five years based on current state and regional economic research and a public vetting to ensure the inclusion of suitable goals and measurable objectives. The initial strategy was finalized in August 2008 and the current ITI Strategy was finalized in February 2014.

The overall policies governing the ITI Strategy are to create jobs, increase revenues for California enterprises, improve California's international competitiveness by expanding the export of California goods and services, and by increasing foreign direct investment into the state. Based on these guiding policy goals, the ITI Strategy sets forth a comprehensive set of recommendations around six strategic objectives:

1. Comprehensive Framework: Develop a comprehensive, coordinated, and cohesive strategy framework with a clear vision to expand trade and investment;
2. Marketing: Implement more proactive outreach, awareness, education and engagement programs both within the state for California-based companies and through foreign partners and trade office(s);
3. China Trade Office: Maximize China Trade Office resources and opportunities;
4. Infrastructure: Develop an action plan to address key challenges facing our ports and related infrastructure to ensure their competitiveness;
5. Federal-State Relationship: Re-engage and strengthen working relationships with the Office of the U.S. Trade Representative and the state’s Congressional delegation to advocate California interests related to international trade and investment; and
6. Website: Develop and implement a more user-friendly, comprehensive, interactive and useful website to assist California companies wanting to export and to attract foreign investment.

Under each of the program objectives, the ITI Strategy identifies a set of specific actions, including timelines, priority levels, and measurable outcomes. Among other actions under the Comprehensive Framework objective, the ITI Strategy calls for identification of foreign markets with the greatest potential for export expansion. Currently, the top trade partners identified include: Canada, Mexico, and China, and emerging markets such as Brazil and India.

GO-Biz has identified two impediments to the implementation of the ITI Strategy including: (1) the challenge of raising sufficient funding through public and private partnerships to participate in investment events and trade missions on an equal footing with other states, and (2) the lack of regional representation for GO-Biz international staff.

Emerging Markets: This bill proposes that the state look more closely at emerging markets and specifies two regions in particular: Africa and the Caribbean. The charts, displayed on the left, show export data related to these regions for 2015 and 2016.

The two largest exports from California to Caribbean countries were computers and other electronic products (37.4%) and miscellaneous manufactured commodities (13.7%) in 2016.

The two largest exports from California to Africa in 2016 were computers and other electronic products and agricultural equipment, 22.3% and 19.1% respectively.

Analysis Prepared by: Toni Symonds / J., E.D., & E. / (916) 319-2090 FN: 0000625

Date of Hearing: May 10, 2017

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

ABPCA Bill Id:AB 923

Author:(Ridley-Thomas) – As Amended Ver:April 19, 2017

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill requires the Governor's Office of Business and Economic Development (GO-Biz) to include an analysis of dominant and emerging foreign markets within the already mandated state international trade and investment strategy (ITI Strategy). More specifically, the bill requires an analysis and identification of dominant and emerging foreign markets for California goods and services, including, but not limited to, the state's top trade partners of Mexico and Canada and potential new markets in countries located in Africa and the Caribbean.

FISCAL EFFECT:

Approximately $220,000 on-time General Fund (GF), and on-going cost of $115,000 GF to GO-Biz. GO-Biz will be required to collect data, analyze and identify dominant and emerging markets for California goods and services.

COMMENTS:

Background and Purpose. In California, the primary state agency responsible for state trade and foreign investment activity (excluding agriculture) is GO-Biz. Initially established in 2011, international trade responsibility was transferred from the Business, Transportation, and Housing Agency to GO-Biz in 2012. State law authorizes GO-Biz to undertake ITI activities and, as a condition of that authority, directs the development and implementation of a comprehensive ITI strategy. All international trade and foreign investment activities and funding are required to be consistent with the ITI strategy. Existing law requires the ITI Strategy to, at a minimum, include the following: a) Policy, goals, objectives and recommendations; b) Measurable outcomes and timelines for meeting the ITI Strategy goals, objectives, and actions; c) Identification of key stakeholder partnerships that will be used to implement the goals and objectives; d) Identification of impediments for achieving the goals and objectives; e) Identification of options for funding recommended actions; and f) Identification of an international trade and investment organizational structure.

International trade and foreign investment are very important components of California's $2.4 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% vs. 22.0%. California's land, sea, and air ports of entry served as key international commercial gateways for the $573 billion in products entering and exiting the U.S. in 2015. If California were a country, it would be the 28st largest exporter and the 12th largest importer in the world, based on 2015 trade numbers. California’s two-way trade represented 15.3% of total U.S. imports and exports. In 2015, exports out of California were valued at $165.3 billion and represented 11% of total U.S. exports. Imports into California were valued at $408.1 billion and represented 18.2% of total U.S. imports in 2015. In 2016, California exported $163.6 billion in goods.

According to the author, “AB 923 would require that the strategy for international trade and investment provided to the Legislature by the Director of GO-Biz additionally require an analysis and identification of dominant and emerging foreign markets for California goods and services, including, but no limited to, the state’s top trade partners of Mexico and Canada and potential new markets located in Africa and the Caribbean.”

Analysis Prepared by: Daisy Gonzales / APPR. / (916) 319-2081

Date of Hearing: April 25, 2017

ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT, AND THE ECONOMY

Sharon Quirk-Silva, Chair

ABPCA Bill Id:AB 923 (

Author:Ridley-Thomas) – As Amended Ver:April 19, 2017

SUBJECT: State government: trade

SUMMARY: Requires the Governor's Office of Business and Economic Development to include an analysis of dominant and emerging foreign markets within the already mandated state international trade and investment strategy (ITI Strategy). More specifically, the bill requires an analysis and identification of dominant and emerging foreign markets for California goods and services, including, but not limited to, the state's top trade partners of Mexico and Canada and potential new markets in countries located in Africa and the Caribbean.

EXISTING LAW:

1. Establishes GO-Biz to serve as the state's primary agency for issues of economic and business development. Among other entities within GO-Biz' oversight are the California Business Investment Services Program, the Office of the Small Business Advocate, the International Trade and Investment Program, and the California Infrastructure and Economic Development Bank.
2. Establishes the California Business Investment Services Program within GO-Biz to serve employers, corporate executives, business owners, and site location consultants who are considering California for a business relocation or expansion.
3. Authorizes GO-Biz to undertake international trade and investment activities and, as a condition of that authority, directs the development and implementation of a comprehensive international trade and investment strategy (ITI Strategy). All international trade and foreign investment activities and funding are required to be consistent with the ITI strategy.
4. Requires the GO-Biz to provide the Legislature with an ITI Strategy by February 2014 and update it at least once every five years.
5. Requires the ITI Strategy to, at a minimum, include the following:
   1. Policy, goals, objectives and recommendations;
   2. Measurable outcomes and timelines for meeting the ITI Strategy goals, objectives, and actions;
   3. Identification of key stakeholder partnerships that will be used to implement the goals and objectives;
   4. Identification of impediments for achieving the goals and objectives;
   5. Identification of options for funding recommended actions; and
   6. Identification of an international trade and investment organizational structure.

FISCAL EFFECT: Unknown

POLICY FRAME:

International trade and foreign investment are very important components of California's $2.4 trillion economy supporting 4.4 million California jobs. 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.

This measure proposes expanding the statutory framework of the ITI Strategy to include an evaluation of the dominant and emerging foreign markets. Below are additional details about the state's trade economy, the existing ITI Strategy, and current economic growth within Africa and the Caribbean nations.

COMMENTS:

1. The Current ITI Strategy: Between 2003 and 2006, California had no trade and international marketing authority. After years of debate, the Legislature and the Governor began an unprecedented collaboration on the development of a new international trade and investment program. Agreements on the new program were codified in SB 1513 (Romero/Figueroa), Chapter 663, Statutes of 2006 and further refined in AB 2012 (John A. Pérez), Chapter 294, Statutes of 2012.

Under California's new trade and foreign investment framework, state activities are required to be directed through the development and implementation of the ITI Strategy. The ITI Strategy is prepared every five years based on current state and regional economic research and a public vetting with the Legislature to ensure the inclusion of jointly agreed upon goals and measurable objectives. The initial strategy was finalized in August 2008 and the current ITI Strategy was finalized in February 2014.

The overall policies governing the ITI Strategy are to create jobs, increase revenues for California enterprises, improve California’s international competitiveness by expanding the export of California goods and services, and by increasing foreign direct investment into the state. Based on these guiding policy goals, the ITI Strategy sets forth a comprehensive set of recommendations around six strategic objectives:

1. Comprehensive Framework: Develop a comprehensive, coordinated and cohesive strategy framework with a clear vision to expand trade and investment, which includes other relevant state agencies, with input from private and public sector stakeholders;
2. Marketing: Implement more proactive outreach, awareness, education and engagement programs both within the state for California-based companies and through foreign partners and trade office(s);
3. China Trade Office: Maximize China Trade Office resources and opportunities to expand exports and investment;
4. Infrastructure: Develop an action plan to address key challenges facing our ports and related infrastructure to ensure their competitiveness;
5. Federal-State Relationship: Re-engage and strengthen working relationships with the Office of the U.S. Trade Representative and the state’s Congressional delegation to advocate California interests related to international trade and investment; and
6. Website: Develop and implement a more user-friendly, comprehensive, interactive and useful website to assist California companies wanting to export and to attract foreign investment.

Under each of the program objectives, the ITI Strategy identifies a set of specific actions, including timelines, priority levels, and measurable outcomes. Among other actions under the Comprehensive Framework objective, the ITI Strategy calls for identification of foreign markets with the greatest potential for export expansion. Top trade partners identified include: Canada, Mexico, and China, and emerging markets such as Brazil and India. AB 923 would include an analysis of countries in Africa and the Caribbean, as potential emerging markets.

GO-Biz identifies two impediments to the implementation of the ITI Strategy including: (1) the challenge of raising sufficient funding through public and private partnerships to participate in investment events and trade missions on an equal footing with other states, and (2) the lack of regional representation for GO-Biz international staff.

1. The Governor's Office of Business and Economic Development: In California, the primary state agency responsible for state trade and foreign investment activity (excluding agriculture) is GO-Biz. Initially established in 2011, international trade responsibility was transferred from the Business, Transportation, and Housing Agency to GO-Biz in 2012. Among GO-Biz' assets are the Office of the Small Business Advocate, the Permit Assistance Unit, the Office Foreign Trade and Investment, and the Business Investment Services Unit. [AB 29 (John A. Pérez), Chapter 475, Statutes of 2011 and AB 2012 (John A. Pérez), Chapter 294, Statutes of 2012]

The Governor's Reorganization Plan transferred a number of additional economic development related entities under the purview of GO-Biz in 2012 including the California Travel and Tourism Commission, the California Infrastructure and Economic Development Bank (IBank), and the California Film Commission. In 2013, the Innovation Hub Program and the EB-5 investment visa program were codified under the administration of GO-Biz. Also in 2013, a Small Business Finance Center was established within the IBank and debt and credit enhancement programs administered through a network of 11 small business financial development corporations were transferred to GO-Biz under the auspices of the new Center. [AB 250 (Holden and V. Manuel Pérez), Chapter 530, Statutes of 2013, AB 1067 (Medina), Chapter 535, Statutes of 2013, and AB 1247 (Medina and Bocanegra), Chapter 537, Statutes of 2013]

In addition to developing the ITI Strategy, GO-Biz operates a number of key programs to facilitate business development, in general, and trade and foreign investment, specifically, including the State Trade and Export Promotion (STEP) Program, EB-5 investment visa activities, export finance support through the Small Business Finance Center, data reports and tracking of foreign trade trends, and the China Trade Office.

STEP is a three-year pilot trade and export initiative authorized by the federal Small Business Jobs Act of 2010. The program is regionally administered through a partnership between GO-Biz and the California Community Colleges through a network of Centers for International Trade and Development (CITDs). The primary purpose of the program is to create jobs by increasing the number of, and the volume of, small businesses exporting.

The California Trade and Investment Office in Shanghai is the first trade office opened under the AB 2012 program authority. The Trade Office is self-funded through private contributions and operates under a cooperative agreement between GO-Biz and the Bay Area Council, a San Francisco-headquartered nonprofit business organization. Opened in October 2012, the purpose of the Trade Office is to provide Californian companies increased access to Chinese business contacts, Chinese investors with access to California projects, and spur new investment and trade growth between California and China. In order to expand the Offices' outreach, GO-Biz entered into a memorandum of understanding with additional California-China trade partners including the California Asian Pacific Chamber of Commerce; World Trade Center Los Angeles; and the City of Sacramento.

1. State's Diverse Population as a Trade Advantage: New globally-based models for innovation and technology have brought great changes in how world economies work. The emerging economies of China, India, and Singapore, just to name a few, have been and are committed to continuing massive investments in research and development. While these dynamics may pose challenges to some existing technology centers, California's diverse population provides the state with a key trade and investment advantage over other states and nations.

Due to strong past immigration from other nations, more than one-in-four of California's current residents (9.5 million people) were born outside the U.S., compared to just over one-in-ten nationally. About half of foreign-born Californians are from Latin America, and another third are from Asia. Regionally, 36% of the population in Los Angeles is foreign-born, as is 27% of the Bay Area. It is estimated that 40% of the entrepreneurs in the Silicon Valley are foreign born. For many immigrant groups, California represents the single largest gathering of their brethren outside their native lands.

1. California's Global Economy: International trade and foreign investment are very important components of California's $2.4 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% vs. 22.0%.

California receives more foreign direct investment (FDI) than any other state in the U.S., which is significant since the U.S. is the largest receiver of FDI in the world. The California economy benefits from FDI in many ways, some of which include increasing employment, boosting worker wages, increasing government revenues, bringing in new technology and skills, and generally strengthening the state's manufacturing base.

The top 5 regions with the highest foreign owned and affiliated businesses are: Gateway Cities (796 establishments), South Bay-LAX (741 establishments), San Fernando Valley (725 establishments), San Gabriel Valley (698 establishments), and West Side (415 establishments). The top 5 cities with the highest concentration of foreign owned and affiliated businesses are Los Angeles (1591 establishments), Torrance (310 establishments), Long Beach (212 establishments), Santa Monica (134 establishments), and Pasadena (127 establishments).

The federal International Trade Administration estimates that in 2012 over 602,800 California workers benefit from jobs with foreign-owned firms, which accounts for 4.8% of all private sector jobs in the state. California has had the highest level of employment in foreign-owned firms in the nation since at least 1997. Along with employment, foreign-owned firms own more property, plants, and equipment in California than in any other state.

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 775,320 jobs were directly supported by the export of products in 2014, including 665,000 manufacturing jobs. Workers in trade-related jobs earn on average 13% to 28% higher wages than the national average. 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, eleven new jobs are supported. Workers in trade-related jobs earn on average 13% to 28% higher wages than the national average.

California's land, sea, and air ports of entry served as key international commercial gateways for the $573 billion in products entering and exiting the U.S. in 2015. If California were a country, it would be the 28st largest exporter and the 12th largest importer in the world, based on 2015 trade numbers. California’s two-way trade represented 15.3% of total U.S. imports and exports. In 2015, exports out of California were valued at $165.3 billion and represented 11% of total U.S. exports. Imports into California were valued at $408.1 billion and represented 18.2% of total U.S. imports in 2015.

In 2016, California exported $163.6 billion in goods. The Chart below shows export data on the state's top five trade partners, based on origin of movement. Other top-ranking export destinations not shown on the chart include Hong Kong, Taiwan, Germany, the Netherlands, and the United Kingdom.

The International Trade Administration estimates that in 2015, approximately 11.5 million U.S. jobs were related to the export of goods and services. Statewide, 707,000 California jobs are dependent on exports, 11% of all U.S. export related jobs. Texas is reported to have the largest number of jobs related to exports (1 million). Manufacturing is responsible for the largest number of trade-related California jobs (469,000).

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 have benefited 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.

The federal International Trade Administration estimates that in 2013 over 631,500 California workers benefit from jobs with foreign-owned enterprises (FOE) firms, which accounts for 10.3% of all FOE jobs in the U.S. California has had the highest level of employment in foreign-owned firms in the nation since at least 1997. In 2013, California FOE-related jobs represented 4.1$ of all private sector jobs in the state. According to the Business Roundtable, there are:

• 110,000 companies in California that are headquartered in Japan;
• 78,500 companies in California that are headquartered in the United Kingdom;
• 59,200 companies in California that are headquartered in France; and
• 58,900 companies in California that are headquartered in Switzerland.

Along with employment, foreign-owned firms own more property, plants, and equipment in California than in any other state.

1. Emerging Markets: As the chart on the previous page shows, California has a number of large trade partners. Mexico, as an example, has been the state's number one trade partner since the late 1990s.

AB 923 proposes that the state look more closely at emerging markets and specifies two regions in particular: Africa and the Caribbean.

The charts to the right show exports to these regions over last three years.

The two largest exports from California to Caribbean countries were computers and other electronic products (37.4%) and miscellaneous manufactured commodities (13.7%) in 2016.

The two largest exports from California to Africa in 2016 were computers and other electronic products and agricultural equipment, 22.3% and 19.1% respectively.

1. Related Legislation: Below is a list of bills from the current and prior sessions.
   1. AB 29 (John A. Pérez, Feuer and V. Manuel Pérez) Office of Business and Economic Development:* This bill establishes the Governor's Office of Business and Economic Development (GO-BIZ), to be administered by a director appointed by the Governor. The bill would also moves the Office of the Small Business Advocate to the Office of Economic Development. Status: Signed by the Governor, Chapter 475, Statutes of 2011.
   2. AB 337 (Allen) Economic Development: International Trade and Investment Strategy: This bill adds specificity to the development and content of the state international trade and investment strategy (ITI Strategy), which is an existing report requirement of the Governor's Office of Business and Economic Development (GO-Biz). This bill requires the ITI Strategy to be based on current and emerging market conditions and the needs of investors, businesses, and workers. Specific new content requirements include the addition of a framework, which can be used by GO-Biz to evaluate the changing needs of business during the five-year term of the ITI Strategy. Status: Signed by the Governor, Chapter 776, Statutes of 2014.
   3. AB 1137 (V. Manuel Pérez) Small Business Assistance and Attracting Private Investment: This bill would have facilitated local economic development and job creation by assisting small businesses to access new export markets for their goods and services, 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: Held in Senate Committee on Appropriations, 2012.
   4. AB 1409 (Jobs, Economic Development and the Economy Committee) International Trade and Investment Strategy: This bill, as it passed JEDE, would have required that the next update by Business, Transportation and Housing Agency, of the international trade and investment strategy to include policy goals, objectives and recommendations from the state Goods Movement Action Plan. The measure was amended in the Senate related another subject matter. Status: Held in Senate Rules Committee, 2012.
   5. AB 2012 (John A. Pérez) 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. 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.
   6. SB 460 (Price) International Trade Marketing and Promotion: This bill would have required the Secretary of the Business, Transportation and Housing Agency to convene a statewide business partnership for international trade marketing and promotion. Status: Held on the Suspense File of the Assembly Committee on Appropriations, 2011.

REGISTERED SUPPORT / OPPOSITION:

Support

None on File

Opposition

None on File

Analysis Prepared by: Toni Symonds / J., E.D., & E. /

Date of Hearing: April 25, 2017

ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT, AND THE ECONOMY

Sharon Quirk-Silva, Chair

ABPCA Bill Id:AB 923 (

Author:Ridley-Thomas) – As Amended Ver:April 19, 2017

SUBJECT: State government: trade

SUMMARY: Requires the Governor's Office of Business and Economic Development to include an analysis of dominant and emerging foreign markets within the already mandated state international trade and investment strategy (ITI Strategy). More specifically, the bill requires an analysis and identification of dominant and emerging foreign markets for California goods and services, including, but not limited to, the state's top trade partners of Mexico and Canada and potential new markets in counties located in Africa and the Caribbean.

EXISTING LAW:

1. Establishes GO-Biz to serve as the state's primary agency for issues of economic and business development. Among other entities within GO-Biz' oversight are the California Business Investment Services Program, the Office of the Small Business Advocate, the International Trade and Investment Program, and the California Infrastructure and Economic Development Bank.
2. Establishes the California Business Investment Services Program within GO-Biz to serve employers, corporate executives, business owners, and site location consultants who are considering California for a business relocation or expansion.
3. Authorizes GO-Biz to undertake international trade and investment activities and, as a condition of that authority, directs the development and implementation of a comprehensive international trade and investment strategy (ITI Strategy). All international trade and foreign investment activities and funding are required to be consistent with the ITI strategy.
4. Requires the GO-Biz to provide the Legislature with an ITI Strategy by February 2014 and update it at least once every five years.
5. Requires the ITI Strategy to, at a minimum, include the following:
   1. Policy, goals, objectives and recommendations;
   2. Measurable outcomes and timelines for meeting the ITI Strategy goals, objectives, and actions;
   3. Identification of key stakeholder partnerships that will be used to implement the goals and objectives;
   4. Identification of impediments for achieving the goals and objectives;
   5. Identification of options for funding recommended actions; and
   6. Identification of an international trade and investment organizational structure.

FISCAL EFFECT: Unknown

POLICY FRAME:

International trade and foreign investment are very important components of California's $2.4 trillion economy supporting 4.4 million California jobs. 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.

This measure proposes expanding the statutory framework of the ITI Strategy to include an evaluation of the dominant and emerging foreign markets. Below are additional details about the state's trade economy, the existing ITI Strategy, and current economic growth within Africa and the Caribbean nations.

COMMENTS:

1. The Current ITI Strategy: Between 2003 and 2006, California had no trade and international marketing authority. After years of debate, the Legislature and the Governor began an unprecedented collaboration on the development of a new international trade and investment program. Agreements on the new program were codified in SB 1513 (Romero/Figueroa), Chapter 663, Statutes of 2006 and further refined in AB 2012 (John A. Pérez), Chapter 294, Statutes of 2012.

Under California's new trade and foreign investment framework, state activities are required to be directed through the development and implementation of the ITI Strategy. The ITI Strategy is prepared every five years based on current state and regional economic research and a public vetting with the Legislature to ensure the inclusion of jointly agreed upon goals and measurable objectives. The initial strategy was finalized in August 2008 and the current ITI Strategy was finalized in February 2014.

The overall policies governing the ITI Strategy are to create jobs, increase revenues for California enterprises, improve California’s international competitiveness by expanding the export of California goods and services, and by increasing foreign direct investment into the state. Based on these guiding policy goals, the ITI Strategy sets forth a comprehensive set of recommendations around six strategic objectives:

1. Comprehensive Framework: Develop a comprehensive, coordinated and cohesive strategy framework with a clear vision to expand trade and investment, which includes other relevant state agencies, with input from private and public sector stakeholders;
2. Marketing: Implement more proactive outreach, awareness, education and engagement programs both within the state for California-based companies and through foreign partners and trade office(s);
3. China Trade Office: Maximize China Trade Office resources and opportunities to expand exports and investment;
4. Infrastructure: Develop an action plan to address key challenges facing our ports and related infrastructure to ensure their competitiveness;
5. Federal-State Relationship: Re-engage and strengthen working relationships with the Office of the U.S. Trade Representative and the state’s Congressional delegation to advocate California interests related to international trade and investment; and
6. Website: Develop and implement a more user-friendly, comprehensive, interactive and useful website to assist California companies wanting to export and to attract foreign investment.

Under each of the program objectives, the ITI Strategy identifies a set of specific actions, including timelines, priority levels, and measurable outcomes. Among other actions under the Comprehensive Framework objective, the ITI Strategy calls for identification of foreign markets with the greatest potential for export expansion. Top trade partners identified include: Canada, Mexico, and China, and emerging markets such as Brazil and India. AB 923 would include an analysis of countries in Africa and the Caribbean, as potential emerging markets.

GO-Biz identifies two impediments to the implementation of the ITI Strategy including: (1) the challenge of raising sufficient funding through public and private partnerships to participate in investment events and trade missions on an equal footing with other states, and (2) the lack of regional representation for GO-Biz international staff.

1. The Governor's Office of Business and Economic Development: In California, the primary state agency responsible for state trade and foreign investment activity (excluding agriculture) is GO-Biz. Initially established in 2011, international trade responsibility was transferred from the Business, Transportation, and Housing Agency to GO-Biz in 2012. Among GO-Biz' assets are the Office of the Small Business Advocate, the Permit Assistance Unit, the Office Foreign Trade and Investment, and the Business Investment Services Unit. [AB 29 (John A. Pérez), Chapter 475, Statutes of 2011 and AB 2012 (John A. Pérez), Chapter 294, Statutes of 2012]

The Governor's Reorganization Plan transferred a number of additional economic development related entities under the purview of GO-Biz in 2012 including the California Travel and Tourism Commission, the California Infrastructure and Economic Development Bank (IBank), and the California Film Commission. In 2013, the Innovation Hub Program and the EB-5 investment visa program were codified under the administration of GO-Biz. Also in 2013, a Small Business Finance Center was established within the IBank and debt and credit enhancement programs administered through a network of 11 small business financial development corporations were transferred to GO-Biz under the auspices of the new Center. [AB 250 (Holden and V. Manuel Pérez), Chapter 530, Statutes of 2013, AB 1067 (Medina), Chapter 535, Statutes of 2013, and AB 1247 (Medina and Bocanegra), Chapter 537, Statutes of 2013]

In addition to developing the ITI Strategy, GO-Biz operates a number of key programs to facilitate business development, in general, and trade and foreign investment, specifically, including the State Trade and Export Promotion (STEP) Program, EB-5 investment visa activities, export finance support through the Small Business Finance Center, data reports and tracking of foreign trade trends, and the China Trade Office.

STEP is a three-year pilot trade and export initiative authorized by the federal Small Business Jobs Act of 2010. The program is regionally administered through a partnership between GO-Biz and the California Community Colleges through a network of Centers for International Trade and Development (CITDs). The primary purpose of the program is to create jobs by increasing the number of, and the volume of, small businesses exporting.

The California Trade and Investment Office in Shanghai is the first trade office opened under the AB 2012 program authority. The Trade Office is self-funded through private contributions and operates under a cooperative agreement between GO-Biz and the Bay Area Council, a San Francisco-headquartered nonprofit business organization. Opened in October 2012, the purpose of the Trade Office is to provide Californian companies increased access to Chinese business contacts, Chinese investors with access to California projects, and spur new investment and trade growth between California and China. In order to expand the Offices' outreach, GO-Biz entered into a memorandum of understanding with additional California-China trade partners including the California Asian Pacific Chamber of Commerce; World Trade Center Los Angeles; and the City of Sacramento.

1. State's Diverse Population as a Trade Advantage: New globally-based models for innovation and technology have brought great changes in how world economies work. The emerging economies of China, India, and Singapore, just to name a few, have been and are committed to continuing massive investments in research and development. While these dynamics may pose challenges to some existing technology centers, California's diverse population provides the state with a key trade and investment advantage over other states and nations.

Due to strong past immigration from other nations, more than one-in-four of California's current residents (9.5 million people) were born outside the U.S., compared to just over one-in-ten nationally. About half of foreign-born Californians are from Latin America, and another third are from Asia. Regionally, 36% of the population in Los Angeles is foreign-born, as is 27% of the Bay Area. It is estimated that 40% of the entrepreneurs in the Silicon Valley are foreign born. For many immigrant groups, California represents the single largest gathering of their brethren outside their native lands.

1. California's Global Economy: International trade and foreign investment are very important components of California's $2.4 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% vs. 22.0%.

California receives more foreign direct investment (FDI) than any other state in the U.S., which is significant since the U.S. is the largest receiver of FDI in the world. The California economy benefits from FDI in many ways, some of which include increasing employment, boosting worker wages, increasing government revenues, bringing in new technology and skills, and generally strengthening the state's manufacturing base.

The top 5 regions with the highest foreign owned and affiliated businesses are: Gateway Cities (796 establishments), South Bay-LAX (741 establishments), San Fernando Valley (725 establishments), San Gabriel Valley (698 establishments), and West Side (415 establishments). The top 5 cities with the highest concentration of foreign owned and affiliated businesses are Los Angeles (1591 establishments), Torrance (310 establishments), Long Beach (212 establishments), Santa Monica (134 establishments), and Pasadena (127 establishments).

The federal International Trade Administration estimates that in 2012 over 602,800 California workers benefit from jobs with foreign-owned firms, which accounts for 4.8% of all private sector jobs in the state. California has had the highest level of employment in foreign-owned firms in the nation since at least 1997. Along with employment, foreign-owned firms own more property, plants, and equipment in California than in any other state.

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 775,320 jobs were directly supported by the export of products in 2014, including 665,000 manufacturing jobs. Workers in trade-related jobs earn on average 13% to 28% higher wages than the national average. 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, eleven new jobs are supported. Workers in trade-related jobs earn on average 13% to 28% higher wages than the national average.

California's land, sea, and air ports of entry served as key international commercial gateways for the $573 billion in products entering and exiting the U.S. in 2015. If California were a country, it would be the 28st largest exporter and the 12th largest importer in the world, based on 2015 trade numbers. California’s two-way trade represented 15.3% of total U.S. imports and exports. In 2015, exports out of California were valued at $165.3 billion and represented 11% of total U.S. exports. Imports into California were valued at $408.1 billion and represented 18.2% of total U.S. imports in 2015.

In 2016, California exported $163.6 billion in goods. The Chart below shows export data on the state's top five trade partners, based on origin of movement. Other top-ranking export destinations not shown on the chart include Hong Kong, Taiwan, Germany, the Netherlands, and the United Kingdom.

The International Trade Administration estimates that in 2015, approximately 11.5 million U.S. jobs were related to the export of goods and services. Statewide, 707,000 California jobs are dependent on exports, 11% of all U.S. export related jobs. Texas is reported to have the largest number of jobs related to exports (1 million). Manufacturing is responsible for the largest number of trade-related California jobs (469,000).

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 have benefited 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.

The federal International Trade Administration estimates that in 2013 over 631,500 California workers benefit from jobs with foreign-owned enterprises (FOE) firms, which accounts for 10.3% of all FOE jobs in the U.S. California has had the highest level of employment in foreign-owned firms in the nation since at least 1997. In 2013, California FOE-related jobs represented 4.1$ of all private sector jobs in the state. According to the Business Roundtable, there are:

• 110,000 companies in California that are headquartered in Japan;
• 78,500 companies in California that are headquartered in the United Kingdom;
• 59,200 companies in California that are headquartered in France; and
• 58,900 companies in California that are headquartered in Switzerland.

Along with employment, foreign-owned firms own more property, plants, and equipment in California than in any other state.

1. Emerging Markets: As the chart on the previous page shows, California has a number of large trade partners. Mexico, as an example, has been the state's number one trade partner since the late 1990s.

AB 923 proposes that the state look more closely at emerging markets and specifies two regions in particular: Africa and the Caribbean.

The charts to the right show exports to these regions over last three years.

The two largest exports from California to Caribbean countries were computers and other electronic products (37.4%) and miscellaneous manufactured commodities (13.7%) in 2016.

The two largest exports from California to Africa in 2016 were computers and other electronic products and agricultural equipment, 22.3% and 19.1% respectively.

1. Related Legislation: Below is a list of bills from the current and prior sessions.
   1. AB 29 (John A. Pérez, Feuer and V. Manuel Pérez) Office of Business and Economic Development:* This bill establishes the Governor's Office of Business and Economic Development (GO-BIZ), to be administered by a director appointed by the Governor. The bill would also moves the Office of the Small Business Advocate to the Office of Economic Development. Status: Signed by the Governor, Chapter 475, Statutes of 2011.
   2. AB 337 (Allen) Economic Development: International Trade and Investment Strategy: This bill adds specificity to the development and content of the state international trade and investment strategy (ITI Strategy), which is an existing report requirement of the Governor's Office of Business and Economic Development (GO-Biz). This bill requires the ITI Strategy to be based on current and emerging market conditions and the needs of investors, businesses, and workers. Specific new content requirements include the addition of a framework, which can be used by GO-Biz to evaluate the changing needs of business during the five-year term of the ITI Strategy. Status: Signed by the Governor, Chapter 776, Statutes of 2014.
   3. AB 1137 (V. Manuel Pérez) Small Business Assistance and Attracting Private Investment: This bill would have facilitated local economic development and job creation by assisting small businesses to access new export markets for their goods and services, 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: Held in Senate Committee on Appropriations, 2012.
   4. AB 1409 (Jobs, Economic Development and the Economy Committee) International Trade and Investment Strategy: This bill, as it passed JEDE, would have required that the next update by Business, Transportation and Housing Agency, of the international trade and investment strategy to include policy goals, objectives and recommendations from the state Goods Movement Action Plan. The measure was amended in the Senate related another subject matter. Status: Held in Senate Rules Committee, 2012.
   5. AB 2012 (John A. Pérez) 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. 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.
   6. SB 460 (Price) International Trade Marketing and Promotion: This bill would have required the Secretary of the Business, Transportation and Housing Agency to convene a statewide business partnership for international trade marketing and promotion. Status: Held on the Suspense File of the Assembly Committee on Appropriations, 2011.

REGISTERED SUPPORT / OPPOSITION:

Support

None on File

Opposition

None on File

Analysis Prepared by: Toni Symonds / J., E.D., & E. /