(May 25, 2007) It’s no accident that what is now a national observance — World Trade Month — began in California 81 years ago as World Trade Week, celebrated during the third week of May.
International-related commerce accounts for approximately one-quarter of the state’s economy, and California ranks among the 10 largest economies in the world with a gross state product of more than $1.5 trillion. About 1 in 7 jobs in California is related to trade, with every million-dollar increase in trade equaling 11 new jobs, according to the California Business, Transportation and Housing Agency."
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| Susan Corrales-Diaz |
In 2006, California exported to 224 foreign markets. California exports totaled $127 billion, according to the U.S. Department of Commerce. This was an increase from $116 billion in 2005. California maintained its perennial position as a top exporting state.
Exports from California accounted for more than 12 percent of total U.S. exports, with Mexico, Canada, Japan, China and South Korea being the state’s top trading partners.
California is the number one exporter in the nation of computers, electronic products, food and kindred products. Computers and electronic products are California’s top export, accounting for 35 percent of all the state’s exports.
To maintain the health of international commerce for California and the nation, a number of activities merit business support.
Trade Promotion Authority
The United States’ standing as a world leader depends directly upon its competitive success in the global economy. Increased market access achieved through trade agreements has played a major role in the nation’s success as the world’s leading exporter.
Trade promotion authority (TPA, formerly called fast track trade negotiating authority) is the process by which Congress gives authority to the President and/or U.S. Trade Representative to enter into trade negotiations in order to lower U.S. export barriers.
The Trade Promotion Authority Act of 2002, which was extended in 2005, will expire this June. Renewed TPA is needed for the President to negotiate new multilateral, bilateral and sectoral agreements that will continue to tear down barriers to trade and investment, expand markets for U.S. farmers and businesses, and create higher-skilled, higher-paying jobs for U.S. workers.
Free Trade Agreements Critical
In 2006 and early 2007, free trade agreements (FTAs) were enacted with Morocco and Bahrain. The U.S.-Oman FTA passed the U.S. Congress and was signed by President Bush. Currently pending before Congress are the U.S.-Peru FTA, U.S.-Colombia FTA, and U.S.-Panama FTA. Soon to be considered also is a U.S.-Korea FTA (the world’s largest bilateral free trade agreement).
All these agreements are critical elements of the U.S. strategy to liberalize trade through multilateral, regional and bilateral initiatives. The passage of these FTAs will mean the elimination of billions of dollars in tariffs for U.S. exports, as well as increased market visibility and will benefit California and the United States as a whole.
California Programs
Governor’s Canada Trade Mission
Governor Arnold Schwarzenegger has scheduled a trade mission to Canada during the last week of May.
California Chamber President Allan Zaremberg is part of the trade delegation accompanying the Governor.
Canada is now the second largest customer for California’s exports, with a total dollar value of $14.2 billion in 2006. Two-way trade with Canada supports an estimated 832,000 jobs in California.
Canada-California trade has grown steadily since the 1970s, accelerating with enactment of the Canada-U.S. Free Trade Agreement in 1989, and the North American Free Trade Agreement (NAFTA) in 1994.
According to a recent Bay Area Economic Forum study, Canada is one of California’s largest tourism sources. Canadian tourism generates $27 million in California state tax revenue and supports more than 7,000 California jobs.
Trade and Investment Offices
Although trade policies are determined at the national level, the state can be a positive force to keep California open for business through continued economic growth and development, and support for trade and investment promotion.
The CalChamber supports establishing a strategic plan for coordinating and conducting international trade and investment programs and activities in the state, including the establishment of California state trade and investment offices under the auspices of the Business, Transportation and Housing Agency.
Such a program can promote exports and foreign investment by matching California products and services with foreign buyers; collecting trade leads; offering counseling on market penetration strategies; advertising and promoting California as a supplier and location for investment; organizing foreign investment and buying missions to California; and supporting businesses in foreign trade shows throughout the world.
At one time, California supported America’s premier export finance program — the California Export Finance Office (CEFO) — which boosted the ability of the state’s small business exporters to secure financing for international transactions that the federal programs couldn’t support. The federal programs for export financing continue to be difficult to access, particularly for small business; therefore, to re-establish CEFO’s successful program would significantly energize California exports.
State trade and investment offices are an important symbolic statement to our major trading partners. An official representative for the state of California can lend credence to a business transaction. Moreover, face-to-face representation still has recognized value. Protocol is a significant part of the business culture of many of our trading partners and enables us to build government-to-government relationships that can lead to trade and investment flows and measurable success of these offices.
As the California Legislature considers (re)establishing trade and investment promotion support on behalf of the state, it is crucial that it do so with an eye toward putting in place a continuing process. Globalization is here to stay and our Golden State must continue to be engaged.
The CalChamber remains dedicated to continuing our efforts to enhance California’s international trade abilities to keep the state competitive in a global economy.
Susan Corrales-Diaz, chair of the California Chamber of Commerce International Trade Committee, is president of Systems Integrated in Orange.