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  • California lawmakers refocus on developing foreign trade

    California lawmakers refocus on developing foreign trade
    By JUDY LIN

    Sacramento Bee
    16-JUN-06

    SACRAMENTO, Calif. -- California's foreign trade offices _
    taxpayer-funded enterprises disbanded three years ago amid scandal
    and budget woes _ are staging a comeback despite lingering questions
    about their usefulness.

    Gov. Arnold Schwarzenegger and some legislators are once again
    trumpeting the value of trade promotion for the sixth-largest economy
    in the world. In recent months, the governor has established an
    undersecretary for international trade, while lawmakers have proposed
    resurrecting outposts in Seoul, South Korea, and Johannesburg,
    South Africa.

    In coming weeks, the Legislature is expected to take up bills that
    call for developing a comprehensive trade strategy and moving the
    state back into the business of operating trade offices.

    Such a move has raised eyebrows among trade experts who believe former
    state offices were mismanaged. Some have questioned whether the state
    should even have trade offices.

    "Historically, they have not been very successful. In fact, they
    have been somewhat disastrous," said trade consultant Jock O'Connell
    "There's this feeling in the state Capitol that California needs to
    be represented by the state. The real California is superbly well
    represented in the form of 57,000 exporting companies."

    California's 12 trade offices were shut down in 2003 _ along with the
    rest of the Technology, Trade and Commerce Agency _ after critical
    news reports and damaging audits appeared.

    At the time the state had more than 90 workers spanning the globe,
    from Hong Kong to London. Their charge was simple: Help California
    businesses sell their products abroad while luring foreign investment
    to the state. Last year, the state exported $116.8 billion worth
    of goods.

    But the legislative analyst's office and the state auditor's office
    questioned the effectiveness of such offices.

    The offices were accused of taking credit regardless of how much
    involvement they had in facilitating a deal.

    "For instance, an office may only have provided a list of foreign
    companies potentially interested in a product developed by a California
    business. However, the agency counted the total value of a subsequent
    export agreement," according to one legislative analyst report.

    The Orange County Register quantified the overstated benefits at
    $44.2 million for one year.

    In the end, only one trade office survived. The California Armenia
    Trade Office was subsequently transferred to the authority of the
    Business, Housing and Transportation Agency, where it remains today.

    Sen. Jack Scott, D-Pasadena, salvaged the trade office by requiring
    that it thrive on private donations Scott's district is home to the
    largest Armenian community in America.

    Scott considers the Armenia office a pilot project that could, perhaps,
    become a model for future trade offices. Unlike its predecessors,
    the office is funded through $75,000 in private donations, must
    file evaluation reports, and will automatically close in 2008 unless
    reauthorized by the Legislature.

    "We're learning from mistakes of the past," Scott said.

    But experts say accepting private donations is bad public policy.

    Jeffrey Gersick, former managing director of the state's trade offices
    in London, Frankfurt, Johannesburg and Jerusalem, said the state's
    priorities can be muddled by those who "pay to play."

    Rather than putting offices where there's growth potential, Gersick
    and others say the practice could hold the state hostage to special
    interests looking to leverage the state's seal for their own cause,
    creating a case of "country du jour."

    The director of the Armenian Trade Office, Arthur Khachatryan,
    said he reports to the Foundation for Economic Development, a
    non-profit Armenian group based in Glendale, Calif., handling the
    state contract. However, the trade office keeps the state abreast of
    its work through biweekly phone calls and progress reports.

    "The ultimate responsibility rests with the state," Khachatryan said.

    "But on day-to-day questions, of course, we work with the foundation."

    Sen. Kevin Murray, D-Culver City, said he believes private donations
    are the way to go. He is carrying two bills to install trade offices
    in Seoul and Johannesburg, both of which are modeled after the Armenia
    trade office.

    Murray and Scott argue that the private-funding model deserves a
    chance before being tossed out.

    "If you can generate far more business than the cost of the trade
    office, I can't see how you'd lose," Scott said.

    Lawmakers are now trying to consolidate all trade office bills,
    and they hope to develop an overall trade strategy for the state.

    Assemblyman Juan Arambula, D-Fresno, chair of the jobs committee,
    has written a bill that would give Schwarzenegger's Business
    Transportation and Housing Agency $140,000 to develop an overall
    state policy on trade. Assembly Bill 2601 is being supported by
    the Republican governor after another bill to give the agency legal
    control of trade offices failed.

    Concerned that there won't be enough oversight, Sen. Gloria Romero,
    D-Los Angeles, has written a bill that would also develop a strategy
    for the state. However, Senate Bill 1513 allows the Legislature to
    decide where to put trade offices and requires them to be funded with
    through private donations.

    Both bills require public disclosure of donations but Romero's requires
    them to be posted on the Internet.

    Business, Transportation and Housing Secretary Sunne Wright McPeak
    said the governor has made trade promotion a priority, citing his
    trade missions to Baja California, Japan and China. However, she said
    the agency would be reluctant to spend taxpayer dollars.

    Instead, McPeak said the agency has begun coordinating with trade
    associations and the U.S. Commerce Department as a cost-effective
    approach to trade promotion.

    Agency officials say that even if the Legislature fails to pass a bill,
    the administration intends to develop a trade strategy for the state.

    Howard Shatz, a research fellow at the Public Policy Institute of
    California, a non-partisan think tank, said lawmakers will have to
    be careful in formulating a plan with reliable performance measures.

    Trade experts say the state should take advantage of existing resources
    like the Commerce Department, look to countries with the most growth
    potential, and assign trade offices clear mandates, then measure
    their achievements accordingly.

    "It needs to be done right because they are going to be scrutinized
    given the history of trade offices," Shatz said. "The last thing you
    want is another scandal."

    http://www.shns.com/shns/g_index2. cfm?action=detail&pk=TRADE-06-16-06
    http://www .ancfresno.org

    From: Emil Lazarian | Ararat NewsPress
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