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California Capitol Hill Bulletin

                Volume 8, Bulletin 36 — December 6, 2001    [or see pdf version]

CONTENTS OF THIS ISSUE

House Passes Fast Track By 215-214 Vote

FY02 Transportation Appropriations Sent To President

Senate Farm Bill Vote Still Pending

Federal Approval For New Bay Bridge Announced

House Passes Amended Trade Adjustment Assistance; Senate Finance Reports Bill

California Transportation Briefing For Congressional Staff

California’s Economic Future Assessed by Economists

PPIC Outlines History and Importance of Manufacturing in California

FTC Commends Film and Electronic Game Industry for Marketing Progress

California Wins Funds for EU Export Initiative

To expand communications between Washington and California, the California Institute provides periodic faxed bulletins regarding current activity on Capitol Hill which directly impacts our state. Bulletins are published weekly during sessions of Congress, and occasionally during other periods. The e-mail edition is made possible in part by in kind donations from Sun Microsystems and IBM Corp.

House Passes Fast Track By 215-214 Vote

After an afternoon of heated debate, the House, on Thursday, December 6, narrowly passed fast track trade negotiating authority, also known as Trade Promotion Authority (TPA). The bill, H.R, 3005 was authored by Rep. Bill Thomas (Bakersfield), Chairman of the Ways and Means Committee. It gives the President the authority to negotiate trade agreements with U.S. trading partners that must be considered on an expedited basis and are non-amendable by Congress.

Proponents of the bill stressed that the President must have the authority in order to shape trade policy not just for the United States but for the new global economy. They argued that the bill would in effect reduce taxes by reducing import tariffs and bring down the cost of imports to Americans. In addition, they called for support of expanding free trade as an effective means of assisting developing countries to boost their economies and increase their standard of living, as well as political and social rights.

Arguments against the bill included procedural concerns as well as substantive. Some Democrats on the Ways and Means Committee argued that they had been left out of the drafting process for the bill. Other members, traditionally supportive of expanding free trade, reluctantly withheld their support because increased federal assistance to unemployed workers has not been addressed. Members from regions of the country with large agricultural and textile sectors voiced concern over the loss of market share and jobs to underdeveloped countries, and other members continued to cite the need to directly address labor and environmental issues in trade agreements.

To assuage some of these concerns, Chairman Thomas expanded the benefits available under the Trade Adjustment Assistance Program (see article below) and included provisions to increase congressional involvement in efforts to reduce agriculture tariffs.

H.R. 3005 extends TPA through June 2005, with a further extension available through October 2007. It limits Congress’ consideration of trade agreements negotiated under fast-track to a 90 period, followed by up or down votes in the House and Senate. The bill sets the negotiating objectives that the President must pursue in order to utilize fast-track. It also establishes a congressional oversight group to monitor ongoing trade negotiations. Other provisions were also included in the bill to strengthen congressional involvement in trade negotiations.

Previous fast-track authority expired in 1994. In 1997, a fast-track bill was pulled from the House floor because there were insufficient votes to pass it. In 1998, another attempt was defeated by a vote of 180-243.

Prior to passage, the House defeated a Motion to Recommit, which contained the Democrat’s alternative to H.R. 3005. The vote was 162-267.

FY02 Transportation Appropriations Sent To President

On November 30 and December 4, the House and Senate, respectively, approved the conference report on the FY02 Transportation Appropriations and sent the bill to the President for signature. In total, the bill provides about $59.6 billion in total budgetary resources, an increase of $1.5 billion (2.5 percent) over the FY01 level. Total highway spending amounts to $32.9 billion, an increase of $1.2 billion (4 percent) over last fiscal year. Of this total, $31.8 billion is under a limitation on obligations, which is $100 million more than the TEA-21 guaranteed level.

A total of $335 million is provided to enhance and improve motor carrier safety and operations. Of this, about $140 million is devoted to facilities and operations necessary to open the U.S.-Mexican border for commercial motor vehicle traffic. The conference agreement contains a compromise between the House and Senate bills regarding the safety of cross-border trucking between the United States and Mexico. The compromise will allow the operation of Mexican trucks beyond the 20-mile "commercial zone" in the United States if they meet several, specific public safety requirements. See, Bulletin, Vol. 8, No. 35 (11/29/01).

Transit program spending totals $6.7 billion, an increase of $493 million over the fiscal year 2001 level. The transit formula program increases from $3.35 billion to $3.6 billion, an increase of $247 million over last year’s level and the same as the President’s request. The bill increases transit discretionary grants from $2.65 billion to $2.841 billion in fiscal year 2002, the same as the President’s request.

Further information on the final bill can be obtained from the Appropriations Committee’s website at: http://www.house.gov/appropriations . The California Institute will prepare a detailed analysis of the California implications of the bill in the near future.

Senate Farm Bill Vote Still Pending

A controversial dairy provision in the Farm Aid bill (S. 1731) in the US Senate continues to generate resistance from major dairy-processor states although a fresh deal between dairy program proponents and Midwestern states may have secured enough support for Senate floor passage. The initial program included in Committee mark-up to win key votes was intended to compensate for the shelving of a related measure, the Northeastern Dairy Compact, earlier this year. The Compact authorized six New England states to set wholesale milk prices above the minimum federal threshold. The S.1731 program mimics and expands the expired compact nationally to benefit other small dairy state producers. The program is denounced by critics as a mechanism for expanding the production while diminishing the market value of milk.

Projected to cost $3 billion over 10 years, the dairy measure would be partially funded by new fees against major milk processing states. California, the nation’s premier milk-producer would suffer losses of $1.5 billion over nine years, according to California Department of Food and Agriculture estimates. Senator Dianne Feinstein has expressed strong support for an amendment offered to delete the dairy section of the Farm Bill. In a statement, Senator Feinstein said, "national dairy policy cannot be formulated at the expense of some states to benefit others."

The new proposal is not expected to eliminate the threat to states with large dairy operations; it does however, placate the concerns of upper Midwestern states by establishing a second dairy program that would benefit their dairy farmers. The likely support to be gained from Midwestern Senators by including the new provision is hoped to offset opposition votes that have stalled the bills progress.

The Bush administration in a Wednesday statement has come out in strong opposition to the Democratic-written S.1731, claiming that the commodity section of the Farm Aid bill focuses too much on increasing subsidies. President Bush has placed his support behind a commodity-related amendment offered by Senators Thad Cochran (MS) and Pat Roberts (KS) that would maintain current farm support prices, continue direct payments, and authorize farmers to establish "rainy day" savings accounts.

Although the Senate looks likely to act on the Farm Aid bill before Congress adjourns, Senate Majority Leader Tom Daschle (SD) on Thursday said that it would probably not be sent to President Bush’s desk until next year.

Federal Approval For New Bay Bridge Announced

The final piece of financing for the new eastern span of the San Francisco-Oakland Bay Bridge has been approved, Governor Gray Davis announced this week. The U.S. Department of Transportation approved a $450 million loan through the Transportation Infrastructure Finance and Innovation Act (TIFIA). This is the final step needed to begin work on the $2.6 billion bridge, and will allow the California Department of Transportation (Caltrans) to begin construction early next year. The remainder of the funding needed for the project will come from state gas taxes, toll bridge fees, and revenue bonds.

The 65 year old eastern section of the bridge was slated for replacement after the Loma Prieta Earthquake in 1989. It will be replaced with a modern, single tower suspension skyway, and after its completion, projected for 2006, the old span will be taken down. The new span is designed to withstand major earthquakes on either the San Andreas or Hayward fault. The western span of the bridge is currently being retrofitted to bolster its strength against earthquakes.

House Passes Amended Trade Adjustment Assistance; Senate Finance Reports Bill

On Thursday, December 6, the House passed, under suspension of the rules, H.R. 3008, to reauthorize the Trade Adjustment Assistance (TAA) program under the Trade Act of 1974 (P.L. 93-618). The vote was 420-3. The bill provides retraining and relocation assistance to workers displaced by the effects of U.S. trade agreements.

Before floor consideration, the original bill was expanded to increase the period of benefits by 26 weeks (from the current 52 weeks) and require more expeditious determinations of eligibility. The changes were made in the hope of assuaging members’ concerns about the impact of providing new trade promotion authority to the President (see article above).

In the meantime, the Senate Finance Committee reported its version of the bill (S. 1209) on December 4, although Minority Leader Trent Lott (MS) has filed a parliamentary complaint that is pending. He argues that the markup extended beyond the permitted time constraint and must be repeated.

S. 1209 goes beyond the scope of the House version. It increases the size of the program by almost 100 percent to a level of $800 million, as well as extending the period of benefits by 26 weeks. In addition, it shifts the focus of the program from plants that close to entire communities adversely affected by trade expansion. It also extends eligibility to the suppliers of closed plants, fishermen, and farmers.

The existing TAA program expired on September 30, but has been kept running through continuing resolutions.

California Transportation Briefing For Congressional Staff

On Wednesday, December 12, at 10:00 a.m., the Governor’s Washington Office begin a series of meetings on California transportation issues in anticipation of the 2003 Congressional reauthorization of TEA-21 with a Congressional staff briefing on Capitol Hill.

Caltrans Director Jeff Morales and California’s Deputy Secretary of Transportation John Ferrera will provide a broad overview of California’s transportation expenditures in recent years and highlight several key issues pertaining to TEA-21 reauthorization. It will also give congressional staff an opportunity to meet the state’s top transportation officials.

Interested California congressional staff are invited to attend. For more information, contact David Kim in the Office of Governor Gray Davis at 202-624-5270.

California’s Economic Future Assessed by Economists

An extensive report released by the Center for Continuing Study of the California Economy (CCSCE) finds that the California economy fared better than the nation’s during the economic downturn prior to September 11^th. Extrapolating 1990 and 2000 US Census (and supplement) data, California County Projections uses statewide socioeconomic indicators to predict future trends for 2010 and to compare California’s past performance to present conditions. Statewide figures are presented along with regional disaggregations, providing detailed county-by-county statistics, charts, and graphs. The report is being publicized as the only publication that includes projections of population, household income and spending growth for each county in California. Additionally, to assess California’s long-term and short-term economic outlook, a comparison is made of this year’s downswing to that of the 1990s recession. Recent energy crisis challenges served as a harbinger to the state’s waning long-term commitment to infrastructure needs, the report suggests. Finally, it is likely that a rise in unemployment and fall in public revenues, common in the early 1990s, will lead to a further backslide of infrastructure considerations.

Supplementing their initial projections, the CCSCE released a series of short articles discussing the economy’s performance since September 11^th. Predicting no significant change in course to California’s long-term future, the latest article presupposes that the California economy has been less severely impacted by the recent economic slump than the rest of the nation; going further to suggest that there is still no evidence of recession in Southern California.

A separate study released last month by the Milken Institute somewhat affirms California’s advantageous position and potential to economically bounce back from recession by ranking the state second in the nation as having the most potential to benefit from the New Economy. The Institute’s New Economy Index annually ranks each state based on twelve economic and technology-related criteria. A second forecast by the Institute, an offshoot of a report presented to the Economic Impact Task Force of the City of Los Angeles last month, predicts that California could be headed for a more ominous future with the state expected to lose 236,700 jobs by mid-next year. Aircraft parts manufacturing and the advertising industry are likely to be adversely impacted, although most job losses would be attributed to declines in the travel and tourist industry, the forecast suggests, with some offset due to growth in security and safety industries.

"Fairly mild" is the outlook for California in the most recent economic forecast released on Wednesday by the Los Angeles Economic Development Corporation (LAEDC). Unemployment will rise and California’s gross product will have contracted by the end of 2002, according to the preliminary 2002-2003 Economic Forecast & Industry Outlook for the Los Angeles Five County Region. The Bay Area will be the most economically impacted region in California due to the technology crash, diminishing tourist numbers and shrinking international trade issues, the report states. As well, the report predicts that the recessionary knockdown in the Bay Area will be comparable in magnitude to that of Southern California’s economic difficulties in the early 1990s. The LAEDC will publish its detailed and comprehensive forecast in January 2002.

California economic outlook articles may be viewed at http://www.laedc.org and http://www.milkeninstitute.org . The California County Projections report may be ordered from the CCSCE website at: http://www.ccsce.com .

PPIC Outlines History and Importance of Manufacturing in California

A recent study by the Public Policy Institute of California (PPIC) tracks the evolution and rise of the manufacturing sector in the state, citing several factors which are unique to California, and describes some of the local, regional and international conditions influencing the state’s current status as the number one industrial state in the nation. The report, entitled Manufacturing the Dream: How California Became the Leading Industrial State, was prepared by Paul W. Rhode.

The report describes California’s early reliance on natural resources-based industries, such as lumber, winemaking and canning, and notes that the state’s lack of significant coal resources led to the development of a major petroleum refining industry. Following the establishment in the early 20th Century of Douglas Aircraft and Caltech in Southern California, the state became an aviation manufacturing hub, with half the nation’s aircraft output emanating from the state by mid-century, and began its rise as a power base for knowledge-based industries. Much of the initial development of the high technology sector, which in 1997 accounted for one fourth of the state’s production workers and half of its value added, was attributed to the demand for new technology from the aerospace industry. The report notes, however, that the state’s long-standing specialization in the transportation sector disappeared following the aerospace cutbacks of the early 1990s.

PPIC describes how declining transportation costs a century ago allowed some industries, such as winemaking and canning, to grow via foreign exports, while it subjected other industries, including textiles, shoes and tobacco, to stiff import competition. Yet while restrictive immigration laws at that time led to recruitment of well-paid, well-educated workers from the Midwest, more recent immigration policies have led to large labor inflows from Latin America and Southeast Asia which has led to a revival of lower-wage manufacturing in apparel and leather goods industries, particularly in Southern California.

The report argues that by many measures the state has now lost its historical character as a high-wage and labor-scarce region, and it notes that the state’s productivity and wages have converged to national levels. Echoing past work on income inequality by PPIC, the report finds recent expansion in both the low-wage and high-wage portions of the state economy has not been matched by productivity growth in the middle ranges.

The report concludes that, while California is less reliant on manufacturing industries than other states, manufacturing expansion has been an integral part of balanced growth in a state economy which "fires on all cylinders." Small enterprises and strong exports have helped maintain the vibrance of the manufacturing industries in California.

The report is available on the PPIC website, http://www.ppic.org , or by calling (415) 291-4400.

FTC Commends Film and Electronic Game Industry for Marketing Progress

On Wednesday, December 5, the Federal Trade Commission released a follow-up report on its ongoing monitoring of entertainment industry marketing to children. The FTC lauded the motion picture and electronic game industry for its "commendable progress" regarding the marketing of violent content to children, finding no express targeting of either R-rated films to children under 17 or PG-13-rated films to children under 13, no ads for R-rated movies in teen magazines, and no trailer promotion of R-rated movies before G- or PG-rated films. Jack Valenti, President and CEO of the Motion Picture Association of America, welcomed the positive feedback from the FTC.

The report found significant forward progress in the reduction of child marketing of electronic games with violent content — those designated with an M rating — especially in fewer youth-oriented television advertisements, though there it did find some marketing in teen magazines and on websites. The FTC noted, on the other hand, that the music industry continues to market explicit-content recordings in popular teen media venues, though it acknowledged that the recording industry chooses to rely on parental advisory labeling rather than age-specific rating schemes.

For further information, see http://www.ftc.gov/opa/2001/12/violence.htm .

California Wins Funds for EU Export Initiative

On Tuesday, December 4, ACET (Advancing California’s Emerging Technologies) unveiled its federally-supported initiative to help California small-and medium-sized environmental and biomedical start-up companies enter the European market. ACET, in partnership with the Bay Area World Trade Center (BAWTC) and the State’s Technology, Trade and Commerce Agency, was one of two California winners out of the seven chosen nationwide by the U.S. Department of Commerce’s Market Development Cooperator Program. Total project funding for the East Bay-based ACET’s initiative will total $1.2 million.

Dr. Sam Doctors, CEO of ACET, noted that the European Union’s market is growing twice as fast in environmental technologies compared to its U.S. counterpart. As an example, he commented that, "due to stricter recycling requirements and limited landfill in the EU, innovative recycling technologies for plastics will probably find their first customers in Europe."

Ivy Cohen, a BAWTC board member, cited a longstanding partnership with both the U.S. Commerce Department and the California Commerce agency. She noted that the BAWTC will support the EU initiative by helping identify and make contacts for environmental start-up and small- to medium-sized businesses, providing promotional kickoff seminars, recruiting groups to learn about how to export to the EU, and offering mentoring services. She also highlighted a free event to be held in San Francisco on December 14, entitled Managing Trade in Turbulent Times, about which information is available at 510-251-5942 or at http://www.bawtc.com .

Further information regarding ACET is available at http://www.greenstart.org .

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