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California Lacks an International Trade Strateg

By Jock O'Connell

This article appeared in the Sunday Forum section of the Sacramento Bee on August 24, 2003.

Next month in Cancun, the World Trade Organization will host officials from 146 countries at meetings aimed at further reducing trade barriers. Even though California, as one of the world's foremost economies, has an obvious and considerable stake in what is decided at the Mexican resort, it won't have a seat at the negotiating table. Instead, along with the other 49 states, California will have to rely on the good offices of the U.S. Trade Representative to safeguard its commercial interests.

That might not be a matter worth fretting over were it not for the fact that, as documented in a study published earlier this summer by the San Francisco-based Public Policy Institute of California, the Golden State's "trade liberalization interests differ from those of the rest of the country."

California firms rely more heavily on exports than do other U.S. companies, with merchandise exports accounting for 10 percent of California's economic output compared to 7.6 percent for the rest of the country. California firms also export a different mix of products, with manufactured exports concentrated in high-technology sectors. Even in agriculture, we export fruits, vegetables, wines, nuts and other specialty crops, not the raw grains and soybeans that constitute the vast bulk of U.S. farm exports. And regardless of what we are shipping, we are much more reliant on Far Eastern markets than is the rest of the country.

So what steps have officials at the state Capitol taken to insure that those who make U.S. trade policy do not give short shrift to California's distinctive economic interests? Who in Sacramento sounds the political alarm the next time the feds decide to swap lower U.S. tariffs on fresh fruit and vegetable imports in return for expanded foreign markets for Midwestern corn? The short, unhappy answer is that the world's fifth or sixth largest economy has effectively taken itself out of the trade policy game. And it has done so at an especially critical juncture in the evolution of the global trading system.

Under the terms of the budget signed by Gov. Gray Davis earlier this month, the California Technology, Trade and Commerce Agency as well as the California State World Trade Commission are being eliminated.

Critics have condemned these money-saving moves as shortsighted. That complaint may be literally true. The scuttling of the trade agency bore all the signs of a dyspeptic overreaction by legislators to the chronic ineptitude of the agency's management.

The big question is whether legislators meant to leave the state with no institutional focal point for monitoring international trade negotiations, assessing the overall impact of foreign trade and investment on California and determining what kinds of policies best serve California's interests in this age of globalization.

Such a venue for informed deliberation on trade policy matters once existed. The pity is that it's been at least a decade since the California State World Trade Commission enjoyed any real respect either at the state Capitol or in international business circles. Indeed, the commission's plight these past several years is reflective of politically inspired antics that have earned the state's trade programs the contempt of real international traders.

The commission's lamentable slide into bureaucratic oblivion began in 1993, when it was absorbed into what ultimately became the Technology, Trade and Commerce Agency. Over the ensuring years, the panel was deliberately marginalized by a succession of political operatives whose prime directive in running the trade agency was apparently to smother any original thoughts or policy initiatives that might venture their way. Seldom in the history of state government has so much effort been expended to achieve so little.

Not that the Legislature was much help. For most of the past decade, legislative leaders tacitly co-conspired in the diminution of the commission by appointing real estate developers, restaurateurs and other politically helpful but otherwise clueless souls to the commission.

Not surprisingly, the commission became a public embarrassment, with its members often revealing an understanding of foreign trade that seemed informed less by professional experience than by old black-and-white movies featuring Ernest Borgnine and William Bendix wrestling heavy sacks onto tramp steamers.

The inability of the commission to provide sage advice to state policymakers has proven especially lamentable in recent years. The international trading system has been undergoing a continuous and rapid transformation as the result of dramatic advancements in transportation and communications technologies, the emergence of global supply chains and successive waves of trade liberalization. It has been a time in which even the pace of change has been accelerating. By contrast, California's trade policies and programs remained mired in the past, essentially unchanged since they were established in the 1980s.

State government's steadfast refusal to keep pace with the times was further sustained by the almost dyslexic way in which legislators and trade bureaucrats routinely mistook the state of California for the State of California. Monthly increases in California's export trade became the topic of gubernatorial press releases, as though he or anyone else in Sacramento had anything to do with it. The exceedingly meager trade promotion programs wrought by state government were mystically transformed into assets deemed to be absolutely crucial to the ability of this state's private industry to manage a $100-billion-a-year merchandise export trade. If exhibited in an individual, such a delusion would certainly be diagnosed as psychotic.

Now that the detritus of trade programs past has been cleared away by a budgetary broad axe, California's political leaders need to engage the state's international business community in a serious and long overdue conversation about the state's future trade policy.

To that end, the Legislature might consider reconstituting the California State World Trade Commission as an independent, privately financed commission of bona fide international businesspeople, economic development officials and trade economists - not political hacks and cronies. To this new panel would then fall the responsibility for facilitating a comprehensive public-private deliberation about the role state government should be playing to insure California's competitiveness in global trade.

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Copyright (C) 2003 by J. A. O'Connell.