STATE IS PUSHED TO SELL ITSELF
By Evelyn Iritani, Times Staff Writer
Los Angeles Times, CA
September 18, 2006
A bill on the governor’s desk mandates a new effort to boost foreign
investment and trade.
California produces some of the world’s finest foods, movies and
software, but unlike other states, it has no outposts abroad to market
its goods to eager buyers.
Unless you count Armenia, a former part of the Soviet Union, where
the trade office is funded by donations from California’s Armenian
American community.
ADVERTISEMENT The Golden State exported more than $116 billion
worth of goods last year and handled 40% of the country’s container
traffic. After Gov. Arnold Schwarzenegger took office in 2003, he
vowed to be a "super-salesman" for the state, whose $1.6-trillion
economy ranks among the world’s largest.
Now, a group of lawmakers and business leaders is prodding the governor
and the state to get back to promoting the state’s industries.
Senate Majority Leader Gloria Romero (D-Los Angeles) successfully
pushed legislation requiring the state Business, Transportation
and Housing Agency to develop a strategy for attracting foreign
investment and trade. That bill, which was passed by a wide margin,
has been sent to the governor’s office.
Schwarzenegger has not taken a position on the legislation, said
Darrel Ng, a spokesman for his office.
The state once staffed a dozen trade offices abroad, including in
Tokyo, Shanghai and London. But during the budget crisis of 2003, the
Legislature shut down the California Technology, Trade and Commerce
Agency, which had a $13-million budget and 91 employees, and closed
11 of the 12 outposts.
State Sen. Jack Scott, a Democrat from the Pasadena area, which has
a large Armenian American community, was able to save the Armenia
office because it was privately funded.
Romero said state officials needed to determine whether they should
reopen offices abroad and if so, how they should be managed and
funded. The state also needs to look at the effects of tax policies
and other regulations on foreign companies, she said.
"We have been flying blind in California," she said.
"We don’t have a trade policy."
Garrett Ashley, a former Schwarzenegger aide whom the governor picked
to head the state’s international trade efforts, said California has
suffered because it lacked the resources to sell itself overseas.
"I think there’s no question that a state the size of California
and the significance of California needs to have a presence in the
international business arena and a way to promote itself," Ashley said.
Jock O’Connell, a trade consultant in Sacramento, agrees that the
state’s trade strategy needs an overhaul. But he said foreign trade
offices were a waste of taxpayers’ money because they were too
difficult to manage from afar and often became politicized.
"The common point of view in the private sector is these trade offices
serve political, not commercial, purposes," he said.
The state would be better off using its resources to modernize
California’s highway system, railroads and ports, O’Connell
said. Airports should be a high priority because more than 50% of
the state’s exports, including electronic components and perishable
commodities, are shipped by air.
The governor has asked voters to approve a $20-billion transportation
bond measure in November that includes $3.1 billion to facilitate
the movement of goods.
On trade missions to Japan, Israel and China, the governor used his
celebrity to hawk California wine, produce and other products. The
governor is taking another group of officials and executives to Mexico
in November.
After Schwarzenegger’s Asia trip, Air China signed multimillion-dollar
contracts with United Airlines to have its San Francisco maintenance
facilities service the Chinese airline’s Boeing 747 and 777 engines,
according to the governor’s office. Schwarzenegger also helped persuade
Virgin America, the new budget U.S. airline partly owned by British
entrepreneur Richard Branson, to locate its headquarters in the Bay
Area hub.
Famima, one of Asia’s biggest convenience store chains, decided to
expand into California after its chief executive saw a billboard in
Tokyo featuring Schwarzenegger, the governor’s office said.
In two years, Famima has opened six of its high-end convenience stores
in Southern California and plans to have a bunch more in place by
year end.
But some foreign employers have recently left the state for better
offers, citing high operating costs and taxes. Last year, Nissan Motor
Co. announced it was moving its U.S. headquarters, which employed
1,300 people, from Gardena to Nashville. Carlos Ghosn, chief executive
of the Japanese auto firm, said Tennessee’s "favorable business and
taxation climate" played a role in the decision to move.
The Organization for International Investment, a Washington-based
lobbyist for foreign firms, has asked the California Franchise Tax
Board to amend its "discriminatory" policy of taxing transactions
between those firms and their California-based subsidiaries, including
royalty payments and interest on loans.
The board has agreed to consider that petition at its meeting
Wednesday.
"I think this is a case of the state sending a mistaken signal of
hostility to these companies when it’s not intending to," said Todd
Malan, executive director of the group.
State officials argue that they are only trying to collect taxes on
income that is legitimately tied to business within California.
But Alex Spitzer, senior vice president of taxes for the
U.S. subsidiary of Switzerland-based Nestle, said the state’s tax
policies were one reason his company decided to put a $359-million
factory in Indiana instead of California. The food giant employs
7,500 people in California.
The disputed tax policy, he said, "is reflective of the attitude
California projects that, ‘We love the jobs but not the businesses
that create them.’ "