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What does California's international trade community have to do to get some respect from the state legislature?

LOS ANGELES -04/02/07 - Well, everybody ready? OK, got something to read? Remember no flash photography, make sure your I-Pods are powered-up, and prepare to buckle-in for yet another flight of fancy aboard the intergalactic starship Sacramento - a breathless voyage to the farthest reaches of the huge black hole that is the collective brain-trust of California's State Senate.

But, first, let's travel briefly back in time to a little more than three years ago, when the California legislature displayed a staggering inability to grasp the elemental concept of "the common good" by not only shutting down the dozen overseas trade offices that the state managed (I use the term "managed" advisedly, but more on that later), but completely shuttering the California Technology, Trade & Commerce Agency (TTCA), as well.

A move that left California - loudly touted as one of the world's top economies - without any agency capable of effectively representing its global business interests.

It seems that despite the adage that the passage of time usually leads to wisdom, the folks in Sacramento are at it again.

Segue to the present.

What's being served-up now from the giant Cuisinart that passes for a legislative body in Sacramento is Senate Bill 515, or SB515, a bill that would extend by two years the authorization for a privately-financed California state trade promotion office in - hold on to your space helmets, kids - Armenia!

What? You didn't know that California has a trade office in Armenia?

Yes, sir. No, not a solitary soul representing the state in major trading partners like Mexico or Canada, not Australia or Israel, or even China or the European Union, but Armenia - the 127th  ranked economy on the planet and virtually off the chart as one of California's most active, or even potentially active, trading partners!

Please note the aforementioned word "extend."

The California-Armenia Trade Office - or CATO - sprang forth Venus-like several years ago from the brow of State Senator Jack Scott, a Democrat representing the eastern part of the San Fernando Valley and environs.

Scott, ever the visionary, shouldered the legislation through the State Senate that established the CATO to represent California business interests not only in the bustling trade center that is Yerevan, Armenia, but in the rest of Eastern Europe and Western Asia, as well "with little fiscal impact" on the state budget. (More on this below.)

It's perhaps interesting to note at this point that the City of Glendale, California - which is the hub of the good Senator Scott's district - has a population that is upwards of 65% Armenian. It is actually the largest concentration of first generation Armenians outside of, you guessed it, Armenia.

To make it even more interesting, the gallant rush to establish the office in Yerevan was championed prior to the last statewide general election.

Also, interesting is that while the CATO was set-up in October 2005 to operate under the aegis of the California Business, Transportation & Housing Agency, the office itself has been operated by the Foundation for Economic Development, a California not-for-profit corporation that has been contracted by the State of California to handle its operations.

Gosh, just call me Mr. Cynical, but the plot thickens.

An analysis of SB 897 - the bill that Senator Scott used to extend the original authorization for the Armenia office -was prepared in August 2005 by California Assembly's Committee on Jobs, Economic Development, and the Economy.

According to the analysis, in early 2004, the BTH issued a donor solicitation letter for contributions to the state for purposes of establishing and operating the office. The contract execution was to occur after one year's worth of operative funding - $75,000 - was collected and deposited into the Economic Development and Trade Promotion Account.

What is interesting about the analysis is the reference to $75,000 as "one year's worth of operative funding."

To the best of anyone's knowledge, the original $75,000 was never augmented and, even though the office has now been up and running for 18 months, sources say there is a pile of money left in the account.

While some might find this a rare, and seemingly laudable, case of a state-affiliated operation cost-effectively serving the people on target and under budget, it's difficult to set the champagne corks popping when one remembers that the CATO was established to serve California's interests not only in Armenia, but throughout Eastern Europe and Western Asia.

With loads left in the bank after a year-and-a-half tirelessly carrying California's tattered global trade flag in a campaign to conquer an area covering hundreds of thousands of square miles, one has to wonder how much time California's Man in Yerevan spends on the road.

Just what has this fellow been doing for the last 18 months and how about producing a document showing what business has been generated for California-based companies by his breathless efforts?

In late February 2006, the powers that be apparently thought it would be sufficient to post an amateurishly written press release on the State of California's official website that actually got the official name of the office in Armenia wrong (calling it the "California International Trade and Investment Office").

It also breathlesly praised the visit to Sacramento of Dr. Arthur Khachtryan, director of said office, to - note the following is unedited - "share with experience with different Californian agencies promoting foreign trade.”

A couple of things: the release touted the "participation" of Dr. Khachtryan in the Global California: Doorstep to the World conference that was held in Sacramento February 16, 2006, a statement implying that he took an active role in the event.

He did not. How do I know? Well, because, as one of the two organizers of the event, I was co-host of the conference and was responsible for coordinating all of the speakers and panelists.

Dr. Khachtryan may well have attended the conference, but he did not "participate" in the event. 

They are two entirely different things.

The release also announced the creation of the CATO website (www.armenia.ca.gov, which, incidentally, hasn't been updated since last September), and that the office in Yerevan has "generated trade leads worth several hundreds of thousands of US dollars."

Several requests to the CATO office for the names of the companies in California that have reaped the benefits of the office's efforts to be put on the public record have gone unanswered.

Well, so much for professionalism and transparency.

So, moving on; who's lining up to support this latest wrapping of the international business cable around the axle of Sacramento-style politics?

Would you be surprised to know that leading the very short list is the Armenian National Committee of America, a highly influential lobbyist group based in Washington, DC, which is asking Congress to allocate $200,000 of the recently proposed US foreign aid package for Armenia to support the CATO.

In a February 13, 2007 letter to the chairwoman of the House Appropriations Committee's Subcommittee on State, Foreign Operations, ANCA executive director Aram Hamparian wrote: "We urge the panel to appropriate $200,000 to allow the California-Armenia Trade Office to expand its operations to assist business communities in California as well as other US states."

The CATO, he wrote, “began operations in October of 2005 under the auspices of the California Business, Transportation and Housing Agency, but is funded entirely through privately raised donations.”

Let's recap: that's $200,000 milked from the federal government to augment the $75,000 in annual funding already committed to, but apparently not put to any use, by the CATO in Yerevan.

Virtually, nothing's being done with the $75,000, much of which is still in the bank; Wow, boys and girls, imagine what won't be accomplished with $275,000!

Interesting and scary, particularly on a couple of points.

First, the good people at ANCA want the CATO to bag not just an extension of its operational scope from the Democrat-dominated California State Legislature, but big bucks from the federal government to help it "promote other states."

You might want to pause here, read the above again, and grab a Tylenol.

Yes, an office supposedly operating as an ersatz representative of California given the blessing of the California State Legislature and more than adequate funding to spend its time singing the praises of doing business in Rhode Island, Michigan, Texas, Ohio, New York et al.

Words fail, but, there's more.

Second, slapping the Great Seal of the State of California on a vague, privately-run, not-for-profit foundation and giving it the blessing of the state legislature with no mechanism in place to track how the money is being spent, who is promising what to whom, and what business the office is supposedly generating is a dangerous, ticking scandal-bomb waiting to blow up in our faces.

A curious point here: A website search on Yahoo, Google and Dogpile for the suspiciously generic Foundation for Economic Development and any California-centric variations thereof failed to come up with anything other than the usual local and regional groups one would expect.

Other than the fact that the organization is, not surprisingly, headquartered in Glendale, California (note above), virtually no information is available on the group other than the public record showing the name of the Agent for Service of Process, an address on North Glendale Avenue and that it was incorporated in November 2002.

Interestingly, there are literally dozens of organizations from Union County, Kentucky to Arizona's Hualapai Indian Nation with that exact moniker and scores more with similar names, but no organization that I could find with the name Foundation for Economic Development that calls California home.

Oh, by the way, is it germane to mention here that the White House actually wants to slash overall aid to Armenia from $75 million this year to just $35 million next year?

Perhaps it's the right time to address the question of "management."

Though the political spin went in another direction, the actual cause of the mass execution of California's overseas trade offices wasn't mismanagement on the part of the office's directors (though some were, admittedly, not up to the task), but a total lack of leadership or support from the TTCA in Sacramento - an agency which had, over the years, gained a well-founded reputation of being less a partner of and advocate for the state's international trade community and more as a dumping ground for well-heeled political appointees and friends of since-deposed Gov. Gray Davis and like-minded legislators.

But the buck continues to float in the breeze until it lands on the collective desk of - guess where? Yes, the California Legislature, which, through it all, turned a Nelson's Eye to the political shenanigans at the TTCA “ being busy, of course, with its own and failed miserably to hold the agency accountable for its malfunctioning bureaucracy and its total failure to do much of anything of value to assist California businesses in competing in the increasingly competitive global arena.

All this despite three scathing evaluations of the TTCA over a period of five years by the California State Auditor and countless Senate and Assembly committee and sub-committee hearings that produced report after critical report that were shelved and forgotten, never to be acted on.

Revamping the agency and letting it operate independently (and effectively) free of the politics-as-usual funk that permeates Sacramento would, of course, have meant a spotlight being thrown on the legislature's chronic failure to hold the management of the TTCA accountable for their failure to function professionally.

Get the picture? The state legislature proved itself totally incapable of doing anything to rein-in an out-of-control state agency a mere five blocks from the California state capitol building.

Imagine, then, an entity of dubious provenance thousands of miles away, given the blessing of the California Legislature to represent one of its most precious assets -its international trade community - with nothing more than a wink and a nod, no discernable deliverables, and virtually no accountability.

What's more, it's simply ludicrous to claim that this measure would have no fiscal impact.

"The very notion that California can have a state trade office in a distant land without any cost to tax-payers is both naive and disingenuous," says Sacramento-based international trade columnist and pundit Jock O' Connell.

"How, other than by providing for a meaningful oversight capability here at home, can the Legislature presume to guarantee that the ability of private parties to acquire - for an astonishingly meager amount - the privilege of posing as the official representatives of the State of California in some far-off land will not ultimately be abused?," he asks.

"What happened to the principle of Trust But Verify?"

One of the more compelling reasons to reject the bill and question the lucidity of the mindset that forged it, O'Connell says, "is that passage of SB 515 could preempt current efforts to forge a rational state trade and investment strategy by supplying a powerful precedent for any legislator desiring to curry favor with a constituent group passionate about its ancestral homeland."

In an environment where electoral survival is the prime imperative, he concludes, "the most finely-conceived strategies can become irrelevant in the face of the exigencies of constituent politics, especially if the voices of California's mainstream international business community are not heard."

We agree wholeheartedly, as do a growing number of individuals, economic development groups, and trade organizations across the state - for example, the San Diego World Trade Center, the Bay Area World Trade Center, the Northern California World Trade Center, the Bay Area Economic Forum, and the California Council for International Trade, one of the state's largest and oldest international trade promotion groups, among others - that have come out publicly against SB 515.

An office in Armenia while there's no plan in the offing to create an effective mechanism to communicate with and ascertain the needs and expectations of the international business community within California itself?

Sure makes sense to me. Uh-huh. 

Let's be very, very clear: the ire and exasperation here is not directed at Armenia itself or its people; it's aimed at a state legislature that is totally oblivious of the critical role that  international trade plays in fueling the California economic engine and the feckless individuals who would take advantage of the chronic fetid miasma that permeates Politics Sacramento Style for their own questionable ends.

The people who "lead" this state should be aware of and appreciate the fact that California's international business community is made up of experienced, visionary entrepreneurs who battle with increasingly intense competition both here and abroad every day.

They are smart and world-wise and they know how world trade works. Sacramento, well, isn't and doesn't.

It's about time California's leaders stopped flapping their arms in a vain attempt to convince everyone that they're accomplishing something, take a deep breath to clear their heads, and expend some effort to rebuilt the bridge of communication with the state's global trade community that it so thoughtlessly destroyed three years ago when it demolished the TTCA.

They need to be still, stop thinking in clever sound bytes, and listen for a change to the people who know how to get the state back full-bore in the international trade game where it belongs.

What California's global traders need - and deserve - is to be heard and not have their intelligence insulted by another exasperating and embarrassing reprise of "The Capitol Brainiacs Meet The Marx Brothers."

Well, blast-off time for SB515 is set for Monday, April 9, when the California State Senate's Business, Professions and Economic Development Committee will hold a "policy hearing" to appraise the purported value of the measure.

Please, before you grab for your air sickness bag, make the time to send a letter to Committee Chairman Sen. Mark Ridley-Thomas (D-Los Angeles) at The State Capitol, Room 2053, Sacramento, CA 95814 and tell him that SB 515 - The Great Armenian Experiment - is an insulting and ridiculous waste of time and money and needs to be scrapped.

The fax number there is: 916-324-0917.

Your comments are welcome.

Michael D. White
Publisher / Editor
CalTrade Report
323-255-6565
[email protected]

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