[Senate Hearing 105-291]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 105-291


 
   THE ROLE OF THE DEPARTMENT OF COMMERCE IN THE U.S. TRADE POLICY, 
      PROMOTION AND REGULATION, AND OPPORTUNITIES, FOR REFORM AND 
                             CONSOLIDATION

=======================================================================

                                HEARING

                               before the

                            SUBCOMMITTEE ON
                  OVERSIGHT OF GOVERNMENT MANAGEMENT,
              RESTRUCTURING, AND THE DISTRICT OF COLUMBIA

                                 of the

                              COMMITTEE ON
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE

                       ONE HUNDRED FIFTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 20, 1997

                               __________

      Printed for the use of the Committee on Governmental Affairs


                               


                      U.S. GOVERNMENT PRINTING OFFICE
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_______________________________________________________________________
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                   COMMITTEE ON GOVERNMENTAL AFFAIRS

                   FRED THOMPSON, Tennessee, Chairman
WILLIAM V. ROTH, Jr., Delaware       JOHN GLENN, Ohio
TED STEVENS, Alaska                  CARL LEVIN, Michigan
SUSAN M. COLLINS, Maine              JOSEPH I. LIEBERMAN, Connecticut
SAM BROWNBACK, Kansas                DANIEL K. AKAKA, Hawaii
PETE V. DOMENICI, New Mexico         RICHARD J. DURBIN, Illinois
THAD COCHRAN, Mississippi            ROBERT G. TORRICELLI, New Jersey
DON NICKLES, Oklahoma                MAX CLELAND, Georgia
ARLEN SPECTER, Pennsylvania
             Hannah S. Sistare, Staff Director and Counsel
                 Leonard Weiss, Minority Staff Director
                    Michal Sue Prosser, Chief Clerk

                                 ------                                

SUBCOMMITTEE ON OVERSIGHT OF GOVERNMENT MANAGEMENT, RESTRUCTURING, AND 
                        THE DISTRICT OF COLUMBIA

                    SAM BROWNBACK, Kansas, Chairman
WILLIAM V. ROTH, Jr., Delaware       JOSEPH I. LIEBERMAN, Connecticut
ARLEN SPECTER, Pennsylvania          MAX CLELAND, Georgia
                        Ron Utt, Staff Director
  Laurie rubenstein, Minority Staff Director and Chief Counsel to the 
                                Minority
                      Esmeralda Amos, Chief Clerk


                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Brownback............................................     1
    Senator Lieberman............................................     2

                               WITNESSES
                        Thursday, March 20, 1997

Hon. John L. Mica, Representative in Congress from the State of 
  Florida........................................................     4
Hon. Rick White, Representative in Congress from the State of 
  Washington.....................................................     7
Professor William H. Lash III, Director of the Law and Economics 
  Center, and Associate Dean, George Mason University School of 
  Law............................................................    16
Edward L. Hudgins, Director of Regulatory Studies, Cato Institute    20
Edward J. Black, President, Computer and Communications Industry 
  Association....................................................    23
Timothy J. Hauser, Deputy Under Secretary, International Trade 
  Administration, Department of Commerce.........................    34

                     Alphabetical List of Witnesses

Black, Edward J.:
    Testimony....................................................    23
    Prepared statement...........................................    68
Hauser, Timothy J.:
    Testimony....................................................    34
    Prepared statement...........................................    77
Hudgins, Edward L.:
    Testimony....................................................    20
    Prepared statement...........................................    63
Lash, Prof. William H. III:
    Testimony....................................................    16
    Prepared statement...........................................    51
Mica, Hon. John L.:
    Testimony....................................................     4
    Prepared statement...........................................    45
White, Hon. Rick:
    Testimony....................................................     7
    Prepared statement...........................................    48

                                APPENDIX

Prepared statements of witnesses in order of appearance..........    45
Questions and responses for the record from Mr. Hauser submitted 
  by Senators Brownback and Lieberman............................    84


                     THE ROLE OF THE DEPARTMENT OF
                   COMMERCE IN THE U.S. TRADE POLICY,
                     PROMOTION AND REGULATION, AND
                      OPPORTUNITIES FOR REFORM AND
                             CONSOLIDATION

                              ----------                              


                        THURSDAY, MARCH 20, 1997

                                       U.S. Senate,
       Oversight of Government Management, Restructuring,  
                       and the District of Columbia Subcommittee,  
                                 Committee on Governmental Affairs,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 9:35 a.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Sam 
Brownback, Chairman of the Subcommittee, presiding.
    Present: Senators Brownback and Lieberman.
    Staff present: Ron Utt, staff director and Esmeralda Amos, 
chief clerk.

             OPENING STATEMENT OF SENATOR BROWNBACK

    Senator Brownback. We will go ahead and get the hearing 
started. Thank you all for joining us this morning. This is 
going to be the second in our series of hearings on the 
Department of Commerce. We looked first in last week's hearing 
at some of the management issues and problems that have been 
existing at the Department of Commerce, and some of the changes 
we could make there. This hearing will be focused on the role 
of the Department of Commerce in international trade policy and 
promotion. We're going to be exploring that role with three 
panels that we have present today.
    The first panel will be two members of Congress who have 
proposed a plan for consolidating the trade promotion and the 
trade policy making functions within the Federal Government.
    The second panel will look at the overall trade policy and 
promotion structure within the Federal Government. And the 
third panel will be the deputy undersecretary for international 
trade for the Department of Commerce.
    This has been an area of some focus for a period of years 
in Congress. The Department of Commerce is just one of 18 
agencies involved in trade policy making, and 19 involved in 
trade promotion. And different agencies take different leads in 
different subjects.
    The U.S. Trade Representative's Office is the lead in trade 
policy and negotiations. The ITC is the lead in import 
protection, such as anti-dumping. Agriculture has the biggest 
export promotion program, and the Customs Service is the lead 
in enforcing our export laws.
    Because of this, the Department of Commerce plays second 
fiddle to many other agencies in the overall trade field.
    I do have a letter here today from Senator Roth, who is a 
member of this Subcommittee, and is unable to join us today 
because he is chairing another hearing. He has been a long time 
advocate of creating a consolidated Department of Trade. And I 
just want to read one paragraph from Senator Roth's letter, 
where he said this:
    I appreciate your invitation to testify before the 
Oversight Subcommittee on March 20, 1997 at the hearing to 
examine the trade policy role of the U.S. Department of 
Commerce.
    As you know, I have advocated for many years the creation 
of a Department of Trade which would unify the trade functions 
of the Department of Commerce and the Office of U.S. Trade 
Representative. In my opinion, a Department of Trade would 
allow our government to pursue trade policy and negotiations 
and to administer our trade laws in a more rational and 
efficient manner.
    So I'm sorry that Chairman Roth could not be here today, 
but he is vitally interested and pretty focused on this subject 
as well.
    Our first panel will be two members of Congress, as I had 
stated previously, who I will have an introduction for a little 
bit later, and I'm delighted to have my former colleagues from 
that historic 104th Congress joining us today.
    But we'll be able to talk--gosh I get choked up thinking 
about the 104th Congress. [Laughter.]
    Senator Lieberman. So do I. [Laughter.]
    Senator Brownback. We'll look forward to their testimony. I 
do hope that this can be a discussion like around a kitchen 
table about what we can and should do in this area of trade 
promotion and trade policy development, because clearly we've 
got a lot of players trying to do a lot of things, and if there 
isn't direct duplication, there's a lot of overlap that's 
taking place.
    And I believe we can have a more effective trade policy and 
save dollars for the taxpayers of America if done right and 
done well. So I'll look forward to those presentations.
    And with that, I will turn the mike over for an opening 
statement to another member of that historic 104th Congress, 
Senator Lieberman from Connecticut.

             OPENING STATEMENT OF SENATOR LIEBERMAN

    Senator Lieberman. Thank you, Mr. Chairman. It's my 
pleasure to join with you in this morning's hearing on 
international trade and the Commerce Department and to thank 
you for the way in which you're going about this series of 
hearings on the Commerce Department.
    In the last couple of sessions there have been times when I 
think some of us who have supported some of the activities over 
there have felt that we were fighting on the question of 
whether there ought to be a Commerce Department or there ought 
to be any government role in trade or commerce. And undoubtedly 
that will be part of the conversation here today. But my sense 
is as you are going at it that we really want to see how best 
government can work together with the private sector to support 
American trade.
    And I appreciate that, and to say the obvious, this is 
not--the array of governmental programs supporting trade and 
exporting are not necessarily the neatest and most orderly 
alignment.
    And, as we've learned in the private sector, nothing that 
exists ought to be assumed to be the best way to go. And I 
could even put it more to the point: very little that existed 
five or ten years ago in the private sector exists as it was 
then, so there's no reason we should have a sense of 
defensiveness about the status quo in government. In fact, we 
should have a decided sense of challenge and innovation about 
it.
    Exports are important to the American economy. If I may 
look at this in a local or parochial sense, my own State 
depends on exports and trade to a very substantial degree for 
its own economic growth.
    Connecticut, actually, has the highest per capital rate of 
exports of any State in the United States. And those exports 
tend to create higher paying jobs requiring more skilled 
employees.
    I was struck by a recent study that found--these are 
National figures, not Connecticut, but they apply equally to my 
State and all States--workers in exporting plants on average 
earn 15 percent more than non-exporting plants.
    Benefit levels are between 25 and 40 percent higher. 
Exporting plants are at least 30 percent more productive than 
non-exporting plants. Out of a list of 15 modern manufacturing 
technologies, exports employed 40 percent of those working in 
those industries.
    And the failure rate in plants that are involved in 
exporting is 30 percent less than those that are not. All of 
this is by way of saying, in statistics, that we're in a global 
economy. And to succeed in a global economy, you've got to be 
sharp.
    Skill counts a lot, particularly for a developed economy 
like ours, and trading and exporting successfully.
    Interestingly, the benefits that I've described, the 
advantages tend to appear once a firm makes a commitment to 
exporting, not necessarily after a long period of time in which 
it's reached a certain level. Which is to say in another sense 
that the benefits of exporting are not reserved only to the 
large multi-national firms.
    So acknowledging that trade is a good thing, or at least 
advocating that position, the question then becomes what should 
the role of government be with regard to trade. And I take for 
my inspiration here this morning the somewhat battle scarred, 
war-weary words of Jeff Gartner, who used to be undersecretary 
of Commerce, during President Clinton's first term, but who has 
now sought refuge in my home city of New Haven, Connecticut as 
the dean of the Yale School of Organization and Management.
    But Jeff said, having been involved in this, and I quote, 
in the best of worlds, government ought to get out of this 
business all together, which is to say the business of trade. 
But the marketplace is corrupted by the presence of government. 
So do you sit on the side and pontificate about Adam Smith, or 
do you enter the fray.
    That's an interesting way to phrase it. And obviously what 
he has reference to is the enormous involvement of nations with 
which our businesses compete in support of the trading efforts 
of those businesses.
    So I think there is an important partnering role for 
government to play here with American business in promoting 
exports. The Department of Commerce has performed an essential 
role, I think, in helping American firms and workers take 
advantage of the tremendous opportunities offered by the global 
economy.
    We're never going to achieve perfection here, but I think 
there is a lot of room for improvement and hopefully together 
on a bipartisan basis we can achieve that improvement. Part of 
that is hearing the kind of testimony that we will hear this 
morning.
    Thank you, Mr. Chairman.
    Senator Brownback. Thank you very much, Senator Lieberman.
    We now have our first panel today, and we have with us 
Congress John Mica from Florida, and Congress Rick White from 
Washington, two States deeply involved in trade, and two 
individuals who I know have personally been directly involved 
in a great deal of trade activity, and have watched the trade 
issue from various perspectives.
    So I appreciate your personal perspectives, and your 
perspectives as members of Congress. So, Congressman Mica, the 
mike is yours.

TESTIMONY OF HON. JOHN L. MICA,\1\ A REPRESENTATIVE IN CONGRESS 
                   FROM THE STATE OF FLORIDA

    Mr. Mica. Thank you, Chairman Brownback. It is indeed an 
honor and privilege to be with you today on this side of the 
Congress to talk about a subject on which you are really an 
expert and a leader, one who in the last Congress helped 
spearhead attention to this problem of how we compete in the 
international marketplace, and how we organize our agencies of 
government.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Mica appears in the Appendix on 
page 45.
---------------------------------------------------------------------------
    In the spirit also of your request that we make this an 
informal discussion, I would ask unanimous consent that my 
formal statement which the staff, I'm sure, toiled many hours 
on, be made part of the record.
    Senator Brownback. Without objection.
    Mr. Mica. And what I will do is proceed by just informally 
addressing some of the issues that I think are of major concern 
and that deserve our attention as a Congress. I would also be 
remiss if I didn't recognize the leadership that Senator Roth 
has played in this issue.
    When I came as a freshman in 1992 one of my goals was to 
find a way to reorganize our trade operations in the Federal 
Government, and Senator Roth had been there for I think more 
than a decade, or many, many years advocating similar changes 
and reorganization.
    So he is indeed a leader and knowledgeable on this side of 
Congress, and I salute his efforts.
    Let me tell you how I got involved in international trade. 
I was actually sitting back where some of these folks are in 
the back many years ago as a Senate staffer, and then let me 
warn you all, too, that doesn't last forever, because you, too, 
will find real employment. [Laughter.]
    Mr. Mica. And when I did, I was cast out--you'll find 1 day 
maybe your boss doesn't win. But I was cast out into the 
private sector, and I got asked to help on an international 
trade problem for one of the major corporations, and found 
myself on a plane going to Venezuela sometime after 1985.
    And I sort of got thrust into the world of international 
business, and ended up representing many large firms--I'm sure 
you'd recognize the names if I mentioned them--and many small 
firms in overseas business.
    And what stunned me was how ill armed and how ill aided our 
American businesses are abroad. And it's not that we don't 
spend a lot of money, or that we don't have a lot of folk 
involved in trying to assist business. In fact, we have 19 
agencies, Federal agencies, that spend $3.2 billion in that 
effort.
    And this chart isn't my chart, but I think one of our 
colleagues, and it may have been Nick Smith, one of them put 
this together. And it shows part of the problem. And this chart 
shows the trade coordinating committees.
    And the situation got so bad that some years ago they put 
together a trade coordinating committee of all these agencies, 
because the right hand didn't know what the left hand was 
doing.
    This trade coordinating committee is sort of a band-aid on 
a very serious organizational, dysfunctional operation of our 
Federal Government.
    But this is how we conduct trade with all of these 
agencies, again, in an expensive, uncoordinated fashion.
    Now, is this important? Is this important? Last year our 
merchandize trade deficit reached a staggering $166.6 billion. 
Now, stop and think about it. I was thinking about it last 
night, and I didn't research this, but probably for the first 
time our National deficit has been exceeded by our trade 
deficit. Stop and think about that.
    This outflow of cash will eventually catch up with us, 
because we're buying goods from other countries--and that means 
fewer good paying jobs in our country, fewer economic 
opportunities for all Americans.
    So to me it is as important and as vital as the National 
deficit that we're facing. So we must really look at some way 
to effectively organize. And the elements of this are trade 
promotion, trade assistance, trade finance and trade 
negotiation. Those are the elements, and getting them all 
together.
    So as you look at the Department of Commerce, you have a 
small piece of this puzzle. Now, Senator Brownback, we all 
remember the last Congress, and sometimes with mixed emotions. 
But I introduced the reorganization bill with some of you on 
the other side, again.
    We reduced the number of committees in the House in the 
last Congress to 18 committees. To show you how dysfunctional 
this trade operation is, my bill was referred to 11 committees 
of the House--11 out of 18. And I still don't know how we did 
it, but we made it through all of these committees.
    We actually had a draw. We had Mexican stand-offs. We had 
all kinds of things, but we eventually got the proposal 
forwarded, and I know the proposal made some progress here in 
the Senate.
    But because there are so many people that have a piece of 
the pie, and they are all protecting their own turf, and they 
want to continue the inefficiencies and the bureaucracies they 
have created, we have literally created a monster that doesn't 
function well, and maintains the status quo.
    So that's what we have to contend with. It's a very, very 
difficult undertaking.
    And trade is just a small part of the Department of 
Commerce. As you may recall, there are somewhere in the 
neighborhood of 30,000 employees in the Department of Commerce. 
If you identify those that deal with trade or business, you get 
down to about 3,500. So it's a small piece of the Department of 
Commerce puzzle.
    I proposed a consolidation into a Department of Trade. I 
take no pride in authorship. I'm willing to take almost any 
arrangement that makes sense, and that's our challenge, to find 
what makes sense, what can be most effective.
    And to do this right, you've got to look at other 
jurisdictions. As many of you may know--I don't know if the 
staffers know this--of how much of the business overseas is 
conducted. And that is one of the important arenas in our 
embassies.
    Our Foreign Commercial Service officers are located within 
the embassies, but in the Department of State facilities. We 
also have USAID now, which we should be looking at and others 
should be looking at, which is now trying to justify its 
existence by betting into trade promotion and assistance 
overseas, creating another wing and another problem, and 
entrenching themselves in this, and not always communicating. 
And I could give you specific examples.
    Our AID mission still far exceed anything we do with 
Foreign Commercial Service assistance, and AID, I hate to say 
it, is a post-World World War II mentality in providing this 
assistance to folk and not providing a way to conduct business 
and trade and build industries.
    So we're still emphasizing this approach. You go to some of 
our foreign posts and our AID mission is sometimes twice or 
three times as big as the embassy staff.
    And then, Senator Lieberman said, do we enter the fray. I 
don't think we have a choice. The parameters have already been 
set by our competition, and I have other charts here that show 
that we are getting our pants beat when it comes to promotion 
budgets.
    For example, as a proportion of gross domestic product, UK, 
France, Germany and Japan all just beat us. If you look at 
other financing programs, we just get slaughtered. And when you 
have government, industry and finance all working together--in 
fact, in most countries there is now a seamless relationship 
between some of these activities.
    I have been in business. Some of you have been in business. 
You can cut any business deal if you can finance the project 
properly. And I could sit here the rest of the morning and tell 
you where we got beat in financing, and also in the ability to 
promote and assist our business.
    Let me just say that I am not here to speak for big 
business, but I think big business needs our attention and 
needs the support of our government in this, because they are 
competing, and these conglomerates are put together, and they 
beat our pants in many instances.
    Some of our big businesses can compete. What concerns me 
also is our small business and medium business. Because the 
United States has for many years relied on domestic markets, 
the trade between Connecticut and Kansas has been good. The 
trade between Washington and Florida has been good, and good 
opportunities.
    But those opportunities extend now beyond our borders. And 
when you take the French and the Italians and the Japanese, and 
around the world our major trading partners, they've been 
trading internationally for centuries and centuries, while we 
have grown from a domestic market activity.
    So we are in this marketplace, we are in the fray, whether 
we want to be or not. And the question is do we provide the 
tools, the organization, the assistance to our medium, our 
small and our large businesses.
    And there is no question about it. The job opportunities 
for the future, whether they're again in Connecticut, Kansas, 
Florida, wherever, the promise and the statistics that support 
it, good paying jobs, good economic opportunity for our folks.
    The answer, too, isn't, you know--no disrespect to the 
former Secretary of Commerce--isn't taking just a few business 
folks around the world and helping them. That was a good idea. 
It's good for our government to do that and hold hands.
    But think of the thousands and thousands of medium and 
small, even large businesses, that were left behind that didn't 
get that opportunity. So just because some good was done in 
these things, in this approach, that's not the answer, that's 
not the defense. We have to be looking to the future.
    Finally, our goal is to eliminate duplication, overlapping. 
Make it mean, clean and lean. Give our business and industry 
every tool possible to compete in the world. And I think if 
Congress reorganizes these activities, it really has to go 
beyond the scope, even of your Committee here, as I've outlined 
a little bit today. The problem is greater than just your 
jurisdiction.
    So you're going to have provide leadership, and many 
members of Congress have no idea how things are organized or 
how they interlink to this problem. So I've spoken far beyond 
the time allotted, but did want to make those points, and I 
thank you for allowing me to be with you today.
    Senator Brownback. Thank you, Congressman Mica. I 
appreciate that presentation, and we'll have some questions in 
a little bit.
    Next we'll call on Congressman Rick White, good friend from 
Washington, and who has also been involved in the trade field 
from another perspective. And Rick, the mike is yours.

 TESTIMONY OF HON. RICK WHITE,\1\ A REPRESENTATIVE IN CONGRESS 
                  FROM THE STATE OF WASHINGTON

    Mr. White. Thank you, Mr. Chairman, and Mr. Ranking Member. 
I will say that I probably feel very much the same way that 
soldiers of the Revolutionary Army felt in the late 1700's when 
after fighting side by side with General Washington they 
finally got to see him become President of the United States.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. White appears in the Appendix on 
page 48.
---------------------------------------------------------------------------
    And to address you as Mr. Chairman gives me very much that 
feeling.
    Senator Brownback. Oh, boy. You are kind.
    Mr. White. I also would like to submit my statement for the 
record, and won't make you go through my reading of it. But I 
do have just a couple of points I'd like to make. I think we 
probably all come from trading States and trading districts.
    You know, the trading lanes of Puget Sound go right by my 
house, and when I look out of my window at home, every day, 
there is a ship on its way to China, or a ship on its way from 
Japan coming to the ports of Puget Sound, taking apples or cars 
or software or aircraft components in one direction or another.
    Trade is very important to my District. It's very important 
to our country. It's one of the foundations of our country's 
prosperity right from the beginning. Yankee traders are one of 
the things that got our country off in the right direction. So 
I don't think any of us can misunderstand how important it is 
to our economy.
    I also think, if we're fair about it, none of us can really 
disagree that the way we have organized our trade functions in 
the Executive Branch now isn't the way we would do it if just 
sat down right now with a blank sheet of paper and tried to 
design the most efficient system possible.
    As Congressman Mica pointed out, we have these trade 
functions parcelled out in many, many different areas of the 
Federal Government and the Executive Branch, and that's 
probably not the right way to do it.
    I introduced a bill last year that would take a small stab 
at this problem. It was called the Trade Modernization Act, and 
it basically would have consolidated in the United States Trade 
Representative's Office most of the trade functions of the 
Federal Government, certainly those at the Department of 
Commerce, which, as I understand it, represent about 8 percent 
of that Department's functions, not really a big percentage of 
what they do. It's primarily a statistical function that is 
being undertaken at the Department of Commerce.
    It just makes sense to me, from an organizational 
standpoint, to have those functions consolidated in one 
Department of one agency, whose function is limited to 
international trade. And I think that would be a big step in 
the right direction, just from an organizational point of view.
    I will say that the greater issue that we need to address, 
and I think Senator Lieberman raised this point, is what is the 
role that the Federal Government ought to play in promoting 
trade. The quote was a very interesting one, whether it's 
enough to sit back and pontificate about Adam Smith.
    My own view, though, is that it's not--although we should 
be engaged, the way we should be engaged is a little bit more 
of an open question, in my mind, than perhaps in some others.
    You know, I very clearly remember the year 1989, and the 
whole discussion we had about high definition television at the 
time. If you recall you could pick up the Wall Street Journal 
at that time, and read a lot of hand wringing about how once 
again the United States was losing out to the Japanese, because 
the Japanese were organized, and they were all focused on one 
particular form of high definition television.
    And if we didn't adopt a trade policy like that, we were 
going to find ourselves once again losing out to the Japanese 
in their analog high definition television technology.
    Well, the next year, Americans in our system of free 
enterprise invented digital high definition television, and 
that's why we're now the leaders in that area. And I make this 
point simply to say that just because other countries in the 
world feel that they have to subsidize their trade, and they 
have to take the approach that they take to try to promote 
their products overseas doesn't mean that we should give up our 
tradition of free enterprise and Yankee trading because usually 
if we're doing something right, it triumphs in the end.
    And I would ask us to think very carefully about whether we 
want a representative of the Executive Branch of our Government 
focus simply on promoting trade, or being the salesman for 
American products overseas.
    My own view, coming from a District that represents Boeing 
and Microsoft is that Boeing and Microsoft can do a heck of a 
lot better job selling their products overseas than the Federal 
Government can do in helping them.
    And, really, we don't want those decisions on what products 
should be bought to be based on political considerations. We 
want to be able to compete in an open marketplace.
     So, from my perspective, what the Federal Government ought 
to be doing in terms of trade is fighting for open trading 
policies around the world. That really should be the primary 
function of the Federal Government, opening those markets, so 
that our people can get in there and compete fairly in an open 
market situation.
    Because if we do, we'll win, and our country will prosper. 
And I think if we go too far down the road of having the 
political side get involved in these transactions, we find that 
these decisions get made on a political basis, and frankly 
that's not the strongest place where our country can compete.
    We've got to compete on merit, on just the commercial 
details of a deal. That's my view, and I know it's one that's 
subject to some debate, but I think if we reorganize our trade 
function a little bit with that in mind, that would help us be 
more effective in the right way.
    Now, one last comment. Human beings don't like change, and 
it's a hard thing for any of us to do. And I think making this 
sort of change in the existing administrative framework would 
be a difficult thing.
    Ambassador Barshafsky was in our Subcommittee yesterday, 
and I had the opportunity to ask her some of these questions--
how would they react to giving her department a little more 
umph in terms of international trade.
     She didn't seem all that red hot on it, just to start off. 
So I think we in Congress are going to have to think very 
carefully for ourselves about how this ought to be done, 
certainly in conjunction with the Executive Branch.
    But it's a process that we really shouldn't avoid. I 
couldn't agree more with Senator Lieberman, that we need to 
take a fresh look at how our policy is organized, try to figure 
out a better way to do it. And if we figure out a better way to 
do it, we shouldn't let inertia and all our normal resistance 
to change stop us from taking those steps.
    So having said that, I applaud your Committee in looking 
into this issue, and I think with Congressman Mica we would 
both be delighted to answer any questions at this point.
    Senator Brownback. Thank you both for your testimony and 
your thoughtful insight as to what you would do in the bills 
that you have put forward on this.
    Let me ask you, Congressman White if I could, we look at 
this and we say, OK, the real thing that we want to do is open 
markets. Would you use the tools that we have now to open those 
markets? Is that the way we should do those, or should we drop 
back on a number of these tools and say we're only about 
opening markets, and these tools really are inappropriate for 
government.
    I'm thinking of some of the export finance programs. I'm 
thinking of some of the export promotion dollars. What would be 
your perspective on that in a near term basis?
    I think we all would agree that on a long term basis we 
should be negotiating internationally through the WTO or other 
means to remove all of these tools from the use of government. 
And we should just say, this is inappropriate for the role of 
government in an international setting.
    What would you do on a near term basis until we get those 
sort of international agreements?
    Mr. White. That's really the crux of the question right 
now, and it's one that we have struggled with a lot. I think 
there is a role in the current international situation to 
finance some of our exports.
     I think a lot of our exports couldn't be made if you 
didn't have some financing. But I do think our goal ought to be 
to minimize that and to eliminate it over time, as you say.
    My concern is more the idea of having the Federal 
Government be the specific deal closer for certain sales that 
might be negotiated in the private sector. That's where I think 
we really get ourselves on the wrong side of this politics 
versus commercial equation.
    And I would just like to see us recognize that if you can 
open markets, our companies are likely to succeed. They don't 
need help in making the sale, but they do need help in doing 
something that a private enterprise simply can't do, which is 
to negotiate with another government, and get that government 
to compete with us on a fair basis.
    Senator Brownback. What do you think about that, Mr. Mica? 
Should we be involved in the near term, in export financing? 
And I want to add that AID being rolled into a Trade 
Department, is a new twist from what I've seen previously.
    Mr. Mica. Well, I don't think we have any choice. Just look 
at the charts, what our competition is doing in finance, for 
example. We must have programs. Ex-Im, there's some proposals. 
I think even Mr. Kasich was talking about doing away with Ex-
Im.
    And I shudder to think--Boeing, I would imagine many of 
their planes--I don't know what the percentage is, but to 
compete in this international market you have got to compete on 
an equal footing.
    My colleague talks about a wonderful world we would all 
like to get to. But, you know, you have every day battles, and 
we're fighting in the international markets, and we've got to 
have the tools to do that.
    And, again, I laud his lofty goals, but in the mean time 
it's a dog fight. And if our folks are not well armed or 
equipped, and they've got government support of these 
activities--if it's research and development, they tie all 
their aid packages into some economic development package.
    I watched us lose Chile. Chile is a great market, one of 
the outstanding in South America. And the biggest trading 
partner with Chile is Japan. And the U.S. has been zeroed out. 
And they have used financing there as a tool.
    So we have got to compete. AID had a purpose and a mission, 
and I don't want to say AID is all bad. There are very good 
programs in AID, and they are programs that should be 
continued. But it's role should be dramatically changed.
    I think the figure now is 16,000 people in AID, and about 
7,000 in Foreign Commercial Service operations.
    Senator Brownback. But you would eliminate AID and role the 
remnants into trade?
    Mr. Mica. I think that AID, its mission has changed. You 
may want a smaller, downsized AID in some areas. But even that 
mission should be more oriented to helping hand, to conduct 
business, as opposed to just give-away programs. Now, there are 
going to be give-away programs whether we like it or not.
    But if you're going to assign personnel, I would rather 
them having working in assisting our companies overseas. If you 
all get to travel, go in and see what our Foreign Commercial 
Service offices are doing. I do that, and I've traveled all 
around the world. And they are ill-equipped. They are 
understaffed.
    Japan, UK, France, Germany--their embassies have turned 
into trade missions. Their goal is no longer just diplomatic.
    I will give the former Secretary of State some credit, 
because he did begin to start making our embassies aware that 
their mission is not just diplomatic. It is also one of 
promoting trade. But there is a great variance between 
embassies in their capabilities.
    So if you're going to have assistance to our folks 
overseas, I would rather see the resources there.
    Now, communications today has also dramatically changed 
access to information, whether it's trade assistance, 
promotion, financing. And there are some efforts to put a lot 
of this into some type of network that can be pulled up.
    Even the private sector has several services where you can 
get this information, and may even transcend what we're able to 
do in government. But a lot of these folks can't talk to each 
other.
    I was down in Haiti, and they were looking for some citrus 
products or something like that, and they got a Department of 
Agriculture person trying to find out this information. I was 
in Guatemala. Guatemala, their Foreign Commercial Service 
office didn't have a modem so that you could transmit data 
information back and forth.
    I was in Russia, and we had--you could count all the 
Foreign Commercial Service officers in Moscow on one hand. And 
the AID building is as big as the Dirksen Building, 
practically.
    It's funny, because when I went to Moscow, I flew over and 
we met with those folks, and I came back, and I turned on the 
television. This was a couple of years ago. Things have changed 
a bit since then, but on the TV was a broadcaster broadcasting 
from Moscow, and he said tonight we're at the biggest trade 
fair in the history of Moscow, and it was hosted by the 
Japanese.
    And here I had just come from our AID give-away mission, 
which is our biggest enterprise, and the Japanese were doing a 
trade fair. Things like that. And the government does support 
these fairs and other things, actually assists businesses into 
these markets.
    Then what's amazing is if government provides this little 
bit of help, then business takes over, and business--our 
business can compete. Our business can beat the pants off 
anybody. Our workers can produce products. And actually our 
products are even sought overseas, but sometimes they aren't 
bought. They're sought but not bought, because of the way we're 
structured and the assistance we provide. So that's a long 
answer.
    Senator Brownback. A couple of real narrow questions, and 
then I want to turn it over to Senator Lieberman.
    Number one, you both fundamentally believe from your 
private and public experience and perspective that the current 
design of the system is fatally flawed and not producing the 
way it should. Would that be fair?
    Mr. White. Yes, but I mean fatally flawed may be going too 
far. I think we can make significant improvements, and we ought 
to try to do that.
    Mr. Mica. Very expensively flawed. I always do the cost/
benefit analysis, and they fail.
    Senator Brownback. Second question would be, do you both 
agree that the primary function should be opening markets 
overseas? Or is it promoting our products? Or can you not agree 
on the primary function of our trade apparatus?
    Mr. White. I was going to say I do think that should be our 
primary function. That's the one thing the government can do 
that the private sector can't, and I think if we organize 
ourselves around the principle that that's what the Federal 
Government ought to be doing, that will help us do that job 
better than we're doing it right now.
    That doesn't mean that for a period of time or recognizing 
that we live in an imperfect world, there isn't some promotion 
that should take place at the same time. But I just think we 
make a mistake if we start to let that cloud our judgment about 
what the real role of the Federal Government ought to be.
    Mr. Mica. Well, I think that there is a role for the 
Federal Government today, maybe for some time in the future, 
for trade assistance, trade promotion, trade financing, and 
certainly trade negotiation. And the role may vary. It may 
change.
    So we've got to be flexible, create something flexible. But 
I know this is very costly, the way it's now structured. It's 
not as effective as it should be, and it leaves a lot of people 
behind, and it shouldn't.
    Senator Brownback. Senator Lieberman?
    Senator Lieberman. Thank you, Mr. Chairman. The discussion 
and your testimony have been very helpful. And I appreciate the 
questions that the Chairman asked at the end, which show the 
consensus here, and I share it.
    And that is that we are in a situation now where we do need 
to have a trade promotion and financing role, but there is 
nothing to be self-righteous about, to put it mildly, or 
defensive in terms of trying to do better what we're doing.
    I remember early on I got interested in this after I came 
to the Senate. I remember meeting with a business in 
Connecticut, and they were telling me they had just gone 
through a negotiation, a competition, really, for a major 
contract abroad. I believe it was in Asia. And they were 
competing against a company from Asia and a company from 
Europe.
    And they said there were simultaneous negotiations going on 
between the vendor and these three competitors. And they were 
in a room alone. And in the other room was the Asian company, 
plus the representative of their finance ministry and their 
export financing agency. And the same was true of the European 
company. And our company lost the competition.
    That memory always sticks with me. So in a way that alters 
the terms a little bit. The reality of the market is changed by 
the activity of the other foreign governments. So it forces us 
to try to help our businesses to compete in that marketplace.
    Obviously as time goes on and we can reduce some of those--
and maybe we can--some of those activities by foreign 
governments, we can do the same ourselves.
    I am interested in what you said about USAID, and it's 
something to think about. I haven't visited this topic for a 
while, but early on while I was here, there was a movement 
which was somewhat successful, and in some ways may account for 
some of what we're seeing, what we called tied aid.
    We were trying to set up standards where more of the 
American foreign aid was tied to business opportunities for 
American business as opposed to just giving away, and the whole 
notion was that if we helped--well, the classic example--helped 
invest with American foreign aid in their telecommunications 
infrastructure, then they, whatever foreign country it was, 
would continue to come back to American companies to supply and 
maintain that structure.
    So they are playing a trade support function in that sense, 
and I had never thought before about how or whether we might 
coordinate that with the other trade functions.
    Let me ask a couple of questions. One is, as you know, in 
1992, Congress created this TPCC, the Trade Promotion 
Coordinating Committee, which has as its goal to do some of the 
things that we're talking about here. And I wonder how you 
would evaluate its record.
    Mr. Mica. I view it, as I said in my testimony, as a band-
aid approach. There are much more fundamental problems. Again, 
all these folk want to protect their turf. They are wonderful 
people, and some of them do a great job.
    But the thing is still dysfunctional. It spends a lot of 
money. There is duplication, and there could be some 
consolidation. There are many difficult questions in how you 
restructure this, from the top all the way down to the bottom.
    But it's our responsibility to bite the bullet and to put 
it in some order that does a better job, more cost effectively. 
And again, that's just a band-aid holding this together.
    And what will happen, in some instances the private sector 
is leaping ahead. Remember I talked about the communications? 
There are some services now that are, in the private sector 
they are providing better assistance than the government.
    But when the right hand doesn't know what the left hand is 
doing in government, you have a problem. Now, they may know, 
but they want to protect their turf. So that provides some 
temporary, band-aid approach.
    Senator Lieberman. So you'd say that we need more than a 
coordinating committee?
    Mr. Mica. Oh, yes. No question about it. And a coordinating 
committee can't do what we have to do, and that is, we've got 
to go through and eliminate some of these positions. If you 
look at some of the trade assistance areas, too, there is 
duplication.
    Through some communication, through spending a few bucks 
and communicating, you can eliminate many of these positions. 
We don't need that information. Putting some of that on line--
we have the capability of hooking up all of our embassies in 
the world in instantaneous communications. Now, why can't they 
have through that incredible technology that we have in 
communications with our embassies have a link for trade and 
instantaneous information?
    Somebody in Kansas should be able to instantly find out 
what the opportunities are in South Africa or in India. Some 
little pieces of this are starting to be put in place, but not 
in a good fashion.
    There are little experimental things out there. But our 
role as Congress is to put it together, make some tough 
decisions. There have got to be some positions eliminated.
    Another one, not in your jurisdiction, is go to an embassy 
and start looking at the economic counselors that they have. 
These are post-World War II statistics gatherers. I submit to 
you today that most of the economic information that they have 
is readily available or provided somewhere. So what are they 
doing, these economic counselors?
    And you will have in some embassies more economic folks 
than you will have Foreign Commercial Service folks. And then 
gain we look at AID. We look at what we're doing, and tied aid 
is very important. Almost every country uses that approach--the 
Japanese, the Canadians.
    I was in Haiti, and represented some Florida industries 
before the fall of the government there, and one of the things 
we looked at was having the Florida folks upgrade the 
utilities. Because you can't conduct business without 
utilities.
    And as it turned out, we wanted to have U.S. firms put in 
the generating equipment, or work on that. When I came back, as 
a member of Congress and went down to ask how's the power 
generation project coming, the Canadians had got the project. 
Well, the Canadians won the project--it's basically a tied aid 
thing. Then they will be putting in the power things. The 
telephone polls will be Canadian, the switches, all the 
generation equipment.
    So these things have a big impact in future business 
opportunities, and we need to be devising a system that can 
compete and give our folks at least a level playing field.
    With that, there is a vote.
    Mr. White. We have to go. Let me just comment on this 
coordinating committee.
    Senator Lieberman. Yes, go ahead.
    Mr. White. Which is that it essentially prevents us from 
doing what we really should do. It's adding another agency, 
instead of really going through and organizing things on an 
appropriate basis.
    Senator Lieberman. Take 30 seconds, if you would, and 
answer for me what I gather is the reflexive question about 
your proposal to put all the trade agencies under the USTR. Is 
it appropriate to combine both the trade negotiation advocacy, 
opening up markets function with the promotion function?
    Mr. White. I think so, because the fact is you're kidding 
yourself if you think that function isn't consolidated in the 
first place. I mean, when we're negotiating with a foreign 
country, we're the United States and we're not the U.S. Trade 
Representative, or somebody else.
    And I think that conflict of interest exists. It's going to 
go on whether we have it organized differently, and it really 
just gives other countries an ability to play off one agency 
against another.
    We're really probably better from a functional standpoint 
in having one agency responsible for making that particular 
decision.
    Senator Lieberman. Thank you very much.
    Senator Brownback. Thank you very much. Good seeing you 
again.
    The next panel that will join us is Professor William Lash 
from George Mason School of Law. He is an expert on 
international trade and business issues. Dr. Ed Hudgins, an 
expert in trade and regulatory issues at the Cato Institute. 
And Mr. Ed Black, the president of the Computer and 
Communications Industry Association, and that's an association, 
obviously, very active in export issues.
    Gentlemen, we've very pleased that you would join us today. 
Sorry if there was a bit of a delay, but I hope you also found 
the last panel somewhat enlightening. I think you just heard 
from a couple of members of Congress who are some of the 
leading thinkers about how we should be reorganizing our trade 
functions to get the most out of it.
    I was struck by one of their statements that now our 
National trade deficit exceeds our National deficit. And 
actually I think maybe Adam Smith may have more to say about 
that than some others we will see.
    But with that I believe we'll start, Professor Lash, with 
you. As I said earlier, we can take your written testimony. 
Happy to do that. I'd rather have a kitchen table discussion. 
You proceed however you are comfortable. Thank you for being 
here.

TESTIMONY OF PROFESSOR WILLIAM LASH III,\1\ DIRECTOR OF THE LAW 
   AND ECONOMICS CENTER, AND ASSOCIATE DEAN OF GEORGE MASON 
                    UNIVERSITY SCHOOL OF LAW

    Mr. Lash. Thank you, Mr. Chairman and Ranking Member. I 
will refer to my written testimony, but I would also like to 
comment on the excellent discussion by the previous panel.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Lash appears in the Appendix on 
page 51.
---------------------------------------------------------------------------
    I am in partial agreement with both of the previous 
panelists. I have long advocated the approach of Senator Roth 
and Representative Mica to a unified trade agency. However, I'm 
more in sympathy with Representative White's approach for a 
limited trade agency.
    I also want to preface my statements by saying I am not 
here just as an academic, which is always a negative comment in 
this town. I am actually an exporter in my free time. I have 
never once gotten any assistance from the Ex-Im Bank, OPIC or 
the Department of Commerce.
    The Department of Commerce's stated role is to promote job 
creation and economic growth, sustainable development and 
improved living standards for all Americans. Who could possibly 
disagree with those statements?
    Unfortunately, the Department of Commerce's actual 
functions, particularly in international trade, have very 
little to do with accomplishing these goals. The trade 
functions, people have stated earlier, duplicate the efforts of 
other agencies and States, and the private sector, while 
engaging in a massive wealth transfer, and showing limited 
results.
    Secretary Daley has earlier appeared before this body, and 
stated that the Department of Commerce will be continuing to 
engage in aggressive export promotion. The Secretary stated 
they have put $250 million in export promotion, resulting in 
over $40 billion in overseas sales. He maintains that advocacy 
for American exports is one of the prime responsibilities of 
the Department of Commerce, and these efforts are paying off 
dramatically, claiming that some $65 billion, including $38 
billion in American content exports, were generated from these 
advocacy efforts.
    Those are very impressive claims made by the Secretary, but 
in the words of a popular film today, I ask you to show me the 
money. Nineteen agencies, as people have already stated, have 
some role in promoting U.S. exports. While the Department of 
Commerce controls only 8 percent of this budget.
    Despite Secretary Daley's assertion that the Department of 
Commerce is at the forefront of trade promotion efforts, nearly 
75 percent of export promotion expenditures are made by the 
Department of Agriculture.
    Regardless of ideology, economists generally agree that 
it's virtually impossible to verify these claims of trade 
promotion. Even Bob Shapiro, of the Progressive Policy 
Institute, and a former economic advisor to President Clinton, 
admits there is no economics to this argument. Shapiro 
correctly recognizes that what is going on is nothing more than 
a wealth transfer of taxpayer monies.But that's at the expense 
of industries who don't have the clout. You're simply shifting 
things around.
    American exports are competitive in global markets because 
of the productivity and ingenuity of American entrepreneurs and 
workers. It is insulting to the many successful large and small 
exports who succeed without federally financed export 
assistance.
    The fan rooting for his team while watching the game on TV 
may take pride in the victory, but he can't be so delusional to 
think that he actually scored the winning touch down.
    The International Trade Administration, part of the 
Department of Commerce, is the home of the Big Emerging Market 
Initiative. The ITA will help exporters find distributors, 
refine their export strategy, set prices, find language 
interpreters, and refine their information needs--everything 
but build the product and design for you as well, it appears.
    It also assumes that no one else could accomplish these 
tasks. Regional banks, consultants, and, dare I say, attorneys, 
and chambers of commerce are also capable of filling this role, 
and do so on a daily basis.
    Information regarding trade leads are generated by industry 
groups and private news services. When I mentioned my 
industry--I work in the cable industry as director of a cable 
network--we get our leads frankly by going to cable shows. The 
cable operators from Argentina or Chile are there. Not the 
Department of Commerce.
    And again it's a minimal expense, because the cable shows 
are typically held in places like D.C. and New York. This may 
not be true for all industries, but the information is out 
there, Senator.
    The ITA, frankly, is unfairly competing with private 
service providers. At a time when even the poorest of our 
citizens are being forced to become more self-reliant, the 
Department of Commerce cannot continue to offer these needless 
subsidies.
    The Department of Commerce, ITA, has also been touting the 
effectiveness of the National Export Strategy for the past 
several years. The NES, as many of you are aware, targets 
specific countries as Big Emerging Markets for export 
penetration.
    These BEM's are Mexico, Argentina, Poland, Brazil, China, 
Indonesia, India, South Africa and Turkey. I don't think any 
exporter ever needs the Department of Commerce to tell him that 
China and India are big emerging markets. Simply looking at any 
book on economics or picking up the Wall Street Journal will 
tell you that is where the growth is.
    Similarly, the NES targets specific sectors. Under the 
BES--I love the acronyms--the Big Emerging Sector initiatives. 
These targeted sectors include aerospace, telecommunications, 
information technologies, environmental technologies, and 
infrastructure industries.
    Let's take an area like aerospace. Export finance or export 
promotion is not going to be what makes Boeing or McDonnell-
Douglas successful. They will continue their success, and, 
again, since Boeing is the number one player in the aerospace 
market, and McDonnell-Douglas is number three, you could do 
more for these companies simply by relaxing of anti-trust 
controls, rather than export finance or export promotion.
    I think if you had representatives of these companies 
before you, and gave them a trade-off, we'll make this sure 
this merger goes through, or we will give you some export 
finance, I would be hard pressed to think that they would not 
take the former.
    The bottom line, Senator, the importance of big emerging 
markets and sectors should be made by businessmen, not 
bureaucrats. The government has no role in picking winners and 
losers, and I'm sure Dr. Hudgins will comment further on that.
    As former GATT Director General Peter Sutherland once 
noted, once bureaucrats become involved in managing trade 
flows, potential for misguided decisions rises greatly. As the 
former panel mentioned, HDTV is a stellar example of industrial 
policy gone awry.
    Also the National Export Strategy, while promoting 
subsidized loans and guarantees for exports, will support non-
market, non-finance based considerations in selection of loan 
recipients. The NES not only selects based on where they think 
there will be growth. For example, environmental technologies 
have been targeted for special consideration, not simply 
because it's a market with great demand globally, but because a 
political decision has been made that we want to promote 
environmental technologies above others.
    Under this plan, the Department of Commerce will make 
export financing readily available to environmental technology 
firms, while, quote, identifying suitable markets for 
environmental products. This glaring attempt at industrial 
policy and managed trade empowers the government to select a 
designated sector for market development and subsidization.
    I know people always say, we must join the fray and not 
spout off Adam Smith. And I was a long detractor of now-Dean 
Garten. I hope I have not forced him into academia, though.
    But I must point out this constant belief, this mantra of, 
everyone else is doing it. If I was an 18-year-old, or a 20-
year-old young man in China or in Europe or Japan, I'd find my 
prospects for advancement far less than they are in the U.S.
    Obviously this idea of managed trade is not what is leading 
productivity and success. At the same time, for everyone to 
talk about the great--how we are being overspent by the 
Japanese and the Europeans, well, that means we are winning.
    Because we're the leading exporter with less money being 
spent on export promotion. Obviously they are the ones who are 
losing out on this.
    Now, getting back to the question of redefining or 
reorganizing various trade functions, some of the ITA's 
function is informational rather than export finance or 
subsidies. These functions can be provided, if necessary, by 
other agencies.
    For example, overseas commercial attaches should be 
detailed to the Department of State. The attaches currently 
report to the U.S. ambassador anyway, who is an official of the 
Department of State.
    I also find that since many States--Kansas, Connecticut, 
Massachusetts, to name just a few--have their own trade 
promotion activities, with offices in Europe, Latin America and 
the Pacific Rim. State governors and officials, even mayors of 
large cities--even Marion Barry managed to find his way to Hong 
Kong, I believe--routinely travel abroad to promote exports of 
their State.
    The Department of Commerce should not be duplicating these 
efforts. As we seek to shrink big government and return power 
to the States, we should extend the same courtesy and model to 
export promotion.
    The ITA is also actively involved and promotes itself as 
the guardian of United States firms suffering from unfair 
competition from foreign producers. By this I am referring to 
the anti-dumping laws. The Department of Commerce is the 
designated administering authority, and conducts the 
investigation to determine whether or not dumping is likely to 
take place.
    The ITC, my former agency, considers the question of 
injury. Commerce's role is to determine whether or not the 
imports under investigation are sold in the U.S. at less than 
fair value. The role of the ITA as a political body, versus 
independent agencies like the ITC, is not conducive to an 
atmosphere of trust and integrity in our anti-dumping laws.
    The Department of Commerce, again, has many functions. So 
does ITA. While engaged in market negotiations and export 
promotion on the one hand, how could I be perceived as giving 
people a fair shake in determining dumping margins? We really 
can't underestimate that.
    I can tell you from personal experience that the dumping 
margin is probably the most important factor in determining 
whether or not an affirmative finding will be found.
    Since cases are not typically brought by healthy 
industries, a sizable dumping margin found by the Department of 
Commerce will get you a 75 percent chance of finding an injury.
    The bifurcated nature of the investigation can have no 
rational, political or economic basis. If the ITC is 
determining the condition of the American industry, and the 
final question of injury, I have always found it curious as to 
why the Department of Commerce was engaged in that 
determination.
    Other functions of the Department of Commerce, such as 
pursuing market access, implementation of the General Agreement 
on Tariffs and Trade--GATT--and the World Trade Organization--
WTO--while monitoring trade agreements, can best be handled by 
the USTR.
    If the USTR is charged with negotiating most of these 
agreements, shouldn't implementation be linked with monitoring 
of these agreements?
    The Department of Commerce, Bureau of Export 
Administration, BXA, safeguards our National security by 
monitoring and controlling the export of potentially dangerous 
dual-use technologies. But BXA is not the sole arbiter on 
export control issues. The Department of State has a major 
voice in implementing the Arms Control Munitions Act.
    Five years ago, an interagency report prepared by the 
Departments of Commerce, State, Defense and Energy, recognized 
the error of the decentralized control of export regulation. 
The report concluded, consolidating these functions under the 
appropriate official will provide not only the proper 
oversight, but also a more efficient and effective approach for 
tracking referred applications and examining export trends.
    If export controls are truly a matter of foreign policy, 
let BXA join the Department of State, and let there finally be 
one voice on export controls. If Congress believes that export 
controls are a matter of National security, let BXA and the 
arms control function of State be jointly transferred to the 
Department of Defense.
    BXA is slated to have responsibility for export control 
under the Chemical Weapons Convention, if ratified by the 
Senate. As a major new export control initiative, this role 
would seem more properly suited to the Department of Defense.
    A plurality of exporters polled by the U.S. Chamber of 
Commerce, indicated that they have seen no changes in export 
markets due to the administration's export policies. Export 
promotion and finance activities cannot be the dispositive 
factor in export success.
    Interest rates, currency rates, and infrastructure are far 
more significant in determining export success. Similarly, the 
Congressional Research Service similarly concluded that U.S. 
economic policy and the domestic supply and demand of capital 
will continue to determine the level of trade and employment 
for the economy.
    To boost exports, government relaxation of onerous Cold War 
export regulations will be far more successful and frankly less 
expensive than relying on government trade promotion.
    An estimated $30 billion in increased exports is expected 
as we relax export controls on certain computer equipment. 
Billions more in exports are exports when telecommunications 
sales are similarly eased.
    Export promotion activities, be they advocacy, financial 
subsidies, or informational, should be left to the States or 
private sector. And this notion of governments competing, and 
the Department of Commerce as our champion should be frankly 
banished to the scrapbook of economic history.
    Thank you for your time.
    Senator Brownback. Thank you, Professor Lash. I appreciate 
that presentation. We'll have some questions later.
    Dr. Hudgins, we would appreciate your testimony. The mike 
is yours.

   TESTIMONY OF EDWARD L. HUDGINS,\1\ DIRECTOR OF REGULATORY 
                    STUDIES, CATO INSTITUTE

    Mr. Hudgins. Thanks a lot. I'm going to depart a little bit 
from my written remarks, and do as you suggested, to suggest 
some general guidelines for how to reorganize the Department of 
Commerce.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Hudgins appears in the Appendix 
on page 63.
---------------------------------------------------------------------------
    First of all, there really are two approaches to trade and 
economics. The one that seems to fascinate a lot of people is 
typified by MITI in Japan, but I think actually a better case 
is found in Western Europe. This is the notion that governments 
can help industries directly, pick winners and losers, help in 
exports, et cetera.
    I point out that in Western Europe unemployment is over 
twice as high as in the United States, around 12 percent; job 
creation is virtually zero; under-employment is a very serious 
problem.
    The industries in Western Europe are now becoming non-
competitive. Germany is not building plants in Germany any 
more. They're building them in South Carolina, and they're 
building them in the Czech republic and lots of other places.
    Essentially those corporate welfare systems are collapsing, 
and I think if they don't make some major changes, quite 
frankly, you will see in Western Europe a slow motion version 
of what happened in Eastern Europe--that those systems will 
fall apart within the next decade without major reforms.
    The notion that we should copy such a failed system I think 
is a serious mistake. Japan has a similar system, perhaps not 
quite as bad. But again, to the extent that Japan has had 
success, it has not been primarily because of their government 
promotion policies.
    MITI tried to stop Honda from going into the auto business. 
MITI tried to keep the Japanese auto makers from expanding the 
numbers and kinds of models that they had. If you look at a lot 
of the MITI advice, for example, you find that it was a mixed 
bag to say the least.
    The point is that if we are concerned that Western Europe 
and the governments of Western Europe are, as it were, outdoing 
us in getting involved in the economy, I would say yes they 
are, and that's why they are collapsing.That's why in Western 
Europe, unemployment--and everyone unemployed tends to be 
unemployed for approximately a year. In the United States it's 
maybe two or 3 months.
    Their systems are not systems that we should copy. We 
should run as fast as we can in the opposite direction.
    The other approach is a more market approach, and that's 
what I think we should take.
    Before we get into detail, the trade functions of the U.S. 
Government fall into three categories. One is market openings, 
such as negotiating free trade areas, such as the recent 
Uruguay Round that created the World Trade Organization. These, 
I think, are valid functions of government. They are, of 
course, performed principally by the USTR, and while I might 
disagree with some of the content of the negotiations, I think 
it's a valid function. The USTR does a pretty good job.
    The second function that the U.S. Government is involved in 
is trade restrictions, that is, preventing Americans from 
disposing of their own property, specifically from purchasing 
products from other countries.
    This, I think, as I say, is an infringement on the 
liberates of Americans, and should not be a matter for the U.S. 
Government. Unfortunately, we do have trade restrictions.
    We have anti-dumping laws, which I consider simply to be 
protectionism under a different name. I don't consider the 
anti-dumping laws to have any basis in economic theory, 
especially when you are not talking about a government directly 
helping another industry. We can get into that a little bit 
later.
    That, of course, is a function that is in part performed by 
the Commerce Department and part performed by the International 
Trade Commission, and I think it's an unfortunate function.
    The third is export promotion, which I will go on the 
record of saying I don't think it's the government's business. 
Let me give you some of the reasons and concerns that I have 
here.
    First of all, it is important how we think about trade and 
exports. No doubt the Commerce Department members and members 
of all the other agencies that we've seen that are involved in 
export promotion can point to the fact that they have given 
money or assistance to some particular industry, that the 
people in that industry have used the money well or prospered 
in some way.
    But if you drop money out of a plane over Washington, 
everyone who picks up money, number one, is going to be glad 
they got it, and, number two, they're going to probably use it 
for something of which we approve.
    That does not necessarily make good public policy. I think 
we have to go a little bit beyond that.
    There is no indication that I have seen that government 
picking winners and losers, either directly through the kind of 
subsidies the Department of Commerce passes out, or in terms of 
helping exporters is any better than what the private sector 
does on its own, and what they could do with their own money.
    And we've mentioned the case of the high definition 
television. I will remind you that in the 1960's and early 
1970's the U.S. Government spent $960 million on a supersonic 
transport that we were absolutely convinced we needed to remain 
competitive in the world.
    Of course, we didn't make a supersonic transport. The 
French and the British got stuck with one. They haven't 
recovered their development costs. They don't run the thing at 
a profit. It was a big flying turkey.
    This is the problem with having government involvement. 
Now, let's take a closer look at the trade issue. One of the 
serious problems I have with how we reorganize trade functions 
is that free trade does not become managed trade.
    This has been the trend in the last few years. Not where we 
tried to get a foreign government to remove a trade barrier 
that they should remove, but where we tried to do bureaucrat to 
bureaucrat management of trade flows.
    For example, the recent complaints about semi-conductors 
are to me a key example. What you found is that the 
administration argued that because the United States controlled 
40 percent of the world market and only 25 percent of the 
Japanese market, that indicated that they were doing something 
unfair and that they should guarantee us a market share.
    Well, you can turn it around and point out that the 
Japanese control about 40 percent of the market, just a little 
less as well, but only have 20 percent of the U.S. market. So 
the Japanese, using the same logic, could say that we are being 
unfair.
    In fact, in the high valued microprocessor chips, the U.S. 
suppliers control something like 70 percent of the Japanese 
market. The point is you see a lot of this attempt to use 
numbers to manage trade rather than to do what I think the U.S. 
Government should be doing, that is, creating free trade and 
removing real barriers. That is something I am very concerned 
about.
    I will make two more remarks. First of all, I want to say 
something about the problem of corruption, which has been one, 
of course, that Commerce Department has been associated with 
recently.
    In a sense, you have two forms of corruption. Classical 
corruption sees a government official give some special favor 
to a citizen, maybe they expedite a license, they give them a 
special government loan or contract, in return for some direct 
remuneration.
    There is another form of corruption that I call 
institutional corruption that we see especially in Western 
Europe, and unfortunately in this system as well. The corporate 
welfare state, by its nature, breaks down the separation 
between government and the private sector, between political 
and economic power.
    Government is expected to help this interest group, this 
business, this sector directly. What you get as a result is a 
form of institutional corruption that differs from what you see 
in Third World countries only in the form of remuneration.
    Politicians and bureaucrats will get, of course, political 
support. They will get the prestige of helping the people and 
so forth. But the mechanics is the same.
    So when I hear that the Department of Commerce officials 
have been involved in straight out shakedowns of foreign 
businessmen, in a sense it doesn't surprise me, because that's 
the nature of the system.
    And I think that that has to seriously be taken into 
account when you look at how to reorganize Commerce and 
whether, in fact, you want to copy one of the system that we 
see in other countries.
    The final thing I will say about reorganization, yes, we 
have a lot of bureaucratic sprawl. That's the nature of 
bureaucracies. Everybody wants to get involved and show how 
they're helping the people. But I'm concerned that when you 
reorganize, you insulate the market opening functions that are 
currently performed by the U.S. Trade Representative, that is, 
negotiating free trade areas and so forth, from some of the 
other functions.
    It will detract from America's effectiveness and 
credibility if the same Department and agency that is saying we 
want you to remove a trade barrier is also saying we would like 
you to give some special preferences to U.S. goods, we would 
like some kind of managed trade arrangement, by the way we 
think your businesses are dumping in the American market, and, 
by the way, we're also the guys who are handing money or 
assistance to some of our businessmen.
    I worry that if we mix those functions together, it is 
going to take away from the effectiveness of our trade 
negotiators. And, as I have said, I don't think we should be 
involved in some of those other functions anyway. But that's 
the one thing I would emphasize as a guideline in 
reorganization.
    I will end there and welcome your questions.
    Senator Brownback. Thank you very much.
    We will now hear from Mr. Ed Black, president of the 
Computer and Communications Industry Association, which is very 
active in exports.

   TESTIMONY OF EDWARD J. BLACK,\1\ PRESIDENT, COMPUTER AND 
              COMMUNICATIONS INDUSTRY ASSOCIATION

    Mr. Black. Thank you very much, Mr. Chairman. I'm happy to 
be here. Senator Lieberman, as well. I appreciate this 
opportunity to testify. Our industry certainly has a great 
interest in global trade, and a lot of involvement.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Black appears in the Appendix on 
page 68.
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    We represent a cross section of small, medium and large 
companies with both computer, telecommunications, hardware, 
software and services backgrounds.
    First of all, let me just say I will not give a very long 
statement. I will submit it for the record. I have a few 
prepared comments to make now, and lots of notes on what people 
have said before me to comment on, but I'll hold those.
    I believe many others will provide a lot of impressive 
statistics to the Committee showing how many new jobs and how 
much of our economic growth that we have experienced is related 
to international trade, and not just growth totally, but the 
amount, the percentage of our economy and the jobs related 
thereto.
    Our industry is a very globally competitive industry, and 
we're growing stronger. Effective competition in global markets 
is essential for our industry's health and survival. We're 
attracting many competitors, which is fine. We are wary of some 
energetic efforts, however, by other governments to bolster our 
competitors in ways which might be unfair.
    We can succeed, but we do need to have the proverbial level 
playing field.
    We're also wary of too much government involvement. We 
recognize there are areas where government and the Commerce 
Department can play a particularly important role, and we 
welcome those areas.
    We think this is a pragmatic decision that should be made, 
not ideological. We want and need a healthy and open global 
market place.
    We have years of experience, frankly, being critical of 
government and Commerce in many areas. But in contrast to some 
of the earlier comments that have been made, we don't think the 
current system is broken. We are succeeding tremendously, our 
companies are, our industry is, and many other industries are 
succeeding quite well.
    I'll comment on the trade deficit. Comparing it to the 
budget deficit is like comparing apples and oranges. The trade 
deficit, I think almost everyone will admit, is largely a 
function of macro-economics. Right now the vitality of the 
American economy is sucking up products both from by U.S. 
companies and imports from overseas.
     I think it would be very inappropriate to use that as a 
measure somehow of the unhealthiness of the trade system and 
our structure of government.
    We are sometimes nervous when we hear discussion of the 
role of government as an enforcer, or regulator or attacker, at 
times. But even language calling the government a partner has 
made us nervous.
    I think we see the need for an ally, and at times a 
catalyst and a stimulator. There are things government can do 
to leverage limited resources that do have a tremendous pay off 
for our economy. We see trade promotion, advocacy and 
assistance functions in this light.
    We urge that attempts to change structures be based on 
making sure that any fixes don't damage the many programs that 
are supporting some pretty successful outcomes. ``Penny-wise, 
pound-foolish'' is a saying that many in industry admit has 
applied to some of our decisions when streamlining.
    And we urge government to learn from us. The structure of 
government is important. Though many in business, frankly, 
don't often focus on structure, our main concern is: Are 
important functions being effectively carried out, are programs 
helpful or harmful, are programs responsive to the real world 
of the private sector?
    To the extent that we can save or retarget resources that 
are being inefficiently used or redundant, that's certainly 
desirable. But it's important primarily that well run programs 
be structurally in places where they work.
    They can be in different agencies. There is no one magic 
formula how to structure. I think it is very important that we 
have good communication and coordination between those 
different structures.
    In that regard, I found the chart that was shown 
fascinating. And I have worked with John, and I'm going to have 
to get a copy.
    But what is important in government that is missing from 
some of the proposals relating to structure is location because 
of the policy role--not the operational role. It's really the 
function of government to be an advocate of different concerns, 
and that's where we find the structural differences are so 
strong.
    I think everybody has mentioned export controls, and I will 
come back to that. And that is where policy and function are 
tied very closely together.
    Over the years we have watched many reorganization plans in 
the trade area. We have seen some partially implemented, and, 
frankly, many have had a lot of alluring effects.
    But under analysis, and sometimes just because of political 
pressure, most have wound up losing their appeal, and frankly 
if we felt the system was broken, I would be more intensely 
involved in finding the solution.
    But as I said, I'm not sure we feel--it's not neat, without 
a doubt. It's messy. But is it--and I heard dysfunctional. Is 
it really? I'm not sure I see the harm. I don't see how it's 
hurting us. We are booming. We are succeeding in many ways.
    I'm not sure it's broken. Congress deserves no small amount 
of credit for the better working of our system, because the 
Export Enhancement Act, passed by Congress, created the TPCC 
process for coordination. It has worked to a great degree in 
taking what was then a very disorganized effort, and making it 
into a much more coordinated and cohesive one.
    There is always a danger when you have so much diversion 
and you start coordinating that you wind up with group decision 
making, and as a result have no real accountability. This is an 
area I would urge the Committee to stay focused on.
    I think it's important that agencies be given principal 
responsibility. They don't have to all be in the same agency. 
But you do want to know who is responsible for pieces of it, so 
that they can be held accountable.
    We have to applaud, looking at what's happened the last 
several years, what Commerce has done with the Congressional 
mandate to coordinate. We think there's been strong leadership, 
and from all indications Secretary Daley is committed to 
continuing that, and we welcome it.
    We think Commerce can lead, but making sure our policies 
are aimed at opening markets, promoting exports, enforcing 
existing trade agreements, being a strong advocate for the free 
enterprise system, with other governments and within our own.
    As a country, we need to be able to identify, understand, 
respond to developments in global business and developments 
undertaken by foreign governments, whether it's bribery, 
product standards, technology, financing, or export promotion.
    I will end with one area where we have had such long, 
historically consistent problems that it deserves mention, and 
that is the export licensing, export administration, both 
policy creation and licensing.
    We have more agencies involved now in the interagency 
license review process than we did at the height of the Cold 
War. I think accountability has suffered greatly as a result. 
The only thing that saved, our industry is that so much has 
been finally decontrolled that was not effectively 
controllable, that the pinch is not as bad as it used to be. 
But there are still areas where that hurts.
    There was a reference to BXA possibly being at State or 
Defense. No. Please. Don't do that to us.
    I'll leave the other points--I'd love to have a chance to 
dialogue on a number of the interesting points that have been 
raised. Thank you very much, Mr. Chairman.
    Senator Brownback. And thank you, Mr. Black, for giving of 
your time to come here and speak with us. And since Mr. 
Lieberman endured all of my questions at the start of the 
earlier panel, I am going to let him go first on this set of 
questions here. So, Senator Lieberman.
    Senator Lieberman. Thank you, Mr. Chairman. That is very 
gracious of you. I did not really consider it to be an 
endurance test. But you're nice to let me go first. I 
appreciate it.
    Mr. Black, you said something that is slightly off the 
focus of the hearing, but I found it so intriguing I just 
wanted to engage you on it for a moment, which is your caution 
to us not to overreact to the size of the trade deficit, 
because, as you say--or you're interpreting it as a sign of our 
economic strength, which is to say that we are consuming a lot, 
including a lot from abroad.
    So how do we judge the trade deficit? Does it have any--you 
know, we don't like to be in deficit on anything. It's our 
nature. It's almost as if we're losing a competition. So what 
value does it have to us?
    I mean, interestingly, Congressman Mica, I believe, did 
exactly what most of us in Congress would do, which is he 
talked about the importance of trade, and then he said that we 
have a problem. And the indicator of the problem is the trade 
deficit.
    How would you use the deficit, if at all?
    Mr. Black. I appreciate that. I think the deficit has such 
a negative connotation as a word. I think that is part of the 
problem. And I think somehow over the years we have come to 
think of exports as good and imports as bad.
    We're in a global business. We import, export, invest, 
source all over the place. There can be deficit situations that 
can be unhealthy. You need to look at the numbers to see if it 
is a sign of some kind of structural weakness.
    Senator Lieberman. In our own economy.
    Mr. Black. In any economy. You need to look at what we're 
doing, and exports and imports are a relevant factor. But a 
deficit, per se, depending on which industries are strong, what 
your natural resources are, a whole bunch of factors. And a 
deficit may not indicate any weakness whatsoever. It may be 
just a sign of strength.
    The fact that we import things that people want is really a 
way of enriching the American public. It's wealth creation. 
Pick the classic, VCR's--we don't make them here.
    We could shut off all the VCR's and we'd have a positive 
impact on the trade deficit. But would we be helping any 
American citizen? No. So the numbers themselves are just 
misleading. You need to look at what they mean.
    What we look at are the overall trade number, and the trade 
has grown dramatically. It has fueled our economic growth, and 
trade includes imports and exports. It's both.
    Most of CCIA's companies are multinationals. On the 
computer side, especially, 40 to 50 percent of our revenue 
comes from exports. So I think exports are good.
    We also are huge importers of products, of components, of 
sourcing. It's just too integrated. Global economic trade is 
too complex to use simplistic trade deficit numbers which are 
real tempting to want to use.
    But they should not be controlling. I'm seeing a lot of 
head nodding.
    Senator Lieberman. You're saying that what we really should 
be looking at--and obviously this question of whether the trade 
deficit is related to domestic structural economic weaknesses, 
but also more relevant is the--if I can put it this way--the 
absolute numbers on trade. Are we exporting more, particularly?
    Mr. Black. Again, and not saying imports are bad. We can 
get that tendency, but we are exporting a lot, and what we're 
exporting is a huge percentage of high value manufactured 
products. We're not just a natural resource exporter. So it 
shows strength.
    Senator Lieberman. That's very interesting to me. Let me 
come back to our focus here. In your testimony you have 
basically taken the if it ain't broke don't fix it. We're doing 
well for the reasons you've just stated.
    I presume that Mr. Hudgins and Mr. Lash might say that, 
yes, we are doing well, but it's not because of the government 
support for trade. But I'll come to that in a minute, but let 
me ask you if you would for a little more detailed evaluation 
of the TPCC, the Trade Promotion Coordinating Committee.
    Are there any changes you would make in the apparatus of 
governmental promotion, financing for trade?
    Mr. Black. Over the years I have probably advocated some. 
And I'm not sure I wouldn't still feel that, given the 
capability to make changes, I would. I think one of the best 
ways, and what I've tried to convey is a structure to think 
about it, which is to accomplish positive goals as the core 
rationale.
    In that context, the way we spend--first of all, what we 
spend in this area as a country--and I think some of the 
congressmen made the point--it's relatively small compared to 
other countries. But even given that as a set number, the way 
in which we distribute our resources throughout the trade 
bureaucracy is not necessarily a sensible one.
    I represent manufacturing interests. But clearly, if you 
look at the trade promotion dollars, agriculture which is 
important, but nevertheless a more limited part of our economy, 
gets a huge percent. And that's a trade allocation issue.
    Maybe if there was a structural change so that those 
decisions were made in one place, it would force more of a 
rationalization. I think that's a big one.
    A lot of the others--again, USTR is worthy commenting on, 
because it's mentioned so prominently. And it's been really 
tempting over the years, and I have toyed with wanting to 
combine Commerce and USTR.
    But WTR is liked by many in the business community because 
it is lean and mean and quick. You can really cripple it if you 
start making it run a bureaucracy.
    For anyone to not think there is tremendously important 
coordination between the Commerce functions of information 
gathering, support for negotiations, they worked very closely 
with the USTR, they're part of the same effort.
    But the USTR people, senior people, very skilled people, 
are not burdened with the management of that structure. And I 
think it enhances their ability. I'm actually a little nervous 
right now. They're getting into the trade enforcement world. 
And I'm not sure they should. Stay negotiators.
    Senator Lieberman. Let me ask just one question, and I 
don't want to burden you, Mr. Chairman, to Mr. Hudgins and Mr. 
Lash. Let me really frame it in terms of the anecdote I gave 
with this Connecticut company competing with an Asian and 
European company. Simultaneous negotiations. They're in the 
room alone, the Connecticut company.
    The other guys have their finance--a representative of the 
finance ministry and export-import bank. And we lose. So what 
do we say--what would you say to that American company?
    Mr. Lash. Well, it's kind of hard to counsel a person who 
loses, and there's a lot of reasons why someone loses. And the 
dispositive reason was you were there with a deputy assistant 
commerce secretary from MITI, and that's why they got the deal, 
I find that argument kind of hard to swallow, Senator.
    Senator Lieberman. Well, let me reframe it. My sense of 
what they were saying to me was that the reason they lost was 
that the other countries, in this case, particularly, were 
offering financing for the purchase.
    Mr. Lash. There are a lot of private sector financing. I've 
done a lot of writing about Ex-Im Bank and export finance. 
There is private sector financing available. I think now if 
you're talking about tied aid, that's a different story. But if 
we're talking purely--and OECD has come out against tied aid--I 
think if you want to come out and get aggressive in those 
markets, we should bring these two questions to OECD, and bring 
the Japanese and the Europeans to the carpet.
    And we've been very successful about----
    Senator Lieberman. Because of their tied aid.
    Mr. Lash. Because of their tied aid programs. And not try 
to duplicate that. Now, former Secretary of Commerce Brown was 
always advocating more tied aid, saying the way to beat tied 
aid is to counter with tied aid. I think the real question is 
let's use the mechanisms we have built.
    But I think the question of losing out on a particular 
sale, or having government financing available, there are so 
many regional banks. Twenty years ago, I think you would have a 
very good--I think it's an absolutely true story, where there 
might be difficulty is getting financing.
    But now you've got so many regional banks coast to coast 
that have export offices that are willing to help small 
exporters--I've had students, second year law students, 
obviously not business people, walk in to regional banks and 
get export finance, for small products. Fish ponds for Germany, 
thinks like that.
    So it can be done. The idea of two wrongs making a right is 
not true in global business. And it's certainly not true in 
other sectors.
    Senator Lieberman. Mr. Hudgins, do you want to give a brief 
response, and then I'll yield to the Chairman.
    Mr. Hudgins. Yes. I agree generally with what Bill has 
said. I would just add a couple of other points. In any given 
situation, you can point to examples where an American company 
might lose out because there literally is a MITI person there 
saying, and by the way, we will give you finance or some other 
thing.
    Perhaps it's cold comfort to say that this does not imply 
that it would be an advantageous thing if we could counter 
subsidy for subsidy, MITI or any other government form of aid.
    That means that we're going to lose out occasionally. We 
do, in fact, have most of our companies getting private finance 
and doing pretty well in the world market. I would say, by the 
way, this also argues for us looking a little bit more at our 
financial deregulation here. I've been following also the 
issues of banking deregulation that would make it much easier 
for us to do certain things that we would like.
    Remember, in other countries, they are not burdened by some 
of the regulations that we are, in terms of their banking 
sector, so I would certainly look to that.
    What I don't want to do is create what I consider to be a 
failed and failing system that the other countries have in 
order to deal with any given case where, yes, unjustly and 
unfortunately American companies might lose out because there 
is a foreign subsidy of which I disapprove.
    By the way, I also think that that's something for a future 
World Trade Organization negotiations. I would like to see us 
negotiate away the ability of governments to do what our 
government does, what MITI does and what the Europeans do. And 
I hope that will be on the agenda in the future.
    Senator Lieberman. Mr. Black.
    Mr. Black. I guess I, as somebody representing businesses, 
that's unilateral disarmament. Sorry, we don't want to do it. 
We have to play in the world, and we're doing real well. And 
academic--I mean, it's ivory tower.
    Senator Lieberman. OK. Thank you. Very interesting and 
lively discussion.
    Senator Brownback. Thank you. Mr. Black, would you agree 
with Congressman White that our primary mission on trade should 
be opening markets? Or would you disagree with that statement?
    Mr. Black. I think it's an essential one. I'm not sure how 
beneficial, if you want to try to figure priorities. It is one. 
I think there are other important roles, as well, however. And 
I think the U.S. Government, again, I'm not trying not to be 
philosophical or ideological. I think there are real positive 
benefits that come from a variety of government programs and 
activities.
    Senator Brownback. So you don't have a primary mission for 
trade functions?
    Mr. Black. Oh, I think opening--when we face closed 
markets, they are tremendously burdensome, and yes, they have 
got to become very important. We have had a lot of success in 
opening many markets. There are limits. We've had a lot of 
success. We're very big supporters of what we have done 
internationally. And I am not facing the same problems as I 
did. I don't mean to say there are no problems out there, but 
our companies are not facing the same intensity of closed 
markets that we did 15 years ago in many places in the world.
    Senator Brownback. So it's one of many needs, is that what 
you say? One of equal and many needs?
    Mr. Black. It's a very important one, but not the only one.
    Senator Brownback. OK. And they would all be roughly equal 
in your estimation?
    Mr. Black. No. It's hard to subdivide.
    Senator Brownback. Here's what I'm driving at, and you can 
dispute this, but it seems to me that we in government have 
frequently tried to do everything, and we end up doing most 
things poorly then.
    And I really feel like we ought to do fewer things, 
probably as your business community does, but do them better. 
So I'm trying to focus in on, OK, what are the fewer things we 
should do. But if you dispute that, that's fine. I don't have 
any problem with that.
    Mr. Black. I really am in sync with your emphasis on 
wanting to try to get to a simplified, let's call it one stop 
shop approach.
    Senator Brownback. No, that's not it. Not one stop shop. 
It's one specialized shop doing a very good job, or two 
specialized shops. But not 15 doing everything, is what it's 
been.
    Mr. Black. And I guess I would go to the private sector 
metaphor, which is when you do global business as a company, 
you don't just do it alone. You go to banks, you go to 
accountants, you go to lawyers, you go to freight forwarders. I 
might say a freight forwarder is a less important function. The 
trouble is you've got to use them. It's an essential function, 
even though it's a less important one.
    So I guess what I would--I'm not sure I'd say I support the 
status quo, and every single program and agency is vital or 
important. No, I'm not saying that at all. I'm very willing to 
look for unnecessary and inefficient, duplicative programs.
    But I'm not starting out with the assumption that they have 
no value.
    Senator Brownback. Neither am I.
    Mr. Black. I know. I'm not suggesting that. I'm just saying 
I want to look at them one by one, and not in an abstract 
sense.
    Senator Brownback. And you're not willing to prioritize. 
That's fine. If you would prioritize the functions, it would 
help us, but if you're not, that's fine.
    Mr. Black. The USTR function, most of the Commerce 
functions we find valuable. BXA and export controls are 
negative in many ways. The USTR function is very important. Ex-
Im, and OPIC, they're more specialized, but for whom they 
serve, they have a great deal of value.
    Within the State Department, economic counselors I think 
have a little wider role than was described here. I think there 
is a danger there of maybe overlapping with the Foreign 
Commercial Service, and maybe that's one to look at. I think 
the Foreign Commercial Service has an important role there. But 
I think there is a different function, and maybe it shouldn't 
be allowed to overlap too much, but there is a different 
function, and maybe there for State.
    A lot of the other agencies who are involved--you've got 
Energy--they focus on their narrow piece. I think you could 
make an argument that maybe you take the similar functions in 
different specialized subject matter agencies, whether it's 
Energy, Agriculture, whatever, and put them into a cohesive 
group. That's intellectually conceivable, and it might work in 
a practical way.
    I don't see it as a huge gain. It might work. It might make 
sense. I'm just not sure that I don't see--I don't see a 
tremendous positive force or gain by doing it.
    But I would be open to think about specific possibilities 
along that line.
    Senator Brownback. OK. If later you want to come back with 
a priority list----
    Mr. Black. I'd be glad to.
    Senator Brownback. That's what we obviously have to do. We 
have been spending money like there's no tomorrow, but those 
days are ending. And you've been real critical of these 
functions in the past. Last year, in the House Commerce 
Committee your testimony was very critical of international 
trade functions.
    You said international trade is an increasingly important 
part of our economy, and should be an area where functions are 
consolidated, not dispersed. There are significant linkages and 
synergies which can result from the various international trade 
operations and programs working closely together.
    Which perhaps is not inconsistent with what you're saying 
today. It would be very helpful to the Subcommittee if you had 
a design consistent with this statement and todays testimony, 
of how we could pull some of these functions together. That 
would help us. Because that's ultimately what we're going to be 
looking for.
    And I think it would help you folks, too.
    Mr. Black. I'd be willing to participate. Over the years, 
and in past legislative efforts, we've made that effort. The 
difficulty, quite honestly why I am somewhat reserved here, is 
that usually they foundered on some very big, important 
political rocks.
    The agriculture community being the most obvious. I didn't 
mean to target them for any reason, but the truth is it's a 
very significant--it wants to be treated separately from the 
rest of the American economy, and it's got the power to make it 
happen.
    And as long as you leave that side out of the equation, I 
mean, everything else becomes awkward.
    Senator Brownback. Well, give us your proposal as you would 
create the world if you could do it.
    Dr. Hudgins, you were saying that trade opening, that is an 
appropriate function of government, but trade restrictions, 
export promotion are not? That's basically what you are saying?
    Mr. Hudgins. That is correct.
    Senator Brownback. The earlier panel, Congressman White 
would certainly agree with you. But, it seemed like to me, he 
also was saying, we have to use functions two and three to get 
to function one. In other words, in today's environment, in 
today's world, functions, trade restrictions and export 
promotion are necessary until we get trade openings.
    And Congressman Mica was basically saying, look, I'd rather 
we just do trade openings, but we need these next two functions 
to get us there, given the global situation. And Congressman 
White was saying, well, I'd rather not, but I think maybe near 
term we're going to have to.
    What's your response to that suggestion, that if you just 
focused trade functions on opening markets, you're going to 
need tools two and three to get that done?
    Mr. Hudgins. Well, first of all, I would question both. In 
terms of the export promotion, again, I've been critical of it, 
because I don't think it's the main reason why America is the 
world's largest exporter, the world's largest economy, and we 
have the highest GDP per capita, I think, than any other 
country in the world.
    Not because we spend a few million here and a few million 
there promoting exports. It's because of the quality of our 
products, and it's the kind of system we have. It's those sorts 
of things.
    In terms of market openings, I don't see that as a good 
thing either. I think that the countries that have--actually, 
if you take a look at two indexes of economic freedom, one done 
by the Fraser Institute in Canada, but in cooperation with Cato 
and others; another done by the Heritage Foundation--and both 
of those indexes indicate that the countries with the freest 
economies are the most prosperous. And I believe the 
correlation holds for open markets.
    So the point is that the countries that have the more 
closed markets are the economies that are crippling themselves. 
They are the ones that need free trade in a sense more than we 
do. Our markets are pretty open right now.
    So I know that the leverage argument is what you usually 
hear. Well, we will drop our trade barriers in exchange for 
doing the same thing with the others. And, by the way, that 
works fairly well with free trade areas. If you have a country 
that's really honest about doing on a bilateral basis.
    But, remember, I consider that where we do have our markets 
closed, we're harming Americans. We're restricting the liberty 
of Americans to dispose of their property. We're restricting 
the freedom of businesses that might need quicker access to 
certain inputs.
    So I don't consider it a good thing to withhold freedom 
from Americans for this purpose. I think what you're seeing, as 
I mentioned in my remarks, is that the global trend is towards 
either freer markets, more open markets, and deregulation at 
home, or more managed trade, in which point the countries that 
try to stay with the old system are going to collapse.
    That's going to happen in any case, I think. So while I see 
the argument in favor of using our trade barriers to leverage 
open other markets, I would say that it should not be made an 
essential thing. If we can use them because we have them, and 
they are unfortunate, that's fine and dandy. I'm happy to see 
it. But let's not push that too far.
    Senator Brownback. Mr. Lash, would you care to respond to 
that same question?
    Mr. Lash. Yes. I definitely believe that opening markets 
should be the primary, and, in fact, the sole function of the 
Department of Commerce international trade area. But again I 
strongly believe it should be shifted to the USTR.
    The export promotion activities are at best peripheral. If 
you look at the number of corporations that are succeeding in 
exports, and case studies, and see that they are doing it 
without any help whatsoever from export promotion, but that 
what has been important has been market opening initiatives.
    And those initiatives which establish an open market for 
U.S. exporters are where you'll see the consensus. It's 
interesting, this whole debate, on corporate welfare, which I 
don't like that term, but it's the term people have been using, 
obviously, export promotion.
    You'll see everyone from Cato and Heritage joining with 
Ralph Nader. And that's about as strange bedfellows as you can 
get. But when you talk about market opening, you see a 
differing consensus. You see a broader consensus across the 
spectrum, and no criticism.
    So export promotion is an activity that is hard to find an 
advocate for export promotion, unless someone is already on 
line for that gravy train. For market access, I think you'll 
find that most Americans will say that's an important role.
    Mr. Hudgins. I would just add one other thing to follow up. 
When you talk about corporate welfare, that is a serious 
problem. I also think that the danger, one of the dangers of 
using our leverage is managed trade, which as I say is the 
drift we seem to be having.
    If it's true market openings, I'm 100 percent in favor of 
it. If it's managed markets, bureaucrat to bureaucrat, that's 
the thing that I'm very concerned about.
    Senator Brownback. I would invite the two of you, as I have 
with Mr. Black, to design a new Federal trade organization. If 
you had a blank sheet of paper, and these assets, how you would 
design it today for us.
    I want to thank the panel for joining us today. It's been 
very illuminating, and I appreciate very much the discussion.
    Mr. Hudgins. Thank you.
    Mr. Black. Thank you very much.
    Mr. Lash. Thank you.
    Senator Lieberman. Thank you.
    Senator Brownback. The next presenter will be Mr. Timothy 
Hauser, deputy undersecretary for international trade at the 
Department of Commerce. We appreciate Mr. Hauser being present 
here today. I don't know if you've been able to be present to 
hear the earlier testimony. We had proposals from two members 
of Congress, and then the current panel, looking at the current 
design.
    Our intent in this hearing is to look at sensibility and 
functionality of the trade promotion and export market opening 
functions within the Federal Government, and try to make some 
sort of sense out of that. We appreciate your being here with 
us today and your testimony and the mike is yours.

   TESTIMONY OF TIMOTHY J. HAUSER,\1\ DEPUTY UNDERSECRETARY, 
   INTERNATIONAL TRADE ADMINISTRATION, DEPARTMENT OF COMMERCE

    Mr. Hauser. Thank you, Mr. Chairman. It's my pleasure to be 
here. Thank you, Senator Lieberman, for joining us. What I 
would like to do this morning if I may is to talk basically 
about how the Federal Government is organized to help American 
firms and workers compete and win in an increasingly 
competitive global marketplace.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Hauser appears in the Appendix on 
page 77.
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    In particular, I appreciate the opportunity to speak with 
you about what the Commerce Department is doing, how we have 
focused in recent years on doing it better, and also what we 
are doing on an interagency basis to streamline, improve and 
enhance the export promotion services we provide for American 
business, particularly small and medium sized business.
    If I may, Mr. Chairman, I'd like to submit my full 
statement for the record and briefly summarize, and then would 
welcome your questions and pick up on some of the other issues 
you've raised with the previous panel.
    Senator Brownback. Without objection, so ordered.
    Mr. Hauser. Mr. Chairman, the administration has made it a 
top priority to leverage Federal resources and focus our 
capabilities to help U.S. firms, both small and large, take 
full advantage of business opportunities overseas.
     Exporting is not just critical to the United States. It is 
absolutely critical to our long term economic growth. In 1970, 
the value of trade was about 11 percent of America's GDP. Today 
it is about 25 percent.
    In 1996, over 11 million jobs depended on exports. By the 
year 2000, that number could rise to as many as 16 million 
American jobs linked to exports. Over the past 4 years, exports 
have accounted for a third of total U.S. economic growth, with 
export related jobs growing several times faster than overall 
employment.
    Moreover, various studies have shown that these export 
related jobs pay 13 to 18 percent more than average U.S. wages. 
The conclusion is clear: the more we shift into globally 
competitive sectors where exports are part of the picture, the 
more we will increase our own standard of living. Exports are 
fundamental to the health of the U.S. economy.
    Our job in the International Trade Administration of the 
Department of Commerce is to promote American exports, to help 
them build and expand upon this tremendous growth. The 
International Trade Administration is composed of four integral 
parts, which work together to provide market information and 
export promotion services to the business community while 
guaranteeing a level playing field for our businesses at home.
    And since I know, Mr. Chairman, that you have a particular 
interest in management and management issues, let me as I 
describe what our program areas do, and frankly having heard 
some of the previous testimony, Mr. Chairman, some of the other 
panelists may not have had a clear fix on what it is we're 
doing, I'd also highlight the efforts we have taken over the 
past 4 years within Commerce to do it better.
    Our premier export promotion unit is the Foreign Commercial 
Service. It consists of over 90 offices across the United 
States, and 134 offices, at last count, in about 70 countries 
around the world. This is our delivery arm. It reaches out and 
provides our programs and services directly to the business 
community, whether at home or overseas.
    To improve this service delivery, we have in recent years 
totally revamped our domestic field network into a series of 
inter-connected offices--we call them hubs and spokes--arranged 
around the central office that provides full service 
information, often in conjunction with the Ex-Im Bank, the 
Small Business Administration, local trade partners--whether 
they be chambers of commerce or other State government trade 
promotion organizations, to get our information out where the 
businesses are.
    In addition, we have mounted a major effort to combine the 
two personnel systems that we had heretofore had. Our 
commercial officers overseas are foreign service officers. Our 
domestic offices have historically been tapped and staffed with 
civil service employees.
    We believe to have a fully well rounded, responsive corps 
of trade experts. We want to rotate people. A person will learn 
the domestic side, in the domestic office. They might have a 
tour overseas to cover business transactions from all ends. 
That way we increase our expertise to help the business 
community.
    Our second program area is our trade development unit. It 
is a unique source of industry-specific expertise in the 
Executive Branch. Trade development works closely with trade 
associations, as well as small businesses, to insure that our 
programs respond to the needs of the variety of industries, the 
full range of industries, in the United States.
    With its trade information center, a 1-800 number, we open 
our doors to provide trade advice free to anybody across the 
country who is interested. In the past 3 years, we have built 
up within trade development a very effective advocacy unit, 
plugged in across the Federal trade promotion establishment, 
plugged in to our agencies overseas, to go to bat when asked by 
American businesses, competing in foreign competition where a 
foreign government is playing a role.
    Our third program area within the International Trade 
Administration has been totally refocused over the past year. 
Previously known as International Economic Policy, it has been 
renamed and refocused on market access and compliance.
    The administration has negotiated 200-plus trade agreements 
over the past 4 years. We want to work hand in glove with the 
U.S. Trade Representative's Office to insure that our 
businesses are getting the full effect of those agreements.
    Through the market access and compliance unit, which is 
arranged on a country and regional basis, and our newly 
established, within existing resources--no new money went into 
this--compliance center, with a powerful database covering our 
major trade agreements, we think we can take a very proactive 
role in ensuring that foreign governments provide what they 
negotiated to us, whether it's in sectors ranging from autos to 
semiconductors to you name it.
    Our fourth program area is not part of the trade promotion 
apparatus at Commerce, Mr. Chairman. It is our Import 
Administration. It provides the very essential service of 
enforcing our anti-dumping and countervailing duty laws.
    The philosophy is quite simple. By enforcing those laws, 
Import Administration defends a level playing field for 
American businesses at home. It prevents unfairly traded goods 
from disadvantaging our companies in our domestic market, and 
in so doing is a powerful support and a basis for our being 
able to conduct a free trade policy.
    This past summer, we reorganized the Import Administration 
to eliminate two levels of management, get people out of 
bureaucratic chairs, signing forms, putting them to work on 
trade cases, legitimate grievances brought by U.S. industry.
    We have also looked at how we process cases. We used to 
have two units. One would handle a case through the decision-
making stage. Once an anti-dumping order, our duty was imposed, 
a second unit would then pick up on it.
    Now, we believe that the people who might work on a steel 
case or a semiconductor case from the beginning, will carry it 
through to whenever that dumping order is on the books and when 
it is ultimately sunsetted. The point being, the same experts, 
the same people who know these industries, will be intimately 
involved.
    Mr. Chairman, the overwhelming majority of the work we do 
in the International Trade Administration is aimed at helping 
small and medium sized businesses undertake their first, or in 
sometimes their second or third overseas sale.
    This in turn translates into helping thousands of companies 
break into new export markets every year. I put in my written 
testimony a number of examples. Let me just highlight one here 
in terms of the kind of stuff we do.
    Carrier Vibrating Equipment, a Louisville, Kentucky, small 
manufacturer of conveyor belt systems has seen its exports grow 
from 10 percent to 30 percent of its total sales since 1990, as 
a result of aggressive marketing and interest on the part of 
the firm.
    Government doesn't do this alone. We're partners with the 
private sector, as well as direct assistance from the 
International Trade Administration's Louisville office. Carrier 
has now growing sales in South Korea, China, India, and other 
Pacific Rim countries. They plan to add 15 to 20 new employees 
to its 100 person payroll right now--again, directly as a 
result of this foray into foreign markets.
    As I say, there are other examples in my written statement. 
I believe the common denominator in each of these success is 
the role we have played in providing information and assistance 
in foreign markets, something that most of these small 
businesses simply do not have the resources to provide for 
themselves.
    They don't have the money to send a representative 
overseas, open up an office. But they can use the resources of 
the Federal Government to provide to fill this information gap.
    Why are small businesses the key? In looking at some data, 
it is estimated that small businesses account for about 25 
percent of manufacturing output in the United States, but only 
about 12 percent of exports. There is a serious exporting gap, 
and concomitant lack of additional jobs that could be filled if 
we could help introduce these firms into the foreign markets.
    And I think this is at the heart of why we are engaged in 
the export promotion business. Now, we don't do this alone in 
the Commerce Department, Mr. Chairman. To help ensure that the 
entire Federal Government is working together to promote U.S. 
exports, Congress, in its wisdom, through the Export 
Enhancement Act of 1992, created the interagency Trade 
Promotion Coordinating Committee, abbreviated TPCC, gave it a 
mandate to review, analyzed, streamline and better coordinate 
Federal export promotion efforts.
    In response, we developed, at the President's direction, 
the Nation's first ever National export strategy. A blueprint, 
and we've now gone through 4 years of these reports, to 
increasing jobs, and economic growth through exports.
    Since its inception in 1993, under Secretary Brown's 
leadership--the statute designates that the Commerce Department 
chair the TPCC--we have gone through the whole gamut of U.S. 
Government export promotion programs, and through our series of 
reports can identify a large number of success. Again, largely 
aimed at small and medium sized firms.
    It wasn't always like this. What we looked at when we were 
launching the TPCC early in 1993 was an array of complaints and 
problems brought to our attention by the private sector. We 
heard horror stories, particularly across the country, of 
potential exporters wanting to get information, running around 
town.
    They would go to a Commerce Department office here for 
market access information, trade leads, trade data. Then in the 
quest for finance, which is the major concern of America's 
small businesses thinking about exporting, they would run 
across town and hopefully they could find the Small Business 
Administration office.
    They may then get diverted through a number of calls to the 
Ex-Im Bank or other agencies in Washington. We also heard, in 
addition to problems domestically, that our companies were 
being increasingly disadvantaged in overseas markets by very 
aggressive efforts of our European, Japanese and other trading 
partners.
    Other countries were using trade distorting tied aid linked 
back to purchases from the home country, or other forms of 
political and economic pressure on the government side. You 
work with our country's firm on this kind of deal, and we'll 
work with you on developing an airport, or on private sector 
side, the tendency of firms in other countries to engage in 
bribery and related practices which are simply illegal in the 
United States.
    The sum total of all of these practices was the loss of 
billions and billions of dollars in potential overseas sales. 
Given those conditions, their lack of access to financing, 
there was a busy agenda for the Trade Promotion Coordinating 
Committee to address, and we believe we're making good progress 
in doing this.
    What we did, in the best spirit of government reinvention, 
was take a hard look at what we did, and in the current budget 
climate it was not a look that suggested we should go out and 
demand more money. Rather it was a focus on how can we work 
harder, smarter, better than anybody else, and leverage what 
the government was doing to improve our services.
    We have had a fairly impressive list of achievements, Mr. 
Chairman, over the course of the last 4 years. Let me just give 
you a couple of highlights. We'd be glad to share with you and 
your staff our full set of National Export Strategy reports.
    One, we have reduced potentially trade distorting tied aid 
offers by almost $5 billion annually by refocusing what the Ex-
Im Bank does in this area. Two, within the Commerce Department, 
working with the interagency process, we have significantly 
liberalized outdated export controls on high technology 
products, freeing about $42 billion in exports from licensing 
requirements, while still effectively protecting our National 
security.
    Three, we have created an advocacy center, and an 
interagency advocacy network--Commerce, State, the posts and 
missions overseas--to work to help our firms win major overseas 
contracts. We estimated we have supported about 300 projects 
with a total estimated export value over the life of these 
projects of about $50 billion.
    This was not government doing it alone. We supported the 
business community's efforts. But where, on a project, in a 
country in the Middle East, the government of France may have 
been bringing pressure to bear, the government of Japan may 
have been pressing for its companies, we have stepped in as 
well to put the support of the U.S. Government behind our 
highly competitive firms.
    We have only done so when we are asked. We did not go out 
and dig up things to do. It is when an American company comes 
to us, looks for assistance, meets a full set of criteria we 
have prepared, that we will then go to bat for them.
    Another major accomplishment has been completing this 
National network of export assistance centers to provide one 
stop shopping. We have put under the same roof Commerce, Ex-Im 
and SBA.
    So a company in Columbia, Ohio is not driving around 
Columbus. He comes to one office, he gets full service support 
for his efforts to go overseas. Last year we estimated that 
these centers helped with a total of over 8,000 export 
actions--meaning about 4,000 different U.S. firms have been 
able to step into foreign markets with our assistance.
    We have also, as I have said several times, focused our 
efforts on small and medium sized firms, through enhanced 
information services, putting information on line, on the 
Internet, and looking at our financing mechanisms. We have also 
for the first time, working closely with the Office of 
Management and Budget, pulled together a comprehensive export 
promotion budget to identify how we are spending our export 
promotion dollars and ensuring that we do so in the right way 
by establishing performance measures to judge their 
effectiveness.
    This cooperation, this synthesis of the agencies involved 
in export promotion is probably reflected--I'll tell you one 
other story about a company, Mr. Chairman. A small company, 
Bricmont Contractors, in Murray, Pennsylvania, is a small 
manufacturer of industrial furnaces.
    Bricmont first tapped the Commerce Department in 1992. It 
was thinking about a deal in Mexico. They had never done any 
international work, but said let's dip our toe in the water of 
exporting and see what happens.
    The Mexican company required financing, and it turns out 
that Bricmont's competitors in this particular deal, the 
Germans, the Italians and the French, were all assured export 
financing from their governments. We, through the interagency 
network that we have set up under the Trade Promotion 
Coordinating Committee, introduced them to the Ex-Im Bank and 
the Trade And Development Agency, which provides grants for 
feasibility studies, to help our firms get into foreign 
markets.
    Bricmont got the necessary financing, they got the deal in 
Mexico, and since then they have expanded--they have already 
now done $10 million worth of contracts in Korea, in India. 
They are looking at opportunities in Europe and Russia.
    The company has gone from a position where none of its 
business in 1992 was export drive to the point where it's 60 
percent now. Again, government didn't do it. The aggressive 
management and sales force at Bricmont did, but we provided 
some help along the way.
    Let me briefly conclude, Mr. Chairman, with what we're 
looking at on our agenda for the coming year. In our last 
report to Congress, we highlighted a strategy to respond to one 
of the greatest problems we are facing in world market--the 
practices our competitors use, legal and illegal, to succeed in 
the fastest growing economies.
    One example is trans-national bribery. Since 1994, we 
estimate that bribery has been used by foreign firms in at 
least 139 international commercial contracts, with a value of 
about $64 billion. Through the TPCC, we developed a strategy to 
reduce these practices, because out of these 139 contracts, we 
can document that the U.S. lost at least 36 as a result of 
foreign bribery.
    So we now have initiatives in the multi-lateral development 
banks, in the World Trade Organization, in the Organization for 
Economic Cooperation and Development to eliminate the practice 
of bribery.
    In some countries it's still a tax deduction, a legitimate 
tax deduction. We also want this criminalized. We want to raise 
the world to our standards so our companies compete on a firm 
footing.
    Another emerging area of incipient trade barriers which 
inhibit American exports is the use of commercial standards. 
Here the response has been our attempt to negotiate mutual 
recognition agreements. Otherwise, European country may go into 
a developing market like Saudi Arabia, introduce a European 
standard for a particular electrical device--the three plug 
standard. Our companies are permanently disadvantaged, because 
we still do things on a two plug standard.
    We want to eliminate this competitive advantage other 
countries are setting up by providing technical assistance to 
countries developing standard systems, and working to 
internationalize standards so that we can all participate.
    On another front, we are moving forward on new finance 
mechanism for small business. Last year, the Ex-Im Bank and SBA 
launched two initiatives to improve the ability of small 
businesses to obtain trade finance, and we will be following 
through on them this year.
    Senator Brownback. Mr. Hauser, I think Mr. Lieberman's 
going to have to leave here in a minute, so if you could 
summarize here quickly, we'd appreciate that.
    Mr. Hauser. I will, Mr. Chairman. I will conclude with the 
point that our competitors are investing more and more of their 
resources to help their firms succeed in these critical 
markets.
    Let me give you one last number. In 1995, as a proportion 
of GDP, the United States spent 3 cents per $1,000 of exports, 
while France spent 18 cents, and Canada 33 cents. I'm sorry, 
per $1,000 of GDP, on their export promotion efforts.
    We need to work harder, smarter to meet this foreign 
competition. We believe that we must continue to streamline and 
improve our services, and develop new strategies to meet the 
foreign competition.
    I will stop at that, that our mission basically is where we 
started--exports and job creation.
    Senator Brownback. Thank you, Mr. Hauser. Senator 
Lieberman?
    Senator Lieberman. Thank you, Mr. Chairman. I have two 
things, one is to thank you for your testimony which I think 
has been very helpful, and comprehensive, and shows how much 
progress we've made.
    You made an interesting point which I took to be the answer 
to the charge about winners and losers, that basically the 
Commerce Department is not making choices. The Commerce 
Department is responding to requests from American businesses 
that see a market opportunity in trying to help them achieve 
that market opportunity, and obviously I presume making an 
evaluation yourselves about the opportunity.
    The question I would like to ask, and I really, with 
apologies, am going to ask you if you would answer this just 
for the record, because I regret I can't stay. Picking up the 
spirit that you evoked about more streamlining, which is how, 
and acknowledging that you feel that the TPCC has been very 
helpful, as you've documented, how do you respond to the 
statement that 19 agencies across the government is a lot of 
different agencies in a lot of different places, supporting the 
trade function.
    Isn't there a better way to organize this? Maybe you might 
say it's in Commerce. Some others here have said it would be in 
the USTR. But do we continue to gain by that multiplicity of 
places?
    And then I suppose the second question, if you would answer 
for the record, is what you would change if you could change, 
about the way we're spending the money.
    I think the whole tone of this hearing is not that the 
government should leave the field, but how can we more 
effectively and more cost effectively be players in the field 
of international trade.
    Mr. Hauser. I would be happy to respond to that.\1\
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    \1\ The questions and responses of Mr. Hauser appears in the 
Appendix on page 00.]
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    Senator Lieberman. Thank you, Mr. Chairman, for your 
kindness.
    Senator Brownback. Thank you, Senator Lieberman. I 
appreciate that very much.
    I, too, may have to just submit a couple of questions in 
writing, unless you have specific answers for some of these 
questions.
    Thank you for your testimony, and thank you for your 
thoroughness in going through these functions. We are wrestling 
with some key issues here.
    Do you have macro numbers of what has happened as a result 
of U.S. Government investment in export promotion? You cited a 
number of anecdotal situations of companies you have helped, 
and I while I don't doubt that they've done very well with you 
support. But what I am curious about are macro numbers.
    Your investment, our investment, the taxpayer's investment 
in the U.S. export promotion program has yielded what 
percentage increase in our exports, or total export dollar 
increase? Do you have that number available?
    Mr. Hauser. Mr. Chairman, and I realize your time 
constraint, as I mentioned, in the TPCC, we have, through OMB, 
developed a trade promotion budget. We're trying to, consistent 
with the will of Congress and the Government Results and 
Performance Act, develop performance measures.
    For 1995, we spent about $3 billion on export promotion. We 
believe that that effort resulted in U.S. export sales of about 
$68 billion. These are measures in flux, Mr. Chairman. I would 
not tell you that they are letter perfect to the fourth decimal 
place, but we believe data like that show that we get a very 
healthy pay back for the taxpayer's dollars.
    Senator Brownback. But for the investment of this $3 
billion, that $68 billion in sales would not have occurred?
    Mr. Hauser. Again, Senator, it's so imprecise that I would 
not say precisely but for, but I would say we believe we played 
a significant role in contributing to.
    Senator Brownback. OK. You mentioned Canadian and French 
investment in export promotion at the end of your testimony. 
Could you produce for us macro numbers on the increase in 
exports--their percent of export increase--over the past 5 
years as they have increased their export promotion?
    And here is what I am getting at. You're citing basically 
Western European industrialized country models as they have 
increased their investment in export promotion. Now, I am sure 
you would say, then, or I hope the data shows a concomitant 
increase in then in their export over and above what it would 
have normally been.
    I would like to see that compared to China's export 
promotion budget over the last 5 years and their increase in 
exports that they have taken place. I mean, have the Chinese 
gone like this, investment in export promotion? And is that the 
reason that they are getting increases in sales?
    Because that really goes to the comments of an earlier 
panel, they said that basically this is a corporate welfare 
system in Western Europe and we would be hard pressed to follow 
that model.
    I want to see what are the macro numbers associated with 
that. Because as you look at our own macro numbers, here, I was 
looking, 1993, total spending on Federal trade promotion, since 
1993, total spending on Federal trade promotion has fallen by 
45 percent, U.S. Government, while exports over the same period 
have risen by 21 percent.
    And 13 percent better than the overall economy. So while we 
have been spending less on export promotion investment, our 
export sales have been going up.
    I think most of us would think, now, this is more a 
function of overall economy, overall competitiveness of our 
businesses. You'd probably agree with that. Our businesses have 
been fighting hard lately, and you provide a valuable role for 
a number of businesses.
    I've been in this business before. I was secretary of 
agriculture in Kansas. I've worked with people in export sales, 
internationally. I used to work at the U.S. Trade 
Representative's Office. I've been on the Ex-Im Bank Advisory 
Board for 2 years.
    I've been in this and I've seen this. Still, my great 
suspicion is that if we gin up our economy and do things better 
here that we get far more in exports than if we invest another 
dollar in export promotions.
    That's my great suspicion. And I would like to see macro 
numbers that dispute that, if you have those, or that support 
that--I would appreciate those as well.
    Mr. Hauser. Mr. Chairman, we'll take a look. Obviously as I 
mentioned we are in the initial throes of being able for the 
first time to catalogue what we're doing and looking at what 
the possible effects are.
    Getting the data on foreign spending is something that we 
have been pursuing for several years. I will see what we have, 
but I fear we could not have a trend line that might be 
directly correlated to outputs.
    But we will look at it, Senator, and get back to you.
    Mr. Hauser. Let me address another point, though. I think 
implicit in your statement, one, yes, obviously macro forces 
are a major determinant of export sales. Growth abroad, lack of 
growth abroad, opening of foreign markets, which is something 
we work on on the policy side, something you would remember 
from USTR.
    The point is not that we're looking for more resources, 
given the current budget climate. The fact that our export 
spending has declined is very much a result of the current 
budget climate. We all realize there are constraints on what 
we're doing.
    So what we're looking at is ways to work harder, work 
smarter at the margin to maximize what we get out of the 
limited money available for export promotion.
    And it was a phrase the late Secretary Brown always used: 
to not do so would be unilateral disarmament, given what other 
governments are doing. One of the wry ironies of the U.S. 
having come up with a focused export strategy, we looked at 
what the competitors were doing.
    We can't emulate them. There is not that kind of money. 
There are conflicting program priorities, but as we have become 
more aggressive, we set up an advocacy center, we opened some 
offices overseas that small businesses can use, all of a 
sudden, the Europeans are back looking at our owners manual.
    If we can open an information center in China, the 
Europeans will come in and focus on one. They saw Ron Brown, 
Mickey Kantor taking trade missions, they've heightened their 
attention to it.
    The bottom line is, and we'll try to quantify for you sir 
as best we can what they're doing. They are doing it and that 
is something, the involvement of other governments, that a firm 
on its own cannot counter. That is the legitimate role of 
government.
    Senator Brownback. Well, I am just asking are the Europeans 
the right model to follow, or are the Chinese the right model 
to follow.
    And that is why I'm asking you for macro numbers. If at the 
same time that we have reduced our export promotion investment, 
the French and Canadians have increased their export promotion 
investment, I would like to see what their export sales have 
done during that same period of time relative to what ours did.
    Mr. Hauser. I would suspect, sir, and we will look at it, 
that there is probably not definable numbers with regard to 
what China is doing. Part of China's obvious export success in 
this fantastic growth is we have a fully open market. Their 
stuff is coming in. We are getting China to be our second 
largest trade deficit, an issue that my boss, Stu Eisenstat, 
raised when he was in China a couple of weeks ago, an issue the 
Vice President will take on.
    The Chinese market is not open. There are tremendous 
restrictions, including the right to get in to try to trade 
there to begin with. So a lot is coming in. We want to level 
the playing field to ensure that we get our goods into China 
and enforce our agreements.
    For example, last year we concluded the Intellectual 
Property Agreement, again because the Chinese were not living 
up to the terms of the previous agreement. So there are other 
factors contributing, Senator.
    Senator Brownback. I think the other factors are 
significant. And if you could provide a written response, I 
would appreciate your analysis as to which would do more for 
our exports, cutting capital gains in half and indexing them 
for inflation, or investing in export promotion. That would 
seem to me to be something the Department of Commerce would be 
very interested in analyzing.
    If you have a macro analysis on that I'd love to see it.
    So thank you very much. I do appreciate your time and your 
willingness to present. We are going to be taking a very hard 
look at this, and where we actually get the greatest yield for 
these dollars. I appreciate it very much.
    Mr. Hauser. We appreciate your interest, Mr. Chairman, and 
we would be pleased to work with you on it.
    Senator Brownback. Thank you very much. The hearing is 
adjourned.
    [Whereupon, at 11:56 a.m. the Subcommittee was adjourned.]
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