[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]



 
               MEASURING IMPROVEMENTS IN THE U.S. EXPORT
                       ASSISTANCE CENTER NETWORK

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

                                HEARING

                               before the

                            SUBCOMMITTEE ON
                       TAX, FINANCE, AND EXPORTS

                                 of the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                   WASHINGTON, DC, SEPTEMBER 9, 1999

                               __________

                           Serial No. 106-33

                               __________

         Printed for the use of the Committee on Small Business




                      U.S. GOVERNMENT PRINTING OFFICE
60-563                        WASHINGTON : 1999




                      COMMITTEE ON SMALL BUSINESS

                  JAMES M. TALENT, Missouri, Chairman
LARRY COMBEST, Texas                 NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado                JUANITA MILLENDER-McDONALD, 
DONALD A. MANZULLO, Illinois             California
ROSCOE G. BARTLETT, Maryland         DANNY K. DAVIS, Illinois
FRANK A. LoBIONDO, New Jersey        CAROLYN McCARTHY, New York
SUE W. KELLY, New York               BILL PASCRELL, New Jersey
STEVEN J. CHABOT, Ohio               RUBEN HINOJOSA, Texas
PHIL ENGLISH, Pennsylvania           DONNA M. CHRISTIAN-CHRISTENSEN, 
DAVID M. McINTOSH, Indiana               Virgin Islands
RICK HILL, Montana                   ROBERT A. BRADY, Pennsylvania
JOSEPH R. PITTS, Pennsylvania        TOM UDALL, New Mexico
JOHN E. SWEENEY, New York            DENNIS MOORE, Kansas
PATRICK J. TOOMEY, Pennsylvania      STEPHANIE TUBBS JONES, Ohio
JIM DeMINT, South Carolina           CHARLES A. GONZALEZ, Texas
EDWARD PEASE, Indiana                DAVID D. PHELPS, Illinois
JOHN THUNE, South Dakota             GRACE F. NAPOLITANO, California
MARY BONO, California                BRIAN BAIRD, Washington
                                     MARK UDALL, Colorado
                                     SHELLEY BERKLEY, Nevada
                     Harry Katrichis, Chief Counsel
                  Michael Day, Minority Staff Director
                                 ------                                

               SUBCOMMITTEE ON TAX, FINANCE, AND EXPORTS

                 DONALD A. MANZULLO, Illinois, Chairman
STEVEN J. CHABOT, Ohio               CAROLYN McCARTHY, New York
PHIL ENGLISH, Pennsylvania           RUBEN HINOJOSA, Texas
PATRICK J. TOOMEY, Pennsylvania      CHARLES A. GONZALEZ, Texas
                                     GRACE F. NAPOLITANO, California
           Philip Eskeland, Senior Professional Staff Member






                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on September 9, 1999................................     1

                               WITNESSES

Nelson, Benjamin, Director, U.S. General Accounting Office.......     3
Frazier, Johnnie, Inspector General, Department of Commerce......     5
Marquez, Awilda, Assistant Secretary and Director General, 
  Department of Commerce.........................................     7
Sachs, Joseph, Director, U.S. Export Assistance Center...........    10

                                APPENDIX

Opening statement: Manzullo, Hon. Donald A.......................    26
Prepared statements:
    Nelson, Benjamin.............................................    27
    Frazier, Johnnie.............................................    62
    Marquez, Awilda..............................................    88
    Sachs, Joseph................................................   107


  MEASURING IMPROVEMENTS IN THE U.S. EXPORT ASSISTANCE CENTER NETWORK

                              ----------                              


                      THURSDAY, SEPTEMBER 9, 1999

                  House of Representatives,
          Subcommittee on Tax, Finance and Exports,
                               Committee on Small Business,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 2:00 p.m., in 
room 311, Cannon House Office Building, Hon. Donald A. Manzullo 
[chairman of the subcommittee] presiding.
    Chairman Manzullo. Good afternoon.
    I was playing musical chairs up here. Obviously, somebody 
who occupied this chair before me wasn't vertically challenged, 
and I was sitting closer to the ground than I wanted to.
    The Subcommittee will come to order. Today we will continue 
our evaluation of the USEAC or U.S. Export Assistance Center 
network. Steve Chabot, a representative from Ohio and I are the 
only members who were part of the Subcommittee in 1996 when we 
held our last oversight hearing on the program.
    We are here today because USEACs are unique in the Federal 
Government. They represent an innovative effort to attempt to 
consolidate, improve and stretch the various export promotion 
programs spread throughout 19 Federal agencies. That is not an 
easy task. From where the U.S. Government was in the early 
1990s, the auditing reports for us today confirm that there 
have been significant improvements in the delivery of export 
promotion programs to those interested in international trade.
    The major problem outlined by GAO appears to be a disunited 
effort to help small firms that are not ready to export but 
show potential. A minority of USEACs have aggressive outreach 
programs, while the rest refer these small businesses to other 
resources mostly in the private sector. But there is little 
follow-up at the USEACs to see if these companies have 
graduated and are now prepared to export.
    As a Member who has held numerous trade forums to encourage 
more companies to export, I know the frustration many trade 
specialists at the USEACs feel about the lack of response to 
the invitation for help. This is not about outreach or 
marketing. It is about small companies that already know about 
USEACs but do not receive the appropriate help because they are 
not ``export ready''.
    The GAO reports the SBA's E-TAP program is one of the tools 
that holds promise for assisting firms that are not ready to 
export. I am also familiar with several private sector 
alternatives that may be of assistance also. Our mutual goal 
should be that no small business that contacts a USEAC for 
export help is turned away because the company is not export 
ready. That apparently was the conclusion of the GAO study.
    We have a record trade deficit mainly because of our recent 
anemic export performance. Small business accounts for nearly 
93 percent of exporting manufacturers but accounts for only 30 
percent of the value of U.S. exports. Clearly, we have a lot of 
work to do.
    I look forward to the testimony of our witnesses. I yield 
for an opening statement by the ranking minority member, Mrs. 
McCarthy of New York.
    Mrs. McCarthy. Thank you, Mr. Chairman.
    I would also like to thank our panel of witnesses for 
taking time out of their busy schedules to testify before this 
Subcommittee.
    While small businesses are looking to global markets to 
expand and remain competitive, export assistance centers have 
shown they have a potential to help small business increase 
their exports. This hub and spoke network, which is centered 
around USEACs throughout the country, is linked with 141 
overseas posts in 76 countries.
    Exports account for 25 percent of the total U.S. Economy. 
Furthermore, an increase of $1 billion in exports translates to 
22,800 new jobs. By creating one export assistance network, 
U.S. Businesses no longer encounter a fragmented and confusing 
system when looking to Federal assistance for counseling. Their 
ability to assist small businesses interested in exporting 
their goods and services translates into more jobs and a 
healthier economy.
    As you are aware, U.S. Government export programs have come 
under close scrutiny of the Congress. In response to questions 
raised by Senator Smith regarding this issue, the GAO produced 
a report examining the nature of USEACs with federal and 
nonfederal agencies, as well as marketing initiatives.
    Although the report sufficiently answers most of the 
questions raised by Senator Smith, it also raises some 
inconclusive points that need clarification such as, how 
agencies are dealing with overlapping of services. Though 
USEACs have shown the potential to help small businesses 
increase their exports, recommendations made by GAO, as well as 
continued congressional oversight, is still needed to improve 
their services, especially the firms that have never exported 
their goods.
    I thank the chairman for recognizing the importance of this 
issue and look forward to the testimony of our witnesses.
    Chairman Manzullo. Thank you very much.
    Our first witness is Ben Nelson. Ben or Benjamin?
    Mr. Nelson. Benjamin, but Ben is fine.
    Chairman Manzullo. Okay.
    Mr. Nelson joined the GAO's Detroit regional office in 1974 
after participating in the General Motors management 
development program. In 1983, he transferred to Washington, 
joining the newly established Office of Quality Assurance and 
then to National Security and International Affairs Division in 
1985 to help establish the Division's quality review operation. 
You have quite a background. Mr. Nelson graduated with a BA in 
Business Administration from Albany State College and his 
graduate degree is from Johns Hopkins University, School of 
Advanced Studies in International Studies. He also completed 
work on international trade and competitiveness issues at 
Georgetown University. Excellent qualifications.
    Mr. Nelson, we look forward to your testimony on behalf of 
the GAO investigation.
    Mr. Nelson. Thank you.
    Chairman Manzullo. I don't think investigation is a fair 
term.
    Mr. Nelson. I am sorry.
    Chairman Manzullo. I said GAO investigation. I think GAO 
review or audit is a better term.
    Mr. Nelson. Review.
    Chairman Manzullo. Review would be more appropriate.
    Mr. Nelson. More appropriate, yes.
    Chairman Manzullo. Thank you.

   STATEMENT OF BENJAMIN F. NELSON, DIRECTOR, INTERNATIONAL 
  RELATIONS AND TRADE ISSUES, U.S. GENERAL ACCOUNTING OFFICE, 
                         WASHINGTON, DC

    Mr. Nelson. Mr. Chairman and members of the Subcommittee, I 
am pleased to be here today to discuss the activities of the 
U.S. Export Assistance Centers, so-called USEACs. As you well 
know, small businesses offer great potential for export growth. 
However, they are also likely to seek export assistance, 
particularly those firms that have never exported. Various 
Federal agencies and public and private organizations provide a 
range of export assistance activities, from giving export 
counseling to supplying export finance.
    Research by GAO and others in the late 1980s and early 
1990s found that export assistance at the Federal level was 
fragmented among 10 different agencies. In response, USEACs 
were created to strengthen the delivery of export promotion 
programs by serving as one-stop shops that could provide 
information on all export promotion activities available to 
U.S. Firms seeking assistance. Today, there are 19 USEACs.
    We have followed the development of the USEAC concept and 
have reported on early implementation issues. My testimony 
today will focus on our most recently issued report entitled: 
Export Promotion: U.S. Export Assistance Centers Seek to 
Improve Services. Specifically, I will discuss our findings 
related to, one, USEAC agencies' efforts to improve 
coordination among Federal agencies and nonFederal export 
service providers; and, two, the challenges the USEAC agencies 
face in their efforts to better meet the needs of the business 
community, particularly firms that export services and firms 
that are not yet ready to export.
    In conducting this latest review, our work included visits 
to six of the 19 USEACs and meetings with members of the export 
community at each location. These locations include Atlanta, 
Baltimore, New York, San Jose, Seattle, and Portland.
    With respect to coordination, we found that the agencies 
participating in the USEACs are making joint calls on 
perspective clients and sharing information on clients and 
services where appropriate. The USEACs have also pursued 
partnerships with nonFederal export service providers, 
including State and local government, profit and nonprofit 
organizations.
    In many cases, the USEAC agencies have co-located their 
staff in the same office suite of a building as nonFederal 
providers. In fact, for fiscal year 1998, nearly 20 percent of 
the export actions reported by USEAC trade specialists 
mentioned that at least one partner had participated in 
assisting a firm and in exporting a product or service.
    While coordination among the various entities has improved, 
USEAC faced significant challenges in helping firms that export 
services. At a time when opportunities for service sector 
exports are growing, Commerce's export promotion services are 
often unavailable or inappropriate for firms that export 
services, as they were largely designed for firms that export 
goods.
    Certain USEACs have initiated creative approaches to 
addressing this issue. For example, one USEAC helped to stage a 
series of international video conferences through which U.S. 
Architects could gain market intelligence and meet potential 
clients. USEACs are also helping design and education sector 
firms to form consortiums to which they can jointly pursue 
export business.
    Some USEACs have also used a special partnership program 
developed by the Small Business Administration to assist in 
projects that are not yet ready to export. Under this program, 
USEACs organize Federal and nonFederal export service providers 
into consortiums that provide firms that are not ready to 
export with comprehensive export training tailored to the 
firm's needs.
    USEACs then offer intensive follow-up counseling to those 
firms and those firms that successfully complete the SBA 
program. Some firms participating in the program have become 
customers of USEAC export promotion and finance services and 
ultimately exportors.
    Mr. Chairman, this concludes my opening remarks. I would be 
happy to answer questions you or other members of the 
Subcommittee may have.
    Chairman Manzullo. Thank you very much.
    [Mr. Nelson's statement may be found in the appendix.]
    Chairman Manzullo. You will notice that the chairman 
removed his coat. And if any of the witnesses feels more 
comfortable in doing so, because of this oppressive humidity, 
just join in.
    Our next witness is Johnnie Frazier----
    Mr. Frazier. Frazier.
    Chairman Manzullo [continuing]. Frazier, thank you--
Inspector General, U.S. Department of Commerce.
    Mr. Frazier was sworn in as the fourth Inspector General of 
the U.S. Department of Commerce by Secretary Daley on July 
20th, 1999. He had served as the Department's Acting Inspector 
General since January of 1998. As IG, Mr. Frazier manages the 
Office of Inspector General, which is charged with conducting 
and supervising audits, inspections, and investigations of the 
Department's programs and operations. He is the Department's 
senior official in charge of promoting economy, efficiency and 
effectiveness and preventing and detecting fraud, waste and 
mismanagement.
    Mr. Frazier also served as Assistant Inspector General from 
1994 to 1998 and as Deputy Assistant Inspector General from 
1984 to 1994 in the Office of Inspections and Program 
Evaluations.
    I would state that what Mr. Frazier has done here is not an 
investigation, but it is an audit for determining efficiency. 
Is that correct?
    Mr. Frazier. Yes, audits, inspections, and evaluations, all 
three of them.
    Chairman Manzullo. Okay. Please proceed with your 
testimony, Mr. Frazier.

STATEMENT OF JOHNNIE E. FRAZIER, INSPECTOR GENERAL, DEPARTMENT 
                  OF COMMERCE, WASHINGTON, DC

    Mr. Frazier. Thank you. Thank you, Mr. Chairman.
    Mr. Chairman and members of the Committee, I am pleased to 
appear before you today to discuss some of the Office of 
Inspector General's work and recent observations related to the 
U.S. Export Assistance Centers.
    I appeared before this Subcommittee just over 3 years ago 
to discuss the results of our early assessment of the 
development and roll-out of the USEACs. I concluded that 
appearance by stating that although there were clearly problems 
and challenges, we were optimistic about the USEAC's potential 
to better address the export promotion and trade finance needs 
of U.S. exporters.
    If I were to fast forward to the end of my statement here 
today, you would see that I essentially have the same 
conclusion, that there are indeed problems to be addressed, but 
I believe that the USEACs are demonstrating their ability and 
potential to better meet the needs of U.S. exporters.
    Several key factors cause my optimism, the foremost being 
that the USEACs have come a long way in demonstrating how 
Federal agencies can and should work together to better provide 
export assistance to U.S. businesses. And, secondly, the 
centers, while not perfect, represent a major improvement over 
the fragmented export promotion and finance assistance 
previously provided to U.S. exporters.
    Long before the establishment of USEACs, my office 
recognized and highlighted the need for improved coordination 
of the Federal Government's export promotion efforts.
    Recognizing the USEAC program's potential for success or 
failure and the resulting impact on small- and medium-sized 
firms who look to the Federal Government for export assistance, 
we completed an early assessment of the development and roll-
out of the USEACs.
    Calling your attention to the map here on my left, I would 
highlight that since that early assessment, we have monitored 
the changing status of the USEAC program through the various 
audits, evaluations, inspections, and visits, including several 
centers that I personally visited. As you might expect, we have 
found that most of the centers have some unique strengths and 
their own weaknesses. Each center also appears to have its own 
special opportunities for success, as well as its own special 
challenges.
    Let me quickly share with you in the form of a report 
card--and the report card is intended to encourage discussion 
here--a few of our general observations about the USEAC 
program.
    Federal Partnerships. Federal partnerships are increasingly 
working in a cooperative fashion. This is the good news. This 
is a solid B-plus here. My observations here are more about 
attitude, of quality. That is relatively intangible and 
difficult to quantify, yet can make a big difference. More 
often than not, we are finding that the collocation of export 
promotion and trade finance partners in the USEACs does in fact 
foster closer working ties and strengthen information 
exchanges. Clearly, when this happens, the result is improved 
export marketing and export finance assistance.
    USEAC Staffing. While SBA has at least one representative 
in every USEAC, Ex-Im has staff physically located in only four 
USEACs. Ex-Im officials emphasized that, although they are not 
present in every USEAC, they attempt to visit the remaining 
USEAC sites during their routine visits to the major cities in 
their region. They also rely with varying degrees of success on 
the 36 centers that have Ex-Im Bank city-state partners in 
their vicinities who serve as their authorized agents. A B 
grade here.
    USEAC Performance Measures. The USEACs clearly need a 
better system for identifying, measuring and reporting 
programmatic accomplishments. In our 1996 review, we 
recommended that the USEACs have performance measures and 
criteria for assessing and encouraging the success of the 
USEACs as a single entity and not only as the sum of the 
individual parts of the participants. Although some officials 
are now attempting to address this matter, there is clearly 
more work to be done here.
    State and Local and Private Partnerships. Again, this is 
good news. The USEAC network is fostering stronger partner 
relationships with State, local and other trade associations. A 
solid B-plus here is given to highlight our overwhelmingly 
positive observation, that there is increased partnering 
between Federal and State and local trade promotion 
organizations.
    Coordination with the U.S. and Foreign Commercial Service's 
Overseas Offices. Coordination between the USEACs and the U.S. 
and FCS overseas offices must be better. One of the unique 
aspects of the U.S. and Foreign Commercial Service is its 
worldwide network of domestic and foreign offices. Because 
cooperation and interaction between them has been spotty, we 
see the U.S. and FCS's efforts in this area as only average, at 
best.
    USEAC Marketing. What is the USEAC program? This is a 
question that is frequently asked. Our grade here reflects the 
opinion of many representatives of some of the Federal, State 
and private trade organization that we have spoken with who 
believe that the USEACs must be more effective in getting out 
the message of who they are, where they are, what they do, and 
what products and services they have to offer.
    In closing, if I had to give the overall USEAC program a 
grade today, it would be a solid B. U.S. exporters are clearly 
being better served through the USEAC program with improved 
coordination and cooperation between the Federal agencies and 
the various public and private organizations in the field that 
are involved in promoting and financing U.S. exports.
    Thank you. This completes my statement, and I will be glad 
to answer any questions.
    Chairman Manzullo. Thank you.
    [Mr. Frazier's statement may be found in the appendix.]
    Chairman Manzullo. Our next witness is Awilda Marquez, 
Assistant Secretary and Director General of the U.S. and 
Foreign Commercial Service of the Department of Commerce. And 
we look forward to your testimony I am not even going to go 
through the list of credentials here, because we will take up a 
lot of time, except to say that our witness has a thorough 
understanding of international trade and administration.
    And with that introduction, Ms. Marquez, please.

    STATEMENT OF AWILDA R. MARQUEZ, ASSISTANT SECRETARY AND 
  DIRECTOR GENERAL, THE U.S. AND FOREIGN COMMERCIAL SERVICE, 
             DEPARTMENT OF COMMERCE, WASHINGTON, DC

    Ms. Marquez. Good afternoon, Mr. Chairman, and thank you 
Representatives McCarthy, Gonzalez and Napolitano and members 
of the Subcommittee for providing me with the opportunity to 
speak to you about one of the true success stories in 
government today, the U.S. Export Assistance Centers. I would 
ask, of course, that my complete statement be made a part of 
the official record.
    You have asked if there is a measured improvement in the 
USEACs since their creation in around 1993. I am pleased to 
report that the Export Assistance Centers have become a 
catalyst for small- and medium-sized companies seeking to 
expand their markets overseas and an invaluable resource for 
the tens of thousands of companies that use the USEACs.
    Almost 6 years have passed since we opened four pilot 
USEACs in Baltimore, Miami, Chicago and Long Beach. By 
fostering strong partnerships with Federal, State and local 
trade promotion organizations, by incorporating technology and 
strategically placing our resources where they could serve our 
clients most effectively, we have created an integrated 
national export assistance delivery network.
    And I do want to thank you, Mr. Manzullo, for sponsoring 
H.R. 1993 ITA's Reauthorization Act that would support the 
continuance of the USEACs.
    I have offered here a chart to talk about some of the 
measured improvements of the USEACs and have provided copies 
for you to look at.
    Today, the Export Assistance Network is comprised of over 
350 Commercial Service employees at 105 Export Assistance 
Centers providing export assistance to American companies 
nationwide. Each offers one-on-one counseling to businesses, 
particularly small and medium-sized companies with export 
potential. But with a growing scarcity of resources and a 
greater demand on services, working through partnerships at the 
point of service delivery is the most effective way to help the 
American exporter in today's climate of increased global 
competition.
    The trade finance counseling provided by SBA and Ex-Im Bank 
professionals at several Export Assistance Centers complements 
the export marketing counseling offered by the Commercial 
Service. The original vision of providing one-stop shop for 
American exporters has become a reality. Each agency in this 
one-stop shop offers its own expertise. Of course, this is not 
a merger of identities but a close coordination of efforts to 
make it easy for customers to get to the solution to their 
export-related problems.
    In addition to our Federal partners, the Commercial Service 
partners with State and local public/private organizations to 
again leverage resources and expand the range and the depth of 
the services that we can provide.
    While the USEACs have matured to deal effectively with 
clients, and we are proud of this accomplishment, we do not 
rest on our laurels. The operation is not yet perfect, and we 
are working on improvements.
    We are moving toward integrated planning with our USEAC 
partners. Every USEAC already engages in joint planning 
activities among the partners to coordinate specific local 
trade events, trade mission recruitment, World Trade Week 
activities, et cetera. In addition to this, the Commercial 
Service would like to see integrated planning so that one 
partner's goals are incorporated into the goals of all partners 
and that all successes are shared collectively.
    In addition, USEAC partners, as has been noted, already 
actively engage in joint client calls. Every Commercial Service 
annual performance plan for our staff has one element that is 
dedicated to working with partners. We are working to develop 
joint performance measures, including joint counseling, good 
management business processes and customer service within the 
USEACs.
    The Commercial Service has taken the lead within the USEAC 
network to provide partners with training on our products and 
services. We have provided week-long Trade Specialist training 
courses in which our partners have participated. We also 
arrange for USEAC training for all USEAC partners, encompassing 
topics such as export counseling, Federal resources for 
international business, using trade finance effectively, et 
cetera.
    In an effort to incorporating partner and client feedback 
into our Managers' and Trade Specialists' evaluations, the 
Commercial Service will soon be adopting a 360-degree review 
process; that is, that 360-degree feedback will be incorporated 
into evaluations allow superiors, subordinates, peers, clients 
and partners to provide input to help evaluate our individual 
Trade Specialists' performance.
    We also use Teams, as you know. Our Teams initiative has 
greatly improved the effectiveness of the Commercial Service's 
global network and the USEACs. In 5 years, the Commercial 
Service Teams have matured to become a solid and effective 
global virtual structure that coordinates activities across the 
Commercial Service units, other ITA units and among USEAC and 
local partners to bolster Teams' international and industry 
expertise.
    With the focus on innovation, the Teams have increased 
outreach to new clients, developed enhanced matchmaking 
programs and used new technology such as web casting and video 
conferencing to educate clients and put them in touch virtually 
with buyers overseas.
    The goal and main measure of the Commercial Service is to 
increase the number of American SME exporters. We are 
aggressively working to expand and diversify our client base. 
Our rural Export Initiative reaches small and medium-sized 
companies who are export-ready but have not yet had full access 
to international trade services because they are located in 
remote areas or in business centers that are away from major 
metropolitan areas and lack international trade infrastructure.
    Rural companies are exporting more than ever, but they 
share common characteristics. They lack access to trade 
services, such as counseling, banking and freight forwarding 
experts. They are often not exposed to international cultures 
and do not often have the benefit of industry clusters in their 
areas. We can find and do find rural companies with the 
capacities to exceed and help them enter the international 
marketplace.
    In addition to rural companies, we are also working to help 
minority-owned businesses export more, and we have launched a 
Global Diversity Initiative to help those export-ready 
minority-owned businesses take advantage of international 
opportunities. Working with partners or partners in the USEACs 
and other partners outside of the USEACs, we provide 
comprehensive counseling and training over 6 months with a 
trade mission opportunity at the end for minority-owned 
businesses to expand their international reach.
    We are one of the few agencies that provide direct service 
to the business community, and this unique relationship 
necessitates that we, the Commercial Service, maintain 
credible, flexible, business-friendly and business-relevant 
services to keep up with the dynamic technological pace of 
business.
    We are also using technology very aggressively to help 
businesses, especially the rural, the new-to-export and the 
minority-owned companies, to help them reduce the costs of 
investigating markets. We are using video conferencing very 
aggressively. We are using push technology to get trade 
information and research directly to their computers.
    We set up a virtual trade show where companies can save on 
travel costs and market investigation costs by going to our 
virtual trade hall and developing a virtual trade booth in our 
virtual trade show.
    We are also using web casting very aggressively, developing 
videos on market opportunities in Europe, in China, NAFTA 
countries, among others so far. This is available on the web 
through our website global speed.com so companies can get 
information and research directly through our website.
    Innovation is also our current priority, modernizing what 
we do. We are well deployed. We are well managed. We are well 
operated. Now we also need to be modern thinking and fast 
thinking and fleet footed. So we are using technology and 
innovating, developing new tools and services to help companies 
export. We will be ending our pilots next April with our 20th 
year anniversary. We will be rolling out a whole new set of 
products and services for companies that will meet their needs 
in the new millennium.
    I thank you for the time to talk about what the Commercial 
Service, the USEACs have done in partnership to help companies. 
We are proud of what we have done. We know we need to continue 
to better ourselves. And I am certainly able and willing to 
answer any questions you might have. Thank you.
    Chairman Manzullo. Thank you for your testimony. We will 
enter your complete statement and all statements of the other 
witnesses into the record.
    [Ms. Marquez' statement may be found in the appendix.]
    Chairman Manzullo. Our next witness is Joseph Sachs, who is 
the Director of the U.S. Export Assistance Center located in 
Long Beach, California. Mr. Sachs has been director there since 
it opened in 1993. The Long Beach USEAC is one of the four 
original USEACs and brings together staff from the SBA, 
Department of Commerce, Ex-Im Bank and the Agency for 
International Development.
    Prior to heading the USEAC in Long Beach, Joe spent over 22 
years with the SBA working in both in SBA's Washington 
headquarters and the LA district office. He began his career 
with the SBA in 1971 as a Federal Management intern.
    Joe, we look forward to your testimony.

STATEMENT OF JOSEPH S. SACHS, DIRECTOR, U.S. EXPORT ASSISTANCE 
CENTER, LONG BEACH, CALIFORNIA, REPRESENTING THE SMALL BUSINESS 
                         ADMINISTRATION

    Mr. Sachs. Thank you, sir.
    Good afternoon, Mr. Chairman. Thank you for inviting me 
here today to speak about the U.S. Export Assistance Centers, 
the recent GAO report on the USEACs and particularly our newest 
export development program, the Export Trade Assistance 
Partnership, the E-TAP program. My name is Joseph Sachs, and I 
have been the director of USEAC in Long Beach since the USEAC 
policy began there in January of 1994.
    I would like to extend personal regards to Representative 
Napolitano whose office we have worked with on a regular basis 
for at least 4 years now.
    The General Accounting Office report mentioned E-TAP as a 
``promising new program.'' we certainly agree. That is why we 
are attempting to expand the program on a national basis.
    The concept is very simple: Target small businesses who are 
ready to export but have not done any actual exporting. And, in 
specific instances, we might even allow a company that has done 
one or two exports to participate, teach them how to do it, 
hold their hands while they do, follow up with a trade show or 
a trade event overseas, and then support them with the 
financing that is necessary when the overseas orders begin to 
come in. We refer to this as the SBA export continuum--
education, technical assistance, risk management and financing. 
But the key to E-TAP's success is the commitment of SBA and its 
partners to continuously monitor throughout the entire process.
    Typically, programs for new-to-export companies offer a 
series of seminars to help educate small firms on the various 
aspects of exporting. Most of these programs either fall short 
of success or, more commonly, cannot measure their success due 
to little, if any, follow-up after the company completes the 
seminar. The E-TAP program is different in that it ensures 
mentoring of the E-TAP participants to ensure that as they go 
through the process they become export ready.
    The success of this program is in its simplicity. Resource 
partners offer information and training to their respective 
areas of expertise. Another difference E-TAP offers is that, 
working as a group, the resource partners are more effective by 
being able to offer seamless delivery and mentoring services, 
something too time-consuming to offer separately.
    We began this program about 5 years ago in Seattle as an 
SBA program with the district office in Seattle and a local 
Small Business Development Company participating. Building on 
that success, we introduced the program into the USEACs as they 
were opened. We found that the USEACs were ideal locations for 
the program, because the co-located Federal partners were 
already on board and most USEACs are located where there are 
SBDCs capable of offering high-quality counseling services and 
new--and specifically, too, new-to-export companies.
    Our participation and location in the USEACs also afforded 
us regular access to other partners well suited for the 
program. This includes SBA's service core of retired 
executives, freight forwarders, international attorneys, 
insurance brokers, the World Trade Center Association, 
international trade associations and the District Export 
Councils of the Department of Commerce.
    Although each of these groups came to the program with 
their own distinct goals and agendas, each has found the 
program beneficial. The success of each E-TAP graduating 
company is a success for which each service provider can 
justifiably claim credit.
    Despite limited funding for E-TAP, SBA has been working to 
expand the program nationwide. This year active E-TAP programs 
are operating in almost half of the 19 USEACs, representing 
over 230 companies, getting export support as participants in 
the E-TAP program.
    SBA's participation as a partner at all 19 USEACs has 
afforded SBA an improved environment to deliver our trade 
finance services. Volume and the export working capital program 
has grown from 79 loans worth $28 million in 1994 to 412 loans 
worth $159 million in 1998, a growth in loan portfolios size of 
over 450 percent. This represents an estimated $350 million 
supported by this program in export sales volume.
    The export working capital program is also one of the best 
performing finance programs at SBA. The overall charge-off rate 
during this period is less than 1 percent. We are continuing to 
improve the program and are developing new, more efficient 
finance products to meet the evolving needs of the small 
business community.
    Because small businesses continue to be the fastest growing 
sector for U.S. Exports, SBA must and will continue to adapt to 
meet small business needs.
    Attached to my written testimony is a more detailed 
description of the E-TAP program and a success story which I 
think you would enjoy reading. A woman-owned business, a 
graduate of the E-TAP program in Long Beach, was counseled by 
the Department of Commerce and by SBA, got an SBA loan, which 
they completely paid off, and is back now looking for a second 
loan.
    I thank you for the opportunity to testify here today, and 
I would be happy to respond to any questions you may have.
    Chairman Manzullo. Thank you very much.
    [Mr. Sachs' statement may be found in the appendix.]
    Chairman Manzullo. We welcome Congressman Gonzalez and 
Congresswoman Napolitano. Good to have you here this afternoon.
    Let me ask a couple of questions. I want to refer first to 
the GAO report.
    First of all, I want to thank you all for your statements. 
You will notice that even though we have two auditing 
investigative agencies here, the issue is about coordination 
and outreach. It certainly doesn't go beyond that and I don't 
want anybody to get the opinion that because the GAO and the 
OIG here that it is anything other than trying to make USEAC 
more efficient than what it is. That certainly is our goal with 
all Federal programs, and I want to thank you all here for your 
efforts on it.
    In the GAO report, it talks about USEACs struggling with 
assisting enterprises that are not yet ready to export. It then 
makes reference to the program developed by the SBA, which is 
E-TAP. Yet the E-TAP program mentions that it helps small 
businesses that are ready to export. What do we have here? Is 
E-TAP working with companies that are ready to export or just 
inquiring about whether or not they should even get involved in 
exports?
    Maybe, Mr. Sachs, that would be your question.
    Mr. Sachs. Okay. I think that what has happened is the E-
TAP program has evolved over time; and I think because of the 
mission of the USEACs to focus our attention on ready-to-export 
companies, at least to date, I think that is what has happened 
with E-TAP. We have now identified companies who are successful 
domestically. We are trying to introduce them into the export 
marketplace, and so those are the companies that we actively 
recruit. But I wouldn't say there is any specific prohibition 
against another company coming into the program.
    Chairman Manzullo. I am not talking about prohibition. I am 
talking about outreach. Did you have a response to that, Mr. 
Nelson?
    Mr. Nelson. Go ahead with your question. Maybe----
    Chairman Manzullo. I can appreciate what E-TAP is doing, 
because that is obviously filling a hole that GAO picked up on 
and said that it has fitted in very nicely. But my question 
here is that the fifth witness chair, if filled by anybody, 
would be by a person who is a small manufacturer that either 
did not receive assistance at the USEAC or, two, didn't know 
about it, which is the biggest problem; or, three, went to 
USEAC and was, according to GAO report, referred to an outside 
agency, ostensibly a private agency.
    Does anybody want to comment on that?
    Mr. Sachs. If I may.
    Chairman Manzullo. Sure.
    Mr. Sachs. We have agreements with all kinds of different 
organizations. There are approximately 138 different entities 
in southern California involved in export counseling. 
Organizations like SCORE, the Small Business Development 
Centers, the Ports of Long Beach and Los Angeles. Again, I am 
speaking about my particular USEAC.
    Chairman Manzullo. Sure.
    Mr. Sachs. The World Trade Center Associations, and others 
mentioned earlier, have been invited and have come into our 
USEAC to counsel people who are not ``export ready.'' and, in 
many instances, those people have received counseling from 
those entities--which happen to be in the same building, by the 
way, that is a big plus--that has resulted in them becoming 
export ready.
    Chairman Manzullo. Are those feeder groups, Mr. Sachs?
    Mr. Sachs. That is correct. And they are right there in our 
office with us. We do not turn anyone away.
    Chairman Manzullo. I wasn't suggesting that.
    I know we have experienced this problem in our own office. 
We have a large manufacturing base. We brought in Counsels 
General from different countries to talk about exporting 
possibilities. And we send out a thousand letters to different 
businesses and you get a 1 or 2 percent response. Yet you end 
up with a C-minus.
    Could somebody remove the paper covering the report card 
chart so we can see all right at the bottom where it says USEAC 
marketing?
    Would you want to comment on that, Ms. Marquez?
    Ms. Marquez. Yes. Let us see. And I guess I will talk about 
also what is export ready. Because----
    Chairman Manzullo. If you could move closer to the mike, I 
would appreciate it.
    Ms. Marquez. Yes. Right.
    Export ready we envision is a company that has a CEO that 
is committed to wanting to export, that has a viable business, 
that has financial statements, viabilities, some couple of 
years in practice as a business. Those that don't even reach 
that level who are so young that they may not survive exporting 
are the ones that are often referred to the SBDCs and others 
for basic business counseling and basic business strength and 
development.
    At that point when you have a company with a CEO that is 
committed with a couple of years in business and they are 
actually a viable company, that is export ready. Now, most 
companies we know may be export ready, but they are not 
exporting. They don't think about it. They don't know about it. 
They don't appreciate the opportunity.
    Chairman Manzullo. That is a different group, right.
    Ms. Marquez. That is most of the companies. That is--our 
problem is that fewer than 5 percent of U.S. Companies are 
exporting. You know, we pull our hair out every day to figure 
out how can we get them to think about the incredible 
opportunities that exist overseas. Ninety-six percent of the 
world's market is overseas. They are clamoring for our 
companies in markets overseas. I have been to Brazil, to Chile, 
to Africa, to Europe. They are clamoring for U.S. Companies, 
but U.S. Companies aren't there.
    Because the American economy is so strong, many companies 
don't feel the need or the desire to venture out overseas. 
Others don't have--others are afraid of or don't want to deal 
with other cultures and other languages. So it is our task to 
try to promote the opportunities that are overseas and then to 
make it clear how easy it can be to export and that we are 
available to help them. That is our basic marketing.
    Our offices, of course, conduct hundreds and hundreds of 
seminars every year across the country on all sorts of products 
from basic ``do you want to export'' to ``do you want to export 
to China,'' which is for the strong of will and the very strong 
of spirit.
    And we issued press releases. We worked with partners. But 
we can't----
    Chairman Manzullo. Okay. I am going to wind up my questions 
here. Where it talks about marketing campaign in the document 
that was just removed, it says, in order to produce an 
effective national marketing strategy campaign, additional 
resources are needed. That is not going to be forthcoming.
    Ms. Marquez. Right.
    Chairman Manzullo. I would like our office to get something 
from your office, within 1 or 2 months, just an outline of how 
you are going to reach these people without additional 
resources.
    Ms. Marquez. That is our challenge. That is our challenge. 
We spend the day providing counseling to businesses, and we 
offer the seminars. We issue the press releases. We have 
performance measures about expanding the client base, so our 
trade specialists have the motivation to go out and get new 
clients.
    Chairman Manzullo. I understand that. I guess the point I 
am trying to make is that you may not be able to rise above a 
C-minus level. Because when our congressional office tries to 
reach out to companies to get them involved in exports, it is 
very, very difficult to get a half decent response. Because you 
get a letter saying I am from the government, I am here to help 
you, and most small----
    Ms. Marquez. It is true.
    Chairman Manzullo [continuing]. Businesses will run the 
opposite direction. I am really open for anything innovative, 
because I am sure you have the same frustration. We have done 
press releases. We have sent individual letters. We have done a 
lot of telephone contact, knowing companies are involved in 
manufacturing, knowing that they have a product that they may 
be able to sell overseas, and yet we can't bring them into the 
fold exporting.
    So don't feel bad about it. We are experiencing the same 
problem as you, and we look forward to any type of suggestion 
to fill that.
    Ms. Marquez. We wrack our brains, and we are--we have the 
rural export initiative that is targeting--so targeting is one 
good way--targeting resources to at least get certain sectors 
out. Rural exporters, minority exports are teams that have 
industry sector specializations focused on certain industry 
sectors and use databases of companies in those industries to 
target mailings for those. So we are trying that. We are using 
technology, as I said. When you use the web, the web casting is 
a great way to go.
    Chairman Manzullo. Keep it up, somewhere along the line the 
hard work will pay off. Thank you.
    Mrs. McCarthy.
    Mrs. McCarthy. Thank you, Mr. Chairman.
    It is always interesting to see when a program has started, 
which is actually only a few years ago, and then to read the 
testimony and see how far it has actually gone. As with 
anything, you have to improve, always.
    My question is to Mr. Sachs. It is my understanding that 
there is the potential to compete for capital financing as we 
always--we are always competing around here for money, too--
between the SBA and the Ex-Im bank. How is the SBA and the Ex-
Im bank working together to avoid the overlapping of services 
and harmonize their programs?
    Mr. Sachs. Harmonization agreement was part of the original 
concept of the USEAC, and basically we use the SBA's 
legislative authority for ceilings on its loans, which is 
$750,000. And what happens is, if it is $750,000 or less and it 
is an export-ready company, it comes to SBA; and if it is above 
that threshold, it goes to Ex-Im bank. Since we are all in Long 
Beach together, it is just a question of walking the client 
down the hall.
    Now in our territory, in southern California, this has 
worked out pretty well. But Ex-Im bank has a delegated lender 
program, and many of those lenders have been participants in 
that program long before the establishment of the USEACs. And 
so, therefore, Ex-Im still allows those lenders to make smaller 
loans.
    I don't see us as competitors. I see us as partners. And 
because of that working relationship, I think we have been very 
successful. We have done a lot of loans in our USEAC.
    Mrs. McCarthy. Thank you.
    Chairman Manzullo. Mr. Gonzalez.
    Mr. Gonzalez. The question is to Mr. Sachs, and it is kind 
of just a practical one. Let us say that I am a resident of 
Long Beach and I want to get into the import business, how 
would I know about you?
    Mr. Sachs. That is a good question.
    Mr. Gonzalez. In the export business.
    Mr. Sachs. I notice the rating we received with respect to 
marketing our programs--there are approximately 20 of us on a 
regular basis in our USEAC, and we have a huge territory to 
cover. For SBA I cover four States. The Department of Commerce 
is scattered all throughout that same territory basically, and 
Ex-Im bank's people are responsible for 12 States. So a lot of 
us are on the road all the time doing the best we can to 
promote the programs.
    But we don't have a budget specifically targeted at 
marketing, and we rely on each of the agencies providing us 
with literature and appropriate information that we can pass 
out at seminars and workshops. I have spent a lot of time 
speaking on the media, radio, television and even in the papers 
in the LA area, and every time I do one of those appearances, 
we do generate between 10 and 25 calls. And so I think we are 
doing the best job we can under the circumstances.
    Mr. Gonzalez. I am from San Antonio, so if I was a small 
business person, and there is a lot of export business right 
now developing in San Antonio for all the reasons, the first 
thing I would do is--the city would have a department on 
international trade that might be able to assist me. There may 
be the private sector free trade alliance. We have an 
organization. We have an international center, and we even have 
some development in Kelly Air Force Base as we redeveloped 
that.
    But we also have all the Chambers of Commerce, all of these 
groups that I am just--throwing them out for examples. Do you 
all have consistent contact with these individuals so that if I 
have contacted any of them--and for a lot of them it is just 
common sense on where to go would they be able to tell me about 
your services?
    Mr. Sachs. Absolutely. I mentioned earlier there are about 
138 different entities in southern California. I included in 
that the Chambers of Commerce. Even Chambers of Commerce for 
specific countries are part of that.
    We have made contact with anyone and everyone that we have 
felt would be able to help impact what we are trying to do for 
American businesses. And many of them may not be regular 
participants at the USEAC physically, but they are out there 
promoting our programs. We provide them with the literature, 
the forms, the information about who we are and what we do. And 
we always appear at seminars and workshops that those 
organizations put on. So I do think we have the benefit of 
those organizations as partners in what we are trying to 
accomplish.
    Mr. Gonzalez. Yes, ma'am.
    Ms. Marquez. We partner very, very closely with all of 
those organizations in the Commercial Service as well, our 
partners in the USEAC. We have MOUs with them, in order to 
complement each others' services. We try not to duplicate, so 
often a local Chamber of Commerce provides one certain kind of 
service but not the kind of service that we might provide, and 
so it is a very complementary relationship.
    We are always trying to fill in the gap with all of those 
partners, and this happens across the country. You will often 
ask those partners do they know about the USEACs being there, 
and they do. And as a matter of fact, if you really--the only 
global network that exists is the Commercial Services, is 140 
offices overseas.
    None of those offices are going to have that source of 
original primary research on market information, potential 
trade contacts, the market climate, the investment climate. So 
having that global network around the world is an added value 
that no one offers to the small business exporters at an 
affordable price.
    And in San Antonio we work with the Free Trade Alliance, 
with the Chambers and others and, of course, now have recently 
hired our new person for our office there, because it had been 
vacant for several months.
    Mr. Sachs. If I can just mention----
    Mr. Gonzalez. Yes, sir.
    Mr. Sachs. All of my comments in answering your question 
were as the USEAC director, as opposed to SBA, and it is 
absolutely correct that all of the participating agencies and 
many of our partners are together trying to accomplish the same 
task.
    Mr. Gonzalez. Because James Harmon was in San Antonio about 
3 weeks ago and speaking to the Chambers and going out to Kelly 
Air Force Base and the international center and a big space out 
there on the former Air Force base soon to be--is going to be 
dedicated to the export business where we are going to have all 
sorts of individuals coming in there, and President Harmon at 
that point indicated this would be a good place to have some 
sort of presence, as far as the Export Import Bank. Of course, 
I guess I will be in touch with your new person in exploring 
all the possibilities.
    Thank you very much.
    Chairman Manzullo. Mrs. Napolitano.
    Ms. Napolitano. Thank you, Mr. Chairman.
    I have a lot of questions, but I think I will just direct 
myself to Mr. Sachs, if anybody can come on board.
    Part of my problem has been, and you well know that in 
California I had to take my Chambers and business people over 
to the one-stop shop and nobody had even heard, and I was only 
20 minutes away. And this was several years ago. And that was 
not to say that you were doing your job, but it was your 
personnel at the time was better used in other areas, I would 
imagine.
    Long Beach is such a big area, and the Port requires so 
much assistance. So I have, as you well know, embarked on trade 
conferences. Well, that is one area where--the possibility of 
expanding the different agencies and what they do and how you 
are working together to disseminate that information to 
businesses who are either interested in exporting or who are 
exporting want to expand their market.
    And that is what we have found out. It isn't just through 
the Chambers but rather going out into the community and asking 
people--here are people who represent these agencies. Come and 
talk to them if you are interested. And certainly you have a 
lot of loop-de-loos, but, in the end, you get a lot of people 
who are extremely ready and able, but they don't know where to 
go. So those are some of the things we are doing in our area.
    But one of the things that comes to mind as I am hearing 
you testify is who your partners are, what is the one-stop shop 
doing or any of your agencies doing to communicate with the 
State Office of trade and commerce? Lon Hatamiya has long been 
wanting to work since he got appointed to be able to assist in 
being able to provide information to the businesses that they 
deal with, whether it is the trade missions, whether it is 
information or being partners in the one-stop, to be able to 
further--you know.
    Mr. Sachs. As I mentioned earlier, we are in the World 
Trade Center building, which is a superb location.
    Ms. Napolitano. I know where you were.
    Mr. Sachs. The State of California's Export Promotion 
Office and the State of California's Export Finance Office (who 
we do co-guarantees with to double the size of the loan) are 
all located in the same building. And we are constantly 
interacting with them. In fact, I don't think we do----
    Ms. Napolitano. Do you have a MOU with the State?
    Mr. Sachs. I don't know if there is a written MOU, but they 
have been working very closely with us since the very 
beginning.
    Ms. Napolitano. Okay. One of the things that we found out 
during the trade hearings that we held was the ability to bring 
in the trade representatives from the different countries, 
where our State representatives were helping business. When 
they come to the State, then we wanted them to do briefings or 
debriefings, if you will, workshops, for business.
    Mr. Sachs. We have always been there with them.
    Ms. Napolitano. But we never hear about them. So how can we 
interact if we don't know what is going on? And, unfortunately, 
that marketing--you may have a small budget, but maybe on 
your--I am assuming you are on the Internet, on the Net and you 
can post that information so we then can tell our Chambers or 
our businesses, look there, that is where you will find the 
info. I have no problem putting it in my mailers to my 
businesses to say this is where you should look for that 
information.
    Ms. Marquez. May I add a couple of things?
    Ms. Napolitano. Certainly.
    Ms. Marquez. We do have a MOU with the State of California. 
In fact, we worked with the State of California and Lon 
Hatamiya's organization to start Bay Trade, for example, and LA 
Trade. So we are in a very close working relationship with them 
on a number of activities. And, of course, the information on 
whether it be trade opportunities, whether it is where the 
office closest to you has information available on the 
Internet, and, indeed, even direct market research and soon the 
Commercial Service is developing a new website that will be 
transactional, where a business can come on and order research 
on-line and pay for it on-line and have it delivered 
automatically to them to make it as easy as possible for them.
    All of that market research will be available, much of it 
free, and then when you want to get customized for that 
company's product in a particular market that requires 
customized research, they will be paying a small fee for it.
    Ms. Napolitano. Is this true for all of the States?
    Ms. Marquez. All States. All of our sites are on the Net, 
and if you hit our website you can get access to all of our 
U.S. offices and all the international offices and all of their 
staff and all of their schedules of events. Every office has 
posted all of the schedules of the seminars or the special 
activities with partners or alone that are scheduled for that 
office for the year. So all of that is posted on the website.
    Ms. Napolitano. Then the other question would be whether or 
not you are working at all with the education institutions to 
be able to help those that are working in the area of business 
and trade. Sometimes they do it together, sometimes they do 
international separate, but I know the community colleges have 
an extensive--they have--I don't know if it is 12 now centers 
that deal strictly with international training for small 
business.
    To me that would be an ideal way to be able to market what 
you are doing and be able to disseminate the information 
through not only a class but also in their brochures to be able 
to give information to the general business public.
    Ms. Marquez. Yes. And in the various seminars that we have, 
in the E-TAP program that is conducted and the Global Diversity 
Initiative program that is conducted, we bring in other 
partners, including university experts, to talk about 
significant products.
    Ms. Napolitano. Internet and the community colleges, are 
they specifically doing that?
    Ms. Marquez. Community colleges----
    Mr. Sachs. There are three CITDs in our general area.
    Ms. Napolitano. CITDs?
    Mr. Sachs. Centers for international trade, funded by the 
community college, chancellor's office, and they are all an 
integral part of everything that we do, so they do know about 
our organizations; and on many occasions we have been out 
speaking jointly with them through some particular audience.
    Ms. Napolitano. Okay. Because we did a conference with Ed 
Net at Long Beach State specifically on international trade, 
and we brought some of the agencies in to talk to them. And 
their perspective is deal with us so that we can then 
disseminate the information. We would be glad to help you do 
that.
    But I don't know whether anybody is doing any outreach to 
them to be able to include them, so they can get that 
information out to the----
    Chairman Manzullo. Would you yield for a question?
    Ms. Napolitano. Certainly.
    Chairman Manzullo. When you had that seminar, did you make 
a mailing to area manufacturers and businesses that you thought 
would be interested in attending that seminar?
    Ms. Napolitano. Our international trade is our fifth one 
already, so we have established a long line of mailing. Not 
only that, but utilities mail for me. The people that they know 
that are traded individuals, companies as well as the Chambers 
and utilities, includes gas, water, electric and the Chambers, 
and then we also have ties in with international groups that 
mail to their international groups.
    Chairman Manzullo. What kind of response do you have?
    Ms. Napolitano. I was laughing when you said 2 percent. We 
must mail out 40,000, and we probably get maybe 300, 400 
people. But those are the ones who are really interested in 
doing the trades.
    Chairman Manzullo. But I think that really goes to the 
problems in marketing. I am sorry, I didn't mean to interrupt.
    Ms. Napolitano. No. But then you keep reaching new folks. 
New people come in, and they learn, and the word is starting to 
get out, and then they are able to communicate with the people 
that went to the conference. And they are able to share 
information about whether you can get the financing and all.
    Chairman Manzullo. One of the problems is the number of 
pieces of literature a small business person gets in the mail. 
I was raised in small business, in the grocery store and the 
restaurant business. Even in a nonpolitical year, how many 
pieces of literature does a small business person get? How do 
we actually get the small business person to open the letter? 
When I go through my mail, if it is not first class, I pitch 
it.
    Ms. Napolitano. That is true.
    Chairman Manzullo. Carolyn is nodding her head up here, 
too. If it has a first class stamp on it, then I will open it 
up. They are all nodding, also. Because I am looking at this C-
minus over here, and that is why I am saying that I don't know 
if you can go above the C minus. Because the big problem that 
we have in this country is that there is a need for the small 
manufacturers to export, but how do you get them? How do you 
get them into making that one phone call to the Chamber in Mr. 
Sachs' area so they can make the link to the USEAC? How do you 
do that, Grace?
    Ms. Napolitano. It takes the word of mouth. It takes the 
people who are interested and know who has a product or a 
service that is saleable, that is exportable. Then to do the 
outreach, whether it is the Chamber member, whether it is a 
member of the community or the business community that 
understands that. And we have done all of that. What helps the 
most is the Chamber themselves. When they send out their 
notices through their blast fax, they can send out 500 in one 
whack and be able to attract attention to what specific program 
they are offering that they can tap into. There are many 
different ways.
    But you are right. And I have approached business people, 
why don't you come to a seminar? I am sorry, I have payroll on 
that day. I mean, it is just--I am told excuses. But many of 
them are kicking themselves, because people they know started 
working, have been--gone to branch out and all of a sudden they 
are saying I could have been there.
    So this is a word of mouth. That we know. But if we refer 
them, we want to be sure they are going to get the service and 
they are not turned off. That is another problem sometimes. 
Maybe the end of year is a little tired or maybe they just do 
not communicate well because the person does not express 
themselves adequately in the English language so they sometimes 
have a little language problem.
    But those people are just as adequate. In California, we 
have got such potential, and we are still trying, pulling them 
in, trying to get them to----
    Chairman Manzullo. Would you yield further?
    Ms. Napolitano. Please.
    Chairman Manzullo. One of the things that we have done on 
our website through the congressional office, we put a link on 
trade to the ITA. And, of course, the ITA has more links. That 
is one of the things that Members of Congress can do. My office 
gets about 13,000 hits a month on my Web page. Most of them are 
for visitors' information from Washington. And I don't know if 
we have been able to quantify the number of hits where people 
will actually hit the trade on it.
    Ms. Napolitano. No, we are too busy.
    Chairman Manzullo. That is about it. But there is a need, 
and it is something to think about on how to get the initial 
interest of the small business person.
    I have been looking at some different software, and I think 
the SBA uses some software where there is a self-evaluation 
that the small businessperson goes through to even determine if 
they want to get involved in exporting. Most small 
businesspeople are terrified because they don't want to be paid 
in vodka or diamonds or something else. They want to be able to 
get the cash out of it. How do you overcome the fear factor, 
which I think is what separates our small manufacturers from 
exporting? Anybody?
    Ms. Napolitano. Would you yield for a second?
    Chairman Manzullo. I am sorry.
    Ms. Napolitano. I just wanted to suggest that maybe all the 
agencies that deal in trade produce a video, an educational 
video, for business. Very simple, but using businesses that 
have had success in being able to work with them. It has worked 
great for some of my other entities; and I would hope this 
would address the problem that you are talking about that 
people could see an individual, that real person who has 
succeeded.
    Ms. Marquez. It is available, and I would invite you to 
look on the Web at globalspeak.com. That is one word, 
``globalspeak,'' and on there we have a running video: ``talk 
to the Experts on Exporting.'' And these are members of the 
District Export Councils that you may know. These are 
companies. These are companies, heads of companies. When you 
are an exporter, what can I say, you become an expert in the 
problem. Not academic or government. These are companies that 
talk about different aspects of exporting. That certainly is 
available on the Internet now as we speak. It is a stream-lined 
constantly as part of that webcasting that I was talking to you 
about that is available.
    Ms. Napolitano. Is it possible that this Committee could 
get copies of that so that we could get it and have it passed 
on cable or public access? It is worth a shot.
    Ms. Marquez. Yes, we can certainly get copies of that 
videotape to you. And then this issue of reaching companies and 
how to encourage them to export, that is what our counseling is 
about. Once we get someone in who is interested, is trying to 
allay their fears or at least to help them think through what 
are the appropriate markets for them. You don't encourage them 
to go to Brazil right away. You start with Canada, a nice 
English-speaking, close-by market and then you graduate to how 
to advise them on where to go, where their product is most 
appropriately exported.
    The easing into exporting is what our Trade Specialists can 
do to counseling those companies first. Of course, we have to 
get them in the door and through the partnering with the 
various chambers of commerce.
    I spoke to the Vice President of the U.S. Chamber of 
Commerce. He has polled his own organization of thousands--how 
many do they have--7, 10, 13,000 company members and even of 
his own membership of the U.S. Chamber. He has a minuscule 
percentage that was interested in their international trade 
Subcommittee of the U.S. Chamber. So we are not alone in our 
struggle.
    But it is a conundrum, and this is why Secretary of 
Commerce William Daley had begun his Trade Education Initiative 
some months ago to talk about the value and importance of trade 
to communities across the country, and we will continue this to 
the Midwest and the Southwest leading up to WTO in Seattle in 
December.
    Chairman Manzullo. Is there anything afoot on any 
reorganization in Commerce that would change the hub and spoke 
system now of the Export Assistance Centers being the spoke and 
the USEACs being the hub? Is there anything in the air on that?
    Ms. Marquez. We certainly have looked at the GAO study, and 
we are always looking at where the appropriate places are to 
have our offices, the USEACs. We are working to strengthen 
them.
    Chairman Manzullo. Allow them to keep their semiautonomy 
from Washington?
    Ms. Marquez. The spokes or the hubs?
    Chairman Manzullo. I guess the hub would be the USEACs and 
then the spokes would be, for example, the assistance center in 
Rockford, Illinois.
    Ms. Marquez. Yes.
    Chairman Manzullo. There is no move afoot to change that 
strategy?
    Ms. Marquez. Well, we are always reviewing the operations 
of our offices for their performance and their effectiveness 
for the investment of the Federal dollars. And those that are 
producing and that are working well with the customers and the 
markets are there. They are going to stay as long as we have 
funding to support them. We are always looking to become more 
effective. The USEACs is a young----
    Chairman Manzullo. You left a huge hole there. I guess what 
I am trying to impress upon you is the fact that the regional 
assistance centers such as the one we have in Rockford, are 
critical. If there is any move to centralize everything back in 
Washington this Congress is going to raise hell from the 
rafters.
    Ms. Marquez. That is not how we would operate. It would 
never occur to us to think about this. In fact, we are always 
trying to decentralize our services and our support service. 
Washington is not the place that people come to do exporting 
and trade. It is in the communities. That is where we need to 
be, is where the businesses are. This is part of our operation. 
It is part of our credo, and it is part of our values. Those 
offices are going to stay out there or that is it. Nothing is 
going to be coming back to Washington. That wouldn't make sense 
for any company, and that is not what we believe in. So 
certainly not under my watch will we--are we thinking about 
that.
    Chairman Manzullo. I ran into a person who is involved in 
exporting, but it is just a minor element of his business. He 
is a small manufacturer. I visited over 200 manufacturers in 
the 16th District of Illinois. We have somewhere between 1,500 
and 1,700 manufacturers in the 16th District. We are not even 
sure of the exact number because they spring up overnight, and 
sometimes they will grow eight, tenfold within a year because 
of the ingenuity of small businesses.
    He said, Don, I would like to get involved in more exports. 
And I said, well, we have an Export Assistance Center in 
Rockford. Get a hold of James Meid, who is one of the finest 
officers in the country.
    And his question was just unbelievable. He said, what does 
the Department of Commerce have to do with exporting? I would 
consider this man to be a sophisticated businessperson. And I 
gave him Mied's number, and I am sure he followed up on it.
    But the question was so basic that you have to ask what is 
it about our approach corporately to the small businesspeople 
that have made them really shy away from getting involved in 
exports? We are all in this together. Because I want my 
constituents, obviously, to experience international growth, 
and you want the program into which you have all poured your 
hearts and souls to be effective.
    If you don't have an answer to that question, don't feel 
bad, because I have been groping with that for about 7 years 
myself. I guess that is the question we have to answer, isn't 
it? And once we are able to answer that question, then maybe we 
will be able to do some other things. But I just want to thank 
you all.
    Mr. Chabot, did you have any questions you wanted to ask?
    Mr. Chabot. Well, if this has been addressed already, I 
apologize.
    Chairman Manzullo. Go ahead, please.
    Mr. Chabot. You may have already addressed it, but it is my 
understanding that there are about 19 Federal agencies now that 
are involved in delivering export promotion and trade finance 
assistance and those types of things. And let me play devil's 
advocate here but not too much the devil's advocate, because it 
is pretty close to what I believe.
    One can make a pretty strong argument that the government 
should not be involved in this to the degree that we are, that 
we ought to have the private sector, that we ought to have 
chambers of commerce and trade associations and the businesses 
that are directly benefiting that should pay for this and 
should organize it because it is in their best interest to do 
so.
    Whenever the government does anything, we don't do it 
nearly as efficiently as the private sector would because we 
become too bureaucratic. And it is my belief on a whole lot of 
levels, not just this. I don't think the Federal Government 
ought to be paying for art, for example, in the National 
Endowment for the Arts, National Endowment for the Humanities 
and all of these things. And so I think folks should do that 
privately and that sort of thing. So that is basically my 
philosophy here.
    Convince me otherwise that if you all--no offense or 
anything, but if you all didn't exist or those 19 agencies 
didn't exist, that the private sector would not basically do 
what you all are doing because it would be in their interest to 
do so. If you could address that.
    Ms. Marquez. I will give it a small shot.
    The private sector is providing a lot of these services to 
companies now. You will find companies such as Price 
Waterhouse, Arthur Andersen and other export counseling 
companies that provide fabulously good advice to companies on 
how to export, how to do it. They often do it for a $25,000 a 
month retainer fee. And this is the problem. It is which 
companies are we trying to reach? The Commercial Service, the 
USEACs are focused on the small- and medium-sized companies of 
the United States because we believe they are the engine of 
growth of the United States. They are the job creators. That is 
our future--that is our present, that is our future, and those 
companies are the ones that we want to get into exporting more 
than anything else.
    I think that if we look at our trade data we will probably 
find that one quarter of it or more is Boeing alone, and maybe 
half of it is Boeing and maybe Lockheed and Grumman and the 
others. What we need to do is diversify the group of companies 
that are exporting from the United States and to make it 
affordable for them to do so. They cannot afford--the small 
companies cannot afford $25,000. They cannot afford $1,000 to 
pay for information on exporting.
    So there needs to be an affordable, easy-access service to 
the small- and medium-sized companies. Because if they don't 
have it, it is not that they are going to go elsewhere. Because 
there is not any other that is more affordable. It is just that 
they are not going to export because they don't have to export 
because the United States economy is fine, at least it is for 
now. And the economy around Rockford, Illinois, they are making 
a nice living. Why should they bother going to France and 
exporting?
    That is the issue. We found it in our national interest--
Congress found it in the national interest to encourage small- 
and medium-sized companies, and there was a gap there. I 
believe that that is why we exist, to serve that gap, an 
affordable service to those companies. Because if they don't 
access us, they simply will not be exporting.
    And we do operate on a fee-paid basis so this is not all 
free services that are given. So there is a revolving fund that 
exists where fees are charged to just cover the costs, cost 
recovery only for this kind of service to businesses. That is 
why I said earlier our mandate is only to increase the number 
of SMEs that are exporting because there are too few and the 
base of companies that are exporting is not diverse enough.
    The companies that are medium and large, they can afford to 
pay the counselors and the private sector consultants that are 
there, but others cannot.
    The other one is the global network. It is through the U.S. 
Embassies and Consulates where most of our offices are. Those 
are preexisting operations. We have our Commercial Officers at 
140 countries around the world that represent 95 percent of the 
markets for U.S. Businesses. So we are there, on the ground, 
providing, as I said, this basic primary research on contacts, 
on markets, on environments, et cetera.
    You often--in fact, you most often will find that in the 
private sector they take that basic research that we generate 
for often free for the companies, and they repackage it and 
then charge many, many dollars to the companies that can pay 
for it. Again, we don't want to do that. We want to get 
companies exporting, and so we provide low-cost, easy-access 
service but only to the small- and medium-sized exporters.
    Mr. Chabot. Thank you, and I think that is a very good 
answer. I would--just to let you know my feelings about not 
just this program but most of what the government does, other 
than providing defense and some other things that I could name. 
I don't think anything is free, really. Because, yes, we may 
not be charging, but somebody is paying for it, and that is the 
taxpayers. And if it is in business' best interest ultimately 
as U.S. Business to export, they will find a way to export. And 
I don't think the government ought to be picking winners and 
losers.
    And I just think because the government has gotten so 
involved in so many areas over the years that the level of 
taxation on individuals and businesses is much higher than it 
otherwise would be, and if we got out of their way then they 
will do what is in their best interest, for the most part. We 
do need environmental laws and certain laws to make sure that 
they are not harming society, that they are paying the taxes 
they owe, et cetera. But this certainly is not as bad or as--
well, it is not as bad as many other things that the government 
does. And I think certainly your intentions are right, and as 
long as you are in existence we certainly want you to do the 
best job you can, and that is what the purpose of this hearing 
is.
    Chairman Manzullo. Will the gentleman yield?
    Mr. Chabot. Certainly, I will yield.
    Chairman Manzullo. I share your same beliefs on keeping 
government as small as possible. I have been a member for 7 
years, and you and I have served on the same committees since 
1995, but one of the things that I have noticed is that the 
Department of Commerce really started out as an agency to do a 
couple of things. The first was to collect this incredible 
amount of trade data, because that determined the income that 
ran the Nation, before the income tax. So there was this huge 
amount of trade data that started to be compiled by the 
Department of Commerce, and that is really something that no 
private sector would even attempt to gather because it was 
pretty boring. It is exhaustive. You have to tie into all these 
different reporting agencies just to get that material.
    And so, as the Department of Commerce evolved, it serves at 
finding out things such as import surges to undermine whether 
any dumping is occurring. So what has happened during this 
sometime, the Europeans began to heavily subsidize their 
corporations for exporting. So what the United States tried to 
do was to use the resources that of the Department of Commerce 
and the SBA to get out those statistics and the opportunities 
to export and the tools to export to the companies so that they 
would have some basic means of education within their hands in 
order to try to educate the rest of the American public.
    Now, I don't usually make a case for government agencies, 
but somebody has to collect the trade data. Somebody has to 
determine whether or not dumping had occurred. That is what 
happened to one of our companies, Brake Parts of McHenry, 
whether or not the Chinese indeed were involved in dumping. As 
it turned out, they were, and we got to file an appropriate 
case on that, but we couldn't do that without the tremendous 
amount of data that Commerce had collected.
    So Commerce continues to collect that data. No one put a 
grade for effort down there. There should be an A for effort.
    What we are all trying to do, Steve, because I know you 
have been a part of it, is to expand export opportunities. You 
have a big tool and die center in Cincinnati, and we are very 
much concerned over the drop in exports on tool and die. What 
we are all trying to do is take this massive amount of 
government data from the national trade database, and convert 
that so that the companies can use the information to determine 
if they can be involved in exports.
    Were you done?
    Mr. Chabot. Yes, just reclaiming my time, and I think you 
make very good points as well.
    Chairman Manzullo. But it means monitoring. We have the IG 
and the GAO. So they are half the team that is up here, so you 
can tell that we are trying to place an emphasis on efficiency.
    Mr. Chabot. Thank you for your time, and thank you for what 
you do. I think the government is growing too large, and we 
need to pare it down, and we haven't scratched the surface of 
what we do.
    Chairman Manzullo. We thank you for spending your afternoon 
with us. We thank you for updating us, and we look to another 
opportunity as the GAO and Inspector General's Office will 
continue to monitor the success that is going on and appreciate 
your coming this afternoon. Thank you.
    This Subcommittee is adjourned.
    [Whereupon, at 3:30 p.m., the Subcommittee was adjourned.]



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