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


 
  EVALUATING THE INTERNATIONAL TRADE ADMINISTRATION AND THE TRADE AND 
                           DEVELOPMENT AGENCY

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                INTERNATIONAL ECONOMIC POLICY AND TRADE

                                 OF THE

                              COMMITTEE ON
                        INTERNATIONAL RELATIONS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                              JUNE 9, 1999

                               __________

                           Serial No. 106-107

                               __________

    Printed for the use of the Committee on International Relations




 Available via the World Wide Web: http://www.house.gov/international 
                               relations
                                 ______


                    U.S. GOVERNMENT PRINTING OFFICE
64-675 CC                   WASHINGTON : 2000




                  COMMITTEE ON INTERNATIONAL RELATIONS

                 BENJAMIN A. GILMAN, New York, Chairman
WILLIAM F. GOODLING, Pennsylvania    SAM GEJDENSON, Connecticut
JAMES A. LEACH, Iowa                 TOM LANTOS, California
HENRY J. HYDE, Illinois              HOWARD L. BERMAN, California
DOUG BEREUTER, Nebraska              GARY L. ACKERMAN, New York
CHRISTOPHER H. SMITH, New Jersey     ENI F.H. FALEOMAVAEGA, American 
DAN BURTON, Indiana                      Samoa
ELTON GALLEGLY, California           MATTHEW G. MARTINEZ, California
ILEANA ROS-LEHTINEN, Florida         DONALD M. PAYNE, New Jersey
CASS BALLENGER, North Carolina       ROBERT MENENDEZ, New Jersey
DANA ROHRABACHER, California         SHERROD BROWN, Ohio
DONALD A. MANZULLO, Illinois         CYNTHIA A. McKINNEY, Georgia
EDWARD R. ROYCE, California          ALCEE L. HASTINGS, Florida
PETER T. KING, New York              PAT DANNER, Missouri
STEVEN J. CHABOT, Ohio               EARL F. HILLIARD, Alabama
MARSHALL ``MARK'' SANFORD, South     BRAD SHERMAN, California
    Carolina                         ROBERT WEXLER, Florida
MATT SALMON, Arizona                 STEVEN R. ROTHMAN, New Jersey
AMO HOUGHTON, New York               JIM DAVIS, Florida
TOM CAMPBELL, California             EARL POMEROY, North Dakota
JOHN M. McHUGH, New York             WILLIAM D. DELAHUNT, Massachusetts
KEVIN BRADY, Texas                   GREGORY W. MEEKS, New York
RICHARD BURR, North Carolina         BARBARA LEE, California
PAUL E. GILLMOR, Ohio                JOSEPH CROWLEY, New York
GEORGE RADAVANOVICH, Califorina      JOSEPH M. HOEFFEL, Pennsylvania
JOHN COOKSEY, Louisiana
THOMAS G. TANCREDO, Colorado
                    Richard J. Garon, Chief of Staff
          Kathleen Bertelsen Moazed, Democratic Chief of Staff
                                 ------                                

        Subcommittee on International Economic Policy and Trade

                ILEANA ROS-LEHTINEN, Florida, Chairwoman
DONALD A. MANZULLO, Illinois         ROBERT MENENDEZ, New Jersey
STEVEN J. CHABOT, Ohio               PAT DANNER, Missouri
KEVIN BRADY, Texas                   EARL F. HILLIARD, Alabama
GEORGE RADANOVICH, California        BRAD SHERMAN, California
JOHN COOKSEY, Louisiana              STEVEN R. ROTHMAN, New Jersey
DOUG BEREUTER, Nebraska              WILLIAM D. DELAHUNT, Massachusetts
DANA ROHRABACHER, California         JOSEPH CROWLEY, New York
TOM CAMPBELL, California             JOSEPH M. HOEFFEL, Pennsylvania
RICHARD BURR, North Carolina
             Mauricio Tamargo, Subcommittee Staff Director
        Jodi Christiansen, Democratic Professional Staff Member
                Yleem Poblete, Professional Staff Member
                     Camilla Ruiz, Staff Associate




                            C O N T E N T S
                              ----------                              
                               WITNESSES

                                                                   Page

Hon. David Aaron, Under Secretary for International Trade, 
  Department of Commerce.........................................     4
Hon. Nancy Frame, Deputy Director, Trade and Development Agency..     6
Mr. Edmund Rice, President, Coalition for Employment Through 
  Exports........................................................    22
Mr. James Alco Merritt, President, MD International..............    24
Mr. Michael Katz, President, Cenogenics Corporation..............    26




  EVALUATING THE INTERNATIONAL TRADE ADMINISTRATION AND THE TRADE AND 
                           DEVELOPMENT AGENCY

                              ----------                              


                        Wednesday, June 9, 1999

                  House of Representatives,
                      Subcommittee on International
                                 Economic Policy and Trade,
                              Committee on International Relations,
        Washington, D.C.
    The Subcommittee met, pursuant to notice, at 1:30 p.m. In 
Room 2200, Rayburn House Office Building, Hon. Ileana Ros-
Lehtinen [Chairwoman of the Subcommittee] Presiding.
    Ms. Ros-Lehtinen. The Subcommittee will come to order.
    Promoting U.S. exports is key in keeping American 
businesses competitive in the world economy. We are all aware 
of this important fact. How to go about promoting global 
commerce and supporting U.S. companies in the most effective 
manner, however, is often the topic of much controversy. Every 
year $75 billion of taxpayer money is spent on programs that 
subsidize businesses. Some believe that this investment in the 
development of U.S. businesses in the international marketplace 
is a small price to pay for the returns, the creation of 
American jobs and a booming U.S. export market.
    Others, however, are quick to criticize any government 
intervention in what they believe should be left to the private 
entities and to market flows.
    Today we will be focusing on two agencies whose goal it is 
to promote the growth of U.S. small businesses in an 
increasingly globalized marketplace.
    The International Trade Administration's goal is to promote 
competitiveness through promoting U.S. exports, fighting unfair 
foreign trade barriers and negotiating and implementing 
multilateral and bilateral trade agreements. Its primary 
function is to assist and advocate for U.S. exports by focusing 
on the big, emerging markets and providing industry and country 
analysis for American businesses.
    The Trade and Development Agency helps U.S. companies 
pursue overseas business opportunities in infrastructure and 
industrial projects in developing middle-income countries. TDA 
funds feasibility projects in a variety of sectors which 
evaluate the technical, legal, economic and financial aspects 
of a development project, as well as assess the credit 
worthiness of a project.
    Many have praised the work of these agencies in helping 
U.S. businesses to overcome barriers to trade and investment. 
U.S. businesses claim they have been able to benefit from the 
monitoring and assurances that they receive from ITA, for 
example, of full compliance with the trade agreements by 
foreign countries. They also cite information that these 
agencies supply to U.S. companies and the tools available to 
the agencies for resolving issues.
    U.S. industries which depend on the information and support 
provided by ITA and TDA claim that without this analysis and 
data the U.S. would be far less successful in efforts to break 
foreign markets, to protect property rights and to further the 
interests of American businesses internationally.
    The business community has pointed out that, in the face of 
highly competitive markets where their foreign counterparts 
enjoy the full backing and support of their respective 
governments, the quality project support provided by TDA, for 
example, is essential to their success and thus to our overall 
U.S. economy.
    Critics, however, have labeled these types of Federal 
assistance programs designed to promote U.S. exports and 
business abroad as corporate welfare. They claim that select 
businesses and industries which are politically well connected 
have an unfair advantage over the average American corporation. 
Further, they argue that big business is often the ones which 
reap the profits, not the small- or medium-sized businesses, 
the ones that really need the assistance.
    Critics have also claimed that current Administration trade 
policies and programs are counterproductive and that, instead 
of leading to market openings, they lead to government and 
bureaucratic manipulation of trade flows.
    They assert that the best government can do to promote 
economic growth is to simply get out of the way and let private 
entrepreneurs with their own capital at risk determine how the 
economy's resources will be directed, creating a level playing 
field, which minimizes government interference in the 
marketplace and dramatically reduces the overall regulatory 
burden and cost of the government.
    Yet another critique is that these programs lie outside of 
Congress' limited spending authority under the Constitution and 
in fact they constitute a misuse of taxpayer funds.
    As the Subcommittee with oversight jurisdiction over the 
function and operations, the operations of both the 
International Trade Administration and the Trade and 
Development Agency, we look forward to the testimonies of our 
witnesses today and to provide a forum for members to evaluate 
the effectiveness and the impact of these programs on promoting 
U.S. products and businesses abroad.
    I am pleased to recognize the Ranking Member of our 
Subcommittee, Mr. Menendez from New Jersey, for his opening 
comments.
    Mr. Menendez. Thank you, Madam Chair lady, and I appreciate 
you holding this hearing. I think it is an important one.
    America's marketplace is clearly global; and if America is 
going to stay on top, we need to ensure that our companies have 
equal access to that marketplace. To do that, we have got to 
understand where and what market opportunities exist. We need 
to enhance programs, in my view, in the areas of export 
promotion and contract procurement so that we can compete on a 
level playing field with our foreign competitors. Last, we need 
to show off trade compliance programs to ensure that the 
countries that sign trade agreements with the United States 
comply with all of its provisions. Like laws, trade agreements 
need to be enforced for them to have meaning.
    In my view, ITA and TDA are crucial to the maintenance of 
America's global economic leadership. I am concerned that the 
President's budget for the International Trade Administration 
appears to be inadequate. Not only does it presume the 
collection of fees by the Commercial Service at a level which I 
believe is unrealistic, the budget request also fails to 
provide inflationary adjustments to ITA's base, and I am 
concerned that these budget numbers will force ITA to make 
programmatic cuts.
    We cannot afford to forfeit market opportunities cuts in 
emerging markets like Latin America, nor can we afford to be 
insufficiently staffed as we enter into substantial trade 
negotiations like the Chinese WTO accession negotiations.
    We need to protect both America's opportunities and its 
interests. Similarly, we need to ensure that TDA is adequately 
funded. TDA is often the crucial factor between a project going 
to an American company or a foreign company. By funding 
feasibility studies, orientation visits, specialized training 
grounds, business workshops and various forms of technical 
assistance, TDA enables American businesses to compete for 
infrastructure and industrial projects in middle income and 
developing countries.
    As we seek to address our trade deficit and maintain our 
competitive edge in the global market, we need to look to 
programs which yield big benefits for a small cost. We need to 
understand that American exports mean American jobs; and, 
clearly, I think that all of us understand that the goods and 
services that the United States are exporting support more than 
12 million domestic jobs. That is something I believe all of us 
can get behind.
    Just before the recess, I joined Congressman Manzullo, a 
Member of our Committee, in introducing the Export Enhancement 
Act of 1999 which reauthorizes and enhances some of the 
provisions in OPIC, TDA and ITA Programs. I believe these 
programs are crucial to reducing the escalating U.S. trade 
deficit, which reached a record high of $19.4 billion in 
February of this year, by helping American companies to stake a 
claim in the global market through exports.
    I look forward to hearing from our witnesses about how the 
Congress can best assist them in the preservation of America's 
global economic leadership, how we can best ensure foreign 
compliance with current trade agreements, advocate American 
interests in future trade agreements and guarantee American 
access to global market opportunities.
    I would like to say in closing, Madam Chairlady, I have 
heard the concerns that have been expressed about corporate 
welfare. Let me just say, as someone who comes from a district 
that is rather blue collar, urban in nature, I would share 
those concerns. But in both ITA's and TDA's Programs, it is my 
clear view that what they do for us at the end of the day is 
really generate American jobs here at home, create American's 
business opportunities abroad that ultimately inure to the 
benefit of our resources that we receive here at home in taxes 
that are paid, employment that is created, revenues that are 
generated and at the end of the day, with an incredibly small 
budget, and in many cases, such as OPIC, that returns money or 
gives money to the Federal Treasury.
    I think that is a good deal for American taxpayers, and I 
appreciate you holding these hearings and giving us the 
opportunity to make that case.
    Ms. Ros-Lehtinen. Fine. Thank you.
    Mr. Burr of North Carolina.
    Mr. Burr. Madam Chairman, no opening statement. I would 
just take this opportunity to welcome all of our witnesses.
    Ms. Ros-Lehtinen. Thank you so much, Richard.
    We will now introduce our first panel.
    Ambassador David Aaron currently serves as Under Secretary 
of Commerce for International Trade, appointed by the President 
on June 10th of 1997. As head of the International Trade 
Administration, Ambassador Aaron is responsible for formulating 
and providing leadership for U.S. trade policy by promoting 
U.S. exports, by advocating for U.S. businesses abroad, and by 
ensuring compliance with U.S. trade agreements.
    Prior to becoming Under Secretary, Ambassador Aaron was the 
U.S. Permanent Representative for the Organization for Economic 
Cooperation and Development, where he was instrumental in 
concluding multilateral OECD negotiations.
    Thank you so much, Ambassador, for being with us.
    Next we will hear from Nancy Frame, who joined the U.S. 
Trade and Development Agency as Deputy Director in 1986. As 
Deputy Director for TDA she is responsible for the day-to-day 
operations of this export promotion agency.
    Prior to her position at TDA, she served as the Assistant 
General Counsel at the Agency for International Development, 
specializing in the area of international commercial law, as 
well as contracting. For her excellence in service in 1983 she 
received AID's Superior Honor Award for outstanding Service.
    We welcome you here today, Ms. Frame.
    I would like to tell the Members and the audience as well 
that Ambassador Aaron needs to leave by 2:15. Thus, we would 
appreciate it if the witnesses abide by the 5-minute rule and 
if Members would limit their questioning to afford everyone an 
opportunity to address the Administration's panel. If we run 
out of time and if there are additional questions you would 
like to raise, you can submit them in writing to the 
Subcommittee; and we will, of course, forward them to the 
appropriate officials so that both the questions and the 
answers are included in the official transcript.
    We welcome both of you.
    Ms. Ros-Lehtinen. Ambassador Aaron.

  STATEMENT OF THE HONORABLE DAVID AARON, UNDER SECRETARY FOR 
          INTERNATIONAL TRADE, DEPARTMENT OF COMMERCE

    Mr. Aaron. Madam Chairlady and distinguished Members of the 
Subcommittee, thank you very much for this opportunity. I am 
pleased to be here today to speak to you about the 
International Trade Administration's export promotion 
activities.
    Basic to our mission are four functions--market opening, 
compliance, advocacy, and helping small- and medium-sized 
business, SME's, crack the international market.
    On the last, let me note, between 1992 and 1997, the total 
number of U.S. exporters nearly doubled, from 112,000 to 
220,900. And 97 percent of exporters are SME's. These are the 
people we help.
    The three units of ITA engaged in export promotion are 
Market Access and Compliance, Trade Development and the 
Commercial Service. All work closely together to help American 
firms and workers take advantage of export opportunities. We 
also lead the Interagency Trade Promotion Coordinating 
Committee in implementing the national export strategy and 
coordinating activities of other agencies.
    Since I came to ITA, each unit has better defined its role 
and achieved significant results, but each could be doing 
better. Budget constraints affect us all, this despite the fact 
that other countries spend many times more on export promotion 
per dollar of GNP. France, for example, spends 16 times as much 
as the U.S. on export promotion and puts eight times as many 
people in the field to assist its exporters.
    Market Access and Compliance, which is ITA's smallest unit, 
was completely realigned 2 years ago. It now focuses on 
obtaining market access for American firms and workers and 
achieving full compliance by foreign nations with our trade 
agreement.
    Ensuring access to foreign markets is absolutely essential. 
The best export promotion in the world won't get the job done 
if barriers block access.
    The realigned MAC features are a Trade Compliance Center 
which spearheads this compliance activity. MAC has produced 
excellent results in removing access barriers and boosting U.S. 
exports. It is also generating cases for dispute settlement 
under the WTO and NAFTA, such as a Korean construction 
procurement that allegedly discriminates against U.S. bidders.
    MAC does much more, despite receiving only about 84 percent 
of the President's requested budget in recent years. I can 
assure you that access to foreign markets just doesn't happen. 
An underfunded MAC means lost opportunities and potential 
damage to excluded U.S. exports.
    Trade Development is the second largest unit of ITA. TD 
provides advocacy, export promotion services, industry-specific 
market analysis, and support for trade negotiations. It 
provides industry expertise found nowhere else in government or 
outside it.
    The centerpiece of Trade Development and a key part of the 
President's export strategy is the Advocacy Center. It was born 
in the realization that U.S. companies were losing business to 
foreign firms that received strong support from their 
governments. We now stand beside U.S. companies as they fight 
for and win contracts.
    Over its 5 years of existence, the Advocacy Center has 
helped U.S. firms win some 400 competitions for contracts. That 
is $60 billion in U.S. export contracts and hundreds of 
thousands of U.S. jobs. SME's account for 25 percent of that 
total directly and much more indirectly as subcontractors and 
vendors.
    Trade Development is also operating on meager rations. For 
years its operating budget has not kept pace with wage and 
price increases. Funding for the Advocacy Center has been 
reduced. The lean times has taken their toll in fewer industry 
specialists. New industries such as biotech and E-commerce have 
to be covered with stretched resources. Continuing along this 
path could result in even more severe service cutbacks.
    That brings me to the largest unit of ITA, and that is the 
U.S. and Foreign Commercial Service. It is a global network of 
trade professionals stationed in more than 100 U.S. cities and 
80 countries abroad. Small- and medium-sized companies are the 
Commercial Service's chief constituency. They receive a wide 
variety of information and counselling services from the U.S. 
and FCS.
    The domestic staff counseled more than 35,000 clients last 
year and helped produce $2.3 billion in exports. Overseas, the 
staff counseled more than 63,000 clients.
    The Commercial Service has several new initiatives this 
year. It is expanding services to minority and rural business 
people, and it is developing an array of new electronic 
commerce products that will reduce market entry costs and open 
up new business opportunities.
    These initiatives and other program expansions cost money. 
However, issues stemming from the fiscal year 1999 budget, 
including reductions to the base, increased costs of overseas 
administrative support, declining field revenues in the light 
of the Asian recession and issues relating to carryover cloud 
the budget picture going forward and may force some tradeoffs 
between our proposed new and existing programs.
    Finally, let me briefly discuss the achievements of the 
Trade Promotion Coordinating Committee. Since its formation in 
1993 the TPCC has established the National Network of U.S. 
Export Assistance Centers, developed a government strategy to 
combat bribery abroad and focused trade and finance programs on 
the Asian financial crisis, among many other initiatives. This 
year, one TPCC focus is on increasing coordination with the 
States. As always, helping small business to export is a top 
priority.
    In conclusion, let me repeat that ITA is both committed to 
and effective in promoting U.S. exports. We have developed new 
and innovative ideas that are paying off for American 
companies, but we cannot follow through on these efforts 
without policy and budget support from the Congress. At a time 
when a slowed world economy demands that we support U.S. 
exporters more than ever before, we cannot withdraw from an 
area so critical to our economic prosperity.
    I want to thank you for your attention and, in particular, 
for the Committee's support on ITA reauthorization. Thank you.
    Ms. Ros-Lehtinen. Thank you, Ambassador.
    Ms. Ros-Lehtinen. Ms. Frame.

STATEMENT OF THE HONORABLE NANCY FRAME, DEPUTY DIRECTOR, TRADE 
                     AND DEVELOPMENT AGENCY

    Ms. Frame. Thank you.
    Madam Chairwoman, Members of the Subcommittee, I want to 
thank you for giving me this opportunity to testify today on 
H.R. 1993, the Export Enhancement Act of 1999. We very much 
appreciate the efforts of Congressmen Menendez, Manzullo and 
Gejdenson along with Chairman Gilman for working so closely 
with us on this important legislation.
    Let me begin by expressing the regrets of our Director, 
Joseph Grand Maison, who wanted to be here today to testify, 
but, unfortunately, he is attending a TDA-sponsored Asia-
Pacific Aviation Symposium in Los Angeles. Although he very 
much wanted to be appear before you in support of this 
legislation, he was equally committed to facilitating the 
success of this conference, an event featuring over $21 billion 
of potential export opportunities for U.S. firms.
    I would like to just take a few minutes to tell you a 
little bit about the conferences that TDA sponsors. Last year 
we did a very successful Latin America Aviation Conference in 
Miami; and, building upon that, we formulated the conference in 
Los Angeles with the idea of introducing over 40 projects 
sponsors from Asia to over 100 U.S. business executives who are 
currently attending this conference. Not only will these U.S. 
executives learn a lot about a variety of projects in the 
aviation field from various Asian countries, but they also have 
the opportunity to meet one on one with the key decisionmakers 
for those projects. So this is an excellent opportunity.
    In addition, we provide them with this briefing book, 
which, as you can see, is a very big book. It has got lots of 
information on all of the projects that are being featured at 
this conference.
    We do a number of these conferences every year, and we 
believe that they are very successful in helping American 
businesses, particularly small businesses, learn about the 
project opportunities overseas and market their goods and 
services.
    It is obviously easier for any business to go to one 
location in the United States where they have the opportunity 
to meet with a whole lot of project sponsors and to learn about 
a variety of projects, and also they are able to meet with 
people that they might not otherwise find available to them.
    In addition to conferences, we fund orientation visits. We 
also call them reverse trade missions, and in this way we 
introduce foreign projects sponsors again to U.S. companies. An 
orientation visit brings the foreign delegates to the United 
States for a firsthand look at our equipment, our technology in 
operation and facilities all over the United States. In 
addition to these site visits, the orientation visits always 
include at least one business briefing, where interested 
companies can come once again, learn about the project 
opportunities that these foreign projects sponsors are moving 
forward on and have an opportunity to discuss the technology 
and services that they provide with them.
    In addition, we found that the strategic use of very 
project-specific technical assistance training grants and 
procurement advisers can lead to increased exports of U.S. 
technology and services.
    Now, all of these activities, all of these tools which I 
have just described complement our core activity which, of 
course, is funding feasibility studies on major infrastructure 
projects. The record shows that when a U.S. company conducts a 
feasibility study, it greatly increases the chances that U.S. 
companies will win the lucrative follow-on contracts that arise 
upon implementation of the project.
    These then are the array of activities that TDA uses in 
order to achieve our mission, which, very simply put, is to 
create jobs in the United States by promoting exports to 
infrastructure projects in developing and middle-income 
countries. We are proud of the fact that $32 of exports are 
associated with every dollar invested in TDA and fully \1/3\ of 
the projects in which we have invested results in exports.
    Our program is dynamic and creative, and we are pleased 
that the legislation being proposed increases and reinforces 
this flexibility.
    We also support the legislation because it codifies two 
existing policies, cost sharing and success fees, both of which 
help us to stretch our budget to meet the increasing demands of 
the global market.
    Under our cost-sharing program, we have been able to 
leverage roughly 50 additional cents for every dollar invested 
by TDA. With regard to success fees, almost half of our 
feasibility studies last year had a success fee provision 
requiring that a U.S. company, if successful in project 
implementation, will pay back to TDA the amount of money that 
we put into the feasibility study.
    While this success fee program is relatively new and the 
results are not yet in, we are cautiously optimistic about its 
prospects.
    We are also proud of our record in working with small- and 
medium-sized firms. Fully 60 percent of the companies with 
which we do business are small, and many of the small companies 
get into the international marketplace by being subcontractors 
to larger companies.
    A classic example of this is a small consulting firm in the 
aviation business, Birk, Hillman Associates. It is a firm 
located in Miami. They first learned about TDA because they 
were a subcontractor with Bechtel working on a TDA funded 
feasibility study on an aviation project in Trinidad. Building 
on this experience, they went on to win two TDA-funded 
feasibility studies on other airports, one in Peru and the 
other in Jamaica; and I am very happy to report that all of 
three of those projects are now moving forward.
    Birk, Hillman have won exports of their services on those 
projects along with a lot of other American companies who are 
exporting goods to those projects.
    Finally, I would just sum up by saying that we are very 
pleased that the proposed legislation authorizes full funding 
of the President's budget requests for TDA for fiscal year 
2000. The proposed increase in our budget is relatively modest, 
going from $44 million to $48 million, but we believe it will 
be money well spent.
    This year, the demand for our program has grown 
particularly in Latin America and Africa, and we have been 
forced to turn away some very good projects. Every missed 
opportunity can mean a loss of valuable, high-paying export 
jobs here in the United States.
    We believe that the budget that has been proposed for 
fiscal year 2000 would allow us to continue to grow gradually 
and thoughtfully, and TDA welcomes the support of the Committee 
in pursuing this object.
    Madam Chair, thank you again for this opportunity; and I 
certainly would be happy to answer any questions you have or 
others have.
    Ms. Ros-Lehtinen. Thank you so much.
    Ms. Ros-Lehtinen. I would like to ask a question to both of 
you and then an individual question to each.
    What are the costs and benefits to U.S. taxpayers of your 
agencies' ITA and TDA Programs? What data do you have available 
to measure this data to determine the export potential versus 
the actual figures, the job creation versus domestic job loss, 
and have any studies been conducted on the impact on the U.S. 
economy should ITA and TDA products not be available?
    Mr. Aaron. We try very carefully to assess the actual 
export actions and the value of the export actions that ITA 
creates in the course of a year. For example, in trade advocacy 
work, we very carefully track that. It has been looked at by 
outside auditors to make sure that we are not inflating the 
figures or getting them wrong in any way. Last year, for 
example, our advocacy work on behalf of small- and medium-sized 
enterprise was $400 million for an investment in the Advocacy 
Center of slightly over a million dollars.
    So right there, just for small- and medium-sized 
enterprises, we have got more than our money's worth for the 
Advocacy Center.
    The same is true, I think, for the U.S. and Foreign 
Commercial Service. When we look at what the SME's were able to 
accomplish last year and compare that to what was spent on the 
Commercial Service, I think we have a very strong set of 
numbers.
    Let me see if I can find that right here in our budget 
papers. Page 62 here. Excuse me a moment. Thank you.
    The programs funded in fiscal year 1997 supported about $49 
billion of exports in fiscal year 1997, with many more exports 
expected in future years. Since fiscal year 1995, the agencies 
have estimated to support an average of $20 in exports per 
budget dollar spent on trade promotion.
    It should be emphasized that these reflect several 
limitations. The numbers reflect several limitations. For 
example, more than one agency can support the same export with 
different contributions. Agency estimates of exports did not 
accurately indicate programs additionalities, so, therefore, 
some of the exports counted above might have taken place even 
in the absence of these numbers.
    But, on balance, we believe that the investment that has 
been made of slightly more than $200 million for all of ITA and 
for TDA and the other agencies, supporting almost $50 billion 
in exports, is a very, very good investment for our country.
    Ms. Ros-Lehtinen. Thank you.
    Ms. Frame.
    Ms. Frame. With regard specifically to TDA, we track every 
single project that we get involved in to see what the results 
are, and we attempt to identify all of the exports that have 
gone to the United States from those projects. In total, our 
activities have facilitated over $12.3 billion in U.S. exports. 
That is a return of $32 in U.S. exports for every dollar that 
TDA has invested, and we believe that is an excellent return on 
our fairly small investment.
    Ms. Ros-Lehtinen. Thank you.
    Ambassador, I wanted to ask you about overlapping duties. A 
recent inspection report by the Inspector General for Auditing 
at the Department of Commerce found that there is relatively 
little cooperation between the National Telecommunications and 
Information Administration and the International Trade 
Administration. In fact, it states that ITA's Office of 
Telecommunications within the Trade Development unit has its 
own staff working on many of the same issues, and this 
certainly does point to a potential problem of overlapping 
duties.
    How can export promotion activities, trade monitoring, 
compliance be streamlined so that we can make better use of our 
resources and how are operations coordinated within the 19 
Federal entities that an are involved in trade that would 
enable us to offer efficiency and expediency and a better use 
of taxpayers' funds?
    Mr. Aaron. I think this is a very important question. As 
your question noted, there are problems within agencies and 
there are potential problems between agencies.
    Within our agency, on the specific question that you asked, 
the office that is inside TD that deals with telecommunications 
really focuses its operational activities in a different area 
than the telecommunications office that functions separately 
under a separate assistant secretary.
    That office, frankly, focuses primarily on domestic kinds 
of issues, occasionally involving itself in international 
issues such as the distribution of spectrum, the whole question 
of domain names of the Internet and so forth. That is their 
activity. Our activity has been focused much more on trade 
barriers and standards and potential trade barriers.
    For example, our office in TD has taken on this question of 
the third generation wireless standard that is being adopted in 
Europe. This issue had the potential of barring U.S. technology 
from being sold in Europe, and we lose literally a multibillion 
dollar trade barrier in the making due to this office in TD 
which focused on the trade barrier type of issue. We have now 
reached a compromise which is slowly working its way through 
the international standards bodies and we hope will be adopted 
by the ITU in the near future.
    So while they both focus on telecommunications issues they 
are focusing on rather different issues; the other agency 
essentially domestic, with some international dimensions that 
are highly technical. We are focusing primarily on trade 
barriers and standards that would impede trade.
    Now as for the interagency process, we have established the 
Trade Promotion Coordinating Committee, which meets regularly 
at many levels, the office director level, assistant secretary, 
under secretary, and even Cabinet level. What we try to do is 
coordinate our trade promotion efforts, try to coordinate our 
trade missions. We coordinate and discuss how we can get, for 
example, the work of TD to support a particular advocacy 
project that may be advocated by the Department of Commerce, 
and then we work with Eximbank to see if they can come in with 
financing for a particular project, so that all of us are 
working in tandem to bring our specific expertise to bear.
    This process, without being too elaborate about it, I think 
is working pretty well; and what we are trying to do this year 
is bring the States into it, because the States themselves, 
Governors and even mayors, often are leading proponents of 
trade with their particular regions. We are now working with 
them to try to coordinate their activities with Federal efforts 
to support them and to gain benefit of their efforts as well.
    Ms. Ros-Lehtinen. Thank you so much, Mr. Ambassador.
    Mr. Menendez.
    Mr. Menendez. Thank you, Madam Chairlady.
    I want to thank you, both of you, for your testimony.
    I want to pursue first with you, Ambassador, on a budgetary 
situation of the agency; and before I do that, let me 
understand correctly your answers to the Chairlady's questions.
    I heard you say that in the advocacy work your agency is 
generating $400 million for a million dollars' worth of--is 
that million dollars your budget----
    Mr. Aaron. Yes, just for the advocacy area.
    Mr. Menendez. On the advocacy area. Nearly $50 billion in 
terms of actual exports.
    Mr. Aaron. $50 billion overall for all of the trade 
agencies in the Trade Promotion Coordinating Committee group.
    Mr. Menendez. All right. I think there is a general norm 
out there that says for every billion dollars we generate 
13,000 jobs, so if we were to multiply that $50 billion, that 
is 650,000 jobs here in the United States. So I just want to 
make sure about that.
    Having said that, two questions, and one is a prelude to 
the next. This issue that is constantly raised that you and the 
other relative agencies are part a corporate welfare program 
and really dealing with the biggest entities, how would you 
respond to that?
    Mr. Aaron. It is not true, for several reasons.
    First of all, most of our effort goes to supporting small- 
and medium-sized enterprise.
    Mr. Menendez. As defined?
    Mr. Aaron. As defined by--really by the Small Business 
Administration, which is small- and medium-sized businesses at 
500 to 100; and I think small business is 100 below. I think 
that is the definition, anyway. They are below 500 personnel. 
This is our real focus. This is where we try to provide 
additional support.
    We do that not only in big projects like for our Advocacy 
Center, but, as I say, even in the Advocacy Center itself which 
tends to deal with large-scale infrastructure projects, even 
there, 25 percent of the contracts that are awarded through the 
Advocacy Center go directly to small- and medium-sized 
businesses. Then, beyond that, of course, small- and medium-
sized businesses participate in subcontractors and vendors.
    But focusing on SME's themselves, there are a number of 
things that we do for them that we don't believe can be 
considered corporate welfare.
    First of all, we provide services that the private sector 
cannot, including this advocacy work. Second is dealing with 
issues like corruption and dealing with standards setting so 
that standards are equal and small companies can participate in 
it and compliance with our trade agreement.
    Second, small businesses often and quite frequently, 
particularly if they are just getting into the export business, 
do not have the expertise or the financial wherewithal to open 
up new markets, to do the market research to find the contact, 
to develop the trade leads that would be possible. They come to 
us. Our Commercial Service goes out and works on their behalf 
as their trade consultants, both domestically and in our 
foreign places, to bring to them trade opportunities, to bring 
to them potential distributors, agents, even potential paying 
customers. So this is a very important function that can't be 
found anyplace else.
    Third, as I pointed out, these produce I think very 
important returns. But, third, these programs are crucial to 
meet foreign competition. This is a very competitive world now, 
and other governments are working very hard to support their 
large-, small- and medium-sized businesses, and in terms of 
dollars for GDP, if you look at most of our competitors, they 
outspend us on GDP per dollar basis between 5 and 15 times what 
we are spending.
    Mr. Menendez. Between 5 and 15 times?
    Mr. Aaron. That is right, depending on the country.
    Mr. Menendez. That leads to my last question, which is, I 
am concerned about your budget. I understand your limitations 
with regard to answers that you are going to give to my 
questions. Before I have you answer, we have got a whole bunch 
of trade agreements currently being negotiated--China's entry 
into the World Trade Organization, the upcoming WTO ministerial 
meeting in Seattle, the Transatlantic Economic Partnership, the 
Free Trade of the Americas.
    USTR, of course, is the lead on this; and they only have 
about 150 people. They have to depend to a large degree on you 
for the country and sectorial areas. Do you understand, for 
example, some of the issues we have in Japan and elsewhere and 
in terms of some of the interests that we have in promoting 
greater opportunities in emerging markets like Latin America? 
Do you really have with this budget the wherewithal to meet 
those challenges?
    Mr. Aaron. Without reference to this budget specifically, 
which we support as the President's budget, I think it is fair 
to say that when you look, for example, in the negotiating 
area, we used to have during the Uruguay Round 30 officers 
supporting USTR just in the Uruguay Round.
    We are now preparing for a new round, which will be upon us 
in November. We have only six officers to deal with the 
preparation for that round; and it is going to be, I am sorry 
to say, at least as complex as the Uruguay Round. If we----
    Mr. Menendez. So one-fifth of what you had originally?
    Mr. Aaron. That is just in that office alone.
    If you look at China, we are in the process now of trying 
to negotiate China's succession to the WTO. The staff that we 
have had there in recent years has declined from nine to four. 
When China comes into the WTO, there will be a great panoply of 
things that they have committed themselves to do.
    We will have to monitor that. We will have to monitor this 
enormously complex agreement to be sure that our companies are 
really getting their fair share, and we have got four people to 
do it with.
    Japan shows a similar situation. We used to have 18; now we 
have eight.
    In the European area, I believe we used to have 11, and now 
we have 6. We are trying to monitor mutual recognition 
agreements that are worth a billion dollars a year to U.S. 
industry if they are followed, if they comply with them. So in 
that area, we have important shortfalls.
    I think I also have to say that over the last many years, 
in order to meet Congress' own budget targets, we have had a 
situation where oftentimes there were kind of one-shot funding 
devices found to pay for some of the activities of ITA, whether 
that be the Commercial Service or the Trade Development Agency. 
But these one-shot arrangements, like raiding a pension fund, 
for example, that there was for our Foreign Service nationals 
abroad or assuming a certain level of carryover that actually 
didn't exist or proposing a certain level of--being able to 
find money in different little pots around the agency, we have 
done all of that. Each time we have used those, the next year, 
of course, the base of our appropriation is in fact lower, 
because we have used those things, not straight appropriations, 
to pay for it.
    So we get this step-down phenomena that is taking place 
from trying to take money from all of these different pots, 
some of which need to be replaced. So we have arrived at a 
point as a result of previous budget cycles where our services 
are very tightly strapped and where we are having to look at 
the issue of actually closing offices, both here and abroad.
    Mr. Menendez. Thank you, Madam Chairlady.
    I think--32 to 1 odds. I like 400 million to 1. I don't 
understand the zeal that some of my colleagues have here in the 
House for the export, the undercutting of the very 
opportunities to make sure that we can even do greater export 
opportunities. I appreciate your answers.
    Thank you, Madam Chairman.
    Ms. Ros-Lehtinen. Thank you, Mr. Menendez.
    Mr. Burr.
    Mr. Burr. Thank you, Madam Chairman.
    Let me just ask you, Ambassador, there are 19 Federal 
export promotion agencies. Do we need all of them?
    Mr. Aaron. We call them export promotion agencies, because 
they are on our Export Promotion Panel. But the fact of the 
matter is there are agencies like USAID that spend money, and 
some of that money is spent abroad. So, therefore, we try to 
get that money back as exports.
    They are the State Department, because they have a role in 
advocacy. I mean, you can go down the list and you will find 
that they are tangentially related to export.
    When you get down to it, the real core export promotion 
agencies are our agency; TDA, which gets in at the ground floor 
of big projects; Eximbank, that does financing for exports. We 
are the three agencies that really have to work together, and I 
think we do, and I think we do so very effectively.
    Mr. Burr. They all do claim some responsibility in real 
dollars as to what they bring in export, don't they? I mean, 
every one I listened to claim some dollars that they have 
brought.
    I guess where I am getting at is, you gave the total number 
of dollars, and you have said, here is our share of it. Is 
everybody claiming the same dollars?
    Mr. Aaron. As I tried to indicate in my answer to the 
Chairwoman, there is a problem of sorting out exactly where----
    Mr. Burr. Whose dollars are what?
    Mr. Aaron. Whose dollars are whose. But we think the 
numbers are pretty good. But we would have to put an asterisk 
on it, and maybe some people are doing that. I am sorry I have 
left out OPIC which, since that is a subject of your bill. I am 
very remiss in identifying it as very, very important.
    Mr. Burr. Just out of curiosity, how many people do you 
have with you today?
    Mr. Aaron. I have three people with me, and I have lots of 
people here whose budgets are going to be affected by your 
decisions.
    Mr. Burr. They are certainly responsive to the questions.
    How do you allocate your resources?
    Mr. Aaron. Well----
    Mr. Burr. Let me say, you mentioned industry specialist. 
How do you choose which industries? Do you have them for all?
    Mr. Aaron. First of all, the government goes back many 
years, and so we inherit a certain structure. We look at that 
structure, and we say to ourselves, is this the structure we 
need now? How many people do we have in aviation? How many in 
basic industries? How many in tourism? How many in services and 
insurance and so forth?
    Before the Congress now is a plan of realignment for ITA 
which will shift some resources, shift some of the people 
inside our industry specialization, move some of people out 
from industries that aren't as active, aren't as important for 
us to support and support themselves to industries that need 
support. Like we are creating a new area for electronic 
commerce. We are strengthening our area in biotechnology.
    Similarly, a few years ago the Congress decided we 
shouldn't be in the area of supporting tourism, so we basically 
got rid of the tourism office, even though we still have a lot 
of responsibilities for collecting information and having 
knowledge of that area.
    So, basically, it is a question of continuing review, 
trying to get a sense of what industry wants. We have--with our 
ISAC and ITAC Industry Advisory Councils, we get a good sense 
of what is needed out there from the standpoint of promoting 
trade, what is needed from the standpoint of knocking down 
trade barriers, and that gives us a sense of how we structure 
the level of staffing for the various industrial sectors.
    Mr. Burr. Let me ask one question for the Trade and 
Development Agency, and I know other Members would like to 
catch you before they go. I think you supplied for us or the 
Committee supplied to us an appendix to Trade and Development 
Agency Program activities, the number of participating 
companies State by State. I would take for granted that they 
are listed for the State and the number of participating 
companies for the 1997 timeframe, that the numbers to the side 
would indicate how many companies in each area that 
participated with you in some type of activity. Would that be 
correct?
    Ms. Frame. I believe that is correct. I am not really 
familiar with that document. We didn't provide that, I guess.
    Mr. Burr. Let me just ask you, in this particular case at 
the top of the list of the District of Columbia and Virginia 
with almost 50 percent of the participating companies, would 
that be a correct conclusion on my part that 50 percent of the 
companies that participated with you at the agency came from 
those two areas, either the District of Columbia or the State 
of Virginia?
    Ms. Frame. I think that is unlikely. I don't know the 
answer to that absolutely, and we can get back to you on that.
    We do a lot of business with small consulting firms. They 
help us to analyze the projects that come to us to help us make 
decisions whether or not to fund a $500,000 feasibility study 
or $200,000 feasibility study.
    So there are a number of small businesses in this local 
area that do assist us, so that may bring some of the numbers 
up. But I think it is not that high. So I am not quite sure 
where that comes from.
    Mr. Burr. Assist you in determining----
    Ms. Frame. Assist us in analyzing--in making our due 
diligence and deciding whether or not to fund a feasibility 
study. We call these definitional missions or desk study 
contracts. They are the small contracts.
    Mr. Burr. So how many companies in the United States in 
whatever the last year you have a record for, worked with you?
    Ms. Frame. We do approximately 150 feasibility studies a 
year, so there is going to be at least--there may be some 
overlap of some companies doing more than one feasibility 
study. In addition, we do about 180 direct contracts for these 
small contracts, definitional missions and desk studies. Those 
are the companies that work with us directly, if you will.
    But, in fact, there are companies all over the United 
States who are really the beneficiaries of our program. It is 
not these companies with whom we have contracts or who actually 
do the feasibility studies. It is all the small- and middle-
sized, big companies that manufacture----
    Mr. Burr. That are affected.
    Ms. Frame [continuing]. Exactly, that manufacture the 
products that go into the project.
    Mr. Burr. How do you choose where you hold these 
conferences?
    Ms. Frame. We try to spread them around throughout the 
United States. In part it depends on the sector. For the 
aviation sector, we thought Los Angeles would be a good locale, 
because it is close to a number of companies that are in the 
aviation sector. But we do have conferences all over the United 
States, and so we try to spread them around a little. Because, 
for us, the conferences are also an outreach for TDA. It is an 
opportunity for other companies who are in that area who might 
come to that conference to learn about what we have to offer in 
terms of goods and services, as well as it is obviously 
learning about the projects. That is the main focus of the 
foreign projects.
    Mr. Burr. I thank the chair. I would yield back.
    Ms. Ros-Lehtinen. Thank you so much.
    Mr. Sherman.
    Mr. Sherman. Thank you, Madam Chairman.
    Ms. Ros-Lehtinen. And, Mr. Ambassador, we understand, as 
previously announced, that you do have to leave.
    Mr. Aaron. I would like to take one question. My deputy is 
here, and he can answer.
    Ms. Ros-Lehtinen. No problem. We have informed the Members 
you need to leave, and if any questions are related to that----
    Mr. Sherman. If you have time for just one question.
    Mr. Aaron. Please.
    Mr. Sherman. Let me pose the following example and draw 
upon your expertise.
    Let me say we let China into WTO, and they do a spectacular 
job of changing their statutes and regulations. You can't find 
a single flaw in any one of them. American exporters go over 
there. They think they have a good product, better than the 
Europeans, et cetera. My good friend, Nancy Pelosi, gives a 
speech about human rights in China. The business in China that 
they are trying to sell to gets a call from a commissar that 
says, dear Mr. Businessman, I know that the Americans have the 
best product, the best price. Great. OPIC can help--assist in 
financing to boot. But, if you buy their product, you will need 
to be sent to a reeducation camp.
    Is there any way in hell that we could possibly find out 
about that or take any enforcement action? I mean, it would 
obviously be an unfair trade practice, but there would be no 
way we would find out about it.
    If we live by the rule of law and we make our laws open--
and they live by the rule of political fear, where a telephone 
call or a hint can stop a billion dollar project--then aren't 
we condemning ourselves to absolute, total failure to have any 
kind of balanced trade, as long as we ignore results and rely 
only on the published laws of a society that doesn't follow its 
laws?
    Mr. Aaron. I think it is a very good question. I think what 
we do is try to rely on results. That is what our compliance 
group is trying to do.
    For example, we recently ran into difficulties in the 
procurements for a contract for a multibillion dollar project 
in Korea on their airport. They had committed themselves in the 
WTO to certain government procurement practices which should 
have given us an access to that project. They just said, no, it 
wasn't, it didn't, it couldn't, it is not, it is something 
else, it is not here.
    Mr. Sherman. Here you have----
    Mr. Aaron. Wait. We went to them, pressed this. Finally, we 
have taken them to the WTO; and we are going through a formal 
dispute settlement process, because we looked at the results 
and not at the letter of their commitments. We looked at their 
actual performance.
    Now, my intention will be to look at the performance of 
China as well. There are informal relationships in every 
society, and you can run into the kind of problem you just 
talked about in countries all over the world, not merely China, 
other places--in Asia, Latin America, Africa, Middle East and 
even Europe. The only way that you can fight those is to stay 
very close to your industry, develop information on patterns of 
activities that are taking place and then use all of your 
diplomatic and legal remedies to respond to it. We do. We have 
had success.
    Mr. Sherman. Unless you are able to tap the phones of every 
Chinese business person in a position to make a subjective 
decision, I just don't know how you deal with this. But I 
know--if you have to go, I understand.
    Mr. Aaron. Thank you very much.
    Mr. Sherman. There is a kind of artificial division of 
thought on trade that says you are either pro-trade or you are 
pro-protectionist. I think many of us are pro-export. I think 
several of us here on the panel have cosponsored the Export 
Enhancement Act, yet those of us who are pro-trade are somehow 
lumped together with these saccharin sweet, ``we-are-doing-
great'' presentations we often get from those involved in trade 
that tell us that total American trade is growing year after 
year without ever mentioning that we have the largest trade 
deficit in the history of mammalian life.
    As I just illustrated, even if we get new agreements, new 
agreements mean that American business people are free to 
import with lower tariffs, the absence of quotas, and they are 
going to do whatever is in their best interests. In contrast, 
it means that a business person from a closed society is free 
to do whatever he is told to do or she is told to do over the 
phone; and we will never find out what those instructions are.
    But the other thing is that we have an Administration that 
is urging that we plunge headlong into all kinds of new trade 
agreements, and what has been very interesting here is that 
Administration--that these trade agreements are going to be 
inadequately negotiated and grossly inadequately enforced.
    We now have eight people dealing with an issue with Japan 
that we used to have 18 people deal with.
    You work for an Administration, Ms. Frame, and I am sure 
that they are in favor of all of these new trade agreements. 
But just between us, is there any chance that you would ever 
have the resources to enforce them?
    Ms. Frame. Luckily, this is not my area. As my boss says, 
we don't make policy; we just get involved in feasibility 
studies on projects. So I am going to turn it over to Tim 
Houser.
    Mr. Sherman. It is a question for your new boss.
    Mr. Malloy. I am Pat Malloy. I am the Assistant Secretary 
for Commerce for Market Access and Compliance. I have been in 
this job for a year. I come to it after 15 years working on the 
Senate side for the Banking Committee, so I am very familiar 
with the concerns here in the Congress.
    One of the things I got down there and looked at is the 
decline in the resources that we have to deal with these 
country trade problems. We have been underfunded--gotten 84 
percent of what we have asked for over the last 4 years, and 
that means a decline in resources for Japan, China, and Europe 
and these other----
    Mr. Sherman. Decline in resources as you have a 
skyrocketing trade deficit, as you have an increase in total 
trade, as you have more sophisticated means of keeping exports 
out of countries.
    Mr. Malloy. I agree with you, Congressman. This is a very 
important----
    Mr. Sherman. The Administration that wants fast track 
authority is also the Administration that submitted the budget 
to continue for 1 more year inadequate funding.
    Mr. Malloy. Let me tell you, Congressman, over the last 4 
years for MAC, which I am in charge of, we have requested, I 
think, around $87 million for resources. We have got about $70 
million. So we have been underfunded by a pretty good amount.
    Mr. Sherman. So Congress has been cutting. But even if you 
got everything you wanted, you would have--everything you asked 
for, not everything you wanted, you would still have grossly 
inadequate resources to try to enforce the trade agreements 
that we already have, let alone the new ones that the 
Administration that puts you down for $87 million would like us 
to have.
    Mr. Malloy. Our budget request for now is somewhere around 
$22 million. I think that the bill that Congressman Manzullo 
and others put in would give us about $24 million for Market 
Access and Compliance activities, which would be an enormous 
increase, and we would really be able to strengthen.
    Mr. Sherman. You are saying your agency is at 22----
    Mr. Malloy. My Market Access and Compliance.
    Mr. Sherman [continuing]. Units----
    Mr. Malloy. We have got about $17.7 in our base, and I 
think our request would give us--the President's request would 
give us about $4\1/2\ million more, and then Congressman 
Manzullo's and other bills would give us about 2 million on top 
of that. So if we got what your Committee is proposing to 
authorize, it would tremendously strengthen all of those 
countries' desk functions for us.
    Mr. Sherman. So if I understand this, we are trying to 
authorize you for $2 million more--when I say you, I mean the 
MAC?
    Mr. Malloy. More than the President's request.
    Mr. Sherman. More than the President has asked for.
    Mr. Malloy. That would be enormously helpful. But I am 
sticking with the President's request. But it would be helpful.
    Mr. Sherman. That is at least a small step in the right 
direction.
    Mr. Malloy. Right.
    Mr. Sherman. I don't know if I have time for another 
question.
    Ms. Ros-Lehtinen. Yes.
    Mr. Sherman. There was great fanfare about getting the 
other developed countries to agree to a Foreign Controlled 
Practices Act. I wonder if you could report on whether, as a 
practical matter, a French or a German firm would face criminal 
prosecution at home today if they slipped a suitcase filled 
with marks or francs into the hands of a government official in 
a Third World or other market country.
    Mr. Malloy. First off, I appreciate that question.
    I worked for Proxmire, who wrote the original Foreign 
Corrupt Practices Act, and I worked with him in 1988 when we 
tried to get the provision in the OECD. When Ambassador Aaron 
was over there, this Administration really pushed that hard. We 
do have this convention now which was approved by the Senate 
last year.
    We have a report which we will be submitting to the 
Congress probably I think by the end of July which will talk 
about the agreement, what each country committed to do, who has 
adhered to it, what kind of laws they had passed and who still 
is not fulfilling the terms of the convention.
    So that, again, is another part of what MAC does. We 
monitor this international bribery convention, and we will be 
giving a report to the Congress. I think it was this Committee 
which required that report, and we will be happy to get it up 
to you in July.
    Mr. Sherman. Whether it is the Committee in general or Mr. 
Manzullo in particular with the argument to increase your 
authorization, there are brilliant people on this Committee.
    Mr. Malloy. We appreciate it.
    Mr. Sherman. But can you just preview your report and just 
tell me whether a German or a French business person would 
likely face prosecution under those circumstances?
    Mr. Malloy. My understanding is again under the terms of 
the convention each country----
    Mr. Sherman. I mean in terms of the laws on the books.
    Mr. Malloy [continuing]. Committed to criminalize that 
activity. I can't tell you right now without refreshing my 
recollection exactly what the situation is in France and 
Germany.
    Mr. Sherman. I hope you would tell us each year how many 
people in Japan and Europe have actually been prosecuted or 
actually incarcerated for foreign corrupt practices. If the 
number gets all the way up to one in any of our major 
competitor countries, please let me know.
    Mr. Malloy. Thank you, Congressman.
    Ms. Ros-Lehtinen. Thank you, Mr. Sherman.
    Mr. Manzullo.
    Mr. Manzullo. Thank you.
    We had an interesting hearing with George Munoz on OPIC, 
Mr. Sherman, I understand your inquiry on the Foreign Corrupt 
Practices Act, but the activities of the foreign countries 
don't have to go to marks in a bag.
    There was a firm out of southern Wisconsin that makes weed-
eating machines, trying to get a contract into Thailand, and 
the Canadian government--I just returned from an inter 
parliamentary exchange with their members of parliament 2 weeks 
ago. The Canadian government gave a weed-eating machine to the 
Prince of Thailand. Here is our weed eating machine. It is just 
wonderful. You take it. It is your gift. If you like it, we 
will sell you some more.
    That is the type of fierce, I mean, cut-throat competition 
that the French spend--I mean--I don't want to start an 
international incident here, but you want to talk about some 
really tough negotiations, they spend 16 to 20 times more per 
capita on export opportunities, subsidizing the bridges out of 
their exporters, and our American companies just taking it on 
the chin time and time again.
    I put in this bill to give you an increase. I vote against 
everything in this Congress most of the time. I am one of the 
most conservative Members here. I don't even like government. I 
voted yesterday against the market access program. Is that what 
it was?
    Ms. Ros-Lehtinen. Yes.
    Mr. Manzullo. Market access. Let me get the right one. 
Which one was it?
    Ms. Ros-Lehtinen. Market access.
    Mr. Manzullo. The market access with the Department of 
Agriculture because it was $100 million. Because I think we 
have to pick and choose as to who is actually doing it.
    The Market Access Program does programs and joint things 
with matching moneys and partnerships and promotion of this and 
advertising. Your organization doesn't do that stuff. You go 
after actual contracts and get it right down to working with 
companies, many of whom are small and would never have the 
opportunity to become an exporter were it not for the type of 
very distinct and unique services that your agency provides to 
them. I mean, me voting to increase something, that is very 
unusual.
    Brad, you know me. You ask my kids how cheap I am.
    Mr. Sherman. You don't have to.
    Mr. Manzullo. And you don't have to. But for me to weigh in 
and try to increase what is going on here--the area that I 
represent, the 16th District of Illinois, in 1981, it led the 
Nation in unemployment at close to 28 percent. A city of 
140,000 that had over 1,000 industries lost 100 companies and 
10,000 highly skilled jobs. A lot of it was because of the 
strong American dollar, but when the recession hit, it hit the 
tool and dye industry first. It is the first to get hit, and 
the last to recover. It has been hit now, and it has been hit 
bad.
    This country has lost 100,000 manufacturing jobs in the 
past year, and the employment--the new employment is reflected 
in terms of jobs in the service industry. So the figures are 
already false out there, and our people back home that export 
machine tools are hurting, and they are hurting bad, big time, 
anywhere from the giant companies that are being excluded 
because of unfair and unreasonable export controls to the 
little guys that want to expand their base. So in case there is 
a downturn domestically they can't do it.
    So we have to look to agencies that aren't just involved in 
promoting generic products overseas but get down to working one 
on one, and that is exactly what your company does.
    Now after that glowing editorial, the key issue that I 
would ask both of you is, and this really goes to the guts of 
the reauthorization and to the success of the agency, is what 
is it that you do that cannot be done in the private sector? 
Because the answer to that justifies your existence.
    Mr. Malloy. The first thing, just my narrow part of what 
ITA does, which is the monitoring and enforcing of trade 
agreements, the private sector cannot take these countries one 
on one and talk with them about whether they are not--they are 
fulfilling the terms of an agreement that they have made with 
us or as part of a WTO or a NAFTA or some other agreement that 
we have entered into. That is a governmental function----
    Mr. Manzullo. That is monitoring fairness.
    Mr. Malloy. Monitoring whether in fact the other country--
when our guys run into trade barriers in the other country and 
come in and say, we have got a problem here--first you look at 
it and say, now does it violate the terms of one of our 
agreements with that country? If it does, it is a governmental 
function. Then go to the other country and say, you are not 
living up to the terms of this agreement. Then you take it on 
with them through different layers of, from myself up to the 
Secretary's level, and even we prepare talking points for the 
President when he is going to meet with people to raise issues 
that we think are problems that are violating of our trade 
rights.
    Now, if you can't get it done on that basis, then you 
either take it--we go to USTR and say, this is a case that we 
have to bring to the WTO and try to get relief from the market 
access problems that we run into. Private industry cannot do 
that. They cannot take it up, government to government, and 
they can't take it to the WTO.
    So that is a governmental function, I think, in terms of 
the foreign commercial service being out there in the embassies 
in the field and again helping us when we identify a problem to 
go to the other government and take it up on a regular basis; 
or knowing the key people in the other government who are 
decisionmakers who our people should go and see and talk about 
their problems. This can't be done by the private sector.
    I know my friend Ed Rice will be talking to you because we 
work very closely with the private sector to try to understand 
where they are running into these market access problems. We 
cannot do it just by studying the agreements; we have to have 
live people come in and tell us, here is a problem area, can 
you help us. They will tell you that the government has to take 
those issues on. If we are not adequately funded, we can't do 
it.
    One of the things that the Under Secretary talked about is 
the number of new exporters. The number of new exporters in 
this country has almost doubled in the last 6 or 7 years. These 
people can't afford lawyers and lobbyists in Washington. We 
have to be the ones that they can turn to when they run into 
these problems. If we are going to say we are going to be in a 
global economy, they have to know who they can turn to and get 
help when they run into problems abroad.
    Mr. Manzullo. If a company thinks that they are being 
unfairly priced by predatory pricing from foreign countries, do 
you work with them to get them before the International Trade 
Commission? Is that also part of your mission?
    Mr. Malloy. We have our import Administration people. For 
example, if there is dumping, that is part of the ITA. It is 
not authorized by your Committee, it is authorized by the Ways 
and Means Committee. But that is a governmental function.
    When we have the advocacy--for years we were involved in 
geopolitical struggle in the Cold War and commercial activity 
was not considered right for top policymakers. We did not 
advocate for our companies.
    Right now, we are really taking on that function in a big 
way. Our advocacy center in trade development is the one that 
tracks and monitors these contracts around the world and where 
input by top policymakers can be helpful with foreign 
officials.
    That is an area that can't be done by the private sector. 
In fact, they come and ask us for help on it.
    Mr. Manzullo. Thank you. I don't have any questions for 
you, Ms. Frame.
    Ms. Ros-Lehtinen. We appreciate your being here with us, 
and if we have any followup questions, we will be glad to 
submit them.
    Mr. Malloy. Thank you. We really appreciate the help of 
this Committee.
    Ms. Ros-Lehtinen. I would like to introduce our second 
panel.
    Mr. Edmund Rice, in 1998 Mr. Rice was named president of 
the Coalition for Employment Through Exports, which is a 
coalition representing 35 major U.S. exporters and specializes 
in issues of export financing and export promotion. Prior to 
his election as president of CEE, Mr. Rice was staff director 
for this Subcommittee. He served with Congressman Toby Roth and 
specialized in banking legislation as well, and we are happy to 
have you back with us. Thank you for being with us.
    Next we will hear from James ``Al'' Merritt who is the 
president and founder of MD International, a company which 
resides in my congressional district. Mr. Merritt is an 
outstanding example of the rapidly growing business sector in 
south Florida. Prior to founding MD International, he was the 
Latin American general manager for Welch Allyn, Inc., a New 
York-based lending manufacturer of diagnostic equipment and 
before his work at Welch Allyn, he worked for Schultz Medical 
Information in Copenhagen.
    Next we will hear from Michael Katz. Mr. Katz is the 
president and founder of Cenogenics Corporation. This company 
was honored with the New Jersey Exporter of the Year award and 
the SBA National Exporter of the Year award in 1990 because of 
its profitable growth and because of its expansion to over 70 
international areas.
    Prior to his tenure as president, he served as president of 
Medical Technology Corporation where he was responsible for 
diagnostic product development, for developing manufacturing 
systems and for domestic and international market activities 
and corporate financial management. We welcome all three 
gentlemen with us today.
    Ms. Ros-Lehtinen. Ed, we would like to start with you.

 STATEMENT OF EDMUND RICE, PRESIDENT, COALITION FOR EMPLOYMENT 
                        THROUGH EXPORTS

    Mr. Rice. Thank you, Madam Chair, and thank you again for 
your very kind comments. Congressman Manzullo, it is great to 
see you again. I was honored to work for you and your 
colleagues on the Subcommittee for a number of years, and it is 
great to be back.
    Let me make a couple of brief comments so we can all get to 
the more important testimony from the people on this panel who 
are actually out making the deals and working in the export 
markets.
    Two points first of all about what is happening with U.S. 
exports that underscores the importance of this Subcommittee's 
work and, in particular, H.R. 1993:
    In 1998, for the first time in a number of years, U.S. 
exports dropped 1 percent, and that was in a global export 
market that, in fact, rose 3.5 percent. So for the first time 
in a number of years, the U.S. market share of global trade 
dropped.
    There are a number of factors that have contributed to 
that. The Asian economic downturn is certainly one; and another 
important factor is the fierce, cutthroat competition that 
Congressman Manzullo put his finger on in his earlier comments. 
Global markets are getting ever more competitive, and 
governments in foreign countries are ever more closely aligned, 
we find, with their exporters with one goal, and that is to 
take away business from American companies.
    Second, the economic impact of this drop and the slowdown 
in U.S. exports has been masked to a certain extent by the 
continued rise in domestic consumer spending, but that spending 
is coming at a cost to household savings. In fact, we have seen 
in the last several months negative savings rates which has 
been fueling economic growth. The point is that that 
circumstance is not going to continue for very much longer. 
American consumers are going to reach a psychological point 
where they are not willing to spend their savings and take on 
more debt, and domestic consumer-driven demand is going to 
drop. That means that the weakness in U.S. exports and the 
overall economic impact of that is going to become ever more 
apparent, and that is going to become a big issue. So this 
Subcommittee is ahead of the curve in looking at the importance 
in U.S. exports in terms of the global economy.
    Let me make a couple of points about TDA. Since its 
inception in 1980, TDA has been successful in helping U.S. 
exporters win roles in infrastructure projects overseas. To 
U.S. exporters, that is really the key role that TDA has been 
playing. By helping to fund the feasibility and initial design 
of these projects, the U.S. Government gives U.S. companies a 
leg up in winning the follow-on business. That is the 
conceptual underpinning for TDA, and in fact, it has worked 
very well. For a very small amount of investment of U.S. funds, 
the payoff is a multiple, as was indicated in TDA's earlier 
testimony, with U.S.-origin exports, which can go on for years 
and years. Very often the export ``tail,'' in the parlance of 
U.S. companies, can be 20 years in one of these infrastructure 
projects. The initial investment by TDA is helping U.S. 
companies to win.
    Now our competition is doing the same thing. Japan, in 
particular, is very aggressive in trying to help with the 
design of infrastructure projects to try to steer these 
projects to Japanese companies. Without TDA, U.S. companies 
would be less able to compete in particular against the 
Japanese aggressive actions.
    Now to the International Trade Administration. ITA helps in 
several very practical ways that are not sometimes fully 
understood or appreciated, and I would just hit on five key 
roles to summarize. First, to support U.S. trade negotiating--
that was a point Congressman Menendez touched on earlier--the 
data and analysis used by Ambassador Barshefsky and her 
colleagues mostly comes from the ITA. USTR is a very small 
agency. They do superb work, but they would be flying blind 
without ITA in negotiating on behalf of the U.S. Government and 
U.S. exporters.
    Second, once trade pacts are completed, ITA does the 
monitoring, not the U.S. Trade Representative's office; ITA 
does the monitoring and the enforcement of these agreements. 
Pat Malloy's office is doing a super job in that regard. There 
can never be enough resources. This is an era of limits in 
government, but the more resources that are devoted to 
enforcing these agreements, as Congressman Sherman was 
indicating earlier, the better off we are.
    Third, on the individual company level, ITA acts as an 
advocate when U.S. companies run into bureaucratic red tape 
overseas, and that happens all the time. The U.S. exporter has 
a transaction, the deal moves forward, the goods leave. They 
arrive in the overseas port, and all of a sudden there is a 
problem. Customs is giving them a problem, some inspection, 
some new obscure rule shows up.
    Who does the U.S. exporter turn to in that circumstance 
when the obstacle is a foreign official? The answer is, the 
International Trade Administration, to the U.S. foreign and 
commercial service; and they are very effective in stepping in 
and using the power and influence of the U.S. Government to 
solve these kinds of problems. Without the foreign and 
commercial service available, U.S. exporters would be on their 
own. In many of these foreign countries, that means that they 
would be left holding the bag.
    Fourth, small- and medium-size exporters use ITA for 
reliable market data and clues on finding real, live customers 
overseas, a point that Congressman Menendez made earlier. In 
particular, the export assistance centers, which originated 
legislatively in this Subcommittee, have been extremely helpful 
to small- and medium-size exporters in finding overseas export 
opportunities.
    A second office at the Commerce Department which has been 
particularly good in this area has been the BISNIS office, that 
is B-I-S-N-I-S office, that finds export opportunities in 
Russia and the NIS countries. Yes, there are export 
opportunities in Russia.
    Every day U.S. exporters are making deals successfully, and 
the BISNIS office at Commerce is helping in that regard. Every 
day they are sending out real, live leads for U.S. companies to 
pursue. As a matter of fact, I got two such contacts from them 
just today. Before I came up to this Subcommittee, I got two 
messages from the Commerce Department, listing export 
opportunities in a country that the mainstream media would 
indicate is flat on its back. In fact, they are buying U.S. 
goods through the help of the ITA.
    Finally, ITA helps to coordinate Federal programs. This is 
a point that Congressman Burr raised earlier about the many 
agencies that are involved. Yes, there are too many Federal 
agencies involved; not being in the government any more I can 
make that comment.
    This Subcommittee created the Trade Promotion Coordinating 
Committee to help deal with that, and it is a tough battle--it 
is a tough battle to rein in the bureaucracies that want to 
establish their own export programs. The answer is to further 
strengthen the Trade Promotion Coordinating Committee so it can 
help remove these duplications that exist in the Federal 
bureaucracy.
    My final point in the real world, success in trade depends 
on a partnership. That is how our competitors approach it 
between their companies and their governments, and so must we. 
That is why H.R. 1993 is so important and why the exporting 
community are so in favor of moving this bill forward.
    Thank you.
    Ms. Ros-Lehtinen. Thank you.
    Ms. Ros-Lehtinen. Mr. Merritt, if you can quickly go 
through your statement before we vote.

  STATEMENT OF JAMES ALCO MERRITT, PRESIDENT, MD INTERNATIONAL

    Mr. Merritt. Thank you for this opportunity to testify here 
today. MD International was founded in 1987, and we provide 
medical equipment into Latin America. We export approximately 
$30 million of U.S.-made medical equipment all through Latin 
America.
    I am going to talk about a couple of the examples where I 
have used these agencies in recent years to help our business.
    I attended recently a Department of Commerce trade mission 
to Central America with Ambassador David Aaron, who spoke 
earlier, from March 21 to the 28th of this year which 
successfully opened doors for new business for our company. By 
the way, this is the first time that we have participated in a 
trade mission like this.
    Mission participants met with members of the reconstruction 
cabinets of four central American countries to discuss 
rebuilding after Hurricane Mitch. We also met with other top 
country officials, including the presidents and with country 
Ambassadors. As a result of our participation in this mission, 
we have gained a new distributor in Guatemala that was 
previously buying products from Germany, and we anticipate 
doing several hundred thousand dollars in business with this 
company this year.
    Our company also is working on a $4 million sale to a new 
medical center in Tegucigalpa, Honduras, called Los Lomas 
Medical Center. Again, this was primarily going to be Japanese- 
and German-made product, and we are converting it to American-
made product. We met the owners of this center at the 
Ambassador's house when we were on this trade mission.
    MD International has been actively involved with the U.S. 
Export Assistance Center in Miami. Among other benefits, we 
receive a weekly newsletter advising of export opportunities 
and current events in the Latin American region. This 
organization also organizes and participates actively in trade 
shows relating to commerce in Latin America. They have also 
assisted us with our application for the President's E Award 
which we submitted last August. They also have been a liaison 
to us with the Export-Import Bank Programs. All of this through 
the local office in Miami.
    A major problem faced by medical equipment exporters are 
trade barriers in Brazil today where government-mandated 
product registration has cost our company over $4 million in 
the lost sales in the last 18 months due to these ridiculous 
and unrealistic registration requirements. It can cost up to 
$18,000 per product, per medical instrument, and we have 
thousands of medical instruments to register to be able to sell 
these in Brazil; and the Brazilian Government changes these 
rules with little or no warning. There needs to be government 
funding to help get rid of these barriers which are being 
backed by the Brazilian manufacturers of medical devices to 
keep our goods out of Brazil.
    The ITA, which has been helping us to fight back, is two 
people who work on the Brazilian desk, and Brazil, prior to 
this, was our largest export market in Latin America, even 
larger than Mexico which traditionally was our largest market.
    We are getting hammered right now in Brazil. Our sales have 
dropped off the charts, and we are not getting the necessary 
support; and I fully agree with the comments of Patrick Malloy 
previously. We are a small company and we don't have lobbyists 
up here in Washington or people to fight for us. We just have 
to depend on the Department of Commerce to fight these battles 
and enforce our trade agreements.
    NAFTA is a good example of a trade agreement that has had a 
very positive impact on our business. It has increased access 
to the Mexican market, and our business has grown as a result. 
Our products are much more competitive in Mexico because of 
NAFTA.
    As far as the Trade Development Agency, we have begun to 
pursue opportunities in Africa. MD receives information from 
TDA concerning new business opportunities in Africa. The TDA 
Web site is full of useful articles, forms and up-to-date 
information that helps companies like ours develop trade 
relationships with other countries.
    We also recently attended a TDA seminar in St. Petersburg, 
Florida, which we found very stimulating and informative.
    The bottom line is, what do we need as a small business 
based in Miami, Florida, from our government. We need your help 
to help us finance products through the Export-Import Bank and 
through OPIC, similar help to what our competitors have from 
Japan, Germany, Spain and Italy; and I fully agree with the 
comments earlier, we are getting outfunded many times to what 
we get from our government.
    We need help with finance and enforcing our trade 
agreements so we have access to the markets, and we need help 
with trade leads, and these organizations are giving that.
    Ms. Ros-Lehtinen. Thank you so much.
    Our Subcommittee will be back. We will go to a vote, and 
Mr. Manzullo will chair the remainder of the meeting. Thank 
you.
    [Recess.]
    Mr. Manzullo. The Subcommittee will come back to order.
    Our next witness is Mr. Michael Katz, who is a constituent 
of the Ranking Minority Member of our panel, Mr. Menendez; and 
Mr. Menendez, I will let you introduce your constituent.
    Mr. Menendez. Thank you, Mr. Chairman.
    Mr. Katz is a constituent, so far as he is a New Jerseyan, 
and we appreciate him making the trip. He is the president and 
cofounder of Cenogenics Corporation, which was honored as the 
New Jersey Exporter of the Year award and the SBA National 
Exporter of the Year award in 1990, and I believe he has a 
little bit of the new technology, or not so new anymore, but 
still a visual to help us in the process; and we thank him for 
coming here.

  STATEMENT OF MICHAEL KATZ, PRESIDENT, CENOGENICS CORPORATION

    Mr. Katz. Good afternoon, and thank you for inviting me to 
speak here today. My excitement for the profits export business 
has brought our company has driven my international efforts for 
many years. Our company, Cenogenics Corporation, manufactures 
medical diagnostic products that are used in 70 countries.
    Let me get on the right section with my slide projector 
here.
    Mr. Katz. From our inception 18 years ago, our company has 
enjoyed continuous profits and growth as a result of our export 
activities. Our ability to gain significant markets worldwide, 
using the excellent Department of Commerce Programs available, 
led to our winning the SBA National Exporter of the Year award 
in 1990.
    I have discovered in studying companies that have risen to 
global leadership that they, like us, invariably began with 
ambitions that were out of all proportion to their resources 
and capabilities. To gain world markets, we needed to create an 
obsession with winning at all levels of our organization, and 
then sustain that obsession for years in pursuing our quest for 
export sales. Professors Gary Hamel and Prahalad term this 
obsession ``strategic intent.'' Fortunately for us and all U.S. 
companies, Commerce's continuously available strategic programs 
give us our best chance to reach our potential in now 
overwhelmingly competitive markets.
    Our Department of Commerce has alerted U.S. companies that 
we have been outsold by other principal manufacturing nations 
for years. Indeed, we, as a company competing worldwide, have 
seen a surge by almost all countries to build manufacturing 
capabilities. I have termed this strong, nationally motivated 
surge for manufacturing ``manufacturing determinism.'' It is a 
movement as strong in motivation as unification was for Europe 
following the Middle Ages.
    Dramatically, since 1970, and extremely rapidly since 1990, 
non-U.S. manufactured goods and services originating from all 
countries are burgeoning into world markets. Approximately a 
$5.15 trillion in goods and services are being made 
collectively by countries outside our borders and are being 
sold to countries outside our borders. Less than 1 billion of 
all the goods and services being used in the world are being 
supplied by U.S. companies. Add inter-region trade pacts, 
tariff-free or reduced-tariff trade links, as Mexico, as an 
example, is capably forming. Add foreign trade barriers, and we 
quickly realize foreign competition is brutal.
    Fortunately, and only with a phenomenal effort, considering 
the personnel resources at their disposal, the DOC and ITA are 
holding the windows of opportunities open for us. We have found 
within the U.S. Commerce Department a most sincerely dedicated 
and knowledgeable group of people committed to bringing all of 
us export profit opportunities.
    Our New Jersey Export Assistance Center trade specialists 
network with a capable group of DOC/ITA colleagues SBA 
specialists and banking professionals to maximize our trade 
initiative. A sampling of U.S. DOC services we have used 
successfully to bring in $8 million in export sales include 
matchmaker trade delegations to 12 countries, gold key programs 
to three countries, and all of the other trade-producing 
services shown on the slide.
    Matchmaker Programs were effective for us. Highly qualified 
trade specialists gave knowledgeable and unstinting attention 
to making our efforts successful. The ITA staff canvassed and 
screened exhaustively to find competent prospects for us. 
Matchmakers enabled us to learn important market information 
less expensively and quicker than any other approach we have 
ever used.
    Export Assistance Center specialists guide us to 
significant trade show opportunities. Participation at the U.S. 
pavilion in Medica in Dusseldorf, Germany, an exhibition 
attended by over 100,000 people, allowed us to sign 21 new 
distributors our first year. Booth details, shipment 
deliveries, translation services, hospitality suite 
accommodations were flawlessly handled. Many additional DOC 
Programs directly helped us.
    With the assistance of Greater Philadelphia First, a 
private nonprofit business leadership organization and a grant 
from the U.S. Department of Commerce, a total of 12 companies 
were assisted through the health tech program to enter the 
Argentina and Brazilian markets.
    Another opportunity, an invitation from the Trenton Export 
Assistance Center to a certified foreign buying event, 
comprised of 30 businesses from Saudi Arabia, led to a joint 
venture and a $440,000 sale the first year.
    Additionally, important help from the US-FSC in South Korea 
allowed us to meet with the director of the South Korean FDA to 
request a change in a registration requirement that required 
proprietary manufacturing information from all registrants. It 
was definitely holding back our entry in the country, and the 
foreign service commercial officers had told us they have had 
over 200 complaints. The request was granted. We came in with a 
very powerful Korean company partner. The regulation was 
amended to the benefit of all U.S. exporters.
    The programs work. The DOC/ITA EAC expertise exists to make 
a difference. International trade is crucial to our future. 
Against the intense competitive trade pressures that now exist, 
we need to hold the window of export opportunity open as long 
as it may take for American business to be led through your 
excellent programs to a global business capability.
    I appreciate and thank you for your kind attention.
    Mr. Manzullo. We haven't had a slide show here in a long 
time, and now they have these electronic pointers--my kids know 
how to make them up on the computer. I was late coming to this 
hearing, but I want to tell you what happened.
    They were having a Flag Day celebration down in the Cannon 
caucus room, and my colleague from Illinois, David Phelps, was 
going to sing a song. I sat there to listen to him and a lady 
came up to me in a state of panic, and she was looking for 
another Member of Congress who was supposed to participate in 
this program and read something. So she saw my pin and she 
said, here, would you read this and she gave me a script.
    I didn't know what it said and I read this thing cold from 
the teleprompter, and it said something to the effect life is a 
rectangle, and it explained it, but it only talked about two 
sides. I sat down and I thought maybe the next speaker would 
talk about the other sides, but that was it.
    I just went there to see my colleague sing and ended up 
giving this great talk about exploiting the ecosystem. I have 
no idea what it was about, but I do know that it was a two-
sided rectangle. But if you can catch it on C-SPAN it was--
aside from my magnificent mathematical speech, it was the 
fourth Congressional Flag Day celebration, and it was 
absolutely spectacular. Now we know how we get recruited. Next 
time I won't wear my pin and just be very quiet.
    I appreciate your patience and dealing with the tyranny of 
the bells, and I would like to open up my portion of the 
questioning here.
    Mr. Katz, I appreciate what you did here. I am intrigued 
that you went to the U.S. pavilion at--I can't read it----
    Mr. Katz. Medica. That is in Dusseldorf, Germany. It is 
actually the largest medical trade show that exists in the 
world. I am not even sure how many exhibitors there are.
    Mr. Manzullo. How did you find out about that?
    Mr. Katz. Only through the Commerce Department. We were a 
small company 18 years ago, sir, and received a flyer from the 
Commerce Department about a workshop on various topics: how to 
actually use a freight forwarder; what is a letter of credit. 
Extremely basic. I had a motivation that international trade 
would be one building block for our company because our 
concentration was products that are used in every laboratory. 
We had seen ups and downs in our own U.S. recession types of 
economies, and I thought I could branch out and maybe even that 
flow a little bit.
    From that beginning I got this--this answers your 
question--continuous documents, agendas, programs, and I was 
captured by the system. It truly works. In being caught, the 
local--and this is why they are so important, the regional 
offices, came out and saw me and they told me about the 
Commerce Department Programs. I never would have known about 
them. They introduced me to the idea of Matchmakers and the 
fact that a Matchmaker Program was going to go to Germany and 
one other country, and that this would be a good opportunity 
for us to see an international trade show as part of this 
Matchmaker Program which was housed right within one of the 
Medica buildings, 13 buildings of medical and diagnostic kinds 
of supplies, most of them the size of football fields.
    What we saw there being taken abroad was how strong the 
purchase activity was worldwide, how knowledgeable people were 
in business, how amateur we were in our approach to sourcing 
events.
    Mr. Manzullo. How many employees did you have at the time?
    Mr. Katz. At the time--less than 8 at the time we went to 
the show.
    Mr. Manzullo. That was 18 years ago?
    Mr. Katz. Approximately, yes.
    Mr. Manzullo. Did you have to pay your way to go there?
    Mr. Katz. Fortunately, there was another Commerce 
Department Program that helped subsidize 50 percent, which was 
very modest; it was only $1,200. So we met the remainder with 
$600. It was certainly a very small investment, but what we saw 
was over 100,000 people at that time from 67 countries. I said, 
this would be a wonderful vehicle. After all, it was what the 
Commerce Department was teaching us, and we became an exhibitor 
8 consecutive years in a row. But the very first year we 
exhibited, we actually signed 21 distributors from other 
countries, and we have every one of them today. It became a 
basis for our business growth.
    Mr. Manzullo. You picked up more obviously after that?
    Mr. Katz. Yes. We are in 70 countries now.
    Mr. Manzullo. How many employees do you have now?
    Mr. Katz. We have 32 here and 60 worldwide. 32 are used in 
manufacturing here because we prefer to keep the heart of our 
manufacturing here. We might do packaging in some of these 
other countries, or sell, hire the nationals to sell.
    Mr. Manzullo. That is a great story.
    Mr. Katz. Thank you.
    Mr. Manzullo. Mr. Merritt, your Congresswoman had to leave, 
and she extends her apologies. Fortunately she was able to hear 
your testimony, but your testimony was hurried trying to beat 
the bells. Tell us how you got into exporting.
    Mr. Merritt. The company was started in 1987. I had worked 
for a manufacturer and traveled around Latin America for 3 
years and saw an opportunity to establish a company to export 
products into Latin America. So I started the company in 1987 
with 3 people. We sold a little more than a million dollars the 
first year, and this past year we have 85 employees from 17 
nationalities and we have sold about $37 million total of 
medical devices, about $30 million of which were American made; 
and we estimate that we generate about 600 jobs upstream at the 
manufacturers that we represent. They are all across the 
country. We have manufacturers from California, Chicago, 
Minnesota, from New York, Connecticut, Florida, Atlanta, all 
around the country.
    Mr. Manzullo. Are you two competitors?
    Mr. Katz. No. But even if we were, it would be fine.
    Mr. Manzullo. I noticed in your bio, Mr. Merritt, that you 
used to sell vacuum cleaners.
    Mr. Merritt. I pride myself on selling those vacuum 
cleaners. Electrolux.
    Mr. Manzullo. I was going to say, Mr. Oreck probably 
started the same way as you.
    Tell us how you first got the interest in exporting.
    Mr. Merritt. I had been to the University of Cincinnati, 
and I went abroad to Spain and spent a whole year in Europe and 
enjoyed it. I learned to speak Spanish, so after I graduated, I 
had this opportunity to start traveling to Latin America and I 
just really enjoyed it.
    Mr. Manzullo. You mentioned you have been having a lot of 
bumps in Brazil and the rial has rebounded about 70 percent 
from its lowest about a year ago.
    Would you tell us the resources that our government 
provided to help you through that quagmire down there? I saw 
here where it said ``snag in Brazilian red tape.'' Tell us what 
happened there.
    Mr. Merritt. About 1\1/2\ years ago the American--primarily 
American companies were really hurting the Brazilian medical 
industry. They were a closed market for a long time, and they 
started opening up imports within the past 10 years; and I 
think that we were severely damaging the Brazilian industry, 
and so they got on their government to enforce legislation for 
registration of products, similar to what we have here with the 
FDA, only non--very nontransparent.
    This started--this problem was before the rial devaluation. 
This started about the beginning of 1998, late 1997. 
Effectively, they stopped our imports or our ability to sell 
there because if you don't have the registration, you cannot 
sell there, and you cannot get the registration without putting 
your products through two laboratories that are allowed to 
certify your products. They had a backlog of over 20,000 
products, and obviously cannot handle it. They ignore the 
international accepted standards like the ISO, the 510(k) 
procedure here in the United States, UL, those types of 
standards that are set up internationally.
    I put $4 million, I don't know how much it has hurt us 
exactly, but for sure it is that much; those are sales that I 
have definitely lost. I have spoken with big companies--GE, 
Hewlett Packard, J&J, some of the big players that--we 
represent more the middle-size companies, not the big players 
with their own offices down there, and they have been very much 
hurt also.
    It is extremely expensive; they are charging now about 
$10,000 per product to go through this process that takes up to 
a year. It took us over a 1\1/2\ years to register one of our 
key products, and it has to be renewed every 5 years. It is a 
major problem.
    Patrick Malloy's office here is aware of it. The Health 
Care Industry Manufacturers Association is aware of it and has 
tried to intervene, but so far we are still fighting this and 
all of our business has dropped off in Brazil. This was before 
the rial. The rial devaluation just exacerbated our drop in 
business there. We are doing less than 20 percent of what we 
were doing there previously.
    Mr. Manzullo. The barriers are still continuing?
    Mr. Merritt. Yes, they are. I talked to their office, they 
have two people, one guy in Brazil who is doing all kinds of 
other stuff. He has gone to some meetings and tried to 
intervene, but I think it needs to be brought to a higher 
level. They need to get attorneys involved and look at what is 
the WTO agreement and fight for us. I am sure once our 
agreements are looked at, it is going to be clear that this is 
a barrier that is not a fair barrier and can be negotiated, but 
we don't seem to have the manpower to get that done.
    Mr. Manzullo. Mr. Menendez.
    Mr. Menendez. I appreciate the testimony of all of the 
witnesses. Mr. Katz, coming from New Jersey, I thought it was a 
great story. I particularly appreciate because while your 
individual success stories are important to us, they exemplify 
why it is that we--some of us, at least--are advocates of ITA 
and OPIC and some of the other agencies that we think make a 
difference.
    Let me finally ask you, Mr. Rice, on behalf of your 
coalition and others, if you didn't have these programs, would 
you have the wherewithal on your own, within your own budgets, 
to do what you have been able to accomplish with them?
    Mr. Merritt. We definitely would not. We are definitely a 
small business. We still are not getting what we need to get 
done with these trade barriers in Brazil, and it is coming up 
in Argentina as well. Another major area which is not the 
subject of this hearing is Eximbank and our need for expansion 
of Eximbank's Programs for financing our medical devices.
    We are competing directly with the Germans, the French, the 
Japanese, the Italians and the Spaniards, who have extremely 
aggressive financing programs. They back their companies in a 
way that we don't here, and they have the manpower to support 
that. So we are getting beat a lot because of lack of 
financing, plus this trade barrier issue.
    Fortunately, we have incredibly good products and so we are 
able to continue to sell because our industry is so strong. But 
we should be selling a lot more.
    Mr. Menendez. Mr. Katz?
    Mr. Katz. There would be no possibility for a small midsize 
company to enter the international markets today without the 
help, strong help of our Commerce Department and all the 
associated offices. The flood of products from manufacturing 
countries all over the world is so overwhelming.
    The reduction in the price margin is lower now than we have 
seen in 18 years. The competitive pressures, as we have heard 
on all of the so-called ``nontariff barriers,'' are immensely 
strong.
    The difficulties that we have had in moving targets in 
regard to the characteristics that the products are supposed to 
have standards, there is a big moving target which has not been 
addressed properly by our government. What has really happened 
worldwide is, we have been having some of the best standards in 
all of our industry areas not being accepted in most areas of 
the world. The FDA and the leadership there has acknowledged 
that problem and made it part of their agenda, but it exists as 
a problem that only our government can really tackle. We need 
and rely on that advocacy.
    Then there is the major problem, the Commerce Department is 
very proud that they have doubled the number of small- and 
midsized companies that are approaching the export markets in 
the last several years, but it is a very small proportion of 
what really could be our capable resource. There is no way but 
to hammer at our American business for--to show these 
opportunities exist so that we need, from the highest level of 
our government to the Committee levels that exist for all of 
these purposes, to wave the flag that American business has to 
move.
    They have to move into these markets. To diminish the 
programs even one bit, to diminish the field service people 
that you have now and satellite centers all over the United 
States is the wrong movement. We would not have been found. We 
would not have been introduced to these programs.
    Once you are with the Electronic Age that exists now and 
the ability to access so much information on the Internet, to 
know that it is there and what could be available, and to have 
one of those individuals, one of those field officers who says, 
we have this program and we can pick up the phone and help you, 
and you can access that information.
    To have that resource has made the difference for us to get 
in there.
    Mr. Menendez. We are going to send your testimony to the 
Citizens Against Government Waste so they can view it and maybe 
respond to it. They don't support the program.
    Mr. Rice, your coalition basically is the answer to Mr. 
Katz and Mr. Merritt a reality for most members of your 
coalition, and is it fair to say that most of your competition 
abroad has the same type of support, if not greater, greater 
support by the governmental entities like ITA, TDA, OPIC and 
others that match your competition; or maybe even exceed what 
we are doing for members of your coalition?
    Mr. Rice. Yes, sir, that is absolutely on target. Even the 
largest companies, the ones with a number of resources at their 
disposal, are no match for the combination of foreign companies 
and foreign governments when they get together. The bigger the 
deal in the export market, the even tougher the competition. 
That is the only thing I could add to the eloquent answers 
which have just been given.
    Mr. Menendez. Thank you, Mr. Chairman. I have no further 
questions.
    Mr. Manzullo. Mr. Katz, you intrigue me. I have a friend at 
home who, when he gets up in the morning, he sees the sun and 
he gets excited, and so he is excited all of the time. You have 
a minuscule amount of enthusiasm for these programs. Are you 
this way all of the time?
    Mr. Katz. I am very grateful that the programs have existed 
and we have done well with them. Yes, I am excited. I have 
worked hard to make them work.
    Mr. Menendez. We New Jerseyans are enthusiastic people.
    Mr. Manzullo. We live in a world that is so sober. The days 
of people getting excited about technology--now, I would think 
that you would have sold vacuum cleaners going through college.
    Were you involved in sales before you got involved in your 
profession?
    Mr. Katz. No, basically I was a scientist who concentrated 
on developing diagnostic devices. But when something works, and 
I look at everything with a scientific mind, just as I do the 
accounting balance sheets. Why do an experiment, if you know 
the answer, is always my philosophy; and if there is the tool 
that allows you to succeed, use it.
    The opportunity that the Commerce Department has given us 
to succeed as a company showed us that there are profits in the 
international market. I made a comment here within my text that 
we had to have an obsession to sustain ourselves in these 
international markets, to overcome those problems in order to 
enjoy the income that could come from it. But in solving those 
problems, that income came and the resource they gave us, the 
solutions, helped us with the solutions, brought them to these 
people and they had the interconnections to help us with these 
solutions.
    It even went down to, in New Jersey, a district export 
council, the people that they knew in business, people that 
they knew in banking to help us, the information that was 
available from that collegial network of people made the 
difference; and that is what we needed. So it worked as it 
existed.
    Mr. Manzullo. I want to thank all three of you for coming. 
Bob and I get involved in a lot of things. There are over 
10,000 Federal programs, 10,000 Federal programs. Every day 
people come in our offices and they are talking about this 
program and that program. I knew about the FBI and the CIA 
before I came here, but it is always good when you see a 
program that is self-executing.
    We have noticed that about the people who come before our 
Subcommittee that--normally, it is the agency trying to sell 
you, keeping funding; but what we have noticed about TDA and 
OPIC, the agency heads will give us a general overview and then 
present the people with the real, live stories.
    Mr. Merritt. I would like to mention one other thing along 
that line. I am a member of the Small Business Exporters 
Association. We had our annual meeting a couple of weeks ago in 
Washington. We are a small company, but our association--the 
views that I expressed of positive support for these programs 
would be shared by our several hundred members across the 
United States of small business exporters.
    Mr. Manzullo. We appreciate that. All of the statements 
that have not been submitted as part of the record will be 
allowed to be put into the record with no objection, and this 
Subcommittee is adjourned.
    [Whereupon, at 4 p.m., the Subcommittee was adjourned.]




                                

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