[Senate Hearing 106-915]
[From the U.S. Government Publishing Office]



.                                                       S. Hrg. 106-915
                      MARKETS FOR A NEW MILLENNIUM
=======================================================================




                             FIELD HEARING

                               before the

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 19, 1999
                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation













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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                     JOHN McCAIN, Arizona, Chairman
TED STEVENS, Alaska                  ERNEST F. HOLLINGS, South Carolina
CONRAD BURNS, Montana                DANIEL K. INOUYE, Hawaii
SLADE GORTON, Washington             JOHN D. ROCKEFELLER IV, West Virginia
TRENT LOTT, Mississippi              JOHN F. KERRY, Massachusetts
KAY BAILEY HUTCHISON, Texas          JOHN B. BREAUX, Louisiana
OLYMPIA J. SNOWE, Maine              RICHARD H. BRYAN, Nevada
JOHN ASHCROFT, Missouri              BYRON L. DORGAN, North Dakota
BILL FRIST, Tennessee                RON WYDEN, Oregon
SPENCER ABRAHAM, Michigan            MAX CLELAND, Georgia
SAM BROWNBACK, Kansas                
                       Mark Buse, Staff Director
                  Martha P. Allbright, General Counsel
     Ivan A. Schlager, Democratic Chief Counsel and Staff Director
               Kevin D. Kayes, Democratic General Counsel











                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held June 19, 1999.......................................     1
Statement of Senator Ashcroft....................................     1

                               Witnesses

Cook, Mike, president, Marketing Division of Necco Seeds.........    41
Copps, Michael J., assistant secretary for Trade Development, 
  International Trade Administration, U.S. Department of Commerce    57
    Prepared statement...........................................    60
Eberle, Karl, vice president and general manager, Harley-Davidson 
  Corporation, Kansas City Operations............................     3
    Prepared statement...........................................     6
Ehinger, Robert, director, International Trade Data System, U.S. 
  Department of the Treasury.....................................    46
    Prepared statement...........................................    48
Grueff, James, assistant deputy administrator for International 
  Trade Policy, Foreign Agricultural Service, U.S. Department of 
  Agriculture....................................................    64
    Prepared statement...........................................    65
Hurst, Blake, District #1 board director, Missouri Farm Bureau, 
  and farmer.....................................................    29
Klestinec, Jan, president, Dollins Tool, Inc.....................    42
    Prepared statement...........................................    44
Newsom, Tiffany, executive director, North America's Superhighway 
  Coalition, Inc.................................................    37
    Prepared statement...........................................    39
Pyle, Mary K., director, International Business Development and 
  managing director of the Kansas City Area World Trade Center...    32
    Prepared statement...........................................    34
Ray, Jan, president, International Trade Club of Greater Kansas 
  City, Inc......................................................    23
    Prepared statement...........................................    25














                      MARKETS FOR A NEW MILLENNIUM

                              ----------                              

                        SATURDAY, JUNE 19, 1999

                                      U. S. Senate,
        Committee on Commerce, Science, and Transportation,
                                              Kansas City, Missouri
    The committee met, pursuant to notice, at 10:50 a.m. in the 
Foyer of Midwest Terminal Company, 1700 North Universal Street, 
Kansas City, Missouri, Hon. John Ashcroft presiding.
    Staff members assigned to this hearing: Robert Taylor, 
Republican counsel; and Gregg Elias, Democratic counsel.

           OPENING STATEMENT OF HON. JOHN ASHCROFT, 
                   U.S. SENATOR FROM MISSOURI

    Senator Ashcroft: Good morning. I am pleased to call this 
meeting to order. I would like to thank all of you who have 
come to participate in this hearing today, and especially want 
to express my pleasure in the fact that Kansas City is so 
focused on the opportunities that appear to be represented in 
the kinds of inquiries that are being made by us and the 
members of the city council who are here. Teresa Loar and Chuck 
Eddy are to be commended, as local officials, for expressing 
their interest and sacrificing their Saturday. And those of you 
that have also come to help us from industry and from the 
governmental entities, I am grateful.
    This hearing has been entitled ``Markets for a New 
Millennium.'' It is an honor to spend time with you today and 
to exchange ideas in one of the nation's premier potentials for 
the kind of New Millennium marketing that will include not just 
the United States but the capacity of American producers, be 
they agricultural or industrial or service sector related, to 
serve the entire world.
    We are here to discuss the cornerstone of economic 
opportunity for every Missourian. Kansas City, of course, is 
already a leader, as we well know, and Missouri is a leader. 
Our state ranks second in the number of farms. We just heard 
this morning, again, that Kansas City is the second most active 
railhead in the nation. We are in the top five states in 
livestock production. Missouri's success reflects the ingenuity 
and competitiveness of the private sector.
    I believe that the best definition of America is a phrase. 
It is not geography, it is not demography. It is a definition 
that simply says, ``The best is yet to come.'' It has always 
been true about this country; we want it always to be true 
about this country, and this State.
    This definition is our basis for developing international 
trade, because if we are going to continue to improve our 
standing, we will have to continue to improve our performance. 
Our capacity is the best capacity for competitive work, and I 
believe we cannot be either hindered by hurdles that we put in 
the way of those who would serve the world, and we cannot be 
allowed to be stopped by barriers that others would put in our 
way in foreign markets.
    Missourians need to have full access at every stage from 
the farm gate to the foreign market, from the factory floor to 
the trading centers of the international community.
    International trade does not just occur at the nation's 
borders. It begins in the factory and on the farm. A more 
advanced transportation infrastructure will accommodate us in 
helping develop international trade from the heart of America. 
It is my belief that the heart of America has the capacity and 
opportunity to demonstrate that we can be the heart of 
America's international trade. Missouri is already first-class 
in production, processing, marketing, and manufacturing-at home 
and abroad. America is the world's leader in technology, and 
Missouri is at the head of the pack.
    But our continued prosperity and competitiveness for the 
next generation is tied to our current competitiveness in 
global markets. The U.S. must face, head-on, the barriers that 
our own government places between us and foreign markets. If 
indeed the Heartland of America is to be at the heart of 
foreign trade, we must make sure that we do everything we can 
to streamline our approach to helping Missourians move their 
goods to markets overseas.
    As we are holding this hearing, the President is meeting 
with the Heads of State of the G8 countries at the summit in 
Cologne, Germany. He has made a commitment to raise with his 
foreign counterparts the issue of their barriers to U.S. 
agriculture grown with biotechnology. That is something I asked 
him to do. It is something that we passed a resolution last 
week in the Senate asking him to do, and I thank the President 
publicly for doing it.
    This commitment was made because Senator Harkin of Iowa and 
I passed the resolution and asked the President to raise these 
issues. The interests of the American farmer have always had a 
seat at the table, especially at the highest political levels, 
I believe they ought to continue to do so.
    Nearly 40 percent of all U.S. agricultural production is 
exported, so in terms of the industries that we have 
represented today, all of them are interested in export, 
clearly. Agriculture is one of the highest levels of exports. 
Some agricultural sectors export over half of their production. 
In the United States, we consume less than half of the soybeans 
we produce, for instance. That means the rest has to go 
overseas.
    However, we can create even more export opportunities, 
because 95 percent of the world's market, 95 percent of the 
world's consumers, live outside the United States. This gives 
us an opportunity to build on our tradition of ascending 
opportunity in world markets.
    America must lead on every front. My goal is for the 
nation's international trade policy to reinforce the character 
and definition that we have a level of ascending opportunity. 
We must remove barriers here at home by streamlining, by 
integrating, by doing a better job so that Missouri's 
enterprising business community will be able to get the goods 
out of America efficiently and effectively. And we must break 
down barriers overseas that would keep us from being 
competitive.
    It is my pleasure now to call upon a group of individuals 
whose from-ground-zero-up understanding of manufacturing and 
farming and processing and moving goods in international trade 
can help us comprehend what our challenges are. I am delighted 
to welcome the witnesses we have here from this community and 
from the State of Missouri.
    So, today, it will be my privilege first to call upon Mr. 
Karle Eberle, who is the Executive Vice President of the 
Harley-Davidson Corporation. Harley-Davidson is a relatively 
new member of the Kansas City community, since 1998. It is my 
understanding that about a quarter of the sales of all Harley-
Davidson products are in overseas settings, and so it is with 
that in mind that I welcome the testimony of Mr. Eberle.
    Would you please turn that microphone toward you, and give 
me and the rest of us a chance to hear clearly those things 
that you can develop in us an awareness about.

         STATEMENT OF KARL EBERLE, VICE PRESIDENT AND 
   GENERAL MANAGER, HARLEY-DAVIDSON CORPORATION, KANSAS CITY 
                           OPERATIONS

    Mr. Eberle. OK. Thank you, Senator. I would like to thank 
you for making this opportunity possible today. I am going to 
give you 20 minutes worth of testimony in 5 minutes, and then I 
am going to leave for my daughter's baseball game.
    I have had the privilege of working for Harley-Davidson for 
the past 9 years, and it is a very unique company. To really 
understand our export capability and importance, I would like 
to give you a little background on the company.
    With that, I would like to show you some of the models that 
we make. We have four families of motorcycles in these mounted 
slides: a Sportster family, which is made exclusively in Kansas 
City now; we have our Dyna and Softail family, which is made in 
York, Pennsylvania, along with the Touring motorcycles.
    The Touring and the Sportster both represent about 25 
percent of our total volume, and contrary to what most people 
believe, there are Harleys for less than $20,000. In fact, the 
family of Sportsters start at $5400 and go to about $8500, and 
the York models can go to about $18,500 at suggested retail 
price. Obviously, with the shortage of Harleys, that in itself 
is part of a wish list to get one at retail price.
    In addition to that, we offer the Buell model. The Buell 
model is our sport bike model, which is particularly popular in 
Europe and Asia, where sport bikes make up the biggest portion 
of the heavyweight motorcycle market.
    We are a lot more than just a motorcycle company. Seventy 
eight percent of our sales are motorcycles, but our mission is 
really about fulfilling dreams. I think this picture captures a 
lot of it; there are not many customers or products that will 
brand themselves with the brand of the company, and that is 
very typical for our products. We have a 94 percent repurchase 
rate amongst our customers.
    A little bit about the Kansas City facility. The Kansas 
City facility was constructed in 1996 and 1997 with a capital 
investment of $85 million. We started up production in January 
1998. We are currently in the 400-employee range, and we 
continue to go up.
    The economic impact that we have had on Missouri: in 1996, 
about $45 million; $85 million in 1997 at the peak of our 
construction; and in 1998, about $78 million.
    As far as the public-private partnership that we have 
established with the State of Missouri and the city of Kansas 
City, Missouri, our success in Kansas City is due in large part 
to that relationship that has been established with both the 
State and the City. We certainly look forward to continued 
relationship in that. We have had enormous success when it 
comes to training, infrastructure, utilities, and community 
support with that partnership. It is a very important part of 
our future.
    From a revenue perspective, if you look at our growth over 
the last 13 years, we have had a year-over-year growth of 17\1/
2\ percent from total revenue for the company. Earnings has 
grown faster than that. It is a compounded annual growth rate 
of 37 percent year over year. Exports is a very critical piece 
of that.
    If you look at registrations, the top line is the worldwide 
registrations of heavyweight motorcycles, and it has grown for 
7 years in a row. The last 2 years have been double-digit 
growth. The bottom line indicates Harley's growth, and we have 
had steady growth for the last 13 years in the motorcycle 
market. This is the heavyweight motorcycle market, which is 
651cc and above.
    Worldwide market share: this chart shows the four main 
areas, but in the U.S. last year--and this is from 1998--there 
was a 19 percent growth in the market. In Europe it grew at 8 
percent, and in the Pacific Rim, 17 percent. Of that, Harley-
Davidson grew at about 18 percent in the U.S. alone. If you add 
it all up worldwide, 1 out of 4 motorcycles is a Harley-
Davidson heavyweight motorcycle that has been sold in 1998.
    So we are definitely a player, and we believe we have 
significant opportunities in both Europe and Asia because of 
our lower percentage of market share.
    If you look at export versus domestic, we are at 
approximately 30 percent of all of our products are sent 
overseas. That in itself says a lot. When you look at Kansas 
City, the only reason Kansas City exists today is because of 
the export potential that we have been displaying over the 
years. Without this 30 percent, there would be no need to build 
the Kansas City facility.
    Now, with that comes its challenges. One of them is the 
Japanese area. We will use it as an example. You can see here, 
for the past 4 years, we have had an annual growth rate of 20 
percent up to 1997. What we found is that there were some very 
unique opportunities from a regulatory standpoint. We worked 
directly with the U.S. Offices of Trade and Department of 
Commerce, and indirectly with American Motorcycle 
Manufacturer's Association, as well as some of the federal 
international motorcycle associations, to influence some of the 
barriers to trade.
    For example, there was a barrier in Japan that in order to 
get a license on a heavyweight motorcycle, you had to be able 
to put the motorcycle on its side and pick it up. Well, there 
are not many of us that can do that, especially if you are 
riding a Harley.
    In working with these agencies, both directly and 
indirectly, we were able to influence that law. That law was 
reversed. And as a result of it, in 1998--or between 1996 and 
1997, we saw a 43 percent increase in our export sales to Japan 
alone.
    Now there are other barriers over there. For example--you 
cannot ride tandem on a motorcycle over there. That, obviously, 
is a huge barrier for us, and we are working now to resolve 
that issue. But it certainly talks about the growth potential 
in the export market, but it is something that you have to pay 
close proximity to and attention.
    In addition to that, global harmonization is another thing 
that we are looking very hard at, and for example, we have four 
engine platforms in our motorcycles, and we have 26 different 
models. With the international requirements for exports, each 
one of those has eight different varieties, so we come up with 
208 variants, instead of 26. So--and I am sure we are not 
unique in this industry; that those requirements have barriers 
to other manufacturers as well. So that is an area that we 
would also like to work.
    Bottom line, though, for Harley-Davidson, this is a--this 
really shows our shareholder price from 1986 to 1999. If you 
invested 65 cents in 1986, in March 1999, you would have got 
back $57.38. We believe this is indicative of Harley-Davidson's 
performance, and we believe it is indicative of what has gone 
on. It is really work in progress for the past 96 years.
    So we look forward to continued growth in the export 
business, and we look forward to our 100th anniversary in 2003. 
Thank you.
    Senator Ashcroft: Let me thank you very much. I know you 
are eager to get to your daughter's game, and you should be. We 
need for parents to spend more time with their children in this 
culture. I'm glad that you, as a leader, a community leader, 
not only lead in industry but in character and in your family. 
But before you go, I guess I want to make sure I understand 
clearly. You are telling us here today that if we did not have 
export opportunities, there would be no need to have the Kansas 
City production facility.
    Mr. Eberle: That is correct.
    Senator Ashcroft: About 30 percent of all the company's 
output finds its way into international markets.
    Mr. Eberle: Yes. That is a fair statement. Kansas City 
presently produces about 25 percent of the total motorcycle 
volume for Harley. So that would eliminate the need for Kansas 
City.
    Senator Ashcroft: Well, I thank you very much for coming. I 
wish you the best, and I hope you will extend to your daughter 
our best wishes that she has a great day----
    Mr. Eberle: Thank you, Senator.
    Senator Ashcroft: --and that she plays to the very top of 
her capacity. If she does that, we may have a job for her with 
the Royals.
    Mr. Eberle: Thank you very much.
    [The prepared statement of Mr. Eberle follows:]
Prepared Statement of Karl Eberle, Vice President and General Manager, 
                         Kansas City Operations



    Thank you for the invitation to speak on Harley-Davidson and the 
importance of exports for our company. I would like to thank Senator 
John Ashcroft's office, and Mike Copps, Assistant Secretary for Trade 
Development for making this input today possible.



    I would like to set the context for our conversation by providing 
an overview of Harley-Davidson. I've had the privilege of working for 
Harley-Davidson the last nine years, and it is truly a unique company. 
The passion and commitment of our employees, dealers, and customers are 
instrumental in our business success. By first providing the overview, 
I can hi-lite exports and its importance to Harley-Davidson's business.



    At the center of the lifestyle, the passion and the brand of 
Harley-Davidson are Harley-Davidson motorcycles.
    Under the Harley-Davidson brand we offer 24 different motorcycle 
models in the custom and touring segments of the heavyweight motorcycle 
market, above the 650cc displacement. Contrary to popular belief not 
all Harley-Davidson motorcycles cost $20,000. In fact our motorcycles 
range in manufacturers suggested retail price, or MSRP from $5,400 to 
$18,500. However, the fact that demand still exceeds supply in most of 
our markets does create the opportunity price premiums at retail.
    We have four families of motorcycles that are considered 
heavyweight Custom motorcycles. Our Softail and Dyna families are our 
larger custom motorcycles, while our Sportster family is the platform 
for our smaller custom bikes. The pictures show a Sportster on top and 
a Fatboy model from our Softail family below.
    In the Touring segment we offer a variety of models. This slide 
depicts the Ultra Classic Electra Glide which is designed for long 
comfortable rides.
    Our new Twin Cam 88 engine which has gained notoriety as the best 
air cooled v-twin engine in the industry currently powers all the Dyna 
and Touring motorcycles.



    Under the Buell brand, we offer motorcycles that compete in the 
Sport/Performance segment of the heavyweight motorcycle market which in 
Europe and the Asia/Pacific capture the majority of the heavyweight 
market.
    Buell motorcycles are powered by Harley-Davidson engines, but 
that's where the similarity ends. Buells are purchased by customers 
that desire a different riding experience: one that requires a 
motorcycle with higher performance and handling characteristics 
suitable for more aggressive riding.
    We offer three Buell models with an MSRP range of $8,600 to 
$12,800.
    This picture is of the 1999 Lightening XI that was introduced to 
the U.S. market in July of last year. It has been well received and was 
featured on the cover of Cycle World Magazine. They subsequently named 
it one of the 10 best motorcycles in the world.



    Although 78% of our sales are motorcycles, Harley-Davidson is much 
more than a motorcycle manufacturing company.
    Harley-Davidson has 96 years of heritage and mystique behind the 
brand. The brand represents individuality, freedom, and a desire for 
adventure. And even as we've made motorcycling a more socially 
acceptable sport and broadened the customer base--we've managed to keep 
an ``edge'' to the brand.
    In 1998 we rewrote our mission statement and it starts with simple 
phrase ``We fulfill dreams...'' I really think this captures what 
Harley-Davidson means to our customers. Some of them feel so strongly 
about it that they even brand themselves with our brand. This loyalty 
is also illustrated by our incredible H-D motorcycle repurchase intent 
of 94 percent.





    Our success in Kansas City is in a large part due to the public-
private partnership with the state of Missouri and the city of Kansas 
City, Missouri. We appreciate this continued support from all levels of 
Government.



    Harley-Davidson is also about growth.
    This chart illustrates the steady, consistent growth that Harley-
Davidson has experienced over the past 13 years, and we are committed 
to growth in the future. As we will discuss in a minute, expanding in 
international markets is an essential tenet of our future growth 
strategies.



    This chart also shows our consistent steady growth in earnings. And 
for 12 of the last 13 years earnings have grown faster than revenue.
    There aren't many companies that have delivered this type of 
financial results.



    Turning to the market now, the Worldwide heavyweight motorcycle 
market grew for the seventh consecutive year in 1998. And for the last 
two years it has been growing at a double-digit rate.
    During the same timeframe Harley-Davidson retail registrations have 
also grown. In fact Harley-Davidson retail registrations have grown 
steadily for the past 13 years.



    More specifically, this chart shows the 1998 growth in each of the 
three major regions.
    As you can see all three regions experienced strong growth in 1998. 
Harley-Davidson and Buell retail registrations also grew in each 
region. Although in each region we grew somewhat less than the overall 
market--worldwide we gained a little market share. This may seem 
counter intuitive--but because the U.S. is over 70% of our sales and it 
is growing faster than the world it really drives our market share.
    However, as this data indicates, we have significant opportunity to 
increase market share in Europe and in Asia/Pacific.



    Exports represent a substantial and important part of our 
motorcycle business. This percentage varies by model and by country. 
The challenge to growth is to overcome the barriers to entry, including 
complexity due to unique country requirements.



    Specifically, for the period from 1994 to 1997 Harley-Davidson has 
experienced an average annual growth rate of 20%.



    Harley-Davidson maintains a very active and effective regulatory 
and international affairs strategy. This strategy divides into two 
basic tenets. The first is to create direct influence on international 
trade barriers and regulatory interests through U.S. government 
agencies. Harley-Davidson has worked extensively over the past years 
with the United States Trade Representative's Office and the United 
States Department of Commerce.
    The second tenet of this strategy is to exert indirect influence 
through the support of industry and consumer groups. Harley-Davidson 
maintains constant involvement with the world's most influential 
motorcycle associations--evidenced by the fact the Tim Hoelter, Harley-
Davidson's Vice President of International Trade and Regulatory 
Affairs, is also the acting president of International Motorcycle 
Manufacturer's association.
    The influence brought by these strategies has made a difference for 
Harley-Davidson.



    In 1994, Harley-Davidson began an effort in conjunction with the 
United States Department of Commerce to petition the OTO Council on 
regulations and licensing issues for large class motorcycles. Because 
Harley-Davidson competes singularly in the large engine displacement 
category, these regulations create unnecessary disadvantages for our 
products. Utilizing the direct and indirect influence strategy 
previously described, Harley-Davidson was able to coordinate an 
effective intervention which resulted in the change to the licensing 
requirements in 1996. Although we continue our efforts to influence the 
tandem riding and maximum speed restrictions, this singular change on 
licensing has made an impact on the market. Without the combined 
influence of the United States Department of Commerce, and numerous 
industry and rider associations, these changes would likely not have 
occurred.



    Due to the regulatory changes brought about by Harley-Davidson's 
efforts, the 651+ cc motorcycle market grew by over 73% in 1997 in 
Japan. Although the bulk of the growth was in the sport/performance 
segment of the market, which is dominated by Japanese manufacturers, 
the changes also created a 43% growth for Harley-Davidson in the same 
year.
    Clearly, removing the licensing barrier benefited the entire 
industry. Harley-Davidson's ongoing strategy has been to open markets 
and allow competition to exist on the merits of the competitors. 
Although the intervention we sponsored in Japan created a larger 
dividend for our competition, it has continued to crate the market 
structure to provide an open playing field.



    In addition to our efforts to continue to influence the tandem 
riding and maximum speed restrictions in Japan, we have engaged in a 
strategy to support ``global harmonization'' in our industry. Contrary 
to the phrase, ``global harmonization'' does not imply that we are 
going to ``buy the world a Coke.'' In fact, it centers on providing 
common regulatory specifications for vehicles in the same categories 
across all global markets.
    The absence of this creates significant cost to everyone's 
products. For Harley-Davidson this creates a proliferation from 26 
different models to 208 variants due to the eight different regulatory 
specifications that the industry is subject to across the various 
international markets.
    Given the significant effort expended to simply change the 
licensing standard in Japan, global harmonization becomes an effort of 
significant proportion.



    I began this discussion by commenting on Harley-Davidson as a truly 
unique company. Wall Street has a way of valuing the success of a 
company's business proposition or model.
    This graphic show that for the last 13 consecutive years we have 
delivered sustainable growth. Our strategy that I have outlined in 
Japan represents an important part of that 13 year history--and more 
importantly represents the experience and strategies needed to sustain 
our future growth in international markets.
    Its been a pleasure to talk to all of you this afternoon, and 
convey a little bit of the Harley-Davidson story. It's a work-in-
progress that has been 96 years in the making.
    Thank you.

    
    
    Senator Ashcroft. Thank you very much.
    It is my pleasure now to call upon Ms. Jan Ray, who is the 
President of the International Trade Club of Greater Kansas 
City. I have to say that this is a unique organization, which I 
believe, has a membership of over 700. To have that kind of 
intense involvement in a community like Kansas City is a 
reflection of the fact that this community is interested in and 
focused on its ability to serve the world.
    I am very pleased that you would come and be a part of this 
hearing, and would ask you to give your testimony at this time.

 STATEMENT OF JAN RAY, PRESIDENT, INTERNATIONAL TRADE CLUB OF 
                   GREATER KANSAS CITY, INC.

    Ms. Ray. Thank you, Senator Ashcroft. It is a pleasure to 
be here on behalf of the International Trade Club presenting to 
your hearing today under the topic of ``Markets for the 
Millennium.'' I, ironically, have been out of the country doing 
international business, so have just returned, so have pulled 
together the best information possible to reflect on what the 
International Trade Club does in the Greater Kansas City area.
    We are the oldest international organization in the area. 
We have been in business for over 55 years, starting out in 
1944 through just a small group of Kansas City business 
persons, who were either interested in international trade or 
doing some international trade, and they just informally formed 
an organization. Of course, later the organization was 
formalized. Today--you are correct, Senator--we represent over 
700 members and over 350 different companies in the Greater 
Kansas City area.
    Our organization is comprised of both manufacturers and 
service organizations. Our goal for the International Trade 
Club is really quite simplistic, and we intentionally keep it 
that way. It is all based on our mission statement, and that is 
that our mission statement says that we are here to promote 
international business through focused commercial education and 
networking. So, therefore, I am going to share with you an idea 
of our educational programs and what we have done just so far 
this year.
    So far this year, since January 1, we have conducted 18 
different seminars and conferences on a variety of topics. I am 
just going to quickly go through the topics, which I think will 
give you an idea of how diverse our organization is.
    On January 6, we did a breakfast meeting on the update of 
North America's Superhighway Coalition. On the 13th of January, 
we did an export documentation seminar; on the 15th, Security 
While Traveling Overseas. These seminars are open to both 
members and nonmembers of the International Trade Club.
    On January 27, we began a three-part series on import, the 
import aspects, the first one being called Customs Compliance 
Assessment. On February 3, we did a seminar on globalization; 
on February 10, International Letters of Credit; on February 
24, the second part of the import series; on March 3, 
Communications Across the Pond; on March 10, a report on the 
Jackson Hole Conference; on March 24, the third part of the 
import series; on April 7, China and Its Business Insights; on 
April 22, Current Events in Transportation; on April 28, the 
fourth part of the import series; on May 5, International 
Agriculture.
    May 18, is a premier event of the International Trade Club, 
in conjunction with the Greater Kansas City Chamber of Commerce 
and other international organizations, called our World Trade 
Week. This year, the theme was the European Union. All of the 
various countries involved in the European Union were 
represented, and our two keynote speakers featured Minister 
John Richardson, who is the Deputy Head of the European 
delegation to the United States in Washington, D.C., and also 
Ambassador Thomas Niles. Ambassador Niles is the former 
Ambassador to both the European Union and Greece and is now the 
President of the United States Council of International 
Business in New York City.
    Then after that, we have also had another seminar on 
Business with Russia; another one on International Sales and 
Marketing; and then the end of this month, June 29, one on the 
``How To'' of International Trade. So hopefully that gives you 
an idea of our members' interests in getting a broad base of 
information on the global marketplace. Ten of these seminars 
were offered in conjunction with the Greater Kansas City 
Chamber, so we very much try to partner with other 
international organizations.
    The networking component of the International Trade Club is 
comprised of any number of meetings, receptions--and this year 
we started a new program called International After Hours, 
where anyone who is involved in the international marketplace 
is encouraged to come and to network with others.
    The International Trade Club provides information to new 
members of the international marketplace, as well as veterans 
in the international marketplace. While we do not have 
particular statistics regarding our own members, for obvious 
reasons--many of them are very sensitive competitors to one 
another, if you will. But since our members are comprised of a 
broad base of both service and manufacturing, and are on both 
the Missouri side and the Kansas side, we feel very comfortable 
in using the Department of Commerce figures.
    So, therefore, the figures that we use for the 
International Trade Club is that--and the most recent figures 
we have are the 1997 figures from the Department of Commerce, 
and that the export totals from the Greater Kansas City area 
were 3 billion 818 million. Those are broken out into various 
global regions. The NAFTA countries, Canada and Mexico, 
comprising the largest of 1 billion 190 million, going on down 
to Australia with the smallest export totals of 41 million.
    As far as the product totals, in 1995, again, the latest 
figures that we have, the manufactured goods were 1 billion 425 
million; the non-manufactured goods 1 billion 925 million. So 
that gives you an idea of the scope of the numbers that we deal 
with at the International Trade Club.
    To also give you an idea of our organization and how we try 
to keep it open to, again, new persons interested in the 
international marketplace, as well as veterans, we try to keep 
our membership very, very low. For example, a corporation 
membership is $300, and that entitles you to up to five 
members. An individual membership is $80; an educational 
membership, $65. We have several students who are members at 
$30.
    We are more than happy to provide you with additional 
information on behalf of the International Trade Club for 
additional conferences, seminars, other aspects of our 
organization, but hopefully that gives you an idea of what we 
are about in the Greater Kansas City area. Thank you.
    [The prepared statement of Ms. Ray follows:]
 Prepared Statement of Jan Ray, President, International Trade Club of 
                       Greater Kansas City, Inc.
    The International Trade Club of Greater Kansas City, Inc. is 55 
years old and is comprised of a membership of over 600 members 
representing approximately 350 companies.
    The foundation for the club through its over half a century rests 
with its mission statement: to promote international business through 
focused commercial education and networking to support individuals and 
businesses in the Greater Kansas City area.
    The commercial education component of the mission statement is 
fulfilled through a number of seminars conducted annually. This year's 
seminars have included:

Jan. 6 Updates on NASCO & the Federal Highway Bill (North America's 
Superhighway Coalition)
Jan. 13 Export Documentation Seminar
Jan. 15 Security While Traveling Overseas
Jan. 27 Import Series Part I--Customs Compliance Assessment
Feb. 3 Globalization
Feb. 10 International Letters of Credit Seminar
Feb. 24 Import Series II--Fundamentals of Importing
Mar. 3 Communications Across the Pond
Mar. 10 The Jackson Hole Conference Report Seminar
Mar. 24 Import Series Part III - Draw Back Regulations
Apr. 7 China--Business Insights
Apr. 21 Current Events In Transportation
Apr. 28 Import Series Part IV--Custom Penalties & Prior Disclosure
May 5 International Agriculture
May 18 The European Union
June 2 Business with Russia
June 9 International Sales & Marketing
June 29 The ``How to'' of International Trade

    Ten of these seminars were offered in conjunction with the 
International Division of the Greater Kansas City Chamber of Commerce. 
A recent survey by the International Trade Club indicated a majority of 
our members are interested in specific countries and focused tactical 
seminars.
    The networking component of the mission statement is fulfilled 
through a number of meetings, receptions, and other social gatherings 
throughout the year. At the request of our members for additional 
networking opportunities, we established a new program for 1999 
entitled International After Hours, a bi-monthly reception after 
business hours for socializing. Anyone doing business or interested in 
doing business in the international marketplace is encouraged to 
attend. The response has exceeded our expectations.
    Whether you are new to the international arena or a veteran 
conducting business globally, the International Trade Club offers 
opportunities to grow your business. Joint efforts with other Kansas 
City international organizations offer further additional international 
opportunities for our members.
    While the International Trade Club does not have statistics for the 
international business activities of its individual members, we feel 
comfortable in the utilization of the export totals as compiled by the 
Department of Commerce for the Greater Kansas City area. Our membership 
base is representative of a broad spectrum of manufacturers and service 
providers doing business throughout the world. (See Attachment A)
    An additional indicator of international activity utilized by the 
International Trade Club is via the Heartland International Business 
Index (HIBI). This index was started by the International Trade Club in 
1996 in conjunction with Professor Ernie Goss of Creighton University 
in Omaha, Nebraska. The index is compiled for the Heartland Alliance 
and is an economic indicator of international business with the nine 
member states: Missouri, Kansas, Iowa, Nebraska, Oklahoma, North and 
South Dakota, Minnesota and Arkansas. An index of 50 or greater depicts 
growth. The HIBI measures changes in the monthly export and import 
activities for the nine Heartland states and compares it to the United 
States average.
    Heartland export orders moved up again in May but lagged national 
export order growth. Heartland orders reached 48.8 in May, up from 
April's 48.3. For the state of Missouri, the May export index reached 
51.5. In comparison, the national export orders index rose to 52.4 in 
May from 51.6 in April.
    The international Trade club offers its information, educational 
seminars and networking opportunities to both members and non-members.

                                Attachment A--METROPOLITAN MERCHANDISE EXPORT TOTALS TO SELECTED DESTINATIONS, 1993-1997
                                                                        (Dollars)
 
            Metro Area                      Market                1993               1994               1995               1996               1997
 
Kansas City, MO--KS:
                                    NAFTA Countries              618,809,120        847,505,187        876,500,509      1,357,188,382      1,189,840,808
                                     Canada                      293,854,580        339,084,694        367,111,902        367,877,533        428,549,412
                                     Mexico                      324,954,540        508,420,493        509,388,607        989,310,849        761,291,396
                                    Caribbean & Cen. Am.         114,347,297        103,391,288        145,636,859        199,916,463        201,256,375
                                    South America                199,536,800        210,120,898        347,100,721        430,400,459        465,822,516
                                     Argentina                    12,081,225         14,921,657         25,245,639         27,014,374         58,330,189
                                     Brazil                       26,291,887         20,429,696         35,163,954         53,888,913         31,992,833
                                     Other S. America            161,163,688        174,769,545        286,691,128        349,497,172        375,499,494
                                    Europe                       481,708,946        361,974,091        437,091,393        468,425,032        553,038,579
                                     Belgium                      17,450,740         51,072,031         56,614,152         46,760,730         18,219,017
                                     France                       21,239,285         21,051,989         33,384,156         21,155,256         43,694,308
                                     Germany                      63,972,678         55,731,314         63,621,474         57,336,185         91,970,975
                                     Netherlands                  28,956,352         26,196,421         31,459,253         50,819,745         34,553,953
                                     United Kingdom               44,725,101         60,977,867         51,585,236         76,226,784         83,449,763
                                     Turkey                       11,821,220          1,632,025          4,189,802         19,017,620         78,912,939
                                     Former Soviet Rep.          184,320,230         38,248,835         51,514,030         53,601,755         37,835,754
                                     Poland                        4,358,781          1,531,999          2,324,133         10,805,888          8,924,521
                                     Other E. Europe              49,601,412         26,304,802         11,521,377         21,287,319         19,580,823
                                     Other Europe                 55,263,147         79,226,808        130,877,780        111,413,750        135,896,526
                                    Asia                         444,915,091        639,106,772      1,150,334,518      1,120,338,531        997,262,380
                                     Japan                       174,130,326        253,748,329        537,506,287        641,303,100        506,344,558
                                     China                        24,355,050         43,284,423         53,823,085         61,331,086         94,858,679
                                     Hong Kong                    12,580,443         12,015,611         20,093,584         14,233,688         14,073,400
                                     Taiwan                      129,046,883         96,272,287        147,597,701        131,077,211        134,836,632
                                     Singapore                    19,244,376         21,761,282         21,599,816         26,799,930         27,523,987
                                     S. Korea                     31,103,316         60,701,207        225,709,254        142,680,787         88,397,567
                                     Indonesia                     4,454,307          5,542,880         17,571,672         24,275,191         48,528,334
                                     India                         2,560,371          6,877,798          4,110,614          5,892,277         11,653,882
                                     Other Asia                   47,440,019        138,902,955        122,322,505         72,745,261         71,045,341
                                    Africa                       137,178,912        154,512,708        151,044,462        146,603,884        138,942,401
                                     North Africa                 95,519,079        106,907,239         67,657,516         57,752,552         77,359,227
                                     Rep. of S. Africa            26,363,882         16,467,488         40,076,825         17,296,692         11,649,485
                                     Other Subsaharan             15,295,951         31,137,981         43,310,121         71,554,640         49,933,689
                                     Africa
                                    Middle East                  127,191,232        167,769,396        163,514,359        167,667,103        209,305,801
                                    Australia                     24,719,571         41,746,231         34,652,697         63,037,728         41,364,482
                                    Rest of World                 77,493,573         52,433,249         44,294,047         31,494,979         20,803,523
                                    World                      2,225,900,542      2,578,559,820      3,350,169,565      3,985,072,561      3,817,636,865
 
Prepared by: Office of Trade and Economic Analysis, International Trade Administration, Dept. of Commerce
Source: Exporter Location Series, Census Bureau


                                                           METROPOLITAN MERCHANDISE EXPORTS TO THE WORLD, BY PRODUCT SECTOR, 1993-1997
                                                                                            (Dollars)
 
                  MSA                        Product Description               1993                     1994                     1995                     1996                     1997
 
Kansas City, MO--KS
                                         Manufactured Products                 1,091,733,254            1,347,718,649            1,425,258,895            1,503,492,234            1,910,850,976
                                          Food Products                          238,162,931              265,968,846              272,592,351              263,017,143              322,198,192
                                          Tobacco Products                                 0                        0                        0                    9,000                    3,000
                                          Textiles & Apparel                      32,301,376               38,498,541               55,432,534               79,740,201              111,787,875
                                          Lumber & Wood Products                  13,566,986               14,728,566               14,728,035               13,535,749               14,306,412
                                          Furniture & Fixtures                     3,294,598                4,139,051                3,825,995                4,474,742                6,658,105
                                          Paper Products                          11,239,681               15,048,675               21,886,957               19,213,555               23,354,208
                                          Printing & Publishing                   28,390,480               38,854,962               36,563,259               44,419,324               48,528,875
                                          Chemical Products                      147,440,454              159,975,381              175,085,786              205,955,751              263,572,247
                                          Refined Petroleum                        2,888,980                2,560,564                2,839,454                2,656,603                3,181,278
                                          Products
                                          Rubber & Plastic Products               20,473,488               26,269,201               30,064,647               25,126,297               31,514,467
                                          Leather Products                           340,264                1,358,341                  920,571                  813,251                1,288,359
                                          Stone, Clay, & Glass                    13,430,163               28,545,578               22,939,950               22,014,497               14,743,510
                                          Products
                                          Primary Metals                           9,138,995               18,247,017               12,423,241               15,653,235               52,555,024
                                          Fabricated Metal Products               67,092,356              102,291,728              129,505,671              129,688,990              175,384,447
                                          Industrial Machinery &                 191,589,598              216,459,294              243,548,400              288,178,409              361,152,240
                                          Computers
                                          Electric & Electronic                   95,358,737              174,995,373              128,507,282              111,524,108              157,610,891
                                          Equipment
                                          Transportation Equipment                82,195,303               98,843,199              121,980,631              102,275,851              122,388,014
                                          Scientific & Measuring                 122,795,399              116,047,629              129,138,245              145,991,282              168,372,423
                                          Instruments
                                          Misc. Manufactures                       7,413,054               10,179,612               12,430,558               11,872,227               18,629,083
                                          Unidentified Manufactures                4,620,411               14,707,091               10,845,328               17,331,583               13,622,018
                                         Nonmanufactured                       1,134,167,288            1,230,841,171            1,924,910,670            2,481,580,327            1,906,785,889
                                          Commodities
                                         TOTAL                                 2,225,900,542            2,578,559,820            3,350,169,565            3,985,072,561            3,817,636,865
 

    Senator Ashcroft. Well, we thank you very much. It seems to 
me that a person who goes to at least two out of three of their 
conferences should get a Ph.D. in about the span of 6 months.
    Ms. Ray. We agree.
    Senator Ashcroft. What a tremendous array of informational 
conferences you hold.
    It is my pleasure now to call upon a longtime friend, a 
personal friend and also a friend of this community. He is a 
farmer, a board member of the Missouri Farm Bureau. And given 
the fact that 40 percent of all agriculture in the country is 
exported, it really behooves us to make sure that we do not 
have barriers between that community and overseas markets--
barriers either through our own inefficiency in the way we 
handle goods for export or barriers that we allow to exist 
overseas.
    I have tried to focus on both of these categories of 
barriers in my legislative duties. Sometimes we have been very 
quick to impose embargoes, which make it impossible for our 
farmers to export. I think we have to review carefully these 
U.S. barriers.
    I have also spent a lot of time recently in speaking to the 
effects of foreign barriers such as those the European 
community has against American agricultural products. Senator 
Baucus of Montana and I specifically called the Ambassador of 
the European Union to our offices to talk to him about their 
continued refusal to accept American beef and other 
agricultural products in spite of the fact that they have lost 
every WTO case and have exhausted their appeals.
    So as we work together, I am delighted to have this 
opportunity to hear from someone at the production base of one 
of America's greatest industries, the agricultural industry. 
Mr. Blake Hurst is here to provide us with information on how 
we can understand better our capacity to help in agricultural 
export and production.
    Mr. Hurst.

STATEMENT OF BLAKE HURST, DISTRICT #1 BOARD DIRECTOR, MISSOURI 
                    FARM BUREAU, AND FARMER

    Mr. Hurst. Thank you, Senator. I raise corn and soybeans, 
as you know, in Northwest Missouri, about two hours north of 
here, with two brothers and my father. My wife, Julie, and I 
also have a commercial greenhouse business where we raise 
bedding plants that are shipped to about four different states. 
It is my privilege to serve on the State Board of Directors of 
Missouri Farm Bureau, a farm organization representing 80,000 
member families in the State of Missouri.
    I want to thank you especially today, Senator, for your 
continued efforts to expand trade opportunities for our 
nation's farmers and ranchers. We appreciate your work to 
ensure that the world leaders discuss the biotechnology issue 
and the other non-tariff restraints to trade at the G8 meeting, 
your leadership in pursuing legislation in trade sanctions 
related to agriculture, and your attempt to make the customs 
service more efficient by standardizing international trade 
data.
    As you know, U.S. agriculture has not shared in the 
prosperity associated and enjoyed by the general economy. These 
are trying times in agriculture, and we must pursue every 
opportunity to enhance the demand for the products that we 
raise.
    You know, I think back to the 1996 Presidential campaign. I 
think one of the most unfortunate metaphors that anybody, any 
candidate, used that year was Pat Buchanan's call for peasants 
to attack Washington with pitchforks--peasants with 
pitchforks--in protest against international trade, because you 
know the peasants that Pat was talking to have replaced that 
pitchfork with a skid loader made in Japan, and they paid for 
that skid loader with dollars earned from selling soybeans to 
Germany and Asia. We farmers are totally dependent on trade, 
and the troubles we have experienced in the last few years are 
largely a result of the economic turmoil in Asia, and of course 
the Russian troubles and trade barriers as we try to sell to 
Europe.
    Three years ago we exported $60 billion of farm products; 
this year we will only export $49 billion. The U.S. Department 
of Agriculture has reported that stockpiles of U.S. soybeans 
could be the largest in 13 years, and stockpiles of corn the 
largest in seven. Of course, as you know, soybean prices are 
lower than they have been in 20 years. So there are three 
things I would like to bring up today that could perhaps help 
turn this agriculture situation around.
    First, infrastructure must be in place for low-cost 
movement to U.S. borders. The agreements must be in place that 
allow fair competition in overseas trade, and mechanisms must 
be in place to enforce and resolve trade conflicts, as you 
pointed out in your remarks.
    There are 6 billion people in the world today, 95 percent 
of which are outside our borders. About 1.5 billion people live 
a life of subsistence, and another 800 million people are so 
malnourished they cannot work. This is unacceptable, given the 
abilities of the American farmer to feed the world.
    In 1996, U.S. agriculture exports, as I said, reached $60 
billion, about 30 percent of our sales. In 1997, Missouri 
agriculture exports totaled $1.55 billion, again, almost 30 
percent of Missouri farmers' sales. The loss of our export 
markets would erase demand for almost a third of our state's 
annual production.
    The U.S. has been blessed with the climate and natural 
resources that make us the envy of the world. But it is 
frustrating that we seem reluctant to take advantage of these 
assets. We have an inland waterway that allows products to be 
shipped to and from ports in a cost-efficient and 
environmentally friendly manner. Missouri, Mississippi, and 
many other rivers are gateways to the world that must 
constantly fight government officials and environmentalists 
that seem to put the pallid sturgeon before farmers, and the 
least tern before the 800 million people that need to eat what 
we produce.
    We have an aging lock-and-dam system on the Mississippi 
River that must be modernized; have a rail system that has been 
consolidated to a point that it is not uncommon for grain to 
sit on the ground waiting for shipment. This reduces quality 
and prices paid to producers. Rail movement is no longer seen 
by my fellow farmers as a dependable means of getting our grain 
to market.
    Five, the very same environmental groups that are fighting 
navigation on the rivers also work to cut off funding for 
highway projects here in Missouri. Our concern with funding for 
rural roadways is well known, and we are appreciative, when you 
were Governor, that you kept in mind how important the farm-to-
market roads are to farmers, because before the grain that 
leaves my farm can get to that intermodal transportation 
facility, it has to go down Route C and Route O and through 
Craig and Fairfax and Westboro. If we do not have the roads and 
bridges that allow us to do that efficiently, then our prices 
go up and we are not as competitive.
    Increased transportation costs, for whatever reason, not 
only hurts producers in the rural communities, but also make 
our products less competitive in world markets.
    Free and fair world trade will not happen on its own. The 
U.S. must remain the leader in pursuing international 
agreements that open new markets. Farm Bureau and farmers 
strongly support fast-track negotiating authority, and we hope 
the administration will work on that before the WTO talks start 
again.
    I also believe it is important that agriculture be exempted 
from unilateral trade sanctions that do nothing more than 
penalize U.S. producers. A recent Farm Bureau trade mission to 
Cuba found a market desperately waiting access to U.S. farm 
products, a market that might amount to a billion dollars a 
year. Economic sanctions are costing the U.S. $15 to $19 
billion in loss of exports in 1995. This translates into loss 
of more than 200,000 American export-related jobs.
    Trade agreements are not worth the paper they are written 
on if they cannot be enforced. There must be a rigid dispute 
resolution process in place with specific time tables. Social 
policies and political concerns cannot replace sound science. 
Ongoing disputes with the EU are ominous reminders of the 
presence of politics. We cannot agree to actions that are 
ignored by competitors. If the beef hormone issue is indicative 
of the way the present dispute process works, then we need to 
change it.
    Finally, increased trade will not simply happen. Our future 
lies in utilizing our natural resources in a manner that 
recognizes our competitive advantages and opening new markets 
to international trade agreements and vigorous enforcement and 
improvement of the dispute resolution procedures that govern 
present-day trade agreements.
    Thank you very much.
    Senator Ashcroft. Well, thank you, Blake. You touched down 
on a number of very important points for us, whether it is 
infrastructure, which is fundamental to getting our goods to a 
place where they can be exported, or to trade agreements that 
may look good on paper, but if they are unenforceable, are 
useless. I was just stunned when the Europeans, having lost a 
protracted set of appeals regarding American beef, decided on 
May 13, the last deadline for compliance, to say, ``We will not 
comply, regardless of the absence of any support for our 
position. The fact that we have lost--just start stacking on 
the penalties. We will not comply.''
    It is clear that we need to look carefully at that. I am 
very pleased that we are trying to revise in some way the 
dispute resolution mechanisms of our trade agreements, because 
if we just resolve the disputes and we win the dispute 
resolution and then the other countries simply say, ``Well, you 
get to call yourself the winner, but we are going to continue 
to make you the loser by not complying,'' it is obviously a 
very unacceptable situation.
    Thank you for your testimony.
    Ms. Mary Pyle is the Director of the Kansas City Chamber of 
Commerce Division on International Business Development. She is 
the Managing Director of the Kansas City World Trade Center. We 
have been able to work together on the I-35/I-29 corridor, and 
I believe it was with you and your organization that this grant 
that we worked to help achieve for the $800,000 to study how 
this corridor transportation capacity can be better utilized in 
international trade would work.
    So it is my pleasure to call upon you for your remarks at 
this time. It would be inappropriate for me to welcome you to 
Kansas City, but I welcome you to this hearing.

  STATEMENT OF MARY K. PYLE, DIRECTOR, INTERNATIONAL BUSINESS 
DEVELOPMENT AND MANAGING DIRECTOR OF THE KANSAS CITY AREA WORLD 
                          TRADE CENTER

    Ms. Pyle. Thank you, Senator Ashcroft, for the opportunity 
to speak with you today. On behalf of the Greater Kansas City 
Chamber of Commerce, it is an honor to be able to appear before 
this distinguished field panel hearing.
    The Chamber has intense interest in international trade 
development that are longstanding and numerous. To summarize 
our priorities today, relative to this hearing, the Chamber and 
our membership strongly supports full funding for international 
trade data systems, a trade processing technology, and 
infrastructure that will simplify and reduce the cost of 
importing and exporting our goods.
    We also support increased funding for the development of 
international trade corridors, such as I-29 and I-35 corridor; 
approval of normal trade relations with China this year and 
permanent normal trade relations for China; approval of fast-
track authority for the President; and continued management of 
the Missouri River with priority for navigation.
    Rather than repeat testimony or cover testimony submitted 
in writing for the record, the Chamber felt this might be a 
good opportunity for your limited time, too, to answer the most 
common question regarding inland trade processing; how would 
this work?
    Our Chamber represents small business, so we thought we 
would take an example. Let us assume I am a small button-maker 
from Columbia, Missouri. I would like to take advantage of 
NAFTA. I have worked with the Missouri Department of Economic 
Development and I have identified a buyer for my product. Now I 
have to get it there. I will be shipping one container of 
buttons every other month to Monterrey, Mexico.
    Right now, I must wade through various forms and paperwork 
required by U.S. agencies, as well as forms required by the 
Mexican government. I must identify a customs broker and a 
freight forwarder who will be able to represent my interests in 
Kansas City, in Monterrey, and also at the border in Laredo.
    If there is any problem with my shipment, I must resolve it 
long-distance or by using my agent at the border. Because I 
have a small volume, I am not able to take advantage of 
competition in the rate for hauling my containers to Mexico. 
Railroads have difficulty accounting for such a small 
container, calling loads like mine ``orphans,'' and 
discouraging their inclusions in trains. So I must ship by 
truck.
    I would like to tell my customers when to expect delivery, 
but I can only tell them the date I have shipped my product. I 
have no idea when they will arrive, because processes at the 
borders can be so unpredictable. I am fairly confident in my 
company and the driver taking my container to the border, but I 
do not know who might be taking my load the rest of the way to 
Monterrey, where it needs to be transferred to a Mexican 
carrier, and it will be difficult to track that load. I worry 
about inventory control.
    I am forced to pay an additional 6 percent overhead caused 
by processing, and I am swamped in paperwork and am at the 
mercy of freight forwarders and numerous people who I do not 
know. Because my deliveries are unpredictable, payment for them 
is also unpredictable, and I question cash flow.
    I need help with international banking, with the customs 
brokering process, and with paperwork. I need help managing 
inventory and cash-flow. For six container loads per year, 
despite the prospect of increased sales, I decide it is not 
worth it for me to pursue this opportunity, and I have passed 
up an opportunity internationally.
    Now, for example, let us envision the button export process 
with the Kansas City International Trade Processing Center 
already in place. I have worked with State and Commerce 
Department and have identified the opportunity in Monterrey, 
Mexico. I register as a user of the international trade data 
system and review the information I need to provide that will 
satisfy the regulatory entities in Mexico and in the U.S.
    I still have a number of questions about banking, forms, 
tariffs, taxes, risks, and shipping options. But rather than 
going through the phone book, I can travel to the International 
Trade Processing Center in Kansas City and visit onsite with 
representatives of each of the organizations.
    I find out I can provide all my trade data on a secure 
internet site, directly from my business. All parties involved 
in the inspection process will accept this information. I can 
prepay all my fees, all my tariffs. Having pre-filed, my load 
can be sealed and proceed directly to its portage in Mexico, 
without having to stop at way stations along the way. It can be 
processed in minutes, rather than days.
    Because the trains are assembled in Kansas City that can go 
directly to Monterrey without being altered along the way, I 
now have the option of using truck or train. I find this 
competition reduces my shipping costs substantially. I also 
find I am able to track my inventory along the way, and I am 
able to tell my customer when to expect delivery.
    My account receivables are a little more regular. When I 
experience a problem, I am able to address it through Kansas 
City, rather than people in Laredo or elsewhere. Not only have 
I saved on shipping costs, but my other costs associated in 
getting goods across the border. I figure I am saving between 
10 and 25 percent per shipment, which allows me to invest more 
money in business and also look at additional international 
markets.
    This is obviously a dramatic and simplified answer of how 
the International Trade Processing Center envisioned for Kansas 
City would work. It assumes a fully functional trade corridor 
that includes Kansas City and a fully developed and staffed 
trade processing center. We believe this type of system could 
be up and running in Kansas City within the next 3 to 5 years 
if Federal resources were available.
    We appreciate the efforts of the Commerce Committee to 
address this critical need for enhanced trade processing 
capabilities and maximum use of existing infrastructure. We 
very much appreciate your efforts, Senator, to be an advocate 
and a champion for international business and--that America 
could be much more competitive in the international 
marketplace.
    Thank you for allowing the Chamber an opportunity to 
testify.
    Senator Ashcroft. I am very pleased that you would so 
testify. You left out one thing, and that is after this new 
millennial approach, the guy needs to go to the bank to deposit 
his profits----
    Ms. Pyle. Details.
    Senator Ashcroft. Details, yes.
    It obviously has great promise, especially for those 
businesses that have the scale that would allow them to, 
through the result of the mass of their enterprise, to be able 
to endure so many of these requirements.
    [The prepared statement of Ms. Pyle follows:]
 Prepared Statement of Mary K. Pyle, Director, International Business 
    Development and Managing Director of the Kansas City Area World 
                              Trade Center
                               background
    The Kansas City region has been evolving as an international trade 
processing center since its founding as a trading post in the mid-19th 
Century. It has always been a critical component in the 
transcontinental movement of goods and services. Innovations have 
included providing the first permanent rail crossing over the Missouri 
River, the first paved runways and the initial construction of the 
nation's Interstate highway system. The concept of processing 
international goods at an inland site is a natural progression in the 
region's logistics development. Most recently, the iteration we're 
discussing today has its genesis in 1993 with the work of the Chamber's 
Inland Port Task Force. Since then we have undertaken with the Mid-
America Regional Council two landmark studies to confirm the concept is 
feasible and practical. Those studies were the Intermodal Freight 
Strategies Study in 1995 that won the American Consulting Engineers 
Council's top award for an engineering project, and the Mid-Continent 
Tradeway Study completed in March of this year. Through the North 
America's Superhighway Coalition, we also worked with U.S. Treasury to 
identify Kansas City as the first international compliance center in a 
memorandum of understanding signed by Assistant Undersecretary John 
Simpson in 1996.
   barriers to kansas city development of inland trade and processing
    There have been essentially three barriers to Kansas City's 
development as an International Trade Processing Center that build on 
each other and perpetuate a negative cycle: (1) a mindset among policy-
makers and government agencies that trade improvements, particularly 
infrastructure-related improvements, must be focused at traditional 
access and egress points such as deepwater ports and border crossings; 
(2) a lack of necessary funds to jumpstart the process of international 
trade processing at inland ports, necessitating an incremental 
approach; and, (3) a lack of enthusiasm from shippers and carriers as 
potential users of the system caused by incomplete information, no 
national inland trade processing infrastructure and the fear that such 
a system, once developed, would be paid for on the backs of the 
transportation industry. These barriers, coupled with a robust domestic 
economy and a perception of a weak international economy have stifled 
any sense of urgency or passion for developing a trade system that 
works better.
    Meanwhile, the U.S. government has authorized and spent hundreds of 
millions--even billions of dollars to add capacity at overwhelmed 
border crossings and deepwater ports, even agreeing to landfill part of 
the Pacific Ocean at Long Beach. All this has been pursued while 
relatively inexpensive technological solutions using existing and paid-
for infrastructure at inland cities has been underdeveloped.
          federal response to inland trade processing concept
    The federal government has spoken much of developing a national 
freight infrastructure, an intelligent transportation system, and 
pursuing the notion of international trade corridors and inland ports. 
The true test of its resolve, however, is shown in the funding and 
implementation of such systems. The National Highway System is rarely 
discussed as a planning tool and is underfunded. Intelligent 
transportation systems technology is trickling out to the metro areas 
and includes no common architecture. International Trade Data Systems 
technology, developed jointly by the governments of Canada, the U.S. 
and Mexico, needed a small sum of $19 million for full deployment. It 
received no funding recommendation initially and currently stands to 
receive somewhere between zero and $5 million, when $13 million is the 
minimum amount necessary to gain any benefit from the system for inland 
cities.
    The final demonstration of the lack of any priority for development 
of non-traditional approaches to facilitating trade may be seen in 
implementation of TEA-21. For the first time, the nation's 
transportation program included a category for border crossings and 
international trade corridors. In its first year less than $100 million 
was made available for all the states after the rest of the funding was 
taken off the top for traditional projects. In setting up its field 
hearings to determine how to spend even this small amount, FHWA held 
all of its hearings at border crossings or coastal cities, specifically 
canceling its one inland hearing originally planned in Kansas City. Not 
surprising, most of the projects identified in the hearings support a 
status quo approach, as does the final list of recommended projects.
     needs of inland cities generally and kansas city specifically
    First, there needs to be a mandate from policy makers to the 
agencies stressing and rewarding innovations in developing the nation's 
trade processing system. If lawmakers continue to slant the playing 
field in favor of incremental and traditional approaches to dealing 
with the increased flow of trade, bureaucrats will do likewise.
    Second, adequate resources and development of demonstration 
projects need to be made a priority in the pursuit of non-traditional 
and more efficient ways to maximize previous infrastructure investments 
in a holistic approach to the national and intercontinental trade 
systems. How can any rational person expect to see meaningful changes 
that would spur private industry to take risks on system innovations 
like ITDS that are funded with less than $5 million for the entire 
nation? That is not a commitment to improvement as much as it is a 
token allocation to defer meaningful action.
    Kansas City's needs include deployment of ITDS technology that is 
sufficiently funded. We will require additional allocations of funds to 
assist with development of what amounts to a pilot program and model 
for other cities for the implementation of a full-service international 
trade processing center capable of assisting inland traders as well as 
relieving and complementing the traditional border crossing systems. 
And we will need sufficient federal personnel from relevant agencies 
such as Commerce and Customs to ensure the success of our virtual 
processing center and other amenities. Finally, we will need champions 
in Washington committed to the success of inland trade processing and 
the proliferation of such a system on a national basis.
  companies have been disadvantaged by lack of u.s. participation in 
                        various trade agreements
    While specific numbers are difficult to obtain because of the 
competitive nature of various companies and industries, we believe area 
companies of all sizes have been disadvantaged. In a recent survey of 
thousands of large and small businesses, as well as freight carriers in 
our 5-state region (MO, KS, IA, NE, OK), no fewer than 50 percent were 
engaged in international trade, while nearly 80 percent would like to 
be so. More than 73 percent of those not pursuing international trade 
cited reasons related to the complexity of such trading and their 
inability to decipher the system. There has got to be an easier way to 
facilitate trade. Also, with Kansas City's reliance on an agriculture-
rich economy, it has been clear that other agricultural powerhouses 
such as Canada and certain South American countries have benefited by 
the inequities faced by U.S. businesses trying to compete in numerous 
markets without the benefit of trade agreements. Farmland's written 
testimony addresses the impact on its business and its industry of the 
numerous trade sanctions being enforced by the U.S. government. It is 
ironic that we are engaged in more trade sanctions than trade 
agreements, even in our own hemisphere.
    Unfortunately for regions like Kansas City, where more than 90 
percent of all businesses employ fewer than 100 people, it is the small 
businesses that suffer as they lack the resources to overcome hurdles 
placed in international trade.
    kansas city would not be the only inland trade-processing center
    We believe Kansas City is ideally situated and prepared to 
demonstrate that such a center can work and provide greater 
efficiencies in the nation's trade infrastructure. If Kansas City is 
the only one for long, however, it only demonstrates a lack of will and 
commitment to fully develop the potential of the nation's tremendous 
inland infrastructure, ignoring the vast potential of cities like 
Dallas/Fort Worth, Oklahoma City, Des Moines, Minneapolis, Columbus, 
Memphis and others. There must be a national architecture for trade 
processing and a network of cities that provide the greatest efficiency 
for shippers.
  the need for traditional operations at borders and deepwater ports 
                                remains
    The Chamber does not view inland facilities as competitors for 
business and growth at traditional ports. Rather, we see inland 
facilities relieving the stresses of ever-increasing imports and 
exports as the global economy expands. At ports like Long Beach, for 
instance, only about 60 percent of the goods entering the U.S. there 
have a regional distribution. The other 40 percent could be processed 
further inland, eliminating congestion, added expense and worsening 
traffic and environmental impacts. Similar statistics exist for most 
other ports. Still, the bulk of goods entering and leaving various 
ports and border crossings need to be processed at those points. Also, 
the traditional borders and ports provide an important front in the 
battle against the shipping of illegal drugs and illegal aliens. 
Without maintaining the discretion of agents at the borders to seize 
and inspect goods there, the nation would lose an important deterrent. 
There is no expectation nor is there a desire to eliminate the 
important processes that occur at the borders.
                         greatest beneficiaries
    The Chamber believes small manufacturers and shippers will be the 
greatest beneficiaries of the trade-processing center being advocated 
for Kansas City. These entrepreneurs have few options relative to how 
their goods must be shipped and pay a substantially higher percentage 
of the cost of transporting their goods across borders. According to 
Bob Ehinger, director of the U.S. Treasury Department's ITDS office, 
about 6 percent of the cost of shipping goods internationally is 
consumed at the border crossings. Six percent can make or break a small 
business with slim margins. By eliminating much of the paperwork, 
duplication and uncertainty surrounding the import and export of goods, 
we will help the small businesses that comprise the vast majority of 
businesses in the middle part of the U.S.

    Senator Ashcroft. Ms. Tiffany Newsom is the Executive 
Director of the North American Superhighway Coalition. I am 
delighted that she would come to share with us information on 
the way in which the right understanding of the potentials 
related to our highways and other modes of transportation can 
be integrated, so that we can have an improved trading 
capacity.
    Ms. Newsom.

    STATEMENT OF TIFFANY NEWSOM, EXECUTIVE DIRECTOR, NORTH 
             AMERICA'S SUPERHIGHWAY COALITION, INC.

    Ms. Newsom. Good morning, Senator Ashcroft and all esteemed 
guests.
    I appreciate the opportunity to be here today to tell you 
about North America's Superhighway Coalition, or NASCO, and 
this incredible trade and transportation corridor which 
encompasses I-35, I-29, and I-94 to the Ambassador Bridge at 
the Detroit-Windsor border crossing. We call it North America's 
International Trade Corridor, and it is the only existing 
central artery that connects all of the NAFTA partners, as well 
as connecting to all major east-west interstate routes in the 
U.S.
    NASCO is a non-profit, public-private corporation founded 
in 1994, whose membership has grown to include representatives 
from Missouri, Kansas, Texas, Oklahoma, Iowa, North and South 
Dakota, Minnesota, Canada, and Mexico. NASCO is headquartered 
in Kansas City because of its central geographic location and 
because of the international trade and transportation 
opportunities here.
    NASCO's mission is to maximize economic opportunity and 
investment along the North American International Trade 
Corridor through advocacy and development of a seamless, 
efficient, intermodal trade and transportation system. NASCO is 
working very hard to build and promote our corridor as North 
America's premier trade and transportation corridor, and we 
have accomplished much toward this end.
    NASCO was largely responsible for the creation of two new 
international trade corridor categories under the 
Transportation Equity Act for the 21st Century, the national 
corridor planning and development program and the Border 
Infrastructure Program. Those categories combined will receive 
$700 million in funding over the next 5 years.
    Last month, U.S. Department of Transportation announced 
that a project application facilitated by NASCO and submitted 
by the Missouri Department of Transportation would receive 
$800,000 in Federal funding through the two new categories. 
This project, which is a $1 million study involving intelligent 
transportation systems and commercial vehicle operations, will 
examine ways to apply and harmonize cutting-edge technology to 
improve the flow of people and goods along the corridor, which 
is from Laredo, Texas, to our northern borders in Detroit, 
Michigan, and Pembina, North Dakota.
    NASCO strongly supports increased Federal funding for 
implementing ITDS technology. Turning the corridor into a smart 
highway will increase safety and efficiency and help minimize 
congestion at checkpoints and international borders.
    It is important to note that this study will focus on ways 
that transportation technology can be harmonized corridor-wide 
so that international trade processing centers and intermodal 
systems in one city can easily interface with systems that will 
be online in other cities along the corridor. It is also 
critical that data for import and export movement be harmonized 
so that governments, carriers, and businesses alike can be 
assured that commodities are moving efficiently while 
maintaining a high level of security.
    This is why NASCO supports the full funding of 
International Trade Data Systems, or ITDS, the only system that 
truly promises to reduce the time and effort it takes to get 
products to international markets safely and efficiently. NASCO 
urges Congress to fully fund and support the ITDS program.
    As you will hear later, ITDS is a U.S. Government 
information technology initiative, creating an integrated 
government-wide system of electronic collection, use, and 
dissemination of international trade data. ITDS will 
standardize commercial based data, eliminate redundant and 
confusing processing, improve risk assessment, and create an 
integrated, inter-operable electronic environment. NASCO 
supports the use of ITDS technology at all international border 
crossings and at future inland international trade processing 
centers.
    Plans for these processing centers are being developed in 
Kansas City, San Antonio, Dallas-Ft. Worth, Oklahoma City, and 
Des Moines. These centers will utilize an intermodal approach 
that takes advantage of rail, air, and highway facilities to 
move people, vehicles, and goods more efficiently than ever 
before.
    NASCO supports making transportation infrastructure and 
technology improvements through environmentally sustainable 
policies. We currently have a memorandum of understanding with 
the Department of Energy, the U.S. Postal Service, the Texas 
General Land Office, and our coalition to work on the promotion 
of alternative fuels along the corridor and to develop 
alternative fuels refueling stations along the corridor.
    NASCO is working to ensure that our corridor is improved in 
a way that suits those who use it as well as those who live on 
it. The coalition urges Congress to increase funding for the 
National Corridor Planning and Development and coordinated 
Border Infrastructure programs when the next Federal 
transportation bill is crafted in 2004. NASCO supports fast-
track authority for the president as well as the full 
implementation of the North American Free Trade Agreement, 
particularly the provisions relating to transportation and 
trucking.
    An aggressive approach to planning and coordinating 
corridor improvements is needed. The increase in export and 
import traffic resulting from growing trade between Canada, the 
U.S., and Mexico is placing our infrastructure under increasing 
stress. Highways, bridges, rail hubs and other facilities 
require expansion and increased maintenance. North America's 
Superhighway is a strong coalition of forward-looking leaders 
behind it working for these improvements. NASCO exists to 
convince government and business leaders at the highest levels 
that the I-35/I-29/I-94 trade corridor is this country's 
transportation backbone.
    I want to thank you again for giving me the opportunity to 
speak here today.
    [The prepared statement of Ms. Newsom follows:]
       Prepared Statement of Tiffany Newsom, Executive Director, 
              North America's Superhighway Coalition, Inc.
    Good Morning, Senators Ashcroft and McCain and all esteemed guests. 
I am Tiffany Newsom, Executive Director of North America's Superhighway 
Coalition, Inc. (NASCO). I appreciate the opportunity to stand before 
you today to tell you about our coalition and this incredible trade and 
transportation corridor which encompasses I-35, I-29 and I-94.
    NASCO is a non-profit, public/private corporation founded in 1994 
whose membership has grown to include representatives from Missouri, 
Kansas, Texas, Oklahoma, Iowa, North and South Dakota, Minnesota, 
Canada and Mexico. NASCO moved it's headquarters to Kansas City, 
Missouri, last year because of the city's central geographic location 
and to take advantage of international trade and transportation 
opportunities here.
    Originally, NASCO's main focus was to create some type of 
International Trade Corridor category in the ISTEA Reauthorization. 
With the passage of the Transportation Equity Act for the 21st Century, 
we accomplished that goal. Two new categories were created--the 
National Corridor Planning and Development program and the Border 
Infrastructure program--and those categories (combined) received $700 
million in funding over the next five years.
    Now, our mission is to maximize economic opportunity and investment 
along the North American international trade corridor by promoting the 
I-35/I-29/I-94 Corridor as a seamless, efficient intermodal trade and 
transportation system. In other words, we want as much of the $700 
million as possible to go towards infrastructure and technology 
improvements along this critical corridor--a large portion of which is 
located in Missouri and Kansas.
    As we stand together today at this facility it is critical that a 
cooperative effort continues to build and promote this corridor for the 
benefit of all. NASCO is a leader in this effort. Statistics indicate 
that unprecedented growth is continuing because of NAFTA and the 
general strength of our economy. The States of Missouri and Kansas are 
beneficiaries of this growth.
    In 1997, the value of Missouri exports to Mexico grew by more than 
19 percent compared to the previous year. Missouri's exports to Canada 
rose by 31.5 percent. Since 1994, Missouri's exports to NAFTA partners 
has increased 92.6 percent overall.
    Today, Canada and Mexico are Missouri's leading and second-leading 
export markets, accounting for 53.5 percent of Missouri's total exports 
to the world.
    In Missouri, approximately 57,900 people held jobs related to North 
American exports in 1996. In the year 2000, the number of people with 
export-related jobs is expected to reach almost 67,000.
    In 1996, an estimated 33,821 Kansans had jobs that were directly 
tied to export trade with Canada and Mexico. In 2000, that number is 
expected to grow to more than 38,000.
    Statistics like these are why NASCO is working so hard to build and 
promote North America's premier trade and transportation corridor. 
NASCO is involved with numerous major initiatives.
    NASCO and a group of eight states (including Missouri and Kansas), 
the Canadian province of Manitoba and numerous private entities are now 
enjoying some of the success we've worked so hard to achieve. Last 
month the U.S. Department of Transportation announced that a project 
application facilitated by NASCO and submitted by the Missouri 
Department of Transportation would receive $800,000 in Federal funding. 
This project--a one million dollar study involving Intelligent 
Transportation Systems/Commercial Vehicle Operations--will examine ways 
to apply and harmonize cutting edge technology to improve the flow of 
people and goods along I-35, I-29 and I-94 from Laredo, Texas to our 
northern borders in Detroit and Pembina, North Dakota. NASCO strongly 
supports increased Federal funding for implementing ITS technology--
turning the corridor into a ``smart highway'' will increase safety and 
efficiency. Implementation of ITS items including ramp metering, HOV 
lanes, Traffic Operations Centers, etc. will help to partially 
alleviate congestion problems when adding lane capacity isn't feasible. 
Truck tracking while the transport vehicle is moving will also help 
minimize congestion at checkpoints.
    It is important to note that this study will focus on ways that 
transportation technology can be harmonized corridor-wide so that 
international trade processing centers and intermodal systems in (for 
example) Kansas City can easily interface with systems that will be 
online in Dallas, Winnipeg and Monterrey, Mexico. It is also critical 
that data for import and export movement be harmonized so that 
governments, carriers and businesses alike can be assured that 
commodities are moving efficiently while maintaining a high level of 
security.
    This is why NASCO supports the full funding of International Trade 
Data Systems (ITDS), the only system that truly promises to reduce the 
time and effort it takes to get products to international markets 
safely and efficiently. NASCO urges Congress to fully fund and support 
ITDS.
    ITDS is a U.S. Government information technology initiative 
creating an integrated government-wide system of electronic collection, 
use and dissemination of international trade data. ITDS seeks to reduce 
cost and burden, enhance enforcement and compliance and improve the 
quality of international trade data. These goals can be achieved 
through standardization of commercial-based data, elimination of 
redundant and confusing processing, improvement of risk assessment, 
more convenient access to requirements information, improved data 
editing and validation, and creating an integrated electronic 
environment. NASCO supports the use of ITDS technology at all 
international border crossings and at future inland international trade 
processing centers. Delays at the border or at the processing center 
for clearance of goods and customs will be drastically reduced, as 
processing can be done while trucks and trains are moving. NASCO 
advocates development of a plan for ITPCs in each country--in the U.S., 
plans for international trade processing centers in Kansas City, San 
Antonio, Dallas/Ft. Worth, Oklahoma City, and Des Moines are at various 
stages of development. These centers will utilize an intermodal 
approach that takes advantage of rail, air and highway facilities to 
move people, vehicles and goods more efficiently than ever before.
    NASCO supports making transportation infrastructure and technology 
improvements through environmentally sustainable policies.
    We have a Memorandum of Understanding with the U.S. Department of 
Energy, the Environmental Protection Agency, and the U.S. Postal 
Service to develop an environmentally-conscious ``clean'' corridor and 
explore the potential use of alternative fuels.
    To summarize, NASCO is working to ensure that this transportation 
and trade corridor is improved in a way that suits those who use it as 
well as those who live on it. The coalition urges Congress to increase 
funding for the National Corridor Planning and Development and 
Coordinated Border Infrastructure programs when the next Federal 
transportation bill is crafted in 2004.
    The increasing amount of trade between the United States, Canada 
and Mexico is great for the economy. Businesses are growing and 
creating thousands of new, good jobs.
    But the increase in export/import ``traffic'' is placing our 
infrastructure under increasing stress. Highways, bridges, rail hubs, 
airports and other facilities require expansion and increased 
maintenance.
    The I-35/I-29/I-94 Trade Corridor is the only existing main, 
central artery that connects all of the NAFTA partners. No other Trade 
Corridor Route can boast the prime routing and strategically-located 
terminus points that the I-35/I-29/I-94 Corridor can. It connects to 
all major east/west interstate routes in the U.S. We must do all we can 
to promote the efficient use of this corridor.
    It is a proven fact that highway construction and other types of 
transportation development boost local economies and create new, good 
jobs.
    An aggressive approach to planning and coordinating corridor 
improvements is needed. North America's Superhighway has a strong 
coalition of forward-looking leaders behind it working for these 
improvements.
    The economy is good now. But to keep the economy moving in the 
right direction, markets must be grown. Just as important is making 
sure that commodities can get to those markets safely and efficiently. 
NASCO exists to convince government and business leaders at the highest 
levels that the I-35/I-29/I-94 corridor is this country's 
transportation backbone.
    I want to thank you again for giving me the opportunity to speak 
here today.

    Senator Ashcroft. I am very pleased to have your testimony.
    The subcommittee on trade of the U.S. Commerce Committee, 
U.S. Senate, needs to work closely together with the committees 
on surface transportation. They are not distinct and separate 
or segregated areas of inquiry and understanding, and we need 
to have the right surface transportation and the right waterway 
transportation, right rail transportation. The whole package 
has to be right. Our understanding of these issues needs to be 
thorough and complete in order for us to work well with these 
other entities.
    I thank you.
    Ms. Newsom: Thank you.
    Senator Ashcroft. Mike Cook is the President of Necco Seeds 
and exports his farm output from his farm to the rest of the 
world. As a farmer, he has an ability to talk about the most 
fundamental level of production and sees both the opportunities 
and the barriers as they exist and as he encounters them in his 
particular endeavor. I am very pleased to have him bring his 
first-hand awareness of this situation to me.
    Before you begin, let me indicate to all of you who are a 
panelist that the record of this hearing will be maintained as 
open for a couple of days into early next week, and if you want 
to supplement--it probably never happens to you, but frequently 
to me, as I am leaving the hearing, I am saying, Oh, I should 
have said-- well, if that happens to you and you want to take 
the time to write it up and let us know about it. We are eager 
to include it in the record of the hearing.
    I do not mean that to suggest any of you have left anything 
out, but if you come up with that kind of a thought, you should 
feel free to supplement with written remarks your oral 
testimony.
    Mr. Cook.

              STATEMENT OF MIKE COOK, PRESIDENT, 
               MARKETING DIVISION OF NECCO SEEDS

    Mr. Cook. Yes. Thank you, Senator Ashcroft, for this 
opportunity to testify this morning.
    I am with Necco Seeds. I am the president of our marketing 
division and also a swimming producer and one of 2,000 members 
of the Missouri Swimming Association. I would like to give a 
brief description of our company's activities to give you an 
idea of my own and our company's perspective.
    We work with U.S. producers and growers and what we call 
POCOs, producer owned and controlled organizations, throughout 
the Midwest, primarily in Kansas and Missouri. We preserve the 
identity of our crops we grow in order to turn them into 
products, whether it is a seed product our neighbor is planting 
or a tofu bean a Japanese tofu processor will be using to make 
tofu.
    With commodity prices at all-time lows and the increase in 
competition in agriculture production from other countries 
around the globe, for the U.S. farmer to survive, they have to 
think in terms of, how can I differentiate my product from 
others?
    It is the same concept we have all learned in Marketing 101 
or Ag Econ 50. Can we differentiate our products? Definitely. 
Can we compete globally? Definitely. How can we better compete 
globally? That is why we are here today, to answer that 
question, how can we better compete globally?
    Here are some points to consider in order to better compete 
globally. No. 1, like you said earlier, Senator, 96 percent of 
the world's population lives outside our borders. Moreover, 
global population 5.9 billion is projected to reach 8.5 billion 
by 2030. In order to share in this growth, U.S. agriculture 
producers must maintain and increase access to foreign markets. 
This can only be done through negotiating trade agreements, and 
we cannot negotiate these trade agreements unless the 
administration has fast-tracked negotiating authority.
    No. 2, it is a very basic statement. Open markets--keep 
them open and let U.S. private enterprise do what they do best: 
provide value. No. 3, to always push for a fair playing field 
and to know the rules of play. Four, the accountability for 
commitments made, whether it be private companies or 
governments who made those commitments. We must know the deals 
that we make will be kept, regardless.
    That is a fairly short testimony I gave this morning. I 
have left some time for any questions you might have, Senator. 
I want to thank you again for having me here this morning.
    Senator Ashcroft. Thank you for your testimony. I kind of 
like the way you got to the bottom bean right there: fast-track 
authority, open markets, and accountability. Those are very, 
very important items.
    Before we just have a few minutes for questions, I would 
like to invite testimony from an outstanding small family 
manufacturer businessman who employs about three dozen 
Missourians or more and competes with the Canadians and other 
individuals for business abroad. Jan Klestinec is the president 
of the Dollins Tool and Die Company, I believe in Independence.
    Mr. Klestinec. That is correct.
    Senator Ashcroft. Is interested in the world as a 
marketplace, and that is indicative of the kind of interest 
that has been shown by a number of Kansas City enterprises. It 
is my pleasure now to call upon Mr. Klestinec for his remarks.

            STATEMENT OF JAN KLESTINEC, PRESIDENT, 
                       DOLLINS TOOL, INC.

    Mr. Klestinec. Thank you very much and good morning, 
Senator Ashcroft.
    Senator Ashcroft. Good morning.
    Mr. Klestinec. Thank you for the opportunity of being here, 
and I just want you to know that your leadership is very, 
important to small business, not only in Kansas City but I 
believe all over the United States.
    For more than four decades, Dollins Tool has been 
manufacturing high speed, thin wall plastic injection molds. 
The primary industries we supply is the houseware items and 
food packaging. Since the company started in 1952, we have been 
in the same location in Independence, Missouri, and as you 
stated, we currently employ about 35 very highly skilled 
people, and put about $2 million back into the Kansas City 
economy.
    Middle America is small business and in order for this 
business to survive, they need to be exposed to international 
trade. Today our lives are exposed to so many different avenues 
of communications. These avenues should allow us to do business 
with companies all over the world. The difficult task is not 
communications, but of making yourself visible. This I believe 
is the biggest task in obtaining a market share in 
international trade.
    As you are aware, Senator, the South American economy was 
on the rise and doing very well for quite a while. With the 
population of the people that many of these countries have, the 
opportunity for the plastic industry has been growing rapidly 
over the last three or four years.
    Over 90 percent of our competition is north of the border 
in Canada. Our main competitor has been involved in the South 
American market now for almost three years. The Canadian 
government has been very involved for the past several years 
with helping Canadian businesses get their foot in the door. 
This definitely gives our competitors a step up on the 
competition in this particular market. For example, our main 
competitor from Canada claims publicly that one-third of their 
business is being done in South America today.
    So therefore, by the time a company such as ours, Dollins 
Tool, makes itself visible, companies such as our competitors 
have already established themselves through the help of its 
government.
    Our molds have created some of the most popular food 
containers found on grocery store shelves throughout North 
America but our market as well as many other markets are 
becoming globalized. In order for companies of our size to stay 
competitive, we must also venture into international markets. 
In order to do this, an established plan needs to be developed 
to help companies access these markets.
    Last year, I had the opportunity to go on the Governor's 
Business Mission to South America. This was a small step in the 
right direction, but the experiences I had on this mission, 
were sometimes not as pleasant as others. Basically we found 
out that even the State of Missouri needs a better 
understanding of all the people who work abroad so they can 
represent us better when the time comes. I believe that there 
were also a few participants on this trip who believed our trip 
to Brazil was very poorly organized.
    Middle America needs to establish a plan to help the small 
business of our areas secure a foothold in this ever-growing 
global market. In order for Kansas City to remain and grow as a 
city, we need to bring international trade to Middle America.
    America was founded on small business. It is the backbone 
of this country and it has made this country what it is today. 
We are in an age where small businesses are in danger of 
disappearing. Please take the next couple of weeks and look at 
our President, Governor, and see how many articles, newspaper 
articles or television news, and see how many pictures of them 
you see with small businessmen.
    Nothing against big business, but we small business people, 
work just as hard, and I believe we deserve some recognition.
    Thank you very much.
    Senator Ashcroft. I want to thank you very much for being 
an eager competitor and a producer who represents the United 
States and Missouri very well.
    We are running a little bit late, so let me just see if I 
can summarize some of the things that I have been hearing from 
you. I seem to have heard from many of you that we need to have 
the kind of access to markets that would be accommodated if we 
were to have fast-track authority. We try to sell some 
agricultural products in South America, to Chile for example, I 
believe they have an 11 percent tariff against U.S. goods. They 
have a zero tariff against Canadian goods. It is kind of hard 
for us to sell American goods when we pay 11 percent penalty 
going into the country and Canadian farmers have a zero penalty 
to pay.
    That would make it hard for you to compete, would it not?
    Mr. Klestinec. That is correct.
    Senator Ashcroft. So fast-track--is that a common 
denominator in terms of all of your recommendations?
    Mr. Klestinec. Yes.
    Senator Ashcroft. In some of the hearings we held in 
Washington, we found out when we did the grain embargoes 
against Russia we ended up saving Russia about $250 million, 
when we released them from their contracts to go buy grain on 
the world market and hurt American farmers substantially in the 
late seventies. It appeared to be that some of our sanctions 
efforts really hurt us more than they hurt our enemies. It 
seems as though this understanding would make us inclined to 
reverse such policy?
    Mr. Klestinec. Yes.
    Senator Ashcroft. Finally we have this very serious problem 
with certain trading partners, especially the European 
Community, and I am glad the President has agreed to raise some 
of these issues at the G8 meeting. But I guess Blake mentioned 
it most aggressively, that even when the (EU) European Union 
loses the case in the GATT, the General Agreement on Trade and 
Tariffs, and they lose in the WTO, they still refused to live 
by the agreements.
    Would all of you support the concept that we need to look 
carefully at the dispute resolution mechanisms so that when 
they are finally resolved we actually get compliance with the 
final order?
    [A chorus of ayes.]
    [The prepared statement of Jan Klestinec follows:]
   Prepared Statement of Jan Klestinec, President, Dollins Tool, Inc.
    Good morning Senator: Thank you for the opportunity of being here, 
and I just want you to know that your leadership is very important to 
small business, not only in Kansas City but I believe all over the 
United States.
    For more than four decades, Dollins has been manufacturing high 
speed, thin wall plastic injection molds. The primary industries we 
supply is the houseware items and food packaging. Since the company 
started in 1952, we have been in the same location in Independence, 
Missouri, and as you stated, we currently employ 35 very highly skilled 
people, and put over $2,000,000 back into the Kansas City economy.
    Middle America is small business and in order for these businesses 
to survive they need to be exposed to international trade. Today, our 
lives are exposed to so many different avenues of communication. These 
avenues should allow us to be able to do business with companies all 
over the world. The difficult task is not the communication, but of 
making yourself visible. This I believe is the biggest task in 
obtaining a market share of international trade.
    As you are aware, Senator, the South American economy was on the 
rise and doing well for quite a while. With the populations of people 
that many of these countries have, the opportunity for the plastic 
industry has been growing rapidly over the years.
    Over 90% of our competition lies north of the border in Canada. Our 
main competitor has been involved in the South American market now for 
almost three years. The Canadian Government has been very involved for 
the past several years with helping many businesses get their foot in 
the door. This definitely gives our competitors a step up on its 
competition in this particular market. For example, our main competitor 
from Canada claims publicly that \1/3\ of their business is being done 
in South America today.
    So therefore, by the time a company such as ours, Dollins Tool, 
makes itself visible, companies such as our competitors have already 
established themselves through the help of its government.
    Our molds have created some of the most popular food containers 
found on grocery store shelves throughout North America but our market 
as well as many other markets are becoming globalized. In order for 
companies our size to stay competitive we must also venture into 
international markets. In order to do this an established plan needs to 
be developed to help companies access these markets.
    Last year I had an opportunity to go on the ``Governor's Business 
Mission to South America.'' This was a small step in the right 
direction, but the experiences that I had on this mission, were 
sometimes not as pleasant as others. Basically we found out that even 
the State of Missouri needs a better understanding of all the people 
who work abroad so they can represent us better when the time comes. I 
believe that there were also a few participants on this trip who 
believed our trip to Brazil was very poorly organized.
    Middle America needs to establish a plan to help the small 
businesses of our areas secure a foothold in this every-growing global 
market. In order for Kansas City, to remain and grow as a city, we need 
to bring international trade to middle America.
    America was founded on small business. It is the backbone of this 
country and has helped make this country what it is today. We are in an 
age were small businesses are in danger of disappearing. Please take 
the next couple of weeks and look at our President and Governor and see 
how many newspaper articles or television news shows have these 
gentleman with any small businessman.
    And nothing against big business, but we small business people, 
work just as hard, and I believe we deserve some recognition.
    Thank you very much.

    Senator Ashcroft. Well, we are going to take a short break. 
When we come back from that break we are going to hear from the 
Federal authorities. I wanted to hear from the Missouri 
interests first, but the individuals from the Washington side 
of things are going to be here to talk about their ideas to try 
and address some of these challenges.
    Again, let me indicate to you that if you have additional 
items that you would like to submit, if this light went on and 
intimidated you, do not hesitate to provide it in writing, 
because we want to get the full wisdom before the Senate 
Commerce Committee's subcommittee on trade which I chair. We 
need that information and would look forward to hearing it from 
you.
    With that in mind, I think we will take about a 10-minute 
break and come back and be eager to hear from those authorities 
and individuals who have come from the administration in 
Washington.
    (Whereupon, a short recess was taken.)
    Senator Ashcroft. I apologize for my having to extend the 
break a little bit, but the news industry has expressed 
substantial interest in what you are here to talk about, and I 
wanted to make sure the people of Kansas City knew that you had 
come to be a part of this, and I am grateful. So the meeting 
will now be resumed.
    I want to express my appreciation, again, publicly, to 
these officials of the U.S. Government whose interest and 
commitment to the capacity of America to be an effective 
competitor in the world marketplace has been reflected in 
outstanding service in the development of ways to facilitate 
trade. So I will call upon these individuals, and then we will 
have a chance to discuss their testimony.
    First is Mr. Bob Ehinger. He is the director of the 
International Trade Data System project office in the 
Department of Treasury. The International Trade Data System is 
new to many Americans, and it is a system about which I need to 
learn more. The idea of integrating the information and the 
requirements and the ability of individuals to comply with the 
trading system is an idea whose time has at least come, if it 
is not overdue. Some of the members of the first panel 
indicated such a need.
    So I am very pleased that Mr. Bob Ehinger, who is the 
director of that International Trade Data System project 
office, has come to Kansas City, and I would call upon him to 
outline briefly what the International Trade Data System is and 
to give us his assessment about the potential of such a system 
assisting in an arena of trade opportunity like the heartland 
of the United States.
    Mr. Ehinger.

            STATEMENT OF ROBERT EHINGER, DIRECTOR, 
    INTERNATIONAL TRADE DATA SYSTEM, U.S. DEPARTMENT OF THE 
                            TREASURY

    Mr. Ehinger. Thank you, Senator Ashcroft.
    I especially want to recognize your leadership in this 
area. Your team here, Tonya McLarty particularly, and others 
have been very helpful to us, as well as Senator Bond's office. 
Tracey Hinkey has been very effective in helping us along the 
way, and the MARC organization, Ron Achelpohl and David Warm, 
and Doug Luciani and Mary Pyle of the Chamber of Commerce, as 
well as Tiffany Newsom from NASCO.
    This is the kind of Federal, state, and local cooperation 
that it is going to take to help us get into the 21st century 
and have effective and efficient trade.
    I have offered a statement to Mr. Latham for the record and 
hope it can be added there.
    Senator Ashcroft. It will be added and as with the other 
panel, if at any time you come to the conclusion during this 
proceeding that you want to offer additional statements, we 
will keep the record open until say, Tuesday evening, so that 
you can add additional information.
    Mr. Ehinger. Here in the heartland of America as well as 
throughout our country, international trade, no question about 
it, is the growth engine of the late 20th century economy, and 
as we approach the 21st, it is not the growth engine, it is the 
lifeblood. It will be our survival or our failure.
    From 1997, international trade grew nearly four times 
faster than the GDP, when measured in 1992 dollars. Exports and 
imports have increased from 11 percent of GDP in 1970 to now 25 
percent.
    If we intend to maintain our lifestyle--and we have heard 
this so eloquently from our first panel--all businesses need to 
board the trade train. That trade train better operate in the 
most effective and efficient way that we can find to have it 
operate. That does not happen to be the case today. Why is 
that?
    Well, we have 225 years nearly under our belt of 
administrative history in international trade. We do not have a 
central authority in our government as many governments do have 
for international trade. It is spread among, as we have found 
in our work, over 100 entities of the Federal Government: the 
departments, the agencies, the commissions, and boards. There 
are that many different institutions that touch, feel, smell, 
affect, put regulations and requirements on, establish data, 
and so forth for how international trade is handled.
    I am not suggesting in any way, Senator, that we take on 
the job of trying to create a new department of international 
trade. One of the worst possible results of what we are doing 
here is creating another bureaucracy. Let us not do that. 
However, we can make the ones that we have work more 
efficiently.
    These people are well-intentioned, but if left to their own 
devices, they create what my dad would call, back in the days 
when we were farming together--a dog's breakfast of 
requirements. There is every kind of new requirement, form, 
manual, procedure, and in many cases what we have done is add 
automated systems on top of these requirements without ever 
streamlining the original procedures that have accumulated over 
these many years.
    Indeed, it has been said and was quoted recently in the New 
York papers that the Federal Government regulation in the 
international trade process is probably one of the greatest 
untapped sources of productivity improvements we have left. 
Producers, farm producers, manufacturers, and so forth have 
wrung essentially every dime and dollar and half cent that they 
can out of the process. Most of them feel totally helpless when 
it comes to changing, as individual organizations, the way 
government does business.
    So what is the problem here? We have totally non-standard 
data among these agencies and commissions of the government. 
They all feel as if they are entitled to create them 
individually. We have redundant forms, most of which ask the 
same questions over and over. We find in many cases that 
indeed, these requirements are just growing and growing.
    When we went to do the evaluation of the requirements for 
international trade that exist today on the books, paper 
reduction acts and so forth, we had over 602 forms in the 
Federal Government for registering data on international trade, 
and they comprise 10,000 fields of separate information. That 
is a stunning and unacceptable conclusion that we have reached 
in developing these systems.
    What do businesses say about this? Well, in evaluating 
these processes, as was done recently in the trade study here 
in Kansas City, the ETC Institute asked traders, mostly small 
traders, what they thought was the importance of international 
trade and why they did or did not participate. Most of them 
said the processes are too time-consuming. They have tried it. 
But it is just something they could not possibly address in 
their day to day business. It was too expensive to compete 
overseas. There was excessive paperwork, inconsistency of 
regulations from one department and agency to the other, and 
too much risk was involved in addition to the bottlenecks they 
put up with at the borders.
    What we are proposing here is in fact a very simple vision. 
We are simply saying it is time for the government to reinvent 
itself. We have heard that term over and over again. It is time 
to stop talking about it, and in fact do it in an area that is 
most vital to our economic future in the 21st Century.
    The vision is very simple. Mary Pyle laid it out for you. 
There was not a clearer way to state it than she stated it. We 
ought to be able to have one set of information. We ought to be 
able to operate electronically from our businesses, our farms, 
our factories, and our locations of business. We ought to be 
able to give this to the government. The government agencies 
ought to be able to share this information. They ought to be 
able to reduce the number of individual and repetitive pieces 
of information they require and the time it takes them to 
process them. We ought to get this down to as cheap and as 
efficient a process as possible.
    The United Nations and the University of Pennsylvania and 
other organizations studying the effect of government 
regulation and requirements on international trade estimate 
that between 4 and 6 percent, a very conservative estimate, is 
consumed on the value of international trade on an annual basis 
in satisfying government regulations. That is mostly a 
processing burden.
    That 4 to 6 percent, if applied against 1.6 trillion in 
trade, in the latest estimates, is a staggering figure. We need 
that money put on the profit line of businesses and taken off 
from the cost line. That is what ITDS is about. This will 
require cooperation among government agencies. We are beginning 
this process and I sit with two gentlemen here at the table who 
represent departments that are cooperating fully with this 
effort as it exists today.
    It is, however, getting minimal resources and minimal 
attention. We need essentially three things: we need more 
visibility. Efforts as you are extending today, Senator, are 
helping us achieve that. The visibility of raising these issues 
up top--we need persistent and consistent work between the 
Administration and the Congress to address issues such as 
information sharing among departments. There are probably 
statutory changes we estimate that will be necessary for this, 
and some realignment of authority for some of the organizations 
in government.
    There are competitive forces. I am not going to sit here 
and tell you that everybody gets along well on the 
Administration side among the departments and agencies on this 
business. It does take a lot of arm-twisting and a lot of 
consideration. But we do not have a lot of time left. We really 
do not. Either the United States is going to develop a model 
for this and we are going to show the rest of the world how to 
trade more efficiently, or we are going to follow along in some 
halting, expensive way, or wait for someone else to develop the 
model that we will be expected to follow.
    I suggest that we take this up now as the world's largest 
trading nation. We could do this, we estimate--in our cost 
benefit analysis and our implementation plan, within 3 to 4 
years, nationwide. Develop a fully electronic means so that the 
button maker that Mary was talking about could sit at her 
dining room table with her PC and through e-commerce and one 
set of information she could satisfy the government's 
requirements. More than anything else, she'd be able to move 
her goods efficiently, rapidly, and with the greatest 
productivity and with the greatest profit to an American 
business.
    That is what we are trying to achieve here. I very much 
welcome your support and efforts that the Senate might make to 
consider our resources that we have asked for in the budget, as 
well as some additional resources that if available, could be 
useful. In addition, I ask you to address some of the issues of 
contention that sometimes arise among the organizations of the 
government.
    Thank you for your time.
    [The prepared statement of Robert Ehinger follows.]
  Prepared Statement of Robert Ehinger, Director, International Trade 
              Data System, U.S. Department of the Treasury
    International trade will be the most significant economic driver of 
growth and prosperity for the United States in the 21st Century. This 
is true even for areas that traditionally have not participated in 
international trade, and have thus not experienced trade's benefits--
areas such as Kansas City in the heartland of America. However, the 
full potential of these benefits and prospects will not be realized 
unless Government changes in some very fundamental, yet feasible, ways. 
Government can and should be doing more to open up, expand and simplify 
international trade.
    International Trade is an area of opportunity and growth for 
American business--especially for small & medium enterprises (SMEs). 
Trade agreements and free trade policies have reduced duties and 
eliminated some of the barriers to international trade, but government 
processes have largely remained the same. In 1996, for example, 43% of 
all imports into the United States were duty-free. Through April of 
1999, that number is now 58% duty-free.\1\ However, the Government has 
failed to keep pace with the shift from revenue collection to non-
revenue collection goals and interests such as health and safety.
---------------------------------------------------------------------------
    \1\ United States Customs, Office of Information Technology Briefs, 
June 4, 1999.
---------------------------------------------------------------------------
    Old, paper-based non-coordinated processes impose what amount to 
non-tariff barriers on importers and exporters. Imposing barriers of 
any kind on exporters is counterintuitive and counterproductive. A 
study performed in 1994 by the United Nations Conference on Trade and 
Development (UNCTAD) showed that the estimated total cost to the trade 
community of meeting Government's international trade regulations 
requirements was 4% to 6% of the value of traded goods. This cannot 
continue if the United States wishes to remain competitive in the 
global marketplace. Reduction of the costs associated with Government 
processing in international trade is one of the only remaining untapped 
sources for productivity gain for U.S. businesses.
    Here in Kansas City, as in other areas in the heartland of America, 
there are several organizations and individuals who are working very 
hard to realize the potential of ``free trade.'' Despite the enormous 
efforts of organizations such as the North America Superhighway 
Coalition (NASCO), the Mid-America Regional Council (MARC), the Kansas 
City Chamber of Commerce, and individuals and the people of Kansas 
City, the positive effects of free trade will be greatly reduced by one 
single overarching feature--that is, the Government continues to 
process international trade as if modern communications measures and 
practices did not exist.
    A study in July of 1998, conducted by the ETC Institute, in 
association with TranSystems Corporation, documented some compelling 
reasons for the lack of participation of Kansas City Area companies in 
international trade. The survey determined that, ``a majority of 
freight carriers and large and small businesses surveyed would like to 
increase their international trade.'' The survey identified some of the 
chief reasons for not participating in international trade.\2\ These 
are:
---------------------------------------------------------------------------
    \2\ Kansas City International Trade Processing Center Study 
Stakeholder Interview Summary Report, Conducted for Mid-America 
Regional Council and The Greater Kansas City Area Chamber of Commerce 
by ETC Institute, in association with TranSystems Corporation, July 24, 
1998.

         Processes are too time consuming
         Too expensive to compete overseas
         Excessive paperwork
         Inconsistency of Customs regulations
         Too much risk is involved
         The bottleneck at the border crossing in Laredo, Texas

    A program that directly addressed these and other similar 
impediments was the North American Trade Automation Prototype (NATAP). 
NATAP endeavored to standardize the data collected for international 
transactions, and to collect that data electronically. NATAP also made 
use of leading edge technology, such as dedicated short-range 
communications technology (DSRC) to provide arrival and departure 
notification for trucks. NATAP was the proof of concept for the 
International Trade Data System (ITDS).
                                  ITDS
    ITDS is an inter-agency initiative designed to standardize and 
streamline international trade data processes within U.S. government 
agencies, at our borders, with our two North American trading partners 
(Canada & Mexico), and eventually to standardize and expand the trade 
process internationally. ITDS is an innovative, cross-agency initiative 
that aims to bring Government procedures more in line with current 
actual business practices, without compromising the need to enforce 
laws and collect duties.
    More specifically, the ITDS concept is very simple. Traders will 
submit one commercially-based, standard electronic data record to the 
ITDS for imports, exports and in-transits. ITDS will distribute this 
standard record to the concerned federal trade agencies for their 
selectivity and risk assessment. Through one electronic message from 
ITDS, the trader and the port will be advised of the status of the 
shipment. ITDS simplifies trade. Imports and exports will be handled in 
the same manner and with the same data. ITDS eliminates the need to 
submit redundant information to multiple agencies so that businesses 
will no longer need to maintain complex, redundant systems for 
reporting trade activities and statistics to the Government. In 
standardizing the process, ITDS removes the confusion and complexity of 
international trade enabling more U.S. businesses to broaden their 
markets to buy and sell globally. For the Government, ITDS will provide 
more current and accurate information for revenue, public health and 
safety, enforcement activities, and statistical analysis.
    The reality is that the current Government processing environment 
for international trade does not support the vision of a seamless 
global economy. It is a barrier to trade and effectively a tax on 
international trade that costs consumers, businesses, and government 
billions. Our ``system'' of processing goods at U.S. borders presents 
importers and exporters with a gauntlet of complex, confusing, and 
redundant requirements, forms, and reporting systems. For example:




         Traders are required to send the same data 
        electronically or via paper forms (or both) to multiple 
        government agencies
         Traders are often unable to determine which agencies 
        require data for a given import or export transaction
         Traders are often confounded by incompatible data 
        exchange methods, where electronic processing exists

    ITDS is an integrated, government-wide system solution to these and 
other problems. It would standardize trade data requirements and 
processes, clarify and streamline reporting requirements, and implement 
the centralized electronic collection, use and dissemination of 
international trade data within government. ITDS would be implemented 
first within the United States, and over time, could serve as a 
worldwide model, and as a new standard through which ``digital 
government'' facilitates international trade and e-commerce, and 
provides reliable international trade service at our borders. 
Implementation of ITDS would result in tremendous savings for 
multinational traders and the consumers they serve. It would eliminate 
many of the inefficiencies in the current system; improve the speed of 
clearance processes; and improve compliance with import and export laws 
and regulations. It is estimated that by 2005, net benefits of ITDS for 
the United States could reach $2 billion, a return of $9 for every 
dollar spent.\3\
---------------------------------------------------------------------------
    \3\ Cost Benefit Analysis for the International Trade Data System, 
September, 1998.
---------------------------------------------------------------------------
 INTERNATIONAL TRADE PROCESSES ARE IMPORTANT BECAUSE GLOBALIZATION AND 
  INTERNATIONAL TRADE ARE INCREASINGLY IMPORTANT FACTORS IN THE U.S. 
                                ECONOMY
    In the United States international trade is growing faster than the 
domestic economy. Competition in global markets will be stiff and those 
countries, industries, and companies that have developed the 
infrastructure to support global trade will prosper while those that 
have not will suffer economically. Winners and losers in the global 
economy will be determined by success in establishing an environment 
that builds international competitive advantage through better and more 
efficient supply chains. This requires investment in transportation 
infrastructure (ports, harbors, roads, and rail), information 
technology, and financial systems, and supportive government policies 
which encourage trade and reduce risk, thereby driving costs down.
    Governments have tremendous influence over the competitiveness of 
their economies and companies--they make the investment decisions in 
transportation, technology, and communications infrastructures; define 
the domestic policies that shape financial and banking systems; and 
define the rules that control imports and exports. Collectively, those 
decisions and policies determine whether or not a country is a 
desirable locale for trade and investment and affect the success of 
their firms in the global marketplace. Governments are in the middle of 
all international supply chains, with opportunities to facilitate or 
disrupt, or sever supply chains on either side of every international 
border.



    U.S.-based multinationals recognize the increased importance of 
improving global supply chains and reducing international logistics 
costs. There are four major impediments to improving the free flow of 
commerce among trading nations:

        1. Inefficient processes and antiquated systems.
        2. Increasing regulations related to health, safety, food, and 
        environmental issues.
        3. Deliberately protectionist policies.
        4. Inconsistent and non-standard data (information) 
        requirements
FAILURE TO INVEST IN MODERNIZED, 21st CENTURY STANDARDS, PROCESSES AND 
                                SYSTEMS
    While the capabilities of modern information systems have been 
exploding in recent years, governments have failed to invest 
sufficiently in information technology, and upgrade business processes. 
In the U.S., between 1986 and 1996, business and consumer computer 
purchases increased by 22% and 38% per year, respectively. In that same 
period, government computer expenditures increased only 9.4% per year. 
Further, over the next decade, government computer purchases are 
expected to increase at an annual rate of only 1.2%, a rate that is 12 
times slower than that predicted for business and 25 times slower than 
that for consumers.




    Failure to invest in government information technology to support 
processing of goods at the nation's borders has a direct impact on 
business, consumers, and government. For businesses, complex, slow, 
redundant, or manual processing substantially increases supply chain 
and transaction costs and inhibits the development of just-in-time 
inventory and lean manufacturing systems. For consumers, it means less 
choice and higher costs for products. For government, it means higher 
costs, lower compliance, and missed opportunities for capturing better 
information about the international trade in which our country is 
engaged.
    The cost of catching up and rebuilding infrastructure, and the 
danger of failure of the existing systems is increasing each year. The 
existing system that serves U.S. importers is 15 years old, has 
exceeded its life expectancy, and is in danger of collapse if it is not 
upgraded or replaced. Work on systems modernization and replacement is 
not enough.
    In today's digital world, government and industry, manufacturers 
and suppliers, and buyers and sellers, are connected and 
interdependent. Witness the Y2K concerns, and the need for governments 
and businesses to ensure that not only are their own systems Y2K 
compliant, but that those of their partners are as well. Failure to 
recognize this interdependency and to act now to invest in the future 
will jeopardize U.S. leadership and competitiveness, increase costs for 
consumers, and raise the bill for repair in the future.
              WORTHWHILE BUT INEFFICIENT BORDER REGULATION
    Global trade and uncertain international conditions have raised an 
array of new national concerns about the quality and use of imported 
goods in developed as well as developing economies. These concerns have 
led governments, industry, consumers, and special interest groups to 
press for enforcement of a growing array of restrictions on goods for 
export and import. These requirements involve many different federal 
agencies that have the potential and ability to disrupt supply chains 
and to increase transaction costs for exports and imports. The national 
interests involved are broad in scope, and great in diversity and 
number.




    These national interests are legitimate issues of sovereign 
governments. But if not implemented efficiently, the regulatory 
environment deployed to protect these interests can become a 
significant burden on the global trading system. Moreover, these 
burdens are even greater in countries with governments that simply 
cannot cope with the increasing volume of trade and the need for 
safeguards without disruption in the flow of legitimate commerce.
    Historically, even the most conscientious of Government agencies 
have believed that a choice must be made between facilitation of trade 
and enforcement of laws at the borders. Some governments will use the 
growing volume of trade and concerns over relatively recent issues such 
as the environment, food safety, genetically engineered agricultural 
products, and hormones in beef products as a cover for deliberately 
protectionist policies. The reality is that the only way to cope with 
exponentially increasing workloads and achieve improvements in 
compliance with the laws at the borders is by adopting modern business 
practices and the new tools of information technology. ITDS will use 
these new tools to collect a standardized and streamlined set of 
information while satisfying the needs of the various agencies.
    ITDS will improve the enforcement of each agency's trade-related 
mission by providing data in advance that will allow for the use of 
sophisticated, agency-specified risk assessment techniques. Using the 
standard data set, ITDS will facilitate information sharing among 
Federal agencies. Many of the federal agencies have no automated 
capabilities today. With ITDS, agencies will be able to access 
virtually all the transaction information necessary to assess 
compliance with legal requirements in one place, ITDS.
    In short, ITDS can significantly reduce barriers to trade while 
protecting government's legitimate interests at international borders. 
The principles under which ITDS was developed (standardized 
international data elements, universal communications protocols, common 
practice business processes, single interface to meet all government 
requirements, and the substitution of information for intrusive 
inspections) are equally applicable to developed and developing 
economies. Indeed, increased efficiencies achieved through closer 
collaboration and electronic sharing of standardized data will enhance 
the Government's abilities to carry out its critical missions with a 
minimum of disruption to legitimate trade flows.
    IMPLEMENTING ITDS DOMESTICALLY WOULD CREATE A MODEL FOR DIGITAL 
            GOVERNMENT THAT IS BOTH EFFICIENT AND EFFECTIVE
    ITDS will redefine the trade environment at U.S. borders for 
industry and the government by enabling the vision of a seamless 
international buy/sell transaction. This transaction is conducted 
electronically between importer and exporter, and government 
requirements on both sides of the international border are satisfied by 
an integrated electronic transaction. ITDS will accomplish this by:

         providing a single electronic access point for 
        industry with government through which to meet all requirements 
        for international trade
         standardizing and eliminating the duplication of data 
        requirements to support all government agencies involved in 
        international trade
         linking all government processes with international 
        exporters and carriers upstream, and brokers and importers 
        downstream, to create an integrated international supply chain 
        for complying traders in which electronic government processes 
        are transparent to the trading community

        
        

         reducing the cost of processing international trade 
        transactions for both the trade community and the government
         improving the enforcement of and compliance with 
        government trade requirements, despite an ever-increasing 
        volume of trade
         providing access to more accurate, thorough and timely 
        statistics and data about international trade for government 
        and business
         providing a basis for expanding the same approach to 
        U.S. trading partners and other countries around the world

    TDS is an enabling system and approach that will transform 
government agencies into information-based organizations, fundamentally 
transforming their basic processes, linking government systems to those 
of international traders and governments around the world, and shifting 
performance expectations higher.




                     EXTENDING ITDS INTERNATIONALLY
    As American businesses trade among more and more countries, the 
problems encountered when importing and exporting compound. Companies 
trading in a dozen or more countries may think globally, but soon learn 
that ``all customs is local.'' Seamless international supply chain 
management is exposed as a myth when the problems found at U.S. borders 
are mirrored by the different, unusual, and non-standard requirements 
and systems at each foreign border crossed. In each country, the 
multinational trader will encounter systems, forms, data elements, and 
requirements that are unique to that country. The multinational trader 
soon discovers that there is no ``system of international trade'' but 
rather a patchwork of similar but unique border barriers that must be 
addressed individually rather than through the application of a global 
solution. Due to their resources, multinational companies have better 
adapted to this environment but at a high cost that is passed on to 
consumers.
    Among the problems faced by companies engaged in international 
trade are:

         An inability to institute integrated international 
        supply chain management systems and the associated impact on 
        just-in-time, lean manufacturing, and enterprise resource 
        planning systems
         An inability to substitute information for inventory
         Billions of dollars in annual unnecessary transaction 
        costs caused by unique and inefficient customs and government 
        formalities at international borders

    Reform will require a partnership of world organizations, such as 
the World Trade Organization (WTO) and the World Customs Organization 
(WCO), international financial institutions, and global business 
organizations such as the International Chamber of Commerce (ICC), 
working with governments and business to effect change and standardize 
the process. Changing deeply embedded and culturally based systems will 
be difficult. In addition to a high level coalition of international 
organizations, these changes will require leadership, leverage, and a 
model.
    ITDS can provide the model, and the United States the leadership. 
But we should start at home--carefully consolidating and downsizing our 
own government requirements, and applying experiences and successes in 
improving government services.
              WHAT NEEDS TO BE DONE TO MAKE ITDS A REALITY
    The development of ITDS is based upon concepts proven under NATAP, 
and updated and improved in ITDS. There are three key priorities for 
action, to move from concept to implementation.
     Leadership. We need focused, effective, and sustained leadership--
from leaders in the Administration and Congress. ITDS depends on major 
change in the way government does business, which hasn't come easily 
and ultimately will not happen without clear, effective, and sustained 
leadership--from leaders in the Administration and in Congress.
    The government has created, reinforced, and perpetuated these 
problems, and it is only the government that can resolve and overcome 
them. (Neither the business community nor taxpayers can change 
stovepipe approaches of multiple government organizations and systems. 
Legislative action will also eventually be required to sanction and 
institutionalize more efficient government information collection and 
sharing processes.)
    Focused leadership is also important because the challenge of 
changing government's approach is especially great. ITDS depends on 
transforming our government's approach from that of multiple stove-
piped agencies, to a single, coordinated approach--managed on behalf of 
all agencies by an independent, interagency Board of Directors. This is 
new, cheaper, and more effective government.
    Leadership is also justified because the US has traditionally been 
a leader in reducing barriers to international trade, and as the 
largest trader in the world, has the most to gain from further reducing 
barriers for our companies to export into foreign markets.
     Urgency. This leadership is needed now, because the costs of the 
current environment are big, and the opportunities to build exports and 
competitive advantage for our country and businesses of all sizes, is 
great.
    The cost of the current environment on American business, 
consumers, and taxpayers is so great that it demands immediate 
attention. The current environment is a big, frequently fatal, barrier 
for SME's that want to export to foreign markets. It is a major tax on 
all trade. It presents the risk that our country and our businesses 
will lose our position of leadership in international trade, ceding 
opportunities to build trade processing centers and provide intermodal 
transportation services to our neighbors to the north and south, and 
losing our opportunity to gain competitive advantage in global markets.
    It is equally clear that the principal challenge here is not 
technology. The technology can be done quickly, as we see from business 
operating at internet speed--where the progress of new systems and 
companies is measured in months, not years and decades. Although much 
progress has been made in ITDS over the past 5 years, and we are on the 
brink of beginning operational pilots with Canada and Mexico, these 
won't happen without leadership. It would be unfortunate (and 
completely unnecessary) for us to let the timeframe for completing this 
work drift into years and possibly another decade.
     Resources. Finally, resources are also needed to complete 
development of the pilot and implementation of the program. 
Fortunately, the required funding is tiny compared with the 
opportunities--the cost benefit analysis shows a minimum 10:1 return on 
every dollar invested. The Administration has supported resources of 
$5.4 million, which is sufficient to maintain the project office, but 
not to complete development and begin implementation of the pilot. For 
these purposes, an additional $7.6 million is required in FY-2000, for 
a total of $13 million.
                               CONCLUSION
    ITDS represents an important innovation in government and 
technology support for global trade. It will speed and improve 
government performance, reduce burden, and cut costs. It will offer 
major operating and competitive advantages to those countries and 
governments that embrace it, benefiting consumers and industry. For 
consumers, it will remove layers of government inefficiency that amount 
to a significant tax on international goods, reducing sources of supply 
and raising prices. For international traders, ITDS will significantly 
lower barriers to importing and exporting, by simplifying 
identification of and compliance with international trade requirements, 
and enabling effective global supply chain management.

    Senator Ashcroft. Thank you, Mr. Ehinger, from the U.S. 
Treasury Department. It is a pleasure to have you here.
    Vision is the thing we really need in this country, and the 
vision of a trading system that will release and enhance the 
capacity of our producers to do well is very important. I 
appreciate the fact that you are looking down the road to see 
how it can be done.
    I am glad, as well, that you are joined by Michael Copps--
that is the correct pronunciation?
    Mr. Copps: Yes, sir.
    Senator Ashcroft: --from the U.S. Department of Commerce. I 
am very pleased to welcome you to the state of Missouri. 
Obviously, the Department of Commerce links up with the 
Commerce Committee in the U.S. Senate, and as the chair of the 
subcommittee, jurisdiction over which I have of trade, I am 
very pleased that you would be with us here and pleased to know 
of the Secretary's interest in the state of Missouri and in 
expanding trade. I hope that he will some day in the near 
future be able to visit Missouri, and I think we would love to 
be able to help him plan a day here to see what the potentials 
are in our great state.
    But thank you for coming, and I would invite you to make 
your remarks at this time.

 STATEMENT OF MICHAEL J. COPPS, ASSISTANT SECRETARY FOR TRADE 
     DEVELOPMENT, INTERNATIONAL TRADE ADMINISTRATION, U.S. 
                     DEPARTMENT OF COMMERCE

    Mr. Copps. Mr. Chairman, thank you for inviting me here 
today to talk about the need to encourage American exports and 
about how working together, we can grow those exports for 
Missouri, for America. I am going to take a line from your 
presentation earlier and abbreviate my statement. I have 
already thought of something I want to add at the end, so I am 
going to cut out some of the material from the formal 
statement, but I would ask that it be included in the record.
    Senator Ashcroft. Sure. The entire statement--written 
statement will be included in the record.
    Mr. Copps. Thank you. Let me thank you, at the outset, on 
behalf of Secretary Daley, for your leadership in our trade 
efforts, and particularly your very active participation in the 
President's Export Council, which I think is one of the higher 
visibility and more effective forums that we have going.
    In the past 6 years, America's role in global trade has 
grown very dramatically. Since 1993, Missouri's exports have 
grown by more than 44 percent, to over $7 billion. Its 
industrial and high-tech and service industry exports go to 
diverse destinations such as Canada, the EU, Australia, Brazil; 
even China is among your top 10 markets. Here in Missouri the 
number of firms exporting has shot up by a phenomenal 76 
percent since 1992, from 2,674 in 1992 to 4,702 in 1997.
    Let me use the few precious minutes I have to tell you a 
little bit about how we at the International Trade 
Administration of the Department of Commerce are trying to 
promote and grow U.S. exports and suggest some ways how all of 
us might work together. ITA, I think, is very well organized to 
help Missouri exporters sell their goods and services overseas. 
I often liken ITA to four legs supporting a table. One leg is 
the U.S. and Foreign Commercial Service--I will just call it 
the Commercial Service--which is a globe-spanning operation 
dedicated to helping U.S. businesses, particularly small and 
medium-sized enterprises, export.
    Here at home, the Commercial Service has 105 export 
assistance centers around the country. There is one right here, 
as you know very well, in Kansas City. There is another one in 
St. Louis. Their job is to reach out, primarily to small and 
medium-sized enterprises, tell them about the resources 
available--and there are substantial resources in the Federal 
Government to help them export. Often they partner up with USDA 
or the Small Business Administration, or the U.S. Export-Import 
Bank.
    Overseas, the Commercial Service has 140 offices, and they 
can help arrange visits for small business men and women who do 
not have a lot of time to go globe-trotting when they are 
looking for business. They have businesses to run right here in 
Kansas City, so any way we can facilitate their overseas 
setting up meetings, by giving them market analysis, by 
providing interpreters for meetings, by going with them to 
meetings: that is the function of the Foreign Commercial 
Service overseas.
    My shop, Trade Development, is the second leg of the ITA 
table, and it is a unique place in government. We are the 
industry sector experts, running the gamut from basic industry 
through high-tech through increasingly important service 
industries. When Ms. Barshefsky, our U.S. Trade Representative, 
goes out to negotiate a trade agreement on aerospace or 
automobiles, she looks to us to support those negotiations. So 
that is one of the very important things we do.
    Our primary clientele and our constituency is the private 
sector. We work with the companies. We work with the trade 
associations. We work with the private sector to grow exports. 
We are also the home of the Advocacy Center--and maybe we can 
talk about that a little bit more in the question and answer 
period--but I am proud of the work that the Advocacy Center 
does. This is something the government never did before, and I 
say that in a non-partisan way.
    I have been in Washington for 30 years and I have seen 
Republican administrations come and go and Democratic 
administrations come and go, and maybe it was the Cold War--I 
do not know what it was--but we never wanted to get into doing 
what other governments were doing, supporting their businesses 
overseas.
    That is all changed now. We have an Advocacy Center that 
coordinates the work of all the different agencies of 
government. When a Cabinet member--not just Secretary Daley, 
but any Cabinet member goes out, they have a list of commercial 
projects, private-sector projects that they are supposed to 
advocate for. Other governments have long stood shoulder-to-
shoulder their business, Now we, too, fight for our businesses 
and level the field of play. In the 6 years of the existence of 
that little Advocacy Center, business credits us with being a 
decisive influence in 450 competitions, translating into $60 
billion of U.S. content and hundreds of thousands of U.S. jobs.
    We also run, in our Trade Development shop, the Trade 
Information Center. If a small or medium-sized businessman has 
no idea of where to go, they hear me come through and say how 
wonderful international trade is, then they say, What do I do 
now? If they do not know where their export Assistance Center 
is or if they do not know where to turn, they can dial up 1-
800-USATRADE. They will get a bright young person who can 
answer their questions or put them on the road to where they 
need to go to get those questions answered.
    We have a third ITA unit called Market Access and 
Compliance. There has been a good bit of talk here this morning 
about the necessity of enforcing trade agreements. Nothing is a 
higher priority for Secretary Daley or Under Secretary Aaron. 
They have set up a new Compliance Center whose job is, first of 
all, to put on-line all of the trade agreements of the United 
States, to work with the private sector, identify instances 
when those trade agreements are not being lived up to and then 
to work through our own resources and if necessary, with those 
of the United States Trade Representative, to get those 
problems fixed.
    The fourth leg of ITA is the Import Administration. I will 
not go into that a lot today, but it is kind of like the 
traffic cop on the beat. They are the folks who are involved in 
administrating our anti-dumping, countervailing duty laws. They 
have been front-and-center in the steel cases. You have all 
heard about these cases. They assist domestic industries in 
determining whether there is sufficient evidence to petition 
for anti-dumping or countervailing duty actions.
    At the core of what ITA does is a commitment to involve 
small and medium-sized business in the world of global 
commerce, and there is some good news.
    We have used for years the figure that there are 112,000 
firms in the United States that export. Those were 1992 
figures. A couple of weeks ago the 1997 figures, which we were 
eagerly awaiting, came out, and they show that that 112,000 
U.S. firms exporting has shot up to 209,000. That is a 97,000 
increase. Ninety-four thousand of those 97,000 are small and 
medium-sized enterprises. Ninety seven percent of the firms who 
export in this country can be categorized as small and medium-
sized enterprises.
    That is impressive, but it is only a trickle of what we 
need to have if we are to really succeed for small business in 
the global economy. It is not a question of whether we are 
going to participate in the global economy or not, it is 
whether we are going to do it well or do it poorly.
    I want to conclude with two thoughts. One, I want to 
emphasize public sector-private sector partnership. There are 
so many opportunities out there in the world of exports and in 
the world of trade development, but neither the public sector 
nor the private sector working alone can take full advantage of 
those. I have worked in government for 20 years and I know that 
without the expertise and the creativity and the good judgment 
of the private sector, government cannot get the job done.
    I have worked in the private sector also, running a 
Washington office for a large corporation and as a senior 
executive of a leading trade association, and I know that in a 
world where market access decisions are often made by foreign 
governments, commercial climates are determined by foreign 
governments, foreign governments are backing their business, 
the private sector cannot get the job done by itself either. So 
if we are going to succeed in the global marketplace, it is 
going to be because we find more innovative and creative ways 
to work together. My job is to work with the private sector to 
get that done.
    My final thought--I applaud you for taking those few extra 
minutes to talk to the press outside. They are gone now, but I 
think you got the message across. But you know, we are all in 
this room, and we are talking to one another, and we all pretty 
much believe the same thing. A lot of Americans do not. All the 
polls are going south on this issue. I go around and talk and 
say exports and someone will say, Yes, I know what you want to 
export. You want to export my job.
    It is frustrating to see the consensus for trade eroding. 
We have to work--everybody in this room has to work so that we 
educate our employees, that we educate our communities. I 
applaud you for the outstanding job you do in this, but I think 
our private sector and all of us as government spokesmen really 
have a tremendous challenge here to turn America around on 
this. Our future is, as you said, in the global marketplace. 
Small and medium-sized businesses future is in the global 
marketplace.
    But we have got to reach the American people on the 
importance of trade so that they understand how important 
exports are to them.
    At the Commerce Department, we are in the arena. We are 
knocking down trade barriers and opening the way for U.S. 
business, and I think we are beginning to win more than our 
fair share of competitions. We have got a lot of problems but a 
lot of opportunities out there, and we look forward to working 
with you, working with the Subcommittee, the full Committee, 
and the Congress. This has got to be a collective effort: 
public sector, private sector, and all of us pulling together. 
If we do that, I think we can get the job done.
    Again, my thanks for the opportunity to be out here today 
with you.
    [The prepared statement of Mr. Copps follow:]
 Prepared Statement of Michael J. Copps, Assistant Secretary for Trade 
  Development, International Trade Administration, U.S. Department of 
                                Commerce
    Mr. Chairman, Thank you for inviting me here today to talk about 
the compelling necessity to encourage American exports and about how, 
working together, we can grow those exports. And let me thank you, at 
the outset, for your leadership in this effort, and for your active 
participation as a member of the President's Export Council.
    In its early days, the Clinton Administration developed and began 
implementing a coordinated National Export Strategy in pursuit of 
increased exports. The National Export Strategy is continuously updated 
by the interagency Trade Promotion Coordinating Committee, which was 
given new life and vitality by the Clinton Administration to improve 
coordination and consistency among government export programs. 
Secretary of Commerce William Daley chairs this important group. The 
TPCC combines the resources of some 20 Cabinet, independent and White 
House organizations to initiate new export promotion programs. This 
effort is not just desirable, it is imperative to counter the 
aggressive export promotion programs of other countries, programs 
targeted to put U.S. exporters--here in Missouri and across the 
country--at significant disadvantage and put U.S. workers out of jobs.
    This National Export Strategy is working for America; it is working 
for Missouri. Since 1993, Missouri exports have grown by more than 44 
percent, to nearly $7 billion last year. Its industrial, high tech and 
service exports go around the world, and its top ten markets include 
such diverse destinations as Canada, the European Union, Australia, 
Brazil and even China. Here in Missouri, the number of firms exporting 
has shot up by a phenomenal 75.8 percent since 1992--from 2674 
businesses to 4702 last year.
    Let me use the few precious minutes that I have to tell you about 
how we at the International Trade Administration of the U.S. Department 
of Commerce are trying to promote and grow U.S. exports, in the process 
suggesting ways in which your exporters and our Department can expand 
an already productive relationship. The Commerce Department is the lead 
agency in carrying out most of the export promotion elements of the 
National Export Strategy, with the notable exception of the large 
agricultural export program.
    I believe ITA is well-organized to help Missouri exporters sell 
their goods and services overseas. I often liken the Commerce 
Department's International Trade Administration to four legs holding up 
a table. One leg is our U.S. and Foreign Commercial Service--a globe-
spanning operation dedicated to helping U.S. businesses, particularly 
small and medium-sized businesses, export. Here at home, the Commercial 
Service's 105 Export Assistance Centers counsel U.S. firms on the steps 
needed to enter the export market and to succeed in it. These are 
``one-stop shops''--that is, they offer access not only to the 
resources of the Department of Commerce, but to those of the Small 
Business Administration, the U.S. Export-Import Bank, and a range of 
other U.S. government agencies. They work with, and often are located 
near, state and private groups with the same mission. In Missouri, 
there are U.S. Export Assistance Centers located in both St. Louis and 
right here in Kansas City.
    Overseas, the Commercial Service has 140 international offices, 
strategically located in markets that account for 95 percent of 
American exports. The commercial officers stationed abroad advise U.S. 
companies on opportunities; help them in project bidding and trade 
disputes; collect valuable market information; set up meetings with 
foreign government and business officials whose decisions may be key to 
the success of a proposed venture; and even locate distributors and 
other contacts.
    My shop, Trade Development--a second leg of the ITA table--is a 
unique place in our government that deals day-in, day-out with the 
private sector--with U.S. companies and trade associations--to identify 
opportunities for the full range of U.S. businesses and to develop and 
implement strategies to grow U.S. exports. We make sure that America is 
putting its best foot forward--the coordinated strength of the private 
and public sectors--in a world where other countries seem to have 
learned this lesson long before we did.
    Trade Development's industry expertise, found nowhere else in 
government, covers the spectrum from basic industries to high tech to 
services and e-commerce. We are also home to the Advocacy Center, which 
is really a hallmark of the National Export Strategy. Your government 
and mine, far more than ever before, is directly and aggressively 
advocating for U.S. exports in the face of foreign government 
competition. This Administration realized early-on that the 
international business lost to American firms was far too important to 
write-off and that our traditional non-interventionist policy was 
equivalent to unilateral disarmament in the global competition. The job 
of our Advocacy Center is to deploy the power and prestige of the U.S. 
government to help U.S. businesses win contracts overseas. The Center 
works continuously with the private sector and with the other agencies 
of the TPCC to ensure that American firms have full support in their 
bids on global competitions.
    Make no mistake: the Advocacy Center represents a dramatic change 
in attitude. For years, Administration after stood blithely off on the 
sidelines while government leaders from other nations aggressively 
promoted their home companies and walked off with the deals. U.S. 
business suffered; U.S. jobs were lost. No more. Nowadays, from the 
President on down through the Cabinet and ambassadors, everyone is 
hitting the advocacy road, and the results are plain to see. Over the 
five years of its existence, the Advocacy Center counts some 450 
competitions in which our efforts assisted U.S. bidders to win contract 
awards. These awards represent $60 billion in U.S. content and hundreds 
thousands of U.S. jobs. In this time of soaring trade deficits, 
deploying the strongest possible advocacy effort makes more sense than 
ever. Again, it's not just desirable--it's essential.
    Also located in Trade Development is our Trade Information Center, 
whose mission is to improve small companies' access to both general and 
country-specific counseling and information. The TIC, as we call it, 
features both an 800 number and newly-upgraded websites. During FY 
1998, TIC trade specialists responded personally to about 85,000 
telephone, e-mail, letter, fax or visitor inquiries, 86 percent of 
which were from small businesses, and we responded to nearly half a 
million inquiries. The TIC's number is 1-800-USA-TRADE.
    Market Access and Compliance is another leg supporting the ITA 
table. This is where the Department focuses on identifying and 
eliminating trade barriers. Its mission is to see that market obstacles 
holding back U.S. exports are removed, and that the benefits of U.S. 
trade agreements are actually made available to U.S. firms and workers. 
Its regional and country focus on barriers is unique in the U.S. 
government, and its understanding of the policies and tactics behind 
foreign barriers is an essential component of the National Export 
Strategy.
    A cardinal tenet of the National Export Strategy is that trade 
agreements exist to be observed and enforced. This Administration is 
proud of the more than 240 trade agreements it has negotiated--but the 
success of these agreements hinges upon their implementation. As long 
as our markets are open to others, their markets must be open to us. We 
have also made it abundantly clear that we will not stand by and allow 
U.S. workers, communities and companies to bear the brunt of other 
nations' unfair trade practices.
    Secretary Daley and ITA's Under Secretary David Aaron have made 
compliance with trade agreements their high priority. Whenever we 
discover restrictions on our access to a foreign market, the 
Administration moves aggressively. Our new Trade Compliance Center at 
Commerce is charged with tracking our trading partners' compliance. 
This Trade Compliance Center works closely and carefully with the 
Department's industry analysts and country specialists, as well as with 
the Trade Enforcement Unit at the office of the U.S. Trade 
Representative, and with numerous industries. We try to achieve trade 
compliance and market access short of dispute settlement wherever 
possible, and we strongly support USTR efforts when dispute settlement 
cases become necessary. Nor do we hesitate to seek enforcement either 
through the World Trade Organization or through the use of U.S. trade 
laws.
    The fourth leg of the ITA table is the Import Administration, and 
its purpose is to keep the playing field of international commerce 
level for America's industries. IA enforces laws and agreements to 
prevent unfairly traded imports. The most prominent recent example has 
been the determination that certain countries were dumping rolled steel 
products, and that countervailing duties should be imposed to safeguard 
the U.S. steel industry.
    The Import Administration not only makes those determinations, but 
assists domestic industries, especially small businesses, in 
determining whether there is sufficient evidence to petition for anti-
dumping and countervailing duty investigations. IA also works with the 
USTR in negotiating fair and transparent international rules for such 
investigations; participates in negotiations to promote fair trade in 
specific sectors such as steel, aircraft and shipbuilding; and 
implements the laws concerning foreign trade zones.
    At the core of the National Export Strategy, and at the heart of 
ITA's organization, is a commitment to involve America's small and 
medium-sized businesses in the world of global commerce. Small and 
medium-sized firms are central to building economic opportunity, and 
involving them more in global commerce is central to our strategy. This 
is as it should be. SMEs are the lead engine in creating jobs, and if 
America's future is in the global marketplace, we must make sure that 
our small businesses are competing and prospering in that marketplace.
    There is some good news. The number of U.S. exporting companies 
grew from 112,000 in 1992 to 209,000 in 1997, the last year for which 
the figures are complete. Of this 97,000 increase, 94,000 were small 
and medium-sized firms. SMEs comprise 97% of our exporting companies. 
Nearly 30 million Americans work for firms that export. But we must 
involve many, many more such businesses in global commerce. We know 
that America is destined to live in a world of global business. It is 
not a question of whether we will participate or not. It is a question 
of whether we will participate well or poorly.
    Our commercial officers, our industry specialists, our mission 
organizers and trade promoters, our advocates, our Trade Information 
specialists, our compliance experts are, all of them, dedicated to this 
important mission of growing exports for America's small business 
exporters and the millions of workers dependent upon these firms for 
their livelihood. More than half of the U.S. companies that have 
received direct support from the Advocacy Center that I described 
earlier are small or medium-sized businesses. Hundreds more have 
benefitted from its services as subcontractors and suppliers on large-
scale infrastructure projects.
    Mr. Chairman, I want to ``talk up'' public sector-private sector 
partnering. I want to talk it up because it works. Neither sector can 
get the job of trade development done alone. I have worked in 
government and I know that without the expertise and creativity and 
good judgment of the private sector, government cannot get the job done 
by itself. But I have worked in the private sector, too, running a 
Washington office for a major U.S. business, and as a senior executive 
of a major trade association, and I know that the private sector cannot 
open the doors of global commerce by itself in a world where market 
access and procurement decisions and commercial climates are so often 
determined by governments, and wherein our competitors combine all 
their resources, public and private, to win the competition. I am a 
believer that if we are to develop America's tremendous trade 
potential, it will be because we find constantly more creative ways to 
work together and to leverage off each other's particular strengths and 
access. My job is to work with the private sector to make it happen.
    There are many opportunities out there, even given the troubled 
global financial climate we have encountered over the past two years. 
And we--this Administration, the TPCC, the Department of Commerce--are 
developing new ways to accomplish our goals. In this era we can video-
conference, we can use the Internet, we can help U.S. exporters 
understand and take advantage of such developments as the creation of 
the Euro. We are also enhancing the TPCC's cooperative activities with 
state and regional export development groups and with the National 
Governors' Association.
    Time precludes my going on, but I think you get the flavor. I hope 
you can tell that I am a believer, a true believer, in what we are 
doing. We do have a strategy--a National Export Strategy--and we are 
implementing it in a way that makes sense and makes progress. Surely I 
am not here to suggest that the implementation is perfect. We depend 
upon constant review and upon the oversight of Subcommittees such as 
this, and on the creative input of our private sector partners, to 
critique our performance on an ongoing basis.
    In the meantime, we are, as Teddy Roosevelt said, in the arena--
knocking down trade barriers and opening the way for U.S. businesses as 
they venture out into the world, always looking to reach agreement, but 
ready to protect and fight for their interests if necessary--and 
winning more than our share of confrontations.
    I believe we have, in all, mounted a strong, vigorous and effective 
program. We are a committed group of people doing an increasingly 
effective job--day by day, month by month, year by year--of advancing 
the cause of U.S. commerce in the world arena. Working together, the 
Executive Branch, the Legislative Branch, our states, cities and 
localities, and the private sector, we can, and we will, ensure 
America's continued leadership in global commerce.
    I thank the Chairman and the Subcommittee for your attention, and I 
would be pleased to respond to your questions.

    Senator Ashcroft. Well, Mr. Secretary, I appreciate it. It 
is an honor to have the Assistant Secretary for Trade 
Development in the Department of Commerce come to Missouri. You 
are right about the fact that we need to work together. I liked 
what Mr. Ehinger said, that if the growth engine of the 
nineties was international trade, it will be the life blood of 
the next century. That maybe means, though, that for Mr. 
Grueff, our next participant, is that we will be able to do 
everything except export turnips, because we know that you 
cannot get blood out of a turnip.
    But I think that when we look at all the sectors of 
America's great economic engine. There is a sector that is very 
distressed, the agriculture sector, but it is also a sector 
that relies heavily on the international markets.
    So I am very pleased to welcome to our discussion this 
morning the Assistant Deputy Administrator for International 
Trade Policy at the Department of Agriculture, and to say how 
much I appreciate the fact that you have taken time to come. I 
do not know of any more qualified or talented individuals to 
speak and address these very issues than those of you who have 
been willing to come. I thank you.
    Mr. Grueff, if you would at this time, share your remarks 
with us.

          STATEMENT OF JAMES GRUEFF, ASSISTANT DEPUTY 
         ADMINISTRATOR FOR INTERNATIONAL TRADE POLICY, 
  FOREIGN AGRICULTURAL SERVICE, U.S. DEPARTMENT OF AGRICULTURE

    Mr. Grueff. Thank you, Mr. Chairman. It is a pleasure to 
appear before you on the theme of ``Markets for a New 
Millennium'' to discuss U.S. trade policy that will make our 
farmers and ranchers more competitive. I would like to focus my 
brief remarks today on a crucial challenge and opportunity that 
lies before U.S. agriculture. That is the upcoming negotiations 
of the World Trade Organization, the WTO, beginning in Seattle 
later this year.
    The previous negotiations at the WTO, the Uruguay Round, 
have illustrated what a successful negotiation can do for U.S. 
agriculture. Every WTO member agreed in the Uruguay Round to 
reduce the import tariffs on every agricultural product. In 
addition, the United States was able to achieve specific 
agreements, such as persuading the Japanese to lower their 
protection against pork imports. This particular agreement has 
resulted in a significant increase in U.S. pork exports to 
Japan.
    We used the Uruguay Round negotiations to achieve the 
first-ever limits on the use of agricultural export subsidies 
by the European Union, which is by far the world's largest user 
of these subsidies. Our current estimates are that the European 
Union currently uses at least 90 percent of all the 
agricultural export subsidies that are expended around the 
world today.
    Also, we were able to institute for the first time into 
international trade rules the principle that countries can 
prohibit or hinder agricultural imports if they have health-
related concerns, but they must have a sound, scientific basis 
for doing so. This principle, as embodied in the WTO sanitary 
and phyto-sanitary agreement allowed us to successfully 
challenge the European ban on imports of U.S. beef.
    Now, let me say, Senator, I very much understand and share 
the frustration expressed here today about the fact that the 
European Union has not rescinded their ban on our exports of 
U.S. beef. However, I guess it is good to keep in mind that 
before the Uruguay round results, we did not even have a means 
for challenging the European Union on this ban and on similar 
issues at the World Trade Organization. We are now at least in 
a situation where if they continue to maintain the ban, we will 
be able to at least take some measure of retaliation against 
them.
    This sanitary and phyto-sanitary agreement has proved to be 
particularly important for trade in livestock products and 
other high value products.
    The Uruguay Round also gave us a trade dispute settlement 
process that works. Now again, let me say, based on today's 
discussion, that I understand the frustration expressed here 
today about this process. The process, as it currently exists, 
is slow. It has its deficiencies. But again, before the Uruguay 
Round results, we essentially had no process. It was so easy 
for other countries to block any challenge that we would make 
on an agricultural issue. But the process, from our point of 
view, was completely ineffective.
    So now the new negotiations--they give us the opportunity 
to go further. This time we want to completely eliminate the 
use of agricultural export subsidies. This would be a very 
important step in moving toward a level playing field with the 
European Union. We also will insist on disciplines on 
agricultural state trading enterprises, the foremost example of 
which is probably the Canadian Wheat Board.
    We want to see significant further reduction in 
agricultural import tariffs, and we want to again specifically 
pursue U.S. interests, as we did with Japan on pork, in markets 
of particular importance to us. We will strive to achieve 
further reductions in the levels of domestic subsidies that 
distort production and trade. In fact, our 1996 farm 
legislation has put us in an excellent position to pursue this 
particular issue because of the decoupling of support from 
production.
    We want to address the issue of trade in agricultural 
products produced through biotechnology. This is likely to be 
one of the most important and most difficult sectors of the 
negotiations. We will need to deal with the question of food 
security in the sense that many importing countries will 
probably not be willing to agree to open their markets further 
unless they are sure that the major agricultural exporters of 
the world are going to be reliable suppliers. We believe that 
the United States will be in a position to do this.
    In conclusion, the upcoming WTO negotiations are much too 
important to U.S. agriculture to not take full advantage of 
this opportunity. Yourself, Senator, and a number of others 
have pointed various statistics to show the importance of 
exports to U.S. agriculture. One other way to look at it is 
according to our data for the non-agricultural sectors of the 
economy, of total revenues, about 11 percent come from exports. 
For agriculture, we see that as about 26 percent coming from 
exports.
    Private sector, as Mike Copps was saying--private sector 
input is very important in this process. We are using our 
private sector advisory group structure at the Department of 
Agriculture to get this. We are also in the midst of a series 
of 12 outreach sessions around the country where we are 
explaining to audiences what we want to do in the negotiations, 
and we are listening to their statements about what their 
interests are and what their objectives are for the 
negotiations. But we already know that the growth and 
prosperity of U.S. agriculture clearly depends on exports.
    We must be ambitious in this negotiation and we intend to 
be ambitious. Thank you.
    [The prepared statement of Mr. Grueff follows:]
Prepared Statement of James Grueff, Assistant Deputy Administrator for 
       International Trade Policy, Foreign Agricultural Service, 
                     U.S. Department of Agriculture
    Mr. Chairman, members of the subcommittee, it is a pleasure to 
appear before you with Assistant Secretary for Trade Development 
Michael Copps of the Commerce Department and Director of the 
International Trade Data Systems Project Office Bob Ehinger of the 
Treasury Department to discuss U.S. trade policy that will make our 
farmers and ranchers more competitive in the new millennium.
                      the world trade organization
    Last year, in Geneva, at the 50th anniversary of the world trading 
system, President Clinton commented on the importance of open and fair 
trade for all nations. He also highlighted the need for the World Trade 
Organization (WTO) to provide a transparent and open forum where 
business, labor, environment, and consumer groups can provide regular 
and continuous input to help guide further evolution of the WTO. The 
United States Department of Agriculture (USDA), in conjunction with 
several other federal agencies, is doing just that through a series of 
listening sessions around the country and consultations with private 
sector advisory members from the agriculture industry. In doing this, 
USDA will use industry's valuable input to shape our agricultural trade 
policies for the new round of negotiations under the WTO as we enter 
the new millennium.
    As you are fully aware, while our national economy has been 
booming, it has been a year of struggle and hardship in many parts of 
rural America. We at USDA recognize that much of agriculture is going 
through a very difficult period right now. At USDA we are marshaling 
all of our resources to address this economic situation. We are making 
sure that emergency economic relief gets to producers as soon as 
possible, that strengthening the farm safety net is at the top of the 
agenda, that the consolidations and mergers sweeping agriculture are 
subject to proper scrutiny and that we continue to press to open new 
markets for our exports in the new millennium. In order to address 
these issues, we need to focus on: (1) the critical role that exports 
already play for agriculture; (2) the role that trade agreements have 
played in obtaining the current level of agricultural exports; and (3) 
our goals for the upcoming WTO round of negotiations.
                  exports are critical for agriculture
    U.S. agricultural exports reached $53.6 billion in 1998. 
Agricultural exports support nearly 750,000 jobs here in the United 
States. Products of nearly 1 of 3 harvested acres are destined for 
overseas. Even in the current economic downturn, about 25% of 
agricultural sales are export sales, compared with 10% on average for 
the rest of the economy. The vast majority--96%--of potential customers 
for U.S. products, including agricultural products, live outside the 
United States. We must work to increase our opportunities to sell into 
these global markets in the new millennium. Access to customers in 
foreign markets is a key factor to the health of U.S. agriculture. 
Compared to the general economy, U.S. agriculture's reliance on export 
markets is higher and projected to grow faster. Agriculture is already 
more reliant on exports than the economy as a whole.
                     trends in agricultural exports
    Other factors point to the increasing importance of exports. First, 
the overall trend has been one of increasing exports for American 
agriculture. U.S. agricultural exports climbed to nearly $60 billion in 
1996 up from $40 billion at the beginning of the 1990s. Exports were 
down last year and will likely be slightly down for 1999 as well, due 
to record world-wide crop production, the Asian financial crisis, and 
the strong dollar--agricultural exports in 1998 were $53.6 billion, and 
we project exports of $49 billion in 1999. However, when the global 
economy rebounds as we are beginning to see in the Asian economies, the 
trend of increasing exports is predicted to continue, and exports will 
account for a larger percentage of farm income.
    Second, the 1996 Farm Bill increased the market orientation of 
agriculture and so to be prosperous in an increasingly competitive 
market, we must increase our exports in those areas where we have the 
comparative advantage. A number of agricultural sectors are already 
exporting more than 60% of production with export sales over the $1 
billion threshold annually for a number of food and agricultural 
products.
    Third, U.S. agricultural productivity is increasing while domestic 
demand for agricultural products is growing slowly. We must therefore 
develop new overseas markets for our products now and in the new 
millennium. Another factor pointing to the importance of exports to 
agriculture is how closely the level of our farm equity has tracked the 
level of exports over time. Expanding export markets, while certainly 
not the only tool, is a very important resource for leading us out of 
the slump in agriculture. We must however be realistic, exports are 
projected to decline again in 1999 to $49 billion. It is estimated that 
45% of the world economy outside the United States that is now 
suffering recession or depression is just showing signs of 
revitalization-until the global economy turns around we will not 
immediately increase our global customer base. But as a long-term 
strategy, expanding our export markets in the new millennium is 
critical.
          trade agreements that open markets increase exports
    A key to expanding export markets for the new millennium and 
increasing our access to customers outside the United States is through 
trade agreements that are good for American agriculture. We would not 
be at the level of exports we are at today if we had not negotiated 
trade agreements such as the WTO or the North American Free Trade 
Agreement (NAFTA). Trade agreements such as these have boosted exports. 
Soon after the implementation of the Uruguay Round, U.S. agricultural 
exports reached their highest levels. Now many factors, including 
exchange rates, factor into rises in exports. But almost all economists 
agree that lowering trade barriers through trade agreements has been a 
critical factor to boosting U.S. agricultural exports.
    Of course, trade agreements are a two-way street and we must reduce 
our own barriers as well. However, because the U.S. already has one of 
the more liberalized markets, we have very little to fear and much to 
gain from a new international agreement reducing trade barriers. We are 
an efficient, competitive agricultural producer both domestically and 
abroad. It is estimated that in 2005 exports including agriculture will 
be $5 billion more annually than they would have been without the 
Uruguay Round agreement. Other trade agreements will provide similar 
benefits. It is estimated that in 1994 we sold $1.29 billion more beef 
and citrus to Japan than we would have without the trade agreement we 
successfully negotiated with the Japanese. For export growth to 
continue, we must move forward with our strategy for opening markets 
through trade agreements in the new millennium.
    NAFTA is also fulfilling its promise for agriculture. Our NAFTA 
partners, Canada and Mexico, have become more important destinations 
for U.S. products, now accounting for over 25% of U.S. exports sales, 
surpassing our sales to the European Union (EU). We estimate that in 
the first three years, NAFTA can take credit for 3% additional exports 
to Mexico and 7% additional exports to Canada. The 10% growth from 1997 
to 1998 in exports to Mexico and Canada was especially welcome as 
overall exports fell 6%, thus helping to offset the sales declines to 
several of our leading Asian markets during the economic downturn in 
that region.
    We recognize that although we have achieved many benefits for 
agriculture from recent trade agreements, the playing field is far from 
level and there is much work to be done. The U.S. tariffs, on average, 
are much lower than those of our major trading partners. When it comes 
to export subsidies, we must work to eliminate the high EU export 
subsidies. Further, we must continue to work for adequate and accurate 
health and safety measures that do not act as disguised protection, but 
are based on science. A major part of our strategy to level the playing 
field for agriculture is to be successful in the upcoming WTO round of 
negotiations. The U.S. wants both a free and fair global trading 
system, and we will continue to pursue that goal in the upcoming WTO 
and new millennium.
                       uruguay round and the wto
    The most important existing trade agreement for agriculture--
because it covers trade among 134 member countries--is the Uruguay 
Round Agreement. The upcoming round of talks must continue and improve 
on the progress made in the Uruguay Round. While we in the 
Administration are engaged in many market opening endeavors, now and in 
the new millennium, the upcoming WTO Round is the centerpiece of our 
efforts.
    To understand where we are going in the WTO, it is important to 
understand where we have been. The General Agreement on Tariffs and 
Trade, the GATT, was established in 1948 and set the basic rules for 
international trade. A number of multilateral GATT negotiations, or 
``rounds'', took place between 1948 and the present, with the most 
recent round--the Uruguay Round--concluded in 1994. The Uruguay Round 
established the World Trade Organization, or WTO, which is basically a 
continuation of the GATT system. The Uruguay Round Agreements opened a 
new chapter in agricultural trade policy, committing countries around 
the world to new rules and specific commitments to reduce levels of 
protection and support that were barriers to trade. Agriculture finally 
became a full partner in the multilateral trading system.
    For the first time, countries had to make across-the-board cuts in 
agricultural tariffs. For the first time, export subsidies had to be 
reduced, and internal support policies that distort trade were capped 
and/or reduced. New rules set a scientific standard for measures that 
restrict imports on the basis of human, animal, or plant health and 
safety. And a new dispute-settlement process was adopted--one that the 
U.S. has successfully used in a number of cases. The option that the 
WTO provides for solving disputes in a formal, legal setting has been 
valuable in achieving tangible gains for U.S. agriculture and has also 
acted as a deterrent--our trading partners know that we have this 
option if they do not live up to their agreements. For example, we 
recently won dispute-settlement panels against the EU's ban on beef 
from cattle treated with growth hormones, against the EU's banana 
import licensing regime, against Japan's restrictive quarantine 
requirements for fresh fruit, and Canada's dairy policy on subsidies. 
We now must maintain a firm line to ensure that the banana and hormones 
decisions are carried out so that U.S. exporters have the access 
determined to be their legal right.
    The Uruguay Round agreement was a good start. It has already 
contributed to increased U.S. agricultural exports and higher farm 
incomes as American producers have taken advantage of newly opened 
markets and new opportunities. But the Uruguay Round was just a start, 
the first important steps in global agricultural trade reform. We are 
now planning for the next major step--the round of WTO agricultural 
trade negotiations.
       next round of multilateral agriculture trade negotiations
    The next round of WTO negotiations will be kicked off at a 
ministerial meeting in Seattle, Washington from November 30-December 
3rd of this year. The ministerial meeting will be a major event with 
representation by most of the 134 WTO-member countries. We also expect 
and encourage strong private sector attendance. The actual negotiations 
will start early in 2000. The final scope of coverage of the 
negotiations is yet to be determined, but agriculture and services will 
undoubtedly be included. The general expectation is that the 
negotiations should last 3 years with implementation of the agreement 
beginning in 2004. In setting the agenda for the agriculture 
negotiations, we will build on the Uruguay Round accomplishments that 
yield substantial benefits to our nation's farmers and ranchers. 
Tariffs were reduced in the Uruguay Round, but they are still too high. 
Some countries maintain average agriculture tariffs of 50%, while the 
U.S. tariffs average about 8% on all agricultural products. It is our 
goal to negotiate the further reduction of tariffs. We also want to 
expand market access under tariff-rate quotas by increasing the quota 
amount and decreasing the tariff outside the quota. We also want to see 
the reduction or elimination of export subsidies, especially for the 
EU. The EU has outspent the U.S. by more than 20 to 1 on export 
subsidies $7 billion to $100 million in 96/97).
    Another problem in agricultural markets are state trading 
enterprises or STEs, government entities that act as monopolies. When a 
STE has government authority and monopoly power they are able to price-
pool by pricing their products artificially low and unfairly increasing 
their market share. It is important that we develop stricter WTO rules 
to ensure that STEs operate in a fair and transparent manner. Trade 
distorting domestic support is being reduced under the WTO rules, but 
the job is not yet complete. A comparison of the levels of such support 
shows that globally, including the United States, but particularly in 
Europe and Japan, domestic support remains high. Our goal for the next 
round is to make sure that the assistance other governments give to 
agriculture is provided in ways that do not interfere and/or displace 
commercial sales of agricultural commodities in world markets.
            goals for the next wto agriculture negotiations
    Trade reform through the WTO provides the biggest bang for the 
buck. In one agreement, for example, we can get 134 countries to cut 
tariff barriers on exports. But getting all these countries to agree on 
major reforms will take a lot more time and effort. It clearly won't be 
easy. The United States has already completed much preparatory work in 
Geneva, where the WTO is located. We are using the WTO Committee on 
Agriculture to identify places where current rules and commitments 
don't go far enough to open up markets for our exports. At the same 
time, we are using a less formal process to build a consensus and 
prepare the ground for the tough negotiations to come.
    The Administration is working with industry to make sure their 
concerns are met as well, as they are critical both at this early stage 
and in the long-term of the negotiating process. The views and concerns 
addressed by local farms groups to state government representatives in 
the legislature or the executive branch is just one of our means to 
obtain such advice. Other sources of industry information come from our 
Agricultural Trade Advisory Committees and producer panels at trade 
hearings on Capitol Hill. In all our activities, we want to send a 
clear message to the rest of the world that agriculture is a top 
priority for the United States and that we remain fully committed to 
fair trade and open markets both now and in the new millennium. The 
Administration will continue to seek support and advise from the 
American farmers and ranchers to ensure that trade agreements continue 
to work for them and for U.S. agribusiness as a whole.
    Mr. Chairman, everyone in this room knows the importance of trade 
to U.S. agriculture. In the past year, we've been sobered by a global 
financial crisis that devastated many of the emerging Asian economies 
and thus softened demand in other countries, many of which are 
important markets for U.S. agriculture. While we now see some 
strengthening in the Asian economies we continue to face a global 
oversupply of many commodities that sent prices plunging to their 
lowest levels in years. We have learned that our efforts to reform 
world agricultural trade must continue if our exports are to expand in 
world markets in the new millennium.
    As President Clinton said earlier this month in Chicago, ``We ought 
to continue to expand trade. We ought to enforce our agreements more 
vigorously. But I do not believe that a country with 4.5 percent of the 
world's people can maintain its standard of living if we don't have 
more customers. We did it for a year last year, but we can't do it over 
the long run.''
    To realize the potential of the global marketplace, we have a lot 
of work ahead of us. We must construct a world trading system where 
every producer gets a fair shake, where all products, goods and 
services are traded freely across oceans and continents.
    The next round of WTO negotiations later this year will be a 
turning point in this effort and we will be working hard to help 
American agriculture realize that potential. This concludes my 
statement, Mr. Chairman. I will be happy to answer any questions.

    Senator Ashcroft. If you do not mind, I would like to ask 
several questions. I was struck by the idea that our 1996 Farm 
Bill puts us in a better position to argue against European 
subsidies. I think that would be clearly the case. And you say 
it is your ambition in the Seattle Round to abolish export 
subsidies.
    If you were successful, what impact would that have on U.S. 
farm exports and prices, and what would happen in the United 
States if the Europeans were to end their subsidies?
    Mr. Grueff. Yes. We do not really have any quantitative 
analysis now that could put a good number on that. The most 
direct impact would come if we can agree to a complete phase-
out of export subsidies. We think there would be--it would put 
us in a significantly better position in many markets around 
the world.
    On the use of domestic subsidies, perhaps less of a direct 
impact, but the--we are in such a strong position because we 
have de-linked production from support. The European Union is 
still very much dependent on it. So we are in a--we have a lot 
of leverage on that issue and we expect, later this year, to 
have some good quantitative analyses of what exactly this would 
mean in terms of--certainly we know it will be in the billions 
of dollars of additional trade, but we have agencies such as 
the Economic Research Services who are now focusing on this 
particular question.
    Senator Ashcroft. Yes. I was struck by Secretary Copps' 
statement that people are distrustful of trade and of trade 
negotiations. I think part of it is that we negotiate 
agreements, we have the enforcement procedures, and we win the 
dispute resolution, but then we get sort of stiffed on the 
remedy.
    We have gone through such a history with GATT and WTO 
dispute settlement. Some of our trade partners discriminate 
against our products for one reason and then they lose all the 
dispute resolution procedures. As soon as the U.S. wins, they 
run to get another reason to discriminate against our goods. 
Would you agree that we must try and to find ways that give the 
American people a basis for believing that we can get some 
enforcement that makes a difference?
    Mr. Copps. I agree 100 percent. Right in our own house, as 
I indicated, at the Department of Commerce, we have organized 
the Compliance Center so that business has a responsive place 
to go and American workers have a responsive place to go to 
remedy infractions or violations of our trade agreements. We do 
need to increase the comfort level of the American people with 
the WTO. There has always been historically in this country a 
suspicion of international organizations.
    So these procedures have to be open. They have to be 
transparent. We have to know what is going on in those dispute 
resolution panels, so that there is not the feeling in the 
American people's mind that this is all being done behind 
closed doors. So I agree very strongly with that, but I also 
think there is this other dimension.
    When those who are perhaps being adversely impacted by 
trade--and there are some who have been adversely impacted by 
trade--they seem to have a little easier time of getting the 
attention of the media, or they seem to know how to go about it 
better than we do.
    I was in a state the other day giving a talk and all the 
headlines of the newspaper were filled with one sector that was 
encountering a problem. Now, it was a real problem with 
imports, but yet this was a state whose exports had grown 45 or 
50 percent in the last 4 or 5 years. Their people were 
benefiting enormously from trade, but they were not being told. 
Now, the media does not rush out and tell a story by itself 
unless someone tells them.
    Big business has to do a better job of talking to its 
suppliers, and talking to their employees about trade. Many 
workers in this country make components that go into cars or 
airplanes or computers that are exported. A lot of people 
making those parts do not have the foggiest idea that what they 
are building is going into an export.
    So I think if we can figure out a way to inform the 
American people of the facts of life and the reality of trade, 
then we can turn this around, but that is going to take a 
proactive and a very extensive effort. As I say, Secretary 
Daley, who is very much hopeful that he can come out here and 
be with you very soon, is trying to do this around the country.
    Senator Ashcroft. Very good. Part of what we are up against 
is the bad news is more news than good news is.
    Mr. Copps. Right.
    Senator Ashcroft. You just cannot imagine seeing a headline 
that says, ``X number of workers keep their jobs this week.''
    Mr. Ehinger, we heard about the International Trade Data 
System. We heard that you are sort of an architect of it.
    Would you just give me a thumbnail sketch of that system 
and could you give an idea of whether you think that system is 
border specific. Or could that system be made to work at an 
inland, heartland site, if we were to have new thinking about 
trade. It seems as though inland sites--those not on the 
borders and not susceptible to some of the jam-ups of the 
borders--are being accessed for trade.
    Mr. Ehinger. As a matter of fact, that is exactly why I 
mentioned the working relationship we have with your 
constituents here in Kansas City. Part of the concept of the 
International Trade Processing Center, an absolutely essential 
part of that concept, is that you must have sites and centers 
of activity that are actually processing locations. In these 
places, information, electronic processing and electronic 
systems can be integrated to draw the information from the 
businesses in that area, bring it into the system, create the 
transactions and the information necessary for the government. 
Take Mary's example of the button-maker. I love it. She did a 
beautiful job with this--that in fact, the transit time between 
Kansas City and the border going to Mexico can be used to 
interface, through this one electronic process with the 
government. We are not going to continue to do business agency 
by agency and duplicate all this anymore. It is going to be a 
fully e-commerce process.
    We can get the information to the government agencies. They 
can decide what they want to do with these shipments, what 
additional information they may need, or whatever the situation 
is so that by the time the goods reach the border, we do not 
have 5, 7, and 8 mile back-ups at the border waiting for goods 
to enter another country.
    Through negotiations, particularly with our contiguous 
neighbors, Canada and Mexico, which comprise such a huge 
portion of our trade, we are rationalizing the requirements for 
international trade, so that it is less difficult to get your 
goods into Mexico. They will use the same data that we use in 
this country. They will accept an electronic transfer of 
information, and the goods can flow more freely. This is where 
we will pick up 4 to 6 percent of the cost of doing business 
and move that to the profit line.
    Senator Ashcroft. I am interested--the study you said was 
UN/UPIN.
    Mr. Ehinger. Right.
    Senator Ashcroft. --four to 6 percent? Was that the 
transactional cost, or was that the amount of our trade deal 
that is surplus cost that we can squeeze out if we were to do 
things properly?
    Mr. Ehinger. That is the amount that we could squeeze out--
--
    Senator Ashcroft. Oh, my goodness.
    Mr. Ehinger. --if we were able to do this.
    Senator Ashcroft. So beneath that is some rational cost of 
doing things right?
    Mr. Ehinger. Absolutely.
    Senator Ashcroft. So we are actually penalizing companies. 
Do you know what the rational cost of doing things right is?
    Mr. Ehinger. The rational cost of is somewhere around 1 to 
1\1/2\ percent----
    Senator Ashcroft. Wait a second. Then you are telling me 
that if we have got 6 percent over--even if we went to 2 
percent, if we have 6 percent more than that, we are paying a 
300 percent penalty?
    Mr. Ehinger. That is right.
    Senator Ashcroft. When I say we are paying it, that means 
that our producers are, and that kind of penalty is attached to 
every job----
    Mr. Ehinger. That is right.
    Senator Ashcroft. --that is designed for export.
    Mr. Ehinger. That is right. 10,000 fields of data is a lot 
of information.
    Senator Ashcroft. Yes. Does that mean--I wrote that down 
here because I was afraid it might be on the quiz at the end of 
the day.
    Now, when you say 10,000 fields of data, does that mean 
that you have to make 10,000 answers?
    Mr. Ehinger. Yes.
    Senator Ashcroft. So on the 602 forms, there must be about 
1,500 answers per form?
    Mr. Ehinger. Fifteen hundred separate pieces of information 
that go into comprising it.
    Senator Ashcroft. Per form?
    Mr. Ehinger. That is right.
    Senator Ashcroft. That takes you to 10,000?
    Mr. Ehinger. That is right.
    Senator Ashcroft. Wow. Now, what occurs to me is that we 
have this penalty of about 300 percent that accommodates an 
inefficient governmental system--with 100 plus boards and 
agencies. You have described the savings to the culture and to 
the business community of going from a total of say 7.5 percent 
of the total cost of exports to a transactional cost of 1.2 
percent.
    Is the amount of money that government spends in doing all 
this stuff repeatedly wasteful to the government as well?
    Mr. Ehinger. Yes.
    Senator Ashcroft. Are there long-term savings both to the 
culture at large and to the private sector, and are there a 
long-term savings for government in moving away from its old 
processes to a new process? That is where I am going.
    Mr. Ehinger. We have a cost-benefit analysis that I will be 
glad to offer to you as an amendment to my submission for the 
record. And that is the area where we have done most of our 
work because it is the most easily quantifiable, and we did in 
the cost-benefit analysis to this process. We have estimated 
that it is somewhere around $2.5 billion to $3 billion a year 
that the government would save alone, in its own costs.
    Senator Ashcroft. Now, in moving to that annual savings, 
are there costs greater than that are the startup costs that 
get you to the point of the savings?
    Mr. Ehinger. Yes--no, not greater than this. Certainly not 
greater than this, because----
    Senator Ashcroft. So it takes less than $2.5 billion to 
implement the changes?
    Mr. Ehinger. The total cost of constructing this 
environment and making the government systems interfaceable, 
reducing the amount of information that is duplicated in the 
system is somewhere around $268 million----
    Senator Ashcroft. So basically, over----
    Mr. Ehinger. --over 5 years.
    Senator Ashcroft. OK. So that is 1/100 of the first year's 
savings to government----
    Mr. Ehinger. That is right.
    Senator Ashcroft. --is the first year cost to government?
    Mr. Ehinger. That is right.
    Senator Ashcroft. That really argues strongly in favor of 
considering this very seriously. Win-win is usually the matrix 
we look for, to win in the private sector, to win in the public 
sector. It is a win big on both fronts.
    Mr. Ehinger. I am afraid you are right.
    Senator Ashcroft. --and----
    Mr. Ehinger. These people would like to get rid of this 
burden, I am sure.
    Senator Ashcroft. Well, I am very eager to--this has been a 
very important learning experience for me. I had a remote 
awareness of this, but this argues very strongly--now, when you 
talk about the savings to the private sector, you are talking 
about how much is saved when you can just simply go into your 
computer instead of driving to one of these centers or to some 
other place.
    Mr. Ehinger. That is right. What happens here is, this is a 
simplification on consolidation process. We actually took these 
10,000 fields of information and reduced it to what we find to 
be 138 pieces of information, total on a transaction, from 
10,000. Senator, it is very simple. Each one of these folks 
asked the same questions.
    If you are the button-maker and I am the buyer in Mexico, 
you know who you are as the shipper and seller, I know who I am 
as the buyer. We know how many buttons there were, what we 
called them as a definition, how much each they were, what the 
total was, and so forth. It is the same information produced 
over and over and over for each agency, only they ask for it in 
a little different context. So it has to be adjusted. It has to 
be corrected.
    We have huge numbers of people just repeating information 
over and over again. Basically, the cost saving here is just 
the destruction of duplication of government requirements.
    Senator Ashcroft. Yes. Reduction and redundancy.
    Mr. Ehinger. Absolutely.
    Senator Ashcroft. I really thank you all for your kindness 
to come and to participate in this hearing. I always have a 
fear that I will, in my questioning, not be as fair as I should 
be to what you have said. So I would like to offer each of you 
120 seconds to summarize, correct some misstatement, or 
whatever I have done. So if you all take your time in 6 
minutes, this hearing will be over.
    But I just want to do that to make sure I have not 
prejudiced in some way what you have meant to say or prejudiced 
the truth in something that I have said.
    Mr. Ehinger. Well, for me, Senator, this has been a very 
worthwhile experience. I do not normally like to spend my 
Saturday away from home. However, this has been very useful and 
I thank you again and your staff for their leadership and for 
your attention to these details.
    It does make a difference, but we do have to get going and 
I think that is what has been expressed here today, and so much 
better by your own constituents than I could, that I do not 
think I need to take more of your time.
    Thank you.
    Senator Ashcroft. Thank you.
    Secretary Copps.
    Mr. Copps. The only dimension I would add that I gleaned 
from our experience earlier this morning and our tour, is to 
compliment the exceptional teamwork that I see in Kansas City, 
and I surmise that is a characteristic of the state and I know 
it is from the work that we have done with the state. That is 
the most important element, when you look to growing exports. 
Can we get the Federal Government, the state government, the 
export development agencies, the private sector, everybody 
working together? I saw an enthusiasm in Missouri's sense of 
teamwork this morning, which I think is laudable and stands 
this city and this state in good shape.
    I think Missouri is about 24th or thereabouts in exports. I 
think working together, we can build that up considerably.
    Senator Ashcroft. Good. Thank you very much for coming.
    Mr. Grueff. It was quite interesting for me, Senator, to 
hear the comments of some of the panelists on the first panel 
about their frustrations with WTO, dispute settlement, and so 
on. I would like to tie this in with something that Mike Copps 
said.
    I think that in agriculture, one of our foremost challenges 
is informing and educating that trade agreements have done a 
lot for U.S. agriculture in terms of exports. There is the 
potential to achieve a lot more through trade agreements and as 
you said, often people focus on the bad news and what is not 
working. But we really have to make sure that people understand 
what has been done and what is at stake through these trade 
agreements that we are involved in.
    Thank you for the opportunity.
    Senator Ashcroft. Well, my appreciation goes not only to 
these excellent servants of the public from the departments, 
but to all of you who care enough about promoting tomorrow and 
making sure we approach it properly to do it effectively.
    My staff has indicated to me that I should announce that 
the record will remain open for 10 days. We should be able to 
get some encyclopedic comments from you all in 10 days, and 
that strikes a little note of fear in me. But just to prove 
that--well, I think that is a good idea, and we will maintain 
the record as open for that period of time, and welcome 
anyone's contribution to this record who wants to be heard.
    I want the record to be complete, because, frankly, I have 
learned something from every participant here today, and it is 
helpful to me. I look forward to working with you.
    Thank you very much.
    [Whereupon, at 12:55 p.m., the hearing was concluded.]

                                
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