[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]



 
  TRADE PROMOTION AUTHORITY AND TRADE ADJUSTMENT ASSISTANCE: HOW WILL 
             SMALL BUSINESS EXPORTERS AND FARMERS BENEFIT?
=======================================================================

                                HEARING

                               Before the

               SUBCOMMITTEE ON TAX, FINANCE, AND EXPORTS

                                 of the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                               __________

                     WASHINGTON, DC, JULY 24, 2001

                               __________

                           Serial No. 107-22

                               __________

         Printed for the use of the Committee on Small Business



                        U.S. GOVERNMENT PRINTING OFFICE
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                      COMMITTEE ON SMALL BUSINESS

                  DONALD MANZULLO, Illinois, Chairman
LARRY COMBEST, Texas                 NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado                JUANITA MILLENDER-McDONALD, 
ROSCOE G. BARTLETT, Maryland             California
FRANK A. LoBIONDO, New Jersey        DANNY K. DAVIS, Illinois
SUE W. KELLY, New York               WILLIAM PASCRELL, New Jersey
STEVEN J. CHABOT, Ohio               DONNA M. CHRISTIAN-CHRISTENSEN, 
PATRICK J. TOOMEY, Pennsylvania          Virgin Islands
JIM DeMINT, South Carolina           ROBERT A. BRADY, Pennsylvania
JOHN THUNE, South Dakota             TOM UDALL, New Mexico
MIKE PENCE, Indiana                  STEPHANIE TUBBS JONES, Ohio
MIKE FERGUSON, New Jersey            CHARLES A. GONZALEZ, Texas
DARRELL E. ISSA, California          DAVID D. PHELPS, Illinois
SAM GRAVES, Missouri                 GRACE F. NAPOLITANO, California
EDWARD L. SCHROCK, Virginia          BRIAN BAIRD, Washington
FELIX J. GRUCCI, Jr., New York       MARK UDALL, Colorado
TODD W. AKIN, Missouri               JAMES R. LANGEVIN, Rhode Island
SHELLEY MOORE CAPITO, West Virginia  MIKE ROSS, Arizona
BILL SHUSTER, Pennsylvania           BRAD CARSON, Oklahoma
                                     ANIBAL ACEVEDO-VILA, Puerto Rico
                  Phil Eskeland, Deputy Staff Director
                  Michael Day, Minority Staff Director
                                 ------                                

               Subcommittee on Tax, Finance, and Exports

                   PAT TOOMEY, Pennsylvania, Chairman
STEVEN J. CHABOT, Ohio               JAMES LANGEVIN, Rhode Island
DARRELL E. ISSA, California          GRACE F. NAPOLITANO, California
EDWARD SCHROCK, Virginia             ANIBAL ACEVEDO-VILA, Puerto Rico
TODD AKIN, Missouri                  DANNY K. DAVIS, Illinois
FRANK LoBIONDO, New Jersey           ROBERT A. BRADY, Pennsylvania
JIM DeMINT, South Carolina           MIKE ROSS, Arizona
JOHN THUNE, South Dakota
                     Sean M. McGraw, Staff Director








                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on July 24, 2001....................................     1

                               Witnesses

Aldonas, Hon. Grant, Undersecretary for International Trade, 
  International Trade Administration.............................     4
Williams, Don Lloyd, President & CEO, Princeton Medical 
  Enterprises....................................................     7
Hartman, Paul, Leesport, Pennsylvania............................     9
Gursahaney, Suresh, MicroAutomation, Inc.........................    11
Bujalos, William, Mid-Atlantic TAA Center Director...............    22
Froning, Denise, Policy Analyst, The Heritage Foundation.........    24

                                Appendix

Opening statements:
    Toomey, Hon. Patrick.........................................    32
Prepared statements:
    Aldonas, Grant...............................................    38
    Williams, Don Lloyd..........................................    52
    Hartman, Paul................................................    55
    Gursahaney, Suresh...........................................    58
    Bujalos, William.............................................    66
    Froning, Denise..............................................   101










  TRADE PROMOTION AUTHORITY AND TRADE ADJUSTMENT ASSISTANCE: HOW WILL 
             SMALL BUSINESS EXPORTERS AND FARMERS BENEFIT?

                              ----------                              


                         TUESDAY, JULY 24, 2001

                  House of Representatives,
          Subcommittee on Tax, Finance and Exports,
                               Committee on Small Business,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 2 p.m., in Room 
2360, Rayburn House Office Building, Hon. Patrick J. Toomey 
[chairman of the subcommittee] presiding.
    Chairman Toomey. The hearing will come to order. This 
afternoon the Small Business Subcommittee on Tax, Finance and 
Exports convenes to conduct a hearing on Trade Promotion 
Authority, the reauthorization of the Trade Adjustment 
Assistance Program and their respective impacts on small 
business exporters and farmers.
    One of the major issues of the 107th Congress is approval 
of TPA. The President was granted fast track authority, as it 
was formerly known, almost continuously from 1974 to 1994. The 
authority lapsed after the passage of Uruguay Round legislation 
that established the WTO, and it has not been renewed since. 
America's competitors have clearly taken advantage of this 
situation in the interim by developing market share in 
countries with which the United States does not yet have 
favorable trade agreements.
    On May 10, 2001, President Bush outlined his 2001 
legislative agenda, and TPA was a top priority. The President 
intends to use TPA for a new round of negotiations under the 
WTO, a Free Trade Area of the Americas agreement, and other 
regional and bilateral negotiations. The President said that he 
wants the authority by the end of the year. I hope we can 
deliver this authority to him before we adjourn for the August 
recess.
    Our training partners need to know the President's 
negotiators speak for the entire United States. U.S. Trade 
Promotion Authority tells other governments that there will be 
no more negotiation once they reach an agreement with the 
President. Because Congress has the final authority to approve 
or disapprove, the President will work closely in collaboration 
with Congress during the negotiations.
    In my district in the Lehigh Valley, Pennsylvania, and 
throughout the United States, international trade is creating 
new economic opportunities in our cities and on our farms. 
American-made goods and services are recognized for their high 
quality, and they are in demand all around the world. From 
large companies like Air Products and Chemicals to small 
businesses like Olson Technologies in downtown Allentown, both 
employees and employers benefit from expanding trade 
opportunities.
    Export firms employ 42 percent of all workers engaged in 
manufacturing and wholesaling in my district, and employees 
working for exporters, such as those in my district, earn 
higher wages and better benefits.
    Further, trade has a particularly strong impact on the 
survival of our Nation's farmers. Export markets are critical 
to U.S. farmers' prosperity. According to the U.S. Department 
of Agriculture, agricultural export value is equivalent to 
about 20 percent of the value of farm production and 25 percent 
of farm income.
    In our second panel today, the Subcommittee will examine 
the reauthorization of the Trade Adjustment Assistance Program. 
The TAA program has two components, trade assistance for 
workers, which is administered through the Department of Labor, 
and trade assistance to farms, which is administered by the 
Economic Development Administration at the U.S. Department of 
Commerce. Authorization for the TAA program is set to expire 
September 30th of this year.
    My colleague from Pennsylvania, Phil English, has 
introduced H.R. 85, which would extend the authorization of the 
TAA program through 2006. H.R. 85 would increase the time 
available for dislocated workers to apply for benefits from 1 
year to 2 years. The bill also provides authorization for 
technical assistance to qualifying firms who are seeking relief 
from lost jobs and sales due to foreign imports. In a more open 
trade environment, some firms and industries will grow; others 
will contract, merge or perhaps fail. And while adjusting to 
freer trade may be a healthy process from a macroeconomic 
perspective, which I believe it is, much like nonmarket--many 
other factors absent trade, such as changing technology, can 
have a rather harsh reality for the firms that experience the 
detrimental effect. So I want to commend Representative 
English, our Ranking Member Bill Pascrell, who is a cosponsor 
of this legislation, for recognizing and addressing the needs 
of our workers and businesses.
    I look forward to the testimony of the witnesses before us 
today and to a spirited discussion concerning these important 
issues. I want particularly to thank those who have traveled a 
long distance to be with us, including Mr. Paul Hartman, a 
farmer of my own home State of Pennsylvania, who clearly 
understands how TPA will benefit farmers throughout the Nation.
    And now I will yield to my friend from New Jersey, the 
Ranking Member Bill Pascrell.
    [Mr. Toomey's statement may be found in appendix.]
    Mr. Pascrell. Thank you, Mr. Chairman. I would like to 
welcome all of our guests who have taken the time to testify 
before this Subcommittee.
    Most of the world, there is an image that large 
multinational corporations dominate the world of international 
trade. We know that perception certainly does not match reality 
within the import-export sector. Small firms represent 97 
percent of all companies working with the United States import-
export marketplace. In fact, 88 percent of the U.S. companies 
in the trade industry are small companies with 100 or fewer 
employees. As the Ranking Member of the Subcommittee on Tax, 
Finance and Exports, ensuring that these companies and their 
employees receive fair and balanced treatment in the world 
marketplace is of critical importance to me.
    I think it is important, Mr. Chairman, that we do stress 
that this is not a debate over trade or not to trade. We all 
believe in trade. This is a question of how far we extend 
ourselves. This is a question of how far we extend ourselves. 
And we know that in the past 7 years, there have been 200 trade 
agreements without fast track. Many of those trade agreements 
have been a benefit to the Nation. Many of those trade 
agreements are still in effect.
    We are going to discuss two important programs concerning 
trade, as the Chairman outlined today: the trade adjustment 
assistance and fast track. One of these, I think, is of major 
benefit to small businesses. The latter, I have reservations 
about. The reality is that the issue of trade is not always 
industry- or business-specific. Whether it is large or, in this 
case, small business, trade authority can have varied effects. 
Many believe that the textile industry in America fell victim 
to trade agreements that resulted in the United States textile 
companies shifting their U.S. jobs to Central and South America 
where wages, where labor laws and environmental requirements 
are weak at best.
    I have my reservations about fast track. Of course, I see 
that the President has made it a trade priority to ensure that 
labor and environmental standards will not be included in our 
trade agreements. I feel that by ignoring international 
workers' rights, we are not allowing but assisting in the 
mistreatment of millions of workers in sweatshops around the 
globe. Meeting the bottom line is apparently worth the cost of 
inhumane conditions.
    We are repeating the same mistakes that the U.S. remedied 
decades ago. If we can place issues such as copyright 
protection, fair trade protection and not allowing unfair 
subsidies and antidumping protections to be among the 
requirements, why can we not add decent labor and environmental 
standards? Why can we not also decide to pay out the average 
working folks?
    Any gain in expanded free trade must be weighed against the 
serious prospect of the loss of U.S. capital resources and, 
more importantly, jobs being sent overseas and to cheaper labor 
cost markets in the wake of NAFTA.
    And I might add, Mr. Chairman, that when we look at pre-
NAFTA to the present moment, we have an imbalance--we have an 
imbalance in 1994 of $121 billion, and now it is $435 billion. 
And whether we are talking about goods balance or talking about 
service balance, that imbalance does not speak well for trade. 
And we need to be aware of which jobs are being lost and 
whether we are sacrificing them up on the altar of free trade 
or, as William Jennings Bryant might say, crucified to the 
cross of gold; in this case, crucified to the cross of trade.
    I am vociferously supporting the trade adjustment 
assistance. TAA Program provides assistance to eligible 
businesses and workers that have been disadvantaged by U.S. 
trade agreements.
    And on conclusion, Mr. Chairman, as I always refer to in 
any trade discussions, article 1, section 8 empowers the 
Congress to regulate commerce and foreign--with foreign nations 
and to lay and collect taxes, duties and impose excises. For 
145 years Congress exercised this power through frequent 
enactment of tariff acts setting in detail duty rates for 
individual imports. I am not in the Congress, but he is. I have 
not been elected to surrender the constitutional 
responsibilities.
    Thank you, Mr. Chairman.
    Chairman Toomey. Thank you, Mr. Pascrell.
    Mr. Schrock, do you have an opening you would like to make?
    Mr. Schrock. No, sir, I don't, but thank you, Mr. Chairman. 
I just want to welcome everybody, and it is rather timely we 
are talking about this. I just had folks in my office talking 
about this subject in the last hour, so I have a few questions 
that I am going to ask and am looking forward to your 
testimony.
    Chairman Toomey. Thank you.
    At this time I will recognize the Honorable Grant Aldonas, 
Under Secretary for International Trade, International Trade 
Administration. Thank you very much for being with us, and I 
welcome your testimony.

      STATEMENT OF GRANT D. ALDONAS, UNDER SECRETARY FOR 
   INTERNATIONAL TRADE, INTERNATIONAL TRADE ADMINISTRATION, 
                         WASHINGTON, DC

    Mr. Aldonas. Thank you, Mr. Chairman, Congressman Pascrell, 
and members of the Committee. Thank you for the invitation to 
testify. With your permission, I would like to make a brief 
opening statement and submit the balance of my testimony for 
the record.
    First of all, I want to say I was talking with Secretary 
Evans before coming down here, and he wanted me to reiterate 
his interest in working with the Committee and your staffs on 
trade issues, both sides of the aisle, for Trade Promotional 
Authority, but also what we do in terms of trade promotion 
generally at Commerce on behalf of our exporters. Most of our 
programs are dedicated to small and medium-sized exporters. 
That is where he has asked me to focus most of my attention in 
terms of my job, and we look forward to working with you in 
terms of that common effort.
    It would be difficult to overstate the importance of small 
business to our economy. Twenty-five million plus small 
companies create 75 percent of the new jobs in our country. 
They generate more than half of the Nation's GDP, which amounts 
to $5 trillion. And international trade is more critical than 
ever to the future of American small businesses. We now live in 
a global marketplace. It is here. It is not something that is 
coming in the future. Our small businesses need the ability to 
engage in that market and find access to those markets 
overseas.
    As Congressman Pascrell noted, 97 percent of all U.S. 
exporters are, in fact, small businesses. Many of the critics 
of trade have pointed to the fact that it is only large 
multinational corporations that benefit from this process. In 
fact, more often than not, small businesses receive benefits 
from the removal of trade barriers overseas, and there is a 
simple reason for that. For the big guys, they have more than 
one option. They can export out of the United States. They can 
invest overseas behind a tariff wall and manufacture there. 
They have a number of ways around that problem. For the small 
guys, there is only one option. That is exporting. That means 
the President has to be at the negotiating table trying to 
break down trade barriers on behalf of small business. 
Ultimately things like--very simple things like customs 
procedures, the red tape that goes along with trying to get 
into a market, the Customs official at the overseas border, 
those are very practical things that are real obstacles for 
small business exporters that larger companies do not confront. 
That is where a lot of the work has to be done.
    My view is we have to have a primary set of negotiating 
objectives that serve small businesses' interest in terms of 
trade facilitation, in terms of the actual negotiating 
objectives that we take to the table.
    Last week I had the chance firsthand to see some of the 
ingenuity and innovation that is going on among America's small 
businesses. I was in Los Angeles to speak at a conference put 
on by the Commerce Department's Minority Business Development 
Agency. Part of my goal and my mission, along with Ron 
Langston, who is the Director of MBDA, is to try and create 
opportunities for small businesses. What was most remarkable 
about that experience was the energy in the room, the interest 
in exporting, the questions that we had, and the interest in 
having the Commerce Department's help in terms of accessing new 
markets, mostly in terms of information. It was more of a 
question of ``how to'' than it was necessarily about trade 
barriers.
    But when they did talk about the troubles they have getting 
into markets, it came back to the same sort of practical thing: 
Higher tariffs on auto parts going into Europe than they face 
coming into the United States; agricultural subsidies in 
Europe; the same sorts of barriers that are part of the 
American trade agenda that they need broken down. To do that, 
of course, the President has to be at the negotiating table. 
What that boils down to is some very practical considerations.
    For example, I met with Joe and Jack Nalgian, who produce 
auto vehicle safety, and security systems in Congressman 
Berman's district. They started out with a real good idea. What 
they found was there were, in fact, intellectual property 
problems. They needed the support of the U.S. Government trying 
to break into a variety of markets. Now they export as close as 
Mexicoand as far away as Mongolia, oftentimes with the support 
of the United States Government being at their shoulder not only in 
opening the markets, but also in terms of providing assistance and 
financing along the way.
    Same thing with Maria Sorveno, who produces high-quality 
gelatin desserts in East Los Angeles. There you have somebody 
who started out in her kitchen. Through NAFTA she has gained 
access to the Mexican market. It has created a business not 
only regional, national, but also international, exporting as 
far away as New Zealand. Again, it just underscored for me the 
importance of external markets to the future of our small 
businesses.
    That leads me to my two final points, the answer, really, 
to the question of how best our Government can help small 
businesses. First and foremost is the topic of the hearing, Mr. 
Chairman, which is Trade Promotion Authority. My own view, 
although its oftentimes said you don't need TPA until the end, 
frankly, I view TPA as a way Congress and the President get on 
the same page in terms of trade. I agree with Congressman 
Pascrell about where the power resides in the Constitution with 
respect to the regulation of our foreign commerce, and 
ultimately, the President has to be the sole voice of the 
Nation at the negotiating table. What this is about is trying 
to find a way to accommodate those two interests, to make sure 
that Congress is in the driver's seat in terms of setting the 
objectives and has an opportunity fully throughout the process 
to be involved as a part of it; and also at the end to have the 
up or down vote as to whether or not the United States is 
actually going to enter into an agreement and implement it.
    In my view, it is essential to have Congress and the 
President on the same page. You can imagine if you are in 
negotiations, and you don't feel like you have the full power 
of the U.S. Government behind you, it is difficult to make 
choices. It is difficult to know where to draw the lines. It is 
difficult to know whether you have a deal that will pass 
muster. One of the most important things about Congress setting 
the negotiating objectives is defining the parameters within 
which American negotiators can pursue an American trade agenda. 
It is also the united U.S. Government telling our trading 
partners what we have to have at the negotiating table.
    The second of my two points is what we do after an 
agreement is in place. One thing we have not done with our 
trade promotion budget is think strategically about it. We 
negotiate trade agreements. We do not necessarily coordinate. 
What we do in terms of trade promotion activities is to fill in 
behind those trade agreements and secure the markets that we 
have bargained for in negotiations.
    So one of the things that Secretary Evans has asked me to 
focus on is what we do in terms of our trade promotion 
activities once agreements are in place. Now, a good share of 
that is compliance. We have seen a significant increase in the 
Commerce Department's compliance budget. We have hired 28 new 
people to contribute to that effort. But more fundamentally, we 
have launched the Trade Promotion Coordinating Committee, which 
is a statutory body that the Secretary chairs, to find 
efficiencies in how we go about trade promotion; to try and 
encourage a more strategic vision about how we approach trade 
agreements and fill in behind the market initiatives that we 
secure.
    As a part of that, we have had significant help on both 
Trade Promotion Authority and trade promotion policies from 
small businesses. We have a very active Industry Sector 
Advisory Committee that has contributed a great deal to our 
understanding of the barriers that small businesses face. They 
have done a great job of advising us, along with our district 
export councils, in terms of where we should be going with our 
trade promotion activities.
    Let me close there, and I welcome your questions.
    Chairman Toomey. Thank you very much, Mr. Aldonas.
    [Mr. Aldonas' statement may be found in appendix.]
    Chairman Toomey. At this time, I would welcome Mr. Don 
Lloyd Williams from Marietta, Georgia. Thank you for being with 
us today.

 STATEMENT OF DON LLOYD WILLIAMS, PRESIDENT AND CEO, PRINCETON 
               MEDICAL ENTERPRISES, MARIETTA, GA

    Mr. Williams. Good afternoon, Mr. Patrick Toomey, Honorable 
Chairman, Congressmen, Congresswomen, Representatives and 
staff, distinguished guests and fellow international exporters 
and businesses. My name is Don Lloyd Williams, and I am 
president of Princeton Healthcare, an international healthcare 
consulting and integration company doing business in both Latin 
America and Africa. We provide USA-manufactured medical and 
information technology products and support services to 
hospitals and clinics worldwide. Our mission is to improve the 
quality of healthcare in emerging markets in undeveloped 
countries through the use of new technology.
    Princeton Healthcare is classified as both a small business 
and minority-owned business and operating company, or SME, if 
you will. And again, as you mentioned, my firm is located and 
based in the metropolitan area of Atlanta, Georgia.
    I have come today to Washington, D.C., to speak to you in 
support of both the Trade Promotion Authority and Trade 
Adjustment Assistance Program. And I speak to you from a 
perspective of not only many years of international experience, 
but from a perspective unique to small firms that have to work 
in the trenches against fierce international competition in a 
global community. This is how we create business opportunities, 
revenues for our companies and jobs for U.S. citizens.
    You see, I was blessed with the opportunity to start my 
business career working with several U.S. major companies, and 
which later afforded me an opportunity to work for several 
major international companies. The experiences and the 
perspectives that I gained from these firms were beneficial 
because it helped me to gain the expertise and knowledge to 
create business opportunities in these foreign markets and to 
transact business successfully. However, my firm, similar to 
most small businesses, have all the challenges that the larger 
firms have, but typically have to operate without the support 
systems and resources that the larger firms can invest in to 
support their internationally-based business development 
programs.
    U.S. small businesses in general have a wide array of 
challenges to overcome in developing market-entry strategies in 
foreign markets. My firm has had to work effectively to 
overcome the barriers associated with the commercial risk of 
doing business in Latin America and Africa. This includes 
currency and exchange rate dynamics and payment and performance 
issues with customers. We have had to manage risks associated 
with logistics, freight forwarding, cargo insurance and 
completing the appropriate documentation to clear Customs. To 
date, and to our credit, we have been able to manage these 
issues rather successfully.
    Two major areas, however, continue to present problems for 
my firm: One, getting our projects financed for the foreign 
buyer or customer; and two, dealing with the trade policies 
which may further disadvantage our exports to that region.
    Let us take a look at the financing scenario. My firm, 
similar to most small businesses, is in a better position to 
secure a contract with a foreign buyer if we can provide low-
interest financing. Financing provided by Ex-Im Bank's Medium 
Term Foreign Buyer Programs has helped to level the playing 
field for small exporters. For example, my firm was recently 
approved by Ex-ImBank to provide $400,000 in medical and 
laboratory equipment to a diagnostic testing laboratory in Ghana. This 
testing laboratory supports the clinical testing of patients that are 
treated at surrounding hospitals in the region.
    Last year we were also able to secure financing for a 
hospital in the Ivory Coast through Ex-Im Bank financing. And 
this region has been a stronghold for Francophone-based 
European companies, yet we were able to secure the contract and 
gain export revenues. In both instances, by providing both 
competitive financing and financing for these customers, we 
were able to beat out several major European and Asian 
companies that were clearly in a better position in the market. 
Without Ex-Im Bank's support, these transactions would have 
been impossible. So from our perspective, it is important to 
increase the funding for Ex-Im Bank so that smaller firms have 
a shot to secure business in these emerging markets.
    Aside from financing, Princeton Healthcare's most 
significant challenge lies within the constraints of the U.S. 
trade policy and number of free trade agreements. Clearly the 
U.S. seems to be behind in the number of bilateral trade 
agreements established in these emerging markets. My firm is at 
a significant disadvantage in markets where host countries of 
European and Asian competitors have established free trade 
agreements. You see, in many instances, being competitive on a 
transaction can make the difference in deciding if you will win 
a contract or lose a contract. Therefore, any cost differential 
that may be artificially created can put us at a disadvantage.
    An example of this is in the Brazil marketplace. My firm is 
currently developing programs to establish business in this 
region. However, the U.S. does not have a free trade agreement 
for this market. This could put us at a major disadvantage to 
our European competitors if the European Union establishes a 
free trade agreement in this market before the U.S. And as you 
are aware, the U.S. is currently negotiating an FTA with the 
Mercosur Customs Union to cover the Latin American countries of 
Argentina, Brazil, Paraguay and Uruguay. We also are aware that 
many other countries in Asia are establishing bilateral FTAs to 
expand their economies and increase their number of trading 
partners.
    Therefore, from my perspective, the U.S. represents the 
largest economy and most competitive Nation in the free world. 
We must take a leadership position towards the development of 
international trade programs. We must be proactive rather than 
reactive. We must be innovative on multiple fronts when dealing 
with trade matters and find effective solutions that can impact 
the trade deficit.
    Small businesses will continue to play an important role in 
the growth of international trade by opening up new markets. 
However, we need your support to help create the tools that can 
minimize the trade barriers to allow us to be successful in 
these markets. We feel that through proactive legislation, for 
example, reestablishing the TPA and developing and expanding 
the TTA programs are positive steps which will help level the 
playing field for U.S. small businesses pursuing opportunities 
in these markets.
    We encourage you and challenge you as Congress to continue 
to take giant steps towards legislation that promotes 
international trade development. I thank you for your time and 
consideration.
    Chairman Toomey. Thank you for your testimony.
    [Mr. Williams' statement may be found in appendix.]
    Chairman Toomey. At this time, I would like to introduce 
Paul Hartman from Pennsylvania.
    Thank you for being with us today.

            STATEMENT OF PAUL HARTMAN, LEESPORT, PA

    Mr. Hartman. Good afternoon. My name is Paul Hartman. I am 
an eighth-generation farmer from Reading, Pennsylvania.
    I want to thank Congressman Toomey and the entire Committee 
for this opportunity to testify before you on behalf of the 
Pennsylvania Farm Bureau and the American Farm Bureau 
Federation regarding our strong support for H.R. 2149, the 
Trade Promotion Authority Act of 2001.
    My family owns and operates an 800-head dairy farm. We grow 
crops on approximately 500 acres, which is used entirely to 
feed the cows and replacement young stock. Our dairy produces 
about 9 million pounds of milk per year.
    U.S. agriculture continues to be increasingly reliant on 
access to export markets. The agricultural industry in this 
country can only continue to grow and prosper by reaching the 
96 percent of consumers who live outside this country. Our 
ability to export continues to be hampered by significant 
barriers to trade. Given continued low commodity prices, access 
to world markets is now more important than ever. U.S. 
leadership in international trade has languished since 
negotiating authority for the President lapsed. Other countries 
have struck new trade deals that place our producers at a 
disadvantage relative to their competitors. We need to arm 
President Bush and his team of negotiators with the tools that 
are necessary to open new markets for our commodities. Granting 
this authority without trade restrictions or sanctions 
governing environment and labor is essential. Employing trade-
restraining measures to address these important societal goals 
will serve only to hamper, not promote, trade without achieving 
the desired policy result.
    The lack of Trade Promotion Authority is hindering the 
United States' ability to be taken seriously as a trade 
negotiating partner. Meanwhile, other countries are moving 
forward without us. The European Union, Canada, Mexico and 
Latin American countries are negotiating new free trade 
agreements and preferential arrangements that do not include 
the United States. Over 130 preferential trade agreements exist 
today. Only two of them include the United States. The 
preferential access given to European Union producers on a 
number of commodities, including dairy, has enabled them to 
better compete with U.S. Exports. On subsidies, the European 
Union outspends the United States nearly 4 to 1 on domestic 
supports and uses over 90 percent of the world's agricultural 
export subsidies. World agricultural tariffs today average 
about 62 percent, while U.S. agricultural tariffs average 12 
percent. These farm barriers to U.S. agricultural exports can 
only be eliminated by trade agreements, and without Trade 
Promotion Authority, we are unlikely to achieve these goals.
    Economic studies show that the most significant growth in 
demand for agricultural products, and, in particular, for 
value-added foods, is in societies with emerging middle 
classes. As families and households move into the economic 
middle classes, they spend an increasing portion of their 
discretionary income on food. It is estimated that in the next 
decade, nearly 250 million Indians and more than 200 million 
Chinese will attain middle class status. Growth of demand for 
food will be strongest in these emerging markets. To maximize 
our opportunities to supply these markets, we must get tariff 
and nontariff barriers down.
    A wider range of U.S. agricultural products now depend on 
export markets. Corn, wheat, soybeans and other bulk 
commodities used to dominate the trade picture, accounting for 
two-thirds or more of total U.S. agricultural exports. No more. 
Since the 1980s, the most rapid andconsistent growth has been 
in consumer-oriented products, everything from meats to snacks and 
fruits and vegetables to pet foods. This category ranked third in 1985 
after bulk and intermediate products. By 1989, for the first time ever, 
consumer-oriented exports captured the lead. This means that a wider 
range of jobs and economic activity in the agricultural sector depends 
on trade than ever before. An estimated 750,000 full-time U.S. jobs in 
1999 were related to the production, assembly, processing and 
distribution of U.S. agricultural exports. Of this total, the majority, 
470,000 jobs, were off the farm.
    World market prices for many agricultural products are 
depressed in part because of high levels of trade-distorting 
subsidies and protected home markets. Strengthening of world 
prices which helps incomes of U.S. producers and exporters can 
only happen with effective international disciplines on unfair 
trading practices and trade barriers. Other countries are 
unlikely to agree to such disciplines except through a 
comprehensive round at the World Trade Organization 
negotiations that Trade Promotion Authority would authorize.
    We can no longer afford to stand idly by while other 
nations' governments improve trading opportunities for their 
citizens and industries. Securing Trade Promotional Authority 
for the President will make launching a round in the World 
Trade Organization where the greatest gains will made in 
agricultural trade more likely. Leadership and action by 
Congress must no longer be delayed. The time to act is now. 
Congressional passage of Trade Promotional Authority is 
essential this year. Thank you.
    Chairman Toomey. Thank you very much, Mr. Hartman.
    [Mr. Hartman's statement may be found in appendix.]
    Chairman Toomey. At this time, I would like to recognize 
Mr. Suresh Gursahaney from MicroAutomation in Chantilly, 
Virginia.
    Thank you for being with us.

   STATEMENT OF SURESH K. GURSAHANEY, MICROAUTOMATION, INC., 
                         CHANTILLY, VA

    Mr. Gursahaney. Thank you for giving me an opportunity to 
testify today before the House Small Business Committee, 
Subcommittee on Tax, Finance and Exports.
    My name is Suresh Gursahaney, and I am the president and 
CEO of MicroAutomation, Incorporated, located in Chantilly, 
Virginia. We are a small, disadvantaged business, certified 
minority business enterprise. We currently have a work force of 
20 employees.
    MicroAutomation designs and implements product sets for 
call center environments. We consider ourselves to be one of 
the industry's pioneers and are quite pleased that our products 
and applications are used in organizations renowned for their 
customer service, such as Hilton Reservations Worldwide, Maytag 
and Baltimore County 911.
    In the last several years, we have brought a variety of 
ways for consumers to reach customer contact centers. Advances 
in technologies have allowed customers access to service via 
the fax, Web, e-mail, chat sessions and telephone. 
MicroAutomation helps businesses and organizations develop one 
integrated point of customer service contact that is accessible 
from these diverse media.
    Based on the statistics available from the U.S. Government, 
and based upon my own experience, the opportunities for small 
firms to participate in the global marketplace are quite 
exciting. Small businesses with less than 20 employees made up 
two-thirds of all U.S. exporting firms in 1998, which has been 
a significant increase from 1992 when these small business 
exporters stood at 59 percent. In 2000, the U.S. information 
technology sector alone exported $134 billion in products. This 
sector contributed one-third to real U.S. GDP growth from 1997 
to the year 2000, according to the Department of Commerce. 
Small businesses dominate the IT sector and many of them, like 
MicroAutomation, work in these technologies and markets. The 
growth of the innovative IT sector can only be sustained 
through expanding markets, and much of these opportunities will 
occur abroad. MicroAutomation is so pleased by our expanding 
opportunities, and we are hopeful that more U.S.-based small 
businesses will have an opportunity to pursue markets abroad as 
well.
    MicroAutomation's successful work in implementing solutions 
for Hilton Reservations Worldwide in five U.S. reservation 
centers has led to an expansion of our work overseas. We most 
recently completed a call center project in Glasgow, Scotland 
Reservation center, and there are plans for four additional 
international call centers. Our international portfolio also 
includes work via prime contractor for South Korea Telecom, 
Samsung Life Insurance, Citibank using IBM, and Hong Kong 
Telephone via Mosaix. Indeed, there are many opportunities for 
MicroAutomation to conduct business abroad for a variety of 
clients, and we are thrilled by these opportunities for growth. 
However, as we have also learned from our overseas work, there 
are risks for small businesses also.
    While MicroAutomation's experience participating in 
overseas markets has been largely positive, our experience in 
South Korea served as a wake-up call to the prospective perils 
faced by small firms in the world marketplace. Through a local 
South Korean subcontractor, MicroAutomation implemented our 
call center solution for SK Telecom and Samsung just prior to 
the fall of the Korean economy. Unfortunately, we fell victim 
to an economic slump, and invoices totaling $100,000 are still 
outstanding, which is a significant amount of revenue for a 
small company.
    While larger companies have the resources to dispatch legal 
teams when such circumstances arise, the recourse small firms 
have, such as MicroAutomation, are really rather limited. It 
would require enormous sums of money for our firm to pursue 
collection of those outstanding bills, and, quite frankly, we 
are less powerful and politically connected than larger firms. 
Our experience in Korea did not dampen our pursuit of overseas 
work, but it has altered our international strategy for 
pursuing such opportunities.
    MicroAutomation's current plans are to work with companies 
that are headquartered in the United States with contracting 
and invoicing performed domestically. The current prerequisites 
that we have established for ourselves in conducting work 
abroad only underscores the importance of expanding trading 
opportunities for all American business abroad. Clearly there 
are many small businesses that successfully export their 
products and services on their own, and expanding favorable 
trade agreements with a variety of countries will give small 
businesses a broader market to sell those products and 
services.
    In the case of MicroAutomation, it is also clear that when 
all businesses have increased access to overseas markets, 
small, medium and large businesses alike, all sizes of business 
and their work force, will benefit from increased global 
opportunities.
    As mentioned, it is quite risky and difficult to transact 
overseas as a smaller business entity. Competing with 
businesses around the globe in unfamiliar environments is a big 
step for a small firm. Any steps that our Government can take 
to lay the groundwork for better trading relationships with 
countries abroad, including favorable trade agreements that 
create more certainty and lower tariffs, I believe, is 
beneficial for all small businesses.
    Trade Promotion Authority is a positive tool that will not 
only expand our market opportunitiesfor small firms, but help 
establish favorable parameters for doing business in foreign countries. 
Thank you very much.
    Chairman Toomey. Thank you very much for your testimony.
    [Mr. Gursahaney's statement may be found in appendix.]
    Chairman Toomey. Thank you all.
    Let me explain something briefly about how our light system 
works, and we are going to try to follow that system here. We 
have got three lights in front of you. The green light is set 
for 5 minutes. As the clock ticks down, with 1 minute 
remaining, the light switches to yellow to warn us there is 
only a minute left. And when the 5 minutes expire, the light 
goes red. I explain this not so much for your benefit, but for 
the benefit of myself and my colleagues. And I would like to 
stick to the clock because we have a number of folks here who 
have a number of questions, and we have another panel coming 
afterward. So with that having been said, if people could try 
to address questions as succinctly as they can, it would be 
very helpful.
    And I have a couple of questions for Under Secretary 
Aldonas. Thanks again for being here.
    My first question is that some would suggest that certain 
past trade agreements--NAFTA is one that comes up 
periodically--have been a failure because we have a trade 
deficit with the countries in question. Of course, United 
States has a large trade deficit in general, but certainly we 
have experienced the greatest economic expansion in American 
history during a period of time in which we have had increasing 
trade deficits. Could you address the question of whether we 
ought to be measuring the success of trade by the extent to 
which we have either a surplus or deficit?
    Mr. Aldonas. Trade deficits in and of themselves generally 
reflect differences in growth rates between economies rather 
than necessarily barriers to trade.
    For example, right now, if you take a look, the trade 
deficit is narrowing. It is not because there has been any 
recent market opening initiative or any change in the barriers 
we face. It is because the economy started to slow relative to 
other economies. Interestingly enough, the last time that we 
really closed the trade deficit that we had with Japan was the 
1991 recession, and again, nobody would argue that Japan was 
opening its market in 1991 to us. That was well in advance of 
the conclusion of the Uruguay Round agreement. So generally, 
that is what drives the deficits.
    Another way to look at it is that we benefit in a way from 
a capital surplus and that gives us the ability to buy more 
abroad or investing in our country. There was a period in the 
1980s where that surplus was going to current consumption. Now 
generally that comes to us in the form of foreign direct 
investment. We have been running a capital surplus in this 
country since 1975. In fact, people are investing their money 
in the U.S. to make it productive. The return on that exceeds 
the cost of the capital, so that foreign direct investment here 
in the United States is the net benefit.
    Chairman Toomey. Thank you, yes. I would just--further to 
that point, I would suggest it is not a coincidence that we 
have the freest trading environment in the United States, and 
we are the most attractive place in the world for people to 
invest capital as manifested by huge capital inflows that we 
have had that have kept the dollar strong despite large trade 
deficits.
    One of the objections that people frequently raise or will 
want to address with TPA is whether or not and to what extent 
labor and environmental considerations should be part of those 
agreements. It is my understanding that the position of the 
administration is that those should be addressed separately, 
not as part of the trade agreement per se. Could you address 
that issue, and how do we--I should say not as part of the 
Trade Promotion Authority per se--how do we address labor 
issues and environmental issues in a constructive way?
    Mr. Aldonas. Well, there is a trade component to this 
debate. For example, on the environmental front, there are 
plainly things we can be doing that would be helpful to the 
environment. First of all, trade in and of itself helps 
conserve resources. What you are doing is making our economy 
more efficient, economies more efficient. That puts less weight 
on the environment generally.
    Second, if you think about the most serious problem in 
terms of overproduction, things that are damaging to the 
environment, the common agricultural policy in Europe would 
have to rank number one. Going after the CAP, frankly, at the 
negotiating table at WTO is one of the most helpful things we 
can do for the environment at this stage. In addition, opening 
up new markets for our environmental goods and services would 
also be a great benefit.
    Now, is the WTO the best place to try and negotiate labor 
standards or environmental standards? I would argue it is a 
difficult place just to negotiate trade standards much less to 
actually enforce those standards. There are other places where 
we can go. I agree, however, we need an active agenda on that 
front. Certainly there is a consensus that we need to be more 
aggressive on the international labor front which was reflected 
in the United States agreement to the 1998 ILO declaration, and 
there is a venue to do that. The real question is whether you 
might undercut the real benefit of trade for labor and the 
environment, which is raising living standards abroad, if you 
include things that result in sanctions that would block trade, 
and that is the hard nut to crack.
    I think we say in order to use trade as a powerful tool to 
raise living standards and raise labor and environmental 
standards overall, there needs to be component pieces that work 
those issues separately. But at the end of the day, you don't 
want to undercut the real value of trade.
    Chairman Toomey. Mr. Hartman, I had a question for you. 
Many parts of Pennsylvania, my district included, there is 
significant crops in corn and soybeans, but not a large amount 
of that is exported today. Nevertheless, I think one could 
argue that greater exports of American agricultural products 
will help Pennsylvania farmers. Do you share that view? And if 
so, how is it that expanding trade can help all the farmers in 
America and especially in Pennsylvania?
    Mr. Hartman. Corn and soybeans are commodities that are 
priced based on the marketplace, and if you open up trade in 
other marketplaces around the world--if you open up trade 
around the world, you are going to have more markets, and 
hopefully your commodity prices would rise because there would 
be more demand for your product.
    Chairman Toomey. Well, in the interest of observing my own 
rule, I will at this time yield to the gentleman from New 
Jersey Mr. Pascrell.
    Mr. Pascrell. Thank you, Mr. Chairman.
    Agreeing with the agenda, the objective to broaden market 
opportunities, wouldn't you agree that one of the major 
problems we have is--Mr. Under Secretary, is making these 
broadened opportunities reciprocal? Isn't that a major problem 
that we are facing in terms--and which brings about imbalance 
in trade?
    Mr. Aldonas. Yes. We face trade imbalance and as well as 
opportunities. The United States has been a leader in world 
trade, really, since the end of the Second World War, and my 
view is there have been times when we have ``paid more at the 
office'' than others. So this time around I think what we have 
to do is say, look, on tariffs, for example, we are not going 
to tolerate the fact that Europe continues to impose a 10 
percent tariff on our automobiles when we only impose 2\1/2\ 
percent on imports. We can't let that stand.
    Mr. Pascrell. But the problem is if we have fast track, and 
the Congress is not able tomodify the agreement that the 
President comes to, thereby surrendering our constitutional obligations 
and responsibilities, that is what I am concerned about, not with the 
fact that we do not want to trade with other countries. We do. We live 
in a global economy. When you see six or seven countries in the worst 
fiscal condition, whether we are talking about Turkey, Argentina, 
Indonesia, Brazil, when you look at those countries, we have had trade 
agreements with those countries, and other European countries have 
trade agreements. That isn't what is the cohesive force in whether the 
economy moves forward or backwards. It is important. I am not 
downplaying it. But the more reciprocal the trade agreement is, the 
better off both nations are. That is what I am saying.
    Mr. Aldonas. I agree with that completely. Part of it, what 
we need to do with our trade policy--I mean, these remarkable 
stories that you hear about small business people--that ought 
to be the focus of where we go in terms of our trade 
negotiating objectives. In some respects you have to look back 
at the past and say, who paid the last time around? That means 
you have to be aggressive on that front. At the end of the day, 
we have to have our best salesperson at the table.
    Mr. Pascrell. When you look at the commitments and promises 
that were made concerning NAFTA--I mean, we have Mexican 
farmers going south. We have Mexicans that are involved in the 
factories that we built losing their jobs. And so one has to 
wonder not only what NAFTA did to our economy, but what did it 
do to the Mexican economy.
    Now there is a report coming out next week that is going to 
state in stark terms just before we debate, I guess, some 
issues--in stark terms what really the fallout was of NAFTA.
    You know, China-U.S. Business and Industry Council claims 
that a 1996 report by the National Association of Manufacturers 
show that a mere eight United States companies generated more 
than one-third of all the U.S. goods exported to China. 
Opponents of China's participation in the WTO argue that open 
trade with China will therefore only benefit a few large 
companies and expand the gap between the large companies and 
the small business exporters, which we do not want. What we are 
here to do is help primarily the small business company in the 
United States of America, and I think if we can agree on that 
and look at the facts and see what mistakes we made in the 
past, I think we can move forward on a lot of trade agreements. 
Wouldn't you say that?
    Mr. Aldonas. I think the essence of it, like with China, 
goes back to the point I was making in my oral remarks, which 
is, you know, the big guys have more options in terms of how 
they get into that market. When you look at what our auto 
industry faced in the way of tariffs in China--still faces 
until the WTO agreement goes forward--it is a surprise that 
there is one American vehicle in China. Now you see a number of 
them, and you wonder how they got there.
    But the bottom line is the agreement. Reducing those 
initial barriers at the negotiating table helps small and 
medium-sized enterprises by reducing tariff levels. It is also 
helpful, I think, in China in particular to introduce 
disciplines on Customs procedures and transparency because that 
is a lot of what the obstacles are for small business. So the 
WTO is a good vehicle to go after that. It is also going to 
require us to follow up very, very hard on compliance with the 
Chinese.
    Mr. Pascrell. Well, you bring up the issue. Who is going to 
force anyone to comply? There is no compliance with NAFTA. 
There is no follow-up. Who is supposed to be there to enforce 
the rules? The rules are not being enforced. And this is what I 
fear about fast track. And we all would like to have reciprocal 
trade agreements, and we don't have.
    I am not going to ask any more questions, Mr. Chairman. Mr. 
Williams, I listened very closely to your testimony, and I read 
it. I can't find where fast track would assist you. I don't 
understand the barriers that exist with our trade agreements 
that you were citing and how that would be assisted directly by 
fast track.
    And, Mr. Hartman, interestingly enough, a lot of folks that 
we trade with in terms of--in different trading agreements that 
we have had, farmers are getting hurt most of all in very 
different, very specific commodity products, and we have got to 
look at this very carefully. Small farmers in this country are 
being hurt.
    Chairman Toomey. Thank you.
    Mr. Schrock.
    Mr. Schrock. Thank you, Mr. Chairman.
    Let me follow up on what Mr. Pascrell said, and I address 
my question first to Mr. Hartman. If we do not get this act--
the Trade Promotion Authority, if it doesn't pass, how will it 
impact your ability to enter foreign markets?
    Mr. Hartman. I believe now to get into these markets, we 
need to have a force at the negotiating table. And right now I 
feel without fast track and having a strong voice at the 
negotiating table, we are limiting our opportunities. And there 
is some trade going on, which Mr. Pascrell mentioned, that 
perhaps with better negotiating procedures and regulations that 
could be set up at the table, then maybe some of this 
distortion in certain products could be avoided.
    Mr. Schrock. Mr. Secretary, the Chairman of the Federal 
Reserve seems to indicate that the economy is slowing down. I 
hope that is not the case, but that is what he is indicating. 
What impact do you believe Trade Promotion Authority will have 
in jump-starting the economy not only here in America, but 
throughout the world?
    Mr. Aldonas. Well, passage of TPA is something that is 
basically procedural, isn't going to do anything economically. 
What you do, though, is send a strong signal when our 
negotiators are going off to Doha, for example, in the fall, to 
launch a new trade round of trade negotiations that were back 
at the table.
    Last time we saw this was 75 years ago when you had the 
major economies of the world slowing down. Traditionally what 
you do in those circumstances, you try to move the trading 
system along. Liberalization then starts to move the forces 
forward, so you affect the psychology and eventually the 
market. But you need that first step so that people understand 
that the President is back at the table, and the United States 
is going to assert its leadership on trade.
    Mr. Schrock. Mr. Williams and Mr. Gursahaney, how do you 
expect your businesses will expand if this authority passes, 
and what will happen if it does not?
    Mr. Williams. I would like to say I think it is--we need 
the leadership, first of all, when we are fighting against 
competition in these particular markets. It is very clear to us 
that in many instances, they have, one, the support and a 
little more incentive to get into these markets because they 
are--the trade arrangements that they have actually promote 
certain products that are now coming into these markets.
    We are, in fact, hampered by, as I was alluding to, some 
differentials with tariffs and the Customs issues if it 
becomes, in certain markets that we compete against, a pricing 
issue. And so any differential, any barrier that we deal with 
in that regard can prevent us from being as competitive as we 
need to be. And if we do not have all of our ducks lined up, it 
makes it very difficult for us to win, and many of these 
companies that we are competing against are lining up all of 
their--positioning themselves and lining up all of their 
strategies to make sure that the financing and trade barriers 
and everything is working in sync for them to win these 
contracts and opportunities in the markets. And we do not have 
that sync. That it is going to be very difficult, and I have 
encountered that in certain markets, and I think this fast 
track program canreally help us.
    Mr. Gursahaney. From my perspective--I suspect I represent 
the IT the portion of the industry--as we go and attempt to 
secure opportunities in international countries, we are always 
faced with the laws of the local country.
    Our experience in South Korea is a prime example of that. 
We went in and implemented a solution, and we were never paid 
because of the fall in the economy. There was no trade 
agreement with South Korea that the government had established 
that we could leverage. From our perspective, if there were 
trade agreements that were authorized by the United States 
Government, we could leverage those as a small company and 
essentially be able to go out and trade to these companies with 
some sort of security that they would abide by the laws and 
such that we see in the United States.
    Mr. Schrock. But you heard one of the Members ask how do 
you make sure the laws are being adhered to--I guess my time is 
up.
    Chairman Toomey. Thank you.
    Mrs. Napolitano.
    Mrs. Napolitano. Thank you, Mr. Chair. There are a number 
of questions, and I am afraid 5 minutes is not going to get to 
everybody.
    I have been involved in international trade for a number of 
years, and small business specifically, particularly. I have 
been to China or to Thailand where I found that the government 
had set up a panel of judges to be able to help American 
businesses resolve differences, but it had no enforcement, no 
teeth.
    So while it looks good, it is really not helpful to 
American businesses. How do you see the working in the 
enforcement, even though there is already trade agreements, 
there is already in place the ability to be able to do it and 
yet it is not being done? Somehow it just escapes me.
    Mr. Aldonas. Part of the explanation is the fact that two 
sovereign states are using one enforcement tool. That is always 
going to be difficult, but one thing I have found in my own 
experience, both working with clients when I was in the private 
sector and when I was in government before, is that a lot of 
these things can be resolved on a practical basis if you have 
the U.S. Government on the ground. That means that--and it is 
my responsibility to do that--is to ensure that our foreign 
commercial services really try and rectify the problems there 
so that the problem stops with the customs officer in Shanghai 
rather than becoming a political issue.
    Mrs. Napolitano. Then the question becomes is the agency 
that should be involved doing the outreach to the MCHMS because 
they are the ones who are telling us this is not happening and 
I have had MCHMS come to me and try to get workshops in our 
area, anywhere in the United States for that matter, with 
American business to help them do outreach, to help them set up 
in those different countries, but I am kind of leery because I 
don't know what is happening in those areas. I don't know how 
well they will be protected. I don't know how much their 
product is going to be able to get reimbursed, and as he says, 
whether that country is going to be able to help our American 
business get paid back. That is of concern to me because if I 
am putting something out in my area and it turns sour, I am the 
one that is going to get blamed, not the government, me.
    The other is the SBA, since I sit not only on SBA but I 
also sit on International relations is--and I find sometimes 
that agencies don't talk to each other. How well does ITA work 
with SBA and any of the other agencies that have to do with 
small business? Because I find that sometimes when you are 
questioned there is a very small segment that works on small 
business and the rest is general.
    Mr. Aldonas. The answer is not as well as I would like. One 
of the reasons----
    Mrs. Napolitano. What are you going to do to make it 
better?
    Mr. Aldonas. Secretary Evans and I have launched, through 
the Trade Promotion Coordinating Committee which he chairs and 
oversees all of the committees involved in export promotion, a 
benchmarking exercise, where what we are going to look at is 
our own performance, first of all, relative to our own 
customers' expectations. We have gone out to our District 
Export Councils to muster the small businesses involved 
currently through ISAC-14, as well as the other ISACs, the 
Industry Sector Advisory Committees, and we are going to be 
asking them for their input, A, on what their expectations are 
and, B, where we are now relative to those expectations.
    Second, we are going to be looking at our foreign 
competition--what a foreign government is doing. If they are 
doing it better, I am going to be an absolute thief about the 
ideas and we will use those.
    Finally, we are going to be looking at where our business 
processes, for example, like Eximbank lending, mirrors things 
that go on in the private sector and try and benchmark against 
those practices to determine how we can gain efficiencies. We 
live in a time of tight budgets. We need to find ways to do 
more with what we have, in effect, but the principal thing is 
getting everybody communicating so that my foreign commercial 
service officer in country, when they have a customer in front 
of them, is capable not only of explaining the ``how to'' of 
how to get a letter of credit, who to talk to here to get your 
goods in, how do you deal with the Customs officers; but they 
can also tell them here is where Eximbank can help, here is 
where the Overseas Private Investment Corporation can help, 
here is where SBA can help.
    Mrs. Napolitano. But the unfortunate part is that sometimes 
your budget does not allow for that outreach. Now, how do you 
handle your Web site, do you hit on the SBA and on the other 
agencies so that a business can go in and actually know where 
to go?
    Mr. Aldonas. The answer is there is--export.gov, which is 
essentially a one-stop shop that then links you to other Web 
sites.
    Mrs. Napolitano. But who knows about it? That is my point.
    Mr. Aldonas. I understand.
    Mrs. Napolitano. And for me to go tell my businesses I can 
only reach a certain segment of them, but what are the agencies 
doing to educate the business that might not be doing export 
but may be in the process of developing something that is 
exportable, if they have no way of knowing and, beyond that, if 
they have no way of getting the capital to be able to expand it 
other than maybe some State help and no Federal because they 
are too small and our agents are too busy dealing with the big 
guys and forget the little guys?
    Mr. Aldonas. What we try to do, and again, I would love to 
be able to do this much, much better, but what we try to do is 
leverage our resources by relying on District Export Councils. 
Those are businesses who have been exporting in communities. So 
our local officials in the U.S. commercial service work closely 
with the DECs as a way of trying to communicate to other people 
in the business about export opportunities. Also, those DECs 
serve as mentors for new companies that are in the business of 
exporting so they can say, look, if you are going into the 
Mexican market here was my experience, here is how I did a 
letter of credit, here is the banking relationship I 
established. Not all stuff we can provide but certainly ways we 
can do outreach through other folks who have succeeded with the 
help of our services.
    Mrs. Napolitano. Thank you for your answers, and I am 
hoping somehow we will be able to get more of that for a bigger 
audience.
    Mr. Aldonas. I would love your advice about how to do more 
on that because we really need to. There is no doubt about it.
    Mrs. Napolitano. Thank you, Mr. Chairman.
    Chairman Toomey. Thank you. Mr. Chabot.
    Mr. Chabot. Thank you, Mr. Chairman. Mr. Under Secretary, 
last time this came up of course it was called fast track back 
then and trade promotion authority now, and it didn't have the 
votes to pass then and of course that was during the Clinton 
administration, and a lot of my Democratic colleagues, not all 
but a lot of them, were against it principally because the 
unions were against it, and it was the chicken and egg thing, 
but the bottom line is that is where the opposition came from.
    On the Republican side there were various reasons, but one 
of the reasons some of my colleagues--they oftentimes didn't 
say this on the record but their opposition was because they 
didn't trust Clinton or they didn't like Clinton or whatever. I 
supported it because I thought it was the right thing to do 
regardless of what my feelings might have been relative to our 
President, but I really felt it was the right thing to do, and 
the union opposition I think there is a number of reasons, but 
principally is because they felt jobs would leave this country 
and go offshore where wages could be lower and all the rest.
    And you have addressed it to some extent already, but could 
you address again the numbers of jobs that go offshore versus 
the jobs that are created here because we are trading more and 
businesses are created in this country and that sort of thing?
    Mr. Aldonas. One of the things that was striking about the 
last decade, of course, is you had the significant market 
openings with both NAFTA and the WTO, and during that time the 
U.S. economy created 20 million new jobs since the early 1990s. 
Jobs don't literally leave the United States. Some jobs are 
lost. In certain sectors, new jobs are created. Overall 20 
million new jobs during that period of time were created in the 
United States after a very significant opening in both NAFTA 
and in terms of the WTO. Real wages are up, private sector 
productivity increased by 3 percent annually and our exports 
supported approximately 12 million jobs. Wages in export jobs 
are higher, between 13 and 18 percent higher.
    So the value of trade for workers in the United States is 
extremely high, not only in terms of real wages, because we are 
moving in the direction where we are more efficient and more 
productive so you would expect to see wages be higher, but also 
as consumers in terms of the range of goods that are available 
to them. So it reduces their costs while their wages are 
rising.
    Mr. Chabot. Thank you. Secondly, another argument for free 
trade or for trade promotion authority is that the consumer, 
the folks in this country who are actually going to the store, 
going to the markets, going to the department store, wherever 
they might shop, are able to purchase more goods, more variety 
of goods at a price that they can afford which they might not 
otherwise be able to afford if we just threw up walls around 
this country and just traded amongst ourselves or made it more 
difficult for other products to come in.
    Could you address that issue relative to goods that are 
available to folks here, the actual consumer, how the consumer 
benefits?
    Mr. Aldonas. Yes. Certainly there is a wider range of 
consumer goods available and there is a heck of a lot of 
competition in those products, whether it is automobiles on 
whether it is electronics. I also want to make the point that 
in addition to consumers, when we think about the individual, 
the people at the table here are consumers as well, and when 
they have to remain competitive globally, what they have to be 
able to do is manage their costs, and what they need in front 
of them are the lowest cost inputs possible. So you want the 
competition that international trade brings because what it 
means, inputs for these products that we then export, are kept 
at a manageable level and they can remain cost competitive 
globally.
    So it is not just for the individual consumer that faces a 
wider range of higher quality goods at lower prices, but from 
the point of view of small businesses, it helps to manage their 
costs also, and that is the bottom line.
    Mr. Chabot. Okay. And finally, my time is wrapping up here, 
so I will make it real quick. The G-8 just met recently. It 
seems whenever our leaders get together now we are seeing 
turmoil in the streets and you know it might be the death 
penalty or it might be the environment, a whole range of 
issues, anarchists I guess as well, too. But it seems that 
globalization and trade seems to be one of their pet peeves and 
something that they are against, and I would certainly argue 
that people all around the world, if you are trying to help 
folks that are poor or disadvantaged, they are going to be 
helped by trade.
    Can you make an argument, you know, for that particular 
point of view?
    Mr. Aldonas. Well, there is no doubt based on the evidence 
that economies that open their markets increase their rate of 
economic growth and raise their living standards. That is the 
strongest and most powerful tool that we have in fact in terms 
of economic development, but I would say one other thing, which 
is that those countries with closed markets are often those 
countries with the worst labor practices that literally shackle 
their people in poverty. Some of that is because the markets 
are closed and at the end of the day that is why you will hear 
the President and you will hear Secretary Evans and you will 
certainly hear me say that we view this as a moral issue on 
those grounds. We really believe that freedom is indivisible 
and ultimately that is our strongest export, and that goes with 
American business when it goes overseas. That is the real value 
at the end of the day.
    Mr. Chabot. Thank you very much.
    Chairman Toomey. I will yield a couple of minutes to the 
ranking member here.
    Mr. Pascrell. Since we are talking about morality, I can't 
miss the point here. Do you want me to believe--let's take an 
example, about trade, final questions that the gentleman asked 
are really I think on point. I might not have agreed with the 
preface, but I think they are excellent questions. The average 
dress at Macy's in the Liz Claiborne department is between 125 
and 145 bucks. I have bought a few for my wife there, that is 
why I know, and when you go back in the history, I know where 
it is made, how it is made, I know where it is patterned, I 
know how much it costs to transport the dress. Maybe it costs 
somewhere between $15 and $18, including all of those things. 
Everybody has got to make a profit, they are not going in 
business for charity. At best that dress should cost no more 
than forty bucks, no more than that, with a 200 percent profit.
    Do you want me to believe that because we aren't involved 
in these trade agreements that the consumer in America is 
paying less for products? Is that what you want me to believe? 
Because you can't prove it.
    Mr. Aldonas. My sense is you are paying a lot less for 
products in a number of different categories and you are 
getting higher quality out of those and innovation out of those 
industries in part because of competition. Now a lot of that is 
here but a lot of it comes from overseas as well.
    Chairman Toomey. Thank you, and I would like to thank all 
the witnesses who provided testimony, the first panel here. 
Your input has been very helpful and constructive. Thank you 
for being with us today.
    At this time I would like to invite the witnesses from the 
second panel to approach the table.
    Okay. Why don't we get started with our second panel. We 
have joining us today Mr. William Bujalos, the Mid-Atlantic TAA 
Center Director from Philadelphia, Pennsylvania, and Ms. Denise 
Froning, Policy Analyst with the Heritage Foundation, and I 
want to thank you both very much for joining us.
    We will be using the clocks, as I think you were here for 
the first panel, so you saw that. So if you could keep your 
comments to about 5 minutes, we would appreciate that and we 
would have more time for questions, and with that I would like 
to welcome you both and recognize Mr. Bujalos.

 STATEMENT OF WILLIAM BUJALOS, MID-ATLANTIC TAA CENTER DIRECTOR

    Mr. Bujalos. Thank you, Mr. Chairman. My remarks have been 
supplied, and I will just be paraphrasing them and they will 
stand on their own.
    I want to first off thank the Committee for giving me this 
opportunity to discuss the effects of TPA on the small business 
manufacturer in at least my region and the effects that TAA and 
its firms have on such an event.
    When I was invited to speak here today I was asked to do 
two things very simply: One, explain what it is we do, and 
number two, offer some examples of the results of what we do. 
It is better for me to do that if I ask you to step into the 
shoes of a typical client of mine.
    You are a small businessman. You have invested just about 
all of your savings into starting up, mainly because banks 
weren't going to give you everything you needed because they 
are not willing to take as much of a risk as you are. You have 
very few employees. Chances are your facility or your business 
is somewhere in a semirural area, you are not in a very big 
city, although some of them are, but chances are you are not. 
You find yourself on any given day being the CEO, the CFO, the 
COO, the plant manager, the purchasing manager, the quality 
assurance manager and any other manager you can think of, 
including sometimes the janitor. You are going to work 10, 12, 
13 hours a day 6, 7 days a week, maybe more. And you are not 
going to be concerned about things like free trade agreements, 
inventory procedures that are more improved, productivity 
improvements that may be available, technology improvements 
that may be available. What you are concerned about is making 
your payroll by Thursday afternoon. You haven't got time to 
read junk mail, let alone be worried about what we are talking 
about today.
    Now, you will probably come in contact with one of our 
trade centers. I am the Director of the Mid-Atlantic Trade 
Center. There are 12 of them spread all over the United States. 
My responsibilities include the firms in Virginia, West 
Virginia, Maryland, Delaware, Pennsylvania and the District of 
Columbia. There are three phases that you will be faced with if 
you start a relationship with us, and let me mention to you 
first off our relationship will span years. It will not be 
fast. Our relationship will be very, very detailed. It will not 
be a quick broad stroke.
    The first thing that will happen is you will be visited by 
one of our project managers. That individual will spend 
probably half of a day trying to understand how we can certify 
you as being bona fide negatively impacted by imports. We will 
interview several of your customers so they can confirm to us 
that they have reduced their purchases or even stopped their 
purchasing from you because they can get it cheaper from 
imports. We will take a look at your business volume over the 
last 2 years and your employee head count of the last 2 years 
to confirm that they are on their way down or that there is an 
imminent catastrophic loss of jobs in the next month or two 
that we can verify.
    In the second phase is you will be visited again by another 
member of our staff or me personally for a day or two or more, 
depending on the size of the organization, how many levels in 
the organizational chart and what the learning curve probably 
is. What we want to know is every single function within your 
business, your marketing, your sales, your financial 
management, your computer systems, your management development, 
your human resources, your quality assurance, all of those 
things and more that I can't list right now. I want to know how 
they got where they are, where are they weak and why. But I 
also want to know where are they strong and also why.
    After that is done, that is a diagnostic phase, another 
phase starts, same day, where we will sit down with the 
ownership, employees and management, sometimes individually and 
sometimes in groups, depending on what we have to discuss, to 
try to understand what do we have to do specifically in terms 
of projects to take every one of those weaknesses and turn them 
into strengths, and take every one of those strengths and try 
to make them bulletproof and what it is going to cost and how 
long it is going to take and how it is going to be done 
specifically by listing the number of specific projects that 
have to be done and trying to think of a logical means, a 
logical progression of making this take place.
    Once that is done, it is all put together in this kind of a 
book. This is an AP. This is, for lack of a better expression, 
a business plan and it may be, if you are a typical small 
business, the first time you have ever done one, except maybe 
the first one you did for a bank, but we all know that bankers 
don't ask really, tough questions. This one is really detailed. 
This is sent to Washington and we get concurrence from EDA.
    Third phase is the implementation phase. We will sit down 
with you again and try to come to an understanding of what we 
have agreed to do on the plan, and get it started. We want to 
make sure we start within the first 6 months. Then our 
relationship may span 1, 2, maybe even 3 or more years where we 
are implementing these projects, one after the other.
    When it came to creating this document, you paid one 
quarter of the cost. When it comes to actually implementing you 
are going to pay a half of the cost, not all at once because as 
we are invoiced by professional providers in the private sector 
every 30 days, two invoices will be issued, one to me and one 
to you, and we will split the costs as we go through from 
project to project.
    That in essence is what we do. There are some nuances but 
not too many. The thing I want to emphasize is that TAA for 
firms is unique in the sense that it is not one size fits all. 
That is one of the reasons, for instance, we don't have any 
people on our staff that are professional consultants. We don't 
go out and sell their talents to keep them busy. Our job is to 
see what is necessary to turn the corner with your company. Our 
job is to work with you so that you will think differently 
about the way you distribute, manufacture, develop and sell 
your products. Maybe even consider different products than you 
make now.
    If you think that perhaps this is just another form of 
corporate welfare, consider several things. One, if you are the 
client you are going to pay for it. Two, it is really tiny. The 
Mid-Atlantic region is serviced by four people Three, most of 
the time when a client and I work together, they determine what 
they want to do and we determine how to do it with them, but it 
is only a small part of a much larger strategy they have in 
mind. In many cases they are buying more equipment, they are 
putting in more powerful software, they are putting in more 
technology and they are creating larger buildings all on their 
dime.
    And finally, the kicker is this. We have taken your 
company, and it is now quicker, faster, smarter, brighter and 
better than it was before in many ways. Your jobs now are 
moreproductive, stronger, more positive than before. It was less costly 
for us, to save your job than try to put something on the table after 
you had lost it and try to retrain you to get you a new one.
    I understand we have to stop. So I will be glad to take any 
questions later on.
    [Mr. Bujalos' statement may be found in appendix.]
    Chairman Toomey. Thank you for your testimony. Ms. Froning.

   STATEMENT OF DENISE FRONING, POLICY ANALYST, THE HERITAGE 
                           FOUNDATION

    Ms. Froning. I would like to thank the chairman and members 
of the Subcommittee for the opportunity to speak here today. I 
would really like to address today not so much whether we 
should have compensation for workers who have lost their jobs 
because I think a number of people feel strongly about that, 
but rather whether the TAA program itself is delivering the 
benefits that it is meant to do, and the answer to that is by 
and large it is not.
    There are several problems with the current program. I am 
going to highlight just two and then mention what many have 
floated as an alternative.
    The first problem is that there is insufficient monitoring 
of the program's effectiveness. Specifically, criticism is 
focused on the program's inadequate attention to performance 
measures and failure to conduct proper evaluations on what 
results program participants achieve. The TAA program does not 
measure results. Instead the Department of Labor sets goals for 
the number of assistance programs each center implements per 
year, not whether the aid proves successful.
    While the Department of Labor tightened controls after a 
1993 Inspector General's report found that the system was 
subjected to a number of abuses, the controls themselves have 
not been evaluated for their effectiveness.
    Second, TAA has largely turned into a cash payout program. 
The TAA program has become a mere compensation procedure, 
effectively acting as a disincentive for workers to quickly 
find new jobs. This is possible under the TAA program because 
workers are allowed to obtain a training waiver which allows 
them to collect the cash payouts, the trade readjustment 
allowances, without enrolling in any classes.
    According to the Department of Labor, 38 percent of TAA 
participants who left the program in 1999 received some type of 
training waiver, more than the number of displaced workers that 
enrolled in those training courses. The numbers bear out this 
fact. Between 1995 and 1999 TAA spent over $900 million for 
basic and additional allowances to displaced workers. 
Meanwhile, only a third as much went to training costs in the 
same time period, and only $9 million, or one-hundredth, as 
much over those 5 years went to job search and relocation 
costs, in part because so few of the TAA eligible workers chose 
to use these elements of the benefits program.
    According to the GAO October 2000 report, most State 
officials we surveyed said job search and relocation benefits 
have not been heavily utilized because workers are reluctant to 
move to new areas primarily because of family commitments or 
ties to the community.
    If more funds had gone to training aspects of the TAA 
program, the Institute for International Economics, among 
others, criticized the training programs themselves for lack of 
effectiveness. It points out that, quote, workers have no 
guarantees of employment when they finish the training 
programs. For this reason, there is broad consensus that the 
best training is delivered on the job or if workers are already 
at a job, then in supplemental programs that workers help pay 
for themselves and choose to attend at night or other off 
hours.
    Thus, the TAA program does not work as it is designed. The 
current TAA program has failed to provide effective assistance, 
one of the crucial factors for a successful adjustment program.
    If the aim of such programs is to help workers find new 
jobs, then we should eliminate TAA over time and fund a program 
that provides incentives, not disincentives, for workers to do 
just that. Wage insurance is one such proposal that has won 
widespread support.
    Robert Litan of the Brookings Institute and Lori Kletzer of 
IIE proposed putting wage insurance at the center of a more 
effective adjustment program. Wage insurance would allow 
qualifying displaced workers to receive benefits upon 
reemployment, protecting workers from the loss of income that 
can result from finding a new job that does not pay as well. 
The program would provide benefits to full-time workers who 
have been dislocated for any reason, not just trade, from jobs 
they had held for a minimum of at least 2 years.
    Most importantly, Litan and Kletzer argue that wage 
insurance would fix a deficiency in the current program. Unlike 
TAA, which works as a disincentive for rapid reemployment, the 
proposed wage insurance program would strongly encourage 
workers to quickly find new jobs since they would not receive 
the assistance until this takes place.
    A central issue in this reauthorization debate is the 
question of what is the proper role of government in the United 
States. If we decide that among government duties is to give 
money to workers who have lost their job for whatever reason 
then we should do it efficiently and effectively, ensuring the 
existence of an effective program to fulfill our responsibility 
to all Americans whose livelihoods are affected through the 
taxes they have to pay in order to make any such program 
possible. It is a betrayal of this responsibility to continue 
to fund a program that has been proven ineffective and which 
cannot even measure its own results or lack thereof.
    Thank you.
    [Ms. Froning's statement may be found in appendix.]
    Chairman Toomey. Thank you. I think it is fair to say we 
have somewhat different perspectives on the trade adjustment 
assistance. See how astute I am. But let me start by pointing 
something out which is probably obvious to everyone, but there 
are two different aspects of the Trade Adjustment Assistance 
Program, and Mr. Bujalos was referring primarily to the program 
that assists small businesses through what strikes me as a 
consulting process, while Ms. Froning was describing the 
assistance that goes indirectly through States to workers.
    So these are two different aspects, but it might be 
helpful, Mr. Bujalos, if you feel comfortable doing so in 
commenting on the other aspects of the TAA, but first, if you 
could, my first question to you is, help us a little bit more 
to understand the structure of this organization. There are 12 
regional centers. Are the people who work there, are you a 
Federal employee? Do you work for a private company that 
contracts with the Federal Government to provide these 
services? They do sound as consulting services. Do you not 
compete against fully private sector consulting services? Maybe 
you could address some of those structural issues for me.
    Mr. Bujalos. Good question. To answer the question in 
reverse, no, we don't compete. As a matter of fact, we hire 
them. None of the people who work in trade centers are 
government employees. As a matter of fact, to my knowledge none 
of them ever have. Most of them have had pretty high level 
executive experience. Some of them have even owned their own 
businesses at various times in their career. Some of them have 
been management consultants at various times in the private 
sector. As I said before, we do not consider ourselves in 
competition with them. We consider ourselves to be those who, 
through a competitive bidding hire consultants from the private 
sector.
    Remember now, our client is a very hard working individual 
who if he hasn't got time to readhis junk mail hasn't got an 
awful lot of time to evaluate consultants--matter of fact he probably 
doesn't even like the word ``consultant''. He or she needs someone who 
has the wherewithal and the capability of evaluating as his advocate 
what is available, who is qualified and who can do the work. The only 
thing we can't do is we can't determine the chemistry. So when we do a 
bidding process we always try to have three, four or five possible 
candidates meet personally with the client so they can take the measure 
of each other and so they can conclude whether or not they can work 
together, but whether or not they are qualified, yes, we can determine 
that.
    Chairman Toomey. Now, the services you provide are paid in 
part by the company, paid in part by the Federal Government; is 
that correct?
    Mr. Bujalos. Yes.
    Chairman Toomey. The total budget that you operate with is 
how large?
    Mr. Bujalos. $10.5 million. The total budget that I 
personally work with for the Mid-Atlantic region is $718,000.
    Chairman Toomey. Okay. So the 12 offices split in some 
fashion the $10 million odd, and the criteria for being 
eligible for what amounts to a federally subsidized consulting 
service is that your business had to have an adverse impact 
from trade, but there is no other criteria. If, for instance, 
technology leapfrogged ahead of the product that you made as a 
company, that would not qualify you for this service?
    Mr. Bujalos. No. In fact, your business probably could be 
suffering because of that, but no, you would not be certified 
as being negatively impacted by the importation of goods.
    Chairman Toomey. Okay. Thank you. Since my time is running 
out, Ms. Froning, I wanted to ask you, you have suggested that 
a wage insurance program might be a better alternative than the 
current regime for paying displaced workers. I am not entirely 
clear on how that would work. Specifically, would this 
contemplate making up the difference between the income earned 
at a new job and the income a worker used to earn at his 
previous trade impacted job?
    Ms. Froning. Well, the proposal that I mentioned by Litan 
from Brookings suggests that it could either replace part or 
fully the amount lost by changing to a job that pays less, and 
they suggest that perhaps you can consider such things as age 
and occupation that go into that. It is one of the better known 
wage insurance proposals out there, and it seems to be a more 
pragmatic approach to addressing the issue. I think the details 
could be worked out.
    Chairman Toomey. The idea being it diminishes the incentive 
not to work, to simply remain unemployed so you can collect 
this payment?
    Ms. Froning. And I am not suggesting that it is because 
people are lazy. I think it is human nature. You do what you 
have to do. And sometimes it takes time and, you know, it is a 
little bit easier to go out and find a job if you don't have 
the money coming.
    Chairman Toomey. You have made the comment if I understood 
you correctly, if I can paraphrase, that we don't have a valid 
assessment of the effectiveness of the program. Do we not have 
statistics as to how many people participating, how much they 
have benefited, how long they are on for, what kind of wage 
change they have experienced, those kind of basic figures; are 
they not available?
    Ms. Froning. Well, what the GAO recorded was that while 
there is information on the number of people that have taken 
part in this program, there is more on what results were 
achieved or how many people found new jobs. Those are areas 
where it is harder to quantify. Studies that have actually 
tried to measure how well it has worked have not also compared 
it to other workers that have not used this program. So the 
bases for measurement are not the same.
    Chairman Toomey. I am going to finish there, but I am going 
to instruct our Committee staff to get the reports from the TAA 
to find out exactly how they evaluate their own effectiveness 
because that is part of our role as oversight.
    Mr. Pascrell.
    Mr. Pascrell. Thank you, Mr. Chairman. I would like to 
start with Ms. Froning if I may. I want to take exception on 
the second page of your testimony. Of course I think it goes to 
the very core of what you were saying and I think what you said 
was very valuable.
    Second paragraph that based on the, third sentence, based 
on the rationale that job displacements caused by foreign 
competition are no different from job displacements caused by 
any other form of competition, the Reagan and first Bush 
administrations each attempted, et cetera, et cetera, et 
cetera.
    I would contend and I would like your reaction and response 
if I may, that there is a very big essential, not quantified or 
qualifiable difference but an essential difference between a 
person who loses their job in an industry or be it service or 
whatever, where that job is eliminated because of national 
policy, compared to a job that is lost, for instance, in the 
domestic market. I think there is a large deep difference 
between the two. You disagree?
    Ms. Froning. No, I don't disagree, but I think I was 
looking at it from the perspective of the worker who loses 
their job. To them they are out of a job regardless whether it 
is due to trade or not. They are not having the income coming 
in anymore. I was kind of looking at it from that perspective, 
how can we help those people, and I understand there are 
different ideas about trade, and we might disagree there, but 
fundamentally also you can lose your job from domestic 
competition because the government chooses to protect one 
industry over another, say steel over a steel using industry 
such as the automobile.
    So that is also national policy that could affect the 
worker's job, and so all I am saying is that to the worker they 
would rather just get another job, they would rather have that 
income.
    Mr. Pascrell. These are the companies, Ms. Froning, that 
have been helped in my District, about 14 of them, going back 
from 1998 to the present moment, and they are varying 
manufacturing companies that have been certified on the TAA. I 
understand your criticism, that if there is no monitoring 
obviously this is not going to work. We talked about that just 
a little while ago. If there was better monitoring, it probably 
would work a lot better, but I think the TAAs are doing a great 
job out there, could do a lot better, and I think your 
criticisms are really on target.
    I am very interested in the wage insurance proposal that 
you put forward. What you are saying, correct me if I am wrong, 
is that in this program the worker would have to wait till he 
gets another job and that difference would be paid only after 
he got the second job. I think that is an interesting idea. It 
might provide an incentive, and I think this is part of what 
you are talking about. How do you see that being initiated, 
through which program, Federal program or would it be a Federal 
program?
    Ms. Froning. It is not my proposal specifically but Litan 
and Kletzer's that I cite, through the Department of Labor, and 
they have the details. And I have the report, but I would be 
happy to send it to you, that that they offer.
    Mr. Pascrell. I think it is a pretty decent idea. We ought 
to explore it, but I wouldn't explore it without and at the 
same time eliminate the TAA program.
    Mr. Bujalos, many critics of the TAA for businesses argue 
that the free market should be allowed to run its course, and 
if a few businesses have to be shut down as a result of free 
trade or whatever, so be it. We should not be providing 
government assistance to private corporations. How would you 
respond to that argument?
    Mr. Bujalos. I forget the number of businesses there are in 
the United States, it is in the millions. Every single one of 
those once upon a time was in a garage or a car or someone's 
basement. Every single one of them had some sort of assistance 
somewhere along the way, not all of it always government 
assistance, but I would bet my next paycheck it was more than 
50 percent of them. Every single business we had and have now 
goes through some sort of help.
    Consider 30, 40 years ago. At the end of the Second World 
War the United States was king of the hill. If you were an 
American businessman in the United States at the end of the 
Second World War, you had to work at failure because nobody was 
out there to compete with you. Things change. This is now, that 
was then. The world is different today.
    Today, the U.S. isn't just the only king of the hill. Today 
the average businessperson has to compete with the huge wave of 
change in technology that is taking place that we don't even 
address. These are other things that are in his universe that 
weren't there 30 or 40 years ago.
    Mr. Pascrell. And you know what you say makes a lot of 
sense because a lot of the companies that have folded in my 
district, a lot of the manufacturing companies, be it small 
machinery parts or fabric, textile, folded not because the 
workers weren't up to snuff, the boss was not up to snuff, did 
not produce the state of the art in that particular industry, 
but can't compete with a factory in Honduras where that factory 
owner does not have to deal with any environmental standards, 
can pay his workers whatever the heck he wants, doesn't have to 
worry about sick time or leave or anything like that. We can't 
compete against that. But we can compete on a level playing 
field.
    Mr. Bujalos. But I would extend the argument even further. 
We are going to pay for it one way or the other. If, God 
forbid, your business closes, it gets hammered and it cannot 
respond for a variety of reasons, well, the other side of TAA 
is going to be there to help. We will be paying for it. My 
argument is it just makes sense because it is cheaper to do it 
before the job is lost and before the closure takes place.
    Mr. Pascrell. Thank you.
    Chairman Toomey. Thank you. Mr. Schrock.
    Mr. Schrock. I have no questions.
    Chairman Toomey. Thank you. Mrs. Napolitano.
    Mrs. Napolitano. Quite a few interesting points that both 
of you have brought up, and I am intrigued by the worker 
assistance, but when you look at that viewpoint specific in 
there, like mine, when there is people with families that will 
have no income, that is crucial, I mean that hurts. So you know 
it is going to have a lot of tweaking before something specific 
to an initial problem is addressed via--I don't know what the 
report says but I would certainly like to have a copy of it.
    Mr. Bujalos, I am wondering how big is your staff.
    Mr. Bujalos. Four people, including me.
    Mrs. Napolitano. And you are able to spend time, a whole 
day with a business?
    Mr. Bujalos. Without exception. We just make sure we do it. 
We have to--see, put yourself in my shoes.
    Mrs. Napolitano. No, I understand, and I totally agree. I 
wish there were more of you.
    Mr. Bujalos. I wanted to make one point though. TAA, one of 
the things we are paid to do is improve the productivity of the 
clients we work with. How can we possibly not be as productive 
as we possibly can ourselves if we are doing that?
    Mrs. Napolitano. Then the question is, how many clients do 
you get? How many people apply? How many can you help? How many 
do you find are justifiable clients or clients that you may be 
able to pick up legitimately and how many of those you actually 
save? I mean there is a question there, with four people for 
that many States, it begs the question of how thin are you 
spread.
    Mr. Bujalos. Well, we are spread thin, I won't argue that 
point at all, and you raise a very good point. Consider, I said 
that my yearly budget now is, $718,000. My backlog, that is, 
the dollar amount of approved assistance that I can't do, is 
over $1.8 million.
    Mrs. Napolitano. And why can't you do it?
    Mr. Bujalos. I don't have the money to do it. I barely have 
enough money to take care of the clients that are coming into 
our doorway now.
    Mrs. Napolitano. Are you translating hours into dollars for 
helping business or is it personnel that you can't hire to get 
the job done?
    Mr. Bujalos. No, no. I am not being clear here. That $1.8 
million is the value of just the amount of grants that we would 
use in hiring professionals to help companies. It has nothing 
to do with our salaries, which of course should be added.
    Mrs. Napolitano. That is hiring professionals, I am sorry, 
that is the same thing. Having personnel is somebody to work 
and do the job, the outreach, the assistance to the small 
business.
    Mr. Bujalos. That is right.
    Mrs. Napolitano. In other words, you are short-handed.
    Mr. Bujalos. Well, yes and no. For instance, last week.
    Mrs. Napolitano. You have got a backlog, you have got to 
be----
    Mr. Bujalos. I know, I know, but listen to me for a second. 
There is a point to be made. I get invited to make speeches all 
the over the place by a lot of different organizations. The 
last time was 2\1/2\ weeks ago in Erie, Pennsylvania, where I 
got a chance to stand in front of about 200 and some odd tool 
and die manufacturers. I gave remarks that did not exceed 6 
minutes. Yesterday I was given a fax containing eight clients, 
eight companies who within that short period of time want to 
become part of this program from that one event, and that 
happens all the time.
    Mrs. Napolitano. I don't argue that. That is my point, is 
that four people in as many States are not capable of handling 
what is out there that can be helped.
    Mr. Bujalos. You are absolutely right.
    Mrs. Napolitano. So how do we remedy that?
    Mr. Bujalos. The obvious way to remedy it is to change the 
way it is funded.
    Mrs. Napolitano. What way is that?
    Mr. Bujalos. I would--if you were asking me----
    Mrs. Napolitano. I am asking you.
    Mr. Bujalos. I would make it a stand-alone program, and I 
would fund it out of funds, say from tariffs or other means, so 
that we don't have to worry about this appropriation every 12 
months year in and year out. That is if I were doing it.
    Mrs. Napolitano. Okay. Tariffs based on what, on the people 
you help or on the overall general tariff?
    Mr. Bujalos. Some thought would have to be given to that. I 
am not sure which one or the other. I do know that the 
government now has a very, very tight budgetary situation and I 
understand that, and virtually every dollar that goes to one 
thing has to come from something else. I am only proposing that 
a separate way of handling this might exist.
    Mrs. Napolitano. I don't mean to be disrespectful, but we 
were in a flush year and we are not able to do some of the 
programs we want. Never mind getting into the whys and 
wherefores,but somehow we are missing the point in helping 
small business, and that has been my gripe for many years, is that we 
put into programs that help mega business, they can take care of 
themselves, but the small business that is the backbone of our economy 
keeps getting shafted, and my support to you for TAA is to do more 
outreach, because I see what it does, and I agree with Mr. Pascrell, 
businesses might have been helped, but how do we help expand the 
program to help more small business that can help our economy grow, and 
that is one of my biggest concerns.
    Mr. Bujalos. The only way to do that is to increase our 
budget. There is no other way.
    Chairman Toomey. Thank you both very much for your 
testimony. The hearing is adjourned.
    [Whereupon, at 3:45 p.m., the subcommittee was adjourned.]
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