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



 
  FEDERAL PROCUREMENT AND INTERNATIONAL TRADE: ASSESSING THE FEDERAL
    GOVERNMENT'S EFFORTS TO MEET THE NEEDS OF LOCAL SMALL BUSINESSES
=======================================================================

                             FIELD HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                               __________

                     NORWALK, CA, SEPTEMBER 3, 2002

                               __________

                           Serial No. 107-68

                               __________

         Printed for the use of the Committee on Small Business





                          U.S. GOVERNMENT PRINTING OFFICE
82-504                             WASHINGTON : 2002
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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               BILL PASCRELL, Jr., New Jersey
STEVE CHABOT, Ohio                   DONNA M. CHRISTENSEN, Virgin 
PATRICK J. TOOMEY, Pennsylvania          Islands
JIM DeMINT, South Carolina           ROBERT A. BRADY, Pennsylvania
JOHN R. THUNE, South Dakota          TOM UDALL, New Mexico
MICHAEL 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
W. TODD AKIN, Missouri               JAMES R. LANGEVIN, Rhode Island
SHELLEY MOORE CAPITO, West Virginia  MIKE ROSS, Arkansas
BILL SHUSTER, Pennsylvania           BRAD CARSON, Oklahoma
                                     ANIBAL ACEVEDO-VILA, Puerto Rico
                      Doug Thomas, Staff Director
                  Phil Eskeland, Deputy Staff Director
                  Michael Day, Minority Staff Director










                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on September 3, 2002................................     1

                               Witnesses

Thompson, Bruce, Regional Administrator, Region 9, SBA...........     3
Ramos, Frank, Director, Office of Small & Disadvantaged Business 
  Utilization, Office of the Under Secretary of Defense..........     5
Cabreira-Johnson, Deborah, Program Manager, Los Angeles County 
  Procurement Technical Assistance Center (PTAC).................     8
Espinoza, Eric, Owner, Stitches Uniforms, Montebello, CA.........    11
Grippa, Adriana, President, Master Research & Manufacturing, 
  Inc., Norwalk, CA..............................................    13
Bearden, David, Deputy Assistant Secretary and Chief Operating 
  Officer, Economic Development Administration (EDA), U.S. 
  Department of Commerce.........................................    22
Holbert, David, Executive Director, Western Trade Adjustment 
  Assistance Center (TAAC), Los Angeles, CA......................    24
Thompson, Bruce, Regional Administrator, SBA.....................    26
Delmege, Mary, Senior Advisor, Trade Promotion Coordinating 
  Committee (TPCC), San Diego, CA................................    28
Redway, William, Group Vice President, Small and New Business 
  Group, Export-Import Bank of the United States (Ex-Im), 
  Washington, DC.................................................    30
Hinojosa, Raul, Research Director, North American Integration & 
  Development Center, School of Public Policy & Social Research, 
  University of California Los Angeles (UCLA), Los Angeles, CA...    35
Loftus, Hugh, Director, Community Adjustment and Investment 
  Program, North American Development (NAD) Bank, City of 
  Industry, CA...................................................    36
Huseth, Anita, President, Mace Metal Sales, Los Angeles, CA......    39
Reynolds, John, General Manager, Mace Metal Sales, Los Angeles, 
  CA.............................................................    39
Alcamo, Bart, President, RBK Tool & Die Company, on behalf of The 
  Society of The Plastics Industry, Inc..........................    41
Bonds, Terry, Director, District 12, United Steel Workers of 
  America (USWA), Albuquerque, NM................................    43
Martin, Tom, Chair, Government Affairs, Small Manufacturers 
  Association (SMA), Pomona, CA..................................    44

                                Appendix

Prepared statements:
    Thompson, Bruce..............................................    61
    Ramos, Frank.................................................    66
    Cabreira-Johnson, Deborah....................................    70
    Espinoza, Eric...............................................    75
    Grippa, Adriana..............................................    80
    Bearden, David...............................................    84
    Holbert, David...............................................    87
    Delmege, Mary................................................    91
    Redway, William..............................................    94
    Hinojosa, Raul...............................................    99
    Loftus, Hugh.................................................   128
    Reynolds, John...............................................   133
    Alcamo, Bart.................................................   135
    Bonds, Terry.................................................   139
    Martin, Tom..................................................   143
Additional Information:
    Matthews, Robert Guy. ``Tariffs Give Edge to Foreign Steel on 
      West Coast.'' The Wall Street Journal, August 23, 2002.....   163
    Vieth, Warren. ``Steel Prices Stoke Tariff Backlash.'' Los 
      Angles Times, June 24, 2002................................   164
    Letters to Chairman Manzullo, House Small Business Committee.   166












  FEDERAL PROCUREMENT AND INTERNATIONAL TRADE: ASSESSING THE FEDERAL 
    GOVERNMENT'S EFFORTS TO MEET THE NEEDS OF LOCAL SMALL BUSINESSES

                              ----------                              


                       TUESDAY, SEPTEMBER 3, 2002

                          House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The committee met, pursuant to call, at 9:00 a.m., at the 
Norwalk City Hall, Council Chambers, 12700 Norwalk Boulevard, 
Norwalk, California, Hon. Donald Manzullo presiding.
    Chairman Manzullo. Good morning. The U.S. House of 
Representatives Committee on Small Business will come to order. 
Before I give my opening statement, first I am going to defer 
to my distinguished colleague that represents this 
Congressional District. Grace, I will let you go first. But 
before you do that, I just want to share with you the joy it is 
to be out here in sunny California.
    I spent a semester at Pasadena City College, just a few 
years ago, Grace, back in January of 1963, on an interesting 
course through college. I really fell in love with the weather 
here. I also realized at that time how very practical your 
community college system is. There we had a four-hour course in 
speaking Spanish, and, unfortunately, Grace, I didn't keep up 
with it. And otherwise, I would have been invited to become a 
member of the Hispanic caucus.
    Because you may wonder, with a name like M-A-N-Z-U-L-L-O, 
is it--pronounced Man-zoo-low or Man-zway-low. You can 
pronounce it however you like, and we just have a lot of fun 
with that name. It's Italian, like Grace's husband.
    I am proud to represent the 16th Congressional District in 
Illinois, but our Congressional District is a little bit 
different than yours, Grace, but in a sense it's similar 
because we have a lot of suburbs.
    But our Congressional District starts at the Mississippi 
River, and it runs all the way across the top of the state to 
within one county of Lake Michigan. It's about a three-and-a-
half-hour drive, and we have the two fastest-growing counties 
in Illinois, plus we have Rockford, Illinois, which is the 
machine tool center of the country. It has a 30 percent 
manufacturing base. Then as you go westward towards the 
Mississippi River, we have huge agricultural and value-added 
food processing facilities. So it's a Congressional District 
that has just a lot of things in it that make it for a very 
interesting mix.
    Congresswoman Napolitano, I'll leave it to you to make your 
opening statement.
    Mrs. Napolitano. Thank you, Chairman Manzullo. It is a 
pleasure for me to have the Chairman of the Small Business 
Committee in Norwalk to listen to our business issues, 
especially when it deals with government access to the 
procurement business, which is so vital to our areas, not only 
Southern California, but specifically the 34th Congressional 
District.
    Chairman Manzullo, the fact that this area had double-digit 
unemployment due to the departure of one of the biggest defense 
manufacturers has created a lot of problems, and so one of my 
jobs is to make sure that we assist all business, small, medium 
and large--we have very few large--be able to be successful in 
knowing what is out there, not only in city procurement, 
county, state, but also specifically federal procurement.
    And the idea being that if we help our business be able to 
have the ability to know how to be successful, then it's up to 
them to be able to do it, and we want to be sure that our 
agencies are in tune with that and that we are able to help 
both sides be able to increase sales in our area, because I 
need the jobs, very simply. I need the employment in the area.
    Mr. Manzullo, I believe that Mrs. Millender-McDonald broke 
her ankle, and might come. Loretta is supposed to be here, so 
she may be coming in off and on, but I certainly thank you for 
your true nature of love for business, for consenting to come 
to Southern California and meet here.
    And, while there is only two of us, you would be surprised 
what we have done before together. We are a Republican and a 
Democrat, and yet we work for business. There is no political 
line when it comes to small business. And I thank him for that.
    And I also must thank the city of Norwalk for facilitating 
this nice City Council chambers, where I have been before. I 
used to be mayor of this city. And my staff and all the staff 
who worked on this. It takes a lot of work, including Mr. 
Manzullo's staff, to put this together. And the agencies who 
are cooperating, and it's good to see some of my old--one of my 
old colleagues who is now in government, in federal government, 
Mr. Thompson. Welcome, it's good seeing you, truly. So thank 
you very much. We will move on.
    We hope that today brings you a little more insight and the 
ability to connect and contact the agencies that are here. 
Please feel free to talk to them. SBA has ten consultants 
outside the courtyard, ready to help answer questions 
throughout the meeting. Don't feel like you need to sit, and if 
you need to ask them questions, they are here to do just that. 
So with that, Mr. Chairman, thank you, I will turn it over to 
you.
    Chairman Manzullo. Thank you. Let me acknowledge Donna 
Jimenez. Donna, where are you? Why don't you stand up. Donna is 
representing Congressman David Dreier, who can't be with us 
today. Thank you for your participation. I appreciate it very 
much.
    Just to give you some of the rules, I know it won't happen 
here, it's happened in some field hearings, but unlike what you 
might see on C-SPAN during the House of Representatives, during 
the committee hearing, we don't allow--what's the word for 
them?--any displays of emotion. You can smile, you can chuckle 
if you want. But no booing or hissing. I know that's not going 
to take place.
    You ought to see what has happened at some hearings. But 
that is not going to happen here. Sometimes the issues are a 
lot more complex and divisive.
    We have a five-minute clock, and the purpose of that is to 
facilitate the testimony. When it gets to 30 seconds to go, I 
will try to gently tap like this, and then I would like you to 
sum up within 30 seconds. Okay.
    All the written testimony of the witnesses will be accepted 
for the official record. If anybody in the audience wishes to 
give any testimony, any written testimony, if you could keep it 
to under two pages, two 8\1/2\-by-11 pages, single spaced, I 
will keep open the record for a couple of weeks, and then if 
you could get your testimony over to Ms. Napolitano, she will 
make sure it gets to our office and is made part of the 
complete record.
    Most of you have never testified before a Congressional 
committee. The first thing I want to tell you is relax. Nobody 
is going to put you under oath. Nobody is going to accuse you 
of doing anything wrong. I sit on the Financial Services 
Committee, and we went through that with MCI WorldCom. I just 
want to let you know you are real people out there, not those 
clowns thatcome in from those bogus corporations and do the 
huge injury that they've done.
    So let's start with our first witness Bruce Thompson. Bruce 
is the regional administrator of Region Nine for the Small 
Business Administration. And Bruce came in from San Francisco 
for us this morning. Bruce, we look forward to your testimony.
    Mr. Thompson. Thank you, Mr. Chairman, and Congresswoman 
Napolitano. Is this on?
    Chairman Manzullo. It is, but it's very soft.
    [Whereupon discussion was held off the record.]

  STATEMENT OF BRUCE THOMPSON, REGIONAL ADMINISTRATOR FOR SBA 
              REGION 9, SAN FRANCISCO, CALIFORNIA

    Mr. Thompson. Mr. Chairman, Congresswoman Napolitano, thank 
you for convening this field hearing to discuss the important 
issues of federal procurement and international trade as they 
relate to small business.
    I am Bruce Thompson, the U.S. Small Business 
Administration's Regional Administrator for Region 9, which 
includes California. I am pleased to be here today representing 
Administrator Hector Barreto and having the opportunity to 
discuss SBA's role in these areas. Here with me in the audience 
is Alberto Alvarado, our District Director for Los Angeles, and 
his very capable staff are also here.
    Chairman Manzullo. Why don't you have them stand.
    Mr. Thompson. Would you please stand up? I didn't want to 
do that with my five minutes.
    Chairman Manzullo. That's okay. We won't penalize you for 
it. So people know to whom to go for help.
    [All stand.]
    Mr. Thompson. Great people. Great people. Also, Martin 
Selander, our SBA's USEAC representative, is here, and Nick 
Manalisay, a Procurement Center representative, is also here.
    It is the mission of the SBA to help entrepreneurs realize 
the American dream of owning and expanding their businesses. I 
think President Bush said it best when he said, and I quote, 
``The role of government is to create an environment in which 
people are willing to take risk, an environment in which people 
are willing to risk capital, an environment that heralds the 
entrepreneur and small businessperson.''
    I am pleased to report that over the last three years, 
SBA's Los Angeles District Office has led the nation in 
providing $2.8 billion in financing to more than 7,000 small 
businesses, including over $1 billion to over 4,000 minority 
and women-owned businesses.
    The SBA is committed to representing small business men and 
women as an effective and efficient 21st century national 
organization, an organization that focuses on simplification, 
innovation, and dedication, in order to create a climate in 
which entrepreneurship can be both encouraged and sustained, a 
climate that ensures that small businesses have a maximum 
opportunity to compete for available procurement dollars.
    To that end, the SBA is working with the Office of 
Management and Budget as the President called for in his small 
business agenda on task force dealing with issues vital to 
small business access to federal procurement data. They are 
full and open competition and contract unbundling. It is 
important to note that this President has made it clear that he 
expects more than task force reports. He demands results.
    For 34 years, the SBA and industry have come together to 
conduct a procurement conference. This year for the first time, 
the SBA included matchmaking as part of this event. As a 
result, 1,000 appointments between qualified small businesses, 
federal agencies, and prime contractors were conducted. Due to 
its success, the SBA is taking this matchmaking program to 12 
locations across the country.
    Additionally, the SBA is conducting a top-to-bottom review 
of the 8(a) business development program to ensure effective 
management and efficient delivery, and we are also developing 
an online 8(a) application to dramatically simplify the 
process.
    Another initiative under way is the SBA's online 
procurement academy to train entrepreneurs, and, as you may 
know, the SBA has plans to restructure its workforce, including 
the Procurement Center representatives, to bring them closer to 
customers.
    In your district, Congresswoman, we are very supportive of 
the President's goal to improve small business access to 
federal procurement opportunities. During the fiscal year of 
2001 a total of 170 federal government procurements were 
awarded to small business concerns in the district for $15.9 
million, including Philatron International.
    Philatron has grown into a highly respected multimillion 
dollar electronic and electric wire, cable, and hose 
manufacturer. The company is a graduate of the 8(a) program and 
is considered the world's foremost expert in coiled cable hose.
    America's small businesses want more business. The 
President and administrative staff are strong champions for 
small business in the federal procurement system, and, 
accordingly, as I have briefly described, the SBA is committed 
to evolving and simplifying our delivery of products and 
services. We are dedicated to being proactive and delivering 
procurement opportunities to the small business community.
    Thank you for giving me this opportunity to share the 
administrator's vision, and I will be happy to answer any 
questions.
    [Mr. Thompson's statement may be found in the appendix.]
    Chairman Manzullo. Right in back of you is Phil Ramos, who 
is the president, secretary, CEO, chief operating engineer and 
janitor for Philatron. Stand up, Frank. I'm sorry, Phil. Okay. 
Thank you. [Applause.] We had the opportunity to visit his 
facility last night.
    Our second witness--and I got Phil and Frank mixed up on 
it--oh, Nick--is Nick Manalisay, is he here? Nick, would you 
stand up? All right. Everybody turn around and look at Nick. He 
is the Procurement Center representative for the USDA. What did 
I say? No, U.S. Small Business Administration. SBA. All right. 
I need some more coffee. I got the FBI and the AFL/CIO--I'm 
going to get--all these initials, Grace, with members of 
Congress.
    Anyway, people that are interested in doing business with 
the federal government, Nick, you're the person to see, is that 
correct?
    Mr. Manalisay. Yes.
    Chairman Manzullo. Okay. Thank you. Our next witness is 
Frank Ramos, Director of the Office of the Small and 
Disadvantaged Business Utilization Department of Defense. Frank 
is going to talk about Department of Defense's efforts to 
address the concerns of small business on general procurement 
practices. Frank, I didn't quite see it in your prepared 
testimony, but give us a thumbnail definition of what small and 
disadvantaged businesses are, because there is a little 
confusion that goes on there. We look forward to your 
testimony. Once you give the definition, then I'll start the 
clock. All right? Is that fair enough?

    STATEMENT OF FRANK RAMOS, DIRECTOR, OFFICE OF SMALL AND 
   DISADVANTAGED BUSINESS UTILIZATION (OSDBU), OFFICE OF THE 
    SECRETARY OF DEFENSE, DEPARTMENT OF DEFENSE, ARLINGTON, 
                            VIRGINIA

    Mr. Ramos. That sounds good. I would like to recognize, Mr. 
Chairman, Congresswoman Napolitano, and a gentleman I 
introduced you to last evening, Dr. Robert Segura, former dean 
of the School of Education, Cal State University Fresno. He has 
been on my staff for two weeks. And we are going to be doing 
some things there. Is Bob here?
    Chairman Manzullo. Stand up, Bob.
    Mr. Ramos. Mr. Chairman, and specifically Congresswoman 
Napolitano, thank you for bringing me back home. I am a Fresno, 
California native, and it's always good to get back to 
California to get a fix of Mexican food, so thank you.
    Let me define what we call small and disadvantaged 
business. According to the statute, some are firms that are 
what they call SBA certified 8(a) companies. These companies 
are socially and economically disadvantaged firms, again 
certified by the Small Business Administration. There is 
another group called disadvantaged businesses----
    Chairman Manzullo. If you'd excuse me just a second, we are 
joined by Congresswoman Loretta Sanchez.
    Ms. Sanchez. Good morning.
    Mr. Ramos. Congresswoman. I was describing small and 
disadvantaged businesses. Essentially, what that business is, 
is one who is, in effect, certifying that they are a small 
disadvantaged business, not necessarily going through all of 
the details of the certification process as an 8(a) company, 
but is certified in part by the SBA that they are, in fact, a 
small and disadvantaged business.
    In that grouping we also have HUBZones. HUBZones are 
historically under-utilized business economic centers. We are 
trying to improve their economic well-being. They are important 
because they also include Native Americans--all reservations 
are HUBZones in the Native American territories.
    We also have, according to the statute, severely 
handicapped veterans, which have again, a high degree of 
interest on my part. Then we also have small women-owned 
businesses that are, again, part of our outreach effort, and 
really all of the federal government, so just not the 
Department of Defense but all the Federal agencies.
    Chairman Manzullo. Frank, you're there just for the regular 
small business, they need some help, they can come to you.
    Mr. Ramos. I'm sorry, sir?
    Chairman Manzullo. This is for regular small business that 
may not fit into any of those categories.
    Mr. Ramos. Well, they don't enjoy the interest of the 
economic focus of all the federal agencies, but they are 
included within our umbrella, Department of Defense, as well as 
other Federal agencies.
    Chairman Manzullo. So you service everybody?
    Mr. Ramos. Yes, we do.
    Chairman Manzullo. Now we will start the clock.
    Mr. Ramos. Thank you. Again, my name is Frank Ramos. I am 
the director of Small and Disadvantaged Business Utilization. 
Essentially I am responsible for all the small business 
contracting inside of the Department of Defense.
    I want to speak to you today about the Department of 
Defense and its procurement activities within the small 
business arena. We at the Department of Defense consider small 
business to bea high priority. The very fact that 88 percent of 
all Department of Defense prime contractors are small businesses 
demonstrates how important the small business world is to the 
Department.
    Additionally, our dependence on small business is 
increasing. In fiscal year 2001 the number of small businesses 
receiving contract awards grew by 1,825, an increase of 8.2 
percent over fiscal year 2000.
    Of these 1,825 additional firms, 584 were owned by women 
and 355 were located in historically underutilized business 
zones or HUBZones, as I alluded to earlier.
    We exceeded the statutory goal of five percent contracting 
with small disadvantaged businesses, spending 5.7 percent of 
our prime contracting dollars on purchase from small 
businesses. Small businesses received over $50 billion of 
Department of Defense procurement funds last year alone. The 
Department of Defense regards the contributions of small 
business as critical and invaluable.
    There has never been a more vital need for small business 
support within the Department of Defense. Neither this 
department nor our nation could have recovered from the 
shocking events of September 11th so quickly and effectively 
without the small business community.
    Small business provided the critical surge capacity the 
Department of Defense needed to begin the rebuilding of the 
Pentagon and to take on the task of fighting terrorism. These 
business owners immediately responded to a broad agency 
announcement issued by the Office of the Secretary of Defense 
for new ideas to counter this terrorist threat. Small 
businesses have great ideas, innovative technology, and can 
respond to our needs with flexibility, speed, and agility.
    The Department of Defense has established a Small Business 
Reinvention Program. This policy assigns responsibility and 
accountability for the program at the most senior levels within 
the Department of Defense, and includes solid metrics for 
gauging success.
    Each military department and defense agency is responsible 
for an annual small business improvement plan. These plans 
detail special initiatives unique to each Department of Defense 
component that will enhance small business participation. Each 
Department of Defense component has targets, and performance 
will be measured by my office.
    Under this initiative, the secretaries of the military 
departments and directors of the defense agencies will report 
semiannually to the Under Secretary of Defense, Mr. Pete 
Aldridge, who in turn will inform the Deputy Secretary of 
Defense on their performance against the improvement plans and 
targets.
    It is important that we stay in touch with the concerns of 
the small businesses that supports our requirements. The Under 
Secretary has, consequently, established small business forums. 
The Department of Defense Office of Small and Disadvantaged 
Business Office staff, which has already met with a Wichita, 
Kansas group of small businesses that produce aircraft 
components.
    My office has strategized with women-owned businesses, 
brainstormed with Native Americans, and represented the 
Secretary of Defense on the Board of Directors of the National 
Veterans Business Development Corporation. These forums 
identify prime and subcontracting barriers, enabling us to 
discuss and develop recommended solutions with department 
leadership and the chief executive officers of the major 
defense firms. Additionally, we appreciate the support from the 
Small Business Administration, and we look forward to working 
with them in the future.
    The Army, Navy, Air Force and defense agencies' small 
business offices are also doing their part to help the 
Department of Defense meet its goals. They, along with over 500 
small business specialists across the nation, are my means to 
transform the small business acquisition culture in the 
Department of Defense. And I emphasize culture.
    The Department of Defense specialists will foster a 
cultural shift in the attitude of the acquisition workforce 
towards small business through new teaching modules. The office 
of Secretary of Defense, my office, in partnership with the 
Defense Acquisition University, is creating the first small 
business training module for executives and program managers. 
These new modules will explain why the Department's acquisition 
workforce should value the contributions of small businesses. 
Future training initiatives will focus on improving the use of 
Historically Black Colleges and Universities/Minority 
Institutions, Hispanic-serving institutions, and we intend to 
reinvigorate training about HUBZones, including Native American 
reservations, and so on.
    Department of Defense continually strives to enhance its 
overall small business performance, particularly to achieve the 
goals recently established for woman-owned small businesses, 
HUBZones, and service disabled veteran-owned small business. 
There are positive trends. In fiscal year 2001, $51.8 billion 
of Department of Defense procurement spending went to small 
business firms, with $28.3 billion of this going to small 
business prime contractors.
    I'm sorry, sir.
    [Mr. Ramos's statement may be found in the appendix.]
    Chairman Manzullo. Appreciate it. Our next witness is 
Deborah Cabreira-Johnson of the Office of Procurement of the 
County of Los Angeles. She is going to speak about the county's 
effort to assist small businesses to access and secure federal 
contracts. I look forward to your testimony. In your testimony, 
if you could also bring in what other agencies may be doing the 
same thing you are, or trying to do the same thing you are, it 
would make it a little easier for folks that want to break into 
procurement to try to put all the pieces together. We look 
forward to your testimony.
    Ms. Cabreira-Johnson. Yes, can I answer that----
    Chairman Manzullo. Sure. First Frank has to turn off his 
microphone.
    Mrs. Napolitano. And while he does that, I want to tell 
everybody, before everybody runs out, validation for your 
parking, please see the table over there. Validation.
    Chairman Manzullo. Okay, Debbie, you can tell that before 
we turn the clock on.

   STATEMENT OF DEBORAH CABRIERA-JOHNSON, MANAGER OF THE LOS 
  ANGELES COUNTY PROCUREMENT TECHNICAL ASSISTANCE CENTER, LOS 
                      ANGELES, CALIFORNIA

    Ms. Cabreira-Johnson. Thank you. The Office of Small 
Business is the parent of the PTAC or Procurement Technical 
Assistance Center. The PTAC is one of the activities of the 
County of Los Angeles Office of Small Business, which is the 
resource center for helping business attain government 
contracts.
    Our director, Edna Bruce, is here this morning with me. 
Edna, would you stand?
    Chairman Manzullo. Stand up, Edna. Good to see you this 
morning.
    [Applause.]
    Ms. Cabreira-Johnson. And as far as other agencies or 
organizations that may be doing the same thing, there are quite 
a few which we do not try to replicate those same processes, 
but we try to complement each other. Some of the agencies would 
be the Small Business Development Centers located throughout 
Southern California. Of course, our partners--major partners in 
offering our training is the SBA, Small Business 
Administration, who often speaks and presents at our workshops, 
trains. The General Services Administration, which is a 
majorpurchasing agency for the Federal Government, and we conduct 
training classes together.
    Chairman Manzullo. Somebody could come to you and if they 
are not in the right facility, you could direct them, is that 
correct?
    Ms. Cabreira-Johnson. Certainly. That's my job.
    Chairman Manzullo. Look forward to your testimony. Now 
we'll start the clock. Thank you.
    Ms. Cabreira-Johnson. Mr. Chairman, Congresswoman 
Napolitano and distinguished members, I appreciate the courtesy 
you are extending to Los Angeles County in giving me the 
privilege to present this testimony.
    I am Debbie Cabreira-Johnson, Manager of the Los Angeles 
County Procurement Technical Assistance Center, funded by the 
Department of Defense, Defense Logistics Agency.
    The Procurement Technical Assistance Center, or PTAC, is 
one of the program activities of the County Office of Small 
Business. There are 88 other PTACs nationwide, five of which 
are in California. Our mission is to assist businesses, 
especially small, minority, woman-owned and veteran and/or 
service-disabled-veteran-owned businesses in their efforts to 
do business with the Department of Defense and other government 
agencies.
    The County of Los Angeles has a population of approximately 
12 million, a greater population than 42 states in the nation, 
with more than 1 million in the county unincorporated areas 
alone that ranges from a few blocks to 100 square miles in the 
Antelope Valley. There are 88 cities within the county's 
borders, the largest of which is the city of Los Angeles.
    As members of the Small Business Committee, you know how 
critical small business is to this nation's economy. In Los 
Angeles County there are approximately 250,000 small 
businesses, 96 percent of which have fewer than 100 employees.
    The Los Angeles County PTAC receives numerous inquiries 
from firms and business in the county as well as the 
surrounding areas. On a daily basis we see and hear which 
government buying practices work well and also which might 
present obstacles to small business participation.
    It is our job to guide these firms step by step if 
necessary through the stages of this complex procurement 
process. This may include but is not limited to marketing, 
identifying appropriate solicitations, preparing bids, helping 
them prepare their bids, understanding regulations, the federal 
acquisition regulations, and administering the contracts.
    In addition, we are in a position to help connect large 
prime contractors with capable small business contractors, a 
growing function which is significant in this area of contract 
consolidation.
    In order to service these many businesses and cover the 
county's vast area, we hold regular monthly courses at the PTAC 
headquarters. We coordinate quarterly workshops with our 
partners, the U.S. Small Business Administration, and the 
General Services Administration throughout the county to train 
and disseminate this information.
    For the first 18 months of our operation, the L.A. 
businesses that we have been able to register on the County's 
electronic database numbers approximately 9,000. Of those 9,000 
businesses, 212 of those are registered vendors right here 
located in the 34th Congressional District.
    The number of active clients that the PTAC services, 
roughly 423. The number of small business awards that I can 
report number 18, resulting in over $7.4 million in awards. We 
have held numerous classes over the last year and a half, 42 
and counting. The average attendance at our county workshops 
held quarterly number 300. In many instances we run out of 
paper, we run out of documents to hand out at the door because 
they show up unregistered, without RSVP. The average attendance 
at monthly classes, 50.
    I believe our presence has made a positive impact in the 
community. Many contract awards are not reported back to us, 
thus making it difficult to measure our impact in dollar 
figures. However, in just the one and a half years of PTAC's 
existence, five years for the County Office of Small Business, 
we can report success in our outreach and marketing efforts 
with small business.
    We help our clients one by one find the opportunities, 
complete the paperwork, which eventually will lead to obtaining 
a government contract. Small business contract awards mean the 
creation and retention of jobs. But the PTAC mission is an 
ongoing one. Federal and local matching funds are critical to 
enable the PTACs to continue our mission of helping these 
capable small firms pursue contracts as either prime 
contractors or subcontractors in whatever capacity possible. I 
always tell my small business clients that even the smallest 
piece of pie is better than no pie at all.
    We applaud the Senate Defense Appropriations bill which 
included an additional $5 million for the PTAC program.
    Mr. Chairman, thank you again for the privilege of 
presenting this testimony. Please let me know if you have any 
questions.
    Chairman Manzullo. The ding means you've got 30 seconds to 
go.
    Ms. Cabreira-Johnson. Okay. I applaud the Defense 
Appropriations Committee. We hope that the House version will 
agree to the Senate's increased spending level. We also commend 
this committee for listening to the needs of small business, 
and Representative Velazquez for introducing Bills H.R. 1324 
and H.R. 2867, aimed at helping small business in the federal 
procurement arena. Again, Mr. Chairman, honorable members, 
thank you again for this privilege. Please let me know if you 
have any questions.
    [Ms. Cabriera-Johnson's statement may be found in the 
appendix.]
    Chairman Manzullo. Thank you. Appreciate it very much. Our 
next witness is Eric Espinoza. He is the owner of Stitches 
Uniforms, and he is going to talk about specific problems faced 
by his company securing federal contracts, and the 
recommendations for the system. Eric, we look forward to your 
testimony.
    Mr. Espinoza. Thanks very much. A little nervous, but first 
I want to thank Chairman----
    Chairman Manzullo. The first thing you do is take a glass 
of water. Go ahead. Take a sip of water, and then we will start 
the clock.

   STATEMENT OF ERIC ESPINOZA, OWNER, STITCHES UNIFORMS/G.S. 
           DUNBAR & CO. INC., MONTEBELLO, CALIFORNIA

    Mr. Espinoza. First, I want to thank you for coming on a 
long weekend and yesterday. I am sure staying away from your 
family on a holiday weekend was a little trying.
    Chairman Manzullo. It was great to get together for some 
true Mexican food, really, that Grace had prepared for us.
    Mr. Espinoza. Again, Congresswoman Napolitano, thank you 
for putting this all together, and giving us a chance to speak.
    First, I would like to say that the SBA and the House Small 
Business Committee were formed in function for the purpose of 
fostering competition and promoting small businesses throughout 
the United States. What our research has shown, however, is 
that a disproportionate number of contracts to provide clothing 
for the military are awarded to the southern and northeastern 
part ofthe country to the same contractors over and over.
    In the two and a half years that I have been researching 
contract awards through the DSCP clothing and textiles, I have 
not seen one contract awarded to a firm in California. I am not 
saying there haven't been any, but I haven't seen any.
    GS Dunbar, our partner in our joint venture to provide 
clothing to the military, was in the 8(a) program for almost 
ten years before they were awarded their first contract, and 
the total award for their contract was a relatively small 
$300,000.
    The testimony that--prior to mine right now, the--I forgot 
your name. Stated that there were 18 awards for--and what was 
the total on that? 18 awards for $7 million. 18 awards for $7 
million. You divide that among the companies, that is a fairly 
small dollar amount per company that is coming out of the 
military for these contracts.
    The contracts that we see when we are doing our research 
have been large contracts, to large companies, throughout the 
south and the northeast.
    The contract that is--I am speaking of now that we are 
having a problem with was for a little over $5 million to 
provide a million T-shirts to the army. The cost on those last 
year was $5.99 for the short sleeved and $7.77 for the long-
sleeved T-shirt, and we underbid that bid at $5.49 on the short 
sleeve and $7.49 on the long sleeve, a significant savings to 
the government, yet our experience has been that we have been 
stonewalled on a number of situations with the DSCP.
    They have--I lost my train of thought there. They have 
negotiated, changed the bid from a sealed bid to a negotiated 
buy on us, and twice they have had negotiations, and they just 
do not seem to be very forthcoming with information for us. 
They have made it very difficult for us to get any information 
out of them, and we have just had a significant number of 
problems. If we're the low bid on this contract, we feel we 
should be getting a little more information from them on why 
they have renegotiated and why they have taken steps they have.
    Now, there is something to be said for proximity to the 
capital with regards to the companies that are in the northeast 
and the south. They are a lot closer to the capital. They can 
attend frequent seminars and meet with procurement officers, 
but the fact that in this instance we were able to produce the 
same garment for less money, we felt should stand on its own to 
a certain extent. We felt that we have been--that, given the 
hostile nature of the procurement officers to our inquiries, 
that a trip to the capital would not serve much of a purpose. 
We believe that the proposal should stand on its own in order 
to receive full consideration for award, and if it is necessary 
to meet the procurement officers, in order to satisfy their 
questions, we would be happy to attend any requested meeting, 
but that request has never been forthcoming.
    Another important issue that I would like the government to 
address perhaps is competitive pricing. Some of these companies 
in the northeast or in the south have much lower cost structure 
than we do out in California. We were still able to bid this 
contract for less, but we are not seeing anything with regards 
to an award. I think there is something wrong with that, but, 
these are the problems that we need to address.
    Sorry, I kind of stumbled through that. I was a little 
nervous, but I do again want to thank you for listening to me 
and taking the time out of your busy schedules. Thank you.
    Chairman Manzullo. If you encounter a procurement officer 
that is nasty to you, have you taken the appropriate steps----
    Mr. Espinoza. They have never been forthcoming. One example 
was when we inquired--we have hired a consulting firm basically 
in Washington, DC, that had done these types of procurement, 
and we were told that when the buy is turned from a sealed bid 
to a negotiation, that we have a right to request a debrief on 
why it was changed to a renegotiation. When we requested that, 
we were told that basically we did not have that right, and 
they were not going to----
    Chairman Manzullo. If you run into that contact Grace. She 
is a member of Congress and representative on the Small 
Business Committee, and relay that to us and we will take care 
of it.
    Mr. Espinoza. Okay.
    [Mr. Espinoza's statement may be found in the appendix.]
    Chairman Manzullo. Our next witness is Adriana Grippa.
    Ms. Grippa. Good morning.
    Chairman Manzullo. Did I pronounce that correctly, Grippa?
    Ms. Grippa. Yes, thank you.
    Chairman Manzullo. All right. There is a vowel on the end 
of my name, too, so I struggle to make sure I pronounce them 
correctly.
    Ms. Grippa. No problem.
    Chairman Manzullo. She is the president of Master Research 
& Manufacturing, Incorporated, to testify on specific problems 
faced by her company to secure federal contracts and 
recommendations, and we look forward to your testimony.

   STATEMENT OF ADRIANA GRIPPA, PRESIDENT, MASTER RESEARCH & 
            MANUFACTURING, INC., NORWALK, CALIFORNIA

    Ms. Grippa. Thank you very much. I appreciate it. Good 
morning, ladies and gentlemen. I would like to start my 
comments with my personal thanks to Donald Manzullo, chairman 
of this hearing, and Congresswoman Grace Napolitano.
    Like Mr. Manzullo said, my name is Adriana Grippa, and I am 
the president of Master Research & Manufacturing. We are a 
company who specialize in the fabrication of critical aerospace 
components and assemblies.
    My husband Miguel and I started our small company about 25 
years ago. And I am proud to say that we have been doing 
business with the Department of Defense for 20 of those years. 
Overall, we also enjoy a good business relationship with the 
Procurement Offices and an excellent relationship with the 
administration and quality representatives from Defense Center 
Management Administration Office with the IC trade in Van Nuys 
and Norwalk.
    The last few years, however, have been very difficult 
because of our dealings with the Defense Supply Center--
Richmond. For those of you who are not familiar with this 
agency, it is now the procurement center for most of the 
military hardware needed by the Navy and the other Armed 
Forces.
    Throughout the years, we received over 800 contracts from 
Department of Defense centers located all over the country. 
This procurement process always went through the normal steps 
and successfully completed. By normal steps I mean request for 
quote is solicited by a government agency.
    The suppliers submit quotes. The contract is awarded to the 
lowest bid. Items are manufactured in compliance with contract 
requirements. Items are then inspected, approved and delivered, 
and payments made.
    We can't recall an occasion where the terms and conditions 
of the contracts were changed by the procuring office after 
award. According with the Federal Acquisition Regulations and 
standard business practices, to do so requires a bilateral 
agreement from the government and the contractors.
    However, in the past two years in dealing with the Richmond 
Center, 10 contracts have beenmodified unilaterally by the 
Procuring Office after the award, without regard to the consequences to 
our company, our rights, and in violation of the Federal Regulations. 
It's almost as if the Richmond Center is intentionally trying to injure 
its small business base.
    I say the small business base because we are not the only 
contractor experiencing this problem. We attended an open house 
in Richmond some months ago and heard many of the same 
complaints from other business owners. These modifications 
after award have caused severe financial hardship, and continue 
to do so.
    Our business goal is to produce good quality products for 
the aerospace industry on schedule and at a reasonable price. 
To do so, we have to concentrate our efforts in two main areas, 
which are quality control and lean manufacturing.
    Now our time is spent correcting procurement blunders and 
after-the-fact modifications to the items being manufactured. 
We have even been forced to hire a contract specialist and have 
retained legal counsel just to deal with the growing problems.
    The most common and most expensive contract modification we 
are experiencing is the change of items to flight critical item 
status. Categorizing an item as flight critical restricts 
procurement to purchase only from approved sources, in most 
cases just the prime contractor. Some are items that we have 
manufactured and that have been in use for many years. Besides, 
critical nature or not, we have proved our capabilities to 
build them. And we have seen many items categorized as flight 
critical that has nothing critical on it.
    When the status of the item is changed after award and we 
have already started the manufacturing process, it forces us to 
stop working and freezes the funds already invested. For 
example, after a recent contract award, we purchased a special 
material from Dupont, which is the only authorized fabricator. 
After we received this material and paid $50,000 for it, we 
received a stop work order from Richmond and a request to 
submit what is called a source approval request, because the 
item had been reclassified to flight critical. This special 
material has been sitting in our warehouse and our money tied 
up for more than six months now, waiting for our source 
approval request to be approved. The Procurement Office's 
response to our complaints has only been, ``We are very 
sorry.''
    This chart that I had brought with me is an example of how 
the taxpayers' money is also wasted (see page 83). As you can 
see--thank you. As you can see, we received and successfully 
completed two contracts, and after we received the third one, 
somebody decided to change the product to flight critical.
    We submitted a source approval package, which took 18 
months to be approved by the Navy. 18 months. That is a long 
time. In the meantime, another order was awarded to the prime 
contractor, the only approved source. And finally, our parts 
were purchased to meet an emergency need before we received our 
source approval.
    In this example, as you can see, 177,000 taxpayers' 
dollars----
    Chairman Manzullo. Adriana, could you suspend a second and 
turn that chart towards the audience? Because we have a copy of 
that before us. Thank you. Go ahead.
    Ms. Grippa. Okay. In this example, 177,000 taxpayers' 
dollars were wasted because of a senseless restriction. In 
addition, it smacks of discrimination against a small business 
and collusion between the big primes and the government.
    And this is just the tip of the iceberg. I wish to have 
more time to tell you all about our troubled history, but I 
don't have time. I know that you may have more important issues 
to deal with, but if we let Procurement Offices continued with 
this behavior, they will drive our company, and who knows how 
many others, out of business. Besides, the amount of money 
wasted may be tremendous, and I think it justifies for an 
investigation.
    I hope that you can use your power to solve the obvious 
problems within the government procurement system and 
especially those at the Defense Supply Center-Richmond. As a 
small business owner and a taxpayer, I thank you for this 
opportunity to bring this case to your attention. Thank you.
    Chairman Manzullo. And thank you.
    Ms. Grippa. And can I add something very, very quickly?
    Chairman Manzullo. Sure.
    Ms. Grippa. I just want to let you know that I am not only 
a small business, but we are minority, woman-owned, and also I 
am an 8(a) certified business.
    [Ms. Grippa's statement may be found in the appendix.]
    Chairman Manzullo. Mrs. Sanchez, do you want to go first?
    Ms. Sanchez. Thank you, Mr. Chairman. First of all, I want 
to thank you, Mr. Chairman, for allowing this Congressional 
hearing here in the greater Los Angeles area. In particular 
because we here in Southern California do a lot of defense 
contracting, and as you know, at the federal level, the defense 
budget is the largest part of our discretionary spending.
    I also wanted to thank my colleague, Grace Napolitano, for 
twisting the arm or cajoling or whatever it is that you did to 
get the Chairman to be here, but, you know, I am from Orange 
County, and I--well, it is easier than my chairman, but--I am 
from Orange County, but I feel very strongly about this whole 
issue of small business, having been both in the corporate 
world before and owning my own business before I became a 
Congresswoman.
    In fact, you know, it's interesting, because I don't sit on 
this committee, and I consider this committee a very big policy 
committee, and a policy committee whose efforts impact the rest 
of the committees and the spending committees of the Congress. 
I happen to sit on the Defense Committee, on the Armed Services 
Committee, and almost $300 billion a year gets spent on defense 
at the federal level, versus maybe about $700 million or so 
from a small business perspective that maybe this committee has 
jurisdiction over, so you can tell that the largest spending 
comes out of a committee that I sit on. And because of that, 
what happens here, and how we make policy and how we move it 
through the Congress, and more importantly, maybe not just 
policy, but process, how the process is driven, makes a big 
difference for small business, and I see it all the time, being 
the only Democrat sitting on the Defense Committee for this 
section of our area.
    I have seen a lot of things over the last six years in my 
time on that committee in the Congress. And first and foremost 
is this whole issue of, before 9/11 really, was our biggest 
problem was that real defense dollars were not increasing, in 
fact, was contracting in the budget. And what happened, because 
of that, is that prime contractors, the big guys, in order to 
meet their growth, needs, because they--a lot of them are 
publicly traded, they would begin to cannibalize all of the 
work inside to their own companies, eliminating the contracts 
that were going to subcontractors, small and medium business 
size, even the medium business size, $50 million, $100 million 
companies were affected by this.
    There is also another problem I think at the defense level, 
and I see it all the time, and I know if we could fix this, we 
would be so much better off, and it all comes down to this 
issue of processand really how we finance defense projects, how 
we put them in the budget. And also I think a mentality from the 
defense, Pentagon area, where everything--you know, once the Congress 
decides we are going to spend on a project, there is this sort of what 
I call an orderly procurement process. You know, you are the prime, we 
go year after year, this is the way we spend.
    So if there is any innovation or if there is an outside 
company that is coming in and telling us, we have something 
innovative, you don't have to spend the $100 million doing this 
particular thing, you can buy it off the shelves, and you can 
save a lot of money, and the technologies available from a 
commercial basis right now and it's redundant and it's robust 
and we can use it, the guy at the Pentagon says, ``You know, 
you are going to mess up my orderly procurement process. I 
mean, these are my marching orders.'' So we need to fix that, 
and I hope that we can work together with the help of the Small 
Business Committee members to ensure that particularly in 
defense where the majority of the money is spent, we can do 
something about it.
    Bundling is a problem, it's been a major problem for small- 
and medium-sized businesses. Rebid, you know, when a small 
business goes out and it has a five-year contract, first option 
opt two years from now, and all of a sudden through a new 
process in the federal government, their two-year contract, 
they are notified, well, now is just a one-year contract. If 
they put the investment in for capital machinery and other 
things, invested in the training of their employees and all of 
a sudden they don't even have a guarantee of a two-year 
contract, that is a big problem for small- or medium-sized 
businesses. So we need to address that also.
    And I want to make a couple of questions to Mr. Ramos. I 
know I am going on a little, but I didn't get an opening 
statement. And I think these are so important for us to 
realize. Vendor payments, making the payments on time. I have 
got so many vendors who have gotten a contract, and they are 
half a million dollars behind from the Pentagon payment. This 
is another process we need to work on to get right.
    And lastly, I want to say to the gentleman here, the 
younger gentleman who is a little bit nervous, first of all, 
thank you for coming, Eric, because your time is worth money 
when you are a small business owner or when you run that 
company, and so we appreciate you being here today instead of 
being out trying to make rain, as we call it in the business, 
and getting the contract.
    I have found, in the 6 years I have seen this process, that 
it's relationships to a large extent that allow you to identify 
far enough ahead of time what is going to be procured, what is 
going to be available. It allows you to get ready for the whole 
process, so relationships become very important, and I think 
the first place you start is with your Congressperson, because 
they can help you with their staff to work with you.
    You know, I have not really found, and I hate to say this 
because I have a lot of lobbyist friends, but, you know, hiring 
somebody back in Washington, DC. Because they tell you they can 
get the in and they can get the hit for you, isn't the easiest 
way to break into all of this. And this is to DC. They come 
later when you are very far along the process, and you are 
really, really competing for something.
    First and foremost I would say to you begin with your 
Congressperson, and with all this spending that is going into 
defense, I am sure--I think at the Pentagon there is this guy, 
and I am sure his name is Mr. Jones, and, excuse me, he is an 
Anglo, older male, and he is the one that is letting all these 
contracts, and I haven't been able to find him, I haven't been 
able to find the door where I can send my subcontractors to go 
and to get this contract. So we need to make a better process 
by which we can involve small business.
    And I would like to have Mr. Frank Ramos--who, by the way, 
I think you have been doing a great job, Frank, but you and I 
both know, there are major, major problems. What are we doing 
about making the process more transparent so that our small 
innovative businesses have a shot to win these contracts?
    Mr. Ramos. Let me just go back, Congresswoman. First of 
all, your contract comment about being able to purchase right 
off the shelf. After September 11th I arrived in my office and 
listened to the special operations command, and the past 
circumstances that the military found itself, and I don't want 
to say before this Administration came out, the shelves were 
somewhat bare. I listened to the command--special operations 
commander procurement officer, senior person, who was literally 
taking a credit card and going around California and buying 
products for the special command officers that are in the field 
in Afghanistan. They literally did that, and they found a way 
to go after the new technology.
    The second thing that happened, and I inserted myself into 
this process which hadn't been done, and I alluded to the 
comment I made earlier about culture and attitude, there was an 
announcement for counter-terrorism, and they asked everybody in 
the world, ``Tell me what can you bring to the table to fight 
this war against terrorism.'' We had 12,500 proposals, 
including small businesses. We reviewed 200 of those, some of 
which were small businesses.
    What I did is I inserted myself by saying, if you come 
across a small business, which is mom and pop, for example, 
that doesn't have the managerial, technical, financial 
capability, we don't do a finance, and my experience of the 
SBA, I bring this capability to it, we will assist that small 
business to provide their product or service to the special 
operations counter-terrorism expert.
    Not only that, I offered that if they found a firm that 
needed that type of support, we will put them into the Mentor-
Protegee Program. We have $25 million that we can use within 
that program to support the small business owner, so we are 
taking some proactive effort into that.
    This area of procurements that you alluded to, I recognize 
and am assured by Mr. Aldridge, that we did not have in the 
procurement training of the senior executive offices within the 
Department of Defense the training module that explains with 
some clear clarity the process to help small businesses. There 
is some, but it's not in a regular training module.
    I have contacted, and have secured agreement of Frank 
Anderson. He is the president, CEO, former one-star Air Force 
general at the Defense Acquisition University, and we are going 
to have a procurement module to train the most senior officers 
within the Department of Defense.
    I brought on Dr. Segura, as I introduced him earlier, the 
former Dean of the School of Education, Cal State Fresno, to 
help me with that specific endeavor, and to bring those 
training modules so that our small businesses can understand 
how to do business with the Department of Defense. It is 
complex. There are some issues there.
    With respect to this panel, and I think the Chairman 
recalled the last hearing that we had, I took all of the panel 
members that were there by the hand and I said, I will find out 
what is going on because I am learning the process of what is 
right and what is wrong. That which is right we are going to 
showcase. That which is wrong we are dealing with, and eyeball 
to eyeball these contracting officers in there, and I am deadly 
serious about this.
    So I have committed to--yesterday that Mr. Berrazas, who 
was here yesterday, the gentleman to my right, and to Mrs. 
Grippa, that I will take this issue, and members of my staff, 
and we are going to explore what went on in the process, we are 
going to tell them the good, bad, ugly of the process. If it is 
inside, we are going to address it, and if it is outside, at 
least you will be informed as to what went wrong.
    Chairman Manzullo. Frank, we appreciate that very much. I 
know you have beenfollowing up on the witnesses we have had in 
Washington, and your work on that has been no less than exemplary.
    Ms. Napolitano, do you have some questions?
    Mrs. Napolitano. This might not work too well, so they 
asked me to use this one.
    There aren't any questions, but in the interests of time I 
am going to be very short and very specific, and Bruce and 
Frank, I--and also Deborah, I need to find out how many 
employees do you have and where are they placed, and what kind 
of business community do they serve? I mean, the number of 
businesses your staff serves, and how can we get the best--how 
can we help you increase the outreach to the businesses, 
because obviously you can't have enough personnel?
    It is proven, I have had to take some of my chambers over 
some of the actual--the one-stop shops, and we have done all 
kinds of different things to be able to have--I don't know of 
all of the things that are out there, and I would like you to 
share with us in how we can help you do a better job. And 
Frank, I won't become one of those [inaudible]. As Mr. 
Manzullo, Chair. It's that important to our businesses.
    Mr. Thompson. Congresswoman Napolitano, when in Washington 
they had the joint meeting with the procurement offices back 
there, we brought in, as I mentioned in my testimony, a 
thousand small businesses to line them up so they could be 
right there and interview with these procurement officers. We 
are going to take that on the road, and I have been assured 
that one of those 12 meetings will be here in California. And I 
think that--too loud?
    Chairman Manzullo. My district, too.
    Mr. Thompson. Oh, absolutely. Mr. Chairman, I can almost 
guarantee there will be one there around the corner from you.
    Chairman Manzullo. That's why I'm the chairman.
    Mr. Thompson. That's exactly right, and I apologize for not 
mentioning that when I was talking to my good friend 
Congresswoman Napolitano here from California, because it is 
important that we do bring it out to the West Coast, because of 
course there is a lot that happens in Washington, DC.
    With staff, we are trying to reorganize the procurement 
staff that we have out here with our six offices in California. 
We want to make sure that they are persistent in what they are 
doing in working with small businesses.
    Our SBDC offices, as you mentioned, the one-stops, those 
are so important for those individuals to give counseling and 
direction to small businesses of how they can work with the 
SBA, and how they can work with the federal government, and 
that's happening. We have some great SBDC directors.
    Mrs. Napolitano. No, they are wonderful. I don't dispute 
that. What I am trying to figure out is how many people do you 
actually have at those SBD centers, and more than that, I think 
California, because of the budget consciousness, is looking at 
cutting some of those offices. I want to be sure we continue to 
be able to have them there to provide the assistance.
    Mr. Thompson. Well, we might be leaner, but we're going to 
be more--I don't want to use the word meaner, but we're going 
to be direct in what we do and try to focus. We are taking a 
lot of our--as you know probably better than most, a lot of our 
back room operations and loan collections, things like that, we 
are taking and trying to put those in certain centers around 
the country so that we can take our people that are in SBA 
offices that have been sitting at desks taking notes and 
writing papers, and doing those things, to get them out into 
the community so that our work force can really be out there to 
help small businesses. Right now we don't reach the 24 million 
small businesses the way we should. The Internet is a big asset 
to us, and there's a lot of these things, and small businesses 
will go on the Internet. There's all kinds of opportunities for 
them, not only to register for loans, but also--I'm sorry, go 
ahead.
    Mrs. Napolitano. We know that; the problem is these people 
don't. They don't know how to access that information, and 
unless you get those workers out here to actually sit and 
listen to them and give that information out to the Chambers 
and to the newspapers so they put it out and people can look at 
it, there is very little information filtering to the West 
Coast, and that is a fact.
    And that is why I am so concerned about how do we get the 
information out to a small business to become more informed and 
educated about how it is that they can do government 
procurement. And so that was the reason why I was asking.
    And you guys do a great job. The problem is you are 
understaffed. You don't have enough time to service the 
hundreds of thousands of businesses in California, and that's 
why I am trying to figure out how do we help you do a better 
delivery job, so that you can, because I'm sure if everybody 
here went to you right now, you would be swamped. You need to 
be able to have an effective method of being able to deliver, 
just like my colleague over here, Sanchez, had mentioned. 
Frank?
    Chairman Manzullo. Frank, what's the answer to the 
question?
    Mr. Ramos. Thanks, Grace. Congresswoman, here is what I am 
willing to offer, but I have to do this very narrowly. And the 
reason why I want to do this very narrowly focus just on 
Department of Defense, Department of Defense. I will give you a 
quick example. We had a veterans forum with the other agencies 
including the Department of Energy, and somebody asked the 
question about security clearances, and it took a half hour to 
explain the difference between the security clearance, which 
was top-secret from the Department of Energy, versus the 
security clearance from the Department of Defense.
    While you obtain the same result, the process is different.
    I am willing to bring a forum of Department of Defense 
personnel, if you would host it. We don't have the resources.
    Mrs. Napolitano. You have got it.
    Mr. Ramos. It would be very narrowly focused in terms of 
how-tos with regard to the Department of Defense, and we are 
doing this in the HUBZone up in Newark, New Jersey, the 
Chairman's counsel, Nelson Crowther, is going to join us, we 
have--we're bringing Native Americans, because they're 
HUBZones, they bring contracting opportunities. We alluded to 
the Alaskan tribes, who have sole source, no contract threshold 
ceilings; we will also bring in the local commands to explain 
the how-tos.
    What I don't like to do is bring Nelson Crowther, of the 
Chairman's staff, doesn't like these conferences, because you 
give high hopes for people assuming that you're going to need 
contracts. I think it's more important that we explain to them 
the requirements of how you do business with folks, past 
performance, how to team with other folks, and that is what I 
would like to do, and I'm willing to do this, with some lead 
time.
    Mrs. Napolitano. You're on, sir. And Ms. Sanchez is also 
going to be in on that, and I have invited Mr. Manzullo to come 
down, and not quite sure whether he can. But thank you so much. 
I appreciate that.
    Chairman Manzullo. Thank you, Grace. I've actually got a 
follow-up question. During the direct testimony, Bruce, you 
talked about some event in Washington with a thousand small 
business people. Would you tell us about that again? And when 
did that take place?
    Mr. Thompson. This took place in May, I believe, Mr. 
Chairman. Every year for the past34 years they have had the 
procurement hearings back there in Washington as kind of a--I haven't 
been to it, but my understanding of it is that businesses come in and 
listen to basically what Frank was talking about. How do you get 
contracts, so forth, so on.
    This year for the first time what we did is we set up 
appointments with a thousand small businesses with prime 
contractors and also with the federal government to sit face to 
face and talk about these contracts and how you get them. And 
that's the difference, Mr. Chairman, and this was the first 
year that this happened. And that's what we're going to take on 
the road. We are going to do an additional 12 of those around 
the country.
    Chairman Manzullo. I don't want to interrupt you, but----
    Mr. Thompson. No, that's all right.
    Chairman Manzullo [continuing]. But we had a procurement 
conference back home; Deirdre Lee came in along with some of 
the highest officials, and we had about 250 people showed up. 
Even a lady that makes baskets. She said, who knows? The 
Department of Defense may need a basket. Maybe they do. I don't 
know. But then we worked with--in conjunction with our local 
PTAC center, and it takes a while--I don't want to use the word 
qualified, but to get the small business people up to speed.
    I want to see the Department of Defense, and the SBA, and 
the rest of the agencies, get a hold of the large corporations 
and say, ``You shall show up at this conference, and you shall 
bring with you requests for proposals.'' Because they are doing 
business using government money, and I don't see much 
excitement.
    If the beneficiaries of most of this money are big 
companies, then they should be the ones out there trying to 
find the little guys. With all due respect, not you. You're 
there to facilitate the meeting. But as many meetings as I've 
been to, and to which my constituents go, it is the same thing: 
Where are the big corporations with the RFPs? And that is what 
I would like to see.
    They say, Well, you got to go online; Well, you got to do 
this; Well, you have to do that. Well, heck, just show up. You 
want to do business with the federal government, you are a big 
corporation, you got a big contract, then you shall, s-h-a-l-l, 
you shall be in Rockford, Illinois, or wherever it is, and you 
shall show up with contracts in hand, and willing, hungry, 
starving bidders over here. The area that I represent has a 30 
percent manufacturing base. In 1981 we led the nation in 
unemployment at 25.9 percent.
    More people were unemployed in Rockford, Illinois 
proportionately in 1981 than during the so-called Great 
Depression. I see zero incentive on the part of the major 
corporations whose legal task it is to bring in the little 
people that we represent. They don't do anything. Sure they 
have people that are associated with them. Sure they outsource 
and everything. Sure they do this, they do that, but that's the 
type of hearing I would like to have. I want them to just show 
up. There may be 100 people bidding for one contract, but at 
least there is a contract, and after a while the little guys 
get tired of going to schools. I see a lot of nodding going on 
around here. Little guys--little guys; that's Midwest. What do 
you say in California? The word ``guys,'' is that okay out 
here?
    Whatever it is. But little guys are out there, and they 
come to these shows--Many of them run the machines at their 
little shops, and they get all the tools and are told to go on 
site and go to everything, and then nothing happens. But I 
would love to work with you to be able to have one of these 
forums.
    Mr. Thompson. We will do it.
    Chairman Manzullo. Well, great.
    Mr. Thompson. Thank you, Mr. Chairman. We will take you up 
on that.
    Chairman Manzullo. Okay. We're going to have to move on. We 
have 13 witnesses on the next panel, and again, we want to 
thank you for coming and appreciate everything that you are 
doing, and you can applaud this panel. We'll allow that here. 
(Applause.)
    Mrs. Napolitano. The panel, before you leave, thank you 
very much. May I ask that you begin giving us some contacts, 
some of the California contacts for small business for defense 
so that we can, when we do our workshop, we can invite all 
those folks that you want to come in, especially the big guys.
    [Recess.]
    Chairman Manzullo. We have a second panel divided in two 
groups because of the logistics of the cases. Jeff, your mike 
is on. How many more do we have here?
    [Whereupon discussion was held off the record.]
    Chairman Manzullo. Let's get everybody up here. Set the 
rest of them over here. That would be fine. While we are 
waiting, let me introduce, representing Congresswoman Solis--is 
Aiha Nguyen. Aiha, where are you? I tell you what, are you 
going to set up everybody over there?
    [Whereupon discussion was held off the record.]
    Chairman Manzullo. I think we are going to start the 
testimony over here on this side, and I think that should work 
out okay. And Ray, if you would turn those name plates towards 
us, at an angle, and if those witnesses could come over and 
take their seats.
    Our next panel, we are going to start with David Bearden. 
Dave is the Deputy Assistant Secretary and Chief Operating 
Officer of the Economic Development Administration, EDA, with 
whom we work very closely in our district at the U.S. 
Department of Commerce out of Washington. You came all the way 
from Washington to be with us, Dave. We appreciate it and look 
forward to your testimony.

   STATEMENT OF DAVID BEARDEN, DEPUTY ASSISTANT SECRETARY OF 
  COMMERCE FOR ECONOMIC DEVELOPMENT, HOUSE COMMITTEE ON SMALL 
                            BUSINESS

    Mr. Bearden. Okay. Well, thank you very much, Chairman 
Manzullo, and also Representative Napolitano, for inviting me 
to be here with you today, and I appreciate the opportunity to 
talk to you about the Economic Development Administration's 
Trade Adjustment Assistance for Firms program.
    Now, while the authorizing legislation for this program 
expired at the end of last year, President Bush was able to 
work successfully with Congress this year to reauthorize this 
program and to extend it through September 30th of 2007, and 
that was signed into law under the Trade Act of 2002 by 
President Bush last month, on August the 6th.
    My comments today will briefly summarize for you the 
purpose, the process, and some of the results of this program.
    The purpose of the TAA for Firms program is to help 
manufacturing and producing firms that have lost sales and 
employment as a result of increased imports of similar or 
competitive goods. The program is a unique federal response for 
mitigating the problems that firms encounter as a result of 
changing trade patterns. It is also fully consistent with the 
concepts of free trade. Instead of relying on quotas, and 
tariffs, and other types of trade barriers, the TAA for Firms 
program actually works with trade-impacted firms directly, and 
it helps them to become moreefficient and competitive within 
the global marketplace.
    The Commerce Department supports a national network of 
Trade Adjustment Assistance Centers, or TAACs, to help injured 
firms in navigating their way through this TAA program. 
Currently there are twelve TAACs in the network. California 
here, for example, is served by the Western TAAC, which is 
sponsored by the University of Southern California. David 
Holbert here is the director of the Western TAAC, to testify 
before you today.
    There are three steps that a firm must go through in order 
to attain assistance under the TAA for Firms program: The first 
is certification, and the second is preparation and approval of 
an adjustment proposal, and then finally is the implementation 
of that adjustment proposal.
    In the first step, EDA determines that a firm is eligible 
for assistance under the TAA program. And the way they do that 
is the firm submits to EDA a petition which documents that it's 
been adversely impacted by increased imports.
    EDA must find that the firm reduced its employment by 5 
percent or 50 employees, whichever is less, it lost sales, and 
that there was an increase of imports of similar or competitive 
goods that that firm produces, and that increase significantly 
contributed to those losses.
    If EDA makes those findings, then a firm is issued a 
certificate of eligibility to apply for assistance.
    The second step involves the preparation of the firm's 
adjustment proposal and then that is approved also by EDA. The 
adjustment proposal is essentially a strategy for guiding the 
firm's recovery, and it may include technical assistance in 
such areas as marketing, product development and 
diversification, computer system enhancements, production and 
industrial engineering, and export promotion.
    And then finally the third step is the actual 
implementation of the firm's adjustment proposal. And usually 
what happens is a firm will consult with a private consultant 
to actually implement those technical assistance tasks, and the 
firm will pay 50 percent of the consultant's fees, and then the 
TAAC will pay the other 50 percent, up to an amount of $75,000.
    As far as the results of the TAA program, we have seen 
instances in which some firms have increased their sales 
between 13 and 40 percent, and we've seen some other instances 
where firms have been able to decrease their production costs 
by as much as 40 percent.
    And also in 1998, an evaluation by the Urban Institute 
compared certified firms that prepared and actually implemented 
their adjustment proposals with certified firms that didn't. 
Those firms that actually implemented their adjustment 
proposals survived at a significantly higher rate, added as 
opposed to lost more employees, and they achieved an almost 
double increase in their sales.
    And, Mr. Chairman, just the last thing I'll tell you is 
that for those that are seeking more information about the TAA 
for Firms program, that may be interested in looking at the TAA 
for Firms web site, and that's located at taacenters.org. And I 
thank you very much for the opportunity to visit with you 
today, and I would be happy to answer any questions.
    [Mr. Bearden's statement may be found in the appendix.]
    Chairman Manzullo. Appreciate your testimony. Thank you.
    The next person to testify is David Holbert, who is the 
Executive Director of the Western Trade Adjustment Assistance 
Center, one of the 12 TAACs, located here in the Los Angeles 
area. Mr. Holbert, look forward to your testimony.

  STATEMENT OF DAVID G. HOLBERT, EXECUTIVE DIRECTOR, WESTERN 
  TRADE ADJUSTMENT ASSISTANCE CENTER, LOS ANGELES, CALIFORNIA

    Mr. Holbert. Thank you, Chairman Manzullo, and 
Congresswoman Napolitano, for this opportunity to testify. 
Speaking on behalf of the TAA Centers across the country, we 
deeply appreciate the past support of the Congress to authorize 
and fund this program. Those decisions have saved and created 
thousands of jobs nationwide.
    The TAA Centers also wish to thank EDA, and Mr. Bearden in 
particular, for the energetic initiatives to improve this 
program that have taken form in the last year.
    My testimony will address two questions, why TAA for firms 
is particularly effective for trade-impacted firms, and what 
improvements could be made to the program.
    While the Trade Act does not specify the size of the 
business that may be eligible, very few participating firms 
employ more than 500. The average is fewer than 100 employees. 
Nearly all are manufacturing or agricultural firms. Most are 
family owned or closely held. Typically, the principal owner is 
the chief executive, and the firm operates from a single 
location.
    Characteristics of these small firms and the nature of 
trade impact combine to create a crisis for otherwise viable 
companies. Whereas small firms tend to have narrow product 
ranges, a slight change in imports, invisible at the macro-
economic level, can bring an aggressive new competitor to small 
firm's market overnight. Lower costs and thereby lower prices, 
a common feature of imports, attract customers in rapid 
succession. Often, business decline occurs before correction 
can be implemented.
    Despite the talent required to found a small business, 
firms faced with low-cost competition find that they have to do 
something differently than in the past, and this requires new 
expertise. Further, since trade impact tends to occur 
pervasively in particular products, entire fields of industry 
can be threatened. Most importantly, a temporary and 
correctable crisis can threaten the livelihoods of employees 
and the life's work of owners.
    By assisting firms with planning and the use of outside 
expertise, TAA for Firms brings an essential component of 
recovery into the trade-impacted firm's near-term operations. 
Indeed, it has been proven time and again that by operating 
with exceptional quality, with cutting-edge designs, addressing 
a particular group of customers' needs, and a host of other 
business improvements, producers can overcome competitors, even 
those with large price advantages.
    By helping to source and monitor as well as partially fund 
outside expertise, TAA for Firms makes implementation a reality 
at a time when its need is greatest and yet least feasible for 
a firm facing declining sales and job losses. Larger firms 
facing trade impact may rely upon internal financing or turn to 
sourcing abroad. Small firms do not have these options. Most 
importantly, a temporary and correctable crisis can threaten 
the livelihoods of employees and the life's work of owners.
    Further, since trade impact tends to occur pervasively in 
particular industrial segments, entire fields of industry can 
be threatened with the potential of being lost forever to the 
U.S. industrial base.
    By assisting firms with planning in strategy and 
implementation of outside expertise, TAA for Firms brings an 
essential component of recovery into the trade-impacted firms 
near-term operations. By helping to source and monitor as well 
as partially fund this technical assistance, TAA for Firms 
makes implementation a reality at a time when its need is 
greatest yet least feasible for a firm facing declining sales 
and job losses. It often surprises observers that a common 
outcome of recovery is expanded exporting.
    During the five years from 1997 through 2001, the TAA 
Centers monitored results for 511companies with just under 
50,000 employees and $6.4 billion in sales. As a group, these firms had 
lost 12 percent of employment and 10 percent of sales in the two 
preceding years.
    Since starting the program, the firms grew 29 percent in 
sales, stopped job losses, and gained 18 percent in 
productivity, more than double the national rate.
    The level of appropriation for TAA firms since 1997 has 
been between $9.5 million and $10.5 million annually. This 
year, the President's proposed budget includes $13 million for 
TAA for Firms. This is a most welcome endorsement, and the only 
substantial increase proposed in recent years.
    Weeks ago, Congress passed legislation authorizing TAA for 
Firms for six years and recommending appropriations of $16 
million annually. Yet without positive efforts, level 
appropriations would appear to be the most likely income. I ask 
the members of the committee to help see the adequate 
appropriations through the various processes of the Congress.
    Throughout this testimony I have referred to trade impact 
without precisely defining it, yet I am confident everyone 
present knows what I'm talking about. I've stood with company 
owners in their fields and factories, both of us convinced that 
the firm is trade impacted, but challenged as to how to 
demonstrate this. The Trade Act definitions, while certainly 
appropriate at the time of their creation, offer a qualified 
standard for today's experience with trade impact.
    I would ask the committee to encourage your colleagues to 
consider anew the subject of what constitutes trade impact.
    In the Trade Act of 1974, Congress created TAA for Firms in 
order to save and create jobs and help American farms and 
manufacturers compete internationally without creating 
artificial trade barriers. Your wisdom in establishing this 
effective trade remedy is now obvious.
    I would emphasize that the small business owners that 
participate in this program face genuine crises of survival. We 
are told that firms like these are the bedrock of the economy 
and the engines of job growth. Their individual stories are 
dramatic and compelling.
    To the question as to how this program could--what 
improvements could be made to this program, I would say first, 
effective, more effective criteria for defining trade impact, 
and adequate resources for the program's operation.
    I would conclude by again thanking the committee for your 
attention to this important matter for the nation's small farms 
and manufacturers as well as the many and valued jobs 
represented at these enterprises. Thank you very much.
    [Mr. Holbert's statement may be found in the appendix.]
    Chairman Manzullo. Thank you. Bruce, you are back for a 
cameo.
    Mr. Thompson. I can't stay away, Mr. Chairman. It's a 
pleasure.
    Mrs. Napolitano. Thank you.
    Chairman Manzullo. This time you are going to be testifying 
on efforts of SBA to promote small business expansion in the 
international marketplace. For those of you who are with the 
government testifying, I would ask that you localize your 
testimony. You don't have to lobby us to get more money for 
your programs. That is not why we are here. That goes on all 
the time in Washington. There are a lot of people here who have 
come to this hearing whose businesses have been severely 
impacted, and they are coming here because they want help. I 
want you to testify as though you are speaking to them and not 
the two members of Congress, because that way, this becomes a 
full utilization of the resources here as opposed to the normal 
type of hearing that you can hear in Washington as opposed to a 
field hearing. So with that in mind, Bruce, give us your 
additional testimony.

STATEMENT OF BRUCE THOMPSON, REGIONAL ADMINISTRATOR, REGION 9, 
    SMALL BUSINESS ADMINISTRATION, SAN FRANCISCO, CALIFORNIA

    Mr. Thompson. I appreciate that, Mr. Chairman. I think you 
will find this is a local driven little talk here.
    With regards to international trade, opportunities are 
growing rapidly. The President sought and Congress recently 
granted a trade promotion authority. This authority will open 
markets for U.S. exporters through a new round of global trade 
negotiations which is very good for America's small businesses.
    Ninety-seven percent of all exporters are small businesses 
with fewer than 500 employees, and two-thirds of those small 
exporters have less than 20 employees. The SBA has technical 
assistance and loan product guarantees specifically for 
exports. Also the SBA is a partner with our sister federal 
agencies in U.S. export centers (USEACS). There are 19 USEACS 
across the country, with locations in Southern California.
    The SBA also offers three financing tools developed 
exclusively for export development. They are Export Express, 
Export Working Capital Programs, or as we call them, the EWCP, 
and the International Trade Loan Program.
    The SBA's new Export Express loan program, offering a 
maximum loan amount of $250,000, is geared towards small 
businesses that have export potential but require funds to 
cover the initial cost of entering an export market. A local 
example of a firm that used Export Express is Korea Crest, an 
exporter of piping insulation and industrial chemicals. Korea 
Crest received a working capital loan used in part to attend an 
international conference in Seoul. The SBA in association with 
California Center Bank financed their trade promotion costs.
    Paul Lee, the International Development Vice President of 
California Center Bank in Los Angeles, who underwrote the 
guaranty application, commented that this unique loan program 
can provide much needed trade promotion financing to America's 
exporters, and we look forward to providing financing 
assistance to many more export businesses through the SBA.
    The SBA recognizes that many small businesses have 
difficulty in obtaining a short-term working capital loan 
because their collateral is tied up in long-term loans. The 
EWCP is designed to help these small exporters by supporting 
transaction-based loans. To make the EWCP even more user 
friendly for exporters and lenders, the SBA and the U.S. 
Export-Import Bank, Ex-Im, divided the export financing market 
with the SBA, extending guarantees of $1 million or less, and 
Ex-Im Bank holds all guarantees over $1 million.
    Congresswoman, in your district we have provided nearly $5 
million in export working capital financing to area businesses 
with 60 percent of the assistance going to minority enterprises 
and 25 percent to women-owned businesses. The SBA has also had 
a very successful partnership with the State of California's 
Export Finance Office, whereby we jointly guarantee loans to 
eligible small businesses.
    The SBA's offices in Southern California have financed 470 
transactions for $207 million. Recently the Small Business 
Administration and Ex-Im entered into a small business 
initiative memorandum of cooperation.
    The first phase of this initiative is to leverage market 
resources, thereby raising awareness among lenders and 
exporters.
    Lastly, Mr. Chairman, you also wanted to discuss trade 
adjustment assistance for minimizing any adverse effects of 
trade agreements. The SBA offers the International Trade Loan 
programfor those small businesses that have been adversely 
impacted by import competition. This program was designed to help small 
businesses improve their competitive position by providing eligible 
firms with necessary financing to support their export and upgrade 
their physical plant and equipment.
    Under this program the SBA can provide a repayment 
guarantee to commercial lenders for up to $1.25 million in 
combined working capital and fixed asset loans, including any 
other current SBA loan guaranties.
    Additionally, here in Los Angeles the North American 
Development Bank administers a loan program called the U.S. 
Community Adjustment and Investment Program, or CAIP. Through 
the Department of Agriculture's business and industry loan 
guarantee program and the SBA's 7A and 504 program, the CAIP 
provides finance resources in U.S. communities that need 
assistance adjusting to changes in trade patterns with Canada 
or Mexico. It is estimated that the SBA has helped to create or 
preserve over 5,000 jobs.
    In general, the SBA's programs can help people start a 
business, change, or modify their business plan, assist with 
advertising to different markets or any other management needs 
and financing. The SBA's Los Angeles District Office and its 
Government Contracting and International Trade units are proud 
of the service they have provided to small minority- and women-
owned businesses.
    While Administrator Barreto continually remind us that much 
remains to be done, it has been exciting and rewarding to work 
with the area's entrepreneurs to support their business growth, 
thereby creating jobs and build stronger neighborhoods. The SBA 
is here to serve you as well as to listen so we can serve you 
better.
    Please note that I have also submitted written testimony 
with the committee, and once again, thank you, and I will be 
happy to answer any questions.
    [Mr. Thompson's statement may be found in the appendix.]
    Chairman Manzullo. Thank you. Our next witness is Mary--is 
it Delmege?
    Ms. Delmege. Delmege.
    Chairman Manzullo. Delmege. Sent here by, I guess, would it 
be your boss, Jeri Jensen-Moran?
    Ms. Delmege. Yes, sir.
    Chairman Manzullo. As the senior advisor for the Trade 
Promotion Coordinating Committee. I was elected to Congress in 
November of '92, and sat for years on the International 
Relations Committee, on the Subcommittee on International 
Economic Policy and Trade. And I recall, as I was sworn in on 
January 3 1993, that September 1st of 1993 was the deadline 
date by which the Trade Promotion Coordinating Committee was to 
come up with its report bringing together all 19 agencies 
involved in trade promotion, and they met the deadline. We were 
astonished, but we have found that some of the most prolific 
workers in the federal government have been those that are 
involved in trade. We look forward to your testimony. Thank 
you.

    STATEMENT OF MARY DELMEGE, SENIOR ADVISOR TO THE TRADE 
 PROMOTION COORDINATING COMMITTEE, DEPARTMENT OF COMMERCE, SAN 
                           DIEGO, CA

    Ms. Delmege. Thank you very much. Thank you very much. Mr. 
Chairman, Representative Napolitano. Thanks for inviting us to 
this hearing. It provides an excellent opportunity to highlight 
the importance of trade for our economy and to talk about how 
small and mid-sized businesses are participating in global 
trade.
    I'd also like to discuss current efforts to ensure that the 
resources that are available to help small businesses 
participate in trade are delivered in a coordinated manner. 
Finally, I'd like to share with you some examples of small 
California firms that have recently succeeded in selling into 
overseas markets.
    With regard to the importance of trade, the facts speak for 
themselves, as my colleague from SBA said. Exports have 
accounted for nearly 30 percent of U.S. economic growth since 
1989, and 97 percent of the U.S. businesses that export are 
small and mid-sized firms.
    In developing the National Export Strategy this year, we 
surveyed more than 1,000 small and mid-sized exporters. One of 
the things we learned was that many small and mid-sized 
companies that export regard trade as a core element of their 
business, and they expect it to serve as a continued source of 
revenue growth.
    Many of them also view their export sales as an important 
source of diversification when their domestic sales are either 
flat or declining.
    The majority of the firms surveyed have experienced growth 
of more than five percent annually in the past three years in 
their exports, and they expect their export sales will continue 
to grow more than five percent annually over the next three 
years. Of the small businesses, those under 100 employees, that 
export, 60 percent of those companies derive more than 20 
percent of their total sales from exporting.
    There is no doubt about the fact that trade provides 
tremendous benefits for small and mid-sized U.S. companies, and 
it's well worth the time and effort we are spending to make 
sure that services are delivered in a coordinated and effective 
manner.
    The Trade Promotion Coordinating Committee was established 
in 1993 by executive order, pursuant to the 1992 Export 
Enhancement Act, and it was designed to provide a unifying 
framework for all of the different agencies that provide.
    Each year we produce the National Export Strategy. This 
year, the strategy was developed through a unique process. We 
reached out to U.S. firms in order to better understand their 
needs. In addition to the survey that I just mentioned, we also 
conducted numerous one-on-one interviews and focus groups. We 
also looked at the trade promotion practices of other 
industrialized countries to learn as much as we could about 
their best practices.
    All of this was used to develop a series of 
recommendations, for better customer service, better outreach, 
and better education. And a lot of the specific 
recommendations, as you know, go to the issue of training. 
Although the users of our services generally tend to be 
pleased, many of them told us that they would like to see 
better coordination between the agencies. They expect more 
seamless customer service, if you will.
    As a result of this, there is an interagency task force 
that's working right now on developing a training proposal that 
will make sure that trade specialists who interact with clients 
are well versed in the full array of services available. Trade 
specialists should be able to match the needs of the clients 
with the most appropriate resources. The Commercial Service 
currently has over 300 international trade specialists in the 
field, and our goal is to develop them as true account managers 
who are able to provide clients with the full array of 
services.
    This isn't really a new effort. It's important to point out 
that the 1993 National Export Strategy called for the creation 
of U.S. Export Assistance Centers. Right here in Los Angeles 
was one of the first four that was developed, and the work 
continues today with Ex-Im, SBA, and the Commerce Department 
working side by side to develop export services.
    So far this year, these offices in Southern California have 
counseled more than 1,100 clientsand they've reported 480 
completed export transactions worth a total of $180 million.
    I'll just give you a couple of quick examples. One is a 
firm here in Santa Fe Springs. We helped them resolve an issue 
with Mexican Customs authorities, leading to the successful 
shipment of over $30,000 worth of refurbished electronics 
equipment.
    In another case, the U.S. Export Assistance Center helped 
an apparel manufacturing firm here in Vernon link up with our 
commercial officer in France, through a series of ``gold key'' 
meetings, and the company was able to expand their distribution 
network and generate sales in excess of $200,000 this year.
    These are just a couple of examples of local firms that 
have benefited locally, but we feel that provided these trade 
specialists with additional training and resources, we will be 
able to increase the scope of assistance that's available to 
small and mid-sized firms.
    I very much appreciate the opportunity to testify, and look 
forward to answering any questions that you might have.
    [Ms. Delmege's statement may be found in the appendix.]
    Chairman Manzullo. Thank you. The next two witnesses will 
split a five-minute segment. William Redway, who is the group 
vice president of Small and New Business Group, of the Ex-Im 
Bank, and who came in from Washington, and David Josephson, who 
is the regional director of the Western Region Office of the 
Export-Import Bank out of Long Beach. I look forward to your 
testimony.

 STATEMENT OF WILLIAM REDWAY, GROUP VICE PRESIDENT, SMALL AND 
 NEW BUSINESS GROUP AND DAVID JOSEPHSON, REGIONAL DIRECTOR OF 
 WESTERN REGION OFFICE, EXPORT-IMPORT BANK OF THE UNITED STATES

    Mr. Redway. Thank you very much, Chairman Manzullo, and 
thank you very much, Congresslady Napolitano, for giving us the 
opportunity to testify. I am Bill Redway, and I'm with the 
Export-Import Bank. For those of you that are not familiar with 
Ex-Im Bank, just briefly, we are the U.S. Government's export 
credit agency. It's designed to support U.S. exports by 
providing competitive financing. Other countries, almost every 
developed country, has an organization like us, the Japanese, 
the English, who do the same thing we do.
    We are a small agency. We're about 420 employees with about 
110 of those employees in my group which is devoted to small 
business.
    We've got several mandates. We're not supposed to compete 
with the private sector. We are supposed to support small 
business. We are--we have other mandates, exporting goods to 
Africa, this sort of thing. What this means, especially the 
business don't compete with the private sector, is that we are 
the agency of last resort. We do the riskiest deals, we do the 
longest term deals, and we do the smallest deals. The private 
sector generally takes what is the middle, and we go around the 
periphery.
    The last year we did, we supported $12.5 billion of U.S. 
exports of which $1.7 billion, or 18 percent, were for small 
business; 90 percent of the bank's transactions, however, were 
small business transactions. So that the picture of Ex-Im Bank 
is support for large business, but also a very, very large 
support for small business.
    Our small business programs, which the state of California 
has taken a lot of, has used very aggressively over the last 30 
years, the first one is our working capital guarantee facility, 
which my friend from the SBA described their facility. Ours is 
similar. We do handle the larger transactions, but they're 
still small. We did almost $700 million of these last year, and 
90 percent of those were for small business.
    It's based on delegated authorities, so we delegate 
authority to banks, of which there are 70 in the state of 
California which are approved delegated lenders. Wells Fargo 
Bank here in Los Angeles was our Small Business Bank of the 
Year last year.
    Our other very large small business program is our 
insurance program which supports--which basically insures 
repayment by the foreign buyers so that we basically are taking 
foreign buyer risk. If you go into our insurance division, it 
looks like the commercial lending unit of any Commerce Bank, 
but it's fairly sophisticated, and we did about 10,000 
transactions in that division last year.
    Chairman Manzullo. You have two and a half minutes there. 
Did you want to yield to your colleague there?
    Mr. Redway. What I'm going to do, I am going to do most of 
the talking, and David, who is going to be the California guy, 
who sits right here, he's going to answer most of the 
questions. If that's okay with you all.
    The biggest problem we have got is nobody knows who we are, 
so how do you get our name in front of--in front of small 
businesses here in California and all over the country? We have 
got a marketing budget by U.S. Government standards which is 
large, but it's less than a million dollars, so you can see 
that is not large by most standards. We have six branch offices 
which spread the word.
    Last year we sent out 300,000 pieces of direct mail, we did 
37 trade shows, we did 60 seminars, and we've worked very hard 
with various trade associations around the country. We also 
worked with 39 city-state partners, of which Seafoe here in the 
state of California is a very active participant.
    I will talk a little bit about California at this point. 
The--and, David, you jump in if I don't get any of this right. 
As I said, Wells Fargo Bank was our Small Business Bank of the 
Year last year. We're also in the San Francisco area. The 
Silicon Valley Bank is our largest delegated authority lender, 
our most experienced.
    We did out of the state of California last year--no, I'm 
sorry, the first nine months of the year, $619 million, we 
supported. We have 15 active insurance brokers who are 
promoting our products, and, as I said, we did SeaFoe, and we 
have got as a very active delegated authority lender.
    In this district, District 34, in the last five years, 
we've done a total of 23 transactions, of which 19 were for 
small business, a total of $158 million. So we have been fairly 
active here. That is not--remember, it's five years. It's not a 
figure that I--it's not a figure I am ashamed of, but it's one 
I think can be very definitely improved on, if we can get the 
word to people on what our programs really are.
    Chairman Manzullo. Let me make this suggestion. And, again, 
I want to emphasize the reason that we have the folks from 
Washington out here is not to justify the existence of the 
agencies. Nobody's got any gripe at all.
    The problem is there is always a huge disconnect, and we 
see it happening today. The purpose of this testimony is not to 
edify Ms. Napolitano and me. We understand this probably better 
than most of you because we have to authorize a lot of it. I 
rewrote OPIC and TDA, and I was in the process of writing the 
Export Administration Act before I became Chairman of this 
Committee, but the purpose of your testimony, again, is not for 
us. What I would like to do is take an additional minute and a 
half, and tell the small business people here exactly what Ex-
Im can do for them. Could you do that?
    Mr. Redway. All right.
    Chairman Manzullo. Appreciate that. Go ahead.
    Mr. Redway. Let's start with the working capital guarantee 
program. This is an asset-based lending program which is 
designed to provide working capital for small firms. So if you 
are a small California exporter and you have an export order 
you need working capital to fill, and you've got an order in 
your hand, you can take that to your bank and say, hey, I have 
got this, the buyer--I've got a signed contract, the buyer 
looks like he is okay credit-wise, the--you, Commercial Bank, 
you, Wells Fargo Bank, take a look at that buyer, and if you 
think he is okay, you can approve it under your delegated 
authority and advance me the funds so I can build the widget 
that needs to be built. That's the working capital guarantee. 
$700 million last year done that way.
    On the insurance side, again, you are a California 
exporter, and--I'm going to turn this over to David in one 
minute to give you actual examples. But you've got, say, a 
Brazilian buyer, and he wants--he places a million dollar 
order, he wants 90 days to pay. You are not going to take 
Brazilian risk. It's just not a risk you want to take.
    So you say, okay, get yourself an insurance policy, and Ex-
Im Bank will go and insure that buyer as long as the credit is 
good, because again, reasonable assurance of repayment, we are 
not an aid organization, we are a commercial organization. We 
look at the Brazilian buyer, we say, that's okay, we will give 
you an insurance policy against commercial and political risks, 
and that is what that does.
    Now, the California exporter can then take that to his 
bank, any bank, and they will advance against a federally 
insured receivable, not a Brazilian receivable. That is what we 
do. We did 10,000 of those deals last year.
    Mrs. Napolitano. Would you mind telling the audience what 
countries you are in, what countries you're not in?
    Mr. Redway. We are open in just about every country in the 
world. The ones we are politically prohibited from, I'm 
thinking, say, Libya, Cuba, right, those countries we are not 
open, but every other country we are in, with some exceptions. 
It's a long list, but basically, most of the countries that you 
would be dealing with, we are open.
    Mrs. Napolitano. And you now have a working agreement with 
Mexico, I understand, which you didn't have it for many years.
    Mr. Redway. We do a ton of--Mexico is our biggest market. 
Yes, we have a very strong working agreement with Mexico, and 
all the way through. Latin America is our largest area.
    I might just finish with this and say that--and this is a 
political statement, I suppose, but we have a small business 
set-aside which with our reauthorization has just been doubled, 
so we are going to try and be twice as aggressive as we have 
been in the past. I think you all are very familiar with that, 
and I am open for any questions, and Dave in particular.
    [Mr. Redway's statement may be found in the appendix.]
    Chairman Manzullo. So, bottom line is, if companies are 
already exporting, then they can go to you, but if a company, a 
small business person wants to get involved in exports, the 
best place to go is to the local USEAC center. Is that correct?
    Mr. Redway. Right.
    Chairman Manzullo. Dave, you want to answer that?
    Mr. Josephson. Right. We have--in our office, we get the 
full spectrum. We get extremely experienced exporters that need 
to fine-tune their risk portfolio when they come in to Ex-Im 
Bank for insurance; we get middle size and small businesses 
that need working capital; and then we get hopefuls, you know, 
they have a formula in a garage, and their wife has a brother 
in the Ministry of Industry in some country, and they--they 
don't have a business plan, they don't have anything, except a 
dream; so we have a SCORE representative who can help the new 
businesses actually get equity financing and a business plan up 
and running.
    I think our colleague from the Small Business 
Administration already noted that if they need working capital 
under one million, we refer them to Small Business 
Administration. If it's over a million, we do the underwriting 
on that transaction.
    Then some of them come in as you mention. They really want 
to expand their market so then we send them to the DOC for a 
whole array of products and services that they offer through 
their foreign commercial center.
    Chairman Manzullo. So, if you get somebody here that 
doesn't even know if he or she has a product to export, the 
very first stop they would go to would be the United States 
Export Assistance Centers or the Small Business Development 
Centers? Would that be correct?
    Mr. Josephson. The first stop would be the DOC. The DOC can 
go into any country.
    Chairman Manzullo. Okay. Now, where do people contact the 
Department of Commerce in this area?
    Mr. Josephson. In one of 19 USEACS, is it?
    Ms. Delmege. Here in Southern California we have five 
offices. We have two in Los Angeles, one in West L.A. And one 
in downtown Los Angeles.
    Chairman Manzullo. Okay. Now, for the folks in Los Angeles, 
then, Grace, do you have the number there for the USEAC office, 
at your office? What phone number? We're getting very practical 
here, folks. What phone number? Way in back. Yes? Is that Ray? 
Go ahead.
    Mr. Redway. The number is back in the office, 
Congresswoman.
    Mrs. Napolitano. Well, I know we have it, but this place 
doesn't have it. And that's why it should be out to the 
business.
    Chairman Manzullo. Okay. Well, they could contact your 
office, and you can get that to them. So, if you want to 
export, get a hold of Grace. Yes, sir. Back with your hand up.
    Audience Member. We have a flyer out here that has phone 
numbers and contact names.
    Chairman Manzullo. That's great.
    Mr. Thompson. He works for the SBA, Mr. Chairman.
    Chairman Manzullo. Good. That's great.
    Mrs. Napolitano. Mr. Chairman, I'll take the prerogative as 
your host--hostess, that the SBA representative, Mr. Alvarado, 
has been exemplary in working with my small businesses. In 
fact, we have a gentleman sitting in the back, Ron Beilke, just 
opened his business, and he can't say enough about SBA. He's 
got several people here. I just want to tell you that he does 
great work.
    And while a lot of people don't know, it's important that 
they realize that you don't have that kind of big staff, so 
they need to be patient. However, small business doesn't have 
the time, so it's important that we kind of understand 
different agencies' roles in what it is they need to learn 
about, and while we have you here, we are taping it, hopefully 
we will get it running and capable so business can understand 
it, but it's not all the time--how many people come in here to 
listen and understand and learn and get educated, and this is 
one of the things I hope you will help all of us be able to 
better do the outreach to our businesses so that we can have 
you better--how would I--not prepared, you are prepared, able 
to deal with the influx of business.
    You are saying you're doing a certain amount of money in my 
district. That's not enough. And I can tell you because we have 
got thousands upon thousands of businesses that are looking 
forhelp, and yet, if I send them to you, you are not going to be able 
to deal with them, because there is so many. You don't have that kind 
of personnel. And, again, my frustration is that there's too many 
bureaucrats doing things in Washington and not enough down here.
    Chairman Manzullo. Well, I guess on that note, everybody 
here has a purpose in dealing with the small business people, 
and our goal, Grace, is to make sure that anybody who wants to 
get involved in the exports, really all they have to do is call 
your office, and you'll get them over to the nearest USEAC 
center, and that will put into operation the folks from SBA, 
the Department of Commerce, and the Ex-Im Bank. Okay. I guess 
we've made that point.
    Our next guest is Raul Hinojosa. Is it a member of your 
family that is a member of Congress, from Texas?
    Mr. Hinojosa. Yes. The southern part of Texas, yes. 
Related, yes.
    Chairman Manzullo. Southern part. He's way at the bottom of 
Texas down there. Anyway, Raul is the Research Director of the 
North America Integration and Development Center, School of 
Public Policy and Social Research, University of California at 
Los Angeles. That's quite a title there. We look forward to 
your testimony.
    Mrs. Napolitano. Not only that, Mr. Chair, but he's also 
what I consider to be the brains behind NADBank.

 STATEMENT OF RAUL HINOJOSA, RESEARCH DIRECTOR, NORTH AMERICAN 
INTEGRATION AND DEVELOPMENT CENTER, SCHOOL OF PUBLIC POLICY AND 
 SOCIAL RESEARCH, UNIVERSITY OF CALIFORNIA LOS ANGELES (UCLA), 
                    LOS ANGELES, CALIFORNIA

    Mr. Hinojosa. Thank you, Grace. And thank you, Mr. 
Chairman. I do in fact run something called the North American 
Integration and Development Center. And I am proud to say what 
we do at the Center is focus on the questions of globalization, 
its impacts, both positive and negative, and how do we create 
public policy to make globalization a win-win proposition, 
particularly for local communities, and I am proud to say that 
we enjoy very good support from unions as well as small 
business Chambers of Commerce, and we try to be very, very sort 
of evenhanded in our analysis.
    I just want to make two quick points about the nature of 
small businesses in the international arena. One, from the 
tracking information that we have, and I have prepared some 
testimony for you on this as well as some policy initiatives. 
One quick thing, small businesses, the reality of it is, they 
are not actually in the tradable sectors of the economy. 
Ninety-five percent of small businesses, as you know, are in 
what are called the nontradable sectors, so they are not very 
participatory right now.
    Hispanics, interestingly enough, Hispanic businesses and 
Hispanic workers are much more represented in the tradable 
sectors of the economy, which means both exports, which is 
potentially positive, but also imports, which is very--
affecting this area. So we are looking at both the job gains 
and the job losses.
    In particular, though, one thing I want to point out, that 
a lot of the debate on globalization has concentrated on these 
job losses and job gains, is actually missing what I actually 
think is a very important part of the picture, particularly in 
Southern California.
    Our relationship to the world is actually much more through 
immigration and through remittances, and a very large untapped 
resource is immigrant entrepreneurs, and that is what I want to 
focus a little bit on.
    We have a project now at UCLA that we think that immigrant 
entrepreneurs, small business entrepreneurs are an incredible 
asset for the United States in terms of the ability to link up 
with markets and with new types of joint ventures all over the 
world that is unique to the United States, unlike actually many 
parts of Japan, for example, which doesn't have that type of 
ability, and particularly from a small business perspective.
    We are now working with Hometown Association of Immigrants 
from Mexico, Central America, Vietnam, and India. I am going to 
mention just one of 20 projects that we are incubating to 
create, for example, wireless technology here by Indian and 
Chinese companies, that are now providing Internet connectivity 
in the rural countryside and immigrant centered regions of 
Mexico to reduce costs of telecommunications and remittance 
sendings, which represents more than 50 percent of what 
immigrant households, transnational households, spent. Both 
here in the U.S. and abroad, 50 percent of their income goes to 
financial services or to telecommunications, very high cost.
    Here is a small company, rooted here, developing this new 
type of technology. What is the problem? The problem is that 
we--our--and these gentlemen and ladies are--have developed a 
very important base here in the United States for small 
business support.
    What we really need to do is get it globalized, 
transnational small business development activities. And that 
was actually the idea that we originally had six years ago, 
with the North American Development Bank, to create, in the 
case of North America, a unified strategy for supporting these 
types of transnational small businesses.
    Multinationals have it. They have the transnational law 
firms, they have the transnational banks. It's very hard for 
the small businesses to break into that.
    I know that Hector Baretto with SBA has now opened up an 
SBDC in Guadalajara, first of its kind in the world. You know, 
it's not really off the ground yet, and in part we really need 
to have a great deal more focus. NAFTA is a perfect place to 
really even out these benefits in this community which is also 
potentially the most at risk, which I was pointing out.
    So I would suggest a couple of very concrete points. One is 
that we work with the North American Development Bank. I would 
love it if your committee worked more closely with SBA to 
develop this strategy on a bi-national basis, go down to the 
Bi-national Conference that is going to be held with 
legislators from both countries, in November, with--President 
Bush is now apparently going to go down there to raise this 
agenda item.
    Secondly, broader point, we are about to negotiate 
something called the Free Trade of the Americas Initiative. The 
small business agenda has to be on these globalization 
discussions. If not, people are going to continue to be left 
out of the process, and my time is up. There's a lot more that 
I think that we can talk about at the local level that there 
are really opportunities to advance along these lines.
    Chairman Manzullo. I appreciate your testimony. I also am a 
member of the Financial Services Committee, and I sit on the 
subcommittee that deals with the multilateral development 
banks, and next time you are in Washington, please stop by and 
you can take out Grace and me for some coffee, and look forward 
to exploring this on a greater level with you.
    Mr. Hinojosa. Absolutely.
    [Mr. Hinojosa's statement may be found in the appendix.]
    Chairman Manzullo. Our next good follow-up witness is Hugh 
Loftus. Hugh is the director of the Community Adjustment 
Investment Program of the North American Development Bank in 
the City of Industry in California. Hugh, look forward to 
hearing your testimony.

 STATEMENT OF HUGH LOFTUS, DIRECTOR, COMMUNITY ADJUSTMENT AND 
INVESTMENT PROGRAM, NORTH AMERICAN DEVELOPMENT (NAD) BANK, CITY 
                    OF INDUSTRY, CALIFORNIA

    Mr. Loftus. Thank you, Mr. Chairman. I am pleased to be 
here today, and thank you, Congresswoman Napolitano, for 
including me in the program. I have submitted some remarks 
which I will let stand on their own, since they went in a 
direction which was not of the chairman's wishes, to be a 
little bit more practical in terms of how we can interact 
directly with businesses. Does give me an opportunity to answer 
the question and also talk about one of the fundamental 
problems in the way we've approached our particular program.
    We were established to go in to help communities as opposed 
to businesses or individuals deal with NAFTA impacts measured 
by job losses by trying to replace jobs in the community so we 
did not try and preserve businesses that were being negatively 
affected, we did not impose on the Department of Labor's issues 
in working with workers. We tried to take a regional community-
wide look at how can we create replacement jobs.
    We work very closely with the SBA and with the U.S. 
Department of Agriculture, augmenting and enhancing their loan 
programs for small business, trying to overcome with the 
resources we had some of the perceived problems that we felt 
both caused businesses to hesitate in pursuing the 
opportunities, typically the fees and costs associated with 
that or the processing time associated with that, and to 
encourage them, if they were going to pursue the program, to 
look at actually possibly borrowing more money, expanding more 
rapidly because of some of the cost savings that we could 
afford.
    I have nothing but compliments for our friends at SBA and 
USDA that we have worked with over the years, but the critical 
element that is involved in that process, and alluded to by 
several other groups, are the commercial lenders in the 
marketplace.
    What we have found over the six years of our program in 
working with these agencies is that we can have a very 
effective program in rural and smaller communities because we 
can become a visible entity. They can see a transaction; they 
can identify our participation; they can think of us as a 
resource and a tool, which is what we want. You take that same 
program, and put it in a large urban area like Los Angeles 
County, and getting visibility in Los Angeles County is the 
hardest thing you can do in the world.
    We have had meetings with lenders, we have had meetings 
with businesses, we outreached to Chambers. If you don't turn a 
meeting into a transaction within 48 hours, within another 48 
hours, that meeting never took place. Life goes on, and memory 
diminishes.
    So we have found that the one--the critical element for us 
to work with is a better way to engage the financial 
institutions. Candidly, the program that we put together was 
designed to enhance small businesses, to attract them and to 
give them an incentive. The cost of that is an additional work 
burden on the banks. They have to take on more burden to 
process the loans the way we're doing them in order to garner 
benefits for their borrowers, and which basically, in summary, 
there is really not very much in it for the banks.
    And so, for the smaller communities, where the bank is an 
integral part of the community, and works with the businesses 
on a daily basis, we have been successful. In the larger 
communities, we have been told by some large banks, that they 
simply cannot interrupt their normal production process by 
identifying the occasional transaction that might qualify, and 
could save--in the maximum it could save the small business 
$25,000.
    Chairman Manzullo. Hugh, let me interrupt here in your time 
left. When would a small business person come to you or a local 
community come to you for your services at the NADBank?
    Mr. Loftus. Let me answer that--I'll flip the question. We 
deal at the community level, and when we identify a community 
as becoming eligible for our program and using the resources at 
the NADBank, they provide us with regular analysis of data 
where we can identify NAFTA-impacted communities. We bring them 
into the program, at which time we notify the elected 
representatives, both federal, state and local.
    We do outreach through the SBA's auspices to the local 
institutions and notify them they now have eligibility for the 
program. We provide them with brochures, and there are copies 
of those outside on the table. That's how they would know that 
they were in the program and get information as to what the 
program would do for them.
    Our program basically only has about $20 million in 
funding. There's very little money, so there is not much 
interactions directly with small businesses per se.
    We have made a total of five direct loans under our program 
which says we will lend directly, where one of the government 
guaranteed loan programs or a regular conventional loan isn't 
applicable, but it is still supposed to be a reasonable credit, 
and there aren't an awful lot of those out there.
    So we have in a few cases found transactions where we can 
participate as a direct lender. Primarily we direct borrowers 
to the bank, to the local resource centers that they've got, 
the Small Business Development Centers, SBA offices, and just 
ask them, do you have a bank in your community that is willing 
to take the additional time--and it isn't much, probably takes 
an extra two or three days, is all the process through our 
program, to save the applicant the cost of the guarantee fee or 
to assure that in the case of the Department of Agriculture 
that the loan guarantee funds will be available to cover them, 
because we actually can supplement the Department of 
Agriculture's capacity to issue guarantees by giving them 
additional funding when a qualified loan comes along.
    We also do the same thing with SBA, but with SBA last year 
I think we did 100 loans. The SBA probably did 30 or 40,000. So 
with the SBA, we are not a huge program.
    [Mr. Loftus's statement may be found in the appendix.]
    Chairman Manzullo. I appreciate your testimony. Okay. We 
are going to shift gears just a little bit here and go to the 
issue of import duties that have been placed upon steel under 
the Section 201, of the Trade Act, and we are going to have a 
pair that will testify together, Anita Huseth, President, and 
John Reynolds General Manager of Mace Metal Sales here in Los 
Angeles. Whoever wants to start and control the time, can go 
first. Anita, would that be you? Go ahead. We look forward to 
your testimony.

  STATEMENT OF ANITH HUSETH, PRESIDENT, MACE METAL SALES, LOS 
                      ANGELES, CALIFORNIA

    Ms. Huseth. Thank you, Mr. Chairman. I would like to thank 
Congressman Donald A. Manzullo, Chairman of the Committee on 
Small Business, for inviting me to represent my company, Mace 
Metal Sales, Inc., a steel service center located in Los 
Angeles, California. I would also like to thank Congresswoman 
Grace Napolitano for hosting this meeting in her district.
    My husband and I initially started Mace Metal Sales in 
1971, and have seen it evolve into asuccessful company during 
these 31 years. My husband Marvin ran the business for 20 years, and 
upon his death in 1991 I took charge.
    As a steel service center, we deal primarily with carbon 
flat rolled steel. We store, cut or process the steel for end 
users.
    We are proud to say that we never turn down a customer, no 
matter how small the order may be, and consider ourselves a 
customized service center because we adhere to the customer's 
most demanding considerations. Perhaps this is the reason for 
our success. We continue to put food on the table for 29 
American families, provide full medical coverage for all the 
family members, and fund employee to retirement one hundred 
percent. We solve our own internal problems.
    President Bush stated that small business owners account 
for the majority of employment in this country.

           NEGATIVE IMPACT OF SECTION 201 ON MACE METAL SALES

    We do not have enough domestic mills here in California. We 
are put on allocation with lead times that are not dependable. 
What used to be six- to 12-month steel contracts with our 
customers are now three-month contracts because of the steady 
rise in steel prices. It is very difficult to keep going back 
to our customers and informing them that the steel is not 
available, our allocation allotment has been reduced or our 
lead times are now pushed out another two to four months.
    This year, we had to turn down at least $2 million worth of 
business simply because the steel was not available.
    We have layoffs, and the final end is unemployment. It is 
obvious that Section 201 is not working for us, and the 
domestic mills cannot do the job, simply because they do not 
have the capacity, material, or work force.
    To meet our needs, the mills will have to supply us with 
the additional 25 percent of steel that we normally import.
    Something can be done and action must be taken to rescind 
or amend Section 201 and open the door for more steel to come 
in and give us relief.
    Our problems are serious, and we need help. Thank you.
    Our general manager of Mace Mills, John Reynolds.

   STATEMENT OF JOHN REYNOLDS, GENERAL MANAGER OF MACE METAL 
                 SALES, LOS ANGELES, CALIFORNIA

    Mr. Reynolds. I'd like to thank you for giving me the 
opportunity to testify today. I just want to make everybody 
aware, that Mace Metal Sales has been a very good supporter of 
domestic mills in the past, and will continue to do so in the 
future.
    However, we do disagree with the 201 decisions for the 
following reasons.
    Never before have the prices increase at this rate. Since 
March 2002, depending on the product, prices have gone up $20 
to $40 per ton every 30 to 60 days. Overall, we have seen a 40 
percent increase that's very difficult to pass on to our 
customers, and we don't know where it's going to end or how 
far--or how much longer it will last.
    It's just been too much too soon for our customers to 
absorb. They are losing business at an alarming rate to 
countries such as China who are importing finished goods into 
this country at prices below the raw material cost. So maybe 
the 201 decision should focus on some issues like that instead 
of raw material. Raising prices for those type of customers is 
not the answer.
    Allocations, steel shortages and lead times. What can be 
said? If you don't have steel, you can't sell it. We have been 
cut back by roughly 30 to 40 percent. Without imported steel, 
the domestic mills cannot produce enough steel to supply this 
market. Therefore, we have shortages, which leads to 
allocation, which leads to loss of business.
    If we cannot get enough steel for all of our current 
customers' requirements, they must buy elsewhere, and so 
they'll go shopping around and we lose part of that business 
too.
    In July, we were asked to place orders through the end of 
the year. That is a six-month lead time. In this business, that 
is way too long. It is only a guess at that time how much steel 
you are going to need and at what sizes you can bring in. When 
we get calls for future inquiries, at the time we cannot 
accommodate the customers simply because all of our steel has 
already been ordered and has been booked.
    One of our suppliers called and said, ``I had to reduce my 
allocation by another 400 tons for the fourth quarter of the 
year 2002, simply because the third quarter allocations, 400 
tons of it could not be produced and had to move over into the 
fourth quarter.'' I don't understand that. I don't know why I 
have to pay the price for their failure. They also explained 
that they can only roll so many tons, which is another problem 
out here on the West Coast. There are simply not enough 
suppliers.
    Number three is the loss of business. If you take points 
one and two, high prices, long lead times along with not enough 
steel, and it all adds up to loss of business, and there's just 
not enough--not only for the current business, but future 
business as well.
    It is our position that the 201 decision should be 
reconsidered. It seems to help only a few and not the majority 
in the steel industry.
    While Mace is a small minority woman-owned business and may 
not seem significant in the context of the entire steel 
industry, don't forget, there are thousands of us out there. 
Thank you very much.
    [Applause.]
    [Mr. Reynolds's statement may be found in the appendix.]
    Chairman Manzullo. These must be the steel users.
    Let me introduce again, representing Hilda Solis, member of 
Congress, Aiha Nguyen. Are you here? She had to leave. We have 
also been joined by Tony Cardenas, California Assembly Member 
from the 39th District. Tony, where are you? Why don't you 
stand up.
    Then Grace wants me to reemphasize that you can validate 
your parking at the sign-in table. Is that correct?
    Mrs. Napolitano. Right there.
    Chairman Manzullo. Okay. The next witness will be Bart 
Alcamo, President of RBK Tool & Die Company, on behalf of the 
Society of the Plastics Industry, Incorporated. We look forward 
to your testimony.

STATEMENT OF BART ALCAMO, PRESIDENT, RBK TOOL & DIE COMPANY, ON 
BEHALF OF THE SOCIETY OF THE PLASTICS INDUSTRY, INC., MODESTO, 
                           CALIFORNIA

    Mr. Alcamo. Thank you, Chairman Manzullo and Representative 
Napolitano, for calling this field hearing of the U.S. House of 
Representatives' Small Business Committee to address a number 
of important issues affecting small businesses in California.
    On behalf of The Society of the Plastics Industry, I would 
like to address one of the issues slated for your consideration 
today: The adverse impacts on companies from the recent tariffs 
onsteel.
    Founded in 1937, The Society of Plastics Industry, Inc. Is 
the trade association representing one of the largest 
manufacturing industries in the United States. SPI's 1,500-
member companies represent the entire plastics industry supply 
chain, including processors, machinery and equipment 
manufacturers and raw material suppliers. The U.S. plastics 
industry employs some 1.5 million workers and provides $330 
billion in annual shipments.
    The plastics processing industry is the fourth largest 
manufacturing industry in the United States after motor 
vehicles, electronics and petroleum refining. California, it 
must be noted, ranks number one in the country in terms of 
plastics jobs, 147,000 persons.
    The State ranks second for shipments, shipping more than 
$27 billion in plastic raw material, products and equipment. In 
the six-county region from Los Angeles to San Diego, the 
plastics industry is responsible for more than 70,000 jobs and 
$14.3 billion in shipments, and Los Angeles County has more 
plastics jobs than any other county in the entire United 
States.
    Thus, I don't think there should be any doubt about the 
significance of the plastics industry to the United States, 
California, or, in particular, this region of California.
    Ours is an industry that has grown more rapidly than 
overall manufacturing for the past 25 years, as it has 
continued to adapt to meet the ever-growing needs of consumers 
and to meet ever-changing economic challenges. Today, however, 
the industry is certainly facing some particularly tough times, 
as it has been hard hit in the past two-and-a-half years during 
the nation's economic slowdown.
    For example, the plastics equipment sector experienced a 
40.4 percent decline in shipment in 2001 compared to 2002. 
Shipments of injection molding machines, the largest industry 
equipment market, dropped nearly 50 percent from quarter four, 
2001 compared to quarter four, 2000. The hope that 2001 was a 
bottoming out of the equipment market did not materialize as 
the first quarter of 2002 continued the downward trend, with an 
additional 23.3 percent slowdown compared to the previous year.
    The current economic climate for the plastics equipment 
sector has been very hard indeed, with frequent announcements 
of layoffs and plant closures that hurt American workers and 
the industry. In one company survey of 1,000 moldmakers, 
another plastics industry equipment segment, the average 
profitability for moldmakers is down to just 1.4 percent.
    All this serves to explain, as you may have been wondering, 
why the plastics industry is here to testify before the Small 
Business Committee on the effects of the recent Steel Tariff's 
decision by the Bush Administration. And that is because the 
equipment and mold sectors of the plastics industry are steel 
consumers, and the President's imposition of tariffs on steel 
has exacerbated an already challenging situation.
    As an example, Universal Dynamics, a plastics auxiliary 
manufacturer, experienced a 20 percent increase in their steel 
price immediately following the tariff's decision. Its steel 
suppliers have told them that another increase may be expected 
in September. Estimated annual costs to this company for steel 
price increases are more than $100,000 annually. While this 
company has grown to meet the global demands of the worldwide 
plastics industry, uncertainty about if and when a steel 
increase may happen, or how much the increase may be, adds 
another level of uncertainty to an overall already volatile 
economic environment.
    Another large diversified company, ITW, which is a major 
plastics processor and employs some 52,000 workers in plants in 
43 countries, believes that the tariff's increase may cost the 
company nearly $20 million annually in additional duties. Other 
major plastics equipment manufacturers have experienced price 
increases ranging from 9 to 16 percent since March 2002, when 
the tariff was implemented, with increases growing to more than 
35 percent over the past year.
    While there have been exclusions granted from the U.S. 
Trade Representatives for certain steel imports, steel 
consumers are still feeling the pinch. One plastics company, 
for instance, applied for 21 exclusions from the tariff, to 
have only four granted.
    Chairman Manzullo. Your time is up, but tell us about your 
own company.
    Mr. Alcamo. Our company has had some experience with the 
steel increase in the tariffs. However, it's been minimal to us 
because there's been a lack of work because of the uncertainty 
of the manufacturers placing orders.
    Chairman Manzullo. You have had a double whammy.
    Mr. Alcamo. Got a double whammy.
    Chairman Manzullo. Okay. Does that conclude your remarks? 
Is that really everything you wanted to say in there?
    Mr. Alcamo. Yes. It pretty much concludes what I had to 
say.
    [Mr. Alcamo's statement may be found in the appendix.]
    Chairman Manzullo. Okay. We'll get that in the Q and A. 
Thank you. The next witness is Terry Bonds. Terry is the 
District Director 12 of United States Steelworkers of America, 
came all the way from Albuquerque, to be with us, and here you 
are, Terry. We look forward to your testimony.

    STATEMENT OF TERRY BONDS, DIRECTOR, DISTRICT 12, UNITED 
        STEELWORKERS OF AMERICA, ALBUQUERQUE, NEW MEXICO

    Mr. Bonds. Good morning. My name is Terry Bonds, and I'm 
the director of District 12 of the United Steelworkers of 
America. I represent 40,000 men and women who work in many 
industries within nine southwestern states, including 
California.
    I would like to thank the Committee on Small Business 
Chairman Manzullo for giving me the opportunity to address the 
issues of international trade and steel tariffs. I'd also like 
to express my appreciation to Congresswoman Napolitano for 
inviting me to this hearing in her home district.
    Following the Asian economic crisis, steel imports destined 
for Asia and Europe were diverted to the U.S. steel imports 
rose from 31 million tons in 1997 to 41 million tons in 1998, 
and reached nearly 40 percent of the market.
    Domestic steel prices fell by 30 to 40 percent. The price 
of hot-rolled steel fell from an average of $340 per ton in 
1997 to $210 per ton by December 2001.
    Currently there is a global over-capacity of 250 million 
tons.
    The impact of the steel crisis of 1997-2002 cannot be 
overstated. Since 1998, 35 companies have declared bankruptcy 
and 17 have ceased production. Over 50,000 steelworkers lost 
their jobs. More than 100,000 retirees have lost their health 
care benefits, and the benefits of another 500,000 retirees are 
at risk.
    Last year the International Trade Commission found that 
imports had seriously injured domestic steel producers. 
Following the most thorough investigation in its history, the 
FTC recommended tariffs and quotas be applied to 16 of 33 
products.
    On March the 5th, 2002, President Bush ordered tariffs on 
14 of those products starting at 30 percent this year, falling 
to 24 percent next year, and then 18 percent in the third year 
with regular schedules resuming in the fourth year.
    ITC Commissioner Hilman has estimated that the section 201 
tariffs apply to only about 29 percent of all steel imports. 
Some legitimate exemptions have been issued, though hundreds of 
the 727 exemptions are for products that the domestic industry 
has the capacity and willingness to produce. Too many unfounded 
exemptions will undoubtedly weaken the 201's effectiveness.
    The President's 201 decision was not intended to be a 
permanent solution. In fact, this temporary safeguard provides 
a 3-year reprieve during which the reduction of global over-
capacity, the lessening of retiree health care liabilities, and 
the consolidation of the domestic industry must occur for 
future viability.
    Some have expressed concern about recent price increases. 
Reasonable price increases were to be expected. Worldwide, 
prices have increased for reasons other than the 201. Current 
steel prices in the U.S. remain below 1997-1998 levels, and 
below their 20-year average.
    No one wants to pay higher prices, and steel-consuming 
companies are no different. Steel producers have invested $60 
billion to improve quality and lower prices. But the '98-'01 
import prices were not fair market prices, but rather unfair 
dumping prices, against which U.S. producers simply could not 
compete. Steel consumers couldn't compete with imports dumped 
at 30 to 40 percent below domestic prices, and they shouldn't 
expect steel producers to do so either.
    With steel at $210 a ton, no steel producer in America can 
survive. For steel consumers to expect artificial prices is not 
only unrealistic, it is an endorsement of dumping, a clear 
violation of American and international trade law. I am not 
assuming that they have felt no impact. We have members 
employed by steel-consuming firms as well as steel-producing 
companies. We must search for a balance to allow both to 
survive. But, it seems to me, for America to survive, as we 
know it, our nation must have a strong steel industry. We must 
be able to produce our own steel.
    My hope is to present a balance, a view towards survival 
for our steel and steel-consuming industries, rather than a 
short-sighted view. It is not in America's interest to allow 
the steel industry to vanish, not for our infrastructure, not 
for our national security.
    America has seen the danger of relying on foreign oil. 
Repeating this misfortune in steel would be a mistake and a 
threat to our economy. The day our government refuses to use 
our trade laws to rightfully defend American industry is the 
day we become solely subject to the WTO and global markets that 
have no regard for America's workers, producers or consumers.
    Revoking the tariffs would be misguided. If Congress wishes 
to help steel producers and consumers, it should pass H.R. 
4646, the Steel Industry Legacy Relief Act. This bill would 
provoke consolidation, protect retiree health care benefits, 
and foster a more level playing field since many foreign 
governments provide workers and retirees with national health 
care. It could even help steel consumers by reducing the cost 
of American steel. This bill has gained 175 co-sponsors since 
its introduction in May, and we hope to see its expeditious 
passage.
    Thank you for allowing me to share my views regarding this 
important issue of international trade and steel tariffs. I 
look forward to responding to your questions.
    [Mr. Bonds's statement may be found in the appendix.]
    Chairman Manzullo. Thank you, Terry. Appreciate it. We are 
joined also by Kimberlee Tachiki. She is the Senior Field 
Deputy for Congresswoman Lucille Roybal-Allard. Kimberlee, 
where are you? Thank you for coming. Appreciate it very much.
    The last witness is Tom Martin, who is the Chair of 
Government Affairs of the Small Manufacturers Association, SMA, 
out of Pomona, California, and we look forward to your 
testimony.

   STATEMENT OF TOM MARTIN, CHAIR, GOVERNMENT AFFAIRS, SMALL 
      MANUFACTURERS ASSOCIATION (SMA), POMONA, CALIFORNIA

    Mr. Martin. Good morning, Mr. Chairman. I wish a special 
good morning and hello to Congresswoman Grace Napolitano, who 
through redistricting now represents Pomona, where my employer, 
Coast Foundry and Manufacturing, is located.
    I am a member of the Board of Directors and legislative 
chair for the Small Manufacturers Association of California, 
SMAC, an organization representing about 1,000 small 
manufacturers in California.
    David Goodrow, Chairman of the SMAC, has asked me to speak 
to you because our company has an intimate knowledge of this 
import-export issue. I am also on the Board of Directors of the 
California Small Business Association, another major and active 
organization that represents small businesses throughout 
California.
    More importantly, I am a full-time paid employee, and 
manager of insurance and safety for Coast Foundry and 
Manufacturing, Inc., a Pomona company, which manufactures price 
competitive water control valves for the toilet industry.
    While Coast is an industry leader, and may be the largest 
producer of toilet valves in the world, today we employ 210 
people. Two weeks ago we employed 240, and we will say 
unequivocally those 30 jobs were lost to unfair imports. My 
remarks today are primarily on behalf of members of the SMAC, 
including Coast Foundry.
    I am sure, if we look closely, small manufacturers can find 
many good things about exporting, and even a few good things 
about importing. Dr. James Morrison, president of the Small 
Business Export Association, on May 15, 2002 told the 
Congressional Committee on International Relations, ``While 
there's no doubt that some of America's biggest companies can 
continue to increase their exports, the largest untapped 
resource for American exports is small and medium-sized 
companies.''
    Some of our SMAC members are exporters or want to be 
exporters. They are looking for customers offshore who can 
afford our rising prices. California proudly announced this is 
the fifth largest economy in the world. Unfortunately, in the 
eyes of California manufacturers, service industry jobs, and 
lawyers filing lawsuits drive our economy. California 
legislation is raising our cost and quickly making it 
noncompetitive in the Continental U.S., especially if your 
company manufactures price-sensitive products.
    California has the second highest minimum wage in the 
Nation, and might soon be first. Our legislative costs and 
taxes to run a business are major. Private companies in most 
inland states cannot or more importantly will not support the 
high wages and benefits costs that California manufacturers 
must charge. They go offshore in search of cheaper but 
comparable products. Often they find products that are visually 
comparable, and occasionally they are comparable in performance 
and quality, but the bottom line is they are cheaper.
    Manufacturers that want to stay in California have to look 
offshore for clients who want the quality we produce, not just 
the low prices and lax quality coming from overseas.
    You were kind enough to offer me the opportunity to address 
federal programs to support small business exporting, improved 
trade adjustment assistance and to minimize the adverse impacts 
resulting from trade agreements, imports and tariffs. Although 
the SMAC fully supports trade adjustment assistance, I will not 
be discussing that today.
    We have members who export, or want to export to virtually 
every country and every continentexcept Antarctica. When we 
export to those countries, we often find ourselves in a quagmire, where 
regulations in the receiving country can change overnight.
    We have one member who exports to an American-owned 
production facility in China. Our member's product is 
palletized on hardwood pallets because China said they would 
not accept standard softwood pallets. In fact, China threatened 
to remove the product from the pallets, burn the pallets, and 
charge the expense back to the customer, which in turn would be 
charged to the export seller.
    Now China has determined they will not accept hardwood 
pallets because they are not totally hard woods. They argue 
that even with hardwood pallets, certain portions are soft 
wood, and might harbor bugs and insects. If it is decided that 
wood-burrowing bugs have attacked the soft wood portions of the 
hardwood pallets, the shipment will be returned at the expense 
of the exporter, and the importer on their end will also be 
chastised and possibly barred from importing into the Chinese 
market.
    The exporter, our member, is looking for realistically 
priced plastic pallets, while still trying to keep costs low to 
compete. China realized that the expenses will have to be eaten 
by the exporter or paid by the customer. Neither is a positive 
for the exporter. If their cost drives too high because of 
these irksome regulations, the Chinese believe our exporters 
will bail out and/or American companies, already lured to 
China, will buy Chinese produced products.
    The Chinese are not the only ones looking to create markets 
for their plants' products at the expense of outsiders, but 
their low labor, subsidized materials and large manufacturing 
base make them a natural.
    In his remarks to Congress, Dr. Morrison noted that a 
positive government study on exporting stated, ``The report 
calls for better training, better measuring of results, and 
imparting a big picture national goal of promoting exports to 
all government export promotional personnel, as opposed to 
narrower agency goals.'' He also said, ``National export 
strategy requires a collective effort at all levels of 
government. Exporting companies won't be interacting with 
agency officials in Washington; they will be dealing with lower 
level officials in federal offices across the country.''
    This is especially true in California. We have a mindset 
that says we are a part of the Pacific Rim. We have two major 
ports within minutes of this hearing room. California now looks 
to the government to provide them support in California, not 
Washington. But we do look to the Congress to protect us by 
providing a level playing field. A tariff on us should be 
matched by a tariff paid to us. If we are forced to pay greater 
tariffs going out than they are paying coming in, you are 
exporting our jobs. When a competitor makes price-sensitive 
products, is able to put that product on our dock, ready for 
inland shipment, that it costs lower than we pay for basic 
materials, we should tell our employees to go home. We cannot 
compete. There is more, but if you'd like me to stop, I will.
    Chairman Manzullo. The written testimony will be made part 
of the record. Okay. Ms. Napolitano, do you want to ask some 
questions?
    [Mr. Martin's statement may be found in the appendix.]
    Mrs. Napolitano. This is the part where we start asking 
some of the questions that we have in mind so that the general 
public can get an idea of what happens. And I will start off 
with David Holbert, and USC. How many personnel do you have, 
sir?
    Mr. Holbert. There are five individuals that work in our 
office.
    Mrs. Napolitano. Five individuals. And you cover all of Los 
Angeles or all of the----
    Mr. Holbert. We cover California, Arizona, Nevada, and 
Hawaii.
    Mrs. Napolitano [continuing]. With five people.
    Mr. Holbert. With five people, yes.
    Mrs. Napolitano. Again, Mr. Chair, this is why it's 
important that we let our people know how understaffed some of 
our agencies are. And I just was amazed because I didn't know 
you were there, and I just wanted to bring that out. So that do 
you think you will be able to handle some of the input that is 
going to be generated from here, some of the questions, some of 
the businesses that may want to be able to get assistance from 
your agency?
    Mr. Holbert. Yes, most certainly. I brought some brochures 
and I will be here to speak to people, and available on the 
phone as well.
    Mrs. Napolitano. Thank you so much. Mr. Thompson, my 
friends and former colleague, you saw Mr. Carvanas. He just----
    Mr. Thompson. Did he already leave?
    Mrs. Napolitano [continuing]. He was there a minute ago. I 
don't know where he went.
    Mr. Thompson. He is probably out helping somebody.
    Mrs. Napolitano. Oh, good. How many employees do you have?
    Mr. Thompson. Do I personally have?
    Mrs. Napolitano. No, in your agency.
    Mr. Thompson. In the region?
    Mrs. Napolitano. Correct.
    Mr. Thompson. It varies. About--the average is 17 employees 
per office, and we have nine offices within the region. L.A. is 
larger, but, you know, Hawaii is smaller, and so it averages 
out to about 17, 18 employees.
    Mrs. Napolitano. So, that is still very understaffed, am I 
correct? In other words, to be able to handle the assistance to 
the many small businesses of California, especially Southern 
California.
    Mr. Thompson. We have our challenges, Congresswoman. And we 
are trying to deal with those. I would like to keep my job, 
so----
    Mrs. Napolitano. I understand. Thank you. No, I understand. 
What I am saying to these people is that, you know, you have 
many agencies. May I ask, then--let me put it another way--what 
time do you have to interact with other agencies, so you know 
what everybody is doing, so you can channel some of these 
individual businesses that have issues, to the correct agency 
and to be able to come up with programs that are going to help 
everybody?
    Mr. Thompson [continuing]. I think the important thing is 
that we leverage our employees and we leverage the amount of 
money we get from Congress with the State of California, with 
the community colleges and other organizations, to provide the 
information and the business assistance as needed. The SBDCs, 
the other organizations, State of California and some other 
organizations, and of course you've heard here with exporting. 
And that is the important thing, to try to get as much bang for 
our buck wherever we are at. That is our goal, and that is what 
we try to do.
    I know that the staff in Los Angeles is very capable and 
they accomplish those things, they are in the Chamber of 
Commerce's offices in the outlying areas. Any place we need to 
be, we are at.
    Mrs. Napolitano. I don't know about the L.A. one. I know 
about Glendale, because we worked very much in hand with Mr. 
Alvarado.
    Mr. Thompson. Well, that is L.A. That is the L.A. office.
    Mrs. Napolitano. Oh, that is the L.A. office.
    Mr. Thompson. That is the L.A. office. And we have one in 
Santa Ana and San Diego.
    Mrs. Napolitano. Do you have any businesses coming to you 
for small export assistance?
    Mr. Thompson. We do, and we have experts in each one of our 
offices for export. And then of course we have our two USEAC 
representatives that cover the six offices here. The USEAC 
offices in the Southern California area, there are six of those 
and they rotate a day here and a day there, to make sure that 
they have appointments and so forth and so on.
    And then of course we use the SCORE counselors which--or 
executives, retired executives, where we possibly can, and we 
are always looking for those that are involved with exporting 
in their past so that they can give the advice and counsel 
that's needed there too.
    Mrs. Napolitano. Thank you. The businesses that are here I 
think want to learn where they can go, where they can get 
assistance, the correct--they want to be guided to an agency 
that is not going to say, ``Well, I can't help you if somebody 
else is going to,'' or referrals. And as you well know, and we 
have been working on that, is the work reduction, which 
hopefully will come about so maybe the agencies can begin to 
work on how they can at your level recommend to Congress where 
we can begin cutting down so that individuals don't have to go 
through a myriad of red tape and paperwork to be able to get 
the assistance they need because they don't have that kind of 
time. Thank you very much for being here.
    Mr. Thompson. Thank you.
    Mrs. Napolitano. Ms. Delmege, does your agency work in 
cooperation with the other agencies in regard to--well, the 
same questions, basically.
    Ms. Delmege. Sure. I am wearing two hats here. One is with 
the U.S. Department of Commerce as part of the local network, 
and the other being with the Trade Promotion Coordinating 
Committee, which is tackling just those issues that you are 
raising, of coordination between the different agencies.
    Here in Los Angeles County, we have two offices, one in 
downtown L.A., and one in West Los Angeles, and I believe that 
there is a total of eight trade specialists there. Again, we 
are co-located with SBA; we work very closely with Ex-Im who is 
in the offices as well.
    Mrs. Napolitano. Okay. But, again, you are talking about 
L.A. Most of my businesses won't go, can't go, don't have the 
time, don't even know where you're at, and West L.A. is out of 
the question. Anything in this area, or anything between here 
and Orange County?
    Ms. Delmege. Generally speaking, no, I mean, in short. But 
they go out to the companies. I mean, you should understand 
that most of the time they are not sitting behind a desk down 
in L.A.
    Mrs. Napolitano. No, I understand.
    Ms. Delmege. They are out.
    Mrs. Napolitano. How many employees do you have?
    Ms. Delmege. In Los Angeles County total I believe we have 
about eight employees. I don't have the exact number.
    Mrs. Napolitano. Thank you so very much.
    Ms. Delmege. You are welcome.
    Mrs. Napolitano. I don't mean to belabor, but I just wanted 
to show that, you know, we just don't have the amount of 
personnel.
    To Mr. Hinojosa, and I guess I am skipping because we are 
running short on time, but you and I go back a few years, and I 
can remember when NAFTA was passed, I wasn't there for the 
vote, unfortunately, would have voted the way I normally would, 
although I believe totally in trade, I think that there are 
several provisions that are not included in NAFTA or any other 
trade agreement. My concern has been for the communities. Now, 
you have funding that was allocated by Congress for the 
NADBank, which was in what amount, sir?
    Mr. Hinojosa. Well, actually there was an appropriation 
made by the U.S. and the Mexican government of $450 million 
plus guarantees by the U.S. and Mexican government totaling 
essentially a capitalization of $3 billion, and I hope I know 
where you are going with this.
    Now, after seven years of operation, those $3 billion in 
capitalization has led to a total, what is it, about $20 
million in loans throughout this entire period of time, which I 
consider a disgrace given the nature of globalization, and the 
incredible challenge that NAFTA in particular has meant for the 
context of globalization.
    Mrs. Napolitano. And then it follows up with the question 
of the training funding that was supposed to be made available 
to employees who have been displaced, and the companies who had 
lost business because of flight into the Maquilas or into other 
areas, and what has happened to that?
    Mr. Hinojosa. That's the NAFTA TAA program that's 
administered out of the Department of Labor which is a separate 
program, with a separate line item which continues to be 
funded. We--I mean, what's interesting, we think that that 
program right now is reaching about 60 percent of the workers 
that really should be eligible. But there is a large number of 
workers who would fall under these categories.
    And by the way, I would say the same thing about the small 
firm trade judgment assistance. I think there is a massive 
undercount of the affected firms and affected workers that--
from international trade activities. And I think that this 
frankly is the problem with the NADBank.
    The NADBank was created, but it's then--in a sense, it was 
also fought tooth and nail by the people in the Treasury 
Department against creating it, because everybody who knows in 
this context of debating globalization, nobody wants to focus 
on the adjustment costs associated with international trade. 
They like the positive benefits, and that is great, and I agree 
that we should push that; but I think that part of the problem 
we have in this country right now is by not really stepping up 
to the plate to deal with the workers and the firms that are 
affected in a negative way, which is not that much, by the way. 
It's a pretty small number.
    If you really look at the real impacts of all of the--job 
impacts given all of the job market of the United States, it's 
still pretty small, but we refuse to really step up with I 
think aggressive programs to deal with the dislocation, and not 
enough program, and I completely agree with you, to take 
advantage of the incredible opportunities that a particular 
place like Southern California can offer in trade.
    Mrs. Napolitano. Thank you. What is the--very quickly, just 
what is the percentage, the interest rate, that NADBank 
charges?
    Mr. Hinojosa. NADBank basically charges triple A financing 
rates. It's not--it's not the type of lending--not the type of 
rates that should be charged for the type of rates they are 
going to adjust.
    Mrs. Napolitano. Thank you, Mr. Chair.
    Chairman Manzullo. Thank you. The issues are all over the 
place. Before we conclude, and before I ask my questions, I 
want to thank everybody for coming here. I appreciate your 
patience.
    I am going to limit my remarks on the steel issue. As far 
as I know, the only committee that held a hearing on the issue 
of steel was our Small Business Committee. There are 17 full 
committees in the House of Representatives. Several of them 
would have direct jurisdiction, including Ways and Means, on 
the issues of tariffs. And no one would even touch this 
subject.
    Our committee did for a couple of reasons. Number one is 
that we were being contacted bothby management and by union. 
Unions--with the steel consumers. There are actually more union members 
involved in steel consuming than there are in steel producing, which is 
a pretty interesting aspect.
    In fact, in a hearing that we held on July 23rd of this 
year, a fellow by the name of Robert Herrman, who was the head 
of the United States Steelworkers Local 735-14, which 
represents 250 workers of A.J. Rose, in Ohio, testified that he 
thinks that the union workers who use the steel are being 
treated like second-class union workers to the union workers 
that manufacture the steel. (See Hearing Serial No. 107-66) 
This is not an easy issue.
    And I would say to you, Mr. Bonds, that the issue is not 
with the unions. The issue is with the dang steel companies 
that are gouging, and with the Attorney General that refuses to 
answer our letter where we asked for an inquiry as to why these 
domestic steel companies have to gouge.
    In fact, the word that they used in their language, is, 
quote, ``profit recovery,'' end of quote, that they have been 
gougers. The U.S. steel producers, and I name them, Bethlehem 
Steel, LTV, you go right down the lineup, we have evidence of 
their gouging--We have a book of Steel Letters that I delivered 
to the Secretary of Commerce, where Bethlehem Steel says, ``All 
right, because of the steel shortage we had to raise prices.'' 
Excuse me. They created it with the Section 201 which was done 
simply for political purposes. Because the steel shortage, the 
steel companies have unilaterally broken steel supply contracts 
with steel distributors or directly with the steel-using 
manufacturers and used the word profit recovery to say they 
want more money.
    That is not the fault of the unions. I listened to your 
testimony, and the premise of it is correct. In fact, you will 
find, Terry, that if you interview 100 steel-using industries, 
99 will agree with the basic premise that they would be willing 
to pay a little bit more for the price of steel in order to 
keep manufacturing here state-side.
    I have a huge industrial base back home, and there isn't 
one person in that group that is being hit, such as some of the 
people here, that doesn't agree with the basic premise.
    The problem is called greed, and it's the greed on behalf 
of these steel manufacturing companies, that they think they 
can come in there and arbitrarily raise prices, and really--and 
I hate to use the word since it is made of steel--put the 
screws to the people that are using the steel.
    And I know you agree with me, that these steel companies, 
you can only charge so much before they become noncompetitive.
    We talked to a fellow yesterday. Here is the irony of it. 
We have a company in Ohio who testified at our hearing in 
Washington that had a contract to supply a steel-made product 
to another American company. He had an American manufacturer 
that used an American steel to supply an American purchaser, 
the best of all the worlds.
    Because of the increase in the price of U.S. steel to the 
domestic steel user, that company has to lay off people, and 
guess which country they lost their steel contract to supply a 
U.S. manufacturer? They lost it to China. I'm sorry, it was a 
New Jersey company, and it was a union company.
    And what we are seeing here is the ill-fated results of 
what happens in a classic trade war, which was started for 
political purposes.
    Now, I agree with the fact that we should not give up our 
protections. In the area that I represent, I testified before 
the U.S. International Trade Commission, on a Section 332 
petition that was filed by the National Tooling and Machining 
Association. These are the little guys that obviously do 
tooling and machining.
    And the basis of my testimony there was similar to the 201 
by showing that there has been a tremendous hit in the tooling, 
the machining, and also the molding industries. Using the same 
argument as yours, Terry, that what is going to happen is that 
people who make the molds go offshore. You want to be able to 
make a mold, to make a shell casing, for example, in a time of 
national emergency. What we found, what Phil actually found in 
doing the research is the Bureau of Labor statistics, which 
does the core research for the number of jobs that are in any 
particular sector, stated that the city of Rockford has only 
570 tool and die jobs. Now, this was a city founded by the 
Swedes in the 1850s that brought with them their expertise in 
carving wood, and they actually invented the lathe in Rockford. 
This is where it all started. In the process of developing 
tools to carve the wood, when the machine age came along and 
steel came along, they took that artistry of wood carving and 
turned it to the artistry of steel carving, and thus the birth 
of the tool and die industry in Illinois.
    My dad was a union machinist, and was a union carpenter, 
and came up through the ranks in that way. But what we found 
was the Bureau of Labor statistics does not understand the city 
of Rockford, when they say only 570 people are employed in the 
tool and die industry. Now, two shops alone employ over 570 
people. And what we were trying to do is to try to educate our 
own Department of Labor, that, get this, the United States 
government does not understand the importance of manufacturing 
in this country. It has no clue. Because they do not have the 
correct figures.
    In Rockford, Illinois, with 150,000 people, we have 1,100 
factories, most employing less than 100 people. And if our own 
U.S. Government does not have the correct figures, does not 
have a clue as to what is going on in the manufacturing, Terry, 
how could they have any clue as to what is going on in the 
manufacturing of steel, and its importance in America?
    Mr. Bonds. In the first place----
    [Applause.]
    Mrs. Napolitano. Now you understand why I invited him.
    Chairman Manzullo. And steel is manufacturing.
    Mr. Bonds. Do what?
    Chairman Manzullo. Manufacturing of steel is manufacturing. 
You are included in with that segment.
    Mr. Bonds. Well, I think in the first place, if you look at 
the reason that prices have risen, it is not altogether to do 
with the 201. I mean, we have closed 20 million tons of 
domestic steel capacity here in this country. Thirty-five steel 
companies are bankrupt right now. Seventeen of them have gone 
out of business.
    So I am not sure there is anything particularly wrong with 
steel companies who have been losing money for the past decades 
to want to make profit. If they don't make profits, we are not 
going to have a steel industry, and we are competing with a 
steel industry worldwide that is subsidized by its federal 
governments, that where they provide national health care, and 
our steel industry in this country just simply cannot compete. 
Prices must rise.
    And even though prices have risen, they are still below 
where they were in, you know, three years ago, and below the 
20-year average. So if we are going to have an economy and a 
national defense system and infrastructure, we must have a 
steel industry.
    Chairman Manzullo. I understand. But my question, which is 
more of a comment, is that when you testified, you said, well, 
what we need here is balance, and I turned to Phil Eskeland, 
and I said, the man understands what is going on----
    Mr. Bonds. I do.
    Chairman manzullo [continuing]. But you can't justify price 
gouging, and I don't think you are. Forexample, if every steel 
mill in this country were still operating at 100 percent capacity, 
during normal times, and don't even look at the market today, that 
would only fulfill 75 percent of the demand.
    So there is just no way that the American guys can fulfill 
100 percent of the demand that is going on in this country so 
you have to bring in the imports.
    But the point that I am trying to make with some of the 
fellows here, what Anita is testifying to, the price of your 
steel went up, what, 20 to 40 percent?
    Mr. Bonds. Forty.
    Chairman Manzullo. Yes, it went up 40 percent. And the 
tariffs are only 30 percent. And if you take some of the folks 
back home, we have got a shortage situation. This is the 
weirdest thing in the world. I am the guy that got tool grade 
steel excluded from the tariff, because those are the cutting 
knives, the very high-density steel that you need for the 
knives, because the tool and die industry would have been 
devastated on it. We worked with the USTR on that all the time. 
But we have a situation going on back home, follow me closely 
on this, because this is what happens when you impose these 
tariffs.
    The foreign company that was supplying this particular type 
of steel, which a U.S. steel manufacturer said they could 
fulfill, but as to which there is a letter on file saying that 
they cannot make fulfillment, that foreign steel manufacturer 
is going to set up operation in the United States to be in 
direct competition with the domestic guys. That is being 
brought about by the tariffs, Dave is raising his eyebrows over 
there, saying this has got to be the weirdest thing in the 
world. But it's what happens when we get into these trade wars.
    Now, the European Union is in the process of slapping 
retaliatory tariffs against the United States because of the 
tariffs. Now, one of the things they want to slap tariffs on is 
Harley-Davidson motorcycles. Okay? Now, you know what could 
happen is if those retaliatory tariffs are slapped, if the EU 
imposes retaliatory tariffs on the motorcycle industry, that 
entire motorcycle manufacturing sector in the United States 
could leave this country and go overseas and set up shop. We 
are dealing with huge, huge repercussions of what is going on 
here.
    My entire life in Congress has been in manufacturing. 
Before that when I practiced law, when as a sole practitioner 
in a town 35 miles away from Rockford, Illinois, I never had 
less than 65 to 80 pending petitions for bankruptcy because of 
the devastation that took place in 1981. It is not just steel.
    It's the fact that Paul O'Neill is a great American, 
formerly with Alcoa. He believes in a strong monetary policy 
for the United States, and the stronger our dollar is the 
better. Even though it's taken a 10 percent reduction from the 
EU in the past several years, our guys in Rockford are still 
having enough difficulty dealing with the Chinese, but now they 
got to deal with the Germans and Italians particularly on the 
sales of the machine tool industry.
    There is a huge show that is going to be started in a few 
days in Chicago, probably some of you go to here, on machine 
tools. It's not because of cheap imports that are from China; 
it's because of U.S. domestic monetary policy that makes us 
unable to compete with the Germans and the Japanese, who have 
several times gone in there and shored up the value of their 
own currencies, and the United States does nothing about it. 
And, I am a Republican. Complicated issues. Very complicated 
issues. Go ahead, Terry.
    Mr. Bonds. I don't disagree with a lot that you have said. 
The problem is, I don't think there was a choice. The 
international--the ITC voted six to nothing to institute this 
policy, and the president agreed with it, with the ITC.
    Chairman Manzullo. Right.
    Mr. Bonds. The reason is because I don't think there was a 
choice. If there would not have been action taken we would not 
have a steel industry. We are not even sure we are going to 
assist steel industry now.
    Chairman Manzullo. We agree with you.
    Mr. Bonds. But I certainly agree with you on another point, 
it is not just steel. It is manufacturing in total in this 
country. I represent in the southwest people who make copper, 
the copper mines. We once had 60,000 members in that industry. 
Now there's probably less than 3,000, and aluminum, the same 
way. I worked for Alcoa at Point Comfort, Texas as a millwright 
before I went to work for the United Steel Workers.
    My home plant at Point Comfort, Texas, is now in danger of 
being closed. We are in danger of losing manufacturing in this 
country, and the only people that we can turn to to help us is 
our government, and we need help.
    Chairman Manzullo. Terry, as you said it, it's a matter of 
balance; it is a matter of fairness. Now, the steel companies 
have until I believe it's September 5th to come up with a plan 
for restructuring. Regardless of where you go in this country, 
we have that problem with manufacturing.
    But let me make these observations. We came up with a list 
of ten reasons why manufacturing is getting hit, and among 
those are the steel tariffs. Anything that happens in this 
country that makes it less competitive for American 
manufacturers is bad news across the board. We haven't even 
gone into what it has cost the little guys especially for the 
tremendous spikes and the high costs of health care insurance 
premiums.
    That led to your legacy cost and you're bankrupt there. We 
had Dr. Roger Ferguson, who was vice chair of the Fed, come out 
to our Congressional District last week. He is second to 
Greenspan. He is an economist you can understand, which is sort 
of unusual, but that's why I asked him to come out I asked 
Greenspan as a matter of a courtesy, but I really hoped that 
Dr. Ferguson would have come out, and he chose to do that.
    He sat down with our local manufacturers for the number one 
purpose of whenever the Fed decides to change the interest 
rate, they should look at all these economic indicators. We 
especially wanted him to bring into consideration the indicator 
that looks at what is going on in machine tool sales, because 
if machine tools aren't being ordered, that means no new 
products are coming out on the market, and that's the first 
indicator of an economic slowdown.
    The testimony of the men and women involved in 
manufacturing back home came down to this issue; can the United 
States ever have a recovery from the recession without 
buttressing up its manufacturing base? I asked Dr. Ferguson to 
work with me on an econometric model.
    For the first time in 150 years the city of Rockford, 
Illinois, has gone to more jobs in the service sector from 
those in the manufacturing sector. Some of the increase in jobs 
is a debt collection company that opened up in Rockford, and 
that's a job, it is employment, et cetera. That's the first 
issue, that he has agreed to work with us on.
    The second thing is if you don't have an economy based on 
manufacturing, in addition to mining, agricultural, then who is 
going to be leading in this country?
    And Grace and I share the same concern. We vote differently 
on the trade issues. I have two young men working for me on the 
committee have been in Shanghai now for two weeks that have 
been trolling for contracts with the Chinese companies, and 
American companies doing business in China. If this product, 
for example, is made in China, 52 percent of the content 
represents a product that is shipped into China. Are you with 
me?
    What we found out when I was in China in January, and I 
will go back probably in Novemberor January again, is that the 
American manufacturers that have picked up and moved from the United 
States to China have a whole developed system over there of civilian 
procurement. They go out and access companies around the world, looking 
for materials to put into the stuff in China, for either domestic 
consumption in China or for exports.
    We can still be competitive, even in China, in certain 
areas if the American companies that have left behind the 
little guys with whom they were doing business, would simply 
turn their eyes to the West and say, ``We can still access from 
American manufacturers.''
    Now, what does that do? It changes the conversation on 
trade because there is nothing that will bring more hallelujahs 
and high fives and shouts back home, when a little guy lands an 
international agreement.
    And second of all, it shows that free trade does in fact 
work. We don't even use the word ``free trade'' any more, it's 
called fair trade. The word free trade indicates that somebody 
is getting something for nothing and somebody is being gouged. 
And so the word free trade shouldn't appear on any more trade 
agreements. It should not be the North American Free Trade 
Agreement; it should be the North American Fair Trade 
Agreement, because if it can't be sold on the basis that it is 
fair, then it shouldn't be passed.
    And so what we are doing is we are working with American 
companies and set up a program called America's Jobs First 
whereby American companies and foreign companies who are 
interested in maintaining a manufacturing base in this country 
will start using American companies. This is where the 
Department of Commerce has to get involved. Somebody has to sit 
down with the American companies and say, ``You may save money 
by outsourcing back home.''
    And let me conclude on this note. I have talked too long 
already. I sit on the Financial Services Committee, and the 
main guys came in from WorldCom MCI, crook de la crap. These 
are the scumbags of society who come in and do what they have 
done to their workers. One of the interesting people that came 
in is a fellow who I call ``Grab Man.'' It is Grubman. He was 
the stock analyst. His contract was terminated, and he got a 
golden parachute of $30 million. Just amazing. Terry, I don't 
think you make that much. Not quite.
    But somebody asked him a question. He is the stock market 
analyst with the financial house of Salomon, Smith, and Barney. 
Somebody asked him a question, and his answer to this really 
says where we are in America today in our state of 
manufacturing and in our state of business. He was asked how 
did we get to this point where we could have a system whereby 
there is so much greed within this system? And he said, ``The 
problem with America's companies today is that there is no 
long-range planning. The longest range plan that goes on is the 
next quarterly dividend.''
    Now, I submit to you, the difference between a dividend of 
28 cents and 27.9 cents could mean an American company being 
involved, and preserving the American manufacturing base. So if 
everything is driven based upon what that next quarterly 
dividend is, how do you bring about change in short-term 
thinking?
    We had a guy back home, Jack Packard, who ran a company 
called Alcoa Tool before it got bought up by a major 
international company. Even during the height of the depression 
or recession of 1981, he didn't lay off one person. He 
contacted all of his shareholders, there was a huge number, and 
said, ``You can vote us out of office if you want but we are 
not going to incur a dividend until we all work through this 
thing, for two reasons. Number one, these people have families, 
and number two, where are we going to get the work force if we 
let them go now?'' So we just continued to struggle with that.
    Grace has a request that for the first ten people that line 
up there from the audience, we are going to take ten one-minute 
statements, not questions. Everybody get in line. And then we 
will limit it to one minute, because then we will close up 
here, and I have to go to San Diego. Okay. Go ahead.
    Mr. Beilke. Mr. Chairman, Congresswoman, I just want to say 
how glad I am to have the opportunity to be here to show my 
appreciation for the effort your office made, along with the 
SBA, in helping me start my business. My Wiener Schnitzel 
franchise in Pico Rivera just got off the ground, and it's a 
two-and-a-half-year dream on my part to operate my own 
business. I live in the city that I opened the business, and I 
feel it's a great opportunity.
    I would like to thank the efforts of the SBA. I know Albert 
Alvarado is here, the director of the L.A. office, along with 
Lorenzo Flores, the assistant director, and they provided--
being able to work with them directly provided me with great 
insight on what I was getting into, made me really dig down and 
do the research I needed to do. I learned the SBA isn't 
necessarily an agency that just gift- wraps a bag of money for 
you. They make you make sure you know what you are doing, what 
you are getting into, and I think obviously that's the best way 
to proceed, and I feel comfortable, and in fact--and also I'll 
mention obviously working with Grace's office and her staff, 
helping me through the process----
    Chairman Manzullo. One minute is up. Do you want to state 
your name and spell the last for the record.
    Mr. Beilke [continuing]. Yes. My name is Ron Beilke, B-E-I-
L-K-E. And I also want to present something for Grace and for 
Alberto. Be real quick.
    [Applause.]
    Chairman Manzullo. Okay, appreciate that. Next witness. 
State your name and spell your last name.
    Ms. Bruce. Mr. Chairman, Congresswoman Napolitano, my name 
is Edna Bruce, E-D-N-A, B-R-U-C-E. I have the pleasure to serve 
as Director of the County of Los Angeles, Office of Small 
Business. We would not have an Office of Small Business if the 
Board of Supervisors had not been concerned that too many 
county contracts were going to large corporations, $4 billion 
of contracts, and we would not have a Small Business Office if 
we had not gotten a grant from the Economic Development 
Administration, two grants actually from them, specifically for 
international trade.
    We also have had two grants from the Department of Defense, 
and I want to say how nice of you to have the hearing here, 
because I can see my good friend Bill Redway, and Frank Ramos, 
from the Department of Defense, and local friends Hugh Loftus, 
and Alberto Alvarado, they have been very kind to us.
    I want to say just one thing and then I will close. We have 
had four trade missions, specifically for small businesses. One 
to South America, two to the People's Republic of China, one to 
South Africa, and one next month to the People's Republic of 
China. One of the major problems----
    Chairman Manzullo. Edna, your minute is up.
    Ms. Bruce [continuing]. Oh, thank you. Sorry.
    Chairman Manzullo. Anybody else that wants to come up here 
for one-minute testimony? Dale?
    Mr. Congelliere. Dale Congelliere from the Walker 
Corporation (See page 170).
    Chairman Manzullo. Spell the last name for the record.
    Mr. Congelliere. C-O-N-G-E-L-L-I-E-R-E. I had one question 
that I wanted to ask and that is for the steel industry, or the 
steel manufacturers industry producers. Why is it thatNucor 
made profits for so long in this economy, and why is it that they did 
such a great job in making profitable steel, whereas all the other ones 
were going under at the same time?
    Chairman Manzullo. Does anybody want to handle that? Nucor 
is a mini mill. Did you want to try and handle that, Terry?
    Mr. Bonds. Nucor was, I guess, a prime example of the mini 
mills which re-melted scrap. A lot of the large integrated 
mills that made steel from iron that they made from ore, they 
just couldn't compete with it.
    Chairman Manzullo. Much cheaper to melt the scrap than it 
is to work from the ore.
    Mr. Bonds. A lot of the integrated mills are now trying to 
go to that mini mill strategy, but it takes a lot of capital 
and when you are losing money, and you are strapped with all of 
the baggage that they have----
    Chairman Manzullo. Different equipment.
    Mr. Bonds. They are having trouble getting to--the 
financing to go to that mini mill strategy.
    Mr. Congelliere. I was just going to recommend that we as a 
nation or in this industry look to some similar situations like 
that that we can come up with some more profit.
    Chairman Manzullo. Okay. Dale, your time is up. Anybody 
else that wanted a one-minute? Come on up. Go ahead.
    Mr. Wolfe. My name is Charles Wolfe, and my company is C. 
Wolfe Industries.
    Chairman Manzullo. Want to spell your last name, Charles?
    Mr. Wolfe. W-O-L-F-E. We are a contract manufacturer. We 
are in Congresswoman Napolitano's district. We are job 
producers of steel parts. That's all we do, is make parts from 
steel. We know our business very well. We have contracts with 
some of our suppliers. We have limited our cost increase at 
this point to about 25 percent.
    If we were buying in the open market we would be paying 40 
or 50 percent more for our steel. Our major customers have 
contacts in Asia. They buy over there. We are under pressure to 
keep our prices down. We cannot pass this along.
    The other things that have happened is that we are faced 
with the inability to get steel, and the quality of what we are 
getting is going down. There is a disregard for quality, 
period, and we buy from mixed metals, but we are all in this 
thing together. This tariff is not working. This cost our 
company $45,000 last month, compared to the prices we paid for 
steel in January and February.
    Chairman Manzullo. Appreciate your testimony. Anybody else 
want to give a one-minute? Okay, Ms. Napolitano. Why do I have 
a hard time? Is it Italian names? I have a hard time. 
Napolitano. Do you have any concluding remarks?
    Mrs. Napolitano. Well, you have another----
    Chairman Manzullo. Oh, I'm sorry, go ahead.
    Mr. Jensen. Robert Jensen, J-E-N-S-E-N. I work for North 
Star Company (See page 171). I want to thank you for the 
opportunity for coming, Mr. Chairman, Mrs. Napolitano. We are a 
custom roll former. In the year 2000 we rolled form 62 million 
feet of product. Much of that in steel. Today, we are one of 
Mace Metal's customers. Also today we are faced with shortages. 
About 70 percent of everything we do goes into the construction 
industry, much of which we have to have what is known as graded 
steel. It is unavailable. If it is available, the prices have 
gone up 40 percent. We are looking at more increases this month 
and by the first of the year. We have had suppliers cancel 
contracts for blanket orders, and we are noticing a 20 percent 
reduction in sales, last year, and at least another 15 percent 
reduction on sales this year because now we are starting to get 
finished goods, competing goods coming in on performance 
suppliers.
    Chairman Manzullo. Thank you. Anybody else? Okay. Oh, our 
State Assemblyman here from California. And thank you so much, 
Grace Napolitano, Congresswoman, for bringing this hearing to 
your communities here.
    You want to spell your last name for the record, for the 
court reporter?
    Mr. Cardenas. C-A-R-D-E-N-A-S, Tony Cardenas. I represent 
the San Fernando Valley, just down the ways a little bit, 
little warmer than it is here, and I just wanted to come here 
today to listen to the hearing. It was very informative.
    And also I brought with me a representative from Rayes 
Construction, minority-owned business, 8(a) approved union 
business that does concrete work. They do big storm drains and 
bridges and things of that nature. And I was encouraging them 
to come. To be quite honest with you, they're kind of 
intimidated, ``What am I going to go to a hearing for?'' I 
said, ``I will be there with you. I will explain to you.'' 
Forgive me for the whispers in the background. I was just 
explaining to him how important it is to notice the connections 
and to listen to everything that is going on. Working with 
government can be quite complicated, but when you really get 
down to it there is a lot of good people there who want to put 
the product out, who want to help our local businesses. And 
that's why you are here. Thank you.
    Chairman Manzullo. Tony, appreciate your input. Anybody 
else? Okay, Grace, concluding remarks.
    Mrs. Napolitano. Thank you, Chairman Manzullo. I think all 
of you can understand the frustrations that the Small Business 
Committee has, when it has the different federal agencies 
testifying, especially when they don't meet their minority 
caps, the minority owned, women owned, veteran owned, disabled 
owned, et cetera.
    But you also must understand that we are but one of the 
many committees that deal with small business, and with all the 
other issues. You need to be able to be more vocal as business 
people, to your elected representatives, to your agencies that 
are within your reach that you know about. You need to be 
proactive. Like Assemblyman Cardenas was saying, you need to 
understand how government works. If you don't, ask, and if you 
don't ask, you won't know, and you won't get the assistance, as 
Mr. Beilke has. He came to me, and we put him in with the SBA.
    There are many things that hamper the ability of small 
business to be successful. Let's not have government be one of 
them. I certainly thank my Chairman for consenting to come to 
California during this heat wave. And, Tony, I'll argue we 
probably were as hot as you were in the valley, because this is 
the first time we have had this high of heat in this area.
    But I thank all the panelists that came, Director Bonds and 
Mr. Thompson, my good friend, and hope that this will not be 
the last one, Chairman Manzullo, because you can see the need 
in this area. When you have 12 million people just in the L.A. 
County, you have hundreds and thousands of businesses that need 
help, and we could certainly be able to put that expertise to 
work in your area.
    We need to maybe communicate with some of your businesses 
and see how we can help each other. I don't want my businesses 
to go to your state, but I certainly would want to know what we 
can do to help.
    To all of you, thank you for enduring with us. Ron Uwi from 
the Business magazine is here. A lot of people who didn't get a 
chance to speak because this is all formulated to get 
information from the agencies so you can hear and listen and 
learn, and please contact them. Before they leave this 
building, get their card, get their number, interact with some 
of the businesses that are here. We have already had some of 
the businesses talk to each other. This is where you come in, 
you the business people. It isn't like, well, I am shy, I don't 
want to talk. I don't mean todisparage anybody, but you need to 
be more outgoing, and participating, so that people can hear and see 
where your problems are, and hopefully guide you to an agency that can 
assist you, and being able to make that connection so you can be 
successful in your business.
    Thank you from the iron workers and the people who came 
here to testify on the steel industry's woes, and I agree with 
you, there is a lot that can be done. We have the pros and the 
cons, and we need to listen to both sides, which we have today.
    On the small business export, I think we have a lot of 
potential, I mean, a tremendous potential, for small business 
to get involved. Their problem is, as you all know, they don't 
have the time to come and sit with an agency to find out how 
they can prepare themselves to go do the exporting, and with 
the small business issues that Mr. Manzullo and the rest of the 
committee, I can't thank him enough, because he has been, as 
you've heard, an advocate, a tireless advocate for small 
business, and he sits and he argues with the generals and with 
the agency heads to the nth degree, short of getting rude with 
them, in fact, I think we all do, because we are frustrated at 
their inability to hear what we hear from you the business 
people, you, the ones in our back yard, who come to us with 
your problems that can't get addressed by those agencies.
    So, again, thank you very much, everybody, for being here, 
and Mr. Manzullo, I certainly want to make sure that--I've 
already thanked staff before, but I don't know that you know 
who they are. My staff please stand up, Edla, Bernie, Homa, 
Ray, Amelia, and you see some of the staff outside. These are 
the guys that put this together. And my husband walking in the 
door, the other Napolitano, that you can't mention it, Mr. 
Manzullo. It's amazing. Thank you very much.
    [Applause.]
    Chairman Manzullo. I want to again thank you, Grace, for 
your leadership. Those of you who are represented by 
Congresswoman Napolitano, you just don't realize the tremendous 
advocate that you have in Washington. She is a very close 
friend of mine, and a person who really keeps on top of things. 
You know, Grace, perhaps we should take credit for this. As we 
have been having this hearing, the SBA put out a press release 
that I got on my Blackberry e-mail. It says, ``SBA to bring 
more export financing to small businesses through the enhanced 
Export Express loan program.'' See, that is just the result of 
you and I being here and the folks coming in to testify 
already.
    In conclusion, I want to thank everybody for coming. The 
people that are here from the government, their biggest concern 
is that they are out there ready, willing, and able to let you 
know of the services that are available from them. They spend 
more time on that trying to bring you into the loop so they can 
help you out.
    I hope this has been of help to the people that have been 
here. Again validate parking at the sign at the table, and this 
committee is adjourned.
    [Whereupon, at 12:15 p.m., the committee was adjourned.]


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