[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
_____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
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COMMITTEE ON SMALL BUSINESS
DONALD MANZULLO, Illinois, Chairman
LARRY COMBEST, Texas NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado JUANITA MILLENDER-McDONALD,
ROSCOE G. BARTLETT, Maryland California
FRANK A. LoBIONDO, New Jersey DANNY K. DAVIS, Illinois
SUE W. KELLY, New York 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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