[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
DEPARTMENTS OF COMMERCE, JUSTICE, AND STATE, THE JUDICIARY, AND RELATED
AGENCIES APPROPRIATIONS FOR 2004
----------
Thursday, March 6, 2003.
DEPARTMENT OF COMMERCE
WITNESSES
HON. DONALD L. EVANS, SECRETARY OF COMMERCE
Mr. Wolf. Mr. Secretary, there are other subcommittees
meeting.
The subcommittee is pleased to welcome the Secretary of
Commerce, Don Evans to testify on behalf of the Department's
fiscal year 2004 budget request.
The Department of Commerce's budget request includes 5.8
billion for this year, an increase of 1 percent over the fiscal
year 2003 appropriation.
This is your third time appearing before our committee, and
we certainly want to hear your views on a number of issues, and
let me just say personally I appreciate the good job you are
doing, and the difficulty that the Administration is facing in
these days of war, with the potential war with Iraq, terrorism,
and the economy.
And it is like Esther to be here for a time like this. This
is a very difficult time. So we appreciate your service and
others in the Administration on these really very, very tough,
tough issues.
Before we hear your opening statement we would like to take
a few minutes to welcome back to the subcommittee--they are not
here because they are at other subcommittees--but Congressman
Martin Sabo has joined this committee, who was the ranking
member when I was the chairman of the Transportation
Appropriations Subcommittee. Also Congressman Mark Kirk, who I
know wants to be here today. And with that, I guess, we will
just submit the rest of the statements for the record. And I
recognize Mr. Serrano for an opening statement.
Mr. Serrano. Thank you, Mr. Chairman. Let me first take a
second here to publicly thank you for your treatment of me
personally, the members of this subcommittee and my staff
during the very last year difficult appropriations process. And
you were very kind and as always a gentleman, and I want to
publicly state that.
Mr. Secretary, welcome back to our subcommittee. It is
always a pleasure to see you. I want to thank you also, because
every time you show up we get a big room. So I appreciate that.
Mr. Secretary, 2 days ago you were at the White House to
announce the launching of a Digital Freedom Initiative. The
goal of the new initiative is to promote economic growth in the
developing world by transferring the benefits of information
and communications technology to entrepreneurs and small
businesses in Senegal and other developing nations. I applaud
this new effort.
But I am also concerned that we are not offering the same
opportunities to bridge the digital divide in our own country.
I am concerned we are not doing enough to ensure that our own
minorities and small businesses enjoy the economic growth and
prosperity we are all trying to foster.
Once again, you propose to end the Technology Opportunity
Program. Once again you propose to phase out the Manufacturing
Extension Partnership Program that has helped so many small
U.S. Manufacturers. And for the first time you recommend
suspending public television digital conversion grants from the
National Telecommunications and Information Administration. I
understand there is a proposal elsewhere in the budget to
provide such grants, but only by taking 20 percent of the funds
already appropriated to produce and acquire public television
shows.
I believe, I certainly hope, Congress does not have the
appetite to take that big a bite out of Big Bird. But I do not
want to focus on the negative today. There is so much good you
and the Department are doing in general in a vast array of
activities.
And the Department's importance is also evident in my
district and my city with the Bronx River Restoration Project,
the Hunts Point Weather Station, which is a very, very exiting
project, and the investigation into the collapse of the World
Trade Center Towers to name just a few.
So, again, while there are some concerns I have, I also
commend you and the Department for a wonderful job during a
very difficult time. I thank you and look forward to your
testimony.
Mr. Wolf. Mr. Secretary, your full statement will appear in
the record. But you can read the entire statement or summarize
it, do as you see appropriate.
[The information follows:]
[Clerk's Note.--It is noted that the witness and
Representative Sweeney and Representative Kirk referred to
programmatic increases from the Fiscal Year 2003 President's
Request to the Fiscal Year 2004 President's Request. The
Chairman and the other Members of the Committee referred to
programmatic increases from the Fiscal Year 2003 Appropriation
to the Fiscal year 2004 President's Reqeust]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Opening Statement by Secretary Evans
Secretary Evans. Thank you, Mr. Chairman. I am delighted to
be back here. This is my third opportunity to be before this
outstanding committee. I want to thank you, Mr. Chairman, Mr.
Serrano, for the pleasure I have had with working with the two
of you and this entire committee over the last several years.
I think that we do continue to make progress, and I want to
tell you, along with the entire committee, how much respect I
have for all of you that are here committing your time to
public service. It is a very noble calling.
As somebody who served 26 years of his life in the private
sector, I know something about the private sector, and am
learning something now about the public sector. I just want to
state for the record how much respect I have for anybody that
commits their life to public service and say for the record
that it is not only a sacrifice of the individuals that serve,
but it is a sacrifice for their spouses and a sacrifice for
their families.
So I thank you, all of you, and I would like to read a
brief statement into the record.
Mr. Chairman, Mr. Serrano, members of the committee, I am
pleased to be here again and to present the President's fiscal
year 2004 budget request for the Department of Commerce.
With your permission, I would like to briefly highlight
some key components of our budget and submit my written
testimony for the record. A vibrant private sector is essential
to American jobs and security. 100 years ago Congress created
the Department of Commerce to promote American industry and
business and economic opportunity for our citizens.
This is the nexus of our diverse programs in trade,
technology, entrepreneurship, and environmental stewardship. In
developing this budget request, I have carefully followed the
President's directive to focus on core priorities.
As you know, making a budget entails difficult decisions.
Resources are limited. Choices have to be made. Clearly these
troubled times of war and attacks on our way of life demand
responsible, targeted spending.
The President's total budget request for the Department of
Commerce is $5.4 billion. This budget provides for the
continued funding of key Commerce programs, while focusing
resources on four critical priorities: Fostering economic
growth, contributing to homeland security, advancing science
and technology, and upgrading facilities.
To generate jobs and economic growth, government and
business decisionmakers need the best possible economic
information. An additional $5.4 million is requested for the
Bureau of Economic Analysis. These funds are required to
improve the accuracy and timeliness of GDP and economic
accounts data. As you know, two-thirds of the revisions in the
last three GDP annual releases were due to a lack of
information.
For the Census Bureau which monitors the Nation's social
and economic development, we are asking $9.3 million to
increase funding. The money is for improved data collection and
methods, the measurement of the important services sector, and
continued planning for the 2010 Census.
The President and I are very concerned about the economic
security of America's workers. A proposed increase of $13.8
million for the Economic Development Administration will assist
communities severely impacted by plant closures and layoffs.
To meet homeland security needs, the President is
requesting an additional $2.3 million for the Bureau of
Industry and Security. The funds will be used to strengthen
export controls on dual-use goods and technologies that would
strengthen the military capabilities of our adversaries.
The NOAA budget request includes $6 million to expand NOAA
weather radio to a truly national all-hazard warning network.
The funding will allow first responders and emergency managers
direct access to the network to transmit all hazards messages.
And to further strengthen homeland security, we are requesting
$10.3 million dollars for NIST. As you know, NIST is
investigating the collapse of the World Trade Center buildings.
Using lessons learned, we want to help develop new
standards for cost effective safety and security of buildings.
Additionally the funds will be used to test performance
standards for biometric systems used to identify visitors to
our country and to test radiation standards.
To support technology innovation and provide for
intellectual property protection, the Department is working to
eliminate the practice of using USPTO revenues for unrelated
Federal programs. Making more fees available sooner will enable
the agency to increase the quality of patents and trademarks
issued.
Because America's leadership in science and technology has
direct impact on our economic and homeland security, we are
requesting $9.2 million for NIST research into such emerging
areas as nanotechnology, quantum computing and health care
quality assurance.
We also include a $16.9 million increase for NOAA to study
areas of scientific uncertainty in climate, and a 31.8 million
increase to modernize fishery management to better this $50
billion industry.
Mr. Chairman, the scientists, engineers, and support staff
in our Commerce laboratories are world class. Unfortunately in
some cases the facilities they occupy are not. For example, the
NIST facilities in Boulder, Colorado were built in the 1950s
under the Eisenhower administration. I have seen them. They
lack adequate temperature controls. They suffer power outages
and power spikes. All of this is adversely affecting our vital
research, which is central to our core mission.
The fiscal year 2004 budget request includes funding to
renovate the NIST Boulder facilities and to bolster safety and
security in NOAA's facilities and throughout the Department.
As I said earlier, these are troubled, threatening times
for our Nation. We have had to make some tough choices
affecting some very, very good programs. To enable us to focus
on new economic and homeland security needs, this budget phases
out funding for the Advanced Technology Program and the
Technology Opportunities Program.
It includes funding only for those Manufacturing Extension
Partnership Centers in operation for less than 7 years, as the
original law specified. It also suspends funding for the public
telecommunications facilities planning and construction
program.
I know there will not be universal agreement about these
choices. There are members of this committee and other Members
of Congress who will have different views on priorities and
funding. I respect those views and those judgments. I look
forward to working with this committee and with you through the
budget process on the many issues affecting the Department.
Mr. Chairman, we appreciate the support the committee
members have provided for Commerce programs and initiatives in
the past. This budget is focused on helping our Nation meet the
challenges it faces in these difficult times. I welcome your
comments and would be pleased to answer any questions that you
have.
Thank you, Mr. Chairman.
Mr. Wolf. Thank you, Mr. Secretary. Before I get into
questions, let me recognize now Mr. Kirk and Mr. Sweeney, who
are the two members, we mentioned them before, who are now on
the committee, and also Congressman Sabo, who was here. I just
saw him walk in, but perhaps he had to walk out again.
Mr. Secretary, the overall budget request, as you said, is
5.8 billion for fiscal year 2004, an increase of 1 percent over
fiscal year 2003. Yet as you go through this process, there
really are a number of problematic reductions used to offset
it.
I worked for a Cabinet secretary a number of years ago, and
I understand the degree of difficulty with regard to OMB
sometimes. But for example, the digital transmission grants for
public television are eliminated, a reduction of $41 million
from the fiscal year 2003 appropriation.
Some of the trash on other television, compared to public
television, I mean, it is almost impossible as a father of four
girls to sit and watch continually the network TV shows from 8
until 11 o'clock at night.
I mean, when I think of the 31 million people starving and
dying in Africa of hunger and HIV/AIDS, I think the
Administration has an outstanding record on HIV/AIDS in Africa,
and on hunger. We are giving 51 percent of all of the food, 51
percent of all of the food worldwide, and our friends in the EU
and France and Germany are giving like 21 percent.
When I look at ``The Bachelorette'' and ``Joe Millionaire''
and the garbage. Sometimes, public television may be the only
thing that as a dad or as a grandfather you can sit and watch.
So I think that becomes a problem.
Advanced technology program grants are eliminated, a
reduction of $180 million. When I go back to that point, when I
think of how little coverage the network is giving 30 million
people dying of hunger and famine in Ethiopia and places, and
then if they would give the same attention to that as they give
to ``Joe Millionaire'', we could electrify the world. They
would support what this President and this Administration,
which frankly I guess you really haven't told the story of how
good this Administration has been on the issue of HIV/AIDS and
the hunger in Africa.
Only by me digging did I find out that 51 percent of all of
the food that is given to poor people around the world is
coming from the United States. No where did I see, until I
found the figures, how little the French are doing. No where
did I see how little the Germans are doing. No where until I
dig did I find out how little the Italians are doing.
The Manufacturing Extension Partnership, MEP Program, is
eliminated, reduction of $94 million; $97 million rescission to
the steel loan guarantee. I know Congressman Regula has been
very, very concerned with regard to that. Economic downturns in
the United States manufacturing and our high tech sector, my
area out in Northern Virginia, as you know make these program
cuts particularly difficult and perhaps not really appropriate.
The public broadcasters are concerned that the public
television stations have not yet completed their transition
from analog to digital communications. Yet you proposed to
suspend funds for this program.
Further, your budget continues to include a rescission from
the steel loan guarantee, and the steel industry is in crisis.
We were told, whether it is accurate or not, we will check and
see, perhaps you may want to check and submit for the record,
that one company that applied for the benefits of this program
said they were denied on Monday. Other companies have expressed
interest in receiving the benefits. No steel companies are in
my Congressional district.
Last year's budget proposal rescission of this program was
not enacted. So, overall we estimate that the budget is based
upon at least $331 million in unlikely, and I would have to
say, unrealistic offsets.
Given these holes, we are going to have to ask you, you can
tell us now, but I think that we have a good working
relationship with you and your staff, we are really going to
have to know the highest priorities within this request, so as
we are putting the budget together, some of these things will
not be cut, but we can also make sure that we go and give you
the necessary money in the areas that you also think that are
priorities.
So what are your comments with regard to that?
Secretary Evans. Well----
Mr. Wolf. Not ``Joe Millionaire'' or ``Survivor'', or if
you want to comment on that you can, but on these issues.
Secretary Evans. Well, Mr. Chairman, you bring up several
very important issues that I would like to comment on. You
mentioned some very worthwhile programs that are not in our
2004 budget, including ATP, Advanced Technology Program, which
has had some significant successes in its life over the last 15
years.
The MEP program, Manufacturing Extension Partnership is
still going to be funded. However, we are proposing to fund
only those partnerships that have been in existence for less
than 7 years, which is what the original law said. The law was
later changed, and I would acknowledge that. the MEP is a very
good program that produced some very good results. In fact, I
would submit that the results are so good that I am surprised
that the private sector would not be able to pick it up and run
the program. With the kind of improvements in productivity that
you have seen in some of the small manufacturing companies
resulting from this worthwhile program, you would think that
there would be a market for someone to offer these kind of
services.
Public television conversion, is also a very important
program that has been underway for quite some time. About 312
of the 350 stations either have been converted or are in the
process of being converted. We did take it out of our budget.
We are aware that there are other funds that will continue to
allow for the ongoing conversion of these final 38 stations
that need to be converted. But certainly all need to be
converted. I share your view of the importance of that medium
for our society to have access to it. I am very sensitive to
that.
[Clerk's Note.--Subsequent to the hearing, the following
information was provided:]
Emergency Steel Loan Guarantee Board Approves $250 Million Loan
Guarantee
On March 26, 2003, the Emergency Steel Loan Guarantee
Board, acting pursuant to the Emergency Steel Loan Guarantee
Act of 1999 (Public Law No. 106-51, Chapter 1), as amended, and
the Board's regulations (13 CFR Section 400.1 et seq.),
announced that it had unanimously approved, with certain
conditions, a guarantee to Royal Bank of Canada with respect to
a proposed loan of $250,000,000 to Wheeling-Pittsburgh Steel
Corporation of Wheeling, West Virginia. The Board will
guarantee repayment of 88 percent of the principal of the loan.
The states of Ohio and West Virginia are also guaranteeing
repayment of portions of the loan.
STEEL LOAN GUARANTEE PROGRAM
Finally, you mentioned the steel industry. I will touch it
just quickly. Yes, Wheeling Pittsburgh was denied a loan
guarantee this Monday. The industry is going through a very
difficult, tough, but constructive, restructuring. You are
seeing it throughout the steel industry right now. It was the
original intent of the steps taken by the President that there
be a brief, limited time period, breathing space as we called
it, for the industry to restructure and be competitive on the
global market.
I think when it comes to the steel industry, when it comes
to all industries, and workers all across America, that it is
important that we send a signal to all industry across America,
our entire economy, that we are going to fight to make sure
there is a level playing field for Americans to compete in the
world. The steel industry had been competing against subsidized
companies for the last 30 years, and it was time for them to
restructure and be competitive. We believe that is what the
safeguard has done, provided a little breathing space for them.
But in terms of the denial, Mr. Chairman, I think when it
comes to committing the American taxpayer's money, we all know
our fiduciary responsibility for doing everything we can to
make sure that it is invested wisely. According to the law, the
Steel Loan Guarantee Board is an independent board that has a
member of the SEC who in fact is a Democratic appointee of the
SEC, a member of the Fed, and the Deputy Secretary of Commerce.
It was a unanimous ruling that the loan be denied. I can say to
you is that there are certain tests that have to be met in
order for the application to be approved. I think it is very
important that the Commission and the Board respected those
tests. I am sure that they did. It was a unanimous decision.
But there are difficult choices, and we are here to make
difficult choices on behalf of the American people. And these
very worthwhile programs that you mentioned were not included
in the 2004 budget, as I said, I know there will be differences
of opinion.
You have mentioned working with us as we work through the
completion of the 2004 budget, so that we clearly identified
our highest priorities to you. We certainly will do that. As
always, we have looked forward and have enjoyed working with
this committee. And we will make every effort to make ourselves
available to you and make every effort to make sure that you
clearly understand what our highest priorities are, because I
know they won't be exactly the same priorities that this
committee would have.
U.S. TRADE DEFICIT
Mr. Wolf. Sure, and you have and your people always have.
One other question, then I will recognize Mr. Serrano, is the
issue of the trade deficit. The United States recorded $435.2
billion trade deficit for the year 2002, the largest imbalance
in history.
For the record, let me just say it is not your fault, it is
not the Bush Administration's fault. When these things--it is
like an ocean liner moving. So it has been moving for a long
while, during the Clinton years, during other years. So there
is no reason--I am not trying--this is not an adversarial
question. It is just kind of what are we going to do type of
thing, because we do have to do something.
The Department of Commerce statistics state that the gap
has grown 21 percent since the year 2001. For example, the
numbers show a trade deficit with China, $102 billion, compared
with $84.6 billion a year ago.
Our deficit with Germany was $34.6 billion, compared to a
$29.6 billion this time last year. Wholesale inflation, which
has nearly been nonexistent jumped to 1.6 percent in January,
the largest increase in 13 years.
Mainstream economists, and it is hard to get an honest--it
is hard to get a symptomatic answer from--depends on who you
are asking the questions. But mainstream economists assert that
U.S. Trade imbalances, put plainly, are because the United
States consumes more than it produces. I mean, at Christmas
time you couldn't buy a Christmas ornament celebrating the
birth of Jesus, and they are made in China, which is about so
far away from the concepts of and the way they treat their
people, 14 Catholic bishops in jail, evangelical house churches
rolled on a constant basis. And so there is some inconsistency
when we see that.
But mainstream economists say the manufacturing sector
makes up one-fifth of our economy. What are the long-term
impacts? And I had a report by the Library of Congress, I will
just read it. It says, the U.S. Trade deficit has risen more or
less steadily since 1992. This imbalance is estimated to reach
about 512 billion in the year 2002, an increase of nearly $120
billion over the 2001 deficit, and a rise of about $470 billion
since 1992, showing this is a problem that we have had in the
1990s as well as today. It says U.S. Trade deficits do impose
burdens on trade sensitive sectors of the economy. One other
thing it says, and then I will let you comment, is it is
unlikely that the deficit will shrink any time soon. In fact,
most projections out over the next 1 to 2 years see a further
widening. Nevertheless a rapidly increasing trade deficit is
not likely to be a phenomenon that is sustainable indefinitely.
And then there was one other comment, which I won't go
into, but where they say that there are some potential problems
here. And I just wonder how do you see it, how as Secretary of
Commerce, and what can we do to deal with it? My sense is for a
period of time--and when you look at the numbers, and we will
submit them for the record and I will give you a copy of the
study--there was a period of time we actually had a trade
surplus. Now, always having a trade surplus is not always
necessary at all times. Germany has a trade surplus and their
economy is in the tank, 9, 10 percent unemployment. But
overall, my blue collar background tells me we cannot
continually import more on a constant basis over a long, long
period of time with that trend continuing to rise more than we
are exporting. It is a question of jobs, it is a question of
control over our economy.
So, one, your thoughts about it, and, two, if you have any
ideas of what the Congress might do or the Congress working
with the administration might do. We are going to have some
other questions about your trade people and other things like
that later on.
U.S. TRADE DEFICIT
Secretary Evans. Sure. Chairman, it is a very important
question. Let me give you some of my broad thoughts. The first
thought is, as you mentioned, the rest of the world is not
doing particularly well in terms of economic growth. Youfind a
spot or two, one of them might be China. But beyond that it is hard to
find other areas, other regions of the world that are really growing.
Japan has clearly been flat for well over a decade now.
The European countries are basically flat, or experiencing
very modest growth. So the U.S. Economy is driving the global
economy. We are a third of the global economy right now. Since
1992, that has been true. As I traveled around the world,
people marveled at the American economy. How have you been able
to generate 20 million jobs in the 1980s. You generated 20
million jobs in the 1990s? They marvel at the American economy
and its ability to continue to grow, continue to expand, and
continue to create jobs.
And what we need to do is continue to not only lead the
world in economic growth, but help the world create their own
economic growth environment so the rest of the world grows and
we don't become the only engine of a global economy. The answer
to the concerns that we all have, is to lead this world to of
peace and lift it up out of poverty. I always think, Mr.
Chairman, there are 6 billion people that live on the planet.
There are 3 billion that live on less than $2 a day. That
doesn't work. There is too much poverty in this world. And so
what you think about is how can we create the global conditions
for economic growth, take some of the pressure off the United
States to continue to drive this global economy. We need to
continue and we will continue to make sure that our economy is
growing at its full potential.
But the reason we are seeing this growing deficit right now
is because the rest of the global economy is not performing.
And so now the flip side of a deficit, of course, Mr. Chairman,
is it means that inflation is in check. And it means that
families across America are buying goods and services, needs
for their children, needs for their families at lower prices
than they might otherwise have had to pay for them.
It also means, since you have inflation in check, you are
able to pursue some pro-growth monetary policies and some pro-
growth fiscal policies. Obviously, we have some pro-growth
monetary policies in place right now, which is healthy for our
economy. With interest rates at 41-year lows, and household
ownership at historic highs, you have the American dream being
realized by more people than ever.
So there are some pluses to a deficit in terms of
continuing to keep inflation in check. And another point, Mr.
Chairman, that is important to make is the global economy is
indeed becoming more integrated and more interlinked and more
interrelated. There are more multinational ownerships in the
world. In fact, if you look at the imports that come into the
United States, 50 percent of them are going from one company to
the subsidiary of a company in a foreign country that has a
subsidiary here in the United States.
And then when you also look at the imports of goods coming
to the U.S., about 30 percent winds up being converted into
some kind of export. And so you have imports coming in that are
placed as part of an export that gets exported back out of this
country. So you are going to see this continuing integration
and interlinking and networking of a global economy, and it
should lead to a more efficient global economy.
It just so happens that right now we are the only economy
in the world of size that is growing, and so it puts pressure
on the U.S. because we will see more and more imports coming
in, we need to encourage other countries to create the
conditions for economic growth.
That is what we do when we travel around the world and talk
to our colleagues, whether it be in Japan or the EU, or
wherever it may be. You really need to get some pro-growth
economic policies in place to play a role in growing this
global economy so we can help lift this world up out of
poverty--that is the goal.
One other final point that has to be acknowledged at this
point is that the growing deficit, in part, is not only related
to energy prices, but also energy volumes. We are becoming more
and more dependent every day on foreign sources of energy,
including not only oil but natural gas as well. And so that is
a growing component of the trade deficit that we are now
experiencing.
Mr. Wolf. Well, I appreciate that. Maybe we can chat about
it some other time. But when you look at the numbers, and I am
for opening up ANWR. I voted to do that so we have more
domestic production here. But when you look at it from 1960,
1960 we had a $4.6 billion trade surplus. Then you go to 1990,
it was $102 billion deficit. 1991, $65 billion deficit. 1992,
$84 billion deficit. 1993, $115 billion deficit. 1994, $150
billion deficit. 1995, $158 billion deficit. 1996, $170 billion
deficit. 1997, $180 billion deficit. 1998, $229 billion
deficit. 1999, $328 billion deficit. 2000, $431 billion
deficit. 2001, $411 billion deficit. 2002, $470 billion.
That if it were happening over a period of years, I don't
think there is anything magic about always having a surplus, I
would rather have a surplus, but you have commercial attache
offices who are out there who are encouraging our people to
export. So there is some--that is important. But when I see it
over a long term it just doesn't seem to be turning the corner.
Let me just recognize Mr. Serrano.
WORLD TRADE CENTER STUDY
Mr. Serrano. Thank you, Mr. Chairman.
Mr. Secretary, the collapse of the World Trade Center
Towers was the worst building disaster in human history.
Immediately after September 11th, the Commerce Department was
involved in the recovery and investigation. NOAA, as you know,
took the first--NOAA planes took the first aerial photographs,
and the National Institute of Standards and Technology
Buildings and Fire Research promptly started working on
understanding what happened and what we should change in the
way we design tall buildings.
Now, there was money in the 2002 supplemental for this
study. There were additional dollars in 2003, and I know that
you have a request, which I am sure this committee will look
with support on for this coming year.
How is that investigation going? And, most importantly, at
this time, since there are already designs being considered
very seriously in New York City for the new structure, how
involved are you with the City in planning what these buildings
should look like in terms of the condition that they would face
from another attack, hopefully not but that could happen? And
how involved are they with you? Are they reaching out through
your study to find out what went wrong and what can be taken
care of?
Secretary Evans. Well, I know we have had good access to
all of the data that we have needed, and so I would say that we
have felt good cooperation with all departments, all agencies,
including the City with respect to gathering the information
required to conclude a study. The study is ongoing, not
completed yet.
I had a brief discussion about it just within the last
couple of weeks. The Assistant Secretary at NIST is pleased
with the performance to date and is looking forward to the
final conclusion of the report. Don't have the specific time
right now when that will be, but we are talking to and working
with the city officials, the planners. Yes, we are.
Mr. Serrano. When do you think that study would be
complete?
Secretary Evans. The study commenced in August 2002, and is
expected to take 24 months.
Mr. Serrano. Well, perhaps we should wait for the study to
be complete. But the big argument in New York now is do we
build a memorial with a few office buildings, do we not shy
away from what could happen in the future and sort of with
great--not arrogance, but with great desire build tall
structures again?
Do you think, even as they begin to plan prior to the study
being in place, that you folks should be looking over their
shoulders?
Secretary Evans. We ought to be talking to them certainly.
They would want to have the information that we have collected
and the tests and analysis that have been run, the conclusions
that have been reached. That is the purpose of the study, to
provide contractors, architects, designers of these the kind of
structures some guidelines as to kind of considerations that
they should have in future building. I mean, that is the reason
to go spend the $16 million that is being spent on the study.
I think we will have more definitive information by the end
of the summer, but completion of the study is going to take a
while longer. It is going to be ongoing until about August
2004. But should they be actively communicating with those that
are building or are involved in the design of the future
structures? I would say absolutely.
Mr. Serrano. Well, you know, at the expense of opening a
dangerous door, our elected officials usually don't want the
Federal Government meddling in local affairs. On this one, I
invite you to make sure that if they begin to move fast,
without having the information that I think they need in place,
please feel free to tell them, you know, to hold that a second
to discuss things with you, because we want to make sure that
that structure, those structures get built properly.
Secretary Evans. As I mentioned, the full cycle of the
study is about 2 years, and we have been going for about a
year. So I know we have more milestones coming up this summer.
But that is not to say that there is not some valuable kind of
information that can be used now in terms of the construction
and design of future buildings.
Mr. Serrano. Right. In the area of Manufacturing Extension
Program, Advanced Technology Program and the Technology
Opportunity Program, it seems that we have to go through
something here a couple of years in a row, which makes me
wonder what the idea is. You have proposed, once again, that
MEP, ATP and TOP should be--you know, they are on the chopping
block again. But yet you must know that this committee seems to
favor these programs and will work hard to put them back in
again. But when you do that, when you folks present a budget to
us that makes us then have to pay for these again, you put us
in a hole, a hole that does not allow us perhaps to address
some new initiatives that you have in place.
So my question to you is, does your Department dislike
these programs so much that you continue to present them, you
know, a death wish for them every year or, you know, why
continue to do that when we are going to put them back?
Secretary Evans. Again, I would say that it is not a matter
of disliking the programs. It is a matter of priorities. I want
to acknowledge that these are worthwhile programs. I talked to
people across the country on college campuses and in
communities that are involved in the programs. I have seen some
of the results of the programs. I really do think that there
ought to be a market opportunity out there for someone to
actually provide this to the small manufacturers in some kind
of fee for service, or fee for whatever kind of basis.
But no, I understand how the process works, and we have
basically not put programs in our budget that were placed back
in the budget by Congress. We present to the Congress the
President's budget, his priorities, and that is what this
budget is all about, presenting the President's priorities,
which basically is saying that this is the Administration's
position. In this difficult period that we are managing very
tight budgets, MEP, ATP and TOP just didn't make the list.
It is not saying MEP, ATP and TOP not programs. It is not
saying they don't have good track records, or haven't delivered
a valuable service to American manufacturers and communities.
They just do not make the cut right now.
But I understand that we will have differences on these
programs. We just have to sit down and work our way through it,
give you whatever other kind of advice or other kind of data we
can. But I just know we have to work through these together.
Mr. Serrano. Well, maybe there should be an unwritten rule
if 3 years in a row that we replace them maybe the fourth year
you don't ask them to be cut.
Secretary Evans. Okay.
CENSUS BUREAU WORK WITH MINORITY SERVING INSTITUTIONS
Mr. Serrano. Let me ask you one other question before we
give some other members some time here. But it is a Census
question, but I promise not to ask you about the Suitland,
Maryland facility.
The 2003 conference report includes language urging the
Census Bureau to continue to work to address concerns about
Hispanic subgroup enumeration for the 2010 Census, and
recommending that the Bureau take advantage of certain programs
to improve the representation of minorities in senior
management, and in all areas of research.
How does the Census Bureau plan to address these concerns?
Secretary Evans. Well, we are reaching out touniversities
all across the country, particularly those that are minority serving
institutions, that have a high percentage of minorities at their
institutions, seeing if we can make some headway on that front.
I can acknowledge that we still have work to do, but know
that we are working on it very diligently and will continue to
work on it. We are contacting minority serving institutions and
will continue to do so. I am going to look at it again, expand
it. I have asked the question a while back, are you going to
the University of Texas at El Paso? I know the high percentage
of Hispanics that are there at the University of Texas at San
Antonio. Texas is a place that has a growing Hispanic
population. I think it is a great ground for recruiting
individuals that could serve in the Census Bureau very well.
Mr. Serrano. Okay. Thank you, Mr. Chairman.
Mr. Wolf. Mr. Rogers.
Mr. Rogers. Thank you, Mr. Chairman, and, Mr. Secretary, it
is good to see you here. Welcome again.
Secretary Evans. Thank you, Hal. Thank you, sir.
Mr. Rogers. We hope that you have every success in your
job, because there is success for the rest of us when you
succeed. So this subcommittee will try to find ways to be
helpful to you as we can. We may disagree with you on a few
minor points here and there, but overall you will find support,
as have you, on this subcommittee's work.
HOMELAND SECURITY RELATED PROGRAMS
I want to ask you briefly about your--in your statement you
refer to a funding that is homeland security-related that you
are requesting, and I wanted to ask you how this relates to the
work of the new Department of Homeland Security, how you will
work together with them. For example, you ask an increase of
$13.3 million for NIST to address key national needs for
homeland security measurement standards and technologies,
saying that that request would strengthen NIST's portfolio of
more than a hundred projects that address those needs.
Tell us about that.
Secretary Evans. Well, there are a number of projects that
NIST Works very closely with Homeland Security on. One is
developing the kind of technology that will absolutely identify
individuals that are coming into the United States from some
other country. For example, it could be some kind of physical
mark on an individual that would provide you positive
identification for who that individual is.
NIST also is conducting work that would help in the
detection of what are called dirty bombs, small nuclear kinds
of bombs. So they are using the good science, the good
technology that they have in that bureau to see what core kind
of technology that we may be able to employ, not only to
address individuals coming into the country, but materials that
may be coming into the country or are in the country.
Mr. Rogers. Well, that is the reason I asked that. Your
budget request for NIST in relation to homeland security items
included moneys to develop the measurement infrastructure
needed to detect radiological bomb threats, to improve the use
of radiation such as x-rays and other imaging techniques to
detect concealed threats, to use radiation safely and
effectively to destroy biowarfare agents like anthrax, moneys
to develop standards and test methods for biometric
identification systems, and things of that nature.
Now, the Homeland Security Department will have a research
and development arm itself, where I thought this type of thing
would be done. Tell me how this would relate to what is being
called HARPA, the homeland security version of DOD's DARPA. How
will what you are asking for interplay with HARPA?
Secretary Evans. Well, as you said, again the number is
about $13 million; 6 of it relating to the issues that you just
brought up. Another 7 of it relates back to Congressman
Serrano's subject in terms of the study of the World Trade
Center. So there is about $6 million there that relates to
developing technology to detect dirty bombs. It is not being
done in HARPA right now because the scientists are in place,
the labs are there, the facilities are there.
What the long-term consolidation will look like I am not
sure. I think time will tell whether or not those scientists
should remain there at NIST or to be moved into Homeland
Security.
But in order to get up and going at this moment with the
labs that are in place, the tools that are in place, the
scientists that are in place, they decided that that was a
small thing that ought to be carved out at this point.
Mr. Rogers. Well, that is something that we need to keep an
eye on as we go through here. I want it done where it best can
be done, like you do.
NOAA ALL HAZARDS WARNING SYSTEM
Secretary Evans. Sure. Absolutely.
Mr. Rogers. Now, also I notice you saying in your statement
that you are requesting money for National Weather Service and
NOAA, an increase of $7.7 million, which apparently would be
used to change the NOAA weather radio system to what you call
an all hazards warning network.
Tell us what you have in mind there.
Secretary Evans. Everybody is going to think that this was
a setup, Congressman, but I have one with me.
Mr. Rogers. Well, I assure you this was not setup. I didn't
mean to do that.
Secretary Evans. Well, yeah, we can get them. I assure you
of that. This is a NOAA weather hazards alert radio, and the
idea is that the NOAA weather radio that has been out there for
many, many years incorporates into it a new element, which is
the element of providing for an all hazards radio that would
allow for the messages for Homeland Security to be front-end
loaded into this radio. By front-end loaded, I simply mean that
Homeland Security will have access to our system so they can
quickly get the information out across America.
We think that it will cut the time down from delivering the
important information from 7 minutes to 2 minutes, say, to a
region in this country, that is a possible terrorism threat in
western Colorado, and that would then go into this, what has
been a weather radio system now will be called an all hazard
system, and get the information quickly across America.
It is the desire that this will be in the hands of first
responders, the local police, the local fire, the local
officials as well as individuals across America. You can buy
this right off the shelf. And so I think it is a great program.
We have $5.5 million of the $7.7 million increase for Homeland
Security activities allocated for that, and it just will give
people more advanced warning of any possible threats.
Mr. Rogers. So if a person now owns one of the weather
radios in their home, would they need to make any changes in
order to receive the new warnings?
Secretary Evans. Don't need to make any changes.
Mr. Rogers. They would automatically then hear warnings
from Homeland Security through the weather radio that may be
particularly related to where they live.
Secretary Evans. To where they live.
Mr. Rogers. So if there was a threat of anthrax in some
portion of a city or a town, you would be able to rifle-shot
the warning just to that locality by way of the radio?
Secretary Evans. That is correct. We do it through--we have
a series of towers across the country. We cover about 95
percent of the country. And so there is about 5 percent that is
not covered. I can't tell you what 5 percent that is.
Mr. Rogers. So suppose there was a national alert of some
sort. Would Homeland Security be able to go on the weather
radios to the Nation at large with a national warning?
Secretary Evans. Absolutely. Absolutely.
Mr. Rogers. Well, I want to congratulate you. That is a
very interesting piece of information and very, very helpful,
and it gets the word out there instantaneously by way of the
radio to localities or the Nation as a whole about the
particular threat.
Now, will there be anything done on the system to--when we
change the color codes of warnings, will there be a warning
going out?
Secretary Evans. Congressman, I can't imagine that there
won't be. The purpose of the all hazard system is to get
emergency information to the American people as quickly as
possible. And so I haven't heard someone tell me absolutely,
but I can't imagine that there would not be a warning. That is
the whole reason for it. RPTS THOMAS
DCMN NORMAN
Mr. Rogers. I want to thank you for that. That is an
excellent idea. It utilizes a system that is wonderful in and
of itself on weather alerts that can be used now for these
other national purposes as well.
Secretary Evans. The other thing I would say to you
Congressman, is that this system is very user friendly. You can
buy the weather radios at, your local electronics store. And
they have also the portable ones that you can carry with you.
So if you want to have one on a trip you can have it with you
wherever you are.
Mr. Rogers. For those people who may not be familiar with
the little weather radio, two of them there that you have, are
those available at the regular stores?
Secretary Evans. Right there available at the regular
stores. I better not mention any specific stores, I will
probably get in trouble, but anyway, any of the local
electronics stores.
Mr. Rogers. Do you have an idea of the relative cost?
Secretary Evans. I think about $40 or $50.
Mr. Rogers. Well, thank you very much. Wonderful
innovation.
Secretary Evans. You bet.
PUBLIC TELEVISION ISSUES
Mr. Rogers. I want to ask you briefly--I know my time is
running short here--you propose to suspend the public
telecommunications facilities planning and construction grants
that the Chairman asked you about, reduction of $41 million
during FY04. And I just wanted to reinforce what the Chairman
said about some of the junk, what was it, the vast wasteland
that we now see on commercial television. CBS in fact is
proposing a new Beverly Hill Billies show which would take a
poor family from the Appalachian region of the country and set
them in a Hollywood setting today and make fun of them. If you
did that to any other ethnic group in this Nation or even
thought about it, the community of the Nation would condemn you
for it.
And I can't for the life of me see how CBS being a
responsible major network would have the audacity to begin
poking fun at the people that I call constituents. And I live
among them, always have. They want to exploit a stereotypical
image of those people that existed 50 years ago. But it is no
longer there. It has changed. Our area has progressed and
moved. Our people are spirited and they are progressive, and
they want to leave behind the old stereotype that had attached
to them. And we are making great progress. And it really makes
me furious that one of the major networks, using the public
airways that we own, wants to denigrate that group of people.
Now, we may want to talk with you about the monies that you
want to cut from public television because that is one place
where we get fair treatment. And I would hope that CBS would
scrap this idiotic idea, this discriminatory idea that defames
a group of American citizens. And I want to assure you and
everybody else, I will not sit idly by and watch anybody,
particularly one using the public airways that this Congress
controls, denigrate my people. Do you have any thoughts about
that?
Secretary Evans. Well, as I said earlier, I do. I am a big
fan of public television as well. I am glad to see that we have
made as much progress as we have made in terms of conversion of
these public television stations. The program needs to
continue. I am pleased to know that it will continue.
The only other thought, Congressman, that comes to my mind
about this very important issue that both you and the Chairman
have focused on is a recent visit to Africa. I made a wonderful
trip to Morocco about 4 months ago. I landed at Casablanca and
got in the car and was driving to Rabat, the capital of
Morocco. I drove through a number of fairly impoverished
villages along the way, and saw a lot of dwellings where
obviously people of very, very, very, very low income lived.
The one striking thing to me was that on the top of every one
of those dwellings was a satellite dish. And they were picking
up programs from right here in America.
Mr. Rogers. That is probably not a good sign, Mr.
Secretary.
Secretary Evans. I just make that point, because this is
the stuff that is being beamed around the world.
Mr. Rogers. I just wondered what you thought about the
exploitation of this group of people that CBS is thinking about
doing.
Secretary Evans. Well, I would say this--it is pretty
simple to me. One of the strengths of America is we treat
everybody with respect, dignity, and honor, which is part of
the American values that we all cherish in this country. I hope
everybody will continue to honor those great American values
that we cherish. I hope also that we are able to share those
same values with the rest of the world; because I do think it
is critical that the rest of the world understands that
Americans are good people, and have great respect for everybody
in our society.
Mr. Rogers. What would you think if they were going to pick
a family of hill people in west Texas, to poke fun at them in
Hollywood. What would you think about that?
Secretary Evans. I am sure it wouldn't please me or the
people in west Texas.
Mr. Rogers. That is not the way to use the public airways,
is it?
Secretary Evans. I wouldn't think so, Congressman.
Mr. Rogers. Thank you.
Mr. Wolf. Obviously I share Mr. Roger's comments. These are
people that have sent their sons and daughters over the years
to fight our wars. And anything that demeans, it is almost--and
I had the same experience, too, traveling in the Middle East
earlier this year. They were talking about some of the shows,
``Baywatch'' and different things like that. And I think those
things almost push cultural decline; whereas when you are
watching public television, the ``Burns'' series, the ``Civil
War'' series, different things like that. So I share Mr.
Rogers' comments.
Mr. Mollohan.
Mr. Mollohan. Thank you, Mr. Chairman. The gentleman from
Kentucky continues to impress me.
Mr. Secretary, I would like to join the Chairman and the
rest of the committee in welcoming you to the hearing. I will
simply note that I associate myself with every comment that Mr.
Rogers made, and you are in a unique position as an opinion
maker to express that opinion, fairly powerful way in
appropriate forums. And appreciate your answer and your
sensitivity to the issue.
EMERGENCY STEEL LOAN GUARANTEE PROGRAM
Mr. Secretary, the steel industry is very important to the
upper Ohio Valley, to West Virginia, the area that I am
privileged to represent, to the area across the river, and to
Pennsylvania just across the line. We have a significant steel
industry that has survived during 25 years of challenge and
reorganization and increasing international station of our
economy that has put disproportionate pressure on basic
industry and certainly on the steel industry. We recognize that
process and we are appreciative of, quite frankly, President
Bush's being responsive in a couple of areas, particularly the
201 tariffs that he imposed and they have been helpful.
That has provided an opportunity, a certain relief, if you
will, to allow the steel industry to regroup, to consolidate,
and to effect efficiencies. We are appreciative of the 201
program, about which I would like to ask you a couple of
questions later.
The other program that is of significant importance is the
Emergency Steel Loan Guarantee Program. Do you sit on the board
of that program?
Secretary Evans. No, I don't, Congressman.
Secretary Evans. The Deputy Secretary of Commerce sits on
the board. I delegated that to him.
Mr. Mollohan. Okay. Thank you. I note in your fiscal year
04 budget that you rescind funds for the Emergency Steel Loan
Guarantee Program. Does the President support this program?
Secretary Evans. Over the course of the last 2 years, the
independent board has reviewed a number of applications and has
approved one of those applications.
Mr. Mollohan. I believe you approved two, haven't you?
Secretary Evans. The Geneva application was approved, but
that was before we showed up. So this Administration has only
approved one, Hanna Steel.
Mr. Mollohan. Geneva and Hanna.
Secretary Evans. The Geneva one was before us. And that one
is in trouble, as you know. We won't get full recovery on that.
I am not sure what the recovery will be. It is in bankruptcy
and we will have to see what we are going to wind up getting.
But it will clearly be a loss to the American taxpayers. The
program is scheduled to come to an end December 31st of 2003.
In order to even be considered, you have to have an application
in by June 30 of 2003. So actually in terms of the 04 budget,
if you are not in by the beginning of the 04 budget, it is too
late because time has run out on the program.
So we thought that the program has probably been a program
that was useful for maybe one company. I am not sure it is a
useful program, and clearly don't think it is a useful program
going forward. I think, as you said, the industry is going
through restructuring. I think very constructive restructuring.
You are seeing industry take the kind of steps--when I say
``industry,'' you really have to say the integrated sector of
the industry, the mini-mill sector of the industry has been
competitive globally. They are not going through the kind of
restructuring that you are seeing in the integrated sector of
the industry.
But the integrated sector is restructuring. It is healthy
and we have several emerging viable integrated companies. We
have others that are still trying to determine just exactly
what their structure will be. And I think the market forces
will continue to drive what their structure will be. I have
been pleased to see capital that is available for the
restructuring. That is healthy, to know that there is capital
available to be injected into these new merged companies or
restructured companies.
Mr. Mollohan. Okay. If I might, however the President feels
about the program or however the Administration feels about the
Loan Guarantee Program, it was a program that came from
Congress and I think you would agree that certainly in certain
situations it would be a good tool to use. It would be
applicable, maybe, if it was just one steel company. I know if
Hanna is successful from Alabama, that would be a success
story.
But I am particularly interested in Wheeling--Pittsburgh
and the fact that the board unanimously turned down the
guarantee request last week. I must say was a surprise because
we were hearing--obviously inaccurate--rumors that the
guarantee might be approved. So the denial was somewhat of a
surprise. It was a surprise to me, it was a surprise to a lot
of members of Congress who represent these areas. It was a
surprise to the company, it was a surprise to the union, it was
a surprise to the State of West Virginia that the application
was not approved. You are in a unique position to give us some
insight into that disapproval and I would ask that you do that.
Secretary Evans. Well, I am not in quite as unique a
position as you might think, because as I said, I don't
actually serve on the board, but delegated that to the Deputy
Secretary. The other members of the board are Harvey
Goldschmidt, who is the Democratic appointee to the SEC,
Governor Lyle Gramley who is with the Federal Reserve Board,
appointee of Chairman Greenspan's; and Deputy Secretary of
Commerce Sam Bodman. So I just mention the three names to say
that this is a bipartisan board.
Mr. Mollohan. I know. I am not asking that question. I will
stipulate that it is a bipartisan group. I am just asking for
insights, substantively, why wheeling--Pitt's application was
not approved.
Secretary Evans. And what I would say to you is while,
these are terribly difficult times for the industry and
difficult human challenges, when it comes down to upholding the
laws of the land, there are some very specific guidelines and
laws that have to be honored, and of course are going to be
honored. Those kind of guidelines that would be used in any
kind of loan application. Are there adequate assets available
as collateral to support the loan?
Mr. Mollohan. Okay. I understand that there are general
criteria. I am very much for abiding by the law. What I am
asking is could you give us some feedback. Feedback has been an
issue throughout the processing of this guarantee, request and
we are very appreciative of the board considering this
application. I am trying to get some feedback. This is a $250-
million guarantee request. Surely you have some feedback and
insight into what were the deficiencies with regard to this
specific loan guarantee application for this specific
corporation?
Secretary Evans. I will be glad to put the appropriate
people in touch with your office so you can get whatever
feedback they can provide you.
Mr. Mollohan. All right. That is fair enough. I thank you
for that.
Secretary Evans. You bet.
201 TARIFF EXCLUSIONS
Mr. Mollohan. As I indicated before, we are very
appreciative to the Administration for the 201 proclamation and
it has been helpful; however, it is interesting that it has not
necessarily decreased imports with regard to hot-rolled steel.
I guess it has had an impact on cold-rolled imports. The
Administration is considering, I believe, a fourth round of
exemptions to the 201 order.
Can you tell us what exemptions are being considered and
how many are likely to be approved?
Secretary Evans. Well, Congressman, I can't--I don't know
the list specifically. I know a few names, just a couple of
names. I know there are about 400 exclusion requests in. I know
we plan to release that before the end of March. But I don't
know how to give any kind of guidance right now as to how many
of those will be approved and which ones will be disapproved.
Again, as you know, it is a methodical, legal kind of process
that we go through to determine which ones meet the criteria
and which ones do not. But we should have an announcement to
make before the end of the month.
Mr. Mollohan. All right. There was a concern when the 201s
were imposed that we would possibly have surge issues and from
specific regions and countries. Some of my companies have been
in touch with Ambassador Zoellick noting that there were
initial import surges from India and Turkey in September of
2002, and more recently in January of this year from developing
countries. It appears that imports from these countries are
really cutting into the teeth of the 01 remedies. Do you have
any plans to address these surges?
Secretary Evans. Congressman, I know that it is something
that we monitor every month. I haven't heard it being a major
issue, but it is something that I will certainly check on.
Mr. Mollohan. Well, the industry is imputing your
Department, Mr. Secretary. There are expressions of concern
from the industry with regard to these surge problems. And if
only at this hearing, I appreciate the opportunity to sensitize
you to it and look forward to working with you with regard to
it and appreciate your good work and appreciate your
sensitivity to our special concerns.
Thank you, Mr. Chairman.
Secretary Evans. I appreciate your good work. Thank you.
Mr. Wolf. Mr. Secretary, we are going to have to recess for
about 15 to 20 minutes. There are three votes. There are about
8 minutes left, so we will go and vote and come right back and
begin the hearing with Mr. Vitter and then wewill go back and
forth.
Secretary Evans. Good. Thank you, Mr. Chairman.
[Recess.]
FEES FROM INTERNATIONAL TRADE MISSIONS
Mr. Wolf. The committee will resume. When the other members
come back, we will defer to them for questions. But in the
interim, I have a couple other questions.
Mr. Secretary, your budget requested a number of new trade-
related personnel enhancement for the International Trade
Administration, ITA; yet the budget proposed to pay for these
increases by charging more for companies to attend
international trade missions. We have been told that the market
will not bear an increase in the fees to allow small- and
medium-size businesses to attend trade missions. I think that
is open to question. I would like to get your thoughts on that.
But has there been any analysis done to show that ITA will
be able to bring in the $13 million to offset the spending
needs? And I understand, again, OMB--and I think it is
appropriate that you are here representing the Administration,
I am not trying to get you to be critical of anybody, but from
your point of view, do you think that that will drive people
away or do you think that it will bring there that $13 million?
Secretary Evans. Well, Mr. Chairman, I asked the Foreign
Commercial Service to look at this issue very thoroughly and
thoughtfully a couple years ago because I saw some
opportunities for enhancing the fee structure somewhat in order
to continue to strengthen that very, very important agency. I
think it is one of the really hidden treasures of certainly the
Department of Commerce, maybe the Federal Government, in terms
of an agency that can work with small- and medium-sized
businesses and introduce them to the global marketplace. And so
along with this study the Department was very sensitive to
making sure that we didn't change the fee structure in any kind
of way that would discourage small businesses and medium-size
businesses from participating. I think that the fee structure
that has been proposed discourage small- and medium-size
businesses. I think we will continue to see, in fact, growth in
that area, of more of them being participants in that very
important program of trade missions and other kinds of services
that we provide.
Mr. Wolf. What would the cost be, on average then, to a
small company?
Secretary Evans. Chairman, I am not sure of all the fee
structures or what it costs to go to a trade show or a trade
mission. I am sorry, but I will be glad to get that to your
office. I just don't know the whole fee structure of that. But
I do know that we did run a very thorough study of that to
check if these fees were going to drive small- and medium-size
businesses away from that service that we are providing. The
answer was no.
Mr. Wolf. Could we see the study for the record?
Secretary Evans. Sure. You bet.
Mr. Wolf. Mr. Sweeney, would you like to have a question? I
recognize Mr. Sweeney.
Mr. Sweeney. Thank you, Mr. Chairman. What an honor it is
to be here, Mr. Secretary, with you my first day on this
subcommittee. And I have, as I think you know, been a great
admirer of your work and thank you for your testimony and
welcome.
FREE TRADE FOR AMERICA
I am going to play a little bit off on some of the
questions that the Chairman asked as it relates to some
concerns that I have on trade. I am a member who, unlike my
predecessor, has moved very distinctly towards a freer trade
agenda for America, recognizing that there was risk in doing
that, frankly, because some of my constituents don't share that
view because they have felt that it has been disproportionate
and unequal over the years. And finding that balance between
what is fair trade and necessary trade and what still maintains
the essential needs of your constituents is always the
challenge that someone like myself faces.
Recently, in particular, it has become a more sensitive
issue in my region of the world in upstate New York. You spoke
earlier about the steel issues and finding the level playing
field, and I think that was as adequate a place to point out
the complexities of what challenges you face in making the
decisions you have to do that.
But as it relates to agriculture in particular, I am
hearing a great number of concerns from many of my family
farmers, many of whom I will point out, are sending their sons
and daughters overseas to defend America and fight for freedom
and liberty, and at the same time feel a great level of concern
with what they see are inequities in trade policy as it relates
to agriculture.
And specifically, I will point to the dumping of Chinese
apple juice concentrate and the mislabeling of milk protein
concentrates flooding domestic markets from the EU and from
Canada, which shares great close proximity with my district.
And it is manifesting itself in this notion that as we are
sending our families over to fight for the right things and
defend America, we are at the same time allowing nations like
China and others--who would seemingly be our allies in some
respects but have not much acted like our allies lately.
And I would like to ask you to speak specifically to the
coordination between the ITA, the International Trade
Administration, and USDA in ensuring the local producers and
their products are a priority of this government and that we
continue to seek to find that place for equity and balance in
fair trade. If you could talk a little bit about some of the
initiatives you have undertaken and give us an assurance that
might be available to us, I would appreciate that.
Secretary Evans. Thank you very much Congressman. I am
honored to be here with you as well. Probably the central focus
right now of agriculture in the world is our negotiations at
the WTO. The President has said that any future negotiations
related to trade, that agriculture would be the cornerstone.
That is where the focus is. And that is clearly where the focus
is at the WTO Round right now in Geneva. That is the top
priority issue for America nd we believe we will have concluded
by December of 2004.
There are a number of changes in the global system with
respect to tariffs, export assistance, and domestic support,
that we have put on the table to bring down barriers around the
world to our farm community here in America.
As I travel across the country and have a chance on
occasion to talk to some ranchers and farmers--and obviously
that is not absolutely in my bailiwick, that is over in the
Department of Agriculture--what I hear is they want to see
markets opened up around the world. In fact, a third of the
land that we plant and harvest right now goes to exports. And
so it is already a major, major component of the agriculture
income in this country.
But the focus needs to be, should be, not only on bringing
down tariff barriers around the world, but also making sure, as
you mentioned, about steel that we achieve a level playing
field for our products. And it is complex, but we have got to
continue to fight for a level playing field. We cannot allow
other countries to dump their agriculture products here in our
country that have been subsidized by their governments.
And so that is an issue that we must continue to wrestle
with and we must continue to stay focused on. So, Congressman,
the agriculture community is a critical part of this economy,
the backbone of this country. The President understands that.
It is where the focus, as I said, of all future trade
negotiations will be. We are going to continue to do all we can
to challenge other countries to make sure that we have a level
playing field, and that they are not subsidizing their products
and then trying to dump them into our economy.
Mr. Sweeney. I appreciate that. And from your position, I
think you could bring to bear great influence on the debate and
discussion. And it isn't simply the issue of subsidies by
nations, although that is an issue of concern. It is the level
of the standard and the quality of the product that we, I think
rightfully, have great pride in what is being produced by our
agriculture community, and simply ask--we want markets open as
well, it is to our benefit no doubt--but simply ask that when
we are in those competitions and those products are brought
forth to our land, that they be of the same quality, the same
standards be applied.
And I know our friends overseas, especially recently, like
to talk about the need for the United States to comport to
different principles, be they environmental or other things,
standards that they have established somewhat arbitrarily, I
would contend. But here is something definitive where we think
the equities haven't been matched and would really appreciate
your strong voice in that.
Secretary Evans. You will continue to have it, I assure
you. There are big countries that are becoming integrated into
this global economy. China is an obvious country on everybody's
mind, particularly the kind of force they are going to have in
this globalization that we see taking place. And what we are
focused on is making sure that they are complying with the set
of international laws, international norms, as well as making
sure that they are honoring our own laws right here in America;
because we have trade laws here that we expect others to honor.
We have four officers in China, who focus mainly on compliance.
And we have an Import Administration Office that has a great
team of people, who focus on compliance to make sure we don't
have countries that are violating our laws and dumping things
here that would hurt our economy and our consumers and our
workers.
ECONOMIC DEVELOPMENT ADMINISTRATION
Mr. Sweeney. Along those same lines, I have two different
questions but relative to the same sorts of notions of
competitiveness and how we best help an American workforce in
transition in some respects and in manufacturing. For example,
there is a changing of the guard from industrial production to
industrial-technology labor. And I would like to ask you what
is being done out of the Economic Development Administration,
some of the initiatives that are being undertaken that address
the changes that need to be addressed. I understand the Labor
Department has significant workforce development possibilities,
but there has to be some cohesion between that and the policy
established at Commerce.
As well, I note in your request that you wish to increase
the resources to the Bureau of Economic Analysis. This is a
little more of a statement than it is a question. I understand
the value, and you may want to expound on that a little bit
more, towards having and ensuring that we have the most
accurate data and most up-to-date data. One of the concerns
that I would have is the notion that those resources aren't
going to get out into the field. And so maybe you can tell us a
little bit about how that information is going to help and we
will get out into the field in a tangible way that will help
both the quality of the workforce but also help with the growth
agenda.
Secretary Evans. Right. First of all on the Economic
Development Administration, one of the very encouraging steps
that we have taken as far as I am concerned is how we are
working closer and closer with the Department of Labor. As you
say, they have far more funds than we have in this area for
training and education and working with the workforce that in
many areas is in transition. We have a number of industries
that are in transition. It is harder and harder for them to
compete with the rest of the world. So you have members of
those industries, workers in those industries, that need a
transition into other industries.
And so we have, in fact just this last fall, a cooperative
program with the Department of Labor down in North Carolina,
where--obviously the textile industry has been hit pretty hard.
The textile industries lost some 700,000 jobs over the last
number of years.
The Economic Development Administration is teaming up with
the Department of Labor, combining our strengths and our
resources to provide a more complete kind of program--not only
where we can come in and provide funding to build the
infrastructure that is needed to encourage economic
development, but at the same time encourage other industries to
come into that community. We can combine that with the
Department of Labor funds that are brought in.
The central point is a very good one. We have to be very
sensitive to the fact that our economy is going through a
transition and it will continue to. And we have to be sensitive
to do all we can to help and support those workers that are
being impacted by this transitioning economy. And I think we
are doing, quite frankly, a good job in terms of looking at
ways that we can be more efficient and more effective and have
more results with respect to delivering the service to the
worker, to the community, to the town.
So we asked for $13.8 million additional funding there, and
that is what some of that funding will go to, a more targeted
focus with more cooperation with Department of Labor and other
agencies.
With respect to the BEA and funding to improve the data
that we use, really those funds were primarily to give the
Bureau of Economic Analysis as well as the Census Bureau the
resources they need to better analyze a changing economy. We
are moving to where more and more of this economy is service
oriented. We all know that. We really don't have the tools in
place right now to capture, like we should, the service sector
of this economy. And we also learned in the 1990s there are a
number of things that impacted the economy that we didn't do--
we don't do a particularly good job of evaluating. One of them
happens to be stock options: How do you look at those with
respect to what is going on in the economy?
So anyway, these are funds that were primarily to make sure
that the Bureau of Economic Analysis, which presents a number
like the gross domestic product growth to this country every
quarter, is providing the country the best and most accurate
possible data; because that number is so important not only to
Federal Government planning but State government planning,
local government planning, and private sector planning. We saw
some weaknesses there, because we missed the mark by quite a
bit.
Mr. Sweeney. I understand the weaknesses and appreciate the
extra effort, but the linkages you spoke of at the back end of
this I think are critical, because they will lead to the kinds
of measurable successes that we hope to have in growing the
economy.
INTELLECTUAL PROPERTY AND PATENTS
Let me ask one final question, and it is a little off the
subject in some respects but not in others, and it relates to
the ongoing effort to find ways to lower prescription drug
costs, make them more affordable, balance the needs of
consumers and recognize that the pharmaceutical industry has
accomplished a great many things that have improved the quality
of life of people throughout the world, and we do not want to
create disincentives in that process.
And one of the areas I think that provides a stark
difference between what we do and, say, what the Europeans do,
and whether it is good or bad I am not sure, but I am hoping
that the Department of Commerce can kind of help bring some
focus to the issue, is the notion of patents in the current
patent system and whether it is adequate in order to meet those
balances.
The question is simply what kind of an overview have your
folks done, or could you provide information to us on what has
been looked at and what has been discussed and what the impacts
are and what the evaluations are in that area. If not, I would
like to work with you at trying to do that as well.
Secretary Evans. That is a great question. It is a timely
question because of what we see happening in this world, the
rapid integration of this world and the critical importance of
intellectual property rights and patents. The Patent and
Trademark Office has been working very, very, very hard to
engage the world community to move toward a global system so
that we are all sharing the same information and agreeing to
the same patent standards and criteria, and then honoring those
patents.
Eighty-five percent of the patents right now are in Japan,
the United States and the EU. So you can take those three
entities and work with them and develop a global patent system,
which is what we are doing, and is one of the reasons for part
of the request that we have asked for. But it is very important
because we have got to set the standard for the rest of the
world.
I just mention those three areas. Well, guess what? There
are a lot of other countries in the world that will want to use
the drugs as you are talking about, and will want to use other
intellectual property that we have here in America. And one of
the critical--one of the real challenges for us as we move on
into the first part of the 21st century is the enforcement of
intellectual property rights and intellectual capital. And that
includes things like patents, people coming up with ideas that
are patentable ideas.
So know that we are working very hard on it. Glad to hear
you have got an interest in this area. We would like to work
with your staff on this because I know I don't go to a country
where I don't talk about the importance of intellectual
property rights protection.
And the other point that you made, which I think also we
need to acknowledge, is that our pharmaceutical industry is the
best in the world. We have the absolute best scientists in the
world. We have foreign pharmaceutical companies that are
relocating here to the United States because we have the best
resources in terms of scientists and human capital right here.
And it is very important that we do what we can to protect
their property rights around the world.
Mr. Sweeney. I appreciate your comments. I look forward to
working with you in that area and many others. Great to talk to
you.
Mr. Chairman, I hope you know--I think you know how
enthusiastic I am and happy I am on this committee. I thank you
for the opportunity, and the Ranking Member, my friend from New
York.
Mr. Serrano. I wanted to make sure that it was mutual.
Mr. Wolf. We are glad to have you.
Before I recognize Mr. Kirk, let me just say I do agree
with Mr. Sweeney on the apple issue. What they are doing, the
Chinese are dumping it here. We have some people coming in here
to say that garlic is ready to go through the same thing. We
need our people to be champions for it. You cut an apple tree
down, it takes 5 to 7 years for an apple tree to produce; you
put an apple farmer out of business because some slave labor
opportunity came along in China. The guy cuts down a tree, the
land is developed, and you have lost the industry. And I think
Mr. Sweeney is so right on the apple concentrate issue. And I
think a lot of our apple growers really don't believe that our
government is a champion for them.
And I bet if you dig, if you dig--and I may be wrong, and
if I am I think somebody should check and put it in the record,
suggest the Chinese have probably hired some big powerful law
firm in this town, people who may have served in this Congress,
maybe on both sides of the aisle, that are representing the
slave labor people over there in China. Paying big money. The
more disreputable the operation, the bigger money they pay. And
the poor apple grower in upstate New York or out in the
beautiful Shenandoah Valley that I represent just gets lost.
And so Mr. Sweeney is right, and I think we are going to
have a hearing. To focus on the issue of China and apple and
garlic issues. Let the word go forth.
I voted for WTO. I voted for the Fast Track, whatever the
new name is. Nobody from the Administration asked me to vote
for it. I did it to give the President of the United States--
who I dearly appreciate the fact that he came to change the
administration. I did not vote for it under the Clinton
administration. But with that I think goes a tremendous burden,
a responsibility to advocate for these apple growers and these
garlic growers and these other people who sometimes feel that
they are powerless in this town.
And I think and I would urge you and your people to be very
outspoken, to be very, very aggressive, to speak out on behalf
of not only the apple people and the garlic people but all of
the other industries in this United States.
Some, I know, go; the buggy and horse whip and other things
that end up going, and I know we are in a changing time, but
there are some that feel that they are being really forced out
not because they are not productive and they are not
hardworking, but because of powerful interests around the
world.
I just saw the Administration put out its new report on the
U.S Religious Freedom Commission. That was my bill. Saudi
Arabia didn't make the list. There is no religious freedom in
Saudi Arabia, but no one wanted to offend the Saudis at this
particular time, so nobody wants to speak the truth to them.
The same thing on these trade issues.
So I want to share what Mr. Sweeney said, and I will tell
Mr. Sweeney we will have a hearing. You may want to bring your
people in. We will bring and talk to this issue. But maybe
after the hearing, your people who work on the issue of apples
can come to me--with Mr. Sweeney, before the hearing.
Mr. Kirk.
Mr. Kirk. Thank you, Mr. Chairman. It is a pleasure to be
on this committee as well with you and Mr. Serrano.
Mr. Kirk. Mr. Secretary, first of all, I want to thank you
not necessarily for your public service as Secretary of
Commerce, but as a good friend of the President. I think he as
a person probably is going through an enormous amount of stress
right now. Your voice and counsel to him is probably almost
more valuable than anything else, and I want to thank you for
that.
ELECTROMAGNETIC SPECTRUM
Secretary Evans. You bet.
Mr. Kirk. On the NTIA, we have got a $4.3 million increase.
It belies an incredibly important issue of the allocation of
the spectrum that our government owns. I am just coming out of
the Navy, and the last 2 years on the Armed Services Committee,
and can I report to you that the Defense Department does not
know that its second most valuable asset, after its land
holdings, is the electromagnetic spectrum that it holds, worth
between $60- and $90 billion.
They also are unable to come to the realization that
European countries, countries in Asia have already allocated
the spectrum they use to their civilian sector. And so in
countries in which we ask U.S. Armed Forces to deploy, the
spectrum is already occupied by the civilian side. I am worried
that resistance inside the DOD will inhibit the deployment of
third-generation wireless so critical to the 21st century
economy that we want to bring about.
Can you give me this increase per NTIA, your spectrum
vision for maybe a post-Iraq policy on spectrum?
Secretary Evans. Well, I--my vision is--is continuing to
use technology as well as work very cooperatively, but yet
aggressively on finding ways to free up more spectrum for the
private sector. I have been pleased, quite frankly, with the
cooperation from Department of Defense over the last couple of
years that this has been on our watch, my watch, whatever.
We, in fact, announced last year, after working with DOD
for a year or so, the freeing up some 90 new megahertz of
spectrum that will be available in the private sector in the
year 2008. I also have been pleased to know that the Department
of Defense is working with us on understanding new technology
that will allow spectrum that they may now have and hold to be
freed up during certain times during the day when it is not
being used.
And so you can see some new technologies entering into the
market all of the time that will provide, I think, more
opportunities for us to free up more spectrum, because the
Defense Department will get more comfortable with, not giving
it up in its entirety. D.O.D. would only give it up during
times of the day when they don't need it or periods of the
month when they don't need it. I don't know what the timing is.
My point is I think we are making some pretty good progress
in what I have seen to not only free up new spectrum,
absolutely, but also entering into discussions about technology
that can be used to provide for more spectrum in the private
sector that maybe you can lease during certain hours of the
day.
You do raise, I think, though, another important point,
which is just kind of the lack of harmonization around the
world, the standardization around the world. I don't know what
you do to get that back in the box. It is kind of gone. And
could we focus on trying to go forward? How can we harmonize
more? We should, but some of it is just too late.
Mr. Kirk. We have got one anecdote that my troops, when we
deployed into Kosovo, would not use their military radios
because they were so outdated. We used Italian cell phones for
military operations. The DOD leadership does not want to
wrestle with that, but their own troops would move to the
higher technology cellular communications that the civilian
side used.
But as we move into a deficit world, $330 billion now and
with the supplemental, et cetera, we may once again have to
look at further auctioning of the spectrum to help ameliorate
this. And so I hope that we can have some further look at that.
You have got a great staff. I want to praise Robert Sawyer, who
is your EDA regional director for my area. He has shown some
unique leadership in taking a project in my district. The
world's largest naval training center had locked itself off
from the second poorest town in Illinois, and with a
cooperative arrangement between the Department of Commerce and
the Navy, we are opening up a gate that will restart economic
activity in Illinois' second poorest town. Robert Sawyer signed
off on it, but you have got one guy, and I wanted you to call
him and tell him you love him. The guy named Jack Arnold, who
is a case guy at EDA, has really reflected well on DOC.
BUREAU OF ECONOMIC ANALYSIS
We talked about BEA, Mr. Sweeney, and I think that is
another critical issue. We have got a $1.6 million increase to
improve the data there, and there have been a number of changes
here in the House that may need to be coordinated with what BEA
is doing.
The House, in our rules, has adopted the requirement that
we provided a real-world or dynamic score for the tax and
entitlement legislation of the House. So the need for the data
on how the taxpayers and the economy responds to changes in
laws has gone up by a quantum level. And that we have--looking
at the--the incredible inaccuracies that we have had in prior
projections, there has been a resistance here in the House and
Congressional Budget Office to the idea of what the experts
would call back-casting, where you take the data that has been
received from the actual performance of the economy, you then
load it back into the models that were used to generate a
projection, and figure out where you were wrong.
In other words, they are doing that at CBO, but I can just
highlight this for you that BEA may be extraordinarily tasked
to do this, because we are now going to be producing static and
dynamic scores here in the Congress. And BEA is going to be
absolutely in the center for this battle for new and better
data.
Let me just give you one example of what I am talking
about. We are wrestling with asbestos liability reform. In a
geometric rise in the lawsuits, we have already bankrupted
companies that made asbestos. We are talking about any company
that in any way involved asbestos. My favorite is Sears
Roebuck, which sold an iron in 1957 and 1958 with one asbestos
washer. Now they are subject to a huge asbestos lawsuit.
This is a geometric rise, and RAND Corporation says $200
billion in judgment are probably going to bankrupt several
hundred companies in America. Nine hundred stocks right now are
depressed because of asbestos liability concerns, aweight that
is hanging over.
Right now we do not calculate the loss in tax revenue if we
let the system go as it is now and see that $200 billion taken
out of corporate earnings and into jury awards, but we should,
because taking $200 billion out of the taxable income of
corporations and giving it to plaintiffs removes--at the
corporate rate of 35 percent, removes about $70 billion from
the U.S. Taxable base that the government survives on.
Those kind of liability reform proposals and their tangible
effects on the revenues of this U.S. Government should be
calculated. We do not right now. But they make a visible
difference to the bottom line of the U.S. Government, and we
are hoping that BEA can help us begin to calculate the real
economic benefit not just to the economy, but to the budget of
the United States for those various tort reform proposals.
Secretary Evans. Well, I appreciate those remarks,
Congressman. You are right on target. You need good information
to make good decisions for the American people. And that is why
I am so strongly supportive of the additional funding for BEA.
I have had the pleasure to visit with the Chairman of the
Federal Reserve quite frequently. It is an issue that he brings
up with me almost every time we visit.
When you have got these large issues that impact our
economy, it is critical that all of you have the best possible
data that we can possibly present so you can make the decisions
that the American people expect you to make. So we look forward
to working with you on the issue.
Mr. Kirk. Thank you.
Mr. Chairman, thank you.
Mr. Wolf. Thank you, Mr. Kirk.
Mr. Vitter.
Mr. Vitter. Thank you, Mr. Chairman.
Thank you, Mr. Secretary, for being here.
SECTION 201 TARIFFS
I want to focus on trade, which has come up a few times
today already. It is a very sensitive set of issues, in
particular for those of us from Louisiana. As I think you know,
I was a strong supporter of fast track, and the entire
Louisiana delegation was, and we helped pass that legislation.
Very strong support for the controversial and difficult issue
of improved trade relations with China, again very strong
support in the Louisiana delegation. So we have consistently
been for free trade and supported the President on those
issues.
But whenever, quite frankly, it has come to a specific
issue that has a big impact on us, namely steel, and now sugar,
we just haven't had a big impact in terms of Administration
policy, and we feel like we are really not being heard and our
concerns are falling on deaf ears.
The steel tariffs have had an enormous negative impact on
our ports. And nationally, of course, they have had a big
negative impact north of us in terms of steel consumers with
major price increases.
And now we are in the midst of a potential sugar agreement
with Mexico that is still up in the air, that is still in flux,
but that also poses enormous threats and consequences for
Louisiana.
So I guess I have a few specific questions with all of that
in mind. On steel, you touched on Administration plans to
decide and announce on additional exclusions to the section 201
tariffs on steel imports. What is the precise timetable on
that?
And, secondly, under that 201 process, I know the
Administration has mandated to undertake a review of tariff
policy. In that review can you commit to specifically examine
the impacts of the tariffs on both steel consumers domestically
and the port industry, which is a major, major economic impact
on the other side of the ledger?
And then, number three, on sugar, a big frustration many
Louisiana folks have had with the ongoing sugar discussions is
lack, in their opinion, of full consultation in terms of the
domestic industry. What can we do, perhaps within the Commerce
budget, through the International Trade Administration or some
other part of Commerce, to fully engage domestic industries,
whether it is sugar or anything else, in key negotiations that
are going to dramatically impact their futures?
Secretary Evans. Congressman, the first one, in terms of
the precise date, I have got to get you the precise date on the
201 exclusions. It is sometime this month, the month of March,
we will make the announcement on the exclusions that are being
considered right now.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
In terms of the 201 review, I can absolutely assure you
that we will consider the impact of the 201 safeguard on not
only the producers, but the consumers. That includes,
obviously, the ports as well as other manufacturers. And so you
have our assurance that we will look at that. The anniversary
date was yesterday, so it is 6 months from today that you have
the midterm review.
Finally, what was your third one? I am sorry.
TRADE NEGOTIATIONS
Mr. Vitter. It was really focused on ongoing sugar
negotiations with Mexico, but, more broadly, what can we do to
make these domestic industries feel like they have a seat at
the table in terms of active input during those negotiations.
Secretary Evans. Exactly.
Congressman, you know, I would say this: We certainly have
endeavored on many of the industry issues like lumber and
steel, and whenever the Commerce Department has a role to play
in the negotiations, in the discussions, I feel like we have
been very open, very available, very accessible, encourage
groups to come in from both sides of the issue, and have, I
think, a pretty good track record of doing that.
Now, I hear some concern specifically on sugar, and that is
not in our Department to deal with that. That is USTR, as you
know. But they are not trying to pass the buck either. We are
responsible for Commerce and making sure that the commercial
side or the commerce side of this committee, that if there are
concerns, that we are involved in making sure the right people
are talking to each other.
I do know on the sugar issue, which happens to be, kind of
the issue of the moment, there are active discussions going on
with the industry. And I know USTR is talking to them now. So I
know those discussions are under way. And I am glad to follow
up with that and check to make sure that the industry is
satisfied with the administration being accessible to them,
because it is important.
Listen, as far as I am concerned, it gets back to the basic
fundamental issue of trust and being able to sit down with
people and have your views heard and expressed, and it is
something that, as I said, I think we do a good job of around
the Department of Commerce.
If there are problems where we are not dealing with other
industries like we should be, I want to know about it.
Mr. Vitter. Well, by way of background, I have been
involved on the sugar side. I have met with the lead
negotiator. And to boil it down, I think the domestic industry
is quite frustrated about the level of consultation and the
method of consultation, because basically they are brought in
once an issue within the broader negotiation has been closed in
principle. And they are brought in and told, this is the deal
on that issue. We would love to hear your technical comments.
And very often, you know, the big picture items that they
would have significant input on, and how those fundamental
issues affect other related issues, and what sort of deal it
portends, when the whole thing is wrapped up, it is too late.
They are basically asked for rather marginal technical comments
once the principle has been decided. And so from their
perspective, that is minor or marginal consultation and input.
Because they are only invited in, they have a conversation at
the beginning about broad principles, and then they don't hear
again until an issue is put to bed and they are invited for
technical comment.
Well, the devil is in the details, and everything in
between those two points is really the heart of the matter that
they feel that they are basically shut out of. So I am just
passing that on----.
Secretary Evans. Thank you.
Mr. Vitter [continuing]. --As their perspective in terms of
how this particular consultation isn't very effective from
their point of view.
NOAA PROGRAMS IN THE GULF SOUTH
Secretary Evans. Okay.
Mr. Vitter. Finally--let's switch gears. Another very
important part of your Department in my part of the world, the
Gulf South, southeastern Louisiana, is NOAA. Obviously the Gulf
maritime commerce is enormously important to us. Just two
thoughts, and you don't really need to react, but just two
thoughts to put in your mind.
NOAA has an ocean exploration program that I think, from
everything I know, has taken off in the right direction very
successfully. There are things called AUVs, autonomous
underwater vehicles, that are very effective in terms of that
exploration, and I would encourage NOAA to look at that as part
of their program, and in particular to look at what is out
there in the private marketplace versus reinventing the wheel
in government, because I have gotten briefings and think that
can be a very effective way of doing that work cost
effectively.
And, secondly, obviously NOAA charts the oceans and the
Gulf, and that is very important for maritime commerce. We
still have a big backlog in terms of charting, and that has a
negative impact on maritime commerce, including in my part of
the world. Anything you all can do, NOAA can do, to eat through
that backlog would have a direct positive impact on that part
of our economy, which is a big part of our economy, and in
particular, I believe their somewhat hesitant exploration of
private charter opportunities which has been getting going, but
somewhat hesitantly, I think it has been proven very cost-
effective. So I would encourage them to look at the numbers and
to see what sort of bang they get for the buck when they hire
out that charting service versus the old government way of
doing everything in-house.
Secretary Evans. Thank you, Congressman. I will look at the
AUVs and appreciate that thought and idea. I know that the
private charters are something that we have been incorporating
more and more into the program. What I know of it is they are
pleased with it. But I will take another look at it and see if
there is a way that we can ramp it up even more.
Mr. Vitter. Thank you.
Mr. Wolf. Thank you, Mr. Vitter.
Mr. Kennedy.
NOAA ISSUES IN NEW ENGLAND
Mr. Kennedy. Welcome, Mr. Secretary. Before we went off to
the vote, I presented you with some unique challenges that we
have in the New England area, one of which is affecting most of
the New England area, and that is the precipitousdecline in the
lobster fishing industry. What we found in last year's budget is this
buy-out of commercial fishing vessels. But I am not sure whether your
Department has the discretion to target some of those funds to the buy-
out of some of these lobster fishing boats because of the NMFS's total
agreement that we have overfished the lobster grounds up there, and I
would ask you, if you would, to comment on that.
And then I have two other points that revolve around the
previous question by Mr. Vitter regarding NOAA, and that is to
ask about the regional computer modeling efforts under way so
that we can better develop a climate modeling center for the
New England region, which right now we are looking to get
going. I know other regions of the country have that going. In
New England we want to get that climate modeling going.
And in regard to the climate modeling hurricane research.
You know, that University of Rhode Island has worked well with
NOAA in working with some innovative technologies to have
better predictive models for hurricane forecasting. I think
that needs to continue, given the fact that the loss of life
and valuables is growing with each hurricane, and we need to do
a better job at forecasting.
I just ask if you can comment on what NOAA is doing with
URI on that. So basically there are three questions.
Secretary Evans. Thank you, Congressman. Good to see you
again, sir.
On the late lobster issue, I know it is an issue we have
been working on for quite some time, before I showed up, and
the difficulty in reaching an agreement in the area of how we
are going to manage lobster is that there are some 10 or so
States that have to be worked with and coordinated. And so
what--they could collectively agree on here is the plan for
fishing lobster in this region.
Mr. Kennedy. If I can interject. All of the lobstermen, all
of them, usually there is controversy whenever you talk about
fishing and conservation, they are all agreed that there needs
to be boats taken off the market and licenses retracted, and
they are in total agreement. So it is very infrequently that
you find them wanting to give up their trade, but they are
desperate. They need a buy-out program like the one we just
passed in the 2003 budget. I am just hoping that you can
consider lobster fishing in the overall commercial fishing buy-
out.
Secretary Evans. We will look at that in terms of buy-out.
I am not aware of any funds being designated for buying out
lobster fishing boats, but I am glad to take a look at that.
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Also, in terms of an overall program for lobster fishing in
that part of the world, it has been something that they have
been dealing with for quite some time. I am optimistic that we
will soon have the plan that we can present to that region. It
has been 4 years since we have been working on it. So I think
we are very, very close there, and I think that they will have
a plan in the very near future.
GLOBAL CLIMATE CHANGE
In terms of regional modeling, let me say this: This
Administration has given the highest priority to understanding
the issues around global climate change and getting this
country in a position to make good policy decisions with
respect to global climate change, measured steps that we should
take.
We are not the leader in the world right now when it comes
to modeling. The leaders of the world are elsewhere. We do have
a lab, a Geophysical Fluid Dynamics Lab, at Princeton, New
Jersey, that we work with. And we have committed some $3-1/2
million in funds to continue to strengthen that lab so that we
can move this country toward being the leader in the world when
it comes to global climate change modeling.
With respect to regional modeling, I know that there are
some areas that are ahead of others. We have committed some
$1.7 million in the budget this year to assess other regional
modeling centers, and so I am certain that that also includes
the New England region, which is an area that our staff will
report back to you, and just to tell you the results of that
assessment and steps that will or may not be taken.
[Clerk's note.--Subsequent to the hearing, the following
was provided:]
REGIONAL CLIMATE RESEARCH
There is currently very little research being done to
develop regional climate models specifically for New England.
However, research is being conducted by NOAA and its partners
on development of higher resolution global and very high
resolution regional climate models which will be used to assess
the impacts of climate variability and change on the U.S. as a
whole, and will enable New England studies also. In addition,
the FY 2004 budget request includes a request (description
attached) that will allow the Geophysical Fluid Dynamics
Laboratory to obtain the necessary resources to enable
simulations addressing policy and business issues, and turn
NOAA's investments in the Climate Change Research Initiative
(CCRI) research into policy relevant knowledge. Such
simulations could be specifically targeted to the New England
area as needed.
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With respect to the good work with University of Rhode
Island, hurricanes, and as you pointed out this is a matter of
public safety and of great importance to this country. We stay
very, very focused on doing all we can to strengthen our
ability to deliver the information to the American people they
need with respect to hurricanes. What I know is that people
have been pleased with the work that has been done with the
University of Rhode Island.
I also know that we have put into the budget some $10.4
million that will be focused on a new world weather building.
This new center will allow us to continue working with
meteorologists, both in government and academia, to improve the
models that NOAA uses to produce nationwide forecasts,
including those used for hurricane modeling and forecasting.
And so I will make sure that our team makes note of your
comments with respect to the University of Rhode Island, and we
will continue to look forward to working with them.
Mr. Kennedy. Great.
Finally, Mr. Chairman, let me just say, if we can continue
to work together on some of the other programs that Commerce
has, the MEP program which has worked very well in our State
with small businesses, giving them the support services they
need to transition during difficult economic times, and the
Trade Adjustment Assistance has been fantastic in helping many
of our businesses, which, have very stringent five requirements
in order to qualify for that trade adjustment assistance, such
as not only reduced sales, but concurrent increases in imports
and the like, we should keep that going. That is a program that
has really been worth its while to my region, and it has helped
maintain jobs where there have been signs that those jobs are
going to be in decline, and would just commend you on the fact
that those programs work very well.
And my MEP in Rhode Island has done a terrific job. So I am
sorry to see the budget declining for that, but I hope that we
will be able to work with each other in the coming year to try
to rectify some of that.
Secretary Evans. Thank you, Congressman.
Mr. Kennedy. Thank you.
NOAA Partnership With the University of Rhode Island
NOAA has funded hurricane research at the University of
Rhode Island through the U.S. Weather Research Program (USWRP).
The program is a cooperative effort between NOAA and the other
USWRP agencies (National Science Foundation, Federal Aviation
Administration, Navy, Air Force, Department of Agriculture, and
Department of Energy). The program works towards improving
forecasts of the location and intensity of heavy precipitation,
including predictions of where inland flooding will occur
during the following extreme weather. The fundamental USWRP
goals are improving hurricane-at-landfall and precipitation
forecasts and determining the quality and cost-effectiveness of
different observations applied to models used for medium-range
forecasts. These goals address the Nation's highest priorities
to improve forecasting of high-impact severe weather events.
Among other activities, the University of Rhode Island has
conducted ground-breaking research on the heat flux, or
transfer of energy, between hurricanes and the oceans. The
results of the research have been applied to NOAA's Geophysical
Fluid Dynamics Laboratory's hurricane model, which is now used
in an operational capacity at NOAAs National Center for
Environmental Prediction. The work has been fundamental in
improving the accuracy of forecasts of hurricane intensity at
landfall.
Mr. Wolf. Thank you.
Mr. Secretary, I have some other questions. I am sure Mr.
Serrano does. We have another hearing at 2:00 p.m. with
Attorney General Ashcroft, so we will probably certainly end
before. We will try to make the questions go faster, and we are
sorry for the delay back and forth, but the House has just
apparently recessed and are in Special Orders, so there
probably will not be many other Members come.
A couple of fast issues. Conflict diamonds. There are press
reports, and I have seen data, that I now believe, in fact,
that it is true that al-Qaeda is funding their terrorist
activity through conflict diamonds, and conflict diamonds
coming out of Sierra Leone and places like that.
The Administration has been very slow in dealing with this
issue. On December 31st the State Department issued a press
release stating the U.S. has determined the full implementation
of the Kimberly Process recommendations can best be achieved
through legislation. I know this is not directly--I don't know
how much you know about conflict diamonds. There is a whole--
conflict diamonds has funded Hezbollah. Hezbollah blew up and
killed 241 marines in Lebanon in 1983. They blew up the
American Embassy there. But now they are involved. And I will
send you and show you--if you or your staff or someone can come
by, we will give you the tape. We have met with our people in
the government. But that is a law enforcement issue.
The Administration has to deal with this issue, and the
bill just kind of hangs around down there. The Ways and Means
Committee wants to move it now. But if you would as the chief
business trade agreement Commerce person get behind tough,
aggressive legislation that shuts down the diamond trade coming
out of--the conflict diamond trade coming out of that region so
that we do not fund al-Qaeda and bin Laden and Hezbollah and
those. If you could say something about it, I don't expect you
to be an expert, but if you will look at it and make sure that
the administration comes up with tough and aggressive
legislation.
Secretary Evans. Absolutely I will look at it, Mr.
Chairman. I appreciate your championing of this very important
issue. I know it is something that you have worked very, very
hard on. I think it is something that does need to be dealt
with. You have my assurance that I will communicate that with
the right people within the Administration.
EXPORT CONTROLS
Mr. Wolf. Thank you very much.
Export control. Last year you requested additional funding
and positions to establish new attaches in China, Russia,
United Arab Emirates, India, Singapore and Egypt to reduce the
risk of dual-use sensitive items to terrorist groups and
countries. The fact that these five are mentioned, are these
five--do you have particular concern about, or was the office
not fully staffed, or why did we pick these five countries?
Secretary Evans. Well, those are countries that are of
interest to us that we are going to pay attention to, and very
closely scrutinize when it comes to exporting dual-use
products.
Mr. Wolf. Do you have any comment about the article in
today's paper with regard to Hughes and Boeing settling with
the U.S.troubles me deeply that two American companies would be
actually giving or selling something and doing this whereby the Chinese
would have this technology. What are your thoughts about the agreement
that was reached?
Secretary Evans. Well, actually that is handled by the
State Department. But let me just say, I was glad to see it had
been resolved. It is very troubling, like you say, to see that
information may have been passed that should not have been.
The export control. Let me get back to your original
question for just a moment, because--and I will specifically
mention China, because it is an area on which we have great
focus because they haven't cooperated with us like we feel they
should, particularly when it comes to end-use visits of some of
their facilities. And also China is not a member of the other
countries that you listed. I am not sure about all of them, but
some of them are not a member of many of the nonproliferation
agreements that are out there in the world today, like
Wassenaar and other international agreements.
So it is these countries that we will pay extra close
attention to, especially concerning the list of products that
we must monitor and license. It is countries like China that
won't have an automatic exception or exclusion. We will give
anything that is on the list, that is going to China, an extra
amount of scrutiny. So countries that are not members of some
of the nonproliferation agreements that are out there in the
world right now get added scrutiny from us and our team.
Mr. Wolf. Separating the comment out from the two
countries, the two companies that have been involved, because I
don't know that much about this case, so I don't want to have
any--what I am going to say now should have no connection to
Hughes and Boeing, because I am maybe saying something
inaccurate with regard to them, I would sense, and I would
believe and feel very, very deeply, particularly since we are
asking men and women to serve in the military to fight and
defend our country when you find the companies are doing this,
I believe it is very important to have criminal penalties. I
believe when a company does something like this is treasonous,
traitor activity.
The Justice Department was seeking the death penalty for
Regan, his name was, who was trying to sell secrets. And then
for a company--and again, I disassociate this comment from
these two companies, because I don't want to say something
negative about them and hurt them that way. But when you find a
company that is doing this in the world today, it is like the
Enron situation and some of the other situations. To
prosecute--and the Administration has a good record of cracking
down on some of the corporate crime. I have listened to the
President speak. This is a corporate crime, but this almost
approaches treason, because you are jeopardizing the lives of
young men and women who are fighting for the country, so
sometimes just a civil penalty of a fine just really doesn't do
it. And I think criminal penalties, particularly since, you
know, it is to whom much is given, much is required, we want to
trade, we want to be out there, we want to be doing this.
But on the other hand, if you are doing something, and
these companies who will be doing this will be knowing that
they basically--remember the Toshiba case years ago under the
Reagan Administration, the selling of the quiet propeller and
the technology whereby we used to hear the Soviets so far off
the coast. After they did that, it was very difficult for a
period of time, which put in danger the security of the United
States.
Criminal penalties. Bring them to justice, because, in
essence, it is the same thing, in essence, to a certain extent,
of what the penalties with regard to the person who is trying
to sell secrets, and do that, that the Administration asked for
the death penalty on. I understand the jury decided not to give
the death penalty. I am not talking about death penalty, but
criminal charges so the word goes forth that companies ought to
be as patriotic as individuals and not do this, which
jeopardizes the security of the men and women who serve in the
military.
Fiscal year 2003 bill included funding for a new
comprehensive human rights training program for ITA employees,
including U.S. Foreign Commercial Service officers, to help
them understand the importance of promoting human rights. When
these employees are counseling U.S. Businesses on market
conditions within a particular country, and I understand your
staff is now working with it, it is important to let them know
how important it is that they also counsel with regard to human
rights.
I urge you to kind of make some statement when they all
come together so that they know, in addition to promoting
business, it is--we want to be sure that we are also promoting
human rights at the same time.
CORPORATE RESPONSIBILITIES
Secretary Evans. I am excited about the program. I am
delighted that we are going to have a training program that
will be part of the U.S. Foreign Commercial Service Agency that
will address the issues of corporate responsibility of human
rights and the rule of law.
One thing that I do when I travel the world, Mr. Chairman,
is I always like to go to a facility that is being supported by
American capital, by enterprises in the region that are there
and giving back to the community and taking the American values
of respecting human rights and the American values of sharing
with others with them.
And I always have a very easy time of finding a school or a
hospital or some facility that is being supported by American
companies. I was in Lima, Peru, not too long ago and went to a
school that was located right next door to a brickyard. This
brickyard was a large pit where they had children that were
filling forms with mud and water to form the bricks.
A company from America that is prominent now in Peru
decided that is not right, these children need to be in school.
And so the company went and provided the funding to establish a
school that is right next door to the brickyard, and now those
children are in school instead of in the brickyard, where they
shouldn't be. In fact, it is illegal for them to be there, but
they have been there.
And so this program that we will have inside the Foreign
Commercial Service will talk about the great social
responsibilities that companies have when they go to other
places in the world. I mean, it is what we feel here in
America, these offices that are scattered all around the world
will talk about the importancewithin the country for the
country to understand basic issues of human rights and rules of law and
other corporate social responsibilities.
So this is a program that will feed through about 100
offices here in America and 100 offices around the world. I
will make a statement to them, I assure you of that, to tell
them how important this is for America leading the world toward
people having the kind of freedoms that we cherish here in
America, the kind of dignity that all human beings should have.
I think it is integral to our responsibility of leading the
world. And I have already mentioned Foreign Commercial Service
during this testimony this morning. I tell you it is a
wonderful team of people. They are all over the world. They can
take this powerful message of American values and deliver them
into the countries where they are, remind the companies that
are moving into these countries of the importance of practicing
corporate social responsibility and human rights issues and
encourage rule of law in these countries.
Mr. Wolf. Thank you. I have a few more, and then I am going
to submit the others for the record and then recognize Mr.
Serrano.
2010 CENSUS PREPARATIONS
The budget request includes $662 million for the Bureau of
Census of which $260 million is to continue preparation for the
2010 census. The 2000 census and the decennial census before, a
household would expect to receive either a long form or a short
form survey to fill out.
The budget proposal is to reengineer the way that the
decennial census is conducted, more specifically the proposal
would have American households expect to receive only a short
form survey during the decennial 2010 census; is that correct?
Secretary Evans. That is correct.
Mr. Wolf. With the congressionally approved questions
included on the long form survey in 2000 census that are
proposed to be included in the annual survey called the
American Community Survey, ACS, your proposal includes sending
this long form questionnaire to 3 million households not every
10 years, but every year. Is this from a budgetary issue?
Secretary Evans. Well, it is a couple of issues, Mr.
Chairman. One is to provide better, more timely data to the
customers that we have out there, like the Federal Government
and State governments and local governments and the business--
and the private sector, as to demographic patterns in our
country. And with the long form being used every year by 3
million a year, we will be able to provide more timely
information to our customers as to the patterns in this
country. So instead of waiting every 10 years to understand
population movements and growths in certain areas of our
country, we will have a running total of it. Instead of
collecting long form data every 10 years we will get ourselves
in a position to have an annual number.
It is providing better information to the customers that we
have that make big, big, big, very large resource decisions as
to how money is going to be allocated, or how it is going to be
invested. It will be a very valuable tool to States when they
receive Federal money to how they disburse the money within
their own State. How they disburse it, whether it be county by
county or city by city, they will have more accurate
information as to where the people are in their State than they
would if they were waiting every 10 years.
In terms of is it an economic issue, quite frankly, Mr.
Chairman, we feel that by doing this annually every as opposed
to incorporating it into the 2010 decennial census, that it
certainly won't cost us any more money, and, in fact, may save
us some money as to just trying to do it as a one-time, one-
shot, do it in the 10th year and not any other.
Mr. Wolf. You think it will save?
Secretary Evans. I think it will save us some. We do feel
like the track we are on now, we will save several hundred
million dollars in the decennial census that we would wind up
spending if we don't incorporate the American Community Survey.
Mr. Wolf. Okay. Then we will just submit the other--we had
others that were budgetary issues. They tell me Congressman
Davis's Committee is going to have a hearing on this issue. We
will just submit them for the record. Some of the questions we
will ask you, if you do not get the funding you are asking for,
what will the impact be? But let me submit them for the record.
Secretary Evans. Right.
INTERNATIONAL STANDARDS BARRIERS
Mr. Wolf. Last year we heard reports that U.S. Companies
did not appear to be as competitive as non-U.S. Companies
because U.S. Standards are not incorporated in many of the
international agreements. What is happening is when they bid
they are automatically cut out because the standards have cut
them out.
Secretary Evans. Well, first of all, we are being as
aggressive as we can through NIST to work with the
international standards organizations so we are in the mix when
it comes to setting standards in emerging countries.
Mr. Wolf. Are we finding that some of them are trying to
knock us out by setting the standards?
Secretary Evans. I wouldn't go that far at this point, Mr.
Chairman. I am not saying that they are or they aren't. All I
can tell you, I will get a more specific answer to that good
question if we have a specific example of a credit that it
seems like they are trying to knock us out. I will say this
then to you, that we have been out of the kind of trade
negotiations game for quite some time. Now we are back in it
with trade promotion authority.
But others in the world, like the EU, have been very
aggressive, and they have many more trade agreements than we
have. And when you enter into trade agreements, sometimes
certain standards are set within those trade agreements between
those countries that wind up as barriers to American companies,
because when we finally get into that market, maybe it is in
Brazil or maybe it is in some other country, but there is
already a trade agreement between that region and the EU, and
certain standards have been set, and we don't meet these
standards, and it is our tough luck, because the market has
been established or the standards have been established.
So it happens in trade agreements, but it happens outside
of trade agreements as well. It happens just through the
associations that are around the world that are trying to set
standards for the various products that are moving around the
world.
So what we have to do is just continue to be very proactive
and very engaged in the whole standard-setting process of the
world to try and bring to it as much harmonization as we quite
possible can, but I would also say American-friendly. We
obviously want it to be friendly to American businesses, and
every decision that we make should consider if this makes it
harder for America to compete or easier for America to compete?
So we want to continue to focus on standards and make it easier
for America to compete.
Mr. Wolf. If you can submit something for the record
telling us if there have been circumstances whereby we have
been, over the last 10 years--which would go beyond your time
up to now--whereby the standards have kept us from competing.
[The information follows:]
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GENETICALLY MODIFIED FOOD
Mr. Wolf. And in the interests of time, I want to leave at
least 10 or 15 minutes for Mr. Serrano.
But that leads me into another issue. It is not your issue,
but I think in your capacity of friendship with the President
and going back to run his congressional campaign in 1978 that
you told me that you ran or whatever, so you have known him for
a while, I think people do use you to get word back,
genetically modified food.
I was in Ethiopia where 11.5 million people are dying or
are subject to dying because of lack of food. You go down in
Zimbabwe, Mugabe is not allowing genetically modified food. The
genetically modified food issue is going to begin to cut us out
and the French are promoting it, and some of us--also bring
about starvation and death.
In Uganda, with regard to bananas, Uganda is a relatively
poor country faced with a terrible situation of Idi Amin and
now AIDS. They are beginning to work their way out. The banana
trees in certain areas are dying, so they have a genetically
modified banana tree.
They are afraid to go in that direction, though, because if
they go in the genetically modified banana tree, they will lose
their markets in France. They will lose their markets in
Germany. So the poor Ugandan--and if you have been to Uganda,
the banana is a large staple, like rice, they use in so many
other things. They don't know what way to go. I believe we have
been relatively silent when you look at what the EU has given--
we have this report which I will submit in the record--on the
food issue. There are 30 million people, as I said earlier,
that are subject to dying that are facing famine in the world.
The EU has done very, very little. When you add in the
genetically modified food, our companies cannot compete.
So I think it is important that we be aggressive in
speaking out, because, one, it will cost lives, but, two, we
will also lose business.
I don't know if you have any comment about the genetically
modified food issue, but it is one that is very, very important
to the economy, but I would say equally important to keeping
people alive that are going to die without it.
Secretary Evans. Mr. Chairman, when I leave my office every
night, my desk is clean except for one piece of paper. It is a
piece of paper that is a newspaper article that I read when I
was in South America about 4 months ago. It was a cover of the
newspaper, and it was a story about a mother who was selling
three of her children, selling three of her children to feed
the other four. And it was a mother in Zambia. And it was
another one of those countries that has felt like they should
not accept genetically modified food because they are worried
about what it might do to their health, or they had heard it
might be unsafe or unhealthy.
And so just be assured that it is an issue that is very
high priority to me and this Administration. We are speaking
out on it. I haven't seen a single minister from that part of
the world that I haven't talked about it; in fact, that I
haven't put it at the very top of the list. I do point out to
them the great famine that is taking place in that part of the
world while they study the issue.
And so know that we are very conscious of it. Know that we
are very much aware of it. And know that it is an issue that I
think is very important to this world. As you say, while some
are studying it, people are dying.
Mr. Wolf. Well, I think they are, and I think you have to
say things 10 times before it resonates. The poor countries are
caught in a bind. Many of them would like to move and take the
genetically modified food, but they are afraid because some of
our allies are telling them if they take that, it will
contaminate the food supply system, and, therefore, they are
going to lose their markets.
And so you get a country like Uganda who wants to go that
way; 50 percent of the banana trees are dying, but they are
afraid if they go that way, they are going to be cut off at the
knees, and there will be no markets. So as we are talking to
the ministers from Zambia and Uganda and Ethiopia, which is
important, but it also is important to talk to our friends in
the EU, particularly the Germans and the French and those
countries, because they are literally exploiting these people.
I sent a letter yesterday to Kofi Annan, and I sent a copy
of it to the White House yesterday, asking him to appoint a
special envoy on behalf of the U.N. In the area of hunger,
genetically modified food, and to go around the world asking
them to deal with this issue and deal with the issue of others
because of all of the foods being donated in Africa and
different places.
And, frankly, I don't think the Administration has done a
very good job of telling the story. It has done a good job, but
you are hiding your light under a bushel basket. Fifty-one
percent of all of the food, fifty-one percent of all of the
food in the world for hungry people, is coming from the people
of the United States. Fifty-one percent. The EU and all of the
nations like that combined in that area was 27 percent, and
last year they were below the 27 percent. It is like Dietrich
Bonhoeffer talked about cheap grace. That is cheap grace. They
talk about it, but you have been involved in the campaign, have
you ever heard someone say, I want to help you, I will be
there? But I am not there. And I will talk about it. You had
the event, but the check never comes in.
There are promises, and they are talk and conferences, but
they are not giving the food to Ethiopia or to Eritrea, the
other place, Mauritania and all of the different places. As a
result of that, they feel no pressure because nobody is saying,
French, you are not giving the food. The Italians, the Italians
ought to be flooding Eritrea, because if you go to Eritrea,
there is Italian architecture, they used to control the
country. The same in Ethiopia.
But the administration ought to put pressure, friendly
pressure--I mean, these are our friends, we certainly want to
be allies with them--that they should give. And I did do a
letter to the President yesterday asking that the President
contact Kofi Annan to ask him. There is a special envoy for
AIDS, which was a very appropriate thing the U.N. did; now with
30 million people ready to die because you put AIDS on top of
famine.
The U.N. ought to have this person, and this person can
work with Jim Morris, who was appointed by this Administration,
can work with former Congressman, my good friend, Tony Hall,
can work with the U.N., but can go around to those who have not
given--and I might say parenthetically so we are not just--the
Chinese have given zero, zip, almost nothing--but to go to some
of these countries and ask them, in order to help the starving
people of the world, would you give? And a large portion of
that is genetically modified food.
The others will be for the record, except for one other
thing. NOAA we didn't spend the time I wanted to spend, but I
would like to know, the early warning system with regard to
famine, does NOAA put out a monthly report that is published
nationwide and particularly sent to the ambassadors, perhaps,
of the countries that are here in the United States, or also
have offices at the U.N. Saying, our projections are for next
year a famine, for this will be taking place, this will be
taking place?
Do we get the information out so that the world knows, so
that the different countries, whether it be in South America,
Central America--I understand there is ready to be some famine,
I was told--I couldn't believe this--in Central America, in
Honduras and Nicaragua and Guatemala. But does NOAA put out any
bulletin or notify anyone with regard to the good work that
they are doing and what the outward projections are?
Secretary Evans. Two comments, Mr. Chairman. I don't know
if we put out a monthly report or not. I will check on that.
Mr. Wolf. Or quarterly.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Secretary Evans. I don't know exactly what we put out, but
I will find out. I know that we talk to the other countries
around the world with respect to expected weather patterns in
their country.
Second point is, though, that one of the most important
elements of the President's Global Climate Change Initiative in
this year's budget is to cover the world's oceans with a global
ocean observing system so we have better information as to
weather patterns of the world. Right now we have about 40
percent of the world covered. The reason that we hear about El
Nino and La Nina is because we have that part of the world
covered. We have lots of buoys out there, so we can pick up
weather patterns, and we know what is going to happen out
there. To make good decisions you have to have good data.
Secretary Evans. I have to have 100 percent of the world
covered. That is the direction we are going. So not only will I
check and see how it is we are communicating the weather
patterns of different countries around the world, all of them,
but particularly the emerging countries, developing countries
as you are pointing out and sensitive to. But also just know
how important--how much emphasis we are putting together a
global system so we will have better information as to where
famine may or may not occur in a part of the world.
Mr. Wolf. You may want to bring people in from some of
these developing countries to train them, maybe a fellowship
for 2 weeks or something whereby they can come back and see how
we do it. I think you develop the relationships and also the
expertise.
I will submit the rest of the questions for the record.
I will recognize Mr. Serrano.
Mr. Serrano. I will be brief. I don't want to keep the
Secretary any longer.
Mr. Secretary, one of the things I have noticed is the
worst-kept secret in Washington, that you are very close to the
President and that you advise him and that you comfort him. Be
aware that the next home run Sammy Sosa hits will be his 500th
home run. I think that is going to depress the President,
because he traded him. So I wondered if you advised him to
trade him.
Secretary Evans. No, I wasn't part of that decision, no.
Only the good decisions.
Mr. Serrano. So you told him to keep Palmeiro. Get rid of
Sosa. But just be aware that that could hurt him in some way
while we celebrate in this country.
I want to take a moment to publicly thank you and NOAA for
the ceremony that was held in my district on December the 5th.
Admiral Lautenbacher came out to the Hunts Point community
where they are taking advantage of the educational
opportunities available at the weather station. It is a group
of young people that now have their own weather station. All of
a sudden there is even talk about local New York-type TV and
radio stations going to Hunts Point for some young people
through NOAA to give them some information.
I would also like to commend NOAA in general for the
excellent job they have done, in association with minority-
serving institutions, to expand educational research
opportunities. The House report to accompany the Fiscal Year
2003 bill directed the National Institute of Standards and
Technology to review NOAA's program to interact with minority-
serving institutions and to report back on its efforts to
introduce a similar program. I want to thank you for the report
we received last month giving many examples of grants,
fellowships and collaborations between this and minority-
serving institutions. I think they are making a good start, and
I hope they strengthen existing ties and continue to develop
new opportunities with minority-serving institutions.
I will submit for the record a question to follow up on
this, but I wanted to publicly commend you for the work you
have done. You know that is an issue for so many of us for a
long time, and you have done well, and we congratulate you on
that.
Secretary Evans. Thank you very much, Congressman.
Mr. Serrano. I would like to take this opportunity to State
the fiscal year 2004 budget proposes to suspend Public
Telecommunications Facilities Planning and Construction grants.
Elsewhere in the budget, $80 million is set aside for digital
conversion grants to be taken from $380 million already
appropriated and advanced for the Corporation for Public
Broadcasting to produce or acquire programs for public
television or radio. That is more than a 20 percent cut.
You don't have to defend that idea. That proposal goes to a
different subcommittee. But I do have two questions for you.
First, even if we agree that the two digital conversion
grant programs should be consolidated, why should it go to the
Corporation for Public Broadcasting? The Public
Telecommunications Facilities Planning and Construction program
is older, more established, has more stringent requirements and
has a good track record as a well-run program. Why not keep the
program here? And about one quarter of the Public
Telecommunications Facilities Planning and Construction grants
are for things other than digital conversion. Who will pick up
the other equipment and facilities grants?
Secretary Evans. Congressman, I have to tell you I haven't
looked at the pluses and minuses of having the funds in one
organization over another. I am more than happy to do that. I
do acknowledge the good work of the agency you commended over
the years and it has done a good job in the conversions. So why
one as opposed to the other I am not sure, but I would be glad
to take a look at it and get back to your office.
Mr. Serrano. I appreciate that.
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Also, on the issue of El Salvador, I like your idea of
creating a new U.S. and foreign commercial service post in El
Salvador to promote trade in the region. But I want to clarify
a fine point about your proposal.
You asked for this post in the 2003 budget along with
several other new items, all tied to a $10 million fee
increase. In this year's budget, you propose to continue these
fee-funded programs in fiscal year 2004 for the extent of
actual collections, and that is the quote from the language.
Now in the fiscal year 2003 omnibus bill we provided $1,650,000
in direct appropriations, not dependent on collections, to
cover the cost of a new presence in Central America. What are
your plans this year for the new post?
Secretary Evans. We will open a post there, and it will
most likely be a regional post. It will cover not just El
Salvador but the countries in that immediate region. I am not
sure exactly what the division of labor will be, but we
certainly will have a senior commercial officer, sir, in that
post as well as some support staff. So the office will be open
this year.
Mr. Serrano. Let me encourage you to continue, of course,
to do anything you can in promoting our presence in Latin
America and certainly in other parts, as the chairman has well
established.
With that in mind, I just have one question that just came
to mind that I asked your predecessor once.
Notwithstanding the fact--I know this is a touchy subject
for some folks--that we have no relations with the Republic of
Cuba, does the Commerce Department take time to look at what it
would look like if that were to happen?
You know, there is--when I first started talking about this
subject 12 years ago, I used to get about three votes on the
House floor for any kind of a bill that looked like it was
opening up the relations between Cuba and the U.S. As you know,
that has changed dramatically. My Republican colleagues have,
to my amazement, my satisfaction, taken those bills and made
them into amendments and now pass by 300 odd votes, not as far
as I would like it to go but certainly a long way.
Is the Commerce Department not allowed under present rules
and regulations under present law to begin to look at what it
would be like if we had open trade with Cuba?
Secretary Evans. Well, I am not aware of any law that would
prevent us from doing that, Congressman. I am not aware of us
doing it, though. But if it is something that you would like
for us to consider, I would be glad to take that request under
consideration and then get back to you as to whether or not it
would be appropriate for us to do it.
Mr. Serrano. Sure. I would like that.
I would like, Mr. Secretary, just in case some things
continue to change, where would the Commerce Department be in
advising folks in this country what to do and how to do it and
where to do it? I mean, I am sure we should know what Cuba has
to offer us and what Cuba needs from us other than friendship.
So that time may come and you know, for me, as you know, that
is a very delicate subject. Because here we are talking about
all the trade we have with China, and the same people who
support trade with China are the people who do not support
trade with Cuba, and last time I looked I think they had the
same kind of Government. So I would hope that you could start
to look at it, because I suspect things are changing really
fast.
Secretary Evans. I will certainly take that under
consideration, Congressman.
But just one more quick point about Central America. As you
know, we entered negotiations with Central America with respect
to a free trade agreement. So make no mistake about how
important that region is to this Administration, to this
President who has been there, to that region. So not only are
we going to open up an office in El Salvador, but we are also
looking forward to negotiating with that region a free trade
agreement over the next few years.
Mr. Serrano. Okay. I thank you for your presence. I would
hope that you would advise the President to invite Sosa to the
White House, but don't discuss the trade.
Secretary Evans. Thank you, Congressman.
Mr. Wolf. Thank you, Mr. Secretary. We appreciate your
testimony here.
The hearing is adjourned.
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Thursday, May 22, 2003.
THE EFFECTS OF CHINESE IMPORTS
ON U.S. COMPANIES
OVERVIEW
WITNESS
FRANK VARGO, VICE PRESIDENT, NATIONAL ASSOCIATION OF MANUFACTURERS
Mr. Wolf. Our hearing will begin.
At the outset let me say this is going to be a day where
there is going to be a lot of votes, apparently. So we are
asking the witnesses to keep their testimony to 3 minutes. I
know that is brief, but this is not just a show situation where
there is going to be a hearing and it is over. All of your
testimony will be gone through. Christine and the staff will be
working with you. The purpose of this hearing is to do
something constructive and positive about this issue.
So I would ask in respect for those who have come from out
of town that we limit this to 3 minutes when you come up here.
I know that is a brief, brief period of time but we have a lot
of witnesses.
We wanted to do this before we began to mark up our bill.
That is why we have rushed this. This is a closing day of the
Congress, so maybe the closing day or day before. So because of
that, if you could do that, we would very much appreciate it.
Good morning, today, the subcommittee will hear the
experiences and the concerns of a number of American businesses
about increased imports from the People's Republic of China,
and we will review the efforts of U.S. Trade-related agencies
to support American businesses in this regard.
This committee has funding responsibility for a number of
trade-related agencies, including the Departments of Commerce
and State and United States Trade Representative, and the U.S.
International Trade.
In the coming weeks we will be making a decision on the
fiscal year 2004 budget. Therefore, it is important for us to
understand the effectiveness of these agencies in helping
America's small and medium-sized businesses deal with the
consequences of increasing imports from China.
Today we will hear from the National Association of
Manufacturers, a number of business owners, officers of
manufacturing companies, pharmaceutical and chemical companies,
and agricultural interests, the farmers. We welcome you all and
again, I appreciate you all showing up.
The purpose of the hearing is not to review international
trade policy, but to highlight the particular concerns of
American companies about the impacts of imports from China. The
subcommittee has heard concerns that the Administration has not
been very favorable and has unfairly favored Chinese businesses
at the expense of American companies and antidumping cases.
These allegations are very deeply troubling to me and,
hopefully, to the entire Congress, and they are more startling
given the sharply increasing U.S. Trade deficit numbers.
Last year the United States trade deficit was at an all-
time record of $435 billion dollars. This is the highest trade
deficit in the Nation's history. Some are predicting it to soon
top $600 billion. The numbers for China are even more
startling. According to the Census Bureau in 1985, our trade
deficit with China was $6 million, million, not billion, but
million.
In 1995 it was $33.8 billion, B billion. Last year, it was
$103, B, billion. If you do your math, our trade imbalance with
China has grown to an astronomical 107 million percent since
1985. Put another way, our trade imbalance with China was
greater in the past half an hour at about 935 than in all of
1985. I, for one, am deeply concerned there's not been
sufficient amount of attention focused on the possible long-
term impacts of trade imbalance on the country and, especially,
its impact on jobs. Fortunately, this Congress, and there may
be some differences, we are going to pass a tax package to help
create jobs, and for the Administration then to be asking us to
do this with regard to jobs with the tax package, and then
allow jobs to dissipate and go out abroad, does not really make
any sense. So this hearing is about jobs. This is about
recovering the economy. This is about having people having
places to go to work. According to the Bureau of Labor
Statistics, the U.S. has lost more than two million of its
manufacturing jobs in the past 5 years, a greater than 12
percent decline. According to one report, this has been the
worst decade for manufacturers since the great depression.
Right now, 27.5 percent of our manufacturing capacity is
sitting idle. Some would say that a manufacturing sector isn't
all that important in this high-tech economy. I don't agree.
Without a manufacturing base, our country cannot be as
competitive on the global stage, and we are also exporting
high-tech jobs in the same way as we are exporting
manufacturing jobs. As recently as the year 2000, U.S. received
about seven times as much foreign direct investment or FDI as
China. Now, China has surpassed the U.S. In FDI. In fact,
China, FDI in China, is up 51 percent this year. In the U.S.,
it is stagnant.
At the outset of the hearing, I want to say that I did not
vote for PNTR with China. I have been a long-time critic of the
human rights violations of the People's Republic of China and
continue to be concerned that the values we, as Americans, hold
dear, freedom of speech, freedom of press, freedom of religion
are not the values shared by many of our trading partners,
especially China.
I can spend the entire time documenting human rights
violations which continue unabated in China, but this a hearing
today is not about human rights in China. While I disagree with
the direction of our Nation's trade policy with China and
question the wisdom of not only this Administration, but past
Administrations and Congress, inregarding to trade relations
with China, the bottom line is the U.S. And China are now trading
partners. Accepting that reality, however, I continue to believe we
must do everything possible to ensure that trade with China is fair,
and that U.S. Businesses, especially small and medium-sized businesses,
are not cut off at the knees by products dumped into our economy by
China. We have to look at what our policies are when it comes to
dealing with imports from China and make sure American companies are
able to compete on a level playing field. We are losing too many jobs
to stand by and let products from China flood our markets.
Again, the administration has to deal with this issue
because if you are passing the tax cut to help American
businesses to stimulate the economy, it is not to stimulate the
economy in China so we can buy more Chinese goods, but it is to
stimulate the economy in the United States, to put American men
and women with dignity jobs back to work and not have your own
government that you are funding and paying with your taxes be,
basically, an adjunct in supporting the Chinese Government.
That's absolutely inappropriate.
I recognize Mr. Serrano for any comment, and we will go to
the first witness, Frank Vargo, Vice President, National
Association of Manufacturers.
Mr. Serrano. Thank you, Mr. Chairman. I would like to join
you today in welcoming our guests for today's hearing. As you
may have been aware, I have been a supporter of efforts to
continue to normalize trade relations with China. Now, some of
you who have been to hearings before may know that there is a
little behind-the-scenes conversation going on always at these
hearings as to how long it will take me before I bring up the
subject of Cuba. Well, this time it is easy, because when you
talk about trade with China, I think the natural question is
why China and not Cuba? And while some may want to revisit
China and some may be opposed to trade with both, I am on the
opposite side. I think we should trade with both and as soon as
possible with Cuba and continue to grow.
Now, as the Chairman knows, one of my favorite Presidents
was the former President Clinton, and I respected his
intelligence, and I remember asking him once, ``Mr. President,
why China and not Cuba?'' and this brilliant, and I am not
being sarcastic, I think we all agree on that, Rhodes Scholar,
high-IQ President gave me such an honest answer that it was a
painful and sad answer. He said, ``China's big.'' and therein
lies perhaps what's wrong with our foreign policy on trade, the
fact that we do deal with one and not with the other.
So I would hope that today we discuss the issues that the
Chairman wants to discuss, but I hope also that we continue to
pay attention to the fact that trade is more than trade. Trade
is good or bad, lack of it, foreign relations. A lot of what
happens in the world, a lot of how we influence what happens in
the world, I think, has to do with whether or not we have good
relations with people.
So if we fear, if we are concerned, if we do not like the
Chinese model of government, I think the best way to deal with
that issue is to continue to get closer to them. And so if we
do not like what is happening in Cuba, whether it is our
business or not, I think the best way to go is to trade with
them.
The big difference for me, and I will close with this, is
obviously, it is two separate issues in that in the Chinese-
American community, there is no Dade County, Miami that
controls the issue. Otherwise, we would not trade with China at
all, and the fact that we somehow for years have felt that we
can ignore Cuba or push them around, and we know that we cannot
ignore China or push them around.
So while it is not my intent at all to hurt American
businesses, it is also my intent to make sure that American
businesses trade wherever possible, and with whomever possible,
and so I respect the Chairman's words. I believe that he has
taken on a very serious issue and one that he believes deeply
in in terms of the behavior of our trading partners, but I
think the idea should be to bring more people closer to us
rather than to keep people away from us.
Thank you, Mr. Chairman.
Mr. Wolf. Thank you very much, Mr. Serrano, Mr. Taylor
would like to make an opening comment? Mr. Taylor.
Mr. Taylor. Mr. Chairman, thank you very much. Coming from
the heart of furniture country, and the major manufacturer s
will be testifying today, I certainly want to say that I agree
with what you said earlier. I share the vision that trade is
not a supplement to one country's wealth at the expense of
another. It should be trade where both countries experience
advance for both their economies.
It is almost impossible to think of a trade growing 107
million--percent in that short period of time and not envision
that there are not some problems that need to be recognized.
The question is China using surrogates to dodge America's
laws and quotas? Are patents and copyrights being copied and
used in illegal manners to gain trade advantages? Are
trademarks being violated, as several magazines have reported
in the last 12 months, to sell goods under false names at lower
quality? These are all serious questions I think we need to
answer and see if any of those statistics play a part in this
enormous trade increase on the one side.
Thank you, Mr. Chairman.
Mr. Wolf. Thank you, Mr. Taylor. In the interest either Mr.
Regula or Mr. Sabo or Mr. Pitts would like to make a comment,
you are welcome to.
Mr. Regula. Mr. Chairman, I will use my time on introducing
my guest.
Mr. Wolf. Sure. Mr. Sabo.
Mr. Sabo. Thank you, Mr. Chairman.
Just briefly, I, fundamentally, do not understand how we
can describe a trade policy with a country that we have over a
hundred billion dollar trade deficit with as being fair.
Something is wrong and desperately wrong. It is a one-way
track. It is a massive subsidy of our hard American dollars
into one country. At times I observe, I don't pretend to be a
trade expert, but I fear that we are becoming a country that
cannot produce anything. I am not sure that without China, we
would have clothes today. I just think it is desperately wrong,
and when trade is so one-way, there is something desperately
wrong with our trade policy, and I thank the chairman for this
hearing.
Mr. Wolf. Thank you. Mr. Pitts or Mr. Peterson, either one.
Mr. Pitts. Thank you, Mr. Chairman. Thank you for giving me
the opportunity to provide an opening statement in support of
ensuring free and fair trade for our U.S. Businesses.
I am here today in support of Anvil International, which is
on your first panel, which has major facilities in Columbia,
Pennsylvania, my congressional district. Anvil International,
producer of malleable, nonmalleable and ductile iron pipe
fittings, as well as steel pipe nipples, hangers and couplings.
In addition to their foundry and production facility, Anvil
also operates a nationwide distribution organization consisting
of five distribution centers that supply a wide range of
construction products to the commercial building industry, has
a total of 12 manufacturing plants in the U.S. And Canada, and
employs 2600 employees. Anvil has one remaining foundry located
in Columbia. They combined the operation of their former
Statesboro, Georgia, plant at the PA facility and had
originally planned to add two more jobs in Pennsylvania, but
coupled with unfair imports and the slow economy, these
additional jobs were not realized in Columbia. Instead there
are a hundred less employees at that plant today. Fifteen years
ago there were seven foundries in the U.S. Today only Anvil and
Ward remain in this industry, and Anvil joined Ward
Manufacturing in the filing of two anti-dumping cases against
Chinese imports of malleable and non-malleable fittings in
2002. They share a similar concern that the end result with the
nonmalleable duty margin has not benefited the company and
instead has led to an increase in imports. With this in mind, I
testified for the ITC in support of Anvil and ensuring that
this vital U.S. Industry is protected from further harm caused
by unfair trading practices. Anvil is facing stiff competition
from Chinese fittings producers, and in a time when the State
of our national security is of utmost importance, we cannot
afford to have this industry vanish from our economy.
The nonmalleable case has been completed. While the ITC
issued a unanimous 4-0 final decision, an injury the final
anti-dumping margins issued by the Department of Commerce were
in the single digits, and instead, first quarter 2003 data
actually shows an increase of 10 percent as compared to the
first quarter of 2002. And so their case is pending before the
Department of Commerce. We will also be consider ed by the ITC,
and I commend Mr. Fish of Anvil for his clear commitment to
making quality products to serve Anvil's customers.
However, they also know that the company needs to make a
return on investment. They need to be certain that this
administration, that the Commerce Department does everything
possible to see that these laws are enforced and that
appropriate actions are taken to ensure that they and other
companies are able to compete in this global trade environment.
So it is my hope that the subcommittee will pave the way
for necessary enforcement of our trade laws, and thank you, Mr.
Chairman, for permitting the testimony this morning.
I yield back.
Mr. Wolf. Thank you Mr. Pitts. Mr. Peterson do you have
anything?
Mr. Peterson. Thank you, Mr. Chairman.
I join Representative Pitts in support of Ward
Manufacturing and Anvil. Ward Manufacturing is in northeastern
Pennsylvania. They used to have 1100 workers, now have 800
workers, and have found this unfair competition could be deadly
on their future. And I guess everything I was going to say, Mr.
Pitts has just shared in statistics, so I will wax more
philosophical, but as was stated earlier by Mr. Sabo, you
wonder sometimes what we are going to manufacture in this
country. And I recently lost two furniture factories to China
imports, so I just closed two particle board plants. I never
thought that bulky particle board would be something that a
country so far away could compete with us on, but they are
using European particle board to make the ready to use
furniture. These plants, one was 10 years old and one was 12
years old, this was new, latest technology in America plants,
that had huge investments made in them, and are now sitting
idle after just 10 years of operation.
If we cannot make particle board as bulky, what can we make
sheer that can compete? I guess, one part I would like to add
is Ward and Anvil's concerns that the Department of Commerce
allowed the Chinese producer in this investigation to provide
fraudulent information that, in turn, resulted in a greatly
compromised result in terms of the final dumping margins.
Mr. Gleason also notes that he and others in the industry
were shocked to learn of these single-digit margins after
knowing that both Mexico and the European Union found dumping
margins against malleable pipe fitting imports from China in
the ranges of 42 and 48 percent. That is pretty devastating
when you find out that our information is that much different,
from 10 percent to 42 and 48 percent.
Ward has said here: It is concerned that absent the strong
enforcement of trade laws by the Commerce Department and by the
Administration, there will be a limited and bleak future for
the fittings industry, and I am saying, for the manufacturing
industry. I recently was with Congressman Regula and Jack
Murtha when they chaired the Steel Caucus, and I asked the
former Secretary of Commerce and the President's economic
adviser and trade adviser at a hearing Mr. Regula was chairing,
and I said to them, is there anything on the list that is vital
to the future of America's defense that we must maintain the
capacity to manufacture and process in this country, and there
was a long pause and the three of them looked at each other. I
knew then, they did not have an answer.
One, the politician, Mr. Daley, who very nicely said, well,
everybody would want to be on that list. I said, no, everybody
should not be on that list. Is there a list? He said, no.
So it appears, as a country, we have not looked at what do
we have to produce here to be able to defend ourselves? What is
vital for us to produce to be this powerful Nation we have
always been? I think we better be inventorying that. I think we
better be looking at that. What capacity do we have to remain
in this country? I am not interested in being part of a country
that serves each other food and serves each other with diaper
services. I just think it is time that we have to demand fair
trade, and if we don't enforce the trade laws, they are not
worth the paper they are printed on. And I think there has been
a weakness for a long time. I do not think there is enough
people in that Department or staff. They are overwhelmed, and
we better put some resources there that demand fair trade, and
if we do not, I fear the future, long-term future, of this
country.
Thank you.
Mr. Wolf. Mr. Vargo, first witness, please.
Mr. Vargo. Thank you, Mr. Chairman.
It is a pleasure to testify before you, and thank you for
your support of American manufacturing.
I have an exhibit here showing what you stated about
manufacturing having lost two million jobs in just the last 33
months, and as you can see from the various colors on the
graph, all States, other than Nevada, have shared in this loss.
Trade has been not the most important reason, but a very key
reason, for this overall loss and the key factor there has been
the over evaluation of the dollar, which fortunately is now
coming back into line. But within this, China, has played a
very important role.
As you have noted, the trade deficit with China has grown
very rapidly. It is now about a third of our overall trade
deficit in manufacturing. For 20 years, we have had a trend of
20 percent import growth from China and 12 percent export
growth, and that has brought us to a hundred billion dollar
deficit. It has been up $50 billion in the last 3 years, but if
those trends continue for five more years, 20 percent import
growth and 12 percent export growth, we will find within 5
years, by 2008, we have tripled our trade deficit with China to
over $300 billion. We cannot let that happen. China is also the
world's fastest growing market. We need to bring the trade back
into balance not just on the import side, but on the export
side as well.
China's been closed to us. It only had opened up after it
came into the WTO, it is only beginning to. Enforcement as you
noted is something we have to really press. Many people feel
this deficit is due to American companies having gone over to
China. So far, that is not the case and the Commerce Department
figures show that only three percent of our imports from China
come from American affiliates there.
However, that could change because we have talked. So many
of our members now say the cost of production in China is so
low, and the cost of production in the U.S. keeps rising
because of health care and regulations and all these things,
that we could be just at the beginning of a movement of a lot
of our production to China.
So as we look at this, as we look at the trends of if you
see we can boost our export growth to 25 percent a year or 30
percent a year, if the import growth from China moderates, then
this can come under control, but we cannot let things just go.
So this hearing, I hope, is the just the beginning of your
process, Mr. Chairman.
As you look at the Department of Commerce and USTR and
Customs, you are going to hear a lot. I would just like to
point out a few things you might want to keep in mind.
Implementation of the WTO. My prepared statement contains an
example of semiconductors where the Chinese charge a 17 percent
value-added tax on foreign semiconductors, but if you design
the chip and build it in China, it is only three percent. To me
that is open and shut, they are violating the WTO regulations.
Semiconductors are vitally important to this country. We have
to do something about it, not 2 years from now, but now.
The exchange rate. We believe the Chinese rate is
undervalued by about 40 percent. That is not immediately under
this Committee's jurisdiction, but it is the single most
important factor, and we cannot ignore it.
Counterfeiting. China is the epicenter of counterfeiting in
the world. It affects large companies and small. So many small
companies tell us that they export one product to China, the
market dries up because it is counterfeited, and the market
disappears. We need a massive export promotion program. China's
just beginning to open up. We are beginning to return to our
competitiveness against the European Union and other countries.
This is the time not to just put a little bit more on. We need
a, massive export promotion in China, or we are just not going
to see those numbers change.
We need to ensure that trade is market-driven. When there
are instances of subsidies, these things have to be addressed.
Mr. Chairman, just to conclude, we have a serious problem
with China, but if we do not start addressing it soon, it can
become a critical problem. Thank you very much, Mr. Chairman.
Mr. Wolf. Thank you, Mr. Vargo.
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Mr. Wolf. I am really not going to have a lot of questions.
One, we are going to deal with it, period. We are going to
use this Committee to deal with this issue. I am going to do
everything I possibly can. I may fail, but I may not, and we
are going to stay with this issue. The fact is, when I get an
issue, we generally stay with the issue. It took me three times
to get elected in Congress, lost in '76, lost in '78, won in
'80. We may have to come back next year, but we hope to do it
this year.
Secondly, I would like to say, do you see anything now,
aside from what we are talking about today, that is going to
change that figure if nothing happens? Nothing comes from this
hearing? Is there anything that is going to change your
projection for the next 3 years?
Mr. Vargo. One thing may, and that is, some of the imports
from China, particularly in electronics, have been at the
expense of Japan and other countries whose share has really
fallen. And as China works its way through eating their lunch,
so to speak, there may be some slowdown in the import trend,
but the fundamental answer to your question is, no. If we leave
things the way they are, we are going to have massive problems
that will overwhelm us, but, Mr. Chairman, I just want to say
two things, if I could.
I know your determination. When I was in the Commerce
Department, I used to come talk to you about MFN and Romania,
and you were very good and determined on your position.
Secondly, what I would like to note is that China has
pluses as well as minuses. We need a positive approach, and I
know that is the approach this Committee is going to take.
Mr. Wolf. If you recall President Reagan, God bless him,
signed the bill that we had to take away MFN from Romania
because they were persecuting people. Even though Reagan was a
free-trader on that, I think. I appreciate your comments.
What I want to ask you, and we will not go through it with
every witness, we would like to get all of you back together in
my office a week or two after we come back from the recess
where we can sit around to talk about it. We cannot rewrite the
trade laws in this Committee. I don't have that authority, but
I would like to see what we can due constructively to make a
difference. So we are going to get back together again with
everyone that is here afterward. If everyone can call Christine
and talk to her, whereby we will have a time and maybe we can
bring the Commerce people up, sit around, not be under the
three-minute rule, and deal with the issue of what can we
constructively do. So everyone will be asked to call Christine
after the hearing to work out a time where we all come
together.
Mr. Serrano.
Mr. Serrano. Just one quick question, sir.
Some of the difficulties in this new thing for us, this new
experience with China, is that, based on China's recent entry,
let us say, into markets throughout the world or in other
words, is it a matter of the Chinese putting together the kind
of trade team, if you will, that can be on par with other
countries?
Mr. Vargo. I think one thing we are seeing is that as the
State owned enterprises and the central control in China begins
to diminish a little, you are seeing more entrepreneurship. You
are seeing more movement into new products, but part of it, is
I do not know, and I am not a China expert. I do not know if
they know what their prices are or their costs are. One hears
that loans in China are nonperforming, 25 percent at least
maybe 50 percent. So if companies do not have to repay their
loans, and if they do not really have market-driven prices, you
know, that could explain a lot.
But I want to keep coming back to the point, we need a very
positive agenda. We need to use our trade laws, absolutely, but
we also really need to press to get our sales up to China and
bring it more into balance.
Mr. Serrano. Thank you.
Mr. Wolf. Mr. Taylor.
Mr. Taylor. Would you say the currency is having anything
to do with the lack of competition in the sense, manipulation
of the currency by the Chinese of their own currency?
Mr. Vargo. Absolutely, Mr. Taylor. They froze their
currency at a very low level. I think very much for the purpose
of having an export advantage in the world. We believe it could
be undervalued by as much as 40 percent, and that gives them a
tremendous advantage.
The Chinese Business Press has said a number of times, this
is what makes our exports dirt cheap, and it is something that
we cannot ignore.
Mr. Taylor. I personally experienced in the nineties a
Chinese purchase of a piece of equipment from a company in my
district. They bought one piece and after reverse-engineering
it, that company is no longer in business in my district. In
fact, it isn't at all. Do you see that in a number of areas?
Have you documented that in any extensive way?
Mr. Vargo. Congressman, it is across the board. It is
endemic in China for large companies and small, everybody
suffers from it. No foreign trademarks are registered in China,
only Chinese, and that to us is a violation of WTO, again, and
China's obligated by its bilateral agreement with the U.S. To
prevent counterfeit products from leaving China, and they are
not doing that either.
Mr. Taylor. There was a magazine, I don't have it in front
of me today, that reported just a few weeks ago about the
number of nationally known trade names that were being
manufactured and counterfeited in that way, and sold as a
national trade name but without the quality and the production
in China, and I do not think it was in collusion with the
company at all. It was just that they used that name and then
produced this product.
Mr. Vargo. It happens across the board, Congressman. It is
a problem that we want the U.S. Government to deal with.
Increasingly, we have started working with Commerce and USTR,
and we certainly appreciate the committee's support. We also
hope that Customs has enough resources to stop counterfeited
goods from coming into the U.S. In addition to doing all the
essential work they have to do against terrorism.
Mr. Taylor. Well, how can the United States if it is so
prevalent that I see it and you see it and people all over the
country see it, how can we allow this to go on, this rogue
trading, which is so obvious that any of us ought to be able to
investigate and stop it?
Mr. Vargo. Until China came into the WTO, it really was not
subject to international rules. So they have been subject to
international rules only very recently. A lot of emphasis has
gone into the proprietary software and recording industry, and
manufacturers have just been a little slow getting off the mark
in saying, what about us too, because ofall of our products are
being copied? So we are pressing on that. We are finding we are
knocking on open doors with government agencies, but we need to move
quickly.
Mr. Taylor. Well, if it is being so, almost uniquely,
abused, then should the American Congress take a step that we
put everything on hold until this is straightened out, or do we
have to go through years and years to try to work our way out,
how to negotiate piece by piece what is illegally being done?
Mr. Vargo. I do not think that we ought to be waiting at
all. I think we have tools now and that we just need to use
them.
Mr. Taylor. Thank you. Thank you, Mr. Chairman.
Mr. Wolf. Mr. Sabo.
Mr. Sabo. In some way this isn't knew. Isn't it sort of a
repeat of what happened with Japan for the recent years?
Mr. Vargo. It does have that flavor.
Mr. Sabo. I watched for years when we had the huge trade
deficit with Japan. They clearly had a policy of promoting
exports not producing for local or internal consumption. It has
finally caught up to them in a negative fashion, but at least
as it relates to the United States, that is clearly what's
going on, but in some ways what I find even more troubling as
it relates to our policy, it is my understanding most other
countries do not have the same type of trade gap that we do?
Mr. Vargo. No, they do not. I do not think that other
countries were as open to China as we were. And what we have to
do is now is to take China's openness and we really have to
increase our exports, our position in China a lot, and there is
a lot of very positive opportunity for that. This is not just a
one way solution, and I do not want to leave the impression
that this is just an import problem. It is very much an export
problem as well, and it is good for China to open up and be
able to get those goods. It would be good for China to have a
more realistic exchange rate, be good for their standard of
living, be just a win-win as we press for China to really open
up.
Mr. Sabo. How does Europe and Australia, how do all those
countries avoid having the same problem we have?
Mr. Vargo. Their imports from China are rising rapidly as
well, and there are a lot of concerns on their part when you
talk to them. But in looking at the data, we have asked
ourselves the same question, and we certainly would not mind
having the International Trade Commission or others take a look
at this question of, just why is our trade imbalance so much
more than those? Europe sells more to China than we do and has
bought a lot less.
Mr. Sabo. I hear you do not have a good answer to that
question.
Mr. Vargo. I wish I could give you a good answer.
Mr. Sabo. I just think it somehow reflects our mentality of
doing one-way trade that does not exist in other countries.
Mr. Vargo. China, using our number, has as trade surplus
with us over a hundred billion dollars, and a global trade
surplus is about $30 billion. So they have a trade deficit
together with the rest of the world of about $70 billion. A lot
of that is probably petroleum and others, but nevertheless the
question is very valid one of why is the U.S. trade situation
with China so different from others? I can only hypothesize,
and my hypothesis is that many other countries were more closed
to Chinese products over the years before WTO than was the
United States, and if that is so, now that China has more
access to them, we may see Chinese exports rising to them more
rapidly than to us. That is a hypothesis. I would welcome some
good economic research from Congressional research service or
ITC or somewhere else.
Mr. Sabo. Does our government ever have any answer to that
question?
Mr. Vargo. You will have to put that to the government.
Mr. Sabo. You may have more access to asking the question.
Mr. Vargo. It is one that we have an active interest in,
and to the extent we have resources we can use for that, we
will.
Mr. Wolf. Following up on Mr. Sabo's comments, if you would
give us a series of these questions, we will ask the Library of
Congress, the CRS to do this study. We will also ask the GAO to
do this study and whoever else. We would like to get something
back by the week after we get back after the recess. So if you
can define some questions and put them down in writing, we will
get that study done.
Mr. Regula.
Mr. Regula. I do not want to be repetitious, but if I hear
you correctly, there is a violation in terms of intellectual
property, as well as reverse-engineering patents abuses, and so
on in violation of WTO rules. So what's the point of their
being part of WTO and why are not these rules being enforced by
WTO?
Mr. Vargo. Well, again, they came into the WTO just
recently. Time is that which keeps everything from happening at
once. We all need to press, I think, to use the government,
U.S. Government's resources, which are not unlimited into these
areas, and the oil goes where the squeak is, and I think it is
incumbent upon manufacturers to squeak more, and we are doing
that.
Mr. Regula. Does the pressing have to be done from which
Department, Commerce, in the executive branch?
Mr. Vargo. For intellectual property?
Mr. Regula. Well, all of these problems.
Mr. Vargo. Well, I think all the trade agencies really need
to focus on this.
Mr. Regula. USTR.
Mr. Vargo. USTR has an important role, and we have raised
this with USTR, and we believe they will be moving forward on
it. But again, I was in the Commerce Department for over 30
years. It is a great agency. They do not have unlimited
resources. I know this Committee does not have unlimited
resources to give to them.
Mr. Regula. Thank you, Mr. Chairman.
Mr. Wolf. Mr. Vitter.
Mr. Vitter. I have nothing right now, Mr. Chairman.
Mr. Wolf. Mr. Peterson and Mr. Pitts.
Mr. Vargo, thank you very much. If you will be in touch
with Christine, both on the study and then to pick a date where
we all can gather and we can get Commerce to come on up and see
what we can do.
Mr. Vargo. Mr. Chairman, I will be happy to do that. Again,
we have great opportunities as well as challenges from China.
We have problems, but it is important we go after the right
problems and not the wrong ones.
Mr. Wolf. In a fair way.
Mr. Vargo. In a fair way.
Mr. Wolf. Thank you very much.
----------
Thursday, May 22, 2003.
MANUFACTURING SECTOR
WITNESSES
DAVID DYER, VICE PRESIDENT, HENREDON FURNITURE, MORGANTON, NORTH
CAROLINA
THOMAS GLEASON, VICE PRESIDENT, WARD MANUFACTURING, BLOSSBURG,
PENNSYLVANIA
THOMAS FISH, PRESIDENT, ANVIL INTERNATIONAL, PORTSMOUTH, NEW HAMPSHIRE
BRUCE CAIN, VICE PRESIDENT, XCEL MOLD AND MACHINE, N. CANTON, OHIO
WILLIAM LITZLER, PRESIDENT, QUICKDRAFT, CANTON, OHIO
Mr. Wolf. The next panel will be manufacturing, Mr. Dyer,
Mr. Gleason, Mr. Fish, Mr. Cain, Mr. Litzler, if you can,
again, I apologize, keep it to three minutes or two and half.
This is not your last opportunity. If you will, we are going to
ask you to again gather, so why does not Mr. Dyer begin first?
Mr. Regula.
Mr. Regula. Mr. Chairman, I would like to introduce two of
the panel members from my district, and one is Mr. Bruce Cain
from our area. He is basically a fulfillment of the American
dream, and he has bought into the XCEL Mold and Machine, and
has reached a point where he has a substantial interest in it,
and he is being hurt desperately by the imports to the point
that that they can produce and sell for less than he can
produce, and the other is Mr. Bill Litzler from the Cleveland
area, Bill is Chairman of the Litzler Company and employs 50
people in my district, and the same thing has happened. They
are being impacted in a very unfair way, and I think these two
gentlemen, along with the other panel members will point out
the unfairness of all this. I think probably the goal of our
Committee should be to ensure that these procedures are fair in
terms of trade, and perhaps we need to get USTR and Commerce up
here to tell us why they are not pressing ahead on the issue
with WTO.
Mr. Wolf. I agree. Well, they are going to be in Panel
Five, but we are also going to be talking to them off the
record again too, so we will involve all the members of the
committee, so we will let everyone know so everyone can
participate and be involved. Maybe just go straight, right
down, if you can limit it, I will appreciate it.
Mr. Cain.
Mr. Cain. Thank you. XCEL'S been in business since 1956. I
have been there 33 years myself, and there are 11 employees
been there longer than me. We have 60 employees. When I was
invited to come here to testify on May 1, is when I was
contacted, I decided to save auction flyers of companies that
are going out of business, and in that time, in 22 days, I have
saved 11 flyers.
Mr. Wolf. Will you submit them for the record?
Mr. Cain. I don't have them with me.
Mr. Wolf. Just send them; we will put them in the record.
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Mr. Cain. I want to tell you about one company we quoted a
mold for. I called him the next week to see how our price was.
He said the price was great, but the mold went to China to be
built for free just so they could run the parts over there.
From 1988 to 1998, our largest customer was Black & Decker.
They were 35 percent of our business, and we have not built a
mold for them since 1999. In 2000, one of our better customers
started going to China. They sent two molds to China. In 2001
they sent seven. In 2002, they sent 86 molds, 65 of those going
to China, the remainder going to South Korea. So it is a
definite problem, and we need help. The small business detail,
large manufacturers want this to happen. They are cutting their
costs, they are building buildings over there. Things are going
great for them, but it is really hurting us.
Thank you.
Mr. Wolf. Thank you.
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Mr. Wolf. Mr. Litzler.
Mr. Litzler. I am Bill Litzler. We manufacture capital
equipment to a variety of different industries. We have been
impacted in the sense that our customers are going offshore,
closing down or moving their production facilities over there.
We are not directly being competed with by Chinese or Asian
imports, but our customers are, and they are moving overseas to
do it. The question was asked, the difference between Japan and
China. I have sold to China. I have been sold all over the
world. The difference between the two in this instance is
American companies or multinational companies are actually
investing and setting up in China, whereas in Japan you could
not do that. They would only send to us or allow minority
ownerships. So that is a fairly major difference.
We use a lot of subcontractors in northern Ohio for
fabrication and machine shops and so on. The vast majority of
those companies are down to one shift from what was three. If
it was 50 people before, it is 10 people, and I think the only
reason it hasn't been more dramatically made a crises is that
many of the people are just retiring and kind of quietly going
away, and this is a big difference. The industries we serve,
one of our biggest industries is the printed circuit board
industry. It was huge in the United States. Three years ago it
started going to Asia. Right now, there is virtually no printed
circuit board materials being made in the United States, none.
We have a customer, all the plans are cut. First the ritual is
pretty straightforward. First it was consolidation, big guys
buy little guys, very typical. Little guys are gone, big guys
handle it. Then American manufacturers have sold out to
European manufacturers, who seem to have a somewhat longer view
toward markets. Now, they are gone. And the trade show in this
country three weeks ago for the printed circuit board industry
was like a funeral. But the one in China, we had a man over in
China, it was 30,000 people attended. It is gone. It isn't just
down, it is gone, and it is not going to come back. We see this
pattern repeatedly.
We are in the paper industry. The paper industry has got
the same problem. Textiles, I can repeat what everybody else
does. One by one these, industries are getting knocked out, and
it is as if somebody in a big global sense said, maybe we do
not have to be manufacturers here anymore. We will just be a
service economy. But the service economy, if going overseas, we
can buy software at $18 dollars an hour in India on the
Internet; $18 dollars an hour for software.
Banks are doing their backroom operations in Asia. They are
doing them in India. Call the American Express travel service,
if you are a platinum member, the man that answers your phone
is in Bangalore, India. The service economy is not working
either. We are losing the base of good jobs overseas, and it is
just getting worse. It isn't getting any smoother.
Thank you.
Mr. Wolf. Thank you very much.
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Mr. Wolf. Mr. Fish.
Mr. Fish. Good morning, Chairman Wolf, members of the
committee. My name is Tom Fish, President of Anvil
International. We are a producer of malleable, nonmalleable,
and ductile iron pipe fittings, as well as steel pipe nipples,
hangars and couplings. We have our own nationwide distribution
organization consisting of five distribution centers located in
major cities in the United States, and supply a wide range of
construction products to the commercial building industry. We
currently have 12 manufacturing plants in the United States and
Canada, and a total of 2600 employees.
Prior to 2001, we had two foundries, one in Statesboro
Georgia and one in Columbia, Pennsylvania. Due to our loss of
market share to the low priced Chinese product, we found
ourselves in a situation with excess foundry capacity. In an
effort to solve this excess capacity problem and to reduce our
manufacturing costs, we shut down our Statesboro foundry in
2001, eliminated 350 jobs and consolidated our foundry
operations into our Colombia Pennsylvania foundries at a cost
of approximately $20 million. Our plan was to add about 200
jobs in Colombia as we combined the production and the
equipment of two foundries into one. However, the net result so
far has been instead of adding any jobs in Colombia, we have
lost another hundred. And again, the result of loss of market
share to the Chinese.
Shortly, Mr. Gleason will speak about our disappointment
with the two dumping cases we have had already, but what I want
to talk to you about for a minute is our pipe nipple business.
Also, in 2001 we acquired Beck Manufacturing. They were the
second largest pipe nipple producer in the United States. And
we consolidated all of our pipe nipple operations in the U.S.
From three plants into two to achieve cost savings. This
happened at the same time we were having the 201 case
investigation, and we thought we were doing the right thing,
what the administration was telling the steel industry to do,
consolidate, rationalize, and become more competitive. Tariffs
were then imposed on pipe, which is our primary raw material,
at 30 percent and similar tariffs at 13 percent on Chinese
nipples. So what has happened since then? Well, the imports of
Chinese pipe nipples from China is up 50 percent. The 13
percent tariff was--they absorbed it, and the volume continues
to move overseas.
As I said, we have a plant in Canada, and we are having the
same problem in Canada where nipples from China had taken as
much as a third of the market share. Up there, our Canadian
operation filed an anti-dumping case last year against pipe
nipples from China, and we recently obtained preliminary
dumping margins in the range of 100 to 200 percent. Now, that
is great news for our Canadian operation. We have been doing
much better up there. Unfortunately, these nipples have to go
someplace, and they are going to come down here, and we are
seeing it as we speak.
We have contemplated filing another dumping suit against
the Chinese on the nipple side of the business. We have already
filed two and have not gotten any relief at this point in time,
but if Commerce is not going to find meaningful dumping
margins, I am just wasting my money.
My job as a businessman is to make profit for my investors.
And my owners, right now, are telling me that my nationwide
distribution system and all the costs that I have is not
getting the return that it should. We have been very focused on
making our own products and distributing those products. But it
is becoming clearer to me and to our owners that we can make
more money importing products from China and selling them and
shutting down our manufacturing plants, and this is really what
the crux of the problem is. We talk about deflation. I know
there was a lot of talk about deflation in Washington. I see it
everyday. Hundreds of products that are used in the
construction market are now being sold for half of what they
were sold for 5 years ago. If you want to see it, go into a
Wal-Mart or go into a Lowe's and ask for a US-made fitting,
nipple, any kind of product like that that is used in the
plumbing business. You will not find them. These imports from
China are deflationary, and I know everyone's already talked
about the dollar and the fact that the Chinese dollar is fixed.
Again, another problem that our government, we looked at it,
and nothing is being done.
I am not a big political person, but I have spent a lot of
time in Washington over the last 2 years, and I have met with
our two Republican Senators, I am from New Hampshire, and one
Republican Congressman. Our largest manufacturing facility is
in Columbia, Pennsylvania, where we have 900 people now, and
every chance I get, I try to tell my Congresspeople that the
economy, it matters, and what's happening is you are seeing
American jobs going overseas and the Administration is
supporting that. I mean it is just letting them go.
So I thank you for your time and the opportunity to
testify, and I hope that your Subcommittee can also have some
influence on Commerce as we move into our next dumping case and
get our final duties.
Mr. Wolf. Thank you.
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Mr. Wolf. We are going to try, Mr. Gleason, if you can
limit it. We are going to have to vote pretty soon too.
Mr. Gleason. Good morning, Chairman Wolf and members of the
Committee, Congressmen Peterson, Pitts thank you for being
here. We applaud your courage for this, and I thank you for
this opportunity to testify here today.
Word is there are only two fitting manufacturing facilities
left and Ward is one of them. We were founded in 1924. We have
gone from 1100 to 800 jobs. We have been fighting these imports
from China for a long, long time now. Our experience with the
dumping laws has been completely disappointing. Along with
Anvil, we filed an anti-dumping case in February of 2002, on
nonmalleable pipe fittings from China and in October of 2002 on
malleable fittings from China. In the nonmalleable case, we
received unanimous preliminary and final injury determination
by the ITC, but our final dumping margins against the two
foundries from China that participated in the investigation
were only single digits. Given the Chinese prices are roughly
half our prices, these margins had little impact. In fact, in
the first quota of 2003 imports from China increased by 10
percent. This is in a market where the demand is lower. The
same is true for the malleable imports, which increased by 76
percent in the first quarter of this year, in spite of the fact
that we have got a dumping case against them. They went up 76
percent, and that is after a hundred percent increase the year
before.
How did the Commerce Department find such low dumping
margins against these producers who are less efficient than we
are? The only answer I can come up with is that the Department
just plain allowed the Chinese foundries to lie to them about
their factors of input quantities, and I understand that this
is the heart of the dumping investigation.
For example, the largest foundry in China, JMC, has stated
repeatedly in both cases that it does not record the actual
weight of each input included in each charge, the actual weight
of each charge with the total number of charges fed into the
cupolas each day. They do not record their inputs. Their costs,
they are not recording them. I have been in the foundry
business for more than 30 years, and I know that this is not
true. It is simply a bold-faced lie. I believe even the ancient
Egyptians, who started the foundry business, recorded these
factors of input.
When another Chinese foundry, Pannext, stated that it
weighed and recycled iron before they're reintroduced into the
cupola to ensure that the steel-scrap input ratio was correct,
we heard through back channels that the other Chinese foundries
and their counsel went ballistic about this truthful admission,
and the next response that the companies gave us was basically
that they had to retract their statement.
Even more shocking to us is that just before we file filed
our cases, both Mexico and the EU found dumping margins against
malleable pipe fittings from China of 42 and 48 percent. How
can the Commerce Department find single digit margins when the
rest of the world is finding 50 percent?
After receiving low margins and witnessing further
increases in China imports that threatened to force us to shut
down our foundry, we have contemplated a safeguard case with a
Section 421. However, having seen the President twice deny
relief to industries that have one won cases at the ITC, we
have decided not to pursue this remedy. For the people of Tioga
County, Pennsylvania, it appears to us that the President and
his Administration have taken the side of the Chinese and not
the American manufacturing workers. The Aadministration and
Congress talked about tax cuts and job creation, but who is
talking about job preservation in the face of sky-high monthly
trade deficits? Trade deficits rob the U.S. manufacturing and
agricultural jobs, there's no doubt about it. Our company can
either keep 800 Americans working and possibly rehire 300 back
at wages of $14 an hour, plus health benefits or the same
workers can go to State unemployment benefits and pursue
alternative jobs that may pay minimum wage and no health
benefits. All we can ask for is real enforcement of the trade
laws passed by Congress.
On the behalf of the employees of Ward Manufacturing, we
wish to thank you, Chairman Wolf, for having the courage to
have this hearing.
Mr. Wolf. Thank you. Mr. Gleason.
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Mr. Wolf. Mr. Dyer.
Mr. Dyer. Good morning, my name is Dave Dyer, and I am the
Senior Vice-President for Henrendon Furniture Industries
headquartered in Morganton, North Carolina. At the outset, I
would like to thank the Subcommittee and Representative Taylor
for this opportunity to comment on China's impact on the
domestic furniture manufacturing industry.
Our company began in 1945 with just 75 employees and a
modest product line of three chests. Today we employ more than
1400 skilled crafts people in four state-of-the-art plants in
North Carolina, covering more than two million square feet of
manufacturing, finishing, and distribution space. In 1996, the
dollar value of all residential furniture imports from China
was roughly $440 million. By the end of last year, imports shot
up to $3.2 billion, an astounding 15 fold increase in just 6
years.
Mr. Dyer. Unlike our Chinese competitors, our industry is
heavily regulated from OSHA to EPA. Where many Chinese factory
workers are paid only a few dollars a day, our hourly employees
average between $11 and $16 an hour, while some of our most
highly skilled crafts people can earn more than $20 an hour.
Faced with this challenge, we concluded that to remain
competitive required us to supplement our product lines with
furniture and fabric components sourced from overseas, all over
the globe. Currently, our imports represent 30 percent of our
overall product line. In furniture, imports have been a
strategy for some 15 or 20 years, but we manage the imports;
with the Chinese threat, it is now managing us.
While there are no easy solutions to the challenges of
manufacturing and retailing in a global economy, there are
three steps that we believe will help level the playing field
when it comes to trade with China. The first is to ensure that
China, like any other trading partner, is playing by the rules.
The dramatic increase in furniture imports from China has
raised legitimate questions about whether the country is
dumping low-cost furniture products into the U.S. market.
Therefore, it is imperative that the ITC and the International
Trade Administration have the necessary resources to
effectively administer and enforce the Nation's anti-dumping
laws, and provide relief to the domestic industries that have
been injured by unfair trade practices.
The second is to beef up protection of intellectual rights.
Furniture manufacturers face a serious problem with theft
involving a unique manufacturing process or a distinctive
furniture design or mechanism. We urge the U.S. Government to
continue working with Chinese authorities at all levels of
their government to improve China's IPR enforcement.
Finally, increasing exports is essential to our industry's
long-term competitiveness. We encourage the ITA to continue its
efforts to identify and eliminate barriers to foreign markets,
also, that makes it difficult for U.S. manufacturers to do
business abroad.
While Washington can be an effective advocate for American
business overseas, there are steps that we must take on our own
to build on our competitive advantage. In recent years, we have
developed a leaner, more competitive and productive workforce.
We have implemented cellular manufacturing, a continuous
improvement process, and have implemented the tenants of Toyota
production system. We also yearly spend millions on state-of-
the-art technology to enhance our competitive advantage.
Mr. Chairman, we are proud of the truly world-class
furniture produced by our dedicated employees, and we feel
strongly about remaining a predominantly domestic manufacturer,
but we are not invincible. It is reassuring to know, however,
that our elected officials take an active interest in
understanding the many challenges facing our interests. Thank
you.
Mr. Wolf. Thank you, Mr. Dyer.
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Mr. Wolf. I have no questions. We will get together. And it
seems to me that you are all saying that you don't have a lot
of confidence in the Commerce Department. Is that a fair
statement? Is there anyone that disagrees with that? And,
secondly, this is about jobs. And the Administration, in
pushing its tax package--and rightly so, which I support--is
talking about jobs. And yet, as we are putting in this tax
package to help jobs, the jobs are coming out from the bottom.
So I think we definitely need a change. I see the Department of
Commerce representatives over there. I just wonder what they
are thinking when they hear all of you testify. So thank you
for taking the time. Be in touch with Christine. We will gather
again to talk and see what we can substantively do rather than
just have a hearing and walk off and nothing happens, to see if
we can honestly make a difference with regard to fairness. We
thank you very much.
Mr. Serrano.
Mr. Serrano. A quick question. Mr. Litzler, are you
familiar with the MEP program, I understand.
Mr. Litzler. Yes.
Mr. Serrano. What are your thoughts, very briefly?
Mr. Litzler. It has been very, very beneficial for us. We
first got into it about 4 years ago in Canton, and it has
helped us be far more--it has helped streamline much of our
manufacturing process. It is almost embarrassing how much
better it allowed us to become, because it told us how bad we
might have been before. But it has forced us--it has caused us
to go back and redesign many of our products to enhance the
manufacturing capability. It has been a tremendous asset to us,
made us a much better company. Allowed us to produce our goods
at lower cost, which is always a tremendous advantage.
Mr. Serrano. Well, we are a big supporter of that program.
And it may be more embarrassing to all of us that advised the
President foolishly to cut it out of the current budget. So I
think we have to work hard.
Mr. Litzler. I am not a politician, either. But I think for
the lousy hundred million dollars of cost to the MEP program,
it is--I used the expression once before, it is chump change
when it is something that can actually help manufacturers be
better. And we have to be made better. And it encourages us
because it underwrites the initial study and understanding of
what you can do better. We have read about lean, and I think we
have got a nice management team. But we never had the time or
effort to get into it. And they came out and did a good study
which was part of what the funding was for, and we paid for the
rest, we put 40 or $50,000 into that to make us better. It is a
very, very good program.
Mr. Serrano. Well, I think Mr. Litzler, with that comment
on chump change, you might have just saved the program.
And Mr. Fish, we are going to work hard to get you a
Democrat to talk to in your State. It is getting very lonely.
Thank you so much, gentlemen. Thank you all.
Mr. Wolf. Mr. Taylor.
Mr. Taylor. Mr. Chairman, I know Mr. Dyer's company and the
history of the company, and it has been a leader in North
Carolina which has been a leader in the country. I will quickly
ask a couple of questions. You mentioned means of staying
imbedded, Mr. Dyer. Does your company export any furniture
products? If so, what has been the company's experience in
reaching foreign markets?
Mr. Dyer. We presently export about eight percent of our
volume. To China, nothing. Of course the consumer there doesn't
have the wherewithal to get what we have. But Japan, South
America, Saudi Arabia we have had some success.
Mr. Taylor. You have an innovative process. And what is
your competitive advantages with the Chinese in your company,
if you compete with them directly?
Mr. Dyer. We have a whole organization within our
organization that is focusing on improving and driving out
waste. I don't see that in the plants that I have toured in
China. But they have such an advantage where it is 20 to one
that we have got both our arms tied behind our back.
Mr. Taylor. At last month's furniture show in High Point,
based on the sales and the attendance at the international home
furnishing market, what was your impression about the industry
and what is going to happen in the third quarter in this
industry?
Mr. Dyer. First of all, we thought that, we were all afraid
that nobody would come to the event. Usually there are about
80,000 people from all over the world. People did come. It was
a little better than what we expected. But it seems in the
furniture industry the end of the tunnel is always two quarters
away. And that just keeps moving. Nothing to write home about,
but we are at least able to run our plants somewhat.
Mr. Taylor. Have you be to China and seen the
manufacturing?
Mr. Dyer. I have.
Mr. Taylor. What is your opinion?
Mr. Dyer. I know what their national bird is, it is the
building crane. The infrastructure was tremendous. The plants
had more people than we would ever put in a plant. The week or
week and a half that I was there, it was hazy the whole time. I
question the air quality. In the plants that we toured, did not
see the attention to safety and care for the employees that we
have. But, an awful lot of money going into that country.
Mr. Taylor. Thank you. Mr. Dyer, we appreciate your coming
today. And thank you, Mr. Chairman.
Mr. Wolf. Thank you.
Mr. Regula.
Mr. Regula. I appreciated the comments of Mr. Litzler on
the manufacturing extension partnership. We have funded that
for a number of years. The administration calls it corporate
welfare, and I think I would paraphrase it by saying it is job
welfare. That, the ability to get the information that it
provides you, is it an important element in the preservation of
jobs in your industry?
Mr. Litzler. It has been tremendously helpful in that it
introduced us, and in a very aggressive form, to how we can
process and produce our products more simply and better.
Absolutely. I resent the opinion of corporate welfare in the
sense that it is, in effect, a loan that is more than amply
paid back with good paying jobs and income tax and all the
other provisions. It is a tremendous advantage to us. And it is
being multiplied--and we are one little company. We have got
roughly 100 people. It is being multiplied, at least in
northern Ohio, through an awful lot of other companies, big and
small, that see the value in this.
Mr. Regula. Mr. Cain, do you think that, in China, the lack
of environmental regulations, the lack of worker safety
standards, the lack of any element of much in the way of care
for the employee does give them a substantial competitive
advantage? And, of course, these things are all promulgated by
government here.
Mr. Cain. It definitely gives them an advantage. They don't
have to pay near what we have to pay. Their hourly wage is
another thing that is not even close to what we pay.
Mr. Regula. No, I understand.
Mr. Cain. But, yeah, the benefits alone. And we are an
older company, I mean, as far as employees. Like I said, the
average tenure of our employees is 25 years. So you are not--
they don't care about the employees over there. That is not a
factor for them at all. I don't see that ever being a factor
for a long time from what I know of people going over there.
Mr. Regula. Are there any environmental standards at all? I
know you have to meet them.
Mr. Cain. No. They have none, that I know of. I have never
been there personally. Some of these other guys may know.
Mr. Regula. Somebody mentioned hazy, and the hazy
conditions when you were visiting the plant was probably
contributed by the lack of any environmental requirements.
Would that be your impression? I don't know which one of you
mentioned it.
Mr. Dyer. I did. I think that was my thought.
Mr. Regula. Note the yeses for the record.
Thank you, Mr. Chairman.
Mr. Wolf. Mr. Vitter. Mr. Weller. Mr. Peterson.
Mr. Peterson. Yes, Mr. Chairman.
I just want to share with you--I don't remember the
person's name, but I was at a dinner shortly after this
Administration came in to power. And I was sitting with a lady
who had a major job in the trade office and she was very
complimentary. She said it was the hardest working crew she had
ever seen, but she said it was just a handful of them.
And for all of the trade cases and all of the issues all
over the world that they had to deal with, she said they came
to work at 7:00 in the morning and are working at 7:00, 8:00,
9:00, and 10:00 at night. And she said it was the best crew of
people she had ever seen, but there was absolutely no way they
could get their arms around it. And I think, maybe, is
something we ought to be looking at. Do we have enough people
to enforce our trade laws? And if we don't, there is no way
they can. I mean, you can't do it with a handful of people.
This is a huge issue today, I think. So I just wanted to share
that with the Chairman.
Mr. Wolf. Thank you, Mr. Peterson.
I want to thank all of you. Just follow up with what Mr.
Regula was saying. There are no wage and hour, there are no
environmental, there are no OSHA, there are no family leave. I
was in a Beijing prison Number 1 in 1991, where 40 Tiananmen
Square demonstrators were making socks for export to the United
States. I picked the socks off the line. When we got back, I
had it tested by Commerce. They were for export to the U.S.
These were Tiananmen Square demostrators in a cold, brutal
Beijing prison number one. We went into the prison, and then
after we got into the prison, they had the hosiery operation. I
have the pictures. And then we asked Commerce to go in. They
finally got in, under the Clinton Administration, they finally
got in, and by that time they cleared the place out.
So they have none of these. Harry Wu I saw earlier was in a
gulag for 17 or 18 years. They are making products in slave
labor camps. There are more slave labor camps in China today
than there were when Solzhenitsyn wrote the book Gulag
Archipelago. And we have a list of products that are coming out
of those camps, and sometimes they come out of the camps and
they are--and who runs the camps? The Peoples Liberation Army.
So, none of these are. That is why the administration ought to
focus with regard to those things.
And so, you know, this is not a hearing on human rights and
I don't want to get started on that issue. But, no, they have
none of those requirements. I thank all of you for your
testimony. And if you all can be in touch with Christine so we
can follow up to see what we can do. But thank you very, very
much.
And then the next panel, chemical and pharmaceutical, Mr.
Walter, Mr. Cossart, Ms. Carus. If you can also keep your
testimony to three minutes, we would appreciate it very, very
much. We can begin. Why don't we begin first on the list, Mr.
Walter and Mr. Cossart, Ms. Carus. If you can keep it for three
minutes, we would appreciate it.
----------
Thursday, May 22, 2003.
CHEMICAL/PHARMACEUTICAL SECTOR
WITNESSES
WILLIAM WALTER, CHAIRMAN, FMC CORPORATION, PHILADELPHIA, PENNSYLVANIA,
ACCOMPANIED BY DOUG PARKER, PRESIDENT, INTERNATIONAL CHEMICAL
WORKERS UNION COUNCIL, LOCAL 76C, FMC PERSULFATE PLANT IN
TONAWANDA, NEW YORK
BENOIT COSSART, BUSINESS DIRECTOR, PHARMACEUTICALS INGREDIENT, RHODIA,
INC.
INGA CARUS, VICE PRESIDENT, CARUS CHEMICAL COMPANY, PERU, ILLINOIS
Mr. Walter. Thank you, Mr. Chairman and Ranking Member
Serrano.
Mr. Wolf. And for all of you, your full statements for all
the witnesses will all be in the record.
Mr. Walter. Members of the subcommittee, I am Bill Walter,
Chairman, President, and Chief Executive Officer of FMC
Corporation, a $2 billion diversified chemical company. Let me
try to summarize my written statement.
FMC was one of the leaders in support of the PNTR. We sell
to, manufacture in, and export from China. We believe having
China in the WTO is important to FMC, and we believe it is
important to the U.S. Economy. However, China's membership in
the WTO has brought with it challenges that we had not
anticipated. The Administration notes in its 2003 trade report
``serious problems'' in some areas of. One of the most serious
concerns posed by a non-market economy is the challenges posed
by verifying that their behavior follows WTO rules. We
understand that administering our trade laws with respect to
China pose unique challenges, and we applaud this Subcommittee
for addressing what needs to be done to improve upon current
practice.
FMC's case against dumped Chinese persulfates may provide
the Subcommittee with some insight as to what is going on with
trade in China. As a background, persulfates are an essential
and widely used family of industrial chemicals, awide variety
of end uses ranging from etching of printed circuit boards to adhesive
in carpet backing. FMC is the only American manufacturer of this
important chemical. We produce sulfates in our Tonawanda plant. In
1997, in response to a complaint we brought, the Commerce Department
placed a 43 percent duty on dumped Chinese persulfates. However, in
subsequent annual reviews, that duty has been substantially reduced,
and in 2001 and 2002 reviews, the duty placed on Chinese persulfates
was zero. In other words, Mr. Chairman, the dumping duty went from 43
to zero--43 to zero--while the facts from our perspective in the case
did not change but rather the Department's methodology of judging
whether dumping was occurring did.
This difference is in the result itself. It is, at least
our experience, in the very period when Chinese joining the WTO
our government relaxed the application of its own standards as
applying to China; and I think as you have already heard, and
will hear from others, we are apparently not alone in
suggesting the government change the way they apply the rules.
Specifically in our case, the Department changed the
surrogate company against which costs are measured. This is at
the core of the Department's methodology and fundamental to the
result. They also did not follow their own standards for
evidence, and gave the Chinese exporters the benefit of the
doubt through the appeal process. FMC has had dumping cases
before the Department before. We have won some, we have lost
some. But this is the first time in our experience that the way
the rules are applied changed midstream.
Mr. Chairman, in my written testimony, we suggested some
potential remedies for the current situation. These fall under
the category of applying more and more focus resources on the
Chinese dumping cases. We make these recommendations on the
basis both of the large and growing volume of dumping cases
against the Chinese and on the special circumstances particular
to nonmarket economy cases.
Let me conclude by saying that we are very concerned about
the economic consequences of the results in our case. We have
invested over $50 million in recent years in our Tonawanda
plant to keep it globally competitive. We are not looking for
protection. We do not support the Byrd amendment. However, we
do ask that the concerns of a globally competitive operation be
fairly heard. If so, we believe that U.S.-based operations can
sustain its global leadership.
I am pleased today to be with Mr. Doug Parker, the
President of our union in Tonawanda. Mr. Parker has witnessed a
40 percent decline in the well-paying jobs our persulfate plant
offers since the Chinese product came into our own market. His
union, along with the management, have sacrificed together to
keep our competitive edge, but we can't sustain this if the
playing field is not level. Mr. Chairman, with your permission,
I would like to turn to Mr. Parker for some brief additional
remarks, and thank the committee for its consideration.
Mr. Parker. Mr. Chairman, my name is Doug Parker. I am
president of the International Chemical Workers Union Council,
Local 76C at the FMC persulfate plant in Tonawanda, New York.
It is an honor to be here today.
On behalf of the 65 remaining union employees, let me
emphasize our commitment to making our FMC persulfate plant the
most competitive facility in the world. Because sacrifices made
by our union members in Tonawanda, FMC's made-in-America
persulfates are sold throughout the world. But because of what
the Chinese are doing, I cannot say that I will be here a year
from now saying the same thing.
Mr. Chairman, in the last five years, as the Chinese have
invaded our markets with below value persulfates, we have lost
40 percent of our employees in Tonawanda. During this period
union leadership has worked very close with FMC management on
initiatives that increase our productivity. We have reinvented
ourselves to meet the increasingly competitive demands of the
global chemical markets. We have taken on more work with less
people, and we are very proud of our accomplishments. In light
of the sacrifices my fellow workers have made, Mr. Chairman, I
have a hard time explaining to them why their own government
cannot be a part of our team. Why do Americans have to lose
their jobs at the expense of the Chinese workers? Why is our
government undercutting the efforts made by our company to be
the global leader in the persulfate chemistry? In short, I will
ask you the same question I asked representatives in
Washington: Why can't my government support this sort of
management, labor cooperation? If this Administration is
looking for economic stimulus in the upstate New York, they
should start by addressing the unfair Chinese trade practices.
Mr. Chairman, we don't need our government to protect us.
All we ask is that you join our team before it is too late.
Thank you.
Mr. Wolf. Thank you very much.
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Mr. Wolf. The next witness is Mr. Cossart.
Mr. Cossart. Yes, good morning, Mr. Chairman and members of
the Committee. I am Benoit Cossart, business director for
Pharmaceutical Ingredients Business Unit of Rhodia, Inc. Until
March of this year, my business operated the last United States
aspirin plant. The plant was located in St. Louis, and for many
years was owned and operated by Monsanto Company. For the past
five years, it has been owned and operated by Rhodia. At its
peak, our plant employed close to 100 people. When it was
closed, 60 people lost their jobs.
In May 1999, we filed an anti-dumping petition against
imported aspirin from China. At that time, Chinese aspirin was
being sold at prices in many cases less than half of our price.
Our plant in St. Louis was losing money, and our largest
customers in the generic market were rapidly switching to
Chinese aspirin.
Almost from the beginning of the anti-dumping case, the
Commerce Department began shifting its methodology and sources
for information. For example, phenol is a major raw material
used to make aspirin. Only a few days before the final decision
in our case, the Commerce Department used domestic Indian price
to value phenol, in the case of sebacic acid, for example. For
the aspirin case, however, Commerce used import pricing to
calculate the value for phenol. There is a significant
difference between Indian domestic and Indian import prices,
and this decision by Commerce impacted the aspirin cost
calculation by 20 percent.
Turning to another issue. Commerce also changed
methodologies with respect to overhead. In the original
investigation, Commerce recognized that the Chinese aspirin
makers were fully integrated producers. That is, the Chinese
producers were producing aspirin in a three-step process. The
problem with calculating overhead costs arose because the
Indian surrogate companies were not fully integrated but only
practicing one of the three steps. For example, Andhra Sugars
only produced aspirin, it did not produce the upstream
chemicals, salicyclic acid and acetic anhydride. The other two
surrogate companies only practiced step one, they did not even
produce aspirin.
In the original determination in 2000, Commerce tried to
account for the fact that Chinese aspirin producers were fully
integrated but Indian surrogates were not. On appeal to the
Court of International Trade, the court remanded this issue to
obtain an explanation why such an approach was supported by the
record. Today, Commerce takes the opposite approach. Commerce
presumes that the Indian and Chinese companies are equally
integrated. In the end, Commerce changed its methodology in a
manner that placed the burden on U.S. producers to supply
information from companies in India. We were asked to supply
information about companies that we didn't even believe should
be used as surrogates. In my view, this change in methodology
was devastating to the anti-dumping order. Commerce was, in
effect, rewarding the Chinese producers for finding the annual
report of this company but it has not imposed any burden on the
Chinese to submit evidence showing that the company was fully
integrated.
I sincerely hope that our experience will not be shared by
other U.S. industries. And I thank you for the opportunity to
testify.
Mr. Wolf. I thank you very much.
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Mr. Wolf. Ms. Carus.
Ms. Carus. Thank you, Mr. Chairman. My name is Inga Carus,
and I am senior vice president of Carus Chemical Company. Carus
is a small, family-owned company founded by my grandfather 88
years ago. We are the sole remaining U.S. producer of potassium
permanganate, a chemical that is used in water treatment and
other strategic applications. Carus has 205 U.S. employees, and
is based in Peru, Illinois. We thank our Congressman, Jerry
Weller, for attending today.
Carus is the world's low-cost and most efficient producer
of potassium permanganate. Despite this, we have had to obtain
an anti-dumping order against unfair imports from Chinese
producers who sell at less than world material costs. That is
to say, less than the raw material costs that it takes to
produce the product.
In recent years, unscrupulous Chinese exporters have used
illegal means to attack the anti-dumping order. Let me briefly
summarize two particularly outrageous examples. The first
example is the 1999 review of the Chinese producers Zunyi. In
that review, potassium permanganate was smuggled from China in
a shipping container marked ``tools and toys.'' because
permanganate is an incendiary material, this smuggling violated
hazardous materials laws and placed the ship's crew in grave
danger. Additionally, the smuggling is of concern because
permanganate is a DEA-controlled precursor chemical for cocaine
production, and has been found in domestic and foreign
terrorists.
Second, a particularly alarming example is from the 2000
new shipper review. We have recently learned that in that
review, the Chinese exporter, Groupstars, fabricated virtually
the entire case. In quotation marks, it made up factor values,
it forged production and financial records, and it lied to the
Commerce Department about the actual producers of the product.
This review is terminated only because Carus was able to show
that Groupstars had forged its Chinese business license.
Based on our experience, we have serious concerns about the
administration of our dumping laws. We are concerned that the
Commerce Department has no direct means of sanctioning parties
that routinely certify false information in dumping cases. We
are concerned that fraud uncovered in trade cases is not more
aggressively investigated and, if necessary, prosecuted.
Finally, we are concerned that the continuation of illegal
tactics and future reviews will eventually lead to the
unjustified loss of the anti-dumping order. This could well
cause the demise of Carus, a significant employer in the
Illinois Valley region, and leave North America without any
manufacturer of this important chemical and accompanying
services despite our low-cost, efficient, and advanced
technologies and processes.
Mr. Chairman, we thank you and the subcommittee for your
interest in these critical issues. We urge you to examine
specific proposals to address fraudulent and unfair trade from
China. This is no academic exercise. The futures of many U.S.
companies and their employees hang in the balance. Carus
strongly supports free and fair trade with China. However,
Congress and the U.S. Government must take steps to assure that
this trade is fraud free. Thank you.
Mr. Wolf. Well, thank you very much. I appreciate the
testimony.
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Mr. Wolf. And I would ask that all three of you be in touch
with Christine, or four of you.
Ms. Carus, I would ask for information, because based on
what you are saying--and I appreciate Mr. Weller bringing this.
I am going to ask the FBI to investigate this. So if you give
us all the data, all the information, I am going to be the FBI.
The FBI happens to come before this committee, too. And we are
going to ask the FBI.
So I think your charges, you should be very, very careful
though. It is important not to say anything unless you have
very good information. So, give us all the data, all the
information, put it in the record. We will get it over to
Director Mueller and ask that they have a team. We will also
get a copy to Attorney General Ashcroft, because--we will also
get a copy to the DEA, because if anything with regard to
drugs.
So be very careful, because reputations are involved and
things like this, and we want to be very responsible. But we
will take this and we will ask the Bureau, the Attorney
General, and DEA to take a look at it. And we will put the
results of that in the record so people can see it.
With that, we have a lot of questions which we will be
dealing with you as we talk a back and forth. With that, I will
recognize Mr. Serrano.
Mr. Serrano. I have no questions.
Mr. Wolf. Mr. Vitter. Mr. Kennedy.
Mr. Kennedy. Thank you, Mr. Chairman. I just had a couple
of questions regarding trade in general. I don't know whether
this is the proper time or we have another panel coming up.
Mr. Wolf. It probably would be better for the
administration panel, if you can. I mean, if there is a
question, go ahead.
Mr. Kennedy. No, that is fine. I think the issues they
brought up I will be able to bring up in the next panel.
Mr. Wolf. Fine. Mr. Weller.
Mr. Weller. Well, thank you, Mr. Chairman. As a member of
the House Ways and Means Committee, I appreciate the
opportunity to serve as a guest on your Subcommittee today and
the opportunity to participate in what is a very, very
important hearing. And I do have some questions I would like to
direct to Ms. Carus, but let me begin by saying I am, of
course, a strong advocate of free trade. I support normal trade
relations with China. I welcome China as part of the World
Trade Organization. And of course, as part of the World Trade
Organization, we in the United States Congress expect China to
honor its commitment to follow the rules. And of course, as
testimony has been provided today, there is serious concern
they may not be, and it appears that they are not.
Ms. Carus, you noted in a case where you are the sole
domestic producer of potassium permanganate, a substance that
is very important for the American economy in many, many ways
as well as health and drinking water.
Ms. Carus. Right.
Mr. Weller. You stated in your testimony how Chinese
companies have, according to your testimony, provided false
information to the United States Department of Commerce and
their ability to get around anti-dumping orders. I was
wondering, from the standpoint of your company and from the
standpoint of your employees, what has this meant to Carus
Chemical? Of course, an employer in my district. What has it
meant in terms of lost productivity and wasted resources that
have taken you away from going about doing your business?
Ms. Carus. It has meant a very high amount of cost in
defending the anti-dumping orders, specifically as relates to
the fraud charges. We have spent probably half a million
dollars easily in the last 10 to 12 months just defending the
fraud charges or investigating the fraud charges that the
foreign entities have been making. And that is a significant
drain on our resources as a small company. Half a million
dollars we could do a lot with in our company in terms of
improving manufacturing processes and so forth.
But in addition to that cost to us, as a company, we are
very concerned as U.S. taxpayers, because there is also a
significant amount of work being done at the Department of
Commerce, some of it really that shouldn't be. For example, the
2000 review, the new shipper review would have never occurred
had Groupstars given their real date of its business license.
In addition, the Department spent thousands of dollars
traveling to China to verify two plants that weren't the actual
producers of the product, that Groupstars admitted to in a
subsequent filing. So this is wasted money. This verification
trip to China should have never occurred. That is a lot of
money as a U.S. taxpayer that I am very concerned about.
Mr. Weller. Ms. Carus, you identify Groupstars as a company
which provided false information. Are there other companies,
Chinese companies that have also performed in a similar way?
Ms. Carus. In terms of--yes, there is another one called
Wego Chemical in New York out of Long Island.
Mr. Weller. Which is a Chinese-owned company?
Ms. Carus. I don't know that. I don't know that.
Mr. Weller. Well, you raise your concern regarding the
Department of Commerce, and of course as it has work to
implement its anti-dumping order and to investigate what is
occurring with what appears to be very unfair competition and
misleading competition by one particular Chinese company
andperhaps others. Do you believe that it is reasonable that Chinese
companies that provide false information, that have committed fraud,
have shipped potassium permanganate under extremely hazardous
circumstances, and of course have now admitted providing false
information to the Department of Commerce--do you think they should be
allowed to come back year after year and challenge the anti-dumping
orders after this record of performance?
Ms. Carus. No. Absolutely not. I think it should absolutely
be prosecuted. That kind of behavior seems to be allowed to be
occurring. And I think the Commerce Department needs to
consider ways to better address fraud in the Department. It
should consider ways of sanctioning parties that repeatedly
submit routinely certified false statements.
I know from my conversations with the DEA that they have
what is called a long-arm provision of the law. I don't know if
this is something that could be adopted by the Commerce
Department, but under this long-arm provision, they have the
ability to criminally prosecute foreign entities that are known
to be manufacturing illegal drugs specifically to import to the
United States. I would think such a long-arm provision for the
Commerce Department would be appropriate in these cases where
they would have the ability to prosecute foreign entities that
are known to be committing fraud on U.S. companies to the
detriment and to the injury of U.S. companies like ourselves.
That is just a thought, but I think it is worth looking into
further.
Mr. Weller. Mr. Chairman, thank you very much for the
courtesy of allowing me to participate. I appreciate your
personal interests in this issue that has been raised by Ms.
Carus. And as a member of the Ways and Means Committee, I will
certainly share the information that has been gathered today
with our Trade Subcommittee in the Ways and Means Committee as
well.
Mr. Wolf. Well, and thank you, Mr. Weller.
Mr. Weller. Thank you, Mr. Chairman.
Mr. Wolf. And you are fortunate. Mr. Weller, when he gets
involved in an issue, marriage, penalty tax, he stays with it
until he is very, very successful. So I am glad to have him
join us with regard to this.
Does this Chinese company Groupstars have an American law
firm?
Ms. Carus. Yes, they do.
Mr. Wolf. What is the name of that law firm?
Ms. Carus. Representing them?
Mr. Wolf. What is the name of the law firm?
Ms. Carus. I don't have that name handy. We will provide
that for the record, if that is okay.
Mr. Wolf. Do you think that law firm knew that--I guess the
law firm has dropped the company knowing that fraudulent data
was sent.
Ms. Carus. I don't think so.
Mr. Wolf. Or do they continue to represent them?
Ms. Carus. I don't think so.
Mr. Wolf. We want to know what firm represents the company,
and we want to know if you can write them or we will write the
firm to see how from the Canon of Ethics that we teach at law
school--I am a graduate of Georgetown Law School, one of the
good law schools in the country--from the Canon of Ethics, what
is the responsibility? In fact, we will write the American Bar
Association based on your information to find out, what is the
responsibility of a firm that is representing somebody that
they knowingly--now, do you think the firm knowingly knows that
there were fraudulent data? Has that been proven?
Ms. Carus. We have shown it on the record.
Mr. Wolf. Okay. Well, let us see it so that we don't--I
mean, the firm may very well not know. And if they don't know,
I don't think it is fair to be blaming them. But if you can
give us this, and we will write to the ABA on the Canon of
Ethics to see if that is a problem.
Ms. Carus. Okay.
Mr. Wolf. With that, we thank you all. If you will be in
touch with Christine. Thank you very much.
[Clerk's note.--Subsequent to the hearings, the following
information was provided]
Counsel for Chinese Parties
1999 Administrative Review
William E. Perry, Garvey, Schubert & Barer, 1000 Potomac Street,
N.W., Fifth Floor, Washington, D.C. 20007.
2000 New Shipper Review
S. Stephen Spring III, Spring, Spring & Associates LLC, 8939
Jefferson Highway, Suite E, Baton Rouge, LA 70809.
William E. Perry, Garvey, Schubert & Barer, 1000 Potomac Street,
N.W., Fifth Floor, Washington, D.C. 20007
----------
Thursday, May 22, 2003
AGRICULTURAL SECTOR
WITNESSES
JON VESSEY, VESSEY AND COMPANY, CALIFORNIA
PHIL GLAIZE, THIRD GENERATION GROWER, WINCHESTER, VIRGINIA
PETER BARTON, CHAIRMAN, HUDSON VALLEY FRUIT GROWERS, HIGHLAND, NEW YORK
Mr. Wolf. We are blessed that they are not calling for a
vote. About a half an hour ago they said they were going to be
in 15 minutes. So, the panel three, agricultural sector, Mr.
Vessey, Mr. Glaize, and Mr. Barton. If you could limit it to 3
minutes each, we will appreciate it very much.
Welcome. Mr. Sweeney from New York wants to be here, too. I
know he is at another meeting and trying to make it. He
specifically wanted to make sure that you knew. But why don't
we begin in that order, Mr. Vessey, Mr. Glaize, and Mr. Barton.
If you can limit it to 3 minutes, we would appreciate it very
much.
Mr. Vessey. Thank you, Mr. Chairman.
My name is John Vessey. I am president of Vessey and
Company, a California fresh garlic producer, and a family
farming operation in its fourth generation. Our garlic industry
was nearly destroyed 10 years ago by a surge of 54 million
pounds of Chinese garlic imports. A dumping duty of almost 400
percent was imposed in 1994. That duty saved our industry.
Until last December, the duty was still applied to all the
Chinese exporters. Two Chinese exporters were recently excused
from the duty by Commerce. However, our industry has greatly
been harmed again by a tidal wave of Chinese imports in the
past 2 years.
In 1995, 3 million pounds--3 million pounds per year
through 2000, but the imports spiked to 16 million pounds in
2001, and to 54 million pounds last year. This is demonstrated
by our first chart.
For the first quarter of 2003, Chinese imports were almost
four times greater than the first quarter of 2002. If the
trends continues, Chinese imports for 2003 will be about 150
million pounds, far more than we produce in California. There
are three reasons for this. I will explain in detail in my
written comments that I have given for the record. Let me
summarize each one.
First. Millions of pounds of Chinese garlic are illegally
shipped through third countries. This is reflected in the first
chart, with the dark area representing a trend ship product and
the white area identified as garlic imports from China. Customs
has greatly reduced trend shipments since it started testing
garlic imports last summer. There are two problems, however.
First, Customs has stopped testing the imports. Second, the
funding for the testing program is in jeopardy. Mr. Chairman,
Congress should ensure the crucial testing program is kept in
place.
A second reason for the 54 million pound import surge is
Commerce Department's conduct of new shipper administrative
reviews. New shippers can ship Chinese garlic without paying
cash dumping duties for the entire life of the review,
sometimes from 12 to 16 months, with only posting a bond.
During 2001, there was one new shipper being reviewed by
Commerce. That one shipper shipped 8 million pounds of garlic
during his review. During 2002, there were three shippers in
the new shipper review. They collectively shipped to the United
States 42 million pounds of garlic.
The privilege not to pay cash dumping duties was given by
new shippers by Congressional amendment of the dumping law in
1995, supposedly because the privilege is required by the WTO
Dumping Code. In fact, the WTO does not require this privilege.
Mr. Chairman, Congress should save our industry, and no doubt,
other domestic industries by removing the privilege of this
law. But it must be done now.
The third reason for the surge of imports is Commerce's
methodology for calculating dumping margins in Chinese cases.
These are detailed in my written comments. Unless Congress'
methodology is changed to reflect the reality of garlic
production in China, Congress will grant zero dumping margins
to all exporters in review.
The situation is desperate. Unless changes are made in all
three areas, the domestic garlic industry is doomed. We have
already cut our production 30 percent, and we are now to the
size we were eight years ago after the first Chinese onslaught.
Ask yourselves, how could 54 million pounds of garlic enter the
United States from China with a 400 percent duty? Thank you,
Mr. Chairman.
Mr. Wolf. Thank you.
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Mr. Wolf. The next witness, Mr. Glaize.
Mr. Glaize. Thank you, Mr. Chairman.
I am Phil Glaize, the past chairman of the U.S. Apple
Association, and the current chairman of the Virginia Apple
Growers Association. I am a third generation apple grower from
Winchester, Virginia, and manage 1,000 acres of orchards in
both Virginia and Pennsylvania. We operate an apple cold
storage facility and a packing operation so that we can market
our apples directly to the retailers and the processors.
Apples are grown commercially in 36 States, with the
majority of the crops produced in Washington State, Virginia,
New York, Pennsylvania, and California. While Virginia produces
both fresh and processing apples, the majority of the growers
in our State produce apples for apple sauce, sliced apples for
baking, and juice apples for apple juice.
Thank you for this opportunity to provide the subcommittee
members with a first-hand account of a threat posed to my
family, my company, and our entire industry from imports of
cheap apple juice concentrate from the Peoples Republic of
China.
A flood of cheap apple juice concentrate imports driven by
the Peoples Republic of China is significantly reducing prices
that U.S. growers receive for their processing apples.
Processing apple prices are the foundation of the industry's
entire price structure, and these imports are adversely
affecting returns for all apple categories across the entire
industry. As the price for Chinese concentrate delivered to
U.S. docks fell 53 percent from 1995 to 1998, and imports of
apple juice from China increased to over 2,000 percent during
that period, the price paid to growers for their juice apples
fell by 66 percent.
China's share of the U.S. concentrate market increased from
one percent in 1995 to 18 percent in 1998. U.S. concentrate
producers have been forced to drastically reduce the price they
pay growers for U.S. juice apples. This has significantly
harmed apple growers in Virginia and across the country. And
this is important to know. Since processing apple prices are
the floor of our industry's price structure, the plummeting
apple juice concentrate prices have caused the value of U.S.
fresh market and processing apples to fall dramatically.
In response to economic injury to U.S. producers caused by
the surge in unfairly priced apple juice concentrate from
China, the U.S. apple administered coalition for fair apple
concentrate trade sought to level the playing field by seeking
import relief under U.S. trade law. The coalition was
successful, receiving unanimous ruling from the International
Trade Commission in 1999. However, in November of 2002, the
Commerce Department announced its decision to choose Turkey as
the surrogate market economy even though the U.S. apple
industry strongly favored the choice of Poland. Despite the
fact that Turkey and Poland lined up as statistical equals in
all concerns, Commerce seems to have overlooked the interests
of our U.S. apple industry.
In written testimony submitted, I have elaborated on the
reasons our industry believes Poland was the more appropriate
surrogate country; however, in the interest of time, I will not
go in to detail, but you do need to know two of those factors.
That includes Commerce's judgments regarding the economic
comparability over Poland and Turkey and the quality of data
submitted by the Chinese regarding Turkey.
I continue to believe that the Commerce Department missed
an excellent opportunity to provide our industry with
reasonable protection from cheap imports of Chinese apple juice
concentrate. Regretfully, this protection will not be in place
when I harvest my crop this September.
Commerce's choice of surrogate market economy has had a
harmful impact on our anti-dumping case. Selection of Turkey
led the Commerce Department to propose elimination of dumping
duties for five of the nine Chinese apple juice concentrate
producing companies. These companies will now be free to reduce
concentrate prices as low as they want without the fear of
future anti-dumping consequences. Commerce's decision to choose
Turkey as the surrogate market economy clearly favors Chinese
producers and takes money out of the pockets of U.S. apple
growers.
As an apple grower, this process was particularly
troubling. The decision on which surrogate country to choose
was a close call. Commerce Department was well informed about
the economic harm to our industry being caused by Chinese
imports. Commerce should have used this opportunity to
safeguard American interests, but instead sided with Chinese
apple growers, processors, and exporters.
U.S. apple growers believe that in anti-dumping cases such
as ours, the Commerce Department should be an advocate for U.S.
Industry when the facts allow it. For this reason, we urge the
Subcommittee to consider several recommendations:
One. Establish a separate office with sufficient resources
within the Commerce Department to handle anti-dumping petitions
against China and the subsequent administrative reviews. Before
the Commerce Department moves forward with a case, it should
require a foreign exporter to assume the burden of proof by
having to provide evidence that its facts are true and robust
in the scope of dumping investigations. And, in the case of new
shipper reviews, such shippers should have to satisfy the
dumping duty deposit requirement in cash rather than a bond.
In conclusion, Mr. Chairman, the apple growers of Virginia
and across the country strongly disagree with the Commerce
Department's decisions with regards to our anti-dumping case
against below cost imports of Chinese foreign concentrate. We
believe that the U.S. Government should instead act fairly and
responsibly to support the interest of domestic industries. We
are vigorously and prepared to act upon other means, including
U.S. Government initiatives to keep dumped concentrate from
further harming the already beleaguered U.S. apple industry.
Thank you, Mr. Chairman.
Mr. Wolf. Thank you, Mr. Glaize.
[The information follows:]
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Mr. Wolf. And Mr. Barton.
Mr. Barton. Good morning, Mr. Chairman. My name is Peter
Barton. I am a fruit grower in the Hudson Valley. I actually am
the Chairman of the Hudson Valley Fruit Growers Task Force that
was formed pretty much for last year, which I am sure most all
of you are aware of was the devastating weather events that we
had. And we do thank you for coming forward and including
specialty crops in the disaster bill for 2003. And we were very
hopeful going into this harvest year of 2003. Unfortunately, at
the end of 2002, with the ruling from the Commerce Department,
I think it has taken our industry and is taking us backwards.
That ruling of picking the surrogate country of Turkey over
Poland will have significant impact on all the growers that I
do represent.
This other market, as Phil said, is our foundation. And
what we have seen over the years up until just recently is
almost a nonmovement of this product. And, unfortunately, when
growing a product like this that is a well valued entity that
used to add to our bottom line becomes essentially a liability
to us and to our operations. We have no other outlet for it
except for processing factory. And if that processing factory
is not taking that apply, it becomes a burden to us.
I would like for you all of to please become aware of that
court ruling as to why--actually, in the ruling itself it
seemed to contradict their actual criteria of the significant
producer which would have led you to think it would have been
Poland instead of Turkey that was picked.
Our farm itself where my family farms is 65 miles north of
New York City. We are a great place for learning. We are also a
great place for solitude, which was proved on September 11th
and the days following September 11th. We attract quite an
amount of people to our farm to pick the various crops that we
have. I myself, as a direct marketer and a true ambassador of
agriculture, and I communicate directly to the American
consumer. And there is a concern, because I feel that
agriculture in itself is in trouble. The lack of public
education, understanding about agriculture is eroding our
consumer base which threatens the existence of our profession.
And all this is happening in my generation.
A chief food supply along with an overabundance of products
from around the world has armed the consumer with a false sense
of security. In my hometown, I am an 8-year elected town
councilman, so I see the impacts that I have been hearing this
morning throughout this whole hearing. I have the local
businesses that are no longer there contributing to our tax
base. We have empty warehouses, empty storefronts. Instead, we
have residential properties being built and sprawl, almost
uncontrolled sprawl which, on a local level, is very hard to
control with an infrastructure.
So, to bring forward, the concern I think that we are all
hearing in this room today is having a major impact on our
local hometowns and the way small-town politicians like myself
have to address these issues. The Chinese concentrate needs to
be addressed, revisited possibly in order to make my industry a
viable industry in the future. And I thank you for this time.
[The information follows:]
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Mr. Wolf. Well, thank you very much. And I appreciate all
of your testimony. In fact, Mr. Glaize, I have the privilege of
representing the Shenandoah Valley and Blue Ridge and
Winchester. And as he was talking about the impact on little
towns and all, I mean, from the growth and the apple orchards
that have been cut down and the housing that has been replaced,
I am sure it must have triggered with regard to you. I mean, I
can think of apple orchards that I know I used to drive by that
there are now homes. So it almost gets beyond--and this is not
an issue on growth and sprawl and the issues like that. But it
also does get into those issues. And the vitality of little
towns and places that are very, very important to this country.
Why do you think, both of you, they picked--Turkey and not
Poland? Just briefly, I mean. And we will dig into it. But why
do you think they did?
Mr. Glaize. It is hard to speculate. Statistics were very
close as far as their gross national product and size of the
economy, et cetera. In that they were statistically the same,
Turkey was slightly, lower perhaps closer to China in one of
the statistics. However, they were so close that, in my point
of view, of course it doesn't make sense to have chosen Turkey.
Mr. Wolf. Under the law, do they have the ability to go
back and select Poland over?
Mr. Glaize. I would have to find that out for you. I
believe they do.
Mr. Wolf. Mr. Vessey, do you think the Commerce Department
has been your friend? Do you view it as a friendly place to go
to?
Mr. Vessey. Well, I believe that certainly under the new
shipper review law that the Commerce Department, that Congress
needs to really change that as far as the Commerce Department,
the methodology that is used to calculate these zero dumping
rates is just ludicrous. So I think the Commerce Department's
method of how they arrive at these is bad.
But I would like to comment one thing on--you talk about
small towns. Western agriculture, we farm in the west side of
the San Joaquin Valley in a little town called Coalinga. We are
the largest private employer in that town and employ 600
people. That had dropped to 500, and will drop probably in half
just because of this dumping order that we continue to plant
less and less product. And the whole San Joaquin Valley has a
history of, between cotton that it has lost to China--I think
all of western agriculture. We talk about these small
commodities, garlic or apples. But western agriculture is in
jeopardy. And I think that the fact that we need to look at
whether you call it national security, I mean, are we going to
be dependent upon a foreign source of food?
I think our safe and dependable food supply that Americans
farmers produce is utmost dependable, and I don't think we
should be in jeopardy of a foreign source like the oil
business.
Mr. Wolf. Well, I thank you all. I would urge you also to
be contacting--Mr. Glaize, contacting me and I contact him. But
those of you others and the other witnesses, those before and
those after, to contact your other members of the House and the
Senate. I mean, this is a hearing to hopefully begin to reverse
the process, but there are 435 other members of the House and
there are 100 senators. So I think it is important that you
vocalize and advocate. I mean. And we invited one company, and
the first letter came from the man was very bitter and hostile.
And not against me, but he said, I don't think anything can
ever come of this hearing and, what you are doing. He said, I
am so disappointed. And then he came back and apologized
saying, you know, he can't make it, but he just didn't think
anything would ever come of it.
And so I think it is important for you to be talking to
your Senators and Congressmen, and Mr. Walsh and Mr. Sweeney
are both in agreement with regard--but not just limit it to
this subcommittee, but to the entire Congress. This is an
opportunity. And I appreciate the NAM being here, a great
institution, like that. So this is an opportunity, but just
don't allow it--you haven't done your job by just coming here
and testifying. Before I got elected to Congress, I was a
lobbyist for Gerber Baby Food, and, you know, go out, spread
the word. Speak. Go to town meetings. Go to the villages. Go
when the Congressmen are back. Talk to them. Make appointments.
Go, go, go, go. But just don't think that you have accomplished
your goals by coming here and testifying. We will attempt to
help based on a sense of fairness, but you now have to go out
and advocate it. And I would urge you to--and those who are
listening. I know we have got probably both sides in this
audience. But to go out and make it clear to other members of
the House and the Senate so that when we try to do something
there is the support, if you will. But I thank all of you very
much for your testimony.
Mr. Serrano.
Mr. Serrano. Very briefly. All three of you, you on the
apple issue, both of you, and you on the west coast, in
general, paint sort of a bleak picture about the future of food
producing for this country. We are not anywhere near having
most of our food imported.
Mr. Vessey. I may disagree with you, Congressman.
Mr. Serrano. No, I am asking you. Are we?
Mr. Vessey. Well, I think we are. You have 800 million
farmers in China. I am also a broccoli grower. I have lost
production in broccoli. The recent studies have come out that
China is getting in the package salad business. We think that
it is just maybe the commodity groups. But in the specialty
crop business, I think there is jeopardy. I think we are in
jeopardy of not being in control of our own food source. I
paint that black.
Mr. Glaize. I would like to agree with Mr. Vessey. And it
is going to happen quicker in small crops fruits and vegetables
than it is in the commodity crops of wheat, corn, oats. I would
like to say that last night, ABC News with Peter Jennings aired
something they called the making of a crisis. And for 5 minutes
they talked about our food production moving offshore,
particularly to China. They featured an avocado grower from
California. That little news clip hit so home with me, it is
unbelievable. And that is the large issue that we as farmers
have got to face. I, as an apple grower, have to decide whether
I should plant a tree--I don't get a thing back from my tree
for 6 years. It takes that long. I don't know whether to go
plant any more trees right now or not. 60 percent of the single
strength juice, apple juice consumed in this country is from
foreign concentrate.
Mr. Glaize. It is unbelievable that what we have received
for our product in the last 4 years have gone down so far that
Congress passed a market loss decision for apple growers for
the first time ever and we do not even want it. We want to
survive on our own, but it has gotten that bad.
Mr. Vessey. Just one more comment, Congressman. It is what
we have lost are really our export business. We used to be big
exporters in garlic to Europe, to Canada, to Australia. We have
lost that business. Also, I think all of agriculture is
concerned that we lost Japanese business. We used to export a
lot of product in Japan. China has taken than business. So I
think it is not just we are threatened. We already are
threatened and we have lost a tremendous amount of markets out
there that we no longer will ever get back.
Mr. Barton. I would like to state that that false sense of
security the public has--and I think the public does need to be
educated because we are almost at a crisis right now and as
long as they go on with this false sense of security I do not
think the awareness is going to be built enough.
Mr. Serrano. The apple sauce they buy in northern Virginia
is that mostly produced in Virginia, made in Virginia.
Mr. Glaize. Thank goodness the apple sauce is. They are not
importing apple sauce at this time.
Mr. Serrano. I am a New Yorker. We do love apples but, boy,
do they make apple sauce.
Mr. Wolf. It is good for the industry. Thank you, Mr.
Serrano.
Mr. Vitter.
Mr. Vitter. Thank you, Mr. Chairman. Thank you for leading
this hearing. It is very important and I certainly appreciate
your leadership and appreciate the testimony of all the
witnesses.
I just wanted to quickly add during this ag discussion of a
Louisiana example, which is crawfish. Chinese crawfish tail
meat--and actually this is perhaps an example that highlights a
slightly different problem because if you look at the history
of this anti-dumping action, while there has been criticism and
problems with Commerce, probably the much bigger problem is on
the pure enforcement side from Customs.
The U.S. Anti-dumping duty order against imports of fresh
water crawfish tail meat from China has been in place since
1987. At that original time all company specific cash deposit
rates assigned in that original investigation were in excess of
90 percent ad valorem. Now those change over time with reviews
and with new shipper reviews, and since that time new shipper
reviews in particular have resulted in company specific ad
rates, rates ranging from zero to 223 percent. Certainly in
those new shipper reviews there is some concern that some of
those have been dominated by fraud and are very inaccurate, so
that is a concern resting in Commerce.
But again probably the biggest concern is collection of the
duty, pure enforcement collection out of Customs, and there is
an enormous concern that there is just no adequate enforcement
collection after we have walked through the process and gotten
these determinations.
Why do I say that? Well, if you just go in retail stores in
Louisiana, you find the same Chinese crawfish product for about
$2.99 a pound. This is virtually the same as in 1996 when the
anti-dumping case was first filed and if you look at import
rates, although the levels dip slightly just after publication
of the ad order in 1997, they surged after that to new record
highs. So in this case, you have an anti-dumping action. You
have some significant determinations by Commerce in terms of
the rates that were determined, and there is criticism of some
cases and some new shipper cases but basically you have
significant determinations but the price is the same and import
levels have surged. And so the domestic industry feels like
there needs to be much greater focus and enforcement out of
Customs and they have basically reached the conclusion that
Customs is never going to do anything significant unless and
until there is a specific line item for this enforcement
because it just gets swamped. It is a tiny matter in the
Customs universe and it just gets swamped by legitimate Customs
antiterrorism, antidrug priorities.
So from the point of view of the domestic industry they do
not think anything is ever going to result from this unless we
make Customs with perhaps a specific line item enforce this
because they are basically ignoring it now because it is being
swamped by their bigger understandable priorities.
I just wanted to add that to the discussion and thank the
witnesses again.
Mr. Wolf. Well, thank you, Mr. Vitter, and if you want to
offer an amendment to the Customs markup on that, I serve on
that subcommittee, we could do it at full committee.
Mr. Wolf. Mr. Honda just joined us. Whatever you want to
say.
Mr. Honda. Well, thank you, Mr. Chairman. I apologize for
being a little tardy here. But I really do appreciate you
having this hearing, Mr. Chairman and Ranking Member Serrano. I
came just to specifically make comments on an activity in my
district, and that is garlic, and I understand Mr. Vessey had
made a couple of great comments, one about the unfair
competition, and I am here to echo his concerns and also share
the fact that the imports have increased tremendously from
about, what, about 3 million pounds in the year 2000 to over 54
million pounds this past year, and the total consumption of
garlic in this country is around 160 million pounds. So it is
quite a big impact on our economy.
California is a State that is probably one of the largest
producers of garlic, and I think that it is clearly quite an
impact and we are hoping that the subcommittee will be able to
look at the loopholes that have been created that are
recognized by the California garlic growers. We have to close
that loophole so we can have some fair trade practices, and I
am here to support not only John but Mr. Christopher, who has
probably one of the largest ranches in the State of California.
We welcome the Chair to our garlic festival, and I will
personally be your guide and cook some of the dishes for you if
you like.
Thank you, Mr. Chairman.
Mr. Serrano. For the record can you explain later about the
effects of garlic on werewolves. I have never understood that.
Mr. Vessey. We promote that.
Mr. Wolf. I thank you, Mr. Honda, and I thank the panelists
too and again if you can all work with Christine about that.
But thank you very much.
----------
Thursday, May 22, 2003.
SECTION 421 OF THE TRADE ACT OF 1974/TEXTILES
WITNESSES
AUGUSTINE D. TANTILLO, AMERICAN MANUFACTURING AND TRADE ACTION
COALITION (AMTAC)
WILLIAM WOLF, PRESIDENT, MOTION SYSTEMS, EATONTOWN, NEW JERSEY
Mr. Wolf. We just got another 30 minutes before a vote. So
we are doing well. If we can have Mr. Tantillo from the
American Manufacturing and Trade Action Coalition and William
Wolf, who I want to state for the record is no relation to me
that I know of. If you can limit your statements to 3 minutes,
we would appreciate it very much.
Mr. Tantillo. Good morning, Mr. Chairman, and thank you
very much for this opportunity to appear before your
Subcommittee.
My name is Augustine Tantillo. I am the Washington Director
of the American Manufacturing Trade Action Coalition. AMTAC is
a group of concerned U.S. Manufacturers who have come together
for one purpose, and that is to work in support of Federal
trade policies designed to stabilize the U.S. Marketplace and
to hopefully preserve the over 16 million manufacturing jobs
that remain here in the United States.
So far this morning a good portion of the hearing has dealt
with dumping and CVD cases, and I want to talk about a
different issue that comes under the jurisdiction of the
Commerce Department and other related agencies such as the U.S.
Trade Representative and the State Department.
It is the special textile safeguard mechanism which is
contained in the Accession Agreement with China. In 1997, the
United States negotiated a bilateral textile agreement with the
Chinese, and as part of that agreement they included a
provision that allows for the reinstitution of quotas on
textile apparel shipments from China when their levels become
disruptive within the U.S. Market. That provision was
reaffirmed as part of the 2001 Accession Agreement and has been
in place since January 1, 2002, when China actually joined the
WTO.
Fortunately, Mr. Chairman, the Administration just
yesterday published the procedures for utilizing the China WTO
textile safeguard mechanism. Nearly 6 years after the mechanism
was first negotiated, 2 years after it was reaffirmed in the
Accession Agreement and 18 months after China joined the WTO,
the United States textile industry finally has the rules
available to them for petitioning under this safeguard
mechanism.
Now what has happened during that time period, during that
delay in regard to Chinese textile imports into the United
States? Well, it has been nothing short of remarkable. In 2002,
China grew by 117 percent in terms of their total textile and
apparel exports to the United States. Since January 1, 2001,
our industry has lost 206,000 workers, many in Virginia, the
Carolinas, Georgia, Tennessee, Alabama. So while this massive
surge is taking place, thousands of Americans are losing their
jobs.
The executive branch highlighted during the accession
debate that the safeguard mechanism would be there to protect
against the very thing which is happening. Surging Chinese
imports disrupting our markets, displacing workers, and yet the
mechanism has never been used. Again, the procedures were just
yesterday published. So when is a safeguard mechanism
meaningless? Obviously, when it is never utilized.
Mr. Chairman, China has the potential to overwhelm our
market. For the past 12 months they have been shipping textile
apparel products at over 100 percent in terms of an increase
over their previous shipments. Their total value of shipments
to the United States is valued now close to $10 billion. I will
give you one example that you mentioned earlier, socks,
hosiery.
In March of 2002 China shipped about 1 million dozen pairs
of socks to the United States. Over the next 12 months, they
shipped 8.5 million dozen pairs of socks. They have experienced
an 800 percent increase in that one category alone and, as you
said, many of these companies are owned and operated by the
People's Liberation Army.
Our industry does not need any more commitments or
promises. We have plenty of those. What we need is action. The
government has finally published this safeguard mechanism, but
if it is going to be meaningful it has to be used.
We will be petitioning the Administration to implement a
safeguard in short order. If they do not, China will continue
to absorb a tremendous amount of market expansion within the
U.S. It is going to cost tens of thousands of additional jobs.
We hope that this action will come in time to save some of the
900,000 U.S. textile apparel jobs that are left in the United
States.
Thank you very, very much for this opportunity, Mr.
Chairman, for your leadership in this area.
[The information follows:]
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Mr. Wolf. Thank you, Mr. Tantillo.
Mr. Wolf.
Mr. William Wolf. Chairman Wolf, members of the
subcommittee, I am Bill Wolf, President of Motion Systems of
Eatontown, New Jersey. I thank you for giving me the
opportunity to relate my very disappointing experience as the
first petitioner to bring a case under the China specific
safeguard mechanism known as Section 421. I am also submitting
a written statement, so I will keep my comments brief.
Mr. Wolf. Your full statements will appear in the record.
Mr. William Wolf. Our company, Motion Systems, makes
electromechanical linear actuators and pedestal actuators. This
last product was the focus of the Section 421 case. Our largest
customer used pedestal actuators in his mobility scooters. In
2001 they switched from our company to a Chinese supplier who
had copied our product and then sold it for about a quarter of
the price. The attached chart to the report shows that our
production of pedestal actuators declined by two-thirds as the
Chinese imports surged into the United States.
In response to this surge we filed a 421 petition in August
2002. After investigation, the ITC concluded that imports of
pedestal actuators from China were causing market disruption
and recommended that quotas be imposed. Unfortunately for our
industry the President did not agree. The President denied
relief in part on the presumption that our former customer
would face increased costs if he had to switch from the low
cost Chinese copies.
Section 421 is expressly intended to address surges in
Chinese importers. The possibility that a U.S. purchaser of
Chinese imports would see some increased cost is almost always
going to be the case. To deny relief on this basis is to deny
relief for every Section 421 case. That cannot be what Congress
intended.
The President also appears to have relied upon the
allegation by the U.S. importer that increased costs would be
passed on to the ultimate customer. At the USTR hearing, a U.S.
Importer alleged that cost savings achieved through the Chinese
imports had been a saving for consumers and that by imposing
relief consumers would face cost increases in the future. These
claims were never verified by USTR and I believe that USTR's
fact finding and information verification process in Section
421 proceedings is seriously flawed.
We presented documentary evidence to USTR showing that the
U.S. importer did not lower his prices by switching to the
Chinese imports. Why then would it increase prices to consumer
if he switched back to the American made parts? Government
documents first obtained after the USTR hearing and the
President's decision show that the U.S. importer's prices to
its largest customer, the VA, remain the same after he switched
to the Chinese imports. He never dropped his prices.
Allowing Section 421 cases to be decided based upon the
unsworn, undocumented self-serving testimony of importers
grants them a virtual veto over relief.
I would also like to make a comment on how the Chinese
government addressed this case. An intense lobbying campaign
was launched to thwart relief to our industry. Press accounts
attached to my written statement again reported that this
effort reached the highest levels of the Administration and
resonated in the President's decision making process. To say
that I am dumbfounded by the Administration giving credence to
the viewpoints of the Chinese government over the
recommendation of the ITC and contrary to the will of Congress
would be an understatement.
In conclusion, as it stands, the Section 421 petition is a
dead duck. Maybe it can be fixed.
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Mr. Wolf. Thank you both. Tell me in about 30 seconds of
the lobbying effort that you are talking about. Well, who was
retained? Who are the lobbyists? What did they do?
Mr. William Wolf. Well, it is Chinese officials. We asked
for hearings with the U.S. Trade Rep's office, but the
Chinese--the doors opened up for them.
Mr. Wolf. You could not get into the Trade Rep's office?
Mr. William Wolf. Only one hearing when they were cleaning
up the documentation on it.
Mr. Wolf. Chinese had better access?
Mr. William Wolf. Yes.
Mr. Wolf. I hope you will give us some facts.
Mr. William Wolf. Those press releases are attached.
Mr. Wolf. Why do you suppose the Trade Rep's office did
that?
Mr. William Wolf. Trying to keep feathers from being
ruffled.
Mr. Wolf. For what reason though?
Mr. William Wolf. It was due the next week.
Mr. Wolf. Okay, well, thank you.
Mr. Serrano.
Mr. Serrano. I have no questions.
Mr. Wolf. I thank you both. If you can be in touch with
Christine to see what we can do to see if there ought to be a
change at the Department of Commerce in the Trade
Representative's office.
Now, in fairness and balance sometimes when you advocate
for and I know overstatement can sometimes take place, so we
want to be balanced. We want to be fair but this has to stop.
If we have to cut the budget over there, then we will have to
cut the budget. It is at least the only way we are going to do
it. I feel very passionate about this issue. There is only one
other Member of Congress, Congressman Chris Smith, who has ever
been in a slave labor camp, as I have been. I was in Tibet,
where the Chinese were persecuting the Buddhist monks and nuns
and throwing them into Drapchi Prison. I know there are 50
Catholic bishops that are being harassed and jailed in China
today. There are 250 Evangelical House Church leaders, and for
the Commerce Department officials--and I hear President Bush
speak out very eloquently with regard to human rights and
religious freedom. When you put all these things together, you
see the way they were with regard to the SARS, there ought to
be no doubt that your Commerce Department is on your side and
not on the side of the people that are putting Catholic bishops
in jails, Evangelical House Church, persecuting Muslims,
destroying, capturing the Pancha Lama, prohibiting the Dalai
Lama from going, having organ programs that if you need a new
kidney they will execute the person to sell you a new kidney
and on and on and on, and so we are going to get to the bottom
of it. We are going to do it. We just are. So be in touch with
Christine and see if we can come up with it, but again I would
say to you, and I am talking to everybody else out here, we do
not want anything that is not true. We do not want anything
that is not factual. We do not want hearsay. We do not want
someone once said they told me this, we do not want that. We
only want facts that you can prove. We do not want to damage
people's reputations. Do not give us that information. We are
not looking for anything like that.
I would also say you should err on the side that if there
is some question we do not want it. We only want what is
factual that can be proved that is actual fact. So with that to
both of you, not that you are not giving us that. Do not take
it personal. The same with everybody else. That is what we are
looking for and we are not looking to hurt people's
reputations. We are not looking to demagogue or be after
people. We just want to kind of deal with this because again we
are getting ready to go to the Administration witnesses. We
want to create jobs. We want to get America moving again.
I cannot speak for Mr. Serrano, but I support this
Administration. I probably have one of the highest records of
support for this Administration in this Congress, and I want
this Administration and I want President Bush to do well, but I
want small towns and machinists and mechanics and moms and dads
and the high tech community to do well, too. I think the one
thing we have not covered enough in this hearing is the high
tech industry. Some people say, well, the manufacturers are
gone but we are now focused on high tech. Now I saw the
statement the other day that high tech jobs are beginning to go
overseas. So it is across the board and we stress
manufacturing, but the problem is also heavily in high tech.
You want to say something, Mr. Tantillo?
Mr. Tantillo. Just to comment on that last point. In the
government's own definition of the high tech manufacturing
sector, which is the leading edge of supercomputer,
sophisticated electronics equipment, we had a $13 billion trade
deficit last year, and so if people want to argue that we
really do not need the menial basic manufacturing jobs, where
then are we going to gravitate to if even the leading edge is
being decimated by China and the rest of the Far East.
Mr. Wolf. Why do not you submit to the Committee by Monday
of the following week some information with regard to that you
can gather and also, as we said, to the NAM to help us with
regard to the questions of CRS and others? I think we should
also get that data because many people do operate--I know we
are los ing jobs in manufacturing, but look at what we are
getting in high tech and I look in my district going out Route
66 and out Dulles Access Road and the number of jobs and some
of the things the Chinese are doing this. The FBI comes before
this Committee. If you would know what the Chinese government
is doing with regard to American industry, particularly in the
high technology, it is stealing the secrets, it is incredible.
Many people in the high tech industry do not know what is
actually happening to them. So you put all of these issues, and
this is not FBI intelligence but you get all those things
together. But if we could get that material on high tech
industry we would appreciate it.
Thank you very much.
Thursday, May 22, 2003.
U.S. GOVERNMENT
WITNESSES
PETER F. ALLGEIER, DEPUTY U.S. TRADE REPRESENTATIVE
GRANT D. ALDONAS, UNDER SECRETARY FOR INTERNATIONAL TRADE
DOUGLAS M. BROWNING, DEPUTY COMMISSIONER OF CUSTOMS AND BORDER
PROTECTION
Mr. Wolf. Next would be the panelists from the
Administration Mr. Allgeier, Mr. Aldonas and Mr. Browning.
First witness, Mr. Allgeier first. Then Mr. Aldonas and Mr.
Browning. If you could limit to 3 minutes, please, and also to
the same thing with regard to the other witnesses. We would
like to get you back up because sometimes this is more to make
the record, to have you perhaps sit down with us, perhaps
independently and also with some of the people to see what we
can constructively do. I mean I am operating on the assumption
that you care deeply and want to do something. So we will
operate on that basis. This hearing does not end and we all go
off and do whatever we are going to do. We would like to come
and get you back independently and also with the other people.
First witness, and your full statements will appear in the
record.
Mr. Allgeier. Okay. Thank you very much, Chairman Wolf and
Congressman Serrano. We are very pleased to appear here today
to discuss the Administration's perspectives on U.S. Trade with
China.
We have two overall priorities, general priorities. One of
course is to maximize effective market access for American
businesses and farmers, ranchers and providers of services and
their workers, and the second is to ensure that we deal
effectively with either unfair imports, unfair trade practices
by China or injurious imports through import surges.
I would just like to say a few words about the
implementation of the WTO Accession Agreement by China, some of
the positive points, some of our principal concerns, and then
also to talk about the Section 421 that was mentioned in the
previous testimony.
With respect to China's implementation progress, the focus
has been on changing their laws and regulations. They have done
an enormous amount of that. Secondly, to restructure their
ministries dealing with trade so that those ministries operate
in a way that is compatible with a more open market approach to
the economy, and then third is to train and educate their
officials, both at the central level, at the local level and
the State-owned enterprises about the requirements of the WTO
accession of China and how to implement that.
China has made the required tariff reductions that are in
the agreement. They are working on the nontariff barrier and
they continue to improve their standards regime.
There also has been a number of the legal steps necessary
to increase market access in the services area.
While China has made significant progress in implementing
its commitments, we have identified a number of concerns. The
principal concerns that we are working on at this point are
one, the commitments on agriculture; two, enforcement of
intellectual property rights; three, their commitments on
services; and then the fourth is a cross-cutting one, which is
the issue of transparency in the development of their law and
in the regulations, and I think that this is particularly
important to small and medium-sized businesses in the United
States who do not have the necessary resources to work their
way through opaque and arbitrary regulatory-legal systems. So
this is a very important priority for those sorts of
businesses, as is intellectual property, as you referred to
just prior to our panel coming up, particularly for smaller,
high tech industries, the firms that are getting started. If
they lose one of their patents that can eviscerate the entire
firm.
So these are immediate priorities. Let me just say a few
words then about Section 421. 421 is one of the three measures
that we have available to deal with injurious imports or unfair
imports. I leave to Under Secretary Aldonas to discuss the
element having to do with anti-dumping. We also have the
special textile safeguard which was referred to in a previous
panel and Section 421.
Section 421 has been controversial. There have been two
cases. In those two cases, there was a very thorough, open,
transparent investigation. Ultimately the President determined
that the specific circumstances of those cases did not warrant
providing relief, but he said very clearly in the wire hanger
case that he is committed to use this mechanism when the
appropriate circumstances are there.
One last comment, I cannot leave unresponded the assertion
in a previous panel that the USTR gave preferred access to
foreign officials over U.S. Interests. I have worked at the
Office of the U.S. Trade Representative for 23 years and we do
not, I will say categorically, we do not give preferential
access to foreign officials over U.S. Interests when we make
any sort of an investigation or when we are conducting our
business, and I am confident that the record in this case will
prove that to be true, that the record does prove it to be
true.
So, Mr. Chairman, we look forward to working with you and
other members of the committee to achieve our dual ends, dual
objectives of maximum market access to American interests but
effective implementation of the various mechanisms that we have
to protect against injurious or unfair trade practices.
Thank you very much.
[The information follows:]
[Clerk's note.--Response from USTR is inserted at the end
of the hearing transcript.]
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Mr. Wolf. Mr. Aldonas.
Mr. Aldonas. Thank you, Mr. Chairman, and first I want to
say I appreciate the opportunity to appear before you. Your
interest and your leadership on these issues and trade with
China is enormously helpful. I think you made the point to us
as recently as last week at our senior commercial officers
meeting out in Reston about the importance of the Commerce
Department and trade officials generally making sure that when
we are overseas as commercial diplomats that we are carrying
American values with us.
We take that responsibility seriously.
I want to thank the subcommittee for making sure that we
have the funds available to carry that work forward. I am happy
to say that we are making progress on that and look forward to
working with you in the future.
Rather than go through my testimony in summary form, I just
thought I might as well get right to the heart of the matter
with respect to the dumping cases, talk a little bit about what
the Commerce Department faces and then discuss some of the
individual cases. I welcome the opportunity to sit down with
you and Christine to talk through individual cases because I
know, as a lawyer, you know, that these are very, very complex
cases of economic litigation.
I can say categorically that the Secretary and I coming in
made clear that there was only one rule that was going to apply
in terms of our Administration of the dumping laws regardless
of the country. That was we were going the apply the law as
Congress had written it to the facts as we saw it. It was not
going to be a question of whether there would be bias or any
sort of hint, one way or the other, in these cases. We try and
take the facts as we come to them under the balance Congress
has struck in the trade law. It is the only way you can
efficiently manage these cases.
As to some of the specifics, I just want to try and provide
a little extra context. For example, one of the prior witnesses
talked about cast iron pipe fittings, and they remarked on the
fact that in two instances there were rather low dumping duties
in the neighborhood of 6.34 and 7.04 percent. But at the same
time, these are cases against individual companies. While those
2 companies received low margins, the rest of the companies in
that case received a 75 percent margin, which does not reflect
a bias on the Department of Commerce in terms of trying to
provide additional access, as Peter was referring to, to the
Chinese or trying to lean their way.
I have a chart which, to go from the specific to general,
shows the average margins. I think what you can see is that
there is both with respect to all dumping--or individual
company rates in the Chinese cases, the margins are very high
relative to what you see in dumping cases from other countries.
Mr. Chairman, this goes to the point you made at the outset
and throughout the discussion with the other witnesses. The
fact that you have higher margins in these nonmarket economy
cases, but particularly China, reflects the very things you
were describing. They do not have OSHA standards, they do not
have environmental costs, all those things. That is one of the
reasons why they end up with a significantly higher margin than
other countries. But, the pattern is not one--and this is what
I wanted to illustrate--the pattern is not one where the
Administration has taken office and somehow there has been a
drop in the margins with respect to the dumping cases against
China.
Let me discuss a couple other specifics that were raised. I
know, for example, there were allegations that there were
changes in methodology. More often than not it is a change in
facts, not a change in the methodology.
Apple juice is a good example and an unfortunate example in
my view. At the initial stage of the investigation we took the
petitioner's perspective and relied on India as the surrogate
country. The respondents appealed that decision to the Court of
International Trade. The Court of International Trade rejected
the use of India based on the facts on the record, and sent us
back to the drawing board. We came up with two potential
surrogates, Poland and Turkey, where, with all due respect,
there was a substantial difference between the GDP per capita
we are supposed to look at under the statute in term of Poland
versus Turkey, Turkey being closer to China in term of its
comparability. And as a consequence, given the court's
oversight of that particular case, we wanted to make sure that
our decision was hard wired to the facts on the record and the
facts pointed us toward Turkey rather than Poland under those
circumstances.
The net result was a low margin on the apple juice case.
Based on our initial view of the case, we thought India
actually was the better surrogate and India generally the
surrogate we use in these cases, and that is why even with
respect to apple juice we wanted to lean in that direction
first, but on remand from the CIT we had to respond to the
court's direction.
Another point to make is about potassium--and this again
just goes to the level of detail in these cases. There really
are a number of concerns that we share about false information
that is provided in the cases with respect to China.
I know that when you heard from Augustine Tantillo--I
worked with him many years with respect to transshipment in the
area of textiles--you do see these things repeatedly coming up
with our trade with China.
One thing ought to be clear in the case. The net result was
still margins of 128 percent and 107 percent with respect to
the Chinese imports. Separately we have referred when we see
these cases of fraud, the actions either to Customs Service,
which has been a real ally in this in terms of their
investigations, or to the Justice Department. Because at the
Commerce Department we have the civil authority to administer
the trade laws, and I appreciate you understand this as a
lawyer, but the enforcement arm on this is at Customs. When
people talk about it in terms of transshipment as if it is
something that is not illegal. In fact, it is Customs fraud and
Customs does have both civil and criminal investigative
authority to explore those things when someone has made a
material false statement with respect to the entry of the goods
in the United States. Customs shares that responsibility with
the Department of Justice, which I know is subject to the
subcommittee's jurisdiction.
The question, at times, comes down to resources in terms of
how you grapple with it. If you are a U.S. District attorney
and you have a series of cases that are confronting your
community that do involve a felon in possession of a gun
relative to the complex investigation that is often required in
these cases, you can see that you might not get immediate
resources dedicated to the move completed cases. But that is an
area that I think is worth exploring. How we can better
cooperate between the Department, the Customs Service and the
Justice Department to make sure we are doing a better job with
respect to enforcement issues.
Let me close by saying we take these issues very seriously
and we take our responsibilities very seriously. We welcome the
oversight. We welcome the opportunity to explain with Christine
in greater detail how some of the cases worked out. Where there
are issues the one thing I want to assure you, Mr. Chairman, on
garlic and new shippers review is we are obliged to do what we
do under the statute. It is something where it is not in our
discretion to go to cash deposits rather than bonding. I also
want to make clear is where we have found issues where there
are problems with these new shippers, we have tried to address
them.
Earlier this year I wrote to Commissioner Bonner to make
sure we develop a task force between Customs and the Commerce
Department to look specifically at this problem. Customs has
been great to us in terms of developing techniques specific to
garlic in terms of looking at mineral traces that reflect the
soil content so you can determine whether it is the same
shipper shipping the same garlic. They actually have done a lot
to be helpful to us in trying to pursue this. I want to be
clear we try to get these issues in front of the responsible
party at Customs and Justice as quickly as we can.
Let me stop there, and I welcome your questions.
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Mr. Wolf. Mr. Browning.
Mr. Browning. Thank you, Mr. Chairman. Let me first of all
thank you, Congressman Serrano, and the members of the
committee and join my colleagues in thanking you for the
opportunity to testify before you today.
As you are aware, preventing terrorists and terrorist
weapons from entering the United States is and must be the
priority mission of the Bureau of Customs and Border
Protection. However, I want to emphasize that this does not
mean that our traditional missions have ceased to be important
to us. Our obligations in the area of trade management,
processing travelers and patrolling the areas between the ports
of entry are no less critical today.
At BCBP, as was the case for the Customs Service, we have
twin objectives, increasing security and at the same time
facilitating legitimate trade and travel. We must protect the
American economy as well as the American people. These goals
can and will be achieved simultaneously and the programs we
have created and are continuing to advance are designed with
this express purpose in mind.
As we develop ways to make our borders more secure against
terrorism, we can also develop ways to ensure the speedy flow
of legitimate trade and address noncompliance with our trade
laws. As part of our commitment to continuing to perform the
traditional mission for which we are responsible, we help
protect economic interests by enforcing anti-dumping orders
issued by the Department of Commerce.
At Customs and Border Protection we are continuing to
develop and refine our strategies and tactics to address the
impact of dumping and subsidized imports through the
enforcement of these orders.
BCBP reviews all active anti-dumping cases for data
quality, trends, patterns of circumvention and noncompliance,
and we develop collaborative strategies to address this
noncompliance. We develop instruction for our field officers
and we commence focused enforcement actions that are national
in scope in response to identified or potential pattern of
noncompliance. These enforcement actions are designed to focus
our field resources in an effective and efficient manner to
address this noncompliance.
I want to emphasize that BCBP continues to devote
substantial resources to the enforcement of anti-dumping
orders. As you are aware and as has been mentioned by my
colleague Mr. Aldonas, an important part of the enforcement of
anti-dumping orders relates to the investigation of suspected
related fraud. The fraud investigations branch, formerly part
of the U.S. Customs Service, is now by virtue of the creation
of the Department of Homeland Security part of the Bureau of
Immigration and Customs Enforcement. But it remains responsible
for all matters related to trade fraud investigations stemming
from BCBP enforcement activities at our ports of entry.
During a 2002 joint investigation by the Food and Drug
Administration, you may be aware of this, and the legacy
Customs Service into a widespread scheme to evade payment of
U.S. Anti-dumping duties, bulk shipments of honey were found to
be contaminated with a chemical antibody. This antibody is used
only to treat life threatening infections in humans when other
alternatives are not available. Criminal investigators assigned
to our attache offices played a critical role in pursuing
foreign leads in this anti-dumping investigation and they
continue to be involved in that investigation.
I want to commend the Department of Commerce and the
International Trade Commission for the vital role that they
play in assisting us in our anti-dumping and countervailing
duty investigations. Under Secretary Aldonas, as has been
mentioned, he has initiated a multiagency task force to address
matters related to the fraudulent evasion of anti-dumping
duties. The Customs and Border Protection staff attended those
meetings, opening on Tuesday of this week, and we look forward
to participating in this effort. It is through this type of
collaboration with other involved agencies that we believe will
enable us to assure the best possible administration of this
problem, which we remain committed to.
Thank you, Mr. Chairman.
Mr. Wolf. Thank you very much. I thank all of you. They say
there will be a vote in 15 minutes so we will try to move
quickly. Maybe we can finish, maybe not.
Mr. Allgeier, if you can get us for the record all the
meetings that you have had on the case that that gentleman was
referring to. Those you met with his side, those you met with
the Chinese, dates, times, places, law firms, Chinese
officials, everyone and anyone, time, dates, and all going back
to the very, very beginning. If you can get to the committee by
a week from maybe Tuesday after the Tuesday after the Memorial
Day, so we have it in time as we begin to look at that. And the
gentleman--I do not know if he is still here--who made that
case, if you can give us the dates and the times and the places
that you made the comment with regard to you thought they had
greater, tell us why, tell us so we can kind of compare the
two.
Secondly, to all of you just kind of a yes or no with a
sentence, did you feel the pain here by some of the witnesses
that came before you, I mean was it--did you--I mean what are
your reactions?
Mr. Aldonas. If I could, I would have to say it is similar
to things I have been hearing as I have gone around the
country. Mr. Chairman, we at the President's behest, have
launched a manufacturing review at the Commerce Department
which the Secretary has made me responsible for, and we put
together field hearings across the country to meet with
manufacturers.
I just came back most recently from a roundtable in
Rockford, Illinois and it is a consistent story, going back to
Frank Vargo's testimony. At the outset, even though China is
not the whole issue in terms of our manufacturing
competitiveness, there is no doubt it is a significant factor.
There is no doubt that an active enforcement effort of the
trade laws is due with respect to the Chinese. I think that has
been the case, but we are always interested in doing more. But
it is a pain absolutely.
Mr. Wolf. I would like to request that Secretary Evans and
you meet several weeks after the recess with four or five of
these industries.
Mr. Aldonas. Sure, happy to do that.
Mr. Wolf. Set up that meeting so he can hear, I think
Secretary Evans is a good person and good man, and I would like
him to hear some of this. I know you will go back and
articulate it and this is a cinch. Again, this is not a human
rights issue, human rights hearing, but the administration did
not raise a resolution, a petition as they have in the past in
Geneva on human rights because they said there had been some
improvements in China.
Well, not so. As the author of ``The Religious
Freedom,''the commission report that came out Tuesday, just felt on
China it is not to the better, it is worse. The country by country
report that the Department puts out is horrible. There was some
political involvement here. It is a moral issue, it is a business
issue, trade issue, but it is a moral question and you cannot talk one
way and do something different. So I think that is why there is a sense
of suspicion and a sense of--I mean, if you are in Falun Gong you are
out of the picture. They are just crushing them like that. So you can
understand why there may very well be.
What would you recommend to the witnesses that have
appeared here today? All three of you, what would you recommend
to them.
Mr. Allgeier. Well, first of all, with respect to 421.
Mr. Wolf. With respect to their concerns that have been
raised. I do not know if you were here the whole time. What
would you say to them? I mean, what can they do? We are going
to ask you later about this. What do you recommend to them?
Mr. Allgeier. I recommend that they and others like them,
as they perceive problems, either problems of access or
problems of dealing with injurious imports, come to us as early
as possible and we are prepared to look forward to working with
them to solve whatever particular problem it is. If it is an
enforcement of their intellectual property rights, if they have
got a specific infringement in China, we will work with an
individual company to go after that particular problem.
Mr. Wolf. The problem there--and I appreciate that and I
think that is a fair statement. When Windows 95 was available
on the streets of Beijing before it was available on the
streets of Washington, D.C., nothing was done.
Mr. Allgeier. We push and continue to push very, very hard
on this.
Mr. Wolf. They did not even tell us about SARS. If you read
today's paper--did you read today's paper?
Mr. Allgeier. Yeah.
Mr. Wolf. Did you read the point about SARS?
Mr. Allgeier. Yeah.
Mr. Wolf. Did you read they did not even tell us about
SARS? I mean they arrested a Catholic bishop for giving holy
communion to Congressman Chris Smith. So it is like an
integrity thing. It is like we are not just--it was just not
dealing--I mean, you should pull the shades from your eyes and
see. He who is faithful in little things will be faithful in
big things. If you are not faithful in little things, the more
the likelihood you would be faithful in big things, and big
things are dollars and greed, so that is what they are
concerned about. And so we see SARS. We see human rights. We
see they sold weapons. This is not a hearing to get into that,
but they sold weapons to Iraq. You will probably find that
American military who died in the effort, and I support the
President's efforts, were probably killed by Chinese weapons.
You remember one night as we were all watching CNN and
there was a missile that hit a shopping center in Kuwait, it
had Chinese markings. There are things that I cannot talk about
because they are secure. So when we look at the whole picture,
if we were just a little thing, we would say, well, but we look
at that, we look at this, we look at this, we look at this, it
took Customs, and you were not there, Mr. Browning, maybe you
were, maybe you were not, it took Customs years to get into
Beijing Prison No. 1 and by the time they got in we gave them
everything, the Chinese cleared the whole thing out.
Mr. Allgeier. That is why we put so much emphasis on these
elements of transparency and due process in the commercial
area, not that that is going to solve all the problems, but
that is an important part of trying to open up that society in
the little slice of it that we are working on.
Mr. Wolf. Why do you think the trade deficit with China is
$103 billion today?
Mr. Allgeier. I think it is primarily because of
macroeconomic factors.
Mr. Wolf. There is nothing we could have done or can do to
deal with it?
Mr. Allgeier. I think we certainly do everything we can and
should and we should intensify our efforts to make sure we have
maximum access in those areas where we have comparative
advantage, but we still do operate in an overall global economy
where different growth rates of economies make a huge
difference in terms of their receptivity to imports.
Mr. Wolf. But do you take into all the consideration the
issues we have dealt with from slave labor to all the other--
what does that mean? Does that mean anything?
Mr. Allgeier. Yes, it means an awful lot.
Mr. Wolf. The artificial flowers that are made in gulags.
Does that mean anything from a trade issue? Do we not discuss
that? Does that have a factor we look at? Do we plug that in?
Mr. Allgeier. No, that would be a factor we look at and we
do not want to be supporting unfair trade practices, not just
unfair trade practices at the border and the pricing and so
forth, but the conditions under which the products are
manufactured.
Mr. Wolf. But in essence we really are. I know you are not
knowingly doing it, and I do not know you but I am sure you are
a good person.
I think I have made my point. I guess I would think you
would be troubled that your citizens--we are all public
servants and we serve. I would think you would be troubled that
the people that you are supposed to serve or that I am supposed
to serve are losing confidence, if not have lost it, are losing
it. Maybe today can be a new book, new beginning, but they have
lost confidence, and I think that that should be troubling to
Mr. Zoellick, who we have been supportive of in this committee.
We actually added more money into your budget last year above
what the administration asked for.
Mr. Allgeier. I am very aware of that, and we are very,
very appreciative of that.
Mr. Wolf. I say well, now, we did that, and now one
specific question.
Mr. Browning. Mr. Chairman, if I might, I want to clarify
something, if I could with your permission, sir.
Mr. Wolf. Sure.
Mr. Browning. Actually I was involved in the initial
negotiation of the forced labor agreements with China.
Mr. Wolf. You remember the socks that I brought back.
Mr. Browning. I do remember them.
Mr. Wolf. How dong did it take for the Chinese to let you
in Beijing prison, roughly, just for the record?
Mr. Browning. Far too long, sir. I think it took at least a
year for us to get the diplomatic status for our folks first of
all to be placed in Beijing and almost a year andand half later
before we got the first visit.
Mr. Wolf. When you got in what did you see?
Mr. Browning. Nothing.
Mr. Wolf. Nothing. I have the photos. I have video. We saw
everything. I think the Chinese thought I was a tourist. I took
videos. And so they would not let you in. They would not let
you in until they cleaned it out, and you know those people
that are making the socks and there were golfers on the socks,
and I said to them, Do you have a lot of golf courses here. No,
we do not play golf. I said, well, how come you got golfers
embroidered on this sock? They were all Tiananmen Square
demonstrators. Remember the guy before the tank. They were all
in this one room, they were all, and many of them were still
there. Now they are probably doing that in a different way.
Is Harry Wu still here? In 30 seconds what is life like in
a slave labor camp? Just 30 seconds.
Mr. Wu. According to Chinese regulation, everybody forced
to labor and----
Mr. Wolf. How long were you in a slave labor camp?
Mr. Wu. 19 years.
Mr. Wolf. 19 years. What time did you get up in the
morning?
Mr. Wu. In the morning when the sun rise, go to the field.
Mr. Wolf. What time did you go to bed at night?
Mr. Wu. Come back when the sun setting down.
Mr. Wolf. And 5 days a week, 6 days a week, 7 days a week?
Mr. Wu. 30 days a month.
Mr. Wolf. 30 days a month. Tell us in 15 seconds, 15,
because I saw Harry and he triggered it. I did not know Harry
was coming, but I am glad Harry is here. Tell us the story I
read in your first book where the tractor blade cuts the ground
and you see the snakes and you reach in and grab the snakes.
Just tell them the story, 30 seconds.
Mr. Wu. Your food is related to your work performance.
Mr. Wolf. Food.
Mr. Wu. If your work performance not good enough, they
reduce your food ration.
Mr. Wolf. What did you see when you saw the snakes?
Mr. Wu. With that we have taking all kinds of food,
including mouse, snake, because it is good food for our body.
Mr. Wolf. What did you do with the snakes when you saw
them?
Mr. Wu. I ate it.
Mr. Wolf. Now, I do not think these guys, this young lady
here from Peru, your people are not eating snakes and are not
doing that. So this is what I am talking about, to look at it
in a full range. I mean both of you, all three ought to read
Harry's books. The point is what is triggered. It is 2\1/2\
years, so they are not going to tell you the truth. We may,
there may very well be somebody in this audience, either your
wife or your husband or your son or your daughter or your
grandmother or your grandfather or your mother or father, that
dies from SARS because the Chinese did not really shut this
thing down and go out and open it up. That is what we are up to
and that is their frustrations.
You all are good guys, and I stipulate that. You are, but I
think we really have to make sure and I am a free trader. I
voted for fast track. I voted for fast track without the
administration even asking me to vote for fast track. I added
$2 million to your budget above what the administration asked
for. So we need you to come alongside us and be their advocates
and help us out.
On the 421, Section 421 added to the Trade Act of 1974 by
U.S.-China relations established----
Mr. Aldonas. Mr. Chairman, before you do that, one of the
things I would like to come and talk to you about is how we can
do a better job precisely of that because we want to make sure
the door is open for folks when they have issues in China,
whether it is because they want to get into the market or
whether they are facing unfair competition, and we have been
doing some thinking about some new models that I think would be
worth coming up and chatting with you about. I worry
particularly for small and medium size companies that we have
been hearing from more and more. From the manufacturing side it
is transactional costs. The big guys know where to find you and
it is much harder for small and medium size guys. I think that
is where we need to do the better job and better thinking, and
we have been thinking about using some tools that we used in
the former Soviet Union and materials of relatively low cost
trying to improve the level of communication so that we hear
about these things, including complaints about what they are
facing, if it is slave labor, whatever it might be, so we get a
better intake mechanism.
Mr. Wolf. I appreciate that. Do you both agree with him on
this?
Mr. Allgeier. Yes.
Mr. Browning. Yes.
Mr. Wolf. I think we are not going the ask you the rest of
the questions. I do not want to be confrontational, and I have
never used this position to browbeat a witness or go after
somebody. But I feel strongly and I figure attitude is a good
attitude and what I think we ought to do is see what we can do,
meet with some of the groups. I do not mean to rewrite the
trade laws and do stuff, but see what we can do and maybe we
all change and do different things and find out. So with that
attitude if you both agree and you agree, I am not going to go
through the whole line of questions.
Mr. Allgeier. We certainly would welcome the opportunity to
meet with you and our colleagues and to work on these issues.
Mr. Browning. We fully concur with that. The other piece,
Mr. Chairman, is we have maintained a fairly active dialogue
with the trade. I myself met with folks like Frank Vargo, who
go through some of these issues and we have found him a great
source of information for our enforcement mission, so we
welcome this opportunity.
Mr. Wolf. We will do that. I think I am not going to have
any additional questions because I think we would not--I am not
trying to put you in a tough spot, and I do not think we would
serve any purpose and I think your attitude is appropriate.
With that, I just recognize Mr. Serrano.
Mr. Serrano. Mr. Chairman, I will be brief. Just an
observation and you spoke to it in terms of how I feel about
it.
[Clerk's note.--Subsequent to the hearing, the following
information was provided to the Committee:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Serrano. You know, as the Ranking Member here, I did
not select the witnesses today. It is important to note that,
because to a person the witnesses who came before us today
indicated a concern of dismay and pain with the way our
government is reacting to their needs. Had I selected them, one
could say that I stacked the meeting. And certainly, at the
risk of stereotyping, which I dislike tremendously, they are
not big-city leftist liberals who are coming here to bash the
administration. But they all had concerns about their
government not responding. So, at the minimum, what should come
out of today's hearing is that those of you who are part of
what we do here try to respond, especially in support of the
efforts of Members like myself who support trade with China,
but who never support trade with China either for it to do a
number on the Chinese people or to do a number on the American
people, but certainly to promote goodwill and good
understanding and the flow of capital to both communities.
So I would hope that you know that this meeting was not
stacked, and these are not all my cousins who spoke. I mean,
there are other issues we could discuss I don't like about this
administration. This one I support the administration on. And I
would just hope that you would understand that these folks were
legit in their comments that, hey, our government is not
responding to our needs. And I thank you for you support.
And always, as the Chairman said, keep in mind that the
time that he has been chairman and the time that I have been
Ranking with him usually--I can't believe I am saying this
being who I was and how I got started in politics--that what
most agencies in this bill ask for, we give them more, hoping
that everybody understands what their role should be. Thank
you.
Mr. Wolf. Thank you, Mr. Serrano.
Mr. Mollohan.
Mr. Mollohan. Thank you, Mr. Chairman.
Mr. Chairman, since I am at the other end of this process,
on the structural, some structural questions with regard to our
trade structure, if I might. Quickly.
Mr. Browning, the inspector general of the Department of
Homeland Security is completing a report that reportedly states
that the U.S. Customs Service has failed to collect millions of
dollars under the Byrd amendment, and I think that the number
we are getting is that it has failed to collect as much as $90
million. U.S. law requires the Federal Government to collect
that.
I notice in some of your testimony before you talked about
dealing with noncompliance. To the extent that the agency is
not complying with the law, I would like for you to speak to
that, and understanding that if the companies who are entitled
to this money and the communities were not raising this issue,
would we even know that Customs was not collecting this money
as it is supposed to do under cases, let alone redistributing
where it is supposed to under the Byrd amendment?
Mr. Browning. I understand.
First of all, let me say that we have, in fact, read the
IG's report. In fact, we are working very closely with them.
Commissioner Bonner has given me a clear mandate that we are to
address all of the shortfalls from both the management
standpoint as well as the collections that are due and need to
be deposited into this program.
We undertook this program with perhaps less of an
investment of resources than we should have. We intend to
correct that before the end of this year. I would remind you
that at this point in time, over the 2 years of disbursements
under the Byrd amendment, we have disbursed roughly somewhere
in the neighborhood of $550 million. The reported shortfall or
error in payments is a rate somewhere in the range of 5.5
percent of that amount, absolutely not acceptable.
Mr. Mollohan. Well, that wouldn't add up. I mean, if you
have distributed 500 million, and we are talking about 90
million not being collected, that is about one-sixth, isn't it?
Mr. Browning. Let me actually go to that piece, because the
piece I was speaking of, there are several shortfalls in our
management of the program that was identified. Again, I agree
with all of the findings, as does Commissioner Bonner, and that
is why we have made this a priority activity of the
organization to address that. There are some $90 million in
unliquidated payments and uncollected payments. We are in the
process right now of working with the Commerce Department to
make sure that instructions have been issued for liquidation in
each of these cases. That is going well. We are in the process
of determining, to the extent that we can, whether there is
sufficient bonds to cover that. All of these things are things
that we are going to undertake in terms of trying to manage
that program better to ensure that the collections are made and
deposited into the appropriate accounts.
Mr. Mollohan. And time frame. Did I hear you say you
weren't going to have this fixed until the end of the year?
Mr. Browning. We have a working group that is under way
right now that is addressing all of the various pieces of the
IG report.
Mr. Mollohan. But when do you think we will have this
addressed adequately that we are able to perform this
responsibility under the requirements of the Byrd amendment?
Mr. Browning. In terms of the overpayments, we are going
out to try to collect the overpayments starting June 1 of this
year. With respect to the uncollected payments, we are doing
that right now. I hope to have this entire process completed by
the end of this year, December of 2003.
One thing I need to remind. In some respects, the
uncollected amounts represent a party's ability to exercise a
statutory right to challenge our determinations, and so in that
instance some of these things are tied up in litigation, some
are tied up in our protest process. But to the extent that they
are not, and it is simply a collection responsibility, we will
move expeditiously to correct that problem.
Mr. Mollohan. Fair enough. And I appreciate your response.
Mr. Allgeier, on February 3rd, President Bush recommended
repeal of the Continued Dumping and Subsidy Offset Act. I think
that was in his budget submission to the Congress and the
appropriation committee is looking at that. It is a lot of
money. On May the 6th, I understand that in a statement
regarding the Byrd amendment before an WTO arbitrator, a
statement was made, quote: Unlike other elements of the budget,
the repeal of the Byrd amendment is not tied to the end of the
fiscal year, and, in particular, it is not intended to be
included in the appropriation acts, end ofquote.
That, I think, flatly contradicts the budget's request
submission. And if the administration's position is that the
Byrd amendment should not be repealed, why has the
Administration--why did you ask for it to be repealed without
submission? Why have you not submitted an amended budget
request reversing that?
Mr. Allgeier. I am not sure I fully understand the
question. In terms of----
Mr. Mollohan. I think it is your quote; is it not? I mean,
as I understand it, it is.
Mr. Aldonas. Maybe I could help you, Congressman. Basically
in the budget document what they were doing was taking a look
at all the individual items where they thought there might be
changes. And, of course, in any budget they were trying to
reflect what their expectations were. And I think from OMB's
perspective, the idea at the time that we had lost a WTO case
even on appeal with respect to the Byrd amendment meant that--
--
Mr. Mollohan. Well, you hadn't lost on appeal.
Mr. Aldonas. Actually by the time the budget came out, we
had. But the point, Mr. Mollohan, is that the statement made in
Geneva, at least as I understand it, is a statement that is
absolutely accurate and fundamental from our perspective, which
is Congress has to take the action here.
Mr. Mollohan. Wait. Obviously Congress has to take the
action. Congress took the action. It passed the Byrd amendment.
You have requested in the budget submission a repeal of the
Byrd amendment. My question is if you don't want it repealed,
you need to file an amended budget request reversing that
request. And so if your position is that the Byrd amendment
should not be repealed, can we expect you to file that
amendment?
Mr. Aldonas. Mr. Mollohan, there is no administration
position with respect to whether we are going to give you a
different budget submission. But I want to go back to the
statement, because what the statement was saying was that this
is an authorization matter, not an appropriations measure. So
with respect to the end of the fiscal year, Congress's action
isn't dependent on the end of this particular fiscal year.
Mr. Mollohan. I understand what you want to go to, but what
I want to go to is if it is your position that the Byrd
amendment should remain and should be reinstated, you need to
submit a budget request to that effect. And can we expect you
to do that?
Mr. Aldonas. But what I want to be clear about, Mr.
Mollohan, is the statement that was made in Geneva was not----
Mr. Mollohan. Yes, sir.
Mr. Aldonas [continuing]. A statement----
Mr. Mollohan. Excuse me.
Mr. Aldonas [continuing]. To say that we were, in fact, not
going to comply with the WTO obligations.
Mr. Mollohan. Then let me get it clear on the record, sir.
Do you not--do you support your budget resolution asking for
repeal of the Byrd amendment?
Mr. Aldonas. That is the President's budget.
Mr. Mollohan. And you do not intend to file an amended
budget request to reverse that position?
Mr. Aldonas. Not that I know of. But I am happy to go back
and talk with the folks at OMB.
Mr. Mollohan. One final question. There is a lot of back
and forth, and this is so crucially important to the steel
industry right now. With regard to the loan guarantee program
the administration is in communication with several of the
steel companies that operate in my congressional district that
are in the process of applying for and actually being granted
on a contingent basis a loan guarantee. And there is another
company that--Wharton Steel--that is in bankruptcy now, and I
cannot imagine it going forward with financing without this
guarantee.
Mr. Aldonas. That is my understanding as well.
Mr. Mollohan. In the budget request you have asked for a
rescission of the 2003 money for the steel loan guarantee
program. You have also not asked for any money for the steel
loan guarantee program for 2004, and, consequently, you are not
supporting the loan guarantee program. If you are serious about
supporting the loan guarantee program, as, believe me, when
they are listening to you talking to them on the telephone back
there, they think you are serious about it, you are going to
have to do three things. You are going to have to reverse your
recommendation to rescind the remaining funds contained in the
loan guarantee program, the 2003. You are going to have to
request a reauthorization of the program for another 2 years.
And you are going to have to make certain that it is fully
funded for use by the U.S. Steel companies by an 2004
appropriation, which is likewise going to require a submission
of an amended budget request.
And do you intend to submit an amended budget request with
regard to these three things?
Mr. Aldonas. I will ask OMB about that, but I know that you
had discussions with Secretary Evans with respect to this
particular issue.
Mr. Mollohan. Very good discussions.
Mr. Aldonas. And we recognize it is a difficulty, because
the authorization will still be there even though there is a
sunset provision attached to the steel loan guarantee program.
It is true that the funding will not be there unless there is a
technical fix to that.
Mr. Wolf. We will get that for the record. We are down to 5
minutes.
Mr. Wolf. Mr. Sabo, do you have a question, or do you want
to submit them for the record? Do you want to come back?
Whatever you want to do.
Mr. Sabo. I don't want to come back. Let me just make this
comment. There is sort of this conventional elitist wisdom that
trade is all good regardless of how it works in this country
that permeates to a certain degree both parties. But when we
operate with over a $100 billion deficit with China in contrast
to Europe, and there is sort of a ``who cares'' attitude by
folks who run these programs, something is just haywire. It is
the same international trade laws that apply to us and to
Europe, and somehow their self-interest survives in a fashion
that ours doesn't. And I don't understand this view that is
sort of this is okay. You know. It is something--I don't know
the intricacies of the workings of these laws.
Something is obviously screwed up in a major fashion with
how we are conducting trade policy when we have that kind of
trade deficit and the rest of the world doesn't. You know, it
would appear to some of us that our goal is not to have bigger
markets, but to have a bigger pool of low-paid, poorly served
workers in some country to get access to, not markets.
So I don't have a question. I just think that it is screwed
up in a royal fashion, and at some point I would like to see
some Administration take it seriously.
Mr. Aldonas. Could I take 1 second, Mr. Chairman?
Mr. Wolf. We are out of time. Go ahead.
Mr. Aldonas. Grew up in south Minneapolis. Went to
Roosevelt High. You were my Congressman. And most of my friends
are still working at auto jobs over in that Ford plant across
the Ford Bridge in St. Paul. And I understand what you are
saying.
Mr. Wolf. We are down to 3 minutes. We will just submit
additional questions for the record.
Mr. Wolf. We are going to adjourn. Thank you all very much.
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