[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



                                                   S. Hrg. 102-000 deg.

                  SAVING THE DEFENSE INDUSTRIAL BASE

=======================================================================

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                      WASHINGTON, DC, JULY 9, 2003

                               __________

                           Serial No. 108-23

                               __________

         Printed for the use of the Committee on Small Business


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house


                                 ______

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                      COMMITTEE ON SMALL BUSINESS

                 DONALD A. MANZULLO, Illinois, Chairman

ROSCOE BARTLETT, Maryland, Vice      NYDIA VELAZQUEZ, New York
Chairman                             JUANITA MILLENDER-McDONALD,
SUE KELLY, New York                    California
STEVE CHABOT, Ohio                   TOM UDALL, New Mexico
PATRICK J. TOOMEY, Pennsylvania      FRANK BALLANCE, North Carolina
JIM DeMINT, South Carolina           DONNA CHRISTENSEN, Virgin Islands
SAM GRAVES, Missouri                 DANNY DAVIS, Illinois
EDWARD SCHROCK, Virginia             CHARLES GONZALEZ, Texas
TODD AKIN, Missouri                  GRACE NAPOLITANO, California
SHELLEY MOORE CAPITO, West Virginia  ANIBAL ACEVEDO-VILA, Puerto Rico
BILL SHUSTER, Pennsylvania           ED CASE, Hawaii
MARILYN MUSGRAVE, Colorado           MADELEINE BORDALLO, Guam
TRENT FRANKS, Arizona                DENISE MAJETTE, Georgia
JIM GERLACH, Pennsylvania            JIM MARSHALL, Georgia
JEB BRADLEY, New Hampshire           MICHAEL MICHAUD, Maine
BOB BEAUPREZ, Colorado               LINDA SANCHEZ, California
CHRIS CHOCOLA, Indiana               ENI FALEOMAVAEGA, American Samoa
STEVE KING, Iowa                     BRAD MILLER, North Carolina
THADDEUS McCOTTER, Michigan

         J. Matthew Szymanski, Chief of Staff and Chief Counsel

                     Phil Eskeland, Policy Director

                  Michael Day, Minority Staff Director

                                  (ii)


                            C O N T E N T S

                              ----------                              

                               Witnesses

                                                                   Page
Patrick, Hon. Suzanne D., Department of Defense..................     5
Borman, Hon. Mathew S., Department of Commerce...................     9
Rupert, Timothy G., RTI International Metals, Inc................    10
Coffey, Matthew B., National Tooling and Machining Association...    12
Storie, Chip, Association for Manufacturing Technology...........    14
Bradley, Olav, American Mold Builders Association................    16

                                Appendix

Opening statements:
    Manzullo, Hon. Donald A......................................    49
    Velazquez, Hon. Nydia........................................    51
Prepared statements:
    Patrick, Hon. Suzanne D......................................    53
    Borman, Hon. Mathew S........................................    58
    Coffey, Matthew B............................................    65
    Storie, Chip.................................................    70
    Bradley, Olav................................................    74

                                 (iii)

 
                   SAVING THE DEFENSE INDUSTRIAL BASE

                              ----------                              


                        WEDNESDAY, JULY 9, 2003

                  House of Representatives,
                               Committee on Small Business,
                                                   Washington, D.C.
    The Committee met, pursuant to call, at 2:24 p.m. in Room 
2360, Rayburn House Office Building, Hon. Donald A. Manzullo 
[chairman of the Committee] presiding.
    Present: Representatives Manzullo, Bartlett, Schrock, Akin, 
Shuster, Musgrave, Gerlach, Beauprez, Velazquez, Ballance, 
Christensen, Napolitano, Bordallo, Majette, Sanchez.
    Chairman Manzullo. Good afternoon and welcome to this 
hearing of the Committee on Small Business. A special welcome 
to those who have come some distance to participate and to 
attend this hearing.
    Our domestic manufacturing base is being hollowed out right 
before our very eyes. We are becoming a nation of service 
industry employees and assemblers. A new round of globalization 
is sending upscale jobs overseas that include chip design, 
engineering, basic research, even financial analysis.
    Can America lose these jobs and still prosper?
    It is time to wake up. If we keep losing our manufacturing 
jobs, we will not have much of a service sector to worry about.
    Just this past week, the Department of Labor released its 
June employment report. For the thirty-fifth consecutive month, 
56,000 people employed in manufacturing have lost their jobs. 
Even more shocking is that for the first time since statistics 
have been kept, our country now has fewer than 10 percent of 
its labor force employed in manufacturing jobs. Two years ago, 
it was 16 percent. Fewer than 14.7 million of our nation's 147 
million workers are involved in manufacturing.
    The Defense Authorization Bill as passed by the House of 
Representatives provides important measures to preserve our 
defense industrial base dominated by small businesses. I 
commend my good friend Chairman Duncan Hunter for recognizing 
the present manufacturing crisis and taking steps to prevent 
further erosion of the defense industrial base.
    Last May, the Office of Management and Budget released its 
Statement of the Administration's policy, raising concerns 
about various sections of the House version of the defense 
bill. Specifically, the administration objected strongly to 
industrial based provisions of the defense bill because they 
are ``burdensome, counterproductive and have the potential to 
degrade U.S. military capabilities.''
    In addition, the statement readily admits that the U.S. is 
no longer on the leading edge of some critical technologies 
crucial to our defense needs by claiming that the Buy American 
provisions of H.R. 1588, which increases American content from 
50 percent to 65 percent, will ``unnecessarily restrict the 
Department of Defense's ability to access non-U.S. state-of-
the-art technologies and industrial capabilities.''
    I wish the administration had read their own statement 
because they have just admitted that the United States does not 
possess state-of-the-art technologies and industrial 
capabilities. The person who wrote that probably does not know 
the difference between Brylcream and machine oil.
    The purpose of the hearing is to provide a forum so that 
the administration can explain in more detail the rationale for 
their position on the Buy American provisions in H.R. 1588. 
That is what this hearing is about.
    We need to discuss what can be done to recover America's 
lost edge in certain high technology products, many of which 
are produced by small businesses, and what steps are being 
taken to prevent even more loss of manufacturing critical to 
our defense industrial base to overseas firms.
    We just lost another factory, another 800 workers to China, 
automotive parts, in a county of 18,000 people. The yuan 
remains fixed, as it has been, against the U.S. dollar since 
1994. The only person doing anything about it is Treasury 
Secretary Snow. That is the same as a 40 percent tariff on all 
U.S. goods going to China and nobody is doing anything about 
it. Nobody.
    There are several remedies that are out there. There is 
Section 50 of the WTO, Section 4 of the International Monetary 
Fund, other sections of the trade agreement. When the foreign 
countries continue to manipulate the currency for the purpose 
of making their exports to us a lot cheaper and setting up 
these trade barriers to us, this is another one of our series 
of trying to salvage what is left of the industrial base in 
this country.
    [Mr. Manzullo's statement may be found in the appendix.]
    Chairman Manzullo. I look forward to the statement from our 
ranking minority member, Mrs. Velazquez.
    Ms. Velazquez. Thank you, Mr. Chairman.
    In the upcoming weeks, House and Senate conferees are 
expected to move to resolve differences regarding the 2004 
Defense Authorization Bill. Of the many issues that will be 
discussed are the House provisions to enhance the requirements 
for the Department of Defense to purchase from domestic 
sources.
    A strong industrial base has always been a critical part of 
our nation's economy and military security. Two important tools 
in maintaining our manufacturing sector are the Buy American 
Act and the Berry Amendment. These provisions are as important 
today as the day they were enacted because of the dire straits 
facing our manufacturing industry.
    As of December 2002, the manufacturing sector has lost jobs 
for 29 consecutive months, the longest stretch of monthly job 
losses since the great depression. In June alone, the economy 
lost an additional 56,000 manufacturing jobs. Clearly, 
something needs to be done to bolster this industry and one way 
is through the fair marketplace.
    This Committee has long known that when it comes to 
procurement policy the Department of Defense actions leave a 
lot to be desired. This agency has a history of looking for 
loopholes to avoid doing business with small businesses. What 
is new is that we are now discovering that the Department of 
Defense does not just have a problem doing business with small 
firms, they also do not want to buy from American businesses in 
general.
    The most recent proof of this is the Department of Defense 
legislative package for the 2004 DOD reauthorization. Contained 
in this package is a proposal to weaken the protections covered 
under the Buy American Act and the Berry Amendment. While this 
would raise concern at any time, it is especially worrisome now 
when our manufacturing base is in the midst of such turmoil.
    Today's hearing will give us an opportunity to evaluate why 
the administration believes such actions are justified. In 
addition, it will provide another opportunity to review the 
procurement practices of the Department of Defense as well as 
legislative initiatives that might be contributing to the 
growing U.S. manufacturing crisis.
    It is obvious we need to make sure that the Department of 
Defense has the flexibility in its procurement policy to 
accomplish its mission. However, I believe that the 
administration's proposal uses the excuse of the need for 
readiness to skirt its responsibilities to our domestic 
industry and this is just plain wrong.
    While I believe that the provisions contained in the House 
bill strengthen the Berry Amendment and the Buy American Act 
are reasonable, I also think that to a certain extent they are 
at best a patchwork solution helping some industries. This will 
result in providing little or no assistance to many sectors of 
light manufacturing and small business. This picking of winner 
or loser, whether intentional or not, is poor public policy.
    It is also important to note that with the adoption of 
these provisions in the final Department of Defense 
reauthorization they will not have a demonstrated effect on our 
manufacturing base. This sector is not in trouble because of 
bad procurement practices, but because of poor trade, tax and 
monetary policies by the current administration. This has made 
domestic products too expensive and driven companies to 
relocate overseas.
    Until these ill-fated policies are changed, we will 
continue to experience a decline in our domestic manufacturing 
base, which means our economy will remain in a down turn.
    I want to thank the witnesses for coming today and I look 
forward to hearing their testimony.
    Thank you, Mr. Chairman.
    [Ms. Velazquez's statement may be found in the appendix.]
    Chairman Manzullo. Thank you.
    Congressman Ryan, a former member of our Committee, if you 
could have a seat and introduce your constituent and then he 
will be pre-introduced by the time we get to him.
    Mr. Ryan. Thank you very much, Mr. Chairman. I appreciate 
the opportunity.
    I would like to introduce Tim Rupert from RMI Titanium in 
Niles, Ohio. We have been working on the Berry Amendment and 
numerous Buy America issues that we have been dealing with over 
the past--really a few months now. I was on this Committee for, 
I think, one day, one hour maybe, and Chairman Manzullo and I 
started talking about the Barry Amendment and I just wanted to 
take this opportunity to thank Mr. Rupert for all he has done 
and what Chairman Manzullo has done and what Chairman Duncan 
Hunter has done regarding the Berry Amendment and protecting 
the industrial base in this country.
    With that I would yield back.
    Chairman Manzullo. Thank you very much for your 
participation.
    The focus of the hearing today is with regard to the 
provisions that have been placed into the defense authorization 
bill as it has come from the House. I want to take just a 
minute to summarize those. The first is on domestic source 
limitations, it is similar to a defense type of Berry 
Amendment, but it puts in there--it adds additional products, 
including aircraft tires and ground vehicle tires, added 
because there is only one U.S. manufacturer left of rubber, of 
those types of tires. It also adds pan carbon fiber and other 
types of materials.
    Another section that was added calls for notification 
whenever there is to be any type of a waiver of the Berry 
Amendment and the purpose of that simply is to give people a 
heads up that somebody is ready in the Pentagon to allow 
foreign materials to come in to displace certain provisions of 
the Berry Amendment.
    This started with this Committee about two years ago when 
we held an extraordinary four and a half hour hearing as to why 
the Army was having the black berets for our men and women in 
uniform manufactured in Sri Lanka, India, South Africa, Romania 
and China, to the exclusion of the manufacturers in this 
country and in violation of the Barry Amendment which states 
very explicitly that anything involving clothing has to be made 
with American material and in the United States of America.
    Another provision that was put in that will be amended 
provides that with regard to the machine tool industry, which 
is on its back, losing literally hundreds if not thousands of 
employees each day in this country, that if there is a new 
acquisition in excess of $5 million and if the contractor has 
to buy a new piece of equipment, then that piece of equipment 
has to be at least 70 percent or more of its value made in the 
United States. That also applies to molds, so obviously does 
not force companies to buy huge expensive machines involved in 
manufacturing but in the event that they have to buy a new 
machine because of a new acquisition, then it says it has to be 
at least 70 percent American.
    The bill also requires the Secretary of Defense to collect 
data to identify all contractors and subcontractors that use 
machine tools in contracts of $5 million or more.
    And then with regard to the Buy America Act, which is with 
regard to all government procurement, in this case, just with 
regard to Department of Defense, it increases the term 
substantially all, which is a regulatory definition of 50 
percent, to a legislative definition of 65 percent.
    The Pentagon served notice on it that it opposes each and 
all of these.
    Ms. Patrick, unfortunately, OMB did not get us your 
testimony until this morning and I know that you and Mr. Borman 
got your testimony in plenty of time.
    If anybody is here from OMB, the next time this happens, I 
personally subpoena the director of the OMB to come before this 
Committee with the testimony. It is not fair to minority staff, 
it is not fair to the majority staff, and the members of 
Congress to have that testimony that late and it is not your 
fault, it is OMB's fault. They sat on this thing for a long 
period of time. Yours was in in plenty of time to have that 
done.
    But the reason I bring that up, Ms. Patrick, is that the 
main portion of what we would like to hear from you comes at 
the very end and that is your statement that--you comment on 
H.R. 1588 and where you make the statement, and I want to see 
you defend this, you say, ``I believe that the provisions,'' 
that is the Buy America Act, et cetera, ``are based on 
inaccurate presumptions that the U.S. defense industrial base 
needs to be revitalized and U.S. defense systems are vulnerable 
due to foreign dependencies.'' That is where I would like you 
to focus on this. And if you do not have any more than what you 
have in here, I can understand that because it is not your 
fault. If I had had time, I could have talked to you earlier 
on. But we look forward to your testimony.
    Ms. Patrick. Thank you very much, Mr. Chairman.
    Chairman Manzullo. And obviously the complete statements 
will be put into the record.

    STATEMENT OF THE HON. SUZANNE D. PATRICK, DEPUTY UNDER 
     SECRETARY FOR INDUSTRIAL POLICY, DEPARTMENT OF DEFENSE

    Ms. Patrick. We had the great pleasure and privilege of 
having Mr. Crowther come over and talk to us about this 
hearing, I think it was last week, and so with your indulgence, 
especially since some of the members might not have had a 
chance to read the testimony, let me go ahead and go through my 
oral testimony, which in fact is a bit different than the 
written testimony because I did amend it, based on Mr. 
Crowther's comments, so if you would let me proceed.
    I am delighted to be here to share with you my overall 
assessment of the health of the defense industrial base, as 
well as DOD's small business objectives regarding our defense 
industrial base transformation initiatives.
    Despite the downturn in the U.S. economy, the defense 
industrial base is healthy, innovative and responsive. 
Aerospace defense firm operating margins are about 50 percent 
higher than they were in the 1980s. The return on invested 
capital is about 6.1 percent superior to the 4.4 percent return 
of the S&P 500. The PE ratio is about 15 times earnings, well 
above the historical average of about 9. And, finally, debt 
service capacity is about 6-to-1, as compared to the 4-to-1 S&P 
500 average.
    All of these measures are positive indicators of healthy 
defense companies. Indeed, in a faltering economic setting, 
defense is a significant contributor to economic growth and 
innovative defense companies of all sizes will continue to 
benefit from robust defense spending trends over the balance of 
this decade.
    The tripling of JDAM production, doubling NGBU production 
and countless examples of expedited equipment deliveries in 
support of Operation Enduring and Iraqi Freedom speak volumes 
about this industry's responsiveness. The department firmly 
believes that our strong domestic industrial and technology 
base is one of the cornerstones of our national security and 
that the current U.S. industrial base remains the strongest and 
most capable in the world, one that continues to be fully 
capable of meeting the demands placed on it by DOD.
    However, the department is not content to rest on past 
industry successes. The Secretary of Defense has been the 
department's greatest coach for forward progress. In speaking 
about department wide reforms to give DOD the needed 
flexibility and agility, he said that, and I quote, ``In an age 
when terrorists move information at the speed of an e-mail, 
money at the speed of a wire transfer and people at the speed 
of a commercial jet liner, the Defense Department is bogged 
down in the bureaucratic processes of the industrial age.''
    His viewpoint holds equally for some pockets of the defense 
industrial base. It is a byproduct, we believe, of progress 
that in the current transformation of the department the old 
must sometimes yield to the new.
    The history of the U.S. industrial base has many such 
examples. For example, the first semiconductors were developed 
over 40 years ago with research funding support from DOD. The 
first production order for integrated circuits was for the 
Minuteman missile program in about 1959.
    In 1963, over two-thirds of the devices made by the 
semiconductor industry were used in DOD weapon systems. Today, 
much less expensive integrated circuits are widely used in 
consumer, industrial, automotive and communications products. 
More than 50 years later, DOD and the defense industry can now 
choose from a broad array of semiconductor products that do not 
depend on DOD financial support to develop. In fact, by 2000, 
total government consumption including DOD fell to below five-
tenths of one percent and semiconductors are now a free market 
commodity.
    Our access to this vibrant commercial product market for 
semiconductors serves as well, with few exceptions such as 
application specific integrated circuits.
    Titanium is an example where the U.S. Government developed 
the material and dominated initial purchases, but currently has 
a significant but small portion of the market. Titanium was a 
laboratory curiosity until the 1930s and the 1940s, when a 
production process was invented by W.J. Crawl under U.S. Bureau 
of Mines funding.
    In 1948, DuPont started production in the world's first 
titanium sponge production facility with the government taking 
almost all production, mostly for defense aerospace 
applications. Even in the 1980s, defense sectors consumed 
approximately three-quarters of titanium production. However, 
significant growth occurred in broad civil sectors such as 
sporting goods, chemical plants and automobiles. By 2003, 
defense applications of titanium shrunk to approximately one-
third of the total titanium produced, another commodity 
successfully transitioned to the commercial marketplace.
    And, finally, even the machine tool industry is in many 
cases evolving from the single purpose machines of the 1950s to 
the highly efficient and flexible low cost, multi-function 
machine center so popular across worldwide commercial and 
defense production today.
    In order to draw the next generation of new companies and 
solutions into the defense industrial base, the department has 
launched industrial base transformation initiatives, along with 
what we believe will be significant improvement in small 
business participation in DOD programs.
    In February of this year, my office published a report 
titled ``Transforming the Defense Industrial Base: A Road Map'' 
that sketched a road map for legacy and emerging defense 
suppliers, as well as for senior leadership in the department. 
As a product of its time, our report was informed by the 
lessons learned during Operation Enduring Freedom about 
fielding systems quickly and combining them in new and 
different ways. It also heeded the secretary's transformation 
mandate, attempting to make the defense enterprise more 
transparent so that all companies, current and prospective, 
small and large, could better find their place in the defense 
enterprise and its decision making process.
    Our study was built on case studies of 24 emerging defense 
suppliers, most of whom are small businesses who could grow to 
be tomorrow's giants. All have some business with the 
Department of Defense, but unlike today's giants, their annual 
revenues are often less than $10 million and they are made up 
of dozens, not thousands, of employees.
    The compendium of over 400 emerging defense suppliers that 
accompanies this report are in 47 states and represent this 
generation's inventors and innovators. None of these companies 
want to remain small, but all of them, as the chairman said, 
had difficulties finding their place in the defense enterprise 
and had experienced growing pains transitioning technologies 
they viewed as important to the department and to 
transformation.
    It was our conviction of the importance of the ideas and 
products of these emerging defense suppliers that motivated our 
study. We are sure that the defense industrial landscape of 
2020 will be significantly different from today's because of 
the pace of change and the kind of companies that make the new 
products so critical to transformational warfare.
    Our challenge is to match innovative capabilities and 
companies with the defense strategy and provide beachheads and 
bridges, not barriers, to nurture them and draw them into 
defense.
    But even as our report was going to print, some of the 
small companies we got to know through the report began gaining 
significant positions in the defense industrial base. Let me 
tell you the stories of just four of them.
    California's Foam Matrix, a company of 18 employees, 
started as a surfboard supplier and now is a builder of 
composite wings for the unmanned combat aerial vehicle. It was 
founded----.
    Chairman Manzullo. How are you doing on time there?
    Ms. Patrick. I am doing just fine on time, thank you.
    Chairman Manzullo. We are not.
    Ms. Patrick. Thank you.
    Chairman Manzullo. Do you want to sum up there?
    Ms. Patrick. I will be happy to sum up. I would like to 
give you some of the examples of the small companies, though. I 
think they would be interest to you.
    Chairman Manzullo. I understand, but you have talked about 
small companies and publicly traded companies, and you are not 
talking about existing companies that are being hit. That is 
missing from your testimony.
    Ms. Patrick. How much more time would you like to give me?
    Chairman Manzullo. I would like to give you an hour, 
really, but I just do not have the time here. If you can finish 
in a minute, that would be fine, because I have got to get 
everybody in here before the next series of votes goes on.
    Ms. Patrick. Okay. Well, let me move on, then.
    I think that the examples of the small companies indeed are 
in the written testimony and I think that most of the 
initiatives that we work on with regard to small businesses and 
the inroads that we have provided them to the department also 
are covered in the written testimony, which I think you have.
    The only thing I would ask you to do, Mr. Chairman, if I 
can submit the entirety of my oral testimony for the record.
    Chairman Manzullo. It will be made part of the record. 
Thank you.
    Ms. Patrick. Just so that you have an opportunity to read 
it.
    Let me then turn to House Resolution 1588.
    Chairman Manzullo. That is what I wanted seven minutes ago, 
but go head. Let us get it out. Please.
    Ms. Patrick. You have asked that I comment on the 
provisions of House Resolution 1588 and I will do so now.
    First, you have already alluded to what the Office of the 
President of the United States thinks about this. The 
provisions are indeed based on inaccurate presumptions that, 
first, the defense industrial base needs to be revitalized and, 
two, that U.S. defense systems are vulnerable due to foreign 
dependencies.
    I think that I talked in my formal remarks about how 
impressed we have been with the responsiveness of the defense 
industrial base in operational environments and I have also 
given you some of the examples of the financial performance 
parameters of the defense industrial base to convince you of 
the fact that it is not on the ropes.
    But let me talk about one of the most impressive feats, 
talking to the nimbleness and flexibility of the defense 
industrial base.
    Chairman Manzullo. I have got to move on with these other 
witnesses. We can come back to you in terms of----.
    Ms. Patrick. Let me then cede my time and I will answer 
your questions.
    [Ms. Patrick's statement may be found in the appendix.]
    Chairman Manzullo. We will do that when we finish 
questioning the other people on the panel.
    I know you have a lot of information, it will come out in 
the questioning, and I forgot to introduce you in the midst of 
all this as Suzanne Patrick, Deputy Under Secretary of Defense 
for Industrial Policy. I thank you for your testimony.
    Our next witness is Matthew S. Borman, Deputy Assistant 
Secretary for Export Administration, Bureau of Industry and 
Security. That is the old BXE, as I knew it, Department of 
Commerce.
    I think you know where we are heading with the testimony. 
What we would like you to do--I think I have gotten my point 
across here and we look forward to your testimony.
    Thank you.

   STATEMENT OF THE HON. MATHEW S. BORMAN, DEPUTY ASSISTANT 
  SECRETARY FOR EXPORT ADMINISTRATION, DEPARTMENT OF COMMERCE

    Mr. Borman. Thank you, Mr. Chairman. It is a pleasure to be 
here and testify before you and members of the Committee. As 
you noted, when either I or my colleagues normally come up to 
speak with you, it is on export controls, a subject with which 
you are very familiar, but we are happy to be here to talk 
about the defense industrial base.
    I also have a full statement which I understand will be put 
in the record and I will further truncate my oral statement in 
light of the time considerations.
    The points I wanted to make really in the oral statement 
are the Department of Commerce really has two roles related to 
the defense industrial base and then I will comment briefly on 
H.R. 1588.
    We do a number of functions related to the defense 
industrial base. I think the ones that are most germane to this 
hearing are our assessments of specific industry sectors and we 
have actually five of those going on right now, one that deals 
with the biotechnology industry, one that deals with the 
textile and apparel industry, which was directed by the 
Congress to do, one that deals with the parachute industry, one 
that deals with the battery industry, both of which were 
requested by the Army, and one that deals with the shipbuilding 
subcontractor base, which was requested by the Department of 
Navy.
    We have those that are ongoing. Over the last 15 or so 
years, we have done roughly 30 of these industry subsector-
specific assessments, as I said, virtually all of them at the 
request of one of the services. Typically, what happens when we 
finish one of these studies is there is a series of 
recommendations that address whatever weaknesses there may be 
in that particular industry subsector. So that is one set of 
functions we carry out related to the defense industrial base.
    Another set relates to defense trade advocacy. We, along 
with other agencies, once a U.S. sale of a major weapons system 
to a foreign buyer is approved, advocate on behalf of the U.S. 
company. And obviously when a defense sale is made to a foreign 
government, that has a significant positive impact on the 
defense industrial base because it provides a lot of jobs, not 
only for the prime but for the subs.
    The third thing I wanted to mention that the Department of 
Commerce is doing, this is primarily with the International 
Trade Administration and Under Secretary Aldonis, is carrying 
out the President's manufacturing initiative, which is not 
limited to the defense industrial base, but focuses on the 
manufacturing sector at large and the object of this initiative 
is to really hear from the manufacturing industry the things 
the government could do to address some of the issues the 
chairman has raised.
    As you know, we have had a series of roundtables with 
industry. One was in Rockford recently, there is one in 
Schaumberg, or Naperville, I think, in a couple of days. And 
that report will come out early in '04.
    So that is in summary the issues that we deal with both 
specific to the industrial and also more generally the 
manufacturing sector.
    On H.R. 1588, as you have heard briefly and will hear more, 
I am sure, and see in the testimony, the administration 
believes that a lot of those provisions would make it more 
difficult for the Defense Department to procure what they need 
to procure on a timely and cost effective basis and certainly 
some of the provisions like the machine tool provision have the 
risk of actually helping some, potentially helping some parts 
of the defense industrial base but also hurting others, 
particularly if there are companies that end up having to spend 
a significant amount of money replacing machine tools that have 
foreign content with those that only have U.S. content. So 
clearly care has to be taken in crafting restrictions and 
requirements to that you are not potentially damaging one part 
of the industrial base but hurting or adversely affecting 
another part of the industrial base.
    And with that, I will conclude my statement and be happy to 
answer questions.
    [Mr. Borman's statement may be found in the appendix.]
    Chairman Manzullo. Thank you very much.
    Our next witness, if you have not figured it out by now, 
green is okay, yellow is thin ice and red is--yes, the hatch 
opens. Right.
    You have already been introduced by your very able member 
of Congress and we look forward to your testimony.

  STATEMENT OF TIMOTHY G. RUPERT, PRESIDENT & CHIEF EXECUTIVE 
      OFFICER, RTI INTERNATIONAL METALS, INC., NILES, OHIO

    Mr. Rupert. Thank you. Mr. Chairman, we thank you for the 
opportunity to testify here today on a matter of critical 
importance to my company as well as to my industry. My name is 
Timothy G. Rupert. I am the President and CEO of RTI 
International Metals, Inc. I am also the President of the 
International Titanium Association.
    Titanium due to its unique strength-to-weight ratio is 
critical to the production of jet aircraft. In fact, the 
industry was born out of the military's need for high 
performance metal from which to build key components of new jet 
fighters, as Ms. Patrick has already testified.
    It is for this reason that in 1973 Congress placed 
titanium, along with other specialty metals, under the 
protection of the specialty metals clause of the Berry 
Amendment, requiring that specialty metals be produced 
domestically. You cannot build military aircraft without 
titanium.
    Approximately 90 percent of primary titanium production in 
this country comes from just three companies. Generally three-
fourths of the industry's product goes into the production of 
aircraft, both commercial and military. These are small 
companies relative to their customers and following 9/11 they 
comprise a financially fragile industry.
    Earnings have steadily declined over the past five years, 
with the industry losing $163 million last year alone. To put 
that number in perspective, it represents about one-fourth of 
our combined market value. Obviously, this trend cannot 
continue much longer.
    The only other significant supplier in the world qualified 
for critical aerospace applications is a Russian producer, 
VSMPO, whose capacity is larger than the three U.S. producers 
combined. Yet while the domestic industry continues to shrink, 
VSMPO's shipments and earnings have steadily grown, in large 
part due to favorable treatment by the U.S. Government at the 
expense of domestic producers.
    That favorable treatment takes two forms: a trade policy 
that favors the Russian producer and increasing circumvention 
of the Specialty Metals Clause.
    The trade issue is not our focus here today, but I think it 
is important for the Committee to be aware of it, so I will 
cover it briefly.
    The basic raw material for our melting process is titanium 
sponge, so called due to its appearance. The U.S. industry can 
produce only a fraction of its sponge needs and must import the 
bulk of its requirements, paying a U.S. tariff of 15 percent.
    On the other hand, while our country has ample melting and 
finishing capacity to meet its needs, Russian finished melt 
products have been extended the benefits of the GSP trade 
program, which waives the 15 percent duty. So while U.S. 
producers are paying a 15 percent duty to get needed raw 
material, Russian mill product is permitted to enter our market 
in unlimited quantities duty free. The net effect is that 
VSMPO, in addition to any help that they get from their 
government, has been granted a cost advantage by our 
government.
    An even bigger threat to the U.S. titanium industry is the 
current attack on the Barry Amendment. Increased military 
spending, particularly aircraft, is one of the few bright spots 
in our marketplace. However, attempts to abolish or undermine 
the specialty metals clause in what I will refer to as midnight 
waivers of its requirements threaten to take away that 
lifeline.
    After operating as intended for 25 years, suddenly the 
specialty metals clause has fallen victim to increasing 
misinterpretation, its requirements violated and its intent 
ignored all together.
    A number of us have been subpoenaed to supply information 
in an investigation that began in the spring of 2000 by the 
Defense Criminal Investigative Services Unit of the Office of 
the Inspector General into violations of the Specialty Metals 
Clause. We encourage the Committee to inquire as to the status 
of this investigation and learn the extent of these violations 
from a disinterested party.
    Mr. Chairman, my written testimony details several of these 
questionable waivers of the Berry Amendment. I know that you 
are aware of them, so in the interests of time I am going to 
skip over them now.
    The effect of these waivers has been to seriously weaken 
the U.S. titanium industry and, in our opinion, if this trend 
continues, we believe that it will have a direct and negative 
impact on national security.
    Make no mistake: most of the titanium industry's business 
comes from aerospace, so we have a vested interest in its 
success. However, a strategy that sacrifices the industrial 
underpinnings of the industry in an effort to sell airplanes 
will ultimately fail. After all, the whole point of this 
national wanting to sell planes is because they embody U.S. 
materials and labor. There is no victory in selling an airplane 
with a U.S. name on the side if it is made of foreign materials 
and labor. It hurts our economy and it makes us dependent on 
foreign producers.
    One might ask if these are not the reasons for this assault 
on the specialty metals clause, then what is the motivation?
    It has been suggested that Russian product is cheaper. We 
doubt that that is the case in titanium, particularly when you 
consider the trade advantage mentioned earlier. Consider that 
the cost of the titanium in a 767 tanker, for example, 
represents less than one-half of 1 percent of its total cost.
    Chairman Manzullo. You have got a red light there flashing 
in front of you. Can you summarize in 30 seconds?
    Mr. Rupert. In 30 seconds? It would be difficult. Let me 
just give you my summation, Mr. Chairman, which is that if it 
is still the intent of Congress that small industries such as 
ours be preserved, we need your help in making it clear that 
regulations like the Specialty Metals Clause are a directive, 
not a nuisance.
    Chairman Manzullo. I appreciate that. Thank you.
     Our next witness is Matthew Coffey. He is the President of 
National Tooling and Machining Association.
    Again, I would like to counsel our witnesses that there is 
a narrow focus of this hearing today and that is the impact 
upon your industry, whether or not you think the Pentagon has 
missed the fact that you believe your industry is in peril. The 
purpose is educational. If you could use that as the theme, you 
could start out with saying how bad business is and how 
important your industry is, and what is left in the United 
States. Okay?
    I guess on that basis, you can start with your testimony, 
Mr. Coffey.

STATEMENT OF MATTHEW B. COFFEY, PRESIDENT, NATIONAL TOOLING AND 
        MACHINING ASSOCIATION, FORT WASHINGTON, MARYLAND

    Mr. Coffey. Thank you for making my opening remarks, Mr. 
Chairman.
    Basically, what I think we are dealing with here is a 
conflict of objectives between transnational companies and 
privately held small manufacturing companies. The 
transnationals or multinationals which the Defense Department 
just reported on with glowing numbers are doing just fine right 
now, but they are driven by numbers that they have to report 
each quarter. This forces them to seek the lowest cost source, 
wherever in the world they can find it, and with the Internet 
and inexpensive transportation, that system works for them.
    Not since Theodore Roosevelt was President have we seen 
such concentration in economic power as we see now in the 
transnational companies. Many of these companies' net worth 
exceeds the GDP of major developed countries. These 
transnational companies are highly efficient at moving quickly.
    When a large number of them move at once, that can create 
major economic effects before governments even know what is 
going on. And that is what I think we are involved with here. 
The privately held entrepreneur has no such economic leverage. 
They are geographically limited and resource limited. Teddy 
Roosevelt busted the trusts and maybe Congress needs now to 
regulate the transnationals going forward.
    U.S. government procurement represents a potential refuge 
for small manufacturing companies, 30 percent of which have 
disappeared in just the last three years. At this point in the 
aircraft business, the only real development work is being done 
on military aircraft and weapons. If the primes are allowed to 
out source this work under MOUs, then the devastation that has 
occurred in the last three years will continue.
    We need relief in the forms I have outlined in my 
testimony. What America has been losing these last three years 
is jobs, millions of jobs in manufacturing, mostly in small and 
medium sized companies, jobs that have a multiplier effect in 
the economy.
    You have seen it in your congressional districts. There are 
more big box stores selling foreign made products using loss 
leader pricing. That system works until enough people lose 
their jobs and we are getting very near to that point. The next 
election in your districts and in the country will be about 
jobs. It will not be about tax cuts because all the tax cuts in 
the world will not bring back jobs if the transnationals 
continue to ship the jobs offshore.
    On behalf of the 2000 companies of the National Tooling and 
Machining Association, I thank you for exploring how the 
defense industrial base can be improved so we maintain our tax 
base in the United States.
    I will be happy to answer your questions.
    [Mr. Coffey's statement may be found in the appendix.]
    Chairman Manzullo. You have two minutes left. Could you 
give a definition of what machine tools are?
    Mr. Coffey. Machine tools fall into two categories. There 
are commodity machine tools, which are large tools used by 
toolmakers for the purpose of designing tooling, tooling being 
used to make products in a manufacturing environment.
    I speak for the tooling and machining industry in the 
United States, which includes the toolmakers, the die makers, 
the precision machine companies that are all small, average 
size about 30 employees. There are probably about 7000 of them 
left in the country and our association has 2000 of them as 
members. At one point, we had 3800 members, but that was when 
the industry was much larger.
    We are seeing the industry disappear in the United States, 
we are seeing it being moved to Asia, and we feel that that 
is--since these jobs are so high tech, these jobs require so 
much training, that we are in fact doing ourselves in and you 
will see in my written testimony I am raising questions about 
what in the world we are doing to ourselves as a country.
    Machine tools, the commodity machine tool is a highly 
sophisticated machine that is used by a large range of 
industries and can be quite expensive. Tooling can be anything 
from $30,000 up to $400,000. Machine tools can run into the 
millions of dollars. So that is a basic definition and still 
within time.
    Chairman Manzullo. Thank you.
    Our next witness is Chip Storie, Vice President, Aerospace 
Sales of Cincinnati Machine, speaking on behalf of Cincinnati 
Machine.
    You are now in Kentucky, I understand?
    Mr. Storie. We are in the process of moving. Yes.
    Chairman Manzullo. Speaking on behalf of your company and 
on behalf of the Association for Manufacturing Technology. We 
look forward to your testimony.

 STATEMENT OF CHIP STORIE, VICE PRESIDENT FOR AEROSPACE SALES, 
 CINCINNATI MACHINE, CINCINNATI, OHIO, AND MEMBER, GOVERNMENT 
    RELATIONS COMMITTEE, THE ASSOCIATION FOR MANUFACTURING 
                           TECHNOLOGY

    Mr. Storie. Thank you for inviting me to participate today. 
My company, Cincinnati Machine, a division of UNOVA----
    Chairman Manzullo. Could you move the microphone?
    Mr. Storie [continuing]. Is a manufacturer of machine 
tools. As you know, Mr. Chairman, machine tools cut and shave 
metal to make parts that go into almost everything that is 
manufactured, ranging from pumps to automobiles to aircraft. 
Without machine tools, none of these items can be effectively 
produced.
    As you also know, Mr. Chairman, the machine tool industry 
in the United States today is in a crisis. Consumption of 
machine tools in the United States has decreased by 
approximately 60 percent over the past five years. There is a 
direct correlation between the amount of manufacturing done in 
the United States and machine tool consumption here in our home 
market. As a result, the once strong U.S. machine tool industry 
has seen many of its best, most innovative companies go out of 
business in the last four years. Ingersoll International of 
Rockford, Illinois is just one of the most recent examples of 
this.
    As an aside, Mr. Chairman, I would like to thank you for 
your strong leadership, along with Congressman Richard Neal of 
Massachusetts, of the House Machine Tool Caucus, which has 
provided invaluable support and encouragement for our industry 
during these difficult times.
    Mr. Chairman, the machine tool industry in the United 
States has served the needs of the U.S. defense industrial base 
for well over a century. The machine tool industry, made up 
primarily of small businesses, has a well documented history of 
supporting our nation's defense needs with the high technology 
production equipment that is at the heart of the weapons 
systems that have established the United States as the 
preeminent military power in the world. This tradition 
continues today.
    One of the best examples of the criticality of our industry 
can be demonstrated by the government contracting experience of 
another AMT member, the Moore Tool Company, headquartered in 
Bridgeport, Connecticut. To illustrate, let me give you an 
overview of the past 18 months.
    During that period, Moore Tool has completed the following 
projects with the U.S. Government: They have worked for 
Lawrence Livermore Laboratory, building an optical flycutter, 
two four-axis diamond turning lathes, for Los Alamos labs, they 
built two spherical measuring machines for nuclear components, 
one parting lathe for the disassembly of nuclear components and 
one special L-based lathe for nuclear components.
    For Sandia National Labs, they have built diamond turning 
lathes and for the Y-12 Oak Ridge facility, they built one 
special grinder for nuclear components and one five-axis jig 
more.
    For our part, Cincinnati Machine is supplying equipment to 
support programs such as the Joint Strike Fighter, C-17, F-22, 
V-22, as well as a number of others that cannot be disclosed 
due to their sensitive nature. It is our view that this 
Committee's concern about being overly reliant upon foreign 
sources for critical technologies is quite valid.
    Examples of the technologies currently being consumed from 
the machine tool industry are in high speed machining as well 
as five-axis and composites processing machines. If we focus on 
composites technology, this is a great example of industry and 
defense working together to develop a technology that has 
proven to be invaluable. Cincinnati Machine's composite 
processing equipment produce aircraft components from composite 
materials to provide aircraft such as the B-2 with its stealth 
capability. Cincinnati worked closely with Boeing in the early 
stages of the B-2 program to develop this technology into one 
that could be counted on in a production environment.
    Today, only a handful of companies can produce this type of 
equipment and depending on how one defines composite 
capability, there are only two or three companies in the United 
States, one in Spain and one in France. I do not believe that 
we want our defense capabilities being controlled by the 
prevailing political whims of foreign governments, no matter 
how close an ally they are to be considered. This is why 
America's defense industrial base needs a strong and healthy 
machine tool industry.
    The Defense Production Act allows the U.S. Government to 
prioritize production for any company within its jurisdiction, 
but, of course, it cannot dictate to a company in a foreign 
country as to what it must manufacture or move up the priority 
of the manufacture of any particular product. There are 
inherent limits to U.S. Government authority, no matter how 
urgent its production is the defense of the United States. That 
surge capacity can only be found within the confines and the 
jurisdiction of the United States.
    If the Congress decides to create a mandate to buy American 
built machine tools for defense contracts, other factors aside 
from technology merit discussion. First, can the U.S. 
Government procure the technology at a competitive price? 
Secondly, subject import there enough capacity in the United 
States to satisfy the demand?
    Both factors boil down to basic business principles. Every 
industry faces pricing pressures from overseas competitors. We 
deal with this on a daily basis. We are succeeding in all 
corners of the globe by offering a superior product at 
competitive prices. As long as the dollar-to-euro exchange rate 
ratio remains in a reasonable range, U.S. industry can and does 
compete on price. An increase in defense orders will allow us 
to better utilize our assets which will in turn assist us in 
keeping our costs in line with our foreign competition.
    Without a doubt U.S. suppliers are capable of delivering a 
cost effective product, especially in the area of high tech 
products.
    As for capacity, again, the industry has historically ebbed 
and flowed with demand. There is nothing fundamentally 
different today that would prevent us from increasing capacity 
in a rapid fashion when called upon. We have met the demand in 
the past and we are prepared to do so again.
    To summarize, the U.S. machine tool industry is prepared to 
supply the highest technology at a competitive price and is 
capable of delivering at the appropriate quantities. A Buy 
America will keep our manufacturing base in this country 
strong. A strong manufacturing base is key to the United 
States' continued dominance in the defense field.
    With our nation's defense establishment and the defense 
industrial base working together, the United States will 
continue to be in a position where it can control its own 
destiny.
    Mr. Chairman, thank you for providing the forum for the 
discussion of the nation's defense industrial base. I will take 
questions at the appropriate time.
    Chairman Manzullo. Thank you for your testimony.
    [Mr. Storie's statement may be found in the appendix.]
    Chairman Manzullo. Our last witness is Olav Bradley. He is 
the President of P.M. Mold Company, speaking on behalf of 
himself and as Government Affairs Liaison for the American Mold 
Builders Association.
    We look forward to your testimony.

  STATEMENT OF OLAV BRADLEY, CHAIRMAN AND GOVERNMENT AFFAIRS 
 LIAISON, AMERICAN MOLD BUILDERS ASSOCIATION, PRESIDENT, P.M. 
                          MOLD COMPANY

    Mr. Bradley. Thank you, Chairman.
    I represent the American Mold Builders Association and it 
is a group of precision mold builders throughout the United 
States. We are talking about how manufacturing is being hurt. 
At one point, we had 448 members. Average size shop was like 
27. In the last three years, 32 of those members have gone out 
of business, bankrupt, whatever. Another 65 have closed their 
doors for one reason or another, they sold out, just retired, 
it was not worth it. We, as an industry, are getting killed. We 
have lost about 25 percent of our mold shops.
    Now, we are talking about molds, that is industrial molds, 
and it goes with tool and die makers. Everything in 
manufacturing starts with either tool and die or industrial 
molds. It has to start there. We are a trade. It takes about 
five years apprenticeship to learn the trade. We are losing 25 
percent. They are gone. These skilled workers will never come 
back. It is just gone.
    During the '50s, I believe 48 percent of the gross national 
product was in manufacturing. The last number I heard, it is 
well under 14 percent now. There has to be some kind of--what 
would you call it--help or aid given to this industry because 
if we go down, manufacturing as we know it in the United States 
is going to go down also. And it has gone down fast.
    In the last three years, just over two and a half million 
jobs have been lost. Interesting, on the 4th of July I read the 
headlines, I got the paper here, and it said that again 
unemployment has hit a 9-year high. What is interesting is that 
statement came out on the 4th.
    Chairman Manzullo. Mr. Bradley, in 2 minutes and 13 
seconds, tell us what a mold is and how critical that is to 
manufacturing.
    Mr. Bradley. Well, anything made of plastic comes out of a 
mold. They are precision made. Anywhere from your glasses, 
drinking glasses, to interior parts. A water pitcher. Yes. We 
do a lot of interior parts for automobiles, for cars. Radio 
buttons.
    Chairman Manzullo. In defense?
    Mr. Bradley. Defense, we have made a lot of the water 
coolers. We did the molds for the water coolers that are sent 
over, to contain water for our troops. Also in the past, we 
have made--our company has made the forearm piece for the M-16 
carbine. We have also made for Colt Manufacturing the foreign 
on one of the small assault rifles.
    Chairman Manzullo. And that is just your company?
    Mr. Bradley. That is just our company. The companies that 
we represent with the AMBA, they cover everything, just about 
everything that could possibly be made of plastic or die cast 
dies.
    Chairman Manzullo. And that is military weaponry and parts 
of tanks, airplanes, et cetera?
    Mr. Bradley. Yes, sir.
    Chairman Manzullo. Okay.
    Mr. Bradley. All the equipment, everything.
    Chairman Manzullo. Okay. That answers the question. That is 
part of your testimony. Thank you.
    Mr. Bradley. I would be glad to answer any questions. Thank 
you.
    Chairman Manzullo. Thank you.
    [Mr. Bradley's statement may be found in the appendix.]
    Chairman Manzullo. Everybody has lots of questions and let 
me--I am concerned about the criteria that are used, Ms. 
Patrick, for determining the health and viability of our 
strategic base.
    Do you ever monitor in the Pentagon whenever a contract is 
awarded to a foreign firm the impact that that has on the 
domestic industry?
    Ms. Patrick. You know, we actually are quite vigilant with 
regard to the entire health of the defense industrial base. We 
frequently do studies about various sectors of the defense 
industrial base, but perhaps the study that is most interesting 
to your question is a study that we did in 2001 where we looked 
at the foreign content of eight major defense systems and it 
was a rather involved study, it went down to the level of 
$100,000 equipment in those eight major defense systems, down 
to the third tier of suppliers, 3500 companies were queried. It 
took a team of dozens experts on the order of half a year to do 
this study. And what we found was that only less than 2 percent 
of the content of those eight major weapons systems was 
foreign.
    Chairman Manzullo. Then why----.
    Ms. Patrick. We indeed are repeating a similar study for 
the most consumable and most important items used in Operation 
Iraqi Freedom, but in no case have we found----.
    Chairman Manzullo. I am reclaiming my time.
    Your study showed that only 2 percent of military equipment 
has foreign parts?
    Ms. Patrick. Two percent of the content of those eight 
military systems was foreign.
    Chairman Manzullo. Okay. Then why are you concerned about 
increasing the Buy American Act from 50 to 65 percent?
    Ms. Patrick. We are concerned about it because it 
eliminates the flexibility of our primes whom we must hold 
accountable for the timely and appropriate delivery of our 
weapons systems.
    Chairman Manzullo. So you are saying that the American 
manufacturers cannot give you timely delivery?
    Ms. Patrick. There are times when American manufacturers 
are not either cost or technology competitive to our primes. 
That is absolutely right.
    Chairman Manzullo. In regard to the cost, let me get very 
specific. For example, you may not know, do you know what a 
cold forming machine is?
    Ms. Patrick. I have seen many cold forming machines on our 
production lines. Yes, sir.
    Chairman Manzullo. Okay. There is one cold forming machine 
left in the United States. It is in Tiffin, Ohio. Do you know 
what that machine makes? It makes bullets.
    Ms. Patrick. Right.
    Chairman Manzullo. Okay. Otherwise, you have to machine 
each bullet during several different processes. This takes the 
cold product and turns it into bullets. That company almost 
went under and we would have had no company left in the United 
States that could manufacture bullets.
    Were you aware that this company, that there is only one 
company left that does that?
    Ms. Patrick. Sir, I do not know what the timeframe is you 
are speaking of.
    Chairman Manzullo. I am talking about within the last six 
months. But, see, I think that is the problem, is you are 
looking at publicly held corporations. When you talk about----.
    Ms. Patrick. No, the examples actually that I was providing 
of the small companies and the 400 emerging defense suppliers 
that we have taken a lot of interest in because they are small 
companies----
    Chairman Manzullo. But those are emerging.
    Ms. Patrick [continuing]. None of them are public 
companies. They are small.
    Chairman Manzullo. But those are emerging. What about--I 
mean, you heard about Ingersoll, okay? Now, do you know what--
--.
    Ms. Patrick. Ingersoll also is not a small company, sir.
    Chairman Manzullo. Well, it was 3500, it went down to 300 
before it bankrupted. And do you know why that happened?
    Ms. Patrick. I know that there are a number of viewpoints 
on why that happened.
    Chairman Manzullo. Let me give you the factual reason why 
it happened. The F-35 is the Joint Strike Force fighter. 
Lockheed Martin is the major contractor, British Aerospace and 
Northrop Grumman are the subs.
    Ms. Patrick. We know the program well, sir.
    Chairman Manzullo. Well, let me tell you--then I will ask 
you some questions on it, then. When a contract was given to 
the Spaniards for high precision drilling machines, as opposed 
to Ingersoll, did anybody do an analysis as to the impact that 
would have on Ingersoll at the time?
    Ms. Patrick. Well, we actually did an analysis, because we 
knew that you were particularly interested in Ingersoll----.
    Chairman Manzullo. No, no, no. I am talking about prior to 
the contract being let.
    Ms. Patrick. We have often in cases of large pieces----.
    Chairman Manzullo. Ms. Patrick, on this particular 
contract.
    Ms. Patrick. No, it is not the purview of the Office of the 
Department of the Secretary of Defense to in advance involve 
ourselves with our contracting process.
    Chairman Manzullo. So you do not monitor the impact that a 
foreign contract would have on a domestic industry.
    Ms. Patrick. We do not interfere with the contracting 
processes----.
    Chairman Manzullo. This is taxpayer money. It is not 
talking about interference, ma'am, we are talking about a 
company that went bankrupt and was almost bought by a Chinese 
company in bankruptcy.
    Ms. Patrick. Sir, if you would like to talk about that 
specific issue, you know, it is a contract that we have looked 
into. It was very clear that the offerings of Ingersoll were 
not technically capable.
    Chairman Manzullo. Oh, let me----.
    Ms. Patrick. The Ingersoll bid was not even close----
    Chairman Manzullo. Let me stop you right there.
    Ms. Patrick [continuing]. And it was--and we cannot tell 
what the differential of the bid was of Ingersoll relative to 
the other manufacturers----.
    Chairman Manzullo. Are you aware of the fact that the very 
machine for which Northrop Grumman was to contract for with 
Ingersoll, that Lockheed Martin, the prime contractor, already 
had contracted with Ingersoll to build three of the same 
machines for them? Were you aware of that?
    Ms. Patrick. Yes. We know that there is a Joint Strike 
Fighter contract by Lockheed Martin to Ingersoll. Yes, we are 
aware of that.
    Chairman Manzullo. But it is the same machine. Ingersoll is 
building the same machine for Lockheed Martin that they were 
going to build for Northrop Grumman and you are telling us they 
were not technically capable.
    Ms. Patrick. I am not positive it was the same machine. I 
think they were different machines.
    Chairman Manzullo. Ma'am, I'm telling you--I am telling 
you, it was the same machine.
    Ms. Patrick. I will take that question for the record, sir.
    Chairman Manzullo. No, this is the problem. I do not think 
you have sufficient information. For example, with Cincinnati--
it used to be Millicron, the plastics have been split off. Do 
you know the companies in the United States that have the 
ability to build machines to tape stealth material on wings and 
fuselages of aircraft? How many companies would you say there 
are in the United States?
    Ms. Patrick. Sir, I am sure you will be happy to tell me.
    Chairman Manzullo. Well, but you should know that or at 
least have an indication. There is one left, that is 
Cincinnati. Now, we are down to one company. Now, would you 
agree that it is strategic to have in the United States a 
company in existence that can make those machines for taping 
stealth material for wings and fuselages? Do you not agree that 
is extremely technical, very important to our national 
strategic base?
    Ms. Patrick. We actually do have provisions in Title 3 
where when we find that there is an industrial base capability 
that we do not have in this country that is strategic and that 
we are in danger of losing our edge if we do not have that 
capability, we can fund that capability and we do so when we 
see fit to do that.
    Chairman Manzullo. Well, all they wanted was a contract. 
See, that is the point. In fact, I talked to the admiral who is 
in charge of the contracts overseeing the F-35 and I said, 
``Admiral, do you monitor the contracts that the primes and the 
subs give to the companies to make sure that our defense 
industrial base is maintained?''
    And he said, ``No.''
    I said, ``Well, don't you think that's important?''
    Ms. Patrick. Well, the problem with that is if we begin 
monitoring the contracts of our prime contractors, there is no 
accountability for the products that they actually deliver to 
us in terms of content, in terms of timeliness.
    Chairman Manzullo. What do you mean, no accountability? We 
are talking about national defense. This is strategic industry.
    Ms. Patrick. Because the contractors then can come back to 
us and say, well, you forced us to use XYZ company or you 
forced us to procure this piece of GFE or this was the piece of 
GFE that did not work, this was the machine tool that was a 
problem, and to blur the line of accountability in that way 
jeopardizes the entire process by which we procure weapons 
systems.
    Chairman Manzullo. Blurring of the line----.
    Ms. Patrick. Somebody has to be in charge.
    Chairman Manzullo. The Congress is in charge. That is why 
we passed the Barry Amendment. That is why the Secretary of the 
Air Force just randomly waived the Barry Amendment on aircraft. 
I mean, it is just--we cannot seem to get across to you, number 
one, that the industrial base is in deep, deep trouble. You do 
not believe that----.
    Ms. Patrick. I do not.
    Chairman Manzullo. You have no way of believing that and 
there is nothing I can do to convince you of that, except that 
you have to agree with the statement that a company that makes 
the machines that wrap the material for stealth technology, 
that is obviously important to our industrial base. Is that not 
correct?
    Ms. Patrick. Yes, sir, but let us talk to you a little bit 
about the impact on our industrial base of the tooling 
provisions. I did not have a chance to do so, but I will do 
now.
    If you take a look at just the big five defense contractors 
alone, if we were to try to replace their foreign-made tooling 
with U.S. tooling, it would be----
    Chairman Manzullo. That issue is moot.
    Ms. Patrick [continuing]. Eight to ten billion dollars----.
    Chairman Manzullo. That issue is moot.
    Ms. Patrick. But the thing you have to remember is that we 
have one of the most flexible, innovative defense industrial 
bases and the most flexible production lines in the world. Many 
of our follow-on systems can be produced in existing production 
lines. Much of the wartime surge gets produced on existing 
production lines. And so if there were a tooling provision that 
would require us----.
    Chairman Manzullo. But that provision has been removed.
    Ms. Patrick. If there were a tooling provision that would 
require us to produce new systems on all American production 
lines----.
    Chairman Manzullo. For the fourth time--listen to me, 
please. The provision----.
    Ms. Patrick. What is the tooling provision, if it is not--
--.
    Chairman Manzullo. The tooling provision, as I explained at 
the beginning, is going to be replaced with new language.
    Ms. Patrick. And what will that language say?
    Chairman Manzullo. The new language says anytime there is a 
new order of $5 million or more----.
    Ms. Patrick. Okay. So let us take----.
    Chairman Manzullo. No, please let me explain to you what it 
is, all right? And in the event that a manufacturing company 
has to buy a new tool in order to make that $5 million--so they 
are going to be buying a new piece of machinery anyway, then in 
that case that new piece of machinery has to be only 70 percent 
American content. That is going to be the provision that Mr. 
Hunter is putting into the bill. So that means that the company 
is going to buy the machine tool anyway, just in this case, the 
machine tool will be coming from 70 percent U.S. content. That 
is the new provision.
    Ms. Velazquez?
    Ms. Velazquez. Thank you, Mr. Chairman.
    Ms. Patrick, in the statement of administration policy 
issued as a result of the defense industrial base provision 
contained in H.R. 1588 is the statement that the provisions in 
question establish rigorous restriction against using non-U.S. 
sources that will unnecessarily restrict the Department of 
Defense's ability to access non-U.S. state-of-the-art 
technology and industrial capabilities.
    Do you believe that state-of-the-art technologies are only 
available overseas?
    Ms. Patrick. I do not believe that state-of-the-art 
technologies are only available overseas, but let me give you 
one example.
    The lift fan technology in the Joint Strike Fighter's 
Marine variant is produced by a British company. We would not 
be able to field----
    Ms. Velazquez. Was that----.
    Ms. Patrick [continuing]. The Marine Corps variant of the 
Joint Strike Fighter if we had to rely solely on U.S. content.
    Ms. Velazquez. Was there a time when that technology was 
available in the United States?
    Ms. Patrick. No, it is innovative, new technology. It is 
not technology that has been available in the United States.
    Ms. Velazquez. Ms. Patrick, to trade agreements play a role 
in the fact that some technologies have migrated overseas?
    Ms. Patrick. Trade agreements? You know, I would imagine 
the trade agreements do play a role in the fact that some 
technologies have migrated overseas, but, you know, it is not 
my purview to monitor trade agreements, so let me ask somebody 
else on the panel to answer that question.
    Ms. Velazquez. Mr. Borman?
    Mr. Borman. It is a hard question to answer because there 
are a couple of aspects to it. Obviously, the trade agreements 
are at a very general level. If you are talking about 
technology that we have subject to export controls, the export 
controls continue regardless of the trade agreements, so to 
consider the question just as you have said it, it seems to me 
my initial reaction is trade agreements really do not have an 
effect on certainly controlled technology going overseas and 
controlled technology is, I think, what we are talking about 
here for defense products.
    Ms. Velazquez. Is it not true that purchases from certain 
qualifying countries like the United Kingdom are acceptable as 
part of the Barry Amendment?
    Mr. Borman. I would have to take that question and give you 
answer later.
    Ms. Velazquez. Ms. Patrick, Mr. Coffey mentioned in his 
testimony the concern raised by Armed Services Committee 
Chairman Hunter regarding Boeing's problem with the Swiss 
source of the guidance system for the JDAM bomb during the Iraq 
war. This resupplier refused to supply the system because of 
either Swiss laws or his belief that the war was unjust.
    How do you justify not supporting domestic sub requirements 
for critical defense industries in light of this very recent 
occurrence?
    Ms. Patrick. You know, I have to tell you that Honeywell's 
performance during that particular episode was nothing short of 
epic in the history of Operation Iraqi Freedom. Honeywell in 48 
hours established an alternate source for the Swiss JDAM 
crystals. By the time the confused Swiss company took seven 
days to understand their government's policy and delivered all 
of their items, already a second source had been established 
and that Swiss company is no longer part of our defense 
industrial base.
    Ms. Velazquez. But that does not raise the issue of our 
national security in times of war?
    Ms. Patrick. Well, we became very interested in that issue 
when we had the 48-hour issue with regard to the JDAM crystal 
from the Swiss supplier and, indeed, by the accounts of the 
Joint Chiefs of Staff, the Defense Contracting Management 
Agency, there was not a single instance in Operation Iraqi 
Freedom where any foreign supply caused us an operational 
impact. There was no instance where there was not a delivery of 
foreign supplies as scheduled.
    As a matter of fact, there were other examples where French 
and German companies were extraordinarily helpful to our war 
fighters----
    Ms. Velazquez. Thank you.
    Ms. Patrick [continuing]. In spite of their government's 
well-stated position----
    Ms. Velazquez. Thank you, Ms. Patrick.
    Ms. Patrick [continuing]. On----.
    Ms. Velazquez. Ms. Patrick, this is my time.
    Mr. Borman, we all know how much you are about promoting 
small businesses and providing every opportunity that we could 
in terms of the federal government, so in the reconstruction of 
Iraq, how much effort are you putting so that we make sure that 
small businesses participate in such an effort and not the 
Halliburtons of the world will be involved in the 
reconstruction of Iraq?
    Mr. Borman. That is a question I will have to get back to 
you on. That is not directly in the purview of my 
responsibility at the Department of Commerce, but, as you 
probably know, there are contracts that the State Department 
has let and that is really the entity that is in charge of at 
least the initial phase of the reconstruction.
    Ms. Velazquez. Ms. Patrick, in your statement you described 
the defense industrial base as healthy, innovative and 
responsive. The term healthy caught my attention and you 
mentioned several reasons why the industry was healthy. Would 
you agree that your statement suggests that the U.S. industry 
base is in an economically strong position?
    Ms. Patrick. The U.S. defense industrial base indeed is in 
an economically strong position. It is one of the very few 
engines of the overall----
    Ms. Velazquez. Okay. You say yes.
    Ms. Patrick [continuing]. American economy----.
    Ms. Velazquez. That is enough. If the industry is healthy, 
could you please explain why 2.4 manufacturing workers have 
lost their jobs since January 2001?
    Ms. Patrick. I think we are comparing apples and oranges 
here.
    Ms. Velazquez. Really?
    Ms. Patrick. Ma'am, you are talking about manufacturing 
workers, I am talking about the defense industrial base, which 
is a subset of the manufacturing workers. We have all kinds of 
aerospace workers, manufacturing workers, that work with us--
--.
    Ms. Velazquez. So all these people that are here testifying 
today, they are not part of that industrial base? And so those 
workers who are losing their jobs are not part of this 
industrial base?
    Ms. Patrick. At the same time, for instance, if you take a 
look at just one program that I know one of your members holds 
near and dear, the new aircraft carrier program----
    Ms. Velazquez. Thank you, Ms. Patrick. I would like to hear 
from the other witnesses.
    Ms. Patrick [continuing]. Thirty-five thousand jobs----.
    Ms. Velazquez. Excuse me. I am the one asking questions 
here.
    Ms. Patrick. I am so sorry, I wanted to answer it.
    Ms. Velazquez. I would like to hear comments from you 
regarding how healthy the industrial base is.
    Mr. Coffey. Well, I attempted to make that clear in my 
statement, that what we are seeing is we are losing a 
capability in the United States to manufacture product. Many of 
those capabilities are in defense-related products, as pointed 
out by the chairman, with cold forming. Once we export those 
skills and export the technology associated with those skills, 
which the prime contractors are more than willing to do in 
order to seek the lowest possible costs in the world, we have 
lost those abilities for a very long time and it takes a long 
time to rebuild them.
    Ms. Velazquez. So, Mr. Coffey, you disagree with Ms. 
Patrick's assessment?
    Mr. Coffey. Most definitely.
    Ms. Velazquez. Thank you.
    Yes, Mr. Storie?
    Mr. Storie. I can relate that since the year 2000, 
Cincinnati Machine's employment has gone down from 
approximately 1500 to where we will be by the end of this year 
at 350 people. That is a significant drop in percentage.
    Chairman Manzullo's comments that Ingersoll's employees 
dropped to that same level before they went bankrupt certainly 
gives me pause. We are doing everything we can to remain a 
viable corporation, but we are definitely in distress.
    Ms. Velazquez. It seems to me that there is a disconnect 
between the administration and the phase and the state and the 
status of the U.S. industrial base.
    Mr. Storie. And the fact that a company like Cincinnati 
Machine, and I am sure there are many more examples besides 
just Cincinnati, that we can supply--we are the only supplier 
of key technology around the world, we supply fiber placement 
equipment, the composite equipment, that is being utilized on 
the Joint Strike Fighter program and outside of Ingersoll, 
there was no other company that was capable of supplying that 
type of equipment.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Chairman Manzullo. Thank you.
    Mr. Schrock?
    Mr. Schrock. Thank you, Mr. Chairman.
    My head is kind of spinning with what to say here because I 
am as passionate about this as the chairman is and I totally 
agree with him and I also believe it is the taxpayers' dollars 
and somebody should be watching out for that. In defense of Ms. 
Patrick, I believe they are because in every military project, 
whether they are building a plane or a ship or whatever or 
weapons system, there is a project officer who is supposed to 
be watching over that and he is usually a uniformed person, 
probably the admiral you talked to had been one at some point. 
So I really believe there is somebody looking out for that.
    But I do not want to put words in Ms. Patrick's mouth, but 
what I think she was saying was we give a major manufacturer a 
contract, we expect them to get the product at the price they 
say they are going to get it at a certain date and they are 
going to use every practice they can to make sure they get the 
cheapest product, the best product, to put into the plane. 
Correct me if I am wrong, and many times that probably means 
they feel they have to go overseas.
    I am very bothered by that, I do not like that at all, but 
what is----.
    Chairman Manzullo. Would you yield a second?
    Mr. Schrock. Yes, sir.
    Chairman Manzullo. Those are cost-plus contracts.
    Mr. Schrock. No, I believe those are fixed fee.
    Chairman Manzullo. The F-35 is cost-plus.
    Ms. Patrick. In development, it is currently.
    Mr. Schrock. The F-35 is, yes. But I worry, what causes 
that manufacture to feel they must go to another country? Why 
has not a situation been created in this country where they can 
produce it here? I do not understand that.
    And I want to ask Mr. Rupert and Mr. Bradley what is 
causing that? How can we fix that? Is it labor contracts? Is it 
environmental type things that we have in our contracts that 
other countries do not? Something is causing this and we need 
to figure out what it is because I have a feeling in my own 
mind what it is, but I want to hear what is on your mind. And 
then I would like to hear what Ms. Patrick and Secretary Borman 
think about that.
    Am I way off base here?
    Mr. Rupert. No, not at all. When the red light did me in I 
was about to say that the reason that I suspect that this is 
happening--and I am speaking strictly about titanium right 
now--is that the specialty metals industries are being offered 
up as an offset. The goal is to maximize the use of Russian 
titanium to garner favor with the Russians in selling aircraft. 
So I think these are marketing decisions, not procurement, not 
manufacturing decisions.
    Mr. Coffey. And, if I could, the second dimension to it is 
the active governmental intervention----.
    Mr. Schrock. And there is nothing illegal about that, is 
there?
    Mr. Rupert. Yes. A number of the waivers that have been 
issued under the Barry Amendment I do not think were proper. 
And I know that having been subpoenaed to provide information 
to the criminal investigation that I mentioned that there are 
at least others who think that there were things done that were 
illegal.
    Mr. Schrock. I am sorry, Mr. Coffey.
    Mr. Coffey. That is all right. I think the other dimension 
to it is governmental intervention into the free trading 
system. You have a variety of activities conducted by 
governments to support their domestic industries without the 
United States creating any kind of requirement on any kind of 
foreign product coming into the country.
    The example attached to my testimony of the Turkish defense 
attache saying flat out what the percentage of Turkish content 
will be in anything they buy under a military program is a 
pretty clear example of a government distorting the free 
market. And when a government distorts the free market, as many 
governments do, including most of the Asian governments, you 
have this kind of dislocation of the marketplace and we cannot 
compete in that environment. So the Chinese peg their currency. 
They have pegged their currency for years. That gives them a 40 
percent price advantage before we even get to the table.
    Mr. Schrock. Okay. Mr. Secretary Borman, based on what he 
just said, why is that the case? How can we correct that?
    Mr. Borman. Well, I think this administration is trying 
hard to correct both what they have mentioned and some other 
issues. Our view is under the President's manufacturing agenda 
there are several things that need to be addressed: tax issues, 
intellectual property protection.
    Mr. Schrock. Trying hard is one thing, and I understand 
that, but they have to do it. They have to do it.
    Mr. Borman. I understand. And then obviously you need to be 
able to get the foreign governments to open their markets, stop 
the intervention and so on.
    Mr. Schrock. All right. Mr. Storie?
    Mr. Storie. Well, I concur with my colleagues here. I 
definitely think that there are steps that must be taken to 
allow an even playing field. I mean, if it is offsets--offsets 
are driving work out to foreign shores. We are seeing that 
happen every day. The currency issue in China is major. I mean, 
it used to be that our manufacturers went to Mexico to get 
products made cheaply and now the work is leaving Mexico and 
going to places like China and going to places like Indonesia. 
And that has got to be a serious concern. We cannot be a 
service society.
    Mr. Schrock. That is right.
    Mr. Storie. We have got to be a country that provides vale.
    Mr. Schrock. We were the ultimate manufacturing society, we 
do not even come close now.
    My time is expired so you are off the hook, Mr. Bradley.
    Thank you.
    Chairman Manzullo. Mr. Ballance?
    Mr. Ballance. Thank you, Mr. Chairman.
    Ms. Patrick, I am going to try this. I believe your title 
is Deputy Under Secretary. Is that right?
    Ms. Patrick. Yes, sir.
    Mr. Ballance. Are you high enough in the ranking to have 
been involved in this statement of administration policy that 
was issued?
    Ms. Patrick. Yes, sir.
    Mr. Ballance. I think you addressed this. You all were 
aware that the House had tightened up this idea of trying to 
get more U.S. content and you were aware of the reasons, as 
have been expressed here today. What, in your opinion, was it 
that would override the thinking of the Congress, of the 
Committee?
    Ms. Patrick. Sir, I do not understand your question. We 
were aware of the concerns. What was our reasoning for----.
    Mr. Ballance. Yes, for issuing your statement of 
administration policy, which attempted to override--I do not 
know if it does or not, the thinking of the House.
    Ms. Patrick. Our view really is that across several broad 
fronts the legislation would be devastating. First of all, the 
tooling provision even modified as the chairman has talked 
about would cost us an extraordinary number of jobs if it were 
forced upon us to buy U.S. machine tools when foreign machine 
tools could be bought with better technology and more cost 
effectively.
    Mr. Ballance. When you say cost us, you are referring to? 
Us being?
    Ms. Patrick. It would cost us jobs because we would have to 
find the money for the premium that we would have to pay for 
those U.S. machine tools from elsewhere in the budget. That 
would cause the cost of the programs to increase on the order 
of 20 to 30 percent, which may not lose us jobs in the 
particular machine tool industry, but would be very costly in 
terms of jobs in aerospace and defense.
    Similarly, were we to remove the foreign content of major 
programs, that would cost us jobs because we would have to find 
the money to pay for the additional increment of cost and 
schedule delay that would be incurred by removing that foreign 
content.
    On the Joint Strike Fighter program alone, the fact that we 
would have to rebate back to our partner nations $4 billion of 
their participation in the program----
    Mr. Ballance. Well, can you----.
    Ms. Patrick [continuing]. Would cost us on the order of 
70,000 defense jobs were we to have to find that budgetary 
allocation elsewhere.
    Mr. Ballance. We are all constrained by time, if you do not 
mind.
    Ms. Patrick. Trade retaliation. We have a positive export 
balance----.
    Mr. Ballance. We are constrained by time, if you do not 
mind. Can you give an example of what you are referring to when 
you said it would cost us jobs?
    Ms. Patrick. Absolutely. I mean, if you were to require 
that we remove foreign content, say, from the Joint Strike 
Fighter program, clearly the partners would pull out of that 
program. We would have to find $4 billion that they were 
willing to provide to the development of that program, 70,000 
jobs in the course of our trying to find that $4 billion.
    Mr. Ballance. Let me try one more thing here. When the DOD 
puts out a bid, I guess you do it that way, a request for a 
bid, do you not put in specifications?
    Ms. Patrick. Yes, there are specifications.
    Mr. Ballance. And could you not at that point say that so 
much of the content has to be American?
    Ms. Patrick. Once again, we would not want to tie the hands 
of our prime contractors in that way and we are not----.
    Mr. Ballance. Where are you going to tell them this 
information if you do not tell them at the time that you put 
the project up for bid? How are they going to know?
    Ms. Patrick. We do not require certain norms of U.S. 
content.
    Mr. Ballance. So you ignore the law? I mean----.
    Chairman Manzullo. Would the gentleman yield?
    Mr. Ballance. Yes, sir.
    Chairman Manzullo. Under the Buy American Act, you are 
required to buy at least 50 percent American.
    Ms. Patrick. Right.
    Chairman Manzullo. Are you aware of that?
    Ms. Patrick. Well, that is in the contracts as well, but it 
is not measured by each and every particular contracting 
action.
    Mr. Ballance. So what you do, what you are concerned about 
is just getting the product at the cheapest price----.
    Ms. Patrick. The most innovative product on schedule----.
    Mr. Ballance. You want a good product at the cheapest 
price, and whatever happens to the U.S. manufacturers is not 
really of your concern.
    Ms. Patrick. What happens to all of the manufacturing base 
is of our concern, you know, as good Americans, but we also 
expect that our defense industrial base will innovate, will 
remain competitive, and as many other members of that defense 
industrial base are capable of doing, will provide us 
innovative, state-of-the-art products in a timely fashion and 
at a reasonable price for our warfighters.
    Mr. Storie. Mr. Chairman?
    Mr. Ballance. I will ask you a question, but if you want to 
answer----.
    Mr. Storie. I just wanted to comment. Ms. Patrick, maybe 
you can help me understand.
    She said that it would cost 20 to 30 percent more to buy in 
the U.S. as opposed to foreign goods. I know that my company 
personally cannot sell anywhere and have a 20 to 30 percent 
pricing premium, so I have to be competitive worldwide and I 
doubt that many others are in the situation where they can 
command a 20 or 30 percent pricing premium, the people that are 
trying to compete on a global basis.
    Mr. Ballance. Mr. Chairman, I yield back.
    Chairman Manzullo. Ms. Patrick?
    Ms. Patrick. Did you want me to answer his question or 
another one of your questions?
    Chairman Manzullo. Go ahead.
    Mr. Ballance. The 20 to 30 percent premium that we would 
assess to a program like the Joint Strike Fighter were we to 
take out the foreign content has to do with the fact that we 
would have to re-compete all of those contracts. Many of them, 
the bidders, the next bidders were in the range of 15 to 20 
percent higher. We would have to suffer the administrative lead 
time and the concomitant delay in the program that that 
restructuring of the program would entail and all of that would 
have to be paid for by limited defense resources. And so as you 
make the program more expensive and have to find the money from 
a finite pot of money, you will undoubtedly be in the position 
of limiting the number of quantities and that also costs 
American jobs.
    Mr. Ballance. Mr. Chairman, can I just have one more half 
minute?
    I am going to try to simplify this. I am from a small town 
in North Carolina. If you are going to order 100 fighter jets, 
first of all, would you not be--I am asking the same question I 
asked earlier, would you not be required to put the 
specifications on the table at the time you made the order? 
That is a yes or no.
    Ms. Patrick. You know, I will take that for the record 
because Lockheed actually places the orders to their 
subcontractors.
    Mr. Ballance. And assuming that is true, then we did not 
have within those specifications the provisions about the U.S. 
content. Assuming that's true, then whoever gives the lowest 
bid ought to already have factored that issue in. Would you not 
agree with that?
    Ms. Patrick. Whoever gives the lowest bid--let me take that 
for the record.
    Chairman Manzullo. If I could interrupt again, that is not 
the law. The law is not the lowest bid. The law is it still has 
to have at least 50 percent U.S. content, unless the Pentagon 
wants to have the Chinese build everything.
    Ms. Patrick. Let me take that for the record.
    Chairman Manzullo. What does that mean, take that for 
record? I have never heard that before.
    Ms. Patrick. Can we not take questions for the record from 
this hearing?
    Chairman Manzullo. What do you mean?
    Ms. Patrick. We will provide an answer in writing.
    Chairman Manzullo. You want to provide an answer--oh, okay. 
I am sorry. When do you want to do that? Is it going to go 
through OMB first? Would you do me a favor? As soon as you 
submit it to OMB, would you get a hold of Mr. Nelson, Mr. 
Crowther, and then I will give them hell for sitting on it?
    Ms. Patrick. Yes, sir.
    Chairman Manzullo. Okay. Mr. Beauprez?
    Mr. Beauprez. Thank you, Mr. Chairman.
    I would like to direct this to the four gentlemen on this 
side.
    Mr. Coffey, first of all, I have reviewed as I sat here 
your 11 recommendations in your written testimony and I would 
like to focus on the ninth one because as I have heard this, I 
think we have probably identified the problem and many of the 
frustrations, I am not sure we have identified a whole lot of 
solutions and I suppose we could go one of two avenues. One, we 
could adopt what I will characterize as a bit of a 
protectionist strategy, enact some kind of legislation to say 
this is how it is going to be and just mandate that something 
happen, or we could adopt a different strategy and kind of 
throw open the doors and let everybody compete fairly.
    I was in an industry, farming, and even more specifically 
crops, but dairy, that I think has tried very hard to adopt a 
protectionist strategy, protect their market, and I think we 
are in grave danger of seeing that industry disappear from the 
face of the United States of America. So you can probably guess 
where my biases are.
    Both of you gentlemen, Mr. Rupert and Mr. Coffey, I think 
touched on issues of trade. You just mentioned the Chinese 
fiscal policy, monetary policy of which I am a little bit 
familiar with. I think you all have--and Mr. Bradley and Mr. 
Storie, you have kind of hinted at some of the same--I think 
you have touched on it.
    To summarize your ninth recommendation, Congress and the 
administration ought to address costs inflicted costs such as 
cost of insurance, regulation, taxes, capital, inaccessibility 
to contracts, that is back to the regulation and morass of 
stuff, and especially tariffs.
    I am a free trader, I will confess, but it is free, 
equitable, fair. I maintain to my friends in farming that we 
would feed the world if it were truly accessible to us on a 
free and fair basis.
    Is that the nut that we ought to be focusing on if we are 
going to fix it? I mean, I do not want to minimize the 
difficulty of the problem, but cannot American workers and 
entrepreneurs compete anywhere if it is free and fair?
    Mr. Coffey. Particularly if it is fair. I absolutely agree 
with you.
    Mr. Beauprez. And I do not want to minimize the cost of 
tax, regulation, compliance.
    Mr. Coffey. I absolutely believe that every company in the 
United States that I am associated with does not want tariffs 
to protect their market. What they want is the reduction of 
tariffs in other countries. What they want is other governments 
getting out of the market in their country so that we can have 
a shot at it because productivity-wise, the American worker is 
the most productive worker in the world period. And, you know, 
I do not understand why given that environment we are 
constantly penalized on cost when none of these other countries 
impose the same cost structure on their companies that we do on 
ours.
    Mr. Beauprez. Mr. Bradley, I see you reaching for the mike.
    Mr. Bradley. I think one of the keys here, though, is like 
you touched on: we need fairness. And we talk about free trade, 
fair trade. We need fair trade. And the American workers can 
compete with anybody in the world. If we ship a mold over to 
China, for example, they have--it is a 29 percent tariff for 
our tool going over there. When it comes from China to the 
United States, it is 3.4. That does not sound real fair.
    They also do not have medical, they do not have OSHA, they 
do not have all of that. They do not even have insurance on 
their people. I pay more per hour for insurance for my 
secretary than the average worker in China makes in a day.
    Mr. Beauprez. That is where the fairness comes in. We 
certainly do not want to give up those kind of benefits in our 
working conditions, but it all needs to go as a package into 
our trade negotiations.
    Mr. Rupert, quickly, if I could, because my light is going 
on.
    Mr. Rupert. I think you are right on the money on the trade 
issue. What the titanium industry is looking for is not 
protectionism. We are looking for a negative benefit to be 
taken away here. We are paying a 15 percent duty to get our raw 
materials in here and yet the Russians come in for no duty 
whatsoever.
    Mr. Beauprez. We have butter and cheese coming into this 
country that is subsidized and our dairy farmers are going 
broke.
    Mr. Rupert. Well, I am not even talking about subsidies 
from Russia. I am talking about what the U.S. Government does 
to us. I cannot sell titanium in Russia. They will not give us 
their jobs. And if I could, they have a statutory 15 percent 
import duty that they are not going to waive for me.
    And the other thing I think is the issue that you have 
focused on here and that is what is the law. Is there 
protection for designated industries or not?
    Mr. Beauprez. Thank you, Mr. Chairman.
    Chairman Manzullo. Ms. Napolitano?
    Ms. Napolitano. Thank you, Mr. Chairman.
    I have already handed you my note on Mr. Rupert's testimony 
on page 8 of his report. I would like to request if we might be 
able to find out from the Office of Inspector General whether 
that spring of 2000 report has been finished on the specialty 
metals clause that was to delve into and investigate 
violations. I think that might be something that this Committee 
needs to understand. I am interested in what they have to say 
on it because it is affecting some of our industries. I have 
heard from some of my businesses.
    The second thing is that, Ms. Patrick, I am sitting here 
and I cannot believe--I realize you have a story to tell, but 
this is but a small segment of what I encounter in my district 
over job loss due to the absence of contracting. My small 
vendors cannot even get their foot in the door sometimes with 
the Department of Defense, so they are not able to be able to 
be competitive because they cannot compete.
    The second issue that we are talking about the Department 
of Defense being the world's largest market for our vendors in 
the U.S. and in the world practically, yet we are losing 
manufacturing jobs. We are losing companies that are going 
under because we are not able to--and you have listened, I am 
sure you know the story, whether it is the tariffs, whether it 
is the subsidies these countries give our competitors or 
whoever, we have a problem. We need to begin to understand that 
it is affecting our economy in the United States big time.
    And we need to be able to find a way to work with the 
industry to make sure that they are effectively getting a piece 
of the American pie because we are giving it away. And I do not 
know how else to put it, other than when are we going to have 
the Department of Defense on our, U.S., side? On our marketer's 
side? On our Congress--it is law and yet it is not being 
followed. Somehow we are not holding the Department of Defense 
accountable for what has been in statute for a long time. And 
we are continuing to lose.
    The subsidized businesses that come and compete for our 
American jobs, that has to stop. We have to take a look. And 
you say it is not in your purview, I understand it is not in 
your purview, but somewhere along the line it has to be part of 
our responsibility, joint responsibility, Congress and the 
Department of Defense.
    Now, the third thing is nobody is talking about job 
training because, as you have heard, a lot of those jobs are 
going away. People are not being trained to be able to maintain 
the CMCs.
    Now, we started something in my area three years ago which 
has been effectively producing trained personnel for the 
manufacturing industry, yet I do not see the Department of 
Defense or anybody else saying we need to begin to continue 
training personnel because are losing them, they are retiring, 
they are finding other jobs because theirs went away, and we 
have not addressed that particular issue.
    Now, please, whatever you can, give me some information 
that is going to make at least some of us understand it better.
    Ms. Patrick. Well, let me offer two things. First of all, 
you know, we certainly would not have devoted the time and 
energy to creating a massive study on small companies that were 
innovative and that could enter the defense industrial base if 
we had not also been concerned about the ease of access and 
whether the entry barriers were appropriate.
    Ms. Napolitano. When did that massive concern come about 
and where is it?
    Ms. Patrick. The study was published in February of this 
year. We began working on it, as a matter of fact, last summer 
and it is referred in my testimony.
    Ms. Napolitano. Do we have a copy for the members?
    Ms. Patrick. I think that----.
    Mr. Crowther, I think we gave you a copy of the road map 
study.
    Ms. Napolitano. May we have copies sent to every member of 
this Committee?
    Ms. Patrick. Sure. Sure.
    Ms. Napolitano. Thank you.
    Ms. Patrick. Again, it is an irony that we really do have 
so much common cause with small companies, emerging companies, 
and it really has not come out in this hearing.
    The other thing that I want to emphasize is that aerospace 
and defense is an immensely positive function for the U.S. 
economy, especially in exports. U.S. aerospace and defense 
exports are 300,000 jobs in this country--300,000. One of the 
reasons we are so concerned about the provisions of H.R. 1588 
is that we know that we will risk retaliation from people who 
currently buy that export surplus from us.
    Ms. Napolitano. Now, wait a minute. Excuse me. Retaliation 
by whom?
    Ms. Patrick. By the world that buys our aerospace and 
defense products.
    Ms. Napolitano. And we are afraid of retaliation?
    Ms. Patrick. Well, of course we are. We cut imports from 
France 40 percent in the aftermath of their stance on Operation 
Iraqi Freedom, within months.
    Ms. Napolitano. No, do not misunderstand me. I follow 
your----.
    Ms. Patrick. Retaliation after Smoot-Hartley.
    Ms. Napolitano. Let me tell you one other thing. We have a 
trade imbalance with China that has been growing for the last 
decade and we are not even addressing going into China and 
getting that trade imbalance taken care of.
    Ms. Patrick. Ma'am, but we do not have a negative trade 
imbalance with China in aerospace and defense.
    Ms. Napolitano. But it is all one pie, though, it is not 
cut up. It is all one trade imbalance figure.
    Chairman Manzullo. Mrs. Musgrave?
    Ms. Musgrave. Thank you, Mr. Chairman. Some of the things 
that I have been hearing today bring about more questions than 
we have time to deal with and I certainly appreciated what Mr. 
Beauprez had to say.
    I as a new member really need some more information. When 
we talk about circumvention of the specialty metals clause, 
that is very disturbing to me.
    And I do not know if, Mr. Rupert, if you can comment on 
that with a little more detail for me today.
    Mr. Rupert. There is in my testimony a description of four 
waivers that we are aware of. In terms of any illegal 
circumvention of the Barry Amendment, I do not have that 
information. All I am suggesting is that there has been an 
investigation, it is publicly known that that investigation is 
taking place. What the status is or where the results are, I do 
not know.
    Ms. Musgrave. Mr. Chairman, do you know how we can find out 
the status of that investigation that is going on?
    Chairman Manzullo. Well, under the rules, all you can do is 
send a letter to Justice and they can give you a status. If it 
is under investigation, they can just say it is under 
investigation.
    Ms. Musgrave. Okay. All right.
    Mr. Bradley, you talked about exporting our skills in these 
particular areas and exporting technology, then I read in your 
testimony that you were talking about loss of intellectual 
property to the Chinese and I wonder if you could elaborate on 
that. I believe you mentioned publications that alluded to 
that.
    Mr. Bradley. Well, some of the problems that we have, one 
of them basically is automotive and they are talking now about 
mandating that we send 20 percent of our tooling to China. They 
want it done overseas. It is not a hard fact yet, but it is 
coming. This is what they are talking about.
    They want us to do all the design and development work here 
and then send all the production work over there. What we will 
be doing, if our industry is required to do that, we will be 
teaching them how we are competitive and we will be giving them 
all the ideas.
    One thing is unique in America, and I do not feel that we 
can be touched by anybody else, is imagination and we do a lot 
of imagination design concepts. Well, they are talking about 
they want us to give that away. And it is not just automotive, 
we are getting that from other people, too.
    One of the problems is if we send a mold over to Asia to be 
built, it does not come back. If they build a mold over there, 
chances are the mold will never come back to the United States 
because they are going to hang onto all the manufacturing also. 
So we are not only losing the tooling aspect of it, we are 
losing also our intelligence and all our future manufacturing 
we are going to lose. So in effect we are going to be giving up 
what our country has worked so hard for for a $7.50 toaster. We 
are compromising our entire nation if we allow this to 
continue.
    Ms. Musgrave. Thank you, Mr. Chairman.
    Chairman Manzullo. Mrs. Bordallo?
    Ms. Bordallo. Thank you very much, Mr. Chairman. Before I 
ask my question, I would like to go on record as supporting our 
chairman and members here in the Committee. I truly, especially 
after hearing some of the witnesses today and some of the 
question and the answers, that I do fully support Buy American 
regulations, policies, laws, whatever they might be.
    I would like to ask my question to Mr. Borman. I have here 
a report, a 2001 report from the Department of Commerce, the 
World Export Administration on U.S. shipbuilding and repair. 
And the reason for my question is I am a delegate from Guam. It 
recommends that the Navy shall work with shipyards to review 
legislation on domestic procurement. My question to you is has 
this review taken place since 2001? I am particularly concerned 
because the Navy seems to have thwarted the will of Congress by 
using foreign shipyards for repair work of vessels with no home 
port. And I think our regulations read that ships home ported 
in the United States must be repaired in the United States. So 
putting a label on these ships as no home port allows them to 
go to foreign countries.
    The report also states that Japan and Korea have 69 percent 
of the market and they do not abide by U.S. environment or 
labor standards. So I am very concerned about this. Last year, 
three dozen MSC vessels were repaired in foreign shipyards and 
this was scheduled maintenance, Mr. Borman, not emergency 
repair work.
    So what are you doing about this report?
    Mr. Borman. Give me a second.
    [Pause.]
    Mr. Borman. This is one, I think, Mr. Chairman, we would 
like to get back to you in writing on because we will have to 
double check with the Navy and see what the status is.
    Ms. Bordallo. I do want to point out, Mr. Chairman, they 
have gotten around the law or the regulation.
    Chairman Manzullo. How much time would you need, Mr. Borman 
to get back?
    Mr. Borman. I would say probably a week.
    Chairman Manzullo. Okay.
    Ms. Bordallo. All right.
    Thank you, Mr. Chairman.
    I have one final question. This Buy America, who came up 
with the magic number of 50 percent? Why could it not have been 
60 percent or 70 percent? Can anybody on the panel answer that?
    Mr. Bradley. I think that 50 percent has been in law for 
many years and I do not know that I could answer that.
    Ms. Patrick. It is congressionally mandated.
    Mr. Bradley. Yes.
    Ms. Bordallo. I know. I know it is a regulation, but I am 
just wondering----.
    Chairman Manzullo. As far as regulation, at least 50 
percent since 1935.
    Ms. Bordallo. Well, maybe we ought to look at that, Mr. 
Chairman.
    Chairman Manzullo. We did, we increased it to 65 percent 
and everybody is objecting.
    Ms. Bordallo. Thank you, Mr. Chairman.
    And I will be waiting for the report, Mr. Borman.
    Chairman Manzullo. Thank you.
    Mr. Bartlett?
    Mr. Bartlett. Thank you very much. I am sorry I could not 
have been here for your testimony.
    I have been now for 11 years on the Armed Services 
Committee here and in another life I worked 18 years for the 
military. I was a small business person. And I am now 77 years 
old, so I have seen a lot of history. And I have been 
increasingly concerned as jobs have left this country and gone 
overseas.
    Our trade deficit this year is going to be probably in 
excess of $430 billion, well in excess of $100 billion with 
China alone.
    Just a moment on the Buy American, if we were to buy all of 
our things American, two consequences would follow. One is that 
our costs would go up considerably and, second, there would be 
a lot of retaliation and what we need to do is to trade off how 
much of that industrial base must be in this country from a 
national security perspective so that it is here when we need 
it, with some spare parts made by some countries that were not 
available to us because they were opposed to our Iraq policy 
and that should be a lesson for us.
    I do not know how you trade off those things but, you know, 
it would cost more if it were all American and there would be 
meaningful retaliation.
    Now, why are we in this predicament?
    You have mentioned the reasons. One is that we have 
regulations that other nations do not have, we have taxes that 
other nations do not have and so it just costs more. We have 
more than half of all the lawyers in the world and so that is 
why insurance premiums are so high. Mr. Bradley mentioned that 
he pays more for his secretary's insurance than a worker makes 
in another country.
    So on the one hand we have government policies which 
increase the cost of doing business here. On the other hand, we 
have a very high standard of living here and it takes a number 
of dollars per hours, 16, 18 dollars per hour to maintain that 
standard of living and we are now competing with people who are 
making sometimes a tenth of that.
    What would you expect different than what we have today 
when you recognize that we have policies in this country which 
increase the cost of doing business and we have a pay scale 
here which is maybe ten times more than the pay scale in other 
countries?
    And it is not that other countries are not without 
capabilities. We have an incubator in one of our community 
colleges and I went through that incubator and in every factory 
I go to I look for American made equipment. The only piece of 
American made equipment that I found in that incubator was a 
forklift. Everything else in that incubator the equipment was 
made somewhere else in the world.
    Why should the trend that we're now in just not continue 
indefinitely as long as these two things are a reality, that it 
is more difficult to do business in this country because of our 
regulations and taxes and our people here are paid many times 
more than they are elsewhere in the world? Why is this trend 
simply not going to continue?
    Mr. Coffey. I think that you have to take into account two 
things. First, the American worker is the most innovative 
worker in the world and if you are innovative you can displace 
substantial differences in cost of labor. Technology being 
applied to the manufacture of products drives down the per 
piece price and I think America is probably the most innovative 
society around the world in that regard.
    Mr. Bartlett. But how quickly do others catch up? We were 
first in programming, now India is clearly the premier country 
in the world for programming, they are doing a lot of our 
defense programming, by the way, in India. Sure, we are very 
creative, we are going to be out in front, but how long does it 
take them to catch up? Then what?
    Mr. Coffey. It takes less and less time because now the 
world is interconnected through the Internet and the time is 
shrinking. There is no question about that. If a product lasts 
two years now in the marketplace, it is a huge success. So 
innovation and the pace of innovation continues. The reason 
that we have to do something in this regard is that if we do 
not then that standard of living that we are all so proud of is 
going to continue to decline to the point where we will be 
back.
    I was struck that the Ford Motor Company chose to advertise 
for their hundredth anniversary the fact that they raised wages 
in the United States to $5.00 a day. It seems to me with them 
sending 10 billion in auto parts to China they are trying to 
get back to $5.00 a day after 100 years. And yet they have been 
the beneficiary of a country that has given all of this market 
to them for all these years.
    So I think we have got to raise the consciousness of people 
about the dichotomy we find ourselves in. We have got to do 
everything we can to help companies be competitive. If we can 
do that, then I think the innovation will keep us out front and 
we will be able to continue to be manufacturing in the United 
States. But right now, governmental intervention by other 
countries in their domestic markets is keeping us out of those 
markets and is making us uncompetitive in our own market and 
that has got to stop.
    Mr. Bartlett. Thank you, Mr. Chairman.
    Chairman Manzullo. Mrs. Majette?
    Ms. Majette. Thank you, Mr. Chairman.
    I thank the panelists for being here today and I share the 
concern of my colleagues about the number of manufacturing jobs 
that have been lost and I believe we will continue to have 
those losses unless we address these issues that we are 
discussing today. And I particularly have concern with respect 
to the defense industry. I represent Georgia's 4th 
Congressional District, which is just east of the city of 
Atlanta. We have very near my district the Lockheed Marietta 
plant which is involved in manufacturing defense-related 
aircraft, including the F-22, and I have a number of 
constituents who are employed at that plant, as well as some 
small business owners, minority and women business owners, who 
are subcontractors with Lockheed in the production of that 
aircraft. And so I am very concerned about the ability of my 
constituents and those businesses to be able to continue to 
compete.
    Now, we have talked a little bit about the issue of China 
and my question at this point is directed to Mr. Borman.
    I did not hear your oral testimony, so I do not know 
whether you touched on it, but in the written testimony that 
Mr. Storie provided, he refers to a Department of Commerce 
market cooperator development program to help pay for a service 
and training center in China.
    Now, can you tell me a little bit about the program and 
what it is supposed to or what it does?
    Mr. Borman. Unfortunately, I will not be able to. I will 
have to give you a written answer on that. And the reason is 
because that is done by a different part of the department than 
my bureau.
    Ms. Majette. All right. Well, perhaps you can address this 
other issue for me. A couple of weeks ago we held a hearing 
concerning the manipulation of currency valuation in China and 
the effect of that on small businesses and the ability of 
American businesses to compete.
    Can you address for me the effect from your point of view 
the effect of that manipulation of currency valuation in China 
on the decision that our government makes to do business with 
Chinese companies versus United States companies?
    Mr. Borman. Again, that is one I will have to get back to 
you because, again, my bureau does not deal with those issues 
directly within Department of Commerce.
    Ms. Majette. Can you tell me who would? I understand you 
are going to get an answer, but----.
    Mr. Borman. I think it would be the International Trade 
Administration at Commerce, is the place I will go to to get 
that answer for you.
    Ms. Majette. All right. Well, then probably my other line 
of questioning you would give the same response to, so I will 
move on, but can you talk at all about the trade imbalance with 
China and how we can address that?
    Mr. Borman. I can talk generally about it. Certainly there 
are my colleagues in Department of Commerce, other units, plus 
the United States Trade Representative, who continue to work 
very hard at addressing the structural issues that allow for 
this trade imbalance and I think there is some optimism that if 
China comes into the World Trade Organization they will have to 
deal with those. But, again, the folks that deal with that on a 
day-to-day basis can certainly give you a more detailed answer 
on that.
    Ms. Majette. All right. Well, then, I have got a couple of 
questions for Ms. Patrick.
    Since you have talked about how--essentially, as I 
understand your testimony, the United States, our small 
businesses and companies here cannot compete equally with 
companies with which you are suggesting we have to do business 
with, what is it that we can do to bring our companies in line 
with being competitive so that we can retain this work here 
instead of sending it out?
    Ms. Patrick. I actually did not say that our small 
companies cannot compete to become suppliers to the defense 
industrial base. As a matter of fact, I was trying to give some 
of the examples of very small companies, as a matter of fact, 
that are already coming into our defense industrial base and 
doing stellar jobs with innovative technology, companies that 
have only dozens of employees and have found their way onto 
major programs such as the UCAV, played very important roles at 
ground zero as well as in Operation Enduring Freedom. Some of 
the products of iRobot, for instance. A company like Indigo 
that has found its way onto the Joint Strike Fighter program. 
And our report really has 24 case studies of wonderful small 
companies that we are delighted to have as part of our industry 
base and we actually did the study that we did in many ways as 
a primer so that other companies wanting to get in could learn 
more from the successes of these companies.
    We also are aware of the fact that we have to become a 
little more transparent as an enterprise so that more companies 
come in. We want badly to broaden the defense industrial base. 
We want to include small and innovative companies. We have 
spent a lot of time and effort getting to know some of the most 
innovative of those companies. So once again, we really share a 
common cause with that. It is not that all of our small 
companies are not innovative. Study after study shows that the 
major source of innovation in our defense industrial base does 
not come from the prime contractor, it comes from the second, 
third tier small companies.
    Ms. Majette. Well, then, let me interrupt you. So what is 
it that you say you can do or that you believe you can do to be 
more proactive to bring more of these innovative companies into 
the loop? Because what I hear from my constituents and what I 
have heard time and again here being on this Committee is that 
these small companies, minority companies, women-owned 
companies, cannot get the information they need in a timely 
fashion to be able to compete, to be able to show what they can 
do. They are perfectly capable of doing it, but they cannot get 
into the loop. Tell me what it is either you need from us or 
that you see you can do to get them into the loop.
    Ms. Patrick. Well, there are actually already a number of 
programs that the department has that help with small 
companies. We have the mentor-protege program. We have the 
Small Business Investment Research Fund. DARPA is very actively 
engaging a lot of the smallest of our companies because they 
know they are so innovative. So our view is that what is most 
important is for the small companies to market to us. In the 
course of time that our study was being published, we had 
dozens of inquiries from small companies that we vectored into 
the office of the Defense Research and Engineering Group, which 
actually provides a lot of the funding for small companies, it 
does Title 3, so that we would have a much better viewpoint of 
what some of those small companies were and what their 
capabilities are.
    Ms. Majette. So you are saying that essentially the burden 
is on the company, the small, fledgling, struggling company, to 
seek you out and to market themselves to you as opposed to--and 
I am not using you personally, but for your department--rather 
than your department to go and seek them out or to make the 
information more available and more accessible to them, instead 
of going to foreign markets and engaging them?
    Chairman Manzullo. If you would yield?
    Ms. Majette. Yes, sir.
    Chairman Manzullo. This is about six miles outside of Ms. 
Patrick's expertise, but we have had in our congressional 
district, DOD came and put on a marvelous seminar, 250 people 
attended, on how small businesses can access procurement 
contracts and I would be glad to share that information with 
you.
    Ms. Majette. Thank you.
    Chairman Manzullo. It is just about six rings outside of 
her expertise on that.
    Ms. Majette. Thank you.
    Chairman Manzullo. I have just a couple of questions.
    First, I want to thank you all for being here.
    Ms. Patrick, you said that you had something to do with the 
statement of administrative policy?
    Ms. Patrick. As it affects the defense industrial base. 
Yes, sir.
    Chairman Manzullo. Okay. All right. A statement is made in 
here where it says ``The administration strongly objects,'' 
this is the provision in the defense bill, and it says ``One of 
the reasons is that it will establish rigorous restrictions 
against using non-U.S. sources that will unnecessarily restrict 
the Department of Defense's ability to access non-U.S. state-
of-the-art technologies and industrial capabilities.''
    Did you write that?
    Ms. Patrick. Well, yes, we did write that portion of it.
    Chairman Manzullo. Could you give me some examples of a 
foreign state-of-the-art technology that the U.S. does not 
have?
    Ms. Patrick. I gave you one. It was the Joint Strike 
Fighter tilt fan rotor technology that is being used for the 
Marine variant of the Joint Strike Fighter. That is probably 
the very best current example we have, but one of our other 
concerns with the legislation is that all of the commercial 
military synergies that we enjoy in the defense industrial base 
currently probably would be undone by the restrictions on 
foreign content.
    One of the ancillary effects, for instance, would be all of 
the commercial derivative aircraft that we procure from Boeing, 
over 30 of them, where because they are originally produced for 
commercial markets and clearly would not be subject to this 
kind of restriction, we would not be able to use them. Those 
aircraft range from Air Force 1 to tanker assets----.
    Chairman Manzullo. I understand that but the Joint Strike 
Fighter is 90 percent U.S. money and about 5 percent British 
money. The guarantees of sales are 1700 to U.S., 150 to the 
Britons. No guarantees of any sales to the other countries. I 
think it is Italy, Australia, et cetera. And for every 1 
billion they put up, they get a guaranteed 4 billion contracts.
    Ms. Patrick. No, they do not get any guaranteed contracts, 
sir. I mean, that is a very clear precept of that program, that 
there are no guarantees----.
    Chairman Manzullo. Well, those countries are not going pony 
up money unless they know they are going to get the contract.
    Ms. Patrick. It is 18 percent of the SDD phase.
    Chairman Manzullo. Well, what I would like to do--I am 
trying to figure out exactly who is on first here. Commerce 
comes in, there is a crisis in manufacturing. The Secretary of 
Commerce says that. Hearings are being held all over the place, 
Grant Aldonis comes to my district, I live and breathe this. My 
dad was a master machinist and then he became a master 
carpenter and then a master chef and he was also a master 
father at the same time. And I would like to invite you to come 
to my congressional district. I ant to show you what these 
machines are and I want to show you the shell and the hollowing 
out of America.
    Now, you talked about aircraft was our biggest export, 
okay?
    Ms. Patrick. Aerospace and defense, sir.
    Chairman Manzullo. Do you know how much foreign parts are 
in U.S. airplanes that are exported?
    Ms. Patrick. How many foreign parts are in U.S. airplanes 
that are exported?
    Chairman Manzullo. If an airplane costs $100 million and it 
is exported, it shows up $100 million on the plus side of our 
trade merchandise balance.
    Ms. Patrick. Right. But the net positive trade balance in 
aerospace and defense is $30 billion.
    Chairman Manzullo. Well, no. That is correct, but that is 
not the answer to my question. My question is--let me make it a 
statement. There is no indicator that shows the extent of 
foreign products and foreign engineering that go into an 
aircraft that is exported, so the $100 million aircraft could 
actually have $99 million worth of engineering and foreign 
parts in it, but still show up as $100 million on the trade 
balance sheet.
    Ms. Patrick. Well, but that metric actually does not hold 
for defense products. As I tried to make the point, 98 percent 
of the labor content of the major----.
    Chairman Manzullo. Labor content or labor and parts?
    Ms. Patrick. Ninety-eight percent of the value content 
which you can measure in terms of the salary input per----.
    Chairman Manzullo. $98 out of $100 of the cost.
    Ms. Patrick. Right.
    Chairman Manzullo. Okay.
    Ms. Patrick. That is right. That is U.S. That is in defense 
systems. Now, I cannot speak to the vast remainder of the civil 
manufacturing economy, the commercial manufacturing economy, 
because that is neither my purview nor, frankly, do we have a 
lot of leverage over those particular segments of the economy, 
especially as they have become very commercially successful.
    Chairman Manzullo. I understand that. You are telling us 
that only 2 percent of the content of military equipment is 
foreign.
    Ms. Patrick. Of the eight major systems that we studied two 
years ago, less than 2 percent in value.
    Chairman Manzullo. Okay. Here is what I would like you to 
furnish for me. I want copies of the contracts on the F-35, the 
costs, all right? It is your job--here, let me show you what 
your mission is. Where is it?
    I mean, I have certain ways of getting those, but I do not 
want to use that, because what I am trying to find out here is 
I do not even think that the Defense Department is complying 
with the Buy American Act in its present state of 50 percent. 
The mission here--this is the Department of Defense Directive 
from your home page. It says that you are to provide guidelines 
for DOD managers to use in determining whether specific 
industrial capability is required to meet DOD needs, whether it 
is truly unique and is truly endangered and, if so, what, if 
any, action DOD should take to ensure the continued 
availability of the capability.
    Now, there is an obvious disagreement here that you do not 
think American manufacturing is under siege and you are 
satisfied with the status quo, everybody is healthy. We lost 
almost 3 million jobs, industrial jobs. We have gone from last 
year about 16 percent down to about 10 percent. There are more 
and more manufacturing jobs--the National Association of 
Manufacturers has said if we continue with the present rate of 
loss of jobs, the American people have to get used to a lower 
standard of living. That is NAM.
    And I have talked to Grant Aldonis, Mike Fullerton is 
assigned to our Committee on it. I work almost full time on 
manufacturing issues. And I travel the country trying to find 
out what is going on.
    What will it take to convince you, Ms. Patrick, that 
manufacturing is in crisis? What will take? How many more jobs 
will be lost before you are convinced that there is a problem 
in U.S. manufacturing?
    Ms. Patrick. I likewise spend a lot of my time traveling 
the defense industrial base and so, you know, my viewpoints are 
not based on some theoretical precepts. We measure the health 
of the defense industrial base both in terms of financial 
metrics, but as well and most importantly in the ability of our 
defense industrial base to deliver to our constituents, the 
warfighters. And at no point in my tenure--and it has been a 
pretty tough couple of years, we have fought two wars during my 
tenure--at no point during the time when we might have expected 
a slip or a faltering step, at no point did the defense 
industrial base do anything other than deliver surge 
capability, in some cases that we did not even ask for, did 
companies even establish second sources before being asked to 
do so. I gave you the Honeywell example with the JDAM crystals. 
The same is true----.
    Chairman Manzullo. Well, let me ask you, why did Honeywell 
not get the contract in the first place?
    Ms. Patrick. Why did Honeywell not get the crystals 
contract in the first place?
    Chairman Manzullo. Yes. Why did they not get that contract 
in the first place? Why did you have to go to the Swiss?
    Ms. Patrick. Well, they had initially examined the same 
California supplier that they ended up going to and the 
supplier was not cost competitive.
    Chairman Manzullo. So there it is. So if you could buy 
something cheaper overseas, that is the bottom line. This is 
U.S. taxpayers' dollars buying equipment to be used by men and 
women in uniform to carry out U.S. policy and now you are 
talking about if you can get it cheaper overseas go ahead and 
use it.
    Ms. Patrick. We have a limited amount of funding in our 
defense budget.
    Chairman Manzullo. Yes, $400 billion this past time.
    Ms. Patrick. We have to steward our resources judiciously 
and we have to be good stewards of the taxpayer.
    Chairman Manzullo. You have to be good stewards also to 
protect the manufacturing base, which is your charge. My 
question again is what is it going to take to convince you that 
our manufacturing base--and obviously you disagree with the 
NAM, that is just a minor organization--that our manufacturing 
base is in trouble? What is it going to take?
    Ms. Patrick. Sir, I do not know.
    Chairman Manzullo. Well, that is the problem because you 
are not using the right measurement. You are using the 
measurements of costs, of profit, of profitability of the major 
companies. Those are the companies that are listed on--in fact, 
it is in your testimony, your written testimony, that the 
profit margins are up, that these companies are doing quite 
well, et cetera. Ingersoll was a privately held corporation. 
You would have no way of monitoring--you have no way of 
monitoring, no means to monitor the health of the industrial 
sector based upon P&E statements which you read in the Wall 
Street Journal. There is no other way.
    What could we do to call your attention to these critical 
industries so that--I mean, my suggestion is that, yes, get 
involved in monitoring the contracts. That is taxpayers' 
dollars. What is so hard about that?
    Ms. Patrick. Well, we go back to the issue that there will 
always be a finite amount of defense spending available and if 
we were to implement some of the provisions of H.R. 1588, we 
indeed would be using those finite resources to monitor 
contracts----.
    Chairman Manzullo. I understand. I understand, but that is 
your, is oversight.
    Ms. Patrick. And, frankly, manufacturing jobs would have to 
cede way to administrative and oversight jobs. There is already 
too much of that in our defense industrial base.
    Chairman Manzullo. Too much of what?
    Ms. Patrick. That is why----.
    Chairman Manzullo. Too much of what?
    Ms. Patrick. Oversight.
    Chairman Manzullo. Oversight?
    Ms. Patrick. That is why we lose more companies.
    Chairman Manzullo. I will tell you what, I will do it 
personally. Let me make this very easy, all right? I want the 
contracts in my office from Lockheed Martin and Northrop 
Grumman dealing with the F-35, and you and I will sit down 
together and we will determine the foreign content so far on 
the F-35. Okay? That should not be that hard to do. The admiral 
said that on a scale of 1 to 100, we are only at number 3, 97 
to go with regard to the building of that Joint Strike Force 
Fighter.
    And I will tell you the reason why I am interested in it. 
It bankrupted. The policies of Northrup Grumman to follow the 
cheap parts on a cost-plus contract, condoned by the Pentagon, 
who said buy the cheapest plastics you could get, that 
bankrupted one of America's finest companies and has imperiled 
the industrial health of this country, so much so that your 
office is engaged right now in stopping the Chinese company 
from buying Ingersoll.
    Now, when would you like to come to my office so we can go 
over those contracts? I can issue a subpoena duces tecum, okay? 
And I am willing to do that, when do you want to come?
    Ms. Patrick. I think we have to take this back to the 
department.
    Chairman Manzullo. No, no, no, no. I will give you a time 
to come in. You are not going to take it back, I want an 
answer. This is hardball for America's manufacturers. You know, 
when I was in back home, people did not talk about the war, 
they did not talk about the tax cuts, they came up to me with 
tears in their eyes. Rockford is at 11 percent unemployment--11 
percent. Every day, hundreds of jobs are lost. And do you know 
what is left to level the playing field? It is procurement. 
That is all there is, $250 billion worth to level the playing 
field to keep these--do you know what happens if the molders go 
out of business.
    Tell them, Olav. What happens?
    Mr. Bradley. We lose everything. We lose all manufacturing 
if we go down. We have no more defense. We will have no more 
manufacturing.
    Chairman Manzullo. Matthew, tell them what happens when the 
machine tool industry goes under, which it is right now. Paul 
Friedberg said the latest figures again show machine tool 
orders down 1.2 percent, just for this month, on a continuing 
decline. Down, what, 18 percent for the year.
    Mr. Coffey. It all comes down to a society's ability to 
generate wealth and if you do not have manufacturing capability 
you cannot generate the wealth. If you do not generate the 
wealth, you do not have the service jobs either.
    Chairman Manzullo. What is it going to take to bring 
together the Pentagon that refuses to recognize manufacturers 
in crisis, manufacturers who are going out of business. What is 
it going to take? I am willing to work on that, but I need to 
know what is going to take?
    We cannot continue to have this division between government 
and our manufacturing sector because that is why we are in such 
a problem. What is it going to take?
    Mr. Coffey. It is going to take a recognition on the part 
of the Pentagon that prime contractors are not the entire 
defense industrial base of the United States. And until they 
understand that, I do not think we are going to make any 
progress.
    Chairman Manzullo. I will contact your office and set up a 
date and expect you to come in with those contracts, with 
somebody able to sit there--I am very, very serious. Because 
this appears to be we might as well give everything to the 
Chinese and let them build all of our airplanes. I mean, for 
God's sake, we want to have tires made in this country. Are you 
objecting to that section also? To have U.S. rubber used on 
airplanes and trucks that is in the defense bill?
    Ms. Patrick. Sir, we are objecting to all of the provisions 
in that particular title.
    Chairman Manzullo. Okay. There is one U.S. manufacture left 
of military grade tires. That is Goodyear. Okay?
    Now, would you consider rubber tires to be critical to 
defense?
    Ms. Patrick. Rubber tires are critical to defense, but the 
other thing that we cannot lose sight of is a number of the 
other sources actually produce their tires in the U.S. They 
create jobs in the U.S.
    Chairman Manzullo. As long as they are manufactured in the 
United States, that applies in our bill.
    Ms. Patrick. There are two sources. Michelin produces tires 
in the United States and I think most of the tires produced for 
military aircraft are produced in the United States by 
Michelin. U.S. jobs, U.S. workers.
    Chairman Manzullo. In the bill--in the bill. You have to 
read the language because as long as the manufacturing is done 
in the United States, that is what that says. It could be a 
foreign company manufacturing here, just as an American company 
manufacturing here. But, see, you have objected strenuously--I 
mean, you guys are beating the drums, there was a retired 
general in the paper on the Hill yesterday going absolutely 
nuts over these provisions, but you have to understand it also 
applies to Michelin. I mean, Chrysler is owned by a German 
company and as long as the manufacturing is done here, that is 
all we are trying to do, is guarantee that it is done here. Do 
you not think that is a good idea?
    Ms. Patrick. Sir, I understand the intent, but I think that 
there is an attempt being made here today to solve all of 
manufacturing's problems using the defense procurement budget.
    Chairman Manzullo. That is because you are the biggest 
buyer.
    Ms. Patrick. Yes, but our leverage is modest. I talked 
about five-tenths of 1 percent in terms of semiconductors, less 
than a third in titanium. No matter what we were to do, we 
would not turn the tide on these industries because we do not 
have dominant leverage over them, nor should we. You know, we 
started these industries, they became vastly commercially 
successful, and we are delighted because in their success in 
the United States, in foreign markets, they were able to 
provide us products. They were increasingly more innovative, at 
lower prices and so we benefit from the fact that these are 
commercial and defense products.
    Chairman Manzullo. I understand that, but it is your 
mission to----.
    Ms. Patrick. We do not want to create----.
    Chairman Manzullo. Ms. Patrick, that is not your mission? 
Your job description, the Office of Deputy Under Secretary of 
Defense, Industrial Policy, ensures that an adequate defense 
industrial base exists and remains viable for defense 
production to meet current, future and emergency requirements.
    Ms. Patrick. And our defense industrial base has done all 
of those things admirably in the time of my tenure.
    Chairman Manzullo. But the only way that you do that is by 
looking at economic figures of the larger companies----.
    Ms. Patrick. No, I do not look at just economic figures of 
large companies.
    Chairman Manzullo. But you do not look at contracts to 
monitor the impact on U.S. companies whenever----.
    Ms. Patrick. I look at the responsiveness, I look at the 
nimbleness, I look at the corporate culture they have.
    Chairman Manzullo. But how do you----.
    Ms. Patrick. The things that allow them to replace things 
in 48 hours. I look at the fact that they are willing to surge 
production of spectra shield, shields for our soldiers in no 
time to begin to disadvantage their commercial markets when we 
ask them to. I think they have done an admirable job, and it is 
not just the top five, and I am also delighted in the successes 
of the smallest of the companies.
    Chairman Manzullo. I understand that. They are going to get 
parts from wherever and they are coming from overseas. That is 
what these guys are saying here. When the molding industry is 
in such distress, do you know what is going to happen when you 
can no longer make large molds? You want to have a turret made 
for a tank or something, there will not be anybody left in 
America because they are leaving so fast.
    My request to you is so simple. These are U.S. taxpayers' 
dollars. You are building airplanes, building all kinds of 
military equipment. What is so hard to monitor a contract to 
see if it is given to somebody overseas? Because believe me at 
this point, Duncan Hunter is probably going to put it into law.
    Ms. Patrick. Well, let me----.
    Chairman Manzullo. What is so hard? What is so hard to look 
at a contract given to somebody overseas and ask the question 
which you are required to do here, what is the impact upon 
American industry? This is your mandate. I mean, it says ``some 
examples of specific conditions which might result in a need to 
conduct industrial based studies include incremental changes or 
dislocations in defense industrial base.''
    Do you not think that testimony has been rampant here from 
these people today?
    Ms. Patrick. We do those studies when they are required. 
And let me just talk to you a little bit about the why of----.
    Chairman Manzullo. Have you done one on machine tools?
    Ms. Patrick. Let me answer your question, if I may. What I 
wanted to tell you during my oral testimony but did not get to 
is let me just talk to you about what is involved in the kind 
of studies that you have in mind. I told you about the study we 
did in 2001. We looked at only eight of our major weapons 
systems, but we looked at those eight weapons systems down to 
the third level of supply, not just the primes, not just the 
public companies, down to the third level of supply.
    It took dozens of people seven months to complete that 
study and it involved queries to 3500 companies. And we only 
went down to the level of $100,000 in terms of unit prices of 
those items. Just imagine the armada, an army, of oversight you 
would be creating if you wanted to replicate what was a very 
detailed study, came up with the answer, by the way, of less 
than 2 percent foreign content, if you wanted to replicate that 
kind of a study for the entire defense industrial base, sir, it 
would not be practical.
    Chairman Manzullo. I am just asking----.
    Ms. Patrick. And the answer that we have so far is less 
than 2 percent.
    Chairman Manzullo. Then you should not be fighting what 
Congress wants to do, to raise it from 50 to 65 percent. If you 
are at 98 percent, you should not even be wasting your time 
drawing these documents fighting this thing.
    Ms. Patrick. Less than 2 percent shows us that our defense 
industrial base manages the foreign content issue very 
conservatively, very prudently.
    Chairman Manzullo. And that was three years ago.
    Ms. Napolitano. Mr. Chairman, would you yield a second?
    Chairman Manzullo. I will yield.
    Ms. Napolitano. What was the criteria used in looking 
through and having all those people analyzed? What was the 
criteria used for American made?
    Ms. Patrick. The criteria was where the company was 
domiciled, as a matter of fact.
    Ms. Napolitano. Okay. Where it was domiciled can differ 
from the source is. A lot of companies are U.S.-based and they 
have--like maquillas, they are abroad.
    Ms. Patrick. Well, we might have actually included some 
European content that was actually manufactured in the United 
States. The bias would have been in the opposite direction.
    Ms. Napolitano. How so?
    Ms. Patrick. Well, because if we look at the domicile of 
the company and they actually have components that go into our 
defense systems that are produced in the United States, making 
domicile the standard that we use obviously might count some 
jobs that are U.S. jobs in the value and the content.
    Ms. Napolitano. Mr. Chair, did you capture that one? That 
it was where it was domiciled?
    Chairman Manzullo. Yes. It is where its manufactured, but 
reclaiming my time, in the executive summary on the study--I 
mean, you are unwilling to work with this Committee, Ms. 
Patrick, to provide us--it is my understanding--to provide us 
information as to the foreign content on the F-35. Is that what 
you are saying?
    Ms. Patrick. Sir, it is not my purview to be willing or 
unwilling to provide you data on the contract on the F-35. As 
your colleague, Mr. Schrock told all of us in absolutely 
correct detail, there is a program office in the department--
--.
    Chairman Manzullo. Well, the admiral does not know himself.
    Ms. Patrick.--that is responsible for the F-35 program----.
    Chairman Manzullo. That is correct.
    Ms. Patrick.--and, you know, it is not my responsibility to 
oversee every single contract that is let in the Defense 
Department.
    Chairman Manzullo. Are you in contact with the contract 
officers to tell them what industries are critical?
    Ms. Patrick. A number of our studies will tell a greater 
audience of our reports, which industries we consider to be 
critical.
    Chairman Manzullo. What about machine tool industries?
    Ms. Patrick. Well, you know, one of the things about 
machine tooling is, I mean, you have probably been on at least 
as many of our production floors in defense as I have. You 
know, easily 35 percent of the machine tools in our defense 
production lines are not U.S. and they are not U.S. for good 
reason. First of all, because the capability in many cases has 
not existed in the United States to build those machine tools--
--.
    Chairman Manzullo. All right. Let us stop right there.
    Mr. Coffey, do you want to respond to that?
    Mr. Coffey. Cincinnati Machine.
    Chairman Manzullo. Cincinnati Machine? She is saying that--
--.
    Ms. Patrick. That is one company.
    Chairman Manzullo.--there is a lot of foreign stuff--this 
is one of the premier companies. She is saying that there is 
foreign machines out there that pale the stuff that U.S. 
machines can do.
    Mr. Storie. My experiences would tell me that there is very 
few foreign sources of supply of machine tools that are 
producing equipment that cannot be produced right here in the 
United States. So to say that 35 percent of the machine tools 
are purchased because the capability does not exist is not--I 
cannot believe that that is accurate. The capability does 
exist.
    I am sure there are certain maybe specialty pieces of 
equipment that must be only produced overseas and if there are 
no alternatives, then that is the place that we have to go to 
get those pieces of specialty equipment.
    Chairman Manzullo. And no one is arguing with that.
    Mr. Storie. But there are many machine tool companies in 
the United States and that variety of machine tool companies 
can probably supply 95 percent of all the capability required.
    Chairman Manzullo. Do you agree with that?
    Ms. Patrick. Well, it has been interesting listening to 
this, but I would like to ask a clarifying question.
    On your own production lines, do you have a sense of what 
percentage of your tooling is not U.S.? Could you meet the 100 
percent U.S. tooling standard in your own----.
    Chairman Manzullo. This is not 100 percent. We want to go 
from 50 to 65 percent.
    Ms. Patrick. I can only respond to the legislation as I 
have seen it, but let us----.
    Chairman Manzullo. Wait just a second. The legislation is 
not 100 percent. The present law is 50 percent.
    Ms. Patrick. I am talking about the machine tooling 
legislation, sir.
    Chairman Manzullo. No, that is 70 percent. It is only 70 
percent.
    Mr. Storie. The answer to the question would be that in our 
production capabilities, I would say that 80 to 90 percent of 
the production capability that we have is U.S. manufactured, 
much of it was manufactured by our own company, we build 
machines and we use those machines to build our equipment. We 
have bought machines from Ingersoll in the past, we have bought 
from Giddings & Lewis. I mean, we buy U.S.-built machine tools 
to produce our products and I would say the number on our 
production floor is approaching 85 percent.
    Mr. Coffey. Mr. Chairman?
    Chairman Manzullo. Yes.
    Mr. Coffey. There is also an entire industry out there that 
builds special machines, one off machines for specialized 
purposes, but you do not find most of those companies ever 
getting a defense contract.
    Chairman Manzullo. The confusion is that the language as it 
came out of the House on the Buy American for machine tools did 
say 100 percent.
    Ms. Patrick. That is what I thought.
    Chairman Manzullo. That is correct. That is correct. And it 
is my fault. But the amendment that will be offered in 
conference by Mr. Hunter will bring that down to 70 percent, 
okay? For new buys. Only for new buys over $5 million.
    This has been a very interesting hearing.
    Ms. Patrick, it would be the admiral in charge of the F-35 
that would have that information. That is not your 
responsibility.
    Ms. Patrick. That is right.
    Chairman Manzullo. You folks have done an excellent job.
    Ms. Patrick, you have done a superb job of holding your 
ground. I disagree with you immensely, but I am glad that you 
have met with our staff to give you the utmost opportunity to 
prepare for all of your answers and I am satisfied that you did 
an excellent job in preparing for this hearing.
    The same with you Mr. Borman and the rest of the panelists.
    One of the most frustrating things that can happen is a 
witness coming in and not knowing the facts. Disagreeing with 
the witness is one thing, that goes on all the time, but 
disagreement with the witness because they do not have the 
facts at least as they see them, that is really frustrating. 
You have not been frustrating, you have been very patient and 
we want to thank you all for coming to this hearing.
    This hearing is adjourned.
    [Whereupon, at 4:55 p.m., the Committee was adjourned.]

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