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



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

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                    WASHINGTON, DC, OCTOBER 20, 2003

                               __________

                           Serial No. 108-42

                               __________

         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
Miller, Harris N., Information Technology Association of America.     6
Hira, Ronil, Ph.D., P.E., Institute of Electrical and Electronics 
  Engineers--United States of America (IEEE-USA).................     9
Humphries, Natasha D., TechsUnite.org............................    11
DuPree, Robert, American Textile Manufacturers Association (ATMI)    14

                                Appendix

Opening statements:
    Manzullo, Hon. Donald A......................................    37
    Velazquez, Hon. Nydia........................................    45
Prepared statements:
    Miller, Harris N.............................................    47
    Hira, Ronil..................................................    58
    Humphries, Natasha D.........................................    65
    DuPree, Robert...............................................    70

                                 (iii)

 
              THE OFFSHORING OF HIGH-SKILLED JOBS, PART II

                              ----------                              


                        MONDAY, OCTOBER 20, 2003

                          House of Representatives,
                               Committee on Small Business,
                                                   Washington, D.C.
    The Committee met, pursuant to call, at 2:05 p.m., in Room 
2360, Rayburn House Office Building, Hon. Donald A. Manzullo 
[chair of the Committee] presiding.
    Present: Representatives Manzullo, Schrock, Velazquez, 
Udall, Davis, Bordallo and Majette.
    Chairman Manzullo. Good afternoon, and welcome to our 
second hearing on the offshoring of high-tech, high-paying 
American jobs. A special welcome to those who have come some 
distance to attend this hearing.
    The U.S. economy has recovered from the most recent 
recession, but it has largely been a jobless recovery. In fact, 
in a recent article in the Washington Times yesterday, Paul 
Craig Roberts states that last month the U.S. economy managed 
to eke out a few new private sector jobs for the first time in 
2 or 3 years. The jobs are low-paying ones, retail trained 
temporary help and building construction. These jobs do not pay 
incomes large enough to bear the Federal debt burden.
    The latest issue of Business Week says this is due to 
sharply rising productivity in the offshoring of factories to 
China. That is, the recovery that we are ostensibly 
experiencing and the increase in the stock market is due to 
sharply rising productivity in the offshoring of factories from 
America.
    Though productivity growth actually accelerated, boosting 
profits, companies sent production offshore even as growth 
returned, just as problematic as the offshoring of high-paying, 
high-skilled jobs. This has serious consequences for the long-
term economic viability of this country.
    According to a recent report by the Federal Reserve Bank of 
New York, quote, structural changes, permanent shifts in the 
distribution of workers throughout the economy have contributed 
significantly to the sluggishness in the job market, end of 
quote. It left out the world ``global'' in front of economy. 
What we are really seeing is a permanent shift in the 
distribution of workers throughout the global economy, 
everywhere but here.
    At the information table in the back of the room, there are 
three articles that you will see dealing with the HSBC Bank in 
the United Kingdom. One article states that the United Kingdom 
has the possibility of losing one-third of its jobs offshore; 
one-third of its jobs could go to places with much cheaper 
labor forces. And so what we are facing here in the United 
States, it is not just us; it is a worldwide exodus of high-
paying jobs from productive, prosperous countries chasing the 
cheap dollar of cheap labor.
    And just as the once thriving steel industry is a shadow of 
its former self, the U.S. is in danger of losing its 
competitive advantage in the technology sector. Andrew Grove, 
Co-founder and Chairman of Intel Corporation, agrees. He says 
that the U.S. dominance in key technology sectors threatens the 
country's economic recovery and growth. He says the software 
and service industries, strong drivers of the U.S. economic 
growth for nearly two decades, show signs of emulating the 
struggles of the U.S. steel and semiconductor industries.
    When asked what he thought Silicon Valley would look like 
in 5 years, CEO Larry Ellison of Oracle Corporation replied, 
quote, more like Detroit than Silicon Valley, end of quote.
    The United States has lost 2.8 million jobs in the 
manufacturing sector in the last few years. Most of those jobs 
have gone overseas and will not be returning. At the same time 
we have lost a half million jobs in the tech sector and are 
hemorrhaging more every day. Newspapers across the country run 
daily stories about the offshoring of U.S. jobs.
    What I have in my hand here is a short list of companies 
that have announced in the last 30 days jobs moving overseas. 
And that short list is about 20 companies and, ironically, it 
includes Intel moving 1,000 jobs from the United States to 
China and India. And that is what really provoked its CEO and 
Chairman Andy Grove to pay attention to the fact that he 
readily admits that his company is part of the problem, but he 
wants to do something to try to solve it.
    And if you look at this list, you will see thousands and 
thousands and thousands of jobs, white-collar jobs going 
overseas, chasing the cheap dollar in India, China, Malaysia, 
the Philippines. That is the reason for this hearing--because 
of this incontrovertible evidence that the United States is on 
the verge of adopting the economies of Third World nations. And 
this is shocking, but it is exactly what the National 
Association of Manufacturing [NAM] said when it talked about 
the loss of manufacturing jobs. NAM said if the hemorrhaging 
continues, the United States is going to have to get used to a 
lower standard of living.
    Forrester Research projects that 3.3 million American jobs 
will be shipped overseas by 2015 with an accompanying $136 
billion in wages in high-tech and service industries. Another 
consulting firm, AT Kearney, estimates that U.S. jobs worth 
$150 billion will be sent offshore in the same year, 2015. Even 
still Goldman Sachs predicts that up to 6 million service jobs 
could move offshore over the next decade. Six million service 
sector jobs could move offshore in the next decade.
    To add insult to injury, even several State governments are 
sending call center and software design work overseas, and then 
they come to us complaining about the cheap imports.
    All of this has long-term implications for the U.S. economy 
and the future direction of the country. What could be done in 
the short term to help stabilize the bleeding of these jobs? 
Congress needs to quickly pass Crane-Rangel-Manzullo-Levin, 
H.R. 1769, which replaces the current FSC/ETI law with an 
exclusion from taxation of up to 10 percent of income for 
domestic manufacturers and producers. Once fully phased in, 
this bill would replace FSC/ETI with an effective reduction in 
the corporate tax rate of up to 3-1/2 percentage points or 10 
percent for U.S. manufacturers manufacturing in the United 
States. The legislation gives our manufacturers a reason to 
stay in the United States.
    The bill also applies to the high-tech industry, including 
software companies which would be incentivized to keep the 
software jobs here.
    Let me be very clear on this issue. The House should not 
pass any package with an international tax component. 
Regardless of the merits of Chairman Thomas's bill, now is not 
the time to reward overseas manufacturing to the detriment of 
domestic producers. The Thomas bill simply gives companies more 
incentive to replace American workers with foreign labor. The 
Thomas bill will further encourage cheaper imports. That is not 
what we need in this country at this point. We need a way to 
encourage domestic manufacturing and production.
    Wayne Fortun, president and CEO of Hutchinson Technology, 
has declared that but for the current FSC/ETI benefit or a 
similar benefit, he would have to outsource production to 
China, and Andy Grove again has further observed that the 
software and technology service businesses are under siege by 
countries taking advantage of cheap labor costs and strong 
incentives for a new financial investments.
    Since 1994, the Chinese Government has kept its currency 
pegged at 8.28 yuan to the dollar. China has experienced 
economic growth, gains in productivity, a large export sector 
and increased foreign investment, all factors that would cause 
its currency to appreciate if it were allowed to freely move. 
Some economists estimate that the yuan is undervalued by as 
much as 40 percent.
    The impact is not being just felt abroad. The overvalued 
dollar has caused the U.S. to be flooded with cheap imports. 
Import penetration has caused domestic manufacturers to lose 
market share against foreign products that have a government-
subsidized price advantage.
    I appreciate the tremendous work that Treasury Secretary 
Snow is doing with the Chinese Government to convince them that 
the marketplace needs to determine its current valuation, but 
more needs to be done sooner versus later. That is why I 
authored Joint Resolution 285 expressing the concern of 
Congress on this issue and encouraging the President to review 
and utilize all tools to level the playing field with respect 
to currency manipulation.
    Lastly, I am concerned that our military has become almost 
entirely dependent on foreign sources of materials, components 
and production equipment. We have no independent strategic base 
in this country. We have held two hearings at least in this 
Committee to determine that, and another hearing was held just 
last week to try to demonstrate to the American people and to 
fellow Members of Congress the fact that the continuous 
offshoring puts this Nation at peril. It eventually could 
hinder our Nation's ability to protect itself, and measures 
must be taken to shore up America's defense industrial base.
    The full Committee hearing we held last week where 
witnesses testified that our national security is at risk due 
to continued and increasing reliance on foreign manufacturing 
for high-tech equipment expresses this, and this is why it is 
imperative Congress strengthen and fight for stronger ``buy 
American'' legislation. These provisions include increasing 
from 50 to 65 percent the amount of U.S. content required in 
major DOD purchases for the Buy American Act, and requiring 
defense contractors if purchasing new equipment to buy 
American-made machine tools, dies and industrial molds for 
major weapons acquisitions. And the Pentagon continues to fight 
us on this.
    It was this Committee 2\1/2\ years ago that held an 
extraordinary 4\1/2\-hour hearing where we brought in the Chief 
of Staff of the Army and two other generals to show that the 
Army's order of 2.5 million berets had gone to South Africa, 
Romania, India, Sri Lanka, China, Canada and then the United 
States for manufacturing. And all the procurement experts said, 
well, those contracts are locked in stone, and we broke four of 
them because of the public outcry and the disgrace of using 
U.S. taxpayers' dollars to destroy U.S. jobs.
    Six hundred and fourteen thousand nine hundred ninety-nine 
of those berets are sitting in a warehouse in Mechanicsburg, 
Pennsylvania. The other one I carry in my briefcase, which I 
don't have here now, otherwise I would hold it up as Exhibit A.
    But that is where this inquiry all started. The United 
States Government is doing the same thing that many of the 
multinational corporations are doing. They not only are chasing 
low-dollar wage, but not looking at the long-term effect of it. 
It is hurting the domestic workforce and our fighting 
capabilities at the Pentagon.
    It is crucial that the U.S. stop exporting jobs to other 
countries. Our continued prosperity depends on keeping jobs 
here. As a person who has supported every free trade agreement 
in this Congress and has been given numerous awards for his 
continuous efforts on free trade, I come from that position. 
This is not a free trade versus protectionist hearing today. It 
is far from it. It is a hearing on where the United States is 
going to go and whether we are going to have a standard of 
living that we are used to, or whether we are going to adopt 
the standard of living of the countries to whom we are 
exporting our jobs.
    [Mr. Manzullo's statement may be found in the appendix.]
    Chairman Manzullo. I now turn to the Ranking Member 
Congresswoman Velazquez for an opening statement.
    Ms. Velazquez. Thank you, Mr. Chairman.
    In today's global economy, the movement of jobs and 
operations abroad has become a major factor affecting the 
manufacturing and technology sectors. Many companies are 
looking to markets overseas in order to remain competitive 
while others are driven purely by profit. As globalization has 
made it possible for economic, political and cultural systems 
to cross national borders freely, it has also caused some shift 
in the economic base of our country. It has negatively affected 
U.S. jobs, both high-skill and blue-collar, causing them to 
move overseas.
    Just look at our manufacturing sector, which has lost 2.4 
million jobs since 2001. It is also predicted that 3.3 million 
white-collar jobs and $136 billion in wages will be lost to 
countries overseas by 2015. A large number of service sector 
jobs and small firms will have to readjust and compensate for 
these massive losses.
    Many factors are pushing industries overseas. Today's U.S. 
Tax Code gives away billions of taxpayers' dollars in subsidies 
to companies that transplant their factories, outsource 
production and then hide profits in offshore tax shelters.
    The current U.S. patent process is also impacting our 
ability to quickly develop new innovations that could stir 
economic growth. Many U.S. firms are being hindered by the slow 
process of receiving patents. Their competitiveness is 
threatened as they fail to see rewards for their innovations 
due to significant lags in processing time.
    In addition, cheap labor costs are another incentive that 
results in the outsourcing of domestic industries. High-end 
service sector work is moving abroad into areas with weak labor 
laws and where products can be provided at 50 to 60 percent of 
the cost associated with making them here in the United States.
    The high price of health care is yet another concern for 
U.S. companies. Rising health care costs have created hardship 
in the manufacturing sector, which has long been a leader in 
providing insurance for its workers. As health care costs 
continue to skyrocket, the fact that U.S. companies must 
compete with industries overseas that provide no health care 
for their workers, leaving them at a competitive disadvantage.
    Flawed trade policies have also created challenges. 
Policies such as the GATT and NAFTA have cost domestic 
producers to lose market share to foreign competitors and 
encourage job dislocation and plant closings across the 
country.
    Finally, a major issue in the decline of certain U.S. 
industries is the monetary policies employed by some of our 
trading partners. The artificially high currency levels of a 
few nations have forced flawed or cheap products into the U.S., 
further exacerbating our Nation's trade deficit.
    It is quite obvious that the new age of globalization is 
taking a toll on our Nation. Many of these concerns must be 
closely examined and evaluated.
    While tools like GATT do exist to reverse some of these 
inequities, the Bush administration to date has failed to bring 
these policies to bear on China, the worst offender.
    We also must make revisions to the U.S. Tax Code to create 
incentives for American firms to remain in the U.S. versus the 
current system that encourages companies to move overseas.
    As globalization becomes the norm of the business world, it 
is important that we carefully monitor its impact and take 
proactive steps to ensure that the effects on small businesses 
and our economy are not irreversible. Since small firms are the 
drivers of our economy, we must be sure to take their interests 
into account when reevaluating some of these policies.
    We have watched the U.S. manufacturing sector decline, and 
now have new fears of a similar fate permeating the high-tech 
industry. It becomes clear that we must work to protect these 
vital sectors and our small businesses so that they remain 
competitive and strong. Only then can we look forward to an 
economic rebound in job creation where we need it the most, 
right here at home. Thank you, Mr. Chairman.
    Chairman Manzullo. Thank you.
    [Ms. Velazquez's statement may be found in the appendix.]
    Chairman Manzullo. We are going to set the time clock at 6 
minutes, more or less, and if you hear this [tap from gavel], 
your time is up. We will leave plenty of time for questions, 
and certainly I will leave plenty of time for your testimony.
    Our first witness is Harris Miller. Harris is president of 
Information Technology Association of America, known as ITAA. 
He has quite a background. He worked on Capitol Hill and had 
been involved in--I am going to tease you, Harris; you have 
been involved in technology so long that you were here before 
the word technology was invented?
    Mr. Miller. Absolutely, Mr. Chairman. I take full credit 
for the creation of the term.
    Chairman Manzullo. There you are, but tremendous 
credentials, great background. We look forward to your 
testimony. Thank you.

     STATEMENT OF HARRIS N. MILLER, PRESIDENT, INFORMATION 
            TECHNOLOGY ASSOCIATION OF AMERICA (ITAA)

    Mr. Miller. Thank you, Mr. Chairman. It is an honor to be 
here before you and this Committee again, and also to testify 
before Congressman Schrock in 2 days. I was with him in another 
hearing on Friday.
    ITAA represents approximately 400 companies in every aspect 
of the IT industry, and I commend you, Chairman Manzullo, for 
trying to bring some facts and rational analysis to what is 
understandably a very emotional issue.
    I would like to leave five points with the Committee today. 
Number one, the global challenge to the U.S. IT software and 
services industry is very real.
    Number two, however, the picture is not as dire as many of 
the inflammatory headlines indicate.
    Number three, the U.S. IT industry currently runs a large 
trade surplus with the rest of the world in IT services, and a 
trade war in this area between the U.S. and the rest of the 
world would be extremely harmful to U.S. IT companies.
    Number four, the way to meet the challenges globally is to 
run faster and jump higher, not to try to throw artificial 
obstacles in the hands of our opponents.
    And number five, we--and by that I mean the IT industry, 
academia, IT customers, government and IT workers--need to 
collaborate on what I refer to as a new competitive reality 
program to identify and implement the best programs and 
policies to meet the global challenges to make the U.S. 
companies and their workers more competitive.
    The multinational members of my organization know that fair 
competition opens tremendous growth opportunities, many of them 
are in the developing economies to which you referred, but they 
also know what it means to have unfair trade practices thrown 
in their path. To small IT companies, however, and to many IT 
workers, the meaning of global competition is not so obvious to 
business success and instead is quite alarming. That is why 
ITAA has been an early and often advocate for a better 
understanding of the offshore outsourcing phenomenon including 
educational seminars we have been conducting across the 
country, including one we will be doing in San Francisco 
tomorrow.
    ITAA generally believes that outsourcing---- by that we 
mean trying to build and maintain IT work outside the company 
rather than in-house--is generally the most effective strategy 
for organizations to conduct their IT operations.
    Outsourcing, however, is not necessarily the same as 
offshoring. Rather, offshoring is a subset of outsourcing. It 
is important to understand that companies may provide 
outsourced services on-shore, offshore or as becoming more 
frequent in some combination. The decision on which way to go 
is based on a variety of factors, not the least of which is the 
customer preference.
    As you mentioned, Intel board chairman Andy Grove warned in 
a recent speech that without vision and action, large parts of 
the industry could go the way of the steel industry. As a 
native of western Pennsylvania who worked his way through 
college in part by working in a steel company, I know what 
economic obsolescence can do to a community and ultimately to 
the working lives of average people.
    Globalization is creating a new competitive reality for 
employers, employees, government agencies and academia just as 
it has in the manufacturing industry for decades. It also is a 
phenomenon which draws together numerous public policy threats 
which many of you have mentioned already, Mr. Chairman and Ms. 
Velazquez, trade, business, immigration, education and training 
and retraining, protectionism, global tax policy and employment 
policy.
    As a growing number of countries create the resources to 
compete for global IT business, particularly the business in 
this country and other developed economies, the U.S. IT 
industry finds itself in the difficult position of trying to 
respond to pricing pressure from abroad while maintaining a 
domestic policy tool.
    We cannot legislate or regulate our way out of this 
perplexing situation. On the other hand, however, to do 
nothing, to do the Bobby McFerrin thing, ``Don't Worry Be 
Happy'', is to risk an ever-increasing number of knowledge 
worker jobs disappearing overseas.
    So to remain preeminent in global markets, ITAA is 
advocating this new competitive reality program that will bring 
together all key stakeholders to prepare, number one, a 
detailed analysis of the situation; number two, a thorough 
examination of various policy and programmatic approaches; and 
number three, a specific plan of action to implement critical 
policies and programs. Such a program, rather than knee-jerk 
legislative or regulatory solutions, is the way to preserve 
global competitiveness.
    What are the elements of the new competitive reality? First 
the trend toward offshore outsourcing is a cloud on a horizon, 
not a hurricane sweeping everything in its midst. We need to 
keep our eye on this weather pattern and how it is changing 
over time, but we don't need to start boarding up our windows 
and stashing the patio furniture. The IT industry is facing new 
challenges, but it is not disappearing.
    Over 10 million Americans earn their living in the IT 
workforce; 9 out of 10 of these workers are employed by 
businesses outside of the IT industry, contrary to common 
belief. They work for banks, for law firms, for factories, for 
stores and many small businesses. Eight out of ten of these 
jobs are found in small businesses, the major focus of this 
Committee's work, the firms arguably least likely to seek a 
global solution or to attract a global solution provider. Even 
the most doom and gloom analysts predict that over 500,000 
computer specific jobs will move offshore in the next 10 years.
    If we have seen any storm at all, it has been the perfect 
storm of the current depression of the demand for U.S. IT 
workers, the dot-com bust, the telecom collapse, the recession 
and the cutting in capital spending.
    I am pleased to note, however, that there are indications 
by the U.S. Government and various analysts that spending on IT 
is improving. I don't want to diminish the action felt by IT 
workers who have lost their jobs or are in fear of losing their 
jobs in this country, but I also believe we cannot overreact to 
what up until now was just a short-term situation.
    Certainly we know that much of this demand--and I know my 
time is about up, so I will try to finish up quickly--are being 
driven by the large corporate customers. They are trying to 
save costs. They are under pressure from their customers to 
save costs. So what we need to do is to focus in several areas: 
number one, that you and Congresswoman Velazquez both 
mentioned, education, training and retooling.
    Number two, promoting free trade. We have the most open 
markets in the world, but too many other countries in the world 
do not have open markets. But I remind the Committee again we 
are currently running a $7.9 billion surplus with the rest of 
the world.
    Number three, as Congresswoman Velazquez mentioned, new R&D 
investments, absolutely critical. We are falling way behind in 
R&D investments.
    Number five, we must keep our own markets open and not get 
into a global trade war.
    And number six, we must fix our global trade policy. There 
are too many factors, too many incentives to keep earnings 
overseas and not bring them back.
    We are going through a difficult time, but it is also 
important to remember that the long-term trend is good for the 
U.S. IT industry and U.S. IT workers.
    Thank you, Mr. Chairman.
    Chairman Manzullo. Thank you.
    [Mr. Miller's statement may be found in the appendix.]
    Chairman Manzullo. Our next witness is Ron Hira, Ph.D. He 
is the chair of the R&D policy committee at the Institute of 
Electrical and Electronics Engineers, and we look forward to 
your testimony. This is your second time before our Committee?
    Mr. Hira. That is correct.
    Chairman Manzullo. That is great. Thank you for coming.

    STATEMENT OF RONIL HIRA, Ph.D., P.E., CHAIR, R&D POLICY 
  COMMITTEE, INSTITUTE OF ELECTRICAL & ELECTRONICS ENGINEERS 
                           (IEEE-USA)

    Mr. Hira. Thank you very much, Mr. Chairman. Thank you and 
thanks to the----.
    Chairman Manzullo. You might want to pull that mike a 
little bit closer to you. It would be a little bit easier 
there.
    Mr. Hira. That is the second time I had to do that. You 
would have figured I would have learned by now.
    Thanks to you and thanks to the other distinguished members 
of the Committee, I am very pleased to be here representing the 
235,000 U.S. members of the Institute of Electrical, 
Electronics Engineers USA, IEEE-USA. Our members are electrical 
engineers, electronics engineers, software engineers and so on 
and so forth. In my day job I also teach public policy at 
Rochester Institute of Technology.
    Seventy percent of IEEE-USA's members work for private 
businesses, and 30 percent of those members work for small 
businesses.
    Let me talk about outsourcing first. Our members are 
experiencing unprecedented levels of unemployment, and I really 
want to emphasize that this is unprecedented levels of 
unemployment. We have been tracking unemployment figures for 
our members for over 30 years with the Bureau of Labor 
Statistics, and right now computer hardware engineers are at 
6.9 percent unemployment. Electronics engineer are at 6.7 
percent unemployment. We would generally expect about a 1.5 
percent unemployment rate for those occupations, not a 6.9 
percent unemployment rate.
    And just to give you some historical perspective, 
throughout the whole 1980s when general unemployment was as 
high as 9.5 percent, unemployment rates for electrical and 
electronics engineers never rose above 2 percent. So we are in 
a very different era right now.
    And even engineering managers have become hit hard by the 
unemployment rates. They are now at 8 percent compared to their 
peer group managers and professionals at 3.5 percent. So if you 
are an engineering manager, you are more than twice as likely 
to be unemployed than if you were a manager in another area.
    And let me say that these numbers are sometimes abstract, 
and let me make it a little bit more concrete. I was at the 
annual conference for the Society of Women Engineers 2 weeks 
ago in Birmingham, Alabama, speaking, and a number of people I 
met there were very concerned about job security. It was the 
number one issue in their minds, and these are experienced 
engineers working in R&D worried about whether or not they can 
hang on another 5 years in their companies so that they can get 
health benefits.
    Also even at RIT, at my university, we are hearing students 
talk about this. I have a colleague of mine, a political 
scientist, Rhonda Callaway, who I was speaking with just on 
Friday, and she teaches a course in globalization, and it is a 
university-wide course. So everybody and all majors have to 
take this class in globalization. And she said one of her 
assignments was how does globalization affect you, and many of 
her students who are majoring in information technology wrote, 
well, globalization is basically taking all of our jobs away, 
and they have a pretty pessimistic outlook on what is going to 
happen and what their careers will be like.
    We believe that the trend toward offshoring of engineering 
jobs is a fundamental structural adjustment. This is not just 
the dot-com bust or the telecom bust. I have talked to enough 
engineers who were gainfully employed way before we had the 
dot-com bubble who are not employable now. So something is 
different about this, and it is not just attributable to that.
    In fact, what we are seeing is that this offshore 
outsourcing since the last time I came and spoke has become 
institutionalized in corporations. There is a new job title. It 
is called global supply coordinator. So companies are figuring 
out how to manage this process of moving as much work offshore 
as possible.
    Much of the discussion or policy discussion has been about 
whether offshore outsourcing is good or bad--whether you are a 
free trader or a protectionist. I think this is really the 
wrong way of thinking about offshore outsourcing. The real 
question is how are these displaced workers going to become 
reemployed, and what kind of jobs are they going to get. Will 
an analytical engineer with 20 years of experience and a 
master's degree retrain to become a nurse? And if so, how are 
they going to afford to be able to do that?
    There is a widespread belief, almost a blind faith amongst 
people, that we will just go on to the next big thing. These 
are low-level jobs that are going offshore and the next big 
thing--and many people call it--will say nanotechnology is the 
next big thing. American workers are going to do that. There 
will be great economic benefits, lots of jobs created in that 
area.
    I just want to caution people who think that that is going 
to happen--and I hope it does happen in nanotechnology--that we 
are not the only ones that are worried and investing on the 
frontiers of nanotechnology. I saw a recent study that showed 
that the U.S. is producing about 5,000 technical papers in 
nanotechnology every year, and the second leading country in 
terms of scientific and technical papers was China at 2,400, 
and then Japan was just behind that. And, you know, with the 
cost advantages and those technical advance capabilities in 
R&D, you know, will it be surprising if they don't capture lots 
of those jobs that are going to be created?
    Something else that is affecting American engineers is the 
loss of manufacturing. More than 48 percent of engineers work 
in the manufacturing sector, and even though manufacturing is 
about 15 percent of GDP, manufacturing sector accounts for 
about 62 percent of all R&D that is done. As production moves 
overseas, will it be any surprise that that R&D follows that 
production and that R&D goes there instead?
    So let me sum up very quickly with some policy 
recommendations. First off, we need to start to track what is 
happening. We don't know what the actual impact of all of this 
is yet. We need companies to give adequate notice when they 
plan on moving work overseas to both their employees and to the 
government so that we can plan for transitions for employees. 
Right now they are being blind-sided. We need real and 
substantial assistance for those displaced workers. We need to 
strengthen and enforce American worker protections for the H-1B 
and L-1 visas. Those are inadequate right now, and they are 
accelerating the offshore outsourcing. And I will leave it at 
that. But let me just sum up and say we need a national 
strategy for dealing with this phenomenon. Thank you.
    Chairman Manzullo. Thank you very much.
    [Mr. Hira's statement may be found in the appendix.]
    Chairman Manzullo. Our next witness again brings a very 
interesting personal perspective to what we have been 
discussing here for 3 years. Is that correct? We have been 
talking about this for 3 years, and about the loss of 
manufacturing jobs and all type of jobs, and we are not 
prophets, are we, Ms. Velazquez, but we certainly did see this 
coming for a long time, especially in my home town of Rockford, 
which has--Rockford, Illinois, which is the state of 
unemployment--state of unemployment of 11.5 percent. It is 
probably closer to 15 percent because the people have just 
fallen off the unemployment rolls.
    We welcome Natasha Humphries, former software QA engineer 
at Palm, Incorporated. And we look forward to your testimony.

  STATEMENT OF NATASHA HUMPHRIES, MEMBER, STEERING COMMITTEE, 
    SILICON VALLEY CHAPTER OF TECHSUNITE.ORG, SANTA CLARA, 
                           CALIFORNIA

    Ms. Humphries. Thank you, Mr. Chairman and esteemed members 
of the Committee. Thank you for this opportunity to hear my 
testimony today on behalf of myself as well as many other ex-
Silicon Valley technical workers disenfranchised by the use of 
offshoring by Silicon Valley companies.
    My name is Natasha D. Humphries. Immediately following my 
undergraduate studies at Stanford University School of 
Humanities in 1996, I developed an interest in computer 
software, landing my first job at Apple Computer, Inc.
    Over the years I have continued to acquire new skills 
through classes, seminars and self-study in order to adapt to 
the fast-paced technological changes in Silicon Valley. As a 
senior software quality assurance engineer, I have over 7 
years' experience testing U.S. and international software 
applications, most recently in the hand-held device industry. 
After more than 3 years of service, I was laid off from Palm, 
Inc., at the end of August 2003 due to a workforce reduction or 
realignment.
    Palm, Inc. is the leading global provider of hand-held 
computing devices and operating systems for hand-held devices 
including both Palm-branded and Palm OS-powered devices. 
According to Palm's Form 10-Q SEC filing, dated October 14, 
2003, Palm shipped over 22.9 million Palm-branded devices, and 
approximately 30.1 Palm-powered devices had been sold worldwide 
as of August 31, 2003, resulting in total revenues of $871.9 
million in fiscal year 2003.
    Since the dot-com bust a few years ago, Palm--as well as 
many other companies in Silicon Valley--have been struggling to 
reduce R&D and other costs in order to meet Wall Street's, as 
well as shareholders', fiscal expectations. Early in 2002, 
Palm's software testing organization definitively began an 
aggressive campaign to outsource all testing assignments to 
India and China. After securing bids for pay raises as low as 
$2 to $5 an hour, or $4,200 to $10,400 per year, executive 
management made the decision to outsource all testing 
assignments to software QA engineers in India, achieving 
considerable savings of 50 to 70 percent on salaries alone. Pay 
rates of U.S. workers range from 30 to $60 an hour, or $63,000 
to $125,000 per year.
    In my role as senior software QA engineer and lead, it was 
my responsibility to review product specifications, develop 
product test support documents and milestone schedules, set up 
and manage the software defect tracking system, report defect 
metrics and testing status to QA management and U.S.-based 
cross-functional teams, and to manage the offshore team.
    My software project was one of the first to use the 
offshore team in India. After several weeks of mounting project 
management difficulties, including but not limited to language 
and geographical barriers, cultural differences, downed e-mail 
servers, weak network and telephone infrastructure, immature 
software development knowledge, lack of familiarity with 
software and hardware products and IT engineering systems, I 
and a number of my colleagues forecasted protracted development 
and testing cycles.
    Management quickly identified a solution for the last three 
problems. In order to build core competency of Palm's products, 
software development practices and IT engineering systems, the 
product software integration and test organization began 
sending in-house software QA engineers to train their 
counterparts in India from their Milpitas, California, 
headquarters. I was one of the designees and trained software 
QA engineers in Bangalore, India, for a period of 2 weeks in 
December 2002.
    After 6 months the major problems began to subside, and the 
offshore team were rapidly advancing up their learning curve. 
Over a period of 4 months after returning from India, I met 
repeatedly with my software QA manager and director in order to 
ascertain the new direction of the organization and any new 
skill sets required to remain competitive in my position as the 
offshore team began performing more of my job functions.
    I sought advice and approval for tuition-reimbursed course 
work in programming languages, for example, Java and C++; and 
scripting languages for automation testing, for example, Silk. 
At each individual organizational meeting, I was unable to 
learn any specific new requirements of my position and was 
discouraged to enhance my professional skill set either through 
poor direction or denied approval of course work.
    The QA director always indicated that his organizational 
structure was in flux and that his strategy to increase the QA 
group's technical expertise in alignment with new business 
objectives would be revealed soon. Moreover, he assured the 
group that no one would lose their jobs to offshoring of work, 
although the majority of current assignments were already being 
tested in India and China.
    In March 2003, however, I learned that new automation 
testing assignments had recently been offshored to a different 
vendor in India. Management quickly dismissed my job security 
concerns, stating that delegating the current job functions to 
the offshore team would provide more freedom to develop new 
technical skills. The veracity of these statements were 
doubtful, as I suspected I would be displaced by the offshore 
team, particularly after returning from a 10-day vacation in 
which my lead counterpart in India directed the test effort in 
my absence without me having to work remotely while on vacation 
for the first time in 3 years. In preparation for my vacation, 
I provided detailed instructions to the lead in India, defining 
how to report defect metrics for team status reporting, how to 
manually correct queries that failed, when to send the status 
report Monday mornings prior to executive program review, and 
to which distribution lists.
    When I returned from vacation in June, I was astounded to 
learn that my plan was flawlessly executed without a glitch. I 
recognized immediately that my time horizon at Palm as a senior 
software QA engineer was shortening, and that I may have 
engineered my way out of a job. My suspicions were confirmed 
when management failed to conduct an annual performance review 
in July 2003.
    On August----.
    Chairman Manzullo. You have plenty of time, and you can 
speak slower. Okay. Go ahead. This is very dramatic. I want 
people to hear it. Take your time.
    Ms. Humphries. On August 20, 2003, I was terminated from my 
position along with approximately 40 percent of my software 
quality assurance group, which represented 14 people. Although 
this number may not appear statistically significant, it is of 
import to note that we represented the talented few remaining 
after scores of layoffs over a 3-year period following the dot-
com bust.
    Most of the terminated QA individuals held senior positions 
and commanded a considerably higher annual salary in comparison 
to our offshore counterparts earning less than $5 an hour. 
Although most of the software QA engineers in India are master 
degree holders, Palm is only required to pay home country wages 
commensurate with living standards in India, which is 2 to $4 
an hour.
    According to my termination letter, Palm made a 
determination that the software project to which I was assigned 
had reduced or eliminated investment in the company. However, I 
have knowledge that the software project to which I was 
assigned is indeed in alignment with the company's business 
objectives and, further, represents a new platform on which 
development of all future software applications will be based. 
I have also received confirmation from anonymous sources within 
the company that my offshore team in India continues to test my 
software project following my departure from Palm.
    Ironically, one of my peers in quality assurance was also 
separated from Palm in August during the 7th month of her 
pregnancy. She is a U.S. citizen from India, displaced by 
technical workers in her own home country. I learned recently 
from a former team member in the customer support organization 
that he, too, received notice last week that his employment at 
Palm will terminate at the end of this month. Although the 
notice indicated that the termination was due to the Handspring 
merger, he suspects the decision may be related to the recent 
outsourcing of customer support to India. An anonymous source 
reports that additional layoffs are expected as Palm increases 
its multisourcing efforts to companies in India.
    Multisourcing is defined as companies increasingly doing 
business with multiple service providers in the same or 
different countries, based on the best skills for the best 
price.
    A month following my departure from Palm, I joined 
TechsUnite.org, which is building an alliance of technical 
workers to raise public awareness and to protest offshoring, 
among other workers' rights issues. During TechsUnite meetings 
I have met many software engineers and IT workers who have been 
unemployed or underemployed an average of 18 to 24 months. 
Offshoring has created a devastating economic climate not just 
among Silicon Valley technical workers, but throughout the 
United States.
    Although the public and media have recently faulted H-1B 
and L-1 guest worker visa programs for massive U.S. Job losses, 
companies have found a new back door and are circumventing H-1B 
and L-1 restrictions by directly offshoring large volumes of 
work directly to companies in India.
    Offshoring will prolong the economic recovery period as the 
number of U.S. jobs quickly diminish over time. Rising 
unemployment numbers will further exacerbate local, State and 
Federal budget deficits since the taxable income base will be 
unemployment benefits, that is until the benefit period 
expires, usually 1 year.
    Congress will need to work quickly to revise current 
legislation and enact new legislation with incentives to 
maintain high-tech jobs in the United States and create 
disincentives for companies to offshore U.S. high-tech jobs.
    Chairman Manzullo. Thank you very much.
    [Ms. Humphries' statement may be found in the appendix.]
    Chairman Manzullo. Is this the first time you have 
testified before a congressional Committee?
    Ms. Humphries. Yes, it is.
    Chairman Manzullo. You did a great job at it. That is 
unfortunate it is under these circumstances, but I appreciate 
your speaking up for the people of America that you represent.
    Ms. Humphries. Well, I appreciate this opportunity. Sorry 
my voice is a little crackly, I am recovering from illness this 
weekend.
    Chairman Manzullo. There is some water there if you would 
like it.
    Our next witness is Robert DuPree. Bob is vice president of 
government relations with the American Textile Manufacturers 
Association, ATMI. He has been with that organization prior to 
when I came to Congress in 1992, and it is a national trade 
association of the domestic textile industry representing 
companies that manufacture textile mill products, including 
thread, yarn and fabric for use in home furnishings, industrial 
products and other textile items in the U.S..
    Bob, we look forward to your testimony.

   STATEMENT OF ROBERT DUPREE, VICE PRESIDENT OF GOVERNMENT 
   RELATIONS, AMERICAN TEXTILE MANUFACTURERS INSTITUTE (ATMI)

    Mr. DuPree. Thank you, Mr. Chairman. With your permission, 
I would just submit my written statement for the record and 
summarize some key points.
    Chairman Manzullo. The written statements of all the 
witnesses and all the Members will be made part of the record. 
Anybody wishing to submit--in the audience here wishing to 
submit a statement can do so within 10 days. It must not exceed 
2 pages, including attachments, and it must be at least 10-
point type. Okay? Just get that to one of our staff, and we 
will make that a part of the record.
    Chairman Manzullo. Go ahead.
    Mr. DuPree. Thank you, Mr. Chairman. I had to check and 
think. I do have 11-point type on mine.
    Mr. Chairman, I am Robert DuPree. I have been with ATMI for 
some 14 years now. I would like to thank the Committee, 
especially you, Chairman Manzullo, for your ongoing interests 
and your commitment to the manufacturing sector. Also 
appreciate your comments as well as those of the Ranking Member 
in your opening statements regarding offshoring, which I hope 
does become part of our lexicon in the future. It has become a 
phenomenon that has serious repercussions.
    ATMI's members, you just described what we do. We represent 
large manufacturers. We represent small manufacturers. The good 
news from your standpoint, Mr. Chairman, is more and more of 
our members are eligible for your Committee's jurisdiction. 
That is the bad news, too. They used to be larger than they 
were. In fact, I was before you at the famous beret hearing a 
few years ago. One of my members was testifying. His employer 
is a small company in South Carolina. They just announced some 
layoffs again last week. So the problem still continues.
    In light of your comments also on the FSC/ETI issue, I 
would point out that we only represent textile companies based 
on their domestic operations. If they have plants offshore, we 
do not work for that end of their operations. We do not collect 
dues from them either.
    We employ some 435,000 workers in a variety of jobs. They 
range from highly skilled to unskilled. Let me emphasize the 
highly skilled aspect of our industry. We are not Norma Rae. 
Those days are long gone. We are a highly automated, efficient 
and modern industry. We employ a great many professionals with 
bachelor's degrees, with master's degrees. They are in such 
fields as textile chemistry, textile or mechanical engineering, 
polymer science, which I had to look up what that is exactly 
when I first heard of it.
    We estimate that as many as 100,000 individuals in our 
industry, nearly one-quarter of our workforce, have college 
degrees. Many of these come from schools, from States, 
represented on this dais, Georgia Tech, North Carolina State 
University, the Institute of Textile Technology in 
Charlottesville, Clemson, Philadelphia University. These folks, 
when they lose their jobs, they have a hard time with 
retraining, and they are seeing their jobs go offshore; and 
they have a choice, either learn a new profession, which, if 
you have an advanced degree in some of these fields, is not 
easy, or go offshore. And that is not a fair choice for 
anybody.
    Last June this Committee held a hearing at which ATMI 
testified regarding the damage that foreign currency 
manipulation has been causing our industry and the rest of the 
manufacturing sector. At that time we reported that the textile 
industry has lost over 200,000 jobs in the United States since 
1997 largely as a result of Asian currency manipulation. The 
recovery that you mentioned in some sectors in your opening 
statement, Mr. Chairman, it has not reached our sector at all, 
and we have tried to make that very clear to the government.
    In fact, we regret to report that in the less than 4 months 
since your June hearing, we have lost over 20,000 additional 
textile jobs here in the United States, many of these, if not 
most, attributable to the same factors.
    Mr. Miller, I believe it was, mentioned the perfect storm. 
We have experienced the perfect storm. Many of the restraints 
on imports have been lifted in 2002. At the same time, prices 
have been slashed through willful currency manipulation. In 
some cases prices per square meter have been cut in half by 
Chinese manufacturers.
    We worked hard to remain competitive. In the 14 years I 
have been there, we have invested billions of dollars annually 
to try to retain our competitive advantage. We have tried to 
meet our customers' ``just in time'' demands. We have tried to, 
as our government has urged, establish trading partnerships 
with countries like Latin America, the Caribbean and Mexico so 
that we can sell our yarn and our fabric in those markets and 
have them come back into the United States under the duty 
preference programs that we have established.
    Unfortunately, all of those have fallen to naught as a 
result of unfair and often illegal trade practices from abroad, 
particularly from China and other Asian producers. As a result, 
we have seen an unending wave of plant closings and job layoffs 
here in the United States. Our jobs are literally being shipped 
across the ocean.
    I would note that when our companies lay off workers, close 
plants, file for Chapter 11 or shut down completely, as the 
case with some of the mills, they don't cite the various 
restrictions or burdens placed by our government. We understand 
that we have workplace safety and environmental regulations. We 
can deal with those, but the number one reason we are closing 
down plants is because of unfairly traded imports.
    At the end of my statement, my written statement, is a 
chart showing that fully one-third of all U.S. textile jobs 
have disappeared since 1997. That is 220,000 textile jobs gone 
forever. Just in this year alone we have seen over 40,000 jobs 
gone, and where are they going? Where are those plants going? 
Where are those jobs going? They are not staying here. They are 
going to China, India, Pakistan, Bangladesh, Vietnam and other 
countries in Asia. Our companies have not pulled up stakes and 
moved to these countries. I want you to understand very 
clearly. We are still here, those that are still in business, 
but many of our customers have shifted to Asia, and they have 
taken many of our orders and our jobs with them. One way we can 
tell that is, frankly, by looking at not our exports of yarn, 
fabric and cloth, but, frankly, the exports of used textile 
machinery. When a plant shuts down, foreign companies have come 
in and bought used textile machinery and taken it over there, 
the same companies that have driven these companies out of 
business are now buying our used equipment. Therefore, we can 
consume less cotton, less wool, less man-made fiber made from 
plants here in the United States and many of your States as 
well.
    Mr. Chairman, I do have some other comments in my written 
statement regarding currency manipulation. It is a subject you 
know well.
    I also mention very briefly the impact on the defense 
industrial base. We supply some 10,000 different items to the 
United States military, and Federal law notwithstanding, it is 
inconceivable to us that the U.S. Government could stand by and 
watch this basic manufacturing industry erode, this key defense 
supplier to wither on the vine, so to speak, and let this 
business go offshore. Our military readiness needs a viable 
defense industrial base. We are part of that.
    With that I thank you for this hearing. I thank you for 
your continued interest in our issues, and I look forward to 
anything you can do to help us get the attention this issue 
deserves.
    [Mr. DuPree's statement may be found in the appendix.]
    Chairman Manzullo. Mr. Schrock.
    Mr. Schrock. Thank you, Mr. Chairman, and thank you all for 
coming here today, especially Ms. Humphries.
    My parents live in San Jose. I know Milpitas. I know Santa 
Clara very, very well. And speaking of that, I was talking to 
my 90-year-old father this morning and telling him we were 
having this hearing, and of course he cuts clippings like you 
can't believe and sends them to me because he thinks the only 
way I am going to succeed is if he does that. And most of the 
time he is right.
    But he said, as an example, the last two Levi plants in San 
Francisco closed down, I think he said, last week, gone 
forever, and we are never going to get those things back. And 
that is very disturbing to him. It is very disturbing to me, 
because it impacts every person I represent and every person 
every Member of Congress represents. So it is an issue we need 
to start addressing and seriously.
    I know one of you talked about military sources. I can't 
remember which one talked about military sources. Oh, Mr. 
DuPree. I was recently in Norway at a factory that is producing 
the new gun for the Striker. They got the contract. We have the 
best talent in the world in this country and the best 
technology, but they said--I said, how did you guys get it? And 
I wrote a list of what they told me they don't have. They don't 
have EPA. They don't have OSHA. They don't have lawsuits. They 
don't have labor unions. They don't have outmoded tech 
structures like we do; yet, it is the cleanest, safest place I 
have ever been, and I think it is our laws that we have created 
here that have caused some of these things to happen.
    Trade agreements, yes, there are some real problems with 
trade agreements. I hear people say, well, we have got trade 
agreements. Well, we created the trade agreements. I think in 
some way we ought to be able to change those things so at least 
there is a level playing field.
    When you said buying equipment, they are buying our 
equipment to take over there, too. They are buying it pennies 
on the dollar. So it is a lose-lose no matter how we look at 
it.
    Mr. Miller, you talked about outsourcing versus offshoring, 
and help me understand. I think outsourcing is just the 
beginning of offshoring, unless I don't understand.
    Mr. Miller. Not necessarily, Mr. Schrock. A bank might 
decide that they are very good at doing money. They are not 
very good at managing their IT system, because it is very 
complex because it is constantly changing. They may choose an 
IT company across the street to come in and manage their IT 
department for them. That is outsourcing. That means they have 
closed down their internal IT department, but all the workers 
are U.S. workers. They just happen to work for an IT company 
rather than the bank. So it doesn't necessitate that the work 
goes to another country.
    Mr. Schrock. Did I hear you say, too, you think this is a 
short-term situation? I hope you are right, but please help me 
understand why you think that is the case.
    Mr. Miller. I think the offshore competition is long-term. 
I have been actually giving speeches about it for 7 or 8 years, 
but no one wanted to listen to me because unemployment in 
Silicon Valley was 0.0 percent and people wanted to talk about 
H1Bs and L1s.
    I think we have been relatively naive as a country for a 
long time in the IT space, believing that somehow, because we 
were so smart and so talented, that countries like Ireland and 
Israel and South Africa and Argentina and Mexico and Canada and 
India couldn't be smart, too; and it turns out they can be very 
smart. They can produce very capable IT workers.
    We have been relatively naive the same way that the Detroit 
automobile industry was very naive in the 1960s when they used 
to think, well, no one is going to buy a Japanese car because 
Japanese cars mean low quality. And they woke up one day and 
they realized, in fact, the American consumers liked Japanese 
cars and they had 23 percent of the market.
    So I don't think this offshore competition is short term.
    What I believe is short term and I think people are 
overreacting to is we have had in the year 2001 about a 10 
percent decrease in IT capital expenditure spending in this 
country; in 2002, another 6 percent. So spending on IT in this 
country dropped precipitously after the dot-com bubble and 
telecom bubble in the late 1990s. In 2003, most people think IT 
spending will increase by somewhere between 3 and 5 percent 
after those two major declines. I am hoping that, number one, 
that is true; and, number two, if it is true, that should have 
a positive impact on IT hiring. That is what I am saying I am 
hoping it is short term.
    Mr. Schrock. Okay. But we hear a lot of IT stuff now 
starting to go to India, just like manufacturing has; and I am 
going to ask Dr. Hira about the nanotechnology. You know, we 
talk about the next big thing. But the next big thing is just 
the next big thing somebody offshore can come and try to take 
from us. They will send their people here to our universities 
with these visas you get that they are able to get to train 
them to go back and compete against us. And I just have--I just 
don't understand why we allow that to happen and why that 
continues.
    Mr. Hira. Well, I am not sure I have an answer for you. I 
am not sure why we do these and have these policies.
    But we have been hearing about nanotechnology for some time 
as well as biotech and bioinformatics and what the next big 
thing is. Right now, nanotechnology is still in its infancy, 
but there are enough practical commercial applications to 
indicate that it will be at least a sizable industry. The 
question is, are we going to capture that, especially if we 
don't have the manufacturing capabilities here and much of that 
work is done abroad as well as R&D being done abroad?
    Mr. Schrock. I know my time is up. May I just make one more 
quick comment?
    I noticed, you know, talking about textiles. When I was a 
student at the senior officer course at the Naval War College 
in Newport, Rhode Island, in 1984 and '85, we used to go to the 
clothing places in Fall River, Massachusetts, which used to be, 
they say, the garment production capital of the world; and all 
it is now is miles and miles and miles of empty buildings that 
are selling clothes that come from somewhere else. And it just 
didn't happen yesterday. It has been going on a long, long 
time; and if we don't start addressing it, we are going to lose 
every single thing we have got here that involves 
manufacturing.
    Chairman Manzullo. Thank you.
    Ms. Velazquez.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Mr. Miller, you talk about education, retraining and 
retooling, but how effective is this going to be when we are 
dealing with such an uneven playing field, where companies can 
lay off a worker making $10 an hour, which I might add is not 
that much more than what you would make at a fast food 
restaurant, and move it overseas for a $1.50, a quarter of our 
current minimum wage. How is it that education is going to fix 
this?
    Mr. Miller. Congresswoman Velazquez, if the only issue were 
dollars per hour that the people were paid, the whole industry 
would have disappeared already. The fact of the matter is it is 
much more complicated than that. For example, in a recent 
article in CIO magazine, the author pointed out that, because 
of numerous factors involved with sending work offshore such as 
cultural differences, telecommunications issues and some of the 
others that your other witness referred to, in fact, the 
differential between the U.S. Worker and the IT worker in India 
may be as little as 20 percent.
    Then the issue becomes one of productivity. Is the U.S. 
Worker more productive? Does the U.S. worker do a better job 
for the customer, for the client? Then the issues become much 
more complicated than simply how much per hour.
    The other thing that is important to note is that wages in 
these developing countries are going up fairly rapidly.
    Ms. Velazquez. Okay. Thank you.
    Ms. Humphries, can you please tell me how much a factor 
wages were when your job and other jobs were sent overseas?
    Ms. Humphries. Well, I think clearly, in this case, 
education did not inform Palm's decision. It was pretty much 
the bottom line. We got laid off just before the end of their 
first quarter for the fiscal year 2004. So I think it was 
pretty clear especially the individuals who were targeted for 
layoff were the more senior members of the quality assurance 
group and so we commanded higher salaries. So, clearly, the 
issue here was the bottom line; and of course we got those 
innuendoes from organizational meetings as well as from the 
director and the VP of product software. So they are interested 
in lowering their costs and returning to profitability.
    Ms. Velazquez. Clearly, you disagree with Mr. Miller's 
assessment.
    Ms. Humphries. I disagree with his assessment that 
education retraining is going to resolve this problem and stem 
the tide of offshoring.
    Ms. Velazquez. Dr. Hira, do you think an explanation as to 
why these businesses did not fight harder for an extension of 
the high annual limits on H1B visas is that they have seen 
overseas outsourcing and now the H1 visas as the most effective 
way to circumvent our labor laws?
    Mr. Hira. I don't want to speculate on what is in the minds 
of industry lobbyists. To be honest, it is hard enough to 
figure out what I am thinking about first.
    But let me just read you a quote from one of Mr. Miller's 
constituent members, TCS, Tata Consultancy Services, Executive 
VP from there. He says, our wage per employee is 20 to 25 
percent less than U.S. Wages for a similar employee. Typically, 
for an TCS employee with 5 years experience, the annual cost to 
the company is 60 to $70,000 per year, while a local American 
employee might cost 80 to $100,000. That is the total cost to 
the company, and he is talking about H1B and L1 visa workers 
there. He says, this is a fact of doing work on site. It is a 
fact that Indian IT companies have an advantage here, and there 
is nothing wrong in that. He goes to say, the issue of that is 
getting workers in the U.S. on wages far lower than the local 
wage rate.
    So this is one way that one of the leading firms that does 
offshore outsourcing uses the H1B and L1 visa to get a cost 
advantage and to ship more work offshore.
    Ms. Velazquez. Thank you, Dr. Hira.
    Mr. DuPree, in your testimony you mentioned that many of 
your competitors in Asia are utilizing sweatshop practices or 
even child labor. The administration, as you know, recently 
signed the Chile and Singapore FTAs. As stated in the 
agreements, each country commits to enforce their own domestic 
labor laws, whatever those might be. The agreements do not 
actually commit the countries to have labor laws in place or to 
ensure that their labor laws meet any international standards. 
If we are to pursue trade agreements with countries which do 
not have strong labor laws, don't you think that this approach 
used by the administration invites U.S. Companies to move 
offshore?
    Mr. DuPree. Congresswoman Velazquez, our industry has 
consistently urged that trade agreements take into account the 
disparity in labor laws between our country and the other 
countries. Textile companies will not go overseas looking for 
cheap labor, looking for substandard working conditions. 
Unfortunately, as Congressman Schrock mentioned, some of our 
customers are going overseas and when they go overseas, when 
they go offshore, they look for the cheapest raw inputs nearest 
to them. If they go to China, they will look for Chinese denim. 
They will not look for U.S. Denim.
    But by all means labor standards, environmental standards, 
they are all part of the playing field. But as yourself and the 
Chairman have indicated many times, it is kind of tough to 
compete with a 35 to 40 percent price break that these 
manufacturers are getting right off the top as a result of 
currency manipulation.
    Ms. Velazquez. Thank you.
    Ms. Humphries, as you probably heard in Mr. Miller's 
testimony, he stated that Congress should not legislate a 
solution to the outsourcing problem that we are facing. 
However, in the closing sentence of your statement you 
mentioned that Congress needs to work quickly to review current 
legislation and enact legislation with incentives, incentives 
to maintain high-tech jobs in the U.S. and create disincentives 
for companies to offshore U.S. High-tech jobs. Do you think 
that the problem is worse than what Mr. Miller is leading this 
committee to believe?
    Ms. Humphries. Yes, Congresswoman Velazquez. In short, the 
answer is yes. I do believe that the current Tax Code promotes 
offshoring.
    I had an e-mail forwarded to me recently that indicated 
that certain IT expenditures are, you know, or companies are 
giving tax credits for expenditures, and it makes no 
distinction between the American or foreign labor. So I think 
perhaps we could all benefit maybe if a think tank such as the 
Economic Policy Institute would create a study so we can find 
out comprehensively what should be the strategy to tackle this 
issue.
    Ms. Velazquez. Thank you.
    Thank you, Mr. Chairman.
    Chairman Manzullo. Thank you.
    We had a remarkable hearing last year on the procurement of 
Army berets, and Congressman Bill Pascrell asked what I think 
was the Lincoln-Douglas question of the hearing, and I turned 
green with envy because I hadn't thought of it.
    He asked one of the generals if the ostensible purpose of 
having our men and women in uniform wear the black beret was to 
promote morale, how does that happen when our service people 
take their hat off, turn it upside down and it says ``Made in 
China''?
    Now, this really is an emblem of what is wrong. There is 
nothing wrong with buying stuff in China, but with taxpayers' 
dollars? It wasn't a bargain to buy it there. But if the Army 
had been more sensitive, had DLA been more sensitive, they 
could have saved a lot of jobs. In fact, we took it upon 
ourselves to cancel those contracts.
    But this is the name of the game. Get it at the cheapest 
price you can and don't look at the consequences.
    And, Ms. Velazquez, when you and I got all over DLA and 
they cancelled the contract, we saved hundreds of jobs here in 
America in the fledgling textile industry. In fact, I was 
talking to one textile manufacturer who was in town, and he 
turned on a replay of that hearing. It was played several 
times. Each time we got more eloquent.
    He turned it on and watched it at 11:00 at night, and this 
ran to 3:15 in the morning, and he said the thing was on all 
night. He said, that is the first time that any committee has 
ever taken on the government for this very thing that the 
people in the government accuse--if you want to use that word--
the private sector of doing.
    Then we thought that this was resolved. Then we found out 
that the government was going to buy Pakistani goat leather--
that is right--on the basis that we did not have enough goats 
here in America to provide sufficient leather for the thousands 
of flight jackets that were going to be made. I mean, you go 
from sheep to goats in this Congress.
    We put out a press release and raised Cain. We have found 
that the only way to get something done in this town is you 
first raise hell and then you ask somebody to be accountability 
for it. So we put out a press release about the Pakistani goat 
leather, and we talked to our resident experts on goats. 
Charlie Stenholm represents the goat capital of America. I 
raise cattle. I don't raise goats. I don't know anything about 
goat leather, but Charlie does.
    Sure enough, as soon as we put out the press release, the 
communique came from DLA that they had cancelled the request 
for a proposal. They came into the office, and I can't think of 
the general's name at this point, but he produced this list, 
this old list that was included in the Federal regulations that 
superseded the Buy American and Barry amendment. These are 
regulations that superseded law, and no one had ever called 
them into accountability for that and their list of about 80 
different items on there that they were automatically buying 
offshore. The general advised us and sent us a letter, and I 
take his word to be gold on it, that DLA is now in the process 
of taking every item listed on there that could have been 
bought offshore that is now capable or that would now be 
capable of being bought here in America.
    And the abuse continues. We got through the Pakistani goat 
leather and we got through these hats, although maybe the Army 
can sell these to the Chinese when they have the Olympics. It 
would create bad morale. But what are you going to do with 
these hats that are sitting in storage?
    When we encountered what is now an ongoing investigation, 
the GAO is studying the F-35 as to whether or not defense 
contractors are in compliance with the Buy American laws. It is 
simply for the purpose of accountability. We have got a hearing 
that is pending on that, although the date has not been set.
    But the only reason I bring this up is the fact that, if we 
just start with acquisitions from the government--Ed, would you 
hand me the Blackberry and the case down there? Yeah. The 
Blackberry is made in Canada. The case is made in China. This 
is that leather case here that is given to Members of Congress, 
and this is made in China. Now, if the American people see how 
the U.S. Government is using their taxpayers' dollars to 
destroy jobs here at home, what type of example does that set 
for the private sector?
    So that is why we have been having hearing after hearing 
after hearing after hearing as to why we can't use the 
procurement process as a means to level the playing field.
    The second comment is this: When you are an American 
company manufacturing mostly in America and then you outsource, 
bring in parts manufactured overseas to be made part of the 
final American--final assembly or you outsource services, then 
the rules of free trade no longer apply. I want to tell you 
why.
    If you read--if you read Adam Smith, you will find out--and 
I notice that I think, Mr. Miller, you quoted Adam Smith in 
there. Adam Smith assumes this, that country A has the natural 
resources and the talent wholly within that country to 
manufacture item A as opposed to a second country; and then 
when you start mixing the cheap imports from a second country 
into what the first country is manufacturing, then the rules of 
free trade don't apply.
    That way, you can't--in other words, you can't have it both 
ways. You can't have Congress getting upset and becoming 
protectionist, which it is--and I am not on the Phil English 
bill to slap a 27.5 percent import duty to Chinese goods 
because of a manipulation of currency. I think there are 
diplomatic ways to do that. Because I have a hard time with 
tariffs at all. But the industry brings it on itself.
    And then you can't quote Adam Smith. I am just citing you 
that you cannot run a country based upon economic theory, not 
when we are having the tremendous job losses that we have.
    So I have got a couple of questions here. Mr. Miller, it 
was you who made a comment that we will lose 500,000 IT jobs 
or--have we lost that in the past?
    Mr. Miller. There have been reports that have been somewhat 
hyperbolized in the media by Forrester and Gartner, others, 
some of which have been referred to by some of the witnesses 
today, about 3.3 million jobs being lost. All that I was doing 
was making the point that if you only parse that number, what 
they are really saying is only about 500,000 of those are IT-
related jobs. It doesn't mean that is not a significant number, 
but I am just showing you how the hyperbole in this issue tends 
to outweigh the reality.
    Again, I remind you, Mr. Chairman, that we run a $7.9 
billion surplus in IT services and software. I can't speak for 
the textile industry. I can't speak for other manufacturers.
    Chairman Manzullo. Has that surplus being going down or up?
    Mr. Miller. It has been going up because the rest of the 
world is becoming a bigger consumer. If you travel around the 
world as I do, and I know you do, Mr. Chairman, and others, to 
countries around the world, many of the products you see in 
companies and in government offices have names that you would 
recognize because they are the same products and services you 
use here in the U.S. Many of the leading IT companies here in 
the U.S., household names like Microsoft and Oracle and 
Computer Associates and IBM and EDS and others, earn 40, 50, 60 
percent of their income by selling abroad. Many of the largest 
outsourcing contracts, to go back to Mr. Schrock's question, 
that have been signed the last few years by major banks like 
Deutsche Bank, a German bank; ABN Amro, a Scandinavian 
manufacturing company, have been signed with IT services 
companies based here in the U.S., which means that is revenue 
coming to the U.S., helping to create jobs here in the U.S.
    It is also interesting to note, Mr. Chairman, that the 
fastest-growing market in the world for wireless phones is not 
China. It is not the U.S. It is not Germany. It is India. India 
has suddenly become a huge opportunity. That means job 
opportunities for companies in the wireless industries, many of 
which are in Scandinavia, as we know, companies like Nokia and 
Ericsson and others, companies in Asia like Samsung, but also 
companies here in the U.S. like Motorola, and all the people 
who make components that go into them. So that is why we see so 
many great opportunities around the world.
    Now when those opportunities are cut off--for example, 
China currently discriminates against semiconductors that are 
sent into China. They have a different tariff rate than for 
semiconductors in China. That needs to be fought. That is an 
unfair trading practice. We believe it violates the WTO. It 
violates the spirit, and it hurts the ability of U.S. IT 
companies, U.S. semiconductor companies to sell into China.
    But that is a clear problem that needs to be addressed. But 
China is a huge potential market. India is a huge potential 
market. Between the two of them, they are a third of the 
world's population.
    Chairman Manzullo. I think what bothers Members of 
Congress--in fact, I am the chairman of the American Chinese 
Interparliamentary Exchange. We go to China once a year, and 
the Chinese come here, and we have talked to the Ambassador 
several times especially on this currency imbalance. That is 
the fact that China and India should be building their economy 
based upon sales to people within their own country, in 
addition to, obviously, internationally. China is trying to 
build its economy based upon sales to the United States.
    As the Ambassador said, you need to take a page from Henry 
Ford's book. I said, what is that? He said, well, the people 
that make the stuff should also be able to afford what they are 
making; and I said that was the secret to our success here.
    That is what is particularly disturbing to us, in fact, as 
we--this committee held a hearing on currency imbalance a year 
and a half ago--in fact, even longer than that. Because we 
recognized the problems that were going on there. We don't have 
the solution. I wish we did.
    Andy Grove is the first executive of that stature who has 
had the guts to raise the question, and he is not looking to 
government intervention. When he talks about the government has 
to have a policy, I think what he is looking for is the fact 
that the government needs to sit down--the government, we have 
to sit down with the industry and ask you this one question: At 
what point will we send so many jobs overseas that the American 
consumer will no longer have a job to buy the products 
regardless of where they are manufactured? That is--I don't 
expect you to have the answer to that, because that is a very 
difficult question.
    Mr. Miller. Again, Mr. Chairman, I can't respond for the 
textile industry; and you have a very knowledgeable witness 
here. What I can tell you is, if you look at the U.S. IT 
industry, even the most pessimistic hyperbolic suggestions that 
have come out of groups like Forrester and Gartner and, 
frankly, not too many people give those credibility because 
making 15-year predictions in this industry----.
    Chairman Manzullo. Well, look at this. This is Andy Grove. 
He says 500,000 U.S. jobs. Is this hyperbole?
    Mr. Miller. Because we have a major recession in the U.S. 
IT industry.
    Chairman Manzullo. That is not what he is talking about.
    Mr. Miller. I understand.
    Chairman Manzullo. This is the founder of Intel. I mean, 
this man is the grandfather of technology in America.
    Mr. Miller. I don't want to get into a fight with Mr. 
Grove. Intel is a member. What I am saying is, the U.S. 
Software and services industry, according to all the data from 
the Bureau of Labor Statistics----.
    Chairman Manzullo. Well, the Bureau of Labor Statistics, if 
I may interject at this point, doesn't know the difference 
between hyperbole and a hyperbolic curve. Let me tell you what 
they did.
    Rockford, Illinois, is the tool and die center of the 
world; and we anticipated a year ago in April that the Fed 
thought that the recession was over. Somebody woke up in the 
morning and said, the recession is over. We heard they are 
going to raise the rates. So we got a hold of the Fed. Dr. 
Roger Ferguson came in, and we asked the Bureau of Labor 
Statistics to tell us how many people in Rockford, Illinois, 
were involved in the tool and die industry. They said 570, and 
we just choked. That is two of the thousand factories that are 
in Rockford, Illinois.
    So all these government statistics, you can quote them on 
and on and on. But when I go home, which is very, very 
frequently, and I am in a parade, people come up to me and they 
hand me resumes. They are desperate. They are looking for work. 
They are looking for solutions.
    Mr. Miller. Well, I am just trying to answer your question, 
whether the entire industry is going to move offshore. The 
point I was trying to make, even in the most negative 
assessments it would still only be 3 to 8 percent of the U.S. 
IT workforce.
    Now, as an association which represents American companies, 
I hope it doesn't get that high. I hope it stays more.
    Chairman Manzullo. Look what is going on in industry. The 
factory back home, they used to get a hold of the guys in the 
shop to draw up their engineering plans. Then they would get a 
hold of some local molders. And now this is so-called 
manufactured in the United States. What they do now is they 
contact their Indian engineer and then the Indian engineer 
sends the specs to a tool and die maker in Poland. The Polish 
export comes into the United States, and it is incorporated 
into an American product.
    This product here is manufactured in the United States. If 
it sells for $100,000 and it shows up on the trade merchandise 
trade balance as $100,000, that could have $99,000 worth of 
imported parts in it and you would never know it because there 
is no government economic indicator that shows the amount of 
imported parts that go into the final manufacturing.
    So we are becoming a nation of assemblers. That is why this 
problem is even deeper and more egregious than we anticipate. 
But I enjoy your spirit and didn't mean to pick on you.
    Mr. Miller. Just one other point, Mr. Chairman. You made 
the point about government, and you do have some hard choices 
in government.
    Let me give you an example of the one case in New Jersey 
which got a lot of visibility when the New Jersey State 
government outsourced a call center and the company that they 
used in turn moved those jobs offshore. Because of public 
outcry, those jobs were bought back to New Jersey. But our 
understanding is the cost to the State of New Jersey to bring 
those jobs back--and it was 9 or 10 jobs--was approximately a 
million dollars over 2 years, which is good because it saved 
the jobs. But, unfortunately, with the State governments being 
so tight, it is a zero sum gain, which means that that was a 
million dollars less to go to the child welfare recipients in 
that department. So they had to put money to save the jobs, 
less money to child welfare recipients.
    I am not saying one is right and one is wrong.
    Chairman Manzullo. That actually would have been many 
dollars less because there would have been less jobs, and even 
the child welfare wouldn't have the money.
    Mrs. Velazquez, go ahead. You wanted to interject.
    Ms. Velazquez. Yes. Mr. Miller, when you spoke about China 
and you said that, in terms of the telephone or the wireless, 
that they were--that we needed to fight some of the 
inequities----.
    Mr. Miller. One specific problem we have now, Congresswoman 
Velazquez, they have a value-added tax--we call it a sales 
tax--on goods and services and products. The way they have 
established their value-added tax for semiconductor chips, the 
brains of computers and telephones and the Palm and all these 
devices, is that they have a differential.
    If a semiconductor is manufactured in China and put into 
something, they charge a 3 percent value-added tax. However, if 
a company outside China imports--exports it to China because 
China wants to incorporate it into a product, they charge 14 
percent. Which means that even though a U.S. company or a 
German company or a Japanese company might be able to produce 
the chip at the same price as the Chinese company, because the 
Chinese add that 11 percent differential it unfairly 
discriminates against semiconductors manufactured outside China 
selling to China. Therefore, that is an unfair trade practice 
and we believe it is in violation of all the spirit and the law 
of the WTO, and we believe that China needs to change that 
practice.
    Another concern we have is----.
    Ms. Velazquez. But it is up to us in terms of the U.S. 
Government to use the WTO and fight that inequity. So why do 
you think that we lack the will?
    Mr. Miller. There are geopolitical issues regarding Korea 
and other things that I wouldn't want to speculate on right 
now.
    There is a similar issue, Congresswoman Velazquez, if we 
are going to list problems in China. They are considering as a 
government imposing a policy by regulation which, Congressman 
Manzullo, sounds a lot like the Buy America Act, so don't be 
offended, that basically says China would only buy software 
made in China; and they are trying to use national security 
reasons for that. They are trying to say they are not going to 
buy software products manufactured here in the U.S. or 
manufactured by German companies or French companies. We think 
that would be outrageous. That would be against the spirit of 
the WTO. It may not technically be against the WTO because 
governments do have the right, as Congressman Manzullo knows, 
to make those kind of distinctions.
    Ms. Velazquez. So would you consider Mr. Manzullo's Buy 
American outrageous?
    Mr. Miller. We do not support Mr. Manzullo's provision or 
Chairman Hunter's provision. We think that the Department of 
Defense should have the discretion to make those decisions. We 
don't believe in making stupid decisions; and I agreed with 
Congressman Manzullo in a lot of specifics, that there are bad 
decisions made. But having an across-the-board policy we 
believe would really hurt the fighting man. Not only do we 
believe it, but the Department of Defense believes it, even 
more importantly.
    Chairman Manzullo. I want to get to Mrs. Majette, but we 
just found out that our government that is rebuilding Iraq 
ordered 37,000 AK-47s from a Jordanian firm. That probably 
incorporates parts made in Russia, I think Poland, the Czech 
Republic; and this at a time when the hundreds of thousands of 
AK-47s were found completely intact in caches.
    We can go on and on about what our government is doing, but 
here is a lady that ran for Congress to do something about it. 
Mrs. Majette.
    Ms. Majette. Thank you, Mr. Chairman. I thank you for 
holding this hearing this afternoon, and I also want to thank 
the witnesses for coming to help inform us and helping to 
inform the American people about this very important issue.
    I just got back into Washington about an hour before the 
hearing started. I represent Georgia's Fourth Congressional 
District, which is suburban Atlanta; and part of my district 
includes Stone Mountain, where I live. Mr. Chairman, I have a 
face to go with the number here, this 10,000 jobs lost to 
India. One of my neighbors had just talked to my husband and me 
over the weekend, being--having been downsized from GE because 
of the jobs being sent over to India, the call centers and the 
work that is being done over there. So it really does hit home 
when you have somebody that you know talking to you about these 
various issues.
    But I would like to direct my first question to Ms. 
Humphries. Your testimony was very compelling, and I want to 
know if you have any suggestions or ideas about how we can make 
a difference. What we can do either legislatively or otherwise 
to keep this from happening again and again.
    Ms. Humphries. Yes. I have been mulling that over and over 
the last couple of months, being unemployed, and trying to 
decide, you know, what possible solution I could suggest. I 
mean, obviously, we could revisit the tax code; and I 
understand some of the tax code changes that I was initially 
suggesting to some of my friends here during informal 
conversations that they would probably have impact on certain 
trade agreements. So I think all the parties with a vested 
interest need to come together at a table and discuss these 
issues.
    Once again, I suggest maybe the possibility of a think tank 
so we can come up with a comprehensive strategy. I don't think 
it is just tax code. I think there is going to be some trade 
issues as well that we need to consider.
    Ms. Majette. With respect to education, you said at one 
point during your testimony that you were seeking additional 
training and that that didn't materialize. Do you think that 
that would have been something if you had already had that 
training or if that training had been made available to you 
that that would have made a difference or do you think it would 
make a difference if here in the United States we are providing 
that kind of training or other kinds of training to help stem 
the tide? Or is it something else altogether?
    Ms. Humphries. I think it is something else altogether. I 
don't think the retraining actually influenced Palm's decision 
to terminate a number of employees. It was just the latest 
round of layoffs. After all, I mean, per my testimony, we 
actually flew to India in succession, one after the other, to 
train our Indian counterparts, would suggest to me that 
obviously that they didn't have the training required to do our 
functions. But then after, you know, we were more or less asked 
to go over there and build their core competency is when they 
were able to perform our job functions. So I mean I am still in 
the process of retraining, so to speak, and acquiring 
additional skill sets so that I can market myself in Silicon 
Valley; and so I suspect I will be successful. But I don't 
think my job of programming skills would have assisted me at 
this point.
    Ms. Majette. I see.
    I have a question for Mr. DuPree. What do you think we can 
do in terms of legislation or taking a different approach to 
this situation?
    Mr. DuPree. Well, Congresswoman, I think the main thing is 
to change the dynamic in Washington. For too long I think the 
solution or the answer that has been thrown out there for 
everything is, well, we need to have more free trade; and, as 
we have found in our industry, free trade hasn't equated to 
fair trade. We find it very disturbing, in a week where four of 
our companies announced layoffs or closures, Ambassador 
Zoellick is running off to Thailand to see about opening up a 
new round of negotiations with them.
    I think we need to start looking at what can be done to 
promote U.S. Manufacturing. We need a U.S. Trade policy before 
anything, and that is something that we have tried to 
emphasize. We are not opposed to fair trade, but we are not 
getting it.
    Ms. Majette. I made a note of when you were testifying 
about making the comparison between Chinese denim and United 
States denim. Correct me if I am wrong, but is there a 
difference in terms of quality? If so, then wouldn't people 
still look for goods made from United States denim versus 
Chinese denim, regardless of the cost? I mean, it is almost 
like the difference between want to go by a Kia versus wanting 
to buy a Mercedes. The price doesn't matter if what you want is 
the Mercedes because of what you get for that.
    Mr. DuPree. Well, first of all, I will say that, without 
hesitation, that U.S. Denim is superior to others, because I 
work for them. And if they are watching I said that very 
emphatically. Unfortunately, we have seen, despite labeling 
requirements that are part of U.S. law to say where garments 
are made, whether they are made in the U.S., whether they are 
made abroad of U.S. inputs, including yarn and fabric, if you 
cut prices so much, the consumers, frankly, are having a hard 
time resisting that. When we see Chinese fabric going from 
$6.40 per square meter to $3.30 per square meter--those are 
rough figures off the top of my head--in 1 year, that makes the 
price of that final product so irresistible.
    Of course, you have to have a job to be able to afford blue 
jeans; and that is the point that we have tried to make 
repeatedly. Not everybody can go to work at Wal-Mart to buy 
Wal-Mart.
    Ms. Majette. Yes, you are right. Thank you.
    Mr. DuPree. Thank you.
    Ms. Majette. I see my time is up. Thank you, Mr. Chairman.
    Chairman Manzullo. Mrs. Bordallo.
    Ms. Bordallo. Thank you very much Mr. Chairman. I would 
like to welcome the witnesses that are here.
    I represent the territory of Guam. If you know where that 
is, it is a small U.S. Territory in the Pacific. I find it very 
troubling that companies are increasingly outsourcing high-
skilled jobs overseas, particularly where the unemployment 
level is high. In my territory, unemployment is at 20 percent. 
Think about that.
    Now, the Chairman, he has his black beret; and I like his 
story. I have my Navy MSC ships. The Navy has a policy that 
ships that are home-ported in the United States should be 
repaired in the United States. Well, they found a loophole. 
When a ship is sailing around in the Pacific area, back and 
forth, it is not home ported. So that allows them to do the 
repair work in foreign countries--Singapore, Japan--where the 
labor is so much cheaper. Meanwhile, people at the Navy ship 
repair facility, which has been privately outsourced recently, 
have been laid off in great numbers. I find that very 
troubling.
    I want to ask Mr. Miller a question. That is, how do you 
feel about students who are looking at certain fields, and they 
are looking forward to getting ahead in this life--and we have 
certainly spent a lot of money in research and development. Our 
education system in math and science is excellent in this 
country, and we have created a culture that through hard work 
and study you are going to amount to something. So tell me, Mr. 
Miller, how do we convince students in the United States to 
continue to work hard, get an education in that particular 
field, if your field is electronics or textiles or whatever--
how does our Nation face the future if there is no incentive 
for our citizens and students to advance our country's 
technological capabilities? Do you have any ideas on that?
    Mr. Miller. Yes, Congresswoman. It is an excellent issue, 
and it is something we deal with every day.
    ITAA has had a focus on training in the U.S. IT industry 
for all the 9 years that I have been president of ITAA. Even in 
this downturn in the economy we continue to focus on it, and 
that is because of simple demographics.
    Again, it is very tough when you are unemployed today, as 
Ms. Humphries, to look at longer term demographics, but the 
numbers are there. We are not talking about hypothetical. And, 
by the way, these numbers come from David Elwood, who was in 
the Clinton administration, not exactly a pro-business labor 
economist. He is generally considered a pro-labor labor 
economist.
    But all of his projections say that the U.S. domestic 
workforce, because of the retirement of the baby boomers, 
people in their 50s and on, over the next 10 years we are 
actually going to face over this decade a massive shortage of 
IT workers, even if the economy continues to grow at a 
relatively low rate. He did not include in his projections the 
fast growth that we are having currently in our economy.
    These are based on data that he has put together presented 
also by the Aspen Institute. The Bureau of Labor Statistics, 
which, again, the Chairman obviously has no faith in, but, 
unfortunately, I don't have independent sources so I have to 
use the Bureau of Labor Statistics. Of the 10 fastest-growing 
occupations for the year 2010, the ones that they list, 8 of 
the 10 are in IT. They are systems analyst, data base 
administrators, desktop publishers, network systems 
administrator, systems software engineer and support 
specialists and software engineer. Those are the projections by 
the experts in the US Department of labor.
    So what I see is these are great opportunities for young 
people. Get your IT education.
    Yes, there are going to be ups and downs in our economy. We 
are going through a down time right now, and I certainly 
understand Ms. Humphries' discomfort. She has lost her job, and 
it is very frustrating. But these are people who already exist. 
The numbers are there, and I believe there is a great 
opportunity for IT workers in the United States.
    Ms. Bordallo. Well, I don't know that I totally agree with 
you, Mr. Miller. I think that there is going to be many more 
Ms. Humphries as time goes on, and that is sad.
    Thank you, Mr. Chairman.
    Chairman Manzullo. Mr. Udall. But before--and then Mr. 
Davis.
    Natasha, you have got to respond to that answer. He just 
said that it is a rosy future for people going into IT, and 
here you are imminently qualified and you have been searching 
for work for how long?
    Ms. Humphries. Two months today.
    Chairman Manzullo. And how many of your colleagues are 
looking for work?
    Ms. Humphries. The majority of them. One person, a 
networker, she did land a job 2 weeks after with Adobe.
    Chairman Manzullo. And then how many of your friends that 
got laid off are still looking for work?
    Ms. Humphries. Twelve of them.
    Chairman Manzullo. I would think that, after that statement 
from those experts, that maybe those experts ought to come up 
with some job openings for these people so they can prove their 
forecast correct.
    Mr. Udall.
    Mr. Udall. Thank you, Mr. Chairman; and, Mr. Chairman, 
thank you for calling this hearing. I think it is a very 
important one, and I think it highlights some real problems 
that we have going on today.
    Let me say that, as a Member of Congress that has Intel in 
his district, a major Intel plant, my belief is that Andrew 
Grove is really--it is important what he is saying, and he is 
speaking the truth to all of us, and I think we have to listen. 
When he emphasizes this whole idea of cheap labor costs, I 
think this is an important part of it; and that is what my 
question to the four of you is.
    Recently, I sat in on a briefing or I think it was a 
hearing with Robert Reuben, and he talked about the big 
challenge being to us that we had never faced as a country was 
the fact that there are now in India and in China labor pools 
about the size of the United States labor pool, 200 to 300 
million people that have close to the same education and skill 
levels that we have had, and that this is an enormous challenge 
for us as a country. We have never seen it before in our 
history, where we have had those--the countries that are in 
that position to challenge us.
    I would first like to just ask you, do you see it that way? 
Do you see this as a fundamental change in terms of the 
challenge we face? Mr. Miller, you have been talking about this 
for 7 or 8 years. Do you see that, first of all?
    Then I want to ask my follow-up question here, if you could 
try to be quick.
    Mr. Miller. The answer is, yes, Mr. Udall, but I also see 
it as an opportunity. Just as it is a challenge in terms of 
less expensive labor, it is also a huge potential market.
    Mr. Udall. Go ahead.
    Mr. Hira. Well, I have an interesting vantage point since I 
am ethnically Indian and still have many cousins and relatives 
who live in India. I will just say that the IT employment 
situation there is great, so, you know, the employment 
situation is in a frenzy. It is very easy to get a job. People 
are switching jobs and so on and so forth, and lots of colleges 
are cropping up there. That is not the case here in the U.S.
    Secondly, I am also hopeful that there is a potential 
market in places like India and China as they develop and start 
to consume these goods.
    But there are a lot of things that are very high level that 
are moving offshore. Somebody mentioned--I think Mr. Miller 
mentioned the idea of wireless phones and so on and so forth.
    I talked to an engineer who worked at Researcher Triangle 
Park in the North Carolina area who said that all of their 
80211b, that is the Wi Fi that you get on your laptops and what 
not, all of the design and development was moved offshore to 
both Israel and India. It was a major U.S. Electronics company 
moving that kind of work.
    So even if those markets develop, the question is, who is 
going to be designing for those markets? Will it stay here or 
will that work be done there? That is, I think, one of the 
concerns; and I--you know, the 3.3 million may well be 
hyperbole, but maybe it is not. I mean, we really just don't 
have good numbers right now. The reality is that stuff is 
moving offshore.
    Ms. Humphries. Yes--in response to your question, yes, I 
think there has been a fundamental shift in the labor market, 
especially for high-tech jobs; and now it is a global 
marketplace. So this does present new opportunities for those 
who are on the offshore side as well as I guess new 
opportunities for those, depending upon your response to 
unemployment, if you decide to adopt a new skill set. But, 
clearly, if you are--if you went to school for engineering or 
computer science and that's about where you want to pursue your 
career, this is a serious, you know, obstacle to overcome now 
that we have this global marketplace where companies are more 
concerned about the bottom line than preserving U.S. Jobs.
    Mr. Udall. Mr. DuPree.
    Mr. DuPree. I would actually have to differ just a little 
bit on comparing the labor pools. China has to find jobs for 
its workers. It is largely a state-subsidized industry. They 
have roughly 10 million textile workers to our 435,000 right 
now. They pay an average of 40 cents an hour. We pay far more 
than that, 12, $13 an hour, for our hourly workers, more than 
that for our college graduates and skilled workers. We do have 
a more productive industry, but they can throw all these people 
at us with their state subsidization, with their currency 
manipulation. It makes for a very unequal playing field.
    India was another country mentioned. Yes, India has a 
potential market for us. We have talked about this before. 
There may be a lot of poor people in India, but there are about 
200 million middle-class consumers that could by U.S. denim, 
U.S. jeans.
    But we can't get our product into those countries like 
India because of their various nontariff barriers and tariff 
barriers to our products. This is something we have been 
complaining very forcefully about to the government. It is 
something that we are going to continue to point out when we 
submit our list of trade barriers each year. These nontariff 
barriers were supposed to have been eliminated under the 
Uruguay Round. Now we are seeing in the Doha Round proposals 
that, well, we might get to it later in future years and we 
will phase it in. So it is very frustrating for us.
    Mr. Udall. Which I--and I see my time's out, Mr. Chairman.
    Just to sum up, I think that the point you are making is we 
shouldn't be entering into new trade agreements without doing 
something about the issues that have been demonstrated in this 
panel here today; and to head down that road of just saying 
new--the same old trade agreements aren't going to get us out 
of this hole that we are in.
    Mr. DuPree. Enforcement of agreements that have already 
been signed is so imperative to our industry. Many Members of 
Congress, when they considered China PNTR back in 2000, 
expressed concern about what impact will this have on the 
textile industry. They were assured that there is a safeguard 
mechanism that China has agreed we can use if there are surges 
of imports in decontrolled categories they can--the United 
States governments can do, can impose quotas and try to slow 
those down right away. They gave us that right. We just have to 
use it.
    We have shown in some of the decontrolled categories 
imports have increased 750 percent in 18 months, and that is 
the wave of the future if we don't utilize the agreements we 
have now on the books.
    Mr. Udall. Thank you, Mr. DuPree; and thank you, Chairman 
Manzullo.
    Chairman Manzullo. Mr. Davis.
    Mr. Davis. Thank you, Mr. Chairman. I apologize for missing 
a part of the testimony, but I have listened to the dialog as I 
returned from some responsibilities that I had on the floor.
    I try and remain as optimistic about things as I possibly 
can, but someone just sent me an article out of the Chicago Sun 
Times that says half the city's 20- to 24-year-old black men 
are jobless. I mean, that is--half is 50 percent. Of course, 
Chicago is a pretty big city, and so that is a lot of people.
    I also represent a congressional district that in the last 
35, 40 years has lost more than 140,000 manufacturing jobs. I 
can almost name them without even looking anyplace: Hotpoint, 
Motorola, GE, Sears Roebuck--just right down the line.
    All companies that used to be--there used to be 10,000 
people who worked in the location of my district office right 
now. I mean, there used to be 10,000 people working right 
there. There used to be another 10,000 people who worked about 
two blocks from where I lived every day.
    I guess my question is--and I understand that there are job 
losses internationally, especially in manufacturing, that the 
losses aren't only occurring here in this country, but they are 
occurring in many other places, and we are becoming more 
technologically proficient every day. I am saying, whatever it 
is that you had that you could do five things with this month, 
you can take that same instrument next month, you can do 10. I 
mean, you can take a telephone now; and you don't have to buy a 
camera. You can take a telephone; you don't have to get a fax 
machine. You can take a telephone; you don't have to have an e-
mail set up. I mean, you can do almost anything in terms of 
communication with one device or one instrument.
    So I guess my question is, is there any possibility that 
technological proficiency is going to further reduce 
opportunities to work as opposed to increase opportunities to 
work? And is that a challenge? Is there any fear--is there any 
possibility that we may reach the point where there just aren't 
jobs, Mr. Chairman, to be found?
    I mean, I remember the song we used to sing back when I was 
a young fellow about get a job. ``every morning about this time 
she'd bring my breakfast to the bed acrying, get a job. So when 
I read the paper I read it through and through, but there is no 
work for me to do. Get a job.'' .
    Can we be as optimistic as I would want to be as we try and 
make some projections for the future? I think, for example, 
that our economy is in the worst shape that it has been in 
since I have been observing it. But for the first time in the 
history of this country I am not convinced that we can suggest 
with any real sense of assurance that the quality of life for 
our children is going to be better than what it is for those of 
us who exist right now. So, my question, what does the future 
really kind of look like?
    Mr. Miller. Well, I at least am an optimist, Congressman 
Davis, in several regards. But, number one, I would make the 
point again going back to education and training that is 
critical. Let me just give you one example. This was pointed 
out recently in an article in Business 2.0.
    Intel had 20,000 U.S. Employees in 1982. They have about 
50,000 now. According to the education manager, however, one of 
the big differences is in 1982 all you needed was a high school 
degree in order to have some of these lower-levels jobs at 
Intel. Now, entry level applicants need at least a 2-year 
degree in applied science to hold the same job.
    So that is why I think education and training continues to 
be so important; and, unfortunately, it does create a bit of a 
divide, Mr. Davis, which I think you are referring to for those 
who are not able to figure out how to get in this education and 
workforce.
    My second point would be that productivity increases have 
become a bad word for Members of Congress and other people 
because what productivity has begun to mean is you can do the 
same with less people. But I think economists will tell you at 
a certain point you can only get so much productivity even out 
of information technology. And, as you can imagine, I am a 
great believer in information technology. At a certain point, 
for companies to continue to produce the goods and services 
that the American people want as consumers, they are going to 
have to start hiring again.
    We did have some hiring in September. Whether it is a long-
term trend or not, we don't know. I hope it is.
    My third point is, again--I don't know if you were in the 
room or not at the time I referred to it--but the long-term 
demographics are that, because we have a huge baby boom group 
retiring over the next 5 to 7 years, people in that 50 to 60 
age group, there are tremendous opportunities for young people 
coming along because we are going to have this massive 
retirement.
    The most dramatic example, and admittedly it is a bit of an 
outlie, was the U.S. Federal Government where you have 30 to 40 
percent of all U.S. government IT workers are within 3 years of 
retirement. When they retire, there is going to be huge 
opportunities to fill those positions. Now whether those 
positions are going to be filled by the U.S. Government 
actually hiring people in to the government or whether they are 
going to choose an IT company to outsource it to remains to be 
seen. That is a decision that the top leaders of the Federal 
Government are going to have to choose. But that is one example 
where you are going to have this massive retirement that is 
going to create lot of new opportunities.
    Mr. DuPree. Congressman Davis, if I could just respond. To 
answer your first question, I guess the future will be 
determined for our industry at least by how our government 
looks at future trade policy and other policies in the next 5 
to 10 years. We have done everything we can. We have in fact, 
as you indicated, increased productivity.
    Has that cost jobs? If you look at the long-term job 
picture within the textile industry, it was almost equal to the 
rate of attrition. Retirements equaled--as you had people 
retired, some of them were not replaced, so there was a very 
slow decline in job losses. In fact, the chart on page 3 of my 
testimony, that is actually very close to what was over the 10 
years prior to that we were seeing--700 and some odd thousand 
jobs down to 650,000 jobs.
    Yes, we are three times as productive per loom hour as we 
were in the 1970s. That was intended to try to give us a 
competitive edge over China and Asia and other producers that 
pay such low wages and don't have the standards we do. But, as 
we have seen, productivity can only do so much when you are 
undercut by 35 to 40 percent by price.
    Mr. DuPree. Just as one measure of the fact that--our 
employment drop has not been due to productivity. I believe 
about 6 years ago we were consuming approximately 11 million 
bales of cotton annually. We are down to about 7 million bales 
of cotton annually. We are just not doing the business. The 
orders are going offshore.
    Chairman Manzullo. All right.
    Mr. Davis. Well, thank you very much. I used to pick some 
of it when I was a kid. It is not the best job in the world.
    Thank you very much, Mr. Chairman.
    Chairman Manzullo. Thank you, Congressman Davis.
    I want to thank each of you for--first of all, for being 
extremely well prepared. There wasn't a question asked that one 
of you said, can I get back to you. It is so refreshing. Even 
though we may disagree or pick on you on occasions--and, Mr. 
Miller, we are challenging you, not picking on you, you know 
that--very good preparation, very good answers. And it just 
goes to show the complexity of the issue.
    At one time knowledge was discovered. Today it is invented. 
It is a different era that we are living in. We have to think 
differently because of the challenges that are presented to us.
    Each of the Members of Congress up here represents his or 
her congressional districts. We are creatures of the districts 
that we represent. That is the constitutional framework. The 
area that I represent obviously is involved in heavy 
manufacturing. My father was a master machinist and then a 
master chef and a master butcher and a master carpenter, and 
always a master father, and we grew up knowing what the sweet 
smell of machine oil was. We just presumed that people--that 
the rest of us here know what it is, but probably only about 40 
to 50 congressional districts have an intense manufacturing 
base, and so we have to operate on the basis that we need to 
get people informed as to what is happening.
    When we started holding these hearings on manufacturing 
almost 3 years ago, there was some interest in what we are 
saying. It really wasn't until February of this past year when 
Business Week came out with what I consider to be the seminal 
article, the offshoring of our service sector jobs, where other 
Members of Congress started waking up and saying, hey, just a 
second, we are losing those industries even though we have no 
manufacturing in our congressional district.
    So we are in a position where we can see the tremendous 
loss that is occurring in the--and how perplexing it is that 
the stock market can be going up when we don't have any jobs. 
But the answer to that is easy. The jobs that are being created 
are overseas. The reason that profits are increasing in the 
stock market is because of cutting jobs here and outsourcing 
them overseas in order to increase the demand of the stock.
    The complexity of the problem that Mr. Grove raises is even 
more significant than we think. There is a book called The Loss 
of Shareholder Value--The End of Shareholder Value by Allan 
Kennedy, written in 1999. He is going to be a witness here at 
some time. We are trying to figure out his schedule. But in 
that book he talks about the bubble, and he talks about the 
fact that American companies, the longest-range plan that most 
of them have is 3 months, and that is the comment on the next 
quarterly earnings. That is as far as it goes, and that the 
name of the game is to increase the value of the stock to get 
it to the highest point possible.
    And he also talks about the changing definition of the word 
``profits.'' we are all capitalists. I am to the core on it. 
But he raises something very interesting in that book, and that 
is the redefinition of the word ``profit.'' at one time profit 
meant a reasonable profit, a respectable share of the market, a 
workforce that was happy, compatible, but nowadays profit is 
you have got to make more money than the next guy. You have to 
be number one in order to call yourself successful, and in the 
race to be number one, it has created a panic of people moving 
offshore because no one is thinking long range about what is 
going to happen when there aren't enough people left in the 
United States that have jobs in order to buy the things that 
are out there being manufactured.
    If the emerging markets are in India and in China, then 
those people there should be paid enough money at their wages 
to buy their own stuff. That is the problem with China. But if 
they were paid enough money, then they wouldn't be competitive 
in order to undermine the jobs that are in the United States.
    Something has got to balance. Does that bring about a 
government solution? I doubt it. Who wants to get involved in 
something like that? But there has to be a rethinking.
    Mr. Grove, as far as I am concerned, is leading the charge, 
because he is asking that question, how much of this stuff do 
we offshore before the country pays such a horrific price for 
it that the Nation cannot recover from it?
    Again, thank you for your testimony. You have been great 
witnesses. Appreciate your time, and this hearing is adjourned.
    [Whereupon, at 4:06 p.m., the committee was adjourned.]

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