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



 
 INCREASING THE COMPETITIVENESS OF U.S. MANUFACTURERS IN PENNSYLVANIA
                                   

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

                             FIELD HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                     ALTOONA, PA, DECEMBER 1, 2003

                               __________

                           Serial No. 108-47

                               __________

         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
Sissler, Timothy, Altoona Blair County Development Corporation...     4
Silvetti, Ed, Southern Alleghenies Planning and Development 
  Corporation....................................................     6
McLanahan, Michael W., McLanahan Corporation.....................     9
Stapelfeld, Ben, New Pig Corporation.............................    11
Showalter, John, Appleton Paper..................................    13
Yankovich, William, General Cable................................    16

                                Appendix

Opening statements:
    Manzullo, Hon. Donald A......................................    28
    Shuster, Hon. Bill...........................................    29
Prepared statements:
    Sissler, Timothy.............................................    33
    Hoover, Dan..................................................    39
    Silvetti, Ed.................................................    43
    McLanahan, Michael W.........................................    47
    Stapelfeld, Ben..............................................    50
    Fantini, Rick................................................    56
    Yankovich, William...........................................    64

                                 (iii)


  HEARING ON INCREASING THE COMPETITIVENESS OF U.S. MANUFACTURERS IN 
                              PENNSYLVANIA

                              ----------                              


                        MONDAY, DECEMBER 1, 2003

                  House of Representatives,
                                Committee on Small Business
                                                        Altoona, PA
    The Committee met, pursuant to call, at 10:20 a.m., in 
Blair County Convention Center, Altoona, Pennsylvania, Hon. 
Donald Manzullo [Chairman of the Committee] presiding.
    Present: Representatives Manzullo and Shuster.
    Chairman Manzullo. Well, good morning and welcome. I want 
to start by saying how glad I am to be here with Congressman 
Bill Shuster. The people of the 9th District of Pennsylvania 
are blessed to have him representing them. He is a tremendous 
advocate for small businesses, for manufacturers. He has always 
been a great asset in the fight to bring to the importance of 
the policy people in Washington how necessary manufacturing is.
    You know why we are here. It is because despite our best 
efforts, manufacturers in the U.S. are in rough shape. Unless 
we do something about it, the effects of this will be 
irreversible. You can ask any of the 2.8 million workers 
involved in manufacturing that have lost their jobs in the past 
three years, and they can share that with you. The problem goes 
far deeper than the loss of jobs alone. It is crucial that this 
Congress foster an environment that keeps Americans working, 
and our continued prosperity depends upon not only keeping 
Americans working but working with our colleagues in Washington 
to make sure they understand how important it is to have 
manufacturing. If you don't have manufacturing, agriculture, 
and mining, you end up becoming a third rate country, and this 
Country has a manufacturing base that continues to erode even 
in light of the addition of several hundred thousand jobs. In 
the past month, we lost 24,000 manufacturing jobs. That makes 
the 39th month in a row where we have lost an average of about 
75,000 manufacturing jobs each month.
    And Bill, I want to thank you for making possible today's 
hearing. This is the 52nd hearing that the Small Business 
Committee has had in the past two-and-a-half years just in the 
issue of manufacturing, to give you an idea of how intense we 
study this issue. And Bill, thank you for inviting me to your--
this is windy hill here. Isn't it?
    Mr. Shuster. Today it is.
    Chairman Manzullo. Today it is, and I just appreciate what 
a beautiful area you have. It is very much like the area I 
represent. I have got nine counties, heavy agriculture and 
heavy manufacturing, and that is you. Isn't it?
    Mr. Shuster. Absolutely. Not as much manufacturing as we 
have had in the past, but that is one of the reasons we are 
here today is to try to----.
    Chairman Manzullo. There you are. And here is the gavel, 
and you can conduct the hearing.
    [Chairman Manzullo's statement may be found in the 
appendix.]
    Mr. Shuster. Thank you. Mr. Chairman, first, let me begin 
by thanking you for being here today. It is truly a privilege 
to welcome you to the 9th Congressional District of 
Pennsylvania. We are pleased you joined us here today, which I 
believe will be a very informative hearing, and I want to thank 
you for leading the fight to help our manufacturers restore a 
strong manufacturing sector in this country and to lead the 
fight against unfair trade practices around the world.
    I would also like to extend a warm welcome to those of you 
that are here today to testify. This is really the best way, 
short of talking one on one with you, to really get a 
perspective on your businesses, and what is affecting you, and 
what you would like to see the Federal Government do to 
strengthen your position in the world, manufacturing in the 
world. We are fortunate here in Blair County to have strong 
businesses and an active economic development community. I know 
Betty Slayton is here this morning. Welcome to her, and Marty 
and his team are here. And they are very strong and they do a 
great job, as well as Ed and his folks at Southern Allegheny. I 
thank you all for being here.
    We know that a strong and viable manufacturing sector is a 
critical aspect of our nation's economy. Manufacturing accounts 
for a little less than 20 percent of GDP now and it contributes 
one-third of the economy's productivity growth. In 
Pennsylvania, the manufacturing sector contributed $68 billion 
to the State's economy in 2001. Additionally, we know that 
manufacturing was responsible for increasing business activity 
and jobs in other sectors. It is not hard to see what an 
important role manufacturing plays and why it is essential that 
we work to keep our manufacturing base here in the United 
States competitive in this global market.
    Unfortunately, in recent years our manufacturing sector has 
suffered. The National Association of Manufacturers estimates 
that since July of 2000, we have lost 2.8 million manufacturing 
jobs in this country. Here in Blair County and central 
Pennsylvania there is a long list of companies that have closed 
and moved to other places or just shut their doors and gone 
away. This lost has been felt significantly. Here in 
Pennsylvania, 143 manufacturing jobs were lost in that three-
year period. The economy of the State has clearly felt--
143,400--correct. That is why we must work together to end this 
hemorrhaging of America's manufacturing jobs and create an 
economic environment that is going to foster growth in that 
sector of our economy.
    The good news is that the foundations for an economic 
recovery have been laid and are beginning to take hold. The 
economic indicators from the last few months show a changing 
tide. In October alone, we have seen 126,000 jobs have been 
created. This is good news and a step in the right direction, 
but there is more work to do. We must continue to reduce the 
tax burden on our manufacturers so they have some--they know 
what the long-term tax implications are going to be on their 
companies, and ensure that our businesses are competing on a 
level playing field by enforcing nation's trade agreements. And 
today, I hear a lot of talk in Washington and around the 
country about free trade. There is no free trade in the world 
today. I think the best we could hope for is fair trade, and 
that is what we have to continue to work for, those of us in 
the United States Congress, to make sure that the playing field 
is level and that there is fair trade in the world, because we 
know there are nations out there that are intentionally 
undervaluing their currency in an effort to obtain an 
competitive advantage, among other things.
    And we need to work to help reduce healthcare costs, and as 
I said, the tax and regulatory burden on our businesses. The 
small steps that we have taken in the House is to pass 
Associated Health Plans, which is one way to help businesses be 
able to band together to reduce those costs on healthcare. Tort 
reform, its time has come. It doesn't matter what product you 
are producing or what business you are in. I think many of us 
in small business can tell a story. I, myself, can tell a story 
about being sued, and going through the process, and at the 
end, doing an out-of-court settlement. If someone came by 
without the evidence to prove, or really, the ability to prove 
that somebody has had something wrong, and we face this all the 
time in our court system, time after time, trial lawyers taking 
our businesses. And I think that the number that I have is, on 
average, the average American citizen is paying about $700 a 
year in increased costs just for insurance to cover businesses' 
liability claims.
    But I look forward to working with my colleagues in 
Congress. Those--I know that State Representative Stern is here 
today, focused at the State level and here at the local level, 
to make sure that we can further this economic recovery not 
only throughout the United States, but right here in the 9th 
Congressional District of Central Pennsylvania. And with that, 
I will start to go down through the list. Normally, we are very 
formal at our Committee hearings. I have to call people Mister, 
or Secretary, so if you hear me call you Mr. Sissler, that is 
protocol, but I think I know everybody here at these tables. So 
with that, Tim, if you would like to lead off?
    [Mr. Shuster's statement may be found in the appendix.]
    Chairman Manzullo. There is one housekeeping issue--try to 
keep your testimony to five minutes. That is the purpose of the 
gavel, and so if it gets near five minutes, you may hear--and 
if it goes way over that, the gavel may end up out there.
    Mr. Shuster. I think I read most of their testimony and I 
think most of them are probably right around five minutes.
    Chairman Manzullo. Very good, so we have plenty of time for 
questions and interaction.
    Mr. Shuster. And you told me I had the gavel, so I am not 
going to gavel you down.
    Chairman Manzullo. Your complete statements are made part 
of the record. If anybody wants to--in the audience wants to 
add anything to the record, you can do so. Get it to 
Congressman Shuster within the next three weeks. You must keep 
it to two pages, typed. The print cannot be less than elite 
type. Okay. That is so you can't turn in a book and have it 
printed up.
    Mr. Shuster. Mr. Sissler.

STATEMENT OF TIMOTHY SISSLER, ALTOONA BLAIR COUNTY DEVELOPMENT 
             CORPORATION AND RELIANCE SAVINGS BANK

    Mr. Sissler. Good morning, everyone. Thank you. My name is 
Tim Sissler. I am Vice Chairman of the Altoona Blair County 
Development Corporation, affectionately known as ABCD Corp. We 
are a private nonprofit certified industrial and economic 
development corporation. For more than 55 years, we have served 
as a catalyst for comprehensive economic development in Blair 
County with an emphasis on a broader vision encompassing the 
entire I-99 Innovative Corridor. Through our business 
retention, attraction, and expansion efforts, our overall goals 
remains the development of enhanced quality of life through 
greater employment opportunities for Blair County and 
throughout our region.
    I will not use this time to list the many statistics that 
prove the critical role the manufacturing industry plays in our 
local, state, and national economy. We all know what those 
economic contributions are, especially, when they are lost.
    Blair County, like many parts of Pennsylvania and the 
Nation, has a rich and valued history in manufacturing. The 
manufacturing industry has served as the backbone for wealth 
generation. However, this growth engine is losing steam and 
America's manufacturers face more monumental challenges, both 
domestic and international, than ever before. The 
sustainability of our manufacturing process and our future 
prosperity are threatened. Just a few short years ago, more 
than half of Blair County's economy was represented by the 
manufacturing sector. In 2002, only 18 percent of our economy 
is attributed to manufacturing. Nationally, the number is even 
less.
    Our primary message this morning is a simple one. In order 
for our regional and national economy to be competitive at a 
global level, it is essential that the production of goods and 
services remain a fundamental part of the overall economic 
equation. While organizations like ABCD Corp play a role in 
helping to facilitate economic expansion, the most important 
organizations are those firms that produce, manufacture, and 
directly add to the economy through family sustaining job 
creation. Those firms represented here today know best the 
challenges facing their operations. Their message and those of 
other manufacturing sector industries must be heard to help 
shape a modern policy environment reflective of a 
technologically advanced and global marketplace.
    U.S. manufacturing has been the heart of a significant 
process that has generated economic growth and produced the 
highest standards of living in history. Today, this complex 
process faces substantial challenges, which if not overcome 
will ultimately lead to a decline in the living standards for 
future generations of Americans. We do not expect to hold onto 
the past nor do we encourage others to do so. We recognize that 
the nature of manufacturing is changing. It has transformed 
from a heavy, labor intensive industrial base to an 
increasingly automated, safe, and efficient environment.
    We produce more with fewer employees and the skill sets of 
a modern factory worker are much more different today than they 
were just a few short years ago. The term ``jobless recovery'' 
may fuel the GNP and corporate stock prices, but the phrase 
sounds viciously unsympathetic to those individuals displaced 
by this fundamental change in operations.
    As manufacturers planned for and invested in capital 
equipment to increase efficiencies and output, low skilled 
production jobs were the first to move overseas. Watching this 
transformation take place, the experts said the new industrial 
segments would develop to fill the void. Profits made from this 
evolution would be put back into research and development. This 
research would create new and better products and entire new 
industries would likely develop.
    While fewer employees would be needed in a particular 
company, the modern manufacturing employee would earn much more 
and require advanced degrees and certifications. A new class of 
worker would be created. No longer defined as a blue collar or 
white collar, the modern worker will wear a gold collar, 
symbolizing their ability to manage and operate the production 
operation.
    In many cases, this has proven to be the case. Those 
manufacturers that remain and those developing have firmly 
adopted this new operational paradigm, and their employees now 
wear a gold collar. But what we fear most is that the next 
phase of offshore emphasis will quickly transplant the higher 
skilled, more specialized employment sector that directly and 
indirectly supports the manufacturing industry.
    Evidence of this happening is already clear. Support 
centers, research, and advanced material development are 
increasingly finding a home in other countries. Our Nation and 
region alike are training many people from all parts of the 
globe, providing them with skills needed to ultimately help 
contribute to their home country's overall competitive 
advantage.
    Our Nation must then compete in that global marketplace. 
This cycle has been continuing now for a number of years, and 
based on university enrollment statistics, the trend shows 
signs of increasing in the years to come.
    While we believe in free trade, we also believe in a level 
and fair global playing field. Our country insists on the 
highest standards for workplace safety, environmental 
protection, human rights, and we demand wages that reflect an 
employee's worth, skill, and ability to sustain a family. Along 
with those standards go the costs associated with them, 
including continuously escalating healthcare expense. The U.S. 
manufacturing sector is increasingly required to compete 
against countries that do not share those beliefs and 
standards. So if you agree with our primary message that the 
production of goods and services must remain a fundamental part 
of our Nation's overall equation, we must then also look at 
creating policies that help level this global playing field.
    Such policies should not be punitive in nature but, rather, 
provide incentives to raise the standards for all businesses in 
all industry sectors in all countries. Those policies should 
serve to protect the environment where there are abuses, 
protect the worker where they are exploited. They should help 
monitor global business practices and enforce the highest 
standards of production possible that, in turn, will product 
the best quality product possible. The consumer then can feel 
confident that the price paid for the product reflects the 
highest standards of production possible.
    ABCD Corp will continue to work with our existing 
businesses across all sectors in economic development as we 
move forward. Ensuring that these businesses remain competitive 
and can do business on a global basis is an operational 
priority, but we need strong partners in the State and, 
especially, at the Federal level. We need firm policies to 
support and open but also fair global marketplace.
    Again, thank you for the time this morning. Before 
finishing, also, on behalf of Dan Hoover, President and CEO of 
Roaring Spring Blank Book, I would like to have his written 
testimony made part of this record, in addition.
    Mr. Shuster. Sure.
    Mr. Sissler. Thank you, Congressman.
    [Mr. Sissler's statement may be found in the appendix.]
    [Mr. Hoover's statement may be found in the appendix.]
    Mr. Shuster. Thank you, Tim, and I didn't give you a proper 
introduction as the First Vice Chair of the Altoona/Blair 
County Development Corporation, and also, CEO of Reliance Bank, 
and also, the guy that was responsible for putting me into 
business 14 years ago. So I don't know if you----.
    Mr. Sissler. Thank you for remembering that, Congressman. 
And thank you for paying me back, Congressman.
    Mr. Shuster. Thank you for your testimony and that will 
be--Dan Hoover's testimony or written statement will be 
submitted to the record. Next, Ed Silvetti, who is the 
Director--is that the correct----.
    Mr. Silvetti. Executive Director.
    Mr. Shuster. Executive Director of the Southern Alleghenies 
Planning and Development Commission. Ed, welcome, and go ahead 
and proceed. Thank you for being here.

  STATEMENT OF ED SILVETTI, SOUTHERN ALLEGHENIES PLANNING AND 
                     DEVELOPMENT COMMISSION

    Mr. Silvetti. Thank you. Chairman Manzullo, I appreciate 
the opportunity to testify today before the Small Business 
Committee and I do offer a special note of appreciation for the 
invitation to do so by Congressman Shuster, who representing 
the 9th Congressional District, which along with the 12th 
Congressional District, encompasses the six-county region of 
the Southern Alleghenies Planning and Development Commission.
    I appreciate also the timeliness of this invitation, 
because those of us involved in economic development have 
become increasingly frustrated with the loss of jobs, 
particularly, manufacturing jobs. And I know this loss of jobs 
is not unique to our area, because even as I travel across the 
Commonwealth in some of our neighboring states, I am almost 
embarrassed to admit relief that other areas are also suffering 
job losses because working in economic development, it becomes 
very, very frustrating to see this continued erosion of jobs. 
It seems that for every economic step forward in helping to 
create jobs, we nevertheless suffer two steps backwards, and so 
continue to lose jobs so important to the economic vitality of 
our regional economy.
    This may be best typified by a small article that appeared 
over this past holiday weekend in the local newspaper, the 
Altoona Mirror, making note that SKF, the world's largest 
bearing manufacturer, recently opened yet another plant in 
China; this one in Shanghai to produce deep groove ball 
bearings. While this company is Swedish based, it has a local 
connection with an SKF plant located in Altoona that is 
scheduled to close in 2004. The result will be a layoff of 250 
manufacturing jobs, and high paying manufacturing jobs at that. 
The fact that this is SKF's fifth venture in China since 1995, 
in my opinion, speaks directly to the issue before this 
Committee today. Unfortunately, the impending SKF plant closing 
in Altoona is only the most recent job loss in the regional 
economy, unfortunately.
    Since 2000, as we are all aware, there has been a severe 
net loss of manufacturing and related jobs in the Southern 
Alleghenies Region. The Commonwealth of Pennsylvania economic 
analysts project that job losses will continue in nearly all 
manufacturing sectors. This is a frightening thought, given the 
loss of thousands of jobs already.
    Retraining of dislocated workers is preferred but, frankly, 
many simply want to find another job that pays a family 
sustaining wage. The continued loss of manufacturing jobs makes 
this doubly difficult. Within the six-county Southern 
Alleghenies workforce investment area, and we do administer the 
Federal Work Force Investment Act fund at Southern Alleghenies 
Commission, over 430 dislocated workers have received vouchers 
to attend training programs in the last three years. That is 
only the tip of the necessity for job retraining. Job training 
is vitally important to economic competitiveness within this 
country and around the world.
    I also wanted to provide today a brief overview of some of 
the business climate and entrepreneurial issues in our six-
county region. As Congressman Shuster points out, our region is 
predominantly rural, but does include two small metropolitan 
statistical areas, these being centered in Altoona and 
Johnstown. The region has continued a modest recovery from a 
long period of economic restructuring that began in the 1970's, 
continued in the 1980's, and now has given way to some new 
manufacturing and emerging service and technical industry jobs. 
Just as a point of fact, coal and steel employment in this 
region is a mere 10 percent of what it was in 1960. The same is 
true of the railroad employment here in Blair County and the 
surrounding area.
    The region's economy is more diversified than ever before. 
In fact, unemployment numbers are more aligned with 
Commonwealth of Pennsylvania averages than in earlier decades 
when declines were precipitous and recoveries slow. As with the 
Commonwealth of Pennsylvania as a whole, the demographic pool 
in this area is older than the average population of the 
Country and is increasing in the concentration of older 
citizens. This presents another special set of economic issues 
to impact entrepreneurship levels and worker retraining.
    Unfortunately, business formation rates in our six-county 
region are very low. The entrepreneurial business formation 
rate for the six-county region is only 55 percent of the 
Nation's average. This highlights a general weakness of the 
region in many of the Nation's fastest growing and most 
actively entrepreneurial focused industries, including business 
and professional services, computer related services, data 
process, and such. Not only is the region lagging in what are 
often considered new high tech industries, but there are also 
gaps among the wide range of business and professional service 
industries that require higher educational and technical, but 
not always highly specialized, skill sets.
    Because of the region's cyclical history of economic 
decline and recovery, the reliance on manufacturing jobs has 
been great. Our workforce is generally skilled to meet the 
needs of the region's traditional industries. The result, 
however, is that when a manufacturing job is lost, the effect 
is more acute because the workforce is not skilled to meet the 
needs of new industries. And further, due to the low business 
startup rate, the new industry jobs are simply not available.
    For the last two years, Southern Alleghenies Commission and 
partnership with other economic development agencies, including 
ABCD Corporation and the Bedford County Development 
Association, has spoken directly with over 750 chief executive 
officers of companies based in the region. This is what they 
have told us. Over 50 percent of the executives said that 
applying and financing new technology was of great concern to 
them if they were to remain competitive in a global 
marketplace. Half of the CEO's said that business taxes were 
the single greatest liability affecting their business' ability 
to operate competitively in Pennsylvania and the United States.
    The greatest concern of CEO's relative to operating their 
businesses last year, in 2002, were issues related to their 
workforce. Healthcare costs were second. In 2003, during this 
past year, the top issue became healthcare costs, followed by 
workforce issues. There was a reversal. The issue of healthcare 
is only getting worse. Each new labor contract each new year 
requires employees--to require their employees--not to request, 
but to require their employees to share a greater burden of 
healthcare costs. This, in turn, erodes available disposable 
income of our workers, who already earn less per household in 
per capita than others in the Commonwealth.
    The ability to pay competitive wages tops the reasons for 
employers' inability to retain employees. Paradoxically, in 
order for a manufacturer to compete with foreign competition, 
no more than 45 percent of their product cost can be labor 
cost, with the balance being raw materials and other inputs. On 
the other hand, to keep a well-trained, valuable employee, 
businesses must be able to pay competitive wages. I am at a 
loss, frankly, to suggest a middle ground for these business 
people.
    I don't want to represent to the Committee that our area is 
without resources. Rather, I want to convey that we have 
similar issues impacting our economy that are not unlike those 
affecting the country as a whole. Efforts by economic 
development agencies that work to create an atmosphere 
conducive to job growth have achieved a great deal of success 
and my written testimony highlights some of those positive 
results achieved by agencies working in the economic 
development arena.
    I did want to conclude my testimony by offering some 
suggestions that again come from my agency's discussions with 
the region's business leaders. First, provide training funds 
for incumbent workers that do not have all the strings 
attached, such as new job creation or the increase in wage 
rates, but simply to help them remain competitive. The issue 
with much of the Federal job training funds available, in our 
opinion, is that they are so restrictive, and particularly, 
with regards to incumbent workers. It is almost impossible to 
use those funds to help workers attain new skill sets which, in 
turn, help their employers remain competitive, because the 
system works against us. I know that the Workforce Investment 
Act is up for reauthorization. I think it is a really good 
opportunity to address that in a very meaningful way.
    Provide a basic level of healthcare coverage on a national 
level that can then be enhanced by employers. Foreign trade 
policies must be evaluated to determine the effects on domestic 
small businesses, not just large corporations. Offer better 
incentives for foreign business investment in the United 
States. Offer tax incentives for products 100 percent made in 
the United States.
    Offer more technical and financial assistance to provide 
businesses with market development help in order to remain 
competitive. We provide a fairly wide range of business 
consulting services, export technical assistance, and similar 
activities. The fact is that we find our business clients are 
faring better than many businesses that do not receive the 
basic economic development services, again, such as assistance 
in exporting their products.
    Chairman Manzullo, Congressman Shuster, I thank you for the 
opportunity to be here today. I will be more than happy when 
the testimony is concluded to answer any questions that you 
might have. Thank you.
    [Mr. Silvetti's statement may be found in the appendix.]
    Mr. Shuster. Thank you very much, Ed. Next, Michael 
McLanahan, President and General Manager of McLanahan 
Corporation. I won't give away the years, but you have been an 
historic company here located in Blair County for a lot of 
years, and one of the really rock solid companies in the area. 
So with that, do you want to proceed, Mike?

   STATEMENT OF MICHAEL W. MCLANAHAN, MCLANAHAN CORPORATION, 
                       HOLLIDAYSBURG, PA

    Mr. McLanahan. Thank you. Good morning. My name is Mike 
McLanahan. I am President and CEO of McLanahan Corporation, a 
168-year-old, family-owned small business, here today 
representing 165 loyal, hardworking American employees.
    Your invitation to present my opinions concerning issues 
impacting manufacturer's competitiveness is very much 
appreciated. The issue of competitiveness, as I see it, boils 
down to creation of jobs for small businesses in Pennsylvania 
and the rest of the Country. For too long, local, state, and 
federal governments have created a landscape for manufacturing 
filled with obstacles that have caused us to lose jobs 
overseas. One of the main goals or objectives we have is to 
make a profit. Without profit, there is no reason to exist, no 
reason to face the financial risks we encounter in our journey 
across that landscape. Jobs will only be created if profit is 
made. Unfortunately, Congress has seen to it that businesses, 
especially, small business, has a great deal of difficulty 
making a profit; however, once made, high taxes take away that 
incentive to succeed. There are many potholes and landmines 
erected by government in that landscape that I described 
earlier, but I can only deal with one or two at a time in the 
allotted time.
    McLanahan Corporation is a manufacturer of equipment used 
in the mining industry. One of the main markets for our 
business is the coal industry. The thrust of government 
regulations in the mining industry, and in coal specifically, 
seems to be aimed at destroying our ability to compete in the 
world market. McLanahan Corporation itself needs low cost 
energy to be competitive and it needs the coal mining industry 
to succeed because we need it as a customer for our products 
and services. It should be noted that we pay ten times the cost 
of wages and fringe benefits as compared to our Chinese 
competitors.
    Currently, the coal industry provides over 50 percent of 
the electric energy generated in this Country. However, 
building a coal fired power plant takes more than a decade just 
to get through the government regulations, with no guarantee 
that final approval will be given even if all regulations are 
met. Coal mining is considered by the media to be a dirty, 
hazardous job, yet, in fact, is one of our safest industries. 
Coal can be mined economically, transported efficiently, burned 
cleanly, and delivered to customers at low cost. All of this 
creates hundreds of thousands of jobs, billions of dollars for 
the economy, and a broader tax base. Please note, one ton of 
eastern coal costs about $20 on average and has the same energy 
value as three barrels of imported oil costing $96. 
Strategically, we have more than 300 years of reserves of coal 
in the ground. This would ensure our energy independence if we 
were allowed to use it to the fullest advantage.
    In contrast, the coal industry in Australia and China is 
booming because of significant government support. We, as a 
company, must go where our market potentially is greatest, 
therefore, we have opened an office in Australia and are 
considering our options in China. At the same time, our 
employment here has dropped nearly 10 percent mining, per se, 
is declining due to governmental roadblocks.
    In talking about strategic energy needs, let us just take a 
minute or so to look at the strategic oil reserve. A few years 
back in a political move, President Clinton drew from the 
Strategic Oil Reserve. A little known fact is that because we 
have not built a refinery in this Country in 25 years, and 
because the few remaining refineries were running at 95 percent 
of capacity, that strategic oil had to be shipped offshore to 
be refined. Just how strategic is that? By the end of this 
decade, we will be importing more than 65 percent of our oil 
needs, much of it from politically unstable countries, many 
controlled by governments having the avowed intention of 
destroying us. Even a small hiccup would be a national 
disaster.
    For a time, it appeared that the natural gas industry would 
supply the Nation's low cost energy needs. However, because 
users were chasing a limited resource, the law of supply and 
demand kicked in, more than doubling the price of natural gas 
in just one year. With more gas fired power plants being built 
or about to come on line, the cost of this energy source will 
be driven higher and availability will be reduced. Increasing 
natural gas supplies in this Country is severely restricted by 
government regulation, affecting exploration, drilling, and 
pipeline construction.
    Gentlemen, in conclusion, let me urge you to pass a 
national energy policy as soon as possible, to be followed by a 
national mineral policy. Without both, this Country will 
continue to export jobs. There are many other issues that I 
would have liked to have addressed, such as taxation, 
healthcare costs, legal reform, education; however, my time is 
limited. Thank you for your consideration.
    [Mr. McLanahan's statement may be found in the appendix.]
    Mr. Shuster. Thank you for your testimony, and on the 
Energy Bill, if you have been following the news, we passed it 
out of the House, the Congress report, and it is stalled in the 
Senate once again. That is the latest on that.
    Chairman Manzullo. New clean coal technology.
    Mr. McLanahan. New clean coal technology is being promoted 
by Government, and that is certainly appreciated, but that is 
ten, fifteen years down the line. We need to start now with a 
national energy policy, make use of what we have.
    Mr. Shuster. Absolutely. Thank you. Next, Mr. Ben 
Stapelfeld. He is the Chairman of the Board of New Pig 
Corporation and one of the great companies of Blair County, 
just about 20 years old, something like that, an idea that they 
had and have been very successful with it. So with that, Ben, 
would you go ahead and proceed?

  STATEMENT OF BEN STAPELFELD, NEW PIG CORPORATION, TIPTON, PA

    Mr. Stapelfeld. Good morning. My name is Ben Stapelfeld and 
I am the Chairman of the Board of New Pig Corporation. We 
manufacture and distribute industrial maintenance and 
environmental cleaning products. Our commitment to the 
manufacturing base of the United States is multifaceted, and 
its health is of a primary importance to us. We are 
manufacturers, we buy from manufacturers, but most importantly, 
the largest segment of our customer base is manufacturing.
    In 2003, New Pig Corporation will sell to over 50,000 
sites, domestically. In addition, we will sell in 70 foreign 
countries to approximately 7,500 end user customers. Since our 
inception in 1985, our domestic manufacturing base has been 
shrinking and shifting. In our early years, this fact was 
merely a statistic to read on the back pages of the Economist. 
We were small, the size of the market was huge, our products 
were new, and competition was nonexistent. Growth was not an 
issue.
    Eighteen years later, the market is mature, competition is 
abundant, and the size of the market is smaller. To New Pig, 
the shrinking manufacturing base is no long an insignificant 
statistic in the back of a magazine. Over the last decade, we 
have seen over 78,000 sites in the U.S. close, including 28,944 
of our active buying customer sites, of which 7,945 of those 
sites had over 100 employees. Growth now means fighting for a 
larger piece of a smaller pie. Eventually, the pieces become 
smaller, also.
    These are statistics that indicate why manufacturing is 
important to a little company in central Pennsylvania. We are 
far less qualified to expound on the larger question of 
importance to the overall U.S. economy. And really, we have no 
answers as to how to stem the shifting tide, but we do have 
some thoughts on the relationship of business and government in 
general. Business needs government to do for them what they 
cannot do and to stop doing for them what business is far 
better qualified to do for themselves. An example of the latter 
would be the Manufacturing Technology Competitiveness Act of 
2003, recently introduced by Congressman Ehlers of Michigan. 
This Act establishes programs to build partnerships among 
higher education institutions, businesses, states, and other 
partners to the tune of $184 million.
    Frankly, Congressman Manzullo and Congressman Shuster, New 
Pig wishes Congress would just save our money. We don't need 
federal help partnering with universities or other businesses. 
We don't need you to do our research. We don't need program 
upon program that funds fellowships and technology partnership 
centers. We don't need elaborate training programs. All of 
these things are our job. That is what business does. All we 
need is a profit motive and a level playing field.
    I think I am the fourth person today to talk about a level 
playing field, and maybe we need a definition of what that is, 
and I am probably not qualified to do it. But I think a start 
to getting there would be by having you guys help get 
government off our backs. Do for us those things that only 
government can do to achieve that end. To promote growth, 
government needs to establish sound fiscal and monetary 
policies that foster commerce instead of competing with 
business for the same capital that would promote growth. We 
need government to approach tax policy in a manner which allows 
business to compete on a global level.
    I will bore you with one more statistic. The United States 
makes up approximately 5 percent of the world's population, it 
transacts approximately 15 percent of the world's business, and 
it has 70 percent of the world's lawyers. It is time for 
Congress to stop running from tort reform, for if tort reform 
is not addressed, it will be more than just manufacturing 
leaving our shores.
    Help do something about the over-regulated business climate 
that exists in our Country. Nations that are burdened by 
needless regulations and stymied by a growing bureaucracy are 
always less competitive in a global market. Instead of another 
federal program that cannot be measured, look to the local 
level and help efforts that have already stood the test of 
time. ABCD Corporation has half a century of helping 
manufacturers and businesses like New Pig. Literally, dozens of 
businesses in Blair County would not exist or would not be the 
size they are today if it were not for their assistance. Knock 
down the roadblocks that impede them from helping us. We need 
our government to represent us on the world stage. We need you 
to ensure what we cannot do, and that is make free trade, in 
fact, mean fair trade.
    I would like to thank you for this opportunity, and remain 
confident that given this level playing field, American 
business will do its part in creating wealth for our society.
    [Mr. Stapelfeld's statement may be found in the appendix.]
    Mr. Shuster. Thank you very much. I think that reminds me 
from a Shakespeare play on your facts and figures about 
attorneys was I think--I don't know what Shakespeare play it 
was--there was a line in it that said the first thing we should 
do is kill all the lawyers. So I am not going to take that 
literally; my brother is a lawyer so--oh, that is right, the 
Chairman was a lawyer, but he saw--he had a clear vision on 
what a lawyer should be doing and shouldn't be doing. But thank 
you for your testimony. Next is John Showalter, Vice President 
of Operations?
    Mr. Showalter. I will be speaking for the Vice President of 
Operations.
    Mr. Shuster. Okay. That is what I thought. You have entered 
into that world of consultants and semi-retired, but I know you 
well enough to know you really haven't retired; you just 
started a new career. So you will be speaking on behalf of the 
Vice President of Operations for Appleton Papers. So go ahead.

    STATEMENT OF JOHN SHOWALTER, ON BEHALF OF RICK FANTINI, 
              APPLETON PAPERS, ROARING SPRING, PA

    Mr. Showalter. Thank you. Mr. Chairman, Congressman 
Shuster, my name is John Showalter, and from 1989 until July 1 
of this year, I was the mill manager of the Spring Mill of 
Appleton, which is in Roaring Spring. I will be speaking on 
behalf of the Vice President of Operations for Appleton, Rick 
Fantini.
    I would echo a little bit of what Mike had mentioned 
earlier, as far as longevity. We have been manufacturing paper 
for 136 years in Roaring Spring, so it indeed has established a 
history of manufacturing there. While I will be--while 
Appleton, by definition, is not small business, in today's 
world of corporate giants, we are indeed small. And indeed, 
what I talk about, if it applies to us, it certainly has to 
impact those businesses that are small business. Also, while we 
will focus on the paper industry, because that is what we know 
very well, the conditions and situations that affect and impact 
us certainly impact all other businesses that manufacture goods 
here. I also would like to add that we are an employee owned 
company and have been so since November of 2001.
    Appleton is a major producer of high value added paper 
grades and Appleton's annual sales are $850 million. Appleton 
has manufacturing operations in three states: Pennsylvania, 
Ohio, and Wisconsin; distribution centers in seven states; and 
sales offices across the Nation. We currently compete in four 
major businesses: carbonless papers, performance packaging, 
security papers, and thermal papers. We face competition from a 
myriad of competitors, domestic as well as foreign. My remarks 
will provide background on the paper industry to provide 
context for recommendations, address the impact of foreign 
competition on the paper industry, some personal observations 
of why a strong manufacturing base is critical to our Country, 
and recommend the policy changes that should be evaluated and 
addressed by Congress.
    Before I begin my remarks, I would like to thank Chairman 
Manzullo and Congressman Shuster for holding these hearings on 
a very critical issue of U.S. manufacturing competitiveness in 
a global economy. Other than our war against terrorism, I 
cannot think of a more important issue that our Country needs 
to address. Failure to deal with the erosion of our 
manufacturing base will have dire implications for our future 
way of life.
    The North American market in the paper industry accounts 
for one-third of the worldwide purchases of paper and 
paperboard products. Per capita use of paper products far 
exceeds that in other parts of the world. However, the North 
American market is also a mature market. Overall demand for 
paper products in North America has been described as stagnant. 
Other major markets include Western Europe and Asia. Demand 
increased in both areas, particularly, in Asia. In general, 
demand can be expected to increase most rapidly in developing 
countries and economies.
    Pulp and paper manufacturing is a cyclical industry. New 
capacity is very expensive to add, takes several years to bring 
on line, and has tended to come on line in large blocks as 
several competitors attempt to be the first to meet growing 
demand. The result has been periods of good times, when demand 
caught up to supply, and periods of bad times, when capacity 
exceeded demand because of new mill or machine additions.
    The two biggest issues facing the paper industry today is 
technology substitution and the flood of cheap imports. The 
combination of these two factors has resulted in prices well 
below levels necessary to make an adequate return on invested 
capital. Unfortunately, many paper companies have reported 
significant losses over the last three years. Significant 
fundamental economic changes have occurred in the past ten 
years which have negatively impacted the paper industry. Ten 
years ago, the U.S. paper industry had the following general 
characteristics. The U.S. economy was healthy; demand for paper 
products was increasing; capital spending was strong and 
increasing; and production and market share was fragmented 
among many companies; and more importantly, exports of paper 
and paperboard exceeded imports.
    The situation has changed. The U.S. and world economies 
slumped, beginning in 2000. The global supply for demand 
imbalance became apparent in the 1990's. Demand was waning and 
competition from competing materials and media was increasing. 
Electronic media began to affect demand. Over capacity was 
being addressed through plant and machine shutdowns. 
Consolidations, mergers and acquisitions, became a driving 
factor as companies sought to gain market share and rationalize 
assets. Capital spending was significantly reduced and foreign 
competition, or globalization, became a major factor with 
imports of paper and paperboard exceeding exports. Imports have 
captured 90 percent of increased U.S. demand since 1997. The 
U.S. trade deficit with respect to paper, paperboard, and 
converted products has consistently expanded during recent 
years, climbing from 5.7 million tons in 1999 to 6.9 million 
tons in 2002, which is an increase of 20 percent.
    The above factors have resulted in significant numbers of 
mill closures and corresponding job losses which are in the 
thousands. Since 1997, 72 mills have closed, and in the 2001-
2002 time period, a total of 40 mills and 104 paper or 
paperboard machines were permanently closed. Unless fundamental 
changes are made, this trend will continue.
    As I stated, the paper industry is being negatively 
impacted by two major factors, technological substitution and 
the floor of cheap imports. Technological substitution must be 
addressed by the industry through innovation. I personally 
believe that government should not assist industry, which is 
our job, and which fails to be innovative to compete with the 
technological advances. However, the issue of cheap imports 
requires a cooperative solution between industry and 
government. I am not advocating a protectionist view of 
severely limiting imports through high tariffs; however, some 
fundamental changes need to be made if our industry is going to 
be competitive in a global market.
    And this is the fifth time you have heard this now. The 
fact is free trade is not fair trade in the paper industry or 
any other industry for a number of reasons. The lack of a level 
playing field is demonstrated by one of our Asian competitors. 
We spend tens of millions of dollars to meet federal and state 
environmental regulations and the industry spends billions. Our 
Asian competition does not have to spend the same type of 
resources to meet environmental requirements. Obviously, this 
increases our cost base. And we are not advocating that we 
lower our environmental standards. This is not the answer.
    We spend millions of dollars to ensure the health and 
safety of our workers. Our Asian competitor is not required to 
make such investments. Our Asian competitor enjoys lower fiber 
costs for many reasons; some natural and some unnatural. The 
seizure of land from private owners would not be tolerated in 
this Country. Many of these seizures involved human rights 
abuses. This company also receives hidden fiber subsidies 
through the free use of land. This Asian competitor enjoys the 
benefits of modern technology without having to pay for it. 
This company has defaulted on loans amounting to billions of 
dollars. This company would be operating today if it was 
located in the United States. This Asian competitor pays its 
works at rates that don't even come close to the minimum 
standards that have been established in the United States.
    I want to talk now about the necessity of a strong 
manufacturing base. I do not think it is hyperbole to state 
that the erosion of the United States manufacturing base has 
important implications for the size and quality of middle class 
America, which will eventually impact the quality of life for 
all Americans. A significant and stable middle class has been 
crucial to the political stability of our Country. A 
significant middle class has also allowed for the enactment of 
pro-growth economic policies. The erosion of our manufacturing 
base will erode the size and quality of our middle class, which 
will ultimately erode our political stability. If you think I 
am overstating the issue, I would ask you to think about the 
democracies in Mexico and South America. I believe that the 
periods of political instability in those countries is a direct 
result of economic policy which failed to develop a substantial 
middle class. Many of these countries are now trying to correct 
this situation by increasing the size and diversity of their 
manufacturing base. We are now in a worldwide battle for 
manufacturing jobs, which we must win if we are to preserve a 
way of life we cherish and the rest of the World strives to 
attain.
    Recommendations. In order to address the above issues, I 
recommend that Congress evaluate the Act and act upon the 
following economic policies in order to enhance our 
manufacturing base. These policies are intended to spur new 
investment, provide incentives for retraining employees, and 
address the most egregious inequities caused by free trade. 
They are enact a lower tax rate for manufacturers; allow for 
full and immediate depreciation of capital investments that are 
made to meet environmental regulations; allow for accelerated 
depreciation at 25 percent per year for manufacturing capital 
investments; provide a tax credit for incremental hiring of 
manufacturing employees; provide a tax credit, dollar for 
dollar, for retraining manufacturing employees to operate new 
and rebuilt equipment; institute an environmental tariff for 
goods that are produced without meeting minimum environmental 
standards; institute a health and safety tariff for goods that 
are produced without meeting minimum health and safety 
standards; institute a buy American policy for Federal 
Government purchases through specifications which require 
products be produced in a manner that is consistent with public 
policy.
    Thank you very much for giving me the time and opportunity 
to speak at this hearing. I hope you will find these remarks 
helpful in thinking through this very complex issue.
    [Mr. Showalter's statement on behalf of Mr. Fantini may be 
found in the appendix.]
    Mr. Shuster. Thank you very much, John, and I think that 
your observation of political instability is absolutely right 
on the money, not only here if we don't maintain a strong 
middle class, but in the South American countries and all 
around the world, there is no middle class. It is tough to 
bring about democracy, so I think that is right on the mark. 
And finally, Bill Yankovich, who is the plant manager or 
general manager of the General Cable Industries facility here 
in Altoona. Go ahead and proceed.

   STATEMENT OF WILLIAM YANKOVICH, GENERAL CABLE, ALTOONA, PA

    Mr. Yankovich. Thank you. Good morning, Mr. Chairman and 
Congressman Shuster. My name is Bill Yankovich and I serve as 
General Cable's manager of our manufacturing facility in 
Altoona, Pennsylvania. We are a Fortune 1000 company that is a 
leading global developer and manufacturer in the wire and cable 
industry. Our industry is estimated to have had $58 billion in 
sales in 2002. We sell over 11,500 cooper, aluminum, and fiber 
optic wire and cable products. We believe this represents the 
most diversified product line of any U.S. manufacturer. We 
manufacture our product lines in 28 facilities and sell our 
products worldwide through operations in North America, Europe, 
and Oceania. We employ some 6,000 employees worldwide, most of 
whom are employed in the U.S., and approximately 75 percent of 
our sales are in North America.
    Our operations are divided into three main segments: 
energy, industrial and specialty, and communications. Our 
energy cable products include low, medium, and high voltage 
power distribution and power transmission products for overhead 
and buried applications. Our industrial and specialty wire and 
cable products conduct electrical current for industrial, 
commercial, and residential power and control applications. Our 
communications wire and cable products transmit low voltage 
signals for voice, data, video, and control applications.
    I appreciate the opportunity to appear before you today to 
discuss issues impacting the competitiveness of U.S. 
manufacturers. I also appreciate, Mr. Chairman, your leadership 
in highlighting the need for a strong manufacturing base in the 
United States. We agree with you that we cannot have a 
prosperous economy and rising standards of living for all 
Americans without a vigorous manufacturing sector. U.S. 
manufacturers have and will continue to lead the way in 
innovation, productivity, and international trade. The current 
early stage of economic recovery is encouraging, although, our 
industry still has very substantial excess manufacturing 
capacity and pressures which constrain our growth and 
productivity. There is no question that we will still need 
policies that help reduce business costs in today's 
internationally competitive environment.
    The areas I would like to focus on in my testimony today 
include: (1) The importance of certainty and permanence in the 
tax code; (2) The vital need for passage of the energy bill; 
and (3) The impact of steel tariffs on our industry.
    First, the tax code. In 2001, and again in 2003, Congress 
recognized the importance of broad based tax relief to 
stimulate economic growth and job creation. The tax cuts of 
2001 and 2003 have provided more certainty in tax policy as 
well as spurring an economic recovery that has the potential to 
stimulate business investment and job creation. We particularly 
appreciate the additional depreciation allowance in this years 
bill that will provide powerful incentives for business 
investment in all electrical products.
    However, if tax cuts are temporary, as is the depreciation 
allowance, that may weaken the positive effect that changes 
could have on economic growth. It is just common sense. If 
Congress makes tax relief permanent, individuals and businesses 
are able to make long-term investments and spending plans that 
grow the economy and jobs
    as well as our industry.
    Temporary tax breaks can result in erratic investment 
cycles that are dependent upon government action rather than 
sound business calculations. For example, temporary tax breaks 
might cause firms to buy equipment sooner rather than later, 
but then such investment might dry up when the tax break ended. 
Companies, quite rationally, would delay buying equipment until 
the next economic downturn when they might expect another tax 
break. Instead of a reactive, constantly changing tax policy, 
we support the Administration's efforts to provide a more 
certain investment and job friendly tax environment. Locking in 
the lower tax rates will ensure that the economic benefit of 
the 2001 and 2003 tax changes is sustained.
    Next, the energy bill. A national energy policy is 
essential to ensuring sustainable economic growth in 
manufacturing and our industry. After 39 months of job losses 
in the manufacturing sector, the economy is finally starting to 
recover, but we still see soft conditions in our industry. In 
addition, high energy costs continue to be a drag on the 
economy and particularly on our industry. The failure to pass 
an energy bill prevents our company from contributing to a 
better energy transmission and distribution system and limits 
our ability to benefit from better energy policy.
    The energy bill was perhaps the most important measure for 
our industry this year. According to a survey by the National 
Association of Manufacturers, 92 percent of small and medium 
sized manufacturers support passage of this comprehensive 
energy legislation.
    One-third of our business is in energy cables that we sell 
to utilities. After last summer's significant power outages in 
the U.S., Canada, and Europe, we are all well aware of the need 
to upgrade the power transmission infrastructure used by 
electric utilities throughout the Country.
    One of our largest customers serves the New York City area. 
The energy bill had essential provisions regarding electrical 
grid reliability designed to avoid the type of blackouts we 
experienced last summer. The energy bill included much needed 
mandatory and enforceable transmission reliability standards. 
Currently, compliance with reliability standards is voluntary 
and utilities may fail to make investments that are required to 
assure a robust electric grid.
    In addition, since America's manufacturing sector uses 
about one-third of all energy consumed in the U.S., the 
manufacturing sector itself is vitally depending upon 
affordable and reliable energy. At a time when we are facing 
relentless global competition, we need to find ways to reduce 
domestic costs for business. Lower energy costs are essential 
for global competitiveness in our industry as well as our 
entire economy.
    Every minute that Congress fails to pass this essential 
legislation is costing us jobs and revenue in the manufacturing 
sector, as well as costing your constituents. Mr. Chairman and 
Congressman Shuster, we appreciate your support for the energy 
bill. Any opportunity to pass this bill in your remaining days 
in session next week or early next session would provide our 
industry with the best tools to contribute to a continued 
economic recovery. The energy bill will ensure the development 
of a more reliable energy supply and, in turn, drive economic 
growth and potentially create jobs.
    Steel Tariffs. The imposition of tariffs on foreign steel 
has had a detrimental effect on our industry and our 
competitiveness. We use steel, among many ways, in making 
aluminum wire and cable products that we sell to utilities. 
Therefore, tariffs affect the cost of acquisition of raw 
materials. In today's economy, we simply cannot pass these 
higher prices along to consumers. As you know, a September 2003 
report from the International Trade Commission found the steel 
tariffs cost American steel-consuming businesses $680 million 
in lost capital and jobs to date. As you have noted, Mr. 
Chairman, for every job in the U.S. steel industry, 59 jobs 
exist in American steel-consuming industries that are 
threatened by the steel tariffs. Therefore, we appreciate and 
support your position, Mr. Chairman, that the President should 
rescind the steel tariffs by the end of the year. The National 
Electrical Manufacturers Association has also supported this 
position.
    In conclusion, our industry, along with others in the 
manufacturing sector, faces unprecedented challenges in order 
to remain competitive in the international economy. However, 
with good and consistent tax, energy, and trade policies that 
allow us to make sound, long-term decisions, we will rise to 
meet these challenges. Thank you, Mr. Chairman and Congressman 
Shuster, for this opportunity to assist you in discussing 
issues affecting competitiveness in manufacturing.
    [Mr. Yankovich's statement may be found in the appendix.]
    Mr. Shuster. Thank you for your testimony, and I believe 
the Chairman and I both note that I think we have heard that 
the President is going to rescind the steer tariffs. He is 
going to be in Pittsburgh, I think this week, and I think they 
have come down--don't hold me to that, but I think that is what 
your belief is also, Mr. Chairman?
    Chairman Manzullo. That is the story.
    Mr. Shuster. That is what I thought, so that looks like 
that is going to happen. As I mentioned, the energy bill is 
stymied in the Senate and couldn't guess what they are going to 
do over there. That is always the $64,000 question.
    Chairman Manzullo. I will defer to you for questions, but I 
have got one--New Pig--where did you get that name?
    Mr. Shuster. Did you bring him a hat?
    Mr. Stapelfeld. No, but I will see that he gets one. We are 
New Pig because there is a farmer in Lancaster that is already 
the Pig Corporation, and since he was before us, we had to 
become New Pig. But actually, the name refers to the first 
product that we ever made was called a pig absorbent sock, and 
the sock kind of lays down in grease and oil just like a pig 
does in mud. That is where it came from.
    Chairman Manzullo. All right.
    Mr. Shuster. An interesting company, a great success story. 
The first question is a real broad question, and I think what I 
hear is, what I typically hear as I travel around the District 
or in Washington listening to business, it is basically to the 
Federal Government, get out of our way, stop taking our money, 
stop over-regulating us and let us do our job. And the second 
point is where the Federal Government can be helpful in trade 
and those things, that is where the Federal Government ought to 
be. They ought to be doing those types of things, negotiating 
those trade agreements.
    And each of you had--some of you had a longer list of 
recommendations, but if you can just go down through the list 
here, two things that the Federal Government can do to help 
your businesses, or in your view, help business in America, 
what would be those two things that you would say, number one, 
number two. If you just want to kind of take a shot--anybody?
    Mr. McLanahan. Just picking up on some of the testimony by 
others, not particularly mine, but the accelerated 
depreciation. I think it could be targeted and focused in a way 
that would help American business. It should not be something 
that is available to foreign country manufacturers. It should 
be available only for U.S. produced goods. And this would 
foster a buy American program and also foreign investment in 
businesses in this Country, developing their own businesses 
here, which would create manufacturing jobs. I think it is a 
shame that we are giving tax credits, basically, to foreign 
companies producing products that are shipped into this 
Country. That is one of the reasons why that when the Bush tax 
reduction plan went into effect, it didn't have the immediate 
boost to our economy that was anticipated. So it needs to be 
targeted and focused in that way. Thank you.
    Mr. Shuster. Thank you.
    Chairman Manzullo. Let me address that. In an attempt to 
cure the foreign sales corporation extra territorial income tax 
problem that we had with the WTO, I introduced a bill that 
would solve the problem. The problem was caused by you can't 
have a policy whereby you have--it is cheaper on income tax to 
export than it is for domestic consumption. So we introduced a 
bill that was very simple, and that is if you manufacture in 
the United States, you can receive up to a 10 percent decrease 
in corporate income tax. That also would apply to pass-throughs 
such as LLC's, partnerships, sub-S, and proprietorships. And we 
ran into a big fight with people that wanted to make--wanted to 
have an international tax cut which would actually encourage 
American manufacturers to leave this Country, set up shop in 
China, manufacture their cheap stuff there, and then ship it 
back here, and thereby, that would lower the cost of their 
production for those imports.
    So that came to a fight, and I spearheaded the fight on 
that, and we stopped that legislation at least for now. So we 
will pick it up again in January, but it is precisely what you 
are talking about, is rewarding American manufacturers for 
staying here.
    Mr. McLanahan. Absolutely.
    Mr. Shuster. Thank you. Anybody else want to take a crack 
at that, one or two things that you would like to see the 
Federal Government--I know there was a number of suggestions 
made, but does it boil down to one or two things that you would 
like to see the Federal Government act on? Does anybody have a 
comment on that? It seems to me the tax policy is an area there 
was some--when you start talking about tariffs, I think it gets 
to be very difficult to impose any kind of tariff on it because 
then it just--well, just for the steel tariffs, a perfect 
example. The European Union is going to come back at us and 
target very specifically--I think, one of the things they were 
going to do was Harley Davidson Motorcycles because it was 
produced in Pennsylvania. They went to a couple of the states 
and found industries that they could attack there. So when you 
start talking about tariffs, I don't believe that is the 
answer, but I think through tax policy, through trade policy--
we were sitting here talking about, I think somebody mentioned 
about environmental regulation four or five years, or seven 
years ago maybe it is now, the Kiota Treaty that was hailed by 
so many not in this Country. Fortunately, we didn't--the Senate 
didn't ratify that treaty, but what it did was punish the 
industrialized nations and raised their standard of 
environment, their environmental standards higher, and let 
these countries that were competing----.
    Chairman Manzullo. Except China and Mexico.
    Mr. Shuster. Exactly, so that where we should be starting 
with them first, raising their standards, they can't overnight 
get to our standard, but we certainly can push them to over a 
period of time get to where we are so that we do have a level 
playing field. There were a couple of questions specific that I 
had. Tim, if you would put your banker's hat on for a second, 
as far as capital for new startups if a manufacturer, some 
young entrepreneur wanted to start in manufacturing, how 
difficult would it be for him to go to the bank and get a loan, 
and also, maybe through the equity markets, how difficult is 
that for----.
    Mr. Sissler. I think it is much more difficult now than it 
was--I think I see some contraction in the Small Business 
Administration, as an example, some cutting back. The SBA has 
always been a good way to help those startup companies get 
going. And I know we are losing our regional office in 
Pittsburgh, which was the closest, and some of those things, I 
think are happening. I think there is still money available out 
there, but I think the venture capitalist type piece of it, the 
risk part of it with the market and everything being the way it 
has been, it is tougher to get money now. It is tougher for 
startups.
    Mr. Shuster. Is that through debt financing or is it 
through the equity markets?
    Mr. Sissler. The equity right now, you know, the return on 
your equity is so low, I think more people probably would take 
a chance if there were ways you could get to a capital market 
for a small businessman, but the SBA-504 is an example of that. 
That is a way you can get out and raise some money that way. I 
know ABCD has done a great job of acting as a conduit, doing 
some of those type of things. So I think, yes, there are ways 
of doing that, but I don't know if they are promoted as much.
    Chairman Manzullo. We have done two things in the 
Reauthorization of Small Business Act, and it has a new name. 
It is called the Small Business Reauthorization and Manufacture 
and Revitalization Act. We are trying to reverse what the SBA 
is doing because they pride themselves on huge amounts of low 
dollar loans, and many of those low dollar loans can actually 
be achieved through home equity financing at much more 
competitive rates. Plus we have doubled the amount of money 
that is going to be available in the 504, say, for leverage up 
to $4 million on it, and that should help out manufacturing.
    Mr. Shuster. How do you also find dealing, in general, with 
the SBA, which you have dealt with them for years?
    Mr. Sissler. Well, historically, having the regional office 
in Pittsburgh was very good. I don't know how it is going to be 
now as that thing gets downsized. Anytime you get further away 
from the source point, the more difficult it is.
    Mr. Shuster. Right.
    Mr. Sissler. And I don't know--I guess, probably, scaling 
down, and economies of scale, was there a rationale for doing 
it? But we have actually had a satellite operating through ABCD 
here, you know, where the people from Pittsburgh actually came 
into this market, and that helped us tremendously having that. 
I am hoping that is something that can continue.
    Mr. Shuster. And generally, your experience with them has 
been pleasant?
    Mr. Sissler. Oh, it has been pleasant, yes.
    Mr. Shuster. And I know from the Committee, we get people 
from other parts of the Country, hear horror stories on how 
difficult they are to deal with in some places of the Country. 
And it has always been my experience directly----.
    Chairman Manzullo. It all depends upon how it is--it 
depends on what the banks do in terms of how they leverage 
those loans.
    Mr. Sissler. And I think a lot of it has to do with the 
personnel, too. If you have the right people that understand 
the programs at both ends of the transaction, the SBA people, 
and the local conduit, and the banks, it is--I think, locally, 
we have been very fortunate. All of the financial institutions 
here have a pretty good understanding of how those programs 
work. And we have a great conduit through ABCD to work those 
things.
    Mr. Shuster. That is a great segue into my next question 
about workforce. Ed, you mentioned about when you talked to 
those 750 CEO's, you had said workforce issues. I mean, I can 
think of several, but is it something specific or is that just 
from a broad brush?
    Mr. Silvetti. You know, generally, you know, training 
incumbent workers, those that are already working, I think it 
was Mr. Showalter who mentioned that he would support, and I 
would too, a tax credit for training incumbent workers. He also 
mentioned that is what industry does, that is what businesses 
do, they train their workers, and I agree with that. I think a 
program like the Federal Workforce Investment Act is good at 
dealing with individuals who are not in the workforce. It is 
very good dealing with individuals who have lost their jobs. I 
think what it doesn't address very well is the training of 
incumbent workers. And so in that regard, as Mr. Showalter 
suggested, I think we would support--I know we would support 
some sort of tax credit that would go to manufacturers, to 
businesses, who would train their incumbent workers in new 
skill sets so that they can remain competitive.
    Mr. Shuster. And how is your--you administer the federal 
funds for workforce training?
    Mr. Silvetti. Yes, we do.
    Mr. Shuster. And how has your interaction been with those 
federal agencies that you have to deal with?
    Mr. Silvetti. I think pretty positive--I mean, 
understanding that the Federal Workforce Investment Act 
administered through the Commonwealth's Department of Labor and 
Industry is, by its nature, pretty bureaucratic. And it does 
have a whole set of strict guidelines. That is why I mentioned 
in my testimony the issue of incumbent worker training. There 
are stipulations in that Act that require individuals who 
access training funds as incumbent workers that their wages 
must rise a significant amount within a short period of time, 
within six months. That is impossible, I think, to require a 
business person, to require a manufacturer, to pretty much 
guarantee that they are going to raise the wages of those 
employees who receive training funds. That is nonsense in our 
opinion, which is why I say I think a tax credit for industry 
to train their workers themselves is probably a better twist, 
at least in terms of incumbent worker training.
    Mr. Shuster. Didn't we pass the Workforce----.
    Chairman Manzullo. Yes, that did pass.
    Mr. Shuster. It was passed in the House. I don't know if it 
is stalled in the Senate.
    Chairman Manzullo. It is in the Senate, yes. Everything 
stalls in the Senate.
    Mr. Shuster. And I think we put in there--you had mentioned 
about making it easier or taking some of the restrictions off. 
I think we tried to do that in the Workforce Investment Act, 
but once again, it is over in the Senate, this black hole.
    Mr. Silvetti. Yes. That flexibility is so important. I know 
that the original Act passed in '98 had some flexibility built 
in, but all it really said, in essence, was that you can go 
ahead and do certain things that are innovative, however, you 
know, if in the analysis you don't meet certain benchmarks, 
then you end up being penalized in terms of the amount of money 
available to do these sorts of things.
    Mr. Shuster. Another question I had on export, any 
specifics--I know, Ben, you said you are exporting. Mike, you 
export. Is there any specific cases that you run across in 
difficulties with certain companies--I think it was Appleton, 
you had an unnamed Asian company that you dealt with. I 
wondered if you would let us know what country that is or 
specific things that you come across in trying to export, 
trying to sell your products in other countries?
    Mr. Stapelfeld. I don't think our government makes it any 
harder for us to export than I see other countries trying to do 
the same here. Obviously, when the Foreign Sales Corp bit the 
dust last year, that made things tougher. That was a benefit, 
and with that gone, it sounds like we are beating the same 
drum. It goes back to what are you going to do about taxes, the 
tax policy. That was one that was very helpful from an 
exporting standpoint. If you are able to address that--it seems 
what is so difficult for you is that anytime you change 
something, you run into the World Trade Organization and how 
they view what you do.
    Mr. Shuster. All right. Anybody else care to talk about any 
specific----.
    Mr. McLanahan. I don't find any particular problems with 
exporting at this point. Our shipments to China are done very 
simply. Surprisingly enough, the Chinese coal mining industry 
has a preference for American made products. They are going to 
use them to develop their own industry, certainly, and improve 
their coal mines. So we have no impediments to shipping into 
that country at this point. The only problems that we encounter 
are metrification. We have to metrify our equipment, which 
takes changes in drawings and fasteners and things of that 
sort, and our Country lags that by a considerable amount. It 
was supposed to be implemented back in the '90s and it never 
happened for political reasons. So we are out of step with the 
rest of the world from that standpoint.
    Mr. Shuster. Do you have any concerns that the Chinese, for 
instance, are going to steal your intellectual property rights 
on those----.
    Mr. McLanahan. Oh, certainly. That is a risk that we all 
run whenever we do business in China. There is no intellectual 
property laws that protect us, but we are willing to take that 
risk to create jobs here in this Country.
    Mr. Shuster. All right. Do you have any other questions, 
Mr. Chairman?
    Chairman Manzullo. I have just got a couple of questions 
here. I guess I am intrigued by Mr. Stapelfeld's testimony is 
that he really wants to be left alone, doesn't want any 
government help and research. And I agree with that basic 
philosophy, because you would just rather have a tax cut as 
opposed to a bunch of bureaucrats in there trying to tell you 
how to retrain your people. In exchange for it, you keep 
bureaus and departments and everything going. But the question 
I wanted to ask you has to deal with this--was it your 
testimony that talked about this unnamed Asian?
    Mr. Stapelfeld. No.
    Chairman Manzullo. Was this yours, Appleton's? You know, 
there are some remedies out there that are available. In the 
years chairing the WTO accord, there is Section 421 safeguards, 
which means as a result of China coming into the WTO in 
December 2001, there has been a huge surge in a particular 
commodity. Then you would have standing to file a complaint 
with the International Trade Commission. At least your company 
alone, or you join in with different organizations. There was 
just a ruling by the textile industry. There was a 421 action 
in the WTO that resulted in huge imports on Chinese braziers, 
and that is what it is. They found out there was dumping going 
on in this Country in just unusual amounts. And we can get 
relief under there. And because it is adjudicated by the 
International Trade Commission, it has a better opportunity to 
withstand the strictures of the WTO.
    There is also Section 301 of the Trade Act. We got 
involved--Congressman Phil Anderson and I got involved with 13 
Chinese companies that were dumping rotors and brake parts. He 
has a facility for brake parts, I think, in his Congressional 
District, and I do in McHenry, Illinois. We were able to get an 
ATC ruling interposing extreme restrictive tariffs 
retroactively because the Chinese companies were dumping in one 
of those areas. But it is like the mole game. We hit one 
company and then somebody else comes over there and they start 
selling the thing under them.
    But there has been within the last two weeks retaliatory 
tariffs imposed on Chinese television sets. Believe it or not, 
we still manufacture some here. There is a place, I believe, in 
Mississippi, that has 1,200 employees, plus several Japanese 
firms, I think three, do some assembly in the United States. So 
we have to--when we are talking about fair trade, there are 
those tools, but its expense, we have to join in with like 
industries, or as with the tool and die folks--the molders, 
rather, they brought an action, an inquiry action, simply by 
asking the Ways and Means Committee to start an inquiry and the 
International Trade Commission got involved in that.
    So there are all kinds of things that are going on. What I 
would be intrigued--what I am intrigued with is this Asian 
company. If you have a way to verify that they are, in fact, 
sequestering land without compensation, and taking trees from 
that, if you would put a statement like that on your 
letterhead, get that to Congressman Shuster, we can get the 
International Trade Commission to start investigating that. 
Because what we have found is that when you deal with the 
Chinese, you have to be very vocal, very loud, and very visible 
on it. I am the Chairman of the American Chinese Parliamentary 
Exchange. I have been there three times, worked very closely 
with the Chinese Embassy almost on a weekly basis, dealing with 
sensitive issues like this, and I can tell you when something 
like this comes up, they are extremely sensitive, and sometimes 
you get a change in policy.
    Mr. Showalter. This is in Indonesia.
    Chairman Manzullo. It is in Indonesia? We had Blade 
Products that was in my district. They had sold three of those 
giant paper making machines to Indonesia on an XM loan. You 
know what happened there. When the government went down the 
tubes on it, they didn't take out risk insurance, and the 
company went bankrupt because of that. But we would be wiling 
to work with you on that. Get the letter to Congressman 
Shuster. The letter should be self--don't send a book, you 
know. Just a couple of pages that outlines the issue and that 
is enough to get the inquiry started.
    Mr. Showalter. Okay. I appreciate that. Thank you.
    Mr. Sissler. Congressman Shuster?
    Mr. Shuster. Yes.
    Mr. Sissler. Just a follow-up to the question you asked, 
what could Federal Government do to help, I think one simple 
thing is just at your level ensure that we are buying American 
made products at the Federal Government level.
    Chairman Manzullo. Well, that is the Buy American Act. It 
does apply to--it applies across the board. Unfortunately, it 
has been interpreted to be only 50.1 percent, and we succeeded 
in getting that increased from 50 to 65 percent for materials 
that are bought by the State Department and also with the Coast 
Guard. We found out that the Coast Guard in reconstructing some 
bridges, if one cent of state or local money was incorporated 
into federal money, they took the view that the Buy American 
Act did not apply and they were bringing in Japanese and Korean 
steel. And so I introduced an amendment on that, Congressman 
Shuster supported that, which now mandates that whenever you 
build a bridge in the United States, it has to be with U.S. 
steel, period, or you don't build it.
    Those are the types of things that we can do. That does not 
impact the competitiveness such as with the steel tariff, but 
it says when the U.S. Government uses U.S. taxpayer dollars to 
build a U.S. product, at that point it should be with U.S. 
materials, because that makes it possible for the workers there 
to pay taxes in order to have the procurement going in the 
first place on it.
    Mr. Shuster. I was involved in a heck of a fight last year 
with the New York City Metro Authority.
    Chairman Manzullo. Buses?
    Mr. Shuster. No, the trains. In Lewistown, Pennsylvania, 
Standard Steel--they changed their name now--they are the only 
manufacturer in the United States that makes wheels for transit 
subway cars in the United States, and there is a French or a 
German, and then a Brazilian company, and we just had the 
battle. They wanted to buy a Brazilian wheel, which they were 
clearly dumping. They were $500 below cost. They did it one 
year, and then the next year they got some business that year 
and raised it. But we had a heck of a fight trying to--and they 
eventually bought the wheels, U.S. made wheels. But you have 
that kind of stuff going on, dumping, and the New York City 
Transit Authority gets millions, probably billions of federal 
dollars, to help run that system.
    Does anybody have anything else they would like to add 
before I have just one closing? Mr. Chairman? I appreciate 
everybody coming here today. This is extremely helpful. I 
believe that tax policy is the main vehicle where we can help 
business in this Country. I should say less tax policy, 
allowing businesses and individuals keeping more of their 
money, deciding how to spend it. They do that much better than 
the government.
    But I also believe, as I said earlier, I don't think there 
is such a thing as free trade anymore in the world, except if 
you decide you are going to buy from a Wal-Mart in Blair County 
versus the Wal-Mart in Bedford County. That is the only place 
you don't have to come up against a tariff or some kind of 
regulation. But we need to make sure that the Federal 
Government, that our trade representative is out there fighting 
hard to make sure that it is fair trade, and we will address 
that quickly. I think we have let it lag for far, far too long.
    But I believe here, locally, in the central Pennsylvania, I 
think there are great opportunities for us in the future 
working with the corridor that we have here, working with Penn 
State and some of the things that they are trying to develop, 
and what you gentlemen and your companies provided. So that is 
taking all of us working together, making sure that we are 
doing all the right things, not only from the federal level 
but, of course, state and local, make sure we are all pulling 
that wagon in the same direction. And I think because of our 
location in the United States, we have a great opportunity here 
in the future. I think was it ABC that had--one time your 
slogan, ``Close enough to, but far enough way''. I mean, we see 
Washington, D.C. and Baltimore growing this way, Philadelphia 
and Pittsburgh--we are in a great location to take advantage of 
a lot of the opportunities that are going to come our way.
    Once again, I want to thank you for being here today, and 
if there is anything else you want to add to the record, feel 
free to do that. And one other point that I learned this 
morning at a breakfast. There is a company in Bedford that 
produces something that possibly, probably, can be used in 
Iraq, for the reconstruction of Iraq. So if there is any--if 
you have a product that you want to try to get into that mix in 
Iraq, the rebuilding of Iraq, or anywhere else that the Federal 
Government buys your product, feel free to contact our office. 
That is part of what we try to do is hook you up with the right 
government agency, or in this case, the right government agency 
in Iraq, to try to promote and sell your product over there.
    So with that, I will go back to the Chairman.
    Chairman Manzullo. Well, I just want to thank you all for 
coming. I want to thank you for sending a superb Congressman to 
Washington. Congressman Shuster has been a tremendous source of 
knowledge on the Small Business Committee, a faithful attendee, 
and he really has the intentions of the Small Business 
Community at heart. I can tell you that personally. I have had 
the pleasure to serve with two Congressman Shuster's. I was 
elected in November of 1992, and this is my first trip to 
Altoona, and your dad told me, because I love trains so much, 
is it the train museum that is here?
    Mr. Shuster. Yes. The famous horseshoe car.
    Chairman Manzullo. But I don't have an opportunity to see 
it, so I am going to come back again to see that train museum.
    Mr. Shuster. Well, we will welcome you back anytime and I 
appreciate you coming. I appreciate your leadership and your 
energy, running the Committee the way you do.
    Chairman Manzullo. Well, I appreciate it here. Why don't 
you go ahead and adjourn the Committee.
    Mr. Shuster. And the hearing is adjourned.
    [Whereupon, at 11:46 a.m., the Committee was adjourned.]
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