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



                                                       S. Hrg. 102-000 

         INCREASING THE COMPETITIVENESS OF U.S. MANUFACTURERS

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

                             FIELD HEARING

                               before the

            SUBCOMMITTEE ON REGULATORY REFORM AND OVERSIGHT

                                 of the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                   SPARTANBURG, SC, NOVEMBER 17, 2003

                               __________

                           Serial No. 108-45

                               __________

         Printed for the use of the Committee on Small Business


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
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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           ENI FALEOMAVAEGA, American Samoa
SAM GRAVES, Missouri                 DONNA CHRISTENSEN, Virgin Islands
EDWARD SCHROCK, Virginia             DANNY DAVIS, Illinois
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               BRAD MILLER, North Carolina
STEVE KING, Iowa                     [VACANCY]
THADDEUS McCOTTER, Michigan

                  J. Matthew Szymanski, Chief of Staff

                     Phil Eskeland, Policy Director

                  Michael Day, Minority Staff Director

            SUBCOMMITTEE ON REGULATORY REFORM AND OVERSIGHT

EDWARD SCHROCK, Virginia, Chairman   [RANKING MEMBER IS VACANT]
ROSCOE BARTLETT, Maryland            DONNA CHRISTENSEN, Virgin Islands
SUE KELLY, New York                  ENI F. H. FALEOMAVAEGA, American 
TRENT FRANKS, Arizona                Samoa
JEB BRADLEY, New Hampshire           ANIBAL ACEVEDO-VILA, Puerto Rico
STEVE KING, Iowa                     ED CASE, Hawaii
THADDEUS McCOTTER, Michigan          DENISE MAJETTE, Georgia

              Rosario Palmieri, Senior Professional Staff

                                  (ii)
?

                            C O N T E N T S

                              ----------                              

                               Witnesses

                                                                   Page
Aldonas, Hon. Grant, Undersecretary for International Trade, 
  Department of Commerce.........................................     3
Young, Mr. Daniel, CecD, Managing Director, Business Development 
  Division, South Carolina Department of Commerce................     8
Eisen, Ms. Phyllis, Vice President, Manufacturing Institute, 
  National Association of Manufacturers..........................    17
League, Ms. Barbara, Corporate Secretary, League Manufacturing, 
  Greenville, SC.................................................    19
Moore, Ms. Deborah, Spartanburg Technical College, Spartanburg, 
  SC.............................................................    22

                                Appendix

Opening statements:
    Schrock, Hon. Edward L.......................................    29
Prepared statements:
    Aldonas, Hon. Grant, Undersecretary for International Trade, 
      Department of Commerce.....................................    30
    Young, Mr. Daniel, CecD, Managing Director, Business 
      Development Division, South Carolina Department of Commerce    44
    Eisen, Ms. Phyllis, Vice President, Manufacturing Institute, 
      National Association of Manufacturers......................    49
    League, Ms. Barbara, Corporate Secretary, League 
      Manufacturing, Greenville, SC..............................    53
    Moore, Ms. Deborah, Spartanburg Technical College, 
      Spartanburg, SC............................................    55

                                 (iii)
      


 
          INCREASING THE COMPETITIVENESS OF U.S. MANUFACTURERS

                              ----------                              


                       MONDAY, NOVEMBER 17, 2003

                   House of Representatives
    Subcommittee on Regulatory Reform and Oversight
                                Committee on Small Business
                                                     Washington, DC
    The Committee met, pursuant to call, at 9:36 a.m., at the 
Spartanburg Technical College, Spartanburg, South Carolina, 
Hon. Edward L. Schrock [Chairman of the Subcommittee] 
presiding.
    Present: Representatives Schrock and DeMint.
    Chairman Schrock. Let me call this hearing to order. Let me 
introduce myself. I am Congressman Ed Schrock, I am privileged 
to represent the Second Congressional District of Virginia, and 
I am here in South Carolina where there is a soft place in my 
heart. The first place my wife and I lived after we were 
married was Charleston. So that is real special to us, and I 
can even tell you where, it was 1551 Highway 7, Apartment 202--
so that is how important is was to me and how much I remember. 
So it is really nice being back here, especially with my friend 
Jim DeMint, and I really look forward to this hearing this 
morning.
    Jim is an absolutely fantastic advocate for small business 
and I can tell you the people of the Fourth District of South 
Carolina are truly blessed to have him representing them in 
Washington.
    In my role as Chairman of the Subcommittee on Regulatory 
Reform and Oversight of the Small Business Committee, I often 
hear from small manufacturers on what it takes to increase the 
competitiveness of U.S. industry.
    Jim has told me what an amazing group of entrepreneurs and 
community leaders reside in this district. I am anxious to hear 
from those witnesses today and I want to thank Jim for making 
this event possible today.
    Manufacturers in this country face the same problems as 
many other small businesses--high energy prices, the high cost 
of health insurance for employees, high cost of regulatory 
compliance, and a tax code that is not always helpful to them--
usually not ever helpful to them.
    It is incumbent upon Congress and the President to do 
everything in our power to remove the barriers to manufacturers 
success and survival. Jim and I are working on many initiatives 
to do just exactly that. We are working on tax relief for 
domestic manufacturers, we have passed bills to provide 
association health plans and health savings accounts and our 
committee is working to reauthorize the Small Business 
Administration in a way to make it more helpful to small 
manufacturers by raising loan limits and encouraging government 
agencies to buy more goods from them.
    With that, Jim, thank you again for bringing us here and I 
will turn it over to you to introduce our witnesses today.
    Mr. DeMint. Thank you, Congressman. I would like to thank 
all of you for being here, particularly you, Congressman 
Schrock. The Chairman of the Subcommittee is traveling with us 
today.
    I particularly enjoy working with the Congressman on the 
Small Business Committee and I appreciate his leadership, 
particularly as it relates to regulatory reform and oversight.
    I would like to also thank Spartanburg Technical College 
for hosting us in this brand new community room. This is a 
world class facility here, a real resource to Spartanburg, to 
job creation, and I thank you all for allowing us to be here.
    I am convinced that American manufacturers stand at a 
crossroads today. Faced with international competition, the 
burdensome regulations that the Congressman has already 
mentioned, consistent fear of litigation, it is no wonder that 
this country and our manufacturing sector is facing difficult 
times.
    We are here today to identify those issues which are 
proving most troublesome to manufacturers in the U.S. More 
importantly, we are here to talk about solutions. I firmly 
believe that there are steps that we in Congress can take to 
reduce regulatory burdens, to boost the number of skilled 
employees in the workforce and to improve the business climate 
in America for our manufacturers.
    While it is important to look at our trading partners and 
our trade agreements, to ensure that they are being enforced, I 
believe there is ample room for improvement right here at home 
in the policies of the United States government towards 
domestic manufacturers.
    I would like to thank all of our witnesses for being here 
today, especially those who have traveled long distances to be 
here. I am eager to hear your testimony and I am looking 
forward to hearing from you about what is working, what is not 
working and what we can do to make our manufacturers more 
competitive.
    I would like to introduce our first panel beginning with 
Grant Aldonas. He is our first witness today. We have worked 
very closely together on a lot of issues and I appreciate his 
attention to our office, he has been in our office a number of 
times working on trade issues and trade enforcement.
    Mr. Aldonas is the Undersecretary for the International 
Trade Administration of the United States Department of 
Commerce. And if the rule that the longer your title, the less 
you get paid applies, you are in a heap of trouble, Mr. 
Aldonas.
    Mr. Aldonas. Certainly on a per hour basis.
    [Laughter.)
    Mr. DeMint. Mr. Aldonas serves as Secretary Evans chief 
advisor on international trade issues. Previously he worked 
with the Chief International Trade Counsel, to the Chairman of 
the Senate Finance Committee. Mr. Aldonas has also worked in a 
private law practice and served in positions in the Office of 
the United States Trade Representative and of the State 
Department.
    So Mr. Aldonas, thank you for being here.
    I would also introduce Daniel Young. Mr. Young is the 
Managing Director of the Business Development Division for 
South Carolina Department of Commerce. In his position, Mr. 
Young and his staff provide industrial prospects information on 
the strategic advantages of locating in South Carolina. Since 
1989, Mr. Young worked with the South Carolina Department of 
Commerce in different capacities related to research and 
economic development. He is a recognized authority on state tax 
incentives in South Carolina and I certainly appreciate you 
being here to share your insight.
    Mr. Young. Thank you, Congressman.
    Mr. DeMint. Mr. Aldonas, we will start with your testimony.

 STATEMENT OF THE HONORABLE GRANT ALDONAS, U.S. DEPARTMENT OF 
                            COMMERCE

    Mr. Aldonas. Thank you, Congressman.
    Chairman Schrock. Let me just make one quick comment. 
Because we all have planes to catch, we will ask that you keep 
your opening statements, if you can, to five minutes. At that 
point, the trap door that was installed this morning will open 
and down you will go.
    [Laughter.]
    Chairman Schrock. So if you can try to do that.
    Mr. Aldonas. Definitely will. Thank you, Mr. Chairman; 
thank you, Congressman DeMint. Thank you for giving me the 
opportunity to participate in the hearing as well as being on 
the panel with Dan.
    I want to discuss the Bush Administration's plan to boost 
jobs and help domestic manufacturers. This administration 
appreciates both of your leadership in raising the concerns of 
Virginia and South Carolina manufacturers with the highest 
levels and making folks in Washington understand the challenges 
that industry is facing. In that role, I know you both helped 
in shaping the President's Manufacturing Initiative and I look 
forward to working with you and of course the Committee, which 
has done yeoman's service over time.
    I really want to compliment you both in terms of the effort 
on the reauthorization of Small Business Administration. It is 
a vital link. People oftentimes do not know that small 
companies like Intel and Microsoft started with Small Business 
Administration loans and it is an incubator for so much of what 
is important in small business in the United States. And I want 
to thank you both for your contribution on that side.
    I particularly would like to draw on both your experience 
in Virginia and South Carolina in the effort to attract 
investment. When I have been across the country over the last 
six to nine months meeting with manufacturers in 23 
roundtables, companies large and small, the ultimate question 
is how do we attract investment in the United States, how do we 
make sure that this is an attractive place to invest in 
manufacturing. And there are a number of factors that play into 
that. But both Virginia and South Carolina have an amazingly 
strong record of attracting investment, creating domestic 
investment as well as attracting foreign direct investment to 
your respective states. And I think there are lessons for us in 
the federal government as well as across the country in looking 
at the laboratories that both Virginia and South Carolina 
represent.
    I have been looking forward to today's hearing for another 
reason as well, because it offers me a chance to review some of 
the findings from the roundtable discussions we had with 
manufacturers and to talk a little bit about our trade 
relations and how that fits in the context of the overall 
effort to create and foster an economic environment in which 
manufacturing can succeed in the United States.
    In fact, Secretary Evans and I just returned from Beijing a 
week or so ago, where we did have a length conversation with 
Premier Wen and a number of the subsidiary officials about the 
trading relationship and made a fundamental point which I think 
we should all bear in mind. I think we all recognize that with 
China, they have, by moving in the direction of free market and 
leaving socialism behind in most respects, they have made a lot 
of progress over the last 20 years and lifted 300 million 
people out of poverty. On the other hand, they have 900 million 
left to go. And one of the things we need to be constantly 
aware of is the degree to which we are ensuring the playing 
field is level between ourselves and the Chinese so that they 
are not exporting their unemployment to our shores, as a 
practical matter.
    And because trade in goods, manufactured goods, makes up 
the largest volume, two-thirds of everything that is traded 
worldwide, you feel the pinch in manufacturing before you do in 
other sectors. And I think that explains a lot of what has been 
going on in U.S. manufacturing recently. And I will come back 
to that as I go through my testimony.
    I first wanted to lay out a little bit about the economic 
context that our manufacturers find themselves in. One of the 
most important things to understand is that manufacturing 
really does play a critical role. I worry that there is a bit 
of a crisis of neglect in the country about manufacturing, not 
understanding just the central role that it does play. It 
represents 14 percent of our GDP, 11 percent of our employment. 
But those numbers really do not reveal what the manufacturing 
sector does.
    As a practical matter, most of the innovation in our 
country begins with innovation inside the manufacturing sector. 
That innovation translates into higher productivity, not just 
in the manufacturing sector, but on farms. When I visited John 
Deere in Des Moines, I was fascinated to see what they were 
doing with new spindles, which you would think of as low tech 
manufacturing. It is actually a very high tech operation, it 
means that cotton farming across the country--Texas, California 
and the south--is much more efficient, much more productive and 
has made us world leaders in the export of cotton.
    What that means is you start in the manufacturing sector 
with innovations that really drive change throughout the 
economy in a positive direct and has always been our 
competitive edge in many respects. So we are always concerned 
about when you are at the tipping point, when you lose the 
benefit of that innovation that is key to raising our standard 
of living as we go forward toward our economic future.
    I also want to take issue though that many times I think 
people argue that American manufacturing is being hollowed out 
and the numbers belie that. We have the strongest manufacturing 
sector in the world. We are both the largest producer and the 
largest exporter of manufactured goods. I think I always 
surprise people when I tell them that our manufacturing sector 
standing alone would be the fifth largest economy in the world. 
It would be larger than the entire Chinese economy, as a 
practical matter.
    And it is good to keep in mind that what we have got out 
there in the United States are an enormously terrific bunch of 
people in the manufacturing sector who are excellent 
competitors. And that is really what makes us strong and will 
keep us strong, if we have the wisdom I guess to foster that. 
Some of the comments you were both making about what we needed 
to do in trade policy as well as keep our side of the street 
clean at home really go to the heart of whether or not we can 
foster manufacturing in this country.
    South Carolina's experience, I would say, Congressman 
DeMint, is instructive in terms of what you do to try and 
create that environment. In 2002, South Carolina saw $9.7 
billion in export sales, which was up 35 percent from the 1999 
level of $7.1 billion. What is interesting about that is 
through that period of 1999 to 2002, what South Carolina was 
doing was really working against the tide. The dollar was at an 
all time high since 1985, you had very slow growth in economies 
abroad, but you still had South Carolina exporters making good 
in a market that was very difficult for them to compete, by 
raising the volume of their exports. And so it is a real 
tribute to sort of the economic environment that has been 
fostered here in the state.
    Of course, those figures translate into jobs for South 
Carolinians as well as a higher standard of living throughout 
the state. And that is why manufacturing not only matters, but 
is worth fighting for. Although I think we are starting to see 
the economy turn around and after a very tough spot, the 
manufacturing sector is beginning to participate in the broader 
recovery, at 7.2 percent growth in the third quarter, an uptick 
in employment, certainly stronger growth in the manufacturing 
sector with industry's supply management figures showing not 
only good growth but prospects for future orders being up 
significantly. And so I think things are turning around.
    That should not give us any sense of complacency by the 
manufacturing sector. There are still some root problems that 
we have to grapple with. I think again, both some on our side 
of the street as well as some on the trade side. And that is 
what the President's Manufacturing Initiative is really 
designed to come to grips with. The manufacturing recession 
actually started earlier than the rest of the recession in the 
economy, it started early in 2000. And at that point, there had 
been significant pressure on pricing for a long time, 
particularly since the Asian financial crisis in 1997 and the 
dropoff in some of our major export markets. And what that has 
meant is not only a significant contraction in manufacturing in 
the recession, but also a sharp downturn in employment. 
Employment losses in manufacturing represented about 90 percent 
of all job losses during the recession and during the recovery.
    And I think what surprised all of us is the extent to which 
the economy has been growing since 2001 after the President's 
tax plan went into effect. You still have seen continuing job 
losses in manufacturing, there is tremendous pressure to raise 
productivity and reduce costs and that has had an impact on the 
ability of manufacturers to start the hiring process again. So 
while recessions are traditionally harsh on the manufacturing 
sector, normally in the post-war recessions, overall economic 
activity has dropped about two percent, whereas manufacturing 
has dropped about seven percent in those recessions. Here, you 
had a relatively mild recession, but manufacturing was still 
off by six percent. So this one has been extraordinarily harsh 
on the manufacturing sector.
    That reflects both some cyclical changes as a part of the 
business cycle as well as the more structural issues. And the 
structural issues, there is no mystery to them. I like to say 
that, you know, if you are serious about manufacturing, we have 
to get serious about things like tort reform, things like 
getting our energy costs down, things like getting our 
healthcare costs down, things like getting regulatory costs 
under control.
    If you ask many small businesses about what their current 
biggest problem is with our Tax Code, the will tell you it is 
the cost of compliance as much as it is the effective rate. 
They will take a look at things like the depreciation schedules 
under the alternative minimum tax, which is known in 
manufacturing sectors as the anti-manufacturing tax, and if you 
go through the mechanics of both what it costs a company 
because of those depreciation schedules and the fact that you 
effectively have to keep three sets of books in order to comply 
with the tax law. I remember when I was starting out as a young 
lawyer, when you were required to keep two sets of books, now 
as a practical matter to comply with the law, you have got to 
keep three. And there is a cost attached to that. We oftentimes 
do not think about the cost.
    I would say that what we have had--and this is not through 
any level of intent, I think we all understand that, but at all 
levels of government and in every branch--and I include the 
courts here--we have a tendency to make individual decisions 
without understanding the multiple burdens we have imposed on 
manufacturing as a part of the process. That is true of what we 
do inside administrations, both at the federal and state level 
with environmental regulation, energy regulation. It is also 
true with the courts when they make decisions in tort suits or 
allow asbestos class action litigation to go on for 20-30 years 
without compensating anybody and not resolving the cloud that 
hangs over business investment as a consequence of that.
    So there are an awful lot of things, as you were 
commenting, Congressman DeMint, that we could clean up on our 
side of the street. No doubt about it.
    Now, having said that, we do have some immediate and 
striking problems on the international front. And I would say 
this is both on the financial and on the trade side. For a long 
time, we used to have the luxury of thinking about these worlds 
of international monetary policy and trade policy as separate 
worlds. We started out after World War II with a fixed exchange 
rate regime. The trade policy part of it kind of functioned on 
its own. That has not existed since 1973. As a practical 
matter, things that happen in currency markets can dwarf 
anything that happens on the trade side. And I am happy to say 
that the President understands that. He has been willing, and 
Secretary Snow has been willing, really to confront many of our 
trading partners about the problems we face on the currency 
side, to make sure that they understand that it is economic 
fundamentals that drive currency rates, not government 
intervention.
    On the trade side, I have seen a number of the pieces of 
legislation that advocate things like across-the-board tariffs. 
Those things do not take into account the diversity of our own 
manufacturing base, the extent to which we are well integrated 
into the international economy and that we need to make sure 
that we stay integrated in the international economy to 
succeed, including in manufacturing.
    That said, there are places where we lack, and much of that 
comes down to whether or not we are willing to enforce our WTO 
rights and whether we are willing to be aggressive in the use 
of the trade remedy tools that we have available to us under 
the law. I am happy to say that I think the Administration has 
been aggressive on those fronts. I know, for example, China, 
which presents in many respects the biggest challenge that we 
are grappling with on the trade front, over half of the anti-
dumping cases in the Commerce Department are focused on China.
    And I do want to come back to China, because it does 
present something of a unique problem. But I never want to let 
anyone else off the hook. As a practical matter, the Japanese 
have intervened as heavily as the Chinese in terms of the 
currency market. That is a problem still for auto manufacturers 
20 years after this was a significant political issue.
    There are still a lot of inadequacies as far as I am 
concerned in the trading system, much of which we are trying to 
resolve in the current negotiations. For example, you know, 
throughout the post-war period, we always left a little more on 
the table because we wanted the system to move ahead. It was 
part and parcel of a process of making sure that the allies 
hung together in the cold war. But those days have passed too. 
And the fact that our tariffs are below two percent, whereas 
tariffs in much of the rest of the world are above 15, some 
places as high as 30 to 50, is simply unfair. The only way to 
do that, frankly, is to negotiate in the WTO and ensure that 
other people come down to our level and we can go to zero at 
that point. We can make sure that we clean this out and move 
toward what would represent free trade. But we are going to 
have to do that at the negotiating table. It is something where 
in the absence of the President's ability to go to the WTO and 
meet with our trading partners in these fora, we will not solve 
that problem for American manufacturers.
    With that, let me turn the China. China presents some 
unique problems. As I was alluding to earlier, I think over 20 
years, they have shifted away dramatically from a reliance on 
socialism. But we should not be under any illusion that that 
process is complete. This is still a non-market economy in many 
respects. I know here in South Carolina, it is true in Virginia 
as well, when I think about the textile industry, I have not 
heard a textile manufacturer say they were not willing to 
compete on a level playing field. But when I think about a 
Chinese industry that is still, you know, by conservative 
estimates, 50 percent state-owned, where those companies 
continue to be financed by state-owned banks, where the 
companies simply do not face the pressure to earn a profit, you 
have got a very different system at work than you do here in 
the United States. Not to put too fine a point on it, but, you 
know, for American companies, if you are a small manufacturer, 
your bank will pull your financing, your working capital now 
because they do not like the look of what is going on with your 
asset values. You might still have good solid cash flow, you 
have met every payment that you have made, the bank may still 
pull the loan, based on the covenants. That does not happen in 
China. And if they do not face the same capital market 
pressures, frankly the playing field is not level.
    So a lot of what we have been talking about with the 
Chinese recently is to bring them up short in terms of saying 
there is not only a system of laws in the WTO that you have to 
comply with and have not yet complied with, but beyond that, 
you have to understand that an international trading system, to 
be free, and for the Chinese to get the best benefit out of it 
as well as for us to get the best benefit out of it, it assumes 
certain things about the workings of the market. And until the 
reform process is complete in China, we will not actually have 
resolved the fundamental issue.
    So our pressure has been on them to fundamentally reform 
the sorts of things that are going on in their economy, whether 
it is on the currency side or whether it is on the trade side. 
Because until we are through that process of reform, we will 
see continuing friction in the trading relationship and we will 
see a demand from manufacturers, justified in my view, to use 
the trade remedy tools that are available to us to offset what 
is fundamentally different between our economy and the Chinese 
economy. Until the day when we are through that process, my 
guess is that we will continue to face those problems and have 
to work through those with the Chinese.
    I will say, to their credit, they are--every time we have 
met with the Chinese recently, they are willing to engage in a 
very frank and constructive conversation about what needs to be 
done. They are certainly dedicated to closing the trade deficit 
at this point. We have emphasized to them that one time 
purchases of Boeing aircraft or automobiles in Detroit or 
textile equipment in South Carolina or for that matter even 
fabric is not enough. It still has to be that plus the 
structural changes that have to go on in the Chinese economy 
before we will be satisfied that there is in fact a level 
playing field.
    With that overview, let me stop there and I will be happy 
to take your questions when the time comes.
    Mr. DeMint. We do have some questions for you but we will 
allow Mr. Young to share his thoughts with us first.
    [Mr. Aldonas' statement may be found in the appendix.]

    STATEMENT OF DANIEL YOUNG, SOUTH CAROLINA DEPARTMENT OF 
                            COMMERCE

    Mr. Young. Thank you very much, tough act to follow.
    South Carolina Department of Commerce is the recruiting 
arm, the industrial recruiting arm for the State of South 
Carolina. We work very hard, we market the state, we work very 
hard to bring in international and national companies to our 
state, primarily in manufacturing. That is one of our target 
industries. Manufacturing is the backbone of the South Carolina 
economy. It not only creates jobs for the people in the state, 
but it also pays for government services and pays property 
taxes that eventually go to educate our children. Over the past 
five years, we have been successful in bringing in 100,000 
announced new jobs from industry and over $20 billion worth of 
capital investment. And 80 percent of that is in the 
manufacturing sector.
    Despite those gains, however, over the past five years, we 
have got 90,000 fewer South Carolinians employed ion the 
manufacturing sector. That is very troubling. Some of that 
comes from moving away from the labor intensive industry that 
has historically been a part of South Carolina's economy. The 
textile industries where we used to have one person working a 
loom, now is run by--is one person working a room full of 
looms, machinists where threat is shot back and forth at two or 
three times a second by a puff of air that actually is a vacuum 
going back and forth. It is an amazing process. That has 
evolved from a bullet of water that actually was shooting back 
and forth only two times a second. So the industry has changed, 
all of manufacturing has changed in much the same way.
    We think of, for example, we are in the shadows of BMW 
Manufacturing Corporation, one of our crown jewels in the state 
that we were fortunate enough to bring in 10 years ago now. You 
go in there and there are machines that are building cars. You 
do not see a room full of people, it is not an assembly line 
with people here all over the place, it is a lot more 
mechanical.
    But we have been successful in South Carolina in bringing 
in industry. One of the things that we have used to do that is 
to reduce the cost of doing business. It has been the state 
government's strategy to get the State of South Carolina out of 
manufacturers' pockets as much as possible. We have done that 
through an aggressive incentive program and an aggressive tax 
program, where we offer--we have lowered the cost of doing 
business as much as possible by reducing corporate income 
taxes, creating credits that allow companies that are creating 
jobs to offset their corporate income taxes. We have eliminated 
a lot of sales taxes, almost all sales taxes, that a 
manufacturer would pay in South Carolina have been exempted. We 
also have created some other programs that allow them to reduce 
both the startup cost of doing business and the ongoing cost of 
doing business.
    We work with existing industries same as if they are a new 
industry because those existing industries are generally branch 
manufacturing plants and a branch manufacturing plant within 
say a Michelin is competing with another branch manufacturing 
plant perhaps in Oklahoma or perhaps in Newfoundland, Canada or 
perhaps in France, for expansion dollars. And if a plant is not 
growing, the plant is dying. We work those just as 
competitively as if it was a new company coming into the state. 
Existing industries are eligible for the same types of 
incentives that a new industry is.
    We have seen the job losses over the past few years. And in 
2000, there were two plants a month on average closing their 
doors in the state. Those were very painful to watch happen. 
Each one was lost opportunity for the state and for the 
citizens of the state. But as those job losses were occurring, 
on the state level as far as business retention, providing 
incentives or trying to save those companies, it is a very 
tough sell for the state in that those dollars, dollars that we 
put towards retaining those jobs are hard, they are fresh out 
of the general fund. They create great fiscal strain on the 
state at a time when we are already seeing budget cuts left and 
right.
    In conclusion, just let me say that manufacturing is the 
backbone of the state. It will always be the backbone of the 
state. We do want manufacturing jobs and we are working as hard 
as we can with federal sources as well as state sources to try 
to save those jobs.
    [Mr. Young's statement may be found in the appendix.]
    Chairman Schrock. Let me yield to you, Senator.
    Mr. DeMint. Thank you.
    Chairman Schrock. --Congressman DeMint. I am thinking 
ahead.
    Mr. DeMint. Not so fast.
    I will start with Mr. Aldonas. The U.S. textile industry, 
as you know has filed four petitions for relief under the China 
Textile Safeguard Provision in the China Trade Agreement.
    Mr. Aldonas. Yes.
    Mr. DeMint. One of my I guess priorities since being in 
Congress was to push China to play under the same rules that we 
do under the WTO. And as part of that, I insisted that these 
safeguards be a part of that in case China imports grew faster 
than we could accommodate them.
    What is the status of these safeguards and what is the time 
line that the Administration has for that?
    Mr. Aldonas. I am glad you asked me that, Congressman 
DeMint.
    First of all, I want to thank you for your support for the 
industry and for our actions with respect to China on these 
issues over time. It is important, I think, for the Chinese to 
understand that this is not an issue that is just the 
Administration speaking, that this is Congress speaking 
frankly, and that it is our industry talking and it is the 
American people talking when we say we are willing to 
accommodate China and see them grow, hopefully prosper so they 
can pull the other 900 million out of poverty, but definitely 
to make sure that the playing field is level as a part of that.
    And you are right on point in saying that the Textile 
Safeguard, when it was negotiated by the past Administration, 
was there because of pressure from Congressmen like both of you 
in making sure that what they were doing was providing a way of 
addressing the fundamental problems that we have with China in 
this area. It is not just a question really of the fact that 
their industry would expand so much in the absence of heavy 
government involvement, but you have got something unique with 
China. A good way to put that, Congressman, is that if it was 
based on wages alone, wages are actually a lot lower in other 
parts of the world, they are lower in Indonesia right now, 
certainly lower in Africa, certainly lower in parts of India. 
The investments going to China, are in part because of heavy 
government involvement on behalf of that industry, and that is 
what we are competing against. And to that extent, I view these 
safeguards as a way of addressing those fundamental problems, 
not simply trying to grab the fact that we are seeing too many 
imports, which was kind of traditionally the way things worked 
under the quota regime for years, with textiles.
    Now I expect that on schedule there will be a vote today in 
the Committee to implement the textile agreements on the 
safeguard actions, the meeting is scheduled for 4:45 this 
afternoon. My own view is that there is a strong case for the 
safeguards. If you look at the standard that was included as a 
part of the WTO agreement, we are supposed to be looking at 
whether there has been market disruption and a threat to the 
orderly development of the trade. In that context, it is 
important to know that in the lowest of the cases we are 
facing, you have seen about a 300 percent increase in China's 
imports and perhaps the most significant case on knit fabric, 
you have seen a 27,000 percent increase in imports. Virtually 
all of the knitting machines in the world are being imported 
into China right now because of the efforts of the Chinese 
government to trap investment into the knitting sector.
    What that means is that our guys are competing not just 
with manufacturers in China, but with the Chinese government. 
To me, that is a legitimate point at which I think you do have 
to bring the Chinese up short.
    I was with my counterpart from China this past week talking 
about textiles. Certainly from the Administration's 
perspective, there is a broader problem and we would be far 
better off in a constructive dialogue with the Chinese to deal 
with the problem comprehensively.
    We are using the safeguards frankly as a way to engage in 
those consultations because the way the mechanism works, if 
CEDA does in fact vote in favor of the safeguards, we do 
introduce a quota, but as a practical matter we also engage in 
consultations with the Chinese, so there is a good opportunity 
there if the Chinese are willing to pick it up with us, to work 
out a more constructive relationship so we do not see the quick 
rise and fall and the things that are damaging industry because 
it is difficult to adjust to those inflows in any given year, 
as a practical matter.
    So I am hopeful that the action will be positive on those 
and that where we end up is in a broader conversation with 
Chinese about the sector as a whole.
    Mr. DeMint. So you expect, anticipate a positive vote today 
for these safeguards?
    Mr. Aldonas. I do. At the same time, you know, you never 
say never and you never actually say you won until you have 
counted the votes. So my own reaction is that, you know, people 
understand the problem we are trying to grapple with the 
Chinese. I think we could always do a better job, us 
collectively I mean, in trying to get the word out about what 
is really going on. I worry a little bit honestly, Congressman, 
that oftentimes because of the protection that the textile 
industry has had over the years, that the sentiment is that 
these particular safeguard actions are just more of the same. 
They are not, they are grappling with some fundamental problems 
with China that go well beyond what the industry has faced 
before. And we need to sort of dwell on that.
    Mr. DeMint. You mentioned the currency issue.
    Mr. Aldonas. Yes.
    Mr. DeMint. I think we would agree that the market forces 
without the tariffs and the quotas long term is the better 
policy, but without some market force behind the currency, it 
is going to be hard to get there. What do you think will 
happen? I know you have put some pressure on the Chinese too. 
Do they recognize that we have got an issue there?
    Mr. Aldonas. They do and they have committed themselves to 
moving toward a float eventually. I think they are very worried 
that if they opened up the capital account right now, that they 
would see a fairly dramatic outflow of funds and that would 
undercut deeply their economic growth. And from their 
perspective, you know, they basically have to generate above 
eight percent growth just to keep up with the number of people 
coming into the market in terms of employment. So they are 
loathe to do that.
    I also have to say that China is about the only other 
engine in the world economy right now. So I do not think as an 
American economy, we actually have a vested interest in slowing 
down China's economic growth.
    Now having said that, we are happy to work with them on the 
fundamentals of their financial system to make sure that it 
does work and it can get to the position where they can 
eliminate the capital controls that maintain the peg and I know 
Secretary Snow has succeeded, as did the President, in 
persuading them that we have to get after those problems.
    I do expect that they will take a number of steps short of 
a revaluation in effect to revalue. For example, when they--
this goes a little bit back to what we saw in the 1960s when we 
still had a fixed exchange rate regime--a lot of countries at 
that time would try and do what was the equivalent of a 
revaluation by doing things like eliminating the rebate of 
value-added taxes on exports that has the effect of making them 
a little less export competitive, has the same effect as would 
be a revaluation in some sense. But ultimately you have to 
grapple with the fact that they have got to pay and that it 
ought to be set by the market. And so while immediate action 
may actually be harmful to the Chinese economy and indeed to 
what is our fastest growing export market, we have got to see 
some steady action on this front. And I think that they have to 
understand they are going to continue to see us react on the 
trade side because if you cannot solve the currency problems, 
you see the friction on the trade side and they are going to 
have to understand that until we resolve this problem with 
respect to the currency, we are going to have continuing 
friction on the trade side and we will have to use the trade 
remedies that are available to us.
    Mr. DeMint. Mr. Chairman, do you have some questions?
    Chairman Schrock. I sure do. Let me ask one question.
    I want to go back to what you said, Mr. Secretary, and you 
mentioned some of the problems that manufacturers are having, 
tort reform and, you know, regulatory restrictions and the AMT, 
which is anti-manufacturing. That said, I want to ask you both, 
what are the departments within the federal government and your 
state government doing to make sure that they are sensitive to 
the cost of regulatory compliance to manufacturing? Because we 
hear, I hear that all the time at home, we hear it in 
Washington, that you have lawyers breathing down your back, you 
have OSHA, you have EPA, on and on it goes. And that is just 
killing business. What are we doing to make sure the federal 
and the state agencies are not being overly restrictive on how 
they handle these things?
    Mr. Aldonas. Well, traditionally it has been the province 
of the Office of Management and Budget and frankly one of the 
complaints that we have heard from manufacturers as we went 
through the roundtables, Congressman, was the need for a 
stronger focus within the federal government on manufacturing. 
That is one of the reasons the President stepped forward and 
said we have got to create an Assistant Secretary for 
Manufacturing Services in the Commerce Department, make them 
the focal point for this and then give them the kind of tools 
so they can be helpful in analyzing, whether it is legislation 
or whether it is regulations, in terms of its cost on 
manufacturing. And that is something where we have been working 
closely with Chairman Wolfe as well as with Chairman Gregg on 
the Senate side in the appropriations process, not only to 
establish that Assistant Secretary, but provide the tools they 
would need so they can be helpful in addressing these issues.
    I think beyond that, we need to make manufacturing sort of 
the forefront of any issue and any argument about where we are 
going. I am conscious of the fact that despite the best intent 
of any Administration, if you look at the Tax Code, it is 
complex because we write complex tax laws in Congress.
    Chairman Schrock. By design.
    Mr. Aldonas. By design. And I think what we need to do 
frankly is make sure that we give you the ammunition so that as 
a part of the debate whenever any tax bill goes through, for 
example, that one of the things that people are thinking about 
is what is the impact on manufacturing.
    And if I could just go a little bit further. There is one 
lens that we should look at any government action through. We 
now live in a global economy, whether it is a small 
manufacturer in South Carolina or a big manufacturer in South 
Carolina, whether it is a small manufacturer in Virginia or a 
big manufacturer in Virginia; they get up every morning 
competing in a global economy, like it or not. And it is here 
to stay.
    And as a consequence, every step we take, whether it is in 
the Administration or whether it is in Congress or in the 
courts, we should look at it from the point of view of whether 
or not the action we are about to take will help our 
manufacturers compete in a global economy or hinder their 
ability to compete. And we need to essentially provide the 
tools inside the Administration that illuminates those issues 
and makes sure those costs are clear.
    Chairman Schrock. No matter what we pass in Washington, tax 
or otherwise, there are unintended consequences.
    Mr. Aldonas. Absolutely.
    Chairman Schrock. Seems like there have been severe ones.
    I was impressed with your testimony, you said some of the 
things the state was doing and it looks like you mean business.
    Mr. Young. We do mean business.
    Chairman Schrock. That is a play on words, I know, but--
    Mr. Young. It sounded good.
    And on the regulatory side, we have our state environmental 
group, they work with industry to keep industry in compliance 
and try to get them ready for their permitting process as 
quickly and as smoothly as possible. While they are certainly 
within the mandates of EPA, they work with them as well as 
possible.
    On the taxation side, actually at the state level for a 
manufacturer, we in the lower half of the state, we are out of 
their pockets except for a few sales taxes they pay. We have 
user friendly forms that are available on the Internet and we 
are trying to be as pro business as possible and we work with 
companies to try to keep them in business. One of the things, 
when I talked about the investment numbers, 85 percent of the 
jobs that are created in manufacturing investment within the 
state comes from existing industries. Once they are here, we 
work with them as well as we can to keep them active and 
profitable.
    Chairman Schrock. Let me ask one final question. Is the 
worst over for manufacturing or is it going to have to get 
worse before it gets better?
    Mr. Aldonas. I think in terms of the business cycle, the 
worst is over. You have got strong growth, we will see the 
numbers turn around even in employment.
    The worst is not over though in the broader structural 
issues, because if you think about it, some very positive 
things have happened over the last decade--the end of the cold 
war, trade barriers have come down as we have succeeded in 
moving through trade agreements and you have had a 
technological revolution that makes more trade possible than 
ever. But any time you have those constraints on a market, it 
means that there will be a build up of capacity much more than 
there would be in a free market state. And now when you peel 
those sorts of barriers away, you have got a tremendous over-
capacity problem in manufacturing worldwide and until we adjust 
through that and supply and demand come back into balance, 
there will be very tough times. And our goal has to be how do 
we make sure that our guys understand their place in the supply 
chain and can compete. And a lot of that is stripping away the 
costs that we impose on our businesses.
    I mean I was impressed by the things Dan was saying, 
because it is a model for what we ought to be doing at the 
federal government level. Thinking about taking the tax man out 
of your pocket, you know, my wife is the Assistant Secretary of 
Treasury for Tax Policy in the federal government. We do not do 
our own taxes.
    [Laughter.]
    Mr. Aldonas. It is too complicated and, you know, Pam, 
fortunately is a farm kid from Minnesota up in the Red River 
Valley and her view of the tax law is if it is too complicated 
for my sharecropper father, it is too damn complicated. 
Probably have to edit that out, but the fact of the matter is, 
that is where we are and South Carolina is a much better model 
from the point of view of manufacturing because that is what we 
have to do, we have got to make sure that they have the capital 
to acquire the technology and expand. A growing business is one 
that is going to succeed. If we are just satisfied with the 
status quo, that is not going to work because of these broader 
pressures.
    Chairman Schrock. Mr. Young, you lifted some of those 
things, was that done in your State House with your Senate and 
your House?
    Mr. Young. Yes.
    Chairman Schrock. It was voted. You need to bring them up 
to Washington, because there are people up there who just do 
not get it, they think business is the bad guy and business is 
favored over the individual. Well, without business, the 
individual does not work. And I just do not know why they do 
not understand that.
    Mr. Young. Well, actually our Governor came from 
Washington, Governor Sandford was in the House not too long 
ago.
    And I would like to agree with something the Undersecretary 
said. The capacity issue is an issue. I mean the manufacturing 
side has taken such a hit that you have got a lot of floor 
space available. Certainly that floor space is going to have to 
be filled before we are going to see a lot more new investment 
come in.
    And I will be honest with you about something else, the 
labor intensive industries that the south has historically been 
our bread and butter and what I refer to as our backbone, those 
jobs are probably going to continue to dwindle away. We cannot 
compete with a China where they are getting paid on a fraction 
of what a South Carolina worker makes per hour. And certainly 
we are only a fraction of what you are getting paid in other 
parts of the United States. Some of those jobs are going to 
continue to go offshore and that is going to happen.
    Chairman Schrock. Everybody thinks of the automotive 
business as tens of thousands of people. Well, I have a Ford 
plant in the district I represent and you have the BMW, it is 
all robotics.
    Mr. Young. It is all robotics. Plus you have got a system 
where certain goods will be made in the United States, those 
that cost too much to ship in and the automotive industry is 
one of those. And we have made some hay in the State of South 
Carolina and all across the southeast on automotive and 
automotive suppliers and will continue to do that. But those 
traditional--if you look up into North Carolina where you have 
got textiles and you have got the furniture industry and you 
have got that too in your state as well. That is a double 
whammy that we did not have to go through. We just lost the 
textile jobs. Certainly North Carolina also lost on their 
telecommunications side as well with the fiber optic cable.
    Chairman Schrock. Well, you might remember the brouhaha in 
the Army when they made the new black berets, they were all 
made in China.
    Mr. Young. Ooh.
    Chairman Schrock. And the House had a fit. Now there are 
hundreds of thousands of those things sitting in warehouses 
because they said no, they have got to be made in America. That 
is where it has got to be.
    Mr. DeMint. I understand you gentlemen can stay for the 
11:00 roundtable with the media, is that right?
    Mr. Aldonas. Yes.
    Mr. Young. Yes.
    Mr. DeMint. Well, we want to get the other panel in, but--
    Mr. Aldonas. Could I tell a joke just to close?
    Chairman Schrock. Sure.
    Mr. DeMint. I think we probably need one.
    Mr. Aldonas. There is a lesson there, which is that, I was 
talking to one of the guys in the auto industry in Detroit and 
he was saying that look, we have got to help you out, just 
happened to be in places like South Carolina or Virginia, 
Tennessee and Kentucky, did not happen to be in Detroit any 
longer, and he said for Detroit to compete, we are going to 
have to move to one man, one dog manufacturing. Well, I have 
heard of lean production methods, I had never heard of one man, 
one dog. He said yeah, if we were going to compete with South 
Carolina, we would have to have one man to come in and turn on 
the machines and have the dog bite him if he tried to do 
anything else.
    [Laughter.]
    Mr. Aldonas. So I mean the lesson there I think is that 
what you are seeing, particularly across the southeast, is that 
there has been a real effort to create the environment to 
attract that level of investment, but it is going to have to 
keep moving up the value chain and has to increase its 
productivity, which does mean less employment.
    Mr. DeMint. Right.
    Chairman Schrock. Sure does. Thank you both, we really 
appreciate it.
    Mr. DeMint. Please stick around for a few minutes and we 
want to get our second panel to move into position here.
    Let us move ahead because I know the media wants to get 
directly at you, so the roundtable is coming up.
    But we appreciate you folks being here this morning. I want 
to start with Phyllis Eisen. Thank you so much for being here 
and I turned to the questions rather than the introduction. Let 
me get back here.
    Ms. Eisen. No, do not go through the whole thing.
    Mr. DeMint. No, just briefly.
    Our first witness on the second panel is Ms. Phyllis Eisen. 
Ms. Eisen is the Vice President of the Manufacturing Institute 
of the National Association of Manufacturers. Ms. Eisen travels 
around the country speaking about the need for local 
communities to take steps to ensure a skilled workforce, and we 
are delighted that she could be with us here today to share her 
research and findings.
    I also want to introduce my friend Barbara League, very 
involved with the community and Ms. League is the Corporate 
Secretary of the League Manufacturing, an 85-year old small 
manufacturing firm in Greenville. Ms. League serves in many 
volunteer capacities and on several commissions including as 
Chairman of the State's Consumer Affairs Commission. Thank you 
for joining us, Barbara.
    Deborah Moore. Ms. Moore is our final witness today and Ms. 
Moore is here today to speak on her experience working in our 
one-stop shop. She will tell us about that in a minute. She is 
currently employed by Spartanburg Technical College, but prior 
to that, she worked for over 20 years in the textile industry. 
Ms. Moore has a powerful story to share with us today and I 
look forward to hearing from you.
    We will start, Ms. Eisen, with you.

      STATEMENT OF PHYLLIS EISEN, MANUFACTURING INSTITUTE

    Ms. Eisen. Thank you and I appreciate it--I will sum up my 
remarks, but I would appreciate it if my whole testimony could 
be put into the record.
    Chairman Schrock. Without objection.
    Ms. Eisen. And I want to thank both of you for doing this 
and focusing on manufacturing. Not just for small business, 
which by the way makes up, of course, 95 percent of where all 
Americans work, but makes up a majority of the National 
Association of Manufacturers. They are truly the engine that is 
continuing to drive this economy and will into the future. And 
they do need attention and respect.
    Thank you again for focusing on just manufacturing. The 
heartbeat of this economy--I am a real cheerleader for 
manufacturing, I have been involved in it for 25 years and been 
privileged to both work for a manufacturing company, Mack 
Trucks, and to represent the NAM.
    This is a very unique time, as you know, and I do not need 
to go into all the issues that the Undersecretary did, but 
support the fact that this is our good time in this country and 
how we decide to support and promote manufacturing and the 
people who work in it. When we say we are at a crossroads and a 
turning point, it is not an idle discussion.
    It is our view that if we do do the kinds of things we know 
we must do, we will continue to be the leader in the world, the 
industrial leader in the world. We think the innovation and the 
creativity that comes from manufacturing is unique to this 
country and unique to the people who work in it. And if we 
continue, again, to provide the foundation for that, we can be 
second to none.
    I also want to say that I am pleased that we are in this 
facility, in the technical college here in South Carolina's 
extraordinary community college and technical college system 
and I just want to say that community and technical colleges 
are manufacturers' first choice of training providers and have 
been for 14-15 years, since we began asking them. And they need 
support and help too, they are having their trouble in River 
City, to say to least, in this economy and I think they need to 
be supported.
    We are in a bit of a perfect storm right now in 
manufacturing in the workforce and that is what I am going to 
focus on for just the next few minutes. The storm is between 
the demographic, global and technology changes that the 
Undersecretary talked about. They have come together uniquely 
to provide us with a set of challenges in creating a skilled 
workforce as we have never had before. The smartest generation 
that we have ever had, the most skilled generation, is 
beginning to retire, the baby boomers. In two years, they will 
seriously begin retiring, by 2010 they will begin peaking in 
their retirement. We will be short about four to five million 
skilled workers at that point. By 2020, most of them will have 
been retired. A few will be left on their walkers and running 
around, but short of that--oh, yeah, me too--short of that, we 
will see pretty much the end of the baby boom generation in the 
workplace. That is only, gentlemen, 14 years from now. We used 
to say 2020 looks like forever--14 years from now. And we will 
be short, according to demographers, about 10 to 14 million 
skilled workers. They argue about it, just as all economists 
argue about everything, as demographers do, but it is a big 
number. We have got to fill it. The generation behind them is 
not as large, though they are fairly well skilled.
    However, there is also a significant number of minorities 
and immigrants, as we are only growing by immigration in this 
country, and we have not had a policy for a long time, an 
immigrant policy in this country looking truly at diversity and 
the challenges of a culturation in language into our workforce. 
We have a numbers policy but we really probably need to think 
about having immigrant policy.
    The second part of that storm are the technological changes 
that are just at the very beginning. I happen to have two 
children that work for Intel and what they tell me is happening 
in the chip industry is mind-boggling. We are just on the edge 
and it is taking smarter, more technically skilled workforce 
that has strong math and science. And I will promise you, we 
are not producing that in this country.
    And finally, all the globalization issues.
    We are in the middle of that storm. And as a result, we are 
in trouble in manufacturing. And I have come here to tell what 
I think is a frightening story but one that we can fix. I am 
going to sum this up quickly so that we can get to questions, 
but we had to find out what 80 percent of our manufacturers 
consistently said that they were having a serious to very 
serious to moderate problem finding qualified employees. That 
means employees who can read and write and calculate 
appropriately and show up to work on time, stay all day and 
have some communications and technology skills. They could not 
find them. Jobs were going empty even during the recession. We 
had to find out, so we went out and had a conversation with the 
country and we found out three critical things and they are in 
a publication which I would also like to submit for the record 
called Keeping American Competitive: A Talent Shortage 
Threatens U.S. Manufacturing.
    Number one--and we did an extraordinary number of 
interviews and focus groups on the standard research 
methodology with Deloitte & Touche, a partner of ours. We found 
that the majority of Americans had no connection in their mind 
between the growth of their economy and the stability and 
robustness of a manufacturing sector. They had disassociated 
the two. They thought most of our goods had gone overseas, the 
production of our goods had gone overseas and that was just 
fine with them, except for the people whose jobs were affected. 
The rest did not mind because they said that their goods would 
be cheaper. So I want to tell you that in their heads, there is 
a huge disconnect and we have to understand that.
    Two, to a person, from young people, their parents, old and 
poor and rich and middle class, from every region of this 
country, politicians and manufacturers themselves told us the 
image of manufacturing was dark and dirty and dangerous and all 
the Dickensian words and it devastated us. We knew that for a 
long time, manufacturing has not been good, but the unrelenting 
picture of assembly line workers wearing hairnets, acting like 
robots, a bunch of young women in this country told us they 
would rather work with dead bodies in a funeral home than work 
in manufacturing, in a modern manufacturing sector. The 
knowledge that manufacturing was high tech, complicated, 
exciting, innovative and creative is not understood in this 
country at almost any level.
    Finally, the third thing that stunned us and we are out to 
fix was that there is not in this country at all any career 
education as there are in many, many other countries, who hold 
it as a priority, particularly in Europe and now parts of Asia.
    There is no consistent career education given except by 
parents in this country and most of the young people that we 
focused and surveyed told us they get about three hours every 
six months from their parents and that is mostly from their 
mothers. Forget it, dads, you are not in that picture.
    Because of the lack of career education, young people do 
not know what they need to take in order to get into a family 
supporting job for the future. They do not understand the 
course work, they do not understand what they need to learn. 
Teachers do not understand it, administrators in the education 
system do not understand it and it is this lack of 
understanding, this lack of conversation between the education 
community and the business community that is killing us.
    There is one goal, and that is to get your child into 
university. Nothing wrong with that. Unfortunately only 25 
percent of our young people who begin a college education 
finish a five or six year program now and about 87 or 88 
percent actually are pushed into college by the schools.
    So we have a problem. We decided to really tackle it 
because we just cannot lay down and roll over. In order to 
attract manufacturing to this country, to this state, to any 
state, we are going to have to build a labor pool second to 
none in the world. We do not have it now. We still have that 
unique creativity and innovation but we do not have the labor 
pool, they are not getting it in school, business is spending 
close to $100 billion a year in education and training, and 
unfortunately half of those dollars go for basic literacy. We 
must end this or we will not have the labor pool here and there 
will be no reason for any companies to come here.
    We are going to be launching a careers campaign beginning 
this spring. We are going to go to several pilot cities around 
the country and we are going to try to bring these communities 
together before we go nationwide.
    Thank you.
    [Ms. Eisen's statement may be found in the appendix.]
    Mr. DeMint. Thank you, Ms. Eisen. I think you have hit on 
one of the most important obstacles to long term manufacturing, 
particularly in this state. Nearly half the students who start 
high school do not finish. And that is a tough one.
    Ms. League.

       STATEMENT OF BARBARA LEAGUE, LEAGUE MANUFACTURING

    Ms. League. I would like to echo Phyllis' remarks in 
welcoming you back to Greenville and thanking both of you so 
much for affording us the opportunity to express our concerns 
over this most important issue. And Jim, I would certainly like 
to commend you. You have got one of the best staffs known to 
man. I hope you realize that, they are wonderful.
    Mr. Schrock. Does that come with a pay raise?
    [Laughter.]
    Mr. DeMint. Yes.
    Ms. League. During my lifetime, Greenville-Spartanburg has 
evolved from being the textile center of the world where little 
to no emphasis was placed on education, to becoming a most 
diverse international manufacturing base where jobs are now 
driven by knowledge and necessitate undergraduate and graduate 
programs. The old K-4 mentality has been irrevocably replaced 
by K-20. Mr. Young and you are absolutely correct in that.
    Manufacturing today requires skill and knowledge. With our 
technical education systems, both Greenville and Spartanburg, 
as well as the eight university consortium in our University 
Center located in Greenville, Greenville-Spartanburg is 
competently positioned for her competitive place in our global 
economy to supply any industry with skilled and knowledge 
workers. And I would like to talk with you more about that, 
because we are a model for the nation.
    G.F. League Manufacturing Company is a fourth generation 
family owned, family operated custom fabricator located in 
Greenville since 1917. We have been proactive and innovative by 
upgrading our technology and machinery, hiring more knowledge 
workers, severely cutting budgets and greatly diversifying the 
industries we serve in order to stay in business.
    North America is hemorrhaging manufacturing jobs. We have 
lost over 2.6 million manufacturing jobs in the last two years. 
We have lost the textile industry and are losing the furniture 
industry. Our company receives auction notices on a weekly 
basis from third, fourth and fifth generation 100 year old plus 
businesses that have closed their doors forever and many of 
those businesses are in North and South Carolina.
    In September, I delivered a 14-pound box of these two-page 
notices to Senator Lindsey Graham in Washington and asked him 
to please work with our newly formed Congressional 
Manufacturing Caucus and Representatives Dan Manzullo and Tim 
Ryan to help us prevent the continuation of this devastation. I 
also asked him to share that with you.
    There are, in my opinion, several reasons this is 
happening. All companies are primarily responsible for doing 
everything they can to remain competitive by having a near 
constant cycle of product development based on new research, 
new technology and new ideas. However, many of these companies 
that have gone out of business did do everything they could, 
and they still lost their businesses. Maybe they just simply 
did not start soon enough being proactive.
    And to respond to Mr. Aldonas' statement, we are not 
playing on a level playing field. The inequities in currencies, 
labor costs and over-restrictive mandated regulations is 
killing U.S. industries. We must have in place fair trade 
policies and they must be consistently enforced.
    The governments of China, Japan, Taiwan and Korea, in 
particular, have severely undervalued their nation's 
currencies, making it more expensive to sell American goods in 
their countries and cheaper for their products to be sold in 
the United States.
    For these countries to be able to produce materials to 
manufacture a product, purchase all the required hardware for 
that product, assemble the product with all the necessary 
hardware, ship it halfway around the world and then sell it in 
our country for less than the hardware alone would cost a U.S. 
manufacturer is neither logical, fair, moral, nor ethical. Our 
government must recognize this.
    We desperately need tax incentives for all existing small 
businesses. We need Congressional reforms in export control 
policies, we need legislation passed to lighten the mountains 
of regulations that we are forced to comply with. Or, all other 
countries must be held accountable for the same regulations. 
That is not happening.
    Commodity-like manufacturing is going away and will almost 
certainly never return to our shores. However, the ingenuity of 
America's entrepreneurs is an inherent strength that our nation 
must leverage. Anything the federal government can do to 
promote innovation--research tax breaks, encouraging more 
public/private partnerships between small business and research 
institutions--will lead to long term growth for small 
manufacturers.
    The United States cannot afford to lose its industrial 
base. Without a manufacturing foundation, a service industry 
cannot exist. The future of our country's economic success 
depends on Congress giving our United States manufacturers a 
fighting chance to survive.
    Thank you.
    [Ms. League's statement may be found in the appendix.]
    Mr. DeMint. Thank you, Ms. League. Ms. Moore.

   STATEMENT OF DEBORAH MOORE, SPARTANBURG TECHNICAL COLLEGE

    Ms. Moore. Thank you for inviting me.
    Mr. DeMint. Pull your mic just a little closer to you since 
you speak softly. Thank you.
    Ms. Moore. Thank you for inviting me here today.
    When I was 20 years old, I started out in textile as a 
battery filler. During the next 25 years, I worked most of the 
time in textiles. I was a hard worker and a quick learner. I 
quickly learned to do other jobs until I finally became a 
weaver. I was proud of the quality and quantity of my work. 
From 1985 until November 1999, I was a weaver at John H. 
Montgomery Mill in Chesnee, South Carolina. Most of the workers 
at the mill either grew up together or went to school together. 
We were extensions of each other's families. When word came our 
plant was to be closed because of NAFTA, I was heartbroken. I 
felt I had lost a member of my family.
    I did not think I had the skills to do anything but 
textiles. I knew it would be useless to try to get a job in 
another mill because they were facing the same loss as our 
mill. I had a child and had to think of our welfare and our 
future. I knew I would need new skills to rejoin the workforce 
and the only way to get them would be to go back to school. I 
was terrified at the prospect of going back to school at the 
age of 45. I had been out of school for 27 years.
    With the help of the One Stop Career Center and the JTPA, I 
was able to attend Spartanburg Technical College and receive an 
Associate Degree in Office Systems Technology. They paid for my 
tuition and books for the five semesters that I attended. I 
started school in January 2000 and graduated in July 2001. I 
even made the Dean's List four out of the five semesters I 
attended.
    Chairman Schrock. There are not many people here that can 
say that.
    Ms. League. That is right.
    Ms. Moore. Thank you. If not for the support and 
encouragement from the One Stop Career Center and Charlton 
Williams, I may have given up and not graduated. Charlton kept 
telling me I could do it and she had faith in me. I am very 
grateful there was a One Stop to help all the displaced workers 
who lost their jobs then and are still helping displaced 
workers now.
    The help from the One Stop did not stop when I finished 
school; they also helped me find a job. When a position came 
open in the Financial Aid Office of Spartanburg Technical 
College, Charlton encouraged me to apply. I applied and was 
hired for the position. The position was a temporary one under 
contract, but I was happy to have the opportunity to prove 
myself. When the job became a permanent position, Charlton 
again encouraged me to apply. I did and I was hired for the 
permanent position.
    I have worked in the Financial Aid Office since I graduated 
and am in a position to see other displaced workers who are 
going through what I did and being helped through the One Stop. 
I try to encourage them when they come in and say ``I am 40 
something and I have been out of school for a long time, I do 
not know anything else.'' I just at them and say, ``You can do 
it, I did.''
    [Ms. Moore's statement may be found in the appendix.]
    Chairman Schrock. That is a great story.
    Mr. DeMint. Mr. Chairman, questions?
    Chairman Schrock. I will follow you.
    Mr. DeMint. I want to go back to Ms. Eisen. I have traveled 
around the state and heard the same things that you are talking 
about, that there are jobs open, but that our education system 
is not producing folks who can do the work. It seems to me that 
our whole concept of education needs to change along with the 
concept of manufacturing, which is now an internationally 
competitive business. That the idea of children going to school 
12 years or more with the intent of teaching them no skills, or 
learning in an abstract that applies in no way to a career 
seems to be an antiquated idea and that we know children learn 
better earlier. And to wait until they are in college, if they 
go--but as I mentioned before, in South Carolina, we have a 
problem of now almost nearly half who start the ninth grade do 
not even graduate high school and the number of jobs that these 
folks can do, you know, gets less and less every year.
    Is the National Association of Manufacturers, or are you 
looking at different ways to shape not just college level 
education----
    Ms. Eisen. Absolutely.
    Mr. DeMint [continuing]  But it would seem college is too 
late for people to get a vision of the whole manufacturing 
industry. What are we doing there?
    Ms. Eisen. Well, I agree wholeheartedly that it does seem a 
bit insane to expect people to learn the way we used to learn 
and try to have the same expectations we used to have in a 
different world. The definition of insanity I believe is doing 
the same thing over and over and expecting a different result.
    Mr. DeMint. Right.
    Ms. Eisen. We cannot do that any more. What do we do and 
what are we promoting and asking Congress to support to is a 
redesign of the school system into promoting career technical 
education from the early grades on. That used to be called vo-
tech. We do not call anything vo-tech any more. That again 
brings up images of loser, you are a second class citizen, 
there is not a parent that wants their kids basically to be in 
vo-tech. And if they are, they are not going to talk about it 
at the cocktail party I can promise you.
    But we need to look at it differently. As a matter of fact, 
the Administration promoted last year, and I understand will be 
reauthorized next year, a new way to look at the old vocational 
education money as career and technical education money only 
and that no money would go to schools unless they could show 
that what they were teaching in their schools was connected in 
some way should the child or young person want to a post-
secondary credential, a post-secondary degree of some sort, 
whether it is an associate degree or a full degree, but they 
could use what they learned and connect with high levels, high 
standards of academic learning, the learning they need for, as 
I said, career and a technical education. Charter schools are 
doing that around the country and there is a whole movement now 
of career academies in high schools and even beginning as young 
as junior high that are focusing young people and their 
parents. But if we do not capture the imagination of the 
parents and the educators who are pressured, again as I said, 
to get those college applications filled out no matter what 
those kids want or can do or cannot do.
    It is a vicious circle and it is about a culture, it is 
about a different way of thinking. It is what we call 
flexaskillability at NAM, we call it creating a flexible 
individual who has multiple skills and the ability to be mobile 
and move around. That is the 21st century worker. And workers 
and young people who do not have those skills will not have a 
family supporting job in too few years. Now as far as the 
extraordinary problems of drop outs and illiteracy, the 
President certainly in his no child left behind legislation, 
has attempted to begin that process by saying every child will 
learn to read by the end of third grade. It is getting a slow 
start, there are issues with it, but it is the right way to go.
    If I had my way, I would blow up every school in this 
country, call a holiday like FDR did with the banks, I would 
send everybody home and reorganize the schools to fit into 21st 
century thinking. We cannot learn the old way any more. It does 
not work, it does not work in industry.
    I will tell you the number one skill that employers look 
for--number one, beside obviously being able to read and write 
and calculate. We do not think that is such a big huge bar--is 
teamwork. We work in teams in manufacturing. You cannot product 
just in time and do customization in any event unless you pull 
your units together. Is teamwork being developed in schools? 
Very, very few.
    So I leave it at that.
    Mr. DeMint. I agree. I really think the focus on careers 
and applied learning is a way to keep kids in school, because 
if they cannot see any relevance to what they are learning, it 
is hard to keep their attention. So I think certainly moving 
towards careers in school is a way to improve academics.
    Ms. Eisen. When you reauthorize the Perkins Act next year, 
think about that----
    Mr. DeMint. I will.
    Ms. Eisen [continuing]  If the status quo people come up 
and tell you you do not need any change and the new folks come 
up and tell you it must be integrated in career and technical 
education.
    Mr. DeMint. Yes.
    Mr. Chairman, questions?
    Chairman Schrock. Status quo does not get in my office.
    Ms. Eisen. Does it?
    Chairman Schrock. They do not. And you are absolutely right 
about the education. It is like every parent--you know, we 
wanted our son to go to college. Why? Because we wanted him to 
go to college. He did and did well, but a lot of kids are not 
cut out for that and they need to be in another role.
    Ms. Eisen. That is right.
    Chairman Schrock. I really enjoyed your testimony, and I 
enjoyed yours, Ms. League, but I loved yours. You are a living, 
breathing example of what can happen when somebody has a 
situation like you did. You are the real heroine--and others 
like you are the real heroines in this country who have managed 
to come back up, and I really admire you. When I read your 
testimony on the plane, I could not wait to meet you, so we are 
really happy you are here.
    I want to ask you a question, but I want to base it on 
something that Ms. Eisen asked that maybe a lot of us did not 
hear. I understood you to say that funding for institutions 
like this technical center are in short demand as well, which 
could hamper the long-term viability of this place.
    And I wonder, do you think worker retraining program have 
enough resources like for this place here and are we meeting 
the needs of everyone who comes to this technical center?
    Ms. Moore. I think there are a lot students that still feel 
like there is not enough to go around. We have a lot of 
students that do not get to go because they do not have the 
funding.
    Chairman Schrock. Do you have grants? I should know this--
does the state fund a center like this?
    Ms. Moore. Yes.
    Ms. Eisen. Very little bit.
    Chairman Schrock. Do you get federal funds?
    Mr. DeMint. There are some federal grants.
    Ms. Eisen. Seven percent.
    Chairman Schrock. Where do the funds come from? The 
students I guess, huh?
    Ms. Moore. A lot of the students do pay for it, but we have 
federal grants because we have financial aid and that is a 
grant that helps some students.
    Chairman Schrock. Okay.
    Ms. Moore. But with the One Stop, it is state.
    Chairman Schrock. But not everybody is getting the help 
that they need to get through, what do they do, just have to 
drop out?
    Ms. Moore. They do, because we have so many of them that 
are displaced now.
    Chairman Schrock. Yeah, that just exacerbates an already 
difficult problem.
    Ms. League, I want to ask you, are there specific laws and 
regulatory practices in your experience that are hurting 
manufacturers like you and I just wondered if you could name 
them specifically? In my mind, I think I perceive what they are 
but you are where the rubber meets the road and I would like to 
know what regulations and authorities are getting in your way.
    Ms. League. Tort reform is very high on my list.
    Chairman Schrock. Suing has become a national pastime in 
this country.
    Ms. League. It is incredible. And there again, we are just 
not playing on a level playing field because last week I heard 
of a company in Korea that has started a wine company called 
Napa Valley. I mean, you know, and they can do that. The people 
in California are not real happy about that, but it's perfectly 
legal there. We have to be very careful about trademarks, 
copyrights, et cetera, et cetera, and should be but they just 
should be held accountable for the same things. Tax incentives 
is another thing. We would like to be able to have more help 
getting our employees to Greenville Tech, Spartanburg Tech for 
higher skill level jobs or to our University Center for degree 
programs. Specifically those are the big three.
    Chairman Schrock. EPA, OSHA, do they drive you crazy?
    Ms. League. Oh, yeah, but I mean that has been going on 
since the beginning of time and all those programs are 
necessary, but I think----
    Chairman Schrock. Yeah, but I will tell you something----
    Ms. League [continuing]  It is overburdensome.
    Chairman Schrock [continuing]  I think they have just gone 
overboard.
    Ms. League. It is overboard, it truly is and does not need 
to be as--the reams of paperwork that we have to go through to 
be in compliance is just not necessary.
    Chairman Schrock. I know, the paperwork drill is just 
totally out of hand. We are trying to do something about that 
too with the Paperwork Act. It is just unbelievable.
    Ms. League. Yes.
    Chairman Schrock. Ms. Eisen, what can Congress do 
specifically before the end of this year--I know that is coming 
right up--to increase the competitiveness of U.S. 
manufacturers?
    Ms. Eisen. Well, you are going out by Thanksgiving, you 
have to hurry. But--
    Chairman Schrock. We hope we are out this Friday, but do 
not--
    Ms. Eisen. I know, so you are going to have to hurry. But 
nonetheless, I would suggest that final passage of the 
Workforce Investment Act that was established in 1998 in order 
to consolidate dozens upon dozens of programs that run things 
like One Stops and other public systems should be passed and 
signed into law. I do not know if there are still issues to 
work out in conference, but it will be shortly. I say that 
because our public training system is the only one that really 
gets to people like Ms. Moore and allows them--it is small, it 
is only somewhere between 11 and 13 million dollars a year. I 
mean you can put that in a wing of some new weapon, but at any 
rate, it is there. Again, there has been an attempt by this 
Administration, I give him credit, to bring a dual system 
approach to this public system, making both the customers, the 
job seeker and the business and bring that together and create 
this extraordinary One Stop system that is beginning to work. 
It takes time but it does need to be reauthorized and it does 
need to have business services in it, because the people left 
out have been the small businesses. That is where the jobs are 
and that is where the outreach needs to be.
    Chairman Schrock. You are obviously traveling all over the 
country talking to manufacturers--and I know I am not allowed 
to say the word factories, so what--
    Ms. Eisen. No, you are not.
    Chairman Schrock. I am not, I know that. It is not 
politically correct. What do you tell people who work in a 
manufacturing environment who worry about their long term 
economic security?
    Ms. Eisen. I say there is probably no security in any job 
anywhere. I am asked that all the time. I am asked that by 
union workers, I am asked that by non-union workers and by our 
own manufacturers. The truth is we live in a tumultuous, 
agitated world economy. I do not see that ending.
    I think the Undersecretary again made a very clear picture 
of that. It is what it is. Become flexible, become skilled so 
you can do lots of different things, as Ms. Moore has learned 
to do, and you may have to be mobile. We are not seeing--you 
know, manufacturing is coming back. It is coming back, not 
however, on the big macro picture but it is coming back in 
specific industries and in regions. In due course, we are going 
to see regions in this country competing as much against each 
other as we are going to see them competing with countries 
around the world. And each region has to look at what its 
skills are and what it can provide in order to come off on top. 
But there is no--I am afraid there is no sweet answer to a 
stable--what is stable today? Healthcare? I do not think so. 
What is stable? Politics? No, that's not very stable. There are 
no more stable industries any more.
    So I say get out there, it is white water all the way, and 
learn to swim in it.
    Chairman Schrock. I did not know politics was an industry, 
but I guess it is.
    Ms. Eisen. Well, sure it is.
    Chairman Schrock. It is.
    Ms. Eisen. I am not sure what the goods you are--I am 
teasing. It is a great industry.
    [Laughter.]
    Chairman Schrock. You are just saying that because it is 
true.
    Ms. Eisen. It is a great industry.
    Mr. DeMint. Mr. Chairman, I think if you would gavel this 
official hearing to a close, what I would like to do is get our 
panelists maybe up here and have some of the folks in the 
audience and some of the media have a chance to ask a few 
questions.
    Chairman Schrock. Sure. I would like that. Let me just say 
one quick thing. We are not holding this hearing just to hold 
this hearing. We are holding this hearing because we know there 
is a problem and people like Congressman Jim DeMint and 
Congressman Ed Schrock need to go back and scream and holler 
and get something done about it. That is what we have done with 
every hearing we have held. We are not here just for the 
cameras to come and take pictures of the two of us. That makes 
no sense. There is a problem in this country, it is bad, it is 
getting worse, and we need to be up there fighting to make sure 
it stops and we reverse the trend.
    So you can rest assured as long as this guy is living and 
breathing and still elected, I am going to be working to make 
sure we get this trend turned around and Jim DeMint has been, 
is and will continue to do the same thing.
    So I appreciate the opportunity for me to come to South 
Carolina and I am delighted to be here with Jim and believe me, 
we are going to go back an rattle some cages and cages are 
being rattled and it is starting to affect the leadership on 
both sides of the aisle, because they are having some members 
on the Republican side and the Democrat side who say no, we are 
not voting for that unless this and that happens and I think 
that is a very good thing. It could bode very well for all of 
industry in the coming years.
    Mr. DeMint. And let me just add one point. I think the 
difficulty is that there are a lot of us who in some ways like 
to recreate a past that maybe never existed at all, and to have 
some kind of stable job market. We have seen that as long as 
economies grow, they are going to continue to be in a state of 
flux, and change is happening so much more rapidly today that 
what we need to get back to is these workers with the--what is 
it----
    Chairman Schrock. Flexaskillability. I am going to use 
that.
    Mr. DeMint [continuing]  Flexaskillability in our education 
system. But what we hope this hearing will do in addition to 
giving us some concrete things to go back and work on at the 
federal level is to focus people locally on the real situation 
that we face, which is a world economy. There is no way we can 
put walls around this country or this state and keep that from 
happening. In fact, with 95 percent of the people in this world 
living outside of this country, the real opportunity for 
manufacturers here is to sell to them. But to do that requires 
better trade agreements, more competitiveness here at home, a 
whole different way of thinking, particularly with our 
education system. And so to start thinking differently, to make 
the best of this century, is what we are trying to do, and to 
come up with some real solutions.
    And all of you folks have been tremendously helpful and you 
have certainly put some ideas on my notepad that I want to go 
back and work on.
    But Mr. Chairman, if you will close us, I think there are 
some other folks who would like to ask some questions.
    Chairman Schrock. Thank you all for being here and we will 
go to the next phase and this hearing is adjourned. Thank you.
    Mr. DeMint. Thank you.
    [Whereupon, at 11:01 a.m., the Subcommittee was adjourned.]

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