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



                       THE STATE OF U.S. INDUSTRY

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

                                HEARING

                               before the

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 24, 2004

                               __________

                           Serial No. 108-79

                               __________

       Printed for the use of the Committee on Energy and Commerce


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


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                               __________
                    COMMITTEE ON ENERGY AND COMMERCE

                      JOE BARTON, Texas, Chairman

W.J. ``BILLY'' TAUZIN, Louisiana     JOHN D. DINGELL, Michigan
RALPH M. HALL, Texas                   Ranking Member
MICHAEL BILIRAKIS, Florida           HENRY A. WAXMAN, California
FRED UPTON, Michigan                 EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida               RICK BOUCHER, Virginia
PAUL E. GILLMOR, Ohio                EDOLPHUS TOWNS, New York
JAMES C. GREENWOOD, Pennsylvania     FRANK PALLONE, Jr., New Jersey
CHRISTOPHER COX, California          SHERROD BROWN, Ohio
NATHAN DEAL, Georgia                 BART GORDON, Tennessee
RICHARD BURR, North Carolina         PETER DEUTSCH, Florida
ED WHITFIELD, Kentucky               BOBBY L. RUSH, Illinois
CHARLIE NORWOOD, Georgia             ANNA G. ESHOO, California
BARBARA CUBIN, Wyoming               BART STUPAK, Michigan
JOHN SHIMKUS, Illinois               ELIOT L. ENGEL, New York
HEATHER WILSON, New Mexico           ALBERT R. WYNN, Maryland
JOHN B. SHADEGG, Arizona             GENE GREEN, Texas
CHARLES W. ``CHIP'' PICKERING,       KAREN McCARTHY, Missouri
Mississippi, Vice Chairman           TED STRICKLAND, Ohio
VITO FOSSELLA, New York              DIANA DeGETTE, Colorado
STEVE BUYER, Indiana                 LOIS CAPPS, California
GEORGE RADANOVICH, California        MICHAEL F. DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire       CHRISTOPHER JOHN, Louisiana
JOSEPH R. PITTS, Pennsylvania        TOM ALLEN, Maine
MARY BONO, California                JIM DAVIS, Florida
GREG WALDEN, Oregon                  JANICE D. SCHAKOWSKY, Illinois
LEE TERRY, Nebraska                  HILDA L. SOLIS, California
MIKE FERGUSON, New Jersey            CHARLES A. GONZALEZ, Texas
MIKE ROGERS, Michigan
DARRELL E. ISSA, California
C.L. ``BUTCH'' OTTER, Idaho
JOHN SULLIVAN, Oklahoma

                      Bud Albright, Staff Director

                   James D. Barnette, General Counsel

      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                  (ii)

  




                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Evans, Hon. Donald, Secretary, United States Department of 
      Commerce...................................................    70
Material submitted for the record:
    Evans, Hon. Donald, Secretary, United States Department of 
      Commerce, response for the record..........................   103

                                 (iii)

  

 
                       THE STATE OF U.S. INDUSTRY

                              ----------                              


                       WEDNESDAY, MARCH 24, 2004

                          House of Representatives,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10 a.m., in room 
2123, Rayburn House Office Building, Hon. Joe Barton (chairman) 
presiding.
    Members present: Representatives Barton, Hall, Bilirakis, 
Upton, Stearns, Greenwood, Cox, Deal, Whitfield, Norwood, 
Shimkus, Wilson, Shadegg, Pickering, Buyer, Bass, Pitts, Bono, 
Walden, Terry, Ferguson, Rogers, Issa, Otter, Sullivan, 
Dingell, Markey, Pallone, Brown, Gordon, Rush, Stupak, Engel, 
Green, McCarthy, Strickland, DeGette, Capps, Doyle, Allen, 
Davis, Schakowsky, and Solis.
    Staff present: Bud Albright, staff director; David L. 
Cavicke, majority counsel; Shannon Jacquot, majority counsel; 
Andy Black, legislative director and senior policy coordinator; 
Brian McCullough, majority professional staff; William Carty, 
legislative clerk; Jonathan J. Cordone, minority counsel; 
Ashley Groesbeck, minority staff assistant; and Jessica 
McNiece, minority staff assistant.
    Chairman Barton. The committee will come to order.
    I have the privilege today of introducing the Honorable Don 
Evans. Before I formally introduce him, I have a personal 
privilege announcement.
    Our former chairman, Chairman Billy Tauzin, did have 
surgery last week. He is still in the hospital. The surgery 
went extremely well. He is expected home sometime this week. 
The staff and his wife have asked that he not have visitors 
yet, but he is expected later in the week to be able to have 
visitors.
    I would also like to announce that, because we do have the 
Secretary of Commerce today, I am going to ask that other than 
the chairman and the ranking member of the full committee that 
we try to limit our opening statements, so that we can have as 
much time as possible for the Secretary to make his statement 
and to answer questions.
    There are 57 members of the committee, and if everyone 
takes their full 3 minutes it--we are going to have 2 hours of 
opening statements. Those who don't make an opening statement 
do get an additional 3 minutes in the question time. So I 
wanted to make that announcement.
    Secretary Evans is the cabinet secretary that is charged 
with promoting trade and industry for the United States' 
companies and workers. The department that he chairs has the 
responsibility for a vast array of Federal programs, including 
those relating to telecommunications technology, economic 
statistics, trade promotion, weather, oceanographic services. 
With the exception of oceanographic services and the weather, 
this committee has jurisdiction over all of the programs at the 
Department of Commerce.
    As you all know, I think it is useful for us to bring the 
cabinet secretaries of the agencies under our jurisdiction 
before the full committee. Last week we had the Secretary of 
Health and Human Services, the Honorable Mr. Thompson. In the 
next 2 weeks, we are going to have the Secretary of Energy, the 
Honorable Spence Abraham. So having the Secretary of Commerce 
here today is the second in those cabinet secretaries.
    We think that this is the first time the Secretary of 
Commerce has appeared before this committee, and maybe any 
committee in the House in the last 8 years. We are trying to 
confirm that, but Don Evans is not a gentleman who likes the--
who seeks the spotlight and the limelight. So we are honored 
that he agreed to our invitation today.
    We all know that our economy has had some rough spots in 
the last several years. The terrorist attacks on September 11, 
2001, sent an economic shock through our Nation that we are 
still recovering from. Secretary Evans has taken that task as 
Secretary of Commerce seriously to try to help the economy 
rebound, and he is going to give us some statistics today and 
some facts and figures and his opinions as to why we think that 
we are now rebounding.
    The third quarter of 2003 our economy grew at an 
astonishing rate of over 8 percent, 8.2 percent. That is the 
strongest economic growth rate in over 20 years. That economic 
growth has shown that our economy is continuing to grow. In 
fact, our economic growth rate has outstripped all of the 
industrialized countries. We have inflation now at historically 
low levels, and home ownership in the United States is at the 
highest level it has ever been.
    Americans are living longer, and they are living healthier. 
This committee can take pride in the fact that we have just 
passed a component of that--the Medicare Reform Act that we are 
now in the process of implementing, and that the Secretary of 
Health and Human Services talked about several weeks ago.
    Secretary Evans and this committee is committed to a job 
growth economy for America. He will report in his testimony 
that a quarter of a million new jobs have been created in the 
past 5 months alone. American employment rates are 
substantially higher than our Western trading partners. The 
February unemployment rate in this country at 5.6 percent is 
below its 30-year average, and is still trending downward.
    And, of course, we all hope that it continues to trend 
downward. Still, more job growth and more employment is a key 
goal of the Congress, this committee, and the administration.
    We also have extremely high productivity growth rates. We 
had a productivity growth rate I think last year of over 4 
percent, which is simply amazing because the historical average 
in the post World War II period has been somewhere between 1 
and 2 percent.
    The Department of Commerce has recently released a report 
entitled ``Manufacturing in America.'' In that report, the 
Secretary makes a number of recommendations that would, if 
implemented, promote even more growth in employment for the 
U.S. economy, particularly in the manufacturing sector. The 
Secretary is going to talk about that in his prepared remarks.
    It also points out that we need to pass the conference 
report in the Senate, that this committee did such good work 
on. It would be helpful if we would get the Senate to pass the 
Tort Reform Act, that, again, has passed the House of 
Representatives. And it would be very helpful if we could find 
a way to control some of our health costs that have gone up in 
the last several years.
    This committee, Mr. Secretary, is working hard to achieve 
the goals that I have just outlined. I know that you share 
those goals, because you and I have talked about it, and we 
look forward to your testimony.
    Finally, I want to inform the committee that Secretary 
Evans is here until approximately 12:30, so we want to take 
every opportunity to give him a chance to have interaction with 
the committee.
    So with that, I would like to recognize the ranking member 
of the committee and former chairman of this committee, one of 
the most distinguished members of the House of Representatives, 
the Honorable John Dingell of Michigan, for an opening 
statement.
    Mr. Dingell. Mr. Chairman, I thank you, and I thank you for 
holding the hearing.
    Mr. Secretary, welcome. You are a distinguished public 
servant and a friend, and I am delighted to see you here before 
us. We have a difficult problem in this country with regard to 
making the economy go, and I believe the discussion that we 
will have today will be helpful in that, and that your comments 
to the committee will be of value to us in this matter.
    Since January 2001, my State of Michigan has lost over 
128,000 manufacturing jobs. That is a staggering number, but it 
is just a portion of 2.8 million manufacturing jobs that have 
been lost across this country. This is a serious matter, 
because people are told that there is a recovery going on, but 
nobody seems to be going back to work.
    Unfortunately, we are not addressing these matters. We are 
having a debate about esoteric trade theories from years gone 
by. And it is regretful that the statistics that have been 
coming out of the administration have not reflected the facts, 
nor have they been properly predictive of the events which 
would follow.
    It is also an unfortunate event that the administration has 
not really shown that it appears to be concerned with the needs 
of the Nation at this particular time. We hear from the 
chairman of the Council of Economic Advisors that exporting 
jobs or outsourcing is a normal part of the process. We hear 
that the administration is proposing to change a situation 
where manufacturing will now include turning hamburgers in 
McDonald's and Wendy's.
    We are talking now ofttimes nationally about outsourcing. 
That is one of the first questions, but that is really just 
exporting jobs. It used to be only that manufacturing jobs were 
at risk; now it is white collar. And we note that accounting 
and other jobs of this kind, including government jobs, for 
example, from the Tennessee Valley Authority, which is now 
suggesting that they intend to do this, is at hand. This is an 
outrageous situation.
    Second, small- and mid-sized manufacturers, who are an 
essential and integral part of the American economy, need to 
have the assistance that they have to have to compete on the 
world stage. Most of these are businesses that contribute to 
real job production and are very important parts of the 
automobile manufacturing process.
    We should be manufacturing--rather, we should be expanding 
programs in the Department of Commerce, such as the 
Manufacturing Extension Partnership and the Advanced Technology 
Program, but these programs have been cut continuously in the 
budget of this administration--a most regrettable thing.
    Third, American businesses and American workers deserve a 
government that pursues not just a policy of free trade but one 
which involves a policy of fair trade. In other words, our 
trading partners must be compelled to play by decent rules. 
Labor and working conditions must be brought up to intelligent 
and reasonable standards.
    Environmental practices and laws must be made to work, so 
that we do not degrade the environment around the world, but 
also so that the United States does not subsidize misbehavior 
by allowing other countries to disregard important things which 
we do to see to it that the quality of life in the United 
States is proper and good.
    The fourth point is the cost of health care is now out of 
control--$1,400 it is in the cost of an automobile, more than 
the value of steel. Nothing do I hear addressed by the 
administration in this matter.
    Now, I think, Mr. Secretary, that you are concerned about 
these matters. They deserve a frank and an honest discussion. I 
think that we have not really begun to focus on that, and I 
hope that this meeting this morning will begin to move us in 
the direction of achieving that kind of national purpose that 
meets our needs through an intelligent discussion, and I look 
forward to having a colloquy with you on this, Mr. Secretary. 
And thank you again for your presence.
    Chairman Barton. We thank the gentleman from Michigan for 
that opening statement. I want to encourage members again, now 
that Mr. Dingell and I have given an overview, to not ask--to 
not give an opening statement, but the rules do allow for it.
    I would ask if anybody on the Republican side at this time 
wishes to make an opening statement. All right. Does anybody on 
the Democrat side wish to make an opening statement? Okay. We 
will go to Mr. Pallone. Mr. Pallone is recognized for 3 
minutes.
    Mr. Pallone. Thank you. Mr. Chairman, I want to thank the 
Commerce Secretary for coming to the Hill today to address the 
state of our Nation's economy, and I am hoping that he will be 
as honest with us as he was last month when he refused to 
support his own administration's lofty job creation numbers.
    After seeing the job creation numbers for February--an 
anemic 21,000 jobs--I am hoping that finally today we can 
discuss economic policies that will finally create American 
jobs. If we can take anything from the February job numbers, it 
is that the economic policies of President Bush and the 
Republican Congress still are not creating jobs.
    The President continues to say that the best way to create 
more jobs in the upcoming months is for Congress to make 
permanent all his tax cuts--tax cuts that overwhelmingly 
benefit our Nation's wealthiest Americans. But when is the 
President going to learn? Congressional Republicans cut taxes 
year after year, and the jobs they predicted would be created 
have never become a reality.
    Last year when the President was touting another round of 
tax cuts benefiting our Nation's wealthiest elite, the White 
House predicted the cuts would create more than 2.1 million new 
jobs in the 7 months after its passage. But what actually 
happened during that period? Only 296,000 jobs were created--
1.8 million short of the President's predictions.
    Perhaps that is why Secretary Evans refused to endorse 
President Bush's own economic report of the President, in which 
the administration predicted that 2.6 million jobs would be 
created this year. And I would be interested to hear from your 
administrations the latest estimates.
    One of the major reasons for the current jobs recession is 
the increased exporting of high-paying white and blue collar 
jobs overseas. Consider several examples from the township of 
Edison in my congressional district. Last month, the Ford plant 
closed, leaving more than 900 New Jersey employees without 
jobs. Last year, the Frigidaire Air Conditioning plant closed 
its Edison plant and shifted production to Brazil, leaving 
1,600 unemployed.
    Mr. Secretary, I would think you would be concerned--and I 
am sure you are--about shipping these New Jersey jobs overseas. 
Last month, however, we learned that the Bush administration 
views the movement of American factory jobs and white collar 
work to other countries as a positive transformation that will, 
in the end, enrich our economy.
    No wonder the President thinks our Nation's economic 
forecast is rosy. He isn't concerned about creating jobs here 
in the U.S., as long as the economy continues to grow. And if 
that can happen best by sending more jobs overseas, that is 
fine with him. It is time the Bush administration realized that 
shipping jobs overseas and cutting taxes for the wealthiest 
elite in our country will not create jobs.
    President Bush and congressional Republicans have had 3 
years to turn this jobs recession around. They have completely 
failed. And I am just hopeful that today we will finally hear a 
change of course from the Bush administration, although I have 
to say, Mr. Chairman, I am certainly not holding my breath.
    Thank you, Mr. Chairman.
    Chairman Barton. Thank you.
    Mr. Strickland, do you wish to make an opening statement?
    Mr. Strickland. Yes. Thank you, Mr. Chairman.
    Chairman Barton. Wait a minute. Mr. Brown, too, ahead of 
you. He is senior. The gentleman from Ohio is recognized.
    Mr. Strickland. I will defer to my Ohio colleague.
    Chairman Barton. Yes, Mr. Brown of Ohio is recognized for 3 
minutes.
    Mr. Brown. Mr. Chairman, thank you for having this hearing.
    Secretary Evans, thank you for being here. We know the 
numbers. One in six manufacturing jobs in my State has been 
lost since President Bush took office, 168,000 manufacturing 
jobs in my State have been lost, 300,000 Ohioans are unemployed 
today. That is 2,000 people have lost their jobs every week of 
the Bush administration; 260 people have lost their jobs every 
day since George Bush took office in Ohio alone.
    What puzzles Ohioans is that the Bush administration 
actually seems to be hurting, not helping, American 
manufacturing and working Americans, in large part because the 
President's answer to every bad case and bad piece of economic 
news is the same: more tax cuts for the wealthiest Americans 
with the hope that some of those benefits will trickle down and 
create jobs and help someone else, and more trade agreements 
that hemorrhage jobs that ship jobs overseas.
    I would hope today, Mr. Secretary, that we could hear from 
you some words of support for the Crane-Rangel bill legislation 
that actually rewards American manufacturing for keeping--
American manufacturers for keeping their jobs in this State. So 
many Republican members have co-sponsored this bill. It is the 
White House and Republican leadership that have refused to 
allow the Crane-Rangel bill to come to the House floor.
    I got a letter yesterday from a man named David Grumbose, 
who lost his steel industry job midway through the Bush 
administration. He has had decades of factory experience, 
skills that include a degree in computer management. He has 
been out of work for 1\1/2\ years. He has long since exhausted 
his unemployment benefits.
    He writes, ``It isn't easy on the unemployment line. Hope 
is waning, and despair is close to setting in. I have almost 
given up, but that is not my nature. I have worked hard all my 
life. I started at age 13 delivering newspapers at 4 a.m. I 
really don't know what to do next.''
    Mr. Chairman, I have a stack of letters from others in my 
district saying essentially the same thing, frustrated that 
they can't find jobs, angry that their unemployment benefits 
have not been extended. Some 900,000 Americans are in that 
position. I would like to ask unanimous consent, Mr. Chairman, 
to enter these into the record if I could.
    Chairman Barton. Excuse me. Could you repeat the question?
    Mr. Brown. I would like to ask unanimous consent to enter 
these letters into the record, Mr. Chairman.
    Chairman Barton. Do we know what--have the majority staff--
--
    Mr. Brown. I just described what they were.
    Chairman Barton. [continuing] seen the letters?
    Mr. Brown. I don't know if they are simply----
    Chairman Barton. If you will let us look at them, I am sure 
that during the hearing we will----
    Mr. Brown. Okay. I appreciate that.
    Chairman Barton. [continuing] do that.
    Mr. Brown. Mr. Chairman, Mr. Grumbose and the 2.8 million 
other Americans like him deserve better from this 
administration and from this Congress. But we had better hurry 
up. During the time I have been talking, three more American 
manufacturing jobs have disappeared.
    I yield back my time.
    [The letters follow:]

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    Mr. Pallone. I didn't know that.
    Chairman Barton. The gentleman from Florida, Mr. Stearns, 
one of our distinguished subcommittee chairmen, wishes to make 
a 3-minute opening statement.
    Mr. Stearns. Thank you, Mr. Chairman. I won't be long, and 
I just obviously ask unanimous consent that my entire statement 
be part of the record. But obviously I want to----
    Chairman Barton. Without objection, so ordered.
    Mr. Stearns. [continuing] welcome the Secretary. But I 
would like to raise one point with the administration. I am 
concerned about the privacy implications of outsourcing. Jobs 
involving access to sensitive information are being outsourced, 
including financial services, medical examination, and tax 
preparation, and I am concerned that sensitive financial, 
medical, and other personal information will not receive the 
same type of protection that it does when work with the 
information is done in the United States.
    I understand that companies are subject to the same U.S. 
privacy laws, whether they are processing the information in 
the U.S. or in India, but I want to know that the 
administration is doing all it can to ensure the privacy and 
security of that information. And I hope, Mr. Secretary, 
perhaps that you will address that.
    And I thank you, Mr. Chairman.
    [The prepared statement of Hon. Cliff Stearns follows:]

Prepared Statement of Hon. Cliff Stearns, a Representative in Congress 
                       from the State of Florida

    The Department of Commerce is often called the voice of business in 
government and we have its esteemed Secretary here today to testify 
about the state of U.S. industry. The Department has vast 
responsibility for areas as diverse as enforcing international trade 
laws to conducting ocean and coastal zone research to developing 
telecommunications and technology policy. Today we will use this 
opportunity to focus on a main priority of this Administration, as well 
as this Committee--economic growth and job creation. The 
Administration, with the assistance of Congress, has set forth a pro-
growth agenda that has been a powerful tool in steering the U.S economy 
out of recession. Secretary Evans, as a key member of President Bush's 
economic team, has been a leader in implementing the pro-growth and 
job-creating policies of the Administration.
    Perhaps the most significant recession fighting tool of the past 
four years has been in the form of tax cuts. Individual income tax cuts 
put more discretionary income in the hands of consumers who continue to 
fuel the demand for goods and services. Equally important was the 
reduction in capital gains taxes that will continue to facilitate 
capital investment necessary for businesses to grow. Without the tax 
cuts, the recession that began in 2000--exacerbated by the horrendous 
terrorist attacks of 9/11 and the corporate malfeasance of the late 
1990's--would have had a much more debilitating affect on the U.S. 
economy. Instead, our economy has been growing for the past nine 
quarters with an impressive 8.2% growth rate in the 3rd quarter of 2003 
and a healthy 4.1% growth rate in the 4th quarter. Economic growth 
creates jobs and the unemployment rate is indeed falling.
    Despite the falling unemployment rate, there are pockets of workers 
for which unemployment is still high--namely the manufacturing 
industry. I applaud the Secretary for his focus on growth in 
manufacturing. The Department of Commerce recently released a report 
entitled ``Manufacturing in America: A Comprehensive Strategy to 
Address the Challenges to U.S. Manufacturers.'' In that report, the 
Secretary outlines a six-point plan for improving the manufacturing 
sectors' competitiveness and therefore growing jobs in the years to 
come. Those six points include important public policy changes that are 
within the jurisdiction of this Committee. I urge my colleagues to 
recognize our responsibility for implementing these pro-growth and job-
creating changes. In many of the areas the Committee has already worked 
hard, on a bipartisan basis, to promote growth and job creation. 
Specifically, the Committee has moved comprehensive energy legislation 
to promote affordable and reliable supply of energy. The House has 
acted to enact that legislation and I urge the Senate to do the same.
    Other public policy changes include making health care costs more 
affordable to the companies that hire workers by passing medical 
malpractice liability reform; passing general tort reform; streamlining 
regulatory requirements to provide smarter regulation that is less 
burdensome; reducing dependence on foreign sources of oil and natural 
gas; and opening foreign markets for American products. Mr. Secretary, 
I hope that you will call on this Committee to help implement the 
important pro-growth agenda you have set forth in your plan. The 
Committee has worked to achieve some of the goals you set forth in the 
report and Chairman Barton has indicated a strong desire to work on the 
others in a bipartisan fashion.
    Before I close, I do have one important issue I would like to raise 
with the Administration. I am concerned about the privacy implications 
of outsourcing. Jobs involving access to sensitive information are 
being outsourced, including financial services, medical examination, 
and tax preparation. I am concerned that sensitive financial, medical, 
and other personal information will not receive the same type of 
protection that it does when work with the information is done in the 
United States. I understand that companies are subject to the same U.S. 
privacy laws whether they process the information in the U.S. or in 
India but I want to know that the Administration is doing all that it 
can to ensure the privacy and security of that information. I hope that 
you will address this issue in your testimony today and that the 
Administration will work with the Congress to ensure the protection of 
sensitive consumer information.
    I thank the Chairman for holding this hearing today and I thank the 
Secretary for his time with us today. I look forward to a healthy 
dialogue on the state of U.S. industry. I yield back the balance of my 
time.

    Chairman Barton. We thank the gentleman.
    We want to point out that members that don't make opening 
statements do get an additional 3 minutes in the questioning. I 
just thought I would mention that again.
    The gentleman from Michigan Mr. Stupak is recognized I 
assume for a 3-minute opening statement.
    Mr. Stupak. No, Mr. Chairman. I will waive my 3. I just 
want to make sure that our opening statements will be made part 
of the record.
    Chairman Barton. All opening statements will be made part 
of the record.
    Mr. Stupak. Then I will waive my 3 minutes.
    [The prepared statement of Hon. Bart Stupak follows:]

 Prepared Statement of Hon. Bart Stupak, a Representative in Congress 
                       from the State of Michigan

    Mr. Chairman, thank you for calling this hearing, and Secretary 
Evans, thank you for joining us today to discuss one of the most 
important issues facing our country, the issue of American jobs.
    On September 15, 2003, you visited the great state of Michigan and 
said that your department is making a series of changes to boost 
American manufacturing. Now, six months later, (with you at the helm of 
the Commerce Department) you were right, a series of manufacturing 
changes have occurred, but the changes that we have seen in Michigan 
and across America have done nothing to ``boost manufacturing.'' In 
fact, in Michigan,128,900 manufacturing jobs have been lost since 
President Bush took office.
    In a speech you gave during that same visit in September you said, 
and I quote, ``There is no doubt that our manufacturing sector 
confronts serious challenges.''
    The Administration's answer: repeatedly slash funding for job 
growth programs like the Manufacturing Extension Partnership (MEP) 
program that has successfully helped small American manufacturers to 
modernize and stay competitive in the global marketplace. I know that 
MEP has directly helped companies in my district including Horner 
Flooring of Dollar Bay and Jacquart Fabric Products with 100 workers in 
Ironwood, Michigan.
    Again, this Administration has been all talk and little action on 
finding ways to put people back to work. As you can see, I have with me 
a copy of the President's Economic Report delivered to Congress last 
month. If you turn to page 98 you find the Administration has projected 
that their tax cuts will create 2.6 million jobs over the next year. 
That would require adding an average of about 216,000 jobs per month to 
reach the President's projection. With a little over 9 months left to 
go in 2004 its no wonder President Bush has recently distanced himself 
from his own report.
    This wouldn't be the first job creation claim where the 
Administration has been just dead wrong. In fact, they have been wrong 
every time they have used this rationale as an excuse to cut taxes.
    Where it has created jobs is overseas and abroad. In Michigan, 
Electrolux the refrigerator manufacturer recently announced it was 
closing shop and moving its 2,700 jobs to Mexico to save labor costs--
although they were making a profit.
    And just last week, Secretary Powell assured India that the 
Administration would not halt the shipping of American jobs overseas.
    While I have no doubt that such an assurance helps to ease the 
minds of workers abroad, this sends the wrong message to our struggling 
workers here at home.
    The bottom line is this Administration has no credibility on its 
job creation predictions. Instead of a real job growth plan it wants to 
cut programs like MEP that are essential to rural economic growth--it 
wants to give employers disincentives to hire new workers by allowing 
companies to deny workers overtime pay--and it is telling other 
countries--don't worry--we've got your back on outsourcing American 
jobs. It refuses to acknowledge that Americans can't find work and 
continues to deny them extended unemployment benefits.
    Mr. Chairman, I look forward to hearing from Secretary Evans on 
exactly what steps the Administration plans to take to create American 
jobs. Michigan's 335,868 unemployed residents need to know.

    Chairman Barton. Well, bless you. That is a good example.
    Mr. Green, are you going to waive your opening statement?
    Mr. Green. No, Mr. Chairman. I appreciate our Secretary----
    Chairman Barton. The gentleman is recognized for 3 minutes.
    Mr. Green. [continuing] being here for 3 hours, or 2\1/2\ 
hours, but--and, again, I want to thank the chairman and our 
ranking member for holding this--I think this is the most 
important hearing we have had this year on the state of U.S. 
industry. And, again, I join my fellow Texan, the chairman, in 
welcoming a neighbor, even though he is from Midland and I am 
from Houston--it is kind of close in Texas terms--Secretary 
Evans to testify.
    Mr. Secretary, since this administration came to town, our 
State of Texas, we have lost 175,000 manufacturing jobs. In 
fact, in Texas, we have lost more manufacturing jobs than any 
other state, with the exception of California. And since 2000 
our country as a whole--and, again, I see different numbers, 
but the one I think is common is that we have lost 2.8 million 
manufacturing jobs.
    During a time of economy recovery, we shouldn't forget that 
manufacturing jobs are traditionally the engines of our 
economic growth in our country. Furthermore, these highly 
skilled, good-paying jobs have been the backbone of a strong 
middle class that has been the foundation of opportunity in our 
country. And to me this is where the issue of outsourcing comes 
in.
    And the economic term may be outsourcing, and the practice 
may be utilized to help a company's bottom line by decreasing 
labor costs, but at the end of the day outsourcing is the 
wilful exporting of jobs. And if we continue to export those 
manufacturing jobs, there is a very real possibility that our 
country's labor market will be made up of highly paid 
executives and low wage earners in service sector jobs with no 
middle class in between.
    And if there are doubts about the possibility of that, one 
need only flip through the recently released economic report of 
the President, to which the chief economic advisor suggested 
that making hamburgers in a fast food restaurant constituted 
manufacturing. We have learned the hard way that manufacturing 
jobs aren't the only ones being exported. Many high tech and 
service sector jobs are also leaving our country, and I 
represent a district that has been losing manufacturing jobs 
for decades.
    Our district in Texas is the third most blue collar 
district in the country, and the fifth youngest in the country 
according to the 2000 Census. And I have long encouraged my 
younger constituents, and even my older ones, to retain for the 
high tech skills, yet now even the high tech service sector 
jobs are being exported. In fact, 3.3 million are scheduled to 
leave the country within the next 15 years.
    How do we, as a Nation, keep our high standard of living 
where we are not only exporting manufacturing jobs, but now 
highly skilled information-related jobs, to the lowest wage 
countries with an adequately skilled labor market? Yesterday's 
Wall Street Journal highlighted some of the professions that 
will be exported in other countries--accountants, tax 
professionals, technical writers, architects, legal and 
investment researchers, and insurance claims processing.
    What are we supposed to tell our constituents who have been 
retrained for these high tech jobs only to find those jobs, 
too, are being exported? We can't expect them all to go into 
manufacturing hamburgers.
    Mr. Secretary, the arguments coming from our administration 
are troubling. It is unconscionable that the President's top 
economic advisors would call exporting American jobs just a new 
way of doing international trade, and that it is probably a 
plus for the economy in the long run. And, again, being a 
business school major from the University of Houston, I 
understand economics professors. But often times they don't----
    Chairman Barton. The gentleman's time has expired.
    Mr. Green. [continuing] have the real world--well, thank 
you, Mr. Chairman. I would like my full statement to be placed 
into the record.
    Chairman Barton. Without objection, so ordered.
    Does the gentlelady from Missouri wish to make an opening 
statement? Ms. McCarthy?
    Ms. McCarthy. No, sir.
    Chairman Barton. Okay. The gentleman from Ohio, then, is 
recognized for 3 minutes.
    Mr. Strickland. Thank you, Mr. Chairman, and Mr. Secretary.
    Mr. Secretary, I come from Ohio, a State that has lost 
168,000 manufacturing jobs in the last 3 years. Mr. Secretary, 
I have read your testimony. You say that, clearly, the 
President is taking the country in the right direction. 
However, data from the Bureau of Labor Statistics show the 
President is headed toward the worst job growth in 58 years. In 
fact, he will be the only President since Herbert Hoover to 
have a net job loss during his term.
    You say in your testimony that our companies and workers 
see international trade as a simple question of fairness. When 
I went to Mexico recently, Mr. Secretary, and I asked, ``Is it 
fair to encourage a race to the bottom? Is it fair to exploit 
foreign workers who make only $38 a week?''
    You say we all know the rising health care costs are 
eroding competitiveness. But the administration had a chance 
during the Medicare bill to support the reasonable 
reimportation of cheaper drugs from Canada, and to allow the 
Secretary to negotiate lower prices for drugs, and they 
resisted those efforts.
    You say that we are preparing--the next generation of 
America's leaders starts with the basis, and that is why the 
passage of the No Child Left Behind bill was so important. But, 
Mr. Secretary, the Republican Governor in Ohio and the 
Republican legislature commissioned a study, and that study 
concluded that the No Child Left Behind bill is costing Ohio 
$1.4 billion per year as an unfunded mandate.
    Mr. Secretary, you say the decline of manufacturing 
employment and the rise of service employment are 
manifestations of structural change. But what do you say to the 
fact that we are exporting service jobs overseas? We all know 
that is happening, and I have introduced H.R. 3816, the Call 
Centers' Consumers Right to Know Act, and simply this bill 
would just simply require call center staff to disclose their 
physical location at the beginning of each call, so the 
American consumer would be informed.
    And while we are talking about service jobs, I would like 
to share with you what happened to Mr. Kirk Tremain, who is a 
constituent in my district. Mr. Tremain worked in the 
electrical industry in Eastern Ohio. GM closed that. He went to 
Mexico. He was out of work. He went to work for U.S. Steel. The 
steel mill shut down. Then he went back to school and got a 
bachelor's degree, got a high tech job in the computer 
industry, and National Citibank has taken that job to India. 
What do we say to Mr. Tremain and others like him who are 
losing these jobs?
    And then, I close with this. In the President's economic 
report, these words, ``When a good or service is produced at 
lower cost in another country, it makes sense to import it 
rather than to produce it domestically.'' Mr. Secretary, I 
would like a list that cannot be produced at lower cost in 
another country. I think that list would probably be rather 
short. And I look forward to your testimony, sir.
    Chairman Barton. The gentleman's time has expired.
    Does the gentlelady from New Mexico wish to make an opening 
statement?
    Ms. Wilson. Thank you, Mr. Chairman. Yes, I do.
    Chairman Barton. New Mexico.
    Ms. Wilson. Thank you, Mr. Chairman. I appreciate your 
having this hearing.
    Mr. Secretary, thank you for being here. Despite some of 
the rhetoric from my colleagues on the other side of the aisle, 
the reality is that our economy is growing. The interest rates 
are low, inflation is low, the stock market has recovered. 
Unemployment is below the 30-year average for unemployment in 
this country.
    We need to continue with economy policies that include low 
taxes, fair regulation, and America is the best in the world at 
providing a stable environment for companies to be able to 
invest and grow and produce wealth.
    I think it is important, because we hear a lot about it 
these days, to talk a little bit about trade. Ninety-five 
percent of the people in this world are not American citizens. 
If Americans are going to survive, we need to be able to sell 
what we produce to those people who aren't privileged to have 
been born in America.
    So a return to protectionism can't be the answer. So what 
is the answer? Well, first, we have got to understand the 
challenge. In the last 10 years of human history, in the last 
10 years, more people have joined the free enterprise system in 
this world than at any other point in human history. That has a 
huge economic impact in the world that we live in.
    Of all the jobs that were lost in the recession of 2000 and 
2001, only 1 out of 100, 1 percent, were outsourced or 
offshored. And at the same time, other foreign investors had 
the opportunity to invest in America. And when you build a 
Sunnheiser plant in Albuquerque, New Mexico, or Heel, Inc. from 
Germany comes and sets up a new operation in Albuquerque, New 
Mexico, that capital brings jobs here in America. And 16 
million Americans owe their jobs to international trade.
    The real challenge in our economy is actually productivity, 
which is a good thing in general, although hard to deal with if 
you are one sitting without a job. Productivity growth has 
moved from manufacturing to service productivity growth, and 
anybody who has checked in at an airport recently, or gone 
through Home Depot and checked out their own stuff at the front 
of the store, knows what productivity is all about.
    UPS used to have 70 service centers, and in those service 
centers they had clerks who filled in timesheets every week for 
every UPS employee around America. Now that clipboard that a 
UPS guy carries punches in his time, and when he plugs it into 
the dashboard of his truck it automatically reports his time, 
and all those people filling out timesheets are now doing 
another job.
    So the real issue in our economy is: how do we take 
advantage----
    Chairman Barton. The gentlelady's time has expired.
    Ms. Wilson. Thank you, Mr. Chairman.
    Chairman Barton. Finish the statement, though.
    Ms. Wilson. The real challenge for our economy is how we 
take the productive American workforce and train them for the 
next highly productive, well paid job. And that is the 
challenge I look forward to your testimony on, sir.
    Chairman Barton. The gentlelady's time has expired.
    The gentlelady from Colorado?
    Ms. DeGette. I will submit my statement.
    [The prepared statement of Hon. Diana DeGette follows:]

Prepared Statement of Hon. Diana DeGette, a Representative in Congress 
                       from the State of Colorado

    ``Anemic.'' ``Unambiguously ugly.'' ``Terribly disappointing.'' 
``Uncharted territory.''
    So read the comments from financial analysts and chief economists 
with regard to February's lackluster job creation of 21,000 jobs. When 
one digs deeper, an even bleaker picture of the current labor market 
emerges: all 21,000 jobs in February were created in the public sector 
with the private sector showing no job gains--an especially disturbing 
fact given the enormity of this Administration's tax cuts in favor of 
the private sector. While the Administration will assert that 
unemployment levels have held steady at 5.6% and therefore there is 
nothing to worry about, we are all painfully aware of the reason for 
this: hundreds of thousands of workers, discouraged by the current 
labor prospects in our economy, have dropped out of the labor force.
    Unfortunately, the February jobs report is only the most recent 
evidence that the economic recovery is not going according to plan. 
Real wage growth is at its lowest level since 1987. The average period 
of unemployment of 20.3 weeks is the longest it has been since 1984; 
23% of the unemployed population have been out of work for six months 
or more. The average number of jobs produced in the past three months 
was a paltry 42,000, compared to the 150,000 jobs needed just to keep 
pace with those entering the labor force. The manufacturing industry 
has shed 6.2 million jobs since 2001. Consumer confidence in February 
plunged to its lowest level in months. Both consumer and federal debt 
levels have reached record highs, making our country increasingly 
vulnerable to fiscal crisis if--or more precisely, when--interest rates 
increase.
    Yet, despite the economy's anemic job growth, soaring federal 
deficits and decade-low real wages, the Administration has unwaveringly 
adhered to its misguided fiscal policy of tax cuts for the rich, no 
matter what. A case in point is the recent report issued by the U.S. 
Department of Commerce, ``Manufacturing in America,'' in which the 
Department recommends making President Bush's tax cuts permanent in 
order ``to address the challenges identified by U.S. manufacturers.'' 
Apparently, the Administration is unconcerned with the overwhelming 
evidence that after three consecutive years of major tax cuts, the 
economy has failed to produce jobs, especially in the manufacturing 
sector, which has lost 2.6 million jobs since the beginning of 2001. 
Frankly, I do not know how the Administration justifies making at the 
center of their proposal to help American manufacturers, a tax cut plan 
that provides an average tax cut of $112,925 for the very rich and a 
paltry $400 average cut for the majority of Americans.
    The impact of making the Bush tax cuts permanent is not 
theoretical--it means less money for services and programs that make a 
real difference in the lives of Americans, including programs that 
create jobs. In fact, the Bush Administration, citing huge deficits 
that it is primarily responsible for creating, is threatening to veto 
the transportation authorization bill, the largest job-creation 
legislation proposed in the 108th Congress.
    Additionally, President Bush, in his recently released budget, 
proposes the fourth consecutive annual cut of $80MM to the Small 
Business Administration program, a program that provides long-term 
loans to more than 30 percent of all small businesses. This cut to the 
Small Business Administration program represents one of the largest 
agency cuts under the President's budget and is especially questionable 
given that small businesses employ nearly half of all workers and 
create three out of four new jobs. I personally cannot reconcile how 
President Bush claims that he is doing everything possible to create 
new jobs, yet he cuts funding for the very loan program that would 
ensure that small businesses--a lynchpin to economic recovery--have 
access to capital they need in order to grow and create new jobs. While 
the Administration pays lip-service to creating jobs, it repeatedly 
cuts programs that would provide real employment opportunities for the 
American people, opting instead to push forward its agenda of tax cuts 
for the rich, no matter what.
    Although the Administration will cite Gross Domestic Product growth 
numbers and housing starts statistics as proof of an economic recovery, 
such data is irrelevant when Americans do not have jobs. I am eager to 
hear from Secretary Evans what action he plans on taking, other than 
making the Bush tax cuts permanent, in order to improve the labor 
opportunities for Americans and I thank him for his presence in front 
of this committee today.

    Chairman Barton. Okay. The distinguished gentleman from 
Pennsylvania wishes to make an opening statement.
    Ms. DeGette. He is distinguished?
    Chairman Barton. I called you--you are gentle. You are 
gentle and distinguished. He is just distinguished.
    Mr. Doyle. Mr. Chairman, I ask unanimous consent to submit 
my full statement for the record, along with a report on 
manufacturing in Pennsylvania recently completed and issued by 
the Pennsylvania Industrial Resource Center and----
    Chairman Barton. Without objection, so ordered.
    Mr. Doyle. [continuing] the Pennsylvania Foundation.
    Chairman Barton. And we will also--we have looked at Mr. 
Brown's documents, and they will also be put in the record.
    Mr. Doyle. Mr. Chairman, my clock is ticking here.
    Chairman Barton. Oh, I will restart it.
    Mr. Doyle. Thank you. Mr. Chairman, I want to thank you for 
holding----
    Chairman Barton. I am not going to cheat you, Mr. Doyle.
    Mr. Doyle. I want to thank you for holding this hearing 
today, because there are few issues of greater importance, not 
only to my district but to the country as a whole. And I want 
to also thank Secretary Evans for appearing before us today, 
and I hope, Mr. Secretary, that you will be able to take the 
concerns and sentiments that I suspect will be expressed here 
back to the administration and the White House in the hope that 
some changes can be made.
    And rest assured, change is what we need because our 
economy is floundering, especially when you look at the job 
losses and lack of new job creation. I represent Pittsburgh and 
the surrounding metro area in the heart of Western 
Pennsylvania, where manufacturing and hard work have ben the 
hallmark of generations. And based on the amount of visits that 
the President and the Secretary have made to my district since 
the administration began, it would seem as though they were 
really committed to the residents in the area I represent.
    Yet, since January 2001, when President Bush took office, 
Pennsylvania has lost 154,700 manufacturing jobs. And I would 
say to my friend from New Mexico, that is not rhetoric, that is 
people that can't put bread on their table anymore. An 
additional 287,600 people are unemployed in my State.
    This suggests very strongly to me--and a great many of my 
constituents--that regardless of what the travel schedule of 
the Bush administration has been, this administration has been 
bad for the economy and terrible for jobs. And yet I am not 
sure what the administration plans to do to address these 
issues. As near as I can figure, the basis of the entire Bush 
economic agenda is to make these excessive tax cuts permanent 
and expand free trade agreements.
    Well, they made a lot of promises about how many jobs would 
be created by their tax cuts, and how many more will occur if 
we just make these tax cuts permanent. But I want to mention 
154,700 manufacturing jobs have been lost in my State since 
this tax-cutting frenzy began.
    And as far as calling for more in expanded free trade, it 
may be free, but it certainly doesn't seem to be fair, as it is 
leading to more and more outsourcing of our jobs in 
manufacturing and many other areas. And some people in this 
administration have actually said this is a positive 
development.
    Well, when I consider these issues, I also find myself 
thinking about what has been a success story? What have we done 
to improve the climate in manufacturing? And the first thing 
that comes to mind is the Manufacturing Extension Partnership. 
In Pittsburgh, the MEP has been tremendously successful, helped 
create 164 businesses and generate $90 million in sales alone, 
and keep or create 400 jobs in 2001.
    Yet the Bush administration in the middle of this massive 
manufacturing job crisis has proposed a budget that would slash 
funding to the MEP to just 33 percent of last year's level. So 
for these reasons and others, I find myself wondering, just 
what does this Bush administration really have in mind when it 
consider the status of our manufacturing base?
    I am hoping Secretary Evans can shine some light on just 
what the agenda is when it comes to creating jobs and restoring 
a commitment to our manufacturers----
    Chairman Barton. The gentleman's time has expired.
    Mr. Doyle. [continuing] in this country. As it stands now, 
Mr. Chairman, I really have to wonder.
    [The prepared statement of Hon. Mike Doyle follows:]

  Prepared Statement of Hon. Mike Doyle, a Representative in Congress 
                     from the State of Pennsylvania

    I want to thank Chairman Barton for holding this hearing today as 
there are few issues of greater importance to not only my district but 
the country as a whole. I also want to thank Secretary Evans for 
appearing before us today and I hope, Mr. Secretary, that you will be 
able to take the concerns and sentiments that I suspect will be 
expressed here back to the Administration and the White House in the 
hopes that some changes can be made.
    And rest assured, change is what we need because our economy is 
floundering especially when you look at job losses, the lack of new job 
creation, and the unemployed and underemployed. I represent Pittsburgh 
and the surrounding metro area in the heart of western Pennsylvania 
where manufacturing and hard work have been the hallmark of 
generations.
    Based on the amount of visits the President and the Secretary have 
made to my district since their administration began, it would seem as 
though they were really committed to the residents of the area I 
represent. Yet since January of 2001, when President Bush took office, 
Pennsylvania has lost 154,700 manufacturing jobs. That's a truly 
massive number! Additionally, data from the Bureau of Labor Statistics 
indicates that there are 287,600 unemployed workers in Pennsylvania 
which includes 54,400 in the Pittsburgh metro area. This suggests very 
strongly to me and a great many of my constituents that regardless of 
their travel schedule, the Bush administration has been bad for the 
economy and terrible for jobs.
    And yet, I'm not sure what the administration plans to do to 
address these issues. As near as I can figure, the basis of the entire 
Bush economic agenda is to make their excessive tax cuts permanent and 
to expand free trade agreements. Well they've made a lot of promises 
about how many jobs would be created by their tax cuts and how many 
more will occur if all the cuts are made permanent, but like I 
mentioned 154,700 manufacturing jobs have been lost in Pennsylvania 
since their tax cutting frenzy began. And as far as calling for more 
and expanded free trade, it may be free but it certainly doesn't seem 
to be fair as it's leading to more and more outsourcing of our jobs in 
manufacturing and many other areas and some people in the 
administration have actually said that is a positive development.
    When I consider these troubling issues, I also find myself thinking 
about steps that have been taken to improve the climate for 
manufacturing and some of the successes we have had. Immediately the 
Manufacturing Extension Partnership comes to mind. In Pittsburgh, MEP 
has been terrifically successful over the years. The Pittsburgh-based 
MEP-funded center is Catalyst Connection which shares a mission with 
MEP centers throughout the nation to help small and medium-sized 
manufacturers adopt new processes and technology to allow them to be 
more productive and create more jobs. Since Catalyst Connection was 
begun in 1988, they have helped over 1,000 local manufacturers, and in 
all of Pennsylvania the MEP helped 164 businesses generate nearly $90 
million in sales and keep or create 400 jobs in 2001 alone. Yet, the 
Bush administration, while in the middle of this massive manufacturing 
job crisis, has proposed a budget that would slash funding for the MEP 
to just 33 percent of last years level. That's an approach that simply 
doesn't make any sense and will devastate this highly successful and 
important program.
    Then there's the steel industry which is also very important to my 
district and the country. Less then two years ago, this administration 
took an important step by enacting temporary steel tariffs to address 
the illegal dumping of surplus steel on our domestic markets. These 
tariffs were scheduled to remain in place for at least three years to 
give the steel industry time to consolidate and recover from the unfair 
beating they had been taking. Well we did make some progress in that 
regard and there was reason for optimism about this industry that is so 
vital to our economy and national security. But unfortunately, last 
December, President Bush buckled under to threats from our European 
allies and pulled those tariffs away way too soon and long before the 
initial three year period was over. Right now, the steel industry is 
still standing thanks at least in part to a temporary bubble in high 
prices. But that bubble will burst, dumping could resume, and without 
the industry having had the chance it deserved to fully recover there's 
no telling what will happen. You did the right thing by enacting the 
tariffs but you've made a tragic mistake by pulling them away too soon.
    So for these reasons and others I find myself wondering just what 
this Bush administration really has in mind when it considers the 
status of our manufacturing base. I hear far too many people say that 
before too long we won't really make anything in this country anymore 
and believe me that has serious ramifications, not only for our 
economy, but for our national security that this Administration 
purports to be so concerned about. So I'm hoping maybe Secretary Evans 
can shine some light on just what the Bush agenda is when it comes to 
creating jobs and restoring a commitment to our manufacturers in this 
country. As it stands right now, I really have to wonder.

    Chairman Barton. We thank the gentleman.
    Mr. Buyer. Mr. Chairman?
    Chairman Barton. Does the gentleman from Indiana wish to 
make an opening statement?
    Mr. Buyer. I have a--I would like to make a unanimous 
consent request.
    Chairman Barton. The gentleman is recognized.
    Mr. Buyer. I would ask unanimous consent that members of 
the committee submit their opening statements for the record. 
And for those who do not give a statement, be added their time 
in accordance to the rules of the committee.
    And the reason I ask unanimous consent request is the 
Secretary is here on limited time, and we would--it would 
behoove all of us to hear the Secretary.
    Chairman Barton. The gentleman----
    Mr. Buyer. So I would make this unanimous consent request.
    Chairman Barton. If the gentleman would withdraw that 
request--would the gentleman withdraw that request?
    Mr. Dingell. I am reserving the right to object.
    Chairman Barton. The gentleman from Michigan is reserving 
the right to object. The gentleman is recognized.
    Mr. Dingell. I believe that the gentleman is seeking a 
unanimous consent that all members will waive their opening 
statements. And my concern here is that: a) this is a precedent 
which troubles me, and b) I am not sure how members on both 
sides of the aisle might feel about this matter.
    I will be content to let the members comment on this, if 
they wish me to yield. And I also would say, as long as this 
does not constitute a precedent, I am willing to consider the 
matter further.
    Chairman Barton. Would the gentleman yield?
    Mr. Dingell. I would yield to my good friend.
    Chairman Barton. If the gentleman from Indiana insists on 
his unanimous consent request, I am going to object to it. I 
have already asked members to defer, but under the rules every 
member has a right to give an opening statement. Some have used 
that right; some have deferred, which they will get an 
additional 3 minutes.
    So, you know, we are going to have openness and civility 
and democracy, and we do hope that we do get to the Secretary 
at some point in time this morning, so he can make an opening 
statement himself and then take some questions. And I am sure 
in the question period we are going to have a very good debate 
about many of the things that Mr. Doyle and Mr. Strickland and 
Mr. Brown and Mr. Pallone and Ms. Wilson and----
    Mr. Dingell. I think the Chair has made a good point.
    Chairman Barton. All right.
    Mr. Dingell. And with respect for my good friend from 
Indiana, I do object to----
    Chairman Barton. Well, let me give the--before the 
gentleman--would the gentleman withhold his objection just a 
second? Or is that parliamentarily possible?
    Mr. Dingell. I didn't hear that, Mr. Chairman.
    Chairman Barton. I said can you withhold your objection to 
give him a chance to withdraw his----
    Mr. Dingell. I will withhold, certainly.
    Mr. Buyer. I don't want to waste any more time even 
debating this.
    Chairman Barton. Would the gentleman withdraw his----
    Mr. Buyer. Just stop the pontification.
    Chairman Barton. Did the gentleman withdraw----
    Mr. Buyer. I withdraw the unanimous consent request.
    Chairman Barton. The gentleman withdraws his unanimous 
consent request.
    Mr. Buyer. I am anxious to hear from the Secretary.
    Chairman Barton. All right. Let us see. Now, where were we? 
Mr. Doyle had given an opening statement. Is there a member of 
the majority who wishes to make an opening statement? Seeing 
none, the Chair would recognize Mr. Allen for an--for what 
purpose?
    Mr. Allen. To make an opening statement.
    Chairman Barton. The gentleman is recognized for 3 minutes.
    Mr. Allen. I thank the chairman. And I would only comment 
when you get down to my level, Mr. Secretary, the possibility 
exists we might not be able to speak to you at all, just 
because of time constraints. But I thank you for being here.
    When the history of the Bush administration is written, I 
tend to think it will be characterized as having been motivated 
by three grand obsessions--Iraq, missile defense, and tax cuts 
for the wealthiest among us. I believe that two qualities of 
obsessions is that those who hold them become impervious to 
evidence that challenges received opinion; and, second, that it 
prevents us from focusing on emerging challenges.
    The loss of manufacturing jobs in this country is a rapidly 
growing challenge. And in my view, the administration has no 
plan that is adequate to the seriousness of the problem. My 
home State of Maine has lost more manufacturing jobs per 
capita, I believe, than any other State in the country since 
the President took office. But as I said, there seems to be no 
plan of--adequate to the seriousness of that problem.
    In Maine, we live next to Canada. And our small businesses 
know all too well that sawmills in Canada, to take one example, 
don't have to pay for their health care, and they don't have to 
pay for their workers comp. And all across this country health 
care premiums are rising at a rate that is driving our small 
business men and women out of business. They simply can't 
compete.
    And yet, once again, this administration has no plan 
adequate to the seriousness of this health care problem that 
will address what we are looking at. Instead, this 
administration has proposed a budget that reduces funds for job 
training, reduces funds for vocational education, cuts SBA 
programs, eliminates the microloan program--small program, but 
it meant a lot to Maine--and, as my friend from Pennsylvania 
has said, reduces the Manufacturing Extension Partnership 
Program from $110 million to $39 million.
    Mr. Secretary, unless we get away from this obsession with 
tax cuts for the wealthiest Americans, we cannot devote 
ourselves to the real business of figuring out how to help this 
sector of our economy that is bleeding jobs not just overseas 
but here as well, and particularly how we deal with those 
people who no longer have a job, and, therefore, have lost 
their health care and lost their other benefits when their job 
goes.
    The hard, cold truth is losing a job in this country is 
much harder, has much more severe consequences, than losing a 
job in the rest of the developed world. And I believe this 
administration needs to deal with that particular problem.
    I thank you for being here.
    Chairman Barton. The gentleman yields back the balance of 
his time.
    Does any other member on the minority side wish to make an 
opening statement?
    Mr. Cox. Mr. Chairman?
    Chairman Barton. Oh, Mr. Cox, do you wish to make an 
opening statement?
    Mr. Cox. I do. Mr. Chairman, I just wanted to welcome----
    Chairman Barton. The gentleman is recognized for 3 minutes.
    Mr. Cox. [continuing] the Secretary and respond, because 
the Secretary isn't being given the opportunity yet, to respond 
to some of what we are listening to. I think it is important to 
recognize, first, we have before us the Secretary of Commerce, 
not the Secretary of Treasury.
    But if people want to raise tax policy, then I think we 
need to point out that instead of incessantly repeating this 
mantra about tax cuts for the wealthiest Americans, we ought to 
acknowledge that is intentionally misleading, because the 
President cut taxes, and the Congress cut taxes--tax rates, I 
should say. Revenues to the government are way up because of 
the economic growth it spurred. We cut tax rates for everybody, 
and we cut them disproportionately for the lowest bracket.
    Over half of the tax benefit goes to the bottom 10 percent 
bracket. There are disproportionate tax cuts for the least 
wealthy taxpayers in America, and the Tax Code is more 
progressive. It is less flat and more progressive than it used 
to be as a result of those tax cuts, and it has created 
economic growth.
    People need to be reminded that we had a recession, and 
that recession is behind us. And we are creating jobs, and the 
tax rate changes either caused that improvement in the economy, 
or they certainly didn't stand in the way of it. But there is 
no reason to complain about that.
    I think it is also important to point out when we are 
talking about jobs that our economy is creating jobs. We don't 
have the Secretary of Labor before us. We have the Secretary of 
Commerce. But if people want to talk about job statistics, we 
need to focus on the fact that the unemployment rate, which by 
any standard is remarkably low in America right now, is lower 
than it was during the 1990's when everybody's favorite 
President, Bill Clinton, was in charge. It is lower now.
    The unemployment rate is lower, and more people work in 
America right now than at any time in our Nation's history. So 
add it up. Do the math. There are more Americans at work today, 
more jobs in America today, than at any time in our Nation's 
history in terms of the total number of jobs. And as a 
percentage of the total workforce, the unemployment rate is 
lower right now than it was during the 1990's.
    So what part of this math don't people understand? Now, 
obviously, you look around the country and it is not the same 
everywhere. And that is why we are working on policies that 
create growth, and that is why I want to compliment the 
Secretary for some of what I know we are going to hear from him 
today.
    Thank you for your leadership in helping create certainty 
in our economy, so that the tax rate changes that we made are 
permanent and people can plan and create jobs. Jobs are not 
created in an environment of uncertainty and raising taxes.
    I think this abundant concern that people have for the 
pocketbook of the government and the lack of concern they have 
for taxpayers, particularly as we near April 15, is unbecoming.
    Thank you for your leadership on regulatory review and the 
costs that regulation imposes on job creation. Thanks for your 
leadership in helping lower health care costs. Thanks for 
helping modernize the U.S. legal system, which is driving jobs 
overseas.
    Chairman Barton. The gentleman's time has expired.
    Mr. Cox. Thank you very much for all of this, and I thank 
the chairman for letting me respond to some of what we heard.
    Chairman Barton. We appreciate that.
    Mr. Secretary, before I introduce the next person for an 
opening statement, you need to know that Mr. Markey is noted 
for his opening statements.
    He normally gives a very serious, with a real educational 
message, but he doesn't consider it a crime that they also be 
entertaining and amusing. Now, I am going to put him on the 
spot and make a prediction that if anything gets on the 6 news 
tonight in the opening statements it is going to be from the 
next opening statement, Mr. Markey.
    So with that, for 3 minutes, the Honorable Ed Markey of 
Massachusetts.
    Mr. Markey. Thank you, Mr. Chairman. I could actually sing 
you my song that I sang on St. Patrick's Day in Boston, but I 
think at this point I will spare you.
    The point--to my friend from Indiana, Mr. Buyer, just so 
you understand how we view it on this side, this will be the 
only appearance of the Secretary of Commerce in his 4 years as 
Secretary of Commerce before the Commerce Committee. And so 
since he is only going to be testifying from 20 past 10 in the 
morning until 12:30, you can imagine where out of 4 years----
    Chairman Barton. Hopefully he will get to testify.
    Mr. Markey. Yes. Well, I appreciate that. But out of 4 
years, to give us 2 hours and 10 minutes on the committee of 
jurisdiction over the Commerce Committee is something that, you 
know, it does kind of test the patience of our side, because 
there are so many questions that we feel he could be answering 
to us and through us for the American people. So that is our 
perspective on it. Two hours and 10 minutes out of 4 years just 
isn't enough time.
    So we are going to be respectful of the Secretary here 
today, because he says he has more important things to do. But 
over the course of 4 years, we do wish that there had been more 
time given to us.
    Mr. Secretary, my home State of Massachusetts lost 9,500 
jobs last month. Since 2001, we have lost a total of 200,000 
jobs, and unemployed workers in Massachusetts now can expect to 
be out of work an average of 5 months--the longest average 
period of unemployment in 20 years. Nationwide there are 8.2 
million jobless Americans, and 3 million fewer private sector 
jobs than there were just 3 years ago.
    As many Americans try to make ends meet, the outsourcing of 
jobs overseas has received considerable attention. Less 
notable, but also troubling, is the growing practice of 
offshoring American private medical and financial information 
to less developed countries such as India and Pakistan, where 
the information is processed for U.S.-based firms.
    These countries lack the privacy safeguards that are in 
place when records are processed in the United States, and U.S. 
privacy standards are not enforceable overseas. And offshoring 
of information, as it increases, Americans are losing their 
jobs and their privacy in one fell swoop.
    When American companies send private information overseas, 
they are telling consumers, ``Check your privacy at the 
shore.'' Last year, a worker in Pakistan who was transcribing 
medical files for a California hospital threatened to post the 
confidential records on the Internet unless she received money 
that she claimed was owed her. She backed up the threat by 
attaching two patient files to an e-mail warning that she sent 
to hospital officials.
    The San Francisco Chronicle has reported that 2 of the 3 
major credit reporting agencies, each holding detailed files on 
about 220 million U.S. consumers, are in the process of 
outsourcing sensitive operations abroad, and a third may follow 
suit. So while your credit cards stay safely in your wallet, 
your credit reports travel the world, racking up frequent flyer 
miles as you sleep.
    I have requested from the Bush administration their policy 
on how we are going to protect privacy overseas. I have yet to 
receive an answer from the Bush administration on this issue. I 
don't think there is a more sensitive issue to all Americans, 
regardless of party, than what happens to their financial and 
medical records as they are shipped overseas into the hands of 
people that are not under U.S. law.
    And I think the American people deserve an answer to that 
question. I thank the chairman very much.
    Chairman Barton. The gentleman's time has expired.
    Any other--the gentlelady from Illinois, Ms. Schakowsky, is 
recognized for 3 minutes.
    Ms. Schakowsky. Thank you, Mr. Chairman. And I thank you--
--
    Chairman Barton. Let me say the distinguished and 
gentlelady. I have gotten in a bad habit of just saying gentle 
when I say the females, and I say distinguished for the males. 
So the distinguished and gentle----
    Ms. Schakowsky. You are taking my time, Mr. Chairman. 
Please----
    Chairman Barton. I am not going to count this against you.
    Ms. Schakowsky. Thank you very much, Mr. Chairman, my 
distinguished chairman.
    And I thank you, Mr. Secretary, and I appreciate the 
opportunity to tell you that something you said yesterday 
really offended me, and I wanted to just ask you about it. 
Economic isolationists--words that you used to characterize 
people who are very concerned about exporting jobs overseas--
economic isolationists are waving a surrender flag rather than 
an American flag.
    And I have been feeling for a long time that those 
individuals who disagree with policies of this administration--
and you are entitled to your views, and we are entitled to 
ours--are characterized often as unpatriotic, as appeasers, and 
now as waving a flag of surrender.
    And I am offended by that on behalf of Jeanette, someone in 
Illinois who lost her job when McCloud USA Publishing exported 
278 of its jobs to India. I don't think she is an economic 
isolationist.
    Or what do you call hardworking Americans like Ralph, who 
worked hard his whole life and lost his job when Premier Auto 
Finance closed its doors in the Bush economy, whose 
unemployment benefits are going to end soon, since the Bush 
administration has refused to extend them, and who is faced 
with the daunting prospect of now losing his health care. I 
don't call him an isolationist. I call him a hardworking 
patriot.
    Or what about the one out of six manufacturing jobs that 
has been lost in the State of Illinois during the Bush economy? 
One hundred thirty-nine thousand, just manufacturing jobs, a 
total number of 258,000 jobs.
    In January 2004, Mr. Secretary, there were 25 percent more 
people unemployed in Illinois than in January 2001. These are 
hardworking Americans. These are patriots. These are people who 
are concerned about exporting our jobs overseas. These are not 
people waving a flag of surrender rather than an American flag. 
These are people who proudly salute our flag, whose children 
pledge their--to their flag every morning in school and whose 
parents are out of work right now.
    I think it is so wrong to characterize people who accept--
who embrace our country, our great Nation, want full 
employment, as somehow less than full Americans, and that we 
are waving some sort of flag of surrender. Your administration 
said that--the President said that in 2001 the tax cuts would 
create 800,000 more jobs by the end of 2002.
    In February, the claim was that new tax cuts would create 
510,000 new jobs in 2003; 891,000 new jobs in 2004. We have 
lost 2.3 million jobs. I think that our--this administration 
needs to be held accountable for the loss of 2.3 million jobs, 
a net loss rather--in the private sector rather than talking 
about how the state of American industry is strong or the 
resilience of the American economy when so many people are 
suffering right now, patriotic Americans who are suffering.
    Mr. Secretary, I thank you.
    Chairman Barton. The gentlelady's time has expired.
    Is there any other individual who wishes to make an opening 
statement? The gentlelady from California, Ms. Solis, is 
recognized for 3 minutes.
    Ms. Solis. Thank you. Thank you, Mr. Chair.
    And thank you, Mr. Secretary. I would like to request 
unanimous consent to submit my testimony, but I also would just 
like to make a few comments.
    Chairman Barton. Without objection.
    Ms. Solis. And briefly, Mr. Secretary, I know that you are 
involved in overseeing many aspects of our commerce in our 
country. And, yes, with respect to jobs and the economy, in my 
district alone in California we have lost over 20,000 jobs. 
Unemployment rates in my district are a scathing 9 percent. 
They have been that way for the last 3 years.
    We have many working families who don't have insurance. 
They don't have medical insurance. They are very concerned 
about the fact that the new prescription drug benefit program 
that was voted upon will not allow for us to negotiate lower 
prices for medicines.
    We have people that are telling me, Congresswoman, ``Who is 
going to protect us, then? If these pieces of legislation are 
going through, who are going to be the valiant folks to stand 
up for us?'' I have a problem also with respect to the loss of 
jobs that are being outsourced.
    One of my small companies in the area of Covina, which was 
previously represented by another Member of Congress, lost 110 
employees. Their jobs are gone out of this country. With NAFTA 
used as something to provide an incentive some years ago, that 
we would somehow see growth in our country as well as abroad, 
and in Mexico in particular, I have yet to see that.
    I understand there are over 850,000 jobs that were lost 
because of NAFTA. And on a recent trip that I had Ciudad Juarez 
in Mexico, the maquilas--the U.S. maquilas that went down there 
to provide opportunities for people there to earn $30, a 
grandiose number--$30 a week--have now--half of those maquilas 
have left. They have gone to China.
    What happens to those folks, then, that want to try to find 
some meaningful way of having salaries that would provide for 
them? They try to cross the border. So what is it that we are 
doing with NAFTA that isn't working? Now we are changing 
another page and going into NAFTA plus, which is CAFTA, going 
to Central America where, again, we are looking at cheap labor, 
labor probably only providing an incentive of maybe less than 
half of what they earned in Mexico for jobs in Nicaragua and El 
Salvador.
    Those jobs we are losing because the needle trades, 
textiles, and other manufacturers here have lost those jobs to 
those parts of our hemisphere. And I worry, because in my 
district where we have 60 to 70 percent Hispanic population, 
hardworking folks, that somehow the hope and the dream of a 
recovery here in this country is not real for them.
    Unemployment rates for the Hispanic population across the 
country has been a staggering 7.4 for the last 3 years. It has 
not changed. It has gotten worse for people of color in my 
district, and people who work hard who think that they should 
be able to have some dignity in the United States. So I ask you 
to contemplate those questions, and I will submit my statement 
and some other questions.
    [The prepared statement of Hon. Hilda L. Solis follows:]

Prepared Statement of Hon. Hilda L. Solis, a Representative in Congress 
                      from the State of California

    Thank you Mr. Chairman. I also want to welcome Secretary Evans to 
the Committee today and to thank him for joining us for this important 
hearing.
    The issue that I hear about most often when I return home to my 
district every weekend is the economy. For three years, I have watched 
as unemployment in every one of the cities I represent in Los Angeles 
County has risen steadily. In some areas of my district, particularly 
in East Los Angeles, South El Monte, and El Monte, areas with large 
Latino populations, the unemployment rate has hovered near or over 10%, 
well above the national average. In fact, the unemployment rate among 
Latinos nationwide, now at 7.4%, has increased a remarkable 28% since 
President Bush took office.
    In total, over 20,000 of my constituents are currently looking for 
work. Many of them have been unemployed for a long period and have 
exhausted their jobless benefits. Even those that are fortunate to find 
work are bringing home paychecks that are sizably less than what they 
received at their old jobs.
    The trade and tax policies of the Bush Administration are not 
creating much-needed jobs.
    As our manufacturing industry continue to bleed jobs, President 
Bush continues to aggressively pursue free trade agreements that 
exacerbate our job loss problems. These agreements fail to include 
basic labor and environmental standards. Without such standards, 
especially in the context of a trade agreement with Central American 
nations where labor standards are so poor and so rarely enforced, we 
continue to provide incentives to companies to move jobs out of the 
United States.
    The North American Free Trade Agreement has been a disaster for our 
economy, contributing to the loss of over 850,000 well-paying American 
jobs. It has also led to a half a trillion-dollar trade deficit that is 
spiraling out of control and creating more job loss. In my own 
district, the Medsep Corporation in Covina had to layoff 110 employees 
last year because of competition from imported goods. CAFTA, or as I 
call it, NAFTA-plus, would have a similar effect on our economy.
    The Bush Administration has called outsourcing ``a positive 
development.'' I don't see anything positive about putting hard working 
Americans out of work and onto unemployment lines. While the Bush 
Administration may be surprised at our economy's low job creation 
level, my constituents are not. For them, the distressed state of our 
economy and its devastating impact are a reality.
    Each day in this country, 85,440 workers lose their jobs. With a 
record 8 million Americans looking for jobs, I'm left to wonder how 
many workers must lose their jobs before President Bush begins to 
seriously evaluate our nation's economic policies. In this regard, I 
look forward to hearing from Secretary Evans about any plans President 
Bush might have to spur job growth and put Americans back to work.
    Thank you.

                                           UNEMPLOYMENT--32nd DISTRICT
                                              As of March 11, 2004
                                                  FEBRUARY 2004
----------------------------------------------------------------------------------------------------------------
                                                                                                 # of UNEMPLOYED
                             CITY                               UNEMPLOY. RATE  # of UNEMPLOYED     (Jan. 2001)
----------------------------------------------------------------------------------------------------------------
Azusa........................................................             6.9%            1,540            1,280
Baldwin Park.................................................             7.0%            2,310            1,920
Covina.......................................................             4.4%            1,100              910
Duarte.......................................................             5.3%              570              480
East Los Angeles.............................................             9.6%            5,160            4,800
El Monte.....................................................             7.8%            3,900            3,240
Irwindale....................................................             5.8%               30               20
Rosemead.....................................................             7.0%            1,700            1,410
South El Monte...............................................             9.6%              950              790
West Covina..................................................             4.1%            2,180            1,810
NATIONAL UNEMPLOYMENT RATE (FEB. 2004): 5.6%
----------------------------------------------------------------------------------------------------------------
Source: State of California, Employment Development Department, March 11, 2004


    Chairman Barton. Without objection, so ordered.
    Ms. Solis. Thank you.
    Chairman Barton. Does the gentleman from Tennessee wish to 
make an opening statement?
    Mr. Gordon. Yes. Thank you, Mr. Chairman.
    Chairman Barton. The gentleman is recognized for 3 minutes.
    Mr. Gordon. Mr. Secretary, thank you for being with us. I 
know that it is not particularly pleasant to sit here and be 
lectured to. But all of us go home, we see our friends, our 
neighbors, our constituents that are either out of work, but 
more likely they are underemployed rather than unemployed. And 
we see the pain that it really creates to these families.
    And I know that you certainly would like to see a reversal 
of this loss of jobs, too. I mean, you do not wish anything bad 
on anybody. I know that. And that is why after the President 
unveiled his manufacturing initiative earlier this year I 
expected that the budget would contain some thoughtful new 
initiatives in this area.
    Instead, the administration has proposed yet again to 
eliminate the Advanced Technology Program, and to slash the 
Manufacturing Extension Partnership--the only Federal programs 
explicitly designed to help manufacturers. And these are not 
wise proposals at a time when U.S. manufacturing is in crisis.
    The ATP and MEP programs are effective tools for economic 
growth and job creation. They have provided thousands of small 
and medium firms across the Nation with technical assistance 
and business support services they need to compete globally. 
The Manufacturing Extension Partnership was selected by Harvard 
University, Institute of Government Administration, as one of 
the Nation's most creative, forward-thinking, result-driven 
government programs, yet the administration cut the MEP program 
by $72 million this year. And that is a 65 percent cut to a 
program that has helped small manufacturers create jobs.
    The MEP is one of the few Federal programs that every 
Federal dollar leverages $2 additional in State and private 
sector funding. This is a unique partnership with local 
government and the private sector that works and keeps 
Americans working.
    In FY2002, companies using MEP assistance reported $2.3 
billion in sales, $681 million in cost savings, $940 million in 
investments and plant modernization, and 35,000 jobs as a 
result of their MEP projects. The return in the Federal 
investments of MEP centers is $4 in Federal tax revenues for 
every $1.
    At a Science Committee hearing last summer, one small 
business manufacturer summed it up in a nutshell. Although 
tax--he said, ``Although tax policies that encourage investment 
surely helps, it does not directly respond to what is 
happening.'' His recommendation: substantially expand ATP and 
MEP program. All of the other panelists agreed.
    And, Mr. Secretary, let me tell you that this is a 
bipartisan feeling, at least on the Science Committee. We have 
jurisdiction of this program. We see that it works. The 
administration has zeroed it out the 2 previous years. Congress 
puts money back in because it is important. At least you 
allowed us, I guess, that same level, but it is a phaseout 
level.
    Make no mistake about it. It is a phaseout level, and what 
is going to happen is it is going to undermine this network, 
and all 50 States that it has been set up. It is going to be 
like Humpty Dumpty.
    Chairman Barton. The gentleman's time has expired.
    Mr. Gordon. Once that network has been undermined, you 
can't put it back together. I hope you will reconsider.
    Chairman Barton. Okay. Does any other member that has not 
had an opportunity wish to have a 3-minute opening statement? 
Seeing none, all members' opening statements will be made a 
part of the record.
    [Additional statements submitted for the record follow:]

   Prepared Statement of Hon. Michael Bilirakis, a Representative in 
                   Congress from the State of Florida

    Mr. Chairman, thank you for holding this very important hearing on 
the state of industry in the United States. I also want to welcome 
Secretary Evans and to express my appreciation for his willingness to 
appear before this Committee to talk about issues impacting American 
businesses and consumers.
    Mr. Chairman, I am pleased to see that the economy is recovering 
and new jobs are being created in the United States every week. The 
outlook today is better than it was a few years ago, and I want to 
commend President Bush, Secretary Evans, and my congressional 
colleagues for enacting policies which I believe have led to the growth 
in job creation and consumer spending and the drop in the rate of 
unemployment.
    However, I am still very much concerned about maintaining the 
United States' competitiveness in the global marketplace and ensuring 
that America's businesses continue to grow.
    Like many of my colleagues, I have heard from many constituents who 
have expressed very real concerns about the outsourcing of American 
jobs to overseas operations. They simply cannot understand--and I tend 
to agree with them--why companies are choosing to relocate jobs 
offshore when there are many Americans right here at home wanting to 
work and having difficulty finding gainful employment. Outsourcing 
doesn't make sense to them. I look forward to hearing what the 
Administration is doing and how Congress can act to encourage these 
companies to keep manufacturing and information technology jobs here in 
the United States.
    As Chairman of the Health Subcommittee, I also am extremely 
concerned about the impact rising health care costs has on 
manufacturers and small businesses. This Committee and the House have 
recognized the importance of controlling rising health care costs by 
passing medical liability reform legislation and creating association 
health plans. Unfortunately, the Senate has not been able to address 
these issues.
    I appreciate the Administration's support for reforming our 
nation's tort system, particularly as it relates to capping punitive 
damages for medical malpractice awards, and for creating association 
health plans. I am eager to hear from Secretary Evans what additional 
initiatives Congress and the Administration should undertake to further 
address the skyrocketing costs of health care.
    I also have concerns about trade issues affecting the U.S. steel 
industry. For many years, I have been working hard with my colleagues 
in the Congressional Steel Caucus to stem the tide of bankruptcies, 
layoffs, closures, and illegally imported steel. In reference to ``The 
Presidential Determination on Steel'' issued in December 2003, I am 
interested to hear what assurances Secretary Evans can offer regarding 
the expansion of the steel import monitoring and licensing system to 
include steel products that were not subject to 201 tariffs and quotas.
    Mr. Chairman, these issues are important to my constituents and to 
the health of the American system of enterprise. We have made great 
strides in the past two years in growing our economy, but Congress and 
the Administration should do more to promote American goods and 
services and ensure that we maintain our country's advantage in 
worldwide markets. I look forward to hearing Secretary Evans' 
perspective on the issues I have raised today.
    Thank you, Mr. Chairman.

                                 ______
                                 
    Prepared Statement of Hon. Charlie Norwood, a Representative in 
                   Congress from the State of Georgia

    Thank you Mr. Chairman. I want to extend a special welcome to 
Secretary Evans, we sure do appreciate you being with us today.
    Let me start by saying I appreciate Chairman Barton holding this 
hearing today to focus on the state of our country's manufacturing 
industry. Many of our great manufacturers have roots in Georgia and I 
am proud to represent them. I have taken the time to sift through the 
Commerce Department's strategic plan to promote U.S. trade and the 
industry. For the most part I must say I am pleased with your 
suggestions, but I have some concerns that I'd like the Secretary to 
address.
    Your report expresses the need to enforce trade agreements and 
combat unfair trade practices. I couldn't agree more, and let me just 
say that I have been extremely disappointed with the lack of action on 
a number of these unfair practices.
    For starters, there's the problem of China manipulating their 
currency. The undervalued yuan has contributed to our trade deficit 
with China, which has risen from $30 billion in 1994 to an estimated 
$126 billion in 2003. It has also hurt U.S. production and employment 
in several U.S. manufacturing sectors, especially textiles, because 
they are forced to compete domestically and internationally against 
artificially low cost goods from China. Can we expect you to take 
action on this in 2004?
    Strengthening the U.S. Patent system is also important and holding 
our trading partners to the same laws is also vital for our industries 
to grow. One case where that is not happening and could prove to be 
devastating if not fixed is with the rug and carpet industry. Again, 
another one of our great industries with strong roots in Georgia. The 
U.S. carpet industry produces 45% of the world's carpet and is a $12 
billion per year presence at the mill level. Mills produce almost 2 
billion square yards of carpet annually in 230 plants located across 21 
states with a workforce in excess of 70,000 employees. In Georgia, 80% 
of this domestic industry is located within a 65-mile radius of Dalton.
    Despite these robust numbers and significant economic footprint, 
the carpet and rug industry faces tremendous challenges from abroad. By 
far the most immediate problem facing the carpet and rug industry is 
the theft of intellectual property rights, primarily from China and 
India. Can we expect you to take action on this in 2004?
    Mr. Secretary, you will be receiving a letter shortly signed by 
many members of the Georgia delegation asking you, in conjunction with 
the U.S. Trade Representative, to give a renewed priority to 
intellectual property theft in the context of the upcoming DOHA Trade 
Round and as additional bilateral or regional trade agreements are 
pursued by the government.
    I also have grave concerns about outsourcing. And my concerns came 
long before ``60 Minutes'' reported that credit card companies moved 
their telephone banks to India. I want to hear from you that we 
insource more than we outsource.
     There is much more I could say about trade, but let me change 
subjects for just a moment and make a comment on your health care 
suggestions. Mr. Secretary, I know you support AHPs. I could be 
convinced to support AHPs; all you have to do is fix them so AHPs can't 
discriminate against sick people.
    With that Mr. Chairman I thank you for the time and will yield 
back.

                                 ______
                                 
Prepared Statement of Hon. Barbara Cubin, a Representative in Congress 
                       from the State of Wyoming

    I'm pleased that Secretary Evans has joined us today to discuss the 
state of U.S. industry. You know as well as I, Mr. Secretary, that 
there isn't an area of this country that doesn't feel the impact of the 
Commerce Department. From telecommunications and trade to patents and 
economic development, the proper stewardship of this department is 
crucial to a strong America.
    That's why I appreciate your coming before the Committee today. 
There are a lot of allegations swirling about in a presidential 
election regarding jobs, the economy, and just who deserves the credit 
or blame for any--or all--of it. During your testimony I would 
appreciate your assessment of these allegations, and make certain that 
policy debates, especially those surrounding an election, are factually 
based. Like my friend from Wyoming, former Senator Al Simpson, says, 
``a charge unanswered is a charge believed.''
    I would also appreciate your comments about the Manufacturing 
Extension Partnership (MEP). I know it was covered in the Manufacturing 
in America report the Department of Commerce published in January, but 
I would like to get a better handle on what the Administration is 
proposing absent this important funding.
    I can tell you that I was visiting with several small manufacturers 
from Wyoming last week, and to a man they explained how the MEP program 
benefitted their companies and provided jobs and revenue to their 
communities and the state. After all, Wyoming isn't home to 
manufacturers like Boeing or General Motors, but rather folks filled 
with the Wyoming ``can do'' spirit who find a special niche or have an 
innovative idea, but lack the capital to bring it to market, or produce 
it more efficiently.
    I thank you in advance for delving into these matters and look 
forward to hearing what you in the Administration and we in Congress 
can do to keep a steady hand on the wheel and not pursue disincentives 
to further economic growth.
    I yield back the balance of my time.

                                 ______
                                 
 Prepared Statement of Hon. Mike Rogers, a Representative in Congress 
                       from the State of Michigan

    Mr. Secretary, thank you for taking the time to meet with us today. 
I know that the title of today's hearing is ``The State of U.S. 
Industry'', but I would suggest that Jobs, Jobs, Jobs would also be an 
apt title.
    In Washington we do a funny thing. We say that jobs are an issue, 
but then when it comes time to debate a piece of legislation we rarely 
talk about jobs. Instead we say, this is not a jobs bill, this is an 
energy bill. We say this is not a debate about jobs, this is a debate 
about tort reform. Rarely is the question asked, how can we help 
someone who wants work find it.
    Mr. Secretary, you have asked that question, and you know the 
answer. You know that taxation, regulation, litigation, and health care 
costs are killing American jobs. You know that these issues are not 
separate conversations; they are all part of one debate about the 
future of a competitive American worker. You know that if American 
workers and American manufacturing are going to compete in a world 
market than we will have to tackle all of these things.
    Mr. Secretary, some people will disagree with you. They will say 
that wages are the only thing causing us to be uncompetitive. Mr. 
Secretary, their argument is a Trojan horse. It allows them to hide 
from real issues, over which they could really have an effect.
    And so, Mr. Secretary, before my colleagues give up on the American 
worker, before they embrace protectionism and make-work government 
jobs, I would ask them, has Congress done all it can do? Have we lifted 
the weights being placed on the backs of American workers? What have we 
done to tame the gang of regulators trying to shut down factories? What 
have we done to slow the pack of lawyers milling around job sites 
encouraging someone to sue?
    Mr. Secretary, you are trying to do something. For that I thank 
you, and I look forward to working with you on behalf American 
Industry, and American jobs.

                                 ______
                                 
 Prepared Statement of Hon. John Shimkus, a Representative in Congress 
                       from the State of Illinois

    Good morning. Thank you Mr. Chairman for holding this hearing 
regarding the State of the U.S. Industry with Secretary Evans. I look 
forward to hearing Secretary Evans statements on how the U.S Industry 
is performing.
    I would like to start out by thanking Secretary Evans for taking 
time to come before the committee and I appreciate his leadership. I 
would also like to extend my thanks to the Secretary for the creation 
of a DOT KIDS website through the National Oceanic and Atmospheric 
Administration or NOAA. I am always happy to see another Dot kids 
website created. As many of us know, Dot kids is a wonderful resource 
for our children to have, so they can safely look on the internet 
without the danger of inappropriate sites.
    Next I would like to focus on manufacturing. In my District alone 
there are some 500 manufacturers. Companies like Continental Tires and 
Hella North America, who was in the hearing last week, are doing good 
things and creating and maintaining jobs. A lot of these small to 
medium sized manufacturers rely on Manufacturing Extension Partnerships 
(MEPs). MEPs have helped create many success stories throughout 
Illinois and the rest of the country and I appreciate all the help they 
give manufacturers.
    Even with the guidance of the MEPs there still has been job loss 
and I look directly at the high energy prices and some of our state tax 
proposals on trucking and natural gas to be the reason for this job 
loss. An estimated 85,000 jobs have been lost by US chemical makers 
since natural gas prices began to rise in mid-2000. If we can't get 
natural gas at an affordable price, more and more of our production 
facilities will be forced to pack up and leave the country. According 
to the US Department of Commerce, America loses 12,389 jobs for every 
billion we spend on imports. At today's oil prices, that means America 
is sending more than 1.7 million jobs overseas every year. In 2003 
alone, the US sent more than $100 billion overseas to import oil from 
foreign nations. The energy bill will help create or maintain over 
156,738 full-time and part-time jobs in Illinois alone. Those are hard 
numbers to argue with.
    I am very interested to hear the testimony of Secretary Evans and 
look forward to working with him in the future. I yield back the 
remainder of my time.

                                 ______
                                 
 Prepared Statement of Hon. Mike Rogers, a Representative in Congress 
                       from the State of Michigan

    Mr. Secretary, thank you for taking the time to meet with us today. 
I know that the title of today's hearing is ``The State of U.S. 
Industry'', but I would suggest that Jobs, Jobs, Jobs would also be an 
apt title.
    In Washington we do a funny thing. We say that jobs are an issue, 
but then when it comes time to debate a piece of legislation we rarely 
talk about jobs. Instead we say, this is not a jobs bill, this is an 
energy bill. We say this is not a debate about jobs, this is a debate 
about tort reform. Rarely is the question asked, how can we help 
someone who wants work find it.
    Mr. Secretary, you have asked that question, and you know the 
answer. You know that taxation, regulation, litigation, and health care 
costs are killing American jobs. You know that these issues are not 
separate conversations; they are all part of one debate about the 
future of a competitive American worker. You know that if American 
workers and American manufacturing are going to compete in a world 
market than we will have to tackle all of these things.
    Mr. Secretary, some people will disagree with you. They will say 
that wages are the only thing causing us to be uncompetitive. Mr. 
Secretary, their argument is a Trojan horse. It allows them to hide 
from real issues, over which they could really have an effect.
    And so, Mr. Secretary, before my colleagues give up on the American 
worker, before they embrace protectionism and make-work government 
jobs, I would ask them, has Congress done all it can do? Have we lifted 
the weights being placed on the backs of American workers? What have we 
done to tame the gang of regulators trying to shut down factories? What 
have we done to slow the pack of lawyers milling around job sites 
encouraging someone to sue?
    Mr. Secretary, you are trying to do something. For that I thank 
you, and I look forward to working with you on behalf American 
Industry, and American jobs.

                                 ______
                                 
 Prepared Statement of Hon. C.L. ``Butch'' Otter, a Representative in 
                    Congress from the State of Idaho

    Thank you, Mr. Chairman, for conducting this hearing on such a 
timely issue.
    As the economy recovers, it's more important than ever that 
Congress works to create a climate for businesses large and small to 
thrive. Job growth depends on it. This administration already has made 
great strides toward improving the business climate here in the United 
States. The tax relief initiatives of 2001 and 2003 were essential to 
setting the stage for job creation, and they need to be made permanent.
    Over the past year we have watched the robust impact of tax relief 
on our nation's economy. Yet despite the record growth rate of 2003, 
too many Americans are still pounding the pavement in search of a job 
rather than earning an income for their family. We hear a lot these 
days about how American jobs are being moved overseas. What many people 
fail to see, however, is the inhospitable business environment here in 
the United States that's led to some of those moves.
    How can we expect America's bright and successful entrepreneurs to 
keep their enterprises here at home when we burden them with over-
regulation and the world's only double-taxation on corporate income? 
The exportation of American jobs is the fault not of savvy American 
corporations but of an unfriendly corporate tax system and overzealous 
bureaucracy.
    We all want a clean environment and a safe work place, but a one-
size-fits-all, top-down regulatory approach isn't the way to get there. 
America is a nation with vast natural resources. But our government-
knows-best approach has turned us into a country importing more and 
more of its minerals, watching its forests burn while importing logs to 
build homes, and losing good, high-paying jobs in rural areas to 
foreign countries that recognize the importance of a domestic natural 
resources industry.
    Our failure to enact a national Energy Policy is another reason 
we're exporting American jobs. Rather than drilling for oil and gas on 
our public lands, we're becoming more dependent on foreign energy 
sources. America's energy production jobs are being sent oversees, 
which increases energy prices, reduces the stability of supply and 
increases the cost of doing business here at home. At the same time, 
our failure to address energy infrastructure concerns inhibits 
potential growth and threatens more of the kind of devastating 
blackouts we experienced last summer, with the attendant economic 
consequences.
    An abundant and reliable energy supply is an absolute necessity for 
America's continued economic recovery. The Energy Policy Act approved 
by the House last year would go a long way toward achieving that goal.
    I'd like to welcome Secretary Evans to the Committee and I look 
forward to hearing his views on the state of U.S. Industry. Thank you 
Mr. Chairman.

                                 ______
                                 
Prepared Statement of Hon. John Sullivan, a Representative in Congress 
                       from the State of Oklahoma

    Thank you, Chairman. Thank you for calling this most important 
hearing. Secretary Evans, thank you for coming to share the state of 
U.S. industry with the Committee. As we all know, the state of the U.S. 
manufacturing sector is in a precarious state. In my district alone, we 
have lost 1,700 manufacturing jobs in the last year. However, the 
economy is on the rebound.
    A recent survey of U.S. manufacturers found that far more 
manufacturers are planning to add jobs, than to cut them. This year is 
forecast to be the biggest increase in production since 1999, according 
to the National Association of Manufacturers.
    We need to create the conditions for economic growth and 
manufacturing investment. Nobody knows better than the manufacturers 
themselves about what needs to happen to bolster the sector. A recent 
report sponsored by American manufacturers clarified that many of these 
proposals were necessary to further economic growth:

 Making the tax cuts permanent
 Making health care costs more affordable for families and small 
        businesses;
 Reducing frivolous and junk lawsuits;
 Making Federal regulations less burdensome on small businesses;
 Enacting a national energy policy that ensures a more affordable and 
        reliable supply of energy, and makes us less dependent on 
        foreign energy sources; and
 Opening foreign markets to American products and services
    I would like to submit this study for the record.
    According to the ISM survey released this month, manufacturing 
purchasing managers reported expanding employment for the fourth 
consecutive month in February.
    We must lower the cost of manufacturing in the United States. 
Through AHP's we can lower health care costs for small manufacturers. I 
believe we should conduct a regulatory review. Inventory existing 
regulations, evaluate and implement reforms, and review the act of new 
rules. It is also critical that we enact energy legislation. We must 
increase the reliability and affordability of electricity, facilitate 
adequate and economical supplies of natural gas, and encourage further 
research and development in new energy technology.
    I have consistently supported the manufacturing sector and will 
continue to do so.
    Manufacturing is a cornerstone of the American economy. 
Approximately one out of every five factory jobs is due to 
manufacturing exports. Some today would like to play politics with this 
issue rather than take a hard look at what we need to accomplish. 
People's jobs and livelihoods are at issue; let's take an honest look 
at how we can improve the situation. We have started to give 
manufacturing the tools it needs to survive AND thrive, including 
AHP's, tax credits, and trying to reduce the bureaucratic burden on 
manufacturers. Now we need to finish the job.
    I yield back. 

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Prepared Statement of Hon. Bobby L. Rush, a Representative in Congress 
                       from the State of Illinois
    Thank You Mr. Chairman: I am pleased that we are having this timely 
hearing on the State of U.S industry. Although I am not an economist 
nor a doctor , it does not take much to see that the U.S. industry is 
hemorrhaging. More than 146,000 jobs were lost last year. Unemployment 
rates are on the rise. Manufacturing jobs have been cut or sent 
overseas (139,000 jobs to be exact in my state--Illinois). Yet we are 
hearing conflicting reports from our President that the economy is 
rebounding. Last year the White House promised that their tax cuts, 
favoring the wealthy, would create 306,000 jobs a month. That did not 
happen. But what has happened, the economy produced a job gain of 
21,000. 285,000 to be exact--below the projected monthly increase. What 
has happened is that there are now more than 8.2 million Americans 
unemployed and 34 millions Americans, including 12 million kids that 
live below the poverty line.
    Again, I am not an economist but we can all see that the U.S. 
economy is in dire straits, undergoing a lengthy downturn, high 
unemployment, a fall in real wages, declining family incomes, and 
extensive job losses. What we need is obvious, more jobs, lower 
unemployment and more wage growth. How we accomplish this is the 
million dollar question. But it is clear that this cannot be 
accomplished by the U.S. industry outsourcing good U.S. manufacturing 
jobs overseas nor by instituting further misguided tax cuts that favors 
the wealthy.
    That said, I look forward to hearing the views of Secretary Donald 
Evans on how best we can strengthen the state of U.S. industry.

                                 ______
                                 
 Prepared Statement of Hon. Eliot Engel, a Representative in Congress 
                       from the State of New York

    Thank you Mr. Chairman. Mr. Secretary, welcome and thank you for 
your time.
    As you may know I started out as a school teacher. I believed that 
setting clear, but high, standards was important for my students to 
succeed. I believe most Americans do the same for their Presidents and 
the Administration.
    When I look at the goals that this Administration has set--a 
stronger economy and more jobs, I can only come to the conclusion that 
the policies being pursued are a failure. As a teacher, I would have to 
grade these policies as an F. I believe most Americans would too.
    The basic concept has been a return to a failed economic theory of 
trickle down economics. I believe the data is clear--tax cuts for the 
super rich do not result in more economic activity.
    We don't have a stronger economy.
    We don't have more jobs.
    What we do have is an ever growing debt that will be passed onto 
our children.
    The Preamble of the Constitution says ``We the people of the United 
States, in order to form a more perfect union, establish justice, 
insure domestic tranquility, provide for the common defense, promote 
the general welfare, and secure the blessings of liberty to ourselves 
and our posterity . . .''
    OUR POSTERITY!
    How can we look at our children and grandchildren and say we are 
promoting their general welfare? We are leaving them an economic time-
bomb!!! Seven trillion dollars in debt. Every American now carries a 
burden of $24,326.36. Just this year alone we will spend $340 billion 
on interest for this debt.
    Job creation remains a problem as well. But instead of pursuing 
successful strategies, this Administration has ignored them. In fact, 
it has pursued policies that encourage shipping jobs overseas.
    In the case of the Manufacturing Extension Program, funding has 
fallen from about $100 million to $39 million. This is a small 
program--but it has helped create many jobs.
    History tells us of when the Irish would seek a job, they would see 
a sign in the window that said ``NINA.'' It meant ``No Irish Need 
Apply.'' I can sum this Administration's policies up in a similar 
phrase--NANA--No Americans Need Apply.
    I yield back.

    Chairman Barton. And with that, we want to welcome the 
distinguished Secretary of Commerce, the Honorable Don Evans 
from Midland, Texas, my good friend, good friend of the 
President, and good friend of the American people, a man who 
has done an outstanding job as Secretary of Commerce, takes his 
job seriously, and agreed to come to the committee today 
knowing that the issues to discuss are of a very important and 
sensitive nature, but need to be debated and need to have a 
dialog.
    Mr. Secretary, your written statement is put into the 
record in its entirety, and we recognize you for such time as 
you may consume to elaborate on that opening statement. Welcome 
to the Energy and Commerce Committee.

   STATEMENT OF HON. DONALD EVANS, SECRETARY, UNITED STATES 
                     DEPARTMENT OF COMMERCE

    Mr. Evans. Thank you so much, Mr. Chairman, and to the dean 
of the House. Thank you also, my friend, for the invitation to 
testify.
    I look forward to working with you and this entire 
committee to strengthen the environment that will enable U.S. 
businesses to continue to succeed in the global economy. And I 
strongly believe that businesses are at the strategic center of 
any civil society.
    In America, businesses provide paychecks to 138 million 
workers, paychecks that allow people to support their families, 
educate their children, and plan for their future. America's 
economy is an amazing engine, creating opportunities, jobs, and 
the most advanced products in the world.
    As a Nation, we are blessed with an abundance that 
testifies to the genius of the free enterprise system, the 
talents and discipline of our workforce, the vision of our 
innovators and entrepreneurs, and the job-creating drive of 
small business owners all across America.
    With only 5 percent of the world's population, the U.S. 
economy accounts for one-third of the global economy. The 
United States remains far and away--far and away--the largest 
producer of manufactured goods in the world. Standing alone, 
our manufacturing sector would be the fifth largest economy in 
the world.
    America is the global leader in services, retaining a 
significant advantage in banking, insurance, 
telecommunications, information technology, and health care. 
This administration took office on the bust side of a boom-bust 
cycle. In fact, 1.78 million jobs were lost by the end of 2001, 
our first year.
    This was a year that marked a recession that had been 
brewing for months, the collapse of the dot-com bubble, the 
collapse of the stock market, the collapse of the 
telecommunication sector of our economy, the tragedy of 
September 11, which devastated the travel and tourism industry, 
and the discovery of years of corporate malfeasance.
    The President's leadership has seen us through some of the 
most difficult times this Nation has ever faced, and it has 
resulted in remarkable economic resiliency. President Bush took 
aggressive action by providing tax relief for families and 
small businesses all across America. Without this action, real 
GDP growth by the end of 2004 would be 3.5 to 4 percent lower, 
and 3 million more people would be out of work.
    Mr. Chairman, I have traveled around the country, and I 
know there is anxiety out there. Far too many workers are 
hurting. As a CEO, and as a president of a company in the 
private sector for some 25 or 30 years of my life, nothing ever 
felt better to me than changing somebody's life and telling 
them they had a job. Nothing--nothing was more painful than 
telling somebody in our company they did not have a job.
    That is experience that has stayed with me my entire life. 
When I look at the economic data, I know behind every number 
there is a person, there is a heart, there is a person with 
hopes and dreams for their family, and that is why the 
President and I will not rest, and we will not tire until this 
economy is creating a job for every American who wants a job.
    Fortunately, major indicators tell us that the economy is 
strong and getting stronger. The economy has shown positive job 
growth for 6 straight months. Unemployment is currently at 5.6 
percent. This is below the average of the 1970's. It is below 
the average of the 1980's. And it is below the average of the 
1990's.
    Disposable personal income was up 4.8 percent in 2003. 
Productivity grew from 2001 to 2003 at the fastest 2-year rate 
in more than 40 years, because of an incredible workforce that 
we have in this country. Small business confidence is at a 20-
year high. The Purchasing Managers Manufacturing Index has been 
above 60 for four straight months, which is a powerful, 
powerful number. This is the strongest sustained pickup since 
1983.
    Mr. Chairman, a Secretary of Commerce last testified before 
this committee in 1995. A few months later, President Bill 
Clinton said in his State of the Union, and I quote, ``Our 
economy is the healthiest it has been in three decades, and we 
have the lowest combined rates of unemployment and inflation in 
27 years.''
    At that time, the number--the combined rate of unemployment 
and inflation stood at 8.3 percent. The number now stands at 
7.3 percent. In addition, home ownership is at an all-time 
high. Sixty-eight percent of the people in America; 72 million 
families now own homes. And the interest rates remain near 
record-year lows. The decrease in mortgage rates since January 
1966 saves the average homeowner more than $2,600 a year.
    These indicators are encouraging, but we all know we are in 
a rapidly changing economy. This is a crucial time in our 
economy, and the decisions we make today will have a profound 
impact on the future. This morning I want to talk about four 
key objectives that I believe are critical to our future 
success.
    No. 1, ensuring that our economy remains the most 
competitive in the world, both here at home and all around the 
world.
    No. 2, promoting America's immense innovative capacity.
    No. 3, preparing our workers for the 21st century economy.
    And, four, promoting strong commercial ties with the 95 
percent of the world's population that does not live in the 
United States of America.
    These objectives are fundamental. American companies and 
workers recognize they are the ingredients for success. These 
principles are also the foundation of the President's six-point 
plan to promote economic growth and job creation.
    As our workers seek to equip themselves for new challenges 
and competition, and as American businesses seek to cut costs, 
manage smarter, and engage in new markets that they rightly 
expect a government at all levels to work with them and not 
against them.
    As Secretary of Commerce, it is my job to advocate for 
American business. In this capacity, I have spent considerable 
time working with and listening to manufacturers all across 
this country. Over the past year, we have had 20 roundtable 
discussions with hundreds of manufacturers in 14 States. Based 
on this effort, we released a major report entitled 
``Manufacturing in America'' this past January.
    Our report contains extensive analysis and more than 50 
recommendations. We have already implemented many of these 
recommendations, and we will be bringing more on line soon.
    Manufacturers told us that they want to be able to compete 
domestically and internationally, but health care, energy cost, 
tax compliance, regulatory and other costs beyond their control 
are seriously damaging their competitive position in the world. 
For example, in 2002, the lawsuit burden on every single 
American was $809. More than $200 billion is spent on our tort 
system, and only 20 percent of that goes to compensate those 
injured for economic damages.
    Junk lawsuits drive up health care cost, cut into the 
bottom line, and destroy jobs. American businesses expect us to 
work together to address these underlying barriers to growth 
and investment.
    The innovative infrastructure of the United States exists 
no place else in the world, and has always been one of our 
greatest advantages. It has been nurtured on the shop floor and 
in small startups. American investment in innovation creates 
breakthrough cures, new industries and jobs of every type every 
day.
    President Bush has made historic commitments to the 
innovative capacity of the United States. We will spend a 
record $126 billion on Federal research and development this 
year, and the President has proposed $132 billion next year. 
This is a 42 percent increase, since President Bush took 
office.
    In addition, the U.S. private sector will spend another 
$193 billion on research and development this year. Innovation, 
technology, and entrepreneurship create jobs and raise our 
standard of living, and we must help them flourish.
    There are fundamental and structural changes under way in 
our economy. It is crucial that students, workers, job seekers, 
and communities have the tools they need to succeed throughout 
life. America's workforce must adapt to meet the needs of the 
21st century economy, and we must be there to support them.
    Future U.S. job growth will continue to be in emerging 
fields, in emerging industries. This administration is 
committed to investing in ongoing retraining programs for our 
workers that need to develop the skills in order to meet the 
needs of a transitioning economy. Our budget proposes roughly 
$23 billion to fund 31 job training and employment programs 
governmentwide this next year.
    In addition, the President has proposed a $250 million 
community college job training program initiative to give 
workers immediate and relevant training opportunities. 
Government can do a great deal, but it is important to note 
that the private sector invests even more--about $60 billion a 
year--to provide training and education to the American 
workers. Lifetime learning is essential to the competitive 
position of our industry and our workers.
    I cannot talk about the U.S. economy without talking about 
the important role of trade. The combined effects of rapid 
change in communications, transportation, technology, the end 
of the cold war's economic divisions, and the lowering of trade 
barriers have made the global marketplace a reality.
    That translates into expanded markets for U.S. goods and 
services. Today, the U.S. gross domestic product is five times 
larger than it was in 1950, and U.S. exports are 20 times 
larger. U.S. exports account for nearly 25 percent of U.S. 
economic growth in the 1990's and support more than 10 million 
jobs.
    It is our responsibility to deliver a level playing field 
for U.S. companies, and we will continue to eliminate tariff 
and non-tariff barriers to our exports. Since 2001, the 
Department of Commerce has initiated 138 new antidumping and 
countervailing duty investigations resulting in 57 new orders 
placed on unfairly traded imports. The goal is simply to ensure 
that everyone is subject to the same rules of the game.
    Let me briefly address our relationship with China. The 
stakes are high. China is growing at an extraordinary rate, and 
it is a major player in the global economy. Indeed, China is 
our third largest trading partner; also, the fast-growing 
market for U.S. goods and services. Our exports to China surged 
by 29 percent in 2003, while imports were up by 22 percent.
    While China's market is an enormous opportunity, it 
presents challenges that we must confront. I can assure you 
that the Department of Commerce is dedicated to making sure 
China plays by the rules. Over 50 percent of the new 
antidumping cases brought in 2003 were against China. In 
previous years, cases against China only accounted for 
approximately 10 to 15 percent of the total.
    And just last week USTR announced the filing of a case at 
the WTO regarding China's discriminatory tax rebate for 
integrated circuits. We are fully committed to ensuring that 
China complies with the WTO rules, opens markets, drops 
barriers, eliminates State subsidies, and allows market forces 
to determine economic decisions.
    In June, I will return to China to press their leadership 
for compliance, enforcement, and openness. The hallmark of our 
trade relationship will continue to be effective enforcement. 
We will enforce our rules and ensure others do the same.
    Before I conclude, permit me to address a topic that is 
getting a lot of attention--the impact of international 
competition on American jobs. There are some American workers 
who have seen their jobs offshored, and who are concerned that 
their jobs could be going overseas. We all share these same 
concerns, and we are all motivated to address them.
    However, the United States greatly benefits from doing 
business with the world. Right now, foreign companies employ 
some 6.4 million Americans. Foreign business leaders realize 
that American workers are the best workers in the world, and 
that is why they are here.
    There are hundreds of foreign companies employing thousands 
of American workers in each of your States. For example, in my 
home State of Texas, Toyota plans to hire 2,000 employees in 
the next year in its new $800 million San Antonio truck 
facility. In addition, an Indiana auto parts manufacturer has 
just broken ground on a $13 million plant in Austin that will 
supply Toyota's factory.
    Economic isolationism would threaten each of these 6.4 
million American jobs. America cannot turn back from a global 
marketplace of goods and services. Engagement with the world 
creates jobs and growth, while a policy of economic 
isolationism destroys them.
    We will continue to strengthen the programs I have 
described earlier to assist individuals and communities 
throughout our economic--throughout our country and through 
this economic transition. We will continue to work to ensure 
American companies remain competitive with anyone in the world, 
and we will enforce our trade laws and make sure others play by 
the rules.
    We will promote education. We will support innovation. And 
we will not turn away from the global engagement that has been 
the most powerful source of economic progress in modern times 
and built the global economy.
    Mr. Chairman, and members of the committee, it is an honor 
to be with you today. I appreciate your time and attention, and 
I would be pleased to answer any questions that you may have.
    [The prepared statement of Hon. Donald L. Evans follows:]
   Prepared Statement of Hon. Donald L. Evans, Secretary of Commerce
    Mr. Chairman, thank you the invitation to participate in this 
hearing on the state of American industry and the United States' 
economy. I appreciate your leadership in raising the concerns of 
American companies and workers and helping policymakers understand the 
challenges and opportunities U.S companies and workers are facing. I 
would like to also congratulate my friend Chairman Barton on your new 
role as Chairman of this Committee. You have served this country well 
for over 20 years and I am sure your experience and leadership will 
bring you continued great success. I look forward to working with you 
and other members of the Committee as we continue strengthening the 
environment that will enable American businesses to continue to succeed 
in today's global economy.
    I strongly believe that businesses are at the strategic center of 
any civil society. There are more than 138 million Americans at work 
right now realizing their aspirations for their families. Businesses in 
America--from the smallest shop to the biggest corporations offer 
opportunity for those with a dream, provide a foundation for community 
and ground our democracy

                THE STATE OF AMERICAN INDUSTRY IS STRONG

    America's economy is an amazing engine--generating opportunity, 
jobs, and the most sophisticated and technologically advanced products 
in history. It is a testimony to the genius of our system, the talents 
and discipline of our work force, and the vision of our entrepreneurial 
spirit.
    With only five percent of the world's population, the United States 
produces about one-third of the global output. Americans have created 
an $11 trillion economy. The United States remains far and away the 
largest producer of manufactured goods in the world. Standing alone, 
our manufacturing sector would be the 5th largest in the world--larger 
than China's economy as a whole. America is the global leader in 
services, and retains a significant advantage in banking, insurance, 
telecommunications, information technology and healthcare.
    Household wealth has soared from an inflation-adjusted $7.8 
trillion in 1950 to $44 trillion in 2004. We all understand how 
important it is for people to own a home and build their own savings. A 
record 72 million American families own their own home. More than 52 
million, or nearly half of, American households, own equities according 
to a recent survey released by the Investment Company Institute and the 
Securities Industry Association. That represents a 7 percent gain, or 
3.5 million more households, from January 1999.

                 THE RESILIENCE OF THE AMERICAN ECONOMY

    The Bush Administration took office on the bust side of a boom-bust 
cycle that led to a recession and significant job losses. In fact, 
nearly 1.8 million jobs were lost before the President's first year in 
office was complete: a year marked by a recession that had been brewing 
for months, the collapse of the dot-com bubble, the tragedy of 
September 11, and the discovery of years of corporate malfeasance.
    It is difficult to estimate the effects of 9/11 on our psyche or 
business confidence. But we now know that in the 5 months following 
September 11, almost 1.2 million jobs were lost: 51 percent of all jobs 
lost in overall payroll employment decline since January 2001.
    The President's leadership has seen us through some of the most 
difficult times in recent memory and resulted in remarkable economic 
resiliency. Fortunately, the tax initiatives of 2001, 2002 and 2003 
softened the blow from the recent recession and set the stage for 
vigorous economic growth going forward. Without the President's tax 
relief for families and small business, by the end of this year real 
GDP would be 3.5 to 4.0 percent lower and 3 million more people would 
be out of work, according to a Treasury Department analysis.
    The Joint Economic Committee recently noted that the peak 
unemployment rate just after the last recession was far lower than in 
prior recessions. The 6.3 percent peak in unemployment during the last 
recession compares favorably to 7.8 percent in 1980, 10.8 percent in 
1982, and 7.8 percent after the 1990-91 contraction. Indeed, the 
current 5.6 percent unemployment rate is below the average rate of the 
1970s, the 1980s, and the 1990s.
    A look at the global economy also underlines the positive direction 
we see at home.
    The latest data shows European unemployment at 8 percent compared 
to 5.6 percent in the United States. America also has the lowest long-
term unemployment rate in the West.
    Over the past three years, the American economy has grown about 
twice as fast as the economies of Europe and Japan. In 2003, the U.S. 
economy expanded at a pace of 4.3 percent, with the second half of 2003 
posting the best growth in 20 years. You cannot have strong employment 
without economic growth.
    Several other indicators show that the economy is recovering from 
the shocks this economy has faced over the past few years. Just look at 
recent data:

 Jobless claims are at their lowest level since the recession began.
 Nominal after-tax income was up 3.4 percent in 2003.
 Productivity grew from 2001 to 2003 at the fastest 2-year rate in 50 
        years.
 Small business confidence over the past several months has been at 
        20-year highs.
 The equity markets added $4.2 trillion in new wealth from October 
        2002 to today.
 The economy has created 364,000 jobs in the past six months according 
        to the payroll survey and nearly one million according to the 
        household survey.
 The purchasing managers index of manufacturing activity recorded its 
        fourth month over 60 in February, indicating the strongest 
        sustained pickup in activity since 1983.
 And a recent employment survey shows that manufacturers are 
        optimistic about hiring.
    The last time a Secretary of Commerce testified before this 
Committee was late 1995. A few months later, President Bill Clinton 
noted in his State of the Union that ``Our economy is the healthiest it 
has been in three decades [and] we have the lowest combined rates of 
unemployment and inflation in 27 years.'' At that time, the combination 
of unemployment and inflation, or the ``misery index,'' stood at 8.3 
percent. Today that measure is still lower--at 7.3 percent. In 
addition, the mortgage rate was then at 7.8 percent; today it is 5.4 
percent. Based on the average price of a home ($168,700), the average 
American homeowner is now paying $2,600 less per year in mortgage 
payments.
    Clearly, the President is taking the country in the right 
direction.
    We do, however, have a lot of work to do, and neither the President 
nor I will be satisfied until every American who wants a job can find 
one. But both of us know that heaping additional burdens on business 
and closing markets always kills jobs. That was the painful lesson of 
the Depression, when raising barriers to trade compounded and prolonged 
the misery for working people around the world.
    There is more to do. The government must continue to encourage 
economic growth through implementing the policies that support the 
principles I will discuss. The President has proposed an aggressive 
plan and I am pleased to be here today to discuss it.
    Before President Bush asked me to serve in his Administration, I 
spent almost 30 years in the private sector; I know that our company 
helped many of our fellow employees realize the dreams they had for 
their families. Watching those dreams become reality was the most 
rewarding aspect of my tenure as a company president and chief 
executive officer.
    During those years, I was tested through business cycles. 
Identifying challenges and risks, and adapting to opportunities allowed 
our company to compete and win. We did not ignore challenges, did not 
try to stop change, and never gave people working with us false 
promises of avoiding change.
    Mr. Chairman, I know that there is anxiety out there in America. I 
know that far too many of our workers are hurting. As a CEO, nothing 
gave me greater satisfaction than changing a person's life by offering 
them a job. And nothing was more painful than telling someone at our 
company that we no longer had a job for them. That experience stayed 
with me. When I look at the latest economic data, I see through the 
numbers. I always see a person with hopes and dreams and a family. 
Fortunately, we are beginning to see favorable momentum.
    The President and I are committed to creating the conditions for 
economic growth and vitality so every single citizen who wants to work 
can find work. The President is defining America's economic future in 
the world--not assigning blame, promoting economic isolationism, or 
selling Americans short. As Secretary of Commerce, my job is to 
advocate for American business. My focus everyday is to help companies, 
workers and communities as they work to meet new challenges and seize 
opportunities.
    Mr. Chairman, I believe that we are at a time of transition. 
Transitions are never easy and this Administration knows there are 
workers experiencing pain. We are directing resources and focusing our 
efforts on those who are hurting. For example, our Economic Development 
Administration at the Department of Commerce has worked with the Labor 
Department as they deploy ``rapid response'' teams to Michigan, North 
Carolina and Tennessee to assist communities in those states dealing 
with economic dislocation.
    The challenges of today will require policymakers to be forward-
looking and innovative like never before. We have to understand and 
keep up with the rapid pace of change, because our businesses must 
continue to lead the world, enter new markets, control costs, and 
attract, train and retain the best people.
    We are at a crucial time in our economic history and the decisions 
we make today will have profound impact. This morning, I want to talk 
about four key objectives that I believe are critical to our future 
success:

Ensuring that our economy remains the most competitive in the world;
Promoting America's immense innovative capacity;
Preparing our workers for the 21st century economy; and
Promoting strong commercial ties with the 95 percent of the world's 
        population that does not have the blessing of living in this 
        country.
    These objectives are fundamental. American companies and workers 
recognize they are the ingredients for our success. I have been to many 
states in the three years that I have had the honor of serving this 
Administration and people tell me time and time again--allow us to 
create, compete and seek new markets and we will get the job done every 
time.
    These principles are also the foundation of the President's six-
point economic plan to promote economic growth and provide momentum for 
job creation.
    As clear and intuitive as these principles sound, however, they are 
not universally held. Some seek refuge in policies and rhetoric that 
promise winning without competition, job creation through economic 
isolationism, and small business fed by additional taxation.
    I look forward to our dialogue about the challenges and 
opportunities facing American industry and the steps that the Bush 
Administration is taking to promote the principles of economic 
development I just articulated. But before turning to each of these 
subjects in more depth, I want to take a moment to provide a framework 
for where the economy of the United States currently stands.
         keeping our economy the most competitive in the world
    As our workers equip themselves for new challenges and competition, 
and as American businesses cut costs, manage smarter and engage in new 
markets they rightly expect the government at all levels to work with 
them, not against them.
    Rising costs of health care, litigation, energy and unnecessary 
regulation kill jobs. It is the steady accumulation of multiple burdens 
that has had the most severe impact on the competitive environment in 
which our companies operate.
    While our businesses have tightened their belts and raised their 
productivity in an effort to succeed in the marketplace, they have seen 
that advantage and their hard-won productivity gains eroded by higher 
energy costs, medical and pension costs, tort liability costs, and 
excessive taxation and burdensome regulation. According to the National 
Association of Manufacturers, these overhead costs add approximately 22 
percent to American manufacturers' labor costs (nearly $5 per hour 
worked).
    As Secretary of Commerce, I have spent considerable time working 
with and listening to manufacturers all across the United States. Over 
the past year, we held 20 roundtable discussions with hundreds of 
manufacturers in the automotive, aerospace, biotechnology, furniture, 
semiconductor, and textile industries, among others, in more than 
fourteen states. And I can tell you that they did not ask us to isolate 
them behind walls or to impose new tariff regimes. They told us to get 
our own house in order by attacking the burdensome costs that make them 
less competitive in a global environment.
    Based on this effort, we released Manufacturing in America in 
January, a comprehensive report with more than 50 recommendations. We 
have already implemented a number of these recommendations and will be 
enacting more soon. For our part, we will be appointing an Assistant 
Secretary for Manufacturing and Services and establishing an Unfair 
Trade Practices Task Force to monitor and ensure our foreign 
competitors are playing by the rules when importing into the U.S. 
market. In addition, we will also aggressively pursue trade violations 
that put U.S. exporters at a disadvantage through a new Office of 
Investigations and Compliance. The President's Manufacturing Council 
will also be established to provide high-level guidance on issues 
impacting manufacturing in the United States.
    These steps will help, but it will take a much larger, very 
sustained effort from policymakers to get some fundamental costs in 
line to assist our companies to continue to win in the world economy.
    We all know that rising health care costs are eroding 
competitiveness. In 1980, health care was 8.8 percent of GDP. In 2000 
it was 13.3 percent and in 2002 it was nearly 15 percent. It will be 16 
percent of GDP within five years. Businesses pay for their employees' 
health benefits because of tax incentives and because they see their 
own interest served by a healthy and motivated workforce: 97% of the 
National Association of Manufacturers' members pay for employee health 
care benefits. However, there is a competitive cost of doing so: the 
United States already spends more than twice as much on health care per 
person as other industrialized countries.
    Regulatory compliance remains a huge burden in expense and lost 
time. While the exact cost of regulation is uncertain, the total cost 
is comparable to discretionary spending--about $640 billion in 2001, 
according to the Office of Management and Budget (OMB). Regulation can 
increase the cost of producing goods and services in the economy, 
thereby raising prices to the consumer and placing jobs and wages at 
risk.
    Regulatory compliance costs fall hardest on small and medium-sized 
businesses. This is a significant finding since small firms account for 
the vast majority of new business growth. Small business ownership is a 
critical vehicle for all Americans--and increasingly for women and 
minorities--to achieve greater economic opportunity.
    In 1999, the OECD estimated that the economic deregulation that 
occurred in the United States over the last 20 years permanently 
increased GDP by 2 percent. The OECD also estimates that further 
deregulation of the transportation, energy, and telecommunication 
sectors would increase U.S. GDP by another 1 percent.
    This country must build on a national energy plan that will help us 
access new sources of supply and improve energy transmission. 
Businesses use nearly 40 percent of the natural gas and 30 percent of 
the electricity consumed in the United States.
    I hear a great deal from businesses of all shapes and sizes about 
the complexity of our tax system, and the disincentives that complexity 
creates for doing business in the United States. This complexity raises 
costs but it also raises uncertainty, which is the enemy of investment 
and job creation. The tax code also has a profound effect on the 
relative attractiveness of investing in and creating jobs in the United 
States. The first, and easiest, action to take is to make the 
President's tax cuts permanent so businesses can continue to expand and 
plan for future growth.
    One of the most egregious examples of government increasing costs 
comes out of the tort system in this country. In 2002, the lawsuit 
burden was $809 for each American. More than $200 billion is spent on 
our tort system, and only 20 percent of that goes toward economic 
damages. One issue of particular concern is the ongoing asbestos 
litigation. The continuing litigation has yet to help many of the 
individuals who were harmed by prolonged exposure to asbestos. At the 
same time, the litigation hangs over our economy, raising all 
companies' insurance costs and dampening their ability to hire.
    You cannot say you support creating the environment for job 
creation unless you grapple with the underlying drivers of costs that 
discourage hiring and depress investment. That is why President Bush 
has proposed relief for the engines of our economy.
  ensure the united states remains the most innovative nation on earth
    The innovative capacity of the United States has always been one of 
our greatest strengths. The innovation infrastructure of our country is 
built on over 200 years of invention, discovery, development and 
commercialization. It is an intricate system that exists no place else 
on Earth. Our investments in innovation--whether in federal labs, at 
universities, or in businesses across America--create breakthroughs, 
cures, industries and jobs every day.
    America's entrepreneurial spirit will originate from businesses 
being built in garages and innovations taking place on shop floors. It 
is America's inventors and workers who create new ways of thinking and 
doing, spawning new industries and ways of life.
    Innovation ensures the jobs created will be good jobs. New products 
and production methods continue to raise our productivity and 
competitiveness, and will raise our standard of living to unprecedented 
levels. President Bush has made historic commitments to the innovative 
capacity of the United States. We will spend a record $126 billion on 
federal R&D this year, and the President has proposed $132 billion next 
year. This is a 42 percent increase since President Bush took office. 
In addition, the American private sector will spend another $193 
billion on R&D this year. To help promote this private sector 
commitment we continue to urge Congress to make the R&D tax credit 
permanent.
    Business leaders want a continued commitment to R&D and assurance 
that the government reinforces, rather than creates obstacles to, the 
process of generating new ideas and of bringing innovations to the 
marketplace. That is why the Administration continues to support the 
unique capabilities of national labs and universities, including 
establishing cooperative research programs for the benefit of small and 
medium-sized businesses. In addition, this Administration is promoting 
the process of manufacturing technology transfer to ensure that the 
benefits of R&D are diffused broadly throughout the manufacturing 
sector, particularly to small and medium-sized enterprises.
    Innovation and investment are key drivers of the economy. One 
reason for the manufacturing sector's early entry into recession was a 
sharp drop in business investment as industry pulled back from a period 
of heavy investment in technology. Not surprisingly, the industries 
with the most significant job losses in manufacturing are precisely 
those industries--telecommunications equipment and computing--that 
benefited most from the boom in investment of the late 1990s.
    There is recent evidence that innovation will continue to propel 
the American economy. According to the Institute for International 
Economics, our economy shed 71,000 software programmer jobs paying an 
average of $64,000 between 1999-2002. But at the same time, 115,000 
software engineering jobs paying $75,000 were created, a good sign that 
higher-paying jobs are replacing those being lost.
    Americans should expect great advances in biotechnology, 
nanotechnology, and in many other industries across our economy. These 
advances will improve lives around the world and create American jobs. 
That is why the President is taking dramatic steps to promote 
innovation through R&D, with targeted spending at the record levels 
noted above. This money catalyzes the private sector's ingenuity and 
creates the industries and jobs of the future.
    Business leaders emphasize the importance of adequately and 
effectively protecting intellectual property rights, and the corrosive 
effect of the failure of some of our trading partners to enforce these 
rights. Intellectual property protection is essential in ensuring the 
virtuous cycle of innovation that raises our productivity and meets the 
needs of consumers around the world. That is why the Department of 
Commerce continues to strengthen the Patent and Trademark Office, 
enhancing intellectual property protection and increasing the 
availability of new products and services.
    This Administration is promoting the technological infrastructure 
of the 21st century. We have taken concrete steps to create an economic 
and regulatory environment in which broadband can flourish:

 The President's tax relief has given businesses powerful incentives 
        to invest in broadband technology.
 The President's economic security package allows companies faster 
        depreciation for capital-intensive broadband equipment.
 The President has signed a two-year extension of the moratorium on 
        Internet access taxes, and urges the Congress to make the 
        moratorium permanent.
 Under this Administration, the FCC has issued an Order freeing newly 
        deployed broadband infrastructure from economic regulation 
        designed for a different era. This decision provides a powerful 
        incentive for incumbents and new entrants alike to invest in 
        new broadband infrastructure.
 The Administration also supports policies that will ensure that 
        Voice-over-Internet Protocol is also free from unnecessary 
        economic regulation.
 The Administration has doubled the amount of radio spectrum available 
        for unlicensed wireless broadband technologies and cleared the 
        way for additional licensed spectrum as well. And,
 The Administration is working to ensure that Broadband-over-Power 
        Lines can be beneficially deployed as quickly as possible.
    All of these actions have helped to ensure that consumers have a 
variety of choices for broadband, particularly in rural communities, 
and will speed infrastructure investment in the United States. As a 
result we have seen the number of broadband subscribers in the United 
States increase from 10 million in 2001 to over 21 million today.
    Other pro-growth policies will help American businesses create new 
industries, companies and jobs. When some propose raising tax rates, 
they are disproportionately taxing the engines of growth--small 
businesses. Small businesses owners pay almost 80 percent of the taxes 
in the top rate through pass-through tax entities. Small businesses 
create approximately 70 percent of the new private-sector jobs in this 
economy. Small businesses employ half our workforce. If taxes are 
raised on these firms, they will have less money to hire and invest.
    Innovation, technology and entrepreneurship continue to create jobs 
and augment our standard of living and we must be committed to helping 
them flourish.

           PREPARING OUR WORKERS FOR THE 21ST CENTURY ECONOMY

    There are fundamental and structural changes under way in our 
economy.To meet this challenge and benefit from the opportunities that 
innovation creates, it is crucial that students, workers, job seekers 
and communities are provided with the assistance and tools they need to 
succeed. America's workforce must adapt to meet the needs of the 21st 
Century economy, and we must be there to support them.
    Employment in manufacturing has been declining since 1979. The 
decline of manufacturing employment and the rise of service employment 
are manifestations of structural change. What many fail to note is that 
this phenomenon is global: almost all major industrialized economies 
have lost manufacturing jobs. Some have tried to lay the blame solely 
on low-cost labor in developing countries, but it is important to note 
that China lost 8.6 million manufacturing jobs between 1998 and 2002.
    In each one of your districts, new jobs are being created every 
day. The Business Employment Dynamics report indicates the American 
economy creates about 600,000 jobs a week. Amid dynamic job 
``churning'' in this country, 39.2 million jobs have been created since 
1980. According to recent data from the Bureau of Labor Statistics 
(BLS), the United States is expected to create 21 million net new jobs 
by 2012, increasing our workforce to 165.3 million in 2012. And looking 
deeper into these numbers reveals that the trend of our economy 
becoming more deeply based upon services will continue. In addition 
these new jobs will be predominantly in emerging fields and 
industries--four of the ten fastest growing industries, in terms of 
output, from 2002-2012 are expected to be in high tech.
    Add to this the fact that BLS also estimates that the average 
American changes jobs ten times from ages 18 to 36, and you get more 
insight into the shifting and dynamic work environment that Americans 
face.
    We will need to prepare for this ongoing transition. The talent and 
motivation of the men and women who work in and manage America's 
companies must be matched by our efforts to promote education and 
training to compete in a dynamic, global economy.
    Some business leaders I have spoken to express serious concerns 
about whether the United States is adequately preparing the next 
generation for the demands of a high-tech workplace. Advanced labor 
skills are one of the decisive factors determining our nation's ability 
to compete in the global economy.
    Preparing the next generation of America's leaders starts with the 
basics. That is why passage of President Bush's No Child Left Behind 
Act of 2001 was so important. The new law reflects the President's 
determination to improve the performance of America's elementary and 
secondary schools while at the same time ensuring that no child is 
trapped in a failing school.
    In addition, the President has a $250 million community college job 
training initiative, to train people for today's economy and help them 
find jobs. The President's ``Jobs for the 21st Century'' initiative 
will prepare our economy and workforce for new challenges by expanding 
access to post-secondary education and fostering job-training 
partnerships between community colleges and employers in industries 
with the most demand for skilled workers.
    This Administration is committed to investing in the types of 
ongoing retraining programs our workers need to develop the skills in 
our transitioning economy. The Administration's 2005 budget proposes 
roughly $23 billion to fund 31 job training and employment programs 
government-wide. The bulk of this funding, about $19 billion, is 
administered by the Departments of Labor and Education primarily 
through the Workforce Investment Act (WIA), the Carl D. Perkins 
Vocational and Technical Education Act (Perkins), Vocational 
Rehabilitation Services, and Pell Grants for students enrolled in 
technical or two-year post-secondary schools.
    We will also dedicate over $1.1 billion in fiscal year 2005 for 
training and cash benefits for workers dislocated by increased imports 
or a shift of production to certain foreign countries.
    Government can do a great deal, but it is important to note the 
significant investment that American business is making in the future 
of the American workforce. The private sector spends about $60 billion 
a year to provide training and education for American workers. This 
investment is made in major corporations that have extensive programs 
akin to in-house business schools, and in small businesses that help 
with tuition for part-time classes and local seminars.
    These public and private investments make a difference in the lives 
of millions of Americans and they are essential to the competitive 
position of our industry and workers.

PROMOTING STRONG COMMERCIAL TIES WITH THE 95 PERCENT OF THE WORLD THAT 
          DOESN'T HAVE THE BLESSING OF LIVING IN THIS COUNTRY

    I cannot talk about the American economy without talking about the 
important role of trade and the role of investment in a global economy.
    Expanding trade and investment abroad are, and have been, 
fundamental pillars of American economic success in the 20th and 21st 
centuries. Trade represents an unprecedented opportunity for our 
workers and our future. Americans welcome trade because it expands 
opportunity and growth. Over 230,000 small and medium-sized enterprises 
(SMEs) export from the United States, accounting for 97 percent of all 
American exporters. Very small companies' those with fewer than 20 
employees--make up more than two-thirds of all American exporting 
firms. President Bush supports expanding trade, just as do American 
businesses, because the benefits are clear.
    Since the creation of GATT in 1948, real GDP has skyrocketed. World 
exports have grown from $58 billion to nearly $6 trillion. Expressed in 
2000 dollars, U.S. per capita GDP grew from $12,000 in 1950 to $36,000 
in 2002. Today, U.S. GDP is five times larger than it was in 1950, and 
American exports are 20 times larger. American exports accounted for 
nearly 25 percent of U.S. economic growth in the 1990s and supports 
more than 10 million jobs.
    Fair trade helps to lower prices and raise American living 
standards. Over the past decade, NAFTA and the Uruguay Round agreements 
have raised the income of the average American family of four by up to 
$2,000 a year. A University of Michigan study shows that lowering 
global trade barriers by one-third could boost the American economy by 
$177 billion, and raise living standards for the average family by 
$2,500. Trade also drives competition and innovation, both of which are 
key to raising productivity and greater prosperity worldwide.
    Trade and security go hand in hand. Countries that trade together 
have more to lose in the event of conflict; trade becomes part of a 
virtuous circle reinforcing peaceful international relations and 
stronger economic development. We have seen in the not-too-distant past 
that, when economies close their doors, it has a ripple effect. Other 
nations adopt protectionism and everyone loses. The world experienced 
this in the 1930s with the Great Depression and the ensuing conflict of 
World War II.
    The combined effects of rapid changes in communications, 
transportation technology, the end of Cold War economic divisions, and 
the global lowering of trade barriers have made the global marketplace 
a reality. That translates into expanded markets for American goods and 
services, but also stiffer competition--both in export markets and here 
at home.
    However, this is no reason to withdraw from the world economically. 
Our business leaders understand that their future growth depends on a 
global market and that their access to export markets depends on a 
willingness to engage foreign competitors here. And they do not shrink 
from the task.
    I do not hear an interest in economic isolationism from the 
business community, whether in the form of tariffs or quotas. Rather, 
our companies and workers see international trade as a simple question 
of fairness. If the United States keeps its markets open to its trading 
partners' goods, then they should do the same. But, where our trading 
partners do not live up to the terms of our agreements or otherwise 
heed the rules, those trading partners should face the consequences as 
laid out in those agreements.

Trade Enforcement
    This Administration will continue our efforts to eliminate tariff 
and non-tariff barriers to our exports through negotiation with our 
trading partners. We will also continue to vigorously enforce existing 
trade rules and American trade laws. Since January 2001, Commerce has 
initiated and completed 152 new antidumping and countervailing duty 
investigations resulting in 61 new orders placed on unfairly traded 
imports.
    We know that we have the best workers in the world, and that we can 
compete with anyone. But the competition has to be fair. The security 
and prosperity of our nation and the world depend on the rules being 
perceived as fair.
    In order to ensure this end, this Administration is taking new and 
proactive measures to strengthen the enforcement and compliance of our 
trade agreements. Within the Department of Commerce's International 
Trade Administration, we have created a new Unfair Trade Practices Task 
Force that will expand and strengthen our ability to advance American 
commercial interests by attacking the root causes of unfair trade. This 
office analyzes market trends and foreign government and business 
practices to identify potential unfair trade problems at the earliest 
stage possible. The Task Force is presently analyzing the 30 largest 
categories of Chinese imports, including computers, footwear, office 
machine parts, furniture, and radio/TV equipment.
    We are also creating a new Office of Investigations and Compliance 
as an enforcement unit within the Commerce Department to make sure our 
trading partners abide by their agreements and to combat violators of 
intellectual property rights (IPR) around the world. Many of the 
investigators in the unit will have law degrees. The unit will have a 
team of experts in IPR, corporate accounting, investigations, and 
intelligence.
    In addition, we are building an Office of China Compliance to focus 
on antidumping cases involving imports from China and to concentrate on 
and strengthen our expertise to address the unique problems encountered 
in China and other non-market countries.
    Nothing hurts innovation like having your ideas stolen from you. We 
are working hard to make sure that does not happen. The World Trade 
Organization (WTO) has agreements barring the theft of intellectual 
property. Piracy by foreign businesses, particularly in China, for 
example, is a chronic problem for many American firms. Last fall, I led 
a mission to China and highlighted China's lack of IPR enforcement. I 
met with high-ranking Chinese officials and reiterated our continuing 
concern; that effective IPR protection requires that criminal penalties 
for intellectual property theft and fines are large enough to be a 
deterrent rather than a business expense.
    I believe in the strong enforcement of our trade laws, especially 
intellectual property protection, and we are taking proactive measures 
to combat piracy. I have tasked Commerce agencies, such as the Patent 
and Trademark Office and the new Office of Investigations and 
Compliance, to coordinate their efforts to vigorously pursue 
allegations of IPR violations wherever they occur, especially in China.
    The Administration is committed to exercising the legal remedies 
available under the WTO and under U.S. law when clear violations occur. 
As a matter of fact, the United States Trade Representative announced 
the filing of a case at the WTO regarding China's discriminatory tax 
rebate policy for integrated circuits.
    This Administration also is working with industry through the 
vigorous enforcement of trade laws, and through consultations with the 
governments involved to address the efforts of other governments to 
confer an unfair competitive advantage on their industry. In one such 
case, after discovering that a Chinese factory counterfeited its 
medical products, the American company involved contacted the Commerce 
Department with the problem. Working with the Chinese government, this 
Administration ensured that the counterfeiter and distributor were 
arrested on criminal charges, resulting in the elimination of the 
counterfeiting of medical supplies valued at roughly $15 million per 
year. Virtually all of the businesses I meet indicate that they are 
prepared to compete head-on with anyone in the global marketplace; what 
they are not prepared to do is compete against foreign governments as 
well.
    While I have mentioned just a few of the steps we are taking to 
bolster trade enforcement and compliance, I need to address briefly and 
specifically our trade relationship with China. The stakes involved are 
high. China is growing at an extraordinary rate and is becoming a major 
player in the global economy. Indeed, China now represents the fastest-
growing market for American goods and services. Our exports to China 
surged by 28 percent in 2003, while imports were up by 22 percent last 
year. China is our third largest trading partner. Bilateral merchandise 
trade reached $181 billion in 2003. China's development, and the 
increased standard of living literally bringing hundreds of millions of 
people out of poverty--are extremely positive signs.
    One of the basic reasons for negotiating for 15 years with the 
Chinese over their accession to the World Trade Organization was to 
knock down the many barriers to entering China's market. The situation 
facing our businesses from a competitive perspective was far worse 
prior to China's entry into the WTO. Our firms lacked access to the 
Chinese market, but their businesses had relatively free access to 
ours.
    While China's market represents an enormous opportunity, it 
presents challenges we must confront: we must be strong on growth and 
strong on enforcement. There is still a very long way to go. I can 
assure you that the Department of Commerce is dedicated to making sure 
that China and all nations plays by the rules. In 2003, over 50 percent 
of all new antidumping orders put in place by the Department were 
against China. Historically that figure has been 18 percent.
    This Administration will continue to pursue China's compliance with 
its WTO commitments vigorously and enforce our domestic unfair trade 
laws rigorously and fairly. The Commerce Department is fully committed 
to ensuring that China complies with WTO rules, opens markets, drops 
barriers, eliminates state subsidies, and allows market forces to 
determine economic decisions. In June, I will be going to China to 
continue pressing their leadership for compliance, enforcement and 
openness.
    Around the world this Administration will continue to fight so 
American workers will continue to succeed in the global economy.

                WORKING WITH THE WORLD BENEFITS EVERYONE

    Before I conclude, permit me to address a topic that has been much 
in the news: the impact of international competition on job creation.
    In addition to trading products, American workers now compete in a 
global labor market. About 2.4 billion of the world's 6.3 billion 
people are currently part of the global workforce. About 75 percent of 
these workers live and work in developing countries and about 25 
percent in the industrialized world. These are staggering numbers and 
when you consider that, with only 5 percent of the world's population, 
the United States generates approximately 33 percent of global GDP you 
get a sense of the true economic leadership position we have.
    The United States greatly benefits by doing business with the 
world. Right now, foreign companies employ 6.4 million Americans, who, 
in turn, help employ millions more. Foreign business leaders realize 
that American workers are the best in the world. There are hundreds of 
foreign companies employing American workers, including Norwegian 
Cruise Lines, Honda, and UBS Investment Bank.
    New foreign investments occur regularly, although they do not seem 
to attract the attention devoted to investment offshore. But foreign 
investments made here are creating many times more jobs than are being 
offshored from the United States. For example, in my home state of 
Texas, Toyota plans to hire 2,000 employees in the next year at its new 
San Antonio facility.
    Foreign direct investment in the United States totaled $82 billion 
in 2003, over twice the amount from the previous year. In fact, since 
1990, foreigners have made direct investments of $1.5 trillion in U.S. 
companies and factories. Increased foreign investment means more 
factories, more research and development and more jobs for Americans 
through companies based abroad. These companies account for hundreds of 
thousands of good jobs, including more than 700,000 in California, 
almost 500,000 in New York, more than 425,000 in Texas, and more than 
300,000 each in Illinois and Florida.
    Many of those 6.4 million jobs are at risk if this country begins 
to engage in the isolationism that would cause us to close down global 
labor markets. America cannot turn back from a global marketplace of 
goods and services. Engagement with the world adds jobs and growth, 
while a policy of economic isolation destroys them.
    Our advanced financial, legal, and educational systems make the 
United States a prime location for investment in our businesses and 
workers. America must continue to strengthen those competitive 
advantages through the policies I have discussed today. Unfortunately, 
there are some who do not seem to believe that American workers can 
compete with workers around the world. I know we can.
    It is important to have the facts: according to the Bureau of Labor 
Statistics, only one percent of job losses in large layoffs are 
associated with overseas relocation, with another two percent due to 
import competition. Contrast that to the 36 percent due to seasonal 
layoffs. Forrester Research projects a worst-case scenario that 3.3 
million jobs will be lost over the next decade. Our economy creates 
nearly 3 million jobs each month. As the Washington Post noted, the 
jobs projected to go overseas represent about one percent of the job 
``churning'' in our labor market.
    IBM, for example, recently won a contract from Nokia, the Finnish 
telecommunications company, worth over $5 billion. Alone, this contract 
equals almost one-third of the entire Indian information technology 
software and services industry in 2003. Put another way, the Best Buy 
retailing chain has more revenues than the entire Indian IT sector.
    In 2003, the United States exported $305 billion of Total Services, 
and we ran a services surplus of $59 billion. Using a simple share of 
GDP, U.S. exports of Total Services support more than 3.9 million jobs 
in the United States. In 2002 (latest data available by region), the 
United States ran a significant trade surplus of Total Private Services 
with China and India. Exports to both countries combined were $9.3 
billion while imports were $5.8 billion.
    There are, however, some American workers who have seen jobs 
outsourced or are concerned about their jobs going overseas. We all 
share these concerns and we are all motivated to address them. 
Globalism and competition are concepts, but a paycheck is a reality, 
and this Administration is dedicated to providing the opportunity for 
every American to find a job and provide for his or her family.
    We will continue to strengthen the programs I described earlier to 
assist individuals and communities in the adjustment to a growing 
global economy. We will continue to work to ensure that American 
companies can continue to successfully compete with anyone in the 
world. We will enforce our trade laws and make sure others play by the 
rules. We will promote education and support innovation. And we will 
not shrink from these challenges or accept defeat. The worst thing the 
United States could do is to pursue isolationist policies that will 
cost jobs.
    America has overcome the challenge of lower global wages in the 
past, and always come out better for it. Forty years ago, people 
worried about low-cost Japanese labor. Ten years ago, people feared 
jobs would all migrate to Mexico. Some make the same mistake when they 
look to China and India with concern today. The doomsayers will 
undoubtedly have another target in the future.
    To achieve sustained growth for all Americans, the United States 
must continue to stay engaged in the world. We must ensure free, fair 
and open competition. It makes our industries more productive, while 
American workers and their families enjoy higher wages and better 
products and services at cheaper prices.

  AMERICAN INDUSTRY AND WORKERS WILL MEET THE CHALLENGES AND LEAD THE 
                                 WORLD

    Americans are innovative, pragmatic problem-solvers who thrive on 
competition. We have the future in our hands, and we control our own 
destiny through the choices we make.
    The President understands that economic security and national 
security are inseparable. In both areas he has laid out a complementary 
vision of America's leadership role. He faces these challenges with 
confidence, understands how to succeed in this environment, and 
believes in the American people. Embracing and shaping the global 
economy toward American values is the only way to ensure a more stable, 
peaceful and secure world for the next generation of Americans.
    America cannot follow the path urged by isolationists who are 
afraid to confront the challenges we face, who refuse to be honest with 
the American people about those challenges, and who deny what it will 
take to respond. There is no protection in protectionism, only defeat 
and defeatism.
    The United States needs pro-growth economic programs to create a 
better American future in a more secure and prosperous world. President 
Bush is dedicated to pursuing economic policies that give American 
companies and American workers the freedom to succeed. As American 
companies remake themselves and successfully meet their customers' 
needs, they will create long-term economic growth and new American 
jobs. To support this process, we must protect the flexibility and 
productivity that have made the American economy the envy of the world 
and American workers the most prosperous in history.
    Mr. Chairman and Members of the Committee it is an honor to be with 
you today and I appreciate your time and attention. I would be pleased 
to answer any questions that you may have.

    Chairman Barton. We thank you, Mr. Secretary. Before I--I 
am trying to reset the clock here.
    I want to alert the committee that there are going to be a 
series of four votes, beginning in the next 10 to 15 minutes. I 
have sent Mr. Shimkus over to vote and rush over here. We are 
going to keep this hearing going to maximize time for people to 
ask questions.
    I would ask you, Mr. Secretary, if there is any way 
possible, to delay your departure at least a little bit, 
because--since this is the first time that you have appeared 
before this--your office has appeared before this committee, I 
think it would be very productive for relationships between the 
committee and the Department of Commerce if we could have 15 to 
30 extra minutes. And when we do get----
    Mr. Evans. Granted.
    Chairman Barton. When we do get to the questions, I am 
going to try to let the people that deferred opening statements 
have a chance. If there is somebody that is way down the list 
that deferred their opening statement, I want to give them a 
chance to ask some questions. I know we have regular order, but 
I do think the people that deferred an opening statement should 
at least have a shot at a question or two.
    So with that, Mr. Secretary, I am going to recognize myself 
for the first 5-minute question period. I want to outline to 
you my job history. In 1966, I went to work as a teenager for 
Ferris Watson Seed Company. I did a terrible job, and Mr. 
Watson encouraged me to seek other employment.
    So then I went to work at Sprigville Store and Bait House. 
It was owned by my uncle, and he felt an obligation to hire me. 
I was not paid much, but I got to eat everything I wanted to. 
After a year of that, he encouraged me to seek other 
employment.
    I then went to work for Texas A&M Industrial Engineering 
Department as a student. I then became a co-op student, co-op 
engineer at LTV, and later at Texas Power & Light. I also 
worked for the city of Bryan Engineering Department. When I 
graduated from A&M, I went to Purdue University, was a graduate 
assistant, worked there.
    Then, when I got out of graduate school, went to work for 
Innis Business Forms, later became a White House Fellow at the 
Department of Energy. When I finished that job, I became an 
engineer at Arco Oil and Gas. And finally, in November 1984, 
the people of the sixth district elected me to be a U.S. 
Congressman to represent them.
    About a month ago, I became the chairman of this 
distinguished committee. Now, if you count that all up, that is 
10 jobs. So one way to score that is I am a nine-time loser. I 
have lost nine jobs. You can also score it that I am now a one-
time winner and not only have a job but have what you would 
call a good job. At least I consider it to be a good job.
    Now, statistically, I have lost more jobs, but in the 
economy today hopefully I am listed as a productive, employed 
person. Would you comment on statistics on this number of jobs 
lost using me as an example? Have I lost nine jobs? And am I a 
drain on the economy? Or am I employed and working?
    Mr. Evans. Well, you know, let me come at that a couple of 
ways, Mr. Chairman. One is we do have an amazing economic 
engine here in America. We actually have 1 million new hires 
every week. Every week there are 1 million new hires in this 
economy. There are a similar number of people that leave a 
job--some not by choice, others by choice.
    So when you think about it, we have an economy, though, 
that is creating about 52 million new hires every year. And 
that will give you a sense of the size of our economy and how 
dynamic it is.
    More importantly, though, is we have an economy that is 
creating new industries every year. Yes, are we losing some 
through the years? Of course we are. You can take the 
agriculture sector of our economy. In 1900, about 40 percent of 
the workers in America worked on farms across America, worked 
in the agriculture sector of our economy.
    Today, about 2 percent work on farms or in the agriculture 
sector of our economy. So our economy, this incredible 
innovative, entrepreneurship economy is always creating new 
jobs and new opportunities and has been for years and years. 
That is why it is the marvel of the world. When people look at 
the American economy, they are just amazed at our ability to 
create new industries and new jobs over the years.
    And so, you know, I would say that you, like many, have 
moved through a life of changing jobs. I might say changing 
careers, too. And that is one thing that I think does concern 
people in this day and time when they talk--when they listen 
about--hear people talk about outsourcing, they worry about, 
you know, am I going to have to change my career? Well, some 
might.
    But, you know, my attitude about that is in America we 
don't leave anybody behind, and we don't leave anybody out. And 
as we have an economy that continues to go through transition 
and change and create new industries, we must have programs 
that support people, so that they have the kinds of skills and 
kind of tools required as this economy changes, and we have--
and we find new--and new industries are developed.
    Chairman Barton. Right.
    Mr. Evans. And you are--you are a productive member of the 
economy, Mr. Chairman, in my view, and----
    Chairman Barton. That is a debatable proposition, but thank 
you for telling me that.
    Mr. Evans. But----
    Chairman Barton. Well, the point--my time is about to 
expire, Mr. Secretary. I also want to say that in some of 
those, especially when I have--after I left the White House 
fellowship I had interviewed for a number of jobs, but I hadn't 
received a firm job offer. I had several months in the fall of 
1982 that I had three children, one a baby, a wife, and I had 
no job.
    And I was extremely despondent and concerned and about 
that, and I have total empathy with everybody in this country 
who wants to work, is willing to work, is able to work, and 
through no fault of their own we do not yet have a job for 
them.
    Now, make no bones about it--on both sides of the aisle we 
know that there are many, many willing Americans that for a 
number of reasons beyond their control are not employed and 
they want to be employed. This committee--and I am sure your 
department and the Bush administration is going to do 
everything possible to give those willing workers an 
opportunity to not only have a job but to have a good job and a 
job that empowers them.
    So I am not belittling that there are people in this 
country that want to work and right now are not working. But 
our economy, and with all of the statistics that you put up on 
the board, is doing the best job in the world today to create 
jobs that are good jobs.
    With that, I am going to recognize the distinguished 
ranking member, Mr. Dingell, for 5 minutes.
    Mr. Dingell. Mr. Chairman, thank you.
    Mr. Secretary, again, welcome. Mr. Secretary, I note that 
the administration has recently announced its intention to 
negotiate free trade agreements with Thailand. Automobile 
manufacturers now use Thailand as the platform to supply pickup 
trucks for all of Asia.
    I note that the United States currently imposes a 25 
percent tariff on pickup trucks imported into this country. 
Now, if that 25 percent tariff were removed, Thailand would 
become the platform through which manufacturers supplied trucks 
to the entire world.
    Now, this leaves the auto workers in States like Michigan, 
Missouri, Minnesota, Louisiana, and Texas, just to mention a 
few, significantly at risk. Mr. Ron Gettlefinger, President of 
the United Auto Workers, in a letter to the President of the 
United States, a copy of which was made available to you, on 
November 10, 2003, addressed this matter with President Bush.
    And he called on the administration to make a commitment 
that any U.S.-Thailand trade agreement will not change the 
existing 25 percent tariff on imported pickup trucks. What 
comment do you have to make on that? The letter has not yet 
been answered.
    Mr. Evans. Right. Chairman, I--it has not crossed my desk, 
but--or, Congressman, it has not crossed my desk yet. But I 
must say that in all of these free trade agreements I think one 
of the central goals is to bring down tariffs on both sides. 
And so, I would say that, one of the principles--I know it is 
certainly one of the President's principles with respect to 
free trade, is lowering tariffs to zero.
    In fact, that is what we proposed through the WTO last 
fall. We proposed taking all industrial tariffs on goods and 
services to zero by the year 2015. And so if----
    Mr. Dingell. Will that be tariffs all around the world, or 
will the United States be the one that goes to zero? For 
example, we charge much larger tariffs on automobiles than do 
other countries. We generally charge much lower tariffs on 
pickup trucks than do most countries.
    Mr. Evans. Right.
    Mr. Dingell. And I am just curious, if we are going to go 
to zero here, and without any--without any changes to see to it 
that other countries abate their trade restrictions on U.S. 
goods, and also that other countries don't address the very 
difficult problem that we confront with regard to the situation 
on environment, working conditions, labor conditions, and so 
forth, we are going to be in a hell of a way, Mr. Secretary. 
What do you have to say about that?
    Mr. Evans. Well, I say that the idea is for everybody to 
head to zero. It is not----
    Mr. Dingell. The trouble is, we are the one who gives, and 
they are the ones who take. And we are watching jobs constantly 
flowing overseas because of unfair trade practices. They are 
going to Mexico. They are going to other places. And in the 
case of Mexico--Mexico is part of NAFTA--it winds up as being 
the entry point for a lot of foreign goods into the United 
States, commitments made to see to it that--for example, that 
goods--rather, automobiles imported from Canada would have 65 
percent U.S.--or, rather, North American content, now have 
about 33 percent U.S. content.
    Unfair trading practices are constantly heaped upon the 
United States. And I am not criticizing you particularly, Mr. 
Secretary, but no administration has addressed these questions. 
And somebody has got to do it, and you guys are in the hot 
seat, and I guess--I guess the buck stops at your door, Mr. 
Secretary, or at least at the President's desk.
    Mr. Evans. Well, listen, Congressman, all I can do--all I 
can say to you is as somebody that was in the private sector 
for 30 years of my life, and just saying what I did earlier, 
there is not anything more painful than telling somebody they 
don't have a job. We also, it is my belief, have the strong 
obligation to be able to look the American workers in the eye 
and tell them they are on a level playing field.
    Mr. Dingell. Mr. Secretary, I know you believe that.
    Mr. Evans. Right.
    Mr. Dingell. And, Mr. Secretary, I know that generally 
Americans insist on that. But, Mr. Secretary, it ain't 
happening, and that is the concern we have. We have always 
folks from the administration coming up--if it is not this 
administration, it is the previous administrations, going right 
back to the day that I first took this job, and they tell us 
about how--about free trade. Mr. Secretary, I don't see anybody 
down there insisting on fair trade.
    Mr. Evans. Yes. Well, let me give you an example. I have 
got an example right here to use. Out of the manufacturing--
because I heard this comment all across America, Congressman. 
When you went and talked to manufacturers across America, they 
want us to open up markets around the world. They are not 
afraid to be with the rest of the world. They want a level 
playing field.
    Mr. Dingell. Absolutely, Mr. Secretary. They want us to 
open, but they don't open theirs. Chinese manipulate the 
dollar----
    Mr. Evans. Right.
    Mr. Dingell. [continuing] and their currency. The Japanese 
do the same thing.
    My time has expired.
    Mr. Evans. Okay.
    Mr. Dingell. But it just ain't--we just ain't getting 
treated fairly, Mr. Secretary.
    Chairman Barton. The gentleman's time--do you want to 
respond to Mr. Dingell before I go to Mr. Hall?
    Mr. Evans. No. We can just go on.
    Chairman Barton. Mr. Hall is recognized for 8 minutes.
    Mr. Hall. Mr. Chairman, thank you. First, I want to thank 
my fellow Texan for the good job he is doing and for the time 
that he gives to this President, to this country, and to this 
committee. My friend--and Markey really is my friend--we--I 
criticize him in his area, and he criticizes me in my area, and 
we help one another get elected that way.
    He complained about access. I think you are the first 
Secretary of Commerce I have seen since I have been here, and I 
thank you for it, for the 4 hours you are going to give us 
today. That is more time than all the rest of them put 
together, so far as I know, other than Bud Brown. I think Bud 
Brown was here on one occasion.
    But thanks for being available, and thanks for when you are 
available making something happen. That has been my experience, 
and I hope it has been the experience of the others here.
    You know, we are an energy state, and we have gone through 
some hard times. We have--I represent not only an energy state, 
but an energy district. I have Tyler, Kilgore, Gladewater, 
Longview, and much of the oil patch. And, you know, the 
independents find it, and they sell it, then, to the majors.
    But the independents--we are talking about jobs. They are 
out of jobs, too, and that is a job profession that has 
atrophied away in the oil patch and in the Texas and all of the 
energy States. Ten of us produce energy and the rest of them 
use it, and that is how outnumbered we are on legislation.
    But I guess one thing that is very important to me and 
important to us, and important I know to you as the Secretary, 
is energy consumption, increasing on--an increasing ratio of 
energy consumption as compared to the increasing production of 
energy, particularly in our area.
    I guess your report explains--and I can't tell you just 
exactly where it is, but that energy consumption is expected to 
rise by 32 percent by 2020. By what percent is energy 
production expected to rise? Do you have any figures on that, 
or something in the back of your mind, or something at your 
elbow that you----
    Mr. Evans. Well, you know, Congressman, all I would say, I 
am sure that oil production is not going to be rising, and it 
is very doubtful domestically that natural gas production will 
be rising, unless we begin to open up some of the lands in this 
country that are not now open to producers and the industry.
    Mr. Hall. How comfortable are you with our source of energy 
supply?
    Mr. Evans. Well----
    Mr. Hall. And the fact that we--what we bring in may be 60 
percent of it almost from countries that I don't feel 
comfortable with.
    Mr. Evans. Right. You know, I am not comfortable that we 
continue to become more and more dependent on sources of energy 
outside of the United States of America. That has been growing 
certainly on the oil side for quite some time now, and now it 
is beginning to grow on the natural gas side.
    And, you know, I think you talk about our needs to develop 
our energy supplies here in America. I think that is very 
important, certainly something that I heard a lot about when I 
was talking to manufacturers all across America. They were 
asking--they were concerned about available and affordable 
energy.
    And as the President laid out when--in the spring of 2001, 
one of the--probably one of the second largest oil fields in 
North America, the strategic petroleum--ANWR is not available 
to us. And you talk about exporting jobs and outsourcing jobs--
--
    Mr. Hall. It is not available. It is not politically 
available to us.
    Mr. Evans. That is correct. And it is--you talk about 
outsourcing jobs, we are outsourcing jobs, and that we are not 
opening up the lands of America to the industry to go develop 
the energy supplies that we have, and in a very environmentally 
sensitive kind of way that we still have vast energy supplies 
in this country that we could be developing with our workers 
that would be providing good jobs for our workers in the 
manufacturing and mining sector of our economy that, quite 
frankly, are just closed because politically, as you say, ANWR 
is not available. And there are a lot of lands in the West that 
are not available.
    Mr. Hall. I don't really understand why ANWR is not 
available. I don't know what they are hiding up there. It is 
dark most of the time. I don't see how out of 19 million acres 
we couldn't, if it would keep our kids from having to get on a 
troop ship and go take some energy away from someone when we 
run short of it, why we couldn't work on at least 1,500 or 
maybe 2,000 lousy acres up there.
    I don't think anybody could even find it if they would go 
searching for it today. So that is one answer, but that is not 
a political answer, because we are blocked over on the other 
side by it. And we have an energy bill that languishes over 
there that is two votes short of solving a lot of the problems 
that you have outlined here and answers that you have given. If 
we could just get that energy bill kicked loose, I have a part 
in it, the ultra deep part, that can solve for a long time in 
the future the gas needs of this country and of energy-seekers 
everywhere.
    It has passed the Conference Committee twice. It has passed 
it last session. It has passed it this year, but we don't have 
a bill. So we don't have anything. The fact that we have 
negotiated that and worked it to the point to where it is with 
the help of Republicans and Democrats who want to solve the 
energy problem, but it is being blocked across the aisle from 
us here.
    So I don't know, I guess I would ask you, what is industry 
doing to address this? And what is our government doing to 
address it? We have to do our part up here politically to pass 
the bills to get them to the President's desk. We have a 
President that will sign a good energy bill, and that is 
different than what we have had the last 8 years. We would have 
to override it, and we don't have that problem now. We have a 
President that will sign it.
    We have a Vice President that understands energy. We have a 
Secretary of Commerce that is drenched in energy, that knows 
about energy. We are in great shape to keep our kids from 
having to decide what branch of the service am I going into, 
rather than what university can I attend, or what can I do with 
my life.
    That is what is on the line when we don't solve our energy 
crisis, when we don't deliver to this President a bill that he 
can sign that is a good energy bill. So what do you see that 
you can do, or that we need to do?
    Mr. Evans. Well, I think we need to continue to push very 
hard to pass an energy bill, Congressman. And I would say to 
you that--just putting it in perspective, when we went through 
an energy crisis back in the late 1970's and early 1980's, we 
had over 4,000 rigs running in America, 4,000 drilling rigs to 
drill for oil and gas in this country.
    Today, we have slightly over 1,000, and the reason we have 
slightly over 1,000 to a large degree is because there are many 
areas of this country that are just not accessible to the 
industry of being denied access because of regulations and 
restrictions and rules that are in place that don't allow easy 
access--not only the vast lands in the West, and the Rocky 
Mountain region of our country, but, as we have already talked 
about, ANWR. I mean, ANWR--that discovery would be the--many 
people believe it would be the second largest oil field 
discovery in America.
    Mr. Hall. And add to that the ultra deep thrust----
    Chairman Barton. The gentleman's time has expired.
    Mr. Hall. Thank you. I thank you, Mr. Secretary.
    Mr. Evans. Thank you.
    Chairman Barton. I am going to ask unanimous consent--under 
the rules that we operate, we alternate between minority and 
majority based on order of appearance with the senior committee 
member and ranking member going first, and then the 
subcommittee, if it is a subcommittee. We have several members 
that deferred opening statements.
    I want to give them an opportunity to ask some questions to 
the Secretary, since they didn't make opening statements. But 
if we go strictly by the rules, that requires unanimous 
consent. So I am going to ask unanimous consent that Karen 
McCarthy be recognized for 8 minutes to ask some questions. Is 
there objection? Hearing none, so----
    Mr. Markey. May I----
    Chairman Barton. The gentleman from Massachusetts reserves 
the right to object.
    Mr. Markey. I reserve the right to object, Mr. Chairman. 
And just to make this point--that if you had made that motion 
at the beginning of the hearing--that is, that members who 
spoke for 3 minutes in an opening statement would then give up 
their right in order to ask questions for 8 minutes if they had 
given up their right, because that is the way this, in effect, 
is going to wind up, then I think most members would have 
waived their rights to the opening statement----
    Chairman Barton. Well, I am----
    Mr. Markey. [continuing] if that was the way in which you 
were----
    Chairman Barton. I am learning.
    Mr. Markey. So the way this is now transpiring--and I will 
not object--the way this is going to transpire is that members 
who gave 3-minute opening statements will not be asking 
questions, and the members who did not will be given 8 minutes 
to ask questions. And I just think that as a matter of 
procedure that if every member had known that before the 
hearing had started, then it would have been a different result 
in terms of----
    Chairman Barton. I understand. I am learning, and I am 
asking unanimous consent. And I am going to try to work 
everybody in, and it is just--we are trying to get this done. 
But there are going to be some people on the majority side that 
didn't give an opening statement and are not going to get to 
ask questions, no matter how I do it, because the Secretary has 
to leave to go see the President around 1.
    Mr. Markey. I appreciate that.
    Chairman Barton. But I am also going to keep the hearing 
going while we are voting.
    Mr. Markey. And I am not going to----
    Chairman Barton. I am going to miss votes.
    Mr. Markey. I am not going to object, and I am not--and I 
am going to yield back, but only to say that since the 
Secretary is only going to be here for 24 more minutes, and if 
you recognize three people at 8 minutes apiece, that will be 
the remainder of the hearing. So everyone else who is sitting 
here is----
    Chairman Barton. Well, I am going to revise my unanimous 
consent request to recognize the gentlelady from Missouri for 
at least 3 minutes to ask----
    Mr. Markey. Well, again, I am not making--I am at this 
point just going to yield back my time with no objection to the 
procedure which you have now put in place.
    Chairman Barton. All right. The gentlelady is recognized, 
and hopefully you will give us back some time. How about that?
    Ms. McCarthy. I thank you, Mr. Chairman, and Mr. Markey, 
and I will definitely try to do that.
    Mr. Secretary, thank you for taking time to be with us 
today, and I wanted to focus in on your testimony on page 4 
when you talk about four key objectives, and reference an 
article I read by Robert Reich, your predecessor in this job of 
labor and love, to see if some of the ideas he poses for 
helping the economy might be ones you are considering as well.
    When you talk about ensuring our economy remains the most 
competitive in the world, there is--you know, what is it that 
you are planning to do to do that? Is it things like, you know, 
taking another look at the businesses that get investment tax 
credit for buying technology that substitutes for labor? Are 
you going to continue that investment tax credit? Or perhaps 
repeal the tax credit and instead give businesses a new jobs 
tax credit?
    In other words, you know, help companies that are trying to 
create new jobs rather than maintain an investment tax credit 
for buying technology that takes away jobs?
    Your second point is to promote America's immense 
innovative capacity. Well, what are we going to be doing in 
order to achieve that? Because businesses who outsource right 
now, you know, can deduct from their taxable incomes the full 
cost of outsourcing. So that does not create new jobs.
    What about limiting production to, say, 50 percent? So 
there is still an incentive, but we are not devastating our 
innovative capacity right here at home. You also mentioned, 
point three, preparing our workers for the 21st century 
economy. If the economy does not improve, the jobs you are 
preparing them for are as sackers at grocery stores and other 
menial work. How do you propose to prepare them for jobs that 
actually will be good-paying jobs?
    And especially buffer workers against income loss--you have 
got a lot of folks having a hard time finding work. 
Unemployment insurance should be extended. And also, are you 
considering wage insurance, paying, say, half the difference 
between the old and the new wages for up to 2 years to help 
with this transition?
    And your fourth point is to promote strong commercial ties 
with 95 percent of the world's population. Let us not have that 
be a one-way connection and one-way tie. Let us be sure that is 
a double tie, back and forth, in what you are doing to achieve 
that fourth goal. And I will await your response.
    Mr. Evans. Thank you very much, Congresswoman. You will be 
glad to know that it is not a one-way street in your State. I 
know that in your State of Missouri there are about 114,000 
good Missourians that work for foreign-owned companies.
    In addition to that, there are certainly plenty of workers 
in your State that supply those companies as well. And so the 
point that I have tried to make throughout this morning, the 
chances I have had to speak, was that trade is a two-way 
street. It is a bridge which crosses jobs and products and 
services, etcetera.
    So there are a lot of foreign companies that are here in 
America employing some 6.4 million workers. On top of that, 
trade supports about 10 million more workers. On top of that, 
those that work for companies that export generally have wages 
that are some 18 percent higher than other wages across the 
economy.
    And so, you know, that is why I think we need to continue 
to engage the other 95 percent of the people in the world. When 
you think about it, only 5 percent of the people live here. I 
mean, 95 percent of the customers live outside the borders of 
America. And so if we are really going to grow this economy and 
increase the standard of living here in America, and grow more 
jobs here in America, it just seems to me we need to continue 
to engage the greater world.
    In terms of competition, how are we going to--we ought to 
always be thinking about, how does it make it easier for our 
companies to compete domestically and internationally and not 
harder? And, of course, the President has laid out a six-point 
plan. What he has said is we need to make the tax cuts 
permanent.
    I think one of the important points to make about the tax 
cuts, because I heard a lot about it being a tax cut for the 
rich, I think one of the very important points that people 
always need to keep in mind that seems to get lost is that when 
you reduce the highest marginal tax rate----
    Ms. McCarthy. Mr. Secretary, if I might interrupt, I concur 
with where you are going, but are you going to propose like a 
new jobs tax credit? Some of the things that I raised in my 
question? Or, you know, the deduction for outsourcing, limit 
the deduction to, say, 50 percent? Could we have----
    Mr. Evans. What we have proposed is--what the President has 
proposed is out there, and that is what we are proposing. We 
will continue to work with Congress on other kinds of ideas. I 
am not here with any specific proposals with other kinds of 
ideas. What I have said, though, is just my--my belief is the 
administration's belief, that, look, we don't--we don't leave 
anybody out in America.
    And if there are programs that we need to continue to look 
at and strengthen like the Workforce Investment Act, I think it 
is very important that that Act be passed. You know, there are 
some $23 billion we have out there that can be used to train 
people to deliver the kind of skills that they need to meet the 
demand for jobs that are in our economy today.
    So there are good programs out there that we can continue 
to work on, and----
    Ms. McCarthy. Should we extend our unemployment insurance?
    Mr. Evans. We will continue to work with Congress. We 
haven't--I didn't come up here with a specific proposal to 
extend unemployment insurance. We will work with Congress on 
all the kinds of ideas that Congress brings to----
    Ms. McCarthy. Will that include considering wage insurance 
for people whose, you know, old and new wages are very 
different?
    Mr. Evans. The administration does not have a position on 
that.
    Ms. McCarthy. Take a look at it. There is a lot of people 
out there that--yes, they are finding another job after they 
are laid off from their other one, but it isn't nearly the wage 
that they had, and it is very hard to sustain a family in that 
new position.
    I recommend this article to you. I will get a copy over to 
your staff, because I think we need to be looking at new ideas 
to really accomplish stability and hopefully then improvement 
of our economy.
    And, Mr. Chairman, out of respect to your request, I would 
yield back the rest of my time.
    Chairman Barton. We thank the gentlelady. And we recognize 
the gentleman from Michigan, Mr. Upton.
    Mr. Upton. Thank you, Mr. Chairman. I will not use my 8 
minutes, I promise you that. I have three brief questions. I am 
going to ask if you can answer them all in one quick answer. 
That would be terrific, Mr. Secretary.
    First of all, I am very anxious to hear about the status of 
filling the new Assistant Secretary for Manufacturing, in terms 
of where we are in that.
    Second, I want to ask about steel. We have had so many 
concerns, particularly with small tool and die industry, and 
other manufacturers in southwest Michigan, about the price 
shocks in steel. I am just curious to know what the 
administration is planning to do.
    And, last, if you can just touch on a little bit--as one 
that supported the entry of China in the WTO, they are going to 
play by the rules. I am anxious to hear some concrete examples 
of where we are talking to the Chinese about playing by the 
rules, what do we see in the next number of weeks ahead. I know 
you have got a conference I think with the Chinese as early as 
next month. If you can just hit those, I will yield back the 
balance of my time once I hear your answers.
    Mr. Evans. Yes. Thank you, Congressman. First of all, on 
the Assistant Secretary of Manufacturing, we are continuing to 
work on that. Let me just say that this is an industry I spent 
30 years of my life in, and so I know the industry very well. I 
know the challenges of the industry. I am responsible for this 
department. I am responsible for the results of this 
department. And I am responsible for the implementation of the 
recommendations that are in the manufacturing report.
    We will continue to pursue putting in place an Assistant 
Secretary of Manufacturing. We have only had since late January 
to work on that, because it was not authorized until then. And 
so this is an effort that we have been engaged in for about 2 
months now. But that is not slowing down the implementation of 
the recommendations that are in the manufacturing report.
    As to steel, it is an area that I am concerned about. I 
have seen the spike in scrap steel prices around the world. I 
know what impact that has on our own small, medium, large 
manufacturers here in America. What I think we need to take a 
very hard look at is how other countries in the world are 
responding to that.
    Are they starting to shut down their exports of scrap to 
the world, which puts more pressure on the American market? If 
they are doing that, I think that is something we need to take 
a hard look at and just see if there are any steps that we can 
take.
    I am also concerned on that same subject when it comes to 
China, and are they slowing down the export to us of coke in an 
unreasonable kind of way, because, as you know, coke is a very 
important raw material in the processing and manufacturing of 
steel. And so if they are holding that back from us in some--by 
putting some artificial barrier or too high an export tax, or 
whatever it might be, we need to take a very aggressive and 
hard look at that, and we are.
    With respect to China in general, I have been over there 
twice. The last time I was over there I was very, very clear 
about our concerns about their enforcement of intellectual 
property rights. There are reports out right now that over the 
course of a year there are some $20 to $24 billion of loss to 
our industry because of theft and counterfeiting of 
intellectual property.
    For example, I have brought here two disks. One is software 
that you can buy in China for $20. You can buy this same one in 
the United States for $4,000. That is totally unacceptable. And 
as you mentioned, I have got the Joint Commission on Commerce 
and Trade coming over here in April. We have had candid 
discussions and frank discussions that we expect results.
    Ambassador Zoellick, myself, Secretary Veneman, sent a 
letter to the Chinese delegation just this last week saying to 
them that if you are going to come to the U.S. and have this 
discussion, we want results. Bilateral discussions are 
interesting, but what we are really interested in are results. 
And so as was said earlier, I think what we are focused on is 
enforcement of our laws on others or enforcing their laws and 
rules.
    Mr. Upton. Well, thank you. I look forward to working with 
you on that issue.
    I yield back my time.
    Mr. Shimkus [presiding]. Thank you. And I would like to 
recognize Mr. Brown. I think you had an opening statement, so 5 
minutes.
    Mr. Brown. Yes, and I will probably go less than that. 
Thank you, Mr. Chairman.
    Mr. Secretary, about 3 weeks ago, I was asked to speak to 
the Acron area machine shop owners and operators. About 60 men 
and women who own small machine shops showed up. Right before I 
spoke, a gentleman walked up and put this on--put this pile of 
brochures, leaflets, auction notices, on my table. And I would 
just to share--I didn't know what they were at first. I would 
like to share them with you.
    First one from Chicago, high tech manufacturing plant 
closing. This is a newsletter, an auction leaflet, on a fire 
sale, on a going out of business sale. From Pittsburgh, a plant 
closed, everything sells. From Mansfield, Ohio, two complete 
stamping and machine tool shops being dismantled and sold. From 
Charlotte, North Carolina, plant closing, everything must sell.
    From Marion, Ohio, complete shop closeout auction. From 
Cuyahoga Falls in my district, Ohio, absolute auction. From 
Scottsboro, Alabama, precision C&C shop--job shop downsizing 
because of outsourcing. This is--he said this is 1 month of 
these--that these shops are getting it.
    Now, these shop owners, overwhelmingly Republican, 
overwhelmingly voted for George Bush they told me, they don't 
think you get it. They don't think you understand that there 
are tens of thousands of people who have lost their jobs in 
these shops alone, and tens of thousands, maybe hundreds of 
thousands of people, that believe that they are going to lose 
their jobs due to trade policy, due to outsourcing, and due to 
the fact that we are--that you can't appoint or you haven't 
appointed a manufacturing job czar, even though you--the 
President announced it in my district on Labor Day in 
Richfield, Ohio.
    Now, my question is: why not support Crane-Rangel? Crane-
Rangel has the endorsement of the Manufacturer Association of 
America--the National Association of Manufacturing, has the 
endorsement of the AFL-CIO, it has got 170 bipartisan co-
sponsors, roughly half and half. Please tell the President to 
support Crane-Rangel. Why is he not supporting it?
    Mr. Evans. Well, the President has laid out his economic 
jobs and growth agenda, and he has been very clear about what 
the elements of it are. We believe that if we pursue that 
agenda it will continue to create the conditions for a growing 
and stronger economy.
    Mr. Brown. But the President's plan, Mr. Secretary, is to 
give incentives to all kinds of companies, equally giving those 
incentives, in fact giving more incentives, to bigger companies 
and smaller companies, and not rewarding U.S. production. 
Crane-Rangel says if you do 70 percent of your production in 
the U.S., you get 70 percent of the tax break. If you do 100 
percent, you get 100 percent. If you do 10 percent, you only 
get 10 percent. What is wrong with that concept to help these 
job shop owners all over the country that are seeing their 
shops close?
    Mr. Evans. Well, let me say, Congressman, that I think, 
again, the economy is strong and getting stronger. If you look 
at the manufacturing indicators over the last four or 5 months, 
they are powerful numbers. The ISM Index has been up over 60 
percent, or over 60 for the last 5 or 6 months, which is a very 
powerful number.
    I just got back from a meeting with the National 
Association of Manufacturers. They are all telling me that they 
haven't seen their order books so full, so strong, so powerful, 
and----
    Mr. Brown. These are different manufacturers from the ones 
that I have seen. Let me ask one more real brief question. 
Jordan Free Trade Agreement had strong environmental and worker 
protection provisions, supported unanimously by the House. Tom 
Donahue, chairman of the Chamber--President of the Chamber of 
Commerce, said trade promotion authority should be unencumbered 
by requirements to advance labor, environmental, other social 
agenda objectives.
    Two weeks ago, Ambassador Zoellick said because of Jordan 
FTA trade between the U.S. and Jordan has nearly tripled in 
only 3 years. Who is right, Ambassador Zoellick saying Jordan 
is working with environmental and labor standards, or Chamber 
of Commerce President Tom Donahue who says they are bad? Who is 
right?
    Mr. Evans. Well, I didn't see--I haven't looked at the 
context of what Tom Donahue was saying. I do think the 
agreement with Jordan is working well. We are continuing to see 
our trade with them increase and----
    Mr. Brown. Good.
    Mr. Evans. [continuing] they will----
    Mr. Brown. Well, I hope, then, that you could advocate a 
similar kind of agreement with CAFTA and with FTAA with labor 
and environmental standards as strong as Jordan, so that we 
really could see that economic growth coming out of those Latin 
American countries.
    I yield back, and I thank the chairman.
    Mr. Evans. Thank you, Congressman.
    Mr. Shimkus. Okay. Thank you. The gentleman yields back.
    Mr. Secretary, it is--I always try to----
    Mr. Brown. Mr. Chairman, I had 45 seconds. I am sorry. Mr. 
Stupak just wanted to make sure that his questions are in the 
record, if you could get unanimous consent on that. And I don't 
know if he can come back, but he would like that in the record 
if he doesn't. Okay. Thank you.
    Mr. Shimkus. Is there objection? Hearing none, so ordered.
    Again, it is great to have you here. And I think you 
brought up a lot of great points. Obviously, we are at a 
theatrical point in the year where we are going to have a lot 
of accusations flying back and forth. But you can't really 
dispute kind of some real numbers. The 5.6 unemployment rate is 
as low as we have seen in years.
    When I mentioned the numbers, that we have got more people 
employed in this country than in the history of the country, 
people really don't believe me. We do have a perception issue 
out there. And when I taught high school psychology, perception 
turns into reality for a lot of people.
    And it may not be that the individuals' jobs are lost, but 
they fear their neighbors' jobs, or they fear someone else's 
job loss. So you did, in your testimony, talk about some 
great--some progress being made, although it is never enough. 
When I talk about this--and we mentioned this yesterday--21,000 
new jobs last month, well, it is not 125,000 new jobs, but it 
is 21,000 new jobs.
    And those 21,000 people who have jobs now are better off, 
because--and that is better than no job increase, and that is 
better than job decreases. So we have got to keep this in 
perspective.
    Tell me how the cut--with the focus on small business and 
reducing the tax rates for individuals, how that helps small 
businesses.
    Mr. Evans. Well, Congressman, as you know, no doubt, small 
businesses create 70 percent, 70 to 75 percent of the new jobs 
in America. And when you cut the highest marginal rate, about 
80 percent of that savings goes to--70 or 80 percent goes to 
small business owners in America, the real job creators of this 
economy.
    And so that is how--by lowering rates, you see, there are 
some 23 million small businesses all across that America that 
pay their taxes through their individual tax return. And so as 
you lower those taxes, that means that they have more money to 
hire people and grow their businesses.
    Mr. Shimkus. Isn't that because they are not incorporated, 
they are sole proprietorships or----
    Mr. Evans. Sole proprietorships or subchapter S or, you 
know, partnership, that is correct. And that is lost in this 
debate. It gets lost in the debate. There is always the 
discussion of it is a tax cut for the rich. Well, you know, 
these people they are talking to are small business owners that 
are responsible for hundreds of thousands, millions of workers 
in our economy, responsible for their livelihood, for their 
families, have great responsibilities, that are paying their 
taxes through their individual tax return, and not as a C 
corporation, as a corporation paying corporate tax rate.
    Mr. Shimkus. Thank you. And I know that there is a 
tremendous focus on manufacturing. I talk about it in my 
district all the time. I have a list of, you know, 500 
manufacturers in southern Illinois. People would not believe 
that we have 500 manufacturing facilities.
    It is easy for the public to see when a factory closes, 
because they put the chain, they close the gate, and it is 
empty. I always talk about if a manufacturing company in my 
district exports 10 percent of their product, then you could 
actually say that 10 percent of the workforce is attributed to 
foreign trade. So whether it is a tire company or an oil 
filter, air filter, they are all in my district, or paper 
products that may go overseas. The overseas part of the trade 
is a job employment aspect in the manufacturing that is 
remaining in this country.
    Talk about the importance of the overseas market to our 
country today.
    Mr. Evans. Well, the overseas market--the export sector of 
our economy was responsible for about 25 percent of the growth 
in the 1990's, 25 percent of the economic growth. Those 
individuals across America--American workers that work for 
companies that export--make--are about 10 million employees 
directly. But, you know, there are a lot more that are 
connected to it.
    Take the export of a tractor from the United States to some 
other country. I know that when you export a tractor, a Case 
New Holland tractor, for example, you export a Case New 
Holland----
    Mr. Shimkus. We are John Deere folks in Illinois.
    Mr. Evans. John Deere. Why don't we take John Deere. It is 
pretty much about the same. When that tractor leaves America, 
there are about 250 parts on it that were manufactured and made 
someplace else, not inside the plant itself, but suppliers to 
that John Deere or Case New Holland or Caterpillar, or whoever 
it might be.
    And those jobs get lost in some of these analyses and some 
of the calculation. And so when I say that there are 10 million 
jobs directly that you can tie to exports in our economy, I am 
convinced there are many, many, many more out there. There is 
the suppliers that are supplying these exporters.
    So that is--you know, it is a critical part of our growing 
economy. And as I say, it is the reason that we saw our economy 
grow. It was 25 percent of the growth in the 1990's.
    Mr. Shimkus. And trade negotiations for me is tariffs, 
tariffs, tariffs. And it is an additional cost of doing 
service. If you want to get into that company--a tractor is a 
perfect example of how we--if we want to sell a John Deere 
tractor to Chile, we actually sell it through Canada.
    Canada has a free trade agreement with Chile, so these are 
sold through a Canadian firm to Chile instead of our ability to 
have direct access to that market, because we don't really have 
a level playing field on the--or negotiations for a reduction 
in tariffs.
    I also, when I have a chance, I--Grant Adonis, who works 
for you, I have had a lot of relationships with the steel 
issue, on the trade debate. I just want to give you a lot of 
kudos. I think he does a great job, and he has become a good 
friend, and he is----
    Mr. Evans. Good.
    Mr. Shimkus. [continuing] working in the trenches. Last 
question has to deal with productivity. My 500 manufacturing 
firms, when they want to stay in this country and they want to 
compete, in effect, how they can still produce because of our 
high taxes, our highly litigious society, all of the other 
costs. They automate and they become more productive.
    Can you talk about the productivity debate that has fallen 
in our country, whether that is good or that is bad? It is good 
because it keeps my companies in southern Illinois if they 
become more productive.
    Mr. Evans. Well, first of all, I think that productivity 
growth in this economy has been remarkable in the last several 
years. And those that deserve the credit are the workers on the 
plant floors and the factory floors, the people that have their 
hands on it, touching it every day, that are coming up with the 
innovative ideas to increase the productivity of America.
    Over the last 2 years, productivity growth in America has 
grown at the fastest pace that it has in 40 years, which is 
absolutely remarkable. And, you know, that has been a 
challenge, though, of course, in the short term as to job 
creation. But productivity growth is healthy for this economy. 
It means higher standard of living for the American people. It 
means more capital to invest in the years ahead, which will in 
turn mean more jobs in the years ahead.
    But in the short term, in terms of job creation, yes, it 
does create a challenge. But as we work through this ongoing 
recovery and strengthening recovery, no doubt productivity 
numbers will begin to come down some, and we will see growth in 
this economy. But it is quite remarkable.
    I mean, again, we are the envy of the world to have the 
kind of productivity numbers that we have.
    Chairman Barton. We are going to recognize the gentleman 
from Georgia, Mr. Norwood, for 8 minutes, or such part of that 
as he may consume.
    Mr. Norwood. I will probably need it all. Thank you, Mr. 
Chairman.
    And, Mr. Secretary, I am delighted you are here.
    Mr. Evans. Thank you, sir.
    Mr. Norwood. I can easily associate myself with the 
chairman's remarks. I think you have a very good Secretary. The 
biggest problem I see is that you aren't running USTR also. If 
we could have you do both, I think the country would be better 
off.
    I am going to go through a statement here, and there are 
some questions built into it, because of our time limitation, 
but I am very anxious about all of those questions and I will 
ask you to verbally answer as many as you can, and those you 
can't in writing.
    Mr. Chairman, I am delighted that you are having this 
hearing today to focus this committee on the state of our 
country's manufacturing industry. Many of our great 
manufacturers have roots in Georgia, and I am proud to 
represent them. I have taken time to sift through the Commerce 
Department's strategic plan to promote U.S. trade and industry, 
and I have to tell you for the most part I am very pleased with 
your suggestions.
    But I also have some concerns that I would like to have us 
address. Your report expressed the need to enforce trade 
agreements and combat unfair trade practices. I believe you 
mean that. I know you mean that; I couldn't agree with you 
more.
    But having said that, I am pretty disappointed with the 
lack of action on a number of unfair practices. For starters, 
there is this problem with China's manipulating their currency, 
and I would like for you to address that at some point.
    The undervalued yuan has contributed to our trade deficit 
with China. As you know, that has risen from 30 billion in 1994 
to an estimated 126 million in 2003. It has hurt U.S. 
production, and employment in several U.S. manufacturing 
sectors, particularly textiles, because they are forced to 
compete domestically and internationally against an 
artificially low cost of goods from China. At some point, I 
would like for you to explain to me, or tell me if we are going 
to take any action on this issue in 2004.
    Now, second, strengthening the U.S. patent system is also 
important, and holding our trade partners to the same laws is 
vital for some of our industries to grow. One case where that 
is not happening and could prove to be devastating to my home 
State if it is not fixed is with the rug and carpet industry. 
Another--again, one of our great industries in Georgia with 
strong roots, the U.S. carpet industry produces 45 percent of 
the world's carpet and has a $12 billion per year presence at 
the mill level.
    The mills produce in this country about 2 billion square 
yards of carpet annually, in 230 plants, Mr. Chairman, located 
in 21 States, and a workforce in excess of 70,000 people. In 
Georgia, 80 percent of the domestic industry is located within 
65 miles of one little town.
    Now, despite these robust numbers and significant economic 
input, the carpet and rug industry faces tremendous challenges 
from abroad, particularly China. By far the most immediate 
problem facing us across the country is the theft of 
intellectual property rights, primarily--well, India, too--
China and India.
    One of my questions is: can we expect action to be taken on 
this in 2004?
    Mr. Secretary, all of us in Georgia are sending you a 
letter very soon asking you, in conjunction with the U.S. Trade 
Representative, to give a renewed priority to intellectual 
property theft in the context of the upcoming DOHA trade round. 
And I might mention at this point, the last time we had a DOHA 
trade round we wrote the U.S. Trade Representative a letter, 
which not only did they not even consider what we wanted them 
to do, they did the absolute opposite thing in non-reciprocal 
agreements, which is what Mr. Dingell is talking about.
    If we are going to get all tariffs to zero in this country, 
then let us have reciprocal agreements with these people around 
the country. It doesn't do any good for us to lower--for 
example, lower tariffs on small trucks to zero when we let 
other countries keep their tariffs on them. I don't understand 
that. I am not smart enough to.
    But I do know that the Trade Representative went right to 
DOHA 2 or 3 years ago and signed a non-reciprocal trade 
agreement, which I just can't catch on to that. Maybe you will 
enlighten me.
    I have also great concerns about outsourcing, and I have 
been worried about that before 60 Minutes had their little 
report. I would like to hear from you a little bit about that, 
and I would like to start, then, for your answers with this 
question. I noticed in The Wall Street Journal today Walter 
Riston had an article in there that said, ``The balance of jobs 
we import from abroad greatly exceeds the jobs we export from 
abroad.'' The balance of jobs we--okay. True or false?
    Mr. Evans. Well, you know, I don't think we know the 
absolute answer to that, Congressman, and let me--but I want to 
talk to that very important point.
    Mr. Norwood. Good.
    Mr. Evans. First, let me talk about unfair trade practices 
and enforcement and getting other people to--because we ought 
to be able to look our American workers in the eye and tell 
them, ``You are on a level playing field. We are all playing by 
the same rules.'' It is not any more complicated to me than 
that.
    And I must admit to you that, having been Secretary of 
Commerce now, and honored to serve this President and this 
country for 3 years or so, I go around the world, and we have 
nice bilateral discussions, and they are interesting 
discussions. But I am more--I am from the private sector, and I 
want results. I don't want to have a lot of interesting 
discussions. I want results.
    I expect when we go talk to other countries, and we point 
out deficiencies in their enforcement, point out deficiencies 
in their practices that are creating this unlevel playing 
field, there is action, and there is not just a lot of talk 
about it.
    And that is one of the outcomes of the Manufacturing 
Report. We are--two areas. One is we have established what we 
call the Unfair Trade Practices Task Force, and this task force 
has the charge to look at other countries around the world and 
try and identify the unfair trade practices and not sit and 
wait for industry necessarily to come to us.
    For example, we are going to monitor 30 products that are 
coming in from China to see if there are any signals that those 
send to us that are a red flag that we ought to look into 
further that identify unfair trade practices.
    Mr. Norwood. Mr. Secretary, that is why I bragged on you. I 
know you are doing that. But the truth is, they are breaking 
the rules out there faster than you can catch them.
    Mr. Evans. Well, I know. And let me tell you about the 
other unit. The other unit we are putting in place is called 
the Unit of Investigation and Compliance. The lacking area, as 
I have seen it, has been in investigation.
    We go over there, and we can talk about it, but you have 
got to go put the case on the table in front of them and show 
it to them, and say, ``Look, you know, what we have done before 
is we will go to retail outlets''--and I will find--here is, 
you know, a CD that they sell for $20 over there. In America, 
it is $4,000. Well, what you have got to do is you have got to 
go over there and build the case for them.
    Here is where they are being manufactured. Here is the 
truck that is carrying them to this store. And so we are in the 
process of hiring investigators that will put together the case 
that you can put on the table in front of them and tell them, 
``You have to fix this.''
    And so instead of just a lot of, you know, nice 
conversations about kind of trade policy, and you need to 
enforce your laws, we are going to be much more aggressive in 
terms of investigation and showing the facts to them. ``Here is 
the case; now go take care of it.'' So those are two areas that 
we are going to be pursuing very hard.
    In terms of outsourcing, what I would say to you is one 
other area within the Manufacturing Report--is a unit called 
the Unit of Industrial Analysis. And the idea is to have a 
place where you can go and develop good data, good information, 
where you know what the facts are. There is a lot of numbers 
being tossed around about outsourcing, and how big is it, how 
small is it. You know, nobody knows for sure. There are a lot 
of forecasts what it might mean. It is scaring people. It is 
concerning people.
    Here is what I do know. I do know that foreign companies 
now in America employ directly about 6.4 million. In your 
state, they employ about 244,000. You have got in your State--
you have got Honda, you have got Mitsubishi, you have got 
Panasonic, you have got Pirelli Tires. You have got companies 
like that in your State that are employing workers in your 
State directly.
    That doesn't count the number of employees that actually 
support those companies. There is another however many that 
support them. And the other thing I know is that we now have, 
with the rest of the world, a trade surplus in services. In 
other words, we are exporting more services to other countries 
than we are importing, and that includes India, and it includes 
China.
    And so I don't know what the exact number is. What I can 
tell you is is that our export in services is about $250 
billion. You could equate that to about 1.5 million jobs or so. 
And so there is a tremendous amount of jobs in the service 
sector of our economy that depend on exports. Are others kind 
of exporting to us? Yes, they are.
    But I am one that thinks that--I don't know. I don't want 
to say on the record that I know that is true until I know what 
the facts are. But that is why we have this new Unit of 
Industrial Analysis in place, and industrial analysis, and they 
are working on that very question.
    They are really trying to get to some good, hard numbers as 
to whether or not there are more foreign companies employing 
workers here in America than we are outsourcing someplace else.
    Mr. Norwood. Mr. Chairman, since nobody else is here, may I 
ask unanimous consent that he answer the other two questions 
that I proposed earlier?
    Mr. Shimkus [presiding]. Just remember that he is supposed 
to be gone at 12:45, so we want to be respectful of the 
Secretary's time.
    Mr. Evans. Let me talk about reciprocal trade agreements, 
because I agree with you. And that is the way we laid out the 
proposal to take on goods and services, that everybody goes to 
zero by the year 2015. We have made the commitment, and I know 
certainly I made the commitment to the textile sector of our 
economy, that when we entered into trade agreements there would 
be reciprocal market access.
    We have one of the lowest tariff levels of any country in 
the world. Period. And it is time for the other countries to 
move toward us.
    Mr. Norwood. Well, there is no question in my mind, Mr. 
Secretary, you are saved. The problem is you are in that CITA 
group, and there are folks in there that aren't saved. They 
just simply do not believe--you know, we are so busy trying to 
make a trade out there and try to have a trade agreement that 
sometimes we make a trade even though it is not in our best 
interest, just to say we made a trade. And if you don't have 
reciprocal versus non-reciprocal agreements, we don't win.
    Mr. Evans. Right.
    Mr. Norwood. We are just--could you comment on the China 
manipulation of the yuan----
    Mr. Evans. Well----
    Mr. Norwood. [continuing] on the patent system?
    Mr. Evans. Yes. Well, let me--two things. I will get to 
that in just a second. The other is Grant Aldonas, who we 
talked about earlier, he is in China right now. And he is with 
a group from the textile sector of our economy. So they are 
over there, and they are focused on it.
    And they are telling them, ``Look, we are going to have a 
meeting in America in April, and it is the JCCT. But don't--you 
know, we are not really interested in meeting unless you are 
coming over here with some results.'' And so we are working on 
that.
    Let me tell you that this whole--in terms of currency, I 
leave that to the Secretary of Treasury. I mean, that is his 
area of responsibility, not mine. What I would say to you is 
this: that we--when I go over there and talk to the Chinese 
leadership, we encourage them to work toward the kinds of 
economic policies, fiscal policies, monetary policies, 
regulatory policies, that work here in America, which are free 
market kinds of policies, free flow of capital, markets make 
decisions.
    That is what--that is the kind of environment you create 
for long-term economic growth in your country. And so certainly 
when I go there, I talk very clearly about the importance of 
free market forces determining----
    Mr. Norwood. They are not listening too well, though. They 
are still manipulating.
    Mr. Shimkus. The gentleman's time has more than expired, 
and we do want to be respectful of the Secretary's time. I 
don't want to run back over to the floor, because I have a big 
biannual Republican versus Democrat basketball game tonight, 
and I have to save my strength to beat the Democrats.
    So, Mr. Secretary, thank you for your time. We appreciate 
your candor. We look forward to working with you as we move the 
economy forward.
    And with that, I adjourn this hearing.
    [Whereupon, at 12:42 p.m., the committee was adjourned.]
    [Additional material submitted for the record follows:]

             Responses of Hon. Donald Evans for the Record

                     QUESTIONS FROM HON. JOE BARTON

    Question 1. What structural changes have shaped the competitive 
environment over the past decade? How have U.S. manufacturers either 
initiated or responded to these changes?
    Response: There have been a number of changes, but clearly the 
information technology revolution and new business models which have 
led to a much more globalized manufacturing process--from R&D to 
marketing--have had profound effects. These changes have increased 
competitive pressures but have also offered opportunities to expand 
productivity. Overall, the U.S. manufacturing sector has responded in 
an exceptional manner to this new environment. Productivity in 
manufacturing increased by 40 percent between 1995 and 2000. U.S. 
industries, both services and manufacturing, have been the benchmarks 
for the rest of the world in adopting new technologies and especially 
new business models.
    This positive response by U.S. manufacturers has helped mitigate 
the recent downturn in manufacturing employment. While U.S. 
manufacturing employment began declining in July of 2000, the majority 
of our trading partners, including Japan, China, France, and Germany, 
saw reductions in their manufacturing employment base greater than that 
experienced here. Today, the U.S. manufacturing sector is expanding and 
adding jobs, with manufacturers creating 91,000 new jobs in the past 
four months.
    Question 2. Based on Department of Commerce roundtables with 
manufacturers, what are the priority issues manufacturers believe need 
to be addressed to ensure the competitiveness of U.S. manufacturing?
    Response: The manufacturing initiative was developed largely from 
input we got from manufacturers during the roundtables. The President 
has the following six-point plan that addresses the priority concerns 
of U.S. manufacturers. This plan responds to the issues that are of 
concern to manufacturers:

1. Enhancing government's focus on manufacturing competitiveness;
2. Creating the conditions for economic growth and manufacturing 
        investment;
3. Lowering the cost of manufacturing in the United States;
4. Investing in innovation;
5. Strengthening education, retraining, and economic diversification; 
        and
6. Promoting open markets and a level playing field.
    The Bush Administration continues to work with Congress to address 
many of these concerns, particularly in areas such as health care 
costs, eliminating junk and frivolous lawsuits, and passing a 
comprehensive, effective energy plan. Significant action has also been 
taken within the Department to strengthen U.S. manufacturing. Al Frink, 
a successful manufacturing CEO, will be nominated to be the first 
Assistant Secretary for Manufacturing. I am leading a Manufacturing 
Council comprised of leaders from the manufacturing sector to ensure 
that the voice of business is heard, and that the government is 
coordinated to respond to it. We have expanded and strengthened our 
ability to attack the underlying causes of unfair trade. We are 
analyzing market trends and foreign practices to identify potential 
unfair trade problems at the earliest stage possible, including 
analyzing the 30 largest categories of Chinese imports.
    Question 3. What would have happened to U. S. growth rates had 
President Bush and Congress not enacted tax relief for American 
families in 2001?
    Response: According to the Department of the Treasury, without the 
tax relief enacted by President Bush and the Congress, by the end of 
last year real GDP would have been more than 3 percent lower and 2 
million fewer Americans would have been working.
    Question 4. What would be the effect of the failure to make 
permanent the tax reductions President Bush and the Congress enacted in 
2001 and 2002?
    Response: Allowing the President's tax relief to sunset would have 
two negative effects on the economy. First, in the short run, the 
effect of higher tax rates, an increased marriage penalty, and a 
smaller child credit would result in a significant increase in the tax 
burden on the average American family. The Department of the Treasury 
estimates that a family of four earning $40,000 would see their taxes 
increase by $915 in 2005. From the economy's perspective, this tax 
increase would likely reduce aggregate demand, decrease utilization of 
capital, and reduce employment and overall economic output.
    Second, the higher taxes would have long-lasting impacts on capital 
formation, labor supply, and, ultimately, income growth. Over time, the 
level of output is determined by the economy's capacity to supply goods 
and services, as reflected in the Nation's stock of capital, labor, and 
technology. Allowing the current lower rates and capital incentives to 
sunset would reduce the incentives to save and invest, which would in 
turn reduce the amount of capital available to the economy. In 
addition, higher taxes on labor income--the reward for working--would 
reduce incentives to work. Together, these changes would have long-
lasting effects on growth and standards of living.
    Question 5. How does the cost of the tort system in the United 
States compare to that in England? In the rest of Western Europe? In 
Japan? In China? How do these differing litigation costs affect U. S. 
manufacturer competitiveness?
    Response: The most recent survey of comparative tort system costs 
was done by Tillinghast-Towers Perrin using 1998 data. The study 
compared tort costs as a percent of GDP in the United States with those 
of 11 other countries--8 Western European countries, along with Canada, 
Japan and Australia--and found that tort costs as a percent of GDP in 
the United States were approximately twice as high as in the other 
countries. In 1998, U.S. tort costs were 1.9 percent of GDP whereas 
tort costs in Denmark, the UK, France, Japan, Canada and Switzerland 
were all estimated to be less than one percent of GDP. Only Italy, with 
costs of 1.7 percent of GDP, rivaled U. S. costs. Data from China are 
not available.
    As noted in an April 2002 Council of Economic Advisers' report, the 
United States bears the burden of an expensive and inefficient 
liability system through higher prices, lower wages and decreased 
returns to investment, as well as lower levels of innovation. The 
Manufacturing in America report released by the Commerce Department 
earlier this year observed that the tort system significantly 
undermines the competitiveness of U.S. manufacturers. According to the 
report, the higher awards in the United States have driven insurance 
premiums higher and, when liability premiums proved cost prohibitive, 
the insurance premiums have driven firms out of business. And, there is 
little evidence quantifying the indirect costs of the tort liability 
system. Indirect costs include litigation avoidance, unnecessary and 
duplicative medical tests, and the disappearance of products from the 
market. As a result, they understate the impact on manufacturers and 
the cost to the U.S. economy as a whole.
    Question 6. Please describe what you learned during the roundtables 
from Manufacturers about how lawsuits affect their business.
    Response: During the roundtables, one of the most frequently cited 
issues was tort reform. Manufacturing leaders pointed to a system that 
drives insurance costs higher even for firms that have never had 
lawsuits filed against them or put hazardous materials on the market. 
Manufacturers pay ``tort taxes'' in several ways. Manufacturers pay as 
product liability and other tort claims increase the cost of general 
liability insurance. These premiums alone can run as high as 30% of the 
coverage itself. Manufacturers also pay when there is no merit to 
claims and they ultimately prevail in litigation. The indirect costs of 
tort litigation are also significant--particularly time spent by 
managers and employees. The basic reason for the manufacturers' concern 
is the dramatic increase in tort claims and awards. The tort system 
significantly undermines the competitiveness of U.S. manufacturers. 
Manufacturers stated that common sense legal reforms are crucial to 
bolster manufacturing competitiveness. Tort reform should focus on 
three areas. First, there is a critical need to cap medical malpractice 
awards in ways that ensure that those deserving of compensation get 
compensated. The second is the need to restore the balance that 
previously existed in tort law. The third area is the need to resolve 
litigation over asbestos-related injuries by ensuring that those 
deserving compensation receive it.
    Question 7. What should our long-term strategy be for acquiring 
additional sources of natural gas?
    Response: The Administration supports enhanced production in our 
own hemisphere and a reexamination of restrictions on natural gas 
exploration and production in the United States. The Administration has 
also encouraged the development of liquified natural gas (LNG) 
terminals to increase U.S. capacity for LNG imports, and supports the 
building of a new natural gas pipeline from Alaska to the lower 48 
states.
    Question 8. What is the implication for U.S. business of more 
stable and reliable sources of energy? How can Congress help to achieve 
these goals?
    Response: Industry uses more than one-third of all the energy 
consumed in the United States Although the Nation's ``energy 
intensity,'' or the amount of energy required to produce a dollar of 
GDP, has declined and is expected to decline further over the next 
decade, energy prices and security of supply still affect U.S. 
businesses, particularly manufacturers. To aid our businesses, we 
should take action to encourage industry to modernize our energy 
infrastructure, increase energy supplies, and improve energy 
conservation and efficiency. For the past two years, the President has 
called on Congress to pass his National Energy Policy to address these 
issues.
    Question 9. Your report [Manufacturing in America] explains that 
energy consumption is expected to rise by 32% by 2020. By what percent 
is energy production expected to rise? If there is a disparity, what is 
industry doing to address it? What is the government doing to address 
it?
    Response: According to the Department of Energy, primary energy 
production in the United States in 2002 was 71.85 quadrillion British 
thermal units (Btu) and consumption was 97.72 quadrillion Btu. In 2020, 
primary energy production is projected to be 84.09 quadrillion Btu, and 
consumption will be 127.92 quadrillion Btu. This trend was one of the 
fundamental motivations behind the President's National Energy Policy 
(NEP).
    Setting aside Congressional action on the NEP, to help bridge the 
projected gap between domestic production and consumption, we are 
implementing the National Energy Policy's recommendations that we 
diversify and expand our supply of energy and develop new technology. 
We are also building relationships with energy producers around the 
world. Among other actions, we created the North American Energy 
Working Group to strengthen cooperation with Mexico and Canada, held an 
Africa Energy Ministerial in 2002 to promote energy ties with Africa, 
held two Energy Summits with Russia to promote Russia's role as a 
leading world energy supplier, and continue to encourage the 
transportation of Caspian energy resources to world markets.
    Question 10. Please comment on the U.S. lead in R&D in technology 
and pharmaceuticals? What are the implications for our economy of that 
lead?
    Response: President Bush's FY2005 Budget request commits 13.5 
percent of total discretionary outlays to R&D--the highest level in 
thirty-seven years. Both private sector and Federal R&D have 
significant effects on the Nation's economy. While private sector R&D 
is more focused on and effective at improving products and processes, 
federally funded activities are best aimed at sustaining basic research 
and improving the Nation's innovation infrastructure. For example, the 
National Science Foundation sponsors fundamental research and supports 
scientific and engineering education, both of which in turn help to 
underpin advances made in the private sector. The role of the National 
Institute of Standards Technology (NIST) in developing measurements and 
standards is critical to industry. Manufacturers depend on these 
services and standards, an important reason why the President's FY2005 
Budget would increase NIST's core (laboratory) budget by 20 percent 
over FY 2004 enacted levels.
    The United States continues to be a world leader in pharmaceutical 
innovation and in the pharmaceutical industry, and this leadership has 
broadly increased over the last decade. Several reasons include: the 
continuing stream of U.S. scientific achievements in the life sciences 
made possible by NIH funding, strong intellectual property protection, 
strong interests of U.S. businesses and capital markets in aggressive 
development and commercialization of new drug possibilities, and the 
increasing attractiveness of the U.S. marketplace relative to other 
developed countries' markets, which tend to be subject to extensive 
government intervention. The United States' competitive strength in 
this industry is also derived from the specialized and highly capable 
drug discovery and clinical trial companies that have emerged 
domestically to meet the industry's need for innovation.
    Question 11. What is the implication of the declining share of 
worldwide R&D spending by the U.S.?
    Response: Despite growing global competition, the United States is 
still the undisputed global leader in science. The U.S. position in the 
number of patents issued has remained remarkably stable since 1988 (52-
56 percent), with the number of patents surging from 80,000 in 1988 to 
166,000 in 2001. The United States has 78 percent more high-tech 
patents per capita than Europe. Since the early 80s, the United States 
has held the largest market share (30-33 percent) of the global high-
technology market and leads in four of the five high-tech industry 
sectors. Pharmaceuticals are the one exception where the EU has held 
the lead position over the past two decades. In aerospace the United 
States accounts for about 50 percent of the market, high-tech services 
(33 percent), financial services (40 percent) and communications 
services (38 percent).
    The United States spends one and a half times more in research and 
development than all of the EU countries combined and nearly three 
times more than Japan, the next highest investor in R&D. Current 
priorities set by the Administration for research funds clearly 
identify fields likely to be important for future economic 
competitiveness. President Bush's FY 2005 Budget request commits 13.5 
percent of total discretionary outlays to R&D--the highest level in 
thirty-seven years. The quality of research produced by our 
universities, industrial and national laboratories is unsurpassed by 
any other nation. As other nations develop their research capabilities, 
and seek ways to reap economic payoffs from research investments, they 
emulate our structures and processes, as best they can. As we act to 
make our system even stronger, let us be proud of the strengths of the 
United States research and development enterprise.
    Question 12. Should the R&D tax credit be made permanent?
    Response: The President's FY2005 Budget proposes making the 
Research and Development (R&D) Tax Credit permanent. The temporary 
nature of the credit was originally justified as a way to review and 
evaluate the measure's performance. However, studies by the General 
Accounting Office and others have now shown that the credit stimulates 
substantial amounts of additional R&D. Moreover, making the credit 
permanent would address concerns of businesses that contend that the 
present short-term approach dampens the credit's incentive effects, 
especially in relation to long-term R&D projects.

                   QUESTIONS FROM HON. CLIFF STEARNS

    Question 1. The Department's report, ``Manufacturing in America,'' 
indicates that manufacturers are frustrated by the costs that are 
imposed on them by government. What are some of those costs and what 
can be done to alleviate them?
    Response: At our roundtables, manufacturers frequently mentioned 
the issue of regulatory costs and the relative burdens they place on 
U.S. firms versus their competitors. An Office of Management and Budget 
(OMB) study found that regulatory costs were 3.7 percent of GDP in 
1997. About half of this goes to compliance with environmental 
regulations and the rest is for compliance with workplace safety and 
product safety requirements, as well as time spent filling out 
government paperwork and keeping records. These costs are expensive to 
government as well. Government must manage these regulatory programs, 
which consequently creates a drain on tax revenues. The most common 
compliance costs for manufacturing companies are related to 
environmental regulation, workplace safety, and tax compliance/
employment rules. We also know that these costs fall hardest on small 
manufacturers with 20 or fewer employees. These costs greatly affect 
cost competitiveness and can offset the benefits of productivity gains 
many times.
    The Administration has slowed the increase in regulatory costs 
produced by new regulations reviewed by the OMB by 70 percent compared 
with the previous Administration. Nonetheless, the overall cost of 
compliance has risen significantly over time. To combat these rising 
costs, OMB is leading a process to reduce the burden of regulation on 
manufacturing enterprises. First, OMB is establishing an inventory of 
potential regulatory reforms that would lower the cost of 
manufacturing. To this end, OMB put out a Federal Register notice 
seeking public comment on overly burdensome regulation by May 20. OMB 
should analyze and prioritize these reforms based on the comments 
received. Further, OMB should rigorously apply its recently developed 
guidance on regulatory impact analysis to any proposed rules that could 
influence the costs imposed on the manufacturing sector.
    Question 2. How has the passage of the ``Jobs and Growth Tax Relief 
Reconciliation Act'' helped the manufacturing sector, specifically? 
What further work needs to be done in the tax area to help the 
manufacturing sector?
    Response: While the Jobs and Growth Act has helped boost economic 
growth and job creation in general, its provisions were of particular 
benefit to America's manufacturers. Manufacturing requires massive 
investments in plant and machinery. The President's tax relief--
including the across-the-board rate relief, lower taxes on investment, 
and increased expensing and depreciation limits--has reduced the cost 
of making capital investments in vehicles, computers, and machines. A 
lower cost of capital makes American manufacturers and their workers 
more competitive.
    Specifically, the Jobs and Growth package first reduced tax rates 
across-the-board. This tax relief was important not only for America's 
families, but also for the 90 percent of American businesses organized 
as S Corporations, partnerships, and sole proprietorships, including 
most of America's manufacturers.
    Second, the Jobs and Growth Act reduced the taxes imposed on 
manufacturers when they invest in new capital equipment. Smaller 
businesses now qualify for the higher, $100,000 expensing limit. For 
smaller businesses, they can now deduct up to $100,000 in investments 
in trucks, computers, and other equipment. Larger businesses are 
eligible for 50 percent bonus depreciation.
    Third, the Jobs and Growth Act reduced the marginal tax rates on 
investment income to just 15 percent. For American businesses, this 
reduction means equity capital can be raised less expensively, making 
our corporations more competitive in the global marketplace. It also 
reduces the bias towards debt and away from equity, resulting in better 
capital allocation and efficiency in the long term.
    The net result of these increased deductions and lower marginal 
rates is a dramatic reduction in the cost of capital for America's 
manufacturers. That means America's manufacturers can better afford to 
purchase the equipment they need to stay competitive and to make their 
workers more productive. It also means their American customers can 
afford more, since they benefit from the tax savings as well.
    In the year since the President signed the Jobs and Growth Act, 
there have been numerous signs that these policies are working. 
Industrial production is up; capacity utilization is up; exports are 
up; and durable goods orders are up.
    While there are numerous ways to help manufacturers through the tax 
code, the most direct means of continuing the success of the 
President's Jobs and Growth package and help America's manufacturers is 
to make its provisions permanent.
    Question 3. Does our tax policy with regard to income derived from 
foreign investment inhibit American manufacturers from competing, both 
domestically and internationally? How so?
    Response: While it is clear that manufacturers understand their 
future success will increasingly depend on their ability to compete and 
sell goods in a global marketplace, your question regarding the net 
impact of our tax treatment of foreign investment on manufacturing 
would be better directed to the Department of the Treasury.
    Question 4. Are there state or local tax laws that the Department 
has identified as particularly problematic for manufacturers? Does the 
Department have a view on how they might be changed?
    Response: Several manufacturers expressed their concerns regarding 
state and local tax issues. They suggested changes to the most 
prevalent forms of state and local taxes. Many states and localities 
rely more heavily than the Federal Government on property and other 
taxes that are fixed in dollar amounts or in a fixed percentage of 
asset value. Those taxes become far more burdensome in an economic 
downturn, when revenue and income fall, but tax liability does not. The 
net effect is an increase in tax on manufacturing firms at a time when 
the economy is weak, exactly the opposite of what good tax policy would 
suggest. Manufacturers' comments suggested a need to shift from taxes 
based on fixed values, to those tied to income, and to rely more 
heavily on consumption as the basis for defining income subject to 
taxation.
    Question 5. What is the cost to U. S. manufacturers of frivolous 
litigation? Can you quantify the cost in terms of jobs lost?
    Response: While I am not aware of any estimates of the exact cost 
of frivolous litigation to U.S. manufacturers either in terms of 
dollars or jobs lost, there is no question but that such litigation 
exacts a steep price. The Manufacturing in America report released by 
the Commerce Department earlier this year noted that manufacturers pay 
a penalty in the form of legal fees even when there is no merit to 
claims and manufacturers ultimately prevail in litigation. The report 
further observed that the indirect costs of tort litigation are also 
significant--particularly the time spent by managers and employees, who 
would otherwise focus on improving operations, raising productivity and 
expanding sales.
    Question 6. What aspects of the U.S. tort system are most damaging 
to U.S. manufacturing and are therefore, most ripe for reform?
    Response: The reforms that would most immediately help U. S. 
manufacturing would be passage of an asbestos bill and medical 
malpractice reform. The continuing asbestos litigation remains a 
contingent liability creating a cloud over the entire manufacturing 
sector and preventing affected individuals from receiving the 
assistance they need to cope with their medical bills. Medical 
malpractice reform would help stem the significantly higher costs that 
manufacturers pay for employee health care benefits as a result of 
increasing medical liability costs.
    Question 7. Have manufacturers been able to recoup the cost of 
rising healthcare costs through increases in the prices of the products 
they sell? If there are disparities between the respective rates of 
increase, can you quantify them?
    Response: Health care costs have risen generally more than other 
prices. Between 1995 and 2003, the Consumer Price Index (CPI) for 
medical care increased 35 percent, while the CPI for All Urban 
Consumers (CPI-U) increased only 21 percent. For manufacturing, 
Producer Price Index increases during this period totaled only 10 
percent. The increase in prices of manufactured goods certainly did not 
keep pace with the rising costs of health care. On the other hand, 
productivity in manufacturing, as measured by output per hour, has 
increased 40 percent during this period and these improved efficiencies 
have help to offset some of the increases in other costs. This 
disparity between producer price increases and health care price 
increases is another reason the President's goal of reducing health 
care costs is of critical importance to America's manufacturers.
    Question 8. A significant amount of money is spent by the 
manufacturing sector on complying with the regulatory regimes to which 
it is subjected. Approximately how much money do manufacturers spend on 
regulatory compliance annually?
AND
    Question 9. How do regulatory costs imposed on American businesses 
compare with regulatory costs imposed on competitors by foreign 
governments?
    Response: We have made reference to the first part of this question 
in the report, ``Manufacturing in America,'' using a 1997 report by the 
Office of Management and Budget. OMB estimated that regulatory costs 
amounted to 3.7 percent of GDP in 1997. Of that amount, about half 
reflected compliance with environmental regulations and the rest for 
work safety, product safety, and the time filling out government 
paperwork and keeping records.
    According to a 2003 study by the Manufacturers Alliance for the 
National Association of Manufacturers, inter-country comparisons of 
regulatory costs are rare. The study did include some estimates based 
on earlier OECD work to the effect pollution abatement costs as a 
percent of the value of manufacturing output were 3.5 percentage points 
higher on average in the United States than for our nine largest 
trading partners.

                 QUESTIONS FROM HON. MICHAEL BILIRAKIS

    Question 1. Many of my constituents have expressed serious concerns 
about the outsourcing of American jobs to overseas operations. They 
simply do not understand why companies are relocating jobs offshore 
during a time when so many Americans who want a job are out of work. 
What are the figures for American companies' jobs shipped overseas 
versus jobs kept at home? What are the figures for foreign companies' 
jobs created in the United States?
    Response: While the loss of a job is always regrettable, the 
President believes the most powerful remedy for this problem is a 
growing economy that can ensure every American who wants a job is able 
to find one. On the other hand, putting workers at a competitive 
disadvantage through economic isolationism would have a negative effect 
on our economy and domestic job creation. I am convinced that the 
President's growth agenda has put the Nation on the path toward that 
essential goal. His policies to reduce taxes and other costs to 
America's job creators are working, as are efforts to open foreign 
markets to American goods and services. Tax burdens are down and 
exports are up. Since last August, we have seen over 1.4 million jobs 
created. Over the last nine months we've seen over 1.4 million jobs 
created while the unemployment rate has fallen from 6.3 to 5.6 percent. 
Meanwhile, over the past half year, exports have grown at a 23 percent 
annual rate, the fastest 6-month rate of growth in almost 10 years. 12 
million American workers rely on exports for their jobs.
    As for statistical measurements, the Bureau of Labor Statistics, 
through the Mass Layoffs Statistics program, provides a limited 
measurement of jobs lost to overseas relocations. I would defer to the 
Department of Labor on the use and limitations of this data.
    The Bureau of Economic Analysis (BEA) collects annual data on the 
operations of U.S. affiliates of foreign-owned companies. In 2001, the 
latest year for which (preliminary) statistics have been published, 
employment at such operations was 6,371,900 or 5.6 percent of U.S. 
private-industry employment. Employment growth at U.S. affiliates of 
foreign-owned companies has averaged 5.0 percent per year since 1977, 
when employment at these companies was 1,218,700 or 1.7 percent of U.S. 
private-industry employment (Zelie, William J., ``U.S. Affiliates of 
Foreign Companies,'' Survey of Current Business Vol. 83, No. 8, August 
2003, p. 45). Policies to isolate the United States from the global 
marketplace could lead to retaliation by other nations, putting many of 
these 6 million jobs at risk.
    Question 2. What are the primary reasons manufacturing and 
information technology companies move operations offshore? Which ones 
are attributable to public policy that makes it more expensive to do 
business here at home? Which ones are attributable to international 
conditions?
    Response: U.S. Government statistical agencies do not survey firms 
on the reasons they move operations offshore. However, it appears that 
many U.S. multinational corporations locate operations offshore to be 
close to their customers in other countries. In 2001, 65 percent of 
sales by foreign affiliates of U.S. parent companies were to customers 
located in the same country as the affiliate, and another 24 percent 
were to customers in other foreign countries, mainly in the same 
economic region as the affiliate's host country. Only 11 percent of 
such sales were to customers in the United States (``A Note on Patterns 
of Production and Employment by U.S. Multinational Companies,'' Survey 
of Current Business, March 2004, pp. 52-3).
    Many press accounts and private sector studies suggest that firms 
relocate jobs offshore because they believe they can reap significant 
cost savings by hiring developing country workers who are paid 
substantially less than similarly qualified U.S. workers. It should be 
noted, however, that in 2001 (the most recent year for which data are 
available) 6.4 million U.S. workers were employed at U.S. affiliates of 
foreign-owned companies. Furthermore, well over half the employment at 
foreign affiliates of U.S.-based companies is located in high wage 
countries (i.e., the European Union, Canada, Japan, and Australia). 
Both of these facts demonstrate that wage differentials are not always 
the motivating factor in job relocations and may be overshadowed by 
other reasons.
    Question 3. What public policy incentives can Congress and 
President Bush enact to encourage companies to maintain these jobs in 
the United States?
    Response: The President's economic policies are designed to reduce 
costs to America's job creators while opening foreign markets to their 
products and services. The President's six point plan attacks the 
rising costs that hurt American job creators. It would reduce health 
care costs, make energy more affordable and reliable, eliminate 
frivolous lawsuits, reduce regulatory burdens, and make the tax relief 
permanent. All would reduce costs and increase the competitiveness of 
American businesses and their employees.
    Opening markets to U.S. exports is a key part of the President's 
six-point plan for sustaining America's economic recovery and creating 
new jobs for American workers. Open trade in goods and services will 
help eliminate incentives for firms to relocate jobs in order to 
circumvent trade barriers. It will also help encourage foreign 
companies to set up and expand operations in the United States.
    In addition, the President's education, job training, and 
immigration policies are designed to address companies' concerns about 
the availability of skilled workers in the United States. The 
President's FY 2005 Budget commits significant resources to helping 
U.S. students and workers obtain job training and attend courses to 
help them acquire the skills that firms need to compete in a global 
marketplace. Moreover, one of the principles of the President's 
immigration reform proposal is to serve America's economy by matching a 
willing worker with a willing employer. If no American worker is able 
and willing to take a job, then a reformed immigration program should 
provide labor to fill that job. To the extent that job relocations 
abroad are motivated by shortages in certain key skills, the 
President's immigration reform initiative will help keep such jobs in 
the United States. Finally, the rest of the President's six-point 
plan--on health care costs, tort reform, energy supplies, regulatory 
streamlining, and permanent tax cuts--will foster robust economic 
growth, which is the most effective way to keep jobs in the United 
States.
    Question 4. This Committee and the House have recognized the 
importance of controlling rising health care costs by passing medical 
liability reform legislation and creating association health plans. 
Unfortunately, the Senate has not been able to address these issues. 
How have increases in health care costs affected the competitiveness of 
U.S. firms? What is the effect of medical malpractice awards on medical 
costs? How would controlling medical liability costs make us more 
competitive?
    Response: Unfortunately, we do not have the data to answer this 
question in greater detail, and it would be best raised with the 
Department of Health and Human Services (HHS). We would be glad to work 
with HHS to find an answer to this question.
    Question 5. How would the implementation of association health 
plans affect the manufacturing sector?
    Response: Studies show that association health plans (AHPs) could 
save small employers and their employees as much as 25 percent on 
health insurance costs. According to an April 2004 Department of Labor 
press release citing these studies, AHPs would allow small businesses 
to join together across state lines through their trade and 
professional associations to purchase health benefits, reducing the 
market and financial barriers that they face. Small businesses would 
enjoy greater bargaining power, economies of scale, administrative 
efficiencies, and more uniform regulation, giving them greater access 
to affordable coverage.
    Question 6. What has been done to help control the costs of health 
care for employers and employees? What still needs to be done?
    Response: The President has advanced a number of proposals to make 
health care more affordable for families and businesses. In December 
2003, the President signed into law the Medicare Modernization Act that 
is already making prescription medicines more affordable to seniors. In 
addition, the Act has already made health insurance coverage more 
affordable to tens of millions of Americans under the age of 65 through 
a product known as health savings accounts.
    Beginning in 2006, prescription drug coverage will be available to 
40 million seniors and people with disabilities through the Medicare 
program. This voluntary drug benefit will provide the greatest help to 
those in greatest need, with richer benefits for beneficiaries with low 
incomes and for those with high prescription drug costs, regardless of 
income. Middle income seniors with moderate drug expenses also will 
benefit from the new program. In addition, the program will encourage 
employers to continue providing prescription drug coverage to their 
retirees through a federal subsidy. This subsidy will make retiree 
health coverage more affordable for employers and more secure for 
millions of retirees.
    Medicare beneficiaries will not have to wait for the new benefit to 
save on their prescriptions. They can now enroll in a Medicare-approved 
prescription drug discount program that will save them 16 to 30 percent 
off the retail price of most brand name medicines and 30 to 60 percent 
off the price of generic drugs at their neighborhood pharmacies. Deeper 
discounts are available to those seniors who prefer to have their 
prescriptions filled through the mail. In addition to the discounts, 
low-income beneficiaries will receive $1200 in subsidies over the next 
year and a half to help them pay for their medicines at the discounted 
prices.
    Making prescription drugs more affordable for seniors is only part 
of the story of the new Medicare law. It also permits individuals under 
age 65 to establish health savings accounts (HSAs), a new product that 
will allow people to use tax-free dollars to pay for their ordinary 
medical expenses and save for future medical needs. These accounts, 
coupled with major medical insurance that is much more economical than 
standard health insurance coverage, will put health insurance premiums 
within the reach of individuals whose employers do not sponsor health 
coverage.
    HSAs also provide a more affordable product for businesses large 
and small that are struggling with the cost of providing coverage to 
their workers. Businesses that already provide insurance can contribute 
to both the lower health insurance premium and the tax-advantaged HSA. 
Businesses that previously could not afford to offer health insurance 
can now either pay all or part of a lower-cost high-deductible policy 
or make tax-advantaged employer contributions to their employees' HSAs. 
Early reports suggest these accounts are working well, reducing health 
insurance premiums, and cutting administrative costs to doctors and 
hospitals. The Administration is working to make HSAs more widely 
available next year, including making them available to federal 
workers.
    Small businesses also would benefit from the President's proposal 
to allow them to form Association Health Plans, joining together to 
purchase insurance coverage. Low-income individuals will benefit both 
from the President's proposed refundable tax credits to help them pay 
for insurance coverage and from his expansion of community health 
centers, which provide free or low-cost medical care in medically 
underserved areas.
    The President also has sought to stem the tide of rising health 
care costs by rooting out fraud and abuse and by advancing legislation 
to eliminate ``junk lawsuits'' that make health care cost more than it 
should. And he has taken the lead in improving health care quality and 
efficiency by advancing legislation to reduce medical errors and by 
promoting health information technology. Health information technology 
(IT)--including electronic medical records and electronic prescribing--
can provide the right information to doctor and patient at the time of 
care to guide treatment decisions. Health IT has the potential to help 
reduce health care costs by assuring that appropriate care is provided, 
by reducing the amount of inappropriate care, by preventing costly 
medical errors, and by improving the efficiency of our health care 
system. To achieve these goals, the President issued an Executive Order 
in May, 2004, creating a health IT coordinator within the Department of 
Health and Human Services.
    In addition, the Centers for Medicare and Medicaid Services (CMS) 
is implementing e-prescribing in the new Medicare prescription drug 
program to reduce medication errors and cut administrative costs. 
Finally, CMS is implementing a major new disease management program 
within Medicare that will target services to chronically ill 
individuals, improving the quality of care that they receive and 
potentially reducing costs by averting expensive hospitalizations.
    Question 7. How can health savings accounts, which were included in 
the recently enacted Medicare legislation, help to control health care 
costs?
    Response: HSAs help control health care costs by putting consumers 
in the driver's seat. High deductible (at least $1,000 for individuals 
and $2,000 for families) major medical insurance that protect families 
against catastrophic medical costs, joined with tax-free accounts for 
ordinary medical expenses, will give consumers more control over their 
health care spending. Empowered consumers will be more cost-conscious, 
especially since money that they do not spend on health care will 
remain in their accounts and grow tax-free.
    Question 8. The Fact Sheet, ``The Presidential Determination on 
Steel'' issued by the White House Office of Communications on December 
4, 2003, stated:
        ``President Bush is committed to America's steel workers and to 
        the health of our steel industry . . . Steel import licensing, 
        established when the safeguard measures were imposed, will 
        continue to provide WTO-consistent data collection and 
        monitoring of steel imports. This will enable the 
        Administration to quickly respond to future import surges that 
        could unfairly damage the industry.''
    The President's Proclamation of the same date stated that ``the 
licensing and monitoring of imports of certain steel products remains 
in effect and shall not terminate until the earlier of March 21, 2005, 
or such time as the Secretary of Commerce establishes a replacement 
program.'' You made several comments to the media on December 4, 2003, 
regarding your commitment to the steel import monitoring and licensing 
system and indicated that it would be expanded to include steel 
products which were not subject to 201 tariffs and quotas. Are you 
still fully committed to this effort?
    Response: Since the President's announcement last December, we have 
continued to closely monitor the imports of those steel products for 
which the President implemented import relief pursuant to Section 201, 
as well as general market conditions. As a result, accurate information 
regarding such imports is being made available to the public on an 
expedited basis. There have been significant changes in the market in 
the last six months. Current market conditions are strong--steel prices 
are high and steel imports are still at fairly low levels. We 
understand the need for a licensing and monitoring system, and 
appreciate that domestic steel producers as well as importers continue 
to feel strongly about this issue. The Administration is continuing to 
evaluate the current system and will ensure that it remains an 
effective monitoring tool.
    Question 9. Do you have a plan to expedite the adoption of these 
expanded regulations? When do you intend to begin the public comment 
period with regard to the replacement system?
AND
    Question 10. When do you estimate the replacement system will be up 
and running? Will you be able to meet that date?
    Response: As we review the current licensing and monitoring system, 
Commerce has been informally gathering information from the domestic 
steel industry, steel consumers, registered licensees and other parties 
that have expressed interest in the current system. We are carefully 
considering all parties' comments and will take them into account 
before making any decision.

                    QUESTIONS FROM HON. RICHARD BURR

    Question 1. I wrote you this month about the investigation into 
whether or not China was transshipping textile and apparel goods 
through Vietnam, and asked specifically when members of the 
Congressional Textile Caucus could expect to see the report--which I 
understand was submitted to Commerce by Customs last November. Can you 
provide me with an update on the investigation or report?
    Response: As you know, we negotiated a unique provision in the 
U.S.-Vietnam Bilateral Textile Agreement allowing for consultations to 
address any discrepancies in the import figures that constituted the 
basis for the negotiated limits. In order to determine whether data 
discrepancies existed, U.S. Customs and Border Protection (CBP) sent 
the largest number of Textile Production and Verification Teams ever 
sent at the same time to one country to review this issue. These teams 
conducted an extensive review of Vietnamese factories and then 
dedicated a substantial amount of time to analyzing the results.
    After carefully reviewing CBP's findings, the United States 
requested consultations with Vietnam on February 12. Those 
consultations were held March 17-18, and Vietnam provided the United 
States with additional data at that time. Under the Bilateral 
Agreement, if no agreement is reached within 90 days of our request for 
consultations, the United States may take action to resolve instances 
where there is clear evidence of data discrepancies.
    The 90-day period expired on May 12, and we have adjusted Vietnam's 
2003 and 2004 quotas to reflect discrepancies in the data upon which 
the quotas were based. The Congress has been notified, as well as the 
Vietnamese Government and the importing public.
    Under Secretary Grant Aldonas has briefed members of the House 
Textile Caucus on this issue and we have provided to the Caucus a 
summary of the CBP report.
    Question 2. Earlier this month, Representative Frank Wolf 
introduced legislation that would shift trade agreement enforcement 
from the Office of the United States Trade Representative to the 
Department of Commerce. Has the Administration taken a position on the 
proposal?
    Response: Commerce, USTR and other trade-related agencies and 
departments work closely to ensure effective enforcement of our trade 
laws. The Administration believes that the current statutory allocation 
of responsibilities provides the best opportunity to leverage the 
resources and expertise of each agency. The Administration is focused 
on real results. The recent U.S.-China JCCT (Joint Commission on 
Commerce and Trade) is an example of effective inter-agency 
coordination of trade enforcement efforts. In these meetings, we were 
able to resolve a number of critical issues for America's farmers, 
workers and businesses. Specifically, at the JCCT this year, Vice 
Premier Wu Yi committed to a detailed action plan to reduce the rampant 
piracy now costing U.S. companies billions of dollars in lost sales. 
China committed to increased penalties for IPR violations, and a 
crackdown on violators with tougher enforcement actions. Concerning 
standards and industrial policies, China agreed at the JCCT to postpone 
implementation indefinitely of a troublesome new mandatory standard for 
wireless computing, and instead promote its approach through 
international standards bodies, and China also agreed to adhere to 
principles of technology-neutrality with respect to the adoption of 3G 
standards for telecommunications.
    China agreed to establish a working group that will allow the U.S. 
Government to review with China non-market-based policies and 
practices, e.g., subsidies for state-owned enterprises, etc., that can 
create an unlevel playing field for U.S. companies. China also agreed 
to accelerate the steps needed to allow our U.S. companies to import, 
export, distribute, and sell their products in China. A comprehensive 
description of JCCT outcomes can be found at http://www.mac.doc.gov/
china/JCCT/outcomes--Commerce.pdf.
    Question 3. What is the Administration prepared to do if China does 
not come to the table regarding a comprehensive quota agreement post-
2005? It is my understanding that the Chinese are refusing to even 
discuss the issue.
    Response: As you point out, China has not expressed an interest in 
reaching a comprehensive arrangement on textile trade post-2005. 
However, under China's WTO Accession Agreement, the United States has 
the right to impose limits on imports from China on textile and apparel 
products which are, due to market disruption, threatening to impede the 
orderly development of trade in these products. (The United States must 
first consult with China to attempt to reach a mutually satisfactory 
solution.) The United States intends to exercise its WTO rights in 
instances where we believe imports from China are playing a role in 
disruption of the U.S. market for specific textile and apparel 
products. As you know, we chose to exercise our rights and impose 
quotas on imports of three such products (brassieres, dressing gowns, 
knit fabrics) last December. Those quotas remain in place.
    Question 4. Will the Administration self-initiate use of the 
safeguards on January 1 if China does not cooperate?
    Response: Under the Procedural Framework for considering China-
specific textile safeguard actions issued by the Committee for the 
Implementation of Textile Agreements (CITA) last year, CITA may self-
initiate such a safeguard action. Of course, there must be a body of 
economic information available to demonstrate China's role in the 
market disruption. In many instances, necessary information is 
available only to the U.S. industry manufacturing the product. It will 
be important to have the cooperation or support of the affected 
domestic producers before pursuing a safeguard remedy.
    Question 5. Has the Administration considered the implications for 
the war on terror of the looming phase-out of textile quotas? The 
phase-out could have severe implications for several ``front line'' 
countries, such as the Philippines, Indonesia, Malaysia, and 
Bangladesh--not to mention roughly 700,000 domestic textile workers.
    Response: We have received private expressions of concern from some 
countries about the impact of removal of quotas on their domestic 
textile and apparel industries. However, no country has formally sought 
to rescind, renegotiate, or delay the Uruguay Round agreement, binding 
on all WTO Members, to eliminate quotas on January 1, 2005. The Uruguay 
Round Agreements Act implements this WTO obligation to eliminate 
textile quotas, and we will comply with this legal requirement.
    Question 6. What can you tell me about the Administration's actions 
in the face of China's ongoing efforts to ``corner'' the global scrap 
metal market?
    Response: The Department of Commerce has been actively working with 
relevant agencies to review the controls that some of our trading 
partners, including China, have placed on key raw materials. The 
Administration is reviewing these measures to assess what effect they 
are having on domestic and world markets, and to identify any 
appropriate actions that may be taken.
    The Department shares your concern regarding the potential impact 
of the recent price increases of key raw material inputs on U.S. 
industry. In October 2003, spot prices for a key raw material input--
ferrous scrap--began to rise sharply in the United States, peaking in 
March. While ferrous scrap prices have dropped since March, the 
Administration plans to follow market developments closely in order to 
determine what actions may be appropriate.
    The Department of Commerce is also reviewing, with the Office of 
the United States Trade Representative, the extent to which export 
controls imposed by our trading partners may be inconsistent with WTO 
requirements. The U.S. Government has also been meeting with officials 
from our trading partners and frequently raising U.S. concerns about 
export restraints on key raw material inputs in several different 
intergovernmental fora. In addition, on April 27, USTR Zoellick and I 
sent a letter to the Russians and the Ukrainians urging them to 
eliminate export duties on ferrous scrap.
    The Department's Bureau of Industry and Security is also in the 
process of reviewing a petition requesting the implementation of 
monitoring and export controls on copper and copper-alloy scrap. 
Procedures for the submission and review of this petition, as well as 
any determination whether to impose monitoring or export controls, are 
provided for in Sections 7 and 3(2)(c), respectively, of the Export 
Administration Act of 1979, as amended. The findings of the review 
should be published on July 21, 2004, as required by law.
    Question 7. Has the Administration or Department taken a position 
on Rep. Phil English's H.R. 3716, which would allow countervailing 
duties to be applied to non-market economies [NMEs]?
    Response: Commerce does not currently apply countervailing duties 
(CVD) law to non-market economies, and this practice has been upheld in 
the courts in Georgetown Steel Corp. v. United States. In that case, 
the court affirmed Commerce's view of NMEs as devoid of the kinds of 
market benchmarks necessary to identify a subsidy. The court also 
relied on Congress's 1974 effort to address unfairly traded NME exports 
through the antidumping (AD) law by enacting the factors-of-production 
methodology. Commerce has re-affirmed Georgetown many times, most 
recently in the 1997 preamble to the post-Uruguay Round Agreements Act 
CVD regulations. Congress enacted substantial amendments to the CVD law 
in 1988 and 1994 without disturbing Commerce's practice in this area.
    The Department recognizes that the reasoning underlying the 
Georgetown decision was informed by the nature of certain non-market 
economies as they existed 20 years ago, and that China's economy has 
undergone many reforms over the past two decades. However, any attempt 
to apply the CVD law to non-market economies would raise complex issues 
of policy and methodology, including implications for antidumping 
policy and practice that could lead some to fear a weakening of that 
important remedy. The Department, therefore, continues to believe that 
this question should be addressed with care and consideration.
    Question 8. The furniture industry in my state is under significant 
pressure from low-cost, offshore competition AND high production costs. 
External overhead costs are estimated to add at least 22.4% to unit 
labor costs of US manufacturers--nearly $5 per hour worked--relative to 
their major foreign competitors. What is the Administration doing to 
address some of these costs?
    Response: As detailed in the Department of Commerce's recently 
released report, ``Manufacturing in America,'' the Administration has 
set out a plan to reduce the cost to employ American workers by 
decreasing red tape and eliminating unnecessary and costly regulations. 
Many U.S. Government agencies are involved with this initiative.
    The Office of Management and Budget will review federal regulations 
to assess their impact on manufacturing competitiveness. The 
Administration will study ways to implement association health plans, 
promote health savings accounts, and pursue other opportunities to make 
health care more affordable and accessible to workers.
    The manufacturing report made several recommendations related to 
improving manufacturing innovation through R&D. A high level 
interagency working group on manufacturing R&D has now been established 
within the National Science and Technology Council. Chaired by 
Commerce, this group is actively engaged, and is planning a thorough 
review of federal R&D programs important to manufacturing. This group 
will serve as a forum for resolving issues associated with R&D policy 
and programs.
    In February, 2004, the President issued an Executive Order making 
manufacturing-related R&D a high priority for the over $2 billion 
distributed through the Small Business Administration's (SBA's) Small 
Business Innovation Research (SBIR) and Small Business Technology 
Transfer (STTR) programs. The Executive Order requires all executive 
departments and agencies with one or more SBIR or STTR programs to take 
action to advance the policy under the Executive Order and submit 
reports to the SBA Administrator on their efforts. The SBA 
Administrator is required to consult with the Director of the Office of 
Science and Technology Policy to coordinate submission of the reports 
by the heads of the departments and agencies.
    These programs, in addition to the new ideas that will come from 
the Department's Manufacturing Council, will go a long way towards 
addressing these costs.
    Question 9. Rep. Sam Graves of Missouri has introduced legislation, 
H.R. 3949, which would delegate to the Under Secretary for 
International Trade the functions relating to Trade Adjustment 
Assistance for firms. Has the Department taken a position on this 
legislation?
    Response: Yes, the Department has taken a position on this 
legislation. It is my firm belief, after looking closely at this issue, 
that America's small- and medium-sized businesses are best served with 
the Trade Adjustment Assistance (TAA) for Firms program continuing to 
reside within Commerce's Economic Development Administration (EDA).
    The TAA for Firms program has a natural synergy with the mission of 
EDA--to increase prosperity by promoting comprehensive, 
entrepreneurial, and innovation-based economic development strategies 
to enhance the competitiveness of regional business environments 
resulting in higher skill and higher-wage jobs. EDA offers an extensive 
set of programs that assist whole communities and regions negatively 
affected by economic conditions, including those affected by import 
competition. These programs include planning and technical assistance, 
public works and development facilities, and economic adjustment 
assistance. The TAA for Firms program is just one of the many programs 
administered by EDA that allow for a comprehensive approach to 
providing communities, regions, and their businesses the resources and 
contacts they need to adjust to challenging economic conditions. 
Additionally, EDA has the resources and experience in assessing 
applications for adjustment assistance. Assisting communities and firms 
located in affected communities requires a broad approach, and I 
believe that this approach is best served with the retention of TAA for 
Firms within EDA.
    To meet the challenges and needs of our manufacturing base, I have 
directed our Commerce Department bureaus, including EDA, International 
Trade Administration and its new Assistant Secretary for Manufacturing 
and Services, the Technology Administration and its National Institute 
of Standards and Technology, and others to better coordinate their 
individual areas of expertise and resources to provide manufacturers 
the full benefit of varied U.S. Government programs and services. We 
will also work to coordinate efforts with other federal agencies, as 
well as state and local entities, to collaboratively improve the value 
that we all bring to U.S. manufacturing. To this end, we have created 
the Manufacturing Council to institutionalize a channel of 
communication between manufacturers and the public sector. Our recently 
released report, Manufacturing in America, also recommends 
establishment of an interagency working group to communicate 
effectively across the Federal Government on issues of concern, and an 
intergovernmental coordinating committee to share sound ideas and 
programs across federal, state, and local governments.

                   QUESTIONS FROM HON. BARBARA CUBIN

    Question 1. Mr. Secretary, can you comment further about what you 
believe the future of the Manufacturing Extension Partnership program 
to be?
    Response: The 2005 Budget maintains the 2004 level of funding for 
the Manufacturing Extension Partnership (MEP). MEP was originally 
intended to be comprised of 12 federally supported centers, with 
federal funding ending after six years. In its 15 years of operation, 
the program has expanded away from this original design to include 400 
locations, and Congress has removed the sunset provision. Funding for 
the MEP centers is a cost-sharing arrangement consisting of support 
from the federal government, state and local government, and the 
recovery of fees for services. Given advances in manufacturing and 
technology, it is appropriate to evaluate MEP operations and take steps 
for continuous improvement. For example, the Department plans to 
recompete the Centers to ensure that funds are targeted to Centers that 
are well qualified and effective. Also, the Administration proposes to 
coordinate MEP fully with other Commerce Department programs that are 
helping manufacturers to be more competitive and expand markets. 
Through this coordination, the Commerce Department can more closely 
link the technical and business staff employed by the MEP centers 
located around the country with trade promotion specialists in the 
Commerce Department's International Trade Administration (ITA). In 
addition, ITA has experts with in-depth knowledge of various sectors of 
industry. By coordinating MEP field agents and these sector experts, 
the program can be a more effective national resource to help small 
manufacturers.
    Question 2. As a Member who's been working to establish a National 
Energy policy, I've been very frustrated by the lack of progress across 
the Capitol. How can the administration help regain some of the 
momentum we lost after the House last acted on this bill?
    Response: The Administration has completed or is implementing 
nearly 75 percent of the 106 recommendations contained in the 
comprehensive National Energy Policy announced by the President in May 
of 2001. The President continues to call upon Congress to pass the 
legislative aspects of his energy plan. The President has been very 
clear, in numerous speeches, that he wants energy legislation enacted. 
The President has clearly stated what he supports and how, had Congress 
acted years ago, the Nation would be better off today. He put forth a 
fiscally responsible package of energy legislative initiatives in June 
of 2001. Congress worked hard last year to put together an energy bill, 
and that effort would have succeeded last fall but for the filibuster 
of a minority of Senators.
    One of the areas of the National Energy Policy that the Commerce 
Department has been most active in implementing is its goal of working 
with other countries to increase global energy supply and security. The 
following are examples of efforts we have made towards this goal:

 DOC helped create the North American Energy Working Group (NAEWG) 
        with Canada and Mexico, which has held technical discussions on 
        energy markets, electricity, energy efficiency, science and 
        technology, and infrastructure security.
 DOC helped initiate a cooperative effort to help improve the 
        regulatory and investment conditions required to increase 
        energy and infrastructure development in Russia. Participants 
        at two U.S.-Russia Commercial Energy Summits presented joint 
        recommendations on increased energy cooperation to both 
        governments in September 2003.
 DOC participated in the third U.S.-Africa Energy Ministers Conference 
        in Casablanca, Morocco, which brought together 40 Energy 
        Ministers or their representatives to discuss critical energy 
        issues among their governments and with the private sector.
 DOC, along with the European Union, helped create the International 
        Partnership for the Hydrogen Economy (IPHE), a forum for 
        promoting the development of hydrogen as a fuel source.
 DOC helped create the U.S.-U.K. Energy Dialogue, to promote the 
        security and diversity of future international energy supplies; 
        integrate international energy investment with the development 
        and social challenges of host countries; develop clean energy 
        technologies to address security of supply and environmental 
        challenges; and expand the U.S.-U.K. trade relationship in the 
        energy sector. Part of this Dialogue is the Commercial Working 
        Group, which gives U.S. and U.K. energy companies a voice in 
        discussions between the two governments on bilateral energy 
        cooperation, security, and supply issues.
    Question 3. Tort Reform is a concept that is discussed a lot in the 
halls of Congress. What do you believe is the most pressing need under 
the umbrella of Tort Reform?
    Response: Legal reform is a high priority for this Administration, 
considering that the U.S. tort liability system is the most expensive 
in the world. Americans spend more per person on the costs of 
litigation than any other nation. The staggering costs of out-of-
control lawsuits continue to hurt American businesses and workers. For 
this reason, the Administration has pressed for legislation to reform 
our treatment of class action lawsuits and to rationalize asbestos 
litigation. In particular, reining in unlimited and unpredictable 
medical liability awards is a pressing need. These lawsuits raise the 
costs of health care for all Americans through higher premiums for 
health insurance and divert precious financial resources from small 
businesses across America. That is why it is important for Congress to 
pass medical liability reform.

                  QUESTIONS FROM HON. CHARLIE NORWOOD

    Question 1. Mr. Secretary, how many jobs does the United States 
currently outsource and how many do we insource? If you could provide 
numbers from the most recent calendar year that would be much 
appreciated.
    Response: As for statistical measurements, the Bureau of Labor 
Statistics, through the Mass Layoffs Statistics program, provides a 
limited measurement of jobs lost to overseas relocations. I would defer 
to the Department of Labor on the use and limitations of this data.
    The Bureau of Economic Analysis (BEA) collects annual data on the 
operations of U.S. affiliates of foreign-owned companies (i.e., 
establishments in which foreign-owned companies held at least a 10% 
stake.). In 2001, the latest year for which (preliminary) statistics 
have been published, employment at such operations was 6,371,900 or 5.6 
percent of U.S. private-industry employment. Employment growth at U.S. 
affiliates of foreign-owned companies has averaged 5.0 percent per year 
since 1977, when employment was 1,218,700 or 1.7 percent of U.S. 
private-industry employment (Zelie, William J., ``U.S. Affiliates of 
Foreign Companies,'' Survey of Current Business Vol. 83, No. 8, August 
2003, p. 45). Policies that seek to limit the relatively small amount 
of offshoring of jobs by U.S. firms could lead to retaliation by other 
nations, putting many of these 6 million jobs at risk. More recent data 
are available on the subset of U.S. affiliates in which foreign 
investors owned a majority stake. In 2002, the latest year for which 
statistics have been published, employment at such operations was 
5,449,000 or 5.0 percent of U.S. private-industry employment, up from 
3,119,000 or 3.5 percent of U.S. private-industry employment in 1988.
    It should be noted that these data are preliminary. In August, BEA 
will release data for the banking industry and for U.S. affiliates that 
are not majority owned. These corporations may commonly be considered 
foreign but the affiliate here in the states might be domestically 
owned. When this data is available this summer, we expect the number of 
jobs to be well over 6 million and very close to the 6.4 million number 
that is our most recent and most complete data on this topic. 
(``Summary Estimates for Multinational Companies: Employment, Sales, 
and Capital Expenditures for 2002,'' BEA Press Release, April 16, 
2004).
    Question 2. Could you please provide me with a graphic of our 
nation's unemployment rates over the past 25 years.
[GRAPHIC] [TIFF OMITTED] T3299.040

    Question 3. During your response to my question about your 
Department's plans to take action against China for manipulating their 
currency, you mentioned that this is mostly the concern of the 
Department of Treasury. I disagree.
    As you know, our trade deficit with China has increased from $30 
billion in 1994 to an estimated $125 billion in 2003. The undervalued 
yuan has contributed to this trade deficit and continues to hurt U.S. 
manufacturing sectors, especially textiles, because they are forced to 
complete [sic] domestically and internationally against artificially 
low cost goods from China. China's manipulation of the Yuan is 
therefore in my mind--and the minds of manufacturers across the 
country--a trade issue and an unfair trade issue at that. Let me ask 
again, can we expect the Department of Commerce to take action on 
China's currency manipulation in the next year?
    Response: The Treasury Department remains the lead agency for 
issues related to the Chinese exchange rate. However, the Department of 
Commerce addressed this issue indirectly through this year's special 
session of the U.S.-China Joint Commission on Commerce and Trade 
(JCCT).
    The United States and China agreed to establish a Structural 
Working Group to assess China's economic reforms, as well as to 
identify steps China can take to improve its ability to achieve market 
economy status under U.S. trade laws. Currency convertibility is one of 
the criteria contained in U.S. law for determining market economy 
status. We will work closely with the Treasury Department as we engage 
with China on the issue of market economy status.

                QUESTIONS FROM HON. C.L. ``BUTCH'' OTTER

    Question 1. I commend you for your focus on manufacturing issues. 
Part of that effort should be about how the U.S. will produce basic raw 
materials used across industry sectors. Mining companies are not 
investing as much in the U.S. and are focusing their activities 
overseas because the U.S. ranks among the worst countries in terms of 
time and expense required to secure mine permits. This is impacting our 
ability to get refined raw materials and semi-fabricated materials such 
as copper and steel products and castings. How will the Commerce 
Department address raw materials issues and work with other departments 
to develop a national minerals policy?
    Response: We recognize the importance of the basic raw materials 
sector, particularly mining and metals, to our manufacturing base and 
our overall economy. During our review of the issues affecting 
manufacturing we held two industry roundtables to address issues 
specific to this sector. In addition, we have held numerous meetings 
and consultations with the steel, copper and foundry industries. We 
maintain a close and cooperative relationship with these industries and 
their associations. ITA will continue to closely monitor this sector, 
provide data and information and directly assist in resolving issues as 
they arise. We are committed to representing this sector's interest in 
international fora and directly assist USTR, State and other agencies 
in trade negotiations affecting the industry. We head the U.S. 
delegation to numerous international organizations dealing with this 
sector; for example, we will represent the United States at the APEC 
Mines Ministers meeting in June.
    We are committed to addressing the issues identified in our 
comprehensive review of the manufacturing sector as they relate to 
metals and mining.
    I would also refer you to the U.S. Department of the Interior for a 
perspective on the Administration's efforts to promote effective mining 
policies.
    Question 2. Ten years ago, North American mining companies spent 
more than 50% of their exploration investments in the U.S. Today that 
amount is less than 10%. Lack of adequate investment in U.S. projects 
will continue absent greater regulatory certainty and a more timely 
permitting process. The mining jobs being taken overseas are among the 
highest in the industrial sector for wages and benefits. Under the 
Commerce Department reorganization you are working on, how will mining 
issues be staffed and addressed?
    Response: We recognize the problems faced by the mining industry in 
developing new mineral properties within North America. Although the 
regulatory and permitting requirements that have affected investment 
are not under the Department's control, we have and will continue to 
assist in overcoming barriers to investment where we can. We are 
currently considering a Memorandum of Understanding with the Canadian 
Ministry of Natural Resources which will enhance our ability to address 
these issues. Under our reorganization we will ensure that the 
resources devoted to the mining and raw materials is adequate. In 
addition, we intend to expand our coverage of environmental and 
sustainable development issues affecting this sector.
    Question 3. Since 1976, Treasury, FEMA, and the Defense Department 
have eliminated specific coverage of commodities and metals issues. The 
State Department has moved its metals coverage into its energy program. 
The Interior Department's Bureau of Mines was eliminated during the 
last Administration and some suggest Commerce seems to be de-
emphasizing its metal commodities coverage. While foreign governments 
continue to encourage mine exploration and development, U.S. policy for 
the past decade is discouraging hard rock mining investment, though 
this administration has made some helpful policy changes. Mr. 
Secretary, shouldn't the Commerce Department's manufacturing 
initiatives include a strong component in support of responsible 
development of domestic minerals resources?
    Response: The Department recognizes the importance of the minerals 
and metals industry to manufacturing and it's contribution to the 
overall economy. Under the ITA reorganization we will eliminate the 
current Metals Division, replacing it with a Materials Team. We will 
continue to support the metals sector as in the past and intend to 
increase our coverage of several domestic issues affecting the 
industries' ability to increase domestic capacity. We also intend to 
increase our coverage of the metal fabrication and casting sectors.

                    QUESTIONS FROM HON. BART STUPAK

    Question 1. Did you review the Economic Report of the President 
prior to its approval and release? If you did, did you object to the 
outsourcing provisions included on Page 25 of the report? If you didn't 
object to the inclusion of outsourcing in the report, why?
    Response: I did not personally review the draft of the Economic 
Report of the President prior to its release and approval. However, the 
report was carefully reviewed by an interagency team and I support its 
analysis.
    Question 2. In my state of Michigan, a refrigerator manufacturer, 
Electrolux, has just announced they are closing up shop and relocating 
to Mexico. This is a profitable company and in its statement, it cited 
labor costs as the reason why they are moving to save $81 million. This 
is certainly not an isolated case in Michigan. What is in the 
President's plan to address this?
    Response: Nationally, the President's goal is to ensure that every 
American who wants a job can find one. His policies, including last 
year's tax relief package, are designed to increase job opportunities 
in the United States while making sure workers have the skills 
necessary to access those jobs.
    There are numerous signs that this approach is working. In the past 
year, the economy has grown at a 5 percent annual rate, the fastest 
rate of growth in nearly 20 years. Productivity is up, consumer 
confidence remains high, and home ownership is at record levels. On the 
employment front, 1.4 million new jobs have been created since last 
August, while manufacturing has seen positive job creation for four 
straight months.
    The President also recognizes that there is more to do. His goal is 
to boost the competitiveness of American industry by improving the 
environment for business in America. This means reducing costs from 
unnecessary or excessive regulations, working to reduce the cost of 
health care, and reform of the tort system. It also means enhancing 
innovation and improving the skills and capabilities of the American 
labor force as well as eliminating foreign unfair practices. The 
President's policies on these issues are outlined in our report, 
Manufacturing in America.
    With respect to the Electrolux facility, I understand the impact 
this closure will have on western Michigan and am hopeful that a 
solution to this situation will be reached.
    In October 2003, prior to Electrolux's announcement of a possible 
closure, the Department of Commerce's Economic Development 
Administration (EDA) began meeting with Greenville leaders and economic 
development officials to discuss potential strategies. EDA shared the 
city's goal of retaining the Electrolux facility. This dialogue 
continues and has included specific discussions on a possible EDA grant 
application to assist the community.
    Following the Electrolux announcement that it was considering the 
closure of its Greenville plant, EDA's representative for Michigan 
attended a November 2003 public forum held to discuss the impact of the 
announcement. EDA's representative subsequently served on a task force 
comprised of local, state, and federal officials focused on developing 
a plan that would retain Electrolux in Greenville.
    The city recently presented a proposal to Electrolux providing a 
package of assistance and incentives for the construction of a new 
facility in Greenville. This package includes possible EDA grant 
assistance of $2.5-$3.0 million to assist with infrastructure necessary 
for a new industrial park to accommodate a possible new Electrolux 
plant and key suppliers. Unfortunately, Electrolux rejected this 
generous package on Friday, January 16, 2004.
    Despite this decision by Electrolux, the Department of Commerce has 
been actively engaged with Greenville officials, and the Department of 
Commerce's commitment to Michigan, in general, and Greenville, 
specifically, remains strong. EDA staff attended another task force 
meeting to discuss the future of Greenville on Monday, January 19.
    EDA's representative for Michigan has been working with city 
officials on development of a preapplication for EDA assistance. EDA 
expects to process the city's official proposal by the end of July. EDA 
has invested over $110 million in Michigan since FY93 creating or 
saving over 66,000 jobs.
    Moreover, EDA has coordinated its efforts with the Department of 
Labor to ensure that Electrolux's dedicated workforce will have the 
resources and services needed as they face this impending closure.
    Question 3(a). The United States has a record trade deficit of $535 
billion. Do you think this is a threat to the U.S. economy? What is the 
Administration's plan to reduce it?
    Response: The trade deficit is not a threat to the U.S. economy, 
but it is an issue that requires attention. The main reason for the 
U.S. trade deficit is that the U.S. economy is growing more rapidly 
than the economies of many of our major trading partners, resulting in 
the growth of imports over exports. However, over the past year, U.S. 
exports have grown 14.6%--the fastest 12-month growth since 1997. Our 
exports in March were $94.7 billion--a record level.
    While trade balances are certainly important economic indicators, a 
trade surplus is not always a sign of economic strength. The last trade 
surplus we incurred was during the 1990 recession. We also saw 
significant trade surpluses during the Great Depression. So while the 
trade deficit certainly requires attention, it should not define our 
economic policies. Our main goals must be overall economic growth, 
creation of jobs, productivity and higher wages for Americans.
    For that reason, our approach to the trade deficit is to continue 
to focus on making U.S. workers and businesses the most competitive in 
the world while opening foreign markets to U.S. goods and services.
    Question 3(b). Do you realize for each free trade agreement the 
U.S. has entered into, we have worsened our trade deficit? If yes, how 
is negotiating more Free Trade Agreements (FTAs) going to reduce the 
trade deficit and create new American jobs, particularly FTAs with no 
enforceable labor and environmental standards? How are you going to 
address that when negotiating future agreements such as Thailand? 
Shouldn't we all be playing by the same rules?
    Response: The major reason for the U.S. trade deficit, as indicated 
above, is that the U.S. economy is growing more rapidly than many of 
our major trading partners. The President's Free Trade Initiative will 
serve as a catalyst for further growth and American job creation.
    The President's FTA initiative constitutes an aggressive campaign 
to open markets to American-made goods and services. In general, our 
FTA partners begin with higher barriers than the United States and 
undertake greater liberalization of their markets than the United 
States. Free Trade Agreements also require many of our trading partners 
to increase their standards for protecting U.S. intellectual property 
rights.
    In the Trade Act of 2002, Congress provided guidance on negotiating 
objectives and priorities, including labor and environment issues, for 
trade agreements. The Administration has met those labor and 
environmental objectives in each FTA that it has concluded and will 
ensure that it meets those objectives in future FTAs submitted for 
approval under Trade Promotion Authority, including any agreement with 
Thailand.
    Our FTAs help promote higher environmental and labor standards. 
Each agreement commits our trading partners to effectively enforce 
their domestic environmental laws, and this obligation is enforceable 
through the agreement's dispute settlement procedures. In addition, our 
trading partners commit to not weaken or reduce environmental laws to 
attract trade and investment.
    The FTAs also require that our trading partners enforce their labor 
laws. A sustained or recurring failure of a country to enforce its own 
labor laws in a manner affecting trade with the United States is a 
breach of the agreement. The labor provisions of current FTAs clearly 
provide the United States with a stronger lever to promote observance 
of core labor standards by our FTA partners. The United States seeks to 
ensure that our FTA partners will effectively enforce their labor laws 
and to strengthen their capacity to promote respect for core labor 
standards, which include the right of association, the right to 
organize and bargain collectively, prohibiting forced labor, a minimum 
age for employment of children, and acceptable conditions of work.
    Finally, I could not agree with you more that we should all be 
playing by the same rules and the Bush Administration has a strong 
record of trade enforcement. The Department of Commerce has focused on 
three key objectives to promote President Bush's commitment to free and 
fair trade:

1. To promote free and fair markets for U.S. companies around the world 
        by actively enforcing our extensive trade agreements.
     Since 2001, we have taken on over 680 market access and 
            compliance cases on behalf of U.S. business. We have 
            increased our market access and compliance staff by 25% and 
            created a new Investigations and Compliance Unit.
     In FY 2003, we saved U.S. companies an estimated $5.6 billion in 
            possible lost sales and investments due to trade barriers. 
            In FY 2000 this figure was estimated at less than $160 
            million.
2. To promote the protection of intellectual property rights (IPR) 
        around the world.
     We created an Office of Enforcement within the United States 
            Patent and Trademark Office (USPTO) to specifically address 
            IPR enforcement policy.
     Since 2001, USPTO has conducted over 290 IPR technical-assistance 
            projects around the world.
     We are expanding cooperative efforts with developing countries 
            and our trading partners. In addition, we are placing an 
            IPR attache in China to deal specifically with intellectual 
            property rights abuses in that country.
3. To ensure other countries play by the rules when they import their 
        products to the United States.
     We have initiated over 195 new dumping and subsidy cases since 
            January 2001, already more than were initiated in either 
            term of the previous Administration.
     We have initiated the largest cases against China ever--on 
            illegally imported TVs, furniture and shrimp--these imports 
            were valued at over $1.5 billion.
     We are the first country in the world to take China to the WTO in 
            a case involving illegally subsidized semiconductors.
     We have already put in place nearly as many antidumping orders 
            against China (17) as the Clinton Administration did in 8 
            years (21).
     We have created two new units specifically devoted to enforcement 
            of our trade laws and preventing unfair trade practices--an 
            Office of China Compliance and the Unfair Trade Practices 
            Task Force.
    Question 4. The Administration says that it supports programs 
within your department to spur economic growth in our country, 
meanwhile it wants to significantly cut programs like the Manufacturing 
Extension Partnership (MEP) which has directly benefited companies in 
my district. In fact, in the last year 600 jobs have been created or 
retained in Michigan as a result. So, please help me understand why the 
Administration wants to continue to cut its funding when it clearly 
helps small U.S. manufacturers to remain competitive while creating 
American jobs.
    Response: This Administration is well aware of the pressure on U.S. 
manufacturing competitiveness. That is why the President has responded 
with a comprehensive set of policies to reduce the costs that impede 
American manufacturers' ability to compete and create jobs. These 
proposals include broad-based tax relief that reduced the cost of 
capital to America's manufacturers and helped increase manufacturing 
activity to near 20-year highs.
    As the Department of Commerce's report, Manufacturing in America, 
makes clear, other principal concerns for America's manufacturers are 
excessive regulations, rising health care costs, unreliable and 
expensive energy costs, frivolous lawsuits, and lack of access to 
foreign markets. The President has put forward aggressive proposals to 
address each of these concerns.
    With regard to the MEP, the Administration has increased its 
requested level for the federal contribution to the MEP in FY2005 to a 
level equivalent to the FY2004 Congressional appropriation of $39.6M. 
As you know, funding for the MEP centers is a cost-sharing arrangement 
consisting of support from the federal government, state and local 
governments, and the recovery of fees for services. Given advances in 
manufacturing and technology, it is appropriate to evaluate MEP 
operations and take steps for continuous improvement.
    The Department of Commerce's report, Manufacturing in America, 
recommends greater alignment and coordination of other federal programs 
and resources that are similarly directed at the small manufacturing 
marketplace MEP serves, and which contribute directly to the health of 
those businesses. If successful, a closer coordination of these 
resources could not only effect greater leveraging of federal assets 
but could also bring to bear a more comprehensive level of service than 
MEP has delivered in the past.
    The Administration's FY2005 Budget request reflects that 
recommendation, by proposing to coordinate MEP fully with other 
Commerce Department programs that are helping manufacturers to be more 
competitive and expand markets. Through this coordination, the Commerce 
Department can more closely link the technical and business staff 
employed by the MEP centers located around the country with trade 
promotion specialists in the Commerce Department's International Trade 
Administration (ITA). In addition, ITA has experts with in-depth 
knowledge of various sectors of industry. By coordinating MEP field 
agents and these sector experts, the program can be a more effective 
national resource to help small manufacturers.
    Question 5. The Trade Act of 2002 created a health insurance tax 
credit for certain trade-displaced workers. Those who qualify (Trade 
Adjustment Assistance and PBGC recipients) are eligible for a 65% tax 
credit toward their health premiums for certain types of coverage. In 
Michigan, there's just one state-qualified provider--Blue Cross Blue 
Shield of Michigan.
    How many TAA eligibles have actually signed up for the credit and 
how much do they have to pay for their coverage, even after the tax 
credit (i.e., what does their 35% amount to on average)? How much of 
the average TAA benefit does that premium eat up? How much are we 
paying to administer this credit? And how many people are we covering?
    So, that's about $6,500 per person, just in administrative costs? 
Once you add in the amount of the tax credit itself, wouldn't it be a 
lot cheaper just to buy coverage for these people?
    Response: These are important questions, but the Commerce 
Department does not administer the Health Coverage Tax Credit (HCTC) 
established under the Trade Act of 2002. The Treasury Department is 
primarily responsible for administering the HCTC. The IRS has 
established a special office to administer the HCTC program, and it may 
be more appropriate to address your questions concerning the operation 
of the HCTC program to that agency.

                    QUESTIONS FROM HON. HILDA SOLIS

    Question 1. Does President Bush support trade adjustment assistance 
(TAA) benefits for dislocated service workers? If so, does the Bush 
Administration support H.R. 3881, legislation to expand TAA to 
dislocated service and computer industry workers?
    Response: The TAA for Workers Program is administered by the 
Department of Labor. I know that my very capable colleague, Secretary 
Chao, is looking closely at this issue and I defer to her expertise in 
determining whether an expansion of this program is appropriate. In my 
opinion, the most important thing that Congress can do for workers, 
right now, is to pass the Workforce Investment Act to modernize the way 
that we train and prepare our workforce for the 21st century economy.
    Question 2. Despite the overthrow of the Taliban, Afghan women 
continue to endure dangers and discrimination. How is the Department of 
Commerce going to ensure that the U.S. takes into account ways in which 
trade and investment may help or impede the progress of Afghani women?
AND
    Question 3. Will the Department of Commerce be consulting with 
gender and Afghanistan experts prior to this meeting? Will they be 
meeting with Afghani women's groups?
    Response: Afghanistan's new constitution, signed in January 2004, 
ensures women play a leadership role in government and contribute 
significantly to the country's development. In light of the increased 
emphasis on women's rights in Afghanistan, I made special note of the 
role of women during my October 2003 visit to Afghanistan. During 
consultations with my counterparts, I also met with the Commerce 
Ministry's Director for Women's Entrepreneurial Development, Mina 
Sherzoy. Ms. Sherzoy is an Afghan-American woman who returned to 
Afghanistan in late 2002 to contribute to her homeland's development 
efforts. I noted the progress in women's rights and encouraged more 
women to take advantage of the new era of gender equality by playing an 
active role in advising the government as it establishes commercial 
laws. I also participated in a business roundtable with local companies 
that included several women who discussed their reestablished abilities 
to participate in Afghanistan's developing economy.
    Assistant Secretary for Market Access and Compliance William Lash 
will continue these outreach efforts during his June 2004 visit to 
Afghanistan. He plans to meet with Commerce Ministry officials, 
including Ms. Sherzoy, to gauge progress in women's entrepreneurial 
development. He will meet with the growing class of women entrepreneurs 
to further encourage that they remain active in pressing the government 
for commercial policies that take into account women's abilities to 
serve as managers and leaders, not just manual laborers.
    The Department of State is also active in promoting women's issues. 
Under Secretary Paula Dobriansky, with Afghan co-chairs Foreign 
Minister Abdullah and Minister for Women's Affairs Sorabi, conduct the 
U.S.-Afghan Women's Council, a public-private partnership to help 
Afghan women. The group includes Presidential Advisor Karen Hughes; 
Connie Duckworth, Chair of the Committee of 200 (an organization of 
pre-eminent women business leaders); Assistant Secretary of State for 
Educational and Cultural Affairs Patricia de Stacy Harrison; Pat 
Mitchell, PBS President and CEO; and Barbara Barrett, Chairman of the 
Board of Thunderbird University. The Council meets twice annually in 
alternating capitals and held its fourth meeting in February 2004 in 
Kabul. The Council focuses on issues of access to education and health 
care, economic sectors and political participation and matching private 
sector donations with stated needs. The Council has sponsored numerous 
projects, including training for aspiring women journalists, 
entrepreneurs and politicians. The Foundation for International 
Community Assistance (FINCA--a micro-lending nongovernmental 
organization) also has given many women the critical start-up loan they 
need to launch their small businesses.
    Question 4. The Department of Commerce announced a restructuring of 
the Industry Advisory Sectoral Committees, which advise the United 
States Trade Representative and the Department of Commerce about the 
development of trade policies on sectoral industries. The new 
committees are supposed to be finalized at the end of March 2004.
    Under the new structure for the committees, how will 
representatives be selected? How many women are serving on the small 
and minority business task force?
    Response: There will be no change in the process by which members 
of the committees are selected. Commerce and USTR jointly review all 
applications to the committees. Members are selected to represent their 
industry interests on trade matters. Considerations for membership 
include knowledge and expertise of the industry represented and of 
trade matters, and diversity among sectors, product lines, firm size, 
geographic areas, and demographics. Committee members must be U.S. 
citizens and represent a U.S. firm or other entity that is directly 
engaged in the export or import of goods or that sells its services 
abroad, or represent a U.S. entity that provides services in direct 
support of the international trading activities of other U.S. entities. 
To begin the nomination process, the Office of Advisory Committees 
requires the following: 1) sponsor letter, which must be on company/
organization letterhead (can be self-nominating); 2) resume, with 
demonstrated knowledge of international trade as relevant to the work 
of the committee; and 3) company or organization information (if 
consultant, legal advisor, or trade association, a membership list or 
client list must be included). Commerce and USTR make every effort to 
maintain balanced industry representation on each Committee and among 
Committees. Appointments are made without regard to political 
affiliation.
    Currently, the Industry Trade Advisory Committee on Small and 
Minority Business (ITAC 11) has a total of 27 members; eight are women.
    Question 5. Will civil society organizations be represented on the 
task forces? If so, which groups on which task forces?
    Response: Four environmental representatives currently serve on the 
new Industry Trade Advisory Committees. Two, representing the Defenders 
of Wildlife and The Mercatus Center at George Mason University, serve 
on the new Industry Trade Advisory Committee on Chemicals, 
Pharmaceuticals, Health/Science Products and Services (ITAC 3); and 
two, representing Defenders of Wildlife and the Pacific Environment 
Resources Center at the Center for International and Environmental Law, 
serve on the new Industry Trade Advisory Committee on Forest Products 
(ITAC 7).
    Question 6. Will there be women or labor groups on the textile task 
force given that women are the majority of textile workers in the U.S. 
and are the majority of textile workers in developing countries?
    Response: As of May 2004, the Industry Trade Advisory Committee on 
Textiles and Clothing (ITAC 13) has 44 members, of which eight are 
women. Two of the three Committee's officers (the two Vice Chairs) are 
women. The women members represent the full spectrum of the fiber, 
textile, apparel, footwear, leather and luggage industries. Labor 
groups are not represented on the ITACs as they serve on the USTR-Labor 
Advisory Committee (LAC), which is included in the trade advisory 
committee system. Textile and apparel labor organizations are members 
of LAC.
    Question 7. How is the Department of Commerce going to ensure that 
U.S. procurement policies can continue to support women and minority-
owned small businesses and still be non-discriminatory?
    Response: Opportunities for women- and minority-owned small 
businesses in government procurement are guaranteed through a variety 
of federally mandated set-asides which insure government agencies 
procure from these businesses whenever possible. The Department 
supports and fully complies with all federal procurement polices and 
legal requirements regarding small, minority- and women-owned 
businesses. Our trade agreements do not affect these opportunities, as 
the United States negotiates government procurement chapters that open 
foreign markets to U.S. suppliers but still protect opportunities for 
women- and minority-owned businesses in U.S. domestic procurement.

                    QUESTIONS FROM HON. ELIOT ENGEL

    Question 1. The U.S. steel industry has suffered grievous harm. The 
federal government had instituted a 3-year-program to protect it from 
unfair foreign competition, yet the Administration pulled the plug 
early. In the case of Brazil this unfair competition is very apparent. 
As you may know, in the U.S. we use coal to make steel. In Brazil they 
use charcoal which is made by the Brazilian lumber industry that has 
been documented in using slave labor. When a vital component of 
Brazilian steel production is made using slave labor, a gross 
competitive disadvantage for the U.S. steel industry is created.
    Question 1(a). Why did the Administration end the program early?
    Response: In March 2002, following an investigation by the 
International Trade Commission (ITC) that found that the U.S. steel 
industry had been injured by a surge in steel imports, the President 
imposed temporary safeguard measures on a number of steel products. The 
safeguard measures were designed to provide the industry with the 
temporary breathing space needed to adjust to the increased imports and 
regain its competitiveness.
    On December 4, 2003, the President terminated the steel safeguards 
as a result of changed economic circumstances, after determining that 
the measures had achieved their purpose. In the 21 months that the 
safeguards were in place, the industry underwent major restructuring 
and consolidation, productivity increased sharply, prices stabilized 
and profitability returned. Since the safeguard measures were lifted in 
December, prices have remained strong and the industry has continued to 
maintain its profitability.
    Question 1(b).  What is the Administration doing to address the 
obvious problem of slavery in Brazil?
    Response: The Administration takes such allegations very seriously. 
The U.S. Department of Homeland Security's Customs and Border 
Protection agency is responsible for investigating allegations of the 
use of prison or indentured labor in the manufacture of merchandise 
imported into the United States. Currently, U.S. Customs and Border 
Protection has staff operating out of the U.S. Embassy in Brasilia to 
specifically address the issue of alleged slavery use in manufacturing.
    The Government of Brazil has developed its own national programs to 
combat slavery, and the Bush Administration supports and encourages 
these efforts. In addition, the Department of Labor provided $1.7 
million in funding for a project led by the International Labor 
Organization for combating forced labor in Brazil, which is scheduled 
to run through the end of 2007. The project contributes to the 
prevention and elimination of forced labor in Brazil by strengthening 
the capacity of governmental and non-governmental institutions to 
detect and combat forced labor, and provides rehabilitation and 
economic alternatives for victims of forced labor. Both the Department 
of Labor and Department of State assist in the administration of the 
project grant in Brazil.
    Question 1(c). What plans does the Administration have to protect 
the steel industry from unfair competition from Brazil?
    Response: As part of the safeguard measures, the Administration 
established a steel import licensing and monitoring system to allow the 
Administration to better detect and, where appropriate, more quickly 
respond to future import surges. This system was kept in place even 
though the tariffs were lifted. In addition, the Administration 
continues to vigorously enforce the antidumping and countervailing duty 
laws which provide our domestic steel industry with the opportunity to 
obtain relief from unfairly traded imports from any country, including 
Brazil.
    Moreover, as part of the Administration's effort to address 
challenges facing our manufacturing sector, the Department of Commerce 
recently established an Unfair Trade Practices Task Force to pursue the 
elimination of foreign unfair trade practices that may harm U.S. 
commercial interests. The members of the Task Force include trade 
experts and economists with a broad range of experience in addressing 
unfair trade issues involving dumping, subsidies, import surges and 
customs practices and are well-versed in such sectors as steel, 
textiles, agriculture and semiconductors.
    In addition to meeting with concerned members of industry and 
conducting its own internal analysis, the Task Force has issued a 
notice in the Federal Register asking the public and representatives of 
the manufacturing sector to identify those unfair trade practices of 
greatest concern, in order to assist the Task Force in determining its 
initial priorities. The notice seeks comments on all types of foreign 
unfair trade practices facing our manufacturers, including those 
practices which currently may not be subject to specific or adequate 
trade disciplines. We will also ask for comments on the underlying 
market distortions that may have led to the practice in question and 
any suggestions regarding the most effective ways the Task Force can 
assist in addressing an identified unfair trade practice.
    We look forward to fully employing these resources to get at the 
underlying causes of unfair trade problems well ahead of the time that 
industries must typically seek relief from the government under our 
trade laws.
    Question 2. As you may know, the Terrorism Risk Insurance Act is 
due to expire at the end of this year. The Secretary of the Treasury 
can extend this for another year, but must do so by September.
    What would the impact be on the U. S. economy if shopping center 
owners and office building owners could not get terrorism insurance?
    Will you pledge to speak to Secretary Snow and urge him to extend 
TRIA quickly?
    Response: The Terrorism Risk Insurance Act (TRIA) requires the 
Secretary of the Treasury to determine by September 1, 2004, whether to 
extend the ``make available'' provisions of the Act into the third year 
of the program. These provisions require each insurer to make 
available, in all of its commercial property and casualty insurance 
policies, coverage for insured losses under the Act. TRIA also requires 
that this coverage must not differ materially from the terms, amounts 
and other coverage limitations applicable to losses from events other 
than acts of terrorism. The Secretary's determination must be based on 
the ``effectiveness of the program,'' the ``likely capacity of the 
property and casualty insurance industry to offer insurance for 
terrorism risk after the termination of the program,'' and the 
``availability and affordability of such insurance for various 
policyholders.''
    To assist the Secretary in making this determination, the 
Department of the Treasury on May 5, 2004, published a Request for 
Comments (RFC) in the Federal Register. Comments were due by June 4. 
Among other things, the RFC asks whether policyholders would still be 
able to obtain terrorism risk insurance and whether the affordability 
would be impacted if the provision were not extended; how the ``make 
available'' requirement has affected or interacted with the available 
capacity of insurers to provide terrorism risk insurance coverage to 
date; and how a Treasury decision to extend or not to extend would 
affect insurers' decisions to offer insurance in Program Year 3. 
Responses to this RFC, along with other surveys Treasury has 
commissioned, should provide the Secretary with the information 
necessary to make an informed decision, consistent with the terms of 
the Act. The information gathered should permit an assessment of the 
availability and affordability of terrorism insurance coverage as well 
as the demand for such coverage.
    I am confident that Secretary Snow and his Department are making 
every effort to obtain the information needed to make a decision on the 
extension as quickly as possible.

                    QUESTIONS FROM HON. BART GORDON

    Question 1. Mr. Secretary, manufacturing jobs have declined for 40 
straight months. Since January 2001, the United States has shed 2.75 
million manufacturing jobs; 27,000 manufacturing jobs were lost in 
January of this year alone. In Tennessee we have lost more than 60,000 
manufacturing jobs since 2001. Our small- and medium-sized 
manufacturers have been particularly hard-hit. Whenever I meet with 
small manufacturers, they tell me about the importance of the 
Manufacturing Extension Program [sic] in helping them meet increased 
international competition and to keep their doors open. The MEP 
generates thousands of jobs and billions of dollars in increased sales 
and investment. Also, each federal MEP dollar invested generates $4 in 
federal tax revenue. And just this month, the President awarded the 
Malcolm Baldrige National Quality award to Stoner Inc., a small 
manufacturer in Quarryville, Pennsylvania--another satisfied customer 
of its local MEP Center. The Administration's Manufacturing Plan is 
very short on specific actions, including a lack of funding estimates, 
to assist U.S. manufacturers. The MEP is a proven program with a 
documented successful track record. Mr. Secretary can you explain to 
me, and the American small manufacturing community, why the 
Administration has targeted the successful MEP for elimination?
    Response: The MEP is not being targeted for elimination. The 
Administration has increased its requested level for the federal 
contribution to the MEP in FY2005 to a level equivalent to the FY2004 
Congressional appropriation of $39.6M. As you know, funding for the MEP 
centers is a cost-sharing arrangement consisting of support from the 
federal government, state and local governments, and the recovery of 
fees for services. Given advances in manufacturing and technology, it 
is appropriate to evaluate MEP operations and take steps for continuous 
improvement.
    The Department of Commerce's report, Manufacturing in America, 
recommends greater alignment and coordination of other federal programs 
and resources that are similarly directed at the small manufacturing 
marketplace MEP serves and which contribute directly to the health of 
those businesses. If successful, a closer coordination of these 
resources could not only effect greater leveraging of federal assets 
but could also bring to bear a more comprehensive level of service than 
MEP has delivered in the past.
    The Administration's FY2005 Budget request reflects that 
recommendation, by proposing to coordinate MEP fully with other 
Commerce Department programs that are helping manufacturers to be more 
competitive and expand markets. Through this coordination, the Commerce 
Department can more closely link the technical and business staff 
employed by the MEP centers located around the country with trade 
promotion specialists in the Commerce Department's International Trade 
Administration (ITA). In addition, ITA has experts with in-depth 
knowledge of various sectors of industry. By coordinating MEP field 
agents and these sector experts, the program can be a more effective 
national resource to help small manufacturers.
    Question 2. Mr. Secretary, the Modernization Forum (the umbrella 
organization for the MEP Centers) sent you a letter outlining the 
impact of the FY04 funding level of $40 million on the national network 
of MEP Centers. The Modernization Forum refutes the Department's claims 
that despite a two-thirds cut in funding, MEP performance can be 
sustained by introducing cost-savings efficiencies such as integration 
with the International Trade Administration and collaboration with 
universities and community colleges.
    After your announcement that EDA funds may be available for MEP, 
the Modernization Forum again wrote you (1 March 2004) asking to work 
with you to ensure MEP Centers have access to these funds as soon as 
possible. In addition, they requested that you arrange a workshop for 
MEP Center Directors on 16 or 18 March while they were in D.C. It is my 
understanding that you have not responded to either of these letters. 
Why not? Could you give us an idea of what the Administration intends 
to do before 1 June to ensure the MEP network is not destroyed?
    (I met with EDA officials last week. At best there is $8 million 
available for MEP Centers. However, there seems to be some legal issues 
about how Center might be able to apply for EDA grants. Commerce 
lawyers have not yet begun addressing this issue and Commerce officials 
would not say that it would be resolved before 1 June.)
    Response: During the past year, the Department took a comprehensive 
look at the issues influencing the long-term competitiveness of U.S. 
manufacturing to identify the challenges our manufacturers face and 
outline a strategy for ensuring that the government is doing all it can 
to create the conditions that will allow U.S. manufacturers to increase 
their competitiveness and spur economic growth. That review ultimately 
led to the Department of Commerce's report, Manufacturing in America. 
The report recommended methods to strengthen the MEP program.
    In addition to the support for the MEP national manufacturing 
network provided by the FY04 appropriation, EDA has made MEP centers 
eligible for Economic Adjustment Program funding. EDA has been working 
with MEP on logistics and arrangements for center applications to 
provide this additional pool of funds as soon as possible.
    MEP intends to hold an interactive dialogue with all stakeholders 
on the impact, scope, and effect of the proposed recompetition. The 
following is the tentative timeline for the recompetition. This 
timeline includes a number of opportunities for discussions and 
dialogue with all MEP stakeholders, including the ModForum.

 We will hold a recompetition for MEP centers in the fall of 2004. 
        This timing will allow the Department to solicit and receive 
        input from state co-investors in the MEP centers. Because MEP 
        is a cost-shared program relying upon the contributions from 
        its State partners (1/3 of the total center funding), it is 
        critical to get their input in defining the format and 
        structure of the recompetition. This is essential to assure 
        state support for the recompetition and to encourage states to 
        support proposals for well-qualified, well-financed centers.
 MEP will conduct a series of regional discussions to get state and 
        other investor inputs in the July/August 2004 time frame. The 
        National Institute of Standards and Technology (NIST) will 
        release a Federal Register notice requesting proposals on or 
        about September 1, 2004, with proposals due October 31, 2004 
        (60 days later). Awards are expected to be effective January 1, 
        2005.
 The center competition will use the criteria and protocols as 
        established in the MEP rule (15 CFR 290).
 MEP will implement, as appropriate, proposed program reforms in the 
        upcoming National Academy of Public Administration (NAPA) 
        analysis of the MEP program.
 Per their request, centers and state economic development offices 
        will be given opportunities to provide input on the 
        recompetition.
    Question 3. The Administration proposes to eliminate the Advanced 
Technology Program (ATP). In our current economic situation and with 
increased competition from abroad should we be closing one of the few 
programs that enable entrepreneurs to bring research ideas to the 
demonstration phase? When the Science Committee held a hearing on 
nanotechnology one of the recommendations we heard was to continue 
funding for ATP. They pointed out there is plenty of funding for basic 
research but there is no funding to bridge the gap between the lab and 
the marketplace. This is exactly the problem that ATP is designed to 
solve. I understand the need to prioritize during tough budget times. 
However, the Administration's own analysis of ATP shows that benefits 
for just a few ATP projects analyzed to date are projected to exceed 
$17 billion on a total of $2.1 billion federal investment since ATP 
started. It seems that when we are losing so many manufacturing and 
high-skill jobs, we should be focusing on the development of next-
generation technologies which will support high-wage jobs. Why does 
this Administration wish to eliminate the ATP, rather than making it a 
part of its manufacturing plan?
    Response: Developing new technologies that will create the next 
generation of high-wage jobs and enhance U.S. competitiveness depends 
upon Federal activities that enable world-class fundamental research, 
create incentives for increased private sector R&D, and strengthen 
intellectual property protections. The President's FY 2005 Budget 
provides for an unprecedented $132 billion investment in R&D, devoting 
13.5 percent of all discretionary outlays to R&D--the highest share in 
37 years. The Administration has also sought to strengthen existing 
technology transfer mechanisms and develop new ones--such as user 
centers that enable private sector access to large-scale, cutting-edge 
research tools and facilities. Examples of user centers include NIST's 
Center for Neutron Research and the various major facilities located at 
Department of Energy laboratories. In addition, the Administration 
seeks to stimulate private sector innovation by making the R&D tax 
credit permanent, and other means, rather than providing direct support 
to only a handful of the many qualified businesses.
    Consistent with an emphasis on shifting resources to reflect 
changing needs and priorities, the Administration proposes to terminate 
ATP. The Administration believes that other NIST R&D programs are much 
more effective and necessary in supporting the fundamental scientific 
understanding and technological needs of U.S.-based businesses, 
American workers and the domestic economy. The decision will also allow 
NIST to focus on programs within its Measurement and Standards 
Laboratories, which have received national and international 
recognition and are central to satisfying NIST's core mission. Further, 
large shares of ATP funding have gone to major corporations that do not 
need subsidies. Finally, ATP-funded projects often have been similar to 
those being carried out by firms not receiving such subsidies.
    Question 4. Mr. Secretary, on 11 February, Under Secretary Phil 
Bond appeared before the Science Committee and had this to say about 
the National Institute of Standards and Technology.
        ``NIST has been often referred to as the `crown jewel' of our 
        Federal laboratory system. It is a well-deserved title because 
        there is no other Federal lab that industry relies on as much 
        as NIST. Industry needs the critical NIST metrology research 
        standards for measurement testing, analysis, and protocols that 
        allow for interoperable products to be created, new products to 
        be developed based on consensus standards, assurance that 
        products meet conformity assessment requirements, and the 
        ability to effectively bring their innovation from the 
        laboratory to the marketplace.''
    I couldn't agree more with this assessment. NIST is very important 
component in U.S. industrial competitiveness. However, NIST plays only 
a very small role in the Administration's Manufacturing Plan. I am also 
concerned about the Administration's FY05 budget request for NIST. The 
Administration's budget request shows an $85 million increase for the 
NIST labs that includes $58 million for new research initiatives. 
However, the budget request does not include close-out costs for the 
Advanced Technology Program, which the Administration proposes 
eliminating. These close-out costs are $35 million according to Dr. 
Arden Bement (5 Feb. budget briefing)) not does it take into account 
that in past years up to 15 % of ATP funds were transferred to the NIST 
lab account--in FY03 this was $13 million. According to my accounting, 
there would only be about $11 million for new initiatives at the NIST 
labs. ($85 million minus $26 million for lab equipment minus $35 
million ATP close-out minus $13 million ATP transfer funds leaving $11 
million.) It seems that either there will be no new NIST research 
initiatives or you will have to take MEP funding to pay for new 
research at NIST. What is the Administration's intent?
    Response: The FY2005 President's Budget proposal represents the 
Administration's intent to strengthen core NIST lab capabilities 
through increases for laboratory upgrades, equipment, and ongoing 
research efforts. As our nation's oldest federal laboratory, NIST 
provides critical measurement, standards, and technology that 
facilitate commerce and trade. The budget provides support for the 
President's research and development (R&D) priorities for combatting 
terrorism, nanotechnology, networking and information technology R&D, 
biosciences, and hydrogen fuel R&D, among others. Additionally, in 
order for the NIST world-class scientists to perform their national 
mission, the budget requests funds for urgently needed construction and 
renovation projects in both Gaithersburg, Maryland and Boulder, 
Colorado.
    If Congress enacts the FY2005 Budget proposal to terminate funding 
for the Advanced Technology Program (ATP), the Department of Commerce 
and NIST will pursue all available means to address the termination 
cost requirements, consistent with legal obligations and sound 
management practices. To the greatest extent possible, NIST will seek 
opportunities to place ATP staff elsewhere in NIST or at other 
agencies, both within and outside the Department. NIST already received 
Voluntary Employee Retirement Authority and buy-out authority to reduce 
the number of its employees in light of the lower appropriation level 
for other programs in FY 2004. The use of funding that may become 
available through prior year deobligations in ATP is also a possibility 
to offset ATP shutdown costs. Prior year deobligations have averaged 
$13 million over the last three years, although a lower level is 
projected for FY 2005.

                  QUESTIONS FROM HON. EDWARD J. MARKEY

    Question 1. Mr. Secretary, Massachusetts used to be a center for 
textile manufacturing, but in the last century we lost those jobs as 
factories moved first to the Southern states, and then offshore. We 
adapted by developing new skills and new industries in high technology 
and medicine. A very high percentage of our employment and therefore of 
the economic base is medical and high-technology oriented. These jobs 
are now being endangered by offshoring to India, Pakistan, or other 
countries, which is threatening the heart of Massachusetts economy. If 
we lose the high-tech, information industry jobs, the bio-technology 
jobs and the outsourceable medical jobs, what are we going to replace 
them with? How are we going to retrain the unemployed and into what 
will they be retrained?
    Response: The President's economic priority is to increase job 
opportunities in the United States while ensuring that Americans have 
the skills necessary to fill those jobs. As you point out, 
Massachusetts has demonstrated the ability of the U.S. economy to shift 
with changing circumstances. At the time Massachusetts started losing 
its textile jobs, nobody knew--or could predict--that the state would 
find its new specialization in areas such as computers and medical 
research. But the state's advantages--especially its tremendous 
university base and well-trained and qualified workforce--gave it an 
advantage in these high-skilled and high-paying areas.
    I believe that the lesson of the Massachusetts experience shows 
that we need to concentrate on the skills and abilities of our labor 
force and our ability to succeed in an innovation economy. While I 
share your concern any time we lose one good, American job, I do not 
believe that we can protect our way to prosperity. Nor can we predict 
exactly where new industries and jobs will be created. This is the most 
difficult and challenging aspect of a competitive global economy, but I 
believe the course we must choose is clear. We must continue to prepare 
our workforce, build the technological infrastructure necessary for 
innovation to flourish and promote the competitive and entrepreneurial 
advantages of America. The President has made commitments to all of 
these objectives:

 Doubling the number of workers receiving job training through the 
        major Federal worker training programs under the Workforce 
        Investment Act, ensuring that those programs work better, and 
        closing the skills gap so we fill every high growth job with an 
        American worker.
 Strengthening and modernizing support for vocational education.
 A Presidential Math and Science Scholar's Fund to ensure that America 
        remains the world leader in the innovation economy.
 Extending the National Assessment of Educational Progress to high 
        schools to ensure that they are producing educated graduates.
 Record commitments of Federal R&D--$132 billion this year.
 Pro-growth tax policies that support entrepreneurship and the 
        deployment of technology. This includes support for the 
        Internet tax moratorium, achieving accelerated depreciation 
        schedules for small businesses (including immediate expensing 
        for purchased computer software), and support for the making 
        the R&D tax credit permanent.
    In addition, my colleague at the Department of Labor, Secretary 
Chao, is targeting those markets generating the most rapid job growth 
or where the greatest skill shortages exist, and focusing training and 
education programs that provide the talent-base to fill those jobs. 
Secretary Chao is implementing the President's High Growth Job Training 
Initiative. Its premise is simple and straightforward: Successful 
workforce development happens when training programs are connected to 
real employment opportunities. The High Growth Job Training Initiative 
encourages the workforce investment system to identify businesses and 
industries with career opportunities, evaluate their skill needs, and 
ensure that people are being trained with the skills these businesses 
require. As part of this initiative, Secretary Chao has focused on 12 
industries at the national level that are either projecting significant 
job growth, experiencing transformation in the nature of the job skills 
required, or are essential to the national economy. Information 
technology, health care, biotechnology, and advanced manufacturing are 
four of those 12 industries.
    Question 2. I am also very concerned that the offshoring of many 
technology jobs really adds insult to injury--for not only do American 
workers lose their jobs, but they also face a very real threat of also 
losing their privacy. Some of the jobs that are being sent offshore 
involve the processing or analysis of the private medical information, 
personal financial information from banks, brokerages, insurance or 
credit card companies, income tax return information, and other types 
of sensitive personal information. Can you tell the Subcommittee what 
the Department of Commerce has done to ensure that sensitive data about 
American citizens--their medical records, their tax returns, their 
financial information, is not sent overseas to a person or a company 
that could compromise this information?
    Response: I understand your concerns and agree that protecting the 
privacy and security of personal information collected by U.S. 
companies is very important. I understand that Federal Trade Commission 
Chairman Timothy Muris recently sent you a letter outlining the FTC's 
authority to safeguard consumer privacy both at home and abroad. As 
Chairman Muris indicated, under current United States law, a company 
must take reasonable steps to ensure that information shared with its 
service providers--whether domestic or foreign--is protected in 
accordance with those laws. And, with respect to medical information, 
current United States law--in particular, the Health Insurance 
Portability and Accountability Act (HIPSAA)--provides Americans with 
strong privacy and security safeguards.
    Continued education and outreach to U.S. companies on the 
importance of developing global privacy policies and practices is 
essential to promote compliance with U.S. laws. Recognizing the 
increasing importance of privacy to consumers and businesses alike, the 
Department of Commerce, in conjunction with the Federal Trade 
Commission and other inter-agency partners, has had productive 
dialogues with other governments, consumer groups, and businesses to 
encourage broader adoption of privacy protections.
    Multilateral and private-sector initiatives are important in the 
development and use of privacy-enhancing technologies and in promoting 
business and consumer education and awareness about online privacy 
issues, including concerns about the offshore transfer of personal 
information. We have continued our commitment to work with other 
countries, businesses, and consumer groups in private sector-led forums 
such as the Global Business Dialogue on Electronic Commerce (GBDe), the 
Trans-Atlantic Business Dialogue (TABD), and the Trans-Atlantic 
Consumer Dialogue (TACD).
    We are also working very closely with multilateral organizations 
such as the Organization for Economic Cooperation and Development 
(OECD) and the Asia-Pacific Economic Cooperation forum (APEC) to 
promote internationally compatible approaches to privacy. As you may 
know, APEC is in the process of developing the APEC Privacy Framework, 
which will build upon the 1980 OECD Privacy Guidelines to create a 
voluntary system of privacy protection that is appropriate for the 
particular conditions in the APEC economies. Additionally, the 
Framework will focus on a cooperative approach to information privacy 
in the Asia Pacific region that will balance and promote both effective 
privacy protection and the free flow of information. The Framework will 
include an accountability principle that makes clear that controllers, 
when transferring personal information, should take reasonable steps to 
ensure that the recipient will protect the information consistently 
with the APEC Principles.
    Finally, I am pleased to note that the Department of Commerce has 
awarded a Market Development Cooperator Program grant to the Better 
Business Bureau (BBB) Online to promote the Global Trustmark Alliance 
(GTA). As you may know, BBB Online's mission is to foster the highest 
ethical marketplace relationship between consumers and business. Many 
in the private sector, government, and consumer organizations view it 
as the leading self-regulation organization in North America. The GTA 
is a new membership organization created to improve cross border e-
commerce by fostering consumer trust and encouraging good online 
business practices. We believe that this program will prove 
instrumental in enabling businesses to recognize the importance of 
privacy protection and to implement protocols for ensuring that 
personal information is safeguarded even when transferred abroad.
    Question 3. Mr. Secretary, the use of computer technology makes the 
global market work. This global computer market however also makes it 
easier to gain access to the data that is present on this world wide 
computer network. Are you at all concerned that the offshoring of 
private data about U.S. citizens and companies will facilitate identity 
theft, industrial espionage, data sabotage or data mining that will 
allow foreign individuals, companies, or for that fact terrorist groups 
access to sensitive data that could be used against individuals, or 
companies in the U.S. or even the American government?
    Response: While the concerns you raise about the misuse of personal 
information by bad actors are legitimate, problems such as identity 
theft, industrial espionage, data sabotage or data mining are not 
unique to the outsourcing context. These issues affect information 
shared with all service providers, both domestic and international. The 
Department of Commerce will continue to engage in cooperative dialogues 
such as the GBDe and continue to work with the OECD and APEC to bolster 
on and off-line privacy and to safeguard business and consumer 
interests domestically and internationally. Moreover, as noted above, 
FTC Chairman Muris recently sent you a letter outlining the FTC's 
authority to safeguard consumer privacy at home and abroad and 
indicated that, under current United States law, companies must take 
reasonable steps to ensure that information shared with service 
providers, both domestic and foreign, is protected in accordance with 
those laws. The FTC, charged with enforcing our nation's consumer 
protection laws, is actively taking steps to ensure that American 
consumers and businesses understand their respective privacy rights and 
legal obligations.
    Question 4. Mr. Secretary, do you believe that before the personal 
medical information of an American citizen, their personal financial 
information, or their personal tax return information, is sent offshore 
for processing or analysis, that the American citizen should be first 
provided with a NOTICE of where their information is being sent, and an 
``Opt-IN'' right to say NO to the transfer and block it?
    Response: We strongly believe that information controllers should 
provide individuals with clear and conspicuous, readily available, and 
affordable mechanisms to choose how their information is to be used. 
However, we also believe that the United States and its partners should 
achieve internationally compatible standards for privacy protection 
while preventing the interruption of trans-border data flows, the key 
to electronic commerce and cross-border trade and services.
    To date, most legislative and policy enactments related to privacy, 
including the Gramm-Leach-Bliley Act and the Health Insurance 
Portability and Accountability Act of 1996 (HIPAA), have required 
companies to provide individuals with notice of how their information 
is being used and disclosed and provide for meaningful opportunities to 
exercise control.
    Question 5. Mr. Secretary, as you know, the European Union has a 
data protection law that addresses transfers of personal data about EU 
citizens to third countries, such as the U.S. In light of the growing 
trend towards offshoring data about U.S. citizens to other countries, 
should the U.S. also adopt a Data Protection Law to ensure that 
personal data about American citizens is only sent to countries that 
provide strong and enforceable privacy protections, and that U.S. 
citizens get disclosure and a right to say NO to data transfers that 
they fear might compromise their personal privacy?
    Response: While we strongly believe that individuals should be 
offered choices concerning how their personal information is used, we 
do not believe that the United States should adopt privacy legislation 
along the lines of the European Union (EU) Directive on Data 
Protection. As you may know, while the United States and EU generally 
agree on the need for privacy protections, the United States and the EU 
employ very different means to achieve this goal. The EU Directive, 
which takes a one-size-fits-all regulatory approach to privacy issues, 
is extraordinarily broad in scope and may have the effect of stifling 
the continued growth of electronic commerce.
    Additionally, the EU Directive includes provisions aimed at 
ensuring that data transfers are only permitted to countries whose 
privacy laws are deemed ``adequate'' by the European Commission. This 
requirement has resulted in a good deal of confusion for other 
countries and the private sector regarding exactly what constitutes 
``adequacy'' under the European regime. To date, only Canada, 
Argentina, Hungary, Switzerland, and Guernsey, along with the U.S.-EU 
Safe Harbor arrangement (see http://export.gov/safeharbor), have 
received ``adequacy'' decisions from the EU, despite the fact that many 
additional countries have enacted comprehensive privacy legislation.
    Furthermore, the EU Directive applies to all processing of personal 
data, including on-line, off line, and manually processed data, as well 
as automatic, by all organizations in all industry sectors. In 
contrast, the U.S. approach, which relies on sector-specific 
legislation, private-sector privacy initiatives and the important role 
of the Federal Trade Commission to enforce privacy promises, preserves 
maximum flexibility for businesses to be responsive to the privacy 
concerns of individuals. Finally, it is worth noting that certain 
recent studies, including findings published by the CATO Institute and 
the AEI-Brookings Joint Center for Regulatory Studies, indicate that 
comprehensive regulatory approaches to privacy may be no more effective 
in protecting personal information than other models, including private 
sector developed privacy programs.

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