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




    TRADE FAIRNESS HEARING: HOW CAN WE MAKE OUR TRADE LAWS WORK FOR 
                      AMERICA'S SMALL BUSINESSES

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

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                     WASHINGTON, DC, JULY 14, 2004

                               __________

                           Serial No. 108-72

                               __________

         Printed for the use of the Committee on Small Business


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


                                 ______

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                      COMMITTEE ON SMALL BUSINESS

                 DONALD A. MANZULLO, Illinois, Chairman

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

                  J. Matthew Szymanski, Chief of Staff

          Phil Eskeland, Policy Director/Deputy Chief of Staff

                  Michael Day, Minority Staff Director

                                  (ii)
?

                            C O N T E N T S

                              ----------                              

                               Witnesses

                                                                   Page
English, Hon. Phil, U.S. House of Representatives (PA-3).........     2
Davis, Hon. Artur, U.S. House of Representatives (AL-7)..........     4
Vargo, Mr. Frank, VP, International Economic Affairs, National 
  Association of Manufacturers...................................     8
Bassett, Mr. John, III, President and CEO, Vaughn-Bassett 
  Furniture......................................................    10
Hopson, Mr. F. Tom, President and CEO, Five Rivers Electric 
  Innovations....................................................    12
Smith, Mr. Wallace E., President, E&E Manufacturing Co., Inc.....    13
Bartlett, Mr. Douglas, Owner, Bartlett Manufacturing Co., Inc....    16
Klinefelter, Mr. William J., Legislative and Policy Director, 
  United Steel Workers of America................................    18

                                Appendix

Opening statements:
    Manzullo, Hon. Donald A......................................    31
    Velazquez, Hon. Nydia........................................    34
Prepared statements:
    English, Hon. Phil, U.S. House of Representatives (PA-3).....    36
    Davis, Hon. Artur, U.S. House of Representatives (AL-7)......    43
    Vargo, Mr. Frank, VP, International Economic Affairs, 
      National Association of Manufacturers......................    48
    Bassett, Mr. John, III, President and CEO, Vaughn-Bassett 
      Furniture..................................................    58
    Hopson, Mr. F. Tom, President and CEO, Five Rivers Electric 
      Innovations................................................    62
    Smith, Mr. Wallace E., President, E&E Manufacturing Co., Inc.    67
    Klinefelter, Mr. William J., Legislative and Policy Director, 
      United Steel Workers of America............................    75

                                 (iii)
      


 
    TRADE FAIRNESS HEARING: HOW WE CAN MAKE OUR TRADE LAWS WORK FOR 
                       AMERICA'S SMALL BUSINESSES

                              ----------                              


                        WEDNESDAY, JULY 14, 2004

                   House of Representatives
                                Committee on Small Business
                                                     Washington, DC
    The Committee met, pursuant to call, at 2:36 p.m., Room 
2360, Rayburn House Office Building, Hon. Donald A. Manzullo 
presiding.
    Present: Representatives Manzullo, Velazquez, Kelly, 
Chocola, McCotter, Udall, Christensen. 
    Chairman Manzullo. Good afternoon and welcome to this 
hearing of the Committee on Small Business. Before we do our 
opening statements, I would like to extend to Congressman 
Boucher from Virginia the opportunity to introduce his 
constituent, Mr. Bassett and then Rick, you can leave, because 
I know you have another hearing going on. And Phil, why do you 
not have a seat and then Mr. Bassett, you would be on the 
second panel, okay? We would yield to you, Mr. Boucher.
    Mr. Boucher. Mr. Chairman, thank you very much for 
affording to me the opportunity to appear before you today for 
the purpose of introducing a good friend of mine and a 
constituent. John Bassett is the chief executive officer of the 
Vaughn-Bassett Furniture Company. It is headquartered in my 
congressional district in the city of Galax, Virginia. John's 
company has been manufacturing bedroom furniture since 1919, 
and it has three factories located in the states of Virginia 
and North Carolina.
    The majority of John's 1,250 employees reside in my 
congressional district in Virginia and as I indicated, the 
company is headquartered there. Vaughn-Bassett invests more 
than twice the industry average on an annual basis in equipment 
that provides for a highly modernized and efficient operation. 
And that efficiency has enabled the company's sales to triple 
over the course of a decade to an estimated $168 million at the 
present time.
    Mr. Bassett is the past president of the Furniture 
Manufacturer's of America. He was voted the Man of the Year in 
2003 by In Furniture Magazine and has received other 
distinctions within the furniture industry. In addition to his 
role as a successful chief executive officer, John Bassett also 
is the chairman of the Committee for Legal Trade. That is a 
coalition of 27 U.S. bedroom furniture manufactures and five 
employee unions. That coalition filed an anti-dumping petition 
against China last fall and the preliminary ruling has been 
issued by the U.S. Department of Commerce in favor of that 
petition. It is anticipated that a final decision will be 
issued by the International Trade Commission before the end of 
this year.
    John Bassett is a champion for fair trade. Locally in the 
western part of Virginia, we are very proud of his success, 
both as a chief executive officer and also as a leading 
national advocate for a level playing field in trade between 
the United States and China. And Mr. Chairman, I thank you for 
giving me the opportunity to say a few kind words about him 
today. I know you will enjoy the testimony he offers later. 
Thank you very much.
    Chairman Manzullo. Thank you, Mr. Boucher, appreciate it. 
Mr. Bassett, do you want to have a seat right in back there and 
then we will have you up on the second panel. Thank you, 
Congressman Boucher.
    I would like to delay my opening statement until both 
members of Congress here have had their opportunity to give 
their statements, because of your schedules and the tyranny of 
the bells. You can sit next to each other, you are co-sponsors 
on the legislation. Phil, let us lead with you. Congressman 
Phil English from the state of Pennsylvania, fresh off of 
victory a few minutes ago on the floor on the resolution.

    STATEMENT OF THE HONORABLE PHIL ENGLISH, U.S. HOUSE OF 
                     REPRESENTATIVES (PA-3)

    Mr. English. Thank you, Mr. Chairman. It is a real 
privilege to be here and particularly to appear with Mr. Davis, 
whom I must say--
    Chairman Manzullo. Phil, could you pull the mike closer.
    Mr. English. Certainly. If you do not mind my passing the 
compliment, as a freshman, emerged already as a leading 
advocate of fair trade and someone who has immersed himself in 
the details of some of the issues that we are going to address. 
I am very grateful for the opportunity to appear with and 
testify with him.
    It is a pleasure to appear before you today on an issue 
that I think is relevant to the entire manufacturing base of 
the United States. And while I have worked on a range of 
legislative vehicles to enhance the way our trades laws work 
for American workers and companies, I am going to focus my 
testimony on H.R. 3716, which, in my view, is one of the most 
effective measures potentially to level the playing field in 
international trade with non-market economies such as China.
    H.R. 3716, which Representative Davis and I introduced at 
the beginning of the year, will allow domestic manufacturers or 
farmers to fight illegal subsidies regardless of the country in 
which they occur. Currently, anti-subsidy or countervailing 
duty cases can only be filed against countries designated by 
the Department of Commerce as market economies. That makes 
absolutely no sense. This narrow, dubious interpretation of the 
law by the Department of Commerce was upheld by the courts in 
Georgetown Steel Corp. v. United States case of a number of 
years ago. As a result, since 1980, the Department of Commerce 
has refused to hear countervailing duty cases against non-
market economies such as China, because it claimed that the 
Tariff Act of 1930 did not require them to do so.
    Thus, in effect, U.S. producers cannot fight illegal 
Chinese and other non-market economy subsidies until China 
chooses when and, indeed, if, to make the reforms necessary to 
graduate to market economy status. This is unacceptable at any 
time, but particularly so at a time when our manufacturers are 
in a state of crisis and we are running a trade deficit which 
exceeds five percent of the GDP. This WTO consistent 
legislation currently has the support of 58 members of the 
House of Representatives and it would simply clarify that the 
Department of Commerce is to hear countervailing duty cases 
against non-market economies such as China, and in certainly 
one famous case in Mr. Davis' district, Vietnam.
    H.R. 3716 does not change any other aspect of CDV law, 
including the statutory requirements by which the Department of 
Commerce evaluates the merit of a case. Support for this 
legislation is not limited to the House of Representatives. 
Companion legislation in the Senate currently has the support 
of 18 Senators. Additionally, the legislation has been endorsed 
by no less than 21 associations and labor organizations.
    Among non-market economies, China receives the bulk of 
attention for subsidizing its domestic industries, however, 
there are ten other non-market economy countries, aside from 
China. Congress must get this issue right and pass legislation 
that permits us to combat all subsidies, no matter where they 
occur. Just because a country has a non-market economy, it 
should not be beyond the reach of the U.S. Countervailing Duty 
law.
    I would like to impress upon this Committee that the 
solution to combating Chinese subsidies is not to prematurely 
graduate China to market economy status, but rather to armor 
domestic producers with strong WTO consistent trade remedies.
    While Congress may have designated the Department of 
Commerce as the administering authority for the purpose of 
determining which countries are to be market economies under 
the Tariff Act, it certainly does not take the statutory 
criteria for making such a determination available as 
bargaining chips in a negotiation between the administration 
and Beijing, to give China market economy status.
    Many commitments were made as part of China's accession 
agreement to the WTO. Many of those commitments remain to be 
fulfilled to any satisfactory degree. Whether it is continued 
use of discriminatory tax regimes, control of the banking 
sector to subsidize core heavy industries such as steel, 
licensing and quota regimes, or export restraints like the one 
currently in place on coke and coking coal, these practices all 
represent commitments China made upon its accession to the WTO 
which have not been successfully satisfied.
    China continues to adopt a mercantilist policy and we can 
no longer tolerate it. Of course, the most egregious practice 
of China's trade policy relates to currency. It is widely 
accepted that the Chinese currency is substantially undervalued 
against the dollar to which it is pegged. China has been able 
this peg because its currency is not fully convertible in 
international markets and because it maintains restrictions and 
controls over capital transactions.
    As a result, China's exchange rate is not based on market 
forces. Illegal trade is not an acceptable practice or answer 
to competitiveness challenges and it is not appropriate for one 
country to gain from illegal trade at the expense of another. I 
would add that this statement also holds true for different 
sectors of the domestic economy.
    Finally, I would be remiss, given the broad nature of this 
hearing, if I did not mention a couple of other bills that I 
think are important for your Committee to consider. One is H.R. 
3058, the Currency Harmonization through Neutralizing Action or 
CHINA Act, which is a critical tool in leveraging China to play 
by the rules. Specifically, it pressures China to float its 
currency or face retaliatory tariffs. This legislation has the 
support of 85 members of the House.
    Chairman Manzullo. How are you doing on time, Phil?
    Mr. English. I am about finished and I thank the gentleman.
    Chairman Manzullo. Okay.
    Mr. English. The Trade Law Reform Act provides a broad set 
of remedies to deal with holes in our existing trade laws. Let 
me finish by again highlighting that the ability to fight 
illegal, non-market economy subsidies is of paramount 
importance. This issue, perhaps more than any other over the 
next few years, will make or break the possibility of a level 
playing field for employers when dealing with China. And I 
thank the Chairman for giving me the opportunity to lay out 
broadly some of my views on this topic.[Congressman English's 
statement may be found in the appendix.]
    Chairman Manzullo. Thank you. Our next witness is 
Congressman Artur Davis, from Alabama's 7th Congressional 
District. And thank you for coming to our hearing. Look forward 
to your testimony.

     STATEMENT OF THE HONORABLE ARTUR DAVIS, U.S. HOUSE OF 
                     REPRESENTATIVES (AL-7)

    Mr. Davis. Mr. Chairman, thank you for doing me the 
courtesy of inviting a freshman Democrat to appear before your 
Committee. I am honored to be here. Let me greet my friend from 
New York, the ranking member of the Committee, and I ask 
unanimous consent that my written statement be submitted into 
the record.
    Chairman Manzullo. All the written statements of all the 
witnesses will be accepted into the record.
    Mr. Davis. Mr. Chairman, let me begin by first of all 
complimenting my good friend from Pennsylvania. It has been an 
interesting and sometimes contentious 108th Session of the 
United States Congress. We found a lot of things as Democrats 
and Republicans that we are fighting about. I am proud of the 
fact that this is a bipartisan piece of legislation. I am proud 
of the fact that my friend from Pennsylvania has joined forces 
with me and numerous individuals in the House and Senate on 
both sides of the aisle to try to craft a responsible solution 
to a problem that is affecting many of our districts.
    This is an uncertain time in America's economy. There is a 
lot of anxiety in your state of Illinois and my state of 
Alabama. A lot of people feel themselves dislocated, if you 
will, by globalization. They wonder if the rules mean what they 
say they mean and they wonder exactly what their government is 
doing to stand on their side or on their behalf.
    There have been and will continue to be spirited debates, 
even on the floor of the House this afternoon as we think about 
Australia. Debates over the direction in which we ought to 
move. I think we ought to be able to agree, though, on some 
very simple premises. The first one is this, that we do have a 
rule structure in this world. A lot of it has been formed by 
the WTO and we ought to find a way to respect that rule 
structure.
    The second thing is that rules have to be fair. What is 
good for the United States has to apply to our competitors. And 
third of all, the rules have to be such that our people 
understand them. Our businesses and our working men and women 
have to be able to look at the rule structure that we have and 
think that it is fair from their standpoint. I know you deeply 
believe in that.
    This bill satisfies all three of those criteria. 
Congressman English described it very, very well from a 
substantive standpoint. Let me make this larger observation. 
This bill is not an act of protectivism. It is not a bill that 
confers unfair advantages on American industry or workers. It 
does not trade one wrong for another wrong.
    What it simply says is that we live in a world where we are 
trying to move past barriers. We live in a world where we are 
trying to move past the subsidies that can distort the market 
and if the rules are good enough to apply to market economies, 
simple fairness dictates that they should apply to non-markets. 
Simple, basic fairness.
    Second of all, this bill will make a very important 
statement to the people in our country. WE have learned in the 
last several years that our military security is not as 
impregnable as we once thought. We know that we face all kinds 
of threats that we did not foresee four years ago. And as we 
talk about our security, I even heard it said on the floor of 
the U.S. Senate last night, that our traditions are an 
important part of that security. That may or may not be the 
case, but there is no question that the economic security of 
our people is vital. Our people are economically insecure when 
they cannot count on their government to insist that the rules 
are played by fairly.
    And make no mistake, I have an enormous amount of 
confidence in America's industries and America's workers. I 
have a very strong belief that they can compete with any 
competitor anywhere in the world. But they cannot do so if 
their hands are unfairly tied behind their back. Right now 
there are numerous economies around this world, non-markets, 
China, Vietnam, some of the old Soviet countries, who are using 
subsidies to provide an unfair leg up for their industries. 
Indeed, that is the very nature of the economy in some of these 
countries.
    The question is whether we sit idly by or whether we stand 
up to that trend. And the way that we stand up for it is to 
give us the power to do what we do with markets, impose 
countervailing duties.
    Let me make one final point about this bill. It should be 
understood that this bill does not require the United States to 
do anything. This bill does not contain a single duty, does not 
impose a duty, does not tie the hand of the executive. What it 
does, though, is to free up the hand of the executive in the 
Commerce Department. What it does is to say in effect that a 
remedy that has worked very well for market economies ought to 
be applicable to deal with the new threats from China.
    In conclusion, I would simply say that this bill does 
provide a chance for this Congress to act as one. There have 
been precious few instances when we have found bipartisan 
common ground in the last 18 months. This is a chance for us to 
do it. I am proud of the support that has formed around this 
bill from the U.S. Chamber of Commerce to the Steelworkers to a 
number of other entities. The reason that they are standing 
together, I believe, in conclusion, is because they want to 
make a promise to America's workers and businesses that if you 
do your part, you make yourself productive. If you play by the 
rules, we will make sure those rules are respected around the 
world.
    So with that spirit, I certainly thank you for your 
incredible leadership on this issue in the state of Illinois 
and thank all the members of this Committee for their interest 
in being here today.
    [Congressman Davis' statement may be found in the 
appendix.]
    Chairman Manzullo. Well, sign me up. I think I am already a 
co-sponsor on the bill. Does anybody here have any questions 
that they want to ask of our two colleagues? Okay, if not, 
thank you very much for your testimony, we appreciate it. If 
the staff could bring in the next panel. Thank you, Phil, 
thanks, Art.
    While that is going on, I will give my opening statement. 
Again, good afternoon and welcome to the hearing on Committee 
on Small Business. A special welcome to those who have come 
some distance to participate and to attend this hearing. I have 
a more comprehensive opening statement at the table, but for 
the sake of time, we will summarize our remarks.
    Today, the Committee will hold a hearing on trade fairness, 
in order to examine how our trade laws might be improved to 
help our small businesses. There is general consensus that 
freer trade is the best means of achieving greater prosperity 
and is a win-win for all countries involved. However, we 
realize that many nations are not fully transparent and 
oftentimes do not play by the same rules.
    Thus, we need trade remedy rules to enable our producers to 
compete on equal footing with their global competitors both 
here and abroad.
    Small businesses played a vital role in the tremendous 
growth over the last few years of both overall exports and the 
number of export firms. In 2001, almost 97 percent of U.S. 
exporters were small or medium sized businesses. Sixty-three 
percent of small business exporters sell to only one market and 
why is that? One key reason is that U.S. exporters still face 
substantial tariff and non-tariff barriers overseas to create 
an unequal playing field. Today, in fact, we just voted on 
another market opening agreement to further knock down trade 
barriers. This afternoon, we will vote on the trade agreement 
with Australia, which will bring zero tariffs on manufactured 
goods.
    We are also honored today to hear from Representatives Phil 
English and Artur Davis on legislation to further improve our 
trade remedy that would allow countervailing duty trade cases 
to be filed against non-market economies like China and 
Vietnam. Assistant Secretary of Commerce for Import 
Administration, James Jochum had hoped to be here today, but 
was unable to join us because he is preparing to travel to 
China to chair an important meeting to discuss with officials 
from the Government of China on the need for fundamental 
reforms within their economy. We look forward to hearing from 
him in the future.
    I would urge you to look at the table. There is a list of 
the Administration's accomplishments on enforcing our trade 
laws. Without objection, I will include that material into the 
record.
    We are now going to hear from the private sector witnesses 
who compete on a global scale. They will discuss their 
experience with trade remedy laws, how they can be further 
improved and talk about their industries and how those 
industries are important so as to come under special cognizance 
by Congress and the Administration.
    Free and fair trade works for all parties involved, 
particularly for small business exporters. It is the best way 
to insure future prosperity and wealth creation. I now yield 
for an opening statement by the gentlelady from New York, Mrs. 
Velazquez.
    [Chairman Manzullo's statement may be found in the 
appendix.]
    Mrs. Velazquez. Thank you, Mr. Chairman. Now more than 
ever, the United States' ability to remain competitive in 
today's fast growing global market is critical. The global 
economy has significantly grown, so much that 80 percent of 
world economic consumption takes place outside of our country. 
In order to guarantee that our nation remains a world leader 
and it is able to work efficiently within the world market, we 
must make sure current trade laws are properly examined so all 
businesses can take advantage of the international market.
    Our country's small firms rely heavily on their ability to 
produce goods to be used worldwide. Ninety-seven percent of 
exporters are small businesses. That is why it is so important 
to carefully weigh the effects trade policies have on our 
nation's small enterprises. While there is no doubting the 
ability of our nation's exporters to access international 
markets, if they have a level playing field, which is why all 
possible solutions should be examined.
    Not only are U.S. exporters facing a struggling economy 
here at home, but they face tough competition abroad. In 
today's hearing, the bill H.R. 3716 will be looked at. This 
legislation allows small manufacturers to sign CD petitions to 
be filed against non-market economies. While a plausible 
solution, these trade remedies are only one possible solution 
to the problem.
    It is necessary to explore all existing trade laws to 
insure they protect small exporters in the international arena. 
In addition, trade laws need to be enforced under the Bush 
Administration. This administration has failed to make a habit 
of taking into account the needs of small businesses, estate, 
trade agreements and set new roles for negotiation objectives. 
Small firms reap significant benefits from the removal of 
tariff barriers. However, they also have a strong interest in 
the elimination of the red type, which many times hinder their 
exports.
    If the Bush Administration truly cared about small 
businesses, then they will make it a priority to negotiate 
trade agreements that do not place unfair burdens on small 
firms. Today's trade laws should allow us to intervene with 
major trading partners and should be the most up to date 
solutions to address small business needs within the global 
market. Just as the case with the FSC-ETI regime, some of the 
U.S. trade laws are in need of a revision and do not fully 
address the needs of small businesses as they stand right now.
    The most important factor in all of this is that our 
nation's small exporters have the tools they need to access 
foreign markets and remain a top competitor. Rather than 
focusing only on these laws, it should also be clear small 
businesses are able to access the tools they need in order to 
succeed. It is not secret. Our nation's entrepreneurs have 
difficulty accessing technical assistance and capital, 
especially when small business programs that provide these 
services are continuously cut in the Bush Administration's 
budget.
    In order for this sector to create the jobs that we need 
here at home while remaining competitive abroad, these needs 
must be addressed in our trade policies. It is my hope to find 
a solution that not only creates a level playing field for 
small exporters, but also allows them to be as competitive as 
possible.
    This solution should allow our nation's 23 million small 
businesses, the economic engine of our economy, to have free 
and fair access to the global marketplace, no matter what the 
circumstance is.
    I look forward to hearing the testimony of today's 
witnesses and I thank you, Mr. Chairman.
    [Congresswoman Velazquez' statement may be found in the 
appendix.]
    Chairman Manzullo. Thank you. The testimony will be 
determined in length--can you get that to work? Thank you. The 
five minute clock that is up there and I would appreciate it if 
you could follow it as closely as possible.
    What I would say to the witnesses, those of you that have 
the small businesses, what is important here is that America 
hears your story. Your entire testimony will be placed into the 
record, including the recommendations as to what to do. But 
what we are trying to do with this hearing is that there are at 
least three entities that have been involved in dumping cases. 
Tell us your experience, tell us the cost. If you could do that 
within five minutes, I would appreciate that. But it is most 
important to get that out first as the first part of your 
testimony. Suggestions on what to do, if you have time, put 
that into your five minutes, otherwise, we can do that in terms 
of the questions, okay?
    Our first witness will be Frank Vargo, VP, International 
Economic Affairs, National Association of Manufacturers. And 
Frank, I look forward to your testimony.

STATEMENT OF FRANK VARGO, NATIONAL ASSOCIATION OF MANUFACTURERS

    Mr. Vargo. Mr. Chairman, thank you very much. Congresswoman 
Velazquez, Congresswoman Kelly, always a pleasure to see you. 
Mr. Chairman, thank you for scheduling this very important 
hearing. It is particularly important to the National 
Association of Manufacturers, because 10,000 of our 14,000 
members are small companies and many of them are affected by 
trade, both on the export side and on the import side. And we 
have a huge trade deficit. It is something that is of great 
concern and we need to address.
    A lot of people do not recognize how unlevel the playing 
field is in the world. Perhaps some members of the Committee 
are not aware that, right now, two thirds of all of our imports 
that come into the United States, two thirds, are totally duty 
free, no duty whatsoever. The average U.S. duty on manufactured 
goods is less than two percent. This is not really a trade 
barrier, you know, it is barely a speed bump.
    The answer is not to put barriers around the United States 
and go back do Smoot Hawley all over again, the answer is to 
get other countries to reduce their barriers. I hope everyone 
is going to vote for the Australia agreement today, because it 
does that. I call it the manufacturer's agreement, because it 
eliminates 99 percent of Australia's duties on our exports 
overnight and we will pick up about $2 billion, $2 billion of 
additional exports.
    But trade also has to be viewed as having a level playing 
field. We have to see that other countries do not manipulate 
their currencies, because currencies have a huge effect on our 
trade. And also that when there are unfair trade practices, 
that we have the ability to offset these. The subsidies and 
countervailing measures code in the WTO, for example, permits 
countervailing duties to offset subsidies. And, in fact, that 
is how we are being hit under the European Union under the FSC 
and ETI.
    The United States, by its own practice, has not applied 
countervailing duties to exports of non-market economies since 
1984. It is nothing that is in the U.S. law, nothing in the WTO 
or the old GATT. It is something that we have done to 
ourselves, because the Commerce Department said, well, you 
know, we cannot measure a subsidy in a non-market economy.
    Well, a couple of things have changed. One of them is that 
in 1994 and subsequently, the World Trade Organization 
redefined subsidies and made the definition much more precise. 
And when China joined the WTO, it expressly agreed to be bound 
by the subsidies and countervailing measures code. In fact, it 
agreed that if you can't really measure the subsidy in China, 
you can find alternative means. So China fully anticipates that 
this was part of its joining the WTO. And every other WTO 
member in the world can, at present time, apply countervailing 
duties to exports from China and other non-market economies.
    Now, H.R. 3716, the English-Davis Bill, if I can call it 
that, would provide a congressional fix to clarify that 
Congress intended that countervailing duties could be applied, 
whether or not the export came from a market economy. The NAM, 
through its policy mechanisms, looked at that. A number of 
members have different views, but we all considered it and the 
National Association of Manufacturers decided, yes, we should 
support this legislation. We should support it because if there 
are subsidies, and a lot of our members feel that there are 
subsidies from non-market economies, companies should have 
their right to this tool. They should not feel that they have 
to sit back and say, well, you know, there are subsidies, but 
there is just nothing I can do about it. That is not right.
    So we do support this legislation. We hope it will pass. 
Now I want to stress, though, we think this is part of a 
positive relationship with China. There is nothing negative or 
protectionist to it. In fact, to the degree that our companies 
and the public and the Congress see that China has to follow 
the rules and the rules are there, this is going to increase 
support for trade.
    We believe that this is very important and we hope that 
everybody in this Committee will support it and we will see 
this become part of U.S. law. It is the biggest missing 
component.
    Now, China is very important in our overall trade 
relationship and China has to comply with its WTO obligations 
and we have been pressing hard on a couple. I do want to 
commend China for just announcing that it is going to end the 
discriminatory value added tax that it had that really was 
preventing American semiconductors from being able to compete 
in China, and that they agreed to do so without going through a 
two year WTO case. They saw they were wrong and they are 
unilaterally removing it and coming into compliance. That is 
what we need more of and I believe that this law can contribute 
to that.
    I have other points, Mr. Chairman. I am hitting five 
minutes. I would be happy to take whatever questions the 
Committee has. Thank you.
    [Mr. Vargo's statement may be found in the appendix.]
    Chairman Manzullo. Our next witness is John Bassett, III, 
president and CEO of Vaughn-Bassett Furniture. He has already 
been introduced by his congressman and Mr. Bassett, we look 
forward to your testimony.

    STATEMENT OF JOHN BASSETT, III, VAUGHN-BASSETT FURNITURE

    Mr. Bassett. Thank you, Mr. Chairman. I would like to thank 
Congressman Boucher for that kind introduction.
    Chairman Manzullo. John, could you pull the mike closer and 
speak directly in it? Thank you.
    Mr. Bassett. Is this close enough? I would also like to 
thank the entire Committee for inviting me to appear before you 
today. Also, we appreciate the testimony of Congressman English 
and Davis. We support that bill to extend countervailing duties 
remedies to subsidized imports from China and other non-market 
economies.
    The Committee for Legal Trade is now made up of 31 bedroom 
furniture manufacturers and five labor unions located in 18 
states. Industry has been devastated by a flood of dumped 
imports from China. In the last three years, China import 
bedrooms jumped 224 percent, or about roughly $1 billion. As a 
result, we have lost over 35,000 wood furniture jobs.
    We filed our anti-dumping petition on October 31, 2003. It 
is the largest anti-dumping investigation ever conducted 
against China. The ITC made a preliminary determination in 
January that our industry was materially injured and the 
Commerce Department issued a preliminary ruling last month that 
China is illegally dumping bedroom furniture. Final rulings 
will be made by December.
    Based on our experience, we offer the following 
recommendations. First, the United States Government should do 
a better job of informing companies of their rights under 
United States trade laws. We only learned of the anti-dumping 
laws of this country after paying $75,000 to a law firm for a 
study. I have read that the government spent millions to 
promote the new $20 bill. I know how to spend a $20 bill, but I 
wish the government had done more to make me and other 
manufacturers aware of their rights under our trade laws.
    Second, the Department of Commerce is doing the best it can 
with the resources it has available. It is obvious to us, 
however, that the Department investigative team is underfunded 
and understaffed. There are hundreds of Chinese exporters of 
bedroom furniture who may be violating our trade laws. The 
Commerce needs more resources to handle the investigation of so 
many exporters.
    Third, there is a wide range of degree of dumping that is 
occurring among Chinese furniture manufacturers. But the 
Department only selected seven Chinese companies to 
investigate, a list that excluded some of the worst dumpers. 
Clearly, the Commerce Department either needs more resources to 
investigate more foreign exporters, or the petitioners should 
have a greater say in who is investigated.
    Fourth, a decision on the administrative review of the some 
of the most egregious Chinese dumpers will not occur until the 
summer of 2007. Some manufacturers, particularly the smaller 
ones, simply will not be able to survive that long while 
awaiting this decision. And given its limited resources, 
Congress may never individually investigate some of the most 
egregious dumpers. Again, petitioners should have more control 
over which exporters are investigated.
    Fifth, the Commerce Department should also be proactive and 
self-initiate any dumping investigations in appropriate 
circumstances, especially when small businesses are facing the 
brunt of injurious imports from China.
    Sixth, with very little notice, the Commerce Department 
held a hearing that set up a study to determine whether China 
should be given market economy status. China pegs its currency. 
It subsidizes, owns or controls many of the furniture 
factories. It manipulates the system in virtually any way it 
wants until its companies win.
    When China joined the WTO in 2001, China agreed to be 
designated a non-market economy until 2016. The United States 
should not truncate this 15 year period and undermine the 
bargain struck with Congress. The European Commission has 
recently confirmed that China remains a non-market economy. It 
would be a travesty for the United States Government to grant 
China market economy status now.
    Mr. Chairman, thank you for this opportunity. I would be 
glad, delighted, to answer any questions.
    [Mr. Bassett's statement may be found in the appendix.]
    Chairman Manzullo. Appreciate your testimony. Our next 
witness is Tom Hopson, president and CEO of Five Rivers 
Electric Innovations out of Greenville, Tennessee and we look 
forward to your testimony.

  STATEMENT OF F. TOM HOPSON, FIVE RIVERS ELECTRIC INNOVATIONS

    Mr. Hopson. Thank you. Good afternoon. My name is Tom 
Hopson and I have been in the television industry for over 25 
years. For the past five years, I have served as president and 
CEO of Five Rivers Electronic Innovations, LLC, a television 
manufacturing company located in Greenville, Tennessee. Five 
Rivers purchased the Greenville factory from Philips Consumer 
Electronics in 1997 and since that time we have continued on 
the tradition of building Magnavox and Philips color TVs in the 
United States.
    While there are several multinational companies that 
manufacture televisions in the United States, such as Sony, 
Toshiba, Sony and Matsushita, Five Rivers is the only remaining 
U.S. owned company and the only company that has been willing 
to speak out publicly in opposition to the flood of Chinese 
imports. We currently employ approximately 400 workers in our 
television plant.
    The principal topic of my testimony today centers on the 
serious difficulty that we have faced as a result of the flood 
of Chinese TV imports. As you may know, the U.S. television 
industry has experienced competition from abroad over the past 
30 years and has consolidated and changed ownerships. Since 
taking over the plant from Philips, however, Five Rivers has 
maintained a high level of efficiency and based on our 
extensive experience in this industry, we were able to make a 
satisfactory return until a couple of years ago.
    Our situation changed dramatically for the worse in 2002. 
Our newest competitors, television producers in China, were 
different from competitors we had been facing in the past. 
Between 2001 and 2003, Chinese imports increased over 3,000 
percent. In less than two years, imports from China caused our 
business to change from a thriving one to a struggling one.
    The impact of the substantial capacity in China became 
particularly noticeable in the U.S. marketplace during the 
first half of 2001. And by the end of 2002, imports from China 
had become a dominant low-price force in the marketplace, 
creating a major disruption in the market.
    Five Rivers, along with other U.S. producers, were forced 
to lower their prices on all makes and models of our 
televisions just to stay in business. But lowering our prices 
was not enough. As we reduced our prices, Chinese producers 
would undercut our prices as the volume of imports continued to 
skyrocket. We experienced massive reductions in sales orders 
from our customers. These reductions severely impacted the 
entire television industry, as U.S. television manufacturers 
and the suppliers lost orders.
    Corning, Thomson, to name a few, have stopped producing 
television glass and television picture tubes in the United 
States. Our company, as well as many others, was forced to lay 
off production workers and management staff.
    In the end, we were left with two simple options. We go out 
of business or we try to fight the imports through the use of 
the U.S. trade laws. So, in May of 2003, we chose to fight and 
stay in business. Five Rivers joined with two unions, the IBEW 
and the IUE/CWA to file an anti-dumping petition with the U.S. 
Department of Commerce and the International Trade Commission 
in May of 2003. According to a March 3, 2004 article in the 
People's Daily, the other multinational producers, such as 
Sony, Toshiba, Sanyo, refused to come forward to support this 
case because, according to the press reports, they had been 
intimidated into silence by the Chinese Government.
    In April of this year, the Commerce Department found that 
the Chinese imports were being dumped and the International 
Trade Commission concluded that the U.S. television industry 
was being injured. This decision, we hope, will once again turn 
the tide for our industry as a whole and for our company in 
particular.
    Most of you have heard about the potential changes in the 
television industry, including new technologies and digital 
broadcasting. In the years ahead, we believe the television 
industry will continue to evolve. We have the capabilities and 
plans to modernize and make direct view, LCD plasma TVs and 
prediction TVs, such as LCOS and DLP. If left unchecked, 
however, the Chinese imports would certainly put an end to the 
U.S. television industry.
    Effective enforcement of our dumping laws can help insure 
that even small business like ours can compete with the Chinese 
imports. Thank you.
    [Mr. Hopson's statement may be found in the appendix.]
    Chairman Manzullo. Thank you. Our next witness is Wallace 
Wes Smith, who will be introduced by his member of Congress, 
Congressman McCotter.
    Mr. McCotter. Thank you, Mr. Chairman. It is a pleasure to 
have Wes here. We had a nice conversation in my office and he 
is probably the only man grumpier than I am these days and I 
think you are going to get a good earful of it and we need it. 
Thank you for coming all the way, Wes.
    Mr. Smith. Thank you, Congressman.
    Chairman Manzullo. Well, that is quite an introduction. We 
will be disappointed if we did not hear something grumpy. So, 
go to it. I know that you are very reticent and that you lack 
opinions. Just feel comfortable.
    Mr. Smith. Okay.
    Chairman Manzullo. Thank you. Look forward to your 
testimony.

    STATEMENT OF WALLACE SMITH, E&E MANUFACTURING CO., INC.

    Mr. Smith. Thank you, Mr. Chairman, and members of the 
Committee.
    Chairman Manzullo. If you could pull up your mike a little 
closer and talk directly into it? Thank you.
    Mr. Smith. My name is Wes Smith and I am the president of 
E&E Manufacturing in Plymouth, Michigan. I am appearing today 
on behalf of the Consuming Industries Trade Action Coalition 
Steel Task Force, to discuss the ways U.S. trade laws can be 
made to work better for consumers of steel and other types of 
raw material.
    E&E is located in Plymouth, Michigan and is a world class 
leader in metal joining technology. It meets the needs of our 
world class automotive customers by manufacturing heavy gauge 
stamped metal fasteners with progressive dies. Also, we do 
plenty of high value added assemblies. E&E was founded in 1963 
by my father and provides meaningful employment to over 280 
dedicated employees. Steel compromises 50 percent of our total 
cost of producing these products.
    E&E Manufacturing and our primary trade association, the 
Precision Metalforming Association, were very active supporters 
of the CITAC Steel Task Force in the recent battle over the 
Global Safeguard Tariffs on steel, and we are grateful that, 
with the support from many on this Committee, they were lifted 
in December 2003. While I do not intend to rehash that issue 
today, the tariffs do serve as a good example of what we have 
come to call the collateral damage that can occur to the 
economy when our trade laws get out of balance.
    Let me state that from the outset that we fully appreciate 
the need for fair trade remedy laws to protect U.S. businesses 
from unfair trade practices by foreign countries or producers 
seeking to gain access to lucrative U.S. markets. It is 
entirely appropriate that industries suffering from such 
conduct and that the recourse should be swift and predictable. 
However, all too often in our judgment, trade remedies intended 
to provide protection for one industry cause damage to other 
industries, particularly so-called downstream industries.
    This is because our trade laws do not require, and in some 
cases do not permit, the Department of Commerce and the U.S. 
International Trade Commission to consider the total effects of 
trade policy decisions on the overall economy. I believe my 
company can compete with anybody in the world, given a level 
playing field. And that term, a level playing field, is like a 
coin with two sides. It means protection from unfair trade 
policies by offshore competitors, but it also means protection 
from unintended consequences of U.S. policy.
    Let us take the case of steel, which is the primary raw 
material input for my company, amounting to about 50 percent of 
my total cost of production on average. What we need and what 
all U.S. steel consuming manufacturers need, is access to an 
adequate, stable supply of globally priced steel. I do not want 
to pay any more for steel than necessary, but the actual cost 
is less important than whether I can buy steel for the same 
total cost as my foreign competitors. If I can, then I can use 
improved productivity, better tooling design and automation to 
offset other disadvantages, such as wage rates. If not, then I 
am at a fundamental disadvantage and because steel is such a 
big part of my cost, I cannot overcome the difference.
    When the Global Safeguard tariffs were put into place in 
March of 2002, the International Trade Commission staff 
analysis, which formed the basis of the recommendations to the 
President, was that 40 percent tariffs on imported steel would 
result in steel price increases of four to eight percent. Mr. 
Chairman, I am not an economist, but given that the U.S. steel 
industry produces only about 75 to 80 percent of the total 
steel consumed in this country, it is hard to imagine how 
anyone could conclude that imposing a 40 percent increase in 
the price of imported steel would not have a far greater impact 
than four to eight percent.
    In fact, as we now know, prices shot up 40, 50, 60 percent 
in some cases. Steel was hard to get, contracts were broken and 
the steel-consuming industries suffered far more negative 
consequences than anyone anticipated.
    In fact, we are still suffering from the effects of the 
tariffs. Some seven months after removal, current prices for 
steel in the U.S. are higher than virtually anywhere in the 
world, due in part to the disruption caused by the tariffs and 
delivery schedules are substantially longer than normal. If 
this situation persists, it will lead to increased offshoring 
of U.S.-based manufacturing.
    So what can we do to avoid these effects? In our view, we 
must find the balance between providing protection for U.S. 
industries facing unfair foreign competition and making sure 
that protection does not create more economic damage than good.
    Specifically, we suggest that U.S. trade laws should 
require an analysis of the total impact of any decision on the 
overall economy, including downstream impact.
    Industrial consumers of a product should have equal 
standing with domestic producers and importers in trade cases.
    Products that are not made in the U.S. or are in short 
supply should not be subject to trade remedies.
    Finally, when trade remedies are implemented, there is 
virtually no opportunity for those remedies to be altered in an 
expedited fashion if a changed circumstance occurs. This means 
that if there are unintended consequences, the industries 
negatively affected by those remedies must suffer far too long 
before changes can be made. For this reason, we believe an 
expeditious review mechanism for affected industries would 
provide a timely remedy against the unintended consequences of 
trade remedies.
    I support H.R. 3716, which will allow U.S. companies to 
seek a remedy against illegal subsidies by countries such as 
China. Passage of this legislation sponsored by Congressman 
Phil English will provide an important tool imposing 
countervailing duties on non-market economies and hold our 
trading partners accountable for their actions.
    Lastly, returning to the price of steel, several countries 
have placed export controls on critical raw materials such as 
coke and scrap. China has controls on coke, while Russia, 
Venezuela and the Ukraine have export controls on scrap. While 
the E.U. has addressed these issues, the U.S. has been slow to 
act. Thank you.
    [Mr. Smith's statement may be found in the appendix.]
    Chairman Manzullo. Thank you, appreciate that. The next 
witness is my constituent, Doug Bartlett, the owner, president 
of Bartlett Manufacturing in Cary. The printed circuit board 
folks that stopped by my office and attempted to explain to me 
how you go from a copper plate to a printed circuit board. I 
said, you know, I appreciate you coming in, but I know of 
Bartlett Manufacturing in my district and within two weeks I 
was there. Doug took me on a tour of his facility as, say with 
you, Wes, and convinced me of the critical importance of the 
printed circuit board industry, not only as to the final 
product but as to the raw material that makes it.
    Doug is a graduate of the Naval Academy and a former Marine 
officer and, yes, sir, we are looking forward to your 
testimony. Thank you, Doug.

 STATEMENT OF DOUGLAS BARTLETT, BARTLETT MANUFACTURING CO, INC.

    Mr. Bartlett. Thank you, Mr. Chairman.
    Chairman Manzullo. If you could pull the mike up closer and 
speak directly into it? There you are.
    Mr. Bartlett. I need to get longer arms. Thank you, Mr. 
Chairman and members of the Committee, for allowing me to speak 
about my industry. I joined my family's business 20 years ago. 
My father started this industry, in this industry, 52 years 
ago. It is the oldest family owned circuit board business in 
the United States and my father was a pioneer in that industry.
    Our industry is that of the printed circuit board. I have 
an example of a circuit board here. It is an industry, it is a 
high tech industry and also an example of what it takes to make 
up a circuit board. Although this is a simple example, there 
are ten layers of electronics in here. Our products are the 
mounting platforms for the electronic devices that run pretty 
much everything in the industry. It is the heart of the 
electronics industry, along with the semiconductor industry.
    Without our product, electronics is nothing more than a bag 
of components that have no function at all. The circuit board 
industry and the semiconductor industry basically are the 
blueprints. These are the blueprints of how every electronic 
device works. It gives us the key of what happens.
    We are a high tech industry. We are an important industry. 
We provide products for the military, aerospace, homeland 
security and we also provide the products that go basically 
into every industry. It supports the welfare of people in our 
country.
    I want to go through a couple of charts just to show you 
what has happened to our industry. This happens to be the 
revenues of Bartlett Manufacturing Company. It has dropped 
dramatically as you can see from near $20 million down to $9 
million. Employment levels have gone from 160 people down to 
here in 98. It is currently 87 and continues to deteriorate. If 
we take a look for high tech, let us take a look at California.
    In California there was a peak of $2.7 and $2.8 billion. 
Look at it now, $1.2 billion. This is not a depression, this is 
not a recession. It is a devastation of a critical injury.
    Next chart, please. If California were not enough, let us 
take a look nationwide. One more. Let us go to the volume. This 
shows ten billion. It was called 11 billion at the height of 
our industry. Now we are struggling at five billion of which we 
guess 10 to 15 percent is already just brought in from China 
and resold.
    So what has happened to our industry? We did not forget how 
to build circuit boards in 2000. Thanks, I will skip the last 
one for a minute. We did not forget how to build circuit 
boards. Low cost products have become available from China. 
They have acceptable quality and delivery and we have faced 
this foreign competition in the past. We faced it from Japan in 
the 80s and we faced it from Taiwan in the late 80s, but now we 
have comparable products at half the price.
    In this high tech industry, low labor alone cannot justify 
what is happening. These are not the results of free market 
forces. These are the direct and significant results of various 
government, Chinese Government subsidies, particularly currency 
manipulation and export subsidies. No amount of ingenuity or 
proximity in the market can offset these government practices.
    Rigid laminate, the raw material that we use to build our 
circuit boards, is rigid material. The supply is critical to 
our industry. Ten years ago, U.S. facilities dominated the U.S. 
market. There were over ten people, ten factories that supplied 
this to the United States. At the end of this year, there will 
be zero manufacturers in this country of this product. Zero. We 
got that information yesterday. The last factory will be shut 
down.
    Again, these market forces are in play and are driving up 
our prices. U.S. manufacturers will pay a 10 percent increase 
per month for the remainder of this year to get this product 
for this most critical industry. As if Chinese Government 
subsidies are not enough, we are in a squeeze play with our 
primary supply line. The implications are clear. China is using 
predatory trade practices to destroy our PCB market. And 
because of Washington's indifference and sometimes 
encouragement, China is succeeding.
    I would like to very rapidly talk about this product. It is 
a sonabouy board. My company makes this. It goes into sonabouys 
that are dropped in the ocean to track and detect foreign 
submarines. We have had this contract for ten years. We were 
notified that we are not competitive. The buyer gave us 
offshore pricing. My industry experience tells me this is 
Chinese pricing.
    Please show the next chart. If we take a look at--one 
more--if we take a look at what happens, the offshore pricing 
has been given, adjusted due to unfair currency and 
manipulation, adjusted due to rebates, and you will see that 
the outcome is that we are competitive. If you take away the 
subsidies, we can compete.
    It should be obvious to the members that it does not make 
sense to have the Chinese build products that go into the 
products for our national defense. I think the implication to 
our national security and homeland defense should be obvious.
    Very briefly, I was asked what U.S. trade laws in action 
have benefitted my industry? There are none to date that have 
benefitted my industry. I was asked what needs to be 
strengthened? To save our PCB industry, until our government 
gets serious about fighting unfair subsidies, enforce the Buy 
America provisions for printed circuit boards, to save our 
industry. Give us time. And to move from 50 percent to 80 
percent in two years and 90 percent in three. Spend times and 
funds to provide awareness of the trade options to small and 
mid-size business, but you must deal with the Chinese 
subsidies. We need a comprehensive approach that eliminates the 
Chinese subsidies quickly. Small businesses do not have the 
time or the money to ask for help under the current system. 
Your system, as it stands today, cannot work for me.
    My industry is divided into big companies and little 
companies. The big companies have packed up and gone to China. 
The little companies remain here and are waiting to see what 
our government is going to do to help provide security to our 
country and protect this most vital industry. Thank you, Mr. 
Chairman.
    Chairman Manzullo. When I visited you, there were two U.S. 
manufacturers of that fiber board, now there are none?
    Mr. Bartlett. Yes, sir.
    Chairman Manzullo. That was just about six weeks ago?
    Mr. Bartlett. We had a meeting late yesterday afternoon 
with the last major supplier who told us that he will shed his 
U.S. facility by the end of this year. And the one remaining 
facility in the United Kingdom, I would consider a close ally, 
will be shed by the end of 2005. That leaves all the 
facilities, major suppliers of this product, in the Asian based 
market. I see concern there.
    Chairman Manzullo. Thank you. Our next witness is Bill 
Klinefelter. Welcome back, Bill. Good to see you again.
    Mr. Klinefelter. Mr. Chairman.
    Chairman Manzullo. Legislative and Political Director of 
the United Steelworkers of America. And we look forward to your 
testimony.

 STATEMENT OF WILLIAM J. KLINEFELTER, UNITED STEEL WORKERS OF 
                            AMERICA

    Mr. Klinefelter. Mr. Chairman, I will be very brief, 
because you know the story better than I do. You hear it every 
single day. I will say this, since 1970, someone who has held 
this position with the United Steelworkers of America, has come 
before this Congress year after year after year after year and 
talked about the predatory practices of our trading partners on 
the American steel industry and the need to do something about 
it, the need to have strong trade laws, the need to have those 
trade laws enforced, the need for people to have access to 
those trade laws. We have done that since at least the 1970s.
    And there are several gentlemen at this table today who are 
now beginning to feel the consequences of the fact that we do 
not have strong trade laws in this country, we do not have 
responsive trade laws in this country. I must say, whether you 
are union or non-union, I welcome you to the fight. Because it 
is the fight for the future of America and whether we are going 
to have an industrial base in this country, it is as simple as 
that.
    I believe this Committee has got to make a strong statement 
to this administration about keeping the trade laws in place. I 
was at DOHA when Mr. Zelig put our trade laws on the table. 
Once they are on the table, they are open to negotiation. Once 
they are open to negotiation, there is only one place to go and 
that is to be weakened.
    We have to find ways so that people can afford to do these 
cases. The union knows this full well. We were involved in the 
201. We spent the legal costs on that 201 and as these 
gentlemen know--I think one gentleman said that they spent 
$76,000. I wish that was all we had to spend when we did the 
201, but I tell you that these cases are very, very expensive.
    And right now, the Commerce, Justice and State Department 
Appropriations Bill, we have asked the International Trade 
Commission begin tracking and reporting on inquiries from small 
and medium sized businesses for getting help with enforcement 
of anti dumping laws against imports, including those from 
China and India.
    Now, we build a records. Let us see what people need, let 
us see what we can do in order to fulfill the needs of these 
people. We need for the administration to stick with what it 
does. I have heard the gentleman talk about 201. Well, 201 is 
gone, that tune is an old tune, and the price of steel is at 
record highs. So somebody should turn their attention to what 
the culprit is. The culprit is China. China is the biggest 
importer of steel, the biggest producer of steel, the biggest 
importer of iron ore, the biggest importer of coke in the world 
and they continue to grow. They grew at the rate of 23 percent 
a year.
    And look, China is going to make steel. That is their 
future. That is what they are going to do and they are going to 
control the world market and the price of steel is going to go 
up. And one of the reasons the price of steel is going to go up 
is because there are only 90 million tons of capacity in the 
United States and in the last several years, we retired 17 to 
19 million tons of capacity.
    You know, we keep retiring capacity and other people keep 
adding it. If you want to talk about subsidies in terms of 
steel, let us talk about the subsidy negotiations at the OECD. 
We just went through two years of negotiations on subsidies on 
steel and not one of our trading partners was willing to move 
one inch on any of their subsidiaries.
    The Europeans want their environmental subsidies to meet 
their Kyoto round obligations and so do the Japanese. The 
Indians say that they need subsidies as a developing country. 
They need special subsidies to protect their steel industry. 
The Brazilians want banking subsidies so that they can invest 
in steel in the next four years in Brazil.
    No one went to the table and said, we want to give up our 
subsidies, which is what a negotiation for subsidy is all 
about, to give them up, not to cause exemptions for other 
countries that have subsidies.
    And who came to the table with no subsidies? The United 
States of America. But we left those negotiations, those 
negotiations are off now at least until after the election and 
all those subsidies are in place. All our trading partners keep 
those subsidies and life goes on.
    Finally, I guess I would say that there have been a number 
of cases that have involved China. And I think that a number of 
companies have gone to the administration and let me just say 
to three companies in particular. There was a pedestal actuator 
company in New Jersey who sought 421 relief against the 
Chinese. This was something that was specially negotiated with 
the Chinese to address surges of exports from China. The ITC 
found in favor of the pedestal company in New Jersey, found in 
favor of the wire garment hanger industry in Ohio, found in 
favor of the ductile iron fittings company, also in Ohio. All 
of these companies, the ITC found that there were surges of 
imports from China. But this remedy is in the hands of the 
president and the president alone and the administration 
refused to act.
    Someone has got to send a shell across the bow of our 
trading partners. I hold this document--this is gong to sound 
like the 1950s. The National Trade Estimate Report on Foreign 
Trade Barriers. Fifty-six countries are reported on in this 
report, from big countries to little countries. But this is not 
the full report. I did not bring the full report. I did not 
want to make my assistant carry it.
    This report tells you the barriers that are there and page 
after page, it says the United States will continue to 
negotiate to try to lessen these barriers. We are going to 
negotiate to lessen the subsidies for Aerobus? These European 
countries and that company is not a new company. They need no 
subsidies--okay, I am sorry, Mr. Chairman, I will close. But 
the fact of the matter is, year after year, these things are on 
the record. We do not take anybody to the WTO. They take us at 
the drop of a hat.
    [Mr. Klinefelter's statement may be found in the appendix.]
    Chairman Manzullo. Thank you for your unimpassioned 
testimony.
    Mr. Klinefelter. These guys got me going, you know.
    Chairman Manzullo. We like to bring in the animated 
witnesses here who have got a real story to tell.
    I would like to ask one question to John Bassett and Tom 
Hopson. You two guys got involved and hired lawyers. Tell us 
about that, tell us about the cost? Mr. Bassett, you paid 
another price in terms of what has happened in the industry. 
Tom, want to go first?
    Mr. Hopson. Well, the cost of filing this action exceeded 
$1 million and now, with an ITC vote of 5 to 0, which one of 
the members recused herself, with a 5 to 0 slam dunk, now we 
face the Chinese appealing. So we are still forced to spend 
more and more money to get what, you know, the Commerce 
Department and ITC found very evidently that there was nothing.
    So in order to keep defending--I feel like I am fighting 
the Chinese Government, along with the U.S. Government to some 
degree, but exactly the Chinese Government. Not Chinese 
companies, it is the Chinese Government. But it is either that 
or fold up and we send all our people home.
    Chairman Manzullo. Your company is the only one involved in 
this group, is that correct?
    Mr. Hopson. Well, we have two labor unions that are 
involved.
    Chairman Manzullo. That is still a lot of money for a small 
amount of people.
    Mr. Hopson. We had some creative solicitation for funding.
    Chairman Manzullo. Bake sales?
    Mr. Hopson. It was difficult, let us put it that way.
    Chairman Manzullo. Mr. Bassett, tell us your experience?
    Mr. Bassett. Well, Mr. Chairman, our association did not 
know about the trade laws in this country, that is what I was 
referring to. And we spent $75,000 just to find out what the 
law said. This is not what we spent on fighting the petition. 
We spent $75,000 to find out what the law said in this country.
    Our budget, we have hired King & Spalding, which we 
consider the finest law firm to defend us and file the 
petition. That budget was $1.5 million and we are far, far, far 
beyond budget. We are opposed by 21 different law firms on the 
other side. There is one on our side, there are 21 on their 
side.
    Let me tell you how we feel and all of our companies feel 
in the furniture industry. First, we know that we have a 
fiduciary responsibility to our stockholders. Secondly, we know 
we have a legal responsibility to our country. WE do not intend 
to be an Enron or World Com, Mr. Chairman. WE are going to be 
responsible corporate citizens, but we also have a moral 
responsibility to our employees. Why should our employees lose 
their job through illegal trade? That is why we are filing this 
petition and we are doing it on behalf of the people who work 
in our companies and it is expensive.
    Chairman Manzullo. Now, the part of the remedy that you are 
seeking is somehow that the government itself would provide and 
I do not want to use the word law firm, but at least some 
minimal assistance for research, etc., so at least you know you 
have a case before you engage a law firm.
    You have how many companies with you, John?
    Mr. Bassett. We have 31 companies in our petition.
    Chairman Manzullo. Okay, and Tom, you just have you and 
your two labor unions?
    Mr. Hopson. Well, we actually started out with a large 
group, not only television companies, but our first meetings, 
we had a large group of people. Some television companies and 
supply companies. And very quickly, they started falling out 
because in our industry, most everyone is owned by 
multinational companies. All the other companies had factories 
in China and they fell out one by one. Then the final one just 
came and said, we cannot afford to stay in this or we could 
suffer for business in China. So it is too huge a market to 
take a chance.
    Chairman Manzullo. Then my next question is, with Wes Smith 
and Bill Klinefelter. You are on different sides of this steel 
tariff issue. You both had very compelling testimonies. Both 
extremely factual. One in favor of the tariffs, one opposed to 
the tariffs. Wes and Bill, how do you resolve that difference? 
Is there anyway in between on this?
    Mr. Smith. Well, from my standpoint--
    Chairman Manzullo. Do you want to pull the mike closer to 
you?
    Mr. Smith. Well, from my standpoint it is either that we do 
need to find a way to resolve this issue or else they better be 
nice to China, because that is going to be the only place they 
are going to be able to sell steel to. The steel consumers will 
be out of business.
    We have no pricing power, no ability to push these costs 
upward. If you are talking of steel right now, at the end of 
the 201, we were paying roughly 21 cents for just vanilla hot 
rolled material. We just last month paid 38 cents. We cannot 
absorb that.
    Chairman Manzullo. So it is yet to peak?
    Mr. Smith. Exactly. We cannot absorb that, we cannot pass 
that on, because our customers have choices and those choices 
are to invest in low cost countries, such as China, who 
manipulate and subsidize their industry. It is really a fire 
sale for these fellows right now. All the foreign direct 
investment is coming from large multinationals and we need to 
have those folks here, healthy. I am not concerned about metal 
stampings coming in from China. My major concern is having 
large components in modules that were once made in the United 
States no longer being made, being made offshore and I will not 
find out until it is time for me to requote a replacement 
business. And I will not even have that opportunity, that work 
will have simply disappeared.
    Chairman Manzullo. China is building 19 fully integrated 
mills as we sit here now. Bill, do you have a response?
    Mr. Klinefelter. Yes, I think the 201, as rightly 
implemented by the President of the United States, is a tool to 
save an industry that is under attack by its foreign 
competitors and the 201 covers all steel mill products from all 
countries and it does it in a comprehensive manner for a period 
of time.
    Initially, the administration put the 201 in for a three 
year period, gradually reducing tariffs over that period. But 
then when they examined it in the mid-term review, they looked 
at the state of the industry. We did not think they rightly 
looked at the state of the industry. They looked at the state 
of the industry and they made a decision to pull the 201 and it 
is gone.
    So, the problem with the price of steel is not the 201 
anymore. The problems with the price of steel is a demand of 
steel in the rest of the world. And part of the overall 
solution to this is to have some stability in the world steel 
market. And the only way you are going to get that is if you 
have a subsidy regime for the entire steel industry in 5sssthe 
world and you have serious capacity talks about capacity not 
inside the United States, but in other places, the former 
Soviet Union and places like that, which is unproductive and 
unenvironment and really should be shut down.
    Steel is a global problem. Right now, it only is going to 
take a solution to stabilize the basic steel industry and the 
price of steel here in the United States and the rest of the 
world.
    Chairman Manzullo. Doug, the fiber board, what is the 
technical name for it again?
    Mr. Bartlett. Laminate.
    Chairman Manzullo. Laminate? That is a composite with 
copper on both sides?
    Mr. Bartlett. It is a woven cloth that is dipped in resin 
and then pressed with copper on both sides.
    Chairman Manzullo. So what you are saying is that there 
would no longer be a U.S. manufacturer of this product, is that 
correct?
    Mr. Bartlett. More precisely, there will not be a major 
supply facility. There are many manufacturers who are small, 
creating specialty products in the United States. But there 
will not be any significant facility left in the United States 
that can provide for capacity and volume production.
    Chairman Manzullo. Well, here comes a dumb question. What 
happens if you cannot get this? What happens if the overseas 
companies just choke the market and nobody in the United States 
can buy this material?
    Mr. Bartlett. That is already happening. Du Pont has told 
the U.S. market that they will not accept anymore material for 
flex products--it is a specialty product in the United States--
for the balance of 2004. We ceased to build flex products and 
the product has to be imported from other countries.
    Chairman Manzullo. What is flex product?
    Mr. Bartlett. Flex is a board. This is a rigid board. A 
flexible board is one that can be bent, such as ribbons on a 
printer. The flip phones, there is a connector there that is a 
flexible board.
    We leave ourselves at the mercy of our allies as some 
people defined them today to provide us that product. It will 
be the end of the electronics industry as you know it today, as 
far as our ability to rely on our own supply lines. It is a bad 
situation for military and homeland security.
    Chairman Manzullo. Frank, I have a final question. There 
was a decision on a dumping action on windshields made in 
China, the article that appeared in the China Daily News, 
whatever it is, about six weeks ago. And the ITC had ruled in 
favor of imposing what was a modest tariff. Then, obviously, 
for finding injury, then the Court of New--Court of 
International Trade, which is a District Court, ruled that the 
ITC had made an incorrect decision, lowered the tariffs to less 
than one half of one percent, therefore the companies did not 
have to put up a bond on it.
    But in the article, it was quoting the Chinese as saying 
that at present, in the automotive industry, they are making 
for U.S. manufacturers $10 to $20 billion worth of automotive 
parts, but that their goal, by 2010, was to ship to the United 
States between $70 and $100 billion worth of U.S. automotive 
parts to be incorporated into our cars.
    That, along with we are seeing the direct orders coming out 
of some of the big three, forcing the original equipment 
manufacturers to go to China as part of their business plan. 
Where is this going to stop? I mean, how long before guys like 
Doug and Wes, who make automotive parts--is there any relief? 
You have been around this for a long time.
    Mr. Vargo. I have, Mr. Chairman.
    Chairman Manzullo. Impart your wisdom to us on what trends 
you see and what remedies, if any, are available?
    Mr. Vargo. Well, I have not seen those numbers. I have seen 
the imports of auto parts from China now are about $2 billion 
and that is rising rapidly. But that is still about one percent 
of the market. Not that that is not a reason for concern, 
because they are growing rapidly.
    As we look at our trade position, one of the key things 
that is important here is to see that we are able to compete. 
You know, I hear company after company that is a member of the 
NAM and I have heard it repeatedly at this table saying if the 
playing field is level, we can compete. The first thing we have 
to do is to see that the field is level. And we hear a lot of 
stories about subsidies coming out of China. I do not know if 
they are true, Mr. Chairman, but they need to be investigated. 
And if there are subsidies, they need to be offset. That is the 
importance of the legislation we have been discussing today. 
And maybe there is a misunderstanding and they are not 
subsidizing. I do not know.
    The currency, the currency we can see from the fact that 
China needs to buy about $10 billion, $12 billion a month of 
American dollars to keep their currency from appreciating, that 
the currency is very undervalued and controlled, and that is 
not right. There are other aspects as well, so we need to put a 
focus on this.
    Now I think that we have seen in recent months, I mentioned 
already, the discriminatory 14 percent tax on American 
semiconductors that has been taken care of. We are seeing more 
initiative out of USDR and Commerce. In part, this reflects the 
funding that they received.
    You have been a part of that. Chairman Wolfe for the 
Appropriations Committee has been an important part of that and 
we need to keep pressing in that direction.
    Chairman Manzullo. Appreciate that. Mrs. Velazquez?
    Mrs. Velazquez. Thank you, Mr. Chairman and thank you all 
for being here today. This has been quite an important hearing.
    Mr. Klinefelter, I just would like for you to help me 
understand why is it that if we have our trade laws, we cannot 
get this administration to enforce some of those trade laws? 
What would you say to this administration to encourage it to 
fight and to step up to the plate and fight for the U.S. 
industries?
    Mr. Klinefelter. Well, Congresswoman, I believe we have to 
ask the administration. I mean, on the 421 cases that I 
discussed, I mean, these companies went through the process 
that was established when China agreed getting into the WTO. 
They went to the ITC. The ITC ruled in their favor, but the 
administration just would not rule in their favor.
    You know, recently the AFL-CIO, you know, lodged a 
complaint in regards to human and worker rights in China and 
the administration just refused to play. You know, this idea 
that we have to keep these foreign policy relationships pure 
and simple with the Chinese. But, on the other hand, if there 
is no industry left here in the United States, what are we 
going to do?
    Mrs. Velazquez. Mr. Vargo? The U.S. China Economic and 
Security Review Commission criticized this administration for 
failing to pressure China on a number of issues, including the 
subsidies and tax incentives that benefit Chinese companies at 
the expense of U.S. borders. The Commission has gone as far as 
to ask Congress to approve legislation that will force the 
administration to take some action.
    Why do you believe that the administration is reluctant to 
take action against China?
    Mr. Vargo. Well, candidly, I have a different view. I do 
not see a foreign policy reluctance to take action on China. 
And at the NAM, we pressed very hard on a number of goals that 
we want to achieve. One of them was to stop China from 
implementing this wireless network standard that would have 
required American companies to partner with Chinese companies 
and transfer their technology to China. Now that is patently 
absurd and the administration worked hard on it and they got it 
stopped.
    Another one of our key priorities was this discriminatory 
value added tax where the Chinese charged a 17 percent tax on 
imported semiconductors but they give you a 14 percent rebate 
if you move your factory to China. Again, patently absurd under 
the WTO rules. And we pressed the administration and they began 
a WTO case and worked with the Chinese and we do not even have 
to go to the WTO, they rolled it back. So, where they are 
focusing, I think they are doing the job.
    Now one thing, and it came out as I was preparing my 
testimony and talking to some companies and I have heard it at 
this table, as well. Not enough companies know of the existence 
of the WTO legal trade remedies that we have. Mr. Bassett said 
it cost him $75,000 to find out that there was such a thing as 
dumping laws.
    Well, that is not ridiculous at all. There is no reason he 
should be genetically imprinted knowing that we have dumping 
laws. I think we get too carried away inside the Beltway 
thinking, oh, everybody in the United States knows all about 
this.
    One further point along these lines. We had a meeting of 
the NAM's China working group a couple weeks ago and a 
gentleman who is very concerned about trade came to Washington 
for that meeting. As we were talking, he said, you know, what 
the government needs to do is set up a trade complaint hotline, 
where small companies can take their trade complaints. Great 
idea. Trouble is, it was done six, seven years ago, when I was 
at the Commerce Department. I started it. Nobody knows about 
it.
    The point was made that $20 million or so was spent 
promoting the new $20 bill. The Commerce Department, as I 
recall, is not allowed to go out and advertise what it has. 
Now, maybe that is something that Congress ought to look at.
    Now, one outcome of this hearing that I hope you will 
consider significant, is that I have decided that the NAM is 
going to link onto all these hotlines and websites and we are 
going to go out to our 14,000 members and we really are going 
to promote the existence of these and see if we can generate 
some more business for these. It is not going to solve the 
problem, but it will help.
    Mrs. Velazquez. Mr. Vargo, earlier this year, during a 
Senate Finance Committee hearing, our U.S. Trade 
representative, Zelig, stated that he did not support pursuing 
a World Trade Organization dispute settlement case against 
China over the country's currency practices, in part because it 
could be difficult to prove that China is in violation of WTO 
laws. Do you agree with that assessment?
    Mr. Vargo. I was part of the fair currency alliance that 
prepared that case and I would rather not discuss a view as to 
whether we think this would be difficult to prove or not. In 
our view, it is a violation--
    Mrs. Velazquez. But you just said before that you do agree 
that there is a manipulation of the currency by China?
    Mr. Vargo. Oh, yes, and the WTO says, you know, you should 
not manipulate your currency. But the point we got from the 
administration on that case, or at least from the Treasury 
Department, was that they, as a result of that, the visibility 
that we have given to the Chinese currency, they have begun 
working with the Chinese. They said that they believe they are 
making progress and the filing of this case at that time would 
move things back.
    So we agreed to work with them and we have been doing that. 
Our goal is still to get that currency revalued significantly 
just as quickly as possible.
    Mrs. Velazquez. Congressman English's bill would allow CDV 
cases against non-market economies like China, we agree on 
that, right? And this legislation follows efforts made last 
year by various groups. The last Senator--from Ohio?
    Chairman Manzullo. Voinovich.
    Mrs. Velazquez. Thank you, to introduce a resolution saying 
that Congress supports the use of CDV cases against non-market 
economies. How would you respond to the Department of 
Commerce's arguments that CDV subsidies cannot, in a conceptual 
manner, be identified in a non-market economy?
    Mr. Vargo. Well, I am not a trade lawyer, but from what I 
have seen, I disagree with that view and I think that since the 
subsidies and countervailing measures agreement was modified in 
1994, Commerce's old reasoning from 1984 does not hold anymore.
    But in any event, it seems to me that if there are 
subsidies, that they should be countervailable, whether they 
are in a non-market economy or not. I do not dispute they might 
be more difficult to prove, I do not know. But I do know that 
our members should have the right to seek to have those 
subsidies offset.
    Mrs. Velazquez. Bill, would you like to comment?
    Mr. Klinefelter. I agree with the gentleman from NAM. I 
think he can identify those subsidies and I think those 
subsidies are prevalent and they exist all through the Chinese 
economy.
    Mrs. Velazquez. Why do you think that Department of 
Commerce is taking that position?
    Mr. Klinefelter. Because we have a gigantic trade deficit 
with China. China is now a gigantic trading partner. I beg the 
gentleman's pardon, but foreign policy is riddled through this. 
I mean, Condoleezza Rice just got her hat handed to her in 
China for the administration's alleged policy on Taiwan. We are 
going to walk softly with the Chinese over foreign policy 
issues, because of the Taiwan issue and because we want them to 
intervene in North Korea.
    So it is not always about trade. Sometimes the foreign 
policy issues intervene big time.
    Mrs. Velazquez. Thank you. Thank you, Mr. Chairman.
    Chairman Manzullo. Just a couple of things. In the reports 
that I have been given by the Department of Commerce, they have 
taken on over 680 market access and compliance cases. Over a 
comparable period, the previous administration conducted about 
half as many cases. In fact, I was with Don Evans just about 
two hours ago and the Department of Commerce is very sensitive 
to what this Committee has been doing. This is our 64th hearing 
on manufacturing. Sixty-four hearings in three years and I am 
going to be on Lou Dobbs tonight. And I said, you know, there 
is some good stuff coming out of Department of Commerce. We are 
still very much concerned, however, that Phil English's bill 
needs to get out front so we can whack China, to treat them in 
a fair manner.
    But in terms of the sound dollar coalition, the people that 
are very much interested in the RMB floating to the U.S. 
dollar, I received a call about two weeks ago from John Snow, 
the Treasury Secretary who was all excited. The word never got 
out that there is an agreement with China in the Chicago 
Mercantile Exchange to exchange derivatives, to trade 
derivatives. That is the first step as far as I can see, and 
Mrs. Velazquez and I both sit on the Banking Committee, so we 
have an opportunity to try to pick up a little bit more of our 
knowledge in that area. That is the first attempt that I see 
towards getting the RMB afloat.
    The big problem that I see is in terms of how long can the 
companies last? I am just, Doug, I just want to tell you, when 
I was with you, what, about a month ago? And you said that only 
20 percent of the U.S. consumption of this board is 
manufactured in the United States, I thought that was shocking. 
Now you are telling me and, of course, we believe you 100 
percent because you know this better than we do, that none of 
this is going to be manufactured in the United States.
    There are remedies whereby the Department of Defense can 
get involved to say that this item is absolutely necessary for 
defense. And Doug, if you could write me a letter explaining 
really in your testimony, or does it occur in the addendum to 
your testimony, about when you talk about this going down to 
zero manufacturers?
    Mr. Bartlett. Yes, briefly it does.
    Chairman Manzullo. We will send that over to the Department 
of Defense to say, you know, there is a remedy out there 
possibly under, I think it is Section 7C of the Export 
Administration Act which talks about--of course, that talks 
about imports coming in. When you have no manufacturer left--I 
am sorry, the Defense Production Act. Whether or not there is a 
remedy available there. Bill?
    Mr. Klinefelter. Mr. Chairman, there is also a methodology 
in the Commerce Department under the Trade Act, where they can 
conduct an investigation on whether a product is critical to 
the national security--
    Chairman Manzullo. That is correct.
    Mr. Klinefelter. --and then impose a remedy and I am 
drawing a blank on it.
    Chairman Manzullo. Well, the Defense Production Act, as 
opposed to the Export Administration Act, where somebody files 
a petition with the Ways and Means Committee?
    Mr. Klinefelter. Yes, exactly. We took that route in 
steel--
    Chairman Manzullo. That is a 331. All right, it is like 
bingo with all these numbers.
    Mr. Klinefelter. But that is a route you can take if there 
is something that is critical.
    Chairman Manzullo. We are definitely going to do that, 
Doug, based on your testimony. Phil, if you could follow up. 
Talk about copper. We had the opportunity to meet with the 
copper people. In fact, we held two hearings on steel and the 
second hearing on steel talked about the shortage of copper and 
nickel, which are obviously both used to make brass and also 
for this application here.
    On the short supply petition, amazing, amazing, amazing is 
that the day the petition was filed, the Chinese backed off and 
stopped buying copper scrap on the open market, which greatly 
reduced the price of copper, what, Dana, 30 percent? Twenty 
percent? Twenty to 30 percent and so when these remedies are 
used, what I would suggest, Doug, in your profession with the 
folks that you have left is that you ponder the efficacy of 
getting a top notch law firm. It is going to cost a tremendous 
amount of money. We will be glad to work with you on it, on the 
petitions that are necessary. We will forward our concerns 
immediately to the Department of Defense to try to get some 
type of acknowledgement that this particular item is no longer 
being made in the United States. Go ahead.
    Mr. Bartlett. Mr. Congressman, as you know, we have an 
industry association that has large manufacturers and small 
manufacturers and the small manufacturers have broken away to 
an independent organization because the large manufacturers 
obviously moved their factory to low cost producing areas where 
they can sell, they can build low and sell high, without the 
interest of American society or American workers.
    Not all large corporations but certainly in our industry, 
that has happened. We have been very active trying to get this 
study done. We have not been embraced yet by the members of 
Congress who control that, although we are knocking on their 
doors actively and we will continue to do so. I think that is 
very important.
    You would think the Department of Defense would be very 
much on our side. There are already provisions to buy American. 
And I am amazed that when it comes down to price concerns, the 
Defense Department, like many companies, will prefer to buy 
offshore than to think through the whole process. I am amazed 
that we do not get more support from the Defense Department. 
And actually, I am not so sure that they are our allies in this 
effort. But we will pursue that.
    Chairman Manzullo. Well, we will work with you on that. I 
think the first hearing that we had, the very first hearing of 
which I was chairman lasted four and a half hours, when we 
found out that the Army was buying the black berets from the 
Chinese. And I have one of those black berets in my briefcase. 
In fact, I think I showed it to you, Doug, when I was out 
there. Everybody has seen that. I mean, it is worn thin now, 
because it is Exhibit A. There are 614,999 of the Chinese made 
American berets that are sitting in a warehouse in 
Mechanicsburg, Pennsylvania because Mrs. Velazquez and I got 
very animated that our men and women in uniform simply were not 
going to be wearing those berets.
    Your testimony from all of you has been extremely 
compelling. I do have one question. Tom, I was not even aware 
that TVs were made in America. Tell us about your company and 
why we do not know more about that? What type of TVs do you 
make?
    Mr. Hopson. Well, currently we make TVs for companies like 
Samsung, Akai, Philips, Magnavox. We build, over the years, we 
built a lot of different brands. There are actually five, six 
television factories in the United States.
    Chairman Manzullo. Is this assembly, are you more assembly 
with foreign parts?
    Mr. Hopson. Some of both. There is some assembly. I used to 
run a plant that also had a PC board plant. We used to make 
boards. We could buy material, our company could buy material 
cheaper, you know, overseas than we could buy the raw material 
in the United States. And that is not just material, finished 
boards were coming out of, I think, Singapore back then. A 
different type of material, but at that time, I worked for 
Philips and the decision was, hey, we can buy the finished 
printed circuit board cheaper than we can buy the raw material 
in the United States.
    Chairman Manzullo. You did not have much choice?
    Mr. Hopson. Yes. But Sony has a huge plant outside of 
Pittsburgh. There are two plants in Tennessee, actually, ours 
and Toshiba has a plant.
    Chairman Manzullo. These are conventional home TVs?
    Mr. Hopson. Yes, a lot of projection TVs, you know, the 
higher tech TVs now. You know, in the 80s, we went through 
NAFTA. I don't know if you know, but everybody in the world has 
factories in Macillas and they all went to the border zones. 
And we competed with those people back in the 80s. You can go 
today and most--our dumping case was on 21 inch and above, but 
you could go today and you cannot find a 13 inch or a 19 inch 
TV that is built in the United States, because the tube supply 
is gone. And that is what is happening to the whole industry 
now.
    Corning shut down glass plants. Those people are losing 
their jobs. Philips is shutting down plants and moving them. 
You know, everyone that had picture tube plants, so you lose 
that. That is a major cost of your set, major cost of 
transportation.
    But competition, that is not the problem. It is the unfair 
competition. We competed with Mexico, like I said, and that was 
not a problem. We found our niche. We knew we could not build 
13s and 19s as cheap as you could in Mexico with labor costs as 
low as they were. But we knew the transportation costs for the 
25 inch and above offset the labor costs. So if we kept working 
on our efficiency and doing the right things, we would not 
worry about the 13s and 19s.
    But, you know, from China what we saw is projection TVs 
that were selling at major retailers for less than our material 
costs. And we knew they had to ship it, you know. We know what 
a container costs to ship across the sea, lead times and 
everything else. A lot of people believe it is labor, but it is 
not. It is not all labor.
    But, yes, I think the television industry, to your first 
question, a lot of people think televisions are made in Japan. 
You know, Japanese have not made televisions forever. It has 
been a long time since they have. But most of the TVs in the 
United States either were, until the last few years, either 
made in the Mexican border region or the U.S. Then, of course, 
the surge of imports started coming in 2001.
    Chairman Manzullo. Then I have one last question. The 
hearing has gone longer than I anticipated. Mr. Bassett, I have 
been reading a lot about you and we have been working a long 
time to make sure that everybody here was free to come on this 
day. You are doing something in your business in terms of 
extraordinary efficiency that you are bragging about and 
rightly so, in terms of going head to head with the Chinese. 
Would you share that with us?
    Mr. Bassett. Well, the first thing we do is we invest very 
heavily in our plants. We are not asking for a bail out and we 
are not asking for a hand out. If we cannot compete fairly, we 
do not deserve to be here. We have to do our part.
    And so first, we invest twice, sometimes three times what 
all our competitors invest, to make sure that we stay 
efficient.
    Chairman Manzullo. You invest in new machinery, etc.?
    Mr. Bassett. All new machinery. We go around the world, 
looking--we tell our people, we are going to put the finest 
tools in their hands that we can find.
    But my personal opinion, Mr. Chairman, I think the most 
underused asset in America today is people. We communicate with 
our people. We take our products, we take the Chinese products, 
we put them out in front of our people, we explain to them 
exactly what we have to compete with. We then design products 
that will compete with the Chinese and we ask our people, do 
you want to join us as partners to compete in this market? And 
overwhelmingly, our people on their own volition, have become 
more efficient.
    They want to compete. What they are looking for, in my 
opinion, is leadership and management that is willing to 
compete. My personal opinion, we, in many ways, have a void of 
leadership. W$e have to get out in front of our people and set 
the example. Now once you tell them that and you set the 
example, it is amazing what American workers can do. It is 
amazing.
    But now, we cannot overcome an unfair playing field. So 
everybody in my organization knows I am up here today. They 
want to know, what are you going to say? And another question 
they asked me is, are they going to listen? We are willing to 
do our part, I will promise you that. Just give us a field that 
we can play on.
    Mr. Vargo. Mr. Chairman?
    Chairman Manzullo. Yes, Frank?
    Mr. Vargo. If I could build on that for one second, because 
it is a very important point. And Mr. Bassett is to be 
commended for his management, his initiatives. A lot of other 
companies are doing the same thing.
    What I really see coming out of this hearing is nobody here 
is saying protect us. We are saying we need a level playing 
field and we can compete. But they are also saying, to compete, 
we compete on our cleverness, we compete on the skill of our 
workers, we compete on the basis of our productivity and 
innovation.
    And Mr. Chairman, one thing we have to do in looking to our 
future is to protect and promote more rapid growth of 
innovation. To take the best practices that firms have and 
spread them to more, like through innovations such as the MEP 
program. We need to have the R&D tax credit. We need to realize 
that our future depends on developing more intellectual 
property, protecting it and putting it to use. Mr. Chairman, I 
hope that you and Congresswoman Velazquez will have some 
hearings on it.
    Chairman Manzullo. Well, we have MEP up from 31 to 109?
    Mr. Vargo. 109.
    Chairman Manzullo. Mrs. Velazquez, did you have--
    Mrs. Velazquez. I just wanted to share with you, I agree 
with you, we need to level the playing field. There is a void 
in terms of leadership and we need to have leaders who will go 
there and fight to protect our U.S. industry. The books and the 
laws are there. We need to enforce it. And MEP, well, we need 
to send an important message to the administration, that it is 
not enough to say that we support small and medium sized firms. 
We have to provide some assistance, technical assistance and 
resources, money. And they cut, in this budget, they cut that 
money from MEP. They cut the money for access to capital for 
the 7A loan program that we were on the floor just fighting--
    Chairman Manzullo. We screamed enough and both got 
restored. Again, thank you very much. This hearing is 
adjourned.
    [Whereupon, at 4:17 p.m., the Committee was adjourned.]

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