[Senate Hearing 108-]
[From the U.S. Government Publishing Office]



 
DEPARTMENTS OF COMMERCE, JUSTICE, AND STATE, THE JUDICIARY, AND RELATED 
              AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2005

                              ----------                              


                         TUESDAY, MARCH 2, 2004

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 10:03 a.m., in room SD-192, Dirksen 
Senate Office Building, Hon. Judd Gregg (chairman) presiding.
    Present: Senators Gregg, Stevens, Hollings, Inouye, Leahy, 
and Kohl.

                         DEPARTMENT OF COMMERCE

                        Office of the Secretary

STATEMENT OF HON. DONALD L. EVANS, SECRETARY


                            opening remarks


    Senator Gregg. We will begin the hearing of the Commerce, 
Justice and State Subcommittee of the Appropriations Committee. 
We are honored today to have with us the Secretary of Commerce, 
Secretary Don Evans. I don't have an opening statement. Do you 
have an opening statement?
    Senator Hollings. No, Mr. Chairman.
    Senator Gregg. We will proceed right to Secretary Evans. 
Make whatever statement you wish, Mr. Secretary, and we will 
proceed to questions.
    Senator Leahy. Are there going to be no statements?
    Senator Gregg. I would rather get to the testimony, if you 
don't mind.
    Senator Leahy. I appreciate that. I would ask consent to 
put a statement in the record and I will use some of it in my 
questions.
    Senator Gregg. Absolutely. We will have plenty of time for 
questions and you can work it in there.
    Senator Leahy. Thank you.
    [The statement follows:]
             Prepared Statement of Senator Patrick J. Leahy
    Mr. Secretary, we thank you for coming to testify before this 
subcommittee today. It is good to see you again. You have an especially 
difficult job at the moment, and none of us envy you for it.
    Whether they have lost their jobs, or worry about losing their 
jobs, or feel frozen in place, so many American workers and their 
families have been hurting for the last three years, and they are still 
hurting in what has been called this ``jobless recovery.'' Job cuts 
have disrupted millions of households, and the effects have rippled 
through our entire economy.
    We have lost nearly three million manufacturing jobs in the past 
three years, and the economic outlook is less than encouraging. In 
fact, more than 2,400 employers reported laying off 50 or more workers 
in January, the third highest number of so-called mass layoffs since 
the government began tracking them a decade ago. Overall, the number of 
manufacturing jobs in the United States is now at its lowest level 
since 1950.
    At the same time our manufacturing numbers are tumbling, our trade 
deficit is spiraling. The Department recently announced that the U.S. 
trade deficit reached a record $489 billion in 2003. While the trade 
report shows strong domestic consumption, it also highlights serious 
problems with our economy's productivity--particularly our lack of 
employment growth.
    Back in September, the Commerce Department announced a broad 
proposal to help the nation's ailing manufacturers. Among other 
elements of that plan, the department proposed creating a new assistant 
secretary of commerce for manufacturing, forming an unfair-trade-
practices team to track and confront unfair foreign competition, and 
supporting the Manufacturing Extension Partnership (MEP) program.
    I join many manufacturing and trade experts in being puzzled by 
that announcement. The Commerce Department already has hundreds of 
employees tasked with tracking unfair labor practices. And it seems 
that the creation of a new assistant secretary for manufacturing really 
may just be boiling down to changing the name and expanding the reach 
of the existing assistant secretary for trade development. On top of 
that, no one has yet been named to fill this new position.
    And then there's the matter of the Manufacturing Extension 
Partnership Program, which offers technical assistance to manufacturing 
firms to improve their performance in production techniques, marketing 
and exports. It does not help the Administration's credibility to cite 
the value of this program and to pledge resources for it, but then to 
repeatedly fail to actually support the MEP program--both in the 
President's budget requests and in the White House's final negotiations 
on this year's appropriations bill.
    You have repeatedly asked that MEP receive around $13 million each 
year, but Congress has deemed it important enough to provide more than 
$106 million. It is disingenuous now for the Administration to say you 
support the MEP program by requesting a mere $39 million this year. And 
while I appreciate your announcement that MEP would be eligible to 
compete for up to $45.4 million in fiscal year 2005 economic adjustment 
assistance, this effort will not provide the funds our MEP centers need 
to continue operations and services to small manufacturers, especially 
after July 1, when the majority of centers face contract renewal under 
the drastically reduced fiscal year 2004 funding.
    I am also concerned about a plan to identify federal rules that 
they believe impede competitiveness in the domestic manufacturing 
sector. Given the Administration's record to date, it is no wonder that 
so many workers are concerned that this is just another Administration 
attempt to roll back health and safety standards that are designed to 
keep American workers safe. Many see this as a backhanded and backdoor 
attack on hardworking, dedicated workers. And I see their point.
    The Administration's lack of follow-through and attention to the 
hemorrhaging of manufacturing jobs amounts to what could charitably be 
called a disconnect between rhetoric and reality. And after so much of 
this, the Administration's credibility becomes a real problem and a 
real issue with the Congress and with the American people.
    Mr. Secretary, that brings us to the Trifecta of controversial 
sections of President Bush's recently released annual ``Economic Report 
of the President.''
    First, it suggested that the movement of U.S. jobs overseas--
commonly referred to as offshoring--is beneficial to consumers. The 
President asserts that American customers will benefits from lower 
costs of the products and services they buy because of cheaper labor 
costs overseas. And the President's top economist said that the 
migration of service jobs overseas ``is just a new way of doing 
international trade.''
    That comment was tossed off with a flippancy that seems to take no 
account of the real pain American families are suffering as more and 
more companies close their U.S. facilities and send their work 
overseas, throwing hardworking Americans onto the unemployment lines.
    Second, the Report predicts that non-farm payroll employment will 
average 132.7 million in 2004, reflecting a 2.6 million increase in 
jobs over its estimated average of 130.1 million in 2003. A joint 
analysis released by the Economic Policy Institute and the Center on 
Budget and Policy Priorities shows that to achieve the 2004 estimate, 
an average of 460,000 jobs a month would need to be created from 
February through December of 2004. In other words, about five million 
jobs will need to be created between now and the end of the year to hit 
that projection.
    Finally, and perhaps most unbelievably, the Report questions 
whether fast-food restaurants should continue to be counted as part of 
the service sector or should be reclassified as manufacturers. 
Specifically, the report asks: ``When a fast-food restaurant sells a 
hamburger, for example, is it providing a `service' or is it combining 
inputs to `manufacture' a product?''
    Two decades ago, another administration wanted to start calling 
ketchup a vegetable for the purposes of the school lunch program. 
Redefining ketchup as a vegetable did nothing for the nutrition of our 
kids, and redefining every Taco Bell as a manufacturing factory would 
do nothing for American workers and real American manufacturers. If 
that is this Administration's idea of thinking outside the bun, then 
this Administration has a lot more thinking to do.
    Mr. Secretary, for the past three years we have heard many 
predictions and forecasts from the Administration that have not been 
anywhere close to reality. We were told that the President's tax cuts 
would stimulate the economy--and instead the economy has weakened and 
tax receipts are at some of their lowest levels ever. We were told that 
there would be 3.4 million more jobs in 2003 than there were in 2000--
and instead the economy ended up losing 1.7 million jobs over that 
period. We were told that budget surpluses would continue on for as far 
as the eye could see--and instead we have gone from a record $239 
billion surplus under President Clinton to a record $521 billion 
deficit under President Bush, and if the President's budget were 
actually enacted, it's those deficits that would proliferate as far as 
the eye can see. And we were told that the Iraq mission would be swift 
and easy--and instead it has dragged on with no end in sight and with 
costs that are so astronomical that the President did not even dare put 
the numbers in his budget.
    These are difficult times for American manufacturers and American 
workers, and the job of answering to them for this Administration's 
policies is a tough one. I hope you take a serious look at the 
questions we pose because there are millions of American workers out 
there counting on you.
    Thank you very much, Mr. Chairman. I ask consent that my full 
statement and written questions be submitted for the record.

    Secretary Evans. Thank you, Mr. Chairman. I have a brief 
opening statement and I will ask for my written remarks to be 
submitted for the record please, sir.
    Senator Gregg. Absolutely.
    Secretary Evans. Mr. Chairman, Senator Hollings, members of 
the subcommittee, it is a pleasure to have this opportunity to 
testify in support of the President's budget request for the 
Department of Commerce for fiscal year 2005.
    Before I do that, let me just take a moment to thank 
Senator Hollings, who is retiring, for his service to this 
country for many, many years, in this body since 1966. I 
can't----
    Senator Hollings. I want you to retire with me.
    Secretary Evans. I have another plan.
    And that just goes to show you that we don't agree on 
absolutely everything, but we agree on a lot and one thing we 
absolutely agree on is your love for America----
    Senator Hollings. Thank you, sir.
    Secretary Evans [continuing]. And your service to America, 
your integrity that you served this body with for so many 
years, and I just wanted to take a moment to say thank you on 
behalf of all Americans.
    I want to say thank you to your wife, as well, because as 
somebody that has just been in public service in Washington for 
3 years, it is very clear to me that it is not just a sacrifice 
of those serving here. It is a sacrifice for the entire family, 
and for Peatsy and your entire family, I thank you.
    Senator Hollings. That is mighty generous. Thank you, sir.
    Secretary Evans. Yes, you bet. We appreciate and have 
benefitted from Senator Hollings' focus on so many areas of the 
Commerce Department. You know, a lot of people said he put the 
``O'' in NOAA, which is absolutely the truth.
    The central mission of the Department of Commerce is to 
promote American jobs and values by creating the conditions for 
long-term economic growth. To fulfill this essential charge, we 
are requesting a budget of $5.8 billion. This budget reflects 
the President's commitment to advancing our Nation's economic 
and homeland security.
    To help American industry and workers meet unprecedented 
global challenges, we are reorganizing the International Trade 
Administration. I want to thank Chairman Gregg and members of 
this committee for their assistance in moving this process 
forward. We are creating a new Manufacturing and Services 
Office, to be headed by an assistant secretary. This official 
will be charged with ensuring that these critical sectors get a 
full hearing when policies are formulated. We are establishing 
an Office of Investigations and Compliance to monitor 
enforcement of trade agreements, and we are also creating an 
Unfair Trade Practices Task Force.
    For the Census Bureau, we are requesting an increase of 
$217 million to reengineer the decennial census and improve 
other data collection.
    For the Bureau of Economic Analysis, we are requesting an 
increase of $15 million for the improvements of GDP data and 
other economic indicators.
    The NIST budget includes $31 million to equip and operate a 
new advanced measurement laboratory and $25 million for 
continued renovation of the NIST laboratories in Boulder, 
Colorado.
    At this time, we are requesting level funding for the 
Manufacturing Extension Partnership. To leverage current 
funding and help small manufacturing firms, we are directing 
EDA to focus economic adjustment grants on areas experiencing 
job losses in the manufacturing sector. MEP centers serving 
these communities can compete for these grants. In the next 
fiscal year, MEP centers will be eligible to compete for up to 
$45.4 million of the EDA grants. We are also looking at 
establishing partnerships with other Federal programs and 
agencies to maintain and strengthen this national manufacturing 
network.
    In fiscal year 2005, the administration proposes giving the 
Patent and Trademark Office full access to its fees. An 
increase of over $310 million will allow the hiring of 
additional examiners and faster processing of applications.
    Our NOAA budget includes an increase of $56 million for 
next-generation weather satellites, $34 million to complete the 
third fisheries vessel, and $24 million to better assess 
climate change.
    Also included in this budget is funding to enhance the 
safety of Department personnel and visitors. Mr. Chairman, new 
challenges to our Nation's security necessitate new responses.
    We have had to make some difficult choices. This includes 
discontinuing funding for the Advanced Technology Program, the 
Technology Opportunity Program, and for the Public 
Telecommunications Facilities Program. I am sure that there are 
members of this committee and other Members of Congress who 
would like to make other funding decisions. Please know that I 
respect those views and I look forward to working with all of 
you through the budget process.

                           PREPARED STATEMENT

    Mr. Chairman, I want to thank you and the members of this 
committee for your continued support of Commerce programs and 
initiatives. I welcome your comments and will be pleased to 
answer any questions that you may have.
    Senator Gregg. Thank you, Mr. Secretary.
    [The statement follows:]
                 Prepared Statement of Donald L. Evans
    Thank you for the opportunity to appear before you to present the 
Department of Commerce's fiscal year 2005 budget request. In the fiscal 
year 2005 President's Budget, the Department of Commerce request of 
$5.8 billion reflects its continuing commitment to creating conditions 
for economic growth and opportunity by strengthening American 
manufacturing and, promoting innovation, entrepreneurship, 
competitiveness, and stewardship. America's manufactures provide our 
nation and our people good jobs, a better quality of life and 
inventions that have established our national identity. To that end, 
the Department has partnered with U.S. businesses to maintain a 
prosperous, productive America. We have a record of innovation in 
manufacturing, transportation, communications, and measurement that has 
helped sustain U.S. leadership of the international marketplace.
    Consistent with the President's Management Agenda, for fiscal year 
2005, the Department presents a performance integrated budget based 
upon the Department's Strategic Plan. The plans goals fully reflect the 
Department's mission and vision and its commitment to promoting 
``American Jobs and American Values.''

Goal 1: Provide the information and tools to maximize U.S. 
        competitiveness and enable economic growth for American 
        industries, workers and consumers
    Economic growth is a central theme for the fiscal year 2005 
President's Budget and to the missions of the Department of Commerce's 
bureaus. To enhance the competitiveness of U.S. businesses in the 
global economy, the President's 2005 Budget focuses the International 
Trade Administration (ITA) on promoting U.S. exports, fighting unfair 
foreign trade barriers, and negotiating and implementing multilateral 
and bilateral trade agreements. ITA has created a new unit called 
Manufacturing and Services, focusing on the domestic and international 
aspects of U.S. industrial competitiveness; working with U.S. industry 
to evaluate the needs of American manufacturers; assessing the economic 
impact of new and existing government rules and regulations on U.S. 
manufacturers; and representing and advocating for the interests of the 
U.S. manufacturing and services sectors.
    For fiscal year 2005, ITA has three new initiatives. ITA requests 
an increase of $4.5 million for the Administration's Capital Security 
Cost Sharing Program (CSCSP) to cover the State Department's capital 
security costs associated with building new embassy compounds. CSCSP is 
scheduled to begin in fiscal year 2005 and continue through fiscal year 
2018 and all agencies represented in embassies will be charged on a 
worldwide per capita basis. ITA requests an increase of $0.5 million 
for the Activity-Based Cost Accounting and Management System to allow 
for more precise management and planning of resources as well as a 
better understanding of ITA's performance and commitment to priority 
activities. ITA has begun implementing this system with existing 
resources and requires these funds to complete the project. ITA also 
requests an increase of $0.2 million for the Free Trade Agreement 
Secretariats to enable ITA to meet a requirement under the Singapore 
and Chile Free Trade Agreements.
    The Minority Business Development Agency (MBDA) will continue to 
focus on accelerating the competitiveness and growth of minority-owned 
businesses by closing the gap in economic opportunities and capital 
access. The President's 2005 Budget requests an increase of $3 million 
for MBDA to conduct an annual survey of minority owned business 
enterprises (SMOBE). The SMOBE will provide more timely, frequent and 
comprehensive statistical data about the minority business universe 
than the current 5-year SMOBE. The President's 2005 Budget also 
requests an increase of $2.1 million for the Business Development 
Centers and Minority Business Opportunity Committees programs to 
improve opportunities for minority businesses in areas with the highest 
minority business density. Finally, the President's 2005 Budget 
requests an increase of $0.5 million for MBDA to establish trade 
activities in response to the President's and the Secretary of 
Commerce's initiative on trade promotion for U.S. minority businesses 
with Asian Americans and Pacific Islanders. This activity will increase 
the access of minority business enterprises to global markets.
    The President's 2005 Budget request for Economic Development 
Administration (EDA) will help accelerate the Nation's economic growth 
by promoting a favorable business environment to attract private 
capital investments and higher-skill, higher-wage jobs. The President's 
2005 Budget requests an increase of $5 million for EDA to assist areas 
that demonstrate a high level of economic distress from long-term 
economic deterioration or that are suffering from sudden and severe 
dislocation to their economies.
    The Bureau of Economic Analysis (BEA) seeks to strengthen the 
understanding of the United States economy and its competitive 
position. BEA accomplishes this task by providing accurate economic 
accounts data in a timely and cost-effective manner, and by supplying 
the Nation's key economic statistics, including Gross Domestic Product 
(GDP). The President's 2005 Budget requests an increase of $15 million 
for BEA over fiscal year 2004 for two initiatives. The first initiative 
will continue to generate more timely economic data, meet U.S. 
international obligations in complying with international standards for 
reporting statistics, and acquire real-time data to improve the quality 
of BEA measures. The second initiative will produce up-to-date annual 
estimates on business investment spending and employment and 
compensation data by industry.
    The President's 2005 Budget requests an increase for the Bureau of 
the Census of $217 million over fiscal year 2004. These additional 
funds will be used in the Bureau's multi-year effort to reengineer the 
Decennial Census by implementing the American Community Survey, 
modernizing its geographic database information, and developing plans 
for the Decennial Census in 2010 using only a short form. Census also 
plans initiatives to improve the quality and timeliness of trade 
statistics, to improve the measurement of services by expanding the 
number of industries covered, to develop a stronger presence in 
electronic government services by allowing businesses to file survey 
information electronically, and to strengthen its measurement of 
migration within the United States.
    As part of our ongoing efforts to improve the review and 
enforcement of export license conditions, the President's 2005 Budget 
is requesting funding for the Bureau of Industry and Security (BIS) to 
develop a comprehensive export license condition, compliance and 
enforcement program. This program will enhance the enforcement of 
license conditions by working with exporters to ensure that they have 
in place appropriate export management systems and devoting dedicated 
resources to detect and prosecute violations of license conditions. The 
President's 2005 Budget is also requesting funding for BIS to establish 
an Office of Technology Evaluation that will enable the Department to 
implement and maintain a more effective system of dual-use export 
controls that better protects U.S. national and economic security. The 
new Office's duties will include identifying new technologies for 
potential inclusion on the Commerce Control List and the comprehensive 
review of items already on the list to ensure that items are 
appropriately controlled for the protection of U.S. national security.

Goal 2: Foster science and technological leadership by protecting 
        intellectual property, enhancing technical standards, and 
        advancing measurement science
    Important priorities for the National Institute of Standards and 
Technology (NIST) in fiscal year 2005 are to upgrade facilities and 
laboratories, to protect critical research data from degradation, and 
to maintain employee safety and security. The President's 2005 Budget 
provides increased funding to NIST laboratories for continuing 
construction projects and high priority research areas. The request 
includes $31 million to equip and operate the Advanced Measurement 
Laboratory and $25 million for continued renovations of NIST's Boulder, 
Colorado facilities. Consistent with the Administration's continuing 
emphasis on shifting resources to reflect changing needs, the fiscal 
year 2005 budget proposes to terminate the Advanced Technology Program 
and to commit stable funding for the Manufacturing Extension 
Partnership.
    The President's 2005 Budget request for the U.S. Patent and 
Trademark Office (PTO) will support the third year of the PTO strategic 
plan to keep pace with workload growth and to enhance the quality of 
products and services. In fiscal year 2005, the Administration proposes 
giving PTO full access to its fees. An increase of $310.9 million will 
allow the PTO to improve processing capacity by hiring additional 
patent examiners, deliver an operational electronic patent application 
processing system, continue moving to an electronic trademark 
operation, expand quality reviews to all stages of patent and trademark 
examination, and cover the full accrual of retirement costs for its 
employees.
    The President's 2005 Budget increase request of $7.1 million for 
the National Telecommunications and Information Administration (NTIA) 
will provide the resources necessary to improve dramatically the 
overall capabilities of NTIA to research, manage and represent 
internationally the government's and industry's spectrum usage. These 
funds will increase the efficiency of radio spectrum usage through a 
paperless system, explore alternative incentive systems, meet 
increasing demand for Federal wireless systems; improve our Nation's 
preparation for and representation of U.S. interests at International 
spectrum usage conferences; and upgrade NTIA's lab facilities used to 
support this important work. The fiscal year 2005 Budget continues the 
proposal to terminate the Public Telecommunications Facilities, 
Planning and Construction and Technology Opportunity Program grants.

Goal 3: Observe, protect and manage the earth's resources to promote 
        environmental stewardship
    This budget supports the core activities of the National Oceanic 
and Atmospheric Administration (NOAA), including fisheries and ocean 
programs, climate research activities, and weather forecasting 
capabilities, as well as the satellite infrastructure necessary to 
support these functions. In addition, the request continues to focus on 
maintenance and safety issues associated with NOAA facilities, vessels, 
and aircraft.
    The 2005 Budget makes investments in critical fisheries and ocean 
programs. The Department continues to work to improve the management 
and economic sustainability of the Nation's marine fisheries with a 
continued focus on fisheries science and stock assessments. To this 
end, the Budget invests $34 million to complete NOAA's third fisheries 
survey vessel. This vessel will meet international standards for 
research surveys and will substantially improve the quality of NOAA 
fisheries research. Additional investments are requested this year to 
maintain safe and efficient maritime commerce through enhanced 
electronic navigational charts and improved collection of data on 
coastal water levels.
    This budget continues the Administration's focus on climate 
research and devotes $23.7 million of new funding to expand climate 
observing capabilities. This funding will allow NOAA to help fill 
critical knowledge gaps identified in the recently released Climate 
Change Science Program Strategic Plan, including research on aerosols, 
oceans and the natural carbon cycle. NOAA's funding is one component of 
a government-wide initiative which will provide $103 million over two 
years to accelerate climate observations. The Administration will 
continue to work with the international community to develop a 
comprehensive, global earth observation system.
    Continuing to seek improvements in weather forecasting, the 
Administration requests funding to expand air quality forecasts 
nationwide. This program will help mitigate the estimated 40,000 deaths 
and $147 billion spent treating air pollution-related illnesses by 
providing advance warning of poor air quality. Also included are 
investments in improved long-range weather forecasting, as well as 
continued improvement of NOAA's NEXRAD radar system, replacement of the 
communications gateway through which all weather-related data flows to 
local weather forecasters, and modernization of the cooperative 
observer network.
    To support NOAA's weather and climate programs, the Administration 
requests an additional $56 million for the continued development of 
next-generation geosynchronous and polar-orbiting satellite programs. 
To support current and future satellite operations, the Administration 
requests funds to occupy and operate NOAA's new satellite operations 
facility. This budget also includes investments to maintain and repair 
current NOAA facilities, for operations and maintenance of the OSCAR 
DYSON, NOAA's first new fisheries research vessel, and for the 
HI'IALAKAI, a vessel acquired from the Coast Guard for research in the 
Hawaiian Islands.

Management Integration Goal: Achieve organizational and management 
        excellence
    The Administration places a high priority on the protection of our 
employees and guests. The Herbert C. Hoover Building (HCHB) is in close 
proximity to multiple high-profile locations in downtown Washington 
D.C., but lacks adequate protection against an explosive blast in the 
vicinity. This request proposes a blast mitigation project for the 
facility. The upgrades will reduce the degree of injury due to glass 
fragments and, in the event of a chemical/biological/radiological 
attack, will significantly reduce the air infiltration of toxic 
substances. This will provide the employees with precious minutes to 
escape the building or to enable them to ``shelter-in-place,'' if 
required. The funding request for the Security Management Application 
will provide for the development and integration of a new corporate 
management application system to enhance the Department's personnel 
security management capabilities.
    The Department is also requesting an increase in resources for the 
Inspector General's Office of Investigation to provide adequate 
coverage for all Commerce activities. This increase will allow the 
Office to strategically deploy its investigative resources, thereby 
enhancing its ability to detect and prevent fraud. The projected $11 
billion cost for the 2010 Census necessitates the OIG to increase its 
level of oversight to improve planning and lower risks, particularly in 
the areas of statistics and systems evaluations.
    The Department of Commerce has a rich history, and after traveling 
the country meeting with both the Commerce employees and the customers 
we serve I am confident it will have a rich future. I look forward to 
working with the committee to ensure that together we are providing the 
best services possible.

    Senator Gregg. Again, we thank you for taking time to come. 
It was very nice of you to acknowledge Senator Hollings' great 
service to this country, which we have done on a number of 
occasions in this committee. It is totally appropriate, 
especially relative to the Commerce Department, where he has 
played an extraordinary role. What is it, 33 years?
    Senator Hollings. I've been on the subcommittee since 1971
    Senator Gregg. And chairman or ranking member of this 
subcommittee, I think, for 27 years or something like that.
    Senator Hollings. Yes, sir.

                        NOAA'S N-PRIME SATELLITE

    Senator Gregg. Nothing has happened at the Commerce 
Department that Senator Hollings hasn't been involved in. One 
of the things that he can take a lot of credit for and which we 
think is appropriate is a strong NOAA program. We congratulate 
the Department for its efforts in this area but we are 
concerned about the funding levels in a number of accounts 
there. Overall, this committee is totally committed to the NOAA 
efforts and we will have some issues with our House members on 
that, but we enjoy that little tussle every year and we usually 
do pretty well in it.
    I did have a question about the satellite program. I 
understand one of the critical satellites was dropped on the 
floor.
    What is the status of that? Is it the N Prime?
    Secretary Evans. Yes, N Prime, that is correct.
    Senator Gregg. And who is liable for what appears to have 
been some negligence possibly?
    Secretary Evans. Mr. Chairman, we don't have that complete 
report yet. We are in the process of working with Lockheed 
Martin, and NASA and NOAA are working together to look very 
carefully at the issues of cause and liability as well as what 
it is going to take to make sure we have the service needed to 
deliver the weather forecasts to this country in the out-years.
    We are close, they tell me, to having a final report that 
we will deliver to Congress, but we are not there yet.
    Senator Gregg. If we conclude that the cause was outside of 
NOAA and NASA but it was the responsibility of a private 
contractor, that the damage occurred as a result of their 
potential negligence, and I don't know whether it was 
negligence or not----
    Secretary Evans. Right.
    Senator Gregg [continuing]. But potential negligence. When 
you drop a satellite on the floor, it does seem to lead to that 
concern. Are we going to pursue legal remedies to get recovery 
of, what is it, about $400 million?
    Secretary Evans. I am certain that we will, Mr. Chairman. I 
am absolutely certain that we will. We have our lawyers looking 
at this very carefully and that is our conclusion. I am sure we 
will be pursuing the total recovery of the loss as well as, at 
the same time, we need to make sure we are putting a plan 
together to cover the gap that this might be creating as it 
relates to satellite coverage during the period that N Prime 
was scheduled to be launched.

           INTERNATIONAL TRADE ADMINISTRATION REORGANIZATION

    Senator Gregg. You spent a lot of time on ITA's 
reorganization. Could you tell us the status of that and how it 
is going?
    Secretary Evans. Well, Mr. Chairman, it is going well, and 
we have spent a lot of time on it. I appreciate the support of 
this committee. We have been very focused on the manufacturing 
sector of this economy, spent 1\1/2\ years on travel around 
America, across America, talking to manufacturers all across 
America, listening to their concerns, their challenges, 
something I know a fair amount about since I spent 30 years of 
my life in the manufacturing sector of this economy. So I am 
very familiar with many of the challenges that they deal with 
on a day-to-day basis.

                        DOC MANUFACTURING REPORT

    We have made significant progress. We presented to the 
country a manufacturing report in January. It laid out over 50 
recommendations that we feel will help create an environment 
for our manufacturers to continue to succeed in the global 
economy. That is the goal. We need to continue to improve the 
conditions so it is easier for American manufacturers to 
succeed in this ever-changing economy.
    One of the central pieces of it is to establish a new 
Office of Manufacturing Services that will have an assistant 
secretary that is a Senate-confirmed position, of course. We 
hope to have a name up to the Senate within the next few weeks. 
We certainly have a candidate that we are very focused on.
    But we are not resting there. I mean, it is time to move on 
with the many recommendations that are a part of this report. 
One of the areas where we are going to spend a lot of energy, a 
lot of resources, and a lot of focus, is in the area of 
enforcement, not only when it comes to enforcing other trade 
agreements around the world, but just focusing on making sure 
that the countries are focused on enforcing their own laws. We 
are doing that through market access and compliance. We have 
beefed up the resources there.
    We beefed up the resources in the Import Administration 
within the International Trade Administration. We have done 
that. We have established what we call an Unfair Trade 
Practices Task Force. This is a task force that will be focused 
on being a proactive task force. In fact, part of their 
responsibility will be monitoring 30 products that are coming 
in from China, just monitoring those products and making sure 
they are in compliance with our trade laws.
    So I would say we have made great progress. You don't put a 
report out that is not the end, that is the start. That is the 
beginning. I have traveled across America, continue to do that, 
letting all manufacturers know that they have one place they 
can go to express their concerns. They can provide their 
challenges. So we look forward to working with the 
manufacturing sector of our economy. We will continue to do so.
    I think one last thing I would say, Mr. Chairman, is, as I 
say, there are 50 recommendations, over 50, so there are lots 
of recommendations, but I will be responsible for a working 
group, an interagency working group, where we will bring all of 
the agencies together to stay focused on the manufacturing 
sector. This will ensure that we have ongoing communications 
across agencies and across departments, because, obviously, 
many of the agencies and departments within the administration 
have responsibilities that relate to creating an environment 
for manufacturers to succeed.
    And so we are going to make sure that there is very active 
communication among the agencies as well as setting up a 
President's Manufacturing Council, Advisory Council, which will 
be individuals from the private sector, small, medium, and 
large manufacturers will have a seat at the table so that we 
can hear their views and hear their concerns as we continue to 
consider policy in this administration in this town.
    So we are making good progress. Thank you again for your 
support, but we have a lot more work to do. We know that.
    Senator Gregg. Thank you, Mr. Secretary.
    Senator Hollings?

           ASSISTANT SECRETARY FOR MANUFACTURING AND SERVICES

    Senator Hollings. I thank the distinguished Secretary and 
our chairman for their kind comments. It has been a privilege 
to work with both of you.
    With respect to manufacturing, when is this office of the 
manufacturing services, the gentleman or lady to be appointed? 
It was announced months ago.
    Secretary Evans. It was. It was, Senator, but this is a 
Senate-confirmed position and we really didn't have the 
authority to move forward on it until you passed the 2004 
budget. The authorization is within that budget. The budget 
passed. We have been moving aggressively. We have an individual 
that we have selected. Now we are just going through the 
process and I believe that we will have that name to the Senate 
within the next couple of weeks.
    But in the meantime, Grant Aldonas, who is the Under 
Secretary of International Trade, it is his responsibility to 
make sure we are moving forward on these recommendations that 
are within the report within the Import Administration. We are 
moving forward with monitoring products coming in from China 
with the Market Access and Compliance Office. We are moving 
forward on putting a task force together to make sure that 
other countries are enforcing their laws.
    So we are not slowing down. We are not waiting for the 
confirmation of one individual. We have a report that has over 
50 recommendations in it and I expect our Department to 
deliver.

                             AMERICAN JOBS

    Senator Hollings. Do you think the Department should be 
leading efforts to export jobs, for the elimination of American 
jobs specifically, for sending jobs to, let us say, China?
    Secretary Evans. I think we ought to lead for creating jobs 
in America. I want everybody----
    Senator Hollings. You and I agree on that, and that is why 
I was wondering about reading articles on Under Secretary 
Juster or Juster--how do you pronounce that?
    Secretary Evans. Juster.
    Senator Hollings. Juster. He has these innovation forums at 
the Ronald Reagan Building and last year with the United 
States-India Business Council and otherwise coming right on 
down all year long to December. I refer specifically to an 
article in the New York Times, December 10, and let me read 
just a couple of lines.

    ``After the opening speeches, the 50 or so American 
executives gathered at the Hotel Pennsylvania in Manhattan were 
invited to divide up. Those interested in investing in China, 
putting an operation there and hiring Chinese workers were to 
go across the hall to the Penntop North Conference Room. Those 
who wanted help in exporting to China were to stay seated in 
Penntop South. Half or more went across the hall.''

    It was stated that across the hall, most of the speakers 
were Chinese promoting what Shen Liguo, Vice Governor of 
Heilongjiang Province in Northeastern China, described as, 
quote, ``Northeast China's beautiful prospects.'' Quote, ``We 
are going to absorb a lot of foreign investment to bring about 
development in this area.'' A big blue banner over the thing 
says, ``Go global.'' The Commerce Department was described by 
the Chinese as a sponsor and its representative, Mr. Spencer 
Ross, acted as moderator.
    Now, there you go. You folks are working to get rid of the 
jobs and we here in the Congress are doing our best to hold on 
to the jobs. What is your comment about this?
    Secretary Evans. Sure, Senator. I think, in fact, I know 
and I am very clear, that it is the responsibility of the 
Commercial Service, the Export Assistance Centers that we have 
across America, and the Foreign Commercial Service Offices that 
we have around the world to promote the export of American-made 
goods and products and services and that is----
    Senator Hollings. I agree with you on that. That is on 
exports of goods. But how about exports of jobs? You just said 
we are trying to maintain jobs and create them in the United 
States.
    Secretary Evans. Right. I want everybody to hire American 
workers. I want foreign companies to hire American workers. I 
want small, medium, and large companies to hire American 
workers. I want to continue to create an environment in America 
where everybody wants to hire our workers and buy our products 
and----
    Senator Hollings. The Under Secretary Juster and Spencer 
Ross and all, are they carrying out the policy of the 
Department of Commerce?
    Secretary Evans. Yes, sir, indeed, I believe that they are. 
They are continuing----
    Senator Hollings. Well, the policy is, then, to export the 
jobs, because I am just reading here where that is what they 
are doing.
    Secretary Evans. Well, I would take issue with the article, 
Senator. I would say that we were there promoting the export of 
our goods and our products and our services. If there are 
people that want to export equipment to China from the United 
States, we want to be supportive of that. We have to be there 
to explain to them how it is that you go through customs and 
the procedures necessary to export equipment and goods and 
services around the world.
    Senator Hollings. Well, the Commerce Department often 
sends, and I am quoting, its representatives to events like 
this one at the Hotel Pennsylvania last month, but it dulls 
their pro-export message by delivering it at conferences 
dominated by the Chinese delegations urging American companies 
to invest in China, not export.
    Secretary Evans. Well, if they----
    Senator Hollings. You have been in the business 30 years. 
If you went to an oil conference to try and export your oil and 
all of a sudden foreign delegations were taking over the 
majority of the activities and the speakers and everything 
else, we are going to import the oil and put you out of 
business down in Texas, after 30 years' experience, you would 
do something about it, wouldn't you?
    Secretary Evans. Well, I would be there encouraging them to 
buy a Caterpillar engine and take it with them to drill the 
well. I would be there encouraging them to purchase equipment 
from the United States to use wherever they might be going. And 
so we are there in the capacity of American capital, and 
American capital does invest in other parts of the world. As we 
continue to work with the world, I want to encourage these 
American companies to take American equipment with them when 
they go, and that means more jobs here in America.
    Senator Hollings. Mr. Secretary, just one other question 
and I will yield because I have got other questions relative 
to----
    Senator Gregg. We can go around again. No, go ahead for 
your second question.

                  MANUFACTURING EXTENSION PARTNERSHIP

    Senator Hollings. It is the National Institute of Standards 
and Technology. We reduced this some $177 million. 
Specifically, we just practically eliminate the Advanced 
Technology Program and the Manufacturing Extension Partnership 
Program. You just close out the MEP with only a recommended 
appropriation of $39.1 million. Just year before last, we had 
it up to $107 million. The Advanced Technology Program, there 
is no question that we have had 200 new technologies 
commercialized as three-quarters of the ATP programs are 
awarded to small businesses, and I could go down the success 
story because it has won the Council on Competitiveness Award.
    It was really fashioned with caveats by myself, but Senator 
Danforth wanted to make sure it wasn't a pork program and just 
giving out awards. So the application has to be vetted by the 
National Academy of Engineering. After it is found to be a 
unique kind of technology, then you have to bring 50 percent of 
the financing and then on a competitive basis over at the 
Department itself stand in line for that particular award.
    I have been on the Appropriations Subcommittee here for 
quite a while and we never have given out any pork projects. I 
don't have--if I have one in South Carolina, I don't know about 
it, but I do know about its success because the Council on 
Competitiveness and Young from Hewlett Packard and all have 
come and attested.
    But now you just red-line it and we are talking about 
getting jobs and helping manufacturing and we are going to 
appoint an Office of Manufacturing Services, and yet we are 
eliminating the services.
    Secretary Evans. Well, Mr. Chairman, Senator, I would say 
to you that these are programs that have delivered an important 
service through the years. I would also say to you that we are 
at war and there are very tough choices that have to be made 
and priorities that have to be set. I would say to you that 
these have been two good programs that have been of good 
service, but given the current environment of making tough 
choices in the middle of a war, they are just not two that made 
the list for us.
    Senator Hollings. You believe both should be eliminated?
    Secretary Evans. No, I didn't say that, because----
    Senator Hollings. But you are eliminating them. Are you 
supporting the budget or not?
    Secretary Evans. No. What we are supporting is to fund MEP 
at the same level that it was funded in the current budget. We 
are supporting funding MEP in the year 2005 at the same $39.2 
million that is in the 2004 budget.
    And also, Mr. Chairman, what I would say to you is we are 
looking for ways, as I mentioned earlier, to work across 
administration lines to make sure that all of the resources 
that are available to manufacturing are being delivered or they 
are aware of them. We will spend in the 2005 budget about $132 
billion on research and development. We said that one of the 
areas that have additional funding possibly available to MEP 
programs is in the Economic Development Administration. There 
are some $45 million there that Manufacturing Extension 
Partnership Centers can compete for with others that might be 
competing for the same funds in an area of our country that is 
distressed because it has been hit hard by the downturn of 
manufacturing in that particular community.
    Senator Hollings. Since you mentioned it, the $45 million 
of the EDA, $40 of that $45 million has already been committed 
and now EDA is distressed. You have got high unemployment and 
everything else like that. Over here, there is a highly 
technological program in the development of manufacturing and 
what you have done, having them compete for the same monies, it 
is like tying two cats by the tails and throwing them over the 
clothesline and saying, claw each other and see who can get the 
money, but that is about the way we are on that. Thank you.
    Senator Gregg. Senator Stevens? Traditionally, we recognize 
the chairman of the full committee whenever he arrives, and it 
was my error not to recognize you earlier. I should have 
recognized you before I recognized myself if I want to keep my 
job.
    Senator Stevens. Mr. Secretary, they do this all the time. 
It is all right.
    I am happy to be here with you, Mr. Secretary. I have got 
just three questions I would like to ask. I would like to just 
submit some technical ones to you, if I may.
    Secretary Evans. Sure.
    Senator Stevens. The first is personal. Are you going to 
come up and go fishing with me this year?
    Secretary Evans. You are trying to get me on the record, 
aren't you?
    I sure hope to.

                     ASSISTANCE TO ALASKA FISHERMEN

    Senator Stevens. In 2002, we put some amendments on the 
Trade Promotion Act that would assist the Alaska salmon 
fishermen who had been really harmed by the importation of farm 
salmon, particularly from Chile. It provided that for 5 years, 
there would be a $15 million item to assist these people to 
transition to other forms of employment, to develop other 
economic opportunities in their areas.
    So far, there has only been a portion of the first $15 
million made available. Could you comment on that or tell me 
you will look into it and see what is happening? It should have 
been $15 million a year, and there are some growing 
opportunities now in tourism in particular and in small 
business development along the coastline that they might be 
able to move into if they had the kind of assistance that EDA 
could provide through that $15 million.
    Secretary Evans. Yes, I know how important those areas are. 
We are supporting those areas, Mr. Chairman, and we obviously 
will continue to support them. I am familiar with the $15 
million commitment. I know that it is not all in there yet. I 
will tell you that I will look into it further to see what it 
is we can do to make sure that we fund that at that level.
    Senator Stevens. I hope you will, because with half the 
coastline of the United States, some of those villages and 
communities are located literally hundreds of miles from other 
communities. But we have found now with the advent of 
telecommunications and with the Internet capability, they can 
start businesses like answering the telephones for some motel 
chain. You would be surprised what is there if they have the 
funding to transition into sort of modern global commerce. So I 
think that $15 million is well spent if we can find some way to 
put the money up. I would hope you would help us find it.

                      CRAB RATIONALIZATION PROGRAM

    Second, I met with the Administrator of NOAA concerning the 
crab rationalization plan recently. I think Bill Hogarth is 
doing a marvelous job for you. This is a program that was 
enacted this year and we are trying to make certain that the 
regulations and actions that are necessary to implement this 
crab program are in effect by the crab fishery, which will take 
place in early 2005. This is a crab fishery that has had the 
highest death rate of any industrial activity in the country 
for a period of years.
    We have enacted a program which will take the race for that 
crab out of the system and allocate firm amounts of crab to a 
boat owner so he or she may harvest the crab when the weather 
is good. But if the regulations aren't in effect come January, 
they will be back racing for the crab again and lose more 
boats. We lost one this January, a very sad loss.
    I would hope that you would help us find a way to implement 
this by the end of this year. Are you familiar with the 
program, Mr. Secretary?
    Secretary Evans. I am, Senator. I am very familiar with it. 
I know Bill Hogarth, as you said, is very focused on the issue. 
He is working with the North Pacific Fishery Management Council 
to implement the regulations. I haven't had anybody tell me 
that we won't be able to be in full compliance of our charge of 
having those regulations in place by the end of the year, so we 
are hopeful that we are able to accomplish that.

                        OCEANS POLICY COMMISSION

    Senator Stevens. Thank you. Last, Senator Hollings and I 
have been involved with carrying out the policies of the 
Stratton Commission that was a commission from the 1960s, 
really. We have now a new Oceans Policy Commission expected to 
release its report either this month or no later than next 
month. I wonder, are you keeping pace with them? Will you be 
able to appear before us and give us some recommendations based 
on that report for possible action this year?
    Secretary Evans. I sure would be delighted to do that, 
Senator, if I am invited up to do that. We have been working 
very close with Admiral Watkins and Robert Ballard and others 
on the Commission. It is my understanding that the draft of the 
report will be out within the next few weeks and then there 
will be a chance for individuals to comment, give information 
back to the committee.
    I would say to you our best guess is we probably will have 
a completed report by mid-summer, and so I am looking forward 
to the report and I salute you and Senator Hollings both for 
really being instrumental in providing the framework for this 
Commission. I think it is going to be a very valuable resource 
for us to review and understand what there is to explore in the 
oceans. But I am hopeful that we will have this report 
presented to Congress, to the President, in its final form, by 
mid-summer.
    Senator Stevens. My good friend from South Carolina is 
going to pursue other activities after this year, and since we 
have been partners in this for so long, I would hope we would 
have a chance to review it here in this committee and to make 
some recommendations to Congress to implement that report while 
he is still here.
    The Stratton Commission has been, as I said, our guiding 
light, but we are going to have a new series of recommendations 
that I think should be implemented as rapidly as possible and I 
am hopeful this committee, Mr. Chairman, will see fit to have a 
hearing as soon as we can after that final report is presented 
to us by you and the President.
    Secretary Evans. Thank you, Senator.
    Senator Stevens. Thank you very much, my friend. Thank you, 
Mr. Chairman.
    Senator Gregg. We will certainly do exactly that. It is a 
very important issue.
    Senator Leahy?
    Senator Leahy. Thank you, Mr. Chairman.

                               PATRIOTISM

    Mr. Secretary, when you began your remarks here this 
morning, you commended Senator Hollings' patriotism, and I 
think every one of us would agree with that. We should also 
commend yours. I know in your case coming into Government also 
involved your personal friendship with the President. It is not 
an easy task. Whether we agree or disagree with policies you 
might carry out, I don't think there is anybody, Republican or 
Democrat, who disagrees with your own sense of patriotism and 
your own commitment to this country.
    Secretary Evans. Thank you, Senator. Thank you very much.

                              U.S. ECONOMY

    Senator Leahy. What I worry about, we have families that 
are hurting. They see a jobless recovery, 3 million 
manufacturing jobs lost in the past 3 years. Our manufacturing 
jobs in the United States are now at the lowest level since 
1950 and I am worried about that, whether it is in my State or 
yours or any other State. This is such a major part of the 
economic engine of this country and probably one of the reasons 
why our trade deficit is so high. Our trade deficit was almost 
half-a-trillion dollars in 2003, $489 billion to be exact. 
These things bother me.
    I look at the Commerce Department's proposal to help the 
Nation's ailing manufacturers, the proposal of a new Assistant 
Secretary of Commerce for Manufacturing, as we have talked 
about, supporting the MEP program that you and Senator Hollings 
just talked about. I am not sure how a new assistant secretary 
does anything. You already have hundreds of people doing this 
at Commerce, and they are supposed to be doing that job to 
begin with.
    Senator Hollings said on MEP, which I think is a very, very 
good program, it has gotten strong bipartisan support. The 
President's budget doesn't really match the rhetoric. The 
reality doesn't match the rhetoric. The money is not in there. 
I was here with the final negotiations on the appropriations 
bill, where the rubber really reaches the road, and the White 
House was not pushing for the extra money on MEP. We are not 
going to have the money for our centers to continue operations 
and service our small manufacturers. And those small 
manufacturers are in every one of our States. So that is a 
bother.

                      PRESIDENT'S ECONOMIC REPORT

    I look at sort of the trifecta of sections in the recently 
released Economic Report of the President. First, it suggests 
that the movement of U.S. jobs overseas, commonly referred to 
as offshoring, is beneficial to consumers. The President's top 
economist said this migration is just ``a new way of doing 
international trade.'' Well, that is kind of a flippant way for 
somebody to speak who has a job.
    If you know you have 2 months left on your job because you 
have to train somebody to do the same work in India or 
Indonesia, you don't think this is a great, new way of doing 
jobs. If you worked hard going through school, you have learned 
the trade and suddenly it is leaving. The administration's 
rhetoric is not going to do very much if you want to send your 
kids to school.
    The report also predicts that non-farm payroll employment 
will average 132.7 million workers in 2004. That would be a 2.6 
million increase in jobs over the estimate in 2003. But then 
you have an analysis from the Economic Policy Institute and the 
Center for Budget and Policy Priorities that says that you 
would have to create something like 460,000 jobs a month to do 
this. You would have to have 5 million jobs between now and the 
end of the year added.
    That is not going to happen unless you do the other thing 
in the report, and that is the question they raised, whether 
fast food restaurants should continue to be counted as part of 
the service sector or part of the manufacturing sector. They 
say specifically, ``When a fast food restaurant sells a 
hamburger, for example, is it providing a service or is it 
combining inputs to manufacture a product?''
    I remember about 20 years ago, and Senator Hollings, you 
were here, and Senator Stevens and Senator Inouye were too, I 
had taken a bunch of reports back to Vermont with me to read 
them over the weekend at my farmhouse. I also serve on the 
Agriculture Committee. And I am reading something in there and 
I remember calling one of the lawyers on the committee. I said, 
``Am I reading this right?'' They hadn't seen it. They read it 
and they called me back and said, you are absolutely right. The 
administration is reclassifying catsup as a vegetable. I do 
have a 5-year-old grandson who probably believes it is. He 
loves it.
    I mean, the only way you are going to get some of these 
jobs, as I see it, is to do the catsup as a vegetable thing, to 
say if you work at Taco Bell, you really have a manufacturing 
job.
    These are just some thoughts of mine. I have a number of 
questions I will submit for the record.
    Mr. Secretary, I see good news and bad news in my own State 
as some areas were able to get jobs, but I just see so many 
manufacturing jobs fleeing. I see it in South Carolina, in 
Alaska, and in Hawaii, Wisconsin and everywhere else. I don't 
think just reclassifying some of these things is going to do 
it, just my thought.

                         FOCUS ON CREATING JOBS

    Secretary Evans. Senator, thank you for those comments and 
observations. Let me just begin by saying I think at the very 
center of America, the very center of the American experience 
is a job, because that is where people go to get a paycheck to 
put a roof over their family's head, to feed their children, to 
educate their children, to provide health care for their 
children.
    I spent 30 years of my life in the private sector doing 
everything I could to create jobs. I measured the success of 
our company by are we creating jobs in our community? The most 
painful thing, the most painful thing I have ever done in my 
life is tell somebody they didn't have a job, which I did. The 
best thing, the most enjoyable thing I ever did in my life was 
telling somebody they had a job.
    So I agree with you, when you put your focus on jobs and 
how important it is to create the environment for creating more 
jobs in America, because there is nothing more painful than 
somebody not having work to be able to provide for their 
families. That is where a lot of our focus should be, is on 
those individuals that are in transition from one job to 
another.
    And in the economy that we are going into as we move into 
the 21st century, as we work more closely in the world in a 
growing global economy, it is going to be an ever-changing 
economy. We are going to be creating new industries in this 
country, as we have been for years. We are going to be creating 
new jobs in this country, as we have been for years. But we are 
also going to be losing them along the way, as we have been for 
years.
    As we move into the 21st century, we are going to see this 
rapidly-changing economy. Individuals that enter it today, 
instead of just having maybe four or five different jobs in 
their lifetime, they may have four or five different careers 
and----
    Senator Leahy. But Mr. Secretary, what are the kind of jobs 
we are going to create? I mean, I look at MEP, which is 
something that helps so many of our small businesses create 
jobs around this country. But that is being cut. I mean, where 
are these jobs going to be? We told kids over the past few 
years to get your math skills, get your work skills and all 
because we are going into this service area of computers and so 
on and that is the place to go. They did it, and now they are 
training people to do their jobs in Asia or in India.
    I understand some things change, but what are we doing? We 
have got a half-a-trillion dollar trade deficit. Doesn't this 
ring alarm bells that we are not creating jobs, we are just 
importing everything?
    Secretary Evans. Well, Senator, first of all, where are the 
jobs going to be created? As you mentioned, manufacturing jobs 
have been declining in this country and in this world for the 
last 40 years because of the higher productivity in the 
manufacturing sector of the global economy.
    Today only 11 percent of the jobs in this country are 
manufacturing-specific jobs. So almost 90 percent of the jobs 
in America today, where people are going to get a paycheck, to 
feed their children, to put a roof over their family's head, 
are jobs that are outside of the manufacturing sector of our 
economy, and we are going to continue to create new industries 
and new jobs.
    I have traveled all across America the last couple of 
years. I was in Portland, Oregon last week at Portland 
Community College, and I heard story after story after story of 
individuals that were there in their 30's or 35 and changing, 
moving from one career to another, learning new skills, having 
the task to meet the ever-growing demand of jobs in America.
    So it is education and job training. We have 1,100 
community colleges across the country, 11 million people in 
those community colleges developing these new skills and new 
talents that will meet the demands in these ever-new industries 
that we are creating in this country every year. It has been 
going on for years.
    In specific areas, you are obviously going to see a lot in 
the biotechnology area, in the whole technology area, in health 
care and services. You are going to see tremendous growth there 
in the years ahead.
    And so this is an economy that since its beginning has 
always shown a remarkable ability to create new industries and 
new jobs. You go back to 1900. About 70 percent of the jobs 
were in the agriculture community. Now, 2 percent. So it is 
just the economy, because it is so dynamic and because we allow 
the free markets to work----

                             TRADE DEFICIT

    Senator Leahy. Mr. Chairman, if I might, Mr. Secretary, and 
my time is up, I know, but half-a-trillion dollars in 1 year in 
trade deficit, we are still not doing something right.
    Secretary Evans. Well----
    Senator Leahy. My time is up. You may want to respond to 
that for the record.
    Secretary Evans. I will just respond real quick. I think it 
is the others in the world who are not doing something right in 
that their economies are not growing as they should be. And as 
we travel the world, we tell other countries, you need to 
implement the kind of policies, economic policies, fiscal 
policies, monetary policies, regulatory policies that provide 
the environment for growth in your own countries and so you can 
create more jobs and that will benefit American workers and 
American businesses. We need more global economic growth. We 
can't be the only engine of growth in the world.
    Senator Gregg. Senator Kohl?
    Senator Kohl. Thank you very much, Mr. Chairman and 
Secretary Evans.

                  MANUFACTURING EXTENSION PARTNERSHIP

    I know the purpose of these hearings is to bring 
information to the table and hopefully to educate from one side 
to the other, from you to us and from us to you so that good 
things can happen. They are, as you know and I am sure you 
agree, not intended for just one side or the other to mouth 
previously held positions and both sides leave having learned 
nothing. That is the purpose of our hearings. We listen to each 
other and we hopefully learn and grow.
    It is in connection with that that I would like to come 
back at least once, perhaps finally at this hearing, to the MEP 
program. As you know, the MEP program is Manufacturing 
Extension Partnerships, a program which helps small and medium-
size manufacturing firms around the country to streamline their 
operations, shorten production time, lower costs to enable them 
to better compete here and around the world, and as a result, 
increase their employment.
    And, as you know, and I don't say this in any way less than 
complimentary fashion, in your best judgment, that program 
deserves to be cut. It is not fully funded. It is fully funded 
as of last year, but it is not fully funded as to where it was 
2 and 3 and 4 years ago. So to say it is fully funded is not 
accurate. It is a program which your Department has made a 
decision deserves to be cut.
    To say that it can compete for other funds elsewhere is to 
rather obfuscate the fact that it is a program which does not 
deserve, in your Department's judgment, does not deserve to be 
funded at its level of 2 years ago and 3 years ago and 4 years 
ago. It deserves to be cut by almost two-thirds, and then go 
out and compete for funds and probably not be very successful 
because the competition is really, really tough among many, 
many different well-qualified operations to compete for a 
limited amount of funding, and they are not going to get fully 
funded relative to where they were 2 and 3 and 4 years ago.
    But it really is a good program, Secretary Evans. You know, 
during this last break, I visited at least two programs around 
Wisconsin, MEP programs, and heard from many, many others, and 
I visited one program with James Haney, who is the President of 
the Wisconsin Manufacturers and Commerce Organization. It is 
Wisconsin's preeminent organization of its kind. They have 
4,300 members representing business around the State. It is 
really a good organization. It politically happens to be an 
organization which is totally supportive of Republicans in 
terms of political, but they are really not that. They try and 
be and they are an effective bipartisan organization.
    So I visited the Bernston International Company in Madison, 
Wisconsin, the manufacturing operation with him, and he wrote 
back to me. He said, ``Senator Kohl, it was a pleasure to tour 
Bernston International with you last week in Madison. This 
company is just one example of many MEP successes that I have 
personally witnessed in Wisconsin. I completely agree with you 
that MEP is one of the best Government investments around and 
it should be fully supported at the State and at the Federal 
level.''
    He goes on to conclude that, ``We need to prioritize our 
economic development initiatives and judiciously place taxpayer 
dollars in those investments that provide the best return for 
our State and our country and there are many programs that 
should not make this cut. However, MEP is one Government 
investment that ranks at the top when evaluated against 
criteria of national need, effectiveness, and results. We 
should not shortchange or undercut this excellent program.''
    ``I understand the Senate Commerce, Justice, and State 
Appropriations Subcommittee will be reviewing the manufacturing 
support program this week. Please urge the Secretary to do what 
he can to restore MEP funding at the level of $106 million,'' 
where it was. This is from a longtime, experienced, highly 
respected businessman in Wisconsin.
    Tell us why you have concluded that MEP does not deserve to 
be funded at its previous level. Thirty-nine-point-six million 
dollars, which is its new level of funding, for a national 
program in terms of Federal support is virtually an 
evisceration. This is not for one State, this is for all 50 
States, $39.6 million. It is not hard to imagine that this is a 
small, small level of support.
    Our opinion is it is for a really good program and there 
are thousands of businesses around the country that would 
attest to it. So one last time, explain to us why does this 
program deserve to be significantly minimized in terms of its 
direct Federal support?

                             BUDGET CHOICES

    Secretary Evans. Senator, again, it is about tough choices. 
I agree with you in that it has served many small and medium 
manufacturers well over its period of existence. It will 
continue to serve many small and medium-size manufacturers well 
at a reduced level.
    I would say to you that while we have made the decision, 
the tough decision of saying we need to, because of the tough 
times that we are in and the priorities that must be set within 
our own Department, we are doing all we can to make sure that 
if there are other funding sources available to Manufacturing 
Extension Partnership Centers, we want to make sure they are 
conscious of those opportunities.
    I would just go back to my other remark, that we are 
spending about $132 billion on research and development. We are 
spending $20 billion on economic development. Within these two 
large pools of money, maybe there are opportunities for 
Manufacturing Extension Partnerships to compete. We have 
identified some already that I have referred to. We are talking 
to the Department of Defense. We are encouraged by some of the 
discussions that are going on there because of their interest 
in making sure that small manufacturers are participating in 
their programs. We don't have anything definitive yet. We are 
just talking to them.
    We are doing the same thing with Homeland Security. 
Homeland Security has about, as I understand it, $800 million 
for research and development kinds of programs. Maybe there is 
opportunity there, so we are talking to them.
    We are trying to look across Government to see where there 
may be additional funding that these centers can compete for. I 
know the challenges these manufacturers face because I was in 
that business. I know that industry. I know the kind of 
challenges they deal with every day.
    So again, I continue to acknowledge that I think the 
program has functioned well, but it is time for tough choices 
and this is one of those very difficult choices that we made 
and acknowledge that doesn't mean we are all going to agree 
with our two choices. I respect, obviously, your view on it, 
but we felt like this was one of those tough choices where we 
were going to--and saying fully funded, I would agree, it is 
what I meant to imply was funding in 2005 at the same level 
that Congress approved for 2004, which is, and I acknowledge, 
below the funding of previous years.

                            SUPPORT FOR MEP

    Senator Kohl. All right. One of the companies I visited was 
the Risota Tool Company of Chippewa Falls, Wisconsin, and we 
toured the company, talked to the owners of the company and 
people who work there. MEP had been in and they had done a lot 
of scheduling and efficiency improvements and profit 
improvements in the company. Those people who worked there were 
totally complimentary, totally supportive of what MEP had done 
and they felt that MEP had contributed significantly to the 
company's ability to continue to exist, employ, and compete. 
There are dozens and dozens of companies around Wisconsin that 
will attest to the same thing and I am certain that this is 
true around the country.
    Now, as I said at the outset, we all hope that these 
hearings serve to educate one another or else they have no 
purpose, and so I am finally suggesting to you that you take 
one last look. It is policy we are talking about, that is the 
most important thing, but it is also political. Everything we 
do here has a political aspect to it. Although not the most 
important, it is part of what we do here in Washington.
    I can assure you that in my State, and this goes back to 
when you were in the State several months ago touring the 
State, you visited Harley-Davidson, you remember that----
    Secretary Evans. You bet.
    Senator Kohl. I saw it on C-SPAN. And, of course, people at 
Harley-Davidson, many of them were very concerned and upset 
about their jobs. One individual stood up at that meeting that 
you had with the workers there and asked about MEP. I don't 
know why or whether they did it out of their own knowledge or 
someone prompted them, I don't know, but talked about MEP and 
how important MEP was. James Haney, who is the President of 
Wisconsin Manufacturers, talks about MEP.
    It would be very, very well received in Wisconsin, which is 
an important State in November, but it has nothing to do with 
policy--I mean with politics. Policy is the most important 
thing we do. I recognize that and I am sure you do, too. People 
in Wisconsin are really concerned about the loss of 
manufacturing jobs and are looking for every shred of help they 
can get at the Federal level to assure them that we are doing 
everything in their power to help them maintain jobs at the 
manufacturing level in Wisconsin and MEP is a recognized and 
accepted part of that effort in our State.
    So I am asking you as well as Chairman Gregg, as we go 
through and figure out our funding levels for this year, and, 
of course, Senator Hollings, who I know is supportive of MEP, 
that we give it another look to see whether or not there is 
something in the interest of our country that we can do with a 
program which is small in terms of its funding, but very 
important in terms of what it does accomplish in many States 
throughout our great country.
    And with that, I am finished.
    Secretary Evans. Thank you, Senator.
    Senator Kohl. Thank you.
    Senator Gregg. Your counsel is taken very seriously, 
Senator, and we will certainly be addressing it. The opinion 
has been expressed, obviously, by the committee. But as the 
Secretary said, he had to set priorities in his budget. We will 
maybe adjust and tweak those priorities a bit and send him back 
a budget he will be very comfortable with but will certainly 
address some of the concerns of the committee.
    Senator Inouye?

                   CLIMATE CHANGE RESEARCH INITIATIVE

    Senator Inouye. Thank you very much, Mr. Chairman.
    I would like to discuss two matters with you, Mr. 
Secretary. In 2001, the President of the United States launched 
the U.S. Climate Change Research Initiative and that was hailed 
by the people in the Pacific for obvious reasons. Climate is 
part of our way of life. More than ever, it is pleasant and 
beautiful, but there are times when it can be devastating.
    So the matter of climate change is very essential to our 
way of life, and I note that in this budget the President has 
suggested $24.7 million. But in analyzing this, we somehow feel 
that to make this up, there were cuts of $11 million from the 
same program. I would like to submit a few questions with that 
in mind, sir.

                            TOURISM INDUSTRY

    The other question I have, sir, is the tourism industry. 
Today, I think it employs about 1 million. It brings in about 
$83 billion. It has been declining, and especially since 9/11 
it has gone further down. But the World Trade and Tourism 
Council just predicted that 2004 may be the year for tourism to 
start going up, provided Government took the initiative to be 
proactive and put out a hand to bring them in.
    My questions would be, what is Government doing, or what 
can Government do, or what can we do to increase this industry, 
because it is a good, clean, potentially productive industry. 
That is all I have, Mr. Chairman. Thank you very much.
    Senator Gregg. Thank you very much, Senator.
    Senator Inouye. May I submit the questions?

                         GLOBAL CLIMATE CHANGE

    Secretary Evans. I would like to respond. First of all, let 
me just touch on global climate change real quick, if you don't 
mind. When I arrived here a little over 3 years ago, that was 
an issue that the President was very focused on, as was our 
Department, and we started to try and understand the scope of 
the global climate change commitment from Government, which is 
significant.
    First, I was told that on global climate change we spend 
about $800 million a year. And then we found some other money 
that really is focused on global climate change and it took us 
up to about $1.6 billion a year. And then as you looked around 
some more, you found some others that would, you know. The end 
of the story is that we commit about $4.5 billion a year to 
global climate change in this country, more than everybody else 
combined, global climate change science and research and 
technology.
    We put together an organizational structure to oversee that 
$4.5 billion. Within the Department of Commerce is the 
responsibility of the oversight of the science portion of 
global climate change, which is about $1.8 billion across the 
Government. We have put out a report for the science community 
to review and consider. We did that last year a couple of 
times. We just recently put out a final report that focuses on 
the science side, the science research side of global climate 
change, which got some favorable comments, from the National 
Research Council.
    In June in Japan, we are going to bring together the global 
community. This will be for the third time, but it continues to 
expand. We will have the global community there to sign an 
accord, a framework that focuses on a global monitoring system, 
a global observation system for the climate so that we can 
develop the kind of data, kind of information we need in this 
world to understand the world, this Mother Earth that we all 
live on, but also make sure globally we are collecting the data 
to make good policy decisions.
    So just know that we are very focused on that very 
important issue, not only for the good people of the islands of 
Hawaii, but the entire world, and I feel the world coming 
together to say, you know what? That is a good idea. We ought 
to have a global observation and monitoring system. The reason 
we know so much about El Nino and La Nina is because we happen 
to have an observation system out there so we measure out 
there. So why don't we measure the world and understand what is 
going on in the world. So that is my basic thoughts on global 
climate change.
    Your second question was on----
    Senator Inouye. Tourism.

                                TOURISM

    Secretary Evans. Tourism. We had hoped that we were going 
to receive $50 million in the budget to promote tourism in 
America. We have put together a Tourism Council that is focused 
on promoting America around the world. As it turned out in the 
2004 budget, there was only $6 million allocated for that 
account, for that program, and so what we have made the 
determination that we will do, working with the Tourism 
Council, is to focus a pilot program on Great Britain and 
commit those $6 million to Great Britain and look at the 
results of that program, and based on the results of that 
program, we will make a determination as to what to ask for in 
subsequent budgets.
    But you are right. It is a vital part of our economy. 
Eighteen million people, when you count the entire travel and 
tourism industry, have a job there, and so it is a critical 
part of our economy and we will continue to do all we can to 
promote it. Thank you, Senator.
    Senator Inouye. Thank you very much.

                              PTO INCREASE

    Senator Gregg. Mr. Secretary, there is a 25 percent 
increase here for the Patent and Trademark Office, which is 
basically taking all the patent fees and putting them into the 
Patent and Trademark Office, which is a legitimate 
philosophical position. In light of the Patent and Trademark 
Office's track record, which is to say at the least spotty, do 
you think they can absorb that type of an increase?
    Secretary Evans. Well, Mr. Chairman, I hope they can 
because I think it is critical to manufacturing in this 
country. What we certainly are learning in this ever-changing 
economy that we are moving into is that the manufacturing 
sector is growing or becoming less mechanical and more driven 
by biotechnology and electrical kinds of issues. It is much 
more complicated. It is much more complex. Patents just simply 
take longer, take more resources, take more hours, take more 
time to review and then make a judgment on.
    It is our determination, as we look at this important area 
that if we don't hire additional examiners--in fact, in our 
plan right now, we talk about hiring an additional 900 
examiners. That is on top of about 3,600 examiners. But if we 
don't hire at that kind of level, which I agree, a 25 percent 
increase is a significant increase, but we see the prospects of 
the pendency continuing to climb. It was a little over 20 weeks 
in 2003. We estimate in 2004 it is going to be 21 weeks. We see 
it continuing to climb but for a plan that will indeed give us 
the examiners, and the training of the examiners that are 
needed in this ever-changing economy.
    So we believe we can absorb them. I have asked that same 
question. I realize that is a big management challenge, but I 
also understand how critical the Patent and Trademark Office is 
to this economy. As rapidly as it is changing and as it 
continues to move in highly technical areas and highly 
complicated areas that require examiners with skills in 
electronics and biotechnology and all the rest. It is a 
challenge, but it is an area we focused on very hard.
    Senator Gregg. Well, I think it is a challenge. It has been 
this committee's experience that when we have put a lot of 
money into a Department to hire a large amount of expert staff, 
for example, we did it with the SEC, we did it with the FBI, we 
did it with the State Department, we have found that it has 
created real problems. We have ended up with some breakdowns in 
the hiring practices. We have ended up either not hiring up as 
quickly as we wanted or hiring up with real problems, like the 
Border Patrol.
    I have serious reservations about putting this much money, 
this quickly, into the Patent and Trademark Office. I readily 
acknowledge your premise, which is that there is a serious 
problem there, that we are not getting the patents approved 
fast enough. I think the problem is expertise and management, 
systems management. We would be interested in further 
information on how you really do plan to find 900 new people 
who have the expertise to do this job in one year's cycle. I 
think it is----
    Secretary Evans. A good question.
    [The information follows:]

                  PTO's Hiring Plan for 900 New Staff

    On a percentage basis, the USPTO has increased its staff by 
even more in the recent past. Hiring 900 examiners in fiscal 
year 2005 represents an increase of about 25 percent over end 
of fiscal year 2004 staff levels. In prior years, the Office 
has successfully hired similar numbers: In 1998, they hired 728 
examiners, an increase of about 34 percent over the previous 
end-of-year staff; in 1999, they hired 799 examiners, an 
increase of about 31 percent over the previous end-of-year 
staff; and in 2002, they hired 769 examiners, an increase of 25 
percent over the previous end-of-year staff.
    The USPTO maintains an automated job application database 
to facilitate the hiring of patent examiners. The database 
currently contains about 3,700 applications. We have a 
strategic recruitment plan in place to build awareness of 
examiner job opportunities through a variety of print media 
that target high-demand technologies, and planned participation 
in about 60 recruiting events this fiscal year that are 
dedicated to engineering and science disciplines.
    The agency has had a special hiring unit in place for 
several years that is dedicated exclusively to bringing in 
patent examiners. In years when the agency had high-volume 
hiring, the unit has brought on board an average of 37 
examiners per bi-week (962 per year), with the ability to 
process and train up to 60 examiners per bi-week (1,500 per 
year).

                  MANUFACTURING EXTENSION PARTNERSHIP

    Senator Gregg. Senator Hollings?
    Senator Hollings. On that particular point, that dovetails 
with the observation of the distinguished Secretary relative to 
Senator Kohl's concern about the Manufacturing Extension 
Partnership. Specifically, the Secretary says there are hard 
choices. Respectfully, I think it is a very easy choice, not a 
hard choice at all. You want jobs, I want jobs, we all want 
jobs, and that Patent Office, $310 million, let us just say 
$210 million, give the $100 million to MEP and we would be back 
up to snuff with the Manufacturers Extension Partnership small 
business services.
    Senator Gregg. You only need $67 million.
    Senator Hollings. Don't start cutting me. Wait until we get 
to conference.

                             BUDGET CHOICES

    The Office of Manufacturing and Services, heck, we are 
going to get us a big super-duper secretary of services and we 
cut down the services, and when we get to a real service, as 
pointed out and emphasized by Senator Kohl, you say hard 
choice. That is not a hard choice, that is an easy choice. Give 
the money where it is producing jobs.
    Now, I don't accuse you, Mr. Secretary, but I have been 
through a dozen Secretaries. Now, Census is a honey pot that 
doesn't need as much funding as you propose because you are 
ramping up 7 to 6 years ahead of time the 2010 census. So we 
can take $100 million of that and restore MEP, an easy choice. 
I could go through this budget and really get the things.
    I really am disturbed, and you mentioned technology. The 
Advanced Technology Program, that is one where all that high 
tech is really there and vetted by the National Academy of 
Engineering, and decisions are made on a competitive basis and 
they have to bring 50 percent of the money.
    Let me get to the point given our limited time here, 
because we are going to have a rollcall, you and I both agree 
that our job is to create, not to export jobs. Export products, 
but create jobs. Would you object to a provision under this 
particular appropriation that no monies be expended to 
encourage or expedite the export of jobs? You wouldn't object 
to that provision in the budget?

                           EXPORTING OF JOBS

    Secretary Evans. I am not for the exporting of jobs----
    Senator Hollings. That is what I mean. So you are not doing 
it, so it wouldn't have any effect, then.
    Secretary Evans. Right.
    Senator Hollings. And that would include the pay of these 
staff cheerleaders that go to these Chinese conferences. We 
don't want to pay those fellows, Ross and all the rest, the 
assistant secretaries who run around to these Chinese 
conferences in New York and elsewhere promoting the export of 
jobs. I am sure you and I agree on that.
    Secretary Evans. Well, they are promoting the export of 
goods and services from America and equipment.
    Senator Hollings. Good, and you and I agree on that. They 
ought to do that, but not the export of jobs.
    Secretary Evans. No. It would be exporting the goods and 
services from America.
    Senator Hollings. That is right, and so we don't want to 
pay them to export jobs.
    Secretary Evans. Just the export of goods and services and 
products from America.
    Senator Hollings. And we don't want to pay them to export 
jobs.
    Secretary Evans. We want to pay them to export Caterpillar 
engines and John Deere tractors and----
    Senator Hollings. A 30-year outstanding business success 
and you keep saying export goods and services, which we all 
agree on. I am questioning on whether or not we can agree on 
the export of jobs.
    Secretary Evans. No. We should not. We are not supporting 
the export of jobs.

                             OCEAN PROGRAMS

    Senator Hollings. Now, with respect to the oceans program 
that Senator Stevens, our distinguished chairman, emphasizes we 
are going to have to get into those issues because we have an 
outstanding commission appointed by President Bush and they are 
reporting henceforth here, like you say, around mid-summer.
    Secretary, under the leadership of Chairman Gregg, we have 
been developing, and it has been a struggle in this 
Appropriations Subcommittee, in that we put in, generally 
speaking, about $15 million for seven-tenths of the Earth's 
surface, namely the oceans, and $15 billion for Mars and moons. 
We know way more about the surface of the Moon than we know 
about the surface of the Earth.
    And yet the Ocean Exploration Initiative, the Ocean Health 
Initiative, the Coastal Estuarine Land Acquisition Program, the 
Coastal Observation Initiative, NOAA's infrastructure for the 
multiple lawsuits and all, you terminate or cut the funding. 
You cut NOAA as we are going into a wonderful venture and 
really find out, like you say, about the weather and the 
climate all the way around the world.
    I have been down to McMurdo Station in the South Pole. That 
is where the beginning of the hole in the ozone layer is. You 
can look up and see it. All of these initiatives are through 
NOAA, but their budget is being cut $308 million just as we are 
going to hear from the Watkins Commission. Please comment on 
that.
    Secretary Evans. Senator, what I would say to you is I 
think we all share the same view that we are looking forward to 
the report that comes from the commission. I think it will 
provide a very important and valuable framework for us in 
determining what the priorities should be and what the funding 
level should be. I think these are some of the finest 
scientists and leaders we have in our country that are focused 
on this invaluable resource of the Earth and it will give us 
good guidance and some important guidelines as to what 
priorities should be and what funding levels should be in NOAA 
or as it relates to the oceans.
    You mentioned this is not a large sum of money, but when we 
showed up here 3 years ago, there was, I understand, zero 
dollars for ocean exploration. This last year, there was $25 
million that included a one-time center in the Smithsonian. But 
now this year in our budget, I think there is $11.7 million for 
ocean exploration.
    I realize, I take your point, this is a small amount of 
money, but what I would say to you, when we showed up, it was 
zero and now it is $12 million. But I think it is a wise thing 
to wait for the Ocean Commission report and look at that and 
see what kind of priorities this country should place on 
funding levels for NOAA.
    Senator Hollings. We want to work together to be able to 
implement that commission's recommendations next year. Thank 
you, Mr. Chairman.
    Senator Gregg. Senator Kohl, do you have anything further?
    Senator Kohl. No.
    Senator Gregg. Senator Inouye?
    Senator Inouye. No, Mr. Chairman.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Gregg. Mr. Secretary, we certainly thank you for 
your time. You have been very generous with it this morning.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]

               Questions Submitted by Senator Judd Gregg

                         NOAA SPACE INITIATIVES

    Question. Mr. Secretary, since our hearing, you've had a chance to 
review the N Prime situation in further detail. First, could you 
explain/document how the N Prime satellite was damaged and the impact 
on NOAA's satellite program? Second, would you provide an update on 
what the Department is doing to recover losses and get the program back 
on schedule.
    Answer. The NOAA-N Prime spacecraft fell from a turnover cart on 
September 6, 2003 at the Lockheed Martin Sunnyvale, California plant as 
technicians rotated the satellite from vertical to horizontal to 
perform an alignment operation on one of the instruments onboard. The 
root cause of the accident was that the satellite was not properly 
secured to the turnover cart. The accident caused significant damage to 
the satellite structure and varying degrees of damage to the 
instruments, including three provided by International partners. 
Fortunately, many flight components were not on the satellite at the 
time of the accident. Spares are available for most of the spacecraft 
components and three of the five U.S. instruments. Two instruments will 
need to be repaired.
    The impact to NOAA's Polar-orbiting satellite program is currently 
under review. NOAA has formed an interagency team with its partners at 
NASA and the Department of Defense to develop and recommend recovery 
options that will ensure NOAA's responsibility to provide continuous 
global environmental measurements given the NOAA-N Prime accident. The 
Under Secretary of Commerce for Oceans and Atmosphere will make a final 
recommendation to me regarding the way forward from the NOAA-N Prime 
accident. I will render a final decision in the Spring 2004. The 
Department of Commerce and NOAA will brief Congress at that time.
    The Department of Commerce, NOAA and NASA legal staff are 
investigating the government's options for recovering losses from 
Lockheed Martin.
    Question. Mr. Secretary, the President's budget calls for major new 
space initiative to return to the moon and explore Mars. But, it is 
NOAA in your Department, not NASA, that is responsible for exploration 
here at home. Yet, the Budget proposes to cut or terminate ocean 
research, ocean exploration, undersea research and such programs here 
on our planet. Why such uneven treatment, Mr. Secretary? Why do NOAA's 
oceanic and ecosystem programs fare so badly in this budget?
    Answer. The Administration recognizes the importance of both space 
and ocean exploration. Given the tight fiscal environment, the 
Administration is required to develop priorities and make difficult 
choices. The fiscal year 2005 President's budget reflects these 
priorities. The Administration does place value in exploring the oceans 
and is continuing support for the ocean exploration program at a level 
of $11.2 million. We will continue to work hard to ensure the success 
of the ocean exploration program, and we thank the Congress for its 
continued interest in this area.
    Question. Mr. Secretary, as I look at your budget, it appears that 
the Commerce Department decided to cut NOAA and use the savings--over 
$300 million--to fund other bureaus like the Census Bureau, ESA and 
International Trade Administration. Many have argued that as a natural 
resource and science agency NOAA will never flourish inside the 
Commerce Department. Doesn't your 2005 budget support their arguments?
    Answer. The $300 million net reduction to NOAA's request reflects 
the elimination of one-time projects and programs added by Congress to 
the fiscal year 2004 request. The fiscal year 2005 budget request is 
supportive of NOAA's mission. The budget maintains current services and 
provides over $146.9 million in new program increases.

     ADVANCED TECHNOLOGY PROGRAM AND HOMELAND SECURITY TECHNOLOGIES

    Question. Mr. Secretary, the fiscal year 2004 Conferees agreed that 
a focused competition on homeland security technologies should be held 
out of ATP's funding provided for new awards. Will the Department of 
Commerce support ATP's involvement in this type of R&D? Can you provide 
detail for the Committee on the design and implementation of this 
competition?
    Answer. The fiscal year 2004 solicitation process for ATP 
applications is currently being undertaken. It is expected that a 
significant number of the enabling technologies ATP will fund this year 
will have homeland security applications. In the recent seven-city ATP 
``Proposers Conferences'' that are designed to attract potential 
applicants, the Director of the Program conveyed Congressional interest 
in funding homeland security technologies.
    After the fiscal year 2004 Omnibus Appropriations Bill became law 
on January 23, 2004, the 2004 competition was initiated on February 11, 
2004, with a Federal Register announcement stating the availability of 
funds in the amount of $60.7 million for new ATP awards.
    Given the compressed fiscal year 2004 budget calendar, ATP was 
unable to run an entirely separate competition that focused solely on 
homeland security technologies in addition to its general solicitation. 
Notwithstanding, ATP takes its obligation to follow the intent of 
Congress seriously, especially with regard to homeland security. ATP 
expects to receive a number of applications and fund a number of new 
awards for homeland security technologies. NIST has also offered to 
provide assistance and expertise to the Department of Homeland Security 
in conducting their own competitions that fund homeland security 
research.

                NIST/MANUFACTURING EXTENSION PARTNERSHIP

    Question. Mr. Secretary, in the Administration's manufacturing 
report there is a recommendation to ``support a newly coordinated 
manufacturing extension partnership.'' What is meant by ``newly 
coordinated''? Your budget doesn't support this, does it?
    Answer. One of the recommendations in the DOC Manufacturing Report 
is to ``Support a Newly Coordinated MEP and Create a National Network 
of Centers of Manufacturing Excellence'' by: coordinating MEP fully 
with other Commerce Department programs that are helping manufacturers 
to be more competitive and expand markets; focusing all MEP centers on 
effectiveness and cost efficiency; exploring the concept of receiving 
funding from private sector entities; encouraging applicants to 
identify areas of sector-specific expertise that could qualify them as 
a ``center of excellence''; and encouraging co-location with 
universities, community colleges, and ITA assistance centers to foster 
cooperation, knowledge transfer, greater efficiency, and manufacturing 
exports.
    All of these efforts comprise the ``newly coordinated'' MEP. The 
fiscal year 2005 budget request supports this effort.
    Question. Mr. Secretary, there has been some discussion that MEP 
might be reduced to the network of regional centers. Are you aware that 
this past January another State decided that the New Hampshire MEP 
would close down due to lack of funding? Who made the decision? Can you 
inform the Committee what the process is for closing centers?
    Answer. Three years ago, the New Hampshire (NH) Center was 
experiencing management problems so the NH Board removed the director, 
reconstituted the board, and brought in the Maine-based MEP Management 
Services Incorporated (MSI) as managing agent.
    Since NH received about $420,000 in Federal cost share annually and 
only received about $150,000 from the state three years ago, the excess 
Maine cost share was used to cover the NH center.
    The Maine MSI's excellent management team was able to bring the NH 
performance up and NH is now the highest performing MSI center.
    However, the NH center had approximately $300,000 in debt which the 
Maine MSI assumed as managing agent. The Maine MSI managed to reduce 
this debt down to $180,000. But as fiduciary agents, the Maine MSI and 
the NH board are responsible for the remaining debt. In light of the 
reductions to MEP funding in the fiscal year 2004 Consolidated 
Appropriations Act, the Maine MSI decided that, even in a best case 
scenario, they would not have enough cash flow to manage the NH debt.
    The Maine MSI will still provide a minimal level of service by 
keeping one NH staffer and assigning other staff from Massachusetts and 
Maine to serve NH companies.

                       INFRASTRUCTURE PROTECTION

    Question. Mr. Secretary, you have the sole responsibility to issue 
Federal Information Processing Standards which are standards developed 
by NIST and used by federal agencies and the commercial sector to 
protect their computer systems. As the Nation's infrastructure is 
increasingly linked by the internet, its vulnerabilities are being 
subjected to daily attacks. Given this fact, is the Nation, and in 
particular the Department of Commerce, investing enough resources to 
protect our computer systems and networks? Does this portfolio of 
investment contain enough forward looking R&D to allow us to be 
proactive and not reactive to these threats?
    Answer. Information security is one of the most critical issues 
facing industry and government. The Department of Commerce and 
especially NIST, takes very seriously our responsibilities to 
strengthen information security in the Federal government and the 
Nation as legislatively mandated in the Federal Information Security 
Management Act (FISMA) of 2002 and other legislation.
    As a Nation, we have made progress in securing our legacy systems, 
but ``bad guys'' continue to find new ways around or through our 
defenses. While we focus on current implementations, new technology 
developments in IT systems and in other disciplines that increasingly 
rely on IT systems are coming on-line at an accelerating pace. Thus, in 
cyber security, we continue to be challenged.
    That is why the President's fiscal year 2005 budget request 
includes a proposed increase of $6 million for NIST to address key 
National needs in cyber security. With this proposed increase to NIST's 
base funding of approximately $10.9 million, NIST will be able to more 
effectively work with industry and government agencies to accelerate 
solutions to critical cyber security issues, including the development 
of security and critical infrastructure application protocols; 
expanding the NIST Cryptographic Toolkit to include developing 
technologies, such as limited power, small-sized computing 
environments, fixing insecure wireless security standards; and 
producing metrics to build secure networks and systems from 
individually understood components.

                              PTFP GRANTS

    Question. Mr. Secretary, can you tell us why the PTFP Construction 
account and the Information Infrastructure Grants are no longer needed 
and why the funding request is shifted to the Public Broadcasting 
budget? Since CPB funds cannot be used for repairs, where will rural 
stations turn for assistance?
    Answer. The Information Infrastructure Grant program was created as 
an awareness program to promote the widespread use and availability of 
telecommunications and information technology in the non-profit and 
public sector. The Department believes that this mission has been 
fulfilled and recommends redirecting the funds to new priorities.
    With the assistance of Federal funds appropriated to PTFP, the 
Corporation for Public Broadcasting (CPB), and the Rural Utilities 
Service (RUS), 90 percent of the Nation's public television stations 
will be broadcasting in digital by the end of the year. As we near the 
end of the digital transition, the Administration proposes to continue 
funding the digital conversion of public television during fiscal year 
2005 through funds already appropriated to CPB.
    PTFP also does not pay for equipment repairs or other operating 
costs. PTFP, however, does pay for the replacement and installation of 
replacement equipment in circumstances of urgent need. We understand 
that these expenses could be supported through the equipment programs 
now in place at CPB and RUS.

                 LONG-TERM PLAN FOR SPECTRUM MANAGEMENT

    Question. Can you tell us what your overall long-term game plan is 
for spectrum management and how you will work with the FCC in this 
endeavor? What are your priorities and what are the most significant 
impacts on the commercial industry?
    Answer. On May 29, 2003, the President established the ``Spectrum 
Policy Initiative'' to develop and implement a U.S. spectrum policy for 
the 21st century. The Secretary of Commerce was directed to chair the 
initiative. The initiative involves an interagency task force to 
develop recommendations for improving spectrum management policies and 
procedures for the Federal Government, as well as an examination of 
ways to improve spectrum management for state, local, and private 
sector spectrum use. A report containing recommendations will be 
provided to the President in early summer.
    The National Telecommunications and Information Administration 
(NTIA) within the Department of Commerce is the President's principal 
advisor on telecommunications and carries out the function of providing 
spectrum to the Federal agencies. NTIA works directly with the FCC 
regarding spectrum allocation and spectrum policy development and 
implementation. In addition, the NTIA and FCC have agreed via a 
memorandum of understanding to meet twice a year at the Chairman and 
Assistant Secretary level and monthly at the Bureau level to discuss 
plans and spectrum management issues.
    Our major priorities include: (a) foster economic growth; (b) 
ensure our National and homeland security; (c) maintain U.S. global 
leadership in communications technology development and services; and 
(d) satisfy other vital U.S. needs in areas such as public safety, 
scientific research, Federal transportation infrastructure, and law 
enforcement.
    In the fiscal year 2005 budget, the President requested funding for 
NTIA for the development of incentives to increase efficient use of 
spectrum; the continuance of a prior year initiative to make the 
spectrum management process more efficient and effective through the 
application of information technology; the expansion of our 
International radio-communication outreach program; and development of 
the necessary analytical engineering tools and methods that will 
improve spectrum efficiency.
    The Administration has strongly supported the creation of a 
``spectrum relocation fund,'' which would have a significant impact on 
the commercial industry by substantially speeding the opening of 
spectrum to commercial use. Passage by the House of H.R. 1320, the 
Commercial Spectrum Enhancement Act, without amendment, would 
significantly improve spectrum management for both Government spectrum 
users and for commercial wireless users. The relocation fund 
legislation strikes a proper balance in three key policy objectives. 
First, the Bill fully funds Government spectrum relocation, providing 
certainty essential to Federal users including the Department of 
Defense. Second, the legislation will result in timelines that are 
workable for Government incumbents and commercial wireless users. 
Third, the legislation provides certainty and accountability in 
developing and adhering to relocation cost estimates and relocation 
timetables.
    Failure to enact this legislation this year could have an adverse 
impact on the timing of the Third Generation (3G) wireless auction and 
the deployment of new 3G wireless services. Industry and the Government 
are in strong agreement that the reimbursement fund mechanism would 
streamline the relocation of Government agencies. The President's 
budget for fiscal years 2003, 2004 and 2005 contained a legislative 
proposal to create a spectrum relocation fund for Federal agencies 
required to relocate their communications systems to allow the spectrum 
to be auctioned by the Federal Communications Commission (FCC) for 
private sector uses. H.R. 1320 passed the House 408-10 on June 11, 
2003. At the time, the Administration issued a Statement of 
Administration Position strongly supporting the bill as passed by the 
House.

             ITA REORGANIZATION AND COLLABORATION WITH USTR

    Question. Mr. Secretary, at the hearing you gave us an overview of 
how the ITA reorganization is progressing. Will you now provide a more 
comprehensive status of this complex reorganization? Also, can you 
offer some insight on how the Commerce Department will leverage this 
new office in cooperation with the United States Trade Representative 
to protect U.S. interest?
    Answer. The Reprogramming was sent to the House and Senate 
Appropriations Committees on May 7th. In addition, the Department 
Organization Orders necessary to formally make the changes need to be 
signed by the Secretary. Once the orders are signed, the staff will be 
formally moved and the management processes (accounting, personnel and 
other logistics) will be completed.
    Our reorganization will provide increased attention to the 
problems, both domestic and international, facing the manufacturing 
sector through the creation of an Assistant Secretary for Manufacturing 
and Services. We will consolidate and strengthen our export promotion 
functions under the Assistant Secretary for Trade Promotion (and 
Director General of the U.S. and Foreign Commercial Service) and 
improve the operations of our Import Administration.
    The Department of Commerce will continue to work closely with the 
U.S. Trade Representative in fulfilling the requirements of U.S. law, 
assisting exporters in overcoming foreign trade barriers and ensuring 
foreign countries comply with their commitments to the United States.

                          IRAQ RECONSTRUCTION

    Question. Mr. Secretary, I would like to commend the dedication of 
the Senior Commercial Officers around the world. They are doing an 
outstanding job. With reference to the emerging need and increased 
workload in the Middle East, specifically related to Iraq 
reconstruction, can you tell us where Iraq is within the priorities of 
the Foreign Commercial Service? What is FCS's basis for the resource 
allocation for the various locations around the world? Do you have a 
plan to increase the FCS presence in the areas serving as gateways into 
Iraq? When the government is turned over to the Iraqi provisional 
government on July 1, what is the plan for the FCS presence?
    Answer. ITA has conceived and developed several initiatives to 
facilitate and assist U.S. business interest in Iraq.
    Our Middle East-based Iraq Reconstruction Regional Initiative is a 
joint effort by Commercial Services posts in Egypt, Jordan, Kuwait, 
Saudi Arabia, Turkey and the UAE to assist interested U.S. companies by 
highlighting and supporting a series of specific events and activities 
such as conferences, seminars and training programs, webcasts, virtual 
(video) trade missions and videoconferences.
    As part of this initiative, we have undertaken an extensive series 
of activities, a schedule of which is attached. As a further complement 
to these activities, we plan to open a Middle East Business Information 
Center, which will showcase private sector development and serve as a 
one-stop shop for U.S. companies seeking opportunities in the region.
    Similarly, the Central and Eastern Europe Regional Initiative seeks 
to provide our Central and Eastern European Coalition allies with the 
necessary information required for their companies to compete for Iraq 
Reconstruction contracts on a level playing field. This initiative is a 
one time commitment to provide a delegation of experts to disseminate 
information and answer questions from the local business communities in 
Poland, Hungary, Czech Republic, Romania, Albania, Bulgaria, Slovakia 
and Ukraine.
    Commerce is also gearing up with a U.S.-based Iraq Reconstruction 
Project Team. This initiative builds on our successful ``sector team'' 
approach to assemble a small, highly focused group of sector 
specialists from around the country, each focused on a specific 
priority development sector in Iraq. Each sector specialist will be 
responsible for developing contacts with Iraq experts, handling 
questions from interested companies, and disseminating information on 
their particular sector.
    Since the end of official hostilities, we have had commercial 
service officers in Iraq assisting the Coalition Provisional Authority 
with private sector development and Iraq reconstruction efforts. We now 
are in the process of establishing a Commercial Service (CS) operation 
in Baghdad in the new Embassy scheduled to open by July 1, 2004. CS 
Baghdad will be staffed by 2 commercial officers and 8 Foreign Service 
nationals. CS has begun hiring staff for the new Baghdad operation and 
has assigned a seasoned officer to arrive in Baghdad in advance of the 
July 1 opening.
    The CS overseas resource allocation model takes into consideration 
Administration priorities, as well as market potential and cost/benefit 
analysis. Historically, the U.S. and Foreign Commercial Service has 
responded to national crisis with all available resources. We are using 
existing resources for this effort.

IRAQ RECONSTRUCTION REGIONAL INITIATIVE (IRRI) LIST OF TRADE PROMOTION 
                            EVENTS (BY DATE)

January 2004
    January 13-15--Iraqi Ministry of Trade training by the Government 
of Jordan on the Company Registration System. COMPLETED.
    January 5--Live Web Broadcast through the World Trade Center (WTC) 
in Ankara, Turkey. COMPLETED.
    January 6-8--Iraq Reconstruction Seminars in Ankara (Jan. 6), Izmir 
(Jan. 7) and Istanbul (Jan. 8). COMPLETED.
    January 11-13--``Outreach 2004 Exhibition'', Amman, Jordan on Iraq 
Reconstruction. Recruit an Iraqi delegation to attend the event. FCS 
Turkey to send Turkish delegation. COMPLETED.
    January 19-23--``Rebuild Iraq'', Exhibition in Kuwait City. Bring 
Iraqi delegation. CS Kuwait to host Iraqi Reconstruction Council 
Meeting. COMPLETED.
    January 18-22--``Arab Health Exhibition'', Dubai, U.A.E. Joint 
United States/United Kingdom initiative to bring an Iraqi delegation. 
CS Baghdad staff to provide CPA/CS Baghdad briefing. COMPLETED.
    January--Proposed Ar'ar Border opening press event in Saudi Arabia. 
U.S. Embassy Saudi Arabia to highlight beneficial aspects of the 
opening for future Saudi-Iraqi business relations. POSTPONED UNTIL CPA/
GC HAND-OVER OF SOVEREIGNTY 6/30/2004.

February 2004
    February--Preparation of Arabic language quick reference sheet on 
``Doing Business in Iraq''. COMPLETED.
    February 17--CS Kuwait and CS Riyadh supported and accompanied 
delegation from the American Business Council of Kuwait to Basra and Um 
Qasr for business meetings and briefings by the Basra Chamber of 
Commerce and CPA South. COMPLETED.
    February 17-20--Assistant Secretary Lash visits Baghdad to meet CPA 
officials, U.S. and Iraqi companies to discuss reconstruction and 
investment. COMPLETED.

March 2004
    March--Iraq Central Organizations for Standards and Quality Control 
(COSQC) delegation to Saudi Arabia for training in establishing 
industry standards, organized by NIST. POSTPONED DUE TO NIST FUNDING 
ISSUE.
    March 20--A/S Lash meets Iraqi and U.S. business groups in Abu 
Dhabi and Dubai regarding Iraqi Reconstruction and Investment. 
COMPLETED.
    March 21-22--``Iraq-Arab Alliance Conference for Reconstruction, 
Trade and Investment in Iraq'' to be held in Bahrain. Conference and 
exhibition focused on Iraq Reconstruction opportunities with 
participation from throughout the Gulf region. COMPLETED.

April 2004
    April 5-8--Conference and exhibition organized by Iraqi American 
Chamber of Commerce and Industry entitled ``DBX: Destination Baghdad 
Expo'' at Baghdad International Fairgrounds. POSTPONED.
    April 10--Iraq Conference by the Council of Saudi Chambers of 
Commerce & Industry in Riyadh. FCS to present business opportunities 
through Saudi-U.S. business relationships. USAID/CPA contractor and USG 
officials to participate as speakers.
    April 4--Iraq Reconstruction seminar at the American Turkish 
Council's Annual Conference, Washington, D.C. COMPLETED.
    April 18-19--Oil and Gas Conference in Basra actively supported by 
CS Kuwait. POSTPONED.
    April 20--Dubai--Conference on Subcontracting Opportunities in Iraq 
with high level DOC and PMO participation. COMPLETED.
    April 25--Amman--Conference on Subcontracting Opportunities in Iraq 
with high level DOC and PMO participation. COMPLETED.
    April 29--Istanbul--Conference on Subcontracting Opportunities in 
Iraq with high level DOC and PMO participation. COMPLETED.
June 2004
    June 2-3--International Investment Conference in Basra, actively 
supported by CS Kuwait. POSTPONED.
    June 6-7--Conference on Iraq's Oil and Gas Industry in Abu Dhabi.
``Doing Business in Iraq'' Outreach Seminars
    Assistant Secretary Lash--February 24, Cleveland, OH; February 25, 
Kansas City, MO; March 23, Detroit, MI; March 24, Minneapolis, MN; 
March 25, New Orleans, LA; and May 6, Houston, TX.
    Senior Advisor on Iraq, Sue Hamrock--March 9, Los Angeles, CA; 
March 10, San Diego, CA; March 18, Boston, MA; March 19, New York, NY; 
April 13, Chicago, IL; and April 14, San Francisco, CA.
          2010 decennial census and american community survey
    Question. Mr. Secretary, this is an extraordinary request for funds 
with six years to go until the census. Could you give us a status 
overview of the preparation for the 2010 census and how the requested 
funds will be used?
    Answer. Things are going very well, thanks to the support of the 
Administration and Congress in these efforts. With these early 
investments in the 2010 census, we are well on our way to achieving our 
goals to improve the relevance and timeliness of census long-form-type 
data, reducing operational risk, improving the accuracy of census 
coverage, and containing costs over the 2010 decennial cycle.
    In the fourth quarter of fiscal year 2004, the American Community 
Survey (ACS) will expand to a sample of 250,000 addresses each month 
spread across every county in the United States and Puerto Rico. Fiscal 
year 2005 will be the first full year of data collection at this sample 
size. The successful implementation of the ACS serves as the 
replacement of the long-form component of the decennial census, 
providing the United States not only more timely data, but also the 
added efficiencies of administering a short-form only decennial census.
    The MAF (Master Address File)/TIGER (geographic reference file) 
Enhancements Project is on schedule to be completed for all counties in 
the United States, Puerto Rico, and island areas by fiscal year 2008.
    Key mailout, field, and special purpose studies have been completed 
in developing a short-form census for 2010. Additional tests and 
development efforts are on track for conducting a dress rehearsal 
census in fiscal year 2008.
    Specifically:
American Community Survey
    Ongoing support for the ACS will allow the Census Bureau to publish 
detailed social and economic data every year for all places with a 
population of 65,000 or more beginning in fiscal year 2006.
    The increased budget is for the annualization of the program that 
will have begun in the fourth quarter of fiscal year 2004. The largest 
cost drivers are questionnaire mailing and collection, following up on 
nonresponses, information technology and data processing/dissemination 
activities.
    After three years of data collection and every year thereafter, 
accumulated data can be used to make such annual estimates for all 
places of size 20,000 or more.
    After five years of data collection and every year thereafter, 
accumulated data can be used to make annual estimates for all places 
and tracts comparable in content and reliability to decennial long-form 
data.

MAF/TIGER Enhancements Project (MTEP)
    By the end of fiscal year 2004, approximately 26 percent of the 
counties in the Master Address File (MAF) and geographic database 
(TIGER) will be brought into alignment with global positioning system 
(GPS) coordinates.
    In fiscal year 2005, improvements will be completed for an 
additional 700 counties. By the end of fiscal year 2005, this work will 
have been completed for nearly half of all counties in the United 
States, Puerto Rico, and the island areas.
    The MAF/TIGER enhancements project is on schedule to be completed 
for all counties in the United States, Puerto Rico, and the island 
areas by the end of fiscal year 2008.
    Work will continue on converting our MAF/TIGER processing 
environment to one based on commercial, off-the-shelf software. This 
effort began in fiscal year 2003 and is planned to be completed in 
fiscal year 2006.

Short-Form Only 2010 Census
    The development and testing of a dramatically revised process for 
conducting the short form Census is key to the strategy for cost 
containment for the 2010 census. We will complete 2004 Census Test 
evaluations by the third quarter of fiscal year 2005 and use the 
results to inform/revise planning, testing, and development for the 
rest of the decade.
    We will begin conducting the National Content Survey and the 2005 
National Census Test in the fourth quarter of fiscal year 2005 and 
complete evaluations in the third quarter of fiscal year 2006.
    We will begin preparations, and conduct early operations, for the 
2006 Census Test in fiscal year 2005.
    We will begin planning for the 2006 Overseas Test in fiscal year 
2004 and prepare for the test during fiscal year 2005.
    We will continue other long-term planning, testing, and development 
for the 2008 Dress Rehearsal and 2010 Census.
    Question. Mr. Secretary, in addition, as this is the first time you 
are implementing the American Community Survey, can you tell us how you 
expect the implementation to go?
    Answer. After almost a decade of research and testing, the American 
Community Survey (ACS) will begin Nationwide data collection in the 
fourth quarter of fiscal year 2004, at a sample size of 3 million 
addresses per year. We feel confident this program will be successful 
given the experience of the staff overseeing the project in 
headquarters, the processing center, the three telephone centers, and 
the 12 regional offices. The testing on the ACS from 1996 to the 
present supports our confidence. The ACS has exceeded our quality goals 
each year. We anticipate continuing this success into full 
implementation.
    There are three major challenges we anticipate and are monitoring 
closely:
  --Full implementation of the ACS requires a significant increase in 
        sample size (from 800,000 to 3 million annually) and requires a 
        significant increase in the overall ACS staff. The one-time 
        classroom training and on the job observation will fully tax 
        the regional office staff working on the ACS program during 
        October through December. However, the experience of the 
        regional office staff will ensure that the staff is well 
        trained and ready to conduct the ACS successfully.
  --The American Community Survey is expanding into Puerto Rico as part 
        of full implementation. We have limited experience in 
        collecting survey data in Puerto Rico. Our Boston Regional 
        Office will manage the personal visit data collection in Puerto 
        Rico. We are working together to hire and train an adequate 
        staff in October 2004 to ensure the data collection is a 
        success.
  --Lastly, although the American Community Survey tested data 
        collection of persons living in group quarters (prisons, 
        college dormitories, nursing homes, etc.) in 1999 and 2001, the 
        National level implementation of group quarters data collection 
        is a major challenge. This operation will require separate 
        training for the regional office field staff and close 
        monitoring to ensure the quality of the data meet the ACS 
        standards.
    While the start-up challenges are significant, the U.S. Census 
Bureau places high priority on the American Community Survey and we are 
confident the program will continue to be successful.

                      FUNDING FOR CENSUS PROGRAMS

    Question. Mr. Secretary, I am concerned about budget reductions in 
the areas of Economic Census, Census of Governments and the Intercensal 
Demographic Estimates. Can you explain how you plan to provide the same 
level of service the government has come to count on?
    Answer. The fiscal year 2005 Congressional request for the 
Intercensal Demographic Estimates is an increase of $1.2 million to 
improve the measurement of migration across U.S. borders. It is 
imperative to accurately assess the size, characteristics, and impact 
of International migration, as it is a critical factor in our 
population growth.
    Reduced funding levels for other programs reflect the cyclical 
nature of these programs. For example, 2005 is the final year of the 
2002 Economic Census Cycle and the first year of the 2007 Economic 
Census. If fully funded, the Census Bureau will carry out all 
activities scheduled for fiscal year 2005 as originally planned. As the 
census programs transition from one phase of the cycle to another, 
activities in fiscal year 2005 are different in nature from fiscal year 
2004. Given the differences in the nature and scope of the planned 
activities for fiscal year 2005, the Census Bureau can, at the 
requested funding level, continue to provide the high level of service 
our customers and stakeholders have come to expect.

                    PTO FUNDING AND REDUCED PENDANCY

    Question. Mr. Secretary, during the hearing we discussed the 
significant increases for PTO in your budget submission. In past years, 
the correlation between funding increases on the one hand and reduced 
patent pendancy and higher patent quality on the other has not been 
demonstrated. Will you provide a more detailed explanation on how such 
a large budget increase in fiscal year 2005 will help achieve these 
goals? Can the PTO actually execute such a large increase in one year?
    Answer. Although the USPTO has received significant budget 
increases, over the past 10 years patent applications filed, patent 
examiners and enacted budget--in constant dollars--have increased at 
about the same rate (applications at 81 percent and budget and patent 
examiners at about 90 percent). The primary reason for pendency 
increases over this period is that the Office has been confronted by an 
overwhelming shift in technology from the traditional chemical and 
mechanical applications to the significantly more complex applications 
in the computer, biotechnology and telecommunications areas. Ten to 15 
years ago only 11-12 percent of the USPTO's work was in the complex 
technologies; today almost 35 percent is. On the average, examiners 
have 18 hours to handle an application in the traditional chemical and 
mechanical areas as opposed to 31 hours in the high tech/emerging 
areas. This shift in technology and the corresponding increase in time 
needed translates to a need of over 600 examiners, before even 
addressing the high annual growth rates in applications received. A 
number of policy changes and International obligations have also 
shifted significant amounts of work to areas that do not reduce 
pendency. For example, from 1993 to 2003 filings pursuant to the Patent 
Cooperation Treaty increased by over 300 percent, from 13,310 to 
44,282. Examiners must be given production credit for resolving these 
cases even though they grant no property rights. Since passage of the 
American Inventors Protection Act in 2000, examiners have been assigned 
classification duties related to pre-grant publication, a task that 
absorbed 36 examiner-FTEs in fiscal year 2003 but did not contribute to 
pendency reduction.
    In the recent past, many have urged the USPTO to stop trying to 
``hire its way out of this problem.'' While the agency continues to 
work on ways to improve efficiency, there is simply no substitution for 
the human mind for making determinations of patentability. As a result, 
the Strategic Plan anticipates continued examiner hiring as a critical 
element of achieving targeted pendency improvements. It also proposes a 
number of efficiency gains, including taking advantage of searches of 
identical or similar applications submitted to other competent patent 
offices and introducing market competition for some of the tasks facing 
the Office. The Strategic Plan initiatives to use non-examiner 
resources to perform search and classification functions will enable 
the agency to focus more examiner attention on making patentability 
decisions and will contribute to pendency improvements.
    The USPTO's fiscal year 2005 budget request includes an increase of 
$311 million over the fiscal year 2004 enacted level. Of this $311 
million, $38 million is for adjustments to base (pay raises and other 
inflationary costs), and another $38 million would be transferred to 
the Office of Personnel Management for post-retirement benefits of 
USPTO employees. The remaining $233 million increase would be dedicated 
to implementing Strategic Plan by fully funding delayed initiatives, 
and continuing to fund those that were implemented at a reduced level, 
as follows:
  --$19 million would enable the USPTO to continue its high priority 
        focus on quality initiatives and fully fund training to address 
        the new electronic workplace. With primarily base resources, 
        the USPTO has made positive progress in implementing key 
        programs to improve quality, such as certification of patent 
        examiners before promotion to grade 13, continuing legal 
        education for all patent professionals, and an expanded, in-
        depth review of the work product of one-third of all senior 
        patent professionals.
  --$39 million would be used to continue e-Government initiatives, 
        including availability of automated systems and recovery in the 
        event of catastrophic disaster. This funding is critical 
        because IT has brought to the examiner's fingertips 
        capabilities not realized 15 years ago, such as:
    --Increased reliance on non-patent literature for prior art 
            searches: Automation funding has provided access for 
            examiners to the hundreds of non-patent literature 
            databases that are needed to perform a quality search.
    --Internet searching: In some technologies, Internet searching is a 
            mandatory primary search requirement.
    --Complexity of applications: Patent applications now include 
            subject matter that requires IT solutions simply to examine 
            them; for example, the newer technologies such as 
            biotechnology applications with complex sequences, and 
            proteins claimed by three dimensional spatial coordinates. 
            Some applications come in on CDs with the equivalent of 
            millions of pages of data.
    --Also included in this amount, and consistent with the fee bill 
            passed by the House, are funds to test the concept of 
            competitive sourcing for prior-art searches by conducting a 
            limited scope proof of concept during fiscal year 2005. The 
            USPTO is analyzing the amendments in the fee bill to 
            determine their implication on operations.
  --$61 million would address, among other things, patent application 
        inventories and workload by hiring 900 new patent examiners. 
        This represents 650 new positions, compared to new positions of 
        67 in fiscal year 2003 and a planned zero increase in fiscal 
        year 2004. Funds also would be allocated to new Trademark 
        examining attorney hires and changes needed to implement the 
        Strategic Plan initiatives of multi-track and accelerated 
        examination, and post-grant review in patents.
  --$106 million would be used to address workload increases by 
        aligning funding needed for activities impacted by the growing 
        examination workloads and the volume of application and search 
        data. Included in this amount is $65 million for patent 
        workload increases in initial examination review, pre-grant 
        publication, patent publication, commercial data bases and 
        examiner search support, and information technology support 
        throughout examination; $35 million for IT upgrades, staff for 
        responding to an increased number of customer assistance and 
        issue resolution incidents, increase and enhancement of mass 
        storage and infrastructure platforms; and $6 million for 
        administrative support, such as mail center and warehousing, 
        and related workload and human resources processing costs

                         TAKING PTO OFF BUDGET

    Question. Mr. Secretary, there is currently legislation moving 
through the House that would take PTO ``off budget''. Can you tell me 
what your position is on this legislation? Can you tell me some reasons 
why this might or might not be good for PTO?
    Answer. The fee revisions and related provisions included in the 
USPTO fee bill (H.R. 1561) were originally introduced at the request of 
the Administration and did not include a proposal to take the USPTO 
off-budget. When the off-budget language was added by amendment in 
subcommittee markup, the Administration indicated in a letter signed by 
Theodore W. Kassinger, General Counsel, on June 12, 2003, to the full 
Judiciary Committee that it could not support the bill as amended 
because, in part, it would have removed the USPTO from the 
appropriations process. The Administration has not yet developed a 
formal position on H.R. 1561, the ``United States Patent and Trademark 
Fee Modernization Act of 2004,'' as passed by the House (on a 379-28 
vote on March 3, 2004) and reported favorably by the Senate Judiciary 
Committee on April 29, 2004.

                       BIS MISSION AND ACTIVITIES

    Question. Mr. Secretary, it seems BIS has an expansive mission for 
a small agency. Can you explain how BIS plans to prioritize it many 
missions and how you plan to apply these few resources to accomplish 
that goal? Also, can you share with us how BIS works with other 
agencies outside of Commerce and any jurisdictional issues that affect 
your operations?
    Answer. The mission of the Bureau of Industry and Security (BIS) is 
to advance U.S. National security, foreign policy, and economic 
interests. BIS's activities include regulating the export of sensitive 
goods and technologies in an effective and efficient manner; enforcing 
export control, antiboycott, and public safety laws; cooperating with 
and assisting other countries on export control and strategic trade 
issues; assisting U.S. industry to comply with International arms 
control agreements; and monitoring the viability of the U.S. defense 
industrial base.
    To assist the Bureau in fulfilling these critical missions, BIS 
published its Guiding Principles in October 2002. These Principles 
represent the philosophy of BIS in approaching its activities and 
fulfilling its responsibilities. A copy of these Principles is 
attached.
    BIS focuses its activities and resources on eight key areas:
  --Export control policy and regulation.--BIS ensures that controls on 
        exports and reexports of U.S.-origin items meet U.S. National 
        security objectives without unnecessarily burdening U.S. 
        industry.
  --Export licensing.--BIS is continually streamlining and updating its 
        processes to increase capacity and better serve exporters.
  --Enforcement.--BIS vigorously enforces U.S. export control, 
        antiboycott, and public safety laws, while working to improve 
        exporter and end-user compliance with export license 
        conditions.
  --Multilateral regimes.--BIS plays a major role in the development, 
        interpretation, and refining of control lists and operational 
        guidelines for the four major nonproliferation regimes--the 
        Nuclear Suppliers Group, the Australia Group, the Missile 
        Technology Control Regime, and the Wassenaar Arrangement.
  --International Cooperation.--In coordination with other federal 
        agencies, BIS participates in a number of International 
        cooperation and enforcement programs to enhance compliance with 
        and enforcement of U.S. export controls worldwide. BIS also 
        assists in the development of effective indigenous 
        infrastructures for export controls in other countries.
  --Treaty Compliance.--BIS assists U.S. industry in compliance with 
        the Chemical Weapons Convention and will assist industry in 
        compliance with the Additional Protocol to the United States-
        IAEA nuclear safeguards agreement.
  --U.S. defense industrial base.--BIS monitors and supports the U.S. 
        defense industrial and technological base through advocacy for 
        U.S. firms competing for foreign defense contracts. BIS also 
        exercises its authority under the Defense Priorities and 
        Allocations System to require preferential acceptance and 
        performance of certain contracts supporting the U.S. military.
  --Outreach.--BIS keeps United States and foreign firms informed of 
        U.S. export control regulations through an aggressive program 
        of seminars, meetings, and other outreach activities.
    To accomplish its mission, BIS works cooperatively with other parts 
of the U.S. Government including the National Security Council, the 
Department of State, the Department of Defense, the Department of 
Energy, the Department of Homeland Security, and the Intelligence 
Community. In many cases, BIS circulates license applications to other 
agencies for review prior to a decision. In addition, BIS manages an 
extensive license application escalation process that enables senior 
U.S. Government officials to consider particularly sensitive 
applications before a final decision is made.
    Most items on the Commerce Control List (CCL) are derived from the 
control lists of the multilateral regimes. BIS works closely with other 
U.S. Government agencies to strengthen these regimes and improve treaty 
compliance. BIS also works with the Departments of State, Defense, and 
other agencies to ensure that the CCL adequately captures all dual-use 
items that potentially could be used to harm the National security of 
the United States, and to clarify the allocation of commodity 
jurisdiction between the Department of Commerce and the Department of 
State, which has responsibility for licensing defense articles.
    In addition, BIS participates in a number of International 
cooperation and enforcement programs in coordination with other federal 
agencies. BIS leverages its capabilities by forming strong working 
relationships with other law enforcement agencies, including the 
Federal Bureau of Investigation (FBI), the Bureau of Immigration and 
Customs Enforcement (ICE), and the military law enforcement groups. BIS 
also has productive and cooperative relationships with the Central 
Intelligence Agency and the National Security Agency.
    These cooperative efforts with U.S. industry and other agencies in 
the U.S. Government have enabled BIS to achieve significant success in 
accomplishing our important mission. Our efforts are guided by the 
principle that protecting security and promoting trade are mutually 
reinforcing objectives. Indeed, legitimate trade is based on the 
foundation of sound security. We look forward to building on this 
success as we address new challenges in the years ahead.

                                 ______
                                 
               Questions Submitted by Senator Ted Stevens

                     ASSISTANCE TO ALASKA FISHERMEN

    Question. Does the department intend to provide full funding of the 
$15 million in economic development assistance each of the five years 
to these fishermen?
    Answer. The Department of Commerce is very concerned about Alaska's 
fishing-dependent communities and is committed to ensuring that these 
communities are economically prosperous and remain viable communities 
with a strong economy.

             CRAB RATIONALIZATION PROGRAM AND OCEAN POLICY

    Question. Do you perceive any problems with meeting the 
implementation date of January 1, 2005 for Bering Sea crab 
rationalization?
    Answer. Congressional language in the fiscal year 2004 Omnibus Act 
(Public Law 108-199) requires Secretary of Commerce approval of a crab 
rationalization program by January 1, 2005. NOAA is committed to 
meeting this deadline, and it is one of NOAA's top priorities. NOAA 
Fisheries is working with the North Pacific Fishery Management Council, 
the State of Alaska, and interested constituency groups to design an 
expedited process that would lead to Secretarial approval by the 
prescribed date.
    Question. Is the Department of Commerce prepared to receive and 
consider the findings of the Commission on Ocean Policy?
    Answer. The Administration is prepared to receive the report and 
looks forward to considering the Commission's findings. The report of 
the U.S. Commission on Ocean Policy (USCOP) certainly has significant 
ramifications for the Department of Commerce, especially for the 
National Oceanic and Atmospheric Administration (NOAA). The Commission 
released its draft report on April 20, 2004. Following a 44-day public 
and gubernatorial review, the Commission will amend the draft report as 
necessary and release its final report, probably sometime in the early-
to-mid summer. The President then has 90 days to review the report and 
provide a report to Congress. The interagency effort being led by the 
Council on Environmental Quality (CEQ) in the Executive Office of the 
President is now reviewing the draft report and developing timely and 
appropriate responses to the recommendations. The Department will 
consider the findings of the Commission as part of the interagency 
effort being led by the Council on Environmental Quality (CEQ) in the 
Executive Office of the President. This interagency approach will 
ensure an integrated response consistent with the Oceans Act of 2000, 
which requires the President to provide a unified response to Congress. 
NOAA has been assisting CEQ in preparing for this review.

                              NOAA FUNDING

    Question. Mr. Secretary, do you believe the significant reductions 
in NOAA's budget and specifically in fisheries and ocean research will 
allow for the necessary management of our Nation's marine resources?
    Answer. The NOAA budget requests a total of $3,380.8 million in 
discretionary budget authority, a net decrease of $309.5 million, or 
8.4 percent below the fiscal year 2004 enacted level. While this is a 
reduction from the fiscal year 2004 enacted level, the fiscal year 2005 
NOAA budget ensures that we continue to sustain healthy marine 
habitats, ocean research, robust ecosystems, and coastal environments, 
and address safety and environmental compliance issues impacting NOAA.
    The reductions requested within the fiscal year 2005 budget request 
are included in order to support high priority increases for the NOAA 
Fisheries Program within a constrained budget environment. For example, 
the fiscal year 2005 budget request includes an increase of $6.0 
million for a total of $20.9 million for fisheries stock assessments 
and surveys, $1.0 million for protected resources stock assessments, an 
increase of $1.2 million for a total of $5.2 million for socio-economic 
data collection and analysis, an increase of $0.5 million for a total 
of $2.0 million for research to understand and predict the effects of 
climate change on major marine and coastal ecosystems in the Bering Sea 
and Gulf of Alaska, $1.0 million to scientifically determine the 
population status of humpback and bowhead whales, and $1.0 million for 
fisheries oceanography which will analyze data to determine basin-wide 
changes in atmospheric and oceanic circulation and their effect on 
marine populations.
    The NOAA budget request provides funds to enhance our scientific 
understanding of the oceans and atmosphere. NOAA conducts research and 
gathers data about the global oceans, atmosphere, space and solar 
activities, and applies this knowledge to science and services. 
Specifically, the National Ocean Service (NOS) fiscal year 2005 budget 
request will promote a wide range of research activities to create the 
strong science foundation required to sustain use of our coastal 
systems. Overall, the fiscal year 2005 request for NOS is $394.3 
million. Specifically, the NOS fiscal year 2005 budget requests an 
increase of $6.5 million (above the current program level) for a total 
of $47.9 million to continue conducting Harmful Algal Bloom and 
Pfiesteria research as mandated by the Harmful Algal Bloom and Hypoxia 
Research and Control Act (HABHRCA). In addition, the fiscal year 2005 
NOS budget includes increases for navigation services, White Water to 
Blue Water.

                                 ______
                                 
            Questions Submitted by Senator Pete V. Domenici

                           ITA REORGANIZATION

    Question. Mr. Secretary, Congress approved the restructuring of the 
International Trade Administration (ITA) as part of the fiscal year 
2004 Consolidated Appropriations Act. I understand that this 
reorganization is now underway and that the Department will establish 
an Assistant Secretary for Manufacturing and Services. I am pleased 
that the Department of Commerce is renewing its focus on domestic 
manufacturing. An essential part of manufacturing is our ability to 
produce and obtain basic raw materials, such as refined metals, and 
semi-fabricated raw materials, such as copper and steel mill products 
and castings, at reasonable prices and in adequate quantities. I am 
concerned that under the reorganization the Metals Division is being 
eliminated. How does the Department plan to cover this important 
industrial sector?
    Answer. We fully recognize the importance of the metal sector to 
our manufacturing base. While we are planning to streamline management 
layers, we plan to provide full coverage of the metals sector as we 
have prior to the reorganization.
    Question. How does the Department plan to address the raw material 
sector issues?
    Answer. We will address these important issues as they arise and in 
the same manner as we have done in the past. Since the reorganization 
provides us a mandate to address many domestic issues of importance to 
manufacturing, we believe our support of the raw materials sector will 
be enhanced.
    Question. Will adequate staff and funding be allocated to this 
activity?
    Answer. We believe that we will be able to cover this sector on a 
basis comparable to our current level of support.

                   PARTICIPATION IN COMMODITY PRICES

    Question. Mr. Secretary, most raw materials are priced on 
International commodity exchanges and all are subject to International 
supply and demand factors. Our domestic metal industry is global in the 
classic sense. Organizations such as the International Copper Study 
Group have made significant progress in improving market transparency 
and statistics. A stated objective of the reorganization is to focus on 
domestic competitive issues. Will the Department of Commerce continue 
to participate in International commodity or raw material 
organizations?
    Answer. Yes. We intend to continue our active participation in the 
International Copper Study Group, as well as the UNCTAD negotiations on 
commodities, APEC Nonferrous Dialogue, OECD Steel Committee and other 
forums as appropriate.
    Question. Will the Department continue to address International 
issues directly affecting the materials industry?
    Answer. Yes. We will continue to cover these issues as in the past.
    Question. Under the ITA reorganization, what unit will cover these 
issues?
    Answer. The reorganization will not change unit responsibilities. 
ITA's Import Administration will continue to cover dumping and 
countervailing duty issues, our Market Access and Compliance Unit will 
cover trade negotiations and our new Manufacturing and Services Unit 
will cover various International and domestic trade and competitive 
issues.
    Question. Is this unit adequately funded and staffed? What would 
those staffing and funding levels be for fiscal year 2004 and fiscal 
year 2005?
    Answer. We are currently in the process of allocating resources. 
Staffing and funding levels will not be reduced as a result of the 
reorganization.
    Question. Finally, Mr. Secretary, the raw material industry must 
address sustainable development and environmental issues on a domestic 
and International scale in order to be competitive in world markets. 
The Department of Commerce has hosted conferences to assist industry in 
meeting these challenges. Would the Department continue such efforts 
after the reorganization?
    Answer. The Department of Commerce will remain actively involved in 
sustainable development and environmental issues, domestically as well 
as internationally. These issues are relevant to the competitiveness of 
practically all sectors in the U.S. industry.
    Question. What unit within the Department would be involved in 
these activities?
    Answer. The Department's activities in these area will involve the 
resources of several offices in the International Trade 
Administration's (ITA) manufacturing and services units. These would 
include, for example, ITA's offices dealing with energy, chemicals, 
metals and materials, and environmental technologies industries. In 
addition, the Department's National Oceanic and Atmospheric 
Administration (NOAA) will continue its active involvement in 
environmental issues and work closely with ITA.

                                 ______
                                 
         Questions Submitted by Senator Ben Nighthorse Campbell

                        NOAA/NIST BOULDER CAMPUS

    Question. I understand that NOAA has proposed to construct a fence 
around the NOAA/NIST facilities on South Broadway in Boulder. I have 
heard from a number of residents in Boulder that are opposed to the 
fence because it would (a) be an eyesore; (b) bicycle and foot traffic 
which currently crosses the campus would be restricted; and (c) the 
area surrounding the facilities is home to a wide variety of wildlife. 
The impacts of a fence on the wildlife habitat has not been addressed.
    What exactly is the nature of the security risk at this campus, 
what security measures are currently in place, and what additional 
security gain can be achieved with this fence given the assessed 
threats? Has DOC thoroughly examined other security measures short of a 
fence? Has DOC consulted with the City of Boulder and local law 
enforcement authorities on other alternatives?
    Is the entire site considered a high level security risk (Level 4) 
requiring all buildings and facilities to be enclosed by a fence? If 
not, why is the fence being proposed around buildings and facilities 
that do not possess this level of risk?
    Has DOC already decided that this fence is necessary? If so, who 
made this decision and what was the process by which it was made? Was a 
cost-benefit analysis conducted? How much will the fence cost, what 
funds are identified to pay for it, and what is the construction/
installation timeline?
    Are other federal facilities across the country required to install 
fences? If not, why not? What is DOC's legal position regarding the 
City of Boulder's easement across the site? Can this easement be 
superceded by the fence? How will the fence provide the security 
envisioned if the City of Boulder refuses to allow the fence on its 
easement?
    Answer. A task team, headed by the Department of Commerce's Office 
of Security, met in August 2003 to assess the security risk at the 
Boulder Labs facility. That task team concluded that:
  --The security risk will be mitigated with effective perimeter 
        security.
  --The most effective and cost-efficient perimeter security 
        countermeasure based on industry averages is the installation 
        of a fence around the main facilities.
  --A Boulder site task force should lead the design and coordination 
        of the perimeter security solution.
    A Boulder site task force was established under the leadership of 
the National Institute for Standards and Technology (NIST) Boulder Lab 
Director, Zelda Bailey. That task force continues to develop possible 
designs and options for the perimeter security solution. No final 
decision regarding the design of the perimeter security solution has 
been made. A creative design should effectively address the elements of 
the security risk--criticality, vulnerability and threat--while also 
preserving valuable attributes such as easements, protected areas, bike 
paths and open areas. The final design will likely combine several 
security options to provide a measured response to the security risk.
    In a meeting on February 26, 2004, between officials of the City of 
Boulder and the Department of Commerce, it was agreed that a 
representative from the City would be added to the task force, to 
ensure that local interests are considered. We are confident that we 
will be able to develop a final solution that will address the 
interests of both the City of Boulder and the Department of Commerce in 
providing a safe and secure working environment for our employees.

                                 ______
                                 
           Questions Submitted by Senator Ernest F. Hollings

              PUBLIC TELECOMMUNICATIONS FACILITIES PROGRAM

    Question. Secretary Evans, the Public Telecommunications Facilities 
Program, which is a longstanding part of the public television funding 
picture, plays a critical role in public television's federally 
mandated digital conversion. PTFP is a relatively small investment that 
is paying tremendous dividends by unleashing millions of dollars in new 
services and products. Despite this, the President's fiscal year 2005 
budget proposal terminates this critical program. What was the 
Department's request to OMB with regard to this program?
    Answer. The Department's request to OMB eliminated funding for PTFP 
and proposed to continue funding of the digital conversion of public 
television through funding already available from the Corporation for 
Public Broadcasting.
    Question. Secretary Evans, there is no doubt that we are in fiscal 
crisis at the moment--we face a deficit and we are at war. However, a 
strong Nation depends on strong infrastructure. PTFP is critical to the 
well being of our public broadcasting infrastructure--the only 
broadcast medium that reaches virtually every household in the United 
States.
    We discussed at length during the hearing the loss of jobs and the 
exporting of critical manufacturing jobs in particular to other 
Nations. You stated that those workers can be trained in new areas and 
for new industries. One proven entity in the area of education, 
including adult education, is public television.
    Why is the Administration cutting a program like PTFP that is so 
vital to the daily work of public television, especially at a time when 
public television's role in adult education and workforce skills has 
never been more vital?
    Answer. The Administration appreciates public television's 
contribution to education, especially adult education. The 
Administration believes, however, that during this period of steady 
economic growth, public broadcasting's equipment needs can be met more 
efficiently through the funding already available through the 
Corporation for Public Broadcasting.

                                 ______
                                 
            Questions Submitted by Senator Daniel K. Inouye

                        CLIMATE CHANGE PROGRAMS

    Question. The President launched his U.S. Climate Change Research 
Initiative in June of 2001 to improve the integration of science with 
policy and management decisions. The President's budget claims that 
$23.7 million in new funds will be devoted to climate research in order 
to expand climate observing capabilities. However, the budget also 
calls for more than $11 million in cuts to the existing climate and 
global change programs that currently provide these very climate 
observing capabilities.
    I would appreciate receiving a breakdown of the reductions and 
increases of all climate specific programs within the National Oceanic 
and Atmospheric Administration (NOAA). Does the budget request actually 
call for $23.7 million in new funding, or will this ``increased 
funding'' come at the expense of programs?
    Answer. The $23.7 million increase for climate research relative to 
the fiscal year 2005 base funding in the Climate Change Research 
Initiative activities has been reallocated from lower priority 
activities. It is being partially offset by reductions that were taken 
from to Climate and Global Change, NOAA's National Environmental, Data, 
and Information Service (NESDIS) Environmental Data Systems 
Modernization program, and other internal programs, which includes $1 
million from the baseline observatories as well as reductions from the 
weather-climate connection.
    Funding has been directed towards activities that will contribute 
to reducing scientific uncertainty in three key areas identified in the 
Climate Change Science Strategic Plan: (1) aerosols-climate 
interaction; (2) ocean climate observations; and (3) carbon sources and 
sinks.

                   OAR CLIMATE PROGRAM BUDGET SUMMARY
                        [In millions of dollars]
------------------------------------------------------------------------
                     Budget Summary                            Total
------------------------------------------------------------------------
Laboratories & Joint Institutes.........................            +623
Climate & Global Change.................................          -9,152
Climate Obs. & Services:
    Other Programs......................................          -1,870
    CCRI................................................         +23,735
NESDIS-EDSM.............................................          -2,191
                                                         ---------------
      Total.............................................          11,145
------------------------------------------------------------------------

    Question. I would also appreciate receiving a geographically 
specific breakdown of the research and observation projects in the 
President's fiscal year 2005 climate budget for the Pacific Ocean.
    Answer. Tropical Atmosphere Ocean (TAO) array: $2.6 million funded 
through NOAA Research. The array provides real-time data from moored 
ocean buoys for improved detection, understanding and prediction of El 
Nino and La Nina. The Japan Marine Science and Technology Center, in 
Yolsutia, Japan, operates the western TRITON portion of the array. NOAA 
Research's Pacific Marine Environmental Laboratory in Seattle operates 
the eastern TAO portion of the array.
    Pacific Regional Integrated Sciences and Assessment (RISA) Program: 
about $0.15 million funded through the NOAA Research Climate & Global 
Change and Climate Observations & Services budget lines. The program 
assists fisheries, agriculture, and tourism in enhancing resilience in 
the face of climate-related extreme events, such as droughts, floods, 
and hurricanes. The Pacific RISA is operated out of the East-West 
Center in Honolulu, HI.
    Mauna Loa and Samoa Baseline Observatories: $2.0 million funded 
through the NOAA Research Climate Observations & Services budget line. 
The baseline observatories provide valuable time series data on various 
atmospheric and solar radiation measurements that are critical to 
NOAA's monitoring of climate. The observatories, though located in the 
South Pacific, are operated by NOAA Research's Climate Monitoring and 
Diagnostics Laboratory in Boulder.
    North Pacific Climate Regimes and Ecosystem Productivity: $2.0 
million funded through the National Marine Fisheries Service. A growing 
component of NOAA's climate program, this Climate and Ecosystems 
project seeks to link NOAA climate information with NOAA models, 
observations and new ecosystem indicators, resulting in better resource 
management by NOAA. These efforts will include projections of the 
status of living marine resources under future climate scenarios. This 
project is operated out of the NOAA/NMFS Alaska Fisheries Science 
Center in Seattle.
    University of Hawaii Sea Level Center (UHSLC): about $0.5 million 
funded through the NOAA Research Climate Observations & Services budget 
line. The Center is operated out of the University of Hawaii/NOAA Joint 
Institute for Marine and Atmospheric Research (JIMAR) within the School 
of Ocean and Earth Science and Technology (SOEST). The UHSLC operates 
37 tide gauge stations in the global sea level network and collaborates 
with host countries in the operation of 7 more stations. The 
measurements are used for the evaluation of numerical models (e.g., 
those in operation at the National Centers for Environmental Prediction 
(NCEP), joint analyses with satellite altimeter datasets, the 
calibration of altimeter data, the production of oceanographic products 
through the World Meteorological Organization Sea Level Program in the 
Pacific (SLP-Pac) program, and research on inter-annual to decadal 
climate fluctuations.
    Question. Is the Commerce Department researching the economic 
impacts of climate change on Pacific island and Pacific Rim Nations? Do 
you believe that the research effort commensurate with the economic 
stakes of climate change in the Pacific region?
    Answer. The Department of Commerce is working to better understand 
the economic impacts of climate change and helping to manage climate 
risks for the Pacific Islands. The following are some examples of the 
Department's efforts. In a recent press release, VADM Conrad C. 
Lautenbacher, Under Secretary for Oceans and Atmosphere and NOAA 
Administrator recognized the dependence of Pacific island economies on 
accurate climate information. He stated that, ``Understanding and 
effectively responding to changes in climate are critical elements of 
planning and economic development in Hawaii and other Pacific Islands. 
Their economies are dependent on climate-sensitive sectors like 
agriculture, tourism and fisheries, and the region is home to some of 
the world's most valuable marine resources such as coral reefs.''
    The press release highlights a new program that begins development 
of climate services for the Pacific Islands. NOAA's Office of Global 
Programs recently awarded a three-year grant of $535,487 to the East-
West Center in Honolulu, Hawaii, an educational and research 
organization, for a project entitled ``Managing Climate Risks in the 
Pacific: A Pacific Islands Regional Integrated Sciences and Assessment 
(Pacific RISA) Program.''
    The Pacific RISA program assists key economic sectors (e.g. 
fisheries, agriculture, and tourism) in enhancing their resilience in 
the face of climate-related extreme events such as droughts, floods, 
and hurricanes. The project represents a significant step towards the 
creation of a new program of climate information services designed to 
meet the needs of decision makers and policy officials in the American 
Flag Pacific Islands (Hawaii, American Samoa, Guam, Commonwealth of the 
Northern Mariana Islands) and the United States-Affiliated Pacific 
Islands of the Federated States of Micronesia, the Republic of the 
Marshall Islands and the Republic of Palau.
    NOAA's Coastal Services Center is complementing the work of the 
Pacific RISA with a climate assessment outreach and education program.
    NOAA has also supported studies of the socio-economic impacts of El 
Nino events in the Pacific through the work of the Pacific ENSO 
Applications Center and related socio-economic research funded through 
NOAA's Office of Global Programs.
    Through these types of research efforts, NOAA's expansion and 
development of climate services in the Pacific Islands is working to 
address the rising economic stakes of climate change in the Pacific 
region.

               INTERNATIONAL TRAVEL TO THE UNITED STATES

    Question. International travel to the United States is a vital 
component of our Nation's economy. International visitors account for 
one million jobs and $83 billion in spending annually. Visitation 
levels have declined by some twenty percent during the past two years. 
U.S. market share of global travel had already been declining since 
1998 and was only exacerbated by the September 11, 2001, terrorist 
attacks. Since September 11, many necessary changes have been made to 
make U.S. ports of entry safe and secure, but little or no measures 
have been taken to reach out to legitimate International travelers.
    Although the World Travel and Tourism Council recently predicted 
that tourism to the United States will rise in 2004, the Council warned 
that relying on excellent products and service alone will not be 
sufficient to guarantee the future growth of tourism to the United 
States. To remain competitive, the Council recommended that we be 
proactive and work with government authorities to ensure that our 
tourism industry is protected and nurtured.
    What steps are being taken by your department to reach out to 
International travelers and work with government authorities to 
encourage travel to the United States? What do you believe the federal 
role should be in promoting travel to the United States?
    Answer. The Department is launching a $6 million promotional 
campaign in the United Kingdom, our largest overseas market to increase 
market share. We are working with the Department of Homeland Security 
and the Department of State to encourage the development of visa 
policies and travel security systems that facilitate travel while 
providing for the safety of the traveler and security for our Nation. I 
believe that the role of the federal government is three fold: (1) to 
assist in ensuring competitiveness in this sector; (2) to measure the 
industry through collection and dissemination of statistical data on 
the volume, flow and characteristics of travelers, through assessments 
on the economic benefits and impact of travel and tourism industries on 
the U.S. economy, and through production of the balance of trade in 
travel and tourism; and (3) to advocate for the United States' tourism 
interests in International service sector trade agreements and 
represent the U.S. tourism policy positions in International tourism 
development and intergovernmental fora.
    Question. The Visa Waiver Program allows International travelers to 
visit the United States for up to 90 days without going through the 
time consuming and often costly process of obtaining a nonimmigrant 
visitor visa. There are currently 27 countries in the program. Current 
rules require that by October, 2004, International visitors entering 
the United States on the Visa Waiver Program possess a machine-readable 
passport. In addition, all Visa Waiver countries must certify that the 
new passports they are issuing contain biometric identifiers, to help 
ensure that the person seeking entry into the United States is the same 
person documented in the passport.
    There is great concern in the visitor industry that only a few of 
the 27 Visa Waiver countries will be able to meet the October, 2004, 
deadline, and that this will result in major disruptions in inbound 
travel to the United States from key markets in Europe and Asia.
    Do you have any suggestions on how we can encourage foreign 
countries to expend the resources necessary to produce passports in 
compliance with U.S. requirements for the Visa Waiver Program?
    Answer. The issue, I believe, is not a lack of willingness by Visa 
Waiver Program countries to comply by the October, 2004 deadline, but 
their ability to do so. Legislated requirements specify that the 
biometric passport identifiers must meet International Civil Aviation 
Association standards. These standards were not established until May 
of 2003. Therefore, technologies are not yet fully developed. The 
United States will also not issue passports that meet these standards 
by the current deadline.
    Sixty-five percent of our overseas visitors come from Visa Waiver 
Program (VWP) countries. All but two VWP countries have indicated to 
the Department of State that they will not be able to meet the 
deadline. If nothing is done to alter the situation, the Department of 
State estimates that there will be approximately five million 
additional visa applicants, of which they have the capacity to process 
only six percent, which may create substantial disruptions in travel to 
the United States. Economic losses across sectors could be substantial, 
and our relationships with our allies could be damaged.
    A legislative remedy is the only option to postpone this deadline. 
Should a legislative postponement be approved, the Department of 
Homeland Security and the Department of State could provide for safety 
and security in keeping with the intent of the legislation through 
existing biometric systems to ensure that travel documents and visitors 
match. During this period, the United States could work with other 
Nations to establish agreement on interoperable systems to produce and 
read passports with biometric identifiers.

                                 ______
                                 
            Questions Submitted by Senator Patrick J. Leahy

                  MANUFACTURING EXTENSION PARTNERSHIP

    Question. With last week's announcement that MEP will be eligible 
to apply for EDA funds, I am greatly concerned that we are nearly half 
way through the fiscal year and it is still unclear how the program 
will be funded and re-competed. Will there be funds set aside for MEP 
Centers to compete for? Will each MEP Center be responsible for 
applying for these funds? How will this help ``leverage'' the limited 
funds available to MEP in fiscal year 2004?
    Answer. EDA is ready, willing and able to assist eligible MEP 
Centers with resources as NIST develops its plans for the MEP going 
forward. Secretary Evans has directed EDA to focus its remaining fiscal 
year 2004 Economic Adjustment program funds on manufacturing-related 
communities and initiatives. EDA will welcome MEP Centers to apply for 
EDA funds. These EDA funds will augment funds provided to the MEP from 
NIST and will be focused on highest performing Centers. These funds 
will be administered in accordance with EDA's competitive grant program 
guidelines. In addition, EDA staff is prepared to work with MEPs in 
developing EDA applications in order to make the process as streamlined 
as possible.
    Question. Given the immediate need for MEP services, what other 
mechanisms would the Administration consider to increase MEP funding in 
fiscal year 2004 and 2005, so small manufacturers can continue to 
receive the assistance they so desperately need?
    Answer. We are doing all we can to make sure that the MEP centers 
are fully aware of any funding opportunities that may exist across the 
Federal government. We have identified some possible sources already 
and are in discussions with others to determine if there are additional 
opportunities for MEP centers to compete for available funding from 
other Federal programs that support U.S. manufacturing. Also, MEP has 
considered foundation-type funding which is typically raised as 
principal to be kept intact, while the earnings from the principal are 
used to capitalize activities. For MEP to develop a steady stream of 
funding of any significance to substitute for some of the Federal 
funding, the foundation would need to be capitalized at $400 to $500 
million. Otherwise, the capital would be rapidly depleted and the 
foundation would need to be in a continuous fundraising mode. However, 
the actual level of funding that could be generated would depend in 
large part on the support of Administration officials, Congress, and 
industry leaders. This is particularly true given these tight economic 
times during which it will be even more difficult to garner significant 
contributions.
    Question. Why ``improve'' MEP and cut its budget when we clearly 
see its effectiveness in building stronger companies that retain high-
skill, high-pay American workers and repay our relatively small federal 
investment with a healthier tax base?
    Answer. Budget constraints have forced the Administration to make 
some tough budget decisions this year. The fiscal year 2005 budget 
request reflects the Administration's policy and funding priorities to 
address the Nation's most pressing needs. Support for MEP is maintained 
at the fiscal year 2004 enacted level.
    Question. The manufacturing strategy, budget documents, and 
comments by Commerce officials suggest ITA and other federal agencies 
can take over functions of MEP. Do you really think that Trade experts 
can discuss, sell, and deliver the technical engineering services that 
MEP provides to manufacturers?
    Answer. It makes sense for all bureaus in the Department engaged in 
improving our Nation's manufacturing to work together. The MEP and ITA 
programs are complementary, and MEP and ITA staff are working together 
to increase coordination. This coordination will link the technical and 
business staff employed by the MEP centers located around the country 
with ITA trade promotion specialists who are working with ITA on behalf 
of the future Assistant Secretary for Manufacturing and Services.
    ITA has experts with in-depth knowledge of and connections with 
various sectors of industry including the automotive, textiles and 
apparel, energy, aerospace, machinery, metals, and microelectronics, 
industries.
    The direct teaming of MEP field agents with the ITA sector experts 
will make the program a more effective National resource to help small 
manufacturers compete and succeed in the global marketplace.
    MEP and EDA are also exploring mutual opportunities to coordinate 
their support of small manufacturers through the local economic 
development infrastructure.
    Question. In the manufacturing strategy, you suggest that savings 
can be found by enhanced partnering. Yet OMB's PART analysis gives MEP 
high marks for collaboration. Tell me how you plan to get significant 
savings from synergies they have already accomplished.
    Answer. The principal purpose of effective partnering is to better 
serve America's manufacturers and provide them with the wide range of 
assistance that the Federal government can provide through its many 
assistance and support activities. Although the MEP is performing well 
it still had room for improvements. Efforts are being made to expand on 
existing partnerships and enhance the benefit to MEP participants.
    Question. How will you ensure that small manufacturers will 
continue to receive the services they need when your ``improvements'' 
will actually cut the availability of MEP services?
    Answer. The MEP program will continue to serve as many 
manufacturers as possible and will continue to explore every avenue 
possible to find new and innovative ways to maximize whatever level of 
Federal investment is made in this program. Improving the effectiveness 
and efficiency of the MEP National manufacturing network is the primary 
goal. In addition to the MEP program, NIST laboratories also support 
manufacturers both large and small by providing the measurements and 
standards needed to improve quality, productivity, and reduce 
manufacturing costs. The NIST Advanced Technology Program (ATP) has 
provided cost-sharing support of improved manufacturing in many U.S. 
industries. NIST laboratories provide calibration standards that ensure 
quality of manufactured products and improve efficiencies. The NIST 
fiscal year 2005 budget proposal includes a request for budget 
increases to support advances in manufacturing. The work proposed in 
the fiscal year 2005 budget initiative will help overcome technical 
barriers facing U.S. industry that will enable it to thrive in nano-
manufacturing, particularly in the key areas of electronics and 
semiconductor manufacturing, and advanced medical technologies. It will 
also promote access to global markets by ensuring that the measurements 
and standards that U.S. manufacturers rely upon are internationally 
accepted.
    Question. Has the Department of Commerce done any studies to 
determine what impact re-competing the entire MEP network would have on 
its ability to serve small manufacturers?
    Answer. The series of manufacturing round tables conducted over the 
past year, while not specifically focusing on the MEP, gave the 
Administration a real sense of what manufacturers want and need. There 
has not been a formal study of the possible impact of a re-competition, 
but such a competition is expected to result in excellent service to 
small manufacturers in the region served by the selected centers.
    Question. One of the strengths of MEP is its partnership with state 
governments and local service providers. Have the state agencies and 
other partners been informed of your re-competition plans and will they 
continue to provide roughly a third of the funding support to the MEP 
system?
    Answer. Additionally, the MEP Director has had preliminary 
discussions with the Centers about the impacts of the funding level. 
Those Centers with agreements that are expiring have been informed that 
their renewals will be on a month-to-month basis. Until the individual 
Centers give us specific information, it is hard to determine which 
states will continue to provide a third of the funding support to the 
MEP system.
    Question. Do you really want to hamstring this program by pushing 
each and every Center to spend its time developing a proposal during a 
time of urgent need for this type of hands-on assistance for our small 
manufacturers?
    Answer. For fiscal year 2004, MEP is exploring the options for 
providing some funding to all Centers in the network through the end of 
the fiscal year.
    Question. Many groups, such as Harvard's Kennedy School, the 
National Academy of Public Administration, NAM and National business 
publications commend the program for its effectiveness and efficiency. 
Doesn't it make better sense to re-compete only those Centers that do 
not meet minimum performance standards? Why should we consider re-
competition for a system that is not broken?
    Answer. The vast majority of MEP centers perform admirably, so only 
isolating those few relatively poorer performers recognizes no 
significant cost savings. Each of those few, poorer performers have 
been addressing their weaknesses.

                       NATIONAL SEA GRANT PROGRAM

    Question. In the President's request for the National Sea Grant 
Program, how much of the funding would be allocated to new programs? If 
we set a goal of bringing all the programs up to $1.2 million in base 
funding a year in $250,000 increments over the next several fiscal 
years, how much additional funding would be needed in fiscal year 2005 
and which Sea Grant programs would receive funds to increase their base 
level?
    Answer. The fiscal year 2005 President's Budget request includes 
$57.5 million for Sea Grant, this amount does not include any funding 
for new programs. The National Sea Grant program currently funds 30 
established college and institutional programs and 4 developing 
institutional programs. Of these 34 programs, 19 currently have a base 
funding level of less than $1,200,000. The Sea Grant Program 
authorization requires that amounts appropriated over the fiscal year 
2003 level be allocated by merit and competition. To bring these 19 
programs up to $1.2 million in base funding in $250,000 increments over 
the next five years would cost a total of $7,723,000 and would require 
additional funding in the amount of $3,759,000 in fiscal year 2005, the 
first year:

------------------------------------------------------------------------
                          Year                                Amount
------------------------------------------------------------------------
1st Year................................................      $3,759,000
2nd Year................................................       2,041,000
3rd Year................................................       1,000,000
4th Year................................................         723,000
5th Year................................................         200,000
------------------------------------------------------------------------

    The 19 Sea Grant colleges, institutions, and developing 
institutions that currently have a base funding level of less than 
$1,200,000 would receive the additional funds. These programs are: 
Connecticut, Delaware, Georgia, Illinois/Indiana, Maine, Michigan, 
Minnesota, Mississippi/Alabama, New Hampshire, New Jersey, Ohio, Puerto 
Rico, South Carolina, California (University of S. California), 
Massachusetts (Woods Hole Oceanographic Institution), Vermont, 
Pennsylvania, Guam, and Western Pacific.

                                 ______
                                 
                Questions Submitted by Senator Herb Kohl

                     MEP FUNDING AND RECOMPETITION

    Question. Mr. Secretary, in addition to the drastic cuts to the MEP 
program, it appears only $29.6 million or 75 percent of the funding is 
going directly to grants to help small and medium sized manufacturers. 
The remaining $10 million is going to administration. When the MEP 
centers were funded at $106.5 million, $90 million or 85 percent of the 
funding was directed to MEP programs.
    It appears that there is a loss of efficiency coinciding with cuts: 
When the program was funded at $106.5 million, administrative costs 
were $16.5 million, as opposed to $10 million in administrative costs 
for a $39.6 million program. Can you provide me a breakdown on where 
the requested funding will be directed?
    Answer. By the end of fiscal year 2004, MEP staff will be reduced 
by 24 positions, from 51 to 27 while maintaining its function of 
overseeing the National manufacturing network. In addition, NIST 
institutional support activities previously supported by MEP will also 
be reduced, including an institutional support staff reduction of an 
additional 24 positions by the end of fiscal year 2004 (from 38 to 14). 
These staff reductions are expected to be accomplished through a 
combination of resignations, Voluntary Early Retirement Authority 
(VERA), buyouts, and Reduction-In Force (RIF). Remaining MEP staff will 
focus on center operations and center support. Center operations will 
focus on stewardship issues, such as panel and annual reviews, cost 
share approvals, and other compliance-related issues. This unit will 
also conduct a more limited level of program data collection and 
program evaluation. Staff conducting center support will focus on 
essential system-level functions, National accounts, partnership 
development, and a minimal manufacturing research component. All 
product development, marketing support, and most IT support will be 
discontinued. Manufacturing research, center and client impact 
evaluation, corporate university training of the system, and National 
sales are all being significantly scaled back.
    Question. In my state of Wisconsin, we lost 13,000 manufacturing 
jobs last year and, just last week, two more Milwaukee companies 
announced plans to send jobs overseas. We must fund initiatives that 
yield tangible results now, programs that help small- and medium-sized 
manufacturing firms, boosting productivity and increasing 
competitiveness as these firms face increasing pressure from global 
markets. We need to fund programs like MEP. Through MEP efforts, more 
than 35,000 manufacturing jobs were created or retained during the last 
fiscal year. MEP was recently selected by Harvard's Institute of 
Government Innovation as one of the Nation's ``most creative, forward 
thinking, results-driven government program.'' MEP has also just been 
named one of the 100 best resources for small businesses under the 
category of Operations by the BIZBEST 100 publication.
    MEP has worked, and worked well due to its decentralized but well 
coordinated networks. Offices are conveniently located such that 
business owners can take advantage of services without drastically 
increasing precious time away from their business. The local nature of 
the offices allows for flexibility and an ability to respond quickly to 
changing needs in different communities.
    I understand the Commerce Department is about to launch a major 
recompetition of the entire MEP program at a time when this program is 
sorely needed. I am concerned that a national recompete could bring 
serious harm to this critical program. In the interest of saving time, 
energy, and scarce resources, is it necessary that the recompete occur 
across all 400 MEP offices? Why not just focus on those centers that 
have not lived up to expectations? Should a nationwide recompete go 
forward, is it expected that MEP will continue to have a physical 
presence in all 50 states?
    Answer. Maintaining the National manufacturing network is a 
priority. Just as the 21st Century manufacturing needs are continuing 
to evolve, a recompetition of the network will allow MEP to effectively 
meet those new challenges with whatever funding levels Congress 
provides. Understanding the possible effect of a recompetition upon the 
Centers, for fiscal year 2004, MEP is exploring options for providing 
funding to all Centers in the network through the end of the fiscal 
year.

                        JOB LOSSES IN WISCONSIN

    Question. Most of the job losses in my state have been experienced 
in small- and medium-sized enterprises. Nationally, small- and medium-
sized manufacturers account for 68 percent of all manufacturing jobs. 
These firms are the best source for manufacturing job creation--and 
these are good jobs--and these firms are far less likely to outsource 
jobs. I have heard from many constituents who are concerned that the 
Administration is focusing its efforts on large firms, leaving small- 
and medium-sized firms behind.
    There is a tension here between small and medium-sized 
manufacturers and large manufacturers. For example, there are well-
respected critics of the ``Manufacturing in America'' report who say 
that this plan does not substantially make a difference for small and 
medium-sized firms. Do you agree that you have had to balance the 
interests of these two groups as you pursue initiatives to respond to 
the crisis facing our manufacturing sector?
    Answer. From the very beginning of the Manufacturing Initiative 
through today, the Department of Commerce has kept the interests of 
small- and medium-sized manufacturers (SMMs) foremost in developing 
policy recommendations for the challenges confronting U.S. 
manufacturing.
    As you may be aware, as an initial step, we organized roundtable 
outreach meetings to hear directly from U.S. manufacturers and 
manufacturing workers. The manufacturers attending these open meetings 
represented a broad mix of small- and medium-sized manufacturers, as 
well as minority-owned and women-owned enterprises. During these two-
hour meetings, we had in-depth conversations with many such 
manufacturers and workers about their particular challenges and issues 
as distinct from larger manufacturers. In addition, as we developed the 
list of panelists for these roundtables, we took great care to balance 
the panel members by size of companies and manufacturing sectors. A 
majority of the panels were formed by SMMs.
    The views of SMMs are strongly represented in the ``Manufacturing 
in America'' report we developed. Chapter Two of this report is 
representative of the detailed input we received from SMMs as well as 
larger companies. The discussion of issues is representative of the 
diversity in sectors, size of companies and regions.
    The recommendations that we put forward in Chapter Three of our 
report continue this commitment. For example, we are creating an 
advocate for U.S. manufacturers in the Department of Commerce who can 
ensure that the voices of SMMs are reflected in USG policy-making. 
Moreover, we created a Manufacturing Council on April 4, 2004, which 
will be representative of small-, medium- and large-manufacturers. The 
Chairman and Vice Chairman have been selected, appointed, and 
announced. We anticipate completing selection and appointment of the 
members the week of May 24, 2004, or shortly thereafter. We expect to 
hold the inaugural meeting of the Council by the end of June. We hope 
this important body representing the interests of manufacturers 
institutionally in U.S. policy-making will enjoy longevity and maintain 
an established voice particularly for SMMs. Many other recommendations 
in the report are also of particular benefit to SMMs. For example, tax 
relief will be particularly helpful for our SMMs that operate as S-
corporations and partnerships. Also, the establishment of Association 
Health Plans will afford small manufacturers greater leverage in 
negotiating the cost of health insurance with providers.
    Two programs of particular benefit to SMMs are the Small Business 
Innovation Research (SBIR) and the Small Business Technology Transfer 
(SBTT). We call attention to these programs and recommend that SBIR and 
SBTT place a higher priority on manufacturing R&D topics that would 
greatly leverage innovation in SMMs. We also focus on the MEP program 
and recommend ways in which that program can deliver greater benefits 
to SMMs by strengthening partnerships with other government programs.
    An owner of a small manufacturing company told us at our Milwaukee, 
Wisconsin roundtable that he, like other SMMs, does not have the 
resources to hire the lawyers to bring forward a dumping/countervailing 
duty case. Pursuant to the manufacturing initiative, we have created at 
the Department of Commerce an Unfair Trade Practices Task Force within 
the Import Administration. This team will take on the burden of 
proactively seeking out and addressing unfair trade practices. To help 
SMMs identify potential customers, we are also developing a Global 
Supply Chain Initiative. Through this initiative, we will help SMMs 
expand their reach and identify new customers they may not otherwise be 
aware of.
    As you can see, we focused significantly on the needs of small- and 
medium-sized manufacturers and will continue to bring resources to bear 
on their needs and challenges. I look forward to continuing this 
dialogue with you on such an important matter.

                NEW ASSISTANT SECRETARY OF MANUFACTURING

    Question. While I have praised the Administration's efforts to 
organize a President's Manufacturing Council and appoint a new 
Assistant Secretary of Manufacturing, I am concerned that is taking so 
long to get these efforts off the ground. These initiatives were 
announced last September and I understand your staff has said not to 
expect anything before June--at the earliest. My constituents are 
understandably skeptical.
    Given the problems already facing the new Assistant Secretary of 
Manufacturing and the expected lag time, are there plans to place MEP 
under the jurisdiction of the Assistant Secretary of Manufacturing?
    Answer. There are synergies between ITA and MEP that we should use 
to provide better support to MEP's private sector clients. MEP and ITA 
staff are already working together to increase coordination. For 
example, our sectoral experts in the new Manufacturing and Services 
unit will benefit from enhanced coordination with NIST's technical 
experts. Similarly, our Commercial Service staff across the United 
States can help in marketing MEP's programs to the business community, 
particularly small and medium-sized business.

                PATENT AND TRADE COMPLAINTS AND BACKLOG

    Question. I have had complaints from constituents about the backlog 
of manufacturers' complaints in both the Patent Office and the 
International Trade Administration concerning both patents and trade 
violations. We have heard stories from constituents regarding American 
manufactured products that have been copied, sometimes down to a 
stamped company emblem, and then produced overseas, undercutting the 
price of the original American producer. What is the Department doing 
to respond to these complaints? How soon can we expect reductions in 
the current backlog?
    Answer. The USPTO supports ITA in providing expert advice on trade 
dispute matters. Trade disputes are principally handled within ITA 
itself. The USPTO also responds proactively to trade issues through 
support of bilateral efforts undertaken by ITA, USTR, Customs, USDOJ, 
State and other agencies involved in IPR matters. We also provide 
support to training programs, which are intended to support foreign 
government's efforts to achieve WTO compliance. Through our 
participation in the National Intellectual Property Law Enforcement 
Coordination Council, we provide guidance on law enforcement matters 
involving intellectual property issues, including encouraging enhanced 
criminal enforcement. In certain instances, piracy and counterfeiting 
issues are attributable in part to delays and procedures by foreign 
patent and trademark offices themselves. Through office-to-office 
discussions as well as meetings in multilateral fora, such as the World 
Intellectual Property Organization, APEC/Intellectual Property Experts 
Group, and the United Nations Economic Commission for Europe, the USPTO 
encourages additional compliance with International standards.

                                 ______
                                 
             Questions Submitted by Senator Robert C. Byrd

                 EMERGENCY STEEL GUARANTEE LOAN PROGRAM

    Question. President Bush's fiscal year 2005 budget proposes to 
rescind $35 million from the Emergency Steel Guarantee Loan Program. 
This rescission will effectively kill the program, despite the fact 
that Congress has extended the program for two more years, through 
December 31, 2005. In recent testimony before the Senate Budget 
Committee, OMB Director Bolten stated that the Department of Commerce 
was ``not planning to pursue rescissions from the steel loan guarantee 
fund.'' How does the Department reconcile this statement with the 
proposed rescission contained in the President's fiscal year 2005 
budget? How does the President reconcile this statement with its 
numerous prior pledges to support the U.S. steel industry?
    Answer. The Administration has supported a number of initiatives 
that have strengthened the steel industry, and will continue to do so. 
The statement of Director Bolten, to which you refer was made with 
regard to a rescission contained in the fiscal year 2004 omnibus 
appropriations bill. For fiscal year 2005, the Administration has 
proposed to fund the Emergency Steel Loan Guarantee Program (ESLGP) at 
a level of $17 million. Enactment of the Administration's proposal 
would provide sufficient money in the ESLGP's account to accommodate 
current and anticipated demand while also permitting funds to be 
utilized for other priorities. Nevertheless, we remain concerned 
regarding the effectiveness of the ESLGP. There has been a very low 
level of utilization of the program; during its existence, only three 
loans have closed with the benefit of a guarantee, and one of those has 
defaulted.

         WTO RULING ON CONTINUED DUMPING AND SUBSIDY OFFSET ACT

    Question. Congress included language in the fiscal year 2004 
omnibus appropriations bill, which directs the Administration to 
negotiate a solution to the World Trade Organization's (WTO) ruling 
against the Continued Dumping and Subsidy Offset Act. When will the 
United States present its negotiating position on this matter to the 
WTO? In report language accompanying the fiscal year 2004 omnibus 
appropriations bill, Congress directed the Administration to report to 
the Senate Appropriations Committee every 60 days on the progress of 
these negotiations. Given the Congressional directive to negotiate a 
solution to this matter, what is the Administration doing to initiate 
these negotiations? Can you confirm that the first update will be 
provided to the Appropriations Committee 60 days from enactment of the 
omnibus appropriations bill, which would be on or about March 23, 2004?
    Answer. The Administration has defended the Continued Dumping and 
Subsidy Offset Act of 2000 (CDSOA) throughout a long WTO dispute 
settlement process. The Administration has raised this issue in the 
context of the WTO's ongoing Doha Round of multilateral trade 
negotiations. Within WTO Rules Negotiations Group, we have raised the 
issue of WTO member's authority to distribute Anti-Dumping and 
Countervailing Duties. Consultations with the Congress on these and 
other trade negotiations are led by the Office of the U.S. Trade 
Representative and are ongoing.
    As required in Senate Report language, the Department of Commerce 
and the Office of the U.S. Trade Representative are consulting for the 
purpose of ensuring proper implementation of the requirements of U.S. 
law regarding negotiations over the distribution of antidumping and 
countervailing duties. The Administration intends to comply with all 
such requirements, including reporting requirements. The Administration 
will complete these consultations as soon as possible and will continue 
to work to advance Congressional objectives in the Doha Round 
negotiations.

                  SECTION 201 DUTIES AND STEEL IMPORTS

    Question. It is my understanding that the U.S. Commerce Department 
is considering whether to adopt a policy that would deduct import 
duties imposed under Section 201-203 of the Trade Act of 1974 
(``Section 201 duties'') from the U.S. price that is calculated in 
determining the margin of dumping in U.S. antidumping cases.
    This is an important issue that is critical to the future of many 
U.S. companies and workers who rely on the effective enforcement of the 
U.S. trade laws. Several of my constituents and other interested 
parties submitted comments to the U.S. Commerce Department in support 
of this deduction of 201 duties last year. I understand that Commerce 
currently has a large number of administrative reviews pending in which 
this issue has been raised.
    Is there any additional information that would assist the 
Department in deciding to endorse this policy of deducting 201 duties 
in antidumping duty cases? What will be the first case in which the 
Department will deduct 201 duties when calculating an antidumping duty 
margin?
    Answer. On April 6, Import Administration announced its decision 
not to treat safeguard tariffs (201 duties) as a cost in the dumping 
margin calculations.
    The issue was raised in several cases, including the ongoing 
administrative review of the antidumping duty order on stainless steel 
wire rod from South Korea. In this case, the U.S. importer, whose price 
to an unaffiliated U.S. buyer was used to calculate export price, was 
required to pay 201 duties. The petitioner argued that these tariffs 
constituted a cost that should be deducted from the U.S. price.
    In September 2003, the Department published a Federal Register 
notice requesting public comment on the treatment of 201 duties (and 
the related issue of whether to deduct countervailing duties) in the 
antidumping duty calculations. The Department received extensive 
comments from a variety of parties, including domestic producers, U.S. 
importers, U.S. consumers, and foreign producers.
    After fully and carefully reviewing the legal and policy questions 
involved in this issue, the Department concluded that the U.S. 
antidumping law does not intend for the deduction of safeguard tariffs 
from U.S. prices in calculating dumping margins.
    Although the law clearly requires the deduction of normal import 
duties for dumping calculations, the Department believes that safeguard 
tariffs cannot be considered import duties. These tariffs are imposed 
only under special circumstances for the express purpose of providing 
relief from serious injury due to increased imports. Deducting 
safeguard tariffs from the export price in calculating dumping margins 
would effectively increase the safeguard remedy; in some cases 
providing a double remedy. Further, it would create a situation where 
fairly traded imports could become liable for antidumping duties simply 
due to the imposition of safeguard tariffs.
    The Department's decision on this issue is articulated in our 
Notice of Final Results of Administrative Review/Decision Memorandum, 
which may be found on Import Administration's website: 
www.ia.ita.doc.gov.
    Question. On December 4, 2003, the White House Office of 
Communications issued ``The President's Determination on Steel,'' which 
stated that President Bush ``is committed to America's steel workers 
and to the health of our steel industry.'' It also stated that, 
``[s]teel import licensing, established when the safeguard measures 
were imposed, will continue to provide WTO-consistent data collection 
and monitoring of steel imports. This will enable the Administration to 
quickly respond to future import surges that could unfairly damage the 
industry.''
    The President's Proclamation of the same date similarly stated that 
``the licensing and monitoring of imports of certain steel products 
remains in effect and shall not terminate until the earlier of March 
21, 2005, or such time as the Secretary of Commerce establishes a 
replacement program.''
    Secretary Evans, you made several comments to the media on December 
4, 2003, regarding your commitment to the U.S. steel import monitoring 
and licensing system and indicated that it would be expanded to include 
steel products that were not subject to 201 tariffs and quotas. I want 
to be certain that you remain fully committed to this effort. Could you 
please advise me as to whether the Commerce Department has a plan to 
expedite the adoption of these expanded regulations? Could you also 
please advise me as to when the Commerce Department intends to request 
public comment with respect to its new import monitoring and licensing 
system? When would you estimate that it will be up and running? What 
assurances can you provide that the system will be operational by that 
date?
    Answer. The Commerce Department is continuing to monitor closely 
the imports of those steel products for which the President implemented 
import relief pursuant to Section 201, as well as general market 
conditions. As a result, accurate information regarding such imports is 
being made available to the public on an expedited basis. We have been 
meeting with representatives of the steel industry and other 
stakeholders to get their input on improvements to the current system. 
The Administration is continuing to evaluate possible modifications to 
the current system and will ensure that it remains an effective 
monitoring tool.
    Question. The U.S. Commerce Department currently does not pursue 
trade remedies under our countervailing duty law against non-market 
economies like China even though: (1) the U.S. negotiated subsidy 
disciplines with China as part of its accession to the WTO; (2) the 
United States has worked to see that China participates in the ongoing 
OECD steel subsidy negotiations; and (3) USTR reports various 
agricultural industries are experiencing ongoing export subsidies by 
China. Can you tell me whether the Commerce Department is reexamining 
this issue? If not, why not?
    Answer. Commerce does not currently apply the CVD law to non-market 
economies, and this practice has been upheld in the courts in 
Georgetown Steel Corp. v. United States. In that case, the court 
affirmed Commerce's view of NME's as devoid of the kinds of market 
benchmarks necessary to identify a subsidy. Congress enacted 
substantial amendments to the CVD law in 1988 and 1994 without 
disturbing Commerce's practice in this area.
    The Department recognizes that the reasoning underlying the 
Georgetown decision may not apply to China today to the extent that it 
did 20 years ago. However, applying the CVD law to non-market economies 
would raise complex issues of policy and methodology that the 
Department has not fully considered, including implications for 
antidumping policy and practice. Any such shift away from 20 years of 
trade practice should therefore only be implemented after careful 
consideration and review.

                           U.S. DUMPING LAWS

    Question. Concerns exist about the adequacy of existing practices 
in administering the U.S. antidumping duty law against imports from 
NMEs, but particularly China. With the extraordinary trade deficit that 
the United States is running with China, can you provide details of 
what changes in the administration of the U.S. dumping law are being 
considered for NME cases and when the agency will be implementing such 
changes?
    Answer. The Department will be giving priority attention to issues 
related to trade with China, which has been the object of a significant 
number of trade complaints. In fact, during the last three years, we 
have initiated more antidumping investigations and issued more 
antidumping duty orders against products from China than any other 
country, more than twice as many as the next leading country. In 2003, 
more than 50 percent of all new antidumping orders put in place were 
against China (8 of 15 total orders).
    The Department will soon establish an office that will focus on 
cases involving Chinese imports, further cultivating the expertise 
necessary to address the unique problems encountered in that market.
    We have developed practices that allow us to more rigorously 
examine requests for new shipper reviews before initiation, and to 
continue to scrutinize eligibility for the reviews after initiation. As 
a result of these practices, in 2003, we declined to initiate 
approximately one-third of all new shipper requests, and we rescinded 
the initiation of several new shipper reviews. We have also increased 
our scrutiny of fraud and circumvention issues in the context of new 
shipper reviews. In addition, we are working closely with U.S. Customs 
and Border Protection to ensure that adequate financial security is 
provided in connection with merchandise imported during new shipper 
reviews and that--if our initiation of a new shipper review is 
ultimately rescinded--we will be able to require in appropriate cases 
that interest be assessed on merchandise imported during the review.
    Single DAS for AD/CVD Operations: By placing all antidumping and 
countervailing duty case work under a single Deputy Assistant Secretary 
for Operations, we will facilitate case specialization.
    Unfair Trade Practices Team: A new Unfair Trade Practices team will 
report to the DAS for Antidumping/Countervailing Duty Policy & 
Negotiations. This new unit will strengthen the Department's ability to 
advance U.S. trade policies and negotiations and address the root 
causes of unfair trade.
    Efforts to Address Possible Fraudulent Activity: We have been 
developing more expertise within the Department on how to uncover 
potentially fraudulent activities, and through the Bilateral Task Force 
with the Bureau of Customs and Border Protection and the Bureau of 
Immigration and Customs Enforcement, we are developing new procedures 
for sharing information that will help us identify problems earlier and 
deal with them more effectively. For example, we now regularly request 
samples of actual entry documentation from Customs to compare with the 
documentation submitted by the foreign respondent or obtained at 
verification to ensure that the same documentation is provided to both 
agencies. We also conduct independent research into the foreign 
respondent's ownership, as well as the U.S. importer's ownership, to 
determine whether the information about affiliations is accurately 
reported in the questionnaire responses.

                          SUBCOMMITTEE RECESS

    Senator Gregg. This subcommittee will convene next Tuesday, 
to hear from the Attorney General. We are recessed.
    [Whereupon, at 11:19 a.m., Tuesday, March 2, the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]
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