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



 
DEPARTMENTS OF COMMERCE, JUSTICE, AND STATE, THE JUDICIARY, AND RELATED 
                    AGENCIES APPROPRIATIONS FOR 2004

                              ----------                              

                                           Thursday, March 6, 2003.

                         DEPARTMENT OF COMMERCE

                               WITNESSES

HON. DONALD L. EVANS, SECRETARY OF COMMERCE
    Mr. Wolf. Mr. Secretary, there are other subcommittees 
meeting.
    The subcommittee is pleased to welcome the Secretary of 
Commerce, Don Evans to testify on behalf of the Department's 
fiscal year 2004 budget request.
    The Department of Commerce's budget request includes 5.8 
billion for this year, an increase of 1 percent over the fiscal 
year 2003 appropriation.
    This is your third time appearing before our committee, and 
we certainly want to hear your views on a number of issues, and 
let me just say personally I appreciate the good job you are 
doing, and the difficulty that the Administration is facing in 
these days of war, with the potential war with Iraq, terrorism, 
and the economy.
    And it is like Esther to be here for a time like this. This 
is a very difficult time. So we appreciate your service and 
others in the Administration on these really very, very tough, 
tough issues.
    Before we hear your opening statement we would like to take 
a few minutes to welcome back to the subcommittee--they are not 
here because they are at other subcommittees--but Congressman 
Martin Sabo has joined this committee, who was the ranking 
member when I was the chairman of the Transportation 
Appropriations Subcommittee. Also Congressman Mark Kirk, who I 
know wants to be here today. And with that, I guess, we will 
just submit the rest of the statements for the record. And I 
recognize Mr. Serrano for an opening statement.
    Mr. Serrano. Thank you, Mr. Chairman. Let me first take a 
second here to publicly thank you for your treatment of me 
personally, the members of this subcommittee and my staff 
during the very last year difficult appropriations process. And 
you were very kind and as always a gentleman, and I want to 
publicly state that.
    Mr. Secretary, welcome back to our subcommittee. It is 
always a pleasure to see you. I want to thank you also, because 
every time you show up we get a big room. So I appreciate that.
    Mr. Secretary, 2 days ago you were at the White House to 
announce the launching of a Digital Freedom Initiative. The 
goal of the new initiative is to promote economic growth in the 
developing world by transferring the benefits of information 
and communications technology to entrepreneurs and small 
businesses in Senegal and other developing nations. I applaud 
this new effort.
    But I am also concerned that we are not offering the same 
opportunities to bridge the digital divide in our own country. 
I am concerned we are not doing enough to ensure that our own 
minorities and small businesses enjoy the economic growth and 
prosperity we are all trying to foster.
    Once again, you propose to end the Technology Opportunity 
Program. Once again you propose to phase out the Manufacturing 
Extension Partnership Program that has helped so many small 
U.S. Manufacturers. And for the first time you recommend 
suspending public television digital conversion grants from the 
National Telecommunications and Information Administration. I 
understand there is a proposal elsewhere in the budget to 
provide such grants, but only by taking 20 percent of the funds 
already appropriated to produce and acquire public television 
shows.
    I believe, I certainly hope, Congress does not have the 
appetite to take that big a bite out of Big Bird. But I do not 
want to focus on the negative today. There is so much good you 
and the Department are doing in general in a vast array of 
activities.
    And the Department's importance is also evident in my 
district and my city with the Bronx River Restoration Project, 
the Hunts Point Weather Station, which is a very, very exiting 
project, and the investigation into the collapse of the World 
Trade Center Towers to name just a few.
    So, again, while there are some concerns I have, I also 
commend you and the Department for a wonderful job during a 
very difficult time. I thank you and look forward to your 
testimony.
    Mr. Wolf. Mr. Secretary, your full statement will appear in 
the record. But you can read the entire statement or summarize 
it, do as you see appropriate.
    [The information follows:]
    [Clerk's Note.--It is noted that the witness and 
Representative Sweeney and Representative Kirk referred to 
programmatic increases from the Fiscal Year 2003 President's 
Request to the Fiscal Year 2004 President's Request. The 
Chairman and the other Members of the Committee referred to 
programmatic increases from the Fiscal Year 2003 Appropriation 
to the Fiscal year 2004 President's Reqeust]

      [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 


                  Opening Statement by Secretary Evans

    Secretary Evans. Thank you, Mr. Chairman. I am delighted to 
be back here. This is my third opportunity to be before this 
outstanding committee. I want to thank you, Mr. Chairman, Mr. 
Serrano, for the pleasure I have had with working with the two 
of you and this entire committee over the last several years.
    I think that we do continue to make progress, and I want to 
tell you, along with the entire committee, how much respect I 
have for all of you that are here committing your time to 
public service. It is a very noble calling.
    As somebody who served 26 years of his life in the private 
sector, I know something about the private sector, and am 
learning something now about the public sector. I just want to 
state for the record how much respect I have for anybody that 
commits their life to public service and say for the record 
that it is not only a sacrifice of the individuals that serve, 
but it is a sacrifice for their spouses and a sacrifice for 
their families.
    So I thank you, all of you, and I would like to read a 
brief statement into the record.
    Mr. Chairman, Mr. Serrano, members of the committee, I am 
pleased to be here again and to present the President's fiscal 
year 2004 budget request for the Department of Commerce.
    With your permission, I would like to briefly highlight 
some key components of our budget and submit my written 
testimony for the record. A vibrant private sector is essential 
to American jobs and security. 100 years ago Congress created 
the Department of Commerce to promote American industry and 
business and economic opportunity for our citizens.
    This is the nexus of our diverse programs in trade, 
technology, entrepreneurship, and environmental stewardship. In 
developing this budget request, I have carefully followed the 
President's directive to focus on core priorities.
    As you know, making a budget entails difficult decisions. 
Resources are limited. Choices have to be made. Clearly these 
troubled times of war and attacks on our way of life demand 
responsible, targeted spending.
    The President's total budget request for the Department of 
Commerce is $5.4 billion. This budget provides for the 
continued funding of key Commerce programs, while focusing 
resources on four critical priorities: Fostering economic 
growth, contributing to homeland security, advancing science 
and technology, and upgrading facilities.
    To generate jobs and economic growth, government and 
business decisionmakers need the best possible economic 
information. An additional $5.4 million is requested for the 
Bureau of Economic Analysis. These funds are required to 
improve the accuracy and timeliness of GDP and economic 
accounts data. As you know, two-thirds of the revisions in the 
last three GDP annual releases were due to a lack of 
information.
    For the Census Bureau which monitors the Nation's social 
and economic development, we are asking $9.3 million to 
increase funding. The money is for improved data collection and 
methods, the measurement of the important services sector, and 
continued planning for the 2010 Census.
    The President and I are very concerned about the economic 
security of America's workers. A proposed increase of $13.8 
million for the Economic Development Administration will assist 
communities severely impacted by plant closures and layoffs.
    To meet homeland security needs, the President is 
requesting an additional $2.3 million for the Bureau of 
Industry and Security. The funds will be used to strengthen 
export controls on dual-use goods and technologies that would 
strengthen the military capabilities of our adversaries.
    The NOAA budget request includes $6 million to expand NOAA 
weather radio to a truly national all-hazard warning network. 
The funding will allow first responders and emergency managers 
direct access to the network to transmit all hazards messages. 
And to further strengthen homeland security, we are requesting 
$10.3 million dollars for NIST. As you know, NIST is 
investigating the collapse of the World Trade Center buildings.
    Using lessons learned, we want to help develop new 
standards for cost effective safety and security of buildings. 
Additionally the funds will be used to test performance 
standards for biometric systems used to identify visitors to 
our country and to test radiation standards.
    To support technology innovation and provide for 
intellectual property protection, the Department is working to 
eliminate the practice of using USPTO revenues for unrelated 
Federal programs. Making more fees available sooner will enable 
the agency to increase the quality of patents and trademarks 
issued.
    Because America's leadership in science and technology has 
direct impact on our economic and homeland security, we are 
requesting $9.2 million for NIST research into such emerging 
areas as nanotechnology, quantum computing and health care 
quality assurance.
    We also include a $16.9 million increase for NOAA to study 
areas of scientific uncertainty in climate, and a 31.8 million 
increase to modernize fishery management to better this $50 
billion industry.
    Mr. Chairman, the scientists, engineers, and support staff 
in our Commerce laboratories are world class. Unfortunately in 
some cases the facilities they occupy are not. For example, the 
NIST facilities in Boulder, Colorado were built in the 1950s 
under the Eisenhower administration. I have seen them. They 
lack adequate temperature controls. They suffer power outages 
and power spikes. All of this is adversely affecting our vital 
research, which is central to our core mission.
    The fiscal year 2004 budget request includes funding to 
renovate the NIST Boulder facilities and to bolster safety and 
security in NOAA's facilities and throughout the Department.
    As I said earlier, these are troubled, threatening times 
for our Nation. We have had to make some tough choices 
affecting some very, very good programs. To enable us to focus 
on new economic and homeland security needs, this budget phases 
out funding for the Advanced Technology Program and the 
Technology Opportunities Program.
    It includes funding only for those Manufacturing Extension 
Partnership Centers in operation for less than 7 years, as the 
original law specified. It also suspends funding for the public 
telecommunications facilities planning and construction 
program.
    I know there will not be universal agreement about these 
choices. There are members of this committee and other Members 
of Congress who will have different views on priorities and 
funding. I respect those views and those judgments. I look 
forward to working with this committee and with you through the 
budget process on the many issues affecting the Department.
    Mr. Chairman, we appreciate the support the committee 
members have provided for Commerce programs and initiatives in 
the past. This budget is focused on helping our Nation meet the 
challenges it faces in these difficult times. I welcome your 
comments and would be pleased to answer any questions that you 
have.
    Thank you, Mr. Chairman.
    Mr. Wolf. Thank you, Mr. Secretary. Before I get into 
questions, let me recognize now Mr. Kirk and Mr. Sweeney, who 
are the two members, we mentioned them before, who are now on 
the committee, and also Congressman Sabo, who was here. I just 
saw him walk in, but perhaps he had to walk out again.
    Mr. Secretary, the overall budget request, as you said, is 
5.8 billion for fiscal year 2004, an increase of 1 percent over 
fiscal year 2003. Yet as you go through this process, there 
really are a number of problematic reductions used to offset 
it.
    I worked for a Cabinet secretary a number of years ago, and 
I understand the degree of difficulty with regard to OMB 
sometimes. But for example, the digital transmission grants for 
public television are eliminated, a reduction of $41 million 
from the fiscal year 2003 appropriation.
    Some of the trash on other television, compared to public 
television, I mean, it is almost impossible as a father of four 
girls to sit and watch continually the network TV shows from 8 
until 11 o'clock at night.
    I mean, when I think of the 31 million people starving and 
dying in Africa of hunger and HIV/AIDS, I think the 
Administration has an outstanding record on HIV/AIDS in Africa, 
and on hunger. We are giving 51 percent of all of the food, 51 
percent of all of the food worldwide, and our friends in the EU 
and France and Germany are giving like 21 percent.
    When I look at ``The Bachelorette'' and ``Joe Millionaire'' 
and the garbage. Sometimes, public television may be the only 
thing that as a dad or as a grandfather you can sit and watch. 
So I think that becomes a problem.
    Advanced technology program grants are eliminated, a 
reduction of $180 million. When I go back to that point, when I 
think of how little coverage the network is giving 30 million 
people dying of hunger and famine in Ethiopia and places, and 
then if they would give the same attention to that as they give 
to ``Joe Millionaire'', we could electrify the world. They 
would support what this President and this Administration, 
which frankly I guess you really haven't told the story of how 
good this Administration has been on the issue of HIV/AIDS and 
the hunger in Africa.
    Only by me digging did I find out that 51 percent of all of 
the food that is given to poor people around the world is 
coming from the United States. No where did I see, until I 
found the figures, how little the French are doing. No where 
did I see how little the Germans are doing. No where until I 
dig did I find out how little the Italians are doing.
    The Manufacturing Extension Partnership, MEP Program, is 
eliminated, reduction of $94 million; $97 million rescission to 
the steel loan guarantee. I know Congressman Regula has been 
very, very concerned with regard to that. Economic downturns in 
the United States manufacturing and our high tech sector, my 
area out in Northern Virginia, as you know make these program 
cuts particularly difficult and perhaps not really appropriate.
    The public broadcasters are concerned that the public 
television stations have not yet completed their transition 
from analog to digital communications. Yet you proposed to 
suspend funds for this program.
    Further, your budget continues to include a rescission from 
the steel loan guarantee, and the steel industry is in crisis. 
We were told, whether it is accurate or not, we will check and 
see, perhaps you may want to check and submit for the record, 
that one company that applied for the benefits of this program 
said they were denied on Monday. Other companies have expressed 
interest in receiving the benefits. No steel companies are in 
my Congressional district.
    Last year's budget proposal rescission of this program was 
not enacted. So, overall we estimate that the budget is based 
upon at least $331 million in unlikely, and I would have to 
say, unrealistic offsets.
    Given these holes, we are going to have to ask you, you can 
tell us now, but I think that we have a good working 
relationship with you and your staff, we are really going to 
have to know the highest priorities within this request, so as 
we are putting the budget together, some of these things will 
not be cut, but we can also make sure that we go and give you 
the necessary money in the areas that you also think that are 
priorities.
    So what are your comments with regard to that?
    Secretary Evans. Well----
    Mr. Wolf. Not ``Joe Millionaire'' or ``Survivor'', or if 
you want to comment on that you can, but on these issues.
    Secretary Evans. Well, Mr. Chairman, you bring up several 
very important issues that I would like to comment on. You 
mentioned some very worthwhile programs that are not in our 
2004 budget, including ATP, Advanced Technology Program, which 
has had some significant successes in its life over the last 15 
years.
    The MEP program, Manufacturing Extension Partnership is 
still going to be funded. However, we are proposing to fund 
only those partnerships that have been in existence for less 
than 7 years, which is what the original law said. The law was 
later changed, and I would acknowledge that. the MEP is a very 
good program that produced some very good results. In fact, I 
would submit that the results are so good that I am surprised 
that the private sector would not be able to pick it up and run 
the program. With the kind of improvements in productivity that 
you have seen in some of the small manufacturing companies 
resulting from this worthwhile program, you would think that 
there would be a market for someone to offer these kind of 
services.
    Public television conversion, is also a very important 
program that has been underway for quite some time. About 312 
of the 350 stations either have been converted or are in the 
process of being converted. We did take it out of our budget. 
We are aware that there are other funds that will continue to 
allow for the ongoing conversion of these final 38 stations 
that need to be converted. But certainly all need to be 
converted. I share your view of the importance of that medium 
for our society to have access to it. I am very sensitive to 
that.
    [Clerk's Note.--Subsequent to the hearing, the following 
information was provided:]

    Emergency Steel Loan Guarantee Board Approves $250 Million Loan 
                               Guarantee

    On March 26, 2003, the Emergency Steel Loan Guarantee 
Board, acting pursuant to the Emergency Steel Loan Guarantee 
Act of 1999 (Public Law No. 106-51, Chapter 1), as amended, and 
the Board's regulations (13 CFR Section 400.1 et seq.), 
announced that it had unanimously approved, with certain 
conditions, a guarantee to Royal Bank of Canada with respect to 
a proposed loan of $250,000,000 to Wheeling-Pittsburgh Steel 
Corporation of Wheeling, West Virginia. The Board will 
guarantee repayment of 88 percent of the principal of the loan. 
The states of Ohio and West Virginia are also guaranteeing 
repayment of portions of the loan.

                      STEEL LOAN GUARANTEE PROGRAM

    Finally, you mentioned the steel industry. I will touch it 
just quickly. Yes, Wheeling Pittsburgh was denied a loan 
guarantee this Monday. The industry is going through a very 
difficult, tough, but constructive, restructuring. You are 
seeing it throughout the steel industry right now. It was the 
original intent of the steps taken by the President that there 
be a brief, limited time period, breathing space as we called 
it, for the industry to restructure and be competitive on the 
global market.
    I think when it comes to the steel industry, when it comes 
to all industries, and workers all across America, that it is 
important that we send a signal to all industry across America, 
our entire economy, that we are going to fight to make sure 
there is a level playing field for Americans to compete in the 
world. The steel industry had been competing against subsidized 
companies for the last 30 years, and it was time for them to 
restructure and be competitive. We believe that is what the 
safeguard has done, provided a little breathing space for them.
    But in terms of the denial, Mr. Chairman, I think when it 
comes to committing the American taxpayer's money, we all know 
our fiduciary responsibility for doing everything we can to 
make sure that it is invested wisely. According to the law, the 
Steel Loan Guarantee Board is an independent board that has a 
member of the SEC who in fact is a Democratic appointee of the 
SEC, a member of the Fed, and the Deputy Secretary of Commerce. 
It was a unanimous ruling that the loan be denied. I can say to 
you is that there are certain tests that have to be met in 
order for the application to be approved. I think it is very 
important that the Commission and the Board respected those 
tests. I am sure that they did. It was a unanimous decision.
    But there are difficult choices, and we are here to make 
difficult choices on behalf of the American people. And these 
very worthwhile programs that you mentioned were not included 
in the 2004 budget, as I said, I know there will be differences 
of opinion.
    You have mentioned working with us as we work through the 
completion of the 2004 budget, so that we clearly identified 
our highest priorities to you. We certainly will do that. As 
always, we have looked forward and have enjoyed working with 
this committee. And we will make every effort to make ourselves 
available to you and make every effort to make sure that you 
clearly understand what our highest priorities are, because I 
know they won't be exactly the same priorities that this 
committee would have.

                           U.S. TRADE DEFICIT

    Mr. Wolf. Sure, and you have and your people always have. 
One other question, then I will recognize Mr. Serrano, is the 
issue of the trade deficit. The United States recorded $435.2 
billion trade deficit for the year 2002, the largest imbalance 
in history.
    For the record, let me just say it is not your fault, it is 
not the Bush Administration's fault. When these things--it is 
like an ocean liner moving. So it has been moving for a long 
while, during the Clinton years, during other years. So there 
is no reason--I am not trying--this is not an adversarial 
question. It is just kind of what are we going to do type of 
thing, because we do have to do something.
    The Department of Commerce statistics state that the gap 
has grown 21 percent since the year 2001. For example, the 
numbers show a trade deficit with China, $102 billion, compared 
with $84.6 billion a year ago.
    Our deficit with Germany was $34.6 billion, compared to a 
$29.6 billion this time last year. Wholesale inflation, which 
has nearly been nonexistent jumped to 1.6 percent in January, 
the largest increase in 13 years.
    Mainstream economists, and it is hard to get an honest--it 
is hard to get a symptomatic answer from--depends on who you 
are asking the questions. But mainstream economists assert that 
U.S. Trade imbalances, put plainly, are because the United 
States consumes more than it produces. I mean, at Christmas 
time you couldn't buy a Christmas ornament celebrating the 
birth of Jesus, and they are made in China, which is about so 
far away from the concepts of and the way they treat their 
people, 14 Catholic bishops in jail, evangelical house churches 
rolled on a constant basis. And so there is some inconsistency 
when we see that.
    But mainstream economists say the manufacturing sector 
makes up one-fifth of our economy. What are the long-term 
impacts? And I had a report by the Library of Congress, I will 
just read it. It says, the U.S. Trade deficit has risen more or 
less steadily since 1992. This imbalance is estimated to reach 
about 512 billion in the year 2002, an increase of nearly $120 
billion over the 2001 deficit, and a rise of about $470 billion 
since 1992, showing this is a problem that we have had in the 
1990s as well as today. It says U.S. Trade deficits do impose 
burdens on trade sensitive sectors of the economy. One other 
thing it says, and then I will let you comment, is it is 
unlikely that the deficit will shrink any time soon. In fact, 
most projections out over the next 1 to 2 years see a further 
widening. Nevertheless a rapidly increasing trade deficit is 
not likely to be a phenomenon that is sustainable indefinitely.
    And then there was one other comment, which I won't go 
into, but where they say that there are some potential problems 
here. And I just wonder how do you see it, how as Secretary of 
Commerce, and what can we do to deal with it? My sense is for a 
period of time--and when you look at the numbers, and we will 
submit them for the record and I will give you a copy of the 
study--there was a period of time we actually had a trade 
surplus. Now, always having a trade surplus is not always 
necessary at all times. Germany has a trade surplus and their 
economy is in the tank, 9, 10 percent unemployment. But 
overall, my blue collar background tells me we cannot 
continually import more on a constant basis over a long, long 
period of time with that trend continuing to rise more than we 
are exporting. It is a question of jobs, it is a question of 
control over our economy.
    So, one, your thoughts about it, and, two, if you have any 
ideas of what the Congress might do or the Congress working 
with the administration might do. We are going to have some 
other questions about your trade people and other things like 
that later on.

                           U.S. TRADE DEFICIT

    Secretary Evans. Sure. Chairman, it is a very important 
question. Let me give you some of my broad thoughts. The first 
thought is, as you mentioned, the rest of the world is not 
doing particularly well in terms of economic growth. Youfind a 
spot or two, one of them might be China. But beyond that it is hard to 
find other areas, other regions of the world that are really growing. 
Japan has clearly been flat for well over a decade now.
    The European countries are basically flat, or experiencing 
very modest growth. So the U.S. Economy is driving the global 
economy. We are a third of the global economy right now. Since 
1992, that has been true. As I traveled around the world, 
people marveled at the American economy. How have you been able 
to generate 20 million jobs in the 1980s. You generated 20 
million jobs in the 1990s? They marvel at the American economy 
and its ability to continue to grow, continue to expand, and 
continue to create jobs.
    And what we need to do is continue to not only lead the 
world in economic growth, but help the world create their own 
economic growth environment so the rest of the world grows and 
we don't become the only engine of a global economy. The answer 
to the concerns that we all have, is to lead this world to of 
peace and lift it up out of poverty. I always think, Mr. 
Chairman, there are 6 billion people that live on the planet. 
There are 3 billion that live on less than $2 a day. That 
doesn't work. There is too much poverty in this world. And so 
what you think about is how can we create the global conditions 
for economic growth, take some of the pressure off the United 
States to continue to drive this global economy. We need to 
continue and we will continue to make sure that our economy is 
growing at its full potential.
    But the reason we are seeing this growing deficit right now 
is because the rest of the global economy is not performing. 
And so now the flip side of a deficit, of course, Mr. Chairman, 
is it means that inflation is in check. And it means that 
families across America are buying goods and services, needs 
for their children, needs for their families at lower prices 
than they might otherwise have had to pay for them.
    It also means, since you have inflation in check, you are 
able to pursue some pro-growth monetary policies and some pro-
growth fiscal policies. Obviously, we have some pro-growth 
monetary policies in place right now, which is healthy for our 
economy. With interest rates at 41-year lows, and household 
ownership at historic highs, you have the American dream being 
realized by more people than ever.
    So there are some pluses to a deficit in terms of 
continuing to keep inflation in check. And another point, Mr. 
Chairman, that is important to make is the global economy is 
indeed becoming more integrated and more interlinked and more 
interrelated. There are more multinational ownerships in the 
world. In fact, if you look at the imports that come into the 
United States, 50 percent of them are going from one company to 
the subsidiary of a company in a foreign country that has a 
subsidiary here in the United States.
    And then when you also look at the imports of goods coming 
to the U.S., about 30 percent winds up being converted into 
some kind of export. And so you have imports coming in that are 
placed as part of an export that gets exported back out of this 
country. So you are going to see this continuing integration 
and interlinking and networking of a global economy, and it 
should lead to a more efficient global economy.
    It just so happens that right now we are the only economy 
in the world of size that is growing, and so it puts pressure 
on the U.S. because we will see more and more imports coming 
in, we need to encourage other countries to create the 
conditions for economic growth.
    That is what we do when we travel around the world and talk 
to our colleagues, whether it be in Japan or the EU, or 
wherever it may be. You really need to get some pro-growth 
economic policies in place to play a role in growing this 
global economy so we can help lift this world up out of 
poverty--that is the goal.
    One other final point that has to be acknowledged at this 
point is that the growing deficit, in part, is not only related 
to energy prices, but also energy volumes. We are becoming more 
and more dependent every day on foreign sources of energy, 
including not only oil but natural gas as well. And so that is 
a growing component of the trade deficit that we are now 
experiencing.
    Mr. Wolf. Well, I appreciate that. Maybe we can chat about 
it some other time. But when you look at the numbers, and I am 
for opening up ANWR. I voted to do that so we have more 
domestic production here. But when you look at it from 1960, 
1960 we had a $4.6 billion trade surplus. Then you go to 1990, 
it was $102 billion deficit. 1991, $65 billion deficit. 1992, 
$84 billion deficit. 1993, $115 billion deficit. 1994, $150 
billion deficit. 1995, $158 billion deficit. 1996, $170 billion 
deficit. 1997, $180 billion deficit. 1998, $229 billion 
deficit. 1999, $328 billion deficit. 2000, $431 billion 
deficit. 2001, $411 billion deficit. 2002, $470 billion.
    That if it were happening over a period of years, I don't 
think there is anything magic about always having a surplus, I 
would rather have a surplus, but you have commercial attache 
offices who are out there who are encouraging our people to 
export. So there is some--that is important. But when I see it 
over a long term it just doesn't seem to be turning the corner.
    Let me just recognize Mr. Serrano.

                        WORLD TRADE CENTER STUDY

    Mr. Serrano. Thank you, Mr. Chairman.
    Mr. Secretary, the collapse of the World Trade Center 
Towers was the worst building disaster in human history. 
Immediately after September 11th, the Commerce Department was 
involved in the recovery and investigation. NOAA, as you know, 
took the first--NOAA planes took the first aerial photographs, 
and the National Institute of Standards and Technology 
Buildings and Fire Research promptly started working on 
understanding what happened and what we should change in the 
way we design tall buildings.
    Now, there was money in the 2002 supplemental for this 
study. There were additional dollars in 2003, and I know that 
you have a request, which I am sure this committee will look 
with support on for this coming year.
    How is that investigation going? And, most importantly, at 
this time, since there are already designs being considered 
very seriously in New York City for the new structure, how 
involved are you with the City in planning what these buildings 
should look like in terms of the condition that they would face 
from another attack, hopefully not but that could happen? And 
how involved are they with you? Are they reaching out through 
your study to find out what went wrong and what can be taken 
care of?
    Secretary Evans. Well, I know we have had good access to 
all of the data that we have needed, and so I would say that we 
have felt good cooperation with all departments, all agencies, 
including the City with respect to gathering the information 
required to conclude a study. The study is ongoing, not 
completed yet.
    I had a brief discussion about it just within the last 
couple of weeks. The Assistant Secretary at NIST is pleased 
with the performance to date and is looking forward to the 
final conclusion of the report. Don't have the specific time 
right now when that will be, but we are talking to and working 
with the city officials, the planners. Yes, we are.
    Mr. Serrano. When do you think that study would be 
complete?
    Secretary Evans. The study commenced in August 2002, and is 
expected to take 24 months.
    Mr. Serrano. Well, perhaps we should wait for the study to 
be complete. But the big argument in New York now is do we 
build a memorial with a few office buildings, do we not shy 
away from what could happen in the future and sort of with 
great--not arrogance, but with great desire build tall 
structures again?
    Do you think, even as they begin to plan prior to the study 
being in place, that you folks should be looking over their 
shoulders?
    Secretary Evans. We ought to be talking to them certainly. 
They would want to have the information that we have collected 
and the tests and analysis that have been run, the conclusions 
that have been reached. That is the purpose of the study, to 
provide contractors, architects, designers of these the kind of 
structures some guidelines as to kind of considerations that 
they should have in future building. I mean, that is the reason 
to go spend the $16 million that is being spent on the study.
    I think we will have more definitive information by the end 
of the summer, but completion of the study is going to take a 
while longer. It is going to be ongoing until about August 
2004. But should they be actively communicating with those that 
are building or are involved in the design of the future 
structures? I would say absolutely.
    Mr. Serrano. Well, you know, at the expense of opening a 
dangerous door, our elected officials usually don't want the 
Federal Government meddling in local affairs. On this one, I 
invite you to make sure that if they begin to move fast, 
without having the information that I think they need in place, 
please feel free to tell them, you know, to hold that a second 
to discuss things with you, because we want to make sure that 
that structure, those structures get built properly.
    Secretary Evans. As I mentioned, the full cycle of the 
study is about 2 years, and we have been going for about a 
year. So I know we have more milestones coming up this summer. 
But that is not to say that there is not some valuable kind of 
information that can be used now in terms of the construction 
and design of future buildings.
    Mr. Serrano. Right. In the area of Manufacturing Extension 
Program, Advanced Technology Program and the Technology 
Opportunity Program, it seems that we have to go through 
something here a couple of years in a row, which makes me 
wonder what the idea is. You have proposed, once again, that 
MEP, ATP and TOP should be--you know, they are on the chopping 
block again. But yet you must know that this committee seems to 
favor these programs and will work hard to put them back in 
again. But when you do that, when you folks present a budget to 
us that makes us then have to pay for these again, you put us 
in a hole, a hole that does not allow us perhaps to address 
some new initiatives that you have in place.
    So my question to you is, does your Department dislike 
these programs so much that you continue to present them, you 
know, a death wish for them every year or, you know, why 
continue to do that when we are going to put them back?
    Secretary Evans. Again, I would say that it is not a matter 
of disliking the programs. It is a matter of priorities. I want 
to acknowledge that these are worthwhile programs. I talked to 
people across the country on college campuses and in 
communities that are involved in the programs. I have seen some 
of the results of the programs. I really do think that there 
ought to be a market opportunity out there for someone to 
actually provide this to the small manufacturers in some kind 
of fee for service, or fee for whatever kind of basis.
    But no, I understand how the process works, and we have 
basically not put programs in our budget that were placed back 
in the budget by Congress. We present to the Congress the 
President's budget, his priorities, and that is what this 
budget is all about, presenting the President's priorities, 
which basically is saying that this is the Administration's 
position. In this difficult period that we are managing very 
tight budgets, MEP, ATP and TOP just didn't make the list.
    It is not saying MEP, ATP and TOP not programs. It is not 
saying they don't have good track records, or haven't delivered 
a valuable service to American manufacturers and communities. 
They just do not make the cut right now.
    But I understand that we will have differences on these 
programs. We just have to sit down and work our way through it, 
give you whatever other kind of advice or other kind of data we 
can. But I just know we have to work through these together.
    Mr. Serrano. Well, maybe there should be an unwritten rule 
if 3 years in a row that we replace them maybe the fourth year 
you don't ask them to be cut.
    Secretary Evans. Okay.

         CENSUS BUREAU WORK WITH MINORITY SERVING INSTITUTIONS

    Mr. Serrano. Let me ask you one other question before we 
give some other members some time here. But it is a Census 
question, but I promise not to ask you about the Suitland, 
Maryland facility.
    The 2003 conference report includes language urging the 
Census Bureau to continue to work to address concerns about 
Hispanic subgroup enumeration for the 2010 Census, and 
recommending that the Bureau take advantage of certain programs 
to improve the representation of minorities in senior 
management, and in all areas of research.
    How does the Census Bureau plan to address these concerns?
    Secretary Evans. Well, we are reaching out touniversities 
all across the country, particularly those that are minority serving 
institutions, that have a high percentage of minorities at their 
institutions, seeing if we can make some headway on that front.
    I can acknowledge that we still have work to do, but know 
that we are working on it very diligently and will continue to 
work on it. We are contacting minority serving institutions and 
will continue to do so. I am going to look at it again, expand 
it. I have asked the question a while back, are you going to 
the University of Texas at El Paso? I know the high percentage 
of Hispanics that are there at the University of Texas at San 
Antonio. Texas is a place that has a growing Hispanic 
population. I think it is a great ground for recruiting 
individuals that could serve in the Census Bureau very well.
    Mr. Serrano. Okay. Thank you, Mr. Chairman.
    Mr. Wolf. Mr. Rogers.
    Mr. Rogers. Thank you, Mr. Chairman, and, Mr. Secretary, it 
is good to see you here. Welcome again.
    Secretary Evans. Thank you, Hal. Thank you, sir.
    Mr. Rogers. We hope that you have every success in your 
job, because there is success for the rest of us when you 
succeed. So this subcommittee will try to find ways to be 
helpful to you as we can. We may disagree with you on a few 
minor points here and there, but overall you will find support, 
as have you, on this subcommittee's work.

                   HOMELAND SECURITY RELATED PROGRAMS

    I want to ask you briefly about your--in your statement you 
refer to a funding that is homeland security-related that you 
are requesting, and I wanted to ask you how this relates to the 
work of the new Department of Homeland Security, how you will 
work together with them. For example, you ask an increase of 
$13.3 million for NIST to address key national needs for 
homeland security measurement standards and technologies, 
saying that that request would strengthen NIST's portfolio of 
more than a hundred projects that address those needs.
    Tell us about that.
    Secretary Evans. Well, there are a number of projects that 
NIST Works very closely with Homeland Security on. One is 
developing the kind of technology that will absolutely identify 
individuals that are coming into the United States from some 
other country. For example, it could be some kind of physical 
mark on an individual that would provide you positive 
identification for who that individual is.
    NIST also is conducting work that would help in the 
detection of what are called dirty bombs, small nuclear kinds 
of bombs. So they are using the good science, the good 
technology that they have in that bureau to see what core kind 
of technology that we may be able to employ, not only to 
address individuals coming into the country, but materials that 
may be coming into the country or are in the country.
    Mr. Rogers. Well, that is the reason I asked that. Your 
budget request for NIST in relation to homeland security items 
included moneys to develop the measurement infrastructure 
needed to detect radiological bomb threats, to improve the use 
of radiation such as x-rays and other imaging techniques to 
detect concealed threats, to use radiation safely and 
effectively to destroy biowarfare agents like anthrax, moneys 
to develop standards and test methods for biometric 
identification systems, and things of that nature.
    Now, the Homeland Security Department will have a research 
and development arm itself, where I thought this type of thing 
would be done. Tell me how this would relate to what is being 
called HARPA, the homeland security version of DOD's DARPA. How 
will what you are asking for interplay with HARPA?
    Secretary Evans. Well, as you said, again the number is 
about $13 million; 6 of it relating to the issues that you just 
brought up. Another 7 of it relates back to Congressman 
Serrano's subject in terms of the study of the World Trade 
Center. So there is about $6 million there that relates to 
developing technology to detect dirty bombs. It is not being 
done in HARPA right now because the scientists are in place, 
the labs are there, the facilities are there.
    What the long-term consolidation will look like I am not 
sure. I think time will tell whether or not those scientists 
should remain there at NIST or to be moved into Homeland 
Security.
    But in order to get up and going at this moment with the 
labs that are in place, the tools that are in place, the 
scientists that are in place, they decided that that was a 
small thing that ought to be carved out at this point.
    Mr. Rogers. Well, that is something that we need to keep an 
eye on as we go through here. I want it done where it best can 
be done, like you do.

                    NOAA ALL HAZARDS WARNING SYSTEM

    Secretary Evans. Sure. Absolutely.
    Mr. Rogers. Now, also I notice you saying in your statement 
that you are requesting money for National Weather Service and 
NOAA, an increase of $7.7 million, which apparently would be 
used to change the NOAA weather radio system to what you call 
an all hazards warning network.
    Tell us what you have in mind there.
    Secretary Evans. Everybody is going to think that this was 
a setup, Congressman, but I have one with me.
    Mr. Rogers. Well, I assure you this was not setup. I didn't 
mean to do that.
    Secretary Evans. Well, yeah, we can get them. I assure you 
of that. This is a NOAA weather hazards alert radio, and the 
idea is that the NOAA weather radio that has been out there for 
many, many years incorporates into it a new element, which is 
the element of providing for an all hazards radio that would 
allow for the messages for Homeland Security to be front-end 
loaded into this radio. By front-end loaded, I simply mean that 
Homeland Security will have access to our system so they can 
quickly get the information out across America.
    We think that it will cut the time down from delivering the 
important information from 7 minutes to 2 minutes, say, to a 
region in this country, that is a possible terrorism threat in 
western Colorado, and that would then go into this, what has 
been a weather radio system now will be called an all hazard 
system, and get the information quickly across America.
    It is the desire that this will be in the hands of first 
responders, the local police, the local fire, the local 
officials as well as individuals across America. You can buy 
this right off the shelf. And so I think it is a great program. 
We have $5.5 million of the $7.7 million increase for Homeland 
Security activities allocated for that, and it just will give 
people more advanced warning of any possible threats.
    Mr. Rogers. So if a person now owns one of the weather 
radios in their home, would they need to make any changes in 
order to receive the new warnings?
    Secretary Evans. Don't need to make any changes.
    Mr. Rogers. They would automatically then hear warnings 
from Homeland Security through the weather radio that may be 
particularly related to where they live.
    Secretary Evans. To where they live.
    Mr. Rogers. So if there was a threat of anthrax in some 
portion of a city or a town, you would be able to rifle-shot 
the warning just to that locality by way of the radio?
    Secretary Evans. That is correct. We do it through--we have 
a series of towers across the country. We cover about 95 
percent of the country. And so there is about 5 percent that is 
not covered. I can't tell you what 5 percent that is.
    Mr. Rogers. So suppose there was a national alert of some 
sort. Would Homeland Security be able to go on the weather 
radios to the Nation at large with a national warning?
    Secretary Evans. Absolutely. Absolutely.
    Mr. Rogers. Well, I want to congratulate you. That is a 
very interesting piece of information and very, very helpful, 
and it gets the word out there instantaneously by way of the 
radio to localities or the Nation as a whole about the 
particular threat.
    Now, will there be anything done on the system to--when we 
change the color codes of warnings, will there be a warning 
going out?
    Secretary Evans. Congressman, I can't imagine that there 
won't be. The purpose of the all hazard system is to get 
emergency information to the American people as quickly as 
possible. And so I haven't heard someone tell me absolutely, 
but I can't imagine that there would not be a warning. That is 
the whole reason for it. RPTS THOMAS
    DCMN NORMAN
    Mr. Rogers. I want to thank you for that. That is an 
excellent idea. It utilizes a system that is wonderful in and 
of itself on weather alerts that can be used now for these 
other national purposes as well.
    Secretary Evans. The other thing I would say to you 
Congressman, is that this system is very user friendly. You can 
buy the weather radios at, your local electronics store. And 
they have also the portable ones that you can carry with you. 
So if you want to have one on a trip you can have it with you 
wherever you are.
    Mr. Rogers. For those people who may not be familiar with 
the little weather radio, two of them there that you have, are 
those available at the regular stores?
    Secretary Evans. Right there available at the regular 
stores. I better not mention any specific stores, I will 
probably get in trouble, but anyway, any of the local 
electronics stores.
    Mr. Rogers. Do you have an idea of the relative cost?
    Secretary Evans. I think about $40 or $50.
    Mr. Rogers. Well, thank you very much. Wonderful 
innovation.
    Secretary Evans. You bet.

                        PUBLIC TELEVISION ISSUES

    Mr. Rogers. I want to ask you briefly--I know my time is 
running short here--you propose to suspend the public 
telecommunications facilities planning and construction grants 
that the Chairman asked you about, reduction of $41 million 
during FY04. And I just wanted to reinforce what the Chairman 
said about some of the junk, what was it, the vast wasteland 
that we now see on commercial television. CBS in fact is 
proposing a new Beverly Hill Billies show which would take a 
poor family from the Appalachian region of the country and set 
them in a Hollywood setting today and make fun of them. If you 
did that to any other ethnic group in this Nation or even 
thought about it, the community of the Nation would condemn you 
for it.
    And I can't for the life of me see how CBS being a 
responsible major network would have the audacity to begin 
poking fun at the people that I call constituents. And I live 
among them, always have. They want to exploit a stereotypical 
image of those people that existed 50 years ago. But it is no 
longer there. It has changed. Our area has progressed and 
moved. Our people are spirited and they are progressive, and 
they want to leave behind the old stereotype that had attached 
to them. And we are making great progress. And it really makes 
me furious that one of the major networks, using the public 
airways that we own, wants to denigrate that group of people.
    Now, we may want to talk with you about the monies that you 
want to cut from public television because that is one place 
where we get fair treatment. And I would hope that CBS would 
scrap this idiotic idea, this discriminatory idea that defames 
a group of American citizens. And I want to assure you and 
everybody else, I will not sit idly by and watch anybody, 
particularly one using the public airways that this Congress 
controls, denigrate my people. Do you have any thoughts about 
that?
    Secretary Evans. Well, as I said earlier, I do. I am a big 
fan of public television as well. I am glad to see that we have 
made as much progress as we have made in terms of conversion of 
these public television stations. The program needs to 
continue. I am pleased to know that it will continue.
    The only other thought, Congressman, that comes to my mind 
about this very important issue that both you and the Chairman 
have focused on is a recent visit to Africa. I made a wonderful 
trip to Morocco about 4 months ago. I landed at Casablanca and 
got in the car and was driving to Rabat, the capital of 
Morocco. I drove through a number of fairly impoverished 
villages along the way, and saw a lot of dwellings where 
obviously people of very, very, very, very low income lived. 
The one striking thing to me was that on the top of every one 
of those dwellings was a satellite dish. And they were picking 
up programs from right here in America.
    Mr. Rogers. That is probably not a good sign, Mr. 
Secretary.
    Secretary Evans. I just make that point, because this is 
the stuff that is being beamed around the world.
    Mr. Rogers. I just wondered what you thought about the 
exploitation of this group of people that CBS is thinking about 
doing.
    Secretary Evans. Well, I would say this--it is pretty 
simple to me. One of the strengths of America is we treat 
everybody with respect, dignity, and honor, which is part of 
the American values that we all cherish in this country. I hope 
everybody will continue to honor those great American values 
that we cherish. I hope also that we are able to share those 
same values with the rest of the world; because I do think it 
is critical that the rest of the world understands that 
Americans are good people, and have great respect for everybody 
in our society.
    Mr. Rogers. What would you think if they were going to pick 
a family of hill people in west Texas, to poke fun at them in 
Hollywood. What would you think about that?
    Secretary Evans. I am sure it wouldn't please me or the 
people in west Texas.
    Mr. Rogers. That is not the way to use the public airways, 
is it?
    Secretary Evans. I wouldn't think so, Congressman.
    Mr. Rogers. Thank you.
    Mr. Wolf. Obviously I share Mr. Roger's comments. These are 
people that have sent their sons and daughters over the years 
to fight our wars. And anything that demeans, it is almost--and 
I had the same experience, too, traveling in the Middle East 
earlier this year. They were talking about some of the shows, 
``Baywatch'' and different things like that. And I think those 
things almost push cultural decline; whereas when you are 
watching public television, the ``Burns'' series, the ``Civil 
War'' series, different things like that. So I share Mr. 
Rogers' comments.
    Mr. Mollohan.
    Mr. Mollohan. Thank you, Mr. Chairman. The gentleman from 
Kentucky continues to impress me.
    Mr. Secretary, I would like to join the Chairman and the 
rest of the committee in welcoming you to the hearing. I will 
simply note that I associate myself with every comment that Mr. 
Rogers made, and you are in a unique position as an opinion 
maker to express that opinion, fairly powerful way in 
appropriate forums. And appreciate your answer and your 
sensitivity to the issue.

                 EMERGENCY STEEL LOAN GUARANTEE PROGRAM

    Mr. Secretary, the steel industry is very important to the 
upper Ohio Valley, to West Virginia, the area that I am 
privileged to represent, to the area across the river, and to 
Pennsylvania just across the line. We have a significant steel 
industry that has survived during 25 years of challenge and 
reorganization and increasing international station of our 
economy that has put disproportionate pressure on basic 
industry and certainly on the steel industry. We recognize that 
process and we are appreciative of, quite frankly, President 
Bush's being responsive in a couple of areas, particularly the 
201 tariffs that he imposed and they have been helpful.
    That has provided an opportunity, a certain relief, if you 
will, to allow the steel industry to regroup, to consolidate, 
and to effect efficiencies. We are appreciative of the 201 
program, about which I would like to ask you a couple of 
questions later.
    The other program that is of significant importance is the 
Emergency Steel Loan Guarantee Program. Do you sit on the board 
of that program?
    Secretary Evans. No, I don't, Congressman.
    Secretary Evans. The Deputy Secretary of Commerce sits on 
the board. I delegated that to him.
    Mr. Mollohan. Okay. Thank you. I note in your fiscal year 
04 budget that you rescind funds for the Emergency Steel Loan 
Guarantee Program. Does the President support this program?
    Secretary Evans. Over the course of the last 2 years, the 
independent board has reviewed a number of applications and has 
approved one of those applications.
    Mr. Mollohan. I believe you approved two, haven't you?
    Secretary Evans. The Geneva application was approved, but 
that was before we showed up. So this Administration has only 
approved one, Hanna Steel.
    Mr. Mollohan. Geneva and Hanna.
    Secretary Evans. The Geneva one was before us. And that one 
is in trouble, as you know. We won't get full recovery on that. 
I am not sure what the recovery will be. It is in bankruptcy 
and we will have to see what we are going to wind up getting. 
But it will clearly be a loss to the American taxpayers. The 
program is scheduled to come to an end December 31st of 2003. 
In order to even be considered, you have to have an application 
in by June 30 of 2003. So actually in terms of the 04 budget, 
if you are not in by the beginning of the 04 budget, it is too 
late because time has run out on the program.
    So we thought that the program has probably been a program 
that was useful for maybe one company. I am not sure it is a 
useful program, and clearly don't think it is a useful program 
going forward. I think, as you said, the industry is going 
through restructuring. I think very constructive restructuring. 
You are seeing industry take the kind of steps--when I say 
``industry,'' you really have to say the integrated sector of 
the industry, the mini-mill sector of the industry has been 
competitive globally. They are not going through the kind of 
restructuring that you are seeing in the integrated sector of 
the industry.
    But the integrated sector is restructuring. It is healthy 
and we have several emerging viable integrated companies. We 
have others that are still trying to determine just exactly 
what their structure will be. And I think the market forces 
will continue to drive what their structure will be. I have 
been pleased to see capital that is available for the 
restructuring. That is healthy, to know that there is capital 
available to be injected into these new merged companies or 
restructured companies.
    Mr. Mollohan. Okay. If I might, however the President feels 
about the program or however the Administration feels about the 
Loan Guarantee Program, it was a program that came from 
Congress and I think you would agree that certainly in certain 
situations it would be a good tool to use. It would be 
applicable, maybe, if it was just one steel company. I know if 
Hanna is successful from Alabama, that would be a success 
story.
    But I am particularly interested in Wheeling--Pittsburgh 
and the fact that the board unanimously turned down the 
guarantee request last week. I must say was a surprise because 
we were hearing--obviously inaccurate--rumors that the 
guarantee might be approved. So the denial was somewhat of a 
surprise. It was a surprise to me, it was a surprise to a lot 
of members of Congress who represent these areas. It was a 
surprise to the company, it was a surprise to the union, it was 
a surprise to the State of West Virginia that the application 
was not approved. You are in a unique position to give us some 
insight into that disapproval and I would ask that you do that.
    Secretary Evans. Well, I am not in quite as unique a 
position as you might think, because as I said, I don't 
actually serve on the board, but delegated that to the Deputy 
Secretary. The other members of the board are Harvey 
Goldschmidt, who is the Democratic appointee to the SEC, 
Governor Lyle Gramley who is with the Federal Reserve Board, 
appointee of Chairman Greenspan's; and Deputy Secretary of 
Commerce Sam Bodman. So I just mention the three names to say 
that this is a bipartisan board.
    Mr. Mollohan. I know. I am not asking that question. I will 
stipulate that it is a bipartisan group. I am just asking for 
insights, substantively, why wheeling--Pitt's application was 
not approved.
    Secretary Evans. And what I would say to you is while, 
these are terribly difficult times for the industry and 
difficult human challenges, when it comes down to upholding the 
laws of the land, there are some very specific guidelines and 
laws that have to be honored, and of course are going to be 
honored. Those kind of guidelines that would be used in any 
kind of loan application. Are there adequate assets available 
as collateral to support the loan?
    Mr. Mollohan. Okay. I understand that there are general 
criteria. I am very much for abiding by the law. What I am 
asking is could you give us some feedback. Feedback has been an 
issue throughout the processing of this guarantee, request and 
we are very appreciative of the board considering this 
application. I am trying to get some feedback. This is a $250-
million guarantee request. Surely you have some feedback and 
insight into what were the deficiencies with regard to this 
specific loan guarantee application for this specific 
corporation?
    Secretary Evans. I will be glad to put the appropriate 
people in touch with your office so you can get whatever 
feedback they can provide you.
    Mr. Mollohan. All right. That is fair enough. I thank you 
for that.
    Secretary Evans. You bet.

                         201 TARIFF EXCLUSIONS

    Mr. Mollohan. As I indicated before, we are very 
appreciative to the Administration for the 201 proclamation and 
it has been helpful; however, it is interesting that it has not 
necessarily decreased imports with regard to hot-rolled steel. 
I guess it has had an impact on cold-rolled imports. The 
Administration is considering, I believe, a fourth round of 
exemptions to the 201 order.
    Can you tell us what exemptions are being considered and 
how many are likely to be approved?
    Secretary Evans. Well, Congressman, I can't--I don't know 
the list specifically. I know a few names, just a couple of 
names. I know there are about 400 exclusion requests in. I know 
we plan to release that before the end of March. But I don't 
know how to give any kind of guidance right now as to how many 
of those will be approved and which ones will be disapproved. 
Again, as you know, it is a methodical, legal kind of process 
that we go through to determine which ones meet the criteria 
and which ones do not. But we should have an announcement to 
make before the end of the month.
    Mr. Mollohan. All right. There was a concern when the 201s 
were imposed that we would possibly have surge issues and from 
specific regions and countries. Some of my companies have been 
in touch with Ambassador Zoellick noting that there were 
initial import surges from India and Turkey in September of 
2002, and more recently in January of this year from developing 
countries. It appears that imports from these countries are 
really cutting into the teeth of the 01 remedies. Do you have 
any plans to address these surges?
    Secretary Evans. Congressman, I know that it is something 
that we monitor every month. I haven't heard it being a major 
issue, but it is something that I will certainly check on.
    Mr. Mollohan. Well, the industry is imputing your 
Department, Mr. Secretary. There are expressions of concern 
from the industry with regard to these surge problems. And if 
only at this hearing, I appreciate the opportunity to sensitize 
you to it and look forward to working with you with regard to 
it and appreciate your good work and appreciate your 
sensitivity to our special concerns.
    Thank you, Mr. Chairman.
    Secretary Evans. I appreciate your good work. Thank you.
    Mr. Wolf. Mr. Secretary, we are going to have to recess for 
about 15 to 20 minutes. There are three votes. There are about 
8 minutes left, so we will go and vote and come right back and 
begin the hearing with Mr. Vitter and then wewill go back and 
forth.
    Secretary Evans. Good. Thank you, Mr. Chairman.
    [Recess.]

                 FEES FROM INTERNATIONAL TRADE MISSIONS

    Mr. Wolf. The committee will resume. When the other members 
come back, we will defer to them for questions. But in the 
interim, I have a couple other questions.
    Mr. Secretary, your budget requested a number of new trade-
related personnel enhancement for the International Trade 
Administration, ITA; yet the budget proposed to pay for these 
increases by charging more for companies to attend 
international trade missions. We have been told that the market 
will not bear an increase in the fees to allow small- and 
medium-size businesses to attend trade missions. I think that 
is open to question. I would like to get your thoughts on that.
    But has there been any analysis done to show that ITA will 
be able to bring in the $13 million to offset the spending 
needs? And I understand, again, OMB--and I think it is 
appropriate that you are here representing the Administration, 
I am not trying to get you to be critical of anybody, but from 
your point of view, do you think that that will drive people 
away or do you think that it will bring there that $13 million?
    Secretary Evans. Well, Mr. Chairman, I asked the Foreign 
Commercial Service to look at this issue very thoroughly and 
thoughtfully a couple years ago because I saw some 
opportunities for enhancing the fee structure somewhat in order 
to continue to strengthen that very, very important agency. I 
think it is one of the really hidden treasures of certainly the 
Department of Commerce, maybe the Federal Government, in terms 
of an agency that can work with small- and medium-sized 
businesses and introduce them to the global marketplace. And so 
along with this study the Department was very sensitive to 
making sure that we didn't change the fee structure in any kind 
of way that would discourage small businesses and medium-size 
businesses from participating. I think that the fee structure 
that has been proposed discourage small- and medium-size 
businesses. I think we will continue to see, in fact, growth in 
that area, of more of them being participants in that very 
important program of trade missions and other kinds of services 
that we provide.
    Mr. Wolf. What would the cost be, on average then, to a 
small company?
    Secretary Evans. Chairman, I am not sure of all the fee 
structures or what it costs to go to a trade show or a trade 
mission. I am sorry, but I will be glad to get that to your 
office. I just don't know the whole fee structure of that. But 
I do know that we did run a very thorough study of that to 
check if these fees were going to drive small- and medium-size 
businesses away from that service that we are providing. The 
answer was no.
    Mr. Wolf. Could we see the study for the record?
    Secretary Evans. Sure. You bet.
    Mr. Wolf. Mr. Sweeney, would you like to have a question? I 
recognize Mr. Sweeney.
    Mr. Sweeney. Thank you, Mr. Chairman. What an honor it is 
to be here, Mr. Secretary, with you my first day on this 
subcommittee. And I have, as I think you know, been a great 
admirer of your work and thank you for your testimony and 
welcome.

                         FREE TRADE FOR AMERICA

    I am going to play a little bit off on some of the 
questions that the Chairman asked as it relates to some 
concerns that I have on trade. I am a member who, unlike my 
predecessor, has moved very distinctly towards a freer trade 
agenda for America, recognizing that there was risk in doing 
that, frankly, because some of my constituents don't share that 
view because they have felt that it has been disproportionate 
and unequal over the years. And finding that balance between 
what is fair trade and necessary trade and what still maintains 
the essential needs of your constituents is always the 
challenge that someone like myself faces.
    Recently, in particular, it has become a more sensitive 
issue in my region of the world in upstate New York. You spoke 
earlier about the steel issues and finding the level playing 
field, and I think that was as adequate a place to point out 
the complexities of what challenges you face in making the 
decisions you have to do that.
    But as it relates to agriculture in particular, I am 
hearing a great number of concerns from many of my family 
farmers, many of whom I will point out, are sending their sons 
and daughters overseas to defend America and fight for freedom 
and liberty, and at the same time feel a great level of concern 
with what they see are inequities in trade policy as it relates 
to agriculture.
    And specifically, I will point to the dumping of Chinese 
apple juice concentrate and the mislabeling of milk protein 
concentrates flooding domestic markets from the EU and from 
Canada, which shares great close proximity with my district. 
And it is manifesting itself in this notion that as we are 
sending our families over to fight for the right things and 
defend America, we are at the same time allowing nations like 
China and others--who would seemingly be our allies in some 
respects but have not much acted like our allies lately.
    And I would like to ask you to speak specifically to the 
coordination between the ITA, the International Trade 
Administration, and USDA in ensuring the local producers and 
their products are a priority of this government and that we 
continue to seek to find that place for equity and balance in 
fair trade. If you could talk a little bit about some of the 
initiatives you have undertaken and give us an assurance that 
might be available to us, I would appreciate that.
    Secretary Evans. Thank you very much Congressman. I am 
honored to be here with you as well. Probably the central focus 
right now of agriculture in the world is our negotiations at 
the WTO. The President has said that any future negotiations 
related to trade, that agriculture would be the cornerstone. 
That is where the focus is. And that is clearly where the focus 
is at the WTO Round right now in Geneva. That is the top 
priority issue for America nd we believe we will have concluded 
by December of 2004.
    There are a number of changes in the global system with 
respect to tariffs, export assistance, and domestic support, 
that we have put on the table to bring down barriers around the 
world to our farm community here in America.
    As I travel across the country and have a chance on 
occasion to talk to some ranchers and farmers--and obviously 
that is not absolutely in my bailiwick, that is over in the 
Department of Agriculture--what I hear is they want to see 
markets opened up around the world. In fact, a third of the 
land that we plant and harvest right now goes to exports. And 
so it is already a major, major component of the agriculture 
income in this country.
    But the focus needs to be, should be, not only on bringing 
down tariff barriers around the world, but also making sure, as 
you mentioned, about steel that we achieve a level playing 
field for our products. And it is complex, but we have got to 
continue to fight for a level playing field. We cannot allow 
other countries to dump their agriculture products here in our 
country that have been subsidized by their governments.
    And so that is an issue that we must continue to wrestle 
with and we must continue to stay focused on. So, Congressman, 
the agriculture community is a critical part of this economy, 
the backbone of this country. The President understands that. 
It is where the focus, as I said, of all future trade 
negotiations will be. We are going to continue to do all we can 
to challenge other countries to make sure that we have a level 
playing field, and that they are not subsidizing their products 
and then trying to dump them into our economy.
    Mr. Sweeney. I appreciate that. And from your position, I 
think you could bring to bear great influence on the debate and 
discussion. And it isn't simply the issue of subsidies by 
nations, although that is an issue of concern. It is the level 
of the standard and the quality of the product that we, I think 
rightfully, have great pride in what is being produced by our 
agriculture community, and simply ask--we want markets open as 
well, it is to our benefit no doubt--but simply ask that when 
we are in those competitions and those products are brought 
forth to our land, that they be of the same quality, the same 
standards be applied.
    And I know our friends overseas, especially recently, like 
to talk about the need for the United States to comport to 
different principles, be they environmental or other things, 
standards that they have established somewhat arbitrarily, I 
would contend. But here is something definitive where we think 
the equities haven't been matched and would really appreciate 
your strong voice in that.
    Secretary Evans. You will continue to have it, I assure 
you. There are big countries that are becoming integrated into 
this global economy. China is an obvious country on everybody's 
mind, particularly the kind of force they are going to have in 
this globalization that we see taking place. And what we are 
focused on is making sure that they are complying with the set 
of international laws, international norms, as well as making 
sure that they are honoring our own laws right here in America; 
because we have trade laws here that we expect others to honor. 
We have four officers in China, who focus mainly on compliance. 
And we have an Import Administration Office that has a great 
team of people, who focus on compliance to make sure we don't 
have countries that are violating our laws and dumping things 
here that would hurt our economy and our consumers and our 
workers.

                  ECONOMIC DEVELOPMENT ADMINISTRATION

    Mr. Sweeney. Along those same lines, I have two different 
questions but relative to the same sorts of notions of 
competitiveness and how we best help an American workforce in 
transition in some respects and in manufacturing. For example, 
there is a changing of the guard from industrial production to 
industrial-technology labor. And I would like to ask you what 
is being done out of the Economic Development Administration, 
some of the initiatives that are being undertaken that address 
the changes that need to be addressed. I understand the Labor 
Department has significant workforce development possibilities, 
but there has to be some cohesion between that and the policy 
established at Commerce.
    As well, I note in your request that you wish to increase 
the resources to the Bureau of Economic Analysis. This is a 
little more of a statement than it is a question. I understand 
the value, and you may want to expound on that a little bit 
more, towards having and ensuring that we have the most 
accurate data and most up-to-date data. One of the concerns 
that I would have is the notion that those resources aren't 
going to get out into the field. And so maybe you can tell us a 
little bit about how that information is going to help and we 
will get out into the field in a tangible way that will help 
both the quality of the workforce but also help with the growth 
agenda.
    Secretary Evans. Right. First of all on the Economic 
Development Administration, one of the very encouraging steps 
that we have taken as far as I am concerned is how we are 
working closer and closer with the Department of Labor. As you 
say, they have far more funds than we have in this area for 
training and education and working with the workforce that in 
many areas is in transition. We have a number of industries 
that are in transition. It is harder and harder for them to 
compete with the rest of the world. So you have members of 
those industries, workers in those industries, that need a 
transition into other industries.
    And so we have, in fact just this last fall, a cooperative 
program with the Department of Labor down in North Carolina, 
where--obviously the textile industry has been hit pretty hard. 
The textile industries lost some 700,000 jobs over the last 
number of years.
    The Economic Development Administration is teaming up with 
the Department of Labor, combining our strengths and our 
resources to provide a more complete kind of program--not only 
where we can come in and provide funding to build the 
infrastructure that is needed to encourage economic 
development, but at the same time encourage other industries to 
come into that community. We can combine that with the 
Department of Labor funds that are brought in.
    The central point is a very good one. We have to be very 
sensitive to the fact that our economy is going through a 
transition and it will continue to. And we have to be sensitive 
to do all we can to help and support those workers that are 
being impacted by this transitioning economy. And I think we 
are doing, quite frankly, a good job in terms of looking at 
ways that we can be more efficient and more effective and have 
more results with respect to delivering the service to the 
worker, to the community, to the town.
    So we asked for $13.8 million additional funding there, and 
that is what some of that funding will go to, a more targeted 
focus with more cooperation with Department of Labor and other 
agencies.
    With respect to the BEA and funding to improve the data 
that we use, really those funds were primarily to give the 
Bureau of Economic Analysis as well as the Census Bureau the 
resources they need to better analyze a changing economy. We 
are moving to where more and more of this economy is service 
oriented. We all know that. We really don't have the tools in 
place right now to capture, like we should, the service sector 
of this economy. And we also learned in the 1990s there are a 
number of things that impacted the economy that we didn't do--
we don't do a particularly good job of evaluating. One of them 
happens to be stock options: How do you look at those with 
respect to what is going on in the economy?
    So anyway, these are funds that were primarily to make sure 
that the Bureau of Economic Analysis, which presents a number 
like the gross domestic product growth to this country every 
quarter, is providing the country the best and most accurate 
possible data; because that number is so important not only to 
Federal Government planning but State government planning, 
local government planning, and private sector planning. We saw 
some weaknesses there, because we missed the mark by quite a 
bit.
    Mr. Sweeney. I understand the weaknesses and appreciate the 
extra effort, but the linkages you spoke of at the back end of 
this I think are critical, because they will lead to the kinds 
of measurable successes that we hope to have in growing the 
economy.

                   INTELLECTUAL PROPERTY AND PATENTS

    Let me ask one final question, and it is a little off the 
subject in some respects but not in others, and it relates to 
the ongoing effort to find ways to lower prescription drug 
costs, make them more affordable, balance the needs of 
consumers and recognize that the pharmaceutical industry has 
accomplished a great many things that have improved the quality 
of life of people throughout the world, and we do not want to 
create disincentives in that process.
    And one of the areas I think that provides a stark 
difference between what we do and, say, what the Europeans do, 
and whether it is good or bad I am not sure, but I am hoping 
that the Department of Commerce can kind of help bring some 
focus to the issue, is the notion of patents in the current 
patent system and whether it is adequate in order to meet those 
balances.
    The question is simply what kind of an overview have your 
folks done, or could you provide information to us on what has 
been looked at and what has been discussed and what the impacts 
are and what the evaluations are in that area. If not, I would 
like to work with you at trying to do that as well.
    Secretary Evans. That is a great question. It is a timely 
question because of what we see happening in this world, the 
rapid integration of this world and the critical importance of 
intellectual property rights and patents. The Patent and 
Trademark Office has been working very, very, very hard to 
engage the world community to move toward a global system so 
that we are all sharing the same information and agreeing to 
the same patent standards and criteria, and then honoring those 
patents.
    Eighty-five percent of the patents right now are in Japan, 
the United States and the EU. So you can take those three 
entities and work with them and develop a global patent system, 
which is what we are doing, and is one of the reasons for part 
of the request that we have asked for. But it is very important 
because we have got to set the standard for the rest of the 
world.
    I just mention those three areas. Well, guess what? There 
are a lot of other countries in the world that will want to use 
the drugs as you are talking about, and will want to use other 
intellectual property that we have here in America. And one of 
the critical--one of the real challenges for us as we move on 
into the first part of the 21st century is the enforcement of 
intellectual property rights and intellectual capital. And that 
includes things like patents, people coming up with ideas that 
are patentable ideas.
    So know that we are working very hard on it. Glad to hear 
you have got an interest in this area. We would like to work 
with your staff on this because I know I don't go to a country 
where I don't talk about the importance of intellectual 
property rights protection.
    And the other point that you made, which I think also we 
need to acknowledge, is that our pharmaceutical industry is the 
best in the world. We have the absolute best scientists in the 
world. We have foreign pharmaceutical companies that are 
relocating here to the United States because we have the best 
resources in terms of scientists and human capital right here. 
And it is very important that we do what we can to protect 
their property rights around the world.
    Mr. Sweeney. I appreciate your comments. I look forward to 
working with you in that area and many others. Great to talk to 
you.
    Mr. Chairman, I hope you know--I think you know how 
enthusiastic I am and happy I am on this committee. I thank you 
for the opportunity, and the Ranking Member, my friend from New 
York.
    Mr. Serrano. I wanted to make sure that it was mutual.
    Mr. Wolf. We are glad to have you.
    Before I recognize Mr. Kirk, let me just say I do agree 
with Mr. Sweeney on the apple issue. What they are doing, the 
Chinese are dumping it here. We have some people coming in here 
to say that garlic is ready to go through the same thing. We 
need our people to be champions for it. You cut an apple tree 
down, it takes 5 to 7 years for an apple tree to produce; you 
put an apple farmer out of business because some slave labor 
opportunity came along in China. The guy cuts down a tree, the 
land is developed, and you have lost the industry. And I think 
Mr. Sweeney is so right on the apple concentrate issue. And I 
think a lot of our apple growers really don't believe that our 
government is a champion for them.
    And I bet if you dig, if you dig--and I may be wrong, and 
if I am I think somebody should check and put it in the record, 
suggest the Chinese have probably hired some big powerful law 
firm in this town, people who may have served in this Congress, 
maybe on both sides of the aisle, that are representing the 
slave labor people over there in China. Paying big money. The 
more disreputable the operation, the bigger money they pay. And 
the poor apple grower in upstate New York or out in the 
beautiful Shenandoah Valley that I represent just gets lost.
    And so Mr. Sweeney is right, and I think we are going to 
have a hearing. To focus on the issue of China and apple and 
garlic issues. Let the word go forth.
    I voted for WTO. I voted for the Fast Track, whatever the 
new name is. Nobody from the Administration asked me to vote 
for it. I did it to give the President of the United States--
who I dearly appreciate the fact that he came to change the 
administration. I did not vote for it under the Clinton 
administration. But with that I think goes a tremendous burden, 
a responsibility to advocate for these apple growers and these 
garlic growers and these other people who sometimes feel that 
they are powerless in this town.
    And I think and I would urge you and your people to be very 
outspoken, to be very, very aggressive, to speak out on behalf 
of not only the apple people and the garlic people but all of 
the other industries in this United States.
    Some, I know, go; the buggy and horse whip and other things 
that end up going, and I know we are in a changing time, but 
there are some that feel that they are being really forced out 
not because they are not productive and they are not 
hardworking, but because of powerful interests around the 
world.
    I just saw the Administration put out its new report on the 
U.S Religious Freedom Commission. That was my bill. Saudi 
Arabia didn't make the list. There is no religious freedom in 
Saudi Arabia, but no one wanted to offend the Saudis at this 
particular time, so nobody wants to speak the truth to them. 
The same thing on these trade issues.
    So I want to share what Mr. Sweeney said, and I will tell 
Mr. Sweeney we will have a hearing. You may want to bring your 
people in. We will bring and talk to this issue. But maybe 
after the hearing, your people who work on the issue of apples 
can come to me--with Mr. Sweeney, before the hearing.
    Mr. Kirk.
    Mr. Kirk. Thank you, Mr. Chairman. It is a pleasure to be 
on this committee as well with you and Mr. Serrano.
    Mr. Kirk. Mr. Secretary, first of all, I want to thank you 
not necessarily for your public service as Secretary of 
Commerce, but as a good friend of the President. I think he as 
a person probably is going through an enormous amount of stress 
right now. Your voice and counsel to him is probably almost 
more valuable than anything else, and I want to thank you for 
that.

                        ELECTROMAGNETIC SPECTRUM

    Secretary Evans. You bet.
    Mr. Kirk. On the NTIA, we have got a $4.3 million increase. 
It belies an incredibly important issue of the allocation of 
the spectrum that our government owns. I am just coming out of 
the Navy, and the last 2 years on the Armed Services Committee, 
and can I report to you that the Defense Department does not 
know that its second most valuable asset, after its land 
holdings, is the electromagnetic spectrum that it holds, worth 
between $60- and $90 billion.
    They also are unable to come to the realization that 
European countries, countries in Asia have already allocated 
the spectrum they use to their civilian sector. And so in 
countries in which we ask U.S. Armed Forces to deploy, the 
spectrum is already occupied by the civilian side. I am worried 
that resistance inside the DOD will inhibit the deployment of 
third-generation wireless so critical to the 21st century 
economy that we want to bring about.
    Can you give me this increase per NTIA, your spectrum 
vision for maybe a post-Iraq policy on spectrum?
    Secretary Evans. Well, I--my vision is--is continuing to 
use technology as well as work very cooperatively, but yet 
aggressively on finding ways to free up more spectrum for the 
private sector. I have been pleased, quite frankly, with the 
cooperation from Department of Defense over the last couple of 
years that this has been on our watch, my watch, whatever.
    We, in fact, announced last year, after working with DOD 
for a year or so, the freeing up some 90 new megahertz of 
spectrum that will be available in the private sector in the 
year 2008. I also have been pleased to know that the Department 
of Defense is working with us on understanding new technology 
that will allow spectrum that they may now have and hold to be 
freed up during certain times during the day when it is not 
being used.
    And so you can see some new technologies entering into the 
market all of the time that will provide, I think, more 
opportunities for us to free up more spectrum, because the 
Defense Department will get more comfortable with, not giving 
it up in its entirety. D.O.D. would only give it up during 
times of the day when they don't need it or periods of the 
month when they don't need it. I don't know what the timing is.
    My point is I think we are making some pretty good progress 
in what I have seen to not only free up new spectrum, 
absolutely, but also entering into discussions about technology 
that can be used to provide for more spectrum in the private 
sector that maybe you can lease during certain hours of the 
day.
    You do raise, I think, though, another important point, 
which is just kind of the lack of harmonization around the 
world, the standardization around the world. I don't know what 
you do to get that back in the box. It is kind of gone. And 
could we focus on trying to go forward? How can we harmonize 
more? We should, but some of it is just too late.
    Mr. Kirk. We have got one anecdote that my troops, when we 
deployed into Kosovo, would not use their military radios 
because they were so outdated. We used Italian cell phones for 
military operations. The DOD leadership does not want to 
wrestle with that, but their own troops would move to the 
higher technology cellular communications that the civilian 
side used.
    But as we move into a deficit world, $330 billion now and 
with the supplemental, et cetera, we may once again have to 
look at further auctioning of the spectrum to help ameliorate 
this. And so I hope that we can have some further look at that. 
You have got a great staff. I want to praise Robert Sawyer, who 
is your EDA regional director for my area. He has shown some 
unique leadership in taking a project in my district. The 
world's largest naval training center had locked itself off 
from the second poorest town in Illinois, and with a 
cooperative arrangement between the Department of Commerce and 
the Navy, we are opening up a gate that will restart economic 
activity in Illinois' second poorest town. Robert Sawyer signed 
off on it, but you have got one guy, and I wanted you to call 
him and tell him you love him. The guy named Jack Arnold, who 
is a case guy at EDA, has really reflected well on DOC.

                      BUREAU OF ECONOMIC ANALYSIS

    We talked about BEA, Mr. Sweeney, and I think that is 
another critical issue. We have got a $1.6 million increase to 
improve the data there, and there have been a number of changes 
here in the House that may need to be coordinated with what BEA 
is doing.
    The House, in our rules, has adopted the requirement that 
we provided a real-world or dynamic score for the tax and 
entitlement legislation of the House. So the need for the data 
on how the taxpayers and the economy responds to changes in 
laws has gone up by a quantum level. And that we have--looking 
at the--the incredible inaccuracies that we have had in prior 
projections, there has been a resistance here in the House and 
Congressional Budget Office to the idea of what the experts 
would call back-casting, where you take the data that has been 
received from the actual performance of the economy, you then 
load it back into the models that were used to generate a 
projection, and figure out where you were wrong.
    In other words, they are doing that at CBO, but I can just 
highlight this for you that BEA may be extraordinarily tasked 
to do this, because we are now going to be producing static and 
dynamic scores here in the Congress. And BEA is going to be 
absolutely in the center for this battle for new and better 
data.
    Let me just give you one example of what I am talking 
about. We are wrestling with asbestos liability reform. In a 
geometric rise in the lawsuits, we have already bankrupted 
companies that made asbestos. We are talking about any company 
that in any way involved asbestos. My favorite is Sears 
Roebuck, which sold an iron in 1957 and 1958 with one asbestos 
washer. Now they are subject to a huge asbestos lawsuit.
    This is a geometric rise, and RAND Corporation says $200 
billion in judgment are probably going to bankrupt several 
hundred companies in America. Nine hundred stocks right now are 
depressed because of asbestos liability concerns, aweight that 
is hanging over.
    Right now we do not calculate the loss in tax revenue if we 
let the system go as it is now and see that $200 billion taken 
out of corporate earnings and into jury awards, but we should, 
because taking $200 billion out of the taxable income of 
corporations and giving it to plaintiffs removes--at the 
corporate rate of 35 percent, removes about $70 billion from 
the U.S. Taxable base that the government survives on.
    Those kind of liability reform proposals and their tangible 
effects on the revenues of this U.S. Government should be 
calculated. We do not right now. But they make a visible 
difference to the bottom line of the U.S. Government, and we 
are hoping that BEA can help us begin to calculate the real 
economic benefit not just to the economy, but to the budget of 
the United States for those various tort reform proposals.
    Secretary Evans. Well, I appreciate those remarks, 
Congressman. You are right on target. You need good information 
to make good decisions for the American people. And that is why 
I am so strongly supportive of the additional funding for BEA. 
I have had the pleasure to visit with the Chairman of the 
Federal Reserve quite frequently. It is an issue that he brings 
up with me almost every time we visit.
    When you have got these large issues that impact our 
economy, it is critical that all of you have the best possible 
data that we can possibly present so you can make the decisions 
that the American people expect you to make. So we look forward 
to working with you on the issue.
    Mr. Kirk. Thank you.
    Mr. Chairman, thank you.
    Mr. Wolf. Thank you, Mr. Kirk.
    Mr. Vitter.
    Mr. Vitter. Thank you, Mr. Chairman.
    Thank you, Mr. Secretary, for being here.

                          SECTION 201 TARIFFS

    I want to focus on trade, which has come up a few times 
today already. It is a very sensitive set of issues, in 
particular for those of us from Louisiana. As I think you know, 
I was a strong supporter of fast track, and the entire 
Louisiana delegation was, and we helped pass that legislation. 
Very strong support for the controversial and difficult issue 
of improved trade relations with China, again very strong 
support in the Louisiana delegation. So we have consistently 
been for free trade and supported the President on those 
issues.
    But whenever, quite frankly, it has come to a specific 
issue that has a big impact on us, namely steel, and now sugar, 
we just haven't had a big impact in terms of Administration 
policy, and we feel like we are really not being heard and our 
concerns are falling on deaf ears.
    The steel tariffs have had an enormous negative impact on 
our ports. And nationally, of course, they have had a big 
negative impact north of us in terms of steel consumers with 
major price increases.
    And now we are in the midst of a potential sugar agreement 
with Mexico that is still up in the air, that is still in flux, 
but that also poses enormous threats and consequences for 
Louisiana.
    So I guess I have a few specific questions with all of that 
in mind. On steel, you touched on Administration plans to 
decide and announce on additional exclusions to the section 201 
tariffs on steel imports. What is the precise timetable on 
that?
    And, secondly, under that 201 process, I know the 
Administration has mandated to undertake a review of tariff 
policy. In that review can you commit to specifically examine 
the impacts of the tariffs on both steel consumers domestically 
and the port industry, which is a major, major economic impact 
on the other side of the ledger?
    And then, number three, on sugar, a big frustration many 
Louisiana folks have had with the ongoing sugar discussions is 
lack, in their opinion, of full consultation in terms of the 
domestic industry. What can we do, perhaps within the Commerce 
budget, through the International Trade Administration or some 
other part of Commerce, to fully engage domestic industries, 
whether it is sugar or anything else, in key negotiations that 
are going to dramatically impact their futures?
    Secretary Evans. Congressman, the first one, in terms of 
the precise date, I have got to get you the precise date on the 
201 exclusions. It is sometime this month, the month of March, 
we will make the announcement on the exclusions that are being 
considered right now.

  [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    In terms of the 201 review, I can absolutely assure you 
that we will consider the impact of the 201 safeguard on not 
only the producers, but the consumers. That includes, 
obviously, the ports as well as other manufacturers. And so you 
have our assurance that we will look at that. The anniversary 
date was yesterday, so it is 6 months from today that you have 
the midterm review.
    Finally, what was your third one? I am sorry.

                           TRADE NEGOTIATIONS

    Mr. Vitter. It was really focused on ongoing sugar 
negotiations with Mexico, but, more broadly, what can we do to 
make these domestic industries feel like they have a seat at 
the table in terms of active input during those negotiations.
    Secretary Evans. Exactly.
    Congressman, you know, I would say this: We certainly have 
endeavored on many of the industry issues like lumber and 
steel, and whenever the Commerce Department has a role to play 
in the negotiations, in the discussions, I feel like we have 
been very open, very available, very accessible, encourage 
groups to come in from both sides of the issue, and have, I 
think, a pretty good track record of doing that.
    Now, I hear some concern specifically on sugar, and that is 
not in our Department to deal with that. That is USTR, as you 
know. But they are not trying to pass the buck either. We are 
responsible for Commerce and making sure that the commercial 
side or the commerce side of this committee, that if there are 
concerns, that we are involved in making sure the right people 
are talking to each other.
    I do know on the sugar issue, which happens to be, kind of 
the issue of the moment, there are active discussions going on 
with the industry. And I know USTR is talking to them now. So I 
know those discussions are under way. And I am glad to follow 
up with that and check to make sure that the industry is 
satisfied with the administration being accessible to them, 
because it is important.
    Listen, as far as I am concerned, it gets back to the basic 
fundamental issue of trust and being able to sit down with 
people and have your views heard and expressed, and it is 
something that, as I said, I think we do a good job of around 
the Department of Commerce.
    If there are problems where we are not dealing with other 
industries like we should be, I want to know about it.
    Mr. Vitter. Well, by way of background, I have been 
involved on the sugar side. I have met with the lead 
negotiator. And to boil it down, I think the domestic industry 
is quite frustrated about the level of consultation and the 
method of consultation, because basically they are brought in 
once an issue within the broader negotiation has been closed in 
principle. And they are brought in and told, this is the deal 
on that issue. We would love to hear your technical comments.
    And very often, you know, the big picture items that they 
would have significant input on, and how those fundamental 
issues affect other related issues, and what sort of deal it 
portends, when the whole thing is wrapped up, it is too late. 
They are basically asked for rather marginal technical comments 
once the principle has been decided. And so from their 
perspective, that is minor or marginal consultation and input. 
Because they are only invited in, they have a conversation at 
the beginning about broad principles, and then they don't hear 
again until an issue is put to bed and they are invited for 
technical comment.
    Well, the devil is in the details, and everything in 
between those two points is really the heart of the matter that 
they feel that they are basically shut out of. So I am just 
passing that on----.
    Secretary Evans. Thank you.
    Mr. Vitter [continuing]. --As their perspective in terms of 
how this particular consultation isn't very effective from 
their point of view.

                    NOAA PROGRAMS IN THE GULF SOUTH

    Secretary Evans. Okay.
    Mr. Vitter. Finally--let's switch gears. Another very 
important part of your Department in my part of the world, the 
Gulf South, southeastern Louisiana, is NOAA. Obviously the Gulf 
maritime commerce is enormously important to us. Just two 
thoughts, and you don't really need to react, but just two 
thoughts to put in your mind.
    NOAA has an ocean exploration program that I think, from 
everything I know, has taken off in the right direction very 
successfully. There are things called AUVs, autonomous 
underwater vehicles, that are very effective in terms of that 
exploration, and I would encourage NOAA to look at that as part 
of their program, and in particular to look at what is out 
there in the private marketplace versus reinventing the wheel 
in government, because I have gotten briefings and think that 
can be a very effective way of doing that work cost 
effectively.
    And, secondly, obviously NOAA charts the oceans and the 
Gulf, and that is very important for maritime commerce. We 
still have a big backlog in terms of charting, and that has a 
negative impact on maritime commerce, including in my part of 
the world. Anything you all can do, NOAA can do, to eat through 
that backlog would have a direct positive impact on that part 
of our economy, which is a big part of our economy, and in 
particular, I believe their somewhat hesitant exploration of 
private charter opportunities which has been getting going, but 
somewhat hesitantly, I think it has been proven very cost-
effective. So I would encourage them to look at the numbers and 
to see what sort of bang they get for the buck when they hire 
out that charting service versus the old government way of 
doing everything in-house.
    Secretary Evans. Thank you, Congressman. I will look at the 
AUVs and appreciate that thought and idea. I know that the 
private charters are something that we have been incorporating 
more and more into the program. What I know of it is they are 
pleased with it. But I will take another look at it and see if 
there is a way that we can ramp it up even more.
    Mr. Vitter. Thank you.
    Mr. Wolf. Thank you, Mr. Vitter.
    Mr. Kennedy.

                       NOAA ISSUES IN NEW ENGLAND

    Mr. Kennedy. Welcome, Mr. Secretary. Before we went off to 
the vote, I presented you with some unique challenges that we 
have in the New England area, one of which is affecting most of 
the New England area, and that is the precipitousdecline in the 
lobster fishing industry. What we found in last year's budget is this 
buy-out of commercial fishing vessels. But I am not sure whether your 
Department has the discretion to target some of those funds to the buy-
out of some of these lobster fishing boats because of the NMFS's total 
agreement that we have overfished the lobster grounds up there, and I 
would ask you, if you would, to comment on that.
    And then I have two other points that revolve around the 
previous question by Mr. Vitter regarding NOAA, and that is to 
ask about the regional computer modeling efforts under way so 
that we can better develop a climate modeling center for the 
New England region, which right now we are looking to get 
going. I know other regions of the country have that going. In 
New England we want to get that climate modeling going.
    And in regard to the climate modeling hurricane research. 
You know, that University of Rhode Island has worked well with 
NOAA in working with some innovative technologies to have 
better predictive models for hurricane forecasting. I think 
that needs to continue, given the fact that the loss of life 
and valuables is growing with each hurricane, and we need to do 
a better job at forecasting.
    I just ask if you can comment on what NOAA is doing with 
URI on that. So basically there are three questions.
    Secretary Evans. Thank you, Congressman. Good to see you 
again, sir.
    On the late lobster issue, I know it is an issue we have 
been working on for quite some time, before I showed up, and 
the difficulty in reaching an agreement in the area of how we 
are going to manage lobster is that there are some 10 or so 
States that have to be worked with and coordinated. And so 
what--they could collectively agree on here is the plan for 
fishing lobster in this region.
    Mr. Kennedy. If I can interject. All of the lobstermen, all 
of them, usually there is controversy whenever you talk about 
fishing and conservation, they are all agreed that there needs 
to be boats taken off the market and licenses retracted, and 
they are in total agreement. So it is very infrequently that 
you find them wanting to give up their trade, but they are 
desperate. They need a buy-out program like the one we just 
passed in the 2003 budget. I am just hoping that you can 
consider lobster fishing in the overall commercial fishing buy-
out.
    Secretary Evans. We will look at that in terms of buy-out. 
I am not aware of any funds being designated for buying out 
lobster fishing boats, but I am glad to take a look at that.

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    Also, in terms of an overall program for lobster fishing in 
that part of the world, it has been something that they have 
been dealing with for quite some time. I am optimistic that we 
will soon have the plan that we can present to that region. It 
has been 4 years since we have been working on it. So I think 
we are very, very close there, and I think that they will have 
a plan in the very near future.

                         GLOBAL CLIMATE CHANGE

    In terms of regional modeling, let me say this: This 
Administration has given the highest priority to understanding 
the issues around global climate change and getting this 
country in a position to make good policy decisions with 
respect to global climate change, measured steps that we should 
take.
    We are not the leader in the world right now when it comes 
to modeling. The leaders of the world are elsewhere. We do have 
a lab, a Geophysical Fluid Dynamics Lab, at Princeton, New 
Jersey, that we work with. And we have committed some $3-1/2 
million in funds to continue to strengthen that lab so that we 
can move this country toward being the leader in the world when 
it comes to global climate change modeling.
    With respect to regional modeling, I know that there are 
some areas that are ahead of others. We have committed some 
$1.7 million in the budget this year to assess other regional 
modeling centers, and so I am certain that that also includes 
the New England region, which is an area that our staff will 
report back to you, and just to tell you the results of that 
assessment and steps that will or may not be taken.
    [Clerk's note.--Subsequent to the hearing, the following 
was provided:]

                       REGIONAL CLIMATE RESEARCH

    There is currently very little research being done to 
develop regional climate models specifically for New England. 
However, research is being conducted by NOAA and its partners 
on development of higher resolution global and very high 
resolution regional climate models which will be used to assess 
the impacts of climate variability and change on the U.S. as a 
whole, and will enable New England studies also. In addition, 
the FY 2004 budget request includes a request (description 
attached) that will allow the Geophysical Fluid Dynamics 
Laboratory to obtain the necessary resources to enable 
simulations addressing policy and business issues, and turn 
NOAA's investments in the Climate Change Research Initiative 
(CCRI) research into policy relevant knowledge. Such 
simulations could be specifically targeted to the New England 
area as needed.

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    With respect to the good work with University of Rhode 
Island, hurricanes, and as you pointed out this is a matter of 
public safety and of great importance to this country. We stay 
very, very focused on doing all we can to strengthen our 
ability to deliver the information to the American people they 
need with respect to hurricanes. What I know is that people 
have been pleased with the work that has been done with the 
University of Rhode Island.
    I also know that we have put into the budget some $10.4 
million that will be focused on a new world weather building. 
This new center will allow us to continue working with 
meteorologists, both in government and academia, to improve the 
models that NOAA uses to produce nationwide forecasts, 
including those used for hurricane modeling and forecasting. 
And so I will make sure that our team makes note of your 
comments with respect to the University of Rhode Island, and we 
will continue to look forward to working with them.
    Mr. Kennedy. Great.
    Finally, Mr. Chairman, let me just say, if we can continue 
to work together on some of the other programs that Commerce 
has, the MEP program which has worked very well in our State 
with small businesses, giving them the support services they 
need to transition during difficult economic times, and the 
Trade Adjustment Assistance has been fantastic in helping many 
of our businesses, which, have very stringent five requirements 
in order to qualify for that trade adjustment assistance, such 
as not only reduced sales, but concurrent increases in imports 
and the like, we should keep that going. That is a program that 
has really been worth its while to my region, and it has helped 
maintain jobs where there have been signs that those jobs are 
going to be in decline, and would just commend you on the fact 
that those programs work very well.
    And my MEP in Rhode Island has done a terrific job. So I am 
sorry to see the budget declining for that, but I hope that we 
will be able to work with each other in the coming year to try 
to rectify some of that.
    Secretary Evans. Thank you, Congressman.
    Mr. Kennedy. Thank you.

          NOAA Partnership With the University of Rhode Island

    NOAA has funded hurricane research at the University of 
Rhode Island through the U.S. Weather Research Program (USWRP). 
The program is a cooperative effort between NOAA and the other 
USWRP agencies (National Science Foundation, Federal Aviation 
Administration, Navy, Air Force, Department of Agriculture, and 
Department of Energy). The program works towards improving 
forecasts of the location and intensity of heavy precipitation, 
including predictions of where inland flooding will occur 
during the following extreme weather. The fundamental USWRP 
goals are improving hurricane-at-landfall and precipitation 
forecasts and determining the quality and cost-effectiveness of 
different observations applied to models used for medium-range 
forecasts. These goals address the Nation's highest priorities 
to improve forecasting of high-impact severe weather events.
    Among other activities, the University of Rhode Island has 
conducted ground-breaking research on the heat flux, or 
transfer of energy, between hurricanes and the oceans. The 
results of the research have been applied to NOAA's Geophysical 
Fluid Dynamics Laboratory's hurricane model, which is now used 
in an operational capacity at NOAAs National Center for 
Environmental Prediction. The work has been fundamental in 
improving the accuracy of forecasts of hurricane intensity at 
landfall.
    Mr. Wolf. Thank you.
    Mr. Secretary, I have some other questions. I am sure Mr. 
Serrano does. We have another hearing at 2:00 p.m. with 
Attorney General Ashcroft, so we will probably certainly end 
before. We will try to make the questions go faster, and we are 
sorry for the delay back and forth, but the House has just 
apparently recessed and are in Special Orders, so there 
probably will not be many other Members come.
    A couple of fast issues. Conflict diamonds. There are press 
reports, and I have seen data, that I now believe, in fact, 
that it is true that al-Qaeda is funding their terrorist 
activity through conflict diamonds, and conflict diamonds 
coming out of Sierra Leone and places like that.
    The Administration has been very slow in dealing with this 
issue. On December 31st the State Department issued a press 
release stating the U.S. has determined the full implementation 
of the Kimberly Process recommendations can best be achieved 
through legislation. I know this is not directly--I don't know 
how much you know about conflict diamonds. There is a whole--
conflict diamonds has funded Hezbollah. Hezbollah blew up and 
killed 241 marines in Lebanon in 1983. They blew up the 
American Embassy there. But now they are involved. And I will 
send you and show you--if you or your staff or someone can come 
by, we will give you the tape. We have met with our people in 
the government. But that is a law enforcement issue.
    The Administration has to deal with this issue, and the 
bill just kind of hangs around down there. The Ways and Means 
Committee wants to move it now. But if you would as the chief 
business trade agreement Commerce person get behind tough, 
aggressive legislation that shuts down the diamond trade coming 
out of--the conflict diamond trade coming out of that region so 
that we do not fund al-Qaeda and bin Laden and Hezbollah and 
those. If you could say something about it, I don't expect you 
to be an expert, but if you will look at it and make sure that 
the administration comes up with tough and aggressive 
legislation.
    Secretary Evans. Absolutely I will look at it, Mr. 
Chairman. I appreciate your championing of this very important 
issue. I know it is something that you have worked very, very 
hard on. I think it is something that does need to be dealt 
with. You have my assurance that I will communicate that with 
the right people within the Administration.

                            EXPORT CONTROLS

    Mr. Wolf. Thank you very much.
    Export control. Last year you requested additional funding 
and positions to establish new attaches in China, Russia, 
United Arab Emirates, India, Singapore and Egypt to reduce the 
risk of dual-use sensitive items to terrorist groups and 
countries. The fact that these five are mentioned, are these 
five--do you have particular concern about, or was the office 
not fully staffed, or why did we pick these five countries?
    Secretary Evans. Well, those are countries that are of 
interest to us that we are going to pay attention to, and very 
closely scrutinize when it comes to exporting dual-use 
products.
    Mr. Wolf. Do you have any comment about the article in 
today's paper with regard to Hughes and Boeing settling with 
the U.S.troubles me deeply that two American companies would be 
actually giving or selling something and doing this whereby the Chinese 
would have this technology. What are your thoughts about the agreement 
that was reached?
    Secretary Evans. Well, actually that is handled by the 
State Department. But let me just say, I was glad to see it had 
been resolved. It is very troubling, like you say, to see that 
information may have been passed that should not have been.
    The export control. Let me get back to your original 
question for just a moment, because--and I will specifically 
mention China, because it is an area on which we have great 
focus because they haven't cooperated with us like we feel they 
should, particularly when it comes to end-use visits of some of 
their facilities. And also China is not a member of the other 
countries that you listed. I am not sure about all of them, but 
some of them are not a member of many of the nonproliferation 
agreements that are out there in the world today, like 
Wassenaar and other international agreements.
    So it is these countries that we will pay extra close 
attention to, especially concerning the list of products that 
we must monitor and license. It is countries like China that 
won't have an automatic exception or exclusion. We will give 
anything that is on the list, that is going to China, an extra 
amount of scrutiny. So countries that are not members of some 
of the nonproliferation agreements that are out there in the 
world right now get added scrutiny from us and our team.
    Mr. Wolf. Separating the comment out from the two 
countries, the two companies that have been involved, because I 
don't know that much about this case, so I don't want to have 
any--what I am going to say now should have no connection to 
Hughes and Boeing, because I am maybe saying something 
inaccurate with regard to them, I would sense, and I would 
believe and feel very, very deeply, particularly since we are 
asking men and women to serve in the military to fight and 
defend our country when you find the companies are doing this, 
I believe it is very important to have criminal penalties. I 
believe when a company does something like this is treasonous, 
traitor activity.
    The Justice Department was seeking the death penalty for 
Regan, his name was, who was trying to sell secrets. And then 
for a company--and again, I disassociate this comment from 
these two companies, because I don't want to say something 
negative about them and hurt them that way. But when you find a 
company that is doing this in the world today, it is like the 
Enron situation and some of the other situations. To 
prosecute--and the Administration has a good record of cracking 
down on some of the corporate crime. I have listened to the 
President speak. This is a corporate crime, but this almost 
approaches treason, because you are jeopardizing the lives of 
young men and women who are fighting for the country, so 
sometimes just a civil penalty of a fine just really doesn't do 
it. And I think criminal penalties, particularly since, you 
know, it is to whom much is given, much is required, we want to 
trade, we want to be out there, we want to be doing this.
    But on the other hand, if you are doing something, and 
these companies who will be doing this will be knowing that 
they basically--remember the Toshiba case years ago under the 
Reagan Administration, the selling of the quiet propeller and 
the technology whereby we used to hear the Soviets so far off 
the coast. After they did that, it was very difficult for a 
period of time, which put in danger the security of the United 
States.
    Criminal penalties. Bring them to justice, because, in 
essence, it is the same thing, in essence, to a certain extent, 
of what the penalties with regard to the person who is trying 
to sell secrets, and do that, that the Administration asked for 
the death penalty on. I understand the jury decided not to give 
the death penalty. I am not talking about death penalty, but 
criminal charges so the word goes forth that companies ought to 
be as patriotic as individuals and not do this, which 
jeopardizes the security of the men and women who serve in the 
military.
    Fiscal year 2003 bill included funding for a new 
comprehensive human rights training program for ITA employees, 
including U.S. Foreign Commercial Service officers, to help 
them understand the importance of promoting human rights. When 
these employees are counseling U.S. Businesses on market 
conditions within a particular country, and I understand your 
staff is now working with it, it is important to let them know 
how important it is that they also counsel with regard to human 
rights.
    I urge you to kind of make some statement when they all 
come together so that they know, in addition to promoting 
business, it is--we want to be sure that we are also promoting 
human rights at the same time.

                       CORPORATE RESPONSIBILITIES

    Secretary Evans. I am excited about the program. I am 
delighted that we are going to have a training program that 
will be part of the U.S. Foreign Commercial Service Agency that 
will address the issues of corporate responsibility of human 
rights and the rule of law.
    One thing that I do when I travel the world, Mr. Chairman, 
is I always like to go to a facility that is being supported by 
American capital, by enterprises in the region that are there 
and giving back to the community and taking the American values 
of respecting human rights and the American values of sharing 
with others with them.
    And I always have a very easy time of finding a school or a 
hospital or some facility that is being supported by American 
companies. I was in Lima, Peru, not too long ago and went to a 
school that was located right next door to a brickyard. This 
brickyard was a large pit where they had children that were 
filling forms with mud and water to form the bricks.
    A company from America that is prominent now in Peru 
decided that is not right, these children need to be in school. 
And so the company went and provided the funding to establish a 
school that is right next door to the brickyard, and now those 
children are in school instead of in the brickyard, where they 
shouldn't be. In fact, it is illegal for them to be there, but 
they have been there.
    And so this program that we will have inside the Foreign 
Commercial Service will talk about the great social 
responsibilities that companies have when they go to other 
places in the world. I mean, it is what we feel here in 
America, these offices that are scattered all around the world 
will talk about the importancewithin the country for the 
country to understand basic issues of human rights and rules of law and 
other corporate social responsibilities.
    So this is a program that will feed through about 100 
offices here in America and 100 offices around the world. I 
will make a statement to them, I assure you of that, to tell 
them how important this is for America leading the world toward 
people having the kind of freedoms that we cherish here in 
America, the kind of dignity that all human beings should have.
    I think it is integral to our responsibility of leading the 
world. And I have already mentioned Foreign Commercial Service 
during this testimony this morning. I tell you it is a 
wonderful team of people. They are all over the world. They can 
take this powerful message of American values and deliver them 
into the countries where they are, remind the companies that 
are moving into these countries of the importance of practicing 
corporate social responsibility and human rights issues and 
encourage rule of law in these countries.
    Mr. Wolf. Thank you. I have a few more, and then I am going 
to submit the others for the record and then recognize Mr. 
Serrano.

                        2010 CENSUS PREPARATIONS

    The budget request includes $662 million for the Bureau of 
Census of which $260 million is to continue preparation for the 
2010 census. The 2000 census and the decennial census before, a 
household would expect to receive either a long form or a short 
form survey to fill out.
    The budget proposal is to reengineer the way that the 
decennial census is conducted, more specifically the proposal 
would have American households expect to receive only a short 
form survey during the decennial 2010 census; is that correct?
    Secretary Evans. That is correct.
    Mr. Wolf. With the congressionally approved questions 
included on the long form survey in 2000 census that are 
proposed to be included in the annual survey called the 
American Community Survey, ACS, your proposal includes sending 
this long form questionnaire to 3 million households not every 
10 years, but every year. Is this from a budgetary issue?
    Secretary Evans. Well, it is a couple of issues, Mr. 
Chairman. One is to provide better, more timely data to the 
customers that we have out there, like the Federal Government 
and State governments and local governments and the business--
and the private sector, as to demographic patterns in our 
country. And with the long form being used every year by 3 
million a year, we will be able to provide more timely 
information to our customers as to the patterns in this 
country. So instead of waiting every 10 years to understand 
population movements and growths in certain areas of our 
country, we will have a running total of it. Instead of 
collecting long form data every 10 years we will get ourselves 
in a position to have an annual number.
    It is providing better information to the customers that we 
have that make big, big, big, very large resource decisions as 
to how money is going to be allocated, or how it is going to be 
invested. It will be a very valuable tool to States when they 
receive Federal money to how they disburse the money within 
their own State. How they disburse it, whether it be county by 
county or city by city, they will have more accurate 
information as to where the people are in their State than they 
would if they were waiting every 10 years.
    In terms of is it an economic issue, quite frankly, Mr. 
Chairman, we feel that by doing this annually every as opposed 
to incorporating it into the 2010 decennial census, that it 
certainly won't cost us any more money, and, in fact, may save 
us some money as to just trying to do it as a one-time, one-
shot, do it in the 10th year and not any other.
    Mr. Wolf. You think it will save?
    Secretary Evans. I think it will save us some. We do feel 
like the track we are on now, we will save several hundred 
million dollars in the decennial census that we would wind up 
spending if we don't incorporate the American Community Survey.
    Mr. Wolf. Okay. Then we will just submit the other--we had 
others that were budgetary issues. They tell me Congressman 
Davis's Committee is going to have a hearing on this issue. We 
will just submit them for the record. Some of the questions we 
will ask you, if you do not get the funding you are asking for, 
what will the impact be? But let me submit them for the record.
    Secretary Evans. Right.

                    INTERNATIONAL STANDARDS BARRIERS

    Mr. Wolf. Last year we heard reports that U.S. Companies 
did not appear to be as competitive as non-U.S. Companies 
because U.S. Standards are not incorporated in many of the 
international agreements. What is happening is when they bid 
they are automatically cut out because the standards have cut 
them out.
    Secretary Evans. Well, first of all, we are being as 
aggressive as we can through NIST to work with the 
international standards organizations so we are in the mix when 
it comes to setting standards in emerging countries.
    Mr. Wolf. Are we finding that some of them are trying to 
knock us out by setting the standards?
    Secretary Evans. I wouldn't go that far at this point, Mr. 
Chairman. I am not saying that they are or they aren't. All I 
can tell you, I will get a more specific answer to that good 
question if we have a specific example of a credit that it 
seems like they are trying to knock us out. I will say this 
then to you, that we have been out of the kind of trade 
negotiations game for quite some time. Now we are back in it 
with trade promotion authority.
    But others in the world, like the EU, have been very 
aggressive, and they have many more trade agreements than we 
have. And when you enter into trade agreements, sometimes 
certain standards are set within those trade agreements between 
those countries that wind up as barriers to American companies, 
because when we finally get into that market, maybe it is in 
Brazil or maybe it is in some other country, but there is 
already a trade agreement between that region and the EU, and 
certain standards have been set, and we don't meet these 
standards, and it is our tough luck, because the market has 
been established or the standards have been established.
    So it happens in trade agreements, but it happens outside 
of trade agreements as well. It happens just through the 
associations that are around the world that are trying to set 
standards for the various products that are moving around the 
world.
    So what we have to do is just continue to be very proactive 
and very engaged in the whole standard-setting process of the 
world to try and bring to it as much harmonization as we quite 
possible can, but I would also say American-friendly. We 
obviously want it to be friendly to American businesses, and 
every decision that we make should consider if this makes it 
harder for America to compete or easier for America to compete? 
So we want to continue to focus on standards and make it easier 
for America to compete.
    Mr. Wolf. If you can submit something for the record 
telling us if there have been circumstances whereby we have 
been, over the last 10 years--which would go beyond your time 
up to now--whereby the standards have kept us from competing.
    [The information follows:]

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                       GENETICALLY MODIFIED FOOD

    Mr. Wolf. And in the interests of time, I want to leave at 
least 10 or 15 minutes for Mr. Serrano.
    But that leads me into another issue. It is not your issue, 
but I think in your capacity of friendship with the President 
and going back to run his congressional campaign in 1978 that 
you told me that you ran or whatever, so you have known him for 
a while, I think people do use you to get word back, 
genetically modified food.
    I was in Ethiopia where 11.5 million people are dying or 
are subject to dying because of lack of food. You go down in 
Zimbabwe, Mugabe is not allowing genetically modified food. The 
genetically modified food issue is going to begin to cut us out 
and the French are promoting it, and some of us--also bring 
about starvation and death.
    In Uganda, with regard to bananas, Uganda is a relatively 
poor country faced with a terrible situation of Idi Amin and 
now AIDS. They are beginning to work their way out. The banana 
trees in certain areas are dying, so they have a genetically 
modified banana tree.
    They are afraid to go in that direction, though, because if 
they go in the genetically modified banana tree, they will lose 
their markets in France. They will lose their markets in 
Germany. So the poor Ugandan--and if you have been to Uganda, 
the banana is a large staple, like rice, they use in so many 
other things. They don't know what way to go. I believe we have 
been relatively silent when you look at what the EU has given--
we have this report which I will submit in the record--on the 
food issue. There are 30 million people, as I said earlier, 
that are subject to dying that are facing famine in the world. 
The EU has done very, very little. When you add in the 
genetically modified food, our companies cannot compete.
    So I think it is important that we be aggressive in 
speaking out, because, one, it will cost lives, but, two, we 
will also lose business.
    I don't know if you have any comment about the genetically 
modified food issue, but it is one that is very, very important 
to the economy, but I would say equally important to keeping 
people alive that are going to die without it.
    Secretary Evans. Mr. Chairman, when I leave my office every 
night, my desk is clean except for one piece of paper. It is a 
piece of paper that is a newspaper article that I read when I 
was in South America about 4 months ago. It was a cover of the 
newspaper, and it was a story about a mother who was selling 
three of her children, selling three of her children to feed 
the other four. And it was a mother in Zambia. And it was 
another one of those countries that has felt like they should 
not accept genetically modified food because they are worried 
about what it might do to their health, or they had heard it 
might be unsafe or unhealthy.
    And so just be assured that it is an issue that is very 
high priority to me and this Administration. We are speaking 
out on it. I haven't seen a single minister from that part of 
the world that I haven't talked about it; in fact, that I 
haven't put it at the very top of the list. I do point out to 
them the great famine that is taking place in that part of the 
world while they study the issue.
    And so know that we are very conscious of it. Know that we 
are very much aware of it. And know that it is an issue that I 
think is very important to this world. As you say, while some 
are studying it, people are dying.
    Mr. Wolf. Well, I think they are, and I think you have to 
say things 10 times before it resonates. The poor countries are 
caught in a bind. Many of them would like to move and take the 
genetically modified food, but they are afraid because some of 
our allies are telling them if they take that, it will 
contaminate the food supply system, and, therefore, they are 
going to lose their markets.
    And so you get a country like Uganda who wants to go that 
way; 50 percent of the banana trees are dying, but they are 
afraid if they go that way, they are going to be cut off at the 
knees, and there will be no markets. So as we are talking to 
the ministers from Zambia and Uganda and Ethiopia, which is 
important, but it also is important to talk to our friends in 
the EU, particularly the Germans and the French and those 
countries, because they are literally exploiting these people.
    I sent a letter yesterday to Kofi Annan, and I sent a copy 
of it to the White House yesterday, asking him to appoint a 
special envoy on behalf of the U.N. In the area of hunger, 
genetically modified food, and to go around the world asking 
them to deal with this issue and deal with the issue of others 
because of all of the foods being donated in Africa and 
different places.
    And, frankly, I don't think the Administration has done a 
very good job of telling the story. It has done a good job, but 
you are hiding your light under a bushel basket. Fifty-one 
percent of all of the food, fifty-one percent of all of the 
food in the world for hungry people, is coming from the people 
of the United States. Fifty-one percent. The EU and all of the 
nations like that combined in that area was 27 percent, and 
last year they were below the 27 percent. It is like Dietrich 
Bonhoeffer talked about cheap grace. That is cheap grace. They 
talk about it, but you have been involved in the campaign, have 
you ever heard someone say, I want to help you, I will be 
there? But I am not there. And I will talk about it. You had 
the event, but the check never comes in.
    There are promises, and they are talk and conferences, but 
they are not giving the food to Ethiopia or to Eritrea, the 
other place, Mauritania and all of the different places. As a 
result of that, they feel no pressure because nobody is saying, 
French, you are not giving the food. The Italians, the Italians 
ought to be flooding Eritrea, because if you go to Eritrea, 
there is Italian architecture, they used to control the 
country. The same in Ethiopia.
    But the administration ought to put pressure, friendly 
pressure--I mean, these are our friends, we certainly want to 
be allies with them--that they should give. And I did do a 
letter to the President yesterday asking that the President 
contact Kofi Annan to ask him. There is a special envoy for 
AIDS, which was a very appropriate thing the U.N. did; now with 
30 million people ready to die because you put AIDS on top of 
famine.
    The U.N. ought to have this person, and this person can 
work with Jim Morris, who was appointed by this Administration, 
can work with former Congressman, my good friend, Tony Hall, 
can work with the U.N., but can go around to those who have not 
given--and I might say parenthetically so we are not just--the 
Chinese have given zero, zip, almost nothing--but to go to some 
of these countries and ask them, in order to help the starving 
people of the world, would you give? And a large portion of 
that is genetically modified food.
    The others will be for the record, except for one other 
thing. NOAA we didn't spend the time I wanted to spend, but I 
would like to know, the early warning system with regard to 
famine, does NOAA put out a monthly report that is published 
nationwide and particularly sent to the ambassadors, perhaps, 
of the countries that are here in the United States, or also 
have offices at the U.N. Saying, our projections are for next 
year a famine, for this will be taking place, this will be 
taking place?
    Do we get the information out so that the world knows, so 
that the different countries, whether it be in South America, 
Central America--I understand there is ready to be some famine, 
I was told--I couldn't believe this--in Central America, in 
Honduras and Nicaragua and Guatemala. But does NOAA put out any 
bulletin or notify anyone with regard to the good work that 
they are doing and what the outward projections are?
    Secretary Evans. Two comments, Mr. Chairman. I don't know 
if we put out a monthly report or not. I will check on that.
    Mr. Wolf. Or quarterly.

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    Secretary Evans. I don't know exactly what we put out, but 
I will find out. I know that we talk to the other countries 
around the world with respect to expected weather patterns in 
their country.
    Second point is, though, that one of the most important 
elements of the President's Global Climate Change Initiative in 
this year's budget is to cover the world's oceans with a global 
ocean observing system so we have better information as to 
weather patterns of the world. Right now we have about 40 
percent of the world covered. The reason that we hear about El 
Nino and La Nina is because we have that part of the world 
covered. We have lots of buoys out there, so we can pick up 
weather patterns, and we know what is going to happen out 
there. To make good decisions you have to have good data.
    Secretary Evans. I have to have 100 percent of the world 
covered. That is the direction we are going. So not only will I 
check and see how it is we are communicating the weather 
patterns of different countries around the world, all of them, 
but particularly the emerging countries, developing countries 
as you are pointing out and sensitive to. But also just know 
how important--how much emphasis we are putting together a 
global system so we will have better information as to where 
famine may or may not occur in a part of the world.
    Mr. Wolf. You may want to bring people in from some of 
these developing countries to train them, maybe a fellowship 
for 2 weeks or something whereby they can come back and see how 
we do it. I think you develop the relationships and also the 
expertise.
    I will submit the rest of the questions for the record.
    I will recognize Mr. Serrano.
    Mr. Serrano. I will be brief. I don't want to keep the 
Secretary any longer.
    Mr. Secretary, one of the things I have noticed is the 
worst-kept secret in Washington, that you are very close to the 
President and that you advise him and that you comfort him. Be 
aware that the next home run Sammy Sosa hits will be his 500th 
home run. I think that is going to depress the President, 
because he traded him. So I wondered if you advised him to 
trade him.
    Secretary Evans. No, I wasn't part of that decision, no. 
Only the good decisions.
    Mr. Serrano. So you told him to keep Palmeiro. Get rid of 
Sosa. But just be aware that that could hurt him in some way 
while we celebrate in this country.
    I want to take a moment to publicly thank you and NOAA for 
the ceremony that was held in my district on December the 5th. 
Admiral Lautenbacher came out to the Hunts Point community 
where they are taking advantage of the educational 
opportunities available at the weather station. It is a group 
of young people that now have their own weather station. All of 
a sudden there is even talk about local New York-type TV and 
radio stations going to Hunts Point for some young people 
through NOAA to give them some information.
    I would also like to commend NOAA in general for the 
excellent job they have done, in association with minority-
serving institutions, to expand educational research 
opportunities. The House report to accompany the Fiscal Year 
2003 bill directed the National Institute of Standards and 
Technology to review NOAA's program to interact with minority-
serving institutions and to report back on its efforts to 
introduce a similar program. I want to thank you for the report 
we received last month giving many examples of grants, 
fellowships and collaborations between this and minority-
serving institutions. I think they are making a good start, and 
I hope they strengthen existing ties and continue to develop 
new opportunities with minority-serving institutions.
    I will submit for the record a question to follow up on 
this, but I wanted to publicly commend you for the work you 
have done. You know that is an issue for so many of us for a 
long time, and you have done well, and we congratulate you on 
that.
    Secretary Evans. Thank you very much, Congressman.
    Mr. Serrano. I would like to take this opportunity to State 
the fiscal year 2004 budget proposes to suspend Public 
Telecommunications Facilities Planning and Construction grants. 
Elsewhere in the budget, $80 million is set aside for digital 
conversion grants to be taken from $380 million already 
appropriated and advanced for the Corporation for Public 
Broadcasting to produce or acquire programs for public 
television or radio. That is more than a 20 percent cut.
    You don't have to defend that idea. That proposal goes to a 
different subcommittee. But I do have two questions for you.
    First, even if we agree that the two digital conversion 
grant programs should be consolidated, why should it go to the 
Corporation for Public Broadcasting? The Public 
Telecommunications Facilities Planning and Construction program 
is older, more established, has more stringent requirements and 
has a good track record as a well-run program. Why not keep the 
program here? And about one quarter of the Public 
Telecommunications Facilities Planning and Construction grants 
are for things other than digital conversion. Who will pick up 
the other equipment and facilities grants?
    Secretary Evans. Congressman, I have to tell you I haven't 
looked at the pluses and minuses of having the funds in one 
organization over another. I am more than happy to do that. I 
do acknowledge the good work of the agency you commended over 
the years and it has done a good job in the conversions. So why 
one as opposed to the other I am not sure, but I would be glad 
to take a look at it and get back to your office.
    Mr. Serrano. I appreciate that.

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    Also, on the issue of El Salvador, I like your idea of 
creating a new U.S. and foreign commercial service post in El 
Salvador to promote trade in the region. But I want to clarify 
a fine point about your proposal.
    You asked for this post in the 2003 budget along with 
several other new items, all tied to a $10 million fee 
increase. In this year's budget, you propose to continue these 
fee-funded programs in fiscal year 2004 for the extent of 
actual collections, and that is the quote from the language. 
Now in the fiscal year 2003 omnibus bill we provided $1,650,000 
in direct appropriations, not dependent on collections, to 
cover the cost of a new presence in Central America. What are 
your plans this year for the new post?
    Secretary Evans. We will open a post there, and it will 
most likely be a regional post. It will cover not just El 
Salvador but the countries in that immediate region. I am not 
sure exactly what the division of labor will be, but we 
certainly will have a senior commercial officer, sir, in that 
post as well as some support staff. So the office will be open 
this year.
    Mr. Serrano. Let me encourage you to continue, of course, 
to do anything you can in promoting our presence in Latin 
America and certainly in other parts, as the chairman has well 
established.
    With that in mind, I just have one question that just came 
to mind that I asked your predecessor once.
    Notwithstanding the fact--I know this is a touchy subject 
for some folks--that we have no relations with the Republic of 
Cuba, does the Commerce Department take time to look at what it 
would look like if that were to happen?
    You know, there is--when I first started talking about this 
subject 12 years ago, I used to get about three votes on the 
House floor for any kind of a bill that looked like it was 
opening up the relations between Cuba and the U.S. As you know, 
that has changed dramatically. My Republican colleagues have, 
to my amazement, my satisfaction, taken those bills and made 
them into amendments and now pass by 300 odd votes, not as far 
as I would like it to go but certainly a long way.
    Is the Commerce Department not allowed under present rules 
and regulations under present law to begin to look at what it 
would be like if we had open trade with Cuba?
    Secretary Evans. Well, I am not aware of any law that would 
prevent us from doing that, Congressman. I am not aware of us 
doing it, though. But if it is something that you would like 
for us to consider, I would be glad to take that request under 
consideration and then get back to you as to whether or not it 
would be appropriate for us to do it.
    Mr. Serrano. Sure. I would like that.
    I would like, Mr. Secretary, just in case some things 
continue to change, where would the Commerce Department be in 
advising folks in this country what to do and how to do it and 
where to do it? I mean, I am sure we should know what Cuba has 
to offer us and what Cuba needs from us other than friendship. 
So that time may come and you know, for me, as you know, that 
is a very delicate subject. Because here we are talking about 
all the trade we have with China, and the same people who 
support trade with China are the people who do not support 
trade with Cuba, and last time I looked I think they had the 
same kind of Government. So I would hope that you could start 
to look at it, because I suspect things are changing really 
fast.
    Secretary Evans. I will certainly take that under 
consideration, Congressman.
    But just one more quick point about Central America. As you 
know, we entered negotiations with Central America with respect 
to a free trade agreement. So make no mistake about how 
important that region is to this Administration, to this 
President who has been there, to that region. So not only are 
we going to open up an office in El Salvador, but we are also 
looking forward to negotiating with that region a free trade 
agreement over the next few years.
    Mr. Serrano. Okay. I thank you for your presence. I would 
hope that you would advise the President to invite Sosa to the 
White House, but don't discuss the trade.
    Secretary Evans. Thank you, Congressman.
    Mr. Wolf. Thank you, Mr. Secretary. We appreciate your 
testimony here.
    The hearing is adjourned.

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                                            Thursday, May 22, 2003.

                     THE EFFECTS OF CHINESE IMPORTS
                           ON U.S. COMPANIES

                                OVERVIEW

                                WITNESS

FRANK VARGO, VICE PRESIDENT, NATIONAL ASSOCIATION OF MANUFACTURERS
    Mr. Wolf. Our hearing will begin.
    At the outset let me say this is going to be a day where 
there is going to be a lot of votes, apparently. So we are 
asking the witnesses to keep their testimony to 3 minutes. I 
know that is brief, but this is not just a show situation where 
there is going to be a hearing and it is over. All of your 
testimony will be gone through. Christine and the staff will be 
working with you. The purpose of this hearing is to do 
something constructive and positive about this issue.
    So I would ask in respect for those who have come from out 
of town that we limit this to 3 minutes when you come up here. 
I know that is a brief, brief period of time but we have a lot 
of witnesses.
    We wanted to do this before we began to mark up our bill. 
That is why we have rushed this. This is a closing day of the 
Congress, so maybe the closing day or day before. So because of 
that, if you could do that, we would very much appreciate it.
    Good morning, today, the subcommittee will hear the 
experiences and the concerns of a number of American businesses 
about increased imports from the People's Republic of China, 
and we will review the efforts of U.S. Trade-related agencies 
to support American businesses in this regard.
    This committee has funding responsibility for a number of 
trade-related agencies, including the Departments of Commerce 
and State and United States Trade Representative, and the U.S. 
International Trade.
    In the coming weeks we will be making a decision on the 
fiscal year 2004 budget. Therefore, it is important for us to 
understand the effectiveness of these agencies in helping 
America's small and medium-sized businesses deal with the 
consequences of increasing imports from China.
    Today we will hear from the National Association of 
Manufacturers, a number of business owners, officers of 
manufacturing companies, pharmaceutical and chemical companies, 
and agricultural interests, the farmers. We welcome you all and 
again, I appreciate you all showing up.
    The purpose of the hearing is not to review international 
trade policy, but to highlight the particular concerns of 
American companies about the impacts of imports from China. The 
subcommittee has heard concerns that the Administration has not 
been very favorable and has unfairly favored Chinese businesses 
at the expense of American companies and antidumping cases. 
These allegations are very deeply troubling to me and, 
hopefully, to the entire Congress, and they are more startling 
given the sharply increasing U.S. Trade deficit numbers.
    Last year the United States trade deficit was at an all-
time record of $435 billion dollars. This is the highest trade 
deficit in the Nation's history. Some are predicting it to soon 
top $600 billion. The numbers for China are even more 
startling. According to the Census Bureau in 1985, our trade 
deficit with China was $6 million, million, not billion, but 
million.
    In 1995 it was $33.8 billion, B billion. Last year, it was 
$103, B, billion. If you do your math, our trade imbalance with 
China has grown to an astronomical 107 million percent since 
1985. Put another way, our trade imbalance with China was 
greater in the past half an hour at about 935 than in all of 
1985. I, for one, am deeply concerned there's not been 
sufficient amount of attention focused on the possible long-
term impacts of trade imbalance on the country and, especially, 
its impact on jobs. Fortunately, this Congress, and there may 
be some differences, we are going to pass a tax package to help 
create jobs, and for the Administration then to be asking us to 
do this with regard to jobs with the tax package, and then 
allow jobs to dissipate and go out abroad, does not really make 
any sense. So this hearing is about jobs. This is about 
recovering the economy. This is about having people having 
places to go to work. According to the Bureau of Labor 
Statistics, the U.S. has lost more than two million of its 
manufacturing jobs in the past 5 years, a greater than 12 
percent decline. According to one report, this has been the 
worst decade for manufacturers since the great depression. 
Right now, 27.5 percent of our manufacturing capacity is 
sitting idle. Some would say that a manufacturing sector isn't 
all that important in this high-tech economy. I don't agree. 
Without a manufacturing base, our country cannot be as 
competitive on the global stage, and we are also exporting 
high-tech jobs in the same way as we are exporting 
manufacturing jobs. As recently as the year 2000, U.S. received 
about seven times as much foreign direct investment or FDI as 
China. Now, China has surpassed the U.S. In FDI. In fact, 
China, FDI in China, is up 51 percent this year. In the U.S., 
it is stagnant.
    At the outset of the hearing, I want to say that I did not 
vote for PNTR with China. I have been a long-time critic of the 
human rights violations of the People's Republic of China and 
continue to be concerned that the values we, as Americans, hold 
dear, freedom of speech, freedom of press, freedom of religion 
are not the values shared by many of our trading partners, 
especially China.
    I can spend the entire time documenting human rights 
violations which continue unabated in China, but this a hearing 
today is not about human rights in China. While I disagree with 
the direction of our Nation's trade policy with China and 
question the wisdom of not only this Administration, but past 
Administrations and Congress, inregarding to trade relations 
with China, the bottom line is the U.S. And China are now trading 
partners. Accepting that reality, however, I continue to believe we 
must do everything possible to ensure that trade with China is fair, 
and that U.S. Businesses, especially small and medium-sized businesses, 
are not cut off at the knees by products dumped into our economy by 
China. We have to look at what our policies are when it comes to 
dealing with imports from China and make sure American companies are 
able to compete on a level playing field. We are losing too many jobs 
to stand by and let products from China flood our markets.
    Again, the administration has to deal with this issue 
because if you are passing the tax cut to help American 
businesses to stimulate the economy, it is not to stimulate the 
economy in China so we can buy more Chinese goods, but it is to 
stimulate the economy in the United States, to put American men 
and women with dignity jobs back to work and not have your own 
government that you are funding and paying with your taxes be, 
basically, an adjunct in supporting the Chinese Government. 
That's absolutely inappropriate.
    I recognize Mr. Serrano for any comment, and we will go to 
the first witness, Frank Vargo, Vice President, National 
Association of Manufacturers.
    Mr. Serrano. Thank you, Mr. Chairman. I would like to join 
you today in welcoming our guests for today's hearing. As you 
may have been aware, I have been a supporter of efforts to 
continue to normalize trade relations with China. Now, some of 
you who have been to hearings before may know that there is a 
little behind-the-scenes conversation going on always at these 
hearings as to how long it will take me before I bring up the 
subject of Cuba. Well, this time it is easy, because when you 
talk about trade with China, I think the natural question is 
why China and not Cuba? And while some may want to revisit 
China and some may be opposed to trade with both, I am on the 
opposite side. I think we should trade with both and as soon as 
possible with Cuba and continue to grow.
    Now, as the Chairman knows, one of my favorite Presidents 
was the former President Clinton, and I respected his 
intelligence, and I remember asking him once, ``Mr. President, 
why China and not Cuba?'' and this brilliant, and I am not 
being sarcastic, I think we all agree on that, Rhodes Scholar, 
high-IQ President gave me such an honest answer that it was a 
painful and sad answer. He said, ``China's big.'' and therein 
lies perhaps what's wrong with our foreign policy on trade, the 
fact that we do deal with one and not with the other.
    So I would hope that today we discuss the issues that the 
Chairman wants to discuss, but I hope also that we continue to 
pay attention to the fact that trade is more than trade. Trade 
is good or bad, lack of it, foreign relations. A lot of what 
happens in the world, a lot of how we influence what happens in 
the world, I think, has to do with whether or not we have good 
relations with people.
    So if we fear, if we are concerned, if we do not like the 
Chinese model of government, I think the best way to deal with 
that issue is to continue to get closer to them. And so if we 
do not like what is happening in Cuba, whether it is our 
business or not, I think the best way to go is to trade with 
them.
    The big difference for me, and I will close with this, is 
obviously, it is two separate issues in that in the Chinese-
American community, there is no Dade County, Miami that 
controls the issue. Otherwise, we would not trade with China at 
all, and the fact that we somehow for years have felt that we 
can ignore Cuba or push them around, and we know that we cannot 
ignore China or push them around.
    So while it is not my intent at all to hurt American 
businesses, it is also my intent to make sure that American 
businesses trade wherever possible, and with whomever possible, 
and so I respect the Chairman's words. I believe that he has 
taken on a very serious issue and one that he believes deeply 
in in terms of the behavior of our trading partners, but I 
think the idea should be to bring more people closer to us 
rather than to keep people away from us.
    Thank you, Mr. Chairman.
    Mr. Wolf. Thank you very much, Mr. Serrano, Mr. Taylor 
would like to make an opening comment? Mr. Taylor.
    Mr. Taylor. Mr. Chairman, thank you very much. Coming from 
the heart of furniture country, and the major manufacturer s 
will be testifying today, I certainly want to say that I agree 
with what you said earlier. I share the vision that trade is 
not a supplement to one country's wealth at the expense of 
another. It should be trade where both countries experience 
advance for both their economies.
    It is almost impossible to think of a trade growing 107 
million--percent in that short period of time and not envision 
that there are not some problems that need to be recognized.
    The question is China using surrogates to dodge America's 
laws and quotas? Are patents and copyrights being copied and 
used in illegal manners to gain trade advantages? Are 
trademarks being violated, as several magazines have reported 
in the last 12 months, to sell goods under false names at lower 
quality? These are all serious questions I think we need to 
answer and see if any of those statistics play a part in this 
enormous trade increase on the one side.
    Thank you, Mr. Chairman.
    Mr. Wolf. Thank you, Mr. Taylor. In the interest either Mr. 
Regula or Mr. Sabo or Mr. Pitts would like to make a comment, 
you are welcome to.
    Mr. Regula. Mr. Chairman, I will use my time on introducing 
my guest.
    Mr. Wolf. Sure. Mr. Sabo.
    Mr. Sabo. Thank you, Mr. Chairman.
    Just briefly, I, fundamentally, do not understand how we 
can describe a trade policy with a country that we have over a 
hundred billion dollar trade deficit with as being fair. 
Something is wrong and desperately wrong. It is a one-way 
track. It is a massive subsidy of our hard American dollars 
into one country. At times I observe, I don't pretend to be a 
trade expert, but I fear that we are becoming a country that 
cannot produce anything. I am not sure that without China, we 
would have clothes today. I just think it is desperately wrong, 
and when trade is so one-way, there is something desperately 
wrong with our trade policy, and I thank the chairman for this 
hearing.
    Mr. Wolf. Thank you. Mr. Pitts or Mr. Peterson, either one.
    Mr. Pitts. Thank you, Mr. Chairman. Thank you for giving me 
the opportunity to provide an opening statement in support of 
ensuring free and fair trade for our U.S. Businesses.
    I am here today in support of Anvil International, which is 
on your first panel, which has major facilities in Columbia, 
Pennsylvania, my congressional district. Anvil International, 
producer of malleable, nonmalleable and ductile iron pipe 
fittings, as well as steel pipe nipples, hangers and couplings. 
In addition to their foundry and production facility, Anvil 
also operates a nationwide distribution organization consisting 
of five distribution centers that supply a wide range of 
construction products to the commercial building industry, has 
a total of 12 manufacturing plants in the U.S. And Canada, and 
employs 2600 employees. Anvil has one remaining foundry located 
in Columbia. They combined the operation of their former 
Statesboro, Georgia, plant at the PA facility and had 
originally planned to add two more jobs in Pennsylvania, but 
coupled with unfair imports and the slow economy, these 
additional jobs were not realized in Columbia. Instead there 
are a hundred less employees at that plant today. Fifteen years 
ago there were seven foundries in the U.S. Today only Anvil and 
Ward remain in this industry, and Anvil joined Ward 
Manufacturing in the filing of two anti-dumping cases against 
Chinese imports of malleable and non-malleable fittings in 
2002. They share a similar concern that the end result with the 
nonmalleable duty margin has not benefited the company and 
instead has led to an increase in imports. With this in mind, I 
testified for the ITC in support of Anvil and ensuring that 
this vital U.S. Industry is protected from further harm caused 
by unfair trading practices. Anvil is facing stiff competition 
from Chinese fittings producers, and in a time when the State 
of our national security is of utmost importance, we cannot 
afford to have this industry vanish from our economy.
    The nonmalleable case has been completed. While the ITC 
issued a unanimous 4-0 final decision, an injury the final 
anti-dumping margins issued by the Department of Commerce were 
in the single digits, and instead, first quarter 2003 data 
actually shows an increase of 10 percent as compared to the 
first quarter of 2002. And so their case is pending before the 
Department of Commerce. We will also be consider ed by the ITC, 
and I commend Mr. Fish of Anvil for his clear commitment to 
making quality products to serve Anvil's customers.
    However, they also know that the company needs to make a 
return on investment. They need to be certain that this 
administration, that the Commerce Department does everything 
possible to see that these laws are enforced and that 
appropriate actions are taken to ensure that they and other 
companies are able to compete in this global trade environment.
    So it is my hope that the subcommittee will pave the way 
for necessary enforcement of our trade laws, and thank you, Mr. 
Chairman, for permitting the testimony this morning.
    I yield back.
    Mr. Wolf. Thank you Mr. Pitts. Mr. Peterson do you have 
anything?
    Mr. Peterson. Thank you, Mr. Chairman.
    I join Representative Pitts in support of Ward 
Manufacturing and Anvil. Ward Manufacturing is in northeastern 
Pennsylvania. They used to have 1100 workers, now have 800 
workers, and have found this unfair competition could be deadly 
on their future. And I guess everything I was going to say, Mr. 
Pitts has just shared in statistics, so I will wax more 
philosophical, but as was stated earlier by Mr. Sabo, you 
wonder sometimes what we are going to manufacture in this 
country. And I recently lost two furniture factories to China 
imports, so I just closed two particle board plants. I never 
thought that bulky particle board would be something that a 
country so far away could compete with us on, but they are 
using European particle board to make the ready to use 
furniture. These plants, one was 10 years old and one was 12 
years old, this was new, latest technology in America plants, 
that had huge investments made in them, and are now sitting 
idle after just 10 years of operation.
    If we cannot make particle board as bulky, what can we make 
sheer that can compete? I guess, one part I would like to add 
is Ward and Anvil's concerns that the Department of Commerce 
allowed the Chinese producer in this investigation to provide 
fraudulent information that, in turn, resulted in a greatly 
compromised result in terms of the final dumping margins.
    Mr. Gleason also notes that he and others in the industry 
were shocked to learn of these single-digit margins after 
knowing that both Mexico and the European Union found dumping 
margins against malleable pipe fitting imports from China in 
the ranges of 42 and 48 percent. That is pretty devastating 
when you find out that our information is that much different, 
from 10 percent to 42 and 48 percent.
    Ward has said here: It is concerned that absent the strong 
enforcement of trade laws by the Commerce Department and by the 
Administration, there will be a limited and bleak future for 
the fittings industry, and I am saying, for the manufacturing 
industry. I recently was with Congressman Regula and Jack 
Murtha when they chaired the Steel Caucus, and I asked the 
former Secretary of Commerce and the President's economic 
adviser and trade adviser at a hearing Mr. Regula was chairing, 
and I said to them, is there anything on the list that is vital 
to the future of America's defense that we must maintain the 
capacity to manufacture and process in this country, and there 
was a long pause and the three of them looked at each other. I 
knew then, they did not have an answer.
    One, the politician, Mr. Daley, who very nicely said, well, 
everybody would want to be on that list. I said, no, everybody 
should not be on that list. Is there a list? He said, no.
    So it appears, as a country, we have not looked at what do 
we have to produce here to be able to defend ourselves? What is 
vital for us to produce to be this powerful Nation we have 
always been? I think we better be inventorying that. I think we 
better be looking at that. What capacity do we have to remain 
in this country? I am not interested in being part of a country 
that serves each other food and serves each other with diaper 
services. I just think it is time that we have to demand fair 
trade, and if we don't enforce the trade laws, they are not 
worth the paper they are printed on. And I think there has been 
a weakness for a long time. I do not think there is enough 
people in that Department or staff. They are overwhelmed, and 
we better put some resources there that demand fair trade, and 
if we do not, I fear the future, long-term future, of this 
country.
    Thank you.
    Mr. Wolf. Mr. Vargo, first witness, please.
    Mr. Vargo. Thank you, Mr. Chairman.
    It is a pleasure to testify before you, and thank you for 
your support of American manufacturing.
    I have an exhibit here showing what you stated about 
manufacturing having lost two million jobs in just the last 33 
months, and as you can see from the various colors on the 
graph, all States, other than Nevada, have shared in this loss. 
Trade has been not the most important reason, but a very key 
reason, for this overall loss and the key factor there has been 
the over evaluation of the dollar, which fortunately is now 
coming back into line. But within this, China, has played a 
very important role.
    As you have noted, the trade deficit with China has grown 
very rapidly. It is now about a third of our overall trade 
deficit in manufacturing. For 20 years, we have had a trend of 
20 percent import growth from China and 12 percent export 
growth, and that has brought us to a hundred billion dollar 
deficit. It has been up $50 billion in the last 3 years, but if 
those trends continue for five more years, 20 percent import 
growth and 12 percent export growth, we will find within 5 
years, by 2008, we have tripled our trade deficit with China to 
over $300 billion. We cannot let that happen. China is also the 
world's fastest growing market. We need to bring the trade back 
into balance not just on the import side, but on the export 
side as well.
    China's been closed to us. It only had opened up after it 
came into the WTO, it is only beginning to. Enforcement as you 
noted is something we have to really press. Many people feel 
this deficit is due to American companies having gone over to 
China. So far, that is not the case and the Commerce Department 
figures show that only three percent of our imports from China 
come from American affiliates there.
    However, that could change because we have talked. So many 
of our members now say the cost of production in China is so 
low, and the cost of production in the U.S. keeps rising 
because of health care and regulations and all these things, 
that we could be just at the beginning of a movement of a lot 
of our production to China.
    So as we look at this, as we look at the trends of if you 
see we can boost our export growth to 25 percent a year or 30 
percent a year, if the import growth from China moderates, then 
this can come under control, but we cannot let things just go.
    So this hearing, I hope, is the just the beginning of your 
process, Mr. Chairman.
    As you look at the Department of Commerce and USTR and 
Customs, you are going to hear a lot. I would just like to 
point out a few things you might want to keep in mind. 
Implementation of the WTO. My prepared statement contains an 
example of semiconductors where the Chinese charge a 17 percent 
value-added tax on foreign semiconductors, but if you design 
the chip and build it in China, it is only three percent. To me 
that is open and shut, they are violating the WTO regulations. 
Semiconductors are vitally important to this country. We have 
to do something about it, not 2 years from now, but now.
    The exchange rate. We believe the Chinese rate is 
undervalued by about 40 percent. That is not immediately under 
this Committee's jurisdiction, but it is the single most 
important factor, and we cannot ignore it.
    Counterfeiting. China is the epicenter of counterfeiting in 
the world. It affects large companies and small. So many small 
companies tell us that they export one product to China, the 
market dries up because it is counterfeited, and the market 
disappears. We need a massive export promotion program. China's 
just beginning to open up. We are beginning to return to our 
competitiveness against the European Union and other countries. 
This is the time not to just put a little bit more on. We need 
a, massive export promotion in China, or we are just not going 
to see those numbers change.
    We need to ensure that trade is market-driven. When there 
are instances of subsidies, these things have to be addressed.
    Mr. Chairman, just to conclude, we have a serious problem 
with China, but if we do not start addressing it soon, it can 
become a critical problem. Thank you very much, Mr. Chairman.
    Mr. Wolf. Thank you, Mr. Vargo.
    [The information follows:]

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    Mr. Wolf. I am really not going to have a lot of questions.
    One, we are going to deal with it, period. We are going to 
use this Committee to deal with this issue. I am going to do 
everything I possibly can. I may fail, but I may not, and we 
are going to stay with this issue. The fact is, when I get an 
issue, we generally stay with the issue. It took me three times 
to get elected in Congress, lost in '76, lost in '78, won in 
'80. We may have to come back next year, but we hope to do it 
this year.
    Secondly, I would like to say, do you see anything now, 
aside from what we are talking about today, that is going to 
change that figure if nothing happens? Nothing comes from this 
hearing? Is there anything that is going to change your 
projection for the next 3 years?
    Mr. Vargo. One thing may, and that is, some of the imports 
from China, particularly in electronics, have been at the 
expense of Japan and other countries whose share has really 
fallen. And as China works its way through eating their lunch, 
so to speak, there may be some slowdown in the import trend, 
but the fundamental answer to your question is, no. If we leave 
things the way they are, we are going to have massive problems 
that will overwhelm us, but, Mr. Chairman, I just want to say 
two things, if I could.
    I know your determination. When I was in the Commerce 
Department, I used to come talk to you about MFN and Romania, 
and you were very good and determined on your position.
    Secondly, what I would like to note is that China has 
pluses as well as minuses. We need a positive approach, and I 
know that is the approach this Committee is going to take.
    Mr. Wolf. If you recall President Reagan, God bless him, 
signed the bill that we had to take away MFN from Romania 
because they were persecuting people. Even though Reagan was a 
free-trader on that, I think. I appreciate your comments.
    What I want to ask you, and we will not go through it with 
every witness, we would like to get all of you back together in 
my office a week or two after we come back from the recess 
where we can sit around to talk about it. We cannot rewrite the 
trade laws in this Committee. I don't have that authority, but 
I would like to see what we can due constructively to make a 
difference. So we are going to get back together again with 
everyone that is here afterward. If everyone can call Christine 
and talk to her, whereby we will have a time and maybe we can 
bring the Commerce people up, sit around, not be under the 
three-minute rule, and deal with the issue of what can we 
constructively do. So everyone will be asked to call Christine 
after the hearing to work out a time where we all come 
together.
    Mr. Serrano.
    Mr. Serrano. Just one quick question, sir.
    Some of the difficulties in this new thing for us, this new 
experience with China, is that, based on China's recent entry, 
let us say, into markets throughout the world or in other 
words, is it a matter of the Chinese putting together the kind 
of trade team, if you will, that can be on par with other 
countries?
    Mr. Vargo. I think one thing we are seeing is that as the 
State owned enterprises and the central control in China begins 
to diminish a little, you are seeing more entrepreneurship. You 
are seeing more movement into new products, but part of it, is 
I do not know, and I am not a China expert. I do not know if 
they know what their prices are or their costs are. One hears 
that loans in China are nonperforming, 25 percent at least 
maybe 50 percent. So if companies do not have to repay their 
loans, and if they do not really have market-driven prices, you 
know, that could explain a lot.
    But I want to keep coming back to the point, we need a very 
positive agenda. We need to use our trade laws, absolutely, but 
we also really need to press to get our sales up to China and 
bring it more into balance.
    Mr. Serrano. Thank you.
    Mr. Wolf. Mr. Taylor.
    Mr. Taylor. Would you say the currency is having anything 
to do with the lack of competition in the sense, manipulation 
of the currency by the Chinese of their own currency?
    Mr. Vargo. Absolutely, Mr. Taylor. They froze their 
currency at a very low level. I think very much for the purpose 
of having an export advantage in the world. We believe it could 
be undervalued by as much as 40 percent, and that gives them a 
tremendous advantage.
    The Chinese Business Press has said a number of times, this 
is what makes our exports dirt cheap, and it is something that 
we cannot ignore.
    Mr. Taylor. I personally experienced in the nineties a 
Chinese purchase of a piece of equipment from a company in my 
district. They bought one piece and after reverse-engineering 
it, that company is no longer in business in my district. In 
fact, it isn't at all. Do you see that in a number of areas? 
Have you documented that in any extensive way?
    Mr. Vargo. Congressman, it is across the board. It is 
endemic in China for large companies and small, everybody 
suffers from it. No foreign trademarks are registered in China, 
only Chinese, and that to us is a violation of WTO, again, and 
China's obligated by its bilateral agreement with the U.S. To 
prevent counterfeit products from leaving China, and they are 
not doing that either.
    Mr. Taylor. There was a magazine, I don't have it in front 
of me today, that reported just a few weeks ago about the 
number of nationally known trade names that were being 
manufactured and counterfeited in that way, and sold as a 
national trade name but without the quality and the production 
in China, and I do not think it was in collusion with the 
company at all. It was just that they used that name and then 
produced this product.
    Mr. Vargo. It happens across the board, Congressman. It is 
a problem that we want the U.S. Government to deal with. 
Increasingly, we have started working with Commerce and USTR, 
and we certainly appreciate the committee's support. We also 
hope that Customs has enough resources to stop counterfeited 
goods from coming into the U.S. In addition to doing all the 
essential work they have to do against terrorism.
    Mr. Taylor. Well, how can the United States if it is so 
prevalent that I see it and you see it and people all over the 
country see it, how can we allow this to go on, this rogue 
trading, which is so obvious that any of us ought to be able to 
investigate and stop it?
    Mr. Vargo. Until China came into the WTO, it really was not 
subject to international rules. So they have been subject to 
international rules only very recently. A lot of emphasis has 
gone into the proprietary software and recording industry, and 
manufacturers have just been a little slow getting off the mark 
in saying, what about us too, because ofall of our products are 
being copied? So we are pressing on that. We are finding we are 
knocking on open doors with government agencies, but we need to move 
quickly.
    Mr. Taylor. Well, if it is being so, almost uniquely, 
abused, then should the American Congress take a step that we 
put everything on hold until this is straightened out, or do we 
have to go through years and years to try to work our way out, 
how to negotiate piece by piece what is illegally being done?
    Mr. Vargo. I do not think that we ought to be waiting at 
all. I think we have tools now and that we just need to use 
them.
    Mr. Taylor. Thank you. Thank you, Mr. Chairman.
    Mr. Wolf. Mr. Sabo.
    Mr. Sabo. In some way this isn't knew. Isn't it sort of a 
repeat of what happened with Japan for the recent years?
    Mr. Vargo. It does have that flavor.
    Mr. Sabo. I watched for years when we had the huge trade 
deficit with Japan. They clearly had a policy of promoting 
exports not producing for local or internal consumption. It has 
finally caught up to them in a negative fashion, but at least 
as it relates to the United States, that is clearly what's 
going on, but in some ways what I find even more troubling as 
it relates to our policy, it is my understanding most other 
countries do not have the same type of trade gap that we do?
    Mr. Vargo. No, they do not. I do not think that other 
countries were as open to China as we were. And what we have to 
do is now is to take China's openness and we really have to 
increase our exports, our position in China a lot, and there is 
a lot of very positive opportunity for that. This is not just a 
one way solution, and I do not want to leave the impression 
that this is just an import problem. It is very much an export 
problem as well, and it is good for China to open up and be 
able to get those goods. It would be good for China to have a 
more realistic exchange rate, be good for their standard of 
living, be just a win-win as we press for China to really open 
up.
    Mr. Sabo. How does Europe and Australia, how do all those 
countries avoid having the same problem we have?
    Mr. Vargo. Their imports from China are rising rapidly as 
well, and there are a lot of concerns on their part when you 
talk to them. But in looking at the data, we have asked 
ourselves the same question, and we certainly would not mind 
having the International Trade Commission or others take a look 
at this question of, just why is our trade imbalance so much 
more than those? Europe sells more to China than we do and has 
bought a lot less.
    Mr. Sabo. I hear you do not have a good answer to that 
question.
    Mr. Vargo. I wish I could give you a good answer.
    Mr. Sabo. I just think it somehow reflects our mentality of 
doing one-way trade that does not exist in other countries.
    Mr. Vargo. China, using our number, has as trade surplus 
with us over a hundred billion dollars, and a global trade 
surplus is about $30 billion. So they have a trade deficit 
together with the rest of the world of about $70 billion. A lot 
of that is probably petroleum and others, but nevertheless the 
question is very valid one of why is the U.S. trade situation 
with China so different from others? I can only hypothesize, 
and my hypothesis is that many other countries were more closed 
to Chinese products over the years before WTO than was the 
United States, and if that is so, now that China has more 
access to them, we may see Chinese exports rising to them more 
rapidly than to us. That is a hypothesis. I would welcome some 
good economic research from Congressional research service or 
ITC or somewhere else.
    Mr. Sabo. Does our government ever have any answer to that 
question?
    Mr. Vargo. You will have to put that to the government.
    Mr. Sabo. You may have more access to asking the question.
    Mr. Vargo. It is one that we have an active interest in, 
and to the extent we have resources we can use for that, we 
will.
    Mr. Wolf. Following up on Mr. Sabo's comments, if you would 
give us a series of these questions, we will ask the Library of 
Congress, the CRS to do this study. We will also ask the GAO to 
do this study and whoever else. We would like to get something 
back by the week after we get back after the recess. So if you 
can define some questions and put them down in writing, we will 
get that study done.
    Mr. Regula.
    Mr. Regula. I do not want to be repetitious, but if I hear 
you correctly, there is a violation in terms of intellectual 
property, as well as reverse-engineering patents abuses, and so 
on in violation of WTO rules. So what's the point of their 
being part of WTO and why are not these rules being enforced by 
WTO?
    Mr. Vargo. Well, again, they came into the WTO just 
recently. Time is that which keeps everything from happening at 
once. We all need to press, I think, to use the government, 
U.S. Government's resources, which are not unlimited into these 
areas, and the oil goes where the squeak is, and I think it is 
incumbent upon manufacturers to squeak more, and we are doing 
that.
    Mr. Regula. Does the pressing have to be done from which 
Department, Commerce, in the executive branch?
    Mr. Vargo. For intellectual property?
    Mr. Regula. Well, all of these problems.
    Mr. Vargo. Well, I think all the trade agencies really need 
to focus on this.
    Mr. Regula. USTR.
    Mr. Vargo. USTR has an important role, and we have raised 
this with USTR, and we believe they will be moving forward on 
it. But again, I was in the Commerce Department for over 30 
years. It is a great agency. They do not have unlimited 
resources. I know this Committee does not have unlimited 
resources to give to them.
    Mr. Regula. Thank you, Mr. Chairman.
    Mr. Wolf. Mr. Vitter.
    Mr. Vitter. I have nothing right now, Mr. Chairman.
    Mr. Wolf. Mr. Peterson and Mr. Pitts.
    Mr. Vargo, thank you very much. If you will be in touch 
with Christine, both on the study and then to pick a date where 
we all can gather and we can get Commerce to come on up and see 
what we can do.
    Mr. Vargo. Mr. Chairman, I will be happy to do that. Again, 
we have great opportunities as well as challenges from China. 
We have problems, but it is important we go after the right 
problems and not the wrong ones.
    Mr. Wolf. In a fair way.
    Mr. Vargo. In a fair way.
    Mr. Wolf. Thank you very much.
                              ----------                              

                                            Thursday, May 22, 2003.

                          MANUFACTURING SECTOR


                               WITNESSES

DAVID DYER, VICE PRESIDENT, HENREDON FURNITURE, MORGANTON, NORTH 
    CAROLINA
THOMAS GLEASON, VICE PRESIDENT, WARD MANUFACTURING, BLOSSBURG, 
    PENNSYLVANIA
THOMAS FISH, PRESIDENT, ANVIL INTERNATIONAL, PORTSMOUTH, NEW HAMPSHIRE
BRUCE CAIN, VICE PRESIDENT, XCEL MOLD AND MACHINE, N. CANTON, OHIO
WILLIAM LITZLER, PRESIDENT, QUICKDRAFT, CANTON, OHIO
    Mr. Wolf. The next panel will be manufacturing, Mr. Dyer, 
Mr. Gleason, Mr. Fish, Mr. Cain, Mr. Litzler, if you can, 
again, I apologize, keep it to three minutes or two and half. 
This is not your last opportunity. If you will, we are going to 
ask you to again gather, so why does not Mr. Dyer begin first? 
Mr. Regula.
    Mr. Regula. Mr. Chairman, I would like to introduce two of 
the panel members from my district, and one is Mr. Bruce Cain 
from our area. He is basically a fulfillment of the American 
dream, and he has bought into the XCEL Mold and Machine, and 
has reached a point where he has a substantial interest in it, 
and he is being hurt desperately by the imports to the point 
that that they can produce and sell for less than he can 
produce, and the other is Mr. Bill Litzler from the Cleveland 
area, Bill is Chairman of the Litzler Company and employs 50 
people in my district, and the same thing has happened. They 
are being impacted in a very unfair way, and I think these two 
gentlemen, along with the other panel members will point out 
the unfairness of all this. I think probably the goal of our 
Committee should be to ensure that these procedures are fair in 
terms of trade, and perhaps we need to get USTR and Commerce up 
here to tell us why they are not pressing ahead on the issue 
with WTO.
    Mr. Wolf. I agree. Well, they are going to be in Panel 
Five, but we are also going to be talking to them off the 
record again too, so we will involve all the members of the 
committee, so we will let everyone know so everyone can 
participate and be involved. Maybe just go straight, right 
down, if you can limit it, I will appreciate it.
    Mr. Cain.
    Mr. Cain. Thank you. XCEL'S been in business since 1956. I 
have been there 33 years myself, and there are 11 employees 
been there longer than me. We have 60 employees. When I was 
invited to come here to testify on May 1, is when I was 
contacted, I decided to save auction flyers of companies that 
are going out of business, and in that time, in 22 days, I have 
saved 11 flyers.
    Mr. Wolf. Will you submit them for the record?
    Mr. Cain. I don't have them with me.
    Mr. Wolf. Just send them; we will put them in the record.
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    Mr. Cain. I want to tell you about one company we quoted a 
mold for. I called him the next week to see how our price was. 
He said the price was great, but the mold went to China to be 
built for free just so they could run the parts over there.
    From 1988 to 1998, our largest customer was Black & Decker. 
They were 35 percent of our business, and we have not built a 
mold for them since 1999. In 2000, one of our better customers 
started going to China. They sent two molds to China. In 2001 
they sent seven. In 2002, they sent 86 molds, 65 of those going 
to China, the remainder going to South Korea. So it is a 
definite problem, and we need help. The small business detail, 
large manufacturers want this to happen. They are cutting their 
costs, they are building buildings over there. Things are going 
great for them, but it is really hurting us.
    Thank you.
    Mr. Wolf. Thank you.
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    Mr. Wolf. Mr. Litzler.
    Mr. Litzler. I am Bill Litzler. We manufacture capital 
equipment to a variety of different industries. We have been 
impacted in the sense that our customers are going offshore, 
closing down or moving their production facilities over there. 
We are not directly being competed with by Chinese or Asian 
imports, but our customers are, and they are moving overseas to 
do it. The question was asked, the difference between Japan and 
China. I have sold to China. I have been sold all over the 
world. The difference between the two in this instance is 
American companies or multinational companies are actually 
investing and setting up in China, whereas in Japan you could 
not do that. They would only send to us or allow minority 
ownerships. So that is a fairly major difference.
    We use a lot of subcontractors in northern Ohio for 
fabrication and machine shops and so on. The vast majority of 
those companies are down to one shift from what was three. If 
it was 50 people before, it is 10 people, and I think the only 
reason it hasn't been more dramatically made a crises is that 
many of the people are just retiring and kind of quietly going 
away, and this is a big difference. The industries we serve, 
one of our biggest industries is the printed circuit board 
industry. It was huge in the United States. Three years ago it 
started going to Asia. Right now, there is virtually no printed 
circuit board materials being made in the United States, none. 
We have a customer, all the plans are cut. First the ritual is 
pretty straightforward. First it was consolidation, big guys 
buy little guys, very typical. Little guys are gone, big guys 
handle it. Then American manufacturers have sold out to 
European manufacturers, who seem to have a somewhat longer view 
toward markets. Now, they are gone. And the trade show in this 
country three weeks ago for the printed circuit board industry 
was like a funeral. But the one in China, we had a man over in 
China, it was 30,000 people attended. It is gone. It isn't just 
down, it is gone, and it is not going to come back. We see this 
pattern repeatedly.
    We are in the paper industry. The paper industry has got 
the same problem. Textiles, I can repeat what everybody else 
does. One by one these, industries are getting knocked out, and 
it is as if somebody in a big global sense said, maybe we do 
not have to be manufacturers here anymore. We will just be a 
service economy. But the service economy, if going overseas, we 
can buy software at $18 dollars an hour in India on the 
Internet; $18 dollars an hour for software.
    Banks are doing their backroom operations in Asia. They are 
doing them in India. Call the American Express travel service, 
if you are a platinum member, the man that answers your phone 
is in Bangalore, India. The service economy is not working 
either. We are losing the base of good jobs overseas, and it is 
just getting worse. It isn't getting any smoother.
    Thank you.
    Mr. Wolf. Thank you very much.
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    Mr. Wolf. Mr. Fish.
    Mr. Fish. Good morning, Chairman Wolf, members of the 
committee. My name is Tom Fish, President of Anvil 
International. We are a producer of malleable, nonmalleable, 
and ductile iron pipe fittings, as well as steel pipe nipples, 
hangars and couplings. We have our own nationwide distribution 
organization consisting of five distribution centers located in 
major cities in the United States, and supply a wide range of 
construction products to the commercial building industry. We 
currently have 12 manufacturing plants in the United States and 
Canada, and a total of 2600 employees.
    Prior to 2001, we had two foundries, one in Statesboro 
Georgia and one in Columbia, Pennsylvania. Due to our loss of 
market share to the low priced Chinese product, we found 
ourselves in a situation with excess foundry capacity. In an 
effort to solve this excess capacity problem and to reduce our 
manufacturing costs, we shut down our Statesboro foundry in 
2001, eliminated 350 jobs and consolidated our foundry 
operations into our Colombia Pennsylvania foundries at a cost 
of approximately $20 million. Our plan was to add about 200 
jobs in Colombia as we combined the production and the 
equipment of two foundries into one. However, the net result so 
far has been instead of adding any jobs in Colombia, we have 
lost another hundred. And again, the result of loss of market 
share to the Chinese.
    Shortly, Mr. Gleason will speak about our disappointment 
with the two dumping cases we have had already, but what I want 
to talk to you about for a minute is our pipe nipple business. 
Also, in 2001 we acquired Beck Manufacturing. They were the 
second largest pipe nipple producer in the United States. And 
we consolidated all of our pipe nipple operations in the U.S. 
From three plants into two to achieve cost savings. This 
happened at the same time we were having the 201 case 
investigation, and we thought we were doing the right thing, 
what the administration was telling the steel industry to do, 
consolidate, rationalize, and become more competitive. Tariffs 
were then imposed on pipe, which is our primary raw material, 
at 30 percent and similar tariffs at 13 percent on Chinese 
nipples. So what has happened since then? Well, the imports of 
Chinese pipe nipples from China is up 50 percent. The 13 
percent tariff was--they absorbed it, and the volume continues 
to move overseas.
    As I said, we have a plant in Canada, and we are having the 
same problem in Canada where nipples from China had taken as 
much as a third of the market share. Up there, our Canadian 
operation filed an anti-dumping case last year against pipe 
nipples from China, and we recently obtained preliminary 
dumping margins in the range of 100 to 200 percent. Now, that 
is great news for our Canadian operation. We have been doing 
much better up there. Unfortunately, these nipples have to go 
someplace, and they are going to come down here, and we are 
seeing it as we speak.
    We have contemplated filing another dumping suit against 
the Chinese on the nipple side of the business. We have already 
filed two and have not gotten any relief at this point in time, 
but if Commerce is not going to find meaningful dumping 
margins, I am just wasting my money.
    My job as a businessman is to make profit for my investors. 
And my owners, right now, are telling me that my nationwide 
distribution system and all the costs that I have is not 
getting the return that it should. We have been very focused on 
making our own products and distributing those products. But it 
is becoming clearer to me and to our owners that we can make 
more money importing products from China and selling them and 
shutting down our manufacturing plants, and this is really what 
the crux of the problem is. We talk about deflation. I know 
there was a lot of talk about deflation in Washington. I see it 
everyday. Hundreds of products that are used in the 
construction market are now being sold for half of what they 
were sold for 5 years ago. If you want to see it, go into a 
Wal-Mart or go into a Lowe's and ask for a US-made fitting, 
nipple, any kind of product like that that is used in the 
plumbing business. You will not find them. These imports from 
China are deflationary, and I know everyone's already talked 
about the dollar and the fact that the Chinese dollar is fixed. 
Again, another problem that our government, we looked at it, 
and nothing is being done.
    I am not a big political person, but I have spent a lot of 
time in Washington over the last 2 years, and I have met with 
our two Republican Senators, I am from New Hampshire, and one 
Republican Congressman. Our largest manufacturing facility is 
in Columbia, Pennsylvania, where we have 900 people now, and 
every chance I get, I try to tell my Congresspeople that the 
economy, it matters, and what's happening is you are seeing 
American jobs going overseas and the Administration is 
supporting that. I mean it is just letting them go.
    So I thank you for your time and the opportunity to 
testify, and I hope that your Subcommittee can also have some 
influence on Commerce as we move into our next dumping case and 
get our final duties.
    Mr. Wolf. Thank you.
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    Mr. Wolf. We are going to try, Mr. Gleason, if you can 
limit it. We are going to have to vote pretty soon too.
    Mr. Gleason. Good morning, Chairman Wolf and members of the 
Committee, Congressmen Peterson, Pitts thank you for being 
here. We applaud your courage for this, and I thank you for 
this opportunity to testify here today.
    Word is there are only two fitting manufacturing facilities 
left and Ward is one of them. We were founded in 1924. We have 
gone from 1100 to 800 jobs. We have been fighting these imports 
from China for a long, long time now. Our experience with the 
dumping laws has been completely disappointing. Along with 
Anvil, we filed an anti-dumping case in February of 2002, on 
nonmalleable pipe fittings from China and in October of 2002 on 
malleable fittings from China. In the nonmalleable case, we 
received unanimous preliminary and final injury determination 
by the ITC, but our final dumping margins against the two 
foundries from China that participated in the investigation 
were only single digits. Given the Chinese prices are roughly 
half our prices, these margins had little impact. In fact, in 
the first quota of 2003 imports from China increased by 10 
percent. This is in a market where the demand is lower. The 
same is true for the malleable imports, which increased by 76 
percent in the first quarter of this year, in spite of the fact 
that we have got a dumping case against them. They went up 76 
percent, and that is after a hundred percent increase the year 
before.
    How did the Commerce Department find such low dumping 
margins against these producers who are less efficient than we 
are? The only answer I can come up with is that the Department 
just plain allowed the Chinese foundries to lie to them about 
their factors of input quantities, and I understand that this 
is the heart of the dumping investigation.
    For example, the largest foundry in China, JMC, has stated 
repeatedly in both cases that it does not record the actual 
weight of each input included in each charge, the actual weight 
of each charge with the total number of charges fed into the 
cupolas each day. They do not record their inputs. Their costs, 
they are not recording them. I have been in the foundry 
business for more than 30 years, and I know that this is not 
true. It is simply a bold-faced lie. I believe even the ancient 
Egyptians, who started the foundry business, recorded these 
factors of input.
    When another Chinese foundry, Pannext, stated that it 
weighed and recycled iron before they're reintroduced into the 
cupola to ensure that the steel-scrap input ratio was correct, 
we heard through back channels that the other Chinese foundries 
and their counsel went ballistic about this truthful admission, 
and the next response that the companies gave us was basically 
that they had to retract their statement.
    Even more shocking to us is that just before we file filed 
our cases, both Mexico and the EU found dumping margins against 
malleable pipe fittings from China of 42 and 48 percent. How 
can the Commerce Department find single digit margins when the 
rest of the world is finding 50 percent?
    After receiving low margins and witnessing further 
increases in China imports that threatened to force us to shut 
down our foundry, we have contemplated a safeguard case with a 
Section 421. However, having seen the President twice deny 
relief to industries that have one won cases at the ITC, we 
have decided not to pursue this remedy. For the people of Tioga 
County, Pennsylvania, it appears to us that the President and 
his Administration have taken the side of the Chinese and not 
the American manufacturing workers. The Aadministration and 
Congress talked about tax cuts and job creation, but who is 
talking about job preservation in the face of sky-high monthly 
trade deficits? Trade deficits rob the U.S. manufacturing and 
agricultural jobs, there's no doubt about it. Our company can 
either keep 800 Americans working and possibly rehire 300 back 
at wages of $14 an hour, plus health benefits or the same 
workers can go to State unemployment benefits and pursue 
alternative jobs that may pay minimum wage and no health 
benefits. All we can ask for is real enforcement of the trade 
laws passed by Congress.
    On the behalf of the employees of Ward Manufacturing, we 
wish to thank you, Chairman Wolf, for having the courage to 
have this hearing.
    Mr. Wolf. Thank you. Mr. Gleason.
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    Mr. Wolf. Mr. Dyer.
    Mr. Dyer. Good morning, my name is Dave Dyer, and I am the 
Senior Vice-President for Henrendon Furniture Industries 
headquartered in Morganton, North Carolina. At the outset, I 
would like to thank the Subcommittee and Representative Taylor 
for this opportunity to comment on China's impact on the 
domestic furniture manufacturing industry.
    Our company began in 1945 with just 75 employees and a 
modest product line of three chests. Today we employ more than 
1400 skilled crafts people in four state-of-the-art plants in 
North Carolina, covering more than two million square feet of 
manufacturing, finishing, and distribution space. In 1996, the 
dollar value of all residential furniture imports from China 
was roughly $440 million. By the end of last year, imports shot 
up to $3.2 billion, an astounding 15 fold increase in just 6 
years.
    Mr. Dyer. Unlike our Chinese competitors, our industry is 
heavily regulated from OSHA to EPA. Where many Chinese factory 
workers are paid only a few dollars a day, our hourly employees 
average between $11 and $16 an hour, while some of our most 
highly skilled crafts people can earn more than $20 an hour.
    Faced with this challenge, we concluded that to remain 
competitive required us to supplement our product lines with 
furniture and fabric components sourced from overseas, all over 
the globe. Currently, our imports represent 30 percent of our 
overall product line. In furniture, imports have been a 
strategy for some 15 or 20 years, but we manage the imports; 
with the Chinese threat, it is now managing us.
    While there are no easy solutions to the challenges of 
manufacturing and retailing in a global economy, there are 
three steps that we believe will help level the playing field 
when it comes to trade with China. The first is to ensure that 
China, like any other trading partner, is playing by the rules. 
The dramatic increase in furniture imports from China has 
raised legitimate questions about whether the country is 
dumping low-cost furniture products into the U.S. market. 
Therefore, it is imperative that the ITC and the International 
Trade Administration have the necessary resources to 
effectively administer and enforce the Nation's anti-dumping 
laws, and provide relief to the domestic industries that have 
been injured by unfair trade practices.
    The second is to beef up protection of intellectual rights. 
Furniture manufacturers face a serious problem with theft 
involving a unique manufacturing process or a distinctive 
furniture design or mechanism. We urge the U.S. Government to 
continue working with Chinese authorities at all levels of 
their government to improve China's IPR enforcement.
    Finally, increasing exports is essential to our industry's 
long-term competitiveness. We encourage the ITA to continue its 
efforts to identify and eliminate barriers to foreign markets, 
also, that makes it difficult for U.S. manufacturers to do 
business abroad.
    While Washington can be an effective advocate for American 
business overseas, there are steps that we must take on our own 
to build on our competitive advantage. In recent years, we have 
developed a leaner, more competitive and productive workforce. 
We have implemented cellular manufacturing, a continuous 
improvement process, and have implemented the tenants of Toyota 
production system. We also yearly spend millions on state-of-
the-art technology to enhance our competitive advantage.
    Mr. Chairman, we are proud of the truly world-class 
furniture produced by our dedicated employees, and we feel 
strongly about remaining a predominantly domestic manufacturer, 
but we are not invincible. It is reassuring to know, however, 
that our elected officials take an active interest in 
understanding the many challenges facing our interests. Thank 
you.
    Mr. Wolf. Thank you, Mr. Dyer.
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    Mr. Wolf. I have no questions. We will get together. And it 
seems to me that you are all saying that you don't have a lot 
of confidence in the Commerce Department. Is that a fair 
statement? Is there anyone that disagrees with that? And, 
secondly, this is about jobs. And the Administration, in 
pushing its tax package--and rightly so, which I support--is 
talking about jobs. And yet, as we are putting in this tax 
package to help jobs, the jobs are coming out from the bottom. 
So I think we definitely need a change. I see the Department of 
Commerce representatives over there. I just wonder what they 
are thinking when they hear all of you testify. So thank you 
for taking the time. Be in touch with Christine. We will gather 
again to talk and see what we can substantively do rather than 
just have a hearing and walk off and nothing happens, to see if 
we can honestly make a difference with regard to fairness. We 
thank you very much.
    Mr. Serrano.
    Mr. Serrano. A quick question. Mr. Litzler, are you 
familiar with the MEP program, I understand.
    Mr. Litzler. Yes.
    Mr. Serrano. What are your thoughts, very briefly?
    Mr. Litzler. It has been very, very beneficial for us. We 
first got into it about 4 years ago in Canton, and it has 
helped us be far more--it has helped streamline much of our 
manufacturing process. It is almost embarrassing how much 
better it allowed us to become, because it told us how bad we 
might have been before. But it has forced us--it has caused us 
to go back and redesign many of our products to enhance the 
manufacturing capability. It has been a tremendous asset to us, 
made us a much better company. Allowed us to produce our goods 
at lower cost, which is always a tremendous advantage.
    Mr. Serrano. Well, we are a big supporter of that program. 
And it may be more embarrassing to all of us that advised the 
President foolishly to cut it out of the current budget. So I 
think we have to work hard.
    Mr. Litzler. I am not a politician, either. But I think for 
the lousy hundred million dollars of cost to the MEP program, 
it is--I used the expression once before, it is chump change 
when it is something that can actually help manufacturers be 
better. And we have to be made better. And it encourages us 
because it underwrites the initial study and understanding of 
what you can do better. We have read about lean, and I think we 
have got a nice management team. But we never had the time or 
effort to get into it. And they came out and did a good study 
which was part of what the funding was for, and we paid for the 
rest, we put 40 or $50,000 into that to make us better. It is a 
very, very good program.
    Mr. Serrano. Well, I think Mr. Litzler, with that comment 
on chump change, you might have just saved the program.
    And Mr. Fish, we are going to work hard to get you a 
Democrat to talk to in your State. It is getting very lonely. 
Thank you so much, gentlemen. Thank you all.
    Mr. Wolf. Mr. Taylor.
    Mr. Taylor. Mr. Chairman, I know Mr. Dyer's company and the 
history of the company, and it has been a leader in North 
Carolina which has been a leader in the country. I will quickly 
ask a couple of questions. You mentioned means of staying 
imbedded, Mr. Dyer. Does your company export any furniture 
products? If so, what has been the company's experience in 
reaching foreign markets?
    Mr. Dyer. We presently export about eight percent of our 
volume. To China, nothing. Of course the consumer there doesn't 
have the wherewithal to get what we have. But Japan, South 
America, Saudi Arabia we have had some success.
    Mr. Taylor. You have an innovative process. And what is 
your competitive advantages with the Chinese in your company, 
if you compete with them directly?
    Mr. Dyer. We have a whole organization within our 
organization that is focusing on improving and driving out 
waste. I don't see that in the plants that I have toured in 
China. But they have such an advantage where it is 20 to one 
that we have got both our arms tied behind our back.
    Mr. Taylor. At last month's furniture show in High Point, 
based on the sales and the attendance at the international home 
furnishing market, what was your impression about the industry 
and what is going to happen in the third quarter in this 
industry?
    Mr. Dyer. First of all, we thought that, we were all afraid 
that nobody would come to the event. Usually there are about 
80,000 people from all over the world. People did come. It was 
a little better than what we expected. But it seems in the 
furniture industry the end of the tunnel is always two quarters 
away. And that just keeps moving. Nothing to write home about, 
but we are at least able to run our plants somewhat.
    Mr. Taylor. Have you be to China and seen the 
manufacturing?
    Mr. Dyer. I have.
    Mr. Taylor. What is your opinion?
    Mr. Dyer. I know what their national bird is, it is the 
building crane. The infrastructure was tremendous. The plants 
had more people than we would ever put in a plant. The week or 
week and a half that I was there, it was hazy the whole time. I 
question the air quality. In the plants that we toured, did not 
see the attention to safety and care for the employees that we 
have. But, an awful lot of money going into that country.
    Mr. Taylor. Thank you. Mr. Dyer, we appreciate your coming 
today. And thank you, Mr. Chairman.
    Mr. Wolf. Thank you.
    Mr. Regula.
    Mr. Regula. I appreciated the comments of Mr. Litzler on 
the manufacturing extension partnership. We have funded that 
for a number of years. The administration calls it corporate 
welfare, and I think I would paraphrase it by saying it is job 
welfare. That, the ability to get the information that it 
provides you, is it an important element in the preservation of 
jobs in your industry?
    Mr. Litzler. It has been tremendously helpful in that it 
introduced us, and in a very aggressive form, to how we can 
process and produce our products more simply and better. 
Absolutely. I resent the opinion of corporate welfare in the 
sense that it is, in effect, a loan that is more than amply 
paid back with good paying jobs and income tax and all the 
other provisions. It is a tremendous advantage to us. And it is 
being multiplied--and we are one little company. We have got 
roughly 100 people. It is being multiplied, at least in 
northern Ohio, through an awful lot of other companies, big and 
small, that see the value in this.
    Mr. Regula. Mr. Cain, do you think that, in China, the lack 
of environmental regulations, the lack of worker safety 
standards, the lack of any element of much in the way of care 
for the employee does give them a substantial competitive 
advantage? And, of course, these things are all promulgated by 
government here.
    Mr. Cain. It definitely gives them an advantage. They don't 
have to pay near what we have to pay. Their hourly wage is 
another thing that is not even close to what we pay.
    Mr. Regula. No, I understand.
    Mr. Cain. But, yeah, the benefits alone. And we are an 
older company, I mean, as far as employees. Like I said, the 
average tenure of our employees is 25 years. So you are not--
they don't care about the employees over there. That is not a 
factor for them at all. I don't see that ever being a factor 
for a long time from what I know of people going over there.
    Mr. Regula. Are there any environmental standards at all? I 
know you have to meet them.
    Mr. Cain. No. They have none, that I know of. I have never 
been there personally. Some of these other guys may know.
    Mr. Regula. Somebody mentioned hazy, and the hazy 
conditions when you were visiting the plant was probably 
contributed by the lack of any environmental requirements. 
Would that be your impression? I don't know which one of you 
mentioned it.
    Mr. Dyer. I did. I think that was my thought.
    Mr. Regula. Note the yeses for the record.
    Thank you, Mr. Chairman.
    Mr. Wolf. Mr. Vitter. Mr. Weller. Mr. Peterson.
    Mr. Peterson. Yes, Mr. Chairman.
    I just want to share with you--I don't remember the 
person's name, but I was at a dinner shortly after this 
Administration came in to power. And I was sitting with a lady 
who had a major job in the trade office and she was very 
complimentary. She said it was the hardest working crew she had 
ever seen, but she said it was just a handful of them.
    And for all of the trade cases and all of the issues all 
over the world that they had to deal with, she said they came 
to work at 7:00 in the morning and are working at 7:00, 8:00, 
9:00, and 10:00 at night. And she said it was the best crew of 
people she had ever seen, but there was absolutely no way they 
could get their arms around it. And I think, maybe, is 
something we ought to be looking at. Do we have enough people 
to enforce our trade laws? And if we don't, there is no way 
they can. I mean, you can't do it with a handful of people. 
This is a huge issue today, I think. So I just wanted to share 
that with the Chairman.
    Mr. Wolf. Thank you, Mr. Peterson.
    I want to thank all of you. Just follow up with what Mr. 
Regula was saying. There are no wage and hour, there are no 
environmental, there are no OSHA, there are no family leave. I 
was in a Beijing prison Number 1 in 1991, where 40 Tiananmen 
Square demonstrators were making socks for export to the United 
States. I picked the socks off the line. When we got back, I 
had it tested by Commerce. They were for export to the U.S. 
These were Tiananmen Square demostrators in a cold, brutal 
Beijing prison number one. We went into the prison, and then 
after we got into the prison, they had the hosiery operation. I 
have the pictures. And then we asked Commerce to go in. They 
finally got in, under the Clinton Administration, they finally 
got in, and by that time they cleared the place out.
    So they have none of these. Harry Wu I saw earlier was in a 
gulag for 17 or 18 years. They are making products in slave 
labor camps. There are more slave labor camps in China today 
than there were when Solzhenitsyn wrote the book Gulag 
Archipelago. And we have a list of products that are coming out 
of those camps, and sometimes they come out of the camps and 
they are--and who runs the camps? The Peoples Liberation Army. 
So, none of these are. That is why the administration ought to 
focus with regard to those things.
    And so, you know, this is not a hearing on human rights and 
I don't want to get started on that issue. But, no, they have 
none of those requirements. I thank all of you for your 
testimony. And if you all can be in touch with Christine so we 
can follow up to see what we can do. But thank you very, very 
much.
    And then the next panel, chemical and pharmaceutical, Mr. 
Walter, Mr. Cossart, Ms. Carus. If you can also keep your 
testimony to three minutes, we would appreciate it very, very 
much. We can begin. Why don't we begin first on the list, Mr. 
Walter and Mr. Cossart, Ms. Carus. If you can keep it for three 
minutes, we would appreciate it.
                              ----------                              

                                            Thursday, May 22, 2003.

                     CHEMICAL/PHARMACEUTICAL SECTOR


                               WITNESSES

WILLIAM WALTER, CHAIRMAN, FMC CORPORATION, PHILADELPHIA, PENNSYLVANIA, 
    ACCOMPANIED BY DOUG PARKER, PRESIDENT, INTERNATIONAL CHEMICAL 
    WORKERS UNION COUNCIL, LOCAL 76C, FMC PERSULFATE PLANT IN 
    TONAWANDA, NEW YORK
BENOIT COSSART, BUSINESS DIRECTOR, PHARMACEUTICALS INGREDIENT, RHODIA, 
    INC.
INGA CARUS, VICE PRESIDENT, CARUS CHEMICAL COMPANY, PERU, ILLINOIS
    Mr. Walter. Thank you, Mr. Chairman and Ranking Member 
Serrano.
    Mr. Wolf. And for all of you, your full statements for all 
the witnesses will all be in the record.
    Mr. Walter. Members of the subcommittee, I am Bill Walter, 
Chairman, President, and Chief Executive Officer of FMC 
Corporation, a $2 billion diversified chemical company. Let me 
try to summarize my written statement.
    FMC was one of the leaders in support of the PNTR. We sell 
to, manufacture in, and export from China. We believe having 
China in the WTO is important to FMC, and we believe it is 
important to the U.S. Economy. However, China's membership in 
the WTO has brought with it challenges that we had not 
anticipated. The Administration notes in its 2003 trade report 
``serious problems'' in some areas of. One of the most serious 
concerns posed by a non-market economy is the challenges posed 
by verifying that their behavior follows WTO rules. We 
understand that administering our trade laws with respect to 
China pose unique challenges, and we applaud this Subcommittee 
for addressing what needs to be done to improve upon current 
practice.
    FMC's case against dumped Chinese persulfates may provide 
the Subcommittee with some insight as to what is going on with 
trade in China. As a background, persulfates are an essential 
and widely used family of industrial chemicals, awide variety 
of end uses ranging from etching of printed circuit boards to adhesive 
in carpet backing. FMC is the only American manufacturer of this 
important chemical. We produce sulfates in our Tonawanda plant. In 
1997, in response to a complaint we brought, the Commerce Department 
placed a 43 percent duty on dumped Chinese persulfates. However, in 
subsequent annual reviews, that duty has been substantially reduced, 
and in 2001 and 2002 reviews, the duty placed on Chinese persulfates 
was zero. In other words, Mr. Chairman, the dumping duty went from 43 
to zero--43 to zero--while the facts from our perspective in the case 
did not change but rather the Department's methodology of judging 
whether dumping was occurring did.
    This difference is in the result itself. It is, at least 
our experience, in the very period when Chinese joining the WTO 
our government relaxed the application of its own standards as 
applying to China; and I think as you have already heard, and 
will hear from others, we are apparently not alone in 
suggesting the government change the way they apply the rules.
    Specifically in our case, the Department changed the 
surrogate company against which costs are measured. This is at 
the core of the Department's methodology and fundamental to the 
result. They also did not follow their own standards for 
evidence, and gave the Chinese exporters the benefit of the 
doubt through the appeal process. FMC has had dumping cases 
before the Department before. We have won some, we have lost 
some. But this is the first time in our experience that the way 
the rules are applied changed midstream.
    Mr. Chairman, in my written testimony, we suggested some 
potential remedies for the current situation. These fall under 
the category of applying more and more focus resources on the 
Chinese dumping cases. We make these recommendations on the 
basis both of the large and growing volume of dumping cases 
against the Chinese and on the special circumstances particular 
to nonmarket economy cases.
    Let me conclude by saying that we are very concerned about 
the economic consequences of the results in our case. We have 
invested over $50 million in recent years in our Tonawanda 
plant to keep it globally competitive. We are not looking for 
protection. We do not support the Byrd amendment. However, we 
do ask that the concerns of a globally competitive operation be 
fairly heard. If so, we believe that U.S.-based operations can 
sustain its global leadership.
    I am pleased today to be with Mr. Doug Parker, the 
President of our union in Tonawanda. Mr. Parker has witnessed a 
40 percent decline in the well-paying jobs our persulfate plant 
offers since the Chinese product came into our own market. His 
union, along with the management, have sacrificed together to 
keep our competitive edge, but we can't sustain this if the 
playing field is not level. Mr. Chairman, with your permission, 
I would like to turn to Mr. Parker for some brief additional 
remarks, and thank the committee for its consideration.
    Mr. Parker. Mr. Chairman, my name is Doug Parker. I am 
president of the International Chemical Workers Union Council, 
Local 76C at the FMC persulfate plant in Tonawanda, New York. 
It is an honor to be here today.
    On behalf of the 65 remaining union employees, let me 
emphasize our commitment to making our FMC persulfate plant the 
most competitive facility in the world. Because sacrifices made 
by our union members in Tonawanda, FMC's made-in-America 
persulfates are sold throughout the world. But because of what 
the Chinese are doing, I cannot say that I will be here a year 
from now saying the same thing.
    Mr. Chairman, in the last five years, as the Chinese have 
invaded our markets with below value persulfates, we have lost 
40 percent of our employees in Tonawanda. During this period 
union leadership has worked very close with FMC management on 
initiatives that increase our productivity. We have reinvented 
ourselves to meet the increasingly competitive demands of the 
global chemical markets. We have taken on more work with less 
people, and we are very proud of our accomplishments. In light 
of the sacrifices my fellow workers have made, Mr. Chairman, I 
have a hard time explaining to them why their own government 
cannot be a part of our team. Why do Americans have to lose 
their jobs at the expense of the Chinese workers? Why is our 
government undercutting the efforts made by our company to be 
the global leader in the persulfate chemistry? In short, I will 
ask you the same question I asked representatives in 
Washington: Why can't my government support this sort of 
management, labor cooperation? If this Administration is 
looking for economic stimulus in the upstate New York, they 
should start by addressing the unfair Chinese trade practices.
    Mr. Chairman, we don't need our government to protect us. 
All we ask is that you join our team before it is too late. 
Thank you.
    Mr. Wolf. Thank you very much.
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    Mr. Wolf. The next witness is Mr. Cossart.
    Mr. Cossart. Yes, good morning, Mr. Chairman and members of 
the Committee. I am Benoit Cossart, business director for 
Pharmaceutical Ingredients Business Unit of Rhodia, Inc. Until 
March of this year, my business operated the last United States 
aspirin plant. The plant was located in St. Louis, and for many 
years was owned and operated by Monsanto Company. For the past 
five years, it has been owned and operated by Rhodia. At its 
peak, our plant employed close to 100 people. When it was 
closed, 60 people lost their jobs.
    In May 1999, we filed an anti-dumping petition against 
imported aspirin from China. At that time, Chinese aspirin was 
being sold at prices in many cases less than half of our price. 
Our plant in St. Louis was losing money, and our largest 
customers in the generic market were rapidly switching to 
Chinese aspirin.
    Almost from the beginning of the anti-dumping case, the 
Commerce Department began shifting its methodology and sources 
for information. For example, phenol is a major raw material 
used to make aspirin. Only a few days before the final decision 
in our case, the Commerce Department used domestic Indian price 
to value phenol, in the case of sebacic acid, for example. For 
the aspirin case, however, Commerce used import pricing to 
calculate the value for phenol. There is a significant 
difference between Indian domestic and Indian import prices, 
and this decision by Commerce impacted the aspirin cost 
calculation by 20 percent.
    Turning to another issue. Commerce also changed 
methodologies with respect to overhead. In the original 
investigation, Commerce recognized that the Chinese aspirin 
makers were fully integrated producers. That is, the Chinese 
producers were producing aspirin in a three-step process. The 
problem with calculating overhead costs arose because the 
Indian surrogate companies were not fully integrated but only 
practicing one of the three steps. For example, Andhra Sugars 
only produced aspirin, it did not produce the upstream 
chemicals, salicyclic acid and acetic anhydride. The other two 
surrogate companies only practiced step one, they did not even 
produce aspirin.
    In the original determination in 2000, Commerce tried to 
account for the fact that Chinese aspirin producers were fully 
integrated but Indian surrogates were not. On appeal to the 
Court of International Trade, the court remanded this issue to 
obtain an explanation why such an approach was supported by the 
record. Today, Commerce takes the opposite approach. Commerce 
presumes that the Indian and Chinese companies are equally 
integrated. In the end, Commerce changed its methodology in a 
manner that placed the burden on U.S. producers to supply 
information from companies in India. We were asked to supply 
information about companies that we didn't even believe should 
be used as surrogates. In my view, this change in methodology 
was devastating to the anti-dumping order. Commerce was, in 
effect, rewarding the Chinese producers for finding the annual 
report of this company but it has not imposed any burden on the 
Chinese to submit evidence showing that the company was fully 
integrated.
    I sincerely hope that our experience will not be shared by 
other U.S. industries. And I thank you for the opportunity to 
testify.
    Mr. Wolf. I thank you very much.
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    Mr. Wolf. Ms. Carus.
    Ms. Carus. Thank you, Mr. Chairman. My name is Inga Carus, 
and I am senior vice president of Carus Chemical Company. Carus 
is a small, family-owned company founded by my grandfather 88 
years ago. We are the sole remaining U.S. producer of potassium 
permanganate, a chemical that is used in water treatment and 
other strategic applications. Carus has 205 U.S. employees, and 
is based in Peru, Illinois. We thank our Congressman, Jerry 
Weller, for attending today.
    Carus is the world's low-cost and most efficient producer 
of potassium permanganate. Despite this, we have had to obtain 
an anti-dumping order against unfair imports from Chinese 
producers who sell at less than world material costs. That is 
to say, less than the raw material costs that it takes to 
produce the product.
    In recent years, unscrupulous Chinese exporters have used 
illegal means to attack the anti-dumping order. Let me briefly 
summarize two particularly outrageous examples. The first 
example is the 1999 review of the Chinese producers Zunyi. In 
that review, potassium permanganate was smuggled from China in 
a shipping container marked ``tools and toys.'' because 
permanganate is an incendiary material, this smuggling violated 
hazardous materials laws and placed the ship's crew in grave 
danger. Additionally, the smuggling is of concern because 
permanganate is a DEA-controlled precursor chemical for cocaine 
production, and has been found in domestic and foreign 
terrorists.
    Second, a particularly alarming example is from the 2000 
new shipper review. We have recently learned that in that 
review, the Chinese exporter, Groupstars, fabricated virtually 
the entire case. In quotation marks, it made up factor values, 
it forged production and financial records, and it lied to the 
Commerce Department about the actual producers of the product. 
This review is terminated only because Carus was able to show 
that Groupstars had forged its Chinese business license.
    Based on our experience, we have serious concerns about the 
administration of our dumping laws. We are concerned that the 
Commerce Department has no direct means of sanctioning parties 
that routinely certify false information in dumping cases. We 
are concerned that fraud uncovered in trade cases is not more 
aggressively investigated and, if necessary, prosecuted.
    Finally, we are concerned that the continuation of illegal 
tactics and future reviews will eventually lead to the 
unjustified loss of the anti-dumping order. This could well 
cause the demise of Carus, a significant employer in the 
Illinois Valley region, and leave North America without any 
manufacturer of this important chemical and accompanying 
services despite our low-cost, efficient, and advanced 
technologies and processes.
    Mr. Chairman, we thank you and the subcommittee for your 
interest in these critical issues. We urge you to examine 
specific proposals to address fraudulent and unfair trade from 
China. This is no academic exercise. The futures of many U.S. 
companies and their employees hang in the balance. Carus 
strongly supports free and fair trade with China. However, 
Congress and the U.S. Government must take steps to assure that 
this trade is fraud free. Thank you.
    Mr. Wolf. Well, thank you very much. I appreciate the 
testimony.
    [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 
    
    
    Mr. Wolf. And I would ask that all three of you be in touch 
with Christine, or four of you.
    Ms. Carus, I would ask for information, because based on 
what you are saying--and I appreciate Mr. Weller bringing this. 
I am going to ask the FBI to investigate this. So if you give 
us all the data, all the information, I am going to be the FBI. 
The FBI happens to come before this committee, too. And we are 
going to ask the FBI.
    So I think your charges, you should be very, very careful 
though. It is important not to say anything unless you have 
very good information. So, give us all the data, all the 
information, put it in the record. We will get it over to 
Director Mueller and ask that they have a team. We will also 
get a copy to Attorney General Ashcroft, because--we will also 
get a copy to the DEA, because if anything with regard to 
drugs.
    So be very careful, because reputations are involved and 
things like this, and we want to be very responsible. But we 
will take this and we will ask the Bureau, the Attorney 
General, and DEA to take a look at it. And we will put the 
results of that in the record so people can see it.
    With that, we have a lot of questions which we will be 
dealing with you as we talk a back and forth. With that, I will 
recognize Mr. Serrano.
    Mr. Serrano. I have no questions.
    Mr. Wolf. Mr. Vitter. Mr. Kennedy.
    Mr. Kennedy. Thank you, Mr. Chairman. I just had a couple 
of questions regarding trade in general. I don't know whether 
this is the proper time or we have another panel coming up.
    Mr. Wolf. It probably would be better for the 
administration panel, if you can. I mean, if there is a 
question, go ahead.
    Mr. Kennedy. No, that is fine. I think the issues they 
brought up I will be able to bring up in the next panel.
    Mr. Wolf. Fine. Mr. Weller.
    Mr. Weller. Well, thank you, Mr. Chairman. As a member of 
the House Ways and Means Committee, I appreciate the 
opportunity to serve as a guest on your Subcommittee today and 
the opportunity to participate in what is a very, very 
important hearing. And I do have some questions I would like to 
direct to Ms. Carus, but let me begin by saying I am, of 
course, a strong advocate of free trade. I support normal trade 
relations with China. I welcome China as part of the World 
Trade Organization. And of course, as part of the World Trade 
Organization, we in the United States Congress expect China to 
honor its commitment to follow the rules. And of course, as 
testimony has been provided today, there is serious concern 
they may not be, and it appears that they are not.
    Ms. Carus, you noted in a case where you are the sole 
domestic producer of potassium permanganate, a substance that 
is very important for the American economy in many, many ways 
as well as health and drinking water.
    Ms. Carus. Right.
    Mr. Weller. You stated in your testimony how Chinese 
companies have, according to your testimony, provided false 
information to the United States Department of Commerce and 
their ability to get around anti-dumping orders. I was 
wondering, from the standpoint of your company and from the 
standpoint of your employees, what has this meant to Carus 
Chemical? Of course, an employer in my district. What has it 
meant in terms of lost productivity and wasted resources that 
have taken you away from going about doing your business?
    Ms. Carus. It has meant a very high amount of cost in 
defending the anti-dumping orders, specifically as relates to 
the fraud charges. We have spent probably half a million 
dollars easily in the last 10 to 12 months just defending the 
fraud charges or investigating the fraud charges that the 
foreign entities have been making. And that is a significant 
drain on our resources as a small company. Half a million 
dollars we could do a lot with in our company in terms of 
improving manufacturing processes and so forth.
    But in addition to that cost to us, as a company, we are 
very concerned as U.S. taxpayers, because there is also a 
significant amount of work being done at the Department of 
Commerce, some of it really that shouldn't be. For example, the 
2000 review, the new shipper review would have never occurred 
had Groupstars given their real date of its business license. 
In addition, the Department spent thousands of dollars 
traveling to China to verify two plants that weren't the actual 
producers of the product, that Groupstars admitted to in a 
subsequent filing. So this is wasted money. This verification 
trip to China should have never occurred. That is a lot of 
money as a U.S. taxpayer that I am very concerned about.
    Mr. Weller. Ms. Carus, you identify Groupstars as a company 
which provided false information. Are there other companies, 
Chinese companies that have also performed in a similar way?
    Ms. Carus. In terms of--yes, there is another one called 
Wego Chemical in New York out of Long Island.
    Mr. Weller. Which is a Chinese-owned company?
    Ms. Carus. I don't know that. I don't know that.
    Mr. Weller. Well, you raise your concern regarding the 
Department of Commerce, and of course as it has work to 
implement its anti-dumping order and to investigate what is 
occurring with what appears to be very unfair competition and 
misleading competition by one particular Chinese company 
andperhaps others. Do you believe that it is reasonable that Chinese 
companies that provide false information, that have committed fraud, 
have shipped potassium permanganate under extremely hazardous 
circumstances, and of course have now admitted providing false 
information to the Department of Commerce--do you think they should be 
allowed to come back year after year and challenge the anti-dumping 
orders after this record of performance?
    Ms. Carus. No. Absolutely not. I think it should absolutely 
be prosecuted. That kind of behavior seems to be allowed to be 
occurring. And I think the Commerce Department needs to 
consider ways to better address fraud in the Department. It 
should consider ways of sanctioning parties that repeatedly 
submit routinely certified false statements.
    I know from my conversations with the DEA that they have 
what is called a long-arm provision of the law. I don't know if 
this is something that could be adopted by the Commerce 
Department, but under this long-arm provision, they have the 
ability to criminally prosecute foreign entities that are known 
to be manufacturing illegal drugs specifically to import to the 
United States. I would think such a long-arm provision for the 
Commerce Department would be appropriate in these cases where 
they would have the ability to prosecute foreign entities that 
are known to be committing fraud on U.S. companies to the 
detriment and to the injury of U.S. companies like ourselves. 
That is just a thought, but I think it is worth looking into 
further.
    Mr. Weller. Mr. Chairman, thank you very much for the 
courtesy of allowing me to participate. I appreciate your 
personal interests in this issue that has been raised by Ms. 
Carus. And as a member of the Ways and Means Committee, I will 
certainly share the information that has been gathered today 
with our Trade Subcommittee in the Ways and Means Committee as 
well.
    Mr. Wolf. Well, and thank you, Mr. Weller.
    Mr. Weller. Thank you, Mr. Chairman.
    Mr. Wolf. And you are fortunate. Mr. Weller, when he gets 
involved in an issue, marriage, penalty tax, he stays with it 
until he is very, very successful. So I am glad to have him 
join us with regard to this.
    Does this Chinese company Groupstars have an American law 
firm?
    Ms. Carus. Yes, they do.
    Mr. Wolf. What is the name of that law firm?
    Ms. Carus. Representing them?
    Mr. Wolf. What is the name of the law firm?
    Ms. Carus. I don't have that name handy. We will provide 
that for the record, if that is okay.
    Mr. Wolf. Do you think that law firm knew that--I guess the 
law firm has dropped the company knowing that fraudulent data 
was sent.
    Ms. Carus. I don't think so.
    Mr. Wolf. Or do they continue to represent them?
    Ms. Carus. I don't think so.
    Mr. Wolf. We want to know what firm represents the company, 
and we want to know if you can write them or we will write the 
firm to see how from the Canon of Ethics that we teach at law 
school--I am a graduate of Georgetown Law School, one of the 
good law schools in the country--from the Canon of Ethics, what 
is the responsibility? In fact, we will write the American Bar 
Association based on your information to find out, what is the 
responsibility of a firm that is representing somebody that 
they knowingly--now, do you think the firm knowingly knows that 
there were fraudulent data? Has that been proven?
    Ms. Carus. We have shown it on the record.
    Mr. Wolf. Okay. Well, let us see it so that we don't--I 
mean, the firm may very well not know. And if they don't know, 
I don't think it is fair to be blaming them. But if you can 
give us this, and we will write to the ABA on the Canon of 
Ethics to see if that is a problem.
    Ms. Carus. Okay.
    Mr. Wolf. With that, we thank you all. If you will be in 
touch with Christine. Thank you very much.
    [Clerk's note.--Subsequent to the hearings, the following 
information was provided]

                      Counsel for Chinese Parties

1999 Administrative Review
    William E. Perry, Garvey, Schubert & Barer, 1000 Potomac Street, 
N.W., Fifth Floor, Washington, D.C. 20007.
2000 New Shipper Review
    S. Stephen Spring III, Spring, Spring & Associates LLC, 8939 
Jefferson Highway, Suite E, Baton Rouge, LA 70809.
    William E. Perry, Garvey, Schubert & Barer, 1000 Potomac Street, 
N.W., Fifth Floor, Washington, D.C. 20007
                              ----------                              

                                             Thursday, May 22, 2003

                          AGRICULTURAL SECTOR


                               WITNESSES

JON VESSEY, VESSEY AND COMPANY, CALIFORNIA
PHIL GLAIZE, THIRD GENERATION GROWER, WINCHESTER, VIRGINIA
PETER BARTON, CHAIRMAN, HUDSON VALLEY FRUIT GROWERS, HIGHLAND, NEW YORK
    Mr. Wolf. We are blessed that they are not calling for a 
vote. About a half an hour ago they said they were going to be 
in 15 minutes. So, the panel three, agricultural sector, Mr. 
Vessey, Mr. Glaize, and Mr. Barton. If you could limit it to 3 
minutes each, we will appreciate it very much.
    Welcome. Mr. Sweeney from New York wants to be here, too. I 
know he is at another meeting and trying to make it. He 
specifically wanted to make sure that you knew. But why don't 
we begin in that order, Mr. Vessey, Mr. Glaize, and Mr. Barton. 
If you can limit it to 3 minutes, we would appreciate it very 
much.
    Mr. Vessey. Thank you, Mr. Chairman.
    My name is John Vessey. I am president of Vessey and 
Company, a California fresh garlic producer, and a family 
farming operation in its fourth generation. Our garlic industry 
was nearly destroyed 10 years ago by a surge of 54 million 
pounds of Chinese garlic imports. A dumping duty of almost 400 
percent was imposed in 1994. That duty saved our industry. 
Until last December, the duty was still applied to all the 
Chinese exporters. Two Chinese exporters were recently excused 
from the duty by Commerce. However, our industry has greatly 
been harmed again by a tidal wave of Chinese imports in the 
past 2 years.
    In 1995, 3 million pounds--3 million pounds per year 
through 2000, but the imports spiked to 16 million pounds in 
2001, and to 54 million pounds last year. This is demonstrated 
by our first chart.
    For the first quarter of 2003, Chinese imports were almost 
four times greater than the first quarter of 2002. If the 
trends continues, Chinese imports for 2003 will be about 150 
million pounds, far more than we produce in California. There 
are three reasons for this. I will explain in detail in my 
written comments that I have given for the record. Let me 
summarize each one.
    First. Millions of pounds of Chinese garlic are illegally 
shipped through third countries. This is reflected in the first 
chart, with the dark area representing a trend ship product and 
the white area identified as garlic imports from China. Customs 
has greatly reduced trend shipments since it started testing 
garlic imports last summer. There are two problems, however. 
First, Customs has stopped testing the imports. Second, the 
funding for the testing program is in jeopardy. Mr. Chairman, 
Congress should ensure the crucial testing program is kept in 
place.
    A second reason for the 54 million pound import surge is 
Commerce Department's conduct of new shipper administrative 
reviews. New shippers can ship Chinese garlic without paying 
cash dumping duties for the entire life of the review, 
sometimes from 12 to 16 months, with only posting a bond.
    During 2001, there was one new shipper being reviewed by 
Commerce. That one shipper shipped 8 million pounds of garlic 
during his review. During 2002, there were three shippers in 
the new shipper review. They collectively shipped to the United 
States 42 million pounds of garlic.
    The privilege not to pay cash dumping duties was given by 
new shippers by Congressional amendment of the dumping law in 
1995, supposedly because the privilege is required by the WTO 
Dumping Code. In fact, the WTO does not require this privilege. 
Mr. Chairman, Congress should save our industry, and no doubt, 
other domestic industries by removing the privilege of this 
law. But it must be done now.
    The third reason for the surge of imports is Commerce's 
methodology for calculating dumping margins in Chinese cases. 
These are detailed in my written comments. Unless Congress' 
methodology is changed to reflect the reality of garlic 
production in China, Congress will grant zero dumping margins 
to all exporters in review.
    The situation is desperate. Unless changes are made in all 
three areas, the domestic garlic industry is doomed. We have 
already cut our production 30 percent, and we are now to the 
size we were eight years ago after the first Chinese onslaught. 
Ask yourselves, how could 54 million pounds of garlic enter the 
United States from China with a 400 percent duty? Thank you, 
Mr. Chairman.
    Mr. Wolf. Thank you.
    [The information follows:]

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    Mr. Wolf. The next witness, Mr. Glaize.
    Mr. Glaize. Thank you, Mr. Chairman.
    I am Phil Glaize, the past chairman of the U.S. Apple 
Association, and the current chairman of the Virginia Apple 
Growers Association. I am a third generation apple grower from 
Winchester, Virginia, and manage 1,000 acres of orchards in 
both Virginia and Pennsylvania. We operate an apple cold 
storage facility and a packing operation so that we can market 
our apples directly to the retailers and the processors.
    Apples are grown commercially in 36 States, with the 
majority of the crops produced in Washington State, Virginia, 
New York, Pennsylvania, and California. While Virginia produces 
both fresh and processing apples, the majority of the growers 
in our State produce apples for apple sauce, sliced apples for 
baking, and juice apples for apple juice.
    Thank you for this opportunity to provide the subcommittee 
members with a first-hand account of a threat posed to my 
family, my company, and our entire industry from imports of 
cheap apple juice concentrate from the Peoples Republic of 
China.
    A flood of cheap apple juice concentrate imports driven by 
the Peoples Republic of China is significantly reducing prices 
that U.S. growers receive for their processing apples. 
Processing apple prices are the foundation of the industry's 
entire price structure, and these imports are adversely 
affecting returns for all apple categories across the entire 
industry. As the price for Chinese concentrate delivered to 
U.S. docks fell 53 percent from 1995 to 1998, and imports of 
apple juice from China increased to over 2,000 percent during 
that period, the price paid to growers for their juice apples 
fell by 66 percent.
    China's share of the U.S. concentrate market increased from 
one percent in 1995 to 18 percent in 1998. U.S. concentrate 
producers have been forced to drastically reduce the price they 
pay growers for U.S. juice apples. This has significantly 
harmed apple growers in Virginia and across the country. And 
this is important to know. Since processing apple prices are 
the floor of our industry's price structure, the plummeting 
apple juice concentrate prices have caused the value of U.S. 
fresh market and processing apples to fall dramatically.
    In response to economic injury to U.S. producers caused by 
the surge in unfairly priced apple juice concentrate from 
China, the U.S. apple administered coalition for fair apple 
concentrate trade sought to level the playing field by seeking 
import relief under U.S. trade law. The coalition was 
successful, receiving unanimous ruling from the International 
Trade Commission in 1999. However, in November of 2002, the 
Commerce Department announced its decision to choose Turkey as 
the surrogate market economy even though the U.S. apple 
industry strongly favored the choice of Poland. Despite the 
fact that Turkey and Poland lined up as statistical equals in 
all concerns, Commerce seems to have overlooked the interests 
of our U.S. apple industry.
    In written testimony submitted, I have elaborated on the 
reasons our industry believes Poland was the more appropriate 
surrogate country; however, in the interest of time, I will not 
go in to detail, but you do need to know two of those factors. 
That includes Commerce's judgments regarding the economic 
comparability over Poland and Turkey and the quality of data 
submitted by the Chinese regarding Turkey.
    I continue to believe that the Commerce Department missed 
an excellent opportunity to provide our industry with 
reasonable protection from cheap imports of Chinese apple juice 
concentrate. Regretfully, this protection will not be in place 
when I harvest my crop this September.
    Commerce's choice of surrogate market economy has had a 
harmful impact on our anti-dumping case. Selection of Turkey 
led the Commerce Department to propose elimination of dumping 
duties for five of the nine Chinese apple juice concentrate 
producing companies. These companies will now be free to reduce 
concentrate prices as low as they want without the fear of 
future anti-dumping consequences. Commerce's decision to choose 
Turkey as the surrogate market economy clearly favors Chinese 
producers and takes money out of the pockets of U.S. apple 
growers.
    As an apple grower, this process was particularly 
troubling. The decision on which surrogate country to choose 
was a close call. Commerce Department was well informed about 
the economic harm to our industry being caused by Chinese 
imports. Commerce should have used this opportunity to 
safeguard American interests, but instead sided with Chinese 
apple growers, processors, and exporters.
    U.S. apple growers believe that in anti-dumping cases such 
as ours, the Commerce Department should be an advocate for U.S. 
Industry when the facts allow it. For this reason, we urge the 
Subcommittee to consider several recommendations:
    One. Establish a separate office with sufficient resources 
within the Commerce Department to handle anti-dumping petitions 
against China and the subsequent administrative reviews. Before 
the Commerce Department moves forward with a case, it should 
require a foreign exporter to assume the burden of proof by 
having to provide evidence that its facts are true and robust 
in the scope of dumping investigations. And, in the case of new 
shipper reviews, such shippers should have to satisfy the 
dumping duty deposit requirement in cash rather than a bond.
    In conclusion, Mr. Chairman, the apple growers of Virginia 
and across the country strongly disagree with the Commerce 
Department's decisions with regards to our anti-dumping case 
against below cost imports of Chinese foreign concentrate. We 
believe that the U.S. Government should instead act fairly and 
responsibly to support the interest of domestic industries. We 
are vigorously and prepared to act upon other means, including 
U.S. Government initiatives to keep dumped concentrate from 
further harming the already beleaguered U.S. apple industry.
    Thank you, Mr. Chairman.
    Mr. Wolf. Thank you, Mr. Glaize.
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        Mr. Wolf. And Mr. Barton.
    Mr. Barton. Good morning, Mr. Chairman. My name is Peter 
Barton. I am a fruit grower in the Hudson Valley. I actually am 
the Chairman of the Hudson Valley Fruit Growers Task Force that 
was formed pretty much for last year, which I am sure most all 
of you are aware of was the devastating weather events that we 
had. And we do thank you for coming forward and including 
specialty crops in the disaster bill for 2003. And we were very 
hopeful going into this harvest year of 2003. Unfortunately, at 
the end of 2002, with the ruling from the Commerce Department, 
I think it has taken our industry and is taking us backwards. 
That ruling of picking the surrogate country of Turkey over 
Poland will have significant impact on all the growers that I 
do represent.
    This other market, as Phil said, is our foundation. And 
what we have seen over the years up until just recently is 
almost a nonmovement of this product. And, unfortunately, when 
growing a product like this that is a well valued entity that 
used to add to our bottom line becomes essentially a liability 
to us and to our operations. We have no other outlet for it 
except for processing factory. And if that processing factory 
is not taking that apply, it becomes a burden to us.
    I would like for you all of to please become aware of that 
court ruling as to why--actually, in the ruling itself it 
seemed to contradict their actual criteria of the significant 
producer which would have led you to think it would have been 
Poland instead of Turkey that was picked.
    Our farm itself where my family farms is 65 miles north of 
New York City. We are a great place for learning. We are also a 
great place for solitude, which was proved on September 11th 
and the days following September 11th. We attract quite an 
amount of people to our farm to pick the various crops that we 
have. I myself, as a direct marketer and a true ambassador of 
agriculture, and I communicate directly to the American 
consumer. And there is a concern, because I feel that 
agriculture in itself is in trouble. The lack of public 
education, understanding about agriculture is eroding our 
consumer base which threatens the existence of our profession. 
And all this is happening in my generation.
    A chief food supply along with an overabundance of products 
from around the world has armed the consumer with a false sense 
of security. In my hometown, I am an 8-year elected town 
councilman, so I see the impacts that I have been hearing this 
morning throughout this whole hearing. I have the local 
businesses that are no longer there contributing to our tax 
base. We have empty warehouses, empty storefronts. Instead, we 
have residential properties being built and sprawl, almost 
uncontrolled sprawl which, on a local level, is very hard to 
control with an infrastructure.
    So, to bring forward, the concern I think that we are all 
hearing in this room today is having a major impact on our 
local hometowns and the way small-town politicians like myself 
have to address these issues. The Chinese concentrate needs to 
be addressed, revisited possibly in order to make my industry a 
viable industry in the future. And I thank you for this time.
    [The information follows:]

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    Mr. Wolf. Well, thank you very much. And I appreciate all 
of your testimony. In fact, Mr. Glaize, I have the privilege of 
representing the Shenandoah Valley and Blue Ridge and 
Winchester. And as he was talking about the impact on little 
towns and all, I mean, from the growth and the apple orchards 
that have been cut down and the housing that has been replaced, 
I am sure it must have triggered with regard to you. I mean, I 
can think of apple orchards that I know I used to drive by that 
there are now homes. So it almost gets beyond--and this is not 
an issue on growth and sprawl and the issues like that. But it 
also does get into those issues. And the vitality of little 
towns and places that are very, very important to this country.
    Why do you think, both of you, they picked--Turkey and not 
Poland? Just briefly, I mean. And we will dig into it. But why 
do you think they did?
    Mr. Glaize. It is hard to speculate. Statistics were very 
close as far as their gross national product and size of the 
economy, et cetera. In that they were statistically the same, 
Turkey was slightly, lower perhaps closer to China in one of 
the statistics. However, they were so close that, in my point 
of view, of course it doesn't make sense to have chosen Turkey.
    Mr. Wolf. Under the law, do they have the ability to go 
back and select Poland over?
    Mr. Glaize. I would have to find that out for you. I 
believe they do.
    Mr. Wolf. Mr. Vessey, do you think the Commerce Department 
has been your friend? Do you view it as a friendly place to go 
to?
    Mr. Vessey. Well, I believe that certainly under the new 
shipper review law that the Commerce Department, that Congress 
needs to really change that as far as the Commerce Department, 
the methodology that is used to calculate these zero dumping 
rates is just ludicrous. So I think the Commerce Department's 
method of how they arrive at these is bad.
    But I would like to comment one thing on--you talk about 
small towns. Western agriculture, we farm in the west side of 
the San Joaquin Valley in a little town called Coalinga. We are 
the largest private employer in that town and employ 600 
people. That had dropped to 500, and will drop probably in half 
just because of this dumping order that we continue to plant 
less and less product. And the whole San Joaquin Valley has a 
history of, between cotton that it has lost to China--I think 
all of western agriculture. We talk about these small 
commodities, garlic or apples. But western agriculture is in 
jeopardy. And I think that the fact that we need to look at 
whether you call it national security, I mean, are we going to 
be dependent upon a foreign source of food?
    I think our safe and dependable food supply that Americans 
farmers produce is utmost dependable, and I don't think we 
should be in jeopardy of a foreign source like the oil 
business.
    Mr. Wolf. Well, I thank you all. I would urge you also to 
be contacting--Mr. Glaize, contacting me and I contact him. But 
those of you others and the other witnesses, those before and 
those after, to contact your other members of the House and the 
Senate. I mean, this is a hearing to hopefully begin to reverse 
the process, but there are 435 other members of the House and 
there are 100 senators. So I think it is important that you 
vocalize and advocate. I mean. And we invited one company, and 
the first letter came from the man was very bitter and hostile. 
And not against me, but he said, I don't think anything can 
ever come of this hearing and, what you are doing. He said, I 
am so disappointed. And then he came back and apologized 
saying, you know, he can't make it, but he just didn't think 
anything would ever come of it.
    And so I think it is important for you to be talking to 
your Senators and Congressmen, and Mr. Walsh and Mr. Sweeney 
are both in agreement with regard--but not just limit it to 
this subcommittee, but to the entire Congress. This is an 
opportunity. And I appreciate the NAM being here, a great 
institution, like that. So this is an opportunity, but just 
don't allow it--you haven't done your job by just coming here 
and testifying. Before I got elected to Congress, I was a 
lobbyist for Gerber Baby Food, and, you know, go out, spread 
the word. Speak. Go to town meetings. Go to the villages. Go 
when the Congressmen are back. Talk to them. Make appointments. 
Go, go, go, go. But just don't think that you have accomplished 
your goals by coming here and testifying. We will attempt to 
help based on a sense of fairness, but you now have to go out 
and advocate it. And I would urge you to--and those who are 
listening. I know we have got probably both sides in this 
audience. But to go out and make it clear to other members of 
the House and the Senate so that when we try to do something 
there is the support, if you will. But I thank all of you very 
much for your testimony.
    Mr. Serrano.
    Mr. Serrano. Very briefly. All three of you, you on the 
apple issue, both of you, and you on the west coast, in 
general, paint sort of a bleak picture about the future of food 
producing for this country. We are not anywhere near having 
most of our food imported.
    Mr. Vessey. I may disagree with you, Congressman.
    Mr. Serrano. No, I am asking you. Are we?
    Mr. Vessey. Well, I think we are. You have 800 million 
farmers in China. I am also a broccoli grower. I have lost 
production in broccoli. The recent studies have come out that 
China is getting in the package salad business. We think that 
it is just maybe the commodity groups. But in the specialty 
crop business, I think there is jeopardy. I think we are in 
jeopardy of not being in control of our own food source. I 
paint that black.
    Mr. Glaize. I would like to agree with Mr. Vessey. And it 
is going to happen quicker in small crops fruits and vegetables 
than it is in the commodity crops of wheat, corn, oats. I would 
like to say that last night, ABC News with Peter Jennings aired 
something they called the making of a crisis. And for 5 minutes 
they talked about our food production moving offshore, 
particularly to China. They featured an avocado grower from 
California. That little news clip hit so home with me, it is 
unbelievable. And that is the large issue that we as farmers 
have got to face. I, as an apple grower, have to decide whether 
I should plant a tree--I don't get a thing back from my tree 
for 6 years. It takes that long. I don't know whether to go 
plant any more trees right now or not. 60 percent of the single 
strength juice, apple juice consumed in this country is from 
foreign concentrate.
    Mr. Glaize. It is unbelievable that what we have received 
for our product in the last 4 years have gone down so far that 
Congress passed a market loss decision for apple growers for 
the first time ever and we do not even want it. We want to 
survive on our own, but it has gotten that bad.
    Mr. Vessey. Just one more comment, Congressman. It is what 
we have lost are really our export business. We used to be big 
exporters in garlic to Europe, to Canada, to Australia. We have 
lost that business. Also, I think all of agriculture is 
concerned that we lost Japanese business. We used to export a 
lot of product in Japan. China has taken than business. So I 
think it is not just we are threatened. We already are 
threatened and we have lost a tremendous amount of markets out 
there that we no longer will ever get back.
    Mr. Barton. I would like to state that that false sense of 
security the public has--and I think the public does need to be 
educated because we are almost at a crisis right now and as 
long as they go on with this false sense of security I do not 
think the awareness is going to be built enough.
    Mr. Serrano. The apple sauce they buy in northern Virginia 
is that mostly produced in Virginia, made in Virginia.
    Mr. Glaize. Thank goodness the apple sauce is. They are not 
importing apple sauce at this time.
    Mr. Serrano. I am a New Yorker. We do love apples but, boy, 
do they make apple sauce.
    Mr. Wolf. It is good for the industry. Thank you, Mr. 
Serrano.
    Mr. Vitter.
    Mr. Vitter. Thank you, Mr. Chairman. Thank you for leading 
this hearing. It is very important and I certainly appreciate 
your leadership and appreciate the testimony of all the 
witnesses.
    I just wanted to quickly add during this ag discussion of a 
Louisiana example, which is crawfish. Chinese crawfish tail 
meat--and actually this is perhaps an example that highlights a 
slightly different problem because if you look at the history 
of this anti-dumping action, while there has been criticism and 
problems with Commerce, probably the much bigger problem is on 
the pure enforcement side from Customs.
    The U.S. Anti-dumping duty order against imports of fresh 
water crawfish tail meat from China has been in place since 
1987. At that original time all company specific cash deposit 
rates assigned in that original investigation were in excess of 
90 percent ad valorem. Now those change over time with reviews 
and with new shipper reviews, and since that time new shipper 
reviews in particular have resulted in company specific ad 
rates, rates ranging from zero to 223 percent. Certainly in 
those new shipper reviews there is some concern that some of 
those have been dominated by fraud and are very inaccurate, so 
that is a concern resting in Commerce.
    But again probably the biggest concern is collection of the 
duty, pure enforcement collection out of Customs, and there is 
an enormous concern that there is just no adequate enforcement 
collection after we have walked through the process and gotten 
these determinations.
    Why do I say that? Well, if you just go in retail stores in 
Louisiana, you find the same Chinese crawfish product for about 
$2.99 a pound. This is virtually the same as in 1996 when the 
anti-dumping case was first filed and if you look at import 
rates, although the levels dip slightly just after publication 
of the ad order in 1997, they surged after that to new record 
highs. So in this case, you have an anti-dumping action. You 
have some significant determinations by Commerce in terms of 
the rates that were determined, and there is criticism of some 
cases and some new shipper cases but basically you have 
significant determinations but the price is the same and import 
levels have surged. And so the domestic industry feels like 
there needs to be much greater focus and enforcement out of 
Customs and they have basically reached the conclusion that 
Customs is never going to do anything significant unless and 
until there is a specific line item for this enforcement 
because it just gets swamped. It is a tiny matter in the 
Customs universe and it just gets swamped by legitimate Customs 
antiterrorism, antidrug priorities.
    So from the point of view of the domestic industry they do 
not think anything is ever going to result from this unless we 
make Customs with perhaps a specific line item enforce this 
because they are basically ignoring it now because it is being 
swamped by their bigger understandable priorities.
    I just wanted to add that to the discussion and thank the 
witnesses again.
    Mr. Wolf. Well, thank you, Mr. Vitter, and if you want to 
offer an amendment to the Customs markup on that, I serve on 
that subcommittee, we could do it at full committee.
    Mr. Wolf. Mr. Honda just joined us. Whatever you want to 
say.
    Mr. Honda. Well, thank you, Mr. Chairman. I apologize for 
being a little tardy here. But I really do appreciate you 
having this hearing, Mr. Chairman and Ranking Member Serrano. I 
came just to specifically make comments on an activity in my 
district, and that is garlic, and I understand Mr. Vessey had 
made a couple of great comments, one about the unfair 
competition, and I am here to echo his concerns and also share 
the fact that the imports have increased tremendously from 
about, what, about 3 million pounds in the year 2000 to over 54 
million pounds this past year, and the total consumption of 
garlic in this country is around 160 million pounds. So it is 
quite a big impact on our economy.
    California is a State that is probably one of the largest 
producers of garlic, and I think that it is clearly quite an 
impact and we are hoping that the subcommittee will be able to 
look at the loopholes that have been created that are 
recognized by the California garlic growers. We have to close 
that loophole so we can have some fair trade practices, and I 
am here to support not only John but Mr. Christopher, who has 
probably one of the largest ranches in the State of California.
    We welcome the Chair to our garlic festival, and I will 
personally be your guide and cook some of the dishes for you if 
you like.
    Thank you, Mr. Chairman.
    Mr. Serrano. For the record can you explain later about the 
effects of garlic on werewolves. I have never understood that.
    Mr. Vessey. We promote that.
    Mr. Wolf. I thank you, Mr. Honda, and I thank the panelists 
too and again if you can all work with Christine about that. 
But thank you very much.
                              ----------                              

                                            Thursday, May 22, 2003.

             SECTION 421 OF THE TRADE ACT OF 1974/TEXTILES


                               WITNESSES

AUGUSTINE D. TANTILLO, AMERICAN MANUFACTURING AND TRADE ACTION 
    COALITION (AMTAC)
WILLIAM WOLF, PRESIDENT, MOTION SYSTEMS, EATONTOWN, NEW JERSEY
    Mr. Wolf. We just got another 30 minutes before a vote. So 
we are doing well. If we can have Mr. Tantillo from the 
American Manufacturing and Trade Action Coalition and William 
Wolf, who I want to state for the record is no relation to me 
that I know of. If you can limit your statements to 3 minutes, 
we would appreciate it very much.
    Mr. Tantillo. Good morning, Mr. Chairman, and thank you 
very much for this opportunity to appear before your 
Subcommittee.
    My name is Augustine Tantillo. I am the Washington Director 
of the American Manufacturing Trade Action Coalition. AMTAC is 
a group of concerned U.S. Manufacturers who have come together 
for one purpose, and that is to work in support of Federal 
trade policies designed to stabilize the U.S. Marketplace and 
to hopefully preserve the over 16 million manufacturing jobs 
that remain here in the United States.
    So far this morning a good portion of the hearing has dealt 
with dumping and CVD cases, and I want to talk about a 
different issue that comes under the jurisdiction of the 
Commerce Department and other related agencies such as the U.S. 
Trade Representative and the State Department.
    It is the special textile safeguard mechanism which is 
contained in the Accession Agreement with China. In 1997, the 
United States negotiated a bilateral textile agreement with the 
Chinese, and as part of that agreement they included a 
provision that allows for the reinstitution of quotas on 
textile apparel shipments from China when their levels become 
disruptive within the U.S. Market. That provision was 
reaffirmed as part of the 2001 Accession Agreement and has been 
in place since January 1, 2002, when China actually joined the 
WTO.
    Fortunately, Mr. Chairman, the Administration just 
yesterday published the procedures for utilizing the China WTO 
textile safeguard mechanism. Nearly 6 years after the mechanism 
was first negotiated, 2 years after it was reaffirmed in the 
Accession Agreement and 18 months after China joined the WTO, 
the United States textile industry finally has the rules 
available to them for petitioning under this safeguard 
mechanism.
    Now what has happened during that time period, during that 
delay in regard to Chinese textile imports into the United 
States? Well, it has been nothing short of remarkable. In 2002, 
China grew by 117 percent in terms of their total textile and 
apparel exports to the United States. Since January 1, 2001, 
our industry has lost 206,000 workers, many in Virginia, the 
Carolinas, Georgia, Tennessee, Alabama. So while this massive 
surge is taking place, thousands of Americans are losing their 
jobs.
    The executive branch highlighted during the accession 
debate that the safeguard mechanism would be there to protect 
against the very thing which is happening. Surging Chinese 
imports disrupting our markets, displacing workers, and yet the 
mechanism has never been used. Again, the procedures were just 
yesterday published. So when is a safeguard mechanism 
meaningless? Obviously, when it is never utilized.
    Mr. Chairman, China has the potential to overwhelm our 
market. For the past 12 months they have been shipping textile 
apparel products at over 100 percent in terms of an increase 
over their previous shipments. Their total value of shipments 
to the United States is valued now close to $10 billion. I will 
give you one example that you mentioned earlier, socks, 
hosiery.
    In March of 2002 China shipped about 1 million dozen pairs 
of socks to the United States. Over the next 12 months, they 
shipped 8.5 million dozen pairs of socks. They have experienced 
an 800 percent increase in that one category alone and, as you 
said, many of these companies are owned and operated by the 
People's Liberation Army.
    Our industry does not need any more commitments or 
promises. We have plenty of those. What we need is action. The 
government has finally published this safeguard mechanism, but 
if it is going to be meaningful it has to be used.
    We will be petitioning the Administration to implement a 
safeguard in short order. If they do not, China will continue 
to absorb a tremendous amount of market expansion within the 
U.S. It is going to cost tens of thousands of additional jobs. 
We hope that this action will come in time to save some of the 
900,000 U.S. textile apparel jobs that are left in the United 
States.
    Thank you very, very much for this opportunity, Mr. 
Chairman, for your leadership in this area.
    [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 
    
    
    Mr. Wolf. Thank you, Mr. Tantillo.
    Mr. Wolf.
    Mr. William Wolf. Chairman Wolf, members of the 
subcommittee, I am Bill Wolf, President of Motion Systems of 
Eatontown, New Jersey. I thank you for giving me the 
opportunity to relate my very disappointing experience as the 
first petitioner to bring a case under the China specific 
safeguard mechanism known as Section 421. I am also submitting 
a written statement, so I will keep my comments brief.
    Mr. Wolf. Your full statements will appear in the record.
    Mr. William Wolf. Our company, Motion Systems, makes 
electromechanical linear actuators and pedestal actuators. This 
last product was the focus of the Section 421 case. Our largest 
customer used pedestal actuators in his mobility scooters. In 
2001 they switched from our company to a Chinese supplier who 
had copied our product and then sold it for about a quarter of 
the price. The attached chart to the report shows that our 
production of pedestal actuators declined by two-thirds as the 
Chinese imports surged into the United States.
    In response to this surge we filed a 421 petition in August 
2002. After investigation, the ITC concluded that imports of 
pedestal actuators from China were causing market disruption 
and recommended that quotas be imposed. Unfortunately for our 
industry the President did not agree. The President denied 
relief in part on the presumption that our former customer 
would face increased costs if he had to switch from the low 
cost Chinese copies.
    Section 421 is expressly intended to address surges in 
Chinese importers. The possibility that a U.S. purchaser of 
Chinese imports would see some increased cost is almost always 
going to be the case. To deny relief on this basis is to deny 
relief for every Section 421 case. That cannot be what Congress 
intended.
    The President also appears to have relied upon the 
allegation by the U.S. importer that increased costs would be 
passed on to the ultimate customer. At the USTR hearing, a U.S. 
Importer alleged that cost savings achieved through the Chinese 
imports had been a saving for consumers and that by imposing 
relief consumers would face cost increases in the future. These 
claims were never verified by USTR and I believe that USTR's 
fact finding and information verification process in Section 
421 proceedings is seriously flawed.
    We presented documentary evidence to USTR showing that the 
U.S. importer did not lower his prices by switching to the 
Chinese imports. Why then would it increase prices to consumer 
if he switched back to the American made parts? Government 
documents first obtained after the USTR hearing and the 
President's decision show that the U.S. importer's prices to 
its largest customer, the VA, remain the same after he switched 
to the Chinese imports. He never dropped his prices.
    Allowing Section 421 cases to be decided based upon the 
unsworn, undocumented self-serving testimony of importers 
grants them a virtual veto over relief.
    I would also like to make a comment on how the Chinese 
government addressed this case. An intense lobbying campaign 
was launched to thwart relief to our industry. Press accounts 
attached to my written statement again reported that this 
effort reached the highest levels of the Administration and 
resonated in the President's decision making process. To say 
that I am dumbfounded by the Administration giving credence to 
the viewpoints of the Chinese government over the 
recommendation of the ITC and contrary to the will of Congress 
would be an understatement.
    In conclusion, as it stands, the Section 421 petition is a 
dead duck. Maybe it can be fixed.
    [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 
    
    
    Mr. Wolf. Thank you both. Tell me in about 30 seconds of 
the lobbying effort that you are talking about. Well, who was 
retained? Who are the lobbyists? What did they do?
    Mr. William Wolf. Well, it is Chinese officials. We asked 
for hearings with the U.S. Trade Rep's office, but the 
Chinese--the doors opened up for them.
    Mr. Wolf. You could not get into the Trade Rep's office?
    Mr. William Wolf. Only one hearing when they were cleaning 
up the documentation on it.
    Mr. Wolf. Chinese had better access?
    Mr. William Wolf. Yes.
    Mr. Wolf. I hope you will give us some facts.
    Mr. William Wolf. Those press releases are attached.
    Mr. Wolf. Why do you suppose the Trade Rep's office did 
that?
    Mr. William Wolf. Trying to keep feathers from being 
ruffled.
    Mr. Wolf. For what reason though?
    Mr. William Wolf. It was due the next week.
    Mr. Wolf. Okay, well, thank you.
    Mr. Serrano.
    Mr. Serrano. I have no questions.
    Mr. Wolf. I thank you both. If you can be in touch with 
Christine to see what we can do to see if there ought to be a 
change at the Department of Commerce in the Trade 
Representative's office.
    Now, in fairness and balance sometimes when you advocate 
for and I know overstatement can sometimes take place, so we 
want to be balanced. We want to be fair but this has to stop. 
If we have to cut the budget over there, then we will have to 
cut the budget. It is at least the only way we are going to do 
it. I feel very passionate about this issue. There is only one 
other Member of Congress, Congressman Chris Smith, who has ever 
been in a slave labor camp, as I have been. I was in Tibet, 
where the Chinese were persecuting the Buddhist monks and nuns 
and throwing them into Drapchi Prison. I know there are 50 
Catholic bishops that are being harassed and jailed in China 
today. There are 250 Evangelical House Church leaders, and for 
the Commerce Department officials--and I hear President Bush 
speak out very eloquently with regard to human rights and 
religious freedom. When you put all these things together, you 
see the way they were with regard to the SARS, there ought to 
be no doubt that your Commerce Department is on your side and 
not on the side of the people that are putting Catholic bishops 
in jails, Evangelical House Church, persecuting Muslims, 
destroying, capturing the Pancha Lama, prohibiting the Dalai 
Lama from going, having organ programs that if you need a new 
kidney they will execute the person to sell you a new kidney 
and on and on and on, and so we are going to get to the bottom 
of it. We are going to do it. We just are. So be in touch with 
Christine and see if we can come up with it, but again I would 
say to you, and I am talking to everybody else out here, we do 
not want anything that is not true. We do not want anything 
that is not factual. We do not want hearsay. We do not want 
someone once said they told me this, we do not want that. We 
only want facts that you can prove. We do not want to damage 
people's reputations. Do not give us that information. We are 
not looking for anything like that.
    I would also say you should err on the side that if there 
is some question we do not want it. We only want what is 
factual that can be proved that is actual fact. So with that to 
both of you, not that you are not giving us that. Do not take 
it personal. The same with everybody else. That is what we are 
looking for and we are not looking to hurt people's 
reputations. We are not looking to demagogue or be after 
people. We just want to kind of deal with this because again we 
are getting ready to go to the Administration witnesses. We 
want to create jobs. We want to get America moving again.
    I cannot speak for Mr. Serrano, but I support this 
Administration. I probably have one of the highest records of 
support for this Administration in this Congress, and I want 
this Administration and I want President Bush to do well, but I 
want small towns and machinists and mechanics and moms and dads 
and the high tech community to do well, too. I think the one 
thing we have not covered enough in this hearing is the high 
tech industry. Some people say, well, the manufacturers are 
gone but we are now focused on high tech. Now I saw the 
statement the other day that high tech jobs are beginning to go 
overseas. So it is across the board and we stress 
manufacturing, but the problem is also heavily in high tech. 
You want to say something, Mr. Tantillo?
    Mr. Tantillo. Just to comment on that last point. In the 
government's own definition of the high tech manufacturing 
sector, which is the leading edge of supercomputer, 
sophisticated electronics equipment, we had a $13 billion trade 
deficit last year, and so if people want to argue that we 
really do not need the menial basic manufacturing jobs, where 
then are we going to gravitate to if even the leading edge is 
being decimated by China and the rest of the Far East.
    Mr. Wolf. Why do not you submit to the Committee by Monday 
of the following week some information with regard to that you 
can gather and also, as we said, to the NAM to help us with 
regard to the questions of CRS and others? I think we should 
also get that data because many people do operate--I know we 
are los ing jobs in manufacturing, but look at what we are 
getting in high tech and I look in my district going out Route 
66 and out Dulles Access Road and the number of jobs and some 
of the things the Chinese are doing this. The FBI comes before 
this Committee. If you would know what the Chinese government 
is doing with regard to American industry, particularly in the 
high technology, it is stealing the secrets, it is incredible. 
Many people in the high tech industry do not know what is 
actually happening to them. So you put all of these issues, and 
this is not FBI intelligence but you get all those things 
together. But if we could get that material on high tech 
industry we would appreciate it.
    Thank you very much.
                            Thursday, May 22, 2003.

                            U.S. GOVERNMENT


                               WITNESSES

PETER F. ALLGEIER, DEPUTY U.S. TRADE REPRESENTATIVE
GRANT D. ALDONAS, UNDER SECRETARY FOR INTERNATIONAL TRADE
DOUGLAS M. BROWNING, DEPUTY COMMISSIONER OF CUSTOMS AND BORDER 
    PROTECTION
    Mr. Wolf. Next would be the panelists from the 
Administration Mr. Allgeier, Mr. Aldonas and Mr. Browning.
    First witness, Mr. Allgeier first. Then Mr. Aldonas and Mr. 
Browning. If you could limit to 3 minutes, please, and also to 
the same thing with regard to the other witnesses. We would 
like to get you back up because sometimes this is more to make 
the record, to have you perhaps sit down with us, perhaps 
independently and also with some of the people to see what we 
can constructively do. I mean I am operating on the assumption 
that you care deeply and want to do something. So we will 
operate on that basis. This hearing does not end and we all go 
off and do whatever we are going to do. We would like to come 
and get you back independently and also with the other people.
    First witness, and your full statements will appear in the 
record.
    Mr. Allgeier. Okay. Thank you very much, Chairman Wolf and 
Congressman Serrano. We are very pleased to appear here today 
to discuss the Administration's perspectives on U.S. Trade with 
China.
    We have two overall priorities, general priorities. One of 
course is to maximize effective market access for American 
businesses and farmers, ranchers and providers of services and 
their workers, and the second is to ensure that we deal 
effectively with either unfair imports, unfair trade practices 
by China or injurious imports through import surges.
    I would just like to say a few words about the 
implementation of the WTO Accession Agreement by China, some of 
the positive points, some of our principal concerns, and then 
also to talk about the Section 421 that was mentioned in the 
previous testimony.
    With respect to China's implementation progress, the focus 
has been on changing their laws and regulations. They have done 
an enormous amount of that. Secondly, to restructure their 
ministries dealing with trade so that those ministries operate 
in a way that is compatible with a more open market approach to 
the economy, and then third is to train and educate their 
officials, both at the central level, at the local level and 
the State-owned enterprises about the requirements of the WTO 
accession of China and how to implement that.
    China has made the required tariff reductions that are in 
the agreement. They are working on the nontariff barrier and 
they continue to improve their standards regime.
    There also has been a number of the legal steps necessary 
to increase market access in the services area.
    While China has made significant progress in implementing 
its commitments, we have identified a number of concerns. The 
principal concerns that we are working on at this point are 
one, the commitments on agriculture; two, enforcement of 
intellectual property rights; three, their commitments on 
services; and then the fourth is a cross-cutting one, which is 
the issue of transparency in the development of their law and 
in the regulations, and I think that this is particularly 
important to small and medium-sized businesses in the United 
States who do not have the necessary resources to work their 
way through opaque and arbitrary regulatory-legal systems. So 
this is a very important priority for those sorts of 
businesses, as is intellectual property, as you referred to 
just prior to our panel coming up, particularly for smaller, 
high tech industries, the firms that are getting started. If 
they lose one of their patents that can eviscerate the entire 
firm.
    So these are immediate priorities. Let me just say a few 
words then about Section 421. 421 is one of the three measures 
that we have available to deal with injurious imports or unfair 
imports. I leave to Under Secretary Aldonas to discuss the 
element having to do with anti-dumping. We also have the 
special textile safeguard which was referred to in a previous 
panel and Section 421.
    Section 421 has been controversial. There have been two 
cases. In those two cases, there was a very thorough, open, 
transparent investigation. Ultimately the President determined 
that the specific circumstances of those cases did not warrant 
providing relief, but he said very clearly in the wire hanger 
case that he is committed to use this mechanism when the 
appropriate circumstances are there.
    One last comment, I cannot leave unresponded the assertion 
in a previous panel that the USTR gave preferred access to 
foreign officials over U.S. Interests. I have worked at the 
Office of the U.S. Trade Representative for 23 years and we do 
not, I will say categorically, we do not give preferential 
access to foreign officials over U.S. Interests when we make 
any sort of an investigation or when we are conducting our 
business, and I am confident that the record in this case will 
prove that to be true, that the record does prove it to be 
true.
    So, Mr. Chairman, we look forward to working with you and 
other members of the committee to achieve our dual ends, dual 
objectives of maximum market access to American interests but 
effective implementation of the various mechanisms that we have 
to protect against injurious or unfair trade practices.
    Thank you very much.
    [The information follows:]
    [Clerk's note.--Response from USTR is inserted at the end 
of the hearing transcript.]

  [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 


    Mr. Wolf. Mr. Aldonas.
    Mr. Aldonas. Thank you, Mr. Chairman, and first I want to 
say I appreciate the opportunity to appear before you. Your 
interest and your leadership on these issues and trade with 
China is enormously helpful. I think you made the point to us 
as recently as last week at our senior commercial officers 
meeting out in Reston about the importance of the Commerce 
Department and trade officials generally making sure that when 
we are overseas as commercial diplomats that we are carrying 
American values with us.
    We take that responsibility seriously.
    I want to thank the subcommittee for making sure that we 
have the funds available to carry that work forward. I am happy 
to say that we are making progress on that and look forward to 
working with you in the future.
    Rather than go through my testimony in summary form, I just 
thought I might as well get right to the heart of the matter 
with respect to the dumping cases, talk a little bit about what 
the Commerce Department faces and then discuss some of the 
individual cases. I welcome the opportunity to sit down with 
you and Christine to talk through individual cases because I 
know, as a lawyer, you know, that these are very, very complex 
cases of economic litigation.
    I can say categorically that the Secretary and I coming in 
made clear that there was only one rule that was going to apply 
in terms of our Administration of the dumping laws regardless 
of the country. That was we were going the apply the law as 
Congress had written it to the facts as we saw it. It was not 
going to be a question of whether there would be bias or any 
sort of hint, one way or the other, in these cases. We try and 
take the facts as we come to them under the balance Congress 
has struck in the trade law. It is the only way you can 
efficiently manage these cases.
    As to some of the specifics, I just want to try and provide 
a little extra context. For example, one of the prior witnesses 
talked about cast iron pipe fittings, and they remarked on the 
fact that in two instances there were rather low dumping duties 
in the neighborhood of 6.34 and 7.04 percent. But at the same 
time, these are cases against individual companies. While those 
2 companies received low margins, the rest of the companies in 
that case received a 75 percent margin, which does not reflect 
a bias on the Department of Commerce in terms of trying to 
provide additional access, as Peter was referring to, to the 
Chinese or trying to lean their way.
    I have a chart which, to go from the specific to general, 
shows the average margins. I think what you can see is that 
there is both with respect to all dumping--or individual 
company rates in the Chinese cases, the margins are very high 
relative to what you see in dumping cases from other countries.
    Mr. Chairman, this goes to the point you made at the outset 
and throughout the discussion with the other witnesses. The 
fact that you have higher margins in these nonmarket economy 
cases, but particularly China, reflects the very things you 
were describing. They do not have OSHA standards, they do not 
have environmental costs, all those things. That is one of the 
reasons why they end up with a significantly higher margin than 
other countries. But, the pattern is not one--and this is what 
I wanted to illustrate--the pattern is not one where the 
Administration has taken office and somehow there has been a 
drop in the margins with respect to the dumping cases against 
China.
    Let me discuss a couple other specifics that were raised. I 
know, for example, there were allegations that there were 
changes in methodology. More often than not it is a change in 
facts, not a change in the methodology.
    Apple juice is a good example and an unfortunate example in 
my view. At the initial stage of the investigation we took the 
petitioner's perspective and relied on India as the surrogate 
country. The respondents appealed that decision to the Court of 
International Trade. The Court of International Trade rejected 
the use of India based on the facts on the record, and sent us 
back to the drawing board. We came up with two potential 
surrogates, Poland and Turkey, where, with all due respect, 
there was a substantial difference between the GDP per capita 
we are supposed to look at under the statute in term of Poland 
versus Turkey, Turkey being closer to China in term of its 
comparability. And as a consequence, given the court's 
oversight of that particular case, we wanted to make sure that 
our decision was hard wired to the facts on the record and the 
facts pointed us toward Turkey rather than Poland under those 
circumstances.
    The net result was a low margin on the apple juice case. 
Based on our initial view of the case, we thought India 
actually was the better surrogate and India generally the 
surrogate we use in these cases, and that is why even with 
respect to apple juice we wanted to lean in that direction 
first, but on remand from the CIT we had to respond to the 
court's direction.
    Another point to make is about potassium--and this again 
just goes to the level of detail in these cases. There really 
are a number of concerns that we share about false information 
that is provided in the cases with respect to China.
    I know that when you heard from Augustine Tantillo--I 
worked with him many years with respect to transshipment in the 
area of textiles--you do see these things repeatedly coming up 
with our trade with China.
    One thing ought to be clear in the case. The net result was 
still margins of 128 percent and 107 percent with respect to 
the Chinese imports. Separately we have referred when we see 
these cases of fraud, the actions either to Customs Service, 
which has been a real ally in this in terms of their 
investigations, or to the Justice Department. Because at the 
Commerce Department we have the civil authority to administer 
the trade laws, and I appreciate you understand this as a 
lawyer, but the enforcement arm on this is at Customs. When 
people talk about it in terms of transshipment as if it is 
something that is not illegal. In fact, it is Customs fraud and 
Customs does have both civil and criminal investigative 
authority to explore those things when someone has made a 
material false statement with respect to the entry of the goods 
in the United States. Customs shares that responsibility with 
the Department of Justice, which I know is subject to the 
subcommittee's jurisdiction.
    The question, at times, comes down to resources in terms of 
how you grapple with it. If you are a U.S. District attorney 
and you have a series of cases that are confronting your 
community that do involve a felon in possession of a gun 
relative to the complex investigation that is often required in 
these cases, you can see that you might not get immediate 
resources dedicated to the move completed cases. But that is an 
area that I think is worth exploring. How we can better 
cooperate between the Department, the Customs Service and the 
Justice Department to make sure we are doing a better job with 
respect to enforcement issues.
    Let me close by saying we take these issues very seriously 
and we take our responsibilities very seriously. We welcome the 
oversight. We welcome the opportunity to explain with Christine 
in greater detail how some of the cases worked out. Where there 
are issues the one thing I want to assure you, Mr. Chairman, on 
garlic and new shippers review is we are obliged to do what we 
do under the statute. It is something where it is not in our 
discretion to go to cash deposits rather than bonding. I also 
want to make clear is where we have found issues where there 
are problems with these new shippers, we have tried to address 
them.
    Earlier this year I wrote to Commissioner Bonner to make 
sure we develop a task force between Customs and the Commerce 
Department to look specifically at this problem. Customs has 
been great to us in terms of developing techniques specific to 
garlic in terms of looking at mineral traces that reflect the 
soil content so you can determine whether it is the same 
shipper shipping the same garlic. They actually have done a lot 
to be helpful to us in trying to pursue this. I want to be 
clear we try to get these issues in front of the responsible 
party at Customs and Justice as quickly as we can.
    Let me stop there, and I welcome your questions.
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    Mr. Wolf. Mr. Browning.
    Mr. Browning. Thank you, Mr. Chairman. Let me first of all 
thank you, Congressman Serrano, and the members of the 
committee and join my colleagues in thanking you for the 
opportunity to testify before you today.
    As you are aware, preventing terrorists and terrorist 
weapons from entering the United States is and must be the 
priority mission of the Bureau of Customs and Border 
Protection. However, I want to emphasize that this does not 
mean that our traditional missions have ceased to be important 
to us. Our obligations in the area of trade management, 
processing travelers and patrolling the areas between the ports 
of entry are no less critical today.
    At BCBP, as was the case for the Customs Service, we have 
twin objectives, increasing security and at the same time 
facilitating legitimate trade and travel. We must protect the 
American economy as well as the American people. These goals 
can and will be achieved simultaneously and the programs we 
have created and are continuing to advance are designed with 
this express purpose in mind.
    As we develop ways to make our borders more secure against 
terrorism, we can also develop ways to ensure the speedy flow 
of legitimate trade and address noncompliance with our trade 
laws. As part of our commitment to continuing to perform the 
traditional mission for which we are responsible, we help 
protect economic interests by enforcing anti-dumping orders 
issued by the Department of Commerce.
    At Customs and Border Protection we are continuing to 
develop and refine our strategies and tactics to address the 
impact of dumping and subsidized imports through the 
enforcement of these orders.
    BCBP reviews all active anti-dumping cases for data 
quality, trends, patterns of circumvention and noncompliance, 
and we develop collaborative strategies to address this 
noncompliance. We develop instruction for our field officers 
and we commence focused enforcement actions that are national 
in scope in response to identified or potential pattern of 
noncompliance. These enforcement actions are designed to focus 
our field resources in an effective and efficient manner to 
address this noncompliance.
    I want to emphasize that BCBP continues to devote 
substantial resources to the enforcement of anti-dumping 
orders. As you are aware and as has been mentioned by my 
colleague Mr. Aldonas, an important part of the enforcement of 
anti-dumping orders relates to the investigation of suspected 
related fraud. The fraud investigations branch, formerly part 
of the U.S. Customs Service, is now by virtue of the creation 
of the Department of Homeland Security part of the Bureau of 
Immigration and Customs Enforcement. But it remains responsible 
for all matters related to trade fraud investigations stemming 
from BCBP enforcement activities at our ports of entry.
    During a 2002 joint investigation by the Food and Drug 
Administration, you may be aware of this, and the legacy 
Customs Service into a widespread scheme to evade payment of 
U.S. Anti-dumping duties, bulk shipments of honey were found to 
be contaminated with a chemical antibody. This antibody is used 
only to treat life threatening infections in humans when other 
alternatives are not available. Criminal investigators assigned 
to our attache offices played a critical role in pursuing 
foreign leads in this anti-dumping investigation and they 
continue to be involved in that investigation.
    I want to commend the Department of Commerce and the 
International Trade Commission for the vital role that they 
play in assisting us in our anti-dumping and countervailing 
duty investigations. Under Secretary Aldonas, as has been 
mentioned, he has initiated a multiagency task force to address 
matters related to the fraudulent evasion of anti-dumping 
duties. The Customs and Border Protection staff attended those 
meetings, opening on Tuesday of this week, and we look forward 
to participating in this effort. It is through this type of 
collaboration with other involved agencies that we believe will 
enable us to assure the best possible administration of this 
problem, which we remain committed to.
    Thank you, Mr. Chairman.
    Mr. Wolf. Thank you very much. I thank all of you. They say 
there will be a vote in 15 minutes so we will try to move 
quickly. Maybe we can finish, maybe not.
    Mr. Allgeier, if you can get us for the record all the 
meetings that you have had on the case that that gentleman was 
referring to. Those you met with his side, those you met with 
the Chinese, dates, times, places, law firms, Chinese 
officials, everyone and anyone, time, dates, and all going back 
to the very, very beginning. If you can get to the committee by 
a week from maybe Tuesday after the Tuesday after the Memorial 
Day, so we have it in time as we begin to look at that. And the 
gentleman--I do not know if he is still here--who made that 
case, if you can give us the dates and the times and the places 
that you made the comment with regard to you thought they had 
greater, tell us why, tell us so we can kind of compare the 
two.
    Secondly, to all of you just kind of a yes or no with a 
sentence, did you feel the pain here by some of the witnesses 
that came before you, I mean was it--did you--I mean what are 
your reactions?
    Mr. Aldonas. If I could, I would have to say it is similar 
to things I have been hearing as I have gone around the 
country. Mr. Chairman, we at the President's behest, have 
launched a manufacturing review at the Commerce Department 
which the Secretary has made me responsible for, and we put 
together field hearings across the country to meet with 
manufacturers.
    I just came back most recently from a roundtable in 
Rockford, Illinois and it is a consistent story, going back to 
Frank Vargo's testimony. At the outset, even though China is 
not the whole issue in terms of our manufacturing 
competitiveness, there is no doubt it is a significant factor. 
There is no doubt that an active enforcement effort of the 
trade laws is due with respect to the Chinese. I think that has 
been the case, but we are always interested in doing more. But 
it is a pain absolutely.
    Mr. Wolf. I would like to request that Secretary Evans and 
you meet several weeks after the recess with four or five of 
these industries.
    Mr. Aldonas. Sure, happy to do that.
    Mr. Wolf. Set up that meeting so he can hear, I think 
Secretary Evans is a good person and good man, and I would like 
him to hear some of this. I know you will go back and 
articulate it and this is a cinch. Again, this is not a human 
rights issue, human rights hearing, but the administration did 
not raise a resolution, a petition as they have in the past in 
Geneva on human rights because they said there had been some 
improvements in China.
    Well, not so. As the author of ``The Religious 
Freedom,''the commission report that came out Tuesday, just felt on 
China it is not to the better, it is worse. The country by country 
report that the Department puts out is horrible. There was some 
political involvement here. It is a moral issue, it is a business 
issue, trade issue, but it is a moral question and you cannot talk one 
way and do something different. So I think that is why there is a sense 
of suspicion and a sense of--I mean, if you are in Falun Gong you are 
out of the picture. They are just crushing them like that. So you can 
understand why there may very well be.
    What would you recommend to the witnesses that have 
appeared here today? All three of you, what would you recommend 
to them.
    Mr. Allgeier. Well, first of all, with respect to 421.
    Mr. Wolf. With respect to their concerns that have been 
raised. I do not know if you were here the whole time. What 
would you say to them? I mean, what can they do? We are going 
to ask you later about this. What do you recommend to them?
    Mr. Allgeier. I recommend that they and others like them, 
as they perceive problems, either problems of access or 
problems of dealing with injurious imports, come to us as early 
as possible and we are prepared to look forward to working with 
them to solve whatever particular problem it is. If it is an 
enforcement of their intellectual property rights, if they have 
got a specific infringement in China, we will work with an 
individual company to go after that particular problem.
    Mr. Wolf. The problem there--and I appreciate that and I 
think that is a fair statement. When Windows 95 was available 
on the streets of Beijing before it was available on the 
streets of Washington, D.C., nothing was done.
    Mr. Allgeier. We push and continue to push very, very hard 
on this.
    Mr. Wolf. They did not even tell us about SARS. If you read 
today's paper--did you read today's paper?
    Mr. Allgeier. Yeah.
    Mr. Wolf. Did you read the point about SARS?
    Mr. Allgeier. Yeah.
    Mr. Wolf. Did you read they did not even tell us about 
SARS? I mean they arrested a Catholic bishop for giving holy 
communion to Congressman Chris Smith. So it is like an 
integrity thing. It is like we are not just--it was just not 
dealing--I mean, you should pull the shades from your eyes and 
see. He who is faithful in little things will be faithful in 
big things. If you are not faithful in little things, the more 
the likelihood you would be faithful in big things, and big 
things are dollars and greed, so that is what they are 
concerned about. And so we see SARS. We see human rights. We 
see they sold weapons. This is not a hearing to get into that, 
but they sold weapons to Iraq. You will probably find that 
American military who died in the effort, and I support the 
President's efforts, were probably killed by Chinese weapons.
    You remember one night as we were all watching CNN and 
there was a missile that hit a shopping center in Kuwait, it 
had Chinese markings. There are things that I cannot talk about 
because they are secure. So when we look at the whole picture, 
if we were just a little thing, we would say, well, but we look 
at that, we look at this, we look at this, we look at this, it 
took Customs, and you were not there, Mr. Browning, maybe you 
were, maybe you were not, it took Customs years to get into 
Beijing Prison No. 1 and by the time they got in we gave them 
everything, the Chinese cleared the whole thing out.
    Mr. Allgeier. That is why we put so much emphasis on these 
elements of transparency and due process in the commercial 
area, not that that is going to solve all the problems, but 
that is an important part of trying to open up that society in 
the little slice of it that we are working on.
    Mr. Wolf. Why do you think the trade deficit with China is 
$103 billion today?
    Mr. Allgeier. I think it is primarily because of 
macroeconomic factors.
    Mr. Wolf. There is nothing we could have done or can do to 
deal with it?
    Mr. Allgeier. I think we certainly do everything we can and 
should and we should intensify our efforts to make sure we have 
maximum access in those areas where we have comparative 
advantage, but we still do operate in an overall global economy 
where different growth rates of economies make a huge 
difference in terms of their receptivity to imports.
    Mr. Wolf. But do you take into all the consideration the 
issues we have dealt with from slave labor to all the other--
what does that mean? Does that mean anything?
    Mr. Allgeier. Yes, it means an awful lot.
    Mr. Wolf. The artificial flowers that are made in gulags. 
Does that mean anything from a trade issue? Do we not discuss 
that? Does that have a factor we look at? Do we plug that in?
    Mr. Allgeier. No, that would be a factor we look at and we 
do not want to be supporting unfair trade practices, not just 
unfair trade practices at the border and the pricing and so 
forth, but the conditions under which the products are 
manufactured.
    Mr. Wolf. But in essence we really are. I know you are not 
knowingly doing it, and I do not know you but I am sure you are 
a good person.
    I think I have made my point. I guess I would think you 
would be troubled that your citizens--we are all public 
servants and we serve. I would think you would be troubled that 
the people that you are supposed to serve or that I am supposed 
to serve are losing confidence, if not have lost it, are losing 
it. Maybe today can be a new book, new beginning, but they have 
lost confidence, and I think that that should be troubling to 
Mr. Zoellick, who we have been supportive of in this committee. 
We actually added more money into your budget last year above 
what the administration asked for.
    Mr. Allgeier. I am very aware of that, and we are very, 
very appreciative of that.
    Mr. Wolf. I say well, now, we did that, and now one 
specific question.
    Mr. Browning. Mr. Chairman, if I might, I want to clarify 
something, if I could with your permission, sir.
    Mr. Wolf. Sure.
    Mr. Browning. Actually I was involved in the initial 
negotiation of the forced labor agreements with China.
    Mr. Wolf. You remember the socks that I brought back.
    Mr. Browning. I do remember them.
    Mr. Wolf. How dong did it take for the Chinese to let you 
in Beijing prison, roughly, just for the record?
    Mr. Browning. Far too long, sir. I think it took at least a 
year for us to get the diplomatic status for our folks first of 
all to be placed in Beijing and almost a year andand half later 
before we got the first visit.
    Mr. Wolf. When you got in what did you see?
    Mr. Browning. Nothing.
    Mr. Wolf. Nothing. I have the photos. I have video. We saw 
everything. I think the Chinese thought I was a tourist. I took 
videos. And so they would not let you in. They would not let 
you in until they cleaned it out, and you know those people 
that are making the socks and there were golfers on the socks, 
and I said to them, Do you have a lot of golf courses here. No, 
we do not play golf. I said, well, how come you got golfers 
embroidered on this sock? They were all Tiananmen Square 
demonstrators. Remember the guy before the tank. They were all 
in this one room, they were all, and many of them were still 
there. Now they are probably doing that in a different way.
    Is Harry Wu still here? In 30 seconds what is life like in 
a slave labor camp? Just 30 seconds.
    Mr. Wu. According to Chinese regulation, everybody forced 
to labor and----
    Mr. Wolf. How long were you in a slave labor camp?
    Mr. Wu. 19 years.
    Mr. Wolf. 19 years. What time did you get up in the 
morning?
    Mr. Wu. In the morning when the sun rise, go to the field.
    Mr. Wolf. What time did you go to bed at night?
    Mr. Wu. Come back when the sun setting down.
    Mr. Wolf. And 5 days a week, 6 days a week, 7 days a week?
    Mr. Wu. 30 days a month.
    Mr. Wolf. 30 days a month. Tell us in 15 seconds, 15, 
because I saw Harry and he triggered it. I did not know Harry 
was coming, but I am glad Harry is here. Tell us the story I 
read in your first book where the tractor blade cuts the ground 
and you see the snakes and you reach in and grab the snakes. 
Just tell them the story, 30 seconds.
    Mr. Wu. Your food is related to your work performance.
    Mr. Wolf. Food.
    Mr. Wu. If your work performance not good enough, they 
reduce your food ration.
    Mr. Wolf. What did you see when you saw the snakes?
    Mr. Wu. With that we have taking all kinds of food, 
including mouse, snake, because it is good food for our body.
    Mr. Wolf. What did you do with the snakes when you saw 
them?
    Mr. Wu. I ate it.
    Mr. Wolf. Now, I do not think these guys, this young lady 
here from Peru, your people are not eating snakes and are not 
doing that. So this is what I am talking about, to look at it 
in a full range. I mean both of you, all three ought to read 
Harry's books. The point is what is triggered. It is 2\1/2\ 
years, so they are not going to tell you the truth. We may, 
there may very well be somebody in this audience, either your 
wife or your husband or your son or your daughter or your 
grandmother or your grandfather or your mother or father, that 
dies from SARS because the Chinese did not really shut this 
thing down and go out and open it up. That is what we are up to 
and that is their frustrations.
    You all are good guys, and I stipulate that. You are, but I 
think we really have to make sure and I am a free trader. I 
voted for fast track. I voted for fast track without the 
administration even asking me to vote for fast track. I added 
$2 million to your budget above what the administration asked 
for. So we need you to come alongside us and be their advocates 
and help us out.
    On the 421, Section 421 added to the Trade Act of 1974 by 
U.S.-China relations established----
    Mr. Aldonas. Mr. Chairman, before you do that, one of the 
things I would like to come and talk to you about is how we can 
do a better job precisely of that because we want to make sure 
the door is open for folks when they have issues in China, 
whether it is because they want to get into the market or 
whether they are facing unfair competition, and we have been 
doing some thinking about some new models that I think would be 
worth coming up and chatting with you about. I worry 
particularly for small and medium size companies that we have 
been hearing from more and more. From the manufacturing side it 
is transactional costs. The big guys know where to find you and 
it is much harder for small and medium size guys. I think that 
is where we need to do the better job and better thinking, and 
we have been thinking about using some tools that we used in 
the former Soviet Union and materials of relatively low cost 
trying to improve the level of communication so that we hear 
about these things, including complaints about what they are 
facing, if it is slave labor, whatever it might be, so we get a 
better intake mechanism.
    Mr. Wolf. I appreciate that. Do you both agree with him on 
this?
    Mr. Allgeier. Yes.
    Mr. Browning. Yes.
    Mr. Wolf. I think we are not going the ask you the rest of 
the questions. I do not want to be confrontational, and I have 
never used this position to browbeat a witness or go after 
somebody. But I feel strongly and I figure attitude is a good 
attitude and what I think we ought to do is see what we can do, 
meet with some of the groups. I do not mean to rewrite the 
trade laws and do stuff, but see what we can do and maybe we 
all change and do different things and find out. So with that 
attitude if you both agree and you agree, I am not going to go 
through the whole line of questions.
    Mr. Allgeier. We certainly would welcome the opportunity to 
meet with you and our colleagues and to work on these issues.
    Mr. Browning. We fully concur with that. The other piece, 
Mr. Chairman, is we have maintained a fairly active dialogue 
with the trade. I myself met with folks like Frank Vargo, who 
go through some of these issues and we have found him a great 
source of information for our enforcement mission, so we 
welcome this opportunity.
    Mr. Wolf. We will do that. I think I am not going to have 
any additional questions because I think we would not--I am not 
trying to put you in a tough spot, and I do not think we would 
serve any purpose and I think your attitude is appropriate. 
With that, I just recognize Mr. Serrano.
    Mr. Serrano. Mr. Chairman, I will be brief. Just an 
observation and you spoke to it in terms of how I feel about 
it.
    [Clerk's note.--Subsequent to the hearing, the following 
information was provided to the Committee:]

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    Mr. Serrano. You know, as the Ranking Member here, I did 
not select the witnesses today. It is important to note that, 
because to a person the witnesses who came before us today 
indicated a concern of dismay and pain with the way our 
government is reacting to their needs. Had I selected them, one 
could say that I stacked the meeting. And certainly, at the 
risk of stereotyping, which I dislike tremendously, they are 
not big-city leftist liberals who are coming here to bash the 
administration. But they all had concerns about their 
government not responding. So, at the minimum, what should come 
out of today's hearing is that those of you who are part of 
what we do here try to respond, especially in support of the 
efforts of Members like myself who support trade with China, 
but who never support trade with China either for it to do a 
number on the Chinese people or to do a number on the American 
people, but certainly to promote goodwill and good 
understanding and the flow of capital to both communities.
    So I would hope that you know that this meeting was not 
stacked, and these are not all my cousins who spoke. I mean, 
there are other issues we could discuss I don't like about this 
administration. This one I support the administration on. And I 
would just hope that you would understand that these folks were 
legit in their comments that, hey, our government is not 
responding to our needs. And I thank you for you support.
    And always, as the Chairman said, keep in mind that the 
time that he has been chairman and the time that I have been 
Ranking with him usually--I can't believe I am saying this 
being who I was and how I got started in politics--that what 
most agencies in this bill ask for, we give them more, hoping 
that everybody understands what their role should be. Thank 
you.
    Mr. Wolf. Thank you, Mr. Serrano.
    Mr. Mollohan.
    Mr. Mollohan. Thank you, Mr. Chairman.
    Mr. Chairman, since I am at the other end of this process, 
on the structural, some structural questions with regard to our 
trade structure, if I might. Quickly.
    Mr. Browning, the inspector general of the Department of 
Homeland Security is completing a report that reportedly states 
that the U.S. Customs Service has failed to collect millions of 
dollars under the Byrd amendment, and I think that the number 
we are getting is that it has failed to collect as much as $90 
million. U.S. law requires the Federal Government to collect 
that.
    I notice in some of your testimony before you talked about 
dealing with noncompliance. To the extent that the agency is 
not complying with the law, I would like for you to speak to 
that, and understanding that if the companies who are entitled 
to this money and the communities were not raising this issue, 
would we even know that Customs was not collecting this money 
as it is supposed to do under cases, let alone redistributing 
where it is supposed to under the Byrd amendment?
    Mr. Browning. I understand.
    First of all, let me say that we have, in fact, read the 
IG's report. In fact, we are working very closely with them. 
Commissioner Bonner has given me a clear mandate that we are to 
address all of the shortfalls from both the management 
standpoint as well as the collections that are due and need to 
be deposited into this program.
    We undertook this program with perhaps less of an 
investment of resources than we should have. We intend to 
correct that before the end of this year. I would remind you 
that at this point in time, over the 2 years of disbursements 
under the Byrd amendment, we have disbursed roughly somewhere 
in the neighborhood of $550 million. The reported shortfall or 
error in payments is a rate somewhere in the range of 5.5 
percent of that amount, absolutely not acceptable.
    Mr. Mollohan. Well, that wouldn't add up. I mean, if you 
have distributed 500 million, and we are talking about 90 
million not being collected, that is about one-sixth, isn't it?
    Mr. Browning. Let me actually go to that piece, because the 
piece I was speaking of, there are several shortfalls in our 
management of the program that was identified. Again, I agree 
with all of the findings, as does Commissioner Bonner, and that 
is why we have made this a priority activity of the 
organization to address that. There are some $90 million in 
unliquidated payments and uncollected payments. We are in the 
process right now of working with the Commerce Department to 
make sure that instructions have been issued for liquidation in 
each of these cases. That is going well. We are in the process 
of determining, to the extent that we can, whether there is 
sufficient bonds to cover that. All of these things are things 
that we are going to undertake in terms of trying to manage 
that program better to ensure that the collections are made and 
deposited into the appropriate accounts.
    Mr. Mollohan. And time frame. Did I hear you say you 
weren't going to have this fixed until the end of the year?
    Mr. Browning. We have a working group that is under way 
right now that is addressing all of the various pieces of the 
IG report.
    Mr. Mollohan. But when do you think we will have this 
addressed adequately that we are able to perform this 
responsibility under the requirements of the Byrd amendment?
    Mr. Browning. In terms of the overpayments, we are going 
out to try to collect the overpayments starting June 1 of this 
year. With respect to the uncollected payments, we are doing 
that right now. I hope to have this entire process completed by 
the end of this year, December of 2003.
    One thing I need to remind. In some respects, the 
uncollected amounts represent a party's ability to exercise a 
statutory right to challenge our determinations, and so in that 
instance some of these things are tied up in litigation, some 
are tied up in our protest process. But to the extent that they 
are not, and it is simply a collection responsibility, we will 
move expeditiously to correct that problem.
    Mr. Mollohan. Fair enough. And I appreciate your response.
    Mr. Allgeier, on February 3rd, President Bush recommended 
repeal of the Continued Dumping and Subsidy Offset Act. I think 
that was in his budget submission to the Congress and the 
appropriation committee is looking at that. It is a lot of 
money. On May the 6th, I understand that in a statement 
regarding the Byrd amendment before an WTO arbitrator, a 
statement was made, quote: Unlike other elements of the budget, 
the repeal of the Byrd amendment is not tied to the end of the 
fiscal year, and, in particular, it is not intended to be 
included in the appropriation acts, end ofquote.
    That, I think, flatly contradicts the budget's request 
submission. And if the administration's position is that the 
Byrd amendment should not be repealed, why has the 
Administration--why did you ask for it to be repealed without 
submission? Why have you not submitted an amended budget 
request reversing that?
    Mr. Allgeier. I am not sure I fully understand the 
question. In terms of----
    Mr. Mollohan. I think it is your quote; is it not? I mean, 
as I understand it, it is.
    Mr. Aldonas. Maybe I could help you, Congressman. Basically 
in the budget document what they were doing was taking a look 
at all the individual items where they thought there might be 
changes. And, of course, in any budget they were trying to 
reflect what their expectations were. And I think from OMB's 
perspective, the idea at the time that we had lost a WTO case 
even on appeal with respect to the Byrd amendment meant that--
--
    Mr. Mollohan. Well, you hadn't lost on appeal.
    Mr. Aldonas. Actually by the time the budget came out, we 
had. But the point, Mr. Mollohan, is that the statement made in 
Geneva, at least as I understand it, is a statement that is 
absolutely accurate and fundamental from our perspective, which 
is Congress has to take the action here.
    Mr. Mollohan. Wait. Obviously Congress has to take the 
action. Congress took the action. It passed the Byrd amendment. 
You have requested in the budget submission a repeal of the 
Byrd amendment. My question is if you don't want it repealed, 
you need to file an amended budget request reversing that 
request. And so if your position is that the Byrd amendment 
should not be repealed, can we expect you to file that 
amendment?
    Mr. Aldonas. Mr. Mollohan, there is no administration 
position with respect to whether we are going to give you a 
different budget submission. But I want to go back to the 
statement, because what the statement was saying was that this 
is an authorization matter, not an appropriations measure. So 
with respect to the end of the fiscal year, Congress's action 
isn't dependent on the end of this particular fiscal year.
    Mr. Mollohan. I understand what you want to go to, but what 
I want to go to is if it is your position that the Byrd 
amendment should remain and should be reinstated, you need to 
submit a budget request to that effect. And can we expect you 
to do that?
    Mr. Aldonas. But what I want to be clear about, Mr. 
Mollohan, is the statement that was made in Geneva was not----
    Mr. Mollohan. Yes, sir.
    Mr. Aldonas [continuing]. A statement----
    Mr. Mollohan. Excuse me.
    Mr. Aldonas [continuing]. To say that we were, in fact, not 
going to comply with the WTO obligations.
    Mr. Mollohan. Then let me get it clear on the record, sir. 
Do you not--do you support your budget resolution asking for 
repeal of the Byrd amendment?
    Mr. Aldonas. That is the President's budget.
    Mr. Mollohan. And you do not intend to file an amended 
budget request to reverse that position?
    Mr. Aldonas. Not that I know of. But I am happy to go back 
and talk with the folks at OMB.
    Mr. Mollohan. One final question. There is a lot of back 
and forth, and this is so crucially important to the steel 
industry right now. With regard to the loan guarantee program 
the administration is in communication with several of the 
steel companies that operate in my congressional district that 
are in the process of applying for and actually being granted 
on a contingent basis a loan guarantee. And there is another 
company that--Wharton Steel--that is in bankruptcy now, and I 
cannot imagine it going forward with financing without this 
guarantee.
    Mr. Aldonas. That is my understanding as well.
    Mr. Mollohan. In the budget request you have asked for a 
rescission of the 2003 money for the steel loan guarantee 
program. You have also not asked for any money for the steel 
loan guarantee program for 2004, and, consequently, you are not 
supporting the loan guarantee program. If you are serious about 
supporting the loan guarantee program, as, believe me, when 
they are listening to you talking to them on the telephone back 
there, they think you are serious about it, you are going to 
have to do three things. You are going to have to reverse your 
recommendation to rescind the remaining funds contained in the 
loan guarantee program, the 2003. You are going to have to 
request a reauthorization of the program for another 2 years. 
And you are going to have to make certain that it is fully 
funded for use by the U.S. Steel companies by an 2004 
appropriation, which is likewise going to require a submission 
of an amended budget request.
    And do you intend to submit an amended budget request with 
regard to these three things?
    Mr. Aldonas. I will ask OMB about that, but I know that you 
had discussions with Secretary Evans with respect to this 
particular issue.
    Mr. Mollohan. Very good discussions.
    Mr. Aldonas. And we recognize it is a difficulty, because 
the authorization will still be there even though there is a 
sunset provision attached to the steel loan guarantee program. 
It is true that the funding will not be there unless there is a 
technical fix to that.
    Mr. Wolf. We will get that for the record. We are down to 5 
minutes.
    Mr. Wolf. Mr. Sabo, do you have a question, or do you want 
to submit them for the record? Do you want to come back? 
Whatever you want to do.
    Mr. Sabo. I don't want to come back. Let me just make this 
comment. There is sort of this conventional elitist wisdom that 
trade is all good regardless of how it works in this country 
that permeates to a certain degree both parties. But when we 
operate with over a $100 billion deficit with China in contrast 
to Europe, and there is sort of a ``who cares'' attitude by 
folks who run these programs, something is just haywire. It is 
the same international trade laws that apply to us and to 
Europe, and somehow their self-interest survives in a fashion 
that ours doesn't. And I don't understand this view that is 
sort of this is okay. You know. It is something--I don't know 
the intricacies of the workings of these laws.
    Something is obviously screwed up in a major fashion with 
how we are conducting trade policy when we have that kind of 
trade deficit and the rest of the world doesn't. You know, it 
would appear to some of us that our goal is not to have bigger 
markets, but to have a bigger pool of low-paid, poorly served 
workers in some country to get access to, not markets.
    So I don't have a question. I just think that it is screwed 
up in a royal fashion, and at some point I would like to see 
some Administration take it seriously.
    Mr. Aldonas. Could I take 1 second, Mr. Chairman?
    Mr. Wolf. We are out of time. Go ahead.
    Mr. Aldonas. Grew up in south Minneapolis. Went to 
Roosevelt High. You were my Congressman. And most of my friends 
are still working at auto jobs over in that Ford plant across 
the Ford Bridge in St. Paul. And I understand what you are 
saying.
    Mr. Wolf. We are down to 3 minutes. We will just submit 
additional questions for the record.
    Mr. Wolf. We are going to adjourn. Thank you all very much.

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