[Senate Hearing 108-438]
[From the U.S. Government Publishing Office]





                   THE U.S. NATIONAL EXPORT STRATEGY

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

                                HEARING

                               before the

                              COMMITTEE ON
                   BANKING,HOUSING,AND URBAN AFFAIRS
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                                   ON

         THE U.S. NATIONAL EXPORT STRATEGY AND THE ROLE OF THE
                 TRADE PROMOTION COORDINATING COMMITTEE

                               __________

                              MAY 21, 2003

                               __________

  Printed for the use of the Committee on Banking, Housing, and Urban 
                                Affairs



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                            WASHINGTON : 2003
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            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                  RICHARD C. SHELBY, Alabama, Chairman

ROBERT F. BENNETT, Utah              PAUL S. SARBANES, Maryland
WAYNE ALLARD, Colorado               CHRISTOPHER J. DODD, Connecticut
MICHAEL B. ENZI, Wyoming             TIM JOHNSON, South Dakota
CHUCK HAGEL, Nebraska                JACK REED, Rhode Island
RICK SANTORUM, Pennsylvania          CHARLES E. SCHUMER, New York
JIM BUNNING, Kentucky                EVAN BAYH, Indiana
MIKE CRAPO, Idaho                    ZELL MILLER, Georgia
JOHN E. SUNUNU, New Hampshire        THOMAS R. CARPER, Delaware
ELIZABETH DOLE, North Carolina       DEBBIE STABENOW, Michigan
LINCOLN D. CHAFEE, Rhode Island      JON S. CORZINE, New Jersey

             Kathleen L. Casey, Staff Director and Counsel

     Steven B. Harris, Democratic Staff Director and Chief Counsel

                    Skip Fisher, Professional Staff

             Martin J. Gruenberg, Democratic Senior Counsel

   Joseph R. Kolinski, Chief Clerk and Computer Systems Administrator

                       George E. Whittle, Editor

                                  (ii)
?

                            C O N T E N T S

1                              ----------                              

                        WEDNESDAY, MAY 21, 2003

                                                                   Page

Opening statement of Chairman Shelby.............................     1

Opening statements, comments, or prepared statements of:
    Senator Crapo................................................     8
    Senator Dole.................................................    12
        Prepared statement.......................................    32
    Senator Sarbanes.............................................    16
    Senator Carper...............................................    24

                               WITNESSES

Donald L. Evans, Secretary, U.S. Department of Commerce..........     3
    Prepared statement...........................................    32

Philip Merrill, President and Chairman, The Export-Import Bank of 
  the United States..............................................     5
    Prepared statement...........................................    36

Peter S. Watson, President and Chief Executive Officer, Overseas 
  Private Investment Corporation.................................     9
    Prepared statement...........................................    39

Hector V. Barreto, Jr., Administrator, U.S. Small Business 
  Administration.................................................    21
    Prepared statement...........................................    41
    Response to written question of Senator Miller...............    48

Barbara R. Bradford, Deputy Director, U.S. Trade and Development 
  Agency.........................................................    22
    Prepared statement...........................................    42

              Additional Material Supplied for the Record

The 2003 National Export Strategy Report.........................    49

                                 (iii)

 
                   THE U.S. NATIONAL EXPORT STRATEGY

                              ----------                              


                        WEDNESDAY, MAY 21, 2003

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.

    The Committee met at 10:15 a.m. in room SD-538 of the 
Dirksen Senate Office Building, Senator Richard C. Shelby 
(Chairman of the Committee) presiding.

        OPENING STATEMENT OF CHAIRMAN RICHARD C. SHELBY

    Chairman Shelby. The hearing will come to order.
    I would like to begin this morning's hearing on the U.S. 
National Export Strategy and the role of the Trade Promotion 
Coordinating Committee by quoting from Title XII, Section 
635(i) of the U.S. Code, which regulates the U.S. Export-Import 
Bank:

    ``The Congress finds that Tied Aid and partially Untied Aid 
credits offered by other countries are a predatory method of 
financing exports because of their market-distorting effects . 
. .''
    ``This and additional like findings are immediately 
followed by this mandate:''
    ``The Bank shall establish a Tied Aid credit program under 
which grants shall be made from funds available in the Tied Aid 
Credit Fund established under Subsection (c) of this Section . 
. .''

    This seems like a contradiction. The seeming incongruity 
present in the law illuminates the continuing challenge of 
achieving the elimination of trade barriers that has been a 
fundamental U.S. foreign and economic policy goal since at 
least the 1934 Trade Act, a goal that increased in importance 
in the wake of the devastation of World War II. Despite our 
evolution to the age of globalization, however, the goal 
remains elusive. I am reminded of the situation involving the 
American commercial shipbuilding industry. When President 
Reagan unilaterally terminated domestic shipbuilding subsidies, 
it was anticipated that the rest of the world would follow the 
United States' lead and would act likewise. The result, we soon 
learned, was the exact opposite. Foreign shipbuilding subsidies 
continued and American commercial shipbuilding industry was 
seriously and possibly irreparably weakened by its inability to 
compete for a diminishing market on a demonstrably uneven 
playing field.
    The lesson is clear. The United States has a vital role to 
play in supporting American business by ensuring a level 
playing field in international trade. That is the 
responsibility, as is evident by the size of today's panel, of 
a number of U.S. Government agencies, chief among them the 
Office of the U.S. Trade Representative, through his role in 
the negotiation of agreements, and the Department of Commerce. 
Our purpose here today, however, is to focus on the role of the 
Government in helping American business to export its products, 
both goods and services, through financial and technical 
assistance, through education, and through the provision of 
business-essential information on foreign markets.
    While we have come a long way under the World Trade 
Organization and through a growing number of bilateral trade 
agreements--indeed, the President recently signed the U.S.-
Singapore Free Trade Agreement, and I anticipate similar 
treatment of the Chilean agreement--in reducing tariffs and 
some nontariff barriers to free trade, the job is far from 
complete.
    The Trade Promotion Coordinating Committee was created--and 
codified in law--due in no small part to the efforts of my 
colleague, the Ranking Member, Senator Sarbanes--with the 
seemingly incongruous mission illustrated earlier by my 
reference to the statutory language establishing the Tied Aid 
Credit Fund. It exists to offer export support at the same time 
we retain as a goal the elimination, on a global basis, of the 
kinds of export support activities common among major 
industrialized countries. Now financial and technical 
assistance is only part of what TPCC does. It also plays a very 
important role in helping American companies identify 
opportunities, and helps educate them on how to maneuver the 
winding roads involved in international commerce. There is no 
denying, though, that the export financing mission of some of 
the agencies represented here today, exist, at least in part, 
because of our inability to date to eliminate export subsidies 
on a global level.
    We have had successes, though. The Japanese agreement to 
end its policy of tying aid to the initial design and 
engineering stage of major capital projects, for example, 
stands out as significant progress given that country's 
historical use of Tied Aid. But much more work remains to be 
done. In fact, in the 12 years since the OECD agreement 
restricting Tied Aid, we have seen not only a continuation of 
this, but also the emergence of new methods designed to 
circumvent the intent of negotiations aimed at trade- 
distorting practices.
    By way of example, we have, as the TPCC's new export 
strategy report points out, the task of dealing with the 
phenomenon of ``market windows,'' the use of ostensibly private 
institutions that are closely linked to the government or are, 
in fact, little more than front companies for the government in 
question to finance deals.
    These are all issues to be discussed, and I hope the 
witnesses will address them during today's proceedings. In all, 
the TPCC has to be considered a success. As much as some of us 
would like to see business free to compete in the international 
arena without undue government involvement, the reality remains 
far different. The hands of American business cannot be tied 
while its foreign competitors exploit the benefits available 
courtesy of their respective governments. As important, the 
responsibility of the TPCC to coordinate the export-related 
efforts of as many as 20 Government agencies, so as to be a 
more efficient tool, should not be overlooked. It is a daunting 
task, but one on which the Coordinating Committee has made 
significant progress. The agencies are working much more 
closely together than ever before, and are orienting their 
efforts toward the needs of business much more efficiently than 
ever before.
    With us today to discuss the National Export Strategy and 
the progress that has been made in the past year are Secretary 
of Commerce Donald Evans; Philip Merrill, President of the 
Export-Import Bank; Hector Barreto, Administrator of the Small 
Business Administration; Barbara Bradford, Deputy Director of 
the Trade and Development Agency; and Peter Watson, President 
of the Oversees Private Investment Corporation.
    We welcome all of you to the hearing. Your written 
testimony will be made part of the record in its entirety, and 
we will start with Secretary Evans. We know you have some time 
constraints, and we will go as fast as we can. We appreciate 
your appearing here today.

                  STATEMENT OF DONALD L. EVANS

                           SECRETARY

                  U.S. DEPARTMENT OF COMMERCE

    Secretary Evans. Thank you, Mr. Chairman, and it is always 
a pleasure to be here with you. I appreciate it very, very 
much.
    As you said, I would like to have my written statement 
submitted for the record.
    Chairman Shelby. Without objection, all of your written 
statements will be made part of the hearing record.
    Secretary Evans. Thank you. I appreciate the opportunity to 
be here to discuss the National Export Strategy of this 
country.
    One year ago, I came before you to lay out a National 
Export Strategy, the Administration's plan to improve our trade 
promotion programs. The 60 recommendations in that report were 
based on the express needs of our customers. I also told you I 
wanted to use the Trade Promotion Coordinating Committee, the 
TPCC, as a management tool to monitor our progress and to spur 
change and cooperation. This is an example of what the 
President's management agenda is all about.
    My message to you today is simple: Thanks in large part to 
the support of this Committee and the outstanding leadership of 
my colleagues here today, the TPCC is a proactive, goal-
oriented vehicle for delivering export services to American 
companies.
    By expanding exports, we promote economic growth, new and 
good-paying jobs, and higher standards of living, here and with 
our trading partners throughout the world. We are on track with 
implementing these recommendations. And we are becoming more 
forward-thinking when it comes to major project procurement.
    We are creating a new culture of customer service among the 
agencies, and we are strengthening our training and partnership 
efforts. In the process, the TPCC has become an important 
resource and advocate for the U.S. business community. For 
example, our agencies and embassies were flooded with calls 
about the Administration's reconstruction plans in Iraq, so the 
TPCC hosted several interagency meetings that culminated in a 
briefing for United States trade associations. This was 
followed by a briefing for Coalition partners at the State 
Department.
    In early June, we plan an event focused on sanctions. We 
are working with the TPCC agencies to identify and eliminate 
obstacles to rebuilding the Iraq economy. We took on similar 
efforts for our central and southeast European Coalition 
partners.
    After I traveled there in March, we brought the agencies 
together to deliver initiatives to help stimulate U.S. trade 
and investment in that region. To monitor new opportunities, 
the TPCC meets about every 6 weeks at the Deputies' level and 
weekly at the staff level. We have worked together to discover 
projects for United States companies with the prospect of 
United States financing in China, Russia, and Mexico. In China, 
of course, we have had our eyes on the Olympics, and will do an 
interagency mission this fall.
    In September, I will attend the Energy Summit in Russia, 
and Grant Aldonis will go to Moscow on my behalf next month. I 
led a trade mission to Mexico for small businesses last year, 
and in June, I will be attending the Partnership for Prosperity 
meeting in San Francisco.
    We are steps away from a new program that would combine the 
Commerce Department, Ex-Im Bank, and SBA resources in an 
integrated small business trade finance tool, and we have 
joined 
Ex-Im/SBA financing seminars, and the agencies are working on 
parallel financing agreements.
    We have launched an interagency trade officer training 
program, so that our people in the field can help firms 
navigate the full array of Government export promotion 
programs. We have trained 31 officers from nine agencies in 
January, and are doing additional training programs next month 
and in September. We have reached out to our State partners as 
their budgets have tightened, collaborating and co-locating 
where possible.
    This year, we have built stronger bridges with many State 
partners, including Florida, Alabama, Delaware, Maryland, and 
New Jersey. We have an agreement with Florida to do a joint 
training and trade finance facilitation; an agreement with New 
Jersey to co-locate out staff and work on trade missions and 
counselling; and with Alabama, we helped recruit the State's 
Trade Mission to Central America this week.
    The TPCC is jointly marketing all of our programs, 
including sharing space at domestic trade shows, so that 
exporters can find out about all agencies' services in one 
place.
    We have developed joint publications and seminars, and are 
sharing client lists, and including data on each other's 
programs in client mailings. As a great example of this 
cooperation, I am pleased to announce today that our redesigned 
export assistance website is now open for business. The new 
Export.gov portal is 
responsive to the stated needs of our customers, the small- and 

medium-sized business community. In addition to links to 
multiple agencies, we now have a step-by-step guide through the 
process for new exporters.
    This was all accomplished with the cooperation of our TPCC 
partners. As we look toward next year, we want to continue 
working to complete our agenda. This includes: Developing a set 
of priority projects based on input from our overseas posts and 
interagency business development missions in key markets; 
completing the development of integrated small business trade 
finance, marketed by the Commercial Service; institutionalizing 
our interagency trade officer training and expanding it to 
include Congressional offices in States; and leveraging 
existing agency budgets in Fiscal 2005 on priorities such as 
training and technology. At the same time, we will continue our 
focus on exporter needs. This includes assisting the business 
community in its efforts to reenter the market in Iraq, and 
further coordinating efforts to stimulate private 
investment and trade.
    Mr. Chairman, I want to thank you and this Committee for 
your interest and oversight of the export promotion process, 
and for your support for the TPCC.
    Thank you, Mr. Chairman.
    Chairman Shelby. Mr. Merrill.

                  STATEMENT OF PHILIP MERRILL

                     PRESIDENT AND CHAIRMAN

          THE EXPORT-IMPORT BANK OF THE UNITED STATES

    Mr. Merrill. Thank you, Mr. Chairman.
    I would like to associate myself completely with the 
remarks of Secretary Evans, and I appreciate the opportunity to 
join you, Mr. Chairman, this morning, and my colleagues from 
the Trade Promotion Coordinating Committee to report on the 
status of the National Export Strategy.
    The first Bush Administration National Export Strategy 
Report in 2002 has served as a road map for the TPCC efforts 
over this past year. The 2003 National Export Strategy Report 
issued this April and my testimony today are primarily devoted 
to reporting on implementation progress.
    As Chairman of Ex-Im Bank and Vice Chairman of the TPCC, I 
have a keen interest in working with the members of the TPCC to 
support our Nation's export sector.
    The Bank's mission is to assist in financing the export of 
U.S. goods and services, thereby helping to create and maintain 
U.S. jobs. It is all about jobs.
    Ex-Im Bank does this by providing financing to counter the 
effect of export credit financing from other governments, or by 
taking reasonable credit risks that the private sector is 
unwilling or unable to accept. We only go where private capital 
will not or cannot go. By cooperating with other agencies, Ex-
Im Bank is trying to achieve a more strategic approach for 
trade and export promotion. Our focus is on improving customer 
service, streamlining case processing, and enhancing risk 
management.
    The Bush Administration recognizes the important role that 
the TPCC can play in supporting U.S. exports and U.S. jobs. I 
am very committed to this effort. The TPCC strives to make it 
easier for U.S. businesses to understand and utilize the U.S. 
Government's export promotion programs. The recommendations put 
forward in last year's TPCC report were developed after in-
depth discussions with our customers and are practical 
solutions to problems that encumber U.S. export potential.
    We have made progress in implementing many of the report's 
key recommendations. I will address the three areas in which 
the Ex-Im Bank is most involved: One -- Joint Marketing, 
Training, and Small Business Initiatives; two--Early Project 
Development; and, three --Tied and Untied Aid. We happen to be 
singing from the same songbook today, by some strange chance.
    First, I would like to discuss the Joint Marketing, 
Training, and Small Business Initiatives. To support these 
initiatives, Ex-Im Bank leads an interagency marketing task 
force--us, the SBA, the Department of Commerce, and OPIC.
    Our marketing objective is straightforward: To establish a 
direct relationship between the U.S. exporter and U.S. 
Government trade agencies in a coordinated and cost-effective 
manner.
    The task force planned, funded, and is now executing three 
primary tactics to reach U.S. exporters, specifically small and 
new exporters. The big guys know we are here. These tactics 
are: Direct mail; participation in major trade shows; and 
exporter and lender seminars. We have had a whole bunch of them 
around the country.
    The TPCC partner agencies also collaborate through 
nationwide U.S. Export Assistance Centers, which have an 
unworkable acronym to reflect them, and we are working to link 
our websites to the U.S. Government Trade Portal, Export.gov. 
We actually completed this just last week, so I understand.
    By agencies sharing costs, the exporter and the taxpayer 
are better served. Ex-Im Bank is also continuously looking to 
leverage the TPCC agency resources by utilizing the private 
sector to reach and provide services to U.S. exporters.
    We have also implemented a cross-training program for our 
staff, the Department of Commerce, SBA, OPIC, and TDA staff. 
This training is designed to enhance our ability to provide 
full-service trade finance advisory services to the export 
community. We want us all to know what we all do, and what the 
exporters do.
    Finally, Ex-Im Bank is collaborating with the SBA to 
provide parallel financing and joint marketing for working 
capital transactions, thereby providing small business 
exporters with a seamless approach to access the working 
capital they need to increase export sales.
    Second, I would like to discuss the Early Project 
Development Initiative. Its aim is to coordinate more 
effectively the efforts of the U.S. Government trade agencies 
to secure contracts for U.S. exporters. Ex-Im Bank's staff 
actively participates on the early project development country 
teams that the TPCC established to coordinate travel and 
promotion activities.
    To aid early promotion efforts, Ex-Im Bank has created an 
``early project letter of interest,'' intended to signal 
preliminary interest in a project before contracts are signed. 
Currently, the interagency 
efforts are focused on three markets: Mexico, China, and 
Russia, where we think the most room for opportunity for our 
exporters 
exists. We plan to broaden our focus to other target markets at 
the appropriate time.
    The largest Ex-Im Bank market is Mexico. We are very active 
in Mexico with an exposure of more than $5 billion. We are 
actively working to develop new products for this market, and 
to coordinate promotional activities with other United States 
Government agencies and with the Mexican government. Last 
September, agencies brought together municipal officials from 
renewable energy, waste management, and water treatment 
agencies, and United States companies in a conference organized 
by Ex-Im Bank and the Mexican Development Bank, Banobras. This 
conference built on the Partnership for Prosperity Initiative 
was created by President Bush and Mexican President Fox. I 
participated with my colleagues here from the OPIC, SBA, and 
TDA, in the Arizona-Mexico Trade and Investment Seminar in 
Tucson. We are working with our partner agencies to follow up 
on leads from these and from other similar conferences.
    In the second market, China, we also have nearly $5 billion 
in exposure and numerous opportunities exist for United States 
exporters, including projects associated with the Olympics in 
2008 and the World's Fair in 2010, and in key sectors such as 
environmental protection, energy efficiency, waste water 
treatment, medical equipment, and electric power.
    Let me interject that I had a nice long chat with the 
Chinese Ambassador a couple of weeks ago, just four of us, in 
which he acknowledged on his own that a trade imbalance of $100 
billion to $125 billion was not acceptable, and that they were 
prepared to deal actively and creatively with American 
exporters. I was a little surprised he brought it up, and we 
are pursuing it together.
    We are working closely with the Commercial Service and TDA 
to coordinate efforts to identify opportunities for United 
States exporters in China and with the Chinese.
    In Russia, the Early Project Development Team is pursuing a 
number of projects in telecommunications, transportation, and 
energy sectors, with particular focus on four pipeline projects 
that are currently under consideration. These projects can 
benefit from enhanced interagency cooperation and adequacy 
resulting from the Early Project Development Initiative.
    Let me say that I spent this last weekend in New York with 
the Rand-Russian-American Studies Group, which I sat on for 10 
to 12 years, with a whole crowd of Russian oligarchs who were 
there. We had, let's say, a full and free and fruitful 
discussion. I did not say ``frank,'' but it was very friendly, 
and they have been in to see us and we are working back and 
forth.
    Ex-Im Bank is also working with the Commercial Service to 
plan a working trip to Moscow and St. Petersburg in June to 
follow up on these projects and to meet with Russian government 
officials to identify additional opportunities for United 
States exporters.
    Overall, the TPCC joint promotion and coordination efforts 
in Mexico, China, and Russia look promising.
    Third, the TPCC, in 2002, launched several initiatives to 
counter foreign aid practices that place U.S. exporters at a 
competitive disadvantage. Ex-Im Bank and USAID are working to 
ensure that transactions we both support complement each other 
in an effective manner. These joint mixed-credit transactions 
will leverage the resources of the two agencies to support aid 
development objectives, while expanding Ex-Im Bank's ability to 
provide business opportunities for U.S. exporters. These are 
separate. They do the aid, we do the business.
    Ex-Im Bank, in cooperation with the Treasury Department, 
continues to closely monitor the use of Tied Aid by foreign 
governments. I note that the bureaucracy agrees that in 2002 
the use of Tied Aid continued to decline dropping to a record 
low. In fact, since 2001, the decrease was 40 percent 
worldwide, so the War Chest just may be working, just by being 
there.
    Further, Ex-Im Bank and Treasury have also agreed to new 
processes and standards governing the use of the Tied Aid 
Credit Fund, commonly known as the War Chest, that will ensure 
more rapid case processing and improve U.S. exporter 
competitiveness. These are known as the Robson-Taylor 
Principles and undoubtedly your staff is totally on top of 
that, as I am sure you are.
    I am asked to say a word with respect to Iraq.
    Chairman Shelby. I am going to have to interrupt you. We 
have a vote in 2 minutes on the second vote, and we are going 
to recess the Committee hearing until the vote is over, so just 
suspend.
    Mr. Merrill. Okay, I will suspend on Iraq.
    [Recess.]

                STATEMENT OF SENATOR MIKE CRAPO

    Senator Crapo [Presiding]. Ladies and gentlemen, we will 
bring the hearing to order.
    I ran into the Chairman in the hall as I was returning from 
voting, and he said we should keep going so we do not get 
people any further behind on their schedules. So, I am going to 
reconvene the hearing. The Chairman is going to run over and 
vote and be back as quickly as he can. I appreciate your being 
understanding and accommodating for our scheduling 
difficulties.
    Mr. Merrill, I understand you were in the process of 
completing your testimony before we were interrupted. You can 
go ahead and complete it now.
    Mr. Merrill. Well, actually, when we were interrupted, we 
were just about to solve the problem of Iraq.
    [Laughter.]
    Senator Crapo. Why don't you just finish with that then?
    [Laughter.]
    Mr. Merrill. Literally, Iraq was the word on the table.
    Senator Crapo. We could have a vote on it, and it might 
win.
    [Laughter.]
    Mr. Merrill. I think an appropriation is more what is 
necessary. In any case, with respect to Iraq, Ex-Im Bank has 
established an internal task force that is working to address 
the legal and credit concerns that currently impede our ability 
to offer trade finance programs in Iraq. We are coordinating 
closely with the other TPCC's member agencies, as well as the 
U.S. exporting community in this effort.
    As you know, we are subject to a number of important 
programmatic constraints, the principal one being a need to 
find ``a reasonable assurance of repayment . . .'' that is the 
legislative language for every credit we support. However, we 
are bringing energy and creativity to the task of helping 
United States companies provide the goods and services that are 
necessary to the reconstruction of Iraq. For example, we are 
actively considering mechanisms that will allow Ex-Im Bank to 
support United States exports to Iraq, sooner rather than 
later, including taking the credit risk of companies and banks 
and third countries such as Turkey, Jordan, and Kuwait, that 
may be involved in obtaining United States goods and services 
for reconstruction efforts.
    Additionally, I believe that the concept of an Iraqi oil 
trust fund for reconstruction has real merit, and I would 
support efforts to establish such a fund under U.S. auspices, 
as rapidly as possible.
    The CEE, who is represented here today by Ed Rice, and 
several of their members, notably Halliburton, Bechtel, 
Motorola, GE, and a number of other companies have been in to 
see us. The general drift of our ideas and their ideas is that 
a country with a GDP of $26 billion, which is what Iraq had, 
cannot possibly support $120 to $140 billion in existing debt. 
That debt has to be restructured in some manner. With the 
investment of several billions of dollars into the declining 
and deferred maintenance problems left by the previous regime, 
Iraq can once again use the revenues from increased oil 
production for its needs.
    Iraq has the capacity to generate between $10 and $15 
billion a year in oil revenue each year for 10 years. Nobody 
knows the exact number. That money can be used for the benefit 
of the people of Iraq and to provide the assurance of repayment 
for foreign direct investment or Ex-Im Bank guarantees in Iraq.
    However, the issue is not only establishing such a trust 
fund or reconstruction finance corporation, if I go back to the 
founding of Ex-Im Bank, but also the issue is that it has to be 
on a long-term basis, because the oil business is a long-term 
basis. You cannot get investment on a short-term basis. I 
should leave the oil business to Secretary Evans, but suffice 
it to say that nobody is going to spend several billions of 
dollars without a legal and professional assurance of being in 
business there for a great number of years, so let me sum that 
up by saying oil trust fund.
    I would like to conclude by thanking this Committee for its 
support of the TPCC, Secretary Evans for his leadership, and my 
TPCC colleagues here today for their commitment to this effort. 
I appreciate the opportunity to appear before you, and I would 
be happy to respond to any questions you may have at any time.
    Senator Crapo. Thank you, Mr. Merrill.
    I understand, Secretary Evans, that you have to leave at 
11:00; is that correct?
    Secretary Evans. Correct.
    Senator Crapo. If we get a couple of our Members back and 
they have some questions for you, we may interrupt in order to 
do those questions.
    Secretary Evans. Certainly.
    Senator Crapo. But until we get them back here, we will 
proceed with the testimony.
    Mr. Watson.

                  STATEMENT OF PETER S. WATSON

             PRESIDENT AND CHIEF EXECUTIVE OFFICER

            OVERSEAS PRIVATE INVESTMENT CORPORATION

    Mr. Watson. Thank you, Mr. Chairman, and in light of the 
time constraints, this will be a very brief oral presentation. 
I want to share the thanks of my colleagues to be here today, 
to articulate support for the President's vision on the 
National Export Strategy, and, for the leadership of Secretary 
Evans, whose efforts to bring together the disparate Executive 
Branch agencies as key to marshalling our collective resources 
to implement the TPCC's worthwhile mandate.
    We appreciate the support from Members of the Committee 
and, indeed, the Ranking Member, Senator Sarbanes. As you know, 
OPIC has a unique role to mobilize U.S. private investment for 
the social and economic development of less developed 
countries. We do so on a self-sustaining basis, at no cost to 
the U.S. taxpayer.
    In implementing President Bush's blueprint for OPIC, over 
the last 2 years the agency has reformed for success by 
bringing the benefits of economic development to the neediest 
countries, fostering cooperation with the private market to 
leverage resources, and focusing on the needs of the smaller 
U.S. businesses to pursue opportunities in the developing 
world. This was in response to the concerns by many in the past 
that OPIC was merely dispensing corporate welfare. Our efforts 
to create lasting results at OPIC mirrors the efforts of the 
TPCC over the last year, efforts in which OPIC has been 
privileged to play a role.
    With our other colleagues, we have conducted a joint 
investment mission in Pakistan. OPIC is active in Afghanistan 
where we are in the closing stages of executing $40 million in 
financing and political risk insurance for a much needed 
business base hotel in Kabul, the first of its kind. This 
project will represent the largest United States private 
investment in Afghanistan since the fall of the Taliban. 
Indeed, it is the largest United States investment in 
Afghanistan in a generation, if not more.
    Suffice it to say that we are also working with the SBA on 
execution of a cooperation agreement, including employee cross-
training. Last week, OPIC signed an MOU with the Department of 
Commerce Commercial Service, again committing the agencies to 
better information-sharing and lead generation. We are also 
working with AID to expand our coordination in our agencies.
    I just want to close on Iraq. As Secretary Evans has 
indicated, that country will clearly be a priority in the 
coming year. Once we have cleared sanctions and the statutory 
issues that impact our ability to operate, OPIC is prepared, 
and very willing and interested to use its programs of finance 
and political risk insurance to support private sector 
development in Iraq.
    Mr. Chairman, in closing, Congress this year will have the 
opportunity to review OPIC and its refocused agenda as it 
considers 
reauthorization of OPIC programs. Although not formally under 
the jurisdiction of this Committee, we look forward to working 
with you and your staff to secure the approval of our 
legislation before September 30 in carrying out the President's 
agenda.
    In closing, I would like to thank the Committee for its 
support of TPCC. OPIC is a partner of the willing with our 
colleagues here today to provide the most effective investment 
program services for U.S. businesses, American taxpayers, and 
men and women in the employment community.
    Thank you and I will also be pleased to take your 
questions.
    Senator Crapo. Thank you, Mr. Watson.
    Mr. Barreto and Ms. Bradford, if you would be willing to 
allow me--we have 10 minutes before we are going to lose the 
Secretary, and I, at least, have one question that I would like 
to ask him, before we lose him. And there may be some others 
who show up by the time he has finished responding to my 
question.
    This question, by the way, is one I would like the rest of 
the panel to respond to also, so you may get a heads-up on what 
may be coming. The question relates to the threat that we see 
overseas to American interests from terrorism, and especially 
in the developing countries that are the focus of so many of 
the TPCC's efforts, where we see a greater threat than at any 
time in recent memory.
    And while the agencies represented before us here today 
have long had as a part of their mission, providing risk 
insurance to American businesses to help them protect against 
political instability and other potential calamities, there is 
really no question that the risk of direct physical attack has 
grown considerably and is much higher than we have ever dealt 
with in the past.
    An April 1 notice from the Export-Import Bank advertised 
the Short-Term Insurance Pilot Program that is now available in 
39 Sub-Saharan African countries, including a number where we 
have threats of terrorism.
    In addition, Mr. Watson's testimony before the House 
Appropriations Committee indicated that despite heightened 
perceptions of risk, and in a very real sense because of them, 
OPIC has committed $1.2 billion in loans, guarantees, or 
insurance to support 45 developmental projects around the world 
in some of these kinds of countries.
    My purpose in covering this ground is to try to get a sense 
from the panel, and I will ask you to respond now, Mr. 
Secretary, of how we are responding to this increased threat of 
terrorism? And I have to believe that this threat is taken into 
account in determining whether to provide risk insurance in 
some of these countries, and would just like to know whether 
you can provide some sense of the threshold of where we are, 
short of a full-scale war in terms of risk insurance being 
denied to American companies seeking to operate in these 
developing countries?
    Secretary Evans. Well, of course, Mr. Senator, there is a 
full-scale war against terrorism. That is a full-scale war.
    Senator Crapo. That is right.
    Secretary Evans. That continues, and America is bringing 
all of the might and strength to that war that it can, to make 
sure that we win that war, along with our friends and our 
allies all around the world.
    As we know right here in America, you cannot have economic 
security or economic growth without national security or 
homeland security. The same thing works around the world. You 
cannot have global economic growth, businesses being successful 
and performing around the world, without international security 
or global security. They are integrated. They work together. 
You cannot have one without the other, and that is why the 
President has been so focused on the war on terrorism, because 
he understands that clearly, I think.
    So, I think my response, Senator, is that we will continue 
to do whatever it takes to win the war on terrorism. I mean, we 
are cutting off their money; we are going after them; we are 
collecting them around the world. We are providing for a safe 
and secure environment for people, not only in this country, 
but also around the world, and to allow for global economic 
growth is an essential part of it, for companies to be able to 
go abroad and export abroad and invest abroad, which means jobs 
right back here in America.
    I think it is just our continuing focus on the war against 
terrorism, so that we can play a role in providing more 
security around the world.
    Senator Crapo. Thank you. And as I said to the other 
members of the panel, we will ask you to comment on that when 
we aren't under a time pressure.
    Senator Dole, we are going to lose Secretary Evans in just 
a few minutes, and so if you have any questions for him, this 
is your 
opportunity.

               COMMENTS OF SENATOR ELIZABETH DOLE

    Senator Dole. Mr. Secretary, I know you are working hard to 
open up foreign markets to U.S. and North Carolina goods and 
services, and I have been a strong supporter in that regard, 
and I will continue to be.
    But I would be remiss this morning if I did not mention one 
thing that has caused a great deal of concern in North 
Carolina, a very critical situation. And that is the agreement 
that was signed recently with Vietnam. This has a lot of our 
textile manufacturers and workers very much concerned. They are 
worried that the agreement will shift jobs out of North 
Carolina to Vietnam and ultimately, through transshipments, to 
China.
    I would be interested in what the Administration might be 
doing to alleviate this situation. I know there have been 
commitments to take the views of our textile industry, our 
textile workers, into account when these agreements are made, 
and this is one that is of great concern to North Carolina.
    Secretary Evans. Indeed, Senator, I understand their 
concern. You mentioned transshipments, and that is an area of 
serious concern on our part.
    In the agreement that was signed with Vietnam, for the 
first time, we signed an agreement like this that I know about. 
We had the opportunity to go in and look at the data in Vietnam 
and see that the data does support the level of quotas that was 
granted.
    If the data does not support it, if the data shows that 
there have been transshipments coming through Vietnam over the 
last 18 months, which is when we have seen the growth of 
imports into the United States from Vietnam--and it has grown 
dramatically--if you take knit shirts for an example: A couple 
of years ago, the imports were zero; a year ago, the imports 
were six million dozen. That was the year 2002. In the year 
2003, the imports were coming in at the rate of 18 million 
dozen a year.
    The quota was set at 14 million dozen. We went to Customs. 
I had two conversations with Asa Hutchinson, and told Asa that 
I wanted him to commit some additional resources to that 
specific issue, and asked him to put a team together that would 
put more resources on Vietnam to go look at this data and 
confirm the data one way or the other.
    If it shows that there have been transshipments, then we 
have the ability in the agreement to go reduce the quota. That 
is something that we are actively working on right now. I have 
asked them to get back to us as soon as possible. I think we 
will have an answer on that within the next couple of months.
    So since, Senator, as you said, it is this team's goal and 
strategy to open up markets all around the world for American 
goods and products and services, but we have to make sure we 
are maintaining a level playing field around the world as well.
    When it comes to transshipments and people--not playing by 
the rules--we are going to be plenty tough on them. And so I 
just wanted you to know that because of this dramatic increase 
that we saw in imports coming in from Vietnam, we felt like it 
warranted additional resources to go in there and confirm the 
data, and make sure the data was, in fact, correct.
    But if it showed to us that this quota was too high, we 
negotiated in the agreement that we would have the right to 
lower the quota.
    Senator Dole. I recall Chuck Hayes, who passed away last 
year, Chuck was head of the Textile Manufacturers Institute, 
and he made the comment that if the transshipments had been 
even half what they have been in the past, our textile industry 
would be thriving, and we have lost, of course, tens of 
thousands of jobs. It has just decimated our industry in North 
Carolina.
    I appreciated your support earlier on the idea of a textile 
tracer. This is something that came up from a citizen in North 
Carolina.
    We were able to find the technology in the Energy 
Department to hopefully develop a tracer that could be put on 
yarn, on fabric, as it leaves the country to be sewn, and then 
when it comes back, you would have something like the watermark 
on a dollar bill, an ability to determine, was this made in the 
USA?
    Now the scientists who have been working on that at the 
Energy Department have come up with three methods that they 
want to test now on the plant floor, and also through Customs. 
Would you support spending the $1.2 million to provide the 
tests to finalize this idea of a tracer?
    Secretary Evans. Yes, we have supported this effort, 
Senator. I think it is a very bright idea, something certainly 
worth pursuing.
    The amount of dollars you just referred to, relative to the 
cost to American workers--when you think about the 
transshipments around the world--the cost is very minor. So if 
we can develop more tools to deal with this critical issue when 
it comes to trade, I am certainly supportive of it.
    Senator Dole. Thank you. I believe my time has expired. 
Thank you, Mr. Chairman.
    Chairman Shelby. Mr. Secretary, I think you have to go. Do 
you have one minute for one question?
    Secretary Evans. Yeah, sure, you bet, Mr. Chairman.
    Chairman Shelby. Thank you. It has been 12 years since the 
OECD agreed to restrict the use of Tied Aid. I know that during 
2002, there was another push by the U.S. to restrict such aid, 
as well as practices like market windows, that are clearly 
designed to evade restrictions. Could you just briefly bring us 
up to date on these efforts on the use of the War Chest, as we 
call it, to support American businesses facing an unlevel 
playing field?
    Secretary Evans. Well, I know we have made some great 
success on that front, Mr. Chairman. As Mr. Merrill just 
mentioned, we have seen a reduction of some 40 percent or so of 
Tied Aid-related exports in the world, and we have been very 
aggressive in working through the OECD and we will continue to 
do so.
    I think the War Chest has been an important tool for us to 
have in dealing with that issue. We have seen Japan come to the 
table and change their practices, as it relates to their Tied 
Aid practices of using engineering design and preliminary 
studies to tie that.
    Chairman Shelby. Any success with the French?
    [Laughter.]
    Secretary Evans. I am going over there soon, Senator. I 
will work with them.
    Chairman Shelby. I am not speaking of the war; I am talking 
about----
    Secretary Evans. Right, I understand. But I think we have 
made great progress, but we are not there yet. I do not want to 
suggest that we think we have accomplished all that needs to be 
done on this front. We need to continue working on it 
aggressively.
    Chairman Shelby. Mr. Secretary, I know you are under a time 
constraint, and we appreciate your appearing before the 
Committee today. You have to go to a meeting, and we are sorry 
we had to vote, but that is part of the Senate.
    Secretary Evans. I understand.
    Chairman Shelby. We will continue with the other panel.
    Secretary Evans. Thank you, Senator.
    Chairman Shelby. To the rest of the panel, the question was 
asked of the Secretary regarding terrorist and risk insurance. 
Do you want to comment on that? Do you want to start, Mr. 
Merrill, on terrorism and risk insurance?
    Mr. Merrill. Yes, I know. Were you here for the question?
    Chairman Shelby. No, I am familiar with the question, but I 
did not know if the four of you had had a chance to answer it 
and give your opinions on it.
    Mr. Merrill. First, that is our business. We have a number 
of risk policies in place to protect U.S. exporters when the 
commercial sectors are not there.
    Now, we still charge market rates. What happens here is 13 
U.S. Government agencies, with which we and OMB participate, 
set the risk assessment on several different scales, but the 
easiest way to think of it is one to 11. The highest number 
being the greatest risk. Cuba would be 11. You are not going 
there. Those numbers reflect the current assessment of risk the 
Government is going to have to take into account.
    We have tried to address this in a couple of other ways. 
The Senator from Idaho referred to an Africa program in his 
question, and this is part of a pilot program. This is a pilot 
program under the AGOA, Africa Growth and Opportunity Act.
    Again, we are trying to open investment in Africa, while 
still providing for a reasonable assurance of repayment. We 
note that the commercial sector is not there, in general, and 
is certainly not there without us. So without us, they are not 
there.
    Let me say that around the world, and with respect to 
Africa, the risk premium will have to be adjusted to fit 
whatever the risks turn out to be.
    One other thing we have been doing--you can cook the books 
in the short-term but you cannot cook them over 10 years. The 
risk will turn out to be whatever it is. We are not going to 
cook the books. Another thing we have been doing, however, is 
talking to insurance companies. I have been talking to an 
American Insurance Group that is commonly known as H. 
Greenberg's operation, Frank Wizner, Ambassador to India and 
Egypt.
    Chairman Shelby. We know him.
    Mr. Merrill. What we have been talking about is working out 
a deal with AIG and other similar insurance companies where we 
overlay one another. In other words, they have certain 
countries where they have, let's say they will reach a cap. We 
may go above the cap. Well, we have countries where we go first 
and they take the upper end of the cap. What we like to do is 
cooperate with American insurance companies to address this 
very issue.
    Chairman Shelby. Mr. Watson, do you have any comments?
    Mr. Watson. Yes, thank you, Mr. Chairman. Senator Sarbanes, 
good to see you, sir.
    Our respective agencies are those primarily involved. For 
OPIC, in addition to supporting jobs, our mission is, of 
course, to support the national security and foreign policy 
objectives of this country. But we do so in a way that takes 
prudent risks in managing our portfolio, which we do in 
cooperation with, not competition with the private sector.
    In that context, OPIC continues to work on a self-
sustaining basis at no cost to the U.S. taxpayer. In fact, it 
returns money to the 150 Account. But we can support America, 
and have done that, in a way that has extraordinary benefit for 
the national security goals of the United States.
    In relation to terrorism, our mission is precisely to 
ensure that the key national security tools of the United 
States, our foreign policy and our military capability, is 
supported by our long-term goals in opening up these economies 
and these peoples to economic pluralism, open markets, and the 
private sector. These are the long-term tools of ensuring that 
we prevent the ability for terrorism to take root in the 
future. Open markets, communication, tourism, freedom of 
belief, these are all principles upon which this country has 
been developed and it is our greatest export.
    Our job is to support that, and we can only do that in 
conjunction with the private sector. We can do it in a prudent 
way at no cost to the taxpayer. That is what we do.
    Chairman Shelby. Mr. Barreto, do you have any observations?
    Mr. Barreto. Thank you, Mr. Chairman.
    Just briefly, the place that SBA interfaces mostly with 
small businesses is really through export financing, we have a 
number of different loan programs. Also, technical assistance, 
which is so critical to small businesses.
    There is no doubt that terrorism plays a major role in a 
small business's interest in exporting and importing and really 
being involved in the export marketplace. It is one of the 
reasons that it is so essential for us as an agency to work 
very closely with our TPCC partners.
    I would say one other thing. According to our figures 97 
percent of all exporters in the United States classify as small 
businesses; over 200,000 firms are small business exporters, 
but they only represent less than one-third of all the trade 
that is occurring. So there is a great opportunity to engage 
those small businesses and really try to grow the pie of 
opportunity for them, and really educate them to those 
opportunities.
    Chairman Shelby. Tell us how they do that?
    Mr. Barreto. We do that through our network of technical 
assistance providers, and all of the people that we have in our 
network that deal with trade issues, and export issues. We have 
a very large network, as you know. We have SBA personnel in 
every State in the union. It is really the place that we can 
touch the most small businesses.
    One of the things that we want to encourage them to do is 
oftentimes they are only doing business with one country. So if 
there is a part of the world that is particularly dangerous, we 
want to open them up to some other opportunity, and we think 
that is a very prudent way for us to go.
    Chairman Shelby. And so, it could help our economy 
immensely, couldn't it?
    Mr. Barreto. Absolutely.
    Chairman Shelby. Ms. Bradford.
    Ms. Bradford. Mr. Chairman, Senators, and the Committee, 
the Trade and Development Agency, as part of the Foreign 
Assistance Program of the United States, finds that SARS and 
terrorism are the greatest impediments to our doing work 
overseas. Of course, we are worried about the risk of our own 
staff who are there and the contractors for the Agency, but we 
really see it as a balancing act. Our job is to keep trade open 
while still providing some security.
    We have focused on transportation security by screening 
passengers and cargo before they travel. Securing the supply 
chain as goods move through Customs and between borders so that 
you can lock containers and make sure that the goods that you 
packed arrive safely where they need to be without having to be 
opened at each border crossing along the way, which provides an 
opportunity for terrorism to happen.
    By using IT expertise so that we can track containers, 
anyone who is trading can track containers and the security of 
those containers. You find that it reduces the chance for 
corruption. It increases transparency. It facilitates trade. 
And as we know, the rapid transit of goods across borders is 
what makes trade happen and helps the economies on both sides 
of the transaction.
    Chairman Shelby. Senator Sarbanes.

             STATEMENT OF SENATOR PAUL S. SARBANES

    Senator Sarbanes. Thank you very much, Mr. Chairman, and I 
apologize for being delayed in getting to the hearing. 
Actually, I have three hearings going on at the same time----
    Chairman Shelby. Plus two votes.
    Senator Sarbanes. Yes. When I first looked at it on my 
schedule, my first reaction was, I am not going to go to any of 
them----
    [Laughter.]
    Senator Sarbanes. --it was too much of a conflict to 
decide, but I finally resolved it.
    First, I want to thank you, Mr. Chairman, for holding this 
oversight hearing. I think it is extremely important that we 
keep a Congressional focus on the TPCC. I think it helps to 
give it some energy and momentum, and it is important for 
people downtown to know that Congress is watching and that we 
care about this program, and we regard it as important.
    The effect on this, of course, on the TPCC depends upon the 
leadership it receives from the chairman and the other key 
members. Let me say it has been my perception that Secretary 
Evans--and I know he had to depart--and Under Secretary Aldonas 
recognized the importance of the TPCC from the time they took 
office as a way of having a greater sense of strategy and focus 
to U.S. export promotion efforts. They have made energizing it 
a priority, and they have gotten the active cooperation and 
leadership from the other agencies represented on the panel 
this morning. I want to express my appreciation to all of you 
in that regard.
    I understand that a Deputy's level, meaning Under Secretary 
level, of the TPCC takes place every 6 weeks and that lower 
staff level meetings take place on a weekly basis. And this is 
a tremendous advance.
    The precipitating event for establishing the Coordinating 
Committee was the hearing we held in which we had at the table 
from a range of agencies, these and others, other departments, 
involved in exports and the question was asked: How many people 
on the panel knew other people on the panel? Nobody knew 
anybody else. They were all just clearly working within their 
own silo and there was no interaction.
    At the hearing last year on the 2002 Report, Secretary 
Evans and the other agency leaders presented findings and 
recommendations obtained from a benchmarking exercise. This was 
a series of surveys and focus groups used to measure customer 
satisfaction with the TPCC's programs and a search for best 
practices among the governments of our major competitor 
countries to see how they promote exports.
    A series of recommendations came out of that, and I am very 
pleased to note this in Appendix A that is in this year's 
report, in effect providing a progress report on the 2002 
recommendations. This is, in my judgment, very good follow-up 
because it sets out the recommendation, the accomplishments so 
far, the next steps the progress measures, and it really gives 
you a very handy way to see where we are and some idea of where 
we are going to go.
    Having said that by way of opening, I would like to just 
ask a few questions:
    First of all, the report mentions that a key area of 
collaboration among the TPCC agencies has been the development 
of an interagency training program designed to impact client 
management skills and broader knowledge of the programs and 
resources that are available to assist U.S. firms in the 
international marketplace.
    The Pilot Training Course was apparently delivered in 
January of this year. Participants from nine different TPCC 
agencies--the five that are here at the table, and the 
Departments of Agriculture, State, Transportation, and AID. 
This strikes me as a promising initiative. It is obviously 
consistent with the statutory mission of the TPCC. Are there 
plans to institutionalize and expand the interagency trade 
officer training program? Who would like to elaborate on that?
    Mr. Aldonas. I would, Senator Sarbanes.
    We included in our budget request for this fiscal year and 
again for next fiscal year training monies that are designed to 
encourage that program to go forward.
    We will have sessions in June and September of this year to 
follow up. From my perspective, these initial stages are a 
little bit of training the trainers. What we are going to have 
to do is, if we are going to get as much of a multiplier 
effect, is to make sure that we have some of these people who 
have gone through the training program get out and meet with 
their Commercial Service overseas, meet at SCO conferences as 
we had last week in Reston, so they can pass on accumulated 
knowledge.
    It is all designed really to create account managers within 
the Commercial Service that can serve as marketing reps for all 
the agencies. So that, whether it is a Commercial Service 
office in the United States where SBA is not co-located, or we 
do not have an Ex-Im Bank rep, you still have somebody there 
you can talk to that knows enough about the programs so they do 
not simply refer the customer on to someone else, but who can 
actually help tailor the programs to their needs, give them the 
advice they need, and make sure they have the contacts overseas 
with the FCS that can put them in touch with their contacts 
abroad.
    Senator Sarbanes. Good. I understand the TPCC has been 
developing a new program that would combine Commerce, Ex-Im 
Bank, and SBA resources toward an integrated Small Business 
Trade Finance tool for working capital loans. However, I 
understand that SBA's participation in the program may be 
affected by the cut in last year's appropriation bill for SBA 
participation in the U.S. Export Assistance Centers, the so-
called One-Stop-Shops. How are we going to deal with this? I 
mean it seems to me it is certainly a worthwhile initiative and 
I am concerned that it seems to be----
    Mr. Barreto. We have been working very closely with our 
partner agencies here. One of the things that we have been able 
to do is actually formalize a lot of our participation with 
formal memoranda of understanding.
    It is correct that we had asked for $3.1 million in this 
year's budget which was not funded. We have continued working 
very closely with the Department of Commerce on this very 
critical function, and we plan to continue doing that. 
Obviously, in the 2004 budget, funding has been requested 
again, and we will do everything that we can to make sure that 
that funding is there and that we are able to continue.
    But regardless of that, there shouldn't be a drop off in 
this collaboration. I mean the things that we are doing already 
together in terms of the training and things that we can do 
going forward I think have been strengthened and are not going 
to go away. But that funding will be critical to us in being 
able to continue our USEAC presence.
    Mr. Aldonas. Could I say, Senator Sarbanes, that one of the 
things we have talked about with Hector, and I was discussing 
with the Secretary yesterday, was could we absorb some of that 
expertise into the Commercial Service? What you really have is 
a cadre of trade finance professionals that could serve as a 
resource for the Commercial Service, particularly in this area 
of small- and medium-sized enterprises where they need the most 
help, frankly, and guidance.
    I was in Rockford last week at one of our manufacturing 
hearings. The President has launched an initiative on 
manufacturing, and a fellow by the name of Don Metz described 
the success he has had in working with Patrick Hoppen with the 
Small Business Administration. He used the phrase of, somebody 
had to persuade him to get out of the boat and walk on the 
water, in terms of exporting and really what he had relied on 
was precisely the cooperation between the local SBA office and 
our USEAC in Chicago and the northern Illinois area.
    There is a lot of value to that, particularly on the 
financing side. So what we are trying to do with Hector is to 
see between the two agencies how we can make sure that we have 
absorbed that talent and we continue to provide that service 
one way or the other.
    Senator Sarbanes. Well, we want to encourage that 
initiative.
    When we reauthorized the Ex-Im Bank Charter last year, we 
addressed the problem of market windows. We gave Ex-Im Bank 
explicit authority to match market window financing, and we 
directed the United States to seek negotiations for 
multilateral disciplines transparency within the OECD with 
regard to market windows.
    The legislation requires a report in 2 years on the 
progress of the negotiations. It also requires Ex-Im Bank to 
include an assessment of the use of market windows by other 
countries.
    I note that the National Export Strategy Report mentions 
that the Ex-Im Bank and the Commerce Department have 
commissioned a detailed study of the nature and volume of 
market window trade financing, and that the report--at least as 
listed here--was expected by the end of April 2003. In other 
words, last month. I would be interested to know if the report 
has been received and, if so, whether a copy could be shared 
with the Committee.
    Mr. Aldonas. Yes, sir, we do have the report and we will 
make a copy available. We can show it to you in draft.
    Senator Sarbanes. What?
    Mr. Aldonas. We will show it to you in draft. We have the 
report in draft at this point. It hasn't been finalized. But we 
are happy to sit down and discuss it with you.
    Senator Sarbanes. When do you expect to have the final 
report?
    Mr. Aldonas. At the end of this month. But I do not see any 
reason why we shouldn't draw you into the process of having a 
discussion about what is coming out in terms of financing.
    Senator Sarbanes. We are very interested in that, and I 
know the Chairman at the outset made a comment about the Tied-
Aid Credit Fund and the need to establish a level playing 
field, and of course some of these countries entered into an 
OECD regime on the Tied-Aid Credit, and then they went around 
to the back door and set up these market windows. So, we need 
to look at that entire landscape, and we are anxious to work 
with you on that.
    I want to ask Peter Watson a quick question. You will be 
seeking a reauthorization, I think--between now and September.
    Mr. Watson. Yes, sir, that is correct.
    Senator Sarbanes. I understand in the draft legislation you 
are seeking a change in the current definition of ``eligible 
investor.''
    Mr. Watson. Yes, sir.
    Senator Sarbanes. So according to the letter accompanying 
the request, ``It is necessary to update this definition to 
include enterprises and financial institutions with projects 
that may not be majority U.S. owned but have significant U.S. 
connections that provide support to the proposed project in the 
form of U.S. employees, facilities, or payment of taxes.''
    I guess the bottom-line question is: Are you now proposing 
that OPIC guarantees be provided for investment by foreign-
owned companies? Is this what this amounts to?
    Mr. Watson. Senator, what we have--not just ourselves but 
the Department of Commerce and Ex-Im--had to try and respond to 
in the last several years is that major U.S. industry groups, 
significant participants in the U.S. economy, Westinghouse, 
Chrysler, amongst others, have no longer been eligible to be 
supported by our agencies. And our agency, in particular, by 
reason of the acquisition of significant U.S. companies and 
U.S. workers, has meant that we, by reason of an antiquated 
definition of who we can support, have, in fact, been penalized 
by the increasing integration of international investment.
    What we are wanting to do is to be able to recapture the 
ability to support U.S.-based employment, U.S.-based taxpayers, 
U.S. content, and U.S. production that is not being able to be 
supported in the current economic environment.
    We have many instances where there are, indeed, nationally 
foreign-owned corporations that have greater assets, a greater 
number of employees, and a greater capital base in the United 
States than they have elsewhere. Siemens is an example. BP 
Amoco is an example.
    Senator Sarbanes. Let me ask you this question: Have you 
run out of U.S.-owned companies to provide the guarantees to 
and now you are searching around for foreign-owned companies?
    Mr. Watson. The answer is, obviously, no, Senator.
    Senator Sarbanes. Why would we shift off some of the 
resources in that direction?
    Mr. Watson. Well, the essence of this is we want equality 
in being able to avoid penalizing existing U.S. workers and 
U.S. companies that previously have been able to receive our 
support. They now have, in fact, been penalized simply because 
of being owned by foreign companies. We want to be able to 
support those U.S. workers but we are not now able to do so.
    Senator Sarbanes. I think this is an issue that is going to 
have to be very carefully looked at.
    Mr. Watson. Agreed.
    Senator Sarbanes. I don't think it really responds to the 
concern to use language that sort of sacks the debate by, for 
instance, characterizing it as ``antiquated requirements,'' 
``penalizing,'' and so forth and so on. I mean there is I think 
a very legitimate question, and particularly the question if 
you start down that slippery slope where do you end up.
    Also you have a lot of people seeking these guarantees, and 
so forth, and so the question becomes how do you choose amongst 
them. But obviously that is something that will be more 
carefully examined when your reauthorization issue comes before 
us.
    Mr. Chairman, I appreciate your indulgence in letting me go 
on.
    Chairman Shelby. Thank you. Senator Sarbanes--I know you 
need to get to other committees--I acknowledged your work 
dealing with the Trade Promotion Coordinating Committee 
earlier, and that was created and it was codified in law due in 
no small part to your efforts, and I wanted to acknowledge that 
in public.
    Senator Sarbanes. I appreciate that very much.
    Chairman Shelby. You have a great interest in this, and you 
are very knowledgeable about it and I think it is an important 
area.
    Senator Sarbanes. We think it is doing some good, and it 
has certainly gotten a good, strong boost from this 
Administration. On occasions I differ with the Administration, 
but when we are in agreement I want to make sure I recognize 
it, and they are doing a good job on this. Thank you.
    Chairman Shelby. Senator Crapo.
    Senator Crapo. Thank you, Mr. Chairman.
    I am going to have to apologize to Mr. Barreto and Ms. 
Bradford because they still have not had a chance to make their 
opening statements yet.
    Chairman Shelby. Do you want to make your opening 
statements, or do you want them to be made part of the record?
    Mr. Barreto. It is your call, Mr. Chairman.
    Chairman Shelby. No, it is your call.
    Mr. Barreto. I am happy to read it. If we have time 
constraints, we are happy to answer questions, as well.
    Chairman Shelby. Read it? Or paraphrase it?
    [Laughter.]
    Senator Crapo. I would give up my time for them to make 
their statements, Mr. Chairman.
    Chairman Shelby. You go ahead.
    Mr. Barreto. I will try to paraphrase.

              STATEMENT OF HECTOR V. BARRETO, JR.

                         ADMINISTRATOR

               U.S. SMALL BUSINESS ADMINISTRATION

    Mr. Barreto. I will try to paraphrase. I just want to echo 
many of the comments that have already been made. I think one 
of the things that we can attest to is that we are working 
closely together. We do know each other. We are doing many 
things together which I really believe are going to further the 
agenda of TPCC.
    I also want to acknowledge the leadership of Secretary Don 
Evans. I think he has really been a champion on us working 
together and really measuring ourselves by the results that we 
get.
    I have had an opportunity to be with him on a number of 
trade missions already, working on the Partnership for 
Prosperity, and this is definitely a top goal and priority of 
this Administration.
    As has been said many times before, for us this is a 
critically important initiative because of the fact that these 
small businesses play such a large role in exporting, and they 
also play a huge role in our economy in the creation of 
businesses.
    One of the things that I was very heartened by was the 
recent study by the Commerce Department which showed that 30 
percent of nonexporting small businesses would be interested in 
exporting if they had somebody to partner with and to help lead 
the way.
    We think that is a very significant opportunity for all of 
us.
    Chairman Shelby. It would create some more jobs, wouldn't 
it?
    Mr. Barreto. Absolutely. Absolutely. We really are the 
engine that fuels the economy and we need to find every way we 
can to grow that pie of opportunity for them.
    I have mentioned some of the things that we have already 
done with regards to our partnership agreements, the symposium 
that we have all participated in, and the coordination that is 
currently going on. And so I just again want to say that we are 
very excited about some of the progress. We are not anywhere 
near done yet. There is a lot more that can be done. But we are 
definitely on the right road and we want to thank this 
Committee for having this hearing and the support that they 
have given all of us in continuing with the mission.
    Thank you, very much.
    Chairman Shelby. Ms. Bradford.

                STATEMENT OF BARBARA R. BRADFORD

                        DEPUTY DIRECTOR

               U.S. TRADE AND DEVELOPMENT AGENCY

    Ms. Bradford. Mr. Chairman and Senators, thank you for the 
opportunity to appear here today. I would like to read my 
statement. It is short. But as a niche player that may not be 
as well-known as the agencies of my colleagues, I would like 
for you to know exactly what we are doing.
    I am Deputy Director of the Agency. Director Askey 
apologizes and regrets not being able to be here today. I am 
very pleased to testify today because I was a staff member on 
one of the original interagency committees that worked on the 
TPCC over 10 years ago and I can verify how valuable it has 
been both to me as an individual and to our Agency over the 
years.
    Throughout the year, the USTDA works closely with other 
TPCC members to enhance our mutual effectiveness, leverage our 
resources, and focus our joint efforts on projects and 
activities that will garner U.S. export success.
    The USTDA's mission is unique. As a foreign assistance 
agency, it is at the nexus of U.S. export promotion and the 
advancement of important overseas development objectives. In 
carrying out our mission, USTDA works with our TPCC colleagues 
and with other agencies to bring their particular expertise to 
a wide range of development priorities.
    At USTDA our strength comes from facilitating U.S. private 
sector solutions to modern infrastructure needs in developing 
and middle-income countries. USTDA also brings U.S. private 
sector expertise to bear in assisting countries in the 
development of specific sectors such as energy and 
transportation, which can serve as catalysts for economic 
growth and increased trade.
    During the past year, the USTDA has worked with other TPCC 
members to implement the National Export Strategy. I would like 
to share some examples of USTDA activities in this effort. In 
particular, USTDA activities are supporting important U.S. 
trade and foreign policy objectives. For example, USTDA is 
active in many post-crisis regions such as Afghanistan.
    Since early 2002, we have committed roughly $2.5 million 
for project planning activities in Afghan civil aviation, 
telecommunications, oil, and gas and electric power sectors. I 
know this does not seem like a large amount of money in the 
scheme of things, but you have to understand that the $2.5 
million are catalytic funds, putting U.S. firms in on the 
ground floor of large projects worth hundreds of millions of 
dollars.
    We are currently considering $3 million in additional 
activities. Next month, USTDA will co-sponsor an Afghan 
conference with the Department of Commerce outlining 
opportunities that we have identified as having strong 
potential for the U.S. private sector involvement while 
rebuilding that war-torn country.
    Along those lines, there is an important role for the USTDA 
to play in Iraq in putting the private sector to work in many 
essential sectors. These areas include: Transportation, 
telecommunications, electric power, and downstream petroleum 
processing such as refining petrochemicals and fertilizer 
production. These sectors represent areas in which the need for 
new investment is great. The population will receive direct and 
tangible benefits and the U.S. private sector has expressed 
interest in these particular sectors.
    Another component of USTDA's portfolio is our support for 
U.S. trade policy initiatives. In Africa, for example the 
Agency has supported activities under the AGOA framework. USTDA 
is also working closely with USTR and other agencies by 
providing support to a number of trade negotiations, most 
notably the SACU, South Africa Customs Union Free Trade 
Agreement, and CAFTA, Central America Free Trade Agreement.
    This year's National Export Strategy discusses a number of 
sectors that are priorities for the TPCC and USTDA. For 
example, we have taken a leading role in identifying and 
supporting potential transportation security projects that I 
referred to earlier in the ``Secure Trade in the APEC Region'' 
or the STAR Initiative. Earlier this year, we co-sponsored a 
STAR conference in Thailand with the State Department.
    Turning to specific countries and regions targeted for 
early project development, USTDA reopened in China 2 years ago, 
and our country portfolio has grown rapidly. In 2002, we were 
involved in 46 separate projects there with a focus on aviation 
safety, again going back to the terrorism problem, and energy 
and the environment. Already we have seen some U.S. exports 
resulting from the USTDA activities in China.
    In Mexico, USTDA funded a variety of activities that 
support the Partnership for Prosperity, P for P, including the 
signing of master grant agreements with two Mexican development 
banks. USTDA has strengthened our cooperation with our TPCC 
colleagues, particularly SBA, OPIC, and Ex-Im through support 
of the Partnership for Prosperity. USTDA has implemented a 
strong program in Central and Eastern Europe, notably in 
environmental investments, particularly waste energy and 
renewable energy projects.
    We work closely with our colleagues overseas in several 
regional offices, which are like the USEAC's where we are co-
located, particularly in Eastern Europe and Eurasia. In 
addition to USTDA personnel, we have representatives from Ex-
Im, OPIC, and the U.S. Commercial Service, and this joint 
overseas presence enables us to share information effectively 
and to better coordinate our activities and services to U.S. 
firms.
    USTDA also participates in a number of events throughout 
the year designed to inform the private sector about the 
Agency's programs. We worked with OPIC in the Andean Regional 
Trade and Investment Conference, Ex-Im's annual meeting, OPIC's 
Arizona Mexico Trade and Investment Conference, and last week 
we hosted a seminar for small- and medium-sized businesses at 
TDA, and we were happy to have Administrator Hector Barreto 
participate in that with us.
    We are also very involved in the pilot interagency training 
course, and we are looking forward to hosting that training 
course at our Business Center in June.
    As we look to the future, we anticipate continued high 
demand for USTDA programs and we are pleased to work with our 
other TPCC members as we move forward.
    Chairman Shelby. Thank you.
    Senator Carper.

              COMMENTS OF SENATOR THOMAS R. CARPER

    Senator Carper. Just a quick couple of questions then I 
have to head back to the floor. How long has the Coordinating 
Council been in existence?
    Mr. Aldonas. About 10 years.
    Senator Carper. Ten years?
    Mr. Aldonas. Yes.
    Senator Carper. Any idea what the trade deficit was about 
10 years ago?
    Mr. Aldonas. I would say it was probably just shy of 3 
percent of GDP.
    Senator Carper. Which would be about?
    Mr. Aldonas. At the time I would have said maybe like $25 
billion, $20 billion, something around those lines.
    Senator Carper. Any idea what it was last year?
    Mr. Aldonas. It is about 5 percent of GDP.
    Senator Carper. And roughly, what would that be?
    Mr. Aldonas. I am sorry. I misspoke myself. It is more on 
the lines of $200 billion, because right now I think we are 
perking along at, gosh, I want to say like $400 billion a year. 
It has about doubled over that time, Senator Carper.
    Senator Carper. Does the rest of the panel agree with that? 
Does that sound about right? Okay. I see heads nodding. So 
before the Coordinating Council was created, our trade deficit 
was roughly $200 billion. Today, it is closer to $400, maybe 
more this year. If you look at the reason why we created this 
Council it is to try to turn things around. And not to take 
anything away from the efforts of each of you and the people 
you work with, why were we headed in the wrong direction? Not 
just by a little bit, I mean by a lot.
    Mr. Aldonas. The trade deficit, of course, is driven by an 
awful lot of things that relate to the disparity in growth. I 
will give you an example. Normally when you see our trade 
deficit close, it is because we have gone into a recession and 
other economies are going stronger. And in fact, one of the 
reasons 10 years ago--it is interesting. It is really the last 
time the trade deficit closed. The reason was, we were in a 
recession. Japan was still growing, and Europe was getting 
strong growth.
    What happened this time around is we went into the 
recession, Japan and Europe trailed us in. We have come out 
rather slowly. They have not. In fact, they may be back in 
recession at this point, which means that our export has faced 
an exceedingly challenging environment. So while exports are up 
in absolute terms, imports are up significantly higher, and it 
is because our economy is growing faster.
    Senator Carper. I am going to ask each of you to think 
about something and then I will come back to ask you for your 
thoughts. I would like your best single thought on what we can 
do to turn this around and get the trade deficit heading in the 
right direction. Each of you just one idea, what you think is a 
very good idea. It could be something that could be done 
administratively, legislatively. It could be something we are 
doing with respect to monetary policy, the value of the dollar. 
Just give that some thought.
    I am amazed, Mr. Chairman, at how little attention is given 
to the magnitude of the trade deficit. To see what it was when 
you and I were in the House together and to see what it is 
today, my understanding is that in order for us to continue to 
run these kinds of trade deficits, somebody has to finance it, 
and as long as people from around the world are willing to 
invest money in this country to offset the size of our trade 
deficit. We can get by.
    But eventually, I fear we are going to reach a point where 
the rest of the world will lose their enthusiasm about 
continuing to invest in a country that forever is increasingly 
purchasing goods and services from abroad. And we are trying to 
get the economy moving here. The monetary policy has been most 
accommodative, and we have these very low interest rates. But 
at some point in time, I fear that in order to be able to 
continue to induce other countries' investors to invest in this 
country, we are going to have to raise interest rates. When we 
raise interest rates, that has, as you know, it could have a 
potentially adverse, maybe devastating effect on our economy 
and our ability to recover.
    So, I would put that on the table. You have had a minute to 
think about your maybe single best idea, and Ms. Bradford if 
you want to lead off, I would welcome your recommendation.
    Ms. Bradford. Thank you, Senator. With due respect, sir, 
our Agency is a very practical, project-by-project agency that 
provides funding to get U.S. firms on the ground floor of 
development. So, I would defer the policy decisions of how to 
take on the large issue of handling the trade deficit to those 
that are more experienced in those policy issues than we are.
    Senator Carper. All right. Thank you.
    Mr. Barreto.
    Mr. Barreto. A number of thoughts on that. I mentioned 
before that 97 percent of all exporters are small businesses, 
but they only represent less than 30 percent of the trade. So 
there is a great opportunity to engage that 97 percent.
    But what we find, and this is in particular to small 
business exporters in general, they do not know what they do 
not know. There are a lot of programs that are represented at 
this table that they are not accessing. We cannot wait for them 
to come to us, we have to go to them. And that is why the 
collaboration that is going on on this Committee, the 
streamlining of processes, the simplification so that it is 
easier for these small businesses to access these programs is 
so critically important.
    I think that we have a significant opportunity. I think 
also that one of the things that we are hearing is a lot of 
excitement with regards to some of the potential trade 
agreements that could be in the offing. The United States has 
been party to very few trade agreements. Now that the President 
has the negotiating authority to engage the Central American 
countries and other countries in the hemisphere, that is a huge 
opportunity for small business.
    Senator Carper. All right. Thank you.
    Mr. Watson.
    Mr. Watson. Senator, I share your concern about the 
increasing numbers on trade deficit. What is little appreciated 
in terms of these numbers of U.S. exports is that, in fact, 
over 50 percent of U.S. exports go to U.S. corporate affiliates 
abroad, which is to say the offices of U.S. companies abroad 
who then in turn integrate these and export them onward into 
other economies. I want to say it is about 56 percent of all 
U.S. exports now currently go to affiliated U.S. companies and 
joint ventures abroad.
    If you think about it, that being the major platform, the 
way to increase our export profile is to ensure that more 
companies can, in fact, establish competitive operations 
outside of the United States and be able to penetrate those 
markets. That means that while their coordination might not 
have been as effective previously amongst these agencies, what 
you do have is the mechanisms to ensure that U.S. exporters, 
U.S. manufacturers, U.S. men and women in the workforce do have 
the platforms and do have the 
vehicles and programs to be able to ensure equitable access to 
these countries and these economies and these markets, which 
are the vehicles and platforms for driving U.S. jobs.
    That 56 percent figure is not well appreciated. And so, we 
have to be able to expand the ability for us to use the 
platforms of foreign access to grow that percentage. You have 
to do that by competitive means and helping programs such as 
these.
    Senator Carper. Thank you, sir.
    Mr. Merrill.
    Mr. Merrill. Senator, I am not smart enough to have a 
single best thought on a subject this complicated, so I will 
have to give you three.
    Senator Carper. Okay. We will take them.
    Mr. Merrill. First, $100 billion of the trade deficit is 
simply China. It came up earlier before you arrived. I 
suggested earlier that I had met with the Chinese Ambassador on 
this subject and so forth.
    Second, let me say $100 billion plus, is undetermined 
because of varying price, is the import of oil. It seems to me 
the oil issue is simply a separate issue that is more complex 
than can be summarized or adequately addressed here. But 
suffice it to say a very large portion of the trade deficit is 
the import of oil and whether it is to our interest to produce 
more of our own oil, or to import more oil, and all the 
associated questions that go with that, cannot really be 
addressed at this point. So let me just say it is oil.
    Senator Carper. Okay.
    Mr. Merrill. The third point that I would make is that the 
central fact of our time is the explosive growth of the U.S. 
economy. We have a $10 trillion economy. We went to war with a 
country that had a $26 billion economy. Russia's economy is 
$346 billion. Brazil, 60 percent of our size in population, 
about the same size in area, has close to a $500 billion 
economy, 5 percent of ours.
    What has shifted is the let's say former banking advice 
that banks would have given their clients, which said invest in 
the United States, diversify, some in the United States, some 
in other places, because if we are doing well, they are doing 
badly and vice versa. What seems to me has changed is that when 
we do well now, because of the sheer size of us, other people 
do well. And when they do well, we do well. That is, we are now 
linked together rather than opposites.
    The biggest and the most promising exports are knowledge-
based services. We should be exporting more services, more 
programs. Training doctors at Johns Hopkins or Massachusetts 
Medical is effectively an export for the United States. The 
exporting industries that do export tend to have about 20 
percent higher paid workers in the United States than the rest 
of the working community. So the short form is that we should 
promote, I am going to call it knowledge-based imports, leave 
that like oil, without going into nuance, and suggest as well 
to you that the Japanese economy is unable to right itself, 
because basically they cannot write off their bad debts, and 
the European economy, without reflections on our putative 
friends, have a problem breaking what might be called a social 
contract. It takes 2 years to fire somebody or replace somebody 
and there is very little mobility of labor, although there is 
mobility of management.
    Senator Carper. Mr. Merrill, my time has expired and then 
some, so----
    Mr. Merrill. Let me just say, it is hard for me to see an 
awful lot of people investing in either one of those great 
entities as opposed to the United States.
    Senator Carper. Those are great answers. Thank you very 
much. Could you just give us a quick benediction here?
    Mr. Aldonas. Sure. Preach what we practice. You know, 
Phil's right. If you look at Asia right now, Japan still 
represents two-thirds of the GDP, if Japan's flat on its back, 
we are not going anywhere. I can put it this way, which is that 
the size of Vietnam's economy is smaller than the Japanese 
annual bar tab. So if Japan is not doing what it has to do to 
spur economic growth, you are not going to see growth 
throughout Asia even with China rising.
    The same thing in Europe. If they are locked into a growth 
and stability pact that essentially limits, as you pointed out 
Senator, the flexibility that Alan Greenspan has responded to 
circumstances in the market, if they do not have those tools 
available to them and they aren't willing to look hard at their 
own policies to try and give them a progrowth strategy, 
particularly on the monetary policy side, then we have real 
trouble.
    And again, I am as concerned as you about the trade deficit 
and whether or not it is sustainable. Because at some point if 
they are not growing, this house of cards comes down. Growth is 
the answer. But they have to be doing the right things 
domestically.
    When the President goes to the G-8, he has to make that 
abundantly clear, as I know he will, that we have to back that 
up through institutions like the IMF and the World Bank so that 
people get the message. Because unless they are doing the right 
things at the macro level--cutting taxes, responsive monetary 
policy--and at the micro level in the developing world--
protection of private property, all the sorts of things that 
give you a sound basis for small businesses to grow and thrive 
and provide the innovation, there is not a lot of hope out 
there for strong growth and a way of closing that deficit 
without us taking a hard economic hit.
    Senator Carper. All right. Thanks.
    Mr. Chairman, those are good responses, and I want to thank 
you for being generous. Let me just say in closing, the comment 
you made about the size of the Vietnamese GDP being smaller 
than the Japanese bar tab, clearly if we can get the Japanese 
to drink more, that will help the people in Vietnam.
    [Laughter.]
    Senator Carper. The other thing I would say is that----
    Mr. Aldonas. They have their reasons.
    Senator Carper. The trade deficit with China is now going 
to $100 billion, one of my friends says, we should reprint 
those Little Red Books, Mao's Little Red Books, and distribute 
them broadly throughout China, and get them back on the right 
track.
    [Laughter.]
    Senator Carper. Thank you.
    Chairman Shelby. I think they are repudiating those books.
    [Laughter.]
    Chairman Shelby. Thank you.
    TPCC has focused on Russia as one of the three major tests 
for the National Export Strategy. These countries were chosen 
on the basis of their potential and TPCC resources already 
dedicated to them, it is my understanding. Some of us are 
concerned about the people in Russia. I am concerned not 
because I question its potential per se, but because of the 
pervasive influence there of corruption and organized crime. A 
recent report by the Moscow-based Central Economic and 
Mathematics Institute of the Russian Academy of Sciences and 
the Foundation for Information on Democracy states the 
following: ``Corruption is an integral part of economic 
activity, with ill-defined boundaries between politics and 
private businesses. Market competition is also weakened, since 
the winners often prove to be not the most competitive agents, 
but rather those who gain advantages through bribery and 
special connections.''
    I appreciate that the goal of capacity-building activities 
is to assist foreign countries to establish a statutory 
framework necessary to draw foreign business.
    I would like to hear from you, if you could, your best 
assessment of the track record, including the Russian 
Government's own efforts, which are spotty, at best, perhaps, 
to date, in eliminating corruption, so that American companies 
can do business there without being unfairly disadvantaged by 
virtue of their adherence to U.S. anticorruption laws, 
specifically the Foreign Corrupt Practices Act.
    I should add that this is particularly important, given 
TPCC's emphasis on small- and medium-sized businesses, which 
may be more vulnerable to illicit, below-the-screen pressures.
    Do you want to start, Mr. Barreto?
    Mr. Barreto. Well, as you know, we are very focused on 
small businesses based in the United States, but absolutely 
with regards to their ability to do business with a country 
like Russia, this is a concern. There needs to be more 
transparency with how you do business. I will tell you that we 
have been approached by our Russian counterparts. They have 
visited us at the SBA. They are very interested in some of the 
programs we have, and they are trying to emulate some of those 
things themselves, in their own country. I know that some of my 
colleagues have had much more experience dealing with our 
Russian colleagues, and probably have a better understanding of 
what some of the current trends are in that area.
    Mr. Aldonas. Senator, if I may?
    Chairman Shelby. Go ahead.
    Mr. Aldonas. A couple things: First, there is no doubt that 
we have to keep after the issue of corruption, both on the 
demand side with Russia, continuing to work with the Russian 
Government, but also on the supply side.
    One of the probably strongest efforts we have had in the 
Commerce Department's Annual Report on Corruption is the effort 
to ensure that those in the OECD who are the source of a lot of 
these funds--you will recall that the French and the Germans 
used to offer tax deductions for bribes--live up to their 
obligations under the OECD Bribery Convention, so that we are 
attacking the problem from both sides.
    Chairman Shelby. That is the cost of doing business to 
them.
    Mr. Aldonas. Exactly. The second thing that I think is 
important, and one of the reasons that we have focused on 
Russia in terms of our development, is that both Russia and 
United States companies benefit in the area of corruption from 
having United States companies on the ground.
    Let me take an example outside of Russia and then come back 
to Russia for just a second.
    A good example would be U.S. Steel's acquisition of the 
steel works in Slovakia. They issued a policy very publicly in 
the Maine Business Daily, a full-page ad that said if any of 
their suppliers or their employees were caught involved in any 
illicit dealings, they would be fired summarily, or the 
relationship would be ended. And their contracts reflect that. 
The whole supply chain now has to live up to that standard.
    Chairman Shelby. Is it working?
    Mr. Aldonas. It is, I am happy to say.
    Chairman Shelby. In Slovakia?
    Mr. Aldonas. In Slovakia. So what you have is the same 
thing with International Paper in Russia, with McDonald's in 
Russia, with Boeing's engineered design facility in Moscow. The 
business values they bring in are helpful.
    You really put your finger on something, though. As long as 
you have this in the market, Russia will continue to be a 
market for big players in the energy area, aerospace, pulp and 
paper, commodities, things like that. It is a very tough market 
for the small business guys, as long as you have these 
continuing problems in the Russian market.
    Mr. Watson. Mr. Chairman, just following on that, 
significant exports come through the major public procurement 
projects, for example, the energy areas in which State assets 
and State-owned enterprises play a role in issuing these 
contracts. That is where a majority of this corruption can play 
a role. One of the important provisions that Russia will soon 
have to comply with when it becomes a member of the World Trade 
Organization is precisely the public procurement code of the 
WTO, which prescribes exactly what these governments have to do 
in terms of opening up the process to transparency. It is not 
just rhetorical. They are very, very significant provisions 
that affect members of the WTO. Working in conjunction with the 
OECD, and, frankly, just disciplining our trading partners, is 
an important part of the process.
    Ms. Bradford. The Agency is supporting a project that will 
support Moscow's efforts to put its government procurement 
activities online, and this will certainly help address, 
specifically, the area of transparency.
    Chairman Shelby. Put a little sunshine in there?
    Ms. Bradford. Exactly.
    Chairman Shelby. Mr. Barreto, you know the problem and the 
challenge that small- and medium-sized businesses would face in 
that kind of an atmosphere, don't you?
    Mr. Barreto. Absolutely. I concur with the remarks, and 
that is why it is so essential that these reforms really get 
accelerated for small businesses to truly have an opportunity 
to do business in that part of the world.
    Mr. Merrill. Senator, let me just say that I want to 
associate myself with the remarks of Mr. Aldonas with regard to 
the trade deficit issue, even though the Senator from Delaware 
is not here.
    First, I would like to address this, however, one second by 
saying that the issue you raise, by saying that this is a 70-
year process with the Russians, in the last decade, more or 
less since the Wall came down, my estimation is that maybe they 
have done 20 years' progress in 10 years' time. We can now make 
some nonsovereign loans in Russia, which you cannot do in 
China, or, for practical purposes, cannot do in China.
    Since we are not under oath, I am still willing to speak 
the truth, and what you have is a number of leading Russian 
economic figures who were thugs a decade ago. We work very 
closely with our colleagues in other departments, including the 
intelligence community, generally to see whether or not they 
are still thugs.
    Chairman Shelby. Their values will be tested, won't they?
    [Laughter.]
    Mr. Merrill. Their repayment record currently is quite 
good. If they were thugs 10 years ago, well, we kind of say 
maybe they have learned something. We are not going back 10 
years. It was 2 or 3 years ago that we started to worry about 
it. We worry about it a lot. The important thing in dealing 
with the Russians is to do everything we can to get an 
effective rule of law, hard currency, the normal attributes of 
free enterprise, including the ability to enforce a contract.
    One could look at it as saying it is two steps forward and 
one step back, but based on, let's say, the experience of my 
long-term friend, Leonard Louder, who was run right out of 
Russia--and that is a pretty good sized company--it is pretty 
difficult for small business to take the risk of doing business 
there. Some can. They have to have a special----
    Chairman Shelby. Maybe that will change and maybe you can 
help change that.
    Mr. Merrill. We would like to help change it.
    Chairman Shelby. Ms. Bradford, I would like to ask you a 
question, and then I am going to submit the rest of my 
questions for the record, if I could.
    As the issue of U.S. exports of genetically-modified 
agricultural goods has proven among our most controversial 
trade issues, our Trade Representative recently announced his 
intention to take the issue before the WTO on account of 
European Union prohibitions on imports of such goods from the 
United States. How do you see the WTO's case as influencing 
TDA's current efforts in China or vice versa, and does TDA have 
similar efforts underway in Europe that might help diffuse a 
difficult, very difficult trade dispute? Can you comment on 
that?
    Ms. Bradford. Yes, Senator, I am glad you asked that 
question. It is a very difficult area for U.S. exports, if the 
exporting countries do not understand or have any appreciation 
for the biotech advances that have been made, China being a 
particularly good example. And we were able to, over a period 
of a year, get them to consider actually coming to the United 
States and taking a look at all of the work that has been done, 
particularly with regard to safety in the biotech area, and to 
begin to consider a change in their position.
    We considered this to be quite a breakthrough from them, so 
by offering technical assistance to the Chinese to let them 
come and take an independent look at what they want to do, we 
think that we have accelerated their understanding and 
acceptance of that.
    Now, with regard to Europe, as a development assistance 
agency, we can only work in Eastern Europe, and Eastern Europe 
is looking toward the EU, really, for the standards that they 
are trying to meet for accession into the EU. So it is a bit of 
a problem that is Europe-EU-based, and our ability to work 
actually in that is somewhat limited, since we are only able to 
do business in Central and Eastern Europe.
    Chairman Shelby. It is going to take some time, isn't it?
    Ms. Bradford. Well, I think actually to get the Chinese to 
turn around in a year or less was quite a success, but we are 
more optimistic than we were a year ago. And we will take a 
look at the 
Europe situation to see what we can do in that area, as well.
    Chairman Shelby. Sure. I appreciate all of your 
appearances, your participation today, along with Secretary 
Evans. I have a number of questions for the record that I 
mentioned, and I will submit them to you. We appreciate you 
doing what you are doing, and let's get this trade moving.
    The hearing is adjourned.
    [Whereupon, at 12:00 noon, the hearing was adjourned.]
    [Prepared statements, response to written question, and 
additional material supplied for the record follow:]

              PREPARED STATEMENT OF SENATOR ELIZABETH DOLE

    Mr. Chairman, I would like to thank both you and Ranking Member 
Sarbanes for agreeing to hold this hearing on the National Export 
Strategy. As a firm believer in the benefits of open trade policies, 
the need to ensure that U.S. goods and services can compete abroad in 
international markets is one of my highest priorities. Unfortunately, 
all too often our goods and services are held at a competitive 
disadvantage due to both tariff and fundamental nontariff barriers. 
Meanwhile goods and services from other nations have no such 
restrictions in our domestic markets.
    Furthermore, many of our trade agreements contain initiatives 
intended to ensure against unfair trading practices by our foreign 
competition. This is an issue of great importance to North Carolina 
where our manufacturing base has been hemorrhaging due to foreign 
competition violating our trade agreements. This issue worries me a 
great deal. Let me be clear; I am not advocating any drastic breaks in 
our trade relations. I am simply advocating the active use of 
initiatives that exist in our current trade laws which were designed to 
protect industries from illegal practices.
    One example of a clear violation is transshipments in which one 
country will avoid their import quotas by shipping their product 
through a different country which has not yet made its quota. I have 
seen evidence of this with China sending their textiles through 
Vietnam, a country which does not remotely have the capacity to 
manufacture the amount of textiles they export.
    Enforcement of our existing laws to protect our industries against 
illegal trade practices is one of my top priorities in the Senate. I 
look forward to working with my colleagues and the Administration on 
these trade issues. I want to assure you all that my staff and I are 
always available to work through these issues.
    Thank you.

                               ----------
                 PREPARED STATEMENT OF DONALD L. EVANS
                 Secretary, U.S. Department of Commerce
                              May 21, 2003

Introduction
    Chairman Shelby, Senator Sarbanes, Members of the Committee, it is 
with great pride that I present our progress report on the 
implementation of the National 
Export Strategy. Last May, I testified, along with my colleagues on the 
Trade Promotion Coordinating Committee (TPCC), on the Bush 
Administration's road map for improving the Federal Government's trade 
promotion programs. We made a commitment at that time that we would use 
the TPCC to ensure that the U.S. business community had world-class 
products and services by the end of this Administration. I am here to 
report to you that we are on track.
    Let me say at the outset that we are under no illusion that the 
challenge we are trying to meet is easy. As you are aware, our trading 
partners still dedicate considerable resources and high-level attention 
to their export promotion programs. The United States continues to have 
the lowest staffing and spending as a percentage of GDP on export 
promotion among the G -7 countries. In addition, many of the 
recommendations we set out in last year's National Export Strategy are 
tall orders, and will take more time to accomplish. But as I said last 
May, we are focused on results. This year, we have not developed 
another National Export Strategy with a new set of recommendations; 
rather we are keeping our commitment to both you and our clients to 
follow through with what we promised last year. We believe we have made 
good progress on the most important recommendations contained in the 
National Export Strategy. The TPCC agencies have become better 
strategic partners of business early in the procurement process. In 
addition, we have sharpened our focus on customer service and 
strengthened our education and partnership efforts. We know what 
remains to be done, and we intend to accomplish it.
    Mr. Chairman, before I provide an update on our National Export 
Strategy recommendations, I want to mention some of the contributions 
the TPCC is making in other areas. First, the TPCC has become a 
resource and an advocate for the U.S. business community in a number of 
vital areas. This has meant everything from helping U.S. businesses 
understand the procurement process in the Iraq Reconstruction effort to 
getting them the timely information they need to make decisions or 
making sure their voice is heard within the Administration on key 
initiatives.
    Second, the active cooperation--indeed, leadership--of my 
colleagues here with me today has resulted in a new culture of 
coordination and client service among the TPCC agencies which we 
believe will make a difference in the quality of our programs across 
the board. We have built a number of bridges across the agencies--
whether it be between the Overseas Private Investment Corporation 
(OPIC) and the Department of Commerce's Commercial Service or the 
Department of Commerce's Advocacy Center and the Export-Import Bank 
(Ex-Im Bank)--to provide our clients with faster service and more 
products. When it makes sense, we are integrating our programs.
    Third, the TPCC is playing a role in the Administration's economic 
strategy in crisis regions such as Iraq, and in helping support our 
coalition partners. Agencies are thinking of the first steps they will 
take to help get the Iraqi economy running once sanctions are lifted, 
and we have developed initiatives to stimulate trade and investment in 
those coalition countries where there is a need.
    For example, a number of TPCC agencies are playing or will soon 
play a significant role in Iraq Reconstruction. We have met several 
times to discuss our efforts. The Department of the Treasury has taken 
the lead in addressing the financial infrastructure in Iraq. The U.S. 
Agency for International Development (USAID) is, of course, another key 
player, providing reconstruction grants and humanitarian and technical 
assistance to the people of Iraq. The TPCC is working within the 
Administration to ascertain the major obstacles preventing the finance 
agencies from operating in Iraq. Once these obstacles are overcome, 
agencies are looking at a variety of steps they could take, including 
the following:

 U.S. Trade and Development Agency (USTDA)--USTDA will use 
    grant funding for technical assistance and feasibility studies to 
    support future projects in Iraq, including transportation, 
    telecommunications, and electric power. USTDA believes this could 
    provide up to $2.5 million in fiscal year 2003 to support 
    reconstruction efforts in Iraq.

 OPIC--OPIC is considering using its existing finance, 
    insurance, and funds programs to help provide liquidity to the 
    financial sector and provide insurance to businesses and 
    contractors.

 Ex-Im Bank--Ex-Im Bank also envisions using interim measures, 
    such as looking to the credit of third-country financial 
    institutions to finance U.S. exports to Iraq, pending the 
    establishment of a creditworthy banking system, or other means of 
    finding reasonable assurance of repayment in Iraq.

 Commerce--Commerce is already providing information to the 
    United States and coalition companies. The TPCC agencies have 
    worked together to produce an Iraq business guide that provides 
    companies with information on the current commercial environment in 
    Iraq. Agencies and embassies have been flooded with calls from our 
    allies and U.S. businesses about Administration reconstruction 
    plans. In order to address these demands for information, the TPCC 
    hosted a number of interagency meetings that culminated with a 
    joint briefing by the Departments of Commerce, State, and Defense 
    and USAID for U.S. trade associations at the Department of 
    Commerce. A second briefing for coalition partners was held at the 
    Department of State. On June 5, 2003, International Trade 
    Administration Under Secretary Grant Aldonas will moderate another 
    interagency roundtable at the Department of Commerce which will 
    provide U.S. businesses with an update on procurement opportunities 
    and a status report on the sanctions situation.

    We are also participating in efforts to assist our coalition 
partners. For example, Administration representatives have traveled to 
a number of the countries to help promote closer commercial ties 
between us. I went to Bulgaria, Romania, and Slovakia in March and plan 
to travel to Eastern Europe again in the Fall. We are looking into the 
continuation, and possible expansion, of Commerce's Central and Eastern 
Europe Business Information Centers (CEEBIC), currently funded by State 
and USAID, to promote investment and trade opportunities in each of the 
coalition partner countries in that region. The agencies are also 
planning a trade and investment conference in the Fall.

Implementing the National Export Strategy
    Of the 60 recommendations presented in the May 2002 National Export 
Strategy, 40 percent have been implemented. Those recommendations that 
are not completed are well underway.

Strategic Initiatives
    Last year, U.S. exporters told us they needed more aggressive U.S. 
Government support for major projects early in the bidding process to 
meet foreign governments' forceful use of financing. We looked at how 
other governments advocated on behalf of their companies, and developed 
a response: A proactive interagency approach in key markets and 
projects and more effective use of our development assistance and trade 
financing, when appropriate.
    Over the past year, we have achieved measurable success:

Early Project Development
    This is an ongoing exercise, as many of the projects we want to 
target will not come to fruition for several years. However, almost as 
important as success on a specific project is the more forward leaning 
culture throughout the agencies that is resulting from this initiative. 
Like other governments, we have recognized the importance of 
demonstrating the likelihood of financing up front in the procurement 
process. The Ex-Im Bank has developed a letter of interest which our 
Commercial Service officers can use when they solicit projects on behalf of U.S. exporters. The Ex-Im Bank and the Advocacy Center have established a 
Memorandum of Understanding that increases the likelihood and speed of 
financing for projects the Commerce Department advocates for.
    Mexico, China, and Russia were our initial pilot markets; however, 
we have not been constrained by those targets. We are applying this 
proactive approach dynamically to opportunities as they arise. Our 
Advocacy Center director is working with USTDA and OPIC representatives 
to explore early project development possibilities in Azerbaijan. In 
China, Ex-Im Bank is pursuing a framework agreement with the Ministry 
of Finance, and we have an interagency mission planned, which is 
currently on hold. In Mexico, agencies brought together hundreds of 
municipal water and wastewater officials and U.S. companies under the 
umbrella of a conference organized by Ex-Im Bank and the Mexican 
development bank. Commerce and TDA followed up that conference by 
bringing officials of some of the most promising projects to attend a 
water conference in San Diego in the Spring. In Russia, the trade 
financing agencies and Commerce will travel together on missions to 
scout out early projects. We also are taking steps to build good-faith 
relationships with Brazil as they come out of a difficult economic 
stretch.

Mixed-Credit Initiative
    A pilot initiative combining USAID grants with Ex-Im Bank financing 
for developmental projects in middle-income countries is one of the 
best examples of how agencies can do more when they combine their 
efforts. USAID, Ex-Im Bank, Commerce, and the Treasury worked during 
the Summer last year to design and develop procedures to implement a 
pilot program. After the 2003 budget was passed, USAID sent out a cable 
and we are now getting inquiries from a number of overseas posts. We 
are currently discussing a pilot project in Peru with the USAID 
mission. The experience we gain from this pilot holds great promise for 
better coordination between the economic development and trade 
promotion agendas on a variety of fronts.

Front-End Engineering and Design (FEED) Studies
    This is technical assistance that sets the specifications for 
particular projects, and therefore often creates a competitive 
advantage for the country sponsoring it to obtain the follow-on 
project. Immediately after the publication of our report last May, 
which included a USTDA pilot FEED study project, the Japanese agreed to 
a U.S. proposal in the Organization for Economic Cooperation and 
Development not to link these early project studies with larger Untied 
Aid projects. This eliminates an important advantage Japanese firms had 
over U.S. companies in winning major projects. This recommendation 
stemmed from a complaint from U.S. exporters that the Japanese had used 
these studies to lock in the overall project for their firms.

Afghanistan
    Since OPIC and USTDA undertook the first joint investment mission 
to Afghanistan last May, USTDA has followed up with orientation visits 
and feasibility studies for a number of Afghan infrastructure 
ministries. The Commerce Department has hosted Afghan-American business 
roundtables and matchmaking events. USTDA and the Department of 
Commerce will jointly sponsor a conference in June on 
Afghanistan Reconstruction.

Customer Service
    There is a new culture among the agencies of putting the client 
first. When the heads of the other agencies and I first came together, 
we made a commitment to our customers and to the American taxpayer. 
Rather than create a new crop of programs, we decided to ask the 
business community exactly what they wanted from us. Rather than 
duplicate each others' marketing and outreach efforts, we decided to 
leverage each others' strengths and human capital. With the President's 
Management Agenda as a backdrop, these commitments have grown into a 
new culture of customer service.

Ex-Im Bank Restructuring
    The Ex-Im Bank went through one of the largest reorganizations in 
its history this past Fall. It has become more market-focused and 
customer driven, while enhancing its management of risk. The changes 
are designed to streamline case processing, and standardize customer 
service and credit evaluation across product lines.

Working Capital
    The Small Business Administration (SBA) and Ex-Im Bank have a team 
developing a parallel financing arrangement to provide the small 
business exporter with a seamless approach to access working capital 
for export sales. Commerce, Ex-Im, and SBA are also exploring taking 
this coordination to a new level by further integrating the working 
capital programs of Ex-Im Bank and SBA and the marketing efforts of all 
three agencies. The goal is to have the customer see only one trade 
finance tool, but provide the agencies with the flexibility to bring to 
bear the best of SBA and Ex-Im Bank programs. All three agencies would 
be focused directly on making sure smaller companies are aware of and 
can easily benefit from the best financing option available, whether it 
is provided by SBA, Ex-Im Bank, or, whenever possible, a private sector 
financial institution.

Streamlining Our Programs and Processes
    We have redesigned Export.gov, the Federal Government's primary 
trade website, to make it more useful to small businesses. This 
redesign was based on feedback from U.S. businesses. Key aspects of the 
redesign are:

 Export Basics--We have added an ``Export Basics'' section 
    designed for new exporters containing ``The Basic Guide to 
    Exporting'' and a step-by-step guide through the exporting process.

 NAFTA Certificate of Origin Tool--The new NAFTA Certificate of 
    Origin Tool guides exporters of products to Mexico or to Canada 
    through the NAFTA form with easy step-by-step instructions. This 
    greatly reduces the time it takes exporters to fill out the form 
    and will allow more of them to take advantage of the tariff 
    benefits.

 BuyUSA--The website provides seamless integration with the 
    BuyUSA online partner and trade lead matching service, allowing 
    visitors to access the services of multiple agencies, as well as 
    search for partners and trade leads.

 Catalogue of Products and Services--The redesigned website 
    categorizes lists of products and services for exporters, offered 
    by the Department of Commerce, the Foreign Agricultural Service, 
    SBA, and Ex-Im Bank.

 Export.gov Community Registration--Community Registration 
    allows site visitors to provide basic information into a central 
    repository that can be accessed by ITA, FAS, Ex-Im Bank, and SBA. 
    Registrants are then able to receive targeted export assistance, 
    market and event information, and automatically fill in online 
    forms within Export.gov.

Training
    We held the first interagency trade officer training session last 
January. Its focus was real-world applications of agency programs and 
instilling an ``account manager'' approach--proactively addressing the 
client's long-term needs, rather than answering one question or helping 
him with one export action. We had 31 participants from nine of the 
TPCC agencies. It was extremely successful, according to our 
participant feedback.

Marketing
    We have a marketing working group that has developed a number of 
joint publications, organized an interagency pavilion at eight domestic 
trade shows, and conducted a dozen interagency trade seminars and 
symposiums.

State Partners
    We are working to leverage our State partners. As State budgets 
have tightened, we have reached out to our State partners to provide 
opportunities to leverage Federal trade promotion resources. For 
example:

 Florida MOU--The U.S. Export Assistance Center agencies 
    (Department of Commerce, Ex-Im Bank, and SBA) signed a Memorandum 
    of Understanding that expanded an existing trade alliance to 
    include some 15 trade organizations throughout Florida. The 
    partnership includes a network of Small Business Development 
    Centers, Chambers of Commerce, and Economic Development Centers. We 
    are collaborating on training, business counseling, and trade 
    finance facilitation.

 Partnership with New Jersey--The Commercial Service and the 
    State of New Jersey signed a partnership agreement. The agreement 
    co-locates the CS and the New Jersey Commerce and Economic Growth 
    Commission's Office of International Trade and Protocol. In 
    addition to combining efforts on a number of the one-stop-shopping 
    services, providing access to the Commercial Service's worldwide 
    database and collaborating on a successful trade mission to the 
    Philippines, we have worked together on substantial outreach to 
    State legislators to educate them about the resources available.

 Trade Mission to Central America--The State of Alabama is 
    taking a trade mission to Central America (El Salvador and 
    Guatemala) on May 17-23, 2003. The Birmingham Export Assistance 
    Center is cooperating in the promotion and the recruitment for the 
    event.

Next Steps
    While we have made a good start, the coming year will be critical, 
as we are in the midst of following through on the most difficult 
recommendations. The TPCC will continue to focus on achieving 
measurable results to make sure that the way we implement these 
recommendations have the kind of impact that exporters expect. We will 
focus on:

 Iraq--The TPCC will work to address existing obstacles to 
    trade and finance agency operations and to coordinate efforts to 
    stimulate private investment and trade.

 Early Project Development--We will develop a set of priority 
    projects based on interagency business development missions.

 Finance--We will complete the co-guarantee between the Ex-Im 
    Bank and SBA, integrate the programs to the extent possible, and 
    leverage Commercial Service resources toward joint marketing.

 Training--The TPCC will institutionalize and possibly certify 
    interagency trade officer training. June and September sessions 
    will fine tune content. We want to expand participants to include 
    Congressional offices and States.

 Budget--We intend to leverage existing agency budgets in 
    fiscal year 2005 on priorities such as training and technology.

    In sum, we will keep our eye on the ball, and make sure we can show 
you next year, just as we have today, that we are close to providing 
world class programs and services for our exporters. My colleagues and 
I promise you that with your support, we will follow through with our 
original agenda, and add to it as the needs of the business community, 
the TPCC agencies, and the Administration evolve.
    I thank you very much for inviting me here today. I would be 
pleased to answer any questions you may have.

                               ----------
                  PREPARED STATEMENT OF PHILIP MERRILL
                         President and Chairman
              The Export-Import Bank of the United States
                              May 21, 2003

Introduction
    Chairman Shelby, Ranking Member Sarbanes, and Members of the 
Committee, thank you for the opportunity this morning to join with my 
colleagues from the Trade Promotion Coordinating Committee to report on 
the status of the National Export Strategy.
    In May 2002, the Bush Administration issued its first National 
Export Strategy Report. This report served as a road map for the TPCC 
efforts over the past year. As stated by President Bush, this report 
``sets the course for achieving a world-class system of Federal 
programs that are coordinated, leveraged, and focused on the tools 
small and large U.S. companies need most to take advantage of emerging 
trade opportunities.'' The 2003 National Export Strategy Report that 
you recently received and my testimony today are primarily devoted to 
reporting on our progress in implementing the recommendations made in 
the 2002 National Export Strategy Report.
    As Chairman of the Export-Import Bank and Vice Chairman of the 
TPCC, I have a keen interest in working with the members of the TPCC to 
support our Nation's export sector. Last Fall, Ex-Im Bank went through 
one of the largest reorganizations in its history. The objective was to 
make Ex-Im Bank even more responsive to the needs of U.S. exporters who 
operate in a global environment that demands the rapid and efficient 
processing of financial transactions. The reorganization achieves this 
objective by improving customer service and streamlining case 
processing, while at the same time enhancing risk management.
    The reorganization has enhanced Ex-Im Bank's ability to fulfill its 
mission. That mission is to assist in the financing of the export of 
U.S. goods and services thereby helping to create and maintain U.S. 
jobs. Ex-Im Bank pursues its mission by providing financing to counter 
the effect of export credit financing from other governments or by 
taking reasonable credit risks that the private sector is unwilling or 
unable to accept. The reorganization also supports the recommendations 
made in the President's National Export Strategy for a streamlined and 
strategic approach for trade and export promotion.
    In nearly 70 years of operation, Ex-Im Bank has supported more than 
$400 billion in U.S. exports. In fiscal year 2002, Ex-Im Bank financed 
2,516 transactions in 
support of $12.9 billion in U.S. exports. We are continually striving 
to better serve our customers--U.S. exporters and those businesses and 
workers who are employed producing those exports.

Implementation of the National Export Strategy
    The TPCC was established by the Export Enhancement Act of 1992 to 
develop a coordinated and effective U.S. Government trade strategy to 
meet the needs of U.S. exporters. The Bush Administration has 
recognized the important role that the TPCC can play in supporting U.S. 
exports and U.S. jobs. Under the leadership of Secretary Evans, the 
TPCC has been reinvigorated as a mechanism for improved interagency 
coordination and cooperation, and I am committed to furthering this 
effort. In short, the TPCC strives to make it easier for U.S. 
businesses to understand and utilize the U.S. Government's export 
promotion programs. The recommendations put forward in last year's TPCC 
report were developed after in-depth discussions with our customers. 
The recommendations contained in this report are practical solutions to 
problems that encumber U.S. export potential.
    We have made progress in implementing many of the report's key 
recommendations. I will address three areas: (i) Joint Marketing, 
Training, and Small Business Initiatives; (ii) Early Project 
Development; and (iii) Tied and Untied Aid.
Joint Marketing, Training, and Small Business Initiatives
    Ex-Im Bank has led an interagency marketing task force consisting 
of Ex-Im Bank, SBA, DOC, and OPIC. The task force was formed to develop 
and execute joint marketing strategies to reach U.S. exporters, 
particularly those small and new exporters that are critical to U.S. 
job creation.
    This group planned, funded, and is now executing three primary 
tactics: Direct mail, participation in major trade shows, and exporter 
and lender seminars. We also collaborate with our TPCC partner agencies 
through the United States Export Assistance Centers throughout the 
United States, and are working with them to link our new website to the 
U.S. Government trade portal ``Export.gov.''
    Our marketing objective is straightforward: To establish a direct 
relationship between the U.S. exporter and U.S. Government trade 
agencies in a coordinated and cost-effective manner. Our collective 
efforts are making a difference. By sharing costs, we provide better 
value to the taxpayer, and by providing a complete menu of our services 
the exporter is better served. In fact, we estimate approximately 
$280,000 in savings from these joint marketing efforts since the summer 
of 2001. Ex-Im Bank is also continuously looking at ways, working with 
our TPCC partners, to leverage our resources by utilizing the private 
sector to reach and provide services to U.S. exporters.
    We have also implemented a cross-training program for Ex-Im Bank, 
DOC, SBA, OPIC, and TDA staff. This training is designed to enhance our 
ability to provide full-service trade finance advisory services to the 
export community.
    Finally, Ex-Im Bank is also working on an initiative with the SBA 
to collaborate by providing parallel financing and joint marketing for 
working capital transactions. This effort is designed to provide the 
small business exporter with a seamless 
approach to access working capital financing they need to increase 
export sales.

Early Project Development
    The aim of the Early Project Development Initiative is to 
coordinate more effectively the efforts of the U.S. Government trade 
agencies to secure contracts for U.S. exporters. To aid early promotion 
efforts, Ex-Im Bank has created an ``early project letter of interest'' 
intended to signal preliminary interest in a project before contracts 
are signed. In addition, Ex-Im Bank staff actively participates on the 
early project development country teams that the TPCC established to 
coordinate travel and promotion activities. Currently the interagency 
efforts are focused on three markets: Mexico, China, and Russia. We 
plan to broaden our focus to other target markets at the appropriate 
time.

 Mexico: This is Ex-Im Bank's largest market. We are actively 
    working to develop new products for this market and to coordinate 
    promotional activities with other U.S. Government agencies and the 
    Mexican government. Last September, the agencies brought together 
    municipal officials from renewable energy, solid waste management 
    and water treatment agencies, and U.S. companies in a conference 
    organized by Ex-Im Bank and the Mexican development bank, Banobras. 
    This conference built on the Partnership for Prosperity Initiative 
    created by President Bush and Mexican President Fox. Earlier this 
    month, I participated with my colleagues from OPIC, SBA, and TDA in 
    the Arizona Mexico Trade and Investment seminar in Tucson. We are 
    working with our partner agencies to follow up on leads from these 
    and other conferences.

 China: Numerous opportunities exist for U.S. exporters, 
    including projects associated with the Olympics in 2008 and the 
    World's Fair in 2010, and in key sectors such as: Environmental 
    protection, energy efficiency, wastewater treatment, medical 
    equipment, and electric power. We are working closely with the 
    Commercial Service and TDA to coordinate efforts to identify 
    opportunities for U.S. exporters. In support of these efforts, Ex-
    Im Bank is in the final stages of negotiations with China's 
    Ministry of Finance on a new Framework Agreement that will govern 
    the provision of future sovereign-based transactions.

 Russia: The Russia early project development team is pursing a 
    number of projects in the telecommunications and transportation 
    sectors. These projects are directly benefiting from enhanced 
    interagency cooperation and advocacy resulting from the early 
    project development initiative. Ex-Im Bank is working with the 
    Commercial Service to plan a working-level trip to Moscow and St. 
    Petersburg in June to follow up on these projects and to meet with 
    Russian Government officials to identify additional opportunities 
    for U.S. exporters.

Tied and Untied Aid
    In 2002, the TPCC launched several initiatives to counter foreign 
aid practices that place U.S. exporters at a competitive disadvantage. 
I would like to provide a brief update on our progress.

 Mixed-Credit Initiative: Under the auspices of the TPCC, Ex-Im 
    Bank, and USAID launched a mixed-credit initiative. Transactions 
    supported by this initiative will combine a USAID grant with 
    standard Ex-Im Bank financing to support developmentally sound, 
    commercially nonviable capital projects in middle-income developing 
    countries. The aim of the program is to leverage the resources of 
    the two agencies and expand the scope and magnitude of U.S. 
    Government-supported capital projects in target countries. Such a 
    partnership would allow the agencies to support U.S. Government 
    development objectives, while expanding business opportunities for 
    U.S. exporters.

 Agreement on Front End Engineering and Design: As a result of 
    an initiative in the National Export Strategy, the U.S. Government 
    succeeded in securing Japan's agreement to multilateral rules at 
    the OECD that prevent governments from using Tied Aid financing for 
    early project studies for projects subsequently financed with 
    Untied Aid. Ex-Im Bank will help monitor the implementation of this 
    agreement to ensure that foreign markets are effectively opened up 
    to U.S. exports of engineering and design services and capital 
    goods.

 Tied Aid War Chest: Ex-Im Bank, in cooperation with the 
    Treasury Department, continues to closely monitor the use of Tied 
    Aid by foreign governments. In 2002, the use of Tied Aid continued 
    to decline, dropping to $2.5 billion worldwide--a record low. When 
    compared to Tied Aid use in 2001, this represents nearly a 40 
    percent decrease in the use of Tied Aid worldwide. Ex-Im Bank and 
    Treasury have also agreed to new processes and standards governing 
    the use of the Tied Aid Credit Fund that will insure more rapid 
    case processing and improve U.S. exporter competitiveness.

Ex-Im Bank's Potential Role in Iraq Reconstruction
    I also want to share with you our current plan of action with 
respect to supporting U.S. exports to Iraq. Ex-Im Bank has established 
an internal task force that is working to address the legal and credit 
concerns that currently impede our ability to offer trade finance 
programs in Iraq. We are coordinating closely with the other TPCC 
member agencies--as well as the U.S. exporting community--in this 
effort.
    As you know, we are subject to a number of important programmatic 
constraints, including a need to find a ``reasonable assurance of 
repayment'' for every credit. However, we will bring energy and 
creativity to the task of helping U.S. companies provide the goods and 
services that are necessary for the reconstruction of Iraq. For 
example, we are actively considering mechanisms that would allow Ex-Im 
Bank to support United States exports to Iraq sooner rather than later, 
including taking the credit risk of companies and of banks in third 
countries--such as Turkey, Jordan, and Kuwait--that may be involved in 
obtaining U.S. goods and services for reconstruction efforts.

Conclusion
    In conclusion, I have come before you today to provide an update on 
the progress that the TPCC and Ex-Im Bank have made in implementing the 
recommendations contained in the National Export Strategy. I am 
encouraged by the strides we have made over the past year through the 
TPCC, which has served as the Bush Administration's primary vehicle to 
coordinate, streamline, and improve Federal export 
assistance programs. Continued implementation of the recommendations of 
the 
National Export Strategy through the coordinated efforts of the TPCC 
will help to insure that U.S. exporters have the tools that they need 
to remain competitive in the dynamic global marketplace. I would like 
to thank this Committee for its support of the TPCC, Secretary Evans 
for his leadership, and my TPCC colleagues here today for their 
commitment to this important effort. I appreciate the opportunity to 
appear before you and I would be happy to respond to any questions you 
may have at this time.

                               ----------
                 PREPARED STATEMENT OF PETER S. WATSON
                 President and Chief Executive Officer
                Overseas Private Investment Corporation
                              May 21, 2003

    Chairman Shelby, Senator Paul Sarbanes, and distinguished Members 
of the Committee, it is an honor to appear before you today to discuss 
our progress in implementing the recommendations of the President's 
National Export Strategy. As President Bush himself said last year, 
this report ``sets the course for achieving a world class system of 
Federal programs that are coordinated, leveraged, and focused on the 
tools small and large companies need most to take advantage of emerging 
trade opportunities.'' I believe we have been faithful to the 
President's promise.
    At the outset, please allow me to express OPIC's sincere 
appreciation for the leadership of Secretary of Commerce Don Evans, 
whose determined efforts and strategic vision have been key to 
marshaling the collective resources of our agencies to implement the 
Trade Promotion Coordinating Committee's (TPCC) worthy mandate.
    Mr. Chairman, when I joined OPIC nearly 2 years ago, we set out to 
implement guidance from the President that would enable OPIC to do a 
better job of bringing the benefits of economic development to the 
neediest countries, that would foster 
increased cooperation with the private market to enhance investment 
resources, and that would focus on the needs of smaller U.S. businesses 
to pursue opportunities in the developing world.
    Over these past 2 years, we have met this challenge. We have 
reformed for success, supporting critical developmental investments 
into chronically underserved regions. For instance, since October 2001, 
OPIC has supported nearly $750 million in new projects in sub-Saharan Africa. We have created a new relationship with the private market whereby OPIC complements rather than competes with private financing and insurance, and 
in so doing, leverages resources that allow OPIC to cooperatively lead the 
private market into the least developed countries and underserved 
sectors.
    We have also made a real commitment to small- and medium-sized 
businesses. In 2002, 67 percent of approved OPIC projects were for 
small- and medium-sized enterprises. Last year, we created the OPIC 
Small Business Center, specifically to meet the needs of companies with 
revenues of less than $35 million. We have also streamlined our 
approval process to provide small business users with a 60-day 
turnaround. As a result, OPIC is making it easier for small business to 
access OPIC programs and we are approving more small business projects.
    To measure the developmental impact of these projects, OPIC has 
developed specific criteria for evaluating the development contribution 
of each of its projects. This new tool allows us to judge empirically 
the value of our commitments, as we make OPIC more relevant to its 
original development mission.
    In sum, we have seen promises made and promises kept.
    Similarly, our testimony here today confirms that during the past 
year, the TPCC has also made and kept promises. OPIC has been 
privileged to play a role in this process. Allow me to highlight some 
of these results.

Afghanistan
    Over the past year, the TPCC has helped coordinate a comprehensive 
commercial strategy for rebuilding and revitalizing Afghanistan by 
harnessing the U.S. private sector. For its part, OPIC is pleased to 
have conducted the first joint investment mission to Afghanistan with 
our colleagues from the Trade and Development Agency (TDA) in May 2002.
    We initially pledged a $50 million line of credit for Afghanistan, 
and I am pleased to report that the agency is fulfilling this pledge. 
With $35 million in OPIC financing and insurance, a consortium of U.S. 
sponsors will soon break ground on a five star international hotel in 
Kabul, managed by Hyatt International. The project will represent the 
largest single United States private investment in Afghanistan since 
the fall of the Taliban; indeed, the largest United States investment 
in a generation if not more. With additional projects in the pipeline, 
I was confident in raising our line of credit from $50 million to $100 
million during President Karzai's recent visit to the United States.

Pakistan
    Additionally, OPIC has been active and successful in promoting 
private investment in Pakistan. As you will remember from last year, 
OPIC, the Export-Import Bank (Ex-Im) and TDA formed the first 
investment development mission to Pakistan in February 2002, with OPIC 
pledging a $300 million line of credit. Since then, OPIC has supported 
nearly $350 million in projects, including significant investments in 
financial services, power, and information technology.

Interagency Coordination
    These types of initiatives find their genesis in better interagency 
coordination and OPIC has been working hard with its TPCC colleagues 
this past year to find innovative ways to leverage our resources and 
expertise.
    In September 2002, I was privileged to conclude a Small Business 
Initiative with the Small Business Administration (SBA) Administrator 
Hector Barreto, which will allow for greater cross-training and 
information sharing for our employees. I am also pleased that we will 
soon have an SBA detailee as a full-time staff member in OPIC's Small 
Business Center.
    Just last week, I was pleased to join with Maria Cino of the U.S. 
Department of Commerce Commercial Service to sign a Memorandum of 
Understanding (MOU) that commits our two organizations to greater 
cross-training and business lead 
development.
    For the future, OPIC will be working to conclude an MOU with the 
Agency for International Development (USAID), which will provide 
greater coordination between our respective guaranty programs and 
leverage USAID's global presence with OPIC's 31 years of experience in 
promoting private sector development. All of these cooperative efforts 
make greater use of existing resources for the benefit of U.S. business 
and the American taxpayer.

Conferences
    Getting the word out to the users of our services is another 
important part of our enhanced coordination. To that end, I am pleased 
to mention several outreach efforts. In early May, leaders from Ex-Im, SBA, TDA, and OPIC met in Arizona for a Trade and Investment Forum, targeting smaller businesses.
    Last October, OPIC was joined by Ex-Im and TDA for a regional trade 
and investment conference in Peru that attracted more than 200 
companies. In November, 50 companies participated in a U.S. Serbia 
Business Conference in conjunction with the Department of Commerce. 
With our TPCC partners, we are planning joint business development 
missions throughout Russia later this year.

The Future
    Looking to the future, OPIC is strongly committed to building on 
the cooperation and results of the past year. As the Secretary has 
said, Iraq will clearly be a priority in the coming year. Once we have 
cleared sanctions and technical operating issues, OPIC is prepared to 
use its finance, political risk insurance, and investment funds 
programs to support private sector investment, including liquidity for 
the financial sector and political risk insurance for businesses and 
contractors. We are uniquely suited as a risk mitigator to support the 
private sector in this endeavor.

Conclusion
    This year, Congress will have the opportunity to review OPIC and 
its refocused agenda as it considers reauthorization of OPIC programs. 
The Administration has submitted a legislative request to Congress to 
reauthorize OPIC for 4 years and to update its statute by modernizing 
and improving OPIC to expand development and operate in today's 
changing global economy. Although not under the jurisdiction of this 
Committee, we look forward to working with many of you here in securing 
approval of this legislation before OPIC's current authority expires 
later this year.
    In closing, I would like to thank the Committee for its support of 
the TPCC. OPIC will stay true to its promise to promote private 
investment in underserved countries and regions, while complementing 
the private sector to maximize our developmental impact. With a 
refocused mission and a track record of results, OPIC is a ``partner of 
the willing'' with our colleagues here today to provide the most 
effective investment promotion services for U.S. businesses and the 
American taxpayers.
    Thank you, and I would be pleased to answer your questions.

                               ----------
              PREPARED STATEMENT OF HECTOR V. BARRETO, JR.
           Administrator, U.S. Small Business Administration
                              May 21, 2003

    Mr. Chairman, Ranking Member, and distinguished Members of the 
Committee, thank you for inviting me to testify on the Trade Promotion 
Coordinating Committee's (TPCC) National Export Strategy and the role 
that the U.S. Small Business Administration (SBA) plays in the Federal 
Government's export promotion strategy.
    I would first like to recognize the outstanding leadership of 
Secretary Evans. The SBA has been working closely with the Department 
of Commerce, Export-Import Bank of the United States (Ex-Im Bank), the 
Overseas Private Investment Corporation (OPIC), and other TPCC agencies 
in developing recommendations for the National Export Strategy . . . 
and we feel that our work, together, will help ensure that American 
small businesses will be competitive in a global marketplace.
    Small businesses create two-thirds of new U.S. jobs, are 
responsible for much of our economy's innovation, and generate over 
half of our private gross domestic product. But while approximately 
two-thirds of U.S. exporters have fewer than 20 employees, fewer than 1 
percent of our small businesses are exporting their products.
    That percentage is too small, especially when you consider the fact 
that desire to engage in trade is strong. A survey done by the 
Department of Commerce to more than 2,000 nonexporting firms last year 
indicated that 30 percent of them would be interested in exporting if 
someone pointed the way. In order to meet the needs of small- and 
medium-sized firms and create a ``one-stop-shop'' approach, over the 
past year we have enhanced our working relationships with our partners 
in such a way that will guide and assist small businesses to have an 
even greater opportunity to trade abroad.
    Before we began to strengthen our relationship with other TPCC 
agencies, SBA reviewed the 2002 National Export Strategy 
recommendations and looked at the areas in which change could be made 
quickly, hopefully having instant results for our small business export 
community.
    I am pleased to announce that SBA was able to increase the limit of 
our Export Express Business development loan guarantee program from 
$150,000 to $250,000 . . . an enhancement which quickly created a 
greater amount of capital for small business to finance their export 
development costs such as participation in foreign trade shows or 
translation of product catalogs, as well as the financing actual export 
orders. Over the past year, SBA and Ex-Im have been very active since 
we entered into a ``Small Business Initiative'' Memorandum of 
Understanding. To leverage marketing resources and raise awareness 
among lenders and exporters, we have done a number of things.
    First, we held joint export symposia throughout the United States, 
focusing on showing a streamlined approach to exporters. We have also 
been working on a joint marketing initiative over the past year. 
Although these are great accomplishments, we are still not done yet. We 
have established a task force to look at further integrating SBA/Ex-Im 
Bank working capital programs. Coordination with other Federal agencies 
is one of the best ways to achieve an increase in small business trade 
participation.
    Another example of interagency coordination is our work with the 
Overseas Private Investment Corporation. Just recently, SBA 
participated in a Trade Investment Forum in Arizona that reached out to 
our small business exporters and introduced them to all the products 
and services that are available. We see this as just the 
beginning to this very important partnership and only see it getting 
stronger. For 
example, SBA intends to detail one of our employees to OPIC to work 
with their new small business center.
    The ability to work very closely with the Department of Commerce in 
reaching out to the small business community has been very rewarding 
and has shown results. I have had the opportunity to participate with 
Secretary Evans on several trade missions abroad which focused on 
opening new market opportunities for small business.
    One example of a success story is of a business owner from Chicago, 
Illinois, who received a significant order for his products as the 
result of a trade mission that took place in Mexico last year. SBA 
helped the business owner attend that mission.
    Reaching out domestically to the export community has also been a 
high priority between the SBA and Department of Commerce. For instance, 
we have successfully participated in major domestic trade shows, trade 
finance seminars, and direct mail campaigns.
    SBA looks forward to continuing its work with other TPCC agencies 
to make sure the coordination of trade promotion and financing programs 
meet the needs of our small business exporter's needs. We are fully 
committed to supporting the President's overall trade agenda abroad as 
it sets up opportunities for small business.
    An example of our commitment is the fact that we currently have 
representatives from the agency participating within the Central 
America Free Trade Agreement and the Southern African Customs Union 
trade capacity building group to make sure small business concerns are 
addressed and implemented with the trade negotiations. Another sign of 
our commitment to trade has been the recent assignment of one of my 
senior staff to work closely with the U.S. Trade Representative office 
to represent small business on a daily basis and assure that as U.S. 
Trade increases globally that so due the opportunities to small 
business that wants to trade abroad.
    There has never been a better time to make sure U.S. small 
businesses continue to be the most competitive companies in the world.
    I look forward to SBA's ongoing contribution to the TPCC and our 
commitment to evaluate and better coordinate our programs. I would be 
happy to answer any questions you may have. Thank you.

                               ----------
               PREPARED STATEMENT OF BARBARA R. BRADFORD
           Deputy Director, U.S. Trade and Development Agency
                              May 21, 2003

    Thank you, Chairman Shelby, Senator Sarbanes, and Members of the 
Committee. It is a pleasure to appear before you to highlight the role 
that the U.S. Trade and Development Agency (USTDA) is playing in 
advancing the U.S. Government's trade agenda as a member of the Trade 
Promotion Coordinating Committee (TPCC). I want to begin by thanking 
the Committee for the strong support that it has given to USTDA in the 
past as we work to promote commercially viable development around the 
world.
    USTDA works closely with Secretary Evans and other members of the 
TPCC to enhance our mutual effectiveness in promoting U.S. exports. In 
particular, USTDA collaborates with our colleagues on the TPCC to bring 
their particular expertise and resources to a wide range of development 
objectives. Among the agencies that USTDA coordinates with are the U.S. 
Departments of State, Treasury, Commerce, Transportation, Energy, 
Agriculture, and Homeland Security; the Office of the U.S. Trade 
Representative (USTR); the Export-Import Bank of the United States (Ex-
Im Bank); and the Overseas Private Investment Corporation (OPIC). USTDA 
works in conjunction with other TPCC members, to leverage our resources 
and focus our joint efforts on projects and activities that will garner 
U.S. export success.
    In addition to our partnerships with other U.S. Government 
agencies, USTDA works closely with overseas foreign project sponsors to 
help them fulfill important development objectives. We also receive 
tremendous support from the U.S. private sector and the many individual 
firms around the country that we help to position to export their 
goods, services, and expertise to overseas markets.
    During the past year, USTDA has taken a number of steps to 
implement the 
action plan laid out in last year's National Export Strategy. In 
particular, USTDA is active in many of the post-crisis regions of the 
world that are discussed in this year's report, such as Afghanistan. I 
have an attachment to my testimony, Mr. Chairman, which I would like to 
submit for the record that highlights a number of current and recent 
USTDA activities. As this paper shows, USTDA is targeting and tailoring 
its activities to support important U.S. trade and foreign policy 
initiatives.
    USTDA is well-suited to respond rapidly to changing global 
environments as we provide effective service to our clients in the U.S. 
private sector, in Government, and overseas. Given the flexible nature 
of the USTDA program, the agency is often one of the first U.S. 
Government agencies to deliver trade-related assistance in post- 
crisis regions and countries. In early 2002, for example, USTDA 
launched an aggressive infrastructure and capacity-building program in 
Afghanistan. Already, we have committed roughly $2.5 million for 
project planning activities in the Afghan civil aviation, 
telecommunications, oil and gas, and electric power sectors. We are 
considering approximately $3 million in additional activities.
    In delivering this assistance, USTDA works closely with other U.S. 
Government agencies, taking advantage of their expertise. These include 
the Federal Aviation Administration, the U.S. Geological Survey, the 
U.S. Agency for International Development (USAID), the Federal 
Communications Commission, and the U.S. Departments of Energy, 
Commerce, and State. Our country program in Afghanistan is a perfect 
example of the agency's rapid response to new priorities and to our use 
of public-private partnerships to bring U.S. expertise and resources to 
bear in helping a country achieve its development goals. Next month, 
USTDA will cosponsor a major conference with the U.S. Department of 
Commerce. This conference will highlight reconstruction opportunities 
in Afghanistan that were identified during a 
series of USTDA-funded definitional missions and orientation visits as 
having strong potential for U.S. private sector involvement.
    We also have moved quickly to build on our existing programs in 
other Frontline States. Overall, USTDA funded 22 activities in 
Uzbekistan, Kyrgyzstan, and Kazakhstan in fiscal year 2002. These 
activities encompass projects in rail, information technology, water, 
power, and petrochemicals, as well as small- and medium-sized 
enterprise development. In January 2003, USTDA awarded its first grant 
since reopening in Pakistan in support of a proposed desalination plant 
in Karachi. Other USTDA activities in Pakistan involve the development 
of a secondary mortgage market, and a study funded jointly by USTDA and 
the International Finance Corporation addressing the identification and 
elimination of trade and investment barriers.
    USTDA anticipates implementing a program in Iraq modeled on the 
approach we are taking in Afghanistan. There is an important role for 
USTDA to play in Iraq to put the private sector to work in many sectors 
essential to development efforts. These areas include transportation, 
telecommunications, electric power, and downstream petroleum 
processing, such as refining, petrochemicals, and fertilizer 
production. These key infrastructure sectors represent areas in which 
the need will be great for new investment and in which the population 
will receive direct and tangible benefits. Equally important, the 
United States private sector possesses experience and expertise in 
these fields that can help to advance modernization and healthy 
economic development in Iraq.
    Another component of the USTDA portfolio is our support for U.S. 
trade policy initiatives. To this end, the USTDA is supplying targeted 
assistance to facilitate a number of U.S. trade policy objectives that 
are discussed in the National Export Strategy. In Africa, for example, 
the agency has supported activities pursuant to the African Growth and 
Opportunity Act (AGOA) framework, including the establishment last year 
of a USTDA Africa Regional Trade and Development Office in 
Johannesburg, South Africa. Other related activities that USTDA has 
funded include AGOA training, provided in conjunction with USTR, in 
Cameroon, Ghana, and Uganda. In addition, the agency sponsored separate 
orientation visits to the United States for African manufacturers to 
meet potential U.S. suppliers to support qualified industries under 
AGOA. In March, the agency supported the negotiation of a U.S.-Southern 
African Customs Union (SACU) Free Trade Agreement (FTA) by sponsoring a 
trade-related study tour for trade negotiators from SACU member 
countries.
    USTDA also is working closely with the USTR and other agencies by 
providing support to a number of on-going trade negotiations. This 
support includes technical assistance and capacity-building activities 
related to the Free Trade Area of the Americas, the U.S.-SACU FTA, and 
the U.S.-Morocco FTA, among others. We are currently exploring possible 
areas for support related to the U.S.-Chile FTA. Most recently, USTDA 
announced trade capacity-building activities in the information 
technology sector in Costa Rica, El Salvador, Guatemala, Honduras, and 
Nicaragua as part of the U.S.-Central American Free Trade Agreement 
(CAFTA) negotiations. These are just a few examples of the agency's 
trade capacity-building activities.
    This year's National Export Strategy discusses a number of sectors 
that are priorities for the TPCC. Many of these are high priorities for 
USTDA, as well. Among them is transportation security. Overall, 
transportation was the largest sector in the USTDA portfolio in fiscal 
year 2002. At last year's meeting of the Asia-Pacific Economic 
Cooperation (APEC) forum, the Secure Trade in the APEC Region (STAR) 
Initiative was announced. Since then, USTDA has taken a leading role in 
identifying and supporting potential transportation security projects. 
In February, USTDA cosponsored a STAR conference with the U.S. 
Department of State in Bangkok, Thailand, that was attended by 
delegations from 21 APEC member economies. Discussions focused on 
policies and procedures to enhance security and efficiency in the APEC 
region's seaports, airports, and other access points. A key point of 
agreement among all participants was the need for new partnerships 
between the government and business. USTDA is poised to follow through 
on this agreement by identifying and helping to develop specific 
projects for implementation.
    Agricultural biotechnology (ag-biotech) issues are another focus of 
the USTDA program and of the National Export Strategy. Specifically, 
USTDA is sponsoring a trade capacity-building program for Chinese 
regulators, government ministries, and scientists designed to minimize 
administrative and regulatory impediments to international trade in ag-
biotech products. The USTDA also funded an orientation visit to the 
United States to support the Chilean government's efforts to enact new 
legislation regulating the biotech industry as part of the USTDA's trade 
capacity-building activities.
    The service sector accounted for nearly 10 percent of USTDA 
activities in fiscal year 2002. As mentioned in the National Export 
Strategy, last year the USTDA sponsored its first conference 
highlighting tourism as a development sector. The conference focused on 
tourism projects in Eurasia and brought together over 200 attendees. 
Among them were representatives of Eurasian companies and governments; 
United States and other financing institutions; U.S. companies involved 
in construction and engineering, hotel supply, transportation, and 
consulting; and senior U.S. Government officials.
    The USTDA combined its focus on services and information technology 
last fall by cosponsoring a worldwide conference on implementing e-
government programs. USTDA jointly sponsored this event with the U.S. 
Department of State and USAID. This highly successful conference 
presented a forum for participants to discuss issues of common concern 
and to establish peer-to-peer networks for further cooperation. The 
event also provided opportunities for participants to consult with U.S. 
companies whose products and services could contribute to the 
development of successful e-government initiatives.
    USTDA also maintains active programs in countries targeted in the 
National Export Strategy for early project development, such as China, 
Mexico, and Russia. USTDA reopened in China about 2 years ago and our 
portfolio there has grown rapidly. In 2002, we were involved in 46 
projects in China, with a focus on aviation safety, energy, and the 
environment. Based on the strong commitment by China's many private and 
public sector sponsors to work with USTDA in a smooth and efficient 
manner, China was awarded the agency's 2002 Country of the Year honor. 
Currently, USTDA is considering sponsoring a conference on project 
financing in China designed to help project sponsors find the right 
financing mechanism to implement important development objectives.
    In Mexico, USTDA has funded several activities supporting the 
Partnership for Prosperity, which Presidents Bush and Fox initiated 2 
years ago. Among them are master grant agreements that were signed last 
year with two Mexican development banks. These master grant agreements 
provide a framework, which will enable the banks to contract with U.S. 
firms to carry out studies related to their respective technical 
assistance programs.
    USTDA maintains an active program in Russia. Many U.S. firms 
continue to see good market opportunities in that country. USTDA is 
working closely with our TPCC colleagues to better coordinate our 
activities and to leverage our resources to maximize our support for 
U.S. firms pursuing business opportunities in Russia.
    The USTDA also has implemented strong programs in other parts of 
the world, including Central and Eastern Europe. USTDA activities in 
this region focus on environmental investments that can be financed on 
commercial terms, particularly in the waste-to-energy and renewable 
energy sectors. In December 2002, USTDA sponsored a major conference on 
this subject to highlight projects that represent significant export 
potential for U.S. firms.
    The USTDA portfolio demonstrates that our agency is one that seeks 
out new challenges. We are also results oriented. To date, our combined 
efforts with other Federal agencies and with the U.S. private sector 
have produced numerous success stories around the world. Overall, 30 
percent of U.S. exports associated with USTDA-funded activities have 
received Ex-Im Bank loans and guarantees.
    Some country-specific examples of our work with other agencies 
include Vietnam, where our efforts and those of other agencies, led to 
a large procurement of GE aircraft engines. In Morocco, we coordinated 
our activities with the U.S. Commercial Service to support a U.S. firm 
that successfully competed to construct and operate the Fes Controlled 
Landfill. In Brazil, USTDA sponsored an orientation visit to the United 
States for private rail concessionaires after the U.S. Commercial 
Service identified opportunities for the sale of U.S. rail maintenance 
equipment. In Georgia, a USTDA-funded feasibility study led to an Ex-Im 
Bank loan for an air traffic control system supplied by Northrop 
Grumman. In Russia, USTDA-funded studies on refinery upgrades have led 
to hundreds of millions of dollars in United States sales.
    USTDA also participates in a number of events throughout the year 
designed to inform the private sector about the agency's program. As 
mentioned in the National Export Strategy, USTDA participated in an 
OPIC conference last year on Andean Regional Trade and Investment. 
Earlier this spring, the USTDA participated in the Ex-Im Bank's Annual 
Conference, as well as the Arizona-Mexico Trade and Investment 
Conference that was sponsored by OPIC.
    In addition, USTDA has a strong record of supporting smaller 
businesses interested in expanding their international portfolio. 
Building on this record, the USTDA sponsored a one-day contract 
opportunities seminar this spring for representatives of small- and 
medium-sized businesses interested in exploring opportunities to 
increase their exports to overseas markets. The program focused on how 
to take advantage of contracting opportunities with the USTDA and 
showcased the types of assistance available through the Federal 
Government to help U.S. businesses compete successfully in the 
international arena. The seminar included participation from the U.S. 
Small Business Administration, the U.S. Commercial Service, Ex-Im Bank, 
and OPIC. The Honorable Hector Barreto, Administrator of the U.S. Small 
Business Administration, was the keynote speaker for the day's events.
    USTDA also participated in the pilot interagency training course 
that is discussed in the National Export Strategy. This event, which 
was held in January 2003, was a good initial exercise in bringing 
together TPCC member agencies and highlighted our respective roles in 
promoting U.S. exports. Based on the success of this event, USTDA looks 
forward to hosting the next training session in the Business Center at 
our headquarters next month.
    As we look to the future, USTDA anticipates continued high demand 
for its programs. Developing countries are reaching out to learn from 
the world's best practices as they seek to implement policies and 
projects that promote economic growth and sustainable development. 
USTDA is responding to this initiative by connecting overseas project 
sponsors with U.S. firms that have the commercially tested expertise 
and technology necessary to achieve important development objectives.
    The circumstances of our time require agencies to restructure 
themselves to respond to new priorities as they emerge. The members of 
the TPCC are at the forefront of this endeavor. USTDA looks forward to 
continuing to work with other TPCC members as we jointly support U.S. 
companies in their efforts to increase their involvement in challenging 
foreign markets.
    Thank you again for this opportunity to testify. The USTDA looks 
forward to continuing to work with the Committee and with our 
colleagues on the TPCC in advancing our dual trade and development 
mission. I would be happy to answer any questions.
                                *  *  *
Activity in Post-Crisis Regions
Afghanistan Reconstruction

 In Afghanistan, USTDA has undertaken a series of activities, 
    primarily targeting those sectors in which the U.S. private sector 
    can make a significant contribution to the reconstruction effort. 
    In delivering this assistance, USTDA works closely with other USG 
    agencies, taking advantage of their expertise. These include the 
    FAA, U.S. Geological Survey, USAID, FCC, and the U.S. Departments 
    of Energy, Commerce, and State.

 Since opening USTDA's program in Afghanistan in early 2002, 
    the agency has committed roughly $2.5 million for a series of 
    activities in the civil aviation, telecommunications, oil and gas, 
    electric power, and other sectors.

 USTDA is considering roughly $3 million in additional support 
    activities; including a study on the establishment of an American 
    University in Afghanistan, training and studies related to civil 
    aviation, and an oil and gas resource assessment.

 USTDA and the U.S. Department of Commerce are sponsoring a 
    conference in Chicago in June 2003, to present and discuss the 
    rebuilding of Afghanistan's infrastructure. The sectors to be 
    presented include: Power and energy; water and sanitation; 
    transportation; buildings; gas and oil pipelines; construction; 
    health care; and tourism. Twenty-five Afghan delegates, including 
    senior Ministers and representatives from international financial 
    institutions, will attend the conference. Many of the 
    infrastructure projects to be discussed are the result of a series 
    of Definitional Missions and Orientation Visits that USTDA has 
    sponsored.

Frontline States in Central Asia
 In Pakistan, USTDA provided a grant to the Karachi Port Trust 
    to support a proposed 25 million gallons per day desalination plant 
    project. Karachi is experiencing a dire potable water shortage and 
    this project would result in a significant increase in the supply 
    of potable water to this rapidly growing city of 12 million 
    inhabitants.

 In Kyrgyzstan, USTDA supported an e-government project, which 
    will help the government deliver government services more 
    efficiently and effectively.

 In Kazakhstan, USTDA sponsored both a feasibility study on 
    potential aviation projects and an orientation visit that brought 
    Kazakh aviation officials to the United States. The resulting 
    meetings provided follow-on contracts for U.S. companies eager to 
    do business in Kazakhstan, and have laid the foundation for 
    future projects in this sector.

 USTDA had a substantial program in Uzbekistan in fiscal year 
    2002, including projects in rail, information technology, water, 
    power, and petrochemicals, as well as small- and medium-sized 
    enterprise development.

Transportation Security and Safety Initiatives
 Following the APEC Leaders' announcement in Los Cabos, Mexico 
    of the Secure Trade in the APEC Region (STAR) Initiative in 2002, 
    USTDA has taken a leading role in identifying and supporting 
    potential transportation security projects.

 In February 2003, USTDA sponsored a STAR conference in 
    Bangkok, Thailand. Twenty-one of the APEC member states sent 
    delegations that included officials responsible for the security 
    oversight of transportation, trade, customs, and related functions. 
    Private sector representatives attended as well. Discussions 
    focused on policies and procedures to enhance security and 
    efficiency in the APEC region's seaports, airports, and other 
    access points. A key point of agreement among all participants was 
    the need for new partnerships between government and business to 
    support security initiatives.

 USTDA has been active for many years in supporting the 
    transportation projects, and has increased its emphasis on 
    transportation security-related activities. For example, in 2002, 
    USTDA sponsored 114 transportation activities totaling $17.2 
    million.

 USTDA's Africa and the Middle East region is spearheading many 
    of the agency's regional and interagency transportation security 
    projects previously discussed, including the Middle East Regional 
    GPS/GNSS project, the East Africa Regional GPS/GNSS project, and 
    the Deepwater Systems for Southern Africa.

 A Definitional Mission will visit Bulgaria and Romania in 
    April 2003, to support aviation security strategic planning.
Participation in the Administration's Trade Agenda
 In the area of trade capacity building, USTDA is working 
    closely with the U.S. Trade Representative (USTR) and other 
    agencies to provide key support for technical assistance activities 
    related to the regional Free Trade Agreement (FTA) with the 
    Southern Africa Customs Union (SACU), and the negotiation of the 
    U.S.-Morocco FTA. This included funding for a workshop for SACU 
    lead negotiators.

 USTDA is supporting capacity-building efforts related to the 
    negotiation of a U.S.-Central American Free Trade Agreement 
    (CAFTA). Most prominently, USTDA is supporting several trade-
    related information technology (IT) priority projects in Costa 
    Rica, El Salvador, Guatemala, Honduras, and Nicaragua.

 USTDA has funded several activities in support of the 
    Partnership for Prosperity with Mexico. In 2002, USTDA signed 
    master grant agreements with two Mexican development banks, 
    Nacional Financiera (NAFIN) and Banco Nacional de Servicios y Obras 
    Publicas (BANOBRAS), that will enable the banks to contract with 
    U.S. firms to carry out studies related to their respective 
    technical assistance programs.

 USTDA is funding technical assistance for NAFIN to strengthen 
    the venture capital industry in Mexico. The technical assistance 
    will result in recommendations that will provide the necessary 
    framework for the Mexican government to move forward with 
    legislative and policy measures.

 USTDA's Europe region maintains a strong focus on the 
    environment. In December 2002, USTDA sponsored a conference 
    focusing on waste-to-energy and renewable energy projects in 
    Central and Eastern Europe. USTDA has continued to pursue specific 
    projects in this sector and recently signed grant agreements 
    supporting a wind energy project in Hungary and a biomass to energy 
    co-generation power plant project in the Czech Republic.

 As Romania begins a massive energy privatization and 
    investment program, USTDA is planning to bring a delegation of 
    Romanian energy officials to the United States to help ensure the 
    Romanians look to American companies as their first source of 
    potential partners.

 USTDA is further developing its China program, with emphasis 
    on transportation, particularly aviation safety, clean energy, and 
    environmental sectors. Training programs for aviation safety, 
    natural gas, and agricultural biotechnology initiatives are 
    underway. A customs modernization project, that is an expansion of 
    the Shanghai Model Port Project, is in the immediate pipeline.

 USTDA efforts in Southeast Asia will concentrate on furthering 
    efforts to upgrade regional transportation security infrastructure, 
    as well as improving environmental conditions and the efficiency of 
    national and regional utilities.

 RESPONSE TO WRITTEN QUESTION OF SENATOR MILLER FROM HECTOR V. 
                          BARRETO, JR.

Q.1. Mr. Barreto, I understand your budgets of SBA have been 
cut by Congress and the Administration. How will these cuts 
impact your TPCC work?

A.1. The Administration requested $3.1 million in fiscal years 
2003 and 2004 for the U.S. Export Assistance Centers (USEAC's). 
The Fiscal Year 2003 Omnibus Appropriations Act did not provide 
funding for the USEAC's.
    We have worked very closely with the Department of Commerce 
on this very critical function, and we plan to continue to do 
that. There should not be any decrease in SBA's participation 
with the TPCC or export assistance in general. The USEAC's are 
still operating, with the assistance of our TPCC partners, and 
small businesses will still receive the assistance and training 
that they need.
    The SBA is working with The Trade Promotion Coordinating 
Committee and Ex-Im Bank in not only creating better harmonized 
marketing programs while also harmonizing Ex-Im and the SBA's 
Export Working Capital Programs.



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