[Senate Hearing 109-]
[From the U.S. Government Publishing Office]



 
  COMMERCE, JUSTICE, SCIENCE, AND RELATED AGENCIES APPROPRIATIONS FOR 
                            FISCAL YEAR 2006

                              ----------                              


                         THURSDAY, MAY 26, 2005

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 2:02 p.m., in room S-146, the 
Capitol, Hon. Richard C. Shelby (chairman) presiding.
    Present: Senators Shelby, Gregg, Stevens, Cochran, and 
Mikulski.

                         DEPARTMENT OF COMMERCE

                        Office of the Secretary

STATEMENT OF HON. CARLOS M. GUTIERREZ, SECRETARY OF 
            COMMERCE
    Senator Shelby. The subcommittee will come to order. I want 
to welcome the Secretary of Commerce, Secretary Gutierrez, who 
is here today. This is your first appearance before the newly 
created Senate Appropriations Subcommittee on Commerce, 
Justice, Science, and Related Agencies. Welcome, Mr. Secretary.
    Secretary Gutierrez. Thank you.

                             BUDGET REQUEST

    Senator Shelby. We thank you for joining us for this budget 
discussion.
    We look forward to hearing from you about your vision for 
the Commerce Department and the challenges that you see as the 
Secretary in the coming year. Given the tight budget, we seem 
to always have tight budget constraints that we are facing, 
this subcommittee will need your assistance big time in making 
some very tough choices about the distribution of resources as 
well as your guidance regarding the essential priorities of the 
Department of Commerce.
    The fiscal year 2006 budget request which is before us for 
the Department of Commerce is $9.4 billion. This includes $3.7 
billion for the President's strengthening America's communities 
initiative, and with the initiative, the Department's total 
budget increases by $3 billion over last year's funding level. 
Without the initiative, however, the Department's total budget 
decreases by $656 million.
    While this initiative has laudable goals, I believe there 
may be some obstacles ahead. The program consolidates 18 
Federal economic and community development programs from a 
variety of agencies into a single direct grant program to be 
housed in the Commerce Department. Legislation has not yet been 
introduced to authorize the program, and the details of the 
initiative are still unknown. I hope today you will provide us 
some information regarding the details that have been lacking 
about the initiative as well as your plan for moving forward. I 
think it is important for us as appropriators to know where we 
are going and how we're going to get there.
    The Department's budget also, Mr. Secretary, proposes 
significant increases for the Census Bureau, the Patent and 
Trademark Office (PTO), and the Bureau of Industry and Security 
(BIS). I understand that the increase for the Census Bureau 
primarily supports the decennial census, and the increase for 
PTO reflects full access to its fees and will support 
minimizing application processing time and enhancing the 
quality of products and services for the patent process and the 
trademark process. I hope we can discuss these increases.
    We would also like to discuss whether the increases 
proposed for the Bureau of Industry and Security are sufficient 
to support BIS' critical mission regulating the export of 
sensitive goods and technologies. Your budget does include some 
programmatic decreases and this concerns me. Mr. Secretary, the 
administration proposes to cut funding for the National Oceanic 
and Atmospheric Administration (NOAA) by 8.5 percent. The cut 
comes at a time when the Presidentially appointed U.S. Ocean 
Commission recommended doubling our Federal expenditures on 
ocean and coastal research, and given the recommendation, the 
subcommittee finds such a decrease a little puzzling.
    Mr. Secretary, following your confirmation, I am sure you 
were surprised to learn that NOAA makes up 65 percent of your 
budget. While we appreciate that you must balance many 
important priorities within the Department of Commerce, you 
will find on this subcommittee, there is significant interest 
in NOAA. NOAA produces nautical charts and tide predictions 
critical to trade and commerce. It manages fish and shellfish 
for world consumption. It provides weather and climate 
predictions vital to the agriculture and energy sectors and to 
commerce as a whole. Mr. Secretary, I hope as you begin to 
write your first budget request for the Commerce Department, 
you consider carefully the concerns of this subcommittee 
regarding the funding for NOAA.
    I am pleased that the administration continues to show 
support in its budget request for the labs of the National 
Institute of Standards and Technology, better known as NIST, by 
proposing $426 million, a 12.5 percent increase above last 
year's appropriation. Your labs play a vital role in the 
development of measurements, standards and technology to 
enhance productivity, facilitate trade and improve the quality 
of life. NIST's standards and measurements contribute to the 
development of such things as bulletproof vests, mammogram 
technology, DNA analysis, computer security, nanotechnology, 
voting machines, and manufacturing.
    Unfortunately, the administration proposed to terminate the 
Advanced Technology Program and reduce the Hollings 
Manufacturing Extension Program by over 50 percent. I am sure 
you will find, Mr. Secretary, that these programs enjoy support 
on both sides of the aisle here from a number of members. I 
plan to work with Senator Mikulski to ensure that all of NIST's 
programs are funded so it can carry out its mission of 
standards and technology.
    In addition, the budget proposes to terminate the public 
telecommunications facilities, planning, and construction 
program, grants which provide support for public broadcasting's 
digital conversion. The proposal assumes these grants can be 
provided through the Corporation for Public Broadcasting (CPB), 
even though CPB's assistance has traditionally been a lot more 
limited. I would like to discuss the impact of the shift of 
responsibilities that it would have, especially on rural 
stations in the United States.
    Mr. Secretary, I look forward to hearing your thoughts on 
the Commerce budget request and look forward to working with 
you in the years ahead.
    Senator Mikulski.
    Senator Mikulski. Thank you very much, Mr. Chairman, and I 
want to associate myself with the priorities you have outlined 
here.
    I do want to welcome Secretary Gutierrez to the hearing 
today, his first appearance, and we look forward to ongoing 
conversation not only in these formal public hearings. Knowing 
of his distinguished career in business, we know that we can 
count on him to promote American business both here at home and 
abroad.
    Mr. Secretary, you know you have a tough job. Our trade 
deficit is at a record high, over $600 billion. Our 
manufacturing is fading. Where will the new ideas and the new 
jobs come from? And also, the challenges of protecting our 
intellectual property as well as moving many ideas into a 
patent framework so that they can be protected. I am concerned 
that we could be losing our competitive edge in the global 
economy.
    But here, as we look at your budget, we feel that we could 
be working for a stronger economy, and we look forward to 
working with you. As I go through my questions, one of the 
areas we will be looking at is how will this budget help 
develop innovation? Because that will be the key to our future, 
to develop new technologies and new innovations, new ideas that 
create the new jobs in the future.
    Also, I want to know how this year's budget actually 
focuses on saving lives and saving property. And this takes us 
to NOAA as well as to NIST. NOAA safeguards and protects 
property by forecasting the weather, protecting natural 
disasters, and helping citizens and communities prepare as well 
as the mapping that it does. NIST, our own National Institute 
of Standards, as Senator Shelby says, is developing 
breakthrough ideas on technology.
    We do not always think of them as life savers; yet, when I 
visited NIST, I saw they had a replica and computer models and 
actual physical renditions of the World Trade Center. And 
there, just in very modest laboratory circumstances, they were 
identifying why did that building collapse? Why was there so 
much smoke? All of the questions that led to such death and 
destruction. And they wanted to know not only so we could honor 
what happened but will lead to new ideas and building codes and 
architectural reform and better standards and toxic materials 
in buildings. They are saving lives. They had digital cameras 
they were testing.
    Mr. Chairman, as we spend millions on homeland security and 
the fire grant program, what are the digital cameras that can 
really help a first responder go into a room and spot whether 
it is a mattress on the floor or whether it is a child wrapped 
in a blanket, and they are doing that, setting those standards. 
So we are proud of them, and we look forward to what we can do 
to work with them. We love the Commerce Department in Maryland. 
It is the headquarters of NOAA. NIST is located there as well 
as the Census Bureau, and I know as you visited them, you see 
how dedicated those civil servants are.
    So as we look at NOAA, I want to reiterate what our 
chairman said: make sure that it is adequately funded so that 
it can save lives and save livelihoods. And also, many of the 
ideas that they develop, we are seeing that they move into the 
commercial marketplace. They seem to be developing public-
private partnerships, especially in the weather field. So we 
look forward to hearing your ideas and how you see that while 
they do the research and do the studies how this goes into the 
future.
    In terms of the innovation economy, I am concerned that the 
Task Force on the Future of American Innovation is concerned 
that we are falling behind in innovation. And that is where we 
look to NIST to research these technologies and in these new 
fields such as nanotech, through programs like the Advanced 
Technology Program and the Manufacturing Extension Partnership. 
I will tell you, they have been a tremendous help in the 
biotech field right here in the Capital region and have spawned 
some of these ideas.
    But really, what has me on edge is the backlog of patent 
applications. We have a backlog of almost 500,000 patent 
applications, and if we invent it, we want to protect it so we 
can sell it. And we look forward to your ideas on how to deal 
with the backlog. We know the budget is tight. We have tough 
choices. But I want to be sure that we work in a partnership 
with you. I want to keep their ideas here and protect their 
ideas so that we continue building our market share, so the 
workers are working in a team and having a budget framework 
that works as well.
    Thank you, Mr. Chairman.
    Senator Shelby. Senator Stevens.

 NATIONAL OCEANIC AND ATMOSPHERIC ADMINISTRATION ACTIVITIES AND FUNDING

    Senator Stevens. Mr. Secretary, I welcome you to this 
hearing today. When we had a shift of control in the Senate, 
this was my office for awhile. It sort of reminds me of a lot 
of things, but one of the things it reminds me of is the 
meetings we had here about NOAA. And we just, your Department 
recently discovered that the way that the coastline of the 
United States has been computed is erroneous, and if you 
include offshore islands and archipelagos and those areas of 
tidal water up to a point where it is less than--more than 100 
foot closure of tidal water, that Alaska's coastline is more--
we used to say it was half the coastline of the United States. 
Now, it is greater than all of the coastline of the United 
States.
    NOAA is to us an enormous entity that covers North Pacific 
surveys, Gulf Alaska surveys, North Pacific maritime boundary 
line surveys, the Gulf of Alaska Ecosystem Monitoring, the 
Southeastern Coastal Observing System, the National Invasive 
Species Act, and the Marine Debris Removal Program. It is not 
only important to Alaska's fishing industry, but it is 
important to the whole country, because we are the home of most 
of the marine mammals that live off our coasts.
    The one thing that bothers me the greatest, though, is the 
tsunami warning system. After the great tsunami that we 
witnessed here just in our own lifetime, I went to look at the 
tsunami warning system in Hawaii. Three of the five warning 
devices are off of my State. Senator Inouye and I helped them 
to get there. They have been inoperable for 2 years because of 
lack of funds. Out of the five, only one was working. Had the 
tsunami come the other way, the damage to our United States 
would have been untold, because we would have had no warning, 
although we thought we were the only Nation in the world that 
had a warning system.
    And now, here comes a level of funding that I just cannot 
understand. I know you did not do it. You were not there. But 
someone needs to have their head examined. We exist primarily 
because of the fish that we consume. Our Nation is turning into 
a Nation of fish eaters. Sixty percent of all the fish that 
Americans consume come from off the State of Alaska. All of 
these NOAA programs are designed to protect those species of 
the ocean, to assist on debris removal, to insist on no drift 
nets, to insist on maintaining the concept of limiting 
fisheries so that they never go beyond the sustainable limit. 
And NOAA does that all. I really do not understand the NOAA 
level. It is just impossible for us to understand it.
    So I look forward to working with you somehow or other. I 
think that you will be known as a magician if you can help us 
solve this problem this year, although I have just come from a 
meeting where there is good news: they tell us that the deficit 
this year will be at least $60 billion to $70 billion lower 
than anticipated. I am sure you have seen the good news. The 
income of the Treasury is up by 20 percent more than it was 
predicted. The rate of growth of the country is up. If we can 
get some of that sunshine shining in this room, maybe we can 
solve this problem.
    Welcome.
    Senator Shelby. Senator Gregg.
    Senator Gregg. Thank you, Mr. Chairman.
    Mr. Secretary, I want to follow on to what the President 
pro tempore said regarding NOAA, and I guess I have some 
specific questions in this area. Last year, the subcommittee 
funded DOC's policy proposal nowhere near what it needed but at 
a fairly significant and robust level, Admiral Watkins' 
proposal of $350 million. And your budget submission basically 
eliminates that funding.
    In addition, we made a strong commitment to NOAA as we 
always do, and unfortunately, your budget submission does not 
have the same robust commitment. So I guess my first question 
to you is what is the administration position on the Ocean 
Policy Commission's report? It appears to be one of active 
neglect. I thought maybe you could tell us something else.
    Senator Shelby. We are not in questions yet.
    Senator Gregg. We are just doing opening statements. Oh, I 
apologize. I thought we were in questions.
    Senator Shelby. Just defer.
    Senator Gregg. Well, just reserve that question in the back 
of your mind. I have given you warning.
    Senator Shelby. Maybe you can answer that, Mr. Secretary, 
when you give your statement.
    Senator Gregg. That is my statement.
    Senator Shelby. Thank you.
    Senator Cochran.
    Senator Cochran. As chairman, I could just suggest to the 
Secretary that you have become Secretary of Commerce at a good 
time. I noticed the recent economic forecast and reports of the 
growth in the economy are suggesting that it is way above what 
expectations were. And we did not expect you would be Secretary 
of Commerce. So maybe this is the reason why the economy is 
growing as robustly as it is, and you can discuss that with us, 
and I would appreciate your observations about what we can 
foresee maybe more realistically for growth in the future, if 
it will continue to grow at this rate.
    Thank you, Mr. Chairman.
    Senator Shelby. Mr. Secretary, your written statement will 
be made part of the record. You may proceed as you will.
    Secretary Gutierrez. Thank you, Mr. Chairman. I have a 
summary of the statement in front of me.
    Senator Shelby. Okay.
    Secretary Gutierrez. Mr. Chairman and Senator Mikulski and 
members of the subcommittee, I am pleased to present the 
President's fiscal 2006 budget request for the Department of 
Commerce, and with your permission, I would like to just 
highlight some of the key components of the budget and submit 
my written testimony for the record.
    Senator Shelby. Sure.
    Secretary Gutierrez. As you well know, Congress created the 
Department of Commerce 100 years ago to promote economic growth 
and opportunity for business and workers. Our approach to this 
vital mission is threefold: first, we provide the tools to 
maximize U.S. business development and competitiveness; second, 
we foster technology and innovation; and third, enhance 
environmental understanding and stewardship.
    The President's total budget request for the Department of 
Commerce is $9.4 billion, and it is focused on core programs 
that promote a prosperous, productive, and secure America. 
Included in this budget is $3.71 billion for the President's 
new Strengthening America's Communities Initiative.
    Our economy, as you know, is solid, it is strong, and it 
certainly is stronger than our major trading partners around 
the world. And as you also know, private forecasters predict 
that strong economic growth will continue. We know that there 
are still transitioning communities and workers who need our 
help. We believe that by consolidating 18 Federal programs 
within the Department of Commerce, we can simplify the 
application process, eliminate duplicative programs, and 
establish greater accountability. Most importantly, we can make 
better use of taxpayers' dollars and achieve greater results 
for low-income people in economically distressed areas.
    For the International Trade Administration, we are 
requesting $396 million to continue aggressively promoting U.S. 
exports, opening markets, ensuring a level playing field for 
American companies and workers. Over the last 50 years, the 
contribution of exports to our economy has more than doubled. 
It is more than likely that exports will continue to be an 
increasing share of our growth as we open markets and the 
economies of our trading partners expand.
    Timely and accurate economic information is needed to 
generate growth and jobs. Therefore, an additional $9 million 
is requested for the Bureau of Economic Analysis. These funds 
will support completing a multiyear effort to improve economic 
measures and expand business investment data.
    An increase of $133 million is requested to support 
initiatives in the Census Bureau, including reengineering the 
decennial census. Ongoing efforts include administering the 
American community survey and developing plans for the 2010 
census based on only a short form.
    For our Bureau of Industry and Security, we are requesting 
a $9.5 million increase to target export enforcement of 
advanced technologies. To maximize technology's contribution to 
economic growth, high-wage job creation and the health and 
safety of our citizens, we are requesting $532 million for 
NIST. This includes a 13 percent increase for high priority 
research in areas such as manufacturing, nanotechnology and 
public safety programs.
    For NOAA, we are requesting $3.6 billion to fund research, 
prediction, and stewardship programs critical to the Nation's 
economy and public well-being. This includes funding to begin 
construction of a fourth fishery survey vessel, to address 
ecosystem research priorities, and to complete a 2-year plan 
for providing 100 percent detection capability for a U.S. 
coastal tsunami. The new system will expand monitoring 
throughout the Pacific and Caribbean basin and provide warning 
coverage for regions bordering half of the world's oceans. I 
would like to thank the members for the funds in the fiscal 
year 2005 supplemental for our tsunami efforts.
    Mr. Chairman, this budget concentrates on our Nation's 21st 
century economic and security needs. The President has shown 
strong leadership in laying out a course for cutting the budget 
deficit in half over the next 5 years, and that requires making 
hard choices across the entire Federal Government.
    We have not requested new funding for the Advanced 
Technology Program. We believe other R&D programs address 
higher priority needs of the U.S. science and technology 
community. We have asked Congress to provide phaseout funding 
for public telecommunications facilities planning and 
construction, and we have requested funds for the Manufacturing 
Extension Partnership (MEP) staff which, when combined with 
outside resources, will allow Hollings MEPs to maintain a 
national network. Funding will be targeted to the centers' 
performance and needs.
    I understand that there are those who have differing views 
about these choices. Please know, needless to say, I respect 
your views, and I look forward to working with you and other 
Members of Congress throughout the budget process.

                           PREPARED STATEMENT

    Mr. Chairman, I want to thank you and the subcommittee for 
the generous support you have provided Commerce programs and 
missions in the past. I welcome your comments, and I would be 
pleased to answer any questions that you may have.
    [The statement follows:]

                 Prepared Statement of Carlos Gutierrez

    Mr. Chairman and Members of the Subcommittee, I am pleased to 
appear before you today to present the President's budget request for 
economic, scientific, technological, and environmental programs of the 
Department of Commerce. Our request of $9.4 billion is an increase of 
$3.1 billion above the fiscal year 2005 enacted level. This 
performance-integrated budget, based upon the Department's Strategic 
Plan, includes a proposal to create a new opportunity to foster 
domestic economic and community development through the Strengthening 
America's Communities Grant Program. And, in keeping with Commerce's 
mission to provide the tools to maximize U.S. competitiveness and 
enable economic growth for American industries, workers, and consumers, 
the request continues programs that create conditions for economic 
growth and opportunity for all Americans by promoting innovation, 
entrepreneurship, competitiveness, and stewardship.

Provide the information and tools to maximize U.S. competitiveness and 
        enable economic growth for American industries, workers, and 
        consumers
    The President's new initiative, Strengthening America's Communities 
(SAC), will consolidate and transform 18 Federal economic and community 
development programs from the Departments of Agriculture, Health and 
Human Services, Housing and Urban Development, Treasury, and Commerce 
into a single direct-grant program to be housed within the Department 
of Commerce. The purpose of this initiative is to create an 
Administration-wide unified approach to the Federal government's 
domestic development efforts, rather than one distributing efforts 
across agencies. The results will better focus resources and eliminate 
overlapping and conflicting programs.
    This consolidated economic and community development grant program 
will streamline Federal assistance. It will provide States and 
communities with simplified access to the Federal grant system, focus 
on communities most in need of assistance, and require communities to 
meet substantive accountability standards that will track progress 
toward achieving the community's goals of long-term economic stability 
and growth. By consolidating those programs that share a similar 
mission, the Strengthening America's Communities initiative will help 
provide a more coherent, strategic and results-oriented focus to 
federal economic development efforts. In addition, by providing 
incentives and increased accountability, we can reward communities that 
make concrete economic improvements in distressed areas. The fiscal 
year 2006 budget requests a total of $3.71 billion for the new 
Strengthening America's Communities Grant Program. The Administration 
intends to prepare and present to Congress legislation to implement the 
initiative as soon as possible.
    This past February, I met with European Union officials in 
Brussels, Belgium, to discuss the Administration's continued commitment 
to working with other nations to achieve common goals. The strength of 
the U.S. economy is closely tied to our success in fostering 
international partnerships and encouraging broad support for the sound 
fiscal and monetary policies that create jobs at home and produce 
prosperity around the world.
    The Bureau of Economic Analysis (BEA) seeks to strengthen the 
understanding of the United States economy and its competitive 
position. BEA accomplishes this task by providing accurate economic 
accounts data in a timely and cost-effective manner, and by supplying 
many of the Nation's key economic statistics, including the Gross 
Domestic Product. To ensure we have sufficient tools to provide our 
decision-makers with the necessary information, we have included in 
this request a 12 percent increase for BEA to support key initiatives: 
to improve international statistics to better describe offshore 
outsourcing, expand business investment data, and finish a multi-year 
effort to improve the timeliness, relevance, and accuracy of economic 
measures.
    The Bureau of the Census requests an increase of $133 million to 
support initiatives that will significantly improve the quality of the 
information it collects and provides to the country. The most 
significant increase supports the three key components of re-
engineering the Decennial Census. First, the American Community Survey, 
the annual replacement to the once-in a-decade long form, will be fully 
implemented with funding for group quarters enumeration and a methods 
panel to update the questionnaire. Second, modernization of the 
geographic database information remains on schedule. Third, preparation 
for a short-form only 2010 Decennial Census continues with the 2006 
Census Test and development of support systems. Several other notable 
program changes are supported by this request: improvements to the 
Automated Export System will produce more accurate trade statistics; 
expansion of the measurements of services will add detail to this 
important sector; creation of a Longitudinal Employer/Household 
Dynamics data base infrastructure will fill critical gaps in local 
employment data; and strengthening the measurements of migration will 
improve state-level estimates. In addition, the Bureau of the Census 
also plans to furnish and move into its new office building at the 
Suitland Federal Center.
    The globalization of trade and the rapid development of technology 
presents great opportunity and risk to the United States' economic and 
national security. The Bureau of Industry and Security (BIS) regulates 
the export of sensitive goods and technologies. The 14 percent budget 
increase requested will give BIS the necessary tools and personnel to 
effectively deal with these challenges. The request includes funding 
for additional licensing personnel to address the rising numbers of 
licenses, and an Office of Technology Evaluation to ensure that the 
Department is controlling the appropriate new technologies while not 
restricting exports of products that are widely available. As license 
requests have increased so has the need for additional enforcement 
resources. We are asking for additional enforcement agents, and 
resources for a seized computer evidence recovery program and 
additional overseas end-use verification. We are also asking for 
funding for a program to recruit and retain the high-quality personnel 
needed for BIS's critical mission.
    The International Trade Administration (ITA) is charged with 
promoting international trade, opening foreign markets to U.S. 
businesses, and ensuring compliance with trade laws and agreements 
while supporting U.S. commercial interests at home and abroad. In 
carrying out its mission, ITA conducts detailed domestic and 
international competitive analyses to ensure that the U.S. 
manufacturing and service sectors compete effectively and meet the 
demands of global supply chains, as well as understand the competitive 
impact of regulatory and economic changes. ITA supports the U.S. 
exporting community directly by providing a variety of products and 
services, and by operating a Trade Information Center to provide a 
single point of customer contact to government export assistance 
programs.
    The Minority Business Development Agency (MBDA) is focused on 
accelerating the growth and competitiveness of minority-owned 
businesses by closing the gap in economic opportunities and capital 
access. We are requesting an increase of $0.2 million for MBDA to 
expand the Agency's capabilities to disseminate, analyze and deliver 
vital statistical data for the minority business community. We are also 
requesting an increase of $0.5 million for MBDA to provide equal 
economic opportunities for full participation of Asian American and 
Pacific Islander businesses in our free market economy, and to increase 
the access of minority business enterprises to global markets.

Foster science and technological leadership by protecting intellectual 
        property, enhancing technical standards, and advancing 
        measurement science
    The President understands the opportunities science and technology 
provide to enhance the lives of all Americans. The President's focus in 
the area of science and technology is reflected in the Department of 
Commerce R&D portfolio. The Commerce budget maintains substantial R&D 
investments in the Technology Administration (TA), which includes the 
National Institute of Standards and Technology (NIST) and the National 
Technical Information Service (NTIS).
    The Technology Administration and its various components seek to 
maximize technology's contribution to economic growth, high-wage job 
creation, and the social well-being of the United States. TA and NIST 
not only serve as advocates for technological innovation but also 
analyze the factors that affect our competitiveness and develop the 
tools needed to enhance productivity, trade, and, in the end, the 
quality of life for all Americans. In addition, NIST is engaged in 
critical research in high-priority areas of technological innovation 
such as nanotechnology, information technology, biotechnology, and 
manufacturing technology. NIST is also conducting research in response 
to the World Trade Center tragedy and the February 2003 nightclub fire 
in Rhode Island to better prepare facility owners, contractors, 
architects, engineers, emergency responders, and regulatory authorities 
to prevent future disasters.
    To meet the Nation's needs in setting technological standards, we 
propose increased funding to NIST laboratories for high priority 
research areas and necessary facilities upgrades and maintenance. The 
increases include $39.8 million to enhance research capabilities in 
manufacturing (particularly in the area of nanotechnology), expand 
public safety and security programs, and provide the measurement 
infrastructure for emerging needs of the Nation's research community, 
and $32 million to support the Facilities Improvement Plan for critical 
construction, major repair, and renovation projects at the NIST sites 
in Boulder, Colorado, and Gaithersburg, Maryland. Consistent with the 
Administration's continuing emphasis on shifting resources to reflect 
changing needs, the fiscal year 2006 budget proposes to terminate the 
Advanced Technology Program. We propose to fund the Hollings 
Manufacturing Extension Partnership Program (HMEP) at $46.8 million. 
This level of funding, combined with expanding partnerships with other 
agencies and institutions, will allow the HMEP to maintain a national 
network.
    The U.S. Patent and Trademark Office (USPTO) request will support 
the USPTO strategic plan for the 21st Century to keep pace with 
workload growth and to enhance the quality of products and services. 
The Administration continues to support giving USPTO full access to its 
fees in the year of collection. This $148.5 million increase will allow 
the USPTO to improve processing capacity by hiring additional patent 
and trademark examiners, continue development of an operational system 
to process patent applications electronically, continue the transition 
of the trademark operation to a fully electronic environment, enhance 
the current quality assurance programs by integrating reviews to cover 
all stages of examination, and work to achieve greater patent examiner 
productivity by reducing the prior art search burden. I have visited 
USPTO's new headquarters in Alexandria, Virginia, and appreciate your 
support for that facility.
    The fiscal year 2006 National Telecommunications and Information 
Administration (NTIA) request will continue to provide the resources 
necessary to improve NTIA's research and Federal spectrum management 
capabilities and provide support for NTIA to implement the President's 
Spectrum Policy Initiative for the 21st Century.

Observe, protect and manage the earth's resources to promote 
        environmental stewardship
    The National Oceanic and Atmospheric Administration's (NOAA) 
mission is to understand and predict changes in the Earth's 
environment, as well as to conserve and manage coastal and marine 
resources to meet our Nation's economic, social, and environmental 
needs. The work performed at NOAA touches the daily lives of every 
person in the United States and in much of the world, since NOAA: 
provides weather, water, and climate services; manages and protects 
marine resources ecosystems; conducts atmospheric, climate, and 
ecosystems research; promotes efficient and environmentally safe 
commerce and transportation; and provides emergency response and vital 
information in support of homeland security.
    In addition to using science and technology to create jobs and 
improve economic prosperity, the Department is also directing resources 
toward disaster prevention, to better understand and minimize the loss 
of life and property from disasters.
    While in Brussels, I led the U.S. delegation to the Global Earth 
Observation Summit and presented the Administration's plan for the U.S. 
component of a Global Earth Observation System of Systems (GEOSS). A 
large portion of the increase requested for NOAA in fiscal year 2006 
will support the effort to better understand the complex interactions 
on our planet. With this improved knowledge, decision-makers around the 
world will be able to make more informed decisions regarding climate, 
the environment, and other issues.
    I applaud the Congress for passing the Emergency Supplemental 
Appropriations Act for Defense, the Global War on Terror, and Tsunami 
Relief, 2005, which embraced the President's desire to protect the 
American people by providing the initial resources necessary to meet 
the need for 100 percent detection capability for a U.S. coastal 
tsunami. To continue this effort in fiscal year 2006, we propose to 
invest $9.5 million to expand the U.S. tsunami warning system. Once 
fully implemented by mid-2007, the new system will extend monitoring 
capabilities throughout the Pacific and Caribbean basins and provide 
tsunami warning coverage for regions bordering half of the world's 
oceans.
    Currently, NOAA leads the Nation and world in ocean and ecosystem 
science, policy and management. In December 2004, the Administration 
released the ``U.S. Ocean Action Plan,'' a response to the U.S. 
Commission on Ocean Policy's report entitled, ``An Ocean Blueprint for 
the 21st Century.'' Working under the leadership of the Council on 
Environmental Quality, and with several other agencies, NOAA 
substantially assisted in the development of this action plan. NOAA 
will play a key role in implementing many of the ocean policy measures 
that the plan contains, including supporting the establishment of a 
coordinated ocean governance structure. Consistent with this approach, 
the Administration continues to support Commerce's leadership role in 
oceans policy and activities by promoting passage of a NOAA Organic 
Act. An Administration drafted Organic Act was sent to Congress on 
April 5th and is awaiting introduction.
    In accordance with the President's U.S. Ocean Action Plan, the 
Department continues to request significant resources for ocean and 
coastal programs and improved fisheries management, as well as 
protected species activities. The President's Budget includes more than 
$1 billion for these ongoing programs, including $61.2 million to 
address state and regional ecosystem research priorities at the 
National Sea Grant College Program, $22.7 million in support of NOAA's 
Ocean Exploration Program, $32.5 million to begin construction of a 
fourth fisheries survey vessel that will substantially improve the 
quality of NOAA fisheries research, and $25.4 million for fisheries 
stock assessment. The Budget proposes reforms to the Pacific Coastal 
Salmon Recovery Fund to help ensure that funds are allocated to high 
priority activities, and to require matching contributions from State 
and local recipients of grants.
    NOAA's global leadership also extends to monitoring the planet 
through the development of the GEOSS. The GEOSS will provide NOAA and 
others with the tools to better understand our planet through an 
integrated, comprehensive, and sustained Earth observation program. We 
are requesting a significant increase for GEOSS of $94.7 million, which 
includes the development of the next generation of weather satellites.
    In addition, the Administration is committed to continuing the 
LANDSAT mission. Our budget requests $11 million to begin the process 
of integrating LANDSAT sensors on future weather satellites. NOAA's 
satellite programs secure the observational data necessary for more 
timely and accurate weather forecasts, hurricane predictions, and the 
development of climate predictive models.
    NOAA leads the Administration's interagency Climate Change Science 
Program. As needs for water, climate, and air quality information 
increase worldwide, NOAA has been working to improve our understanding 
of climate and helping develop products and services that provide 
useful information for national and regional management decisions. One 
example of this is the National Integrated Drought Information System 
(NIDIS), which provides early drought warning on a regional level.
    Finally, the budget includes investments for improvements in 
transportation. Additional funding for electronic navigational charts 
and for accurate current and water level data is essential to safe and 
environmentally sound shipping. Improving aviation ceiling/visibility 
forecasting will result in an estimated $250 million annual fuel cost 
savings for U.S. airlines.

Achieve organizational and management excellence
    The Department's headquarters building, the Herbert C. Hoover 
Building (HCHB), is in critical need of major renovation and 
modernization. The 70 year-old HCHB is one of the last historic 
buildings in the Federal Triangle to be scheduled for renovation and 
modernization. To meet basic health and safety codes, meet industry 
standards, and replace failing mechanical, electrical, and plumbing 
systems, the Department is requesting $30 million for its fiscal year 
2006 portion of the joint General Services Administration/Department of 
Commerce project. The request also includes funding of the Department's 
renovation office that will coordinate the movement of tenants and 
GSA's work to minimize the disruption of the Department's missions and 
provide necessary oversight of the project.
    Both the Office of the Inspector General and Departmental 
Management are requesting funding increases to improve acquisition 
oversight, provide additional training to contract officers and make 
targeted reviews of both specific contracts and the procurement 
process. A quarter of Commerce's appropriation is spent on major 
procurement activities, such as satellites, the Decennial Census and 
the renovation of HCHB. Improving the acquisition process is one of the 
Department's top management challenges because, with proper oversight 
and improvements, taxpayer money can be better utilized.

Conclusion
    In his February 2nd State of the Union Address, the President 
underscored the need to restrain spending in order to sustain our 
economic prosperity. As part of this restraint, it is important that 
total discretionary and non-security spending be held to levels 
proposed in the fiscal year 2006 President's budget. The fiscal year 
2006 President's budget includes more than 150 reductions, reforms, and 
terminations in non-defense discretionary programs, of which six affect 
Department of Commerce programs. To meet this fiscal requirement we are 
proposing terminating the Advanced Technology Program, the Emergency 
Steel Guarantee Loan Program, and the Public Telecommunications, 
Facilities, Planning, and Construction Program. In addition, we are 
proposing a major reduction from fiscal year 2005 enacted levels in the 
Hollings Manufacturing Extension Partnership Program. The budget also 
contains the reform proposals for the Strengthening America's 
Communities Grant Program and the Pacific Coastal Salmon Recovery Fund 
discussed above. The Department wants to work with the Congress to 
achieve these savings and reforms.
    The Department of Commerce's fiscal year 2006 budget has been 
crafted to focus on funding the core functions that the American people 
rely on from this Department, in the most efficient manner. I look 
forward to working with the Committee to ensure that together we are 
providing the best services to the American people--promoting 
``American Jobs and American Values.''

             STRENGTHENING AMERICA'S COMMUNITIES INITIATIVE

    Senator Shelby. Thank you.
    Mr. Secretary, when do you plan to present legislation 
authorizing strengthening America's communities?
    Secretary Gutierrez. Mr. Chairman, we have an advisory 
committee and we expect to have legislation to you later in the 
year. That legislation will have a recommendation on how we 
allocate funds in the future. We have a funding system that has 
two formulas, and depending which formula you use, you can find 
money for just about any community. We have communities today 
at a 2 or 3 percent poverty level who are receiving funds and 
some communities that have a 20 percent poverty level that are 
not receiving enough funds. So the challenge for the advisory 
committee will be how to develop funding criteria that will 
ensure that the money goes to those communities that really 
need the money. So we look forward to working with you, and we 
will have that recommendation to you in late June.
    Senator Shelby. What impact, if any, would this have, if 
this came about, on the Economic Development Administration 
(EDA)?
    Secretary Gutierrez. This would expand what we currently 
do. Essentially, we have EDA today, and we have moved to 
strengthening America's communities. We would collapse the six 
different agencies throughout the Government into one program, 
because you have 18 different programs today. And we think that 
by having one program with one criteria and one process, we 
would make it easier for those who request funds.
    We make the criteria transparent for everyone. We ensure 
that there are accountability measures in the communities; that 
the money we give out either improves employment or improves 
private sector investment or improves poverty rates; we would 
like to tie it to measures and results, and that is what we 
look forward to doing.
    Senator Shelby. Some of us would like that to come under 
Commerce, under this subcommittee, but what are your realistic 
prospects on authorizing and passing that legislation?
    Secretary Gutierrez. Well, Senator, we do believe that if 
we get the information out we can ensure that there is 
understanding about the logic for this and why we are doing 
this. The fact that in the Commerce Department, we have 
contacts with the private sector; we believe that community 
development is very much about attracting private sector 
investment. We already do that. A lot of what we do is in the 
private sector, so we have that skill set within Commerce, and 
we hope that the logic of this will be seen broadly, because we 
do believe that it will be better use of taxpayers dollars.

                       EXPORT ADMINISTRATION ACT

    Senator Shelby. Mr. Secretary, the Congress has not 
reauthorized the Export Administration Act. We continue to 
confront cases of individuals and companies either deliberately 
or inadvertently seeking to military sensitive dual use 
technologies without regard for the licensing process. Do you 
believe that a $9.5 million increase over last year's funding 
level is sufficient to address this?
    Secretary Gutierrez. I know we are working very hard on 
this. We have actually added some resources outside of the 
country to be able to make some checks on dual use items and 
actually go to the buyers and make sure that they are using 
items for what they said they would use them. We have got very 
good contacts with the intelligence community, and we believe 
that we maximize the use of that. We are always trying to make 
the greatest use of a limited budget.

          REORGANIZATION OF INTERNATIONAL TRADE ADMINISTRATION

    Senator Shelby. Last year, you know, there was a large 
scale reorganization of the International Trade Administration. 
What results are you seeing? Have you been able to measure that 
from that reorganization?
    Secretary Gutierrez. We have been able to concentrate and 
focus on specific regions of the world. So for me, it is very 
helpful to be able to have a European expert who is involved 
primarily in Europe and who understands the issues in Europe 
and who understands regulations in Europe. We have some very 
competent Asian experts. We have North American experts. So 
that level of expertise has been very, very helpful.
    We also have individuals who have been involved in industry 
who have expertise in the steel industry or the textile 
industry. Having that focus and expertise has helped me, and I 
know it helps the Department have a sense of focus and results.
    Senator Shelby. Will this include the trade promotion 
mission?
    Secretary Gutierrez. Yes, sir, yes. We have done missions 
and we are planning missions now. We think that an important 
part of our role is ensuring that our exporters have access to 
markets where we have free trade agreements. We have had export 
missions in the past. We are planning one now to eastern 
Europe. We would like to get more missions going, and I would 
love to hear from you, sir, for any areas of the world that you 
think merit missions. An important part of our role is making 
sure that our businesses know how to access foreign markets.

                       CHINA AS A MARKET ECONOMY

    Senator Shelby. Many people believe that once, or I should 
say if or when, if ever, China floats its currency and engages 
in other economic reforms, there is a probability that your 
Department will declare China to be a market economy looking 
down the road. If that were to happen, the subsidies that are 
being given today while China is a nonmarket economy, will that 
be actionable?
    Secretary Gutierrez. For China, one of their big priorities 
is to become a market economy.
    Senator Shelby. Sure.
    Secretary Gutierrez. That is one of their agenda items that 
I know they will be taking to our Joint Commission on Commerce 
and Trade (JCCT). We have a series of other agenda items that 
we would like to see them address first. Intellectual Property 
Rights (IPR) is one that is right on top of the list; 
Government procurement is also on the list. We know that a lot 
of the software we sell, we cannot sell to the Government. A 
lot of the software they have is counterfeit. So it is very 
important for them, and it is a big symbol to them to be named 
a market economy. We would like to see some things happen 
before that takes place.
    Senator Shelby. Senator Mikulski.

         NATIONAL INSTITUTE OF STANDARDS AND TECHNOLOGY FUNDING

    Senator Mikulski. Thank you very much, Mr. Chairman.
    Mr. Secretary, I would like to discuss the National 
Institute of Standards. I was very troubled by the fact that it 
was decreased by 24 percent and is over close to $500 million. 
For NIST, which is not a big chunk but a big bang agency, that 
is a pretty big hit. Would you tell us how you think they can 
provide the same level of service with the reduction, and why 
did we eliminate the Advanced Technology Program just when we 
need to be moving toward cutting edge technology for high value 
jobs?
    Secretary Gutierrez. I was over at NIST not long ago, and 
their challenge, of course, is to focus on their pipeline of 
ideas and to get them done. As you know, some of those ideas 
are several years down the road. Quite often, by having too 
many projects, they can lose effectiveness. We believe that we 
have that balance of the number of projects and make sure that 
people are focused on those areas that only we can do. We do 
not believe that the private sector is involved in 
nanotechnology to the degree necessary, because they do not 
have a return in nanotechnology yet. But we have nanotechnology 
and we have biotechnology. Some of the other areas that require 
R&D spending are being focused on by the private sector. It's a 
matter of finding a balance between what we should do, what we 
can do, and what we can fund.
    Senator Mikulski. Well, Mr. Secretary, I respectfully 
disagree with you. The Task Force on American Innovation says 
that inventors in Asia are applying for patents at a faster 
rates than inventors in America. Asian nations are increasing 
their share of high tech exports while the United States is 
falling. So we have got to be competitive.
    And then, I agree with your focus. So I respect your 
managerial ability and the management effort and focus. But you 
cannot, even with focus, you still need money. Focus without 
funds is unfocused. And to cut the Advanced Technology Program, 
which is a $140 million decrease, I think is really stunning. 
And I would like, as we go through our appropriations, for you 
to read this, and, you know, sure, we could meet with the lab, 
but you are the Secretary of Commerce.
    We want to work with you because we believe that this is a 
very, very, very important program in terms of them being the 
link there. And as you said, our private sector knows about 
nano, and they are already working in nano. But then, they are 
going to need standards: what is the smart dust? Are there 
unintended occupational hazards, because of the small 
particles? So we want to keep on doing it.
    And then, my colleagues are going to ask questions about 
the ocean policy. They are going to ask about the tsunami. 
Senator Stevens is here. I want to ask about NOAA about the 
reduced funding of research there. NOAA research is reduced by 
$40 million. And I know we, we are coastal Senators here, and 
seafood is our life's blood, whether it is our oysters and 
crabs where we have been doing research. We understand New 
England has a lobster disease. We are working on those issues.
    Senator Gregg. New Hampshire is a coastal State.
    Senator Shelby. An important part.

                  OCEANS POLICY REPORT RECOMMENDATIONS

    Senator Mikulski. As you can see, we enjoy each other.
    But what do you think are the consequences of reducing NOAA 
funding for research by $40 million? What are we not going to 
do?
    Secretary Gutierrez. As you know, Senator, we received 200 
recommendations on the Oceans Policy Report. It is hard to 
tackle 200 recommendations at once. The President does not 
really disagree with them, but we picked 50. We have $23 
million in the request to make sure that we have 100 percent 
tsunami protection and coverage. We have $32 million for a new 
fisheries vessel. The big projects, the projects that we 
believe have to be done are funded. And once again, it is a 
matter of choices and priorities, and we hope we have chosen 
the right priorities. But you will note that there is about $1 
billion to respond to the Oceans Policy Report.
    Senator Mikulski. No, there is $40 million less in 
research.
    Secretary Gutierrez. Yes.
    Senator Mikulski. In addition to the broad ocean policy for 
NOAA and research you know, again, there is often the specific 
research. So we are concerned again. I do not know if there is 
a strategic plan for the implementation of the ocean report? 
What, then, are the strategic priorities? In some ways, the way 
the National Science Foundation goes about it.

                            PATENT BACKLOGS

    But my time, I know other Senators would like to ask 
questions. Let me go to an important thing with me. That is the 
patent backlogs. As I understand it, there is a backlog of 
500,000 applicants. You and I have talked about intellectual 
property, and I think we share an interest in it. But you 
cannot protect intellectual property unless you have patents.
    Could you tell us what is the plan to cope with the 
backlog, and why is the PTO funded through fees paid by 
inventors? Should we be able to be looking at other revenue 
streams? Is it the lack of money? Is it the lack of management? 
Is it the lack of technology at the Patent Office? Because this 
is probably one of the most important tech transfer agencies. 
And I will stop there.
    But my own State, where biotech is on the rise, my 
entrepreneurs say we stand in two lines: one to get an FDA 
approval, and that is pretty rigorous. Then, we are standing in 
another line to get our patents, and we feel incredibly 
disadvantaged. You cannot accelerate a clinical trial. You have 
to be careful. The patent process is something that we should 
be able to help them with.
    Secretary Gutierrez. Senator, I agree with you. I feel very 
uncomfortable with the lead times. I feel very uncomfortable 
with 500,000 patents pending in 5 years. The time for pendency 
is about 18 months. It is my understanding that there are some 
projects that have been around for even longer than that.
    There are two areas in the budget to address that, and we 
will report back whether it is speeding up and whether it is 
making progress. One is adding people.
    Senator Mikulski. Adding people?
    Secretary Gutierrez. Adding people. There are quite a few 
new reviewers in the budget who actually review the patents and 
make sure they get through the system quickly. There are over 
600 new positions. I am usually skeptical about just adding 
people to a problem.
    Senator Mikulski. Yes.
    Secretary Gutierrez. But I do think in this case, they do 
need more people; and then, automating more of what we do at 
the agency. We can use technology to be more efficient. So 
those two things have been budgeted. They are in the plan.
    In terms of a management challenge, that is probably our 
biggest one. The part I cannot tell you is how well is the 
agency managed. Do we have the process? Do we have 
measurements? Do people know what they are supposed to do? 
Because I agree, our innovators depend on us to help them get 
through the system, and I am not sure that we are doing that.
    Senator Mikulski. Well, this is an area where we will work 
with you in very intense partnership. I know the chairman of 
the full committee is here. I am going to hold my questions.

                            ECONOMIC OUTLOOK

    Senator Shelby. Senator Cochran, the Chairman.
    Senator Cochran. Mr. Chairman, thank you very much.
    Mr. Secretary, welcome to the subcommittee. I am very glad 
to have an opportunity to be here when you present the budget 
request for your Department to the Appropriations Committee. In 
addition to gathering information about the health and vitality 
of the economy, which I mentioned in my opening remarks and 
congratulated you on the role that you have had in promoting 
growth in the economy, it is exciting to see the United States 
growing certainly in comparison with our major trading 
partners, as you pointed out.
    I wonder what your outlook is now, if you can tell us. Do 
we have the strength, the underlying strength in the economy? 
Is the structure the right structure to help provide 
opportunities for businesses in America to continue to prosper 
and grow in the years ahead? What is your outlook for our 
potential in the near term?
    Secretary Gutierrez. I think it is important to recognize 
that we are at a time today where we have unprecedented 
prosperity in the country, and it is often hard to conclude 
that based on how the economy is editorialized.
    Our growth was just raised today, the outlook for gross 
domestic product (GDP) for the first quarter to 3.5 percent. 
The first number was 3.1 percent. That comes off 4.4 percent 
last year. Our unemployment is down to 5.2 percent. The 
President always says we are not satisfied. We are not 
complacent. 5.2 percent is below the average of the past three 
decades.
    In spite of energy prices, our inflation remains at about 
3.1 percent. So that says a lot about the strength of our 
infrastructure. We have been able to offset that increase in 
energy prices. And in homeownership, more Americans own a home 
today than at any point in our history. I think about what is 
prosperity. People owning their home is a great indicator of 
prosperity.
    Mortgages as a percent of income are actually declining. So 
people can afford the houses they are buying, which I think is 
also a great indicator. Now, the challenge is, we have got this 
prosperity, how do we keep it going?
    I believe that we have seen that the President's strategy 
and his approach to the economy is working. Keep taxes low. We 
want to make the tax cut permanent. Get unnecessary regulations 
out of the way. We do not want businesspeople worried about 
getting sued; we want businesspeople to worry about creating 
jobs. Tort reform is a major step forward. There is more 
regulation to address whether it be asbestos, whether it be 
medical malpractice, but that is part of the agenda. And also a 
long-term energy plan so we can work strategically on energy 
long term and not just be reacting to short-term changes in 
prices.
    Health care; and then, very importantly, opening up markets 
around the world so that we can continue to export market by 
market. That is one of the reasons why CAFTA is so important. 
We are paying tariffs going into Central America, while most of 
their products are not paying tariffs coming into our country. 
This levels the playing field, and it is good for small 
manufacturers, for farming, for services. It is just one more 
example of staying on plan. I think we have to stay on plan. It 
worries me that we do not recognize sometimes, how good we have 
it today, how fragile it is and how quickly we can lose it if 
we do not stay on course.

              TRADE ASSISTANCE FOR NEW AND SMALL COMPANIES

    Senator Cochran. One of the services that I am familiar 
with the Department of Commerce provides to emerging owners of 
business, those who are trying to learn how to more effectively 
compete either in exporting goods and services or doing 
business with the Federal Government as a way to assure success 
of small and new businesses. In my State, for example, there 
are a lot of young people, like in any other State, I suppose, 
but getting started in business for the first time. The 
Department of Commerce once had a program--I can remember 
Elliot Richardson coming to Mississippi at my request when I 
was a Member of the House of Representatives and had a public 
forum on how to do business with the Federal Government, and it 
was specifically designed for small business owners, men and 
women who may not have had the experience that others in 
business had had and were just getting started.
    But the United States is the largest dollar volume 
purchaser of goods and services in America. So it is a 
fantastic opportunity if someone understands how to go about 
getting started. Is there an office now in the Department of 
Commerce that has the responsibility of making available 
information like this in States throughout the country? If 
there is, do you know whether or not you have enough money in 
the budget to see that it is sustained and maybe even expanded?
    Secretary Gutierrez. Yes, sir. We have a minority business 
development agency in Commerce which works very closely with 
small business, and then, there is the Small Business 
Administration, which now works out of the White House. We work 
very closely together.
    And you are right, what drives growth over time is small 
business. People think it is the big corporations such as IBM 
and Kellogg, but it is really the small entrepreneur that 
creates the jobs and comes out with the ideas. Microsoft was a 
small business 30 years ago.
    Your point on the Federal Government being a customer is a 
great point. If that is how they can get started, our standards 
are high. If they can meet our standards, most likely, they can 
go out and sell to consumers as well. So I will take that with 
me.
    Senator Cochran. Thank you.
    Thank you, Mr. Chairman.
    Senator Shelby. Senator Gregg.
    Senator Gregg. Thank you. Thank you, Mr. Chairman.
    I know a lot--I apologize for having to leave. The only 
people who have this number are my children, and when my son 
calls who is at college, it is a rare event.

                    OCEAN COMMISSION RECOMMENDATION

    So I know you addressed the ocean policy issue, and I was 
interested in your point that you have taken 50 of the items 
and picked them out and that you put $32 million, I think, into 
those items. But the budget proposal, as I read it, basically, 
$350 million Congress put in last year was gone, and that was 
sort of a starting. That was a number to try to build the 
emphasis. So I guess my question is how does this 
administration see the Ocean Commission's recommendations? What 
does it see as the priority, the top priorities of that 
Commission, and how is it going to promote those items?
    Secretary Gutierrez. I came in right after the report was 
issued. I believe it was in December. And I remember going 
around preparing for my confirmation hearing, and that was a 
big topic of discussion. We just received this report, which 
was very important, taken very seriously. There were 200 
recommendations, and the challenge was which ones do we start 
with, and how do we get started?
    And my understanding is that 50 were chosen. I think there 
is very clear alignment between the administration and the 
report. We want clear skies. We want clear oceans. We want our 
fisheries to be sound, to be healthy. I do not think that there 
is a philosophical difference at all. I will give you some 
examples of the big ticket items that were funded in our 
budget. There was $61 million for a sea grant program, which we 
believe is important, and that allows us to allocate the funds 
in the areas where we believe they will make a difference; $32 
million for a fourth fishery survey vessel; $23 million for 
ocean exploration.
    We have funded additional buoys, and Senator Stevens 
mentioned that four out of five were not working. I remember 
that during my last hearing. They are all working today. I 
checked that before I came here.
    We want full tsunami detection capabilities for the Pacific 
and the Caribbean by 2007, 100 percent. That requires, I 
believe it is 32 new detection devices. There are big things 
budgeted; not everything, but again, I think we can make a lot 
of progress by focusing on some things, getting them done, 
getting them done right and then moving on to the next listed 
priority.
    Senator Gregg. Well, that is obviously true. We cannot do 
everything. We could not last year either. But a lot of what 
you mentioned there is core NOAA activities versus the ocean 
policy initiative.
    Secretary Gutierrez. Right.
    Senator Gregg. And of course, the budget that came up is 
significantly below what NOAA was funded at last year by about 
$400 million, I think. So even core activities are going to 
have some pressure on them. But let us take a specific idea. 
You asked specifics. You maybe are not up to speed on it on the 
CELP program, which is the coastal estuary protection.
    Senator Mikulski. What?
    Senator Gregg. CELCP. It is called CELCP. It is where you 
protect coastal estuary marine areas. And there are a lot of 
them in Maryland.
    Senator Mikulski. Yes.
    Senator Gregg. Are you familiar with that? You can get back 
to me.
    Secretary Gutierrez. I would love to get back to you on 
that.
    [The information follows:]
            Coastal and Estuarine Land Conservation Program
What is the Coastal and Estuarine Land Conservation Program?
    The Coastal and Estuarine Land Conservation Program (CELCP) has 
been established to help protect estuaries and coastal lands that are 
important to our nation's environment, economy and communities. The 
program provides coastal states with funding for projects that ensure 
conservation of these areas for the benefit of future generations. 
CELCP was created by the Fiscal Year 2002 Appropriations Act for the 
Departments of Commerce, Justice and State (Public Law 107-77) and 
codified at 16 USC 1456d.
Who is eligible for funding through the CELCP?
    Coastal states that have a federally approved Coastal Zone 
Management Plan or National Estuarine Research Reserve are eligible to 
participate in the program. A state is eligible to submit projects for 
competitive funding at the national level once it has developed and 
received approval of a Coastal and Estuarine Land Conservation Plan. 
The state must be able to match CELCP funds, 1 to 1, from other funding 
sources.
What projects will CELCP fund?
    CELCP funds are intended to complement current federal, state and 
local coastal and estuarine conservation plans. To be considered, the 
project should address the following:
  --Protect important coastal and estuarine areas that have significant 
        conservation, recreation, ecological, historical or aesthetic 
        values, or that are threatened by conversion from their natural 
        or recreational state to other uses;
  --Give priority to lands that can be effectively managed and 
        protected and that have significant ecological value;
  --Advance the goals, objectives or implementation of federal, 
        regional, state or local coastal management plans.
What kind of funding is available?
    NOAA has received Congressionally directed funded for this program 
since fiscal year 2002.

                        [In thousands of dollars]
------------------------------------------------------------------------
                                                                Amount
------------------------------------------------------------------------
Fiscal year:
    2002...................................................       15,825
    2003...................................................       37,422
    2004...................................................       50,558
    2005...................................................       41,697
    2006 Req...............................................  ...........
------------------------------------------------------------------------

 STATUS OF NATIONAL INTELLECTUAL PROPERTY LAW ENFORCEMENT COORDINATION 
      COUNCIL AND STRATEGY TARGETING ORGANIZED PIRACY INITIATIVES

    Senator Gregg. Let me say I do support you on your ATP 
proposal. As chairman of this subcommittee, for years, I was 
trying to do exactly what you suggested, and I hope the present 
chairman is more successful than I was. There is another 
acronym called NIPLECC (National Intellectual Property Law 
Enforcement Coordination Council), which last year, we stood up 
with some money, tried to get all of these different groups 
coordinated on protection of international intellectual 
property rights, because we found that there were a whole lot 
of agencies which were supposed to be communicating with each 
other and using NIPLECC as its coordinating effort but were 
not.
    And the initiatives were falling, you know, the protection 
of intellectual property is falling through the cracks because 
so many different people are trying to do it, but nobody is 
doing it. What sort of coordinating effort is being pursued 
there, specifically with the initiative that I think we put $35 
million into last year?
    Secretary Gutierrez. We have NIPLECC in place, and we have 
just received authorization for an intellectual property 
coordinator who will oversee the activities of NIPLECC and 
making sure that those activities are coordinated with other 
agencies. As you know, NIPLECC could be having some great 
sessions and discussions, but if they are not coordinated with, 
say, the Justice Department or the Homeland Security----
    Senator Gregg. Well, that is the whole purpose of NIPLECC.
    Secretary Gutierrez. Right, and that is what this person is 
going to ensure happens.
    We have the Strategy Targeting Organized Piracy (STOP) 
program, and we are taking that to the next level. STOP has 
done some great things, making sure that we have a website so 
people can communicate and a hotline so that people can call in 
with intellectual property rights violations.
    The challenge is then doing something about all of those 
violations, and that requires, a lot of coordination across the 
agencies. We are in the process of putting together what that 
next step is. And we thought about a very simple framework. How 
do we make people more aware that we have a problem? And people 
not just here but consumers.
    How do we make sure that our partners have the right laws? 
How do we make sure that they are enforcing those laws? And 
then, very importantly, and this goes back to the Patent Office 
question, is how do we ensure that we are the role models for 
the rest of the world? Because I think it is important that we 
can point to our intellectual property standards in the United 
States and say that is how we do it, and that is how we expect 
you to do it.
    I would love to come back and present to this subcommittee 
what it is we plan to do in those four areas. To answer your 
question more specifically, as opposed to just telling you this 
is an important priority for me. We are going to make sure that 
NIPLECC works and that it does what it is intended to do and 
that this coordinator does a great job. I would love to share 
with you the plan and get your input as to what else we should 
be doing. I can assure you this is a top priority.
    Senator Gregg. That is good news. I would be glad to help 
in any way that I can.
    Secretary Gutierrez. Thank you.

                   STANDARDS AND INTERNATIONAL TRADE

    Senator Shelby. Mr. Secretary, I guess along those lines, 
standards and international trade: the U.S. manufacturers, 
suppliers, and testing labs are concerned about the new 
requirements of the European Union directive on the restriction 
use of certain hazardous substances with electrical and 
electronic equipment.
    This directive would restrict the amount of certain 
hazardous substances used in electrical and electronic 
equipment such as household appliances, telecommunications 
equipment, lighting, electrical tools, toys, and sports 
equipment. A product must meet these restrictions in order to 
be sold in the European Union.
    The problem is that the directive is vague, and no standard 
has been agreed upon to determine the amount of hazardous 
substance, if any, is in these products. Enforcement, I think, 
is supposed to begin July 1, 2006, a little over 1 year from 
now. Where are you on this? What steps is the Department of 
Commerce taking to assist our manufacturers and suppliers in 
complying with this European Union directive? Where are we 
going? Will that result in a barrier to trade? We have to watch 
what people do.
    Secretary Gutierrez. Yes; that is a great point, and this 
is actually quite recent.
    Senator Shelby. It is important, is it not?
    Secretary Gutierrez. It is very important. And this comes 
on top of another program, which is registration of every 
single chemical used in every single product. It is more 
regulation in an area where we had heard they want to reduce 
regulation. The first step is to meet with our European trading 
partners and our people and ensure that we understand what it 
is they are trying to get at.
    But this worries us, because this is just one more example 
of more and more regulation that impedes trade, that has 
unnecessary steps for businesses, that is not clear, and that 
can become a trade barrier.
    Senator Shelby. It could be a huge trade barrier.
    Secretary Gutierrez. Absolutely.
    Senator Shelby. We are going to be on top of that.
    Secretary Gutierrez. We are very worried, and we will 
report back.
    Senator Shelby. Interoperability, you know, it is all part 
of the--some manufacturers say their radios meet the public 
safety standards for interoperability, but they do not. There 
is no procedure to verify that this standard is being met is my 
understanding. We are aware that NIST has conducted some 
testing on these radios, and not one of the radios tested met 
the standard. It is alarming. It is widely known that one of 
the fatal flaws in our response to the 9/11 attacks was our 
inability to communicate across different radio systems.
    Now, we are spending a lot of money to outfit first 
responders with supposedly interoperable radios; yet, these 
radios fail to meet the interoperability standards. In the 2005 
appropriation, the subcommittee directed NIST's Office of Law 
Enforcement Standards working with the National Institute of 
Justice Communication Tech Program and the Department of 
Homeland Security Safecom program to issue interim standards 
that can be used to specify the required functionality and 
testing validation for emergency radio systems.
    Where does the process stand at the Department of Commerce, 
and what are the expected time lines and milestones for the 
issuance of intercommunications standards? This is a big deal.
    Senator Mikulski. A very big deal.
    Secretary Gutierrez. Yes, I agree with that. This falls 
under the National Telecommunications and Information 
Administration, and the balance here, is to have 
interoperability without overregulating. I would love to get 
back to you on that.
    [The information follows:]

                      Interoperable Communications

    The Department of Commerce, through the National Institute of 
Standards and Technology (NIST) and the National Telecommunications and 
Information Administration (NTIA), supports Project 25 (P25), which is 
a set of standards for interoperable communications equipment used by 
first responders. The steering committee for P25 is governed by the 
Telecommunications Industry Association (TIA), which comprises 1,000 
member companies.
    The following table gives the status of the four P25 interface 
standards that are key for interoperable communications.

------------------------------------------------------------------------
             Standard                              Status
------------------------------------------------------------------------
Common Area Interface............  Complete.
Inter-RF-Sub-System Interface....  Completion expected first quarter
                                    2006.
Console Interface................  Completion expected first quarter
                                    2006.
Fixed Station Interface..........  Completion expected first quarter
                                    2006 (interim form).
------------------------------------------------------------------------

    To accelerate the completion of the standards, NIST and its federal 
sponsors at DHS and DOJ are providing additional engineering support to 
the corresponding technical committees. The second and third standards 
will be completed on the following timeline, pending approval by the 
steering committee and the absence of major technical issues.
  October 2005--Vote by P25 steering committee.
  December 2005--Testing and validation of the standard completed.
  December 2006--First products based on the new standard on the 
        market.
    The Fixed Station Interface standard will follow the same timeline, 
but as an interim standard for federal grants and procurement contracts 
until a final standard is published.
    As noted by the Appropriations Committee, there is no formal 
process for ensuring that products sold as P25 compliant indeed meet 
the P25 standards. Recent testing by NTIA showed that none of the P25 
subscriber units (walkie-talkies) met all of the requirements of the 
Common Air Interface standard.
    Therefore, NIST and NTIA are developing a third-party conformity 
assessment program that will allow accredited private laboratories to 
test equipment for P25 compliance. It is expected that DHS will require 
the use of this program when dispersing federal grants to local and 
state public safety agencies. In addition, the program can be used by 
Federal agencies when procuring land mobile equipment for their own 
use. By January 2006, NIST expects to have all documentation to begin 
the laboratory accreditation process for the P25 Common Air Interface, 
and hopes to have products tested in accredited labs by the summer of 
2006.

    Senator Shelby. Okay; you can get back to us on that. We 
have several entities under our subcommittee that are focused 
on this problem. We have the Bureau. Senator Mikulski is on the 
Intel Committee, dealing with all of the intelligence agencies. 
I spent 8 years on this issue. But you are going to be on top 
of that.
    Secretary Gutierrez. Yes, sir.

                               U.S. TRADE

    Senator Shelby. You know the WTO Doha Round talks are 
accelerating. They are moving along. But I have been told that 
virtually all of the proposals that have been made to date 
would weaken U.S. trade laws with regard to trade law remedies, 
in other words, where we have remedies, and the United States 
has only made several small proposals.
    Some of us are concerned that the United States does not 
have aggressive proposals on the table in these negotiations to 
strengthen trade law rules. Will you initiate and would you 
support an aggressive agenda for developing trade law 
strengthening measures in an interagency process that can be 
offered in the negotiations? And if so, will you let us know 
what we are doing? Both of us have a lot of manufacturing in 
our States, and this trade is important.
    Secretary Gutierrez. I appreciate that, Mr. Chairman. If I 
could just say, there was a ministerial meeting in December, 
and of course, the Doha Round. One of the reasons why I think 
CAFTA is so important is that we want a strong position at the 
table. We have to make sure we hold our own, and I am concerned 
that if we cannot pass CAFTA that we will not be as strong as 
we need to be. There will be a sense that the United States is 
losing its edge. We could not get Central America, so that 
gives other negotiators a sense of strength at the table. I 
agree we cannot weaken our position at the WTO.
    Senator Shelby. Sure. But trade has got to go on. We have 
got to be on top of it. And a lot of that comes under your 
jurisdiction.
    Secretary Gutierrez. Absolutely.

                          SPECTRUM MANAGEMENT

    Senator Shelby. Mr. Secretary, given the Department's 
critical role, the Commerce Department, in implementing the 
President's Spectrum Policy for the 21st Century, what are the 
long-term plans for spectrum management, and how will you work 
with the Federal Communications Commission and other relevant 
agencies in this endeavor? In other words, what are your 
priorities with spectrum management, and what do you see as the 
most significant impact it will have on the commercial 
industry? Because it certainly will have some.
    Secretary Gutierrez. Spectrum, as you know, is incredibly 
valuable. The President has said we want to give every citizen 
digital access. We do not want to take away access to digital. 
That is going to take some time, but by 2007, we want all homes 
in the country to have access to digital.
    Senator Shelby. How are you going to get there?
    Secretary Gutierrez. A lot of these come down to local 
communities and how we ensure that we do not just take away 
service from people who rely on analog television and analog 
services. But once that is done, and that is in the planning 
now, that spectrum can be allocated to businesses. We are also 
getting spectrum from the Defense Department.
    Senator Shelby. It will have a tremendous value, will it 
not?
    Secretary Gutierrez. It is one of the most valuable 
allocations that we will do over the next couple of years. It 
is the most valuable real estate we have. So I agree, and I 
would like to report back on how that is shaping up.
    [The information follows:]

                          Spectrum Management

    President Bush recognized that ensuring needed access to 
the spectrum resource is a critical element in satisfying 
diverse U.S. interests, such as national defense, public 
safety, transportation infrastructure, scientific research, and 
consumer services. The goals of the President's Spectrum Policy 
are to: foster economic growth; ensure our national and 
homeland security; maintain U.S. global leadership in 
communications technology development and services; and satisfy 
other vital U.S. needs in areas, such as public safety, 
scientific research, federal transportation infrastructure, and 
law enforcement.
    The Department's long-term plans for spectrum management 
are to carry out President Bush's direction and implement the 
recommendations which we have provided the President, to carry 
out his Spectrum Policy for the 21st Century that will 
significantly improve the spectrum management system.
    The recently enacted Commercial Spectrum Enhancement Act 
creates a spectrum relocation fund, an important mechanism to 
facilitate the reallocation of spectrum from governmental to 
commercial uses. The Department, through the National 
Telecommunications and Information Administration (NTIA), will 
carry out the provisions in the Act associated with federal 
government spectrum management. In June 2006, the FCC plans to 
auction 90 MHz of spectrum for advanced wireless services, half 
of which is spectrum that will be transferred from Federal 
government to commercial use under the provisions of the 
Commercial Spectrum Enhancement Act.

    Senator Shelby. Mr. Secretary, does CPB, the Corporation 
for Public Broadcasting, provide more limited assistance to 
public broadcasting stations than PTFP? Do you know? Will CPB 
be able to provide grants previously provided by PTFP, that is 
the Public Telecommunications Facilities Planning and 
Construction Program grants?
    Secretary Gutierrez. My understanding, Mr. Chairman, is 
that they will.
    Senator Shelby. That gets into digital conversion.
    Secretary Gutierrez. Yes, and we have reduced our 
involvement. I think we have money in the budget for phasing 
out that program. The Public Broadcasting System continues, and 
I believe that the money allocated in the budget is sufficient, 
and that they will be able to operate. Does that answer your 
question?
    Senator Shelby. Senator Mikulski.
    Senator Mikulski. Thank you, Mr. Chairman.

             INTELLECTUAL PROPERTY AND INTERNATIONAL TRADE

    Mr. Secretary, the questions offered by the chairman very 
much parallel my own. We have worked together since we were in 
the House of Representatives, as I said. A lot of what we are 
talking about here can definitely be done on a bipartisan 
basis.
    I would like to pick up once again on the international 
trade issue. Your comment that you just got an intellectual 
property coordinator was fascinating, because this is a new--
this is the first time I have heard this. Could you share with 
us what that intellectual property coordinator will do and how 
that person will work with the international trade rep? Is this 
one person? Is this one person with 100 people? What is the----
    Secretary Gutierrez. Yes; one person with 100 percent of 
his or her time on intellectual property only. That is all they 
will do. They will report to me. They will work with NIPLECC 
very closely and they will be the conduit to all of the other 
agencies. There is a lot of work that we can be doing with 
USTR, but there is also work we can be coordinating with the 
Justice Department, because a lot of this is enforcement. A lot 
of this is frankly just tearing down some networks of 
intellectual property violations and making sure that people 
are punished.
    A lot of it is just straightforward implementation. This 
person will ensure that we have got priorities, that we are 
coordinating it, that we know what we are trying to do, that we 
are measuring progress, because today, it is just very general.
    Senator Mikulski. It is very general.
    Secretary Gutierrez. It is very general because it is such 
a complex area, and we know it is a problem, but we are not 
sure if we are making progress or not. Hopefully, we will be 
able to report to you with specific measures as to how much 
progress we are making such as how many networks have we 
prosecuted, how many countries have put laws in place, and how 
many companies have been shut down in foreign countries. I look 
forward to doing that.
    [The information follows:]

                          International Piracy

    The U.S. Department of Commerce is working at making combating 
international piracy and counterfeiting a priority. For example, it is 
working on the Strategy Targeting Organized Piracy (STOP) Initiative, 
which has been developed over the last year. STOP is the most 
comprehensive U.S. government-wide initiative ever advanced to demolish 
the criminal networks that traffic in fakes, stop trade in pirated and 
counterfeit goods at America's borders, block bogus goods around the 
world, and help small businesses secure and enforce their rights in 
overseas markets. While STOP is a multi-agency effort (e.g., the 
Department of Justice focusing on the criminal prosecution of criminal 
networks), Commerce is involved in many facets of this initiative.

Building Coalitions
    The ultimate success of the STOP Initiative involves building 
coalitions with many of our like-minded trading partners, such as 
Japan, the United Kingdom, and France, who have all recently launched 
similar initiatives. We are seeking to continue working with our 
partners in the G-8, Organization for Economic Cooperation and 
Development (OECD) and the Asia-Pacific Economic Cooperation (APEC) 
forum. Cooperation on new initiatives to improve the global 
intellectual property environment is essential to disrupting the 
operations of pirates and counterfeiters.

Criminal Prosecution
    Earlier this year, the U.S. Department of Justice announced the 
successful prosecution an international piracy enterprise. ``Operation 
Higher Education'' focused on the highest levels of these so-called 
``release groups.'' The top release groups, also frequently referred to 
as ``warez groups,'' are the first-providers--the original source for 
the illegal trading and online distribution of pirated works. Once a 
release group prepares a stolen work for distribution, the material is 
distributed in minutes to secure, top-level servers and made available 
to a select clientele. From there, within a matter of hours, the 
pirated works are illegally distributed throughout the world, ending up 
on public channels on IRC and peer-to-peer file sharing networks 
accessible to anyone with Internet access.
    The three convictions, while the first U.S. convictions for 
Operation Higher Education, bring the total number of domestic 
convictions for Operation Fastlink to six thus far.

International Outreach
    A delegation of U.S. officials from seven federal agencies, 
including Commerce, recently kicked-off our international outreach 
effort to promote STOP internationally. Earlier this year, we visited 
various capitals in Asia generating much interest and fruitful 
discussions. On each leg of the trip, U.S. officials shared information 
on our efforts to combat the theft of inventions, brands and ideas. 
This first leg abroad is advancing our commitment by enlisting our 
trading partners in an aggressive, unified fight against intellectual 
property theft. Outreach to Asia was followed by visits to other 
capitals, for example, sending a delegation to Europe. We have 
tentatively planned that countries receptive to cooperation on STOP 
will be invited to attend a meeting in Washington, D.C. (likely in the 
fall of 2005) designed to formalize their participation and finalize a 
work plan.
    As we look to the future, however, let me state a positive note. 
Although by all accounts counterfeiting and piracy appear to be growth 
``industries,'' there have been some recent successes in attacking the 
problem. Between 2001 and 2002, the software industry estimates that 
software piracy in Indonesia decreased from 89 percent to 68 percent. 
In South Africa, it fell from 63 percent to 36 percent. The motion 
picture industry has reported a decrease in piracy levels in Qatar from 
30 percent in 2001 to 15 percent in 2002. In Bahrain, there have been 
dramatic and systemic improvements in IP protection and enforcement 
over the past few years. These include the signing of numerous 
international IP conventions and the virtual elimination of copyright 
piracy and counterfeiting in retail establishments.
    There is some reason for optimism. I remain hopeful that with the 
continued support and partnership of the Subcommittee, we will be able 
to do even more to provide American businesses and entrepreneurs with 
the IP knowledge and protection they need. As we proceed with this and 
other IP initiatives, we will be pleased to describe our specific 
progress.

                       OFFICE OF CHINA COMPLIANCE

    Senator Mikulski. Well, we look forward to hearing about it 
too, because this is essentially a form of, you know, unarmed 
robbery in some ways. Now, we also note that we in the Congress 
supported an Office of China Compliance to focus particularly 
on China issues in the area of international trade that would 
affect small and medium-sized business. Can you tell us, then, 
what does the Office of China Compliance as you see it do, and 
do you see them as promoting us to sell products there or also 
to one of these areas where we would be again protecting our 
intellectual property?
    Secretary Gutierrez. It is a combination of assuring that 
our partners in China are abiding by our agreements and that we 
have access to their market. It includes intellectual property 
rights violations. It is a very broad agenda, and that is one 
of the reasons why it is good to have a coordinator. It also 
includes enforcement of antidumping provisions.
    Senator Mikulski. That is a big job, this Office of 
Compliance.
    Secretary Gutierrez. I brought some facts.
    Senator Mikulski. Do you have enough resources for this 
office? Because I think this and India are--there will be other 
countries, but these will be our two big----
    Secretary Gutierrez. We have had more antidumping cases in 
the last 2 or 3 years than we have in the past 10. We have 
increased the activity substantially and we believe we can be 
even more effective.
    Senator Mikulski. What areas of antidumping? You know, we 
were brought to our knees in steel.
    Secretary Gutierrez. Let me give you some examples of 
cases: folding gift boxes, glass windshields, tables and 
folding metal chairs. These are all antidumping cases against 
China. And by the way, it is 28 against China. In the last 8 
years, we had 25. So you already had more than what was done in 
the past 8 years: structural steel beams, welded carbon quality 
steel pipes, furnace coke products, saccharin.
    Senator Mikulski. Saccharin?
    Secretary Gutierrez. You name it: ball bearings, tubular 
goods, fence posts.
    Senator Shelby. Machine tools.
    Secretary Gutierrez. We have some machine tools. We have 
iron pipe fittings, television receivers. I would love to share 
this with you.
    Senator Mikulski. I would like to see.
    There are many issues in this area, and I just want to 
share two yellow flashing lights, and then, I want to just go 
to an NIST issue and an EDA issue in the interests of time.
    I mean, that can drive you crazy. I mean, it sounds like 
small folding chairs. But then, the next thing you know, it is 
dining room sets, and then, it is this, and then, it is that. 
And then, all of a sudden, whole towns in North Carolina or 
Alabama or Maryland are just switched in and out. So it is one 
thing to compete, but it is another to deal with this. So that 
is one issue.

                    INTELLECTUAL PROPERTY VIOLATIONS

    The other area where I am worried about violation of 
intellectual property is where they are sending in essentially 
knockoffs of pharmaceuticals or over the counter medications 
and so on. You just mentioned saccharin. Diabetes is a 
characteristic in our economy. So we use these kinds of 
products. Just imagine if somebody made something under very 
paltry circumstances, and if my mother, God rest her soul, 
thought she was using saccharin, but it really was not 
saccharin, and all of a sudden, it messes up her with her 
insulin and everything else.
    Then, that's just a small thing. That's an over the 
counter. It is not small to a diabetic. But then, let us get 
into someone bringing in phony glucophage or phony abandia or 
knockoff this or that do not meet the standards. It is one of 
the things that raises my concern about the inflow of drugs. Is 
this an area that you are involved with? Is this Justice? Is 
this another agency? Because this, then, goes to not only our 
economic security but actually our physical, our very physical 
safety.
    Secretary Gutierrez. There is a big component to this, the 
importation of pharmaceuticals.
    Senator Mikulski. Oh, no, we know.
    Secretary Gutierrez. And that is really what is driving it. 
It is more about getting the safety. If we can get that right, 
then, we can talk about the commercial part.
    Senator Mikulski. But that is where you would have to team 
up with FDA, right?
    Secretary Gutierrez. Yes. And that is why we absolutely 
support what FDA is doing. If they are saying the safety is not 
there, then, there is no commerce.
    Senator Mikulski. Let us go, though, back to your--you 
know, Mr. Chairman, I found it interesting as Mr. Gutierrez has 
shared with us all these rules and chemical ever made and every 
chemical that might be made, et cetera. Do you see this as a 
way that they are using it to protect, say, their own societies 
for safety, or do you see this as inventing bureaucracy as a 
way to be Fortress Europe, or is that something you would 
rather comment in more genteel terms?
    Secretary Gutierrez. It is a great question.
    Senator Mikulski. You are part of our commercial business 
diplomatic corps.
    Secretary Gutierrez. I can comment in my business 
experience with Europe. I can tell you it is a very difficult 
place to do business. There are a lot of regulations. There are 
European regulations, and there are also country regulations, 
and sometimes, they are not the same. I think there is an 
element where they believe that they are doing the right thing 
for their societies by having all of these regulations that 
they believe will protect.
    But what is happening is that they are actually impeding 
the growth of many of their businesses, because their 
businesses would rather take their capital elsewhere. That is 
why we would love to see Europe grow faster than 1.5 or 2 
percent. I think it grew 1.7 percent last year. Countries like 
Germany, where the unemployment is 12 percent, the growth rate 
is less than 1 percent, and we believe, respectfully, that a 
lot of this has to do with unnecessary regulation and very 
aggressive tax policy. Taxes are too high, and they have too 
many regulations.
    Senator Mikulski. So these are--coming back to my desire 
for an innovation economy and working in partnership, these are 
lessons learned from us.
    Secretary Gutierrez. Yes.
    Senator Mikulski. In other words, let us protect public 
health, let us protect public safety, but let us not----
    Secretary Gutierrez. Yes.
    Senator Mikulski [continuing]. Move in a direction that is 
so excessive and overexuberant we end up with--you cannot have 
a safer society unless you have a stronger economy.
    Secretary Gutierrez. You are absolutely right. That is the 
key. That is what they have learned from us, that if they can 
grow, they can do a lot of things for their society. If they 
cannot grow, they can do a lot of damage.

             STRENGTHENING AMERICA'S COMMUNITIES INITIATIVE

    Senator Mikulski. Let me go to the EDA totally shifting 
gears. We know that you are going to be introducing legislation 
on strengthening American communities, but should not pass as 
we go through the appropriation this year, there is no money 
for EDA here except to monitor existing grants. Do you have a 
plan A and plan B, plan A being the President's position, we 
understand, moving that legislation forward against, I might 
add, quite a bit of resistance? But should that not be passed 
by October 1, this now being June 1, what would be your plan B 
to fund EDA? To keep it at this year's level or----
    Secretary Gutierrez. We would have to go back and revisit 
our programs, the programs we are bringing over. Our plan is 
based on being able to bring over all the programs from five, 
six different agencies, HUD being one of them. And that is what 
we are planning for and what we are looking forward to. If that 
for some reason does not take place, we will have to go back 
and revisit the whole design.
    Senator Mikulski. I know the chairman was, you know, 
representing the majority party, I know. I will tell you: our 
communities depend on EDA, and while we are working on 
strengthening America's communities, and that is being more 
creative and more efficient, the fact is that they are going to 
want to know what about this year? Will there be an EDA? And, 
you know, what we will do or the way that we can do that.

                     STANDARDS AND INTEROPERABILITY

    The last just comment I want to make about NIST and the 
fact that we are so concerned about its reduction in funds, 
pick up on Senator Shelby and homeland security. What we are 
saying is we spent a lot of money on protecting your nation, 
and we are now concerned that this could go to boondoggle. And 
there are a lot of--there is a lot of, quote, gear being sold. 
Senator Shelby spoke about the interoperability. Crucial. 
Because remember, we in the Capital region are several Maryland 
jurisdictions, the District of Columbia as well as Northern 
Virginia. So this is big stuff.
    But then, at the same time, there are now all of these 
things from digital cameras to a lot that law enforcement and 
first responders are buying, and what we hear continually from 
the private sector, whether it is in IT or other types of 
protective things that they buy that there is a lack of 
Federal, national standards, that this is not a priority with 
Homeland Security, and it needs to be a priority.
    And we feel that NIST would be one of the places, 
particularly those things that are used so that when they are 
buying it, they know whether it will be interoperable, whether 
there will be certain standards in terms of efficacy, et 
cetera. Is this an area where you see NIST coordinating with 
the Secretary of Homeland Security, where we really are getting 
value for our dollar in terms of those things that they buy 
really to either protect the first responder or protect the 
community?
    Secretary Gutierrez. Absolutely. NIST, as you know, has 
been working very closely on the World Trade Center.
    Senator Mikulski. I know. It is fascinating. We enjoy it.
    Secretary Gutierrez. That leads to standards for the 
future.
    Senator Shelby. Mr. Secretary, without standards, though, 
there is no interoperability.
    Secretary Gutierrez. That is absolutely right.
    The other part about standards that we have to tackle, is 
the international part, because some countries may be using 
standards as a trading strategy.
    Senator Shelby. Sure.
    Secretary Gutierrez. So if they can get their standard into 
China, we are left out, because our standard does not work in 
China. So it is domestic; it is international; and it is also a 
very big issue down the road.
    Senator Shelby. Somebody has got that edge.
    Senator Mikulski. Well, let us look right now, because we 
may not be able to deal always with some of these issues facing 
us internationally. But America is committed to protecting its 
homeland and protecting, whether it is law enforcement or other 
first responders. We are committed to protecting them as 
citizens and as taxpayers. So this is why I think they are so 
keen on the standards issue, particularly in the area of those 
things that are most frequently bought in the area of homeland 
security and the need for efficacy, interoperability, things 
that the chairman has raised and that, you know, I have seen 
examples of exactly what you said, from the bullet proof vest 
to the digital camera to some other things.
    Secretary Gutierrez. I will take that with me. I know it is 
a big priority for you, and I will be glad to come back and 
report.
    Senator Mikulski. I think that is it, Mr. Chairman. There 
are many things that we could discuss, like the helicopter; 
saving lives and saving livelihoods.
    Senator Shelby. Let us keep talking, Mr. Secretary, over 
time. We know our staffs will.
    [The information follows:]

                        International Standards

    The Department of Commerce's National Institute of 
Standards and Technology (NIST) provides the measurement and 
standards infrastructure and information needed to support U.S. 
manufacturing competitiveness in the global marketplace.
    Some examples of NIST efforts already underway to ease 
regulatory barriers to U.S. exporters include working with 
industrial laboratories to ensure that manufacturers of 
telecommunications equipment have efficient access to foreign 
markets. NIST is the U.S. authority empowered under the Asia-
Pacific Economic Cooperation (APEC) Telecommunications 
Equipment Mutual Recognition Arrangement and the U.S.-European 
Union Mutual Recognition Agreement to designate qualifying U.S. 
organizations as competent to certify U.S. telecommunications 
equipment as meeting foreign regulatory requirements and ready 
for direct export to APEC and European Union countries. As a 
result of NIST's work, U.S. manufacturers of telecommunications 
equipment are now able to certify their products in the United 
States and ship directly to Canada. Two-way trade of 
telecommunications equipment between the two neighbors totals 
some $7 billion annually. U.S. organizations designated by NIST 
can test products for three other APEC markets--Australia, 
Chinese-Taipei and Singapore--as well as for the European 
market.
    NIST has led efforts to align United States and 
international legal metrology standards to ensure acceptance of 
U.S. instrumentation for scales and meters both domestically 
and internationally. The development and implementation of the 
International Organization of Legal Metrology Mutual Acceptance 
Arrangement will reduce the number of evaluations to which 
scale and meter manufacturers must be subjected, thereby 
reducing costs to manufacturers and reducing the time-to-market 
for new products. The total market for measuring instruments is 
estimated to be $5 billion worldwide.
    NIST is also supporting U.S. manufacturers of in vitro 
diagnostic (IVD) medical devices in maintaining access to the 
$6 billion a year European market. U.S. manufacturers supply 
approximately 60 percent of this market. Recently implemented 
European regulations codified traceability requirements for 
control of these devices, requiring reference to ``available 
reference measurement procedures and/or reference materials of 
higher order.'' U.S. IVD manufacturers requested that NIST 
provide the internationally recognized certified reference 
materials and reference methods needed to meet this 
traceability requirement. NIST led the efforts of the Joint 
Committee on Traceability in Laboratory Medicine to establish a 
process for identifying and reviewing the reference materials 
and methods against agreed upon criteria. NIST has published 72 
of the approximately 150 Certified Reference Materials and 30 
of the approximately 100 Reference Measurement Procedures 
required for compliance with the European Community directive 
regarding IVD medical devices.
    NIST has identified work needed to ensure that state-of-
the-art measurement technologies and standards that are under 
development in fields such as nanotechnology, biotechnology, 
and information technology are applied in support of U.S. 
manufacturing trade and exports. If U.S. businesses are to 
compete successfully in global markets, they need to design and 
manufacture products to globally accepted standards and tie 
their processes and products to international standards of 
measurement that are provided by NIST. NIST has identified key 
areas where U.S. standards and calibrations must be aligned 
with international standards to give U.S. manufacturers 
seamless access to foreign markets. NIST highlighted the need 
to monitor the development of foreign and international 
standards for potential impact on U.S. exports and the 
importance of making the resulting information easily 
accessible to U.S. manufacturers. The funding for this effort 
was requested in the President's fiscal year 2006 budget 
request for NIST. NIST's fiscal year 2006 budget also included 
funding to expand its current cooperative standards-related 
information and assistance programs that target emerging 
markets (such as China, India, South Korea, Brazil, Russia) 
where standards-related requirements are still being formulated 
and to accelerate global recognition of measurements performed 
by U.S. manufacturers.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Shelby. We appreciate your appearance here today. 
We know it is your first appearance, and we appreciate your 
coming to this small room. It has got its advantages, too. But 
we will continue to work with you, because you have got some 
real challenges, and so do we working with you on this budget 
and programs. We need certainty when we are funding things. You 
need certainty, too, in carrying them out.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]

            Questions Submitted by Senator Richard C. Shelby

                             BOULDER FENCE

    Question. What is the status of the fence surrounding the Boulder 
facilities? Where do things stand with the city of Boulder? What are 
the current plans, timelines, and costs estimates? How does the 
Department intend to pay for the fence's construction?
    Answer. The final location of the fence line has been determined 
and the City Manager was notified on April 13, 2005. Tribal 
representatives have been notified as well. Design and material 
selection is continuing and should be at 90 percent completion by 
September 2005.
    DOC has worked in close consultation with the City of Boulder 
throughout the process to assure compliance with the Memorandum of 
Agreement (MOA) with the City and Tribes, and we have taken into 
account the concerns and suggestions from Boulder citizens, as well as 
from agency staff at the Boulder Laboratories.
    A response letter to this official notification was sent to the 
National Institute of Standards and Technology (NIST) Boulder Director 
on June 9, 2005, from the City of Boulder, Office of the City Manager. 
The letter states, ``The City is appreciative of the changes that the 
Department of Commerce has made to the proposed security improvements 
in response to concerns that the City has expressed about earlier 
proposals . . . At this time the City remains unconvinced of the need 
for a fence. If Commerce chooses to go forward in developing a fence, 
the City will insist that the terms of the MOA and the easement be 
abided by should any portion of such proposed fence trigger these 
agreements.'' The City has requested additional information on the 
outdoor lighting that will be part of the proposal; the design and 
material of the proposed fence and its effect on wildlife migration; 
the location, size and design of the boulders or bollards proposed to 
be placed on the east side of the NOAA building and where these would 
be located within the protected area or the City's right-of-way. The 
letter further states, ``depending on a review of this information, the 
City may still express concerns or objections to this latest 
proposal.''
    The NIST Boulder Director met again with City staff on June 24, 
2005, and is writing a letter that will be delivered to the City in the 
near future in response to the questions posed in the June 9th letter 
and during the June 24th meeting. It is expected that the letter will 
provide assurances on most of the details of compliance with the MOA 
and with City codes.
    Fence design is continuing in more detail now that the fence 
location is determined, and a 90 percent complete design is expected by 
September 2005. Costs including fence material, installation, and 
electronics (cameras) cannot be accurately estimated until the design 
is final.
    Once the design is finalized and cost estimates developed, the 
Department will work through the President's Budget process to 
determine where funding for the effort falls within other Department 
and Administration priorities.
    The President's fiscal year 2006 budget does not include funding 
for the fence construction. Additionally, the Senate Appropriations 
Committee mark on NIST's fiscal year 2006 Budget Request contains 
language that requires the Department of Commerce to consult with the 
committee prior to proceeding with any security enhancements at the 
Boulder location and prohibits the redirection of funding from other 
proposed construction projects at Boulder for security improvements.

    HOLLINGS MANUFACTURING EXTENSION PARTNERSHIP: ``SMALL AND RURAL 
                         STATES'' PILOT PROGRAM

    Question. Congress required NIST to submit an implementation plan 
for the ``Small and Rural States'' pilot program within the Hollings 
Manufacturing Extension Partnership. This plan was due April 15, 2005. 
The plan is now a month and a half late. When can the Committee expect 
to see the plan?
    Answer. The implementation plan is currently under development and 
review within the Administration.
                                 ______
                                 
             Questions Submitted by Senator Robert C. Byrd

             EMERGENCY STEEL LOAN GUARANTEE PROGRAM (ESLGP)

    Question. Throughout his time in office, President Bush has 
stated--over and over again--that he is a staunch defender of America's 
steel industry. He has told West Virginia steelworkers and other 
steelworkers across the nation that he will stand by them. Yet his 
budget for each of the past three years has recommended rescission of 
all of the available funds in the Emergency Steel Loan Guarantee 
Program (ESLGP).
    I helped establish the ESLGP in 1999 to help American steel 
companies in distress. The program has been absolutely critical in 
helping U.S. steel producers obtain necessary financing. It has saved 
the day for thousands of steelworkers and retirees across the nation--
from Hanna Steel Corporation in Tuscaloosa and Fairfield, Alabama, as 
well as Pekin, Illinois, to Wheeling-Pittsburgh Steel in Wheeling, West 
Virginia. I understand that even the loan that was awarded to Geneva 
Steel in Utah, a company that initially was in default, is now being 
repaid.
    So this has been and continues to be a very successful program. It 
therefore needs to remain available to ensure the future of America's 
steel companies, their workers, and thousands of retirees, who are in 
critical need of health insurance and pension benefits, and may now 
live on limited incomes.
    I would appreciate the Administration's support in maintaining this 
important program.
    Answer. There has been a low level of utilization of the Steel 
Program since its inception. Only three loan guarantees under the 
program have been closed and funded. And only two of these are still 
performing.
    The fiscal year 2004 Appropriations Act extended to December 31, 
2005, the authority to guarantee new loans under the Emergency Steel 
Loan Guarantee Program. No applications were received during this 
extension period so far and no applications are currently pending. The 
Administration proposes rescinding $50.2 million of unobligated 
balances of loan subsidy in 2006.

                        WTO NEGOTIATION STRATEGY

    Question. The Trade Act of 2002 requires significant effort by the 
Bush Administration to preserve U.S. trade laws in the ongoing WTO 
Round. During your confirmation, you assured Senator Rockefeller that 
you would ``vigorously defend and enforce our existing trade remedy 
laws, and implement those laws as intended to stop dumped or subsidized 
goods from injuring U.S. industries.''
    While other countries are making a multitude of proposals to 
dismantle U.S. trade laws, there appear to be few creative, new 
proposals being proposed by the U.S. government to preserve and enhance 
our critical antidumping and countervailing duty laws.
    Can you please explain the Bush Administration's strategy to 
``vigorously defend and enforce our existing trade remedy laws'' in the 
Doha Round's trade negotiations?
    Answer. Our negotiating strategy is quite clear: (1) To maintain 
the strength and effectiveness of the trade laws; (2) to enhance 
transparency and due process requirements; (3) to enhance disciplines 
on trade distorting practices that lead to unfair trade; and (4) to 
ensure that dispute settlement panels and the Appellate Body do not 
impose obligations that are not clearly contained in the Agreements.
    Furthermore, the specific concerns raised by Congress in the Trade 
Promotion Authority have been identified and will be addressed as part 
of the Rules negotiations. The Administration has actively participated 
in the Rules negotiations thus far, both in terms of pursuing our own 
objectives and challenging the proposals of others. The Commerce 
Department is committed to strengthening WTO trade remedy rules and 
ensuring that they remain effective in addressing the problems of 
unfair trade.

                CONTINUED DUMPING AND SUBSIDY OFFSET ACT

    Question. The Administration has recognized that the WTO decision 
on the Continued Dumping and Subsidy Offset Act of 2000 or ``CDSOA,'' 
also known as the Byrd Amendment trade law, incorrectly imposed 
obligations on the United States by prohibiting the distribution of 
monies collected as antidumping and countervailing duties on unfairly 
traded U.S. imports. Congress has repeatedly called for negotiations in 
the Doha Round to address this issue, not only in many letters sent to 
the Administration, but also in the fiscal year 2004 and fiscal year 
2005 Consolidated Appropriations Acts. Report language accompanying 
both of those appropriations bills, signed into law, also directed the 
Administration to report to the Appropriations Committee every 60 days 
on the status of those negotiations.
    I have not been briefed one time on the status of these 
negotiations. I understand that Commerce Department officials have a 
very important role in those negotiations, as do USTR negotiators. By 
law, the Administration has been directed to negotiate a solution to 
this trade dispute.
    In April 2004, the United States did submit a proposal in the Rules 
negotiations to recognize ``the right of Members to distribute monies 
collected from antidumping and countervailing duties.'' During the 
confirmation process, you explained that the Department of Commerce and 
the Office of the U.S. Trade Representative were consulting to ensure 
proper implementation of the requirements of U.S. law regarding 
negotiations over CDSOA distributions and would complete those 
consultations as soon as possible. You also agreed to continue to work 
to advance congressional objectives in the Doha Round negotiations, 
including reversal of the adverse CDSOA decision.
    Since committing to ``pursue changes to those Agreements that will 
reverse specific adverse findings, including those regarding the 
Continued Dumping and Subsidy Offset Act,'' the United States has not 
submitted any further proposals to recognize the right of Members to 
distribute monies collected from antidumping and countervailing duties.
    On May 23, 2005, U.S. Trade Representative Rob Portman sent me a 
letter in which he stated that he wants to work closely with me on the 
Byrd Amendment to determine ``the best way to forge the required 
consensus in the negotiations.''
    Can you please explain how the Administration intends to obtain an 
acceptable and expeditious solution to the CDSOA dispute at the WTO? 
When will there be a briefing by the Administration on the status of 
the negotiations concerning this dispute?
    Answer. The Administration intends to continue to address this 
issue in the context of the WTO's ongoing Doha Round of multilateral 
trade negotiations. While the United States has not proposed any legal 
text on this issue, in April 2004, the Administration did submit a 
paper in the WTO Negotiating Group on Rules indicating our intent to 
negotiate on this matter, as you noted.
    The Rules negotiations are entering a critical phase, and the 
Commerce Department is working earnestly and in concert with the Office 
of the U.S. Trade Representative (USTR) to satisfy Congressional 
objectives. The Commerce Department is working with USTR to draft a 
second-generation proposal on this issue. We are also prepared to 
assist the USTR with its responsibilities in reporting to Congress on 
the progress of these negotiations, and specifically on negotiations 
over the right of Members to distribute antidumping and countervailing 
duties. We would be pleased to consult with you and your staff on this 
paper as the drafting process advances.

              COLLABORATION WITH U.S. TRADE REPRESENTATIVE

    Question. Over the past two years, the United States has been on 
the receiving end of more adverse GATT and WTO challenges than any 
other WTO Member. Roughly half of all WTO decisions have been issued in 
cases that challenged U.S. measures, and over three-quarters of those 
decisions addressed the administration of our trade remedy laws. It is 
clear that the WTO dispute settlement system has been used unfairly to 
threaten U.S. sovereignty and to erode the effectiveness of our trade 
remedy laws. Despite this, the United States has only made four 
publicly available submissions in the dispute settlement negotiations 
concerning two topics.
    How do you intend to collaborate with USTR to redress this 
imbalance? What is your strategy to rapidly generate textual proposals 
that can protect and enhance the U.S. trade laws?
    Answer. I intend to continue working very closely with the Office 
of the United States Trade Representative to advance the negotiation of 
changes to the WTO Dispute Settlement Understanding, as well as the 
Antidumping and Subsidies Agreements, that aim to correct the most 
egregious WTO decisions and to ensure that, in future disputes, the 
panels and the Appellate Body will adhere to the appropriate standards 
of review.
    In the dispute settlement negotiations, the United States has 
already submitted detailed textual proposals that would serve to 
achieve the first two elements of our strategy: increasing WTO Members' 
control over the dispute settlement process and increasing the 
transparency of that process. With respect to the Rules negotiations, 
the Administration believes that the negotiations should now focus on 
``clearing the underbrush'' so that the way forward to a text-based 
negotiation sometime after the Hong Kong Ministerial Meeting is clear. 
At that time, the Administration will be prepared to pursue our Rules-
specific dispute settlement concerns with textual proposals.
    Question. Specifically concerning the issue of the Doha Dispute 
Settlement negotiations, during your confirmation process, you offered 
a general strategy of: (1) increasing member nations' control over the 
dispute settlement process; (2) increasing transparency; (3) pursuing 
changes to the Rules Agreements to ensure that panels and the Appellate 
Body adhere to the appropriate standards of review; and (4) pursuing 
changes to the Rules Agreements that ``will reverse specific adverse 
findings, including those regarding the Continued Dumping and Subsidy 
Offset Act, `zeroing,' and injury determinations.'' The United States 
has not submitted any recent, concrete proposals addressing any of the 
items highlighted in your strategy.
    Can you please explain how you intend to advance the negotiation of 
changes to the WTO dispute settlement system or the Rules Agreements to 
reverse this long line of adverse trade remedy decisions? Can you 
provide a timeline of when we can expect such proposals to be 
submitted?
    Answer. I intend to work very closely with the Office of the United 
States Trade Representative to advance the negotiation of appropriate 
changes to the WTO Dispute Settlement Understanding, as well as the 
Antidumping and Subsidies Agreements.
    In the context of the dispute settlement negotiations, the 
Administration intends to continue pursuing the textual proposals the 
United States has submitted that would increase WTO Members' control 
over the dispute settlement process and the transparency of that 
process.
    In the Rules negotiations, the United States has identified as an 
issue for further negotiation the need to ensure that panels and the 
Appellate Body adhere to the appropriate standards of review. With 
respect to zeroing, the United States has already identified the topic 
as one of our priorities in the Rules negotiations and is taking the 
necessary steps to address this important issue. The United States 
tabled a paper that outlines our views on zeroing and will continue to 
advocate for the continuance of our long-standing practice as the 
discussions move forward. With respect to injury determinations, the 
United States tabled a paper in early July addressing the Appellate 
Body's adverse findings with respect to this issue. The Administration 
intends to pursue these proposals vigorously as the negotiations 
advance.
                                 ______
                                 
            Questions Submitted by Senator Daniel K. Inouye

                       NOAA PACIFIC REGION CENTER

    Question. For several years, my office has worked in partnership 
with the National Oceanic and Atmospheric Administration toward the 
construction of a consolidated regional facility for the agency in 
Hawaii. A site--Ford Island in Pearl Harbor--has been selected after an 
exhaustive search, and the design process and environmental permit 
process is underway. All told, the Hawaiian Archipelago comprises over 
20 percent of the United States' Exclusive Economic Zone. We are in the 
midst of a designation process that will lead, I believe, to the 
creation of the world's largest marine sanctuary. Our pelagic fisheries 
produce the world's best sashimi-grade tuna, and although they are 
currently healthy, vigilance in management is necessary to ensure that 
the international fleets follow America's lead in responsible fishing 
practices. Our National Weather Service region is the largest in the 
nation, and our climate and weather scientists lead the world in 
pushing back the frontiers of understanding the Pacific's meteorology. 
Their excellent work is matched by corresponding initiatives for 
coastal disaster management from an all-hazards point of view--
initiatives that are developed in Hawaii and then used as patterns 
among other Pacific Islands.
    These efforts are currently hosted in a variety of inadequate and 
scattered spaces throughout the Island of Oahu. Lease costs are high, 
and in some cases, the physical plants of the buildings are in serious 
decay. I would appreciate learning your thoughts on the NOAA 
consolidated facility.
    What NOAA programs are currently in Hawaii?
    Answer. The following NOAA operations are supported on the island 
of O'ahu, Hawaii:
  --NMFS--National Marine Fisheries
    --Pacific Islands Regional Office
    --Pacific Islands Fisheries Science Center and Honolulu Lab
    --Office of Law Enforcement
  --NWS--National Weather Service
    --Pacific Region Headquarters
    --International Tsunami Information Center
    --Honolulu Electronics and Technical Support Unit
    --Tsunami Warning Center (this program is not planned for 
            consolidation at the Pacific Region Center, due to 
            operational considerations)
    --Weather Forecast Office
  --NOS--National Ocean Service
    --Pacific Regional Office
    --National Marine Sanctuary Program
    --NW HI Coral Reef Ecosystem Reserve
    --HI Humpback Whale National Marine Sanctuary
    --Pacific Services Center
  --OMAO--Office of Marine Aviation Operations
    --Marine Operations Center--Pacific
  --OAR--Oceanic & Atmospheric Research
    --Climate Monitoring and Diagnostics Laboratory
    --Forecast Systems Laboratory
    --Joint Institute for Marine and Atmospheric Research
    --Office of Global Programs
    --Undersea Research Center
  --Office of General Counsel and Office of Public Affairs
    Question. How many NOAA employees are currently in Hawaii?
    Answer. There are nearly 400 employees (NOAA, Joint Institute for 
Marine and Atmospheric Research, contractors, etc.) in Hawaii.
    Question. What facilities are currently available for these 
programs and employees?
    Answer. There are ten different facilities currently used to 
support these programs and employees:

----------------------------------------------------------------------------------------------------------------
                  Occupant                                                 Location
----------------------------------------------------------------------------------------------------------------
OMAO........................................  #1 Sand Island Snug Harbor
NMFS........................................  300 Ala Moana Blvd
NMFS........................................  2570 Dole Street
NMFS........................................  Kewalo Basin
NMFS........................................  501 Sumner
NMFS........................................  1601 Kapiolani
NOS.........................................  6700 Kalanianole Highway Hawaii Kai Plaza
NWS/NOS.....................................  737 Bishop St
NWS.........................................  220 Kalihi St
NMFS........................................  9-193 Aiea Heights
----------------------------------------------------------------------------------------------------------------

    Question. Describe the status of these facilities. In particular, 
give reference to the age and physical condition of laboratory 
facilities, pier space and facilities for NOAA vessels, and the 
adequacy of space for the number of employees housed at each facility.
    Answer. The current facilities are overcrowded and inadequate to 
support current and future NOAA programs in the Pacific Region. Over 
the next 5-10 years, NOAA expects program growth in Pacific Region 
programs to increase this employee base by a modest amount.
    NOAA's program space requirements can generally be broken down into 
three types of space/operations: Office/Lab Space; Ship Operations 
Space; and Sea-Water (``Wet Lab'') Lab Space.
    Office/Lab Space.--The NOAA laboratory located at the University of 
Hawaii, Manoa Campus (Dole Street Lab) was constructed in 1949 to house 
45 employees of the National Marine Fisheries Service. By the mid-
1990s, the lab's programs had grown to over 129 staff and the 
facilities had deteriorated significantly; thus prompting the plan to 
replace the Dole Street Lab with another lab facility on the same site. 
In addition to this location, NOAA leases office/lab space for other 
programs (including National Oceans Service, National Weather Service).
    Ship Operations.--NOAA's ship operations are supported at the Snug 
Harbor location. The current location of the ship operations support 
facility was barely able to adequately support two ships (due to 
limited pier space and operational facilities) and cannot support the 
existing three ships (KA'IMIMOANA, OSCAR ELTON SETTE, HII'IALAKAI). 
NOAA requires a permanent and cost-effective docking and ship 
operations solution that will accommodate both current and future ship 
operations requirements, and has been forced on an interim basis to 
negotiate temporary berthing arrangements with Navy Region Hawaii at 
the Ford Island site.
    Seawater Lab Space.--The current seawater (wet lab) facility at 
Kewalo Basin supports critical fisheries, marine mammal, and 
sanctuaries programs. This facility is overcrowded, cannot be expanded 
at its current location, operates on a month-to-month rental basis, and 
is at risk of being forced out of its current location because of a 
larger development plan for the area (published plans from the Hawaii 
Community Development Authority call for a major redevelopment of the 
Kewalo Basin and surrounding area). Therefore, a more permanent 
solution to NOAA's seawater laboratory facility needs is required.
    Question. What financial costs would be necessary to remediate any 
deficiencies identified in the previous question?
    Answer. If NOAA were to maintain the separate locations identified 
above to support NOAA's operations and programs, substantial 
investments would be required to replace the facilities at Dole Street 
Lab, and to develop alternative facilities to replace the current Snug 
Harbor and Kewalo Basin facilities. The existing facilities have either 
outlived their useful lives (as is the case with Dole Street Lab); will 
not be available in the future (as is the case of Kewalo Basin); or 
their capacity cannot support current or future programs and operations 
(Snug Harbor, et al.). In addition, given the growth projected in 
NOAA's programs over the next five to ten years, NOAA would also need 
to lease increasing amounts of office space to support a modest 
increase in employee population. These investments in both increased 
leased space and in capital investments that would otherwise be 
required to support NOAA's current and future mission and operations in 
the Pacific Region are estimated at more than $265 million. This is 
substantially more than preliminary estimates for the projected cost of 
the Pacific Region Center.
    Question. What is the projected growth for the agency in Hawaii?
    Answer. There are nearly 400 employees (NOAA, Joint Institute for 
Marine and Atmospheric Research, contractors, etc.) in Hawaii. Over the 
next 5-10 years, NOAA expects a program growth in Pacific Region 
programs to increase this employee base by a modest amount.
    Question. What are the projected financial costs of accommodating 
that growth if each program continues as it does now--pursuing its own 
facilities needs independent of one another, and without any central 
planning? Compare these costs with those of the consolidated facility.
    Answer. The investments in both increased leased space and in 
capital investments that would otherwise be required to support NOAA's 
current and future mission and operations in the Pacific Region are 
estimated at more than $265 million. This is substantially more than 
preliminary estimates for the projected cost of the Pacific Region 
Center.
    Question. What is the position of the Department of Commerce on the 
consolidated NOAA facility in Hawaii? Please explain the Department's 
rationale.
    Answer. The Department of Commerce supports the development of a 
NOAA Pacific Region Center on Ford Island, and appreciates the support 
the Senator and his staff have provided to NOAA over the past several 
years in working towards this objective. NOAA's programs in the Pacific 
Region are diverse and geographically wide-ranging. They affect not 
just Hawaii, but also the larger Pacific Region. By bringing its 
programs together into one facility, NOAA expects to realize benefits 
in improved operations and mission performance, as well as longer-term 
operational savings, including the following:
  --Create greater focus and attention to the vital role that NOAA's 
        programs play in understanding and predicting the Pacific 
        Region's climate;
  --Improve the agency's ability to protect the environment and enhance 
        the sustainability of Pacific Basin resources;
  --Provide greater synergy and integration across NOAA in delivering 
        its products and services in the Pacific Region;
  --Advance its mission and promote community development through its 
        outreach efforts, cooperative relationships with educational 
        institutions, and growth of internship programs;
  --Achieve operational efficiencies and control program expenditures 
        by locating NOAA facilities and services in a common location 
        on existing U.S. government property.
                                 ______
                                 
               Questions Submitted by Senator Tim Johnson

                  BASE REALIGNMENT AND CLOSURE (BRAC)

    Question. On May 13 of this year, the Department of Defense (DOD) 
released its recommendations for realignment or closure of U.S. 
military bases. These recommendations will now be considered by the 
Base Realignment and Closure (BRAC) Commission. A revised list of 
recommendations will likely be considered by the President and 
Congress. Base closures, particularly in rural states like mine, can 
have devastating effects on local and regional economies. To mitigate 
these effects, several federal agencies offer grants and technical 
assistance to communities forced to cope with a base closure. In the 
four previous BRAC rounds, the Economic Development Administration 
(EDA) has been one of the largest, if not the single largest, sources 
of funding for BRAC-affected communities. The Administration's deep 
proposed cuts to community development programs including EDA would be 
of great concern to me under any circumstances. These cuts look even 
more inadvisable this year, however, in light of the fact that the 
current BRAC round will generate a significant increase in demand for 
EDA's assistance. Given that other forms of federal assistance have not 
grown to accommodate this increased demand, would you please indicate 
whether EDA has established a plan for ensuring that the needs of BRAC 
affected communities are met? If EDA has established such a plan, 
please characterize it. If EDA has not established such a plan, please 
justify the Administration's willingness to provide less assistance for 
communities affected by its base closure and realignment decisions.
    Answer. EDA continues to be an active participant in national Base 
Realignment and Closure (BRAC) activities, including working with the 
bureau's federal partners to coordinate assistance to address the 
forthcoming BRAC recommendations. In fact, pursuant to Executive Order 
12788, entitled Defense Economic Adjustment Program, as amended by 
President George W. Bush on May 12, 2005, the Secretary of Commerce 
serves as co-vice chair of the President's Economic Adjustment 
Committee (EAC), the role of which is to coordinate assistance across 
the federal government in support of forthcoming base closure and 
realignment decisions.
    Furthermore, EDA has an existing Memorandum of Agreement (MOA) with 
the Department of Defense's Office of Economic Adjustment (OEA) ``to 
facilitate the award and administration of grant and cooperative 
agreement activities and to promote consultation between the agencies'' 
on base realignment and closure issues. Pursuant to this agreement, OEA 
transfers funds to EDA to assist with economic adjustment projects on 
former military installations including grants for infrastructure 
improvements to facilitate the reuse of former military bases.
    Finally, when the President's Strengthening America's Communities 
initiative (SACI) is implemented and its administrative structure 
established, it is anticipated that the Department, under the auspices 
of a new bureau, will retain its authority and maintain its historic 
role assisting BRAC-impacted communities under soon-to-be proposed SACI 
legislation designed to, among other things, respond to economic 
adjustment problems. Under the anticipated framework for SACI, a base 
closing might cause a sudden and severe economic event that could 
trigger eligibility as a result of the economic dislocation caused by 
the closure.

             STRENGTHENING AMERICA'S COMMUNITIES INITIATIVE

    Question. Part of the Administration's justification for 
reorganizing community development grant programs as part of the 
Strengthening America's Communities (SAC) initiative is its assertion 
that federal funds are not always directed to the neediest communities. 
Yet the Administration also touts the merits of the block grant method 
of distributing federal funds, whereby state and local officials decide 
how such funds should be allocated. They are presumed to understand 
local needs and priorities more comprehensively than federal officials. 
These two positions appear to be incompatible--the Administration's 
critique of how community development funds have been distributed seems 
to contradict its belief in the wisdom of local officials. Could you 
please explain this apparent contradiction?
    Answer. The Administration strongly supports the block grant method 
of distributing federal funds as an effective mechanism to target 
taxpayer dollars to address locally established needs and priorities. 
The Administration notes, however, that existing federal block grant 
programs, such as the Community Development Block Grant (CDBG) and 
Community Services Block Grant (CSBG) programs, were developed to 
address the community and economic development challenges of another 
era and are no longer achieving their intended purpose of aiding the 
nation's neediest communities.
    The Administration strongly believes that funding should be 
targeted to those communities most in need. For example, the CDBG 
program was created to serve distressed communities, but currently 
allocates 38 percent of its funds to communities (including both 
entitlement communities and the State portion) with below average 
poverty rates. The President's Strengthening America's Communities 
initiative (SACI) will address this deficiency by designing a new 
program targeted exclusively to the nation's most economically 
distressed communities.
    The SACI represents a shift in federal community and economic 
development policy. The President and his Administration believe first 
and foremost that direct federal grants in local development efforts 
should be easy to access, flexible to use, and targeted directly to the 
most-distressed communities with an expectation of achieving results.
    In focusing on results, accountability for the use of taxpayer 
dollars will be a critical component of SACI. In exchange for the 
flexible use of funds at the local level, recipients will be expected 
to achieve, and be held accountable for results. This initiative 
represents a new approach to economic and community development 
assistance by placing the focus on long-term outcomes that demonstrate 
improvement toward community self-sufficiency. Communities will be 
required to show that they have made progress toward locally selected 
goals for development (such as job creation, homeownership, and 
commercial development) in return for being able to determine how best 
to spend federal dollars to meet those outcomes.
    Question. A February 2005 overview booklet about the SAC initiative 
contains a Frequently Asked Questions (FAQ) section which includes the 
following question. ``Isn't [the SAC initiative] really just a disguise 
for cutting funding?'' The pamphlet goes on to explain that despite the 
initiative's proposed cuts, community development efforts would be 
improved by the initiative's reforms. To my knowledge, though, the 
Administration has not released any analysis to indicate the harm of 
reducing community development funding will be more than offset by 
gains from reorganizing the programs. Has the Administration conducted 
any analysis to indicate whether the SAC initiative is net-beneficial? 
If so, please share this analysis with me and other members of the 
Appropriations Committee. In the absence of such analysis, how does the 
Administration justify its claim that the SAC is something other than 
``a disguise for cutting funding''?
    Answer. When the Strengthening America's Communities initiative 
(SACI) is implemented, the Administration anticipates that there will 
be administrative savings from reducing the number of programs that 
communities must work with from 18 to 1. These savings will occur at 
the federal, as well as state and local levels where redundant staffing 
and administrative structures can be eliminated. To date, the 
Administration has not conducted an analysis that quantifies the 
administrative savings at the federal level, and it would be virtually 
impossible to quantify the enormous benefits that would accrue by 
eliminating redundancy at the state and local levels.
    In addition to the anticipated administrative savings, the goal of 
the consolidation is to provide a more streamlined delivery system 
resulting in better service and reduced upfront costs for the 
communities receiving assistance. An important principle behind the 
SACI is to avoid the need for communities, especially rural and 
economically distressed communities with limited resources, to have to 
expend those valuable resources coordinating a vast array of similar 
domestic community and economic development programs.
    These concerns about the status quo mirror the growing consensus 
among the nation's leading economists and economic development 
researchers and practitioners that because of the fragmented, 
unfocused, and duplicative nature of the programs, there is a need to 
fundamentally rethink and refocus the federal role in support of state 
and community efforts to promote economic growth and spur job creation 
in the 21st century economy. For example, one GAO report noted that the 
fragmentation and excessive bureaucracy make it difficult for 
communities to obtain assistance and ``limit the development of 
critical knowledge [and] hinder organizations and partnerships.'' \1\ 
The Administration's new proposed grant program would significantly 
improve the coordination of resources at the local level by 
streamlining federal resources.
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    \1\ U.S. General Accounting Office, ``Community Development: 
Challenges Face Comprehensive Approaches to Address Needs of Distressed 
Neighborhoods,'' GAO/T-RECD-95-160BR, April 13, 1995.
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    The recently issued report of the SACI Secretarial Advisory 
Committee reinforces these findings. The report's overarching premise 
is that globalization has fundamentally changed the American economy, 
and that the economic health of our nation is now dependent upon the 
competitiveness of its regions. Despite these economic changes, our 
nation continues with policies, organizational structures, and 
investment strategies built for a past era. Therefore, it is necessary 
to build a new system of federal economic and community development 
that invests in the strengthening of regions and their communities. The 
report emphasizes the need to better target federal resources to 
communities and regions of high distress.
    On the whole, it is anticipated that SACI's new allocation formula 
will direct more funds to the neediest places. The President's 
initiative will focus resources on the nation's most economically 
distressed communities. By focusing on communities most in need, fewer 
communities may be funded, but they will be funded under an allocation 
methodology that allows them to receive increased funding along with 
more flexibility, more control and more focus on activities that drive 
their local economy or make their communities more livable.
    In addition, the President's proposal is more equitable in that it 
will streamline access to federal assistance by providing a single 
access point for all communities. By targeting funds on the basis of 
need, we can direct funding to the communities that are most deserving 
regardless of whether they are urban, exurban, suburban, or rural.

                          SUBCOMMITTEE RECESS

    Senator Shelby. Thank you very much. The subcommittee is 
recessed.
    [Whereupon, at 3:20 p.m., Thursday, May 26, the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]
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