[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]


 
  STIMULATING THE ECONOMY THROUGH TRADE: EXAMINING THE ROLE OF EXPORT 
                               PROMOTION

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

                                HEARING

                               BEFORE THE

                    SUBCOMMITTEE ON COMMERCE, TRADE,
                        AND CONSUMER PROTECTION

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 17, 2009

                               __________

                           Serial No. 111-15


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov



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                    COMMITTEE ON ENERGY AND COMMERCE

                 HENRY A. WAXMAN, California, Chairman

JOHN D. DINGELL, Michigan            JOE BARTON, Texas
  Chairman Emeritus                    Ranking Member
EDWARD J. MARKEY, Massachusetts      RALPH M. HALL, Texas
RICK BOUCHER, Virginia               FRED UPTON, Michigan
FRANK PALLONE, Jr., New Jersey       CLIFF STEARNS, Florida
BART GORDON, Tennessee               NATHAN DEAL, Georgia
BOBBY L. RUSH, Illinois              ED WHITFIELD, Kentucky
ANNA G. ESHOO, California            JOHN SHIMKUS, Illinois
BART STUPAK, Michigan                JOHN B. SHADEGG, Arizona
ELIOT L. ENGEL, New York             ROY BLUNT, Missouri
GENE GREEN, Texas                    STEVE BUYER, Indiana
DIANA DeGETTE, Colorado              GEORGE RADANOVICH, California
  Vice Chairman                      JOSEPH R. PITTS, Pennsylvania
LOIS CAPPS, California               MARY BONO MACK, California
MICHAEL F. DOYLE, Pennsylvania       GREG WALDEN, Oregon
JANE HARMAN, California              LEE TERRY, Nebraska
TOM ALLEN, Maine                     MIKE ROGERS, Michigan
JAN SCHAKOWSKY, Illinois             SUE WILKINS MYRICK, North Carolina
HILDA L. SOLIS, California           JOHN SULLIVAN, Oklahoma
CHARLES A. GONZALEZ, Texas           TIM MURPHY, Pennsylvania
JAY INSLEE, Washington               MICHAEL C. BURGESS, Texas
TAMMY BALDWIN, Wisconsin             MARSHA BLACKBURN, Tennessee
MIKE ROSS, Arkansas                  PHIL GINGREY, Georgia
ANTHONY D. WEINER, New York          STEVE SCALISE, Louisiana
JIM MATHESON, Utah                   PARKER GRIFFITH, Alabama
G.K. BUTTERFIELD, North Carolina     ROBERT E. LATTA, Ohio
CHARLIE MELANCON, Louisiana
JOHN BARROW, Georgia
BARON P. HILL, Indiana
DORIS O. MATSUI, California
DONNA CHRISTENSEN, Virgin Islands
KATHY CASTOR, Florida
JOHN P. SARBANES, Maryland
CHRISTOPHER MURPHY, Connecticut
ZACHARY T. SPACE, Ohio
JERRY McNERNEY, California
BETTY SUTTON, Ohio
BRUCE BRALEY, Iowa
PETER WELCH, Vermont

                                  (ii)
        Subcommittee on Commerce, Trade, and Consumer Protection

                   BOBBY L. RUSH, Illinois, Chairman
JAN SCHAKOWSKY, Illinois             CLIFF STEARNS, Florida
    Vice Chair                            Ranking Member
JOHN SARBANES, Maryland              RALPH M. HALL, Texas
BETTY SUTTON, Ohio                   DENNIS HASTERT, Illinois
FRANK PALLONE, New Jersey            ED WHITFIELD, Kentucky
BART GORDON, Tennessee               CHARLES W. ``CHIP'' PICKERING, 
BART STUPAK, Michigan                    Mississippi
GENE GREEN, Texas                    GEORGE RADANOVICH, California
CHARLES A. GONZALEZ, Texas           JOSEPH R. PITTS, Pennsylvania
ANTHONY D. WEINER, New York          MARY BONO MACK, California
JIM MATHESON, Utah                   LEE TERRY, Nebraska
G.K. BUTTERFIELD, North Carolina     MIKE ROGERS, Michigan
JOHN BARROW, Georgia                 SUE WILKINS MYRICK, North Carolina
DORIS O. MATSUI, California          MICHAEL C. BURGESS, Texas
KATHY CASTOR, Florida
ZACHARY T. SPACE, Ohio
BRUCE BRALEY, Iowa
DIANA DeGETTE, Colorado
JOHN D. DINGELL, Michigan (ex 
    officio)


                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Bobby L. Rush, a Representative in Congress from the State 
  of Illinois, opening statement.................................     1
    Prepared statement...........................................     3
Hon. George Radanovich, a Representative in Congress from the 
  State of California, opening statement.........................     6
Hon. Doris O. Matsui, a Representative in Congress from the State 
  of California, opening statement...............................     7
Hon. Phil Gingrey, a Representative in Congress from the State of 
  Georgia, opening statement.....................................     8
Hon. Betty Sutton, a Representative in Congress from the State of 
  Ohio, opening statement........................................     9
Hon. G.K. Butterfield, a Representative in Congress from the 
  State of North Carolina, opening statement.....................     9
Hon. John D. Dingell, a Representative in Congress from the State 
  of Michigan, prepared statement................................    86
Hon. Steve Scalise, a Representative in Congress from the State 
  of Louisiana, prepared statement...............................    87

                               Witnesses

Michelle O'Neill, Acting Under Secretary for International Trade, 
  International Trade Administration, Department of Commerce.....    11
    Prepared statement...........................................    14
    Answers to submitted questions \1\
Suzanne Hale, Acting Administrator, Foreign Agriculture Service, 
  Department of Agriculture......................................    20
    Prepared statement...........................................    22
Loren Yager, Director, International Affairs and Trade, 
  Government Accountability Office...............................    31
    Prepared statement...........................................    33
Franklin J. Vargo, Vice President, International Economic 
  Affairs, National Association of Manufacturers.................    42
    Prepared statement...........................................    45
Liz Reilly, Director, Traderoots, United States Chamber of 
  Commerce.......................................................    58
    Prepared statement...........................................    60

                           Submitted Material

Report by World Bank entitled, ``Export Promotion Agencies: What 
  Works and Does Not,'' September 30, 2006, submitted by Franklin 
  Vargo..........................................................    89
Statement of Dennis Slater, President, Association of Equipment 
  Manufacturers, submitted by Mr. Rush...........................    96

----------
\1\ Ms. O'Neill did not respond to submitted questions for the 
  record.


  STIMULATING THE ECONOMY THROUGH TRADE: EXAMINING THE ROLE OF EXPORT 
                               PROMOTION

                              ----------                              


                        TUESDAY, MARCH 17, 2009

                  House of Representatives,
           Subcommittee on Commerce, Trade,
                           and Consumer Protection,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:05 a.m., in 
Room 2322 of the Rayburn House Office Building, Hon. Bobby L. 
Rush (chairman) presiding.
    Members present: Representatives Rush, Green, Braley, 
Butterfield, Matsui, Sutton, Stupak, Space, Radanovich, 
Gingrey, Sullivan, and Scalise.
    Staff present: Angelle B. Kwemo, Counsel; Michelle Ash, 
Chief Counsel; Zahara Goldman, Professional Staff; Valerie 
Baron, Legislative Clerk; Jennifer Berenholz, Deputy Clerk; 
Brian McCullough, Minority Senior Professional Staff; Will 
Carty, Minority Professional Staff; and Sam Costello, Minority 
Legislative Analyst.

            OPENING STATEMENT OF HON. BOBBY L. RUSH

    Mr. Rush. The subcommittee will come to order. This is a 
hearing conducted by the Subcommittee on Commerce, Trade, and 
Consumer Protection. The subject of this hearing is Stimulating 
the Economy through Trade: Examining the Role of Export 
Promotion. The chairman recognizes himself for 5 minutes for 
the purposes of opening statement. I want to thank the members 
of the subcommittee for participating in our first trade 
hearing of the 111th Congress. Today the Obama Administration 
and Congress are revisiting our trade policies. It is essential 
that as American companies and workers are faced with 
unprecedented challenges that we recognize the importance of 
international trade as an essential component of our policy 
response to the global financial crisis.
    Today's hearing will explore international trade as a tool 
to stimulate our economy and examine the role of exports in the 
growth of the U.S. economy. I also want to review the impact of 
government-sponsored export promotion programs and the 
effectiveness of assistance available to help U.S. businesses 
expand their market for U.S. products and services. In the 
past, Congress has addressed concerns about several important 
aspects of export promotions, specifically as it relates to 
interagency coordination, common goals, small business 
assistance and enforcement of trade agreements. Some progress 
has been made since then, however, today's economic environment 
demands more progress.
    In my home State of Illinois, Caterpillar, Inc. has 
recently laid off 16 percent of its workforce despite the fact 
that its world-class equipment is needed and necessary to 
support massive infrastructure projects from China to Africa. 
Sixty percent of its market is overseas with untapped potential 
in emerging and new markets. In the U.S., exports support 6 
million jobs in the manufacturing industry, and 1 million jobs 
in the agricultural industry. More than one in every five 
American factory workers owes his or her job to exports. These 
jobs pay 13 to 18 percent more, on average, than non-export-
related employment.
    Furthermore, in the recent months of stagnating domestic 
demand, most growth in manufacturing production was attributed 
to exports. The U.S. is the world's largest manufacturing 
country but, despite extensive engagement with the global 
economy, the U.S. has the smallest percentage of its Gross 
Domestic Product derived from exports in comparison to any 
other G-7 country. U.S. export promotions spending lags behind 
that of Spain, the UK, Italy, France, Korea, Canada and Japan. 
American exports in January, 2009, were down compared to 
January of last year. In addition, exports accounted for only 
13.1 percent of the U.S. economy. This certainly is not 
sufficient, especially now that the American consumer is 
spending less. We need to move to trade and exports to sustain 
economic growth. We cannot afford to be idle as our export 
numbers decrease.
    I strongly believe that if we are serious about lowering 
our trade deficit and creating more jobs for Americans, export 
promotion must be a national priority. I commend U.S. 
businesses for their innovation, their strength and vision in 
this very competitive and perilous time. I also salute non-
profit groups for their dedication and creativity in assisting 
U.S. businesses as they embark in new ventures. I also 
recognize the importance of public-private partnerships in 
fostering the spirit of American business globally. Today is 
the first of a series of hearings on trade-related matters. I 
thank all the members and witnesses for their participation. If 
it my desire that we all continue to work together on trade 
issues in a bipartisan fashion with the goal of helping to 
bolster America's economy.
    [The prepared statement of Mr. Rush follows:]

    [GRAPHIC] [TIFF OMITTED] T7103A.001
    
    [GRAPHIC] [TIFF OMITTED] T7103A.002
    
    [GRAPHIC] [TIFF OMITTED] T7103A.003
    
    Mr. Rush. With that, I yield back the balance of my time, 
and I recognize now the ranking member of this subcommittee 
from California, Mr. Radanovich.

          OPENING STATEMENT OF HON. GEORGE RADANOVICH

    Mr. Radanovich. Thank you, Mr. Chairman. Good morning, 
everybody. I do appreciate, Mr. Chairman, you calling this 
hearing to examine our trade promotion efforts. The global 
economy is suffering right now, and consumer spending and 
business investments have slowed worldwide exacerbating a 
clouded outlook for recovery. In such trying times, there is a 
temptation for countries to retreat into misguided 
protectionist trade policies and in order to find a path toward 
a more stable economy we must treat trade as an opportunity, 
not a threat. One simple approach is to continue to ensure free 
trade agreements remain a priority. Last year, we ran a $21 
billion surplus in manufacturing with our FTA partner 
countries.
    America has also seen similar beneficial increases in 
surpluses with countries with which we have implemented trade 
agreements under the trade promotion authority. Trade 
agreements are growing in importance as international commerce 
becomes a more essential part of our economy and more Americans 
depend on trade for their livelihood. Particularly relevant 
today effective and efficient international trade can serve as 
an important buffer for the economy when domestic growth slows. 
In fact, despite the declines in the last part of 2008, export 
growth surpassed the growth in GDP. We exported over 1 trillion 
in goods and services last year and had a surplus in services 
trade of approximately $144 billion. The salient point here is 
America produces and exports world class goods and services and 
we have the potential to export much more if we are given the 
opportunity access additional markets.
    After all, 96 percent of the world's consumers live outside 
of the United States. Often, the biggest barrier to improving 
trade is facilitating the connection between willing buyers and 
sellers. This is where the promotion of U.S. goods and services 
can be used to improve the prospects of our businesses, many of 
whom have little or no experience exporting their own goods. We 
have a number of federal agencies that assist our small and 
medium size businesses through the export process. Their 
services range from educating businesses on the basics of 
export trade through export assistance centers to more advanced 
services that introduce suppliers and buyers and provide market 
access guidance.
    With these programs in place, we need to focus on improving 
the visibility of existing services and enhancing their 
effectiveness. My home State of California is a leading 
exporter in many areas ranging from high tech to something more 
important to my constituents, which is agriculture. 
Agricultural issues are different than those faced by 
manufacturers. And I commend you, Mr. Chairman, for inviting 
the Foreign Agriculture Service to discuss their role in 
promoting our agricultural exports. Welcome, Ms. Hale.
    Agriculture is a difficult business. Farmers are routinely 
subject to many factors beyond their control including the 
vagaries of weather, pest and disease control, international 
competitors, which are heavily subsidized, and foreign 
standards often subject to whimsical change. It is critical to 
note that specialty crop farmers and their association spend 
millions of their own money to promote their own products 
abroad. For instance, farmers with the California Apple 
Commission spent $1.2 million just last year alone to market 
their own products abroad. When farmers decide to seek 
assistance through federal programs, they must still spend 
funds up front and wait for reimbursement from FAS, which is 
not guaranteed since their export strategy must be approved.
    While I encourage and I support the efforts of increased 
exports, I am equally concerned that we not lose our export 
partners that we already have. Going backwards by adding new 
barriers to trade is not helpful to anybody and reminds one of 
the primary concerns raised by fruit, nut, and vegetable 
growers in my district. In one example, Mexico has claimed the 
presence of pests in our own stone fruit for more than a 
decade. As a result, a plan negotiated by the Animal and Plant 
Health Inspection Service or APHIS which most fresh stone fruit 
growers must follow if they wish to ship to Mexico includes a 
dual regulation with the USDA inspectors and Mexican 
inspectors.
    The growers must pay for the dual regulation unless they 
are approved to receive assistance from the government under 
one of the existing technical assistance programs that would 
help offset the cost of the Mexican inspectors. In addition, it 
is critical that our government continue to work to remove the 
non-tariff barriers thrown up to keep out our U.S. products. 
Some countries such as Taiwan have erected certain barriers 
based on questionable scientific evidence. The normally free 
flow of trade has ceased causing the good folks in my own 
region and others throughout the nation enormous frustration. 
This must not be tolerated, and I encourage our federal trade 
officials to work to remedy such problems.
    I want to thank you, Mr. Chairman, for listening to my 
concerns. In a perfect world, we would not have to worry about 
any trade barriers. My hope is that our officials will remain 
as vigilant in their negotiations with our trade partners to 
reduce such non-tariff trade barriers as they are in promoting 
our products. Thank you, Mr. Chairman. I yield back.
    Mr. Rush. The chair thanks the ranking member. The chair 
now recognizes the gentlelady from California, my friend, Ms. 
Matsui, for 5 minutes for the purpose of opening statements. 
Two minutes. I am sorry. Two minutes.

           OPENING STATEMENT OF HON. DORIS O. MATSUI

    Ms. Matsui. Thank you, Mr. Chairman, and thank you for 
calling today's hearing to examine the role of export promotion 
in today's economy, and I want to thank all the witnesses who 
are here today for sharing your expertise with us. In today's 
economic recession, many families in my home district of 
Sacramento are struggling to make ends meet. I have heard 
countless stories of people struggling to keep their homes, 
their jobs, and their way of life. Small businesses are also 
hurting as they try to make payroll, retain their employees, 
and expand their business. I am pleased that President Obama 
has announced a new proposal to immediately help small 
businesses obtain much needed capital or credit to keep their 
businesses afloat.
    However, we should also be exploring other avenues for 
small businesses to grow, and that is why I am glad we are here 
today. This Congress needs to insure that companies have the 
tools to find new export opportunities for their products or 
services in existing foreign markets. Sacramento area small and 
medium-sized businesses export their products and ideas in 
health care, education, clean energy and agriculture around the 
world. In fact, the Sacramento region exported more than $3 
billion in goods last year while the port of Sacramento handled 
280,000 tons of exports last year. Yet, like in most 
communities our small businesses have not reached their export 
potential.
    If we can provide a small business with a foreign market to 
increase their sales by as little as 5 percent it can mean the 
difference between closing their doors and staying open another 
year. The federal government in partnership with the private 
sector can do more. This is a time in which effective 
partnership is vital. I thank you, Mr. Chairman, for holding 
this important hearing, and I yield back the balance of my 
time.
    Mr. Rush. The chair thanks the gentlelady. The chair now 
recognizes the gentleman from Georgia, my friend, Dr. Gingrey, 
for 2 minutes for the purposes of opening statements.

             OPENING STATEMENT OF HON. PHIL GINGREY

    Mr. Gingrey. Mr. Chairman, I want to thank you for calling 
this hearing today on an economic issue that could not be more 
timely in the face of our current economic struggles. The 
promotion of exports of American products is absolutely 
critical to our economic growth now more than ever. Put simply, 
the relationship between American exports and job growth is 
incredibly important as we see unemployment numbers continue to 
rise. In President Obama's inaugural address, he stressed the 
need to ensure that the federal government works efficiently, 
and I agree with him on that goal, particularly in this very 
important area. The over arching role that the federal 
government will play in export promotion will need to be 
reassessed. Currently there are a number of different federal 
agencies that are working in the realm of export promotion, yet 
there is a need to grow our export numbers in order to remain 
competitive in a global market place.
    Furthermore, Mr. Chairman, the most direct way that the 
federal government can impact U.S. exports is through existing 
and new free trade agreements. First, and let me be perfectly 
clear, free trade needs to be fair trade enabling domestic 
companies to benefit by the removal of foreign tariff barriers. 
This will increase the number of American exports and help us 
grow jobs right here at home. I am encourage that majority 
leader Steny Hoyer last week said that the House will 
potentially revisit the Colombia free trade agreement that was 
awarded during the 110th Congress. This free trade agreement 
was signed over 2 years ago. Mr. Chairman, another interesting 
component of this hearing that has a tremendous impact on U.S. 
exports falls squarely within the agricultural industry.
    In my home State of Georgia agricultural exports account 
for approximately $1.5 billion annually is a tremendous boost 
to the state's economy and it is imperative that the federal 
government remove technical barriers with trading partners so 
that Georgia farmers, as well as farmers across the country, 
California, as Mr. Radanovich said, will be competitive 
globally. Mr. Chairman, I again thank you for holding this 
important hearing on the promotion of international exports and 
trade. I look forward to hearing from the panel this morning, 
and I yield back.
    Mr. Rush. The chair thanks the gentleman. The chair now 
recognizes the gentlelady from Ohio, Ms. Sutton, for 2 minutes 
for the purpose of opening statement.

             OPENING STATEMENT OF HON. BETTY SUTTON

    Ms. Sutton. Thank you, Chairman Rush, for holding today's 
hearing on trade and promoting exports. We all know that trade 
can benefit American businesses and workers. In fact, Ohio is 
the seventh largest exporting state in the nation, and it is 
the only state that has increased exports every year since 
1998. However, there are real problems with our current trade 
policies that are no longer theoretical arguments. While I 
don't believe that trade in and of itself is what is costing us 
jobs, I do believe that our trade system and bad trade policies 
and bad trade deals can cost us jobs and have cost us jobs. And 
I also believe it doesn't have to be that way. You know, 
between 1994 and 2002 an estimated 525,094 U.S. workers were 
certified as eligible for the NAFTA transitional adjustment 
assistance.
    Since 2000, over 1,087 factories, companies or operations 
in Ohio have shut down or had massive layoffs costing Ohio over 
200,000 manufacturing jobs. Promoting our exports is only 
useful if production continues to take place in the United 
States. We must never lose sight that without our workers the 
U.S. would not have products to export. Often when we speak up 
to address the flaws and the unfair trade practices that 
currently exist with so-called free trade and other trade 
arrangements, name calling ensues, and we are attacked with 
distractive tactics such as being labeled as protectionist or 
saying we are simply against trade. Well, that isn't accurate 
and it really doesn't serve our purpose well. We do not live in 
a perfect world, and we are certainly not operating under a 
perfect free market global system.
    And while the trade deficit has narrowed during the current 
recession, China now accounts for more than 60 percent of the 
U.S. trade deficit in manufactured goods. We must have trade 
policies that no longer leave American workers and businesses 
at an unfair disadvantage. We cannot sit quietly aside while 
others engage in unfair trade practices. And while we should 
help promote our exports, it is also imperative to promote 
domestic production as well. I look forward to this hearing and 
this panel and working on this very important issue.
    Mr. Rush. The chair thanks the gentlelady. Now the chair is 
privileged to recognize the gentleman from North Carolina, my 
friend, George Butterfield.

           OPENING STATEMENT OF HON. G.K. BUTTERFIELD

    Mr. Butterfield. Thank you very much, Chairman Rush, and I 
thank the five witnesses for coming out today to be a part of 
this very important hearing. Mr. Chairman, you told us that we 
were going to get into some real deep issues, very important 
issues, on this committee, and today is an example of heading 
in that direction, and so thank you very much for your 
leadership. I think about the world so often, and the world has 
just drastically changed since I was a youngster many years 
ago. I go around to different high schools and middle schools 
in my district and talk about how the world has just literally 
transformed itself over the last 40 years. We are living in a 
global economy, and we cannot deny that, and that is a good 
thing. We can only benefit from increased export promotion. We 
are the world's largest exporter.
    In just 5 years exports have increased from 9\1/2\ percent 
to almost 12 percent of GDP. This growth has sustained nearly 6 
million jobs in manufacturing and 1 million in agriculture jobs 
like those in my district. We have reaped the benefit of double 
digit increases in exports every year for the past 5 years but 
more can be done and more must be done considering the state of 
our economy. And despite double digit gains, we could be 
exporting much, much more. Here is a statistic that might shock 
some of you. Companies that export represent less than 1 
percent, 1 percent of the U.S. business community. That means 
out of all the businesses that are located in this country, 99 
percent do not export, and 60 percent of these companies that 
do export only trade in one foreign market and one only.
    This untapped potential could yield immeasurable benefits 
to the U.S. economy and could mean tens of thousands of jobs. I 
am confident that further exploring opportunities to increase 
exports would drastically change places like Rocky Mountain, 
North Carolina in my district where the unemployment rate is 
now nearly 14 percent. A plant just the other day, Cummings, 
laid off 390 employees, so that illustrates, Mr. Chairman, the 
importance of this hearing today. And I thank you for bringing 
us together. I yield back.
    Mr. Rush. The chair thanks the gentleman. The chair now is 
privileged to recognize the gentleman from Michigan, my friend, 
Mr. Stupak, for 2 minutes for the purpose of giving the opening 
statement.
    Mr. Stupak. Mr. Chairman, I will waive and use the extra 
time for questions, please.
    Mr. Rush. The chair thanks the gentleman. Now it is my 
privilege to welcome this panel of experts to this hearing. I 
will introduce them starting from my left and the audience's 
right. At the conclusion of my introduction, I will swear them 
in because that is the new custom of this committee, swearing 
in before they provide their testimony. Beginning on my left we 
have with us today, Ms. Michelle O'Neill. Ms. O'Neill is the 
Acting Under Secretary for International Trade and 
International Trade Administration for the Department of 
Commerce. We have Ms. Suzanne Hale. Ms. Hale is the Acting 
Administrator for the Foreign Agriculture Service in the 
Department of Agriculture.
    Next, we have Dr. Loren Yager. Dr. Yager is the Director of 
International Affairs and Trade at the Government 
Accountability Office, GAO. Next to Mr. Yager is Mr. Franklin 
J. Vargo. Mr. Vargo is the Vice President of International 
Economic Affairs for the National Association of Manufacturers. 
And then we have with us Ms. Liz Reilly. Ms. Reilly is Director 
of Trade Roots, which is a part of the U.S. Chamber of 
Commerce. I want to welcome all the witnesses, and we certainly 
sincerely are grateful to you for taking the time off from your 
busy schedule to appear before this subcommittee today.
    As I said before, it is a new practice of this subcommittee 
to swear in the witnesses, so I will ask that you please stand 
and raise your right hand.
    [Witnesses sworn.]
    Mr. Rush. We will ask that you limit your opening 
statements to 5 minutes. We will begin with Ms. O'Neill. Ms. 
O'Neill, again, welcome, and please give us your opening 
statement.

   TESTIMONY OF MICHELLE O'NEILL, ACTING UNDER SECRETARY FOR 
   INTERNATIONAL TRADE, INTERNATIONAL TRADE ADMINISTRATION, 
  DEPARTMENT OF COMMERCE; SUZANNE HALE, ACTING ADMINISTRATOR, 
 FOREIGN AGRICULTURE SERVICE, DEPARTMENT OF AGRICULTURE; LOREN 
 YAGER, DIRECTOR, INTERNATIONAL AFFAIRS AND TRADE, GOVERNMENT 
   ACCOUNTABILITY OFFICE; FRANKLIN J. VARGO, VICE PRESIDENT, 
    INTERNATIONAL ECONOMIC AFFAIRS, NATIONAL ASSOCIATION OF 
  MANUFACTURERS; AND LIZ REILLY, DIRECTOR, TRADEROOTS, UNITED 
                   STATES CHAMBER OF COMMERCE

                 TESTIMONY OF MICHELLE O'NEILL

    Ms. O'Neill. Chairman Rush, Ranking Member Radanovich, and 
members of the committee, thank you for the opportunity to 
speak before you today about how export promotion strengthens 
and supports America's economy. As we have undoubtedly heard 
from the statements today, exporting is important to our 
economy. Last year alone it accounted for 13 percent of our 
gross domestic product and millions of jobs. I welcome the 
subcommittee's interest in this topic and look forward to 
outlining the International Trade Administration's efforts to 
promote U.S. exports.
    The International Trade Administration is dedicated to 
helping U.S. companies, especially small businesses, compete 
and win in the global economy. We have trade professionals 
based in Washington, in 109 U.S. communities, and in 77 
countries that provide trade promotion support to U.S. 
companies. We guide companies through every step of the export 
process from shipping and logistics to understanding foreign 
regulations to finding solutions when they encounter trade 
barriers. We provide a wide range of services including trade 
counseling, advocacy, and market research. In 2008 we supported 
more than 12,000 expert successes totaling $67 billion in 
nearly 200 markets around the world.
    We know that 97 percent of exporters are small and medium 
size businesses but they only account for 29 percent of the 
value of U.S. exports. We also know that of the 27 million 
businesses in the United States less than 1 percent export, and 
of the companies that do export 58 percent export to only one 
market. For this reason, our efforts are focused on getting 
more companies to export for the first time and for those 
companies that are already exporting to expand to additional 
markets. To highlight the kind of work we do, let me use some 
recent examples. Last year our commercial specialist in the 
Dominican Republic learned that a Dominican distributor was 
looking for a company that provides fuel additives for cars. 
After reaching out to our entire domestic network our Chicago 
office identified a small Chicago-based business that employs 
150 workers, the Gold Eagle company. A commercial specialist in 
the Dominican Republic arranged a meeting with a Dominican 
company which resulted in Gold Eagle's first sale to the 
Dominican Republic valued at $50,000.
    Often times a company gets an inquiry for the first time 
through their web site from a foreign buyer and doesn't know 
what to do. Other times a company is considering expanding its 
sales beyond the U.S. market and isn't sure how to proceed. In 
both cases, the first stop for them could be one of our 300 
trade specialists located in a nearby export assistance center 
or our Trade Information Center. The Trade Information Center 
provides a single point of contact for all federal government 
export assistance programs. Through its 1-800 USA trade number, 
the Trade Information Center provides assistance ranging from 
helping fill out a certificate of origin finding out about 
export finance options or connecting with the company's local 
commerce export assistance center.
    Last year, the Trade Information Center responded to 36,000 
inquiries, most of which were from small businesses. We also 
hold seminars around the country to educate U.S. businesses on 
a whole range of topics including the nuts and bolts of 
exporting, how to protect your intellectual property rights 
abroad, and how to fill out export documentation. Through our 
strategic partners program, we are leveraging the client 
networks of trade associations, companies, universities and 
state and local governments to help small companies understand 
the benefits of exporting. Let me give you two recent examples 
of how we work with our partners. In the fall of 2008 one of 
our strategic partners, FedEx, led a Commerce Department 
certified trade mission to India to introduce 12 companies to 
business opportunities there.
    Of these companies, two had never exported before and the 
other 10 had never exported to India. Our offices in India 
arranged over 300 appointments for the companies with potential 
buyers, agents, distributors, and Indian government decision 
makers. In another example, in September, 2007, the State of 
North Dakota's trade office in coordination with our offices in 
the former Soviet Union and in North Dakota brought over 100 
foreign buyers to the big iron farm machinery show in West 
Fargo. In the 6 months following the trade show, U.S. companies 
exhibiting at the show sold approximately $14 million in U.S. 
farm machinery to visiting foreign buyers. In 2008 the state 
trade office was awarded a market development cooperator 
program grant for the state to establish an office in the 
Ukraine. Since then, we have worked together on trade missions 
to Taiwan, Ukraine, Russia, Kazakhstan, Australia, and South 
Korea.
    At times, U.S. companies will look to us to help them when 
a foreign government tenders through U.S. government advocacy. 
Our advocacy center insures that U.S. companies can compete 
fairly against foreign competitors that are receiving high 
level advocacy support from their governments. Other times the 
U.S. company may need assistance to overcome a problem they are 
facing in a foreign market. These problems could range from 
regulatory trade barriers to unfair trade practices. This is 
where our Trade Compliance Center comes in. The Trade 
Compliance Center staff works with foreign governments to find 
a solution so that the U.S. company has the best possible 
chance to sell its products and services in that market. For 
example, a 2000 amendment to the Kazak Customs Code required 
importers to provide additional documentation that is not 
normally required before releasing their goods. After direct 
discussions the Customs Department authorized the release of 
some $70 million worth of U.S. goods.
    The Kazak government amended the code and deleted the 
section that required importers to provide the additional 
documentation to clear customs. In closing, the down turn of 
the world economy has affected all of our industries and their 
exports. In these times, our export promotion work is even more 
important than ever for small businesses and to the long-term 
competitiveness of the United States. The International Trade 
Administration remains committed to job creation through 
exporting. Thank you.
    [The prepared statement of Ms. O'Neill follows:]

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    Mr. Rush. Thank you very much. Now we will have opening 
statement from Ms. Suzanne Hale. Ms. Hale, thank you so very 
much and the chair recognizes you for 5 minutes for the purpose 
of an opening statement.

                   TESTIMONY OF SUZANNE HALE

    Ms. Hale. Chairman Rush, members of the committee, thank 
you for this opportunity to discuss how USDA's Foreign 
Agriculture Service supports agricultural exports. Exports are 
crucial to American agriculture. During these difficult times, 
agricultural trade is also important because it supports so 
many jobs off the farm. Twenty-five years ago, the value of 
U.S. agricultural exports was about $35 billion a year. Last 
year, U.S. farm exports had tripled to a record $115 billion. 
Even with the recent economic downturn fiscal year 2009 
agricultural exports are forecast to reach 95.5 billion, the 
second highest level ever. About 1/3 of U.S. agricultural 
production is exported. Every dollar of farm exports creates 
another $1.40 in supporting activities to process, package, 
finance, and ship products.
    U.S. agricultural exports mean U.S. jobs. USDA's economic 
research service calculates that in 2007 agricultural exports 
generated 808,000 full-time American jobs. Our mission at FAS 
is to link U.S. agriculture to the world. The agency maintains 
a small Washington based staff and 97 offices around the globe. 
Our overseas network act as our eyes and ears as we work to 
reduce trade barriers and approve market access. For example, 
our Cairo office was instrumental in opening the Egyptian 
market to U.S. cattle, and our staff in the Philippines 
recently resolved concerns over import quotas that would have 
severely limited our pork and poultry exports. Because of the 
current economic crisis, credit is tight in many key markets. 
Our export credit guarantee program, known as GSM-102, 
facilitates commercial sales of U.S. agricultural exports by 
providing credit guarantees.
    In fiscal year 2009, FAS expects to provide $5.5 billion in 
such guarantees. Over the past 2 years the program has 
facilitated $2 billion in feed grain exports directly 
benefitting states such as Illinois, Iowa, Nebraska, and 
Minnesota. Wheat, poultry, and cotton sales have similarly 
benefitted from the program. FAS administers several market 
development programs including the market access or MAP 
program. Under the MAP program, non-profit commodity and trade 
associations pool their resources into technical expertise with 
USDA's to develop markets overseas. In 2008, FAS approved $200 
million in MAP funds to promote a wide variety of products 
including soybeans in Romania, beef in Taiwan, grapes in 
Australia, and pomegranates in Korea.
    Investments in MAP programs produce results. For example, 
the Northwest Cherry Growers analysis shows that cherry exports 
support an average of 31,000 jobs a year. Cherry exports 
supported by $4.3 million in MAP funding over the past 5 years 
also generated an estimated $131 million in federal and state 
taxes. Now that is a good return. The Foreign Market 
Development program develops, maintains and expands long-term 
export markets for U.S. agricultural products. For example, the 
U.S. Grains Council is undertaking a 5-year effort to help 
rebuild Iraq's poultry industry, an effort which has led to 
nearly $4 million in sales of U.S. feed ingredients.
    USDA's technical assistance for specialty crops program 
funds projects to remove the kind of technical barriers that 
were mentioned earlier. For example, the California Table Grape 
Commission used the program to fund fumigation research. This 
research helped increase grape sales to Australia from $16 
million in 2007 to $52 million in 2008. The program has also 
been used to gain access for California nectarines in Japan and 
to harmonize organic standards with Canada. Emerging markets 
offer great potential for U.S. agricultural exports. A recent 
project funded under the emerging markets program provided 
minority producers of fruits and vegetables in Florida with 
training and other support that enabled them to make their 
first international sales.
    The firms in that program now report $25 million a year in 
exports. Our quality samples program enables U.S. agricultural 
trade organizations to provide small samples of agricultural 
products to potential importers in emerging markets. For 
example, exports of dried cranberries to Mexico increased 17 
percent to $15 million after samples were redistributed to 
Mexican bakers. FAS also links U.S. agriculture to the world by 
sponsoring trade and investment missions. In March, 2008, 17 
U.S. agri-businesses met with more than 125 African 
counterparts through a trade and investment mission to western 
central Africa. The mission facilitated $6.6 million in sales.
    At FAS we take pride in our efforts to improve the 
competitive position of U.S. agriculture in the global 
marketplace. Agricultural trade means jobs, both on and off the 
farm. Agricultural trade remains a bright spot in the U.S. 
economy consistently producing a trade surplus. I look forward 
to answering any questions you may have. Thank you.
    [The prepared statement of Ms. Hale follows:]

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    Mr. Rush. Thank you very much. Our next witness is Dr. 
Loren Yager. Dr. Yager, we welcome you to this subcommittee 
hearing, and we would ask that you limit your remarks, your 
opening remarks, to 5 minutes, if you will.

                    TESTIMONY OF LOREN YAGER

    Mr. Yager. Thank you, Chairman Rush, Ranking Member 
Radanovich, members of the subcommittee. Thank you for the 
opportunity to appear today to provide GAO's perspective on the 
role of exports in the U.S. economy. As Congress responds to 
the economic downturn it must consider the full range of tools 
available for further growth and create new jobs for U.S. 
workers. Some of these tools are related to promoting exports, 
which can have broad benefits to the U.S. economy. Trade 
enables the United States to achieve a higher standard of 
living through producing and exporting goods that are produced 
here most efficiently, and importing goods and services that 
are produced more efficiently elsewhere.
    U.S. exports of manufactured goods grew by approximately 50 
percent from 2004 to 2008 to a level of $1.1 trillion. These 
exports have come from every state. For example, in 2008 
Illinois exported 49 billion worth of manufactured goods. 
Similarly, California exported 127 billion of manufactured 
goods with an additional 8 billion in agricultural products. 
Because of the importance of trade to the U.S. economy, 
Congress has expressed longstanding concerns as to whether U.S. 
agencies are doing everything possible to promote U.S. exports. 
I will briefly mention three policy areas in my statement 
today. First, coordinating export promotion programs. Second, 
effectively meeting the needs of small businesses, and, third, 
monitoring and enforcing trade agreements.
    The first longstanding congressional concern I will discuss 
is the lack of effective coordination and follow up of trade 
promotion activities. Other witnesses have described the trade 
promotion coordinating committee and provided details on 
specific functions of the Commerce and Agriculture departments. 
In terms of coordination and follow up, we have reviewed the 
TPCC several times since its inception, and I testified in 2006 
that the TPCC had improved on their follow up of key measures. 
For example, in the 2008 national export strategy there is 
information regarding the status of priority initiatives 
identified in the prior year's annual report.
    However, despite the importance of agency coordination the 
strategy still does not link the agency's individual goals to 
an overall government export promotion strategy. Promoting 
exports by small businesses has also been a long-term interest 
of the Congress as reinforced by the importance of small 
business in many of the opening statements. While many small 
businesses export it is widely recognized that they face a 
number of challenges in exporting, and Congress had required 
that agencies focus a significant share of their efforts to 
small and medium size businesses. In 2006, I testified about 
the lack of systematic measures for small business 
participation in government export promotion programs.
    More recently, we had a similar finding with regard to the 
export-import bank where a number of congressionally required 
measures lacked targets and lacked time frames. The third and 
possibly most important priority for the United States is 
ensuring that U.S. trading partners comply with trade 
agreements. Monitoring and enforcing these trade agreements, 
which number in the hundreds and cover the vast majority of 
U.S. exports. It is a key responsibility for numerous U.S. 
agencies. Congress has expressed longstanding concerns 
regarding a number of these issues of which I will mention two. 
The first is China's compliance with its commitments. Congress 
has been keenly interested in the extent to which China is 
complying with its obligations. As a result, we have conducted 
a number of studies examining U.S. government efforts to 
oversee China's compliance, and we have made recommendations to 
U.S. agencies to improve communication to key stakeholders such 
as the U.S. Congress.
    A second point is the sufficiency of agency's human 
capital. Effective monitoring and enforcement requires staff 
with expertise in trade policy, the foreign country, and the 
particular industry. However, we found that trade agencies have 
not always been able to get the right people in the right 
places. We recommended that key trade agencies develop better 
planning and training to equip staff to handle increasingly 
complex barriers to U.S. exports. Let me also mention that 
while in China last week, I heard a number of examples where 
having specialized U.S. government personnel in the embassy and 
in the consulates can assist U.S. firms. For example, in China 
patent and trademark office staff who are of particular 
interest to this subcommittee have been actively assisting U.S. 
firms better protect intellectual property, which, as you know, 
has been a big concern for U.S. firms, particularly in China. 
Chairman Rush, Ranking Member Radanovich, this concludes my 
remarks. I would be happy to answer any questions you have.
    [The prepared statement of Mr. Yager follows:]

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    Mr. Rush. The chair thanks the gentleman. The next witness 
is Mr. Franklin J. Vargo. We welcome you, Mr. Vargo. We ask 
that you limit your opening statement to 5 minutes.

                 TESTIMONY OF FRANKLIN J. VARGO

    Mr. Vargo. Thank you, Mr. Chairman, members of the 
subcommittee. I am delighted to be here representing the 
National Association of Manufacturers. You know, 2/3 of 
everything America exports are manufactured goods so the NAM 
really cares about this. Exports, unfortunately, are like 
Rodney Dangerfield. They just don't get any respect. People 
don't see exports. They see imports and all the big box stores. 
Nobody sees exports. A lot of Americans don't even think we 
export anything even though we are one of the world's largest 
exporters, and we are the largest manufacturer in the world. We 
manufacture 1 out of every $5 of everything made in the entire 
world. A lot of people find that astonishing but it is 
nevertheless true. Now our exports of manufactured goods have 
amassed a trillion dollars and in recent years has been growing 
about 15 percent a year, as you noted, Mr. Chairman, one of the 
strongest parts of our economy. People think, wow, that is 
really good.
    I look at exports and say, you know, we are not an export 
powerhouse. In fact, we are missing the boat on exports. Why do 
I say this? Because the NAM has started benchmarking our 
industry against industries around the world, and we have 
looked at the 15 major manufacturing economies in the world 
that account for 80 percent of all the manufactured goods. When 
we look at our imports proportioned to the size of our 
manufacturing industry, it is not really out of line with the 
aggregate. When we look at our exports, we are dead last, 
number 15 out of the 15 countries.
    The world average, all the countries in the world, when we 
look at the World Bank data and trade data, the average is 
twice what we export, twice. We are exporting half as much of 
our manufacturing output as the average country in the world. 
Now if we were exporting at the average, we would have another 
trillion dollars of exports. We wouldn't have a trade deficit. 
Why are we exporting so little? And I should note that before I 
came to the NAM, I had a lengthy career with the Department of 
Commerce in export promotion trade policy. And it has been a 
long-time observation that one of the most fundamental reasons 
we export as little as we do is we grew up as a continental 
economy surrounded by an ocean on both sides, natural 
resources, and large domestic market driven countries didn't 
grow up that way. Japanese countries didn't grow up that way. 
They knew they had to export in order to grow and survive.
    We have to change the mentality of American companies. They 
are in a globalized world and they freely need to do more. The 
second reason is that the dollar is the world's reserve 
currency and in my view at least for too many years that has 
led to an evaluation of the dollar against other currencies 
that are too high to reflect the competitiveness of our 
exports. Additionally, we face a lot of trade barriers around 
the world. We need to get those trade barriers down somehow, 
and that is why the NAM has favored bilateral free trade 
agreements, and without wanting to get into a debate over free 
trade agreements, I just want to note the fact that last year 
we had a manufactured goods trade surplus of $21 billion with 
our free trade partners as a group, 6 billion of which was with 
GAFTA, which used to be in deficit before the agreement went 
into effect. With countries with which we don't have trade 
agreements, we have $477 billion deficit with about 277 of that 
being with China with whom we have no trade agreement.
    But having access to markets, being competitive, wanting to 
export is not enough. You got to market. Just like an 
individual company a country has to market its exports, and 
here I think we really do a very inadequate job. I look at 
Commerce is doing well with what it has got but I look at the 
resources. Last year, Commerce had about $330 million for 
export promotion. The Department of Agriculture had twice that 
amount, 600 and some million or clearly our national priority 
goes on promoting agricultural exports and not manufactured 
goods. And I don't want to stop promoting agricultural goods, 
you know. As Ms. Hale noted, 1/3 of our agricultural production 
is exported. That is great, and we need that, and I would like 
to see it go even higher but only 1/5 of our manufacturing 
export production is exported, and if we could get that up to 
1/3 by my back of the envelope calculation, we would pick up 
another 1.3 million jobs in America's factories, maybe a 
million and a half.
    Now promotion programs work. The figures I have seen, and I 
believe they are reliable, at least 100 to 1. For every dollar 
you put in to export promotion you get at least $100 in 
additional exports and that is a stream that goes into the 
future. Now if you and I could put that into our personal 
portfolios, we would all jump at it, so why doesn't the U.S. 
government? Because they don't know. So that is why this 
hearing is so important. I would like to ask that the World 
Bank document, export promotion agencies, what works and what 
does not, which says every dollar of export promotion produces 
$300 of exports, I would like to ask this be put in the record 
of this hearing.
    Mr. Rush. By unanimous consent, the document will be placed 
in the record.
    [The information appears at the conclusion of the hearing.]
    Mr. Vargo. OK. Thank you, sir. I don't want to take 
anything away from the Agriculture Department. I admire their 
programs. I wish the Commerce Department could do more. I know 
that proportional to the amount of agricultural and 
manufactured exports because manufactured exports are 10 times 
as large as agriculture. If Commerce really had the same 
proportional budget, it would have a $6.4 billion export 
promotion budget, not 300 million. Now I know the department 
has a huge deficit and we have a huge stimulus program so here 
comes the NAM and says, you know, could we have another 6 
billion for export promotion, but the fact of the matter is 
these programs pay for themselves. They will generate a flow of 
tax revenue that will more than pay for it.
    So again I am thrilled that this subcommittee is holding 
this hearing and look forward to working with you, Mr. 
Chairman, the members, your staff because we have to make the 
priority of exports more visible. We are either going to pay 
our way in the world or borrow our way, and we have already 
seen, we have got a $5-1/2 trillion accumulated trade deficit 
already, thank you very much, so I would like us to exporting 
more and paying our way in the world. We can do it but so many 
small companies just don't have the time to fly over to Europe 
or fly over to China, and what do they do when they get there? 
You know, they need more help. The help they get is good, but 
it is much, much too small. Thank you, sir.
    [The prepared statement of Mr. Vargo follows:]

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    Mr. Rush. Thank you so very much. And now the chair 
recognizes Ms. Liz Reilly. Ms. Reilly, we recognize you for the 
purposes of an opening statement. Would you please limit your 
statement to 5 minutes, and thank you for your attendance here 
today.

                    TESTIMONY OF LIZ REILLY

    Ms. Reilly. Thank you. Thank you, Chairman Rush, Ranking 
Member Radanovich, and other members of the committee. I 
greatly appreciate the invitation to speak to this subcommittee 
on this wonderful Irish day. The U.S. Chamber of Commerce is 
the world's largest business federation representing 3 million 
businesses and organizations. TradeRoots is the only sustained 
national trade education program dedicated to raising public 
awareness around the importance of international trade to local 
communities. Our partners include local chambers of commerce, 
trade associations, economic development groups, and federal 
agencies. Last year we hosted and visited over 300 
congressional districts where we talk about business and the 
importance of exporting and the resources that are available to 
do it.
    Ninety-five percent of the world's population lives outside 
the United States. In these challenging economic times America 
must find a way to sell our things to these potential 
customers. Fifty-seven million Americans are employed by firms 
that engage in international trade. That is 1 in 5 factory jobs 
that depend on exports as well as 1 in 3 acres of American 
farms that are planted specifically for export. In 2008, the 
U.S. set a new record and exported nearly $2 trillion of goods. 
That is over 13 percent of our GDP but it should be more. Most 
Americans, however, tend to regard international trade as the 
domain of large multi-nationals when in fact 97 percent of all 
exporters are SMEs. That is close to 240,000 companies and our 
overseas sales represent nearly a third of all U.S. merchandise 
exports.
    America's small business people are the most innovative and 
hard working entrepreneurs in the world. We have told many of 
their success stories as part of our Faces of Trade series 
where we celebrate companies that are exporting made in USA 
products around the world. If more U.S. businesses were able to 
seize export opportunities, the gains could be immense. The 
World Bank site that Mr. Vargo just cited says that $1 spent in 
export promotion brought a 40-fold increase in exports, and 40 
to 1 is not a bad return on investment. To address this need, 
the U.S. Chamber proposes a doubling of federal expenditures on 
export promotion to small business. From Seattle to Savannah, 
many U.S. companies are just not aware of the government 
services that are available to help them break into these new 
markets. I have talked to so many who have never heard of the 
U.S. department export assistance centers or the foreign ag 
service or that Ex-I Bank exists, let alone gives out loans.
    And I don't think this is the fault of American business 
owners. Rather, I think it reflects the inadequate resources 
dedicated by the federal government to promote these services 
adequately. Some companies have had challenging experiences 
with the commercial service offices overseas. Quality Float 
Works in Schaumberg, Illinois, was telling me that they 
normally fare very well until recently when the officers in 
Dubai were so understaffed that they were unable to assist in 
setting up business meetings. Other companies such as Askinosie 
Chocolate in Springfield, Missouri, have worked with their 
USEACs but they cannot afford a fee. With over 15 percent of 
Askinosie's gross revenue coming from overseas markets, finding 
a new one is imperative for their growth.
    Additional funding for the Department of Commerce should 
eliminate or lower these Gold Key Service costs for small 
businesses. Closely affiliated with the USEACs are 60 district 
export councils that combine the energies of more than 1,500 
exporters. We recommend selecting an ex officio DEC member to 
participate on the President's export council in order to 
represent small business. Another exporter, York Wire and Cable 
of York, Pennsylvania, was recently telling me about the 
positive impact of Market Access Grants at the state level. 
Export-ready companies in good standing are eligible for $5,000 
to explore new markets through trade shows, trade missions, and 
internationalizing their web sites. A similar grant system 
should be created at the federal level for companies around the 
country. Market Development Cooperator Program Grants, MDCP, 
are another effective tool for export promotion. TradeRoots was 
actually founded based on an MDCP Grant to educate small 
businesses on exporting and as a result of our grant we reached 
more than 3,800 SMEs and helped generate more than $9 million 
in U.S. exports.
    We support continuing and expanding MDCP Grant funding. An 
additional way to promote U.S. exports would be for Congress to 
pass the pending trade agreements with Colombia, Panama, and 
South Korea. These accords would provide an estimated 42 
billion over 5 years for American workers and farmers. More 
than 25,000 SMEs are already exporting to these countries and 
this number could rise sharply with their implementation. A 
final priority should be to ensure adequate funding for 
programs dubbed trade capacity building. The United States 
spends more than 1.3 billion annually, which is important to 
maintain.
    In closing, investing in export potential of America's 
small and medium-sized businesses is crucial to stimulating our 
economy. I greatly appreciate the opportunity to testify today. 
The U.S. Chamber of Commerce stands ready to work with you on 
these and other important challenges in the year ahead. Thank 
you very much.
    [The prepared statement of Ms. Reilly follows:]

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    Mr. Rush. The chair thanks you so very much for your 
testimony, Ms. Reilly, and the chair thanks all the witnesses 
for their opening statements. The chair now recognizes himself 
for 5 minutes for the purpose of asking questions of this 
outstanding panel. I will begin with Mr. Vargo. Mr. Vargo, you 
mentioned in your testimony the importance of penetrating new 
and promising markets. In my home State of Illinois, Canada is 
the first trading partner, followed by Mexico and then China. 
There is an old adage that says never put all your eggs in the 
same basket. In the trade context, it means it would be wise to 
diversify our export clientele and not put all our exports in 
the NAFTA basket.
    Mr. Vargo, I have two questions. Have you identified a 
region of great opportunities for U.S. businesses, and have you 
also identified a specific part or section that needs to be 
expanded in that particular market? How do you go about making 
such an assessment, and what specific change do you think the 
government needs to undertake to increase exports to these 
countries? That is about five questions rather than one.
    Mr. Vargo. Thank you, Mr. Chairman. You are right. For your 
state and most others, NAFTA is the largest export market. 
Europe generally is number two. In our eyes, the most rapidly 
growing area, it is taking some economic hits right now, is 
Asia, China and other parts of Asia, but over the longer term 
there is going to be an enormous amount of growth there, and we 
need to do more. Asia, it is culturally different from the 
United States. For most people, they don't know what to do when 
they get there. We need a lot more assistance.
    I would also point to Europe. Why Europe? Because the 
European Union is a fairly easy market to sell to, and a lot of 
our companies, especially smaller companies, sell there already 
but they only sell to one or three markets in the European 
Union. Now if they can sell to Britain or Germany, they can 
sell to France, Italy, other countries, but they don't, and we 
don't have enough export promotion resources to make it easy 
for them to find customers and distributors in those markets, 
so I would pick those two markets. And what should we do? In 
China, I think, and some other Asian countries, I think 
American companies need more depth of assistance than they are 
getting. We had one of the commerce departments set up American 
trade centers in all major cities in China, physical facility 
with display space, temporary office space for companies. They 
can't do it. They don't have the resources.
    In Europe some of the most effective components of sales 
for American exports are what are called the FSMs, the foreign 
service nationals, who work for the commercial service. They 
know the local markets. Again, Congress doesn't have the money 
to hire enough. So I think it is doable, but it comes down to 
resources and the national priority. And, frankly, I just don't 
see a national priority for export expansion yet.
    Mr. Rush. I want to ask Ms. O'Neill and Ms. Hale in the 
time I have left, which is about 1 minute and 15 seconds, what 
are your respective agencies doing to identify emerging markets 
and what are emerging markets as far as you are concerned? How 
would you define emerging markets?
    Ms. O'Neill. Thank you for the question, and I think Frank 
went to a good bit of where we would say the largest 
opportunity for exports, and that is in Asia. I think we would 
probably define an emerging market as one where we haven't had 
big U.S. expert penetration yet, but that there are also 
perhaps not the same legal and regulatory infrastructure in the 
market and where services on the ground are particularly needed 
to help U.S. companies navigate and identify opportunities in 
those markets. But I would say our attention has shifted to 
Asia, India, where it is more difficult for companies to do 
business.
    Ms. Hale. I think one of the key things in identifying 
emerging markets is a market where incomes are increasing. We 
find that as incomes increase people eat more meat. They eat 
more vegetable oil. There is a growing middle class. People go 
out and eat fast foods and enjoy American potato products. And 
so we are seeing a lot of growth in Southeast Asia, also in 
Central America, and it is very often related to growth in 
income.
    Mr. Rush. Now the chair recognizes the ranking member, Mr. 
Radanovich, for the purposes of questioning for 5 minutes.
    Mr. Radanovich. Thank you, Mr. Chairman, and again 
appreciate the panel members for your opening statements and 
for being here today. I wanted to first ask Ms. Hale, 
Ambassador, regarding the FAS and your recent reorganization, 
can you explain to me how this reorganization has led you to 
perform more efficiently for agriculture?
    Ms. O'Neill. I think one of the key things is that we are 
better staffed now to address the kinds of technical trade 
barriers that you mentioned before. We have an Office of 
Science and Technical Affairs that works with our sister 
agencies at USDA like the Animal and Plant Health Inspection 
Service, the Food Safety and Inspection Service, to overcome 
and remove some of these technical barriers to trade. We also 
have an office that is doing more strategic planning on a 
country basis. We are better staffed to look at individual 
markets and bring together all of the department's resources in 
an integrated strategic plan, the kind that Dr. Yager was 
talking about.
    And then we also have all of our trade assistants programs 
in one area so we have good coordination between our credit 
programs and our other marketing programs like the MAP program.
    Mr. Radanovich. Thank you very much. Can you tell me within 
your reorganization and such, is there an increased effort on 
the part of governmental staff in export promotion to kind of 
replace some of the work that maybe commodity and crop 
associations currently undertake?
    Ms. O'Neill. No, sir. We are partners. Everything we do, we 
do with industry and industry contributes very significant 
amounts of money for our programs. They are putting more into 
the programs than what we are putting in to them, and we rely 
on their technical expertise. They know--they are the experts 
in how to run feed trials to show people how to use soybean 
meal to improve their productivity. They do things that our 
staff could just never do on our own, and so that partnership 
has been very important over the years.
    Mr. Radanovich. Very good. Thank you very much. One more 
question, and that is can you give me an idea on the Uruguay 
Round, what might have been new export markets that have been 
opened up as a result of that?
    Ms. O'Neill. From the--goodness, that is a way back. We are 
talking about----
    Mr. Radanovich. It is a little way back.
    Ms. O'Neill. Yes. I think one of the most important 
accomplishments in the Uruguay Round was the TBT agreement, the 
Technical Barriers to Trade agreement. That isn't addressed to 
a specific market, but what that agreement did was to make 
international standards the norm for addressing technical 
issues. So we have the OIE is the Animal Health Organization. 
KODAC sets food safety standards. There is an SPS agreement 
that sets plant health standards. And what the TPT agreement 
and the Uruguay Round did was make those international 
standards WTO standards, and so we can use the World Trade 
Organization's dispute resolution mechanism to resolve cases 
when we have technical barriers to trade, and that is a big 
improvement.
    Mr. Radanovich. Very good. Thank you very much, Ambassador. 
Dr. Yager, welcome to the committee. I notice that the TPCC 
consists of about 20 different agencies. Can you give me a 
sense as to whether or not it is an advantage to have 20 
different agencies sharing the same goals or, you know, maybe 
just having one single effort? Can you give me an idea what the 
advantages or disadvantages might be?
    Mr. Yager. Well, the TPCC was created, I guess, in the 
early 1990's, and there were some questions from the Congress 
at that time as to whether all the different agencies that had 
a small piece of export promotion were actually working towards 
the same goals, and so it has existed for about 15 years. We do 
think there is a big advantage in having an organization that 
brings together the export promotion efforts of the different 
agencies. There may be a large number of agencies, but 
realistically there is only a few that do the broad percentage 
of the export promotion efforts, so after you get through 
commerce, agriculture, and the Export-Import Bank, which is 
also a fairly large lender and provider of credit to U.S. firms 
many of the other agencies are much smaller in terms of their 
funding and the kinds of contributions they make to export 
promotion.
    We do believe that getting together and having a single 
report which they put out every year and trying to follow up on 
that to show, for example, if they target big emerging markets 
in one year, we think it is very valuable for them to come back 
the next year and say we were successful, here are some 
measures for how much we were able to accomplish in big 
emerging markets, for example. We think that kind of follow-up 
is very important, so we do think it is a good idea to have the 
trade promotion coordinating council.
    Mr. Radanovich. Very good. Thank you, Doctor, and thank you 
for the time, Mr. Chairman. I am assuming there will be a 
second round of questions?
    Mr. Rush. Yes, the chair does intend to engage in a second 
round of questioning. Our next member recognized will be Ms. 
Matsui of California for 5 minutes.
    Ms. Matsui. Thank you, Mr. Chairman. As you know, 
California is home to one of the world's largest trade markets, 
and there are a number of small and medium businesses in 
California who export their brands and services. But a lot of 
them have not reached their export potential, as we know, and 
there are a variety of services available, both by the 
government and by business associations but a lot of the 
businesses are not aware of this. Ms. O'Neill, I would like to 
ask about the budget situation in the U.S. Commercial Service. 
When my office called a local U.S. Commercial Service Expert 
Assistance Center in my congressional district, I learned there 
was only one staff person there responsible for 22 California 
counties.
    Now our counties are pretty large in California, and this 
one person coordinates all the outreach, the trade missions and 
consultations with individual companies. Now over the last 5 
years, the U.S. Commercial Service budget has remained 
relatively stagnant. It looks like it will increase this year 
maybe less than 1 percent. Is the Department of Commerce asking 
for more resources?
    Ms. O'Neill. Thank you, and you are right. Our largest 
presence in the states is in California and I will certainly 
take back your concern about our staffing level in your 
district. We look forward to working with the new team as 
Governor Locke is hopefully confirmed soon. There have been a 
lot of interesting ideas here today, and I certainly look 
forward to working with Governor Locke and his team to explore 
what might be possible in the export promotion front.
    Ms. Matsui. Mr. Vargo, do you see a similar situation in 
other export assistance offices around the country?
    Mr. Vargo. Regrettably, yes. If there is one thing that we 
could do up front, it would be to significantly increase the 
staff of our district export offices so they can get around 
more and work with companies. As I have noted, the typical 
small business owner is worried about his line of finance from 
his bank, keep holding on to his or her as customers. They just 
don't have time to wander through the Internet or fly over to 
China or France or somewhere. We have got to have the 
commercial specialists go out and reach them, make it easy for 
them. If they make it easy for them, they will do it. Believe 
me, they will do it. We have got lots of examples. The 
resources just aren't there.
    Ms. Matsui. But can you tell me how you compare America's 
export promotion policies to those in Canada and Europe, Japan, 
and China?
    Mr. Vargo. Well, they take their export promotion much more 
seriously than we do. They realize that this is where their 
future is. This is where their growth has to be. And we haven't 
gotten the joke yet frankly. We are missing the boat. I am 
under oath so I won't say that I know for 100 percent this is 
positive. I hear that Canada has more commercial officers 
around the world than the United States does, and if that is 
true, that is ridiculous. Now I do know that the Australian 
trade minister recently looked at the Market Development 
Cooperator Program that principally the Agricultural Department 
uses and the Commerce too a little bit, and threw another $100 
million into it for Australia because they see this as a way to 
expand their exports, so other countries are really pushing 
hard, and we are missing out.
    Ms. Matsui. I am concerned because I feel that trade is 
very important and we have a huge trade deficit. As you say, 
all of you say, that it would be important to get the export 
business moving along, and it seems to me that within the last 
several years we haven't been doing that. We have been reducing 
our resources to do that. And my sense is that had we gone 
ahead and really funded or beefed up the resources, we might 
have been able to encourage others to actually get out there. I 
am wondering whether any of you can answer this question. Has 
there been a change in the type of assistance given?
    I think in Mr. Vargo's testimony he was saying that it 
goes--there is not as much outreach and that the businesses 
aren't getting as much assistance in the foreign offices as 
they might be because they aren't staffed, and there might be 
more trade favors and things of that nature more than anything 
else. Can you comment on that and what direction you think we 
should be going?
    Mr. Vargo. May I comment?
    Ms. Matsui. Yes.
    Mr. Vargo. Because our government witnesses may feel a 
little constrained. The budget situation I believe is so severe 
that offices are being closed in Europe, for example, to be 
able to move commercial officers to China and other parts of 
Asia. The worse thing is, I am not sure that they actually have 
enough funding to fill those new positions, so we may find they 
are cutting some positions and not filling others. And even if 
they are moving them, you know, that still leaves Europe our 
second largest market with inadequate resources. Could I put in 
one plug though for Mr. Chairman and members of the committee? 
When Governor Locke is confirmed as Secretary of Commerce, 
please bring him up here. Share with him your views on expert 
promotion. Governor Engler, our president, is going to go over 
and see Secretary Locke as soon as he is confirmed on this. I 
would like to have him hear from the subcommittee as well.
    Ms. Matsui. Thank you. That is it.
    Mr. Rush. The chair thanks the gentlelady. Your time is up. 
Now the chair recognizes Mr. Scalise from Louisiana for 5 
minutes.
    Mr. Scalise. Thank you, Mr. Chairman. In Louisiana our port 
systems actually have been doing very well. The increase from 
2007 to 2008 was about 38 percent, so we have been promoting 
more exports--different exports, I am sorry, but we have also 
been starting to prepare for the widening of the Panama Canal 
coming up in the next few years, which gives us a lot of 
opportunities to increase both imports and exports. I want to 
get each of your takes if I could go down the table starting 
with Ms. O'Neill on what things are being done to prepare for 
the opportunities that would exist once the Panama Canal is 
widened.
    Ms. O'Neill. As with all our free trade agreements, we work 
very closely with USTR and the negotiators to identify exactly 
where the market access opportunities are and develop 
promotional materials around those opportunities. You have hit 
the nail on the head. The Panama Canal activity is going to be 
a key interest for a number of our companies, and we look 
forward to getting the word out on the opportunities there. 
Even independent of the agreement, we continue to work with our 
officers on the ground in Panama and with U.S. industry to make 
sure that we are well positioned to take advantage of those 
opportunities.
    Mr. Scalise. Thank you. Ms. Hale.
    Ms. Hale. A lot of our corn and soybeans that are exported 
to Asia go through the Panama Canal, and the constraint now is 
the size of the canal. The ships that go through there are 
called Panamax because it is the maximum size that can go 
through the Panama Canal. And so with a larger canal if we can 
increase the size of our ships, it would make our shipping more 
efficient, keep our shipping costs down and make us more 
competitive in Asia.
    Mr. Yager. One of the things that we are aware of in doing 
the work on imports and trade is that the ports on the West 
Coast, particularly the container ports of Los Angeles and Long 
Beach in fact are dominant in terms of shipping many of the 
goods and services. I think the opening of the Panama Canal 
offers an opportunity to have some of that trade diverted to 
other ports on the eastern side of the continent which I think 
would reduce some of the congestion. One of the challenges that 
we have in the United States is port infrastructure, as you 
probably know, and I think you have been doing some things in 
New Orleans but some of the ports on the West Coast are 
challenged due to the volume of trade, particularly container 
shipping that is coming in, so I think that will open up some 
options for eastern ports such as your own.
    Mr. Scalise. Mr. Vargo.
    Mr. Vargo. Well, certainly the widening of the Panama Canal 
I think will be good for the Louisiana ports and others but in 
addition the project is one of the world's largest construction 
projects and we want the American equipment, American 
technology used there so the sooner we have that trade 
agreement and get preferential access to that huge construction 
project the better off we are. And I was very encouraged that 
President Obama's trade policy statements that he expected that 
this agreement could move relatively quickly. We export about 5 
billion a year to Panama already. I would like to see that 
grow. In a good period downhill with the wind behind its back, 
Panama will export as much to us in a year as China does every 
6 hours so there is certainly no threat there.
    Ms. Reilly. Thank you, and I would just have to echo 
basically what the whole panel has said that the need to widen 
the Panama Canal is very important to U.S. business, obviously, 
to first get goods moving quicker, reduce congestion, but as 
well as the project and expanding it itself, that will allow--
the free trade agreement will allow U.S. companies access to 
bid on the expansion project.
    Mr. Scalise. Thank you. Ms. Hale, last year we had a 40 
percent increase in agriculture exports. What was that 
attributable to? Was there one thing or series of things?
    Ms. Hale. That is on a value basis and so part of the 
increase was because of higher prices but we are also seeing 
just across the board increase in demand. In CAFTA we have seen 
a 30 percent increase in agriculture exports to Central America 
with growing middle class. In places like China we are seeing 
big increases in exports of products like soybeans which are 
used for vegetable oil there, crushed there and used for 
vegetable oil and then animal feed because consumption of 
livestock products are increasing. So there isn't one reason. 
It is a different reason in each market but we are continuing 
to see good demand for U.S. agricultural products.
    Mr. Scalise. Thanks. And then one final question in my last 
few seconds for Ms. O'Neill. It does seem like we got a surplus 
on exports of copyrighted material, music, movies. Considering 
the problems with copyright infringements in other countries on 
those types of products, what is being done on our side to try 
to protect the intellectual property from copyright of 
violations so that we can even increase more of that margin?
    Ms. O'Neill. Just a great example of public-private 
partnership, we have worked closely with the Chamber and other 
multipliers to develop a program that we call Stop Fakes. It is 
a combination of technical assistance to companies that is 
helping them understand how to protect their intellectual 
property before they go into foreign markets, what resources 
are available to them once there are challenges once they face 
a problem in a market. And then we are also redoubling our 
efforts overseas to work with foreign governments to improve 
their enforcement of their intellectual property rights and 
make sure that U.S. products and services are protected 
overseas.
    Mr. Scalise. Thank you. Thank you, Mr. Chairman.
    Mr. Yager. Mr. Scalise, if I could just briefly answer 
that. I was in China last week actually looking at the issue of 
intellectual property protection, and one of the things I can 
point out is that U.S. agencies in some cases who have not had 
a presence abroad before such as a patent and trademark officer 
now also putting some of their specialists into key places like 
southern China where a lot of the world's manufacturing takes 
place, so there is now a PTO representative in southern China 
that helps U.S. firms understand the legal system, communicate 
with the Chinese government, and simply just be there to help 
U.S. firms think about how to protect intellectual properties 
so that they can----
    Mr. Scalise. Is the government cooperating, the Chinese 
government cooperating?
    Mr. Yager. Yes, they are working more closely with the 
Chinese government on that. It is a long-term effort though. It 
doesn't happen overnight, but we think that that specialized 
personnel does offer some advantages and can get some results 
for U.S. firms.
    Mr. Scalise. Thank you.
    Mr. Rush. The gentleman's time is up. The chair now 
recognizes the gentlelady from Ohio, Ms. Sutton, for 5 minutes.
    Ms. Sutton. I thank the gentleman and I thank you all for 
your testimony. We are talking about exports now and I 
appreciate that, but I do think that it is somewhat a mistake 
to try and isolate exports out of our international trading 
system and just talk about it in a vacuum so bear with me and 
if you don't have the responses today, that is OK, because I am 
going to talk a little bit more about the interconnectiveness 
of our system.
    I am going to begin by an article that I would like to have 
permission to enter into the record from bloomberg.com.
    Mr. Rush. By unanimous consent, so ordered.
    Ms. Sutton. Thank you, Mr. Chairman. This article was dated 
December 14, and it came in the wake of the passage of the Peru 
free trade agreement, and I know, Ms. Reilly, you talked about 
your hope and the hope of your association that we might pass 
the Colombia free trade agreement so it is relevant as we 
consider that possibility. Now we heard that this trade 
agreement was, quite frankly, just a small piece of trade, you 
know, in the scheme of things and not that big of a deal, and 
we heard how it was going to open up our markets, and I am all 
for exporting American goods, but I am not for exporting 
American jobs, and so I was struck right after this Peru free 
trade agreement was passed that Peruvian President Alan Garcia 
urged American companies to invest in his country and said 
specifically come and open your factories in our country so we 
can sell your own products back to the U.S., Garcia told 
business executives today.
    Of course, where you have oil, mining, agriculture, 
fishing, and manufacturing firms, he urged them to flock to his 
nation of 29 million people which has a per capita income of 
less than $3,000 a year. So the point is not all jobs are 
created equal. We talk about jobs a lot of times in these 
discussions about trade but obviously we weren't just talking 
about exporting to this market. We are also talking about 
trying to export jobs or at least we are not trying to export 
jobs but there is certainly a reference to that. And I would 
just like to hear from Mr. Vargo and Ms. Reilly, if I could, 
about what you think about this.
    Mr. Vargo. I noted that article also, and certainly 
everybody wants more foreign investment in their country. We 
want it too. When we look at the record though, and I will be 
happy to send you data that the Bureau of Economic Analysis 
from the Commerce Department does, we have not seen this large 
sucking sound and out flow of manufacturing investment to 
countries with which we have free trade agreements. About 75 
percent or so of the foreign direct investment from 
manufacturing goes to the industrial countries, principally 
Europe. It does go to Canada, Japan, and about 90 percent of 
the output there is for local consumption, so one can read many 
different things into this, and I would be pleased to meet with 
you and exchange views on the data, but I would like to make 
sure that the data are available.
    But when we look at, again, the record with our free trade 
partners, we see that they have never been a large percentage 
of our trade deficit, 10 percent, 5 percent, something like 
that, and now they are as a group in surplus, so certainly it 
is very good to be concerned and again we can have a variety of 
views but when I look at the data, and I used to run the 
research office in the Commerce Department so I never met a 
number I didn't like, I draw different conclusions. But it is 
good to be vigilant and it is good to ensure that our trade 
agreements do what we expect them to do, and we have seen our 
exports increase more rapidly to every country with which we 
have entered into a trade agreement than before.
    On Colombia, for example, 2/3 of our imports from Colombia 
are oil and other mineral fuels, and we would like to have 
secure sources of energy close to our borders. I thank you for 
the question.
    Ms. Sutton. And I look forward to following up because I 
agree that numbers and data can say many things.
    Mr. Vargo. Right. Thank you.
    Ms. Reilly. And I would also say that I also saw that 
article and know what you are referring to. Regarding Peru 
specifically, our position is a little bit differently where we 
look at the thousands of small companies that are already 
exporting to Peru and the added tariff that was being put on 
those goods which was an average of about 15 percent, so we 
just look at those numbers and think about the potential of 
once that agreement goes into place all the added value that is 
going to come back to those companies here in the U.S. and be a 
benefit on the bottom line.
    Personally, I work with companies all around the country 
and I have not yet heard of any that are planning on relocating 
to opening to Peru in regards to this agreement.
    Ms. Sutton. I appreciate that, Ms. Reilly, and actually 
that was just sort of an example to open up the discussion. It 
really wasn't about Peru per se. And I look forward to having 
more conversation as this hearing goes on. Thank you.
    Mr. Rush. Thank you very much. The chair now recognizes Mr. 
Stupak for 7 minutes for questioning.
    Mr. Stupak. Thank you, Mr. Chairman. Instead of talking 
about trade promotion, I want to talk about trade enforcement. 
In fact, Mr. Vargo, on page 5 of your testimony you say top 
trade priority for the United States is opening foreign markets 
for U.S. goods and services by insuring that the U.S. trading 
partners comply with existing trade agreements. I think it was 
Dr. Yager or Mr. Vargo.
    Mr. Yager. I believe it is in my statement.
    Mr. Stupak. Mr. Yager. So let me ask you this. On trade 
agreements as a general rule can countries refuse to allow 
products into their country if it is not safe or may jeopardize 
the health of the people?
    Mr. Yager. I think the guidelines that are written in the 
trade agreements is that they have to be legitimate concerns. 
They have to be technical concerns that also do not 
discriminate against foreign products, and so if there is----
    Mr. Stupak. Sure. Well, let us just take China since that 
is our base trade agreement, like melamine, toys, heparin, the 
drug for blood anticoagulant. It is all right for the U.S. then 
to refuse products from China if we can prove that there is 
concern about the health and safety of the American people.
    Mr. Yager. Well, I think there are a number of steps. I 
think you have also addressed some of these in prior statements 
about the ability of the United States to, in fact, put 
inspectors abroad, for instance, the Food and Drug 
Administration to make sure that plants in China do get 
inspected on a regular basis, so I think there are a variety of 
ways that the United States can try to assure that the goods 
that are coming in from----
    Mr. Stupak. Sure, but as a general rule a country can 
resist a product if it threatens the health and safety of its 
people.
    Mr. Yager. The United States can prevent products from 
coming in if the kinds of efforts that take place are not 
discriminatory.
    Mr. Stupak. Sure. So I was reading today in the Congress 
Daily in the hill briefs that are on page 6 of today's Congress 
Daily where President Obama has put a halt to the program which 
allowed up to 500 Mexican trucks to move across our border 
without the strict mileage limitations because of the concerns 
for the health and safety of those vehicles and drivers on our 
highways, and the Mexican economy department has said that it 
will--it violates the North America Free Trade Agreement and it 
is going to retaliate with cancellation of truck access by U.S. 
trucks. Now how does that jive with what we just said about it 
is supposed to be fair and open if we have legitimate concern 
about these trucks, Mexican trucks, that haven't passed muster 
since we passed NAFTA, which I believe was about 1994 or '93, 
August of '93, if I remember correctly. And after 16 years we 
still don't feel these products are safe. So it would be in our 
general rule, it would be illegal for Mexico to retaliate, 
would it not?
    Mr. Yager. I don't know that case specifically, but I do 
know prior that the Mexican government did, I think, win the 
panel ruling that allowed them to gain access to U.S.--to 
further U.S. markets through their trucking, so I would have to 
look and do some more research on that, Mr. Stupak.
    Mr. Stupak. Let me ask you this then. Dumping, illegal 
dumping where you undercut the price and put your surplus in 
another country, that has always been considered illegal under 
all trade agreements, right? Can you explain to me how back a 
year or so ago underneath new page in which China and Indonesia 
and Korea were dumping treated paper--excuse me, glossy paper, 
high gloss paper, in this country illegally. The Commerce 
Department said it was illegal, and we put tariffs in. They 
appealed to the ITC. The ITC ruling basically said, well, true, 
particularly with the case of China, they are dumping but it 
has a small effect on the U.S. economy, therefore, the tariffs 
were taken off. Is that now the standard for illegal dumping? 
Illegal dumping is legal as long as it doesn't have a major 
impact on one's economy?
    Mr. Vargo. Could I answer that?
    Mr. Stupak. Sure.
    Mr. Vargo. Actually the Nupage case wasn't dumping. It was 
subsidies, and the NAM was instrumental in getting the Commerce 
Department to agree that our countervailing duty statutes would 
be applied against subsidies so we----
    Mr. Stupak. Because of illegal dumping. China was dumping 
here for less than the cost.
    Mr. Vargo. But the way the U.S. law is set up, and it has 
been set up a long time ago, in order for there to be dumping 
or countervailing duties applied two things have to happen. The 
Commerce Department has to find that they are selling in the 
U.S. at less than they are selling at the local market or the 
selling at less than the cost of production. That is what 
Commerce does.
    Mr. Stupak. And they found they were selling at less than 
cost production?
    Mr. Vargo. They absolutely did. That is true. The 
International Trade Commission then as part of the law, which 
Congress passed a long time ago, said it has to find injury. 
Was that industry injured, and in this case the ITC found no, 
so it is not a change in practice. We can question the decision 
but anyway they followed the practice. There has been no change 
in practice, but let me just for the record say the NAM 
strongly supports the application of U.S. dumping laws and 
countervailing duties.
    Mr. Stupak. For most of us dumping is dumping whether it 
costs one job or in this case in the paper industry 550 jobs. 
People lost their good paying jobs because of this illegal 
dumping, so the wrinkle of this so-called economic injury if 
you read the opinion of the ITC if the injury was greater, more 
economic injury to the U.S. than it would have been illegal. 
Most Americans are under the impression illegal dumping is 
illegal.
    Mr. Vargo. But by U.S. law in order to be illegal it has to 
have caused injury.
    Mr. Stupak. So if 550 people lost their job, it is not 
injury?
    Mr. Vargo. I am not arguing, sir, on that case. I am just 
telling what the law says.
    Mr. Stupak. So when did Congress pass that crazy law?
    Mr. Vargo. 1970s.
    Mr. Stupak. 1970s before we had the big explosion in trade. 
Ms. Reilly, let me ask you this. You indicated that we should 
pass the Korea free trade agreement, and coming from Michigan, 
the auto state, in our automobile trade with Korea, 87 percent 
of the deficit, trade deficit, between U.S. and Korea, and U.S. 
Korea trade deficit is $107 billion we are in the hole, in 2006 
South Korea sold over 700,000 vehicles here in the U.S. but the 
U.S. was only allowed to get in 4,556 vehicles, so Korea, 
according to our research uses tariffs, prohibitive and 
discriminatory taxes, and regulations designed to keep our 
imports out so how is this fair and free trade, why should we 
pass Korea trade agreement when we can only get 4,500 of our 
cars into Korea but yet they are allowed 700,000 in our 
country?
    Ms. Reilly. I appreciate your concern on that, and I cannot 
speak to the specifics of the autos issue within that agreement 
but from a broader standpoint the reason that we believe that 
we should pass the Korean agreement is because Korea is our 
seventh largest trading partner in the world.
    Mr. Stupak. Even though they use tariffs, prohibitive, 
discriminatory taxes and regulations to keep our products out, 
we still should trade with them because they are seventh 
largest?
    Ms. Reilly. They are seventh largest for those goods as 
well as our sixth largest for agricultural goods so they are a 
tremendous potential customer for our companies.
    Mr. Stupak. So when does wrong become right? We have the 
health and safety of the American people. We have 
discriminatory tariffs, regulations, taxes, illegal dumping, 
but we all say that is OK. That is not fair and free trade to a 
lot of us up here----
    Ms. Reilly. I don't think we are saying that that is OK, 
and I think that there is a lot of things that go into free 
trade agreements, and I am not privy to those discussions and 
those negotiations, but all of those things ultimately come 
out. That is where they talk about the importance of labor and 
environmental protection in these countries, as well as patent 
protection, and IPR protections for different products within 
these countries. There are a lot that go into them, and while 
they do have certain flaws, we believe as a whole they are 
beneficial for----
    Mr. Stupak. Do you think we should continue trading if 
these issues remain unresolved?
    Mr. Rush. The gentleman's time is up. We will have a second 
round. The chair now recognizes the gentleman, Mr. Braley, for 
5 minutes.
    Mr. Braley. Thank you, Mr. Chairman, for holding this 
important hearing. I want to follow up on Mr. Stupak's 
questions because I think it is a very important conversation 
to have. A lot of us up on this panel believe strongly in the 
concept of free trade when it is married with the concept with 
fair trade, but a lot of us see gross inequities in our current 
trading system that imposes an unfair burden not just on U.S. 
workers but on U.S. companies competing in a global market 
place. I want to follow up on Mr. Stupak's point about the 
Mexican trucking agreement, which many of us in Congress fought 
to terminate despite strong objections from the Bush 
Administration.
    And I sat in on the hearing in the Transportation 
Subcommittee on Highways and Transit when we discussed that 
agreement at length. And on paper it looked like it created an 
equitable system because Mexico was required to comply with the 
same requirements that U.S. trucking companies are required to 
comply with to operate in this country. And, in fact, anyone 
like myself who used to be a commercial truck operator was 
provided a little green handbook that the Federal Motor Vehicle 
Safety Commission gives to every licensed truck driver to 
understand the rules of the road and also the rules of 
responsibility that go with operating a commercial vehicle. And 
one of those includes maintaining a driver's file so that 
anyone who causes damage whether commercially or personally 
while operating that truck has a source of accountability and 
that accountability is verifiable in this country.
    And one of the concerns many of us had about that Mexican 
trucking program is there was absolutely no corresponding 
transparency on the other side of the border to assure the 
safety of American citizens from the owners of these Mexican 
trucks, and nobody from the Bush Administration could identify 
a similar source of verifiable information when these trucks 
crossed our border, so it was not a fair competition. And the 
same point that Mr. Stupak was raising is another concern. If 
you go back and read the Soviet Constitution, you would swear 
that the Soviet Union was a bastion of civil liberties and was 
doing everything to promote freedom and liberty within its 
country.
    It is one thing to have words on paper. It is another to 
have a commitment to enforce them. And for many of us the 
problem we have with the trading agreements that we have right 
now is that on paper they look good, but our trading partners 
do not have the same level of commitment to enforcing their 
domestic laws on the other side, and we don't feel that there 
is accountability in the ITC to enforce a fair and reciprocal 
responsibility, so I would be interested in hearing from this 
panel what changes you think could be made to the current 
framework we operate in in a global economy that accomplishes 
this dual goal of both a free trading system and a fair trading 
system and brings people together around a trade model that can 
accommodate all of the interests that have been discussed.
    Mr. Vargo. Congressman, if I could provide a response or at 
least some comments to that. I am not a trucking expert but 
certainly the general rule is that we are able to keep anything 
unsafe out of our country, and again I have not examined this 
closely but it is my general understanding that the record so 
far, the Mexican trucks has not shown they were unsafe, but I 
don't want to engage in a debate and that the principle I think 
is a good one. And the principal should apply to other 
countries. To give you one egregious example that the NAM has 
been involved in and that is the situation of American poultry 
being kept under the European market. Why is the NAM concerned 
about poultry? Well, it is a processed food. It is manufactured 
and under our statistical system we have poultry producers in 
the NAM but it is a more important principle.
    Here is an area where because American chickens are dunked 
in a very mild chemical to make sure there is no salmonella the 
European Union says, oh, we don't do that, we won't take your 
poultry, even though the European commissioner said, you know, 
there is no scientific basis for this. Everybody knows that and 
we are going to stop this practice, but there was a public 
outrage so the commission said I am sorry, even though there is 
no scientific basis, we have no basis at all for keeping your 
poultry out, we are going to do it anyway. Well, that should 
not be. Now the U.S. trade representative is preparing a trade 
case against the Europeans and we need to pursue that 
aggressively. What do we need to do? We need more resources.
    Certainly there are lots of instances where countries are 
not doing everything they should, particularly in China. We 
have talked about Chinese counterfeiting. When I talk to our 
companies most of them say the situation is getting worse, and 
when you take action on them. I would differ if the feeling 
were generally all our trading partners are cheating on us. 
From talking with our members companies generally we don't see 
that. There are specific instances, and when there are 
instances, I think we need to move quickly.
    Mr. Yager. Mr. Braley, if I could just point out the last 
section of my written statement, we made 2 comments about 
monitoring and enforcing trade agreements. The first had to do 
with better communication. For example, we did a report last 
year which took a look at the United States trade 
representative's report on China's implementation of its W2 
obligations, and we found it was quite difficult for 
stakeholders to go through that report and really understand 
the state of play within China so we recommended that there be 
better communication, for example, from the key agencies to 
stakeholders such as the Congress and they have a better 
understanding of how things are going and ask more questions 
and get more involved in the process of monitoring and 
enforcement.
    The other point that I made in the statement had to do with 
getting the right people in the right places because many of 
the barriers that we do talk about are quite technical and so 
the knowledge, for example, of the Chinese legal system is 
important. We need to have the right people over there that can 
help address those, ask the right questions, and put the kind 
of pressure on the authorities and in some cases provide 
technical assistance to them because there are also companies 
within China that would also benefit from stronger intellectual 
property protection and stronger safety rules, and we need to 
link up with those like-minded companies in order to be 
successful so we made some recommendations also on human 
capital planning to get the right people in the right places.
    Mr. Braley. Thank you.
    Mr. Rush. The gentleman's time is up. The chair will ask 
the panel if they would indulge us for one additional round of 
questioning. We will limit the questions to 2 minutes so as not 
to infringe too much on your valuable time. The chair 
recognizes himself for 2 minutes. I would like to really point 
my questions to Ms. O'Neill and Ms. Hale. Recently, Time 
magazine published an article written by a gentleman, Alex 
Kerr, stating that among the 10 elements that will shape the 
world tomorrow Africa as a business designation ranks number 
six. It was the only continent mentioned. What are your 
respective agencies doing to identify opportunities for U.S. 
companies to export to areas in Africa and to Latin America and 
how are these efforts different from your past approach to 
these meetings, and how would the new--China has paid some 
special attention to Africa. It is Africa's third largest 
trading partner after the U.S. and France, and how should this 
competition influence U.S. trade policy what we send to Africa? 
So that is my three questions all within one general question. 
Would you care to respond?
    Ms. O'Neill. Sure. Thank you very much. Since the Congress' 
passage of the Africa Growth and Opportunity Act in 2000, we 
have been proud, the Commerce Department, to be one of the co-
hosts of an annual forum. The next one is in August, 2009 in 
Kenya, and we have been actively participating and this look at 
how to provide technical assistance, better legal and 
regulatory infrastructure, how to--I participated on a panel on 
expanding opportunities in telecom and information technologies 
recently focused on Africa. We also have 5 offices, Kenya, 
Tanzania, Ghana, South Africa, and Nigeria. For the countries 
where we don't have a physical presence, we work closely with 
the State Department. We have a partnership post Memorandum of 
Understanding that allows us to work with state econ officers 
in those markets where there is demand for U.S. exports, U.S. 
support, commercial support.
    We have a web site, export.gov/africa. We are partnering 
looking closely at the multi-lateral development bank projects, 
and also providing training, trade promotion coordinating 
committee training for the state officers on the ground.
    Ms. Hale. We are doing some capacity building projects. For 
example, we will bring government officials to the United 
States so they can see how we regulate biotechnology. That is 
very important to us because so much of our agriculture 
production for corn and soybean products are biotechnology. We 
also have a lot of food assistance programs in Africa. The 
McGovern-Dole program is providing food for school lunches. 
Also, I mentioned the trade mission that we have. We also have 
scientific exchanges. I think it is important that we are 
building relationships at all levels among scientists, among 
businesses, among government regulators that will support long-
term trade relationships.
    Mr. Rush. The chair now recognizes the ranking member, Mr. 
Radanovich.
    Mr. Radanovich. Thank you, Mr. Chairman. My first question 
goes to Mr. Vargo. Welcome to the subcommittee. I want to know 
how much additional trade revenue you think could be brought in 
from the passage of pending free trade agreements. There are 
three so far that are pending, Korea, Panama, and Colombia.
    Mr. Vargo. Well, the average tariff on our manufactured 
goods in those countries ranges somewhere between 8 and 15 
percent. And if we could get that down, we would generally, I 
think, pick up 10, perhaps 20 percent more exports in those 
countries. We export, if I recall, about 5 billion to Panama 
now, maybe 11 billion to Colombia, something like 30 billion to 
Korea so we want that business and we want the agreements to be 
good. And tariffs are not the only part of the agreement. Non-
tariff areas are important and other provisions of the 
agreements are important.
    And I look at Colombia right now and I recognize that the 
Congress and the Administration want to do something more on 
the violence in Colombia, particularly that which affects 
members of union, but from my point of view this is costing us 
exports and jobs every day of delay because the Congress has 
already voted----
    Mr. Radanovich. Mr. Vargo, I ask you to sum up real quick 
because I want to try to get one more question.
    Mr. Vargo. I am done, sir.
    Mr. Radanovich. All right. Thank you very much. Ms. Hale, 
during the last round, you were very good in answering my 
Uruguay Round question, but I forgot to ask the second part, 
and that was as far as specialty crop exports, they were in 
surplus then, they are not now. Can you explain why perhaps and 
give me an idea of what it would take in order to bring an 
increase in exports of specialty crops?
    Ms. Hale. There are two important reasons why our specialty 
crop exports have been increasing. One is that people see them 
as very healthful and in countries like Europe and Japan 
people, U.S. nuts and fruits are in very, very high demand. We 
are exporting 80 percent of our almonds, for example. Our 
walnut exports are a billion dollars a year. And the industry 
has done a good job of promoting the health benefits. Another 
reason is that middle income people are growing, and for a 
middle income family in China an orange is a treat, a 
California orange.
    They will buy the orange, split it up. The whole family, 
everybody, will take a piece of it and it is a special treat. 
And we are seeing more consumers around the world that are able 
to afford American fruits and American nuts. And the industry 
has just done a good job promoting them. An example is the 
emerging markets program. We just did a promotion for using 
American fruits and nuts in moon cakes. It is a billion dollar 
business in China, and American dried fruits and nuts would be 
a good contribution to Chinese moon cakes. So that kind of 
technical support in our marketing program has been very 
important as well, so the consumers are there and I think we 
got good marketing programs to take advantage of the changes in 
the marketplace.
    Mr. Radanovich. Thank you very much. I yield back, Mr. 
Chairman.
    Mr. Rush. The chair now recognizes Ms. Sutton.
    Ms. Sutton. Thank you, Mr. Chairman, and I will just ask a 
couple of questions and then allow you to respond. Ms. Reilly, 
in the last line of questioning you answered the question I 
offered with a statement that included a reference to when you 
were evaluating the Peru free trade agreement you just looked 
at the benefit on the bottom line. And that is an interesting 
remark to me, and I would just like to understand better what 
your association's assessment mechanism is on whether or not 
trade is working if it really just encompasses the benefit on 
the bottom line, so if you could just think about that for a 
moment.
    Mr. Vargo, following up on some of Mr. Stupak's questions, 
you know, I heard you referencing that your association is 
obviously against illegal dumping and certainly for the 
imposition of tariffs where appropriate to level the field. One 
of the things that is happening now is that in this economic 
global downturn that we are experiencing steel production in 
this country has been ramped down because as one would when the 
market is down, one would cut back on production. China is 
taking advantage in my view, and certainly the data I will be 
happy to provide to show you, and is ramping up production and 
exporting steel into this country in this moment of global 
interconnectiveness and downturn. What should we do about that?
    And then, finally, the very last question I want to ask 
about is the drywall that we bring into this country from 
China, and some of you have referenced that we don't have to 
accept unsafe products into this country if we know that they 
are unsafe. We know that some of the drywall imported from 
China leaches formaldehyde. We know this. It has been declared 
not only unsafe for, you know, some of our other trading 
partners but China itself will not allow it to be used in their 
own country and yet we have it being imported into this 
country, and I would just like to know about your thoughts on 
all of these things because again these go to the issues that I 
am talking about about the comprehensive nature of our system 
and how it is working and what we need to do to fix it.
    Ms. Reilly. Well, first, to answer your question regarding 
how do we assess the bottom line is we look at it, and we look 
at the free trade agreements that have been implemented thus 
far and the companies that were already having duty free access 
to U.S. markets, selling their things here with no taxes or 
tariffs on it, and us selling our goods abroad with an average 
tariff or tax of about 15 percent. We look at that, and we look 
at those numbers. When we look at Ohio specifically and how 
trade has worked, I look at agreements like the U.S.-Chile 
agreement where 47 percent of exports have increased to Chile 
from Ohio. For NAFTA agreements it has gone up 138 percent.
    Even the agreement with Jordan, and I don't know what Ohio 
is selling to Jordan, but it has gone up over 1000 percent, so 
those are the numbers that we look at regarding that.
    Ms. Sutton. I guess I was just asking about whether you 
look at anything besides numbers, and I appreciate that. Thank 
you.
    Mr. Vargo. On steel and China, the NAM is a broad 
association. We have members of industry associations like 
American Iron and Steel Association and many others. Our view 
is, as I said, we support the strong and effective use of U.S. 
import law. We also believe it is very important that the 
United States, everybody else, adhere as closely as possible to 
the rules-based global trading system. I am very pleased that 
President Obama stressed that several times in his trade 
agenda. It is important that we have a stand still on countries 
and not start putting on more trade barriers because that is a 
road downward that will really hurt us as well as everybody 
else.
    In the case of steel and China, absolutely, the steel 
industry should be able to avail itself of U.S. trade laws. I 
know the Congress department already does special monitoring of 
Chinese steel, and there are additional tools that could be 
available but I will let our steel industry speak for itself. 
On drywall as an illustration of unsafe products coming into 
the United States, this is very troublesome, and clearly we 
need to address this more carefully than we have with having 
tighter inspection or certification of products that are coming 
into the United States.
    Again, you know, that is going to take resources. It is 
going to take some more general agreement. I think we ought to 
look at what other countries do because some other countries I 
think have tougher requirements for getting into their country 
than we do, and it might be useful for this subcommittee to ask 
the GAO to look into that and see what other countries are 
doing that maybe we ought consider doing legally. I am not 
proposing we do anything funny here, but I think some other 
countries just do a more careful job of insuring the safety of 
what is coming into their country.
    Mr. Rush. The gentlelady's time is up. The chair now 
recognizes the gentleman from Michigan for 2 minutes.
    Mr. Stupak. Thank you, Mr. Chairman. If we are looking at 
the bottom line numbers, look at the bottom line numbers. Just 
take January alone. Our trade deficit is $39 billion. From 2001 
to 2008 the trade deficit cumulative is $3.83 trillion. Every 
one of these trade deficits means loss in U.S. jobs. While 
Michigan is a manufacturing state, we are a great state for 
exporting agricultural products. In fact, we are one of the 
leading states for doing that, but it doesn't offset the loss 
of jobs we have from manufacturing because it is a higher value 
product as opposed to agricultural products.
    So, again, I don't mind promoting trade but we have to do 
enforcement. Mr. Vargo, you indicated in my first line of 
questioning, talked about inspections and certifications. And 
where I sit as chairman of Oversight and Investigations and do 
the melamine, the heparin, and the toy investigations and the 
illegal products coming into this country, I have been toying 
with the idea and would like your comments on it because you 
mentioned China's steel. In the early part of this decade, the 
early 2000's, we were doing the standup for steel because China 
was illegally dumping steel in this country. That did have an 
impact and President Bush did put some tariffs in which were 
modified, but we did have them.
    But our concern right now if you go back to safety is 
whether it is drywall from China or whether it is steel or 
cement it is an inferior product. The custom border patrol has 
indicated that they have a right to inspect the product coming 
in and they find it to be not of sufficient strength, and, 
therefore, they will tag it as being inferior but yet the 
importer, the U.S. customer, still comes, grabs that steel, 
takes that tag off, and sells it in the U.S. economy. And we 
have seen schools collapse in California because of inferior 
steel from China.
    So we are toying with the idea to introduce legislation 
that will give the custom border control--not only continue 
their inspection but reject it right there, not even allow the 
U.S. customer to pick up that steel. Just send it right back. 
Do you have any problems with that?
    Mr. Vargo. Well, you know, I try to stick to a policy of 
speaking on things that I know something about. There I don't. 
We do have a working group within the NAM looking at unsafe 
products coming into the United States so with your permission, 
I am going to take that point to our working group and we will 
get an answer to you in writing.
    Mr. Stupak. Please do, because once these inferior products 
get into the mainstream of Congress, there is no way to recall 
them. Once they are in the building, they will rip them out.
    Mr. Vargo. Understand. If I could just comment very quickly 
on the overall trade deficit. You know, we had over a $450 
billion trade deficit in manufacturers last year, but I just 
want to point out again that with our free trade partners we 
had a surplus. All of our deficit was with countries that have 
not lowered their trade barriers to us. I don't want to get 
into a squabble----
    Mr. Stupak. Sure. Most of those countries like China have a 
VAT. As their products come in, they put a value at a tax on it 
which is illegal, and we are not doing anything to enforce it.
    Mr. Vargo. Well, under world trade rules it is not illegal 
and we don't have a VAT. Maybe we should.
    Mr. Stupak. Maybe we should have a VAT.
    Mr. Vargo. But if I could just make 1 point.
    Mr. Stupak. Sure.
    Mr. Vargo. We seem to be drifting more towards talking 
about trade agreements, et cetera. Please don't forget the 
central point here which is we under export. We don't have 
enough export promotion so whatever other problems we deal 
with, I hope that this subcommittee will really press. We need 
to increase our exports.
    Mr. Stupak. But from where I sit as chairman of Oversight 
and Investigations, I see trade agreements jeopardizing the 
health and safety of the American people because it is both 
ways, the products we receive, and we are not doing a good job 
here in this country.
    Mr. Vargo. Well, you might want to have a separate hearing 
on this, but on export promotion whatever disagreements we have 
help us promote exports. Thank you.
    Mr. Rush. The gentleman's time is up, and the chair really 
wants to emphasize that is why we have two committees, the 
Oversight and Investigations Committee, which the chairman does 
an exceedingly good job. He has been keeping the American 
people safe for as long as he has been chair of that committee, 
and I really want to commend him, but we will be--this 
committee is dedicated to promoting trade, international trade, 
as a response to our economic problems that we are facing as a 
nation. And so that is the purpose of this hearing, and that 
will be the purpose of the attention of this committee. I 
really want to thank all of the members of the panel. You have 
really been a tremendous asset to us here on the committee. 
Your testimony has been most forthright and informative to us, 
and we certainly want to let you know that we appreciate you 
taking your time from your busy schedule to be with us today. 
And we thank you for enlightening us with your testimony. The 
chair now calls this committee to close. The committee right 
now is adjourned.
    Right before we adjourn, the chair asks for unanimous 
consent to enter the statement of Mr. Dennis Slater. He is the 
President of the Association of Equipment Manufacturers, and 
without any dissent with unanimous consent to enter Mr. 
Slater's statement into the record.
    [The information appears at the conclusion of the hearing.]
    Mr. Rush. The subcommittee now stands adjourned.
    [Whereupon, at 12:04 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

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