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

           H.R. 4692, THE NATIONAL MANUFACTURING STRATEGY ACT OF 2010

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

                                    HEARING

                                   BEFORE THE

                        SUBCOMMITTEE ON COMMERCE, TRADE,
                            AND CONSUMER PROTECTION

                                     OF THE

                        COMMITTEE ON ENERGY AND COMMERCE
                            HOUSE OF REPRESENTATIVES

                         ONE HUNDRED ELEVENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                 JULY 14, 2010

                                   __________

                               Serial No. 111-143

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          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
    JANICE D. SCHAKOWSKY, Illinois       SUE WILKINS MYRICK, North Carolina
    CHARLES A. GONZALEZ, Texas           JOHN SULLIVAN, Oklahoma
    JAY INSLEE, Washington               TIM MURPHY, Pennsylvania
    TAMMY BALDWIN, Wisconsin             MICHAEL C. BURGESS, Texas
    MIKE ROSS, Arkansas                  MARSHA BLACKBURN, Tennessee
    ANTHONY D. WEINER, New York          PHIL GINGREY, Georgia
    JIM MATHESON, Utah                   STEVE SCALISE, Louisiana
    G.K. BUTTERFIELD, North Carolina
    CHARLIE MELANCON, Louisiana
    JOHN BARROW, Georgia
    BARON P. HILL, Indiana
    DORIS O. MATSUI, California
    DONNA M. CHRISTENSEN, Virgin
        Islands
    KATHY CASTOR, Florida
    JOHN P. SARBANES, Maryland
    CHRISTOPHER S. MURPHY, Connecticut
    ZACHARY T. SPACE, Ohio
    JERRY McNERNEY, California
    BETTY SUTTON, Ohio
    BRUCE L. BRALEY, Iowa
    PETER WELCH, Vermont
            Subcommittee on Commerce, Trade, and Consumer Protection

                            BOBBY L. RUSH, Illinois
                                      Chairman
    JANICE D. SCHAKOWSKY, Illinois       CLIFF STEARNS, Florida
        Vice Chair                            Ranking Member
    JOHN SARBANES, Maryland              RALPH M. HALL, Texas
    BETTY SUTTON, Ohio                   ED WHITFIELD, Kentucky
    FRANK PALLONE, Jr., New Jersey       GEORGE RADANOVICH, California
    BART GORDON, Tennessee               JOSEPH R. PITTS, Pennsylvania
    BART STUPAK, Michigan                MARY BONO MACK, California
    GENE GREEN, Texas                    LEE TERRY, Nebraska
    CHARLES A. GONZALEZ, Texas           MIKE ROGERS, Michigan
    ANTHONY D. WEINER, New York          SUE WILKINS MYRICK, North Carolina
    JIM MATHESON, Utah                   MICHAEL C. BURGESS, Texas
    G.K. BUTTERFIELD, North Carolina
    JOHN BARROW, Georgia
    DORIS O. MATSUI, California
    KATHY CASTOR, Florida
    ZACHARY T. SPACE, Ohio
    BRUCE L. 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. Ed Whitfield, a Representative in Congress from the
      Commonwealth of Kentucky, opening statement....................     6
        Prepared statement...........................................     8
    Hon. Robert E. Latta, a Representative in Congress from the State
      of Ohio, opening statement.....................................    11
        Prepared statement...........................................    12
    Hon. Phil Gingrey, a Representative in Congress from the State of
      Georgia, opening statement.....................................    14
    Hon. Gene Green, a Representative in Congress from the State of
      Texas, prepared statement......................................    14
    Hon. Lee Terry, a Representative in Congress from the State of
      Nebraska, opening statement....................................    15
    Hon. Betty Sutton, a Representative in Congress from the State of
      Ohio, opening statement........................................    16
    Hon. Cliff Stearns, a Representative in Congress from the State
      of Florida, opening statement..................................    16
    Hon. Bruce L. Braley, a Representative in Congress from the State
      of Iowa, opening statement.....................................    17
    Hon. Tim Murphy, a Representative in Congress from the
      Commonwealth of Pennsylvania, opening statement................    18
    Hon. John D. Dingell, a Representative in Congress from the State
      of Michigan, opening statement.................................    19
    Hon. Steve Scalise, a Representative in Congress from the State
      of Louisiana, opening statement................................    20
    Hon. Janice D. Schakowsky, a Representative in Congress from the
      State of Illinois, opening statement...........................    21
    Hon. Daniel Lipinski, a Representative in Congress from the State
      of Illinois, opening statement.................................    21
        Prepared statement...........................................    23
    Hon. Joe Barton, a Representative in Congress from the State of
      Texas, prepared statement......................................   101

                                   Witnesses

    Aneesh Chopra, Associate Director for Technology & Chief
      Technology Officer, Office of Science and Technology Policy....    29
        Prepared statement...........................................    32
        Answers to submitted questions...............................   143
    Scott N. Paul, Executive Director, Alliance for American
      Manufacturing..................................................    41
        Prepared statement...........................................    43
        Answers to submitted questions...............................   150
    Mark A Gordon, Director, Defense Research Programs, National
      Center for Advanced Technologies...............................    52
        Prepared statement...........................................    54
        Answers to submitted questions...............................   154
    William M. Hickey, Jr., President/CEO, Lapham-Hickey Steel Corp..    62
        Prepared statement...........................................    64
        Answers to submitted questions...............................   162
    Owen E. Herrnstadt, Director of Trade and Globalization,
      International Association of Machinists & Aerospace Workers....    69
        Prepared statement...........................................    71
        Answers to submitted questions...............................   168
    Kevin A. Hassett, Senior Fellow and Director of Economic Policy
      Studies, The American Enterprise Institute.....................    75
        Prepared statement...........................................    78

                               Submitted Material

    National Manufacturers Association, Manufacturing Strategy, June
      2010, submitted by Mr. Whitfield...............................   106
    Letters of support from various organizations to Mr. Lipinski....   120
        American Iron and Steel Institute............................   120
        The Association for Manufacturing Technology.................   122
        National Tooling & Machining Association/Precision
          Metalforming Association...................................   123
        Aerospace Industries Association.............................   124
        National Defense Industrial Association......................   125
        Coalition for a Prosperous America...........................   133
        American Manufacturing Trade Action Coalition................   134
        Motorola, Inc................................................   135
        United States Business and Industry Council..................   136
    Statement of National Association of Manufacturers, submitted by
      Mr. Rush.......................................................   140

           H.R. 4692, THE NATIONAL MANUFACTURING STRATEGY ACT OF 2010

                                  ----------

                            WEDNESDAY, JULY 14, 2010

                  House of Representatives,
               Subcommittee on Commerce, Trade,
                               and Consumer Protection,
                              Committee on Energy and Commerce,
                                                        Washington, DC.
        The Subcommittee met, pursuant to call, at 2:04 p.m., in
    Room 2322 of the Rayburn House Office Building, Hon. Bobby Rush
    [Chairman of the Subcommittee] presiding.
        Members present: Representatives Rush, Schakowsky, Sutton,
    Green, Gonzalez, Barrow, Braley, Dingell, Whitfield, Stearns,
    Terry, Murphy, Gingrey, Scalise and Latta.
        Also present: Representative Lipinski.
        Staff present: Michelle Ash, Chief Counsel; Angelle Kwemo,
    Counsel; Tim Robinson, Counsel; Peter Ketcham-Colwill, Special
    Assistant; Will Wallace, Special Assistant; Brian McCullough,
    Senior Professional Staff; Shannon Weinberg, Counsel; Robert
    Frisby, Detailee; Sam Costello, Legislative Assistant; and Ike
    Brannon, Committee Economist.

     OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF ILLINOIS

        Mr. Rush. The subcommittee will come to order. I want to
    thank the members of the subcommittee who have joined us today
    for participating in this legislative hearing. This afternoon,
    we will examine a very important bill introduced in February by
    my dear friend from Illinois, Congressman Dan Lipinski, and I
    want to commend him for his leadership on this issue. And at
    this point, I want to ask unanimous consent that Congressman
    Lipinski be allowed to join us on the dais, be allowed to make
    an opening statement, and be allowed to ask questions for 5-
    minutes at the conclusion of the opening statements and also
    the questioning by members of the committee. Hearing no
    objections, so ordered.
        The Chair recognizes himself for 5 minutes for the purposes
    of an opening statement. H.R. 4692, the National Manufacturing
    Strategy Act of 2010, has bipartisan support from members of
    Congress, including many who serve on this subcommittee.
    Addressing manufacturing issues is not new to this
    subcommittee. Last year, we highlighted the need to make the
    exportation of manufactured goods a national priority for the
    simple fact that America's manufacturing sector is an essential
    foundation of our Nation's economy. Consider the fact that in
    2009 the manufacturing sector employed more than 11.5 million
    people.
        Ladies and gentlemen, that number, though significant, is
    not as good as it could be when you consider that 10 years ago
    America's manufacturing sector employed 17.3 million people,
    meaning that our Nation actually lost 5.8 million jobs between
    1999 and 2009. The bill we are considering today seeks to make
    a significant difference in helping to restore and reposition
    our Nation's manufacturing capacity so that American workers
    can better compete in today's global economy. Today, we are
    still fighting our way through a global financial crisis, and
    we are facing aggressive competition from other industrialized
    nations as well as emerging countries. Some of our
    manufacturing competitors have designed and implemented 5 or
    10-year strategic plans to allow their economies to not only
    compete globally, but also to export their goods to our market
    here at home. The sad fact of the matter is that these
    international markets are not reciprocating by welcoming U.S.
    goods to their marketplace.
        In recent years, the U.S. has actually lost market share to
    growing export countries like China, Southeast Asia and India.
    If we do not act now, this steady decline will increase. We
    simply cannot allow that to happen and, thankfully, President
    Obama agrees. I commend the President for the significant steps
    he has already taken to strengthen our manufacturing sector.
    The President's Council of Advisors on Science and Technology
    continues its assessment of the state of our Nation's
    manufacturing sector, its policies and its initiatives. Their
    efforts are moving steadily toward a set of recommendations
    designed to strengthen our Nation's manufacturing sector.
        With H.R. 4692, the bill we are considering today, we take
    a major step toward this shared goal. This bill requires the
    President to undertake a deep and broad analysis of the
    Nation's manufacturing sector, including the international
    economic environment, related technological developments,
    workforce elements, the impact of governmental policies and
    other relevant issues affecting domestic manufacturers. Based
    on this analysis, the President, in collaboration with key
    cabinet officials within his Administration as well as
    governors, state and local elected officials and other key
    stakeholders in the public and private sectors will develop a
    4-year national strategy that identifies goals and makes
    recommendations to improve our Nation's economic growth. Key
    provisions of this legislation include a provision requiring
    that the proposed national strategy be delivered to Congress
    and that it be published on a web site to allow the American
    people to be able to monitor for themselves our efforts to
    change course as we work to return the American workforce to
    the front line in terms of manufacturing skills and innovation.
        With that, I look forward to hearing from my colleagues on
    this subcommittee as well as our invited guests. Thank you, and
    I yield back the balance of my time. The Chair now recognizes
    the ranking member, Mr. Whitfield, for 5 minutes for the
    purposes of an opening statement.
        [The prepared statement of Mr. Rush follows:]

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      OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN
               CONGRESS FROM THE COMMONWEALTH OF KENTUCKY

        Mr. Whitfield. Mr. Chairman, thank you very much, and I
    certainly want to thank Mr. Lipinski for this legislation, and
    I know that we have people on our side of the aisle that
    support it. I do want to give some constructive criticism of
    this legislation. I think when we criticize, we also need to
    try to come up with suggestions to improve it because all of us
    are concerned about manufacturing. But I read through this bill
    three times, and I was quite concerned about it. First of all,
    we have a sense of Congress on 18 issues of concern regarding
    manufacturing, which is fine, and things like creating high
    quality jobs and increasing productivity, those types of
    issues. And then we have a task force that would be appointed
    by the President, and on that task force everyone on the task
    force are government employees. And then after the appointment
    of the task force, it says at a minimum they must consider the
    following issues, and there are 22, 23 of those issues.
        Now the task force is to make recommendations. In addition
    to the task force, the President is supposed to appoint a
    National Manufacturing Strategy Board and there were 21 people
    that belonged to that board, and they should make
    recommendations to the task force. Now I noticed that the first
    report is due on February 28, 2011, and that is not very far
    from now. And when you consider all the things that have to be
    considered and you look at all the guidelines there also must
    be goals set and they spell out the specific goals that must be
    looked at, and then they make recommendations to fulfill those
    goals. Then you have the Strategy Board itself, and, as I said,
    it has 21 members, and of course after the first report is made
    the Government Accounting Office 3 years following that first
    report is supposed to do a review to determine whether or not
    there has been any success in fulfilling the recommendations
    made by the task force.
        In addition to that, in developing each National
    Manufacturing Strategy the President acting through the Office
    of Science and Technology and Policy, which I believe will be
    on the panel today, must enter into an agreement with the
    National Academy of Sciences, and I am not sure if they are
    with us today or not. But the legislation points out what
    things they must consider, and then it talks about when the
    first report is due. And then in addition to that there are
    further required studies in order to inform future national
    manufacturing strategies not later than 60 days after enactment
    of this act the President shall enter into an agreement with
    the National Academy of Sciences to develop three more reports,
    one not later than 14 months after entering into the agreement,
    two not later than 20 months after entering into the agreement,
    and three not later than 24 months after entering into the
    agreement.
        And while I have not had the opportunity to look at this in
    great depth, it would appear to me that there may be some ways
    to make this legislation more effective than it would be by
    maybe merging the Strategy Board and the task force and
    bringing in the private sector people along with the government
    people on the same board. So as I read through this, like I
    said, I think it is a wonderful idea. We are all concerned
    about manufacturing but this bill is really complex and there
    are so many reports due in this bill that I am quite concerned
    really about the overall effectiveness of it. Having said that,
    I am open to being swayed by our distinguished panel here, and
    I would like to also, Mr. Chairman, just ask unanimous consent
    to place into the record a manufacturing strategy for jobs in a
    competitive America that was developed June, 2010, by the
    National Manufacturers Association in which they set out a
    number of recommendations and policies that they think would be
    helpful to reinvigorate the manufacturing industry in our
    county. And if there is no objection, I would just like to
    enter that into the record.
        Mr. Rush. Hearing no objection, so ordered.
        [The information appears at the conclusion of the hearing.]
        Mr. Whitfield. And with that, I yield back the balance of
    my time although you were kind enough. I still see I have 5
    minutes left.
        [The prepared statement of Mr. Whitfield follows:]

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    OPENING STATEMENT OF HON. ROBERT E. LATTA, A REPRESENTATIVE IN
                    CONGRESS FROM THE STATE OF OHIO

        Mr. Latta. Thank you, Mr. Chairman, and Ranking Member
    Whitfield. Thank you for holding the hearing today on H.R.
    4692, which relates to a subject that is very near and dear to
    my heart in the 5th Congressional District which is
    manufacturing. As many of you are aware, the heart of the
    Midwest is dependent on manufacturing and agriculture to
    maintain a viable and strong economy. In these tough economic
    times, it is important that Congress protect these dedicated,
    hard-working Americans. Ohio employs roughly 629,500
    individuals in the manufacturing sector, and my congressional
    district is the largest manufacturing district in Ohio and the
    20th largest in Congress. I do have some concerns, as Mr.
    Whitfield pointed out, with the legislation, and other pieces
    of legislation that have gone through the committee as we
    continue to see an expansion in federal bureaucracy and the
    creation of new studies in other federal programs as well as
    the creation of new commissions.
        When it comes to a National Manufacturing Strategy to
    strengthen our manufacturing sector and help create jobs and
    business, we do need a common sense approach. Many companies
    and organizations are instituting their own National
    Manufacturing Strategy and one that does not need the taxpayer
    dollars and studies to accomplish it. Congress needs to create
    better tax policies and extend current tax reductions for
    businesses, small and large, who keep Americans employed and
    create jobs for the unemployed, not to burden businesses and
    the American people with job preventing legislation such as cap
    and trade and the health care legislation but pass the pending
    free trade agreements to create a level playing field with
    other countries and not impose harmful rules and regulations
    that burden or hinder industries, hinder economic growth and
    create much uncertainty that keep dedicated, hard-working
    Americans from retaining jobs.
        With that, Mr. Chairman, I look forward to today's
    witnesses and working with the committee on manufacturing
    issues that face our country today. Thank you, and I yield
    back.
        [The prepared statement of Mr. Latta follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Rush. The chair recognizes Dr. Gingrey for 2 minutes.

      OPENING STATEMENT OF HON. PHIL GINGREY, A REPRESENTATIVE IN
                   CONGRESS FROM THE STATE OF GEORGIA

        Mr. Gingrey. Mr. Chairman, thank you. And I want to thank
    you for calling today's hearing on H.R. 4692, the National
    Manufacturing and Strategy Act of 2010. Improving manufacturing
    needs to be a major focus for us to get people back to work and
    to grow our economy. Mr. Chairman, I appreciate your
    willingness to have the subcommittee receive testimony on this
    important issue. Over the past decade, we have seen a once
    robust sector of the economy in decline. As the majority memo
    for this hearing indicates, we have lost 5.8 million
    manufacturing jobs since 1999. Given the success of this
    industry in the past, this statistic is decidedly negative.
    Furthermore, manufacturing continues to represent a smaller
    portion of the overall economy given that we have lost market
    share to our foreign competitors. Mr. Chairman, two to three
    times a year, I convene a meeting of leaders from across the
    industry, I call it my manufacturing and advisory committee, to
    advise me on how policy coming from Washington affects their
    ability to run their businesses. This is, of course, in my 11th
    Congressional District of Georgia.
        I held one of the meetings on Monday, just this past
    Monday, at Dow Chemical in Marietta, Georgia, and during that
    round table session the message I received from them was
    overwhelmingly clear, current Washington policies are not
    helping create jobs or lower the cost of doing business.
    Instead, proposals like cap and trade and the newly enacted
    health care law, Patient Protection and Affordable Care Act of
    2010, are only adding to regulatory burden placed on these
    companies. Additionally, we have not helped these companies
    expand their markets by enacting existing free trade
    agreements, Panama, Colombia, South Korea. We have not provided
    incentives to foreign companies to invest in United States by
    lowering our corporate tax rate.
        One of the largest manufacturers in my district even told
    me that foreign manufacturing companies, his company, and I
    won't mention the name of the company but it is a Japanese
    company, they want to bring jobs to hard-working Americans.
    They will hold off on making those investments because of the
    current policies being pursued by this Administration and
    Congress, and, more importantly, the uncertainty of really not
    knowing how to deal with what is coming next. So, Mr. Chairman,
    I do applaud my colleague and good friend from Illinois, Mr.
    Lipinski, for raising awareness of these important
    manufacturing issues. I look forward to hearing from our panel
    of witnesses on how to grow manufacturing in the United States.
    Indeed, we look forward to that. And I yield back my time.
        Mr. Rush. The chair recognizes Mr. Green for 2 minutes.

       OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN
                    CONGRESS FROM THE STATE OF TEXAS

        Mr. Green. Thank you, Mr. Chairman, for holding the
    hearing. I want to thank our colleague, Mr. Lipinski, for
    introducing this important piece of legislation, which I am a
    co-sponsor. It is important that we closely examine the issue
    of domestic manufacturing and how we can bolster our economy by
    supporting our domestic manufacturing capabilities. I am a co-
    sponsor of this bill because I believe it takes the right
    approach toward analyzing our country's capabilities. This bill
    directs the President to develop a long-term plan for
    supporting our domestic manufacturing and ensuring that it
    includes the input of an array of private sector participants.
    Currently, there are many federal programs aimed at increasing
    our manufacturing sector, and I am concerned that these
    programs lack coordination, efficiency and are reactive to
    events and may leave our workers and companies unprepared for a
    challenge that will present them in the future. It is important
    that we put Americans back to work, and one of the ways we can
    accomplish this is by improving our capacity of manufacturing.
        Our district in Houston has a great deal of manufacturing
    related to the oil and gas production, refinery, and chemical
    industry, but we have capacity to do more. This is the story
    across the country. While our unemployment has fallen from its
    peak, we must remain focused on job creation in short term and
    long term. I believe this bill represents a long-term remedy
    and will give Congress, the President, and private sector
    stakeholders the tools necessary to spur growth in
    manufacturing. Again, Mr. Chairman, thank you for your
    leadership on calling the hearing, and I yield back my time.
        Mr. Rush. The chair recognizes Mr. Gonzalez for 2 minutes.
        Mr. Gonzalez. I waive opening.
        Mr. Rush. The chair recognizes Mr. Terry for 2 minutes.

       OPENING STATEMENT OF HON. LEE TERRY, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF NEBRASKA

        Mr. Terry. Thank you, Mr. Chairman, and I am anxious to
    hear from our esteemed panel here, the breadth of what this
    bill will allow with the new committees to look into this. I
    would like to know if we are working under a premise that the
    Administration's report that they put out is incomplete and
    therefore necessary to duplicate it in some manner with this
    bill. I wonder and would like to have input whether or not
    these panels will look at, as Mr. Gingrey said, look at cap and
    trade. Will it look and say, oK, if we are going to raise
    electric rates, natural gas rates, and transportation fuel
    whether that will impact decision making by manufacturers to
    stay in the United States or move overseas. Look at the health
    bill where now we have a health bill, most manufacturers are
    over 50 employees, even the smaller ones that are around my
    district, and all make more than 25,000, so they will have more
    bureaucratic responsibilities with none of the benefits from
    this health care bill. They will even go far as if they buy
    pizza for their employees on Fridays that they will have to
    1099 Pizza Hut now.
        Are those the type of bureaucratic things that you will
    look at to determine if that provides a lack of incentive to
    manufacturers to stay within the United States. Also, look at
    OSHA. And I have a letter here from one of our manufacturers in
    Nebraska who has one of the best proven safety programs, so
    what do they get instead of congratulations? They get a letter
    saying your establishment was selected from a list of low rate
    establishment and high rate industries. Congratulations. You
    get an additional audit. And we wonder why our manufacturers
    are moving to China. There is less government interference in
    China than there is in the United States now.
        And, by the way, this was so intrusive that they personally
    pulled all of the employees off the line for interviews. They
    walked into every doctor's office and hospitals in the area
    asking for employee records. Why? Because they had a successful
    safety program. Our bureaucracy is chasing our jobs overseas.
    It is not a secret. I yield back.
        Mr. Rush. The chair recognizes the gentlelady from Ohio,
    Ms. Sutton, for 2 minutes.

      OPENING STATEMENT OF HON. BETTY SUTTON, A REPRESENTATIVE IN
                    CONGRESS FROM THE STATE OF OHIO

        Ms. Sutton. Thank you, Chairman Rush, for holding this
    important hearing on the National Manufacturing Strategy Act.
    Manufacturing is the backbone of our economy, our national
    security, and our country, and it is long past the time but we
    must stand up for U.S. manufacturing. Now I am proud to say
    that I am a product of a manufacturing household. When I grew
    up it was the time when people could count on a good
    manufacturing job to put food on the table and cover health
    care costs and supply a pension. But, unfortunately, our Nation
    has witnessed the loss of millions of good manufacturing jobs
    due to unfair trade practices and policies that put our
    companies and our workers at a disadvantage. Over the last
    decade, the U.S. has lost roughly six million manufacturing
    jobs. In Ohio since 2000, we have lost more than one in three
    manufacturing jobs. Many of these jobs have gone to China.
    According to a recent Economic Policy Institute report unfair
    trade with China has cost our Nation 2.4 million jobs between
    2001 and 2008, and that is unacceptable.
        Ohio has lost nearly 92,000 jobs because of China alone. In
    my congressional district, 5,700 jobs have been lost as a
    result of China's current fee manipulation and other illegal
    subsidies and unfair trade barriers. These are good-paying jobs
    that pay families supporting wages, and they have a multiplier
    effect. Each manufacturing job can generate at least four other
    jobs in the private sector. So I am proud to be an original co-
    sponsor of this bill and there must be coordination among the
    various agencies to develop a cohesive strategy. We just focus
    on replacing policies that reward businesses for outsourcing
    jobs with incentives and sensible tax policies that will help
    businesses and workers make it right here in America. We must
    develop a trade model that puts an end, an enforceable end, to
    current fee manipulation, illegal subsidies, and product
    dumping, one that requires reciprocity of market access, and
    one that ensures that products produced elsewhere will be safe
    for consumption here in the United States. With that, Mr.
    Chairman, I thank you again for holding this hearing, and I
    yield back.
        Mr. Rush. Mr. Stearns is recognized for 2 minutes.

     OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN
                   CONGRESS FROM THE STATE OF FLORIDA

        Mr. Stearns. Thank you, Mr. Chairman. I want to welcome our
    witnesses and also thank you for having this hearing. I would
    say to Ms. Sutton and others who have sponsored the bill that
    you should be aware that there is a report by the Executive
    Office of the President, December, 2009, entitled A Framework
    for Revitalizing American Manufacturing. And a lot of the
    things that you have mentioned are already in this report. So I
    think like others I am a little concerned that by passing this
    bill, we will duplicate what has already been done and we are
    going to create a brand new commission, like entities. Of
    course, that means all new government employees and all that
    goes with it when we actually have a report here that is
    outlining what should be done to the President, and, frankly,
    Mr. Chairman, I think the President has the power and
    responsibility to call up any manufacturing CEO in this country
    and ask them what should be done. He could canvas them every 6
    months, every 3 months, whenever he wants, and, lo and behold,
    he could find out all this information without passing H.R.
    4692.
        The other thing I have concern about is people talk about
    the loss of manufacturing jobs, and I think that is true, but I
    think one of the reasons is because the corporate tax rate is
    too high in the United States. I got a graph here in 1981 the
    United States was over 40 percent corporate tax and most of the
    OECD countries were at 45 percent. Do you know what it is
    today? The United States is at 35 percent and the OECD
    countries on average are less than 25 percent. So right there
    is something that immediately, Mr. Chairman, do we lower the
    tax rate for corporations? That would be a big incentive for
    corporations to continue manufacturing.
        Also, I think, as mentioned, signing free and fair trade
    agreements to open up new markets is a good idea for American
    products, obviously, providing regulatory relief and creating
    investment tax credit for new manufacturing investment. I bet
    you if we went to the Manufacturing Association and asked them
    which approach they would rather have is the corporate tax
    relief, investment tax credits, free markets, I think they
    would all approve of that perhaps better than setting up new
    commissions and new entities and new government employees. So I
    think we should caution ourselves as we move forward but I
    certainly welcome the panel and am interested in their
    comments. Thank you, Mr. Chairman.
        Mr. Rush. Mr. Braley is recognized for 2 minutes.

    OPENING STATEMENT OF HON. BRUCE L. BRALEY, A REPRESENTATIVE IN
                    CONGRESS FROM THE STATE OF IOWA

        Mr. Braley. Thank you, Mr. Chairman, and thank everyone for
    the time and attention they give to this very important topic.
    It is true that the President has talked about a National
    Manufacturing Strategy but it is incumbent upon us to take the
    underlying cause of why we have slipped so far in our country's
    strong history of manufacturing as a model for what we need to
    do to right the ship and go forward. My friend from Nebraska
    made the comment that there is less government intrusion in
    China than in the United States. Many of the Chinese
    manufacturers are, in fact, arms of the Chinese government so I
    fail to see how that is relevant to the conversation we are
    having here.
        The reality is that in states like Iowa, which has a long
    history of being a part of the Midwestern Rust Belt, we have
    seen some of our most reliable employers like Maytag, Amana,
    and companies like John Deere, Caterpillar, other companies
    that have been a part of the fabric of our state for over a
    century start to ship jobs overseas because of the failure of
    this country to have a coherent National Manufacturing
    Strategy. That is why this bill is important. That is why this
    hearing is important. And I look forward to hearing the
    testimony of our witnesses as we move forward. Thank you, Mr.
    Chairman.
        Mr. Rush. Mr. Murphy is recognized for 2 minutes.

       OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN
             CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

        Mr. Murphy. Thank you, Mr. Chairman. For more than 100
    years the U.S. has ranked number one in the world of
    manufacturing output. Next year for the first time since we
    overtook at the turn of the 20th century, the U.S. is going to
    give up that title to China, which displaced more than 2.3
    million U.S. manufacturing jobs in the last decade often
    selling defective products like toxic drywall and poisonous
    pacifiers, which we have had hearings on before. While
    unemployment has remained above 9-1/2 to 10 percent in this
    country, we have passed bills that have been by all accounts
    measure to actually lose jobs in America, cap and trade, health
    care, and others. And although we certainly want to see jobs
    come out as in the green energy issue such as wind and solar
    and also insulating buildings, I would much rather see us also
    employing thousands of workers to build clean coal power
    plants, nuclear power plants, and rebuilding America's energy
    infrastructure which is hopelessly outdated.
        Our country does need a comprehensive manufacturing
    strategy, and, quite frankly, I would like to see our committee
    playing a key role in this rather than necessarily
    relinquishing it to someone else. Part of that is to make sure
    that we are pushing to hold China and other countries
    accountable for unfair and illegal trade practices like the
    Currency Reform Act that Congressman Tim Ryan and I have put
    forth ensuring American dollars intended to create American
    jobs are invested in American steel and American equipment,
    provide American manufacturers with tax relief, tax credits,
    loan guarantees, job training, and other financial incentives
    all to create American jobs, not create federal agencies and
    there is more intrusiveness.
        One of the questions I want this panel to be prepared with,
    I want to know how many of you have signed the front of a
    paycheck, how many of you have created manufacturing jobs, and
    if we create some other panel in the federal government, I want
    those people who have actually done this for a living, not
    people who talked about it, read about it, or stayed at a
    Holiday Inn last night. Thank you.
        Mr. Rush. The chair recognizes the Chairman Emeritus of the
    full committee, my friend from Michigan, Mr. Dingell, for 5
    minutes.

    OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF MICHIGAN

        Mr. Dingell. Mr. Chairman, thank you, and I commend you for
    holding a hearing on H.R. 4692, the National Manufacturing
    Strategy Act of 2010, of which I am an original co-sponsor with
    my good friend from Illinois, Mr. Lipinski, who is the
    principal author. I commend him and I thank him. I would also
    like to extend a warm welcome to all of our witnesses today. I
    very much regret that Ron Bloom, who played a key and greatly
    appreciated role in diverting the disaster in the domestic
    automobile industry, cannot be with us today to express his
    views on the bill. I strongly disagree with the views of those
    who consider manufacturing an anathema to advance economies.
    Rather, it is an essential component of these economies. Right
    to the contrary. Several of our most prominent trading partners
    employ national strategies to support domestic, economic growth
    in manufacturing. China and Germany, most notably, use these
    strategies to aid their continued global leadership in,
    manufactured goods.
        Indeed, as is particularly the case with Germany, these
    manufacturing exports need not be low value added but are
    rather technologically advanced goods of consistently high
    quality produced by very skilled workers. For example, as the
    global demand for clean energy technology continues to grow the
    strategy mandated under H.R. 4692 would help the United States
    develop and maintain a competitive position in this very
    important market which is so essential to our continued world
    leadership and economic strength. In brief, I view this
    legislation as part and parcel of the federal government's
    ongoing effort to create much-needed jobs and to adapt the
    country's economy to the future. I am quite gratified to see
    that H.R. 4692 rightly directs that the manufacturing strategy
    mandates include an examination of the detrimental effect of
    unfair trade practices on domestic manufacturing, a very much-
    needed activity by the federal government.
        I firmly believe that the federal government must do all it
    can to ensure that our trading partners play by the rules in
    order to foster sustainable employment growth here as a part of
    a shared advantage to all countries from this kind of practice.
    I note this bill comes at a time when my home state of Michigan
    continues to endure record unemployment levels largely due to
    the hemorrhaging of manufacturing jobs caused by a decade of
    unfair trade practices and policies. I believe H.R. 4692 will
    serve in good part to right past failed policies, and as such I
    passionately support its expedited consideration and adoption.
    I look forward to a frank discussion with our witnesses today
    about their views on H.R. 4692. I thank you for your courtesy,
    Mr. Chairman, and I yield back the balance of my time.
        Mr. Rush. The chair recognizes the gentleman from
    Louisiana, Mr. Scalise, for 2 minutes.

     OPENING STATEMENT OF HON. STEVE SCALISE, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF LOUISIANA

        Mr. Scalise. Thank you, Mr. Chairman. I am pleased that our
    subcommittee is examining the manufacturing industry and the
    need for a National Manufacturing Strategy. I applaud my
    colleagues for bringing attention to this issue. As all my
    colleagues know, manufacturing is a major economic driver of
    our state's economies. In Louisiana alone, manufacturing
    employs over 140,000 people and accounts for over $40 billion
    in economic output. I would also like to point out that the
    chemical and petroleum industries are tops among the
    manufacturing sectors in my state although I question whether
    these industries will continue to lead the manufacturing sector
    in Louisiana, given the reckless policies being pursued by this
    Administration such as the cap and trade energy tax and the
    moratorium on energy exploration in the Gulf of Mexico.
        The United States must continue to lead the world on
    manufacturing. Congress must enact policies that ensure we do.
    The legislation before us today seeks to do. The legislation
    before us today seeks to undertake a broad analysis of the
    manufacturing sector and develop a National Manufacturing
    Strategy. I support the intent of this bill. We should look at
    strategies to help promote the manufacturing industry so we can
    determine what policies will help manufacturers compete in the
    global marketplace. But the industry does not need another
    study. It needs sound policies. If a manufacturing strategy is
    the goal all we have to do is look to the National Association
    of Manufacturers, the voice of manufacturing in the U.S., the
    very association that advocates for manufacturers, and they
    have developed a strategy, the manufacturing strategy for jobs
    in a competitive America.
        It is a comprehensive approach for making manufacturing in
    the United States more competitive and productive. And what
    does the national voice of manufacturing say should be our
    strategy? It calls for lower taxes, less government regulation,
    and free access to foreign markets. It calls for effective
    policies that spur innovation, promote job growth and provide
    immediate results. Unfortunately, we have been getting the
    opposite from this Administration who has given us higher
    taxes, out of control government spending, and reckless
    policies like the President's moratorium on domestic energy
    production that is costing us thousands of jobs and reducing
    America's energy independence. It is no wonder that this
    reckless agenda has cost our Nation millions of jobs at a time
    when we should be sharply focused on creating jobs. I look
    forward to hearing from our panelists today on the merits of
    H.R. 4692, and on manufacturing strategies that have already
    been proposed. Thank you, and I yield back.
        Mr. Rush. The chair recognizes the vice chair of the
    subcommittee, the gentlelady from Illinois, Ms. Schakowsky, for
    2 minutes.

           OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A
         REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS

        Ms. Schakowsky. Thank you, Mr. Chairman. I am really
    excited that we are having this hearing today. I think it is
    probably one of the most important questions that we can deal
    with in our country. The manufacturing sector has taken an
    enormous hit in recent years, over 10 years from 1999 to 2009
    nearly 6 million manufacturing jobs, more than a third of the
    entire sector, were lost. There have been many factors which I
    am sure a lot of people have talked about including tax
    incentives for companies that move jobs overseas. The House has
    passed a number of bills to rein in those tax advantages, but I
    think more should be done. Under the bill before us, every 4
    years the President would have to issue a manufacturing
    strategy that considers federal policies including tax policy
    and how they promote or harm domestic manufacturing.
        I think a critical component is the promotion of domestic
    manufacturing, and I will continue to advocate for rewards for
    businesses that create a real partnership with American
    workers, engage in good corporate practices, and improve our
    standing in the global marketplace. I have introduced a bill
    called the Patriot Corporations of America Act, which would
    reward companies that are good corporate actors by moving them
    to the front of the line for government contracts and giving
    them a 5 percent reduction in their taxable income. To qualify,
    those businesses would have to produce at least 90 percent of
    their goods and services in the United States and spend at
    least 50 percent of their research and development budgets in
    the United States.
        There is no good reason that the trend of job loss in the
    manufacturing sector can't be reversed. There is great
    potential in our American companies. In Illinois, academic
    researchers in private labs are doing amazing things with nano
    technology while smart thoughtful individuals are transforming
    educational systems to educate our children in ways that will
    prepare them for advance manufacturing careers. I am optimistic
    about the future of manufacturing in America, and I hope this
    hearing will help us better understand what our next steps
    should be. I thank you again, Chairman, and I yield back the
    balance of my time.
        Mr. Rush. The chair recognizes now the author of the
    legislation that we are considering, the gentlemen from
    Illinois, Mr. Lipinski, for 2 minutes for the purpose of
    opening statement.

       OPENING STATEMENT OF DANIEL LIPINSKI, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF ILLINOIS

        Mr. Lipinski. Thank you, Mr. Chairman. I would like to
    request unanimous consent that my written statement be put in
    the record.
        Mr. Rush. Hearing no objection, so ordered.
        Mr. Lipinski. I would like to thank my good friend,
    Chairman Rush, as well as Ranking Member Whitfield and the
    subcommittee for scheduling today's hearing. The Strategy Act
    has over 50 bipartisan co-sponsors in the House in support of a
    wide-ranging organization. At this time, I would like to
    request unanimous consent to enter into the record letters of
    support for this bill from some of these organizations.
        Mr. Rush. Hearing no objection, so ordered.
        [The information appears at the conclusion of the hearing.]
        Mr. Lipinski. I would also like to request unanimous
    consent for the record to remain open for 3 days to allow other
    pending letters of support to be entered.
        Mr. Rush. Hearing no objection, so ordered.
        Mr. Lipinski. Thank you, Mr. Chairman. I look forward to
    hearing testimony from our witnesses. I would especially like
    to welcome Bill Hickey, President of Lapham-Hickey Steel, a
    family-owned steel manufacturer located in my district. Almost
    1/3 of domestic manufacturing jobs have disappeared in the past
    decade and manufacturing share of GDP is roughly half of what
    it was in 1980. It is clear that allowing this trend to
    continue will further undermine the American economy and the
    middle class and also undermine our defense capability leaving
    us strategically vulnerable. To help avoid this, I introduced
    the Strategy Act. Although we currently have numerous federal
    programs and policies designed to support American
    manufacturing, they are generally disjointed, ad hoc, and
    reactive diminishing their impact. The goal of the strategy is
    to harmonize manufacturing policy and make a more unified,
    coherent, forward looking and result oriented.
        It is important to point out that this is not an industrial
    policy or command market approach. Instead, it is a way to
    coordinate policy to better support American entrepreneurship
    and job creation. This bill was developed over many months with
    input and feedback from large and small businesses, academic
    trade associations and labor groups. I look forward to hearing
    from the witnesses and working with the members of the
    committee and others to examine ways we can improve upon this
    bill. I have heard some recommendations for changes we may make
    to this bill and I am looking forward to working with members
    of the committee and others, as I said, and incorporate some of
    these changes and make this a better bill because that in the
    end is a goal to make manufacturing stronger in America because
    it is certainly something we need for our economy and for our
    national defense. I yield back.
        [The prepared statement of Mr. Lipinski follows:]

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        Mr. Rush. It is now my privilege to officially welcome the
    witnesses who have sacrificed their enormous and important time
    to be with us this afternoon for the purposes of this hearing.
    On my left, the Honorable Aneesh Chopra. He is the Associate
    Director for Technology and he is the Chief Technology Officer
    for the Office of Science and Technology Policy. Seated next to
    him is Mr. Scott N. Paul. He is the Executive Director of the
    Alliance for American Manufacturing. Seated next to Mr. Paul is
    Mr. Mark A. Gordon, who is the Director, Defense Research
    Programs for the National Center for Advanced Technologies. And
    seated next to Mr. Gordon is Mr. William M. Hickey, Jr.,
    President and CEO of Lapham-Hickey Steel Corporation, and an
    outstanding citizen of the State of Illinois, I might add. And
    next to Mr. Hickey is Mr. Owen E. Herrnstadt. He is the
    Director of Trade and Globalization for the International
    Association of Machinists and Aerospace Workers. And seated
    next to Mr. Herrnstadt is Mr. Kevin A. Hassett. He is the
    Senior Fellow and Director of Economic Policy Studies for the
    American Enterprise Institute. I want to welcome each and every
    one of you here and welcome all to this subcommittee. It is the
    practice of this subcommittee to swear in witnesses. So I will
    ask that you please stand and raise your right hand.
        [Witnesses sworn.]
        Mr. Rush. Please let the record reflect that the witnesses
    have all answered in the affirmative. And now I want to
    recognize the witnesses for their opening statement to be
    followed by questions from the subcommittee. Mr. Chopra, we
    will begin with you, and you have 5 minutes for your opening
    statement.

    TESTIMONY OF ANEESH CHOPRA, ASSOCIATE DIRECTOR FOR TECHNOLOGY &
      CHIEF TECHNOLOGY OFFICER, OFFICE OF SCIENCE AND TECHNOLOGY
        POLICY; SCOTT N. PAUL, EXECUTIVE DIRECTOR, ALLIANCE FOR
       AMERICAN MANUFACTURING; MARK A. GORDON, DIRECTOR, DEFENSE
     RESEARCH PROGRAMS, NATIONAL CENTER FOR ADVANCED TECHNOLOGIES;
      WILLIAM M. HICKEY, JR., PRESIDENT/CEO, LAPHAM-HICKEY STEEL
    CORP.; OWEN E. HERRNSTADT, DIRECTOR OF TRADE AND GLOBALIZATION,
     INTERNATIONAL ASSOCIATION OF MACHINISTS & AEROSPACE WORKERS;
     AND KEVIN A. HASSETT, SENIOR FELLOW AND DIRECTOR OF ECONOMIC
           POLICY STUDIES, THE AMERICAN ENTERPRISE INSTITUTE

                       TESTIMONY OF ANEESH CHOPRA

        Mr. Chopra. Thank you, Mr. Chairman, and Ranking Member
    Whitfield and other members of the subcommittee. It is indeed
    my distinct pleasure to be with you today to discuss the Obama
    Administration's strategy for revitalizing American
    Manufacturing with particular focus on advanced manufacturing.
    With your permission, I have submitted a more formal statement
    for the record but I would like to share a few remarks in
    advance of your questions. This is background. My mission and
    my responsibility in the Administration is to harness the power
    and potential of technology, data, and innovation to transform
    the Nation's economy and to improve the lives of every day
    Americans. Now building on the President's strategy for
    American innovation which was released last September and its
    framework for revitalizing American manufacturing, which was
    released in December, I would like to summarize my remarks on
    how we are investing in the creation of new technologies and
    business practices with emphasis on three key areas.
        Number one, manufacturing research and development. The
    Administration is committed to doubling the basic research
    budgets of 3 key science agencies, the National Institutes of
    Standards and Technology, the National Science Foundation, and
    the Office of Basic Science within the Department of Energy. In
    my capacity as the co-chair of the National Science and
    Technology Committee on Technology, I am particularly focused
    on improving coordination across our agencies with a goal of
    establishing U.S. leadership in advanced manufacturing
    technologies. For example, the Defense Advance Research
    Projects Agency, DARPA, is currently investing approximately
    $200 million a year or roughly $1 billion over the next 5 years
    to synthesize and integrate high value manufacturing efforts.
    The goal is to shorten by five-fold the delivery time from
    concept to first production unit for complex electro mechanical
    defense systems by development of system designs, tooling,
    materials, and democratized design that enables the advantages
    of large scale manufacturing in quantities of one.
        Second, I would like to highlight computational modeling
    and simulation. One technological capability that we believe
    holds great promise for enhancing manufacturing competitiveness
    is computational modeling and simulation. These tools impact
    several key elements of manufacturing competitiveness, quality,
    cost, flexibility, and time to market. Yet, they are not
    exploited by small and medium size manufacturing organizations
    who constitute over 90 percent of the U.S. manufacturing
    enterprises and contribute nearly half of the value added jobs.
    They lack access to this fundamental innovation.
        As the co-chair of the National Science and Technology
    Council's Committee on Technology, I stood up a fast track
    inner agency subcommittee to identify gaps and challenges in
    computational modeling and simulation and to make
    recommendations within 90 days. The committee's report was
    posted on line for public input on June 24. I obviously welcome
    your feedback. By the way, for those interested, the web site
    is opennstc.ideascale.com. Input we have received thus far
    suggests among other instruments that establishing regional
    innovation centers that focus on bringing small and medium-
    sized enterprises into the digital manufacturing age through
    collaboration efforts or through their supply chains and
    software vendors is an immediate and near term opportunity.
    Third, I would like to highlight one particular sector that I
    believe holds great promise for the manufacturing economy in
    the United States, and that is to highlight catalyzing
    breakthroughs in the Nation's smart grid.
        This particular area, we believe, is poised for growth. By
    the way, a topic that happened to have occupied my morning at a
    hearing we held at the Brookings Institution a full day seminar
    on how we might take full advantage of the economic
    opportunities both in terms of manufacturing as well as the
    efficiencies that will be gained by the American people as we
    modernize the Nation's electrical grid. As you may recall, the
    Recovery Act did include $4.5 billion of investment. In a
    sense, that investment will help to expand our manufacturing
    base of companies that can produce the smart meters, the smart
    appliances, the smart transformers, and other components for
    smart grid systems that service both the United States and we
    believe could be potential for export around the world
    representing a significant and growing export opportunity for
    our country and new jobs for the American people.
        In conclusion, we do believe that the United States still
    remains a land of tremendous opportunity and has a wonderful
    future. We retain that honor because of America's scientists,
    engineers, entrepreneurs and public officials understood the
    importance of applying the power of American curiosity and
    ingenuity to the biggest economic and societal challenges. I
    certainly would welcome any questions the committee may have.
    Thank you.
        [The prepared statement of Mr. Chopra follows:]

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        Mr. Rush. Mr. Paul, you are recognized for 5 minutes.

                       TESTIMONY OF SCOTT N. PAUL

        Mr. Paul. Thank you very much, Mr. Chairman. I want to
    thank you, Mr. Whitfield, members of the subcommittee, and Mr.
    Lipinski for inviting us here today to testify. We want to
    comment Representative Lipinski for his authorship of the
    National Manufacturing Strategy Act, and assuming that you can
    agree on some improvements, we urge you to pass it into law.
    There is no question that America needs a manufacturing
    strategy to revitalize this sector as there is simply no
    department of manufacturing, and I am not arguing that there
    should be, but it makes perfect sense to harness the best minds
    as well as to coordinate among the appropriate agencies to
    focus on a government wide strategy to advance manufacturing in
    both employment and output terms. Like most issues that come
    before you every day, there is no simple solution to strengthen
    the manufacturing sector but passage of this legislation would
    compliment ongoing and anticipated efforts that I will detail
    later in my testimony.
        Now the idea of a manufacturing strategy is hardly a
    radical concept. Alexander Hamilton constructed America's first
    manufacturing strategy in 1791. Setbacks during the War of 1812
    due to a lack of domestic capacity to build naval vessels and
    military equipment cemented the determination of the federal
    government to grow manufacturing, a policy that continued until
    the end of World War II. Globalization and economic approaches
    such as a strong dollar policy favoring domestic consumption
    have helped to steadily erode manufacturing as a percentage of
    gross domestic product, private sector employment and by other
    key measures.
        The idea of a manufacturing strategy is also not a partisan
    one. President Reagan, spurred on by Democratic congress,
    adopted a flurry of measures to counter a grossly imbalanced
    trade relationship with Europe and Japan in the 1980's. The
    Plaza Accords, which raised the value of currencies in Japan
    and Europe relative to the dollar in a managed way, had a
    positive effect on lowering our trade deficit. Key government
    investments in the semiconductor industry and other
    technologies spurred their development and commercialization.
    President Reagan signed into law enhanced Buy America
    requirements for certain infrastructure projects to boost
    domestic employment. His administration implemented the Market
    Oriented Sector Specific, or MOSS talks, with Japan that
    focused on market access with measurable results.
        Most recently, and has been mentioned by several members
    here, the Obama Administration released its framework for
    revitalizing American manufacturing. The document recognizes
    the importance of manufacturing to America's economic future
    and talks about a number of important issues, including access
    to credit, skills and training, creating new markets for
    manufacturing, and improving the efficiency of the industry.
    But it is not a substitute for a strategic plan and for
    harnessing the best minds within the federal government to
    focus on this issue day after day. You have pointed out in
    excellent briefing materials the significance of manufacturing,
    and I am not going to repeat those statistics and the crisis
    that it faces, but I do want to mention and add a few new
    thoughts to this.
        The crisis we have seen in manufacturing has really been
    turbo charged over the last decade, and I attribute it to 2
    fundamental things. First is the emergence of China as a key
    competitor and the way that we approach that by passing PNTR in
    2000, and, second, and most acutely, is the collapse of the
    auto and housing markets that we have seen recently. We have
    seen problems with manufacturing in the Bush administration.
    While the U.S. economy expanded 17 percent from 2002 to 2007,
    manufacturing expanded only by 5 percent. We have also seen
    50,000 manufacturing facilities close down over the last
    decade, which is an extraordinary rate, and according to
    Richard McCormick, who is the editor of Manufacturing News,
    there are only a thousand facilities in the United States that
    employed more than a thousand people now. Consider that in our
    manufacturing history.
        The trade deficit in manufactured goods has quadrupled
    since 1997, and we already have significant and growing trade
    deficits in both high technology and green technology products.
    Now there are a lot of issues on which we could focus, and we
    submitted a letter today that I am happy to submit to the
    record to the Speaker of the House detailing a number of steps
    that we think would be advantageous to supporting manufacturing
    that would compliment some of the ideas that had been suggested
    by the National Association for Manufacturing. I also would
    submit to you that we issued a book and gave it to every member
    of Congress last July called Manufacturing, a Better Future for
    America, which was written by a number of key industry experts,
    including a former Reagan administration official with more
    than 300 pages of suggestions on how to improve the
    manufacturing sector. I commend that to your attention as well.
        I want to close by saying that this is an issue, if for no
    other reason, for not economic reason or policy reason, is
    simply a matter of what your constituents want. We commissioned
    a poll, which was conducted recently, on a bipartisan basis by
    Mark Mellman and Whit Ayres. It found overwhelming support for
    the idea of a National Manufacturing Strategy. Seventy-eight
    percent of the American people supported it, want to help
    manufacturing. The support is broad and deep. It is Tea Party
    members. It is union households. It is in the south. It is the
    Midwest. So we commend that to your attention as well. We thank
    you for having the hearing today.
        [The prepared statement of Mr. Paul follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Rush. The chair recognizes Mr. Gordon for 5 minutes.

                       TESTIMONY OF MARK A GORDON

        Mr. Gordon. Good afternoon. Chairman Rush, and members of
    the committee, I am Mark Gordon, Director of Defense Programs
    at National Center for Advanced Technologies, and a member of
    the Executive Committee of the Manufacturing Division at the
    National Defense Industrial Association. On behalf of our 1,700
    corporate members, including 83,000 individual members, I am
    pleased to appear before the House Subcommittee on Commerce,
    Trade, and Consumer Protection to emphasize the importance of
    manufacturing and to support H.R. 4692 in calling for a
    National Manufacturing Strategy. Based upon your request to
    discuss topics of import in consideration of the Bill, I would
    like to address three questions, is manufacturing important to
    our country, do we need a National Manufacturing Strategy at
    all, and are there modifications to the bill which may
    strengthen the process and the resultant strategy.
        First, we have already heard a lot of numbers about the
    importance of manufacturing. I won't add to those, but I will
    say that one of the critical elements about manufacturing is
    that it creates wealth within the U.S. by producing something
    of value from common components or materials. This is
    critically important in comparison to wealth transfer or other
    service sectors. The jobs produced by the manufacturing
    activities are generally high paying and represent an entree
    into the middle class for a number, a large portion, of the
    workforce. Also, manufacturing multiplies each dollar spent in
    that sector into an additional $1.37 in economic activity,
    higher than any other sector.
        In terms of national security, we depend heavily upon our
    domestic manufacturing capabilities. The Defense Department
    relies upon domestic manufacturing to equip our war fighters,
    and our national security is supported by economic strength and
    viability. So, obviously, we need active support from Congress
    to support manufacturing. Do we need a manufacturing strategy?
    Absolutely. There are many groups from government, for
    industry, and academia which are chartered to further domestic
    manufacturing agenda. They are not sufficient or strategic
    enough to deliver the goals of H.R. 4692, a national strategy
    for manufacturing in the U.S. Government bodies continue to
    work on policy technology and other concerns but there are the
    implementation path of a strategy and not setting that
    strategy. Industry groups like NGIA and a host of others
    propose investment changes, policies, incentives, and a level
    playing field which are vital issues but they do not represent
    that comprehensive strategy, and academia pursues activities
    that furthers the body of knowledge in manufacturing but does
    not have that strategic division.
        We need to have these existing groups work together, and I
    believe that that over arching strategy from this bill will fit
    that need. A Quadrennial Manufacturing Strategy, as proposed by
    4692, would also provide a stable, well-planned national vision
    for aligning public-private academia investment opportunities
    at the highest level. And we have heard about the dangers of
    uncertainty. I believe that private industry responds to
    certainty and stability with investment, and so the existence
    of a strategy could lower a greater corporate investment
    domestically. There are also structural problems that are
    talked about in papers by George Tassey, a senior economist at
    the National Institute of Standards and Technology, that talks
    about the flaws in classic neoclassical economic theory to the
    high tech industry where the Law of Comparable Advantage and
    reactions to that law do not hold up in terms of the data that
    we are seeing in our last three recessions.
        In addition, in a March, 2010 letter to Secretary Locke,
    the Department of Commerce's Manufacturing Council also
    addressed this structural change in our economy which has led
    to a high degree of uncertainty and will require a
    comprehensive set of solutions to resolve. Finally, I note that
    the President has recently set an ambitious goal of increasing
    the exports of the U.S. by three times. Considering this goal,
    especially in the context of manufacturing being the largest
    export sector, it is quite obviously that a manufacturing
    strategy would be a major enabler of this effort. Modifications
    to the bill would strengthen the process and the strategy, I
    believe. While the overall content and the intention of the
    bill is excellent, there are some changes during the markup of
    4692 that can strengthen the purpose, process, and eventual
    strategy.
        First and foremost, its relationship between the President,
    the task force, and advisory bodies. I would propose that the
    Manufacturing Strategy Task Force make recommendations to the
    President of a draft strategy instead of simply recommendations
    based upon analysis. Additionally, I would further suggest that
    the listing of Subsections 1 to 23 of analysis in Section 3b be
    changed to allow the President and the task force the latitude
    to define and prioritize the scope of that analysis without
    requiring duplicate and detailed analysis of all 23 areas. And,
    finally, the modification that may be necessary is a schedule
    taking into account the initial stand up period of the
    President' cabinet and advisors. NDIA and its members strongly
    endorse H.R. 4692 requiring the President to conduct a
    Quadrennial Manufacturing Strategy. I look forward to your
    questions.
        [The prepared statement of Mr. Gordon follows:]

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        Mr. Rush. The chair now recognizes Mr. Hickey for 5 minutes
    for purposes of an opening statement.

                  TESTIMONY OF WILLIAM M. HICKEY, JR.

        Mr. Hickey. Thank you, Congressman. Thank you for the kind
    words before. I want to thank Mr. Whitfield for his comments
    about manufacturing. I am Bill Hickey, President of Lapham-
    Hickey Steel Corporation of Chicago. Lapham-Hickey Steel is a
    family owned and managed steel service center founded in
    Chicago in 1926. Today we have several locations in the States
    of Illinois, Wisconsin, Ohio, Minnesota, Connecticut, and
    Alabama. We currently employ about 550 people. The steel
    service center industry is at the heart of the manufacturing
    economy of the United States. We, as an industry and a company,
    purchase large quantities of steel products from producing
    mills and either distribute those products in smaller
    quantities or process that steel through specialized machinery
    to allow our customers lower cost in the manufacturing of their
    products.
        Our company processes steel and sells that processed
    product to customers across North America. We have thousands of
    customers in transportation, construction, metal fabrication,
    HVAC, machine tool, power generation, wind energy, just to name
    a few of the industries in which our customers produce
    manufactured products. We are also in a very strategic position
    as a company to view the full spectrum of the manufacturing
    economy in the United States. I say this since our major
    suppliers are the steel companies that manufacture steel in the
    United States and the vast majority of our customers are
    consuming the products we sell to them in the United States.
        Now that I have given you some background on my 35 years of
    working in the U.S. economy and what economic function the firm
    I lead performs, I have to tell the subcommittee that I believe
    we, as a country, have to grow, mine, and manufacture for our
    economy to create the wealth needed by our citizens and our
    government. We, as a country, have experienced much economic
    and social pain in the last several years. I believe this
    economic pain was caused by the massive imbalances that have
    occurred in our economy. Part of these economic imbalances have
    been the large scale destruction of the manufacturing economy
    in the United States in the past 10 years. Here are some of the
    facts which we have already mentioned, but these are the facts
    that I live--these are our customers that have been devastated
    over the last 19 years. The U.S. manufacturing workforce has
    declined from 17,250,000 in 2000 to 11,549,000 in 2010. This is
    a reduction of 1/3 of the manufacturing employment in 10 years.
    What happened? Why do we have this huge drop in jobs in just 10
    years?
        During the same period the United States had 42,400
    factories that closed. This included 36 percent of all the
    factories that employed more than 1,000 workers. And I can tell
    you when these large factories close the communities where they
    are located are devastated. Why are we losing these factories?
    I have seen these factories close in Ohio, Indiana,
    Pennsylvania, Michigan, Minnesota, Illinois, across the
    Midwest. The case for H.R. 4692. These two facts about plant
    closings and having 1/3 of manufacturing jobs or almost 6
    million disappear in just 10 years, in my judgment, is
    justification to enact H.R. 4692. How do we create sustainable
    economic growth and increase employment? This is the first
    point in the policies that this Congress should promote and
    will be required once this Act is passed into law.
        A focus of this Act that I believe is needed today is the
    Manufacturing Strategy Task Force. I am a member of the
    Department of Commerce Industry Trade Advisory Committee-12.
    This committee advises the Department of Commerce and the USTR
    on trade policy. Even with this insight, I find it very
    difficult at times to understand what our Nation's strategy is
    on manufacturing. I actually think the strategy today is policy
    of reacting to a crisis instead of planning for the future. A
    recent example of this lack of focus on national economic goals
    was the Import-Export Bank refusing to finance mining equipment
    for Bucyrus International, a Wisconsin based company, for
    reasons that seem to be the whim of the appointed official. If
    we had a National Manufacturing Strategy in place in the last
    10 years, would we have lost or greatly diminished our
    manufacturing capacity in television, auto parts, bicycles,
    cell phones, furniture, toys, computers, textiles, and a large
    cross section of industries that I won't have time to go into
    to talk about.
        I keep wondering if the theory about outsourcing our
    manufacturing and having our economy become based on financial
    services has finally shown the imbalances that were created.
    With the National Manufacturing Strategy, we, as a country,
    will now have the opportunity to have a real debate on how we
    help Main Street provide jobs to our citizens versus having
    Wall Street bailed out by our taxpayers. I want to thank
    Congressman Dan Lipinski for his leadership. This National
    Manufacturing Strategy Act is put a small sample of the
    commitment Congressman Lipinski has to the Third District of
    Illinois and the American people. Thank you, Congressman.
        [The prepared statement of Mr. Hickey follows:]

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        Mr. Rush. The chair now recognizes Mr. Herrnstadt for 5
    minutes.

                    TESTIMONY OF OWEN E. HERRNSTADT

        Mr. Herrnstadt. Thank you, Mr. Chair, and members of the
    committee for the invitation to be here today, and thank you,
    Congressman Lipinski, for introducing the bill which is the
    subject of today's hearing. IAM members, that is, the
    International Association of Machinists & Aerospace Workers
    members, work in a variety of manufacturing industries,
    including aerospace, electronics, defense, shipbuilding,
    transportation, and woodworking. We believe that a strong,
    domestic industrial base is one of the essential elements
    needed to restore our economy and build a prosperous and
    sustainable future. As has already been said, U.S.
    manufacturing serves as the bedrock for our Nation's economy.
    That said, it is no secret that U.S. workers and their
    communities are in a crisis. Over 8-1/2 million jobs have been
    lost since December, 2007, and the unemployment rate remains
    exceedingly high. Despite the importance of manufacturing to
    our Nation's economy and our defense capacity millions of U.S.
    manufacturing workers have lost their jobs contributing to our
    high unemployment. As has also been said and has been pointed
    out in the fact sheet provided by the committee nearly 6
    million manufacturing jobs have been lost since 1999.
        Some industries that were once great contributors to our
    economy like auto, shipbuilding, and machine tools are barely
    shadows of what they once were. Jobs in other leading edge
    industries like aerospace are being outsourced to other
    countries. Renewable energy products that are considered to
    represent the future of manufacturing here at home also are to
    a great extent being manufactured abroad. While there are many
    reasons for the decline in manufacturing one of the fundamental
    reasons is that the U.S. does not have a National Manufacturing
    Strategy and has not established a framework for creating one.
    A National Manufacturing Strategy could establish general and
    specific programs for coordinating policies as well, policies
    related to tax incentives that reward corporations to move jobs
    overseas, research and development, trade, employment, currency
    evaluation, export initiatives, domestic procurement, and many,
    many others.
        Other countries have embraced manufacturing strategies as
    has also been discussed. A few years ago the European
    commission presented its new industrial policy noting ``A
    flourishing manufacturing industry is key to fully exploiting
    the European Union's potential for growth and sustaining its
    economic and technological leadership.'' Separately, over 20
    European countries have adopted sophisticated offset policies.
    Offsets occur when one country demands a transfer of technology
    and/or production in return for a sale. Countries like Germany
    have sophisticated manufacturing policies that have helped the
    country weather the current economic crisis and, oh, yes, there
    is China who has also engaged in very comprehensive strategic
    and targeted industrial and manufacturing policies which are
    credited with that country's economic growth far too often at
    the expense of our own manufacturing industry and far too often
    at the expense of our U.S. workers.
        We simply can't be complacent with the hope that
    manufacturing is cyclical and will recover with the passage of
    time. The changes we are witnessing in H.R. 4692, the National
    Manufacturing Strategy Act of 2010, requires the President to
    prepare a Quadrennial National Manufacturing Strategy, and it
    certainly represents a much-needed and key step forward in
    developing a response to the current economic crisis and the
    current state of manufacturing today. We have submitted, of
    course, some recommendations to strengthen that bill, and we
    have also submitted recommendations that constitute more steps
    to be taken. These steps must be urgently taken given the
    crisis that manufacturing workers are certainly facing today as
    particularly have been pointed out by my colleague on this
    panel, Mr. Hickey. In addition to that, we also recommend very
    simple fixes such as requiring Congress and the Administration
    to adopt simple common sense policies that link certain
    government activities immediately to their effect or impact on
    U.S. employment making sure that domestic sourcing requirements
    are closely examined to make certain that they do indeed result
    in the most number of domestic jobs being created and supported
    as possible.
        Manufacturing workers are in a crisis. They have witnessed
    millions of their jobs disappear over the past few years. Their
    pain is real. As their desperation increases and their hopes
    fade, it is critical that we develop a comprehensive National
    Manufacturing Strategy that will in reality make a difference
    in their lives and in doing so ensure a vibrant and sustainable
    economy. Thank you for the opportunity to share our views with
    you today, and I look forward to your questions.
        [The prepared statement of Mr. Herrnstadt follows:]

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        Mr. Rush. Mr. Hassett is recognized for 5 minutes.

                     TESTIMONY OF KEVIN A. HASSETT

        Mr. Hassett. Thank you, Chairman Rush, and Ranking Member
    Whitfield. In my view the economic science supporting this Act
    is essentially nonexistent. Accordingly, passing it into law
    would be a policy error. Whether the policy error is major or
    minor would depend on whether the Strategy Task Force and
    Strategy Board are, like most such entities in Washington,
    irrelevant. If they are not, then the Act could significantly
    harm the business environment in the United States. In the
    front of my testimony, I talk about the decline in
    manufacturing and wonder whether it isn't parallel to a decline
    in agriculture that we have seen that stretches even further
    back and is just a natural tendency for the economies to
    experience as they mature. Now I don't know what the right
    share of GDP for manufacturing is, and I would submit that the
    members of the committee don't either, and so pursuing a
    strategy that focuses specifically on manufacturing as opposed
    to trying to make the overall economy healthy would seem to me
    to be in error.
        Ever since the seminal work of Diamond and Mirrlees in
    1971, economists have known that optimal economic policy should
    not tax intermediate goods or distort productive efficiency.
    This means that the allocation of capital that emerges in
    response to market forces should not be disrupted by special
    treatment for some inputs but not others. The Diamond and
    Mirrlees result indicates that an optimal policy will not favor
    production in one area at the expense of another. The Act we
    are discussing today appears to insist that manufacturing
    receive special treatment that advantages manufacturing
    relative to everything else. Such a focus of policy is not
    defensible on economic grounds. If business activity is viewed
    by Congress to be disappointingly low, and with today's retail
    sales information I think it is even worse than we thought,
    then it is wholly inappropriate to consider measures that would
    stimulate it across the board.
        But when politicians pick winners and losers, they
    interfere in the natural economic process and inevitably cause
    harm. In my many years in Washington, I have acquired the
    opinion that we tend to appoint task forces and commissions
    when we know what the right thing to do is but are unwilling to
    do it. Commissions and task forces make for nice speechifying
    but almost always have a negative policy impact because they
    allow elected officials to appear to be addressing key problems
    without actually doing anything. Business activity in our
    Nation is indisputably disappointing at the present time. It is
    urgent that policy changes be enacted before it is too late,
    but we do not need a commission or task force to study the
    issue. We know why the business climate in the United States is
    so terrible.
        The biggest problem is our corporate tax system. Figure 3
    in my testimony plots the U.S. corporate tax rate from 1981 to
    2010 and compares it to the average tax rate of our OECD
    partners. Currently, the U.S. tax rate is 35 percent and the
    average for the OECD is 23.9 percent. I should note that this
    chart understates our disadvantage because it excludes state
    and local taxation. So if you are wondering why the U.S. is
    hemorrhaging business, why people are locating plants overseas,
    that corporate tax is a big part of the story. I would remind
    the members of the committee that many of these plants that are
    being located overseas are heavily capital intensive. It is not
    differences only in labor costs that is driving this force.
        Now some notes on the specific legislation. On the
    abstract, it is impossible to oppose having a strategy or
    performing a study. I am concerned about what that strategy
    might entail. The development of a strategy and performance of
    the task force could well be beneficial, but the bill as
    written looks to be an invitation for destructive meddling. In
    particular, the biggest cause for concern is the possibility
    that the Act be used as an excuse to increase protectionism.
    The language of the Act seems to invite anti-trade actions and
    to glorify central planning. Many of the catch words used by
    protectionists are present in the wording of the bill,
    including charges to monitor specific industries that face
    ``critical'' challenges and the ``identification of emerging or
    evolving markets, technologies and products that the Nation's
    manufacturers could compete for.'' Those were quotes.
        Is the government to pick winners and losers within the
    manufacturing sector? While it is clear that at some point a
    manufacturing capability has national defense implications,
    even this angle is subject to abuse by protectionists. It would
    be easy to envision that a strategy to enhance manufacturing in
    the U.S. might bear a striking resemblance to the policy sought
    by Bastiat's candlemakers, who argued that the government
    should pass a law requiring individuals to keep their window
    shades down during the day because of unfair competition from
    the sun. Such a policy would, of course, increase the demand
    for candles, but would it make us better off? The pernicious
    government meddling that this Act may invite is perhaps best
    illustrated by the emphasis that policies should promote
    sustainable growth. As Nobel winning economist Robert Solow has
    written, the notion of sustainability is extraordinarily
    elusive.
        I am now quoting. ``It is very hard to be against
    sustainability,'' Solow wrote, ``the less you know about it,
    the better it sounds.'' To carry sustainability out literally,
    Solow writes, would be to ``make no use of mineral resources;
    it would mean to do no permanent construction or semi-permanent
    construction; build no roads, build no dams, build no piers.''
    While the notion of leaving the world the same way we leave a
    campsite, without a trace of our presence, seems romantically
    attractive, open quote again from Solow, ``I doubt that I would
    feel myself better off if I had found the world exactly as the
    Iroquois left it.'' Solow struggles in his piece, and develops
    a definition of sustainability that is, to an economist, quite
    sensible, but it seems quite far removed from the nebulous
    notion that those who invoke the word have in mind. But the key
    point I raise is that the Act seems to place a high priority on
    creating a strategy for sustainable growth, even though, again
    quoting Solow, ``sustainability is an essentially vague
    concept, and it would be wrong to think of it as being precise,
    or even capable of being made precise. It is therefore probably
    not in any clear way an exact guide to policy.''
        Now it is hard to conceive of what good would be
    accomplished by the elevation of this notion to a place at the
    center of U.S. manufacturing policy, but easy to conceive of
    bads that might follow.
        Mr. Rush. Mr. Hassett, would you bring your----
        Mr. Hassett. Yes, I have got one sentence left, sir. The
    clock is so far away, I can't quite see it. On balance, the
    same can be said for the entire Act. Thank you for your
    attention.
        [The prepared statement of Mr. Hassett follows:]

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        Mr. Rush. Thank you so very much. A vote now occurs on the
    floor so we are going to have to recess until--there are three
    votes. It should take us approximately a half an hour. It will
    only take a few minutes. Can the witnesses remain until after
    we reconvene for a series of questions? Thank you so very much.
    The hearing now stands in recess until 10 minutes after the
    last vote occurs.
        [Recess.]
        Mr. Rush. The subcommittee will now reconvene for the
    purposes of asking the questions of the witnesses. I must
    announce to the committee and to all other who are gathered
    here that Mr. Chopra had to leave. He could not remain beyond
    the 3:30 hour so he was excused from the witness table, and any
    questions that the subcommittee members might want to direct to
    him can be forwarded to him via staff in writing. That said,
    the chair recognizes himself for 5 minutes for the purpose of
    questioning. One of the main objectives of the National
    Manufacturing Strategy Act is to create jobs. Mr. Hassett, some
    time ago, I think in March of this year, you wrote in an
    article that what was considered a great recession for white
    Americans has been actually a depression for black Americans.
    This is an issue that I think we all can agree on. In addition
    to the disproportionate impact on minority communities in hard
    times, we also know that there can be a disproportionate impact
    on jobs based on differences within the manufacturing industry.
        Manufacturers may require large or small facilities that
    may be located in urban or suburban areas and so on and so on.
    Mr. Herrnstadt, do you agree that the President should develop
    a manufacturing strategy to include regional and industrial
    areas with specific employment needs?
        Mr. Herrnstadt. I think it would be helpful, but once again
    I think it also has to be part of a coordinated national
    strategy to make sure that we move forward as a country in
    terms of manufacturing. A variety of manufacturing industries
    have suffered. Aerospace, for example, over 500,000 workers
    have lost their jobs over the past 20 years, so, you know,
    there needs to be some concentration on that.
        Mr. Rush. Can you expound on your conclusions? Take about a
    minute and a half. I don't have but a small amount of time.
        Mr. Hassett. Thank you so much, Mr. Rush, for the question.
    That specific article that you mentioned, in fact, was
    discussed in the proposal that is sort of an unusual bipartisan
    one that has been put forward by myself and Dean Baker, who is
    a well-known economist, where we discussed job creation policy
    that would, we think, disproportionately benefit minorities who
    have been hardest hit and would be quite a bit different from
    the subject of this hearing. But the basic idea is that right
    now when you lay a worker off, then if you lay the whole worker
    off then they get unemployment insurance, and what we would
    like to do is make the unemployment insurance, economists call
    it like fractional, so that you could lay someone off 20
    percent during a recession and then they could get 20 percent
    of their unemployment insurance. This would encourage employers
    to maybe reduce hours and wages of five guys 20 percent rather
    than one whole guy.
        Mr. Rush. I get the picture. Thank you so very much. OK. I
    come from the south, as you know, and I have seen the
    devastation in all communities that I represent for the most
    part, Inglewood, Chatham, Woodlawn, all those communities. The
    downturn could be traced back to when U.S. Steel closed down,
    and the steel industry, not your company and I congratulate you
    for it and I commend you for it, but most of them kind of moved
    offshore or moved into the sun belt without jobs, without the
    jobs, entry into the middle class. Can you expound on that
    historical picture just for a moment, if you would, and as
    briefly as you can? Am I correct that the----
        Mr. Hickey. We are, Congressman. As a matter of fact, my
    grandfather, who was one of the founders of the company I
    worked for was Consen steel which was another south side steel
    mill, and he left that company in 1926 to start the company I
    work for. But what has happened is that certainly the economies
    of scale changed. The cost of the production--the South Works,
    the last thing that was being produced at South Works was
    structural steel and they couldn't compete against the electric
    furnace producers that could do--or they re-melt scrap, and
    what has happened is that the technology evolution and steel
    production, when South Works closed probably 30 percent of the
    steel in the United States was made through electric furnace.
    Today it is 60 percent, so what has happened is the technology
    has changed and those old facilities became obsolete. Now they
    didn't relocate them there, and I don't know if that is an
    issue with the city because all those steel mills that were
    located in Indiana and the southern states, all of them have
    incentives from local states.
        All of them do. I mean there is such massive incentives.
    Kentucky has got some--and I am not making a judgment one way
    or the other but that is the reality of it. You got to bring
    jobs back to the cities. You got to bring jobs. You got all
    kinds of land in the south side of Chicago that would be great
    for manufacturing and some of it has to do with there is
    pollution issues on the property, et cetera. Congressman, why
    they don't develop the old South Works, it is what, 200 acres
    sitting on Lake Michigan? It is a gorgeous piece of property.
        Mr. Rush. Thank you. I yield back the balance of my time. I
    recognize the ranking member, Mr. Whitfield.
        Mr. Whitfield. Thank you. And thank you all very much for
    your testimony. And, Mr. Hickey, I certainly would like to
    congratulate you. Any family that can keep a business going for
    84 years deserves a big pat on the back, so thank you. Mr.
    Paul, you and Mr. Gordon both in your comments made some
    reference that you thought this bill could be improved and some
    amendments could be made to it. Is that correct?
        Mr. Paul. Yes. Having worked on Capitol Hill, I know that a
    bill rarely ends up in the form that it started, and I think
    many of the suggestions that Mr. Gordon made are appropriate
    ones, but I will emphasize that I do think that the thrust of
    Mr. Lipinski's bill is sound and is very necessary in part
    simply because there simply is no department of manufacturing.
    The Department of Commerce has some responsibility for
    manufacturing but the Secretary of Commerce is also responsible
    for oceans and fish and weather and a lot of other things, and
    so you need that coordinated voice to have a sound strategy.
        Mr. Whitfield. Well, I think we all agree that this is a
    good piece of legislation. At least its purpose is. And
    although I do also agree with Mr. Hassett that I can think of a
    lot of industries that need some particular attention like the
    coal industry in Kentucky, and like agriculture and so forth.
    But how many of you--I know Mr. Hassett's position, but the
    other four--Mr. Herrnstadt, do you think this bill needs any
    changes or do you feel pretty good about the way it is right
    now?
        Mr. Herrnstadt. You know, I would associate myself with Mr.
    Paul's comments. I think it is an important bill, as I
    testified to, I think that the thrust of it is excellent and
    much needed. I have supplied in my written testimony, I think,
    two or three what I would consider to be minor recommendations
    I think that would strengthen it.
        Mr. Whitfield. I know Mr. Hickey in his testimony talked
    about 36 percent of all factories that employed more than 1,000
    employees had closed down in some period of time. Now to me
    1,000 employees or more is a pretty large manufacturing
    facility. This legislation makes reference to small
    manufacturers, exclusively. I know on page 6, line 14, it talks
    about small manufacturers. On the Strategy Board, page 16, line
    1, coming from small manufacturers. And it seems to me that if
    you are going to deal with manufacturing you should not be
    excluding a large group versus a small group. That was one
    comment I would make. And then second of all when I read this
    legislation you look at this Manufacturing Strategy Board
    versus the task force, the task force is all government
    employees. The chairman is going to be a government employee.
    The strategic board, 21 people, some labor union, some
    manufacturers, whoever, but the co-chair is going to be
    government employees also.
        And then it says that both of them, the task force and the
    strategic board, will make recommendations to the President.
    And I sort of got the sense that the strategic board was to
    branch out in areas other than government which I think is good
    because we need testimony from people outside of government as
    well, but within the task force it talks about sub groupings
    which would also include people outside of government. And then
    when you consider all of the studies and all of the reports, I
    mean the GAO report, the second year of the President, the
    first year was a 4-year term. The reports by the Academy of
    Sciences, 14 months, 20 months, whatever, after. It just seems
    to me, and I may be wrong, that it would have made more sense
    to try to combine the strategic board and the task force to
    eliminate a whole layer of activities, but do any of you have
    any thoughts on that?
        Mr. Paul. Mr. Whitfield, I would submit that I think there
    is a role for both, and the reason I say that is that I know
    from my experience who speaks for the voice of manufacturing
    within a particular administration. It is difficult. We have
    had manufacturing czars. We have had assistant secretaries.
    There has been a lack of coordination. I will say frankly that
    at the end of the day when it comes to a strategy dealing with
    a topic like China, for example, that the recommendations of
    the State Department or the Treasury Department often times
    trump the recommendations that an agency representing
    manufacturing might. And for that reason, I think it makes
    sense to have more coordination. I also see a fundamental role,
    and I agree with you, for outside involvement in informing the
    policy. And I don't pretend to be an expert on boards and
    commissions, so if there is a way to perfect it, I would be
    happy to look at that, but I do see a distinct role for both.
        Mr. Whitfield. And you don't feel that large manufacturers
    should be excluded?
        Mr. Paul. I read the legislation. I don't think there is
    any exclusion of large manufacturers in particular.
        Mr. Whitfield. It specifically says small manufacturers.
        Mr. Paul. Well, I think that, you know, that often makes
    sense because large manufacturers have a large voice, and I
    represent a number of large manufacturers as well. I think
    often times just as the Congress and the federal government
    does very eager to look out for the interest of small
    businesses, and I think that goes within the spirit of what
    that goal tries to accomplish.
        Mr. Rush. The gentleman's time has expired. Ms. Sutton is
    recognized for 5 minutes.
        Ms. Sutton. Thank you, Mr. Chairman. Thank you all for your
    testimony. Let me begin, I think, Mr. Hickey, it was you who
    spoke directly on the point of making things and the creation
    of value and why that is so important as opposed to, for
    example, other sectors perhaps we saw before the recession hit
    in this go round. We saw a lot of people making money by moving
    money around. Can you just amplify a little bit about why
    manufacturing is essential to creating real value?
        Mr. Hickey. Well, Congresswoman, when you hear the
    opportunity to take inputs and take the intellectual capital of
    your employees and their efforts and turn it into a value
    product that is a higher value than the inputs, you are always
    going to create wealth. Sometimes you will make mistakes and
    you will make stuff that people won't buy, et cetera, et
    cetera, but the reality is that the way to wealth is through
    creation of taking--you grow it, you mine it. Congressman
    Whitfield talked about the mining in Kentucky and the corn
    farmers. This is how you create wealth. And manufacturing is
    creating wealth. Every country in the world wants to
    manufacture products and ship them to the United States. The
    trade deficit came out yesterday. What was it, $42 billion, 20
    plus billion with the Chinese? They aren't selling us paper.
    The point is what we are doing is we have to have--the reason I
    came back in support of the Congressman's effort, under the
    last administration there was a study by the Department of
    Commerce by Grant Aldonas, who was the Undersecretary of
    Commerce. I don't know if anybody--I actually had an
    opportunity to talk to the undersecretary several times on this
    program, very complex, very comprehensive study. The last item
    was about currency manipulation by our training partners.
        And I talked to at the time Undersecretary Aldonas and said
    you told me this was going to be highlighted. He said I lost to
    the Treasury. Well, if we don't have the whole government
    looking at why we are losing 6 million manufacturing jobs in 10
    years why we have had 42,000 manufacturing plants close.
    Somebody has got to stand up and say these are the reasons.
    This is why I think Congressman Lipinski's bill makes so much
    sense because we have got to look at all of them. One of the
    other things that we probably should have is the Department of
    State because we do trade agreements with people because the
    Department of State says this is how things are going to work.
        Ms. Sutton. Thank you, Mr. Hickey. I concur with your
    assessment. That was a very powerful answer, and I appreciate
    you bringing that up. I would like to just, if I could, Mr.
    Hassett, just ask you a couple of questions about the free
    market. Do you think that we are operating in some sort of
    global free market economy where free market principles exist
    across the globe?
        Mr. Hassett. To a varying degree, yes. Obviously, there is
    a lot of variation across countries and how free the markets
    are.
        Ms. Sutton. Right. So you would agree that countries
    manipulate their markets and entities manipulate their markets?
        Mr. Hassett. Some do, yes.
        Ms. Sutton. OK. Do you think that China under values its
    currency and manipulates its currency?
        Mr. Hassett. I can't answer that. I don't know what the
    right level of the currency for China is. Yes, I am not a
    currency expert. I can't tell you.
        Ms. Sutton. Does AEI have a position on that?
        Mr. Hassett. AEI doesn't take positions on anything. But I
    have colleagues that I would be happy to forward your question
    to.
        Ms. Sutton. OK. I would certainly be interested----
        Mr. Hassett. In fact, if you asked me the question what do
    people at AEI say about this, then I would be happy to give you
    a lengthy answer.
        Ms. Sutton. OK. Well, since we don't have time for a
    lengthy answer right now, I think your answer will suffice.
    Your answer is that you don't know if China manipulates their
    currency. OK. And, you know, we saw, and I know a lot of you
    will be well aware of this, and probably all of you, in the
    last year we saw a decision come through the ITC regarding oil
    country tubular goods that were being unfairly subsidized by
    the Chinese dumped into our market. And, Mr. Hassett, I would
    want to hear your opinion on this. Now the ITC eventually after
    months of going through the hearing process determined that
    indeed this was taking place and the President moved ahead with
    the recommendations to place anti-dumping and countervailing
    duties in that instance.
        Is that the way that you think we can--you talked about
    there not being economic science behind all this. I also know
    that AEI is about dealing with problems, right, where they
    arise, so is that a sufficient answer or do you agree that
    there is some need to have a more proactive, you know, forward
    thinking manufacturing strategy that might deal with these
    problems before they happen and people in Ohio are out of a job
    for 9 months, 12 months before we get these duties in place?
        Mr. Hassett. I think that there are certainly cases where
    there are abuses, and that is why we have the systems that we
    do. The problem that I have is that if you were to ask what is
    the impact of trade on the welfare of Americans, I think that
    it is indisputably that it improves it. What is the impact of
    trade on the welfare of specific workers, then it is more of an
    open question. Maybe Ohio is an area that has particular
    challenges because there are foreign competitors that for
    whatever reason, maybe abuse, can out compete them. I think
    that my position is that there are things that there is not
    really a dispute about.
        The fact that right now our companies, including Mr.
    Hickey's company, has to pay a higher tax than his competitors.
    It is obvious that that is harmful. And so my concern is that
    we have got this sort of elephant in the room of a really big
    disadvantage for everybody, and then we don't like some of the
    effects of that like maybe there is not enough R&D so we have
    an R&D creditor. The manufacturing may be disproportionately
    hurt because it is easier to locate manufacturing offshore and
    then we want to do special subsidies for manufacturing. I think
    the better solution is to just fix the problem in the first
    place.
        Ms. Sutton. And, if I could, I know that my time is up, but
    I appreciate that your shift back to the issue of the tax
    structuring. Certainly, I want our tax structure to make sense,
    but that really doesn't answer the other question. I think you
    would have to agree that perhaps the efficiency in the approach
    that we have where we have our U.S. manufacturing and the
    workers subjected to a process that takes a year where they are
    sitting out of a job because somebody is cheating that perhaps
    we can do better.
        Mr. Rush. The witness can answer the question, but I just
    want you to know that--do you want to answer the question?
        Mr. Hassett. I agree. I agree. I said, yes, we should do
    better.
        Mr. Rush. The chair recognizes Mr. Murphy.
        Mr. Murphy. Thank you, Mr. Chairman. Thank you, panel. You
    have heard my comments before. I think it is important on an
    issue so important. I do appreciate all of your passion about
    helping to build up America's manufacturing particularly
    because of what I mentioned before about China is about to
    overtake us, and I don't think there is a person in this room
    that wants to sit back and let that happen. But I also think it
    is important, two elements in the legislation. One is that I
    want to make sure we are not abdicating our role as members of
    Congress. Certainly among 435 members of Congress, none of us
    are experts on everything but all of us are experts on
    something, and that is why we look to panels like you and other
    groups to provide that information to use to make sure we are
    passing legislation that works for the best interest of this
    Nation.
        So along those lines, I wanted to ask you. How many of you
    own a company? All right. And now, as I understand, sir, in
    your company, your steel products distribution, but I think in
    your testimony you also said you are a supplier also for
    manufacturers as well as purchasing for manufacturers?
        Mr. Hickey. Our supply base would be U.S. Steel, New Core.
        Mr. Murphy. OK. Now so that is important for all of us to
    know that because I think also we would think if we knew our
    child was being taught by a teacher who had no teaching
    certificate or even the principal knew nothing about education,
    we would be concerned. I doubt if any of us would go to a
    hospital to be treated by a doctor who never practiced
    medicine. But I still want to hear your opinions, I think, so I
    am going to run through this panel, this board that is supposed
    to--Manufacturing Strategy Task Force. I wonder if any of you
    know, do any of these following people have any manufacturing
    experience. Secretary of Defense, Robert Gates. Fine man. All
    these people are great people. As far as I can tell, he
    doesn't. Treasury Secretary Tim Geithner. Does anybody know?
    Good man. I don't think he does either. Gary Locke, Secretary
    of Commerce. One of our colleagues, Hilda Solis, Secretary of
    Labor. Steven Chu, Energy. The head of the National Economic
    Council, Lawrence Summers, anybody know if he has any
    manufacturing experience? National Economic Advisors head
    Christina Romer. I don't know either.
        Head of OMB, Peter Orszag. How about the Office of Science
    and Technology Policy, does the head of that have any
    manufacturing experience, John Holdren? I don't know if he
    does. Director of Domestic Policy Council, Melody Barnes. Now I
    believe that Karen Mills, the head of the Small Business
    Administration, has worked for General Foods and also a company
    that manufactured hardwood flooring, refrigerator motors, and
    plastic injection molding. But how about the head of the NSC,
    does anybody know who the head of the NSC is and does this
    person have any manufacturing experience? Does anybody know who
    the head of NSC is?
        Mr. Paul. I believe it is Admiral Jones.
        Mr. Murphy. It is actually the President of the United
    States.
        Mr. Paul. The head of the--oh, I am sorry. The head of the
    National Security----
        Mr. Murphy. The head of the National Security Council. I
    believe that is one listed here.
        Mr. Paul. I am sorry. I thought you meant the National
    Security Advisor.
        Mr. Murphy. OK. But my point is in this that the two things
    that I want to make sure that we have is--now this is leading
    up to my question. I would like all the panelists to answer
    quickly. Who do you think should be on a panel to really give
    us based upon a wealth of experience information on
    manufacturing, they should actually be on a decision panel, who
    can we look to who really knows this and give us--we want
    expertise here. This committee wants expertise. I will just run
    by it. Where should we look? Mr. Paul.
        Mr. Paul. I think fundamentally there is a role for
    government to be on the side of manufacturing. I think that
    process should be----
        Mr. Murphy. I understand but so far we haven't come up with
    anybody who knows about it.
        Mr. Paul. But I think that process should be informed by
    people who are in manufacturing. I would argue that if you look
    in past administrations, I would include the Clinton
    administration, both Bush administrations, there has been a
    paucity of people who have a familiarity with manufacturing.
    That has been one of the challenges.
        Mr. Murphy. OK, next person. I need some answers.
        Mr. Gordon. I believe people that understand manufacturing
    but because of the structural problems and the fact that they
    are strategic, I would say you need people with economic
    backgrounds as well as policy background.
        Mr. Murphy. OK.
        Mr. Hickey. Mr. Murphy, there is a National Manufacturing
    Strategy group now or a national manufacturing group. I know
    there is a company in Ohio that is in the machine tool
    business. I believe Dan Damico from New Core is on it, so that
    is a group that would be a good core to make part of this
    group.
        Mr. Murphy. All right.
        Mr. Herrnstadt. I think it would also be helpful to include
    workers who actually make the manufactured goods and have the
    experience from all levels.
        Mr. Murphy. Good. Thank you. Mr. Hassett.
        Mr. Hassett. And I disagree strongly with your point. I
    think that you don't have to own a theater to know Shakespeare,
    and I think that what we need if we are going to have this
    commission, which I hope we don't, is people who understand the
    importance of the neutrality of government policy, and that is
    probably not people who have a lot of manufacturing experience.
        Mr. Murphy. I don't have to own a theater to know
    Shakespeare but if you are going to own a theater you ought to
    know about owning a theater. So I would just look upon this and
    make a recommendation, Mr. Chairman, that perhaps there are
    some folks we could also have before us at some point as we are
    looking at legislation to look at some other people working
    this. I think they could help us strengthen this and improve
    upon some aspects of that bill. I think some good ideas came
    out of this panel. Thank you, Mr. Chairman.
        Mr. Rush. Thank you. Mr. Gonzalez for questions for 5
    minutes.
        Mr. Gonzalez. Thank you very much, Mr. Chairman. I am going
    to commend Mr. Lipinski in his effort and I am going to make
    some assumptions that the Board, the task force will be in
    consultation, will include many sources and resources as they
    proceed but they will have a charge, and I think this whole
    effort here is to identify the need, have the structure, and
    then bring in all the necessary resources and it is going to be
    up to this committee and others to make sure that we have the
    oversight and that they do their job. Mr. Hassett, my
    observation with my staffer was I have never seen anybody enjoy
    testifying as much as Mr. Hassett, and that is a good thing
    because you have enthusiasm.
        Now I am not going to agree with you. You made a statement
    that the only way this would work would be if the board and the
    task force would be irrelevant because you see that if they are
    relevant they can only do harm because they are going to
    meddle, is that correct?
        Mr. Hassett. That is, I guess, the most likely outcome, I
    would think, yes.
        Mr. Gonzalez. So I doubt if we are going to agree on a
    whole lot, and I know that you said that Mr. Hickey can't be
    competitive because he pays more taxes. I mean that is the
    whole reason that he can't be competitive because he pays more
    taxes.
        Mr. Hassett. That is not what I said. What I said is that
    that is a really big disadvantage that he faces relative to his
    trading partners, and that on that we know in the United States
    that everybody has that disadvantage in manufacturing and in
    other industries as well. So my point is there is an elephant
    in the room.
        Mr. Gonzalez. And we could have a really good discussion as
    to where we are in economic development in our point in history
    and why and lessons learned that requires what we do today. Now
    we are going to have a difference of opinion to the degree but
    there are many things out there, and I think it is interesting,
    and I am going to quote from Harold Myerson in the Washington
    Post, December 15, 2009. ``America's production of goods no
    longer receive the level of investment that had made it the
    engine of our economic growth from the mid-19th century through
    the 1970s. The change began at the outset of the Reagan years
    when the percentage of corporate profits retained for new
    investment dropped sharply. In the prosperity years of 1946 to
    1979 dividends constituted 23 percent of profits. From 1980 to
    2008, the constituted 46 percent.''
        And it is something that my colleague, Ms. Sutton, pointed
    out. How we make money, how we invest money in this country has
    been a way from manufacturing into something that maybe we make
    money out of money, and we know what happened in the financial
    sector. Let us go back to regulation, which I think you have a
    certain disdain for. Had we had that regulation, had we had
    that oversight, we would have noticed what was going on in the
    financial sector that led to the economic meltdown. So
    regulation is necessary in all aspects, but I would hope that
    this task force and this board will be able to identify what is
    going on out there. Where is the investment being made in
    America and why is it an easier dollar to be made away from a
    solid investment in manufacturing. Those are the questions that
    I think will be pointed out. And the fact that maybe we
    encourage not investing in a manufacturing base.
        I will ask you this because I know Mr. Hickey is in
    competition with foreign companies and such. Do you believe in
    the minimum wage? Should we have a minimum wage? Do you believe
    in OSHA?
        Mr. Hassett. Yes.
        Mr. Gonzalez. Why? Shouldn't the employer just rise to the
    responsibility of taking care of an employee and have safe
    working conditions? Why wouldn't you just trust the situation?
        Mr. Hassett. In part because not all employers are
    necessarily going to work to the benefit of their workers.
        Mr. Gonzalez. Do you believe in the Clean Water Act?
        Mr. Hassett. Absolutely.
        Mr. Gonzalez. Do you believe in the Clean Air Act?
        Mr. Hassett. Yes.
        Mr. Gonzalez. Do all those other countries that are
    competitors have anything similar to what I just described?
        Mr. Hassett. Some do, some don't.
        Mr. Gonzalez. Mostly don't, wouldn't you agree, seriously?
        Mr. Hassett. In the developed world, they do. The air and
    the water is clean----
        Mr. Gonzalez. Well, the developed world. You know, Germany,
    gee, we compete with those German made vehicles and such, but
    do they have any advantage over maybe a domestic manufacturer?
        Mr. Hassett. They have a tax advantage for sure.
        Mr. Gonzalez. Any other advantages other countries may
    enjoy? Health care paid for by the government.
        Mr. Hassett. But they are taxed to pay for that, so it is
    not clear if it is a more efficient method.
        Mr. Gonzalez. But there are advantages out there----
        Mr. Hassett. But, again, the thrust of my testimony is that
    if we make money because someone in the U.S., because somebody
    invents a very cool piece of software that helps people do
    something better or because someone makes a great movie that
    they make millions of dollars in revenue from having people all
    around that will go to it, that that is good too, but what we
    need to do is make policy--not have policy decide what we are
    going to do in the future but make it a vibrant place to do
    anything that is productive.
        Mr. Gonzalez. Well, then you would say basically have no
    policy, no regulation, no law because, don't worry, markets
    will take care of themselves and everybody is going to do the
    right thing by their investor and so on. I mean we have example
    after example of that recently. Everyone did the right thing.
    But, no, that is not true, and I think what you espouse--and I
    understand you may feel very strongly about it, but I think it
    is exaggerated. You are not entirely wrong. I think it is a
    question of degree. But what I think the other witnesses were
    testifying to is the attention and the energy that is required
    of this government to examine the loss of manufacturing jobs in
    America and to determine whether we have policies that work
    against it, can we have policies that will encourage it.
        Mr. Rush. The gentleman's time is up. The chair recognizes
    Mr. Lipinski for 5 minutes.
        Mr. Lipinski. Thank you, Mr. Chairman. I want to thank the
    witnesses for their testimony and for their recommendations for
    improving this bill and thank the members of this committee for
    their recommendations. I think that there certainly is always
    room for making things better, and I appreciate the suggestions
    when I work with you as we move forward on this. A couple
    things I did want to raise though, Ranking Member Whitfield had
    raised the only talking about small manufacturers. It really is
    just talking about in particular by small and medium size
    manufacturers and because the problem is often faced by these
    small and medium size manufacturers relative to large
    manufacturers and unfortunately I think a lot of times the
    large manufacturers are the ones that get the most focused, but
    it is not exclusive to them.
        And Mr. Murphy had raised the issue about everyone on the
    task force being from the government and heads of departments
    and agencies, and also it says in the bill that there will be
    subgroups to advise the task force including members from the
    private sector. And I certainly agree, and I think that is why
    all these recommendations have been very constructive that we
    do need to make sure we are listening to those who are on the
    front line, people like Mr. Hickey who have been working for
    years in manufacturing. A couple things I wanted to talk about
    and ask a couple questions if I have time is, first of all, I
    certainly feel and I think most of us, maybe not everyone here
    agrees that manufacturing is something that is especially
    important for our country. Many other countries certainly
    believe that it is important for their country, it is not only
    China, India that we are talking about, United Kingdom, Brazil,
    Canada all have manufacturing strategies. Mr. Dingell mentioned
    Germany also.
        And the reason for this is, I think, what Mr. Hickey spoke
    about is that manufacturing actually produces wealth, and I
    think that is something that the American people after we saw
    the financial crisis and said what are we doing in our country
    that actually produces wealth. And I think that is why there
    are a lot of concerns out there, and certainly the polling
    shows that people would like to see promotion of manufacturing.
    I think it is important for our country. But I want to ask a
    question of Mr. Gordon because the other part of manufacturing
    that I think makes it particularly critical for our Nation is
    for defense. I just want to ask Mr. Gordon, have you seen what
    you believe the diminution of our defense capabilities or
    potential diminution in the future with what has happened with
    manufacturing in our country.
        Mr. Gordon. Absolutely. Every month our manufacturers that
    may be secondary suppliers or may be a primary supplier for a
    defense system and they are going out of business, there are
    multiple reasons for that, and that does weaken our national
    security for a couple different reasons. One is when you go off
    shore with a manufacturer, you don't have an assured source of
    supply that is free of any political or other issues. And also
    you need a trusted source of supply so there is many--there are
    about 50 or 60 suppliers that go out of business for the
    Defense Department every month, and these are listed in the
    DMSMS working group, which is a small area.
        Mr. Lipinski. Thank you. I wanted to ask Mr. Hickey, as a
    member of a Commerce Department advisory committee, do you see
    that it is especially important from your experience there,
    especially important that we have a National Manufacturing
    Strategy that is coordinated from the top level from the
    President in order to make sure that we actually are having
    some kind of coordinated policy rather than a lot of disjointed
    policies and program that may not really work well together and
    promote manufacturing.
        Mr. Hickey. Congressman, this is exactly my frustration on
    this. I have been on this committee for about 10 years. We
    advise the USTR and the Department of Commerce on trade
    policies that has to do with the steel industry. We get a lot
    of discussion but there never seems to be a coordination. I
    will come back to the best study I saw in a long time done by
    the Commerce Department under Mr. Aldonas back in, oh, I don't
    know, it was probably '94 or '95, and he basically said, you
    know, this is the best I could do because there is way too many
    different people who don't really have a value for
    manufacturing. You know, and it may be an assistant secretary
    here or whatever. You have to have the President of the United
    States say this is a priority for our country. The Defense
    Department is even the--we don't have enough steel today to
    make certain plates that we need for the military applications
    we have going on today. We are importing them from other
    countries.
        Mr. Lipinski. Thank you. I yield back. Thank you, Mr.
    Chairman.
        Mr. Rush. The chair will entertain one additional question
    from any member who desires. Is there any member who desires an
    additional question? Ms. Sutton, would you like to ask an
    additional question?
        Ms. Sutton. Sure, Mr. Chairman. Thank you very much. Mr.
    Paul, you mentioned that Germany has an integrated strategy on
    manufacturing, and, Mr. Herrnstadt, your testimony also
    referred to China and the European Union. And I would just like
    for you to expand upon that a little bit because this isn't
    something that we are just doing in a vacuum but others are
    obviously taking action so if you could elaborate on how those
    countries' strategies compare to the National Manufacturing
    Strategy that we are contemplating in this bill and whether
    there are additional countries with the National Manufacturing
    Strategy and whether you believe those strategies have placed
    them at an advantage.
        Mr. Herrnstadt. I would be happy to respond briefly, and I
    think it is a terrific question. First, there are strategies we
    don't want to pursue like China's which is heavily
    mercantilist. I don't think anyone wants to see our factory
    workers working for $250 a month. That is not a tenable
    manufacturing strategy for the United States. Germany, on the
    other hand, which in many cases has higher compensation cost
    for workers, faces an extraordinary high level of regulation,
    is able to succeed. In fact, Germany has held its share of
    production and of exports as the U.S. shares of these have
    dropped over the past decade and China's have dramatically
    risen. The reason is because manufacturing strategy is
    important to the German government. It is important across
    party lines.
        And I would add it represents a lot of labor management,
    academic, and governmental cooperation working together on
    research production, skills and training, a very aggressive
    trade policy, and a policy that is designed to keep innovations
    in Germany. I mean, for instance, German is one of the world
    leaders in wind and solar production, but Germany is not a
    windy place. It is not a sunny place. But they make the stuff
    because they have a manufacturing strategy and they want to
    sell to the rest of the world.
        Mr. Rush. The chair now recognizes Mr. Dingell of Michigan
    for 5 minutes.
        Mr. Dingell. Mr. Chairman, you are most courteous and kind.
    Thank you. This is to Mr. Paul, Gordon, and Herrnstadt. H.R.
    4692, as currently written, requires the President to draft a
    National Manufacturing Strategy based on the input of a
    Manufacturing Strategy Task Force and Manufacturing Strategy
    Board. Do you believe that these two agencies should
    collaborate to draft the National Manufacturing Strategy
    instead of the President? Yes or no.
        Mr. Paul. I think at the highest level the President needs
    to take ownership for the strategy.
        Mr. Dingell. Yes or no. Should they do it instead of the
    President? We will come to that point then.
        Mr. Paul. They should certainly submit the recommendations.
    I think the President should make the ultimate call.
        Mr. Dingell. All right. And now Mr. Gordon.
        Mr. Gordon. I would say yes. I think that in my testimony I
    said that the task force should draft a strategy and the board
    should inform it.
        Mr. Dingell. Thank you. Mr. Herrnstadt.
        Mr. Herrnstadt. I will agree with that has already been
    said.
        Mr. Dingell. You do or don't?
        Mr. Herrnstadt. I think they should make recommendations to
    the President. That is ultimately where it rests.
        Mr. Dingell. All right. So you think that they should make
    recommendations that the President should submit the policy to
    us, to the Congress, is that right, that statement that you are
    making, gentlemen? All right. All except, I guess, Mr. Gordon,
    but I don't see you are too much out of pace. All right,
    gentlemen, thank you. Now, again, to Mr. Paul Gordon and Mr.
    Herrnstadt. Further, should the membership of the Manufacturing
    Strategy Task Force be expanded to include the Department of
    State, the United States Trade Representative and U.S. Import-
    Export Bank? Yes or no, starting with Mr. Paul.
        Mr. Paul. Only if they say the right thing.
        Mr. Dingell. I am sorry?
        Mr. Paul. Only if they say the right thing. I think they
    should be included but they are often particularly unhelpful.
        Mr. Dingell. I am not sure we can censor at best what they
    had to say. If you would please, Mr. Gordon.
        Mr. Gordon. I would say the state absolutely. I would also
    suggest Homeland Security and National Science Foundation.
        Mr. Dingell. Thank you. Mr. Herrnstadt.
        Mr. Herrnstadt. Yes. I think they should be included.
        Mr. Dingell. Do you have some brief words of explanation as
    to why you feel this way, gentlemen?
        Mr. Gordon. I would say the state has a great deal to do
    with export control and manufacturing and trade. I believe that
    Homeland Security also has a rather large role in terms of
    making sure that you have assured sources for Homeland
    Security, and the National Science Foundation makes a lot of
    the R&D policy and investment in our next generation
    manufacturing technologies.
        Mr. Dingell. Of course, I have got to admit that the
    Department of State has at least to me been a tremendous
    disappointment with regard to trade matters. I sometimes wonder
    whether they represent us or somebody else. Now, gentlemen,
    again, Mr. Herrnstadt notes in his written testimony that the
    Manufacturing Strategy Board established pursuant to H.R. 4692
    would not be chaired by a representative of organized labor.
    You have brought to my attention a concern I think we may
    share. Do you believe a representative of organized labor
    should be denied the opportunity to co-chair such a board? Yes
    or no.
        Mr. Herrnstadt. Absolutely not. I think they should be a
    member of the co-chair.
        Mr. Dingell. OK. Thank you. Do you have a reason that you
    would like to give us for that? Is there a reason you would
    like to say that that should be done that way, that they should
    have an opportunity to co-chair?
        Mr. Herrnstadt. Sure. Keeping in framework of the way the
    task force has been formed it looks like it is trying to
    attempt some sort of well balance to bring divergent views to
    the forefront, and if you only leave chairs of folks that don't
    represent workers, particularly workers in the manufacturing
    era, you deny that opportunity to bring that.
        Mr. Dingell. Again, to Mr. Paul, Gordon and Herrnstadt.
    Gentlemen, H.R. 4692 requires the President to appoint members
    of the Manufacturing Strategy Board after consultation with
    industrial organizations. Do you believe that such industrial
    organizations should include labor unions? Yes or no, starting
    with Mr. Paul.
        Mr. Paul. Speaking as someone who represents both labor and
    business, I do, yes.
        Mr. Dingell. OK. Mr. Gordon.
        Mr. Gordon. Yes, I do, because I believe that they have a
    great stake in that.
        Mr. Herrnstadt. Yes.
        Mr. Dingell. Gentlemen, the same three witnesses, if you
    please. H.R. 4692 requires the President to release the
    National Manufacturing Strategy by the end of the second year
    in office. Now the calendar here may give us pause. Should this
    be modified in light of the fact that the current President's
    second year is halfway done? What are your comments on that, if
    you please, starting with Mr. Paul.
        Mr. Paul. I think, quite honestly, if we want a robust
    document, I think there is a reasonable possibility it should
    be put back to give them a little more time.
        Mr. Dingell. Give them enough time to do the job, is that
    what you are saying?
        Mr. Paul. Absolutely.
        Mr. Gordon. I would agree with that, absolutely.
        Mr. Dingell. And you, Mr. Herrnstadt?
        Mr. Herrnstadt. Yes, I agree there needs to be adequate
    time, but I also think that this urgently has to be done.
        Mr. Dingell. I think your counsel as to how we do it
    urgently and at the same time give them enough time will be
    earnestly sought for the record. I note, Mr. Chairman, you have
    courteously given me more time than I am entitled to. Thank
    you. Thank you, gentlemen.
        Mr. Rush. The chair now recognizes Mr. Lipinski.
        Mr. Lipinski. Thank you, Mr. Chairman. I just want to ask
    Mr. Herrnstadt, are there things that you believe would be
    especially important for a manufacturing strategy from what you
    have seen in manufacturing?
        Mr. Herrnstadt. I think one of the hopes of the task force
    and the board the way you formulated it is that all the
    stakeholders will be at the table to give some give and take to
    develop the strategy, and I think it will address this issue in
    the long term and also I think it is important that this will
    be a permanent and institutionalized task force, so it is not
    just a one-shot deal where it just issues a report and then
    everything goes away. And I think the thrust of that is very
    important, but in the meantime I think there is a lot that has
    to be done. As Congresswoman Sutton and others have talked
    about, and as my members are experiencing, they are losing
    their jobs every day, every week, every month. And some sort of
    strategy, at least short term, needs to be implemented as soon
    as possible to help alleviate this and to help rebuild our
    economy.
        Mr. Lipinski. Thank you. And I want to thank Chairman
    Dingell and Ms. Sutton and Mr. Whitfield, and especially
    Chairman Rush for the opportunity to discuss this bill, and
    thank you for your recommendations and especially thank the
    witnesses for your testimony.
        Mr. Rush. The chair thanks all the witnesses for appearing
    today. You have been more than gracious with your time, and you
    provided us some wonderful insight into this whole area of
    discussion and you have empowered this subcommittee with your
    grasp of the issue. Thank you so very much. Before we adjourn,
    I do have a unanimous consent request that a statement of the
    National Association of Manufacturers on the National
    Manufacturing Strategy Act, H.R. 4962, be submitted for the
    record, and hearing no objection, so ordered.
        [The information follows:]

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        Mr. Rush. The committee now stands adjourned.
        [Whereupon, at 4:52 p.m., the Subcommittee was adjourned.]
        [Material submitted for inclusion in the record follows:]

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