[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]


 
                        HELP WANTED: HOW PASSING
                    FREE TRADE AGREEMENTS WILL HELP
                    SMALL BUSINESSES CREATE NEW JOBS

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

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                             APRIL 6, 2011

                               __________


                               [GRAPHIC] [TIFF OMITTED] TONGRESS.#13
                               

                  U.S. GOVERNMENT PRINTING OFFICE
66-201                    WASHINGTON : 2011
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing Office, 
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, U.S. Government Printing Office. Phone 202ï¿½09512ï¿½091800, or 866ï¿½09512ï¿½091800 (toll-free). E-mail, [email protected].  


            Small Business Committee Document Number 112-008
           Available via the GPO Website: http//www.fdsys.gov
                   HOUSE COMMITTEE ON SMALL BUSINESS

                     SAM GRAVES, Missouri, Chairman
                       ROSCOE BARTLETT, Maryland
                           STEVE CHABOT, Ohio
                            STEVE KING, Iowa
                         MIKE COFFMAN, Colorado
                     MICK MULVANEY, South Carolina
                         SCOTT TIPTON, Colorado
                      CHUCK FLEISCHMANN, Tennessee
                         JEFF LANDRY, Louisiana
                   JAIME HERRERA BEUTLER, Washington
                           ALAN WEST, Florida
                     RENEE ELLMERS, North Carolina
                          JOE WALSH, Illinois
                       LOU BARLETTA, Pennsylvania
                        RICHARD HANNA, New York
               NYDIA VELAZQUEZ, New York, Ranking Member
                         KURT SCHRADER, Oregon
                        MARK CRITZ, Pennsylvania
                      JASON ALTMIRE, Pennsylvania
                        YVETTE CLARKE, New York
                          JUDY CHU, California
                     DAVID CICILLINE, Rhode Island
                       CEDRIC RICHMOND, Louisiana
                         GARY PETERS, Michigan
                          BILL OWENS, New York
                      BILL KEATING, Massachusetts

                      Lori Salley, Staff Director
                    Paul Sass, Deputy Staff Director
                     Barry Pineles, General Counsel
                 Michael Day, Minority Staff Directory


                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

Graves, Hon. Sam.................................................     1
Velazquez, Hon. Nydia M..........................................     2

                               WITNESSES

Mr. Bill Patterson, Founder and Chief Engineer, TEI Rock Drills, 
  Montrose, CO...................................................     3
Mr. Phillip Wise, Owner and Operator, Wise Family Farm, Harris, 
  MO.............................................................     9
Mr. Trevor Myers, Chief Executive Officer, Cloyes Gear & 
  Products, Inc..................................................    22
Mr. Jason W. Speer, Vice-President, Quality Float Works, Inc., 
  Schaumburg, IL.................................................    27

                                APPENDIX

Prepared Statements:
Mr. Bill Patterson, Founder and Chief Engineer, TEI Rock Drills, 
  Montrose, CO...................................................     6
Mr. Phillip Wise, Owner and Operator, Wise Family Farm, Harris, 
  MO.............................................................    12
Mr. Trevor Myers, Chief Executive Officer, Cloyes Gear & 
  Products, Inc..................................................    24
Mr. Jason W. Speer, Vice-President, Quality Float Works, Inc., 
  Schaumburg, IL.................................................    29

Statement for the Record:
Tipton, Hon. Scott...............................................    45


    HELP WANTED: HOW PASSING FREE TRADE AGREEMENTS WILL HELP SMALL 
                       BUSINESSES CREATE NEW JOBS

                              ----------                              


                        WEDNESDAY, APRIL 6, 2011

                          House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:00 a.m., in room 
2360, Rayburn House Office Building. Hon. Sam Graves (chairman 
of the Committee) presiding.
    Present: Representatives Graves, Coffman, West, Walsh, 
Velazquez, Critz, Tipton, Peters, Chabot, Fleischmann, Landry, 
Cicilline, and Richmond.
    Chairman Graves. We had a slight delay. We had a vote which 
we had to take. I want to thank all of you for joining us today 
on a very timely hearing on the importance of passing the 
pending free trade agreements specifically for small business. 
And it sounds like we have come to agreement at least today on 
the Colombian Free Trade Agreement. But I definitely want to 
thank all of our witnesses for coming and traveling long ways 
in many cases.
    Today we are going to hear directly from those businesses 
on the importance of passing free trade agreements and how it 
affects their ability to reach new markets and create new 
paying U.S. jobs.
    With the unemployment rate hovering around nine percent, 
passing the free trade agreements with Panama, Colombia, and 
Korea is an important tool for spurring job creation. Free 
trade boosts our economy by eliminating trade barriers and 
allowing U.S. exports to reach new markets, giving American 
companies an opportunity to grow. In 2010, total U.S. exports 
of goods and services reached $1.8 trillion, including $12.9 
billion from Missouri alone. Those exports equal 12 percent of 
the U.S. gross domestic product and translate into over 10 
million jobs, including more than four million from small 
businesses.
    It has been nearly four years since these trade agreements 
were negotiated and no congressional action has been taken. As 
we remain idle, our major competitors, like Canada and the 
European Union, are aggressively moving forward to negotiate 
free trade agreements with other nations. If we fail to pass 
these free trade agreements before July 1st, our small 
businesses and farmers will lose even more market share to 
foreign competitors. We owe it to our small businesses to open 
new markets and lower trade barriers so that they can compete 
with their foreign counterparts and continue to increase their 
exports, grow their businesses, and create jobs.
    The independent U.S. International Trade Commission 
estimates that passing the free trade agreements would increase 
U.S. exports by $13 million and create over 75,000 jobs. 
Unfortunately, until the administration and Congress act on 
these agreements, small businesses will continue to face higher 
tariffs and these jobs will not be created.
    So I look forward to hearing from our witnesses on how 
passing free trade agreements is going to benefit them. And I 
now recognize Ranking Member Velazquez for her opening 
statement.
    Ms. Velazquez. Thank you, Chairman Graves.
    The story of the economy this year has been one of 
recovery. Last week, the Department of Labor reported that over 
216,000 new jobs were added in March. Payrolls are on track to 
see nearly two million jobs created by the end of this year. 
Small businesses are at the forefront of this recovery. They 
generate nearly two out of every three jobs, but among these 
engines of economic growth one group excels above all others. 
Small businesses that export tend to grow faster, create more 
jobs, and pay higher wages than businesses that do not. As the 
recovery continues gaining steam, small firms will increasingly 
depend on foreign trade to fuel new growth. Despite the many 
advantages of trade, it remains exceedingly difficult for 
entrepreneurs to sell their goods overseas. Even though small- 
and medium-sized businesses account for nearly 97 percent of 
American exporting companies, their exports account for only a 
third of U.S. goods shipped overseas.
    Studies show that only one percent of small- and medium-
sized businesses are currently exporting. Most small exporters 
sell their goods to only one foreign country and to only one 
customer in that country. Clearly, there is a vast potential to 
grow exports among small firms and today's hearing will help us 
understand how the pending trade agreements with South Korea, 
Panama, and Colombia can have that potential.
    There is a growing consensus that well balanced free trade 
agreements can be a significant driver of prosperity. By 
eliminating tariffs and other trade barriers, the pending 
agreements with Korea, Panama, and Colombia can help small 
firms expand sales globally and create jobs at home.
    More than 32,000 small businesses here in the U.S. export 
more than $17.8 billion in goods to these three countries. We 
should not underestimate the importance of getting it right. 
While well trusted trade agreements and balance trade 
relationships, an overly permissive approach to imports can 
push American businesses out of the marketplace and exacerbate 
our growing trade deficit.
    Even with potential benefits of free trade, there are 
looming issues in all three trade agreements. Panama's recent 
economic growth has made it a sanctuary for tax evasion and 
money laundering. Under the South Korean agreement, other 
barriers such as efficiency standards and high taxes on 
American cars go unaddressed.
    Colombia's persistent record of violence and human rights 
abuse against organized labor is the source of serious concern. 
Any trade agreement that opens these countries to an influx of 
U.S. capital while ignoring problems like this will be a 
burden, not a benefit, to businesses in this country that 
played by the rules. Now more than ever our country needs 
policies that encourage fair trade and promote small business 
expansion.
    I look forward to hearing how the proposed trade agreements 
can achieve this goal. I would like to thank all the witnesses 
in advance for their testimony and I am pleased that they could 
join us and I look forward to hearing from you. Thank you.
    Chairman Graves. I might explain the light system for you. 
Each of you has five minutes to give your testimony, and when 
it comes down to one minute left the lights will turn yellow 
and red when your time is up. If you do go over a little bit, 
that is fine. Just please try not to go over too much.
    I would like to introduce Mr. Tipton to introduce his first 
witness of the day.

 STATEMENTS OF BILL PATTERSON, FOUNDER AND CHIEF ENGINEER, TEI 
   ROCK DRILLS, INC.; PHILLIP WISE, OWNER AND OPERATOR, WISE 
 FAMILY FARM ON BEHALF OF THE NATIONAL PORK PRODUCERS COUNCIL; 
TREVOR MYERS, CEO, CLOYES GEAR AND PRODUCTS, INC., ON BEHALF OF 
  THE MOTOR AND EQUIPMENT MANUFACTURERS ASSOCIATION; JASON W. 
SPEER, VICE-PRESIDENT, QUALITY FLOAT WORKS, INC., ON BEHALF OF 
             THE UNITED STATES CHAMBER OF COMMERCE

    Mr. Tipton. Thank you, Mr. Chairman and Ranking Member 
Velazquez. I am very proud to be able to introduce somebody 
from my home area, Montrose, Colorado, and an example of 
American entrepreneurialship, creativity, and job creation.
    And I want to welcome Mr. Bill Patterson from Montrose, 
Colorado. He is the founder and chief engineer of TEI Rock 
Drills, Inc. and is based in Montrose, Colorado. His company 
manufactures high tech drilling equipment for the mining and 
construction industry and has 40 employees. He is also the 
holder individually of six patents relating to rock drilling 
and noise control. He received his master's degree in 
mechanical engineering from Ohio State University in '71 where 
he was summa cum laude and in his current role he oversees full 
operation of the company and leads their international sales 
division. Thanks for being with us today, Bill, and I 
appreciate you making the trip.

                  STATEMENT OF BILL PATTERSON

    Mr. Patterson. Thank you, Scott. And thank you for this. It 
is a unique opportunity for me. I have been here a long time 
ago but this is where the action happens and this is where we 
need to make sure that we do things for small business.
    Let me start by telling my story. You kind of heard the 
background there but I am a mechanical engineer and I started a 
company in 1980. And as with many entrepreneurs, I started the 
business after the company I served as chief engineer, Gardner-
Denver was sold and the machinery division of which I was 
working was essentially cashed out.
    Now, I left there figuring I would never see another rock 
drill in my life except when I drove by it. But what I found is 
that the new company, Gardner-Denver, could not produce. They 
laid off all their workers and I basically went and found the 
workers that were laid off. They were the ones that knew how to 
produce parts and I produced those parts for the clients, my 
clients that I knew, and basically became a pirate part 
manufacturer for Gardner-Denver. That is how I got started in 
business. And I thank Gardner-Denver all the time for doing 
that.
    You know, with our crew we became a family business. I 
brought my sons and daughter in. In fact, my daughter is 
president of the company. And we sell percussion and rotary 
rock drills. We are the last U.S. manufacturer of percussion 
rock drills in the United States. Albany Company does still 
market the jelly drill but we are actually the last one to 
actually produce rock drills. All the other companies have 
either been sold or basically have stopped production. And it 
is a good market.
    To increase jobs and sales we did expand into exports some 
time ago. I worked with the local Colorado Department of Labor 
in international sales and we started marketing primarily to 
South America. The language was one that we understood, and 
that is rule number one. You have to. If you are going to sell 
in any country you have to be a part of that country.
    And we became a leader in rock drilling equipment. 
Primarily, we sell attachments to construction equipment for 
limited access. Our current sales are over $8 million, of which 
about 40 percent typically is exported primarily to America--
North and South America and Europe. We employ about 40 total 
workers and we pay good wages in Montrose, Colorado. That is 
the nice part about manufacturing. Manufacturing tends to pay 
good wages. It is not the service industry. It is a producing 
industry, yet it is a value-added industry, and that is why I 
think it is so important.
    The benefits to trade and job creation. Today our brand is 
sold worldwide. We proudly put ``Made in America'' on every 
unit we sell because that really, I mean, it is amazing. Even 
here, I just got back and was down in Arizona and we had four 
units that are working on the solar generation plant down there 
and those workers said our stickers are falling off. Would you 
bring us more stickers? Because they are proud to be using a 
machine that is made in the United States. And it carries a 
quality connotation that we can also market to the rest of the 
world.
    If we are going to expand we need to be able to sell 
worldwide. It is very difficult for a small company to do this. 
And that is where we need the help because we need a level 
playing field to work with and Congress is in the best position 
to do that. So the free trade agreements under consideration 
are vital for providing a level playing field.
    In particular, what we have found is that one of the major 
problems is transportation. How do you get your product to the 
other country? And how do you make that as seamless as 
possible? The primary advantage of the NAFTA agreement for TEI 
Rock Drills was that we could produce a product, we could put 
it on the truck, and we could ship it into Mexico and Canada 
without changing shippers. And you would be amazed at how 
seamless it is today and how difficult it used to be. 
Everything would stack up in Laredo. So we need these direct 
transportation opportunities. That is an aspect that is in most 
of these bills.
    The other aspect of international trade that we always run 
into is what I call technical requirements. That is where you 
look at trade agreements as leveling the playing field in terms 
of what you have to pay. But even more so is individual 
companies do not erect technical barriers to your sales. And 
this also needs to be addressed. And we have filed--we can 
address most of these. We work 9,000 IFOs, 9,001. And all of 
these make it easier from a technical standpoint.
    And I see I am almost out of time so I had better hurry up.
    But again, what we get in there is Japan--as unique 
technical requirements. And if we are going to export there, 
Korea is working with the United States but that can be a lever 
to make Japan do the same thing. But tariffs are the largest 
barrier, but in particular it is value-added taxes that are 
used as a tariff barrier. And we get that in every country that 
we deal with. It is basically a sales tax. Not many people in 
the United States understand this, but it is as high in Brazil 
as 40 percent. So when we try and sell a product into Brazil, 
we get tacked on a value-added tax.
    And the final issue to be addressed, worldwide trade and 
touching intellectual property. We have patents. It is very 
difficult, very expensive, for any company to protect their 
patents. We protect them very vigorously but the problem is 
that, you know, you need more clout. And what can we do if they 
copy our product other than say, gee, that is too bad and go on 
our way? We need some clout and that is why it is important 
that these trade agreements have protection of intellectual 
property.
    In conclusion, I ask that you reduce the restriction 
starting with the manufacturing business because that is where 
good jobs are created. We need good value-added jobs. It takes 
a tremendous amount of money required per job. We estimate it 
costs a half million dollars in capital equipment for one good 
manufacturing job.
    For access to capital and the expertise, you can use--you 
can get that expertise. The patent needs to be advertised.
    And if I can say one thing from a business standpoint. 
Uncertainty is far more of a barrier than cost or others. We 
can overcome cost. We can be more efficient. But if we do not 
have a certainty with what we are going into as a business, it 
is the greatest barrier that we run into.
    So I thank you. I see I am over time but I appreciate the 
opportunity to come here and speak to you.
    [The statement of Mr. Patterson follows:]

    [GRAPHIC] [TIFF OMITTED] T6201A.001
    
    [GRAPHIC] [TIFF OMITTED] T6201A.002
    
    [GRAPHIC] [TIFF OMITTED] T6201A.003
    
    Chairman Graves. Thank you, Mr. Patterson. At the very 
beginning of your testimony you said that this is where it all 
happens. And I assume what you meant by that is the Small 
Business Committee.
    Mr. Patterson. Yes. Well, I am talking, I mean, I should 
not say that. All politics are local.
    Chairman Graves. You said Small Business Committee. Quit 
while you are ahead. Next, I would like to introduce a 
constituent of mine, Mr. Phillip Wise. And Mr. Wise is the 
owner and operator of Wise Family Farm located in Harris, 
Missouri. He is a local pork producer and operates two 2,400-
head hog facilities on 500 acres. He grew up on the family 
farm. He is an active member of the Pork Producers Association. 
He and his wife, Jane, live on their farm and are the proud 
parents of three grown children. I want to welcome you to the 
Small Business Committee.

                   STATEMENT OF PHILLIP WISE

    Mr. Wise. Thank you very much. Thank you very much. Good 
afternoon, Chairman Graves, Ranking Member Velazquez, other 
members of the Committee.
    I am Phillip Wise. I am a pork producer from Harris, 
Missouri, and unless you have made a series of really bad turns 
I am sure you have never been to my community. I do appreciate 
the opportunity to come here today and speak.
    The future of the U.S. pork industry and the future of 
American family farms such as mine depend on the continued 
expansion of exports. The U.S. is now the lowest-cost producer 
of pork in the world and the number one global exporter of 
pork. Last year nearly 20 percent of pork produced in the 
United States was exported compared to only about 10 percent, I 
am sorry, six percent 10 years ago. In 2010, the United States 
exported more than 1.9 million tons of pork valued at $4.8 
billion.
    There is no disputing that free trade agreements have been 
a major factor in the rapid growth of U.S. exports during the 
past two decades. Since the year before NAFTA was implemented 
in 1994 as an example, U.S. exports to Mexico went from 780 
percent to $986 million last year. Increasing pork exports is 
important to more than just pork producers. The U.S. pork 
industry supports an estimated 550,000 domestic jobs; 110,000 
of those jobs are the result directly of U.S. pork exports. 
Just last year the U.S. exports grew by about a half million 
dollars. The USDA estimates that each one billion in meat 
exports generates approximately 12,000 new jobs, meaning that 
last year the pork exports would have created approximately 
6,000 new jobs.
    Currently, the United States has pending FTAs with 
Colombia, Panama, and South Korea. According to Iowa State 
University economist, Dr. Dermot Hayes, with full 
implementation, three FTAs will generate over $770 million in 
additional pork exports annually, causing live hog prices to 
increase by approximately $11.35, consequently creating more 
than 10,200 direct pork industry jobs.
    But in the year since these agreements were signed, the 
benefits the FTAs would have offered to our nation have been 
lost. Not only have we lost future benefits but also continue 
to lose current market shares in these countries. While we sit 
on our hands, other pork exporting countries are moving forward 
with FTAs of their own with Colombia, Panama, and South Korea. 
In fact, both the European Union, Korea, and the Canada-
Columbia FTAs are set to go in force in about 60 days, July 1st 
of this year. Dr. Hayes estimates or calculates that we will be 
out of the Korean and Colombian markets within 10 years, 
primarily due to the fact that the EU and Canada have these 
FTAs and we do not.
    Losing these markets means lost value to the hogs that I 
sell, which translates ultimately to less profits and less jobs 
in the community. I know firsthand how important agriculture is 
to America as a result of the farm crisis in the early '80s. I 
shut down my business and reduced my farming operations and 
left the community. It was not until recently when things 
appeared to become somewhat more profitable that I returned 
back to the community that I was from after about a 15 year 
absence and began raising hogs again. Today, without those 
industry-wide exports, the price I received for my hogs would 
not allow me to remain in this business. In fact, for every hog 
marketed in 2010, approximately $56 of value is attributable to 
exports.
    This increase in profitability has led Farmland Foods to 
establish a plant in nearby Milan, Missouri, which has allowed 
local producers to expand their operations, which ultimately 
has saved small communities such as my own. In my own operation 
dealing with Farmland, approximately one out of three of every 
hog that I produced last year was exported. I can assure you 
that with the 11.35 percent increase in live hog prices from 
these pending three FTAs, I will not be leaving the farming 
operation anytime soon and will strongly consider expanding my 
operations.
    Before concluding, I would like to point out the U.S. 
domestic policy can and does affect our exports. Currently, 366 
the livestock industry is waiting for a final USDA regulation 
on the buying and selling of livestock and poultry, the GIPSA 
rule, which if implemented as currently drafted will have an 
absolutely devastating impact on producers. According to 
analysis of the rule conducted by Informa Economics, it would 
cost the U.S. pork industry nearly $400 million annually. That 
means our production costs would rise. And if we are no longer 
the world's lowest-cost producer, our exports are going to 
suffer and all the FTAs in the world will not help us. The 
National Pork Producers Council continues to urge the USDA to 
scrap the current GIPSA rule and rewrite the regulations that 
stick to the five mandates that were given to Congress in the 
2008 USDA Farm Bill.
    In conclusion, if the United States fails to implement the 
trade agreements it has negotiated and fails to move ahead with 
new trade deals, it will forfeit sales to foreign competitors 
who are aggressively negotiating FTAs of their own. The 
National Pork Producers Council asks or calls on the Obama 
administration to send up the implementing legislation on the 
Colombia, Panama, South Korea FTAs and urges Congress to 
approve them before its August recess.
    On behalf of myself, the pork producers of the United 
States, agriculture in general, I just want to say thank you 
very much for your time and your consideration of this 
activity. Thank you very much.
    [The information follows:]

    [GRAPHIC] [TIFF OMITTED] T6201A.004
    
    [GRAPHIC] [TIFF OMITTED] T6201A.005
    
    [GRAPHIC] [TIFF OMITTED] T6201A.006
    
    [GRAPHIC] [TIFF OMITTED] T6201A.007
    
    [GRAPHIC] [TIFF OMITTED] T6201A.008
    
    [GRAPHIC] [TIFF OMITTED] T6201A.009
    
    [GRAPHIC] [TIFF OMITTED] T6201A.010
    
    [GRAPHIC] [TIFF OMITTED] T6201A.011
    
    [GRAPHIC] [TIFF OMITTED] T6201A.012
    
    [GRAPHIC] [TIFF OMITTED] T6201A.013
    
    Chairman Graves. Thanks, Mr. Wise.
    Next we will turn to Mr. Peters to introduce the next 
witness.
    Mr. Peters. Thank you, Chairman Graves. I appreciate that.
    I would like to introduce Trevor Myers, who is the CEO of 
Cloyes Gear and Products, an automotive parts and manufacturing 
company with operations in Arkansas and Illinois and in 
Rochester Hills, Michigan, which is not only my hometown but I 
also have the pleasure of representing here in Congress as 
well.
    Cloyes opened a southeast Michigan local in the 1970s and 
they are a tier one supplier for General Motors, Ford Motor, 
and Chrysler, and a leader in the global market in 
manufacturing and supply of automotive timing drive systems and 
components. Mr. Myers has been with Cloyes since 1981 and he 
has served as CEO since 1997. He is testifying today on behalf 
of the Motor Equipment Manufacturers Association, which is 
representative and served manufacturers of motor vehicle 
components since 1904. I am happy Mr. Myers is here to join us 
to discuss how lowering trade barriers can help exports, create 
jobs, and also help provide insight into the perspective of 
manufacturers and auto suppliers on this most important issue. 
Welcome, Mr. Myers. Thank you.

                   STATEMENT OF TREVOR MYERS

    Mr. Myers. Thank you, Congressman. Good afternoon, Chairman 
Graves, Ranking Member Velazquez, and other members of the 
Committee. Thank you for the opportunity to testify this 
afternoon.
    I am Trevor Myers, president and CEO of Cloyes Gear and 
Products. I am here on behalf of Cloyes and the Motor and 
Equipment Manufacturers Association (MEMA).
    MEMA represents over 700 companies that manufacture and 
remanufacture motor vehicle parts for the use in light vehicles 
and heavy duty original equipment and aftermarket industries. 
MEMA and Cloyes support the ratification of the pending free 
trade agreements with South Korea, Panama, and Colombia. My 
company is an example of how free trade can assist a small 
manufacturer, allowing it to grow and employ more American 
workers.
    Cloyes began as a small business in Cleveland, Ohio, 
manufacturing replacement engine timing gears in the 1920s. We 
moved to Arkansas in the early 1960s, beginning with 
approximately 25 people. In the 1970s, we began selling 
products to General Motors. In 1985, we made the decision to go 
global. Our senior management went on a trade mission to Japan 
sponsored by the U.S. Department of Commerce, visiting Japanese 
vehicle manufacturers. Five years after this trip we began to 
do business with Nissan and today Nissan is our third largest 
customer.
    In late 2010, excuse me, in 2005-2006, KPS Capital 
Partners, LLC, took a direct majority investment in Cloyes. KPS 
kept the existing management and growth plan in place because 
both were sound. The KPS strategy is to invest in manufacturing 
businesses that need financial or operational turnarounds. In 
late 2010, our shareholders agreed to merge with HHI, another 
automotive parts manufacturing portfolio company of KPS Capital 
Partners because of the changes the company faced after the 
financial crisis and automotive restricting were better served 
as part of a larger corporation. Today we still operate in an 
entrepreneurial style as an independent division.
    With approximately 750 employees, the Small Business 
Administration defines Cloyes as a small manufacturer in its 
product code. My company is truly a small manufacturer in the 
world of motor vehicle manufacturing. Workers United, an 
affiliate of the SEIU, represents the vast majority of our 
hourly U.S.-based employees. We are primarily a rural-based 
manufacturing business with two plants in Paris and Subiaco, 
Arkansas. These two locations employ approximately 600 people. 
Additional employees are located in Arkansas, Illinois, and 
Michigan, with a small number of international employees. Our 
employees know that they are competing in a highly competitive 
global marketplace. We are constantly training in new 
techniques, such as continuous improvement and six sigma black 
belt activities. The state of Arkansas and the University of 
Arkansas at Fort Smith have greatly aided this effort with 
their incumbent worker training program.
    Export business is growing rapidly. Currently, we export to 
the following countries and regions: France, Germany, Italy, 
Austria, Sweden, the United Kingdom, Colombia, and the Middle 
East. According to the National Association of Manufacturers, 
exports are now 22 percent of U.S. manufacturing production. We 
are a living example of this statistic. In three years, our 
non-NAFTA business will grow to approximately 25 percent of 
sales. In addition, we have benefited greatly from NAFTA, which 
has allowed us to freely sell original equipment and 
aftermarket goods to Mexico.
    Because of our superior value-added manufacturing 
capabilities, technology, and well trained workforce, sales of 
goods to Mexico produced by our U.S. workforce has grown 
approximately 25 percent per year.
    Trade with South Korea is particularly important to a 
company such as Cloyes. We began selling advanced engine 
components to Korea in October of 2010, a new system that 
employs approximately 30 U.S. hourly employees. Engines 
utilizing our components made in Korea are shipped to China, 
Thailand, Australia, and South America. Good trade relations 
are essential to the future growth of additional new programs. 
Moreover, new business opportunities are created in the U.S. 
with Korean transplant business--I mean transplant auto 
manufacturers, as they build U.S. manufacturing locations. We 
will begin producing an advanced engine component in the summer 
of 2011 as another example for sale to General Motors--India. 
This system will employ approximately 10 hourly employees in 
our U.S. plants.
    On behalf of MEMA and Cloyes, I urge Congress to quickly 
consider and ratify all three pending free trade agreements. 
These agreements will increase trade and promote and increase 
U.S.-based jobs. Furthermore, the pursuit of the Trans-Pacific 
Partnership Agreement will open new market opportunities for us 
and other manufacturers.
    In closing, Cloyes and our employees have greatly benefited 
from free trade agreements and the free trade of goods to our 
international customers. Again, thank you for the opportunity 
to testify today and I welcome your questions when appropriate. 
Thank you.
    [The information follows:]

    [GRAPHIC] [TIFF OMITTED] T6201A.014
    
    [GRAPHIC] [TIFF OMITTED] T6201A.015
    
    [GRAPHIC] [TIFF OMITTED] T6201A.016
    
    Chairman Graves. Thank you very much. Next we will turn to 
Mr. Walsh. Please introduce the next witness.
    Mr. Walsh. Thank you, Mr. Chairman, and Ranking Member 
Velazquez.
    It is my pleasure to introduce a constituent, Jason Speer. 
Jason is the vice president and general manager of Quality 
Float Works, Inc. in Schaumburg, Illinois. They manufacture a 
wide variety of metal floatation equipment that is used to 
control the level of liquids and they have 25 employees. Their 
parts go into automobile tanks, water heaters, aircraft, and 
other equipment. Jason is a member of the National Association 
of Manufacturers, the U.S. Chamber of Commerce Corporate 
Leadership Advisory Committee, as well as a member of the U.S. 
Department of Commerce Manufacturing Council. He is testifying 
today on behalf of the U.S. Chamber of Commerce.
    Jason, thank you very much for joining us today.

                    STATEMENT OF JASON SPEER

    Mr. Speer. Thank you very much, Congressman Walsh. Thank 
you, Chairman Graves, Ranking Member Velazquez, and other 
distinguished members of the House Small Business Committee.
    My name again is Jason Speer. I am happy to be here. I am 
sorry if I look a little tired. I just got back from Chile and 
Peru the other day, so please forgive me.
    I live this. Trade is very much a part of what our company 
does. I travel around the world, constantly setting up 
distributors and working with our different distributors and 
helping our company grow.
    We are based, as Congressman Walsh said, out of Schaumburg, 
Illinois. We are a 96-year-old, fourth generation manufacturer. 
We manufacture these right here so you can kind of see what we 
do. I brought along a little visual aid. And we have noticed 
that our growth has come from international.
    Back in 2001, we put forth an international strategy, 
something which I had--since that time we had about three 
percent of our sales were from exporting, mostly to Canada and 
Mexico. Since that time, at that point we had about 13 
employees. Since that time in 2010, our total annual sales, 
about 30 percent were actually from exporting. We export from 
China, Indonesia, all the way through Europe, Australia, and 
all across the world. And we are currently at around just under 
30 employees. So we have definitely seen a significant growth 
in not only sales but our employees because of trade. We are 
currently setting up an office and warehouse in Dubai to 
service our customers in the Middle East and in Asia because of 
the demand that we are seeing.
    We strongly encourage these FTAs because we have noticed 
tremendous growth and advantage in our company being able to 
compete, especially in markets, simple markets like Oman or 
Chile where you would not think there would be a market. We 
noticed we have been able to compete and we have been able to 
get strong business relationships out of those countries that 
we have these FTAs with.
    I especially believe the President's National Export 
Initiative cannot be achieved without the passage of these 
FTAs. It will certainly eliminate a significant amount of 
barriers and help us as manufacturers be able to export to meet 
the President's goals for that program.
    All of our products are made right here in the United 
States and we are proudly, as Mr. Patterson said, ``Made in the 
USA'', it does carry weight and we have inquiries from all over 
the world based on what we do. We are known as one of the 
premier manufacturers of this and we are proud to say we are 
made in the United States and we employ our workers. If it was 
not for trade and exporting, back in 2009 we had a slump in our 
sales due to the economy. If it was not for exporting I do not 
think we would be standing right here. I do not think we would 
have made it to our 96th year. We might have gone out of 
business. Export has kept us alive and that is where we see the 
growth of our company. And that is where, to my wife's dismay, 
I spend most of my time. I try to get on the road and build up 
our exporting business.
    Some of the best stimulus package would be to get these 
free trade agreements not help small businesses that do not 
have the resources like big businesses have to be able to give 
them a little bit of an advantage to get in. We lost a huge 
contract to a South Korean firm to a German company and I 
cannot imagine that part of it has to do with it. I mean, the 
eight percent tariff that we are going to face where the German 
company as of July will have a zero percent tariff for the same 
exact product.
    We have worked with the Department of Commerce in their 
export assistance programs and they have been a tremendous 
resource. And the manufacturing incentive programs. Nothing but 
great help in helping us export.
    You know, I believe that we can certainly compete with any 
company in the world as long as we are playing by the same 
rules. You know, I am convinced of the benefits, like free 
trade agreements, because I have seen a reduction in tariffs 
and government relations have proven and open sales in new 
markets that I never would have thought possible without these 
agreements.
    My company firmly believes that international trade is a 
critical role in fostering the economic growth for America's 
workers and businesses of all sizes but especially for small 
businesses where we do not have the access of the resources 
like the big boys do. In working with the U.S. Chamber of 
Commerce which I am here on behalf of, they have been a great 
advocate in opening up new markets and helping small businesses 
reach out across the world. And again, we need the government 
to help small businesses like ours and to encourage us to do 
this. And again, these free trade agreements are just another 
way of helping us get these things done. You know, simply put, 
more opportunities on a level playing field means more jobs. 
You know, more jobs is what we all want and every little bit 
helps.
    Once again, I truly appreciate the opportunity to share my 
story. This is our product all made in the United States. It is 
what we do here and it has been a joy to be here and I welcome 
any questions or comments anyone has. Thank you very much.
    [The information follows:]

    [GRAPHIC] [TIFF OMITTED] T6201A.017
    
    [GRAPHIC] [TIFF OMITTED] T6201A.018
    
    [GRAPHIC] [TIFF OMITTED] T6201A.019
    
    [GRAPHIC] [TIFF OMITTED] T6201A.020
    
    [GRAPHIC] [TIFF OMITTED] T6201A.021
    
    [GRAPHIC] [TIFF OMITTED] T6201A.022
    
    Chairman Graves. Thank you, Mr. Speer. We will move into 
questions now. I am going to pass on mine. I have questions but 
we have a series of votes coming up so I want to try to get as 
many members as we can to ask. I know I will be back and I know 
they have a busy schedule. So I am going to turn to Mr. West.
    Mr. West. Thank you, Mr. Chairman, and Ranking Member 
Velazquez.
    Mr. Patterson, one of the things that you talked about, and 
I also, when you talk about free trade there is also fair 
trade. We have to make sure that we have that level playing 
field and I think that we see some advantages out there with a 
country like China that we need to help to try to eradicate. 
But when you talk about a couple things here, you said reduce 
restrictions and regulations and also uncertainty, can you give 
me some examples of what you mean as far as some of the 
uncertainty out there that maybe Congress can help to 
alleviate?
    Mr. Patterson. Well, from an uncertainty standpoint, what 
often happens is that, and I hate to use the words kind of like 
a bait and switch, you basically enter into an agreement and 
then you find out that, oh, by the way, you forgot--back there, 
I mean, in terms of a contract. And when we talk about how to 
make it so it is a level playing field it is more along the 
lines of knowing that if you produce a product, by the time you 
get it to the marketplace, that whatever terms you have been 
working on, those will remain. That it will not be, after you 
have the product and you have everything ready to go and now 
the terms are maybe not even revised but restated and it 
creates a difficulty in terms of being able to market that 
product. And we have run into this several times. It is more on 
the technical end than it is on the financial end.
    Mr. West. The other question I had for anyone from the 
panel, when you talk about protection of intellectual property, 
do you see any problems out on the international court systems 
where maybe there is a disadvantage to you where some of these 
foreign countries can, you know, take your patents away and 
reproduce you and undercut you out there in the market?
    Mr. Myers. Well, I would say we have experienced some 
copyright infringements. We are generally able to combat those 
through the use of the courts and so on in the United States. 
We do file patents in the countries that we do business with so 
we try to go internationally but I think as one of the panel 
members this is expensive. And I think ultimately it is up to 
the countries you do business with to enforce those laws. And 
at least with an agreement, if they are strong in intellectual 
property, there is an agreement that we can try to enforce. If 
there is no agreement and no agreement with intellectual 
property, then we really do not have any protection at all. But 
it is important and it is something we do need in the 
agreements.
    Mr. West. And Mr. Wise, I do want to say being from the 
south, keep those pork ribs coming. But I would also like to 
ask you, we have seen the second and third order effects, 
especially with the beef industry with the rise in food prices. 
And I am wondering do you see that also affecting your business 
in the pork industry?
    Mr. Wise. I am sorry. Can you restate that?
    Mr. West. I know. I am speaking southern. Just kidding.
    Mr. Wise. I mean, I missed it.
    Mr. West. No, the thing is we have seen second and third 
order effects on the beef industry from the rise in food prices 
and so I am asking do you see the same thing happening as well 
in the pork industry?
    Mr. Wise. If I understand your question, for instance, 
these FTAs would add about $11.00 to the price of a hog. That 
is maybe four percent in the total value of the pig. And I see 
that as not a significant increase or cost to the consumer, you 
know, as an inflationary cost.
    Mr. West. I yield back, sir.
    Chairman Graves. I believe Mr. Critz is next.
    Mr. Critz. Thank you, Mr. Chairman. Just a couple of quick 
questions.
    For each person on the panel, how did you discover the 
foreign markets to which you could sell your products?
    Mr. Speer. Sure, I can start. We worked with the Department 
of Commerce in a variety of programs and we have done 
matchmaking programs through them. Also, we see ourself as a 
premium manufacturer and people have sought us out in the niche 
market. And also just, you know, sometimes someone finds you 
over the internet, then that leads one path to another.
    Mr. Patterson. Yeah, I would chime in that it was a 
concerted effort. You have to decide that you are going to do 
this and then you have to, if you will, gather the resources in 
terms of help that you get. For us it was a caller in the State 
International Trade Office and they were able to help us by 
marketing, especially in Venezuela and Colombia at the time. 
And so you end up, you know, you have really got to make an 
effort. You have got to think I am going to do this and then 
you have to apply yourself and make it happen. It just--you 
cannot just fall off the log. You really have to push on it.
    Mr. Myers. I would echo Mr. Patterson, Cloyes being in the 
automotive business, it continues to be global business. In the 
mid-90s, as I said in my testimony, we began to look globally. 
For me it was a conversation that I had with another 
manufacturer who was selling overseas. I asked him how he did 
it and he said basically you go there. So we started going 
there and we got with the U.S. Department of Commerce, who put 
on a trade mission, went to Japan, and then we had the success 
after a number of years. And then we continued to go and visit 
the countries and actually find the opportunities. But it does 
take an effort and it is expensive. We are maybe a little 
bigger than some of the people at the table here so we had to 
commit the dollars. But it does take support, I think. It would 
be important for smaller manufacturers to have some kind of 
support to get overseas.
    Mr. Wise. I am not directly involved in negotiating trade, 
etcetera, but it does very directly affect how we raise our 
animals, how we feed them, even how we breed, the types of 
animals, etcetera. I mean, it has a very direct effect on how 
we do things.
    Mr. Critz. Well, the reason I asked that is that in my 
district, we have small business development centers, called 
Centers for Global Competitiveness, and they help companies get 
into that market. You went to Commerce and asked how you get 
into this market. Is that a good analysis of your answers?
    Mr. Patterson. From our standpoint, yes. I mean, we wanted 
to expand and you have a market. We are in a niche market and 
it is so big. In order to expand that market we needed to 
export and go as worldwide as we could. But you have very 
limited access or limited resources in terms of small business. 
So it is vital to have these aid offices and these support 
structures out there that can help you.
    Mr. Critz. Thank you. Free trade agreements have had a 
different impact. I am from the rust belt, and when NAFTA 
occurred, we had a Volkswagen plant that shut down in my area 
and moved to Mexico because it was more cost effective. I don't 
want to say I have heartburn, but I have a more antagonistic 
view of it. Certainly and especially when you are talking about 
foreign products that the United States produces, such as food 
products that we can export. I agree with Mr. Speer that we 
must level the playing field. I think Mr. West mentioned it as 
well, that there is a difference between free trade and fair 
trade, and it seems that our country frequently uses trade 
agreements for State Department purposes. It is wonderful that 
you folks are here, and I am glad to hear you are expanding 
into other markets because that is the future of our economy.
    Thank you, and I yield back.
    Chairman Graves. Mr. Walsh.
    Mr. Walsh. Thank you, Mr. Chairman.
    Much of the testimony, obviously, has been focused on the 
benefits of exports and how they will impact positively each 
one of your businesses and small business in general. Let me 
try to get your thoughts on the inverse of that.
    The potential positive impact on imports from the free 
trade agreements, we know that cheaper imports allow consumers 
to save money through cheaper, final products. They are also 
good for American businesses as well, which often use foreign 
raw materials and capital equipment. Just a quick thought from 
each one of you as to the positive impacts on each of your 
businesses through these trade--free trade agreements as 
related to imports as well.
    Mr. Patterson. Yeah, we work directly with foreign 
companies. In other words, we market the Beretta machines in 
the United States and we also market the Eurogrill which is a 
German product in the United States. And they market our 
products in Europe. And that is one of the ways that we got 
into Europe. And we are right now working with a Swedish 
company to market our products through the Swedish company. And 
that was how we were envisioning being able to, if you will, 
capture the Asian market because we are not large enough to 
really expand that market. But by teaming with other companies, 
in this case we are teaming with a Swedish company who are 
actually owned by a direct competitor to us, and you have to 
remember in our shop we have a sign here that says ``Bring it 
on.'' I mean, we are not afraid of foreign competition. But you 
have to have that ``We can do it'' attitude and not be afraid 
of foreign competition.
    Mr. Walsh. Other thoughts, gentlemen, on how cheaper and 
more reliable imports may impact your business as well?
    Mr. Myers. Well, in our business the components are very 
highly engineered. They go through vigorous testing. So there 
is a barrier in the fact that just to bring anything in does 
not work because it is critical to the automobile's function. 
So maybe we have a little unique situation in the automotive 
industry. Certainly there have been knock-offs and so on but we 
see it as an opportunity because often our goods may go out as 
a single component and then come back as a complete 
transmission, for instance. And we are just beginning a new 
program with a foreign large company that is putting it 
together into a transmission. So we get the benefit of it 
coming back in its finished assembly.
    But it is, so we again, like Mr. Patterson, we are trying 
not to be afraid of it. We try to make sure we put the training 
in place for our workforce so they are highly productive. I 
think our workforce is one of the most productive. I think our 
U.S. workforce is highly--maybe the highest productivity in the 
world and we try to make sure they know that they are a part of 
this as well. They have to work with us and produce a very 
highly technical product and stay competitive because they are 
up against cheaper labor.
    Mr. Walsh. Mr. Speer.
    Mr. Speer. We face a problem where we have had customers 
that have gone overseas or have got imports. And in one 
particular case they all failed so they came back at us 
desperately to rectify it. We do compete with foreign, say 
Chinese made imports. We cater to a higher standard and we--
when I was just in Singapore they were saying that the Chinese 
imports would fail after a few months. And I said, well, we 
have a five-year guarantee so we are able to sell to that and 
able to work. Ours are quality made. But, yeah, there always, 
unfortunately, will be that end but we have been doing it for 
96 years. We know what we are doing. We are kind of, you know, 
we bank on what we have done and on our name and it lends 
credibility. And it is something that we are always aware of 
but we are able to look at the other market that we can be in. 
We can add value by lasting longer.
    Mr. Walsh. Okay. Thank you, Mr. Chairman. I yield back.
    Chairman Graves. Mr. Richmond.
    Mr. Richmond. Thank you. Thank you, Mr. Chairman. Thank 
you, Ranking Member Velazquez.
    Just a quick question for each of you if you can answer 
this pretty quickly. What is your major mode of transporting 
your goods over to your trading partners? And we will start 
with Mr. Speer.
    Mr. Speer. Sure. Ours are small enough. A lot of times we 
will ship like UPS, FedEx. We do ship via container for larger 
orders. And so that is why we are establishing a branch in 
Dubai to help with smaller orders that we can ship locally at 
reduced prices.
    Mr. Myers. Simply, ours go ocean freight.
    Mr. Wise. My product would be primarily truck and ocean 
freight.
    Mr. Patterson. We handle a lot of--the parts go typically 
in some type of either FedEx or UPS or DHL is no longer there 
but we do containers for the larger units. But the 
transportation costs from our standpoint is very critical 
because we are at the end. We are in western Colorado. We are 
not in the harbor so we have to be very careful on our 
transportation costs.
    Mr. Richmond. Well, and I was asking that question because 
I represent the Port of New Orleans and after redistricting it 
appears that I am a representative of the Port of New Orleans, 
the Port of South Louisiana, and the Port of Baton Rouge. So 
when you talk about ports and you lump those together you 
probably have the largest port complex in the country. This 
gets us to a dredging issue, when you are talking about 
containers and the reliability of knowing that you are going to 
have the right depth for ships. How does that affect your 
planning when ordering containers, knowing that you have 
navigable waterways? And that could be for anyone.
    Mr. Myers. I am aware that we are looking at transport up 
the Arkansas River through the port of, I think, New Orleans or 
one of the others you mentioned. So it may have an advantage in 
that regard that we can load straight onto containers into a 
modified river barge situation. And that just came up locally 
in a meeting we had, in a community meeting. So it could have 
an effect in our exports on how we go about the transportation, 
not having to truck it all the way to the port. And so I know 
that specific possibility is being developed.
    Mr. Richmond. When I talked to my port director about our 
largest export from the Port of New Orleans, he said our 
largest export is empty containers going back to other 
countries after they come here. How do we as a Small Business 
Committee or Congress, help fill those containers with American 
products as they are going back overseas, especially if we 
enact these trade agreements?
    Mr. Patterson. I would have to say that enacting trade 
agreements is the first step because if you are, I mean, it can 
be, I can remember one time I was working. I probably was 
trying to ship fresh fruit from California to the east coast on 
air freight. And the problem was that there was no product made 
in the east coast that California needed. So your deadhead 
going back is your major cost. Likewise, if we can set up and 
make the free trade agreement work and get the product flowing 
from the United States so that they are not deadheading, we 
reduce our transportation costs tremendously. And we always 
look at which port we can send this so I would like to know 
more about your port because we typically use Houston.
    Mr. Speer. I would add, too, that, you know, educating 
small business through especially the Department of Commerce is 
educating the importance of exporting and how to is certainly 
vital to getting small business to get in there. And the 
programs that they do is vital to encouraging them and 
educating them how to do it because a lot of small businesses 
just do not know where to go.
    Mr. Richmond. Thank you, Mr. Chairman. And I yield back.
    Chairman Graves. Mr. Tipton.
    Mr. Tipton. Thank you, Mr. Chairman. I appreciate again all 
of you for being here.
    One question we really have not talked a lot about today is 
when you export you have to fill out forms. Have you had any 
experience? Can you give any advice maybe to this Committee in 
terms of some of the regulatory requirements that you face that 
are encumbering your ability to be able to do your business and 
how we can do it better?
    Mr. Patterson, would you like to start?
    Mr. Patterson. Well, it gets back to the uncertainty. I 
mean, quite often what we have had is I remember we were 
shipping into Chile and the problem really was more of a local. 
It was not at the, if you will, the state to state level. It 
was trying to get through this one port. And, I mean, you have 
these small, local problems. Well, for a small business it is a 
killer. I mean, we could not get our product through that port. 
And I am not sure exactly how the trade agreement is going to 
help that but somehow or other we need to stand together and 
work to make it so that they cannot exclude our products in any 
particular location. You know, just from a paperwork 
standpoint. That is entirely what it was. The paperwork is 
never right and it was used as a way, a trade barrier. But, I 
mean, you are fighting with your hands tied behind your back.
    Mr. Tipton. Do any others care to comment on that? You 
know, I think that, and I go back to Mr. Patterson's testimony, 
eight million dollars, I believe if I wrote it down correctly, 
in sales. Forty percent of that is going to be reliant on 
exports and spending about half a million dollars when it comes 
to capital investment to create one good manufacturing job. And 
I do have curiosity that is a little bit off because it will 
affect your ability to be able to create those jobs to be able 
to export. A lot of our current tax code, is that a 
consideration you have in some of those decisions that you are 
making? And even the health care legislation that was passed by 
the last Congress.
    Mr. Patterson. Well, the biggest problem that we have or 
that I notice is the complexity of the tax code. I do not--I 
mean, we all need to pay taxes. I mean, somebody has got to pay 
for everything that is going on. And I do not--how can I put 
it? I do not like to pay taxes any better than anybody else but 
I do not mind paying taxes. I feel that it does good in this 
country. But at the same time, I mean, you have to hire a tax 
expert to work out the tax forms. It just, you know, the 
problem is not the amount; the problem is all the exclusions 
and everything that you need to know. It costs you more to keep 
track of how to pay the taxes than it does to pay the taxes. 
And we need to focus on simplicity.
    Mr. Tipton. So complexity is drawing dollars away that you 
could be investing, create exports, and drive American jobs?
    Mr. Patterson. Absolutely. Yeah. That is the way I feel.
    Mr. Tipton. Any other comments on it?
    Mr. Speer. One of the things that as small businesses, a 
lot of them are family-owned and operated, such as ours, and 
the state tax is a big burden on us having to pay insurance 
premiums. And rather than reinvesting back in our company we 
have to invest in that and prepare for that. And so that is one 
burden that small businesses do face.
    Mr. Tipton. I did have one question. This got me curious. 
What is that particular float used for?
    Mr. Speer. This is used in plumbing and also kennel waters, 
farm water. It just goes up and down and levels it. It is just 
a more standard variety that we have. We sell it all over the 
world.
    Mr. Tipton. Great. And you are handing out samples?
    Chairman Graves. You know, Mr. Wise, I did want to give you 
a chance really to let you explain just how important the pork 
industry and its exports are. When you come from a town of 105 
people, how important is that industry to your community?
    Mr. Wise. In my small community, I do not know the exact 
number. I know there are approximately 3,500 people that are 
locally involved directly in the pork industry, either in the 
slaughter plants or on the farms. I, myself, employ about five 
people throughout the year, just as a farm/grower.
    If we did not--I left the community in the mid-80s. I might 
as well have turned out the lights when I left. I mean, there 
was nothing there. This was before the hog industry came into 
our community, just as it was beginning.
    Mr. Tipton. Thank you, Mr. Chairman. I yield back.
    Chairman Graves. Thank you. We can start with Ranking 
Member Velazquez and then we will come back to you, too.
    Ms. Velazquez. Thank you.
    Mr. Speer, the Korean Trade Agreement contains nothing to 
address the fact that South Korea has a history of currency 
manipulation. Does it make sense to ratify an agreement with no 
safeguards against currency manipulation? And how will that put 
at a disadvantage our American businesses?
    Mr. Speer. Unfortunately, I cannot speak to the exact 
currency manipulation. I am just a business owner. I am not a 
policymaker. I do not know. Where I follow some of the trade 
agreements, I do not know it inside and out. But I just know 
from our end, as a company trying to export, it makes a 
difference. It does make a difference. That extra eight percent 
can make a difference between getting a sale or not.
    Ms. Velazquez. Thank you.
    Mr. Myers, there have been numerous reports of businesses 
in Colombia using violence and intimidation against labor 
unions and disregarding workers' rights to the point that today 
the President announced an agreement with the president of 
Colombia for them to take steps to address those issues. So 
when companies like yours deal aboveboard with an organized 
labor force, does this type of disparity place U.S. companies 
at a disadvantage?
    Mr. Myers. Well, first of all, I think it is a serious 
concern that we treat our workforce, well, and you are right. 
We do treat our people--while we work as a team, we consider 
them family. So in terms of safety and the welfare of our 
workforce, we work as a team. So if it is going on in other 
countries that we do business with, it should be a concern. I 
guess the point is if there is no agreement, then we have no 
leverage with that country. If there is trade going both ways, 
to me there seems to be some leverage through the agreement and 
I think it is important to have an agreement so you can at 
least have some input and maybe in a way some control over this 
serious problem.
    Ms. Velazquez. We have cases like in Colombia and Panama 
where businesses pay lower taxes, face less regulation, and 
have a ready labor force that will work for low wages. And 
every one of the witnesses expressed the fact that it is 
important for American businesses to have a level playing field 
so that you are not put at a disadvantage. Would that not put 
American businesses at a disadvantage?
    Mr. Myers. Well, it is very difficult for a company to 
compete with what our workforce does. They are highly 
productive. The parts--the product that we make. I am not 
speaking for the other witnesses here. It takes a trained 
workforce and the capital and the company as a whole to produce 
a product that somebody wants and the companies want. And that 
is how we get to it. And if you just take a low paid worker 
with poor conditions, they cannot produce the kind of products 
that our workers do.
    Ms. Velazquez. Sure. Mr. Wise.
    Mr. Wise. I guess my . . . I am damn good at what I do. 
Bring on the competition.
    Ms. Velazquez. Mr. Patterson.
    Mr. Patterson. I agree. It is the productivity. I mean, we 
can--we have the capability of being able to compete in a world 
market. But in order to do that we have to do it with increased 
productivity and better quality. And that has to be the focus. 
And we really do not run into this too much because the very 
workers that you are talking about as Mr. Myers talked, they 
really cannot produce the product that we produce. And so they 
are not really that much competition. I mean, they will produce 
a product but that product will not have the value that we can 
get for our products.
    Ms. Velazquez. Thank you.
    Chairman Graves. We will recess. We have three votes. We 
will recess for a short period of time and then we will be 
back.
    [Recess.]
    Chairman Graves. We will call the meeting back to order and 
I will turn to Ranking Member Velazquez.
    Ms. Velazquez. I have no more further questions.
    Chairman Graves. And I have got a few.
    Out of--as much as anything else, when you see countries 
like, and this question is for all of the panelists--we will 
start with Mr. Patterson. When you see countries like Canada 
and the EU, which all are aggressively going after these free 
trade agreements, my question to you is how does that impact 
your ability to compete? Because obviously, you know, and I 
worried about losing those markets for a long, long time. And 
so that is the biggest thing. You know, what that does in terms 
of your long-term planning. You talked about uncertainty out 
there. You know, does that worry you considerably when you see 
these countries that are grabbing those units up? Mr. 
Patterson.
    Mr. Patterson. Yeah, we deal a lot with the European Union. 
And I have to say that right now we have an advantage over them 
mainly because of the currency exchange. But that can change 
overnight. And what the European Union has been doing has been 
primarily setting up technical standards. And the U.S. is well 
advised in my opinion to look at how these are structured and 
make sure that it is used to our advantage as well as theirs. 
It is molded around the IFO standards in terms of looking at 
quality. In other words, the IFO is really just there so that 
you can ensure that the vendors, the people you are buying from 
are providing a quality product and you can trace it back. So 
it is a bookkeeping scheme. It is definitely more costly to do 
it that way but in the long run I think that that is what the 
U.S. is also going to end up having--any successful U.S. 
manufacturer is going to have to address the quality 
requirements in IFO. And in any trade agreement we need to look 
at to make sure that, you know, they have the same requirements 
selling here as we do selling there.
    And I would say the only other thing we have run into has 
been on the safety issues. Especially in the European market 
they have a lot of unique safety requirements for moving 
machinery that we have had to address. But at the same time we 
have been able to, I mean, how do I put this? Especially in the 
English market, we have come up with a solution to some of the 
safety requirements that they had for their drills. And I will 
have to admit, it was much to the dismay of the British and 
German producers that were selling in that country because they 
were not able to do that.
    So it can work. We need to be very careful of how we do 
this for that level playing field, but spell it out and tie it 
to an international standard, if you will, so that everybody 
has to follow that same technique, if you will, or process. 
Whether it goes to Germany or, you know, as an export or as an 
import. That is the way I would address it.
    Chairman Graves. Mr. Wise. I know for pork producers it is 
a little bit different and you obviously are not directly 
involved----
    Mr. Wise. No, but----
    Chairman Graves [continuing]. In export agreements but you 
have got to be worried about the aggressiveness.
    Mr. Wise. As Dr. Hayes has stated, particularly with the EU 
and Korea and Colombia, the Colombia FTA, we will be out of 
those markets within 10 years. Specifically in today's Korea, 
our current market share in the last two years has reduced 
itself by about 15 percent and we are continuing to lose 
competitive edge there as we speak today.
    Chairman Graves. In fact, you might even address, too, and 
you just did, the amount of market share that you have lost. 
Mr. Patterson.
    Mr. Patterson. We operate in a very technical, very niche-
type market. And our focus is to dominate that niche worldwide, 
if we can. And so from that standpoint we focus more on making 
sure that our product is superior in any ways that we can. And 
of course, that is what the competition tries to do. We just 
try to be smarter about it.
    And I hate to use the term but we do not operate in a rope, 
dope, and soap market. I mean, we do not sell by the pound, we 
sell by the unit and we sell productivity. And it is entirely 
different from a marketing standpoint. So we can command and 
get higher margins than, if you will, if you are selling a 
product that is really based on a commodity basis where you 
have so many different producers, so many different people all 
producing the same thing. So then it gets down to kind of a 
relationship and, you know, it is a much tighter market than 
what we are dealing with. It is a lot different.
    Chairman Graves. Mr. Myers.
    Mr. Myers. Mr. Chairman, if I understand your question, you 
are asking if we feel competition can get ahead of us if a 
trade agreement is signed by another country or area like the 
EU or some other country.
    Chairman Graves. Yes. And then also as a dovetail to that, 
the fact that Congress and the administration have not acted on 
these, how much market share?
    Mr. Myers. Well, the automotive business, maybe somewhat 
like Mr. Patterson's business, is very technical. And our 
strongest competitors are in the EU and in Japan. So if they 
are ahead of us, their companies that we compete with can be 
ahead of us, if they are ahead of us in line to trade with the 
partners that we trade with, our customers. So it is a concern 
of ours that we get something moving so we do not get behind 
our strongest, most technical competitors. Our most technical 
competitors, much like you have heard others say, is not 
necessarily out of China but it is out of the EU, Japan. Those 
are developed countries that have the technology to compete 
with us.
    Chairman Graves. Mr. Speer.
    Mr. Speer. As I stated during my testimony, we lost a major 
contract to a German company recently in South Korea and so it 
has caused us to reevaluate going into that marketplace at this 
time and sit back and look at other areas where we can compete 
better. But again, we are competing with a high quality--in the 
EU and that is our biggest competition.
    Chairman Graves. I appreciate all of you participating 
today very much. Again, I know some of you traveled a long ways 
to be here but we are going to continue to, you know, it is 
important, I think, to continue to look at these free trade 
agreements and we are going to try to get these passed just as 
quickly as possible and move forward. I very much believe that 
particularly in the agriculture field, which I am intimately 
familiar with. But I appreciate your testimony today on this 
very important issue and I would ask unanimous consent that 
members have final legislative--make statements and supporting 
materials for the record. Without objection, so ordered.
    And with that, this hearing is adjourned.
    [Whereupon, at 2.48 p.m., the hearing was adjourned.]

    [GRAPHIC] [TIFF OMITTED] T6201A.023
    
