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


 
  COMMERCE, JUSTICE, SCIENCE, AND RELATED AGENCIES APPROPRIATIONS FOR 
                                  2012 
=======================================================================




                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS
                              FIRST SESSION
                                ________

    SUBCOMMITTEE ON COMMERCE, JUSTICE, SCIENCE, AND RELATED AGENCIES

                   FRANK R. WOLF, Virginia, Chairman
 JOHN ABNEY CULBERSON, Texas               CHAKA FATTAH, Pennsylvania
 ROBERT B. ADERHOLT, Alabama               ADAM B. SCHIFF, California
 JO BONNER, Alabama                        MICHAEL M. HONDA, California
 STEVE AUSTRIA, Ohio                       JOSE E. SERRANO, New York
 TOM GRAVES, Georgia
 KEVIN YODER, Kansas                

 NOTE: Under Committee Rules, Mr. Rogers, as Chairman of the Full 
Committee, and Mr. Dicks, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
             Mike Ringler, Stephanie Myers, Leslie Albright,
                    Diana Simpson, and Colin Samples,
                           Subcommittee Staff
                                ________

                                 PART 6
                                                                   Page
 Department of Commerce...........................................    1
 U.S. Patent and Trademark Office.................................  183
 National Institute of Standards and Technology...................  269
 National Oceanic and Atmospheric Administration..................  337
 Office of the United States Trade Representative.................  465

                                   S

                                ________

         Printed for the use of the Committee on Appropriations

















PART 6--COMMERCE, JUSTICE, SCIENCE, AND RELATED AGENCIES APPROPRIATIONS 
                                FOR 2012
                                                                      


















  COMMERCE, JUSTICE, SCIENCE, AND RELATED AGENCIES APPROPRIATIONS FOR 
                                  2012
=======================================================================





                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS
                              FIRST SESSION
                                ________

    SUBCOMMITTEE ON COMMERCE, JUSTICE, SCIENCE, AND RELATED AGENCIES

                    FRANK R. WOLF, Virginia, Chairman
 JOHN ABNEY CULBERSON, Texas               CHAKA FATTAH, Pennsylvania
 ROBERT B. ADERHOLT, Alabama               ADAM B. SCHIFF, California
 JO BONNER, Alabama                        MICHAEL M. HONDA, California
 STEVE AUSTRIA, Ohio                       JOSE E. SERRANO, New York
 TOM GRAVES, Georgia
 KEVIN YODER, Kansas                

 NOTE: Under Committee Rules, Mr. Rogers, as Chairman of the Full 
Committee, and Mr. Dicks, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
             Mike Ringler, Stephanie Myers, Leslie Albright,
                    Diana Simpson, and Colin Samples,
                           Subcommittee Staff
                                ________

                                 PART 6
                                                                   Page
 Department of Commerce...........................................    1
 U.S. Patent and Trademark Office.................................  183
 National Institute of Standards and Technology...................  269
 National Oceanic and Atmospheric Administration..................  337
 Office of the United States Trade Representative.................  465

                                   S

                                ________

         Printed for the use of the Committee on Appropriations
                                ________

                     U.S. GOVERNMENT PRINTING OFFICE

 67-061                     WASHINGTON : 2011


















                         COMMITTEE ON APPROPRIATIONS

                    HAROLD ROGERS, Kentucky, Chairman

 C. W. BILL YOUNG, Florida \1\        NORMAN D. DICKS, Washington
 JERRY LEWIS, California \1\          MARCY KAPTUR, Ohio
 FRANK R. WOLF, Virginia              PETER J. VISCLOSKY, Indiana
 JACK KINGSTON, Georgia               NITA M. LOWEY, New York
 RODNEY P. FRELINGHUYSEN, New Jersey  JOSE E. SERRANO, New York
 TOM LATHAM, Iowa                     ROSA L. DeLAURO, Connecticut
 ROBERT B. ADERHOLT, Alabama          JAMES P. MORAN, Virginia
 JO ANN EMERSON, Missouri             JOHN W. OLVER, Massachusetts
 KAY GRANGER, Texas                   ED PASTOR, Arizona
 MICHAEL K. SIMPSON, Idaho            DAVID E. PRICE, North Carolina
 JOHN ABNEY CULBERSON, Texas          MAURICE D. HINCHEY, New York
 ANDER CRENSHAW, Florida              LUCILLE ROYBAL-ALLARD, California
 DENNY REHBERG, Montana               SAM FARR, California
 JOHN R. CARTER, Texas                JESSE L. JACKSON, Jr., Illinois
 RODNEY ALEXANDER, Louisiana          CHAKA FATTAH, Pennsylvania
 KEN CALVERT, California              STEVEN R. ROTHMAN, New Jersey
 JO BONNER, Alabama                   SANFORD D. BISHOP, Jr., Georgia
 STEVEN C. LaTOURETTE, Ohio           BARBARA LEE, California
 TOM COLE, Oklahoma                   ADAM B. SCHIFF, California
 JEFF FLAKE, Arizona                  MICHAEL M. HONDA, California
 MARIO DIAZ-BALART, Florida           BETTY McCOLLUM, Minnesota
 CHARLES W. DENT, Pennsylvania
 STEVE AUSTRIA, Ohio
 CYNTHIA M. LUMMIS, Wyoming
 TOM GRAVES, Georgia
 KEVIN YODER, Kansas
 STEVE WOMACK, Arkansas
 ALAN NUNNELEE, Mississippi
   
 ----------
 1}}Chairman Emeritus    

               William B. Inglee, Clerk and Staff Director

                                  (ii)

















  COMMERCE, JUSTICE, SCIENCE, AND RELATED AGENCIES APPROPRIATIONS FOR 
                                  2012

                              ----------                              

                                          Thursday, March 17, 2011.

                        DEPARTMENT OF COMMERCE 

                                WITNESS 

HON. GARY LOCKE, SECRETARY, DEPARTMENT OF COMMERCE

                   Opening Remarks From Chairman Wolf

    Mr. Wolf. Welcome, Mr. Secretary. Good afternoon.
    There are going to be a series of votes coming up pretty 
soon. So we will just proceed.
    We have a number of issues to discuss with you today with 
respect to the fiscal year 2012 budget. You are requesting $8.8 
billion in a new budget authority that amounts to $868 million 
or about 11 percent higher than the House-passed Continuing 
Resolution for fiscal year 2011.
    The largest increases in your budget include an additional 
$768 million for the National Oceanic and Atmospheric 
Administration, $145 million for the National Institute of 
Standards and Technology, $70 million for the International 
Trade Administration, and these increases are partially offset 
by reductions in Census totaling $199 million.
    These funding changes are just a few within Commerce. 
Practically every account within Commerce is increasing in your 
request. You are also proposing a number of new initiatives in 
your budget as well as the termination of a few small but 
potentially significant programs.
    The Congress unfortunately will not be in a position to 
provide such increases. The fiscal crisis facing the Nation is 
real and will require a level of austerity that goes beyond the 
President's budget. So we are going to ask you to help 
prioritize.
    And this is not in the statement, but I am sorry to see you 
go, frankly. And it is probably not a good appointment in all 
honesty because I think you are engaged in this thing and your 
ideas with regard to exports. And now you are going to have a 
vacancy there for a long period of time.
    But I want to congratulate you on your nomination. But when 
I heard it, I did not think it was such a good idea because of 
that very reason. But there are some questions we will have. 
These are not confirmation hearings obviously on China, but I 
will have some questions with regard to China, to encourage 
more job growth in manufacturing in this country.
    I will go to Mr. Dicks if he wants to make a comment and 
then we will go to your testimony.

                    Opening Remarks From Rep. Dicks

    Mr. Dicks. Well, thank you, Mr. Chairman.
    And, Secretary Locke, it is good to see you and we 
congratulate you on your nomination to be Ambassador to China. 
We have worked together since you were King County executive 
and governor of Washington. And I think you have done a fine 
job as Secretary.
    We have some great initiatives, the National Export 
Initiative, the Manufacturing Extension Partnership, just to 
name two. And we were pleased with your work on comprehensive--
with NIST's effort on comprehensive cybersecurity.
    I am concerned, and I hope you will have a chance to 
discuss this during the hearing, on the effects of H.R. 1 on 
NOAA procurement, acquisition, and construction. And we are 
concerned about the tsunami that has happened in Japan and what 
the effect of these budget cuts would be on our weather 
satellites and our buoys out in the ocean which I know are very 
important.
    And I hope you could tell us what the impact of the $450 
million cut will be in H.R. 1. I think you are in an ideal spot 
to be able to translate this, and this process is not over yet. 
We are still trying to make sure that we, you know, make 
appropriate cuts. And if there has been mistakes made, we still 
have a chance to review this in light of the current 
circumstances.
    Thank you, Mr. Chairman.
    Mr. Wolf. Thank you, Secretary. Proceed.

                  Opening Statement by Secretary Locke

    Secretary Locke. Thank you very much, Chairman Wolf and 
distinguished Members of the subcommittee. I am really pleased 
to join you today to talk about the President's budget request 
for the Department of Commerce for fiscal year 2012.
    Since I joined the Department of Commerce two years ago, we 
have focused on delivering our services more efficiently and at 
less cost to the taxpayer. Those efforts have paid off.
    The 2010 Census was completed on schedule and under budget, 
returning $1.9 billion to the taxpayers.
    Our Economic Development Administration has cut the time it 
takes to grant awards from 128 business days to 20 business 
days.
    Our Patent Office reduced an application backlog of almost 
800,000 when the President assumed office. We have reduced by 
10 percent last year even as applications surged by 7 percent.
    And next month, we will be rolling out and starting a 
program allowing applicants to have their patents evaluated 
within one year for a very small extra fee.
    Our efficiencies and cost savings are not one-time 
achievements. We have instituted comprehensive performance 
management processes throughout the Department which should 
help our reforms stand the test of time.
    And it is in this context of proven savings and performance 
that I hope the committee will consider Commerce's fiscal year 
2012 budget request.
    Our 2012 budget request is lean. It cuts outdated programs, 
drives major efficiencies in others. And our budget 
incorporates $142 million in savings thanks to significant IT 
improvements, aggressive acquisition reform, and other 
administrative savings.
    At the same time, it contains key investments that will 
help America win the future by spurring innovation, increasing 
America's international competitiveness, and supporting 
scientific research as well as supporting our coastal 
communities. These are core missions of the Department of 
Commerce.
    On the innovation front, the Department of Commerce is 
responsible for providing the tools, systems, policies, and 
technologies that give U.S. businesses a competitive edge in 
world markets. And that is why we are requesting additional 
funds for our National Institute of Standards and Technology 
including an increase of more than $100 million for research 
into advanced manufacturing technologies, health information 
technologies, cybersecurity, and interoperable smart grid 
technology.
    These investments in standards setting and in basic 
research, which are often too risky or too expensive for the 
private sector alone, have historically spurred waves of 
private sector innovation and job creation.
    To further support innovation, our 2012 budget request 
calls for the U.S. Patent and Trademark Office to gain full 
access to its fees so that we can expand the already 
substantial reforms undertaken by Under Secretary David Kappos, 
working with line staff, labor, and career managers. These 
reforms will help get cutting-edge inventions and technologies 
into the marketplace much more quickly which will then create 
jobs.
    The Commerce Department, through our International Trade 
Administration, is playing a lead role in the President's 
National Export Initiative, which seeks to double U.S. exports 
by 2015. American companies, especially small- and medium-size 
businesses, rely heavily on the federal governmental support 
available under the National Export Initiative. I hear about it 
everywhere I go.
    These companies often face significant hurdles in getting 
access to working capital to produce the goods they want to 
sell abroad or simply finding reliable foreign customers and 
vendors for their American-made goods and services.
    Our International Trade Administration helps many companies 
clear these hurdles. And last year, we helped more than 5,500 
U.S. companies export for the first time or increase their 
exports. We coordinated an unprecedented 35 trade missions to 
31 different countries.
    These efforts are paying off with U.S. exports up 17 
percent last year and indeed exports to China were up 34 
percent last year. Our fiscal year 2012 budget envisions more 
funds for activities such as business-to-business match-making 
services and identifying and resolving trade barrier issues.
    Finally, I want to touch on the critical work done by our 
National Oceanic and Atmospheric Administration or NOAA, an 
agency that is a key source of scientific information which is 
also increasingly critical to America's economy.
    Last year, NOAA played a pivotal role in responding to the 
BP Deepwater Horizon oil spill by providing targeted weather 
forecasts, oil spill trajectory maps, and by ensuring the 
safety of Gulf seafood.
    This past week, NOAA issued its first tsunami warning just 
nine minutes after the tragic earthquake struck Japan. NOAA was 
able to so quickly sound the alarm because of strong 
congressional support.
    In 2004, before the tsunami that struck Indonesia, NOAA had 
only six buoys in the Pacific to detect seismic and wave 
activity. Today thanks to congressional support, it has 39 
buoys.
    So the work that NOAA does to predict and respond to 
weather and natural disasters saves communities, saves them 
money and, most importantly, saves lives.
    What I discussed is, of course, just a fraction of the work 
of the Commerce Department and I direct you to our written 
testimony for greater detail.
    In the meantime, we are happy to answer any questions that 
you might have.
    [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Wolf. Thank you, Mr. Secretary.
    Mr. Fattah, you have a statement you want to----
    Mr. Fattah. I will reserve. Thank you.
    Mr. Wolf. Sure. Thanks.

                        TSUNAMI WARNING NETWORK

    A couple of issues and I kind of will jump around. But 
first we extend our sympathies to the citizens of Japan. The 
tsunami that struck there on March 11, 2011, has caused extreme 
devastation and we wish them the best in their recovery.
    I think I can speak for other Members, but I certainly 
speak for myself that we will support, and I think I speak for 
this entire committee, efforts to provide relief and technical 
expertise and other forms of support to Japan during this 
period of recovery.
    There has been much discussion since the terrible tsunami 
in Japan about our country's ability to forecast tsunamis. I 
want to assure everyone that H.R. 1 does not cut funding for 
the tsunami network.
    In fact, there are no specific cuts to any program in NOAA. 
Rather, if H.R. 1 is enacted, the Department of Commerce will 
be required to submit a spending plan to the committee for 
approval. The committee will work with NOAA to ensure that life 
and safety programs are not cut.
    For the record, and I will give you a letter before you 
leave, Mr. Secretary, the funding levels for the National 
Oceanic and Atmospheric Administration in H.R. 1 is $4.4 
billion. This amount is $456 million or 12 percent above the 
fiscal year 2008 level but $410 million or nine percent below 
the fiscal year 2010 level.
    Between fiscal year 2008 and fiscal year 2010, NOAA funds 
increased by 22 percent higher than any other program in this 
bill. NOAA's base funding for tsunami warning network has been 
about $28 million since fiscal year 2008.
    In addition to this base funding, following the Indonesian 
tsunami in 2004, NOAA received three supplemental 
appropriations to improve its tsunami warning programs and 
activities. The Congress provided $17.2 million in Emergency 
Supplemental Appropriations Act for Defense, the Global War on 
Terror, and Tsunami Relief, 2005. That was Public Law 109-13 
for NOAA to enhance tsunami warning capabilities and 
operations.
    NOAA received another $50 million in the Deficit Reduction 
Act of 2005, Public Law 109-171, for tsunami warning and 
coastal vulnerability programs.
    Finally, NOAA received another $10 million in the Security 
and Accountability For Every Port Act of 2006, Public Law 109-
347, for outdoor alerting technologies in remote communities.
    I have been, and we are going to put a copy of the letter 
in, involved when frankly not many people did very much. We 
wrote--I believe you were governor. Were you governor in--when 
were you governor?
    Secretary Locke. From 1997 to 2005.
    Mr. Wolf. Yes. We wrote you. We wrote every governor all 
along the East Coast and the West Coast. We called the UN. And 
we are going to submit a copy of the letter we wrote urging the 
governors to act on tsunami activities, because many were not 
doing what they should have done, to move ahead aggressively 
with tsunami preparation.
    So I will personally tell you we did everything possible 
and the staff did, Mike and the staff, to make sure, because 
when I saw the scenes of what took place in Indonesia, we 
forced governors and we forced administrations and forced 
localities not only on the West Coast but also on the East 
Coast from all the way to Maine all the way down to Miami to 
aggressively move ahead. So we have been involved in tsunami 
funding issues for a number of years. And we will submit the 
letter in the record.
    And I believe very strongly in the need for this program 
and I personally will assure that these important life-saving 
programs such as the NOAA Tsunami Warning Network and 
associated programs are not cut.
    But I want you to take the letter. And if you would go back 
and check your files--if you have access to your files--you 
will probably find the letter that I sent you urging you as 
governor, because the governors were not doing a very good job, 
to move ahead aggressively.

                   NOAA SATELLITE BRIEFS TO CONGRESS

    The other thing I want to raise before we get into the 
questions, we have been told by the staff for the record no one 
from NOAA, and this is with regard to satellites, no one from 
NOAA or the Department of Commerce has spoken with the 
Republican side about funding for the satellites.
    We run this subcommittee hopefully in a bipartisan way. I 
was chairman of it in a different life for six years. We never 
made these issues partisan. We just did not.
    Now, I will tell you last year, there are many times the 
Democratic administration would not even come up and talk to 
me. I mean, I was really not approached. There was an election. 
It changed. Some people like it. Some people do not.
    But if we are going to have a bipartisan--really to go up 
and just talk to one side, which is very appropriate, and not 
talk to the other, it is inappropriate.
    So I am just asking you, and you ought to tell the head of 
NOAA, if they are going to come up and go to one side, they owe 
it to the Republican staff and if they are going to talk to the 
Republican staff, they ought to talk to the Democratic staff. 
But they ought to treat this in truly a bipartisan way.
    So for the record, and you are welcome to comment, no one 
for NOAA or the Department of Commerce has spoken to the 
Republican staff about funding for the satellites. The 
subcommittee with the allocation we receive for H.R. 1, the 
House passed year-long supplemental, provided anomalies to 
three only accounts, the Bureau of Prisons, the Broadband 
Technology Opportunities Program, and the NOAA satellites. So 
much for people even thinking about that.
    I must also point out that the Senate CJS Subcommittee, 
which received a higher allocation than we did, did not 
provide, and the last time I knew the Democrats were 
controlling the Senate, Mr. Reid, a person who I know and like, 
a good person, controls the Senate, and they did not provide 
any additional funding for the satellites in its failed CR 
bill.
    So if there's going to be integrity on this thing, your 
office and your CFO and the people in congressional relations, 
when they come up to talk to the Republican side, I urge them 
to tell Mr. Fattah exactly what you told us. I mean, treat 
everybody fairly.
    And if you are going to come up to talk to Mr. Fattah's 
people, then I would ask you out of respect to come up and do 
the same thing to our staff. And why didn't they do that?
    Secretary Locke. Are you asking for----
    Mr. Wolf. Yes, sir.
    Secretary Locke. Thank you very much, Mr. Chairman.
    I was not aware that there has not been reciprocity and I 
certainly would encourage our staff to talk with all sides 
because we need as many members of the congressional committees 
to understand the budgets and the programs and the policies of 
the Department of Commerce.
    Mr. Wolf. And would you not agree that this is not a 
political issue?
    Secretary Locke. Oh, very much so. I very much agree that 
it is a nonpartisan issue. The funding for any agency is a 
bipartisan issue.
    Mr. Wolf. Okay. And could you let us know what response you 
get from the head of NOAA when you talk or to your 
congressional relations office about this?
    Secretary Locke. I will very much let you know.
    Mr. Wolf. Good. I appreciate it very much, sir.
    Here is the letter which I will submit for the record. 
``Wolf urges Administration to take lead on tsunami early 
warning systems. Washington, D.C., Rep. Frank Wolf,''--this is 
December 29, 2004-- ``Chairman of the Commerce, Justice, State 
Appropriations Subcommittee sent a letter today to Vice Admiral 
Conrad Lautenbacher, Under Secretary of Commerce for Oceans and 
Atmosphere, urging the Administration to take the lead in 
developing an enhanced tsunami prediction and warning 
capability for the U.S. and the world. [ . . .] I am writing 
today in light of the recent tragic . . .,'' and we will just 
submit it for the record.
    But this committee was very much involved and I personally 
was because when I saw those scenes, and when I watched what is 
taking place in Japan today, my heart goes out to those people. 
So we will make sure that that issue will be dealt with.
    And if there is anybody that thinks it is not being dealt 
with, just give us a call, area code (202) 225-5136. And if 
they cannot reach us, just call the Capitol switchboard and 
they can track me down. Now, we will just submit that letter 
for the record there.
    [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
                        FEDERAL BUDGET CONCERNS

    Mr. Wolf. You know, I think you know, I think we all have 
to be careful when we come--I am going to get this--kind of 
cleanse this to get this off my chest, too, because I know it 
would have come out later on. Any cuts that are coming, some 
may be in areas that I do not particularly like. I gave a 
statement on the Floor of the House, and I said I worry about 
the poor.
    In Proverbs, it says when you give to the poor, you give to 
God. And I worry about the poor. But this Administration has 
failed to come forward to deal with the fundamental issue that 
Senator Warner and Senator Durbin and people like that, and 
Saxby Chambliss, are trying to do to get control of the 
entitlement issue.
    And Ruth Marcus from the Washington Post did a story titled 
``Waiting for Waldo.'' The President of the United States 
appointed the Bowles-Simpson or Simpson-Bowles Commission. I 
have said I will support their recommendation. There are some 
things in there that I may not completely agree with. Hopefully 
it will be done in such a way that we can have an amendment 
process to argue these things out knowing that we have to come 
to whatever numbers. If you want to change something, then you 
would have to offer something.
    But the President has failed to come forward, so to say--
and last month in February, the shortest month of the year, we 
had the largest, I think, deficit we have ever had for one 
month. It is a deficit for one month that we used to have for 
years that people used to complain about.
    And I think you have done a good job. Personally I was 
really sorry, glad because I think you will be tougher in China 
than the current ambassador was and maybe the previous 
Administration, because we have had conversations, and I know 
what you care about, so I was kind of glad, but I was sorry to 
see you appointed as Ambassador to China because I think what 
you have done at Commerce and the idea of increasing exports, 
so you are going to be out of the Cabinet.
    But the next time you say, say there is this congressman 
named Wolf, maybe it is Fox, Wolf, say I forget his name, but 
he is saying the President has to come forward to deal with the 
deficit and he ought to do it by the end of this year.
    And if we come forward in a bipartisan way, if Tom Coburn 
and Dick Durbin can sign that, and I have listened to Mr. 
Fattah, he said he could and I could, if we could do that then, 
but we really need the President to provide that leadership.
    So as we agonize about some of these cuts, and some are 
difficult and some I am not anxious about doing, but until you 
deal with the entitlements--Willy Sutton, the bank robber, said 
he robbed banks because that is where the money is. The money 
is in Medicare, Medicaid, and Social Security.
    And also I hear the President, just to get it off my chest, 
talking about how great it was working with the Republicans and 
Democrats in September. We got this tax bill passed. It shows 
you we can work together. That is like giving candy away. 
Anybody can work together to give things away.
    In that, and one thing with regard to the payroll tax, with 
regard to Social Security, that will cost the Federal 
Government $112 billion. You gave Jimmy Buffett and Warren 
Buffett a Social Security tax break. Neither of them needed it. 
Neither of them wanted it. You would have been better giving it 
to the poor or putting it in math and science and physics and 
chemistry and biology.
    So the President has got to come forward on this issue and 
work with Speaker Boehner and work with Mr. McConnell and Mr. 
Reid and the Speaker and former Speaker, have everyone come 
together in a bipartisan way to get these ideas out. And if we 
do that by the end of the year, then I think we can resolve a 
lot of the issues that have come up.
    And I have taken more time. I am just going to go to 
questions and go to Mr. Fattah since he did not have an opening 
statement.

               OPENING STATEMENT BY REPRESENTATIVE FATTAH

    Mr. Fattah. Thank you, Mr. Chairman.
    And let me say just so there is no confusion, my office, 
you know, because we have not been on the subcommittee as long 
as the Chairman has been and we are trying to learn about these 
various agencies, so we are asking agencies--and I am 
traveling. Like I was out in your district. I visited the 
Center for Missing and Exploited Children. I am trying to see 
and learn as much as I can about all of the agencies.
    So if my staff invited NOAA up to talk to me, it was not as 
if NOAA was seeking to somehow just come see me versus see you 
or whatever. That was a request made. You know, as we are 
making it, I met with any number of people who are affected by 
the bill only so that I can be as prepared as possible to work 
in a bipartisan way with the Chairman, because I am convinced 
that we can have a bipartisan bill.
    So I do not want the Secretary to bear the burden for the 
zealousness of my staff trying to make sure that I am 
adequately informed. And I do not believe that in any way that 
NOAA would be seeking to give--if they were going to provide 
one side information, you would want to provide it to the 
majority because in this House, the majority has its way and in 
the minority, we get to have our say.
    So I do not think that they would be--they would be ill 
advised if they just provide information to me. So I want to 
clarify the record in that respect.
    And this hearing, Mr. Secretary, has been moved from 2:00 
to 1:30 and I was off campus giving a speech and we had some 
security issues getting back on campus with some traffic. So I 
apologize for being a few minutes late.
    I know that the Ranking Member of the full committee is 
here, and I know my seniority, so I will be glad to yield to 
Ranking Member Dicks first and then we will go on from there.
    Mr. Dicks. Let me just say there has been a lot of 
discussion about this, and I appreciate the Chairman's 
leadership on this issue over the years. And he has always been 
extremely fair.
    What we are worried about is the level of these cuts in 
NOAA and whether that will affect the weather service.

                          NOAA FUNDING LEVELS

    Mr. Dicks. Okay. Here are the numbers. The request in 2011 
for operations, research, and facilities is $3.3 billion. H.R. 
1 cuts it to $2.8 billion.
    Will that have a negative effect on the weather service and 
on our buoys and on our tsunami early warning system? I am told 
that would be a 28 percent cut.
    Secretary Locke. Well, Congressman Dicks, let me just say 
that if we are looking at, for instance, just the 2010 enacted 
budget and if you exclude all the extra spending that was 
associated with the census, first of all, let me just say that 
the 2012 President's request for Commerce is roughly $822 
million above the 2010 enacted budget of which the President 
has requested almost $687 million for JPSS, the satellite 
program, which only leaves about $135 million for all other 
programs and activities within the Department of Commerce.
    Now, if we then look at H.R. 1 and to the operations, 
research, facilities portion of NOAA's budget, that is where 
the weather service and other programs, tsunami programs are 
located, H.R. 1 specifically reduces the level of funding for 
that segment of NOAA's budget by 16 percent from the 2010 
enacted level and----
    Mr. Dicks. And that number is $450 million?
    Secretary Locke. I would have to get you the exact figure.
    Mr. Dicks. Yes. We do not have your----
    Secretary Locke. I do not have that in front of me. But 
obviously we can always try to prioritize and we will try to be 
as efficient as possible. But you just cannot avoid the math, 
16 percent cut, and that includes not just--I mean, if we were 
to keep all the tsunami programs intact, we would have to make 
those cuts elsewhere, whether it is in hurricane forecasting or 
ocean navigation for ships, et cetera, et cetera.
    And right now, and I do want to thank the Congress and the 
chairman's leadership in the past in the aftermath of the 
tsunami that hit Indonesia. As I indicated, at that time, we 
only had six buoys in the Pacific and now we have some 39, 
thanks to the leadership of the chairman and other Members.
    [The information follows:]

                          NOAA Funding Levels

    NOAA Operations, Research, and Facilities account is set at $2.9B, 
$454.3M (14%) less than the FY 2010 Discretionary Appropriation of 
$3.3B.

    Mr. Dicks. Seven of those buoys----
    Secretary Locke. But seven of those are down for 
maintenance. And under the Continuing Resolution, we do not 
know if there is funding or what the level of funding will be 
as others come on line for maintenance and will they also have 
to go down. What do we do about--you know, tsunami warnings 
involve satellites. It involves the research centers, the 
stations. It is not just the buoys that have to be maintained 
and the interpretation of the data.
    If we ensure that nothing surrounding tsunami warning 
systems is touched, then we are going to have to take the 16 
percent savings or reduction in costs some place else, whether 
it be on the hurricane forecasting, and the list goes on and 
on.
    Just from a math level, there is no way that we can avoid 
compromising the programs that safeguard our country. We are 
going to have to make some very, very tough choices if that is 
the decision of the Congress.
    But the 16 percent cut off of current levels and right now 
we are not even issuing contracts for the maintenance or the 
upgrading of the buoys that are out of commission.
    Mr. Dicks. The other account here in NOAA is procurement, 
acquisition, and construction. And in 2010, that was $1.3 
billion. The President's request was $2.1 billion. And the H.R. 
1 amount is $1.4 billion. That does not sound as bad to me, 
though it is a cut from the fiscal year 2011 request of $728 
million.
    So that is another very significant--and does that have any 
effect--procurement, acquisition, and construction--on the 
weather service or early warning systems?
    Secretary Locke. Well, in H.R. 1, there is a slight 
increase----
    Mr. Dicks. Is that where the satellite is?
    Secretary Locke. That is where the Satellite Program 
resides. And because the 2011 budget has really not been 
enacted or the President's 2011 budget has not been acted on, 
there was a substantial increase for the next phase of the 
satellites contained in the 2011 budget.
    So assuming that there is nothing in the 2011 budget for 
the satellites, then that cost is now pushed on to the 2012 
budget which is why the President has asked for $687 million 
for the phase of the Satellite Program.
    But under H.R. 1, we are only basically given $95 million 
extra to accomplish that task unless we cut back everything 
else in the rest of the procurement, whether it is on ships and 
other capital projects within NOAA.
    The problem with not moving forward, and we are already 
behind schedule on the Satellite Program, and your committee 
and other committees of Congress have looked at that Satellite 
Program extensively, we have had to cut back the number of 
satellites. And even with that reduced number, the costs have 
grown.
    And that is why a whole bunch of blue ribbon commissions 
have called for the complete restructuring of what used to be 
called the NPOESS Program, now called the JPSS, in which the 
Defense Department is no longer in charge. It is now a 
collaboration between the Department of Commerce and NASA.
    But we are already behind schedule and there will be a gap 
between the existing satellites that provide that weather 
forecasting and when the JPSS satellites will come on board. 
And our accuracy of----
    Mr. Dicks. And that weather forecasting is important to 
early detection, right?
    Secretary Locke. We are now able to provide forecasting as 
far out as seven days, whether it is for hurricanes, major 
snowstorms, and so forth, especially over Alaska and other 
parts of the East Coast.
    Once that gap occurs, for however long it takes until the 
satellites are in orbit, our ability to accurately predict with 
confidence weather patterns, whether hurricanes or major 
snowstorms, will be reduced down to three to five days.
    Mr. Dicks. Thank you, Mr. Chairman.
    Mr. Fattah. Thank you, Mr. Chairman.
    Mr. Wolf. Thank you.

                             GULF OIL SPILL

    Mr. Bonner.
    Mr. Bonner. Mr. Secretary, I echo the comments made by 
Chairman Wolf and the ranking member and others that we are 
grateful for your service to our country and we are proud that 
the President has asked you to take on this important role as 
our next ambassador to China. We wish you good luck during the 
confirmation hearings.
    I get a little concerned as I was thinking about focusing 
on the oil spill because you mentioned it in your testimony, 
and I am going to come to that, but I must tell you as tragic 
as it is, and it is of epic proportions, the story line that is 
playing out in Japan and our collective hearts of the country 
and prayers are with the people there, the earthquake, the 
tsunami, the nuclear issues that they are dealing with.
    And, yet, it is very frustrating to hear that we either 
have to support satellites for tsunamis or satellites for 
hurricanes because some of us live along hurricane alley.
    It is hard to believe Chairman Wolf mentioned this. I mean, 
last month, the deficit was $223 billion. And it was not that 
many years ago when that would have been the deficit for the 
whole year.
    And while you said the budget is lean and we have made cuts 
to outdated programs, I do not know if that is a part of the 
testimony or if you could provide us some of the areas that you 
have chosen to cut that are outdated, secretary after 
secretary, administrator after administrator comes up to this 
committee and other committees talking about the cuts that they 
are prepared to make and, yet, they still add up to pennies on 
the dollar in terms of what we have.
    In many ways, it is appropriate that we are sending one of 
our best over to China because you are basically going not only 
to represent our country, you are also going to the banker for 
us to plead our case as 42 percent of the money that we are 
spending right comes from other--not all from China, but much 
of it from China. So we are facing serious challenges here as 
well.
    You know, you know this because you were governor and when 
you are governor, you represent the whole state. And I guess 
when you are the county administrator or whatever Mr. Dicks 
said your earlier positions were, your jurisdiction has 
increased and now you represent the whole country. We represent 
the country and, yet, we--because of the body that we serve in 
and, yet, the people in our respective districts send us here, 
give us the privilege of representing them. And I will tell 
you, you mentioned it in your testimony about the Deepwater 
Horizon, as a Nation, we have a propensity to move on to the 
next tragedy, the next disaster, the next hurricane or whatever 
it is. But our area, the Gulf Coast is still struggling.
    And I hope that if you can speak for the Administration or, 
if not, you can carry this message or this request back to the 
Administration, I think all of us along the Gulf Coast will 
admit that Louisiana bore the largest environmental impact from 
the oil spill, but the economic impact, which the Commerce 
Department has been very focused on.
    My congressional district was Ground Zero. And I hope that 
as the different agencies and departments, the Homeland 
Security and Justice Department, all your colleagues around the 
cabinet table, I hope they understand that as we are looking at 
long-term recovery for an area, this is not parochial just to 
south Alabama.
    You know, a couple years ago, we were all wringing our 
hands about what might happen if Greece fails. And Greece is 
about a $356 billion GDP a year.
    But if you go from the Keys in Florida all the way to the 
tip of Texas, the five Gulf Coast states, it is $2.8 trillion 
impact one year GDP. So it is a big part of the national 
economy.
    And I just hope that you can convey the best--I hope it is 
something you believe as well, that as you are looking to make 
the area whole on the environmental loss, that we do not forget 
the economic loss because it has been substantial, especially 
in tourism-dependent economies like mine and Congressman 
Miller's from Pensacola, Florida, and others.
    So that is really not as much of a question as a request. 
Please, whatever you can do in your remaining days and weeks as 
secretary of Commerce, remind others in the Administration that 
the economic loss is critically important to address as well as 
the environmental loss.
    And the question part of this would be can you give us from 
your perspective what has been one of the lessons learned?
    I mean, not only are we watching the tragedy play out in 
Japan, but with what is going on in Egypt and Libya and the 
price of gas shooting through the roof, I know you are not the 
secretary of Energy, but we are all concerned about the 
fragility of this economy, of this recovery. And here we are. 
We have got moratoriums on deep water drilling. Nuclear policy 
may be up in question now.
    What would you say from your seat as a key member of the 
President's cabinet would be a lesson learned from the federal 
response to the worst environmental oil spill in the history of 
the world last year?
    Secretary Locke. Well, thank you very much, Congressman 
Bonner, for that.
    And let me just say that having been a governor, having 
presided over the dot com bust as well as the huge recession 
that struck the entire country and the aftermath of September 
11th and having been a budget chairman writing budgets for the 
State of Washington, we have had to make tough choices. And it 
is a matter of setting priorities.
    And I very much agree with Chairman Wolf and the other 
Members of the committee that we have to make these tough 
choices. There is not enough money. There will never be enough 
money to satisfy everyone's wish list.
    And let me just say that the President is very committed to 
trying to reduce our deficits. You know, he did create those 
fiscal commissions. And I have heard him speak with Members of 
Congress and the governors saying that he is very serious about 
trying to tackle the issue of the entitlements.
    Then when we talk about the current debates over the 
budget, it represents really a very small fraction of the 
entire federal spending and that to really get to the deficits 
and to get our country on a path of long-term prosperity, we 
have to look at those other issues including Medicare, 
Medicaid, and Social Security.
    And he is very eager to do that in a bipartisan fashion 
working with the Members of the Congress. That is why his 
budget proposal for 2012 does call for a freeze on 
discretionary domestic spending and actually reduces spending 
by some $400 billion and as a percentage of GDP would be the 
smallest in terms of discretionary domestic spending since 
President Eisenhower was in office.
    Nonetheless if we are to really focus on making sure that 
American companies and the American economy can withstand some 
of these challenges from external forces, whether it is 
environmental disasters or other economies, we have got to make 
sure that our economy is strong and robust.
    And that means focusing on innovation, research, and 
development. That means, as the President says, we need to out-
educate, we need to out-innovate, we need to out-build the rest 
of the world. And that, of course, in this tough fiscal climate 
requires some hard choices.
    That is why the President has really focused on 
enhancements. For instance, keeping the budget flat, making 
deep cuts in other portions of the programs, of the budget, the 
Federal Government, while having enhancements in other areas, 
or whether it is in education, expanded R&D, and making the R&D 
tax credit permanent, whether it is in collaborations with the 
private sector, to really spur some of the innovations that 
will create new jobs and new technologies that will help us. 
This includes regulatory reform, to try to simplify and redo 
some of the regulations that we have to make sure that they are 
not a burden on job creation.
    And I think what you see in the President's 2012 budget 
request is that balance, holding domestic discretionary 
spending flat, not calling for pay raises for federal 
employees, making deep cuts in a whole host of different 
programs while putting investments in those areas that will 
actually create jobs down the road.
    And, you know, you talk about the Gulf states. We have had 
to put additional funds in there to try to stimulate the 
economy and to help the economies adjust to the Deepwater 
Horizon disaster. That may not have immediate payoff right 
away, but it is laying the foundation for job growth and 
economic diversification in the out-years, the same way with 
some of the programs in the Recovery Act.
    There were some projects that were immediate job creators 
and others were laying the foundation for job creation and 
competitiveness for American companies two or three years down 
the road to make sure that we are turning our economy around so 
that as we begin to recover, we are not focused on the same old 
industries or the same economic recovery as past recessions 
which turned out not to be very smart, focusing on debt and 
consumption and focusing on real estate speculation.
    And so now we are looking at the better industries of the 
future, like broadband, 120,000 miles of laying fiber optic 
cable so that people in the rural parts of America can sell 
their products and services and market their bed and breakfasts 
and their products all around the world and sell to the world 
instead of waiting for customers to come to them.
    Mr. Bonner. I hope we can count on you to deliver the 
message to the President. You know, he is the one who made a 
commitment to the Nation that they were going to stand by the 
people in Gulf Coast. And we are going to hold him to that 
commitment. And it includes economic loss as well as 
environmental loss.
    And I hope that we can also count--I mean, it is great to 
say we are concerned about the deficit and we are going to work 
with this there. It is good to have you reiterate those words, 
but I think Chairman Wolf, I think Mr. Dicks and others have 
said we really are going to need the President to step in that 
ring with us. It is going to require strong leadership from the 
White House as well as from Congress.
    Thank you very much.
    Secretary Locke. Thank you.
    Mr. Wolf. Before I go to Mr. Fattah--do you want me to go 
to you, Mr. Fattah? No. I am going to go to you.
    When are you leaving? When do you expect to be going to 
China? When are you stepping down?
    Secretary Locke. That is up to the Senate.
    Mr. Wolf. Oh. But, I mean, as soon as they confirm you, are 
you off and then----
    Secretary Locke. Well, we are trying to work that out.
    Mr. Dicks. You cannot hold two jobs at once.
    Mr. Wolf. What is your expectation?
    Secretary Locke. We really do not have a date yet. The 
paperwork has not been filed, has not been completed. Plus I 
may be going to China before the rest of the family. The kids 
are in school in the Montgomery County school system until the 
third week of June.
    Mr. Wolf. Okay. But, I mean, you will be, as soon as you 
are confirmed to be ambassador to China, you will be gone and I 
think that will be controversial. So it would be within the 
next month or two do you think?
    Secretary Locke. I cannot give you a time frame, 
Congressman. I really do not know what their schedule is and 
how soon their processes will take.
    Mr. Wolf. Okay. Mr. Fattah.

                           U.S. MANUFACTURING

    Mr. Fattah. Thank you, Mr. Chairman.
    Mr. Secretary, I wish you well in whatever position you are 
in and going to. And I know you will represent our country 
well.
    Let me start here on manufacturing. What is the leading 
manufacturing country in the world?
    Secretary Locke. The United States is.
    Mr. Fattah. There is a belief that somehow we are not, that 
there are Members of Congress, there are people who write 
editorials who believe we do not make anything in this country. 
Now, I have over 5,000 manufacturers in the Philadelphia area 
alone. We were able and honored to have you visit one of our 
companies, Penn Reels. They make world-class fishing reels and 
have no competitors anywhere in the world that can compete with 
them. It is in my district. But we also have--I mean, we have 
great manufacturers, but all over the country.
    And now the Department has a program called the 
Manufacturing Extension Partnership Program working with 
manufacturers in states like Michigan; I have heard from and 
all over the country.
    And I know that the President's budget in fiscal year 2012 
makes a request of, is it $140 million? And if you could just 
talk a little bit about the work of the Department to assist 
American manufacturers continue to lead the world in making 
products, that would be my first question.
    Secretary Locke. Well, first of all, we are very, very 
proud of the MEP Program, the Hollings Manufacturing Extension 
Partnership.
    And it has been shown that for every dollar of federal 
investment, we actually help generate some $32.00 in new sales 
growth. We actually helped some 34,000 manufacturers last year 
and more than 17,000 jobs were created.
    What we do is go in and partner with the states and look at 
the processes of manufacturing facilities to help them reduce 
their costs, to be more efficient, to be using less inputs, 
whether it is electricity or chemicals so that they are more 
lean and mean and, therefore, more viable and competitive. And 
then we also help them sell their products around the world. So 
the President has asked for a 12 percent increase in that 
particular budget.
    But the other things that we are doing to help American 
companies is, for instance, the Patent and Trademark Office. We 
are on a mission to get the--now it takes almost three years to 
get a patent. I mean, if you are a really small inventor, that 
is unacceptable. You cannot raise capital. You cannot get 
people to invest in your new idea, your invention. It could be 
a life saver.
    If you cannot prove to them and show them that you have a 
patent, it is like going to the bank and saying give me a loan 
to remodel the house, but I cannot prove to you that I have 
title to the property and you are going to have to wait three 
years. You are just not going to get that financing.
    So starting next month, we are starting a program in which 
we will virtually guarantee that for a small extra fee that we 
will issue a patent or make that patent determination within 
one year and that----

                      U.S. MANUFACTURING--EXPORTS

    Mr. Fattah. Mr. Secretary, I am sorry. Is it true that only 
one percent of American companies export?
    Secretary Locke. That is true. Only one percent of U.S. 
companies export and exports make up only about 12 or 13 
percent of our GDP. It is significantly much lower than, for 
instance, countries like Germany which have high wages and 
strong unions and, yet, they export a lot more.
    One percent of U.S. companies export. And of that one 
percent, 58 percent export to only one country, typically 
Mexico or Canada. So 58 percent of all U.S. companies that 
export export to only one country.
    And through our efforts of the International Trade 
Administration and working with the Export-Import Bank, Small 
Business Administration, Department of Agriculture, and other 
federal agencies, we are on a mission to especially help small- 
and medium-size companies export to two or three extra 
countries.
    Mr. Fattah. Well, in my early life in the Congress a few 
years ago, we had all of these entities come together in 
Philadelphia to meet with some of our manufacturers. Peanut 
Chews are made in Philadelphia. They are the best candy in the 
world. And now they are sold in 45 different countries because 
of the work of some of these agencies.
    So it is something that all of our manufacturers need to 
learn about, these services that are provided. You know, we 
have the Overseas Private Investment Corporation. Export-Import 
Bank, I met with a manufacturer this morning from my district 
whose company was involved in providing the drill that got the 
Chilean miners out, but needed a loan guarantee to do some work 
in Iraq and got it done, got the insurance and the bonding 
through the Export-Import Bank.
    So these are entities that are available and we need to 
make sure that they have the kind of support that they need.

                             NATIONAL DEBT

    Let me move on. I do want to make some comments about this 
debt. Because I have been here for a minute. I was here when we 
voted to balance the budget under the Clinton administration. I 
voted to balance the budget then. We raised some taxes. We cut 
some programs. It was a bipartisan vote of Democrats and 
Republicans and Republicans were in the majority. And in the 
waning days of that administration, we were very proud of the 
fact that we were paying off the national debt. We had Alan 
Greenspan testify at the beginning of the Bush administration 
that at the end of that eight years we could pay off our entire 
national debt, and what that would mean for our economy.
    But the Bush administration took a projection of a $3 
trillion surplus, it is like a weather forecast, and they 
decided they wanted to do a tax cut and gave away $1.5 
trillion. And then we went to war. Two wars we have been in for 
a decade. And unlike any other time in our country's history we 
did not pay for it. We did not have a war bond, or a war tax. 
We just added that to the debt. And then we increased domestic 
spending.
    So when President Obama was sworn into office the national 
debt was over $10 trillion. We were losing 800,000 jobs a 
month. So this is not a partisan, there is no partisan 
ownership of the debt. This is the United States of America's 
debt. We should pay it off. We should not leave it for our 
children. We, and it is not just entitlements. We should reign 
in entitlements, but that is really about future obligations. 
That is not about the debt. The debt is already here and now. 
And we have the lowest tax rates, the lowest since 1950 because 
we have a generation of adults who decided that we want to have 
all of this and we do not want to pay for it. And that is why 
we are in debt.
    So even when we reign in entitlements, and I am for doing 
whatever we have to do, I can support the President's 
Commission, I can support the Chairman's Commission, it is not 
going to do anything about the debt. The national debt, this 
mortgage on our country that is, when Bush came into office it 
was $5 trillion. When he left, when the new President was sworn 
in, the one that they want to heap this blame on, it was $10 
trillion. All right? And now we have to address it. That is our 
job. And as a Congress I have never heard this fidelity to a 
President's budget. It has always been known to me that the 
President proposes a budget and we dispose of a budget. That is 
what we do. That is our committee. We decide what we are going 
to spend money on.
    And so I just want to, I want to thank you for your 
leadership. We have had twelve months of net increases in jobs. 
We need to get out of the partisan foolishness and focus on our 
responsibilities. One is to pay our bills rather than when you 
go over to China. I do not want you visiting our bankers, all 
right? Because we need to have a much stronger discussion with 
them. When I talk to manufacturers in my district they say that 
every time they get a product into the Chinese market they 
reverse manufacture it and before you know it they, because 
there does not seem to be a lot of adherence to this 
intellectual property notion, right?
    So we have to think about what we are doing as a country. I 
agree with the chairman on this, that whatever we have to do on 
NOAA we should do, and to make sure that we can deal with 
warnings. But we do not have to wait for a buoy out there to 
tell us about the debt. We do not have to wait for any NOAA 
satellite to tell us. We know what the debt is. We know how we 
got it. And we know that at the end of the day we have to pay 
the bill for it or our children and our grandchildren have to 
pay the bill. Thank you.
    Mr. Wolf. Thank you, Mr. Fattah. Mr. Graves? Mr. Yoder.

                 DEPARTMENT OF COMMERCE FUNDING LEVELS

    Mr. Yoder. Thank you, Mr. Chairman. Mr. Secretary, thank 
you for being here today. I appreciate the opportunity to ask 
you a few questions. I was listening to your testimony at the 
beginning and was trying to understand your request for your 
2012 budget submission through the President's 2012 request. 
You say that was $822 million greater than your 2010 
expenditures?
    Secretary Locke. That is correct.
    Mr. Yoder. Okay. And----
    Secretary Locke. That is if you take out the unusual 
spending for the Census that was part of that 2010 budget. So, 
I mean obviously, the 2010 Census is over and we are not going 
to be continuing that to the same degree that we had. So if we 
back out a lot of those extraordinary one-time costs so that we 
are not really comparing apples and oranges the President's 
budget request for 2012 is roughly $822 million above the 2010 
enacted budget.
    Mr. Yoder. And how much is the 2010 enacted budget?
    Secretary Locke. The 2010 enacted budget, if you take out 
the 2010 Census, was $7.9 billion.
    Mr. Yoder. Okay. So you are asking for, what is that? What 
percentage increase are you asking off of your current 
expenditures?
    Secretary Locke. I would have to do the math on that. I am 
sorry.
    Mr. Yoder. But $822 million off of roughly $8 billion?
    Secretary Locke. Correct.
    [The information follows:]

                 Department of Commerce Funding Levels

    The proposed FY 2012 Budget request of $8,761 million is $822 
million more than the 2010 enacted budget level ($7,939 million) when 
the $6 billion is excluded for the Decennial Census. To clarify, the 
percentage increase is roughly 10.4% over 2010 levels.

    Mr. Yoder. So about a 10 percent increase, just----
    Secretary Locke. Yes.
    Mr. Yoder [continuing]. Roughing it here? And I, in 
entering into this conversation we have had----
    Secretary Locke. Of which the vast majority is for the JPSS 
Satellite System. $687 million, almost $700 million of that 
$822 million is for the satellite work.

                        DEPARTMENTAL EFFICIENCY

    Mr. Yoder. Okay. Well in light of particularly some of my 
colleagues comments prior to my questions in relation to this 
horrible debt burden that we have, and many of the speakers 
have already laid this out, and I know you understand it and I 
know you are concerned about it as well as every American is, I 
am troubled by departments and agencies that come forward in 
light of these conversations asking for additional spending. 
And so I am wondering, instead of asking the Congress to borrow 
another $822 million from the next generation, have you done as 
a Secretary, or have you had your heads of departments, look 
for efficiencies? We all know businesses and families across 
this country have cut spending. They have had to do more with 
less. Most of our constituents are getting by with less money. 
And many of them would love a 10 percent increase, even if it 
was for a major project, a satellite project. Or in their 
regards, you know, some home improvement project. They would 
love to be able to increase their discretionary spending in 
that regard.
    So I guess my question is, what is the, what work have you 
done to try to find that $822 million internally? And do you 
feel that there is waste and inefficiency in the Department of 
Commerce?
    Secretary Locke. Well first of all let me just say that we 
are very proud of our emphasis on efficiency and trying to save 
money. As I indicated in the very beginning, we returned or 
saved the American taxpayers almost $1.9 billion on the 2010 
Census. Some of that, of course, was because of reserves that 
we did not have to tap into. We did not have hurricanes or 
major natural disasters that impacted the Census. That was 
money that had been set aside in case of those catastrophes 
that did not have to be used.
    Also the 2010 Census was written up by the GAO and the 
Inspector General as perhaps the project most likely to fail in 
the federal government. It indicated that we had to set aside 
reserves to really look at things like the computer systems 
that were cobbled together because the previous administration 
had let out a contract for hand held computers. We paid out 
virtually all the money and got absolutely nothing in return. 
Absolutely useless for following up with households that did 
not mail back the Census form. And so we had to scramble and go 
back to a paper and pencil system and cobble together a new 
computer system. It had never been completely tested so there 
was a great fear that it would not work. And thanks to the 
incredible management of the folks at the Census Bureau, the 
system held together. We had to make a lot of adjustments in 
how we use the computer system but it held together and it 
worked.
    Then we embarked on an emphasis on management, and 
emphasized to the American public with advertising campaigns 
the need to send back the questionnaire. Virtually half the 
savings was from that, having a very successful effort of the 
American people to return the questionnaire so that we did not 
have to hire people to go door to door. And that is how we were 
able to achieve the $1.9 billion savings, or returning it to 
the taxpayers.
    In the Economic Development Administration we have cut the 
time it takes to process an Economic Development Grant, whether 
for a scientific park, an industrial park, or wastewater 
treatment facility, or even a port project, from six months to 
one month without spending extra money.
    Our Patent and Trademark Office, has been able to reduce 
the backlog by 10 percent even though patent applications have 
gone up.
    And on program after program we are achieving savings. We 
are embarked on a major acquisition reform that we believe will 
save some $50 million in the next budget cycle. We have made 
savings of some, $255 million. Which includes, for instance, IT 
eliminating programs that we do not think really work. And for 
instance, on international trade we can help American companies 
grow, sell more of their products around the world, by focusing 
on international trade and export promotion. But the President 
has also asked for an enhancement so that we can staff some of 
these offices, foreign offices, where the people's sole job is 
to find buyers and customers for U.S. companies. We are also 
proposing to close down and pare down some of the staff in 
those areas that are not areas that would see great growth or 
have great potential for exports.
    So we are trying to prioritize. We are really trying to go 
to our strengths and cutting back on those things that are not 
as productive.

                         FREE TRADE AGREEMENTS

    Mr. Yoder. Mr. Secretary, I appreciate that answer and 
appreciate your thorough response and the work that you have 
been doing to try to find reductions. I just think it would be 
difficult to go home to constituents and tell them I know you 
having to cut back, and you have lost your job, but we have got 
to continue to increase spending. And so while it sounds like 
you have done a number of things in the right direction, my 
encouragement would be to continue to try to find that $822 
million from additional savings. It sounds like you are heading 
down the right track. It just appears we need to go further. 
And I would find it difficult to support additional spending 
given the state of the debt and the state of many of our 
constituents who are some of them struggling to survive. So I 
appreciate that.
    My next question relates to trade and I noted in your 
testimony that you have expanded the amount of goods and 
services that have been exported, and you have taken some good 
credit for some things that you are doing in that regard. I 
guess my question would be, how much of the expansion in 
exports is related to our currency, the dollar value in the 
global marketplace, and in terms of when we are trading with 
other partners how much of that export is related to 
undervalued currency, such as in China? And how much is related 
to programs that we are doing as a Department of Commerce? And 
then with that as a follow up, where are we on the free trade 
agreements and why are those taking so long? A lot of folks ask 
me at home why those thing continue to lag within the 
administration.
    Secretary Locke. Well I cannot give you, I do not think any 
economist could actually attribute the growth in exports to the 
movement of the currency, the Chinese currency, to the various 
programs, or to just changing world conditions. I can tell you 
that, for instance, when the President was in India he was able 
to help land over $11 billion worth of trade deals and sales 
resulting in supporting some 50,000 American jobs. We have led 
a record number of trade missions bringing hundreds of 
companies with us and immediately they were able to report $1 
billion of increased sales.
    But the federal agency and all the federal government's, or 
all the agencies within the federal government are working at a 
very intensive and collaborative fashion to really help promote 
exports, helping especially small- and medium-sized companies. 
And we are not trying to do it using just federal dollars. We 
are actually partnering, for instance, with the National 
Association of Manufacturers, letting them identify their top 
companies that they think would benefit from assistance from 
the Department of Commerce finding buyers and customers for 
them. We were actually working with UPS and FedEx, where they 
are identifying their customers that they feel are most likely 
to take advantage and benefit from our programs to sell to more 
countries. It is in their economic self-interest because the 
more their customers are shipping, the more revenues for those 
private sector companies. This enables us to meet our goal of 
helping double exports without having to use scarce federal 
dollars.
    These are all part of a collaborative effort. But we can 
tell you that we are on track to meet the President's goal of 
doubling U.S. exports over the next five years. When the 
President first announced that there were many who were 
skeptical that it could be done. All it takes is a 14 percent 
increase in exports every year, and when you compound that, add 
that on top of the previous year, over five years you will be 
able to achieve that goal. Last year we were up 17 percent. 
Exports to China were up 32 to 34 percent. Agricultural exports 
are the second highest in U.S. history and we have a trade 
surplus there. Tourism, foreign tourists coming into the United 
States is considered an export. It is foreign money buying 
American products and services. Instead of occurring let us say 
in Germany it actually occurs on American soil when those 
German visitors come to America. Those were up 11 percent last 
year over 2009 and expected to grow an additional 7 or 8 
percent this coming year. So all of these things are having an 
impact.
    That is why the trade agreements are important and that is 
why we are very pleased that we were able to reach an agreement 
with Korea. You know, the President did set an initial 
timeframe, a deadline, a goal of concluding the Korea Free 
Trade Agreement in November in time for the G-20 meeting that 
was being held in Korea. But he walked away from that deal 
because he did not feel it was good enough. And thankfully he 
turned down what was then on the table because it enabled him 
to go back in a stronger position and get a deal that both the 
auto workers and the auto dealers support. And so it was a much 
better deal. And it shows that if we are not bound by an 
arbitrary deadline, or a linkage with other trade deals, that 
we are able to negotiate from a position of strength. And that 
is why the President wants to conclude an agreement with Panama 
and Colombia but does not feel that we should be tied to a 
particular deadline because that just gives those on the other 
side of the negotiating table greater strength. If they know 
that we have to reach a deal by a certain time frame then they 
will hold out and we will not get the best that we can get.

                            TELECOM SPECTRUM

    Mr. Yoder. Well I appreciate that very thorough answer as 
well, and many have made the deadline argument as well in the 
issue over the Middle East and our military efforts there. And 
so it is interesting in some regards deadlines are useful and 
in other cases they are not. And so the next question I have I 
guess relates, and one more, Mr. Chairman, and then I will 
yield back, relates to just an issue with GPS.
    Recently the FCC allowed a waiver for a company to 
repurpose satellite spectrum immediately neighboring that of 
GPS for use in extremely high powered ground based 
transmissions. And I just want to, I know you have, I think it 
is the NTIA that manages the telecom spectrum, I want to sort 
of put this in your radar so to speak and see if you could help 
us with this. Because there are some companies that produce GPS 
products in the GPS industry that have serious concerns that 
this planned use is incompatible with existing GPS use. And I 
want to know if you are familiar with that, and if you have any 
comment? Or maybe you could get some information back to us?
    Secretary Locke. As I understand it, Congressman, that 
relates to a specific company.
    Mr. Yoder. Yes.
    Secretary Locke. And I understand that the FCC did grant a 
provisional authorization in the issue at hand, provided that 
some of those technical issues could be worked out. And I do 
know that our folks at NTIA are working with that particular 
company to address that issue so that that provisional 
authorization can move forward.
    Mr. Yoder. Thank you, Mr. Chairman. I yield back.

                       WORLD MANUFACTURING LEADER

    Mr. Wolf. Thank you. Before I go to Mr. Serrano? Mr. 
Serrano is not there? Okay, I think he came in, am I wrong? Or 
who should I go to? Okay. I was right? All right, I just wanted 
to, I have a comment here, on the manufacturing. Earlier this 
week the Financial Times reported that China officially has 
displaced the U.S. as the world's leading manufacturer, the 
first time a country has topped America in 110 years. So you 
might want to take a look at that Financial Times report. And 
what we will do is get a copy of that and put it in the record 
at this point.
    [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
                        TSUNAMI WARNING NETWORK

    Mr. Wolf. Mr. Serrano.
    Mr. Serrano. Thank you, Mr. Chairman. I want to bring you 
back for a second. Let me join my colleagues in wishing you 
well. I know it is a great honor when any President calls on 
you to represent our country. And certainly for China that is 
a, it is not just any appointment. And it is a very important 
appointment to us at this time in our history and in their 
history. And so I congratulate you for your past service and 
what I know will be excellent future service.
    Let me take you to the Caribbean for a second. You know, 
for years I have been talking to folks about the possibility of 
creating a tsunami warning center in the Caribbean, 
specifically in Puerto Rico. And as recent as yesterday a 5.4 
earthquake hit the northern part of the Caribbean creating 
tremors in the Virgin Islands, Dominican Republic and Puerto 
Rico. Also a center of that nature would serve not only to deal 
with the issue of the Caribbean but certainly in our coastal 
areas of the fifty states, the southern part, and the Gulf 
Coast.
    So to be very brief, the state government, the local 
government of Puerto Rico, has already allocated half of the 
dollars it would take to build the center. And yesterday 
Resident Commissioner Mr. Pierluisi, along with myself and Dr. 
Christensen from the Virgin Islands, put in legislation to try 
to accomplish this. So my question to you is, what are the 
chances that--on one hand we have been talking about cuts, 
cuts, and cuts, and I understand that--but I am asking you to 
spend a little money. What are the chances that within the 
existing budget we could find the dollars to pay for the second 
part that the state government has already allocated to create 
the tsunami warning center in the Caribbean and Puerto Rico?
    Secretary Locke. Congressman, I have to tell you that I am 
not familiar with that request or a proposal by that local 
entity to contribute half the cost of an additional tsunami 
warning center. I would be happy to look into it.
    [The information follows:]

                        tsunami warning network

    NOAA currently manages a Caribbean Tsunami Program. The overall 
improvement strategy to enhance local response to local events is the 
following:
           Accelerating the TsunamiReady Program for Puerto 
        Rico (PR) & the U.S. Virgin Islands (USVI) by hiring an 
        outreach manager for the Caribbean (accomplished in FY10);
           Achieving TsunamiReady status for 46 communities in 
        PR and USVI by FY14; improving Tsunami Detection and 
        Forecasting by upgrading seismic networks, sea-level stations 
        and communications by FY13, and accelerating Tsunami Inundation 
        Mapping/Modeling for PR/USVI--to be completed by FY13; and
           Working to improve forecasts and warning products, 
        which are issued in three and half minutes (avg.) from seismic 
        events for Puerto Rico and Virgin Islands, and eleven minutes 
        (avg.) from seismic events for the Greater Caribbean.
    NOAA will further improve the Caribbean Tsunami Warning System 
based on recommendations cited in: 1P.L. 109-479 (Tsunami Warning and 
Education Act of 2007); and the National Academies of Science (NAS) and 
NOAA Tsunami Program Assessment Reports.
           Improve tsunami detection, forecasting, warnings, 
        notification, outreach, and mitigation to protect life and 
        property in the United States; and to enhance and modernize the 
        existing Pacific Tsunami Warning System to increase coverage, 
        reduce false alarms, and increase the accuracy of forecasts and 
        warnings, and to expand detection and warning systems to 
        include other vulnerable States and United States territories, 
        including the Atlantic Ocean, Caribbean Sea, and Gulf of Mexico 
        areas.
           From NAS Report: NOAA should explore further the 
        operational integration of GPS data into Tsunami Warning Center 
        TWC operations from existing and planned GPS geodetic stations 
        along portions of the coast of the U.S. potentially susceptible 
        to near-field tsunami generation including Alaska, Pacific 
        Northwest, Caribbean and Hawaii.

    Mr. Serrano. Okay. Are you at least familiar with past 
requests to look at that area as a possible tsunami warning 
center?
    Secretary Locke. Yes. I am familiar with a request for 
additional tsunami warning centers throughout many parts of the 
country and parts of the region.
    Mr. Serrano. Well after praising you so much I cannot take 
that back and I will not. So let me just say that I would love, 
before you leave, to put things in motion just to at least to 
have the discussion with the Commonwealth of Puerto Rico, with 
members of Congress, with this committee, as to the possibility 
of having this warning center. Because what we have seen in 
Japan and what we have seen in other parts of the world it is 
no longer a luxury. And as our chairman said, it is a necessity 
everywhere we can set on up. And that part of the world is 
really not taken care of, that part of the country. So could we 
at least set in motion some conversations?
    Secretary Locke. I am more than happy to have those 
conversations. But again, it all depends on the level of 
funding for the budget. Because if we enhance, you know, if the 
funding is under H.R. 1 then it is very difficult to make 
enhancements in certain parts without making deeper parts in 
another part. Even protecting one area of the operations 
research facilities budget portion of NOAA which is where the 
tsunami and weather forecasting and National Weather Service 
all reside. Under H.R. 1 it is a 16 percent reduction from the 
2010 enacted level. So if we keep one part completely whole it 
means deeper cuts in other aspects of our weather and 
operations programs.
    Mr. Serrano. Thank you on that. Mr. Chairman, I see your 
hand on the----
    Mr. Wolf. I was going to say, yes, that is an area. And 
when we did the letters, too, we checked in the East Coast. And 
it is a problem down in the Caribbean, and particularly because 
the beaches are flat, they are not up on bluffs. And so there 
is a problem there. And I was going to, but I am going to save 
it for some other time, to kind of comment a little bit more on 
that. But I would second what the gentleman says of having you 
take a look at that.

                          POVERTY MEASUREMENT

    Mr. Serrano. Thank you, Mr. Chairman. Rather than read my 
statement here to the question, let me just ask you to comment 
on the new poverty measure that has been discussed at the 
Commerce Department. That is a continuing issue in this 
country. We find everyday that in the greatest economy in the 
world we still have areas of folks with issues of food 
availability and poverty in general. What can you tell us about 
this new way to measure, if you will?
    Secretary Locke. Well that is something that is under 
discussion and just trying to inform the American policy 
makers, whether it is state, local, federal level, to even 
nonprofit organizations, just trying to understand and look at 
different ways in which we understand the impact of poverty and 
what it means and how to measure that. I think it simply gives 
policy makers more ammunition in making very tough decisions. 
We are looking at defining what is considered poor in America, 
and revising a one-size-fits-all formula that was actually 
developed in the 1960s. It could change the estimates, actually 
lowering the estimates or even raising the estimates. So it is 
not with any prejudged determination or particular outcome, but 
just really having a more accurate way in which we understand 
what poverty constitutes.

                         2010 DECENNIAL CENSUS

    Mr. Serrano. Right. Mr. Chairman, I know we are on close to 
some votes and I want my colleagues to ask some questions. Can 
I just ask you a quick question, Mr. Secretary? H.R. 1 and the 
cuts that are included in H.R. 1, could that in any way impact 
on the rest of the Census information coming out? I know that 
is already underway, or was that included in past dollars that 
we allocated?
    Secretary Locke. Well no, work is already underway for the 
2020 Census. Our goal is to make sure that the cost of 
administering the 2020 Census per household is lower than it 
was for the 2010 Census. So that really means that we have got 
to look at the greater use of technology, and we need to start 
some of that planning. We need to start with the private sector 
on the viability of these technologies. We cannot get into the 
position like we were for the 2010 Census when we contracted 
for handheld computers, and they did not work, and then we had 
to scramble to really make up for it. And that actually added 
to the cost.
    We also need to look at other ways of trying to get 
reliable information. And we also need to test some of these 
theories. And on the American Community Survey, that is 
something that the business community relies on heavily. And we 
want to be able to use some of the theories and methodologies 
and almost test them during the annual American Community 
Survey in preparation for the 2020 Census.
    Mr. Serrano. Right but I was, very briefly, I was referring 
specifically to the fact that you probably have the rest of the 
year to give out information on the 2010 Census. If H.R. 1 
becomes law, heaven forbid, sometime soon, does that affect 
that? Or was that information included in dollars that have 
been allocated before? In other words, can you finish the work 
of the 2010 Census or will H.R. 1 impact that?
    Secretary Locke. Well actually what would be of greater 
impact would be if a continuing resolution were not passed. As 
long as we are continued at the existing levels then we quite 
frankly should be able to disseminate the information from the 
2010 Census to the states for the redistricting purposes and 
for the reapportionment purposes.
    Mr. Serrano. Thank you. Thank you, sir.
    Mr. Wolf. Mr. Honda.
    Mr. Honda. Thank you----
    Mr. Wolf. There is a vote. It just began. Mr. Honda.

                        TSUNAMI WARNING NETWORK

    Mr. Honda. Thank you. Let me also add my congratulations to 
you, Secretary Locke. I am sure that, the community is very, 
the Asian American community is very proud of you. I am sure 
your family is too, and I acknowledge that your dad, he is 
watching and he is probably feeling real proud about you, too. 
So I just want to add that.
    And you have done a great job. You are going to do a great 
job as Ambassador, not because I am saying so, but because in 
Silicon Valley there was quite a few articles after the summit 
that had indicated that finally, they said, that we have a 
Secretary of Commerce that gets it. Meaning that the Secretary 
of Commerce gets what is going on in technology, and the 
businesses, and specifically in Silicon Valley. But I think in 
general across this country. And I think Congressman Wolf's 
district is also a very similar district as mine in terms of 
technology.
    The question I had, Mr. Secretary, was around Census and I 
guess I just want some sort of a quick answer on to be able to 
be prepared for 2020 will there be a chart that is going to be 
used as a benchmark where we can pace ourselves and look at all 
the points that we need to hit before 2020? Having gone through 
the 2010 the Administrator had to bear the brunt of the 
criticism on things that had not occurred prior to him being 
appointed. So I want to avoid that, and be assured that someone 
in the Department will lay out a, something like a PERT chart, 
program evaluation review chart. That is one question.
    The other one is about the tsunami detection. I appreciate 
Chairman Wolf's letter that responded to the Indian Ocean 
tsunami, but also anticipated the future. And I think that that 
is a good thing to do. And I understand that there are thirty-
nine buoys out there now?
    Secretary Locke. About thirty-nine, yes.
    Mr. Honda. Yes. Seven down to be----
    Secretary Locke. Seven or nine that are down for 
maintenance.

                         2020 DECENNIAL CENSUS

    Mr. Honda. The question I would have is in order for us to 
provide the additional coverage globally and provide that early 
detection, do you have any numbers that would reflect the costs 
of doing that in order for us to be able to anticipate and 
avoid great costs to other countries and ourselves? And that in 
my mind is not cutting for savings, but it would be investing 
for future cost avoidance. I was wondering whether you had any 
sense about that?
    Secretary Locke. Well let me just first answer the question 
with respect to the planning for the 2020 Census. Planning is 
already underway and we are already trying to stand up advisory 
committees to really look at what needs to be done for the 2020 
Census, what lessons can be learned from the 2010 Census? How 
do we really reduce the cost per household from what we spent 
on the 2010 Census? And how do we really use technology, 
whether it is the internet, and other technologies to reduce 
the costs? So that planning is underway and I am sure that they 
are developing a timeframe or a time schedule of various 
deliverables and projects and we would be happy to share that 
with you.
    [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Honda. Thank you.
    Secretary Locke. That would be used as measurements or 
metrics. With respect to tsunamis let me just say that, while 
it is on a lot of people's minds in light of the tragic events 
in Japan, we know that it is not just the West Coast but as 
Chairman Wolf indicated it is also on the Eastern Coast as 
well. And as Congressman Serrano indicated, not just the north 
but also down in the Caribbean. And we need obviously more 
buoys and more detection facilities, more centers. It is all a 
matter of budget. And we do know that obviously from what we 
saw, and thanks to Chairman Wolf's leadership after the 
Indonesian tsunami, that when you have more buoys we were able 
to have faster response. We were able to issue the warning 
within nine minutes after that earthquake struck Japan last 
week.
    But it is not just buoys. It is not just the centers. It is 
the satellites. It is all the technology that goes with it and 
making sure that everything is maintained and up to date and 
all linked together. That is what makes the tsunami warning 
system effective, and helps save lives.

                         IMPACT OF BUDGET CUTS

    Mr. Honda. Thank you. And I think the line of questioning 
here on this panel is along the lines of looking at deficits 
and debts. But I think my sense is in this committee, 
subcommittee, that there is also a sense that there is going to 
be a great return on investments if we make it properly. And 
with the current cut again on a 2011 that will have a major 
negative impact not only on jobs that I am sure that the 
Department of Commerce is set and can create if we continue the 
2011 without the cuts. I was just curious about if there is 
anything off the top of your head as to the impact on job 
creation and the kinds of things that we have talked about 
here. Not only saving lives and avoiding future costs, but the 
kinds of jobs that we would be looking at that we could be 
losing just because we are looking at cuts for cuts sake.
    Secretary Locke. Well I think that first of all with 
respect to the public safety aspects of the weather service, 
whether it is the satellites, predicting hurricanes or 
tsunamis, or just snowstorms, it is like a police department or 
a fire department of a local community. When you make cutbacks, 
there will be consequences. You cannot foresee those now, but 
you know that your response times will be down. You will have 
less police officers on the street to respond to incidents or 
reports of crime. Those are the consequences when you make 
those cuts. These are tough choices. And obviously you all as 
members of the Congress, the House and the Senate, in 
deliberation with the White House have to make these tough 
calls.
    Let me just say that that is why the President's budget, 
2012 budget, is focusing on laying the groundwork and the 
conditions for job growth. So many of the economists have 
indicated that the Recovery Act did have an impact in creating 
jobs, or at least avoiding more layoffs of people and losses of 
jobs. And whether it is in farming, or in manufacturing, or in 
business sometimes you have to spend a little bit more in order 
to prime the pump and get more revenues and increase your 
business. You advertise a little bit more to get more market 
share. And what the President's budget for 2012, while holding 
discretionary spending constant and freezing domestic spending 
over the next several years, does put selected enhancements and 
increases in programs that he believes will actually 
incentivize job creation and get our economy back on its feet 
faster.
    Programs in R&D, research and development, things that the 
private sector is not able to do on its own but with government 
assistance will create those next products and technologies 
that can be commercialized that can then create more 
businesses, help existing businesses grow, and create jobs, to 
investments in education. You know, you look at the number of 
engineers that other countries including China and in Asia are 
producing. Where are the engineers for America? And not every 
job requires a four-year degree. Some of it is community 
college education, which is why we have more investments in 
community college programs. Because for instance, when the 
President visited Silicon Valley he talked to some companies 
who said that they would be more than glad to move their 
manufacturing facilities back from China to the United States 
if they had engineers. Not four-year degree engineers, but the 
kind of the engineers that work on the assembly line that can 
help in the innovation and the production and the lean 
manufacturing of those products.
    So that is why the President is calling for investments in 
education, in R&D, including making permanent the R&D tax 
credit and expanding it. To encourage more manufacturing and 
more innovation here in America to create jobs. And I think a 
lot of the economists have indicated that many of the programs 
in the Recovery Act did in fact make a difference in avoiding 
further job losses and in fact creating jobs.
    Mr. Honda. Thank you. And Mr. Chair, I appreciate the time.
    Mr. Wolf. Sure. Mr. Schiff may have to, if you want to ask 
another question, because you may have to leave to go back home 
to his district. So why do we not, go ahead.

                           WEATHER SATELLITES

    Mr. Schiff. Thank you, Mr. Chairman. Mr. Secretary, 
congratulations also on the new post. And I would just urge you 
as a representative of a district that relies heavily on 
intellectual property to urge the Chinese government to step up 
its enforcement particularly in the criminal law area on 
intellectual property theft.
    But what I wanted to ask you about today, you mentioned the 
central importance of the new JPSS in developing National 
Weather Service forecasts. The satellite will replace 
satellites currently in orbit that are aging fast. Due to 
problems in previous programs and delays in getting JPSS 
funding because of the continuing resolution we are likely to 
be going without this coverage for a year or more. Accurate 
long-term weather forecasts and storm warnings are such an 
integral part of so many sectors of our economy that this is 
truly worrying. What is the chance we will be able to maintain 
this coverage? And what will happen to our weather forecasts if 
we do not have a budget with the needed funds this year?
    Secretary Locke. Well, there will be a gap. I mean, even 
with the 2012 budget there will be a short gap. Even if it were 
funded at the full level there will be a short gap. And if it 
is not funded that gap will lengthen. And what does that gap 
mean? We have certain satellites in orbit now that are 
degrading. That will basically cease being operational. And so 
until the new satellites are launched and operational we will 
not have the information that we need to provide as accurate a 
forecast as we now provide.
    Mr. Wolf. Excuse me, Mr. Secretary? We are down to three 
minutes. So if you might, will you call Mr. Schiff, too?
    Secretary Locke. Yes.
    Mr. Wolf. Next week? And go through this. And then if you 
will come back, we are coming back.
    Mr. Schiff. Thank you, Mr. Chairman.
    Mr. Wolf. Thanks. Thank you, Mr. Secretary. We will be back 
in about twenty minutes.
    Secretary Locke. Okay. Thank you.
    [Recess.]

                             CYBERSECURITY

    Mr. Wolf. The hearing will begin and we will not be 
interrupted since they were the last votes. And we will try to 
move, you know, fairly fast. And I am going to jump around a 
lot because there are a number of budget issues. You know, we 
can work with your staff and get some answers, too. But your 
Bureau of Industry and Security is responsible for controlling 
the export of dual use goods and technologies. At the same time 
other countries are attacking Department computer systems to 
get similar types of information. Has the Department ever 
conducted a strategic analysis of where these breaches, like 
for instance China, and export control issues, are coming from? 
And who is trying to acquire what technologies, and why? And if 
you have not, and I sense that you have not, and I sense that 
the previous administration has not, would you do that? Would 
you do a study for us and report it to the committee, and maybe 
classified? And we would, you know, however you told us to 
treat it we would treat it. But if you could do that for us, 
but have you ever done one like that?
    Secretary Locke. Mr. Chairman, I believe that we actually 
have done a lot of analysis of the attacks on not just BIS but 
many of our other sites throughout the Department of Commerce. 
And--
    Mr. Wolf. And why they are doing it? Why they are going 
after, what they are going after, government-wide?
    Secretary Locke. Well I am not sure that, we could indicate 
to you, perhaps privately, all the research that had been 
assembled by all the federal agencies with respect to who is 
doing what, and perhaps what their motives are. But obviously 
it is of concern to us, the frequency of the attacks against 
our systems. Which is why the President's 2012 budget does call 
for significant enhancements in cybersecurity.
    Mr. Wolf. But I mean, we are also looking at it as a way of 
knowing what they are targeting. Not only the cyber issue, but 
what they are targeting and what technologies they are trying 
to gain.
    Secretary Locke. That might, with respect, be more 
appropriate for other agencies that actually have technical 
information that others might want. We are understanding that 
the attacks against our systems are simply to understand and 
get all the information that we have, in terms of whether it is 
policy and----
    Mr. Wolf. But are you, but is it, well let us, let us give 
you a letter and let us----
    Secretary Locke. Sure.
    Mr. Wolf [continuing]. You know. But we would like to see 
you do a study to see why they are going after. I mean, are 
they going after NASA because they are trying to do something? 
I mean, obviously they may just be using a vacuum cleaner on 
certain occasions. But other occasions it is targeted. And what 
countries are doing the targeting? And we will also deal with 
the FBI, too. But what countries are doing the targeting? And 
what they are actually targeting, and why are they targeting it 
with regard to technologies?
    Secretary Locke. I believe that information does exist. It 
is not a study that has been initiated by the Department of 
Commerce with respect to why people are attacking the systems 
of, let us say, NASA or defense agencies. But I am sure, we 
would be more than happy to share whatever information the 
federal agencies have with you on that regard?

                     MANUFACTURING AND THE ECONOMY

    Mr. Wolf. Okay. General Electric CEO Jeff Immelt was 
recently appointed by the President to chair his Jobs Council, 
has publicly stated that for the U.S. to have a sound economy 
at least 20 percent of U.S. jobs should be from manufacturing 
yet we have less than half that number today. What level of 
manufacturing do you believe is healthy and necessary for a 
sound economy?
    Secretary Locke. Well I do believe that we do not 
manufacture as much as we can and that we should. That is why 
there are a host of initiatives within Commerce and the other 
agencies and throughout the federal government focusing on 
that. The President has called for, for instance, increasing 
the R&D tax credit and expanding that, making that permanent.
    Mr. Wolf. But do you have a percentage? Immelt said 20 
percent of our workforce should be in manufacturing.
    Secretary Locke. I do not have that percentage.
    Mr. Wolf. Could you look and see if you can think about it, 
and----
    Secretary Locke. Yes, we would be more than happy to get 
back to you on that.
    [The information follows:]

                     Manufacturing and the Economy

    The U.S. is the world's dominant manufacturing economy. One reason 
the U.S. has a lower share of workers in manufacturing compared to 
other nations is because U.S. manufacturing labor productivity has 
outpaced that of our competitors. In February, U.S. manufacturing 
employment was 10.8% of total private employment. Expanding employment 
in the manufacturing sector is a top priority of the Administration, as 
evidenced by the National Export Initiative.

    Mr. Wolf. We understand that the Director of National 
Intelligence has commissioned a classified study on the state 
of the U.S. manufacturing base. Are you working with him on 
this effort?
    Secretary Locke. Our folks at the Department of Commerce 
are working with the not only, well, we are part of a 
collaborative effort on all of these assessments on 
manufacturing, including working with, for instance, Ron Bloom, 
who is the Special Advisor to the President within the White 
House, on manufacturing policy.
    Mr. Wolf. And will that be classified or not?
    Secretary Locke. I do not know.
    Mr. Wolf. Okay. Can you tell us, or----
    Secretary Locke. We would be more than happy to report 
back. I do not know that off the top of my head if that 
assessment will be classified.

                         HUMAN RIGHTS TRAINING

    Mr. Wolf. Previously this subcommittee directed the 
Department to provide human rights training to ITA employees. 
The program lapsed for several years. What is the status of the 
human rights training program now? And how many employees got 
training last year?
    Secretary Locke. I believe that program is ongoing, and I 
believe that we have in fact stood up a 24/7 online training 
component as well. I believe almost two-thirds of our employees 
last year received that training and participated in those 
training efforts. But I could get you the exact training. Oh, 
actually I have it here. More than 600 commercial service staff 
were trained out of about 900. And these were in commercial 
missions to fifty countries. And they participated, we had some 
twenty-six worldwide training events. But again, we also now 
have, for not all who can attend these training sessions, we 
now have a 24/7 access, an online learning module that all 
employees, that we are making available to all the employees.
    Mr. Wolf. Available, or is it mandatory?
    Secretary Locke. Well we do have comprehensive training 
protocols. And if they are not able to attend the in-person 
then we are making those online learning modules available as 
well.
    Mr. Wolf. But available, or mandatory? That was the 
question.
    Secretary Locke. I will find out for you there.

                         Human Rights Training

    During 2010 and early 2011, 603 client-facing CS staff were trained 
(target for this timeframe was 300), representing 50 countries at 26 
worldwide training events.
    To ensure global, 24x7 access to the content and to reach those 
that could not attend an instructor-led session, an online learning 
module was developed. ITA is requiring that all CS client-facing staff 
who have not taken the instructor-led course take the online module 
this fiscal year.

                       DEPARTMENT REORGANIZATION

    Mr. Wolf. There have been press reports that the White 
House will be proposing a major reorganization at the 
Department of Commerce and some related agencies. The committee 
has not seen any proposals so we are unsure exactly what will 
be included. However, one of the proposals is to move the U.S. 
Trade Representative into the Commerce Department. Some have 
voiced concerns about doing this. Would you tell us about the 
proposed reorganization? What are the goals? And what can you 
tell us specifically about it?
    Secretary Locke. Well there is actually no proposal yet. 
The individuals conducting the effort, Jeff Zients, who is the 
Deputy at OMB, is still talking to people and meeting with the 
various agencies and meeting with stakeholders. The 
reorganization is focusing on the export and trade promotion 
agencies of the federal government at this point.
    Mr. Wolf. Do you expect a legislative proposal will be sent 
to Congress this year?
    Secretary Locke. I cannot speak for Mr. Jeff Zients. I do 
know that the President has asked, or signed an executive order 
asking, that the results and the recommendations be delivered 
to him within ninety days.
    Mr. Wolf. And that would take legislation, is that correct?
    Secretary Locke. It depends on the extent of the 
recommendations and the proposed reorganization.
    Mr. Wolf. How do you, can you explain?
    Secretary Locke. Well there are some things that are 
executive agency. For instance, the Trade Representative's 
Office. I mean, if nothing happens, if it is moving other 
things within the Office of the Trade Representative, that 
might be done by executive order. If it is dealing with the 
statutory agencies like Commerce or other agencies then I am 
sure that would require congressional action. But nothing has 
yet been produced. Nothing has been shown to any of the 
agencies now involved in export or trade promotion. Right now 
Mr. Zients and his team are simply talking to people and 
gathering facts and assessing people's viewpoints.

                           BIS FUNDING LEVELS

    Mr. Wolf. Now the Department is, this is the Bureau of 
Industry and Security, the Department is requesting $111 
million for the Bureau of Industry and Security. This amount is 
about $11 million higher than the 2010 enacted level. The 
increase of about $11 million will support thirty-seven 
additional positions on the Office of Export Enforcement. Of 
this amount $10 million will support counterproliferation and 
export enforcement activities with respect to their work with 
sensitive U.S. dual use goods and technologies. An increase of 
$3 million will support an increase in the number of staff 
involved in counterproliferation, counterterrorism, and 
national security programs. Both of these increases are in 
response to the recommendation of the 2000 Report of the 
Commission on the Intelligence Capabilities of the U.S. To what 
extent can you tell us in this open session what worries you 
more, rogue states or lone terrorists?
    Secretary Locke. Let me just say that we need to make sure 
that when U.S. companies export, they are not exporting to 
inappropriate destinations. And that even if they export to 
destinations that are deemed friendly to the United States that 
those exports are not reexported to countries that wish to do 
us harm. And that is why the President has called for enhancing 
our security measures to make sure that any items that might 
have military application do not go to those ultimately who 
wish to do the United States and our allies harm.

                   U.S. PTO PLANNED FUNDING CARRYOVER

    Mr. Wolf. The U.S. Patent and Trademark Office is again 
proposing language to allow it to spend fees in excess of 
appropriations, so-called buffer language. PTO is also 
requesting authority to collect $2.7 billion in fees while at 
the same time their spending proposal is for only $2.6 billion. 
The difference of about $107 million is being proposed by the 
PTO as a reserve to be carried over from fiscal year 2012 to 
2013. PTO anticipates carrying over $342 million in fiscal year 
2013. Please explain why PTO is expecting to carry over this 
level of funding? Why would not PTO spend these funds to work 
now, and work down the backlog?
    Secretary Locke. We are trying to expend as much money as 
we can as fees come in. But we need to try to maintain a steady 
state, just like any company would have, to have a steady state 
of operations so that if the following year we suddenly have a 
drop in applications we do not want to rely on that money 
coming in the door at that point. Because we need to make sure 
that we have people and the staff available to handle all those 
applications that came in a year ago, two years ago, three 
years, and four years ago. So it is really trying to have an 
even flow of revenues and expenditures so that we can gradually 
ramp up and hire additional staff and use more technology to 
process all of these patent applications that have been waiting 
in a much faster timeframe.

                       U.S. PTO PATENT AUTOMATION

    Mr. Wolf. In 2005 GAO reported that PTO had spent over $1 
billion between 1983 and 2004 for patent automation activities 
which did not achieve a fully integrated electronic patent 
process. Between fiscal year 2006 to October of 2010 PTO spent 
another $47.9 million on another IT modernization effort on a 
system that has not been effective. So PTO is now developing 
its new end-to-end patent system and its budget includes funds 
to continue these efforts. And we understand that Under 
Secretary Kappos, he said that he is confident that PTO is on 
the right path with this. The arrangement might be fine with 
him at PTO, or it might not. But if it is, what happens when he 
leaves?
    Secretary Locke. Well that is why we have undertaken a 
completely comprehensive review and change is how we are doing 
everything, focusing on both the line staff and career 
managers. The career staff who, you know, basically are the 
heart and soul of the Patent and Trademark Office. And the 
politicals come and go but we need to make sure that we have a 
highly energized, committed, dedicated career force that are 
people to sustain things.
    Mr. Wolf. But do you have the technical expertise? Because 
the same thing happened at the FBI on their computer system. 
They would bring somebody in, they would go. The cost overruns 
were very, very high. Are you confident? Have you the 
absolutely confidence in people that if he leaves, or should he 
leave, that it will continue? Because you have had these 
occasions where the money was pretty much not giving you what 
you thought you were going to get for it.
    Secretary Locke. And that has always been a concern of 
mine, and that is why we are embarked on a Commerce-wide review 
of our entire acquisition programs. Making sure that the people 
who design these and make these requests are actually realistic 
and that the people who go out and do the procurement are able 
to ask the questions as well and not just accept the wish lists 
of those seeking the systems.
    But going back to the Patent and Trademark Office, there 
has been a substantial change in the entire leadership, the top 
leadership at the Department, or the Patent and Trademark 
Office, with career people in place. We are very confident, 
very pleased with the caliber of people that we have. And if 
you look at it it is not just David Kappos but the line staff 
and the managers who have been really responsible for driving 
the organizational management changes that have resulted in a 
dramatic reduction of the backlog even as the number of 
applications has increased dramatically as well.
    We believe we have this new culture of career and line 
staff and even political appointees who are united in the 
mission of reducing the backlog, making sure that our 
investments in technology really work and pay off. So I am 
confident that even if Mr. Kappos were to leave that the 
reforms that he has initiated, with the support of line staff 
and labor and the management teams, will survive.
    Mr. Wolf. I want to go a few more, and Mr. Fattah will go 
over. But the PTO and China, I believe we are putting ourselves 
at a disadvantage by making U.S. patent applications available 
online. I understand that making applications available online 
is required by law. But I think we should be publishing 
abstracts only. Please provide me with the underlying authority 
whereby U.S. posts its patent applications online.
    Secretary Locke. I will have to get back to you and get you 
that legal authority, sir.
    [The information follows:]

                    U.S. Patent and Trademark Office

    Congress provided for publication of patent applications at 
eighteen months from their filing date in the Domestic Publication of 
Foreign Filed Patent Applications Act of 1999, Sec. 4502(a), now in 
statute as 35 U.S.C. 122(b). This publication requirement is consistent 
with other major Patent Offices around the world.

    Mr. Wolf. What thoughts do you have? How can we stop China 
from counterfeiting the products that they copy from the patent 
applications that are available online?
    Secretary Locke. Well I think that intellectual property 
violations in China and other countries is a major concern. 
American companies are losing billions of dollars of lost sales 
and opportunities as a result of piracy, counterfeiting, and/or 
lack of aggressive enforcement of intellectual property rights. 
It is a high priority for the Department of Commerce with 
respect to China and other countries. It is obviously going to 
be a major issue for the next ambassador to China. And we do 
have ongoing programs between the Department of Commerce, our 
Patent and Trademark Office, our General Counsel Office, in 
trying to improve the rule of law with exchange programs in 
China. But----

                      TRADE ENFORCEMENT WITH CHINA

    Mr. Wolf. But Mr. Secretary, President Obama had a state 
dinner for Hu Jintao when he had the 2010 Nobel Prize Winner in 
jail. And his wife was not even allowed out of her apartment. 
She was under house arrest. So I hope you do not go there with 
a pollyannaish viewpoint that, you know, that we have these 
exchange programs, and we are doing this, and we are doing 
that.
    I mean as of now, two years ago when I was there, there was 
one person working on human rights and these issues in the 
embassy and they had fifteen people working on trade. To think 
that you can trust the Chinese just because you have a program, 
I mean, I hope you are going to go over there with a more 
hardheaded approach with regard to that.
    Secretary Locke. Well I think if you look back at 
everything that I have done at the Department of Commerce with 
respect to our negotiations, our actions against China in terms 
of the trade enforcement cases, to the sanctions against China 
on tires, all that we have done with respect to trying to get 
the Chinese successfully to back off on their government 
procurement contracts that favor their homegrown innovation, to 
our discussions at the Joint Commission on Commerce and Trade. 
I mean, we have not been pollyannaish at all.
    Mr. Wolf. Have you been successful?
    Secretary Locke. I think we have had success. Is it as much 
as we would like? No. Do we want more progress in China, and do 
we want faster progress in China? Obviously, yes.
    Mr. Wolf. Do you trust the Chinese government on these 
issues?
    Secretary Locke. It will always require constant vigilance 
and monitoring, sir.
    Mr. Wolf. Was that a yes, or no, or maybe?
    Secretary Locke. Well we are seeing progress in some fronts 
from the Chinese. Is it as much as we would like, no. Is it as 
fast as we would like, no.
    Mr. Wolf. Does it raise the little question if the Nobel 
Prize winner is in jail, and they have all the Catholic bishops 
in jail, and the Protestant pastors in jail, and they are doing 
that? That there is an element of concern with regard to what 
they are doing on economic issues?
    Secretary Locke. Well that is why we have consistently 
pressed the Chinese on these issues. That is why we have 
various forums by which we can raise these issues. We are 
making progress. Again, it is not as fast and as much as we 
would like. But that doesn't mean that we give up. And 
certainly we go in with a very realistic eye and view of what 
is happening and what needs to be done.
    And, of course, that includes human rights. And you and I 
have chatted about this before. And the policy of the United 
States is very clear. We very much support more openness and 
democracy and respect for human rights, including people's 
ability to worship.
    Mr. Wolf. I think you are going to get more letters from me 
in China as ambassador than you get as the Secretary of 
Commerce on these issues. Will you go worship at a house church 
when you are there?
    Secretary Locke. I look forward to the opportunity of 
worshiping in China.
    Mr. Wolf. But I said at a house church, at a non-
recognized, not a government run but a house church. Will you 
go worship at a house church?
    Secretary Locke. That is something that I will consider, 
sir.
    Mr. Wolf. But why can't you just say--I mean, can you 
imagine if you were to say yes, how that would inspire the 50 
million house church Chinese who are yearning? I wrote the 
previous administration. Nobody there would go. Why wouldn't 
you go to worship at a house church? You can worship at all 
churches. But why wouldn't you at one Sunday go with a house 
church?
    Secretary Locke. Well, again, how I practice my religion is 
not something for the American people to examine.
    Mr. Wolf. It isn't for the American people. It is to stand 
with those who are being persecuted, who are being hauled away. 
And the American embassy in China ought to be an island of 
freedom.
    And if the American ambassador won't even--I will go to 
different denominations just to show up to be there. Woody 
Allen says up to 90 percent of life is showing up. Just in 
showing up and being there, particularly in a church where they 
are cracking down, and taking people away, and putting them in 
prison.
    It doesn't raise my comfort. I am surprised. I knew it was 
a home run. You would have said, yes, I would be glad to 
worship at a house church when I go. So by your answer I get 
the indication that you will not worship at a house church.
    Secretary Locke. That is not what I am saying, sir.
    Mr. Wolf. What do you think your chances are, 50-50, 75-25?
    Secretary Locke. It is not something that I think I should 
be stating in public.
    Mr. Wolf. Mr. Ambassador, if you don't publicly identify 
with the persecuted in China, then more people will be 
persecuted. To say that you raise this issue privately but not 
publicly is a copout.
    If you are a Catholic bishop in jail, you want the American 
ambassador to publicly speak out, not whisper privately in a 
private meeting. If you are in Tibet and you are in Drapchi 
Prison being tortured and you are a Buddhist monk or nun, you 
want the American embassy and the American ambassador to speak 
out publicly. If you are being persecuted as a Uighur you want 
the American ambassador to speak out publicly.
    What you have said raises serious concern with regard to me 
now for you going to China, because if you won't stand publicly 
with the dissidents. Ronald Reagan said, ``The words in the 
Constitution were a covenant with the people of the entire 
world.'' The people in Tiananmen. The words that were in the 
Constitution in 1787 really were the same words with regard to 
what should apply in China.
    But now if you are going to be politically sort of well I 
am not going to do this, I am shocked. I am shocked to say that 
you would not even go and attend a house church. Particularly 
when we know a particular house church is being persecuted.
    Secretary Locke. I did not say that, sir.
    Mr. Wolf. Well I am asking you. Will you go and attend? I 
take out the word ``worship,'' attend, show up, be there in a 
house church, one of the house churches that is being 
persecuted where they crack you down.
    Secretary Locke. That is something that I will seriously 
consider.
    Mr. Wolf. Will you advocate for the persecuted in China?
    Secretary Locke. Yes.
    Mr. Wolf. Will you visit the people that are picked up in 
prison? People who are dissidents who are picked up, had you 
been the ambassador now, would you have advocated for the Nobel 
Prize winner's wife?
    Secretary Locke. I am not the ambassador now.
    Mr. Wolf. I said had you been the ambassador.
    Secretary Locke. That is something that I would have to 
consider.
    Mr. Wolf. That is weak. That is very, very weak. If you 
were in prison, if you were a Buddhist monk, if you were a 
Protestant pastor, if you were a Catholic bishop, you would 
want the American embassy to advocate for you. And if the 
American embassy doesn't advocate for you.
    Your embassy ought to be an island of freedom. And if it is 
not an island of freedom, your time in China will have been 
wasted. It will be a failure. And this administration does not 
have a very strong record of advocating, speaking out for human 
rights and religious freedom in China and in other places.
    And I would hope, when I saw that you were appointed there, 
I thought well, you know, I think he understands that. I think 
he will be somebody who will advocate and speak out.
    Secretary Locke. I believe that the position of the United 
States government with respect to human rights around the 
world, including China, is very clear. We very much support as 
a government greater religious freedom, including the house 
churches. And we encourage people to attend those house 
churches and all forms of worship within China.
    Mr. Wolf. I am going to go to Mr. Fattah now. But, you 
know, during the Reagan administration, when the Secretary of 
State or people in the Reagan administration would go to 
Moscow, they would meet with the dissidents. They would invite 
the dissidents in to the American embassy. They would then 
visit the dissidents, the families of the dissidents who were 
in prison. They would even attempt sometimes to visit the 
dissidents that were in prison.
    Do you think that is a good model?
    Secretary Locke. I think that what others have done has 
been very commendable.
    Mr. Wolf. Mr. Fattah.

                       WORLD MANUFACTURING LEADER

    Mr. Fattah. Thank you. I want to revisit something from the 
hearing before the break. Frank Vargo, the leader at the 
National Association of Manufacturers, says that, ``The United 
States remains the manufacturing leader in the world. We are 
the largest manufacturer in the world despite the inaccurate 
reports that were referenced in the  Financial Times.''
    And I am sure the Chairman was not aware of this when he 
referenced it, but that report in the Financial Times is built 
off inaccurate data. The United States still outproduces, 
substantially, China in manufacturing. We have 21 percent, they 
have 15 percent. And there is no possibility, even though there 
is some months of gap in the data, that they could overtake the 
United States.
    So I want to start here, because this is about the United 
States winning. We have been winning as has been the case for 
110 years in manufacturing. And the objective here and the work 
of your Department, which has been extraordinary on behalf of 
manufacturers, has helped position us to continue to win.
    And I don't mean win in a relative sense. I am not 
interested in 300 million Americans doing as well or better 
than 300 million of some other country. I mean no matter the 
size of the country. China is a much larger country. We still 
lead them. And we still lead the world. And we lead India with 
a billion people.
    Now this is, you know, a competitive circumstance. And, you 
know, competition is great. But winning is the most important 
issue when we are talking about quality of life and wealth.
    And so I want to make the record clear that even though 
this inaccurate report was made, that not only is it inaccurate 
in that we lead but we lead substantially. And that the United 
Nations statistic division compiles global data on 
manufacturing and verifies that we have 21 percent of all 
global manufacturing output. And that when compared, for 
instance, in this matter to China, they have 15 percent.
    So what we want to do is we want to--I said this in the 
hearing the other day, and I will restate it now that the 
Manufacturing Extension Partnership program is my number one 
priority in this bill. And all of us have priorities.
    My Ranking Member is very interested in a lot of issues. 
But he is very interested in the salmon and, you know, the $65 
million that is being allocated there in terms of the work that 
you are doing in a state that you are quite familiar with in 
terms of salmon. And you heard my other colleague talk about 
the Gulf and the importance there.
    So, you know, we all have our priorities. And the Chairman 
has his, which is admirable in the passion that he brings to 
the question of human rights in China. But if you are in the 
role of the Ambassador for the United States, you will be 
carrying the official position of the United States Government, 
which is set by the Administration.
    And we understand that you would not--you would at all 
times adhere to that responsibility as previous ambassadors 
have done. And I would also note that previous ambassadors have 
gone on to do great things. President Bush was the former 
ambassador to China. He became President of the United States. 
And I note that we have another ambassador who may be headed at 
least into the competitive realm for that. So great things for 
those who are ambassadors to China after they move on from 
their post.
    But notwithstanding all of this, I want to walk--go back to 
the issues of the Department relative to American business and 
commerce. It was reported in the Wall Street Journal in 
December that American businesses had their largest profits 
ever in the history that they have been recorded.
    And I want to commend the Department for your work. And I 
want to give you a chance to outline some of the things that 
have been done under your leadership to help American business 
do business, not just here at home but abroad.
    Secretary Locke. Well first of all let me just say that 
America still is the most productive manufacturing country in 
the world. When you look at the hundreds of millions of people 
in China that are involved in manufacturing and how we are able 
to have that same amount of output value of manufacturing with 
just a fraction of the employees, it speaks volumes about the 
productivity and the ingenuity of American workers. And that if 
on a level playing field we can outcompete just anybody else.
    Nonetheless, we need to focus on increasing manufacturing. 
And we need to focus on exports. And that is why the 
President's National Export Initiative seeks to double U.S. 
exports just in the next five years, creating several and 
supporting millions of new jobs in the process. And we know 
that jobs related to export on average pay 15 percent more than 
the typical wage in America. So it is a source of good paying 
jobs, family wage jobs.
    The President is looking at corporate tax reform. He is 
working with many of the top people within Treasury and his 
economic council on corporate tax reform that would address 
some of these issues and create greater incentives for 
company's to bring their foreign earnings back to the United 
States.
    But as the President indicated, he wants to do this without 
adding to the deficit, which means lowering the tax rate, and 
closing--expanding the base, and eliminating a lot of loopholes 
and various exemptions.

                     COMMERCE REVENUE OPPORTUNITIES

    Mr. Fattah. Well I want to commend both you and the 
President for the appointments to the Competitiveness Council, 
because obviously Brian Roberts from Philadelphia was appointed 
and also Ellen Kullman who is the CEO of DuPont, which is our 
neighbor right there in Delaware. So I know you got two great 
people from our region of the country. And I know that the 
Competitiveness Council is really drilling down on some of 
these issues.
    You have done a lot of work on--the Administration has done 
a lot of work on helping small businesses. You have done 17 
separate tax breaks, tax cuts for small businesses. And we see 
a real increase in small business activity.
    And so I think that there is a lot more that we can look to 
in terms of the work that has been done to really position this 
very significant increase in profits. Now we have had 12 months 
of net increase in private sector jobs. And today's job numbers 
in terms of unemployment claims were very, very good, well 
below 400,000. So there is a lot of work that is being done.
    I want to say that in terms of the questions of the 
appropriations, your overall budget is less than three-tenths 
of one percent out of every dollar that we are going to spend 
as a Federal Government. And yet it is the--it is the kind of 
seed corn, if you would, for the world's greatest economy.
    That is, at the Commerce Department you are really at the 
very forefront of trying to make sure that our ability to 
continue to generate well over 130 million jobs and have the 
kind of profits that we have seen really is, in many ways, you 
know, we are making a small investment as a country.
    But I want to ask you this question. Much of the services 
of the Department help business. Obviously it is the Commerce 
Department. I mean so even when we talk about the weather 
service, two thirds of our economy is weather dependent. I 
mean, it is very important about whether or not we invest in 
these satellites, because it is very important that we are able 
to forecast what is going to happen.
    I am interested as you are doing some of your portfolio 
inside the Commerce Department, whether there are opportunities 
to gain revenues from some of the services that you are 
providing and ways in which the Department can still provide 
the immediate help to businesses, as you do, for instance, in 
the patent office revenues.
    And whether you think that is a direction that we should 
move at least in terms of examining or given the fact that it 
is such a small amount in the federal budget, that that is 
really not something that we should focus a lot of our time on.
    Secretary Locke. There are a variety of fee-for-service 
programs within the Department of Commerce, even within our 
International Trade Administration on Export Promotion. There 
is a highly valued and very well spoken for gold key program 
that is a very intensive matchmaking service where our foreign 
trade specialists will actually go find and line up eight, 
nine, or ten potential buyers or customers for a U.S. company.
    We will actually do the pre-investigation due diligence 
work and make sure it is a reliable potential buyer or customer 
for that U.S. company. Then that U.S. company will let us go to 
the U.S. consulate or trade office in Belgium or in Budapest, 
Hungary, and sit there. We will bring those eight or nine or 
ten pre-vetted companies to that American company. It is almost 
like what we call speed dating. Many companies have said that 
their revenues and their sales have come from the matchmaking 
services that we provide.
    Now that is a fee-for-service program. And, in fact, it is 
so highly thought of that both UPS and FedEx are helping pay 
for that service for companies, some of their customers that 
they identify are really ripe for more exporting from the 
United States. And so those are some of the programs that we 
have.
    Now we, for instance have a lot of weather and other 
information and statistical data that we provide. And that is 
something that we are more than happy to look at and consider 
as to whether or not some of those should be on a fee for 
service.
    But, you know, some of the information that we also provide 
is very valuable to the public and is used not just by 
commercial purposes. That very same information might be used 
by independent researchers or scientists. And so how you draw a 
line between public safety purposes, independent researchers 
versus those who might want to use that to make a profit, that 
is certainly an area that should be considered.

                        DEPARTMENTAL BUDGET CUTS

    Mr. Fattah. But it is not an area that I think we should 
rush into. But I do think that to the degree that we can make 
a--you know, that we can analyze it and that it makes sense.
    Now, again, I don't think that the argument is that we are 
doing too much. I think that there is an argument perhaps that 
we should be doing more. I think we should be doing a lot more 
to help manufacturers.
    I think we should be doing a lot more looking at the 
demographics of the country to make sure that women and youth, 
all we are seeing over here two years is a significant uptick 
in the number of women going into business. But we have, you 
know, other demographic realities in which we have had sectors 
in African-American and Latino communities and Native American 
communities in which they have not always had the access to 
capital and the opportunities presented. But that could be a 
significant part of our economic base.
    So I think that we need to be doing--you know, we at least 
need to look at it. But I think we ought to be careful. You 
know, we don't want to--you know, we have to take care of the 
goose. And American business is the most profitable ever. We 
have the lead in manufacturing in a substantial way over 
countries with much larger populations. The administration has 
set in place more than a dozen and a half tax cuts for 
businesses.
    So you have done a great deal. And with the Competitiveness 
Council, it has opportunities to do even more. I think that the 
regulatory reform that has been put in place will or at least 
they will look at regulations is an important one.
    I want to ask you this question. The President, and you sit 
in the cabinet, has asked for two rounds of cuts earlier in 
this process. He first asked for the departments to look. And 
you came back with some $20 billion in cuts. And then there was 
$119 billion in cuts found by the cabinet members.
    And even though Senator McConnell, at that point said that 
that was a paltry amount of cuts, I guess in comparison to the 
efforts that we are engaged in now, it was a very significant 
amount of cuts.
    I want to know in those earlier rounds when the--under the 
President's direction, you know, rather they were--you already 
kind of cut some of the edges around at the Department. And now 
we are really getting ready to cut into very important areas.
    We are trading off tsunami warnings versus hurricane 
warnings from satellites. We are in a touchy area. And we do 
have a responsibility to the public that is beyond the question 
of whether we cut a dollar here or a dollar there. So if you 
could respond about the earlier round of cuts that were dealt 
with in the administration.
    Secretary Locke. Well let me just say that from day one the 
President has impressed upon all of us the need to really be as 
efficient and effective as possible, to be wise stewards of the 
American taxpayer dollars. And it is something that I have 
prided myself on as a former governor of the state of 
Washington where we had to go through some very painful budget 
exercises and make these tough, tough decisions. So I 
understand the dilemma that you all face.
    I think that we cannot ever take the approach of making 
across the board cuts. There are some things you want to 
enhance while you make deeper cuts someplace else. And you go 
to your strengths. And those things that are not as efficient, 
as effective, not really providing the results, those perhaps 
ought to be eliminated as opposed to across the board cuts.
    And I can tell you that in this 2012 budget we have made 
difficult decisions. But we have come up with almost a quarter 
billion dollars of cuts, of efficiencies through acquisition 
reform, taking advantage of IT but actually eliminating 
programs. And the proposal is to, for instance, on the Malcolm 
Baldrige Award to eventually move that off to the private 
sector and the foundation. But we are going to do that over a 
period of time.
    So we are willing to make those tough decisions. At the 
same time, I think that it is important that we, as the 
President has called for a freeze, a five-year freeze, on 
discretionary domestic spending. In that freeze there are 
enhancements. But those are offset by deep cuts elsewhere.
    And I think that what the President has proposed by way of 
focusing on education, research and development, innovation, 
working with the private sector to hasten the discovery of new 
technologies, oftentimes technologies that they are not able to 
do on their own or the research that they are not able to 
embark on their own. We are able to incite, excuse me, incent 
that discovery, hasten it, which leads to new products, 
benefits to our quality of life and creation of jobs.
    That is why I think that the President's 2012 budget is 
very strategic, very focused. And his motto is we want to out 
build, out educate, and out innovate the other countries, 
because we know that our competitors are very focused.
    And that is why the President has also called for corporate 
tax reform that will lower the tax rate and provide the 
incentives for more manufacturing and economic growth to occur 
in this country.
    Mr. Fattah. Well I am glad that we have moved away from the 
notion that we can have--you know, there were earlier 
administrations and opinion leaders who were trying to convince 
us that we were going to have an information-based or service-
based-only economy and that manufacturing was somehow better 
done elsewhere.
    So to have an administration that is focused, and that is 
excited about manufacturing here in America, and is celebrating 
it, and that understands that it is connected to our long-term 
viability as a country. It is also connected obviously to our 
national security. I mean we can't just give away all of our 
manufacturing capability.
    I think the work that you are doing is important. And I 
want to thank you. And, you know, I think that the work you 
have done both at the county level and as governor and 
obviously you have distinguished yourself as Secretary of 
Commerce. And I wish you well in your future endeavors.
    Secretary Locke. Thank you.

                       WORLD MANUFACTURING LEADER

    Mr. Wolf. I am going to read you something. And just 
because Mr. Fattah said he calls the NAM and he gets somebody 
to say something, it doesn't make it true. And so we are going 
to check on this and put this in the record.
    Financialtimes.com, Financial Times, Peter Marsh, and we 
are going to get the full study. And I want it to be opposite. 
That is why I think this administration--we are looking for 
things where we differ. I think we differ strongly on this. 
This administration has not done a very good job with regard to 
manufacturing. This administration has done a miserable job 
when it comes to the debt and the deficit.
    But I read the article. It says, ``China has become the 
world's top manufacturing country by output, returning the 
country to the position it occupied in the early 19th century 
and ending the U.S.'s 110-year run as the largest goods 
producer.''
    I don't want it to be that way. I have a manufacturing bill 
that we are trying to move through this Congress. It goes on to 
say that, ``The change is revealed in a study released on 
Monday by IHS Global Insight, a U.S.-based economics 
consultancy, which estimates that China last year accounted for 
19.8 percent of world manufacturing output, fractionally ahead 
of the U.S. with 19.4 percent.''
    China's return to the top is the ``closing of a 500-year 
cycle in economic history,'' said Robert Allen of Nuffield 
College, Oxford, a leading economic historian.
    Deborah Wince-Smith, chief executive of the Council on 
Competitiveness, a Washington-based business group, said the 
U.S. ``should be worried'' by China taking over a position that 
the country has occupied since 1895.
    And then it goes on to say the figures were derived from 
data gathered by national statistic agencies around the world 
and have been published several months ahead of the equivalent 
comparative figures that will come out for government bodies 
such as the UN and the World Bank.
    So just because a guy at the NAM says it, I mean, we are 
going to put this in the record. So, Mr. Fattah and Mr. 
Secretary, you may not be right. I want you to be right, but 
you may not be right. And just because something is said at a 
Congressional hearing based on a telephone call does not----
    Mr. Fattah. Mr. Chairman, if you would yield for one 
second.
    Mr. Wolf. I will, but I want to finish.
    Mr. Fattah. I didn't make any telephone call. This is a 
statement that was made on March 14th.
    Mr. Wolf. Well maybe----
    Mr. Fattah. It had nothing to do with our hearing.
    Mr. Wolf. Maybe he was wrong.
    Mr. Fattah. And I am just saying, I don't want you to think 
that I went and made a phone call when I didn't.
    Mr. Wolf. Well I did. But I don't think it now if you tell 
me. Also I think the gentleman lives in my district, and he is 
actually a friend of mine. But he may very well be wrong on 
this.
    Also we having Rising Above the Gathering Storm, which I 
was involved with helping set up and working with Norm 
Augustine, is as United States share of global high-tech 
exports dropped from 21 percent to 14 percent while China's 
share grew from 7 percent to 20 percent, so high-tech 21 
percent to 14 percent drop. China goes from 7 percent to 20 
percent.
    It says the national debt grew from $8 trillion to $13 
trillion. Federal debt per citizen increased and then it goes 
on. China then talks about graduating more engineers, 700,000. 
We only graduated 70,000.
    For the last five years, we have been working on this 
issue. And as chairman of this committee, we reversed the 
decline with regard to the investment in math and science and 
physics and chemistry and biology, and all that.
    But the Gathering Storm indicates that really what the 
Secretary said may not be right. And we will get the full data 
that comes with this.
    But, Mr. Secretary, if you are the Secretary of Commerce, 
we don't want China to be number one. But they may have 
surpassed us. And there is a Simon and Garfunkel song, The 
Boxer, that says ``a man hears what he wants to hear and 
disregards the rest.''
    We cannot disregard that. If somebody has a problem, you 
don't want to go whistling through the graveyard saying, well, 
it is not a problem. We are always number one when we are 
falling. I don't want to see us in decline. I want to see us 
ascend. I want us to be the dominant power for economic reasons 
and for freedom and liberty.
    So Mr. Vargo from the NAM may very well be wrong. And we 
will submit that in the record.
    Secondly, we will also submit points from the Gathering 
Storm with other data showing, expressing my concern with 
regard to the manufacturing base. I have a bill in. We have 
asked the administration to comment. We get no answer, so we 
are going to try to move ahead. Mark Warner is going to 
cosponsor it with me in the Senate.
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    Mr. Wolf. I have even raised it with you. We want a 
repatriation program to put a policy in to bring these jobs 
back. I can't get anything out of the administration. I heard 
you talk about jobs, but I can't even get a comment on it. I 
can't even get anybody to write back. And then I will hear the 
President roll out and talk about jobs.
    We have a bill in. And finally Mark Warner is going to--we 
are going to push this bill. And we are going to try to pass it 
to bring real manufacturing jobs back.
    Secondly, on the deficit and the debt, the President has 
failed. Period. And I want to read for the record a letter that 
Senator Coats put in. Senator Coats today led a group of 23 
Republican Senators in sending a letter to the White House 
calling on President Obama to show ``strong leadership, address 
the financial crisis, and entitlement programs.'' This letter 
comes on the heels of Coats' return speech.
    In the letter to the President, the senators wrote, 
``Federal expenditures on Social Security, Medicare and 
Medicaid are expected to double over the coming decade and 
represent an unsustainable portion of total government 
spending. In order to ensure the long-term viability of this 
program, it is imperative that you lead a bipartisan effort to 
address these challenges.''
    And then it goes on to say, and I will quote at the end and 
put the full letter in the record, ``last year's National 
Commission on Fiscal Responsibility,'' which I have said that I 
will support. I didn't set it up. This idea came from Jim 
Cooper and Conrad and Gregg. And I hailed the President when he 
established it. But he has walked away from it.
    ``Last year's National Commission on Fiscal Responsibility 
and Reform marked an important first step in identifying a 
potential path forward.'' Durbin and Coburn together, ``Strong 
leadership is needed now to advance possible solutions to 
ensure that our entitlement programs can serve both current and 
future generations. Without action to begin addressing the 
deficit, it will be difficult, if not impossible, for us to 
support a further increase in the debt ceiling. House Speaker 
John Boehner this month offered to partner with you in a 
nonpartisan effort. We join in the Speaker's offer, and urge 
you to lead.''
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    Mr. Wolf. It is time for the President to lead this 
Congress and this Nation in the critical efforts to strengthen 
our country's long-term fiscal security. And the President has 
not led. And by not leading, he has abandoned the fight. He is 
walking away. He is walking away from the fundamental issue 
that will have an impact on our children, and our 
grandchildren, and all of us alive.
    And then lastly, and then I want to end this hearing, 
because I am going to submit the rest for the record. What I 
want to tell you I am disappointed in your answer with regard 
to whether you would go to a house church or not.
    China is the number one supporter of the genocide, the 
genocide in Sudan. I was the first Member of the House to go to 
Sudan and saw with my own eyes the genocide, what was taking 
place and still takes place against women, and men, and 
children in Darfur.
    China, the country that you are going to be the ambassador 
to is the number one genocidal supporter of the Darfur 
government. And Bashir, the head of Sudan, is under indictment 
by the International Criminal Court. The Congress in the 
previous administration said what is taking place in Darfur is 
genocide. Genocide.
    I am going to write you a letter after you get the 
ambassadorship. I am going to ask you where you are going. I 
will get a guy to call you. I don't know if you will take his 
call or not, but his name is Bob Fu, to call you and invite you 
to go to a Catholic church, a non-recognized church, a church 
connected to where maybe a bishop is in jail or under house 
arrest, for you to show--to start to show up. And if you don't 
want to worship, just to be there, to stand there, to identify.
    I am not Buddhist, but I go with Buddhist monks. And when I 
went to Tibet, I went back into the monasteries to identify, to 
let them know that I cared enough. I cared enough so I went. So 
we are not going to ask you to worship. And I am not going to 
ask you what your language is, what your religion is. But I am 
going to ask you to go to Tibet and stand with the Buddhists 
who are being persecuted. And go into a monastery in Tibet.
    And then I am going to ask you to go with the Muslims, the 
Uighurs, and go ride a triath of that area and stand with them. 
And then I am going to ask you to go to a Catholic church where 
there is a Catholic bishop in jail to stand with them. And then 
I am going to ask you to go to a house church. Where there is 
house church leaders who have been tortured, who have been 
taken away and are in prison.
    And then I am going to ask you to visit the Nobel Prize 
winner's wife, to go visit her. And then I am going to ask you 
on the 4th of July to open up the doors of the embassy and let 
the embassy be an island of freedom where dissidents can come 
to stand with the American ambassador.
    And if you do that, I will hail you. But we are going to 
give you the opportunity. And we are going to wear you down. We 
are going to write you day in and day out. We are going to ask 
you when the dissidents come back from here to send people out 
to the airport to meet him. We are going to ask you to go into 
the jails, because if you don't, you will have failed. If you 
do, you will be the most successful Ambassador.
    And lastly, and I am not going to ask you--embarrass you to 
ask this question. But I hope when you leave, you won't do what 
many of the other American ambassadors do. I hope you won't go 
out and represent the Chinese government.
    The hearing is adjourned.

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                                          Wednesday, March 2, 2011.

                    U.S. PATENT AND TRADEMARK OFFICE

                                WITNESS

HON. DAVID KAPPOS, UNDER SECRETARY OF COMMERCE FOR INTELLECTUAL 
    PROPERTY AND DIRECTOR OF THE U.S. PATENT AND TRADEMARK OFFICE

                   Opening Statement by Chairman Wolf

    Mr. Wolf. The hearing will begin. We welcome Secretary 
Kappos. In fiscal year 2012 PTO estimates it will collect $2.7 
billion in fees. Of this amount, $2.4 billion is from base fee 
collections and another $263 million represents an estimated 15 
percent surcharge on patents that PTO would like to collect to 
address the current backlog. The spending estimate is about 
$819 million, or 43 percent, higher than the 2010 level. Your 
fee collections will in part support 11,137 FTEs, including 
1,500 new hires in fiscal year 2012 to address the backlog. PTO 
anticipates that it will need to hire about 3,400 patent 
examiners between 2011 and fiscal year 2013 to address the 
backlog.
    The PTO is clearly a driver for the economy but you 
certainly have some challenges ahead. We understand that as of 
February 24, 2011 the backlog of applications that have not 
been touched is 718,000 applications. We have a number of 
questions but before that I recognize the Ranking Member, Mr. 
Fattah.

                    Opening Statement by Mr. Fattah

    Mr. Fattah. Thank you, Mr. Chairman. And let me thank you 
for convening this very important hearing on a subject that is 
critically important to our economy and to the President's call 
to focus on innovation. Obviously it is intertwined in its 
connections to the patent, and to having the Under Secretary 
here to testify. And I am very pleased to see that there is a 
compromise in the works around authorization, and moving 
forward, there probably are still a few hiccups down this road, 
and maybe even some questions that we will have about it. But 
it seems like it is essentially a growing consensus that what 
you have argued for, as people are not coming to grips with 
that. We need to move forward. And even in this time of 
discussion around cuts, I think there is broad bipartisan 
agreement that this is an area where we need to invest in terms 
of additional resources. And since it is a fee-generated 
operation, and those who are paying the fee are even for doing 
more. So it is a great day for us to come together and get into 
the details of this. And I know the Chairman is very 
interested, and I am interested, in your testimony. So I will 
yield back. And I thank the Chairman.
    Mr. Wolf. Thank you, Mr. Fattah. Secretary Kappos, you can 
proceed as you see appropriate.

               Opening Statement by Undersecretary Kappos

    Mr. Kappos. Well thank you, Chairman Wolf, Ranking Member 
Fattah, and members of the subcommittee. Thank you for this 
opportunity to discuss the USPTO's operations and our programs 
and initiatives, and the President's 2012 budget request to 
support those efforts.
    Innovation continues to be a principal driver of economic 
growth and job creation in the United States. We at the USPTO 
are proud of the role that we play in serving America's 
innovators and granting the patents and registering the 
trademarks they need to secure investment capital, and to build 
companies, and to bring new products and services into the 
marketplace. The work that we do at USPTO directly contributes 
to strengthening our economy and creating jobs, and it helps us 
move forward toward the President's goal of winning the future 
by out-innovating our economic competitors.
    To effectively carry out our mission, the USPTO must be 
well-run and appropriately funded. Consistent with the 
directive from Secretary of Commerce Locke, our overriding goal 
is to focus our resources more effectively on improving overall 
operations and reducing the time it takes to get a patent.
    Now I am pleased to report that during last year the USPTO 
has increased patent production, reformed key processes, and 
improved quality. During this time we also developed and issued 
a metrics based strategic plan to strengthen the capacity of 
the USPTO to ensure that our resources are appropriately 
focused on our strategic goals. And these accomplishments have 
helped us to begin to reduce the significant backlog of pending 
patent applications.
    Mr. Chairman, the President's fiscal year 2012 budget 
provides the USPTO with the funds we need to reduce the patent 
application backlog and pendency levels, improve patent 
quality, and make necessary investments in our information 
technology infrastructure. The budget requests authority to 
access the $2.7 billion in user fee collections currently 
projected for fiscal year 2012 to execute our multiyear 
operating requirements. This results in an appropriation of 
zero dollars budget authority. As a fully user fee funded 
agency, the USPTO's requirements are addressed at no cost to 
the taxpayer.
    Our performance commitments for fiscal year 2012 assume 
enactment in March of the fiscal year 2011 President's budget 
for the USPTO, including the interim fee increase on patent 
fees. Availability of these budget resources will promote 
America's economic growth and competitiveness by enabling 
investments that are essential for reducing the current patent 
application backlog and pendency levels, maintaining trademark 
pendency at current levels, and moving to 21st century 
information technology systems, and helping improve IP 
protection and enforcement around the world.
    These goals briefly are supported by hiring 1,500 patent 
examiners, establishing a nationwide workforce focused on 
hiring from around the country, telework, and hiring patent 
examiners with previous IP experience, enabling patent 
applicants to fast track their most important applications, 
facilitating work sharing arrangements with foreign IP offices, 
updating patent and trademark IT systems, and enhancing our 
international programs.
    Fee collections are running very strong at USPTO as a 
result of an improving economic outlook, stronger patent 
renewal rates, and our increased production. We are getting 
more done and collecting more fees in doing so. As you know, to 
enable these efforts the President's fiscal year 2011 budget 
proposes that the USPTO be permitted to spend all of the fees 
it collects and proposes a 15 percent surcharge on patent fees. 
Despite our strong fee collections, the USPTO has been forced 
to implement spending reductions as a result of the terms of 
the current continuing resolution, and these include delaying 
critical IT projects, slowing down hiring, and restricting 
examiner overtime. Should the continuing resolution be extended 
beyond March 4 and March 18, and hold the USPTO to its fiscal 
year 2010 spending authority level, we will be forced to halt 
all hiring, overtime, and IT improvements. This would 
unfortunately reverse many of the gains we have begun to make, 
and such continued restriction in appropriations would also 
result in almost $200 million of user fee collections being 
unavailable to support USPTO operations this year.
    Mr. Chairman, in conclusion, ensuring stable funding for 
the USPTO will continue to be a critical component of our 
success in serving America's innovators. We wish to work with 
you to ensure that the job creating, deficit neutral work 
conducted at USPTO for the benefit of our Nation's innovators 
is supported in whatever final spending package is enacted for 
the remainder of fiscal year 2011 and, of course, into fiscal 
year 2012. Thank you very much and I am happy to take 
questions.
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                           OPERATING RESERVE

    Mr. Wolf. Sure, thank you. We want to ask you a couple of 
questions about your operating reserve. The supporting budget 
materials show the PTO's operating reserve or carryover 
balances going into fiscal year 2012 are about $213 million. 
PTO carryover balances have increased significantly over the 
last several years, growing from about $72 million in 2008, 
$119 million in 2009, and $223 million in 2010. Most come from 
trademarks. Would that be accurate so far?
    Mr. Kappos. Yes, I believe it is.
    Mr. Wolf. Okay. A portion of the current carryover balances 
are a result of the fiscal year 2010 $129 million supplemental 
that PTO received in 2010. We understand that you have hired 
350 additional patent examiners with this additional funding. 
Your operating reserve is essentially a carryover, or funds 
that you do not spend in one fiscal year which are carried over 
into the next year. PTO estimates its fee collection to be $2.7 
billion. Your budget request, however, is built toward a $2.6 
billion funding level. Would you please explain the differences 
between the $2.7 billion in fees you anticipate collecting and 
the $2.6 billion that you anticipate spending? Is the 
difference about $107 million to fund another operating 
reserve? I am waiting, yes.
    Mr. Kappos. Okay. Well thanks, Chairman Wolf, for that 
question. The difference, about $107 million, would go into our 
operating reserve. It is absolutely required, it is imperative 
that we carry that reserve going into 2013. And the reason is 
because our hiring in 2012 is going to increase our examiner 
count so that we will have to carry on our payroll throughout 
all of 2013. Those additional examiners are going to take time 
to come up to full production capacity. As a result, we are 
going to need that $107 million carryover in order to fund 
their pay during 2013 while they are coming up to production 
capacity. By the time we get into 2014 we will no longer be 
hiring anymore, and those people will be up to production 
capacity, so we will have the full benefit of their production 
producing income. But in 2013, it is a very critical year for 
us. We will be carrying our maximum head count in that year and 
many of those people will not quite be up to production 
capacity yet. So we do not anticipate that our fee income, 
unless we are able to have that carryover, will be adequate in 
order to enable us to carry through on all of our plans. So 
that is why we need that $107 million reserve carrying over.
    Mr. Wolf. The PTO end-of-year operating reserve will be 
about $342 million, will it not, when you add them both 
together? And I do not quite understand the importance of not 
spending every last penny at the end of the fiscal year and 
allowing a bit of a cushion, but if PTO has such a backlog why 
do we have such a large carryover? Most Federal agencies do not 
have a carryover. Why do you differ than the Department of 
Defense? Or the IRS? Or some agency like that?
    Mr. Kappos. Well a couple of points. Number one, Chairman 
Wolf, as you pointed out before, a tremendous amount of that 
carryover is on the trademark side. And by statute we have what 
is a statutory fence----
    Mr. Wolf. Would you rather not have the fence?
    Mr. Kappos. No, I am comfortable with the fence.
    Mr. Wolf. Why would you not spend the funds on overtime and 
hiring to reduce the backlog now, and not have such a large 
carryover for the following year? So if you broke the fence 
down, took the fence away, could you not do that?
    Mr. Kappos. Well, I cannot do that. It would require a 
change in the statute.
    Mr. Wolf. I understand that. But I said if that were done, 
if the statute and the law were changed. The Park Service takes 
money in from collections if somebody is going through a 
National Park. They also take money from other venues. They 
kind of merge them together, and the Director of the National 
Park Service can use it for whatever. Would it be helpful if 
that fence did not exist? And you could then deal with the 
backlog as soon as possible?
    Mr. Kappos. You know, I actually do not think that it would 
be helpful. I think Congress did the right thing by erecting 
the fence in the first place.
    Mr. Wolf. Why?
    Mr. Kappos. Because it enables us to operate the trademark 
side of the office, which is extremely efficient, extremely 
well-managed, and operating right in its appropriate pendency 
zones. It enables us to preserve the operating efficiency of 
that part of the office and never run into, what I consider to 
be not good management discipline, of breaking the working part 
of your business in order to fix the part that is not working 
so well, which in our case is the patent side.
    Mr. Wolf. But are you the only agency in the government 
that that is the case, that has that? Are there other 
agencies----
    Mr. Kappos. Well, that I do not know. I only know that the 
USPTO, so long as I can remember, has had this trademark fence. 
And I think on policy, and business-wise, it really is the 
right thing.
    Mr. Wolf. I am not so sure. You are again requesting a 15 
percent surcharge on patent fees. You anticipate that this will 
provide the PTO with an additional $263 million. What do you 
anticipate that this additional revenue will enable the PTO to 
accomplish?
    Mr. Kappos. Well the additional revenue is absolutely 
imperative to reaching the President's and the Secretary of 
Commerce's mandated goals of bringing our backlog down to an 
appropriate inventory level of about 350,000 cases in 
inventory, which requires cutting in half from where it is now, 
and bringing our pendency level down to the industry benchmark 
standard of about twenty months from where it currently is, 
which is about thirty-four months or so.
    Mr. Wolf. When is the last time it has been at twenty 
months?
    Mr. Kappos. Actually, it was at twenty months, I want to 
say about 1987, something like that. So it has been a while, 
but it has been there before.

                          REVENUE PROJECTIONS

    Mr. Wolf. According to a December, 2010 Commerce IG report, 
PTO does not have a documented process for projecting patent 
fee collections. This same view, however, also found that 
between fiscal year 2006 and fiscal year 2009 PTO overestimated 
certain fee collections by as much as 30 to 55 percent, while 
another fee collection was under PTO's estimate by 35 to 42 
percent. Were those figures accurate? And would you explain?
    Mr. Kappos. So far as I know, what you have said is 
accurate.
    Mr. Wolf. And? Why the incompetency in projecting patent 
fees, what do you think the reason for that overestimate and 
underestimate was?
    Mr. Kappos. Well, projecting fees at an agency like the PTO 
is like projecting the future. It is like trying to anticipate 
what the stock market is going to do tomorrow. And, I am quite 
serious about this, there is no business in the world, and I 
have worked in business for twenty-six years, there is no 
business in the world that can project the future. We are 
making estimates about what is going to happen in technology 
investments as much as several years down the road here. We are 
making estimates about what patent filers in the U.S. and in 
other countries are going to be doing. There is absolutely no 
way we can be 100 percent accurate about those. We cannot 
anticipate financial downturns, like the one that happened a 
few years ago. And when those occur they are a surprise to 
everybody. They certainly were a surprise to me. I do not know 
if anyone else in this room was able to predict those 
downturns. They affect USPTO fee incomes. They are very 
dynamic. We do our best to anticipate. We actually are quite 
accurate overall. I think in the last couple of years we have 
been accurate to within about a percent, which is an amazing 
accuracy, actually. But we are never going to be perfect.

                           PATENT INFORMATION

    Mr. Wolf. Last summer you announced a new policy whereby 
PTO would provide China with full access to our entire patent 
database, including regular updates with new patents. Your own 
white paper you said as follows: ``Under the new arrangement, 
the Chinese will have easier access to full text public 
documents, including the bulk back file of U.S. full text data 
on tapes followed by regular updates.'' This decision will 
undoubtedly expedite Chinese state sponsored cyber espionage. I 
mean, why would you give the Chinese this?
    Mr. Kappos. Well that last part is not a quote from me.
    Mr. Wolf. No, that is my quote. Why would you give this to 
the Chinese?
    Mr. Kappos. China, like all other countries, already has 
access to all of that same information.
    Mr. Wolf. But why should they have any of the access to it, 
period? China is doing espionage against us, cyber attacks 
against us, stealing from us. We have had IGs from different 
committees, Commerce, NASA telling us about the cyber attacks 
by the Chinese government. Why would you cooperate in any way 
at all? I mean, your comment was, ``Under the new arrangement, 
the Chinese will now have easier access to full text public 
documents, including the bulk back file of U.S. full text data 
on tapes followed by regular updates via file transfer 
protocol, all through the most comprehensive search system.'' 
Why would you do that?
    Mr. Kappos. This is all public information.
    Mr. Wolf. But why should it be public information is the 
question I am asking you? Why should we give that to the 
Chinese government? The manufacturing base of this nation is 
eroding. What they are doing, and different small companies 
tell me, they are going in and seeing what ideas are out there, 
and they are taking them. Why would you make it easier for the 
People's Liberation Army to access that material whereby that 
industry or that idea could be taken and used by the Chinese?
    Mr. Kappos. So patent files----
    Mr. Wolf. You know what I am talking about. I think you, 
were you not in the meeting that we had before? We had some of 
your people come up to meet with Pat Choate and some other 
people with regard to the problem. Do you remember?
    Mr. Kappos. I actually do not recall that.
    Mr. Wolf. Did your people not tell you?
    PTO Staff. We did, the Director was not in that meeting.
    Mr. Wolf. Excuse me?
    PTO Staff. He was not in that meeting.
    Mr. Wolf. Did you tell him about the meeting?
    PTO Staff. We did about the publication and your bill that 
you introduced.
    Mr. Wolf. And did that register with you?
    Mr. Kappos. I am not sure what the question is. Did what 
register?
    Mr. Wolf. Did you give him the full update of what Pat 
Choate said, the meetings, and the concerns? What were the 
Director's comments based on the meeting that you had telling 
him about the meeting that we had?
    PTO Staff. I will let the Director----
    Mr. Wolf. But he does not remember.
    Mr. Kappos. I am happy to help if you could just explain 
the question a little bit more fully?
    Mr. Wolf. I think you ought to come by. One, I do not think 
you ought to give the Chinese anything, period. And we are 
going to officially ask you not to give the Chinese anything. 
China is taking jobs from the United States. The manufacturing 
base is eroding in the United States. As the manufacturing 
moves offshore, the research and development and innovation 
moves offshore. The Administration has said they want jobs here 
in America, not jobs in China. This material should not be 
given to the Chinese in any form, in any way. Do you have a 
comment? Or is this----
    Mr. Kappos. Well, if you have a question, I would be happy 
to answer it, but I did not hear a question.
    Mr. Wolf. You do not understand the concern that I have----
    Mr. Kappos. Well look, it is----
    Mr. Wolf. Look?
    Mr. Kappos. We are required by law to----
    Mr. Wolf. You are not required by--what law requires you to 
give this to the Chinese?
    Mr. Kappos. 35 United States Code, Federal patent law 
mandates that patents get published when they are granted. It 
is part of the original bargain in the Constitution based on 
the constitutional exchange of a patent for a publication. We 
publish all of that information. It is all made available on 
the internet. If we do not make it available on the internet, 
others will make it available on the internet. There is a large 
industry that does that. That information all becomes instantly 
available everywhere in the world. And it is just a fact of, 
frankly a fact of life in the 21st century. I do not see any 
way we can go back to not publishing patents and not having 
them become instantly available, full text searchable, to 
anyone in the world on the internet.
    Mr. Wolf. Okay. And, well, we will take a look at that. Mr. 
Fattah.

                       PATENT APPLICATION FILINGS

    Mr. Fattah. Let me thank you. Let me go to the, what 
appears to be the compromise about how to reform the patent 
operation. And let me start from the generality and move to the 
specific. First and foremost, can you tell us about the level 
of activity, we know a little bit about the backlog, but the 
number of applications on whatever basis, quarterly or 
annually? And whether it is on the uptick or the downtick? And 
who is applying for patents?
    Mr. Kappos. Thanks for that question Ranking Member Fattah. 
Indeed, patent filings are increasing. They increased by over 4 
percent last year. They are increasing so far this year by a 
rate of about 7.5 percent. And to the question of USPTO's 
ability to make predictions, we predicted patent application 
rates would be up about 5 percent or so this year. They have 
exceeded our expectations. I do not know of any way we would 
have anticipated that they were going to be up as much as they 
have been so far this year. But it is causing fees to run quite 
strong because application filings are up so much.
    Mr. Fattah. And who is applying? Who is making applications 
for patents?
    Mr. Kappos. Everybody is applying more. Americans are 
applying more for patents, and filers from outside of the U.S. 
are applying more also.
    Mr. Fattah. Can you quantify the percentages in those two 
groups?
    Mr. Kappos. You know, I do not have exact percentages. I 
would be happy to go back and provide those. We have got all of 
those statistics back at PTO.
    Mr. Fattah. Can you provide a general sense? I mean, are 
half of the patent applications Americans and half from 
overseas?
    Mr. Kappos. Oh, yes. A little more than half originate from 
overseas now. The last statistics I saw were somewhere around 
51 percent or so originating from overseas.
    Mr. Fattah. Is this not a rubicon that has never been 
crossed before in the country's history, in which now we have a 
majority of the patents being applied for by people overseas?
    Mr. Kappos. It is, yes.
    Mr. Fattah. So this is correlated to the President's goal 
of trying to put innovation at the forefront of our efforts to 
restore the American economy, and the fact that this whole 
effort of the Administration, the focus on education, and 
science, and the like, so that we can return to a point at 
which perhaps the majority of patents being sought in our 
country were from American citizens?
    Mr. Kappos. We would love to see that happen. And as you 
say, Ranking Member Fattah, STEM education is a key enabler to 
increasing Americans' patent filings, and also the education 
that we do at the USPTO is a key enabler.

                                 HIRING

    Mr. Fattah. So that is the general context of which, now we 
get to this question, one of the challenges in your shop is the 
backlog. And you have got a program in which I think there is 
bipartisan consensus that unlike the other discussion about 
cutting, that we actually want to hire more people over, was it 
1,500? 1,100 new, right?
    Mr. Kappos. Yeah, about 1,500 this year.
    Mr. Fattah. Total, but some of that is to replace people 
who are retiring?
    Mr. Kappos. Correct, attrition and retirements, yes.
    Mr. Fattah. About 1,100 are new?
    Mr. Kappos. Correct.
    Mr. Fattah. Patent examiners, right?
    Mr. Kappos. Correct.
    Mr. Fattah. Now this will allow us to do what relative to 
the backlog over what period of time?
    Mr. Kappos. Well this will allow us to cut the backlog over 
a period from now, 2011, through 2015, when we will reach our 
optimum backlog level. So patent examining, at the end of the 
day, is enabled by information technology systems. It is made 
more efficient by good management, and we are working on all of 
that. But at the end of the day, it is intellectual work. 
Watson cannot examine patent applications. It takes human 
beings to do that. And so we are going to get to an optimal 
backlog and pendency level. It is clearly going to require more 
examiners and that is why we are hiring aggressively.

                    REDUCING FEES FOR MICRO ENTITIES

    Mr. Fattah. Well I think there is agreement that we should 
hire more. And it is good to know that we can focus on what we 
need to do. Now there is going to be, in the compromise, there 
is a discussion about reducing fees for small and newly defined 
micro-entities. Can you illuminate, provide any information 
about what that might mean?
    Mr. Kappos. Ranking Member Fattah, that goes back to your 
question about enhancing the access to our agency for small and 
micro-entities, independent inventors, and very small 
companies. We already provide a 50 percent discount on many of 
our statutory fees for small entities. If we get this 
legislation, we would very much like to provide a 75 percent 
discount for individual filers who meet certain income levels, 
and for very small companies having very small numbers of 
people in them. This in turn will lead to greater access to the 
USPTO, and we hope and believe, greater numbers of filings by 
Americans in the infant stages of businesses--Americans who do 
not have any business but have a great idea, and Americans with 
very small businesses.

                        PATENT APPEALS TO USPTO

    Mr. Fattah. Now there is, in the adjudication process, the 
agreement would replace the Board of Patent Appeals and 
Interferences with the Patent Trial and Appeal Board. What, 
other than the semantics, does that mean?
    Mr. Kappos. We have a Board of Patent Appeals and 
Interferences. It actually would stay in place. Those people 
evaluate about 20,000 appeals we have currently pending in our 
agency, appeals from the patent process. In addition, if this 
legislation goes through we would be creating this new board 
that you talk about. In terms of management discipline, it will 
be managed under the same roof, if you will, and under the same 
set of management disciplines as our current board. It will be 
more Administrative Law Judges (ALJs), of course, attorneys 
trained and skilled in the patent law. Their job will be to sit 
in panels of three and very expeditiously decide these new 
post-grant reviews and inter partes reviews that are called for 
by this legislation.
    Mr. Fattah. And now I think the real difference is that the 
appeals will go directly to the U.S. Court of Appeals?
    Mr. Kappos. Well that is a difference. But right now our 
post-grant processes are managed in what is called our Central 
Reexamination Unit (CRU) at the USPTO, which is comprised of 
examiners and not ALJs. So it is a big difference to move much 
of that work from the CRU, to this new board. We are going to 
need a lot more ALJs as part of that board in order to handle 
that workload, which will be moving from the CRU into the 
board. As you mentioned----
    Mr. Fattah. Do the ALJs get any particular training?
    Mr. Kappos. Yeah, well----
    Mr. Fattah. Other than that they are lawyers?
    Mr. Kappos. You could think of them as judges. 
Administrative Law Judges----
    Mr. Fattah. But other than being a member of the bar is 
there some particular training?
    Mr. Kappos. Yes. They are trained essentially as judges. So 
they are not examining patent applications, they are 
adjudicating.
    Mr. Fattah. Right. So when Kodak says that BlackBerry or 
someone did, you know, misuse matters that they had on the 
patent to create cameras on the BlackBerries, they come before 
them and they have a big argument, trials and whatever? And 
they make a decision, right?
    Mr. Kappos. Yes, exactly.
    Mr. Fattah. I got you. I was just trying to understand 
whether they got any particular training relative to patent 
issues.
    Mr. Kappos. Oh, of course.
    Mr. Fattah. And the answer is no, right?
    Mr. Kappos. No, the answer is yes. Yes.
    Mr. Fattah. Okay.
    Mr. Kappos. Oh yes.
    Mr. Fattah. All right. I got you. Well, it would seem to me 
that we would all be concerned if now the majority of the 
patents being requested in our country were no longer American 
citizens. Then we have a lot of work to do, this subcommittee 
under our chairman is going to be doing a lot of that work in 
the area of STEM education, and science. And so hopefully there 
will be future projections that are off base in terms of the 
percentage of applications filed. And maybe many more of them 
will be American citizens.
    You know, there is this overall issue of intellectual 
property in terms of our international competitors. And it is 
not just China. You know, others are involved in industrial 
espionage and other activities. And these are very significant 
issues as we go forward, particularly in terms of rebuilding 
our manufacturing base. I know it is above your pay grade 
actually about what our relationships are and how we conduct 
international affairs. But hopefully you can appreciate the 
Chairman's passion on the matter. And I think it is logical for 
us as a country to think about, think anew about how we 
interact with those we are competing with. So I thank the 
Chairman.
    Mr. Wolf. Mr. Schiff.
    Mr. Schiff. Mr. Wolf, I think Mr. Honda was here first.
    Mr. Wolf. Okay, Mr. Honda.
    Mr. Fattah. See how gracious my side is? You know, they 
want to get the order right.

                    PATENT AND TRADEMARK OPERATIONS

    Mr. Honda. Thank you, Mr. Chairman. I appreciate it. And 
let me add my words to Congressman Fattah in terms of the 
passion of our leadership here. But let me start out with this 
question. What is the prime, core mission in terms of the 
concept of having a patent and patent offices?
    Mr. Kappos. Do you mean multiple patent offices? Or the 
Patent Office in general?
    Mr. Honda. What is the purpose of the patent?
    Mr. Kappos. Well the purpose----
    Mr. Honda. It was conceived, it was conceived to do what?
    Mr. Kappos. The purpose of the patent system is to provide 
an incentive to innovation. It is a jobs clause, if you will, 
in the Constitution as originally written. It is about 
incentivizing Americans to innovate.
    Mr. Honda. And then once you file for a patent, and you 
receive a patent, are there certain things that can be expected 
from holding a patent?
    Mr. Kappos. Yes, absolutely. The constitutional quid pro 
quo to get a patent is you have to disclose your invention and 
permit it to be published for the whole world to see.
    Mr. Honda. And the inventor or the innovator, do they have 
protection on that?
    Mr. Kappos. Absolutely. You get twenty years of protection 
from the date of filing.
    Mr. Honda. Against whom?
    Mr. Kappos. Against the whole world as to activities that 
occur in the U.S. So any other party making, using, selling, or 
offering to sell anything that infringes your invention, you 
have the right to prohibit them from doing that.
    Mr. Honda. And if you violate that provision, are there 
sanctions to that?
    Mr. Kappos. Yes. A party who infringes a patent is liable 
to pay damages to compensate the patentee and is also subject 
in most cases to an injunction to prohibit further 
infringement.
    Mr. Honda. And trademarks, are they different in nature?
    Mr. Kappos. Trademarks are very different in nature. 
Trademarks protect brands. So think Coca-Cola, think Microsoft, 
think Kodak brands. And trademarks have no time duration on 
them, so a trademark can persist forever. The Coca-Cola brand 
has been around more than a hundred years, I think.
    Mr. Honda. And to process trademarks versus applications 
for patents, are there distinctions in the timelines?
    Mr. Kappos. Very different timelines.
    Mr. Honda. Which----
    Mr. Kappos. Trademark applications are very complex also, 
but they are processed much more quickly. The trademark 
applicant community wants a processing time of between two and 
three months for trademark applications, and a total of 
thirteen months processing time to final completion. We are 
right on those numbers at the USPTO.
    Mr. Honda. And so the firewall that is created allows you 
to continue to do that work in spite of that fact that as far 
as budgetary concerns may lag a little bit this, this gives you 
the cushion to not fall behind and stay on top of the demand 
for attention in the trademark area?
    Mr. Kappos. Right, that is exactly right. You know, I think 
Congress appropriately wanted the USPTO to protect the 
trademark part of the operation and to keep its funds separate 
and that is the nature of the fence.

                      REDUCING THE PATENT BACKLOG

    Mr. Honda. Now on to your reform, in I guess Senate 23, 
there is provisions for IT and other things like that. How will 
these things help the backlog? And what is your anticipation of 
cutting down the backlog time? I mean, can you give us a 
ballpark figure of what it might look like?
    Mr. Kappos. I can actually be quite precise about that. The 
backlog is currently a little bit over 700,000 applications on 
the patent side. The appropriate inventory level in the USPTO, 
in other words think like a factory. You have to have parts on 
hand for people assembling new things going through the 
factory. Similarly in the patent process you want each examiner 
to have an inventory of cases that they are working on. If you 
multiply out the appropriate inventory levels for all of our 
many, many areas of technology what you come to is about 
350,000 total applications in inventory with the number of 
examiners that we will have in 2014-2015.
    So that is our optimal inventory. We are on a trajectory to 
actually get there. To get there in the timeline the President 
has asked for, 2014-2015, requires us to hire a lot of people 
this year and next year especially. So that is why we are in 
this big hiring bubble.
    Mr. Honda. Right. So in the hiring of new folks, and the 
backlog, the backlog has been created by what, what factor? Is 
it lack of staff? Was it lack of technologies? Is it a change 
in technology that is more complicated so you need more time to 
figure it out? You know, what are, what are some of the factors 
that are involved in the backlog?
    Mr. Kappos. That is a great question. Like with all complex 
problems there were, in my estimation, a number of issues, some 
on the management side, some on the technology side, that have 
contributed to this backlog gradually building up over the last 
decade or so. And part of the problem was that we 
underestimated the growth rate of filings, which meant we did 
not have enough examiners in place to handle that accelerating 
growth rate. And to give you an example, this year alone at a 
7.5 percent growth rate, we will have over 30,000 additional 
applications. We are going to get over half a million, in fact 
528,000 applications this year. That is an enormous amount of 
work coming in.
    Mr. Honda. So that change, that steep increase, and the 
increase in backlog, is that based upon the new technologies 
and the lack of skills, technical skills, that the folks have 
to be able to process it? They have to have knowledge of what 
they are looking at, is that correct?
    Mr. Kappos. Well yes, they do have to have a lot of 
knowledge of what they are looking at. Patent examiners require 
a lot of training.
    Mr. Honda. How will you address that? In what way will you 
address that?
    Mr. Kappos. Well, we are addressing that in a number of 
ways. Number one, one of the changes that I have made at the 
agency is to move as much as we can to hiring people who have 
intellectual property experience when they start at the agency. 
We are hiring lots of attorneys, patent attorneys, patent 
agents, and even patent engineers--within weeks are able to 
start actually examining applications. They require nowhere 
near the amount of training time that a fresh graduate out of 
college requires when that person has no IP experience.
    Mr. Honda. It seems to me that the technical training in 
terms of the law is one thing. The scientific understanding of 
what you are looking at in order to provide the patent and 
being able to distinguish between different applications would 
be a critical piece where you end up with lawsuits. And in San 
Jose when we had the first lawsuit against Microsoft there were 
no judges that understood technology. What is it, what is the, 
is there a ramp up time for your staff to be able to come up to 
snuff? Or are you hiring to that issue in terms of your 
staffing?
    Mr. Kappos. We are not what I refer to as skating to where 
the puck is going rather than skating to where the puck is. 
This is basic business discipline. We are using projections of 
the number of examiners we are going to need and factoring in 
the amount of training time that is needed, and calibrating our 
hiring to that number rather than to the number that we might 
have needed in the past. That is why we are starting to get on 
top of the backlog, even though the number of applications is 
increasing.

                           SATELLITE OFFICES

    Mr. Honda. Well having satellites, you have one in 
Michigan?
    Mr. Kappos. We have announced, we have not yet started it 
but we have announced----
    Mr. Honda. What satellites are you looking at?
    Mr. Kappos. Well we do not have any firm plans to have 
additional offices yet. But I will share that in my view we 
need more than one satellite office. We should be experimenting 
a little bit, this is a pilot program after all. I have in 
mind, and would like to be able to subject to appropriations, 
have three satellite offices using slightly different models at 
each office, in different parts of the country, with different 
demographics involved and then test our results in terms of 
efficiency, retention, quality of the work that we are doing, 
ability to attract the workforce that we need, satisfaction of 
the applicant community, all of those criteria, and judge what 
is working well and then evolve our model.
    Mr. Honda. I would probably anticipate there will be a lot 
of applications coming out of the chairman's district because 
of the activities there, and my district, and possibly in Adam 
Schiff's district. But I guess I would like to know----
    Mr. Schiff. I should get priority.
    Mr. Honda. It is going alphabetically and by power. But I 
was just wondering what your metrics would be in order to 
determine where are you going to be placing this? You know, you 
call them satellites, and satellites we use them to geoposition 
ourselves and figure out where we are going to be. I was just 
curious, will it be the number of patents? The complex, or the, 
what is the, the convenience of people being able to get to a 
satellite? Because I think that unless technology takes over 
and collapses the distance, so I would be interested in it. 
Because it does create activities in the area, and----
    Mr. Kappos. The factors that we have been looking at, and 
the factors that we used in making the decision to put our 
first satellite office in Detroit, included indeed the number 
of patent applications originating from the area. Of course 
places like the valley, you know, Northern California as well 
as Southern California, and many other places score well 
against that metric. We also considered the number of skilled 
patent practitioners practicing in the area. Because after all, 
they are not only our candidate workforce since we are trying 
to hire experienced professionals into the agency, but they are 
also the practitioner group that is going to be wanting to come 
in and interact at the agency. So we considered those folks. We 
also considered the presence of universities in the area that 
would supply graduates that would want to come and work at the 
USPTO, plus would be available to help with training and other 
interactions with the agency. We considered cost of living, we 
considered housing prices, we considered access to major 
transportation hubs because we have to fly people around 
occasionally.

                     INDEPENDENT INVENTORS SUPPORT

    Mr. Honda. My last question, Mr. Chairman. Given this is 
fee based, how do you prevent criticism on the fee based 
process where large companies who may have the wherewithal to 
apply for many patents, do they get special consideration? Do 
they have ways to get involved in the process of moving the 
patent through? Do they, or are, is it a fair fee system where 
you can create a firewall between those who are applying and 
the timelines and the attention that they get? Is my question 
clear?
    Mr. Kappos. It is a good question. We actually provide a 
tremendous amount of assistance for independent inventors and 
small inventors. We do not provide any breaks really at all for 
the large entities. The large entities pay full fees and they 
are expected to interact at a highly professional skilled level 
with the agency. Independent inventors get a 50 percent 
discount and as was asked before, I think by Ranking Member 
Fattah, if we are able to we are actually going to give 
independent inventors a 75 percent discount. We also have 
extensive assistance programs for them. We have an Independent 
Inventors Assistance Center. We train our examiners to help 
what is called pro se, or independent inventors, to get through 
the agency. We have a range of outreach and programs that are 
designed to help small parties, independent inventors, I will 
say people who are not familiar with the patent and trademark 
system, to help them get into the system. We provide those 
services to them for free. We do not provide any of those 
services to large entities. They are expected to fend for 
themselves.
    Mr. Honda. Thank you. And Mr. Chairman, I appreciate your 
patience on my series of questions.
    Mr. Wolf. Sure. Mr. Austria.
    Mr. Austria. Thank you, Mr. Chairman. And I apologize for 
walking in late. Director, thank you for being here. If I could 
just follow up with Mr. Honda on his question about the 
backlog, just so I better understand, Mr. Director. What is the 
backlog now? Is it, I thought I read somewhere where it was 
maybe twenty-two months behind as far as the backlog on patent 
approvals?
    Mr. Kappos. Well that is pretty close. We are currently 
running with a backlog of a little over 700,000 applications. 
What that translates into in terms of the time it takes us to 
process an application is approximately twenty-four months. I 
think it is twenty-three and change, but in that range, until 
we are able to first respond substantively to a patent 
application. And then about another year after that, I think 
thirty-four, thirty-five months we are currently running, until 
we finally finish work and grant the patent.

                         INFORMATION TECHNOLOGY

    Mr. Austria. And that is one of the concerns that I hear 
back in Ohio, is the delay or the timeframe of this process. 
And we talked a little bit about technology. Have you put a 
plan forward where we can help speed up using resources and 
understanding the budget that we are going through right now to 
be able to advance this technology, to be able to speed up that 
process?
    Mr. Kappos. Yes, absolutely. So technology, especially 
information technology, is clearly a key driver to efficiency 
at the USPTO. And I am on record as saying that our information 
technology system at USPTO is moribund. I came from the 
information technology industry. I am an electrical engineer. I 
have twenty-six years of experience in that industry and worked 
on some of the biggest projects every conducted. I know a 
broken IT system when I see one, and the USPTO system has major 
problems.
    We are on a multiyear program right now to completely 
reengineer the USPTO's IT infrastructure. It started with the 
most basic building blocks. We literally did not even have the 
right power coming into our buildings. We did not have the 
right bandwidth across the fiber optical network that we use to 
run our what is called VOIP, or voice over internet protocol. 
We have gotten all of that basic work done so we have gotten 
the foundation laid. And we are now beginning to deploy new 
single work stations to our examiners, universal laptops, which 
is another key building block to basically enable people to be 
effective. We are building up the layers on top of that. It 
will take several years, but we are on the path now.
    Mr. Austria. And you feel comfortable, considering the 
budget process that we are going through right now, that you 
will be able to remain on target with that, and have the 
resources necessary to complete that? I know that is hard to 
predict that in the future. But based on your projections right 
now?
    Mr. Kappos. Well that is a great question. So far we are 
doing okay. So far we are on our plan. We have had to slow down 
some of our information technology efforts. But I will tell you 
I feel pretty good about where we are and we have been able to 
keep the most critical ones going. If we get our 2011 funding 
here fairly promptly, like in March, we will be able to keep 
going, running at pace. We are being extremely careful about 
spending money. The thing I am the most proud of is I stopped 
about $300 million in IT spending that was being considered, 
that was in plan when I started at the agency. So we are being 
very careful about our spending. But if we get our resources 
this year we will, no question, we will be able to continue on 
our plan.
    If we do not get our resources here in the month of March I 
am going to have to stop all of my IT improvement programs 
because I will just not be able to afford going forward with 
them any further that will start to have an impact. 
Unfortunately the impact is more than month by month because 
what I have found in working for the government is that when 
you stop projects the restart time is tremendously long. So, 
unfortunately, we are very much nearing a critical point here, 
where we either need to get our money, the fees that we are 
collecting, or I am going to have to stop the IT efforts and we 
are going to suffer a pretty considerable setback.

                      INTELLECTUAL PROPERTY THEFT

    Mr. Austria. I appreciate that. One other area, and I 
apologize if this has already been asked, that is brought up to 
me a lot is intellectual property, the theft of that. And I 
know you have worked very hard to strengthen both domestic and 
international intellectual property protection. But when we 
look at what is happening, both in the United States and 
internationally, as far as intellectual property theft costs 
that continue to go up. U.S. businesses, the numbers I am 
looking at, $200 billion to $250 billion annually. And we can 
go right on down the line, counterfeit merchandise is 
responsible for the loss of more than 750,000 American jobs. 
These are substantial losses to our economy. And I just would 
like to get your comment, or how you are proceeding as Director 
to try to deal with this issue? Because I know it is very 
important back in my state, and when I am talking to folks 
regarding this issue.
    Mr. Kappos. That is a great question. IP theft, 
counterfeiting, piracy is a huge problem. It is a problem in 
the copyright area. It is a problem in the branding area, 
trademarks. It is a problem in the patent area. So the USPTO 
has an overseas attache program that has been very, very 
successful. We place employees in key embassies. We have got a 
couple in China, and I would like to put another one in China. 
We have got Southeast Asia covered. We have got Brazil covered. 
We have got Russia covered, and some other countries. What 
those people do is they work with U.S. businesses in the 
region, coordinating with U.S. business here in the U.S., to 
look for ways that we can strengthen the enforcement regimes 
overseas. So that is something that we are investing in and I 
think we need to invest more in that.
    On the U.S. side, it is our agency that leads in developing 
policies on a global basis that help our trading partners, in 
fact in many cases, that push our trading partners into 
adopting IP laws and enforcing them in a way that helps to 
counter piracy and counterfeiting.
    Mr. Austria. Well and I will just close by just saying that 
I think it is very important that we be dealing with this issue 
and taking on this war against intellectual property theft. 
Because the substantial losses to our economy, I mean, it is a 
trickle down effect. It impacts, because of the loss of tax 
revenues, it is impacting our schools, our hospitals, our local 
public departments, and other public services. So I think it, 
you know, there is a trickle down effect here and it is 
important that we do get a handle on that and we deal with that 
issue. And I appreciate your comment, and thank you Mr. 
Chairman, I yield back.
    Mr. Wolf. Thank you. I am going to go to Mr. Schiff, but 
that is what I was talking about and we will get back to it. 
Mr. Austria is right. I think you have a Pollyanna viewpoint to 
think that your person in Beijing has any impact on this 
Chinese government. If you think so it is naive. It is 
absolutely, positively, categorically naive.
    They have the Nobel Peace Prize winner in jail today, in 
jail today, and his wife cannot even get out of their apartment 
for house arrest. Does that trouble you, that maybe your person 
in Beijing may be having a difficult time? And we will get to 
it when I come back to the questions, but how successful have 
you been with regard to the Chinese government? And it is sort 
of a Pollyanna thing here with regard to that. They are spying 
against us. There are cyber attacks. My computer was stripped 
by the Chinese. How many times has your computer been hacked. 
We are going to ask you how many cyber attacks? But you just 
sort of speak in Pollyanna terms. They are stealing us blind. 
They are stealing us blind. They are taking jobs from Ohio, 
from all over this country. Mr. Schiff.

                            USPTO RESOURCES

    Mr. Schiff. Thank you, Mr. Chairman. Thank you, Director, 
for being here. And I wanted to follow up with you on questions 
about the patent backlog, which I have had a long interest in 
as you know. I think it really is key to our efforts to get our 
economy moving again and competitive that we reduce this 
backlog to an acceptable level. I want to make sure, though, I 
understand the fee diversion a little further, because this has 
been a particular point of interest of mine. I know there has 
been an issue in the past in terms of the appropriation process 
where if you come in and you estimate that the fees you are 
going to generate are going to be less than they turn out to 
be, the fees that come in above that amount, above the amount 
that we appropriate, end up getting diverted to the Treasury so 
the Patent Office loses the use of that money. On the other 
hand, if you overstate how much you will need and you come in 
under that, then not only do you not have the advantage of 
those resources but the subcommittee then cannot allocate them 
for other purposes. So I know that has been an issue. But I 
want to make sure I understand one thing about it in terms of 
the account you mentioned at the outset of the chairman's 
questioning. And that is, if you estimate fees at $1 billion, 
let us say. And the subcommittee authorizes you to use $1 
billion worth of revenues. And let us say that your actual 
expenditures are $900 million, and the actual fees coming in 
are $1.1 billion. Do I understand it correctly that the amount 
between the amount you use and the amount that is authorized, 
which would be $100 million, can go into a reserve for future 
years, for the use of the Patent Office? But the $100 million 
above that was generated by fees that was not within the 
authorized limit, that would go back to the Treasury? Is that 
right?
    Mr. Kappos. Exactly right.
    Mr. Schiff. Okay. There have been a couple of things we 
have looked at over the years. One has been ending fee 
diversion, such that you could use whatever revenues come into 
the Patent Office until you get to a point where you have 
eliminated the backlog. There has been another proposal where 
the Patent Office would have the capability of setting its own 
fees. And then of course there is the third proposal, which 
would be to have Congress approve a 15 percent increase in 
fees. I know that among the stakeholders there has been concern 
with giving the Patent Office fee setting authority, that, or 
even the 15 percent increase. They are willing to pay more. 
They are willing for you even to have the authority to set 
fees. But they do not want to do it if they are going to be 
subsidizing somebody else. If you are going to raise fees and 
those fees are going to go to some other purpose. And, you 
know, I wonder in connection with the trademark question, which 
I think was a good question by the chairman, is some of the 
reservation that you have about using the trademark, the 
surplus in the trademark fees, is that owing to a concern that 
the trademark community, those that use your office for 
securing trademarks, are going to have the same concern that 
the patent users have? That they are paying fees for trademarks 
that are in excess of what you need and they are not going to 
want to do that if they see those fees going on the patent 
side. Is that part of the issue?
    Mr. Kappos. That is exactly right.
    Mr. Schiff. And how much are the users of both different 
users? I mean by and large are the trademark users not also 
patent users? Or is there heavy overlap between them?
    Mr. Kappos. There is some overlap, but you would find 
significant distinctions. I will give you an example. Louis 
Vuitton, I do not know if they have gotten any patent 
applications in the USPTO. They probably have hundreds of 
trademarks. You know, there are many, many other entities that 
have no patent filings and lots of trademarks. And then on the 
other side if you look particularly at the independent inventor 
community and small businesses they would have no trademarks or 
maybe one trademark and many, many patent applications. So 
clearly there is some overlap. But there is an enormous amount 
of distinct community between those two groups.
    Mr. Schiff. And the trademark fee is when they are in 
excess and you are able to carry them over. What has happened 
in the subsequent year? Is it a situation where the committee 
will reduce the appropriation the following year? Because you, 
let us say you had a $100 million surplus in trademark fees and 
that gets held over to the following year. And you normally get 
let us say $500 million for trademarks from the committee. Will 
they then give you $400 million the next year because they see 
you have $100 million more that you can use? What generally 
happens in those circumstances?
    Mr. Kappos. You know, in my experience that has not 
happened. What is going on on the trademark side is that the 
reserve is obviously money paid by trademark applicants that is 
being used as part of our trademark next generation system, an 
IT project that requires substantial investments that we are 
making right now, although we are at the early stages of it, 
that is designed to very substantially upgrade the capabilities 
of the trademark community to manage trademark portfolios.
    We believe cutting management costs for U.S. businesses and 
significantly advantaging them over time, but it requires an 
investment on our part. That is what the trademark community 
wants done with the funding that they have paid in and that is 
what we are using it for.
    Mr. Schiff. Getting back then on the patent side of things, 
where was the backlog--how long have you been now director?
    Mr. Kappos. Eighteen months.
    Mr. Schiff. Eighteen months. And where was the backlog when 
you began, where is the backlog now, and how does that compare 
the trajectory you need to be on to eliminate all but the sort 
of acceptable norm by 2015?
    Mr. Kappos. When I started, it was somewhere in the 765,000 
range. It is now in the low 700s. We expect to go below 700 
later this month. We expect to be down to about 655,660 by the 
end of this financial year.
    We actually are on trajectory despite the fact that we have 
been constrained in our spending this year and we were 
constrained most of last year. We are on trajectory to get down 
to the appropriate levels of 10 months to first action and 20 
months to final action in 2014 and 2015. So if we get our 
funding, we will be able to make those targets.
    Mr. Schiff. Now, you have had an excess of applications in 
terms of what your expectations were. How much are you able 
each year thus far or every six months to not only keep up with 
the incoming but to reduce the backlog of those that are 
pending? Do you need to reduce the backlog 100,000 a year to 
meet your target? And it does not sound like you have been 
reducing it 100,000 a year. I mean, if you are at 700,000 now 
and you want to get down to what is it, 200,000?
    Mr. Kappos. Three hundred and fifty.
    Mr. Schiff. Three hundred and fifty. That means you need to 
reduce it by 350,000. 2015 is only 14 years away, so----
    Mr. Kappos. Four.
    Mr. Schiff. What's that?
    Mr. Kappos. Four years away.
    Mr. Schiff. Four. What did I say?
    Mr. Kappos. Fourteen.
    Mr. Schiff. Fourteen. Oh, God. Okay. So what does that mean 
in terms of how much you need to reduce it each year and are 
you on that pace?
    Mr. Kappos. Yes. We really are. So the requirement that the 
President and the Secretary of Commerce gave me was to get the 
patent pendency level to the right amount by 2015.
    To do that in that amount of time as a businessman----
    Mr. Schiff. Right.
    Mr. Kappos. I have to resource up in the early years to get 
those folks trained, get our examiners trained and productive 
so that in the out-years, which in this case is 2013 and 2014 
and then finally in 2015, those extremely productive examiners 
are taking the backlog down rapidly.
    So if you look at our projections, we have a model that 
projects given the number of employees we have and their 
seasoning, the GS levels they are at, the technologies that 
they examine, and how that backlog is going to move, if you 
look at it, it is going to go this year to, as I mentioned, 
about 655, 660,000 or so by the end of this financial year. By 
the end of the next financial year, that would be 2012, end of 
financial year, it will be down about to 550,000.
    You can see, Representative Schiff, the rate of decrease 
accelerates over time, but it is not a surprise because more 
examiners are coming online and they are more highly trained 
and they are more seasoned.
    So we get 60,000 off this year, 100,000 off next year, 
something like 150,000 off the year after that, and that is why 
you see in our plan that we stop hiring. After 2013, we stop 
hiring altogether. We want to start attritting some examiners 
off so that we come in and have a smooth landing at about 
350,000.
    Mr. Schiff. Isn't the big variable in all this, though, 
that you have, I mean, what, 100 percent more applications this 
year than you thought? I mean, that is higher. But you had a 
substantially greater number of applications this year than 
anticipated. Someone has got to handle those.
    You know, hopefully, the recovery will continue to gather 
momentum, which I assume will mean more applications. How can 
your strategy take into consideration that growth if it was 
unanticipated?
    Mr. Kappos. Well, that is a great question. So we are 
experiencing about a 7.5 percent increase in filings this year 
which indeed has exceeded by about two and a half percent our 
projections. As the manager of the agency, that makes me 
nervous because it puts all of my plans at risk.
    Obviously we are going to have to recalibrate over time as 
we learn things, and we will come back to this committee with 
recalibration. I think it is a good thing, in fact, and a great 
thing that our patent application filing rates are going up. It 
shows that innovation really is where the action is. So I am 
very comfortable with filing rates going up.
    But clearly we are in a dynamic environment. We cannot 
perfectly predict the future. As things change, we are going to 
keep skating to where the puck is going. If we find out it is 
going to a little different place, we are going to start 
skating there. So I will readily agree with you that that is 
going to require recalibrating over time.
    Now, so far, it is looking like we are able to absorb the 
increases because, of course, other factors are working out a 
little differently too. We are hiring some of these experienced 
people. They are getting online quicker.
    We increased our efficiency by 20 percent last year. That 
is helping us considerably. The new IT systems are helping us 
somewhat or we think they will as they start coming into play.
    Mr. Schiff. In the scale of things, what would be of most 
value in terms of having the consistency of resources to stay 
on track with decreasing the backlog? Would it be a flat 15 
percent increase? Would it be the capability of setting your 
own fees or would it be a policy here in the Congress to ensure 
that there is no diversion of fees because you could set fees 
all you want, but if we do not appropriate the money generated 
by those fees, then you just become a cash cow for someone 
else? What would be the most useful in terms of making sure 
that that downward trajectory stays on track?
    Mr. Kappos. The answer is all of the above. We really do 
need fee setting authority for the USPTO. We need to set and 
keep our fees reasonably in line with what is going on and the 
cost to deliver our services. Right now our fees are, I would 
have to describe them as arbitrary and bizarre relative to the 
cost to perform our services.
    So we need to set our fees in a rational way. We obviously 
need to keep that money. I would be very uncomfortable changing 
USPTO fees, increasing them in any way at all, if I was not 
able to assure the people sitting behind me here that I am 
going to be able to use that money to do what the American 
people are paying into the patent system for. So the ability to 
retain fees, to spend them on decreasing that backlog is 
extraordinarily important.
    The 15 percent surcharge is simply a financial vehicle that 
gets an infusion of money coming into the agency quickly so 
that we can continue to embark on the programs that we are on, 
the IT improvements, the hiring programs, et cetera, during the 
period of time until we are able to have a really thorough 
process with good oversight from this committee and others and 
the IP community to set fees at much more rational levels.
    Mr. Schiff. Do you have the authority within the current 
fee structure to set differing fees based on the complexity of 
the application or based on the multiplicity of applications 
filed by a single party? In other words, a massive user of the 
Patent Office that files a tremendous number of applications or 
tremendously complex applications, do you have the capacity now 
to discriminate in terms of fees for those?
    Mr. Kappos. The answer for the most part is no, we do not. 
We charge the same fee for an application that is three pages 
in length as for one that is 3,000 pages in length. That is one 
of the problems that we have.
    Mr. Schiff. Well, I mean, do you need authorization to do 
that and if you had the authorization, would you utilize it? 
Would it be good policy to do that?
    Mr. Kappos. We would need authorization in order to change 
those fees. We certainly would consider this is something where 
we need to consult with the intellectual property community, 
but we certainly would consider differential charges based on 
things like complexity and length of application. But those are 
perfectly rational criterion to consider.
    Mr. Schiff. Are you embarking on a new plan to allow 
companies to pay extra to have an expedited patent application?
    Mr. Kappos. Yes, we are. It is called Track One and----
    Mr. Schiff. Was that authorized by Congress? How are you 
able to do that, but not differentiate--how can you 
differentiate fees that way but not based on complexity?
    Mr. Kappos. That is a regulatory fee and we are actually 
permitted under statute to set regulatory fees. So that is the 
way we did that one. The basic filing fees are set by statute 
and those fees we are not able to set.
    Mr. Schiff. And tell me the difference between the 
statutory fees and the regulatory fees.
    Mr. Kappos. Well, some number of our fees, I want to say 15 
percent of them, something like that are regulatory and those 
are the ones USPTO can adjust. Some of our fees relative to 
continuing practice, what is called continuation applications, 
are regulatory. But most of our fees, a large majority of them 
and the most important ones are statutory.
    Mr. Schiff. And the last question, Mr. Chairman.
    Is there an independent agency like GAO, for example, who 
is currently overseeing the quality of the patents such that in 
the zeal to reduce the backlog we are not sacrificing the 
quality of the patent examinations for quantity?
    Mr. Kappos. There is not any such agency. We do, however, 
have our own quality metrics that we use at USPTO that are 
published, freely available for anyone to look at. And using 
those metrics, our quality actually increased last year because 
we started giving examiners more time to examine applications. 
Our quality metrics went up about a percentage point each.
    Mr. Schiff. Thank you, Mr. Chairman.
    Mr. Wolf. Mr. Yoder.
    Mr. Yoder. No.
    Mr. Wolf. Mr. Serrano.
    Mr. Serrano. I am sorry, Mr. Chairman.
    Mr. Wolf. We will come back.
    Mr. Serrano. No, no, no. I just walked in. And we had a 
long hearing, so I am just glad to be here.
    Mr. Wolf. We are glad you are here too.
    Mr. Fattah. Did you have a good hearing?
    Mr. Serrano. It was wonderful.

                   PUBLICATION OF PATENT APPLICATIONS

    Mr. Wolf. Let me just put something right on the record. I 
am really disappointed that you did not get in detail and you 
did not understand. It almost seems like we were in the 
minority last year and you literally blew us off. You just did 
not really care. And I do not think that is appropriate.
    And, frankly, we had a good meeting. We brought a lot of 
people in. I thought you would be ready and, frankly, you are 
not prepared. And this is a big issue. It is an issue I am 
going to drive on, I am going to push on, I am going to force 
on until they tackle me and take me down. We are going to deal 
with this issue. And you did not even know anything about it. 
And so maybe this office ought to be abolished or you ought to 
get a new person in the office. And I am kind of disappointed.
    Now, if you can give me a list of when PTO did not have a 
backlog and when PTO did have a backlog each and every year up 
until current time. And, secondly, if we can get a list of how 
many patents per examiner are completed each year, also how 
many applications are examined by those who are at the 
headquarters and those who are now doing telework.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Mr. Wolf. Would you please explain why the PTO makes patent 
applications available online some 18 months after they are 
filed and as they continue to wait in the backlog queue? Is 
that by constitution, by law, or by regulation?
    Mr. Kappos. That is by law.
    Mr. Wolf. By law. What year was that law passed?
    Mr. Kappos. That was in the AIPA, I believe 1999. It might 
have been the previous law in 1996 that instituted it.
    Mr. Wolf. What we were talking about in the meeting that 
you never heard anything about or either forgot about is, 
should there be an exception with regard to a national security 
issue or a dual use issue whereby when the person or company 
files it, they may say this may be something that somebody may 
want to make a nuclear bomb or the Chinese may take this and 
develop an industry?
    Has there ever been an exception whereby at the time, there 
could be an exclusion based on that?
    Mr. Kappos. Well, we already have that very system. A 
number of U.S. security agencies look at all patent 
applications filed at the USPTO and make that very judgment 
about national security risks and they do.
    The U.S. security agencies take some of the applications 
out of our agency and put them under what is called a secrecy 
order and that happens. Every single application that is filed 
at the USPTO goes through that process. So we are actually 
quite sensitive to that issue, Mr. Chairman.
    Mr. Wolf. Is that by the patent person who files it or is 
that by the National Security Agency and do they also look at 
economic issues in addition to national security issues?
    Mr. Kappos. It is the----
    Mr. Wolf. If a plant closes in Ohio or a plant closes in 
Virginia, that is an economic security area because the company 
has left. We do not make any more television sets here in the 
United States. They are made in China and in Mexico. So it is 
an economic security issue.
    Is there a category for economic security?
    Mr. Kappos. Not that I know of.
    Mr. Wolf. Would it be a good idea if there were?
    Mr. Kappos. I would need to see what that looked like. I 
would be concerned to understand what such a category looked 
like before I tried to comment on that.
    Mr. Wolf. Well, so we do not take too much time, maybe you 
should come by the office and we can talk about it if we can 
get an appointment with you.
    I want to see us doing something like that. I think the 
jobs that are being taken out of this country and going to 
places like China both from the national security perspective 
with regard to a threat, but also the economic security 
perspective is very, very important.
    Do other countries make their patent applications available 
online?
    Mr. Kappos. Yes, many do. In fact, if not all----
    Mr. Wolf. Give us a list of those who do and those who do 
not.
    [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Kappos. Oh, absolutely. Sure.
    Mr. Wolf. Does China?
    Mr. Kappos. To my knowledge, they do. In fact, U.S. 
examiners have access to all Chinese patents and published 
applications at 18 months. China, in fact, requires all patent 
applications to be published at 18 months. They have no carve 
out and we get----
    Mr. Wolf. What about Russia?
    Mr. Kappos. Russia requires all applications to be 
published also.
    Mr. Wolf. And what about France and Germany?
    Mr. Kappos. Oh, of course. They long since have.
    Mr. Wolf. Does the PTO provide this information in a 
regular weekly update to China?
    Mr. Kappos. You mean----
    Mr. Wolf. The information.
    Mr. Kappos [continuing]. Information about U.S. 
applications?
    Mr. Wolf. Right.
    Mr. Kappos. I believe that it is provided, that information 
is provided. Well, yes, in the sense that we publish patents on 
a weekly basis. Every Tuesday when patents issue, we publish 
them on the internet and American information providers publish 
them on the internet. So they are available to everyone in the 
world then.
    Mr. Wolf. Does it concern you that maybe China is taking 
them and using them for certain purposes?
    Mr. Kappos. I do not know what purposes you are thinking 
of. I think that every person in the world has access to our 
published patents at the same time and is able to use them for 
the disclosures that they contain.
    Mr. Wolf. And for taking ideas from them?
    Mr. Kappos. Yes. That is the purpose for the patent system.
    Mr. Wolf. Whereby they can then violate the patent?
    Mr. Kappos. No, not to violate the patient, right, but to 
learn from them.
    Mr. Wolf. Has there been any enforcement against China with 
regard to any violation of patents?
    Mr. Kappos. I believe in the U.S., there has been 
tremendous enforcement of infringement of----
    Mr. Wolf. In China, have there been any sanctions with 
regard to activity in China?
    Mr. Kappos. Well, I am not, you know, an expert on the 
daily details there, but the Chinese do have patent laws that I 
would characterize as----
    Mr. Wolf. Of course, they also have laws of freedom of 
speech and freedom of religion. It is in their Constitution. 
But there are 30 Catholic bishops in jail today. There are 
several hundred Protestant pastors in jail today.
    If you need a new kidney, for $55,000, you can go over to 
China, stay in a four-star hotel, and they will take your blood 
type and they will go into the prison and they will then take 
the blood type of the prisoner. It may be a Catholic bishop or 
it may be a pickpocket.
    And so they have what is in their laws and regulations, but 
have there been any enforcements with regard to any violations 
of patent infringements by China in China?
    Mr. Kappos. Yes, I believe there has been enforcement.
    Mr. Wolf. Well, can you give us a list of them?
    Mr. Kappos. Yes, we can certainly provide what we know.
    [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
                                TELEWORK

    Mr. Wolf. Let's move to the telework. How many PTO 
employees are participating in your telework program and how 
many are eligible to participate?
    Mr. Kappos. Okay. I might need some statistics on that. We 
have I want to say as many as 7,000 of our employees are 
teleworking at least one day a week now. We have all of those 
statistics though. And if you want to bear with me, I 
probably----
    Mr. Wolf. I definitely want it because I was the author of 
the law to bring about telework at the Patent and Trademark 
Office.
    Mr. Kappos. Thank you very much, Mr. Chairman. It has been 
enormously successful for us.
    Mr. Wolf. But you do not have those numbers available?
    Mr. Kappos. Well, I may have them here. Bear with me just a 
second. Let's see here. IT improvements. Okay. Let's see. I 
think I have--okay. So you are looking for total numbers of----
    Mr. Wolf. Participating and eligible.
    Mr. Kappos. Yes. I am going to turn for a second to my CFO 
and see if he has got those exact numbers with him.
    Tony. Okay. No. That is the same document I have. And it 
does not have the exact numbers on it. It is thousands though. 
We have----
    Mr. Wolf. But I wanted the exact number. Do you know how 
many were participating and how many were eligible?
    Mr. Kappos. We can get you the exact numbers.
    [The information follows:]

    As of the end of the First Quarter, 2011, Telework Statistics are:
        7,396 Eligible Positions
        6,119 Eligible Positions Teleworking (83% of eligible positions 
        teleworking)

    Mr. Wolf. I thought you would have had that for the 
hearing. That is just a thought that I had.
    Those who telework outside of this region, how often do 
they have to return or do they have to return to Washington?
    Mr. Kappos. They currently still do have to return to 
Washington.
    Mr. Wolf. And how often per year and why?
    Mr. Kappos. Well, they have to return, if I recall right, 
once per biweek which means once every other week, they----
    Mr. Wolf. So if they are in Montana or California, they 
have to come back?
    Mr. Kappos. Yes. And that is a problem for me too.
    Mr. Wolf. And what is the reason for that?
    Mr. Kappos. Well, the law as it was written until it was 
just recently changed last December statutorily required every 
employee to report to their duty station once per biweek. Now, 
thanks to your leadership, that law was changed.
    We are currently aggressively in the process of going 
through the steps that the law, that the new law required us to 
go through in order to waive that requirement for all of our 
employees. And I intend to pursue that and I am pursuing it 
extremely aggressively.
    Mr. Wolf. Have you conducted any studies to determine if 
productivity has improved or sick leave usage has gone down?
    Mr. Kappos. Yes, I have. And that information I have right 
in front of me here. And would you like me to----
    Mr. Wolf. Sure.
    Mr. Kappos [continuing]. Share some of that information? So 
what we have learned from surveying our employees and looking 
at our own data is that the amount of examining time is 
approximately 3.5 hours per examiner greater per biweek for 
examiners who are on our teleworking programs. And the reason 
for that is that they use less leave, less sick leave and less 
other kind of leave because of the flexibility involved.
    We also know that our GS14 and 15 employees, which are our 
most productive examiners, average nearly 10 percent more 
examining time, those examiners who are working at home versus 
those examiners who work in the office. So that is an 
incredible increase in efficiency, 10 percent increased 
efficiency.
    We also have measured the rate of successful ratings of 
examiners who work at home versus examiners who come into the 
office and we have measured 15 percent higher rate of 
outstanding performance for examiners who work at home versus 
those who come into the office which means that 26 percent more 
work gets done by those people with 78 percent fewer hours.
    So statistically the legislation that you passed, Mr. 
Chairman is what we call a no-brainer from a business 
viewpoint. It pays.
    Mr. Wolf. With all the new employees you are seeking to 
hire, do you currently have the office space to absorb the new 
employees?
    Mr. Kappos. The answer is that we do to a limit, but we are 
dependent, very dependent on further expansion of our telework 
programs to be able to permit employees who qualify for 
telework to go work at home and then reuse their offices for 
some of the new examiners coming in.

                           SATELLITE OFFICES

    Mr. Wolf. I am going to go to Mr. Serrano in a minute or 
two. But on the issue with regard to the office in Detroit, why 
did you choose Detroit?
    And by having these regional offices, you are in essence 
arguing against the very purpose of the telework. There are 
many in Congress who very vigorously opposed this telework 
bill. And one of the arguments that we used is we said there 
would be less office space. We said it would do exactly what 
you said it would do. And now you are anticipating establishing 
a satellite office, what seems to work against the very purpose 
that we argued why we needed telework.
    What are your thoughts about that?
    Mr. Kappos. Well, the answer is that no, not at all. In 
fact, establishing satellite offices is not only consistent 
with teleworking, my vision is it is going to accelerate 
teleworking.
    What you get when you establish a satellite office is a 
place for people to go in to, applicants who want to conduct 
business with the agency and our examiners who need to conduct 
business with applicants there, especially to conduct 
interviews, and to meet with their managers and do the other 
things that you occasionally need to go into an office to do.
    Having an office in Detroit is like opening a giant door to 
new teleworking. It is going to enable us to employ potentially 
many hundreds of people if we are successful in Detroit, 
skilled IP professionals that we would never get to move to 
Washington, D.C. for the time that they need to spend training, 
then let them work at home in Detroit or in Montana or wherever 
else they want that is proximate to Detroit. They will be able 
to then commute into there when they need to do interviews with 
applicants but work at home other times.
    So I see having satellite offices as not only consistent 
but an accelerant to getting more qualified examiners in our 
agency and giving them the flexibility to go work at home but 
have a place to come into without having to get on an airplane 
when they need to do an interview with an applicant or conduct 
other business.
    Mr. Wolf. So currently now they have to come back into 
Washington to do the interview?
    Mr. Kappos. Yes, in many cases. Applicants on the patent 
side have a statutory right to have a face-to-face interview 
with an examiner. And the only way we can live up to the law is 
to require our examiners to come here to--well, to Alexandria 
to conduct those interviews.
    Mr. Wolf. You could not have a cooperative arrangement with 
a couple other Federal agencies? For instance, I am sure there 
must be an office of Department of Housing and Urban 
Development whereby a collocation, where you could use that 
because that takes place in a Washington, D.C. office. There 
are some telework centers whereby they have joined with other 
Federal agencies and that is basically a telework center in 
essence in another agency where they come and use the 
conference room. And you cannot do that?
    Mr. Kappos. We can. In fact, that is exactly what we are 
doing. One of the reasons among all the other reasons that I 
mentioned, one of the reasons we chose Detroit is because there 
is a Commerce Connect there which is a sister component of the 
Department of Commerce. We are able to capture efficiencies by 
having other parts of the government, especially other parts of 
Commerce there.
    So over time establishing these offices in conjunction with 
other Federal agencies to cross-use floor space, to capture 
efficiencies is entirely natural, entirely businesslike and 
completely in the plan.
    Mr. Wolf. How many satellite offices do you plan on 
establishing?
    Mr. Kappos. Well, I do not know. As was asked previously, 
there is not a plan. There is not a budget currently to 
establish more offices. In fact, we will not even be able to go 
forward with the Detroit office if we are stuck under the 
current continuing resolution. We are not going to have the 
funds for it.
    But my view is that we should establish several initial 
offices, three is the number that I have been discussing from 
time to time, in different parts of the country, very different 
areas so that we gain experience with different models.

                      USPTO'S IMPACT ON INNOVATION

    Mr. Wolf. Okay. Mr. Serrano.
    Mr. Serrano. Thank you, Mr. Chairman.
    One of the things that President Obama said in his State of 
the Union which has stuck with me and I think is the challenge 
for the majority party as it sets out to have some very 
dramatic budget cuts and also a challenge for us as we decide 
to go or not go along with some of those cuts is how do we at 
the same time keep investing enough money so that our 
scientists and other folks can create and invent things. And he 
said that and I feel strongly about that.
    So as far as patents go, and I do not know and forgive me 
if you have already asked this question, is there a sign, is 
there a history in the last couple of years of where we are 
going? Are Americans inventing more or are most other people 
inventing and we are not?
    I mean, that was part of our strength. That has 
traditionally been part of our strength as a county. And, 
again, he said a couple of hundred things at that State of the 
Union. For some reason, that one stuck with me, the fact that 
as we go out to cut these budgets, we have to keep investing 
here and creating whether it is a new medicine or a new Velcro 
or a new Tang or whatever it is. I am giving credit to all 
these things NASA did, right? But, you know, let's go out and 
be innovative again and be the world leader.
    Any signs in your office of where we are going?
    Mr. Kappos. So the good news in that regard, we did talk 
about it a little bit earlier, the good news is that Americans 
are innovating like crazy. They are every bit as innovative. 
Our country is every bit as innovative, if not more than we 
have ever been. We are getting more patent applications 
including more applications from Americans.
    As Ranking Member Fattah I think pointed out earlier, we 
are also getting more applications from overseas, so we are 
just getting more applications from everywhere.
    The indications that I get from both the statistics and the 
inventors that I talk to, thousands and thousands of them, is 
that there is no shortage of invention in this country.
    The thing that is in shortage right now is the other 
resources, access to capital, the mentoring that is needed in 
order to transit great ideas through the Valley of Death and 
into products and services.
    Mr. Serrano. And is there a tie-in between people on their 
own being innovative or are universities still playing a major 
role?
    Mr. Kappos. Universities are playing a more important role 
all the time.
    Mr. Serrano. More?
    Mr. Kappos. Absolutely. If you look at the statistics, you 
see university patent filings have increased very 
substantially. If you look at seminal inventions or what is 
called breakthrough inventions, many of them originate from 
universities. Universities are playing statistically a much 
increased role in technology transfer, in diffusing technology 
from labs into communities. Universities are playing an 
enormously important role. The Bayh-Dole legislation----
    Mr. Serrano. Right.
    Mr. Kappos [continuing]. Passed by Congress several decades 
ago was absolutely instrumental and it is, in my view, 
substantially responsible for our country's economic 
leadership.
    Mr. Serrano. I remember about 15 years ago, I was talking 
to some folks who were visiting the Hill from Virginia Tech and 
I said wouldn't it be nice if we had a car that would park 
itself. And they said we are working on that.
    Mr. Kappos. We do.
    Mr. Serrano. You know, and so, I mean, that is exciting 
when you see that happening which leads me to kind of a fun 
question. I do not know if you got into the details, but what 
are Americans inventing?
    We spend so much time on the iPad 2 coming out and the new 
nano iPad which will probably, you know, bring the singer out 
into your living room or whatever. And, you know, and you can 
then kick him or her out of your room. But what are we 
inventing that the American people do not know about?
    Mr. Kappos. So American innovation is up across the board. 
We measure it at the USPTO and we are, you know, lucky in that 
we are the first stop on the line for innovation. Every new 
invention first comes to the USPTO. So we see them all.
    We are seeing increases in patent filings across the board. 
So everything from the mundane, believe it or not, new ways to 
make wheels, still getting invented. We see those patent 
applications.
    Mr. Serrano. The wheel is being reinvented?
    Mr. Kappos. Believe it or not. Composites that are used to 
make wheels, new manufacturing processes, those kinds of 
things.
    But the places where we are seeing the biggest inventions 
are in nanotechnology, you know, really serious materials 
technology, green tech innovation, think windmills, wind 
turbines, you know, gas, electric, those kinds of things. We 
are seeing big increases in, as we have for years, in the 
information technology sector, the iPads and the iPods and the 
mobile phone industry. All of the wonderful innovations in 
there continue at pace. And our patent filings continue to 
increase in those areas.
    Then I would point to the bio area as a key area of U.S. 
leadership. And, you know, we have a lot of folks from 
California here. Think San Diego. Think Silicon Valley. Think 
Boston. Think Research Triangle Park. The U.S. far and away 
leads in bio innovation and the patent filings show it.
    Mr. Serrano. Again, I apologize if this has been asked, but 
people come to you. So I invent something and I bring it to you 
to get a patent. Do I have to first prove it works to somebody 
else? Is part of your role ``get out of here, that does not 
work, stop wasting my time with that?''
    Mr. Kappos. Well, yes in the sense that you have to 
disclose the invention. And this is required by law----
    Mr. Serrano. Right.
    Mr. Kappos [continuing]. United States Code Title 35. You 
are required by law to disclose the invention and describe in 
sufficient detail for someone skilled in the area to actually 
make it and use it. So, yes, you are required to show that you 
know how to build this thing, you know how it works and how to 
construct it.
    Mr. Serrano. And that it actually does what you claim it 
does?
    Mr. Kappos. Exactly, yes.
    Mr. Serrano. All right.
    Mr. Kappos. Yeah.
    Mr. Serrano. Thank you, Mr. Chairman.

                                TELEWORK

    Mr. Kappos. Mr. Chairman, I now have the statistics that 
you asked for before, if I can provide them to you.
    So USPTO's fourth quarter 2010 teleworking statistics, we 
had out of a total of 9,778 employees as of the end of fiscal 
year 2010 fourth quarter, we had 5,915 teleworkers. So those 
are people actually teleworking, 5,915 teleworkers. And that 
represented 83 percent of the eligible employees. So a very, 
very high rate of teleworking.
    Mr. Wolf. Do you have a patent that you want to----
    Mr. Serrano. I have a way that we can vote from our 
districts while attending a town hall meeting, although come to 
think of it, we might be better off here.
    By the way, Mr. Chairman, I say this with great pride and 
for the admiration I have for you, not only did you affect the 
workforce in the Federal Government with the telecommuting, but 
you also set the tone for Congress.
    And I can brag about the fact that I was one of the first 
Members of Congress a long time ago that set up the ability to 
get on my laptop in the Bronx or here on a no vote day in 
Virginia and just with the ID, the secure ID, be able to work 
as if I was there.
    When I used to go to schools and talk to people, I would 
say here is the best way to explain it. When I am in the 
office, I am sitting in front of a computer. Now I am in my 
living room sitting in front of the same computer with the rest 
of my staff and they think I am there.
    Mr. Wolf. No, I know. I have often said there is nothing 
magic about sitting before our computer or strapping yourself 
into a metal box and driving 50 miles to work. And you drive 50 
miles if I recall.
    Mr. Serrano. I did at that time, yeah.
    Mr. Wolf. At that time, yes.

                       PATENT OPERATIONS STUDIES

    I am looking here at the patent reform report by the 
Congressional Research Service, its patent reform in the 112th 
Congress in innovation and ideas report. And the last look, the 
last in depth look at this issue shows was the National 
Research Council, National Academy of Science, a patent system 
for the 21st century which was written in 2004.
    We are going to ask the NAPA, the National Academy of 
Public Administration, to take an in-depth look at the PTO 
operation, your operation. We will ask the staff to also look 
at the National Academy and see if maybe they may be the best.
    You sound somewhat like many other patent leaders have said 
and, yet, conditions continue to be worsening. So we want to 
make sure because the one figure that you said to Mr. Serrano, 
and you have said it several times, the number of overseas 
patents are increasing.
    If you could give us the number of patents that have been 
filed, let's say from 1988 because we are using that year as 
the year of U.S. and foreign in 1988, 1989 right up to present 
time. And then if we could get a breakdown as to what countries 
they are coming from.
    But the conditions may be and based on your answer may be 
dramatically changing. So what we are going to do is ask NAPA, 
and we would ask you to cooperate with NAPA----
    Mr. Kappos. Sure.
    [The information follows:]

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    Mr. Wolf [continuing]. And the National Academy of Science 
as they take a look at your operation. Have you seen a trend 
that shows a reduction in the number of U.S. patent filings?
    Mr. Kappos. No, not at all. In fact, the opposite.
    Mr. Wolf. Is it a reduction in percentages or is it a 
reduction-- an increase overall as well percentages? As the 
foreign ones are going up, are we going up as much?
    Mr. Kappos. Foreign filings have indeed increased in 
percentage. If you look back a number of years ago, fewer than 
50 percent of U.S. patent filings were from or originated 
overseas. Now, as I mentioned before, slightly more than 50 
percent originate from----
    Mr. Wolf. When did you cross that line?
    Mr. Kappos. I want to say two, three years ago, we hit the 
50 percent point and went over that.
    Mr. Wolf. Okay. Mr. Fattah, I have a few more. You want to 
go back and----
    Mr. Fattah. Yeah.
    Mr. Wolf. Yes, go ahead. You go ahead.
    Mr. Fattah. You want me to go?
    Mr. Wolf. Yes, you are next.
    Mr. Fattah. Yeah. Within the last year of the Bush 
administration, we crossed this rubicon. But part of this is 
that basic science research----
    Mr. Wolf. Was that a compliment or--I did not get----
    Mr. Fattah. Well, no. It is just a fact. It has nothing to 
do with----
    Mr. Wolf. Oh, okay.
    Mr. Serrano. What do you mean rubicon?
    Mr. Fattah. Oh, that we crossed to the 51 percent mark. But 
it is a very important issue because of so called patents, so 
called engineers. But as the chairman has said, when we are 
producing 70,000 engineers and China produces 700,000, there is 
going to be a differential over time.
    Now, we were at a moment where we led the world in 
scientific research. We now represent about a third of that. 
And, you know, about a third of it is in Europe and a third of 
it is over in Asia, in India and China. So it is a very 
different world map. And, you know, we could have a small 
country like Singapore investing $4 billion in basic scientific 
research.
    And when we look at the National Science Foundation we are 
not--I mean, we are in a challenging situation to find the 
resources. And as we all know, until we get to some budget 
reform around some of the things that are really driving the 
budget, we are not going to be making these investments that we 
need to make in STEM. And it is a major issue.
    But I want to drill down for a minute. When someone applies 
for a patent, do they have to, other than the fact that they 
have this idea, do they talk about how they developed the idea? 
Do they talk about where they got the initial funding?
    Let me give you an example. I met with a 33-year-old young 
guy who is the head of material and mechanical engineering at a 
school in Philadelphia. He got a $20,000 investment from the 
university a few years back and he got, Mr. Chairman, an NSF 
grant for, you know, in the six figures. And now he has got a 
patent and he has got a company. And he has got about a $600 
million product line that is helping make the world a better 
place.
    And this committee is involved in a lot of issues beyond 
patents, but through one of the STEM programs that the 
committee has supported in previous years, there is young lady 
over at Howard University now who has got a patent disclosure 
for a development of an idea to power underwater labs of NOAA 
and other entities by using material on the ocean floor.
    I mean, we have the talent. We have young people who have 
the talent to do almost anything. It is just a matter of 
creating the opportunities for them, and that is what we are 
interested in.
    So the work that you are doing is vitally important, and I 
think that we are going to have to work through the issues of 
the appropriations. The CR is another matter, but I think the 
Senate is acting on the CR today, for two weeks, and they 
passed it. Okay. And then we will go into what happens on March 
the 18th.
    But you are not the only agency to say. The Pentagon came 
out today and said if we keep operating under a CR, it is going 
to actually cost more money, and it endangers national 
security. So we do have to get to a resolution.
    And I hope that there is either a budget summit or there is 
some kind of resolution where we can get the spending at least 
set for the rest of this year and then the Appropriations 
Committee can do its work properly about next year's funding 
because this is serious business. And we owe it to American 
industry that if we are going to have a patent operation, that 
it function in real time. And you have international treaty 
obligations, right?
    Mr. Kappos. Yes.
    Mr. Fattah. So these countries, not only do we have 
obligations, but other countries have obligations. And we want 
to make sure that in order to hold them accountable that we are 
meeting the mark that we need to be meeting.
    So I want to thank you for your testimony.
    And I will conclude on that, Mr. Chairman.
    Mr. Wolf. Thank you. Well, I appreciate the comments from 
my good friend from Pennsylvania. I am from Virginia but was 
raised in his home town in Pennsylvania.
    I think there is an answer, but it is a relatively 
difficult solution to what is relatively easy. And it is really 
to adopt the Simpson-Bowles or Bowles-Simpson Commission, 
changing things. And obviously there are things in there that I 
did not agree with. And I would have made a sincere effort.
    But when Tom Coburn and Dick Durbin can come together, I 
think it is going to take a bipartisanship. It is going to take 
the President to come forward. There was an editorial in 
today's Washington Post, ``Waiting for Waldo'', meaning waiting 
for the President to step forward. It is important that we do 
this in a bipartisan way.
    And until you deal with the fundamental issues of the 
entitlements and those issues, you can come up here and testify 
all you want to testify, it is going to continue to be a 
problem.
    Mr. Kappos. Yes.
    Mr. Wolf. So I think the way to do it is to come together, 
find a rationality. And I think the beginning of it could be 
what the Senate is doing is a bipartisan effort. One of the 
senators from my State, Senator Warner, Senator Chambliss from 
Georgia, Senator Coburn, and Senator Durbin are working on 
something to sort of force the Congress and force the 
Administration to come together.
    Then I think if we can do that and I think we can do it in 
a way that is not painful to the Nation, adjusting around the 
edges, then I think all these issues to a certain degree free 
up a tremendous opportunity for the sciences and math and 
physics and chemistry and investments and have a renaissance.
    But until that comes you are going to continue to have 
budget cuts and you are not going to have the CR be ended 
quickly. I mean, I am not so sure, maybe I am wrong, but I do 
not know if two weeks will be enough. Who knows what? So you 
are going to continue to kick this can down the road. But I 
think if we could begin with what Senator Simpson and Bowles 
did, I think we can begin to make some progress.

                           PATENT AUTOMATION

    A couple of last questions before we end. In 2005, GAO 
reported that the PTO had spent over $1 billion, B billion, 
between 1983 and 2004 for patent automation activities which 
did not achieve a fully integrated electronic patent process. 
Between fiscal year 2006 and October 2010, PTO spent another 
$47.9 million on another IT modernization effort on a system 
that has not been effective either.
    Can you describe PTO's proposed Patents End to End Program 
and when do you anticipate awarding a contract?
    Mr. Kappos. Sure. I would be happy to do that. So the 
Patents End to End Program is designed to take a completely 
different approach than the programs that previously failed. It 
is designed to start and we have started. We have been spending 
the better part of a year now starting without attempting to 
make architectural decisions, without attempting to choose 
servers or programming languages or any of that, without even 
attempting to choose contractors.
    Instead we started doing something that apparently is kind 
of new in the Federal Government but is actually pretty 
straightforward to me as someone who, as I mentioned before, 
has been doing this stuff for going on 30 years now which is to 
actually talk to your customers. In this case, examiners.
    So we put together task forces of examiners. We literally 
have engaged over this period thousands of our examiners at the 
agency. I mean, you can ask the folks at our unions who will 
say management never did that before and they absolutely love 
that management is engaging the employees. And we asked them 
the question, what do you want your IT system to look like. And 
that is where we started.
    We spent a lot of time collecting input. We brought three 
contractors in, very small contracts, to design the prototypes 
of what our user interface would look like. We finished with 
that work. We did extensive user input on it. We would love to 
show you the results. It is actually very, very engaging. Our 
users have chosen what their next system is going to look like. 
And we spent very, very little money so far.
    But this is about collecting the user input that you need 
so that you ensure that you are designing a vehicle that meets 
the needs of the people who are going to ride in the vehicle. 
In this case, primarily Patent and Trademark Office examiners.
    So we finished that initial prototyping work. We are now 
engaged in the process of lining up the contracts to get going 
on the first set of what is called Sprint using a programming 
methodology and a development methodology that again is--that I 
have been using for years in the private sector, but is new to 
the Federal Government, that is called agile development 
methodology. That is the approach that we are using.
    And we expect using that approach to have the first but I 
will caution initial pieces of programming for our Patents End 
to End Project by the end of this calendar year. We are going 
to deploy them initially using our Central Reexamination Unit. 
I mentioned that before. It is a part of our examiner core that 
focuses on patent reexaminations which is extremely important 
work but has the advantage that it is not automated at all 
right now. They are on totally paper processes.
    So there is very little risk in moving them to a new 
system. It is a small group of people, but it employs very 
similar processes to our large core. So you will see that 
rolling out late this year and then you will see the way agile 
works, a steady stream of vertical and horizontal improvements, 
in other words, filling in functionality on top of the initial 
system and more functionality across the whole patent examining 
process. It will take several years, though, to get this done.
    Mr. Wolf. What sort of technical expertise does PTO have to 
oversee the contractors?
    Mr. Kappos. Well, we have got a CIO who has many years, in 
fact decades of experience in the information technology 
industry. I personally, as an IT professional and electrical 
engineer from that industry, I personally spend a lot of time 
working with my team.
    We have now hired as we were requested by the President's 
CIO, we have hired a project manager also from private industry 
with much experience managing projects to design and implement 
complex IT solutions. And so I believe we have actually got a 
robust team in place to manage contracts.
    Mr. Wolf. Is he an employee or is he a contractor?
    Mr. Kappos. Employee of the USPTO.
    Mr. Wolf. All right. Okay. For the record, Mr. Fattah, you 
have any other----
    Mr. Fattah. No.
    Mr. Wolf. Okay. With that, we thank you for your testimony. 
I hope you will come up and see me. I want to talk to you 
because I am going to do something on the China issue.
    And, secondly, if you would cooperate with NAPA and whoever 
it is to take a look. We will try to get that up and running. 
We will try to put language in the bill. But I think we will do 
a letter to them early and if they can begin early, I would 
appreciate it.
    With regard to that, I guess we will just submit the rest 
for the record. Thank you.
    Mr. Kappos. Okay. Thank you, Mr. Chairman.
    [The information follows:]

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                                           Thursday, April 7, 2011.

             NATIONAL INSTITUTE OF STANDARDS AND TECHNOLOGY

                                WITNESS

DR. PATRICK GALLAGHER, UNDER SECRETARY OF COMMERCE FOR STANDARDS AND 
    TECHNOLOGY AND DIRECTOR OF THE NATIONAL INSTITUTE OF STANDARDS AND 
    TECHNOLOGY
    Mr. Wolf. I want to welcome you to the committee. And in 
light of the time, I will not have any opening statement, but 
just welcome you, Dr. Gallagher.
    Dr. Gallagher, your full statement will appear in the 
record. You can proceed as you see appropriate.
    Dr. Gallagher. Thank you very much.
    And in the interest of the time, I will also try to give a 
quick----
    Mr. Wolf. Oh, that is okay. Go ahead.
    Dr. Gallagher [continuing]. Oral sort of summary of the 
written testimony. Chairman Wolf, it is good to be in front of 
the committee.
    And, Ranking Member Fattah, it is good to see you again.
    And it is always great to have an opportunity to talk about 
the NIST 2012 budget. The budget request for NIST is best 
understood by its mission to promote U.S. innovation and 
industrial competitiveness and finds itself very well aligned 
with the President's focus on supporting economic growth 
through innovation.
    The fiscal 2012 budget request for NIST is $1 billion. This 
does represent a 17 percent increase over our 2010 enacted 
level and I would like to briefly summarize the request. There 
are four major accounts in the NIST Program.
    For the NIST Scientific and Technical Research and Services 
account, which funds our laboratory activities, our budget 
request is $679 million which is a net increase of $174 
million. These funds are to accelerate the development of 
standards, technology, and measurement science in areas as 
diverse as advanced manufacturing, cyber security, and advanced 
building infrastructure.
    The NIST Industrial Technology Services account budget 
request is $238 million. This is an increase of $33 million and 
also reflects a $1.9 million reduction to the Baldrige 
Performance Excellence Program consistent with the 
Administration's goal of transitioning that program out of 
federal funding.
    The budget requests $84.6 million for the Construction of 
Research Facilities account. This is a $62.4 million decrease. 
The budget request also includes $25.4 million for the 
continued renovation of the aging Boulder Building One facility 
and funds for needed repairs and maintenance of our facilities 
on the two campuses.
    And, finally, NIST is requesting $100 million in the new 
mandatory account for the creation of a Public Safety 
Innovation Fund. This is NIST's component of the 
Administration's Wireless Innovation Infrastructure Initiative 
(WI3).
    So let me touch on a few of the major themes that are in 
the request: manufacturing, infrastructure, and education.
    The President's fiscal year 2012 budget request for NIST 
includes a very strong focus on manufacturing and provides the 
measurement tools and other essential technical assistance that 
other U.S. manufacturers need to invent, innovate, and 
produce--and to do that more rapidly and more efficiently than 
their competitors around the world.
    With the laboratory budget, there are five manufacturing 
related initiatives totaling $85.3 million and these 
initiatives will enable NIST to bolster and diversify needed 
research and services in areas like nanotechnology, 
biomanufacturing, additive manufacturing, and advanced robotics 
that will position U.S. manufacturers to be competitive around 
the world.
    My written testimony includes more details of these 
initiatives.
    The President's budget request also strongly supports 
manufacturing through our external programs: the Manufacturing 
Extension Partnership program and the Technology Innovation 
Program.
    For MEP, the budget request is $143 million, an $18 million 
increase. NIST MEP will use the funds to expand capabilities of 
its nationwide network of centers located in all 50 states in a 
number of critical ways to assist manufacturers to successfully 
compete over the long term.
    The request for TIP of $75 million will enable the program 
to hold a competition to fund high-risk, high-reward research 
in critical national needs like manufacturing.
    NIST is also requesting $12.3 million for a new program, 
the Advanced Manufacturing Technology Consortia or AMTech. This 
is a new public-private partnership that will provide grants to 
stimulate the formation of industrial consortia to address 
industry-driven technology challenges that any one company 
would not be able to do on its own.
    With regard to strengthening the U.S. infrastructure, the 
budget request contains $43.4 million in three initiatives for 
cyber security related programs and activities. This includes 
activities building upon our core cyber security work in 
support of the Comprehensive National Cybersecurity Initiative, 
to support a national program office to coordinate activities 
for the National Strategy for Trusted Identities in Cyberspace 
or NSTIC, and to expand the scope of the comprehensive National 
Cybersecurity Initiative on Education.
    In the area of interoperability infrastructure, this budget 
request proposes funds to support our work in emerging 
technologies which includes smart grid, interoperable 
electronic health records, and cloud computing standards for 
the Federal Government.
    The physical infrastructure work in NIST includes work to 
increase energy efficiency and reduce environmental impact for 
U.S. infrastructure and to improve our research activities in 
disaster resilient structures.
    This is particularly timely with the earthquake in Japan 
and the resulting damage to structures. And we are pleased that 
it has been included in this request.
    Finally, in wireless infrastructure, the Public Safety 
Innovation Fund that I mentioned earlier will focus efforts to 
support the development of an interoperable nationwide public 
safety broadband network.
    The education initiative, the post-doc research program 
initiative will enable NIST to offer at least an additional 23 
positions per year.
    And I want to thank this committee for its support in 
eliminating the cap on funding for the NIST post-doc program in 
last year's COMPETES Act that makes this opportunity possible.
    Beyond those initiatives, there are two areas in the budget 
which reflect savings. This budget request incorporates over 
$11 million in administrative savings and the proposed decrease 
for the Baldrige Program is an additional $1.9 million.
    Mr. Chairman, the fiscal 2012 budget request for NIST 
reflects the Administration's recognition of the important role 
that NIST can play in innovation and the impact of NIST 
research and services that it can play in moving this Nation 
forward.
    And I look forward to answering any questions you may have 
about our request.
    [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
          HOMELAND SECURITY: INFORMATION SHARING TECHNOLOGIES

    Mr. Wolf. Thank you very much, Dr. Gallagher.
    You know, it is kind of interesting. I think, one, the 
subcommittee really, and I know Mr. Fattah shares this, too, 
really did everything it can to support NIST even in H.R. 1. I 
think you took less of a hit, you and the FBI.
    It is interesting. You probably run and have one of the 
most important agencies for the future of the country in 
manufacturing, education and, yet, I look at this. There are 
empty seats here.
    How many people here are with NIST? Raise your hand. How 
many people in the audience are not with NIST? Yeah. And are 
any of you reporters?
    Okay. Well, I mean, where is everyone--and, yet, NIST 
really is very, very, very important.
    I have a bill in that we are going to introduce in a week 
or two with Senator Warner of my State to deal with 
manufacturing. It puts together an incentive program. It is a 
repatriation bill to help bring back jobs from China and 
Mexico.
    And manufacturing and creating jobs is very, very important 
and, yet, you know, there are still empty seats here if more 
people want to come.
    But we have had other hearings that have been less 
important insofar as the future of the country and in an area 
that you could pretty much get a bipartisan consensus and, yet, 
I guess it is just the way life is.
    I would appreciate if you would look into NIST's 
involvement in Information Sharing and Access Interagency 
Policy Committee and Watch List and Screening Subcommittee. 
That is quite a name. I wonder how they will give an 
abbreviation for that.
    But I understand that the Departments of State, Homeland 
Security, and Justice are working together to determine the 
requirements each would need before procuring name-matching 
software.
    As you are aware, NIST is involved in this process. I 
believe the agencies are asking NIST to compare and ascertain 
what software brings what strengths, weaknesses, capabilities 
when it comes to name-matching software.
    I understand that the work of the subcommittee is still in 
the early stages and that NIST is participating to gain a 
better understanding of the requirements. We understand that 
each of the agencies has significantly different operational 
requirements so achieving consensus will be a challenge for the 
subcommittee.
    However, as we approach the tenth anniversary of the 9/11 
attacks, I think it is imperative for the government to work 
together on this program and that NIST should be an active 
participant.
    I would hope that NIST will be a leader in the effort 
considering the good work that NIST has done on a number of 
homeland security issues.
    And we had Director Mueller up here yesterday and, of 
course, on the 9/11 issue, a number of people from my 
congressional district died in that attack. And so we were 
looking forward to hearing from you of how this thing--you may 
not have to get in great detail here, but how we can kind of 
bring the three agencies together.
    Dr. Gallagher. So thank you.
    We are quite committed to this effort. NIST has long 
research experience in looking at text retrieval and these 
types of technologies. In fact, the Watson computer that 
everyone was watching on Jeopardy, some of that underlying 
technology that enabled that was actually based on some of that 
NIST research.
    So this is a very active interagency process. And I think 
you characterized the situation well. It is early enough that 
what we are trying to do is coordinate and develop a set of 
coherent technical requirements so we can turn this into some 
definitive actions within the agencies.
    And I know we are trying to get our technical people 
working with the agencies in that capacity.

                  RADIATION DETECTION AND MEASUREMENT

    Mr. Wolf. NIST's physical measurements lab has developed 
expertise in radiation detection and measurement.
    Has NIST been asked to perform any analysis of the U.S. 
radiation detecting capabilities in response to the disaster 
that continues to unfold in Japan with their nuclear facility?
    Dr. Gallagher. The NIST program in advancing measurement 
science and radiation has been very active. It is one of the 
more concentrated efforts of the United States. NIST is very 
active at homeland security applications and screening and 
developing advanced screening technologies, nuclear forensic 
measurements.
    The types of measurements that are needed in the situation 
that is unfolding in Japan right now are not ones that are 
pushing detection limits. There is a lot of radiation in the 
area.
    And so these typically fall more in the kind of issues 
involving sort of sensor networks to measure diffusion. And 
those are really responsibilities of other agencies.
    In all these cases, there is a very active interagency 
process and we are offering support as requested to any of 
those sort of ongoing efforts.
    Mr. Wolf. And what about domestically here? I have seen the 
statement by the governor of New York with that one power plant 
that is up on the Hudson north of New York City. Has NIST been 
asked to engage in any studies with respect to the ability of 
U.S. nuclear facilities to withstand similar impacts, 
earthquakes, tsunamis, or other extreme weather events?
    Dr. Gallagher. So, of course, the analysis to look at 
safety or security consequences falls to the Nuclear Regulatory 
Commission directly.
    NIST works in partnership with the NRC to give them a 
technical basis for performing this type of analysis, so 
whether it is a fire risk, we do fire research that looks at 
flammability or degradation of electrical cables, whether it is 
looking at structural components in these types of buildings.
    So we play a role, but it is a secondary role. We are 
trying to provide them the measurement tools and information 
that supports their responsibilities to analyze.
    Mr. Wolf. So you have not been asked specifically by them?
    Dr. Gallagher. Not that I am aware of.

              NATIONAL EARTHQUAKE HAZARD REDUCTION PROGRAM

    Mr. Wolf. Okay. We had asked the director of NOAA, the 
Administrator, I think she said yes, but we are waiting to get 
a definitive answer, to put together a conference both on the 
East Coast and the West Coast, bringing in NOAA people, the 
U.S. Geological Survey people together to talk about the 
potential impacts of an earthquake either on the West Coast or 
East Coast and a tsunami. And I think she said yes. I will have 
to read the transcripts. But the way that it was put, I think 
she said she will do it.
    Would NIST play any role in something like that?
    Dr. Gallagher. We likely would. NIST is actually the lead 
agency in the National Earthquake Hazard Reduction Program 
which is a program established in 1977 and includes FEMA, the 
U.S. Geologic Survey, and the National Science Foundation. And 
so we would be very interested in participating in a workshop 
like that.
    The main NIST role, of course, is to disseminate model 
codes and standards for adoption so that construction standards 
are brought up to a point where we have disaster resilient 
infrastructure.
    I think the other lesson here with the situation in Japan 
is that it is important to look across all different types of 
hazards. So a lot of the damage that was sustained in Japan was 
actually water related damage from the subsequent tsunami and 
not the damage related to the shaking of the actual earthquake.
    And this is a lesson that keeps coming up in the NIST work 
and it is important to look at all of the threats to structure 
and to make sure they are resilient across all of them. You 
could have an earthquake with a subsequent fire and you are 
actually looking at fire related hazards.
    And so we would welcome a workshop like that and be happy 
to work with NOAA.
    Mr. Wolf. Okay. Well, we will tell NOAA that.
    Have your people had any thoughts or comments, I do not 
want to get too far off some of the budget issues, but on that 
about how well prepared--this subcommittee six or seven years 
ago when the Indonesian tsunami took place, we sent a letter to 
every governor up and down the East Coast, we contacted the UN 
to make sure that every locality had the necessary standards 
and warning systems. So the purpose of this would be to kind of 
do the same thing.
    But any comments based on watching what has taken place, 
since you are the lead here, what has taken place?
    Your heart goes out to the people of Japan. It just is so 
painful to watch both the radiation and the death and the 
number of people that have not been found.
    As you look at that knowing what you know, your concerns 
with regard to here in the United States, both East Coast, West 
Coast, and the Gulf?
    Dr. Gallagher. So, yes. We actually do worry about this 
quite a bit and not just the situation in Japan which is an 
unfolding tragedy but also looking very carefully at the 
situation in Christchurch, New Zealand with that earthquake and 
also with Chile which has similar building standards that we 
use in the United States.
    And the answer is, yes, we do worry about that. In fact, 
one of my colleagues is testifying right now in front of the 
House Science Committee on the NEHRP Program. And to summarize 
what I think he is going to say about the program, we have made 
tremendous advances in being able to assess and predict risk 
areas.
    I think that the codes themselves have shown dramatic 
improvement and we continue to take lessons learned. I think 
the fact that the property damage we saw in Chile was nothing 
like we saw in Haiti is a real reflection changes in building 
standards. We have also learned the weaknesses in terms how 
buildings perform under severe earthquake conditions.
    One of the areas that I think we need to work on and an 
area I think I would like to work with you on is the Federal 
Government does not mandate building codes and standards. What 
we issue are model codes and standards. And the authority is 
actually at the state, local, and regional level.
    And so as we look at collecting data and rates of adoption 
in moderate to high earthquake zones, this is an area that we 
are probably not doing as well as we could. And it comes back 
to--have we set things up in the way to be most efficient and 
giving these local jurisdictions the information they need to 
adopt stronger building codes and to assess what percentages of 
their buildings are compliant with different codes?
    Obviously in older communities, they are going to be built 
to older building standards which may be much, much less 
resilient.
    The other major concern I have is that we have focused on 
buildings quite extensively, but we also need to focus on the 
resiliency of the supporting infrastructure which is often 
called life lines, getting power and water and other key 
telecommunication infrastructure rapidly restored or highly 
resilient to these types of effects. And that compromises the 
ability of a community to respond if there is an earthquake.

                           GREEN TECHNOLOGIES

    Mr. Wolf. Sure. Well, good. We will ask that NIST 
participate.
    You have your top issues of manufacturing, education, and 
infrastructure. The NIST budget includes references to 
greenhouse gases, green technology, increased energy 
efficiency, reduced environmental impact.
    How do these activities fit into NIST's core capabilities 
and research activities and standards and measurements? Are 
these new initiatives as critical to innovation, the economy, 
and life and safety issues such as nanotechnology, neutron 
research, or disaster resistant building, for example?
    Dr. Gallagher. The activities in green technologies, if you 
will, at NIST reflect in some cases strengthening ongoing 
activities that we have had before. In some cases, they are 
new. But in all cases, they reflect industrial demand.
    What we are seeing, for example, in the building technology 
area is at the local level and state level requirements being 
placed on promoting green building technologies, whether 
commercial buildings or residential buildings, and a lot of 
interest on the part of the construction industry for tools to 
assess the effectiveness of these technologies.
    It turns out what we have done is a good job at looking at 
the performance of individual components. So we can look at how 
insulation performs or we can look at the efficiency of a 
particular window or door. We can look at the efficiency of a 
particular appliance, heating and cooling system.
    There is almost no information on how to bring all these 
together and optimize them into a working building and to see 
whether they have the type of energy savings impacts.
    And that is important to the industry because without that 
understanding by the consumer--they want to understand their 
return on investment--is this building going to save me money 
as I operate it and how soon will I realize the investments.
    And so what we are trying to do is provide the measurement 
tools to remove a barrier, for adoption for some of these new 
technologies.
    Similarly on the greenhouse gas monitoring, what is 
happening is commercial deployment of greenhouse gas monitoring 
networks. The company that was formerly known as WeatherBug 
announced a few months ago their intention to deploy commercial 
networks of sensor packages that would measure various 
greenhouse gases.
    And they want that data initially to be of use to the 
research community, but ultimately their business model would 
be to make that available to local communities and other areas 
that would be interested in knowing their emissions of 
greenhouse gases.
    If that data is not perceived as being reliable and 
interoperable, that you cannot compare a measurement taken in 
one part of the country with a package with another, so there 
is a lot of interest in how do we provide the measurement 
science to make sure that these technologies perform the way 
they are supposed to, which is a core NIST mission.

        NATIONAL STRATEGIES FOR TRUSTED IDENTITIES IN CYBERSPACE

    Mr. Wolf. You are requesting an increase of $24.5 million 
to increase the national strategy for trusted identities in 
cyber space. We understand that this initiative is supposed to 
enhance security for people when they conduct business online, 
whether it is buying a book from Amazon or check their banking 
accounts or pay bills.
    They would only have one ID and password. Would you explain 
how this would work and could you expand on the statement in 
your budget materials that states that, ``a user will no longer 
be required to maintain dozens of passwords from both public 
and private use?''
    Dr. Gallagher. The idea behind NSTIC is to provide a 
strategy for one of the real perplexing problems in information 
technology which fundamentally is a communication 
infrastructure between computers.
    And to use that infrastructure to carry out a transaction, 
whether you are just sharing information or whether you are 
going online to bank or submit your taxes, requires a 
transaction between your computer and the other device that you 
are using.
    And to establish a trusted connection, there has to be an 
establishment of identity. I am who I say I am. And, of course, 
the level of integrity of that depends on what you are trying 
to do.
    If it was accessing my bank account, I would want that to 
be a very strong form of negotiation, this is really me and 
nobody else, whereas if I am just posting some information on a 
site, I may, in fact, want the amount of information to be very 
low where I can ensure that I am anonymous.
    And what we are seeing in the market is a real 
proliferation. There is no common way of doing this and no 
understanding of how robust these technologies are. And as 
consumers, we know this because we struggle with individual 
passwords or tokens or various other devices with really no 
interoperability between these. So every time you go to a new 
site, you have to recreate that.
    The government's interest, of course, is that we also work 
with citizens. For example, if you are e-filing your taxes, you 
would want to have some assurance that you are logging in 
saying who you are. In other cases, you want to be anonymous.
    So rather than have the government say this is the way it 
is going to be done, we do not think that is an appropriate 
approach for a number of reasons, the adoption would be low, 
the trust would be high for that type of a system, and we may 
not know the right technology.
    What we would like to do is turn to industry and say, look, 
here is the functional requirements, here is the type of 
capability we would like to have, a trust infrastructure, if 
you will, an identity management infrastructure that people can 
opt into. They can use these types of credentials in multiple 
environments and they can control how much information they are 
willing to share when they are setting up a transaction.
    So it is largely a standards effort. I think we are going 
to be working with industry to define these type of 
requirements, how will identities be established, how do you 
protect the privacy of the information you need----
    Mr. Wolf. The privacy, I was wondering. The privacy issue 
is one that I think most people are getting very concerned 
with.
    Dr. Gallagher. Very concerned. And I would say the existing 
approach is the worst imaginable approach from a security 
perspective because every time you go to a new Website and 
create a new account, you have to share an enormous amount of 
personal information to establish your identity.
    And so we have all of this personal information about 
ourselves at all of these different locations. And the question 
is, if I am a small business and I want to set up a Web sales 
application, rather than have to collect all of that new 
information from all of my customers, can I use the fact that 
they can log on through some trusted, some identity management 
organization and basically rely on that.
    So we think that this would be privacy enhancing, that 
there would be much less of your personal information out there 
and it would be used to establish identity and then protected. 
It would not be held by the government. You know, we would like 
this to be private sector.
    If it is done correctly, the government can use these same 
technologies itself which is really, I think, the right 
approach rather than come up with something new.
    Mr. Wolf. Well, the privacy issue even, you know, I saw a 
piece the other day that companies are now able to notice what 
television station you are watching, whether it is ESPN versus 
another channel, and, therefore, begin to tailor ads in the 
mail or to you through your computer based on that.
    You really almost get the feeling from a privacy point of 
view, I mean, you go to the bank teller after the church, the 
ATM, and there is a camera there recording you. You get on the 
toll road out in northern Virginia to come into Washington--on 
the Greenway and the toll road--and use your smart pass. You 
then drive up to New York City with it and you go through the 
toll, through the tunnel.
    And pretty soon everything seems to be almost out there. 
And there is the ability to track and know what the person 
likes to eat, what time they go into work, what time they leave 
to come home.
    And I think from a personal privacy issue, I find it very 
troubling. I do not have the answer to it. And I do not bank 
online, but, I have five kids and they all bank online. They 
just think it is just the way to do it. So the privacy issue 
troubles me deeply.
    And if you can get a young high school graduate to crash 
into the Department of Defense computer system and knowing what 
the organized crime in Russia is doing and knowing what the 
Chinese system that they have set up, almost nothing is not 
able to be penetrated now if they really set out.
    Now, I am sure they are not going to set out to go after 
the individual consumer at Costco. But if they wanted to, they 
almost can do it now.
    Does that trouble you?
    Dr. Gallagher. Well, it does very much. I think that any 
powerful disruptive technology like information technology 
comes simultaneously with enormous advantages. I think back at 
just my 18 years at NIST and it is hard to believe the extent 
to which information technology has permeated everything we do.
    Mr. Wolf. Yes.
    Dr. Gallagher. And so with all of those advantages, of 
course, and that ability to move information come all of the 
possible downsides with that. And I think the challenge we face 
is that the rate of technology change has exceeded our ability 
for the policy to respond to it.
    I mean, this has opened up new types of privacy concerns 
that we simply did not have before just because of how 
connected and how much information is being assembled. It just 
was not possible before.
    So one of the challenges I always am looking at is how do 
we try to respond, with everything we are doing, with 
cybersecurity standards, with privacy.
    The Department of Commerce has been very active in the 
privacy arena trying to basically at least articulate a set of 
guiding principles that we can start to address how we are 
going to think about privacy protection with internet-based 
technologies. And it is simply guiding what our actions will be 
going forward and being able to work effectively with private 
sector, with partner countries.
    So we worry about this all the time and it has just moved 
so quickly that it stresses--you know, it is hard to 
extrapolate something you did in the past that really made 
sense then. In some cases, you almost have to start over.
    Mr. Wolf. Yes. Look at the pain and suffering that 
WikiLeaks has created. I mean, what took place in WikiLeaks has 
resulted in the death of people and the fall of governments. It 
has done a pretty incredible thing.
    We will go to Mr. Fattah now.
    Mr. Fattah.
    Mr. Fattah. Thank you. Thank you, Mr. Chairman.
    Thank you, Dr. Gallagher.
    Let me just for the record also acknowledge that you were 
educated in Pennsylvania, University of Pittsburgh, a doctorate 
in physics.
    And you have worked under a number of presidents. You 
started under the, I guess, the first Bush administration----
    Dr. Gallagher. So I have been at----
    Mr. Fattah [continuing]. In your original role?
    Dr. Gallagher. So I joined NIST in 1993, so actually at the 
start of the Clinton administration.
    Mr. Fattah. Okay.
    Dr. Gallagher. And then through the Bush administration as 
well. And I actually was director of one of our neutron 
research facilities up until 2008 and was made Acting NIST 
Director at the end of the Bush administration and then 
nominated----

                     NUCLEAR REACTOR SAFETY REVIEW

    Mr. Fattah. So you bring a great deal of competence to the 
work that you are doing. And you also have a constitutional 
mandate provided through the Congress to set standards and 
measurements for the country. And we want to thank you for your 
service.
    Let me start where the Chairman interestingly started at on 
this nuclear question. Now, the problem in Japan, as best as I 
can understand, is the most challenging part of it is the spent 
fuel in these pools, right, and the leaking thereof caused by 
the earthquake and then the tsunami?
    We have in our country lots of spent fuel. I am a proponent 
of nuclear energy. I am for nuclear energy. But one of the 
issues is what you do with the spent fuel, and you have to cool 
it for some long period of time. And under the NRC rules, you 
put in these cooling pools for five years.
    Now, we have some 63 metric tons of spent fuel in our 
country. Some of it has been in these pools longer than what is 
recommended and some of it is in dry cask.
    Now, I guess the standard at the moment is that it really 
does not matter whether or not it is a dry cask or whether it 
is in a pool, right?
    But the Sandia Lab has done some work in this regard and 
there seems to be on the science of this edging more towards, 
you know, because I am a layman when it comes to this, but to a 
common sense view that a dry cask might be a better 
circumstance, particularly from a security standpoint, you 
know, potential terrorist attack or something like that, but 
also even in the case of some other disruption like in the 
instance of Japan.
    So on the question of when there is a safety review that 
the Administration has ordered, and I support the President's 
call for this safety review, when we get to the point of trying 
to figure out whether or not there is spent fuel in these pools 
well beyond the period that it needs to be there and whether it 
should go to dry cask, the question of dry cask or no dry cask, 
is this something appropriately for NIST to be in the loop on?
    Dr. Gallagher. So I think the answer is possibly, but it 
would be indirect in support of the NRC. I managed our nuclear 
facility for four years at NIST, so NIST does not have a 
specific role here.
    But speaking as a former manager of a nuclear facility, the 
one challenge you always face, and I think the challenge that 
NRC faces, that you have to look holistically at the problem. 
You want to look at overall the integrity, safety, and security 
of various options of storing fuel.
    And as you pointed out, the problem we face with a once 
through fuel cycle is the fact that there is a lot of decay 
product still in the fuel when you are done using it. And as 
the element continues to decay, it produces heat.
    And so the technical challenge everyone is facing is what 
is the right way to provide that cooling in various storage 
configurations.
    So it is easy to cool in a pool, but you see the 
disadvantages of that long term. It is a very active system of 
pumps and heat exchangers and various things. And there is no 
down side to leaving it in a pool longer than it needs to 
because it is pretty cool.
    So the challenge with dry cask, the advantage is that it is 
passive and can be made very hard, the disadvantage is how do 
you provide passive cooling that is adequate to preserve the 
integrity of the element. You want to keep the metallic, the 
fuel cladding because that is what holds those components in 
there to then maintain its integrity.
    So I think that for the engineers that will have to look at 
this, the best environment they can be put in is to step back 
from some of the policy consequences of these and just look at 
it from a technology perspective, what can be done to look at 
enhanced fuel cladding integrity, what can be done to look at 
advanced passive cooling technologies.
    I think what they can do if they do that is they can give 
us the technical options that let--because there is all sorts 
of tricky policy questions that I know you have to deal with as 
you look at these options and the impact of proliferation and 
various other things, but at least then we have all of the 
technology----
    Mr. Fattah. There are a lot of policy implications, but 
this is a safety review, right? So, again, I start over with 
the fact that I am pro-nuclear. I think we should be even more 
aggressive. I think we should look at small modular nuclear 
reactors. But I also think that we should act in intelligent 
ways to protect public safety.
    So this notion that it is an equal choice between a cooling 
pool and a dry cask to me, and I do not have a doctoral degree 
in physics, even from a distinguished university, but it does 
not sound to me like it is an equal choice either way.
    And I think that this is the kind of thing where NIST, if 
you are setting standards, it might be useful--so I would love 
for you to review some of the work that has been done on this 
question and see what you think.
    I mean, I am not trying to jump in front of the NRC, but I 
just think that it is an important question because absent the 
spent fuel being in the pool, much of the calamity of the Japan 
nuclear reactors would not exist. And even if it was in dry 
cask and there was some rupture, the level of problem would be 
lessened in a very considerable way.
    But I do not know. The Chairman started on this. I just 
wanted to jump in.

                             MANUFACTURING

    I want to go to your other work. Now, as a state 
legislator, I was one of the sponsors of the Ben Franklin 
Technology Program in Pennsylvania which has worked very, very 
well in taking excellent research from our universities and 
bringing it to bear in terms of economic development.
    And now you are engaged in that in a number of different 
ways through the Manufacturing Extension Partnership and 
through the TIP Program. And TIP is an outgrowth of the earlier 
program, the advanced technology program, right, and it is 
focused on small and medium size manufacturers?
    So I have seen some of the work that has been done. I was 
out at a manufacturer in Pennsylvania in my district in 
Philadelphia. They make fishing reels. It is called Penn Fish ` 
Tackle or Penn Fishing Reels. It is in North Philadelphia.
    They make the world-class saltwater fishing reels, Mr. 
Chairman. They sell for about $1,500 a piece and they have no 
competitor in the United States at all. And people buy from all 
over the world.
    But the Manufacturing Extension Partnership helped provide 
some technical assistance in the manufacturing process through 
a grant and a collaboration.
    And I also know another manufacturer who is in bio-tech. It 
is a very different process. He is in Philadelphia, in the 
Spring Garden area, and he is making glass that you work with 
small chemical and biological formulations in the whole DNA 
area.
    And through the Manufacturing Extension Partnership, they 
hooked him up with some people in Chapel Hill who helped design 
how this little firm manufacturer of 14 people could be major 
players in a world that, otherwise, they would have been frozen 
out of by larger players. So the program has worked well.
    I know the chairman and I have gotten letters from 
Manufacturing Extension Partnerships from I think every State 
now and talking about the great work. And we are very 
interested. I have said that it is my most important priority. 
I notice that the Chairman has an important affinity for 
helping in this area.
    So you have a number of different programs in the 
manufacturing area. This is the largest of them, is that 
correct, in terms of dollar amounts?
    Dr. Gallagher. Probably not, only because such a large 
portion of the laboratory program also works towards 
manufacturing. But it is the largest program that is 
specifically focused on providing services directly to 
manufacturers.
    Mr. Fattah. Okay, well if you could walk through all of the 
efforts that NIST is working at, and how they work together or 
separately to help manufacturers? If you could spend a couple 
of minutes on that that would be helpful.
    Dr. Gallagher. So thank you. The NIST role in manufacturing 
is interesting because it comes in sort of two major ways. One 
of them is through that core mission that the Constitution gave 
us in Article 1, Section 8 which is to establish a system of 
weights and measures and to deploy that system into commerce. 
And so a lot of the NIST laboratory work is actually not 
defining what the meter is and what the second is. That is an 
important part of what we do, but it is realizing active 
measurement in commercial environments. How do you measure 
deformation when you are trying to bend sheet metal to form 
cars? Or what are the materials properties of advanced 
materials if you are light weighting? Or how do you 
characterize new nanomaterials? Or how do we look at biological 
materials?
    So an enormous amount of our mission, core mission work in 
measurement science is removing measurement barriers to 
manufacturing. Similarly our role in standard setting. The 
United States is quite unique in that standards are not set by 
a government agency. Standards are set by industry. And that 
approach to industry-led technical standards is one that we 
support. So instead of having us issue standards, we have a 
supporting role. We coordinate federal agencies' use, but we 
are also there to support the industry efforts to make sure 
standards are based on good methodology and so that in the end 
you want to measure something because you want to know that a 
standard was put into practice. It does not matter if it is on 
a piece of paper. You want to show that a product or service 
can, you know, can perform the way you wanted it too.
    So the NIST laboratories all the way through have these 
enormous efforts in providing unique measurement capability, 
lowering measurement barriers to manufacturing, and supporting 
technology standards. In addition to that the extramural 
programs in our ITS account provide a very special kind of 
service to industry. And as you pointed out, MEP is a great 
example.
    The MEP program only provides up to one-third of the 
funding for the MEP centers. What MEP really did is not set 
something up from scratch. It tied efforts that were in all 
fifty states together. It created a network of extension 
programs where they were working, often set up through a state 
university, or through a state-led program, working with 
manufacturers where they were trying to support their local 
business community. The power of networking similar state 
efforts together, though, is very real. And it allowed the 
states to both share information very quickly on best 
practices, what kinds of services were most effective. It also 
allowed us to collect metrics. You know, what worked? And what 
was the impact of these different services. And one of the 
things that happens then is we saw a surprising amount of 
uniformity across all of these fifty, these centers across all 
fifty states.
    And the reason I bring that up is that, you know, one of 
the issues that comes up every time we talk about manufacturing 
programs, and an area that I would like to work with this 
committee on, is this tricky question of the appropriate 
federal role. And I think it is tricky because states have 
always played a major role in economic development in this 
country. And so you end up in this, this decision about, you 
know, how far should the federal government get involved if the 
states are already there?
    One of the natural roles for the federal government, 
though, is helping the states work together. So this idea of 
networking and working across and sharing information, 
facilitating information across states is very powerful. And I 
think MEP may be one of the best examples of that.
    Mr. Fattah. Well this biotech company in my district is a 
good example of that. I mean, we have some very fine 
universities and people who can be helpful to businesses. But 
in this particular case the expertise that was needed for this 
company happened to be in North Carolina. And it was through 
MEP that that connection was made. And so I think that that is 
very useful. Because, you know, as we compete on the world 
stage, we are not competing as an individual state or a 
parochial community. I mean, a lot of the business location 
decisions are either, is it North America, or is it some other 
place? And so it is very useful now.

                  CONSTRUCTION OF RESEARCH FACILITIES

    You talked about your lab program. Part of your budget 
request is for continued construction at the lab. Is this at 
the Colorado lab? Or which labs? Because you got some dollars 
through the stimulus program for construction, is that correct?
    Dr. Gallagher. That is correct. So the Recovery Act 
included funding for internal construction at NIST. Those funds 
have been obligated. And there is a lot of construction 
underway, if you were to visit either in Gaithersburg or in 
Boulder, Colorado. And that is one of the reasons the 
construction request is down considerably in 2012 because we 
are dealing with this wave of ongoing construction. The 
situation in Boulder is that facility was in very poor shape. 
It was built in the 1950's. It had the unfortunate accident in 
history, I guess, of being built before there were, you know, 
central air conditioning and air ventilation systems. So for a 
laboratory facility it was a real problem.
    So what we did is a study to show whether it was most cost 
effective to build new. For very high performance buildings it 
is cheaper to just build it from scratch. And that building is 
under construction now and will be done sometime next year. And 
what functions are most cost effectively addressed by just 
renovating the existing building. So the funds in the 2012 are 
to initiate and continue that renovation part of the project. 
And the reason I focused on it was the timing is really 
important. Because if you are going to do renovation you are 
displacing existing activities. And so the most efficient way 
to do this is to roll right after the completion of the new 
building and move through the renovation phase. If that is 
interrupted, you know, what will happen of course people will 
set up their equipment in these spaces and then we will later 
have to move them out and then move it back in. So we are 
trying to optimize the phasing of that project in Boulder.
    Mr. Fattah. And this is a relatively small agency. What do 
you have, some 2,900 scientists? You can go out to one of the 
national labs like Sandia which has, you know, got 3,300 
Ph.D.'s and another 4,000 or 5,000 workers there. So, you know, 
in comparison. So one of the questions is, I know we are 
dealing with kind of incremental questions about your budget 
from 2010 enacted to next year. But as you look forward over 
the next ten years, are we looking at a need to grow the entity 
in non-incremental ways in order to take further advantage of 
our resources and to compete better? Or are we about where we 
need to be with relatively small or, you know, not so small 
increases? I guess it depends on how one might look at it.
    Dr. Gallagher. So I think the Administration's view is that 
NIST has to grow. It was one of the three agencies, and in fact 
Congress I think would agree because the COMPETES Act, which 
this committee supported very strongly, called for substantial 
growth in three agencies as well. The DOE Office of Science, 
NIST, and National Science Foundation. Looking at NIST----
    Mr. Fattah. For doubling them----
    Dr. Gallagher. For doubling----
    Mr. Fattah. Right.
    Dr. Gallagher [continuing]. That is correct. One way to 
look at, you know, what is the optimal size, this is always 
difficult to do. But NIST is unusual in a couple of ways. One 
is its size, it is relatively small compared to the other major 
national laboratory activities. It is also, it is very diverse 
technically. It is probably the broadest collection of 
technical activities because the measurement science field does 
not confine it very much. So it is extremely broad. And if you 
look at serving industry as a primary mission area the amount 
of technological activity in industry has continued to grow 
over the last twenty years whereas the NIST laboratories have 
been flat or decline. So as a percentage of the industrial 
effort we have lost a lot of ground in the last thirty years.
    It comes back to this role of government question. I think, 
you know, we have tended, it has tended to be easier to focus 
on those areas where there is an overriding national need. 
Energy, defense, aerospace, where we can justify the stronger 
involvement. When you look at activities that are most 
crosscutting I think that has been the harder issue. And I 
think that comes back to a point the Chairman raised at the 
very beginning. Where we are looking at the enthusiasm gap 
maybe in the attendance of the hearing. But I think----
    Mr. Fattah. That is all right. The Chairman and the Ranking 
Member, we are very enthused. So even though no one else may 
be, we are enthused. But thank you, sir, for your testimony. 
Thank you.
    Mr. Wolf. Thank you. We are going to go to Mr. Aderholt in 
a minute. I just want to just ask one question, to give you 
time, okay? It will be good when we can remove this issue from 
the political attack and debate back and forth. I worry, my 
wife and I, we have five kids and I have fifteen grandkids. And 
I worry about the future of our country. And Norm Augustine 
made a comment at an event that I had on a bill to create a 
deficit commission to deal with that. He said in the sixteenth 
century, Spain was the number one country, and that is no 
longer the case. Seventeenth century, it was France. We used 
France at Yorktown to gain our independence. The nineteenth 
century, the British century. The twentieth century, he said 
was the American century. But yet it was in doubt, in essence, 
what the twenty-first century would be. Would it be the 
American century, or would it be the Chinese century?
    I believe if we come together, we are going to have 
differences on a lot of different issues. But if we can come 
together with the American ingenuity, and the free enterprise 
system, it can be the American century. But I worry when I see 
the Chinese and others so cooperating with their government, in 
manufacturing, and doing things like that, that we could see us 
begin to decline. And as these jobs leave America, that the 
manufacturing jobs leave. And some have said, ``Well, it is 
manufacturing but we have the R&D.'' Well if all the 
manufacturing leaves the R&D begins to go. And we are seeing 
companies, American companies, opening up amazing facilities 
and beginning to move a lot of the R&D offshore.
    So for, you know, my grandchildren, and for the future of 
America. But this issue becomes so politically charged. So how 
do we take it out of that? And some have said on the MEP, 
``Well, it is too much government involvement.'' Well, the 
internet came through the government. You know, and I would 
hold my credentials as a conservative Republican up against 
anybody in this Congress. But I want to help America. And on 
the bill that I have, with regard to repatriation of jobs, I 
have actually had somebody say, ``Well, would be an expenditure 
there?'' We give tax credits to companies to return home. We 
also will reshape some EDA grants to go to a locality so that 
if they are going to bring a plant back from China that they 
can have an opportunity for a water and sewer grant. Or 
something like that.
    But so I would hope that we could, and I think it is 
important for your agency to stay totally out of these 
political debates. But hopefully we have to come together to 
fashion a policy that we can, and in the aviation area, much of 
the aviation with regard to Boeing really came out of much of 
what was done in the Defense Department. And we see the 
spinoffs in NASA. So some time I would be interested, and I 
want to go to Mr. Aderholt, to hear your comments. And not here 
at the hearing, but you can come by to tell me. What you think 
we can honestly, ethically, and morally do to enhance the 
manufacturing base of this country?
    When I see Apple, you know, many people have iPods, iPads, 
iPhones. A large number are being manufactured in China. Well, 
they ought to be manufactured in Alabama, or in Pennsylvania, 
or in Virginia. And it takes a certain technical skill to do 
that. But I would like to know what you think. And after I put 
in my bill with Senator Warner in a week or two maybe you can 
just set up a time to come on by. When you are going to be 
downtown, do not make a, and we can see what we can do to 
actually craft a manufacturing program that brings jobs back 
and creates jobs for American citizens, and yet can eliminate 
this debate that we are having so we can have a unified policy. 
So the twenty-first century will be the American century.

              MANUFACTURING EXTENSION PARTNERSHIP PROGRAM

    Mr. Aderholt. Thank you. Thank you, doctor, for being here. 
The Alabama Technology Network, the ATN, is a recipient of MEP 
funds. And I think we have, and our district has been most 
impressed by the work of NIST through those funds. And the 
Alabama Technology Network, they tell us that for every dollar 
it receives in their MEP funds the government gets back about 
$76 in return. The Alabama Technology Network has attracted 
significant private investment and saved or created well over a 
thousand jobs in Alabama last year. What my question would be, 
can you tell us a little bit how those MEP funds are allocated? 
Just for our clarification?
    Dr. Gallagher. Thank you very much. It is always great 
hearing the success stories coming from the MEP program. It is 
a remarkable partnership with small- and mid-sized 
manufacturers. The way the funding currently works in the 
program is actually in two parts. The one-third, the maximum 
one-third federal cost share part that supports the day-to-day 
operations of the MEP centers constitutes up to about $110 
million of the request level. The remainder is what we call 
next gen. It is basically the part of MEP that is working with 
centers. It is actually done competitively. We issue a call for 
ideas and the centers can compete for these additional funds to 
develop if they have ideas for new services. In other words, 
how to match small- and mid-sized manufacturers with new 
technologies. A very active area right now as manufacturers try 
to diversify their products and move into new markets. Or to 
work with small- and mid-sized manufacturers to increase their 
exports. Most of the growing markets are overseas and this is a 
barrier for many small- and mid-sized businesses. How do they 
work if they are going to start working with exports? Or how 
did they become part of an important supply chain? So we have 
been working with DOD and the defense logistic agencies so that 
when Defense needs parts in certain areas we can rapidly hook 
them up with manufacturers who are willing to supply those 
types of parts and components. Buy American Acts, you know, 
when there is a requirement under a certain type of 
construction to supply something that is Buy America to satisfy 
it what we can do is use this MEP network to get that request 
out to the manufacturers and say, ``Hey, can you make this?'' 
And provide that as an opportunity.
    Those types of, those are sort of new ideas that are coming 
from the manufacturers about ways that this programs can 
support them. And that is what the additional $30 million is 
used for. We use it as a competitive program to help them take 
an idea like that and develop it into a program. And then as I 
said, what happens, because the program ties all of these 
centers together through this network, is they can rapidly see 
what works and what does not and can adopt these programs for 
their own use.
    Mr. Aderholt. What as far as the state allocations, is 
every state guaranteed a certain amount? Or is it awarded on 
merit? Or how does that operate?
    Dr. Gallagher. I do not know the algorithm that determines, 
I do not believe there is a state cap for how much each state 
can get. What there is in the statute is the federal share can 
account for no more than one-third of the total funding. What 
the other two-thirds are made of actually varies a lot from 
state to state. In some cases the states are directly investing 
in these activities and are full participants with funding. In 
other cases fees that are collected from the manufacturers make 
up part of it. So it is very diverse in terms of how states, 
you know, how the centers approach the remainder of the cost 
share. And they, the way we determine who runs a center is on a 
merit basis. So there was initially a competition and we 
evaluated that, and there is a regular review process that is 
carried out. And that is what the MEP staff are doing, is 
working with the centers. We want the centers to succeed, so it 
is not a punitive review. But we are trying to make sure that 
these centers are delivering the maximum benefit as possible. 
So if there is a center that is having problems we work with 
them as much as possible before we would go to a, you know, we 
would need to recompete.
    Mr. Aderholt. Well I think one reason it has been 
significant in Alabama is because we have lost a lot of 
manufacturing jobs in Alabama, which a lot of states have. And 
not to say that Alabama is the only state that falls into that 
category, but needless to say some states have fallen in that 
category more so than others especially when it comes to 
manufacturing. And you may not know this, but do you know if 
there is any way that those states that have lost more 
manufacturing jobs, is that taken into account when these funds 
are distributed?
    Dr. Gallagher. No, we have not been adjusting the 
distribution funding based on these changes in manufacturing 
levels. Because the programs themselves are saturated. In other 
words they are, you know, as effective as this program is it is 
not large enough to address all of the small- and mid-sized 
manufacturers who might desire these services. So even though 
there has been sizable manufacturing reductions in certain 
states it is not at a level where there is excess capacity in 
the MEP centers to our knowledge at all.
    Mr. Aderholt. So based on your comments when I originally 
mentioned the MEP program, you have seen a lot of successes 
through those funds, I take it? Throughout your time at the 
Department of Commerce?
    Dr. Gallagher. I have to confess, it is one of the most 
enjoyable parts of my job, is to go visit some of these 
manufacturers and see what they are doing. You get very excited 
that, you know, you are seeing all of the things that we care 
about. The American ingenuity, the excitement in moving into 
new areas. And anyone who has not done it should because you 
will realize immediately when you start visiting these 
companies that manufacturing is not what many people picture it 
to be. This is some cutting edge, high technology work in very 
small firms. This is not just sitting and doing repetitive 
manufacturing tasks over and over again. American companies, 
when they are succeeding, they are providing the highest 
performance products. They have some of the highest 
productivity levels in the world. And you see it all when you 
go into some of these centers. So it is some of the most 
exciting, it is one of the most exciting things I get to do in 
my job.
    Mr. Aderholt. Thank you. Thank you, Mr. Chairman.
    Mr. Wolf. Thank you, Mr. Aderholt. I just, the staff just 
gave me this thing here, an AP story. It is in Tokyo. Japan's 
Northeastern coast has been rattled by a strong aftershock. The 
Japanese meteorological agency has issued a tsunami warning for 
a wave of up to one meter. The warning was issued for a coastal 
area already ravaged by last month's tsunami. Officials said 
the quake was a 7.4 magnitude and hit twenty-five miles under 
the water and off the coast. And I just hope we can get the 
head of NOAA to tell us that they are going to put one of these 
conferences are. But what if 7.4 hit off the coast of 
California? Or off the coast of Atlantic City? What would the 
impact be? I know that is a different configuration, and but--
--
    Dr. Gallagher. Yes, I do not have a detailed knowledge of 
the seismological conditions there. I know that the type of 
geological structures that we have on the West Coast in some 
cases are quite similar to the one that is causing these 
earthquakes in Japan. I know that USGS has risk hazard maps. 
That is one of the things that has developed under NEHRP. And 
what we are developing is a capability to look at the 
structural integrity of how we built things according to these 
maps. So our ability to start understanding the risk is 
improving. But off the top of my head I cannot project what it 
would be like.

                     TECHNOLOGY INNOVATION PROGRAM

    Mr. Wolf. You are requesting a total, this is the 
Technology Innovation Program, a total program level of $75 
million and eighty FTEs for the Technology Innovation Program. 
This amount is $30 million above, or 67 percent higher, than 
that which is in H.R. 1. What research efforts have been funded 
thus far under the program?
    Dr. Gallagher. Thank you. So the TIP program, of course, is 
one of a few that are called proof of concept programs in the 
federal government that are designed to look at high risk, high 
payoff advances in science and technology in a focused area. 
The program is fairly modest in size for a program that is 
trying to do that. So what we have tried to do to maximize 
impact is take advantage of the fact that the program calls for 
us to define what is called a critical national need. 
Justification for why we would make federal investments in a 
particular area. And we have tried to focus those so that 
within, we get high quality proposals in that area.
    The first of the competitions was held in 2007. It was in 
the area of civil infrastructure, looking at new technologies 
to assess the condition of road surfaces, bridges, this type of 
physical infrastructure that we rely on. We are taking this 
infrastructure well past its design lifetime and of course the 
big challenge is how do you assess condition to make meaningful 
maintenance or replacement decisions? And we think technology 
could play a role.
    All the other competitions that have been held since, in 
2008 and 2009, have been in the area of manufacturing. Either 
nanomanufacturing or biomanufacturing. We are looking at these 
emergent areas where as a country we have made deep investments 
in the underlying research and now we are beginning to see the 
real promise coming out in terms of technologies that are being 
made. And so we think that is, those have been ripe areas.
    So the program has focused, with the exception of the first 
call in civil infrastructure, in the areas of manufacturing, in 
advanced manufacturing.
    Mr. Wolf. Well in last year's hearing the TIP program was 
discussed and you referred to it as a pilot then. The program 
was just begun in 2007. You reported that NIST would have to 
evaluate the results of the program to determine if it should 
continue. So have you taken that analysis?
    Dr. Gallagher. Well the discussions are certainly still 
continuing. My feelings have not changed since last year. That 
if the intent of the program is to have a broad national impact 
in looking at breakthrough technologies in all areas of 
national need, it is hard to imagine how we would do that with 
a program that has been funded at $70 million to $75 million a 
year. So what we have done is we have tried to create much 
narrower focal points for the program so we can have an impact 
there. And we continue to look at the size of the program 
whether this makes sense to do it.
    In the context of the 2012 request I think one of the 
reasons it has an increase has to do with the fact that these 
narrower areas of focus have been in manufacturing. So this is 
really reflecting the Administration's desire to increase 
funding in breakthrough technologies for manufacturing. I do 
not think that means we have stopped looking at the 
effectiveness of the program. And we will continue to work with 
the committee as we have those discussions.
    Mr. Wolf. Because we have here, you stated last year that 
TIP, you could really not, you expected impact, unless the 
funding were significantly increased. And the climate that we 
are in now really will not allow that option, even if we wanted 
to do it. So does that make this relatively small program a 
lower priority in comparison with your core research 
activities?
    And as you know, I think, Mr. Fattah is supportive and I am 
supportive. I mean, we are not looking to rip the NIST budget 
up. And I think we would like to plus it up, if we could. But 
make sure that, you know, I can spend a little bit on this, and 
a little bit on that, and a little bit on this, and a little 
bit on that, and you get nothing. Whereas if you really hit. So 
if you had to prioritize programs given the fiscal constraints, 
you know, where does TIP rank in relation to other core NIST 
programs? And the MEP that we have been talking about? And I 
know it is hard to say what one of your children do you want to 
put out for, you know, but because of where we are now I think 
we have got to look at some of those things.
    Dr. Gallagher. So I, yes, this is always tough. And I 
think, your priorities depend on where you set funding levels. 
I think my feeling remains unchanged. That as TIP was designed, 
which was to have broad national impact in a broad set of areas 
of critical national need, it is underfunded to do that. And in 
fact the way the authority was put together requires a lot of 
program management. So we have a lot of staff managing this 
relatively small program.
    From that context, if the decision is made, as you do your 
very difficult job of optimizing these budget choices, that we 
cannot grow that program. It would not rank very high on my 
priorities because I think given a smaller amount of money I 
can think of programs that could have a much bigger impact.
    One of the reasons we proposed the Advanced Manufacturing 
Technology Consortia Program, AMTech, is precisely for that 
reason. It is a relatively small program. But what AMTech is 
designed to do is to bring competing companies together to not 
just work together but to fund the work they are doing 
together. The model is really SEMATECH.
    Mr. Wolf. Well then are there other programs? Assuming the 
committee had a conversion like Paul on the road to Damascus 
and said, ``Well this is just, we have got to do this.'' Are 
there other areas--and I am not going to pin you down here 
because I think you have to think about this because you are 
talking about real live programs and people. Are there other 
areas that you would say, ``This I think is so significant for 
the future of America that I would prepare to,'' I mean I have 
got some other questions, some we will get to, some we will 
not, and we will just submit them for the record. But, ``I 
would be prepared to give up there.''
    Again, we are not looking to take you down. And I think if 
you can just think about that and let the staff know. Are there 
some other areas that because you like to do this, I mean, I 
would like you to be able to move ahead and clean the clock of 
the Chinese, if you can. But, so where would we get that if we 
wanted to give you that increase? And I cannot speak for Mr. 
Fattah, but I think he would feel the same way as we were to--
--

                               SMART GRID

    Mr. Fattah. You can speak for me anytime, Mr. Chairman.
    Mr. Wolf. No, well I, no I cannot, either. But if you could 
sort of let us know, I do not know how close we are coming, but 
we have a smart grid question here. You are requesting $9 
million to continue research on smart grid. What is smart grid? 
And why is this important research? And where do we rank with 
respect to other nations?
    Dr. Gallagher. So smart grid is the combination of 
information technology with the technology used to manage the 
distribution of electricity. What that means is pretty diverse. 
It goes all the way from equipment that is on the high voltage 
lines that manage the actual power management at the national 
and regional level, all the way to smart meters and smart 
appliances that could go into homes. So you could imagine 
within a given building you are enhancing your ability to 
manage when you consume electricity and can you take advantage 
of pricing.
    Mr. Wolf. Which is important.
    Dr. Gallagher. Which is very important, because if you do 
not do that, you cannot store electricity anywhere. So you have 
to build your system for where your peak loads are, and that is 
a very expensive proposition. So if we can enhance our ability 
to manage it there is a very large benefit.
    Mr. Wolf. How do we compare with other nations?
    Dr. Gallagher. Right now we lead the world, I believe, in 
the development of smart grid technologies. The challenge here 
is, there is some research challenge. But the real issue is you 
are developing something kind of like the internet. You are 
going to have a bunch of different devices that need to talk 
and work with each other. So coming up with a set of standards 
that industry can agree on, in terms of how they are going to 
share information, or how a certain device is going to connect 
and talk to another device, how that is going to be done 
securely so we do not introduce new vulnerabilities into the 
system as we increase its ability to do all the good things is 
an enormous challenge. It is very similar to creating a set of 
standards around, for example, 4G wireless technologies, or the 
internet. It is allowing this sort of very high degree of 
interoperability.
    At the present time my personal view is that the effort on 
working with industry, we have 600 or 700 participants in this 
effort. We are working with all the major companies, utility 
companies, utility commissions. And this, the level of 
complexity of a system like that is very high. And this is 
moving as fast as any technology of this complexity I have ever 
seen.
    Mr. Wolf. So this is important?
    Dr. Gallagher. This is incredibly important.

                            CLOUD COMPUTING

    Mr. Wolf. You know, I was the author of the bill to, called 
Journey Through Hallowed Ground, to preserve and protect land 
coming from Gettysburg down to Route 15, down to Monticello. 
Gettysburg Civil War, Monticello the Revolutionary War. VEPCO 
wants to bring, and some others, to take up, so the smart grid 
is important. I am not so sure that most of that power is not 
coming to Northern Virginia or the Shenandoah Valley. It is 
heading up to New York City. So I am for anything that you can 
do to kind of make sure that you can do whatever you would have 
to to protect and preserve, but at the same time. So I just 
wanted to get that on the record. But if you can keep us 
informed on that, too, because I am interested because of the 
impact that it is having on the State of Virginia.
    On cloud computing you are requesting an increase of $5 
million. Would you explain what cloud computing is? Please 
explain, and I am going to combine some of these questions and 
then to go to Mr. Fattah. And how you are working to ensure 
that government information will be as secure as more and more 
information is outsourced? And then, I am combining, we have 
read that IBM is investing in a new cloud computing data center 
in Singapore. They have seven such cloud labs in the Asia 
Pacific region. Where do we stand with respect to our 
competitors in cloud computing? So what is it? And where do we 
stand?
    Dr. Gallagher. Cloud is a frustrating term because it is a 
little bit like manufacturing. It is one of these terms that is 
so broad that a lot of different things fit into it. In short, 
cloud is basically exploiting the internet to provide certain 
types of functions that you would normally now deal with in 
what is called an enterprise mode.
    So if I am an organization and I need certain computing 
capacity, I would need to buy the computers, buy the servers, 
buy the internal internet, buy the software that I run on those 
servers and everything would be controlled and run by my own 
organization.
    What being on the internet at very particularly high speed 
internet allows you to do is basically break that model. For 
example, I don't need to buy the software. I might simply be 
able to let folks in my organization use web applications that 
would provide that service, so I don't need to build a data 
server. I can actually store the information through the 
internet and somebody else can provision it.
    What it actually does is, it is the full use of the 
internet to provide either IT services, IT software or IT 
capacity. And the advantages are pretty significant because it 
is a change in business model fundamental. It allows for very 
great efficiency. They can rapidly deploy and you don't need to 
write software and buy machines. You can very rapidly 
reconfigure information.
    Mr. Wolf. Why would IBM invest in a new cloud computer data 
center in Singapore? There are seven cloud labs in the Asian-
Pacific region. Where do we stand? Where does America stand?
    Dr. Gallagher. Well, again, I think that in the information 
technology arena, American companies are still at the 
forefront, so I think in terms of----
    Mr. Wolf. But, you know, it is like a guy in a race. You 
can be in front, but last time he would have been so far that 
nobody would have been near him but somebody's near him now and 
so I think it is somewhat deceptive to say we are out in front. 
How far out in front? Are we gaining or are we falling behind? 
So I mean, why would IBM--I worry some of these companies--it 
is Asia, Asia, Asia, but how do we compare with abroad and why 
would they not build them here in the United States? And are 
U.S. companies making similar investments here in River City 
where we live, here in the United States?
    Dr. Gallagher. Well, the answer is yes. I think companies 
like Google and Gmail and Amazon, these are all very much 
cloud-service type activities. I think this is going to be a 
global phenomenon. This is basically a business model approach 
and most IT related activities are going to end up being cloud 
based, so I think you are going to see IT investments in cloud 
services all over the world because the market is growing all 
over the world. The challenge in this is that a narrower issue, 
which is if we are going to ask federal agencies to start 
preferentially looking at cloud before they make big 
investments in buying, what are the ramifications of doing 
that?
    If it is just a data service, where is that data residing? 
Do we still meet our obligations to protect that data? Do we, 
once the data is in the cloud, are we handcuffed to that one 
provider because if I change the company that is providing my 
service the data can't get moved over there.
    Is it useable? Are these things still providing the same 
functionality we had before? So the NIST effort is really 
trying to address what the federal CIOs are dealing with. If I 
am going to look at cloud for either storing data or providing 
some applications or web services, how do they meet their 
obligations that are still there to protect the information to 
ensure data portability and ensure usability?
    Some of that, what we will do right now is we will leverage 
existing policy, but I think the thing that makes cloud so 
tricky is it basically breaks existing policy. Everything we 
tell agencies to do now in terms of how they manage their 
assets has to do with how they control all of the assets. It is 
their computers, their people running the computers, and all of 
the services are on their sites and that is no longer the case 
under various types of clouds, so how do they continue to meet 
their responsibilities under this?
    So we will use Scotch tape and bailing wire initially to 
develop in areas where we think it is okay to do that with 
existing policy. But the real challenge is, it tends to be a 
standards and a conformity assessment problem. How do we get 
industry to show us that they can meet our requirements in a 
way that is robust and it is a way that we can actually trust a 
particular cloud service that meets our needs to protect public 
information that we have in our systems and protects all of the 
requirements that haven't changed?
    Mr. Wolf. Are foreign information technology firms 
investing here in the U.S.?
    Dr. Gallagher. I am sure they are. Again the question is, 
to what extent federal agencies are going to use those types of 
services, and I think that is what the Federal CIO community is 
actively struggling with now. How do they reinterpret their 
obligations to protect information in the context of all these 
new services? And we are doing everything we can to provide a 
basis for them to do that.
    Mr. Wolf. Mr. Fattah.
    Mr. Fattah. Well, this is a very sensitive area, but I am 
not going to delve into it other than saying that we do have 
certain protections related to the ownership of broadcast and 
communications entities, and farm land, and I think we have to 
think anew, because that was done a long time ago, about what 
other areas from our own national interests we need to section 
off from, you know, significant foreign ownership because we 
are competing with economic competitors and we have to be 
careful that we don't want them to understand our--you know, to 
be too kind of close in to our huddle either. So you have to 
kind of think this through and move in this internet age.
    But I want to go back to the original subject because I 
want to make a request of you, but I want to mention, and one 
day we will get you to Philadelphia and take you around, but 
Cardel Industries is a fascinating company in Philadelphia, a 
manufacturer, a couple of thousand employees, no competitor in 
the U.S. They make what are called refurbished auto parts, and 
a number of places have required them because they are cheaper 
to use these refurbished auto parts. This is 10 percent of the 
manufacturing job base in Philadelphia. It is a fascinating 
company, family owned. They have a chaplain service. They have 
prayer in the morning and they get to work.
    And they have been doing this so well that, you know, like 
I said, they have no other competitor anywhere in the U.S. Over 
in West Philadelphia is a place, we have a high school there 
called West Philadelphia High and it competed in the XPRIZE to 
develop a car that could go 100 miles on a gallon of fuel and 
they beat out Toyota and they beat out MIT and they beat out--
they were the only high school among 110 teams. And they would 
have won the final, but their car only ran 80 miles, so they 
didn't win, but they hooked up with the entity that did win, 
Edison, and now they are working on manufacturing this car.
    It is fascinating. It is not so much the kind of IQ only. 
The part of it is the desire and the enthusiasm to get 
something done and these kids have done a remarkable job of--I 
mean, all these companies have spent over $100,000,000 on their 
entries in this contest.
    So part of what we have to do is, we have to challenge 
ourselves and then we also need to find opportunities for us to 
demonstrate our interests in this area, which gets to my 
request. And I am sure that the Chairman will join in with me. 
I would be very interested. I am going to send you a letter, 
because I have done this for the Chairman, I am going to send 
you a letter asking if, through the MEP program, we could put 
together essentially a catalog of American manufacturers so 
that when people are looking to have something made, then we 
are trying to get something done, and they want to use an 
American company to make it, they have some sense about where 
they can go to get it done, you know.
    So you have this Cover Sports in Philadelphia. They make 
tarps, but they also have a little contract with DoD, just a 
little teeny $100,000 contract where they make these bags made 
of some of the tarp material for some of the nuclear waste on 
the subs. So, you know, we need to focus our efforts on making 
sure that the capabilities that exist here are utilized.
    So I am going to send you a letter, and I am going to get 
the Chairman and do--our staffs will work together to get it 
over, and I think it will be good because then, at least when 
people want to buy something who need a product or a widget 
made, there is really no reason for them to be looking some 
other place to get it made, and there are people here who can 
do anything, and I think that is part of how America is number 
one today, how it could be number one tomorrow, but we have to 
make sure that people know about these capabilities, and they 
don't exist only in Philadelphia.
    We have 1,300 manufacturers. We've got 5,000 in the region, 
but there are manufacturers all over our country. Some are in 
the MEP program. Some are not, but I think at a minimum if we 
could get a, you know, obviously in this day and age they 
wouldn't be in print, but it would be probably in some online 
format, so that companies and individuals and inventors who 
want to get their product made can find someone who can do it.

                            BALDRIGE PROGRAM

    Mr. Wolf. I think that is a good idea because I think when 
particularly some of the Fortune 500 are looking to, let us say 
in the space program, to do a certain thing, they have places 
they can go to. Maybe the MEP people could put that all 
together that they could look for an American manufacturer 
before--or even someone who is somewhere in the area who could 
then add on and do that. I think that makes a lot of sense.
    The Baldrige Program, is it core scientific NIST activity? 
And we are down so that is why we have been moving, so there is 
a vote on and we will have to leave in a minute. Is it a core 
scientific NIST activity? You are reducing it from $10,000,000 
to $8,000,000 with plan to transition out.
    Dr. Gallagher. It is not a scientific activity, but it has 
been a core NIST activity since it was first created in the 
late 1980s.
    Mr. Wolf. Yes, I remember it as being at Commerce, but how 
do you envision this transition to non-governmental funding 
taking place?
    Dr. Gallagher. I don't know the answer to that yet. So what 
we have done is we have signaled that we would like to move in 
this direction with this request and what we are doing right 
now is engaging with the Baldrige Foundation. Baldrige is 
really already a public private partnership?
    Mr. Wolf. Is it? Is their funding, is it all private?
    Dr. Gallagher. Yes, there is a foundation with an 
endowment. They provide funding through the endowment. Of 
course, at the time it was set up, the cost share was set up 
one way and so the endowment size was limited to the size of 
the contributions into the endowment, so it lowered the 
barriers for doing that.
    So I think the name of the discussion now is--has the 
program matured to the point where it is worth reevaluating 
where you draw that public/private line, and that is the 
discussion we have started with the foundation. And I think 
until we see what the options are and what the consequences of 
the options are, it is premature to start talking about what 
the implementation would be towards a particular goal.
    Mr. Wolf. All right. And that is underway?
    Dr. Gallagher. That is underway.

              POSTDOCTORAL RESEARCH ASSOCIATESHIPS PROGRAM

    Mr. Wolf. That is underway. You are also here on, we 
covered MEP pretty extensively. Is that the education one 
there? Page 9 on post-doctoral research. You are requesting an 
increase of $3,000,000 for a total of $14,400,000 for your 
post-doctoral research program. We are concerned. I am. I 
should say ``I'' rather than ``we.'' But America is falling 
behind our competitors with respect to the number of students 
in technical fields. Would the additional funding enable NIST 
to hire up the authorized level of 120 associates? And with 
regard, if you can make that fast so I can then go to Mr. 
Bonner, he can ask whatever questions.
    Dr. Gallagher. The answer is yes. It was designed to 
restore the program to its full scale, so.
    Mr. Wolf. And are you concerned about America's competitive 
edge falling behind?
    Dr. Gallagher. Yes.
    Mr. Wolf. You are. And if you have any studies where we 
have directed NSF to do a study on how do you get young people 
to be active and major in the sciences, and from maybe up to 
fifth, the numbers fifth or sixth grade to begin to go. What do 
you think we have to do to encourage more people perhaps on a 
longer-run basis? And maybe if you could call the head of NSF 
and see what they are doing and how you may cooperate with 
them, I would appreciate it.
    Mr. Bonner. Mr. Chairman, I don't know where we are, and I 
apologize for being late.
    Mr. Wolf. That is okay.
    Mr. Bonner. I can put these question in the record. That's 
fine. If you are close to concluding----
    Mr. Wolf. No, you are fine. No, no. You go ahead. No, no.
    Mr. Bonner. Dr. Gallagher, forgive us, those of us who came 
in late for these----
    Mr. Wolf. There are so many hearings and people bounce back 
and forth.
    Mr. Bonner. Not having the benefit of hearing the 
conversation between you and the Chairman and the Ranking 
Member, I wanted to just ask a couple of quick questions. In 
your testimony you identify only two proposed cuts, I believe, 
to the fiscal year 2012 budget, and forgive me if this question 
has been posed and it has been answered, but in light of the 
serious financial situation that we are in, acknowledging that 
what you do at NIST is critically important to our country's 
future, can we tell our constituents back home and the 
taxpayers of this country that that is all we can squeeze out 
of this funding request?
    Dr. Gallagher. This tension between looking at the fiscal 
situation, trying to get the budget deficit down and looking 
at, particularly in this request is dissident, and I think what 
the Administration did was to set a top level number that was 
fiscally responsible, but then optimize under it.
    What happens at NIST is that the mission of NIST to promote 
innovation and industrial competitiveness, basically, is 
exactly aligned with what the President put as the centerpiece 
of driving economic growth through supporting technology 
innovations.
    So it is hard to see in our programs that it is 
uncomfortable. I can tell you almost all of my programs are 
looking at increases, but it is really where the optimization 
took place. What we tried to do is, since all of our programs 
were ones that were aligned with this priority is, we certainly 
looked internally and have tried to target Administrative 
savings. We are trying to improve alignment with outside 
agencies who are doing similar things. We are trying to drive 
efficiencies that way.
    I think this is a very responsible request from that point, 
so I think you certainly can reassure constituents that we are 
doing everything we can. We are very cognizant of this need. It 
is quite real.

                             MEP COST-SHARE

    Mr. Bonner. Then the other question. The Hollings MEP has 
been successful in my home state, and I am from Alabama. In 
leveraging state and local funds to support efficiencies, 
especially in the manufacturing industry such as timber, pulp 
and paper, which has just been so devastated over the last, 
really over the last several years, but certainly over the last 
few years, of your other programs can you highlight which have 
such a significant state matching requirement and is this a 
model that should be better utilized where appropriate?
    Dr. Gallagher. So the MEP program sets a limit on the 
federal share, up to one-third. It doesn't actually stipulate a 
state funding level. In fact, the approach across the United 
States is pretty diverse in terms of how the MEP centers 
provide the remaining two-thirds.
    It does align very well with what states have always 
focused on, this type of outreach to business. So most cases 
the states are involved and frankly the success of the MEP 
centers is strongly related to how involved the states are. 
That is one of the key ingredients for success.
    Many of the programs in NIST actually work closely with the 
states, all the way from our laboratory program--because NIST 
has no regulatory authority where technical, non-regulatory 
agencies do. For example, even in weights and measures programs 
where we are defining how do you do certain measurements, we 
work with all 50 states because they are the ones that actually 
set the requirements, so we are working with every state in 
those areas.
    The TIP program, which provides funding for high risk, high 
payoff research has a mandatory 50 percent cost share 
requirement and the makeup of that requirement is quite diverse 
but often includes public universities and other funds.
    So we were talking about when you are in this area of 
innovation, you know, one end is pure research and we are very 
comfortable with the federal government. The other end is 
purely commercial and we know there is private sector activity. 
It is the area in the middle that is tricky but it is 
critically important because if you don't connect the two 
sides, we don't get the optimum efficiency out of our ability 
to take up new ideas and turn them into successful products and 
services.
    And I think one way of getting around that is to have 
public-private partnerships, cost sharing and other 
arrangements to make sure that that is handled correctly. It is 
a very important point.
    Mr. Bonner. Thank you.
    Thank you, Chairman.
    Mr. Fattah. Mr. Chairman, can I follow up on that real 
quick? Is the one-third federal participation in terms of MEP, 
is that in the America COMPETES Act? Is that a statutory 
requirement?
    Dr. Gallagher. It was in the original authorization 
language for MEP. In fact, in the COMPETES Act there is a 
requirement to study that cost share, so the GAO was asked to 
specifically look at the cost share, determine whether it 
should be increased to as much as 50 percent. They just 
released a report this week that we will have to take more 
particular----
    Mr. Fattah. My point is that this is something that the 
Congress said.
    Dr. Gallagher. That is correct.
    Mr. Fattah. That you are following.
    Dr. Gallagher. That is correct.
    Mr. Fattah. And we also are studying whether we might make 
some changes in it, and that is important to note because I 
know a number of states feel burdened. They love their program, 
but obviously that is something that if we said it, we are 
going to have to change it. Thank you.
    Mr. Wolf. Thank you for your testimony. There will be other 
questions from probably a number of others submitted for the 
record. And I, personally, want to thank you for you and your 
people and for what you do. There has been a little concern 
that I have had quite frankly and I think if you just look in 
my voting record, I am a conservative Republican. I am pro-
life, strong on fighting for strong defense and all the things, 
but I really get a little concerned when I see the criticism 
with regard to a number of federal employees.
    And I just looked at your bio. You were with the Agency for 
19 years. You can go out, as I said to Director Mueller 
yesterday, you could go out and make a lot of money. Are you 
married? You have family? Yes. You can make a lot of money. 
IBM, these guys would pick you up at a drop of a hat. And you 
have stayed, and so I appreciate the fact that you haven't 
turned this into a coin operated thing where you can go out and 
work for the Chinese or do something like that or work with a 
maker online but stayed to do what is good for the country. So, 
thanks.

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                                             Friday, April 1, 2011.

            NATIONAL OCEANIC AND ATMOSPHERIC ADMINISTRATION

                                WITNESS

DR. JANE LUBCHENCO, UNDER SECRETARY OF COMMERCE FOR OCEANS AND 
    ATMOSPHERE AND NATIONAL OCEANIC AND ATMOSPHERIC ADMINISTRATION 
    ADMINISTRATOR
    Mr. Wolf. We want to welcome you, Dr. Lubchenco for being 
here today. We want to discuss NOAA's fiscal year 2012 budget 
request which is $5.486 billion. This amount is $723 million or 
15 percent higher than 2010. NOAA's budget request represents 
about 62 percent of the Commerce's entire budget request for 
fiscal year 2012.
    Between 2008 and 2010, NOAA's funding increased by 22 
percent, higher than any other program in this bill, more than 
the FBI, more than the National Science Foundation.
    As we have been telling all the agencies that are 
testifying before us this year, the Congress will not be in a 
position to provide such increases.
    The fiscal crisis facing the Nation is real and will 
require a level of austerity that goes beyond the President's 
budget.
    We are going to ask, though, if you can help us, knowing 
that there are some things that you would not want to do, but I 
think you will have a better sense of what the priorities ought 
to be.
    And so it is kind of like if you are shaving, cutting back, 
or doing something, I think you can help us insofar as to say, 
well, you know, the committee, this issue is really one that 
will--and so we do not want to postpone this, but we will 
postpone that program to be able to do this. But if you can 
help us as we go through that.
    With regard to that then, I recognize Mr. Fattah for any 
opening statement.
    Mr. Fattah. I will reserve my opening statement because of 
the advent of votes, and we want to move through this, so thank 
you very much. Welcome.
    Mr. Wolf. Thank you.
    Your full statement will be in the record. You can proceed 
as you see appropriate.
    Dr. Lubchenco. Thank you, Mr. Chairman. I appreciate that 
very much.
    Ranking Member Fattah, Chairman Wolf, thank you very much 
for your leadership and support of NOAA. Your continued support 
for our programs is greatly appreciated as we work within the 
Department of Commerce to improve science, products, and 
services that are vital to supporting America's businesses, 
also its communities and its people.
    The vital role that NOAA plays in the protection of life 
and property has recently been exemplified by the actions that 
NOAA has taken in the wake of the tragic events in Japan 
earlier this month.
    The earthquake and resulting tsunami had far-reaching 
effects, and many of NOAA's programs played a critical role in 
life-saving information, providing that to emergency officials 
and the public both here and around the world.
    Today I am honored to be here to discuss the President's 
fiscal year 2012 budget request which promotes innovation and 
American competitiveness and lays the foundation for long-term 
economic growth while making responsible reductions.
    The budget recognizes the central role that science and 
technology play in creating jobs and improving the health and 
security of Americans and those abroad.
    I wish to highlight the following in our fiscal year 2012 
request: key savings, climate services, weather, satellites, 
research and innovation, fisheries and protected resource 
management, and coastal and ocean services.
    The fiscal year 2012 request, as you noted, is $5.5 
billion, a decease from the fiscal year 2009 request and an 
increase above the fiscal year 2010 enacted due primarily to 
our requirements to execute the restructured Polar Orbiting 
Civil Satellite Program.
    As part of the Administration's Administrative Efficiency 
Initiative, NOAA analyzed its administrative costs and reduced 
nonessential spending by $67.7 million.
    The fiscal year 2012 request includes proposed budget 
neutral reorganization that brings NOAA's existing but widely 
dispersed climate capabilities under a single management 
structure called the Climate Service.
    If approved by Congress, it would have a budget of $346 
million. Our climate services demonstrate the utility of 
improving our scientific capability.
    Advances in science make it possible to provide useful 
information about the months to years time frame, data which is 
of potentially immense use to businesses, communities, and 
military operations.
    The National Weather Service provides critical information 
to communities and emergency managers and is the Nation's first 
line of defense against severe weather.
    The fiscal year 2012 request of $988 million envisions 
using cost-cutting and cutting-edge technologies to deliver 
more reliable forecasts, reduced weather related fatalities, 
and improve the economic value of weather, water, and climate 
information.
    NOAA's satellites provide data and information for 
forecasts that enable safe transportation, earlier response to 
severe weather, and smart construction, as well as emergency 
rescue operations.
    The fiscal year 2012 budget request for the satellite 
service is $2 billion invested in multiple satellite 
acquisition programs. This includes an increase of $688 million 
for the Joint Polar Satellite System. This program is essential 
if we are to maintain the quality of our severe storm warnings, 
long-term forecasts, and receive emergency distress signals in 
a timely fashion.
    In parallel to creating a Climate Service, NOAA would 
strengthen and realign its existing core research line office.
    The Office of Oceanic and Atmospheric Research will refocus 
its work to be the innovator and incubator of new science, 
technologies, and applications within NOAA as well as an 
integrator across all of NOAA, consistent with the President's 
call for science and innovation.
    NOAA's request includes $212 million to continue 
strengthening core capabilities such as improving our 
understanding of ocean acidification and its impacts, and 
promoting conservation and use of coastal resources through our 
renowned Sea Grant Program.
    Rebuilding our Nation's fisheries is essential to ensuring 
long-term sustainability and to protecting the livelihoods of 
fishermen and related industries.
    In fiscal year 2012, NOAA is requesting a billion dollars 
to support the National Marine Fisheries Service including 
investments to expand annual stock assessments and improve the 
timeliness and quality of catch monitoring in recreational 
fisheries.
    Complementing science with robust management, we will 
continue to support the voluntary establishment of catch share 
programs which have yielded significant financial and 
ecological benefits and the improved safety for fishermen.
    Over half of the U.S. GDP is generated in coastal counties 
and it is expected that the Nation's coastal population will 
grow by more than 11 million by 2015. To continue delivering a 
dynamic range of services to promote safe, healthy, and 
productive oceans and coasts, the fiscal year 2012 budget 
includes $559.6 million for the National Ocean Service.
    In closing, I would like to note that I have a nickel in my 
hand. I believe that this nickel represents one of the best 
bargains that this country has. It costs each American less 
than five cents a day to run NOAA.
    This nickel gets you the world's best weather information 
and allows us to save lives and property when severe storms 
strike. This nickel means that our coasts are more healthy and 
vibrant and in turn our coastal communities more prosperous.
    This nickel helps American business owners succeed from the 
fishermen on the coast to the farmer in the heartland and 
everything in between. This nickel helps keep our homeland 
secure.
    We take our work seriously because we know that citizens 
and businesses depend on us each and every day. I look forward 
to working with the Members of this committee and our 
constituents to achieve the goals that I have laid out in the 
fiscal year 2012 budget. And I am happy to answer any questions 
you may have.
    [The information follows:]

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    Mr. Wolf. Well, thank you very much.
    And I support your programs. I think they are very 
important.

                        TSUNAMI WARNING PROGRAM

    I want to cover an issue that I think is very important and 
I am going to give you a letter to this effect, but I will read 
the first question.
    I would like to talk to you about funding for NOAA's 
tsunami warning activities which have been the subject of focus 
again after the recent events in Japan.
    NOAA's base funding for its tsunami warning network has 
been about $28 million since fiscal year 2008. In addition to 
this base funding, following the Indonesian tsunami in 2004, 
NOAA received three supplemental appropriations to improve its 
tsunami warning programs and activities.
    I believe very strongly in the need for these predictions 
and warning programs. We discussed this when Secretary Locke 
came before us a few weeks ago.
    I inserted a letter in the record that I had written to the 
states back in 2005 urging them to help their coastal 
communities become tsunami ready.
    I wrote the then head of NOAA in 2004 urging him to review 
NOAA's tsunami programs.
    I have drafted a new letter which we will give you so it is 
officially sent. And I want to discuss it with you today.
    I am asking NOAA to convene two summits this year, one on 
the West Coast, one on the East Coast--and as soon as 
possible--to bring together NOAA and the U.S. Geological Survey 
which is out in my area in northern Virginia.
    I used to work at the Department of Interior for five 
years. I was a deputy to Secretary of the Interior, Rogers C.B. 
Morton. And some of the best minds are out there in the U.S. 
Geological Survey with regard to earthquakes.
    To bring together NOAA, the U.S. Geological Survey, and 
state and local officials to talk about tsunami awareness, 
educational needs, and preparedness activities as well as a 
deep ocean assessment and reporting of tsunami programs is 
important.
    And the end to that, I would ask you as you do it on the 
East Coast to involve the nations in the Caribbean, too, 
because as we were checking on this back in 2004 and 2005, they 
were in danger and there was some concerns with regard to 
Puerto Rico and places like that.
    So we will give you the letter at the end of the hearing, 
and I will just read briefly the letter.
    But it said in light of the recent earthquakes in coastal 
regions of Haiti, Japan, and Burma and the devastating tsunami 
that struck Japan last month, I believe it is imperative for 
the National Oceanic and Atmospheric Administration to work 
closely with state and local officials in the United States to 
strengthen our preparedness for a tsunami.
    The tsunami alerts issued in Hawaii and the West Coast 
states immediately following the Japanese earthquake are a 
stark reminder of the danger U.S. coastal states face.
    In order to better prepare the U.S. for future tsunami 
events, I urge you to immediately begin planning two 
conferences including one on the East Coast and one on the West 
Coast and invite governors, all the governors up and down, and 
other state and local officials because we found in 2004 and 
2005 that many localities really did not have a tsunami warning 
program.
    They did not have very much going. Some were participating 
and some were not. But to have the governors and local 
officials from coastal states in the region to discuss deep 
ocean assessment and reporting of tsunami, DART system alert 
and evaluation programs.
    I also believe it important to include the U.S. Geological 
Survey in the summit. Please provide a report to me within 30 
days of the date of this letter regarding your efforts to plan 
and host these conferences.
    And I know you know a lot of people, some at universities 
and maybe people at Caltech and maybe people at other MIT who 
are experts. But I would like to see you do that.
    Dr. Lubchenco. Mr. Chairman, thank you so much for 
recognizing the importance of this very critical topic.
    NOAA has been working very diligently to raise awareness of 
the importance of tsunamis. We currently work quite closely 
with the USGS on--the tsunami warnings that we were able to 
issue following the Japan earthquake, the Haiti earthquake, and 
the Chili earthquake, all of those depend directly on our 
connections to the USGS.
    Mr. Wolf. Right.
    Dr. Lubchenco. We take that scientific information, run 
models that are appropriate to particular ocean basins and then 
utilizing our DART tsunami buoys to issue warnings and 
advisories appropriately.
    But equally important is your highlighting the communities' 
understanding how to respond appropriately when there is a 
warning, to understand what it means for them and what they 
should do.
    NOAA has identified that there some 250 communities at risk 
around the coastal areas of U.S. states and territories. And we 
have a tsunami ready program that works with local communities 
to have signage, to have warning systems, to have trials, 
drills to have people understand what they are supposed to do 
so that they can act in a manner of minutes which is often what 
is required.
    We currently have 83 communities that have been certified 
as tsunami ready and part of our ongoing efforts involve adding 
additional ones through time to that number. We have seen the 
benefit of that.
    For example, in this last tsunami warning, both along the 
West Coast of the U.S. as well as in Guam and Hawaii, our 
tsunami warnings were issued. The first one was issued within 
nine minutes of the earthquake happening in Japan. And the 
response in U.S. states and territories was quite effective. No 
lives that I know of were lost. And many of the----
    Mr. Wolf. Excuse me. You may want to check your 
microphone----
    Dr. Lubchenco. Thank you very much. I apologize. I looked 
at it when I started and it looked like it was green, but 
obviously not enough.
    Mr. Wolf. I hear you fine, but apparently the reporter was 
having a problem.
    Dr. Lubchenco. Okay. So you are absolutely correct. This is 
a vitally important topic.
    We just had tsunami awareness week last week with a whole 
series of activities designed to help raise awareness, but it 
is such a timely and important topic we would be open to 
discussing additional ways to----
    Mr. Wolf. Well, I would really like you to just put the 
conferences on to tell us that this is important. The fact is 
it would be helpful to just say today we will do this and not 
only with regard to the tsunami but also with regard to the 
earthquake issue.
    There is a concern with regard to the power plant up there 
in New York City, north of--up there on the Hudson River. I 
mean, I just would like you to say, ``Mr. Wolf, it is a good 
idea and we are going to move on this and we are going to deal 
with this, one on the East Coast, one on the West Coast, not 
only on the tsunami issue but also on the earthquake issue.''
    I mean, you have the metropolitan New York City. You have 
millions of people that live there. And so I followed it. I do 
not represent New York, but I have heard Governor Cuomo. He has 
made a pretty powerful case.
    And so what I would like you to do is to agree, and I do 
not know why you would not--I mean, this ought to be something 
that we move ahead on.
    You know, there is a song that I sometimes quote by Simon 
and Garfunkel and they sang it in Central Park. It is called 
The Boxer. And the words say, ``man hears what he wants to hear 
and disregards the rest.'' Sometimes we may only be hearing 
what we want to hear. And I do not want us to disregard the 
rest.
    And I would like to see you, I have great respect for you 
and I think NOAA does exceptional work, to bring together a top 
team in the East Coast and a top team in the West Coast and 
invite all of the governors and all--I mean, your testimony 
almost indicated there are some that are not doing what they 
should be doing.
    Also I know Mr. Serrano who is not here has interests with 
regard to Puerto Rico, and involving also the Carribean nations 
because Haiti has been devastated with regard to that.
    So I guess the question is, not to put you on the spot, but 
would you do this, tell us that you will do one on the East 
Coast and one on the West Coast?
    Dr. Lubchenco. Mr. Chairman, I think that's a terrific 
idea. We would be delighted to work with you and explore the 
possibilities, the timing, what it would look like. May we work 
with your office to do that?
    Mr. Wolf. Okay. Well, fine. Good. I appreciate that. And 
your people have done a good job. And I am just afraid of when 
something happens, the whole world focuses.
    I remember when the Indonesian tsunami hit. And then after 
about a year, it was a big issue at the UN and then it sort of 
just drifted away. And now you never heard about it until we 
saw what we have seen and feeling the hurt and the pain and 
suffering of the Japanese people.
    I know the French sent a team there and they are looking to 
see what lessons learned so they can come back, and I think it 
is important for us to do this.
    And I would assume that every governor working with the 
National Governors Association would be very interested to come 
and to kind of find out because particularly in these days of 
budget issues, people are focusing on different things to sort 
of force people's minds back to focus on this, to make sure 
that everything that can be done is being done.
    So we will be glad to work with you, do whatever you think 
is appropriate. I do not have to attend but, I think I just 
want the very best minds that we have both on the East Coast 
and the West Coast.
    And I think Caltech has some pretty good people and I know 
that--I think we should hear what MIT and others have to say, 
okay, let's bring the very best, and maybe you would have the 
same team do it for the West Coast as the East Coast or maybe 
you would even decide that, you know, because of variances, it 
would change. But I would hope we could do that and you can run 
it.
    Dr. Lubchenco. Mr. Chairman, we saw in the aftermath of the 
Indian Ocean tsunami, because that did raise awareness, it 
enabled us to--Congress acted as a response of that, in 
response to that. And that was what prompted our significantly 
adding to the tsunami DART buoy network that are very important 
in detecting tsunamis.
    So I think you are absolutely correct. This is a moment in 
time where people are focused on this and we need to capitalize 
on it.
    Mr. Wolf. And it was this committee that actually pushed 
it. I remember I said we are going to write a letter to every 
governor. We are going to force everybody to focus on this. At 
first, it did not seem that any one paid attention and then all 
of a sudden, the interest came and now until we see what 
unfortunately took place in Japan.
    So, anyway, I appreciate it very much. We will help you 
every way we possibly can. If you need approval to reprogram, I 
mean, you just tell us and we will be there and help you.
    Next we are asking everyone who comes before the 
subcommittee about the priorities for fiscal year 2012. Given 
the funding constraints that we are under and we will continue 
to be under, what are your top three appropriation priorities?
    And what I have been saying to most of the--hello, Mr. 
Bonner-- what I have been saying to most of the witnesses is 
that I wish we could fund all of what you are asking for, but 
we are facing a fiscal crisis in the country. We have $14 
trillion of debt.
    I was listening to the news coming in and there is a new 
report out on PIMCO.com about the unfunded liabilities of the 
Nation. So until we deal with the fundamental issues of the 
entitlements, Medicare, Medicaid, and Social Security, these 
tough times will continue.
    It would be my hope that we could have a bipartisan 
agreement. I personally was not appointed to the Bowles-Simpson 
Commission. It was an idea that Jim Cooper and a group of us 
came up with and the President appointed. But the 
Administration walked away from it. I would support the Bowles-
Simpson Commission. I would try to make some changes in it, but 
we have got to do this thing hopefully by the end of the year.
    And so until there is a bipartisan agreement to come 
together to deal with the big entitlement issues, you are going 
to really find pressure on these programs and other programs.
    Once we reach that agreement to deal with the entitlements, 
then I think you will see a continuation and kind of a removing 
of the lid, if you will, on some of the fundamental programs 
and also including programs for cancer research and Alzheimer's 
research and infrastructure, things that we need as a Nation. 
But you are going to have to deal with the entitlement issue 
and it has got to be done.
    So what are your three top appropriation priorities?

                           FISCAL CHALLENGES

    Dr. Lubchenco. Mr. Chairman, we take the current fiscal 
challenges that the Nation is facing very, very seriously which 
is why in constructing this budget we did a very careful 
questioning of every single item that is in our budget.
    I mentioned that we had achieved some actually quite 
painful administrative cost savings of $67.7 million. We have 
also reduced programs and other areas that under other 
circumstances I think would be very appropriate, very 
worthwhile, very important programs. And we just decided we 
could not do them this year. So we have already gone through a 
very serious exercise of questioning everything.
    The items that we are asking for in this year's budget 
request represent things that are essential to our mission of 
saving lives and property, stimulating the economy, and they 
are ones that I believe will bring great benefit to the 
American people on the short term as well as the long term.
    The analogy that was used by the National Academy of 
Sciences in their report about when it comes time to lighten an 
air load, what you do not want, if an airplane is overweight 
and you need to jettison something, do not jettison the engines 
that enable the plane to fly.
    And, in fact, a lot of what NOAA does is comparable to 
that. Whether it is fisheries or whether it is coasts or 
satellites, those programs are all ones that directly serve the 
American public.

                      JOINT POLAR SATELLITE SYSTEM

    Now, the largest budget number in our request is clearly 
for satellites, $2 billion. And of that, a very significant one 
is this Joint Polar Satellite System which provides us with the 
wherewithal to do severe storm warnings and long-term forecasts 
as well as search and rescue, all vitally important to the 
American public.
    We currently have a polar orbiting satellite that is in 
space now that is providing that information for us. If we do 
not have the funds in both fiscal year 2011 and 2012 to build 
the next satellite and the instruments that go on it to replace 
the one that is there now and the one that we are going to 
launch in the fall, we will have a data gap.
    In fact, because of the current situation in fiscal year 
2011, we already have a delay in the launch of from 12 to 18 
months. And that will likely result in a data gap starting in 
as early as 2015 where we may have coverage--where we will not 
have coverage by a polar orbiting satellite run by the U.S.
    And the consequences of that are quite, quite serious. We 
will not be able to do long-term weather forecasts that we do 
today. Our severe storm warnings will be seriously degraded.
    And we recently took the exercise of looking back at some 
very severe storms of last year and asking the question what 
would our forecasts have been like if we had not had that polar 
orbiting satellite information.
    And with your permission, I would like to request entering 
into the record----
    Mr. Wolf. Without objection.
    Dr. Lubchenco [continuing]. The analyses that we did for 
this.
    [The information follows:]

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    Dr. Lubchenco. And we used two scenarios. One was for the 
snowmageddon which everyone will remember February of 2010 and 
the forecast that we did for that was quite accurate. It 
predicted a horrendous storm and that is exactly what happened. 
That depended directly on the polar orbiting satellite 
information.
    If we take that out of the model and re-run the model, 
which would give us an idea of what would happen in the future 
without that polar orbiting satellite, we would have grossly 
underestimated the severity of that storm. We would have 
estimated it might have been off by 200 to 300 miles in terms 
of where it was and we would have underestimated the amount of 
snowfall by at least ten inches.
    So emergency preparedness would have been impaired. 
Aviation and surface transportation would have been much, much 
worse than it was.
    So that program which is one of our high dollar numbers in 
this budget is really, really important. And the longer we 
delay both with funds in 2011 as well as 2012, the longer this 
gap will be. And for every dollar that we do not spend even in 
2011, it will cost three to five dollars down the road to bring 
that program back up to speed.
    Mr. Wolf. Well, this is not an entitlement hearing. You are 
not the director of OMB and I understand that. But it is the 
``man hears what he wants to hear and disregards the rest.'' 
What the fundamental disregarding of this Administration is 
they are disregarding.
    And I am going to put in the record today at this moment 
the PIMCO report.
    [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Wolf. I agree with everything you have said, maybe even 
more. I take my responsibility seriously. I mean, I worry about 
some of these things. My wife and I, we have 15 grandkids. But 
you have got to deal with the entitlements too.
    And so far, the President and the Administration has been 
AWOL. They appointed Erskine Bowles and Simpson and they have 
walked away.
    And I agree to the engine analogy. I agree with everything. 
I mean, let it be said that I agree with the administrator. But 
where we have differences, and, again, it is not fair and I am 
going to leave it because you are not Jack Lew at OMB, it is 
the entitlements.
    And if Tom Coburn and Dick Durbin can agree to come 
together to link arms, probably, you know, having a concern, 
but link arms, then the President ought to be able to do it.
    Now, Tom Coburn is being criticized by Grover Norquist, but 
he is not afraid of that. He is willing to say this is what I 
believe in and this is what I am going to do to save the 
country. And we expect the President to do the same thing. If 
Durbin and Coburn can do it, then the President can do it.
    And so I have said enough. But it is not enough just to 
say, you know, the engine story and we want to invest in every 
nickel. We are borrowing now 40 cents of every dollar from 
someone for every dollar that we spend. So of that nickel, we 
are borrowing it. And we are also borrowing from China, this 
fundamentally immoral nation, what they are doing to people 
insofar as religious freedom and human persecution and things 
like that.
    So until we deal with this issue of the entitlements, all 
these things are going to be squeezed. And so when they are 
squeezed and people come down and criticize on the forums, you 
say until you are--I have said I am prepared to vote for 
Bowles-Simpson or Simpson-Bowles, whatever they call it.
    Dr. Lubchenco. Uh-huh.
    Mr. Wolf. And I am going to say if you do not like the 
discussion, you tell me what you are prepared to do on the 
entitlement issue. If you are going to be AWOL and just talk 
about it and throw a rock at something, have a little cut, then 
that is that. That is not the way we are going to solve the 
problem.

                        NATIONAL WEATHER SERVICE

    Let me ask you about the Weather Bureau. I would place the 
National Weather Service at the top of NOAA's priorities. The 
fact is before I go to bed, I always watch the weather. It is 
sort of just-- yet, the Weather Service budget has not 
increased at the same rate as the rest of NOAA.
    Does your budget priority prioritize the Weather Service 
and what else among NOAA's programs would you categorize as 
critical to life and safety? But where does the Weather Bureau 
come in?
    Dr. Lubchenco. The Weather Service is absolutely critical 
to saving lives and property. And they depend on the 
satellites, for example, which is one of the reasons why--in 
fact, 98 percent of the information that goes into our 
numerical models for weather come from satellites.
    So the Weather Service cannot do its job without having 
that information from the satellites, both the geostationary as 
well as the polar orbiting. So it is not really easy to 
separate out from a functional standpoint. They need one 
another.
    So the Weather Service is vitally important and they do a 
spectacular, magnificent job not only in providing basic 
information to citizens and emergency managers but also in 
providing opportunities for the private sector to add value and 
sell additional products or provide additional services.
    So AccuWeather, the Weather Channel, for example, take the 
basic information, add value to that. And so there's an 
opportunity to grow businesses and we have seen that in this 
particular instance. So it is a priority. I would love to have 
even more in our budget for the Weather Service.
    What I believe is in our request is a responsible amount 
that will enable us to do what we need to do. And it depends on 
other parts of NOAA to do that efficiently. It depends on the 
ships and the planes to get information to service our tsunami 
DART buoys, for example.
    So the different parts of NOAA actually interact with one 
another and complement one another.
    Mr. Wolf. Okay. I am going to go to Mr. Fattah now. But 
with Mr. Bonner walking in, I just wanted to--I had asked the 
administrator to put together a conference on the East Coast 
and the West Coast to deal with the whole issue of the tsunami 
issue and the earthquake issue.
    But I would also say that I think the Gulf ought to be 
included because Mr. Bonner represents the Mobile area. So I 
would urge that it be not only the East Coast and the West 
Coast, I would amend my letter, but to also say the Gulf to 
make sure what impact it would have on them.
    Dr. Lubchenco. Mr. Chairman, when you were discussing that, 
you mentioned the Gulf and the Carribean, so I understood that 
to be the case.
    Mr. Wolf. Thank you.
    Mr. Fattah.
    Mr. Fattah. Let me thank you, Mr. Chairman.
    And let me start with this whole question of life savings 
now. As I understand from the work of my staff, this work of 
people who are fishing for a living is the most dangerous work 
in the country and that there are over 118 deaths per 100,000 
and that NOAA's satellite services have helped rescue over 
6,500 and saved the lives of people through these satellites.
    I am concerned about the satellite gaps that you mentioned. 
And, you know, we talk about the Gulf. Through your work, you 
have been able to cut in half the error rate on hurricane 
forecasting.
    Now, in the Philadelphia area, we do not get a lot of 
hurricanes, but I know my colleagues in other parts of the 
country do so that when we get to forecasting severe weather, 
you have been able to cut this margin in half over the last 
decade. And I understand there is a significant financial cost 
on the evacuation side of a million dollars per mile.
    So the satellite is development the largest part of the 
increase that you are asking for, right? So that is what I want 
to focus in on. So on one level, you are saving lives, but I 
want to talk--unfortunately, this is the Appropriations 
Committee, so I want to talk about money.
    Dr. Lubchenco. Uh-huh.
    Mr. Fattah. The other thing that is happening with these 
satellites is that it protects and enhances financially a 
number of industries.
    And my question is, for instance, start with the National 
Weather Service, are there any fees that NOAA charges.
    So, for instance, we talk about the maritime industry and 
say, you know, 90 percent of the world's trade is handled 
through this industry. You talked about AccuWeather and the 
Weather Channel and others who are valuable and taking this 
public information and using it. In the fishing industry, there 
is a lot of money made.
    Are there ways for NOAA, and I do not mean today, but over 
the near-term future, are there ways to look at where there are 
abilities to extract fees for services that you are now 
providing that are having a direct impact in terms of various 
industries that may at some point provide some of the resources 
that we need?

                               SATELLITES

    I mean, satellites are not cheap. They cost a lot of money. 
And if we talk about satellites, that we can cut the error rate 
on hurricane forecasts in half in a decade, that is saving 
lives, that is saving money. But in the meantime, there are 
other benefits that are being provided, and they are being 
provided in ways in which some people are making lots of money.
    And so I wonder if you could comment on whether there are 
ways to monetize some of the services that NOAA provides.
    Dr. Lubchenco. Thanks, Mr. Fattah. Thank you for 
highlighting the importance of those satellites to a variety of 
both issues having to do with life and property as well as 
economic issues.
    And let me give you a few numbers that are directly 
relevant and illustrate your point and then answer your 
question.
    For the search and rescue function that the polar 
satellites are involved in, in 2010, 295 lives were saved by 
the rescue beacons that are activated, that signals go to the 
satellites. And we estimate that if we do not have this Joint 
Polar Satellite System that the time for search and rescue, the 
response time would be at least doubled without our polar 
orbiting satellites.
    So that just gives you some sense of what the consequences 
are. And, of course, in an emergency, it is often minutes that 
are important to saving lives.
    Relative to the economic benefits, the maritime commerce 
sector represents $700 billion a year. And that sector depends 
directly on maritime weather information and that comes 
directly from these polar orbiting satellites.
    The fishing industry is hundreds of millions of dollars and 
they, too, depend on the weather information from these 
satellites.
    The aviation industry only for ash forecasting, our polar 
satellites save them $200 million a year, save the aviation 
industry $200 million a year for ash forecasting alone.
    And then if we look to on the land, equally important, 
providing drought forecasts is worth $6-8 billion to farmers, 
to transportation, to tourism, and energy sectors.
    So cutting across multiple different sectors of the 
economy, these polar orbiting satellites are vitally important. 
And, of course, they interact with and support the work of the 
National Weather Service, enable them to do all these, run the 
models.
    The research arm within NOAA develops the new knowledge 
that enables those improvements in weather forecasting. And so 
that is an interconnected part of NOAA that results in these 
economic benefits.
    Now, that said, your question is, you know, what is the 
business model for all of this and are there alternatives. The 
United States' current model for this is to have essentially a 
partnership between the government, the private sector, and 
universities where each has a distinct role and where those 
roles are complementary, not in competition.
    And the basic philosophy is simply that the government 
provides the fundamental information that allows saving lives 
and property and economic benefit. And it is very difficult to 
tease out what part of a weather forecast enables somebody to 
operate safely on the sea versus what part of it is important 
to saving lives and property.
    So because it is fundamental to saving lives and property, 
that basic information is deemed to be appropriate to be 
provided by the government.
    The fee-for-service model is not one that we employ. The 
concept is that there is significant opportunity within the 
current model for businesses like the Weather Channel or 
AccuWeather to take the basic information and tailor it to add 
significant value and then sell that product.
    Mr. Fattah. Well, you know, I would not be raising this 
question except that the question becomes this: Will the 
service be provided at all? You follow me?
    Dr. Lubchenco. I understand.
    Mr. Fattah. If the point is that there is $2 billion in 
your budget for satellites, satellites are needed, they are 
needed to save lives.
    Dr. Lubchenco. Correct.
    Mr. Fattah. And you have saved lives.
    Dr. Lubchenco. Correct.
    Mr. Fattah. They are needed to forecast severe weather and 
to cut down the margin of error so that, for instance, our 
neighbors in the Gulf know when a hurricane is coming and you 
have cut that margin of error in half. These are all public 
spirited and very important things.
    In addition to all of this, you also are facilitating 
others making hundreds of billions of dollars.
    Dr. Lubchenco. Correct.
    Mr. Fattah. So the question becomes, if we are going to 
have either no satellites or have significant gaps, as I would 
understand it, there is no substitute for this satellite 
program anywhere in our government.
    Dr. Lubchenco. That is correct.
    Mr. Fattah. Okay. So either we are going to have the 
satellites or we are not. And then the question is dollars. And 
we have an allocation and, you know, we are limited to an 
allocation. We have got to figure out how to make all this 
work. And the Chairman is absolutely right that these are 
untenable options.
    So I was just wondering, because I know, for instance, some 
of our economic competitors do this a little bit differently.
    Dr. Lubchenco. They do.
    Mr. Fattah. I mean, Germany has a different approach, 
right? So I was just wondering whether or not there were other 
models we could look at. And, again, we cannot create them 
overnight.
    Dr. Lubchenco. Uh-huh.
    Mr. Fattah. It may be they are not even useful in the way 
that we function here in our country, but we should at least be 
knowledgeable because if the satellite is not there, then all 
of these industries are going to be impacted, and it is going 
to harm--for instance, the drought information, that is $6-8 
billion, or the maritime trade which is another $700 billion.
    So, you know, we have to think through, these services and, 
I mean, we are putting a billion dollars just in terms of the 
fish side of this deal, right?
    Dr. Lubchenco. Uh-huh.
    Mr. Fattah. People who go fishing, you know, they get 
fishing licenses. They do other things. They pay. I am just 
trying to figure out, if you are saving the lives of fishermen 
and rescuing people, whether there are ways in which there are 
opportunities for the government to get some of these costs 
reimbursed.
    So this is kind of a straight business question. And I know 
you have advised the Bush administration, the Clinton 
administration. So you have been at this for a long time. You 
are one of the most distinguished scientists in this area.
    This is not really a scientific question. It is a business 
question about whether or not the services that we now provide, 
are there ways to monetize that and ways in which those who are 
benefitting in a specific way that generates profit might also 
share the burden.
    Dr. Lubchenco. Congressman Fattah, I understand exactly 
what you are asking. And as you know, you mentioned Germany, 
other European nations also have different models. They do use 
a fee-for-service model. It is a very different philosophy. And 
there are other models out there.
    I believe that our model is actually one that enables and 
supports businesses and economic prosperity and growth. But 
these are fundamentally, you know, basic questions that deserve 
to be asked. Are there other models that would be an 
improvement and what do they look like?
    In the meantime, we are challenged with providing the 
services under the current model and still struggling to try to 
minimize the gap that is already going to be happening. So that 
is the challenge.
    Mr. Fattah. I do not want to trade our economy for one of 
our European ally's economies. You know, I think our model has 
obviously worked very well for us. We are at a point, though, 
where we are saying perhaps we will not have a satellite system 
there. You follow me?
    So if the question is, we cannot generate the money on the 
public side to finance the work of NOAA, if we have to make 
cuts that are untenable in either the Weather Service or in the 
satellites, in any of these programs, are there other ways to 
think about doing this because you are saving lives?
    Dr. Lubchenco. Uh-huh.
    Mr. Fattah. And you are also helping industry.
    Dr. Lubchenco. Uh-huh.
    Mr. Fattah. And so the only reason I ask the question is 
because whatever we are doing is now being overwhelmed by our 
fiscal circumstance.
    Dr. Lubchenco. I understand.
    Mr. Fattah. Thank you very much.
    I will yield back.
    Mr. Wolf. Mr. Bonner.
    Mr. Bonner. Thank you, Mr. Chairman.
    Dr. Lubchenco, welcome.
    Dr. Lubchenco. Congressman, nice to see you.
    Mr. Bonner. Nice to see you. And I would say for the record 
while I appreciate the chairman's recognition that the Gulf of 
Mexico needs to be considered in any survey such as that.
    The administrator has been to Mobile. She has been to the 
Gulf and was a frequent visitor during the oil spill last year 
for which we personally express our gratitude for your interest 
and your leadership in that.
    I am going to focus a little bit on the oil spill----
    Ms. Lubchenco. Uh-huh.
    Mr. Bonner [continuing]. Because, and I say this very 
carefully, no one would say that what we have gone through 
compares with what the people of Japan are going through. That 
earthquake, tsunami, and then the issues with their nuclear 
plants is beyond comprehension.
    That said, many people along the Gulf Coast felt they went 
through an environmental/economic tsunami last year because it 
was the worst oil spill on record in the history of this 
country. And it may be years or decades before we know the full 
impact of that tragedy that we are approaching the one-year 
anniversary on.
    I thanked you earlier. I repeat not only your leadership 
but also the staff at NOAA for the work that you all did during 
the early period following the April 20th incident. Your 
satellite modeling capabilities came to full utilization during 
the crisis and offered our best hope that federal, state, and 
local responders had to track the movement of the oil in a 
timely fashion so that we could position the very limited 
resources that either industry or government had to try to 
protect sensitive wetlands, the coast, and the other areas of 
those states that were impacted.

                       GULF OF MEXICO RESTORATION

    As many of my colleagues in Congress have heard me say 
before, while we weathered the early storm, the long-term 
economic and ecological impacts remain in question.
    So along those lines, in your written testimony, you note 
that NOAA's ongoing participation in the Gulf Coast Ecosystem 
Restoration Task Force, which I think is being led by Ms. 
Jackson of the EPA, that includes scoping the programmatic EIS 
as well as under the NRDA claims.
    Given the importance of the fisheries economically to our 
region and to the Nation and the impact the oil spill has had 
on that sector, do you believe apart from the mandate of the 
Oil Pollution Act of 1990 and Natural Resource Damage 
Assessment process that economic consideration should carry 
equal weight to environmental restoration?
    Dr. Lubchenco. Congressman Bonner, thank you for 
recognizing the ongoing challenges to the Gulf. I know that it 
is an issue that many people in the Gulf struggle with on a 
daily basis. And I know that they often feel the rest of the 
country has moved on and they are still in great pain. All of 
our folks that are in the Gulf recognize that.
    And as you indicated, there are long-term challenges for 
the Gulf. The Natural Resource Damage Assessment process is 
focused directly on the damage that was done to natural 
resources and the public's loss to those natural resources. And 
that is the process that is underway now to evaluate what the 
impact was, not just the short-term, but the long-term impact.
    And economics plays into that. This is a scientific, 
economic, and legal process for determining the impact to the 
resources and the public's loss to those resources. And that 
process which is a joint one between the states and the federal 
government, there are three federal trustees of which NOAA is 
one, and there are five state trustees. That trustee council 
works together to do the analyses.
    NOAA is providing a very significant fraction of the 
scientific information to enable understanding of what were the 
long-term impacts to different economically important species, 
to a variety of other species that are important to those 
species, and to other parts of the coastal and the open water 
portions of that ecosystem.
    That process continues to be underway. We have had on the 
order of I think 80 different, somewhere between 70 and 80 
different research expeditions on ships to continue to take 
samples in addition to a lot of intense sampling along the 
shore.
    That process is ongoing and is obviously designed to build 
the most effective case possible against the responsible 
parties to ensure that they pay for the restoration of those 
natural resources and the public's access to them.
    So that is just a short summary of what that process is all 
about. I want to emphasize that the NRDA process, the Natural 
Resource Damage Assessment process is completely independent of 
the claims process that Ken Feinberg is leading for individuals 
and businesses to file claims.
    The NRDA process is only about loss to natural resources 
and the public's access to them, so it is a very different 
beast, if you will. Part of the NRDA process is not just 
determining the impact but determining the restoration that 
will address the impact.
    And so there is very active consideration of the range of 
possible restoration activities. Unfortunately, this is going 
to take time to play out and I think everyone would wish that 
we could, you know, push the fast forward button and be farther 
along, but many of these populations are ones that it is going 
to take a while before we know the full impact. So we do not 
want to pre-judge prematurely and not have the responsible 
parties pay what they actually should pay.
    Mr. Bonner. Well, the reason I asked about the economic 
is-- and you mentioned Mr. Feinberg is leading the claims 
process. I would say he should be leading it. He got a pay 
raise to $1,250,000 a month and, yet, we have got businesses 
that are struggling to survive that have been paid pennies on 
the dollar. But just----
    Dr. Lubchenco. Fortunately, I do not have anything to do 
with that.
    Mr. Bonner. The chairman is not holding you responsible for 
OMB. I am not holding you responsible for Mr. Feinberg.
    Dr. Lubchenco. Appreciate you both.
    Mr. Bonner. Your agency has also been helpful, hats off, 
for the announcement regarding additional safety of testing 
Gulf Coast seafood. A recent poll, I hate to even repeat the 
numbers because it is very troubling, but 70 plus percent of 
the American people lack confidence in Gulf Coast seafood and, 
yet, it is probably the most tested seafood for safety of any 
seafood from the Pacific to the Atlantic to the Chesapeake.
    I doubt there is another--that is a good question. Is there 
any other seafood in our country that is being tested as 
thoroughly and closely as Gulf Coast seafood right now?
    Dr. Lubchenco. To the best of my knowledge, no, sir.
    Mr. Bonner. Well, can you tell us, and we are not competing 
against Chesapeake seafood, it is good seafood, especially with 
the chairman, but what steps can you, additional steps can you 
take to continue to communicate with consumers?
    I know the secretary of Defense indicated that they are 
buying more Gulf Coast seafood for our soldiers and sailors and 
airmen, but what steps can NOAA specifically do to communicate 
that Gulf Coast seafood is being tested, is safe, and people 
can purchase it and enjoy it with confidence?
    Dr. Lubchenco. Congressman Bonner, we, as you know, did 
close areas in response to the presence of oil and then 
reopened them only when our extensive testing showed that the 
seafood was free of any contamination by either oil or 
dispersants which some people were concerned about as well.
    And we do, in fact, continue to test. And we have announced 
an ongoing program to do exactly that. As you note, however, 
there continues to be suspicion. And, you know, I think this is 
a cognitive dissonance in the minds of many people.
    After seeing day after day images on TV of this oil flowing 
and on the surface and oiling birds, I think it is hard for 
people to understand how it could not be contaminating 
everything in the Gulf. And so I think that is just a matter of 
human nature, if you will.
    Fish can process hydrocarbons. They can cleanse themselves 
of it. And the testing that we have done is for twelve 
different compounds of hydrocarbons called polycyclic aromatic 
hydrocarbons, PAHs, and----
    Mr. Bonner. I would ask you to spell it, but I bet you 
could.
    Dr. Lubchenco. I probably could. So we test for those 
twelve PAHs that are known carcinogens. We developed, as a 
result of the spill, a brand new test to identify a compound 
that was in the dispersants to be able to know whether it was 
residing still in flesh of fish and other seafood.
    So we know from that testing that the fish, the crabs, the 
shrimp that are being caught from the Gulf are, in fact, free 
of those hydrocarbons and the dispersants. But more has to be 
done than simply asserting that it is safe. That obviously has 
not been enough to convince people either in the Gulf region or 
around the country.
    NOAA has been working very carefully and closely with our 
Sea Grant Program in the Gulf states to help address this. Part 
of this is providing information, holding public hearings, 
holding sessions with folks so that they have access to people 
who have the information and can try to dispel much of the 
misinformation that continues to be out there. So we have been 
doing that throughout the spill and continuing now as a way of 
continuing to provide information to people.
    You also mentioned the recent announcement of the 
Programmatic Environmental Impact Assessment process, the PEIS, 
which is a formal portion of the NRDA process that involves 
public hearings. The major purpose of those hearings is to 
solicit ideas from the public, from academic scientists, from 
anybody with some great ideas about what restoration should 
look like.
    And a part of those seven, it is either seven or nine 
different hearings, I cannot remember which, around the Gulf, 
about half of which have now happened, part of those hearings 
involve opportunities for citizens to ask questions. And over 
and over and over, we are getting questions about seafood 
safety. So we are taking every opportunity even under the 
context of the NRDA process and this PEIS to provide additional 
information.
    On top of that, the seafood industries of the relevant 
states did receive some money from BP to launch a public 
awareness campaign about safety. We have not done that for 
them, but we have provided them information.
    So we have been working closely with the seafood industry 
to try to help get over the hump, if you will, and restore 
their credibility. This is an ongoing effort. We continue to be 
involved and we will support it to the best of our ability.
    Mr. Bonner. Mr. Chairman, I have a lot more questions, but 
could I get three more in?
    Mr. Wolf. Go ahead. Take your time.
    Mr. Bonner. And thanks for mentioning the Sea Grant 
Program. LaDon Swann in our area certainly does a good job.
    Dr. Lubchenco. Terrific.
    Mr. Bonner. He will be pleased to know that he got a shout 
out from the administrator.

                           STOCK ASSESSMENTS

    As we have discussed previously, I and others have called 
on NOAA to fund fishery independent----
    Dr. Lubchenco. Uh-huh.
    Mr. Bonner [continuing]. Data collection of the reef 
fishery in the central Gulf Coast. I want to thank you for 
committing additional funding in a tight budget environment to 
the Gulf for this purpose.
    I believe this data is vitally important to provide the 
most accurate stock assessments that we can arrive at. Can you 
share any information resulting from this effort and do you 
plan to continue supporting it if you can?
    Dr. Lubchenco. Congressman, we absolutely do plan to 
continue to support this. Fishery independent survey 
information is vitally important. And we have not had as much 
of it in the past as we need and we are very seriously 
committed to acquiring that information. That is true for both 
commercial as well as recreational fisheries.
    And one of the things that I know you are aware of is my 
personal commitment to build much better relationships with the 
recreational fishing community, to acknowledge how important 
they are.
    I think they felt for many, many years that NOAA was 
ignoring them and what they do and what they represent, their 
economic value to the country, but also just the importance 
that they bring to families and friends to just get out and 
have a good time, recreation. All of that is vitally important.
    And so one of our challenges with recreational fisheries is 
having adequate information about both the status of the stocks 
as well as what the activities are involved in and this year's 
budget does reflect a serious commitment to improving the 
quality of the information both on the stocks as well as on who 
is catching what, when, and where.
    Mr. Bonner. You mentioned in an earlier answer referenced 
the fishery closures during the oil spill that were necessary 
obviously. During that time, there were no fish landed to 
provide data for the collection efforts.
    Was your use of fishery independent data collection 
increased during that time or do you have a data gap during 
those closures?
    Dr. Lubchenco. Congressman, I do not know the answer to 
that, but I am happy to find out and get back to you.
    [The information follows:]

    Representative Bonner: Was your use of fishery independent data 
collection increased during that time or do you have a data gap during 
those closures?
    Answer: Some data was lost due to the oil spill (Deepwater Horizon: 
DWH) and the diversion of vessels for response efforts. Less data 
invariably leads to potential decreased accuracy in stock assessments; 
however, it is difficult to determine the exact impact. The data that 
was collected was useful, thus still supporting stock assessments. See 
below for more details on the number of lost days at sea (DAS).

                       FY10 SEFSC Survey Impacts

     The Southeast Area Monitoring and Assessment Program 
(SEAMAP) is a State, Federal, University program for collection, 
management and dissemination of fishery-independent data and 
information in the southeastern United States. NMFS conducts surveys in 
federal waters and the states conduct relatively the same survey in 
their state waters so the two surveys complement each other. The SEAMAP 
Spring Plankton Survey lost 7 DAS in the Gulf of Mexico from the 
usually 60 DAS that are used to cover the entire Gulf of Mexico and 
part of the Caribbean. The SEAMAP Reef Fish (i.e. red snapper) survey 
lost 8 DAS out of the 38 DAS that had been allocated. As a result, 
planned survey work was not finished in the western Gulf of Mexico.
     The South Atlantic Reef Fish Survey was allocated 39 DAS 
and lost 5 due to DWH. It is not a component of SEAMAP.
     The first SEFSC/NEFSC Cooperative Survey was canceled. 
This survey of both the southeast and northeast U.S. continental shelf 
ecosystems, would allow NOAA to understand how the resources (i.e. 
fisheries and protected species) in one system depends on the 
neighboring system. The loss of this survey will negatively impact 
NMFS's ability to build a cohesive view of marine ecosystems along the 
east coast.
     Summer groundfish, shark/red snapper longline and the 
SEAMAP reef fish surveys were used to collect DWH samples and at times 
had to be diverted to collect samples but for the most part were able 
to continue with the planned stations.

                          CATCH SHARE PROGRAMS

    Mr. Bonner. And then just a couple more. NOAA has dedicated 
a significant portion of the NMFS budget to the implementation 
of catch share programs which I believe have merit.
    One concern that some of the fishermen in my area have, 
however, is that you are aggressively moving forward with the 
National Catch Share Program in advance of a complete stock 
assessment.
    Can you comment on those concerns?
    Dr. Lubchenco. Certainly, Congressman. The stock assessment 
challenge is an ongoing one and we need the best possible and 
the most current possible information. And when you consider 
over 200 stocks that are priority stocks, the ones that are 
caught most often, that is a significant challenge.
    And that is why in this year's budget request we are asking 
for an increase and $15 million for stock assessments to be 
able to have better and more current information on an ongoing 
basis.
    That information is important regardless of the management 
tools for a particular fishery. Catch shares are a management 
tool. They are not imposed by NOAA. Each fishery management 
council makes decisions in the form of a fishery management 
plan for each different species or groups of species that are 
caught together. And we are encouraging councils to consider 
catch shares where they are appropriate. And councils are, in 
fact, doing that.
    And the funds that are in this year's budget request in 
support of catch shares are to enable the catch share programs 
that have been approved recently, some of which, for example, 
the West Coast Trawl IFQ was seven years in the making, so it 
is a long-term process. It has to be carefully designed, 
carefully planned. And these funds will enable those programs 
to continue to happen.
    The one hallmark of catch share programs is that they 
require considerable information about catches on an ongoing 
basis. So observer programs and monitoring is vitally important 
to the success of these programs. And that is part of what the 
additional resources help support is this additional observer 
and monitoring coverage.
    So what the Federal Government is doing using this West 
coast program as an example, is helping with the majority of 
the costs for this additional monitoring and observing early 
on. So year one, 90 percent of the cost the Federal Government 
is bearing. Year two, 50 percent. Year three, 25 percent. Year 
four, zero.
    So it is to transition the fishery into more productivity, 
less over-fishing, more economic viability with the idea that 
then the fishery assumes the--this is the fee for service. They 
are paying directly for this additional monitoring that is 
needed.
    The benefits of are that it ends over-fishing. Overfishing 
typically does not happen in a catch share program. It also 
reduces by-catch, the unintended catch of other species which 
can--especially in the Gulf, there is very significant impact 
to many different species that are important for recreational 
fisheries that are caught as bycatch in a commercial program, 
for example.
    So a reduction of by-catch. It is also the case that in 
catch share programs, fishermen can choose--they know what 
their quota is going to be for the whole year, so they can 
choose to fish when the price is right, when the market price 
is right, when the conditions are safe so they do not have to 
go out and be competing against other fisherman under 
horrendous weather conditions.
    So the track record for catch share programs is very, very 
impressive which is why we are encouraging councils to adopt 
them where they are appropriate. But they are not a panacea. 
They are not going to solve all of our over-fishing and they 
are not appropriate for every particular fishery.
    So they need to be well-designed. They need to, for 
example, ensure that all the big guys do not buy out the little 
guys which can happen if you do not design it properly.
    So there are a lot of important design considerations that 
are very important and that is why it needs to be done well and 
carefully.
    Mr. Bonner. Well, I could go on and on, but we have got 
other colleagues.
    Chairman, thank you very much.
    And, again, Madam Administrator, thanks for your 
leadership.
    Dr. Lubchenco. Thank you, Congressman.
    Mr. Wolf. Thank you, Mr. Bonner.
    I am going to follow up on one of Mr. Bonner's issues to 
ask you a question along that line. We are going to go to Mr. 
Austria and then Mr. Schiff.
    When I think in terms of the--we have some questions here 
which we hope that we will get to--aquaculture and where some 
of the seafood is coming in from Vietnam and from China with 
the other chemicals and it is just a disgrace. And then I think 
of the Gulf.
    Could we not and what would your position be if we in the 
committee directed you--and before I tell you what I would like 
to direct you to do, think in terms of when cranberries were 
hit very hard back in the 1950s. You may be too young to 
remember the cranberry issue. You were probably--maybe you were 
not even born. I will put it that way.
    Eisenhower made a major effort, had cranberries in the 
White House on Thanksgiving and they brought the cranberry 
industry back. The same thing happened in the 1960s with regard 
to tuna. Tuna went through a very difficult time. They found 
botulism in tuna. They put together a major program.
    Could we not direct you or what are your feelings to 
mandate BP to put together a major advertising program, 
particularly when you think of where some of the stuff from 
Vietnam and from China, some of the pits that their fish has 
come out of there, a major advertising program working with the 
Gulf from Florida to Alabama to Mississippi to promote Gulf 
seafood whereby BP would not do it because I do not think they 
have the credibility, frankly, whereby they would work with a 
consortium to advertise so that everyone when they are 
watching, instead of seeing some of these drug ads that you are 
seeing every other 30 seconds, you would see an ad to encourage 
Gulf seafood?
    What would your position be if we were to put language in 
directing the Administration to approach BP to fund the program 
in cooperation with the Administration and with the Gulf Coast 
states to promote seafood from the Gulf similar to what was 
done in many respects with regard to cranberries?
    Do you remember the cranberry case?
    Dr. Lubchenco. Not well. I remember it vaguely, but I love 
cranberries.
    Mr. Wolf. It devastated the industry. Massachusetts was 
heavily hit. The bogs were hit. Wisconsin was hit. President 
Eisenhower made a deal, made an effort at Thanksgiving time to 
have cranberries to show. And it came back.
    Do you remember the tuna fish botulism issue?
    Dr. Lubchenco. No, I do not.
    Mr. Wolf. Does anyone remember? Yes? And they brought it 
back. I bet everyone here. Who has had tuna fish in the last 
week here? I mean, everyone. And so I would like to see----
    Mr. Bonner. Let the record show almost every hand went up.
    Mr. Wolf. Every hand went up. I would like to see if you 
would look at it working with Mr. Bonner's office and working 
with the committee. We could put language in to direct, and we 
would need your cooperation, the Administration, because you 
are now looking at prosecuting cases with regard to BP, direct 
BP within the next, you know, quickly, 30 days, this is not 
something we want to drag out, we want to take advantage of the 
summertime, for a major advertising program and bid it out 
working with the governors and yourself to promote Gulf seafood 
throughout the United States and throughout the world.
    Would you be open to that? What are your thoughts about 
that?

                             SEAFOOD SAFETY

    Dr. Lubchenco. So I think there are a number of issues that 
are relevant to your suggestion, Mr. Chairman, one of which is 
that NOAA does test seafood, but----
    Mr. Wolf. But it was so tested and so clean and clear and 
good. We have to tell other people about it.
    Dr. Lubchenco. I understand. I understand. The Food and 
Drug Administration, FDA, is the federal agency that has 
responsibility for certifying that seafood is safe. So what I 
am saying is NOAA and FDA have complementary but different 
roles.
    And so there are a number of agencies that have been 
involved and would need to be involved. All I am saying is this 
is not just a NOAA issue.
    Mr. Wolf. Well, I think it is a White House issue.
    Dr. Lubchenco. And the White House has already asked BP to 
fund this campaign that I mentioned with the seafood industry 
in the Gulf to promote awareness.
    Mr. Wolf. Beginning when?
    Dr. Lubchenco. It is underway now, but I do not know. Maybe 
Congressman Bonner has more knowledge about where it is.
    Mr. Bonner. Well, it is whatever is happening is not 
enough.
    Dr. Lubchenco. Exactly.
    Mr. Bonner. And I will give you a quick example. In 
Alabama, our governor, brand new governor that just got elected 
in November, was negotiating directly with BP to get some 
tourism dollars. We got I think $14 million. Louisiana and 
Florida got $30 million because their governors had negotiated 
a better deal.
    I think what the Chairman is saying is is that if the 
Administration will continue to put pressure on the responsible 
party, I think this is a great idea, Mr. Chairman, of trying to 
not necessarily--and the administrator is right. FDA, there are 
a lot of agencies that would have to play a role in this, but 
if you could continue to put pressure on the responsible party 
to do their part and then some----
    Dr. Lubchenco. Uh-huh.
    Mr. Bonner [continuing]. We could go a long way toward 
getting us over what could be even a more challenging summer if 
those claims and the other part of this process do not continue 
to pan out.
    Dr. Lubchenco. I believe we need to be doing more. And NOAA 
would like to be helpful in that process just understanding 
that there are others involved as well.
    Mr. Wolf. If you could work with the subcommittee and Mr. 
Bonner. And we would, if we could, carry language to tell them 
that we are going to carry it, but urge them to do it and 
develop a consortium. And I would urge you to look at the 
cranberry in the late 1950s----
    Dr. Lubchenco. Uh-huh.
    Mr. Wolf [continuing]. And the tuna fish issue and then 
anything we could do, you know, whether it be a letter, so I do 
not think we want to wait until we have a 2012 bill. I think we 
want to kind of move something quickly so it is in play----
    Dr. Lubchenco. Uh-huh.
    Mr. Wolf [continuing]. Ideally and you need one person to 
be the coordinator. I mean, personnel is policy----
    Dr. Lubchenco. Absolutely.
    Mr. Wolf [continuing]. And the right person who can--well, 
thank you.
    Mr. Bonner. Thank you.
    Dr. Lubchenco. Congressman, could I just add one other 
quick thought to this? You were highlighting the need or an 
ideal situation where we would be eating more of our seafood 
from U.S. waters.
    Mr. Wolf. That is from a country that has 35 Catholic 
Bishops in jail, has plundered Tibet, has hundreds of 
Protestant pastors in jail, is shooting people, taking their 
kidneys and selling them for $50,000, and is spying on us.
    That would be my choice. I would rather take fish and 
seafood from the Gulf than from China who has the 2010 Nobel 
Peace Prize winner in jail and his wife is under house arrest.
    Wouldn't it be better--or Vietnam where they got the 
consular U.S. embassy staff guy and shut his foot in the door 
and slammed it and slammed it and slammed it and, yet, we are 
taking all of that because many times you have these big law 
firms in this town that are representing the Chinese government 
and the Vietnamese government.
    Let's take the seafood from Alabama, from Mississippi, from 
New Jersey, from places like that. And that is the point of 
trying to--not to punish China, although I would be certainly 
anxious to do that, but to enhance the American seafood 
industry. And if you look at some of the places that we are 
getting the seafood from, the shrimp, they are literally 
cesspools. And so if we can help our own people.
    Dr. Lubchenco. I wanted to connect what you were suggesting 
in terms of having more seafood from the U.S. waters with our 
current budget request because we, in fact, have a goal of 
recovering all of our fisheries and ending overfishing. And 
that is what much of our policies are designed to do.
    Based on estimates, if we recover all of our fisheries that 
are currently depleted, we could increase economic benefit of 
$2.2 billion from that industry from $4.1 to 6.3 billion 
annually. We are on track to end overfishing, but we have a lot 
more to do. And much of what we are asking for in this budget 
will give us more ability to do that economic recovery, end 
overfishing, and have more great healthy seafood from our 
waters.
    Mr. Wolf. Good.
    Mr. Austria.
    Mr. Austria. Thank you, Mr. Chairman.
    Doctor, thank you for being here. Thank you for your hard 
work and commitment. We appreciate it very much.
    Let me kind of switch gears here a little bit. I know you 
touched briefly on this earlier, but I just want to get some 
more clarification.
    It has been suggested that if adequate funding for the 
Joint Polar Satellite System is not provided quickly, there is 
the possibility of that data gap by 2017. I want to learn more 
about this data gap and the impact it is going to have.
    So could you please describe exactly what this data gap 
would look like and the possible effects it would have on 
particularly the military side and civilian use? In other 
words, what are the short-term, long-term effects of such a 
data gap on our national defense?
    Dr. Lubchenco. Thank you, Congressman, for asking about 
that.

                      JOINT POLAR SATELLITE SYSTEM

    If we do not have adequate funds in both 2011 and 2012 for 
this Joint Polar Satellite System, the consequences will be 
multiple. Because of the Continuing Resolution in this year, we 
already have a delay in the launch of this Joint Polar 
Satellite System of at least 12 to 18 months and it is likely 
to be longer depending on how long it takes to resolve the 
current budget situation for 2011.
    That delay in launch will likely result in a gap in time 
where we will not have a U.S. civil polar orbiting satellite in 
place and the consequence of that will be to our ability to do 
long-term weather forecasts, severe storm warnings, search and 
rescue, and weather for Alaska. Those are sort of four 
different categories.
    You asked specifically about consequences to the military. 
They depend directly on our long-term weather forecasts to make 
decisions about troop deployments, for example, or refueling in 
air. So those are two specific examples of how the long-term 
weather forecasts provided by NOAA are utilized by the 
military.
    So in addition to those direct impacts, having maritime 
weather information is vitally important to the Navy. And those 
polar orbiting satellites provide the eyes on the water, if you 
will. They give us information about weather situations on the 
oceans all around the world.
    And so it is quite likely that the quality of our maritime 
weather information that supports naval operations would be 
degraded. So there are multiple consequences.
    Mr. Austria. Okay. And I know we are running short. We have 
a vote here shortly.
    One other area I wanted to touch on real quick was one of 
the most successful programs I think that NOAA has that 
connects research to the ground and on the ground challenges 
that our State in Ohio and in other states around Lake Erie, 
local entity space, is the Sea Grant Program which was 
discussed briefly.
    Dr. Lubchenco. Uh-huh.
    Mr. Austria. And I think one of them is run out of the Ohio 
State University back in Ohio.
    Dr. Lubchenco. Right. Correct.
    Mr. Austria. And it is obviously focused on the Great Lakes 
and the work that is being done there, Ohio State's program 
leads bi-national efforts between the U.S. and Canada on Lake 
Eries and the Great Lakes.
    How do you plan to use the Sea Grant Program to help in 
running the new Climate Service proposed in your budget? In 
other words, how is that going to impact or what are your plans 
with this program as you restructure with the Climate Service 
Program?

                            CLIMATE SERVICES

    Dr. Lubchenco. Congressman, the climate services, many of 
which we already provide some of, and the proposal in this 
budget is to do a budget neutral reorganization so that we can 
provide climate services more effectively than we can now.
    And I should clarify that when I say climate in this 
regard, it is anything more than 14 days. So our weather 
forecasts are zero to ten-ish. Anything more than 14 is 
climate. So when I say climate services, it is information of 
the a couple months from now or next year. That is climate in 
the way that we talk about it.
    That climate information, the climate services are directly 
relevant to Sea Grant programs and enable them to add value to 
provide information to many of their constituents in making the 
decisions that they make and in turn, they provide a critically 
important flow of information in the other direction where they 
are eyes and ears on the ground, out in the field, working with 
folks all around the Great Lakes in this case to give us 
information about what do communities around the Great Lakes 
want to know about how conditions, you know, a year from now or 
two years from now are affecting their businesses or their 
lives.
    So they will help through a regional organization of 
regional climate centers. Sea Grant programs can help feed into 
that better understanding of what people's needs are, so----
    Mr. Austria. So do you envision with the Climate Service 
now using the established network relationships of----
    Dr. Lubchenco. Absolutely.
    Mr. Austria [continuing]. Working together or are we now 
going to have a new competing set of outreach programs?
    Dr. Lubchenco. We have established regional climate centers 
that are collocated with our National Weather Service regional 
offices. And those will be tapping into existing networks like 
Sea Grant and other existing networks, many of which with our 
universities, to provide this tailoring. We are not going to 
set up a whole new structure. We are going to tap into existing 
networks and Sea Grant Program is a great one.
    Mr. Austria. Thank you very much, Doctor. I appreciate it.
    Thank you, Mr. Chairman.
    Mr. Wolf. Mr. Schiff.
    Mr. Schiff. Thank you, Mr. Chairman.
    I just wanted to follow up briefly on JPSS. I share the 
concerns about the delay in that program.
    In the Washington Post yesterday, there was a story about 
the importance of JPSS in making accurate weather forecasts. 
Looking at just the example of the February snowstorms in 
Washington last year, forecasts without the satellite would 
have seriously under-predicted the snowfall that closed down 
the city. Many businesses and families would have failed to 
anticipate the seriousness of the blizzard and people could 
have been put at risk.
    Under the current budget circumstances, what is your best 
estimate for when JPSS satellite will launch? The first phase 
of the project, the NPP satellite, is due to launch this fall. 
Is that still on track?

                      JOINT POLAR SATELLITE SYSTEM

    Dr. Lubchenco. Yes, the NPOESS Prepartory Project (NPP), 
Congressman, is still on track. The launch date for JPSS-1 is 
highly dependent on funding, funding in 2011. So the launch 
date because of the Continuing Resolution, the launch date for 
JPSS-1 has already been delayed by 12 to 18 months. It might be 
longer than that depending on when we have a budget. And the 
launch date for JPSS-1 was originally 2015, so it has been 
pushed back 12 to 18 months beyond that.
    So we have a current satellite in the sky now that is 
providing the information we are talking about. NPP will be the 
next one that will be providing that information. It was 
originally designed not as an operational satellite but as an 
experimental satellite. This is a NASA satellite that was 
designed to test out some new instruments that would then be 
used by what is now the JPSS series of satellites.
    So its life span as a risk reduction NASA mission, was 
designed for five years. Originally NASA had assigned mission 
success criteria of three year for NPP. So there is some 
uncertainty in exactly how long this data gap would be. But if 
you do the math, it is looking like there is a very, very high 
likelihood that we are going to have a significant data gap 
when we have no polar orbiting civil satellite that the U.S. 
runs that is giving us this vital information for severe 
storms, for long-term weather forecasts, and for search and 
rescue.
    Mr. Schiff. That is a grave concern. If the, and I know 
this is still somewhat speculative given the budget situation, 
but if you do get the greater longevity of five years, what 
will the gap look like then or even under that best case----
    Dr. Lubchenco. We would still have a gap under those 
circumstances. And I think just a couple of other things that 
are relevant for this issue. The amount that we need in 2011 is 
$910 million. So that is the $382 million that was the 2010 
enacted level plus $528 million above that. So it is a very 
sizeable amount. And I fully realize that that is the case.
    But for every dollar of that that we do not have in 2011, 
it will take three to five dollars down the road to bring that 
program back up to speed and all the money in the world is not 
going to close that data gap. So this is fiscally, I think--
well, there are fiscal issues here as well as public safety and 
economic consequences.
    Mr. Schiff. Thank you.
    And in the interest of time, I yield back, Mr. Chairman.
    Mr. Fattah. And just one quick point before we go, Mr. 
Chairman, is that the other thing we are doing is we are paying 
for these satellites as if they are only being utilized in one 
budget year rather than looking at the cost over the number of 
years they are being in service, they are going to be in 
service. It is like paying for a house all at once----
    Dr. Lubchenco. Uh-huh.
    Mr. Fattah [continuing]. Versus paying for it over the life 
of its use. Thank you, Mr. Chairman.
    Mr. Wolf. Thank you.
    Mr. Honda.
    Mr. Honda. Thank you, Mr. Chairman.
    I want to go over some of the other questions that were 
asked previously. You talked about the polar orbiting civil 
satellites. That is both polars that we are talking about?
    Dr. Lubchenco. Yes, sir.
    Mr. Honda. Okay. I just wanted to know because you said it 
covers all the oceans, so I was trying to figure out how you 
did that without----
    Dr. Lubchenco. So the polar orbiting satellites go around 
the poles.
    Mr. Honda. Right.
    Dr. Lubchenco. And the earth is rotating under them. And so 
they see a different part of the earth every time they do a 
pass.
    Mr. Honda. Okay. It is like peeling an orange with that 
little machine?
    Dr. Lubchenco. Repeatedly. Repeatedly.
    Mr. Honda. Then I understand now the distinction between 
Weather Service and Climate Service. And I think that that is 
an important understanding in order for us to understand why we 
should be staying on top of the budget because you just 
mentioned that creating a data gap is the gap is a gap and it 
will never be recovered because it is oriented to the time that 
has elapsed and you cannot go backwards and capture that data 
that has already elapsed; is that correct?
    Dr. Lubchenco. The data gap that we would have, 
Congressman, where we would not have a polar orbiting satellite 
that the U.S. operates means that for whatever period of time 
that it is, we would not have information that would enable us 
to do severe storm warnings of the quality we do today.
    For example, two to three days advanced warning for 
hurricanes or severe storms.
    Mr. Honda. I get that part. So the gap is created because?
    Dr. Lubchenco. Because there is no satellite that is giving 
us information about development of severe storms or----
    Mr. Honda. We are not putting up a satellite to replace one 
that is coming down?
    Dr. Lubchenco. That is correct.
    Mr. Honda. Okay.
    Dr. Lubchenco. Sorry. I apologize.
    Mr. Honda. I just wanted to understand that if we do not 
have that up there and we want to be able to predict in the 
future, a gap is a gap because once time has passed, you cannot 
go back?
    Dr. Lubchenco. That is correct.
    Mr. Honda. You cannot bank it and go back and see if you 
still have it?
    Dr. Lubchenco. That is correct. Those polar satellites, 
both provide real-time information that enables us to do 
weather forecasts, but they also provide data about the earth 
that is irreplaceable.
    Mr. Honda. And in terms of the budgeting process, what are 
the things that Congress is doing that creates the challenge 
for you to be able to be continuous or be able to--that is 
going to create the danger of having a gap? What is it that we 
are doing or not doing?
    Dr. Lubchenco. The challenge is in fiscal year 2011, the 
current fiscal year, lack of adequate resources will keep us 
from continuing the contracts.
    Mr. Honda. So if we do H.R. 1 and cut more into the current 
CR, there will be less money to do what you need to do that was 
planned for 2011?
    Dr. Lubchenco. H.R. 1 would be insufficient to----
    Mr. Honda. H.R. 1 cut into your current planning, what you 
had done for the last CR, the CR that we are operating under 
right now?
    Dr. Lubchenco. So even the existence of the CR now has 
already delayed the launch.
    Mr. Honda. Right.
    Dr. Lubchenco. If we do not have the full $910 million in 
this fiscal year, we will have to terminate contracts and not 
be able to----
    Mr. Honda. It does create a gap.
    Dr. Lubchenco. And that creates the gap.
    Mr. Honda. And that creates the danger in the future as far 
as----
    Dr. Lubchenco. Correct.
    Mr. Honda [continuing]. Condition for satellites for 
weather Climate Service that we depend upon both military and 
commercial and domestic?
    Dr. Lubchenco. Correct.
    Mr. Honda. Okay.
    Dr. Lubchenco. And every dollar that we do not spend this 
year, it is going to cost three to five dollars down the road.
    Mr. Honda. I just wanted to make sure that we understood 
the gravity of not doing the work here in a timely manner with 
the necessary funds for us to maintain, maintain the kind of 
services that we expect for everything from domestic to 
national security.
    Dr. Lubchenco. That is exactly right, Congressman. It is a 
very grave situation.
    Mr. Honda. Thank you, Mr. Chairman.
    Mr. Wolf. Thank you.
    We are going to try to, Mr. Fattah and I am going to try to 
keep going back and forth, so we do not break the hearing. 
There may be a point that we have to, but----
    Dr. Lubchenco. Okay.
    Mr. Wolf [continuing]. On the satellite, a couple of fast 
ones. Given the current funding climate, there will be less 
funding. What contingency plans are you making to address the 
funding amount needed for the JPSS Program in order to remain 
on schedule?
    Dr. Lubchenco. Congressman, the original request for fiscal 
year 2011 was over a billion dollars and we have scrubbed that 
budget and brought it down to $910 million dollar.
    Mr. Wolf. But I guess the next question, and I apologize 
for breaking----
    Dr. Lubchenco. Uh-huh.
    Mr. Wolf [continuing]. I don't want to keep you sitting 
while we are----
    Dr. Lubchenco. I appreciate that.
    Mr. Wolf. Will Commerce reprogram funds in fiscal year 2011 
to minimize the schedule?
    Dr. Lubchenco. We have very little ability to do 
reprogramming at the scale that is needed to address the 
challenges of JPSS.
    Mr. Wolf. If you do not reprogram funds, when do you 
anticipate the first JPSS to launch?
    Dr. Lubchenco. That depends directly on when we get the 
resources and how much they are.
    Mr. Wolf. Well, then I guess the big question is, it is 
very possible that the level of funding you are requesting for 
the satellite program is just not going to be there in 2011 or 
2012.
    Are there lower priority programs in other areas, because 
we would like to help you do this if we can, that you fund at 
reduced levels in fiscal year 2011 and 2012 in order to ensure 
that there is not a gap in weather satellite data? Are there 
other satellite programs that could be further reduced to 
provide more resources for this?
    I am just trying to figure the reality, and the reality is 
the reality. And I do not know how well this has been accepted 
in the Senate either. Do you have any indication of how the 
Senate is thinking?
    Dr. Lubchenco. I know that your counterparts in the Senate 
Appropriations are concerned about this, at least individuals 
with whom I have spoken.
    Mr. Wolf. So then what would you say if there is a gap?
    Dr. Lubchenco. Congressman, we just do not have--these are 
such big numbers relative to the rest of our budget. It is very 
challenging to identify anything that could make up this amount 
as important as this program is.
    Mr. Wolf. Well, I can see you do not want to answer the 
question and I understand basically what-- I think it is 
something you are going to have to work with the committee on. 
And, you know, there is only going to be so much available. And 
I guess if you want to go ahead and we think this is such an 
important program----
    Dr. Lubchenco. Chairman, we are happy to, you know, sit 
down and work through the numbers with you and your staff. I, 
frankly, do not see how we can manage this. I understand that 
it is a huge challenge and I am really pleased that you 
appreciate how important this program is.
    Mr. Wolf. Mr. Fattah, you want to and I will----
    Mr. Fattah [presiding]. Let me stay on our satellite focus 
here. And I know the Chairman may go down and vote, and then he 
will come back and I will go down and vote.
    Walk me through this, right? The length of the service of 
the satellite would be what, the polar satellite?
    Dr. Lubchenco. I am sorry. Say that again, the----
    Mr. Fattah. How many years will we get benefit of the data 
from the satellite?
    Dr. Lubchenco. From JPSS?
    Mr. Fattah. Yes.
    Dr. Lubchenco. So typically our satellites, the polar 
orbiting satellites are expected to live five years. They have 
fuel enough for seven.
    Mr. Fattah. Okay. So five years, right? Prepare for the 
cost all in one year?
    Dr. Lubchenco. Correct. Well, so the costs, we receive the 
money, for example, in this year. We build the instruments. We 
build the satellite. We test them. We refine then. We do all 
this stuff. And then we launch them years down the road. So the 
money, the big bulk of the money is in the years of 
construction.
    Mr. Fattah. Yeah. What I am trying to figure out is I buy a 
car.
    Dr. Lubchenco. Right.
    Mr. Fattah. I bought a Ford Explorer, right?
    Dr. Lubchenco. Right.
    Mr. Fattah. I am going to drive it for a period of years. I 
am going to pay for it over a period of years. I am trying to 
figure out whether you are buying this satellite all cash on 
the front end----
    Dr. Lubchenco. No.
    Mr. Fattah [continuing]. Or whether there are costs 
associated in each year.
    Dr. Lubchenco. There are costs associated in multiple 
years, but the bulk of the costs are before the satellite is 
launched. There are continuing costs after it is launched.
    Mr. Fattah. Okay.
    Dr. Lubchenco. But it is a multi-year budgeting.
    Mr. Fattah. And there is no utility in looking at, for 
instance, leasing satellite space on other satellites that are 
commercial that are already in orbit or partnering up? I know 
you tried to partner with DoD.
    Dr. Lubchenco. Uh-huh.
    Mr. Fattah. That did not work out. That marriage did not 
make it all the way through. Or are there efficiencies in terms 
of or duplications with NASA that help us and help the chairman 
try to think through these budget numbers?
    Dr. Lubchenco. Right.
    Mr. Fattah. That is what I am--so that we can both get 
satellites and be able to afford them.
    Dr. Lubchenco. Yes. I understand. We do not have any 
duplication with NASA satellites. We partner closely with them, 
but it is not a situation of duplication at all. They do 
different things.
    We do already, excuse me, partner with many other 
countries.
    Mr. Fattah. You partner with Taiwan? You have some 
partnerships with Europe?
    Dr. Lubchenco. With Europe.
    Mr. Fattah. But in this particular instance, there is----
    Dr. Lubchenco. We do not.
    Mr. Fattah [continuing]. No substitute?
    Dr. Lubchenco. That is correct. It should be noted, 
however, that the Europeans have a polar orbiting satellite as 
do we and we all use data from both of them, but they are 
nicely complementary and we need both. They do not duplicate 
one another.
    Mr. Fattah. On the dollars. The Europeans use data from 
ours and we use data from theirs?
    Dr. Lubchenco. Correct.
    Mr. Fattah. Do we pay for data for theirs and do they pay?
    Dr. Lubchenco. No. We give them our data. They give us 
theirs.
    Mr. Fattah. Free exchange of information?
    Dr. Lubchenco. Correct.
    Mr. Fattah. All right. Okay. So there is no other----
    Dr. Lubchenco. I like the way you are thinking. I wish I 
could be more helpful in identifying----
    Mr. Fattah. Well, you know, in many of the areas of the 
Commerce Department, which is the department you are situated 
in, they do charge fees----
    Dr. Lubchenco. Uh-huh.
    Mr. Fattah [continuing]. For services that are rendered for 
people who are making money?
    Dr. Lubchenco. Correct.
    Mr. Fattah. So I am just trying to figure out whether there 
are some ways inside NOAA----
    Dr. Lubchenco. Uh-huh.
    Mr. Fattah [continuing]. For us to be as entrepreneurial. 
So this gap that we are going to have notwithstanding because 
of the CR, we are going to have a gap. Your plan in terms of 
data, and this has to do with both morning and afternoon and so 
on----
    Dr. Lubchenco. Uh-huh.
    Mr. Fattah [continuing]. Information, right?
    Dr. Lubchenco. Correct.
    Mr. Fattah. What is the plan just to deal with the gap? It 
has nothing to do with the money issue. But----
    Dr. Lubchenco. So we----
    Mr. Fattah [continuing]. Say we have a 12-month gap, no 
satellite data. How are we going to----
    Dr. Lubchenco. So for the period of time for which there is 
a data gap, we have the European satellite that would be 
providing half of what we have now. So it is not as if we 
have----
    Mr. Fattah. Have morning or afternoon?
    Dr. Lubchenco. They have a morning orbit.
    Mr. Fattah. Right. Okay.
    Dr. Lubchenco. Actually, they have a midday orbit. Sorry. 
And ours is afternoon. And so it is not that there will be no 
data. It is that there will be half as much data and, 
therefore----
    Mr. Fattah. But if you were trying to tell my colleague 
from Alabama in terms of challenges, the data is going to be 
off by a significant amount because of this gap----
    Dr. Lubchenco. That is correct.
    Mr. Fattah [continuing]. Right?
    Dr. Lubchenco. And, for example, our hurricane models, if 
we are going to pick on Alabama for a moment, our hurricane 
models----
    Mr. Bonner. I am glad I came back.
    Dr. Lubchenco [continuing]. Are dependent on information 
from both of those satellites. And we will have half of that 
information. And so the models for that for other severe storm 
warnings for Philadelphia----
    Mr. Fattah. You are going to be off by a day or two?
    Dr. Lubchenco. They will be off by a number of days and 
they will not be as high quality. So the track of hurricanes, 
we will not know that track as well. So you will end up 
evacuating a much larger section of the coast or 
underestimating snowfall by ten inches.
    Mr. Fattah. That is about a million a mile on the 
evacuation cost?
    Dr. Lubchenco. Correct.
    Mr. Fattah. But this gap is going to happen. There is no 
sense-- I mean, we are going to have a gap.
    Dr. Lubchenco. That is right.
    Mr. Fattah. But what I am trying to understand is, are 
there other things that we can do? You know, NASA is under the 
jurisdiction of the subcommittee and the chairman. I mean, do 
they have satellites that could make up some of this data over 
the period of the gap?
    Dr. Lubchenco. They do not have satellites that have these 
instruments----
    Mr. Fattah. Okay.
    Dr. Lubchenco [continuing]. That are flying in this orbit.
    Mr. Fattah. Okay.
    Dr. Lubchenco. This is unfortunately a unique satellite.
    Mr. Fattah. All right. I will yield back.
    Mr. Wolf [presiding]. Thank you.
    We understand that the NPP is supposed to launch in October 
2011 and remain viable for five years. JPSS is supposed to 
launch in September 2016. I understand it takes about a year to 
calibrate.
    Really what would happen if the NPP launches 
unsuccessfully? What are the contingency plans, if any?
    Dr. Lubchenco. If NPP is unsuccessful, we would have an 
even longer data gap than we are currently anticipating.
    Mr. Wolf. You know, one of the problems of all the 
administrators, and I do not want to talk now, people come who 
run agencies and sign contracts and say they are going to do 
things that do certain activities within so many years. Then 
they leave. And then, I mean, you can see the cost overruns 
that people have looked at. I guess that is why the Senate has 
some problems.
    So I think you have to look at the whole big picture. And 
you are having fewer satellites at a higher cost and, yet, 
whoever signed this at the time had these optimistic 
projections. And that is what you are really faced with. What 
do you actually do now to kind of deal with it?
    Dr. Lubchenco. Mr. Chairman, when I came into this 
position, this committee and others challenged us to fix the 
flawed NPOESS Program which had many of the challenges that you 
identified, cost overruns, delays and many problems that were 
really, I believe, inexcusable.
    This Administration made a serious commitment to fix the 
problems with that program and this JPSS Program is a result of 
those fixes. This was to be a transition year. We are on 
target. We have fixed the management problems.
    And one of the reasons that we are up against a wall right 
now is simply the past problems with that program have given us 
very little wiggle room at this point. That is why it is so 
dire.
    So you are right. Part of where we are now is a function of 
history and it is very unsatisfying to all of us.

                                NEXTGEN

    Mr. Wolf. Okay. Some other questions we will have. Let me 
go to aviation weather forecasting. NOAA budget includes an 
increase of $27 million to fund Next Generation air 
transportation, NextGen. That represents a third year 
development.
    Would you please tell the committee what improvements to 
the Nation's aviation weather system you expect as a result of 
this investment and describe the partnership you have with the 
FAA?
    Dr. Lubchenco. The Next Generation Program is a multi-year 
effort to significantly increase the quality and the timeliness 
of information for aviation. The request for this year is for 
NOAA's part, our contribution to that NextGen Program.
    It specifically will develop what is called the 4D weather 
cube which is envisioning essentially a cube of air and 
understanding and being able to model what happens in that 
parcel of air through time.
    And so it is much higher resolution information that will 
enable much more accurate and more timely weather information 
for the aviation industry that is so heavily impacted by 
adverse weather.
    The FAA estimates that two-thirds of the weather delays by 
the aviation industry could be prevented with more timely and 
accurate information about weather. And that is what NextGen 
would do.
    Mr. Wolf. What is your partnership--I am going to run out 
and vote again--but what is your partnership with FAA and how 
much are they putting into this?
    Dr. Lubchenco. Mr. Chairman, I do not have that number, but 
I will get it to you. It is a partnership. We provide our part 
of it in a program that was jointly designed with them, you 
know, taking and drawing on our expertise and utilizing--you 
know, they do their part of it and we do our part. And I am 
more familiar with our part.
    [The information follows:]

                      NextGen Roles--NOAA and FAA

    In the NOAA hearing transcript, Mr. Wolf asked Dr. Lubchenco to 
provide FAA's contribution, financial or otherwise, to the NextGen 
aviation weather program.
    To differentiate between NOAA and FAA contributions to the NextGen 
program, NWS is responsible for developing the 4-D Weather Data Cube 
infrastructure for NWS, populating weather information in the Cube, 
improving forecast accuracy and forecast capabilities, and connecting 
NWS infrastructure to the Federal Aviation Administration (FAA). FAA is 
responsible for developing the 4-D Weather Data Cube infrastructure for 
FAA, receiving weather information from the NWS, and disseminating and 
integrating weather information into decision support for effective 
National Airspace System management. This is in accordance with the 
NextGen Joint Planning and Development Office (JPDO) Integrated Work 
Plan (IWP). To minimize duplication, the NOAA NextGen Weather Program 
and the FAA's NextGen Net-enabled Weather (NNEW) Program continue to 
closely coordinate and align program goals and requirements to meet 
NextGen weather needs. During 2010, the FAA and NWS developed the Joint 
System Specifications v.42 to ensure alignment of technology 
development between agencies for meeting the NextGen weather initiative 
goals. The FAA and NWS completed and adjudicated the Integrated Program 
Management Plan for NNEW and the NOAA NextGen 4-D Weather Data Cube in 
December 2010. Both programs are currently developing an Integrated 
Configuration Management Plan, due in draft in June 2011, and an 
Integrated Risk Management Plan, slated for completion in fall 2011.
    FAA does not currently provide any financial contribution to the 
NWS NextGen aviation weather program. NOAA and FAA do have an agreement 
that FAA will reimburse NWS for NextGen weather capabilities that are 
above and beyond what NWS would otherwise have a requirement to 
implement; however, as NWS starts to implement Initial Operating 
Capability (IOC), FAA does not reimburse NWS for its NextGen 
activities.

    Mr. Fattah [presiding]. Can we just revisit for a second? 
This is a pocket of air? I know you are a great scientist, but 
could you help us? We are politicians. How do you----
    Mr. Bonner. Speak for yourself. What about statesmen?
    Mr. Fattah. You are going to take a pocket of air and study 
it over a period of how long?
    Dr. Lubchenco. So this is actually not my area of 
expertise, so----
    Mr. Fattah. Quantify a pocket.
    Dr. Lubchenco. So instead of modeling, let's say, the 
entire U.S. or, you know, a city or a state, as weather systems 
are moving across the country, there are all sorts of dynamics 
that affect where the weather goes, where a storm goes, how 
intense it is, whether it is snow or rain. And obviously there 
are things happening at different altitudes and different 
places. It interacts, you know, when it goes over a mountain 
range.
    Mr. Fattah. How much air are we talking about here in this 
pocket?
    Dr. Lubchenco. So I actually do not know the size of the 
cube, but I will get that to you. Why don't I just get you a 
description of what that 4-D weather cube is? I would be happy 
to do that.
    [The information follows:]

    Representative Fattah: Dr. Lubchenco offered ``So I actually don't 
know the size of the cube, but I will get that to you. Why don't I just 
get you a description of what that 4-D weather cube is? I would be 
happy to do that.
    Answer: As the lead agency for the Department of Commerce's 
participation in the multi-agency Next Generation Air Transportation 
System (NextGen), National Oceanic and Atmospheric Administration 
(NOAA) is responsible for providing aviation weather information to 
NextGen decision makers and users. The 4-Dimensional (4-D) Weather Data 
Cube is a weather information management and delivery system designed 
to support the time critical decisions made by managers of the National 
Airspace System. The 4-D Weather Data Cube consists of an information 
technology (IT) architecture (software, hardware, and communications 
circuits) and advanced weather forecast information content. The Cube's 
contents and its supporting services will provide users with access to 
global aviation weather information through a single access 
methodology. This concept allows each participating agency (Federal 
Aviation Administration (FAA), NOAA and Department of Defense (DoD)) to 
coordinate their existing, agency-specific efforts to fulfill aviation-
weather requirements to provide a mutually supportable, national--and 
eventually global, construct. This Federal effort addresses a way to 
satisfy public and private sector aviation weather needs while allowing 
each agency to maintain various independent capabilities consistent 
with their own requirements. A foundational element of this effort 
builds upon and takes advantage of evolving information technology 
advances.
    Modernizing the nation's current air traffic system, which is based 
on technology invented during World War II, is universally seen as 
critical to coping with the congested airspace over the United States 
and to accommodate growing traffic. Under NextGen, a greater level of 
automation will help air traffic decision makers manage a highly 
flexible system to maximize the use of available airspace. This system 
requires high resolution, accurate digital weather information that can 
be easily ingested by automated air traffic management systems. The 
NextGen 4-D Weather Data Cube will provide a consistent view of the 
weather relevant to aviation decision makers through a single access 
methodology, ensuring that all users have access to the same 
information.
    The NextGen 4-Dimensional (4-D) Weather Data Cube is fully 
described in the NextGen Concept of Operations and the NextGen 
Integrated Work Plan. This ``Cube'' is characterized by:
    (a) Improvements to IT infrastructure comparable to those already 
employed by other governmental agencies and by industry to provide 
greater and easier access to NOAA weather information for aviation 
decision-makers. Greater access to aviation-relevant weather 
information will facilitate better integration of this information into 
aviation users' decision-making processes.
    (b) More consistent aviation weather information, providing a 
common operational weather picture needed for consistent decision 
making across the National Airspace System.
    (c) Improvements to accuracy of weather information. The research 
and development (R&D) needed to meet the stringent weather requirements 
of NextGen will take an extended, multi-year effort to complete. This 
long lead-time R&D will improve the overall accuracy of aviation 
weather information and will provide forecasters with a more solid 
foundation upon which to add their expertise to move toward meeting 
NextGen requirements.
    (d) Improvements to aviation forecast generation techniques. NWS 
meteorologists require advanced tools and techniques to enable faster, 
more accurate generation of aviation weather information.
    While the 4-D Weather Data Cube is intended to benefit the aviation 
community, improvements to IT infrastructure, forecast accuracy and 
more advanced forecast processes will have wider reaching benefits to 
governmental and private sectors that require environmental 
information. These results will improve other NWS service areas, such 
as support to Emergency Managers and improved forecasts for severe 
weather notification or flood warnings to the public. NOAA, other 
governmental agencies, private industry, and the public will have more 
effective and efficient access to accurate, consistent, and timely 
weather information to drive their decision-making systems and 
processes.

                               Background

    The air transportation industry is an important element of the U.S. 
economy and weather impacts to the National Airspace System result in 
significant economic losses. The industry generates 5.4 percent of 
America's Gross Domestic Product, $640 billion in revenue and over 11 
million jobs. The Congressional Joint Economic Committee estimates that 
air traffic delays cost the U.S. economy over $41 billion in 2007, of 
which 70 percent are related to adverse weather. The FAA has determined 
that two-thirds of these weather delays are avoidable; more accurate 
and better integration of weather information into decision-making can 
potentially reduce the number of delays by 46 percent and save $19 
billion annually. As air traffic increases, delays and the associated 
economic toll will only increase. By 2025, US air traffic is predicted 
to more than double, which is not manageable by the current air traffic 
control system. The NextGen 4-D Weather Data Cube will provide the 
National Airspace System with authoritative and timely aviation 
decision support information in an effort to reduce air traffic delays 
from severe weather. By 2025, all aircraft and airports in the National 
Airspace System will be connected to the NextGen network and will 
continually share information in real-time to improve efficiency, 
safety, and enable the predicted increase in air transportation.
    NOAA is statutorily mandated by 49 U.S.C. 44720 to provide weather 
information to the FAA. In addition, the Vision 100--Century of 
Aviation Reauthorization Act (Pub. Law No. 108-176, 117 Stat. 2490 
(2003)) directs the Department of Transportation (DOT), FAA, Department 
of Commerce, National Aeronautics and Space Administration (NASA) and 
NextGen Joint Planning and Development Office (JPDO) to conduct 
integrated planning for research to operations to support NextGen. This 
investment represents a coordinated effort spanning two NOAA line 
offices with linkages to numerous IT, observation, and service 
improvement projects. NOAA NextGen investments will result in a 
significant increase in weather prediction and dissemination 
capabilities with wide-ranging benefits across the spectrum of NOAA 
product users. The weather information in the NextGen 4-D Weather Data 
Cube will enhance decision-support systems by offering consistent 
information at high spatial and temporal resolutions.

                   GULF OF MEXICO DISASTER RESPONSES

    Mr. Bonner. Mr. Fattah, so you do not have to worry, I am 
going to ask a Mobile, Alabama question.
    Mr. Fattah. I am going to come down to the experience of 
Trent Jones----
    Mr. Bonner. Good. We want you there.
    Mr. Fattah [continuing]. Little pocket of land.
    Mr. Bonner [presiding]. Madam Administrator, as you can 
appreciate with the vote series, I think we have got three or 
four additional votes, we are trying to be respectful of your 
time----
    Dr. Lubchenco. I appreciate that.
    Mr. Bonner [continuing]. And trying to get the chairman an 
opportunity to come back and complete the questioning that he 
has and other Members might have. Since I am the only Member 
here, let me ask you.
    You came down in January of 2010 and we had the pleasure of 
welcoming you to Mobile for the groundbreaking of NOAA's Gulf 
of Mexico Disaster Response Center.
    Do you have an update that you can share with us and, if 
not, could you give us one at your convenience that would give 
us some idea in terms of how the building is coming along, the 
staffing of it, and could we anticipate that it might be ready 
before the upcoming hurricane season?
    And since the chairman is back, I will just leave that on 
the record for a later response.
    Dr. Lubchenco. Perfect. I would be happy to give you that 
information, Congressman.
    [The information follows:]

    Representative Bonner in regard to Disaster Response Center: Do you 
have an update that you can share with us and, if not, could you give 
us one at your convenience that would give us some idea in terms of how 
the building is coming along, the staffing of it, and could we 
anticipate that it might be ready before the upcoming hurricane season?
    Answer: The DRC is scheduled to open in July/August 2011. The 
actual date of opening is dependent upon the remaining construction 
schedule. NOAA's vision is to use the DRC as a regional integrative 
force for disaster preparation and response, and foster federal 
interagency cooperation, federal/state collaboration, and directly link 
NOAA capabilities to the emergency management community.

    Mr. Bonner. Thank you.
    Dr. Lubchenco. Thank you.
    Mr. Wolf [presiding]. Thank you.
    I think we have covered hurricanes. We will have some 
additional questions.

                          CATCH SHARE PROGRAMS

    Now, on the fisheries catch shares issue, you are seeking 
an increase of $37 million to implement additional fisheries 
catch shares. I understand this has been very controversial in 
some fisheries.
    If catch share programs have been used, in use since 1990, 
why are they so controversial and has NOAA changed the way that 
they are implemented?
    And obviously there was a vote on the House floor too. And 
I am glad Mr. Bonner is here too. I had a question. We were 
talking to the staff yesterday.
    If people are concerned that the catch shares program is 
harming small fishing operators, could you reserve a portion of 
the catch for these small operators rather than having them 
openly compete against larger fishing vessels, basically almost 
a small business set-aside that you have at SBA, but that you 
would have for fishermen so that you would take some 
controversy? Have you looked at doing that?
    Dr. Lubchenco. Mr. Chairman, yes, indeed we have. It is a 
very viable model and one that is used in some existing catch 
share programs. This is an assertion that is often made about 
catch share programs, but the reality is any particular catch 
share program can be designed to prevent that from happening. 
So the design is of critical importance.
    Mr. Wolf. But we have a quote from the Environmental 
Defense Fund report on catch shares and the Environmental 
Defense Fund is a strong proponent of catch shares. It seems to 
support the concerns stating that as a result of catch shares 
programs, ``the total number of available crew positions 
decreased by half and the viability of some small scale 
operators in ports may indeed be reduced.''
    So, I mean, this is a concern that it fosters consolidation 
in the commercial fishing and drives out smaller operators.
    Dr. Lubchenco. Mr. Chairman, the real driver here is the 
fact that in many fisheries, there has been overfishing. And 
any attempts to end overfishing are going to have some 
consequences to some individuals. That situation exists 
regardless of whether catch shares is the management tool or 
traditionally managed other tools such as days at sea are used.
    Mr. Wolf. But have you not seen--I have seen a report that 
some of the smaller ones are having a harder time with this. 
The bigger operators can----
    Dr. Lubchenco. So, again, some catch share programs in the 
past have not had provisions to prevent consolidation.
    Mr. Wolf. Well, you know there was a vote on the floor?
    Dr. Lubchenco. I am well aware of that.
    Mr. Wolf. So the sentiment is, and I am just saying I do 
not know what my--I do not come from an area that is heavily 
involved----
    Dr. Lubchenco. Uh-huh.
    Mr. Wolf [continuing]. In that, but I respect both sides. 
And I think both make a legitimate case. The question is, would 
you be able to look at a--you know, and the Small Business 
Administration or DoD, they had small business set-asides----
    Dr. Lubchenco. Uh-huh.
    Mr. Wolf [continuing]. To do something whereby everyone 
knows they are somewhat protected because, I forget what report 
Leslie showed me, but it showed that smaller fishermen were 
having a hard time. And if they are, you know, you could bring 
a couple big guys in and knock them out. So that was the 
question of a set-aside.
    Dr. Lubchenco. Mr. Chairman, that is a very real concern. 
It is one that I share and is one that is fixable either when 
the program is designed or retroactively. And one thing that we 
have done in our Catch Share Policy is to require that the 
design elements be reviewed.
    Mr. Wolf. I am going to let Mr. Fattah finish.
    Dr. Lubchenco. Okay.
    Mr. Wolf. And then I will be right back. It is not a very 
good way to run a----
    Dr. Lubchenco. I understand.
    Mr. Wolf. Otherwise, you would be sitting here without 
anything to do for about an hour and a half.
    Dr. Lubchenco. This is preferable.
    Mr. Fattah [presiding]. If you want to finish the answer to 
the Chairman's question for the record, that would be good.
    Dr. Lubchenco. Okay. I will do that. Thank you.
    I think that there has been a lot of misunderstanding about 
catch shares. There are a lot of assertions that are simply 
untrue.
    One of them is that NOAA is making fisheries become catch 
shares. This is patently false. NOAA encourages the councils to 
consider catch share programs, but it is the actual councils 
themselves that decide whether a catch share program is 
appropriate for any particular fishery or not.
    So they are voluntary programs. There is nothing mandatory 
about them. They are voluntary programs and they are chosen by 
the councils that include fishermen on them. And so there are 
many, many fishermen that are champions of catch share 
programs.
    I think a lot of the concern about catch share comes from 
two corners. One is individuals concerned about what the 
initial allocation of shares would be and it is sort of the 
devil you know versus the devil you do not know. If there is 
uncertainty about what your allocation would be, you are 
nervous and you think it might not be to your advantage, 
especially if you do not have a strong catch history. So that 
is one source of concern.
    The other source is simply many recreational fishermen do 
not see any utility in catch shares for them because they are 
more appropriate for commercial fisheries.
    And so I think for both of those reasons, there is a lot of 
confusion about them. But the track record for catch shares is 
actually very compelling in terms of the economic and the 
environmental, the safety benefits of them.
    Mr. Fattah. Well, let me put into the record an article 
that appeared in the Boston Globe on this point. It is an 
editorial saying that this program has worked very well----
    Dr. Lubchenco. Uh-huh.
    Mr. Fattah [continuing]. In New England and articulates a 
little disagreement between my good friend, the governor of 
Massachusetts----
    Dr. Lubchenco. Uh-huh.
    Mr. Fattah [continuing]. The secretary of Commerce on the 
matter.
    [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Fattah. But it says that the fishermen in Massachusetts 
have had a 21 percent higher result than in 2010 under this 
program and that it is working very well and that the bugs 
should be worked out.
    I am not really a fisherman, so I do not know the details. 
I do know that you are spending about a billion dollars on 
this, the fish question, all of these various programs.
    And, again, I am going to be asking GAO to take a look at 
where there are opportunities for taxpayers to share in the 
burden but not carry the entire burden of any number of these 
programs.
    But I know that my ranking member, Mr. Dicks, would want me 
to ask you about salmon in Washington State so that you can put 
something on the record about where we are there. I know that 
your request is somewhere in the 50 plus million dollar range 
there, but if you could comment in his absence on both the 
hatchery efforts, and that would be helpful to me.

                             PACIFIC SALMON

    Dr. Lubchenco. So I suspect the program that Congressman 
Dicks is interested in is the Pacific Coastal Salmon Recovery 
Fund, PCSRF.
    Mr. Fattah. Interested is an understatement.
    Dr. Lubchenco. Fair enough. He is, as am I, a strong 
champion of that program. It has accomplished some very good 
things. It is a program that we continue to support.
    The amount that is requested in the fiscal year 2012 budget 
is less than the enacted, but it is a respectable amount that 
can do some very important things. I am a strong champion. I 
have seen firsthand much of the good that has come from that 
program. It takes a watershed approach and works with 
communities to recover habitats that are important for salmon.
    And salmon are one of those species where you cannot just 
manage the ocean side. You cannot just manage the land side. 
You have to manage them in an integrated way. And this PCSRF 
Program really focuses on the land side. And it is the example 
of the kinds of programs we need for many other endangered 
species, but it is a successful program.
    Mr. Fattah. Where are we at between where this is impacted 
in some ways by some of the treaties with sovereign Indian 
tribes and this hatchery issue between a more natural approach 
and some that takes a more, I guess, scientific approach for 
lack of a better term? How is that working out?
    Dr. Lubchenco. The hatchery program is very complex and 
there are lots of different dimensions to it as you indicated. 
So is that another understatement? Is that what you were going 
to say?
    Mr. Fattah. Understatement.
    Dr. Lubchenco. There are tribal issues. There are genetic 
issues in terms of impact of hatchery raised fish on wild 
caught fish. We are currently in the process of reviewing the 
comments to the document that was out for public review and are 
on track to have a revision of those that we would be happy to 
share with Congressman Dicks and anyone else on the committee 
who would be interested once we have made those changes.
    Mr. Fattah. And I guess you really cannot jump ahead and 
tell us whether or not there is some concern between how this 
is affecting the natural--I mean, you understand the Native 
Americans. Their assertion is that it is somehow, I do not know 
what the term would be, at least changing the species, I guess 
is the best way I would say it in a neutral way.
    Dr. Lubchenco. Congressman, there is good genetic 
information that hatchery fish in some instances have a 
negative impact on wild salmon. And so the management 
challenges are how do you get the best from hatcheries without 
the problems. That is the challenge. And that is the balancing 
act that we are trying to do. They can provide good benefit, 
but they also we now realize can have significant detriment. 
And so how do you have the benefit without the detriment? How 
do you minimize the detriment?
    Mr. Fattah. Thank you.
    I am going to give it back to the Chairman and I am going 
to go vote.
    Mr. Wolf [presiding]. You do not want to miss this one. 
Thank you, Mr. Fattah.
    NOAA is proposing a $346 million reorganization with regard 
to the Climate Service. The House Science Committee, as you 
know, has raised serious concerns about the establishment of a 
Climate Service. And the amendment to H.R. 1 prohibits funding 
of it.
    And so your budget proposes a new NOAA Climate Service 
built largely by taking resources away from your Office of 
Oceanic and Atmospheric Research. There are significant 
concerns about the wisdom of this, as you know, the Hall 
amendment that Chairman Hall as the chairman of the authorizing 
committee, which passed by an overwhelming vote. I forget the 
exact number.
    But please outline for us how you intend to ensure that the 
science mission of NOAA will not be sacrificed for or driven by 
politics in a reorganization like the one you have proposed.

                     CLIMATE SERVICE REORGANIZATION

    Dr. Lubchenco. Mr. Chairman, the proposed reorganization 
that would result in the Climate Service is budget neutral. And 
what it does is take existing climate sciences and services 
that are now in three different parts of NOAA and brings them 
together into a single new line office.
    Bringing them together can have great benefit because then 
they can interact more directly and that is the intent of 
creating this Climate Service. It is simply an internal 
reorganization to make things more effective.
    Mr. Wolf. But have you talked to Mr. Hall, Chairman Hall, 
because, I mean, what was the vote? Does anyone recall what the 
vote was? It was fairly substantial.
    Dr. Lubchenco. I understand that there is a concern about 
anything that says climate. And this particular formulation has 
been through a very exhaustive review by the National Academy 
of Public Administration at the request of Congress. And the 
review of NAPA, the National Academy of Public Administration, 
took a very hard look at is this reorganization a good idea? 
Should it look like the way NOAA has proposed or something 
else? What is needed to make it most effective, et cetera?
    And their report which was issued last fall said a Climate 
Service is strongly needed, would be of great service to the 
country. The way NOAA has proposed is basically the right 
structure. There were a few things they suggested and we have 
adopted their recommendations. And they agreed with us that 
creating the Climate Service would be in the country's best 
interest.
    One of the concerns that Mr. Hall has had has been that the 
science that remains in the Office of Oceanic and Atmospheric 
Research should remain strong. I could not agree with that 
more. One of my priorities is to ensure that NOAA is not only a 
strong science agency but continues to have strong, good 
science.
    Mr. Wolf. Well, we understand, though, that some of your 
outside stakeholders have opposed this. And I guess the 
question is, have you resolved this with Chairman Hall because, 
I mean, with the vote that you have now in opposition to it, I 
just--where are you with regard to that?
    Dr. Lubchenco. I have made every attempt to discuss the 
areas where there are disagreement. I believe that what we have 
proposed actually does address the concerns part from the 
word----
    Mr. Wolf. What about the stakeholders? We have been told 
universities and others who currently receive funding have been 
somewhat concerned about the quality of science generated by 
NOAA knowing that it will decline as private sector research 
dollars are reduced. And some universities have expressed 
concern. Most of the stakeholders, are they for this or opposed 
to it?
    Dr. Lubchenco. Most are strongly supportive of this. In 
fact, I am unaware of the ones of which you speak. I think 
there was confusion early on because the size of the line 
office that is named Oceanic and Atmospheric Research will 
decrease. It looks as though we are funding less science.
    Mr. Wolf. Right. We have the question that, in fact, if you 
look at the budget, it looks like it is being cut in half.
    Dr. Lubchenco. Correct. But, in fact, that is not the case 
because the same science that was in OAR is now in or would be 
in this Climate Service. So it is the same science. It would 
still be done. It will still thrive.
    Mr. Wolf. You can appreciate the concern, though, that 
people would have.
    Dr. Lubchenco. I absolutely can.
    Mr. Wolf. Okay. I will be right back.
    Jo, you can do whatever you want to do and I will be back 
in about two minutes.
    Mr. Bonner [presiding]. As the chairman was saying, 
likewise, OAR's Laboratories and Cooperative Institute programs 
are being cut nearly in half from about $109 million to $62 
million. Again, this is fewer research dollars going out the 
door to scientists.
    Why the dramatic shift in resources toward in-house 
research and can you help us understand how some might question 
the results of in-house research?
    Dr. Lubchenco. Mr. Congressman, or should I say, Mr. 
Chairman----
    Mr. Bonner. How about Jo?
    Dr. Lubchenco [continuing]. This is a matter of 
appearances. The reality is there is no change to the dollars 
that are going to science or to the dollars that are going out 
the door. The same science is being done. But instead of all 
being in a single structure, it is now split between two 
structures, the Office of Oceanic and Atmospheric Research and 
the Climate Service if this proposal is accepted.
    So the reality is we are not funding less science. We are 
not funding different science. We are not changing anything 
other than the fact that the climate scientists that were in 
OAR are now in the Climate Service.
    Other science remains there and will continue to thrive. 
The climate science would now be housed, I need to make this 
clear, we have not made these changes and we will not make 
these changes if they are not approved, but the proposal is to 
have the climate science be in this climate services line 
office specifically so that it can be more closely aligned with 
the delivery of services.
    So information to people, to communities, to businesses 
about what is happening months to years from now, that is 
climate service information. And if that is collocated with the 
climate scientists in this Climate Service line office, that 
interaction can be more productive and more effective.
    So what we are trying to do is in the best interest of good 
government, of reorganizing where there is a compelling need to 
do things in a way that is more effective, and, in fact, 
without any diminution of the amount, the caliber, the quality 
of the science that would be done.
    Mr. Bonner. So no less science, just----
    Dr. Lubchenco. No less science. It is no less science, no 
fewer bodies of people doing the science. They are simply 
reporting to a different boss, if you will.
    Mr. Bonner. Okay. How would you, though, address concerns 
that would be raised about reducing the peer review standards 
that extramural research undergoes before ideas are awarded?
    Dr. Lubchenco. There will be no change in any of the peer 
review that we typically do. That is a hallmark of holding our 
own feet to the fire and making sure that we have robust, good 
science. Peer review is an integral part of that and that will 
not change.
    Mr. Wolf [presiding]. We are back.
    Dr. Lubchenco. This is definitely multitasking.
    Mr. Wolf. We are really multitasking.
    Mr. Fattah.
    Mr. Fattah. Mr. Chairman, I know we have been around this a 
number of different times. I am not going to belabor it. But I 
would just reiterate that on the satellite issue and the gap, 
obviously it is a very problematic situation.
    And if there are other ways that you believe that there is 
any help in terms of the gap, you know, that the issue of 
shortening the gap is obviously that is totally in our control, 
but the gap itself and whether you think that there are other 
ways we can prevent or shorten this gap, I think that that 
information would be helpful.
    And, Mr. Chairman, I do not have any further questions for 
our witness today.
    Mr. Wolf. Okay. Thank you.
    Well, we have a couple more and then we will probably--I 
think there is a motion to recommit. It will be ten minutes, so 
a while.
    In February of 2011, NOAA released its draft aquaculture 
policy for public comment. According to this report, wild 
stocks are not projected to meet increased demand even with 
rebuilding efforts. So future increases in supplies are likely 
to come either from foreign aquaculture or increased domestic 
aquaculture production.
    According to NOAA's draft, about 84 percent of the seafood 
consumed in the United States is imported. Is that accurate?

                            SEAFOOD IMPORTS

    Dr. Lubchenco. Yes, sir, I believe so.
    Mr. Wolf. And where is it mainly imported from?
    Dr. Lubchenco. Mr. Chairman, it comes from many other parts 
of the world.
    Mr. Wolf. What are the top five?
    Dr. Lubchenco. Asia.
    Mr. Wolf. I mean, countries rather than----
    Dr. Lubchenco. I do not have a list, but I would be happy 
to get that to you.
    [The information follows:]

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    Mr. Wolf. Is China high?
    Dr. Lubchenco. It is certainly up there. I do not know 
exactly where it ranks.
    Mr. Wolf. And is Vietnam high?
    Dr. Lubchenco. I suspect for shrimp farming, it probably 
would be.
    Mr. Wolf. Do our people go over there and inspect? The 
record will not pick up a shake. You are going to have to tell 
us yes or no.
    Dr. Lubchenco. Mr. Chairman, I actually do not know what 
kind of inspection happens, if any. I will have to get back to 
you on that. The Food and Drug Administration is involved here 
as well which is why I am a little uncertain.
    Mr. Wolf. Given our continued trade deficit, what effort 
has NOAA undertaken to ensure that domestic aquaculture can 
keep pace or even outpace our foreign competitors?
    Dr. Lubchenco. Mr. Chairman we believe that aquaculture is 
vitally important and that it can be done in a sustainable 
fashion which is why we released our draft aquaculture policy 
for public comment.
    We believe that there are good checks and balances that can 
be utilized to ensure that aquaculture is sustainable and that 
it is vitally important to the Nation to be able to have 
sustainable aquaculture so that we have more healthy seafood to 
address part of the trade deficit and to be a complement to 
wild caught fisheries. And that is exactly what this 
aquaculture policy has been designed to do.
    Mr. Wolf. Are we doing better today than we were five years 
ago or about the same or what?
    Dr. Lubchenco. I will have to get back to you on that. I 
think it is likely that we are importing more than we did, but 
I will double check.
    Mr. Wolf. That is why I am so sympathetic to what Mr. 
Bonner wants to do. If you are sitting in a seafood restaurant 
in south Philadelphia or southern Alabama or down in the Gulf 
Coast or in Maine and you had a choice of taking fish from the 
Gulf caught by Americans, processed by Americans or taking it 
from China or from Vietnam with the health conditions, almost 
every American would say--and I would hope you could really, 
particularly building on what Mr. Bonner is saying, that you 
could really take it upon yourself to really be the initiator 
in the Administration to do this. It is not a Republican or 
Democratic issue. It is an issue of our country.
    I am sure if you were to dig or if any of the reporters out 
here were to dig and they would look at the Chinese firms and 
the Vietnam, the Vietnamese firms that are exporting in and 
then tie it into their lobbyists here in town, tie it into the 
big law firms that they have, you will find there are probably 
some or the largest law firms.
    Some of his people in the Gulf are lucky if they can afford 
to hire law firms to draft their will. And it is just out of 
balance.
    And I would hope that, you know, I do not think the amount 
of money you want to put in for this is really enough, and I 
would hope that you could really spur it on and to build again 
on that to get back to the committee on the whole issue of 
putting together one person to advertise and promote, so we can 
create American jobs. The Administration wants to create jobs 
here. The same thing would hold true along the Atlantic 
seaboard and, you know, the New Jersey area and places like 
that.
    But if you can supply, and I am anxious to see even before 
it gets to the record, so if you can tell us maybe by the end 
of the day somebody to call, what are the top five and what 
percentage do they--and also whether or not those facilities 
are inspected by the Food and Drug Administration or by NOAA, 
and I am sure NOAA does not, and how many times a year they 
inspect them. And I would appreciate that.
    Dr. Lubchenco. And just to be clear, Mr. Chairman, you are 
asking about just seafood imports regardless of whether it is 
wild caught or farmed?
    Mr. Wolf. Yes, ma'am.
    Dr. Lubchenco. Uh-huh.
    Mr. Wolf. For your educational program, you are 
dramatically cutting NOAA's education programs from $54 million 
in fiscal year 2010 to $21 million in 2012. Why are you doing 
that?

                       NOAA'S EDUCATION PROGRAMS

    Dr. Lubchenco. Mr. Chairman, I will verify this, but it is 
my recollection that what is not in the current budget are the 
congressionally directed funds that were added in last year. 
And so the request, I believe, is similar to what it was last 
year.
    I am a very strong proponent of our educational programs. I 
think they are very----
    Mr. Wolf. That is a big cut though.
    Dr. Lubchenco. I understand.
    Mr. Wolf. That is taking an engine off. You made the 
analogy earlier. That is taking an engine off if you are 
cutting the education programs.
    In the past, the ocean education activities of the JASON 
Project were funded through earmarks. Is the funding in your 
fiscal year 2012 budget request for competitive opportunities 
for groups like the JASON Project to apply for support for 
science education activities?
    Dr. Lubchenco. I do not know, sir.
    Mr. Wolf. Have you ever met Dr. Ballard?
    Dr. Lubchenco. Oh, yes. And I am well familiar with the 
JASON Project. It is terrific. And I know a lot of teachers, my 
sister included, who is a teacher who has participated in that 
program. It is a terrific program.
    Mr. Wolf. Well, then if you could answer that and then tell 
us how they would compete because if you cannot have an earmark 
on an issue with regard to science, the ocean, how would they 
compete in order to promote exploration and education with 
regard to NOAA?
    Dr. Ballard has noted that we have better maps to Mars than 
we do of the earth's oceans. And do you want to say something 
about that letter or give it to you?
    Dr. Lubchenco. I would, please. It is my understanding that 
JASON could compete for funding. I think the point is more that 
the funds are not as much as we would like them to be.
    Mr. Wolf. But if there is very little in the bank and 
everyone can compete, legally under the law, they would have 
the opportunity to compete. But practically speaking, they may 
be foreclosed.
    Dr. Lubchenco. Well, they would have the ability to 
compete.
    Mr. Wolf. Yes.
    Dr. Lubchenco. I think there are more good science 
education opportunities for oceans and atmosphere than we can 
possibly fund with the resources that we have.
    Mr. Wolf. I think the JASON Foundation has been funded for 
years through this committee. I think Mr. Regalua, if I recall, 
was the beginning. And I think they do tremendous work.
    I had an opportunity. I was invited to introduce Dr. 
Ballard at the Rachel Carson Intermediate School in Fairfax 
County.
    Dr. Lubchenco. Uh-huh.
    Mr. Wolf. And it was the same night I think of the seventh 
game of the world series. And I said to the people I will come, 
but I really do not think there is going to be very many 
people. When I walked into the school and into the auditorium, 
it was actually the gymnasium, it was packed and it was packed 
with young kids, some with their parents, but young kids who 
were really excited to listen to Dr. Ballard.
    We have very few programs that really bring young people in 
whereby they have that. So I would hope that you could be very 
sensitive as that goes on.
    Mr. Fattah. Mr. Chairman, that is one reason why we should 
revisit this congressional directive spending issue and maybe 
one day we will in the future.
    Mr. Wolf. One or two other questions and we will have a lot 
for the record, but I know there is going to be a vote pretty 
soon. And I do not want to keep you away.
    The National Ocean Service is also proposing a new $8 
million program called Working Waterfronts to assist fishing 
dependent coastal communities. Funds would support 
socioeconomic studies, community-based planning, and capacity 
building and economic development and transition projects.
    This sounds like an EDA program in NOAA. Should this be 
funded out of EDA and not out of NOAA? Shouldn't you take that 
money and put it into satellites?

                          WORKING WATERFRONTS

    Dr. Lubchenco. Mr. Chairman, we at NOAA collaborate closely 
with EDA on a variety of our programs and this would be a nice 
complement to the things that they do. This particular program 
is really focused very specifically on fishery dependent 
communities that are undergoing transition.
    Mr. Wolf. But shouldn't it really be in EDA, I guess? I 
mean, the question, how does this program rank in priority to 
the National Ocean Service program like Navigation Services?
    Dr. Lubchenco. They are both important.
    Mr. Wolf. Well, I know. Marine Sanctuaries. I mean, if we 
had to rank and----
    Dr. Lubchenco. I understand.
    Mr. Wolf [continuing]. Somebody said, okay, Madam 
Administrator, I know you do not want to tell us what one, but 
how do they rank, Marine Sanctuaries or this program? What is 
the most important?
    Dr. Lubchenco. That is a tough one. They are so very 
different.
    Mr. Wolf. But if you had to answer. I am not going to make 
you answer, but if you had to answer. The answer is Marine 
Sanctuaries or Coastal Zone Management Grant.
    Okay. We have another vote. I appreciate your testimony. I 
think the satellite issue will be a difficult one. I think you 
are going to have to work the Senate hard. I think everyone 
will help. I doubt that will be the amount of money that you 
really think. And so I think it is important for you to be 
talking to the staff about the reprogramming and with Mr. 
Fattah and see how we do it.
    The last thing is, and I would hope that you could respond, 
I am hopeful, and we did not want to surprise you, but now that 
we have raised the issue on the conferences on the--here is the 
letter that, we will just give it to you, that you can get an 
answer to us on or not even, but just tell people that we are 
going to move ahead on this summit or whatever you want to call 
it, it is your thing, to bring together all the people that 
should be interested in it who may not be and who may be on the 
East Coast including the Gulf and also on the West Coast and 
including in the whole issue of earthquakes also----
    Dr. Lubchenco. Uh-huh.
    Mr. Wolf [continuing]. Because I do not think you can talk 
just about tsunamis without earthquakes.
    Dr. Lubchenco. Correct. Right.
    Mr. Wolf. And hopefully someone from the media will call 
you by the end of the day to see if you are going to be doing 
it. But I hope you will. And we would be certainly open to, you 
know, the reprogramming. I do not think we are talking about a 
lot of money.
    I think you do have some of the best minds there, but to 
sort of sensitize communities that may not be sensitive to it 
and also involve in some of the Caribbean areas and also Mr. 
Serrano I know has an interest in Puerto Rico. So if you can 
get back to the committee and let us know what you are going to 
do with regard to that.
    Dr. Lubchenco. We will do that, Mr. Chairman. And as you 
can appreciate, you know, the budget uncertainties this year 
make everything a real challenge. And, you know, I think this 
is a good idea. We would like to work with you to figure out 
how we might do it.
    You know, simply reprogramming is not--the biggest 
challenge, I think, is just figuring out, given where we are 
this fiscal year and given the CR's, especially just the 
uncertainty with planning is a challenge for everything. That 
does not mean we will not try to do this. It just means--and I 
know you appreciate how challenging this year is.
    Mr. Fattah. Well, we can find, you know, the Pew Foundation 
or Rockefeller, someone to help. But I think the point is that 
we should probably do it versus have a calamity and wish we had 
done it.
    Dr. Lubchenco. I think that is a very good suggestion to 
look for partners. And I think that we should definitely pursue 
that idea.
    Mr. Wolf. Mr. Fattah has a good idea. Pew and the Council 
of State Governments funded the one on corrections. Did a 
pretty incredible job. And I think it would be good to partner 
with some of those groups on the outside. And I would imagine 
that you would be very, very anxious and very interested in 
doing that.
    Dr. Lubchenco. Uh-huh.
    Mr. Wolf. I thank you.
    Mr. Fattah, you have any other----
    Mr. Fattah. No. I think Rockefeller would also be 
interested, you know, but there would be plenty of, I think, 
people who would be anxious to support the Subcommittee's 
interest in this matter.
    Dr. Lubchenco. Uh-huh.
    Mr. Fattah. And I think the Chairman is right, which is 
that we need to get people together and talk and make sure that 
we are----
    Dr. Lubchenco. It is the right time, the right time.
    Mr. Fattah. It is a good time to talk before the problem.
    Dr. Lubchenco. Absolutely.
    Mr. Wolf. Good. Thank you.
    Thank you very much, and the hearing is adjourned. And, 
again, sorry.
    Dr. Lubchenco. Thank you so much. I appreciate your time.

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                                            Tuesday, April 5, 2011.

            OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE

                                WITNESS

AMBASSADOR RON KIRK, U.S. TRADE REPRESENTATIVE
    Mr. Wolf. The hearing will come to order. We welcome 
Ambassador Kirk here today, and I thank you for being here. We 
are here to discuss the Trade Rep's budget request for fiscal 
year 2012. Your budget request is $51.3 million, which is $3.4 
million greater than fiscal year 2011.
    We have a number of issues to discuss with you today, and 
particular issues with respect to China. If you compare U.S. 
and Chinese manufacturing output at current dollars China has 
surpassed the U.S. in manufacturing. Chinese manufacturing 
has--do you agree with that, that China has surpassed us? All 
the indications are that they have. Secretary Locke said that 
they had not. But where do you stand on that? Has China 
surpassed us?
    Ambassador Kirk. Well output----
    Mr. Wolf. We are going to put a lot of the information in 
the record so I just want, but where do you stand on that?
    Ambassador Kirk. I am sort of one of those ``whatever the 
numbers, the numbers are what they are.''
    Mr. Wolf. Oh, okay.
    Ambassador Kirk. I think in raw numbers that they have 
surpassed us. On productivity we have still a huge competitive 
edge.
    Mr. Wolf. But Chinese manufacturing has exploded and 
particularly since it was accepted into the WTO in 2001. Our 
trade deficit remains lopsided, totaling $252 billion in 2010, 
the largest trade deficit in the world between any two 
countries. The committee would like to get your assessments of 
the impact of this deficit and what can be done about it. We 
will have a number of questions on other issues on pending 
trade agreements, and things like that. But with that, I 
recognize Mr. Fattah for any opening statement. And then we 
will go directly to the questions.
    Mr. Fattah. Let me thank the Chairman and let me welcome 
the United States Trade Representative Ron Kirk, who has had an 
extraordinary career of public service, both as a mayor, and in 
a number of other capacities. But in this role, he has taken 
the lead in helping to increase in a positive way the exports 
of the United States around the world. I know you have done 
extensive traveling and a great deal of work and let me commend 
you for the work you are doing to help create American jobs and 
also the secure American jobs that exist now based on our trade 
with the rest of the world. And I look forward to your 
testimony.
    Mr. Wolf. Your full statement will carry in the record. You 
can proceed as you see appropriate, but welcome.

                  OPENING STATEMENT OF AMBASSADOR KIRK

    Ambassador Kirk. Mr. Chairman, thank you again for the 
invitation to come and discuss with you and members of the 
committee our proposed budget for fiscal year 2012; to Ranking 
Member Fattah, thank you for your kind words; other members of 
the committee. With over 95 percent of the world's consumers 
now living outside of the United States increasing exports is 
critical to putting Americans back to work and the United 
States back on a path of sustainable long term economic growth. 
With just over 230 employees and a couple of dozen detailees, 
USTR plays a critical role in meeting these goals.
    Over the past two years our small agency has enforced 
America's trading rights, held our partners accountable, 
negotiated agreements that will expand opportunities for 
American exporters and their workers. And we have accomplished 
these goals while maintaining strong fiscal discipline that 
saved or voided cost of more than $2 million last year alone. 
Mind you, this is against a budget of less than $50 million.
    We believe that the smart investment that the President's 
fiscal year 2012 budget proposes for USTR will have significant 
bang for the buck, even as our work continues to produce 
results. I would like to share with you three areas of our work 
and how it is related to our budget.
    First, we are negotiating high standard job creating trade 
agreements. I hope you know that in December we successfully 
concluded negotiations with the proposed trade agreement with 
Korea that is much better for our auto and manufacturing 
industries, but more importantly, will support a minimum of 
70,000 additional jobs and $10 billion to $11 billion in 
additional U.S. goods exports alone. We have made significant 
progress on negotiations in the nine country Trans Pacific 
Partnership, in which the U.S. has provided leadership in 
drafting what we hope will be one of the most dynamic regional 
trade negotiations in unlocking East Asia Pacific for U.S. 
businesses.
    We have also intensified, Mr. Chairman, our engagement with 
Colombia and Panama so that we can resolve outstanding issues 
relevant to those trade agreements and then submit them to 
Congress this year. As you know, Colombia represents an over $1 
billion market in new export opportunities, as does Panama. But 
we believe Panama is also critical to providing and increasing 
our access to growing markets in Latin America.
    In the Doha talks, we continue to provide the leadership to 
seek a more ambitious outcome that will provide meaningful 
market access for all of the members of the WTO. And we look 
forward to working with Congress this year to grant Russia 
permanent normal trade status so that U.S. firms and workers 
can fully benefit when Russia accedes to the WTO.
    Secondly, I would like to address your concerns about 
enforcement. At USTR we have made holding our partners 
accountable for their commitments through enforcement of our 
rights, one of the hallmarks of the Obama administration's 
trade policy. We have taken steps to stop China's use of so-
called indigenous innovation policies. We brought the first 
labor enforcement consultation ever under a U.S. trade 
agreement. And we have secured major wins at the World Trade 
Organization across the board for our farmers and ranchers. 
Just last week, for example, the WTO announced a second in a 
pair of decisions that constitutes the largest win ever of 
anybody at the WTO to the benefit of U.S. workers in the 
aerospace industry. This relates to our cases we have been 
prosecuting over Boeing.
    Third, we are creating new opportunities to strengthen 
trade relationships and eliminate barriers to U.S. exports. 
This include unexpected barriers, and I give you again an 
example. Last year we worked with the Department of 
Agriculture, and Commerce, and others to successfully reopen 
markets from China and Russia and Indonesia and others to U.S. 
pork exports after the H1N1 scare. These countries collectively 
represented over $900 million worth of exports to our pork 
producers in 2008.
    Through all of these efforts we are on pace to achieve the 
President's ambitious goal established in the National Export 
Initiative to double U.S. exports by the end of 2014 and to 
support the creation of two million additional jobs here at 
home.
    Our budget provides us the necessary resources for USTR to 
implement a robust trade agenda that boosts American exports, 
and it does so in a fiscally responsible manner. The 
President's $3.4 million increase for this nimble agency in 
2012 can have significant returns for our economy. As the 
President makes prudent investments at USTR we also ask 
Congress to join us in making smart investments in America's 
workers. Trade adjustment assistance helps us do that by 
putting Americans back to work and providing training to help 
prepare them for the challenges of the 21st Century. Likewise 
our preference programs, the General System of Preferences and 
the Andean Trade Preferences Act, also merit renewal we believe 
for as long as possible. Both of these critical programs not 
only help foster economic growth among some of the world's 
poorest countries but just as importantly they help create well 
paying jobs here in America.
    In closing, opening new markets, enforcing our trade 
rights, and addressing trade barriers in existing markets 
supports businesses and workers and communities all across the 
United States. USTR will continue to use the resources you 
provide us as wisely as possible to support these important 
objectives. I look forward to our dialogue today, Mr. Chairman. 
At this time I am welcome to take your questions.
    [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
                 VACANCIES IN IP ENFORCEMENT ATTORNEYS

    Mr. Wolf. Thank you very much. One such shortfall that we 
have heard about in the past was intellectual property 
enforcement attorneys. Are all the vacancies filled in that 
area?
    Ambassador Kirk. I know that we have filled two of those, 
Mr. Chairman. I think we are at full capacity, but we may still 
be trying to fill one of those. Unfortunately, I think for me 
at least, one sign the economy is turning around is the speed 
at which the private sector is beginning to raid our very 
talented staff. And as you know, in IPR that is a critical 
area. But we have brought on board two very talented lawyers. I 
will, if I can check with my staff and maybe give you a more 
precise answer?
    [The information follows:]

    The Office of General Counsel has three GC attorneys assigned 
during FY 10 and 11 to cover IPR issues: one GC staff attorney full 
time, one GC staff attorney part time, one detailee full time.
    The Office of Intellectual Property and Innovation has 7 policy 
staff, of whom 2 are designated Attorney-Advisors.
    The overall staffing of 7 has been consistent for the past three 
years. The designation of 2 of the slots as attorney-advisors is a new 
development this year.

    Mr. Wolf. Sure. Would you outline for us USTR's presence in 
China? How many positions are there? What are they doing? Does 
your budget seek to send any additional staff to the China 
office?
    Ambassador Kirk. China, we have a very modest presence, if 
I can be honest. We share space in a mission provided by the 
State Department.
    Mr. Wolf. How many?
    Ambassador Kirk. We have I think at most three or four 
full-time employees in that office. But----
    Mr. Wolf. Should that be beefed up?
    Ambassador Kirk. You know, if I can couch this with the 
recognition that I think the events going on outside this 
committee room today magnify the challenge before this Congress 
and administration to make sure we have a budget that lives 
within our means. And the easy thing for me to come and say, 
``Do we need more people?'' Is yes to everything. But all of 
the work we do with China is not just contained in that office. 
So I think you have to balance that against the staff that we 
have within our office here.
    Mr. Wolf. But there is nothing like being on the ground at 
that time, seeing, feeling, listening, touching, speaking the 
language. And so we are not necessarily increasing. We are not 
talking about spending a lot. But would it be helpful to have 
more in China? Is this the high water, low water mark that USTR 
has had in China?
    Ambassador Kirk. Well for us it would be the high water 
mark. You know we, as you noted in your introduction, we are a 
very small agency. You know, literally roughly forty, fifty 
years old, and really only been over 200 employees within the 
past decade or so. And so we have gone from having just one 
employee in China to now having two or three.
    But I would say one of the things we do very well, we rely 
very heavily on the cooperation and resources we get with the 
State Department, with the Commerce Department, and with the 
U.S. Department of Agriculture as well. We often forget that 
the Department of Agriculture, I think, has over ninety offices 
around the world. So we try to be smart and economical about 
leveraging all the resources the United States has on the 
ground.

              HUMAN RIGHTS AND RELIGIOUS FREEDOM IN CHINA

    Mr. Wolf. Earlier this month the USTR published its 2011 
trade policy agenda and 2010 annual report. This report is 443 
pages long, yet the committee did not find any references to 
human rights or religious freedom in China. Similarly, the 
USTR's 2010 report to Congress on China's WTO compliance does 
not reference human rights or religious freedom. Does USTR have 
any interest in promoting human rights in China?
    Ambassador Kirk. Well let me say the Obama administration 
has very strong interests in the issue of human rights in 
China. But as head of this agency we are expressly tasked in 
terms of our relationship with China at looking at the 
commercial relationship. As I am sure you know, the State 
Department heads up our dialogue with China as it relates to 
human rights. We do follow that in an ancillary manner, 
particularly through our participation in our strategic and 
economic dialogue. But my responsibility that you have tasked 
me with as a Congress is to make sure that we almost singularly 
focus on how we can expand economic opportunities and address 
barriers to U.S. businesses and exports.
    Mr. Wolf. But by comparison on the English language website 
of the Chinese Ministry of Commerce, their agency responsible 
for trade, there are over sixty references to human rights. If 
the Chinese can put up 13,000 pages mentioning human rights, 
should not the USTR at least have it as a factor? As I look 
through some of your testimony, you are very heavy into climate 
change. I read the testimony, looked through it last night, I 
have it marked up here. If you can get involved in climate 
change, could you not get involved in human rights and 
religious freedom, which has a major impact on trade and all 
these other issues?
    I mean, you probably were at the White House, I would 
assume, when Hu Jintao came? Were you not?
    Ambassador Kirk. Yes, sir. I was.
    Mr. Wolf. At the very time Hu Jintao came to the White 
House the 2010 Nobel Prize winner was in jail in China. And his 
wife was under house arrest. So trade dominates and drives a 
lot of that. So if the Chinese could reference it, over sixty 
references to human rights, would it not be appropriate for the 
USTR to at least factor this in?
    Ambassador Kirk. Mr. Chairman, first of all we very much 
share your concerns about human rights. And I know the 
President and Secretary of State have spoken not only to their 
concerns about the treatment of the Nobel Prize winner, but 
more recently the arrest of others. But I took an oath when I 
was given the privilege of being confirmed by the United States 
Senate to conduct myself in a manner consistent with the charge 
in the Constitution, and the mandates of this Congress.
    Now if this Congress were to expand the responsibilities of 
our office to include human rights, then we would do that. They 
are addressed, I want to make it plain, they are addressed by 
the administration. Our relationship, as you know, with China 
is complex enough that it involves the work that we do on the 
trade front at USTR, the work of Treasury on currency and 
macroeconomic matters, the work of our State Department, and 
Defense on security and others. And I mean, I can only state to 
you what I said. Within the overall construct----
    Mr. Wolf. Did your oath deal with climate change?
    Ambassador Kirk. No, but our oath does give me the 
responsibility to carry out----
    Mr. Wolf. But that is in, that is in your materials, 
though.
    Ambassador Kirk. But in our mandates and in the work that 
we do----
    Mr. Wolf. I believe it is even in your testimony about 
climate change?
    Ambassador Kirk. I do not think I mentioned anything about 
climate change----
    Mr. Wolf. In your submission to the Congress?
    Ambassador Kirk. I am not sure that we addressed climate 
change specifically as much as we addressed climate within the 
context of the work that we do to secure and address in our 
trade agreements to reflect those values we have on labor and 
the environment. It is contained within that context.
    Mr. Wolf. The USTR budget request places a large emphasis 
on labor rights. The request notes that the administration 
brought a labor case against Guatemala, worked with the 
Panamanian government on labor rights issues, and made progress 
on a plan to address labor issues in Colombia. Your budget 
submission appears to omit labor rights in China. What have you 
done with respect to labor rights in China?
    Ambassador Kirk. In every engagement that we have with 
China, whether it is through direct bilateral dialogue with, 
between President Obama and President Hu, or our participation 
in the strategic and economic dialogue, which is led by 
Secretary Geithner and Secretary Clinton, or our direct JCCT. 
When we have issues, labor issues as reflected in trade issues, 
we raise those with the Chinese in every one of those four 
occasions.
    Mr. Wolf. But your budget submission, the report request 
notes the administration brought a labor case against 
Guatemala, worked with the Panamanian government on labor 
rights, made progress on a plan to address labor issues in 
regard to Colombia. But it is silent on China. Now China has 
one of the worst human rights and workers rights records in the 
world, bar none. Probably at the very, very top. You have done 
activity in Colombia, activity with the Panamanian government, 
activity in Guatemala, and nothing with regard to China.
    That does not seem really appropriate. It seems almost--
personally I believe, and if I, and I am not taking issue, we 
are not going to get into it, but I just want to, for the 
record, if anyone is listening or ever reads this record. This 
administration has a very poor record with regard to human 
rights and religious freedom in China. There are a number of 
Catholic bishops that are in jail today that no one speaks out 
for. There are hundreds of house church leaders that are in 
jail today that no one in the administration speaks out for. 
The person who designed the bird's nest stadium in China, which 
I have seen, was arrested the other day, taken away. And only 
when it was quizzed at the State Department did a spokesman say 
anything. And no one in a political position, and no one in the 
administration, has said anything. They have pretty much 
plundered Tibet. They have destroyed the Tibetan culture. Hu 
Jintao was the one who put together that policy. They have 
persecuted the Uighurs, the Muslims. And so in some respects, 
the human rights record of this administration with regard to 
China is one of the worst, I think, since I have ever seen us 
be engaged with regard to human rights in China.
    But there was no, back to workers rights which I know is 
part of your effort, there was none with regard to China. Do 
workers in China have the right to organize independent labor 
unions?
    Ambassador Kirk. I am not sure if they do, but it would not 
surprise me if they do not. Mr. Chairman, and I do not want to 
belabor the point. I think you made your point and want to move 
on. One difference in terms of our engagement with China and 
the other cases that you reference in our budget is that we 
have free trade agreements with Guatemala, and we have proposed 
free trade agreements, as you know, with Panama and Colombia. 
And that dramatically increases the tools and resources that we 
have to pursue them under those. The engagements that we are 
pursuing under those are for violations of not complying with 
the standards with those FTAs. We do not have a free trade 
agreement with China.
    Mr. Wolf. Well we did not have one with the Soviet Union, 
and yet during the Reagan administration the Trade Rep spoke 
out on these issues of human rights. And every time someone 
from the cabinet would go to the Soviet Union they would 
attempt to meet with dissidents, they would raise these issues 
of workers rights. Lane Kirkland, who was head of the AFL-CIO, 
was one of the champions on this issue of workers rights. And 
so we did not, the Reagan administration did not have an 
agreement with the Soviet Union, yet advocated for human 
rights, religious freedom, and workers rights. And Lane 
Kirkland, with the AFL-CIO, was an advocate, one of the best we 
have ever had, on this issue. And yet we had no trade 
agreement.
    So I do not think we can just say simply because we have no 
trade agreement that we will never advocate. You know, silence 
is almost an advocation if you refuse to raise something when 
people are being persecuted. And silence of your friend is 
terrible. And so the dissidents who were speaking out, those 
who want to work, and organize, and have labor reforms, are 
looking for the United States to advocate. And I think with all 
due respect the USTR ought to be somebody who is advocating on 
those issues. And if you could do it in Panama for workers 
rights then I think you could certainly do it in China.
    I am going to leave this. I might come back to it. But a 
prominent human rights lawyer, and you do not have to answer 
this if you do not want to, who I personally know. His name is 
Jiang Tianyong, who appeared before a committee we had. He 
testified before the Human Rights Commission, which I cochair, 
has not been seen or heard from since he was grabbed by police 
in Beijing on February 19th. His wife and daughter do not know 
his fate, or if they will ever see him again. It appears to be 
part of a broader crackdown by Chinese authorities on human 
rights defenders and pro-democracy advocates in the wake of the 
revolution in Egypt. I know the USTR has representatives in 
China. I would ask that you or your representative at least 
raise the Jiang case at the highest levels. Would you be 
willing to do that if I give you this here, and raise, have 
somebody in your office in China raise this?
    Ambassador Kirk. I will certainly bring this to the 
attention of our representatives in----

                      INTERNET CENSORSHIP IN CHINA

    Mr. Wolf. Thank you. I appreciate that. The great internet 
firewall of China is increasingly a favorite tool of repression 
and control. Limiting access to information has often been 
viewed as solely a human rights concern, delink them from any 
discussion of trade. But in November, 2010 a Google white paper 
pointed out, ``The internet is the 21st Century trading route. 
And so when it is impeded the commerce that passes through it 
is impeded, too.'' Is the USTR doing anything to address this 
issue? And is there any serious consideration being given to 
bringing a WTO case against China?
    Ambassador Kirk. Well let me first say that one, it is, 
just as a matter of policy, we do not publicly broadcast 
whether or not we are thinking of bringing a case with any of 
our trading partners, just because it, and particularly in 
cases with China, if I can be so candid. You telegraph that 
ahead of time, our ability to do the diligence we need to make 
that case is compromised. I can tell you we had extensive 
consultations with Google throughout their ordeal and worked 
with other partners in the WTO as well because of the very 
broad implications of the internet firewall, and have followed 
that closely. We did not get to the point where Google had 
asked us to pursue but we engaged them on that extensively and 
involved our partners from the European Union, Japan, and 
others in trying to get China to make sure that they kept that 
an open market.
    Mr. Wolf. Well maybe that answers this question, and maybe 
you can tell me offline. A recent Bloomberg Business Week 
article reported, ``The Office of the U.S. Trade Rep has been 
reviewing the idea of internet censorship as a trade barrier at 
least since 2007.'' Do you know what the status of that review 
is?
    Ambassador Kirk. That might be one of those that it would 
be more helpful to engage the committee off the record.
    Mr. Wolf. Okay. If you could, I would appreciate that. I 
have a number of others, but we will go to Mr. Fattah, and then 
back. So Mr. Fattah.

                     PRESIDENT'S EXPORT INITIATIVE

    Mr. Fattah. Thank you very much. Can you talk to us about 
the President's export initiative? And you indicated in your 
prepared testimony that we were moving towards meeting the goal 
that was set, to double exports. And can you talk about where 
we are on that and how that work is being done? And what more 
can be done? The committee has a number of entities under its 
jurisdiction, including the Commerce Department, for instance 
the Manufacturing Extension Partnership program, and a number 
of other entities that in certain ways are engaged in 
activities that could be beneficial to the export initiative. 
So if you could talk about where we are, and where you see us 
going?
    Ambassador Kirk. The good news is where we are. We are well 
on pace to meet that goal. Now I frame that, you know, with a 
bit, I may perhaps parentheses now just because of the 
extraordinary disruption of markets not just because of the 
horrific earthquake and tsunami in Japan, but if you combine 
that with the earthquake in New Zealand, and the floods in 
Australia, that creates a little bit of uncertainty there. But 
broad numbers, we are on pace. Last year was a very strong year 
for U.S. exports, up some 19 percent over the previous year. An 
incredible year in particular for our agricultural exports. We 
are on a pace, I think according to Secretary Vilsack if we can 
keep the pace this year we will have a record number, maybe 
$135 billion in agricultural exports.
    We have been working, the President has tasked us as you 
know, to have more collaboration than we have ever had before 
within the administration, recognizing that we cannot have any 
duplicating of effort or services. So within that, and part of 
I think our budget reflects that increase, is making sure that 
we have the ability to continue to do what we do best which is 
negotiate new market access. But particularly, I think, our 
budget reflects that we have then, people are beginning to see 
the value of the emphasis that we have placed on enforcement 
equal to what we do in opening new markets and when we enforce 
our agreements. For example when I came into office I sat down 
with our general counsel, asked him to give me a synopsis and 
review of every case we had pending at the World Trade 
Organization. And I know we spend a lot of time talking about 
China, but I was frankly stunned that by a huge margin it was 
not close. The largest single number of disputes we had were 
with the European Union.
    What troubled me more, particularly, and you were kind to 
mention my background as a mayor. In which, you know, I grew up 
in a world of retail politics. You do not have five years to 
solve something. We have cases pending seven, eight, nine 
years. We had a beef dispute that had locked us out of that 
market for twelve years. We got it resolved in three months. 
And since then our beef exports are back up almost 20,000 
metric tons, which is about $200 million in value. I can give 
you more examples of those, whether it is----

               PROPOSED REORGANIZATION OF TRADES AGENCIES

    Mr. Fattah. Let me drill down on this for a minute. Because 
both the administration, and I know that the Chairman has 
mentioned this a number of times, to think about how these 
agencies can be organized. There are a number of entities that 
are disconnected from your office or your department, like the 
Export/Import Bank and the Overseas Private Investment 
Corporation, that have a relationship to helping with exports. 
So for instance, in the Philadelphia area, you know, we took 
the Goldenbergs, they have a peanut chew, they make peanut 
chews. The world's best candy bar, anywhere in the world. And 
we brought in the Export/Import Bank, OPIC, now they sell them 
in forty-five different countries around the world. And we want 
to open up more opportunities. But some of these other 
entities.
    So the question is, since the administration is looking at 
reorganizing Commerce, and there is some talk of your shop 
being moved into Commerce. I mean, there are all kinds of 
discussions that you may or may not be able to get into. But 
are there ways that we should be thinking about restructuring 
the federal effort to be more supportive? As I would understand 
it, less than one percent of our businesses export. And of 
that, 57 percent of that only export to one other country. So 
we need to build up the focus of American companies that, as 
you have said in your testimony, more than 90 percent of the 
world's customers are outside of the United States. So we have 
to have a view towards doing that. But share with me what your 
thinking is around this notion of reorganization.
    Ambassador Kirk. Well as you know, in the State of the 
Union this year the President as part of his approach to making 
sure that we are as a federal government are going through the 
same exercises that American families are, of having to cut the 
cloth to fit the pattern, singled out an effort to make sure we 
are streamlining our efforts. And he singled out trade because 
it is touched by nine different agencies as a place we would 
start. He has appointed a task force headed up by Jeff Zients 
at OMB to look at how we might rationalize that.
    I can tell you that as part of the export initiative we had 
begun doing some of this anyway. And you mentioned the Export/
Import Bank. As a matter of course when we do export initiative 
road shows, which we have done, we always travel with Commerce, 
USTR, Export/Import Bank, and the Small Business Administration 
to try to bring a holistic approach to both educating 
businesses about opportunities and making them aware of the 
resources that are available. We have done that in New Orleans. 
We have done it in Illinois. We attempted to do it I know under 
Governor Rendell. He had a big export initiative. We are doing 
these all around the country and improving information access.
    With respect to government reorg my belief, and again 
building on my bias as a mayor, but more importantly my bias 
having served on three corporate boards, that if every three, 
four, five years you are not stopping and examining how you are 
doing it to see if you cannot be more efficient you are 
probably losing ground with your competitors. Now I say that 
within the broad framework that I think, and one of the reasons 
I have enjoyed my work at USTR contrasted to my work as mayor, 
it is a lot easier to get things done with 230 employees than 
15,000, 90,000. We can be nimble. We can be responsible. We 
engage businesses every day and can attack problems that they 
face, try to solve them sooner.
    We welcome this review. If there are ways we can strengthen 
that by partnering more thoughtfully, whether it is with the 
International Trade Administration at Commerce or others, I 
think we should welcome that. But that is a judgment frankly--
--

                              TRADES BLOCS

    Mr. Fattah. Let me ask you my last question in this round, 
and it will be a more general question. So you see the world 
now in which the markets are kind of aggregated themselves 
together as trading blocs. You mentioned the EU, and they have 
gotten beyond language and other barriers to gather themselves 
together in a way in which they could be a force economically 
in the world, these European countries. And you see now in, as 
we look at the world, particularly as we think about China and 
India and countries much larger than ours in terms of 
population. So as we see South America, and even the African 
continent, how do you see us as a long term matter? Not in the 
short term, but over the next ten, fifteen years, how do we go 
about approaching our interactions in the world related to 
trade? Right now we have been doing these trade agreements, 
right? Country specific. Do you see that at some point moving 
to a broader platform in which we might engage markets that are 
not bound by these kind of, these individual national 
boundaries?
    Ambassador Kirk. Well as we say in Texas, my friend, that 
may not be a question as much as it is an answer. Let me, if I 
can do two things. One, part of our mission of the export 
initiative was to try to move away from a tactical approach, of 
just sort of obsessing on, ``Are we going to do this FTA?'' to 
taking that broad look. And one, just to be frank, is where are 
the markets? And the best example that I can give you is that 
is the rationale behind our efforts in this Trans-Pacific 
Partnership. Recognizing most economists tell us this is a 
region that is going to dominate and drive global economic 
growth for the next ten to twenty years. It is a region in 
which there have been almost 200 trade agreements done among 
other economies in the Pacific, none of which included the 
United States. We thought that was unacceptable. So our work in 
the Trans-Pacific Partnership is a part of that.
    Secondly, when you ask about our competitiveness relative 
to the EU, we examined that. We do not often think about it, 
and I know among some, depending on where you live in the 
United States, we think of NAFTA as a dirty word. But the 
reality, NAFTA created an integrated manufacturing model in 
North America. And if you look at it in terms of continental 
competitiveness, what we gained, what we have learned from 
NAFTA has been helpful to us as we export to other markets 
around the world.
    Third, when you talk about emerging markets, that is what 
we are focusing on as part of the export initiative as well. 
And maybe in the interest of time, we will be submitting a 
report to Congress both on our overall progress in some of 
these strategies. I think that will be coming to you in the 
next several weeks.
    Mr. Fattah. We will look forward to your submission. Thank 
you, Mr. Chairman. I yield back.
    Mr. Wolf. Mr. Bonner.

                            EXPORTS TO CHINA

    Mr. Bonner. Thank you, Mr. Chairman. Mr. Ambassador, 
welcome. Let me pick up on I think an answer that you gave to 
Mr. Fattah, but also the original line of questioning about our 
relationship with China that was started by the chairman. I 
want to make sure that I have the numbers right. You said that 
the President's goal of doubling our exports to China by 2014, 
that--I do not want to put words in your mouth. We are well on 
our way to that?
    Ambassador Kirk. The question was about our goal of 
meeting, in the national export initiative. Which is our 
exports everywhere. That is not country specific. The goal is 
to increase our ability to export and, you know, within the 
broad framework of the President's strategy about winning the 
future. What he said in both this year's State of the Union and 
last year's is America has to make more. We have to save more, 
and we need to invest in our education, invest in innovation, 
and use that to sell more of what we make in these markets 
around the world. But I want to make it, that was not limited, 
that is not a China specific goal.
    Mr. Bonner. Well let us talk about China, though. Because 
China is certainly a big player in this conversation. Is it 
safe to say that we have a goal of increasing our exports to 
China?
    Ambassador Kirk. Absolutely. Yes, sir.
    Mr. Bonner. But how would that compare with the imports 
coming from China?
    Ambassador Kirk. Well that is our challenge. You know, it 
is one of those good news, bad news conundrums. Our exports to 
China-- and look, I want to make sure, we absolutely share 
every one of your concerns, frustrations about doing business 
in China. But the reality is, it is a market, it is an economy 
too big to ignore. The good news, our exports have exploded to 
China. They are now our second largest market. Our ag exports 
are going in every area. Now, the challenge is there is almost 
this inverse relationship. The better our economy does, the 
more we tend to buy from China. Some of it is because we are 
buying, you know, cheaper consumer goods that they tend to 
dominate the production of. But what President Obama said, what 
we focus on at every one of our engagements with China through 
the strategic economic dialogue and JCCT, is we think there 
needs to be a healthier balance in that. And we have advocated 
that in every case. And we believe, just by raw science, I 
mean, you see in our Census numbers. I think we are, what, 309 
million now? China is one-point-whatever billion. With their 
goal of moving 600 million people from an agrarian society in 
which they make in most cases less than two dollars a day, we 
think we offer them enough in a complementary way because of 
where we are in the manufacturing process and our productivity 
and innovation, if they will open up their markets and see us 
as a partner, and as they begin to develop more of a 
consumptive base model rather than an export model, we think 
within that that is a great way to help them grow, help us 
sell, and we should see a healthier, you know, rebalancing of 
that trade deficit.
    Mr. Bonner. Shifting gears but staying in the same area, 
you mentioned manufacturing. It is very important to every 
district in this country and to every state. Certainly to my 
district in South Alabama. But as a country we have lost 
thousands of manufacturing jobs in the last decade, tens of 
thousands, due in large part to unfair foreign trade practices. 
When we enter into trade agreements we expect our trading 
partners to live up to their obligations and to not dump their 
goods or provide government subsidies that distort trade or 
adversely affect American businesses. When these violations 
occur, and they do, we must stand up for our rates by 
aggressively enforcing our anti-dumping and countervailing duty 
laws.

                       KOREA FREE TRADE AGREEMENT

    However, it has come to some of our attention that there 
are some provisions in the trade remedies chapter of the Korean 
FTA that may affect our existing trade laws. Will these 
provisions-- three questions. Will these provisions change in 
any way how our trade laws are enforced? Secondly, if not how 
do you intend to inform the members of Congress of this? And 
then third, would you include language on this issue in the 
statement of administrative action that will accompany the 
Korean FTA when it is sent to Congress?
    Ambassador Kirk. I have not revisited that language in a 
while, but broadly speaking we have not had any departure from 
our overriding policy on application of countervailing duties, 
and anti-dumping laws in course, or any other FTA. And if I 
find out differently, Congressman Bonner, I will get that to 
you.
    Second, I would say on the issue of enforcement I do 
believe very strongly this is an area that the Obama 
administration has distinguished ours from previous 
administrations, Democrat or Republican. We felt very strongly 
that one of the legitimate concerns that we hear from Americans 
all over the country, and parenthetically if I might, Mr. 
Chairman, last year I made the deliberate decision that as 
much, as engaging as it is for me to go to Geneva and Paris and 
Africa that we were not going to be able to move America's 
trade agenda with me over there. And so last year I have spent 
for the most part traveling around the country. I think I have 
been to now sixteen states, and forty-five cities including in 
your state. And one of the biggest concerns I heard about trade 
policy, both from those of us who are more forward leaning, was 
people just felt like we were not enforcing the agreements and 
everybody else was gaming them. We have made enforcement a 
hallmark of our policy, just as we have negotiating new 
agreements. And I think we have a very strong record on that.
    But our frustration on the countervailing duties laws 
frankly is not here, but it is in Geneva. As you know we have 
had nine cases that we have rules against us in the manner in 
which we apply those. And we are 0 for 9 in those. And so 
Secretary Locke and I have been meeting with industries and 
others to see if we cannot fashion a remedy that meets the 
concerns of manufacturers but at the same time does not put us 
in jeopardy of being hammered the way we have been in the WTO.

                       INCREASES IN PRODUCTIVITY

    If I might also say, and I understand and I know there is 
the prevailing wisdom out there that most of the job losses in 
manufacturing have been from trade. I know there is an 
economist for everything but the reality. You have probably had 
five times as many job losses in the manufacturing sector due 
to the productivity than you have the trade, when you study all 
of the economic modeling. Trade has been a part of it, and that 
is one reason why we are so dogmatic about asking Congress to 
pass trade adjustment assistance. But the reality, one of our 
biggest challenges, we are very good at what we do. When 
manufacturing is up, and in the context of your question, Mr. 
Chairman, about China. Every American worker is about eight 
times as productive as their Chinese counterpart. We can 
produce with 11 million workers what it takes China 100 million 
workers to do. And so part of our challenge is making sure we 
continue to innovate and invest so we create the next 
generation of industries that we can dominate and continue to 
sell to these new markets.
    Mr. Bonner. We can produce them, but not at the same price.
    Ambassador Kirk. Well but we are producing, if we are on 
the cutting edge and ahead of them, and at the same time doing 
as we are. Asking countries to improve their laws and 
respecting intellectual property rights, combating piracy, we 
can create a world in which we can own that. And again, that is 
one of the reasons the President is focusing I think wisely on 
making sure that even as we try to make very difficult budget 
decisions we do not want to do things that hinder our 
competitiveness in the future. We have to continue to invest 
and research in development and innovation. Because that is 
where we are going to win the future.
    Mr. Bonner. And I would add just as an observation, we also 
have to look at the burdens we are putting on American 
manufacturers and American companies. When I got elected to 
Congress, I was not intending to give this aside, but when I 
got elected in 2002 I wanted to have some coffee mugs that had 
the seal of Congress and my name on it to give to our friends 
from Alabama who came up to see us. I had to pay $1.50 more to 
get a coffee mug made in America over one that I could have 
bought made in Mexico. I just did not think it looked good to 
put the Great Seal of the United States and made in Mexico at 
the bottom. But whether it is Mexico or China, therein lies 
part of the problem. Those companies have gone out of business 
because of added rules and regulations and burdens and mandates 
that we have put on them over the years. That is certainly not 
just during your tenure. Just finally, if you could share. You 
have been a mayor, so that is about as retail of politics as 
you can get in our country, and of an important city, 
obviously. How important, we talk a lot about exports and 
imports and trade imbalances. How important, though, in your 
current position is foreign investment? And I am going to go 
ahead and tee it up.

                     FOREIGN INVESTMENT IN THE U.S.

    Ambassador Kirk. You know in Alabama better because of the 
strength, not just in Alabama, you look in Alabama, South 
Carolina, Texas. You know, the notion that we are not making 
cars in America is not true. We are making a lot of cars. We 
are having production move, Mercedes Benz, for example, is 
moving either the E or C class----
    Mr. Bonner. C class.
    Ambassador Kirk [continuing]. Entirely to Alabama. Now our 
friends at Ford call me every week and remind me BMW sort of 
fudges the numbers because they exclude non-FTA partners. But 
one of the larger American automotive exports is the BMW X 
series, all made here in the United States. And then they 
export over 100,000-something cars. So we like the idea, and 
welcome the idea. Whether it is Germany, China, Brazil, of our 
partners bringing money here and doing it. We talk a lot about 
China. One of the issues we have engaged them on is this race 
for green energy. And our frustration, this Congress wisely has 
done a lot to try to incentivize the next generation of 
development of clean energy. But China sort of owned the wind 
turbine production. Well we fought with them, nudged them, and 
they have agreed one of the bigger investments they are going 
to make here, they are now going to move that plant here. I 
think in this case it is actually going to go in Texas, but 
that now means those 1,500, 2,000 jobs are going to be here. 
And so you can find examples.
    We just came back from Latin America. The President had a 
very successful trip to Brazil, and Chile, and El Salvador. And 
the Brazilian businesses are very shrewd, but welcome the fact 
we do not have any constraints on their investments. And we 
probably, you know, in your state I would guess you have got 
100,000 workers who are working for foreign-owned companies. 
That is good investment and we think that is a smart part of 
our trade policy as well.
    Mr. Bonner. Thank you. Thank you, Mr. Chairman.
    Ambassador Kirk. And you can correct me on whether it is 
the, I think, is it the Mercedes that is made in Alabama? Not 
the BMW----
    Mr. Bonner. It is Mercedes, Honda, and Hyundai, and Toyota 
truck engines. And quite frankly, fifteen years ago we did not 
make any automobiles in Alabama. And so the conflict that many 
of us have is, probably everyone around this table is Buy 
American. And yet the Ford Explorer that I just traded a few 
years ago was actually made in Mexico. I am not knocking Ford. 
I believe it is a great company. But you do have to look at 
those foreign investments and put that in the equation when you 
are seeing those are jobs. 55,000 people in Alabama have jobs 
in the automotive industry today that did not have them fifteen 
years ago because of those foreign investments. So it is part 
of the balance. Thank you, Chairman.
    Mr. Wolf. Thank you. Mr. Schiff.

                        TRADE BALANCE WITH KOREA

    Mr. Schiff. Thank you, Mr. Chairman. Ambassador, I want to 
ask you about a couple of areas, Korea and Russia. On Korea, 
what is your expectation in terms of the Korean Free Trade 
Agreement and its impact on our trade balance with Korea? You 
know, questionably our exports would grow to Korea but our 
imports would as well. Do you anticipate that Korean imports 
would outpace any increase in American exports to Korea? If 
that is the case, would the increased number of imports from 
Korea be displacing imports from other countries? And to what 
degree would they be displacing goods that would be 
manufactured here? And can you give us a sense of what 
industries you think win, and what industries you think are 
going to be adversely impacted by the trade agreement?
    Ambassador Kirk. Well if I can address Korea first. We 
believe, because the President was stubborn enough to not take 
the deal that we inherited on the table, that frankly a lot of 
people wanted us to just sign. And we went back and we got a 
better deal, in this case in the automotive sector. Because 
there was such an extraordinary imbalance in terms of the 
openness of our market and the access to theirs. But we think 
we have a much healthier agreement that is going to allow us, I 
think, and forgive me but when I get into numbers is when I get 
into the most trouble, Congressman. But I think our balance 
trade deficit with Korea is now about $10 billion. But I will 
get you a more precise number. We think we have the ability to 
correct that and have a much healthier relationship because as 
the President expressed it, the United States is now supported 
in the unique position, because our economy is so open and our 
tariffs are so low. In just about every trade agreement that we 
are going to negotiate going forward, including Korea, they are 
going to be moving from a base where in agriculture, for 
example, their average agricultural tariff is in excess of 58 
percent. Ours is at 6 percent. So that is going to be a huge 
win for farmers, ranchers, beef, soybean, across the board. We 
talk about----
    Mr. Schiff. So Ambassador is it your expectation, or is it 
the analysis of your office, that with the trade agreement our 
deficit with Korea would go down?
    Ambassador Kirk. It would certainly go----
    Mr. Schiff. Our exports to Korea would go up faster than 
any new imports from Korea?
    Ambassador Kirk. We believe they will, sir. And if I might 
say, the numbers that we have given you we do not produce. You 
know, the International Trade Commission does those 
independently. And in my opening I mentioned they estimate 
Korea is about an $11 billion opportunity. If you want a 
comparison, that is larger than the last nine free trade 
agreements we have done.
    Now what it does not capture is the opportunity in the 
service market, since you asked about what sectors. And Korea 
has a half a trillion dollar service economy. And we are seeing 
a lot of interest from everything from our express companies, 
banking, finance, insurance, architecture. But manufacturing, 
to Congressman Bonner's point, still dominates, is about 80 
percent of our exports to Korea. So we think there is a great 
opportunity for growth across all sectors.
    Mr. Schiff. And you know, because every trade agreement has 
this, what industries do you anticipate are adversely impacted?
    Ambassador Kirk. On the----
    Mr. Schiff. On the American side.
    Ambassador Kirk. On the, negatively?
    Mr. Schiff. Yes.
    Ambassador Kirk. Or positively? We did not revisit, to be 
honest. You will hear from some of your friends in Congress 
that they are still concerned about, they have grave concerns 
about the impact on the textile industry. But we did not reopen 
that particular provision. That is the one industry we have 
heard the most. You will hear from some discrete industries 
within ag. And just about every major agricultural association 
in the country has endorsed the Korean Free Trade Agreement. 
Some would have liked for us to get more in rice. There are 
some that wanted us to do more in fresh orange juice, I can go 
on. I mean, I can get to a level of detail that might numb you 
here. But we think on balance it is a very strong forward 
leaning agreement for the United States.

                    INTELLECTUAL PROPERTY IN RUSSIA

    Mr. Schiff. Let me turn to Russia. I understand that the 
administration may ask Congress to lift Jackson-Vanik as it 
applies to Russia, paving the way for PNTR. And that process is 
hand in hand with Russia's WTO assession. When the Vice 
President visited Russia last month this was a major part of 
the conversation and I think many members of Congress, myself 
included, would like to support PNTR but still have many 
unanswered questions about Russia's commitment to uphold its 
end of the bargain. And from my point especially, coming from a 
district that is so completely dependent on intellectual 
property. A lot of the studios and production houses are in my 
district.
    Russia has appeared on the priority watch list of special 
301 reports every year since its inception. I wrote to him 
along with my co-chair of the Anti-Piracy Caucus urging him to 
raise this issue. And just as one illustration, our letter 
highlighted VKontakte, a notorious Russian website, that you 
mention in your notorious markets report, and I want to 
compliment you on those reports which I think have a great 
impact, as one of the five most visited sites in Russia. It is 
popular for social networking but also because it features 
copyrighted music and video without permission or compensation. 
And you know, for me there has to be a level playing field if 
this is going to happen. And where some of our dominant 
industries in the export business, i.e. the entertainment 
industry, cannot compete because you have these rogue websites 
it is not a level playing field.
    Have you seen any progress from Russia on IP? Is there any 
reason to think when we have been basically trying to hold 
Russia's feet to the fire regarding WTO assession and PNTR that 
they need to improve their IP, and frankly I do not see much. 
Is there any reason why we should believe that if they do get 
PNTR they are going to change their behavior? Or frankly are 
they doing to feel that they got what they wanted, and did not 
have to change, and there is even less reason to do so after 
PNTR. Did any concrete steps come out of the meetings that the 
Vice President had with Prime Minister Medvedev?
    Ambassador Kirk. Well first of all Congressman, let me 
thank you. I know you were, you have been a leading advocate 
for stronger intellectual property rights enforcement. And we 
actually hosted a very successful roundtable with a number of 
your businesses that I understand you were helpful in 
facilitating. On Russia----
    Mr. Schiff. And I want to thank you and your staff for 
that, who were excellent.
    Ambassador Kirk. I appreciate your support of that.
    Mr. Schiff. And your deputy administrator was wonderful.
    Ambassador Kirk. There is nothing I can say that will blunt 
any of your concerns about Russia and their behavior. Now I can 
tell you it may seem counterintuitive but one of the reasons we 
believe it is important to have the largest economy in the 
world not in a rules based system in is that all of the things 
you expressed your frustration about right now we are very 
limited in our ability to hold Russia accountable because they 
are outside of the WTO. And one of the factors that weighs in 
favor of us asking you to do this, at least if we get them in a 
rules based system, as we have done with China and others, then 
we have the ability where the facts are appropriate to go and 
hold their feet to the fire and make that case.
    Now I would tell you that not only did the Vice President 
raise this on that trip. More importantly, if you recall 
President Medvedev was here last June and met with President 
Obama. And President Medvedev has been, you know, perhaps the 
most vocal proponent of the need for Russia to join the global 
economic community. And President Obama directed our office to 
work over the next several months to resolve our bilateral 
issues with Russia. A number of them were around the IPR issue. 
I can tell you in that forum we were very successful in getting 
Russia to adopt the commitments we ask them to, to strengthen 
their intellectual property regime. Their Duma has in fact 
moved on many of those. And part of our reason for encouraging 
this conversation on granting them Permanent Normal Trade 
Status is because of the good work we have done it is now more 
likely than not that Russia will finally accede to the WTO. If 
not by the end of the year, next year. And if they do, not 
withstanding all of our concerns, we then would have the unique 
situation, the only businesses that would not have the full 
benefit of Russia being in that system would be ours. So yes, 
we have those concerns. We made very good progress with them in 
the bilateral fora. But if we want to really reap the benefits 
of them we need to get them into a rules based fora such as the 
World Trade Organization.
    Mr. Schiff. Thank you, Mr. Ambassador.

                               CHINA PNTR

    Mr. Wolf. I am going to go to Mr. Austria. But you know, 
and you are so persuasive when you say that. Except when you 
look at the reality our trade deficit with China until they got 
in, they got, in the old days they called it Most Favored 
National Trading Status.
    Ambassador Kirk. Right.
    Mr. Wolf. They changed it because they wanted to confuse 
everybody. But PNTR. But once they got PNTR it got worse. It is 
just, and the numbers, our trade deficit with China alone was 
$273.1 billion. Since 1999 our trade deficit with China has 
increased nearly four-fold. So what you say, and I know you 
believe it, and I know it is logical and makes sense, but the 
reality was that that is how China really took off. I mean, and 
we used to hold them every year. We would give them a one-year 
opportunity, and then we could open up the prisons, and have 
people released, and put pressure. Now there is no pressure.
    And the other, and then I want to go to Mr. Austria, but 
the problem is, and I am not going to ask you if you will ever 
go out working for China. I am not going to ask you that. But a 
lot of your predecessors have gone out. And a lot of the 
American people have lost confidence in Republican 
administrations. R-E-P, I can spell it, Republican 
administrations. I mean, Bush made a terrible mistake when he 
went to China. There were Catholic priests and bishops being 
tortured in jail. And he was sitting in the stadium watching 
the venue for the Olympics.
    Now the guy who just designed, I had a question for him. I 
am not going to ask you. Just designed the Olympic stadium is 
in jail. He is missing. And we don't know where he is. So as a 
Republican, let me say, you don't get too offensive and say 
this guy is a Republican. He is coming after us Democrats and 
both administrations.
    But the American people have lost confidence, because they 
have seen prominent people in both administrations. Clark Randt 
who was our ambassador in China I believe is now working for 
the Chinese government.
    So when an auto manufacturer, laborer, AFL-CIO guy, UAW guy 
in Ohio, in Pennsylvania says, ``Hey, the powerful, the 
wealthy, they work in administrations and then they go out.'' I 
mean, you look at the number of law firms in the city and in 
New York City that are representing the Chinese. It is immoral. 
Now some will say immoral? It is immoral.
    I mean, when you have Congressman Chris Smith took holy 
communion from Bishop Su, he has never been seen since, and you 
can represent that government? That government that are doing 
cyber attacks against us? And that government that has--we had 
a meeting in China. I went over there with Chris Smith a month 
before the Olympics. And we had a meeting one night, a dinner 
meeting, with a lot of religious leaders. Every one but one got 
arrested on their way there and before they got there. And the 
one who made it was arrested the next day.
    Well the embassy never really spoke out on it. They were 
interested in it. They were sympathetic to it. But I don't 
think they wanted to sort of keep them from getting an economic 
opportunity later on. So the American people they see these 
numbers. And they say well I hear that same thing over and over 
and nothing ever changes.
    Apple, you probably have an iPhone; you probably have an 
iPod; you probably have an iPad, or if you don't I am sure a 
lot of people. Why can't Apple make them in the United States 
if the productivity--and you have been a very impressive 
witness. You seem like an awfully nice person. Every time I 
hear something good about you, it is a good--no, I mean it.
    Ambassador Kirk. I am going to try my best not to dissuade 
you of any of that for the remaining time I have--maybe I 
should--if you will give me permission not to speak for the 
rest of the hearing. Hopefully I won't--I won't do anything to 
dissuade you from that.
    Mr. Wolf. Why couldn't Apple do those jobs here in America 
based on the statistics that you gave us? Why couldn't they 
have them here?
    Ambassador Kirk. Mr. Chairman----
    Mr. Wolf. And we see the administration, and I want to get 
to you, but I just got to get this off my chest to say this 
thing. President Obama appointed Jeff Immelt, the guy from GE, 
as his job's guy. One they pay no taxes. GE paid no taxes. That 
is not good. That is not good.
    But secondly I saw an article in the paper three months 
ago, we will try to dig it out and put it in the record here, 
that GE signed an agreement with China to develop an avionics 
program that will really hurt Boeing. Now we want Boeing, and I 
appreciate the numbers you told me, we want Boeing to be the 
number one manufacturer, because I want to create jobs at 
Boeing.
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    Mr. Wolf. And so the American people see this. And so they 
say well here is Immelt. He is creating jobs in China. He is 
not paying any taxes. Steve Jobs and Apple now they are doing 
the iPad, the iPhone, the iPod in China. And they are taking it 
away from American workers, Republicans, Democrats, 
independents, people who just want to raise their family, 
educate their kids.
    And so I think there is a cynicism that really develops. 
And when they see high-level officials and people who came to 
town to do well, stay to do good, to make a lot of money, they 
get very discouraged.
    We find former ambassadors that are now working for the 
countries that they were supposed to be advocates for us for. 
We find it in the trade rep's office. I bet your alumni, the 
number of people that are going out now working for--and I 
probably shouldn't mention the law firms. I am tempted to but I 
won't. And I think--I don't know how you live with yourself.
    You know, I say when I leave here, and I have no intention 
of leaving soon, but when I leave here, I will never go lobby. 
And I am certainly not going to go on to lobby for a foreign 
power that arrests Catholic bishops, and puts house church 
leaders in jail, and has plundered Tibet.
    In 1997, I snuck into Tibet with a young Buddhist monk in a 
trekking group. And what they have done to Tibet. Hu Jintao, 
the guy that President Obama had that state dinner for, what he 
has done to Tibet.
    And there is the Simon and Garfunkel song, ``The Boxer.'' 
You know, ``man hears what he wants to hear but disregards the 
rest.'' And we can't disregard. So when somebody goes out and 
goes with a big law firm to represent the Chinese that are also 
spying against us and doing it.
    The number one supporter, and then I am going to go to Mr. 
Austria, I promise, the number one supporter of the genocide in 
Darfur--I was the first member of the House to go to Darfur. 
Genocide. Congress says it is genocide. The Bush administration 
says it. The number one supporter of the genocidal government 
of the Bashir administration, who is under indictment by the 
war crimes, is China.
    So you can leave, not you, a person could leave and go out 
and work for China. And so I think the American people are just 
saying wow. So, you know, hopefully, you know, you will do 
these things and make sure that we keep the jobs here and bring 
the jobs back.
    Mr. Austria now.
    Mr. Austria. And I thank you, Mr. Chairman, because I think 
you are hitting on some very, very important points.
    Ambassador, thank you for being here.
    Ambassador Kirk. Thank you, sir.

                       U.S. AND CHINA'S ECONOMIES

    Mr. Austria. And I want to follow up a little bit on what 
the chairman has said from an economic standpoint, because I--
let me ask you your opinion as to where China is economically 
compared to the United States. Have they passed us technology 
wise in your opinion? You know, they have now--I think most 
indicators show they have the second strongest economy.
    When you look at the deficits that we are running, if you 
look at the President's budget. I think it reduces the federal 
deficit to a low I think roughly of $600 billion in 2015. But 
then it starts expanding after the years after that, which 
means more borrowing, more spending.
    And China, you know, obviously controls a large amount of 
our debt. And how is that impacting us economically?
    Ambassador Kirk. Well first of all, Mr. Austria, thank you 
for your questions. You asked a number of questions. Let me try 
to break them down.
    One, in terms of where China is, I think we have been--to 
some degree we don't give ourselves enough credit for what we 
do. China's economy is growing. We think that is a good thing. 
I mean, look they have got 600 million people in China, another 
600 million in India, another 600 million in Africa, all living 
on less than $2 a day. You can see that as a threat. You can 
see that as an opportunity for the United States to help them 
grow those economies, build the middle class. So it is nothing 
for us to fear.
    But by a wide margin, I want to make this plain, we are 
still, by an extraordinary margin, the largest and most 
dominant economy in the world. Now the chairman had asked 
earlier about reports that China had surpassed us in 
production, manufacturing and production. In raw numbers, yes; 
technology, no.
    The evidence of that, every American worker in a 
manufacturing facility is eight times more productive than 
their Chinese counterpart. I think the numbers that we showed 
that for what it takes 11 million American workers to do, the 
Chinese have to take 100 million. So, I mean, we have to be 
careful when we just look at a raw number. But what they have 
right now is the ability they can throw 100,000 people. And I 
don't mean to make light of it.
    You know, I tell them in China you get promoted if you can 
take something that we do 10,000 workers in Mr. Fatah's 
district and you can do 100,000 workers in China. The only way 
you get promoted is if you can figure out how to do it with 
125,000 workers, because they have a premium on putting people 
to work in mass manufacturing where we have the edge.
    And where the President I think has wisely called for us, 
even as we make these tough decisions to continue our edge, is 
in innovation, in technology, in research and development in 
which China doesn't excel.
    Now what we have to do and what we have done, and it 
addresses a little of your question and the chairman's as well, 
we have to make sure we have a multi-pronged, very disciplined 
response to China in which we fight them on their lack of 
enforcement, of their intellectual property rights. We 
encourage them, as we have done, to make sure they combat 
piracy. We have to watch what they are doing on indigenous 
innovation.
    Our Treasury Secretary and the President engaged them on 
human rights, on currency, all of those things, because at the 
end of the day, with an economy with 309 million people versus 
a combined 3 billion people in India, Africa, and China, the 
United States is going to win by our ability to develop the 
products that services the technology that not only drive only 
growth but that are going to help them meet their objective to 
move people from poverty into a middle income.
    And we think our budget within the context of what I am 
here visiting with you about helps us drive our part of that.
    Mr. Austria. Let me ask you this. With those types of 
disputes, you are talking about intellectual property concerns, 
government procurement of market, the fact that we are so 
reliant on China to help finance our debt, is that--how is that 
impacting our ability to enforce and our ability to deal with 
them on these particular disputes, you know, on a level playing 
field or is it impacting it?
    Ambassador Kirk. Well it has not. And forgive me, I know I 
have a story for everything. The ranking member knows that I 
was a former mayor of Dallas. And most people----
    Mr. Austria. I can tell by your voice.
    Ambassador Kirk. Like our friends from Alabama, if you are 
from Dallas, Washington, you tend to be more forward leaning on 
trade. And I am proud of the record we built.
    But I said to the President, and I say in every hearing, I 
think one of the greatest things I have brought to the job is I 
married an extraordinarily talented and good looking woman who 
got her degree from the Wharton School at Penn but grew up in 
Ohio. And all my in-laws, and I have been married 23 years, 
that means I have had 23 years of going to Detroit, and 
Columbus, and Cleveland, and honestly I think I can more 
honestly see the other side of trade and your frustration, Mr. 
Chairman, in which I hear people that don't think our trade 
policy works.
    And when you ask China, our administration did something no 
other administration did with China, Democrat or Republican, we 
filed the first safeguard case last year over tires. And them 
dumping in this market. In seven previous cases, the 
International Trade Commission, separate us, had found similar 
circumstances, presented those to previous administrations. 
None had ever decided to pull the trigger. We did that. And the 
Chinese didn't like it.
    And I will tell you we were pilloried in the press. We were 
going to start a trade war. But we thought it was the right 
thing to do to combat all the cynicism the chairman said. And 
we still believe.
    That is why I talk so much about enforcement. For us to 
have a holistic balanced trade policy, which the United States 
has to. We can't grow our economy the way we want in the future 
if we think we can roll our self off from the 95 percent of the 
rest of the world who doesn't live here.
    But we do have to honestly address that cynicism, that 
concern the chairman and you mentioned. We think that is one 
area the Obama Administration has distinguished our self. And I 
am happy to come back. I don't want to drag it out.

                                 NAFTA

    Mr. Austria. Well let me ask you about, you know, another 
important part of that, and I am sure you hear it in Ohio, is 
NAFTA. What is the administration's position on NAFTA, or are 
what are your thoughts on NAFTA?
    Ambassador Kirk. We have worked under the directive of our 
three leaders to look at everything we can do in that to 
strengthen it and make it work better, particularly as it 
relates to our labor and environment provisions.
    I know in Ohio you are especially concerned about the 
labor----
    Mr. Austria. Well excuse me, sir. Well you have the 
President. When he was campaigning there as a Senator he was 
opposed to--I believe in NAFTA. And that is where I want to 
make sure that--maybe if that is not correct, please, you 
know----
    Ambassador Kirk. Well I will let you go back and speak for 
that. But I tell people I would like to believe his selection 
of me as U.S. Trade Representative, knowing the passion that I 
had for trade, was deliberate and not accidental.
    But what we have done, and we have worked with our 
Secretary of Labor, Hilda Solis, and our counterparts in Mexico 
and Canada, is looking at how we can strengthen that model and 
make it better. Beyond that we are doing a number of other 
things in NAFTA to recognize. There are a lot of ways we can 
increase trade. And NAFTA is still our largest trading 
partners, including for Ohio.
    For all of the criticism I know there is about trade in 
Ohio, and I have been there several times. I am going back with 
Senator Brown. I was there with the governor and others. A 
quarter of all our trade with Canada goes across that 
Ambassador Bridge in Detroit.
    So what we have heard----

                          AGRICULTURAL EXPORTS

    Mr. Austria. The theory I wanted to get to, and I apologize 
because of time, manufacturing as you know, you have been to 
Ohio, along with agriculture, is our number one industry in 
Ohio. So I want to also talk a little bit about agriculture, 
because that is very important.
    I know some of the other members have talked about the 
manufacturing side. But in my district, you know, I have one of 
the strongest agriculture industries that are represented in 
Ohio and I think probably across the country. There is a lot of 
agriculture in my district and a lot of agriculture across the 
State of Ohio.
    I believe that America has the best farmers in the world. 
And I have had an opportunity to see the production. And I 
think they can outgrow, and outproduce, and out compete any of 
our foreign competitors. But we have to give them, in my 
opinion, the legal framework in order to do that. In other 
words, level the playing field to give them an opportunity to 
do that.
    What is your office doing to promote the passage of the 
free trade agreements with, for example, Columbia, Panama, 
South Korea? And what impact will the upcoming trade agreements 
between South Korea and the EU, Canada, and Columbia have on 
the U.S. agriculture or exports if our own FTAs are not 
implemented?
    Ambassador Kirk. Well the good news is you are right. And 
our agricultural exports are very strong, Congressman. We are 
at the highest level this year, I mean for 2010, than we have 
been in almost 15 years.
    Secretary of Agriculture Tom Vilsack is somewhat bullish 
that if we can continue on the path that we are going, opening 
new markets, being rigorous in our enforcement, we have the 
potential to hit $135 billion in agricultural exports this 
year, which is extraordinary. That would be an almost, I think, 
a $17 billion increase. So we are doing well.
    Part of it is because we have brought a holistic approach 
to what we are doing in trade. And we work with the Department 
of Agriculture and Commerce every day. I mentioned the work we 
did to reopen markets after the H1N1 scare. I gave an example 
earlier of our resolving a long-time dispute with the European 
Union that got us back into that market.
    With respect to the three FTAs, as you know we have 
concluded our negotiations with the Koreans. That agreement is 
ready for this Congress to act on. And we have made that aware 
to our committees of jurisdiction.
    But the agricultural community, just about every sector of 
the agricultural industry, has supported and asked Congress now 
to move forward on course. Korea, I think the number are right, 
their average tariff on agriculture products in Korea is 58 
percent. Ours is less than 6 percent.
    So I think you can see agricultural will be a big winner. 
About half of those will come to zero almost immediately. The 
rest are going to come down over the next several years. So 
with respect to Korea, the agriculture community is very, very 
happy. Not only beef, but grains, and seeds, and others.
    We have intensified our work with Panama and Columbia. We 
believe those are great markets for agriculture. And we are 
very, very close to be in a position hopefully we can resolve 
those as well.
    Mr. Austria. And, Ambassador, I thank you for that. And I 
do appreciate the hard work you are doing. And I agree with the 
chairman. I think you personally are working hard. I understand 
this. And I appreciate that very much and you being here to 
testify in this committee.
    Mr. Chairman, I will yield back. Thank you for your time.

                         JOBS REPATRIATION BILL

    Mr. Wolf. Thank you, Mr. Austria.
    I want to follow up on one or two issues that the 
congressman raised. But, you know, I have a bill that I have 
asked the administration for over a year to get back to me. We 
have actually given a copy to Secretary Locke.
    And now I know I am a Republican member. And so probably 
they don't want to deal with a Republican member. But I have 
asked. And it is a good bill. It creates jobs. And what it does 
is it sets up a program of repatriation. We will repatriate 
jobs back. Not using punishment, but using a stimulus, and 
using taxes, and things like this.
    And so if you could take a look at it and see if it got 
lost behind a filing cabinet down there. Now the cosponsor in 
the Senate will be Senator Warner, Mark Warner. He is a good 
Democrat, good fellow. I can't get an answer out of the 
administration. It has been over a year.
    So if you could take the bill back. We will give you the 
number. But we want to introduce it, reintroduce it again. And 
what we are doing is at three different levels, basically no 
punishment involved. At EDA they can have an opportunity for 
grants to a locality that wants to bring a company and let us 
say from Mexico or whatever that water and sewer or something 
like that.
    Secondly, we are asking governors to change their tax code 
to give incentives to a company that returns. They have to be 
an American company, and they have to return. It is the 
repatriation.
    And lastly, we are working with Chairman Camp at the Ways 
and Means Committee to do the same thing. But if you could have 
someone look at that and give us some comments. We have been 
trying to get some thoughts, ideas. And a job is a job. A job 
coming back from Mexico, or China, or Bangladesh will be good 
for whatever political party you are in. So if you could do 
that for me.
    Ambassador Kirk. We will pass on your concern. And I think 
since you mentioned Chairman Camp, I think he will tell you for 
me that I don't particularly care a whole lot for partisanship. 
I care about fighting for America's rights and creating jobs. 
We have worked with him, and we worked very well.
    I am proud of the fact that it was because of the 
partnership we had with Chairman Camp and Ranking Member Levin 
that we were able to get a Korea agreement. That we had both 
strong support. And for the first time not only the 
manufacturers in the chamber but forward in the UAW.

                  NORTH KOREAN KAESONG INDUSTRIAL ZONE

    Mr. Wolf. Okay. We will get that to you.
    Now you set up the Korean issue. I want to get and ask you 
a question about that. And I support the Korean Trade 
Agreement. Let me just state again. I am a strong supporter.
    But this information I was given, maybe you can clarify it, 
with regard to the U.S.-Korea Free Trade Agreement, which I 
continue to support, could you discuss the issue of the 
treatment of products from the North Korean Kaesong Industrial 
Zone, the duty free processing zone where South Korean 
companies pay the North Korean government to have their 
citizens produce products for export to South Korea? Keep in 
mind they are gathering nuclear weapons----
    Ambassador Kirk. Right.
    Mr. Wolf [continuing]. And they have gulags there that when 
that government falls and the people see what they have done to 
the people it will be brutal.
    The employees in North Korea work under terrible conditions 
and are essentially used as slave labor. It is my understanding 
I have been told that the FTA currently would allow component 
products from Kaesong to be included in South Korean goods that 
would be eligible for export to the U.S. with preferential 
treatment.
    While the U.S. can stop products from North Korea from 
entering the U.S., that appears to only cover final products 
and not South Korean products from Kaesong products. Could you 
tell us if that is accurate or not? Because if we are taking 
something that we can import into the United States that was 
made by slave labor or violating workers' rights, that would 
not be good. Are you aware of that?
    Ambassador Kirk. I am aware of that. And this is a bit 
confusing, so if you will just give me a minute. First let me 
start here. Nothing in the Korea FTA makes a provision for 
goods from Kaesong to come in.
    More importantly, nothing in the Korea FTA changes U.S. 
policy and law relative to goods coming from North Korea to the 
U.S. Now there has been in place a long-standing policy that 
basically you cannot have goods, component goods, from North 
Korea come to the U.S. except for on a very limited exception.
    And this is, as I understand it, it is language that is 
administered by the Department of Treasury. That provision 
expired I think in February of this year. Treasury and State 
are in the process of updating that.
    But even within that, whatever exceptions there are are 
exceptions that Congress would have to approve. We didn't do 
anything. There is nothing I could do in an FTA that would 
override your congressional authority to say no goods from 
North Korea.
    Now the confusion, well not the confusion, one of the 
challenges there is language in the FTA that allows us to have 
a commission that would look at the issue of bringing 
components in from Kaesong. The commission would have to make a 
determination. They would want to ask for that exception. But 
the commission would only exist, and it would be essentially 
U.S. governmental officials and South Korean officials, but 
they wouldn't have the ability to say the goods couldn't come 
in. That commission would only exist for the purpose of saying 
we are going to recommend that Treasury hears an exception. And 
then Treasury would still have to come to Congress.
    The bottom line is unless Congress changes your mind and 
allows goods from North Korea to come in, nothing we do in the 
FTA changes that. The ultimate authority still resides in the 
U.S. Congress.
    Mr. Wolf. So those goods could not come in.
    Ambassador Kirk. Not unless this Congress was to make a 
determination. You would grant an exception under whatever this 
new standard that Treasury would present to you.
    Mr. Wolf. Well if you could give me a letter to that 
effect. And what I will do is send it to the Ways and Means 
Committee, and making sure, and give it to Mr. Camp, because we 
want to make sure that we certainly don't import goods made.
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    If you could just explain it. Okay. And just explain it, 
and say pursuant to the question and this is--these are the 
circumstances. And unless Congress did, they cannot. And then I 
will pass it on.

                    INTELLECTUAL PROPERTY PROTECTION

    Intellectual property issue: In 2010 the three largest U.S. 
companies by market capitalization were Exxon, Microsoft, and 
Apple with a combined market capitalization of nearly a 
trillion dollars. When two of these three companies, the 
biggest companies in America, are in the IP business, 
protecting intellectual property rights is crucial.
    Could you provide the committee your plans with regard to 
IP with regard to China enforcement? As Mr. Schiff, he is not 
here, with regard to Hollywood, with regard to some of the 
recording devices and others, is there--can you sort of flesh 
out what you are actually doing on IP?
    Ambassador Kirk. Yes, we are. We are attacking this on a 
number of fronts, because it is so critical to us. And I know, 
and I appreciate your kind comments about me, but I appreciate 
your work. I know this has been a matter of concern for you. 
And you have studied this.
    We raised this and confronted China with this in every 
form, both the strategic economic dialogue, the Joint 
Commission on Commerce and Trade, and President Hu's business. 
We had a number of we think positive steps forward. If I could 
give you three examples.
    One, I know you in particular have highlighted the use of 
pirated software by the Chinese government themselves. Well we 
have been banging on them to reduce that number to a more 
acceptable level if not have them use legal software for years.
    As a result of our advocacy on this, during President Hu's 
visit for the first time, they have agreed. They are going to 
have a campaign to encourage. And they are going to audit the 
use of legal software by their government. But more 
particularly at the sub-central level.
    Now the important things we got this year, because they 
have made this commitment before but never done it because they 
never funded it. So this year we got a commitment they would 
agree that they are going to increase their use of legal 
software. They are going to extend it to sub-central 
governments. And they are going to give them money to purchase 
legal software.
    And this is a huge, again, lost opportunity, since you 
mentioned Microsoft, for Microsoft. If we could just get that 
number from 92 percent down to 70 or 60, billions of dollars 
and thousands of jobs for us here in the U.S.
    Secondly, I mentioned the issue of indigenous innovation. 
It is one area that most concerns our American businesses, 
because China basically tries to force you to say you can have 
work, but we want you to move your factory here.
    Mr. Wolf. Right.
    Ambassador Kirk. Not only do we want you to move your 
factory here. Then we won't allow you to sell anything in China 
unless you agree that it is made. It is a license transfer. We 
have gotten them to agree to do two things. One is to de-link 
their legitimate, you know, efforts in government to try to 
foster innovation. But de-link that from government 
procurement, which is where most of their purchasing is done.
    And secondly, one of the commitments that they made when we 
granted them most-favored-nation status, now PNTR, was that we 
wanted them to join the government procurement agreement within 
the WTO. And they have drug their feet on that. They have 
agreed. They will submit a revised offer and join, you know, 
make an effort to join the Government Procurement Act by the 
end of the year.
    And we had a number of other areas I can--I feel like I am 
going on too long. We would be happy to go through them. We 
worked with them to make an agreement in their energy sector. 
They have an exploding investment in that. One of the 
requirements was non-Chinese businesses could only bid on that 
if they demonstrated that they had experience. But it had to be 
in China.
    Well we thought that was ridiculous. We have American 
companies that are building projects all around the world. They 
have now agreed they would take that relevant experience from 
around the world. And we made other progress on issues that----
    Mr. Wolf. When did that go into effect?
    Ambassador Kirk. That one would go into effect immediately. 
That they will allow us to bid on that and demonstrate that.
    Mr. Chairman, we share your frustration. We know we are 
going to have to continue to stay on top of China and monitor 
these. But the intellectual property rights area is one that we 
pay particular attention, not only software but copyrights and 
patents.
    And they do have a campaign that is being run by Deputy 
Vice Minister Yang Xueshan who oversees both their strategic 
economic dialogue and ours in which they are really 
highlighting the importance of recognition of intellectual 
property rights. But they are going to enforce it and bring 
people to justice.
    Now the challenge is what they always do. It is a six-month 
campaign. We are pushing them to try to make that longer. But 
slowly our best ally is the fact China is beginning to develop 
an indigenous innovation community that is putting as much 
pressure on their government to respect and protect 
intellectual property.

                             CYBERSECURITY

    Mr. Wolf. Have your computers been hit with cyber attacks?
    Ambassador Kirk. Not to my knowledge. I hope not.
    Mr. Wolf. When, and I don't want to put you in the spot 
here, but I want to ask you. When your people go to China, do 
they take BlackBerrys and laptops with them?
    Ambassador Kirk. We do not.
    Mr. Wolf. Good. And had there been instructions from the 
FBI? Have you been personally briefed by the FBI as to the 
activity?
    Ambassador Kirk. That might be a conversation perhaps we 
might more appropriately have in private.
    Mr. Wolf. Okay.
    Ambassador Kirk. But we are very, very careful.
    Mr. Wolf. Well let us have it if we can.
    Ambassador Kirk. Yes, sir.
    Mr. Wolf. So this is not just an okay. But okay I would 
like to have that with you.
    Let me go to Mr. Fattah.

                            EXPORT PROMOTION

    Mr. Fattah. Thank you, sir. I am going to ask one question. 
I have to step out and take a phone call in a second. But let 
me ask this one question. And you can supply it to the Chairman 
or to the committee.
    But I was out a few weeks ago in a neighborhood that the 
chairman would be quite familiar with over around 70th and 
Elmwood. I was at a place called CoverSports. Now the last 
question actually was about this global aggregation, because 
this is----
    Ambassador Kirk. You are not going to brief me in Cowboys 
and----
    Mr. Fattah. No, no, no.
    Ambassador Kirk. We are not going to go that far.
    Mr. Fattah. We are not going into that. CoverSports has 
been in Philadelphia for 100 years. They make tarp out in 
southwest Philadelphia. And it is a great story of a family-
owned business that has been out there. And they make the tarp 
for the Washington Nationals and for the Philadelphia Phillies.
    They only have one competitor, and it is in China. They got 
some new equipment under the small business depreciation----
    Ambassador Kirk. The tax credit?
    Mr. Fattah [continuing]. The deal that we did last year. 
And they bought some heavy equipment from Ohio that now allows 
them to make even larger pieces of tarp and do it more quickly. 
And they got some very significant innovation going on there. 
And they obviously are going to be here for another 100 years.
    But the point now is to get to the export side. You know, 
before they were getting beat from China dumping cheap tarps 
into the U.S. market. Now they are fine. And they are making 
tarp for a lot of the college teams.
    But this is the point, in terms of the President's export 
initiative, is that making the opportunities available for them 
now to start to compete around the world and not just here.
    And what I want to know is, I know we have all these trade 
agreements, and we got all these things we can and we can't do. 
We, through the Commerce Department, helped manufacturers with 
creating the efficiencies that you talk about when you compared 
the 11 million to the 100 million.
    But the question is, could you supply for the committee 
what it is that we can't do to help the manufacturing sector 
because of trade agreements? You know, where we get too close 
to the line, or what we can do, or a little bit of both, 
because I think that we are very interested in what we can do. 
We have some 1,300 manufacturers in Philadelphia. The 
Philadelphia area has 5,000.
    Now we have lost--in 27 years, we have lost 200,000 
manufacturing jobs. But we still have lots of manufacturing 
jobs. In fact, it was just reported last week that we had a 27-
year high in Philadelphia of manufacturing jobs. In the last 
two years, the Philadelphia Fed has documented major increases 
in manufacturing. It has really led the recovery in our area.
    But those manufacturers need to have markets that go 
beyond. So we don't have to get into the rhetorical jousting 
about it now. But it would be very interesting to me to know 
where the--where we can do more. And what, if any, legal 
restrictions we are under relative to these various trade 
agreements about how we can help our manufacturing sector 
continue to compete.
    Ambassador Kirk. I can give just a couple of quick 
examples. And frankly in your question again you mentioned one. 
In the tax compromise that Congress wisely passed last year----
    Mr. Wolf. I voted against it.
    Ambassador Kirk [continuing]. But the extension of those 
depreciation, I have heard from small businesses all around the 
country that are using that ability to buy new equipment and 
depreciate, that is completely legal.
    Within the WTO, what is usually prohibited is if you are 
doing something expressly for the purpose of having a business 
export and not any domestic component. If you just--which is 
principally what a lot of other countries do.
    If you are giving a tax depreciation credit that is going 
to help you grow, and you are going to continue to expand your 
market like this company is here in the U.S., you happen to 
also export, that you can do.
    Part of what we are doing through the export initiative is 
to go to companies like that and say let us make sure you are 
aware of the combined resources we have to help you find 
customers through Commerce, to finance it through Export, and--
--
    Mr. Fattah. Because as big as baseball is in South America 
and Latin America, they probably could use some tarp. You know, 
so we could sell it.
    Ambassador Kirk. I was just in Austin. We did another one 
of these. I visited a company called Formaspace that you can 
read about. And they are a small company growing.
    But 30 percent of their market now are markets around the 
world. And the guy said a big part of him being able to stay 
ahead of the curve was he bought a very advanced cutting-edge 
machine that helps him make--he basically makes these tables 
that other manufacturers put components on. But they are 
exploding. But that depreciation credit was hugely important to 
him. And he is being financed through the Export-Import Bank.
    Mr. Fattah. Thank you, Mr. Chairman.
    Mr. Wolf. Thank you.
    I think Mr. Fattah voted against it. And I think we both 
would have supported that provision. I thought the portion on 
the $112 billion loss to the government on giving a two percent 
payroll tax to Jimmy Buffett and Warren Buffett was a little 
too much. And I think, if you recall, that was part of that 
package. And that, I think, creates a problem.

                           TRADE PREFERENCES

    On the trade preferences: the U.S. offers a program that is 
designed to encourage economic development in lower income 
countries by offering preferential duty-free income, U.S. duty-
free, U.S. market access to imports from countries covered by 
these programs. The imports cannot be the same as any products 
manufactured in the United States.
    An example would be coffee from Ethiopia. So if imports 
total $80 billion in 2010, up 33 percent. What are the 
benefits? But I guess equally important, how do you ensure 
these imports are not hurting U.S. businesses?
    Ambassador Kirk. Because the program is reauthorized now by 
Congress every year, we go through a fairly exhaustive process 
with our committees of jurisdiction. And we are required to go 
through a notice and filing period in which we publish in the 
Federal Register that any industry for example that may say--
that feels like they are being harmed because of these products 
has a right to petition us to say that product should be 
removed.
    Broadly it is a very valuable tool that we use to help some 
of the truly poorest countries in the world create some economy 
and create some wealth. And then as they mature hopefully they 
become markets for our products.
    One of the best examples is Colombia. Colombia is a 
preference country under the Andean Trade Preference Act. In 
that case not only are we helping them to send goods here we 
don't make, but we have the added benefit we are getting 
farmers that otherwise might have been involved in growing 
crops that were used in the drug trade to go to a more 
productive behavior.
    In other cases, not only do we have the objective, I think 
the one legitimate one and humanitarian one, of helping these 
really desperately poor societies, but there is also a case 
that in many of these some of the inputs coming from these 
countries are used by American manufacturers. So it has a dual 
value and benefit.
    But there is a fairly structured process, Mr. Chairman, by 
which we examine the impact on American businesses.
    Mr. Wolf. Do you also look at their record on workers' 
rights, and human rights, and things like that?
    Ambassador Kirk. We will remove that. We have three broad 
programs. The one, the generalized system of preferences, 
covers a number of poor countries. AGOA, which is the African 
Growth and Opportunity Act, covers I think 38 economies in sub-
Saharan Africa. And then we have Andean.
    Our administration has removed a couple of countries from 
AGOA and others and one in South America where their behavior 
just gets to a point where they are engaged in activities that 
I think you or I would find----
    Mr. Wolf. Could you supply the committee with the list of 
the countries?
    Ambassador Kirk. Yes, sir.
    Again, these usually go to our committees of jurisdiction. 
But we are required by law when we make those determination we 
provide notice to the Ways and Means and Senate Finance 
committees.
    And one of our concerns though in terms of the holistic 
strategy we are trying to bring to trade is just as much as we 
are being pressured. And we want to work with Congress to pass 
the pending free trade agreements with Korea, and Panama, and 
Colombia. We do think it is equally important that we pass 
these preference programs and fair trade.
    You know, just so you get both sides of it, one of the big 
challenges we have in our preference programs is because they 
are only authorized every year, it is hard for a business to go 
out and get capital, make an investment when you are not sure 
of whether or not Congress is going to allow that program to 
continue but on an annual evaluation.
    Mr. Wolf. It sounds good obviously. Gum arabic comes from 
Sudan. Is that part of this program?
    Ambassador Kirk. If I might get a more, I don't recall that 
Sudan is a part of AGOA, but I'd like to get you a more precise 
answer.
    [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
                      MILLENNIUM CHALLENGE GRANTS

    Mr. Wolf. The other issue on that is there was a program 
developed under the Bush Administration called the Millennium 
Challenge Grant. Are you familiar with the Millennium Challenge 
Grant?
    Ambassador Kirk. Yes, sir. I served on that Board by a 
matter of Congressional authority.
    Mr. Wolf. You served on the Board?
    Ambassador Kirk. The Millennium Challenge? Yes, sir.
    Mr. Wolf. Now we're getting reports, which we'll send you, 
when I say, I hope you're going to look at these and get back 
to us because these are all serious questions. So sometimes 
witnesses come and they go but, so I would like you to look at 
this and maybe if you can give me a call. We're giving about 
$600 million dollars to Morocco, in Millennium Challenge and 
Morocco just expelled about 50 Christian missionaries. We also 
have had reports from the American companies that some 
companies in Africa, and I want to be sure that I have the 
right countries so I'm not going to say. We'll share it with 
you. We have given them foreign aid through the Millennium 
Challenge grant and they then have turned around and these, the 
grants have gone to Chinese companies to do what they're 
anxious to do.
    Ambassador Kirk. May I speak to that one?
    Mr. Wolf. Yes, sir.
    Ambassador Kirk. Because that one, that is one issue I 
raised directly and we got a report on it, and forgive the 
number, I want to, I think the numbers have less than three 
percent.
    Mr. Wolf. I don't know that that's accurate. We have an----
    Ambassador Kirk. It's a fairly, I was surprised. I was 
frankly surprised.
    Mr. Wolf. When was that given? When did you get that?
    Ambassador Kirk. This was within the last six months. I'll 
get the report. We have studied that and I specifically raised 
that.
    Mr. Wolf. We have an idea, investigation now. They, the 
Millennium, I forget the director's name. You would know him 
well.
    Ambassador Kirk. Daniel Yohannes.
    Mr. Wolf. Yes.
    Ambassador Kirk. Under our authorization, our statutes, we 
try to make sure, well first, we're trying to help those 
countries create an infrastructure that helps them do more than 
just build roads.
    Mr. Wolf. But to give American taxpayer dollars to country 
X and then turn around and give those grants to China.
    Ambassador Kirk. It is a huge concern of ours.
    Mr. Wolf. Are you currently on the Board?
    Ambassador Kirk. I am on the Board and our general policy 
is unless you have a case where there's no American company who 
bids on it, and there is no domestic capacity in that country, 
then there is a provision that they can go out and bid then 
those countries come in.
    Mr. Wolf. Well----
    Ambassador Kirk. The numbers on China are much less than 
what they have been.
    Mr. Wolf. Well, I'm not, just not referencing China. I'm 
referencing all, I mean a country like China. We will send you 
a report. Maybe you can have someone from your office call Tom, 
Mr. Tom Culligan, and we'll give you the IG at the Millennium 
Challenge Corporation is doing an investigation, and a number 
of companies have come forward, and we believe it is deeper. 
Also, since you are a voting member, have you looked at the 
numerous letters that I've sent over there with regard to 
Morocco?
    Ambassador Kirk. We get, usually we get a summary of those. 
But we do a fairly thoughtful review of all of our challenge 
grants, and part of what we're doing with the Millennium 
Challenge grants is now more broadly wrapped up in the 
initiative President Obama started last year to have a more 
rational approach to what we call all of our aid in trade work. 
But it is a, on balance, I think it is a good program. It is 
well run and we have a number of criteria that we examine 
before we issue them. But we do look at the impact of labor 
rights and of the concerns you raised, say in a case whether 
it's Morocco, or Philippines or others.
    Mr. Wolf. Well, but do you think that the test that they 
have to meet is only for that one year in order to get in on 
the challenge.
    Ambassador Kirk. No. We look at----
    Mr. Wolf. Well, but we're seeing slippage and I think once 
the grants are given out, it almost seems like they begin to 
look other places, and so you're the person I should call.
    Ambassador Kirk. I'll be happy to follow up with Tom and 
get him with our director on that.

                     COLUMBIA FREE TRADE AGREEMENT

    Mr. Wolf. Okay, and if you could comment on these cases 
with regard to the country, specific? Very good. Columbia has 
free trade agreement. Do you believe that Columbia has 
sufficiently addressed the concerns regarding the anti-labor 
violence?
    Ambassador Kirk. We are in the process. When I testified 
before Ways and Means Committee, I think it's been about a 
month ago, we, I informed them that the President has asked us 
to undertake the same diligence that we used to produce the 
agreement with Korea with respect to Columbia and Panama. Since 
then I can tell you we have had very productive engagement with 
Columbia. President Santos, frankly, has made addressing the 
issues of violence, assassinations against labor leaders and 
strengthening frankly their administrative capacity of their 
labor ministry and looking at enforcement, and our work, we 
have engaged with them every week over the last five weeks and 
we are making very strong progress, and there was a press 
report yesterday in which frankly President Santos outlined 
many of what we had asked him to do, but highlighted the fact 
that he thought this was important for Columbia. So what I've 
said, and in many cases we feel like we're pushing on an open 
door. But we are making very good progress.

                            TRADE STATISTICS

    Mr. Wolf. Okay. We have a couple on the commerce 
reorganization, but I, you sort of covered that. We'll just 
submit that for the record. In December, the Wall Street 
Journal reported on a study that found that the U.S. and other 
countries do not accurately track balanced trade. They found 
that trade statistic models are outdated and do not reflect 
many complex modern trade flows. According to a subsequent 
editorial in the Journal that, ``The study ought to be required 
reading on Capitol Hill. Most importantly, they raised the 
question how much anyone really knows what a meritous trade 
with China is.'' Has your office studied this issue, and what 
were they conclusions, and do you believe we need to revisit 
how we collect and analyze those trade statistics?
    Ambassador Kirk. Well, my office does not have the 
responsibility. I haven't seen this Wall Street Journal study, 
but as a general rule I try not to use the Wall Street Journal 
as my sort of guiding light on which direction because they 
usually whack us over the head. Particularly on, I love 
reminding them, they were the most critical of our efforts when 
we held China's feet to the fire on the 421 case.
    Mr. Wolf. I'm glad, that I said the record, I'm glad that 
you did.
    Ambassador Kirk. Yes, we did. But let me say we are, part 
of what we're doing through the National Export Initiative is 
reexamining every export of our trade. The ITC and Commerce do 
a pretty good job. We can track shipment of goods. Where we are 
deficient is in services, and we intuitively know that in the 
service sector, in which now over 80 percent of Americans work, 
we have a trade surplus with just about every country we have 
an FTA or strong trade relationship. But it's very difficult to 
track, to track those numbers, and we are, I know that Commerce 
and others are looking at different models on how to strengthen 
that and better track it.

                             TRADE DEFICIT

    Mr. Wolf. Well, top ten countries for what's U.S. trades, 
where's the one that we have the negative? Top ten countries 
with U.S. has a trade deficit. China, wow. Off the charts. Off 
the charts. Japan, Mexico, Canada, Germany, Nigeria, Venezuela, 
Russia, Ireland, and Saudi Arabia, and that ought to be the 
target reach list. I mean, the Saudis want to help, friends 
help friends, if you will, and is this your target list----
    Ambassador Kirk. Well, we, we're looking both at the 
markets, we aren't just looking at the deficits per se, but 
we're looking at markets where we have an opportunity and we 
have a strength and they have a need, and that's one reason, 
for example, we're so strongly focusing on the Trans-Pacific 
Partnership. That's one reason the President made the recent 
trip to Latin America. That is a huge opportunity for us that 
we haven't built. We think the relationship allows us to 
explore that and what's sounding with some of these countries, 
and you are right. China represents over half of our deficit. 
If you look at some of the rest of them, even Canada, Mexico, 
and Saudi, a big component of that, frankly, is oil, because we 
are so dependent on other countries for energy. But we are 
examining all of that and trying to take a more thoughtful 
approach, not just necessarily how do we reduce our deficit 
with those countries, that's what's component, but where are 
the best opportunities, where are the best markets?

                  SANITARY AND PHYTOSANITARY BARRIERS

    Mr. Wolf. I just have two more and then go to Mr. Fattah 
and Mr. Austria. The Chinese have indicated that one of their 
trade priorities is U.S. market for fresh apples. I'm concerned 
that the Administration's decision to share a list of invasive 
pests and diseases associated with Chinese apples telegraphs 
the desire to quickly move an agreement, even though the 
Chinese have a terrible track record, even when approved 
sanitary import protocols are in place. For example in 2004, a 
researcher happened to discover quarantined pests on Chinese Ya 
pears while shopping at his local grocery store in Washington 
state. Sound scientific principles indicate that one should 
take a deliberate and cautious approach to allowing fresh 
apples into our nation. I strongly urge the Administration to 
be careful to make sure any fresh apple imports meet the SPS 
standards. In December you chaired a meeting of the U.S. China 
Joint Commission on Commerce and Trade. I understand that one 
issue on the agenda was our desire to import beef into, or 
export beef into China. Was it a Chinese request that that 
meeting, or have they talked to you about importing fresh 
apples into America?
    Ambassador Kirk. Yes. You, Mr. Chairman, many of our 
trading partners, one of our frustrations frankly in this 
business is they almost feed us as tit for tat. You let our 
beef in, I mean you let our apples in, we'll let your beef. I 
will tell you, we do not yield on our basic principle in one. 
In order for a rules based system to work, everybody's got to 
rule by the rules and live by the rules, and nowhere is that 
more critical as it relates to sanitary and phytosanitary 
standards, and for us, we just ask that everyone comply with 
internationally accepted standards, and that means if we meet 
them, you let our goods in. If your goods meet them on the 
other hand and they meet the requirements of APHIS, which is I 
think you know, separate from us through the Department of 
Agriculture, we should let them in. But we do not trade off one 
for the other in that sense. But just as we ask China to do 
things, they, you know, will come to us and say, ``Well, you 
won't let our apples in'', and we usually direct them to APHIS 
and tell them if they meet their standards and meet the test.
    Mr. Wolf. Well, in most cases most of the apple concentrate 
that you drink comes from China, and they planted millions of 
apple trees now and basically the workers that are working on 
them are paid almost nothing, and so I would like if you could 
look into this apple issue and have somebody come by my office 
and sort of just tell me where we are on the apple issue and 
maybe at the same time bring somebody from the USDA to come 
along.
    Ambassador Kirk. I would, on that one, I mean I will be 
happy to take that to Secretary, but APHIS, we keep them, I 
mean Congress wisely has kind of kept that separate from us so 
that, you know, whatever our trade imperatives are don't at all 
get factored into what should be purely an issue of science and 
health and good sanitary practices. So we stay out of APHIS's 
way in that process.
    Mr. Wolf. Well, maybe this would be, let me cover this 
other issue too, then. For the last three years China has been 
rejecting poultry exports from the Commonwealth of Virginia in 
response to a single isolated case of Subtype H5N1, a low 
pathogen Avian Influenza reported in a commercial Virginia 
turkey flock. The flock was depopulated, the premise was 
cleaned and disinfected under Federal and State supervision, 
and the farm has long since been raising turkeys with no 
further incidence of Avian Influenza. I'm concerned that the 
research is contrary to the WTO. Do you know much about that? 
Have you been in contact with the Chinese with regard to the 
ban?
    Ambassador Kirk. We have been. We agree with you that we 
think that this is, that they are using their rules creatively 
to block our export. I'm not sure because I feel like I'm 
filibusting----
    Mr. Wolf. No, I think you're----
    Ambassador Kirk. Well, I will tell you, Mr. Chairman, we 
are concerned enough about this, and it may not be to your 
attention. We just transmitted to Congress, I was concerned 
enough about this. You wisely require us to make a report to 
you every year called the National Trade Estimate, in which we 
have to kind of tell you how our partners are meeting their 
requirements. It has been a very good tool, particularly to get 
partners that we identify as being not compliant within 
intellectual property rights. It's been a great tool, some say 
to name and shame them into doing with it. We made the decision 
last year to include two new reports, one on non-tarriff 
barriers in manufacturing, one on sanitary and phytosanitary 
issues, and so a lot of the questions you raise, I think if we 
can maybe get you an executive summary. We just submitted that 
report to you last week. But this is critically important. I 
would tell you we believe China moved to block our poultry, 
unfortunately based on two things. One when we did the 421 
case, but second, we had a deal where Congress put a rider on 
the Appropriations bill in 2008 that blocked APHIS's ability to 
do the study on Chinese poultry, and when Congress did that 
then they, we think, acted in a manner that wasn't consistent 
with the WTO. We challenged them in the WTO, China challenged 
us, but we were able to show and demonstrate we worked with 
Congress to have that rider removed. So we're still pressing 
this. We're acutely aware of it.
    Mr. Wolf. Could you have somebody, when they come up on the 
apples, tell us also on the turkey, because that is Virginia. 
It's not from my Congressional district but I, I am very, very 
interested. We have a number of questions we're just going to 
submit for the record. Okay, I go to Mr. Austria, do you have 
any?
    Mr. Austria. I'm fine.
    Mr. Wolf. Well, I want to thank you. I appreciate it. I 
think you've done a very good job. I hope, and I'm not going to 
embarrass you, but I hope you do not go and work as effective 
as you are and as persuasive as you are, I hope you do not 
ever, ever, ever even consider representing the Chinese 
government. I would be very, I would be very disappointed in 
you. I was very impressed in your testimony.
    Ambassador Kirk. I would not want to disappoint you.
    Mr. Wolf. I looked at your background and so I would not. 
What we're going to do is a letter to the CRS asking if they 
have the ability to go back and see where all our former trade 
reps are at this moment, and who they're representing. But 
anyway, thank you very much for your testimony.
    Ambassador Kirk. Thank you, Mr. Chairman. Thank you, 
Members.

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                           W I T N E S S E S

                              ----------                              
                                                                   Page
Gallagher, Dr. Patrick...........................................   269
Kappos, David....................................................   183
Kirk, Ambassador Ron.............................................   465
Locke, Hon. Gary.................................................     1
Lubchenco, Dr. Jane..............................................   337


                               I N D E X

                              ----------                              

                         Department of Commerce
                   Gary Locke, Secretary of Commerce

                                                                   Page
2010 decennial census............................................ 63-67
BIS funding levels...............................................    72
Commerce revenue opportunities................................... 79-80
Cybersecurity.................................................... 69-70
Department of Commerce:
    Budget cuts.................................................. 80-82
    Efficiency................................................... 31-32
    Funding levels............................................... 30-31
    Reorganization............................................... 71-72
Federal budget concerns.......................................... 20-21
Free trade agreements............................................ 32-34
Gulf oil spill................................................... 24-27
Human rights training............................................    71
Impact of budget cuts............................................ 67-68
Manufacturing and the economy.................................... 70-71
National debt.................................................... 29-30
NOAA funding levels.............................................. 22-24
NOAA satellite briefs to Congress................................ 16-19
Opening statements:
    Mr. Dicks....................................................     2
    Mr. Fattah...................................................    21
    Mr. Wolf.....................................................   1-2
    Secretary Locke..............................................  2-14
Poverty measurement.............................................. 62-63
Questions for the Record:
    Mr. Bonner................................................... 93-97
    Mr. Fattah...................................................98-110
    Mr. Wolf....................................................111-181
Telecom spectrum.................................................    34
Trade enforcement with China..................................... 74-77
Tsunami warning network.......................................... 15-16
U.S. manufacturing............................................... 27-29
U.S. PTO patent automation....................................... 73-74
U.S. PTO planned funding carryover............................... 72-73
Weather satellites............................................... 68-69
World manufacturing leader....................................... 34-60

               United States Patent and Trademark Office
  David Kappos, Under Secretary of Commerce for Intellectual Property

Hiring...........................................................   195
Independent inventors support...................................200-201
Information technology..........................................201-202
Intellectual property theft.....................................202-203
Opening statements:
    Mr. Fattah...................................................   183
    Mr. Kappos..................................................184-189
    Mr. Wolf.....................................................   183
Operating reserve...............................................190-191
Patent and trademark operations.................................197-198
Patent appeals to USPTO.........................................196-197
Patent application filings......................................194-195
Patent automation...............................................237-238
Patent information..............................................192-194
Patent operations studies.......................................223-237
Publication of patent applications..............................209-217
Questions for the Record:
    Mr. Aderholt................................................263-268
    Mr. Fattah..................................................255-260
    Mr. Schiff..................................................261-262
    Mr. Wolf....................................................239-254
Reducing fees for micro entities.................................   195
Reducing the patent backlog.....................................198-199
Revenue projections.............................................191-192
Satellite office................................................219-220
Satellite offices...............................................199-200
Telework........................................................218-219
USPTO resources.................................................203-209
USPTO's impact on innovation....................................220-223

             National Institute of Standards and Technology
 Dr. Patrick Gallagher, Under Secretary of Commerce for Standards and 
                               Technology

Baldrige program................................................304-305
Cloud computing.................................................301-304
Construction of research facilities.............................293-295
Green technologies..............................................285-286
Homeland security: information sharing technologies.............282-283
Manufacturing...................................................291-293
Manufacturing Extension Partnership:
    Cost-share..................................................306-308
    Program.....................................................295-298
National earthquake hazard reduction program....................284-285
National strategies for trusted identities in cyberspace........286-289
Nuclear reactor safety review...................................289-291
Opening statement of Dr. Gallagher..............................269-281
Postdoctoral research associateships program....................305-306
Questions for the Record:
    Mr. Fattah..................................................309-310
    Mr. Graves...................................................   311
    Mr. Wolf....................................................311-335
Radiation detection and measurement..............................   283
Smart grid......................................................300-301
Technology innovation program...................................298-300

            National Oceanic and Atmospheric Administration
    Dr. Jane Lubchenco, Under Secretary of Commerce for Oceans and 
                               Atmosphere

Catch share programs............................................377-379
Climate services................................................382-383
Fiscal challenges................................................   355
Gulf of Mexico disaster response.................................   393
Gulf of Mexico restoration......................................372-375
Joint Polar Satellite System....................................355-367
National Weather Service........................................367-369
NextGen.........................................................390-393
NOAA's education programs.......................................407-408
Opening Statements:
    Dr. Lubchenco...............................................337-350
    Mr. Wolf.....................................................   337
Pacific salmon..................................................398-399
Questions for the Record:
    Mr. Aderholt................................................460-463
    Mr. Fattah..................................................451-455
    Mr. Graves...................................................   456
    Mr. Serrano.................................................457-459
    Mr. Wolf....................................................411-450
Satellites......................................................369-372
Seafood imports.................................................402-407
Seafood safety..................................................379-381
Stock assessments...............................................375-377
Tsunami warning program.........................................351-355
Working Waterfronts.............................................408-410

            Office of the United States Trade Representative
        Ambassador Ron Kirk, United States Trade Representative

Agricultural exports............................................501-502
China PNTR......................................................494-498
Colombia free trade agreement....................................   516
Cybersecurity....................................................   509
Export promotion................................................510-511
Exports to China................................................487-488
Foreign investment in the U.S...................................490-491
Human rights and religious freedom in China.....................481-484
Increases in productivity.......................................489-490
Intellectual property in Russia.................................493-494
Intellectual property protection................................508-509
Internet censorship in China.....................................   484
Jobs repatriation bill..........................................502-503
Korea Free Trade Agreement.......................................   489
Millennium Challenge grants.....................................515-516
NAFTA...........................................................500-501
North Korean Kaesong Industrial Zone............................503-507
Opening Statements:
    Ambassador Kirk.............................................466-479
    Mr. Fattah...................................................   465
    Mr. Wolf.....................................................   465
President's export initiative...................................484-485
Proposed reorganization of trade agencies.......................485-486
Questions for the Record:
    Mr. Dicks...................................................546-547
    Mr. Fattah..................................................537-546
    Mr. Graves..................................................536-537
    Mr. Wolf....................................................521-536
Sanitary and phytosanitary barriers.............................518-520
Trade balance with Korea........................................491-492
Trade blocs.....................................................486-487
Trade deficit....................................................   517
Trade preferences...............................................511-514
Trade statistics................................................516-517
U.S. and China's economies......................................498-500
Vacancies in IP enforcement.....................................480-481

                                  
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