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


 
       MADE IN AMERICA: INCREASING JOBS THROUGH EXPORTS AND TRADE

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

                                HEARING

                               BEFORE THE

           SUBCOMMITTEE ON COMMERCE, MANUFACTURING, AND TRADE

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 16, 2011

                               __________

                           Serial No. 112-21


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov



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                    COMMITTEE ON ENERGY AND COMMERCE

       FRED UPTON, Michigan          HENRY A. WAXMAN, California
              Chairman                 Ranking Member
JOE BARTON, Texas                    JOHN D. DINGELL, Michigan
  Chairman Emeritus                  EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida               EDOLPHUS TOWNS, New York
ED WHITFIELD, Kentucky               FRANK PALLONE, Jr., New Jersey
JOHN SHIMKUS, Illinois               BOBBY L. RUSH, Illinois
JOSEPH R. PITTS, Pennsylvania        ANNA G. ESHOO, California
MARY BONO MACK, California           ELIOT L. ENGEL, New York
GREG WALDEN, Oregon                  GENE GREEN, Texas
LEE TERRY, Nebraska                  DIANA DeGETTE, Colorado
MIKE ROGERS, Michigan                LOIS CAPPS, California
SUE WILKINS MYRICK, North Carolina   MICHAEL F. DOYLE, Pennsylvania
  Vice Chair                         JANICE D. SCHAKOWSKY, Illinois
JOHN SULLIVAN, Oklahoma              CHARLES A. GONZALEZ, Texas
TIM MURPHY, Pennsylvania             JAY INSLEE, Washington
MICHAEL C. BURGESS, Texas            TAMMY BALDWIN, Wisconsin
MARSHA BLACKBURN, Tennessee          MIKE ROSS, Arkansas
BRIAN P. BILBRAY, California         ANTHONY D. WEINER, New York
CHARLES F. BASS, New Hampshire       JIM MATHESON, Utah
PHIL GINGREY, Georgia                G.K. BUTTERFIELD, North Carolina
STEVE SCALISE, Louisiana             JOHN BARROW, Georgia
ROBERT E. LATTA, Ohio                DORIS O. MATSUI, California
CATHY McMORRIS RODGERS, Washington   DONNA M. CHRISTENSEN, Virgin 
GREGG HARPER, Mississippi                Islands                      
LEONARD LANCE, New Jersey            
BILL CASSIDY, Louisiana              
BRETT GUTHRIE, Kentucky              
PETE OLSON, Texas                    
DAVID B. McKINLEY, West Virginia     
CORY GARDNER, Colorado               
MIKE POMPEO, Kansas                  
ADAM KINZINGER, Illinois             
H. MORGAN GRIFFITH, Virginia         
                                     

                                  (ii)


           Subcommittee on Commerce, Manufacturing, and Trade

                       MARY BONO MACK, California
                                 Chairman
MARSHA BLACKBURN, Tennessee          G.K. BUTTERFIELD, North Carolina
  Vice Chair                           Ranking Member
CLIFF STEARNS, Florida               CHARLES A. GONZALEZ, Texas
CHARLES F. BASS, New Hampshire       JIM MATHESON, Utah
GREGG HARPER, Mississippi            JOHN D. DINGELL, Michigan
LEONARD LANCE, New Jersey            EDOLPHUS TOWNS, New York
BILL CASSIDY, Louisiana              BOBBY L. RUSH, Illinois
BRETT GUTHRIE, Kentucky              JANICE D. SCHAKOWSKY, Illinois
PETE OLSON, Texas                    MIKE ROSS, Arkansas
DAVE B. McKINLEY, West Virginia      HENRY A. WAXMAN, California, ex 
MIKE POMPEO, Kansas                      officio
ADAM KINZINGER, Illinois
JOE BARTON, Texas
FRED UPTON, Michigan, ex officio
  

                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Mary Bono Mack, a Representative in Congress from the State 
  of California, opening statement...............................     1
    Prepared statement...........................................     3
Hon. G.K. Butterfield, a Representative in Congress from the 
  State of North Carolina, opening statement.....................     4
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, prepared statement..............................     7
Hon. John D. Dingell, a Representative in Congress from the State 
  of Michigan, prepared statement................................    21
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, prepared statement...................................   107
Hon. Cliff Stearns, a Representative in Congress from the State 
  of Florida, prepared statement.................................   107
Hon. Edolphus Towns, a Representative in Congress from the State 
  of New York, prepared statement................................   107

                               Witnesses

Francisco J. Sanchez, Under Secretary of Commerce for 
  International Trade............................................     8
    Prepared statement...........................................    10
    Answers to submitted questions...............................   109
Robert W. Holleyman, II, President and Chief Executive Officer, 
  Business Software Alliance.....................................    34
    Prepared statement...........................................    36
    Answers to submitted questions...............................   119
John G. Murphy, Vice President, International Affairs, U.S. 
  Chamber of Commerce............................................    46
    Prepared statement...........................................    48
    Answers to submitted questions...............................   122
Jack J. Pelton, President, Chairman, and CEO, Cessna Aircraft 
  Company........................................................    58
    Prepared statement...........................................    60
    Answers to submitted questions...............................   128
Daniel J.Ikenson, Associate Director, Center for Trade Policy 
  Studies, Cato Institute........................................    66
    Prepared statement...........................................    68
    Answers to submitted questions...............................   130
James Crouse, Executive Vice President of Sales and Marketing, 
  Capstone Turbine Corporation...................................    82
    Prepared statement...........................................    84
    Answers to submitted questions...............................   138

 
       MADE IN AMERICA: INCREASING JOBS THROUGH EXPORTS AND TRADE

                              ----------                              


                       WEDNESDAY, MARCH 16, 2011

                  House of Representatives,
Subcommittee on Commerce, Manufacturing, and Trade,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:10 a.m., in 
room 2322 of the Rayburn House Office Building, Hon. Mary Bono 
Mack (chairman of the subcommittee) presiding.
    Members present: Representatives Bono Mack, Blackburn, 
Stearns, Bass, Harper, Lance, Cassidy, Guthrie, Olson, 
McKinley, Pompeo, Kinzinger, Barton, Butterfield, Gonzalez, 
Dingell, and Towns.
    Staff present: Paul Cancienne, Policy Coordinator, 
Commerce, Manufacturing, and Trade; Robert Frisby, Detailee, 
Commerce, Manufacturing, and Trade; Debbee Keller, Press 
Secretary; Brian McCullough, Senior Professional Staff Member, 
Commerce, Manufacturing, and Trade; Carly McWilliams, 
Legislative Clerk; Gib Mullan, Chief Counsel, Commerce, 
Manufacturing, and Trade; Shannon Weinberg, Counsel, Commerce, 
Manufacturing, and Trade; Andrew Powalenty; Michelle Ash, 
Democratic Chief Counsel; and Will Wallace, Democratic Policy 
Analyst.

 OPENING STATEMENT OF HON. MARY BONO MACK, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mrs. Bono Mack. The subcommittee will come to order.
    This is the second in our series of hearings aimed at 
fostering job creation across the United States and to make 
``Made in America'' matter again.
    Today, with Japan reeling from a catastrophic earthquake 
and tsunami and violent turmoil in the Middle East spreading, 
our Nation's trade outlook is more clouded than ever. As 
chairman of the subcommittee which has jurisdiction over trade 
issues, I am convinced that we can create tens of thousands of 
desperately needed jobs in our Nation by expanding U.S. exports 
through our free trade agreements. The chair now recognizes 
herself for an opening statement.
    In 2007, Apple introduced its very first iPhone and 
Congress finally approved the United States-Peru Trade 
Promotion Agreement after years of give and take. Since then, 
there have been three new generations of iPhones, two iPads and 
several new nano iPods but not a single free trade agreement 
signed into law. Not one. So while American ingenuity zips 
along at millions of bits per second, America's trade policies 
are stuck in the fax age, and it is time for an upgrade. Our 
subcommittee has a unique opportunity to roll out a new model 
for the future and to demonstrate leadership on this critically 
important issue. But time is running out.
    America's $46 billion trade deficit in January grew at the 
fastest rate in 18 years. While Washington rolls its eyes and 
wrings its hands, our competitors in Europe are busy signing on 
the dotted line and moving quickly into promising new markets. 
We simply cannot wait on the sidelines any longer, allowing 
ourselves to be benched by partisan politics. Today, we will 
hear what the Administration plans to do about the trade 
imbalance from Francisco J. Sanchez, Under Secretary of 
Commerce for International Trade.
    Let me be clear: long-stalled trade promotion agreements 
with South Korea, Colombia and Panama should move forward 
immediately--all of them. Years of lost opportunities have only 
resulted in thousands of lost jobs all across the county. Let 
us make ``Made in America'' matter again by actually increasing 
jobs through expanded exports and trade. If you doubt that we 
can do it, then just consider the iPhone again. Today, Apple is 
the second most valuable company in the world, and yet at one 
point it was 90 days from bankruptcy court. Apple didn't turn 
around its fortunes by being timid and parochial. Instead the 
company was bold and innovative. Apple sold shares to rival 
Microsoft and agreed to make Internet Explorer its default 
browser. That is the kind of decisive, forward-looking thinking 
we need today when it comes to our trade policies.
    President Obama has vowed to double exports in 5 years, but 
that is simply not going to happen if we continue to allow free 
trade agreements to be held hostage by organized labor and to 
languish in limbo. It is disingenuous for the Administration to 
say: ``Let us work together to create new jobs, but not if it 
means passing all three trade agreements together.'' That is 
the kind of thinking that leads to a $46 billion U.S. trade 
deficit in January, and that is the kind of thinking that 
threatens the future prosperity of our Nation.
    To date, the Administration has not offered any detailed 
plans for opening up trade with Colombia and Panama. We have 
gotten plenty of promises, but no plans. It is time to quit 
playing politics with our trade policies. Tens of thousands of 
new jobs hang in the balance, as well as tens of billions of 
dollars in new exports.
    Today, American businesses are genuinely concerned and, I 
believe, rightfully so, that if the proposed United States-
Korea agreement is finally approved this year by itself, then 
separate trade deals with Colombia and Panama will be quietly 
forgotten, as a concession to organized labor. If that is not 
the case, Secretary Sanchez, then this is the Administration's 
golden opportunity to set the record straight. Please tell us 
how the White House plans to deal with all three free-trade 
agreements. Today, you have a chance to make some news, and to 
give American businesses a reason to cheer. I have my fingers 
crossed, Mr. Secretary, but at the very least, let us make sure 
our signals are not crossed. Exactly what is the 
Administration's plan and what is the timetable for 
accomplishing it?
    Recently, Secretary of State Clinton said, and I am quoting 
now, ``Our goal is to have all three pending agreements--Korea, 
Panama and Colombia--with their outstanding issues addressed 
and approved by Congress this year.'' And, yet, with the next 
breath, an Administration official warns that trying to pass 
all three free trade agreements together, and quoting again, 
``is putting all three agreements at risk.'' Perhaps I lost the 
fax, Mr. Secretary, but how do you reconcile those positions?
    It is my sincere hope that we can put politics aside, work 
out our legitimate differences and approve all three trade 
agreements this year. We simply cannot sit on the sidelines any 
longer while other nations gain footholds in promising, new 
global markets. Too much is at stake for us to fail.
    [The prepared statement of Mrs. Bono Mack follows:]

               Prepared Statement of Hon. Mary Bono Mack

    In 2007, Apple introduced its first iPhone and Congress 
finally approved the United States-Peru Trade Promotion 
Agreement after years of give-and-take. Since then, there have 
been three new generations of iPhones, two iPads and several 
new nano iPods--but not a single free trade agreement signed 
into law. Not one. So while American ingenuity zips along at 
millions of bits per second, America's trade policies are stuck 
in the fax age. It's time for an upgrade. Our subcommittee has 
a unique opportunity to roll out a new model for the future and 
to demonstrate leadership on this critically-important issue. 
But time is running out.
    America's $46 billion trade deficit in January grew at the 
fastest rate in 18 years. While Washington rolls its eyes and 
wrings its hands, our competitors in Europe are busy signing on 
the dotted line and moving quickly into promising new markets. 
We simply can't sit on the sidelines any longer, allowing 
ourselves to be benched by partisan politics. Today, we'll hear 
what the administration plans to do about the trade imbalance 
from Francisco J. Sanchez, Under Secretary of Commerce for 
International Trade.
    Let me be clear: long-stalled trade promotion agreements 
with South Korea, Colombia and Panama should move forward 
immediately--all of them. Years of lost opportunities have only 
resulted in thousands of lost jobs all across the county. Let's 
make ``Made in America'' matter again by actually increasing 
jobs through expanded exports and trade.
    If you doubt that we can do it, then just consider the 
iPhone again. Today, Apple is the second most valuable company 
in the world, and yet--at one point--it was 90 days from 
bankruptcy court. Apple didn't turn around its fortunes by 
being timid and parochial. Instead the company was bold and 
innovative. Apple sold shares to rival Microsoft and agreed to 
make Internet Explorer its default browser.
    That's the kind of decisive, forward-looking thinking we 
need today when it comes to our trade policies. President Obama 
has vowed to double exports in five years, but that's simply 
not going to happen if we continue to allow free trade 
agreements to be held hostage by organized labor and to 
languish in limbo. It's disingenuous for the administration to 
say: ``Let's work together to create new jobs, but not if it 
means passing all three trade agreements together.''
    That's the kind of thinking that leads to a $46 billion 
U.S. trade deficit in January. And that's the kind of thinking 
that threatens the future prosperity of our nation. To date, 
the administration has not offered any detailed plans for 
opening up trade with Colombia and Panama. We've gotten plenty 
of promises, but no plans. It's time to quit playing politics 
with our trade policies. Tens of thousands of new jobs hang in 
the balance, as well as tens of billions of dollars in new 
exports.
    Today, American businesses are genuinely concerned--and, I 
believe, rightfully so--that if the proposed the U.S.-Korea 
agreement is finally approved this year by itself, then 
separate trade deals with Colombia and Panama will be quietly 
forgotten, as a concession to organized labor. If that's not 
the case, Secretary Sanchez, then this is the administration's 
golden opportunity to set the record straight. Please tell us 
how the White House plans to deal with all three free-trade 
agreements. Today, you have a chance to make some news, and to 
give American businesses and workers a reason to cheer. I have 
my fingers crossed, Mr. Secretary, but--at the very least--
let's make sure our signals aren't crossed. Exactly what is the 
administration's plan? And what's the timetable for 
accomplishing it?
    Recently, Secretary of State Clinton said, ``Our goal is to 
have all three pending agreements--Korea, Panama and Colombia--
with their outstanding issues addressed and approved by 
Congress this year.'' And, yet, with the next breath, an 
administration official warns that trying to pass all three 
free trade agreements together ``is putting all three 
agreements at risk.'' Perhaps, I lost the fax, Mr. Secretary, 
but how do you reconcile those positions?
    It's my sincere hope that we can put politics aside, work 
out our legitimate differences and approve all three trade 
agreements this year. We simply can't sit on the sidelines any 
longer while other nations gain footholds in promising, new 
global markets. Too much is at stake for us to fail.

    Mrs. Bono Mack. I yield back my time and I would like to 
recognize the gentleman from North Carolina, the ranking member 
of our subcommittee, Mr. Butterfield, for 5 minutes.

OPENING STATEMENT OF HON. G.K. BUTTERFIELD, A REPRESENTATIVE IN 
           CONGRESS FROM THE STATE OF NORTH CAROLINA

    Mr. Butterfield. Let me thank you, Chairman Bono Mack, for 
convening this very important hearing. This is a timely 
conversation and I am glad that we are finally having it.
    A major part of our economic recovery is indeed increased 
exports. The President seems to get it. He clearly knows that 
increasing exports is key to the American economy returning to 
the pre-recession levels. To that end, during the State of the 
Union the President announced the goal of doubling U.S. exports 
by 2014, a goal that requires exports to grow to $3.14 trillion 
at the end of that period. In March 2010, the President issued 
an Executive Order officially creating the Export Promotion 
Cabinet, which oversees the coordination and implementation of 
the National Export Initiative. We refer to it as NEI. The NEI 
brings together secretaries from seven federal departments as 
well as the heads of other federal entities. As Commerce 
Secretary Locke said recently, ``The NEI represents the first 
time the United States will have a government-wide export 
promotion strategy with focused attention from the President 
and his Cabinet.''
    Other nations have employed similar strategic initiatives 
to their benefit, and it is absolutely essential that the 
United States embrace the NEI by working towards its goal of 
improving advocacy and trade promotion, increasing access to 
export financing, removing trade barriers, enforcing trade 
rules and adopting policies that promote sustainable and 
balanced growth.
    We have great potential to export more. With the world's 
population at nearly 7 billion people, 95 percent of those live 
outside of our country. The products they purchase and the 
equipment they use must come from somewhere else. There is no 
reason it shouldn't be from the United States. Recent data 
indicates that foreign markets are buying more and more U.S. 
goods. With only a year under NEI's belt, exports have grown 17 
percent, let me repeat that, 17 percent, but more must be done. 
We must not focus solely on convincing foreign entities to 
purchase goods that we already make. Instead, we must also 
encourage American businesses to innovate and develop cutting-
edge products that will be attractive to fast-growing foreign 
markets. We must make more in America. This is beginning to 
happen in areas like medical technology and green technology 
and agriculture, but innovation is just one part of the effort 
to increase exports. Exposure to foreign markets is another 
equally important piece to this puzzle.
    The ITA has been moving at a blazing pace to participate in 
trade and reverse trade missions to put American manufacturers 
in front of foreign buyers. Their efforts have paid off with 
ITA executing 35 trade missions in 31 countries involving some 
400 U.S. companies within the last year, resulting in an 
anticipated $2 billion in increased exports. It is my hope that 
small- and medium-sized enterprises across the United States, 
those same businesses that are the focus of NEI, will avail 
themselves of the tremendous opportunities to begin or increase 
exports to foreign markets. This could yield immeasurable 
benefits to the U.S. economy and could mean tens of thousands 
of new good-paying jobs, dramatically transforming struggling 
communities like Rocky Mount, North Carolina, located in my 
Congressional district, where the unemployment rate is 12 
percent. Just a small increase in exports could yield 
tremendous benefits for the American people and for industry 
across the country.
    I want to thank the witnesses for being here today, the 
Under Secretary and the other witnesses. I read your 
testimonies last evening. I look forward to working with 
American businesses and my colleagues in a collaborative effort 
to increase American exports.
    Thank you, and before I yield back, I want to read this 
note, Madam Chairman. Just go ahead and yield back? All right. 
I yield back. I saw the chairman emeritus down at the end of 
the panel. I wanted to see if he needed time, but they are 
going to work that out later. Thank you. I yield back.
    Mrs. Bono Mack. I thank the gentleman, and Chairman Upton 
yielded his 5 minutes for an opening statement to me in 
accordance with committee rules. As his designee, I now 
recognize Ms. Blackburn, the vice chairman of the subcommittee, 
for 2 minutes.
    Mrs. Blackburn. Thank you, Madam Chairman. Welcome to our 
witnesses.
    Earlier this year in his State of the Union, our President 
laid out an encouraging goal of doubling exports in the next 3 
years. We all took note of that, and now all we need it 
leadership so that we can achieve that objective. It is 
important to my State of Tennessee. Leadership is needed by 
both the President and by both parties in Congress to finally 
step up and do what is best for the economy.
    That being said, without strong intellectual property 
enforcement tools in place, no free trade or exporting policy 
will work. In my home State of Tennessee, there are countless 
companies, both big and small, that rely heavily on strong U.S. 
export policies for their livelihoods, among them Tom James 
Incorporated, Bridgestone, Swiftwick Socks, Cargill Cotton, 
Nucor Steel, International Paper, Eastman Chemicals, FedEx, 
Right Thought Pens, and now Volkswagen is on the way. Those are 
just a few of the companies that are saying get this 
intellectual property policy right. If IP cannot be protected, 
innovation and commerce is going to slow. If we are to continue 
as the world's leading innovator, if we are to reclaim the lead 
in green innovation, if we are going to truly spur small 
business growth, we must protect intellectual property with the 
same vigor as physical property. We need your leadership to do 
so. We need the leadership of this committee, and Madam 
Chairman, I yield back.
    Mrs. Bono Mack. I thank the gentlelady and would like to 
recognize the gentleman from Texas, Mr. Barton, chairman 
emeritus of this committee, for 2 minutes.
    Mr. Barton. Thank you. If we are holding a hearing in this 
subcommittee, there must be a Cabinet Secretary testifying in 
another subcommittee. Last week, I believe we had the Secretary 
of Health and Human Services and you had a hearing, so this 
week we have the Secretary of Energy, the chairman of the 
Nuclear Regulatory Commission, and we have a hearing here. So 
it is no disrespect to you, Mr. Secretary, that given what has 
happened in Japan, a lot of our members are going to be 
downstairs with the NRC chairman and the Energy Secretary, but 
we are glad you are here.
    We are all concerned about jobs and we are all concerned 
about job creation. I think both sides of the aisle agree with 
that. Unfortunately, my friends on the Minority seem to be able 
to only create jobs in the government sector, and those on my 
side would rather we create as many jobs as possible in the 
private sector. Hopefully we can reach agreement that that is 
the way to go in this hearing.
    There are several things that we need to do. Number one, we 
need to enforce our existing free trade agreements. That is 
easier said than done, obviously. And number two, we need to 
pass new trade agreements, and I think you are very well aware 
that the Senate has yet to take up several of those agreements 
but hopefully in the next month or so they will. I would like 
to see us pass a free trade agreement with Korea, with Colombia 
and also with Panama.
    And with that, Madam Chairwoman, I yield back, but welcome, 
Mr. Secretary.
    Mrs. Bono Mack. I would like to recognize the gentleman 
from Illinois, Mr. Kinzinger, for 2 minutes.
    Mr. Kinzinger. Thank you, Madam Chairman, for the time and 
for holding this hearing, and thank you, sir, for coming in.
    I want to say thank you to the Administration for the 
support on the Korean free trade agreement. I think that is 
going to be very important. In my district, the free trade 
agreement itself will support $75 million in exports and nearly 
300 jobs. More American goods in foreign markets means more 
American jobs back home, and removing export tariffs on 
agriculture, electronics and manufactured goods makes American 
products more competitive in the Korean marketplace and fuels 
both nations' economies. History has taught us that robust 
trade creates jobs and strengthens the economy. Our Nation 
cannot afford at this critical time to pass on opportunities to 
expand free trade.
    I am very concerned with this Administration's failure to 
lead on two remaining free trade agreements with our allies and 
partners to the south, Colombia and Panama. These trade 
agreements serve as important milestones for the bilateral 
relationships with these countries and failure to take action 
puts American exports and jobs at risk. The U.S. International 
Trade Commission believes a Colombian agreement alone could 
increase U.S. exports by $1 billion. In Panama, companies like 
Caterpillar build and deliver the equipment that is developing 
the nation's infrastructure but do so under onerous rules and 
fees. Free trade agreements lower costs and benefit us all.
    Although I am pleased with the Administration's actions on 
Korea, I do not believe we can allow a vote on the Korean free 
trade agreement without taking action on Colombia and Panama. 
We should not give the Administration a pass on future 
agreements with the passage of one agreement.
    Thank you, Madam Chairman, and I yield back.
    Mrs. Bono Mack. The gentleman yields back, and the chair 
recognizes the ranking member, Mr. Butterfield.
    Mr. Butterfield. Thank you, Madam Chairman. I have no 
further speakers except to say that the ranking member of the 
full committee, Mr. Waxman, was here earlier. He wanted to be 
here for this hearing and he especially wanted to welcome his 
constituent, Mr. Crouse, from Capstone Turbine, but Mr. Waxman 
had to leave for another hearing, and I ask unanimous consent 
that his statement, his opening statement that he would have 
given had he been here, be included in the record.
    Mrs. Bono Mack. Without objection.
    Mr. Butterfield. Thank you. I yield back.
    [The prepared statement of Mr. Waxman follows:]

               Prepared Statement of Hon. Henry A. Waxman

    Thank you Chairman Bono Mack and Ranking Member Butterfield 
for today's hearing.
    In a global economy, exports are a national imperative. 
They are a key indicator of our competitiveness, an important 
component of deficit reduction, and a gauge of our future 
economic health. I welcome President Obama's goal of doubling 
U.S. exports within 5 years. It is a target that is not only 
bold, but attainable if we stay focused on the task.
    It is notable, that even as our economy shrank in 2010 in 
the wake of the Wall Street collapse, U.S. exports grew by 
17%--the largest year to year increase in history. Without a 
doubt, exports will continue to be an important part of our 
economic recovery. American companies will succeed not only by 
innovating how they make products, but also by expanding where 
they sell them.
    Ensuring that our companies have an opportunity to succeed 
on a level playing field is a responsibility that only 
government can shoulder. Too often, American exports are 
undermined by unfair trade practices, and even blatant criminal 
acts such as intellectual property piracy.
    IP sensitive industries are among our most internationally 
competitive. Today, nearly half of the motion picture 
industry's revenues are generated overseas. The software 
industry estimates that sixty percent of its sales originate 
outside the United States. Our success in eliminating trade 
barriers in this arena and stepping up international 
enforcement efforts against piracy will be essential for 
achieving the goal of doubling exports.
    But the question remains--once we reach the goal of 
doubling exports, will it make a dent in our trade deficit. 
Today, I worry that the answer is no. Because today, over 50% 
of our trade deficit can be attributed to our dependence on 
foreign oil.
    As unrest unfolds in the Middle East and fuel prices once 
again rise here at home, the moral, economic, and national 
security consequences of our dependence on fossil fuels are as 
clear as ever. Although we do not buy from Iran or Libya, our 
appetite for oil bolsters the international crude prices that 
are subsidizing these dangerous regimes.
    We can do better. We need to do better. Building stronger 
clean energy and energy efficiency markets here at home and 
abroad is critical. It is not only critical for reducing the 
staggering $366 billion worth of foreign oil we import. It is 
critical for advancing U.S. leadership in the emerging and 
lucrative field of clean-tech.
    This morning we will have the opportunity to hear from 
Capstone Turbine Corporation. The company is a leading 
manufacturer of microturbines, or localized generators that 
boost efficient energy usage with cost-savings, energy-savings, 
and overall emissions reductions. More than 70% of the 
company's products are manufactured for export and 100% of its 
products are made in America. And, I am proud to say, Capstone 
is headquartered in the 30th Congressional District of 
California, which I represent.
    Small- to medium-size firms like Capstone are a cornerstone 
of the President's National Export Initiative.
    I look forward to hearing from all of our witness about 
what it will take to make the President's vision a reality.

    Mrs. Bono Mack. And we did see Mr. Waxman pop in briefly so 
I am sorry he had to leave but as Chairman Barton said, there 
are other things happening as well.
    But we do have two panels before us today. Each of the 
witnesses has prepared an opening statement that will be placed 
into the record. Each of you will have 5 minutes to summarize 
that statement in your remarks.
    On our first panel, we are fortunate to have the Hon. 
Francisco J. Sanchez, Under Secretary of Commerce for 
International Trade. We appreciate your being here very much 
today, Mr. Secretary, and would recognize you for 5 minutes.

STATEMENT OF FRANCISCO J. SANCHEZ, UNDER SECRETARY OF COMMERCE 
                    FOR INTERNATIONAL TRADE

    Mr. Sanchez. Thank you. Good morning. Chairwoman Bono Mack, 
Ranking Member Butterfield and members of the subcommittee, 
thank you for giving me the opportunity to speak to you today.
    In his State of the Union address, President Obama told 
Americans that the future is ours to win. By understanding how 
the world has changed, we can create the environment that can 
expand the American economy. Great opportunities lie in the 
vast global market. Today, 95 percent of the world's customers 
live outside our borders. The International Monetary Fund 
forecasts that 83 percent of the world's economic growth during 
the next 5 years will happen outside the United States.
    The nations of the world are giving rise to a new global 
middle class. They are a new marketplace for American exports, 
and one example of this is travel and tourism. Data released 
just this morning reveals a record-breaking 60 million 
international visitors in the United States, shattering the 
previous record set in 2000. These travelers spent more than 
$134 billion. That is a 12 percent increase over 2009, 
generating a 50 percent increase for the travel trade surplus 
of $32 billion. Travel and tourism is no small industry. These 
exports generate $1.3 trillion for the U.S. economy, supporting 
7.8 million jobs.
    Through the National Export Initiative and its goal of 
doubling exports by 2015, we hope to support millions of jobs 
right here at home. U.S. exports of goods and services in 2010 
representing $1.83 trillion increased nearly 17 percent over 
2009. That is the largest year-to-year percent increase in more 
than 20 years.
    As we search for ways to create jobs for American workers, 
increasing our Nation's exports must be a important tool in our 
toolbox. On average, manufacturing jobs supported by exporting 
pays up to 18 percent more than non-export-supported jobs.
    The NEI is the United States' first Presidential-led 
government-wide export promotion strategy and it is good for 
American workers and companies alike. The NEI focuses on five 
areas: improving trade advocacy and export promotion, 
increasing access to credit, especially for small- and medium-
sized businesses, removing trade barriers abroad, robustly 
enforcing our trade laws and pursuing policies to promote 
strong, sustainable and balanced growth.
    Congress created the International Trade Administration to 
promote American companies and workers abroad. During 2010, ITA 
assisted more than 5,500 U.S. companies. Eighty-five percent of 
these were small- and medium-sized companies. ITA coordinated 
an unprecedented 35 trade missions to 31 countries with nearly 
400 companies participating. We recruited 13,000 foreign buyers 
to major U.S. trade shows and connected them with U.S. 
companies, resulting in approximately $770 million in sales. In 
2010, ITA also assisted U.S. companies competing for foreign 
government procurement contracts, winning projects valued at 
$18.7 billion in U.S. export content, and that supported an 
estimated 101,000 jobs. We successfully resolved 82 trade 
barriers in 45 countries, helping to ensure U.S. companies 
better access to overseas markets.
    The Obama Administration is committed to aggressively 
enforcing our trade laws. In 2010, we had approximately 300 
anti-dumping and countervailing duty orders in place covering 
more than 120 products from 40 countries. We strive to make ITA 
the one point of contact in the Federal Government for 
companies who want to succeed abroad. The Administration is 
continuing our hard work to address outstanding concerns with 
the pending trade agreements and to improve those agreements 
and get them to Congress as they become ready.
    As this subcommittee is aware and many of you have already 
mentioned, the United States-Korea trade agreement is ready for 
consideration. President Obama is eager to see this agreement 
ratified as I know many of you are, and he requests that 
Congress approve this agreement.
    With the same engagement and bipartisan cooperation as we 
have had on the Korea agreement, we will continue to address 
outstanding concerns relating to the Panama and Colombia 
agreements. Our goal is to have all three of these agreements 
with their outstanding issues addressed approved by Congress. 
We will not be left behind as others secure greater market 
share at the expense of American exports. To compete, we must 
access the world's fastest-growing markets and we must do so on 
a playing field that is both level and reflects our values as 
Americans. The NEI is the Obama Administration's commitment to 
help U.S. companies compete and win in an increasingly 
competitive global marketplace.
    I thank you again for the opportunity to come before you, 
and I look forward to answering your questions. Thank you.
    [The prepared statement of Mr. Sanchez follows:]

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    Mrs. Bono Mack. Thank you, Mr. Secretary. The chair 
recognizes herself for 5 minutes for questions.
    As you mentioned, the President's NEI is designed to double 
U.S. exports by 2014. First of all, a clarification. Is that 
2014 or 2015?
    Mr. Sanchez. It is 2015.
    Mrs. Bono Mack. The President did say in his State of the 
Union 2014.
    Mr. Sanchez. Well, then the President is right.
    Mrs. Bono Mack. Good answer. But isn't that going to be 
very difficult to accomplish unless we enter into new trade 
agreements with countries like Korea, Colombia and Panama?
    Mr. Sanchez. There is no question that one of the most 
important things we can do to achieve the doubling of exports 
is reducing barriers, and trade agreements play an important 
role in that. In fact, we have 17 trade agreements in place 
now. With those 17 countries, we actually have a trade surplus.
    Mrs. Bono Mack. But if we focus on the three in question, I 
think that a number of members raised those three specifically, 
is the Administration committed to getting all three trade 
agreements completed this year?
    Mr. Sanchez. They absolutely are completed. They are 
absolutely committed to getting all the issues resolved and 
getting them to Congress as soon as possible.
    Mrs. Bono Mack. What is the timetable?
    Mr. Sanchez. Well, let me just say what we have done to 
achieve that. Obviously, Korea is ready to come before you. 
With Colombia, we sent a team to Colombia a few weeks ago. 
There is a team now from Colombia meeting with folks at USTR. 
We are working very, very hard to work through the issues that 
we believe still need to be resolved with regard to their labor 
code and violence toward labor organizers, so I am very 
confident just from the activity that you have seen over the 
last 8 weeks that we will move forward on Colombia.
    Mrs. Bono Mack. Thank you. Switching gears for a second, 
Mr. Secretary, U.S. creativity without a doubt is one of our 
Nation's greatest competitiveness advantages but we have 
ignored it for too long. Around the world, especially in places 
like Russia, online theft is undermining that competitiveness. 
Can you tell me what the Administration is doing to ensure that 
the government of Russia effectively responds to this threat 
before it joins the WTO?
    Mr. Sanchez. Well, you are absolutely right. Intellectual 
property rights protections is one of the most important trade 
barriers that affect American competitiveness, and we work on 
that issue across the world, and in Russia we work closely with 
the business community, and Russia recently passed a law that 
upgrades their enforcement of piracy and counterfeit products 
so we----
    Mrs. Bono Mack. Is piracy up or down?
    Mr. Sanchez. I am sorry?
    Mrs. Bono Mack. Is piracy, is the rate of it up or down?
    Mr. Sanchez. I don't know the exact rate of piracy with 
regard to Russia. What I can tell you is, though, with our 
encouragement and working closely with the business community, 
Russia has acted to expand and upgrade its enforcement. Now, 
the proof is in the pudding, and this happened in late November 
so it is too early to tell, but I can tell you that we are 
closely monitoring what is going on in Russia. We are working 
very closely with the business community, and if we don't see a 
problem, we will be sure to continuously raise this issue 
because it is very important to our competitiveness.
    Mrs. Bono Mack. And also, a number of members on this 
committee, specifically Ms. Blackburn and myself, are very 
interested and very keenly aware and we will be watching. We 
will hold Russia's as well as China's feet to the fire as far 
as piracy goes.
    But finally, I have three yes or no questions for you, a 
simple yes or no, good news. Is the free trade agreement with 
Colombia in trouble because of opposition from labor?
    Mr. Sanchez. No.
    Mrs. Bono Mack. What about Panama?
    Mr. Sanchez. No.
    Mrs. Bono Mack. Will the agreements again get done this 
year?
    Mr. Sanchez. I am confident we will resolve these issues 
and get them to Congress.
    Mrs. Bono Mack. Yes or no.
    Mr. Sanchez. The issues will be resolved this year.
    Mrs. Bono Mack. Thank you, and I yield back my time and 
would recognize the ranking member for 5 minutes.
    Mr. Butterfield. Thank you, Madam Chairman.
    Mr. Under Secretary, the National Export Initiative lays 
out what we call a bold goal to double exports in 5 short 
years. It outlines priorities and strategies for streamlining 
U.S. government export promotion activities. That is a 
promising set of ideas. As chairman of the Trade Promotion 
Coordinating Committee, the Department has Commerce has to 
coordinate approximately 20 separate agencies. Is that correct?
    Mr. Sanchez. Yes, sir.
    Mr. Butterfield. In export promotion ranging from DOE to 
the U.S. Trade Representative to the Department of Agriculture, 
and instead of tackling the problem, the NEI creates another 
layer called the Export Promotion Cabinet. Mr. Secretary, in 
approximately 90 days the President intends to recommend how we 
address some of these redundancies. He has promised to do that. 
He should be commended. Previous Administrations only have 
asked for generic reorganization authority but refuse to 
explain how such authority might be used. So far, it sounds as 
if the President will recommend specifics, and trade programs 
are a good place to start. Would you speak to that briefly, if 
you would, please?
    Mr. Sanchez. Yes, Congressman. Let me first say that the 
President's Export Promotion Cabinet does not really add 
another layer of bureaucracy. In fact, it is requiring cabinets 
to pay attention to the importance of export promotion. So for 
many years the Secretary of Commerce and Secretary of State 
were the primary Cabinet members who when they went abroad 
would do commercial diplomacy. Under this Export Promotion 
Cabinet, any Cabinet member that goes abroad is also tasked 
with commercial diplomacy. In addition to this, Secretary of 
State Clinton has directed her ambassadors and said that your 
performance will be measured in part y the degree to which you 
do commercial diplomacy. So it is more than anything putting 
emphasis on the importance of this.
    Now, specific to the reorganization, as President Obama 
said, we can always do better and it is his goal to review how 
we do export promotion. As you pointed out, there are many 
agencies that have some role to play in export promotion and it 
is his goal to take a fresh look at that and see how we can 
best do that. Now, they are just now in the process of 
gathering information, interviewing both folks within the 
government as well as in the private sector that they serve, 
and my understanding is that they will have a recommendation to 
the President in about 90 days but it is still in the process 
of being formulated.
    Mr. Butterfield. Thank you. Some people have suggested that 
in order to increase exports, the United States should focus on 
exporting more of the same goods and the same services that it 
already exports or more goods and services that U.S. 
manufacturers are good at producing right now. That probably 
sounds reasonable, but I am concerned that if that is all we 
do, we may be forgetting the most basic tenet of economics, 
that is, supply and demand. So Mr. Under Secretary, can you 
tell me what ITA is doing to ensure that U.S. manufacturers 
know what goods and services other countries really want? For 
example, does ITA regularly survey the domestic and import 
markets of other countries, and if so, how do we go about this?
    Mr. Sanchez. Thank you for the question. We are doing 
rigorous analysis both on the markets that offer the best 
opportunity for us, and that is a combination of emerging 
markets--China, Brazil, India--next-tier markets like Vietnam, 
Indonesia, Turkey, Colombia, Peru, but also focusing on mature 
markets, Canada and Mexico, for example. Forty-two percent of 
our exports go to countries within the Western hemisphere, so 
we are doing rigorous market analysis and then we are 
superimposing on that sector analysis within each of those 
markets to see where we get our best bang for the buck, and I 
would say as the chairwoman pointed out in her opening 
statement, it isn't just what we do best but it is the 
innovation that we create. Apple is a great example of 
innovation and practice and the very positive impact it can 
have on our economy, so we are focusing on those sectors that 
can have the highest impact in those markets where we see high 
growth and high opportunity.
    Mr. Butterfield. All right. I have another question but 
maybe the next round. Thank you. I yield back.
    Mrs. Bono Mack. Under the committee rules, the chair will 
now recognize Mr. Pompeo of Kansas for 5 minutes.
    Mr. Pompeo. Thank you, Madam Chairman, and good morning, 
Secretary Sanchez.
    Mr. Sanchez. Good morning.
    Mr. Pompeo. You talked, when you were talking about the 
Colombia agreement as labor being the last sticking point. Is 
that correct?
    Mr. Sanchez. Well, the issue was certain provisions in 
their labor code as well as concerns about violence toward 
labor organizers and in particular impunity toward those who 
commit acts of violence.
    Mr. Pompeo. And would that be the same for the Panama 
agreement?
    Mr. Sanchez. The Panama agreement, I think one of the 
issues remaining has to do with their labor code. It is an 
issue that we are working on closely with the Panamanian 
government and we don't see any big problem. We don't foresee 
any challenges in moving that forward.
    Mr. Pompeo. We had a chance to talk just briefly before the 
hearing started this morning, and you talked about being an 
evangelist for trade.
    Mr. Sanchez. Yes.
    Mr. Pompeo. Kansas 4th Congressional district relies on 
enormous trade exports. We build airplanes and airplane 
components in south central Kansas and we export a lot of 
agricultural items as well. When you are out evangelizing, do 
you talk to organized labor about how important trade 
agreements are to them? I know in our district that the more 
trade we have--our aircraft manufacturing plants have the IAM 
as their primary union and we have lots of union folks that are 
great folks in the 4th district. These trade agreements are 
critical to them. I hope that you are out there talking to them 
about that. Can you tell me what you tell them about the 
importance of trade?
    Mr. Sanchez. Yes. I have reached out to labor and we do 
meet, and I talk about the impact of the existing agreements. 
As I mentioned earlier, we have 17 current agreements, and in 
the aggregate with those 17 agreements, we have a goods 
surplus, a significant surplus, and so overall they have been 
good. Now, I acknowledge that in certain sectors and in certain 
communities it isn't equally distributed and some of them may 
be hurt and so it is important that we support those 
communities when those things happen. But overall for our 
economy, trade agreements have a positive impact. And the other 
thing I tell them is that again as the chairwoman pointed out 
in her statement is that other countries are not waiting for us 
to sign agreements. Agreements are being signed by the EU, by 
South Korea, by other countries in Southeast Asia, by countries 
in South America, and so if we don't move, we get left behind, 
and that is not good for the American economy, not good for 
American companies and certainly not good for American workers.
    Mr. Pompeo. I appreciate that. I am glad to hear that from 
this Administration. I think that is an important message. I 
know, I hear from our agriculture folks already about the delay 
in Colombia impacting their ability to move crops into a market 
that they think they can be incredibly competitive in.
    I guess my last comment is, you had mentioned a series 80, 
I think it was, in your statement, trade barriers that you had 
knocked down. Can you give me a couple of concrete examples in 
the last 12 months, places and particular barriers that you all 
took on and were successful in helping us increase exports?
    Mr. Sanchez. I don't have a specific one in mind but I can 
give you kind of an illustration. These are initiated by a 
company who is trying to get into a particular market and there 
might be a regulation that is overly burdensome, goes beyond 
just responding to the public benefits that they are trying to 
create with the regulation and creates a barrier, so we will 
work with that country, with that trading partner to put a 
spotlight on that and reduce it. We have done this in 45 
different countries including countries like China, Brazil, 
Turkey and India. I will be happy to get more specific ones to 
you in writing after the hearing.
    Mr. Pompeo. I would appreciate that. We have got some 
issues with export controls as well. I know that is not 
directly tied to what you do, but I think you may be heading 
out my way before long and I would love to get a chance to 
spend a few minutes talking to you about that.
    Mr. Sanchez. I will be well prepared with examples before I 
go out to see you.
    Mr. Pompeo. Thank you very much, Mr. Sanchez.
    Mr. Sanchez. Thank you.
    Mrs. Bono Mack. Thank you. The chair would recognize Mr. 
Gonzalez for 5 minutes.
    Mr. Gonzalez. Thank you very much, Madam Chair, and Mr. 
Secretary, welcome. I know that many of us supported your 
appointment, nomination and confirmation, so it is great to see 
you here.
    Mr. Sanchez. Thank you.
    Mr. Gonzalez. Nothing is an easy road in Washington.
    Mr. Butterfield. Will the gentleman yield?
    Mr. Gonzalez. Of course.
    Mr. Butterfield. When I first met the Under Secretary, the 
first word that came out of his mouth was ``Charlie Gonzalez.'' 
I yield back.
    Mr. Gonzalez. And the conversation continued regardless.
    Anyway, Mr. Secretary, well, first of all, I will get the 
parts and stuff out of the way because I know that my colleague 
from Texas, Mr. Barton, alluded to the creation of private 
sector jobs and it is not all created by the government. I will 
say this about the present Administration. In the past month, I 
think about 35,000-plus government jobs were lost and 200,000-
plus private sector jobs were created. I will say this, and I 
think the record will bear me out, that this Administration's 
record as far as creating private sector jobs far exceeds that 
of the years 2000 to 2008, but I must say that beating the 
number zero of net job creation between the years 2000 and 2008 
shouldn't be all that hard to do, and we do have great 
challenges and I am hoping that we will get past all this and 
figure out how we are going to get out of this tremendous 
recession that we still find ourselves in.
    In a minute we are going to have the second panel, Mr. 
Secretary, and a couple of those witnesses, maybe three--of 
course, we will have the chamber and we will have think tank 
but we are going to have businesspeople and they are going to 
obviously touch on what they sense or feel is the greatest 
challenge to them in finding markets and such. I have not read 
their testimony. I am just assuming that that will be the crux 
of the subject matter. What is your estimation? What do you 
think it is? What do you think they are going to tell us in the 
next hour or so?
    Mr. Sanchez. Well, I think what the American business 
community tells us every day is that they understand the 
importance of exports and they want to export more, and so in 
order to do that we have to reduce trade barriers. Now, we are 
doing that certainly with trade agreements, which are a very 
important tool, but we do it in a lot of other ways as well--
harmonizing standards, regulatory cooperation, really putting a 
spotlight on corruption or the lack of intellectual property 
rights protection. These are issues that of vital concern to 
the business community. We work very closely with them to try 
to reduce these non-tariff barriers every day. So I think they 
will tell you that we need to get the three pending trade 
agreements completed. I think they will also tell you that the 
Trans-Pacific Partnership which will also expand and benefit us 
in the Asia Pacific region needs to get done, and we are on 
track. We are hoping to have the framework for an agreement on 
that in November, and they will also tell you we need to the 
base hits. You know, trade agreements you might think of as 
home runs. Base hits are working every single day resolving the 
trade barriers that Congressman Pompeo referred to that may 
affect one particular sector or in some cases one particular 
company. It is working on those issues that I mentioned country 
by country. I have privilege of serving on the commercial 
dialog with Brazil and another commercial dialog with India 
where we raise these issues that create non-tariff barriers. 
Those are the base hits that we have to be hitting every day 
along with the bigger home runs like trade agreements.
    Mr. Gonzalez. Thank you very much, and I would yield back 
the balance of my time.
    Mrs. Bono Mack. I thank the gentleman. The chair recognizes 
the gentlelady from Tennessee, Ms. Blackburn, for her 5 
minutes.
    Mrs. Blackburn. Thank you, and thank you, Mr. Secretary.
    Let us stay right there talking about these emerging 
markets--Brazil, China, India. Tell me what you are doing to 
help our businesses. In Tennessee, our exports have increased 
tremendously. You know that. You know that this is an issue 
that is important to us just like the intellectual property 
protections are important to us and so since you raised Brazil, 
which is a market that we have our eyes on, talk to me about 
what ITA is doing on a daily basis to help businesses take 
advantage of opportunities that are there or to seek out and 
know where they can be competitive. How are you helping them 
target and drill down on these?
    Mr. Sanchez. Thank you, Madam Congresswoman. Brazil is a 
very important market for us. It is one of our targeted 
emerging markets. We have a team of trade specialists in 
country in Brazil as well as our domestic network that work 
with companies around the country to take advantage of the 
opportunities that exist. Let me give you a few in the 
infrastructure space. As you well know, Brazil is going to be 
host to the Olympics as well as the World Cup. It is estimated 
that Brazil will spend over $200 billion in infrastructure, and 
American companies are well positioned to support Brazil as 
they grow in that space. So we are working closely with the 
business community promoting that. We have trade missions 
there. We have information available through our portal, our 
web portal, Export.gov, and we will continue to focus on that. 
So on export promotion, we are disseminating information, 
taking trade missions, extending gold key services, which is a 
customized service that is extended on a fee basis for 
companies that want to go down there and have appointments 
already made for them so they can hit the ground running. So we 
are doing a lot on the export promotion side.
    Mrs. Blackburn. So you are facilitating the information 
dissemination and the awareness as well as the onsite, in-
country relationship?
    Mr. Sanchez. Yes, ma'am. We are doing both.
    Mrs. Blackburn. All right. Let me switch gears, since I 
just have a little bit more time left. I want to look at the 
export initiative.
    Mr. Sanchez. Yes.
    Mrs. Blackburn. And ask you a little bit about what steps 
the bureau is taking to make certain that we avoid duplication 
and redundancies and duplication of efforts among other federal 
agencies. You know this is something that we want to make 
certain we clean up a lot of the bureaucratic operational 
processes, so as we look at this, and you know Congress has not 
appropriated funding for this yet, what are you doing that is 
going to ensure that you get rid of some of these redundancies 
before you stand it up?
    Mr. Sanchez. Well, let me highlight three things. First, we 
have the trade promotion coordinating committee, and that trade 
promotion coordinating committee has as its membership all of 
the agencies that have some role, even if it is a very small 
role, in export promotion. We meet regularly. We talk about 
what we are doing. We look for places to collaborate and 
cooperation. So for example, under that effort, we recognize 
that our best use of the trade specialists that we have both 
domestically and internationally are for companies that are 
export-ready, companies that have already dipped their toe in 
the water and are exporting, although they may only be 
exporting to one market or two markets. So we have begun to 
focus on those companies. Now, there are a lot of companies 
that have never----
    Mrs. Blackburn. So you are focusing more on enabling growth 
rather than enabling entry?
    Mr. Sanchez. ITA is focused on that. SBA through this 
effort of making sure that we weren't doing duplication and 
maximizing our resources, we work with SBA who now takes the 
lead on companies that have never exported before.
    Mrs. Blackburn. OK.
    Mr. Sanchez. So on the trade promotion coordinating 
committee is one. Number two, within ITA, we have looked at how 
we can streamline our own efforts and make it tighter, so we 
have a unit of manufacturing and services. Their mandate was 
quite broad and we are looking at now streamlining that and 
focusing it just on sectors that have export potential, and 
then more broadly, as Congressman Butterfield alluded to, the 
President has directed his team to look at how we do export 
promotion and trade policy and see if we can't do it better, 
more effectively and more efficiently. So on three levels we 
are actively----
    Mrs. Blackburn. Do you feel like that in that process--and 
my time is nearly up. Do you feel like in that process you are 
picking winners and losers, or no?
    Mr. Sanchez. No, that is not our job. It isn't our job, but 
it is our----
    Mrs. Blackburn. OK. My time is expired. I yield back.
    Mrs. Bono Mack. The chair recognizes the chairman emeritus 
of the full committee, the distinguished John Dingell.
    Mr. Dingell. Madam Chairman, thank you for your kindness, 
and I really much appreciate you holding this hearing. It is 
important leadership in a very important area. Thank you.
    I have an excellent opening statement which I have inserted 
in the record, and I hope everybody will read it and find it 
both enlightening and enjoyable.
    [The prepared statement of Mr. Dingell follows:]

               Prepared Statement of Hon. John D. Dingell

    Thank you, Madam Chair, and I commend you for exercising 
our Committee's often overlooked jurisdiction over trade-
related matters.
    I wholeheartedly agree with calls to increase U.S. exports 
in order to put people back to work and restore our country's 
reputation as a place that makes things. When I came to 
Congress some years ago, the United States exported more 
merchandise than it imported. We now enjoy a sizeable goods 
trade deficit, attributable, I believe, to unfair and deceptive 
foreign trade practices, similarly poor enforcement of our own 
trade laws, free trade agreements that are anything but, our 
ballooning debt and associated interest payments thereon, and a 
general focus on promoting the interests of the financial 
services sector over those of our domestic manufacturers. The 
current recession gives us the opportunity to re-orient U.S. 
trade policy toward the job-creating export of tangible 
manufactured goods and away from the smoke and mirrors long 
associated with Wall Street.
    I welcome our witnesses this morning, particularly Commerce 
Undersecretary for International Trade, Francisco Sanchez. I 
intend to focus my attention on the pending Korea-U.S. Free 
Trade Agreement and ask that you, Mr. Sanchez, help me improve 
my understanding of that deal by responding to a series of 
``yes'' or ``no'' questions. I hope to learn about the deal's 
potential effects on the automobile industry, which, as my 
colleagues and those assembled here today know, is of great 
importance to my home state of Michigan.
    I thank you for your courtesy, Madam Chair, and yield back 
the balance of my time.

    Mr. Dingell. Now, Mr. Secretary, thank you for appearing 
before the committee today. I have a number of questions to ask 
you which though I think the best answer is a yes or no, and I 
will try and see that you have them in writing so that you may 
later make such additional comments as you find necessary. I 
want to tell you, I am a particular admirer of your department, 
particularly your Foreign Commercial Services Agency and the 
market access and compliance operation that you have down 
there. These are very important to us in our trade, and I hope 
my colleagues on the committee will inform themselves of the 
work that they do in increasing American exports and improving 
our trade posture.
    President Obama recently announced that the KORUS FTA will 
create 70,000 jobs in the United States. Korean President Lee 
Myung-bak has announced that the deal will create 335,000 jobs 
in Korea in the next 10 years. Do you agree with these 
estimates? Yes or no.
    Mr. Sanchez. First of all, I just want to say thank you for 
the kind comments about the International Trade Administration. 
I can't speak to the estimates by the Korean president, but 
yes, I do agree with the estimates and the impact on the U.S. 
economy.
    Mr. Dingell. You have no reason to challenge either set of 
figures?
    Mr. Sanchez. I have no reason to challenge, and I can----
    Mr. Dingell. Thank you, Mr. Secretary. The International 
Trade Commission's 2007 report on KORUS FTA as amended in March 
2010 indicated that the U.S. motor vehicles and parts trade 
deficit with Korea would increase between 1 billion and 1.3 
billion annually if FTA was implemented. Does the Department of 
Commerce estimate this as well? Yes or no.
    Mr. Sanchez. I would need to look at that. I can't answer 
that.
    Mr. Dingell. But you have no reason to challenge those 
numbers at this time?
    Mr. Sanchez. Not at this time.
    Mr. Dingell. I am troubled by the KORUS FTA's country-of-
origin rules. Is it true that such rules permit a product from 
Korea with a minimum 35 percent Korean content to be considered 
as having originated in Korea for U.S. tariff purposes? Yes or 
no.
    Mr. Sanchez. I am not familiar with that provision so I 
can't----
    Mr. Dingell. I believe it is so. Do you have any reason to 
challenge it?
    Mr. Sanchez. Not at this time.
    Mr. Dingell. All right. Mr. Secretary, for the sake of 
argument, is it possible if that be true that a Korean product 
with 65 percent Chinese content could be imported to the United 
States under the KORUS FTA's favorable tariff conditions? Yes 
or no.
    Mr. Sanchez. If that provision is in place, I suspect that 
would be true.
    Mr. Dingell. Now, Mr. Secretary, I note that KORUS FTA as 
amended last December includes a provision that allows United 
States to snap back its tariffs on automobiles and light trucks 
if Korea violates the terms of FTA. Is it true that the 
agreement does not allow the United States to snap back to its 
original 25 percent tariff on light trucks? Yes or no.
    Mr. Sanchez. Mr. Chairman, I am not familiar with that 
provision but I have no reason to challenge your statement.
    Mr. Dingell. Mr. Secretary, I appreciate your courtesy and 
the way you are responding. Further, Mr. Secretary, is it true 
that the snapback provision would allow Korea to reimpose an 8 
percent tariff on U.S. vehicles while the United States would 
be allowed to impose a tariff of only 2.5 percent on Korean 
passenger vehicles? Yes or no.
    Mr. Sanchez. Once again, I am not familiar with that 
specific provision but have no reason to challenge your 
statement.
    Mr. Dingell. Mr. Secretary, I appreciate your courtesy. 
Finally, Commerce will bear significant responsibility in 
enforcing the terms of KORUS FTA. Will you commit that the 
Department of Commerce will do so vigorously, vigilantly and 
fairly?
    Mr. Sanchez. Yes.
    Mr. Dingell. Mr. Secretary, I want to thank you again for 
your appearance here. I want my colleagues to know the very 
great importance of the department of which you are part and 
the extraordinary good work that you do in stimulating our 
trade efforts abroad, particularly the assistance that you give 
to small businesses and middle-sized businesses as they seek to 
increase their exports and that your services in this 
particular area are extraordinary.
    Madam Chairman, I think it would be useful if this 
committee were to take a look at that because they do superb 
work in these areas and they do not have the funds and the 
resources they need for producing the kind of benefits that 
they can produce if we provide them support. Again, Madam 
Chairman, I thank you for your courtesy and for your wisdom in 
this matter. Thank you.
    Mrs. Bono Mack. I thank the gentleman, and the chair 
recognizes the gentleman from Illinois, Mr. Kinzinger, for 5 
minutes.
    Mr. Kinzinger. Thank you, Madam Chairman. Again, Mr. 
Secretary, how are you?
    Mr. Sanchez. Good.
    Mr. Kinzinger. You have obviously heard this today. You 
know where we are coming at on this. One of the reason 
disappointments I have had is just, I think, the feeling that 
there is no real hurry to do anything in Colombia or Panama or 
really this idea that we can't find out exactly what it is but 
there is a hesitancy. I don't know if it is an attempt to 
satisfy base. I don't know what is going on but there is really 
a hesitancy to do it, and I can tell you in my own life, prior 
to coming here I was and remain in the reserves, a pilot with 
the military, and I actually have been involved in some joint 
operations in the south and I can tell you they are a very 
strong ally of the United States, specifically, Colombia I am 
talking about now, Panama as well, but a very strong ally of 
the United States, and one of my concerns as we continue to 
kind of just limp along or dilly-dally and we don't pass this 
agreement which was negotiated years ago now, I am afraid that 
we begin to lose that support in Colombia where the people 
begin to wonder, you know, what is the hesitancy. Every moment 
that goes by that this agreement is not in place that we are 
unable to export in a very strong way to these nations, other 
countries like China, European nations are very quick to come 
in and pick up that vacuum, pick up that slack. So I really 
feel that every moment that goes by not in Colombia 
specifically I am talking about now we are losing potentially 
the support of the people as they wonder what is happening and 
we lose market export opportunities, not to mention the fact 
the role that a free trade agreement or really a leveling of 
the playing field for us, what a free trade agreement would do 
in terms of just generally national defense, continuing to 
build that alliance in an area of the world where frankly 
American interests have begun to be challenged by many fronts 
and especially on the eastern front of Colombia. So that is a 
concern I have.
    Let me ask you a few questions, and I guess I will start 
with one first. You testified that the Korean free trade 
agreement represents $10 billion in exports and 70,000 American 
jobs. In both that and the one with Panama and Colombia that 
have been sitting on the table, have there been any estimates 
so far about how much really has been left on the table by our 
failure to implement these trade agreements over the last few 
years, how many potentially the export amount we have lost or 
how many jobs have not been created because this has been 
sitting on the table for so long?
    Mr. Sanchez. I know that with the Colombia trade agreement, 
I can say forward leaning. I can't speak to years past but 
forward leaning it is estimated to increase exports by about a 
billion dollars to that country, Panama, I think slightly less 
than that. But let me just say, Congressman, that I agree with 
you completely in how important moving these trade agreements 
is. As with you, I have a history with Colombia as a 
businessman and I recognize Colombia not only as a good friend 
and an ally but as a strong commercial partner, so it is 
important to move forward on this.
    Mr. Kinzinger. Well, and so I think that is good because 
from what I am hearing from you, it sounds like we are going to 
have enthusiastic cooperation from the Administration here very 
soon over passing all three of these trade agreements, which I 
think would be great for the American economy and I look 
forward to working in a bipartisan way with the Administration 
on that.
    In your opinion, what are the biggest impediments right now 
to our global competitiveness for our business and our exports?
    Mr. Sanchez. Well, let me put them in two categories. One 
is domestic. Only 1 percent of American businesses export. 
Compare this to Germany, 12 percent of their business is 
exports. So one challenge we have is getting the word out to 
American business, particularly small- and medium-sized 
companies, that we can no longer look at our market as a 
community, a state or----
    Mr. Kinzinger. Well, I think business knows that. I think 
we need to get that out continually and I would love to hear 
the Administration continue to talk about this to organized 
labor, to the American people about the importance of trade. Go 
ahead.
    Mr. Sanchez. Well, I think a lot of American business does 
but I want to see more American businesses exporting, and then 
within that 1 percent, 58 percent of those companies only 
export to one market. So we need to do a better job of selling 
our goods and services abroad.
    Mr. Kinzinger. Well, let me ask you something because I am 
almost out of time. What about corporate tax rates?
    Mr. Sanchez. I think we need to look at everything that can 
have an impact on our competitiveness.
    Mr. Kinzinger. Well, what about corporate tax rates 
specifically?
    Mr. Sanchez. I think corporate tax rates should be looked 
at. I think they should absolutely be looked at as----
    Mr. Kinzinger. Would you support reducing corporate tax 
rates so that we could reduce our costs overseas and be more 
competitive in the export market?
    Mr. Sanchez. Well, I certainly support a review of what we 
need to do.
    Mr. Kinzinger. All right. Thank you, sir.
    Mr. Sanchez. Thank you.
    Mrs. Bono Mack. The chair recognizes the gentleman from New 
York, Mr. Towns, for 5 minutes.
    Mr. Towns. Thank you very much, Madam Chair. Let me thank 
you and the ranking member for having this hearing. I think it 
is a very important hearing and you are doing it in a very 
timely fashion, and I like that as well.
    Let me ask you, since it is our job to analyze how trade 
barriers are hurting American industry, will you develop an 
analysis of the impact that the current visa processing 
procedures and visa interview delays in key growth markets like 
Brazil, China and India are having on travel to the United 
States and provide it to this committee?
    Mr. Sanchez. Congressman, you raise an important issue. I 
am happy to provide information that could be useful to you and 
to this committee. What I can say about that issue is that my 
boss, Secretary Locke, heard an earful from American business 
all over the country. He then raised this with Secretary of 
State Clinton. He also heard about concerns when people come to 
our borders and entry points so from those conversations a 
working group has been established between Commerce, State and 
Homeland Security to focus on visa and entry issues. We use 
that working group to gather information from the business 
community and make sure that State Department and Homeland 
Security knows about these issues. We also use it as 
dissemination of information to the business community. So we 
are aware that this is a problem that we can solve ourselves 
and we are working on it and working very closely with State 
and Homeland Security.
    Mr. Towns. So you don't need the Congress to do anything?
    Mr. Sanchez. Well, I wouldn't say that. What I would say is 
that we will provide you any useful information that we have 
gathered, particularly in the last year and a half that we have 
been working closely with those two agencies on this issue.
    Mr. Towns. In your testimony, you said that you will use 
all the tools in your toolbox. What tools do we have in that 
box?
    Mr. Sanchez. Well, we have a lot of tools. On the export 
promotion side, we took 35 trade missions last year, a record-
setting number. We had 400 companies participate in it. We also 
have an international buyers program where we bring--last year 
we brought 13,000 foreign buyers to our shores to trade shows 
and we connected them with American businesses where sales were 
made. We provide market analysis. We have a gold key service, 
which is a fee-based service for companies that want us to help 
them identify the right distributors or potential buyers, and 
we arrange their meetings for them in country so that is on the 
export promotion side, a sample of services.
    On the policy side, we focus on non-tariff trade barriers 
and try to work with the business community on identifying 
them, putting a spotlight on those barriers and then working 
with our trade partners to reduce them.
    Mr. Towns. In your testimony, you also indicated that ``we 
are doing our part to keep America globally competitive and 
implement President Obama's National Export Initiative.'' What 
are some of the things you are actually doing?
    Mr. Sanchez. Well, one is certainly reducing trade barriers 
abroad. The more barriers we can reduce, the more competitive 
we will be. On the domestic side, the President is committed to 
the R&D tax credit and making that permanent. One of the 
greatest competitive advantages we have around the world is we 
invest more in research and development than any other nation 
in the world. We need to continue to do that, and the R&D tax 
credit will go a long way to helping that happen.
    Mr. Towns. Before I yield back, let me thank you for the 
work that you are doing.
    Mr. Sanchez. Thank you, Congressman.
    Mr. Towns. I really, really appreciate it, and I think that 
you are moving in the right direction. If there is anything 
that we need to do on this side of the aisle, I think you just 
need to voice it because I think more and more people are 
beginning to realize how important it is to improve in terms of 
our trade and strengthen our relationship across the board and 
realizing that there is a correlation between unemployment and 
crime. We have to recognize that, and I think that more and 
more people realize it and that we hope to be able to remove 
those trade barriers and be able to move forward.
    On that, Madam Chair, I yield back.
    Mr. Sanchez. Thank you.
    Mrs. Bono Mack. I thank the gentleman. The chair recognizes 
Mr. Guthrie for 5 minutes.
    Mr. Guthrie. Thank you, Madam Chairman.
    Thank you, Mr. Secretary, for coming today. I appreciate 
that. I know you mentioned tourism earlier, and that is a great 
industry. We have people coming here. I think it is important. 
I guess I didn't think of it so much as exports, but it is 
great when people are here, and when I hear somebody walking 
around with a foreign accent out here, I will stop and talk to 
them because I am proud to show off our great capital city to 
them and appreciate them being here.
    But I was thinking I remember being in another country, 
somewhere I won't mention, but standing in this grand 
marketplace, great buildings, a castle, the whole, just 
fantastic, and they were talking about the great ships that 
came in and out of the harbor, and it dawned on me as I was 
standing there. I said you know what their biggest industry now 
is selling the history of when they were a great power, and 
that is something that we need to make sure--I mean, that was 
their number one industry was people coming to see the great 
buildings built when it was a great power, and we have to be 
mindful as we are here, and in Brazil, Brazil in the late 
1990s, I believe it might have been the mid-1990s to late 
1990s, had financial issues, deficit problems, and took some 
tough medicine. They were willing to take the tough medicine, 
and the president at the time, Cordoza, led that effort. They 
had the same kind of federal system we have. And look where 
they are now. I think the benefits of that have paid off 
tremendously. It is a wonderful country, a great place to be, 
180 million people, maybe somewhere around that.
    Mr. Sanchez. I think over 190.
    Mr. Guthrie. Over 190 million now. But I do know there are 
trade barriers between Brazil. I know the President is either 
going or is there.
    Mr. Sanchez. Yes.
    Mr. Guthrie. What is going on with Brazil in particular?
    Mr. Sanchez. Well, it is certainly one of our targeted 
emerging markets. As you have pointed out, many, many years ago 
Brazil was called the sleeping giant. Well, it has awoken and 
it is a tremendous opportunity for American business, but also 
has challenges both tariff and non-tariff barriers. As I 
mentioned earlier, I have the privilege of co-chairing the 
commercial dialog with Brazil. That is the vehicle we use to 
raise trade issues, and so we have done everything from trying 
to get them to open up their express delivery service. Express 
delivery is very important for our small- and medium-sized 
companies who don't have their in-house logistics operations, 
and we made progress there. We are working with them on 
harmonizing standards in a number of sectors but in particular 
in alternative energy because we see a great opportunity to 
boost our efforts there. We are working closely to bring our 
smart grid technology to Brazil, so we are working on a number 
of fronts to create opportunities, and as I mentioned earlier, 
we are doing a lot of export promotion in the infrastructure 
area because Brazil will be making significant investments in 
that sector over the next 6, 7 years.
    Mr. Guthrie. And that is all good. Also, just the product 
manufacturing to ship in is something that is interesting. On 
the export initiative that is coming out of the White House, is 
it solely focused on tariff barriers or are you trying to make 
ways to business more competitive? I know you talked about the 
research credit, but when you talk to businesses now, they are 
just concerned about the regulatory environment. We had an 
issue yesterday we were hearing in the full committee about 
energy costs that could come because of the way the EPA is 
regulating. I know in Kentucky manufacturing, energy, that 
gives us competitive advantage in Kentucky compared to other 
countries because we have low energy prices, and a lot of 
businesses are just concerned not just about getting into 
countries and finding out opportunities but being competitive 
because of the regulatory structure that is coming down. I 
don't know if you guys are looking. Is this just a Commerce 
Department initiative or are you looking at----
    Mr. Sanchez. No, the National Export Initiative is a 
government-wide initiative specifically on regulations. The 
President has directed his Administration to look at 
regulations and how they affect our competitiveness, and 
Commerce participates in that review. We don't get involved in 
every regulatory review but those that have significant 
economic impact, and then finally, looking at regulations 
abroad that affect our competitiveness is something we take a 
very active role in as well.
    Mr. Guthrie. And I am just about out of time. The three 
trade initiatives together we have discussed today, if they 
were moved in together, I don't know if you said it or maybe I 
read the Administration says that would put all three in 
jeopardy if they moved together. Do you find that to be the 
case if we were to approve all three at the same time?
    Mr. Sanchez. You know, I am not aware of who said that but 
what I can tell you is this. I know we have one that is ready 
to go now, and as Ambassador Kirk said I think in recent 
testimony, if we are a company and we have a product ready to 
go, we ought to take that product to market. So we are going to 
do that. The other two, I think we are close. We are working 
very, very hard. There has been a lot of activity with both 
Panama and Colombia. I know the President is committed to 
getting them to Congress and so I would say let us finish up 
the work we have to do on these other two. We are working them. 
There have been meetings. In fact, there are meetings going on 
I believe today with Colombian officials and U.S. officials, 
and let us move with the product we have ready, which is Korea.
    Mr. Guthrie. All right. Thanks. I will yield back.
    Mr. Sanchez. Thank you, Congressman.
    Mrs. Bono Mack. The chair recognizes Mr. Harper for 5 
minutes.
    Mr. Harper. Thank you, Madam Chair.
    Good to see you, Mr. Sanchez.
    Mr. Sanchez. Thank you, Congressman.
    Mr. Harper. Thank you for being here. I know you would 
rather be getting a root canal right now than having to come 
join us, but we thank you for your time and patience with us 
today.
    Mr. Sanchez. So far it just feels like filling a cavity.
    Mr. Harper. That is good. Well, hopefully it won't get any 
worse than that.
    Mr. Sanchez, I wanted to talk to you about an issue that I 
believe just happened very recently, perhaps yesterday, when 
the Commerce Department announced the final determination in an 
administrative review of the anti-dumping duty order against 
frozen fish fillets from Vietnam. Of course, this announcement, 
as you know, represented a reversal from a preliminary 
determination that your agency announced I believe just last 
September. This decision seems to be at odds with your stated 
mission of improving the competitiveness of U.S. industry and 
taking appropriate steps against unfair trade. What is most 
concerning to me is the apparently perhaps political nature of 
the decision your agency announced yesterday. I understand that 
just after last September's preliminary determination, the 
Vietnamese significantly stepped up the diplomatic pressure on 
the Commerce Department. Further, I understand that this 
diplomatic pressure culminated with a meeting only a few weeks 
ago very late in the administrative review process between you 
and the Vietnamese government. I also understand that when the 
U.S. industry requested a meeting with you to present their 
side of the case, you were personally unavailable or unable to 
make room on your schedule. And then I also understand that in 
just a couple of weeks, perhaps in early April, you plan to 
lead a trade mission to Vietnam, and I believe that is a good 
thing. You know, that is certainly an important thing for you 
to do, to lead a trade mission to Vietnam. However, I am 
concerned that this recent decision perhaps may have been 
political in nature and that it has been made to the detriment 
of a U.S. industry and of course thousands of workers in that 
industry. So I would ask if you could help this committee 
better understand how the department reached this final 
decision.
    Mr. Sanchez. Congressman, I take my role as enforcing our 
trade laws very, very seriously. I think it is one of the most 
important things we can do is to make sure we are creating a 
level playing field at home for American business. I can assure 
you, I can look you and this committee in the eye and say that 
this decision was made based on the statute that we have to 
follow and based on the facts in the record. Politics played 
zero role in this decision. In this particular case, a 
preliminary decision was--because Vietnam is a non-market 
economy, we have to look at other markets to determine our 
evaluation of whether or not there is dumping going on. In the 
preliminary finding, we looked at the Philippines. Subsequent 
to that preliminary finding, we reviewed the record, and based 
on the information in the record determined that Bangladesh was 
a more appropriate market, analogous market. This was based on 
what was brought in by the petitioners as well as those 
defending, that is, the Vietnamese, and based on that, it was 
determined by our staff that Bangladesh was the more 
appropriate market. Upon doing that, that changed the 
calculation.
    But let me just close by saying enforcing our trade laws is 
absolutely critical. I do that with great pride. There were no 
political considerations taken in making this decision. We 
followed the statute and we used the facts as were presented.
    Mr. Harper. When this change was made, when you were 
looking at the surrogate market economy, so previously, let us 
say back to September of 2010, before that which country was 
used?
    Mr. Sanchez. I believe it was the Philippines.
    Mr. Harper. And then the change was made, was that 
September of 2010 that the change was made?
    Mr. Sanchez. You can't hold me to the dates.
    Mr. Harper. But the change was made to Bangladesh?
    Mr. Sanchez. Correct.
    Mr. Harper. Did you get a pushback from the Vietnamese 
government on making that change?
    Mr. Sanchez. I got no pushback on any change, and if we had 
gotten a pushback, it wouldn't have made a difference. The only 
thing that would make a difference is the facts that are 
presented to us, what makes the most sense as we apply the 
statute.
    Mr. Harper. You understand our concern, though?
    Mr. Sanchez. I absolutely understand.
    Mr. Harper. The appearance and the timing and some of those 
events that took place, we just needed to get a better 
explanation on that.
    Mr. Sanchez. I understand.
    Mr. Harper. With that, I yield back.
    Mrs. Bono Mack. I thank the gentleman. The chair recognizes 
Dr. Cassidy for 5 minutes.
    Mr. Cassidy. Hello, sir.
    Mr. Sanchez. Hello, Congressman.
    Mr. Cassidy. I am struck as I look at--can you just 
speculate on the potential benefits to our export of products 
such as rice if we complete that Colombia free trade agreement?
    Mr. Sanchez. I can't speak specifically to rice but I can 
speak without any hesitation that the trade agreement would be 
very, very good for American business, and the President fully 
supports getting that completed and getting it to Congress. I 
can tell you that I would like to see it completed because it 
will help me in my job doubling exports by 2014, as the 
President pointed out.
    Mr. Cassidy. Now, there has been concern from some folks 
that Colombia's human rights record is such that we should not 
have that free trade agreement. Do you have any assessment of 
that?
    Mr. Sanchez. Well, my understanding is that the issues that 
we are focused on are certain provisions in the Colombia labor 
code and concern about violence toward labor organizers and the 
impunity that happens when violence occurs, that people 
literally have gotten away with murder. What I can say is that 
the Colombian government is a strong collaborator in 
confronting these issues and working with us to address those 
concerns. We have been meeting with them. There has been a lot 
of activity over the last 6 weeks, I would say, and I think 
that both the Colombian government and our team are committed 
to working through the concerns we have, finding a solution and 
getting this to Congress as soon as possible.
    Mr. Cassidy. Not to put words in your mouth, but it is my 
general sense that there has been dramatic improvement in that 
record over the last decade.
    Mr. Sanchez. I think there has been. I have a personal 
history with Colombia and I would agree with you. I think there 
have been improvements and I am particularly impressed with the 
Santos administration, the current administration that has 
taken great steps to focus particularly on this issue that 
concerns us. In addition to that, the vice president of 
Colombia was a 20-year labor leader and he is a strong 
proponent of the free trade agreement.
    Mr. Cassidy. So some of the criticism was that the violence 
was particularly directed towards labor unions so the fact that 
he is a labor leader and also a leader in their government I 
presume is particularly significant.
    Mr. Sanchez. Well, I think he is a strong voice to 
underscore that he is going to pay attention to the concerns 
that we have raised, and they actually have taken a lot of 
steps since August when they took----
    Mr. Cassidy. Let me interrupt, just because I have limited 
time.
    Mr. Sanchez. Sure.
    Mr. Cassidy. Now, what I am about to ask is kind of 
sociological in nature so you may defer. It is my general 
impression, though, that as countries become bigger trading 
partners, they become more prosperous, and as they become more 
prosperous, there are more employment opportunities for folks 
rather than to be a mule to bring cocaine across the border. So 
do you know if there is a body of literature that suggests that 
as a country becomes more prosperous, they are less likely to 
resort to international criminal activity?
    Mr. Sanchez. I am not familiar with any body of literature 
that focuses on that but what I can tell you is that I believe 
that a Colombia trade agreement will be good for our country.
    Mr. Cassidy. Now, let me ask you, changing subjects, my 
district, Louisiana Baton Rouge area, has a lot of 
petrochemical plants. When I was looking over our exports to 
Korea, and we have apparently lost many of our petrochemical 
imports to China. Now, is that a function of China just having 
proximity? Is it a function of China, you know, not having the 
same environmental regulations and so that they can lower the 
cost of production because they can potentially pollute with 
impunity or is it because no, these tariffs are actually the 
barrier, and if we eliminate these tariffs, whatever else is 
there we will overcome it?
    Mr. Sanchez. I believe it is probably a combination of many 
of the things that you mentioned. What I do know is by 
ratifying this agreement, we will put our American companies in 
a much better competitive position and I believe it will help 
and benefit companies in Louisiana as well as other States 
around the country.
    Mr. Cassidy. It has been my general impression that if we 
do a value-added product, oftentimes the Chinese don't do that 
well. They do the commodity generic product but the value-added 
they don't, but of course, the value-added is the most value.
    Mr. Sanchez. Well, what I would say, and I think we will 
agree on this, is that when you lower barriers both tariff and 
non-tariff, we can compete with anybody in the world, and I 
believe that those companies in Louisiana will be well served 
by the Korea trade agreement.
    Mr. Cassidy. I will add to that, our workers can out-
compete with anybody.
    Mr. Sanchez. I agree with you.
    Mr. Cassidy. I yield back. Thank you.
    Mr. Sanchez. Thank you, Congressman.
    Mrs. Bono Mack. The chair recognizes Mr. McKinley for 5 
minutes.
    Mr. McKinley. Thank you, Madam Chairman.
    Sorry I am late. We have a meeting downstairs going and I 
am splitting my time.
    Mr. Sanchez. I heard I have competition.
    Mr. McKinley. I have a series of things. I am coming from 
the northern section of West Virginia, and you have a 
representative there in our district that is helping out, but I 
have had conversations with him and he is very frustrated with 
what is happening long term. The last American manufacturer of 
china is existing in the northern district, Homer Laughlin 
China, and he is holding on. He has got 900 union jobs and he 
is struggling, and he is looking for help and apparently we 
can't help him with the tariffs. He is up against all the 
countries that we have free trade with and he is losing. He 
can't keep up.
    Mr. Sanchez. In the Chinese market, or you are talking 
about generally?
    Mr. McKinley. All his china. He makes Fiestaware. It is one 
of his main products that you will see across America is 
Fiestaware, but he is competing with India, Vietnam, Indonesia, 
Japan, China, and he is struggling, and I don't have answers 
for him. But when I asked him what could we do to help, he 
said, ``Just give me some tariff protection and I can compete 
with them.'' But with the fact that he has to work with so many 
of the EPA requirements for air and water quality and against 
people that are not paying a living wage, it is very difficult 
for him. So I would like to have some direction how we could 
help Homer Laughlin China to get through all this because I 
have seen the demise. In the northern section of West Virginia, 
we had a chemical industry which was very vibrant, now gone. 
The glass industry, we had Fenton, Fostoria, Viking Glass, all 
gone because of imports. I don't want to see Homer Laughlin go 
the same way. In fact, we are trying to hold on to those. So I 
am hoping you can see there is a general problem I have with 
free trade, where we are going with that. We have a steel 
industry that they used to have 30,000--we had two steel 
companies, Weirton Steel and Wheeling Pittsburgh Steel with 
30,000 steelworkers just 15, 20 years ago. Now we have less 
than 2,000, and when you speak to them about it, it is all 
about imports where China and Japan have dumped their steel in 
America but it is so costly and so time-consuming to get 
litigation, they just give it up, so we are down now to 2,000 
with the prospects of them finally just shutting the doors 
after a long and very illustrious history and full employment 
where families have been counting on that. And then we have 
Marble King down in Paden City, West Virginia, the largest 
manufacturer of marble products in the country. She is 
struggling against imports that are coming in that are unfairly 
priced and she has been told by everyone she has to take it 
before whatever, is it the WTO or what? She can't afford to do 
that. She is just a small operation.
    What are small companies supposed to do? Do we have a 
mentality that if you are a U.S. Steel or Weirton Steel you can 
handle it but these small companies are struggling. Homer 
Laughlin has just 900 employees. They are struggling. What can 
we do to help them?
    Mr. Sanchez. Well, Congressman, in that particular case, if 
you will get me contact information, I will make sure that our 
team----
    Mr. McKinley. Could you have your staff contact us?
    Mr. Sanchez. I would be happy to, and we will reach out to 
them----
    Mr. McKinley. They said they have reached out and they are 
hearing nothing back, so----
    Mr. Sanchez. Well, count on it. We will reach out to them 
and we will sit down with them and see how we can be of help. 
For the broader issue, there is no question that some 
communities are disadvantaged by trade agreements. Those 
communities, we need to give them help and we have programs in 
place. The Trade Adjustment Assistance Program, one that 
President Obama is promoting from our department is the 
economic adjustment assistance program that helps workers, 
companies and communities. We can't leave communities behind as 
we pursue these agreements.
    Mr. McKinley. We feel left behind.
    Mr. Sanchez. And so we need to make sure that we are doing 
everything we can to help as the world marketplace changes and 
affects some communities very positively and others quite 
negatively. So any way that we can help your community, count 
on us to be there to do that, and our staff will reach out to 
your staff specifically to work on helping this company that 
you mentioned.
    Mr. McKinley. Thank you very much.
    Mr. Sanchez. Thank you, Congressman.
    Mrs. Bono Mack. All right. The chair would like to 
recognize Mr. Olson for 5 minutes.
    Mr. Olson. Thank you, Madam Chairman.
    Sir, I am from Texas, and I want to ask you about the beef 
industry and the impact of the Korean free trade agreement upon 
that industry. As you know, Texas produces 14 percent of the 
total U.S. cattle and 16 percent of the total U.S. beef cows, 
and we are slapped with a 40 percent tariff before this beef 
from Texas--American beef--reaches Korean soil. We need to get 
rid of that tariff. I understand that the free trade agreement 
does get rid of that tariff, and I ask you to stick to that 
because it is important for our country.
    Also, Australia is very close to finalizing their agreement 
and they are a large beef producer as well. Could I go back to 
the beef producers in my State and tell them that this 
Administration is going to fight for them to end that 40 
percent tariff and get American beef in South Korea?
    Mr. Sanchez. Congressman, what I can tell you is that one 
of the reasons that we didn't bring the Korea trade agreement 
forward sooner is that we were working on that very issue, so 
we are very much aware of the impact of tariffs on the beef 
industry. It is probably still not perfect but it is far 
better, and we will continue to fight once it is ratified to 
make sure the implementation of this agreement makes good on 
the commitments that were made on beef.
    Mr. Olson. Yes, sir, I appreciate that, and as I understand 
it, the original tariffs were put on our beef because of mad 
cow disease, and obviously that is not a factor right now. That 
was something that was a viable argument maybe 5, 10 years ago. 
And so again it is very important for my beef producers back 
home that we have a fair market there in Korea. It is a big 
market and we want that market to be a U.S. market, not an 
Australian market.
    Mr. Sanchez. Got it.
    Mr. Olson. Thank you, sir.
    Mr. Sanchez. Thank you, Congressman.
    Mr. Olson. I yield back my time.
    Mrs. Bono Mack. All right. Seeing no other members present, 
I would like to thank you very much, Mr. Secretary, for your 
time today. You have been very gracious, and just to say to you 
that it is our plan to work with you and Secretary Locke and 
the successor, whoever might have that next post to move our 
country forward and really make ``Made in America'' matter 
again. So thank you for your time.
    At this point we are going to take a brief, maybe 2- or 3-
minute recess as we reset the table, and again, thank you. We 
are hoping you are back again soon and often.
    Mr. Sanchez. Thank you very much for the opportunity to be 
with you. I really appreciate it and look forward to working 
with all of you and expanding export of American products and 
services. Thank you.
    Mrs. Bono Mack. Thank you.
    On our second panel, we have, as you can see, five 
witnesses. Our first witness is Robert W. Holleyman, II, 
President and Chief Executive Officer of the Business Software 
Alliance. Welcome. Our second witness is--oh, OK, not in order, 
but another witness is Daniel Ikenson, Associate Director of 
the Center for Trade Policy Studies at the CATO Institute. 
Welcome. Also testifying today is John Murphy, Vice President, 
International Affairs for the U.S. Chamber of Commerce. We also 
have Jack J. Pelton, President, Chairman and CEO of Cessna 
Aircraft Corporation, and finally we have James Crouse, 
Executive Vice President of Sales and Marketing for the 
Capstone Turbine Corporation.
    Welcome to each of you. You will each be given 5 minutes to 
make your testimony. To keep track of time, there are timers on 
either side. If you need to slide them down so you have a 
better view of them, feel free to do that. When you see the 
yellow light, you are down to 1 minute, and when it hits red, 
if you could briefly sum up your remarks, I would appreciate it 
very much. So we are going to recognize Mr. Holleyman first for 
5 minutes. Welcome.

    STATEMENTS OF ROBERT HOLLEYMAN, II, PRESIDENT AND CHIEF 
  EXECUTIVE OFFICER, BUSINESS SOFTWARE ALLIANCE; JOHN MURPHY, 
    VICE PRESIDENT, INTERNATIONAL AFFAIRS, U.S. CHAMBER OF 
 COMMERCE; JACK J. PELTON, PRESIDENT, CHAIRMAN AND CEO, CESSNA 
 AIRCRAFT COMPANY; DANIEL IKENSON, ASSOCIATE DIRECTOR, CENTER 
  FOR TRADE POLICY STUDIES, CATO INSTITUTE; AND JAMES CROUSE, 
   EXECUTIVE VICE PRESIDENT OF SALES AND MARKETING, CAPSTONE 
                      TURBINE CORPORATION

               STATEMENT OF ROBERT HOLLEYMAN, II

    Mr. Holleyman. Thank you very much, Madam Chairman, Mr. 
Ranking Member, members of this subcommittee. It is indeed a 
pleasure to be with you today.
    This is all about creating jobs and what is the link 
between U.S. export policy and American jobs, and the software 
industry certainly knows from experience how to do that and we 
think there are some lessons that can apply to the broader 
economy.
    Software contributes a $36 billion trade surplus to the 
United States. We employ nearly 2 million Americans at twice 
the national average wage. And there is one simple thing that 
would allow us to contribute even more and have broader impacts 
on the U.S. economy, and that is to reduce software theft. For 
us, the challenge is not how to encourage businesses in other 
countries to use American software. They are already using it 
in overwhelming numbers. But too often they are not paying for 
it, and so stopping illegal software use will certainly create 
jobs for the software industry but it will also create jobs in 
the rest of the American economy, and let me explain that.
    Software is an essential tool of production, and nearly 
every company and business in every sector relies on software 
to create products and to do business. That includes everything 
from manufacturing to transportation to financial services. In 
the United States, 80 percent of businesses pay for their 
software, in contrast, in countries like China, where 80 
percent of the businesses do not pay for their software. The 
result is an unfair competitive advantage. For companies who 
are operating in countries that use software to run their 
operations but don't pay for it, then they have an ability to 
undercut U.S. companies who do by and large pay for their 
software, and this unfair competition undermines U.S. products, 
U.S. sales, U.S. exports, and displaces U.S. jobs far outside 
of the software industry. More than $50 billion of software is 
installed illegally around the world, and this problem is 
fastest growing in large, emerging markets like China where the 
PC market is exploding and the software sales are not tracking. 
Microsoft, one of our members, commissioned a study by 
Dartmouth economists, who estimated that eliminating piracy in 
China for Microsoft products alone would create as many as 
60,000 new jobs throughout the U.S. economy, and of course, 
this would be expanded significantly when extended to other 
companies.
    The United States government has a variety of trade tools 
at their disposal to secure better protection overseas, and we 
believe they must be used. But to maintain our leverage in 
negotiations with trade partners, we also have to lead by 
example in this countries. Federal agencies already require the 
use of legal software within the Federal Government but we must 
also extend this to the next logical step to ensure that 
federal contractors are also using legal software. The U.S. 
Intellectual Property Enforcement Coordinator, Victoria 
Espinel, is exploring that very idea and others as part of her 
joint strategic plan on IP enforcement, and Madam Chairman, I 
want to thank you for your role and cosponsorship in helping 
create through the IP Act, the PRO-IP Act, that position which 
has been enormously important domestically and internationally.
    But this Congress with the Administration has an even more 
important role: that is, to keep up the pressure on every 
country that is using illegal software because it not only 
hurts the software industry but it hurts more businesses more 
broadly, and I would use China as the recent example where 
Congress weighed in quite strongly about the unfair competitive 
advantage that exists because of the use of illegal software in 
that country where President Obama raised directly with 
President Hu Jintao that issue on multiple meetings. We now 
have good commitments in place but unfortunately, I will 
report, that we have not yet seen any measurable increase in 
sales of legitimate software by our companies as a result, and 
I think we know and share with you, as we do with the 
Administration, that the ultimate test is not the commitments 
but the ultimate test is whether we see increased sales and 
exports of U.S. software in these high-value markets that will 
benefit not only software jobs but it will better level the 
playing field between all sectors of the U.S. economy.
    So thank you for this opportunity to testify.
    [The prepared statement of Mr. Holleyman follows:]

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    Mrs. Bono Mack. Thank you.
    Mr. Murphy, you are recognized now for 5 minutes.

                    STATEMENT OF JOHN MURPHY

    Mr. Murphy. Good afternoon. Madam Chairman Bono Mack, 
Ranking Member Butterfield, it is a pleasure and a welcome 
opportunity for me to testify before this subcommittee today.
    For the U.S. Chamber of Commerce, no priority facing our 
Nation is more important than putting Americans back to work. 
With nearly 9 percent of the workforce unemployed, the biggest 
policy challenge we face over the next decade is to create the 
20 million jobs that we need to replace the jobs lost in the 
recession and to meet the needs of our growing workforce.
    With booming demand overseas for U.S. goods and services, 
we believe that trade can play a vital role in reaching this 
goal. The opportunities are immense. Already, more than 50 
million Americans are employed by firms that engage in 
international trade. One in three manufacturing jobs depends on 
exports, and 1 in 3 acres on American farms is planted for 
hungry consumers overseas. Nor is trade just for big companies. 
More than 97 percent of the quarter-million U.S. companies that 
export are small- and midsized firms, but for companies large 
and small, the chief obstacle to reaching the goal of doubling 
U.S. exports by 2014 is the complex array of foreign barriers 
to American exports. Those barriers are alive and well. For 
example, Colombia's effective tariff on imports from the United 
States averages 14 percent for manufactured goods and is even 
higher for agricultural products. By contract, the average U.S. 
tariff last year imposed on imports from Colombia was one-tenth 
of 1 percent.
    Historically, the only way the U.S. government has ever 
enticed a foreign government to open its market to American 
exports is by negotiating free trade agreements to eliminate 
them on a reciprocal basis. This is just what will be achieved 
by the FTAs with Colombia, Panama and South Korea. These are 
pro-growth agreements that will create good American jobs, 
bolster important allies and confirm American leadership around 
the world.
    Such agreements have a proven record of success. Between 
2003 and 2008, for example, U.S. exports rose by 79 percent, 
their fastest growth in nearly two decades. It is no 
coincidence that this period also saw the U.S. implement free 
trade agreements with 10 countries and saw earlier agreements 
such as NAFTA attain their full implementation with the 
elimination of all tariffs on U.S. goods entering Canada and 
Mexico.
    Recognizing these benefits, countries are rushing to 
negotiate new trade accords but America is being left behind. 
According to the World Trade Organization, there are 283 
regional trade agreements in force around the globe today but 
the United States has just 11 such agreements covering 17 
countries. There are more than 100 such agreements currently 
under negotiation among our trading partners. Unfortunately, 
the United States is participating in just one of these.
    The United States is standing on the sidelines while other 
nations clinch new trade deals. For example, the European Union 
has ratified an FTA with South Korea. Canada has done so with 
Colombia. Both of those agreements are expected to enter force 
by July 1st. If Washington delays further, U.S. exporters will 
be put at a marked competitive disadvantage in Colombia, 
Panama, and South Korea. According to a study by the U.S. 
Chamber, the United States will more than 380,000 jobs and $40 
billion in export sales if it fails to implement the pending 
trade agreements while the European Union and Canada move 
forward with their own agreements. Unfortunately, this is 
already happening. The U.S. share of Colombia's import market 
for agricultural products fell from about three-quarters in 
2008 to about one-quarter last after Bogota implemented a new 
trade deal with its South American neighbors.
    In the interest of time, I will simply refer the committee 
to my written testimony where I have also addressed the 
importance of defending intellectual property at home and 
abroad, and I would like to associate myself with the remarks 
of Mr. Holleyman in that regard.
    It is also important to modernize export controls s the 
Obama Administration has begun to do in a very positive 
initiative. It is also critical to develop a tax system that 
incentivizes investment and job creation here in the United 
States.
    In conclusion, the United States needs a laser-like focus 
on opening foreign markets. We need to approve the pending 
trade agreements and negotiate more of them including the 
Trans-Pacific Partnership and an ambitious Doha Round 
agreement. Also, Congress should renew the traditional trade 
negotiating authority that every President since FDR has 
enjoyed. If we stand still on trade, we fall behind. At stake 
is the standing of the United States in the world and our best 
hopes for escaping high unemployment, massive deficits and 
exploding entitlements.
    The U.S. Chamber of Commerce looks forward to working with 
the members of the committee to forge a trade agenda that will 
create jobs, opportunity and growth here in the United States. 
Thank you.
    [The prepared statement of Mr. Murphy follows:]

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    Mrs. Bono Mack. Thank you.
    Mr. Pelton, you are recognized for 5 minutes.

                  STATEMENT OF JACK J. PELTON

    Mr. Pelton. Chairman Bono Mack, Ranking Member Butterfield 
and members of the subcommittee, my name is Jack Pelton. I am 
Chairman, President and CEO of Cessna Aircraft Company. Cessna 
is the world's largest general aviation manufacturer in the 
world based on sales units, and since its inception in 1927, 
Cessna has delivered more than 192,000 airplanes virtually to 
every country in the world. Cessna is also one of the 70 member 
companies of the General Aviation Manufacturers Association, 
which represents the world's leading manufacturers of 
generation aviation aircraft engines, avionics and components.
    General aviation is an important contributor to the U.S. 
economy. It supports more than 1.2 million jobs, is providing 
more than $150 billion in economic activity, and in 2010 
generated $5 billion in exports. We are one of the few 
remaining manufacturing industries that still provides a 
significant trade surplus for the United States. These exports 
accounted for 62 percent of the billings generated by general 
aviation manufacturers, significantly up from 50 percent of the 
billings attributed to exports in 2009.
    Cessna, like many other companies, is coping with the 
realities of a weak economy. Since late 2008, we had to lay off 
nearly 8,000 employees out of our 16,000 that we employed 
before the recession. The three major manufacturers in Wichita 
alone have been experiencing significant declines in sales in 
recent years. In 2010 alone, Bombardier Learjet was down 29 
percent, Hawker Beechcraft was down 22 percent and Cessna was 
down 28 percent. We do believe the market is stabilizing as we 
see an increase in orders in some segments of our industry.
    The tax bill that was passed in 2010 will be very helpful 
to our industry by extending the research and development tax 
credits and allowing 100 percent expensing for capital 
investments like aircraft, avionics, engines and cabin 
equipment.
    Cessna fully supports the current efforts to reform, 
streamline and overhaul the export licensing and policy 
framework. As an aircraft manufacturer, we have found that we 
have a generally positive export environment for our physical 
products: aircraft spares, ground support equipment. However, 
ITAR in many cases is a problem for our utility and special 
missions aircraft sales. These aircraft do not contain 
sensitive military systems and are functionally equivalent to 
commercial aircraft and do not provide significant military or 
intelligence impact yet many of our export existing controls 
and policies have slowed our globalization and have slowed our 
sales efforts.
    Due to the high standards we adhere to in the United 
States, manufacturers cannot sell aircraft or major aircraft 
parts unless they are certified by the Federal Aviation 
Administration. This means that the financial health and 
competitiveness of the U.S. manufacturers in the global market 
depends in large part on the ability of the FAA to do its job. 
Unfortunately, we are concerned that the FAA will be unable to 
meet certification requests by manufacturers in the United 
States unless the FAA is provided adequate resources and 
implements new processes and procedures to streamline the 
certification process. We believe it will not be able to keep 
up with the demand by manufacturers and this will severely 
diminish the competitiveness of the U.S. industry and its 
ability to bring new products to the global market and create 
new jobs in the economy.
    There is, however, a mechanism already in place that can 
help manage the resource demands on the FAA. For aircraft 
certification, the FAA established organization designation 
authorization, referred to as ODA, in 2006. This allows the FAA 
to delegate routine certification tests such as the review and 
approval of thousands of individual drawings and tests. More of 
the U.S. manufacturers have invested in the development of the 
ODA system that has been approved by the FAA but unfortunately 
the certification process efficiencies have yet to be realized 
by our industry.
    Aircraft financing in this new economic climate remains a 
challenge. The availability of credit continues to be a 
constraint on exports, and Cessna has worked very hard to 
create a $500 million facility backed by the Export-Import Bank 
of the United States. This facility has assisted Cessna with 
exports over the past couple years when liquidity in the market 
has been very tight. We do applaud the Export-Import Bank for 
working with us to deliver creative solutions that support our 
export needs.
    Madam Chairman, if government and industry work together on 
the issues discussed here today, then we will help ensure that 
our country stays ahead of the pack economically and 
technologically in the years ahead. Thank you for the 
opportunity to be here today.
    [The prepared statement of Mr. Pelton follows:]

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    Mrs. Bono Mack. Thank you, Mr. Pelton.
    Mr. Ikenson, you are recognized for 5 minutes.

                  STATEMENT OF DANIEL IKENSON

    Mr. Ikenson. Good morning, Chairman Bono Mack, Ranking 
Member Butterfield and members of the committee. My name is Dan 
Ikenson. I am an Associate Director at the Center for Trade 
Policy Studies at the CATO Institute. I am pleased to be here 
today to share my views on manufacturing, jobs and trade.
    Expanding trade has been an important source of U.S. job 
growth historically. In the quarter-century between 1983 and 
2007, as real GDP more than doubled and the real value of U.S. 
trade increased fivefold, the U.S. economy created 46 million 
net new jobs. That is 1.84 million net new jobs per year. And 
just to be clear, when I say expanding trade, I mean expanding 
exports and imports. It is important to note that it is exports 
and imports that support U.S. jobs up and down the supply chain 
through various channels. I think people generally understand 
that exports contribute to economic growth, which is essential 
to job creation, but many of them make the mistake of 
concluding that if exports help grow the economy and create 
jobs, then imports must shrink the economy and cost jobs. Trade 
is thus viewed as a competition between our producers who 
employ us and their producers, who employ them. I think that is 
the wrong way to look at trade.
    In the 21st century, it is inaccurate to characterize 
international trade as a competition between us and them 
because of foreign direct investment, joint ventures and other 
equity-sharing arrangements. Quite often, we are they and they 
are we. Just apply that question to the U.S. auto and steel 
industries. As a result of the proliferation of disaggregated 
transnational production and supply chains, we and they often 
collaborate in the same endeavor. There is competition between 
supply chains but success first demands cooperation within 
those supply chains, and this reality I think demands policies 
that are welcoming of imports and foreign investment.
    A recent study by the Asian Development Bank Institute 
found that just a tiny fraction of the cost of producing the 
Apple iPhone is Chinese value added. The only Chinese input is 
labor, which is used to assemble the components manufactured in 
other countries. The value of that labor accounts for about 
$6.50, or 3.6 percent of the $179 it costs to produce the total 
iPhone. The other 96.4 percent of the total cost is components 
produced in other countries including the United States. Most 
of the iPhone's value, however, accrues to Apple, which reaps 
the lion's share of the approximately 100 percent markup, and 
that markup goes to retailers, distributors, marketers and 
other firms in the supply chain as well as to Apple, which 
distributes some to shareholders and retains some for research 
and development which supports engineering and design jobs 
higher up the value chain so as to continue the virtuous 
circle. So even though only about $6.50 of that iPhone is 
Chinese value, the entire $179 cost is chocked up as an import 
from China because that was the product's final point of 
assembly. That added $1.9 billion to the U.S. trade deficit 
with China in 2009.
    But should we lament a trade deficit in iPhones or any 
other products assembled abroad, particularly when those 
products comprise U.S. value added and support high-paying U.S. 
jobs? Legions of American workers and their factories, offices 
and laboratories would be idled without access to foreign 
workers and foreign factories. Without access to lower-cost 
labor, countless ideas hatched in U.S. labs which became viable 
commercial products that support hundreds of thousands of U.S. 
jobs in engineering, design, marketing, logistics, retailing, 
finance, accounting and manufacturing might never have made it 
beyond conception.
    Countless U.S. jobs up and down the value chain depend on 
imports from China but imports support U.S. employment through 
many other channels as well. According to the Bureau of 
Economic Analysis, intermediate goods and capital equipment 
accounted for 55 percent of the U.S. import value last year. 
These are products purchased by producers, not consumers, so 
imports help reduce the cost of production, enabling producers 
to better compete and support U.S. jobs and wages. The 45 
percent of imports that are consumer goods support U.S. jobs in 
logistics, transportation, wholesaling, retailing and 
aftermarket services industries, and by helping to keep prices 
lower and quality higher, imports allow consumers to have more 
resources with which to purchase other products and services, 
both of which support U.S. jobs.
    The Obama Administration, as we heard this morning, has 
offered an answer to the question implicit in this hearing. Its 
National Export Initiative aims to double U.S. exports in 5 
years by reducing an eliminating various administrative, 
regulatory and financial obstacles faced by U.S. exports. That 
plan includes some laudable components which I fully support. 
The idea of streamlining export controls makes a lot of sense 
and it is likely to lead to export growth. Wrapping up the 
three pending bilateral trade agreements, the Doha Round, the 
Trans-Pacific Partnership agreement, those will clearly all 
lead to increased exports.
    But there are other aspects of the NEI that I find 
troubling. First of all, it completely ignores the import side 
of the equation. It is silent on the fact that U.S. exporters 
are producers before they are exporters and as producers they 
do a lot of importing, and there are many other ways to reduce 
their costs including through streamlining of various 
regulations.
    Mrs. Bono Mack. Can you please wrap up? You are over the 
limit.
    Mr. Ikenson. Yes. I will just conclude by saying a serious 
plan to boost U.S. economic growth and hiring should start by 
identifying all policies, regulations, practices and conditions 
that impede U.S. competitiveness not just those obstacles that 
confront U.S. companies as exporters. Thank you.
    [The prepared statement of Mr. Ikenson follows:]

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    Mrs. Bono Mack. Thank you.
    Mr. Crouse, 5 minutes.

                   STATEMENT OF JAMES CROUSE

    Mr. Crouse. Thank you for the opportunity. I am Jim Crouse 
with Capstone Microturbine manufacturing in Chatsworth, 
California.
    A microturbine is a small combustion turbine used to 
generate electricity at the location of an end-use customer. 
Capstone turbines are used as range extenders in hybrid 
electric vehicles as well as stationary power for a host of 
customers from hotels to hospitals to industrial customers on a 
global basis. As the leading manufacturer of microturbine 
energy systems, Capstone has valuable insight into what it 
takes to compete globally in a growing industry characterized 
by technological change and innovation.
    Although we were invited to testify on behalf of the 
chairwoman and ranking member, our power generation systems can 
be found in almost every State in the United States. Customers 
use our systems mainly to save money by increasing their energy 
efficiency. By utilizing exhaust from the turbine to make hot 
or chilled water, businesses can cut their energy costs by up 
to 50 percent. The use of both electricity and thermal energy 
simultaneously from a single fuel source is called combined 
heat and power, or cogeneration. Some of our systems also 
provide cooling, known as CCHP.
    Microturbines produce very little criteria pollutants as 
well as very little greenhouse gases. Capstone's unique 
technology makes clean, efficient combustion possible. We are 
able to use fossil fuels including abundant natural gas in a 
clean, efficient manner. Other systems that we manufacture burn 
biogas or methane from landfills or digesters. In these 
applications, we are renewable energy.
    Our customers can be found all over the world in a variety 
of industries. Oil and gas companies use our product to power 
their installations, oftentimes in remote locations. Oil and 
gas customers prize reliability, and a microturbine is highly 
reliable since it has only one moving part, does not require 
lubrication or coolants and has only one maintenance interval 
per year. Additionally, generating power with microturbines can 
eliminate the need for air permitting as we design our product 
to meet the most stringent air standards in the world: 
California Air Resources Board standards.
    Our CCHP and CHP customers typically are commercial 
businesses such as industrial plants, hotels, hospitals and 
retailers that use our product to increase their efficiency and 
reduce their cost, making them more competitive in both a local 
and global market. Microturbines are installed in hybrid buses, 
trucks, and we have recently been installing microturbines in 
marine applications both here in the United States and in 
Europe.
    Capstone employers approximately 200 highly skilled 
American workers in its manufacturing facility in Los Angeles, 
and with over 120 patents, Capstone is a technology innovator. 
We produce about 80 percent of the world's microturbines. Most 
of the balance is also manufactured in the United States by 
Ingersoll Rand. This is not a product that we are buying from 
China. This is a product we are selling to China. We have a 
good and strong business in China.
    We export because of a variety of reasons. That is where 
the markets are. We sell in over 50 countries both developing 
and developed countries on six continents. In many cases, 
overseas markets are stronger than our domestic markets. Europe 
is a particularly strong market for Capstone, in part because 
of feed-in tariffs that exist there.
    Capstone Turbine sees value in adopting long-term energy 
policy here in the United States. We believe that a strong 
domestic policy will only strengthen our export business. 
According to Oak Ridge Laboratories, the CHP could provide 20 
percent of the U.S. generating capacity by 2030, generating 
$234 billion in new investment and create 1 million highly 
skilled jobs. CO2 emissions could be cut by more than 800 
million tons per year, the equivalent of taking half of the 
U.S. passenger fleets off the road.
    Energy efficiency combined heat and power makes sense 
regardless of where you stand on climate change. Efficiency is 
good. Saving money on your energy is good. It makes us more 
competitive.
    Capstone Turbine has received several grants in research 
and development from the Department of Energy. However, lack of 
long-term energy policy that promotes energy efficiency and 
distributed generation in combined heat and power--sorry.
    Mrs. Bono Mack. You can complete your sentence.
    Mr. Crouse. So Capstone strongly believes that a strong 
domestic policy is important. We have a bill currently that was 
introduced by Linda Sanchez, and would love to see that bill 
move forward to grow our business domestically, to see our 
international business grow as well. The two are tied together, 
domestic and international.
    [The prepared statement of Mr. Crouse follows:]

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    Mrs. Bono Mack. Thank you.
    The chair will recognize herself for the first 5 minutes of 
questioning, and I will begin by commenting on your testimony, 
Mr. Crouse. As a resident of California, almost lifelong--we 
moved from Cleveland before I was 2 but I don't admit that very 
often--but it surprises me. California, you mentioned CARB and 
what we live under, the most stringent regulations of any 
State, I would say, in the country, yet you only sell 5 percent 
of your total sales in California, and to me, that leads really 
to my question, which is for Mr. Ikenson.
    In your testimony, you mentioned that you are frustrated 
that NEI is absolutely doing nothing to deal with the burdens 
on business. I think you were trying to get into that when you 
ran out of time. Can you go into a little bit more? Your exact 
words are: ``The NEI is silent on the significant obstacles to 
U.S. competitiveness at home and abroad.'' Can you expand?
    Mr. Ikenson. Sure. Well, in fairness, it is called the 
National Export Initiative, so limiting the concern to exports 
is, I suppose, understandable, but it really should be 
broadened. I wish it were called the National Economic 
Initiative in which--I mean, if we are really concerned about 
our exporters, we need to recognize first that they are 
producers, and as producers, they rely on imported raw 
materials that account for a lot of the costs, and they also 
are confronted with lots of regulations. Those burdens are 
immense. Having a free trade agreement with Korea is an 
excellent idea. It is clearly going to lead to export growth, 
but cutting a tariff, a foreign tariff, by 5 percent is a good 
thing but what about cutting your costs, your domestic costs by 
10 percent because the regulatory burden has subsided.
    There was a survey of about 13,000 business executives that 
was conducted by the World Economic Forum recently, and it 
found that there were 52 countries that have less burdensome 
regulations than the United States, and we operate in a global 
economy here. Governments, enterprises are competing for 
investment, capital investment and investment in human talent. 
There is a competition in policy, and I think we are sort of 
missing the boat here. We have the highest corporate tax rate 
in the world. We have the regulatory burdens. Infrastructure is 
in disrepair. We don't have a policy that welcomes high-skilled 
immigrants.
    Mrs. Bono Mack. Let me just jump in here if I can. I know 
in your written testimony you write that the U.S. has the 
highest corporate tax rate among all OECD countries. How would 
you recommend reforming corporate taxes?
    Mr. Ikenson. Well, I am not really an expert in the tax 
field, but there has been a lot of tax competition globally 
over the past decade or so. We need to streamline the tax 
system. A lot of U.S. companies that are operating abroad, some 
of them don't want to repatriate their profits because of the 
corporate tax code, and these companies, in my view, are 
unfairly demonized as either Benedict Arnold companies or 
companies that aren't helping the U.S. economy. Well, you can 
incentivize the return of those investments to create 
productive facilities in the United States and to hire by 
changing the tax code. I am not expert on how to do that but 
there are plenty of others at CATO and maybe even at this table 
who could help you.
    Mrs. Bono Mack. I just like to note that you pointed it 
out, so that is good enough to me. But also in your testimony, 
you said something that I think we as Members of Congress feel 
very often at home, and you talk about the American people, the 
sentiment that they just don't get it and you spoke a little 
bit about in your verbal testimony, that they think imports 
bad, exports good, and then you talked a lot about iPhone, and 
I just whipped off the back cover of mine. You know, Apple is 
pretty smart that they do say designed by Apple in wonderful 
California--I added a couple words there--but assembled in 
China. And perhaps they in their own way could help by saying--
it is a mutt of a product.
    Mr. Ikenson. Right.
    Mrs. Bono Mack. It is assembled everywhere, and I think 
that could help. Can you explain? Do you think the American 
people would begin to understand? And I think about, I have a 
brother who is an engineer. He has worked for Hyundai and Kia 
and all sorts of car companies, and he has an American job, he 
is an engineer. Can you speak of why the American people don't 
quite understand that?
    Mr. Ikenson. Yes, and I think that the media presents 
fairly simplistic accountings of what the trade deficit means. 
We hear about the trade deficit on a monthly basis, and it is 
always reported that imports are bad and we are going to lose 
jobs. There was a report last week that imports always mean 
that foreigners are--when imports outpace exports, foreigners 
add more jobs than are added in the United States. I think that 
is not true. I mean, lots of jobs rely on imports.
    And to get to the technical aspect, you flipped over your 
iPhone. Pascal Lamy, who is the chairman of the WTO, 
understands that people are misled by these trade statistics. 
These trade statistics are reflective of a bygone era. We now 
live in this age of globalization that we need to break out the 
constituent elements of the value, and he is sort of leading a 
charge to try to do that so people say hey, this import in fact 
even though it is all attributed as an import from China, it is 
actually supporting, you know, 10,000 U.S. jobs because of the 
patents or the high-end manufacturing that happened here.
    Mrs. Bono Mack. Well, thank you, and I am down to my last 
15 seconds. Let me just jump to Mr. Holleyman.
    Why do developed countries such as the United States and 
France still have piracy rates of 20 to 40 percent, 
respectively, and how much can Congress do and how much really 
ought to be technologically driven?
    Mr. Holleyman. Well, we certainly think the thing Congress 
can do is to make sure that we have the right laws on the 
books, and I think there are some additional things we can do 
here in the United States. There is the use of trade pressure, 
and I think I would put France very high on that list. It has 
the fourth highest piracy losses in the world, and the U.S. 
government should be pressing that issue. Technological 
measures will certainly help but they won't solve the problem 
and so we need to keep sort of one step ahead of the pace. In 
the United States, I think one of the best signals would be 
ensuring that as the U.S. government is required to use legal 
software, that federal contractors are required to do that as 
well. That would be the next big step that would be a great 
thing to take to France and to China and other countries and 
get them to do that.
    Mrs. Bono Mack. Thank you. My time is expired. I would 
recognize the ranking member, Mr. Butterfield, for his 5 
minutes.
    Mr. Butterfield. I thank the chairman.
    Let me go to you, Mr. Crouse, if I can. Again, thank you 
for your presence today. Mr. Crouse, recognizing export 
promotion as a priority, President Obama's 2012 budget 
increases resources for the ITA, particularly for the 
commercial service. Meanwhile, others have sought to impose 
severe cuts to export promotion, not believing it worth the 
cost. Mr. Crouse, Capstone, I am told, has participated in 
several trade missions. Would you say they were worth the cost 
to you as the exporter?
    Mr. Crouse. Yes, definitely. We participated, as you said, 
in several trade missions, and it has resulted in new business 
for us. We recently in the last couple weeks received an order 
out of Tunisia after attending a trade mission in North Africa 
a year ago or so. The Department of Commerce, by the way, is 
one of the most professional government organizations I have 
ever worked with. It is a pleasure to work with them, and we 
plan to continue doing so.
    Mr. Butterfield. Please tell me in what ways did the 
support of the Federal Government allow Capstone to export 
goods to new markets it otherwise might not have been able to 
do?
    Mr. Crouse. We used the gold key service that we are able 
to use in-country resources to screen potential distributors or 
customers prior to arriving so that when we get there, we 
already have meetings set up and we are much more efficient and 
able to streamline our sales process and partner process. It is 
a big help.
    Mr. Butterfield. In your work with ITA, have you had an 
occasion to encounter U.S. trade professionals that were 
stationed abroad?
    Mr. Crouse. Yes, we have.
    Mr. Butterfield. And did you find them to be reasonably 
helpful to you and your company?
    Mr. Crouse. Yes, both U.S. employees that were there 
working internationally as well as some of the domestic or 
locals that they have working in the offices there have always 
been very helpful to us.
    Mr. Butterfield. The Republican spending plan that passed 
the House, we call it H.R. 1, would prevent those trade 
professionals from being available when and where companies 
such as yours could use their help to complete sales and to 
generate jobs back home. Mr. Crouse, is it correct that on 
these trade missions that you have traveled that you pay your 
own way, you pay for your hotel room and for your food?
    Mr. Crouse. Yes, we pay our own way.
    Mr. Butterfield. My final question. Today, Google is the 
global leader in Internet search. It is worth hundreds of 
billions of dollars. It employs thousands and thousands around 
the world including here in our country, and it is so well 
known and used that the company's name is now a verb. The idea 
that led to Google was originally funded in the mid-1990s by 
the National Science Foundation, and let us not forget that the 
Internet itself originated with the Federal Government and its 
development was pushed along by NSF in the 1980s when it sought 
to give researchers across the country a way to access its 
supercomputing resources. Today, electric cars and iPhones and 
other high-tech gadgets that we rely on daily are powered by 
lithium ion batteries. The development of this type of battery 
is a result of federally funded materials research at the 
University of Texas in the 1980s. These are just a few examples 
showing that the federal investments now in R&D can lead to 
innovative, high-value products from the private sector well 
into the future. It also shows that the Federal Government can 
be, is and must be an engine for private sector growth, and 
nowhere else is that more true than with respect to developing 
new energy technologies.
    In your testimony, you also note, Mr. Crouse, that your 
company has received several R&D grants from the Department of 
Energy. In the remaining minute, can you please tell me a 
little bit more about those grants? For example, can you 
describe the research Capstone has done or is now doing and how 
that research relates to the growth of your business?
    Mr. Crouse. Certainly. Capstone was founded 20 years ago, 
and had DOE funding as well as funding from Ford and Southern 
California Edison to develop a microturbine for hybrid electric 
vehicles. Our turbine is more efficient than traditional 
turbines, in part because of the funding and the research that 
we did in cooperation with the government as well as other 
private companies. Today we have several programs that we are 
working on--a flexible fuel microturbine that will run on 
hydrogen. We are also working on a more efficient turbine that 
will increase our efficiency in the range of 45 percent. And 
those programs combine government dollars with private dollars, 
our own dollar and our investors' dollars, to develop new 
technologies and products.
    Mr. Butterfield. Mr. Crouse, thank you very much for 
answering those questions. I wish you well as you continue to 
grow your business.
    Mr. Crouse. Thank you.
    Mr. Butterfield. This Congress wants to be an ally, not an 
obstacle, so thank you very much.
    Mrs. Bono Mack. I thank the gentleman. The chair recognizes 
Mr. Pompeo of Kansas for his 5 minutes.
    Mr. Pompeo. Thank you, Madam Chairman.
    Welcome to everyone here this morning. A special welcome to 
Mr. Pelton, a constituent, and leader of a company with 8,000 
employees in my home district. Thanks for all of the hard work 
from you and your team in these challenging economic times. I 
know that a group of witnesses that came to Washington, D.C., 
before was excoriated for having traveled in general aviation 
aircraft. I want to go on the record hoping everyone in this 
room flew here today on a general aviation aircraft built in 
Wichita, Kansas.
    Mr. Pelton, you talked about export controls. Can you give 
me an example of a special mission aircraft as some place where 
the government got in the way of helping you make a sale in a 
foreign country for a product that didn't present any national 
security risks?
    Mr. Pelton. Congressman Pompeo, thank you for inviting me. 
There are numerous examples. I can give you one today that is 
right in front of that actually kind of dovetails into the 
discussion earlier this morning dealing with Panama. The 
government of Panama is interested in our brand-new CJ-4, which 
we just certified last year. For us to even have the discussion 
with the Panama government, I have to apply for a marketing 
license to go down there to have the discussion. Now, here is 
the interesting part about that. I don't know what they are 
interested in, so when I apply for the license, I have to 
decide are they looking for a VIP airplane, are they looking 
for an airplane that may have a camera on it, it may have a 
flare on it, it may have some sort of med-evac, and I have to 
guess because I haven't been able to have contact with the 
customer in Panama to really understand because I have to have 
this marketing license. So I have to go get the marketing 
license. Then once I have the discussion, which could take 6 to 
9 months to get that license, so if the avenue is still open to 
my competitors internationally who don't have to go through 
those restrictions having gone down there and swept the deal 
away from me, I will have to find out exactly what they need on 
the airplane and I will have to come back and work with 
potentially three different departments to get the licenses 
necessary for whatever equipment may be installed. It could be 
Commerce, it could be State and it could be Defense, depending 
on what the item is. Many of the items that are on the 
restricted list are really outdated and not that of national 
security or technically one that we should be worried about as 
a country, but I will have to continue to go through that 
process, continue to apply, may even be rejected along the way, 
and then in the end after the product is delivered to be able 
to support that product down there if it has been determined 
that there is a component as simple as a camera that gets 
identified as ITAR. I have to in any support of that airplane 
go through licensing to be able to keep that airplane working 
properly and keep the customer's satisfaction that they demand. 
So it is a very, very onerous process for product that is 
essentially getting delivered with nothing that we should be 
concerned about from a national security standpoint.
    Mr. Pompeo. Thanks. Are there a couple quick hits that 
maybe anybody on the panel, a couple quick things that Congress 
could do? We talked about these regulatory issues. Are there a 
couple rifle shots where we could when we have got unemployment 
where it is today where we could really find bipartisan support 
to get something down and move the ball forward?
    Mr. Pelton. Before any of my colleagues here respond, I 
think there are two quick hits that were discussed. The 
research and development tax credit needs to be made permanent. 
That provides the high-tech engineering jobs that this country 
was founded on so we don't become a service industry, and I 
also believe that while it has been lightly touched on, the 
corporate tax rate, this is a fantastic country that is number 
one in everything and I hope we are not going to be number one 
in corporate tax rates, and if you can find a way to reduce the 
corporate tax rates, I can assure you that the manufacturers in 
this country can offset that revenue with new jobs immediately.
    Mr. Pompeo. Thank you. Mr. Murphy?
    Mr. Murphy. If I could just add to the tax comment there, 
unfortunately we do seem to be on track to have the highest 
corporate tax rate in the world if Japan moves forward and 
lowers theirs. But often there is a comment made in response to 
that, that many companies have exclusions that allow them to 
pay much less. I would just mention a study done by KPMG. They 
have an index that they do called the total tax index, which 
looks at what companies are actually paying, and according to 
this index, companies and operations of companies in Canada, in 
the Netherlands and many other countries are often paying 20 to 
40 percent less in taxes than production in the United States 
is, and this is something that is--those are huge numbers. That 
makes a significant difference. You know, the title of the 
hearing is about making it in America. Companies have to take--
that is something that is very much on their radar as they 
think about where they are going to be investing and hiring.
    Mr. Pompeo. I appreciate that. Mr. Holleyman, did you have 
something you wanted to say?
    Mr. Holleyman. I will say that 60 cents of every dollar 
spent around the world on software comes back to U.S.-based 
companies, so every single bilateral discussion by any member 
of this committee or the Administration should raise the issues 
around IP theft.
    Mr. Pompeo. Great. Thank you. My time is up. Thank you.
    Mrs. Bono Mack. I thank the gentleman. Mr. Gonzalez, 5 
minutes for your questions.
    Mr. Gonzalez. Thank you very much, Madam Chairwoman.
    Mr. Holleyman, in your testimony--I am trying to see if I 
can find it quickly--nearly four out of five PC programs in 
China, 79 percent, are not paid for. What is that figure for 
the United States?
    Mr. Holleyman. For the----
    Mr. Gonzalez. I just want to know the extent of the 
problem.
    Mr. Holleyman. It is just the reverse, so essentially 80 
percent of the software in China is not paid for. In the United 
States, 80 percent of the software is paid for.
    Mr. Gonzalez. And if you will just kind of walk me through 
why is that, and I mean, I know you are going to assume that 
Members of Congress are going to understand software and 
everything else, but I assure you, it is not necessarily a 
Member of Congress. We use programs. We use things that are 
downloaded and so on. But technically, if you just walk me 
through, tell me how something in the United States or in China 
is basically acquired illegally and it continues obviously 
spiraling uncontrollably in places like China.
    Mr. Holleyman. Well, I will give you a great example. I 
will focus on the business sector because that is where the 
biggest opportunity is to change behavior quickly. What 
happened in a hypothetical, let us say China, the 80 percent 
piracy rate could be a business in China is operating and they 
have 100 computers but they have only paid for the software for 
20 of their computers, and they are internally duplicating for 
all the rest of their operations. Or they may be 100 percent 
illegal because they have used an illegal Office program or an 
illegal operating system. So they have just internally 
duplicated it, which is simple to do. There are no effective 
penalties against it. And the big thing that we are trying to 
do in China, which is really what the bilateral discussion is, 
is really twofold. One, to get the Chinese government to ensure 
that when it uses software that it is using only legal 
software, and secondly, to ensure that when Chinese state-owned 
enterprises use software, that they are using only legal 
software. There are simple ways of making sure that that is 
done, but unfortunately, in rapid growth markets like China, we 
are seeing a dramatic lag in the use of legal software, and 
what is happening is that because the market is growing so 
fast, the dollar value of that is skyrocketing year over year.
    And this goes much more broadly. It is not just the 
software impact but that is a lower cost of doing business for 
any enterprise in a high-piracy market, and any constituent of 
yours who is using software, which is most every business, if 
they have a competitor in a country with a high piracy rate, 
the U.S. company has a higher cost of doing business than their 
competitor in the area of tool production of software.
    Mr. Gonzalez. Now, in the business environment, and I don't 
want to say anything that could be controversial. I am trying 
to contrast the situation in the United States and that in 
China, and why it is viewed with some lax attitude of maybe not 
seeing anything wrong with utilizing your software without 
having to pay, obviously as we said, for the 100 computers as 
opposed to the 20. But in the United States, it is an 
environment, is it a business sense, is it certain human 
behavior? Is it enforcement? What is that combination that 
results in 30 percent or less or whatever it is.
    Mr. Holleyman. Twenty percent in the United States.
    Mr. Gonzalez. Twenty percent in the United States as 
opposed to 80 percent in China.
    Mr. Holleyman. By the way, I think 20 percent is too high 
and so we are pressing to get it down further in the United 
States. It is really two things. I mean, one, we have 
constitutional underpinnings for intellectual property in this 
country and we have the toughest civil laws on the books and 
that provides an effective deterrent, particularly against 
businesses that would otherwise use illegal software. It is 
just not worth the risk and the cost. And secondly, I think 
that is also why the software industry has grown so well out of 
this country is we began with a stronger market both size-wise 
but in terms of legal protection. In a country like China, 
there are few effective civil remedies. There are no criminal 
penalties whatsoever against use of pirated software within a 
corporate environment. And finally, there just isn't any 
deterrents in the marketplace that are effective and that is 
why it really has to be a high-level, bilateral economic 
discussion.
    Mr. Gonzalez. Thank you very much, Mr. Holleyman.
    Mr. Holleyman. Thank you.
    Mr. Gonzalez. I yield back the balance of my time, Madam 
Chairman.
    Mrs. Bono Mack. Thank you, Mr. Gonzalez. I recognize Mr. 
Lance of New Jersey for his 5 minutes.
    Mr. Lance. Thank you, Madam Chair, and good afternoon to 
you all.
    Following up on that, and I guess to Mr. Holleyman, is it 
better to have bilateral discussions on this issue as opposed 
to the WTO, or it is a combination?
    Mr. Holleyman. Certainly, Mr. Lance, is it a combination, 
but I think that in this case, the most effective mechanism is 
for the bilateral discussion, and when Members of Congress 
speak, as they have, on this issue and when the President of 
the United States directly talks about software enterprise 
legalization to President Hu Jintao, I think that we have a lot 
farther to go to see the results, but to me, it takes that type 
of direct engagement.
    Mr. Lance. And I am sure you follow this very closely, the 
recent meetings here in Washington between the two presidents. 
Do you think that that was at all helpful or do you think we 
have to do more?
    Mr. Holleyman. I think from a U.S. perspective, they were 
very helpful in raising it to the highest level on the 
bilateral relationship with China that we have ever seen. On 
the China level, have my companies seen any increased sales as 
a result of those commitments? No. I hope they will come but 
they have not, and I need to be blunt about it including to the 
U.S. government. So the U.S. side is working hard but we have 
to ultimately test it by results, do we see increased sales, 
not just commitments.
    Mr. Lance. Well, thank you. This is very helpful. 
Obviously, we respect what the Administration is doing but we 
need to see results and not just levels of talks, even if they 
are at the highest levels.
    To Mr. Ikenson, yesterday the full committee passed out of 
its jurisdiction an issue regarding net neutrality, and I am 
sure you are aware of that. What is your position regarding the 
FCC's recently announced net neutrality regulations?
    Mr. Ikenson. That is an area that I am absolutely 
uninvolved with, but I can tell you that CATO Institute 
institutionally and our experts that deal with communications 
issues like that, we are opposed to it.
    Mr. Lance. Thank you.
    And then back to the issue of corporate taxation, obviously 
I am in agreement with many of my colleagues that the rate has 
to be lowered in the United States to remain competitive. To 
anybody on the panel who might be knowledgeable in this area, I 
am also concerned about the repatriation of profits from 
abroad. Perhaps to Mr. Murphy, your thoughts on that.
    Mr. Murphy. Yes, and it is unfortunate that it has become 
commonplace from a number of political leaders to hear the line 
that our tax system actually incentivizes investment overseas 
when in fact what they are describing is our system of 
worldwide taxation, which is unique practically in the 
industrialized world, and the deferral that is allowed on 
income earned overseas is the fact that deferral exists only 
partly levels the playing field for those U.S. companies. This 
is an issue that has been brewing for a long time as a 
competitive challenge for U.S. industry.
    Mr. Lance. My bottom line is, we need to create more 
American jobs, and if we can bring funds from abroad that will 
create more American jobs, that is what I favor, and I know 
there is a lot of talk regarding this but I want to get to the 
bottom so we can create more American jobs, particularly more 
American manufacturing jobs.
    Mr. Murphy. The chamber strongly supports allowing 
repatriation of those funds, which was done several years ago 
successfully and we think it should be done again.
    Mr. Lance. Is there any other member of the panel who would 
like to comment on that?
    I thank you very much, Madam Chair. I yield back the 
balance of my time.
    Mrs. Bono Mack. I thank the gentleman and recognize the 
gentleman from Louisiana, Dr. Cassidy, for 5 minutes.
    Mr. Cassidy. Thank you, Madam Chairman. It has been a long 
time since I was called a gentleman.
    Mrs. Bono Mack. A gentleman and a doctor, but please 
remember your microphone. Thank you.
    Mr. Cassidy. Mr. Murphy, it is my sense that when we 
compete internationally, we typically are sending out high-
value-added products. Now, maybe agriculture is an exception so 
I will limit myself to the manufacturing sector. But it seems 
as if we are sending out something which the folks who are 
employed in that field have good jobs with good benefits and so 
obviously extrapolating from that, if that is true, is it safe 
to say if we expand trade and this trend continues, we cannot 
compete on commodity pricing for tennis shoes perhaps with 
China but we certainly can compete on Micro Windows which again 
is high value added. Would you agree with that statement, that 
line of object?
    Mr. Murphy. I would very much so, and you see that in high-
tech industries, for instance, in the defense industry. It is 
the most sophisticated products that the United States excels 
in producing and exports worldwide. But you see it in other 
what you don't necessarily think of as high-tech products. For 
instance, you think of the textile and apparel sector. The 
textile industry is very capital intensive, and the United 
States still has a significant textile industry which employs I 
believe close to half a million Americans. What we don't have 
is the cutting and sewing which is a low-skill, low-value-added 
operation, the apparel making. That has largely moved outside 
the United States, so I think that is another illustration.
    Mr. Cassidy. So the way to save, manufacturing, at least in 
terms of that manufacturing with good jobs and good benefits, 
is to promote trade where our workers and our companies which 
add value and intellectual expertise and in so doing employ 
more, correct?
    Mr. Murphy. That is absolutely correct, and you see that in 
the statistics. For instance, major manufacturing States like 
Ohio, for instance, are incredibly dependant on exports. The 
proportion of exports of their manufacturing output that is 
exported is very high. It is well above half.
    Mr. Cassidy. Now, let me ask you, I represent Louisiana in 
the 6th district, which is the Baton Rouge area, and so 
recently Exxon Mobil did a big build-out. Now, I asked them, 
since they have plants in China, they have refineries in the 
United States, what do they do, where do they go, and they said 
anything that involves intellectual property we do domestically 
because if it is just strictly commodity, we are sure that our 
blueprints are going to be--this isn't Exxon, OK? I am not 
trying to get Exxon in trouble with China. I will just say the 
observation of the person was that the absence of intellectual 
property rights in China means that oftentimes whatever process 
they bring there seems to be reproduced at a local plant. That 
said, it seems like--now, they also said that it is the 
availability of inexpensive feedstock, in this case, natural 
gas, as well as the Mississippi River to transport as well as a 
highly trained workforce that combines to make the United 
States the place to be. What would happen in that scenario, 
knowing that the feedstock is incredibly important because you 
can find waterways and trained workforces in Europe, if we 
raised our energy prices to, let us say, I think I just read 
Denmark has a 38-cent-per-kilowatt-hour rate of energy and 
probably Louisiana is 6 cents per kilowatt-hour, if we 
increased our energy prices substantially, what would happen to 
that sort of manufacturing base I just described?
    Mr. Murphy. Well, I think even in your question you have 
outlined how it is really a web of policies and industries that 
come together that add up to the competitiveness of a nation. 
So absolutely, when you take one of those strands and weaken 
it, you undermine the competitiveness of industries worldwide. 
That is why hearings like this are so useful to be able to draw 
the connections between these different kinds of policies.
    Mr. Cassidy. I am actually struck that when folks talk 
about raising the price of carbon or the cost of energy, they 
seem to ignore the impact it will have upon domestic 
manufacturing, at least energy-intensive enterprises. I have 
just read now Spain is having to withdraw their subsidies 
because the effect of high-cost energy has made them less 
competitive, weakened their economy, etc., etc., etc. I think 
it used the word ``demoralized.'' Any other comments on that?
    Mr. Murphy. Well, just in the chamber's membership, what 
you have indicated is the reason why there is such a breadth of 
concern about proposals to add to energy costs in this country, 
and it comes not just from energy-producing companies and 
sectors but from the major consumers, the industrial consumers.
    Mr. Cassidy. And just to be sure, because sometimes for 
whatever reason people don't make the connection, if we hurt 
those industries, we hurt those workers. Those good jobs and 
good benefits are now lost and they are shipped overseas.
    Mr. Murphy. And it all goes into the calculus that 
executives have to make about where they are going to site 
production and invest and hire.
    Mr. Cassidy. Yes. I yield back. Thank you.
    Mrs. Bono Mack. I thank the gentleman and recognize Mr. 
Stearns from Florida for 5 minutes.
    Mr. Stearns. Thank you, Madam Chair, and this is a very 
good hearing. I have been watching it on the television.
    I hear from the other side, they are talking about, they 
say if the government is broke, why are we giving tax breaks 
for corporations, and there has been some question about that 
we are not competitive as corporations. So Mr. Murphy, I think 
one thing we need to explain to the American people is this 
idea of territorial-based tax regime, and you might use an 
example like if a company in the United States goes to Germany 
and opens up a plant, that company is going to pay taxes in 
Germany and then they are going to come back to the United 
States and pay taxes. You might just elaborate on that so that 
the people understand that there is sort of extra taxation on 
our corporations.
    Mr. Murphy. I am happy to. You know, as was mentioned 
earlier, the United States is one of the very few countries in 
the world that has this worldwide system of taxation and so the 
danger is that a worldwide company that has operations in more 
than one market is going to be taxed twice on its income. It is 
a huge disincentive. By contrast, all of our major industrial 
competitors have territorial tax systems where they only pay 
taxes on their production in a given country. At present we 
have some tax treaties that allow us to avoid double taxation 
but this is a partial solution, and I think there is a growing 
sense in the business community that it is time to have a full 
reexamination of this system and whether or not it is 
comprehensively putting U.S. industry at a disadvantage.
    Mr. Stearns. Another point is Canada has dropped their 
corporate tax rate, and I think the folks on the other side are 
saying how can we drop the taxes on corporations. Well, again, 
as you pointed out, they are competing globally, and if the tax 
rates are less in Canada and other countries, those 
corporations have an advantage.
    Mr. Murphy. The Canadian government has taken a very 
interesting approach to their competitiveness, whether it is 
cutting their tax rates, which I believe is just a little bit--
the corporate tax rate is just above 15 percent, 16 percent. 
They have also undertaken an initiative to permanently reduce 
tariffs on industrial inputs that they import. As Mr. Ikenson 
was pointing out, the competitiveness of a manufacturing 
operation depends on imports much of the time as well, and with 
little controversy the Canadians were able to permanently 
eliminate a lot of those tariffs on imports.
    Mr. Stearns. Mr. Ikenson, let me ask you a question. I 
chair the Oversight and Investigation Committee, and we had 
Cass Sunstein come up and we had a lot of questions for him 
dealing with regulation, and the Obama Administration plants to 
implement a slew of new regulations including regulation of 
carbon emissions and implementing regulations obviously related 
to health care. Do you have any concern? I asked them if there 
was any economic impact on these regulations. They said they 
didn't know of any. Do you have any concerns about the impact 
of these up-and-coming regulations on the ability of the United 
States to compete and what suggestions would you offer?
    Mr. Ikenson. You know, President Obama visited the chamber 
a few weeks ago and he said I have come to the center on taxes 
and I have come to the center on trade, now invest and hire. 
But there is a lot of uncertainty to the business environment, 
the health care legislation, the Dodd-Frank bill. There is a 
lot of pending regulation that hasn't been promulgated yet and 
it is leaving the business community in a state of uncertainty 
and I think that that is a problem. You know, regulations that 
are absolutely sensible and not redundant make sense, I 
suppose, under certain circumstances but maybe we have 
superfluous regulation. Maybe there is too much. And certainly 
the fact that we don't know what is coming down the pike is a 
deterrent to investment. You know, as Mr. Murphy said, one way 
we can stimulate our manufacturing base, which by the way is 
the most prolific manufacturing sector in the world. We produce 
more output by value than any other country in the world and we 
are doing quite well but one way is to do what the Canadians 
did. Let us scrap our tariffs on industrial inputs. And this 
might be a little bit controversial, let us revisit the anti-
dumping law so that downstream users, our manufacturers, our 
exporters, can have a say in the hearings at the International 
Trade Commission.
    Mr. Stearns. Thank you.
    My last question is for Mr. Holleyman. You testified that 
the U.S. government needs to increase its efforts to prevent 
our own government from purchasing counterfeit software. How 
often does the government purchase counterfeit software and how 
does this happen that the government is not buying legitimate 
copies of software?
    Mr. Holleyman. That is a good question. The U.S. government 
is overwhelmingly acquiring legitimate software, and that has 
been a formal policy and Executive Order that has been in place 
for over a decade, and typically when piracy happens within a 
government or a business, it may not be a purchase of a 
counterfeit product, it is simply allowing an extra three to 
five to 1,000 people use a software program without having a 
proper license. So our recommendation is to build on what is a 
strong Executive Order here in the United States about federal 
use of software. By the way, Inspector Generals within agencies 
audit to make sure they have the proper licenses. Two, require 
that federal contractors also have to comply with U.S. laws and 
ensure that they are using legal software. That will help 
reduce some of the 20 percent piracy rate here in the United 
States, not eliminate it, but it will be a tool that we can use 
with other governments to encourage them to lead by example.
    Mrs. Bono Mack. And on that note, the gentleman is out of 
time and we have to wrap things up today. I want to thank all 
of our panelists and my colleagues and the ranking member for 
his help today, for our staffs on both sides, and for everybody 
for your time and for your commitment on these critically 
important issues. Clearly, we have a great challenge before us 
but I have always believed that new challenges create new 
opportunities. Working together, I am convinced that we can 
increase U.S. exports and create new U.S. jobs in the process.
    I also need to remind members that they have 10 business 
days to submit questions for the record, and I ask the 
witnesses to please respond promptly to any questions that you 
might receive.
    Again, thank you all very much, and the hearing is now 
adjourned.
    [Whereupon, at 12:47 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

                 Prepared statement of Hon. Fred Upton

    Thank you, Madam Chairman. I want to commend you for 
holding this timely hearing, the second in a series 
investigating how we at the national level can foster an 
environment of job creation.
    As we heard at our last hearing, and as January's 
impressive export numbers reveal, the U.S. manufacturing sector 
is alive and close to well. How we get those companies fully 
well is why we are here today. I firmly believe the key to 
growing jobs here in the U.S. is growing demand, and the key to 
growing demand is reaching consumers in the global economy.
    Based on the President's creation of the National Export 
Initiative, I am not alone in that belief. But while we may 
agree on the need to grow our exports, we may not be on the 
same page on how to do so.
    I believe we need policy changes that will make our 
companies more competitive with their foreign counterparts. 
This can be accomplished in areas such as reforming our tax 
regime and reducing regulatory burdens in ways that do not 
sacrifice safety. I also believe we need to act on pending free 
trade agreements with Korea, Panama, and Colombia. Those 
agreements represent billions of dollars left on the table 
because of a failure to act on them in the last four years. In 
addition, I believe we must find new trade partners, opening 
the doors of opportunity to new and emerging markets. Free 
trade agreements not only remove tariffs and other barriers for 
American products to enter foreign markets, they are essential 
to ensuring producers here in America have access to affordable 
supply chains.
    Let me be clear: I fully support making it here in America, 
but I do not believe we should demonize imports. Inexpensive 
component parts used to manufacture and assemble final products 
here in the U.S. not only keep American products affordable to 
Americans, but they also ensure American products are 
affordable to consumers in other countries. In other words, 
affordable component parts are what keep our exports 
competitive in foreign markets.
    I look forward to hearing about what the Administration is 
doing to foster growth in exports, whether and how Congress 
should act to aid in that effort, and what the economic and 
employer perspectives are on how the federal government can 
help cultivate export growth to promote American job creation.
    Thank you, Madam Chairman, and I yield back.
                              ----------                              


                Prepared statement of Hon. Cliff Stearns

    Thank you, Mr. Chairman. I am deeply pleased to have the 
opportunity to be here today to discuss and maintain our bi-
partisan mission to create jobs.
    Unemployment remains a deep concern for all of us and we 
hear about it from our constituents on a daily basis. The 
solution obviously is job creation. No one in this committee 
would dispute this to be true, but its time that our actions 
reflected our words.
    According to the President, our export should double in 
five years. If the Administration is sincere about this goal to 
boldly increase our exports, their actions should be just as 
bold. We need to analyze if current trade laws are supporting 
or impeding American companies from this achievement. We need 
to put politics aside and work through these barriers to make 
"Made in America" a proud statement.
    We understand that the road to recovery will be tough and 
will certainly take time. American families struggling to make 
ends meet have been patient. Being here today enforces our 
commitment to our constituents, showing we are sincere about 
getting the economy on track and that are words are more than 
just words. Again, I appreciate the opportunity to be here and 
I look forward to hearing the testimonies of our witnesses. 
Thank you Mr. Chairman.
                              ----------                              


               Prepared Statement of Hon. Edolphus Towns

    Thank you Chairman Bono-Mack and Ranking member Butterfield 
for holding this hearing today on ``Made in America: Increasing 
Jobs through Exports and Trade''. Our economy has been steadily 
improving over the course of the past several months. The 
unemployment rate is a key indicator of economic strength. 
Currently our unemployment rate sits at 9 percent and the Dow 
Jones Industrial Average peaked above 12 thousand for the first 
time in two years. While these economic indicators are welcome 
news to the markets they do little to instill confidence in the 
American people that jobs are on the way.
    This congress must do everything in its power to promote 
and create jobs, free and fair trade is one way to accomplish 
this goal. As a Democrat I believe in free
    and fair trade. In this 21st century economy we must be 
ably equipped to compete in the global market place. Our 
manufactures and small businesses must have open access to 
overseas markets to promote job growth in America. There are 
far too many barriers to this ideal that still permeate in the 
market place today.
    Given the opportunity free and fair trade will translate 
into job growth for our economy; however the benefits of such 
trade deals will be lost if we continue to incur imbalance in 
US trade agreements. According to the Center for American 
Progress the third quarter trade deficit in 2010 reached 3.7 
percent of GDP, up from 2.4 percent in the second quarter of 
the previous year. The higher the trade deficit the more 
indebted the United States is to overseas investors who must 
eventually be repaid.
    I look forward to working with my colleagues on both sides 
of the aisle to address these barriers to job growth and 
economic independence. I also look forward to hearing from our 
witnesses today on their ideas for unleashing American 
innovation through trade. Capstone Turbine Corporation is one 
such company that has unleashed their innovation in the global 
market place and is excelling in their industry. Sixty percent 
of all sales at Capstone Turbine Corporation are from exports. 
I look forward to hearing from them on how we can translate 
their success to other companies looking for economic growth.
    Thank you and I yield back the balance of my time.
                              ----------                              

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