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







     U.S. TRADE STRATEGY: WHAT'S NEXT FOR SMALL BUSINESS EXPORTERS?


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

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD
                              MAY 16, 2012

                               __________



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



            Small Business Committee Document Number 112-068
              Available via the GPO Website: www.fdsys.gov

                                _____

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                   HOUSE COMMITTEE ON SMALL BUSINESS

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

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













                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page
Hon. Sam Graves..................................................     1
Hon. Nydia Velazquez.............................................     2

                               WITNESSES

Ambassador Miriam Sapiro, Deputy United States Trade 
  Representative, Office of the United States Trade 
  Representative, Washington, DC.................................     3
Thomas Crafton, President, Thermcraft, Inc., Winston Salem, NC...    19
Robert B. Sinner, Partner and President, SB&B Foods, Inc., 
  Casselton, ND..................................................    20
Joshua Meltzer, Ph.D, Fellow, Global Economy and Development, 
  Brookings Institution, Washington DC...........................    22
Mark Luden, CEO, The Guitammer Company, Westerville, OH..........    24

                                APPENDIX

Prepared Statements:
    Ambassador Miriam Sapiro, Deputy United States Trade 
      Representative, Office of the United States Trade 
      Representative, Washington, DC.............................    31
    Thomas Crafton, President, Thermcraft, Inc., Winston Salem, 
      NC.........................................................    37
    Robert B. Sinner, Partner and President, SB&B Foods, Inc., 
      Casselton, ND..............................................    42
    Joshua Meltzer, Ph. D, Fellow, Global Economy and 
      Development, Brookings Institution, Washington DC..........    45
    Mark Luden, CEO, The Guitammer Company, Westerville, OH......    51
Questions for the Record:
    Rep. Ellmers Questions for Ms. Sapiro........................    57
    Rep. Mulvaney Questions for Ms. Sapiro.......................    58
    Chairman Graves Questions for Ms. Sapiro.....................    59
Answers for the Record:
    Ms. Sapiro Answers for Rep. Ellmers..........................    60
    Ms. Sapiro Answers for Rep. Mulvaney.........................    62
    Ms. Sapiro Answers for Chairman Graves.......................    63
Additional Materials for the Record:
    National Council of Textile Organizations Statement for the 
      Record.....................................................    64
    eBay Comments for the Record.................................    75
    Letter to Ambassador Ron Kirk for the Record.................    79
    Association of Small Business Development Centers Statement 
      for the Record.............................................    85
    American Frozen Food Institute Statement for the Record......    89

 
     U.S. TRADE STRATEGY: WHAT'S NEXT FOR SMALL BUSINESS EXPORTERS?

                              ----------                              


                        WEDNESDAY, MAY 16, 2012

                  House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 1:00 p.m., in Room 
2360, Rayburn House Office Building. Hon. Sam Graves (chairman 
of the Committee) presiding.
    Present: Representatives Graves, Chabot, Mulvaney, Tipton, 
West, Ellmers, Hanna, Schilling, Velazquez, Schrader, Chu, 
Cicilline, and Hahn.
    Chairman Graves. We will call the hearing to order. Good 
afternoon to everybody. I want to thank you our witnesses on 
both panels for being here and I look forward to all the 
testimony that is going to be given today.
    As we celebrate World Trade Month, it is only fitting to 
have Deputy United States Trade Representative before the 
Committee to discuss the administration's trade strategy. 
First, I appreciate your effort to expedite the implementation 
of the free trade agreements with Korea and Colombia, which 
actually just went into effect yesterday. I hope the FTA with 
Panama is quick to follow. The certainty and protections 
provided by these agreements will help thousands of small firms 
increase their sales, grow their businesses, and ultimately 
create many more jobs.
    Small businesses rely heavily on negotiated agreements to 
remove trade barriers and to be competitive in the global 
marketplace. Unlike large corporations, most small firms do not 
have the personnel and resources to navigate technical trade 
barriers. As a result, many either do not export at all, or 
only export to just a few countries. Given the right 
circumstances and tools, I know America's small businesses can 
do a whole lot better. We must provide small businesses with 
the resources necessary to increase their exports.
    That means we need an aggressive trade strategy to open new 
markets, streamline the trade process, and combat unfair trade 
practices. As we have heard, the president's goal to double 
exports by 2014 puts small businesses as the number one 
priority. While I applaud this effort, we have yet to see a 
real strategy. Small firms and the U.S. economy cannot wait 
another five years for the next trade agreement.
    This Committee has made increasing exports an absolute 
priority, and that is why I recently introduced the Export 
Coordination Act of 2012 to make the export process more 
efficient while reducing duplication and wasteful spending on 
federal trade promotion agencies. I look forward to working 
with the administration on identifying ways to improve the 
system.
    Again, I want to thank you for being here and also thank 
our other witnesses for being here. And I will turn to Ranking 
Member Velazquez for her opening statement.
    Ms. Velazquez. Thank you, Mr. Chairman. Welcome, Ambassador 
Sapiro.
    We have heard time and again about the need to put small 
businesses at the forefront of our economic recovery, but 
perhaps no other group is more critical to this effort than 
small exporters. According to U.S. Treasury Department figures, 
more than 50 million American workers are employed by more than 
250,000 small and medium-sized companies that export goods 
overseas. Small businesses that export grow faster, create more 
jobs, and pay higher wages than other businesses. Clearly, in 
order for the recovery to gain steam, our economy will 
increasingly depend on foreign trade to fuel new growth.
    Despite these advantages, it remains difficult for small 
businesses to take up the mantle and enter foreign markets. By 
some estimates, just 1 percent of the 28 million small firms in 
this country are doing so. Even though they account for 97 
percent of America's exporting companies, the exports account 
for only a third of all goods shipped overseas. Most sell their 
goods to only one foreign country and to only one customer in 
that country. Clearly, these theorems possess untapped economic 
potential and today's hearing will help us understand how this 
may be accomplished in the wake of passage of the South Korea, 
Panama, and Colombia free trade agreements last year.
    Balanced free trade agreements have the potential to be a 
significant driver of prosperity. By eliminating tariffs and 
other barriers, these agreements can help small firms expand 
sales globally and create jobs at home. In order for these 
benefits to be fully realized, we must hold our trading 
partners accountable for unfair practices and ensure that our 
small businesses receive the level playing field they were 
promised.
    Unfortunately, our history in this area does not inspire 
much optimism. In 1993, before the North American Free Trade 
Agreement took effect, the U.S. had a 1.6 billion trade surplus 
with Mexico, which supported 29,400 jobs here at home. Since 
then, imports from Mexico have grown much faster than U.S. 
exports, resulting in large trade deficits that have displaced 
682,900 jobs nationwide. Although many of the workers that were 
laid off due to NAFTA were reallocated to other sectors, the 
majority were relocated to the service industry where average 
wages are a fraction of what they received before. As long as 
the U.S. persists in trying to play by free trade rules while 
foreign nations are allowed to play the 400-year-old game of 
mercantilism, we can expect to see similar results. Still, we 
must be diligent in our efforts to get it right.
    In regard to the Trans-Pacific Partnership, this sweeping 
agreement has the potential to remove numerous barriers and 
give American small firms access to new markets on the Pacific 
Rim. However, there are concerns that are reaching beyond areas 
that have traditionally been the purview of trade policy. 
Reports have emerged that this agreement may seek to bind the 
U.S. to new standards for everything from foreign investment to 
pharmaceutical prices and copyright protections. It will be 
critical that these issues be discussed in an open and 
forthright manner before this agreement can be finalized. And 
it is my hope that the office of the USTR will make good on its 
commitment to do so.
    Now, more than ever, our country needs policies that 
encourage fair trade and promote small business growth. I look 
forward to hearing how our existing and potential future trade 
agreements can achieve these goals, as well as how export 
assistance programs can assist small firms.
    I would like to thank the witnesses in advance for their 
testimony, and I am pleased they could join us today. I look 
forward to hearing from them. Thank you, Mr. Chairman.
    Chairman Graves. Thank you, Nydia.
    Our first witness is Ambassador Miriam Sapiro. She is the 
deputy U.S. trade representative with the Office of the United 
States Trade Representative. She is responsible for trade 
negotiations and enforcement with Europe, the Middle East, and 
the Americas. She also oversees the Office of Small Business 
Market Access and Industrial Competitiveness at the USTR. Thank 
you for being here, and I look forward to your testimony.

    STATEMENT OF MIRIAM SAPIRO, DEPUTY UNITED STATES TRADE 
    REPRESENTATIVE, OFFICE OF THE U.S. TRADE REPRESENTATIVE

    Ms. Sapiro. Thank you very much, Chairman Graves, Ranking 
Member Velazquez, and Members of the Committee, especially for 
convening this hearing today and for giving me the opportunity 
to testify about what we are doing to support small business 
and thereby support greater economic growth and jobs throughout 
the country.
    Despite a fragile global economy, the growth of U.S. 
exports over the last year has been a bright spot. Our exports 
of goods and services have surpassed their pre-crisis peak and 
we are making good progress towards meeting President Obama's 
goal of doubling exports by the end of 2014. During the past 12 
months, the United States exported more than $2 trillion in 
goods and services, which is the highest level of exports in 
any 12-month period in U.S. history. As our economic recovery 
continues, we have added private sector jobs for 26 straight 
months, for a total of 4.25 million jobs over this period.
    As the President has emphasized, America's small businesses 
are key engines of our nation's economic growth and job 
creation. They are a critical source of innovative processes, 
products, and services. I speak as someone who started and ran 
a small business before re-entering government and experienced 
firsthand the challenges, the risks, and the opportunities 
involved.
    America's smaller firms are already playing a major role in 
international trade, accounting for nearly 98 percent of all 
exporters. Direct and indirect exports by U.S. small businesses 
support four million jobs and account for an estimated 40 
percent of the total value of our goods and services exports.
    These trends are very positive, but we believe our small 
companies still have significant room for export growth. Only a 
small fraction, as you both pointed out, currently export, and 
of those, most tend to go only to one market and have one 
customer. With 95 percent of the world's customers living 
beyond our borders, we can, and we must, do better.
    To accomplish this, we are pursuing a robust trade policy 
that supports small business and broader economic growth by 
tearing down barriers to trade and by creating new 
opportunities for U.S. farmers, ranchers, manufacturers, and 
service providers. We are also vigorously enforcing our trade 
rights, insisting that countries fulfill their commitments and 
act according to the rules to which they agreed.
    Our trade agreements now with nearly 20 countries open the 
doors for valuable export opportunities for our small 
businesses.
    With this Committee's strong support, Congress approved the 
FTAs with South Korea, Colombia, and Panama, and as you pointed 
out, just yesterday the Colombia Agreement entered into force. 
This makes it easier and less expensive for small businesses, 
like the meat packers and the dairy farmers in your district, 
Mr. Chairman, to export their products to this important Latin 
American country.
    And this week we are concluding the 12th round of the 
Trans-Pacific Partnership negotiations in Dallas, Texas. 
Relevant to this Committee is our focus on developing specific 
provisions to help small businesses participate more actively 
in regional trade, including through information sharing. Our 
commitment builds upon the joint APEC Trade-SME Ministers' 
meeting that Ambassador Kirk held last year in Big Sky.
    We are also helping small business by opening Russia's 
market of 145 million customers. Russia's WTO membership will 
create new export opportunities and bind Moscow to a clear set 
of rules for trade and transparency. However, for U.S. 
companies to enjoy these benefits, Russia's WTO membership this 
summer, Congress will have to act quickly to terminate 
application of the 1974 Jackson-Vanik amendment to Russia. We 
hope this Committee will strongly support Chairman Camp's 
efforts to do just that.
    In the Western Hemisphere, we are collaborating with other 
agencies to connect more of our small businesses to regional 
partners and entrepreneurs there as President Obama announced 
last month on his way to the Summit of the Americas.
    As we continue to strengthen the international rules-based 
trading system and hold our trading partners accountable, we 
are also enhancing our trade enforcement capabilities. The 
Interagency Trade Enforcement Center, known as the ITEC, 
recently established by the President will increase our 
capacity to prioritize and to aggressively challenge unfair 
trade practices brought to our attention by smaller companies.
    Ambassador Kirk and the entire USTR team continue to reach 
out to small businesses across the country to highlight not 
only export opportunities that we have created but to hear more 
about the existing trade challenges. As a result, last year we 
were proud to launch the FTA Tariff Tool, a free online way for 
small firms to do market research and look up specific tariffs.
    In conclusion, we are very proud of our small businesses 
that offer high-quality, ``Made in America'' products and 
services to customers around the world. We are determined to 
see that they have the trade policy tools they need to compete 
and to succeed in the global economy. We look forward to 
working with you to accomplish that goal. Thank you.
    Chairman Graves. Thank you very much.
    I will turn to Mr. West.
    Mr. West. Thank you, Mr. Chairman, and also Ranking Member. 
And thank you, Ambassador, for being here.
    We had an Ag roundtable down in our district area, Martin 
County, and one of the major complaints came from a gentleman 
who has Yee Farms down there about the flooding of tomatoes 
coming in and how it is affecting our market out of Mexico. So 
the big question I am sure that the farmers down in South 
Florida would like to know, what are the specific things that 
we are putting in place to help them as far as, you know, the 
tariffs and the non-tariffs and the NAFTA and also the CAFTA, 
how we can open up China and other Asian markets for our 
agricultural products so that they are not penalized.
    Ms. Sapiro. Thank you for that important question. We had a 
terrific year in 2011 in terms of our Ag exports. We are fully 
committed to doing everything that we can to help farmers 
across the country compete in every single global market. With 
our free trade partners we do that by lowering tariffs and also 
reducing the non-tariff barriers behind the border that you 
cannot always see at first. But as you may well know, our 
ability to fight what we call SPS, sanitary and phytosanitary 
restrictions that are not justified by science or by risk 
assessments, is really an important part of what we do every 
single day at USTR.
    Mr. West. Thank you, Mr. Chairman. I yield back.
    Ms. Velazquez. Ambassador, Ambassador Kirk has expressed a 
commitment to maintaining transparency in the negotiations for 
the Trans-Pacific Partnership and in all the talks that have 
been conducted this week in Dallas I just would like to ask you 
why did he make the decision to further restriction public 
involvement in the negotiations by eliminating the full day 
stakeholder forums?
    Ms. Sapiro. The talks that are going on in Dallas right now 
had a very robust set of stakeholder consultations. The 
negotiators broke for several hours to sit down with all of our 
stakeholders who have a very important role in terms of giving 
us feedback on what they would like to see in the TPP 
agreement. So we have spent considerable amounts of time 
working with our stakeholders both before the round in Dallas 
and also in Dallas.
    Ms. Velazquez. Why the decision to eliminate the full-day 
stakeholder forum?
    Ms. Sapiro. I think what we did was break up the 
consultations into different periods of time so that we could 
accommodate the schedules of different stakeholders as well as 
the negotiators. I know, Ranking Member, that we have had a 
very robust set of consultations with our stakeholders at this 
round in Dallas, just as we have at previous rounds and just as 
we will continue to do so.
    Ms. Velazquez. Yeah, in other rounds that have been 
conducted, in other places you have not eliminated the full day 
stakeholder forum. So I am just wondering why. How do you 
reconcile the fact that he said we are going to maintain 
transparency and engagement and then yet you cancel this event?
    But I would like to ask you who is representing or how are 
small businesses represented in the stakeholder forums?
    Ms. Sapiro. We have a number of small businesses that are 
part of the stakeholder groups. For example, we have our 
advisory committees that are the more formal way in which we 
receive input, and we have small and minority business advisory 
group that is very robust and provides terrific input. And we 
also have informal ways of reaching out across the country. I 
do not think there is a trip that Ambassador Kirk or Ambassador 
Marantis or I take where we do not reach out to small business, 
as well as Ambassador Siddiqui, who is our agricultural 
negotiator and who meets with farmers across the country.
    So outreach and transparency are a critical, critical part 
of our job that we take very seriously, both in Dallas at this 
round and in our broader work.
    Ms. Velazquez. Well, I am glad to hear that. Moving forward 
I hope that you will not cancel again the full day stakeholder 
forum so that we can have more engagement.
    But talking about small businesses, we hear that small 
businesses make up 9 of every 10 businesses that export goods 
from the U.S. But when it comes to the negotiation process for 
trade agreements, the interests of the small business community 
often take a backseat to that of large multinational 
corporations. My question is what is your agency doing to 
integrate safeguards in the TPP to ensure that the interests of 
big corporations are not disproportionately favored and expend 
small businesses. And if you hear a level of pessimism coming 
from my line of questioning, we have seen this rerun before 
where we come here, we discuss trade agreements, and we always 
raise the issue that even though 97 percent of all exporters 
are small businesses, they are always at a disadvantage.
    Ms. Sapiro. I understand your concern and I would like to 
reassure you. If I cannot do it in my limited time today then 
to come back and visit with you. We are working very hard to 
make a difference and I think we are starting to see the 
results.
    So just to give you a few examples. For the first time we 
have one person designated to handle SME issues within our TPP 
negotiating team. So they are looking out just for SMEs. And 
that role is two-fold. One, it is crosscutting to make sure 
that SME interests are represented in general chapters on, for 
example, trade facilitation or business competitiveness. And 
then also for the chance in this negotiation to have a separate 
chapter on small and medium enterprises focused on giving them 
the tools they need to succeed in the TPP region. And I am very 
pleased that that chapter is going exceedingly well right now 
and we think we may have agreement with our other TPP partners 
in terms of the robust approach that the United States is 
taking towards helping SMEs.
    Ms. Velazquez. Okay. I have other questions so in the 
second line I will come back. Thank you, Mr. Chairman.
    Chairman Graves. Mr. Mulvaney.
    Mr. Mulvaney. Ambassador, I would like to talk about 
textiles for a few minutes if we can. One of the members of the 
TPP assuming it goes through will be Vietnam, one of our major 
textile trading partners. As most folks know, it is not an open 
economy. It would be different than some of the other members--
New Zealand, Australia, Singapore--in that fashion. It is a 
government that still has a lot of state-owned enterprises. It 
is a government that still manipulates its currency. What is 
the USTR going to be doing as part of the TPP to protect our 
businesses domestically generally but also the textile industry 
specifically against market manipulation by the Vietnamese 
government?
    Ms. Sapiro. We are working very closely with all of our TPP 
partners to develop a truly 21st century trade agreement. And 
the obligations obviously run two ways. So we intend to hold 
each and every one of our partners, including Vietnam, to the 
highest standards that we succeed in negotiating. And that goes 
for the range of issues, whether we are talking about goods or 
non-tariff barriers or state-owned enterprises, which is a very 
important topic I think related to your question in terms of 
agreeing on some basic rules of the road.
    So with respect, for example, to state-owned enterprises, 
it is not that countries cannot have them but that we have a 
common understanding of how they operate when it comes to 
international trade so that they do not disadvantage 
businesses. This is a really key piece of the TPP effort that 
we are undertaking. But our goals for TPP as you know are very 
ambitious. We have been consulting closely with members of 
Congress. I believe we have had several hundred consultations 
at least, and we intend to have many more because this is an 
issue, including particularly on textiles, where our 
stakeholders have clear interests and we want to do our very 
best to be responsive to those interests as we all work 
together to forge what we hope will be a very ambitious 21st 
century agreement.
    Mr. Mulvaney. Specifically, because Vietnam is a nonmarket 
economy, are you all looking at extended phase out or phase 
down provisions for textile tariffs?
    Ms. Sapiro. It is hard to speak publicly about specific 
negotiating objectives but, we would be very happy to brief you 
and your staff in more detail.
    Mr. Mulvaney. Let me ask a question that hopefully you can 
answer publicly, which we have heard back home that the 
Vietnamese negotiators have taken a fairly hard line on this 
and said that they do not want any restrictions on textile 
exports in the United States and that if there are any it will 
be a nonstarter for them for the rest of the negotiations. Can 
you comment on that?
    Ms. Sapiro. Well, I can say that there is often a lot of 
posturing in public about trade negotiations, not just with 
respect to TPP but across the board. What I will say and 
promise you is that Ambassador Kirk and I, and the whole team 
are committed to vigorously defending U.S. interests, both with 
respect to the negotiation of trade agreements and then, of 
course, with respect to their enforcement so that everybody 
lives by the rules as I mentioned earlier to which they have 
agreed. That is a critical, critical piece of what we believe 
is a robust trade agenda.
    Mr. Mulvaney. And as part of our previous robust trade 
agendas that we have with various countries and various other 
regions, we have a fairly traditional and fairly standard yarn-
forward rule. Are you familiar with what that is?
    Ms. Sapiro. Yes.
    Mr. Mulvaney. Is it currently the USTR's position that they 
will be pushing that same rule as part of the TPP or have you 
decided to change your position on that?
    Ms. Sapiro. Well, I am not going to speak for our chief 
textile negotiator who has been down in Dallas working this 
issue but I do believe that that is an important component of 
what our general policy is. So I would be happy, if you like, 
to take a question for the record and get back to you with a 
specific answer if that is useful.
    Mr. Mulvaney. That would be great. Anything you can do. And 
I recognize you cannot do everything publicly here. I know how 
negotiating works.
    Let me ask one question though that I do get from folks 
back home, which is what is the schedule? It seems so often 
that textiles, for example, sort of go to the very end of the 
line and are negotiated in the last couple of days and weeks 
before there is a deadline approaching. What is the schedule 
for the overall negotiation and where do textiles fit in that 
timeline?
    Ms. Sapiro. Well, the schedule is that President Obama and 
other TPP Leaders have asked the negotiators to wrap up their 
work by the end of this year. They asked that last November, 
and so we have been on an accelerated schedule ever since.
    Mr. Mulvaney. End of this calendar year?
    Ms. Sapiro. This calendar year. Correct, 2012. And so as I 
mentioned, Dallas is the 12th round. We have also had some 
informal intercessional rounds so we can get our work done. We 
are scheduling several additional rounds this year with the 
goal of trying to wrap this up. As you know, sometimes the most 
difficult issues are those that end up being worked at the end 
but at the same time each round we are making progress, in our 
view, on the textile issue as well as all the other issues. It 
is a 25-chapter roughly agreement and so textiles are a 
critical piece and other stakeholders have interest in other 
chapters. So we are really trying to push everything as much as 
we can in favor of our interests.
    Mr. Mulvaney. Thank you, Ambassador. And I will just close 
by saying that I recognize it is 25 chapters. Mr. Chairman, it 
always struck me that free trade agreements could be written on 
one page which is you lower your tariffs, we will lower ours 
and we will just go and compete. It is a shame that we get into 
these documents that would make the health care bill look 
simple, for example. But I appreciate you coming today and I 
yield back the balance of my time.
    Chairman Graves. Ms. Hahn.
    Ms. Hahn. Thank you, Chairman and Ranking Member Velazquez. 
Ambassador Sapiro, it is great to have you here.
    I am the founder and co-chair of the Bipartisan Port Caucus 
back here in Congress and I have made it a priority of mine to 
raise the profile of ports in Congress and the importance for 
our nation's economy which obviously includes exports. And 
everyone knows that our trade policies affect all businesses, 
whether they directly export a project, import a component or a 
part or sell foreign merchandise. And all these goods need to 
get to and from our ports of entry in a timely and efficient 
manner. It was recently reported that goods imported through 
the Port of L.A. took 48 hours to travel to Chicago and an 
additional 30 hours to get across Chicago. And it is safe to 
assume that exports will also be facing transportation 
bottlenecks.
    Last week, I sent a letter to the transportation companies 
highlighting the critical need for our country to have a 
national freight policy, to have a national plan on how to best 
move imports and exports throughout our country. So 
specifically with this goal to double our exports in a few 
years, could you discuss if you think it is important for us to 
have a national policy on moving goods throughout this country, 
investing in our infrastructure, grade separations, whatever. I 
am worried that businesses are poised to benefit from exports 
but we may get bogged down in our infrastructure in this 
country so that will slow things down.
    Ms. Sapiro. Well, thank you for that question. We are very 
supportive of efforts to make sure that the United States has 
modern infrastructure, whether we are talking about ports or 
airports or highways or railroads. As you know, President Obama 
is very dedicated to doing everything that the Administration 
possibly can to create and build an economy that will last. So 
I think the point that you are making is a very important one 
and an effort that we are very supportive of from the trade 
perspective.
    Ms. Hahn. You know, with just a few minutes left, one of 
the things I hear from my small businesses as well is there are 
particularly women-owned, minority-owned businesses. They would 
love to get involved in the international trade industry. They 
would love to get somehow involved in exporting their goods. 
There is a big disconnect between small businesses and this 
incredible opportunity. What are you doing? What can we do a 
better job of in terms of educating our small businesses in how 
they can access capital and how they can get the experience and 
how they can get the training to actually be involved.
    I have businesses that can literally see the Port of Los 
Angeles but yet have no idea on how they might benefit from 
this huge growth opportunity in exports.
    Ms. Sapiro. Well, at USTR, working with SBA and the 
Commerce Department and others, we are very focused on doing 
everything possible to publicize our export opportunities to 
ensure that small businesses have the finance tools and the 
other tools they need to access these opportunities.
    I think one step that they can hopefully take if they are 
interested in exporting is to contact the local SBDC, the local 
Small Business Development Center. We have about 2,000 
throughout--actually, we have about 1,000 throughout this 
country and nearly 2,000 in the hemisphere and we are looking 
to expand more because these SBDCs--and I know the ranking 
member has at least one in her district--they are great tools 
to be able to sit down one-on-one and consult with our 
entrepreneurs and companies that are smaller, to find out what 
is their product. Are they interested in a market where we have 
a free trade agreement? If so, the public online tariff tool 
that I mentioned is a great way to help them look up their 
product code. They can right away see what is the tariff 
treatment with respect to Colombia, since the Agreement entered 
into force just this week, as we noted. We hope Panama will be 
in force within the next few months. Korea entered into force 
on March 15th and we have 17 other agreements where we have 
either zero tariffs or relatively low tariffs.
    So I think contacting in the first instance the SBDC that 
is local could be a very important step to get them started. We 
are ready to help as well and ready to work with you on other 
ideas. But publicizing I think what we are already doing as 
much as possible and the tools we have. While at the same time, 
within the government, we are looking at ways to be more 
efficient and make sure as much as possible we have one stop 
shopping, whether it is our Business USA initiative or going to 
www.export.gov, or using the tariff tool. We are going to try 
as much as we can to continue to make this easier for people 
because we know at first it can seem quite complex. So we would 
like to work with you to simplify things.
    Ms. Hahn. Thank you. Thank you, Mr. Chairman.
    Chairman Graves. Mr. Schilling.
    Mr. Schilling. Thank you, Chairman, and Ranking Member. And 
thank you, Ambassador, for being here today. We appreciate your 
time.
    My home state of Illinois ranks second in the country for 
ag exports to nations and China is a major market, of course, 
as you are well aware to U.S. ag products. But International 
Trade Commissions stated China's tariff and non-tariff barriers 
inhibited between 1.3 billion and 2.1 billion in annual sales. 
What is the USTR doing with regard to the issue with China?
    Ms. Sapiro. We are very much focused on ensuring that China 
lives up to the obligations that it took on when it joined the 
WTO 10 years ago. And so with respect especially to the SPS 
restrictions we really want to make sure that they are science-
based and consistent with valid risk assessments.
    We have been very active in using international remedies 
through the WTO when we feel that China is not living up to its 
obligations. I am thinking, for example, of broiler parts. We 
filed an action against China that is proceeding because of the 
way they were treating our poultry. Because we are so 
competitive in ag exports. I mentioned how we have had a banner 
year and we want to have another one this year thanks in part 
to Illinois. We are also very focused on Russia. We negotiated 
with Russia for many, many years, and finally wrapped those up 
last fall successfully so that we could provide greater access 
to the Russian market for our pork, for our poultry, for our 
beef, and for a number of U.S. products where we are highly 
competitive and we want to see more access.
    Mr. Schilling. Thank you for that.
    We often hear about the negative implications of free trade 
agreements. Do you think the United States economy and small 
business exporters are better off with them in place or worse?
    Ms. Sapiro. With trade agreements?
    Mr. Schilling. Yes, ma'am.
    Ms. Sapiro. I think they benefit clearly small business, 
which simply do not have the tools and the resources that 
larger companies have to try and figure out what is the trade 
regime of another country. And unfortunately, the trade 
agreements cannot be one page. They are sometimes many, many, 
many pages. But the reason we do that is to try to provide 
clarity on what the rules of the road are. And that benefits 
our small business.
    So I am very supportive of the efforts I mentioned in TPP, 
trying to involve more small businesses in this effort and 
doing it with transparency as I mentioned earlier. I indicated 
that it was not so much that we canceled an event; rather, we 
reallocated the time and we had an intensive round of 
consultations with all of our stakeholders. We simply broke it 
up, as I understand it, differently than we did in other 
rounds. But transparency--so small businesses understand what 
we are negotiating, and when we are done explaining to them 
clearly how they can benefit--is a critical part of our work 
and our agenda.
    Mr. Schilling. Very good. So that leads me to the next 
question. That is a good lead-in.
    Considering only 1 percent of small businesses in the 
United States export, what do we need to do to get them to 
participate a little bit more, I guess?
    Ms. Sapiro. I think part of it is continuing to speak 
forcefully, and I commend the Chairman and all of the members 
of this Committee for speaking across the country, about the 
importance of trade and why what we are doing is so critical to 
help small businesses thrive and help our economy succeed as a 
whole. So a large part of this is outreach and making clear 
what the tools are. That we are negotiating TPP. That we have 
negotiated in APEC, which is a broader group. The Asia-Pacific 
Economic Cooperation forum is a broader group than TPP.
    What we are doing with the European Union, one of our 
closest trading partners. We, like they, are very committed to 
making our SMEs a higher priority. They think we are doing 
something right. We think they are doing something right. So it 
is a wonderful opportunity for the sharing of best practices.
    I mentioned in the Western Hemisphere this effort to 
connect our SBDCs with those hopefully to the north in Canada, 
and also down through Mexico and Central America and into South 
America, particularly in Colombia, our newest trade partner.
    So as you look around the world, we are very committed to 
making things as easy as we can so that our small businesses 
can thrive. And I would add also we are giving them the 
confidence to try another customer in an existing market or try 
a new market. So again, I think it is a collaborative effort 
working with all of you to try to figure out where the gaps 
still are, and what we can do together, as partners, to try to 
fill them because we have the same interest here, which is 
letting our small businesses thrive and export more.
    Mr. Schilling. Very good. Thank you, ma'am. With that I 
yield back.
    Chairman Graves. Ms. Chu.
    Ms. Chu. Well, I also sit on the Judiciary Committee, where 
I have been working hard to address business concerns about 
intellectual property rights. And this is a major priority for 
my constituents in the San Gabriel Valley of California.
    Your testimony mentions that you are pursuing a robust 
trade policy that supports small business and vigorously 
enforcing our trade rights. How is USTR making sure that the 
small businesses are protected from overseas intellectual 
property rights violations? What recourse does USTR provide for 
small businesses to ensure that they can report violations and 
seek redress given their limited resources and what can you do 
to strengthen relationships between these small businesses and 
regulatory agencies such as the Department of Justice so that 
these small businesses can have more confidence in exporting 
overseas?
    Ms. Sapiro. Thank you for that very important question.
    The importance of intellectual property rights and 
enforcement is another reason why I believe that small business 
can benefit greatly from our trade agreements. In our trade 
agreements we always seek to have a very robust intellectual 
property chapter so that we lay out the rules of the road and 
make clear that if other countries want to partner with us, and 
have more access to our market through reduced tariffs, they in 
turn have to provide the kinds of protections that we want to 
see for all U.S. companies but that particularly benefit the 
smaller companies that do not have the resources to engage 
legions of lawyers to bring litigation in foreign countries. So 
I think that is another reason why small businesses might want 
to look first and foremost to trade with our partners under an 
FTA because of the additional comfort that that provides.
    For trading partners that are not FTA partners we, of 
course, have the WTO agreements. I am thinking in particular of 
the TRIPS agreement with respect to intellectual property 
rights. We have, for example, prosecuted successfully a case 
against China in the WTO with regard to audiovisual. And in 
fact, just a few months ago we reached an important agreement 
with them on implementing some of their commitments in the film 
and audiovisual area. So it is an ongoing process where we are 
very committed to doing what we can to enforce these rights 
because of the innovation that they foster, and because of the 
entrepreneurship that depends on them.
    I would add also that the new ITEC, the Interagency Trade 
Enforcement Center is going to be looking at a range of areas 
to make sure that we are keeping our trading partners focused 
on our rights and if they are not implementing them, that we 
have the capacity to launch investigations and do what we can 
to enforce our rights. And again, small businesses I think, 
which can be disproportionately affected by barriers can also, 
we hope, gain by the new ITEC; our additional resources mean 
that when smaller companies come to us with a problem we will 
be able to look into it ourselves. The larger companies, again, 
have the resources to look into these questions on their own 
and then come to us. The smaller companies do not. By having a 
robust enforcement capability as a new tool in our arsenal, we 
believe we will be able to benefit small businesses again in 
this manner.
    Ms. Chu. Thank you for that.
    I went on a delegation to China recently and I was very 
startled to find that half of the wine that the Chinese consume 
comes from France, while only 5 percent comes from the U.S. And 
yet we have some of the best wines in the world, particularly 
from my home state of California. So what programs are 
available in the national export strategy to help particular 
industries like the wine industry enter these new markets 
abroad?
    Ms. Sapiro. Well, I am also a fan of California wines. I 
hope I do not insult anyone from another state, but they are 
excellent.
    I wonder if we have had a trade mission to China focused on 
the wine industry or what the great potential is for the export 
of California wines. I think this is an important industry for 
California and also for other states, a growing industry 
certainly in Virginia as well. I think it is something that we 
can certainly look into in conjunction with the Commerce 
Department and its ability to lead trade missions.
    Ms. Chu. Okay, finally, let me ask, there are many small 
businesses in my district but nearly two-thirds of my district 
does not speak English at home. And they have trouble accessing 
the services that they need in order to export. What do you do 
to offer assistance to business owners who are not native 
English speakers?
    Ms. Sapiro. I would certainly hope that an SBDC located in 
an area where there are business owners who speak other 
languages could have someone on staff to help. I would have to 
look into whether that is indeed the case but I am guessing 
that probably the Commerce Department has done something to 
address this concern.
    Ms. Chu. Okay. Thank you.
    Chairman Graves. Mr. Hanna.
    Mr. Hanna. I heard a couple people mention currency 
manipulation. Tell me everything you know about it and with 
Vietnam, with China, it is alleged--I think personally I think 
maybe some of it is blown out of proportion but what do you 
know about it?
    Ms. Sapiro. Well, I know it is in the papers a lot. 
Certainly, it is a hot topic for discussion in Congress and I 
will say this is something that the Administration is very 
focused on. Secretary Geithner has been very involved in this 
question and I would probably best refer that question to him 
and his team because they really have done the most work on 
this.
    Mr. Hanna. But is that not an integral part of what makes 
you successful or not successful? I mean, the value of the 
dollar right now has a lot to do with our changing export 
picture. So conversely, is it not the same when it is coming in 
the opposite direction?
    Ms. Sapiro. The value of the dollar can certainly have 
bearing on the export question. But as I mentioned, Secretary 
Geithner and his team are focused on the currency fluctuations 
and discussing that issue with other countries. So I have to 
defer to him on this question.
    What I can say is that we are very focused on, no matter 
what, is the international climate in terms of monetary policy. 
We make sure that our companies have the tools that they need 
to succeed in the marketplace in terms of the free trade 
agreements and in terms of the other tools, such as enforcement 
capabilities that we are very committed to pursuing.
    Mr. Hanna. But how can you do one without understanding or 
at least having a handle on a lever, if you will, on the other?
    Ms. Sapiro. As a government, we are very involved across 
the board in these kinds of questions. But USTR's role is to 
formulate trade policy and make sure that we can negotiate 
trade benefits for our companies of all sizes and then, of 
course, that we have the ability to follow up on the 
enforcement side. Our jurisdiction does not get into currency 
questions, and those we defer to the Secretary of the Treasury 
because that is his expertise.
    Mr. Hanna. In terms of dairy policy, in Russia for years we 
have been shut out. Assuming that the Jackson-Vanik goes away 
and they join the WTO, do you have an idea--I come from a place 
that is a lot of dairy farms--how you can encourage our 
products to go over there and that particular product?
    Ms. Sapiro. If Congress is able to terminate the Jackson-
Vanik amendment, then our companies, including our dairy 
farmers, will be able to enjoy the benefits that we negotiated 
in terms of, for example, the SPS rules. And if Russia does not 
abide by the rules to which they have agreed, we would then 
have the option of dispute settlement. So strict adherence to 
the SPS rules that can benefit dairy farmers and enforcement 
tools, should we need them, would be very important benefits I 
think for the farmers of New York State. But it all depends on 
whether or not Congress will act quickly this summer to 
terminate this provision, which dates from 1974, before Russia 
becomes a Member. Otherwise, our exporters will not be able to 
enjoy the additional benefits that we negotiated.
    Mr. Hanna. Thank you, ma'am. I appreciate it. I yield back.
    Chairman Graves. Ms. Ellmers.
    Ms. Ellmers. Thank you, Mr. Chairman.
    Ambassador Sapiro, I am from North Carolina. I represent 
the 2nd District. Textiles and tobacco are very important in my 
district. My first question to you is in regard to tobacco. A 
moment ago you were mentioning the amount of transparency and 
trying to increase the amount of transparency. I was recently 
told as a member of Congress that I am allowed to request the 
language on tobacco within TPP; however, I am not allowed to 
share any of this language with my staff or any of my 
constituents that have concerns. My question to you is why have 
we not seen this language and why is the USTR attempting to 
halt the discussion of the tobacco exemption in Dallas as we 
speak? And why are they unwilling to share the language on this 
issue in the agreement?
    Ms. Sapiro. The tobacco question is obviously an important 
one that is being worked first interagency and with Congress 
and with stakeholders. I know I am not personally involved in 
that discussion because I am not handling the TPP negotiations 
on a day-to-day basis, but I know it has been the subject of a 
lot of discussion and consultation in terms of finding the 
right proposal to move forward with.
    So I just want to reassure you that this is a very 
important issue, one that the Administration and USTR is taking 
very, very seriously. And we are doing our utmost to work with 
everyone to find the right path ahead.
    Ms. Ellmers. But the question being why is, you know, 
again, on the issue of transparency, why would the language not 
be readily available for, of course, myself, but I would need 
to go over that information with my staff and possibly some of 
my constituents who are tobacco farmers and have these 
concerns. Why would that be not forthwith? Why are we holding 
back on that?
    Ms. Sapiro. Well, I cannot speak to the exact details but 
what I can say is we do a significant amount of outreach with 
Congress, and at the staff level as well. So I am not sure 
exactly what happened but I do think in general we try to be 
very transparent with Congress because it is such an important 
part of what we do, making sure that we are being responsive to 
you and your concerns and the concerns of your staff.
    Ms. Ellmers. Great. Well, then I will make sure that my 
staff is reaching out to you on those issues.
    My next question, and I understand that my colleague, Mr. 
Mulvaney has already touched on this issue, and of course, that 
is the yarn-forward rule. And my understanding is now we are 
looking at possibly changing that and going forward with the 
flexible rule of origin. And of course, you know, again, in 
some of the discussion that I listened to with my colleague, 
Mr. Schilling, you were talking about the concerns that we have 
with China, and yet this will actually benefit China.
    So I am wondering why on earth would we consider this rule 
and once again throw the textile industry under the bus as was 
done in the South Korean Free Trade Agreement forcing textiles 
to work against another free trade agreement, as well as, for 
instance, myself. I ended up, I am a big proponent of free 
trade, fair trade, but I had to vote no on that agreement 
because of my textile industry. Do not do that to us again. And 
I am going to do everything that I can to make sure that that 
does not happen. But if you could maybe just touch on that 
again I would truly appreciate it.
    Ms. Sapiro. I would be happy to, Congresswoman. I cannot 
stress enough how important the textile industry is to our 
ability to trade. And we take their interests and their 
concerns very, very seriously. So I just want to reassure you 
that we are doing that in TPP as well. This is an important 
issue, an important constituency, and we want to see them 
succeed.
    Ms. Ellmers. So why would there be some favorable thinking 
here on the flexible rule of origin rather than the traditional 
way that we have looked at this issue when it comes to the 
textile industry? I mean, where is the change and why have we 
made that?
    Ms. Sapiro. I have not been involved in the specifics. Our 
chief textile negotiator has been very involved and is working 
this issue in Dallas. But I can say as a general matter that we 
are very committed to making sure that all of our exporters, 
including the textile industry, remain competitive, and that 
they remain a vibrant part of our own economy.
    Ms. Ellmers. Thank you. I am sure that that will be 
reassuring to the textile industry. Thank you. And I yield back 
the remainder of my time.
    Chairman Graves. Do you have any more questions?
    Ms. Velazquez. Ms. Sapiro, Ambassador, despite the fact 
that for the last two decades there has been an emphasis on 
free trade agreement as a primary tool to increase trade and 
the facts that we have before us in respect to small businesses 
is that only 1 percent out of 28 million are exporting a 
product to a country and then when you come before our 
committee and there are trade negotiations you are telling us 
that trade agreements are going to benefit small businesses. So 
it seems to me that after two decades, and I have been here now 
for two decades and I have been hearing the same rhetoric, if 
you will, that those trade agreements are not living up to the 
promises that were made to small businesses. They are doing 
great for big corporations but not for small businesses.
    And to tell me that SBDCs, small business development 
centers, they are not experts on trade promotions, they provide 
technical assistance for startups, microbusinesses, small 
businesses domestically, but they do not have the expertise. So 
there has to be a better job, interagency jobs when it comes to 
trade promotion and we are not seeing that.
    Ms. Sapiro. I want to assure you that one of the key 
priorities of the National Export Initiative, launched by the 
President, is focused on SMEs. All of the agencies involved in 
trade are working together to have the most robust set of tools 
we possibly can to help our SMEs succeed.
    I cannot speak to what happened earlier but I can tell you 
in the last two years I have seen an unprecedented level of 
coordination interagency and coordination with our trading 
partners. In probably every meeting I have had with a foreign 
counterpart I have raised SMEs. How can we work together to 
help? And, just like they are the backbone of our economy, they 
are the backbone of most economies around the world. So there 
is great interest in working together more closely to establish 
these regional links between our SBDCs, which link at the micro 
level, to partners in different countries around the world so 
that they have a virtual network and they have real resources, 
too, including access to financing tools and export promotion 
opportunities to succeed.
    This is a challenge, and I am not suggesting that we have 
answers, but I am suggesting that we have a firm commitment and 
a real dedication and priority placed on this issue that I do 
not think has been a hallmark of previous administrations. We 
are determined to work with you to figure out exactly how to 
make a difference.
    For example, under a number of our FTAs we are starting 
small and medium enterprise committees so that we can, again 
together, focus on how do we help. How do we connect our SMEs 
together so that they have export opportunities in both trading 
partners, or in additional partners? So it is a challenge but 
we have done a lot. I think there is a lot more to do and that 
is part of the reason I wanted to come today and see how we can 
work more closely together in the future.
    Chairman Graves. Mr. West.
    Mr. West. Ambassador, you just mentioned the National 
Export Initiative. One of the countries that the Administration 
is pushing hard to get into that is Brazil. And this Committee 
was contacted by a small business owner, this health care 
equipment manufacturer, and he faced on average 65 percent 
import tariffs as opposed to on this side only 3 percent. So 
how can, if we want Brazil to be a part of this National Export 
Initiative, how can we level that playing field so the small 
businesses can participate in that? I mean, 65 percent versus 3 
percent? I mean, that is exorbitant. I mean, what can the USTR 
do to get Brazil to level that playing field out so that, you 
know, free trade is fine but it has to be fair trade. And 
again, I have to echo the comments of the Ranking Member. We 
talk about small businesses but they are put at a severe 
disadvantage.
    Ms. Sapiro. Brazil is a challenge. We do not have a trade 
agreement with Brazil. We do not have an investment agreement 
with Brazil. We did have the first meeting under the new Trade 
Partnership Agreement that Ambassador Kirk signed last year. We 
held that meeting in March. So we are very focused on 
developing a much closer partnership with Brazil. There are 
many issues we do see eye-to-eye on. Others we are still 
working towards.
    SMEs are an issue where they do want to work with us. 
Investment is also an issue, not in terms of an agreement but 
in terms of a dialogue. So we are looking for areas of common 
ground where we can work together. High tariffs are a concern; 
so are some of the non-tariff barriers. We have been forthright 
with them in trying to address these concerns and we will 
continue to push with Brazil to do that.
    Mr. West. Well, I guess is there some numerical threshold? 
You know, part of being a member of this export initiative, we 
are going to say that this is nonnegotiable with them. I mean, 
I do not want us to, you know, roll over and allow our bellies 
to be scratched and our small businesses end up losing out. So 
is there a threshold? Is there some point of no return where we 
are going to push the table? Push the envelope?
    Ms. Sapiro. Well, we are pushing the envelope, Congressman, 
as far as we can with Brazil, through looking for areas where 
we can work together. So, for example, they are hosting the 
World Cup, and other events as well, so they have 
infrastructure needs. In some cases, initially that benefits 
the larger companies but then they subcontract with the smaller 
companies. So it is not an ideal solution, but it is something 
that we are working towards at this point. And as I said, they 
have focused domestically on SMEs. And so one opportunity might 
be to link our SMEs through this ``Connect the Americas 
Initiative.'' Then they can have more access to each other 
through virtual networks and other forms of assistance.
    Mr. West. Well, that is an important thing for us because, 
like Ms. Hahn said, you know, we have got Port of Miami, Port 
Everglades, and Port of Palm Beach down in our neck of the 
woods and that is very beneficial. So thank you, Mr. Chairman 
and Ranking Member. I yield back.
    Chairman Graves. Mr. Hanna.
    Mr. Hanna. Some of the bills, for example, the highway bill 
has a ``Buy America'' provision in it. Do you have an opinion 
about those? And do you have an idea of how the net effect--
what the net effect might be on American businesses?
    Ms. Sapiro. Well, we do hear a lot from our trading 
partners, regarding concerns about ``Buy America'' provisions. 
We try to gain as much access as we possibly can to trading 
partners' procurement markets. We do have to obviously offer 
access here as well, or they will not allow us to access their 
markets.
    In general, if a country is a trading partner and they are 
a party to the WTO's Government Procurement Agreement, then 
they have broad access. But there are, of course, some 
exceptions. So it is a continuing source of friction with our 
international trading partners. On the other hand, domestically 
we know that this is important especially for our small and 
medium enterprises, so they can compete effectively through 
those procurement processes here.
    Mr. Hanna. Do you think it works?
    Ms. Sapiro. In terms of helping SMEs or in terms of giving 
us more access overseas?
    Mr. Hanna. Both.
    Ms. Sapiro. I think it does help in terms of SMEs. I have 
seen the statistics and they are certainly getting more and 
more federal procurement contracts. Overseas, as long as we 
have exceptions, it is a tougher push for us to make. So I have 
not seen stats on how that balances out yet. It is a very good 
question.
    Mr. Hanna. Well, thank you, ma'am. I yield back. Thank you, 
Chairman.
    Chairman Graves. Any other questions?
    Seeing none, I want to thank you, Ambassador, for being 
here today. It is obviously clear that we have a lot of 
opportunity, I think, to remove some trade barriers and open 
new markets for our small businesses. And we need to stay 
aggressive and continue to make small business a priority. But 
we very much appreciate you coming in today and I look forward 
to working with your office. So thank you very much.
    Ms. Sapiro. Thank you. Thank you, Mr. Chairman. Thank you, 
Ranking Member. Thank you, everyone.
    Chairman Graves. We will seat the next panel.
    [Recess.]
    Chairman Graves. We are going to go ahead and start. We 
have a series of votes coming up between 2:25 and 2:30, so that 
will create a little bit of a problem. We will probably have to 
recess for those votes and then we will come back, but we will 
try to get through as much testimony as we can.

  STATEMENTS OF THOMAS CRAFTON, PRESIDENT, THERMCRAFT, INC., 
      TESTIFYING ON BEHALF OF THE NATIONAL ASSOCIATION OF 
 MANUFACTURERS; ROBERT B. SINNER, PRESIDENT, SB&B FOODS, INC., 
   TESTIFYING ON BEHALF OF THE AMERICAN SOYBEAN ASSOCIATION; 
JOSHUA MELTZER, PH.D., FELLOW, GLOBAL ECONOMY AND DEVELOPMENT, 
   BROOKINGS INSTITUTION; MARK A. LUDEN, CEO, THE GUITAMMER 
   COMPANY, TESTIFYING ON BEHALF OF THE CONSUMER ELECTRONICS 
                          ASSOCIATION

    Chairman Graves. I will go ahead and introduce our first 
witness, which is Mr. Thomas Crafton. He is the president of 
Thermcraft, Inc., in Winston-Salem, North Carolina. Thermcraft 
is a leading manufacturer of high quality thermal processing 
equipment, including industrial furnaces that can reach over 
3,000 Fahrenheit. They currently export to 12 countries. He is 
testifying on behalf of the National Association of 
Manufacturers. And welcome to the Committee.
    I might point out each of you have five minutes and the 
lights will be green up to the last minute it will turn yellow 
and then red at the end of five minutes. But Mr. Crafton, thank 
you for being here.

                  STATEMENT OF THOMAS CRAFTON

    Mr. Crafton. Thank you for the invitation. Chairman Graves, 
Ranking Member Velazquez, and members of the House Committee. 
You know, we appreciate the opportunity to present our 
experiences regarding international trade as a small business.
    Again, my name is Tom Crafton with Thermcraft, Inc., and we 
are located in Winston-Salem, North Carolina. Founded in 1971 
and we just celebrated our company's 41st birthday and now 
employ more than 70 people. We manufacture high temperature 
equipment, supplying to many different types of industries like 
solar cell industry, aircraft, glass, nuclear components, OEMs, 
fiber optics, just to name a few industries. We are also a 
member of NAM, National Association of Manufacturers, which is 
one of the largest national trade organizations.
    Thermcraft started out 41 years ago in a small 5,000 square 
foot building in a very poor section of Winston-Salem, and we 
have now grown to having our own building and about 70,000 
square feet with about 70 employees. But we grew rapidly from 
making small laboratory equipment, small systems to much larger 
systems for high volume manufacturing. Customers currently 
include most of the Fortune 500 companies, like the General 
Electrics, Boeings, DuPonts, Corning Glasses, Rockwell, again, 
just to name a few.
    Our customers with international presence actually is what 
got us started in exports from the standpoint our specialty is 
designing custom systems for manufacturing. A U.S. customer 
here would purchase equipment, a custom furnace for a 
particular manufacturing process. They would be in discussions 
with sister companies that were overseas. The sister companies 
would need to duplicate that process so they came to us. And 
that is how actually we began. Our start in exporting was a 
result of our dealings with U.S. companies.
    But the bulk of our exports have been primarily the 
semiconductor industry worldwide, mainly Asia and Western 
Europe. In the early 1990s, we began dealing with an MRO, 
maintenance repair and overhaul organization in Europe, and 
they began distributing our heaters to the semiconductor 
industry there. In the late 1990s, we began to see much of that 
business move to Asia, so as a result we began relationships 
with Asian representatives in several Asian countries, 
including Japan, Taiwan, Singapore, China, and they helped us 
support that business there.
    The business in Asia continued to increase, which again 
gave us more experience, more exposure to exporting. And again, 
in a variety of different countries. Each country kind of 
presents its own different sets of challenges based upon the 
product that you are shipping into and in Asia, Europe, and 
even within any of those communities.
    By 2008, our export business had actually reached about 35 
percent of our total sales which was probably in excess of $4 
million a year. And during the same time period, in order to 
help generate additional export sales, we developed a standard 
line of equipment that was more of a catalogue distributor-type 
item versus custom equipment. And we participated in the 
Commerce Department's new export initiative, Gold Key 
distribution program in Singapore, which we were very 
successful in finding a good qualified distributor there.
    We also worked with the U.S. commercial service 
representatives locating distributors in China, Korea, again, 
Singapore, and many of the other Asian countries. And we are 
currently working on distributor networks in Europe and the 
Middle East, but in order to get that Middle East business 
developed further, there are trade shows we participate in. 
Most recently, in the Arab Lab Expo, which is a laboratory 
equipment trade show that was in Dubai. And as a result of 
doing that show, we have located a number of possible strong 
prospects that have potential of enhancing our export items 
through distributors throughout the Middle East.
    And that has been the positive side. We have had a lot of 
help with the U.S. commercial service. We had a lot of export 
issues arise on a daily basis that continue to be a problem and 
mainly it is a matter of finding one source for information to 
be able to help us get the information we need to be able to 
adequately export to a particular country.
    Commercial officers seem to, by our experience, have more 
or less the big picture and when we start trying to get into 
the small picture they are just not in a position to help. They 
do not have that information or expertise to be able to help. 
You know, regulatory changes are constant and trying to find 
one source, again, one source in one place, to locate that 
information is a challenge. It takes hours and hours and people 
that we simply, we do not have the manpower to be able to 
support those types of things.
    And we have also gone to private export consultants that 
have helped us and many have experienced the same problem. You 
know, we always thought it was our problem as a small business 
but we find out it is more of a small business issue versus 
just our small business. But, you know, we can all benefit from 
improved access to markets abroad. And we are looking to see 
recent implementation, new trade agreements, which we think can 
be beneficial to us. But we hope the Small Business 
Administration will redouble efforts to help pursue more FTAs 
and be able to help find a local single source to be able to 
help small businesses, like us, get the information we need.
    And again, I appreciate the opportunity to be able to 
testify about my experiences and I am happy to answer any 
additional questions.
    Chairman Graves. Thank you, Mr. Crafton.
    Next, I would like to introduce Mr. Robert Sinner. Bobby is 
the president and partner of SB&B Foods in Casselton, North 
Dakota. He is a family farmer of over 30 years and has 
extensive experience in international trade. SB&B is a two-time 
winner of the Export of the Year award from the State of North 
Dakota and he is testifying on behalf of the American Soy Bean 
Association. Thanks for being here.

                 STATEMENT OF ROBERT B. SINNER

    Mr. Sinner. Good afternoon, Mr. Chairman, members of the 
Committee. My name is Bob Sinner. I am a fourth-generation 
partner in a family farming business and president of SB&B 
Foods, Inc. Thank you for the opportunity to appear before you 
today to provide my views concerning trade policy and its 
effect on small business exporters.
    Our company, SB&B, employs approximately 30 people who 
produce, package, and export an extensive line of Identity 
Preserved soybean products to customers worldwide. With annual 
export sales between $20 and $25 million for the past three 
years, our largest exports are in Asia.
    When our business first expanded to the international 
marketplace, we received funding for promotional activities in 
Japan from Food Export, USA, a non-profit funded by USDA's 
Market Access Program (MAP). I cannot overstate the success and 
value of USDA's export promotion programs in expanding farm 
exports globally.
    One of the challenges we have encountered over the years is 
we have expanded to other markets is the lack of consistency in 
international standards, specifically the patchwork landscape 
of countries that require a phytosanitary certificate, and the 
inconsistency of our government to provide them. In this 
regard, the U.S. government must work towards achieving 
international harmonization of standards in order to facilitate 
trade between small businesses and global markets.
    Under the Korea Free Trade Agreement, food-grade soybean 
producers now have access to a zero tariff-rate quota (TRQ) for 
the first time outside of that country's state trading 
enterprise. But access to the quotas will be a challenge for 
small exporters because the TRQ is managed by local processor 
associations and competing member companies. On this point, I 
strongly urge our government to ensure a certain level of 
transparency on the implementation and administration of the 
TRQ so that U.S. exporters can reap the full benefits of the 
FTA.
    I would also like to share some thoughts about our 
infrastructure and transportation system, which challenges a 
small exporter's ability to compete effectively. We have a 
transportation system in the United States that prices 
equipment into and out of large metropolitan locations in favor 
of bridging many of the rural supplier states en route to 
departure ports. This approach ignores the importance and 
necessity of timely food shipments, and we are concerned that 
as the world continues to demand more grains and soybeans from 
the U.S., small exporters may not be able to compete unless we 
have available container equipment at competitive pricing.
    Finally, it is also my hope that the Food Safety 
Modernization Act does not impose an additional set of 
burdensome and costly requirements on small businesses in 
addition to food quality standards already required by our 
customers and safety requirements already established by 
foreign governments.
    As I have stated, small exporters face enormous competition 
and a web of international regulatory constraints. Our export 
promotion programs are among the few tools that help American 
agricultural exporters stay competitive abroad. And while 
rapidly growing markets in the Asia-Pacific region are key 
drivers of the food-grade soybean demand, we must break down 
remaining barriers to meet increased demand for our products in 
the region. We hope that a TPP FTA is successful in easing 
foreign regulatory burdens so that U.S. companies can operate 
more seamlessly abroad and help small businesses participate 
more effectively in international trade.
    Thank you, Mr. Chairman, for the opportunity to present our 
views. I am happy to respond to any questions.
    Ms. Velazquez. Mr. Chairman, it is my pleasure to introduce 
Dr. Joshua Meltzer. He is a fellow at the Brookings Institution 
specializing in global trade and development. His work focuses 
on issues related to international trade, as well as U.S. trade 
with key economies such as China, India, Japan, and the 
European Union. He currently serves as an adjunct professor at 
the John Hopkins University School for Advanced International 
Studies in Washington, D.C., as well as an adjunct professor of 
law at Georgetown University Law School in Washington, D.C. 
Thank you and welcome.

                  STATEMENT OF JOSHUA MELTZER

    Mr. Meltzer. Chairman Graves, Ranking Member Velazquez, 
honorable members of the Committee, thank you for this 
opportunity today to share my views with you on U.S. trade 
strategy and what is next for small business exporters.
    In 2011, it became clear that concluding the WTO Doha Round 
in its current form is not possible. Efforts are therefore 
underway to make progress on elements of the Doha agenda and 
the United States is taking the lead in such areas as services 
liberalization.
    The Trans-Pacific Partnership (TPP) negotiations are really 
the only other trade negotiation to which the United States is 
currently a party. The nine countries involved in these 
negotiations including the United States are Australia, Brunei, 
Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam. The 
TPP also has the potential to be the building block for a wider 
free trade agreement of the Asia-Pacific region, a goal 
endorsed by APEC leaders and recently reiterated by United 
States trade representative Ron Kirk at the TPP negotiations in 
Dallas this week.
    Given the focus of the current administration on completing 
the TPP negotiations this year, I will focus the rest of my 
testimony on the implications of the TPP for the United States 
and small businesses. In particular, I will focus on the 
economic implications of the TPP, the role of the TPP in 
achieving free trade in the Asia-Pacific region, and finally, 
we will discuss some of the implications for small businesses.
    The Asia-Pacific region is crucial for the United States. 
It is the fastest growing region in the world and a key driver 
of economic growth. Indeed, the region already accounts for 60 
percent of global GDP and 50 percent of international trade, 
and is expected to grow by around 8 percent this year.
    In 2011, the United States' exports to TPP economies were 
worth approximately $105 billion and imports were valued at $91 
billion, giving the United States a trade surplus in the range 
of $14 billion. However, the economic benefits to the United 
States of the TPP will be greatly expanded as more countries 
join. In this regard already Canada, Mexico, and Japan have 
expressed interest in joining. And should these countries join, 
the agreement will end up covering over $800 billion worth of 
exports and $875 billion worth of imports of goods and 
services.
    The potential economic gains to the United States from the 
TPP highlights its significance as a template for free trade in 
the Asia-Pacific region. The recently created free trade 
agreement which came into effect on March 15th of this year 
will likely serve as a baseline in the negotiations. USTR is 
also seeking agreement on a range of new rules such as on 
regulatory coherence to reduce trade barriers arising from 
unnecessary regulatory diversity among TPP countries and rules 
of state-owned enterprises that will discipline the trade-
distorting impact that they have when they are not operating 
according to competitive market-based principles.
    The TPP should also address the realities for businesses 
which rely on supply chains located in different countries, 
often in the Asia-Pacific region. Developing coherent rules of 
origin is one way of ensuring that the TPP reflects these 
business realities. Progress on trade facilitation, which 
reduce the cost of moving goods through customs is another one.
    The TPP can also provide an important framework to develop 
new rules that protect the free flow of data across borders. 
The Internet is now a key driver of trade and actually, 
especially for small and medium-sized enterprises as these 
companies are now able to use the Internet to access customers 
overseas and at scale.
    The TPP will also address the trend in the Asia-Pacific 
region toward regional economic integration that excludes the 
United States. For instance, ASEAN, the Association of South 
East Asia Nations, has free trade agreements with China, Japan, 
South Korea, Australia, and New Zealand. These agreements 
divert trade from the United States, and in the absence of U.S. 
participation in developing these trade rules undermines the 
United States' leadership in the region.
    In this light, the TPP will also be an important vehicle 
for pursuing economic integration that is both Asia-Pacific in 
scope and involves the United States.
    Small and medium-sized businesses will stand to gain 
significantly from trade liberalization under the TPP. In fact, 
almost 98 percent of all exporters and 97 percent of importers 
are small and medium-sized enterprises, though representing 
only 40 percent of goods and 31.5 percent of imports, so there 
is clearly room for growth.
    In addition to this, 94 percent of small and medium-sized 
enterprises both import and export. Therefore, trade agreements 
which as the TPP which both liberalize barriers in the United 
States and abroad should benefit small businesses. Small 
businesses will also benefit the most from government efforts 
to reduce trade barriers as the capacity to overcome these 
barriers, for instance, by establishing subsidiaries overseas, 
is certainly limited. The TPP has the potential to be a 21st 
century trade agreement, and if it fulfills these ambitions, 
small businesses should stand to gain.
    Thank you again for the opportunity to testify here today.
    Chairman Graves. Thank you very much. Our final witness is 
Dr. Mark Luden. He is the chief executive officer of Guitammer 
Company in Westerville, Ohio. They manufacture the speaker and 
sound systems that are used in major theaters around the world, 
including IMAX. He is testifying on behalf of the Consumer 
Electronics Association. Welcome. I appreciate your testimony.

                   STATEMENT OF MARK A. LUDEN

    Mr. Luden. Thank you very much. Chairman Graves, Ranking 
Member Velazquez, members of the Committee, thank you very much 
for having me here today and for your efforts on this important 
matter. I also very much appreciated the depths of the 
questions the Committee asked to the ambassador previously.
    As Chairman Graves said, my name is Mark Luden. I am the 
president and CEO of The Guitammer Company. We are based in 
Westerville, Ohio, a suburb of Columbus, and we make the 
ButtKicker-brand of consumer electronics products. And what 
they do is let you feel bass like a silent subwoofer so that 
you are able to have the full experience without the volume. 
And our products are used by the world's best musician in home 
theaters by video gamers and in movie theaters around the world 
and in Kansas City. I am also a member of the Board of Industry 
Leaders and of the Consumer Electronic Association (CEA) and 
past chairman of CEA's small business committee. The CEA 
represents over 2,100 diverse technology companies, and my 
company, The Guitammer Company, is proud to be among them. And 
we are also very proud to be a small exporter.
    I would like to briefly talk about two things. First, that 
well-crafted free trade and free trade agreements can and do 
help small businesses. And secondly, to recommend three actions 
Congress can take to continue to help our small businesses grow 
and thereby allow us to hire more Americans.
    So why is free trade important to our small business? 
Historically, 35 percent of our sales are outside the U.S. In 
fact, in Q1 of this year, 45 percent of our sales were outside 
the U.S.--10 percent in Canada and 35 percent outside of North 
America. In the past six months alone, we have shipped 
ButtKicker-brand products around the world--Spain, Belgium, 
France, South Korea, Brazil, the Netherlands, Germany, the 
U.K., Singapore, Japan, Denmark, Switzerland, Portugal, Kuwait, 
and more, including product to a Chinese movie theater chain. 
So we are proud to let you know that we are shaking Chinese 
movie theaters' ``you know whats'' with Kentucky-made 
ButtKickers.
    So as you can see, exports are a vital part of our 
business. For example, the Korea Free Trade Agreement dropped 
an 8 percent tariff on our products that we sell to a Chinese 
movie theater chain. It made us much more competitive. The New 
Colombia Free Trade Agreement should reduce the price of our 
products exported there about by 11 percent, and we were just 
recently contacted by their leading cinema company asking about 
our products. So that will make us, I think, more competitive 
and have a better chance to win that business. These lower 
costs help us sell more products and our international 
customers to buy more of our products.
    Trade barriers act as a tax on transactions and create a 
zero sum gain where no one wins. Trade barriers and trade 
policies can unfairly and disproportionately affect small 
businesses who are not able to absorb these extra costs and it 
can make it harder for us to compete against large 
multinational companies. But well-crafted free trade agreements 
do not cause small businesses to lose jobs. Instead, they can 
be the reason small businesses create jobs.
    So what can Congress do to help? I would like to make three 
recommendations. First of all, I ask you to support the Trans-
Pacific Partnership. This agreement is of key importance to CEA 
members and the tech industry as a whole. Successfully 
negotiated it will include tariff elimination and removes 
technical barriers to trade.
    Secondly, support the expansion of the Information 
Technology Agreement (ITA). Guitammer and CEA strongly support 
the efforts to expand the product coverage within this 
agreement. Since its passage, which I think was about 15 years 
ago, ITA has helped drive innovation, create jobs, open new 
markets, and lower consumer prices across the globe. Yet, since 
its passage, the product scope of this agreement has never been 
expanded, leaving products that we all use now, such as tablets 
and Smartphones outside of the scope of the current agreement.
    And finally, pass the TRADE (Transparent Rules Allow Direct 
Exporting and Jobs) Act as sponsored by Representative Tipton. 
This act, the TRADE Act, creates an easy-to-use tool for 
companies to access country-specific information regarding 
export regulations and trade requirements, and there is 
something to be said for simple-to-use points tools. And you 
are right, I do agree the SBDCs, they are not experts in it so 
the TRADE Act really will help. This tool will make it more 
cost-effective for a small business to easily access 
information about foreign regulations, labor requirements, 
custom declaration information , and more.
    So thank you very much for giving me the opportunity to 
testify. I welcome any questions you may have.
    Chairman Graves. We are into this vote series. There are 
three votes, so it may take us--hopefully we will be back 
within 30 minutes and then we will ask questions if that is all 
right with you all. So we will recess for a short period of 
time and we will be right back.
    [Recess.]
    Chairman Graves. We will bring the hearing back to order. 
Ms. Velazquez.
    Ms. Velazquez. Mr. Meltzer, critics of the USTR have 
complained that negotiations for the Trans-Pacific Partnership 
have been conducted behind closed doors, and in fact, one of 
the congress ladies was questioning about the tobacco issue. 
And nobody will know what the proposal will look like until it 
has been signed off by all the parties involved. Does this 
secretive approach to the negotiating process pose risks that 
the agreement may not be able to garner public support once it 
sees the light of the day?
    Mr. Meltzer. Thank you for our question. And I am a very 
big supporter personally of transparency throughout government, 
certainly as far as possible in the trade negotiating process. 
My sense is that generally speaking USTR has done a very good 
job of trying to be transparent in its trade negotiating 
processes with the TPP as well as with its other free trade 
agreements. I do understand that often these issues involve 
somewhat of a tradeoff between providing as much information as 
possible to stakeholders and keeping them informed of the 
developments in the negotiations while at the same time 
providing a certain level of confidentiality for negotiators 
from the United States and other countries to also express 
their views freely and frankly. And I think that is always an 
ongoing balance.
    Ms. Velazquez. Thank you.
    I think, Mr. Sinner, you spoke about the lack of 
coordination in terms of trade promotion assistance. What in 
your opinion would be the quickest and most cost-effective 
means of improving coordination between the different agencies 
and harmonizing their support when it comes to putting together 
strategies that will help small businesses and medium-sized 
businesses reap the benefits of trade agreements?
    Mr. Sinner. Well, in agriculture you have regional 
divisions of Food Export USA, which is a division of MAP. And 
those are funds that are available for export promotion, export 
promotional materials, and those are actually, you know, quite 
helpful to help a small business get started. Many of the trade 
offices in the states in cooperation with the Department of 
Agriculture which have a conduit link to Food Export USA or the 
regional offices of MAP are also very helpful to small 
exporters to looking at the regulatory regulations and some of 
the things, the first steps to get started. So, I mean, there 
is a process and I think at the ground level those have been 
helpful.
    Ms. Velazquez. Okay. Mr. Crafton. Thank you, sir.
    While the recently passed trade agreements and Trans-
Pacific Partnership improve access to foreign markets, they 
will not translate into improved market share for small 
businesses if problems accessing credit go unresolved. How 
might the ongoing lack of trade financing impact your 
industry's capacity to export abroad?
    Mr. Crafton. We have been fortunate that it has not made a 
major impact simply because we have forged partnerships with 
distributors. We utilize them to handle the financial 
transactions. At the same time, we also were dealing with some 
larger potential projects at this point and having the 
association with EX-IM Bank has been a tremendous boon to 
allowing us to actually get orders that we otherwise probably 
would not be able to handle.
    Ms. Velazquez. So when you say ``we,'' are you referring to 
your company?
    Mr. Crafton. Yes, to the company. Yes.
    Ms. Velazquez. And do you have any kind of anecdotal 
stories coming out of the manufacturing sector?
    Mr. Crafton. Not specifically. I mean, again, it has just 
been a lot of cases. We deal with markets that are maybe Middle 
East and someone's maybe marginal credit so that we have to 
deal with financing that, you know, EX-IM allows us to do that 
where otherwise we just do not have the resources to do 
otherwise.
    Ms. Velazquez. Okay. Thank you.
    Mr. Crafton. You are welcome.
    Chairman Graves. Mr. West, questions?
    Mr. West. Thanks to the panel and thanks you Chairman and 
Ranking Member. You all were here when the ambassador was here. 
If you could trade places with the ambassador or the actual 
USTR ambassador and there were two things that you would 
implement which would help our small businesses and the arena 
of free trade, fair trade, what would be the two policy 
initiatives that you would enact?
    Mr. Sinner. Congressman West, I will respond to that first. 
And it was addressed by Ranking Member Velazquez a couple times 
earlier today.
    Those of us that are involved in international trade would 
like to be involved and would like to be somehow in the 
discussion of some of the negotiation.
    Mr. West. At the table?
    Mr. Sinner. At the table so that we understand what is on 
the table. I hear all the time from customers in Asia their 
fear of what this is going to be. They are asking me questions 
about what is involved in this TPP. To be honest with you, I do 
not know the nuts and bolts of the TPP. But I would like to be 
more involved in that. So, that is one thing.
    Mr. West. And that concerns me because, Mr. Luden, you 
asked us to make sure we support the TPP, but Mr. Sinner just 
said he does not exactly know what is in it. And that is one of 
the problems we have up here on Capitol Hill sometimes. We pass 
things that we do not know what is in it. But next?
    Mr. Meltzer. Congressman, if I might, the two things that I 
would think would help small businesses the most in the United 
States on the trade liberalizing front generally speaking, 
reducing tariffs and tariff barriers both overseas but also 
importantly here in the United States I think would be 
significantly beneficial. You know, it always needs to be 
remembered that when we talk about improving the opportunities 
for small businesses and businesses generally to be competitive 
internationally, imports are an important part of that 
equation. And in fact, the statistics do demonstrate that 
approximately 55 percent of imports into the United States are 
actually used as imports into production processes into making 
other goods which are then sold. So actually reducing those 
types of barriers can also be particularly helpful.
    The other thing which is probably not particularly 
necessarily in the purview of the USTR but I think would go a 
long way towards improving the competitiveness generally of 
small businesses are some of the more longer term but really 
crucial policies which evolve around things like education, 
innovation, infrastructure, and creating really the environment 
here in the United States which allows these businesses to be 
highly productive and competitive.
    Mr. Luden. And if I may answer, Representative West, I 
would agree with Mr. Sinner that the inputs from the SMEs to 
the USTR to these processes, although I am sure they are 
getting them, maybe a wider ask to the SMEs so that they knew 
it was available to speak on those topics, a way of soliciting 
comments, of soliciting input maybe in a more aggressive manner 
I think would be very helpful.
    The other point I would go back to is Brazil that one of 
the representatives brought up. It is a booming market. It is a 
burgeoning market for our type of product. The disparity, I 
think you brought that up.
    Mr. West. Yes, 65 percent.
    Mr. Luden. Yes, the disparity is something that although 
the USTR is working on it, that is something that if that is 
equalized out could certainly open new markets for us.
    And to your point about the TPP, I do urge you to support 
it but only as all the members have said, if it is well crafted 
and if it makes sense. So in the old review standpoint of being 
able to reduce tariffs and to break down trade barriers, that 
makes sense and I am totally in favor of that. But done poorly, 
no. A bad bill is not a good bill.
    Mr. West. Absolutely.
    Mr. Crafton. I agree with Mr. Sinner and Mr. Luden for the 
most part. From our standpoint, the free trade agreements do 
not directly impact us quite as greatly only from the 
standpoint of we have such a diversity of industries that we 
cater to. We are not focused through electronics, through 
textiles, through one other one necessarily. But the bottom-
line is it is important that the organizations that are 
supposed to be helped have some input into what has been 
crafted in the bill.
    Mr. West. And if I may, Mr. Chairman, last question. Will 
there ever come a time when we do not need the Export-Import 
Bank?
    Mr. Crafton. I think not. When you are dealing with smaller 
companies, smaller, you know, our sales are 10 to 15 million 
range and we simply do not have the resources and any other 
way--it is also a safety net. If a customer defaults on a bill 
or defaults on payments, the Ex-Im Bank is able to--acts as an 
insurance policy in addition to it, so it allows us to go after 
things which otherwise might be too risky.
    Mr. Sinner. My comment is we do not use Ex-Im Bank. We use 
an International Credit Insurance Company. It works fine. We 
did use some Ex-Im Bank a few years ago but the level of 
protection was a little bit lower than going with an 
International Credit Insurance Company.
    Mr. West. Okay.
    Mr. Luden. We do not take advantage of the Ex-Im Bank 
either at this point.
    Mr. West. Thank you, Mr. Chairman and Ranking Member. I 
yield back.
    Chairman Graves. You all have been successful in or 
experienced some success at least with exporting and creating 
jobs. Do you have any recommendations you would give to 
businesses who are struggling with starting that process or not 
wanting to start that process just because they are afraid of 
it or whatever the case may be? Any advice? What would that 
advice be?
    Mr. Crafton. Our main benefit is there are a lot of U.S. 
government and state resources that are available to help 
companies like us export. You know, North Carolina, for 
example, has six offices scattered throughout the world and 
those offices have a dedicated employee that their sole job is 
to help companies like me be able to develop export markets 
within that country or that region. So again, just through a 
little research, finding those resources, government resources 
that are available because most of the time they are of no 
expense to the company.
    Chairman Graves. Mr. Sinner.
    Mr. Sinner. That is a good question. And I am quite 
involved on the state level, involved in the North Dakota trade 
office and we are very proactive with companies, encouraging 
them and put together resources on the state level through 
export assistance with companies that have experience in 
helping smaller companies get started. We have done okay with 
that, and a lot of companies at first, you are right, they are 
scared. I do not really need this. And once they get started 
and involved they do very well.
    You know, people are people and doing business with someone 
is no different than how you want to be treated. If you can 
develop an honest relationship, Americans are notorious for 
wanting to make a quick buck, but when you get outside the 
borders of this country it is all about relationships and 
building integrity with a relationship. Of course, quality is 
always important but it can be done.
    Mr. Meltzer. I will just say briefly, Chairman, that the 
preamble to the World Trade Organization in fact says something 
along the lines of I am ensuring the predictability of the 
instability of the world trading system and I think that from a 
business perspective, even though these are long and certainly 
at times complex rules, the key underlying goal here is really 
to create a certain degree of certainty and reduce the risk for 
businesses when they do want to engage in trade overseas. So 
despite the what can appear at times daunting length of some of 
these trade agreements, taking time to understand the extent at 
which they provide them with actually more certainty and 
predictability than without them might actually be some help.
    Mr. Luden. I would like to answer that may be a little 
differently. And I think what we need to do is to help convince 
people that you can do it. That you must need to take the jump. 
And with no disrespect, you know, the saying is, one of the 
worst things you hear is we are the government. We are here to 
help. And I guess in this case that that is really--the 
government from state, local, and federal level on the export, 
you guys have done a masterful job on this. And I do not know 
that that message is quite getting out of how much on a 
bipartisan effort that you are really trying to make it 
something that is accessible. And so I think what happens to an 
SME, especially a very small one, is the amount of regulations 
and the ensuing possible risk can be very daunting. And then 
the question is where do you find the help? How do you get the 
help? And will anybody help me? And again, as a small 
businessperson, it is all about the level of risk you are 
comfortable with. Right? You do not want to take more risk not 
to get the reward.
    In this instance, just look at what you are doing here with 
this hearing by bringing the USTR ambassador in. You were kind 
enough, Ranking Member, to meet with us when I was with the SBC 
Small Business. I mean, it has been something that you folks 
have really lived and have put your hearts into. And there are 
some real resources out there that make it possible. We were 
not born with this knowledge. Our lady who does our export and 
does the harmonizing codes and learns that, we have gotten 
help. And candidly, we have gotten help from the government.
    So I think one of the things--I would answer this just to 
summarize in two ways, Chairman. One is the message I think 
would be jump in, the water is fine. And secondly, that your 
government--state, local, and federal--is really trying to pave 
the way and has the sense of focus to make it a level playing 
field because when given that chance American small businesses 
really do compete and they compete well. So I thank you for the 
question and I thank you for your efforts on this.
    Ms. Velazquez. Are you sure you were not my witness?
    Mr. Luden. I was born in Queens as you remember.
    Chairman Graves. Well, with that the Committee is going to 
obviously continue to closely follow the impact of trade policy 
on small businesses. And I appreciate all of you coming in 
today. Some of you came a long way and that is very much 
appreciated. And your testimony was very helpful. And with that 
I would ask unanimous consent that members have five 
legislative days to submit statements and supporting materials 
for the record. Without objection, so ordered. And with that 
the hearing is adjourned. Thank you.
    [Whereupon, at 3:39 p.m., the Committee was adjourned.]


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