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



  BUREAUCRATIC OBSTACLES FOR SMALL EXPORTERS: IS OUR NATIONAL EXPORT 
                           STRATEGY WORKING?

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

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                             JULY 27, 2011

                               __________



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            Small Business Committee Document Number 112-028
              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

Mr. Suresh Kumar, Assistant Secretary and Director General, U.S. 
  Department of Commerce, International Trade Administration, 
  U.S. Commercial Service, Washington, DC........................     3
Ms. Marie Johns, Deputy Administrator, Small Business 
  Administration, Washington, DC.................................     5
Mr. Christian Foster, Deputy Administrator, U.S. Department of 
  Agriculture, Foreign Agriculture Service, Washington, DC.......     7
Mr. Mark Rice, President, Maritime Applied Physics Corporation, 
  Baltimore, MD..................................................    19
Mr. Mitchell Goetze, President and COO, Goetze's Candy Company, 
  Inc., Baltimore, MD............................................    21
Mr. Maurice Kogon, Director, Center for International Trade 
  Development, El Camino College, Hawthorne, CA..................    25
Mr. Wade Merritt, Vice-President, State International Development 
  Organizations (SIDO), Vice-President, Maine International Trade 
  Center, South Portland, ME.....................................    23

                                APPENDIX

Prepared Statements:
    Mr. Suresh Kumar, Assistant Secretary and Director General, 
      U.S. Department of Commerce, International Trade 
      Administration, U.S. Commercial Service, Washington, DC....    35
    Ms. Marie Johns, Deputy Administrator, Small Business 
      Administration, Washington, DC.............................    39
    Mr. Christian Foster, Deputy Administrator, U.S. Department 
      of Agriculture, Foreign Agriculture Service, Washington, DC    42
    Mr. Mark Rice, President, Maritime Applied Physics 
      Corporation, Baltimore, MD.................................    50
    Mr. Mitchell Goetze, President and COO, Goetze's Candy 
      Company, Inc., Baltimore, MD...............................    52
    Mr. Maurice Kogon, Director, Center for International Trade 
      Development El Camino College, Hawthorne, CA...............    67
    Mr. Wade Merritt, Vice-President, State International 
      Development Organizations (SIDO), Vice-President, Maine 
      International Trade Center, South Portland, ME.............    74
Questions for the Record:
    Questions for Mr. Kumar, Ms. Johns, and Mr. Foster...........    77
    Chairman Graves Questions for Mr. Foster.....................    79
    Rep. Owens Questions for Mr. Goetze..........................    80
    Rep. Owens Questions for Ms. Johns...........................    81
    Chairman Graves Questions for Ms. Johns......................    82
    Chairman Graves Questions for Mr. Kumar......................    83
Answers for the Record:
    Mr. Goetze Answers for Rep. Owens............................    84
Additional Materials for the Record:
    Aerospace Industries Association of America Statement for the 
      Record.....................................................    87
    National Council of Textile Organizations Statement for the 
      Record.....................................................    92

 
  BUREAUCRATIC OBSTACLES FOR SMALL EXPORTERS: IS OUR NATIONAL EXPORT 
                           STRATEGY WORKING?

                              ----------                              


                        WEDNESDAY, JULY 27, 2011

                  House of Representatives,
                       Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 1 p.m., in Room 
2360, Rayburn House Office Building. Hon. Sam Graves (chairman 
of the Committee) presiding.
    Present: Representatives Graves, Bartlett, Hanna, Mulvaney, 
Tipton, Ellmers, Velazquez, Clarke, Chu, Cicilline, Richmond, 
Keating.
    Chairman Graves. Good afternoon, everyone. I will call this 
meeting to order.
    I want to thank our witnesses on both panels for being here 
today. Today we are going to hear testimony on the National 
Export Strategy and the administration's efforts to increase 
coordination among federal agencies, reduce domestic obstacles 
to trade, and expand exports for small businesses. We will also 
hear directly from some small firms on the barriers that limit 
their ability to export.
    In March 2010, President Obama announced his National 
Export Initiative aimed at doubling exports by the end of 2014. 
There is strong bipartisan support on the benefits of exporting 
and it is a major contributor to the U.S. GDP totaling $1.8 
trillion in 2010. It provides new sales opportunities for small 
businesses and most importantly, exporting creates and supports 
high paying U.S. jobs. However, of the 28 million small 
businesses in the U.S., only one percent currently export. 
There is a great untapped potential there.
    One important way to get more small businesses to export is 
by passing the three pending free trade agreements with 
Colombia, Panama, and South Korea. The independent U.S. 
International Trade Commission estimates a passing of three 
trade agreements would increase U.S. exports by $13 billion. 
President Obama stated this will create over 250,000 jobs. 
Unfortunately, until the administration and Congress act on 
these agreements, American small businesses will be at a 
competitive disadvantage with foreign firms.
    As we seek to open new foreign markets, we also need to 
reduce the domestic bureaucracy to make exporting much easier. 
The export process can be complicated and overwhelming, and 
many firms do not know where to start. It is just a simple 
fact. Small firms have a limited amount of time and resources 
to understand the complex federal and foreign regulations that 
are out there.
    There are over 20 federal agencies that can assist 
businesses with some or all of the export process. Small firms 
have long voiced that navigating the agencies may be as 
difficult as navigating the export market itself and it is our 
Committee's job to take a look at these programs and ensure 
that small businesses can access the help they need to 
effectively compete in the global marketplace. With the 
unemployment rate staying above eight percent for 29 
consecutive months, exports can be a catalyst to create new 
jobs and get our economy back on track.
    I look forward to today's testimony and understand how we 
can work together to make it easier for small businesses to 
export. And now it is my pleasure to yield to Ranking Member 
Velazquez for her opening remarks.
    Ms. Velazquez. Thank you, Chairman Graves.
    The resilience of American small businesses is 
unquestionable. In the face of an economic downturn they have 
adapted and come to utilize foreign trade as a tool for growth. 
Even as domestic sales lapsed, U.S. exports grew more than 17 
percent and shrunk the trade deficit to levels not seen in over 
a decade. Since 2003, American small business exports have 
grown by about 80 percent. They now account for nearly half a 
trillion dollars in annual export sales.
    Despite these figures, however, small exporters possess a 
significant source of untapped potential. While small 
businesses account for nearly 97 percent of all export firms, 
they are responsible for only 30 percent of all export 
revenues. Additionally, more than half of all small business 
exporters ship goods to just one foreign partner. If we are to 
achieve the goal set forth in the National Export Initiative of 
governing exports within the next five years and creating two 
million new jobs, it will be critical to increase both the 
number of small business exporters and the number of countries 
they ship to.
    The 2011 National Export Strategy was promulgated for 
precisely this purpose. The NES sets forth a strategy to 
implement the NEI. In the context of small exporters this means 
improving coordination of trade promotion activities. It means 
increasing access to export credit for small firms. It also 
means updating antiquated regulations and reducing redundancies 
that discourage small firms from shipping abroad. While the 
issuance of the NES undoubtedly represents a step in the right 
direction, much more must be done.
    We often hear from small businesses that red tape and 
convoluted agency processes prevent them from accessing the 
very programs that are meant to help them. Duplicative 
initiatives coupled with a lack of coordination between 
agencies can lead to conflicting messages about where to go for 
assistance. Breaking down these barriers should be a priority.
    Additionally, more must be done to provide small businesses 
with improved access to capital. Many small firms have 
continued to find lending conditions extremely unfavorable. 
This is particularly true in the context of export loans where 
banks are wary of financing products that will be shipped 
overseas. Despite unprecedented efforts taken over the last 
three years to support and expand the SBA's credit programs, 
its internal trade loans have actually fallen by more than half 
over the past five years. They now provide $390 million less in 
loans to small exporters.
    At the same time, small businesses have found credit 
difficult to come by on the programs operated by the Export-
Import Bank. While small businesses receive more than 85 
percent of all EX-IM bank loans, they receive only slightly 
more than 20 percent of the authorization dollars. With so many 
small firms continuing to struggle to find credit, it simply 
does not excuse why this agency should continue 
underperforming. Today almost nine out of 10 consumers live 
outside the United States. In order for small businesses to 
remain at the center of our recovery, they must be able to tap 
into those markets. If implemented correctly, the NES has the 
potential to advance that goal, making our small businesses 
more dynamic, competitive, and robust, while allowing them to 
focus on what they do best, creating new jobs.
    With that I take this opportunity to thank all the 
witnesses for coming and spending some time with us today. I 
would like to thank the chairman for yielding and I yield back.
    Chairman Graves. Thank you, ranking member.
    If any other Committee members have an opening statement 
prepared, I would ask that they submit it for the record.
    And just to explain the testimony process, each witness has 
five minutes. The light will stay green in front of you until 
you have one minute left. Then it turns yellow and then red 
after five minutes. I would ask that you please try to keep on 
the time limit.

 STATEMENTS OF SURESH KUMAR, ASSISTANT SECRETARY AND DIRECTOR 
GENERAL, U.S. COMMERCIAL SERVICE, U.S. DEPARTMENT OF COMMERCE; 
       MARIE JOHNS, DEPUTY ADMINISTRATOR, SMALL BUSINESS 
ADMINISTRATION; CHRISTIAN FOSTER, DEPUTY ADMINISTRATOR, OFFICE 
OF TRADE PROGRAMS, FOREIGN AGRICULTURE SERVICE, U.S. DEPARTMENT 
                         OF AGRICULTURE

    Chairman Graves. Our first witness is Suresh Kumar. He is 
the assistant--did I get it right? He is assistant secretary 
and director general of the U.S. Commercial Service with the 
U.S. Department of Commerce. He has an Economics degree from 
Delhi University and an MBA from Bombay University. Thank you 
for being here. I appreciate you coming in and you have five 
minutes.

                   STATEMENT OF SURESH KUMAR

    Mr. Kumar. Chairman Graves, Ranking Member Velazquez, and 
distinguished members of the Committee. Thank you for the 
opportunity to appear before you today.
    Priority number one of the National Export Strategy is to 
develop programs designed to enhance export assistance to small 
and medium enterprises. This is consistent with the statutory 
mandate of the U.S. and Foreign Commercial Service to assist 
SMEs to grow exports. It is essential to both the national 
economic recovery and global competitiveness that small 
businesses participate more effectively in export markets. Our 
clients consistently tell us what they need most is assistance 
to better understand complex documentation requirements, 
helping and identifying the right international partners and 
distributors--what we call matchmaking and our clients often 
term as entering a market but ensuring that they get paid.
    Our small business clients particularly value in connecting 
to federal and state government programs. This is exactly what 
the Commercial Services does. We serve as a one-stop shop, a 
single point of contact and a clearinghouse for small 
businesses. We are the surrogate export department for small 
businesses. Background Dynamics, a $5 million, 20 percent 
operation which I visited on Monday, is a small business which 
epitomizes what we do for them and the services they need from 
us. They design and manufacture linear actuators, multi-axis 
automation, and mechanical motion systems for multiple 
industries ranging from defense to entertainment to health care 
amongst others.
    Our trade specialists help connect them to a support 
network to realize export success. By connecting to the 
Delaware Valley Industrial Resource Center, a part of the 
Manufacturing Extension Partnership Program, they received 
valuable manufacturing-related guidance. Contact with the 
Pennsylvania Department of Trade allowed Macron to access a 
$3,000 grant that permitted them to participate in a commercial 
service trade mission to Mexico, where through our matchmaking 
services they identified two potential distributors that 
provided them a beachhead in Latin America. Macron is currently 
working with the Commercial Service in exploring new 
opportunities in Asia and Latin America.
    The global network of the U.S. and Foreign Commercial 
Service spans approximately 1,450 trade specialists across 108 
domestic U.S. export assistance centers and 126 offices in 79 
countries. Our trade specialists are the boots on the ground in 
local communities across the country and in global markets 
across the world that connect businesses to market 
opportunities.
    Our programs connect SME exporters to international 
partners, distributors, and buyers. Our counseling and 
facilitation services help businesses across state and federal 
government resources to secure expertise, grants, and even 
financing. The U.S. Commercial Service works closely with state 
governments, trade associations, cities' local chambers of 
commerce, and institutions like the State International 
Development Organization to engage small businesses in our 
programs. Last year, the Commercial Service assisted 18,000 
companies to export, 16,000 of which were SMEs, and we 
facilitated 12,300 export successes and helped 4,630 companies 
export to new markets. For every one dollar invested in the 
U.S. Commercial Service, we returned $135 to the American 
taxpayer by way of facilitated exports.
    Through the Trade Promotion Coordinating Committee (TPCC), 
the Commercial Service promotes joint collaboration amongst the 
20 federal agencies involved in trade promotion. We helped 
design a single uniform method for referring new clients to the 
most appropriate service provider. Our enhanced client intake 
registration form on export.gov, the Federal government's 
export assistance web portal more accurately identifies and 
directs companies to the most appropriate federal agency.
    The National Export Initiative, which President Obama 
announced in March 2010, is off to a good start. Exports 
comprised 12.5 percent of U.S. GDP last year, up from 11.2 
percent in 2009. The $1.84 trillion in exports of U.S. goods 
and services is the second highest annual total on record. We 
remain on pace in 2011 to achieve the NEI goals.
    Besides looking into the rearview mirror it is important to 
prospectively look forward to the future. This is why the 
pending trade agreements with Korea, Colombia, and Panama are a 
priority for the Obama administration. With the Korea Trade 
Agreement alone, U.S. exports could increase by more than $10 
billion and could support more than 70,000 American jobs. The 
agreement would eliminate tariff on over 95 percent of 
industrial and consumer goods within five years, making small 
and big businesses globally competitive.
    A recent study by the U.S. International Trade Commission 
reported that tariff and non-tariff barriers disproportionately 
affect a small business's ability to export. FDAs are 
particularly important to small businesses to ensure low 
tariff, remove complex trade barriers, and secure access 
through a streamlined trade process. Small businesses do not 
need to navigate global markets alone. They have the full 
support of the U.S. government to connect to profitable 
opportunities worldwide. The U.S. and FCS of the Commercial 
Service Trade Specialists stand ready, willing, and able to 
connect small U.S. businesses to the 95 percent of consumers 
who live outside our country.
    I thank you again for the opportunity to appear before you 
today and I look forward to answering your questions. Thank 
you.
    Chairman Graves. Thank you. Our next witness is Marie 
Johns, the Deputy Administrator for the Small Business 
Administration. In her role she oversees the Office of 
International Trade, including the administration of the State 
Trade Export Promotion grants. She earned her Bachelor's and 
Master's degree from Indiana University School of Public and 
Environmental Affairs. Thank you for coming and welcome.

                    STATEMENT OF MARIE JOHNS

    Ms. Johns. Thank you, Chairman Graves. Thank you, Ranking 
Member Velazquez, and members of the Committee. I am honored to 
be here this afternoon to testify.
    In his first State of the Union Address, President Obama 
announced the National Export Initiative and his goal of 
doubling U.S. exports in five years. This is an important goal. 
Increasing exports will strengthen our economy, bolster our 
global competitiveness, and create good jobs. As the agency 
that serves America's small businesses, the SBA has an 
important role to play. Administrator Mills chairs a small 
business working group of the Trade Promotion Coordinating 
Committee or the TPCC, which is the main federal body working 
to encourage more U.S. businesses to export. Meanwhile, the SBA 
is working with our partners across the Federal government to 
support small businesses.
    Small businesses are well poised for growth through 
exports. Since 2003, revenues from America's small business 
exports have increased as ranking member said about 80 percent. 
They now account for nearly $500 billion in annual sales. 
However, small businesses, as the ranking member also 
mentioned, only represent about 30 percent of export revenues 
and more than half of small businesses who do export are only 
shipping to one country.
    The SBA, along with our partners and the TPCC, is working 
to increase both the number of small companies who are 
exporting and the number of countries to which they ship. Our 
plan, which has been incorporated into the 2011 National Export 
Strategy, has four components. First, we identify small 
businesses that are ready to export. Second, we prepare those 
small businesses with counseling and technical assistance. 
Third, we connect those small businesses with export 
opportunities. And fourth, we support those small businesses 
with loans and counseling.
    The SBA and our partner agencies have done extensive 
outreach to identify and motivate small business exporters. For 
example, the Department of Commerce and the SBA have worked 
closely together to identify and refer new clients to the most 
appropriate resource. To better prepare small businesses for 
successful exporting, federal agencies have collaborated to 
train the trainers, offering export training for SBA resource 
partners such as counselors at our Small Business Development 
Centers, our Women's Business Centers, and SCORE. Meanwhile, 
the NEI is working to connect small businesses with export 
opportunities. In September of 2010, we launched a series of 
export matchmaking events, the first of which was in New 
Jersey, and it drew participation from approximately 150 small 
businesses, lenders, and others.
    Lastly, the SBA and other agencies, excuse me, continue to 
support small businesses once they have begun exporting. This 
includes an increased presence at international trade shows, 
coordination of marketing materials, and ongoing outreach to 
lenders to encourage their participation in export financing 
programs.
    Thanks to increased guarantee percentages, increased loan 
limits, and an improving economy, SBA export loan programs have 
seen a major uptick over last year's levels. These loans are 
helping small businesses across the country expand their export 
capabilities. For example, in Missouri, Environmental Dynamics, 
Inc., took advantage of an export working capital loan once the 
limit was raised to $5 million. The increased loan size made 
the program much more appealing to the company, and the firm 
which has sold internationally for 20 years, is using the loan 
to finance an expansion. Meanwhile, in New York, Turbofil 
Packaging Machines used an export working capital loan to help 
the company complete a large overseas contract.
    The success of the NEI depends on the work of more than a 
dozen agencies across the Federal government. Each agency has 
staff dedicated to working on NEI initiatives who meet and 
communicate regularly with their colleagues throughout the 
administration. We have worked to reduce bureaucratic barriers 
and make our efforts as crosscutting as possible. Overall, our 
goal is to ensure that we are connecting federal resources at 
every point and making them work for small businesses.
    Thank you, Mr. Chairman, ranking member, and members, and I 
look forward to answering your questions.
    Chairman Graves. Thank you.
    Our final witness on this panel is Christian Foster. He is 
the deputy administrator for the Office of Trade Programs in 
the Foreign Agriculture Service within the U.S. Department of 
Agriculture. He earned a Master's of Arts from Georgetown 
University in 1982 and a Bachelor of Science in Foreign Service 
from Georgetown in 1980, I believe. Welcome. And I appreciate 
you being here.

                 STATEMENT OF CHRISTIAN FOSTER

    Mr. Foster. Mr. Chairman, members of the Committee, I am 
pleased to be here with you today.
    In his 2010 State of the Union address, President Obama 
told the nation we are launching a National Export Initiative 
that will help farmers and small business increase their 
exports. USDA has taken the President's charge to heart. The 
efforts of USDA personnel throughout the country and around the 
globe, bolstered by public-private partnerships, have assisted 
farmers, ranchers, and all agricultural exporters in achieving 
record export sales. In Fiscal Year 2011, we expect U.S. 
agricultural exports to reach their highest level in history, 
reaching $137 billion.
    For more than 50 years, the Foreign Agricultural Service 
has led USDA's efforts to build overseas markets. We know that 
every $1 billion in agricultural exports supports 8,400 jobs 
and generates an additional $1.3 billion in economic activity. 
At USDA, the commitment to NEI starts at the top. I am pleased 
to say that next week Secretary Vilsack will be hosting the 
administration's NEI Small Business tour event in Milwaukee, 
Wisconsin. The event is designed to connect small businesses 
with the resources they need to export. We will be 
collaborating with the Department of Commerce, the Small 
Business Administration, and the Export-Import Bank.
    I would like to now highlight a few of USDA's actions in 
NEI priority areas. Last year, more than 625 new small 
businesses benefited from the USDA administered Market Access 
Program to promote their products overseas, resulting in over 
975 first-time sales. For example, a company, WildRoots, a 
healthy snack food company with production facilities in 
Illinois and Nebraska, matched MAP funds to market their 
products in Canada. Export sales from this company soared from 
zero in 2008 to $4 million last year. The company buys 
blueberries from Michigan, corn and soy products from Illinois, 
cranberry from Massachusetts, and almonds from California.
    Another example of our export assistance to small 
businesses is how we link them to foreign buyers at USDA hosted 
and supported trade shows. Last year, USDA supported U.S. 
pavilions at 27 international trade shows in 19 countries. 
Nearly 1,000 exhibitors reported $179 million in onsite sales 
and over $1 billion in estimated 12-month sales. Participating 
U.S. companies introduced over 6,000 new-to-market products.
    USDA-led trade missions link our producers to foreign 
buyers. A trade mission in January to Peru included 16 small 
businesses. Three hundred thirty eight one-on-one meetings were 
held with over 100 Peruvian and 10 Ecuadorian companies. To 
date, USDA has recorded $1.9 million in sales resulting from 
that mission. In addition, USDA supports reverse trade missions 
that bring foreign buyers to the United States to meet with 
potential suppliers of agricultural products. Such missions are 
particularly valuable for small businesses that may not have 
the resources to travel abroad.
    Tariff and non-tariff barriers remain challenges for U.S. 
agricultural exports. Securing congressional approval of the 
pending trade agreements with South Korea, Colombia, and Panama 
would significantly reduce tariff barriers to U.S. farm 
exports. USDA is also stepping up efforts to address sanitary 
and phytosanitary barriers to farm exports.
    In 2010, the USDA administered U.S. Technical Assistance to 
Specialty Crops Program assisted U.S. potato exporters in 
overcoming a Thai phytosanitary protocol that prevented U.S. 
exports. The U.S. Potato Board used program funds for Thai 
officials to visit and review U.S. seed certification 
procedures and pest mitigation measures. Thailand agreed to 
additional market access that more than doubles the number of 
states that are eligible to export seed potatoes to Thailand.
    I am pleased to report that USDA is making progress in the 
Administration's goals under the NEI. As our Secretary said, 
increased exports mean higher incomes for producers, more 
opportunities for small business owners, and for folks who 
package, ship, and market agricultural products. They mean a 
thriving rural America which is good for our Nation as a whole.
    This concludes my statement. Thank you very much. And I am 
happy to answer any questions.
    Chairman Graves. We will move into questions and our first 
questions are going to come from Mr. Mulvaney.
    Mr. Mulvaney. Thank you, Mr. Chairman.
    Very briefly, Ms. Johns, Mr. Kumar, I was listening to your 
summary of what your agencies do and it sounded to me like 
there might be some overlap between those two things. Ms. 
Johns, tell me what your agency does that Mr. Kumar's does not.
    Ms. Johns. Congressman, we--our agency, as you know, we are 
the voice of small businesses in the administration among 
federal agencies. And so our entire focus is on small 
companies.
    Mr. Mulvaney. I understand. But in terms of helping them 
with exports, what do you do that is unique from what Mr. 
Kumar's organization does?
    Ms. Johns. We do a number of things. But I certainly want 
to emphasize that we work closely with the Department of 
Commerce under the Trade Promotion Coordinating Council. Our 
administrator sits on the president's Economic Council. So we 
are involved in the crosscutting federal efforts to coordinate 
federal resources to support exporting.
    What we do specifically. We have capital programs. We have 
counseling programs. And those areas of our agency's 
programmatic thrusts are the primary ways that we support small 
businesses.
    For example, we are working, as I mentioned in my opening 
statement, on training more international trade counselors so 
that we have a network across the country available to small 
businesses. Any small business in our country is less than an 
hour's drive away from an SBA resource where they can get 
counseling for exporting. We have specific loan products that 
are available for them.
    Mr. Mulvaney. Let me stop you there because the loan 
program was one thing I did hear that was different from what 
Mr. Kumar does. But what you just described is training 
counselors to help folks sort of get through the process of 
exporting, which is exactly what I heard from him.
    So Mr. Kumar, tell me what am I missing here? What is the--
help me understand how the SBA's efforts to promote small 
business exports and the Department of Commerce's efforts to do 
the same--how they are complementary and not duplicative.
    Mr. Kumar. Thank you very much for that observation.
    Trade, any trade, until it is consummated, is touched by a 
number of agencies. And indeed there are several things before 
you can consummate a trade. From identifying a customer to 
defining the access for finance, to getting the right 
distributor, it is an entire chain. And how the two of us or 
the two agencies get contrasted is this.
    First, physical availability of finance is handled by them 
but connecting customers who invariably, because we work in the 
communities--I mentioned the 109 offices we have across the 
United States. And we physically work with the businesses to 
connect them to the right resource.
    Second, we ensure this time through the National Export 
Strategy and National Export Initiative that how do we leverage 
the combined resources for maximum benefit? In fact, it was 
something the president challenged us through the NEI. And what 
we did as a consequence is we realized that dealing with new-
to-export companies, people who want to export for the first 
time, people who needed to go through an education, 
information, and skills training program, were perhaps best 
leveraged through the SBA. On the other hand, dealing with the 
280,000 current exporters and one of the members, 
representatives mentioned that 58 percent of them only go to 
one market, we chose to concentrate on exporters currently 
going to some to take them to newer markets.
    So here was a classic example of looking at the entire 
supply chain, concentrating the efforts of one agency towards 
new exporters and concentrating the efforts and the abilities 
and the boots on the ground as we call it towards current 
exporters to take them to newer markets.
    Mr. Mulvaney. Mr. Kumar, let me cut you off there, Mr. 
Kumar. I am sorry. I only have a few minutes. Because I am 
going to follow up on that point and ask Mr. Foster a question 
aside from congratulating him on where he went to school.
    If I am a farmer who is new to exporting, I want to get in 
the export business, do I go see you, Ms. Johns, or Mr. Kumar?
    Mr. Foster. Indeed, in the U.S. government there are vast 
resources available across all agencies. If you are a farmer 
you have a number of options to get support. You can go to the 
U.S. government portal, export.gov, which will direct you to 
the U.S. Department of Agriculture. You can go to your 
Department of Agriculture for the state, which will link you to 
our regional service provider that will help any small business 
in that region. You can come to FAS directly, again, via the 
internet. And then I should say we are working now with our 
local farm service agency offices and rural development offices 
across the country so that they know if any farmer were to walk 
in, any small business from a rural area were to walk in, they 
would know where to go in the Department of Agriculture.
    Mr. Mulvaney. Thank you. I yield back my time. Thank you, 
folks.
    Chairman Graves. Ranking Member Velazquez.
    Ms. Velazquez. Thank you.
    Ms. Johns, you do business planning, right, for small 
business exporters?
    Ms. Johns. Yes, we assist them with business plans.
    Ms. Velazquez. And access to capital?
    Ms. Johns. Yes.
    Ms. Velazquez. And Commerce does not. Right?
    Ms. Johns. We provide--I think that my colleague said it 
well. When we talk about exporting and small businesses, the 
clear issue that we, I think, all agree on is that there is 
tremendous upside potential to involve more small businesses in 
exporting in order to grow and create jobs in the country. So 
what the SBA does is to use its network and its longstanding 
experience in preparing more small businesses to be able to do 
just that.
    Ms. Velazquez. Okay. It has been almost a year since the 
state Trade Export Promotion Program was enacted under the Jobs 
Act. And the agency has yet to award a single dollar under the 
program. With three out of every five states' Export Promotion 
Projects being caught, this money, as you know, has netted more 
than ever before. So what can you tell us and the states that 
they can expect--when will they be able to expect these funds?
    Ms. Johns. Yes, ranking member. We have gone through a 
process, a very rigorous process, for managing this new grant 
program. First of all----
    Ms. Velazquez. Thirty million, right?
    Ms. Johns. Thirty million per year.
    Ms. Velazquez. Per year.
    Ms. Johns. And it is a--we were authorized for three years 
but we have money appropriated for two. Every state that 
applied for the funds will receive funding. That is the first 
thing.
    Ms. Velazquez. Just answer my question. When do we expect 
for these funds to get into disbursed?
    Ms. Johns. My best estimate of that is early to mid-
September.
    Ms. Velazquez. Okay. And under the STEP Program, grant 
recipients will have one calendar year to fulfill the 
requirements of the program. Will this year begin on the date 
states are notified of successful applications or from the date 
they actually receive the grant?
    Ms. Johns. That is a detail that I do not know. I will 
certainly get back to you on that.
    Ms. Velazquez. I would like to know that.
    Ms. Johns. I will let you know.
    Ms. Velazquez. While USDA and the Department of Commerce 
know the number of new-to-export firms they are providing 
assistance and which new markets the programs are helping to 
open, SBA has yet to begin tracking those numbers. And as you 
know, as part of the national strategy for small business 
exports, tracking numbers are going to be very important to 
measure success. So when are you going to start putting 
together the framework to collect those numbers?
    Ms. Johns. We have a requirement to report on the state 
activity with exporting and we are in the process of pulling 
that framework together now. I wrote to the committee saying 
that we needed additional time from the timeframe that was 
specified in the Small Business Jobs Act, so we appreciate your 
flexibility there and we are working hard to get that document 
to you.
    Ms. Velazquez. Mr. Kumar, of all the services provided by 
the Department of Commerce, the Gold Key Matchmaking Services 
is perhaps the best in terms of linking small businesses here 
in the U.S. with foreign buyers abroad. But what we continue to 
hear from small business exporters is that the cost is 
prohibitive. What can you tell us your agency will do to make 
this program more affordable so that small business orders can 
benefit?
    Mr. Kumar. Thank you, Ranking Member Velazquez.
    The Gold Key indeed is one of our more popular services. 
And what it does is physically matches----
    Ms. Velazquez. Answer my question, please. I know what it 
does. What I am asking you is what will you do, the agency, to 
make this program accessible for small business exporters?
    Mr. Kumar. It is currently accessible to any business which 
wants to do it. The cost for that program is $700. The value 
through research that we find is perhaps more than 10 times 
what we charge for it. And it is already discounted for small 
and medium enterprises. We happen to believe it is a fair 
charge. And in discussions with several small and medium 
enterprises who not only use our services and those who 
counsel, the cost of a Gold Key has never come as a challenge 
to SMEs.
    Ms. Velazquez. Well, that is not what we hear from small 
businesses. We are going to have a second panel here and I will 
invite you to stay so that you can listen to what they have to 
say.
    Mr. Kumar. Thank you.
    Ms. Velazquez. That cost will go up. Do you foresee?
    Mr. Kumar. We have an obligation to Congress to assess the 
value of the services we provide. And measure the costing and 
adjust the pricing once every two years. That is the reason why 
I could give you the 10 time multiple. We are just in the 
process of going through the findings of that. I cannot comment 
whether it will go up or stay where it is but it appears that 
the value provided by the service and what is likely to be 
provided by any external vendor is about 10 times more than 
what we can get.
    Ms. Velazquez. Mr. Foster, a significant portion of the 
National Export Strategy seems primus on the passage of not 
just the Korea, Panama, Colombia Free Trade Agreements but also 
the ratification of a Trans-Pacific Partnership and completion 
of the Doha agreement. Can the Export Strategy succeed if these 
agreements are not completed?
    Mr. Foster. We continue to work as part of the 
Administration and remain committed to securing Congress's 
approval of the pending trade agreements that you mentioned. We 
are committed to seeing those through. The Trans-Pacific 
Partnership is another agreement we continue to work on. We at 
USDA, with USTR that has the lead on this, we remain committed 
and will continue to work on that.
    Ms. Velazquez. But do you think that if we do not get those 
agreements passed and ratified that the Export Strategy will be 
in jeopardy in terms of the success?
    Mr. Foster. As the Administration says, the agreements, we 
believe, have tremendous benefits for American exporters and 
jobs and producers' incomes. So we believe they will have 
tremendous benefits.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Chairman Graves. Ms. Ellmers.
    Ms. Ellmers. Thank you, Mr. Chairman. My question is 
basically for each one of you, and thank you for being here 
today to give your testimony.
    As we know right now, small businesses are facing many 
obstacles domestically, including higher gas prices, increased 
government regulations, and always the looming possibility of 
tax increases. Can you explain how this impacts small 
businesses and their supply chain and your ability to help them 
export? And I will start, Mr. Foster, with you. And then if we 
could just move down the panel. Thank you.
    Mr. Foster. Our goal at FAS for the last 50 years is 
promoting agricultural exports. We believe we do that well and 
investment there is a wise decision. We are trying in every 
manner possible across government and within the multiple 
agencies in the Department of Agriculture to make sure small 
businesses get the support they need. We certainly understand 
that transportation infrastructure at ports and the like are 
incredibly important to moving exports, agricultural exports 
out of the country. We work through the NEI, on that topic. 
That is one of the primary recommendations of NEI looking at 
infrastructure. I believe we would all agree we will continue 
to focus on that. For agriculture that is vital. As we know for 
Louisiana, Congressman Richmond here, the Port of Louisiana is 
one extremely important example of getting agricultural exports 
out of the United States. Forty-seven percent of grain 
transports out of that region, a tremendously large amount.
    Ms. Johns. Thank you for your question, Congresswoman.
    At the SBA we are--our mission is to support our small 
businesses. And we are coming out of the worst economic 
downturn since the Great Depression. Small businesses were hit 
inordinately hard but they are bouncing back faster actually 
than some other sectors of the economy. The reason that this 
National Export Initiative and the work that we are doing at 
the agency in conjunction with our federal partners at the TPCC 
is that as has been stated earlier, 95 percent of market demand 
exists outside of our country. The USA--Made in the USA brand 
is still a very, very strong, very valued brand. And so the 
extent--to the extent that we can get more of our small 
businesses ready for exporting, that is a huge win for the 
economy overall.
    As I mentioned in my testimony, we have a four-prong 
approach that first we identify those companies that have not 
yet exported but are right there and with some support can move 
into that category. Once we identify those companies, then we 
prepare them with the counseling through our national network 
of resource partners and the counseling that we provide through 
our 68 field offices. We have a robust and a very integrated 
network to provide the counseling for them. We have more 
international trade counselors available thanks to the Jobs 
Act, et cetera. Then we connect those small companies, excuse 
me, with opportunities working closely with the Department of 
Commerce and other federal partners in that role and then once 
the business opportunity happens we support those small 
businesses with what they need in order to be successful. So 
this effort is incredibly important to small businesses and to 
our economy as a whole because small businesses are the 
creators of jobs in our country. They really are our economic 
engine.
    Ms. Ellmers. Amen. I believe that, too.
    Mr. Kumar.
    Mr. Kumar. Thank you very much, Congresswoman.
    In the face of increased costs which everyone is going 
through the question really was how can we most effectively 
help small and medium enterprises engage in global markets. 
That is what we do through our business counseling sessions. 
And also through helping people develop business plans and 
marketing plans. But it does not stop there. Ours is a turnkey 
plan which we work with. And what we do is then connect the 
players to the most cost effective logistics provider. 
Logistics is a major part of the exercise. Then look at the 
best distributors through matchmaking services in external 
countries where they export to.
    In addition to that, we engage people through trade 
missions, which is an easier better way by scale to come to 
meet buyers. Additionally, we have increased the concentration 
we place and focus we place on international buying programs 
where we get buyers from foreign countries coming to shows 
here. So that also reduces the cost burden on an SME.
    And finally, even using technology. We now have, even wine 
tasting or export of wines from California. We have had virtual 
wine tasting missions put together where simultaneously when 
you are here on your Internet or website or through web access 
you are dealing with buyers in China or wherever they are who 
are tasting the same wine, educated on what the wine is about, 
and have all the product benefits and features which they can 
base it on.
    So we are interceded by looking at the elements of cost and 
trying to provide the value to small and medium enterprises in 
the most cost effective manner because we believe the price is 
right only when those who must buy, buy, and those who sell 
make a profit.
    Ms. Ellmers. Thank you so much. And I yield back. Actually, 
I think I went over a little bit. Thank you.
    Chairman Graves. Ms. Clarke.
    Ms. Clarke. Thank you very much, Mr. Chairman. And thank 
you, Ranking Member Velazquez. I would like to thank our 
panelists for their expertise and their testimony today.
    While I am a bit skeptical about the pending FDAs, I 
recognize that we are in a global economy where trade plays an 
important crucial role towards our domestic economic success. 
So to that end I would like to ask each of you if you could 
elaborate a bit more about the internal framework within your 
various entities regarding programs or initiatives that you 
have unveiled or plan to unveil in support of the NEI.
    Ms. Johns. I will begin, if I may.
    Ms. Clarke. Yes, please.
    Ms. Johns. You are asking about actual programs that we 
have launched in support of the NEI. Yes, thank you, 
Congresswoman Clarke.
    We have done a number of things. First of all, by our 
very--the very role that the agency plays as part of the 
president's Export Council where Karen Mills is a member, I 
work with the Trade Promotion Coordinating Council where Karen 
chairs the Small Business Working Group. That is the 
institutional way through the TPCC and the PEC where the SBA is 
involved. And the benefit of the TPCC is that it has allowed us 
to work in a much more collaborative fashion with our federal 
partners.
    And we have talked a bit in this hearing about the 
different pieces and different players who are involved in this 
process. It is complicated. It is certainly doable but it is 
complicated to ensure that we are providing all the resources 
that businesses need across the board to be able to export. And 
so what we are doing with the Small Business Working Group 
under the TPCC is that various working groups have been 
created. A working group focused on preparing--identifying 
small businesses. A working group focused on preparing, 
connecting, and supporting. Each of the four elements of the 
plan have a working group assigned to them and we have specific 
programs under each of those working groups that we have 
launched.
    For example, the Connecting Working Group is focused on 
matchmaking events. I mentioned in my testimony the first one 
in New Jersey. We intend to have more of those around the 
country because we found them to be very successful in bringing 
the players, the right players together to make business 
happen. Under the Preparing Work Group we have launched our 
Train the Trainers Initiative where we are working with the 
Association of Small Business Development Centers and training 
individuals who work in the SBDCs as well as our Women's 
Business Centers and our other resource partners. And we have 
created within each of our district offices, each of our 68 
district offices, a district international trade officer so 
that any small business in the country will be in a very short 
distance able to reach someone who can provide expertise in 
those areas. Those are some of the initiatives.
    Ms. Clarke. Let me ask. Do you have sort of a, I guess, a 
formula for what you think participation of--given the number 
of businesses that exist in the small business, medium-size 
business sphere of our economy, what percentage of those 
businesses should be eligible to participate in these programs? 
And based on that, are you I guess targeting resources because 
when you think about it, you know, it--I think part of the 
pushback is not understanding how these businesses actually 
plug into a system of global economic--with global economic 
implications. And so no one quite understands what it means for 
the average small business in terms of its growth and its 
development.
    And for those who do venture into that area it is so very 
complicated for them to break through that they kind of 
discourage others because it is such a daunting endeavor. Do 
you get where I am?
    Ms. Johns. If I may respond, yes, Congresswoman. That is 
exactly why I have been--to your point, that is exactly why I 
have been focusing on the counseling and the nationwide network 
of counselors that the SBA is putting in place. Because that 
can address--it can take away the mystique. It can take away 
the complexity for that small business who needs that support. 
You are talking a large business. They have their own in-house 
resources for how to navigate this global marketplace but we 
are that--we stand in that gap for small businesses.
    And I will give you an example. I was in Indianapolis, 
Indiana not long ago at one of our Women's Business Centers, 
talking to a group of women, one of whom I will highlight. She 
is a jewelry maker. Because of the resources that she found at 
the Women's Business Center and was exposed to the idea of 
exporting, she is now able to take her jewelry making business 
and she, through the web, has launched in two countries. She is 
in Great Britain and she is in France. And she intends to grow 
from there.
    And I just use that as an example to say that with the 
benefits of technology that we have at our disposal now and I 
believe a strong role that we must play at the SBA is to build 
awareness to again demystify the notion of exporting, connect 
small businesses with the expert advice that they need and the 
other support, and we will see a breakthrough. It is our 
responsibility to develop metrics to track that. We are in the 
process of thinking through how we need to do that but the main 
point is getting these tools from the Small Business Jobs Act 
into the hands of small businesses, doing our part to develop 
the network of support that the small businesses need, and then 
building awareness. Because that is a big problem. Too many of 
our small businesses just have not thought about exporting. And 
when the issue is raised and when we talk about the tools that 
are there at the SBA and across the Federal government, a very 
strong positive reaction always results.
    Ms. Clarke. Thank you very much, Mr. Chairman. I yield 
back.
    Chairman Graves. Mr. Tipton.
    Mr. Tipton. Thank you, Mr. Chairman. Panel, I would like to 
thank you for taking the time to be here.
    I am a small business guy myself and certainly I recognize 
your appreciation that small business is the number one job 
creator in this country and probably one of the keys to being 
able to lead us out of this recession.
    If I could, Ms. Johns, you stated in your opening statement 
and I heard this, that the administration wanted to be able to 
double exports in the last five years--over the next five 
years. How is that going?
    Ms. Johns. Well, we are certainly working as hard as we can 
to----
    Mr. Tipton. Where do we sit now?
    Ms. Johns [continuing]. To do our part but I would defer to 
my colleague on the actual data there.
    Mr. Kumar. Last year exports grew at 17 percent over a year 
ago. A doubling of export is a 15 percent compounded annual 
growth rate year over year. This year in the first seven months 
exports are tracking at 17 percent. Given the fact that over 19 
months we are tracking at 17 percent, that is about our goal 
but that is why we always like to call it a beginning. Whether 
you look at macro level or micro level, the trend is quite 
heartening. Besides the 17 percent, exports were at 1.83 
trillion last year, the second highest. And exports as a 
percent of GDP went up from 11.2 to 12.5. That is at the macro 
level.
    At the micro level we physically were able to touch 18,000 
SMEs. No, 18,000 companies, of them 16,000 SMEs. And we were 
able to post significant increases in export success. Again, 
our approach was to divide and conquer to leverage our combined 
resources. The USFCS focused on taking newer companies--
existing exporters to newer markets. We succeeded in 4,700 such 
cases; 12,300 export successes.
    So whichever form we look at it, whether we look at it in 
physically facilitated exports and what it had been over a year 
ago or at the macro level, we are tracking well onto our goal.
    Mr. Tipton. Good. You know, I guess I am curious because 
part of the problem is when we are dealing with small 
businesses, as you note, you do not have some of the 
sophistication in the marketplace. Are all of the forms, all of 
the applications, are those available and deliverable online?
    Mr. Kumar. Export.gov is the single web portal which we 
would like every business to be directed to. And what we have 
done on that portal and continue to improve the portal is have 
the Trade Information Center intercede so that any inquiry from 
any one of your constituent companies is directed to the right 
agency.
    Mr. Tipton. I understand the direction but I mean in terms 
of filling out forms, are those available online?
    Mr. Kumar. Yes, it is.
    Mr. Tipton. All forms are available?
    Mr. Kumar. Not all. Most forms, through the Client Intake 
System. The right forms----
    Mr. Tipton. Are you working to get them all online?
    Mr. Kumar. Yes, sir.
    Mr. Tipton. You are. What is your time of completion on 
that?
    Mr. Kumar. Export.gov is an interagency staff. Most of the 
forms which small business entities require are already online. 
And I cannot give you a finite time but it should not be more 
than six months or so when every form would be there.
    Mr. Tipton. Okay. Great. And I may be following up a little 
bit on Congresswoman Velazquez's question there. If I was 
interpreting it correct. But the return on investment that we 
were having for the cost of what you do versus the yield from a 
benchmark, do you have any idea what that is?
    Mr. Kumar. I do not have the benchmark idea but what we do 
is track the value of exports. Export successes.
    Mr. Tipton. On a year over year basis what would you say 
given some of the statistics that you just gave me earlier?
    Mr. Kumar. It is tracking upwards. I did mention in my 
testimony that the return on investment to date states that 
every dollar invested in the service is coming out at 1.35. And 
I do know it is significantly higher than what it was in the 
previous year.
    Mr. Tipton. Okay. I think there will be probably something 
because, you know, as Congressman Mulvaney was pointing out, it 
sounds like we do have some duplication going on. And I think 
it is probably in all of our interests right now to see where 
we can merge those components to be able to work the most 
efficiently, to be able to achieve that common goal of being 
able to export more at the most efficient cost that we can 
certainly have.
    Thank you, Mr. Chairman. And I yield back.
    Chairman Graves. Thank you. Our next questions come from 
Mr. Richmond. I might remind Mr. Richmond that that last pitch 
was not a strike; it was a ball. And I should limit your time 
and I am too nice a guy.
    Mr. Richmond. Mr. Chairman, I certainly appreciate that. 
And, you know, sometimes you get lucky and you just have to 
accept luck. So I just accept the luck from the baseball game 
and hope that I can repeat it next year. But you never know.
    Chairman Graves. Well, just remember when the chairman is 
up to bat and you are pitching.
    Mr. Richmond. I will tell you I was surprised and 
disappointed that the umpire called that a strike. I just did 
not want to overrule the umpire but certainly he was wrong for 
calling it a strike. I thought it was a ball all the way.
    First I will start with Mr. Kumar. First let me thank you 
because I had the opportunity to see and participate in a New 
Markets, New Jobs NEI Small Business National Tour, one of 
which was in New Orleans at Tulane University. And the feedback 
that I received from many constituents and small businesses in 
New Orleans was incredible in terms of the education and the 
information that was provided there. My question to start off 
with is for Mr. Foster and Mr. Kumar. How much do you all talk 
to other agencies? Because Mr. Foster, you correctly pointed 
out Louisiana and the Port of New Orleans, Port of South 
Louisiana, our role in exporting in the country. However, I do 
not know if the Corps of Engineers understands that if they are 
not dredging the Mississippi River, which is our superhighway 
for trade, you have now put road bumps in the middle of our 
highway. So the more you can talk to other agencies to let them 
know the importance of that it would certainly be helpful.
    Now my question to you, you talked a little bit about 
hosting a reverse trade mission. And I guess I wanted to hear a 
little bit more about how you do it and how you identified 
businesses outside of the country to come to it. And do you 
have that in such a model that cities can duplicate it if they 
have the resources to do it? We are a port city and we export a 
lot of things and we have the ability to do more. That would be 
something I am interested in if you all could give us a roadmap 
on how to do it.
    Mr. Foster. Thank you. I will answer that first. Thank you 
very much, Congressman.
    And again, yes, we at USDA are very familiar with your 
district and your state. I was mentioning earlier corn, wheat, 
and soybeans are going out through your ports at about $49 
billion a year, so that means a lot to us.
    We at USDA have four regional trade associations, non-
profits that help small businesses exclusively in those 
regions. In fact, our Southern United States Trade Association, 
which covers the whole south, is based in New Orleans. They 
work every day with new small and medium-size companies to help 
enter world markets. I have a note here that a company called 
Magic Seasonings, not far from New Orleans, is involved in our 
program and is now exporting to several countries after 
attending a number of trade shows that we helped fund them to 
go to. Another company, Crown Products, that produces sunflower 
seeds and popcorn and so forth in Louisiana, are working with 
us and going to trade shows. They are now selling to the 
Dominican Republic at the tune of $200,000.
    The Southern United States Trade Association (SUSTA) that 
we fund brings reverse trade missions regularly to Louisiana. 
We want to make sure they do this through all our partners 
there. We can do even more to make sure that they are reaching 
out to every small business in your state and any of the 
states--to make sure that they are meeting the buyers that our 
posts are bringing to the United States. We have 100 offices 
around the world covering 150 countries. They regularly bring 
buyer missions to the United States. Again, that is because 
small businesses cannot afford to get all over the world to 
meet the buyers. But I will say the SUSTA trade organization I 
mention has funds to supplement any company in your district, 
for instance, that wants to attend an international trade show 
to enter world markets. They get funding up to 50 percent of 
the cost to travel. And I must say USDA does not charge any 
services, any fees. I am sorry, charge any fees for our 
services.
    Mr. Richmond. Okay. Ms. Johns, I have a two-part question. 
When we talk about the STEP Program I guess the question 
becomes was there large participation from the states? And do 
you all anticipate allocating or leveraging all of the funds 
allocated for the program?
    Ms. Johns. Thank you, Congressman. Yes, there was a very 
good response to the STEP grant program. Fifty-three states and 
territories responded and as I mentioned earlier, each one of 
the entities who sent in an application will receive funding. 
We are in the process now of working with the states to ask 
them to--it is a comparative process. We are asking them to 
resize their application because we were oversubscribed. The 
applications that we received were over $42 million for a $30 
million program. But that process is underway and as I said to 
the ranking member, we will have those dollars out the door 
within the next few weeks.
    And I am sorry. The second part of your question was 
regarding----
    Mr. Richmond. Just would you leverage it all.
    Ms. Johns. Oh, I am sorry. Yes. There is a matching 
requirement. And the good thing about the STEP Program is that 
it really gives--it gives an incentive. A bit of a jump start 
and another opportunity for states to build their own capacity 
for supporting exporting small businesses because as discussed 
earlier, some of those resources have gone away at the state 
level but this is a way to help replenish that opportunity.
    Mr. Richmond. Thank you. Mr. Chairman, thank you. I 
exceeded my time but next year I will make that up to you.
    Chairman Graves. Does anyone else have any other questions?
    With that, I appreciate you coming. And I would encourage 
you if you have got to leave if one of your staff could stay to 
listen to the next panel. And I will go ahead and seat our 
second panel.

 STATEMENTS OF MARK RICE, PRESIDENT, MARITIME APPLIED PHYSICS 
 CORPORATION; MITCHELL GOETZE, PRESIDENT AND COO, GOETZE CANDY 
    COMPANY, INC., ON BEHALF OF THE NATIONAL CONFECTIONERS 
ASSOCIATION; WADE MERRITT, VICE PRESIDENT, STATE INTERNATIONAL 
      DEVELOPMENT ORGANIZATIONS; MAURICE KOGON, DIRECTOR, 
       INTERNATIONAL TRADE DEVELOPMENT, EL CAMINO COLLEGE

    Chairman Graves. We will bring the hearing back to order.
    Our first witness is Mr. Mark Rice, who is the president 
and founder of Maritime Applied Physics Corporation. His 
company designs and builds high-tech Maritime vessels, 
including hydrofoils and unmanned vehicles for the U.S. Navy. 
They started with one person and grew into 80 full-time 
employees with the help of a Small Business Innovative Research 
Program. Mr. Rice received his Bachelor's degree in physics 
from the University of Maine and is a licensed professional 
engineer. Welcome. I appreciate you coming in and traveling all 
this distance.

                     STATEMENT OF MARK RICE

    Mr. Rice. Thank you very much. Thank you, Chairman Graves 
and Ranking Member Velazquez and members of the House 
Committee. I appreciate the opportunity to testify.
    Our company is a 75-person, 80-person employee-owned 
company. I founded it in 1986. The company builds five defense 
products. We are a manufacturer of defense products and these 
range from unmanned boats to very automated cranes. We also 
have about 10 R&D contracts mainly with DOD.
    We have exported to South Korea, Germany, Scotland, France, 
and hopefully to Brazil. Our company has offices in three 
states and through the recession we have grown at an annual 
rate of about 20 percent due in large part to exports.
    Our journey has not been easy to become an exporter and I 
would like to share a particular story with you about our 
experiences in South Korea. It began in the year 2000. We 
received an email from a business agent in South Korea. The 
agent had researched our involvement in a U.S. Navy project for 
supplying ship rudders through the Internet. And he indicated 
there was a similar program in South Korea. He invited us to 
visit the world's largest shipbuilder, Hyundai Heavy Industries 
in South Korea, and at this point we were a 25-person company 
with no exporting experience. We did not understand the laws, 
the customs, or the cultural aspects of doing business 
overseas. We had no idea who the Department of Commerce was or 
where to get financing. We were totally ill-prepared. We did 
not understand the laws, either in this country or overseas, 
and at the time it was really unclear to us whether we needed 
an export license, and once we understood that we might it was 
not clear whether this was from the Department of State or the 
Department of Commerce. We learned through trial and error 
until we found the U.S. Export Assistance Center in Baltimore 
and they really bailed us out of the export license problems 
that we got ourselves into.
    So with that scare behind us we continued three more times 
to Korea and we got, in one case, the State of Maryland Export 
Assistance Grant. On each trip we were sort of gradually drawn 
a little further into this. We had never built these products 
ourselves. We had largely done the engineering for the products 
that we were talking to the Koreans about. We ended up in a 
head-to-head bidding competition against a British firm that 
was a multi-billion dollar firm. They brought in 
representatives of the British government. They had a retired 
Korean admiral on their staff. And we went head-to-head with 
them over a period of about six months. And at the end of that 
process we won the competition on both a technical basis and 
our cost was about half a million dollars below the British 
cost. We received a contract for 100 tons of machinery, 
hydraulics, and electronics. We came home to celebrate and to 
find 20 new workers to do the work. We then went to our bank, 
shared the news with our bank, and they promptly canceled our 
credit lines and said the deal was too big for us. And it was a 
large U.S. bank.
    So we were in a very disparate business situation at that 
point and I approached a local bank and I found a very brave 
banker who understood the SBA Export Assistance Program, went 
to the SBA and basically stitched the deal back together. He 
saved our company. And after three years we basically got 
through the export process, delivered 100 tons of equipment, 
and broke even on the deal.
    So without the Export Assistance Center, the SBA and Sandy 
Spring Bank, we would not have survived as a company. It was 
very difficult and it required a lot of commitment and time and 
resources, both from our company and from those people who 
helped us through this process. It was overwhelming and I can 
attest to that.
    So the USEACs, the SBA, the local offices, the people we 
really go out and interact with on a one-to-one basis, are the 
people who saved our company, put this deal together, and 
turned us into an exporting company.
    So there are four recommendations I would like to make at 
the end of this.
    The interagency coordination of export licensing has gotten 
a whole lot better since we did this. The Department of State 
and Commerce are pretty well coordinated but we need to get to 
a one-stop shop here. Having two parallel processes is just 
confusing and it makes it twice as hard. We got caught between 
the two agencies.
    The second one is the same recommendation on export 
financing, whether it is SBA, EX-IM, there are a myriad of 
opportunities out there. Not only do the small companies not 
understand these options but their bankers do not understand. 
So in many cases the banks that have to act as the go-between 
between the small business and EX-IM or SBA are not well 
informed in these programs and things like letters of credit 
and the complexities of international business are just tough.
    The third one, as a country we need to increase our 
awareness of the need to export and the national priority given 
to exporting. When I went to a shipyard in South Korea and I 
talked to the average worker, every worker in that shipyard 
knew the importance of exporting. When I go hire someone from a 
U.S. university or a U.S. high school, they have no idea. It is 
a cultural thing that we teach and we need to learn how to 
teach it.
    The fourth one is the Department of Commerce recently 
reduced its staff in Washington by sending people out to the 
field offices. That is great. The real work in this business is 
done in the field offices. In our case the SBA representative 
was with the USEAC sitting in that office and had the 
Department of Agriculture been there and everybody else this 
whole thing would have gone more smoothly. So get people to the 
field and get the decision-making in the field. There is far 
too much bureaucratic time spent in these programs discussing 
the administration in the offices as opposed to the execution 
of their missions.
    So I would like to thank the members of your Committee, 
Chairman, ranking member, and I look forward to your questions.
    Chairman Graves. Our next witness is Mr. Michael--Mitchell. 
Mr. Mitchell Goetze, president and COO of Goetze Candy Company, 
Inc. Goetze Candy is a fifth generation family business that 
manufactures the trademark candy Caramel Creams and Cow Tales. 
Mr. Goetze grew up in the family business, attending his first 
trade show when he was 12, and he is testifying on behalf of 
the National Confectioners Association. Welcome and I 
appreciate you being here.

                  STATEMENT OF MITCHELL GOETZE

    Mr. Goetze. Thank you, Chairman Graves, Ranking Member 
Velazquez, and other members of the Small Business Committee 
for inviting me to testify on behalf of our company, as well as 
our trade association, and highlight some of the issues facing 
our industry and small business today.
    The Goetze Candy Company is located in Baltimore, Maryland, 
and I am certainly honored to be here. The Goetze Candy Company 
was founded in 1895 by my great-great-grandfather and it has 
been in my family for five generations. We have 100 employees 
and manufacture, as you said, confections under the brand names 
Caramel Creams and Cow Tales. I am also the chairman of the 
National Confectioners Association.
    The association is representing the United States Gum, 
Candy, and Chocolate industries of which 85 percent are small 
businesses like mine. U.S. confectionary is a $30 billion 
industry with international sales of well over a billion 
dollars. Industry sales grew by about three percent a year and 
international sales grew by about seven percent. Industry 
employs over 70,000 in manufacturing and over 200,000 when we 
include our suppliers and distributors that support the sale of 
our products. The confectionary industry is a critical 
component to manufacturing in the United States overall.
    We welcome the opportunity to grow our exports but two key 
obstacles stand clearly in our way of export growth. First, the 
input costs of American products that are higher than our 
foreign competitors; and second, several bureaucratic obstacles 
and larger public policy issues that add complexity and impede 
trade. As a small company it is hard to find the resources to 
adequately research global markets and execute sales orders. 
Input costs drive a small company's ability to export our goods 
and present an extreme challenge. Sugar is the most widely used 
ingredient in the confectionary industry but the current U.S. 
sugar policy is woefully outdated. The current law allows only 
about 15 percent of sugar to be imported and what we are forced 
to buy domestically from a handful of sugar suppliers is priced 
at twice the world price. Actually, we had a price increase 
yesterday from the top three U.S. suppliers of sugar and it has 
officially doubled over the last three years, the price per 
pound.
    The artificially high price of sugar directly drives the 
price of all other agricultural materials we buy. To be able to 
compete, companies today are moving operations to Canada and 
Mexico to avoid the U.S. sugar restrictions and take advantage 
of lower business operating costs. We need reform to the 
outdated sugar program now.
    Health care expense has dramatically increased over the 
past 10 years. Goetze's cost to provide health care to our 
employees has risen two and a half times, pushing our rate from 
$182 to $465 per employee per month. We need to address the 
uncertainty of health care and the abuse of the system or 
companies like mine will be forced to raise employee 
contributions or worse, drop health insurance altogether.
    All goods need to be transported to our ports on our coasts 
to be exported. Transportation costs are roughly 10 percent of 
operating costs for our industry and the freight cost per pound 
shipped has risen by 15 percent in two years. That increase 
along with a rise in diesel fuel price surcharges have led to a 
34 percent increase in overall shipping costs for us. We 
advocate for increase in the truck weight limit to offset 
enormous transportation costs associated with the diesel fuel 
index.
    The U.S. Government provides some great services to 
business but the promotion of these services offered must be 
increased. The Foreign Agricultural Service has been 
particularly instrumental through their Market Access Program 
known as MAP. We certainly support continuing MAP funding.
    I would like to point to the U.S. Department of Commerce 
Gold Key Program, which was mentioned earlier, that could be a 
good model for use in the agricultural sector which it does not 
apply to us. A similar program would help us with basic steps 
of how export--how to export would be very helpful and make 
entering new markets less intimidating. On a broader policy 
scale, 95 percent of the world's population lives outside the 
United States and what an enormous opportunity for exporting 
small goods manufactured here. If tariffs were reduced by 10 
percent to our top 17 export markets, NCA estimates that we 
could see more than a $14 million increase in U.S. export sales 
of confectionary goods.
    We support the president's National Export Initiative to 
double U.S. exports and the most efficient way to do this is 
through congressional approval and a timely implementation of 
the pending Free Trade Agreements with Korea, Colombia, and 
Panama. With Free Trade Agreements in place, we would help 
lower our input costs, make our products more competitive, 
which will increase exports and grow jobs.
    When a product is labeled Made in America that message 
resonates around the world. I believe that we can grow U.S. 
manufacturing but only if we consider a careful balance of 
reduced domestic regulatory burdens, smarter, more competitive 
supply management, increase marketing of government resources, 
and have the policies in place to not only allow our products 
to enter new markets but to be able to enter those markets at a 
competitive price.
    In conclusion, owning or running a small company today, 
small confectionary company today, is far more challenging than 
even my grandfather could imagine. It has become so complicated 
and challenging at times that I forget that I am just 
manufacturing candy. There are many bureaucratic obstacles to 
overcome in order to even ready one's product to be able to 
break into an international marketplace and grow exports. I 
would like to say that our National Export Strategy is working 
but with the ever-growing obstacles and challenges I cannot.
    Again, thank you for inviting me to share my perspective 
and I look forward to working together to find solutions to 
resolve these issues. And I am happy to answer any questions.
    Ms. Velazquez. Now it is my pleasure to welcome Mr. Wade 
Merritt. He is currently vice president of State International 
Development Organizations, the leading U.S. organization 
dedicated to supporting state international trade agencies. He 
also serves as vice president for the Maine International Trade 
Center where he works directly with small and medium-size 
businesses, as well as federal agencies to coordinate trade 
missions, technical assistance, and export credit assistance 
programs. Welcome, and thank you for being here.

                   STATEMENT OF WADE MERRITT

    Mr. Merritt. Thank you, ranking member, Chairman Graves, 
Ranking Member Velazquez, members of the Committee. Thank you 
for inviting me to testify today.
    My name is Wade Merritt. I am the vice president of the 
Maine International Trade Center and currently serve as vice 
president of SIDO, which is the National Association of State 
Trade and Export Promotion Agencies. And an allied but separate 
group of boots on the ground providing export development 
services in the United States.
    Nationally, SIDO states currently boast a domestic staff of 
300 with a total budget of over $83 million for international 
development. I know that is not a lot when compared to the 
overall budget for the commercial service. Our overhead is 
lower and we have become experts in doing much more with much 
less.
    The president's goal of doubling exports is ambitious and 
requires robust export development programs at both the state 
and federal level. The president also suggested that this 
growth be led not by the Boeings and Caterpillars of the world 
but by small and medium-size businesses like my friend here 
from the University of Maine, Maritime Applied Physics, or the 
80 percent of my clients in Maine who have fewer than 100 
employees. These small and medium-size businesses hold the 
largest potential but also require the greatest level of 
overseas support.
    A 2006 World Bank study demonstrated that on average every 
dollar spent by countries on export promotion yielded $40 in 
new exports. And you heard from Director General Kumar that 
Commerce is showing a much higher number than that. And I would 
point out that our number was from 2006. Presently, our 
country's export promotion spending by percentage of what we 
export--and this is state and federal combined--is much closer 
to that of a developing country than to our peer nations. There 
is a lot of room to grow and the time to take advantage of that 
opportunity is now.
    The states working collaboratively with the Federal 
government are ready to do our part. However, as states are 
being called upon to provide even higher levels of service, the 
current fiscal crisis has prompted state governments to make 
difficult choices. In just two years, state support for trade 
development and investment attractions dropped by 20 percent. 
States are having to choose short-term budget fixes over long-
term solutions. And as I mentioned earlier, foregoing an 
investment with a proven 40, 90 or 135 to one return is not--
just is not a choice that states should have to be making.
    The STEP Program to the U.S. Small Business Administration 
is now poised to provide much needed support to our state trade 
offices and exporters. While the roll out of the program has 
been delayed as metrics have been revisited, proposals have 
unexpectedly had to be reformatted and resubmitted. And I can 
attest that I have personally been wrestling with this while 
simultaneously preparing this testimony. The program has the 
potential to truly revitalize American exports. Once STEP 
Program funds are awarded, states will quickly be in a position 
to enhance the services and assistance available to small and 
medium-size exporters in our states. I think that is a key 
point because we are much closer to the ground.
    There are several export promotion priorities that should 
be addressed and implemented in order to maximize the chances 
of success for the NEI. First, the commercial service will be 
essential to deliver--a revitalized commercial service will be 
essential to deliver on the NEI's commitment. Even the best 
funded state trade program cannot provide global market 
coverage and all states depend on the worldwide network of 
commercial service posts to provide their businesses with 
market access in countries where the state has little or in my 
case no independent resources. State programs are well 
positioned to complement federal promotion efforts domestically 
through our on-the-ground practical assistance programs but 
reductions in CS budget and overseas personnel deployment 
adversely affects our programs and has a chilling effect on the 
ability of U.S. producers to export their products.
    Secondly, access to traditional markets is essential. While 
accessing emerging markets is a worthwhile objective, most new-
to-export companies will find the best opportunities where our 
exporters have enjoyed a comparative advantage in the past. 
Case posts such as Hamburg, Barcelona, Amsterdam have been 
closed and Canada, our largest trading partner and often the 
first export market, has just one American officer responsible 
for the entire country. These offices should be reopened and 
staffed as soon as possible.
    Third, pricing for CS services. We heard that earlier, such 
as Gold Key and International Partner Search should be 
maintained at the current rate which we believe is affordable 
for small business. These programs represent some of the tools 
most frequently used to enter new markets and increasing the 
costs would be counterproductive to the growth of the NEI.
    Fourth, support for the SBA's Office of International Trade 
is essential to the success of the STEP Program. Through STEP, 
the Federal government has provided much needed assistance to 
boost non-agricultural exports. Now it is necessary to fulfill 
that commitment by affording the SBA the resources it needs to 
name a full-time associate administrator for international 
trade and to supplement its staff with the numbers necessary to 
roll out this pilot program successfully and efficiently.
    And finally, an enhanced partnership between the federal 
and state trade agencies to seamlessly deliver customer focused 
services is critical to expanding the pool of successful U.S. 
exporters and promoting market diversification among existing 
exporters. In order to better coordinate efforts and avoid 
duplicative services, there needs to be a mechanism for sharing 
metrics, tracking successes, and identifying the areas for 
improvement where currently there is no incentive for 
collaboration. American exports create and sustain millions of 
jobs in the U.S. and current prospects for expansion are 
excellent, but a collaborative partnership that combines 
resources and finds efficiencies at the federal and state 
levels in a systematic manner is the best way to assist 
companies in finding export success.
    Thank you, members of the Committee, for allowing me the 
opportunity to speak. And I will also welcome your questions.
    Chairman Graves. Our final witness is Mr. Maurice Kogon, 
director for International Trade Development, El Camino College 
in Hawthorne, California. Mr. Kogon has over 50 years of 
international business experience as a U.S. government 
official, business executive, educator, and consultant. His 
experience includes over 30 years with the U.S. Department of 
Commerce, which he held management positions in trade promotion 
and strategic planning. Mr. Kogon has a Bachelor's and Master's 
degree in Foreign Affairs with George Washington University 
here in D.C. and we welcome you.

                   STATEMENT OF MAURICE KOGON

    Mr. Kogon. Thank you, Chairman Graves, Ranking Member 
Velazquez, and Committee members. Thank you for the opportunity 
to provide this testimony.
    As you said, my name is Maurice Kogon and I have spent a 
lot of time in this field, at the federal and state level, with 
a multinational, as a small business owner and as an educator, 
including 33 years in the Commerce department. My testimony 
today raises a basic question about the National Export 
Initiative, specifically does it adequately meet needs of the 
thousands of small businesses that are or could be exporting? 
In my view, it is not yet as relevant or as helpful as it could 
be to meet needs of this vital constituency.
    I have three main points. First, the NEI has an ambitious 
goal to double exports in five years but not a strategy that 
will get us there. The strategy relies too much on global 
economic factors we cannot control, while the programs we can 
control are not focused enough on the small businesses that 
most need export help, and also not enough on the services they 
most need at critical early stages. The NEI's export promotion 
programs are basically only what the government can afford; not 
on what can best help small businesses at each stage of their 
export development. Far too many small businesses with export 
potential are left to fend for themselves. Claims that the NEI 
is on pace based on recent large export gains belie the reality 
that most of these gains came from recovery and world import 
demand and would have happened anyway.
    My second point is that the NEI does not adequately address 
what I see as our national export paradox. That while we are a 
very large exporting nation, we are not a nation of exporters. 
Roughly 85 percent of U.S. manufacturers do not export at all 
and over half of the 15 percent that do export sell only to 
Canada or Mexico. The NEI addresses the half of the 15 percent, 
the low hanging fruit, but essentially writes off the far 
larger group of potential new exporters in the 85 percent. U.S. 
exports would increase significantly if we could get more of 
the 85 percent into the export base. For that, in my view, we 
need to go beyond a low hanging fruit strategy. We need what I 
call a fertilize the tree strategy to optimize exports--that 
is, to increase exports to our full potential and capacity as a 
nation. An optimization strategy would focus not just on 
getting existing exporters into new markets, but would also 
cultivate the far larger group of potential new exporters that 
could most contribute to long-term export expansion.
    It would have two interrelated goals. First, we need to 
increase U.S. exports as a percent of GDP. Although we are the 
world's third largest exporter, our exports to GDP ratio lags 
well below our major world competitors. For example, Germany is 
at 45 percent; we are at 12 or 13 percent. Our competitors, 
with comparable economies and competing in the same global 
marketplace, are more fully exporting to their capacity. We 
have the potential to close this gap. We are, after all, the 
manufacturing powerhouse of the world and the world leader in 
innovation and technology. And, most of our manufacturers are 
not even exporting yet.
    Second, we need to increase the number of new exporters. We 
could come much closer to our national export potential if more 
non-exporters were to start exporting. We now have roughly 
280,000 actual exporters in the U.S. As noted, they account for 
only 15 percent of all manufacturers. Many of the 85 percent 
non-exporting manufacturers may well have export potential. 
Why? For one reason they have succeeded in the world's toughest 
market--our own--against the same competition they would face 
in foreign markets. If they can sell competitively here, they 
have the potential to export to at least one or perhaps even 
many of the roughly 200 world markets.
    If my suggested priority on new exporters makes sense, why 
is the NEI so narrowly wedded to the low hanging fruit? The 
reason is, and Mr. Kumar mentioned that and I agree, they 
cannot afford to do both. Limited resources should be reserved 
for the export ready firms able to make the best use of the 
trade promotion and matchmaking services. But that misses the 
larger point. The new-to-export sector is too important to 
ignore or write off. The solution is obvious. It is not to 
stretch federal resources further, but to collaborate with non-
federal partners well equipped to fill the gap.
    This gets to my third and final point, the need for 
systematic collaboration with non-federal partners. The vast 
network of state and local export assistance organizations 
could be part of an overarching export optimization strategy to 
both fertilize the tree and pick the low hanging fruit. Centers 
like mine and others are at the grassroots of potential new 
exporters. We have the expertise and resources and are ready 
and willing to engage in a meaningful collaboration. 
Unfortunately, I do not see a federal mindset, a plan, or a 
mechanism to collaborate. The NEI is more concerned with 
internal collaboration within the TPCC. It gives abundant lip 
service to collaboration with others, but not much else.
    Here is what real collaboration would look like in my view. 
Nonfederal partners would have a seat at the TPCC table. They 
would help plan and develop a holistic export optimization 
strategy that shares data with potential and existing 
exporters, jointly recruits prospects, reconciles programs to 
reduce wasteful duplication and overlap, and coordinates the 
seamless delivery of complementary services to both new and 
existing exporters.
    Before concluding, let me emphasize that my concern is with 
the strategy, not with the programs. They do increase exports 
and do have a high ROI to justify their costs. The only problem 
is that they do not go far enough and do not meet enough small 
business needs.
    Thank you again for the opportunity to share my thoughts. 
My written submission elaborates on all my points today, 
including specific needs of small businesses through all stages 
of the export process from start-up to getting paid. Thank you 
and I welcome your questions.
    Chairman Graves. Ms. Velazquez, I will start with you.
    Ms. Velazquez. Sorry. I was not ready.
    Chairman Graves. That is okay.
    Ms. Velazquez. Mr. Kogon and all of you, it has been 
incredibly helpful to us, your testimony, and specifically your 
experience in the exporting business.
    Mr. Kogon, you said you do not have any issue with the 
program but the strategy. In putting together the formulation 
of the strategy did the administration reach out to any of you 
or do you know of any input that was requested from businesses 
that are in the export business--in the exporting business?
    Mr. Kogon. When the NEI was first issued there was an 
opportunity to submit comments to the TPCC. I submitted a very 
detailed white paper saying basically what I said today in much 
more detail and laying out a complete strategy that I thought 
would be more effective. I do not believe anybody paid any 
attention to that frankly and I thank the Committee for 
recognizing that that paper exists.
    Ms. Velazquez. Any other? Yes, Mr. Rice.
    Mr. Rice. Yes. Yes, ma'am. There was an outreach effort and 
there were several visits through the District Export Council. 
There were road shows that traveled through the country but I 
agree that I think it as more show than substance. I did not 
feel that I had an opportunity to significantly influence it.
    Ms. Velazquez. Mr. Rice, you spoke that when you first were 
contacted by the overseas industry or business you went to the 
State Department, the Department of Commerce, and the SBA to 
complete your first overseas sale. Of all those agencies, which 
of them was the easiest one to work with? And this is not to be 
critical of the agencies; it is just to learn how to better 
improve what they do.
    Mr. Rice. There were two key people. There was in the USEAC 
in Baltimore a gentleman named Bill Burwell and in the SBA 
there was a woman named Debora Conrad. I mention the names 
because they were individually extremely helpful as opposed to 
organizationally. They understood our problem, they took us 
under their wing, and they really helped us through these 
things. And that interagency interaction worked extremely well.
    And to your earlier question, there was a great division 
between the financing role and the overseas Gold Key sort of 
reach out role. And I understood that very clearly from the 
first interaction with the two groups.
    Ms. Velazquez. Mr. Kogon, I asked the representative, the 
witness from the USDA the question that the strategy was 
predicated into the success of trade agreements--Korea, Panama, 
and Colombia. What will happen to the strategy if we do not get 
those trade agreements ratified?
    Mr. Kogon. The strategy is multifaceted. It includes the 
reduction of trade barriers and it also----
    Ms. Velazquez. Oh, the success of the strategy.
    Mr. Kogon. Yeah. I do not, you know, they were already 
claiming success of the strategy based on export increases of 
the past two years. I do not think it had anything to do with 
the strategy. For the same reason, a couple of years ago 
exports went down and I do not think they would blame bad 
strategy on that. So I think strategy is not really the driving 
force here. It is what we can do to help companies get into 
exporting.
    Ms. Velazquez. Okay. Mr. Goetze. Yes, sorry.
    Mr. Goetze. That is okay.
    Ms. Velazquez. You wanted to add something?
    Mr. Goetze. Yes. I would just add to that. You know, from 
our perspective with the Free Trade Agreements, I mean, what 
they allow certainly is the first step of opening those new 
potential export markets. But along with Free Trade Agreements, 
they also include the protection of intellectual property. 
There are agreements on that which is a big concern of U.S. 
brands like ourselves. Mr. Rice manufactures a product that is 
very successful because of its technology, whereas a piece of 
candy, you know, is not all that complicated to go into another 
foreign land. It is easily duplicated. So the protection of 
intellectual properties is important.
    And then certainly some of the issues that have floated 
around about child labor certainly dealing with countries with 
Free Trade Agreements. There are also stable economies. The 
governments usually have collaborative efforts.
    Ms. Velazquez. Are those the reasons why in your testimony 
you said that the North American Free Trade Agreement created a 
disincentive for you as companies to remain here but you also 
said that you support Free Trade Agreements with Korea, Panama, 
and Colombia. Why will these trade agreements produce different 
results than the ones from North America?
    Mr. Goetze. Well, first of all I think I am here 
representing certainly the U.S. company with extreme input 
costs and, you know, when we originally spoke I thought my 
contribution could be that before a product is even ready to be 
exported, input costs are important. I think when you take a 
look at Free Trade Agreements, you know, if you talk about the 
north or the south of us they are very similar to what we did. 
That is the way we see the world. When we try and take this 
product and go to the Middle East which we were recently over 
in Dubai looking at a show or Germany through the NCA, through 
the MAP Program, it is more complicated. But with an agreement 
in place I think as a small company you feel more secure 
conducting business with a country like that or a country that 
falls under a Free Trade Agreement for all the reasons I 
mentioned--the intellectual properties, the stability of the 
economy, things of that nature.
    Ms. Velazquez. Thank you.
    I have another question. I will come back.
    Chairman Graves. Okay. I have got a question concerning--
and it was brought up in the earlier panel. And it comes to 
marketing plans. How much, you know, we have so few firms 
obviously or small businesses in particular, you know, 
exporting stuff. How much of that is related to--and I welcome 
input from all of you--how much of it is related to market? I 
mean, that is obviously--it can be extraordinarily expensive. 
And if you are concentrated on domestic here in the United 
States obviously and I suppose it could be very, very tough to 
go into another country and try to even let them know you have 
got a product out there available, I mean it is very curious to 
me and, you know, is it just too expensive to try to do that? 
And you know, where do you go, you know, what country do you 
pick to try to make a dent at least? Let us start with Mr. 
Rice.
    Mr. Rice. A couple of thoughts. Number one, the expense of 
going overseas is in the $5,000 to $10,000 range for a 
reasonable thing. And that is a lot for a small company, a very 
small company. So the more you can do virtually--so the 
Department of Commerce has some virtual methods to get you 
overseas to get your feet wet.
    The second thing I would say is when I came back we put 
together a program that is called Export Tech, which is a 
three-day program where a CEO from a small company comes in. 
The first day it is really infusing them with knowledge. The 
second day is addressing specific problems they may have in the 
markets they think they want to go to. And the third day, which 
is two months later, they have to provide a business plan to a 
council of their peers and experts on where they want to go, 
what it is going to take, and what the realities of the 
business plan might or might not be. I think that is the sort 
of training we need to get out to people, whether it is through 
Mr. Kogon's organization or these public-private partnerships. 
People just do not understand what the markets are. The 
business plans are daunting. They do not understand the 
cultural aspects and they need help. And they have to have help 
coaching themselves through the process. They have to do it. As 
a farmer, if you were going to export, you know, to Dubai and 
you needed to understand what crops you were going to raise and 
what might there be a demand for, that is where the foreign--
where the foreign presence and the commercial service really 
helps. It lets you reach into the country, understand through 
their culture what their market is, and then feed that 
information back through the USI Act to the local business to 
reach their educational level up to where it needs to be.
    Mr. Kogon. I would like to comment on that. Mr. Chairman, I 
think you started to say how important is marketing and market 
planning. For new-to-export companies, which is my focus today, 
none of which is being provided by either SBA because they do 
not have the competence to do it and US&FCS because they are 
not interested in helping new-to-exports; they are focused on 
the other. It is not one thing or two things you can do. That 
is why we developed a seven-step export enabler program. And we 
start with assessing whether that company has the potential and 
readiness to export. Then we train them on how to export. Then 
we provide the research to identify which markets are most 
promising and what is the best strategy to get into those 
target markets. Then we help them develop an export market 
plan. And the market plan would address the distribution 
pricing, promotion, and adaptation strategy in each target 
market. Then we move to the marketing, the promotion, to 
implement those aspects of the market plan. So we take them to 
trade shows or we recommend that they improve their website or 
they do all the marketing things.
    And the seventh step is the matchmaking. Matchmaking 
through Gold Keys is very important. What you should know is 
the U.S. and Foreign Commercial Service is no longer able to 
provide the level of Gold Key support that is needed. And when 
the STEP Program comes along with more demand for Gold Keys it 
is going to be a mess--there are going to be some problems.
    Mr. Goetze. I would say when talking about marketing a 
product overseas, we spend approximately $12,000 to send two 
people to let us call it Germany. Germany every year. That is 
two people. That is time away from the office. We participated 
in that show for 10 years. So in essence we have spent about 
$120,000 just in participating in travel and the show. Right 
now we roughly do maybe a half a million dollars in export 
sales. The real challenge is when you show up there, is 
actually selling the product and having the person that you are 
trying to sell it to understand, you know, your product just in 
general.
    Again, I go back to the input costs. Usually sugar and 
other agricultural products that are in our Caramel Creams, you 
throw the cost out to them and they shake their head and say, 
well, no, that is not what it should cost. So once you get over 
that and you come home it is usually a nine-month to a 12-month 
sale cycle for confectionary. By the time you finish your 
communication and negotiation you might have to come up with 
some type of special packaging or labeling to comply with that 
country.
    In our case, those sales, unlike the United States, you go 
and you sell a retailer here in the United States, it is sold 
and it usually stays on the shelf if you perform. International 
business constantly needs this feeding that you hear. There are 
not the retail--other than Europe there are not the retail 
placements that there are here in the United States. It is 
mainly an ad hoc sale. So every year it seems we are 
duplicating the sale thing. We know you get residual sales if 
the product sells well or they find a different market. But the 
challenge is it is not placed on a retail shelf in most cases.
    Chairman Graves. Mr. Merritt.
    Mr. Merritt. Thank you, Mr. Chairman. I completely agree 
with my colleague form California that the ability that it will 
sell in the United States pretty well, you know, you are battle 
hardened by the time you reach the world market. I think that 
is a good thing.
    What we find is that it is incredibly difficult to shake 
some of these small business owners from their complacency, 
that they have been able to survive on the U.S. market for so 
long that the thought of even getting out of the office is, you 
know, it is not there.
    It is very expensive to market. We run trade missions in 
Maine on a complete total cost recovery basis. Those are, 
again, they match up very nicely with Mr. Rice and Mr. Goetze. 
About $7,000 for a participant to go overseas with us for a 
week. The USDA has fantastic programs for agricultural 
exporters and then we have been able to stretch those into 
fishers and into forest products, which for a state like mine 
that is a large portion of our base but that is not the case 
necessarily for other states. It is why we got really excited 
about the SBA STEP Program, honestly, which is that there is 
lots of money out there for agriculture and for forestry and 
for fisheries, but there has never really been anything for 
manufacturers which is one thing that we have kind of thrown 
out there for a long time of our competitor nations are, you 
know, providing whatever. I mean, it does not have to be much. 
In our case, small--we were able to find from another pot of 
money small grants. A thousand dollars to put towards companies 
participating with us on trade missions to offset costs of 
travel or matchmaking services or whatever. And just that tiny 
little bit of money was enough to be an incentive to get them 
out of the office and actually looking at that international 
market.
    So, you know, we had not pushed. We, the states, had pushed 
Commerce to do something like this, to do a market access 
program like grant program for manufacturers. SBA kind of came 
out with this more flexible program that said the states could 
apply for it and do whatever you would like to do for export 
development. Most of us have decided to go that route. That is 
what we are doing with our application is to provide offsetting 
costs for Gold Keys. Mr. Kogon mentioned, however, there may be 
an issue with capacity at the commerce level as to whether or 
not the posts are going to be able to handle this influx of 
Gold Keys which is going to come out of many of our STEP 
proposals.
    And then finally, just to kind of put a point on the 
difference between USDA and the ag programs and everything 
else. We heard a couple of years ago that there was actually 
more money that was given to the California Raisin Board for 
marketing of California's raisins than there was in the entire 
one grant program that the Commerce Department offered for 
manufacturers. Just one industry was receiving more money than 
all the rest of the manufacturers could even have the potential 
to get their hands on which was not much honestly.
    So I guess that would be my key. It is just difficult to 
get people out of the office and if you are able to provide 
them even a small incentive, you know, they are willing to do 
it and willing to think about it.
    Chairman Graves. Mr. Goetze, do you guys use beet sugar or 
cane sugar?
    Mr. Goetze. Cane.
    Chairman Graves. Cane.
    Ms. Velazquez. Mr. Merritt also answered my question.
    Chairman Graves. Okay.
    Ms. Velazquez. Thank you.
    Chairman Graves. Mr. Bartlett.
    Mr. Bartlett. I am sorry that I could not have been here 
for the testimony and the questions but I wanted to get back 
because two of our witnesses are from Maryland. Thank you very 
much.
    When I ran for Congress 20 years ago there was an article 
in Money Magazine that said that Maryland was the least 
attractive state in the union for retirees and business. And 
just the other day, I forget which entity it was, said that 
once again Maryland is the least attractive state in the union 
for business. So I wanted to come to see two really triumphant 
warriors. You are still making it in Maryland. Thank you very 
much.
    You know, every six hours, in fact, just a little less than 
that, we have another billion dollar increase to our debt. And 
about every 12 hours we have another billion dollar increase in 
our trade deficit. I know people who have been--who feel that 
because that dirty smokestack industry is moving overseas and 
we have that nice, clean service-based economy in our country 
now. And sometimes if you push something to an absurdity you 
can say, gee, that is not going to work. Is it?
    And no matter how much you charge for cutting each other's 
hair and doing each other's laundry, that is not going to be a 
viable economy. Is it? And so what this hearing is about today 
is enormously important. And we have got to do something to 
reduce that trade deficit. I do not know which one of those two 
deficits will bring us to our knees first; whether the budget 
deficit and the increasing debt or the trade deficit. When 
every 12 hours another billion dollars of wealth leaves our 
country--it comes back. A lot of it comes back but it comes 
back to buy us. Seventy percent of all of our cement, about the 
same number--70 percent of our track is owned by foreign 
countries now. So I really appreciate what you all are trying 
to do increasing trade because that will help to lower that 
trade deficit.
    We have--one of the first things that we can do, you know, 
what you have to do to compete with those people over there, 
unless you are competing with somebody in Japan, every one of 
those companies pays less corporate tax than you do. You have 
the second highest corporate income tax in the world. That is a 
little tough for you to compete in a global marketplace when 
you start out with that deficit, is it not?
    And then we have probably more regulations here than most 
places. There was an article that really gave me some pause. It 
must be a year or more ago now and it was in a strange place. 
It was a National Demographic. I do not know if you read it or 
not. It was the story of two Chinese businessmen, a local 
contractor, and a reporter. And they went to a shell of a 
building in a small Chinese town. And they were going to build 
a factory. And the reporter says that the senior businessman 
took a scrap of paper out of his backpack and wrote an outline 
of the building on it and said I would like to put, you know, 
restrooms here and manufacturing here and so forth and so 
forth. And he timed them and it took him an hour and eight 
minutes. And he had engineered the conversion of all three 
floors of this building for a factory. And then he turned to 
the--the businessman turned to the local contractor and said if 
you do not use cheap materials and do a good job, I will get 
you to do my next factory conversion. And he said and I would 
like you to start immediately. And the local contractor looked 
at his watch and he said it is 2:30. Is it okay if I start 
tomorrow morning?
    Wow. How many years would it take us before we could get to 
that point after our environmental impact study and so forth? 
And I wondered, you know, just how long--just how long can we 
continue this fight with all of the problems that we have with 
the second highest corporate income tax in the world with all 
of the regulations, and with the impediments starting a new 
business. Can you start--I would like you to start immediately. 
It is 2:30. I said, okay if I start tomorrow?
    So I want to thank you very much for what you do for our 
country and, you know, help us fight the battle to get the 
taxes down, to get regulations down so that you have a truly 
level playing field.
    The fact you are able to export at all means that you are 
super performers because all the impediments that we have laid 
in your way you do very well to be able to compete. We would 
like to help you compete better. Thank you very much for what 
you do for our country and thank you, Mr. Chairman.
    Chairman Graves. Thank you.
    I want to thank you all for participating today. We are 
going to closely follow the bureaucratic obstacles that small 
business exporters are facing right now. And I plan to let you 
know--I plan to send a letter to the U.S. Government 
Accountability Office. The GAO requesting a report on the 
efficiency of trade promotion, the efficiency of the Trade 
Commission, coordinating committee, and the barriers faced by 
small business exporters.
    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 
this hearing is adjourned.
    [Whereupon, at 4:00 p.m., the Committee hearing was 
adjourned.]





                      CERTIFICATE OF NOTARY PUBLIC

                          DISTRICT OF COLUMBIA

    I, Stephen K. Garland, notary public in and for the 
District of Columbia, do hereby certify that the forgoing 
PROCEEDING was duly recorded and thereafter reduced to print 
under my direction; that the witnesses were sworn to tell the 
truth under penalty of perjury; that said transcript is a true 
record of the testimony given by witnesses; that I am neither 
counsel for, related to, nor employed by any of the parties to 
the action in which this proceeding was called; and, 
furthermore, that I am not a relative or employee of any 
attorney or counsel employed by the parties hereto, nor 
financially or otherwise interested in the outcome of this 
action.
    Notary Public, in and for the District of Columbia
    My Commission Expires: May 31, 2014


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