[Senate Hearing 112-359]
[From the U.S. Government Publishing Office]
S. Hrg. 112-359
THE FUTURE OF AMERICAN MANUFACTURING: MAINTAINING AMERICA'S COMPETITIVE
EDGE
=======================================================================
HEARING
before the
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
MARCH 2, 2011
__________
Printed for the use of the Committee on Commerce, Science, and
Transportation
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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
JOHN D. ROCKEFELLER IV, West Virginia, Chairman
DANIEL K. INOUYE, Hawaii KAY BAILEY HUTCHISON, Texas,
JOHN F. KERRY, Massachusetts Ranking
BARBARA BOXER, California OLYMPIA J. SNOWE, Maine
BILL NELSON, Florida JOHN ENSIGN, Nevada
MARIA CANTWELL, Washington JIM DeMINT, South Carolina
FRANK R. LAUTENBERG, New Jersey JOHN THUNE, South Dakota
MARK PRYOR, Arkansas ROGER F. WICKER, Mississippi
CLAIRE McCASKILL, Missouri JOHNNY ISAKSON, Georgia
AMY KLOBUCHAR, Minnesota ROY BLUNT, Missouri
TOM UDALL, New Mexico JOHN BOOZMAN, Arkansas
MARK WARNER, Virginia PATRICK J. TOOMEY, Pennsylvania
MARK BEGICH, Alaska MARCO RUBIO, Florida
KELLY AYOTTE, New Hampshire
Ellen L. Doneski, Staff Director
James Reid, Deputy Staff Director
Bruce H. Andrews, General Counsel
Ann Begeman, Republican Staff Director
Brian M. Hendricks, Republican General Counsel
C O N T E N T S
----------
Page
Hearing held on March 2, 2011.................................... 1
Statement of Senator Rockefeller................................. 1
Prepared statement........................................... 1
Statement of Senator Hutchison................................... 17
Prepared statement........................................... 17
Statement of Senator Warner...................................... 20
Statement of Senator Snowe....................................... 22
Statement of Senator Pryor....................................... 24
Statement of Senator Cantwell.................................... 26
Statement of Senator Boozman..................................... 28
Witnesses
Hon. Steny Hoyer, Democratic Whip, U.S. House of Representatives. 2
Prepared statement........................................... 5
Hon. Gary Locke, Secretary, U.S. Department Of Commerce.......... 7
Prepared statement........................................... 9
THE FUTURE OF AMERICAN
MANUFACTURING: MAINTAINING AMERICA'S
COMPETITIVE EDGE
----------
WEDNESDAY, MARCH 2, 2011
U.S. Senate,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Committee met, pursuant to notice, at 10:06 a.m. in
room SR-253, Russell Senate Office Building, Hon. John D.
Rockefeller IV, Chairman of the Committee, presiding.
OPENING STATEMENT OF HON. JOHN D. ROCKEFELLER IV,
U.S. SENATOR FROM WEST VIRGINIA
The Chairman. This hearing will come to order.
It is my honor to introduce the Democratic Whip of the
House, the Honorable Steny Hoyer.
[The prepared statement of Senator Rockefeller follows:]
Prepared Statement of Hon. John D. Rockefeller IV,
U.S. Senator from West Virginia
Welcome to today's hearing. I'm pleased Commerce Secretary Gary
Locke is here to share his ideas on the future of American
manufacturing. I'd also like to welcome Congressman Steny Hoyer. As
House Minority Whip, Congressman Hoyer has been leading the charge to
strengthen America's middle class by ``Making it in America'' again.
Over the last century, manufacturing was the engine of America's
prosperity. Henry Ford's assembly lines were a model of industrial
efficiency, providing jobs and good pay to American workers at the turn
of the century. During World War II, Americans' prowess and
productivity turned the tide of the war and cemented our place as the
world's largest and most dominant manufacturing economy.
After the war, the world watched as America continued to build,
make and create. Great American icons, like General Motors and Boeing,
grew and prospered. American manufacturing became synonymous with
ingenuity and American know-how. The jobs it supplied grew our economy.
A large, vibrant middle class was born.
But today's manufacturing sector is a shadow of its former self. In
the last decade alone, more than 5 million manufacturing jobs have
disappeared and 57,000 factories have closed.
Even America's iconic inventions--and iconic brands--are no longer
made here. Mattel Toys--the largest toy company in the world--closed
their last American factory in 2002. 65 percent of their products are
now made in China. The last time a pair of Levi jeans was made in
America was in December 2003.
Across the nation, plant shutdowns have devastated small towns and
communities. I've seen it happen in West Virginia. When a factory
closes, it creates a ripple effect with far reaching consequences. It's
not just the plant workers and their families that suffer, but the
entire town. Local shops and restaurants lose business. Tax revenues go
down, impacting schools and emergency services.
Now, there are some who say our manufacturing decline is
inevitable. They claim that we do not need an industrial base; and that
as long as we keep high-value work in the U.S., we'll be fine. I
couldn't disagree more. That policy is usually espoused by people who
sit at desks for a living and have not ventured into America's
industrial towns.
This country cannot subsist as a service economy. We will not
thrive as a nation if we do not make things. In order to get our
economy humming again, we need to buy--and make--American. Here's why:
On average, manufacturing workers get higher pay and more generous
benefits than Americans in non-manufacturing jobs. Where manufacturing
goes, research and development tend to follow.
Manufacturing has one of the largest multiplier effects in our
economy. It is estimated that 2.5 additional jobs are created for every
one manufacturing job. Think about it. Where there are factories, there
are suppliers. Where there are suppliers, there's a supply chain of
producers--and more workers. And where there are workers, there are
restaurants, cultural establishments and stores to sustain and
entertain them.
Today, I want to hear from you, Secretary Locke, on what more we
can do to grow America's manufacturing sector and create more good-
paying jobs.
I have some ideas about the role Congress can and should play. I'm
proud of the work this Committee has done funding new investments in
science, technology, engineering and math education. We recognized some
time ago that if we are to prepare the next generation of workers for
advanced manufacturing jobs, we need a highly trained workforce.
But there is more to do and no time to waste. Manufacturing is a
jobs issue--plain and simple--and we must get this right.
This hearing is the first in a series I will hold on manufacturing
and jobs in America. I want everyone's best ideas on how we can
encourage more manufacturing. These ideas, in turn, will serve as the
basis for legislation to rebuild American manufacturing and make our
country better, stronger and safer.
I look forward to hearing from you today. Thank you.
STATEMENT OF HON. STENY H. HOYER, DEMOCRATIC WHIP, UNITED STATE
HOUSE OF REPRESENTATIVES
Mr. Hoyer. Thank you very much, Senator Rockefeller,
Senator Hutchison, my good friend, as is Senator Rockefeller,
and the junior, very junior, Senator from Virginia, Senator
Warner. It is always good to be with you, sir.
I am pleased to be here and particularly pleased to join
Secretary Locke. I had the opportunity of working on a lot with
Governor Locke when he was the Governor of Washington state, an
extraordinary public servant, and the nation is very fortunate
to have his services as our Secretary of Commerce. And he and I
have been working together on making sure that we extend
services not only to large manufacturing enterprises but to
medium and small sized. And I thank him for his leadership and
efforts.
Senator Rockefeller, members of the Committee, I want to
thank you for giving me this opportunity to speak on one of our
nation's defining challenges: strengthening and creating jobs
for America's middle class. That same goal is behind our effort
to ``Make It In America.'' That is our agenda, Make It In
America, which obviously means two things.
Number one, we are going to make it. All the kids say, you
are going to make it. You are going to succeed. You are going
to grab that opportunity and go with it.
And of course, you are going to make ``it'' in America. It
is about creating an environment in which American business can
thrive, innovate, and create jobs here in America. It is about
ensuring we have a workforce that can fill the well-paying jobs
of the future. I believe that when more products are made in
America, more families will be able to make it in America.
That is why manufacturing is so important to Make It In
America and its vision of middle-class opportunity. For
generations, manufacturing has been a source of reliable, well-
paying, middle-class jobs. And just as manufacturing helped
build the world's most prosperous middle class here in America,
it is essential to our economic recovery today.
Sadly, Mr. Chairman, manufacturing employment has been in
decline until very recently. From its peak in 1979, the number
of manufacturing employees has been cut nearly in half.
Luckily, we have a story in today's paper which indicates--the
headline being ``Global Manufacturing Picks up Pace'' here in
the United States and in Europe. But from some 20 million
employees some decades ago to fewer than 12 million today. The
last decade was an especially devastating one for manufacturing
employment: from 2001 to 2009, nearly a third of our
manufacturing jobs disappeared.
Those jobs were especially well-paying and attractive to
middle-class families. While average total compensation is
about $58,000 across all jobs, manufacturing workers receive an
average of nearly $71,000. That difference of $13,000, of
course, is extraordinarily significant.
It is no coincidence that the years of sharp manufacturing
decline were also the years of middle class stagnation. In
fact, during that period, median household income fell even as
the economy as a whole expanded, the first time in our history
that that has happened. When we talk about a ``lost decade for
the middle class,'' we are talking, to a great extent, about
the lost decade for manufacturing employment.
And our ability to remain the world's innovation leader and
create tomorrow's jobs depends directly on our ability to make
things here today. The President of Dow Chemical, in fact, has
written a book. Now, we adopted Make It In America as an agenda
item last summer. The book was published in January of this
year, but it was entitled ``Make It In America.'' From computer
chips to advanced display screens to precision optics to
photovoltaic cells, a host of products invented in America have
been rolling off assembly lines in other countries. Every time
that happened, according to Intel's Andy Grove--and I quote--
not only did we lose an untold number of jobs, we broke the
chain of experience that is so important in technological
evolution. We lost not just the jobs of today, but entire
industries for tomorrow. We have to break that pattern.
Andy Grove's premise is that we have the best inventors,
the best innovators, the best developer of products here in the
United States, but we are taking them to scale too often
offshore. And his premise as well is that if we continue to do
that, inevitably the innovators, inventors, and developers will
follow the manufacturing. And so we will be eating our seed
corn.
The good news, however, is that we are beginning to turn
this record of decline around. Today manufacturing is leading
our economic recovery. In fact, that sector has grown every
month for 19 straight months. This month, we learned that the
ISM Manufacturing Index, which measures the strength of that
sector, is at the highest point in almost 3 decades. That story
appeared today.
We have also seen a host of success stories about
manufacturers choosing to bring jobs back to America, such as
General Electric's decision to move 400 jobs from China back to
the United States, or Ford's decision to move 2,000 employees
back to the U.S. from Japan, Mexico, and India. In fact, I was
with Alan Mulally in Detroit 3 weeks ago at the auto show--
maybe 4 weeks ago--and he indicated that they were finding that
in terms of quality and productivity, that they are doing
better building it here, notwithstanding the salary
differential. That is a very important point for us to make.
And I talked to John Engler when he was head of the National
Association of Manufacturers, and he made a similar point.
The Federal Government cannot foster that kind of success
on its own, of course, but it can act as a smart partner for
the private sector. And that is what the Make It In America
agenda is all about. Again, Secretary Locke has been leading on
that partnership and I know will be announcing later today a
public/private partnership on this issue.
We need to create the conditions that help companies, large
and small, build here, keep jobs here, and compete in an open
global market. It is an agenda that has won support from both
businesses and labor because all Americans benefit--all
Americans benefit--when our industry is more competitive. The
Make It In America agenda is one that can be talked about in
any district in America, the most conservative, the most
liberal, the most Republican, the most Democratic, and you will
find that Americans' heads will nod yes. If we are going to be
successful in the decades ahead, it will be because we are
making things in America.
Mr. Chairman, as you know, I lost my wife 14 years ago. So
now I shop--actually my granddaughter and I shop in Toys R Us
for my three grandchildren and my one great granddaughter. I
then bring the toys home. I have an island in my kitchen and I
wrap them. And of course, when you pick up the toy and you see
almost invariably it is made in either in China or someplace
else. And I think to myself I bought this toy and I am glad to
give it to my grandchildren, but boy, I wish it were made by
Americans that created jobs, good paying jobs, so they in fact
could have a better ability to purchase for their grandchildren
or their children the toys that they want.
Creating the conditions that help companies, large and
small, is absolutely essential. President Obama has already
signed seven Make It In America bills into law, bills that
speed up innovation and patents, support our growing energy
sector, create tax cuts and loans for small businesses, support
science, technology, engineering, and math education, STEM, and
more. Many of these bills won significant bipartisan support
And manufacturing can remain an area for bipartisan
cooperation in the new Congress. Make It In America crosses, as
I said, all ideologies and locations in our country, from
Arkansas to Maine, Senator Snowe.
I am so pleased to be with Senator Snowe, Senator
Rockefeller, because Olympia and I had offices very close to
one another on the fifth floor of the Longworth Building when
we both came to Congress. And so we walked to the elevator on a
regular basis. It was a basis for a great friendship.
Senator Pryor, glad to have you here, sir.
There is no reason--no reason--why Democrats and
Republicans cannot come together for stronger job training
partnerships, a fair playing field for American exporters, and
efforts to hold China accountable for its currency
manipulation. In the coming weeks, Mr. Chairman and members of
this committee, I look forward to expanding this positive
agenda for job creation. I have talked to Eric Cantor. I have
talked to Mr. McCarthy, our new Whip. I have talked to David
Camp, the Chairman of the Ways and Means Committee. We can and
should and must work together on this agenda.
I believe that the Federal Government can fulfill its role
as a smart partner for private sector job creation by investing
in the innovation, infrastructure, and education our economy
needs to grow. President Obama, of course, focused on that in
his State of the Union, in investing in growing our economy.
Again, that is an idea that finds support across the
ideological spectrum.
As Tom Donohue of the U.S. Chamber of Commerce and Richard
Trumka of the AFL-CIO put it--and I quote--whether it is
building roads, bridges, high-speed broadband, energy systems,
and schools, these projects not only create jobs and demand for
business, they are an investment in building the modern
infrastructure our country needs to compete in a global
economy. Close quote. That was Mr. Donohue and Mr. Trumka.
It is time to recommit ourselves, Mr. Chairman, and I
applaud you for leading this effort and having this hearing.
And I applaud each one of the Senators in attendance. It is
time to recommit ourselves to manufacturing, to our middle
class, and to the pride Americans have always taken in making
things, making it in America.
I want to thank you for calling this hearing and say how
much I look forward to working closely with you in the coming
months and years to expand our manufacturing sector and
opportunities for our people. Thank you very much.
[The prepared statement of Mr. Hoyer follows:]
Prepared Statement of Hon. Steny Hoyer, Democratic Whip,
U.S. House of Representatives
I want to thank Chairman Rockefeller and Ranking Member Hutchison
for giving me the opportunity to speak on one of our Nation's defining
challenges: strengthening and creating jobs for America's middle class.
That same goal is behind the Democrats' Make It In America agenda. Make
It In America is about creating an environment in which American
businesses can thrive, innovate, and create jobs here--and it is about
ensuring we have a workforce that can fill the well-paying jobs of the
future. I believe that when more products are made in America, more
families will be able to Make It In America.
That's why manufacturing is so important to Make It In America and
its vision of middle-class opportunity. For generations, manufacturing
has been a source of reliable, well-paying, middle-class jobs. And just
as manufacturing helped build the world's most prosperous middle class
here in America, it is essential to our economic recovery today.
Sadly, manufacturing employment has been in decline until very
recently. From its peak in 1979, the number of manufacturing employees
has been cut nearly in half: from some 20 million to fewer than 12
million today. The last decade was an especially devastating one for
manufacturing employment: from 2001 to 2009, nearly a third of our
manufacturing jobs disappeared.
Those jobs were especially well-paying and attractive to middle-
class families: while average total compensation is about $58,000
across all jobs, manufacturing workers receive an average of nearly
$71,000. So it's no coincidence that the years of sharp manufacturing
decline were also years of middle-class stagnation. In fact, during
that period, median household income fell even as the economy as a
whole expanded--the first time in our history that that has happened.
When we talk about a ``lost decade for the middle class,'' we are
talking, to a great extent, about a lost decade for manufacturing
employment.
And our ability to remain the world's innovation leader and create
tomorrow's jobs depends directly on our ability to make things here
today. From computer chips to advanced display screens to precision
optics to photovoltaic cells, a host of products invented in America
have been rolling off assembly lines in other countries. Every time
that happened, according to Intel's Andy Grove, ``not only did we lose
an untold number of jobs, we broke the chain of experience that is so
important in technological evolution.'' We lost out not just on jobs
today, but on entire industries for tomorrow. We have to break that
pattern.
The good news, however, is that we are beginning to turn this
record of decline around. Today, manufacturing is leading our economic
recovery: in fact, that sector has grown every month for nineteen
straight months. This month, we learned that the ISM Manufacturing
Index, which measures the strength of the sector, is at its highest
point in almost three decades.
We've also seen a host of success stories about manufacturers
choosing to bring jobs back to America--such as General Electric's
decision to move 400 jobs from China back to the U.S., or Ford's
decision to move 2,000 back to the U.S. from Japan, Mexico, and India.
We recently learned, in fact, that Ford is planning on adding another
7,000 jobs here in the U.S.
The Federal Government can't foster that kind of success on its
own--but it can act as a smart partner for the private sector. That's
what the Make It In America agenda is all about: creating the
conditions that help companies large and small build here, keep jobs
here, and compete in an open global market. It's an agenda that has won
support from both business and labor, because all Americans benefit
when our industry is more competitive.
President Obama has already signed seven Make It In America bills
into law--bills that speed up innovation and patents, support our
growing energy sector, create tax cuts and loans for small businesses,
support science, technology, engineering, and math education, and more.
Many of those bills won bipartisan support.
And manufacturing can remain an area for bipartisan cooperation in
this new Congress. There is no reason why Democrats and Republicans
can't come together for stronger job-training partnerships, a fair
playing field for American exporters, and efforts to hold China
accountable for its currency manipulation. In the coming weeks, I look
forward to expanding this positive agenda for job creation.
I also believe that the Federal Government can fulfill its role as
a smart partner for private-sector job creation by investing in the
innovation, infrastructure, and education our economy needs to grow.
Again, that's an idea that finds support across the spectrum. As Tom
Donohue of the U.S. Chamber of Commerce and Richard Trumka of the AFL-
CIO put it, ``Whether it is building roads, bridges, high-speed
broadband, energy systems and schools, these projects not only create
jobs and demand for businesses, they are an investment in building the
modern infrastructure our country needs to compete in a global
economy.''
It's time to recommit ourselves to manufacturing, to our middle
class, and to the pride Americans have always taken in making things.
Thank you for calling attention to this pressing challenge.
The Chairman. Thank you, sir.
I need to point out that I did not have an office close to
you, so I did not get to walk to the elevator with you.
Mr. Hoyer. The good news, however, was, Senator, that I
served on the Labor, Health Appropriations Subcommittee for 23
years and I served during the period of time that Sharon was
such an extraordinary force in communicating information,
culture, and arts to the people of the United States.
The Chairman. You are kind.
But I did have the experience of working with you on a very
controversial, very important piece of legislation called FISA.
And there were many members on the Democrat side in the
Intelligence Committee who did not vote for it. It was very
controversial. And I just watched you with your experience
stitch together a coalition, and it worked. And the bill passed
and it has re-passed and it is a very important piece of
legislation.
I want to say to the membership that we have a vote at 11
o'clock. This is so unfair to Secretary Locke. But I have
consulted with my Ranking Member, my Co-Chair, Kay Bailey
Hutchison, and what we thought is that we would not do opening
statements and that we would go to the Secretary so we have
maximum time, unless anybody feels that the world will be
changed by what they say.
You should know this is the first of a whole series of
hearings that we are going to have on manufacturing in America.
I mean, this is our theme for the year. So you have led it off
and what better person.
Mr. Hoyer. Aren't you kind? Thank you very much, Senator,
and thank you, Senator Hutchison and members of this committee
for the leadership you have shown and the positive direction
you are setting, and I look forward to working with you.
The Chairman. Thank you, sir.
Mr. Hoyer. Thank you.
The Chairman. Secretary Locke, I sometimes wonder--I do not
know how many times you are asked to testify and what it does
to your schedule and you have got trips planned overseas and
around the country and the demands on your time are simply
endless, but this is a subject that you care enormously about.
And anytime that America could lose 57,000 factories in a 10-
year period, I think we ought to be pretty nervous. So I would
like to be able to, with the permission of my colleagues, just
go directly to you, sir. We are honored that you are here. We
are honored about the work that you do, and we look forward to
hearing what you have to say. Then we will have questions.
I should tell you also about the 11 o'clock vote. That puts
a little crimp on us and I would rather question you than
listen to us.
STATEMENT OF HON. GARY LOCKE, SECRETARY,
U.S. DEPARTMENT OF COMMERCE
Secretary Locke. Great. Thank you very much, Chairman
Rockefeller, and Ranking Member Hutchison, and members of the
Committee. It is a pleasure to be here, and I want to thank you
for the opportunity to engage in this very important topic and,
as the Chairman indicated, a series of yearlong discussions on
the role of manufacturing and the need to bring back
manufacturing to the United States.
I would like to begin by clearly stating that the Obama
administration believes that manufacturing is essential to
America's economic competitiveness. Manufacturing is a vital
source of good, middle-class jobs, and it is a key driver of
innovation with 70 percent of all private sector R&D done by
manufacturing companies.
The United States is still the world's largest and most
productive manufacturer. On its own, U.S. manufacturing would
rank today as either the sixth or the seventh largest economy
in the world. And just yesterday, it was reported that U.S.
manufacturing activity hit its highest level since 2004.
But manufacturing productivity gains, which are so
essential to growth, are partly responsible for millions of
lost manufacturing jobs. Factories that once needed 1,000
people to build a product can now do it with 100.
Meanwhile, competitors abroad are consistently producing
quality goods at less cost. America cannot escape this global
competition, but we can win by helping existing manufacturers
be more competitive by leading the development of new
industries and by manufacturing more of the high-value goods
that the world's consumers demand. And it is important that
when American companies invent something here, that they make
it here because the fact is that companies learn by doing. The
manufacturing process itself, the interaction between engineers
on the assembly line and the engineers in the laboratory or in
the design centers help companies develop innovations and
better products that would never be discovered on the front end
of the design process alone.
And that is why so many of President Obama's economic
policies are focused on: number one, creating incentives for
American companies to build more things here, to make more
things here; and number two, opening up global markets so that
they can sell those things in more places around the world.
Early on, the Recovery Act made critical investments in
basic infrastructure critical to manufacturers, like roads,
bridges, and rail lines, as well as in emerging industries like
advanced batteries and clean energy technology. At the Commerce
Department, we have been helping U.S. manufacturers become more
efficient and productive through our Hollings Manufacturing
Extension Partnership.
The Commerce Department has also been addressing one of the
most urgent needs of manufacturers, fixing a broken Patent
Office that had a 770,000 patent application backlog and a time
frame of 3 years to act on a patent application. This was the
status that existed when I arrived as Commerce Secretary. But
under the leadership of our Patent and Trademark Office
Director David Kappos and working with all of our employees and
labor unions, complete work processes have been overhauled and
the application backlog has been cut by 10 percent, even as the
volume of applications has increased by 7 percent.
Recently we announced a fast track measure that will let
applicants have their patents evaluated in 1 year for a
slightly higher fee. And if the Senate passes the pending
patent reform bill, it will give our Patent Office the tools it
needs to simplify the processes even further, as well as reduce
unnecessary litigation and other costs for patent holders.
Meanwhile, President Obama has favored tax policies that
overwhelmingly benefit those who make and build things here in
America. There is the 30 percent tax credit for manufacturers
of renewable energy components, and in the December tax cut
package, there was the provision allowing 100 percent expensing
for all equipment purchased in 2011, the largest temporary
investment incentive for manufacturers in U.S. history. In his
2012 budget proposal, the President calls for expanding and
making permanent the R&D tax credit.
These efforts to spur domestic manufacturing have been
partnered with an equal focus on helping our companies compete
abroad through the National Export Initiative. Although the
United States overall is a strong exporter, only 1 percent of
our companies export, and of those that do, 58 percent export
to only one country, typically Mexico or Canada. We can and we
must do better.
Manufacturers are responsible for 68 percent of all U.S.
exports, and they have been a particular focus of our outreach
at the International Trade Administration within the Department
of Commerce. We have been working with UPS, FedEx, the Postal
Service, and the National Association of Manufacturers to
identify companies well positioned to take advantage of new
export opportunities, and we are pairing these companies up
with our trade specialists in 77 countries around the world.
And the sole job of these trade specialists is to find new
customers for ``made in USA'' goods and services.
Meanwhile, my Department led 35 trade missions last year,
and that is a record. In fact, I just returned from India a few
weeks ago where I was helping 24 U.S. companies capitalize on
new opportunities in the wake of the President's historic visit
to India, as well as the reforms announced by the President on
how India is treated by U.S. export control rules.
So the Commerce Department and the entire administration
are working hard to make our manufacturers more innovative at
home and competitive abroad. I know that sentiment is shared by
the members of this committee, as evidenced by your unanimous
support for the America COMPETES Act which supports research,
education, and technology investments that are so critical to
the future of manufacturing. And I hope we can build on that
support in Congress to continue strengthening American
manufacturing.
And with that, I will be happy to take any questions that
you have.
[The prepared statement of Secretary Locke follows:]
Prepared Statement of Hon. Gary Locke, Secretary,
U.S. Department of Commerce
Introduction
Chairman Rockefeller, Ranking Member Hutchison, members of the
Committee, thank you for giving me an opportunity to appear before you
today. I first want to commend the Committee for holding this hearing
and focusing on the critical role of manufacturing in the United
States.
Without a doubt, domestic manufacturing production is vitally
important to the United States, ensuring both our national and economic
security, and providing good-paying jobs to millions of Americans.
Maintaining a vibrant U.S.-based manufacturing sector is necessary if
we are to protect our citizens, create good jobs, foster innovation,
and ensure that our Nation retains the capacity to make products that
we, and the rest of the world, need to transition into a cleaner,
greener economy. In short, manufacturing matters.
Overview of Manufacturing in the United States
Let me start by stating the obvious: The U.S. manufacturing sector
has changed dramatically over the last 30 years. The challenges that
currently face our manufacturing sector are a result of two important
and fundamental shifts. First, we have seen a dramatic improvement in
productivity in the manufacturing sector, a resulting rapid
technological change in how we make products. This was most recently
evidenced by the introduction of computerized ``smart'' production
processes. Second, the growth in worldwide manufacturing capacity and
trade has presented challenges in a world of ever increasing
competition. U.S. manufacturers are operating in a world of vastly
increased global competition. Overlaid on these two fundamental shifts
is the rapid evolution of consumer demand for what is produced--
products have ever shorter life cycles and consumers expect new,
improved versions to rollout with increasing regularity.
We cannot turn back the clock on these changes. This transformation
has not been easy or painless, and while we still have a long road
ahead of us, we have seen real progress.
While U.S. manufacturing has changed dramatically, our
manufacturing sector continues to be the largest in the world. As a
stand-alone economy, U.S. manufacturing would be the world's seventh
largest economy. Over the past year, the manufacturing sector has been
leading the economic recovery. The sector has increased employment for
the first time in over a decade, and manufactured goods exports have
increased by 16 percent over the last year. This is not to say that
manufacturing has not faced real challenges in both the recent
recession and in the decades that preceded it. While we have the
world's largest manufacturing sector, our share of global manufactured
goods has declined over the last decade. Over that period of time, our
trade deficit in manufactured goods began to soar. And of course, we
have lost millions of manufacturing jobs.
For manufacturing firms operating in the United States, many
changes have been required. Successful U.S. manufacturers have only
been able to maintain their competitive advantage in the global
marketplace by continuing to invest in research and development and by
continuously introducing new products and manufacturing techniques. In
particular, to remain a leader in manufacturing the United States
cannot allow others to set the pace in the development and production
of the services and products that go into a greener, more sustainable
economy. To remain competitive in the global marketplace, our
manufacturing operations must be at the forefront in energy and
resource efficiency, and innovate to meet and exceed increasing demands
for cleaner production and sustainable consumption.
Further, we have been able to drive high levels of productivity
growth by increasing the capital intensity of our manufacturing base,
moving away from labor-intensive manufacturing and toward more high-
value-added manufacturing. This productivity growth enables
manufacturers to continue to provide good-paying jobs in the face of
global competition, but it also means that fewer people are needed to
produce our manufactured products.
In 1979, there were 19.4 million manufacturing jobs in the United
States. In 2010 there were only 11.5 million workers employed in the
manufacturing sector. Moreover, the skill mix of manufacturing workers
has also shifted. The need for highly skilled workers in the
manufacturing sector is growing as a result of changes in technology,
which is why the Obama Administration is investing resources to make
sure the U.S. workforce has the skills needed to fill manufacturing
jobs now and in the future.
Even as the domestic manufacturing sector and its workforce have
evolved dramatically over time, one thing that has not changed is the
central importance of the manufacturing sector to our Nation's economy
and its future. While the relative percentage of the U.S. workforce
employed in manufacturing has declined over time, manufacturing creates
more ancillary economic activity than any other sector, it represents
68 percent of exports and 70 percent of private sector R&D. There are
those who would argue that manufacturing does not need special help--
that competitive forces will naturally result in the right allocation
of resources in our economy. However, that completely laissez-faire
approach ignores the fact that we do not live in a world defined by
free and open competition, operating without government intervention.
Actions of governments--our own included--influence the relative
competitiveness of entire sectors and individual industries. For
example, our corporate tax system causes costly distortions where
particular companies and industries with accountants or lawyers can end
up paying no taxes at all, but all the rest are hit with one of the
highest corporate tax rates in the world. This is why the President
called for reform of the corporate tax code in his State of the Union
address.
The government also has an important role to play with regards to
innovation. All advanced governments invest in basic and applied
research. The challenge is for our Nation to make private and public
investments in science, engineering, research and development that will
ensure that the United States is the world's leader in innovation for
decades to come. However, there is a growing concern that further
decline in American manufacturing could have broader negative effects
on overall economic performance. It is not enough to only invent
products here. The ``invent it here, manufacture it there'' economic
approach is not sustainable. We must be able to make things here in
America, and without this capability it may become increasingly hard to
invent things here in America.
Lastly, in the face of transitory but severe situations,
governments must sometimes play a critical stabilizing role, so that
companies and markets have time to adjust. In 2008, the U.S. auto
industry faced such a situation. GM and Chrysler faced almost certain
liquidation, and most believed that without intervention Ford would
soon follow. The Administration was left with a decision of whether the
U.S. auto industry was worth saving. There is no doubt that the old
business models of GM and Chrysler were no longer viable. However, many
have estimated that the ripple effects of jobs that would have been
lost had the Administration not intervened would have been in the
millions. The Administration set tough but fair conditions for the
companies in order to receive assistance, requiring major
restructurings of both their balance sheets and their entire
operations. While this should not be a general model for government
intervention, it was what was required given the extraordinary
circumstances. Last month's announcement that each of GM's 45,000 U.S.
hourly workers would receive at least $4,000 under a profit-sharing
agreement with the United Auto Workers was a fitting Valentine's Day
testament that the transition plan has been a success.
Manufacturing Agenda
The Obama Administration's top priority since day one has been
fixing our economy and putting Americans back to work. Manufacturing is
a key component in revitalizing the U.S. economy and creating U.S.
jobs. That is why the President unveiled a framework to revitalize
American manufacturing in December, 2009. However, the challenges that
face manufacturers existed long before the recession. Winning the
future will require a robust and vibrant manufacturing sector, but to
get there we must ensure that companies see the United States as a
competitive location to invest, build factories, and create jobs. The
Commerce Department is actively supporting President Obama's commitment
to ensuring that the United States maintains a robust, globally
competitive manufacturing sector that will continue to generate high-
paying jobs for Americans both in the near-term and well into the
future.
Just as the character of our manufacturing sector continues to
evolve, so too must the services Commerce provides in support of this
sector. Gone are the days when manufacturing was characterized by
highly repetitive work performed in mass production facilities that
were geographically concentrated and where the output was sold almost
exclusively to the domestic market. Instead, today's manufacturing
sector relies on a highly trained workforce and entrepreneurial
behavior that drives continuous innovation--all subject to the
discipline imposed by global competition. Moreover, evolving advanced
manufacturing technologies offer the potential to produce higher
quality and wider variety of products--even customizing products for
just a few or even a single buyer--and do so at low cost. However, the
rest of the industrialized world is pursuing these same goals for their
domestic industries by investing substantial sums in new technology
platforms and supporting technical infrastructures. To foster such
innovation and entrepreneurship in the United States, the Commerce
Department has focused the work of its bureaus on supporting the needs
of manufacturing firms at crucial points in their lifecycle where
government activity can provide added value--helping support
innovation, commercialization, and access to global markets.
Today, I want to highlight these three areas where the Department
of Commerce is engaged in helping U.S. manufacturers succeed in today's
competitive marketplace and discuss our new approach to providing
services.
However, before, I move on to the Commerce programs, I would like
to take a moment to applaud this Committee for not just recognizing,
but acting on the need to maintain America's global leadership in
science, technology, and innovation. Your leadership reauthorizing the
America COMPETES Act is truly an investment in America's future and our
long-term global competitiveness that transcends politics and
partisanship. By increasing science and research investments;
strengthening science, technology, engineering and mathematics (STEM)
education; and developing an innovation infrastructure, you are
focusing attention on the drivers of our economy and keys to our
economic success. You have provided all the right tools. Now,
supporting the President's FY 2012 budget request, which maintains the
Administration's commitment to double Federal investment in key basic
research agencies consistent with the COMPETES Act, is among the most
important things that Congress can do to ensure America's continued
leadership in the decades ahead.
Innovation--A competitive manufacturing capacity requires creating
and deploying new ideas in the form of new products, new business
models, and improved production processes. Our Patent and Trademark
Office (USPTO) enables these developments through an improved
environment for intellectual property (IP) creation--driving a more
efficient patent system and better protection at home and abroad. As I
noted earlier, recent innovation in the manufacturing sector has
enabled makers to produce variable quantities or on a semi-custom basis
at a low unit cost. This development, coupled with strong IP protection
for local innovators and manufacturers will enable any American with an
idea, anywhere, to set up shop and build her dream. The USPTO supports
this objective by providing IP education, resources, and fee discounts
for small businesses and independent inventors. Commerce, through
investments in our National Institute of Standards and Technology
(NIST), further supports the creation of new ideas directly through
critical investments in basic science, measurement capacity, and
technical assistance for the establishment of industry standards that
enable the development of entire markets for manufactured goods.
Without a strong foundation for advanced manufacturing, benefits
for the economy, including long-term job growth, cannot be maximized.
This is why our Economic Development Administration's (EDA) leadership
on regional innovation clusters is critically important to building the
capacity for global competitiveness. For example, EDA invested in the
Northeast Ohio Technology Coalition (NorTech) of Cleveland, Ohio, to
develop a regional innovation strategy and advanced energy industry
cluster roadmap, creating new jobs and reinvigorating the
competitiveness of communities and regions impacted by the downturn of
the auto industry. This investment is especially timely as this region
has been hard hit over the past few decades with job losses and a
significant decline in small business development.
Commercialization--Transforming new ideas into manufactured outputs
is a challenge that often confounds entrepreneurs--both start-up and
large-businesses alike--in their attempts to take new ideas to market
and ensure profitable, sustainable manufacturing businesses. Commerce
supports these efforts in multiple ways. I would like to offer three
examples that demonstrate the Department's work in this area.
EDA's Office of Innovation and Entrepreneurship (OIE) focuses
specifically on the challenges of commercialization. OIE plays a
leading role in developing policy recommendations, with a focus on
increasing the commercialization of technology developed through
university and federally funded research. The Office has developed the
i6 Challenge, a multi-agency competitive grants initiative that
encourages and rewards innovative ideas that accelerate technology
commercialization, new venture formation, job creation and economic
growth in the United States. The Office is also leading efforts to
develop a study of Federal lab commercialization efforts, with the
ultimate goal of advising on methods to increase results.
Additionally, the Hollings Manufacturing Extension Partnership
(MEP) at NIST is a program that works directly with companies to help
them improve production efficiency and identify and enter new markets.
This is an effective program with demonstrated success.
For example, the MEP program helped Ulbrich Precision Flat Wire in
Westminster, South Carolina, reorganize and modernize its manufacturing
process and maximize efficiencies internally. MEP's assistance enabled
Ulbrich to achieve $1 million in increased sales, $2 million in
retained sales and realize $150,000 in cost savings. In Marlow,
Oklahoma, MEP worked closely with the Wilco Machine & Fab, Inc., to
help them implement an export program when opportunities to grow in the
domestic market were limited. This enabled the company to expand by
identifying and entering new overseas markets, resulting in a 60
percent increase in revenue and a 600 percent increase in export
revenue. In Fiscal Year 2009, MEP clients reported the creation of more
than 17,000 jobs and nearly 54,000 jobs retained.
C.U.E. of West Virginia, LLC located in Mount Hope, West Virginia,
manufacturers cast urethane products for industrial applications.
C.U.E. contacted the West Virginia Manufacturing Extension Partnership
program recently to help the company improve operations and maintain
certifications needed to satisfy customer requirements. The West
Virginia MEP performed a review of the current qualify and
environmental/management system and the required improvements needed to
achieve success. Company managers were briefed on MEP's findings and an
improvement plan was agreed to and implemented. With the assistance of
the West Virginia MEP, the company was able to position itself for
success in the future, increase sales by $695,000 and realize $4,000 in
cost savings.
We know that in technology entrepreneurship, angel investors and
venture-capital firms often will not invest capital unless the startup
possesses a granted patent. Therefore, the USPTO has announced the
creation of an Accelerated Patent Examination program as part of a
Flexible ``Three Track'' Patent Processing Program that will provide a
decision on a patent application within 12 months, thus speeding
capital to our Nation's best ideas.
Commerce is also able to support commercialization by providing
direct information and support to manufacturers in understanding the
domestic and global marketplace, areas of growth and opportunity in key
sectors through the work of the Economics and Statistics Administration
and the International Trade Administration. This is also true with
regard to crucial scientific information which can help manufacturers
understand emerging demand opportunities. For example, the National
Oceanic and Atmospheric Administration is working with the Department
of Energy to improve atmospheric forecasting and support the siting and
interconnection of renewable energy projects into the grid.
Global Competitiveness--The future of manufacturing will be
fundamentally reliant on the ability of U.S. businesses to access and
thrive in overseas markets, and the Commerce Department is working to
help position these businesses for success through its efforts to drive
the National Export Initiative (NEI). At the heart of the NEI is the
basic premise that domestic production is critical: we need to make it
here, in order to export it from here. Further, by subjecting our
businesses to the rigors of foreign competition, it makes it more
likely that they will produce products of the caliber that is demanded
by our domestic markets, possibly displacing some imports. The NEI was
established by President Obama in 2010 with a goal of doubling U.S.
exports over 5 years. Implementing a strategy to expand exports is
critical because 95 percent of the world's customers live outside of
the United States. We ignore these consumers at our peril. By
identifying and removing market access barriers and by determining key
markets, sectors and export opportunities for manufacturers, the
Department is profoundly focused on ensuring export competitiveness for
U.S. manufacturers primarily through the work of the International
Trade Administration in partnership with other agencies both within and
outside the Department. The Manufacturing and Services unit of the
International Trade Administration will sharpen its focus on current
and high potential export intensive manufacturing sectors.
In support of the National Export Initiative, I am embarking on
four trade missions with U.S. businesses to key overseas markets this
year. In February, I led a delegation of 24 U.S. businesses to India to
promote their technologies and services related to civil nuclear
energy, civil aviation, defense and homeland security, and information
and communications technology. This mission provided the U.S.
delegation access to key Indian public and private sector decision-
makers to explore opportunities to enter or expand their presence in
this emerging market. I am looking forward to leading three additional
trade missions with U.S. businesses in the months ahead to further
expand U.S. exports in overseas markets.
If we are serious about fighting for American jobs and American
businesses, one of the most important things we can do is open up more
markets to American goods around the world. The Department of Commerce
is also actively engaged in promoting approval and implementation of
the U.S.-Korea Trade Agreement (KORUS Agreement) as soon as possible,
as the President has called for. American manufacturers--from
machinery, aerospace and chemicals to information technology and
medical devices--stand to gain tremendous benefits from the tariff and
non-tariff provisions of this agreement. According to the U.S.
International Trade Commission, the KORUS Agreement is expected to
increase our annual merchandise exports to South Korea by nearly $11
billion, and these additional exports could support 70,000 American
jobs.
On a related note, in February the European Parliament ratified the
European Union's trade agreement with South Korea, which is scheduled
to enter into force this July. Unless we act soon to approve and
implement the KORUS Agreement, U.S. manufacturers and business will be
at a competitive disadvantage against their European competitors in
South Korea's $1 trillion market. I believe strongly it would be
unacceptable to stand idly by and watch South Korea and European Union
nations benefit from our inaction when we have the opportunity,
presented by KORUS, to ensure U.S. firms can compete and excel on a
level playing field.
Recognizing the importance of a level playing field for U.S.
manufacturers, the Department of Commerce is committed to rigorously
enforcing trade laws and compliance with trade agreements. Commerce
currently has 298 antidumping (AD) and countervailing duty (CVD) orders
in place, covering over 120 products from 40 countries. Roughly 36
percent of the overall orders are on products from China. Commerce
currently maintains 108 AD and CVD orders on imports of a wide range of
Chinese products, including consumer goods, steel products,
agricultural products, seafood and chemicals. Based on 2010 trade data,
roughly $11.6 billion, or 3.2 percent of imports from China, were
affected by orders that year.
If we are going to reap the full benefits of trade, we must take
seriously our obligation to call a foul when we see one and hold our
trading partners accountable. Our actions in this regard since I became
Secretary demonstrate that this Administration considers enforcement of
our trade agreements a priority. We will remain vigilant about
enforcement going forward.
In addition, the Department, through our Bureau of Industry and
Security, is committed to reducing unnecessary regulatory burdens that
harm U.S. global competitiveness, and reforming the U.S. export control
system in a manner that strengthens national security and also reduces
unnecessary barriers to U.S. competitiveness abroad.
The Commerce Department also provides an important piece of
infrastructure to support global competitiveness--the data provided by
our statistical agencies, the Census Bureau and the Bureau of Economic
Analysis. Most of the public data that companies use to make decisions,
including information on imports and exports by detailed industry
sector, as well as the macroeconomic indicators such as GDP that guide
long-term investment planning, are produced by these two organizations
within our Economics and Statistics Administration.
While we are highly conscious of the benefits the country gains
from trade, I believe we must acknowledge and respond to the pain and
struggle that workers in the manufacturing sector have endured as our
economy and the world marketplace has changed. Competitive pressures
ensure that manufacturing productivity will continue to increase, but
as President Obama remarked in the State of the Union address in
January, this transformation has not happened without hardship for many
workers. The rules and market conditions have changed over the last 30
years. Steel mills that once needed 1000 workers can now do the same
work with 100. However, the same changes this industry made to improve
productivity has also enabled this once threatened industry to adapt,
survive and grow. Therefore, in our Fiscal Year 2012 budget request,
the Department of Commerce proposes to transform and improve the
services and benefits the Department, through our Economic Development
Administration (EDA), provides to communities negatively impacted by
foreign competition and other challenges to help them adapt to a
rapidly changing global marketplace. Specifically, the Economic
Adjustment Assistance (EAA) program within EDA can provide a wide range
of technical, planning, public works and infrastructure assistance to
communities that empowers them to harness the ingenuity and hard work
of their communities to compete and thrive.
Improved Service--To ensure that the tremendous synergies of
Commerce and the Federal Government are brought to bear on the goal of
manufacturing competitiveness, we have established CommerceConnect--a
``one-stop-shop,'' offering businesses a single point-of-contact for
accessing the wide range of services and programs that Commerce and the
Federal Government have to offer. This initiative is not only changing
the direct customer experience for manufacturers, it is also driving
reform of the Commerce Department's internal processes across the many
services that we offer.
I would like to highlight a few examples of the type of assistance
CommerceConnect has provided to manufacturers. In our CommerceConnect
field office located in Pontiac, Michigan, we have helped companies
that have historically produced small lot, precision tooling and
components solely for the automotive market to consider the medical or
aerospace industries as an alternative. For example, a former plant
manager for a Big 3 automobile manufacturer came to CommerceConnect for
assistance with a new business start, OPS Solutions, LLC. OPS Solutions
has obtained a patent for its Light Guide Systems* that can help
improve product quality and worker productivity on the plant floor.
After collaboration with CommerceConnect, we directed OPS Solutions to
Oakland County's Medical Mainstreet Program which has introduced the
company to local hospitals interested in the system for worker training
and surgical room instrument setup.
CommerceConnect also engages manufacturers with help in identifying
and accessing new markets overseas. Palmer Paint Products in Troy,
Michigan, is the original manufacturer of the Paint-By-Number arts and
craft product you may remember from your childhood. The company
continues to manufacture high quality, lead-free paint products, but
faces stiff competition from cheaper, lower quality imports.
CommerceConnect recommended the company consider exporting to increase
sales and introduced the company to our local U.S. Export Assistance
Center in Pontiac. Since then, the company has been accepted for a
``Gold Key Program'' to help them export to Canada and an ITA-
sponsored trade mission to Nigeria.
President's Fiscal Year 2012 Budget Request
Looking to the future, the President's Fiscal Year 2012 budget
request for the Commerce Department contains several proposals and
initiatives that will strengthen the Department's capacity to promote
manufacturing competitiveness, while ensuring a commitment to the
President's deficit-reduction priorities. Commerce has re-invested in
its most effective and synergistic programs--the programs that provide
the highest return to taxpayers. These investments, which can be
thought of as down payments necessary to secure the future of American
manufacturing, include:
$764 million for NIST laboratories, part of President
Obama's goal to double the funding of our Nation's key science
agencies. These investments will expand the frontiers of human
knowledge and help create industries and jobs of the future in
areas such as clean energy, advanced manufacturing and
nanotechnology. This funding includes an increase of $85
million that is specifically focused on research and standards
development that will enable the development of innovative
manufacturing processes and technologies.
$143 million for the Hollings Manufacturing Extension
Program
$12 million for the Advanced Manufacturing Technology
Consortia (AMTech)
$75 million for the Technology Innovation Program (TIP) to
fund high-risk, high-reward research in areas of critical
national need, including advanced manufacturing
Approximately $444 million for trade promotion activities
through International Trade Administration
Nearly $300 million for analytical and information support
in the Economics and Statistics Administration
$40 million for EDA investments in regional innovation
strategies
$96 million for EDA's 21st Century Innovation Infrastructure
Program
$45 million in loan guarantees under the newly reauthorized
America COMPETES Act Science and Research Park Loan Guarantee
Program.
In developing the budget, we took a hard look at existing programs.
As a result, we are making changes to better focus limited resources.
As just one example, the President's Fiscal Year 2012 budget achieves a
cost savings of $20 million by restructuring ITA by eliminating a
number of foreign posts and better focusing its support of domestic
industry toward priority sectors, markets, and activities. We believe
these changes will enhance ITA's overall contribution to manufacturing
competitiveness in the global marketplace.
The Department of Commerce is also in the beginning stages of a
report that will help us plan strategically for the future. The America
COMPETES Act requires the Secretary of Commerce to complete a
comprehensive study of the economic competitiveness and innovative
capacity of the United States 1 year after enactment and develop a set
of recommendations. I look forward to conducting and completing this
report, which I believe will inform our approach to manufacturing
policy in many important ways. Consistent with the COMPETES Act,
Commerce will also participate in the interagency National Science and
Technology Council effort to develop a framework for coordinating
Federal programs and activities in support of manufacturing.
Conclusion
Despite increased global competition, evolving consumer demands and
a multitude of changes generally in this sector over the last 30 years,
I am optimistic about the future of the U.S. manufacturing sector. That
optimism rests in my confidence that American workers are the best in
the world, and on the belief that the Federal Government will do its
part. Americans recognize that we are operating in a new world. The
decisions we make today about how we invest in R&D, education, and
innovation will profoundly influence America's economic competitiveness
tomorrow. The President knows and I know we can out-compete any other
country on Earth. Our nation is well positioned to take advantage of
many great strengths and promising opportunities, and we are committed
to helping American manufacturers make the most of them.
Thank you again for the opportunity to appear before you today. I
look forward to answering your questions.
The Chairman. Thank you, Mr. Secretary, very much.
You have mentioned the America COMPETES Act, and that rings
dearly in the hearts of all of us around this table. It was
consummated actually in the last couple of minutes by the
wonderful Senator sitting on my left and Lamar Alexander of
Tennessee. And we just sort of did a little deal on the floor
and settled the whole thing. It went through with unanimous
consent, allowing the House 4 days to pass it. Basically we had
a 2 to 1 margin. So the agreement about the need for science,
technology, engineering, and math is enormous.
The timeline is what worries me, and that is, what we do at
the Federal level in the way of programs, the International
Trade Administration, all kinds of things, patents, all the
rest of it--and yet the bulk of young people deciding at an
early age, because you have to get them in the third and fourth
grade if you are going to keep them, to get them started on
science and started on math--you know, kids have to discover
how good they are, and they can only do that by taking on a
subject which they think they cannot do and then discover they
can and off they go. And that creates your entrepreneurs and
innovators in the future.
So what I would love to know in your mind is with that as
an ongoing challenge to America, because we are not where we
used to be in all of those subjects--we are down compared to
the rest of the world. The Government has to fill in in the
meantime and the private sector has to fill in in the meantime,
and there has to be a balance for that because if the
Government does too much, people will not like that. If the
private sector does too much, people will do that, will like
that, provided it does the right things.
What are your worries about the coexistence of an
increasingly better trained workforce, more motivated, more
entrepreneurial, and the role of the private sector and the
public sector and the chances of their working together in a
harmonious way?
Secretary Locke. Well, we clearly need that collaboration
between the public and private sector because if you talk to a
lot of companies, especially in the manufacturing area, as they
go into more advanced technologically based manufacturing, they
are actually reporting vacancies that they cannot fill, that
they cannot find enough skilled workers to meet the demands of
this new technology, this more advanced engineering and
manufacturing.
That is why it is incumbent upon the private sector to work
with our community colleges and our educators to develop those
specific courses and to ensure that those graduating from
whether 2-year courses, 4-year courses, or even 1-year courses
have the appropriate skills so that they can actually jump into
the marketplace.
We have, for instance, in the Department of Labor numerous
programs that provide on-the-job training to meet the needs of
manufacturers, to provide the very specific upgrading of skills
that those companies need, working with existing employees.
But we have even in the technology sector the need for
courses that are embraced or where the curriculum is almost set
by the private sector so that they can feel confident that when
students graduate with this particular certificate, that the
private sector is confident that those graduates have the
skills necessary to immediately move into the workforce.
The Chairman. And they can do that. I will just end with
this little story.
A couple weeks ago, I had a meeting at West Virginia
University with all of the top scientists, the provosts, and
president, and all the rest of it. And there was one fellow,
who has been a longtime friend by the name of Craig Hartzell
who runs a company called Azimuth, which virtually nobody in
the western world has heard of, but I sure have. And it is so
sophisticated in its work that it does for the intelligence
community and the military community that you cannot go to the
second floor without top secret clearance. In West Virginia
that is kind of a strange concept.
But he said nothing until I called on him, and I said,
Craig, you must have something you want to say. He said, yes,
in fact, I hire 80 percent of all of the people that work for
me out of this university because they are so well trained.
People have to believe in themselves, don't they? They have
to get engaged with a subject. They have to be shown to
themselves, sometimes by themselves, whether it is robotics or
whatever it is, that they can do things they did not imagine
they can do. When they do that starting in the third and fourth
grades, they just begin to take off. They get this lust for
knowledge and hunger for the future and imagination that you
cannot substitute for.
But the idea is that we can do it. We absolutely can do
this. The question is do we have the will to do it. Will
parents help? Will universities help? Will budgets be friendly
enough to allow the America COMPETES Act to establish itself
and to carry on?
That was a statement.
Secretary Locke. I thoroughly agree and I am sure, Senator
Warner, as a former Governor and myself as a former Governor--
we understand that we have to continue to invest in education.
The manufacturing agenda, the business agenda must always focus
on education as well. And the President's proposed 2012 budget
calls for significant enhancements in terms of training more
teachers in math and science and focusing on the Race to the
Top to make sure that we have the very best teachers in the
classroom, teachers that will excite our students and show them
the great possibilities out there.
Not all jobs require a 4-year degree or a Ph.D. Certainly
the good family wage jobs in manufacturing do require more
skills than ever before. We need to make sure that our entire
education system is aligned to provide that trained workforce.
The Chairman. Senator Hutchison?
STATEMENT OF HON. KAY BAILEY HUTCHISON,
U.S. SENATOR FROM TEXAS
Senator Hutchison. Well, thank you, Mr. Chairman. And I
will submit my opening statement for the record.
[The prepared statement of Senator Hutchison follows:]
Prepared Statement of Hon. Kay Bailey Hutchison, U.S. Senator from
Texas
I want to thank the Chairman for holding this important hearing on
``The Future of American Manufacturing: Maintaining America's
Competitive Edge.'' I also want to thank Secretary Locke for appearing
today as a witness.
Given the amount of negative reporting about the continued loss of
American jobs in manufacturing sectors, such as steel and automobiles,
it might surprise some to know that the United States remains the
world's number one manufacturing nation--producing 21 percent of all
global manufactured goods and out-producing number two China by more
than 40 percent.
Manufacturing supported an estimated 18.6 million jobs in the U.S.
in 2009 or one of every six jobs in the country. There is, however,
justifiable concern that our position as the leading manufacturing
nation is slipping.
Members of the Secretary of Commerce's Manufacturing Council
reportedly told the Department of Commerce that, ``U.S. manufacturers
face a 17 percent higher cost of doing business compared to our major
trading partners.'' As a result, over the past decade, more than 50,000
factories have shuttered in the United States. Between 2001 and 2010,
the total number of manufacturing employees in the United States has
declined by 31 percent.
Exports have remained a key driver of our Nation's economic growth.
In 2008, the manufacturing sector accounted for 57 percent of the
Nation's total exports of goods and services. However, despite the
demand for U.S.-manufactured goods, China continues to overtake the
United States as a leading exporter of manufactured goods.
Consequently, the U.S. share of global exports of these products
declined from 19 percent in 2000 to 14 percent in 2007. To cite just
one example, the U.S. share of semiconductor exports has fallen from 20
percent to 12 percent as the industry has shifted to a more global
business model.
If the United States is going to remain the world's number one
manufacturing nation, we must retain our competitive advantages by
continuing to invest and lead in research and development and private
sector innovation, productivity and technology. We must aggressively
open markets to export our products, negotiate and ratify free trade
agreements, and most importantly, put in place a tax and regulatory
environment that rewards and encourages growth in the manufacturing
sector.
Last December, we were able to pass a fiscally responsible
reauthorization of the America COMPETES Act, which funds STEM education
for our future innovators, groundbreaking research into new frontiers
and out of the box technologies, as well as technology transfer from
our national labs and agencies. Strengthening all of these activities
is part of the solution to assist U.S. competitiveness in
manufacturing.
While the figures that indicate we are losing our competitive
advantages are troubling, there are also some encouraging data. The
United States leads the world in worker productivity--in other words,
we build more with fewer workers. I am also encouraged by the success
of manufacturers in my own state of Texas over the past decade. Texas
continues to lead the Nation in the number of jobs created in all
sectors, including manufacturing. Texas continues to attract and create
manufacturing jobs and export our products throughout the world. I
believe that success is the direct result of the business-friendly
climate in Texas that has resulted from a number of principles that the
Federal Government would do well to replicate. Texas offers low taxes,
a limited regulatory burden, access to highly qualified STEM graduates,
tort reform and right to work laws.
If the United States is to maintain our manufacturing base and
compete globally, we must do all we can to ensure we enhance our global
advantage through innovation, and regulatory and tax reform to lighten
the burden on manufacturers.
I look forward to hearing from Secretary Locke on the efforts of
the Department of Commerce to address the many issues and challenges
facing the manufacturing industry.
Senator Hutchison. But I do want to first acknowledge the
mention of our America COMPETES legislation. We need to also
add to our manufacturing base. But without the innovators,
without the creativity that we have fostered through research
and education, America's economy in my opinion would be
stagnant. So I am very pleased that we were able to pass this
bill. Research is our seed corn, and it is the innovation that
we want to support.
And improving STEM education and inspiring our students is
also part of America COMPETES, through assuring that our
teachers have the capability to get teacher certificates at the
same time they are getting degrees in science and engineering
and math. We need teachers who can inspire the young people,
and if they are majors in STEM courses, they are even better
able to do that.
So I think that we have made a great head start with
America COMPETES, and I appreciate your support for that.
I want to also ask you this question. One of the things
that concerns us and the reason the chairman is calling this
hearing is that while we are still the manufacturing leader of
the world, we have lost much of that base. Some of the people
that we have talked to, the CEOs who have moved jobs overseas,
are saying the regulatory burden and the U.S. tax structure is
one of the reasons. I even had a CEO tell me that there is a
more stable regulatory environment in certain foreign countries
than in America. Now, that is a stunning statement from a CEO
who must manage a business with our changing regulatory
environment. The regulations ramp up, and then it changes, and
the law changes, and then the regulations change again.
I would just ask you what do you think needs to be done to
give regulatory certainty and the ability for a CEO to predict
what the regulatory environment is going to be. Do you think
that we need to change the corporate tax structure, which is
currently at the 40 percent rate, while in the competing
nations there is a much lower tax rate to spur jobs?
Secretary Locke. Well, thank you very much, Senator
Hutchison, for that question because the President in January
did issue an executive order directing agencies to analyze all
of their existing regulations to determine if they are
ineffective, insufficient, or excessively burdensome. And so
the President has spoken to the cabinet about that and stressed
the importance of that effort moving forward. We know that it
is important that we have regulations that do not hinder
economic growth while at the same time striking that balance of
protecting consumers and the public.
Let me just say that with respect to corporate tax reform,
the President is very much supportive of that, and he has
indicated that he wants to lower the base as much as possible
through the closure of loopholes and exemptions and to have a
much lower corporate tax rate. That would include looking at
the issues of some of the penalties that companies have if they
bring some of their foreign earnings back to the United States.
And so that is all a topic of major concern and a priority for
the administration.
Let me just also indicate--you talked about we have the
creators here in America and the need to manufacture here in
the United States. We are actually finding that some of the
labor advantages, the low-cost labor advantages elsewhere,
particularly in Asia, are disappearing, and that with the need
for just-in-time delivery, the rising fuel prices,
transportation costs, you are seeing a lot of manufacturing, as
Congressman Steny Hoyer indicated--a lot of manufacturers
moving their operations back to the United States and that
there is a great value and a great demand for that ``made in
USA'' product. So we are seeing a lot more manufacturing coming
back to the United States, and certainly if we are able to
fulfill the President's goal of streamlining and reviewing our
regulatory system, as well as corporate tax reform, I think
that there will be even greater incentives for American
companies to do more manufacturing here.
Senator Hutchison. My time is up, and I want my colleagues
to have a chance.
I just want to say that I hope we can work together on the
corporate tax rate and the repatriation of foreign earnings
into our country without the penalties. I think that would add
much to our manufacturing capabilities.
But I am going to be looking, as the Ranking Member of the
oversight committee for many of our regulatory agencies, for
some kind of signal that there really are reductions in
regulations. I heard the President's State of the Union where
he said he wants to lessen regulations, but then he went on for
a full paragraph about how important regulations are. And I see
the EPA trying to regulate greenhouse gases. I see the FCC
trying to regulate the Internet. And that is not a good sign
that he is doing what he actually said he wants to do.
So I think we need to be looking at those things and trying
to assure that what the President is accurately portraying what
is actually happening in his regulatory agencies. And any
suggestions you would have on how we can assure that this
perceived priority is actually happening in the agencies
themselves would be helpful.
Thank you.
Secretary Locke. Well, thank you.
The Chairman. Senator Warner?
STATEMENT OF HON. MARK WARNER,
U.S. SENATOR FROM VIRGINIA
Senator Warner. Thank you, Mr. Chairman.
Let me, first of all, welcome my friend and former
colleague, Secretary Locke. We had a great opportunity to work
together when we were Governors. We both had the distinction of
serving as Chair of the National Governors Association, and I
think the President made an excellent choice in choosing
Governor Locke to be the Secretary of Commerce.
In a note of personal interest, let me also acknowledge Dr.
Patricia Buckley who I know is working for Secretary Locke who
I have known for 35 years and argued with for close to those 35
years about economic policy.
I want to follow up very briefly on one of the things
Senator Hutchison said. I share with you the notion that we
need to get the regulatory balance right. I think there are
appropriate roles for regulation, and we have been working for
about 8 months on a regulatory pay-go notion that actually
tries to put the appropriate incentive on an agency so that if
they are adding a new regulation, there is actually a
replacement of one of equal value. You have to put appropriate
barriers around this, but it puts the incentives on the agency
to think twice, as well as look back. There was never any
retrospective incentive for agencies to kind of clear out the
underbrush in the past.
And while this has got some challenges, let me just add the
UK has actually adopted a ``one in and one out'' regulatory
approach, and the UK recently, as I am sure Secretary Locke
knows, passed America in terms of the international
competitiveness rankings in many ways because of some of their
regulatory reform.
I have got a series of questions. I want to try to get at
these very quickly.
One of the things, Secretary Locke, I know that we both did
and you did very well in Washington state and we tried to do in
Virginia as well was attract manufacturing jobs to our states
as Governors. And I found--and I am sure--you know, we have
talked about this in the past--you found as well when we were
competing against certain other states, we could be successful
linking together our state and local incentive packages. But
when we were competing against other countries, whether it was
Canada, your neighbor to the north, or Korea or other
countries, oftentimes their federal governments, in terms of
job location, supplemented local efforts.
So we have been working for the past year--and I know the
chairman did this in his tenure as Governor as well--without
adding a lot of bureaucracy could we add--and we have got up to
a $10,000 loan forgiveness program that would supplement state
and local economic development efforts. So you do not need to
create a new bureaucracy. You can do it through the EDA that
would supplement state and local economic development efforts
where states and locals will put up most of the dough, but then
if you were competing for a job repatriating to the United
States, an in-sourcing of a job particularly in manufacturing
and technology, this added site location incentive could come
to bear.
With your Assistant Secretary Fernandez, we have had a
number of conversations. And I would just like to get some
ideas about what we could do at the national level in terms of
continuing to incent, at least on that site location piece,
jobs coming back into this country.
Secretary Locke. Clearly that is a priority for the
administration and for the Department of Commerce. At the
Department of Commerce, of course, we have a variety of
programs. But let me just say that, for instance, at the
Federal level, the President has called for a reauthorization
of the clean energy manufacturing tax credit which leverages
the private sector investment. It is oversubscribed and the
President has called for doubling that. That would really
provide incentives for companies, both domestic and foreign, to
enter into the United States and do more manufacturing here.
You are right that the states have a whole host of
programs, and we as a nation, as a Federal Government, do not
do enough compared to other nations in terms of attracting
foreign investment here.
We do have a program within the Department of Commerce
called Invest in the United States, and we are looking at
expanding that to really provide the resources for foreign
investors in deciding where they might want to locate in the
United States and providing a catalog of all the different
services, programs, tax incentives, tax structures, educational
workforce training programs the various states would offer. And
then we believe that the Commerce Department is well
positioned, through the Economic Development Administration and
other programs, to then interact with the other Federal
agencies to make sure that the regulatory burden that various
Federal processes are as efficient and as quick and less
burdensome as possible, whether it is a United States company
looking to expand a facility somewhere in the United States or
trying to bring a foreign company back to the United States.
Senator Warner. Well, Mr. Chairman, this is an issue that
we have put forward called The America Recruits Act. I mean, it
would not stop Washington state from competing with Virginia or
Virginia competing with Arkansas, but when we are competing
against foreign nations who add at their Federal level extra
incentives, I think this would be an additional tool in the
toolbox. It is not a silver bullet.
I know my time has expired. Just two quick comments.
One is one of the things--I want to thank the chairman and
Senator Hutchison as well on the America COMPETES Act. One of
the small amendments we added was actually requiring the United
States to finally have a national competitiveness strategy. We
have not done that since the 1980's. A written plan. The last
time that happened under President Reagan, the outgrowths of
that were the R&D tax credit initiative to get Federal research
out of the universities and into the workplace. We need that.
My closing comment would be I do hope, as I think you and
the President have moved forward on trying to dramatically
increase exports--we got a lot of programs in the Commerce
Department, but it is a real bureaucratic challenge. The notion
of trying to consolidate and streamline some of our export
support programs I hope will be on the agenda as well.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Warner.
Senator Snowe?
STATEMENT OF HON. OLYMPIA J. SNOWE,
U.S. SENATOR FROM MAINE
Senator Snowe. Thank you, Mr. Chairman.
Welcome, Mr. Secretary.
Manufacturing and our rural economies are inextricably
linked without question, and certainly that is true in my
state. The essence of our manufacturing in the state of Maine,
of course, is the pulp and paper industry that represents more
than 7,000 jobs. So that is estimated that each one of these
jobs indirectly supports five to seven positions in Maine's
economy. And it is really the engine that drives our rural
economy. And it is certainly is true across this country that
it represents more than 900,000 workers.
Several of us on this committee, including Senator Begich,
Senator Vitter, and Senator Pryor, wrote a letter to you in
December to ask you to release a report that was conducted by
your Department with respect to the impact of the boiler MACT,
the maximum available control technology, on the pulp and paper
industry. You did not release that report on the basis that a
new rule would be issued by EPA so that this report was not
pertinent.
First of all, I think the report should have been released
because I think it would have shown the extent to which it
would have had major, wide-ranging implications that serves as
notice to agencies. Every time they are issuing rules, they
have to understand in this tough economy where we are not
really creating jobs, they have got to be sensitive and
responsive to that. It is one thing to be saying we are
responsive, we are concerned about jobs, and then on the other
hand, it is just not happening through rules and regulations.
It is a deep-seated frustration. We have had 21 consecutive
months of an unemployment rate of 9 or above. That is the
longest in history here.
So I get to the next point. EPA has now issued another
rule. It modified that boiler MACT rule. It is still going to
be an essential assessment of $2.1 billion on this industry.
First of all, the pulp and paper industry is the
cornerstone of manufacturing.
Second of all, we need a national strategy.
Third, we need to understand what the implications are for
job creation. And I think your Department needs to do a study
on this particular rule as well and its impact on the industry.
We need these jobs. We need to save this industry. They can be
competitive, but they are facing enormous disadvantages, as we
well know, from abroad and in particular China.
So what can you do on that issue? We need to have a report
from your Department on this particular ruling. Even with its
modification, it is going to be a huge tax on the industry and
the jobs that depend on it.
Secretary Locke. Well, thank you very much, Senator Snowe.
As you indicate, the EPA significantly modified their
preliminary proposal, their first proposed rule, and they have
come up with one that is substantially different that will have
less burden on industry. Because it is so extensive a change, I
think to the surprise of many, it is now putting out that rule
for additional public comment before any final rule is enacted.
Our initial reports or assessment was, in fact, informal.
It was part of the pre-decisional collaboration among all the
different Government agencies, but we will now be taking a look
at this most recent revised rule to see if it warrants comment
and analysis from the Department of Commerce.
Senator Snowe. Well, I am just concerned we are always
putting the cart before the horse here within the agencies and
rulemaking. We should know in advance before they are issuing
these kind of rules for rulemaking, frankly, as to what the
effect is going to be. I mean, this is a matter of desperation.
It is no wonder there is anxiety and anger that is fueling
America's disposition these days with respect to our economy
and, most importantly, our ability to create jobs.
The Maine paper industry just did a report, ``Maine on
Paper: An Industry We Can't Afford To Lose.'' That is an
understatement.
And so I think that by the time they go through the
rulemaking and what the effects are--you know, they are already
underway. They have to anticipate those costs. They have to
incorporate them into their business plan. That is the point.
That has a ripple effect. I think you know that.
So the question is what can we do to turn it around so that
we can make sure we can block any effects of any of these
potential rulemakings. The industry has already assessed it is
going to be a $2.1 billion effect on their industry. They
employ 900,000 jobs in mostly rural America. Where are these
people going to go find jobs? I mean, this industry is
struggling.
Secretary Locke. Rulemaking is an iterative process. It
requires, obviously, analysis by those involved in the proposal
stage, but then after those proposed rules are published, it
invites comment from the public, as well as other agencies, and
then it is taken into account and either rewritten or modified.
So I think that because of the public input that was given on
these boiler rules, that is why the agency substantially
modified it and came back with a totally different one.
We need to understand, however, as I understand it, that
this original proposed rule was required by the courts, and so
EPA had to act and put out something. But because of the
comments that were received by the private sector and other
agencies, they substantially proposed a different rule. And
because it is so substantially different, which speaks to the
fact that agencies listen, that now because it is so
substantially different, it needs to go out for additional
public comment.
Senator Snowe. Well, I would hope on two fronts that your
Department weighs in aggressively and proactively on this
question. And two, we should have a national strategy on this
industry that is the cornerstone of manufacturing in America
and certainly true of my state. I mean, we cannot just assign
benign neglect to this industry. It is fundamental.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Snowe.
Senator Pryor?
STATEMENT OF HON. MARK PRYOR,
U.S. SENATOR FROM ARKANSAS
Senator Pryor. Thank you. Mr. Chairman, thank you.
And Secretary Locke, thank you for being here today. It is
always good to see you.
I was glad to know that you are focused, as you have been
for a good while on science parks and research parks. I am
convinced that they play a role in revitalizing American
manufacturing. I am glad to know that you share that same
conviction.
But let me ask you a question, just a brief question, about
our commitment as a nation to manufacturing. Do you think that
we should make a general commitment to manufacturing, or do you
think that we should focus on a few specific types of
manufacturing, a few specific areas of manufacturing and really
try to focus on those and rev those up?
Secretary Locke. I do not think that we should be trying to
pick selected industries. I think we should be trying to create
the conditions by which all manufacturing can exist and prosper
in the United States. And that is why the President has really
focused on, in his 2012 budget proposal, significant
enhancements toward innovation and research and development. It
is part of his goal to double Federal funding for R&D which
will lead to more products that would be manufactured in the
United States, as well as extension and reauthorization of
various tax credits to reward manufacturing and, of course,
education, to make sure that we have the skilled workforce,
whether at the community college level or at the 4-year
baccalaureate and advanced degree level that will design the
products and engineer these products all the way from the
design centers and the laboratories down to the actual assembly
line and the manufacturing processes.
Senator Pryor. Right. I think one of the things I really
liked to hear last year in the State of the Union was the
President's goal to try to double our exports in 5 years. I
think that is a great goal.
My question is now are we taking the steps necessary to get
there. Are we going to actually achieve that goal?
Secretary Locke. We are on track to meet the President's
goal of doubling exports over the next 5 years. In order to
achieve that goal, we would need to grow exports by roughly 14
percent over 5 years compounded, and when you compound it, you
will get to 100 percent or a doubling of U.S. exports.
This last year, 2010, we saw exports at 17 percent,
virtually 17 percent over 2009. So we are well on our way.
Let me just say, for instance, exports to China were up 34
percent, 2010 over 2009.
Manufactured goods were up substantially and agricultural
goods are their second highest in U.S. history with a huge
trade surplus.
I know that Senator Warner had to leave, but he was talking
about the consolidation of Commerce Department programs to help
companies export. I can tell you that we are consolidating our
programs and consolidating not just within the Department of
Commerce but also with the other Federal agencies. We have
embarked on a nationwide tour, a promotional effort, to really
help us target especially small and medium-sized companies and
inform them of the opportunities to export. So many of the
programs at the Department of Commerce are for free to help
U.S. companies find buyers and customers around the world. And
our motto is that the more that companies export, they more
they produce. The more they produce, the more workers they
need, and that creates jobs, especially in the manufacturing
sector.
We have a program now, for instance, called
CommerceConnect. And we are changing all of our Commerce
offices throughout the United States where you go into one
Commerce Department office and a person is cross-trained in all
the programs offered by the Department of Commerce, and not
just the Department of Commerce, but the Labor Department,
Small Business Administration, Defense Diversification
Programs, Export-Import Bank programs, and even state and local
programs so that this Commerce Department employee is an
advocate, a counselor for a small/medium-sized company in the
full needs and full range of services that that company might
be able to take advantage of to sell more.
Senator Pryor. I think that is great, and I think that
helps with efficiency but also helps with the public being able
to access what you do.
Let me ask you really one last question because I am almost
out of time here. I would find it interesting and helpful to
me--I cannot speak for the rest of the Committee, but some of
them may as well. I would find it interesting and helpful to me
if you could sort of provide a list--and it could be 5 or 10 or
it could be 100 different items, but you know, a few items at
least--of things that we can do in the Congress to help spur
innovation and manufacturing.
I hope as you are thinking about that, you will not be
limited to just things that may come to mind immediately
because I think one thing we ought to consider--and I would
like your thoughts on this. You may not have time today, but
immigration policies. We allow the best and the brightest to
come over here and get educated, but then we do not let them
stay here and work. And unfortunately, what we end up doing is
we are training the best and the brightest to go to our
competitor nations, places like China, India, et cetera, and
they go over there and they have these U.S. degrees and they do
great things over there.
So there are lots of things in that basket of options that
I think we should consider. And I would really appreciate and,
again, would find it interesting to get your thoughts on sort
of a list of things that we could do.
Secretary Locke. Great. I would be happy to do that, sir.
Senator Pryor. Thank you.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Pryor.
Senator Cantwell?
STATEMENT OF HON. MARIA CANTWELL,
U.S. SENATOR FROM WASHINGTON
Senator Cantwell. Thank you, Mr. Chairman. Thank you for
holding this important hearing and your interest in
manufacturing. It certainly is critical to where our country is
going in the future.
And Secretary Locke, I appreciate your testimony which I
have had a chance to review about some of the President's
priorities. You obviously know that big news back in the other
Washington on a very big defense contract that was about U.S.
manufacturing, and in aerospace we still have a competitive
edge in a variety of markets. But it seems in this particular
case that one of the deciding factors was the implementation of
lean manufacturing to drive down the costs to compete even
against foreign subsidies--or at least in my view, the
consideration of subsidies were not taken off the table. So
they were basically competing against foreign subsidy, but yet
U.S. lean manufacturing drove up the efficiency to a point
where the United States was still competitive.
So my question--and I see from your testimony that the
Manufacturing Extension Program is one of the plus-ups in the
budget. That is good news.
What can we do in this area to continue that lean
manufacturing effort in a more expansive way? And to what
degree can that be used for retooling and re-skilling the
workforce in America? Or are there other things that we should
be looking at?
Secretary Locke. Well, clearly there are a whole host of
programs, some that the President has called for expanding,
whether it is the investments in advanced manufacturing, a
public/private partnership called AMTech that is proposed to be
led by our National Institute of Standards and Technology, our
NIST laboratories. That would be a public/private partnership
to look at some of the commercialization of lean manufacturing
programs that could really hasten development of new products
and ensure that that manufacturing occurs in the United States,
all the way to our MEP program, the Hollings Manufacturing
Extension Partnership, which just last year served some 34,000
manufacturers in the United States. And those clients reported
that more than 17,000 jobs were created, as well as retaining
some 54,000 jobs. And part of that was also to identify markets
and additional customers abroad for these manufacturers in the
United States. So increasing their efficiency, their
productivity, as well as finding additional customers, buyers
for those ``made in USA'' products and services.
Clearly, I think we need to look at R&D because a lot of
the things coming out of our Federal laboratories are creating
those strategies on how to be lean manufacturers, reduce their
costs. Again, if we are able to reduce their costs, they are
competitive around the world. And then we turn around and help
them sell those products around the world, whether it is Boeing
airplanes, to tugboats and barges and dredging equipment, to
even thin film solar. There is a great demand, a high value for
those ``made in USA'' products and services.
Senator Cantwell. I definitely agree on the--it seems that
we are leading the way on the innovation side. In fact, a lot
of our R&D ends up getting used in other places. But the
advantage that we still have in manufacturing is where
innovation continues to increase the opportunity. I mean, if
you are just making the same thing over and over again, no, we
do not have that advantage. But if we are going to continue to
innovate in manufacturing or a particular area, then that gives
us the advantage over some other country who cannot innovate as
fast as we do. But that innovation takes a skilling of the
workforce as well. I just think with this great level of
unemployment, figuring out how to get those--the biggest thing
that will next happen out in the Northwest is all those new
jobs that are created. People will go from the supply chain to
the manufacturer, and then the supply chain will be looking for
people and they will be looking to skill them so that they can
keep that innovation pace going.
So our advantage is innovation. That is our advantage. We
know how to innovate. And the question is what can we do to
help get that implementation of those wins into that
manufacturing base quicker. I am sure there are some--as my
colleague from Maine suggested, there is probably some in
paper. There is probably some in other areas. But it is
implementing those. It seems like some of the other countries
are having a little bit advantage of. They take our technology
and get it implemented faster than we do. And so I think we
need to look at how we take our innovative edge and actually
get it implemented.
Secretary Locke. I think there are a whole host of
strategies that we need to focus on, and one includes just
hastening the commercialization of the R&D and getting those
ideas into the marketplace whether it is speeding up the patent
process, whether it is addressing those issues of the ``valley
of death'' that entrepreneurs face when they come up with a
great product, a great idea, and how to get the capital that
they need. And that is why, for instance, the President has
called for expansion of programs in the Small Business
Administration that would really provide some of the initial
capital that companies need to commercialize their great
products and their ideas, all the way to providing tax
incentives, whether it is the President's call for no capital
gains taxes on investments in small businesses that are able
then to succeed. So it is trying to provide that capital and
then, of course, making sure that manufacturing occurs here.
And as you indicated, we have to have a highly trained
workforce. We are finding that the cost advantages of labor in
other countries like in Asia are disappearing and that there is
more incentive for companies to move manufacturing facilities
here. But if you are going to do that, you need to have a
highly trained workforce, and that includes programs at the
Department of Labor to the Department of Education working with
community colleges and so forth.
So there is a whole range of actions that are necessary in
order to create those incentives for more manufacturing to
occur here and to stay here and to bring manufacturing back to
the United States.
The Chairman. Thank you very much, Senator Cantwell.
Senator Boozman, you are in a most awkward position here.
Number one, we are delighted you are on the Committee. We are
delighted you are here. A vote has started. There are about 12
and a half minutes. It only has to do with keeping the
Government going. And yet, I think you should have a chance to
ask Secretary Locke a question.
So what I want to do is just say that the record is going
to be kept open for the next 2 weeks until the close of
business on March 16 for submissions and questions, but
depending on your foot speed, you should proceed, I think, with
a question.
STATEMENT OF HON. JOHN BOOZMAN,
U.S. SENATOR FROM ARKANSAS
Senator Boozman. Well, thank you, Mr. Chairman. I
appreciate you and our Ranking Member for having such an
important hearing. In Arkansas, the name of the game right now
and really throughout the country is jobs, jobs, jobs. So I
will be very brief and, as an Arkansan, try and hurry the best
I can with my speech.
But I apologize for being late. I did have the opportunity
to look at your testimony. Again, manufacturing--I know we all
agree--certainly has to be the basis of us having a great
country and moving forward on improving our economy.
My concerns--and I know that these probably have already
been mentioned. I think my manufacturers feel like they are
getting killed with regulations whether it is boiler MACT or
this or that. Numerous things coming down that are creating so
much uncertainty that the last thing in the world they are
doing is thinking about hiring people. So we have to have some
certainty.
Lots of manufacturers that are very successful with what
they produce build manufacturing facilities overseas to serve
markets there and keep transportation costs down, too, and then
they are unable to bring those profits home. So in not bringing
them home, pretty soon they say, well, you know, we need to
spend that money and they start expanding overseas plants and
before you know it, the decision is made to actually move
overseas.
So again, these are problems that we are all going to have
to work together to solve. They are not easy problems, but I do
appreciate your leadership and working on them.
With that, I yield back.
The Chairman. You are a splendid Senator, sir.
Senator Boozman. I wanted to get off on the right start.
The Chairman. Right.
[Laughter.]
The Chairman. Mr. Secretary, thank you very much. This is
an important vote. It is not fair to you. We cutoff part of our
conversation which we should have had, but the record is open.
We are grateful for your presence. Thank you.
Secretary Locke. Thank you very much, sir.
[Whereupon, at 11:09 a.m., the hearing was adjourned.]