[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














                  U.S. GOVERNMENT PRINTING OFFICE
73-925 PDF                WASHINGTON : 2012
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC 
area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC 
20402-0001









       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.]

                                  
