[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]






   UNFAIR TRADE PRACTICES: ADDRESSING BARRIERS FACING SMALL BUSINESS 
                               EXPORTERS

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

                                HEARING

                               before the

             SUBCOMMITTEE ON AGRICULTURE, ENERGY AND TRADE

                                 OF THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD
                              MAY 22, 2014

                               __________


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


            Small Business Committee Document Number 113-070
              Available via the GPO Website: www.fdsys.gov


                               __________

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                   HOUSE COMMITTEE ON SMALL BUSINESS

                     SAM GRAVES, Missouri, Chairman
                           STEVE CHABOT, Ohio
                            STEVE KING, Iowa
                         MIKE COFFMAN, Colorado
                      BLAINE LUETKEMEYER, Missouri
                     MICK MULVANEY, South Carolina
                         SCOTT TIPTON, Colorado
                   JAIME HERRERA BEUTLER, Washington
                        RICHARD HANNA, New York
                         TIM HUELSKAMP, Kansas
                       DAVID SCHWEIKERT, Arizona
                       KERRY BENTIVOLIO, Michigan
                        CHRIS COLLINS, New York
                        TOM RICE, South Carolina
               NYDIA VELAZQUEZ, New York, Ranking Member
                         KURT SCHRADER, Oregon
                        YVETTE CLARKE, New York
                          JUDY CHU, California
                        JANICE HAHN, California
                     DONALD PAYNE, JR., New Jersey
                          GRACE MENG, New York
                        BRAD SCHNEIDER, Illinois
                          RON BARBER, Arizona
                    ANN McLANE KUSTER, New Hampshire
                        PATRICK MURPHY, Florida

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

























                            C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Scott Tipton................................................     1
Hon. Patrick Murphy..............................................     2

                               WITNESSES

Mr. Milton Magnus, President, M&B Metal Products Company, Inc., 
  Leeds, AL, testifying on behalf of the American Wire Producers 
  Association....................................................     4
Mr. Peter Jhones, Legal Advisor, Spyderco, Golden, CO............     6
Mr. Don Shawcroft, Owner, Jon B. Shawcroft Ranches, Alamosa, CO, 
  testifying on behalf of the Colorado Farm Bureau...............     8
Mr. Timothy C. Brightbill, Partner, Wiley Rein, LLP, Washington, 
  DC.............................................................    10

                                APPENDIX

Prepared Statements:
    Mr. Milton Magnus, President, M&B Metal Products Company, 
      Inc., Leeds, AL, testifying on behalf of the American Wire 
      Producers Association......................................    20
    Mr. Peter Jhones, Legal Advisor, Spyderco, Golden, CO........    30
    Mr. Don Shawcroft, Owner, Jon B. Shawcroft Ranches, Alamosa, 
      CO, testifying on behalf of the Colorado Farm Bureau.......    47
    Mr. Timothy C. Brightbill, Partner, Wiley Rein, LLP, 
      Washington, DC.............................................    53
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    None.

 
   UNFAIR TRADE PRACTICES: ADDRESSING BARRIERS FACING SMALL BUSINESS 
                               EXPORTERS

                              ----------                              


                         THURSDAY, MAY 22, 2014

                  House of Representatives,
               Committee on Small Business,
     Subcommittee on Agriculture, Energy and Trade,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 9:31 a.m. in 
Room 2360, Rayburn House Office Building, Hon. Scott Tipton 
[chairman of the Subcommittee] presiding.
    Present: Representatives Tipton, Luetkemeyer, Bachus, Meng 
and Murphy.
    Chairman Tipton. Well, good morning. I want to thank 
everyone for taking time to be able to be here, and this 
hearing will come to order.
    I would like to be able to thank our witnesses for taking 
time away from your full-time jobs for this important hearing 
and we do look forward to your testimony.
    As we celebrate World Trade Month, this is an ideal time to 
review our trade policy initiatives and the effects on small 
businesses here in the United States.
    Currently there are a variety of trade policy initiatives 
in the pipeline, including ongoing negotiations with Trans-
Pacific Partnership, the Transatlantic Trade and Investment 
Partnerships and the possible renewal of Trade Promotion 
Authority. These initiatives will directly or indirectly affect 
the way small firms compete and operate in the global economy. 
Exports are a significant contributor to the United States 
economy, helping to support millions of good paying jobs in 
trade and competing industries.
    In 2013, the United States exported nearly $2.3 trillion in 
goods and services, an all-time high. Small businesses account 
for a substantial share of this value. According to statistics 
from the United States Census Bureau, approximately 97 percent 
of exporting businesses are small and medium sized businesses.
    While legal trade can confirm many benefits for small 
businesses and the economy, the opposite is true, when foreign 
nations and companies refuse to play by the established rules. 
Particularly unfair and predatory trade practices like dumping 
and intellectual property theft can result in substantial 
monetary harm to small businesses in trade competing 
industries. In addition, an inability to be able to protect 
your intellectual property rights can stifle the innovation 
necessary to come up with further technological advances.
    Remedies exist for small businesses to fight these unfair 
trade practices. Unfortunately in too many cases, the cost and 
complexity involved in fighting unfair foreign trade practices 
are beyond the means of most small businesses.
    A recent report from the Government Accountability Office 
highlighted some of these challenges, noting that the cost of 
pursuing antidumping and countervailing duty cases at between 
$1- and $2 million. I have no doubt that the U.S. small 
businesses can compete with any company in the world. As we 
review the current trade agenda, we need to take a dual 
approach of improving coordination of domestic Federal agencies 
and strengthening our enforcement against unfair trade 
practices to ensure a level playing field for all small 
businesses.
    Again I want to thank our witnesses for participating in 
today's hearing, and I would like to recognize our ranking 
member for his opening statement.
    Mr. Murphy.
    Mr. Murphy. Thank you, Mr. Chairman. I want to thank you 
for putting this all together today, and thank you for calling 
this very important hearing.
    I also want to thank the witnesses for being here and 
testifying on this very important issue. I am sure we all wish 
that votes were not interfering this morning, but I am looking 
forward to listening to your comments and understanding how 
unfair trade practices are hurting American small businesses 
and what we can do to alleviate these problems.
    Reducing trade barriers and expanding free movement of 
capital, goods and services has transformed the U.S. economy 
and enabled the rise of global economy that has created new 
markets and expanded American access to emerging markets. The 
resiliency of small businesses has accounted for two-thirds of 
all new jobs created.
    In 2011 alone, small businesses accounted for 97 percent of 
the total number of U.S. exports. Over 200,000 small businesses 
are sending American products to every corner of the globe, 
reducing our trade deficit to the lowest levels in a decade and 
spurring a revival in the U.S. manufacturing sector. Although 
small firms have increased exporting in recent years, they 
still face several challenges accessing foreign markets. The 
main barrier seems to be the lack of information and an unclear 
understanding of where to start. Nearly half of small business 
exports spend a minimum of three months to nearly 10 percent of 
their annual operating revenue just preparing to export.
    The Export-Import Bank and the Small Business 
Administration have been vital to promoting the success of 
these companies by providing needed capital, one-on-one 
counseling, and access to foreign markets. I am hopeful that 
idealogical crusades do not get in the way of reauthorizing Ex-
IM so that small business owners can continue to be at the 
forefront of global trading. While the Federal Government 
offers numerous trade promotion programs, more collaboration 
and outreach is necessary to ensure these services are 
accessible by the firms that need them the most.
    Unfair trade practices remain a major concern of U.S. 
workers as America debates new trade liberalization agreements 
in TPP, TTIP and TISA. These agreements have the potential to 
open new avenues for exporting around the world by lowering 
tariffs and harmonizing regulations.
    The benefits are not without cost however, and some 
provisions remain controversial. It is our job here in Congress 
to promote U.S. interests and see that our trade objectives are 
met. As negotiations progress, we will be watching closely. 
Issues such as currency manipulation, unacceptable labor and 
environmental standards, anticompetitive state-sponsored 
subsidies, dumping of goods in the U.S. below market value, and 
intellectual property rights violations, are all serious 
problems that need to be addressed to preserve American small 
business competitiveness in the global stage. Hopefully, this 
hearing will provide insight into addressing these obstacles.
    Again, I want to thank the chairman, and I want to thank 
the witnesses; and I apologize that votes are going to take us 
away this morning.
    Thank you.
    Chairman Tipton. Thank you, Mr. Murphy.
    If the committee members have an opening statement 
prepared, I ask that they submit it for the record.
    I would like to be able to take a moment to be able to 
explain our timing lights for you. Each of you will have five 
minutes to be able to deliver your testimony. The light will 
start out as green. When you have one minute remaining, the 
light will turn yellow, and finally at the end of your five 
minutes, it will turn red. I would ask that you would try to 
adhere to the time limit if you can, and we will let you 
summarize at that point.
    I would now like to yield to our colleague, Mr. Bachus, so 
that he may introduce our first witness.
    Mr. Bachus. Thank you, Chairman Tipton, also Ranking Member 
Murphy, for allowing me this privilege.
    Milton Magnus is a spokesman for both his company and the 
American Wire Products Association. He serves as their 
president. He is President of M&B Metal Products in Leeds, 
Alabama. He is a third leading job supplier or employer in that 
town of 12,000 people. I can't imagine Leeds without M&B 
Hangers. What they do is they produce coat hangers. You will 
find that he is a very knowledgeable witness about the impact 
of unfair and illegal trade practices and their devastating 
effect on small and medium sized businesses that are really the 
backbone of our economy. They supply 70 percent of our jobs.
    He has just about been put out of business by illegal 
dumping from China. That is the bottom line. Most of his 
competitors in the United States are out of business, and the 
incredible thing is they put them out of business, the American 
companies, and then they buy their equipment and sometimes take 
it to China or just put it out of production. They buy it 
because they--and they have eliminated most of the domestic 
production.
    Our office has worked with him for years. He has hired 
private investigators. He has documented with pictures, 
transshipping, dumping, where they actually put on a box that 
it is made in Vietnam, and they ship it directly from China. He 
has had pictures of where they claim the production is in 
Vietnam, and all it is, is a small shack with absolutely 
nothing there--and let me say this; I have always voted for 
free trade. I have been an advocate of free trade, but this 
sort of foolishness turns people against fair trade and makes 
people resist it. And if we are going to continue to be a 
trading Nation and negotiate these agreements, which I think we 
have to, the bottom line is we have to enforce them.
    Some of our competitors don't play by the rules, don't even 
make a pretense of doing it and some of us, I think, have been 
the advocates of free trade with some countries unless they 
change their ways, I am afraid we just can't, there is just no 
way to promote trade with people who don't play by the rules.
    So thank you again. Mr. Murphy and I are both going back to 
Financial Services for a markup, so thank you for the privilege 
of testifying.
    And he will tell a horrifying story. Unfortunately, several 
of his colleagues in the business are no longer in business 
because they just simply didn't survive what he has gone 
through.
    Thank you.
    Chairman Tipton. Thank you, Mr. Bachus.
    And Mr. Magnus, thank you for appearing here today, and we 
appreciate you and look forward to your testimony.

  STATEMENTS OF MILTON MAGNUS, PRESIDENT, M&B METAL PRODUCTS 
COMPANY, INC., LEEDS, AL, TESTIFYING ON BEHALF OF THE AMERICAN 
   WIRE PRODUCERS ASSOCIATION; PETER JHONES, LEGAL ADVISOR, 
 SPYDERCO, GOLDEN, CO; DON SHAWCROFT, OWNER, JON B. SHAWCROFT 
RANCHES, ALAMOSA, CO, TESTIFYING ON BEHALF OF THE COLORADO FARM 
 BUREAU; AND TIMOTHY C. BRIGHTBILL, PARTNER, WILEY REIN, LLP, 
                        WASHINGTON, D.C.

                   STATEMENT OF MILTON MAGNUS

    Mr. Magnus. Thank you, Chairman Tipton.
    Thank you, Representative Bachus for your words and your 
friendship.
    I am testifying today to explain the constant struggles 
small and medium size manufacturers face with unfair trade. In 
2002 my company, along with two other U.S. hanger producers, 
saw a flood of Chinese-made hangers entering the United States 
at below our cost. We decided to file a Section 421 trade case, 
which is one avenue for relief for U.S. producers that are 
being harmed by imports from China. We were successful in our 
trade case at the ITC, but unlike an antidumping or 
countervailing duty case, a Section 421 case has to go to the 
President for approval.
    Unfortunately no relief was granted. Shortly after that, 
Cleaners Hanger Company, an American company which was the 
largest garment hanger producer in the world, filed for Chapter 
7 bankruptcy. Then it seemed like dominoes. All of the 
remaining U.S. hanger producers with the exception of M&B 
either went out of business or closed their U.S. operations and 
imported all their hangers from China.
    Over the next few years we struggled having to close our 
plant in South Hill, Virginia and lay off 85 hardworking 
Americans. We continued our struggle, but the Chinese were 
relentless, and eventually we had to either import 100 percent 
of our hangers or fight by filing an antidumping petition 
against China. We chose to fight.
    On July 31, 2007, we filed an antidumping petition against 
Chinese hangers. When we filed we were almost out of business, 
and we really didn't know how we were going to pay the 
substantial legal fees and other costs to file this case, but 
we proceeded. After a long and demanding process before the ITC 
and Commerce, dumping duties ranging from 16 to 187 percent 
were imposed on imported hangers from China. Things improved, 
and we were able to pass along raw material increases. But just 
as we were hiring again, increase in our production, the same 
producers that were shipping hangers from China were working on 
illegal schemes to avoid dumping duties by shipping their 
hangers through other countries or simply just changing the 
company of origin on the paperwork.
    We filed over 30 e-allegations with Customs with specific 
information about these illegal schemes. We met with Customs 
officials on a number of times detailing what was happening, 
but we saw no progress.
    We then hired an investigator at great cost to our small 
company and sent him to Taiwan and Vietnam to visit these so-
called new factories that were shipping hundreds of millions of 
hangers to the United States. He didn't find any hanger 
factories, but he did receive detailed offers from Chinese 
producers to illegally transship hangers to the United States 
through Taiwan and Vietnam avoiding the dumping duties that 
should have been collected.
    When our investigator returned, we took him, his reports 
and our attorneys and met with Customs, as well as Immigrations 
and Customs Enforcement, or ICE, to detail the schemes. I felt 
really good when we left the meeting, but with the exception of 
one small importer transshipping Chinese hangers through 
Mexico, nothing happened.
    We then filed anti-circumvention petitions against two so-
called hanger producers in Vietnam. We won those cases, too, 
but with the help of the Chinese producers, hanger imports from 
Taiwan and Vietnam continued to grow. We had no choice but to 
file an antidumping case against Taiwan and antidumping and 
countervailing duty cases against Vietnam. We won those cases 
as well, but immediately hangers started appearing from Laos 
and Malaysia. We have been told these hangers are made in 
Vietnam or China and transshipped to the United States. We 
decided not to file any more e-allegations or send 
investigators to these countries to bring back proof of duty 
evasion because we saw no results from our previous efforts.
    M&B along with U.S. producers suffering from the same 
evasion schemes formed a coalition to try to get meaningful 
legislation passed to address these illegal activities. The 
Enforcing Orders and Reducing Customs Evasion, or ENFORCE Act, 
creates a procedure at Customs to investigate claims of evasion 
including timelines for Customs to make determinations and 
apply the appropriate duties as well as regular and timely 
reports that will not only deter future evasion, but add 
transparency, accountability and oversight where there 
currently is none. The provisions of ENFORCE passed the Senate 
Finance Committee by voice vote and have been included in the 
Senate Customs Reauthorization bill. The complimentary bill in 
the House, introduced by Representatives Long and Sanchez, has 
a bipartisan group of 46 cosponsors.
    There are many other industries that face the same 
struggles with cheating, illegal transshipping, and evasion of 
their orders. They include industries making nails, 
innersprings, threaded rod, PC strand, wire shelving, and many 
more. We all produce with a high degree of integrity, which 
includes paying our workers a fair wage with good benefits, 
being environmentally responsible, paying taxes, and providing 
a return on investments. Without meaningful relief from ongoing 
duty evasion schemes, it will be difficult to maintain our U.S. 
production.
    Thank you for your time, and I welcome any questions.
    Chairman Tipton. Thank you, Mr. Magnus.
    Our next witness is Mr. Peter Jhones. He serves as legal 
advisor to Spyderco, a manufacturer of utility knives based in 
Golden, Colorado. Spyderco is a family-owned enterprise started 
in 1981 and currently exports its products to over 60 
countries.
    Mr. Jhones, thank you for appearing here today, and we look 
forward to your testimony. Please begin.

                   STATEMENT OF PETER JHONES

    Mr. Jhones. Thank you.
    Chairman Tipton, Ranking Member Murphy, members of the 
Subcommittee, thank you for your invitation to appear today.
    I am Peter Jhones, Manager of Research and Development at 
Spyderco, Inc. The company has designed and manufactured and 
distributed some of the highest quality and most innovative 
folding knives and related products in the world. Spyderco was 
built from nothing by its founder Sal Glesser and his family. 
It now employs more than 80 individuals in Golden, Colorado, 
generates $20 million annually, and has been awarded more than 
190 pieces of intellectual property worldwide.
    Customers have come to rely upon the high performance, 
superior engineering and ergonomic designs of Spyderco's 
products. These customers include virtually all of this 
country's military branches, special services, law enforcement 
personnel, and are in service at every level of state and local 
law enforcement. We sell our products through the United States 
and to 57 countries around the world. A significant portion of 
our manufacturing is performed in Golden, and we are in the 
process of tripling that capacity.
    The safety and reliability of the tools used by our 
country's servants should not be called into question. However, 
that is exactly what is now happening. An alarming increase in 
counterfeits, knock-offs and infringing product is flooding the 
United States market by Chinese companies. The Chinese 
counterfeits are anything but an exact duplicate of a genuine 
item. These products are made of inferior materials, 
demonstrate poor manufacturing techniques, making for a 
dangerous and unreliable tool for service personnel and the 
consumer alike. These copies have achieved a level of outward 
appearance that makes it difficult for even our own staff to 
tell a genuine product from a fake.
    Spyderco does its best to police the marketplace seeking to 
remove copies from the stream of commerce. For the most part 
Spyderco has been successful in these activities, stemming the 
flow of counterfeit goods being sold through United States 
sales entities. However, it is having difficulty stopping the 
sales of counterfeit products sold through Chinese distribution 
outlets. Indeed, the bulk of these copies are entering the 
stream of commerce through online auction sites, primarily 
Alibaba, TaoBao and DHgate. These Chinese owned sites have a 
very poor or no response to requests to remove auctions of 
infringing goods.
    In contrast, the famous online auction house eBay has 
developed their Verified Rights Owner program to combat just 
this issue. Although utilizing more of a storefront format, 
Amazon.com also keeps a tight rein on infringing products 
preventing their entrance into the Amazon.com stream of 
commerce.
    Costs associated with trying to remove unauthentic products 
from Chinese sales Web sites is now prohibitive. As with all 
small business operations, availability of funds to fight an 
infringement war are restricted. Every dollar diverted for an 
effort to protect the marketplace from unsafe counterfeits and 
patent infringements takes money from corporate activities such 
as research and development, increasing production capacity, 
additional employees, machinery acquisition, wage increases, et 
cetera. As a result copies of many of our core products are now 
available on these sites at significantly lower prices than for 
which our genuine products can be offered.
    As I am sure we all realize, it is impractical for U.S. 
Customs and Border Patrol to inspect every package coming into 
this country. If all manufacturers selling products in America, 
domestic and international alike, were subject to the same 
intellectual property enforcement standards, this problem would 
be alleviated. All internet auction sites should be required to 
have an infringement notification and removal system that 
works. This would level the playing field between the U.S. and 
Chinese owned internet auction and commerce sites. It would 
also provide an ideal point for IP holders to review and stop 
the offer for sale of infringing items being put into commerce 
worldwide.
    Spyderco agrees it is important for the United States to 
continue embracing free trade principles with our trading 
partners. However, it is imperative that these partners respect 
and enforce American intellectual property rights regardless of 
importation venue. Spyderco respectfully requests this 
Subcommittee and the United States Congress to implement laws 
and treaties which require all Web sites viewable within the 
United States to publish and enforce strong intellectual 
property protection mechanisms and to require trading partners 
to respect and enforce American intellectual property rights.
    Thank you.
    Chairman Tipton. Thank you, Mr. Jhones. Good to see a 
fellow Coloradan here.
    And it is now a pleasure of mine to also be able to 
introduce another fellow Coloradan and also a constituent of 
mine who has a product that I think it is important for any of 
us who like to be able to eat in this country.
    Representing a lot of our farm and ranch communities in 
terms of his property in Alamosa, Colorado, our next witness is 
Mr. Don Shawcroft. He is owner of Jon B. Shawcroft Ranches in 
Alamosa, Colorado. If you haven't been there, one of the most 
beautiful places in the country and certainly a delight to 
visit.
    In addition to operating a small cattle operation, Mr. 
Shawcroft also serves as President of the Colorado Farm Bureau 
and has been a great advocate on behalf of our farm and ranch 
community, and I appreciate you taking the time to be able to 
be here today to testify; and please continue.

                   STATEMENT OF DON SHAWCROFT

    Mr. Shawcroft. Thank you, Chairman Tipton, members of the 
Subcommittee. Thank you for holding this hearing.
    I am Don Shawcroft, President of the Colorado Farm Bureau, 
a fourth generation rancher from the San Luis Valley of 
southern Colorado and a board member of the American Farm 
Bureau Federation. Farm Bureau is, in fact, the largest 
agricultural based grassroots organization in the country with 
a membership of over 6 million farm and ranch families growing 
everything imaginable from alligators, to children, to 
grandchildren, and even to zucchini.
    Trade is vitally important to agriculture on the U.S. 
economy. According to USDA's Economic Research Service, the 
$136.4 billion of agricultural exports in 2011 produced an 
additional $176 billion of economic activity in the United 
States, including 637,000 jobs in the non-farm sector. Ag 
exports helped offset some of the nonagricultural U.S. trade 
deficit and are a significant market for Ag products from 
Colorado and the rest of the Nation.
    Agricultural trade could and will be more significant if 
and when it is unfounded upon and the SPS issues a non-tariff 
trade barriers and these things are eliminated. For example, 
Mexico has been using sanitary and phytosanitary measures to 
block the importation of U.S. potatoes into Mexico's cities 
beyond those cities that are near our common border, where we 
have been able to in the past. However, I am pleased to 
announce that through the hard work of negotiation now, over 
time Colorado potatoes will be allowed into Mexican cities with 
populations of 100,000 or more.
    Early estimates give the indication that revenue from 
potatoes could be as high as $80 million, a truly fourfold 
increase over the present situation. This is a prime example of 
how SPS issues are used to prevent agricultural trade and how 
they can be overcome with science and negotiation and have a 
direct impact on American farmers. I ask you today to do all 
you can to eliminate all SPS issues and other barriers to 
agricultural trade.
    As was mentioned, when it comes to trade, currently there 
are three Ts that are in action and things that can be done. 
One is TTIP, or Transatlantic Trade and Investment Partnership 
Agreement. The other is the TPP, Trans-Pacific Partnership 
Agreement, and the other is key as well, Trade Promotion 
Authority. The TTIP negotiations between the U.S. and the 
European Union are an opportunity to deal with many substantial 
issues that impede U.S. and EU trade in agriculture, such as 
longstanding barriers against conventionally raised U.S. beef, 
ongoing restrictions against U.S. poultry and pork, and actions 
that limit U.S. export of goods produced using biotechnology.
    The U.S. and the EU are major international trading 
partners in agriculture. Ten years ago, the EU was the third 
largest designation for U.S. Ag products, but over the last 
decade, this growth has been the slowest among our top ten 
agricultural destinations. The EU is now the fifth largest 
export, and in 2013 we exported to them $11.5 billion of 
agricultural and food products, while they exported to us $17 
billion of Ag products. This market needs to be increased, and 
the TTIP is an opportunity to do so.
    The other trade agreement, the TPP, deals with, of course, 
specific countries, and in particular one of those important 
ones is Japan. Japan is currently the fourth largest export 
market to the United States with over $14 billion of trade. 
This is important because Japan continues to do things that 
restrict the trade based on SPS as well as non-tariff barriers. 
The tariffs going into Japan need to be reduced. That is 
something that can be done with this agreement, and hopefully 
that will, in fact, happen.
    The last and perhaps the most important thing is the Trade 
Promotion Authority. If we negotiate these other agreements and 
the Trade Promotion Authority is not available to quickly and 
effectively put a stamp of approval by Congress on these 
agreements, much of that effort can be wasted. I highly 
encourage you to support the current Trade Priorities Act of 
2014, which is H.R. 3830. It is a necessary and critical 
component for a successful trade policy agenda.
    While there are many challenges that yet remain, I again 
thank you, Chairman Tipton, and the members of this 
Subcommittee for the opportunity to testify to you today on 
this important issue. American agriculture drastically needs 
more market access that is free of SPS and non-tariff trade 
barriers. American farmers and ranchers are the most productive 
in the world. With market access, we can continue to provide 
high quality products to markets throughout the world.
    I look forward to answering any questions you may have. 
Again, thank you.
    Chairman Tipton. Don, thank you for your testimony.
    And I would now like to be able to yield to my colleague, 
Ms. Meng, for purposes of introduction of our final witness.
    Ms. Meng. Thank you, Mr. Chairman.
    It is my pleasure to introduce Tim Brightbill. Mr. 
Brightbill is a partner in the international trade practice of 
Wiley Rein, LLP, in Washington, D.C., where he represents 
clients on all aspects of international trade law and policy, 
including import trade remedies, global trade policy, and trade 
negotiations. He is also an adjunct Professor at Georgetown 
University Law Center and has provided advice to the U.S. 
Government on ongoing trade agreement negotiations such as the 
Trans-Pacific Partnership and the Transatlantic Trade and 
Investment Partnership.
    He is a graduate of Northwestern University and Georgetown 
University Law Center. From 1994 to 1995, he served as counsel 
to the House Committee on Small Business.
    Welcome back, Mr. Brightbill.

               STATEMENT OF TIMOTHY C. BRIGHTBILL

    Mr. Brightbill. Thank you, Congresswoman. I appreciate 
that.
    Chairman Tipton, Ranking Member Murphy, members of the 
Subcommittee, thank you for the opportunity to testify before 
you today on the issue of unfair trade practices and barriers 
facing small business exporters.
    I practiced international trade law for almost 20 years, 
and my practice has always focused on helping American 
companies, American industries, and American workers. I have 
worked with a variety of industries, including manufacturing of 
everything from steel to solar panels, to school notebooks, to 
heavy forged hand tools. I also work with many companies that 
provide services, both here and abroad. My job is to help these 
companies grow, prevent unfair trade practices from harming 
them, and to help eliminate trade barriers overseas.
    Small businesses face enormous challenges in the area of 
international trade. Trade laws and regulations are 
complicated. Trade remedy cases are expensive, as you have 
heard, and trade barriers are becoming more pervasive and more 
challenging all the time. As a result, it is probably not 
surprising how few small businesses are able to become 
substantial exporters of goods or services.
    Let me list several of the challenges facing U.S. small 
business exporters. First, dumping and subsidies. These are two 
of the most pervasive unfair trade practices. Foreign 
manufacturers often sell below cost to enter the U.S. market 
and take market share away from domestic competitors.
    Subsidies and government ownership of foreign competitors 
facilitate this kind of unfair pricing. Small businesses are 
forced to choose between cutting prices to match foreign 
competition or giving up sales and market share. Notably the 
antidumping and countervailing duty laws that address these 
practices are complex, and the requirements for filing trade 
remedy cases are difficult even for large companies.
    There are many steps that Congress and the Commerce 
Department could take to make the trade laws simpler and easier 
to use for small businesses. I would be happy to discuss those 
specific ideas later this morning.
    I would also like to endorse the comments of Mr. Magnus 
regarding the ENFORCE Act, which we hope will be passed and 
signed into law this year.
    Second is currency manipulation. This is a serious problem 
that harms all U.S. exporting businesses, large and small. The 
Peterson Institute for International Economics has called 
currency manipulation the biggest subsidy of them all and 
estimates that currency actions by China and more than 20 other 
countries have increased the U.S. trade deficit by $200 billion 
to $500 billion per year and that the United States has lost 1 
million to 5 million jobs as a result of foreign currency 
manipulation. If Congress wanted to take one trade-related 
action that would create new American jobs, it would be to pass 
legislation to investigate currency manipulation as a 
countervailable subsidy.
    Third is intellectual property theft. This is a pervasive 
problem. It demands a serious response from the U.S. Government 
and law enforcement. The United States took an important step 
this week by filing criminal charges against the Chinese 
military for cyber hacking. The U.S. companies targeted are at 
the heart of American manufacturing of steel, aluminum, solar 
and others, and I applaud the Administration for taking that 
step; but the reality is that the Chinese government sees no 
difference between military espionage and corporate IP and 
trade secret theft, and there are thousands of U.S. companies 
that are victims of these activities. As one expert has stated, 
there are two kinds of U.S. companies, those that know they 
have been hacked and those that just haven't figured it out 
yet.
    Fourth is the rise of state-owned and state-controlled 
enterprises, another factor that is very harmful to small 
business exporters. U.S. companies should not be forced to 
compete with foreign governments, and while China is a big 
problem in this area, there are many other economies that are 
problems as well. We need to include strong, enforceable 
disciplines on state-owned enterprises in all new trade 
agreements including the TPP and the TTIP agreement. I would be 
happy to discuss that later today as well. Finally, we need to 
address the growing use of non-tariff barriers to shut down 
trade. This can involve obvious measures like export taxes, but 
also more subtle barriers like Customs regulations, import 
licenses, and burdensome standards and certification 
requirements, even SPS requirements as Mr. Shawcroft just 
noted.
    The United States has been very successful in reducing 
tariffs worldwide, but those that want to protect their markets 
are continually looking for new ways to shut out foreign 
competition.
    So thank you again to the Committee and the Subcommittee 
for addressing this important issue today, and I would be happy 
to answer any questions.
    Chairman Tipton. Well, thank you all for your testimony 
here this morning. I appreciate you again taking the time to be 
able to be here.
    I would like to begin some of our questioning, and Mr. 
Shawcroft, I would like to be able to begin with you.
    A number of Nations have imposed trade restrictions on GMO 
crops, citing safety concerns. Do you believe science supports 
these claims or are some of our trading partners claiming 
safety as a dubious excuse to be able to limit the export of 
American products?
    Mr. Shawcroft. I think you have stated the problem 
precisely. The science does not back up these claims. In fact, 
it is just the opposite. Science proves that these GMO products 
are safe. They have been through a rigorous testing, and it 
goes back to a precautionary type of approach that in 
particular the EU takes upon these things, and that that is it 
is trying to prove the negative.
    If there is no evidence that, in fact, they do not cause 
this, instead of saying, well, the use of this product does 
cause X, Y and Z, if you do have the proof that it does not 
cause those kinds of things, that is a precautionary principle, 
and that is I think true in the GMO case as well as other 
things that the EU is concerned about. We are extremely about 
the GMO case because there is a tremendous opportunity for 
increased corn and soybean export to the EU, and that's an 
important issue.
    Chairman Tipton. I appreciate that, and while we are on the 
issues for the San Luis Valley, you mentioned how potato 
growers were able to successfully challenge unfair Mexican SPS 
standards that restricted American potato exports. In this 
case, is it an outlier, or is the WTO dispute resolution 
mechanisms, are those adequate to be able to address 
agricultural product barriers in a timely manner?
    Mr. Shawcroft. I think that it is an effective avenue, but 
it does take time and it does take money, just the same as the 
other issues that have been discussed here by the other 
witnesses. The cost is tremendous, and I applaud Mr. Magnus for 
going through the effort of challenging those things rather 
than just lying down and going on his own way and doing 
something else.
    WTO is a process. We need to support that process. We need 
to make it something that is workable in a more expeditious 
manner, just the same as TTIP and TPP need to have those types 
of provisions where actions can be taken and that they can be 
enforced and again, in a timely and effective manner.
    Chairman Tipton. Do you believe that some of the future 
multilateral trade agreements such as the proposed TPP and TTIP 
should adopt similar SPS resolution mechanisms?
    Mr. Shawcroft. I believe they need to. If they were to 
follow the lead of the WTO and say that those SPS issues can 
only be resolved based on science and that they need to have a 
level of reasonability to their implication and the 
implementation, I think that's important.
    Chairman Tipton. You know, and I think you brought up an 
important point. Mr. Magnus, how much money did you spend in 
terms of trying to be able to defend yourself?
    Mr. Magnus. An enormous amount. It is an ongoing process. 
We have to go through administrative reviews every year, and 
that is expensive also. It is well over $1 million to file a 
trade case, and then it is a quarter of a million dollars just 
to maintain them.
    Chairman Tipton. Just out of your pocket?
    Mr. Magnus. The Government doesn't pay for it, yes, sir. It 
is out of my pocket.
    Chairman Tipton. It is out of your pocket. The bottom line 
either way you are paying for it, even if the Government pays 
for it, so you have still got that challenge.
    Mr. Magnus. Yes sir.
    Chairman Tipton. Mr. Jhones, I appreciate you taking the 
time to be able to be here and a lot of great opportunities 
certainly for small businesses, small businesses like mine, to 
be able to take advantage of the websites and to be able to 
reach out of our different areas to be able to sell some of our 
products, but it also appears that as you noted in your 
testimony, ripe with opportunities to be able to counterfeit 
some of these products.
    eBay has its Verified Owner Rights program in place to be 
able to prevent these counterfeits, but many other forum 
websites, as I know you are aware, do not.
    What actions do you believe that the government should take 
to be able to prevent Web sites from carrying counterfeit 
products?
    Mr. Jhones. Well, we have found the huge bulk of our patent 
infringements coming in over Chinese websites, auction sites; 
and what we would like to see is just to have the same 
expectations of those websites as far as being able to have an 
infringing product taken off of it, the sale of infringing 
product.
    eBay responds to us now within eight hours if we notify 
them of an infringement that is being sold as an auction. 
Alibaba we almost don't get any response. Alibaba, DHgate will 
make us prove our IP rights to an item that is on sale on their 
website, whereas eBay they will just allow us to say we will 
take liability for the case. If we say we have these pieces of 
intellectual property and we are willing to sign off on the 
liability issue for eBay, eBay will respond to us right away 
and does so. They are quite good about that.
    Chairman Tipton. You know, I am curious, Mr. Jhones, have 
you been able to do any sort of an estimate in terms of what 
you have lost in terms of counterfeiting?
    Mr. Jhones. We had that discussion just before I came here. 
Our financial losses are probably not what would be considered 
to be significant. Where we really, really have concerns is 
with losses with our reputation.
    For example, a customer will buy a product off of a Chinese 
website, or a secondary sale that's occurred from a product 
that we know came in through a Chinese website but was sold for 
example, at a store or flea market or a secondary sale, and 
then they are calling us saying what is your customer service 
going to do for this, it is broken. It has wounded me. It is 
falling apart. It is a poor product, and then our reputation 
winds up on the line because we have to tell that person that 
is not our product. It is a clone. We are aware those are out 
there. We apologize. We are working to cure that market, to 
close that market up, but that is not our product. And you can 
imagine that creates quite a bit of animosity in the customer-
business relationship.
    Chairman Tipton. I can imagine. I don't want to belabor 
this, but I am a little curious given what you just commented 
where somebody wounds themselves. Have you had the threat of a 
lawsuit when it wasn't your product?
    Mr. Jhones. Well, no, because you know, it is not our 
product. We are not in the chain of liability. But, of course, 
we still have concern for the consumer. We have concern for the 
people that thought that they bought our product. We have a 
high-end product.
    As I mentioned, a lot of our products find their way into 
service in this country in law enforcement and in all of our 
country's servants, and we are really quite concerned that some 
of those people are going to get a hold of inferior product, 
and they are not going to meet the standards and the 
expectations that they have.
    Chairman Tipton. All right, well, I appreciate that.
    Mr. Brightbill, certainly hearing some of these comments, I 
would ask you that they would probably appreciate it to be able 
to provide some free legal counsel on some of these issues. But 
what is the first thing that you would tell a small business 
company like Spyderco or M&B Metal Products if they came to you 
asking for help with intellectual property theft and dumping?
    Mr. Brightbill. Well, I think there are a range of options 
available. It is true that the trade remedy cases are very 
expensive. They can be time-consuming. There are other ways to 
address the problems, sometimes in negotiations, although that 
can be difficult. There was the reference to negotiations with 
Mexico. There are agencies that are out there willing to put 
some effort in, whether it is Customs and Border Protection, 
Commerce Department, the U.S. Trade Representative. We have had 
good results sometimes just on a bilateral level talking to 
another country, flagging a barrier that they have imposed 
without having to bring a full case.
    So, although sometimes trade remedy cases are necessary, 
there are other ways sometimes to address the same problem and 
hopefully get some results for companies that shouldn't have to 
pay for this, and the Government can support them on it.
    Chairman Tipton. Okay. I appreciate that.
    Mr. Magnus, I thought it was curious in your testimony to 
where you were able to stop the illegal importation through 
legal remedy and awareness, but then it would pop up coming out 
of a different country as well and it kind of reeked of Whack-
A-Mole. You put one down, and another would pop up somewhere 
else.
    You referenced that transshipping is a way that they are 
using to be able to avoid the tariffs and trade laws. Do you 
have some recommendations that you could make to Congress on 
how to best and most effectively combat that.
    Mr. Magnus. We do and we have in the ENFORCE Act. The 
ENFORCE Act sets timelines, makes accountability where there is 
none, and involves the private sector as well as Customs. It is 
a tough job for Customs, but it is a black hole when we give 
them something because we never hear back from them. We have 
detailed it with the ENFORCE Act. Senator Wyden endorsed it, 
and his staffers even in a half a day were able to set up 
illegal transshipping schemes from China on hangers. They 
emailed the Chinese producers to say, yes, we can't ship it 
from China, but we can ship it from another country, and this 
is your price. They don't respect our trade laws, and the 
provisions of the ENFORCE Act that we have put before both the 
Senate and the House details some steps to be taken.
    Chairman Tipton. Yes, I am certainly aware of the ENFORCE 
Act. Any of the other gentlemen, do you have any other comments 
or thoughts in terms of how Congress can start to be pushing 
back to make sure that our businesses, our jobs, are going to 
be able to be protected?
    Mr. Shawcroft. I would suggest that the principle of trust 
but verify is a very important aspect in all of these 
negotiations. As was mentioned or referred to the Mexico 
situation and potatoes, that took a long time. That was a slow 
process, and now what has to happen is we have to trust those 
Mexican officials and what they have said they will do but, 
follow through and make sure they, in fact, do that. I think 
that's an important aspect.
    Chairman Tipton. Mr. Brightbill.
    Mr. Brightbill. Sure. With regard to Mexico, I wanted to 
point out that a couple of industries we work with, notably the 
steel industry, is facing a similar problem where Mexico has 
introduced a new import licensing system that is holding up 
steel shipments at the border and greatly increasing costs for 
U.S. companies that are trying to export, large companies and 
small companies.
    And then just to highlight the ENFORCE Act one more time, 
we have had a couple of cases as well where the circumvention 
begins even before the trade case is over. We have brought 
cases on school notebooks from China. Before you know it, they 
are allegedly coming from Taiwan or some other country.
    Another case we brought on steel grating, subway grating 
like you walk on here in Washington, before the case had even 
ended, all the exports from China had disappeared and they 
started showing up from Malaysia. The only problem is Malaysia 
doesn't make bar grating. So, this is the kind of problem that 
companies face every day, and while Customs might bring a big 
enforcement action after four or five years, what we really 
need is enforcement of the antidumping duties right from the 
start, and that is where the ENFORCE Act could really be 
valuable to companies and industries like ours.
    Chairman Tipton. Well, I appreciate again, gentlemen, your 
comments. I would like to yield to my colleague, Ms. Meng for 
her questions.
    Ms. Meng. Thank you.
    I have a question for Mr. Brightbill. Trade assistance is 
administered by 20 different Federal agencies, each of which is 
tasked with their own mission, their own set of policies, and 
their own competing resources. What in your opinion would be 
the quickest and most cost effective means of improving 
coordination between these agencies and harmonizing their 
export strategies? And anyone is free to answer.
    Mr. Brightbill. Thank you for that question. I think this 
committee and subcommittee have done a good job flagging the 
issue that there are lots of resources out there, but they 
overlap, and the missions are not always clear to companies out 
there just trying to figure out how do I send my products 
abroad to other countries.
    So, I think there is a way to streamline and simplify and 
try to not have so many different agencies trying to provide 
aid so that its understandable to the companies who aren't 
familiar with all of these different programs and efforts; so I 
think this committee has done a good job flagging that as a 
place to start.
    Ms. Meng. And we frequently hear that small businesses make 
up nine out of every ten businesses that export goods from the 
U.S., but when it comes to the negotiating process for these 
trade agreements, the interests of the small business community 
often takes a back seat to that of the larger multinational 
corporations. Is there anything that can be done to elevate the 
concerns of these small businesses in going multilateral trade 
negotiations?
    Mr. Brightbill. I would just say to that that there is a 
system of industry trade advisory committees that provide input 
to the trade negotiators. I sit on one of those committees 
relating to services, and there is a specific small business 
committee that is open. Now that is one way that some of the 
views can get across, but I do think the process needs to be 
more transparent.
    We are negotiating very significant, gold standard free 
trade agreements. I think if the American public and American 
businesses knew a little more of what was being negotiated, 
they would support them strongly, and they would be enacted 
into law once we reach these final agreements. But in the 
meantime when the process is not particularly transparent, it 
is very difficult to build support for them.
    Ms. Meng. Yes.
    Mr. Shawcroft. Yes. Thank you.
    I would also like to comment the value on behalf of small 
businesses in agricultural, organizations like the American 
Farm Bureau and Colorado Farm Bureau who stand up for the needs 
of those individuals and those small businesses in those 
negotiations, that type of representation is important.
    Ms. Meng. Thank you.
    And as the U.S. continues to negotiate with its 11 partner 
Nations on the terms of the TPP trade agreement, as you know 
the Administration has been less than forthcoming with 
specifics with trade talks resuming this week. What protections 
are vital for your industries in any new agreement with Pacific 
Rim countries?
    Mr. Shawcroft. Yes. Thank you.
    I would just say that foremost is the concerns that have 
been expressed here today, the idea of having provisions there 
that antidumping cannot happen, make sure that those 
countervailing issues are resolved and particularly for 
agricultural, the non-tariff type barriers, and the tariff 
barriers, the SPS, sanitary and phytosanitary issues in 
agricultural, those types of things need to be in that 
agreement specifically and that there needs to be a viable and 
easily accessed enforcement tool in those agreements.
    Mr. Brightbill. Congresswoman, I would just add to that.
    The issue of state-owned enterprises is a critical one. We 
have not had SOE provisions in a free trade agreement before. 
We need strong, enforceable disciplines there. Companies should 
not have to compete with foreign governments, and they 
shouldn't have to compete with foreign government investments, 
whether or not it is coming here or in a third country, and so 
we need strong, enforceable disciplines. State-owned 
enterprises should not receive preferential legal or regulatory 
treatment. They shouldn't receive subsidies, and we should have 
a way to be able to ask questions of these state-owned 
enterprises and get information. That is the least we can do in 
a free trade agreement like the TPP or the TTIP.
    Ms. Meng. If the TPP is ratified, would U.S. beef producers 
create more jobs as a result of it, or would the benefits flow 
mainly to foreign producers?
    Mr. Shawcroft. I would certainly expect that in 
agricultural, in particular beef, that the advantage would be 
to us. There is much of the beef production today goes 
internationally because, quite frankly, most American consumers 
are not interested in consuming that part of the animal, as 
well as particularly the impact of the high-end cuts when it 
comes to steaks and prime rib roasts and those types of things 
in the beef trade.
    That demand is, in fact, global and so those products move 
across the world. The more demand that there is with growing 
economies and emerging economies around the world, I can see 
that, I would certainly hope, at least and believe, in fact, 
that those prices would increase because of this agreement once 
they were ratified by Congress.
    Ms. Meng. Question for Mr. Magnus or again anyone is 
welcome.
    When I talk to small firms in my district, the barrier they 
most commonly raise is not necessarily stiff tariffs on exports 
but finding affordable credit to support their export business. 
Do you believe that the Government's current mix of trade 
financing programs meets the needs of small firms?
    Mr. Magnus. I will have to decline answering that. I am not 
fully versed on that. Most of our trade issues are dumping 
coming this way, not being able to export. Because many other 
Nations don't have dumping duties on Chinese hangers, it is 
very difficult for us to compete in foreign countries because 
of the low-priced Chinese hangers in foreign countries.
    Mr. Brightbill. On the financing issue, there are financing 
programs available through the Government. I think this 
committee has emphasized private investment in private 
financing as well, which is important. One concern we have is 
when Ex-Im Bank provides financing abroad, in areas where there 
is already overcapacity, like steel or raw materials that then 
goes into steel coming back here, so that is a particular 
concern where the financing is subsidizing or benefitting 
excess capacity abroad that then is going to come back here and 
compete with U.S. companies.
    So, but in general I think there are financing options 
available. It is still difficult for companies and small 
businesses in particular to get credit. Many of my clients 
which are in a weakened condition when they are bringing these 
dumping cases, also have difficulty in terms of financing and 
credit to grow their businesses, so that is still of an 
important area of concern.
    Ms. Meng. Thank you.
    I yield back, Mr. Chairman.
    Chairman Tipton. And I appreciate the question, 
particularly on some of the access to capital issues.
    We have got a bill that I am cosponsoring called Capital 
Access to Main Street to be able to actually allow banks to 
eliminate some of the regulatory requirements to be able to do 
a look-back on seven years of financial statements, P and Ls, 
balance sheets, to be able to make a good business decision. 
When we talk about are farm and ranch community, the crops can 
be flooded out, frozen or burned, but in that fourth year when 
the commodity prices are up, it is going to come back. We just 
need to be able to free up some of these banking options and 
let bankers be bankers, I think frankly to be able to address 
some of that.
    Since we have got just a couple of minutes I think before 
votes are going to be called, Mr. Magnus, your company has 
filed more than 30 e-allegations with the Customs service once 
you discovered that Chinese manufacturers were circumventing 
the antidumping duties. What kind of response did you receive 
from the agency?
    Mr. Magnus. We received none except when we would meet with 
them they would say that we received your e-allegations but 
because of the laws we cannot report on what we are doing on 
them.
    So they really, once you file an e-allegation, you have no 
idea whether they look at it, whether they act on it, or 
whether they throw it in the trash can.
    Chairman Tipton. So the answer is nothing.
    Mr. Magnus. Nothing.
    Chairman Tipton. Absolutely nothing.
    Mr. Magnus. Absolutely nothing.
    Chairman Tipton. Would you remind me again how many 
Americans you employ?
    Mr. Magnus. In Alabama we employ between 80 and 90.
    Chairman Tipton. Okay, great. That is some good information 
for us.
    And, Mr. Jhones, has your company attempted to be able to 
avail itself of any of the intellectual property remedies 
through the ITC, and have you been made aware of some remedies 
that are potentially available to you.
    Mr. Jhones. We have pretty much fairly recently have become 
aware of the ITC. We have a quite cyclical sales. Fourth 
quarter is quite high for us. If we were to request Customs to 
stop a shipment of infringing product and they were to stop one 
of our shipments, remembering that these are clones, that could 
very well put Spyderco out of business.
    It is a very large concern with us and we have had some of 
the same responses to our concerns with Customs that Mr. Magnus 
has had. We haven't had a lot of response. We have had, quite 
frankly, rumors; and competitors in our industry discuss the 
same problem, and they feel like Customs is somewhat 
unresponsive to them.
    We have a large fear that if we were to request assistance 
there, that some of our stuff would get stopped, and we 
wouldn't have the ability to continue business basically. Our 
American production will not support us at this time, although 
we are trying to get that ramped up. So it is a bit of a 
fearsome situation.
    Chairman Tipton. So you aren't feeling a lot of support in 
that area?
    Mr. Jhones. No. Sorry.
    Chairman Tipton. No. That is good for us actually to be 
able to know.
    You know what, it took this administration more than two 
years to be able to submit the Korea, Panama and Columbia free 
trade agreements to the Congress, and during that period of 
time, these Nations that just cited the ratified trade 
agreements with other Nations, resulting in American farmers 
losing a substantial market share to their competitors.
    Mr. Shawcroft, do we need to be able to guard against 
something similar happening while we negotiate this Trans-
Pacific partnership and Transatlantic agreements?
    Mr. Shawcroft. We do. I am not real sure what you can do to 
keep other people from taking advantage of an opportunity other 
than to move quicker and, in fact, for Congress to take action 
and approve a trade promotion agreement.
    So that once those negotiations have taken place, it can be 
ratified quickly without a lot of discussion about what the 
individual terms of it are. I know it is sometimes somewhat 
perceived as a two-edged sword when you have a trade promotion 
authority because not everybody will be happy with it, but it 
is something that we have to rely on those negotiators; and if 
there is a little bit of emphasis that it needs to be done 
quickly by Congress and for example, yourselves in these 
Subcommittee, who can influence the expeditiousness of that, I 
think it needs to be done.
    Chairman Tipton. Well, thank you.
    And, gentleman, I would like to take you all for taking the 
time.
    Ms. Meng, did you have any other further questions to 
follow-up on.
    I want to thank for taking the time to be here. This has 
provided us with some good information in terms of the 
responsiveness and lack thereof by the government in terms of 
being able to protect American jobs and to be able to expand 
those opportunities to create more jobs. I know in our district 
that's a number one issue, jobs and the economy, the people are 
concerned about and our opportunities to be able to export. We 
have the empirical evidence when those are present, and we have 
the opportunity to be able to do it in a fair way. We actually 
benefit the American consumer and certainly American families 
in that process.
    You have all provided some very important insight to that 
and how unfair foreign trade practices are actually impacting 
our small businesses. This insight will assist us in Congress 
in our efforts to be able to ensure that foreign nations and 
companies play by the rules so that we are going to be able to 
compete on a level playing field, which is I think all that we 
ask for.
    I would like to able to ask for unanimous consent that 
members and the public have five legislative days to be able to 
submit comments and supporting materials into the hearing 
record.
    Hearing no objection, so ordered, and this hearing is now 
adjourned. Thank you again, gentleman, for your time.
    [Whereupon, at 10:30 a.m., the subcommittee was adjourned.]
                            A P P E N D I X


                        Milton Magnus Testimony


                   House Committee on Small Business


                              May 22, 2014


    Good Morning, my name is Milton Magnus, and I am President 
of M&B Metal Products Company, Inc. of Leeds, Alabama. We 
manufacture wire Garment Hangers in Alabama. I am also the 
President of the American Wire Producers Association, an 
association of U.S. companies that purchase steel wire rod and 
produce wire and wire products of all types. I am testifying 
today to explain the constant struggles that small and medium 
size manufacturers face with unfair trade.

    In 2002, my company, M&B, along with two other U.S. hanger 
producers saw a flood of Chinese-made hangers entering the 
United States at prices below our cost. We decided to file a 
Section 421 Trade Case, which is one avenue for relief for US 
producers that are being harmed by imports from China. China 
agreed to this special procedure when they entered the WTO. We 
were successful in our case at the International Trade 
Commission (ITC); but--unlike an antidumping or countervailing 
duty case--a Section 421 case has to go to the President for 
approval. Unfortunately, no relief was granted to our industry.

    Shortly after that, Cleaners Hangers--an American company, 
which was the largest Garment Hanger producer in the world--
filed for Chapter 7 bankruptcy, and all of their assets were 
sold at auction. Then it seemed like dominoes--all of the 
remaining US wire hanger producers, with the exception of M&B, 
either went out of business or closed their US operations and 
imported all of their hangers from China. Over the next few 
years, we struggled, having to close one of our US plants in 
South Hill, Virginia and lay off 85 hardworking Americans. We 
continued our struggle for another year, but the Chinese were 
relentless, and eventually we either had to join the club and 
import 100% of our hanger sales or fight by filing an 
antidumping petition against China. We chose to fight.

    On July 31, 2007, we filed an antidumping petition against 
unfairly traded Chinese hangers. When we filed, we were almost 
out of business, and we really didn't know how we were going to 
pay the substantial legal fees and other costs to file this 
case, but we proceeded anyway. At the end of a long and 
demanding process before the ITC and Department of Commerce 
dumping duties between 16% and 187% were imposed on imported 
hangers from China.

    Things improved almost immediately. We were able to pass 
along raw material increases. Our margins improved, and things 
were progressing as we had hoped. But, as we were hiring again 
and increasing our production, the same producers that were 
shipping hangers directly from China were working on illegal 
schemes to avoid dumping duties by shipping hangers through 
other countries, or simply just changing the country of origin, 
and they continued to dump hangers in the U.S. market. We filed 
over 30 e-allegations with US Customs and Border Protection 
(Customs) with specific information about these illegal 
schemes, and we met with Customs officials a number of times 
detailing that was happening, but we saw no progress.

    We then hired an investigator at great cost to our small 
company and sent him to Taiwan and Vietnam to visit the so-
called new factories that were shipping hundreds of millions of 
hangers to the US. Guess what, he didn't find any hanger 
factories. He even had detailed offers from Chinese producers 
to illegally transship Chinese hangers to the US through Taiwan 
and Vietnam, avoiding the dumping duties that should have been 
collected. When our investigator returned, we took him, his 
reports, and our attorneys and met with Customs as well as 
Immigration and Customs Enforcement, ICE, to detail the 
schemes. I felt really good when we left this meeting. Both 
Customs and ICE complimented us on the detailed reports and 
told us how much they appreciated the information. Days, weeks, 
and months went by, and except for a small importer in Mexico 
that was caught transshipping Chinese hangers across the 
border, we saw no other action being taken.

    We then filed Anti-circumvention petitions against two so-
called hanger producers in Vietnam. We won those cases also, 
but with the help of the Chinese producers, hanger imports from 
Vietnam and Taiwan continued to grow. We had no choice but to 
file another antidumping petition against Taiwan, and an 
antidumping petition and countervailing duty petition against 
Vietnam. We won those cases as well, but immediately hangers 
started appearing from Laos and Malaysia. We have been told 
that these hangers were made in Vietnam or China. We decided 
not to file more e-allegations or send investigators to these 
countries to bring back proof of duty evasion because we had 
tried that but saw no results from our previous efforts.

    Customs continues to be a black hole when it comes to 
commercial enforcement to the detriment of US manufacturing and 
workers and at great cost to the US Treasury.

    In addition, the costs associated with fighting for our 
dumping order continue to add up. Each year Chinese producers 
or exporters can ask Commerce to recalculate their dumping 
margins. We are in the midst of our fifth review. While each 
review involves additional costs to our company we have to 
participate in order to ensure the dumping margins remain 
accurate and effective. As the result of the first four 
reviews, all but two Chinese hanger producers will have a 
dumping margin of 187%. I should be very excited by these 
results and begin adding employees and equipment, but I am very 
cautious because I already have heard that Chinese hangers are 
now being transshipped through Cambodia and Sri Lanka. I fear 
that we will have to start this never-ending, expensive process 
all over again.

    We also see no aggressive action on Customs to collect 
duties that are owed. In the US, we operate on a Retrospective 
System, which means the final dumping rate is determined after 
the products have been imported. The importer only pays an 
estimated dumping margin, or deposit, when they import the 
product. After the Administrative Review, the final dumping 
margin is set and Customs is required to either refund any 
excess deposit paid, with interest, or collect the additional 
duty, with interest. We have seen in the past that Customs is 
quick to return overpayment, but slow (many times never) 
collect the additional duty. This not only hurts the US 
Treasury, but it shows that Customs will NOT enforce our 
Dumping Orders.

    M&B, along with other producers experiencing the same 
evasion schemes, formed a coalition to try to get meaningful 
legislative and policy changes passed to address these illegal 
activities. The Enforcing Orders and Reducing Customs Evasion 
(ENFORCE) Act creates a procedure at Customs to investigate 
claims of evasion, including timeliness for Customs to make 
determinations and apply the appropriate duties as well as 
regular, timely reports that will not only deter future evasion 
but add transparency, accountability and oversight where there 
currently is none. The provisions of ENFORCE passed through the 
Senate Finance Committee by voice vote and have been included 
in the Senate Customs Reauthorization bill. The complimentary 
bill in the House, introduced by Representatives Long and 
Sanchez, has a bipartisan group of 46 co-sponsors.

    As I said at the beginning, there are many other industries 
besides the garment hanger industry that face the same 
struggles with cheating, illegal transshipment, and evasion 
under their trade orders. They include the Nail industry, the 
innerspring industry, the threaded rod industry, the PC Strand 
industry, the wire shelving industry, and many more.

    I see manufacturing in the US as a privilege. We all 
produce with a high degree of integrity, which includes paying 
our workers a fair wage with good benefits, being 
environmentally responsible, paying income taxes, and providing 
a return on investments to our owners. Without meaningful 
relief to ongoing duty evasion schemes, it will continue to be 
difficult to maintain our production in the US.

    Thank you for your time. I welcome your questions.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                               Hearing on


            Combating Unfair International Trade Practices:


               Barriers and Obstacles for Small Business


                             Presented to:


                     U.S. House of Representatives


                      Committee on Small Business


             Subcommittee on Agriculture, Energy and Trade


                              On behalf of


                             Spyderco, Inc.


                              May 22, 2014


                           By Peter H. Jhones

    Chairman Tipton, Ranking Member Murphy, and Members of the 
Subcommittee, thank you for the invitation to appear today.

    Spyderco Inc. Introduction

    Spyderco has designed, manufactured and distributed some of 
the highest quality and most innovative folding knives and 
related products in the world. The company was built from 
nothing by its founder Sal Glesser and his family. The company 
now employs more than 80 individuals in its Golden, Colorado 
facilities and generates more than $20 million dollars annually 
for the Colorado economy. Spyderco has been awarded 33 U.S. 
trademarks (60 overseas), 29 U.S. utility patents (11 overseas) 
and 48 U.S. design patents (12 overseas).

    Spyderco customers have come to rely upon the high 
performance, superior engineering and ergonomic designs of the 
Spyderco products they use daily. These customers include 
virtually all of this Country's military branches. Special 
Services, and Federal Law Enforcement Agencies. Our products 
are also in service at every level of state and local law 
enforcement. We sell our products throughout the United States 
and to 57 countries around the world. A significant portion of 
our manufacturing is performed in Golden, Colorado and we are 
in the process of tripling that capacity.

    Unfair Practices: Chinese Counterfeits

    The safety and reliability of the tools used by our 
country's servants should not be called into question. However, 
that is exactly what is now happening. An alarming increase in 
clones, knock-offs and infringing product made by Chinese 
companies is flooding the U.S. market. The Chinese counterfeit 
knives of which we have become aware, are anything but an exact 
duplicate of our genuine items. These products are made using 
inferior materials and demonstrate poor engineering techniques. 
They make for a dangerous and unreliable tool for service 
personnel and consumer alike. The problem is these copied 
products have reached a level of outward appearance which makes 
it difficult even for our own staff to tell a genuine Spyderco 
knife from a fake.

    Obstacles and Solutions

    Spyderco does its best to police the marketplace, seeking 
to remove copies from the stream of commerce. For the most 
part, Spyderco has been successful in these activities, 
stemming the flow of counterfeit product being sold through 
U.S. based sales entities. However, we are having difficulty 
stemming he sales of counterfeit product sold through Chinese 
distribution outlets. Indeed, the bulk of these copies are 
entering the stream of commerce through on-line auction sites; 
primarily Alibaba, TaoBao and DHgate. The first appearing page 
of a ``Spyderco'' search of DHgate and Alibaba is attached. No 
item therein is an authenic Spyderco Inc. product. These 
Chinese owned sites have incredibly poor or absolutely no 
response to requests to remove auctions of counterfeit goods. 
In contrast, the famous on-line auction house eBay has 
developed their Verified Rights Owner (VeRO) program to combat 
just this issue. Utilizing more of a storefront format, 
Amazon.com also keeps a tight rein on infringing products, 
preventing their entrance into the Amazon.com stream of 
commerce.

    The costs associated with trying to remove unauthentic 
products from Chinese sales websites are now prohibitive. As 
with all small business operations, availability of funds to 
fight an infringement war are limited. Every dollar diverted 
for the effort to protect the marketplace from unsafe clones 
and patent infraingements, takes money's slated to be invested 
in corporate activities; increasing production capacity, 
research and development, additional employees, machinery 
acquisition, wage increases, etc. As a result, copies of many 
of our core products are now available on these sites at 
significantly lower prices than for which our authentic 
products can be offered.

    As I am sure we all realize, it is impractical for U.S. 
Customs and Border Patrol to inspect every package for IP 
infringements. If all manufactuers selling products into 
America, domestic and international alike, were subject to the 
same intellectual property enforcement standards, this problem 
would be alleviated. All internet auction sites should be 
required to have an infringement notification and removal 
system that works. This would level the playing field between 
the U.S. and Chinese owned internet auction and commerce sites. 
It would also provide an ideal point for IP holders to review 
and stop the offer-for-sale of infringing items being put into 
commerce worldwide.

    Spyderco agrees that it is important for the U.S. to 
continue embracing free trade principles with our trading 
partners. However, it is imperative that these partners respect 
and enforce American intellectual property rights. Spyderco 
respectfully requests this Subcommittee and the United States 
Congress to implement laws and treaties which require all 
websites viewable within the United States to publish and 
enforce strong Intellectual Property protection mechanisms 
similar to the eBay VeRO system, and to require our trading 
partners to respect and enforce American intellectual property 
rights.

    Thank you


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                       STATEMENT OF DON SHAWCROFT


                     PRESIDENT-COLORADO FARM BUREAU


                               before the


                      COMMITTEE ON SMALL BUSINESS


                SUBCOMMITTEE ON AGRICULTURE, ENERGY AND


                                 TRADE


                     U.S. HOUSE OF REPRESENTATIVES


                              MAY 22, 2014

    Chairman Tipton, members of the subcommittee, thank you for 
holding this hearing.

    My name is Don Shawcroft, President of the Colorado Farm 
Bureau. I am a rancher from the San Luis valley in Colorado. I 
am a board member of the American Farm Bureau Federation. Farm 
Bureau is the largest agriculture based grassroots organization 
in the country. Our membership is made up of 6 million farmers 
and ranchers growing everything you can think of--from 
alligators to zucchini and everything in between.

    Trade is vitally important to agriculture. According to the 
Economic Research Service (ERS) at the United States Department 
of Agriculture (USDA),

          ``U.S. agricultural exports generated employment, 
        income, and purchasing power in both the farm and 
        nonfarm sectors. ERS estimates that each dollar of 
        agricultural exports stimulated another $1.29 in 
        business activity in 2011. The $136.4 billion of 
        agricultural exports in 2011 produced an additional 
        $176 billion in economic activity for a total economic 
        output of $312.3 billion. Every $1 billion of U.S. 
        agricultural exports in 2011 required 6,800 American 
        jobs throughout the economy. Calendar year 2011 
        agricultural exports required 923,000 full-time 
        civilian jobs, which included 637,000 jobs in the 
        nonfarm sector. The agricultural export surplus helped 
        to offset some of the nonagricultural trade deficit.'' 
        \1\
---------------------------------------------------------------------------
    \1\ http://www.ers.usda.gov/data-products/agricultural-trade-
multipliers/2011-data-overview.aspx#.U3OS7YFdVyl

    These are not just high level impacts either. On the ground 
farmers and ranchers in Colorado, Kansas, Iowa and states all 
over the United States feel the positive impact of trade. 
However, with every positive, there is always a negative. One 
challenge that we are facing in agriculture is the use of non-
---------------------------------------------------------------------------
tariff trade barriers.

    This issue can be illustrated through Mexico's use of 
Sanitary-Phytosanitary (SPS) measures to block the importation 
of U.S. potatoes into Mexico. This issue caused hardship for 
U.S. potato growers and Colorado potato growers specifically. 
Colorado farmers send about seven truckloads of potatoes a day 
to Mexico--that's nearly 2,000 truckloads a year for only 5 
percent of all the potatoes shipped.\2\ However, I am happy to 
announce that through work and negotiation Colorado potatoes 
will now be allowed to be export potatoes to Mexican cities 
with populations of 100,000 or more. Early estimates give the 
indication that revenue from potatoes could be as high at $80 
million, a four-fold increase. This is money that comes back to 
farmers.
---------------------------------------------------------------------------
    \2\ http://www.cpr.org/news/story/new-trade-deal-mexico-good-news-
colo-potato-farmers

    I provided this example because it is a good illustration 
of how SPS issues are used to prevent agriculture trade and the 
---------------------------------------------------------------------------
negative impacts that it can have at the farmgate.

    While potatoes are a success story of how science has 
prevailed, agriculture still see impacts of SPS barriers being 
used against U.S. products. There continue to be simmering 
issues between the European Union (EU) and the U.S. pertaining 
to the production of beef and the use of hormones. This ban is 
an example of how SPS measures and non-tariff barriers are used 
as disguised protectionism, primarily intended to restrict 
imports from other countries.\3\
---------------------------------------------------------------------------
    \3\ http://www.fas.org/sgp/crs/row/R40449.pdf

    However, the Transatlantic Trade and Investment Partnership 
is a mechanism that can help to alleviate this problem. Farm 
Bureau supports efforts to increase agricultural trade flows 
and remove trade barriers that currently exist between the 
---------------------------------------------------------------------------
United States and the European Union.

    The Transatlantic Trade and Investment Partnership (TTIP) 
negotiations between the U.S. and the EU must deal with the 
many substantive issues that impede U.S.-EU agricultural trade, 
such as long-standing barriers against conventionally raised 
U.S. beef, ongoing restrictions against U.S. poultry and pork, 
and actions that limit U.S. exports of goods produced using 
biotechnology.

    The U.S. and the EU are major international trading 
partners in agriculture. U.S. farmers and ranchers exported 
more than $11.5 billion worth of agricultural and food products 
to the EU in 2013, while the EU exported more than $17 billion 
worth of agricultural products to the U.S. last year.

    Despite this impressive sum, just 10 years ago, the EU was 
the third-largest destination for U.S. agricultural exports. 
Today, it has fallen to our FIFTH-largest export market. Over 
the last decade, growth of U.S. agricultural exports to the EU 
has been the slowest among our top 10 export destinations. If 
U.S. farmers and ranchers were provided an opportunity to 
compete, the EU market could be a growth market for them.

    Regulatory barriers have become a significant impediment to 
that growth. Unless these trade barriers are properly addressed 
within the TTIP negotiations, they will continue to limit the 
potential for agricultural trade. It is imperative that TTIP be 
a high-standard trade agreement that covers all significant 
barriers in a single, comprehensive agreement. Scientific 
standards are the only basis for resolving these issues. 
Continuing barriers to the export of U.S. beef, pork and 
poultry, along with the slow approval process for biotech 
products, are major areas of interest to the U.S. in the TTIP 
negotiations. Both the U.S. and the EU adhere to the World 
Trade Organization's Agreement on SPS measures. These measures 
states that measures taken to protect human, animal or plant 
health should be science-based and applied only to the extent 
necessary to protect life or health.

    Continuing barriers to the export of U.S. beef, pork and 
poultry, along with the slow approval process for biotech 
products, are major areas of interest to the U.S. in the TTIP 
negotiations. Both the U.S. and the EU adhere to the World 
Trade Organization's Agreement on Sanitary and Phytosanitary 
Measures, which states that measures taken to protect human, 
animal or plant heath should be science-based and applied only 
to the extent necessary to protect life or health. The U.S. 
follows a risk-assessment approach for food safety. The EU is 
additionally guided by the ``precautionary principle,'' which 
holds that where the possibility of a harmful effect has not 
been disproven, non-scientific risk management strategies may 
be adopted.

    The use of the ``precautionary principle'' is inconsistent 
with the WTO SPS Agreement and is used as a basis for 
scientifically unjustified barriers to trade. The TTIP 
negotiations must result in a modern, science- and risk-based 
approach, based on international standards that can truly 
resolve SPS disputes. SPS issues must be directly addressed as 
a part of the negotiations, and these provisions must be 
enforceable.

    The EU approach for approving products of biotechnology 
combines a lengthy approval process with the ability of EU 
member states to ban approvals. The result in restrictive 
import policies and substantial reductions in U.S. exports of 
corn and soybeans to the EU.

    Furthermore, is it not just SPS issues that present non-
tariff trade barriers to agricultural trade. An example of one 
of these issues is the EU system of geographic indications for 
foods and beverages designates products from specific regions 
as legally protected for original producers. The use of these 
markers will prevent forward looking U.S. farmers and ranchers 
from developing products for a marketing program which would 
allow then to capture the value added through processing. The 
U.S. has opposed recognizing geographical names for foods when 
it would inhibit the marketability or competitiveness of U.S. 
products. The TTIP must not become an avenue to erect a new 
barrier to U.S. agricultural exports through the use of 
geographic indications...pretty sure salami is salami no matter 
where it is made.

    Negotiations on bilateral concerns move in both directions. 
There must be positive outcomes for all sides. The European 
Union has concerns about U.S. rules on EU beef and dairy 
products. An emphasis on finding trade-opening solutions to 
sanitary barriers will assist in resolving our many trade 
issues.

    In addition to resolving non-tariff barriers to trade, the 
TTIP negotiation proposal also calls for the elimination of 
tariffs. The average U.S. tariff on imported agricultural 
products is 5 percent, with 75 percent of our tariff lines at 
between zero and 5 percent. For the EU, the average tariff is 
14 percent, with 42 percent of tariff of lines at zero to 5 
percent. In order to expand market opportunities for U.S. 
agricultural products in the EU, tariff reductions will be 
necessary.

    We call for an ambitious agreement that addresses the real 
barriers to the growth of agricultural trade between the United 
States and the EU, both in the form of tariff and non-tariff 
barriers. The European Union's 28 members account for 19% of 
world imports and exports \4\ and in 2012 consumed $458 billion 
in goods and private services from the U.S.\5\
---------------------------------------------------------------------------
    \4\ http://ec.europa.eu/trade/policy/eu-position-in-world-trade/
    \5\ http://www.ustr.gov/about-us/press-office/fact-sheets/2013/
june/wh-ttip

    While the EU presents U.S. farmers and ranchers with very 
real potential for a major new market, TTIP is not the only 
trade deal that has the potential to help farmers and ranchers 
through reductions in tariff and non-tariff trade barriers to 
---------------------------------------------------------------------------
trade.

    The Trans Pacific Partnership (TPP) is the other major 
regional trade negotiation for the U.S. TPP consists of 
Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New 
Zealand, Peru, Singapore, Vietnam in addition to the United 
States. The addition of Japan to full participation in the TPP 
talks enhances the significance of the negotiations and makes 
the agreement much more encompassing of North American goals 
for agricultural trade. It will also fuel interest among other 
Asia-Pacific nations for similar opportunities to improve trade 
relations with the U.S. and other participating countries. 
Japan is the fourth-largest agricultural export destination for 
the U.S. with more than 12.4 billion dollars in sales in 2013.

    Again despite our trade success in Japan, the country 
maintains several restrictive policies that inhibit U.S. 
exports, such as high tariffs on dairy, horticulture, rice and 
other products, along with various SPS barriers. By joining the 
TPP negotiations under the same conditions as other 
participants, Japan must negotiate to resolve long-standing 
trade barriers for all agricultural products thus benefitting 
U.S. farmers and ranchers.

    The TPP will only fulfill its promise of improved and 
increased trade in the Pacific region by including the 
elimination of tariffs on agricultural products.

    While TTIP and TPP offer ways for the U.S. to deal with SPS 
and other non-tariff trade barriers through the framework of 
trade deals, they are not the only option for the U.S. As a 
member of the World Trade Organization (WTO) U.S. agriculture 
must continue to seek a commercially meaningful outcome through 
expanded market access from WTO negotiations. We must remain 
committed to advancing the goal of trade liberalization and 
increased opportunities for real trade growth. The U.S. wants 
an outcome to trade negotiations in the WTO that will open new 
markets around the world, produce new trade flows and grow the 
global economy. We can achieve this outcome by negotiating on 
the basis of a new agenda, not be reliving the failures of the 
past. Lastly, Farm Bureau has long supported trade promotion 
authority (TPA) in order to complete and pass into law trade 
agreements. For our important TPP and TTIP negotiations to move 
forward, to maintain the focus on improving and expanding trade 
between our negotiating partners, we need to have TPA in place.

    Agricultural market access measures are usually finalized 
at the end of negotiations when the certainty of TPA is crucial 
to a successful negotiation. We urge the House to pass the 
Bipartisan Congressional Trade Priorities Act of 2014, HR. 
3830, as a necessary and critical component for a successful 
trade policy agenda. While we understand that the Small 
Business committee is not the primary committee of jurisdiction 
for H.R. 3830, the committee can sever as an excellent conduit 
for support of H.R. 3830. They can do this by sharing the 
challenges faced by small business and small agribusiness with 
the House Ways and Means committee as they move this 
legislation.

    While many challenges continue to present themselves, 2013 
was not without some successes. 2013 saw expanding U.S. beef 
exports by 12 percent to reach over $6 billion by expanding 
access for U.S. beef to Japan, the European Union, Indonesia, 
Mexico, Panama, and the Dominican Republic. In 2013, the 
European Union also opened its market to live swine. Peaches, 
nectarines, and cherries may now be exported to Australia and 
Japan. These increases were the result of the removal their 
unwarranted SPS measures.\6\
---------------------------------------------------------------------------
    \6\ http://www.ustr.gov/sites/default/files/FINAL-2014-SPS-Report-
Compiled.pdf

    I thank you Chairman Tipton for the opportunity to testify 
today on this important issue. American agriculture drastically 
needs more market access that is free of SPS and non-tariff 
trade barriers. American farmers and ranchers are the most 
productive in the world. With market access, we can continue to 
provide high quality products to markets throughout the world. 
I look forward to answering any questions you may have.
               House Committee on Small Business

         Subcommittee on Agriculture, Energy, and Trade

  ``Unfair Trade Practices: Addressing Barriers Facing Small 
                      Business Exporters''

               Testimony of Timothy C. Brightbill

             Partner, Wiley Rein LLP, Washington DC

      Adjunct Professor, Georgetown University Law Center

                          May 22, 2014

    Chairman Tipton, Ranking Member Murphy, and Members of the 
Subcommittee. I am Tim Brightbill, a partner at Wiley Rein LLP 
and adjunct professor at Georgetown University Law Center. 
Thank you for the opportunity to testify before you today on 
the issue of unfair trade practices and barriers facing small 
business exporters. (These views are my own, not those of my 
firm or my clients.)

    I have practiced international trade law for almost 20 
years, and my practice has always focused on helping American 
companies, American industries, and American workers. I have 
worked with a variety of industries--including manufacturers of 
everything from steel to solar panels to school notebooks to 
heavy forged hand tools. I also work with many companies that 
provide services both here and abroad. My job is to help these 
companies grow, to prevent unfair trade practices from harming 
these companies, and to help eliminate trade barriers overseas.

    Small businesses face enormous challenges in the area of 
international trade. While all U.S. companies face trade 
barriers and unfair trade practices, these problems can be even 
greater for small- and medium-sized businesses. Trade laws and 
regulations are complicated, trade remedy cases are expensive, 
and trade barriers are becoming more pervasive and more 
challenging all the time.

    As a result, it is probably not surprising how few small 
businesses are able to become substantial exporters of goods 
and services. Let me list several of the challenges facing U.S. 
small business exporters, as well as all U.S. companies:

          1) dumping and subsidies - are two of the most 
        pervasive unfair trade practices. Foreign manufacturers 
        often sell below cost to enter the U.S. market and to 
        take market share away from domestic competitors. 
        Subsidies and government ownership of foreign companies 
        facilitate this type of unfair pricing. Small 
        businesses are forced to choose between cutting prices 
        to match foreign competition, or giving up sales and 
        market share. Notably, the antidumping (AD) and 
        countervailing duty (CVD) laws that address these 
        unfair practices are complex and the requirements for 
        filing trade remedy cases are difficult for even large, 
        sophisticated companies. There are many steps that 
        Congress and the Commerce Department could take to make 
        the trade laws simpler and easier to use for small 
        businesses. I would be happy to discuss these specific 
        ideas with the subcommittee later this morning.

          2) currency manipulation - is a serious problem that 
        harms all U.S. exporting businesses, large and small. 
        The Petersen Institute for International Economics, one 
        of the most respected think tanks in Washington, has 
        called currency manipulation ``the biggest subsidy of 
        them all,'' and estimates that currency actions by 
        China and more than 20 countries have increased the 
        U.S. trade deficit by $200 billion to $500 billion per 
        year, and that the United States has lost 1 million to 
        5 million jobs as a result of foreign currency 
        manipulation. If Congress wanted to take one trade-
        related action that would create the most new American 
        jobs, it would be to pass legislation directing the 
        Commerce Department to investigate currency 
        undervaluation as an illegal subsidy.

          3) intellectual property theft - is a pervasive 
        problem that demands a serious response from U.S. 
        government and law enforcement. The United States took 
        an important step this week by filing criminal charges 
        against five members of the Chinese military for cyber 
        hacking. The U.S. companies named as victims in this 
        week's indictments are at the heart of American 
        manufacturing of steel, aluminum, solar, and others. I 
        applaud the Administration for taking this step. But 
        the reality is that the Chinese Government sees no 
        difference between military espionage and corporate IP 
        and trade secret theft. And there are thousands of U.S. 
        companies that are victims of these activities. As one 
        expert has stated, there are two kinds of U.S. 
        companies--those that know they've been hacked, and 
        those that just haven't figured it out yet.

          4) the rise of state-owned and state-controlled 
        enterprises is another factor that is harmful to small 
        business exporters. U.S. companies are forced to 
        compete not with private companies, but with foreign 
        governments. And while China is also a notable example 
        of this problem, SOEs play substantial roles in the 
        economies of many countries--Russia, Brazil, Indonesia, 
        India, Malaysia, and many others.

    We need to include strong, enforceable disciplines on 
state-owned enterprises in all new free trade agreements, 
starting with the Trans-Pacific Partnership and the T-TIP 
agreement with the European Union. I would be happy to discuss 
what specific terms and conditions we need to include in these 
trade agreements in order to help U.S. small businesses 
compete. And, if we are serious about addressing SOEs, we 
should include such provisions in any bilateral investment 
treaty with China as well.

          5) Finally, we need to address the growing use of 
        non-tariff barriers to shut down trade. This can 
        involve obvious measures like export taxes, but also 
        more subtle barriers like Customs regulations, import 
        licenses, burdensome standards and certification 
        requirements that can become technical barriers to 
        trade. The United States has been very successful in 
        reducing tariffs worldwide, but those that want to 
        protect their markets are continually looking for new 
        ways to shut out foreign competition.

    Thank you for addressing this important issue today, and I 
would be happy to answer any questions.

                             -END-

                                 
