[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]




 
           THE STATE OF TRADE FOR AMERICA'S SMALL BUSINESSES

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

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD
                             APRIL 11, 2018

                               __________
                               
                               

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]   

                               

            Small Business Committee Document Number 115-065
             Available via the GPO Website: www.govinfo.gov
             
             
             
                                _________ 

                    U.S. GOVERNMENT PUBLISHING OFFICE
                   
 29-518                      WASHINGTON : 2018                   
             
             
             
             
             
                   HOUSE COMMITTEE ON SMALL BUSINESS

                      STEVE CHABOT, Ohio, Chairman
                            STEVE KING, Iowa
                      BLAINE LUETKEMEYER, Missouri
                          DAVE BRAT, Virginia
             AUMUA AMATA COLEMAN RADEWAGEN, American Samoa
                        STEVE KNIGHT, California
                        TRENT KELLY, Mississippi
                             ROD BLUM, Iowa
                         JAMES COMER, Kentucky
                 JENNIFFER GONZALEZ-COLON, Puerto Rico
                    BRIAN FITZPATRICK, Pennsylvania
                         ROGER MARSHALL, Kansas
                      RALPH NORMAN, South Carolina
                           JOHN CURTIS, Utah
               NYDIA VELAZQUEZ, New York, Ranking Member
                       DWIGHT EVANS, Pennsylvania
                       STEPHANIE MURPHY, Florida
                        AL LAWSON, JR., Florida
                         YVETTE CLARK, New York
                          JUDY CHU, California
                       ALMA ADAMS, North Carolina
                      ADRIANO ESPAILLAT, New York
                        BRAD SCHNEIDER, Illinois
                                 VACANT

               Kevin Fitzpatrick, Majority Staff Director
      Jan Oliver, Majority Deputy Staff Director and Chief Counsel
                     Adam Minehardt, Staff Director
                     
                            C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Steve Chabot................................................     1
Hon. Alma Adams..................................................     2

                               WITNESSES

Mr. Charles Wetherington, President, BTE Technologies, Inc., 
  Hanover, MD, testifying on behalf of National Association of 
  Manufacturers..................................................     4
Mr. Ken Couch, Director of Product Management and International 
  Business Development, ComSonics, Inc., Harrisonburg, VA, 
  testifying on behalf of State International Development 
  Organizations, Inc.............................................     5
Mr. Raymond J. Keating, Chief Economist, Small Business & 
  Entrepreneurship Council, Vienna, VA...........................     7

                                APPENDIX

Prepared Statements:
    Mr. Charles Wetherington, President, BTE Technologies, Inc., 
      Hanover, MD, testifying on behalf of National Association 
      of Manufacturers...........................................    21
    Mr. Ken Couch, Director of Product Management and 
      International Business Development, ComSonics, Inc., 
      Harrisonburg, VA, testifying on behalf of State 
      International Development Organizations, Inc...............    28
    Mr. Raymond J. Keating, Chief Economist, Small Business & 
      Entrepreneurship Council, Vienna, VA.......................    33
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    None.


           THE STATE OF TRADE FOR AMERICA'S SMALL BUSINESSES

                              ----------                              


                       WEDNESDAY, APRIL 11, 2018

                  House of Representatives,
               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 11:00 a.m., in Room 
2360, Rayburn House Office Building, Hon. Steve Chabot 
[chairman of the Committee] presiding.
    Present: Representatives Chabot, Leutkemeyer, Knight, 
Kelly, Blum, Gonzalez-Colon, Fitzpatrick, Marshall, Norman, 
Curtis, Evans, Adams, and Schneider.
    Chairman CHABOT. Good morning. The Committee will come to 
order. We thank everyone for joining with us this morning.
    This Committee has held countless hearings on the 
importance of increasing small business exports, and one thing 
is clear, we must do more to make it easier for small 
businesses to engage in foreign markets. About 1 percent of 
U.S. small businesses export, around 300,000 of them, and in 
2016, exports reached $2.2 trillion and supported nearly 11.5 
million jobs.
    Simply put, trade means opportunity for small business. 
After all, 95 percent of the world's consumers live outside our 
borders, and I have long believed that if we tear down trade 
barriers, we can make it easier for small businesses to 
participate in the global marketplace and unleash one of the 
largest sectors of the American economy.
    However, that also means we must enforce the trade 
agreements that we do have. There is little question that we 
need better trade deals, agreements that not only make 
America's small businesses more competitive but are also fair 
to American workers.
    For too long, China has exploited weaknesses in the global 
trading system. Whether China exports products through other 
countries to skirt tariffs or requires our most innovative and 
entrepreneurial companies to share their trade secrets in an 
effort to obtain American technology, American businesses in 
those cases lose. Stronger and more easily enforceable trade 
agreements mean small businesses will be able to access 
international customers and offer their products at a more 
competitive cost. It also means that businesses will create 
more and well more, driving up wages and benefits and job 
creation. In short, increased access to international markets 
strengthens the American economy.
    Trade is also an inherently American value, bolstering the 
importance of economic freedom and individual liberty across 
the globe. Furthermore, as we have seen earlier this week, the 
administration has gone to great lengths to level the economic 
playing field with China, and it appears to be having at least 
some impact.
    I have said before, and will say it again, that trade is 
not a choice or luxury in our modern world; it is a necessity. 
If the United States wants to continue to be a global economic 
leader, we must ensure that small businesses have every 
opportunity to engage in global commerce.
    Today, we will hear from small exporters, who will be 
directly impacted by the administration's ongoing trade policy 
negotiations. Additionally, our small business witnesses will 
share their stories about entering the world marketplace and 
the resources and policies that have made this possible.
    I want to again thank the witnesses for being here, and I 
would now like to yield to the acting Ranking Member today, Ms. 
Adams, for her opening statement.
    Ms. ADAMS. Thank you, Mr. Chairman, for holding this timely 
hearing. And I want to thank all of the witnesses for being 
here today.
    Small and medium-size businesses make up 97 percent of 
American exporting companies, making exports critical to our 
nation's overall economic health. Not only are small businesses 
active in the export market, but many of them rely on important 
materials to manufacture products and deliver services to 
consumers.
    I am troubled at the President's recent announcements 
related to tariffs represent an erratic economic policy that 
could jeopardize small firms' participation in the global 
economy. The unpredictable and ad hoc nature of President 
Trump's tariff announcements are raising concerns about how 
these changes and threats of other changes might harm 
entrepreneurs.
    Instead of creating a thoughtful plan to address some of 
the harmful effects trade agreements have had on our economy 
and middle class, the Trump administration has launched 
retaliatory attack after attack that brings our country 
perilously close to an international trade ware. And it is 
necessary to clarify, trade wars are not good and they are not 
easy to win.
    Setting aside recent developments, small businesses already 
face enormous challenges when attempting to enter foreign 
markets. These firms often lack the resources to identify 
opportunities abroad and develop contacts overseas. Moreover, 
small businesses that export products are often unaware that 
they are at risk for intellectual property theft. One study 
even found that only 15 percent of small businesses that 
conduct business overseas know that they need to file for IP 
protection abroad.
    Perhaps the most prohibitive factors small companies face 
in exporting are costs and resources. In fact, nearly all small 
business exporters spend a minimum of a few months preparing to 
export. Fully one-third spend over 5 percent of their annual 
operating revenue to start exporting.
    The Federal government operates a range of programs aimed 
at minimizing these barriers and facilitating small firms' 
entry into world markets. The State Trade and Export Promotion 
Grant Program administered by SBA are partners with state 
government organizations to help small companies access tools 
that they need to begin exporting. It is important that 
initiatives like these operate as effectively as possible to 
promote small business growth.
    To that end, I look forward to hearing from today's 
witnesses about how programs like these are meeting the needs 
of entrepreneurs and what improvements can be made either by 
the agency or by Congress to better serve small firms. While 
ensuring the smooth functioning of export promotion initiatives 
must be a priority for this Committee, it is equally important 
that we have an open, frank discussion about how the 
administration's recent tariff announcements are impacting 
global markets and American small business. Rapid, ill-
conceived changes to trade agreements could result in small 
business supply chain disruptions, price increases, and costs 
shifted to consumers.
    Equally important is the President's economic rhetoric and 
rattling. Trade wars initiated by tweets certainly cannot be 
beneficial to small firms, whether they rely on imports or for 
products made domestically, or if they are hoping to expand 
their international footprint.
    And while our Committee should rightfully focus on ensuring 
SBA trade-oriented programs are functioning well, I also hope 
today's discussion takes a meaningful look at what the 
administration's broad trade action means for small business.
    In that regard, I would like to thank our witnesses again 
in advance for your testimony. I look forward to hearing your 
perspectives on these timely issues.
    Thank you, Mr. Chairman. I yield back.
    Chairman CHABOT. Thank you very much. The gentlelady yields 
back.
    If Committee members have opening statements prepared, we 
ask that they be submitted for the record.
    And I would like to take just a moment to explain our 
timing and lights here. We operate under the 5-minute rule. You 
will each get 5 minutes. The lighting system will kind of 
assist you in that effort. The green light will be on for 4 
minutes. When the yellow light comes on, it will be on for a 
minute, and then the red light comes on, which means your 5 
minutes is up. So if you can stay within those parameters we 
would greatly appreciate it.
    And I would now like to introduce our very distinguished 
panel.
    Our first witness today is Mr. Charles Wetherington. He is 
the President of BTE Technologies, Inc., a medical device 
manufacturer and workers' compensation professional services 
business. He is an experienced business leader with expertise 
in global business development, engineering, and manufacturing. 
He is testifying on behalf of National Association of 
Manufacturers. We thank you for being here today.
    Our next witness will be Mr. Ken Couch, who serves as the 
Director of Product Management and International Business 
Development of ComSonics, Inc. He has over 30 years of 
leadership and business experience, including engineering, 
information technology, and business development work. Mr. 
Couch is testifying on behalf of the State International 
Development Organizations, Inc., and we thank you also for 
being here.
    And I would now like to yield to Ms. Adams for the purpose 
of introducing our final witness.
    Ms. ADAMS. Thank you, Mr. Chairman.
    It is my pleasure to introduce Mr. Raymond Keating, Chief 
Economist at the Small Business and Entrepreneurship Council, a 
nonpartisan small business advocacy research and training 
organization. He also served as an adjunct professor in the MBA 
program at Townsend School of Business at Dowling College for 
over a decade.
    Welcome, Mr. Keating, and thank you for testifying today.
    Chairman CHABOT. Thank you very much.
    And Mr. Wetherington, you are recognized for 5 minutes.

      STATEMENTS OF CHARLES WETHERINGTON, PRESIDENT, BTE 
 TECHNOLOGIES, INC.; KEN COUCH, DIRECTOR OF PRODUCT MANAGEMENT 
   AND INTERNATIONAL BUSINESS DEVELOPMENT, COMSONICS, INC.; 
     RAYMOND J. KEATING, CHIEF ECONOMIST, SMALL BUSINESS & 
                    ENTREPRENEURSHIP COUNCIL

               STATEMENT OF CHARLES WETHERINGTON

    Mr. WETHERINGTON. Thank you very much, Chairman Chabot, 
Acting Ranking Member Adams, and members of the Committee on 
Small Business. I thank you for the opportunity to testify 
today.
    My name is Chuck Wetherington, and as said, I am the 
President of BTE Technologies. BTE is based in Hanover, 
Maryland, and is widely regarded as the leading provider of 
advanced solutions for physical therapy and rehabilitation, 
manufacturing advanced physical therapy equipment. In addition, 
our professional services business provides world-class 
workplace injury avoidance solution for Fortune 500 companies.
    I am pleased to testify today as a member of the board of 
directors on behalf of the National Association of 
Manufacturers, the largest manufacturing association in the 
United States, which represents more than 14,000 manufacturers 
in every industrial sector and in all 50 states. Manufacturing 
employs 12.6 million men and women across the country, and 
contributes over $2 trillion to the U.S. economy annually. More 
than 90 percent of NAM members are small and medium-sized 
businesses like BTE.
    Our success, like that of many other small businesses, is 
due in significant part to our ability to sell to foreign 
consumers. Global economic growth over the past quarter century 
has created record levels of demand for advanced and high-
quality consumer and durable manufactured goods, including the 
products we manufacture at our facilities in Maryland and 
Colorado.
    Overall the United States quadrupled U.S. manufacturing 
good exports over the last quarter century, representing more 
than half of U.S. output and supporting about 6 million 
American manufacturing jobs. Ninety-six percent of exporting 
manufacturers are small and medium enterprises.
    At BTE, we have consistently focused on expanding into new 
markets, the latest being our work in the Gulf Cooperation 
Council of six Middle East countries where in the past 3 years 
we have been able to grow from virtually no sales at all to 
over 20 percent of our exports.
    However, small manufacturers in the United States face 
fierce challenges overseas imposed by barriers imposed by 
foreign countries and by foreign competitors that are 
advantaged when their home countries ratify more free trade 
agreements or provide more robust export credit assistance and 
promotion activities than the United States.
    Let me give a couple of examples. When the European Union 
completed its free trade agreement with Korea before the United 
States, our company lost significant sales. Once we did 
negotiate and ratified the FTA with Korea and that went into 
full force, our sales rebounded and we grew by over 130 
percent. FTAs work.
    Another example is as a medical device manufacturer, we 
confront a myriad of regulatory regimes globally, which are 
often accompanied by conflicting guidelines and requirements. 
This makes it harder to sell and compete in foreign markets, 
for example, China, which is just now rolling out brand new or 
major overhauls in their medical device regime.
    Negotiating additional trade agreements to eliminate 
foreign barriers, including regulatory barriers and providing 
strong enforcement tools would better enable companies like BTE 
to expand overseas and thereby help support manufacturing and 
grow jobs in the United States.
    There are other things that would help small businesses 
like BTE. First, SMEs need a positive outcome on NAFTA talks. 
The NAM put forth a 10-point plan on June 2017 to modernize 
NAFTA in a manner that will eliminate barriers, raise 
standards, and strengthen enforcement to grow manufacturing and 
jobs in the United States. We simply have to avoid outcomes 
that would increase uncertainty, raise costs, or undermine 
enforcement tools.
    In addition, we also need the Senate to confirm the pending 
board nominees for the return of the EXIM Bank, which plays a 
critical role in the ability of companies like BTE to win 
foreign contracts and level the playing field. We need the EXIM 
Bank to be in full functionality. This would help us compete 
with companies overseas that benefit substantially from their 
own export credit agencies.
    And then finally, more export promotion assistance 
programs. Over the past 3 years, my company has benefitted 
directly from the Small Business Administration's STEP program 
that has helped us offset costs associated with participating 
in trade events both in Europe and in the Middle East. And 
we've had very strong returns on those investments.
    In summary, many strong and enforceable agreements, export 
credit and export promotion are critical tools to level the 
playing field so that our small business manufacturers can 
compete and succeed in markets around the world. I request and 
urge the Committee to support these initiatives. Thank you.
    Chairman CHABOT. Thank you very much.
    Mr. Couch, you are recognized for 5 minutes.

                     STATEMENT OF KEN COUCH

    Mr. COUCH. All right. Thank you, Chairman Chabot and Acting 
Ranking Member Adams and members of the Committee.
    First, I want to thank you for the opportunity to testify. 
My name is Ken Couch, obviously. I work for a very small 
company called ComSonics. We manufacture products for the cable 
TV industry. More specifically, to put it in context, we 
provide test equipment that actually helps the cable TV 
industry identify problems in the network in your home to help 
your Internet actually work better.
    We have been in business for about 45 years. We actually 
helped start the first cable TV industry companies here in the 
U.S. We have about 250 employees, $47 million in revenue. We 
actually are located in four states across the U.S., so we are 
in Virginia, California, Georgia, and Indiana.
    To put things in perspective from an international 
perspective, I started working international about 4 years ago. 
We had about $100,000 in revenue, which was not much, and in 
just a couple countries. This year, we predict that we should 
make about $2.4 million in over 26 different countries. So I 
wanted to briefly share with you how that came about and what 
we did to get there.
    Basically, we utilized two major programs, the Virginia 
Economic Development Partnership, as I refer to as VEDP, and 
the State Trade Expansion Program (STEP). Both are managed by 
the U.S. Small Business Administration.
    When you start out from ground zero, you do not know which 
country to approach. You do not even know if your product is 
marketable. You do not know how big the market is. You do not 
have any contacts. You do not speak the language. You do not 
know the legal risks. You do not even know how to get paid. So 
as a small company, how do you overcome these barriers?
    What both the VEDP and STEP programs do, they 
systematically bring all of the experts together for you in 
kind of a one-stop shop format. So they bring legal counsel 
that is familiar with international. They bring banking. They 
bring shipping consultants. They bring in-country consultants. 
So they bring everyone you need together to answer all of your 
questions and to get you going.
    In addition, STEP helps provide the funding you need. All 
these resources they bring are not free. Unfortunately you have 
got to pay them, so the funding comes--it is very useful 
because a lot of companies that are small either do not have 
the funding or they are too risk averse. Why would I invest in 
something that I have no idea if it is going to go anywhere, 
especially with these huge barriers.
    The third thing that they do, which is probably my favorite 
part is they do something called trade missions, and basically 
what that is is they have in-country experts that help you 
target which countries you want to go after and they actually 
go into the country prior to you going and they find customers 
for you, they actually set up meetings for you. All you have to 
do is show up. I mean, there could not be a better way. It is 
like handing you a customer on a silver platter. So they even 
provide a translator. They provide transportation, everything 
you need to get in front of that international customer. So it 
is just, in my opinion, one of the best programs out there. If 
you are a small business and you feel like it is too daunting, 
these programs will significantly help you to get in the game.
    ComSonics is just but one of many success stories. Not 
every company can make it. It does take a lot of dedication on 
the part of each company. It takes resources that you have to 
commit. I personally can attest that I have about 700,000 
frequent flyer miles now over the last 4 years, so it did take 
a toll, but we have the results to show for it.
    Quickly, with respect to tariffs, with the proposed 
tariffs, our company would be impacted in three major ways. One 
is even though our products are made here in the U.S., we 
proudly say our products are made in the USA, here in Virginia. 
However, we buy a lot of components overseas. Drone components 
largely are sourced from Asia, so if they are tariffed and 
those costs go up, it will impact our ability to compete 
globally. In the same context, if we have to export and 
retaliatory tariffs are imposed on our products, that will also 
impede our ability to compete internationally.
    So in summary, there are three thoughts I want to leave 
with you. One, small businesses typically do not have the 
resources or expertise to build an international business from 
ground zero. It is just really tough. Small businesses tend to 
be risk averse when they have to invest in international 
markets because they are untested and unknown. Why would I put 
forward dollars when I have no idea if there is a return? So 
without the support of programs like VEDP and STEP, the 
barriers into international markets are almost insurmountable. 
These programs are vital to cultivate the success of small 
businesses and to start and grow international sales.
    I want to thank you for your time and support and 
leadership on this issue. I believe that continued funding and 
support for these programs are crucial to helping small 
businesses compete in the global marketplace, and in turn, grow 
our domestic economy.
    Thank you again for your time, and I certainly welcome any 
questions.
    Chairman CHABOT. Thank you very much.
    Mr. Keating, you are recognized for 5 minutes.

                STATEMENT OF RAYMOND J. KEATING

    Mr. KEATING. Chairman Chabot, Acting Ranking Member Adams, 
members of the Committee, thank you for hosting this important 
hearing on the state of international trade and small business.
    I serve as the Chief Economist for the Small Business and 
Entrepreneurship Council, which is a nonpartisan, nonprofit 
advocacy, research, and training organization dedicated to 
protecting small business and promoting entrepreneurship.
    In the summary of my written testimony, I would like to 
highlight some key points on trade, small business, and the 
economy. A critical foundational point is that free 
international trade amounts to a significant plus for the 
economy, for consumers, and for small businesses. This is one 
of the rare cases where we economists, almost all of us 
actually agree. Thanks to lower trade barriers, competition has 
expanded and resources are allocated more efficiently. In turn, 
consumers experience a wider choice of products and lower 
prices. The same goes for small businesses regarding acquiring, 
for example, intermediate and capital goods. Entrepreneurs, 
businesses, and workers also experience greater opportunity as 
more markets are opened for their goods and services.
    In terms of the overall economy, international trade is 
deeply integrated in and vital to the U.S. economy. Consider 
that real total trade exports plus imports in 1955 equal just 6 
percent of real U.S. GDP. Today that is almost 30 percent. And 
growth in trade equals a significant portion of U.S. economic 
growth, at least 40 percent in recent times.
    Combine the importance of trade in the economy with the 
fact that our economy largely is a small business economy, 
meaning that most U.S. businesses are small and mid-sized 
enterprises, then it is still surprising that most people 
assume that trade is overwhelmingly about large businesses. In 
reality, in terms of the number of employer firms involved, 
international trade is largely about smaller businesses. For 
example, 76 percent of U.S. exporters have fewer than 20 
employees; 87 percent fewer than 50 workers.
    On the import side, the same thing goes. Seventy-five 
percent of U.S. employers have fewer than 20 workers, and 86 
percent have fewer than 50 workers.
    As for the current issues confronting small businesses on 
trade, the U.S. has benefitted tremendously from NAFTA, which, 
of course, is now undergoing some renegotiation. The growth in 
U.S. trade with both Mexico and Canada has been robust, and the 
role of small business again has been critical with 75 percent 
of firms exporting to Canada and 73 percent of firms exporting 
to Mexico have fewer than 50 employees. For good measure, the 
growth in the number of U.S. firms exporting to both Canada and 
Mexico has been dramatic.
    As for trade with China, which also we know is coming under 
scrutiny, consider that U.S. goods exports to China from 2001, 
the year that China was admitted to the WTO, to 2017, they grew 
by 579 percent. In addition, 54 percent of U.S. exporters to 
China have less than 20 workers; 69 percent less than 50 
workers. So again, this is about small business. Also, from 
2001 to 2015, the number of U.S. firms exporting to China grew 
by over 600 percent.
    In my written testimony, I also note the importance of 
lower governmental barriers and the small business role in 
trade in key sectors of our economy. I highlight the energy 
sector, railroads, agriculture. Again, when you look at the 
businesses involved there in trade, it is overwhelmingly small 
firms.
    Finally, regarding the best trade policy agenda for small 
business going forward, it should be focused on policymakers 
working to reduce barriers to trade by entering into and 
expanding free trade agreements. That includes strengthening, 
such as via enhanced intellectual property protections and not 
weakening NAFTA. NAFTA, by the way, was the first trade 
agreement where you had intellectual property protections in 
the agreement.
    Also, the U.S. needs to lead by example, and hopefully 
through negotiations with the goal of entering into, 
ultimately, a trade agreement or trade agreements with China. 
That, I think, is going to be the real way where we can get in 
there, roll up our sleeves, and in a constructive way hopefully 
make some changes and really teach China about the benefits of 
property rights and free trade and so on.
    And, of course, we need to reclaim a global leadership role 
in advancing free trade. We had that for decades. We need to 
reclaim that role. It is vital.
    Thank you for our time and attention. I look forward to 
your questions and to further discussion.
    Chairman CHABOT. Thank you very much. And we thank all the 
panel members for their testimony.
    And I will recognize myself for 5 minutes to begin the 
questioning. And Mr. Wetherington, I will start with you.
    How can NAFTA be strengthened for America's small 
businesses? If you have one or two suggestions, or more if you 
would like.
    Mr. WETHERINGTON. Certainly.
    As a small business owner, the biggest thing that we need 
is predictability. So the longer that we drag this out, the 
more time that it takes to get to solutions creates 
uncertainty, and with uncertainty creates problems that are 
very difficult for any business to deal with, let alone a small 
business. We are not resourced in a way to be able to do that.
    So the things that I would personally be a strongest 
proponent for, and I think ISDS has kind of gotten over the 
hurdle, but that is a very critical thing for us to make sure 
that we have methods for remediating problems if problems do 
occur. It is a very near and dear point to my business because 
I both import subcomponents from Canada and I sell finished 
products back to Canada. I also have a Canadian sub on my 
professional services business. So really for us, the key is 
let's get it done. It has been very important for us. Let's not 
throw the baby out with the bathwater, but let's get this 
through so we can get rid of the uncertainty.
    Chairman CHABOT. Thank you very much.
    Mr. Couch, I will turn to you next.
    Many trade policy experts urge us to improve protections 
for intellectual property rights and stronger enforcement 
mechanisms is part of that, of course. Can you discuss the 
importance of IP for small businesses? And do you believe that 
a lack of IP protections in other countries has discouraged 
many small businesses from engaging in trade-related activities 
there?
    Mr. COUCH. I am going to give you a very different 
perspective on IP based on my experience.
    So as a small company, we definitely have IP. When we 
started to first engage in countries, particularly like Asia 
and China, we looked into IP protection. Part of the issue is, 
one, it is difficult to navigate. As a small company, there is 
a lot involved, and in particular, there are rules like if you 
have not filed for IP I think a year prior to, you know, going 
to market, then you are disqualified. So I do not know the 
exact rules. I just know that they were cumbersome and 
difficult.
    The other issue is that even if we went through the process 
of getting IP protection, particularly with China, I do not 
think they would adhere to or honor the policy. So in other 
words, our ability to protect the IP would be limited. Because 
we are a small company, we cannot really afford to really put a 
lot of money into the legal system to protect the IP. So we 
would just be run over, essentially. So it is a choice that a 
lot of small businesses need to make, which I think is 
difficult. One, being the process is difficult, and two, can 
the IP regulations really be upheld?
    So in our case, we chose to forego it mainly because we 
were in a niche market and we felt like the chances of the IP 
being exploited was minimal. But that is my experience.
    Chairman CHABOT. Thank you very much.
    Mr. Keating, let me turn to you then. There is no question 
that small business trade with China, both imports and exports, 
have grown significantly over the past, say, 15 years. Do you 
have any sense of the value small businesses have lost due to 
China's theft of intellectual property or state-backed firms 
undercutting America's small manufacturers and service 
providers? And do you believe that the United States should 
take a stronger stance on China's predatory trade practices in 
an effort to strengthen the competitiveness of American small 
businesses?
    Mr. KEATING. Yes. Well, I wrote a book on intellectual 
property, how important it is to small businesses. So it is 
vital that we get China pointed in the right direction on this.
    I do not have the numbers off the top of my head but I will 
certainly provide some numbers in terms of estimates on losses. 
They are significant without a doubt, and understand what we 
just heard, small firms do not have the legal department. 
Right? They have got to, you know, this is why having 
agreements and structures and policies that are enforced are 
critical for small firms in terms of reaching into these 
markets.
    So this is, if not the number one issue, then in the top 
two when dealing with China. The question is how do we go about 
it? And my own view as an economist is not to go the route of 
tariffs, which ultimately hurt U.S. consumers and small 
businesses, but you have to engage with them and make it clear 
to them that if they want the long-term growth in their own 
economy, you know, they are looking now to move from low cost 
producer to a high value economy. They are not going to do 
that, quite frankly, if they do not enforce and protect 
property rights, including intellectual property.
    Chairman CHABOT. Thank you very much. My time is expired.
    Ms. Adams is recognized for 5 minutes.
    Ms. ADAMS. Thank you, Mr. Chairman.
    Free trade agreements inevitably create winners and losers 
in our economy. Some small businesses are able to recap the 
benefits of trade through access to new markets and lower 
prices, yet in other sectors, the textile industry in North 
Carolina comes to mind, trade leads to displaced jobs from 
increased competition and offshoring. North Carolina's textile 
industry lost 82 percent of its workforce since the mid-1990s.
    How can we balance these competing needs to maximize the 
benefits for small business exporters while minimizing harm to 
important industries? And anyone can answer that if you would 
like to.
    Mr. WETHERINGTON. I will take the first swipe at this.
    I believe that free trade agreements--let's start with what 
trade is and how trade works. And my mind, trade is like water. 
It is going to find the path of least resistance. It will be 
there and it will find a way to exist, whether you have 
tariffs, free trade agreements or not. The beauty of the free 
trade agreement is you are getting some knowns into the 
process. You are getting a rule of law. You are getting 
agreements on how you are going to work together, how you are 
going to resolve disputes, and I think that the United States 
is well behind in where we should be as a leader in having 
these kinds of talks.
    And I agree with Mr. Keating. I believe that the most 
important way that we can work with China, for example, is 
through the negotiating table and working towards a free trade 
agreement.
    Ms. ADAMS. Okay. Mr. Keating?
    Mr. KEATING. I would agree. Mr. Wetherington pointed out 
that trade is going to find a way, if you will. And he is 
right. Understand, these free trade agreements that we have 
entered into--NAFTA. Actually, when you look at the list, in 
most cases we already had pretty low barriers to trade. It was 
the other countries that have high barriers. So when you look 
at these free trade agreements, the big beneficiaries have been 
U.S. firms in the U.S. because the barriers, you know, tariffs 
and quotas have come down on the other end. So I think that is 
part of the answer.
    The other thing that you are going to have inevitably in a 
dynamic economy, you are going to have shifts like this. You 
know, we saw it in our own country over the years where certain 
manufacturing went from the northeast to the south and so on 
and so on. These things are going to happen. While you can 
certainly address it in terms of education programs and so on 
that can be beneficial, but also, I think quite frankly, having 
the best environment for free enterprise to flourish is the 
best answer. You mentioned North Carolina. North Carolina has 
lost textile jobs, but it has added so many other areas and 
become quite a diverse economy, high tech economy to their 
credit. So this is kind of the dynamic economy that we are 
dealing with and we always will deal with.
    Ms. ADAMS. You know, we frequently hear that small 
businesses make up more than 9 out of every 10 businesses that 
export goods from the U.S., but when it comes to the 
negotiating process for trade agreements, the interests of the 
small business community often take a back seat to that of 
large multinational corporations.
    So what do you think can be done to alleviate the concerns 
of small businesses in ongoing trade negotiations?
    Mr. Couch?
    Mr. COUCH. That is a great question. I wish I had a great 
answer.
    Again, I can only speak from my company's perspective. And 
we do do business with countries that have extremely high 
tariffs. I mean, in some cases 300 percent. So you question how 
can you compete in a market where we have to raise our price 
300 percent just to sell into the countries? But again, 
probably because we are in a niche market, what we see is that 
everyone pays the tariff. So as long as they do not have in-
country competition, everyone pays the duty. Everyone pays the 
tariff. And so a lot of our customers are just used to paying 
an exorbitant amount for products from the U.S., for example.
    So I do not have a good answer for you in terms of how can 
we be better represented. It would certainly be nice not to 
have to pay 300 percent tariffs in these countries, and I do 
not know how those get lowered.
    Ms. ADAMS. Okay. I have got 30 seconds. Anybody else want 
to take that? Twenty-three now.
    Mr. WETHERINGTON. If I could take a swipe at that question 
as well. I think things like today is a perfect example of how 
we get our voice across. We come, we talk to you. You can help 
us carry the voice. My membership in the National Association 
of Manufacturers, we have a very strong small and medium 
enterprise membership there and that amplifies our voice. It is 
one of the key reasons why I do that, so we can get our voice 
out there.
    Ms. ADAMS. Great. Thanks very much, Mr. Chairman. I yield 
back.
    Chairman CHABOT. Thank you very much. The gentlelady yields 
back.
    And the gentleman from Missouri, Mr. Luetkemeyer, who is 
the Vice Chairman of this Committee is recognized for 5 
minutes.
    Mr. LUETKEMEYER. Thank you, Mr. Chairman. Thank all of you 
for being here today.
    Mr. Wetherington, in your testimony you talk about 
harmonization of regulations between countries. To me that is 
very important because it puts everybody on a level playing 
field. And it would seem to me that you need to do those in 
trade agreements. Is that basically where you do that or do you 
have other negotiating opportunities to level that?
    Mr. WETHERINGTON. I cannot see another place where you 
would do it other than through free trade agreements. It is 
critical for us. In the medical world, every single country 
seems to want to have their own regime, and oftentimes it is 
used as a barrier to entry. It is a business tariff. It is not 
a cost directly but it is a cost we have to pay in order to get 
our products certified for those countries.
    Mr. LUETKEMEYER. So when you see an opportunity in another 
country, when you want to open up another country and you see 
that there is a barrier there and we do not have a free trade 
agreement with them or any sort of agreement, do you go to the 
administration and ask them to help you with breaking down the 
barriers? And if you do, are they receptive? Do they work with 
you? Or do you have to do this on your own? How does that work?
    Mr. WETHERINGTON. The choice we have to make is an economic 
choice of what is the cost for entering into that country and 
do we think there will be a payback? I do not feel like there 
is a path currently for us to go get our voice heard to say 
harmonization needs to be a factor here. I have been out 
staying that for years and years inside the beltway. I still 
have hope, but within the short term I have got to make the 
decisions for the company and that is based off of can I get 
the return after I do the investment to get certified for that 
country?
    Mr. LUETKEMEYER. Okay, great.
    One of you, I think Mr. Wetherington, maybe you were the 
one that talked about the ability to finance stuff that you are 
going to be able to export. Would you elaborate on that just a 
little bit more? And if you cannot find financing through the 
Export-Import Bank, where do you go to get that? Is it 
available? Do you just not do it? Your competition is getting 
it and you are not?
    Mr. WETHERINGTON. Right.
    Mr. LUETKEMEYER. Can you explain a little bit of that, how 
that works?
    Mr. WETHERINGTON. We bought our company in 2001, and at the 
time we were doing less than 2 percent of our sales in exports. 
We focused hard. We worked with commerce to try to get through 
the Gold Key program, identifying ways in countries like your 
mission, trade missions. Got it up to 15 percent, but we were 
not able to find financing anyplace. We were having to put our 
products onto ships or onto airplanes at risk, and we did not 
want to do that because the value of our products are too 
great. So we required everybody to pay cash upfront or an 
irrevocable letter of credit, which is kind of an onerous way 
to do business. And it was not until we started working with 
Export-Import Bank with their accounts receivable insurance 
that we were able to get the financing we need. During the 
period of time when EXIM lost its certification, we went to our 
bank. We tried to get financing for those deals and we could 
not. Fortunately, we had enough experience with most of our 
distributors we could absorb the risk. But if I was going to 
new markets, it would have been very difficult at that time.
    Mr. LUETKEMEYER. So what kind of impact did that have on 
your business by not being able to--I mean, did the amount of 
your sales go down 10 percent, 20 percent?
    Mr. WETHERINGTON. It did not last long enough to have an 
impact on the business, but it certainly impacted our ability 
to go expand into new markets. So we lost opportunity.
    Mr. LUETKEMEYER. Okay. Did that allow other companies from 
other countries to take your----
    Mr. WETHERINGTON. Of course.
    Mr. LUETKEMEYER. You get a toehold and keep you out that 
way?
    Mr. WETHERINGTON. Of course. Of course. The world loves 
American medical devices, but they also love German medical 
devices or Swiss medical devices. And the vacuum will get 
filled.
    Mr. LUETKEMEYER. We talked about NAFTA a little bit today. 
I know that it is being renegotiated, and I read something I 
think Monday where the Canadian Prime Minister was excited 
about where the agreement is going to go to. Apparently, they 
are down to one issue, which is Mexico's minimum wage for 
autoworkers is the hang-up apparently right now. Do any of you 
know what is in the agreement? Have you seen the agreement or 
heard things about it? Do you know where it is at? I am just 
kind of curious if it is a good deal, bad deal, irrelevant?
    Mr. Keating?
    Mr. KEATING. The only thing that I have heard that 
concerned me a little bit was that intellectual property, they 
were kind of getting around to it, so I would have liked to 
have heard that that was kind of number one on the hit parade, 
but that is all.
    Mr. LUETKEMEYER. Well, it brings up a great question. How 
do you enforce the laws on intellectual property? I have only 
got 30 seconds here but if you can.
    Mr. KEATING. Extremely difficult when you think about 
China, what we are talking about here, it is a massive 
undertaking, and that is where you need----
    Mr. LUETKEMEYER. Do you not really have to do it upfront 
just to make sure they do not get it, period, because you 
really cannot enforce it on the other end?
    Mr. KEATING. Well, you have to make sure it is in the 
agreement. You get as many checks and balances and everything 
and resolution mechanisms and so on. You need all of that in 
there. But you really need to have the other country understand 
why property rights and intellectual property matters. If they 
do not, they are going to find ways around it.
    Chairman CHABOT. The gentleman's time has expired.
    Mr. LUETKEMEYER. I yield back the balance of my time.
    Chairman CHABOT. Thank you.
    The gentleman from Pennsylvania, Mr. Evans, who is the 
Ranking Member of the Subcommittee on Economic Growth, Tax, and 
Capital Access is recognized for 5 minutes.
    Mr. EVANS. Thank you, Mr. Chairman.
    Mr. Keating, you stated in your testimony that one of the 
few points that economists can agree on are the net benefits of 
free trade. The representative of Pennsylvania Pork Industry 
just dropped by my office to drive home the point that they are 
targets of China's retaliation. And since China is 
Pennsylvania's third largest export market after Canada and 
Mexico, the pain will be felt. Can you address this?
    Mr. KEATING. Well, from an economist's perspective, it is 
predictable. I mean, when we talk about fears of a trade war, 
you know, if you are going to down the path of imposing or 
threatening tariffs, your hope is that it comes out okay in the 
end, but the real risk, obviously, is that you are going to see 
retaliation. So this is the standoff that we are at. It is not 
a productive way to go about trade policy in the end because 
you are creating such uncertainty. You met with pork people 
today; right? Go down industry after industry and look at what 
happens in the market. So it would be much more constructive to 
sit down at the table and move in the right direction.
    I mean, think about if U.S. and China sat down and said, 
you know what? We are going to start talking with the goal 
ultimately, we do not know when, of reaching a free trade 
agreement. Think about how entrepreneurs and markets and so on 
would react to that? That would be a tremendous positive.
    Mr. EVANS. In your testimony you stated that trade deficits 
are not necessarily economic negatives. Could you talk a little 
about that, please?
    Mr. KEATING. Trade deficits, yes. Well, this is the problem 
that we run into with trade deficits. We automatically think 
they are economic negatives, but again, when you look at number 
one U.S. economic history, when our economy is growing fast, 
our trade deficit tends to expand. Why does that happen?
    Well, number one is we have increased demand for imports, 
both consumer goods, capital goods, intermediate goods. So that 
is one side of it. And then the other side of it is we have a 
current account and a capital account. If the current account 
is in deficit, the capital account is going to be in surplus. 
Okay? Now, to understand what is going on here, if you have a 
trade deficit, it balances out with the capital account. That 
means people are investing. Foreigners are investing into the 
United States. That is another plus. That is a positive.
    I always tell people, I tell my students, when you look at 
trade, ignore the deficit or the surplus. Look at what is going 
on with exports and imports. And if they are both growing, that 
is good news. That is the bottom line.
    Mr. EVANS. Mr. Wetherington, I want to follow up a little 
bit because I saw you kind of nodding your head, going back to 
something you said earlier about predictability. So do you want 
to speak to kind of what Mr. Keating just expressed? Because I 
think that is the message you were sending to us, and also, you 
were raising the aspect of this hearing could be helpful to 
this process.
    Mr. WETHERINGTON. Absolutely. I applaud the idea of what it 
would be like for the markets to have us talking instead of 
tariffs talking about sitting down and beginning the 
conversation. I think that, even heading in the right 
direction, is going to provide a level of predictability and 
kill the uncertainty that I think is going to help bolster both 
the markets and bolster those small and medium enterprises that 
are not trading today for whatever reason, to get them to feel 
much more comfortable about the idea of going into some of 
these markets that they may have fears of losing IP today, but 
I think that would help them in that ability to make the 
decisions to go.
    Mr. EVANS. Interesting you said it because the consulate 
general from China was in Philadelphia last week and the first 
thing she said to me is, can you talk to the White House?
    So Mr. Chairman, I just want to let you know that is what 
the consulate general of China said to me as we were talking 
about as the airport was talking about direct flights to China. 
So I just want to carry the message there. You may have a 
hotline phone number there.
    I yield back the balance of my time, Mr. Chairman.
    Chairman CHABOT. The gentleman yields back. I will make 
that call right after this meeting.
    The gentleman from Utah, Mr. Curtis, is recognized for 5 
minutes.
    Mr. CURTIS. Thank you, Mr. Chairman.
    I feel during your testimonies a lot of pain that I have 
experience as a small business owner and manufacturer. And I 
want to go back to a couple of these points that we have kind 
of gone over and over.
    Let me start with you, Mr. Couch. The world of exporting 
overseas is just what I would call a big gray cloud, right, to 
most small businesses. Can you look the camera in the eye and 
give some advice to all those thousands of businesses out there 
that want to do what you have done and tell them where to start 
and what you have learned that could be helpful to them.
    Mr. COUCH. Sure. Again, I am going to refer back to you 
need help to do it. It is difficult to do it on your own. So 
there are in my case the VEDP program and the STEP program are 
exactly what we needed, and there were many other companies 
inside Virginia, for example, that leveraged the same programs 
that got the help they needed to be successful.
    So I think the first step is find whatever available help 
and resources, funding, you can come by to get you going 
because going it on your own is a tough road. And you may be 
successful, but I think your chances are severely diminished.
    Mr. CURTIS. Does that start with a call to the chamber? A 
call to the state? Where does that start to tap into those 
resources?
    Mr. COUCH. Well, it does start with a call, obviously. In 
my case, they called me, so that made it a little easier. But I 
would encourage them to check into whatever state programs and 
federal programs are available, and with a little internet 
search and a few calls you could be able to narrow it down.
    Mr. CURTIS. Thank you.
    Mr. Wetherington, you look like you are ready to answer 
that question.
    Mr. WETHERINGTON. No, I would just say for us it was 
commerce and SBA. So those were the two big pushes. We had 
already had a plan. And that is the key, is to develop a plan. 
Do not be too shy about the plan, but also make sure that you 
have got checks and balances and points where you are looking 
back at it, assessing how you are performing against what your 
expansion plan was. And recognize that being there is 
important. You cannot go and export and not go there. You need 
to go, meet the people, be on the ground.
    Mr. CURTIS. I cannot remember if it was you or somebody 
referred to risk. Can you address just the risk of going into a 
new market and what they need to be prepared for?
    Mr. WETHERINGTON. We have hammered the IP. That is clearly 
one of the risks. But you have to think, too, the lifeline or 
the life cycle of your products as well. How am I going to 
support the product? How am I going to support with training? 
How am I going to support with service? You know, consider all 
of the aspects. If you have a serviceable product, it is not a 
commodity, what would all the aspects of how am I going to go 
do business in that country, and then start thinking about are 
there ways I can do it where I am lumping regions together to 
gain efficiencies.
    Mr. CURTIS. You said we have hammered through the IP and I 
am going to hammer it a little bit more. I once made an 
international trip and it was to the Mid-East. Visited a 
facility that had taken my logo, changed the color on it, and 
manufactured our equipment there and they did not care. They 
did not care that I was there to visit them, to see them. And I 
would just like to add my voice to your voice today in this 
call for help, this call for predictability, and ask you for 
resources in calming the markets and calming discussions that 
will help you be successful.
    And then finally, I would just like to add my voice of 
appreciation to those of you who fight the good fight, who 
provide manufacturing jobs in this country. We do not have 
enough of them. To those of you who take risk and invest in 
these markets, I want you to know from my perspective how much 
that is appreciated.
    I yield my time.
    Chairman CHABOT. Thank you. The gentleman yields back.
    The gentlelady from Puerto Rico, Ms. Gonzalez-Colon is 
recognized for 5 minutes.
    Ms. GONZALEZ-COLON. Thank you, Mr. Chairman. And thank you 
all the panel for being here.
    I think this is one of the biggest issues for our whole 
nation in terms of how do we create more jobs, not just in the 
mainland but going abroad with our products. In the case of 
Puerto Rico, it is the same thing. Thirty-two percent of our 
manufacturing is actually medical devices and pharmaceuticals. 
So a lot of our products are going abroad. And one of my 
questions will be to the Association of Manufacturers. Are you 
either considered to promote the territories as part of the 
economic development through the inclusion and free trade 
agreements?
    Mr. WETHERINGTON. So I do not know that I am involved 
enough with the association to know specifics there. I do know 
I am on the executive committee as well. Pfizer is on the 
executive committee. I know that the pharmaceutical companies 
have done a great job not only with placing the plants there 
but in the support with recent tragedies. So I know that the 
members of the NAM aver very involved with that process.
    Ms. GONZALEZ-COLON. The reason I make this question is 
because when NAFTA was approved, a lot of the businesses in 
areas of Puerto Rico lost a leading source in the Caribbean and 
the eastern part were not considered at the time. So it was a 
big impact in the region at that time. So we are now trying to 
get involved in those trade agreements before, as part of the 
United States as it should be. But that is the reason I am 
asking you directly to consider that as part of the promotion 
of the Manufacturers Association, including all the 
territories, because I do know that some territories in the 
Pacific got their own areas to export.
    You were talking about to ease access to credit assistance. 
In our case, I was hearing to go to Small Business and other 
agencies. We just face the same situation, but add to that we 
are on an island so it is more difficult to ship those goods. 
One of the areas that we are looking to have more partnerships 
is how do we include those imports and exports as part of the 
U.S. agenda, not just Puerto Rico as a sole territory but as 
part of a whole agenda. So that will be one of the areas of 
promotion of Made in USA products, that we do have that seal, 
that we should include that.
    And during your testimony you were saying that the 
regulations medical devices confront around the world, how can 
those agreements solve that situation now? Do you have any 
specific recommendation on those in terms of medical devices? 
Because that is an industry we are very committed to that.
    Mr. WETHERINGTON. Harmonization is the key. You have to 
come up with agreements on how you are going to provide those 
regulations. Manufacturers, especially small manufacturers, we 
are tenacious. We will deal with change. We will figure out a 
way to survive. But that uncertainty and things moving 
dramatically and moving rapidly are things that cause problems. 
I would take a higher level of regulation--please, I almost do 
not want to go on record with that.
    Ms. GONZALEZ-COLON. Do not say it louder.
    Mr. WETHERINGTON. I would almost take a higher level of 
regulation if it were harmonized. Then, we could figure out how 
to deal with it. But having to deal with different standards in 
every single country I go to where, again, it is used as a 
whipping post in many cases, that is what makes that difficult.
    Ms. GONZALEZ-COLON. Mr. Couch, I have to say that you 
represent what is going on in the whole small business 
industry. All those challenges. We receive calls from our 
constituents every time regarding how can we direct them to 
Small Business or other agencies just to get credit, to get 
promotion on how to manage those commercial missions to 
different countries. And that is the most difficult, how to get 
them together to send them abroad. Which countries are being 
the most helpful in that commercial missions in your 
experience?
    Mr. COUCH. Well, like I said, we have, in the last 4 years, 
kind of expanded our portfolio into 26 countries. It is 
certainly easier to remember the most difficult versus the 
easiest. The easiest I would say are the European countries 
just because the shipping and the trade barriers are pretty low 
there. Methods of payment are pretty standard. So we do 
business in most of the European countries now, and that was 
certainly almost like doing business inside the United States. 
So South America, Latin America would have been my second most 
easiest. There are some challenges in certain countries within 
that so it is not across the board, but I would say Asia is by 
far the most challenging. So if I were to kind of step rank it 
in that way.
    Ms. GONZALEZ-COLON. With that I yield back the balance.
    Chairman CHABOT. Thank you. The gentlelady's time has 
expired. Thank you very much.
    And the gentleman from Iowa, Mr. Blum, who is the Chairman 
of the Subcommittee on Agriculture, Energy, and Trade is 
recognized for 5 minutes.
    Mr. BLUM. Thank you, Chairman Chabot. Thank you to our 
panelists for being here today.
    I think the statistic is 97 percent of the world's 
consumers--95 percent, let's say, of the world's consumers are 
outside the United States. So we need access. We need access to 
those buyers. And I think we all agree, we do not want it to be 
a race to the bottom in terms of wages. I would guess that 
American wages are probably higher. Not probably the highest, 
but maybe higher than almost all of our trading partners 
companies' workers' wages. So first question I have, and I 
particularly am interested in hearing from the economist, Mr. 
Keating. You know what Harry Truman famously said about 
economists; right? He said he opined for a one-armed economist 
because he was tired of economists saying ``on the other 
hand.''
    Mr. KEATING. Yes. The profession deserved it.
    Mr. BLUM. My first question is does the United States need 
tariffs to compete?
    Mr. KEATING. No. Why would we need tariffs to compete? I 
mean, you mentioned wages. It is almost important to understand 
that what is income tied to? Income ultimately is about 
productivity. And the reason that we have among the highest 
paid workers on the face of the planet is because they are 
among the most productive workers on the face of the planet. So 
that is number one. And that is key to keep in mind when we 
talk about, oh, what are workers making in Mexico compared to 
the United States, or China versus the United States? But 
understand, it is all about productivity now. That is how those 
wages and incomes are determined.
    We do not need tariffs to compete. We need just the 
opposite. We need to engage in more free trade agreements so 
that other countries lower their tariffs and we can get out 
there and do business.
    Mr. BLUM. I agree with you about productivity. I have two 
questions on that.
    First of all, what types of things lead to increased 
productivity?
    Mr. KEATING. Private sector investment and 
entrepreneurship. Those are the two critical things. And right, 
private sector investment and entrepreneurship lead to 
innovation. This is the package. And we are usually pretty darn 
good at that. You know, entrepreneurship has suffered in recent 
times. It is something that we are concerned about at the Small 
Business and Entrepreneurship Council, not just because they 
are our members but because that is the lifeblood of our 
economy. When you go into the international marketplace, one of 
the big edges, if you will, that the United States has is our 
entrepreneurship. So, and we have also had, you know, until the 
past year or so coming out of the last recession, our private 
sector investment lagged terribly. So we are still trying to 
catch up on that front.
    Mr. BLUM. What can government do on that front? On both 
those fronts, private sector investment and entrepreneurship? 
Are we helping or are we hurting?
    Mr. KEATING. I always talk about five steps. Tax relief. So 
we had some good business tax reform. Regulatory relief. We 
have seen that happening, and at the very least we put the 
brakes on a more egregious regulation. Free trade, that is 
critical, so we have to be lowering barriers to trade. And 
then, of course, sound money and, you know, reigning in the 
size of government, other things like property rights that we 
have talked about and so on. But that is the package. So if you 
get all that moving in the right direction, we are going to do 
a heck of a lot better.
    Mr. BLUM. So are we moving in the right direction in your 
opinion over the last 18 months?
    Mr. KEATING. We are moving in the right direction in taxes. 
I think we are moving in the right direction on regulation. I 
am very concerned, obviously, on the trade front in terms of 
what we are doing there. And I think we still have a lot of 
work to do in terms of reigning in government. And we will see 
what the new Fed Chairman does in terms of sound money. So 
there you go.
    Mr. BLUM. Gentlemen, answer to can we compete without 
tariffs? And if we can, how can we encourage increased 
productivity, entrepreneurship, private sector capital 
investment?
    Mr. WETHERINGTON. I agree that tariffs are a hindrance to 
our growth and improvement, not an assist. My company, we were 
ready to open up a new market in Vietnam when TPP was going 
through. My products receive about a 23 percent tariff when we 
go there. My German competitors have none. The tariffs on 
products from Vietnam coming to the United States were 
miniscule, you know, 2 percent maybe. So that is the example of 
we do not have very high barriers for doing trade in the United 
States. Most of the free trade agreements that we would be 
looking at are lowering other countries' barriers, which are 
only going to help with the exports.
    Mr. BLUM. Mr. Couch?
    Mr. COUCH. I am trying to think through what we could do to 
spur innovation entrepreneurship. That is obviously something a 
lot of small businesses--it is high on their list and it is a 
struggle. I wish I had a good answer. We, as a small company, 
just prioritize it. I do not know if additional funding or some 
sort of, again, external help would be of value, but it is one 
of the highest priorities a company can have because that is 
their longevity. That is how you move forward in the future. So 
I do not have a good answer, but if somebody does, please let 
me know.
    Mr. BLUM. I am a small businessman myself.
    Mr. COUCH. We are trying to figure that out.
    Mr. BLUM. My answer to that would be get off my back with 
excessive regulations so I am not spending time and money on 
that. Get out of my back pocket with excessive taxes so I am 
not spending time and money on that. And we would have some 
time and money to spend then on innovating being creative would 
be my answer to it.
    But thank you so much. My time is expired and I yield back.
    Chairman CHABOT. Thank you very much. The gentleman's time 
has expired.
    And we want to thank all the members here. We want to thank 
our distinguished panel here this morning and now into this 
afternoon for your testimony and your response to all the 
questions.
    There is no question that strong trade agreements make 
America's small businesses more competitive and they just 
continue to be a fundamental component of the United States' 
trade agenda. And so thank you for helping us to better 
understand this and to act on this in all different ways that 
we have the ability to do that and to talk to other members who 
are involved in this and the administration as well. So thank 
you.
    With that, I would like to ask unanimous consent that 
members have 5 legislative days to submit statements and 
supporting materials for the record.
    Without objection, so ordered.
    And if there is no further business to come before the 
Committee, we are adjourned.
    We are adjourned. Thank you very much.
    [Whereupon, at 12:06 p.m., the Committee was adjourned.]
    
                            A P P E N D I X
                            
                            
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    Chairmen Chabot, Ranking Member Velazquez, and Members of 
the Committee, thank you for the opportunity to testify before 
you today.

    My name is Ken Couch; I am the Director of Product 
Management for ComSonics and have also been the International 
Business Development Director for the past four years. My 
objectives as the Director of International Business 
Development was to identify and cultivate new international 
business opportunities for ComSonics.

    ComSonics is a test equipment provider to the cable TV 
industry. We helped start the first cable TV network in the 
United States some 45 years ago. More specifically, our 
equipment is focused on a sector called ``Proactive Network 
Maintenance'' which can be summarized as equipment and services 
that help cable TV operators proactively find network and in-
home cable faults that cause your TV and Internet services to 
perform poorly. Our primary customers in the United States are 
companies like Comcast, Charter, and Altice. In addition to 
test equipment sales, ComSonics also has several other business 
units. These include contract manufacturing which enables 
ComSonics to produce our own equipment as well as products for 
a multitude of other industries. We are proud to say that our 
products are ``Made in America''. We are also a leading 
services provider to the cable TV operators by providing repair 
services for all types of equipment that make up the cable TV 
network. ComSonics currently employs about 250 employees across 
the United States with locations in Virginia, Georgia, Indiana, 
and California.

    ComSonics annual revenue for 2017 was $47 million. Our 
revenue for international sales four years ago was hovering 
around $100,000. In 2018, we expect to generate about $2.4 
million in international sales. This is a 2,300% increase. Over 
the last four years, we have grown our international customer 
base from a few countries to over 26 countries spanning Latin 
America, Europe, and Asia.

    I would like to take this opportunity to testify about the 
vital role that international trade programs of the Virginia 
Economic Development Partnership (VEDP) and the State Trade and 
Expansion Program (STEP) managed by the U.S. Small Business 
Administration (SBA) have played in helping ComSonics and many 
other companies achieve success in growing our international 
business.

    As a typical representative of a small business and one who 
has been through the process, I feel like I have a very good 
understanding of the barriers to starting international 
business. I would summarize these barriers into the following 
categories:

          1. Where to start? Is there a market for our 
        products? How big?

          2. Which countries should I target? How many? Which 
        ones?

          3. How can I uncover business contacts in other 
        countries?

          4. Are there any cultural differences that can impact 
        the business relationship?

          5. What are the risks and investment requirements for 
        our company?

          6. What are the trade barriers such as shipping and 
        customs?

          7. What are the legal risks associated with 
        exporting?

          8. What are best practices for getting paid, 
        especially from Asian companies?

          9. What level of financial resources are necessary to 
        be successful in international business development?

    Each of these barriers are specifically and systematically 
addressed through the VEDP and STEP programs. Once our company 
was prepared to travel based on research provided by the VEDP, 
our company then was funded to be able to travel through the 
STEP grant. ComSonics is proof of what can be achieved if all 
of the resources are effectively used. Without the assistance 
of the VEDP and STEP, I would venture to say that ComSonics 
would not have been successful. The barriers listed above would 
have been insurmountable if ComSonics attempted to build our 
international business without governmental help.

    How specifically does VEDP and STEP help a company overcome 
these barriers? The general answer is that they bring all of 
the needed experts and resources together in the context of 
regular meetings to assist, in our case, a Virginia company 
seeking to enter foreign markets. In addition, through STEP, 
they provide the funding needed to help pay for these resources 
that a company could otherwise not afford or would consider too 
high of an investment risk. However, I believe the most 
meaningful form of support comes in the form of the trade 
missions that are offered to small and medium enterprises 
(SMEs). These missions are the cornerstone that provide 
companies with a chance to meet with perspective international 
customers. While the VEDP coordinates the mission itself, STEP 
is an essential part by providing funds for travel on these 
missions. The VEDP international trade missions help companies 
by:

           Identifying prospective target markets

           Providing access to in-country experts and 
        consultants

           Identifying prospective customers within 
        those targeted countries

           Setting up meetings with the prospective 
        customers

           Providing translation services if needed

           Arranging in country transportation

           Providing funding needed for the trip

    All a company must do is show up and pitch its products 
and/or services to the prospective customers. I could not 
conceive of a better program to help companies jump start their 
international business. It is highly unlikely that any small 
business could overcome these barriers without the assistance 
that is provided through the VEDP program and STEP grant.

    The other strength of these programs is that they bring all 
of the need resources together and make them available to 
companies in a one-stop shopping fashion. VEDP brings experts 
and resources together that cover all aspects of trade 
barriers: legal, banking, shipping, consulting. I have also 
learned from other companies enrolled in these programs as they 
share their experiences. Each company is assigned a VEDP 
advisor who consults with them on a regular basis and helps 
track their progress.

    One of the most significant barriers to success in 
international business is the investment of resources without 
any known return. Companies often do not have the needed funds 
or they are unwilling to take the investment risk. This is 
where both the VEDP and STEP programs play a crucial role. For 
example, China has the lure of being a very large market. 
However, it is also one of the most challenging markets to 
enter. Without the funding and in-country resources made 
available to ComSonics, we would have never attempted to enter 
this untapped market. We now have in roads to many of the cable 
TV operators in China and have developed a very strong 
relationship with local distributors.

    The STEP grant program is also valuable in the assistance 
it provided in funding companies' participation in 
international trade shows. This has helped ComSonics continue 
our international market growth. It is my understanding that 
Virginia has been able to assist hundreds of SME's via the STEP 
grants that it has received over the past five (5) years.

    I do not want to leave you with the impression that every 
company who works with the VEDP and STEP will be successful. 
One of the key ingredients for success is that a company must 
be willing to dedicate full time resources to international 
business development. I have seen companies fail because they 
were unwilling to ante up to compete in a global market. It 
takes dedication and perseverance. I can attest that after 
flying some 700,000 miles around the globe, it does take extra 
effort to succeed. These elements are not under the direct 
control of VEDP and STEP as they cannot do everything to help a 
company be successful. However, if a company is willing to 
invest dedicated resources to exporting, success can certainly 
be attained. Of course, it also helps if you have a product or 
service that has demand in other countries.

    With respect to the changes to NAFTA and trade tariffs, 
ComSonics' concerns are twofold:

          - While our products are manufactured in Virginia and 
        do not contain large amounts of steel or aluminum, many 
        of our electrical components are sourced from China and 
        other parts of Asia. If import tariffs are placed on 
        these electrical components, this will increase the 
        cost of our products and potentially impact our ability 
        to compete in a global market.

          - If Asia or Europe decide to raise import tariffs on 
        electronic equipment in response to our tariff policy, 
        this will also decrease our ability to compete with 
        international competitors.

    In addition, some of our new product lines could be 
affected. Much of the telecommunications and cable TV industry 
are moving towards a fiber optic type infrastructure. In order 
to be competitive in the fiber optics test equipment arena, 
ComSonics has elected to OEM products from China for both time-
to-market and cost reasons. Our primary competitive advantage 
to enter this new market is price. However, if import and 
reciprocal export tariffs are imposed on these products, it is 
unclear as to whether we can maintain a pricing competitive 
advantage.

    In summary, I would like to leave the Committee with the 
following key points to consider:

          1. Small businesses typically do not have the 
        resources or expertise to build an international 
        business from ground zero.

          2. Small businesses tend to be risk adverse to invest 
        money into international markets that are untested and 
        unknown.

          3. Without the support of programs like the VEDP and 
        STEP, the barriers to entry into international markets 
        are almost insurmountable. These programs are vital to 
        cultivate the success of small business to start and 
        grow international sales.

    I want to thank the Committee again for your time, support, 
and leadership on this issue. I believe that continued funding 
and support of these programs are a crucial part of helping 
small businesses compete in the global marketplace and, in 
turn, grow our domestic economy.

    Again, thank you and the Committee for the opportunity to 
appear before you today, and I look forward to your questions.

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