PRESIDENT\'S EXPORT COUNCIL

Room 4830

U.S. Department of Commerce

Washington, DC

Tuesday,

December 4, 2007

The meeting was convened, pursuant to notice,

at 10:00 a.m., MR. J.W. MARRIOTT, JR., Chairman,

presiding.

APPEARANCES:

[PRIVATE SECTOR]{.underline}

MR. J.W. MARRIOTT, JR.

Chairman and CEO

Marriott International, Inc.

Chairman, President\'s Export Council

MS. BETTY MANETTA

President and Chief Executive Officer

Argent Industries

MS. CECILIA OCHOA LEVINE

President

MFI International Manufacturing, LLC

MR. JOHN S. CHEN

Chairman and CEO

Sybase, Inc.

MR. PHILIP CONDIT

Former Chairman and Chief Executive Officer

The Boeing Company

MR. ARTHUR D. COLLINS

Chairman and Chief Executive Officer

Medtronic, Inc.

MR. PRAKASH PURAM

President and CEO

iXmatch Inc.

MR. TIMOTHY P. SMUCKER

Chairman and CEO

The J.M. Smucker Company

MR. LEE STYSLINGER, III

President and CEO

Altec, Inc.

MR. WARREN R. STALEY

Retired Chairman and Co-Chief

Executive Officer

Cargill, Inc.

MR. JUAN CARLOS ITURREGUI

President

Foundation for Inter American Development

MR. MICHAEL L. ESKEW

Chairman and Chief Executive Officer

UPS

MR. LENNY SANDS

Chairman and Chief Executive Officer

Alchemy Worldwide, LLC

MR. LEON TRAMMELL

Chief Executive Officer

Tramco, Inc.

MR. STEPHEN R. TRITCH

President and Chief Executive Officer

Westinghouse Electric Company

[EXECUTIVE BRANCH]{.underline}

THE HONORABLE CARLOS M. GUTIERREZ

Secretary of Commerce

MR. LEON SEQUEIRA

Assistant Secretary of Labor

THE HONORABLE JAMES LAMBRIGHT

Chairman and President

Export-Import Bank of the United States

THE HONORABLE SUSAN SCHWAB

U.S. Trade Representative

THE HONORABLE STEVEN PRESTON

Small Business Administration

THE HONORABLE WILLIAM G. SUTTON

Assistant Secretary for

Manufacturing and Services

International Trade Administration

MS. COLLEEN LITKENHAUS

Deputy Assistant Secretary for

Domestic Operations

U.S. & Foreign Commercial Service

MR. MICHAEL W. YOST

Administrator, Foreign Agriculture Service

[CONGRESSIONAL MEMBERS]{.underline}

THE HONORABLE PHIL ENGLISH

United States Representative

from the State of Pennsylvania

I N D E X

[PAGE]{.underline}

[AGENDA ITEM]{.underline}

MEETING CALLED TO ORDER

Mr. J.W. Marriott, Jr., Chairman 5

REMARKS

The Honorable Carlos M. Gutierrez,

Secretary of Commerce 6

REMARKS ON TRADE RELATIONS WITH BRAZIL,

RUSSIA, INDIA AND CHINA

Ambassador Susan C. Schwab, USTR 12

SUBCOMMITTEE ON SERVICES REPORT

Mr. Michael L. Eskew,

Subcommittee Chairman 20

Presentation of Proposed Letter on

Bilateral Investment Treaties

DISCUSSION ON BILATERAL INVESTMENT

TREATIES 23

REMARKS ON SMALL AND MEDIUM ENTERPRISES

Mr. Steven C. Preston,

Small Business Administrator 25

REMARKS ON ITA ASSISTANCE FOR SMALL AND

MEDIUM ENTERPRISES

Assistant Secretary for Manufacturing

and Services William G. Sutton 32

REMARKS ON U.S. EXPORT ASSISTANCE CENTERS

Deputy Assistant Secretary for Domestic

Operations Colleen Litkenhaus

SUBCOMMITTEE ON TECHNOLOGY AND COMPETITIVENESS

REPORT

Ms. Betty Manetta, Subcommittee Chair 34

Presentation of Proposed Letter on Small- and

Medium-Sized Enterprises

DISCUSSION ON SMALL- AND MEDIUM-SIZED

ENTERPRISES 43

ADJOURN 47

[P]{.underline} [R]{.underline} [O]{.underline} [C]{.underline}
[E]{.underline} [E]{.underline} [D]{.underline} [I]{.underline}
[N]{.underline} [G]{.underline} [S]{.underline}

[MEETING CALLED TO ORDER]{.underline}

Mr. J.W. Marriott, Jr., Chairman

CHAIRMAN MARRIOTT: Good morning, everybody. We welcome you all to the
winter meeting of the President\'s Export Council. Officially, I will
call the meeting to order.

I\'d like to welcome our three new members: Art Collins of Medtronic,
Leon Trammel of Tramco, and Steve Tritch, of the Westinghouse Electric
Company. On behalf of the Council, we welcome all of you and look
forward to working with you.

At our last meeting in June, we approved two letters of recommendation
on U.S.-India trade and capital markets. Since the June meeting, we have
also met by teleconference and have approved letters on civil justice
reform and an APEC leaders\' meeting which was held in September.

At today\'s meeting we are going to discuss bilateral investment
treaties and facilitating exports for small- and medium-sized
enterprises. As you know, Secretary Gutierrez is the business voice of
government and I\'m pleased he\'s able to join us.

Mr. Secretary?

[REMARKS]{.underline}

Secretary of Commerce Carlos M. Gutierrez

SECRETARY GUTIERREZ: Thank you. Thank you, Chairman Marriott.

I\'d like to start out with the swearing in of the new members, if we
may, and maybe find a nice spot here and have the three gentlemen come
forward.

(Whereupon, the new members were duly sworn.)

(Whereupon, photos were taken.)

SECRETARY GUTIERREZ: Okay. Thank you, again. We didn\'t even rehearse
that. (Laughter) Thank you. Once again, welcome to Art Collins, Leon
Trammel, and Steve Tritch, and thank you for your service.

I\'d like to start out just talking briefly about the U.S. economy, and
then talk about the importance of trade within that.

The American economy is strong and it is resilient. Even as we work
through the housing market correction and credit market concerns, we
still have posted very impressive growth. We have had 50 months of job
growth, 4.7 percent unemployment, a 4.9 percent increase in GDP in the
last quarter or the third quarter. That was revised up from 3.9 percent.
The economy has now experienced six years of uninterrupted growth, and
we\'ve seen a 12 percent rise in real per capita income. That\'s an
average of \$3,600 per person since President Bush took office. So, a
lot to be proud of.

Trade, of course, is an important economic driver. Last year, we
exported a record of \$1.4 trillion and we\'re on track to beat that
record this year. I want to thank all of you for your work and your
commitment to boosting exports throughout the nation.

So far this year, exports have increased by almost 12 percent, while
imports have grown by 4.4 percent. That yields a \$54 billion
improvement in the deficit when compared to the same period last year.

Free trade agreements are the best way we can keep up the momentum, and
we have four free trade agreements pending before Congress. Peru passed
the House, a vote of 285:132, and we look forward to a bipartisan Senate
vote, and then move forward with Colombia, Panama, and Korea. These four
agreements open up markets of 126 million consumers and a combined GDP
of \$1.1 trillion.

U.S. companies deserve these agreements. The important thing, as we
talked about in the past, is that Colombia, Peru and Panama all have
duty-free access to our country. We do not have duty-free access to
those countries. So, our Congress has already voted to give their
workers, farmers, and businesses preference to the U.S. market. What we
are asking for is a vote to give U.S. farmers, workers, and businesses
preferential access to those three markets. So, very straightforward
from an economic standpoint.

I recently traveled to Colombia three times with a bipartisan delegation
over the last several months. This is a very critical time for Colombia.
The economic security and social justice case for an FTA has never been
clearer. Colombia has come a long way. We\'ve invested \$5.5 billion in
Colombia, starting with President Clinton, through Plan Colombia, and
then continued by President Bush.

And Plan Colombia has worked. The economy is growing, poverty is down,
35,000 para-militaries have turned in their weapons and have
reincorporated into society. Clearly, the country has undergone a
tremendous transformation. All the indicators have improved:
kidnappings, murders. All of the problems that plagued Colombia six,
seven years ago have improved. They\'re on the right path. We can help
them tremendously by passing the free trade agreement.

The question is, why would we not want to do it? Because after all this
work, and after the \$5.5 billion, Colombia will be hurt being in a
neighborhood where a lot of countries have a free trade agreement, but
they do not. So, very, very important. We need your support and we need
Congress\' support to pass the free trade agreement with Colombia as
soon as possible.

We are focused on further expanding the global economy. I was just
recently in Vietnam. We led our first Cabinet-level business delegation
to that country. As you know, Vietnam is a dynamic country, 85 million
people. We currently do about \$10 billion of trade. That\'s very small,
if you think about the size and the potential of Vietnam.

A lot of Vietnamese Americans are returning to open up businesses. They
clearly are doing everything they can to create an environment to
attract investment, and we believe that Vietnam is a country for the
future and a very important country within the context of Asia.

Of course, as we think about our Korea Free Trade Agreement, that also
expands our business and diversifies our business within Asia.

We were very pleased to have Marriott and Altec represented on the
mission; thank you again for your support. As Ambassador Schwab
mentioned, we remain fully committed to a Doha Round of talks. This is
the single biggest idea for worldwide growth. There is nothing bigger in
the world today that can spark growth around the world than a successful
Doha Round. Estimates are that it will lift approximately 500 million
people out of poverty. Again, a once-in-a-generation opportunity.

We\'re in China next week for the JCCT and the SED, also advancing the
U.S. agenda. It\'s all about market access, intellectual property rights
protection, and transparency, and we\'ll be pushing those concepts and
those points in a very specific agenda for the JCCT.

The JCCT being focused on market access, very much short-term
deliverables, outcomes, tangible results. The SED is more focused on the
future. It\'s a lot more strategic and more focused on where we want to
take the relationship. So, we hope that those two meetings will yield a
successful week.

Again, I want to thank you for supporting exports, for being on the side
of exports. You are on the right side of the economy. Exports are doing
a lot of good for the U.S. economy, and we can do more. We can do more.
We need to be more aggressive. We need to be a lot more focused, and we
have been. The support of this Council is absolutely critical to get
that accomplished. So, thank you all for your valuable service.

Thank you, Mr. Chairman.

CHAIRMAN MARRIOTT: Thank you, Mr. Secretary.

The first letter we will discuss today is on the issue of investment
protectionism, particularly with regard to Brazil, Russia, India, and
China, the so-called \"brick\" countries. We are very pleased to have
Ambassador Susan Schwab with us today to discuss our trade relations
with the brick countries.

Ambassador Schwab?

[REMARKS ON TRADE RELATIONS WITH BRAZIL, RUSSIA]{.underline}

[INDIA AND CHINA]{.underline}

Ambassador Susan C. Schwab, U.S. Trade Representative

AMBASSADOR SCHWAB: Thank you, Mr. Chairman.

Let me add my thank-you to that of the Secretary. We very much
appreciate the service of the President\'s Export Council and very much
appreciate the opportunity to work with you. We appreciate your advice
and look forward to this constructive relationship moving forward.

My topic today is about brick countries, trade relationships and
activities with Brazil, Russia, India, and China. I\'m not necessarily
going to speak in that order. I\'m going to speak both about trade and
the investment side, but ultimately trade as primarily on the investment
side, since that is the nature of the letter that you are considering.

For those of you who have been following the Doha Round negotiations,
you know that Brazil and India, and to a lesser degree China, but
certainly Brazil and India, have been critical players in the Doha Round
negotiations, this is in addition to bilateral activities that we have
with both Brazil and India where we are trying to build bilateral trade
relationships, do problem-solving.

With India, for example, we have our Trade Policy Forum, we have the CEO
Forum. Some of you have participated in that. In the case of Brazil,
again, we have a bilateral forum that is an Executive Office of the
President-led activity, plus activities involving our respective
business communities.

India and Brazil have fought very hard over the years to be on the
inside of the negotiating room, the smoke-filled room, or what assumed
to be smoke-filled rooms in multilateral trade negotiations. In 2003, as
you know, with the explosion in Cancun during the Doha Round
negotiations, the point that Brazil, India, and other developing
countries made was that they were not in the room. They wanted to be
co-equal partners in terms of negotiations, and therefore they demanded
their place.

Fast forward. We have a process in the Doha Round where the developing
countries, particularly the advanced developing countries\--sometimes we
refer to them as bricks, but as you all know we\'re talking about
countries well beyond India, Brazil, and China. We\'re talking,
obviously, Mexico, we\'re talking about Argentina, we\'re talking about
Indonesia, a whole variety of countries that fit into this segment.
These countries now find themselves at the big table, or in the small
room, or whatever description you want.

They are discovering that, with that comes responsibility, with that
comes obligations. Sometimes it\'s harder to be at the big table in the
small room where you are also expected to contribute rather than just
ask. So, one of the issues that I think we see Brazil and India
struggling with in the context of the Doha Round, is how are they going
to position themselves so that they are beneficiaries of a round that
will not conclude if they are not also contributors to that round?

The debate related to industrial and agricultural products has as much
to do with, what will that tier of advanced developing countries
contribute to global trade negotiations, and in particular to opening
their markets to other developing countries? Seventy percent of the
tariffs paid by developing countries are paid to other developing
countries. So, again, what happens? The advanced teenaged years, there
are responsibilities that come with having that driver\'s license.

Brazil and India have exceptionally strong trade ministers, negotiators,
and they are maneuvering to see how they can maximize the benefits they
can get out of this agreement. That\'s great, but they also have to
realize this is not a north/south issue. In many cases, when we talk
about the bricks, the implication is that it\'s north/south, or the
implication is that it\'s developed/developing. It is not, in fact.
There are many advanced developing countries that have already embraced
the notion that they need to make contributions in terms of market
opening in this way.

China. China is involved in the Doha Round, but you probably wouldn\'t
know it from reading the press about the Doha Round negotiations. As
Secretary Gutierrez noted, we also have a very robust and active set of
activities involving China on a bilateral basis. We\'re headed off to
China next week for the JCCT and the SED. Where we are talking about
long-term strategic issues and near-term results, tangible gains and
outcomes/deliverables that we are discussing.

Arguably, China is the biggest beneficiary of an open world trading
system, and is also likely to be the most significant victim if the
world turns on open trade. We would like to see that reflected more in
China\'s posture in the WTO and in the Doha Round.

In the case of Russia, we continue to work very closely with Russia on
their WTO accession. As you all know, slightly over a year ago we
reached a bilateral agreement in the context of Russia\'s WTO accession.
We are still waiting for aspects of that agreement to be implemented by
the Russian federation. Some have been implemented, some have not been
implemented. And we are working very closely with them on the
multilateral side of that accession process.

Russia should be in the WTO, but Russia understands, and I think the
government there has come to understand, that they will come into the
WTO when the WTO members agree that they are prepared to behave as WTO
members, take on the full range of obligations that each one of us has
had to take on as a member of the WTO, whether that involves
intellectual property rights protection, whether that involves the use
of non-scientific barriers to trade, whether that involves the use of a
variety of tools that are frowned upon by the WTO, all of those are
under discussion and we are making significant progress with Russia.
We\'re not there yet.

When it comes to investment \-- and let us note that when we talk about
trade, most people assume all we\'re talking about is goods. In fact, we
are talking about goods, we are talking about services, and we are
talking about investment associated with both. In the case of all four
of these countries, there are bilateral investments going on in the
private sector activities. We have also concluded that it is in our
interests, and we think in their interests, to make sure that the rules
are in place, the transparency is in place to ensure the protections
necessary to generate investment and to protect investment.

Now, when I\'m talking about generating and protecting investment I\'m
not just talking about U.S. investment, I\'m talking about investment on
the part of local entrepreneurs in each of these economies. You\'re
talking about foreign direct investment from whatever source. We have,
in each case, reached out and said, if these countries are interested in
negotiating bilateral investment treaties with us we are interested in
engaging in that, but we aren\'t going to force a bilateral investment
treaty on any country. But we think that this is a potential benefit to
all concerned.

Let me note here as I close. Let me note here about the politics of
trade and investment. There are some who would argue in trade politics
that trade is a zero sum game. Many of us have talked about this in the
past, that if you are against trade agreements \-- for example, today,
as I suspect you are all aware, the Peru Free Trade Agreement is being
acted on on the Senate floor, is being voted on on the Senate floor.

We have the Colombia, Panama, and Korea FTAs pending in front of the
Congress. Many individuals who oppose trade liberalizing agreements do
so from the philosophical perspective that implies trade is a zero sum
game, or negative sum game, that if I somehow had won something in a
trade negotiation, you had somehow lost something.

What they do not recognize and do not acknowledge is that international
trade, bilateral trade, trade liberalization that generates new trade
flows is, in fact, a positive sum exercise. Both sides, in the case of a
multilateral or plurilateral agreement, multiple sides, all those
involved would win, and they\'d win from opening their own markets and
they\'d win from having access to opened their markets outside of their
borders.

In the case of investment, that has been even easier to demagogue in
trade. The implication is, if you create, if you generate more
investment flows, somehow you are encouraging companies to out-source
offshore. The fact of the matter is, the statistical analysis will tell
you that with investment comes trade and comes jobs; whether it is
inward investment or outward investment, it is a positive exercise.

So, this is something that I think our nation has acknowledged and has
welcomed. I come across many members of Congress who speak affirmatively
of all of the foreign direct investment they find generating jobs in
their States and their districts. But again, as with trade, if your
approach is the zero-sum-blinders-on approach, you\'re going to find
reasons to be against investment agreements, as well as trade
agreements. It is important that all of us who understand the positive
sum element of this are out there talking about it and reminding people
of it.

Let me stop there. It was a little broader than the BRICss, but we did
cover the specifics.

CHAIRMAN MARRIOTT: Thank you very much, Ambassador Schwab. Before we ask
you to answer some questions, I\'d like the Council Subcommittee on
Services, who is reporting on a letter on foreign investment, and I\'d
like for Mike Eskew, chairman of the Subcommittee on Services, to
present the letter.

Mike?

# SUBCOMMITTEE ON SERVICES REPORT

Mr. Michael L. Eskew, Subcommittee Chairman

Presentation of Proposed Letter on

Bilateral Investment Treaties

MR. ESKEW: Ambassador, Mr. Secretary, Mr. Chairman, thank you.

I am going to speak on behalf of the Services Subcommittee in support of
the administration\'s efforts to promote a fair and open global
investment climate and ask for the full PEC\'s consideration of our
proposal. It\'s under Tab 3 in your books, if you\'re looking for it. I
think it\'s the first one under the tab.

Cross-border investment is critical for the U.S. economy. Hundreds of
billions of dollars of investment flowing into and out of the United
States translates into higher paying jobs, a stronger economy, and
fosters better international ties. However, persistent and new barriers
prevent the full realization of the benefits of cross-border
investments, and potentially significantly hinder the long-term
competitiveness of U.S. business.

So, for this reason the PEC is recommending that the administration
explore the possibilities of negotiating bilateral investment treaties,
or BITs, with Brazil, Russia, India, and China, the so-called

\"BRIC\" countries.

These countries, as the Ambassador just alluded to, provide significant
market opportunities for U.S. companies, and they also present some of
the most risky and complicated business environments in the world.
Investment agreements with these countries contain a suite of
obligations that would guarantee, among other things, market access and
fair treatment. And \-- obligation would be enforceable through the
international arbitration.

Many of our European competitors operate in Russia, India, and China and
enjoy the benefits of BIT protection due to the agreements already
signed between the EU in these countries. This gives them a competitive
that the U.S. companies now lack, and we need to catch up.

At the same time, we need to maintain an open investment climate here at
home. The administration is drafting regulations to implement the new
legislation governing the committees that require the reviewed
acquisitions of U.S. companies, like the one under

the so-called SIFIUS agreements.

We urge the administration to strike the right balance that protects
national security, but also reflects the critical importance of foreign
investments in the U.S. economy. This is an ambitious proposal. The past
seven years have shown this administration has never shielded from
what\'s difficult.

Thank you for your consideration of our views. On behalf of the
subcommittee, we look forward to the opportunity to continue to provide
assistance wherever we can on the important work that lies ahead.

Thanks so much.

[DISCUSSION ON BILATERAL INVESTMENT TREATIES]{.underline}

CHAIRMAN MARRIOTT: Thank you.

Questions for Ambassador Schwab or for Mike on the letter? Questions?

SECRETARY GUTIERREZ: I would just add, we just had a Brazil-U.S. CEO
Forum. We also have an India-U.S. CEO Forum, and then of course next
week we have the two meetings with China. So, there\'s a tremendous
amount of engagement with many of these countries. Then the Russian WTO
accession, which Ambassador Schwab mentioned. So, it\'s a great, great
focus.

CHAIRMAN MARRIOTT: Thank you. Thank you all very much.

Are there any objections to the letter?

(No response)

CHAIRMAN MARRIOTT: If not, we\'ll assume the letter is approved and
we\'ll pass it on, Mr. Secretary, to you, and you can pass it on to the
President.

All right. The next issue we will discuss is the facilitation of export
expansion for small or medium enterprises, or SMEs. We\'re pleased to
have the Administrator of the U.S. Small Business Administration, Steve
Preston, with us today to discuss the opportunities for small and medium
enterprises.

[REMARKS ON SMALL AND MEDIUM ENTERPRISES]{.underline}

Small Business Administrator Steven C. Preston

ADMINISTRATOR PRESTON: All right. Thank you.

I appreciate the PEC\'s interest in discussing the impact of these
agreements, specially on small- and medium-sized businesses, and Betty,
for the conclusion of that discussion and your letter, which I know
you\'re going to get to in a little bit.

You know, I think a lot of us, when we think about foreign trade, think
about big companies. But this is a very, very significant issue for the
companies, the smaller companies in our country.

You\'ll find in the letter a number of references to the importance of
small business in our country, but let me just highlight a couple of
them for you. Small businesses today represent about half of our private
sector workforce. The Secretary mentioned how strong GDP is right now.
It represents about half, also, of the non-farm GDP in our country.
Small businesses are tremendous innovators. We find a very significant
level of patent generation per employee relative to larger
patent-producing firms. So, I think many of you in larger firms can
attest to this.

Many of the larger firms that we know and deal with actually manage
their supply chain strategies to source small innovative businesses to
bring ideas to feed their R&D efforts, so enabling that innovation and
protecting that innovation is very, very important to small businesses
in our country. And when we look at the tremendous job creation that
we\'ve seen in the United States over the past four years over time,
roughly two-thirds of the new jobs in the country are created by small
businesses.

So as we think about exports, likewise, small businesses represent about
30 percent of the exports. It\'s not the same percentage as the entire
GDP. Interestingly, as exports have grown tremendously, which I think
the Secretary alluded to, we\'re also seeing small businesses keep up
with a lot of that growth.

Small business exports have grown 35 percent between 1999 and 2005. Over
10,000 small businesses have been added to the exporting economy during
that period. Not surprisingly, it\'s even more important in certain
geographies and in certain industries. Some of our largest
states\--California, New York, Florida\-- have very significant portions
of their exports coming from small business. Florida is 60 percent, New
York is 50 percent. So this is a very important part of their small
business economy. Also, in specific industries like diary, seafood,
footwear, wood products, a number very important industries rely heavily
on exports.

There has probably never been a better time for a small business to
export when you look at the non-regulatory issues. The communications
infrastructure is like it has never been before. The transaction
infrastructure across borders really does not present any challenges.
Any small company can look like a big company on its Web site.

Mike, you\'re nodding. People like UPS and your competitors have really
leveled the playing field so much for small businesses in our country
that want to reach other parts of this country, or the world, in fact. I
think the largest remote printing company in the country is in the
middle of Montana, and it\'s because you all enable them so effectively.

So there are so many other things that are enabling small business in
their export activities. But as you take a step back and specifically
look at these trade agreements, tariffs, as well as non-tariff barriers,
have presented a very significant problem historically for small
business.

It\'s a lot harder for a little guy to figure out how to source product
in another country, how to establishment a manufacturing facility,
whatever it would take to work through those challenges. That is why
these are so important to us, and that\'s why we\'re just so thankful to
the work that Ambassador Schwab and Secretary Gutierrez and their teams
are doing in these areas.

Interestingly, I would also mention that if you think about sort of the
large policy issues that are kind of in the mix here right now, health
care, tax, some of those things I think are a lot clearer for us to
understand in terms of the impact of small business. Here, I think we
have a little bit of a communication issue or a little bit of an
understanding issue because it\'s a more complex set of issues to
understand. I think it\'s so important for the people in this room, and
obviously outside of this room, to understand truly what it means for
small business to have a much freer export environment.

Specifically\--and you\'ve heard this mentioned before but I am going to
reiterate it a little bit more specifically\--the first thing we\'re
doing with these FTAs is leveling the playing field financially. Let me
just quickly highlight the three Latin American agreements. You\'ve
heard the Secretary mention that most of the goods from these countries
come here duty-free. Ninety-two percent from Colombia are duty-free; our
average tariff going in that direction is 12.5 percent. Ninety-six from
Panama come over here duty-free; the average tariff on U.S. goods is
7.3. In Peru, it\'s 98 percent coming in duty-free; the average tariff
on U.S. goods is over 10 percent.

Now, the reason that\'s important, other than the obvious for small
businesses, is that those 35 or 40 percent of our exports into those
countries are from SMEs. When you look at CAFTA, it\'s an even larger
number overall. So, it\'s very, very important because we already have a
strong flow going in that direction in spite of the barriers.

The other thing I\'d like to mention is, we\'re focusing heavily on the
financial impact right now, but when you look at the challenges that
smaller businesses have, a lot of it is also non-financial. It\'s
understanding the regulation. It\'s transparency. It\'s the consistent
application of those standards. It\'s expediting trade flows. Then, very
importantly, it\'s IP protections.

A lot of these agreements are beginning to simplify and become better
enablers for us to go into these countries and dealing with some of the
administrative and procedural challenges. I think it\'s very important
for us to understand that because it\'s a big part of the challenge that
small businesses have when they look at some of these more complex
situations.

Before I close, I just want to mention a couple of things on NAFTA.
Small business exports to Mexico and Canada, from 1992 to 2003 following
NAFTA, went from \$25 billion to \$48 billion. In addition, the
percentage of the exports that were represented by small business in
that picture grew from 24 to 28 percent.

During that period of time, Canada and Mexico represented the most
significant expansion dollar-wise for small businesses in the export
picture. I know, sitting a number of times in these meetings, you\'ve
mentioned your own experience on how NAFTA has enabled your business.

So, the history is there, the logic is there, and the message is there.
I don\'t know that we\'re always as effective as we need to be in
getting that clear message out and around, but this is very important
for the people that we represent. Once again, I just want to thank both
Ambassador Schwab and Secretary Gutierrez and your teams, because this
is really fighting the good fight for small businesses and we\'re very
thankful for it.

CHAIRMAN MARRIOTT: Thank you very much.

Woody Sutton is the Commerce Secretary\'s new Assistant Secretary for
Manufacturing and Service. Commerce also has some good resources
available for SMEs. So, I\'d like to ask Woody to discussion the
entrepreneurial Web site.

Woody?

[REMARKS ON ITA ASSISTANCE FOR SMALL AND MEDIUM]{.underline}

[ENTERPRISES]{.underline}

Assistant Secretary for Manufacturing & Services

William G. Sutton

ASSISTANT SECRETARY SUTTON: Thank you, Mr. Chairman. My report today is
a short little show-and-tell of two resources that have just become
available for small- and medium-sized enterprises.

The Finance Office within Manufacturing & Services has developed a Trade
Finance Guide to provide a basic, ready reference with easy information
as the small- and medium-sized enterprise tries to navigate its way
through the very complex issues of financing in the export market.

Our first printing sold out almost immediately. Obviously, they are
free. (Laughter) We lost 5,000 very quickly. We are in our second
printing. We are going to revise it in the spring. However, it is
available for free. You can download it from our Web site either at
export.gov or trade.gov. Also, you can get a hard copy once we finish
the second printing by calling 1-800-USA-TRADE.

The second item that I\'d like to highlight today is an entrepreneurship
initiative started by my counterpart at Market Access & Compliance,
Assistant Secretary Bud Heagen. He has established a partnership with
the Kauffman Foundation concerning entrepreneurship.

Just recently, early in November, a partnership between ITA and the
Kauffman Foundation established a new Web site on entrepreneurship. It
is now being populated with educational material, policy papers, notices
of various events and seminars that we\'ve got going on around the world
to encourage entrepreneurship. So, obviously its Web site address is
entrepreneurship.gov.

That concludes my report, Mr. Chairman.

CHAIRMAN MARRIOTT: Thank you, Woody.

We also have Colleen Litkenhaus with us today. She is Deputy Assistant
Secretary for Domestic Operations with the U.S. and Foreign Commercial
Service. She\'s going to discuss U.S. Export Assistance Centers.

Colleen?

[REMARKS ON U.S. EXPORT ASSISTANCE CENTERS]{.underline}

Deputy Assistant Secretary for Domestic Operations

Colleen Litkenhaus

DEPUTY ASSISTANT SECRETARY LITKENHAUS: Thank you. It\'s an honor to be
here with you today. I know there are a lot of government officials in
the room and I mean no disrespect, but I do have one of the very best
jobs in government. So this is one of my favorite topics, aside from the
pending free trade agreements, which I talk about a lot. But working
with the U.S. Export Assistance Centers, we refer to them often as
USEACs, has just been a wonderful honor. I\'m going to try to speak
quickly so that I can give them the justice that they deserve for how
hard that they work.

We have 108 Export Assistance Centers around the United States. We do
help large companies, but our primary focus are the small- and
medium-sized companies. I see our Trade Specialists as the foot soldiers
for the TPCC agencies, in other words, a liaison to all the government
resources. Our Trade Specialists sit down with small businesses, hear
about their issues, and can direct them to Market Access & Compliance.
They can say, this is where we need to bring in Ex-Im, we can use SBA
here, OPIC can help us with this problem.

They are very results- and goal-oriented. They have goals that they have
to meet each year, so they don\'t just pass them off to another
government agency. They hold their hand until they succeed, because they
get credit once boxes actually leave the country.

A big focus of this administration is, how can we be more effective, how
can we be more efficient by partnering? So we have spent a lot of energy
partnering, breaking down silos, banding together and trying to identify
force multipliers.

So how do we do that? One of the ways we do that, is we co-locate
physically with some of our partners. Out of the 108 Export Assistance
Centers, we are co-located in 89 locations. We co-locate with
universities, world trade centers, states, Ex-Im, SBA, and we work
together to help educate and assist small companies.

Next, we\'ve begun partnering with the private sector. We have official
partnerships with UPS and FedEx that help us with logistics and
shipping. We have partnerships with PNC and M&T Bank, helping us with
finance issues. We have partnerships with E-Bay and Google to help both
the government and the small businesses come to terms with the changes
that are coming about through the Internet.

Let me give you a few examples of how we\'re working with our partners.
We\'re working with FedEx right now. They are leading a trade mission to
India. And we\'re really excited to work with UPS on their upcoming
trade mission to China. So, it\'s not just governors, mayors, and
secretaries of Commerce, government officials leading trade missions.
We\'re trying to find others to lead trade missions as well in order to
have a much greater impact.

UPS became a partner this year. In May, the UPS leadership directed
their sales field force to meet with the Commercial Service staff. I
directed our Commercial Service staff to meet with UPS, and now we have
a very decentralized approach where the UPS staff in Houston is working
with the Department of Commerce staff in Houston; the FedEx staff in
Paris is working with the Commercial Service FedEx post. So, we work
together. We do joint counseling together, for example.

It\'s easier for some people to understand how we work with UPS and
FedEx. A little bit harder sometimes is to understand, how do we work
with E-Bay, how do we work with Google? E-Bay is helping us find this
new class of exporters that are not located on Main Street any more. So,
we help E-Bay help their customers fill out the NAFTA certification form
or find a tariff code.

Google wants the most credible sites to come to the top of the list when
folks are looking for information. They see the government sites as the
most credible sites. So, working with Google, our hits to export.gov
have gone from, on an average of 7,000 hits a month to over 50,000 hits
a month. So, E-Bay helps us find this new class of exporters, Google
helps them find us. The reality is, it\'s not just for small businesses.
It\'s not just what your price plan is any more, and it\'s not just what
the quality of your product is any more. It also is, how findable are
you on the Internet? Google is helping small companies become more
findable.

We, of course, partner with governors and mayors. We, of course, partner
with members of Congress. We assist them with their constituent
services. Through that, we are able to demonstrate how exporting is
having a dramatic impact on their constituents and in their communities.

I\'m just going to close by making two quick points, one about the FTAs
and one of the reasons why I love my job. We have gone over 80 events in
27 states to educate the business community on the pending FTAs. Since
CAFTA passed, we\'ve done over 600 events regarding FTAs.

Once all the work in Washington is done and the President signs the
FTAs, it\'s our jobs to make sure that the companies know, by industry,
how they have a competitive advantage in these countries so that they
can get in there and take advantage of all the hard work that\'s been
done in Washington.

When I travel around the country, I get to meet with these small
companies and it is such an honor. I have literally heard a small
business owner say, \"Because of the help I received from the Department
of Commerce I\'ve had to hire a second shift. Let me introduce you to
the people who have jobs through our international sales, because of our
international sales.\"

So it\'s an honor to serve and it\'s an honor to be here with you. Thank
you.

CHAIRMAN MARRIOTT: Thank you, Colleen. Good work.

MR. ESKEW: Mr. Chairman, if I could, I\'d just like to support
Colleen\'s comments. We meet with these companies, these small
businesses that really don\'t have a chance to export and do the things
they need to do. Working with Commerce has been exciting. So, Colleen,
you should be excited about your job.

CHAIRMAN MARRIOTT: That\'s great. Thank you.

We welcome Congressman Phil English. Glad to have you here.

Our Subcommittee on Technology and Competitiveness has now developed a
letter on small and medium enterprises. I\'d like to ask Betty Manetta,
chair of the Subcommittee, to present their letter.

Betty?

[SUBCOMMITTEE ON TECHNOLOGY AND COMPETITIVENESS REPORT]{.underline}

Ms. Betty Manetta, Subcommittee Chair

Presentation of Proposed Letter on

Small- and Medium-sized Enterprises

MS. MANETTA: Thank you, Chairman.

On Tab 3, it\'s the second letter that you\'ll find in there. You\'ll
notice that it does have some markings on there, too, to demonstrate
that it is still in its draft form. As Mr. Preston related earlier, this
is still a work in progress.

As you know, this is very critical to us. Some of the statistics that he
pointed out, 40 percent of a lot of the SMEs are involved and growing,
and really impact a lot of our economy. Just think about the taxes that
a lot of the SMEs do pay only because we don\'t have tax attorneys, we
don\'t have tax accountants, so we tend to pay a little bit more than
most companies, again, all bringing in and helping our economy grow.

So it is important to us about leveling the playing field. Some of the
things that we are doing through education, through working with
different organizations \-- again, I have to echo, UPS has been very
supportive with the SMEs. I know they\'ve helped my company in looking
for foreign trade zones to be able to do business. So, the UPS supply
chain services has been very helpful to my company. So, again, there are
a lot of things that we can do together.

So without further ado, a lot of my notes were things that Mr. Preston
highlighted, so I don\'t want to belabor the points. But again, suffice
it to say that the SMEs are very important and we are going to be a
major part of mainstream and growing foreign trade.

Again, to Ambassador Schwab\'s point, if it is difficult for large
companies to be able to participate in Brazil, Russia, and other
economies, just imagine how difficult it is for smaller businesses to do
the same.

But again, co-location, being able to partner, having access to Web
sites where we can go for assistance, and again understanding what we
have available to us in the U.S. Now, more than ever before,
manufacturing, light assembly, final assembly is important to do in the
U.S. We have foreign trade zones. We have depressed areas that we need
to consider. We also have something we talked about, American Indian
tribes that are very much aggressively going after the commercial
marketplace and they have land and access to a lot of technology that
can help some of our other companies in providing access through joint
ventures.

So we are still working on the letter, sir, and we will have something
in 2008 that will be partly to the SMEs and leveling the playing field
in international trade.

CHAIRMAN MARRIOTT: So you\'re not ready for the letter to go forward.

MS. MANETTA: No, sir. We are not.

CHAIRMAN MARRIOTT: Okay.

[DISCUSSION ON SMALL- AND MEDIUM-SIZED ENTERPRISES]{.underline}

CHAIRMAN MARRIOTT: Any questions or comments on what we\'ve talked about
as far as Betty is concerned?

MR. CHEN: I have a comment.

CHAIRMAN MARRIOTT: Sure. John?

MR. CHEN: Since you guys are still working on the letter, I know one
thing they were working on is China, doing the GPA \-- fulfilling their
GPA obligation under the WTO requirements. I just wanted to make sure
that we all do focus on it whenever we negotiate with \-- that there are
no size limits to whatever they purchase. In other words, we don\'t want
them to just put a GPA thing on buying \-- they\'ve already got
everything they need on \-- so just make sure that these small and
medium enterprises have the ability to also take advantage of the GPA
that China is about to enter into. That\'s just a comment. You may want
to put that in the letter.

CHAIRMAN MARRIOTT: A fair point.

Any other comments? Yes. Prakash?

MR. PURAM: Chairman Marriott, until today I was the only small business
on the committee here. But today we have Leon Trammell. So we had an
interesting argument, who was smaller. (Laughter) And I won the
argument. (Laughter) Notwithstanding the fact that we are small, it
hasn\'t stopped our market here from proclaiming that we have the mother
of all search engines. So, I want to talk just a little bit about the
work your folks do. It\'s phenomenal.

I went with Frank Lavin to India and the team of U.S. Foreign &
Commercial Service officers knew every company and customer and every
street in Bangor, India and Chenai, and other cities to connect us up
with the Gold Key program. It could be a lot better, but absent other
things it\'s absolutely stunning how they know the customers by name.

For us, it\'s very scary to go into another country\--India as well\--to
do business with a customer who we just don\'t know, whether
intellectual property would be ripped off. If they don\'t pay, we don\'t
have a means to collect the money. So, very basic sustenance factors of
billing, payment, collection. Having the Commerce Department stand by
and facilitate the transaction, this is extremely vital for us and I
applaud you for what you are doing. But I have some ideas, and we\'ll
talk about it in the next letter.

Thank you very much.

CHAIRMAN MARRIOTT: Thanks, Prakash.

Any other comments or questions?

MR. STYSLINGER: I have a general comment, Mr. Chairman.

CHAIRMAN MARRIOTT: Sure.

MR. STYSLINGER: We participated in the trade mission to Vietnam, along
with several other companies. I\'d just like to take this opportunity to
thank and congratulate Secretary Gutierrez, Dan McCardle, and the entire
Commerce team on a very important and successful trade mission to
Vietnam.

SECRETARY GUTIERREZ: Thank you. Thanks for your support. Thank you.

CHAIRMAN MARRIOTT: Any other comments? Betty?

MS. MANETTA: Just one last comment. Since this letter is going to be a
work in progress and we plan to present it mid-2008, I would like to
request that if anybody has anything to add or would like to
participate, that we do so early enough. Because I think what happened,
a lot of people got really excited about the letter, and unfortunately
it all came towards the tail end prior to this meeting. So, again, if we
could have a little bit of time so we can work it and make sure it is
presented in mid-2008, I\'d greatly appreciate it.

CHAIRMAN MARRIOTT: Thank you.

MS. MANETTA: Thank you.

CHAIRMAN MARRIOTT: Other comments?

(No response)

CHAIRMAN MARRIOTT: Mr. Secretary, any last, parting comments?

SECRETARY GUTIERREZ: Well, just, again, stay tuned to the Peru vote
today, a very important vote in the Senate. We\'re going to keep on
working on Colombia, Panama, Korea. Ambassador Schwab is working on
Doha. We don\'t think there\'s anything as important today than
continuing to open up markets for U.S. companies. Anything you can do,
whether it be with your employees, with opinion leaders, anyone who has
a say in trade, it is so critical that today we keep the word out that
backtracking or standing still is a big mistake. We appreciate your
leadership and everything you\'ve done to push that agenda forward. And
Congressman English, thank you for your leadership as well.

CHAIRMAN MARRIOTT: Thank you all for attending today. Let me just thank
Assistant Secretary Sutton and his staff for keeping this Council
running on a daily basis. What a great job you\'re doing! Thank you very
much.

If there is no other business to be conducted today, we will adjourn the
meeting. Thank you.

(Whereupon, at 10:56 a.m. the meeting was adjourned.)

C E R T I F I C A T E

This is to certify that the foregoing proceedings of a meeting of the
President\'s Export Council, United States Department of Commerce, held
on Tuesday, December 4, 2007, were transcribed as herein appears, and
this is the original transcript thereof.

LISA DENNIS

Certified Verbatim Reporter