**WRITTEN STATEMENT ON THE INTERNATIONAL TRADE ADMINISTRATION'S**

**FY 2008 BUDGET REQUEST**

**BY FRANKLIN L. LAVIN**

**UNDER SECRETARY FOR INTERNATIONAL TRADE**

**HOUSE APPROPRIATIONS SUBCOMMITTEE ON COMMERCE, JUSTICE, SCIENCE AND
RELATED AGENCIES**

**March 20, 2007**

# OPENING

Mr. Chairman, Ranking Member Frelinghuysen and members of the
Subcommittee, thank you for the opportunity to testify today in support
of the FY 2008 budget request for the Department of Commerce's
International Trade Administration (ITA).

Mr. Chairman, the mission of the International Trade Administration is
to create prosperity by strengthening the competitiveness of U.S.
industry, promoting trade and investment, and ensuring fair trade and
compliance with trade laws and agreements which enhance the ability of
U.S. firms and workers to compete and win in the global marketplace. At
ITA, our goal is to ensure that U.S. companies can compete fairly in
foreign markets and take advantage of overseas commercial opportunities.
We aggressively work to counter unfair market access barriers that
impede U.S. exports. Moreover, when U.S. businesses seek to promote
their goods and services in overseas markets, our programs smooth the
way. In short, ITA helps America's firms and workers navigate through
the often complicated and unpredictable waters of foreign trade \-- so
that U.S. firms' sales abroad help to ensure their growth here at home.

Our FY 2008 request represents the level of resources necessary to carry
out ITA's mission by our four operational units: Manufacturing and
Services (MAS), Market Access and Compliance (MAC), Import
Administration (IA), and Trade Promotion and the U.S. & Foreign
Commercial Service (US&FCS) with the oversight and support of
Administration/Executive Direction. The FY 2008 budget request for ITA
is \$412.4 million and 2,250 FTE. This is a \$16.7 million or 4 percent
increase over the amounts provided by the full year FY 2007 continuing
resolution.

The FY 2008 increase will fund inflationary adjustments to the base
(ATBs) of \$15.4 million. Funding of ITA's ATBs, including those for
personnel compensation, the State Department's Capital Security cost
Sharing Program (CSCSP) and other costs, are essential to maintaining
the performance of ITA's staffing and field operations. In addition, a
small, but critically important program increase of \$1.3 million is
requested to aggressively monitor and enforce compliance with Free Trade
Agreements (FTAs) and to educate U.S. companies on opportunities
provided by negotiated FTAs in order to increase export successes.
Between 2001 and 2007, the number of countries that will have signed
FTAs with the United States will increase fivefold and make this bloc of
countries our third largest trading partner.

# TRADE AND THE U.S. ECONOMY

The mission of ITA has never been more important. Trade is booming, and
our economy is more closely tied to the global economy than ever before.
Exports comprised 11.1 percent of our GDP in 2006 -- the highest ever in
dollar terms. Four years ago, it was 9.6 percent. Clearly America's
innovative companies depend more and more on the fact that 95 percent of
the world's consumers live outside the United States.

In 2006, for the first time in nearly a decade exports grew at a faster
rate than imports, exports grew by 12.7 percent while imports increased
by 10.5 percent. These numbers also reflect significant export growth to
almost all of America's key trading partners, with America's exports
rising to 29 out of 30 of our largest trading partners, including export
growth of more than 20 percent to countries diverse as Germany, Brazil,
China and Chile. While the goods and services trade deficit was a record
\$763.6 billion in 2006, as a percentage of GDP, the goods and services
deficit was virtually unchanged from 2005 at 5.8 percent.

One of the most important export trends was the continued boom in trade
with advanced developing countries such as China, India, and Brazil. Ten
years ago, U.S. exports to China were \$12.0 billion. Today, China is
the fourth-largest export market for the United States, as well as the
second-largest trading partner. Exports to China grew by 31.7 percent to
\$55.2 billion in 2006 over 2005. U.S. exports to India increased by
26.3 percent in 2006, while exports to Brazil increased by nearly as
much, to 25.1 percent. To put this in some context, U.S. exports to
China were greater than exports to Argentina, France, Italy, Russia, and
Spain combined.

Among the industries that made headway last year in those challenging
markets were energy , electrical machinery, organic chemicals, aircraft
and medical equipment.

Among the fastest-growing sectors in manufacturing exports were capital
goods, such as airplanes, semiconductors, and industrial machines;
industrial supplies, such as petroleum products, organic chemicals, and
precious metals; and automotive vehicles, parts, and engines. In
services, travel and passenger fares stood out, with a record \$107.4
billion in receipts last year.

While these record numbers show tremendous progress, we still need to do
more to grow our exports, open new markets, and promote U.S. exports.
Our trade agenda is working. By continuing to focus on opening new
markets, either through multilateral agreements such as the Doha Round,
or through bilateral Free Trade Agreements (FTAs), our firms and workers
are gaining ever greater access to world markets. Indeed, the positive
impact of our FTA agenda is clear. In 2006, our FTA partners made up 7.3
percent of the world's GDP (excluding the U.S.) but our exports to these
countries comprise almost 43 percent of our total worldwide export. If
you compare U.S. exports to two markets \-- Spain and Chile -- you will
note that our FTA with Chile has had a very positive impact in our
bilateral trading relationship. Chile's GDP per capita (based on
purchasing power parity) is less than half that of Spain's, and Spain's
population is more than twice the size of Chile's. Yet, last year,
exports to Chile increased by 30 percent, while exports to Spain
increased by 7 percent. Today, Chile is our 28^th^ largest trading
partner, and Spain is our 27^th^ largest in terms of exports..

Given the positive impact of the FTAs, extension of the President's
Trade Promotion Authority is all the more essential as we move forward.

ITA - FOCUSING ON ENFORCEMENT, MARKET ACCESS, COMPLIANCE,
COMPETITIVENESS AND PROMOTION

While these facts clearly illustrate the increasing ability of America's
firms to compete and win in world markets, our efforts \-- aimed at
deepening our exporter base, growing our exports, focusing on
competitiveness, opening new markets, enforcing our trade laws, and
ensuring compliance with our trade agreements \-- must continue apace.
Your support for our programs will enable us to continue to serve
America's firms and workers competing in global markets, thus promoting
continued economic growth here at home.

I would like to briefly outline for you ITA's key recent achievements,
and share with you our near term priorities.

**Import Administration -- Enforcing U.S. Trade Laws: \$63.6 million;
383 FTE**

The Import Administration (IA) enforces the U.S. unfair trade laws
(i.e., the anti-dumping and countervailing duty laws - AD/CVD) and
develops and implements policies and programs aimed at countering
foreign unfair trade practices. IA efforts to provide a level playing
field for U.S. industries include:

-   Maintaining 276 orders \-- 241 antidumping duty, and 35
    countervailing duty orders \-- affecting imports of products from 41
    countries. This includes 61 orders on products from China, which
    represents 25 percent of all antidumping duty orders currently in
    effect, and includes those cases where the Petition Counseling and
    Analysis Unit aided the U.S. industry though the petition filing
    process;

-   Determining whether or not China remains a non-market economy and on
    November 18, 2006, initiating the first countervailing duty
    investigation against China since 1991;

-   Implementing a broad textile and apparel agreement with China,
    including a staged entry program for the massive quantity of goods
    shipped in excess of safeguard restraints, allowing for the orderly
    release of embargoed goods to avoid a massive influx of imported
    goods; and

-   Negotiating the Mexican cement and Canadian lumber agreements to
    remove longstanding unfair trade and market access issues, improving
    bilateral relations with our closest neighbors.

We will continue to vigorously enforce our trade laws. Although there
has been a recent decline in the number of petitions filed by domestic
industry, there has been a marked increase in the number of cases filed
against Chinese products, which involve analyzing more complex issues
and require significant time and resources.

**Market Access & Compliance -- Ensuring our Trading Partners Comply
with Their Commitments: \$42.9 million; 217 FTE**

Ensuring that our trading partners fully comply with their trade
agreements with us is a top priority for ITA's Market Access and
Compliance (MAC) unit. MAC is proactively monitoring compliance and
helping U.S. firms gain market access as quickly as possible. The most
timely and effective way to achieve compliance goals is often through
prompt diplomatic efforts. To this end, MAC staff are currently working
on over 200 active cases where agreements are in place to assist in
gaining market access

The largest number of cases involve technical regulations and standards
followed by a broad category of market restrictions. Many of these
issues do not involve trade agreement violations but do restrict our
market access when a company has to retool or otherwise adjust a product
in order to sell in a particular market. We work with countries to
ensure that regulations on trade are as free of restrictions as possible
while meeting a legitimate public policy objective. Most of our case
work involves Europe and Asia. Where warranted and U.S. industry wishes
to press its case through formal proceedings, Commerce does not hesitate
to refer unresolved matters to USTR for potential WTO or FTA dispute
settlement.

Beyond casework, MAC's country desk officers are experts on the
commercial, economic, and political climates in their assigned
countries. They focus on resolving trade complaints and market access
issues, such as intellectual property, standards, customs, and
transparency.

MAC also manages bilateral and regional commercial dialogues with all of
our major trading partners including NAFTA, China, India and Brazil.
These dialogues are designed to address real-time market access
barriers, impediments to doing business and opportunities for
cooperation.

**Manufacturing and Services - Focusing on Competitiveness: Request:
\$49.6 million; 238 FTE**

Manufacturing and Services (MAS) focuses on both the domestic and
international aspects of U.S. competitiveness by working with our
industries to evaluate the needs of both the manufacturing and service
sectors, conducting economic and regulatory analysis to strengthen U.S.
industry, obtaining input and advice from U.S. industries for trade
policy, and participating in policy and trade negotiations. MAS pursues
its mission by combining its analytical capabilities and its in-depth
industry knowledge to provide assessments and recommendations to improve
U.S. business competitiveness. Specifically, MAS:

-   Provides critical economic and policy analysis and information to
    USG policymakers and U.S industry.

-   Ensures appropriate industry and other stakeholder input into trade
    policy development and domestic policy development, assessment and
    implementation through Industry Trade Advisory Committees, the
    Environmental Technologies Trade Advisory Committee, the Tourism
    Policy Council, the Manufacturing Council, the President's Export
    Council, and the Travel and Tourism Advisory Board.

-   Compiles and disseminates data on U.S. and world trade, economic
    performance, and industry competitiveness, and travel and tourism
    market intelligence.

-   Supports industry market access issues in key foreign markets
    through industry analysis, bilateral activities, leading industry
    delegations to key markets, and leading industry-focused subgroups.

> A recent example of MAS's analytic capability was a study requested by
> Congress on the relationship between jobs and the differential between
> U.S. and world sugar prices. Our analysis found that more than 10,000
> U.S. jobs were lost between 1997 and 2002 at sugar-consuming
> companies, such as confectioneries. The report suggests that high
> sugar costs are a major factor in U.S. companies\' decisions to
> relocate to other countries and that for every sugar growing and
> harvesting job saved through high U.S. sugar prices, approximately
> three confectionery-manufacturing jobs are lost.
>
> Other examples of MAS working with industry to facilitate trade
> include:

-   MAS completed a World Wine Trade Group (WWTG) Agreement on Labeling
    that will facilitate increased wine trade among the U.S., Canada,
    Mexico, Chile, Argentina, Australia, New Zealand, and South Africa.
    This agreement will reduce labeling costs by \$1 per case, saving
    industry an estimated \$7-8 million dollars on export sales to WWTG
    countries. In addition, exports to WWTG markets are expected to
    increase by over 10 percent, to nine million cases annually.

-   MAS worked with the National Oceanic and Atmospheric Administration
    (NOAA) to create a tool for rapid assessment of the economic impact
    of the closure of one or more key U.S. seaports as a result of a
    natural disaster or national-security-related emergency. The tool
    has received high praise from industry and will be instrumental in
    terms of reducing the number of days of lost operations and the time
    it takes to reroute cargo to safer destinations.

**Trade Promotion and U.S. and Foreign Commercial Service \-- Promoting
U.S. Goods and Services: \$229.7 million; 1,259 FTE**

Trade Promotion and The United States and Foreign Commercial Service
(US&FCS) conducts trade promotion programs intended to broaden and
deepen the base of U.S. exports, particularly of small and medium-sized
firms. Through its overseas network of 108 offices throughout the United
States and in U.S. Embassies and Consulates in 80 countries overseas,
the Commercial Service works to reduce foreign trade barriers and to
realize market opportunities for American firms. Our domestic office
network serves as a gateway for U.S. exporters by providing reliable
trade counseling and assistance through a wide range of export promotion
initiatives. The US&FCS offers export assistance through information,
referral and follow-up services through its integrated global field
network, and leads interagency advocacy efforts for major overseas
projects, including early involvement in project development and
assistance to resolve post-export transaction problems.

An example of what US&FCS does every day on behalf of American exporters
is captured by the exporting success of Supracor Inc, of San Jose, CA,
which worked with the Commercial Service to break into Japan's growing
home healthcare market:

-   Supracor Inc., based in San Jose, CA, has developed a fusion-bonded
    honeycomb technology used in products including (1) wheelchair
    cushions and mattresses for the prevention and healing of pressure
    sores, (2) saddle pads to help prevent sore backs in horses, (3)
    personal care and fitness products, and (4) high-performance
    applications such as bullet-proof vests, sports protective equipment
    and bumpers for amusement park rides. Aiming to penetrate Japan's
    burgeoning home healthcare market, Supracor leveraged the export
    promotion expertise of the federal government in the latter half
    of 2004. Through the help of Commercial Service offices in San Jose
    and the Commercial Section of the U.S. Embassy in Japan, Supracor
    located a qualified Japanese partner, Parker Corporation. Midway
    through 2005, Parker Corporation's orders of Supracor products
    topped \$80,000 and kept growing. These orders contributed to the
    company's expanding export sales that help support 75 jobs at
    Supracor's San Jose, CA, manufacturing facility. "With the help of
    the U.S. Commerce Department\'s Commercial Service, we are able to
    rapidly enter into this multibillion dollar international
    marketplace. It is allowing us to grow the business and in turn
    increase our activities to purchase more from our American vendors.
    The U.S. Government\'s assistance is outstanding and invaluable,"
    said Curt Landi, Supracor President and CEO.

Highlights of Recent Achievements:

[Trade Missions]{.underline} **\--** Last December was the trade mission
to India. With more than 250 executives from 200 U.S. companies, the
mission to India was the largest ever organized by the U.S. government.
The mission began with a business summit in Mumbai, with spin-off
missions to Bangalore, Chennai, Hyderabad, Kolkata, Mumbai and New
Dehli. Already, we have seen tangible results. Shortly after the mission
to India, Secretary Gutierrez led a mission to China. Together, these
trade missions promoted U.S. exports and helped hundreds of American
firms of all sizes pursue

[Strategic Partnerships]{.underline} -- Through force multipliers, such
as Federal Express, eBay, PNC Bank, Dow Jones Asia, M&T Bank and UPS, we
are reaching out to more small and medium-sized exporters. This effort
is absolutely key to our future success. Through these partnership
arrangements, we are reaching thousands of companies that are either
new, or potential exporters. This is a new development and one that
changes the dynamics of the public/private relationship, allowing the CS
to reach far beyond its previous limits to more small and medium-size
companies throughout the country.

[Advocacy]{.underline} **\--** In FY 2006, ITA completed an unsurpassed
total of \$33.2 billion dollars of Advocacy cases successfully, due
primarily to the completion of six airline purchase agreements at a
value of \$5.6 billion and the total number of export successes in FY
2006 totaled 11,919.

**Executive Direction and Administration: \$26.6 million 153 FTE**

"ExAd" provides the administrative support services and policy and
planning functions that are necessary for ITA to effectively operate and
advance program goals. Services include policy formulation and review,
information technology support services wherever ITA employees work,
both nationally and world-wide; strategic planning and performance
management; human resources services; and, financial management.

# ITA'S NEAR TERM PRIORITIES 

These are just a sampling of some of our recent achievements. With the
time remaining, I would like to mention just a few initiatives that we
plan to focus on during the next 18 months or so.

[Free Trade Agreements]{.underline} -- Free Trade Agreements (FTAs) are
one of the U.S.'s most effective tools for obtaining increased market
access and expanding trade. These comprehensive trade agreements address
tariffs and non-tariff barriers to U.S. exports, and provide increased
access to government procurement, investment and services opportunities.
They promote the rule of law and a predictable business climate. FTAs
encourage transparent and enforceable regulatory practices in
intellectual property, labor and the environment.

To improve ITA's ability to ensure that U.S. businesses can take full
advantage of the FTAs, ITA is requesting an additional \$1.3 million and
8 FTE to provide for a robust monitoring regime for the new FTAs, meet
an expected increase in compliance costs related to FTAs and new
accessions to the World Trade Organization, and continue to reach out to
U.S. exporters to ensure they have the information and tools to take
advantage of commercial opportunities created by the FTAs. From
enforcement to market access and trade promotion activities, all of
ITA's units will be engaged in this effort.

[Enforcement]{.underline} -- Our near term enforcement priorities
include: disciplining subsidies in China, possibly via countervailing
duty law, and utilizing the WTO dispute settlement system; renegotiating
the U.S./Russian suspension agreement on uranium; implementing the
softwood lumber agreement with Canada; and working with domestic steel
manufacturers to curb steel trade-distorting government support and
subsidies in the global steel industry.

[Intellectual Property Rights \--]{.underline} Since the October 2004
announcement of the Strategy Targeting Organized Piracy (STOP!), the ITA
has undertaken numerous activities to assist businesses in protecting
intellectual property rights (IPR), both in the United States and
abroad. ITA works on a case-by-case basis to develop strategies to
overcome IPR-related trade barriers abroad. ITA continues to develop new
tools and programs to educate SMEs about protecting and enforcing their
IPR, including outreach events, a free online IPR training module and a
program to promote protection of IPR at trade fairs. ITA has formed
public-private partnerships to develop and promote the use of tools,
such as the No Trade in Fakes Supply Chain guidelines, created by the
U.S. Chamber of Commerce. ITA coordinates with our trade partners
through bilateral and multilateral initiatives like the US-EU IPR
working group, the Security and Prosperity Partnership with Canada and
Mexico and similar initiatives to promote IPR and to educate businesses
and consumers.

["Invest in America" Initiative]{.underline} -- The Administration views
foreign direct investment (FDI) as vital to continued economic growth,
job creation, and building an ever-stronger America. The free flow of
capital in open and competitive markets contributes directly to higher
productivity, growth, and efficiency. To ensure the United States
continues to be the best place in the world for FDI, the Department of
Commerce's International Trade Administration has launched an FDI
initiative. This initiative will work to promote the United States as a
destination for FDI as well as examine perceived impediments to foreign
investment in the U.S. The Administration regards our nation's security
as its top priority and supports efforts to reform the Committee of
Foreign Investment in the United States (CFIUS) process to address more
effectively national security imperatives since 9/11. The Bush
administration is firmly committed to keeping the U.S. economy open to
international investment while, at the same time, protecting our
national security.

[Industry Sectors]{.underline} -- Throughout the coming year, we will
work with all U.S. industry sectors to help maintain their
competitiveness. The following are just a few of the initiatives that we
have planned.

-   Travel and Tourism -- Key sector indicators are largely positive,
    indicating that industry has recovered from the affects of 9/11
    (receipts were \$107.4 billion in 2006 vs. \$103.1 billion in 2000).
    We are continuing to work with industry, as well as the State
    Department and DHS on further ways to facilitate the ease of travel
    to the U.S.

-   Education Initiative -- Last November we undertook an innovative
    approach to promote U.S higher education opportunities for students
    in China. Our goal was to increase enrollment of foreign students in
    U.S. colleges and universities -- helping our education institutions
    recover from a post 9/11 downturn. The program reached over 180
    million Chinese. We plan this year to develop a similar program for
    India.

-   Energy -- In his State of the Union address, the President
    emphasized the critical role American innovation must play to help
    reduce greenhouse gas emissions. ITA will do our part by promoting
    the use of nuclear power, alternative energy, and alternative fuels
    -- especially in China and India. Next month, we will lead a "Clean
    Energy Technologies" trade mission to promote cutting-edge U.S.
    technologies in these fast growing markets.

[50/50/50 Outreach]{.underline} \-- Additionally, we have kicked off an
outreach strategy that we have dubbed the "50/50/50" plan. Our goal is
to reach out to all 50 governors, 50 key mayors, and 50 or more trade
associations, encouraging them to work with us to lead trade missions.

# 

# CONCLUSION

Mr. Chairman and members of the Committee, the International Trade
Administration is a vital partner for America's exporters. The
Administration's FY 2008 budget request for the International Trade
Administration reflects this Administration's commitment to U.S.
economic expansion and job growth through trade.

With the guidance and continued support of this committee, our FY 2008
budget request will provide for ongoing enforcement, market access and
compliance, competitiveness and trade promotion efforts, and will
provide for new investments so that we may adequately help U.S. workers
and businesses take full advantage of our trade agreements.

This concludes my statement, Mr. Chairman. I want to thank you
personally for your support of ITA, and for the opportunity to share
with you today the achievements and ongoing efforts that we undertake
every day on behalf of American firms and workers. I will be pleased to
respond to any questions or concerns the Committee may have.