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THE ROLE OF TRADE AND TECHNOLOGY IN 

21ST-CENTURY MANUFACTURING 

HEARING 

BEFORE THE

COMMITTEE ON FINANCE 

UNITED STATES SENATE 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

JULY 17, 2014 

( 

Printed for the use of the Committee on Finance 

COMMITTEE ON FINANCE 

RON WYDEN, Oregon, Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

CHARLES E. SCHUMER, New York 

DEBBIE STABENOW, Michigan 

MARIA CANTWELL, Washington 

BILL NELSON, Florida 

ROBERT MENENDEZ, New Jersey 

THOMAS R. CARPER, Delaware 

BENJAMIN L. CARDIN, Maryland 

SHERROD BROWN, Ohio 

MICHAEL F. BENNET, Colorado 

ROBERT P. CASEY, Jr., Pennsylvania 

MARK R. WARNER, Virginia 

ORRIN G. HATCH, Utah 

CHUCK GRASSLEY, Iowa 

MIKE CRAPO, Idaho 

PAT ROBERTS, Kansas 

MICHAEL B. ENZI, Wyoming 

JOHN CORNYN, Texas 

JOHN THUNE, South Dakota 

RICHARD BURR, North Carolina 

JOHNNY ISAKSON, Georgia 

ROB PORTMAN, Ohio 

PATRICK J. TOOMEY, Pennsylvania 

JOSHUA SHEINKMAN, Staff Director 

CHRIS CAMPBELL, Republican Staff Director 

(II) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Wyden, Hon. Ron, a U.S. Senator from Oregon, chairman, Committee on 

Finance .................................................................................................................. 1 

Hatch, Hon. Orrin G., a U.S. Senator from Utah ................................................. 3 

WITNESSES 

Ezell, Stephen J., senior analyst, Information Technology and Innovation 

Foundation, Washington, DC .............................................................................. 5 

Sturm, Jacklyn A., vice president and general manager of global supply 

management, Intel Corporation, Santa Clara, CA ............................................ 6 

Kimber, Ray, founder, owner, and president, Kimber Kable, on behalf of 

Kimber Kable and the Consumer Electronics Association, Ogden, UT ........... 8 

ALPHABETICAL LISTING AND APPENDIX MATERIAL 

Ezell, Stephen J.: 

Testimony .......................................................................................................... 5 

Prepared statement .......................................................................................... 27 

Hatch, Hon. Orrin G.: 

Opening statement ........................................................................................... 3 

Prepared statement .......................................................................................... 37 

Kimber, Ray: 

Testimony .......................................................................................................... 8 

Prepared statement .......................................................................................... 40 

Sturm, Jacklyn A.: 

Testimony .......................................................................................................... 6 

Prepared statement .......................................................................................... 44 

Response to a question from Senator Hatch .................................................. 62 

Wyden, Hon. Ron: 

Opening statement ........................................................................................... 1 

Prepared statement .......................................................................................... 63 

(III) 

(1) 

THE ROLE OF TRADE AND TECHNOLOGY IN 

21ST-CENTURY MANUFACTURING 

THURSDAY, JULY 17, 2014 

U.S. SENATE, 

COMMITTEE ON FINANCE, 

Washington, DC. 

The hearing was convened, pursuant to notice, at 10:06 a.m., in 

room SD–215, Dirksen Senate Office Building, Hon. Ron Wyden 

(chairman of the committee) presiding. 

Present: Senators Cantwell, Cardin, Brown, Hatch, Grassley, 

Thune, and Isakson. 

Also present: Democratic Staff: Joshua Sheinkman, Staff Director; Lisa Pearlman, International Trade Counsel; and Jayme 

White, Chief Advisor for International Competitiveness and Innovation. Republican Staff: Everett Eissenstat, Chief International 

Trade Counsel; Shane Warren, International Trade Counsel; Rebecca Eubank, International Trade Analyst; and Kevin Rosenbaum, 

Detailee. 

OPENING STATEMENT OF HON. RON WYDEN, A U.S. SENATOR 

FROM OREGON, CHAIRMAN, COMMITTEE ON FINANCE 

The CHAIRMAN. The Finance Committee will come to order. 

Americans, from the water cooler to professional societies, now 

often debate the future of American manufacturing. Academic journals, for example, are filled with articles where naysayers say that 

American manufacturers cannot compete with cheap labor in Asia 

or that robots and computers do the jobs once held by our hardworking middle-class workers. 

This hearing is going to show that it is too soon to hang the 

crepe on American manufacturing. There is genuine reason to be 

optimistic, because many American manufacturing companies— 

many American manufacturing companies—now succeed in tough 

global markets. Manufacturing accounts for more than $2 trillion 

in the American economy, it supports more than 17 million American jobs, and it drives three-quarters of all private sector spending 

on research and development. There are many more players in the 

manufacturing game worldwide, but the bottom line is, America is 

more than holding its own. 

Now, that is not to say there have not been significant changes 

in recent years, and it is not to say that it is going to be exclusively 

smooth sailing from this point on. U.S. manufacturers have run up 

against greater competition today. Some of it is unfair, and 50 or 

60 years ago the United States was the world’s factory, accounting 

2 

for 40 percent of the world’s manufacturing goods. Today, the U.S. 

accounts for less than 20 percent. 

Yet, American manufacturing has real strengths and opportunities to build on. For example, technology is an area where it is ‘‘advantage America.’’ The same is true in finished products and production methods. It is important for the Finance Committee to 

identify and examine which policies have stifled manufacturing and 

learn the lessons of the past. So the focus today is going to be on 

how to come up with fresh trade-related policies that can unleash 

the full potential of American manufacturers and give our manufacturers—American manufacturers—a new springboard to goodpaying, middle-class jobs. 

So there is a tremendous opportunity before American producers. 

There are going to be about a billion new middle-class consumers 

in markets around the world with significant sums of money to 

spend. That number is only going to grow as more people rise from 

poverty. Many of those consumers prize American products. They 

look for the American brand because the American brand represents top-notch quality, safety, and reliability. The American 

brand is a winner. Furthermore, American manufacturers are at 

the forefront of a number of fields, innovative fields, that are going 

to lead our economy in the future: clean energy, health care, and 

information technology are just a handful of examples. 

For example, I am very pleased that Oregon’s largest manufacturer, Intel, is here today. Their products are at the core of computing equipment and form the foundation of the global digital 

economy. Intel competes and they win in tough global markets. 

There are many more examples of vibrant manufacturers from Oregon and from other States. 

Brammo, based just outside Medford, makes award-winning electric vehicles. A-dec, based in Newberg, makes some of the world’s 

best dental equipment. Erickson, based in Portland, makes heavylift aircraft for a huge number of uses. 

Now, I think I have established that American manufacturing 

has a lot of room to grow, and I think every member of this committee—we have Democrats and Republicans here—can also attest 

to the fact that in their home states there are thriving, cuttingedge manufacturers that are winning in tough global markets. The 

investments these manufacturers make support stable, healthy 

communities, and they create good-paying jobs for our hardworking 

middle class. 

The bottom line? The right policies, especially on trade, can help 

launch a new era defined by successful, sustained manufacturing 

in America. Those policies ought to reflect what American manufacturing looks like today and where it is headed in the future, and 

not in effect be tethered to what was done 10 or 20 years ago. Our 

new policies have to dismantle trade barriers American manufacturers face abroad, like tariffs on high-tech products, requirements 

to relocate factories, intellectual property theft, and anti-competitive subsidies for state-owned enterprises. 

New policies have to foster an environment in which American 

manufacturers of all sizes can grow and create good-paying middleclass jobs. The challenge ought to be, colleagues, to make things 

3 

here, add value to them here, and then ship them, ship that American brand around the world. 

Today’s hearing gives the Finance Committee a chance to, on a 

bipartisan basis, develop those trade policies that can meet those 

objectives. Senator Hatch has been a close partner in all of these 

issues. For those of you who were not here yesterday, Senator 

Hatch made some extremely important points yesterday with respect to protecting American intellectual property. 

[The prepared statement of Chairman Wyden appears in the appendix.] 

The CHAIRMAN. Senator Hatch, we welcome your statement. 

OPENING STATEMENT OF HON. ORRIN G. HATCH, 

A U.S. SENATOR FROM UTAH 

Senator HATCH. Well, thank you very much, Mr. Chairman, for 

holding this hearing on the role of trade and technology in the 21st 

century with regard to manufacturing. 

The success of our manufacturing sector is vital. Nearly 12 million Americans are directly employed by manufacturing. That is 

nearly 1 out of 10 American jobs. This is true in my State, where 

nearly 10 percent of working Utahans are employed in manufacturing. That is 120,000 jobs in Utah alone. That is one reason I am 

happy Ray Kimber is here with us today, and we welcome all three 

of you with us today. 

I often talk about the small, innovative company that begins in 

a garage and grows to become the driver of economic growth and 

a source of jobs. That is Kimber Kable. Twenty-five years ago, Mr. 

Kimber figured out a way to weave audio cables to reduce unwanted noise and improve fidelity. He founded Kimber Kable to 

manufacture those cables, and now he employs 30 people in Ogden, 

UT. He sells his cables to the world. Today, two-thirds of Kimber 

Kables are shipped to customers overseas. 

Ray is not only a friend, he is also an outstanding example of a 

larger truth, that the U.S. manufacturing sector is the most innovative in the world and American workers are unsurpassed in manufacturing productivity. Because of U.S. innovation and productivity, in those areas where U.S. manufacturing competes on an 

equal footing, it succeeds. 

Our manufacturers maintain a trade surplus of $60 billion per 

year with the 20 countries where we have a free trade agreement 

in place. Per capita, the consumers from those countries purchased 

nearly 13 times more U.S. goods than consumers from the rest of 

the world. When you find a market that is open and secured by 

strong international trade rules, you will find goods like Mr. 

Kimber’s that are manufactured in America. 

Put simply, U.S. trade agreements are good for U.S. manufacturers, but we need to do a better job of opening overseas markets and 

making sure that our manufacturers do not face discrimination and 

other trade barriers. There are several negotiations under way with 

our partners in the Pacific region, in Europe, and in the World 

Trade Organization that will help address the challenges faced by 

U.S. manufacturers, but I do not think any of these efforts are 

going to succeed without Trade Promotion Authority, or TPA. 

4 

Without TPA, this administration is severely handicapped in negotiating high-quality agreements that will benefit American manufacturers and achieve the goals of Congress. That is why in January former Senator Baucus and I introduced the bipartisan Congressional Trade Priorities Act which would renew TPA and empower our trade negotiators to bring home trade agreements that 

meet the high standards set by Congress and to see those agreements passed into law. 

Importantly, the bill sets negotiating objectives for our agreements. I want to highlight two of those today. We have witnesses 

with us here today representing companies that have created and 

taken advantage of advances in technology. Part of getting their 

products around the world happens to be digital trade. That is why 

the TPA bill we introduced requires U.S. trade agreements to ensure that electronically delivered goods and services are classified 

with the most liberal trade treatment possible and that our trading 

partners allow the free flow of data across borders. 

But using the Internet to market, sell, and transmit digital products is only part of the story. These companies are also innovators, 

and their innovations must be protected. Our witnesses today have 

experienced first-hand the destructive impact of intellectual property theft. Mr. Kimber, for example, has had to contend with counterfeiters stealing his company’s name to sell inferior products. 

Our TPA bill also requires that U.S. trade agreements reflect a 

standard of intellectual property rights protection similar to that 

found in U.S. law, and it calls for an end to the theft of U.S. intellectual property by foreign governments, including piracy and the 

theft of trade secrets, and for the elimination of measures that require U.S. companies to locate their intellectual property abroad in 

return for market access. 

For our manufacturers to continue to succeed overseas, we must 

also ensure our companies are able to exploit global supply chains 

so they can access the best inputs, add the most value to products, 

and ship their goods around the world as efficiently as possible. 

That is why last year former Senator Baucus and I introduced the 

Trade Facilitation and Trade Enforcement and Reauthorization Act 

to make trade facilitation a top priority at U.S. Customs and Border Protection and to improve intellectual property rights enforcement at the border. 

Trade is good for U.S. manufacturing. Like I said, where our 

manufacturers operate in markets secured by free trade agreements, they succeed. But the challenges they face around the world 

are only growing, and we in Congress need to do our part to help 

achieve the conditions overseas under which American manufacturers can thrive. 

That being the case, I hope the committee will soon be able to 

consider some of these pending trade bills. We really cannot afford 

to wait, and I want to personally express my regard for our chairman of this committee, who has worked very hard to try to work 

in a bipartisan way to get these things done, and who I think 

shares much of the same feelings that I do about international 

trade and what we need to do and how we need to do it. So I thank 

you, Mr. Chairman. 

5 

The CHAIRMAN. Thank you, Senator Hatch. I will not turn this 

into a bouquet-tossing contest, but I really appreciate the fact that, 

consistently, we are trying to work in a bipartisan way here in the 

Finance Committee. Certainly, as your statement indicated, manufacturing is an ideal opportunity for doing that. 

[The prepared statement of Senator Hatch appears in the appendix.] 

The CHAIRMAN. So we welcome our guests. First before us will 

be Mr. Stephen Ezell, who is a senior analyst at the Information 

Technology and Innovation Foundation. 

Next will be Ms. Jacklyn Sturm, who is vice president and general manager of global supply management at Intel Corporation. 

They, of course, have an enormous footprint in my home State in 

manufacturing, and around the country. We are happy to have Ms. 

Sturm here. 

Finally—and we already heard some glowing remarks, almost an 

introduction of Mr. Kimber—we are happy to have you, Mr. 

Kimber. He is the founder and owner of Kimber Kable, a manufacturer from Utah. Let the record show that Mr. Kimber’s testimony 

is also going to be on behalf of another organization that we 

worked very closely with, the Consumer Electronics Association, 

and we always appreciate the input of that fine group. 

So let us begin with Mr. Ezell. Welcome. 

STATEMENT OF STEPHEN J. EZELL, SENIOR ANALYST, INFORMATION TECHNOLOGY AND INNOVATION FOUNDATION, 

WASHINGTON, DC 

Mr. EZELL. Chairman Wyden, Ranking Member Hatch, and 

members of the committee, I appreciate the opportunity to discuss 

the role of trade and technology in 21st-century manufacturing and 

commend you for taking up this important topic. 

Today I would like to provide an overview of America’s manufacturing economy and offer several policy recommendations to bolster 

it. You have ably detailed manufacturing’s vital importance to the 

U.S. economy. Unfortunately, the 2000s were a disaster for U.S. 

manufacturing, as America lost almost 6 million, or one-third, of its 

manufacturing jobs and saw real manufacturing output, when 

measured accurately, decline by 11 percent. 

Yet today we hear talk of an inevitable U.S. manufacturing renaissance. For example, the Boston Consulting Group recently asserted that lower production costs will fuel a dramatic re-shoring 

of U.S. manufacturing, generating up to 5 million new jobs by 

2020. To be sure, lower energy costs, a slightly depreciated dollar, 

and mostly rising foreign wages will help, yet the reality is that 

U.S. manufacturing costs per worker hour are already quite low, 

just 60 percent of Germany’s level and only 20 percent higher than 

South Korea’s. 

Despite this, when one excludes the U.S. computer and electronic 

sector—because official government data overstates this sector’s 

output—U.S. manufacturing value added in 2012 actually remained 7.4 percent below 2007 levels. America has fewer manufacturing factories today than it did just 2 years ago. While we have 

added back 650,000 manufacturing jobs since 2010, this only recovers one-tenth of the loss we experienced in the 2000s. 

6 

Likewise, while we have stemmed the outsourcing tide, at best 

we are at parity, with the United States re-shoring roughly one 

manufacturing job for each one off-shore today. In short, some believe that simply getting the business climate right and costs low 

enough are all that is needed for American manufacturing to 

thrive, but lower manufacturing costs alone will not restore the 

erosion of an industrial commons that has left America unable to 

manufacture a wide variety of high-technology products, nor will 

they address countries’ rampant and growing use of innovation 

work-influenced trade practices which seek to advantage domestic 

producers at the expense of American manufacturers. These policies, which the World Trade Organization found countries used at 

an all-time record high in 2012, include currency manipulation, export subsidies, discriminatory technology standards, intellectual 

property theft, and localization barriers to trade which force American enterprises to manufacture locally or sacrifice intellectual 

property if they desire access to foreign markets. 

Rather, it will require effective technology and trade policies to 

ensure that American manufacturers can reliably innovate and 

fairly compete in global markets. With one in three U.S. manufacturing jobs dependent on exports and more than 90 percent of the 

world’s consumers living beyond America’s shores, Congress should 

support market-expanding free trade agreements such as the TTIP, 

TPP, and an expanded Information Technology Agreement which 

could boost U.S. exports of information technology products by $3 

billion annually, supporting 60,000 U.S. jobs. 

With the U.S. Export-Import Bank supporting $37 billion in U.S. 

exports annually and 205,000 U.S. jobs in 2013, it is imperative 

that Congress swiftly renew the bank’s authorization. Congress can 

also help boost exports by strengthening American manufacturers’ 

ability to innovate next-generation products by expanding the research and development tax credit and supporting a national network for manufacturing innovation. 

But innovative products will not reach foreign markets unless 

America commits to combating foreign mercantilism, thus Congress 

should require the U.S. Trade Representative’s office to rank nations according to the extent of their use of mercantilist practices, 

while providing it with significantly expanded resources for trade 

enforcement. 

In conclusion, American manufacturing can once again become a 

key driver of U.S. economic and employment growth, but that will 

not happen in the absence of constructive and comprehensive public policies to support American manufacturing competitiveness. 

Thanks. I look forward to your questions. 

The CHAIRMAN. Thank you very much, Mr. Ezell. 

[The prepared statement of Mr. Ezell appears in the appendix.] 

The CHAIRMAN. Ms. Sturm, welcome. 

STATEMENT OF JACKLYN A. STURM, VICE PRESIDENT AND 

GENERAL MANAGER OF GLOBAL SUPPLY MANAGEMENT, 

INTEL CORPORATION, SANTA CLARA, CA 

Ms. STURM. Good morning, Chairman Wyden, Ranking Member 

Hatch, and members of the committee. I appreciate the opportunity 

7 

to discuss how increased trade can help strengthen 21st-century 

technology manufacturing. 

Intel is a prime example of why the U.S. Government should 

open up new markets and remove existing trade barriers overseas 

to increase U.S. exports. Although we began as a small start-up, 

today Intel is the world’s largest semiconductor manufacturer, and 

our products power everything from phones and tablets to servers 

and super-computers, and they form the foundation of the information economy. 

Last year, the International Trade Commission reported that 

semiconductors were among the top three U.S. manufactured exports. Intel’s revenue in 2013 was about $53 billion, and it was 

generated from sales to customers in more than 120 countries. In 

fact, more than three-fourths of our sales are actually generated 

outside of the U.S., yet, at the same time, three-fourths of our advanced manufacturing and R&D are conducted across 23 States 

here in the U.S. The revenue we generate selling domestically 

manufactured products outside this country helps create and sustain high-paying jobs here at home. Of our over 100,000 employees 

worldwide, more than half are based in the U.S. This domestically 

manufactured/internationally sold dynamic is fundamental to the 

growth of our business. 

But our access to foreign markets does not just impact Intel and 

its employees. To support our business, we contract with over 7,000 

suppliers in 46 States, and more than 3,000 of those suppliers are 

classified as small businesses. In 2012 alone, Intel’s multiplier effect on the U.S. GDP was more than $96 billion. 

All of these economic benefits, however, are dependent upon our 

ability to sell innovative semi-conductor products outside of the 

U.S., although they are made in the U.S., to the 95 percent of consumers who live overseas. So today I would like to make three key 

points to ensure that the U.S. Government trade agenda protects 

and promotes further U.S. manufacturing such as ours. 

First, existing trade agreements need to be expanded. Too many 

key markets are subject to too few existing trade rules. One key example in our industry is the WTO Information Technology Agreement, which dramatically increased U.S. exports when it was implemented, by eliminating significant duties in many countries on 

a range of technology products. Unfortunately, many of the digital 

products developed in the last decade are not covered by the ITA, 

which was negotiated back in 1997. The Information Technology 

and Innovation Foundation estimates that expansion of ITA could 

increase direct U.S. exports by $2.8 billion, boost U.S. revenues by 

$10 billion, and support an increase of 60,000 new jobs. 

Intel strongly supports the administration’s efforts to expand 

product coverage of this aging agreement and, because of the accelerating pace of technology and innovation, it is imperative that ITA 

expansion be completed quickly. 

Second, the U.S. must enter into additional robust trade agreements on an accelerated basis. America’s 20 existing free trade 

agreement partners account for less than 10 percent of the global 

economy, but those 20 partners purchased nearly half of all of U.S. 

manufactured goods exported. U.S. exports create and sustain U.S. 

jobs. We need more FTAs to create more of those U.S. jobs. 

8 

We appreciate the administration’s ongoing negotiations of both 

TTIP and TPP. TPP will set the standard for market access in the 

Asia Pacific region and, of most interest to Intel, USTR has pushed 

hard for language that will increase trade secret protection, enhance e-commerce provisions, restrict commercial encryption regulation, and ensure more robust due process protection in competition cases. We hope this agreement will be completed quickly, but 

without sacrificing quality. 

TTIP is another key initiative. The transatlantic economy accounts for nearly half of the world’s GDP and a third of its trade. 

When the U.S. and E.U. speak with one voice on emerging trade 

issues such as forced IP transfer and tech mandates, we set a 

precedent that other governments are more likely to follow. Despite 

these major agreements in the works, other economies such as Europe and India have entered more regional trade agreements than 

the U.S. 

As global competitiveness increases, our pace to increase market 

access for U.S. goods and services must also increase. However, we 

should also ensure that our FTAs are robust and effective. If and 

when Congress considers Trade Promotion Authority, it should direct negotiators to fully address 21st-century manufacturing challenges. 

Third, the government must use a variety of mechanisms to tackle ever more complex non-tariff barriers, or NTBs. Some governments are linking traditional NTBs, such as local content measures, with new NTBs that promote discriminatory standards and 

favor domestic intellectual property rights to create national manufacturing champions. Existing trade rules do not deal with these 

complex NTBs holistically, and new trade agreements are not likely 

to adequately fill the gaps or keep up with rapid technological developments. 

For example, the government should seek other ways besides 

FTAs to isolate data protectionism, while dealing with legitimate 

privacy and security concerns, including development of best practices through increased international collaboration. 

Finally, trade agreements should be living documents that can be 

easily updated to effectively address new barriers raised by greater 

global competitiveness in the information economy. 

Intel appreciates the chance to share our views, and we look forward to working with you to ensure that trade agreements help 

American manufacturers prosper and create more jobs here at 

home. Thank you. 

The CHAIRMAN. Ms. Sturm, thank you very much. We appreciate 

your comments and having Intel pay good wages to so many Oregonians day in and day out. We thank you. 

[The prepared statement of Ms. Sturm appears in the appendix.] 

The CHAIRMAN. Let us welcome Mr. Kimber. 

STATEMENT OF RAY KIMBER, FOUNDER, OWNER, AND PRESIDENT, KIMBER KABLE, ON BEHALF OF KIMBER KABLE AND 

THE CONSUMER ELECTRONICS ASSOCIATION, OGDEN, UT 

Mr. KIMBER. Good morning, Chairman Wyden, Ranking Member 

Hatch, and distinguished members of the committee. My name is 

Ray Kimber. I am founder and CEO of Kimber Kable of Ogden, 

9 

UT. It is my pleasure to appear today on behalf of Kimber Kable 

and the Consumer Electronics Association, of which I am a longstanding member. 

CEA owns and produces the international Consumer Electronics 

Show, the global stage for innovation. CEA’s over 2,000 member 

companies represent the $211-billion U.S. consumer electronics industry, and that is an updated figure from just yesterday. 

I founded my company in 1979 with the Kimber Kable product 

line of audio, video, and speaker cables. Over time, our innovations 

have established us as a global leader in sound technology and 

audio cable. Our product improves the fidelity of entire audio/video 

systems. Both Kimber Kable and CEA rely upon an open global 

marketplace with policies that promote free trade and protect our 

innovations at home and abroad. 

Kimber Kable employs 30 people in Ogden, UT, where our product is manufactured in a facility one and a half times the size of 

a football field. Approximately 60 to 70 percent of the product we 

manufacture in Utah is exported to nearly 60 countries. Kimber 

Kable is typical of U.S. manufacturers that rely on access to international markets for continued growth and success. Enactment of 

trade agreements and legislation which protect us against counterfeiters and trademark infringers are strong examples of areas 

where my government can help me and other American innovators. 

I commend you, Mr. Chairman and Ranking Member, for working with industry to secure agreements and policies that U.S. companies need to be competitive. Free trade agreements have worked 

for us in the past. FTAs increase confidence and certainty for U.S. 

industry doing business in those partner countries. 

America’s free trade agreement partner countries buy more goods 

from the U.S. than other countries. We want new FTAs negotiated 

and passed by Congress to establish good rules where U.S. companies can operate with confidence that they have protections and enforcement. Please do not forget counterfeiting, an area in which we 

face daily challenges and damages. Agreements currently under negotiation, such as the Trans-Atlantic Trade and Investment Partnership and the Trade in Services Agreement, can do just that. 

For agreements to be concluded swiftly, we need FTA partners 

to trust that the United States has the ability to actually pass 

these agreements into law. Trade Promotion Authority expired in 

2007, and, without its renewal, we risk that negotiated trade agreements will never pass into law. That costs me, my employees, and 

our families in Utah, along with the entire U.S. economy. It literally diminishes our ability to innovate and remain competitive in 

the global marketplace. 

Finally, I want to address a pending agreement, the success of 

which would be a boon to our industry. The Information Technology Agreement, ITA, was negotiated over 15 years ago and has 

not been updated since. Products such as video games and consoles 

and the audio/video systems that support them are not part of the 

original agreement. 

Updating the ITA to include these will make them more affordable, promoting greater production, thereby creating jobs. CEA and 

its members have been working tirelessly with the USTR to advance the deal. We could use Congress’s help to encourage China 

10 

to return to the negotiation table motivated to make significant 

and meaningful progress. 

We risk falling behind other countries that are passing agreements with each other. How can you expect me to maintain innovative competitiveness if my government is not matching my passion 

with crucial agreements and legislation? I think a unified Congress 

which promptly passes needed agreements and bills will send just 

as strong a message as the content of the bills and agreements 

themselves. I respectfully say ‘‘please.’’ 

Thank you again for the opportunity to testify. I will sincerely respond to any questions that the committee may have. 

The CHAIRMAN. Thank you all. You have been very, very helpful. 

I know you are going to get important questions from colleagues. 

[The prepared statement of Mr. Kimber appears in the appendix.] 

The CHAIRMAN. Let me start with you, Ms. Sturm, on the question of strengthening trade secret protection. It really is hard to 

over-emphasize the importance here, because we are talking about 

‘‘advantage America.’’ These are our inventions. These are the creative efforts of Americans. Then you have threats from traditional 

moles and state-supported cyber-theft, a whole host of very significant efforts that are coming from around the world, that undermine our intellectual property. 

I think it would be very helpful if Intel could start by outlining 

what the company sees as the major gaps—the major gaps today— 

in global trade secret protection. 

Ms. STURM. Thank you, Mr. Chairman. Yes, we think trade secrets are critical to how we operate our business. We develop very 

advanced manufacturing techniques, and those are not patented 

because we do not even want them to be visible to the world. It is 

crucial to us that we protect them and that we maintain a high degree of confidentiality internally. 

From the standpoint of trade secret capability, we would like to 

see more focus on enforcement and then also on better written 

trade agreements in the future that set up effective protections for 

trade secrets. 

The CHAIRMAN. I also understand that, in the area of the trade 

secret rules, it seems that the rules are particularly weak in the 

area of these flimsy protections, on providing unfair advantages to 

state-owned enterprises, and with inadequate disciplines on technical standards. I understand that you all are concerned about 

those as well. 

Ms. STURM. We look at those as non-tariff barriers. We certainly 

are concerned when preferential access is given to products that 

are inferior to ours. Relative to trade secrets, those protections 

really are in the realm of enforcing existing trade agreements and 

ensuring that future agreements build in even stronger protections. 

The CHAIRMAN. Let me offer a question for you, Mr. Ezell. Senator Cantwell has done very good work on this question of the 

Export-Import Bank and is an eloquent advocate for it. I hear Oregonians talk a lot about how important it is for the small firms, 

that the small firms often just kind of get lost in this debate about 

great titans of enterprise, taking one position or another. You all 

11 

work a lot with the small firms. What would be some examples of 

how the Export-Import Bank is important for the small firms? 

Mr. EZELL. Well, regarding the question on the Export-Import 

Bank, I think it is first important to recognize that global export 

credit competition has only increased. In fact, over the past 5 years 

China and Germany respectively have issued 4 and 5 times as 

much export credit as the United States has, so we need to both 

reauthorize the Export Bank and increase its lending portfolio. 

Now, with regard to the question of small and medium enterprises, the reality is that the vast majority of the bank’s transactions—80 percent—go to SMEs. In 2013, the U.S. Export-Import 

Bank supported the export activities of 3,400 U.S. SMEs, so it can 

play a vital role in helping our small businesses export. 

One other key point here, I think, is that sometimes you will 

hear the criticism of the Export-Import Bank that its activities only 

support the activities of larger corporations such as GE or Boeing. 

But the reality is that every single time the U.S. Export-Import 

Bank supports the sale of a Boeing aircraft, it is also supporting 

the activities of the 22,000 suppliers, the vast majority of them 

small businesses, that comprise Boeing’s value chain for the production of aircraft. So across the board, from the bank support for 

large businesses to small ones, there are at heart supporting the 

export capacity of small U.S. businesses. 

The CHAIRMAN. One last question if I might, for you, Mr. Ezell, 

and you, Mr. Kimber. When we are talking about the new priorities—because that is a big part of our agenda here, to respond to 

trade barriers—it seems to me that if we are dealing with preferences for a country’s state-owned enterprises, requirements that 

U.S. companies produce in a foreign country to access its market, 

and these technical kinds of standards, these strike me as three of 

the areas that we really ought to zero in on. I think Ms. Sturm 

touched on those as well. Do you share that view, Mr. Kimber, and 

then Mr. Ezell? 

Mr. KIMBER. I do. We have some markets—for instance, Brazil— 

where the import tariff for our class of goods is so high that it 

makes it untenable to even attempt much of a business down 

there. They do not have anybody that competes with us down 

there, so I do not really understand that. 

What we have found is that, when we go into a market, it actually triggers and encourages legitimate competitors of our product 

for the benefit of the entire global marketplace. So I think that the 

high tariffs for products as collateral damage actually damage the 

country that establishes such high tariffs. So we can actually do 

them a favor by making them do the right thing. 

The CHAIRMAN. You are being too logical, Mr. Kimber. 

Mr. KIMBER. I am sorry. 

The CHAIRMAN. It is an important point. We do not have too 

much of that in government. 

Do you want to add anything, Mr. Ezell? I know my time is up. 

Mr. EZELL. Just to say that the evolution of trade in the global 

economy is that, as countries have reduced their tariffs to trade, 

they have surreptitiously replaced them with these types of nontariff barriers. I think you correctly called out localization barriers 

to trade that force U.S. companies to either locate their production 

12 

offshore or to sacrifice their intellectual property as a condition of 

exporting to foreign markets as one of the key challenges we face. 

For example, India recently put in place a policy called the Preferential Market Access policy which would have required that 80 

percent of the computer and electronics sold in India by 2020 be 

manufactured there. While they have repealed that to only apply 

to government procurement of electronic products, these types of 

policies are poised to do significant damage to the global production 

system and also to U.S. manufacturers. You are exactly right to 

call on Congress to push back more strongly against them. 

The CHAIRMAN. Very good. 

Senator Hatch? 

Senator HATCH. Well, thank you, Mr. Chairman. 

Mr. Kimber, you export to almost 60 countries around the world, 

and, in many of these markets, your products still face high tariff 

barriers. I agree with you that updating the Information Technology Agreement would help you and other companies across the 

United States access growing foreign markets. 

Can you give us some idea of what concluding an updated Information Technology Agreement would mean to your company and 

its ability to export to more countries, including China? 

Mr. KIMBER. Yes. We actually export a fair amount to China 

now, but our biggest scourge is counterfeit products. Counterfeiting 

literally costs us. It deprives and deceives the consumers. Counterfeiting damages my reputation. 

Let me show you how we struggle to grow and retain our overseas markets. These percentages are the export portion of our total 

sales: in 2012, we exported 76 percent; in 2013, 67 percent; in 2014 

year-to-date, 62 percent. This sales erosion is directly tied to certain models of our product. 

In countries around the globe like Taiwan, China, Canada, even 

right here in the U.S., counterfeit goods are running roughshod, 

damaging both manufacturers and consumers. Sometimes it even 

seems that counterfeit producers are aided, or at least protected, by 

local governments. 

Senator Hatch, I believe that your efforts to introduce the Customs reauthorization bill will have a measurable benefit to me and 

to the CEA members and the U.S. economy, if passed. This bill 

would direct agencies to coordinate with each other and with 

Kimber Kable. We need to stop bad product crossing the border. 

Current Customs and Border Protection internal policies impede 

such cooperation and coordination. This is an action that CEA 

members have long urged. 

It is illogical to continue CBP’s internal policy that impedes cooperation and coordination. Legislation such as the proposed Customs reauthorization bill will streamline information sharing and 

is a critical action that Congress should take to protect all consumers and help domestic manufacturers like me. Please pass this 

bill. Thank you. 

Senator HATCH. Thanks, Mr. Kimber. 

Ms. Sturm, you pointed out in your statement that trade secret 

theft is a growing problem around the world. We know that China 

in particular is systematically stealing critical information from 

hundreds of U.S. companies. That is why the Trade Promotion AuVerDate Mar 15 2010 19:23 Mar 09, 2015 Jkt 000000 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 R:\DOCS\93516.000 TIMD
13 

thority bill that we introduced earlier this year includes provisions 

directed at combating this threat, including new provisions calling 

for governments to protect trade secret information and to prevent 

or eliminate their involvement in the theft of trade secrets. So 

would you please tell us why it is so important for our trade agreements to address this growing threat? 

Ms. STURM. Advanced manufacturing requires an effective use of 

trade secrets to deliver high-yield, low-cost products, and protecting 

those trade secrets allows companies to stay competitive. At this 

point, we believe that our trade secrets are well-protected inside 

our company, but we believe that trade agreements need to be better enforced to ensure that individuals and countries that do not 

follow these agreements are penalized and that the penalties are 

effective enough to make an impact on those countries. 

Senator HATCH. Thank you. 

Mr. Ezell, ITIF published a report in April of 2014 entitled, ‘‘The 

Indian Economy at the Crossroads.’’ In that report, you make a 

compelling case that the path to growing India’s economy lies in 

India repudiating its ‘‘innovation mercantilist’’ policies of the past 

and instead embracing an economic model that respects intellectual 

property rights, attracts investment, and of course unleashes India’s labor productivity. 

Now, we are all hopeful that India’s new Prime Minister Modi 

will follow that path. Unfortunately, I understand that one of the 

first trade actions by the new Indian government at the World 

Trade Organization was to block consensus on a protocol to implement the trade facilitation agreement. I find that very troubling. 

What can we do as a government to help make the case that policies that protect intellectual property, enhance trade facilitation, 

and liberalize trade and investment, are key tools to economic development? 

Mr. EZELL. I think several things. The first will be to demonstrate that policies such as local content requirements, which 

mandate our companies to locate production in these nations, are 

not as effective as these countries focusing on providing an attractive and compelling location for our manufacturers to put their production activities there. 

For example, Intel would certainly not put a semiconductor fabrication facility in India where there are rolling blackouts, so it is 

incumbent upon us to show them that investing in the innovation 

potential and the infrastructure in their own economy is what they 

need to attract the manufacturing activity that can drive their 

growth. 

I think it is also important to point out that, when you look at 

intellectual property in India, for example, a lot of the people who 

are most strongly damaged by intellectual property theft are content creators, for example, in Bollywood, which is the secondlargest movie production industry in the world. IP theft of movies 

and digital content affects their own innovators. So when India 

does not implement as strong an intellectual property rights statute as it could, it only damages the long-term innovation potential 

of its own economy. Having a whole-government approach that constantly makes that case toward Indian colleagues, I think, is one 

14 

of the strongest things we can do to get them to put in place strong 

intellectual property rights statutes and better trade rules. 

Senator HATCH. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator Hatch. 

Senator Brown? 

Senator BROWN. Thank you, Mr. Chairman. 

Recently—and this question is for you, Ms. Sturm—DOJ indicted 

five Chinese military officers for the cyber-theft of trade secrets 

from U.S. manufacturers and the United Steelworkers. The stealing of trade secrets by the Chinese military underscores just how 

valuable IP and trade secrets of U.S. manufacturers are to the Chinese government. We know, or we think, that there has been a 

long-term pattern of that kind of abuse of the rule of law. 

I met earlier this week with the Software Alliance and talked 

about some of these issues on trade secrets and theft of trade secrets. Is this threat one of the reasons that Intel and other companies you observe are looking to in-source, to bring jobs back here? 

Ms. STURM. Like most major companies, Intel is subject to cyberattacks with the intent to extract IP. We do not think it is isolated 

to China at all. Relative to our operations, we think that we have 

robust controls that protect us from that, so, no. 

Senator BROWN. All right. 

It is pretty apparent, it is pretty obvious, that U.S. trade policy 

and tax policy have encouraged jobs, American companies, to relocate overseas. It is pretty interesting. The last 20 years is the only 

time period I can think of in economic history around the world 

where companies will shut down in Cleveland and move production 

to Wuhan and then sell their products back to Ohio, or back to 

Cleveland, or back to the United States, and it has become a business plan for a number of U.S. companies. 

There are other factors of course, but trade agreements and tax 

policy seem to have played into that. What happens is we, the most 

innovative country probably in the history of the world, with a 

great system of research and development and universities, we lead 

the world in innovation still. But when the production goes overseas, both in terms of process and product, the innovation takes 

place on the shop floor, making a production more efficient and 

making a product itself that is manufactured better. 

What do we change about U.S. trade policy? What does TPP do, 

what does TTIP do, to begin to change that whole view that is part 

of many companies’ business plans: to shut down here, move overseas, and sell back into the United States? How do we change trade 

policy, tax policy? This is for both Mr. Ezell and Ms. Sturm. How 

does that play with these proposed trade agreements, and what do 

you suggest we do to encourage companies to no longer do that and 

to begin to re-shore jobs? 

Ms. STURM. I think the most important thing that could be done 

to affect those kinds of changes is comprehensive tax reform. In 

particular, in the short-term, a stronger and permanent R&D tax 

credit would stimulate companies to retain a lot of those activities 

at home. 

Senator BROWN. Mr. Ezell? 

Mr. EZELL. So ITIF talks about the four Ts, which we call Technology, Trade, Tax, and Talent policy. I think countries have to get 

15 

that suite of policies right to create an attractive environment in 

which manufacturing can occur. With regard to tax policy, for example, U.S. manufacturers pay a corporate tax rate that is 37- 

percent higher than Asian manufacturers do, so we do need a corporate tax reform. 

However, in the process of doing that, we should not sacrifice incentives for firms to invest in research and development and investment. For example, the U.S. only has the world’s 27th most 

generous R&D tax credit now. Brazil, China, and India even offer 

more attractive R&D tax credits than we do, so we need to increase 

our incentives for American firms to invest in innovation and capital equipment. 

Senator BROWN. So is this going to just be a continued race to 

see which countries can have the lowest tax rates? I mean, you see 

that the chairman has shown great leadership when dealing with 

this inversion issue. The chase just continues. We do not have the 

highest effective tax rates in the world. 

I mean, I think there is a bit of disingenuousness in somebody 

always saying, from the Wall Street Journal and other people all 

the time, we have the highest tax rates in the world. Well, look at 

effective tax rates. I think we need change. I am not arguing 

against that. But where does this end? 

I mean, you live in this country, you work in this country. You 

benefit from infrastructure, you benefit from medical research, you 

benefit in your businesses, let alone personally, from scientific research. You benefit in the freedoms we have. Then you want to 

move just to continue to lobby for and look for the lowest tax rates. 

We are just going to keep moving and keep moving and keep moving. Is that where we end up? Mr. Kimber? 

Mr. KIMBER. Well, I would make the point that the actual tax 

rate is not as important or crucial to me as the complexity of how 

to assure that I pay the right tax. I view the complexity of how 

much time, effort, and money we spend on outside professionals to 

make sure that even we, as a small company, pay the correct 

amount as the essential equivalent of a non-tariff barrier. 

If you could make it more certain, less complex, I think that 

would help. I do not mind paying taxes. I understand the benefits, 

and I support appropriate taxation. But to have it so convoluted 

that it makes it difficult for me to be assured that I am paying the 

right amount, that kind of uncertainty is something you guys could 

fix, and I wish you would, please. 

Senator BROWN. I think Senators Wyden and Hatch have argued 

for a simpler tax system. We will have other decisions to make 

with it, but I think there is general agreement on that. 

Mr. KIMBER. So, thank you. 

Senator BROWN. Would the two of you like to comment on my 

question? 

Ms. STURM. Yes. Let me say that we are looking for a level playing field. As we go around the world, countries come to us repeatedly looking to bring our high-skilled, high-paying jobs into their 

country. They routinely offer us a billion or more dollars, which is 

largely comprised of tax-based incentives, to bring those jobs, to operate in their countries. So that does create an uneven playing 

16 

field, and that is one of the issues that we would like to see addressed. 

Senator BROWN. Mr. Ezell? 

Mr. EZELL. I would stress, on tax policy, that it is about assessing where we stand competitively via other countries. It is also 

about ensuring that more of those tax dollars go back into reinvesting in the manufacturing capabilities of our firms. For example, we have a great program called the U.S. Manufacturing Extension Partnership, which supports the innovation capacity of small 

businesses. When you look at countries like Germany, they invest 

3 times as much as a share of GDP as we do, Japan 20 times as 

much. So reinvesting those tax dollars in our innovation potential, 

I think, is very important. 

Senator BROWN. Fair enough. Thank you. Thank you. 

The CHAIRMAN. Thank you, Senator Brown. 

Before we go to Senator Isakson, I want to address a number of 

the important points that Senator Brown made. What Senator 

Brown was talking about is how we grow red, white, and blue jobs, 

jobs in this country—high-skill, high-wage jobs for our people, this 

point that Senator Brown touched on with respect to innovation 

taking place on the factory floor. We just want to make sure that 

those factory floors are in the United States. So what Senator 

Hatch and I and all our colleagues have tried to do on a bipartisan 

basis is attack those kinds of opportunities to do it. 

For example, a number of you mentioned the research and development tax credit. That is in the extenders package, not just the 

way it used to be, but as an improved version so as to do more to 

create opportunities for inventors, as Senator Brown so correctly 

said—to have the innovation on the factory floors here in America. 

Also, colleagues, so we know, because we have had several references to the matter of the international taxation debate, next 

Tuesday we will have an extremely important hearing on international taxes that will touch on, obviously first and foremost, the 

inversion question. Senator Hatch and I are working with colleagues to tackle that in a bipartisan way as well. 

Senator Isakson? 

Senator ISAKSON. Mr. Chairman, I am going to apologize for not 

asking a question, but there is no need to really ask a question of 

these three witnesses. Our only problem today is, they had the 

wrong audience. We ought to send these remarks to the leadership 

of the Senate in both parties to make them realize that we have 

a lot of work to do. Ms. Cantwell is going to talk about the ExportImport Bank. I think she is going to sing out of Mr. Ezell’s hymnal 

about the importance of that. 

I am going to talk about what Ms. Sturm said on the TPA. I 

mean, Trade Promotion Authority is absolutely essential if we are 

ever going to do a TTIP or a Trans-Pacific Partnership. We have 

the African Growth and Opportunity Act, which I know we have a 

hearing coming up on. 

The biggest enemy of manufacturing domestically in the United 

States of America is the U.S. House and Senate. We need to pass 

the legislation that facilitates the ability for them to do business. 

I will add one other statement that was not mentioned, and that 

is the Miscellaneous Tariff bill. There are a lot of 20th-century 

17 

manufacturers in the United States still producing a lot of jobs who 

make products that have components in them that are minute in 

their import value but have heavy tariffs on them that cost the 

American manufacturer a lot of money. 

This committee should be moving forward on the Miscellaneous 

Tariff bill, moving forward on the two partnership bills. But understand that nothing is going to happen without us taking action on 

the Export-Import Bank, TPP, AGOA, TTIP, and Trade Promotion 

Authority. I want to commend the witnesses on addressing the key 

points of what we need to pay attention to as members of the U.S. 

Senate. 

Thank you very much. 

The CHAIRMAN. Well said, Senator Isakson. 

Next is Senator Cantwell, the leader of the effort on the ExportImport Bank, and particularly on raising that question of the small 

companies. 

Senator CANTWELL. Thank you, Mr. Chairman. I want to associate my comments with the member from Georgia, because I think 

Senator Isakson hit the nail right on the head. You guys have 

clearly outlined what we need to be doing, and we here need to do 

our job. 

I think so many people think that we are somehow helping U.S. 

manufacturing when all we are doing is delaying the certainty and 

predictability that they need to compete. They have to focus every 

single day on shipping product. That is the level of competition 

that they face. They are so busy focusing on shipping product, yet 

we think they should take time away from that competition and 

come and run around the halls here and explain to us in intimate 

detail things that we cannot understand. I would rather they be 

competitive and ship their product and have us do our job. 

So first of all, I want to thank you, Mr. Ezell, for clearly articulating that the health of U.S. manufacturing depends on exports. 

I do not think we can emphasize that enough, that the market is 

outside the United States of America. 

I have a question, though. Your testimony—I am trying to understand the upside and the down-side in manufacturing. So I think 

you are saying—well, let me try this. We used to have about 18 

million manufacturing jobs in the United States? 

Mr. EZELL. That is correct. 

Senator CANTWELL. All right. And we lost 6 million, so we are 

down to about 12 or 13? 

Mr. EZELL. Twelve-point-one million, yes. 

Senator CANTWELL. All right. So we are at 12 million. All right. 

What is the upside for us and what is the risk side? By that I 

mean, how big of an upside do you think we have in manufacturing? I am not asking for an exact, precise number, but I know 

in aviation, we have a world demand for 35,000 new airplanes. 

That is a lot of jobs. But we have to build them, we have to compete, we have to have the Export-Import Bank to sell them, all of 

that. So what do you think the upside is for the U.S. economy on 

manufacturing, if we proceed correctly? 

Mr. EZELL. I think the upside is at least 3 to 5 million more U.S. 

manufacturing jobs. The key point of my testimony was that we 

cannot rely on market forces and lower production costs alone, 

18 

though they are important. But they will not be sufficient to ensure 

a U.S. manufacturing renaissance without these types of proactive 

public policies around trade and technology that we have been talking about here today. 

One key point I would just like to make—— 

Senator CANTWELL. Well, our calling card in the competitive 

arena is our ability to innovate, correct? Our ability to innovate 

next-generation faster than anybody else, right? 

Mr. EZELL. That is precisely right. 

Senator CANTWELL. All right. 

Mr. EZELL. And our ability to do so depends on three conditions 

existing in global marketplaces. First is the existence of large markets, because our innovative products, like aircraft and semiconductors, have very high fixed costs of initial design and development, so their marginal costs need to be spread across larger global 

markets. That does not happen when other countries are closed to 

our exports. Intellectual property theft then becomes a key threat 

to our ability to innovate, because so much of our innovation is 

knowledge- and resource-intensive. 

Then when you get excess competition in the global economy— 

for example, India recently issued a compulsory license for Bayer’s 

Nexavar, an anti-cancer drug, and that is going to allow an Indian 

manufacturer to now produce a generic copy. 

So it creates excess competition in the global economy which prevents our manufacturers not only from competing, but from then 

generating profits from one generation of innovation that can be reinvested into the future. 

So, getting no excess competition, access to large markets, and 

protection of intellectual property rights in the global economy, are 

the key things we have to have to assure American innovation. 

Senator CANTWELL. Well, I appreciate your speed there. Thank 

you. But what is the down-side? Because we are at 12 million, and 

if the upside is another 3.5 million or higher, what is the down-side 

if we do not act? What happens to that 12 million? 

Mr. EZELL. Well, when you consider that we lost a third of our 

manufacturing jobs in the prior decade, if we do not get our act 

right, we could lose at least 20 to 30 percent in the coming decade. 

That is not inevitable. It should not happen. It does not have to 

happen. 

But just very briefly, if you look back to the year 1997, the U.S. 

has lost 43 percent of its manufacturing jobs when correcting for 

labor force growth; Germany has only lost 8 percent over that time. 

So Germany has put in place a right set of policies to support the 

export economy. We need to be thoughtful about looking at what 

other countries are doing smartly and how we can emulate such 

policies in the United States. 

Senator CANTWELL. I do not know where else we can be so accountable for an upside of 3.5 million or a loss of 3.5 million. So, 

I mean, to me, as I said, I think my colleague Senator Isakson got 

it right. 

I did want to just put up two charts quickly. To your earlier 

point, this is the U.S. aerospace supply chain. You can see that it 

has companies in every State in the United States. In fact, we are 

passing out for our colleagues today data and information about 

19 

the supply chain companies that exist in their area. Then the second chart is just the actual Ex-Im larger supply chain, which is 

33,000 companies. It shows by State each of those States and 

where these manufacturing jobs are. 

So there is a lot at stake all throughout the United States. I do 

not think people—I noticed when I handed Senator Schumer his 

handout yesterday, he was delighted to see that there were more 

supply chain manufacturers in his State than in mine. So I think 

that you can see that it is all across the United States of America, 

and this is why we have to get this policy right. This is why we 

have to move forward on the Ex-Im Bank and these other policies 

we have discussed here today. So, thank you. 

Mr. KIMBER. If I could just make note, even though our primary 

product is consumer electronics, we do supply component parts to 

the manufacturers for both aerospace and automotive. So internally 

we innovate these little ideas, and it has picked up, so it ends up 

being little parts inside of big parts that end up flying or driving. 

Senator CANTWELL. If I could just, Mr. Chairman, make one last 

point. I think our colleagues just really need to understand what 

Mr. Kimber just said. Our competitive advantage is that the small 

companies are continuing to perfect the innovation, so it is flat organizations continuing to be the best experts at their particular 

area. That is why we can innovate faster, but it is a very spreadacross-the-United States thing. So just because you do not hear 

from them does not mean they do not exist and they are not producing great products. We have to empower them. 

Ms. STURM. If I may make one last comment relative to the 

down-side. I agree with Mr. Ezell that there is a meaningful downside, but I want to express that our international competitors are 

not standing still. So we may have experienced something from 

1997 until now, but competition is accelerating, and, as preferential 

policies are being established by international governments, they 

are facilitating even greater acceleration there. So we must act. 

The CHAIRMAN. I think the point Senator Cantwell makes very 

much dovetails with that last comment, Ms. Sturm. The reason 

Senator Cantwell pushes so hard for us to innovate and for policies 

that encourage that innovation is because of what you just said. 

We know the international competition is not just sitting around 

reading paperbacks; they are out there innovating, and we appreciate that. 

Senator Thune has joined us, and we welcome him. 

Senator THUNE. Thank you, Mr. Chairman, to you and Senator 

Hatch, for holding this hearing today. I want to thank our witnesses for being here. 

I think many Americans would be surprised to know that the 

majority of our Nation’s exports are manufactured goods. While 

many manufacturers face pressure from foreign competitors, the 

fact is that trade agreements, when they are enforced, make our 

trading partners play by the rules. I think that has been very successful in encouraging U.S. exports. 

So, if you look at the countries around the world with which we 

do business, those with which we have free trade agreements, they 

constitute a big part of our manufactured exports. I think something we need to continue to do is aggressively expand those tradVerDate Mar 15 2010 19:23 Mar 09, 2015 Jkt 000000 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 R:\DOCS\93516.000 TIMD
20 

ing relationships through trade agreements. We need a renewed 

and strengthened TPA in order to do that. So let me put my plug 

in, as I am sure some of my colleagues, including Senator Hatch, 

have already done. 

Ms. Sturm, I would like to ask a question about what you see 

in terms of the increasing trend of trading partners using non-tariff 

barriers as a way to block access to markets and unfairly block the 

flow of trade. What are the emerging trade barriers for IT goods 

and services? 

We see a lot of those when we talk about agricultural exports, 

and that is something that I am a little bit more familiar with. But 

what areas, when it comes to the goods and services that a company like yours exports, what types of non-tariff barriers do you 

run into? 

Ms. STURM. Thank you, Senator. What we see is preferential 

focus, and Mr. Ezell discussed the PMA in India, where governments are attempting to set preferential standards for locally developed technologies. Then those are implemented to the exclusion 

of other technology that may in fact be better, and this can limit 

the ability to bring leading-edge product to market. 

Also, as Mr. Ezell pointed out, because of the scale of operations 

that are required in our high fixed-cost businesses, in order for us 

to be successful we need to be able to sell our product in very high 

volume. As countries limit our access to those markets through discriminatory standards or even through technology mandates, it reduces our ability to be competitive with our products, both from a 

cost standpoint as well as an access standpoint. 

Senator THUNE. Mr. Kimber, there is a perception that exporting 

is generally something done only by multinational companies, and 

your company has 29 employees, yet you export the majority of 

what you manufacture to nearly 60 countries around the world, I 

understand. 

So what particular challenges does a smaller company like yours 

face in becoming an exporter, and is there anything that Congress 

can do to make that process easier? 

Mr. KIMBER. Well, the trade agreements, so that the tariffs are 

equalized and intellectual property rights are protected, are really 

key. For instance, we had a case where we had a serious inquiry 

from Vietnam years ago, and, because we sell parts to our own 

competitors, what they did not realize was, when they called in to 

one of our divisions to buy our own brand-name printed-on parts 

that they wanted to buy from us to put on counterfeit goods, that 

they were busted. 

So, if we would have had a trade agreement with Vietnam at the 

time, I think that we would have stood a much better chance of 

being in that country legitimately, and so it has kind of a followon. 

If I could draw a parallel between the type of development and 

research that we do, along with bringing an actual product to market, with the legislative product, it has to be the same way. If we 

design and just continue to re-design and re-design and never bring 

a product to market, then we do not ever know what we are doing, 

and we will get eaten alive by our competitors. So, I think that that 

21 

is a fair analogy between development of legislative agreements 

and development of actual technology and products. 

Senator THUNE. In your estimation, is this problem of counterfeit 

goods getting better or worse? 

Mr. KIMBER. It is getting worse. We pay a lot of money to counsel 

just to take care of eBay. It is just like Whac-A-Mole. We can identify and we can figure it out, but it is tough. It is not just that they 

are competing with a product that mimics our technology; they are 

actually using our own brand name and our own trade dress. 

Senator THUNE. Are there additional steps you think that we 

ought to be taking? 

Mr. KIMBER. Yes. I think Senator Hatch’s bill, where it requires, 

say, Border Patrol, the Customs people, to actually, if there is a 

product coming into the States that says Kimber Kable on it, contact us and say, we do not think this is yours, because we think 

that all of your product is made in the U.S. So we can put a stop 

to that right there. If we can impede that, it means we discourage 

it. If you discourage bad behavior long enough, hopefully it goes 

away. 

Senator THUNE. Yes. 

Mr. Chairman, my time has expired. Thank you. Thank you all 

very much. 

The CHAIRMAN. Thank you, Senator Thune. 

We have been joined by Senator Cardin. He is always ready to 

swing into action. Let us recognize him at this time. 

Senator CARDIN. Well, Mr. Chairman, thank you. I want to thank 

our witnesses. I apologize for not being here for the full hearing. 

We had a Foreign Relations Committee meeting on the border 

issues. But I am extremely interested in this subject. I have been 

doing in Maryland what I call ‘‘Made in Maryland’’ tours and have 

really seen the innovation and creativity of manufacturing in our 

State. 

I usually ask the people there what we can do to try to help. It 

is interesting. International trade comes up frequently, and I am 

talking about, as Senator Thune was mentioning, smaller companies. This past week I went to the Tulkoff company, which is the 

largest horseradish producer in the United States. It does not have 

much penetration outside the United States. Part of that is the 

type of products they manufacture, but part of it is the difficulty 

of a small company dealing with market access outside of the 

United States. 

It seems to me that we have made a huge error in manufacturing 

in that we have sort of adopted the World Trade Organization’s tax 

regime, which allows for consumption taxes to be borderadjusted, whereas we rely more on income taxes, which are not 

border-adjusted. When we tried to correct that, we got into trouble 

with the WTO, and the manufacturing credit has not really solved 

the problem. 

So can you just share with me your thoughts on what would be 

the most important steps for us to take to try to help market access 

to smaller companies in manufacturing that produce products? 

What would be on top of your wish list if we could make certain 

changes to gain greater access for our companies in the international market? What is number-one on your list? What would 

22 

you like to see? Don’t be bashful—go. Mr. Ezell, why don’t you 

start? 

Mr. EZELL. Well, of course I would say that market access, expanding free trade agreements that can do a better job of opening 

global markets to our exporters, would be the first thing. But getting down to a more detailed and technical level, I think one thing 

that would really help is, I mentioned earlier our Manufacturing 

Extension Partnership, which is a program that helps our manufacturers innovate and adopt modern manufacturing processes. 

But when you compare how that program operates in most other 

countries of the world, like Britain’s Manufacturing and Advisory 

Service, they have an export orientation to that program where 

they are helping those small manufacturers understand needs and 

tastes in foreign markets, so they are helping them tailor their 

products and services to the taste of a global economy. 

I think we can look at having MEP most certainly bolster the export potential of our small firms, and also have our embassies 

around the world be more attuned to the export capacity of our 

small manufacturers and make that a greater part of the trade 

portfolio at the embassy level. 

Senator CARDIN. There have been some success stories in my 

State. Marlin Steel, which is a small steel manufacturer, exports 

a lot more than—I mean, the export market is huge for them even 

though they are a small specialty steel operation. So it has worked. 

I am not trying to say it cannot. 

But it seems to me it is challenging for small manufacturers to 

take the risk of needing market share outside of the United States 

in order to be able to be successful. It seems to me that most of 

the initiatives that you are talking about are aimed more towards 

the larger manufacturers. 

Mr. EZELL. Well, for example, the Manufacturing Extension Partnership is designed specifically for companies of less than 500 

employees, so it is specifically targeted to SMEs. So, I think it 

could have an incremental impact, because the first order of business in getting to exports is that our manufacturers innovate nextgeneration products. So, I think it would play an important role. 

Another point to elaborate on, one Mr. Kimber made earlier, is 

that small businesses are often subject to foreign firms counterfeiting or exploiting their intellectual property, and they clearly do 

not have the resources to contest those unfair trade practices, so 

we really do need to increase funding for agencies like the Interagency Trade Enforcement Committee, ITEC. The Senate legislation has called for $12 million in funding for this agency in 2015, 

the House only $7 million. We have to adequately resource these 

agencies. 

Senator CARDIN. I agree completely. Also, we should have quality 

trade agreements that give us a better chance for manufacturing, 

quality trade agreements that have strong enforcement provisions 

for anti-competitive manufacturing practices in other countries, 

which we have been somewhat weak about. 

Mr. KIMBER. Yes. Let me brag about a fellow CEA member. 

MiTek manufactures speakers in Ennis, TX. They have about 150 

employees there. They also manufacture in Kentucky and Phoenix 

with about 100 employees each. They recently outfitted the ShangVerDate Mar 15 2010 19:23 Mar 09, 2015 Jkt 000000 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 R:\DOCS\93516.000 TIMD
23 

hai airport and the Shenzhen ferry station with U.S.-made paging 

systems, even in the face of a 40-percent tariff. 

Can you imagine how good those products are to overcome that 

kind of price barrier? Imagine how much more innovation and how 

much more sales we would get if that trade tariff was even-handed 

on both sides. So it is important. We are overcoming it, and we can 

see how the technology can do it, but it is—— 

Senator CARDIN. Well, I agree with you. My time has expired, 

but let me just point out that in TPP one of the major issues is 

whether we really will get a level playing field on government procurement and state-owned enterprises, particularly in the developing countries that are aspirants in TPP. 

So I agree with you on your trade, but there have to be quality 

agreements. The trade regime has been more skewed towards Europe and Asia from the point of view of their practices than it has 

through the United States, particularly on taxes but also on intellectual property. I look forward to working with you. 

Thank you, Mr. Chairman. 

Mr. KIMBER. Thank you, Senator. 

The CHAIRMAN. Senator Cardin, well said. The ultimate compliment, I think, is Senator Hatch’s, because he wanted me to mention specifically that he very much wanted to be here for your questions, and apparently he was called away by a scheduleing conflict. 

So as usual, you have made points that resonate here in a bipartisan way. 

Senator CARDIN. Can I get a transcript of the exchange and give 

it to Senator Hatch? 

The CHAIRMAN. Yes. I will make sure that that is available. I 

thank you for those valuable points. You know we are going to 

work very closely with you and your office on these questions in the 

context of these trade agreements. 

The second thing I want to do, Mr. Kimber, is, I am very glad 

that now, on several occasions, you mentioned how important it is 

for the Congress to require the Customs agents to take the steps 

necessary to identify counterfeit goods. As you know, this is a problem around the country, but it is a big, big problem, as Ms. Sturm 

knows, in the Pacific Northwest. We are talking about fake computer chips, we are talking about fake Nikes, we are taking about 

all manner of fakes. So I am very glad that you have made that 

point. It is one that Senator Hatch and I will be following up on 

in a bipartisan way. 

I have one last question that somehow we managed to not get 

at, and I think it would be good for you, Mr. Ezell, and any of you, 

if you choose, can comment on it. 

Mr. Ezell, you in effect tried to kind of take us through some lessons to be learned from successful exporting industries. You really 

cited several that you felt were winning in global markets. Electronics, aerospace, pharmaceuticals, I think, were three that you 

cited. 

Almost as a wrap-up and the fact that you all have done a lot 

of research, are there some broader policy lessons to be learned 

from the fact that there are some sectors that are doing well, some 

comments you can give about why they are doing well and perhaps 

24 

policies that would allow us to get more sectors into what I call the 

winner’s circle? 

Mr. EZELL. I think today’s most innovative companies recognize 

that there has been a globalization of both innovation production 

and innovation consumption. That means that these companies tap 

into global markets to find best-of-breed suppliers and partners, 

and they have the ability to export their finished products at scale 

to the entire world. 

Another key point is that they embrace modern concepts of open 

and collaborative innovation. If you look at Proctor and Gamble, it 

gets 50 percent of its ideas for new products outside the company 

and beyond the shores. But you cannot have open innovation without open trade. This increasingly pernicious use of localization barriers to trade, which are both affecting manufacturing and digital 

markets, is a huge problem. 

Indonesia and Vietnam, for example, recently announced localization barriers to digital trade that will require Internet companies to use local data centers in the provision of digital services. 

But, when you start to shut down cross-border data flows with 

these types of local data storage or local IT facility use requirements, then you are disrupting the global production and value 

chains on which modern innovation relies. 

So, from a trade policy perspective, I think we need to ensure 

that our companies both have access to suppliers and partners 

across the world in modern global value chains and then also the 

ability to innovate their products on a global basis. 

The CHAIRMAN. Thank all three of you. I am just going to send 

you off with one comment. I think you have reinforced again why 

those who are hanging crepe over the American manufacturing sector are just wrong. I talked, I think a couple of hours ago, about 

the American brand. It is really now, based on your testimony, the 

American manufacturing brand. We have a brand in the manufacturing sector that the world is interested in. 

What I am taking away from your testimony today is that the 

two areas that we have really, I think, come back to again repeatedly—one of them is trade and one of them is tax—are both areas 

under the jurisdiction of the Finance Committee. 

In effect, our big challenge is that policies in both of these areas 

really have not kept up with the times. You look, for example, at 

the tax issue. I have 9 years of sweat equity into the only bipartisan Federal income tax reform bills that have been put in front 

of the Senate in several decades. When you look at the 1986 tax 

reform debate, the global economy was hugely different in 1986. 

Now it plays a much bigger role. And that is why it is so important in this set of hearings that we are really starting on Tuesday—where we will look at the global economy, where we will look 

at inversions—that we do it in a bipartisan way, that we recognize 

that, as I would describe it, we have a big job in the sense of playing catch-up ball so that the good work that you are doing, the innovation that you all are producing on your factory floors and in 

the areas that we have talked about, are not held back by policies 

in the tax area that are out of date. 

On the trade issue, I often tell my colleagues—and lots of them 

were not even around for the TPA vote in 2002, which I supVerDate Mar 15 2010 19:23 Mar 09, 2015 Jkt 000000 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 R:\DOCS\93516.000 TIMD
25 

ported—the times are very different. I remember as a young member of the House, having a full head of hair and rugged good looks 

back then—yes, Mr. Kimber—the President had the ex-Presidents 

to the White House. He talked for 45 minutes without notes, really 

kind of laying out what was then the challenge of exporting and 

getting American goods and services into global markets. 

The digital economy was not a big factor in those early debates 

in the Clinton days. Now Senator Thune and I have a bipartisan 

piece of legislation to kind of update what we are doing on an issue 

that really was not even on the radar back then during those first 

years when President Clinton was inspiring a lot of us to really 

look to the future and figure out how to address it. 

Now, as you have heard from my colleagues, I thought Senator 

Brown and Senator Cardin made some very important points about 

areas where we need, on a bipartisan basis, to update our trade 

laws. I just so appreciate the three of you. You have given us very 

helpful and thoughtful comments today, ones that I think we can 

pick up in this committee, particularly on the trade issue but also 

on the tax issue, in a bipartisan way. You can expect that we will 

be calling on you all often. 

With that, the Finance Committee is adjourned. 

[Whereupon, at 11:36 a.m., the hearing was concluded.] 

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