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MADE IN AMERICA: INCREASING JOBS THROUGH 

EXPORTS AND TRADE 

HEARING 

BEFORE THE

SUBCOMMITTEE ON COMMERCE, MANUFACTURING, 

AND TRADE 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

MARCH 16, 2011 

Serial No. 112–21 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

JOE BARTON, Texas 

Chairman Emeritus 

CLIFF STEARNS, Florida 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO MACK, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

Vice Chair 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

BRIAN P. BILBRAY, California 

CHARLES F. BASS, New Hampshire 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

EDWARD J. MARKEY, Massachusetts 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

ANTHONY D. WEINER, New York 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

(II)

(III) 

SUBCOMMITTEE ON COMMERCE, MANUFACTURING, AND TRADE

MARY BONO MACK, California 

Chairman 

MARSHA BLACKBURN, Tennessee 

Vice Chair 

CLIFF STEARNS, Florida 

CHARLES F. BASS, New Hampshire 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVE B. MCKINLEY, West Virginia 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

JOE BARTON, Texas 

FRED UPTON, Michigan, ex officio 

G.K. BUTTERFIELD, North Carolina 

Ranking Member 

CHARLES A. GONZALEZ, Texas 

JIM MATHESON, Utah 

JOHN D. DINGELL, Michigan 

EDOLPHUS TOWNS, New York 

BOBBY L. RUSH, Illinois 

JANICE D. SCHAKOWSKY, Illinois 

MIKE ROSS, Arkansas 

HENRY A. WAXMAN, California, ex officio 

(V) 

C O N T E N T S 

Page 

Hon. Mary Bono Mack, a Representative in Congress from the State of 

California, opening statement ............................................................................. 1 

Prepared statement .......................................................................................... 3 

Hon. G.K. Butterfield, a Representative in Congress from the State of North 

Carolina, opening statement ............................................................................... 4 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, prepared statement ........................................................................... 7 

Hon. John D. Dingell, a Representative in Congress from the State of Michigan, prepared statement ...................................................................................... 21 

Hon. Fred Upton, a Representative in Congress from the State of Michigan, 

prepared statement .............................................................................................. 107 

Hon. Cliff Stearns, a Representative in Congress from the State of Florida, 

prepared statement .............................................................................................. 107 

Hon. Edolphus Towns, a Representative in Congress from the State of New 

York, prepared statement .................................................................................... 107 

WITNESSES

Francisco J. Sanchez, Under Secretary of Commerce for International Trade .. 8 

Prepared statement .......................................................................................... 10 

Answers to submitted questions ...................................................................... 109 

Robert W. Holleyman, II, President and Chief Executive Officer, Business 

Software Alliance ................................................................................................. 34 

Prepared statement .......................................................................................... 36 

Answers to submitted questions ...................................................................... 119 

John G. Murphy, Vice President, International Affairs, U.S. Chamber of Commerce ..................................................................................................................... 46 

Prepared statement .......................................................................................... 48 

Answers to submitted questions ...................................................................... 122 

Jack J. Pelton, President, Chairman, and CEO, Cessna Aircraft Company ...... 58 

Prepared statement .......................................................................................... 60 

Answers to submitted questions ...................................................................... 128 

Daniel J.Ikenson, Associate Director, Center for Trade Policy Studies, Cato 

Institute ................................................................................................................ 66 

Prepared statement .......................................................................................... 68 

Answers to submitted questions ...................................................................... 130 

James Crouse, Executive Vice President of Sales and Marketing, Capstone 

Turbine Corporation ............................................................................................ 82 

Prepared statement .......................................................................................... 84 

Answers to submitted questions ...................................................................... 138 

(1) 

MADE IN AMERICA: INCREASING JOBS 

THROUGH EXPORTS AND TRADE 

WEDNESDAY, MARCH 16, 2011 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON COMMERCE, MANUFACTURING, AND

TRADE, COMMITTEE ON ENERGY AND COMMERCE, Washington, DC. 

The subcommittee met, pursuant to call, at 10:10 a.m., in room 

2322 of the Rayburn House Office Building, Hon. Mary Bono Mack 

(chairman of the subcommittee) presiding. 

Members present: Representatives Bono Mack, Blackburn, 

Stearns, Bass, Harper, Lance, Cassidy, Guthrie, Olson, McKinley, 

Pompeo, Kinzinger, Barton, Butterfield, Gonzalez, Dingell, and 

Towns. 

Staff present: Paul Cancienne, Policy Coordinator, Commerce, 

Manufacturing, and Trade; Robert Frisby, Detailee, Commerce, 

Manufacturing, and Trade; Debbee Keller, Press Secretary; Brian 

McCullough, Senior Professional Staff Member, Commerce, Manufacturing, and Trade; Carly McWilliams, Legislative Clerk; Gib 

Mullan, Chief Counsel, Commerce, Manufacturing, and Trade; 

Shannon Weinberg, Counsel, Commerce, Manufacturing, and 

Trade; Andrew Powalenty; Michelle Ash, Democratic Chief Counsel; and Will Wallace, Democratic Policy Analyst. 

OPENING STATEMENT OF HON. MARY BONO MACK, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mrs. BONO MACK. The subcommittee will come to order. 

This is the second in our series of hearings aimed at fostering job 

creation across the United States and to make ‘‘Made in America’’ 

matter again. 

Today, with Japan reeling from a catastrophic earthquake and 

tsunami and violent turmoil in the Middle East spreading, our Nation’s trade outlook is more clouded than ever. As chairman of the 

subcommittee which has jurisdiction over trade issues, I am convinced that we can create tens of thousands of desperately needed 

jobs in our Nation by expanding U.S. exports through our free 

trade agreements. The chair now recognizes herself for an opening 

statement. 

In 2007, Apple introduced its very first iPhone and Congress finally approved the United States-Peru Trade Promotion Agreement 

after years of give and take. Since then, there have been three new 

generations of iPhones, two iPads and several new nano iPods but 

2 

not a single free trade agreement signed into law. Not one. So 

while American ingenuity zips along at millions of bits per second, 

America’s trade policies are stuck in the fax age, and it is time for 

an upgrade. Our subcommittee has a unique opportunity to roll out 

a new model for the future and to demonstrate leadership on this 

critically important issue. But time is running out. 

America’s $46 billion trade deficit in January grew at the fastest 

rate in 18 years. While Washington rolls its eyes and wrings its 

hands, our competitors in Europe are busy signing on the dotted 

line and moving quickly into promising new markets. We simply 

cannot wait on the sidelines any longer, allowing ourselves to be 

benched by partisan politics. Today, we will hear what the Administration plans to do about the trade imbalance from Francisco J. 

Sanchez, Under Secretary of Commerce for International Trade. 

Let me be clear: long-stalled trade promotion agreements with 

South Korea, Colombia and Panama should move forward immediately—all of them. Years of lost opportunities have only resulted 

in thousands of lost jobs all across the county. Let us make ‘‘Made 

in America’’ matter again by actually increasing jobs through expanded exports and trade. If you doubt that we can do it, then just 

consider the iPhone again. Today, Apple is the second most valuable company in the world, and yet at one point it was 90 days 

from bankruptcy court. Apple didn’t turn around its fortunes by 

being timid and parochial. Instead the company was bold and innovative. Apple sold shares to rival Microsoft and agreed to make 

Internet Explorer its default browser. That is the kind of decisive, 

forward-looking thinking we need today when it comes to our trade 

policies. 

President Obama has vowed to double exports in 5 years, but 

that is simply not going to happen if we continue to allow free 

trade agreements to be held hostage by organized labor and to languish in limbo. It is disingenuous for the Administration to say: 

‘‘Let us work together to create new jobs, but not if it means passing all three trade agreements together.’’ That is the kind of thinking that leads to a $46 billion U.S. trade deficit in January, and 

that is the kind of thinking that threatens the future prosperity of 

our Nation. 

To date, the Administration has not offered any detailed plans 

for opening up trade with Colombia and Panama. We have gotten 

plenty of promises, but no plans. It is time to quit playing politics 

with our trade policies. Tens of thousands of new jobs hang in the 

balance, as well as tens of billions of dollars in new exports. 

Today, American businesses are genuinely concerned and, I believe, rightfully so, that if the proposed United States-Korea agreement is finally approved this year by itself, then separate trade 

deals with Colombia and Panama will be quietly forgotten, as a 

concession to organized labor. If that is not the case, Secretary 

Sanchez, then this is the Administration’s golden opportunity to set 

the record straight. Please tell us how the White House plans to 

deal with all three free-trade agreements. Today, you have a 

chance to make some news, and to give American businesses a reason to cheer. I have my fingers crossed, Mr. Secretary, but at the 

very least, let us make sure our signals are not crossed. Exactly 

3 

what is the Administration’s plan and what is the timetable for accomplishing it? 

Recently, Secretary of State Clinton said, and I am quoting now, 

‘‘Our goal is to have all three pending agreements—Korea, Panama 

and Colombia—with their outstanding issues addressed and approved by Congress this year.’’ And, yet, with the next breath, an 

Administration official warns that trying to pass all three free 

trade agreements together, and quoting again, ‘‘is putting all three 

agreements at risk.’’ Perhaps I lost the fax, Mr. Secretary, but how 

do you reconcile those positions? 

It is my sincere hope that we can put politics aside, work out our 

legitimate differences and approve all three trade agreements this 

year. We simply cannot sit on the sidelines any longer while other 

nations gain footholds in promising, new global markets. Too much 

is at stake for us to fail. 

[The prepared statement of Mrs. Bono Mack follows:] 

PREPARED STATEMENT OF HON. MARY BONO MACK

In 2007, Apple introduced its first iPhone and Congress finally approved the 

United States-Peru Trade Promotion Agreement after years of give-and-take. Since 

then, there have been three new generations of iPhones, two iPads and several new 

nano iPods—but not a single free trade agreement signed into law. Not one. So 

while American ingenuity zips along at millions of bits per second, America’s trade 

policies are stuck in the fax age. It’s time for an upgrade. Our subcommittee has 

a unique opportunity to roll out a new model for the future and to demonstrate leadership on this critically-important issue. But time is running out. America’s $46 billion trade deficit in January grew at the fastest rate in 18 years. 

While Washington rolls its eyes and wrings its hands, our competitors in Europe 

are busy signing on the dotted line and moving quickly into promising new markets. 

We simply can’t sit on the sidelines any longer, allowing ourselves to be benched 

by partisan politics. Today, we’ll hear what the administration plans to do about the 

trade imbalance from Francisco J. Sanchez, Under Secretary of Commerce for International Trade. 

Let me be clear: long-stalled trade promotion agreements with South Korea, Colombia and Panama should move forward immediately—all of them. Years of lost 

opportunities have only resulted in thousands of lost jobs all across the county. Let’s 

make ‘‘Made in America’’ matter again by actually increasing jobs through expanded 

exports and trade. 

If you doubt that we can do it, then just consider the iPhone again. Today, Apple 

is the second most valuable company in the world, and yet—at one point—it was 

90 days from bankruptcy court. Apple didn’t turn around its fortunes by being timid 

and parochial. Instead the company was bold and innovative. Apple sold shares to 

rival Microsoft and agreed to make Internet Explorer its default browser. 

That’s the kind of decisive, forward-looking thinking we need today when it comes 

to our trade policies. President Obama has vowed to double exports in five years, 

but that’s simply not going to happen if we continue to allow free trade agreements 

to be held hostage by organized labor and to languish in limbo. It’s disingenuous 

for the administration to say: ‘‘Let’s work together to create new jobs, but not if it 

means passing all three trade agreements together.’’ That’s the kind of thinking that leads to a $46 billion U.S. trade deficit in January. And that’s the kind of thinking that threatens the future prosperity of our nation. To date, the administration has not offered any detailed plans for opening up 

trade with Colombia and Panama. We’ve gotten plenty of promises, but no plans. 

It’s time to quit playing politics with our trade policies. Tens of thousands of new 

jobs hang in the balance, as well as tens of billions of dollars in new exports. 

Today, American businesses are genuinely concerned—and, I believe, rightfully 

so—that if the proposed the U.S.-Korea agreement is finally approved this year by 

itself, then separate trade deals with Colombia and Panama will be quietly forgotten, as a concession to organized labor. If that’s not the case, Secretary Sanchez, 

then this is the administration’s golden opportunity to set the record straight. 

Please tell us how the White House plans to deal with all three free-trade agreements. Today, you have a chance to make some news, and to give American businesses and workers a reason to cheer. I have my fingers crossed, Mr. Secretary, 

4 

but—at the very least—let’s make sure our signals aren’t crossed. Exactly what is 

the administration’s plan? And what’s the timetable for accomplishing it? 

Recently, Secretary of State Clinton said, ‘‘Our goal is to have all three pending 

agreements—Korea, Panama and Colombia—with their outstanding issues addressed and approved by Congress this year.’’ And, yet, with the next breath, an 

administration official warns that trying to pass all three free trade agreements together ‘‘is putting all three agreements at risk.’’ Perhaps, I lost the fax, Mr. Secretary, but how do you reconcile those positions? 

It’s my sincere hope that we can put politics aside, work out our legitimate differences and approve all three trade agreements this year. We simply can’t sit on 

the sidelines any longer while other nations gain footholds in promising, new global 

markets. Too much is at stake for us to fail. 

Mrs. BONO MACK. I yield back my time and I would like to recognize the gentleman from North Carolina, the ranking member of 

our subcommittee, Mr. Butterfield, for 5 minutes. 

OPENING STATEMENT OF HON. G.K. BUTTERFIELD, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NORTH 

CAROLINA 

Mr. BUTTERFIELD. Let me thank you, Chairman Bono Mack, for 

convening this very important hearing. This is a timely conversation and I am glad that we are finally having it. 

A major part of our economic recovery is indeed increased exports. The President seems to get it. He clearly knows that increasing exports is key to the American economy returning to the prerecession levels. To that end, during the State of the Union the 

President announced the goal of doubling U.S. exports by 2014, a 

goal that requires exports to grow to $3.14 trillion at the end of 

that period. In March 2010, the President issued an Executive 

Order officially creating the Export Promotion Cabinet, which oversees the coordination and implementation of the National Export 

Initiative. We refer to it as NEI. The NEI brings together secretaries from seven federal departments as well as the heads of other 

federal entities. As Commerce Secretary Locke said recently, ‘‘The 

NEI represents the first time the United States will have a government-wide export promotion strategy with focused attention from 

the President and his Cabinet.’’ 

Other nations have employed similar strategic initiatives to their 

benefit, and it is absolutely essential that the United States embrace the NEI by working towards its goal of improving advocacy 

and trade promotion, increasing access to export financing, removing trade barriers, enforcing trade rules and adopting policies that 

promote sustainable and balanced growth. 

We have great potential to export more. With the world’s population at nearly 7 billion people, 95 percent of those live outside of 

our country. The products they purchase and the equipment they 

use must come from somewhere else. There is no reason it 

shouldn’t be from the United States. Recent data indicates that foreign markets are buying more and more U.S. goods. With only a 

year under NEI’s belt, exports have grown 17 percent, let me repeat that, 17 percent, but more must be done. We must not focus 

solely on convincing foreign entities to purchase goods that we already make. Instead, we must also encourage American businesses 

to innovate and develop cutting-edge products that will be attractive to fast-growing foreign markets. We must make more in America. This is beginning to happen in areas like medical technology 

5 

and green technology and agriculture, but innovation is just one 

part of the effort to increase exports. Exposure to foreign markets 

is another equally important piece to this puzzle. 

The ITA has been moving at a blazing pace to participate in 

trade and reverse trade missions to put American manufacturers 

in front of foreign buyers. Their efforts have paid off with ITA executing 35 trade missions in 31 countries involving some 400 U.S. 

companies within the last year, resulting in an anticipated $2 billion in increased exports. It is my hope that small- and mediumsized enterprises across the United States, those same businesses 

that are the focus of NEI, will avail themselves of the tremendous 

opportunities to begin or increase exports to foreign markets. This 

could yield immeasurable benefits to the U.S. economy and could 

mean tens of thousands of new good-paying jobs, dramatically 

transforming struggling communities like Rocky Mount, North 

Carolina, located in my Congressional district, where the unemployment rate is 12 percent. Just a small increase in exports could 

yield tremendous benefits for the American people and for industry 

across the country. 

I want to thank the witnesses for being here today, the Under 

Secretary and the other witnesses. I read your testimonies last 

evening. I look forward to working with American businesses and 

my colleagues in a collaborative effort to increase American exports. 

Thank you, and before I yield back, I want to read this note, 

Madam Chairman. Just go ahead and yield back? All right. I yield 

back. I saw the chairman emeritus down at the end of the panel. 

I wanted to see if he needed time, but they are going to work that 

out later. Thank you. I yield back. 

Mrs. BONO MACK. I thank the gentleman, and Chairman Upton 

yielded his 5 minutes for an opening statement to me in accordance 

with committee rules. As his designee, I now recognize Ms. 

Blackburn, the vice chairman of the subcommittee, for 2 minutes. 

Mrs. BLACKBURN. Thank you, Madam Chairman. Welcome to our 

witnesses. 

Earlier this year in his State of the Union, our President laid out 

an encouraging goal of doubling exports in the next 3 years. We all 

took note of that, and now all we need it leadership so that we can 

achieve that objective. It is important to my State of Tennessee. 

Leadership is needed by both the President and by both parties in 

Congress to finally step up and do what is best for the economy. 

That being said, without strong intellectual property enforcement 

tools in place, no free trade or exporting policy will work. In my 

home State of Tennessee, there are countless companies, both big 

and small, that rely heavily on strong U.S. export policies for their 

livelihoods, among them Tom James Incorporated, Bridgestone, 

Swiftwick Socks, Cargill Cotton, Nucor Steel, International Paper, 

Eastman Chemicals, FedEx, Right Thought Pens, and now Volkswagen is on the way. Those are just a few of the companies that 

are saying get this intellectual property policy right. If IP cannot 

be protected, innovation and commerce is going to slow. If we are 

to continue as the world’s leading innovator, if we are to reclaim 

the lead in green innovation, if we are going to truly spur small 

business growth, we must protect intellectual property with the 

6 

same vigor as physical property. We need your leadership to do so. 

We need the leadership of this committee, and Madam Chairman, 

I yield back. 

Mrs. BONO MACK. I thank the gentlelady and would like to recognize the gentleman from Texas, Mr. Barton, chairman emeritus of 

this committee, for 2 minutes. 

Mr. BARTON. Thank you. If we are holding a hearing in this subcommittee, there must be a Cabinet Secretary testifying in another 

subcommittee. Last week, I believe we had the Secretary of Health 

and Human Services and you had a hearing, so this week we have 

the Secretary of Energy, the chairman of the Nuclear Regulatory 

Commission, and we have a hearing here. So it is no disrespect to 

you, Mr. Secretary, that given what has happened in Japan, a lot 

of our members are going to be downstairs with the NRC chairman 

and the Energy Secretary, but we are glad you are here. 

We are all concerned about jobs and we are all concerned about 

job creation. I think both sides of the aisle agree with that. Unfortunately, my friends on the Minority seem to be able to only create 

jobs in the government sector, and those on my side would rather 

we create as many jobs as possible in the private sector. Hopefully 

we can reach agreement that that is the way to go in this hearing. 

There are several things that we need to do. Number one, we 

need to enforce our existing free trade agreements. That is easier 

said than done, obviously. And number two, we need to pass new 

trade agreements, and I think you are very well aware that the 

Senate has yet to take up several of those agreements but hopefully in the next month or so they will. I would like to see us pass 

a free trade agreement with Korea, with Colombia and also with 

Panama. 

And with that, Madam Chairwoman, I yield back, but welcome, 

Mr. Secretary. 

Mrs. BONO MACK. I would like to recognize the gentleman from 

Illinois, Mr. Kinzinger, for 2 minutes. 

Mr. KINZINGER. Thank you, Madam Chairman, for the time and 

for holding this hearing, and thank you, sir, for coming in. 

I want to say thank you to the Administration for the support 

on the Korean free trade agreement. I think that is going to be 

very important. In my district, the free trade agreement itself will 

support $75 million in exports and nearly 300 jobs. More American 

goods in foreign markets means more American jobs back home, 

and removing export tariffs on agriculture, electronics and manufactured goods makes American products more competitive in the 

Korean marketplace and fuels both nations’ economies. History has 

taught us that robust trade creates jobs and strengthens the economy. Our Nation cannot afford at this critical time to pass on opportunities to expand free trade. 

I am very concerned with this Administration’s failure to lead on 

two remaining free trade agreements with our allies and partners 

to the south, Colombia and Panama. These trade agreements serve 

as important milestones for the bilateral relationships with these 

countries and failure to take action puts American exports and jobs 

at risk. The U.S. International Trade Commission believes a Colombian agreement alone could increase U.S. exports by $1 billion. 

In Panama, companies like Caterpillar build and deliver the equipVerDate Nov 24 2008 12:27 Jan 12, 2012 Jkt 037690 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 P:\MY DOCS\HEARINGS 112\112-21 031611\112-21 CHRIS
7 

ment that is developing the nation’s infrastructure but do so under 

onerous rules and fees. Free trade agreements lower costs and benefit us all. 

Although I am pleased with the Administration’s actions on 

Korea, I do not believe we can allow a vote on the Korean free 

trade agreement without taking action on Colombia and Panama. 

We should not give the Administration a pass on future agreements with the passage of one agreement. 

Thank you, Madam Chairman, and I yield back. 

Mrs. BONO MACK. The gentleman yields back, and the chair recognizes the ranking member, Mr. Butterfield. 

Mr. BUTTERFIELD. Thank you, Madam Chairman. I have no further speakers except to say that the ranking member of the full 

committee, Mr. Waxman, was here earlier. He wanted to be here 

for this hearing and he especially wanted to welcome his constituent, Mr. Crouse, from Capstone Turbine, but Mr. Waxman had 

to leave for another hearing, and I ask unanimous consent that his 

statement, his opening statement that he would have given had he 

been here, be included in the record. 

Mrs. BONO MACK. Without objection. 

Mr. BUTTERFIELD. Thank you. I yield back. 

[The prepared statement of Mr. Waxman follows:] 

PREPARED STATEMENT OF HON. HENRY A. WAXMAN

Thank you Chairman Bono Mack and Ranking Member Butterfield for today’s 

hearing. 

In a global economy, exports are a national imperative. They are a key indicator 

of our competitiveness, an important component of deficit reduction, and a gauge of 

our future economic health. I welcome President Obama’s goal of doubling U.S. exports within 5 years. It is a target that is not only bold, but attainable if we stay 

focused on the task. 

It is notable, that even as our economy shrank in 2010 in the wake of the Wall 

Street collapse, U.S. exports grew by 17%—the largest year to year increase in history. Without a doubt, exports will continue to be an important part of our economic 

recovery. American companies will succeed not only by innovating how they make 

products, but also by expanding where they sell them. 

Ensuring that our companies have an opportunity to succeed on a level playing 

field is a responsibility that only government can shoulder. Too often, American exports are undermined by unfair trade practices, and even blatant criminal acts such 

as intellectual property piracy. 

IP sensitive industries are among our most internationally competitive. Today, 

nearly half of the motion picture industry’s revenues are generated overseas. The 

software industry estimates that sixty percent of its sales originate outside the 

United States. Our success in eliminating trade barriers in this arena and stepping 

up international enforcement efforts against piracy will be essential for achieving 

the goal of doubling exports. 

But the question remains—once we reach the goal of doubling exports, will it 

make a dent in our trade deficit. Today, I worry that the answer is no. Because 

today, over 50% of our trade deficit can be attributed to our dependence on foreign 

oil. 

As unrest unfolds in the Middle East and fuel prices once again rise here at home, 

the moral, economic, and national security consequences of our dependence on fossil 

fuels are as clear as ever. Although we do not buy from Iran or Libya, our appetite 

for oil bolsters the international crude prices that are subsidizing these dangerous 

regimes. 

We can do better. We need to do better. Building stronger clean energy and energy efficiency markets here at home and abroad is critical. It is not only critical 

for reducing the staggering $366 billion worth of foreign oil we import. It is critical 

for advancing U.S. leadership in the emerging and lucrative field of clean-tech. 

This morning we will have the opportunity to hear from Capstone Turbine Corporation. The company is a leading manufacturer of microturbines, or localized genVerDate Nov 24 2008 12:27 Jan 12, 2012 Jkt 037690 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 P:\MY DOCS\HEARINGS 112\112-21 031611\112-21 CHRIS
8 

erators that boost efficient energy usage with cost-savings, energy-savings, and overall emissions reductions. More than 70% of the company’s products are manufactured for export and 100% of its products are made in America. And, I am proud 

to say, Capstone is headquartered in the 30th Congressional District of California, 

which I represent. 

Small- to medium-size firms like Capstone are a cornerstone of the President’s 

National Export Initiative. 

I look forward to hearing from all of our witness about what it will take to make 

the President’s vision a reality. 

Mrs. BONO MACK. And we did see Mr. Waxman pop in briefly so 

I am sorry he had to leave but as Chairman Barton said, there are 

other things happening as well. 

But we do have two panels before us today. Each of the witnesses has prepared an opening statement that will be placed into 

the record. Each of you will have 5 minutes to summarize that 

statement in your remarks. 

On our first panel, we are fortunate to have the Hon. Francisco 

J. Sanchez, Under Secretary of Commerce for International Trade. 

We appreciate your being here very much today, Mr. Secretary, 

and would recognize you for 5 minutes. 

STATEMENT OF FRANCISCO J. SANCHEZ, UNDER SECRETARY 

OF COMMERCE FOR INTERNATIONAL TRADE 

Mr. SANCHEZ. Thank you. Good morning. Chairwoman Bono 

Mack, Ranking Member Butterfield and members of the subcommittee, thank you for giving me the opportunity to speak to you 

today. 

In his State of the Union address, President Obama told Americans that the future is ours to win. By understanding how the 

world has changed, we can create the environment that can expand 

the American economy. Great opportunities lie in the vast global 

market. Today, 95 percent of the world’s customers live outside our 

borders. The International Monetary Fund forecasts that 83 percent of the world’s economic growth during the next 5 years will 

happen outside the United States. 

The nations of the world are giving rise to a new global middle 

class. They are a new marketplace for American exports, and one 

example of this is travel and tourism. Data released just this morning reveals a record-breaking 60 million international visitors in 

the United States, shattering the previous record set in 2000. 

These travelers spent more than $134 billion. That is a 12 percent 

increase over 2009, generating a 50 percent increase for the travel 

trade surplus of $32 billion. Travel and tourism is no small industry. These exports generate $1.3 trillion for the U.S. economy, supporting 7.8 million jobs. 

Through the National Export Initiative and its goal of doubling 

exports by 2015, we hope to support millions of jobs right here at 

home. U.S. exports of goods and services in 2010 representing 

$1.83 trillion increased nearly 17 percent over 2009. That is the 

largest year-to-year percent increase in more than 20 years. 

As we search for ways to create jobs for American workers, increasing our Nation’s exports must be a important tool in our toolbox. On average, manufacturing jobs supported by exporting pays 

up to 18 percent more than non-export-supported jobs. 

9 

The NEI is the United States’ first Presidential-led governmentwide export promotion strategy and it is good for American workers 

and companies alike. The NEI focuses on five areas: improving 

trade advocacy and export promotion, increasing access to credit, 

especially for small- and medium-sized businesses, removing trade 

barriers abroad, robustly enforcing our trade laws and pursuing 

policies to promote strong, sustainable and balanced growth. 

Congress created the International Trade Administration to promote American companies and workers abroad. During 2010, ITA 

assisted more than 5,500 U.S. companies. Eighty-five percent of 

these were small- and medium-sized companies. ITA coordinated 

an unprecedented 35 trade missions to 31 countries with nearly 

400 companies participating. We recruited 13,000 foreign buyers to 

major U.S. trade shows and connected them with U.S. companies, 

resulting in approximately $770 million in sales. In 2010, ITA also 

assisted U.S. companies competing for foreign government procurement contracts, winning projects valued at $18.7 billion in U.S. export content, and that supported an estimated 101,000 jobs. We 

successfully resolved 82 trade barriers in 45 countries, helping to 

ensure U.S. companies better access to overseas markets. 

The Obama Administration is committed to aggressively enforcing our trade laws. In 2010, we had approximately 300 anti-dumping and countervailing duty orders in place covering more than 120 

products from 40 countries. We strive to make ITA the one point 

of contact in the Federal Government for companies who want to 

succeed abroad. The Administration is continuing our hard work to 

address outstanding concerns with the pending trade agreements 

and to improve those agreements and get them to Congress as they 

become ready. 

As this subcommittee is aware and many of you have already 

mentioned, the United States-Korea trade agreement is ready for 

consideration. President Obama is eager to see this agreement ratified as I know many of you are, and he requests that Congress approve this agreement. 

With the same engagement and bipartisan cooperation as we 

have had on the Korea agreement, we will continue to address outstanding concerns relating to the Panama and Colombia agreements. Our goal is to have all three of these agreements with their 

outstanding issues addressed approved by Congress. We will not be 

left behind as others secure greater market share at the expense 

of American exports. To compete, we must access the world’s fastest-growing markets and we must do so on a playing field that is 

both level and reflects our values as Americans. The NEI is the 

Obama Administration’s commitment to help U.S. companies compete and win in an increasingly competitive global marketplace. 

I thank you again for the opportunity to come before you, and I 

look forward to answering your questions. Thank you. 

[The prepared statement of Mr. Sanchez follows:] 

10 


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68520.002
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68520.003
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68520.004
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Mrs. BONO MACK. Thank you, Mr. Secretary. The chair recognizes herself for 5 minutes for questions. 

As you mentioned, the President’s NEI is designed to double U.S. 

exports by 2014. First of all, a clarification. Is that 2014 or 2015? 

Mr. SANCHEZ. It is 2015. 

Mrs. BONO MACK. The President did say in his State of the 

Union 2014. 

Mr. SANCHEZ. Well, then the President is right. 

Mrs. BONO MACK. Good answer. But isn’t that going to be very 

difficult to accomplish unless we enter into new trade agreements 

with countries like Korea, Colombia and Panama? 

Mr. SANCHEZ. There is no question that one of the most important things we can do to achieve the doubling of exports is reducing 

barriers, and trade agreements play an important role in that. In 

fact, we have 17 trade agreements in place now. With those 17 

countries, we actually have a trade surplus. 

Mrs. BONO MACK. But if we focus on the three in question, I 

think that a number of members raised those three specifically, is 

the Administration committed to getting all three trade agreements 

completed this year? 

Mr. SANCHEZ. They absolutely are completed. They are absolutely committed to getting all the issues resolved and getting them 

to Congress as soon as possible. 

Mrs. BONO MACK. What is the timetable? 

Mr. SANCHEZ. Well, let me just say what we have done to achieve 

that. Obviously, Korea is ready to come before you. With Colombia, 

we sent a team to Colombia a few weeks ago. There is a team now 

from Colombia meeting with folks at USTR. We are working very, 

very hard to work through the issues that we believe still need to 

be resolved with regard to their labor code and violence toward 

labor organizers, so I am very confident just from the activity that 

you have seen over the last 8 weeks that we will move forward on 

Colombia. 

Mrs. BONO MACK. Thank you. Switching gears for a second, Mr. 

Secretary, U.S. creativity without a doubt is one of our Nation’s 

greatest competitiveness advantages but we have ignored it for too 

long. Around the world, especially in places like Russia, online 

theft is undermining that competitiveness. Can you tell me what 

the Administration is doing to ensure that the government of Russia effectively responds to this threat before it joins the WTO? 

Mr. SANCHEZ. Well, you are absolutely right. Intellectual property rights protections is one of the most important trade barriers 

that affect American competitiveness, and we work on that issue 

across the world, and in Russia we work closely with the business 

community, and Russia recently passed a law that upgrades their 

enforcement of piracy and counterfeit products so we—— 

Mrs. BONO MACK. Is piracy up or down? 

Mr. SANCHEZ. I am sorry? 

Mrs. BONO MACK. Is piracy, is the rate of it up or down? 

Mr. SANCHEZ. I don’t know the exact rate of piracy with regard 

to Russia. What I can tell you is, though, with our encouragement 

and working closely with the business community, Russia has 

acted to expand and upgrade its enforcement. Now, the proof is in 

the pudding, and this happened in late November so it is too early 

15 

to tell, but I can tell you that we are closely monitoring what is 

going on in Russia. We are working very closely with the business 

community, and if we don’t see a problem, we will be sure to continuously raise this issue because it is very important to our competitiveness. 

Mrs. BONO MACK. And also, a number of members on this committee, specifically Ms. Blackburn and myself, are very interested 

and very keenly aware and we will be watching. We will hold Russia’s as well as China’s feet to the fire as far as piracy goes. 

But finally, I have three yes or no questions for you, a simple yes 

or no, good news. Is the free trade agreement with Colombia in 

trouble because of opposition from labor? 

Mr. SANCHEZ. No. 

Mrs. BONO MACK. What about Panama? 

Mr. SANCHEZ. No. 

Mrs. BONO MACK. Will the agreements again get done this year? 

Mr. SANCHEZ. I am confident we will resolve these issues and get 

them to Congress. 

Mrs. BONO MACK. Yes or no. 

Mr. SANCHEZ. The issues will be resolved this year. 

Mrs. BONO MACK. Thank you, and I yield back my time and 

would recognize the ranking member for 5 minutes. 

Mr. BUTTERFIELD. Thank you, Madam Chairman. 

Mr. Under Secretary, the National Export Initiative lays out 

what we call a bold goal to double exports in 5 short years. It outlines priorities and strategies for streamlining U.S. government export promotion activities. That is a promising set of ideas. As chairman of the Trade Promotion Coordinating Committee, the Department has Commerce has to coordinate approximately 20 separate 

agencies. Is that correct? 

Mr. SANCHEZ. Yes, sir. 

Mr. BUTTERFIELD. In export promotion ranging from DOE to the 

U.S. Trade Representative to the Department of Agriculture, and 

instead of tackling the problem, the NEI creates another layer 

called the Export Promotion Cabinet. Mr. Secretary, in approximately 90 days the President intends to recommend how we address some of these redundancies. He has promised to do that. He 

should be commended. Previous Administrations only have asked 

for generic reorganization authority but refuse to explain how such 

authority might be used. So far, it sounds as if the President will 

recommend specifics, and trade programs are a good place to start. 

Would you speak to that briefly, if you would, please? 

Mr. SANCHEZ. Yes, Congressman. Let me first say that the President’s Export Promotion Cabinet does not really add another layer 

of bureaucracy. In fact, it is requiring cabinets to pay attention to 

the importance of export promotion. So for many years the Secretary of Commerce and Secretary of State were the primary Cabinet members who when they went abroad would do commercial diplomacy. Under this Export Promotion Cabinet, any Cabinet member that goes abroad is also tasked with commercial diplomacy. In 

addition to this, Secretary of State Clinton has directed her ambassadors and said that your performance will be measured in part y 

the degree to which you do commercial diplomacy. So it is more 

than anything putting emphasis on the importance of this. 

16 

Now, specific to the reorganization, as President Obama said, we 

can always do better and it is his goal to review how we do export 

promotion. As you pointed out, there are many agencies that have 

some role to play in export promotion and it is his goal to take a 

fresh look at that and see how we can best do that. Now, they are 

just now in the process of gathering information, interviewing both 

folks within the government as well as in the private sector that 

they serve, and my understanding is that they will have a recommendation to the President in about 90 days but it is still in the 

process of being formulated. 

Mr. BUTTERFIELD. Thank you. Some people have suggested that 

in order to increase exports, the United States should focus on exporting more of the same goods and the same services that it already exports or more goods and services that U.S. manufacturers 

are good at producing right now. That probably sounds reasonable, 

but I am concerned that if that is all we do, we may be forgetting 

the most basic tenet of economics, that is, supply and demand. So 

Mr. Under Secretary, can you tell me what ITA is doing to ensure 

that U.S. manufacturers know what goods and services other countries really want? For example, does ITA regularly survey the domestic and import markets of other countries, and if so, how do we 

go about this? 

Mr. SANCHEZ. Thank you for the question. We are doing rigorous 

analysis both on the markets that offer the best opportunity for us, 

and that is a combination of emerging markets—China, Brazil, 

India—next-tier markets like Vietnam, Indonesia, Turkey, Colombia, Peru, but also focusing on mature markets, Canada and Mexico, for example. Forty-two percent of our exports go to countries 

within the Western hemisphere, so we are doing rigorous market 

analysis and then we are superimposing on that sector analysis 

within each of those markets to see where we get our best bang for 

the buck, and I would say as the chairwoman pointed out in her 

opening statement, it isn’t just what we do best but it is the innovation that we create. Apple is a great example of innovation and 

practice and the very positive impact it can have on our economy, 

so we are focusing on those sectors that can have the highest impact in those markets where we see high growth and high opportunity. 

Mr. BUTTERFIELD. All right. I have another question but maybe 

the next round. Thank you. I yield back. 

Mrs. BONO MACK. Under the committee rules, the chair will now 

recognize Mr. Pompeo of Kansas for 5 minutes. 

Mr. POMPEO. Thank you, Madam Chairman, and good morning, 

Secretary Sanchez. 

Mr. SANCHEZ. Good morning. 

Mr. POMPEO. You talked, when you were talking about the Colombia agreement as labor being the last sticking point. Is that correct? 

Mr. SANCHEZ. Well, the issue was certain provisions in their 

labor code as well as concerns about violence toward labor organizers and in particular impunity toward those who commit acts of 

violence. 

Mr. POMPEO. And would that be the same for the Panama agreement? 

17 

Mr. SANCHEZ. The Panama agreement, I think one of the issues 

remaining has to do with their labor code. It is an issue that we 

are working on closely with the Panamanian government and we 

don’t see any big problem. We don’t foresee any challenges in moving that forward. 

Mr. POMPEO. We had a chance to talk just briefly before the 

hearing started this morning, and you talked about being an evangelist for trade. 

Mr. SANCHEZ. Yes. 

Mr. POMPEO. Kansas 4th Congressional district relies on enormous trade exports. We build airplanes and airplane components 

in south central Kansas and we export a lot of agricultural items 

as well. When you are out evangelizing, do you talk to organized 

labor about how important trade agreements are to them? I know 

in our district that the more trade we have—our aircraft manufacturing plants have the IAM as their primary union and we have 

lots of union folks that are great folks in the 4th district. These 

trade agreements are critical to them. I hope that you are out there 

talking to them about that. Can you tell me what you tell them 

about the importance of trade? 

Mr. SANCHEZ. Yes. I have reached out to labor and we do meet, 

and I talk about the impact of the existing agreements. As I mentioned earlier, we have 17 current agreements, and in the aggregate with those 17 agreements, we have a goods surplus, a significant surplus, and so overall they have been good. Now, I acknowledge that in certain sectors and in certain communities it isn’t 

equally distributed and some of them may be hurt and so it is important that we support those communities when those things happen. But overall for our economy, trade agreements have a positive 

impact. And the other thing I tell them is that again as the chairwoman pointed out in her statement is that other countries are not 

waiting for us to sign agreements. Agreements are being signed by 

the EU, by South Korea, by other countries in Southeast Asia, by 

countries in South America, and so if we don’t move, we get left 

behind, and that is not good for the American economy, not good 

for American companies and certainly not good for American workers. 

Mr. POMPEO. I appreciate that. I am glad to hear that from this 

Administration. I think that is an important message. I know, I 

hear from our agriculture folks already about the delay in Colombia impacting their ability to move crops into a market that they 

think they can be incredibly competitive in. 

I guess my last comment is, you had mentioned a series 80, I 

think it was, in your statement, trade barriers that you had 

knocked down. Can you give me a couple of concrete examples in 

the last 12 months, places and particular barriers that you all took 

on and were successful in helping us increase exports? 

Mr. SANCHEZ. I don’t have a specific one in mind but I can give 

you kind of an illustration. These are initiated by a company who 

is trying to get into a particular market and there might be a regulation that is overly burdensome, goes beyond just responding to 

the public benefits that they are trying to create with the regulation and creates a barrier, so we will work with that country, with 

that trading partner to put a spotlight on that and reduce it. We 

18 

have done this in 45 different countries including countries like 

China, Brazil, Turkey and India. I will be happy to get more specific ones to you in writing after the hearing. 

Mr. POMPEO. I would appreciate that. We have got some issues 

with export controls as well. I know that is not directly tied to 

what you do, but I think you may be heading out my way before 

long and I would love to get a chance to spend a few minutes talking to you about that. 

Mr. SANCHEZ. I will be well prepared with examples before I go 

out to see you. 

Mr. POMPEO. Thank you very much, Mr. Sanchez. 

Mr. SANCHEZ. Thank you. 

Mrs. BONO MACK. Thank you. The chair would recognize Mr. 

Gonzalez for 5 minutes. 

Mr. GONZALEZ. Thank you very much, Madam Chair, and Mr. 

Secretary, welcome. I know that many of us supported your appointment, nomination and confirmation, so it is great to see you 

here. 

Mr. SANCHEZ. Thank you. 

Mr. GONZALEZ. Nothing is an easy road in Washington. 

Mr. BUTTERFIELD. Will the gentleman yield? 

Mr. GONZALEZ. Of course. 

Mr. BUTTERFIELD. When I first met the Under Secretary, the 

first word that came out of his mouth was ‘‘Charlie Gonzalez.’’ I 

yield back. 

Mr. GONZALEZ. And the conversation continued regardless. 

Anyway, Mr. Secretary, well, first of all, I will get the parts and 

stuff out of the way because I know that my colleague from Texas, 

Mr. Barton, alluded to the creation of private sector jobs and it is 

not all created by the government. I will say this about the present 

Administration. In the past month, I think about 35,000-plus government jobs were lost and 200,000-plus private sector jobs were 

created. I will say this, and I think the record will bear me out, 

that this Administration’s record as far as creating private sector 

jobs far exceeds that of the years 2000 to 2008, but I must say that 

beating the number zero of net job creation between the years 2000 

and 2008 shouldn’t be all that hard to do, and we do have great 

challenges and I am hoping that we will get past all this and figure 

out how we are going to get out of this tremendous recession that 

we still find ourselves in. 

In a minute we are going to have the second panel, Mr. Secretary, and a couple of those witnesses, maybe three—of course, we 

will have the chamber and we will have think tank but we are 

going to have businesspeople and they are going to obviously touch 

on what they sense or feel is the greatest challenge to them in finding markets and such. I have not read their testimony. I am just 

assuming that that will be the crux of the subject matter. What is 

your estimation? What do you think it is? What do you think they 

are going to tell us in the next hour or so? 

Mr. SANCHEZ. Well, I think what the American business community tells us every day is that they understand the importance of 

exports and they want to export more, and so in order to do that 

we have to reduce trade barriers. Now, we are doing that certainly 

with trade agreements, which are a very important tool, but we do 

19 

it in a lot of other ways as well—harmonizing standards, regulatory cooperation, really putting a spotlight on corruption or the 

lack of intellectual property rights protection. These are issues that 

of vital concern to the business community. We work very closely 

with them to try to reduce these non-tariff barriers every day. So 

I think they will tell you that we need to get the three pending 

trade agreements completed. I think they will also tell you that the 

Trans-Pacific Partnership which will also expand and benefit us in 

the Asia Pacific region needs to get done, and we are on track. We 

are hoping to have the framework for an agreement on that in November, and they will also tell you we need to the base hits. You 

know, trade agreements you might think of as home runs. Base 

hits are working every single day resolving the trade barriers that 

Congressman Pompeo referred to that may affect one particular 

sector or in some cases one particular company. It is working on 

those issues that I mentioned country by country. I have privilege 

of serving on the commercial dialog with Brazil and another commercial dialog with India where we raise these issues that create 

non-tariff barriers. Those are the base hits that we have to be hitting every day along with the bigger home runs like trade agreements. 

Mr. GONZALEZ. Thank you very much, and I would yield back the 

balance of my time. 

Mrs. BONO MACK. I thank the gentleman. The chair recognizes 

the gentlelady from Tennessee, Ms. Blackburn, for her 5 minutes. 

Mrs. BLACKBURN. Thank you, and thank you, Mr. Secretary. 

Let us stay right there talking about these emerging markets— 

Brazil, China, India. Tell me what you are doing to help our businesses. In Tennessee, our exports have increased tremendously. 

You know that. You know that this is an issue that is important 

to us just like the intellectual property protections are important 

to us and so since you raised Brazil, which is a market that we 

have our eyes on, talk to me about what ITA is doing on a daily 

basis to help businesses take advantage of opportunities that are 

there or to seek out and know where they can be competitive. How 

are you helping them target and drill down on these? 

Mr. SANCHEZ. Thank you, Madam Congresswoman. Brazil is a 

very important market for us. It is one of our targeted emerging 

markets. We have a team of trade specialists in country in Brazil 

as well as our domestic network that work with companies around 

the country to take advantage of the opportunities that exist. Let 

me give you a few in the infrastructure space. As you well know, 

Brazil is going to be host to the Olympics as well as the World Cup. 

It is estimated that Brazil will spend over $200 billion in infrastructure, and American companies are well positioned to support 

Brazil as they grow in that space. So we are working closely with 

the business community promoting that. We have trade missions 

there. We have information available through our portal, our web 

portal, Export.gov, and we will continue to focus on that. So on export promotion, we are disseminating information, taking trade 

missions, extending gold key services, which is a customized service 

that is extended on a fee basis for companies that want to go down 

there and have appointments already made for them so they can 

20 

hit the ground running. So we are doing a lot on the export promotion side. 

Mrs. BLACKBURN. So you are facilitating the information dissemination and the awareness as well as the onsite, in-country relationship? 

Mr. SANCHEZ. Yes, ma’am. We are doing both. 

Mrs. BLACKBURN. All right. Let me switch gears, since I just 

have a little bit more time left. I want to look at the export initiative. 

Mr. SANCHEZ. Yes. 

Mrs. BLACKBURN. And ask you a little bit about what steps the 

bureau is taking to make certain that we avoid duplication and 

redundancies and duplication of efforts among other federal agencies. You know this is something that we want to make certain we 

clean up a lot of the bureaucratic operational processes, so as we 

look at this, and you know Congress has not appropriated funding 

for this yet, what are you doing that is going to ensure that you 

get rid of some of these redundancies before you stand it up? 

Mr. SANCHEZ. Well, let me highlight three things. First, we have 

the trade promotion coordinating committee, and that trade promotion coordinating committee has as its membership all of the 

agencies that have some role, even if it is a very small role, in export promotion. We meet regularly. We talk about what we are 

doing. We look for places to collaborate and cooperation. So for example, under that effort, we recognize that our best use of the 

trade specialists that we have both domestically and internationally are for companies that are export-ready, companies that have 

already dipped their toe in the water and are exporting, although 

they may only be exporting to one market or two markets. So we 

have begun to focus on those companies. Now, there are a lot of 

companies that have never—— 

Mrs. BLACKBURN. So you are focusing more on enabling growth 

rather than enabling entry? 

Mr. SANCHEZ. ITA is focused on that. SBA through this effort of 

making sure that we weren’t doing duplication and maximizing our 

resources, we work with SBA who now takes the lead on companies 

that have never exported before. 

Mrs. BLACKBURN. OK. 

Mr. SANCHEZ. So on the trade promotion coordinating committee 

is one. Number two, within ITA, we have looked at how we can 

streamline our own efforts and make it tighter, so we have a unit 

of manufacturing and services. Their mandate was quite broad and 

we are looking at now streamlining that and focusing it just on sectors that have export potential, and then more broadly, as Congressman Butterfield alluded to, the President has directed his 

team to look at how we do export promotion and trade policy and 

see if we can’t do it better, more effectively and more efficiently. 

So on three levels we are actively—— 

Mrs. BLACKBURN. Do you feel like that in that process—and my 

time is nearly up. Do you feel like in that process you are picking 

winners and losers, or no? 

Mr. SANCHEZ. No, that is not our job. It isn’t our job, but it is 

our—— 

Mrs. BLACKBURN. OK. My time is expired. I yield back. 

21 

Mrs. BONO MACK. The chair recognizes the chairman emeritus of 

the full committee, the distinguished John Dingell. 

Mr. DINGELL. Madam Chairman, thank you for your kindness, 

and I really much appreciate you holding this hearing. It is important leadership in a very important area. Thank you. 

I have an excellent opening statement which I have inserted in 

the record, and I hope everybody will read it and find it both enlightening and enjoyable. 

[The prepared statement of Mr. Dingell follows:] 

PREPARED STATEMENT OF HON. JOHN D. DINGELL

Thank you, Madam Chair, and I commend you for exercising our Committee’s 

often overlooked jurisdiction over trade-related matters. 

I wholeheartedly agree with calls to increase U.S. exports in order to put people 

back to work and restore our country’s reputation as a place that makes things. 

When I came to Congress some years ago, the United States exported more merchandise than it imported. We now enjoy a sizeable goods trade deficit, attributable, 

I believe, to unfair and deceptive foreign trade practices, similarly poor enforcement 

of our own trade laws, free trade agreements that are anything but, our ballooning 

debt and associated interest payments thereon, and a general focus on promoting 

the interests of the financial services sector over those of our domestic manufacturers. The current recession gives us the opportunity to re-orient U.S. trade policy toward the job-creating export of tangible manufactured goods and away from the 

smoke and mirrors long associated with Wall Street. 

I welcome our witnesses this morning, particularly Commerce Undersecretary for 

International Trade, Francisco Sanchez. I intend to focus my attention on the pending Korea-U.S. Free Trade Agreement and ask that you, Mr. Sanchez, help me improve my understanding of that deal by responding to a series of ‘‘yes’’ or ‘‘no’’ questions. I hope to learn about the deal’s potential effects on the automobile industry, 

which, as my colleagues and those assembled here today know, is of great importance to my home state of Michigan. 

I thank you for your courtesy, Madam Chair, and yield back the balance of my 

time. 

Mr. DINGELL. Now, Mr. Secretary, thank you for appearing before the committee today. I have a number of questions to ask you 

which though I think the best answer is a yes or no, and I will try 

and see that you have them in writing so that you may later make 

such additional comments as you find necessary. I want to tell you, 

I am a particular admirer of your department, particularly your 

Foreign Commercial Services Agency and the market access and 

compliance operation that you have down there. These are very important to us in our trade, and I hope my colleagues on the committee will inform themselves of the work that they do in increasing American exports and improving our trade posture. 

President Obama recently announced that the KORUS FTA will 

create 70,000 jobs in the United States. Korean President Lee 

Myung-bak has announced that the deal will create 335,000 jobs in 

Korea in the next 10 years. Do you agree with these estimates? Yes 

or no. 

Mr. SANCHEZ. First of all, I just want to say thank you for the 

kind comments about the International Trade Administration. I 

can’t speak to the estimates by the Korean president, but yes, I do 

agree with the estimates and the impact on the U.S. economy. 

Mr. DINGELL. You have no reason to challenge either set of figures? 

Mr. SANCHEZ. I have no reason to challenge, and I can—— 

22 

Mr. DINGELL. Thank you, Mr. Secretary. The International Trade 

Commission’s 2007 report on KORUS FTA as amended in March 

2010 indicated that the U.S. motor vehicles and parts trade deficit 

with Korea would increase between 1 billion and 1.3 billion annually if FTA was implemented. Does the Department of Commerce 

estimate this as well? Yes or no. 

Mr. SANCHEZ. I would need to look at that. I can’t answer that. 

Mr. DINGELL. But you have no reason to challenge those numbers at this time? 

Mr. SANCHEZ. Not at this time. 

Mr. DINGELL. I am troubled by the KORUS FTA’s country-of-origin rules. Is it true that such rules permit a product from Korea 

with a minimum 35 percent Korean content to be considered as 

having originated in Korea for U.S. tariff purposes? Yes or no. 

Mr. SANCHEZ. I am not familiar with that provision so I can’t—— 

Mr. DINGELL. I believe it is so. Do you have any reason to challenge it? 

Mr. SANCHEZ. Not at this time. 

Mr. DINGELL. All right. Mr. Secretary, for the sake of argument, 

is it possible if that be true that a Korean product with 65 percent 

Chinese content could be imported to the United States under the 

KORUS FTA’s favorable tariff conditions? Yes or no. 

Mr. SANCHEZ. If that provision is in place, I suspect that would 

be true. 

Mr. DINGELL. Now, Mr. Secretary, I note that KORUS FTA as 

amended last December includes a provision that allows United 

States to snap back its tariffs on automobiles and light trucks if 

Korea violates the terms of FTA. Is it true that the agreement does 

not allow the United States to snap back to its original 25 percent 

tariff on light trucks? Yes or no. 

Mr. SANCHEZ. Mr. Chairman, I am not familiar with that provision but I have no reason to challenge your statement. 

Mr. DINGELL. Mr. Secretary, I appreciate your courtesy and the 

way you are responding. Further, Mr. Secretary, is it true that the 

snapback provision would allow Korea to reimpose an 8 percent 

tariff on U.S. vehicles while the United States would be allowed to 

impose a tariff of only 2.5 percent on Korean passenger vehicles? 

Yes or no. 

Mr. SANCHEZ. Once again, I am not familiar with that specific 

provision but have no reason to challenge your statement. 

Mr. DINGELL. Mr. Secretary, I appreciate your courtesy. Finally, 

Commerce will bear significant responsibility in enforcing the 

terms of KORUS FTA. Will you commit that the Department of 

Commerce will do so vigorously, vigilantly and fairly? 

Mr. SANCHEZ. Yes. 

Mr. DINGELL. Mr. Secretary, I want to thank you again for your 

appearance here. I want my colleagues to know the very great importance of the department of which you are part and the extraordinary good work that you do in stimulating our trade efforts 

abroad, particularly the assistance that you give to small businesses and middle-sized businesses as they seek to increase their 

exports and that your services in this particular area are extraordinary. 

23 

Madam Chairman, I think it would be useful if this committee 

were to take a look at that because they do superb work in these 

areas and they do not have the funds and the resources they need 

for producing the kind of benefits that they can produce if we provide them support. Again, Madam Chairman, I thank you for your 

courtesy and for your wisdom in this matter. Thank you. 

Mrs. BONO MACK. I thank the gentleman, and the chair recognizes the gentleman from Illinois, Mr. Kinzinger, for 5 minutes. 

Mr. KINZINGER. Thank you, Madam Chairman. Again, Mr. Secretary, how are you? 

Mr. SANCHEZ. Good. 

Mr. KINZINGER. You have obviously heard this today. You know 

where we are coming at on this. One of the reason disappointments 

I have had is just, I think, the feeling that there is no real hurry 

to do anything in Colombia or Panama or really this idea that we 

can’t find out exactly what it is but there is a hesitancy. I don’t 

know if it is an attempt to satisfy base. I don’t know what is going 

on but there is really a hesitancy to do it, and I can tell you in my 

own life, prior to coming here I was and remain in the reserves, 

a pilot with the military, and I actually have been involved in some 

joint operations in the south and I can tell you they are a very 

strong ally of the United States, specifically, Colombia I am talking 

about now, Panama as well, but a very strong ally of the United 

States, and one of my concerns as we continue to kind of just limp 

along or dilly-dally and we don’t pass this agreement which was 

negotiated years ago now, I am afraid that we begin to lose that 

support in Colombia where the people begin to wonder, you know, 

what is the hesitancy. Every moment that goes by that this agreement is not in place that we are unable to export in a very strong 

way to these nations, other countries like China, European nations 

are very quick to come in and pick up that vacuum, pick up that 

slack. So I really feel that every moment that goes by not in Colombia specifically I am talking about now we are losing potentially 

the support of the people as they wonder what is happening and 

we lose market export opportunities, not to mention the fact the 

role that a free trade agreement or really a leveling of the playing 

field for us, what a free trade agreement would do in terms of just 

generally national defense, continuing to build that alliance in an 

area of the world where frankly American interests have begun to 

be challenged by many fronts and especially on the eastern front 

of Colombia. So that is a concern I have. 

Let me ask you a few questions, and I guess I will start with one 

first. You testified that the Korean free trade agreement represents 

$10 billion in exports and 70,000 American jobs. In both that and 

the one with Panama and Colombia that have been sitting on the 

table, have there been any estimates so far about how much really 

has been left on the table by our failure to implement these trade 

agreements over the last few years, how many potentially the export amount we have lost or how many jobs have not been created 

because this has been sitting on the table for so long? 

Mr. SANCHEZ. I know that with the Colombia trade agreement, 

I can say forward leaning. I can’t speak to years past but forward 

leaning it is estimated to increase exports by about a billion dollars 

to that country, Panama, I think slightly less than that. But let me 

24 

just say, Congressman, that I agree with you completely in how important moving these trade agreements is. As with you, I have a 

history with Colombia as a businessman and I recognize Colombia 

not only as a good friend and an ally but as a strong commercial 

partner, so it is important to move forward on this. 

Mr. KINZINGER. Well, and so I think that is good because from 

what I am hearing from you, it sounds like we are going to have 

enthusiastic cooperation from the Administration here very soon 

over passing all three of these trade agreements, which I think 

would be great for the American economy and I look forward to 

working in a bipartisan way with the Administration on that. 

In your opinion, what are the biggest impediments right now to 

our global competitiveness for our business and our exports? 

Mr. SANCHEZ. Well, let me put them in two categories. One is domestic. Only 1 percent of American businesses export. Compare 

this to Germany, 12 percent of their business is exports. So one 

challenge we have is getting the word out to American business, 

particularly small- and medium-sized companies, that we can no 

longer look at our market as a community, a state or—— 

Mr. KINZINGER. Well, I think business knows that. I think we 

need to get that out continually and I would love to hear the Administration continue to talk about this to organized labor, to the 

American people about the importance of trade. Go ahead. 

Mr. SANCHEZ. Well, I think a lot of American business does but 

I want to see more American businesses exporting, and then within 

that 1 percent, 58 percent of those companies only export to one 

market. So we need to do a better job of selling our goods and services abroad. 

Mr. KINZINGER. Well, let me ask you something because I am almost out of time. What about corporate tax rates? 

Mr. SANCHEZ. I think we need to look at everything that can 

have an impact on our competitiveness. 

Mr. KINZINGER. Well, what about corporate tax rates specifically? 

Mr. SANCHEZ. I think corporate tax rates should be looked at. I 

think they should absolutely be looked at as—— 

Mr. KINZINGER. Would you support reducing corporate tax rates 

so that we could reduce our costs overseas and be more competitive 

in the export market? 

Mr. SANCHEZ. Well, I certainly support a review of what we need 

to do. 

Mr. KINZINGER. All right. Thank you, sir. 

Mr. SANCHEZ. Thank you. 

Mrs. BONO MACK. The chair recognizes the gentleman from New 

York, Mr. Towns, for 5 minutes. 

Mr. TOWNS. Thank you very much, Madam Chair. Let me thank 

you and the ranking member for having this hearing. I think it is 

a very important hearing and you are doing it in a very timely 

fashion, and I like that as well. 

Let me ask you, since it is our job to analyze how trade barriers 

are hurting American industry, will you develop an analysis of the 

impact that the current visa processing procedures and visa interview delays in key growth markets like Brazil, China and India are 

having on travel to the United States and provide it to this committee? 

25 

Mr. SANCHEZ. Congressman, you raise an important issue. I am 

happy to provide information that could be useful to you and to 

this committee. What I can say about that issue is that my boss, 

Secretary Locke, heard an earful from American business all over 

the country. He then raised this with Secretary of State Clinton. 

He also heard about concerns when people come to our borders and 

entry points so from those conversations a working group has been 

established between Commerce, State and Homeland Security to 

focus on visa and entry issues. We use that working group to gather information from the business community and make sure that 

State Department and Homeland Security knows about these 

issues. We also use it as dissemination of information to the business community. So we are aware that this is a problem that we 

can solve ourselves and we are working on it and working very 

closely with State and Homeland Security. 

Mr. TOWNS. So you don’t need the Congress to do anything? 

Mr. SANCHEZ. Well, I wouldn’t say that. What I would say is that 

we will provide you any useful information that we have gathered, 

particularly in the last year and a half that we have been working 

closely with those two agencies on this issue. 

Mr. TOWNS. In your testimony, you said that you will use all the 

tools in your toolbox. What tools do we have in that box? 

Mr. SANCHEZ. Well, we have a lot of tools. On the export promotion side, we took 35 trade missions last year, a record-setting 

number. We had 400 companies participate in it. We also have an 

international buyers program where we bring—last year we 

brought 13,000 foreign buyers to our shores to trade shows and we 

connected them with American businesses where sales were made. 

We provide market analysis. We have a gold key service, which is 

a fee-based service for companies that want us to help them identify the right distributors or potential buyers, and we arrange their 

meetings for them in country so that is on the export promotion 

side, a sample of services. 

On the policy side, we focus on non-tariff trade barriers and try 

to work with the business community on identifying them, putting 

a spotlight on those barriers and then working with our trade partners to reduce them. 

Mr. TOWNS. In your testimony, you also indicated that ‘‘we are 

doing our part to keep America globally competitive and implement 

President Obama’s National Export Initiative.’’ What are some of 

the things you are actually doing? 

Mr. SANCHEZ. Well, one is certainly reducing trade barriers 

abroad. The more barriers we can reduce, the more competitive we 

will be. On the domestic side, the President is committed to the 

R&D tax credit and making that permanent. One of the greatest 

competitive advantages we have around the world is we invest 

more in research and development than any other nation in the 

world. We need to continue to do that, and the R&D tax credit will 

go a long way to helping that happen. 

Mr. TOWNS. Before I yield back, let me thank you for the work 

that you are doing. 

Mr. SANCHEZ. Thank you, Congressman. 

Mr. TOWNS. I really, really appreciate it, and I think that you are 

moving in the right direction. If there is anything that we need to 

26 

do on this side of the aisle, I think you just need to voice it because 

I think more and more people are beginning to realize how important it is to improve in terms of our trade and strengthen our relationship across the board and realizing that there is a correlation 

between unemployment and crime. We have to recognize that, and 

I think that more and more people realize it and that we hope to 

be able to remove those trade barriers and be able to move forward. 

On that, Madam Chair, I yield back. 

Mr. SANCHEZ. Thank you. 

Mrs. BONO MACK. I thank the gentleman. The chair recognizes 

Mr. Guthrie for 5 minutes. 

Mr. GUTHRIE. Thank you, Madam Chairman. 

Thank you, Mr. Secretary, for coming today. I appreciate that. I 

know you mentioned tourism earlier, and that is a great industry. 

We have people coming here. I think it is important. I guess I 

didn’t think of it so much as exports, but it is great when people 

are here, and when I hear somebody walking around with a foreign 

accent out here, I will stop and talk to them because I am proud 

to show off our great capital city to them and appreciate them 

being here. 

But I was thinking I remember being in another country, somewhere I won’t mention, but standing in this grand marketplace, 

great buildings, a castle, the whole, just fantastic, and they were 

talking about the great ships that came in and out of the harbor, 

and it dawned on me as I was standing there. I said you know 

what their biggest industry now is selling the history of when they 

were a great power, and that is something that we need to make 

sure—I mean, that was their number one industry was people coming to see the great buildings built when it was a great power, and 

we have to be mindful as we are here, and in Brazil, Brazil in the 

late 1990s, I believe it might have been the mid-1990s to late 

1990s, had financial issues, deficit problems, and took some tough 

medicine. They were willing to take the tough medicine, and the 

president at the time, Cordoza, led that effort. They had the same 

kind of federal system we have. And look where they are now. I 

think the benefits of that have paid off tremendously. It is a wonderful country, a great place to be, 180 million people, maybe somewhere around that. 

Mr. SANCHEZ. I think over 190. 

Mr. GUTHRIE. Over 190 million now. But I do know there are 

trade barriers between Brazil. I know the President is either going 

or is there. 

Mr. SANCHEZ. Yes. 

Mr. GUTHRIE. What is going on with Brazil in particular? 

Mr. SANCHEZ. Well, it is certainly one of our targeted emerging 

markets. As you have pointed out, many, many years ago Brazil 

was called the sleeping giant. Well, it has awoken and it is a tremendous opportunity for American business, but also has challenges both tariff and non-tariff barriers. As I mentioned earlier, I 

have the privilege of co-chairing the commercial dialog with Brazil. 

That is the vehicle we use to raise trade issues, and so we have 

done everything from trying to get them to open up their express 

delivery service. Express delivery is very important for our smalland medium-sized companies who don’t have their in-house logisVerDate Nov 24 2008 12:27 Jan 12, 2012 Jkt 037690 PO 00000 Frm 00032 Fmt 6633 Sfmt 6633 P:\MY DOCS\HEARINGS 112\112-21 031611\112-21 CHRIS
27 

tics operations, and we made progress there. We are working with 

them on harmonizing standards in a number of sectors but in particular in alternative energy because we see a great opportunity to 

boost our efforts there. We are working closely to bring our smart 

grid technology to Brazil, so we are working on a number of fronts 

to create opportunities, and as I mentioned earlier, we are doing 

a lot of export promotion in the infrastructure area because Brazil 

will be making significant investments in that sector over the next 

6, 7 years. 

Mr. GUTHRIE. And that is all good. Also, just the product manufacturing to ship in is something that is interesting. On the export 

initiative that is coming out of the White House, is it solely focused 

on tariff barriers or are you trying to make ways to business more 

competitive? I know you talked about the research credit, but when 

you talk to businesses now, they are just concerned about the regulatory environment. We had an issue yesterday we were hearing in 

the full committee about energy costs that could come because of 

the way the EPA is regulating. I know in Kentucky manufacturing, 

energy, that gives us competitive advantage in Kentucky compared 

to other countries because we have low energy prices, and a lot of 

businesses are just concerned not just about getting into countries 

and finding out opportunities but being competitive because of the 

regulatory structure that is coming down. I don’t know if you guys 

are looking. Is this just a Commerce Department initiative or are 

you looking at—— 

Mr. SANCHEZ. No, the National Export Initiative is a government-wide initiative specifically on regulations. The President has 

directed his Administration to look at regulations and how they affect our competitiveness, and Commerce participates in that review. We don’t get involved in every regulatory review but those 

that have significant economic impact, and then finally, looking at 

regulations abroad that affect our competitiveness is something we 

take a very active role in as well. 

Mr. GUTHRIE. And I am just about out of time. The three trade 

initiatives together we have discussed today, if they were moved in 

together, I don’t know if you said it or maybe I read the Administration says that would put all three in jeopardy if they moved together. Do you find that to be the case if we were to approve all 

three at the same time? 

Mr. SANCHEZ. You know, I am not aware of who said that but 

what I can tell you is this. I know we have one that is ready to 

go now, and as Ambassador Kirk said I think in recent testimony, 

if we are a company and we have a product ready to go, we ought 

to take that product to market. So we are going to do that. The 

other two, I think we are close. We are working very, very hard. 

There has been a lot of activity with both Panama and Colombia. 

I know the President is committed to getting them to Congress and 

so I would say let us finish up the work we have to do on these 

other two. We are working them. There have been meetings. In 

fact, there are meetings going on I believe today with Colombian 

officials and U.S. officials, and let us move with the product we 

have ready, which is Korea. 

Mr. GUTHRIE. All right. Thanks. I will yield back. 

Mr. SANCHEZ. Thank you, Congressman. 

28 

Mrs. BONO MACK. The chair recognizes Mr. Harper for 5 minutes. 

Mr. HARPER. Thank you, Madam Chair. 

Good to see you, Mr. Sanchez. 

Mr. SANCHEZ. Thank you, Congressman. 

Mr. HARPER. Thank you for being here. I know you would rather 

be getting a root canal right now than having to come join us, but 

we thank you for your time and patience with us today. 

Mr. SANCHEZ. So far it just feels like filling a cavity. 

Mr. HARPER. That is good. Well, hopefully it won’t get any worse 

than that. 

Mr. Sanchez, I wanted to talk to you about an issue that I believe just happened very recently, perhaps yesterday, when the 

Commerce Department announced the final determination in an 

administrative review of the anti-dumping duty order against frozen fish fillets from Vietnam. Of course, this announcement, as you 

know, represented a reversal from a preliminary determination 

that your agency announced I believe just last September. This decision seems to be at odds with your stated mission of improving 

the competitiveness of U.S. industry and taking appropriate steps 

against unfair trade. What is most concerning to me is the apparently perhaps political nature of the decision your agency announced yesterday. I understand that just after last September’s 

preliminary determination, the Vietnamese significantly stepped up 

the diplomatic pressure on the Commerce Department. Further, I 

understand that this diplomatic pressure culminated with a meeting only a few weeks ago very late in the administrative review 

process between you and the Vietnamese government. I also understand that when the U.S. industry requested a meeting with you 

to present their side of the case, you were personally unavailable 

or unable to make room on your schedule. And then I also understand that in just a couple of weeks, perhaps in early April, you 

plan to lead a trade mission to Vietnam, and I believe that is a 

good thing. You know, that is certainly an important thing for you 

to do, to lead a trade mission to Vietnam. However, I am concerned 

that this recent decision perhaps may have been political in nature 

and that it has been made to the detriment of a U.S. industry and 

of course thousands of workers in that industry. So I would ask if 

you could help this committee better understand how the department reached this final decision. 

Mr. SANCHEZ. Congressman, I take my role as enforcing our 

trade laws very, very seriously. I think it is one of the most important things we can do is to make sure we are creating a level playing field at home for American business. I can assure you, I can 

look you and this committee in the eye and say that this decision 

was made based on the statute that we have to follow and based 

on the facts in the record. Politics played zero role in this decision. 

In this particular case, a preliminary decision was—because Vietnam is a non-market economy, we have to look at other markets 

to determine our evaluation of whether or not there is dumping 

going on. In the preliminary finding, we looked at the Philippines. 

Subsequent to that preliminary finding, we reviewed the record, 

and based on the information in the record determined that Bangladesh was a more appropriate market, analogous market. This 

29 

was based on what was brought in by the petitioners as well as 

those defending, that is, the Vietnamese, and based on that, it was 

determined by our staff that Bangladesh was the more appropriate 

market. Upon doing that, that changed the calculation. 

But let me just close by saying enforcing our trade laws is absolutely critical. I do that with great pride. There were no political 

considerations taken in making this decision. We followed the statute and we used the facts as were presented. 

Mr. HARPER. When this change was made, when you were looking at the surrogate market economy, so previously, let us say back 

to September of 2010, before that which country was used? 

Mr. SANCHEZ. I believe it was the Philippines. 

Mr. HARPER. And then the change was made, was that September of 2010 that the change was made? 

Mr. SANCHEZ. You can’t hold me to the dates. 

Mr. HARPER. But the change was made to Bangladesh? 

Mr. SANCHEZ. Correct. 

Mr. HARPER. Did you get a pushback from the Vietnamese government on making that change? 

Mr. SANCHEZ. I got no pushback on any change, and if we had 

gotten a pushback, it wouldn’t have made a difference. The only 

thing that would make a difference is the facts that are presented 

to us, what makes the most sense as we apply the statute. 

Mr. HARPER. You understand our concern, though? 

Mr. SANCHEZ. I absolutely understand. 

Mr. HARPER. The appearance and the timing and some of those 

events that took place, we just needed to get a better explanation 

on that. 

Mr. SANCHEZ. I understand. 

Mr. HARPER. With that, I yield back. 

Mrs. BONO MACK. I thank the gentleman. The chair recognizes 

Dr. Cassidy for 5 minutes. 

Mr. CASSIDY. Hello, sir. 

Mr. SANCHEZ. Hello, Congressman. 

Mr. CASSIDY. I am struck as I look at—can you just speculate on 

the potential benefits to our export of products such as rice if we 

complete that Colombia free trade agreement? 

Mr. SANCHEZ. I can’t speak specifically to rice but I can speak 

without any hesitation that the trade agreement would be very, 

very good for American business, and the President fully supports 

getting that completed and getting it to Congress. I can tell you 

that I would like to see it completed because it will help me in my 

job doubling exports by 2014, as the President pointed out. 

Mr. CASSIDY. Now, there has been concern from some folks that 

Colombia’s human rights record is such that we should not have 

that free trade agreement. Do you have any assessment of that? 

Mr. SANCHEZ. Well, my understanding is that the issues that we 

are focused on are certain provisions in the Colombia labor code 

and concern about violence toward labor organizers and the impunity that happens when violence occurs, that people literally have 

gotten away with murder. What I can say is that the Colombian 

government is a strong collaborator in confronting these issues and 

working with us to address those concerns. We have been meeting 

with them. There has been a lot of activity over the last 6 weeks, 

30 

I would say, and I think that both the Colombian government and 

our team are committed to working through the concerns we have, 

finding a solution and getting this to Congress as soon as possible. 

Mr. CASSIDY. Not to put words in your mouth, but it is my general sense that there has been dramatic improvement in that 

record over the last decade. 

Mr. SANCHEZ. I think there has been. I have a personal history 

with Colombia and I would agree with you. I think there have been 

improvements and I am particularly impressed with the Santos administration, the current administration that has taken great steps 

to focus particularly on this issue that concerns us. In addition to 

that, the vice president of Colombia was a 20-year labor leader and 

he is a strong proponent of the free trade agreement. 

Mr. CASSIDY. So some of the criticism was that the violence was 

particularly directed towards labor unions so the fact that he is a 

labor leader and also a leader in their government I presume is 

particularly significant. 

Mr. SANCHEZ. Well, I think he is a strong voice to underscore 

that he is going to pay attention to the concerns that we have 

raised, and they actually have taken a lot of steps since August 

when they took—— 

Mr. CASSIDY. Let me interrupt, just because I have limited time. 

Mr. SANCHEZ. Sure. 

Mr. CASSIDY. Now, what I am about to ask is kind of sociological 

in nature so you may defer. It is my general impression, though, 

that as countries become bigger trading partners, they become 

more prosperous, and as they become more prosperous, there are 

more employment opportunities for folks rather than to be a mule 

to bring cocaine across the border. So do you know if there is a 

body of literature that suggests that as a country becomes more 

prosperous, they are less likely to resort to international criminal 

activity? 

Mr. SANCHEZ. I am not familiar with any body of literature that 

focuses on that but what I can tell you is that I believe that a Colombia trade agreement will be good for our country. 

Mr. CASSIDY. Now, let me ask you, changing subjects, my district, Louisiana Baton Rouge area, has a lot of petrochemical 

plants. When I was looking over our exports to Korea, and we have 

apparently lost many of our petrochemical imports to China. Now, 

is that a function of China just having proximity? Is it a function 

of China, you know, not having the same environmental regulations and so that they can lower the cost of production because 

they can potentially pollute with impunity or is it because no, these 

tariffs are actually the barrier, and if we eliminate these tariffs, 

whatever else is there we will overcome it? 

Mr. SANCHEZ. I believe it is probably a combination of many of 

the things that you mentioned. What I do know is by ratifying this 

agreement, we will put our American companies in a much better 

competitive position and I believe it will help and benefit companies in Louisiana as well as other States around the country. 

Mr. CASSIDY. It has been my general impression that if we do a 

value-added product, oftentimes the Chinese don’t do that well. 

They do the commodity generic product but the value-added they 

don’t, but of course, the value-added is the most value. 

31 

Mr. SANCHEZ. Well, what I would say, and I think we will agree 

on this, is that when you lower barriers both tariff and non-tariff, 

we can compete with anybody in the world, and I believe that those 

companies in Louisiana will be well served by the Korea trade 

agreement. 

Mr. CASSIDY. I will add to that, our workers can out-compete 

with anybody. 

Mr. SANCHEZ. I agree with you. 

Mr. CASSIDY. I yield back. Thank you. 

Mr. SANCHEZ. Thank you, Congressman. 

Mrs. BONO MACK. The chair recognizes Mr. McKinley for 5 minutes. 

Mr. MCKINLEY. Thank you, Madam Chairman. 

Sorry I am late. We have a meeting downstairs going and I am 

splitting my time. 

Mr. SANCHEZ. I heard I have competition. 

Mr. MCKINLEY. I have a series of things. I am coming from the 

northern section of West Virginia, and you have a representative 

there in our district that is helping out, but I have had conversations with him and he is very frustrated with what is happening 

long term. The last American manufacturer of china is existing in 

the northern district, Homer Laughlin China, and he is holding on. 

He has got 900 union jobs and he is struggling, and he is looking 

for help and apparently we can’t help him with the tariffs. He is 

up against all the countries that we have free trade with and he 

is losing. He can’t keep up. 

Mr. SANCHEZ. In the Chinese market, or you are talking about 

generally? 

Mr. MCKINLEY. All his china. He makes Fiestaware. It is one of 

his main products that you will see across America is Fiestaware, 

but he is competing with India, Vietnam, Indonesia, Japan, China, 

and he is struggling, and I don’t have answers for him. But when 

I asked him what could we do to help, he said, ‘‘Just give me some 

tariff protection and I can compete with them.’’ But with the fact 

that he has to work with so many of the EPA requirements for air 

and water quality and against people that are not paying a living 

wage, it is very difficult for him. So I would like to have some direction how we could help Homer Laughlin China to get through 

all this because I have seen the demise. In the northern section of 

West Virginia, we had a chemical industry which was very vibrant, 

now gone. The glass industry, we had Fenton, Fostoria, Viking 

Glass, all gone because of imports. I don’t want to see Homer 

Laughlin go the same way. In fact, we are trying to hold on to 

those. So I am hoping you can see there is a general problem I 

have with free trade, where we are going with that. We have a 

steel industry that they used to have 30,000—we had two steel 

companies, Weirton Steel and Wheeling Pittsburgh Steel with 

30,000 steelworkers just 15, 20 years ago. Now we have less than 

2,000, and when you speak to them about it, it is all about imports 

where China and Japan have dumped their steel in America but 

it is so costly and so time-consuming to get litigation, they just give 

it up, so we are down now to 2,000 with the prospects of them finally just shutting the doors after a long and very illustrious history and full employment where families have been counting on 

32 

that. And then we have Marble King down in Paden City, West 

Virginia, the largest manufacturer of marble products in the country. She is struggling against imports that are coming in that are 

unfairly priced and she has been told by everyone she has to take 

it before whatever, is it the WTO or what? She can’t afford to do 

that. She is just a small operation. 

What are small companies supposed to do? Do we have a mentality that if you are a U.S. Steel or Weirton Steel you can handle 

it but these small companies are struggling. Homer Laughlin has 

just 900 employees. They are struggling. What can we do to help 

them? 

Mr. SANCHEZ. Well, Congressman, in that particular case, if you 

will get me contact information, I will make sure that our team—— 

Mr. MCKINLEY. Could you have your staff contact us? 

Mr. SANCHEZ. I would be happy to, and we will reach out to 

them—— 

Mr. MCKINLEY. They said they have reached out and they are 

hearing nothing back, so—— 

Mr. SANCHEZ. Well, count on it. We will reach out to them and 

we will sit down with them and see how we can be of help. For the 

broader issue, there is no question that some communities are disadvantaged by trade agreements. Those communities, we need to 

give them help and we have programs in place. The Trade Adjustment Assistance Program, one that President Obama is promoting 

from our department is the economic adjustment assistance program that helps workers, companies and communities. We can’t 

leave communities behind as we pursue these agreements. 

Mr. MCKINLEY. We feel left behind. 

Mr. SANCHEZ. And so we need to make sure that we are doing 

everything we can to help as the world marketplace changes and 

affects some communities very positively and others quite negatively. So any way that we can help your community, count on us 

to be there to do that, and our staff will reach out to your staff specifically to work on helping this company that you mentioned. 

Mr. MCKINLEY. Thank you very much. 

Mr. SANCHEZ. Thank you, Congressman. 

Mrs. BONO MACK. All right. The chair would like to recognize 

Mr. Olson for 5 minutes. 

Mr. OLSON. Thank you, Madam Chairman. 

Sir, I am from Texas, and I want to ask you about the beef industry and the impact of the Korean free trade agreement upon 

that industry. As you know, Texas produces 14 percent of the total 

U.S. cattle and 16 percent of the total U.S. beef cows, and we are 

slapped with a 40 percent tariff before this beef from Texas—American beef—reaches Korean soil. We need to get rid of that tariff. I 

understand that the free trade agreement does get rid of that tariff, 

and I ask you to stick to that because it is important for our country. 

Also, Australia is very close to finalizing their agreement and 

they are a large beef producer as well. Could I go back to the beef 

producers in my State and tell them that this Administration is 

going to fight for them to end that 40 percent tariff and get American beef in South Korea? 

33 

Mr. SANCHEZ. Congressman, what I can tell you is that one of 

the reasons that we didn’t bring the Korea trade agreement forward sooner is that we were working on that very issue, so we are 

very much aware of the impact of tariffs on the beef industry. It 

is probably still not perfect but it is far better, and we will continue 

to fight once it is ratified to make sure the implementation of this 

agreement makes good on the commitments that were made on 

beef. 

Mr. OLSON. Yes, sir, I appreciate that, and as I understand it, 

the original tariffs were put on our beef because of mad cow disease, and obviously that is not a factor right now. That was something that was a viable argument maybe 5, 10 years ago. And so 

again it is very important for my beef producers back home that 

we have a fair market there in Korea. It is a big market and we 

want that market to be a U.S. market, not an Australian market. 

Mr. SANCHEZ. Got it. 

Mr. OLSON. Thank you, sir. 

Mr. SANCHEZ. Thank you, Congressman. 

Mr. OLSON. I yield back my time. 

Mrs. BONO MACK. All right. Seeing no other members present, I 

would like to thank you very much, Mr. Secretary, for your time 

today. You have been very gracious, and just to say to you that it 

is our plan to work with you and Secretary Locke and the successor, whoever might have that next post to move our country forward and really make ‘‘Made in America’’ matter again. So thank 

you for your time. 

At this point we are going to take a brief, maybe 2- or 3-minute 

recess as we reset the table, and again, thank you. We are hoping 

you are back again soon and often. 

Mr. SANCHEZ. Thank you very much for the opportunity to be 

with you. I really appreciate it and look forward to working with 

all of you and expanding export of American products and services. 

Thank you. 

Mrs. BONO MACK. Thank you. 

On our second panel, we have, as you can see, five witnesses. 

Our first witness is Robert W. Holleyman, II, President and Chief 

Executive Officer of the Business Software Alliance. Welcome. Our 

second witness is—oh, OK, not in order, but another witness is 

Daniel Ikenson, Associate Director of the Center for Trade Policy 

Studies at the CATO Institute. Welcome. Also testifying today is 

John Murphy, Vice President, International Affairs for the U.S. 

Chamber of Commerce. We also have Jack J. Pelton, President, 

Chairman and CEO of Cessna Aircraft Corporation, and finally we 

have James Crouse, Executive Vice President of Sales and Marketing for the Capstone Turbine Corporation. 

Welcome to each of you. You will each be given 5 minutes to 

make your testimony. To keep track of time, there are timers on 

either side. If you need to slide them down so you have a better 

view of them, feel free to do that. When you see the yellow light, 

you are down to 1 minute, and when it hits red, if you could briefly 

sum up your remarks, I would appreciate it very much. So we are 

going to recognize Mr. Holleyman first for 5 minutes. Welcome. 

34 

STATEMENTS OF ROBERT HOLLEYMAN, II, PRESIDENT AND 

CHIEF EXECUTIVE OFFICER, BUSINESS SOFTWARE ALLIANCE; JOHN MURPHY, VICE PRESIDENT, INTERNATIONAL 

AFFAIRS, U.S. CHAMBER OF COMMERCE; JACK J. PELTON, 

PRESIDENT, CHAIRMAN AND CEO, CESSNA AIRCRAFT COMPANY; DANIEL IKENSON, ASSOCIATE DIRECTOR, CENTER 

FOR TRADE POLICY STUDIES, CATO INSTITUTE; AND JAMES 

CROUSE, EXECUTIVE VICE PRESIDENT OF SALES AND MARKETING, CAPSTONE TURBINE CORPORATION 

STATEMENT OF ROBERT HOLLEYMAN, II 

Mr. HOLLEYMAN. Thank you very much, Madam Chairman, Mr. 

Ranking Member, members of this subcommittee. It is indeed a 

pleasure to be with you today. 

This is all about creating jobs and what is the link between U.S. 

export policy and American jobs, and the software industry certainly knows from experience how to do that and we think there 

are some lessons that can apply to the broader economy. Software contributes a $36 billion trade surplus to the United 

States. We employ nearly 2 million Americans at twice the national 

average wage. And there is one simple thing that would allow us 

to contribute even more and have broader impacts on the U.S. 

economy, and that is to reduce software theft. For us, the challenge 

is not how to encourage businesses in other countries to use American software. They are already using it in overwhelming numbers. 

But too often they are not paying for it, and so stopping illegal software use will certainly create jobs for the software industry but it 

will also create jobs in the rest of the American economy, and let 

me explain that. 

Software is an essential tool of production, and nearly every company and business in every sector relies on software to create products and to do business. That includes everything from manufacturing to transportation to financial services. In the United States, 

80 percent of businesses pay for their software, in contrast, in 

countries like China, where 80 percent of the businesses do not pay 

for their software. The result is an unfair competitive advantage. 

For companies who are operating in countries that use software to 

run their operations but don’t pay for it, then they have an ability 

to undercut U.S. companies who do by and large pay for their software, and this unfair competition undermines U.S. products, U.S. 

sales, U.S. exports, and displaces U.S. jobs far outside of the software industry. More than $50 billion of software is installed illegally around the world, and this problem is fastest growing in 

large, emerging markets like China where the PC market is exploding and the software sales are not tracking. Microsoft, one of 

our members, commissioned a study by Dartmouth economists, 

who estimated that eliminating piracy in China for Microsoft products alone would create as many as 60,000 new jobs throughout the 

U.S. economy, and of course, this would be expanded significantly 

when extended to other companies. 

The United States government has a variety of trade tools at 

their disposal to secure better protection overseas, and we believe 

they must be used. But to maintain our leverage in negotiations 

with trade partners, we also have to lead by example in this counVerDate Nov 24 2008 12:27 Jan 12, 2012 Jkt 037690 PO 00000 Frm 00040 Fmt 6633 Sfmt 6633 P:\MY DOCS\HEARINGS 112\112-21 031611\112-21 CHRIS
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tries. Federal agencies already require the use of legal software 

within the Federal Government but we must also extend this to the 

next logical step to ensure that federal contractors are also using 

legal software. The U.S. Intellectual Property Enforcement Coordinator, Victoria Espinel, is exploring that very idea and others as 

part of her joint strategic plan on IP enforcement, and Madam 

Chairman, I want to thank you for your role and cosponsorship in 

helping create through the IP Act, the PRO–IP Act, that position 

which has been enormously important domestically and internationally. 

But this Congress with the Administration has an even more important role: that is, to keep up the pressure on every country that 

is using illegal software because it not only hurts the software industry but it hurts more businesses more broadly, and I would use 

China as the recent example where Congress weighed in quite 

strongly about the unfair competitive advantage that exists because of the use of illegal software in that country where President 

Obama raised directly with President Hu Jintao that issue on multiple meetings. We now have good commitments in place but unfortunately, I will report, that we have not yet seen any measurable 

increase in sales of legitimate software by our companies as a result, and I think we know and share with you, as we do with the 

Administration, that the ultimate test is not the commitments but 

the ultimate test is whether we see increased sales and exports of 

U.S. software in these high-value markets that will benefit not only 

software jobs but it will better level the playing field between all 

sectors of the U.S. economy. 

So thank you for this opportunity to testify. 

[The prepared statement of Mr. Holleyman follows:] 

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Mrs. BONO MACK. Thank you. 

Mr. Murphy, you are recognized now for 5 minutes. 

STATEMENT OF JOHN MURPHY 

Mr. MURPHY. Good afternoon. Madam Chairman Bono Mack, 

Ranking Member Butterfield, it is a pleasure and a welcome opportunity for me to testify before this subcommittee today. 

For the U.S. Chamber of Commerce, no priority facing our Nation is more important than putting Americans back to work. With 

nearly 9 percent of the workforce unemployed, the biggest policy 

challenge we face over the next decade is to create the 20 million 

jobs that we need to replace the jobs lost in the recession and to 

meet the needs of our growing workforce. 

With booming demand overseas for U.S. goods and services, we 

believe that trade can play a vital role in reaching this goal. The 

opportunities are immense. Already, more than 50 million Americans are employed by firms that engage in international trade. One 

in three manufacturing jobs depends on exports, and 1 in 3 acres 

on American farms is planted for hungry consumers overseas. Nor 

is trade just for big companies. More than 97 percent of the quarter-million U.S. companies that export are small- and midsized 

firms, but for companies large and small, the chief obstacle to 

reaching the goal of doubling U.S. exports by 2014 is the complex 

array of foreign barriers to American exports. Those barriers are 

alive and well. For example, Colombia’s effective tariff on imports 

from the United States averages 14 percent for manufactured goods 

and is even higher for agricultural products. By contract, the average U.S. tariff last year imposed on imports from Colombia was 

one-tenth of 1 percent. 

Historically, the only way the U.S. government has ever enticed 

a foreign government to open its market to American exports is by 

negotiating free trade agreements to eliminate them on a reciprocal 

basis. This is just what will be achieved by the FTAs with Colombia, Panama and South Korea. These are pro-growth agreements 

that will create good American jobs, bolster important allies and 

confirm American leadership around the world. 

Such agreements have a proven record of success. Between 2003 

and 2008, for example, U.S. exports rose by 79 percent, their fastest growth in nearly two decades. It is no coincidence that this period also saw the U.S. implement free trade agreements with 10 

countries and saw earlier agreements such as NAFTA attain their 

full implementation with the elimination of all tariffs on U.S. goods 

entering Canada and Mexico. 

Recognizing these benefits, countries are rushing to negotiate 

new trade accords but America is being left behind. According to 

the World Trade Organization, there are 283 regional trade agreements in force around the globe today but the United States has 

just 11 such agreements covering 17 countries. There are more 

than 100 such agreements currently under negotiation among our 

trading partners. Unfortunately, the United States is participating 

in just one of these. 

The United States is standing on the sidelines while other nations clinch new trade deals. For example, the European Union has 

ratified an FTA with South Korea. Canada has done so with CoVerDate Nov 24 2008 12:27 Jan 12, 2012 Jkt 037690 PO 00000 Frm 00052 Fmt 6633 Sfmt 6633 P:\MY DOCS\HEARINGS 112\112-21 031611\112-21 CHRIS
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lombia. Both of those agreements are expected to enter force by 

July 1st. If Washington delays further, U.S. exporters will be put 

at a marked competitive disadvantage in Colombia, Panama, and 

South Korea. According to a study by the U.S. Chamber, the 

United States will more than 380,000 jobs and $40 billion in export 

sales if it fails to implement the pending trade agreements while 

the European Union and Canada move forward with their own 

agreements. Unfortunately, this is already happening. The U.S. 

share of Colombia’s import market for agricultural products fell 

from about three-quarters in 2008 to about one-quarter last after 

Bogota implemented a new trade deal with its South American 

neighbors. 

In the interest of time, I will simply refer the committee to my 

written testimony where I have also addressed the importance of 

defending intellectual property at home and abroad, and I would 

like to associate myself with the remarks of Mr. Holleyman in that 

regard. 

It is also important to modernize export controls s the Obama 

Administration has begun to do in a very positive initiative. It is 

also critical to develop a tax system that incentivizes investment 

and job creation here in the United States. 

In conclusion, the United States needs a laser-like focus on opening foreign markets. We need to approve the pending trade agreements and negotiate more of them including the Trans-Pacific Partnership and an ambitious Doha Round agreement. Also, Congress 

should renew the traditional trade negotiating authority that every 

President since FDR has enjoyed. If we stand still on trade, we fall 

behind. At stake is the standing of the United States in the world 

and our best hopes for escaping high unemployment, massive deficits and exploding entitlements. 

The U.S. Chamber of Commerce looks forward to working with 

the members of the committee to forge a trade agenda that will create jobs, opportunity and growth here in the United States. Thank 

you. 

[The prepared statement of Mr. Murphy follows:] 

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Mrs. BONO MACK. Thank you. 

Mr. Pelton, you are recognized for 5 minutes. 

STATEMENT OF JACK J. PELTON 

Mr. PELTON. Chairman Bono Mack, Ranking Member Butterfield 

and members of the subcommittee, my name is Jack Pelton. I am 

Chairman, President and CEO of Cessna Aircraft Company. 

Cessna is the world’s largest general aviation manufacturer in the 

world based on sales units, and since its inception in 1927, Cessna 

has delivered more than 192,000 airplanes virtually to every country in the world. Cessna is also one of the 70 member companies 

of the General Aviation Manufacturers Association, which represents the world’s leading manufacturers of generation aviation 

aircraft engines, avionics and components. 

General aviation is an important contributor to the U.S. economy. It supports more than 1.2 million jobs, is providing more than 

$150 billion in economic activity, and in 2010 generated $5 billion 

in exports. We are one of the few remaining manufacturing industries that still provides a significant trade surplus for the United 

States. These exports accounted for 62 percent of the billings generated by general aviation manufacturers, significantly up from 50 

percent of the billings attributed to exports in 2009. 

Cessna, like many other companies, is coping with the realities 

of a weak economy. Since late 2008, we had to lay off nearly 8,000 

employees out of our 16,000 that we employed before the recession. 

The three major manufacturers in Wichita alone have been experiencing significant declines in sales in recent years. In 2010 alone, 

Bombardier Learjet was down 29 percent, Hawker Beechcraft was 

down 22 percent and Cessna was down 28 percent. We do believe 

the market is stabilizing as we see an increase in orders in some 

segments of our industry. 

The tax bill that was passed in 2010 will be very helpful to our 

industry by extending the research and development tax credits 

and allowing 100 percent expensing for capital investments like 

aircraft, avionics, engines and cabin equipment. 

Cessna fully supports the current efforts to reform, streamline 

and overhaul the export licensing and policy framework. As an aircraft manufacturer, we have found that we have a generally positive export environment for our physical products: aircraft spares, 

ground support equipment. However, ITAR in many cases is a 

problem for our utility and special missions aircraft sales. These 

aircraft do not contain sensitive military systems and are functionally equivalent to commercial aircraft and do not provide significant military or intelligence impact yet many of our export existing 

controls and policies have slowed our globalization and have slowed 

our sales efforts. 

Due to the high standards we adhere to in the United States, 

manufacturers cannot sell aircraft or major aircraft parts unless 

they are certified by the Federal Aviation Administration. This 

means that the financial health and competitiveness of the U.S. 

manufacturers in the global market depends in large part on the 

ability of the FAA to do its job. Unfortunately, we are concerned 

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quate resources and implements new processes and procedures to 

streamline the certification process. We believe it will not be able 

to keep up with the demand by manufacturers and this will severely diminish the competitiveness of the U.S. industry and its 

ability to bring new products to the global market and create new 

jobs in the economy. 

There is, however, a mechanism already in place that can help 

manage the resource demands on the FAA. For aircraft certification, the FAA established organization designation authorization, 

referred to as ODA, in 2006. This allows the FAA to delegate routine certification tests such as the review and approval of thousands of individual drawings and tests. More of the U.S. manufacturers have invested in the development of the ODA system that 

has been approved by the FAA but unfortunately the certification 

process efficiencies have yet to be realized by our industry. 

Aircraft financing in this new economic climate remains a challenge. The availability of credit continues to be a constraint on exports, and Cessna has worked very hard to create a $500 million 

facility backed by the Export-Import Bank of the United States. 

This facility has assisted Cessna with exports over the past couple 

years when liquidity in the market has been very tight. We do applaud the Export-Import Bank for working with us to deliver creative solutions that support our export needs. 

Madam Chairman, if government and industry work together on 

the issues discussed here today, then we will help ensure that our 

country stays ahead of the pack economically and technologically in 

the years ahead. Thank you for the opportunity to be here today. 

[The prepared statement of Mr. Pelton follows:] 

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Mrs. BONO MACK. Thank you, Mr. Pelton. 

Mr. Ikenson, you are recognized for 5 minutes. 

STATEMENT OF DANIEL IKENSON 

Mr. IKENSON. Good morning, Chairman Bono Mack, Ranking 

Member Butterfield and members of the committee. My name is 

Dan Ikenson. I am an Associate Director at the Center for Trade 

Policy Studies at the CATO Institute. I am pleased to be here today 

to share my views on manufacturing, jobs and trade. 

Expanding trade has been an important source of U.S. job 

growth historically. In the quarter-century between 1983 and 2007, 

as real GDP more than doubled and the real value of U.S. trade 

increased fivefold, the U.S. economy created 46 million net new 

jobs. That is 1.84 million net new jobs per year. And just to be 

clear, when I say expanding trade, I mean expanding exports and 

imports. It is important to note that it is exports and imports that 

support U.S. jobs up and down the supply chain through various 

channels. I think people generally understand that exports contribute to economic growth, which is essential to job creation, but 

many of them make the mistake of concluding that if exports help 

grow the economy and create jobs, then imports must shrink the 

economy and cost jobs. Trade is thus viewed as a competition between our producers who employ us and their producers, who employ them. I think that is the wrong way to look at trade. 

In the 21st century, it is inaccurate to characterize international 

trade as a competition between us and them because of foreign direct investment, joint ventures and other equity-sharing arrangements. Quite often, we are they and they are we. Just apply that 

question to the U.S. auto and steel industries. As a result of the 

proliferation of disaggregated transnational production and supply 

chains, we and they often collaborate in the same endeavor. There 

is competition between supply chains but success first demands cooperation within those supply chains, and this reality I think demands policies that are welcoming of imports and foreign investment. 

A recent study by the Asian Development Bank Institute found 

that just a tiny fraction of the cost of producing the Apple iPhone 

is Chinese value added. The only Chinese input is labor, which is 

used to assemble the components manufactured in other countries. 

The value of that labor accounts for about $6.50, or 3.6 percent of 

the $179 it costs to produce the total iPhone. The other 96.4 percent of the total cost is components produced in other countries including the United States. Most of the iPhone’s value, however, accrues to Apple, which reaps the lion’s share of the approximately 

100 percent markup, and that markup goes to retailers, distributors, marketers and other firms in the supply chain as well as to 

Apple, which distributes some to shareholders and retains some for 

research and development which supports engineering and design 

jobs higher up the value chain so as to continue the virtuous circle. 

So even though only about $6.50 of that iPhone is Chinese value, 

the entire $179 cost is chocked up as an import from China because 

that was the product’s final point of assembly. That added $1.9 billion to the U.S. trade deficit with China in 2009. 

67 

But should we lament a trade deficit in iPhones or any other 

products assembled abroad, particularly when those products comprise U.S. value added and support high-paying U.S. jobs? Legions 

of American workers and their factories, offices and laboratories 

would be idled without access to foreign workers and foreign factories. Without access to lower-cost labor, countless ideas hatched 

in U.S. labs which became viable commercial products that support 

hundreds of thousands of U.S. jobs in engineering, design, marketing, logistics, retailing, finance, accounting and manufacturing 

might never have made it beyond conception. 

Countless U.S. jobs up and down the value chain depend on imports from China but imports support U.S. employment through 

many other channels as well. According to the Bureau of Economic 

Analysis, intermediate goods and capital equipment accounted for 

55 percent of the U.S. import value last year. These are products 

purchased by producers, not consumers, so imports help reduce the 

cost of production, enabling producers to better compete and support U.S. jobs and wages. The 45 percent of imports that are consumer goods support U.S. jobs in logistics, transportation, wholesaling, retailing and aftermarket services industries, and by helping to keep prices lower and quality higher, imports allow consumers to have more resources with which to purchase other products and services, both of which support U.S. jobs. 

The Obama Administration, as we heard this morning, has offered an answer to the question implicit in this hearing. Its National Export Initiative aims to double U.S. exports in 5 years by 

reducing an eliminating various administrative, regulatory and financial obstacles faced by U.S. exports. That plan includes some 

laudable components which I fully support. The idea of streamlining export controls makes a lot of sense and it is likely to lead 

to export growth. Wrapping up the three pending bilateral trade 

agreements, the Doha Round, the Trans-Pacific Partnership agreement, those will clearly all lead to increased exports. 

But there are other aspects of the NEI that I find troubling. First 

of all, it completely ignores the import side of the equation. It is 

silent on the fact that U.S. exporters are producers before they are 

exporters and as producers they do a lot of importing, and there 

are many other ways to reduce their costs including through 

streamlining of various regulations. 

Mrs. BONO MACK. Can you please wrap up? You are over the 

limit. 

Mr. IKENSON. Yes. I will just conclude by saying a serious plan 

to boost U.S. economic growth and hiring should start by identifying all policies, regulations, practices and conditions that impede 

U.S. competitiveness not just those obstacles that confront U.S. 

companies as exporters. Thank you. 

[The prepared statement of Mr. Ikenson follows:] 

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Mrs. BONO MACK. Thank you. 

Mr. Crouse, 5 minutes. 

STATEMENT OF JAMES CROUSE 

Mr. CROUSE. Thank you for the opportunity. I am Jim Crouse 

with Capstone Microturbine manufacturing in Chatsworth, California. 

A microturbine is a small combustion turbine used to generate 

electricity at the location of an end-use customer. Capstone turbines are used as range extenders in hybrid electric vehicles as 

well as stationary power for a host of customers from hotels to hospitals to industrial customers on a global basis. As the leading 

manufacturer of microturbine energy systems, Capstone has valuable insight into what it takes to compete globally in a growing industry characterized by technological change and innovation. 

Although we were invited to testify on behalf of the chairwoman 

and ranking member, our power generation systems can be found 

in almost every State in the United States. Customers use our systems mainly to save money by increasing their energy efficiency. 

By utilizing exhaust from the turbine to make hot or chilled water, 

businesses can cut their energy costs by up to 50 percent. The use 

of both electricity and thermal energy simultaneously from a single 

fuel source is called combined heat and power, or cogeneration. 

Some of our systems also provide cooling, known as CCHP. 

Microturbines produce very little criteria pollutants as well as 

very little greenhouse gases. Capstone’s unique technology makes 

clean, efficient combustion possible. We are able to use fossil fuels 

including abundant natural gas in a clean, efficient manner. Other 

systems that we manufacture burn biogas or methane from landfills or digesters. In these applications, we are renewable energy. 

Our customers can be found all over the world in a variety of industries. Oil and gas companies use our product to power their installations, oftentimes in remote locations. Oil and gas customers 

prize reliability, and a microturbine is highly reliable since it has 

only one moving part, does not require lubrication or coolants and 

has only one maintenance interval per year. Additionally, generating power with microturbines can eliminate the need for air permitting as we design our product to meet the most stringent air 

standards in the world: California Air Resources Board standards. 

Our CCHP and CHP customers typically are commercial businesses such as industrial plants, hotels, hospitals and retailers that 

use our product to increase their efficiency and reduce their cost, 

making them more competitive in both a local and global market. 

Microturbines are installed in hybrid buses, trucks, and we have 

recently been installing microturbines in marine applications both 

here in the United States and in Europe. 

Capstone employers approximately 200 highly skilled American 

workers in its manufacturing facility in Los Angeles, and with over 

120 patents, Capstone is a technology innovator. We produce about 

80 percent of the world’s microturbines. Most of the balance is also 

manufactured in the United States by Ingersoll Rand. This is not 

a product that we are buying from China. This is a product we are 

selling to China. We have a good and strong business in China. 

83 

We export because of a variety of reasons. That is where the 

markets are. We sell in over 50 countries both developing and developed countries on six continents. In many cases, overseas markets are stronger than our domestic markets. Europe is a particularly strong market for Capstone, in part because of feed-in tariffs 

that exist there. 

Capstone Turbine sees value in adopting long-term energy policy 

here in the United States. We believe that a strong domestic policy 

will only strengthen our export business. According to Oak Ridge 

Laboratories, the CHP could provide 20 percent of the U.S. generating capacity by 2030, generating $234 billion in new investment 

and create 1 million highly skilled jobs. CO2 emissions could be cut 

by more than 800 million tons per year, the equivalent of taking 

half of the U.S. passenger fleets off the road. 

Energy efficiency combined heat and power makes sense regardless of where you stand on climate change. Efficiency is good. Saving money on your energy is good. It makes us more competitive. 

Capstone Turbine has received several grants in research and development from the Department of Energy. However, lack of longterm energy policy that promotes energy efficiency and distributed 

generation in combined heat and power—sorry. 

Mrs. BONO MACK. You can complete your sentence. 

Mr. CROUSE. So Capstone strongly believes that a strong domestic policy is important. We have a bill currently that was introduced by Linda Sanchez, and would love to see that bill move forward to grow our business domestically, to see our international 

business grow as well. The two are tied together, domestic and 

international. 

[The prepared statement of Mr. Crouse follows:] 

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Mrs. BONO MACK. Thank you. 

The chair will recognize herself for the first 5 minutes of questioning, and I will begin by commenting on your testimony, Mr. 

Crouse. As a resident of California, almost lifelong—we moved from 

Cleveland before I was 2 but I don’t admit that very often—but it 

surprises me. California, you mentioned CARB and what we live 

under, the most stringent regulations of any State, I would say, in 

the country, yet you only sell 5 percent of your total sales in California, and to me, that leads really to my question, which is for Mr. 

Ikenson. 

In your testimony, you mentioned that you are frustrated that 

NEI is absolutely doing nothing to deal with the burdens on business. I think you were trying to get into that when you ran out of 

time. Can you go into a little bit more? Your exact words are: ‘‘The 

NEI is silent on the significant obstacles to U.S. competitiveness at 

home and abroad.’’ Can you expand? 

Mr. IKENSON. Sure. Well, in fairness, it is called the National Export Initiative, so limiting the concern to exports is, I suppose, understandable, but it really should be broadened. I wish it were 

called the National Economic Initiative in which—I mean, if we are 

really concerned about our exporters, we need to recognize first 

that they are producers, and as producers, they rely on imported 

raw materials that account for a lot of the costs, and they also are 

confronted with lots of regulations. Those burdens are immense. 

Having a free trade agreement with Korea is an excellent idea. It 

is clearly going to lead to export growth, but cutting a tariff, a foreign tariff, by 5 percent is a good thing but what about cutting 

your costs, your domestic costs by 10 percent because the regulatory burden has subsided. 

There was a survey of about 13,000 business executives that was 

conducted by the World Economic Forum recently, and it found 

that there were 52 countries that have less burdensome regulations 

than the United States, and we operate in a global economy here. 

Governments, enterprises are competing for investment, capital investment and investment in human talent. There is a competition 

in policy, and I think we are sort of missing the boat here. We have 

the highest corporate tax rate in the world. We have the regulatory 

burdens. Infrastructure is in disrepair. We don’t have a policy that 

welcomes high-skilled immigrants. 

Mrs. BONO MACK. Let me just jump in here if I can. I know in 

your written testimony you write that the U.S. has the highest corporate tax rate among all OECD countries. How would you recommend reforming corporate taxes? 

Mr. IKENSON. Well, I am not really an expert in the tax field, but 

there has been a lot of tax competition globally over the past decade or so. We need to streamline the tax system. A lot of U.S. companies that are operating abroad, some of them don’t want to repatriate their profits because of the corporate tax code, and these 

companies, in my view, are unfairly demonized as either Benedict 

Arnold companies or companies that aren’t helping the U.S. economy. Well, you can incentivize the return of those investments to 

create productive facilities in the United States and to hire by 

changing the tax code. I am not expert on how to do that but there 

96 

are plenty of others at CATO and maybe even at this table who 

could help you. 

Mrs. BONO MACK. I just like to note that you pointed it out, so 

that is good enough to me. But also in your testimony, you said 

something that I think we as Members of Congress feel very often 

at home, and you talk about the American people, the sentiment 

that they just don’t get it and you spoke a little bit about in your 

verbal testimony, that they think imports bad, exports good, and 

then you talked a lot about iPhone, and I just whipped off the back 

cover of mine. You know, Apple is pretty smart that they do say 

designed by Apple in wonderful California—I added a couple words 

there—but assembled in China. And perhaps they in their own way 

could help by saying—it is a mutt of a product. 

Mr. IKENSON. Right. 

Mrs. BONO MACK. It is assembled everywhere, and I think that 

could help. Can you explain? Do you think the American people 

would begin to understand? And I think about, I have a brother 

who is an engineer. He has worked for Hyundai and Kia and all 

sorts of car companies, and he has an American job, he is an engineer. Can you speak of why the American people don’t quite understand that? 

Mr. IKENSON. Yes, and I think that the media presents fairly 

simplistic accountings of what the trade deficit means. We hear 

about the trade deficit on a monthly basis, and it is always reported that imports are bad and we are going to lose jobs. There 

was a report last week that imports always mean that foreigners 

are—when imports outpace exports, foreigners add more jobs than 

are added in the United States. I think that is not true. I mean, 

lots of jobs rely on imports. 

And to get to the technical aspect, you flipped over your iPhone. 

Pascal Lamy, who is the chairman of the WTO, understands that 

people are misled by these trade statistics. These trade statistics 

are reflective of a bygone era. We now live in this age of 

globalization that we need to break out the constituent elements of 

the value, and he is sort of leading a charge to try to do that so 

people say hey, this import in fact even though it is all attributed 

as an import from China, it is actually supporting, you know, 

10,000 U.S. jobs because of the patents or the high-end manufacturing that happened here. 

Mrs. BONO MACK. Well, thank you, and I am down to my last 

15 seconds. Let me just jump to Mr. Holleyman. 

Why do developed countries such as the United States and 

France still have piracy rates of 20 to 40 percent, respectively, and 

how much can Congress do and how much really ought to be technologically driven? 

Mr. HOLLEYMAN. Well, we certainly think the thing Congress can 

do is to make sure that we have the right laws on the books, and 

I think there are some additional things we can do here in the 

United States. There is the use of trade pressure, and I think I 

would put France very high on that list. It has the fourth highest 

piracy losses in the world, and the U.S. government should be 

pressing that issue. Technological measures will certainly help but 

they won’t solve the problem and so we need to keep sort of one 

step ahead of the pace. In the United States, I think one of the best 

97 

signals would be ensuring that as the U.S. government is required 

to use legal software, that federal contractors are required to do 

that as well. That would be the next big step that would be a great 

thing to take to France and to China and other countries and get 

them to do that. 

Mrs. BONO MACK. Thank you. My time is expired. I would recognize the ranking member, Mr. Butterfield, for his 5 minutes. 

Mr. BUTTERFIELD. I thank the chairman. 

Let me go to you, Mr. Crouse, if I can. Again, thank you for your 

presence today. Mr. Crouse, recognizing export promotion as a priority, President Obama’s 2012 budget increases resources for the 

ITA, particularly for the commercial service. Meanwhile, others 

have sought to impose severe cuts to export promotion, not believing it worth the cost. Mr. Crouse, Capstone, I am told, has participated in several trade missions. Would you say they were worth 

the cost to you as the exporter? 

Mr. CROUSE. Yes, definitely. We participated, as you said, in several trade missions, and it has resulted in new business for us. We 

recently in the last couple weeks received an order out of Tunisia 

after attending a trade mission in North Africa a year ago or so. 

The Department of Commerce, by the way, is one of the most professional government organizations I have ever worked with. It is 

a pleasure to work with them, and we plan to continue doing so. 

Mr. BUTTERFIELD. Please tell me in what ways did the support 

of the Federal Government allow Capstone to export goods to new 

markets it otherwise might not have been able to do? 

Mr. CROUSE. We used the gold key service that we are able to 

use in-country resources to screen potential distributors or customers prior to arriving so that when we get there, we already 

have meetings set up and we are much more efficient and able to 

streamline our sales process and partner process. It is a big help. 

Mr. BUTTERFIELD. In your work with ITA, have you had an occasion to encounter U.S. trade professionals that were stationed 

abroad? 

Mr. CROUSE. Yes, we have. 

Mr. BUTTERFIELD. And did you find them to be reasonably helpful to you and your company? 

Mr. CROUSE. Yes, both U.S. employees that were there working 

internationally as well as some of the domestic or locals that they 

have working in the offices there have always been very helpful to 

us. 

Mr. BUTTERFIELD. The Republican spending plan that passed the 

House, we call it H.R. 1, would prevent those trade professionals 

from being available when and where companies such as yours 

could use their help to complete sales and to generate jobs back 

home. Mr. Crouse, is it correct that on these trade missions that 

you have traveled that you pay your own way, you pay for your 

hotel room and for your food? 

Mr. CROUSE. Yes, we pay our own way. 

Mr. BUTTERFIELD. My final question. Today, Google is the global 

leader in Internet search. It is worth hundreds of billions of dollars. 

It employs thousands and thousands around the world including 

here in our country, and it is so well known and used that the company’s name is now a verb. The idea that led to Google was origiVerDate Nov 24 2008 12:27 Jan 12, 2012 Jkt 037690 PO 00000 Frm 00103 Fmt 6633 Sfmt 6633 P:\MY DOCS\HEARINGS 112\112-21 031611\112-21 CHRIS
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nally funded in the mid-1990s by the National Science Foundation, 

and let us not forget that the Internet itself originated with the 

Federal Government and its development was pushed along by 

NSF in the 1980s when it sought to give researchers across the 

country a way to access its supercomputing resources. Today, electric cars and iPhones and other high-tech gadgets that we rely on 

daily are powered by lithium ion batteries. The development of this 

type of battery is a result of federally funded materials research at 

the University of Texas in the 1980s. These are just a few examples showing that the federal investments now in R&D can lead to 

innovative, high-value products from the private sector well into 

the future. It also shows that the Federal Government can be, is 

and must be an engine for private sector growth, and nowhere else 

is that more true than with respect to developing new energy technologies. 

In your testimony, you also note, Mr. Crouse, that your company 

has received several R&D grants from the Department of Energy. 

In the remaining minute, can you please tell me a little bit more 

about those grants? For example, can you describe the research 

Capstone has done or is now doing and how that research relates 

to the growth of your business? 

Mr. CROUSE. Certainly. Capstone was founded 20 years ago, and 

had DOE funding as well as funding from Ford and Southern California Edison to develop a microturbine for hybrid electric vehicles. 

Our turbine is more efficient than traditional turbines, in part because of the funding and the research that we did in cooperation 

with the government as well as other private companies. Today we 

have several programs that we are working on—a flexible fuel 

microturbine that will run on hydrogen. We are also working on a 

more efficient turbine that will increase our efficiency in the range 

of 45 percent. And those programs combine government dollars 

with private dollars, our own dollar and our investors’ dollars, to 

develop new technologies and products. 

Mr. BUTTERFIELD. Mr. Crouse, thank you very much for answering those questions. I wish you well as you continue to grow your 

business. 

Mr. CROUSE. Thank you. 

Mr. BUTTERFIELD. This Congress wants to be an ally, not an obstacle, so thank you very much. 

Mrs. BONO MACK. I thank the gentleman. The chair recognizes 

Mr. Pompeo of Kansas for his 5 minutes. 

Mr. POMPEO. Thank you, Madam Chairman. 

Welcome to everyone here this morning. A special welcome to 

Mr. Pelton, a constituent, and leader of a company with 8,000 employees in my home district. Thanks for all of the hard work from 

you and your team in these challenging economic times. I know 

that a group of witnesses that came to Washington, D.C., before 

was excoriated for having traveled in general aviation aircraft. I 

want to go on the record hoping everyone in this room flew here 

today on a general aviation aircraft built in Wichita, Kansas. 

Mr. Pelton, you talked about export controls. Can you give me an 

example of a special mission aircraft as some place where the government got in the way of helping you make a sale in a foreign 

99 

country for a product that didn’t present any national security 

risks? 

Mr. PELTON. Congressman Pompeo, thank you for inviting me. 

There are numerous examples. I can give you one today that is 

right in front of that actually kind of dovetails into the discussion 

earlier this morning dealing with Panama. The government of Panama is interested in our brand-new CJ–4, which we just certified 

last year. For us to even have the discussion with the Panama government, I have to apply for a marketing license to go down there 

to have the discussion. Now, here is the interesting part about 

that. I don’t know what they are interested in, so when I apply for 

the license, I have to decide are they looking for a VIP airplane, 

are they looking for an airplane that may have a camera on it, it 

may have a flare on it, it may have some sort of med-evac, and I 

have to guess because I haven’t been able to have contact with the 

customer in Panama to really understand because I have to have 

this marketing license. So I have to go get the marketing license. 

Then once I have the discussion, which could take 6 to 9 months 

to get that license, so if the avenue is still open to my competitors 

internationally who don’t have to go through those restrictions having gone down there and swept the deal away from me, I will have 

to find out exactly what they need on the airplane and I will have 

to come back and work with potentially three different departments to get the licenses necessary for whatever equipment may be 

installed. It could be Commerce, it could be State and it could be 

Defense, depending on what the item is. Many of the items that are 

on the restricted list are really outdated and not that of national 

security or technically one that we should be worried about as a 

country, but I will have to continue to go through that process, continue to apply, may even be rejected along the way, and then in 

the end after the product is delivered to be able to support that 

product down there if it has been determined that there is a component as simple as a camera that gets identified as ITAR. I have 

to in any support of that airplane go through licensing to be able 

to keep that airplane working properly and keep the customer’s 

satisfaction that they demand. So it is a very, very onerous process 

for product that is essentially getting delivered with nothing that 

we should be concerned about from a national security standpoint. 

Mr. POMPEO. Thanks. Are there a couple quick hits that maybe 

anybody on the panel, a couple quick things that Congress could 

do? We talked about these regulatory issues. Are there a couple 

rifle shots where we could when we have got unemployment where 

it is today where we could really find bipartisan support to get 

something down and move the ball forward? 

Mr. PELTON. Before any of my colleagues here respond, I think 

there are two quick hits that were discussed. The research and development tax credit needs to be made permanent. That provides 

the high-tech engineering jobs that this country was founded on so 

we don’t become a service industry, and I also believe that while 

it has been lightly touched on, the corporate tax rate, this is a fantastic country that is number one in everything and I hope we are 

not going to be number one in corporate tax rates, and if you can 

find a way to reduce the corporate tax rates, I can assure you that 

100 

the manufacturers in this country can offset that revenue with new 

jobs immediately. 

Mr. POMPEO. Thank you. Mr. Murphy? 

Mr. MURPHY. If I could just add to the tax comment there, unfortunately we do seem to be on track to have the highest corporate 

tax rate in the world if Japan moves forward and lowers theirs. 

But often there is a comment made in response to that, that many 

companies have exclusions that allow them to pay much less. I 

would just mention a study done by KPMG. They have an index 

that they do called the total tax index, which looks at what companies are actually paying, and according to this index, companies 

and operations of companies in Canada, in the Netherlands and 

many other countries are often paying 20 to 40 percent less in 

taxes than production in the United States is, and this is something that is—those are huge numbers. That makes a significant 

difference. You know, the title of the hearing is about making it in 

America. Companies have to take—that is something that is very 

much on their radar as they think about where they are going to 

be investing and hiring. 

Mr. POMPEO. I appreciate that. Mr. Holleyman, did you have 

something you wanted to say? 

Mr. HOLLEYMAN. I will say that 60 cents of every dollar spent 

around the world on software comes back to U.S.-based companies, 

so every single bilateral discussion by any member of this committee or the Administration should raise the issues around IP 

theft. 

Mr. POMPEO. Great. Thank you. My time is up. Thank you. 

Mrs. BONO MACK. I thank the gentleman. Mr. Gonzalez, 5 minutes for your questions. 

Mr. GONZALEZ. Thank you very much, Madam Chairwoman. 

Mr. Holleyman, in your testimony—I am trying to see if I can 

find it quickly—nearly four out of five PC programs in China, 79 

percent, are not paid for. What is that figure for the United States? 

Mr. HOLLEYMAN. For the—— 

Mr. GONZALEZ. I just want to know the extent of the problem. 

Mr. HOLLEYMAN. It is just the reverse, so essentially 80 percent 

of the software in China is not paid for. In the United States, 80 

percent of the software is paid for. 

Mr. GONZALEZ. And if you will just kind of walk me through why 

is that, and I mean, I know you are going to assume that Members 

of Congress are going to understand software and everything else, 

but I assure you, it is not necessarily a Member of Congress. We 

use programs. We use things that are downloaded and so on. But 

technically, if you just walk me through, tell me how something in 

the United States or in China is basically acquired illegally and it 

continues obviously spiraling uncontrollably in places like China. 

Mr. HOLLEYMAN. Well, I will give you a great example. I will 

focus on the business sector because that is where the biggest opportunity is to change behavior quickly. What happened in a hypothetical, let us say China, the 80 percent piracy rate could be a 

business in China is operating and they have 100 computers but 

they have only paid for the software for 20 of their computers, and 

they are internally duplicating for all the rest of their operations. 

Or they may be 100 percent illegal because they have used an illeVerDate Nov 24 2008 12:27 Jan 12, 2012 Jkt 037690 PO 00000 Frm 00106 Fmt 6633 Sfmt 6633 P:\MY DOCS\HEARINGS 112\112-21 031611\112-21 CHRIS
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gal Office program or an illegal operating system. So they have just 

internally duplicated it, which is simple to do. There are no effective penalties against it. And the big thing that we are trying to 

do in China, which is really what the bilateral discussion is, is really twofold. One, to get the Chinese government to ensure that 

when it uses software that it is using only legal software, and secondly, to ensure that when Chinese state-owned enterprises use 

software, that they are using only legal software. There are simple 

ways of making sure that that is done, but unfortunately, in rapid 

growth markets like China, we are seeing a dramatic lag in the use 

of legal software, and what is happening is that because the market is growing so fast, the dollar value of that is skyrocketing year 

over year. 

And this goes much more broadly. It is not just the software impact but that is a lower cost of doing business for any enterprise 

in a high-piracy market, and any constituent of yours who is using 

software, which is most every business, if they have a competitor 

in a country with a high piracy rate, the U.S. company has a higher cost of doing business than their competitor in the area of tool 

production of software. 

Mr. GONZALEZ. Now, in the business environment, and I don’t 

want to say anything that could be controversial. I am trying to 

contrast the situation in the United States and that in China, and 

why it is viewed with some lax attitude of maybe not seeing anything wrong with utilizing your software without having to pay, obviously as we said, for the 100 computers as opposed to the 20. But 

in the United States, it is an environment, is it a business sense, 

is it certain human behavior? Is it enforcement? What is that combination that results in 30 percent or less or whatever it is. 

Mr. HOLLEYMAN. Twenty percent in the United States. 

Mr. GONZALEZ. Twenty percent in the United States as opposed 

to 80 percent in China. 

Mr. HOLLEYMAN. By the way, I think 20 percent is too high and 

so we are pressing to get it down further in the United States. It 

is really two things. I mean, one, we have constitutional 

underpinnings for intellectual property in this country and we have 

the toughest civil laws on the books and that provides an effective 

deterrent, particularly against businesses that would otherwise use 

illegal software. It is just not worth the risk and the cost. And secondly, I think that is also why the software industry has grown so 

well out of this country is we began with a stronger market both 

size-wise but in terms of legal protection. In a country like China, 

there are few effective civil remedies. There are no criminal penalties whatsoever against use of pirated software within a corporate environment. And finally, there just isn’t any deterrents in 

the marketplace that are effective and that is why it really has to 

be a high-level, bilateral economic discussion. 

Mr. GONZALEZ. Thank you very much, Mr. Holleyman. 

Mr. HOLLEYMAN. Thank you. 

Mr. GONZALEZ. I yield back the balance of my time, Madam 

Chairman. 

Mrs. BONO MACK. Thank you, Mr. Gonzalez. I recognize Mr. 

Lance of New Jersey for his 5 minutes. 

102 

Mr. LANCE. Thank you, Madam Chair, and good afternoon to you 

all. 

Following up on that, and I guess to Mr. Holleyman, is it better 

to have bilateral discussions on this issue as opposed to the WTO, 

or it is a combination? 

Mr. HOLLEYMAN. Certainly, Mr. Lance, is it a combination, but 

I think that in this case, the most effective mechanism is for the 

bilateral discussion, and when Members of Congress speak, as they 

have, on this issue and when the President of the United States 

directly talks about software enterprise legalization to President 

Hu Jintao, I think that we have a lot farther to go to see the results, but to me, it takes that type of direct engagement. 

Mr. LANCE. And I am sure you follow this very closely, the recent 

meetings here in Washington between the two presidents. Do you 

think that that was at all helpful or do you think we have to do 

more? 

Mr. HOLLEYMAN. I think from a U.S. perspective, they were very 

helpful in raising it to the highest level on the bilateral relationship with China that we have ever seen. On the China level, have 

my companies seen any increased sales as a result of those commitments? No. I hope they will come but they have not, and I need 

to be blunt about it including to the U.S. government. So the U.S. 

side is working hard but we have to ultimately test it by results, 

do we see increased sales, not just commitments. 

Mr. LANCE. Well, thank you. This is very helpful. Obviously, we 

respect what the Administration is doing but we need to see results 

and not just levels of talks, even if they are at the highest levels. 

To Mr. Ikenson, yesterday the full committee passed out of its jurisdiction an issue regarding net neutrality, and I am sure you are 

aware of that. What is your position regarding the FCC’s recently 

announced net neutrality regulations? 

Mr. IKENSON. That is an area that I am absolutely uninvolved 

with, but I can tell you that CATO Institute institutionally and our 

experts that deal with communications issues like that, we are opposed to it. 

Mr. LANCE. Thank you. 

And then back to the issue of corporate taxation, obviously I am 

in agreement with many of my colleagues that the rate has to be 

lowered in the United States to remain competitive. To anybody on 

the panel who might be knowledgeable in this area, I am also concerned about the repatriation of profits from abroad. Perhaps to 

Mr. Murphy, your thoughts on that. 

Mr. MURPHY. Yes, and it is unfortunate that it has become commonplace from a number of political leaders to hear the line that 

our tax system actually incentivizes investment overseas when in 

fact what they are describing is our system of worldwide taxation, 

which is unique practically in the industrialized world, and the deferral that is allowed on income earned overseas is the fact that deferral exists only partly levels the playing field for those U.S. companies. This is an issue that has been brewing for a long time as 

a competitive challenge for U.S. industry. 

Mr. LANCE. My bottom line is, we need to create more American 

jobs, and if we can bring funds from abroad that will create more 

American jobs, that is what I favor, and I know there is a lot of 

103 

talk regarding this but I want to get to the bottom so we can create 

more American jobs, particularly more American manufacturing 

jobs. 

Mr. MURPHY. The chamber strongly supports allowing repatriation of those funds, which was done several years ago successfully 

and we think it should be done again. 

Mr. LANCE. Is there any other member of the panel who would 

like to comment on that? 

I thank you very much, Madam Chair. I yield back the balance 

of my time. 

Mrs. BONO MACK. I thank the gentleman and recognize the gentleman from Louisiana, Dr. Cassidy, for 5 minutes. 

Mr. CASSIDY. Thank you, Madam Chairman. It has been a long 

time since I was called a gentleman. 

Mrs. BONO MACK. A gentleman and a doctor, but please remember your microphone. Thank you. 

Mr. CASSIDY. Mr. Murphy, it is my sense that when we compete 

internationally, we typically are sending out high-value-added 

products. Now, maybe agriculture is an exception so I will limit 

myself to the manufacturing sector. But it seems as if we are sending out something which the folks who are employed in that field 

have good jobs with good benefits and so obviously extrapolating 

from that, if that is true, is it safe to say if we expand trade and 

this trend continues, we cannot compete on commodity pricing for 

tennis shoes perhaps with China but we certainly can compete on 

Micro Windows which again is high value added. Would you agree 

with that statement, that line of object? 

Mr. MURPHY. I would very much so, and you see that in hightech industries, for instance, in the defense industry. It is the most 

sophisticated products that the United States excels in producing 

and exports worldwide. But you see it in other what you don’t necessarily think of as high-tech products. For instance, you think of 

the textile and apparel sector. The textile industry is very capital 

intensive, and the United States still has a significant textile industry which employs I believe close to half a million Americans. 

What we don’t have is the cutting and sewing which is a low-skill, 

low-value-added operation, the apparel making. That has largely 

moved outside the United States, so I think that is another illustration. 

Mr. CASSIDY. So the way to save, manufacturing, at least in 

terms of that manufacturing with good jobs and good benefits, is 

to promote trade where our workers and our companies which add 

value and intellectual expertise and in so doing employ more, correct? 

Mr. MURPHY. That is absolutely correct, and you see that in the 

statistics. For instance, major manufacturing States like Ohio, for 

instance, are incredibly dependant on exports. The proportion of exports of their manufacturing output that is exported is very high. 

It is well above half. 

Mr. CASSIDY. Now, let me ask you, I represent Louisiana in the 

6th district, which is the Baton Rouge area, and so recently Exxon 

Mobil did a big build-out. Now, I asked them, since they have 

plants in China, they have refineries in the United States, what do 

they do, where do they go, and they said anything that involves inVerDate Nov 24 2008 12:27 Jan 12, 2012 Jkt 037690 PO 00000 Frm 00109 Fmt 6633 Sfmt 6633 P:\MY DOCS\HEARINGS 112\112-21 031611\112-21 CHRIS
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tellectual property we do domestically because if it is just strictly 

commodity, we are sure that our blueprints are going to be—this 

isn’t Exxon, OK? I am not trying to get Exxon in trouble with 

China. I will just say the observation of the person was that the 

absence of intellectual property rights in China means that oftentimes whatever process they bring there seems to be reproduced at 

a local plant. That said, it seems like—now, they also said that it 

is the availability of inexpensive feedstock, in this case, natural 

gas, as well as the Mississippi River to transport as well as a highly trained workforce that combines to make the United States the 

place to be. What would happen in that scenario, knowing that the 

feedstock is incredibly important because you can find waterways 

and trained workforces in Europe, if we raised our energy prices 

to, let us say, I think I just read Denmark has a 38-cent-per-kilowatt-hour rate of energy and probably Louisiana is 6 cents per kilowatt-hour, if we increased our energy prices substantially, what 

would happen to that sort of manufacturing base I just described? 

Mr. MURPHY. Well, I think even in your question you have outlined how it is really a web of policies and industries that come together that add up to the competitiveness of a nation. So absolutely, when you take one of those strands and weaken it, you undermine the competitiveness of industries worldwide. That is why 

hearings like this are so useful to be able to draw the connections 

between these different kinds of policies. 

Mr. CASSIDY. I am actually struck that when folks talk about 

raising the price of carbon or the cost of energy, they seem to ignore the impact it will have upon domestic manufacturing, at least 

energy-intensive enterprises. I have just read now Spain is having 

to withdraw their subsidies because the effect of high-cost energy 

has made them less competitive, weakened their economy, etc., etc., 

etc. I think it used the word ‘‘demoralized.’’ Any other comments 

on that? 

Mr. MURPHY. Well, just in the chamber’s membership, what you 

have indicated is the reason why there is such a breadth of concern 

about proposals to add to energy costs in this country, and it comes 

not just from energy-producing companies and sectors but from the 

major consumers, the industrial consumers. 

Mr. CASSIDY. And just to be sure, because sometimes for whatever reason people don’t make the connection, if we hurt those industries, we hurt those workers. Those good jobs and good benefits 

are now lost and they are shipped overseas. 

Mr. MURPHY. And it all goes into the calculus that executives 

have to make about where they are going to site production and 

invest and hire. 

Mr. CASSIDY. Yes. I yield back. Thank you. 

Mrs. BONO MACK. I thank the gentleman and recognize Mr. 

Stearns from Florida for 5 minutes. 

Mr. STEARNS. Thank you, Madam Chair, and this is a very good 

hearing. I have been watching it on the television. 

I hear from the other side, they are talking about, they say if the 

government is broke, why are we giving tax breaks for corporations, and there has been some question about that we are not competitive as corporations. So Mr. Murphy, I think one thing we need 

to explain to the American people is this idea of territorial-based 

105 

tax regime, and you might use an example like if a company in the 

United States goes to Germany and opens up a plant, that company is going to pay taxes in Germany and then they are going to 

come back to the United States and pay taxes. You might just 

elaborate on that so that the people understand that there is sort 

of extra taxation on our corporations. 

Mr. MURPHY. I am happy to. You know, as was mentioned earlier, the United States is one of the very few countries in the world 

that has this worldwide system of taxation and so the danger is 

that a worldwide company that has operations in more than one 

market is going to be taxed twice on its income. It is a huge disincentive. By contrast, all of our major industrial competitors have 

territorial tax systems where they only pay taxes on their production in a given country. At present we have some tax treaties that 

allow us to avoid double taxation but this is a partial solution, and 

I think there is a growing sense in the business community that 

it is time to have a full reexamination of this system and whether 

or not it is comprehensively putting U.S. industry at a disadvantage. 

Mr. STEARNS. Another point is Canada has dropped their corporate tax rate, and I think the folks on the other side are saying 

how can we drop the taxes on corporations. Well, again, as you 

pointed out, they are competing globally, and if the tax rates are 

less in Canada and other countries, those corporations have an advantage. 

Mr. MURPHY. The Canadian government has taken a very interesting approach to their competitiveness, whether it is cutting their 

tax rates, which I believe is just a little bit—the corporate tax rate 

is just above 15 percent, 16 percent. They have also undertaken an 

initiative to permanently reduce tariffs on industrial inputs that 

they import. As Mr. Ikenson was pointing out, the competitiveness 

of a manufacturing operation depends on imports much of the time 

as well, and with little controversy the Canadians were able to permanently eliminate a lot of those tariffs on imports. 

Mr. STEARNS. Mr. Ikenson, let me ask you a question. I chair the 

Oversight and Investigation Committee, and we had Cass Sunstein 

come up and we had a lot of questions for him dealing with regulation, and the Obama Administration plants to implement a slew of 

new regulations including regulation of carbon emissions and implementing regulations obviously related to health care. Do you 

have any concern? I asked them if there was any economic impact 

on these regulations. They said they didn’t know of any. Do you 

have any concerns about the impact of these up-and-coming regulations on the ability of the United States to compete and what suggestions would you offer? 

Mr. IKENSON. You know, President Obama visited the chamber 

a few weeks ago and he said I have come to the center on taxes 

and I have come to the center on trade, now invest and hire. But 

there is a lot of uncertainty to the business environment, the 

health care legislation, the Dodd-Frank bill. There is a lot of pending regulation that hasn’t been promulgated yet and it is leaving 

the business community in a state of uncertainty and I think that 

that is a problem. You know, regulations that are absolutely sensible and not redundant make sense, I suppose, under certain cirVerDate Nov 24 2008 12:27 Jan 12, 2012 Jkt 037690 PO 00000 Frm 00111 Fmt 6633 Sfmt 6633 P:\MY DOCS\HEARINGS 112\112-21 031611\112-21 CHRIS
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cumstances but maybe we have superfluous regulation. Maybe 

there is too much. And certainly the fact that we don’t know what 

is coming down the pike is a deterrent to investment. You know, 

as Mr. Murphy said, one way we can stimulate our manufacturing 

base, which by the way is the most prolific manufacturing sector 

in the world. We produce more output by value than any other 

country in the world and we are doing quite well but one way is 

to do what the Canadians did. Let us scrap our tariffs on industrial 

inputs. And this might be a little bit controversial, let us revisit the 

anti-dumping law so that downstream users, our manufacturers, 

our exporters, can have a say in the hearings at the International 

Trade Commission. 

Mr. STEARNS. Thank you. 

My last question is for Mr. Holleyman. You testified that the 

U.S. government needs to increase its efforts to prevent our own 

government from purchasing counterfeit software. How often does 

the government purchase counterfeit software and how does this 

happen that the government is not buying legitimate copies of software? 

Mr. HOLLEYMAN. That is a good question. The U.S. government 

is overwhelmingly acquiring legitimate software, and that has been 

a formal policy and Executive Order that has been in place for over 

a decade, and typically when piracy happens within a government 

or a business, it may not be a purchase of a counterfeit product, 

it is simply allowing an extra three to five to 1,000 people use a 

software program without having a proper license. So our recommendation is to build on what is a strong Executive Order here 

in the United States about federal use of software. By the way, Inspector Generals within agencies audit to make sure they have the 

proper licenses. Two, require that federal contractors also have to 

comply with U.S. laws and ensure that they are using legal software. That will help reduce some of the 20 percent piracy rate here 

in the United States, not eliminate it, but it will be a tool that we 

can use with other governments to encourage them to lead by example. 

Mrs. BONO MACK. And on that note, the gentleman is out of time 

and we have to wrap things up today. I want to thank all of our 

panelists and my colleagues and the ranking member for his help 

today, for our staffs on both sides, and for everybody for your time 

and for your commitment on these critically important issues. 

Clearly, we have a great challenge before us but I have always believed that new challenges create new opportunities. Working together, I am convinced that we can increase U.S. exports and create new U.S. jobs in the process. 

I also need to remind members that they have 10 business days 

to submit questions for the record, and I ask the witnesses to 

please respond promptly to any questions that you might receive. 

Again, thank you all very much, and the hearing is now adjourned. 

[Whereupon, at 12:47 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

107 

PREPARED STATEMENT OF HON. FRED UPTON

Thank you, Madam Chairman. I want to commend you for holding this timely 

hearing, the second in a series investigating how we at the national level can foster 

an environment of job creation. 

As we heard at our last hearing, and as January’s impressive export numbers reveal, the U.S. manufacturing sector is alive and close to well. How we get those 

companies fully well is why we are here today. I firmly believe the key to growing 

jobs here in the U.S. is growing demand, and the key to growing demand is reaching 

consumers in the global economy. 

Based on the President’s creation of the National Export Initiative, I am not alone 

in that belief. But while we may agree on the need to grow our exports, we may 

not be on the same page on how to do so. 

I believe we need policy changes that will make our companies more competitive 

with their foreign counterparts. This can be accomplished in areas such as reforming our tax regime and reducing regulatory burdens in ways that do not sacrifice 

safety. I also believe we need to act on pending free trade agreements with Korea, 

Panama, and Colombia. Those agreements represent billions of dollars left on the 

table because of a failure to act on them in the last four years. In addition, I believe 

we must find new trade partners, opening the doors of opportunity to new and 

emerging markets. Free trade agreements not only remove tariffs and other barriers 

for American products to enter foreign markets, they are essential to ensuring producers here in America have access to affordable supply chains. 

Let me be clear: I fully support making it here in America, but I do not believe 

we should demonize imports. Inexpensive component parts used to manufacture and 

assemble final products here in the U.S. not only keep American products affordable 

to Americans, but they also ensure American products are affordable to consumers 

in other countries. In other words, affordable component parts are what keep our 

exports competitive in foreign markets. 

I look forward to hearing about what the Administration is doing to foster growth 

in exports, whether and how Congress should act to aid in that effort, and what 

the economic and employer perspectives are on how the federal government can help 

cultivate export growth to promote American job creation. 

Thank you, Madam Chairman, and I yield back. 

PREPARED STATEMENT OF HON. CLIFF STEARNS

Thank you, Mr. Chairman. I am deeply pleased to have the opportunity to be here 

today to discuss and maintain our bi-partisan mission to create jobs. 

Unemployment remains a deep concern for all of us and we hear about it from 

our constituents on a daily basis. The solution obviously is job creation. No one in 

this committee would dispute this to be true, but its time that our actions reflected 

our words. 

According to the President, our export should double in five years. If the Administration is sincere about this goal to boldly increase our exports, their actions should 

be just as bold. We need to analyze if current trade laws are supporting or impeding 

American companies from this achievement. We need to put politics aside and work 

through these barriers to make ′′Made in America′′ a proud statement. 

We understand that the road to recovery will be tough and will certainly take 

time. American families struggling to make ends meet have been patient. Being 

here today enforces our commitment to our constituents, showing we are sincere 

about getting the economy on track and that are words are more than just words. 

Again, I appreciate the opportunity to be here and I look forward to hearing the 

testimonies of our witnesses. Thank you Mr. Chairman. 

PREPARED STATEMENT OF HON. EDOLPHUS TOWNS

Thank you Chairman Bono-Mack and Ranking member Butterfield for holding 

this hearing today on ‘‘Made in America: Increasing Jobs through Exports and 

Trade’’. Our economy has been steadily improving over the course of the past several months. The unemployment rate is a key indicator of economic strength. Currently our unemployment rate sits at 9 percent and the Dow Jones Industrial Average peaked above 12 thousand for the first time in two years. While these economic 

indicators are welcome news to the markets they do little to instill confidence in the 

American people that jobs are on the way. 

108 

This congress must do everything in its power to promote and create jobs, free 

and fair trade is one way to accomplish this goal. As a Democrat I believe in free 

and fair trade. In this 21st century economy we must be ably equipped to compete 

in the global market place. Our manufactures and small businesses must have open 

access to overseas markets to promote job growth in America. There are far too 

many barriers to this ideal that still permeate in the market place today. 

Given the opportunity free and fair trade will translate into job growth for our 

economy; however the benefits of such trade deals will be lost if we continue to incur 

imbalance in US trade agreements. According to the Center for American Progress 

the third quarter trade deficit in 2010 reached 3.7 percent of GDP, up from 2.4 percent in the second quarter of the previous year. The higher the trade deficit the 

more indebted the United States is to overseas investors who must eventually be 

repaid. 

I look forward to working with my colleagues on both sides of the aisle to address 

these barriers to job growth and economic independence. I also look forward to hearing from our witnesses today on their ideas for unleashing American innovation 

through trade. Capstone Turbine Corporation is one such company that has unleashed their innovation in the global market place and is excelling in their industry. Sixty percent of all sales at Capstone Turbine Corporation are from exports. I 

look forward to hearing from them on how we can translate their success to other 

companies looking for economic growth. 

Thank you and I yield back the balance of my time. 

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