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67–103 2012

STIMULATING THE ECONOMY THROUGH TRADE: 

EXAMINING THE ROLE OF EXPORT PROMOTION 

HEARING 

BEFORE THE

SUBCOMMITTEE ON COMMERCE, TRADE, 

AND CONSUMER PROTECTION 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

MARCH 17, 2009 

Serial No. 111–15 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 


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COMMITTEE ON ENERGY AND COMMERCE 

HENRY A. WAXMAN, California, Chairman 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

RICK BOUCHER, Virginia 

FRANK PALLONE, JR., New Jersey 

BART GORDON, Tennessee 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

BART STUPAK, Michigan 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

Vice Chairman 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANE HARMAN, California 

TOM ALLEN, Maine 

JAN SCHAKOWSKY, Illinois 

HILDA L. SOLIS, California 

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 

CHARLIE MELANCON, Louisiana 

JOHN BARROW, Georgia 

BARON P. HILL, Indiana 

DORIS O. MATSUI, California 

DONNA CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

CHRISTOPHER MURPHY, Connecticut 

ZACHARY T. SPACE, Ohio 

JERRY MCNERNEY, California 

BETTY SUTTON, Ohio 

BRUCE BRALEY, Iowa 

PETER WELCH, Vermont 

JOE BARTON, Texas 

Ranking Member 

RALPH M. HALL, Texas 

FRED UPTON, Michigan 

CLIFF STEARNS, Florida 

NATHAN DEAL, Georgia 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOHN B. SHADEGG, Arizona 

ROY BLUNT, Missouri 

STEVE BUYER, Indiana 

GEORGE RADANOVICH, California 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO MACK, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

PARKER GRIFFITH, Alabama 

ROBERT E. LATTA, Ohio 

(II) 


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(III) 

SUBCOMMITTEE ON COMMERCE, TRADE, AND CONSUMER PROTECTION

BOBBY L. RUSH, Illinois, Chairman 

JAN SCHAKOWSKY, Illinois 

Vice Chair 

JOHN SARBANES, Maryland 

BETTY SUTTON, Ohio 

FRANK PALLONE, New Jersey 

BART GORDON, Tennessee 

BART STUPAK, Michigan 

GENE GREEN, Texas 

CHARLES A. GONZALEZ, Texas 

ANTHONY D. WEINER, New York 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

KATHY CASTOR, Florida 

ZACHARY T. SPACE, Ohio 

BRUCE BRALEY, Iowa 

DIANA DEGETTE, Colorado 

JOHN D. DINGELL, Michigan (ex officio) 

CLIFF STEARNS, Florida 

Ranking Member 

RALPH M. HALL, Texas 

DENNIS HASTERT, Illinois 

ED WHITFIELD, Kentucky 

CHARLES W. ‘‘CHIP’’ PICKERING, 

Mississippi 

GEORGE RADANOVICH, California 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO MACK, California 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

MICHAEL C. BURGESS, Texas 


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C O N T E N T S 

Page 

Hon. Bobby L. Rush, a Representative in Congress from the State of Illinois, 

opening statement ................................................................................................ 1 

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

Hon. George Radanovich, a Representative in Congress from the State of 

California, opening statement ............................................................................. 6 

Hon. Doris O. Matsui, a Representative in Congress from the State of California, opening statement .................................................................................... 7 

Hon. Phil Gingrey, a Representative in Congress from the State of Georgia, 

opening statement ................................................................................................ 8 

Hon. Betty Sutton, a Representative in Congress from the State of Ohio, 

opening statement ................................................................................................ 9 

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

Carolina, opening statement ............................................................................... 9 

Hon. John D. Dingell, a Representative in Congress from the State of Michigan, prepared statement ...................................................................................... 86 

Hon. Steve Scalise, a Representative in Congress from the State of Louisiana, 

prepared statement .............................................................................................. 87 

WITNESSES

Michelle O’Neill, Acting Under Secretary for International Trade, International Trade Administration, Department of Commerce .............................. 11 

Prepared statement .......................................................................................... 14 

Answers to submitted questions 1

Suzanne Hale, Acting Administrator, Foreign Agriculture Service, Department of Agriculture .............................................................................................. 20 

Prepared statement .......................................................................................... 22 

Loren Yager, Director, International Affairs and Trade, Government Accountability Office ......................................................................................................... 31 

Prepared statement .......................................................................................... 33 

Franklin J. Vargo, Vice President, International Economic Affairs, National 

Association of Manufacturers .............................................................................. 42 

Prepared statement .......................................................................................... 45 

Liz Reilly, Director, Traderoots, United States Chamber of Commerce ............. 58 

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

SUBMITTED MATERIAL

Report by World Bank entitled, ‘‘Export Promotion Agencies: What Works 

and Does Not,’’ September 30, 2006, submitted by Franklin Vargo ................ 89 

Statement of Dennis Slater, President, Association of Equipment Manufacturers, submitted by Mr. Rush ................................................................................. 96 

1Ms. O’Neill did not respond to submitted questions for the record. 


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STIMULATING THE ECONOMY THROUGH 

TRADE: EXAMINING THE ROLE OF EXPORT 

PROMOTION 

TUESDAY, MARCH 17, 2009 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON COMMERCE, TRADE, 

AND CONSUMER PROTECTION, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 10:05 a.m., in Room 

2322 of the Rayburn House Office Building, Hon. Bobby L. Rush 

(chairman) presiding. 

Members present: Representatives Rush, Green, Braley, 

Butterfield, Matsui, Sutton, Stupak, Space, Radanovich, Gingrey, 

Sullivan, and Scalise. 

Staff present: Angelle B. Kwemo, Counsel; Michelle Ash, Chief 

Counsel; Zahara Goldman, Professional Staff; Valerie Baron, Legislative Clerk; Jennifer Berenholz, Deputy Clerk; Brian McCullough, 

Minority Senior Professional Staff; Will Carty, Minority Professional Staff; and Sam Costello, Minority Legislative Analyst. 

OPENING STATEMENT OF HON. BOBBY L. RUSH 

Mr. RUSH. The subcommittee will come to order. This is a hearing conducted by the Subcommittee on Commerce, Trade, and Consumer Protection. The subject of this hearing is Stimulating the 

Economy through Trade: Examining the Role of Export Promotion. 

The chairman recognizes himself for 5 minutes for the purposes of 

opening statement. I want to thank the members of the subcommittee for participating in our first trade hearing of the 111th 

Congress. Today the Obama Administration and Congress are revisiting our trade policies. It is essential that as American companies and workers are faced with unprecedented challenges that we 

recognize the importance of international trade as an essential 

component of our policy response to the global financial crisis. 

Today’s hearing will explore international trade as a tool to stimulate our economy and examine the role of exports in the growth 

of the U.S. economy. I also want to review the impact of government-sponsored export promotion programs and the effectiveness of 

assistance available to help U.S. businesses expand their market 

for U.S. products and services. In the past, Congress has addressed 

concerns about several important aspects of export promotions, specifically as it relates to interagency coordination, common goals, 

small business assistance and enforcement of trade agreements. 


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Some progress has been made since then, however, today’s economic environment demands more progress. 

In my home State of Illinois, Caterpillar, Inc. has recently laid 

off 16 percent of its workforce despite the fact that its world-class 

equipment is needed and necessary to support massive infrastructure projects from China to Africa. Sixty percent of its market is 

overseas with untapped potential in emerging and new markets. In 

the U.S., exports support 6 million jobs in the manufacturing industry, and 1 million jobs in the agricultural industry. More than 

one in every five American factory workers owes his or her job to 

exports. These jobs pay 13 to 18 percent more, on average, than 

non-export-related employment. 

Furthermore, in the recent months of stagnating domestic demand, most growth in manufacturing production was attributed to 

exports. The U.S. is the world’s largest manufacturing country but, 

despite extensive engagement with the global economy, the U.S. 

has the smallest percentage of its Gross Domestic Product derived 

from exports in comparison to any other G–7 country. U.S. export 

promotions spending lags behind that of Spain, the UK, Italy, 

France, Korea, Canada and Japan. American exports in January, 

2009, were down compared to January of last year. In addition, exports accounted for only 13.1 percent of the U.S. economy. This certainly is not sufficient, especially now that the American consumer 

is spending less. We need to move to trade and exports to sustain 

economic growth. We cannot afford to be idle as our export numbers decrease. 

I strongly believe that if we are serious about lowering our trade 

deficit and creating more jobs for Americans, export promotion 

must be a national priority. I commend U.S. businesses for their 

innovation, their strength and vision in this very competitive and 

perilous time. I also salute non-profit groups for their dedication 

and creativity in assisting U.S. businesses as they embark in new 

ventures. I also recognize the importance of public-private partnerships in fostering the spirit of American business globally. Today 

is the first of a series of hearings on trade-related matters. I thank 

all the members and witnesses for their participation. If it my desire that we all continue to work together on trade issues in a bipartisan fashion with the goal of helping to bolster America’s economy. 

[The prepared statement of Mr. Rush follows:] 


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Mr. RUSH. With that, I yield back the balance of my time, and 

I recognize now the ranking member of this subcommittee from 

California, Mr. Radanovich. 

OPENING STATEMENT OF HON. GEORGE RADANOVICH 

Mr. RADANOVICH. Thank you, Mr. Chairman. Good morning, everybody. I do appreciate, Mr. Chairman, you calling this hearing to 

examine our trade promotion efforts. The global economy is suffering right now, and consumer spending and business investments 

have slowed worldwide exacerbating a clouded outlook for recovery. 

In such trying times, there is a temptation for countries to retreat 

into misguided protectionist trade policies and in order to find a 

path toward a more stable economy we must treat trade as an opportunity, not a threat. One simple approach is to continue to ensure free trade agreements remain a priority. Last year, we ran a 

$21 billion surplus in manufacturing with our FTA partner countries. 

America has also seen similar beneficial increases in surpluses 

with countries with which we have implemented trade agreements 

under the trade promotion authority. Trade agreements are growing in importance as international commerce becomes a more essential part of our economy and more Americans depend on trade 

for their livelihood. Particularly relevant today effective and efficient international trade can serve as an important buffer for the 

economy when domestic growth slows. In fact, despite the declines 

in the last part of 2008, export growth surpassed the growth in 

GDP. We exported over 1 trillion in goods and services last year 

and had a surplus in services trade of approximately $144 billion. 

The salient point here is America produces and exports world class 

goods and services and we have the potential to export much more 

if we are given the opportunity access additional markets. 

After all, 96 percent of the world’s consumers live outside of the 

United States. Often, the biggest barrier to improving trade is facilitating the connection between willing buyers and sellers. This is 

where the promotion of U.S. goods and services can be used to improve the prospects of our businesses, many of whom have little or 

no experience exporting their own goods. We have a number of federal agencies that assist our small and medium size businesses 

through the export process. Their services range from educating 

businesses on the basics of export trade through export assistance 

centers to more advanced services that introduce suppliers and 

buyers and provide market access guidance. 

With these programs in place, we need to focus on improving the 

visibility of existing services and enhancing their effectiveness. My 

home State of California is a leading exporter in many areas ranging from high tech to something more important to my constituents, which is agriculture. Agricultural issues are different than 

those faced by manufacturers. And I commend you, Mr. Chairman, 

for inviting the Foreign Agriculture Service to discuss their role in 

promoting our agricultural exports. Welcome, Ms. Hale. 

Agriculture is a difficult business. Farmers are routinely subject 

to many factors beyond their control including the vagaries of 

weather, pest and disease control, international competitors, which 

are heavily subsidized, and foreign standards often subject to 


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whimsical change. It is critical to note that specialty crop farmers 

and their association spend millions of their own money to promote 

their own products abroad. For instance, farmers with the California Apple Commission spent $1.2 million just last year alone to 

market their own products abroad. When farmers decide to seek 

assistance through federal programs, they must still spend funds 

up front and wait for reimbursement from FAS, which is not guaranteed since their export strategy must be approved. 

While I encourage and I support the efforts of increased exports, 

I am equally concerned that we not lose our export partners that 

we already have. Going backwards by adding new barriers to trade 

is not helpful to anybody and reminds one of the primary concerns 

raised by fruit, nut, and vegetable growers in my district. In one 

example, Mexico has claimed the presence of pests in our own 

stone fruit for more than a decade. As a result, a plan negotiated 

by the Animal and Plant Health Inspection Service or APHIS 

which most fresh stone fruit growers must follow if they wish to 

ship to Mexico includes a dual regulation with the USDA inspectors and Mexican inspectors. 

The growers must pay for the dual regulation unless they are approved to receive assistance from the government under one of the 

existing technical assistance programs that would help offset the 

cost of the Mexican inspectors. In addition, it is critical that our 

government continue to work to remove the non-tariff barriers 

thrown up to keep out our U.S. products. Some countries such as 

Taiwan have erected certain barriers based on questionable scientific evidence. The normally free flow of trade has ceased causing 

the good folks in my own region and others throughout the nation 

enormous frustration. This must not be tolerated, and I encourage 

our federal trade officials to work to remedy such problems. 

I want to thank you, Mr. Chairman, for listening to my concerns. 

In a perfect world, we would not have to worry about any trade 

barriers. My hope is that our officials will remain as vigilant in 

their negotiations with our trade partners to reduce such non-tariff 

trade barriers as they are in promoting our products. Thank you, 

Mr. Chairman. I yield back. 

Mr. RUSH. The chair thanks the ranking member. The chair now 

recognizes the gentlelady from California, my friend, Ms. Matsui, 

for 5 minutes for the purpose of opening statements. Two minutes. 

I am sorry. Two minutes. 

OPENING STATEMENT OF HON. DORIS O. MATSUI 

Ms. MATSUI. Thank you, Mr. Chairman, and thank you for calling today’s hearing to examine the role of export promotion in today’s economy, and I want to thank all the witnesses who are here 

today for sharing your expertise with us. In today’s economic recession, many families in my home district of Sacramento are struggling to make ends meet. I have heard countless stories of people 

struggling to keep their homes, their jobs, and their way of life. 

Small businesses are also hurting as they try to make payroll, retain their employees, and expand their business. I am pleased that 

President Obama has announced a new proposal to immediately 

help small businesses obtain much needed capital or credit to keep 

their businesses afloat. 


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However, we should also be exploring other avenues for small 

businesses to grow, and that is why I am glad we are here today. 

This Congress needs to insure that companies have the tools to find 

new export opportunities for their products or services in existing 

foreign markets. Sacramento area small and medium-sized businesses export their products and ideas in health care, education, 

clean energy and agriculture around the world. In fact, the Sacramento region exported more than $3 billion in goods last year 

while the port of Sacramento handled 280,000 tons of exports last 

year. Yet, like in most communities our small businesses have not 

reached their export potential. 

If we can provide a small business with a foreign market to increase their sales by as little as 5 percent it can mean the difference between closing their doors and staying open another year. 

The federal government in partnership with the private sector can 

do more. This is a time in which effective partnership is vital. I 

thank you, Mr. Chairman, for holding this important hearing, and 

I yield back the balance of my time. 

Mr. RUSH. The chair thanks the gentlelady. The chair now recognizes the gentleman from Georgia, my friend, Dr. Gingrey, for 2 

minutes for the purposes of opening statements. 

OPENING STATEMENT OF HON. PHIL GINGREY 

Mr. GINGREY. Mr. Chairman, I want to thank you for calling this 

hearing today on an economic issue that could not be more timely 

in the face of our current economic struggles. The promotion of exports of American products is absolutely critical to our economic 

growth now more than ever. Put simply, the relationship between 

American exports and job growth is incredibly important as we see 

unemployment numbers continue to rise. In President Obama’s inaugural address, he stressed the need to ensure that the federal 

government works efficiently, and I agree with him on that goal, 

particularly in this very important area. The over arching role that 

the federal government will play in export promotion will need to 

be reassessed. Currently there are a number of different federal 

agencies that are working in the realm of export promotion, yet 

there is a need to grow our export numbers in order to remain competitive in a global market place. 

Furthermore, Mr. Chairman, the most direct way that the federal government can impact U.S. exports is through existing and 

new free trade agreements. First, and let me be perfectly clear, free 

trade needs to be fair trade enabling domestic companies to benefit 

by the removal of foreign tariff barriers. This will increase the 

number of American exports and help us grow jobs right here at 

home. I am encourage that majority leader Steny Hoyer last week 

said that the House will potentially revisit the Colombia free trade 

agreement that was awarded during the 110th Congress. This free 

trade agreement was signed over 2 years ago. Mr. Chairman, another interesting component of this hearing that has a tremendous 

impact on U.S. exports falls squarely within the agricultural industry. 

In my home State of Georgia agricultural exports account for approximately $1.5 billion annually is a tremendous boost to the 

state’s economy and it is imperative that the federal government 


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remove technical barriers with trading partners so that Georgia 

farmers, as well as farmers across the country, California, as Mr. 

Radanovich said, will be competitive globally. Mr. Chairman, I 

again thank you for holding this important hearing on the promotion of international exports and trade. I look forward to hearing 

from the panel this morning, and I yield back. 

Mr. RUSH. The chair thanks the gentleman. The chair now recognizes the gentlelady from Ohio, Ms. Sutton, for 2 minutes for the 

purpose of opening statement. 

OPENING STATEMENT OF HON. BETTY SUTTON 

Ms. SUTTON. Thank you, Chairman Rush, for holding today’s 

hearing on trade and promoting exports. We all know that trade 

can benefit American businesses and workers. In fact, Ohio is the 

seventh largest exporting state in the nation, and it is the only 

state that has increased exports every year since 1998. However, 

there are real problems with our current trade policies that are no 

longer theoretical arguments. While I don’t believe that trade in 

and of itself is what is costing us jobs, I do believe that our trade 

system and bad trade policies and bad trade deals can cost us jobs 

and have cost us jobs. And I also believe it doesn’t have to be that 

way. You know, between 1994 and 2002 an estimated 525,094 U.S. 

workers were certified as eligible for the NAFTA transitional adjustment assistance. 

Since 2000, over 1,087 factories, companies or operations in Ohio 

have shut down or had massive layoffs costing Ohio over 200,000 

manufacturing jobs. Promoting our exports is only useful if production continues to take place in the United States. We must never 

lose sight that without our workers the U.S. would not have products to export. Often when we speak up to address the flaws and 

the unfair trade practices that currently exist with so-called free 

trade and other trade arrangements, name calling ensues, and we 

are attacked with distractive tactics such as being labeled as protectionist or saying we are simply against trade. Well, that isn’t accurate and it really doesn’t serve our purpose well. We do not live 

in a perfect world, and we are certainly not operating under a perfect free market global system. 

And while the trade deficit has narrowed during the current recession, China now accounts for more than 60 percent of the U.S. 

trade deficit in manufactured goods. We must have trade policies 

that no longer leave American workers and businesses at an unfair 

disadvantage. We cannot sit quietly aside while others engage in 

unfair trade practices. And while we should help promote our exports, it is also imperative to promote domestic production as well. 

I look forward to this hearing and this panel and working on this 

very important issue. 

Mr. RUSH. The chair thanks the gentlelady. Now the chair is 

privileged to recognize the gentleman from North Carolina, my 

friend, George Butterfield. 

OPENING STATEMENT OF HON. G.K. BUTTERFIELD 

Mr. BUTTERFIELD. Thank you very much, Chairman Rush, and I 

thank the five witnesses for coming out today to be a part of this 

very important hearing. Mr. Chairman, you told us that we were 


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going to get into some real deep issues, very important issues, on 

this committee, and today is an example of heading in that direction, and so thank you very much for your leadership. I think about 

the world so often, and the world has just drastically changed since 

I was a youngster many years ago. I go around to different high 

schools and middle schools in my district and talk about how the 

world has just literally transformed itself over the last 40 years. 

We are living in a global economy, and we cannot deny that, and 

that is a good thing. We can only benefit from increased export promotion. We are the world’s largest exporter. 

In just 5 years exports have increased from 91⁄2 percent to almost 

12 percent of GDP. This growth has sustained nearly 6 million jobs 

in manufacturing and 1 million in agriculture jobs like those in my 

district. We have reaped the benefit of double digit increases in exports every year for the past 5 years but more can be done and 

more must be done considering the state of our economy. And despite double digit gains, we could be exporting much, much more. 

Here is a statistic that might shock some of you. Companies that 

export represent less than 1 percent, 1 percent of the U.S. business 

community. That means out of all the businesses that are located 

in this country, 99 percent do not export, and 60 percent of these 

companies that do export only trade in one foreign market and one 

only. 

This untapped potential could yield immeasurable benefits to the 

U.S. economy and could mean tens of thousands of jobs. I am confident that further exploring opportunities to increase exports 

would drastically change places like Rocky Mountain, North Carolina in my district where the unemployment rate is now nearly 14 

percent. A plant just the other day, Cummings, laid off 390 employees, so that illustrates, Mr. Chairman, the importance of this hearing today. And I thank you for bringing us together. I yield back. 

Mr. RUSH. The chair thanks the gentleman. The chair now is 

privileged to recognize the gentleman from Michigan, my friend, 

Mr. Stupak, for 2 minutes for the purpose of giving the opening 

statement. 

Mr. STUPAK. Mr. Chairman, I will waive and use the extra time 

for questions, please. 

Mr. RUSH. The chair thanks the gentleman. Now it is my privilege to welcome this panel of experts to this hearing. I will introduce them starting from my left and the audience’s right. At the 

conclusion of my introduction, I will swear them in because that is 

the new custom of this committee, swearing in before they provide 

their testimony. Beginning on my left we have with us today, Ms. 

Michelle O’Neill. Ms. O’Neill is the Acting Under Secretary for 

International Trade and International Trade Administration for 

the Department of Commerce. We have Ms. Suzanne Hale. Ms. 

Hale is the Acting Administrator for the Foreign Agriculture Service in the Department of Agriculture. 

Next, we have Dr. Loren Yager. Dr. Yager is the Director of 

International Affairs and Trade at the Government Accountability 

Office, GAO. Next to Mr. Yager is Mr. Franklin J. Vargo. Mr. 

Vargo is the Vice President of International Economic Affairs for 

the National Association of Manufacturers. And then we have with 

us Ms. Liz Reilly. Ms. Reilly is Director of Trade Roots, which is 


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a part of the U.S. Chamber of Commerce. I want to welcome all the 

witnesses, and we certainly sincerely are grateful to you for taking 

the time off from your busy schedule to appear before this subcommittee today. 

As I said before, it is a new practice of this subcommittee to 

swear in the witnesses, so I will ask that you please stand and 

raise your right hand. 

[Witnesses sworn.] 

Mr. RUSH. We will ask that you limit your opening statements 

to 5 minutes. We will begin with Ms. O’Neill. Ms. O’Neill, again, 

welcome, and please give us your opening statement. 

TESTIMONY OF MICHELLE O’NEILL, ACTING UNDER SECRETARY FOR INTERNATIONAL TRADE, INTERNATIONAL 

TRADE ADMINISTRATION, DEPARTMENT OF COMMERCE; SUZANNE HALE, ACTING ADMINISTRATOR, FOREIGN AGRICULTURE SERVICE, DEPARTMENT OF AGRICULTURE; 

LOREN YAGER, DIRECTOR, INTERNATIONAL AFFAIRS AND 

TRADE, GOVERNMENT ACCOUNTABILITY OFFICE; FRANKLIN 

J. VARGO, VICE PRESIDENT, INTERNATIONAL ECONOMIC AFFAIRS, NATIONAL ASSOCIATION OF MANUFACTURERS; AND 

LIZ REILLY, DIRECTOR, TRADEROOTS, UNITED STATES 

CHAMBER OF COMMERCE 

TESTIMONY OF MICHELLE O’NEILL 

Ms. O’NEILL. Chairman Rush, Ranking Member Radanovich, and 

members of the committee, thank you for the opportunity to speak 

before you today about how export promotion strengthens and supports America’s economy. As we have undoubtedly heard from the 

statements today, exporting is important to our economy. Last year 

alone it accounted for 13 percent of our gross domestic product and 

millions of jobs. I welcome the subcommittee’s interest in this topic 

and look forward to outlining the International Trade Administration’s efforts to promote U.S. exports. 

The International Trade Administration is dedicated to helping 

U.S. companies, especially small businesses, compete and win in 

the global economy. We have trade professionals based in Washington, in 109 U.S. communities, and in 77 countries that provide 

trade promotion support to U.S. companies. We guide companies 

through every step of the export process from shipping and logistics 

to understanding foreign regulations to finding solutions when they 

encounter trade barriers. We provide a wide range of services including trade counseling, advocacy, and market research. In 2008 

we supported more than 12,000 expert successes totaling $67 billion in nearly 200 markets around the world. 

We know that 97 percent of exporters are small and medium size 

businesses but they only account for 29 percent of the value of U.S. 

exports. We also know that of the 27 million businesses in the 

United States less than 1 percent export, and of the companies that 

do export 58 percent export to only one market. For this reason, 

our efforts are focused on getting more companies to export for the 

first time and for those companies that are already exporting to expand to additional markets. To highlight the kind of work we do, 

let me use some recent examples. Last year our commercial speVerDate Mar 15 2010 00:11 Feb 28, 2012 Jkt 067103 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 E:\HR\OC\A103.XXX A103

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cialist in the Dominican Republic learned that a Dominican distributor was looking for a company that provides fuel additives for 

cars. After reaching out to our entire domestic network our Chicago 

office identified a small Chicago-based business that employs 150 

workers, the Gold Eagle company. A commercial specialist in the 

Dominican Republic arranged a meeting with a Dominican company which resulted in Gold Eagle’s first sale to the Dominican Republic valued at $50,000. 

Often times a company gets an inquiry for the first time through 

their web site from a foreign buyer and doesn’t know what to do. 

Other times a company is considering expanding its sales beyond 

the U.S. market and isn’t sure how to proceed. In both cases, the 

first stop for them could be one of our 300 trade specialists located 

in a nearby export assistance center or our Trade Information Center. The Trade Information Center provides a single point of contact for all federal government export assistance programs. 

Through its 1-800 USA trade number, the Trade Information Center provides assistance ranging from helping fill out a certificate of 

origin finding out about export finance options or connecting with 

the company’s local commerce export assistance center. 

Last year, the Trade Information Center responded to 36,000 inquiries, most of which were from small businesses. We also hold 

seminars around the country to educate U.S. businesses on a whole 

range of topics including the nuts and bolts of exporting, how to 

protect your intellectual property rights abroad, and how to fill out 

export documentation. Through our strategic partners program, we 

are leveraging the client networks of trade associations, companies, 

universities and state and local governments to help small companies understand the benefits of exporting. Let me give you two recent examples of how we work with our partners. In the fall of 

2008 one of our strategic partners, FedEx, led a Commerce Department certified trade mission to India to introduce 12 companies to 

business opportunities there. 

Of these companies, two had never exported before and the other 

10 had never exported to India. Our offices in India arranged over 

300 appointments for the companies with potential buyers, agents, 

distributors, and Indian government decision makers. In another 

example, in September, 2007, the State of North Dakota’s trade office in coordination with our offices in the former Soviet Union and 

in North Dakota brought over 100 foreign buyers to the big iron 

farm machinery show in West Fargo. In the 6 months following the 

trade show, U.S. companies exhibiting at the show sold approximately $14 million in U.S. farm machinery to visiting foreign buyers. In 2008 the state trade office was awarded a market development cooperator program grant for the state to establish an office 

in the Ukraine. Since then, we have worked together on trade missions to Taiwan, Ukraine, Russia, Kazakhstan, Australia, and 

South Korea. 

At times, U.S. companies will look to us to help them when a foreign government tenders through U.S. government advocacy. Our 

advocacy center insures that U.S. companies can compete fairly 

against foreign competitors that are receiving high level advocacy 

support from their governments. Other times the U.S. company 

may need assistance to overcome a problem they are facing in a 


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foreign market. These problems could range from regulatory trade 

barriers to unfair trade practices. This is where our Trade Compliance Center comes in. The Trade Compliance Center staff works 

with foreign governments to find a solution so that the U.S. company has the best possible chance to sell its products and services 

in that market. For example, a 2000 amendment to the Kazak Customs Code required importers to provide additional documentation 

that is not normally required before releasing their goods. After direct discussions the Customs Department authorized the release of 

some $70 million worth of U.S. goods. 

The Kazak government amended the code and deleted the section 

that required importers to provide the additional documentation to 

clear customs. In closing, the down turn of the world economy has 

affected all of our industries and their exports. In these times, our 

export promotion work is even more important than ever for small 

businesses and to the long-term competitiveness of the United 

States. The International Trade Administration remains committed 

to job creation through exporting. Thank you. 

[The prepared statement of Ms. O’Neill follows:] 


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Mr. RUSH. Thank you very much. Now we will have opening 

statement from Ms. Suzanne Hale. Ms. Hale, thank you so very 

much and the chair recognizes you for 5 minutes for the purpose 

of an opening statement. 

TESTIMONY OF SUZANNE HALE 

Ms. HALE. Chairman Rush, members of the committee, thank 

you for this opportunity to discuss how USDA’s Foreign Agriculture 

Service supports agricultural exports. Exports are crucial to American agriculture. During these difficult times, agricultural trade is 

also important because it supports so many jobs off the farm. 

Twenty-five years ago, the value of U.S. agricultural exports was 

about $35 billion a year. Last year, U.S. farm exports had tripled 

to a record $115 billion. Even with the recent economic downturn 

fiscal year 2009 agricultural exports are forecast to reach 95.5 billion, the second highest level ever. About 1/3 of U.S. agricultural 

production is exported. Every dollar of farm exports creates another $1.40 in supporting activities to process, package, finance, 

and ship products. 

U.S. agricultural exports mean U.S. jobs. USDA’s economic research service calculates that in 2007 agricultural exports generated 808,000 full-time American jobs. Our mission at FAS is to 

link U.S. agriculture to the world. The agency maintains a small 

Washington based staff and 97 offices around the globe. Our overseas network act as our eyes and ears as we work to reduce trade 

barriers and approve market access. For example, our Cairo office 

was instrumental in opening the Egyptian market to U.S. cattle, 

and our staff in the Philippines recently resolved concerns over import quotas that would have severely limited our pork and poultry 

exports. Because of the current economic crisis, credit is tight in 

many key markets. Our export credit guarantee program, known as 

GSM–102, facilitates commercial sales of U.S. agricultural exports 

by providing credit guarantees. In fiscal year 2009, FAS expects to provide $5.5 billion in such 

guarantees. Over the past 2 years the program has facilitated $2 

billion in feed grain exports directly benefitting states such as Illinois, Iowa, Nebraska, and Minnesota. Wheat, poultry, and cotton 

sales have similarly benefitted from the program. FAS administers 

several market development programs including the market access 

or MAP program. Under the MAP program, non-profit commodity 

and trade associations pool their resources into technical expertise 

with USDA’s to develop markets overseas. In 2008, FAS approved 

$200 million in MAP funds to promote a wide variety of products 

including soybeans in Romania, beef in Taiwan, grapes in Australia, and pomegranates in Korea. 

Investments in MAP programs produce results. For example, the 

Northwest Cherry Growers analysis shows that cherry exports support an average of 31,000 jobs a year. Cherry exports supported by 

$4.3 million in MAP funding over the past 5 years also generated 

an estimated $131 million in federal and state taxes. Now that is 

a good return. The Foreign Market Development program develops, 

maintains and expands long-term export markets for U.S. agricultural products. For example, the U.S. Grains Council is undertaking a 5-year effort to help rebuild Iraq’s poultry industry, an efVerDate Mar 15 2010 00:11 Feb 28, 2012 Jkt 067103 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 E:\HR\OC\A103.XXX A103

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fort which has led to nearly $4 million in sales of U.S. feed ingredients. 

USDA’s technical assistance for specialty crops program funds 

projects to remove the kind of technical barriers that were mentioned earlier. For example, the California Table Grape Commission used the program to fund fumigation research. This research 

helped increase grape sales to Australia from $16 million in 2007 

to $52 million in 2008. The program has also been used to gain access for California nectarines in Japan and to harmonize organic 

standards with Canada. Emerging markets offer great potential for 

U.S. agricultural exports. A recent project funded under the emerging markets program provided minority producers of fruits and 

vegetables in Florida with training and other support that enabled 

them to make their first international sales. 

The firms in that program now report $25 million a year in exports. Our quality samples program enables U.S. agricultural trade 

organizations to provide small samples of agricultural products to 

potential importers in emerging markets. For example, exports of 

dried cranberries to Mexico increased 17 percent to $15 million 

after samples were redistributed to Mexican bakers. FAS also links 

U.S. agriculture to the world by sponsoring trade and investment 

missions. In March, 2008, 17 U.S. agri-businesses met with more 

than 125 African counterparts through a trade and investment 

mission to western central Africa. The mission facilitated $6.6 million in sales. 

At FAS we take pride in our efforts to improve the competitive 

position of U.S. agriculture in the global marketplace. Agricultural 

trade means jobs, both on and off the farm. Agricultural trade remains a bright spot in the U.S. economy consistently producing a 

trade surplus. I look forward to answering any questions you may 

have. Thank you. 

[The prepared statement of Ms. Hale follows:] 


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Mr. RUSH. Thank you very much. Our next witness is Dr. Loren 

Yager. Dr. Yager, we welcome you to this subcommittee hearing, 

and we would ask that you limit your remarks, your opening remarks, to 5 minutes, if you will. 

TESTIMONY OF LOREN YAGER 

Mr. YAGER. Thank you, Chairman Rush, Ranking Member 

Radanovich, members of the subcommittee. Thank you for the opportunity to appear today to provide GAO’s perspective on the role 

of exports in the U.S. economy. As Congress responds to the economic downturn it must consider the full range of tools available 

for further growth and create new jobs for U.S. workers. Some of 

these tools are related to promoting exports, which can have broad 

benefits to the U.S. economy. Trade enables the United States to 

achieve a higher standard of living through producing and exporting goods that are produced here most efficiently, and importing 

goods and services that are produced more efficiently elsewhere. 

U.S. exports of manufactured goods grew by approximately 50 percent from 2004 to 2008 to a level of $1.1 trillion. These exports 

have come from every state. For example, in 2008 Illinois exported 

49 billion worth of manufactured goods. Similarly, California exported 127 billion of manufactured goods with an additional 8 billion in agricultural products. Because of the importance of trade to 

the U.S. economy, Congress has expressed longstanding concerns 

as to whether U.S. agencies are doing everything possible to promote U.S. exports. I will briefly mention three policy areas in my 

statement today. First, coordinating export promotion programs. 

Second, effectively meeting the needs of small businesses, and, 

third, monitoring and enforcing trade agreements. 

The first longstanding congressional concern I will discuss is the 

lack of effective coordination and follow up of trade promotion activities. Other witnesses have described the trade promotion coordinating committee and provided details on specific functions of the 

Commerce and Agriculture departments. In terms of coordination 

and follow up, we have reviewed the TPCC several times since its 

inception, and I testified in 2006 that the TPCC had improved on 

their follow up of key measures. For example, in the 2008 national 

export strategy there is information regarding the status of priority 

initiatives identified in the prior year’s annual report. 

However, despite the importance of agency coordination the 

strategy still does not link the agency’s individual goals to an overall government export promotion strategy. Promoting exports by 

small businesses has also been a long-term interest of the Congress 

as reinforced by the importance of small business in many of the 

opening statements. While many small businesses export it is widely recognized that they face a number of challenges in exporting, 

and Congress had required that agencies focus a significant share 

of their efforts to small and medium size businesses. In 2006, I testified about the lack of systematic measures for small business participation in government export promotion programs. 

More recently, we had a similar finding with regard to the export-import bank where a number of congressionally required 

measures lacked targets and lacked time frames. The third and 

possibly most important priority for the United States is ensuring 


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that U.S. trading partners comply with trade agreements. Monitoring and enforcing these trade agreements, which number in the 

hundreds and cover the vast majority of U.S. exports. It is a key 

responsibility for numerous U.S. agencies. Congress has expressed 

longstanding concerns regarding a number of these issues of which 

I will mention two. The first is China’s compliance with its commitments. Congress has been keenly interested in the extent to which 

China is complying with its obligations. As a result, we have conducted a number of studies examining U.S. government efforts to 

oversee China’s compliance, and we have made recommendations 

to U.S. agencies to improve communication to key stakeholders 

such as the U.S. Congress. 

A second point is the sufficiency of agency’s human capital. Effective monitoring and enforcement requires staff with expertise in 

trade policy, the foreign country, and the particular industry. However, we found that trade agencies have not always been able to 

get the right people in the right places. We recommended that key 

trade agencies develop better planning and training to equip staff 

to handle increasingly complex barriers to U.S. exports. Let me 

also mention that while in China last week, I heard a number of 

examples where having specialized U.S. government personnel in 

the embassy and in the consulates can assist U.S. firms. For example, in China patent and trademark office staff who are of particular interest to this subcommittee have been actively assisting 

U.S. firms better protect intellectual property, which, as you know, 

has been a big concern for U.S. firms, particularly in China. Chairman Rush, Ranking Member Radanovich, this concludes my remarks. I would be happy to answer any questions you have. 

[The prepared statement of Mr. Yager follows:] 


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Mr. RUSH. The chair thanks the gentleman. The next witness is 

Mr. Franklin J. Vargo. We welcome you, Mr. Vargo. We ask that 

you limit your opening statement to 5 minutes. 

TESTIMONY OF FRANKLIN J. VARGO 

Mr. VARGO. Thank you, Mr. Chairman, members of the subcommittee. I am delighted to be here representing the National Association of Manufacturers. You know, 2/3 of everything America 

exports are manufactured goods so the NAM really cares about 

this. Exports, unfortunately, are like Rodney Dangerfield. They just 

don’t get any respect. People don’t see exports. They see imports 

and all the big box stores. Nobody sees exports. A lot of Americans 

don’t even think we export anything even though we are one of the 

world’s largest exporters, and we are the largest manufacturer in 

the world. We manufacture 1 out of every $5 of everything made 

in the entire world. A lot of people find that astonishing but it is 

nevertheless true. Now our exports of manufactured goods have 

amassed a trillion dollars and in recent years has been growing 

about 15 percent a year, as you noted, Mr. Chairman, one of the 

strongest parts of our economy. People think, wow, that is really 

good. 

I look at exports and say, you know, we are not an export powerhouse. In fact, we are missing the boat on exports. Why do I say 

this? Because the NAM has started benchmarking our industry 

against industries around the world, and we have looked at the 15 

major manufacturing economies in the world that account for 80 

percent of all the manufactured goods. When we look at our imports proportioned to the size of our manufacturing industry, it is 

not really out of line with the aggregate. When we look at our exports, we are dead last, number 15 out of the 15 countries. 

The world average, all the countries in the world, when we look 

at the World Bank data and trade data, the average is twice what 

we export, twice. We are exporting half as much of our manufacturing output as the average country in the world. Now if we were 

exporting at the average, we would have another trillion dollars of 

exports. We wouldn’t have a trade deficit. Why are we exporting so 

little? And I should note that before I came to the NAM, I had a 

lengthy career with the Department of Commerce in export promotion trade policy. And it has been a long-time observation that 

one of the most fundamental reasons we export as little as we do 

is we grew up as a continental economy surrounded by an ocean 

on both sides, natural resources, and large domestic market driven 

countries didn’t grow up that way. Japanese countries didn’t grow 

up that way. They knew they had to export in order to grow and 

survive. 

We have to change the mentality of American companies. They 

are in a globalized world and they freely need to do more. The second reason is that the dollar is the world’s reserve currency and 

in my view at least for too many years that has led to an evaluation of the dollar against other currencies that are too high to reflect the competitiveness of our exports. Additionally, we face a lot 

of trade barriers around the world. We need to get those trade barriers down somehow, and that is why the NAM has favored bilateral free trade agreements, and without wanting to get into a deVerDate Mar 15 2010 00:11 Feb 28, 2012 Jkt 067103 PO 00000 Frm 00048 Fmt 6633 Sfmt 6633 E:\HR\OC\A103.XXX A103

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bate over free trade agreements, I just want to note the fact that 

last year we had a manufactured goods trade surplus of $21 billion 

with our free trade partners as a group, 6 billion of which was with 

GAFTA, which used to be in deficit before the agreement went into 

effect. With countries with which we don’t have trade agreements, 

we have $477 billion deficit with about 277 of that being with 

China with whom we have no trade agreement. 

But having access to markets, being competitive, wanting to export is not enough. You got to market. Just like an individual company a country has to market its exports, and here I think we really do a very inadequate job. I look at Commerce is doing well with 

what it has got but I look at the resources. Last year, Commerce 

had about $330 million for export promotion. The Department of 

Agriculture had twice that amount, 600 and some million or clearly 

our national priority goes on promoting agricultural exports and 

not manufactured goods. And I don’t want to stop promoting agricultural goods, you know. As Ms. Hale noted, 1/3 of our agricultural production is exported. That is great, and we need that, and 

I would like to see it go even higher but only 1/5 of our manufacturing export production is exported, and if we could get that up 

to 1/3 by my back of the envelope calculation, we would pick up another 1.3 million jobs in America’s factories, maybe a million and 

a half. 

Now promotion programs work. The figures I have seen, and I 

believe they are reliable, at least 100 to 1. For every dollar you put 

in to export promotion you get at least $100 in additional exports 

and that is a stream that goes into the future. Now if you and I 

could put that into our personal portfolios, we would all jump at 

it, so why doesn’t the U.S. government? Because they don’t know. 

So that is why this hearing is so important. I would like to ask that 

the World Bank document, export promotion agencies, what works 

and what does not, which says every dollar of export promotion 

produces $300 of exports, I would like to ask this be put in the 

record of this hearing. 

Mr. RUSH. By unanimous consent, the document will be placed 

in the record. 

[The information appears at the conclusion of the hearing.] 

Mr. VARGO. OK. Thank you, sir. I don’t want to take anything 

away from the Agriculture Department. I admire their programs. 

I wish the Commerce Department could do more. I know that proportional to the amount of agricultural and manufactured exports 

because manufactured exports are 10 times as large as agriculture. 

If Commerce really had the same proportional budget, it would 

have a $6.4 billion export promotion budget, not 300 million. Now 

I know the department has a huge deficit and we have a huge 

stimulus program so here comes the NAM and says, you know, 

could we have another 6 billion for export promotion, but the fact 

of the matter is these programs pay for themselves. They will generate a flow of tax revenue that will more than pay for it. 

So again I am thrilled that this subcommittee is holding this 

hearing and look forward to working with you, Mr. Chairman, the 

members, your staff because we have to make the priority of exports more visible. We are either going to pay our way in the world 

or borrow our way, and we have already seen, we have got a $5– 


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1/2 trillion accumulated trade deficit already, thank you very 

much, so I would like us to exporting more and paying our way in 

the world. We can do it but so many small companies just don’t 

have the time to fly over to Europe or fly over to China, and what 

do they do when they get there? You know, they need more help. 

The help they get is good, but it is much, much too small. Thank 

you, sir. 

[The prepared statement of Mr. Vargo follows:] 


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Mr. RUSH. Thank you so very much. And now the chair recognizes Ms. Liz Reilly. Ms. Reilly, we recognize you for the purposes 

of an opening statement. Would you please limit your statement to 

5 minutes, and thank you for your attendance here today. 

TESTIMONY OF LIZ REILLY 

Ms. REILLY. Thank you. Thank you, Chairman Rush, Ranking 

Member Radanovich, and other members of the committee. I greatly appreciate the invitation to speak to this subcommittee on this 

wonderful Irish day. The U.S. Chamber of Commerce is the world’s 

largest business federation representing 3 million businesses and 

organizations. TradeRoots is the only sustained national trade education program dedicated to raising public awareness around the 

importance of international trade to local communities. Our partners include local chambers of commerce, trade associations, economic development groups, and federal agencies. Last year we 

hosted and visited over 300 congressional districts where we talk 

about business and the importance of exporting and the resources 

that are available to do it. 

Ninety-five percent of the world’s population lives outside the 

United States. In these challenging economic times America must 

find a way to sell our things to these potential customers. Fiftyseven million Americans are employed by firms that engage in 

international trade. That is 1 in 5 factory jobs that depend on exports as well as 1 in 3 acres of American farms that are planted 

specifically for export. In 2008, the U.S. set a new record and exported nearly $2 trillion of goods. That is over 13 percent of our 

GDP but it should be more. Most Americans, however, tend to regard international trade as the domain of large multi-nationals 

when in fact 97 percent of all exporters are SMEs. That is close to 

240,000 companies and our overseas sales represent nearly a third 

of all U.S. merchandise exports. 

America’s small business people are the most innovative and 

hard working entrepreneurs in the world. We have told many of 

their success stories as part of our Faces of Trade series where we 

celebrate companies that are exporting made in USA products 

around the world. If more U.S. businesses were able to seize export 

opportunities, the gains could be immense. The World Bank site 

that Mr. Vargo just cited says that $1 spent in export promotion 

brought a 40-fold increase in exports, and 40 to 1 is not a bad return on investment. To address this need, the U.S. Chamber proposes a doubling of federal expenditures on export promotion to 

small business. From Seattle to Savannah, many U.S. companies 

are just not aware of the government services that are available to 

help them break into these new markets. I have talked to so many 

who have never heard of the U.S. department export assistance 

centers or the foreign ag service or that Ex-I Bank exists, let alone 

gives out loans. 

And I don’t think this is the fault of American business owners. 

Rather, I think it reflects the inadequate resources dedicated by 

the federal government to promote these services adequately. Some 

companies have had challenging experiences with the commercial 

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cently when the officers in Dubai were so understaffed that they 

were unable to assist in setting up business meetings. Other companies such as Askinosie Chocolate in Springfield, Missouri, have 

worked with their USEACs but they cannot afford a fee. With over 

15 percent of Askinosie’s gross revenue coming from overseas markets, finding a new one is imperative for their growth. 

Additional funding for the Department of Commerce should 

eliminate or lower these Gold Key Service costs for small businesses. Closely affiliated with the USEACs are 60 district export 

councils that combine the energies of more than 1,500 exporters. 

We recommend selecting an ex officio DEC member to participate 

on the President’s export council in order to represent small business. Another exporter, York Wire and Cable of York, Pennsylvania, was recently telling me about the positive impact of Market 

Access Grants at the state level. Export-ready companies in good 

standing are eligible for $5,000 to explore new markets through 

trade shows, trade missions, and internationalizing their web sites. 

A similar grant system should be created at the federal level for 

companies around the country. Market Development Cooperator 

Program Grants, MDCP, are another effective tool for export promotion. TradeRoots was actually founded based on an MDCP Grant 

to educate small businesses on exporting and as a result of our 

grant we reached more than 3,800 SMEs and helped generate more 

than $9 million in U.S. exports. 

We support continuing and expanding MDCP Grant funding. An 

additional way to promote U.S. exports would be for Congress to 

pass the pending trade agreements with Colombia, Panama, and 

South Korea. These accords would provide an estimated 42 billion 

over 5 years for American workers and farmers. More than 25,000 

SMEs are already exporting to these countries and this number 

could rise sharply with their implementation. A final priority 

should be to ensure adequate funding for programs dubbed trade 

capacity building. The United States spends more than 1.3 billion 

annually, which is important to maintain. 

In closing, investing in export potential of America’s small and 

medium-sized businesses is crucial to stimulating our economy. I 

greatly appreciate the opportunity to testify today. The U.S. Chamber of Commerce stands ready to work with you on these and other 

important challenges in the year ahead. Thank you very much. 

[The prepared statement of Ms. Reilly follows:] 


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Mr. RUSH. The chair thanks you so very much for your testimony, Ms. Reilly, and the chair thanks all the witnesses for their 

opening statements. The chair now recognizes himself for 5 minutes for the purpose of asking questions of this outstanding panel. 

I will begin with Mr. Vargo. Mr. Vargo, you mentioned in your testimony the importance of penetrating new and promising markets. 

In my home State of Illinois, Canada is the first trading partner, 

followed by Mexico and then China. There is an old adage that says 

never put all your eggs in the same basket. In the trade context, 

it means it would be wise to diversify our export clientele and not 

put all our exports in the NAFTA basket. 

Mr. Vargo, I have two questions. Have you identified a region of 

great opportunities for U.S. businesses, and have you also identified a specific part or section that needs to be expanded in that 

particular market? How do you go about making such an assessment, and what specific change do you think the government needs 

to undertake to increase exports to these countries? That is about 

five questions rather than one. 

Mr. VARGO. Thank you, Mr. Chairman. You are right. For your 

state and most others, NAFTA is the largest export market. Europe 

generally is number two. In our eyes, the most rapidly growing 

area, it is taking some economic hits right now, is Asia, China and 

other parts of Asia, but over the longer term there is going to be 

an enormous amount of growth there, and we need to do more. 

Asia, it is culturally different from the United States. For most 

people, they don’t know what to do when they get there. We need 

a lot more assistance. 

I would also point to Europe. Why Europe? Because the European Union is a fairly easy market to sell to, and a lot of our companies, especially smaller companies, sell there already but they 

only sell to one or three markets in the European Union. Now if 

they can sell to Britain or Germany, they can sell to France, Italy, 

other countries, but they don’t, and we don’t have enough export 

promotion resources to make it easy for them to find customers and 

distributors in those markets, so I would pick those two markets. 

And what should we do? In China, I think, and some other Asian 

countries, I think American companies need more depth of assistance than they are getting. We had one of the commerce departments set up American trade centers in all major cities in China, 

physical facility with display space, temporary office space for companies. They can’t do it. They don’t have the resources. 

In Europe some of the most effective components of sales for 

American exports are what are called the FSMs, the foreign service 

nationals, who work for the commercial service. They know the 

local markets. Again, Congress doesn’t have the money to hire 

enough. So I think it is doable, but it comes down to resources and 

the national priority. And, frankly, I just don’t see a national priority for export expansion yet. 

Mr. RUSH. I want to ask Ms. O’Neill and Ms. Hale in the time 

I have left, which is about 1 minute and 15 seconds, what are your 

respective agencies doing to identify emerging markets and what 

are emerging markets as far as you are concerned? How would you 

define emerging markets? 


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Ms. O’NEILL. Thank you for the question, and I think Frank 

went to a good bit of where we would say the largest opportunity 

for exports, and that is in Asia. I think we would probably define 

an emerging market as one where we haven’t had big U.S. expert 

penetration yet, but that there are also perhaps not the same legal 

and regulatory infrastructure in the market and where services on 

the ground are particularly needed to help U.S. companies navigate 

and identify opportunities in those markets. But I would say our 

attention has shifted to Asia, India, where it is more difficult for 

companies to do business. 

Ms. HALE. I think one of the key things in identifying emerging 

markets is a market where incomes are increasing. We find that 

as incomes increase people eat more meat. They eat more vegetable 

oil. There is a growing middle class. People go out and eat fast 

foods and enjoy American potato products. And so we are seeing a 

lot of growth in Southeast Asia, also in Central America, and it is 

very often related to growth in income. 

Mr. RUSH. Now the chair recognizes the ranking member, Mr. 

Radanovich, for the purposes of questioning for 5 minutes. 

Mr. RADANOVICH. Thank you, Mr. Chairman, and again appreciate the panel members for your opening statements and for being 

here today. I wanted to first ask Ms. Hale, Ambassador, regarding 

the FAS and your recent reorganization, can you explain to me how 

this reorganization has led you to perform more efficiently for agriculture? 

Ms. O’NEILL. I think one of the key things is that we are better 

staffed now to address the kinds of technical trade barriers that 

you mentioned before. We have an Office of Science and Technical 

Affairs that works with our sister agencies at USDA like the Animal and Plant Health Inspection Service, the Food Safety and Inspection Service, to overcome and remove some of these technical 

barriers to trade. We also have an office that is doing more strategic planning on a country basis. We are better staffed to look at 

individual markets and bring together all of the department’s resources in an integrated strategic plan, the kind that Dr. Yager 

was talking about. 

And then we also have all of our trade assistants programs in 

one area so we have good coordination between our credit programs 

and our other marketing programs like the MAP program. 

Mr. RADANOVICH. Thank you very much. Can you tell me within 

your reorganization and such, is there an increased effort on the 

part of governmental staff in export promotion to kind of replace 

some of the work that maybe commodity and crop associations currently undertake? 

Ms. O’NEILL. No, sir. We are partners. Everything we do, we do 

with industry and industry contributes very significant amounts of 

money for our programs. They are putting more into the programs 

than what we are putting in to them, and we rely on their technical expertise. They know—they are the experts in how to run 

feed trials to show people how to use soybean meal to improve their 

productivity. They do things that our staff could just never do on 

our own, and so that partnership has been very important over the 

years. 


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Mr. RADANOVICH. Very good. Thank you very much. One more 

question, and that is can you give me an idea on the Uruguay 

Round, what might have been new export markets that have been 

opened up as a result of that? 

Ms. O’NEILL. From the—goodness, that is a way back. We are 

talking about—— 

Mr. RADANOVICH. It is a little way back. 

Ms. O’NEILL. Yes. I think one of the most important accomplishments in the Uruguay Round was the TBT agreement, the Technical Barriers to Trade agreement. That isn’t addressed to a specific market, but what that agreement did was to make international standards the norm for addressing technical issues. So we 

have the OIE is the Animal Health Organization. KODAC sets food 

safety standards. There is an SPS agreement that sets plant health 

standards. And what the TPT agreement and the Uruguay Round 

did was make those international standards WTO standards, and 

so we can use the World Trade Organization’s dispute resolution 

mechanism to resolve cases when we have technical barriers to 

trade, and that is a big improvement. 

Mr. RADANOVICH. Very good. Thank you very much, Ambassador. 

Dr. Yager, welcome to the committee. I notice that the TPCC consists of about 20 different agencies. Can you give me a sense as to 

whether or not it is an advantage to have 20 different agencies 

sharing the same goals or, you know, maybe just having one single 

effort? Can you give me an idea what the advantages or disadvantages might be? 

Mr. YAGER. Well, the TPCC was created, I guess, in the early 

1990’s, and there were some questions from the Congress at that 

time as to whether all the different agencies that had a small piece 

of export promotion were actually working towards the same goals, 

and so it has existed for about 15 years. We do think there is a 

big advantage in having an organization that brings together the 

export promotion efforts of the different agencies. There may be a 

large number of agencies, but realistically there is only a few that 

do the broad percentage of the export promotion efforts, so after 

you get through commerce, agriculture, and the Export-Import 

Bank, which is also a fairly large lender and provider of credit to 

U.S. firms many of the other agencies are much smaller in terms 

of their funding and the kinds of contributions they make to export 

promotion. 

We do believe that getting together and having a single report 

which they put out every year and trying to follow up on that to 

show, for example, if they target big emerging markets in one year, 

we think it is very valuable for them to come back the next year 

and say we were successful, here are some measures for how much 

we were able to accomplish in big emerging markets, for example. 

We think that kind of follow-up is very important, so we do think 

it is a good idea to have the trade promotion coordinating council. 

Mr. RADANOVICH. Very good. Thank you, Doctor, and thank you 

for the time, Mr. Chairman. I am assuming there will be a second 

round of questions? 

Mr. RUSH. Yes, the chair does intend to engage in a second round 

of questioning. Our next member recognized will be Ms. Matsui of 

California for 5 minutes. 


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Ms. MATSUI. Thank you, Mr. Chairman. As you know, California 

is home to one of the world’s largest trade markets, and there are 

a number of small and medium businesses in California who export 

their brands and services. But a lot of them have not reached their 

export potential, as we know, and there are a variety of services 

available, both by the government and by business associations but 

a lot of the businesses are not aware of this. Ms. O’Neill, I would 

like to ask about the budget situation in the U.S. Commercial Service. When my office called a local U.S. Commercial Service Expert 

Assistance Center in my congressional district, I learned there was 

only one staff person there responsible for 22 California counties. 

Now our counties are pretty large in California, and this one person coordinates all the outreach, the trade missions and consultations with individual companies. Now over the last 5 years, the 

U.S. Commercial Service budget has remained relatively stagnant. 

It looks like it will increase this year maybe less than 1 percent. 

Is the Department of Commerce asking for more resources? 

Ms. O’NEILL. Thank you, and you are right. Our largest presence 

in the states is in California and I will certainly take back your 

concern about our staffing level in your district. We look forward 

to working with the new team as Governor Locke is hopefully confirmed soon. There have been a lot of interesting ideas here today, 

and I certainly look forward to working with Governor Locke and 

his team to explore what might be possible in the export promotion 

front. 

Ms. MATSUI. Mr. Vargo, do you see a similar situation in other 

export assistance offices around the country? 

Mr. VARGO. Regrettably, yes. If there is one thing that we could 

do up front, it would be to significantly increase the staff of our district export offices so they can get around more and work with companies. As I have noted, the typical small business owner is worried about his line of finance from his bank, keep holding on to his 

or her as customers. They just don’t have time to wander through 

the Internet or fly over to China or France or somewhere. We have 

got to have the commercial specialists go out and reach them, make 

it easy for them. If they make it easy for them, they will do it. Believe me, they will do it. We have got lots of examples. The resources just aren’t there. 

Ms. MATSUI. But can you tell me how you compare America’s export promotion policies to those in Canada and Europe, Japan, and 

China? 

Mr. VARGO. Well, they take their export promotion much more 

seriously than we do. They realize that this is where their future 

is. This is where their growth has to be. And we haven’t gotten the 

joke yet frankly. We are missing the boat. I am under oath so I 

won’t say that I know for 100 percent this is positive. I hear that 

Canada has more commercial officers around the world than the 

United States does, and if that is true, that is ridiculous. Now I do 

know that the Australian trade minister recently looked at the 

Market Development Cooperator Program that principally the Agricultural Department uses and the Commerce too a little bit, and 

threw another $100 million into it for Australia because they see 

this as a way to expand their exports, so other countries are really 

pushing hard, and we are missing out. 


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Ms. MATSUI. I am concerned because I feel that trade is very important and we have a huge trade deficit. As you say, all of you 

say, that it would be important to get the export business moving 

along, and it seems to me that within the last several years we 

haven’t been doing that. We have been reducing our resources to 

do that. And my sense is that had we gone ahead and really funded 

or beefed up the resources, we might have been able to encourage 

others to actually get out there. I am wondering whether any of 

you can answer this question. Has there been a change in the type 

of assistance given? 

I think in Mr. Vargo’s testimony he was saying that it goes— 

there is not as much outreach and that the businesses aren’t getting as much assistance in the foreign offices as they might be because they aren’t staffed, and there might be more trade favors and 

things of that nature more than anything else. Can you comment 

on that and what direction you think we should be going? 

Mr. VARGO. May I comment? 

Ms. MATSUI. Yes. 

Mr. VARGO. Because our government witnesses may feel a little 

constrained. The budget situation I believe is so severe that offices 

are being closed in Europe, for example, to be able to move commercial officers to China and other parts of Asia. The worse thing 

is, I am not sure that they actually have enough funding to fill 

those new positions, so we may find they are cutting some positions 

and not filling others. And even if they are moving them, you 

know, that still leaves Europe our second largest market with inadequate resources. Could I put in one plug though for Mr. Chairman 

and members of the committee? When Governor Locke is confirmed 

as Secretary of Commerce, please bring him up here. Share with 

him your views on expert promotion. Governor Engler, our president, is going to go over and see Secretary Locke as soon as he is 

confirmed on this. I would like to have him hear from the subcommittee as well. 

Ms. MATSUI. Thank you. That is it. 

Mr. RUSH. The chair thanks the gentlelady. Your time is up. Now 

the chair recognizes Mr. Scalise from Louisiana for 5 minutes. 

Mr. SCALISE. Thank you, Mr. Chairman. In Louisiana our port 

systems actually have been doing very well. The increase from 

2007 to 2008 was about 38 percent, so we have been promoting 

more exports—different exports, I am sorry, but we have also been 

starting to prepare for the widening of the Panama Canal coming 

up in the next few years, which gives us a lot of opportunities to 

increase both imports and exports. I want to get each of your takes 

if I could go down the table starting with Ms. O’Neill on what 

things are being done to prepare for the opportunities that would 

exist once the Panama Canal is widened. 

Ms. O’NEILL. As with all our free trade agreements, we work 

very closely with USTR and the negotiators to identify exactly 

where the market access opportunities are and develop promotional 

materials around those opportunities. You have hit the nail on the 

head. The Panama Canal activity is going to be a key interest for 

a number of our companies, and we look forward to getting the 

word out on the opportunities there. Even independent of the 

agreement, we continue to work with our officers on the ground in 


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Panama and with U.S. industry to make sure that we are well positioned to take advantage of those opportunities. 

Mr. SCALISE. Thank you. Ms. Hale. 

Ms. HALE. A lot of our corn and soybeans that are exported to 

Asia go through the Panama Canal, and the constraint now is the 

size of the canal. The ships that go through there are called 

Panamax because it is the maximum size that can go through the 

Panama Canal. And so with a larger canal if we can increase the 

size of our ships, it would make our shipping more efficient, keep 

our shipping costs down and make us more competitive in Asia. 

Mr. YAGER. One of the things that we are aware of in doing the 

work on imports and trade is that the ports on the West Coast, 

particularly the container ports of Los Angeles and Long Beach in 

fact are dominant in terms of shipping many of the goods and services. I think the opening of the Panama Canal offers an opportunity to have some of that trade diverted to other ports on the 

eastern side of the continent which I think would reduce some of 

the congestion. One of the challenges that we have in the United 

States is port infrastructure, as you probably know, and I think 

you have been doing some things in New Orleans but some of the 

ports on the West Coast are challenged due to the volume of trade, 

particularly container shipping that is coming in, so I think that 

will open up some options for eastern ports such as your own. 

Mr. SCALISE. Mr. Vargo. 

Mr. VARGO. Well, certainly the widening of the Panama Canal I 

think will be good for the Louisiana ports and others but in addition the project is one of the world’s largest construction projects 

and we want the American equipment, American technology used 

there so the sooner we have that trade agreement and get preferential access to that huge construction project the better off we 

are. And I was very encouraged that President Obama’s trade policy statements that he expected that this agreement could move 

relatively quickly. We export about 5 billion a year to Panama already. I would like to see that grow. In a good period downhill with 

the wind behind its back, Panama will export as much to us in a 

year as China does every 6 hours so there is certainly no threat 

there. 

Ms. REILLY. Thank you, and I would just have to echo basically 

what the whole panel has said that the need to widen the Panama 

Canal is very important to U.S. business, obviously, to first get 

goods moving quicker, reduce congestion, but as well as the project 

and expanding it itself, that will allow—the free trade agreement 

will allow U.S. companies access to bid on the expansion project. 

Mr. SCALISE. Thank you. Ms. Hale, last year we had a 40 percent 

increase in agriculture exports. What was that attributable to? Was 

there one thing or series of things? 

Ms. HALE. That is on a value basis and so part of the increase 

was because of higher prices but we are also seeing just across the 

board increase in demand. In CAFTA we have seen a 30 percent 

increase in agriculture exports to Central America with growing 

middle class. In places like China we are seeing big increases in 

exports of products like soybeans which are used for vegetable oil 

there, crushed there and used for vegetable oil and then animal 

feed because consumption of livestock products are increasing. So 


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there isn’t one reason. It is a different reason in each market but 

we are continuing to see good demand for U.S. agricultural products. 

Mr. SCALISE. Thanks. And then one final question in my last few 

seconds for Ms. O’Neill. It does seem like we got a surplus on exports of copyrighted material, music, movies. Considering the problems with copyright infringements in other countries on those types 

of products, what is being done on our side to try to protect the intellectual property from copyright of violations so that we can even 

increase more of that margin? 

Ms. O’NEILL. Just a great example of public-private partnership, 

we have worked closely with the Chamber and other multipliers to 

develop a program that we call Stop Fakes. It is a combination of 

technical assistance to companies that is helping them understand 

how to protect their intellectual property before they go into foreign 

markets, what resources are available to them once there are challenges once they face a problem in a market. And then we are also 

redoubling our efforts overseas to work with foreign governments 

to improve their enforcement of their intellectual property rights 

and make sure that U.S. products and services are protected overseas. 

Mr. SCALISE. Thank you. Thank you, Mr. Chairman. 

Mr. YAGER. Mr. Scalise, if I could just briefly answer that. I was 

in China last week actually looking at the issue of intellectual 

property protection, and one of the things I can point out is that 

U.S. agencies in some cases who have not had a presence abroad 

before such as a patent and trademark officer now also putting 

some of their specialists into key places like southern China where 

a lot of the world’s manufacturing takes place, so there is now a 

PTO representative in southern China that helps U.S. firms understand the legal system, communicate with the Chinese government, 

and simply just be there to help U.S. firms think about how to protect intellectual properties so that they can—— 

Mr. SCALISE. Is the government cooperating, the Chinese government cooperating? 

Mr. YAGER. Yes, they are working more closely with the Chinese 

government on that. It is a long-term effort though. It doesn’t happen overnight, but we think that that specialized personnel does 

offer some advantages and can get some results for U.S. firms. 

Mr. SCALISE. Thank you. 

Mr. RUSH. The gentleman’s time is up. The chair now recognizes 

the gentlelady from Ohio, Ms. Sutton, for 5 minutes. 

Ms. SUTTON. I thank the gentleman and I thank you all for your 

testimony. We are talking about exports now and I appreciate that, 

but I do think that it is somewhat a mistake to try and isolate exports out of our international trading system and just talk about 

it in a vacuum so bear with me and if you don’t have the responses 

today, that is OK, because I am going to talk a little bit more about 

the interconnectiveness of our system. 

I am going to begin by an article that I would like to have permission to enter into the record from bloomberg.com. 

Mr. RUSH. By unanimous consent, so ordered. 

Ms. SUTTON. Thank you, Mr. Chairman. This article was dated 

December 14, and it came in the wake of the passage of the Peru 


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free trade agreement, and I know, Ms. Reilly, you talked about 

your hope and the hope of your association that we might pass the 

Colombia free trade agreement so it is relevant as we consider that 

possibility. Now we heard that this trade agreement was, quite 

frankly, just a small piece of trade, you know, in the scheme of 

things and not that big of a deal, and we heard how it was going 

to open up our markets, and I am all for exporting American goods, 

but I am not for exporting American jobs, and so I was struck right 

after this Peru free trade agreement was passed that Peruvian 

President Alan Garcia urged American companies to invest in his 

country and said specifically come and open your factories in our 

country so we can sell your own products back to the U.S., Garcia 

told business executives today. 

Of course, where you have oil, mining, agriculture, fishing, and 

manufacturing firms, he urged them to flock to his nation of 29 

million people which has a per capita income of less than $3,000 

a year. So the point is not all jobs are created equal. We talk about 

jobs a lot of times in these discussions about trade but obviously 

we weren’t just talking about exporting to this market. We are also 

talking about trying to export jobs or at least we are not trying to 

export jobs but there is certainly a reference to that. And I would 

just like to hear from Mr. Vargo and Ms. Reilly, if I could, about 

what you think about this. 

Mr. VARGO. I noted that article also, and certainly everybody 

wants more foreign investment in their country. We want it too. 

When we look at the record though, and I will be happy to send 

you data that the Bureau of Economic Analysis from the Commerce 

Department does, we have not seen this large sucking sound and 

out flow of manufacturing investment to countries with which we 

have free trade agreements. About 75 percent or so of the foreign 

direct investment from manufacturing goes to the industrial countries, principally Europe. It does go to Canada, Japan, and about 

90 percent of the output there is for local consumption, so one can 

read many different things into this, and I would be pleased to 

meet with you and exchange views on the data, but I would like 

to make sure that the data are available. 

But when we look at, again, the record with our free trade partners, we see that they have never been a large percentage of our 

trade deficit, 10 percent, 5 percent, something like that, and now 

they are as a group in surplus, so certainly it is very good to be 

concerned and again we can have a variety of views but when I 

look at the data, and I used to run the research office in the Commerce Department so I never met a number I didn’t like, I draw 

different conclusions. But it is good to be vigilant and it is good to 

ensure that our trade agreements do what we expect them to do, 

and we have seen our exports increase more rapidly to every country with which we have entered into a trade agreement than before. 

On Colombia, for example, 2/3 of our imports from Colombia are 

oil and other mineral fuels, and we would like to have secure 

sources of energy close to our borders. I thank you for the question. 

Ms. SUTTON. And I look forward to following up because I agree 

that numbers and data can say many things. 

Mr. VARGO. Right. Thank you. 


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Ms. REILLY. And I would also say that I also saw that article and 

know what you are referring to. Regarding Peru specifically, our 

position is a little bit differently where we look at the thousands 

of small companies that are already exporting to Peru and the 

added tariff that was being put on those goods which was an average of about 15 percent, so we just look at those numbers and 

think about the potential of once that agreement goes into place all 

the added value that is going to come back to those companies here 

in the U.S. and be a benefit on the bottom line. 

Personally, I work with companies all around the country and I 

have not yet heard of any that are planning on relocating to opening to Peru in regards to this agreement. 

Ms. SUTTON. I appreciate that, Ms. Reilly, and actually that was 

just sort of an example to open up the discussion. It really wasn’t 

about Peru per se. And I look forward to having more conversation 

as this hearing goes on. Thank you. 

Mr. RUSH. Thank you very much. The chair now recognizes Mr. 

Stupak for 7 minutes for questioning. 

Mr. STUPAK. Thank you, Mr. Chairman. Instead of talking about 

trade promotion, I want to talk about trade enforcement. In fact, 

Mr. Vargo, on page 5 of your testimony you say top trade priority 

for the United States is opening foreign markets for U.S. goods and 

services by insuring that the U.S. trading partners comply with existing trade agreements. I think it was Dr. Yager or Mr. Vargo. 

Mr. YAGER. I believe it is in my statement. 

Mr. STUPAK. Mr. Yager. So let me ask you this. On trade agreements as a general rule can countries refuse to allow products into 

their country if it is not safe or may jeopardize the health of the 

people? 

Mr. YAGER. I think the guidelines that are written in the trade 

agreements is that they have to be legitimate concerns. They have 

to be technical concerns that also do not discriminate against foreign products, and so if there is—— 

Mr. STUPAK. Sure. Well, let us just take China since that is our 

base trade agreement, like melamine, toys, heparin, the drug for 

blood anticoagulant. It is all right for the U.S. then to refuse products from China if we can prove that there is concern about the 

health and safety of the American people. 

Mr. YAGER. Well, I think there are a number of steps. I think you 

have also addressed some of these in prior statements about the 

ability of the United States to, in fact, put inspectors abroad, for 

instance, the Food and Drug Administration to make sure that 

plants in China do get inspected on a regular basis, so I think 

there are a variety of ways that the United States can try to assure 

that the goods that are coming in from—— 

Mr. STUPAK. Sure, but as a general rule a country can resist a 

product if it threatens the health and safety of its people. 

Mr. YAGER. The United States can prevent products from coming 

in if the kinds of efforts that take place are not discriminatory. 

Mr. STUPAK. Sure. So I was reading today in the Congress Daily 

in the hill briefs that are on page 6 of today’s Congress Daily where 

President Obama has put a halt to the program which allowed up 

to 500 Mexican trucks to move across our border without the strict 

mileage limitations because of the concerns for the health and safeVerDate Mar 15 2010 00:11 Feb 28, 2012 Jkt 067103 PO 00000 Frm 00081 Fmt 6633 Sfmt 6633 E:\HR\OC\A103.XXX A103

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ty of those vehicles and drivers on our highways, and the Mexican 

economy department has said that it will—it violates the North 

America Free Trade Agreement and it is going to retaliate with 

cancellation of truck access by U.S. trucks. Now how does that jive 

with what we just said about it is supposed to be fair and open if 

we have legitimate concern about these trucks, Mexican trucks, 

that haven’t passed muster since we passed NAFTA, which I believe was about 1994 or ’93, August of ’93, if I remember correctly. 

And after 16 years we still don’t feel these products are safe. So 

it would be in our general rule, it would be illegal for Mexico to 

retaliate, would it not? 

Mr. YAGER. I don’t know that case specifically, but I do know 

prior that the Mexican government did, I think, win the panel ruling that allowed them to gain access to U.S.—to further U.S. markets through their trucking, so I would have to look and do some 

more research on that, Mr. Stupak. 

Mr. STUPAK. Let me ask you this then. Dumping, illegal dumping 

where you undercut the price and put your surplus in another 

country, that has always been considered illegal under all trade 

agreements, right? Can you explain to me how back a year or so 

ago underneath new page in which China and Indonesia and Korea 

were dumping treated paper—excuse me, glossy paper, high gloss 

paper, in this country illegally. The Commerce Department said it 

was illegal, and we put tariffs in. They appealed to the ITC. The 

ITC ruling basically said, well, true, particularly with the case of 

China, they are dumping but it has a small effect on the U.S. economy, therefore, the tariffs were taken off. Is that now the standard 

for illegal dumping? Illegal dumping is legal as long as it doesn’t 

have a major impact on one’s economy? 

Mr. VARGO. Could I answer that? 

Mr. STUPAK. Sure. 

Mr. VARGO. Actually the Nupage case wasn’t dumping. It was 

subsidies, and the NAM was instrumental in getting the Commerce 

Department to agree that our countervailing duty statutes would 

be applied against subsidies so we—— 

Mr. STUPAK. Because of illegal dumping. China was dumping 

here for less than the cost. 

Mr. VARGO. But the way the U.S. law is set up, and it has been 

set up a long time ago, in order for there to be dumping or countervailing duties applied two things have to happen. The Commerce 

Department has to find that they are selling in the U.S. at less 

than they are selling at the local market or the selling at less than 

the cost of production. That is what Commerce does. 

Mr. STUPAK. And they found they were selling at less than cost 

production? 

Mr. VARGO. They absolutely did. That is true. The International 

Trade Commission then as part of the law, which Congress passed 

a long time ago, said it has to find injury. Was that industry injured, and in this case the ITC found no, so it is not a change in 

practice. We can question the decision but anyway they followed 

the practice. There has been no change in practice, but let me just 

for the record say the NAM strongly supports the application of 

U.S. dumping laws and countervailing duties. 


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Mr. STUPAK. For most of us dumping is dumping whether it costs 

one job or in this case in the paper industry 550 jobs. People lost 

their good paying jobs because of this illegal dumping, so the wrinkle of this so-called economic injury if you read the opinion of the 

ITC if the injury was greater, more economic injury to the U.S. 

than it would have been illegal. Most Americans are under the impression illegal dumping is illegal. 

Mr. VARGO. But by U.S. law in order to be illegal it has to have 

caused injury. 

Mr. STUPAK. So if 550 people lost their job, it is not injury? 

Mr. VARGO. I am not arguing, sir, on that case. I am just telling 

what the law says. 

Mr. STUPAK. So when did Congress pass that crazy law? 

Mr. VARGO. 1970s. 

Mr. STUPAK. 1970s before we had the big explosion in trade. Ms. 

Reilly, let me ask you this. You indicated that we should pass the 

Korea free trade agreement, and coming from Michigan, the auto 

state, in our automobile trade with Korea, 87 percent of the deficit, 

trade deficit, between U.S. and Korea, and U.S. Korea trade deficit 

is $107 billion we are in the hole, in 2006 South Korea sold over 

700,000 vehicles here in the U.S. but the U.S. was only allowed to 

get in 4,556 vehicles, so Korea, according to our research uses tariffs, prohibitive and discriminatory taxes, and regulations designed 

to keep our imports out so how is this fair and free trade, why 

should we pass Korea trade agreement when we can only get 4,500 

of our cars into Korea but yet they are allowed 700,000 in our 

country? 

Ms. REILLY. I appreciate your concern on that, and I cannot 

speak to the specifics of the autos issue within that agreement but 

from a broader standpoint the reason that we believe that we 

should pass the Korean agreement is because Korea is our seventh 

largest trading partner in the world. 

Mr. STUPAK. Even though they use tariffs, prohibitive, discriminatory taxes and regulations to keep our products out, we still 

should trade with them because they are seventh largest? 

Ms. REILLY. They are seventh largest for those goods as well as 

our sixth largest for agricultural goods so they are a tremendous 

potential customer for our companies. 

Mr. STUPAK. So when does wrong become right? We have the 

health and safety of the American people. We have discriminatory 

tariffs, regulations, taxes, illegal dumping, but we all say that is 

OK. That is not fair and free trade to a lot of us up here—— 

Ms. REILLY. I don’t think we are saying that that is OK, and I 

think that there is a lot of things that go into free trade agreements, and I am not privy to those discussions and those negotiations, but all of those things ultimately come out. That is where 

they talk about the importance of labor and environmental protection in these countries, as well as patent protection, and IPR protections for different products within these countries. There are a 

lot that go into them, and while they do have certain flaws, we believe as a whole they are beneficial for—— 

Mr. STUPAK. Do you think we should continue trading if these 

issues remain unresolved? 


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Mr. RUSH. The gentleman’s time is up. We will have a second 

round. The chair now recognizes the gentleman, Mr. Braley, for 5 

minutes. 

Mr. BRALEY. Thank you, Mr. Chairman, for holding this important hearing. I want to follow up on Mr. Stupak’s questions because I think it is a very important conversation to have. A lot of 

us up on this panel believe strongly in the concept of free trade 

when it is married with the concept with fair trade, but a lot of 

us see gross inequities in our current trading system that imposes 

an unfair burden not just on U.S. workers but on U.S. companies 

competing in a global market place. I want to follow up on Mr. 

Stupak’s point about the Mexican trucking agreement, which many 

of us in Congress fought to terminate despite strong objections 

from the Bush Administration. 

And I sat in on the hearing in the Transportation Subcommittee 

on Highways and Transit when we discussed that agreement at 

length. And on paper it looked like it created an equitable system 

because Mexico was required to comply with the same requirements that U.S. trucking companies are required to comply with to 

operate in this country. And, in fact, anyone like myself who used 

to be a commercial truck operator was provided a little green handbook that the Federal Motor Vehicle Safety Commission gives to 

every licensed truck driver to understand the rules of the road and 

also the rules of responsibility that go with operating a commercial 

vehicle. And one of those includes maintaining a driver’s file so 

that anyone who causes damage whether commercially or personally while operating that truck has a source of accountability and 

that accountability is verifiable in this country. 

And one of the concerns many of us had about that Mexican 

trucking program is there was absolutely no corresponding transparency on the other side of the border to assure the safety of 

American citizens from the owners of these Mexican trucks, and 

nobody from the Bush Administration could identify a similar 

source of verifiable information when these trucks crossed our border, so it was not a fair competition. And the same point that Mr. 

Stupak was raising is another concern. If you go back and read the 

Soviet Constitution, you would swear that the Soviet Union was a 

bastion of civil liberties and was doing everything to promote freedom and liberty within its country. 

It is one thing to have words on paper. It is another to have a 

commitment to enforce them. And for many of us the problem we 

have with the trading agreements that we have right now is that 

on paper they look good, but our trading partners do not have the 

same level of commitment to enforcing their domestic laws on the 

other side, and we don’t feel that there is accountability in the ITC 

to enforce a fair and reciprocal responsibility, so I would be interested in hearing from this panel what changes you think could be 

made to the current framework we operate in in a global economy 

that accomplishes this dual goal of both a free trading system and 

a fair trading system and brings people together around a trade 

model that can accommodate all of the interests that have been discussed. 

Mr. VARGO. Congressman, if I could provide a response or at 

least some comments to that. I am not a trucking expert but cerVerDate Mar 15 2010 00:11 Feb 28, 2012 Jkt 067103 PO 00000 Frm 00084 Fmt 6633 Sfmt 6633 E:\HR\OC\A103.XXX A103

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tainly the general rule is that we are able to keep anything unsafe 

out of our country, and again I have not examined this closely but 

it is my general understanding that the record so far, the Mexican 

trucks has not shown they were unsafe, but I don’t want to engage 

in a debate and that the principle I think is a good one. And the 

principal should apply to other countries. To give you one egregious 

example that the NAM has been involved in and that is the situation of American poultry being kept under the European market. 

Why is the NAM concerned about poultry? Well, it is a processed 

food. It is manufactured and under our statistical system we have 

poultry producers in the NAM but it is a more important principle. 

Here is an area where because American chickens are dunked in 

a very mild chemical to make sure there is no salmonella the European Union says, oh, we don’t do that, we won’t take your poultry, 

even though the European commissioner said, you know, there is 

no scientific basis for this. Everybody knows that and we are going 

to stop this practice, but there was a public outrage so the commission said I am sorry, even though there is no scientific basis, we 

have no basis at all for keeping your poultry out, we are going to 

do it anyway. Well, that should not be. Now the U.S. trade representative is preparing a trade case against the Europeans and we 

need to pursue that aggressively. What do we need to do? We need 

more resources. 

Certainly there are lots of instances where countries are not 

doing everything they should, particularly in China. We have 

talked about Chinese counterfeiting. When I talk to our companies 

most of them say the situation is getting worse, and when you take 

action on them. I would differ if the feeling were generally all our 

trading partners are cheating on us. From talking with our members companies generally we don’t see that. There are specific instances, and when there are instances, I think we need to move 

quickly. 

Mr. YAGER. Mr. Braley, if I could just point out the last section 

of my written statement, we made 2 comments about monitoring 

and enforcing trade agreements. The first had to do with better 

communication. For example, we did a report last year which took 

a look at the United States trade representative’s report on China’s 

implementation of its W2 obligations, and we found it was quite 

difficult for stakeholders to go through that report and really understand the state of play within China so we recommended that 

there be better communication, for example, from the key agencies 

to stakeholders such as the Congress and they have a better understanding of how things are going and ask more questions and get 

more involved in the process of monitoring and enforcement. 

The other point that I made in the statement had to do with getting the right people in the right places because many of the barriers that we do talk about are quite technical and so the knowledge, for example, of the Chinese legal system is important. We 

need to have the right people over there that can help address 

those, ask the right questions, and put the kind of pressure on the 

authorities and in some cases provide technical assistance to them 

because there are also companies within China that would also 

benefit from stronger intellectual property protection and stronger 

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nies in order to be successful so we made some recommendations 

also on human capital planning to get the right people in the right 

places. 

Mr. BRALEY. Thank you. 

Mr. RUSH. The gentleman’s time is up. The chair will ask the 

panel if they would indulge us for one additional round of questioning. We will limit the questions to 2 minutes so as not to infringe too much on your valuable time. The chair recognizes himself for 2 minutes. I would like to really point my questions to Ms. 

O’Neill and Ms. Hale. Recently, Time magazine published an article written by a gentleman, Alex Kerr, stating that among the 10 

elements that will shape the world tomorrow Africa as a business 

designation ranks number six. It was the only continent mentioned. 

What are your respective agencies doing to identify opportunities 

for U.S. companies to export to areas in Africa and to Latin America and how are these efforts different from your past approach to 

these meetings, and how would the new—China has paid some special attention to Africa. It is Africa’s third largest trading partner 

after the U.S. and France, and how should this competition influence U.S. trade policy what we send to Africa? So that is my three 

questions all within one general question. Would you care to respond? 

Ms. O’NEILL. Sure. Thank you very much. Since the Congress’ 

passage of the Africa Growth and Opportunity Act in 2000, we 

have been proud, the Commerce Department, to be one of the cohosts of an annual forum. The next one is in August, 2009 in 

Kenya, and we have been actively participating and this look at 

how to provide technical assistance, better legal and regulatory infrastructure, how to—I participated on a panel on expanding opportunities in telecom and information technologies recently focused 

on Africa. We also have 5 offices, Kenya, Tanzania, Ghana, South 

Africa, and Nigeria. For the countries where we don’t have a physical presence, we work closely with the State Department. We have 

a partnership post Memorandum of Understanding that allows us 

to work with state econ officers in those markets where there is demand for U.S. exports, U.S. support, commercial support. 

We have a web site, export.gov/africa. We are partnering looking 

closely at the multi-lateral development bank projects, and also 

providing training, trade promotion coordinating committee training for the state officers on the ground. 

Ms. HALE. We are doing some capacity building projects. For example, we will bring government officials to the United States so 

they can see how we regulate biotechnology. That is very important 

to us because so much of our agriculture production for corn and 

soybean products are biotechnology. We also have a lot of food assistance programs in Africa. The McGovern-Dole program is providing food for school lunches. Also, I mentioned the trade mission 

that we have. We also have scientific exchanges. I think it is important that we are building relationships at all levels among scientists, among businesses, among government regulators that will 

support long-term trade relationships. 

Mr. RUSH. The chair now recognizes the ranking member, Mr. 

Radanovich. 


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Mr. RADANOVICH. Thank you, Mr. Chairman. My first question 

goes to Mr. Vargo. Welcome to the subcommittee. I want to know 

how much additional trade revenue you think could be brought in 

from the passage of pending free trade agreements. There are three 

so far that are pending, Korea, Panama, and Colombia. 

Mr. VARGO. Well, the average tariff on our manufactured goods 

in those countries ranges somewhere between 8 and 15 percent. 

And if we could get that down, we would generally, I think, pick 

up 10, perhaps 20 percent more exports in those countries. We export, if I recall, about 5 billion to Panama now, maybe 11 billion 

to Colombia, something like 30 billion to Korea so we want that 

business and we want the agreements to be good. And tariffs are 

not the only part of the agreement. Non-tariff areas are important 

and other provisions of the agreements are important. 

And I look at Colombia right now and I recognize that the Congress and the Administration want to do something more on the violence in Colombia, particularly that which affects members of 

union, but from my point of view this is costing us exports and jobs 

every day of delay because the Congress has already voted—— 

Mr. RADANOVICH. Mr. Vargo, I ask you to sum up real quick because I want to try to get one more question. 

Mr. VARGO. I am done, sir. 

Mr. RADANOVICH. All right. Thank you very much. Ms. Hale, during the last round, you were very good in answering my Uruguay 

Round question, but I forgot to ask the second part, and that was 

as far as specialty crop exports, they were in surplus then, they are 

not now. Can you explain why perhaps and give me an idea of 

what it would take in order to bring an increase in exports of specialty crops? 

Ms. HALE. There are two important reasons why our specialty 

crop exports have been increasing. One is that people see them as 

very healthful and in countries like Europe and Japan people, U.S. 

nuts and fruits are in very, very high demand. We are exporting 

80 percent of our almonds, for example. Our walnut exports are a 

billion dollars a year. And the industry has done a good job of promoting the health benefits. Another reason is that middle income 

people are growing, and for a middle income family in China an orange is a treat, a California orange. 

They will buy the orange, split it up. The whole family, everybody, will take a piece of it and it is a special treat. And we are 

seeing more consumers around the world that are able to afford 

American fruits and American nuts. And the industry has just 

done a good job promoting them. An example is the emerging markets program. We just did a promotion for using American fruits 

and nuts in moon cakes. It is a billion dollar business in China, 

and American dried fruits and nuts would be a good contribution 

to Chinese moon cakes. So that kind of technical support in our 

marketing program has been very important as well, so the consumers are there and I think we got good marketing programs to 

take advantage of the changes in the marketplace. 

Mr. RADANOVICH. Thank you very much. I yield back, Mr. Chairman. 

Mr. RUSH. The chair now recognizes Ms. Sutton. 


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Ms. SUTTON. Thank you, Mr. Chairman, and I will just ask a 

couple of questions and then allow you to respond. Ms. Reilly, in 

the last line of questioning you answered the question I offered 

with a statement that included a reference to when you were evaluating the Peru free trade agreement you just looked at the benefit 

on the bottom line. And that is an interesting remark to me, and 

I would just like to understand better what your association’s assessment mechanism is on whether or not trade is working if it 

really just encompasses the benefit on the bottom line, so if you 

could just think about that for a moment. 

Mr. Vargo, following up on some of Mr. Stupak’s questions, you 

know, I heard you referencing that your association is obviously 

against illegal dumping and certainly for the imposition of tariffs 

where appropriate to level the field. One of the things that is happening now is that in this economic global downturn that we are 

experiencing steel production in this country has been ramped 

down because as one would when the market is down, one would 

cut back on production. China is taking advantage in my view, and 

certainly the data I will be happy to provide to show you, and is 

ramping up production and exporting steel into this country in this 

moment of global interconnectiveness and downturn. What should 

we do about that? 

And then, finally, the very last question I want to ask about is 

the drywall that we bring into this country from China, and some 

of you have referenced that we don’t have to accept unsafe products 

into this country if we know that they are unsafe. We know that 

some of the drywall imported from China leaches formaldehyde. 

We know this. It has been declared not only unsafe for, you know, 

some of our other trading partners but China itself will not allow 

it to be used in their own country and yet we have it being imported into this country, and I would just like to know about your 

thoughts on all of these things because again these go to the issues 

that I am talking about about the comprehensive nature of our system and how it is working and what we need to do to fix it. 

Ms. REILLY. Well, first, to answer your question regarding how 

do we assess the bottom line is we look at it, and we look at the 

free trade agreements that have been implemented thus far and 

the companies that were already having duty free access to U.S. 

markets, selling their things here with no taxes or tariffs on it, and 

us selling our goods abroad with an average tariff or tax of about 

15 percent. We look at that, and we look at those numbers. When 

we look at Ohio specifically and how trade has worked, I look at 

agreements like the U.S.-Chile agreement where 47 percent of exports have increased to Chile from Ohio. For NAFTA agreements 

it has gone up 138 percent. 

Even the agreement with Jordan, and I don’t know what Ohio is 

selling to Jordan, but it has gone up over 1000 percent, so those 

are the numbers that we look at regarding that. 

Ms. SUTTON. I guess I was just asking about whether you look 

at anything besides numbers, and I appreciate that. Thank you. 

Mr. VARGO. On steel and China, the NAM is a broad association. 

We have members of industry associations like American Iron and 

Steel Association and many others. Our view is, as I said, we support the strong and effective use of U.S. import law. We also beVerDate Mar 15 2010 00:11 Feb 28, 2012 Jkt 067103 PO 00000 Frm 00088 Fmt 6633 Sfmt 6633 E:\HR\OC\A103.XXX A103

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lieve it is very important that the United States, everybody else, 

adhere as closely as possible to the rules-based global trading system. I am very pleased that President Obama stressed that several 

times in his trade agenda. It is important that we have a stand 

still on countries and not start putting on more trade barriers because that is a road downward that will really hurt us as well as 

everybody else. 

In the case of steel and China, absolutely, the steel industry 

should be able to avail itself of U.S. trade laws. I know the Congress department already does special monitoring of Chinese steel, 

and there are additional tools that could be available but I will let 

our steel industry speak for itself. On drywall as an illustration of 

unsafe products coming into the United States, this is very troublesome, and clearly we need to address this more carefully than we 

have with having tighter inspection or certification of products that 

are coming into the United States. 

Again, you know, that is going to take resources. It is going to 

take some more general agreement. I think we ought to look at 

what other countries do because some other countries I think have 

tougher requirements for getting into their country than we do, 

and it might be useful for this subcommittee to ask the GAO to 

look into that and see what other countries are doing that maybe 

we ought consider doing legally. I am not proposing we do anything 

funny here, but I think some other countries just do a more careful 

job of insuring the safety of what is coming into their country. 

Mr. RUSH. The gentlelady’s time is up. The chair now recognizes 

the gentleman from Michigan for 2 minutes. 

Mr. STUPAK. Thank you, Mr. Chairman. If we are looking at the 

bottom line numbers, look at the bottom line numbers. Just take 

January alone. Our trade deficit is $39 billion. From 2001 to 2008 

the trade deficit cumulative is $3.83 trillion. Every one of these 

trade deficits means loss in U.S. jobs. While Michigan is a manufacturing state, we are a great state for exporting agricultural 

products. In fact, we are one of the leading states for doing that, 

but it doesn’t offset the loss of jobs we have from manufacturing 

because it is a higher value product as opposed to agricultural 

products. 

So, again, I don’t mind promoting trade but we have to do enforcement. Mr. Vargo, you indicated in my first line of questioning, 

talked about inspections and certifications. And where I sit as 

chairman of Oversight and Investigations and do the melamine, the 

heparin, and the toy investigations and the illegal products coming 

into this country, I have been toying with the idea and would like 

your comments on it because you mentioned China’s steel. In the 

early part of this decade, the early 2000’s, we were doing the 

standup for steel because China was illegally dumping steel in this 

country. That did have an impact and President Bush did put some 

tariffs in which were modified, but we did have them. 

But our concern right now if you go back to safety is whether it 

is drywall from China or whether it is steel or cement it is an inferior product. The custom border patrol has indicated that they have 

a right to inspect the product coming in and they find it to be not 

of sufficient strength, and, therefore, they will tag it as being inferior but yet the importer, the U.S. customer, still comes, grabs that 


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steel, takes that tag off, and sells it in the U.S. economy. And we 

have seen schools collapse in California because of inferior steel 

from China. 

So we are toying with the idea to introduce legislation that will 

give the custom border control—not only continue their inspection 

but reject it right there, not even allow the U.S. customer to pick 

up that steel. Just send it right back. Do you have any problems 

with that? 

Mr. VARGO. Well, you know, I try to stick to a policy of speaking 

on things that I know something about. There I don’t. We do have 

a working group within the NAM looking at unsafe products coming into the United States so with your permission, I am going to 

take that point to our working group and we will get an answer 

to you in writing. 

Mr. STUPAK. Please do, because once these inferior products get 

into the mainstream of Congress, there is no way to recall them. 

Once they are in the building, they will rip them out. 

Mr. VARGO. Understand. If I could just comment very quickly on the overall trade deficit. You know, we had over a $450 billion 

trade deficit in manufacturers last year, but I just want to point 

out again that with our free trade partners we had a surplus. All 

of our deficit was with countries that have not lowered their trade 

barriers to us. I don’t want to get into a squabble—— 

Mr. STUPAK. Sure. Most of those countries like China have a 

VAT. As their products come in, they put a value at a tax on it 

which is illegal, and we are not doing anything to enforce it. 

Mr. VARGO. Well, under world trade rules it is not illegal and we 

don’t have a VAT. Maybe we should. 

Mr. STUPAK. Maybe we should have a VAT. 

Mr. VARGO. But if I could just make 1 point. 

Mr. STUPAK. Sure. 

Mr. VARGO. We seem to be drifting more towards talking about 

trade agreements, et cetera. Please don’t forget the central point 

here which is we under export. We don’t have enough export promotion so whatever other problems we deal with, I hope that this 

subcommittee will really press. We need to increase our exports. 

Mr. STUPAK. But from where I sit as chairman of Oversight and 

Investigations, I see trade agreements jeopardizing the health and 

safety of the American people because it is both ways, the products 

we receive, and we are not doing a good job here in this country. 

Mr. VARGO. Well, you might want to have a separate hearing on 

this, but on export promotion whatever disagreements we have 

help us promote exports. Thank you. 

Mr. RUSH. The gentleman’s time is up, and the chair really 

wants to emphasize that is why we have two committees, the Oversight and Investigations Committee, which the chairman does an 

exceedingly good job. He has been keeping the American people 

safe for as long as he has been chair of that committee, and I really 

want to commend him, but we will be—this committee is dedicated 

to promoting trade, international trade, as a response to our economic problems that we are facing as a nation. And so that is the 

purpose of this hearing, and that will be the purpose of the attention of this committee. I really want to thank all of the members 

of the panel. You have really been a tremendous asset to us here 


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on the committee. Your testimony has been most forthright and informative to us, and we certainly want to let you know that we appreciate you taking your time from your busy schedule to be with 

us today. And we thank you for enlightening us with your testimony. The chair now calls this committee to close. The committee 

right now is adjourned. 

Right before we adjourn, the chair asks for unanimous consent 

to enter the statement of Mr. Dennis Slater. He is the President 

of the Association of Equipment Manufacturers, and without any 

dissent with unanimous consent to enter Mr. Slater’s statement 

into the record. 

[The information appears at the conclusion of the hearing.] 

Mr. RUSH. The subcommittee now stands adjourned. 

[Whereupon, at 12:04 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 


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