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96–505 PDF 2005

TRADE FAIRNESS HEARING: HOW CAN WE MAKE

OUR TRADE LAWS WORK FOR AMERICA’S

SMALL BUSINESSES

HEARING

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

WASHINGTON, DC, JULY 14, 2004

Serial No. 108–72

Printed for the use of the Committee on Small Business

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house

COMMITTEE ON SMALL BUSINESS 

DONALD A. MANZULLO, Illinois, Chairman 

ROSCOE BARTLETT, Maryland, Vice 

Chairman 

SUE KELLY, New York 

STEVE CHABOT, Ohio 

PATRICK J. TOOMEY, Pennsylvania 

JIM DEMINT, South Carolina 

SAM GRAVES, Missouri 

EDWARD SCHROCK, Virginia 

TODD AKIN, Missouri 

SHELLEY MOORE CAPITO, West Virginia 

BILL SHUSTER, Pennsylvania 

MARILYN MUSGRAVE, Colorado 

TRENT FRANKS, Arizona 

JIM GERLACH, Pennsylvania 

JEB BRADLEY, New Hampshire 

BOB BEAUPREZ, Colorado 

CHRIS CHOCOLA, Indiana 

STEVE KING, Iowa 

THADDEUS MCCOTTER, Michigan 

NYDIA VELA ́ ZQUEZ, New York 

JUANITA MILLENDER-MCDONALD, 

CALIFORNIA

TOM UDALL, New Mexico 

ENI FALEOMAVAEGA, American Samoa 

DONNA CHRISTENSEN, Virgin Islands 

DANNY DAVIS, Illinois 

GRACE NAPOLITANO, California 

ANI ́BAL ACEVEDO-VILA ́ , Puerto Rico 

ED CASE, Hawaii 

MADELEINE BORDALLO, Guam 

DENISE MAJETTE, Georgia 

JIM MARSHALL, Georgia 

MICHAEL MICHAUD, Maine 

LINDA SA ́ NCHEZ, California 

BRAD MILLER, North Carolina 

[VACANCY] 

[VACANCY] 

J. MATTHEW SZYMANSKI, Chief of Staff 

PHIL ESKELAND, Policy Director/Deputy Chief of Staff 

MICHAEL DAY, Minority Staff Director

(II) 

C O N T E N T S 

WITNESSES

Page 

English, Hon. Phil, U.S. House of Representatives (PA-3) .................................. 2

Davis, Hon. Artur, U.S. House of Representatives (AL-7) ................................... 4

Vargo, Mr. Frank, VP, International Economic Affairs, National Association 

of Manufacturers .................................................................................................. 8

Bassett, Mr. John, III, President and CEO, Vaughn-Bassett Furniture ............ 10

Hopson, Mr. F. Tom, President and CEO, Five Rivers Electric Innovations ..... 12

Smith, Mr. Wallace E., President, E&E Manufacturing Co., Inc. ....................... 13

Bartlett, Mr. Douglas, Owner, Bartlett Manufacturing Co., Inc. ........................ 16

Klinefelter, Mr. William J., Legislative and Policy Director, United Steel 

Workers of America ............................................................................................. 18

APPENDIX

Opening statements: 

Manzullo, Hon. Donald A. ................................................................................ 31

Velazquez, Hon. Nydia ..................................................................................... 34

Prepared statements: 

English, Hon. Phil, U.S. House of Representatives (PA-3) ........................... 36

Davis, Hon. Artur, U.S. House of Representatives (AL-7) ............................ 43

Vargo, Mr. Frank, VP, International Economic Affairs, National Association of Manufacturers ................................................................................... 48

Bassett, Mr. John, III, President and CEO, Vaughn-Bassett Furniture ..... 58

Hopson, Mr. F. Tom, President and CEO, Five Rivers Electric Innovations ................................................................................................................ 62

Smith, Mr. Wallace E., President, E&E Manufacturing Co., Inc. ................ 67

Klinefelter, Mr. William J., Legislative and Policy Director, United Steel 

Workers of America ...................................................................................... 75

(III) 

(1)

TRADE FAIRNESS HEARING: HOW WE CAN 

MAKE OUR TRADE LAWS WORK FOR AMERICA’S SMALL BUSINESSES 

WEDNESDAY, JULY 14, 2004

HOUSE OF REPRESENTATIVES

COMMITTEE ON SMALL BUSINESS

Washington, DC 

The Committee met, pursuant to call, at 2:36 p.m., Room 2360, 

Rayburn House Office Building, Hon. Donald A. Manzullo presiding. 

Present: Representatives Manzullo, Velazquez, Kelly, Chocola, 

McCotter, Udall, Christensen.

Chairman MANZULLO. Good afternoon and welcome to this hearing of the Committee on Small Business. Before we do our opening 

statements, I would like to extend to Congressman Boucher from 

Virginia the opportunity to introduce his constituent, Mr. Bassett 

and then Rick, you can leave, because I know you have another 

hearing going on. And Phil, why do you not have a seat and then 

Mr. Bassett, you would be on the second panel, okay? We would 

yield to you, Mr. Boucher. 

Mr. BOUCHER. Mr. Chairman, thank you very much for affording 

to me the opportunity to appear before you today for the purpose 

of introducing a good friend of mine and a constituent. John Bassett is the chief executive officer of the Vaughn-Bassett Furniture 

Company. It is headquartered in my congressional district in the 

city of Galax, Virginia. John’s company has been manufacturing 

bedroom furniture since 1919, and it has three factories located in 

the states of Virginia and North Carolina. 

The majority of John’s 1,250 employees reside in my congressional district in Virginia and as I indicated, the company is 

headquartered there. Vaughn-Bassett invests more than twice the 

industry average on an annual basis in equipment that provides for 

a highly modernized and efficient operation. And that efficiency has 

enabled the company’s sales to triple over the course of a decade 

to an estimated $168 million at the present time. 

Mr. Bassett is the past president of the Furniture Manufacturer’s 

of America. He was voted the Man of the Year in 2003 by In Furniture Magazine and has received other distinctions within the furniture industry. In addition to his role as a successful chief executive officer, John Bassett also is the chairman of the Committee for 

Legal Trade. That is a coalition of 27 U.S. bedroom furniture manufactures and five employee unions. That coalition filed an antiVerDate 0ct 09 2002 16:23 Jun 21, 2005 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 G:\HEARINGS\96505.TXT MIKE
2

dumping petition against China last fall and the preliminary ruling 

has been issued by the U.S. Department of Commerce in favor of 

that petition. It is anticipated that a final decision will be issued 

by the International Trade Commission before the end of this year. 

John Bassett is a champion for fair trade. Locally in the western 

part of Virginia, we are very proud of his success, both as a chief 

executive officer and also as a leading national advocate for a level 

playing field in trade between the United States and China. And 

Mr. Chairman, I thank you for giving me the opportunity to say 

a few kind words about him today. I know you will enjoy the testimony he offers later. Thank you very much. 

Chairman MANZULLO. Thank you, Mr. Boucher, appreciate it. 

Mr. Bassett, do you want to have a seat right in back there and 

then we will have you up on the second panel. Thank you, Congressman Boucher. 

I would like to delay my opening statement until both members 

of Congress here have had their opportunity to give their statements, because of your schedules and the tyranny of the bells. You 

can sit next to each other, you are co-sponsors on the legislation. 

Phil, let us lead with you. Congressman Phil English from the state 

of Pennsylvania, fresh off of victory a few minutes ago on the floor 

on the resolution. 

STATEMENT OF THE HONORABLE PHIL ENGLISH, U.S. HOUSE 

OF REPRESENTATIVES (PA-3) 

Mr. ENGLISH. Thank you, Mr. Chairman. It is a real privilege to 

be here and particularly to appear with Mr. Davis, whom I must 

say— 

Chairman MANZULLO. Phil, could you pull the mike closer. 

Mr. ENGLISH. Certainly. If you do not mind my passing the compliment, as a freshman, emerged already as a leading advocate of 

fair trade and someone who has immersed himself in the details 

of some of the issues that we are going to address. I am very grateful for the opportunity to appear with and testify with him. 

It is a pleasure to appear before you today on an issue that I 

think is relevant to the entire manufacturing base of the United 

States. And while I have worked on a range of legislative vehicles 

to enhance the way our trades laws work for American workers 

and companies, I am going to focus my testimony on H.R. 3716, 

which, in my view, is one of the most effective measures potentially 

to level the playing field in international trade with non-market 

economies such as China. 

H.R. 3716, which Representative Davis and I introduced at the 

beginning of the year, will allow domestic manufacturers or farmers to fight illegal subsidies regardless of the country in which they 

occur. Currently, anti-subsidy or countervailing duty cases can only 

be filed against countries designated by the Department of Commerce as market economies. That makes absolutely no sense. This 

narrow, dubious interpretation of the law by the Department of 

Commerce was upheld by the courts in Georgetown Steel Corp. v. 

United States case of a number of years ago. As a result, since 

1980, the Department of Commerce has refused to hear countervailing duty cases against non-market economies such as China, 

3

because it claimed that the Tariff Act of 1930 did not require them 

to do so. 

Thus, in effect, U.S. producers cannot fight illegal Chinese and 

other non-market economy subsidies until China chooses when and, 

indeed, if, to make the reforms necessary to graduate to market 

economy status. This is unacceptable at any time, but particularly 

so at a time when our manufacturers are in a state of crisis and 

we are running a trade deficit which exceeds five percent of the 

GDP. This WTO consistent legislation currently has the support of 

58 members of the House of Representatives and it would simply 

clarify that the Department of Commerce is to hear countervailing 

duty cases against non-market economies such as China, and in 

certainly one famous case in Mr. Davis’ district, Vietnam. 

H.R. 3716 does not change any other aspect of CDV law, including the statutory requirements by which the Department of Commerce evaluates the merit of a case. Support for this legislation is 

not limited to the House of Representatives. Companion legislation 

in the Senate currently has the support of 18 Senators. Additionally, the legislation has been endorsed by no less than 21 associations and labor organizations. 

Among non-market economies, China receives the bulk of attention for subsidizing its domestic industries, however, there are ten 

other non-market economy countries, aside from China. Congress 

must get this issue right and pass legislation that permits us to 

combat all subsidies, no matter where they occur. Just because a 

country has a non-market economy, it should not be beyond the 

reach of the U.S. Countervailing Duty law. 

I would like to impress upon this Committee that the solution to 

combating Chinese subsidies is not to prematurely graduate China 

to market economy status, but rather to armor domestic producers 

with strong WTO consistent trade remedies. 

While Congress may have designated the Department of Commerce as the administering authority for the purpose of determining which countries are to be market economies under the Tariff Act, it certainly does not take the statutory criteria for making 

such a determination available as bargaining chips in a negotiation 

between the administration and Beijing, to give China market 

economy status. 

Many commitments were made as part of China’s accession 

agreement to the WTO. Many of those commitments remain to be 

fulfilled to any satisfactory degree. Whether it is continued use of 

discriminatory tax regimes, control of the banking sector to subsidize core heavy industries such as steel, licensing and quota regimes, or export restraints like the one currently in place on coke 

and coking coal, these practices all represent commitments China 

made upon its accession to the WTO which have not been successfully satisfied. 

China continues to adopt a mercantilist policy and we can no 

longer tolerate it. Of course, the most egregious practice of China’s 

trade policy relates to currency. It is widely accepted that the Chinese currency is substantially undervalued against the dollar to 

which it is pegged. China has been able this peg because its currency is not fully convertible in international markets and because 

it maintains restrictions and controls over capital transactions. 

4

As a result, China’s exchange rate is not based on market forces. 

Illegal trade is not an acceptable practice or answer to competitiveness challenges and it is not appropriate for one country to gain 

from illegal trade at the expense of another. I would add that this 

statement also holds true for different sectors of the domestic economy. 

Finally, I would be remiss, given the broad nature of this hearing, if I did not mention a couple of other bills that I think are important for your Committee to consider. One is H.R. 3058, the Currency Harmonization through Neutralizing Action or CHINA Act, 

which is a critical tool in leveraging China to play by the rules. 

Specifically, it pressures China to float its currency or face retaliatory tariffs. This legislation has the support of 85 members of the 

House. 

Chairman MANZULLO. How are you doing on time, Phil? 

Mr. ENGLISH. I am about finished and I thank the gentleman. 

Chairman MANZULLO. Okay. 

Mr. ENGLISH. The Trade Law Reform Act provides a broad set 

of remedies to deal with holes in our existing trade laws. Let me 

finish by again highlighting that the ability to fight illegal, nonmarket economy subsidies is of paramount importance. This issue, 

perhaps more than any other over the next few years, will make 

or break the possibility of a level playing field for employers when 

dealing with China. And I thank the Chairman for giving me the 

opportunity to lay out broadly some of my views on this 

topic.[Congressman English’s statement may be found in the appendix.] 

Chairman MANZULLO. Thank you. Our next witness is Congressman Artur Davis, from Alabama’s 7th Congressional District. And 

thank you for coming to our hearing. Look forward to your testimony. 

STATEMENT OF THE HONORABLE ARTUR DAVIS, U.S. HOUSE 

OF REPRESENTATIVES (AL-7) 

Mr. DAVIS. Mr. Chairman, thank you for doing me the courtesy 

of inviting a freshman Democrat to appear before your Committee. 

I am honored to be here. Let me greet my friend from New York, 

the ranking member of the Committee, and I ask unanimous consent that my written statement be submitted into the record. 

Chairman MANZULLO. All the written statements of all the witnesses will be accepted into the record. 

Mr. DAVIS. Mr. Chairman, let me begin by first of all complimenting my good friend from Pennsylvania. It has been an interesting and sometimes contentious 108th Session of the United 

States Congress. We found a lot of things as Democrats and Republicans that we are fighting about. I am proud of the fact that this 

is a bipartisan piece of legislation. I am proud of the fact that my 

friend from Pennsylvania has joined forces with me and numerous 

individuals in the House and Senate on both sides of the aisle to 

try to craft a responsible solution to a problem that is affecting 

many of our districts. 

This is an uncertain time in America’s economy. There is a lot 

of anxiety in your state of Illinois and my state of Alabama. A lot 

of people feel themselves dislocated, if you will, by globalization. 

5

They wonder if the rules mean what they say they mean and they 

wonder exactly what their government is doing to stand on their 

side or on their behalf. 

There have been and will continue to be spirited debates, even 

on the floor of the House this afternoon as we think about Australia. Debates over the direction in which we ought to move. I 

think we ought to be able to agree, though, on some very simple 

premises. The first one is this, that we do have a rule structure in 

this world. A lot of it has been formed by the WTO and we ought 

to find a way to respect that rule structure. 

The second thing is that rules have to be fair. What is good for 

the United States has to apply to our competitors. And third of all, 

the rules have to be such that our people understand them. Our 

businesses and our working men and women have to be able to 

look at the rule structure that we have and think that it is fair 

from their standpoint. I know you deeply believe in that. 

This bill satisfies all three of those criteria. Congressman English 

described it very, very well from a substantive standpoint. Let me 

make this larger observation. This bill is not an act of protectivism. 

It is not a bill that confers unfair advantages on American industry 

or workers. It does not trade one wrong for another wrong. 

What it simply says is that we live in a world where we are trying to move past barriers. We live in a world where we are trying 

to move past the subsidies that can distort the market and if the 

rules are good enough to apply to market economies, simple fairness dictates that they should apply to non-markets. Simple, basic 

fairness. 

Second of all, this bill will make a very important statement to 

the people in our country. WE have learned in the last several 

years that our military security is not as impregnable as we once 

thought. We know that we face all kinds of threats that we did not 

foresee four years ago. And as we talk about our security, I even 

heard it said on the floor of the U.S. Senate last night, that our 

traditions are an important part of that security. That may or may 

not be the case, but there is no question that the economic security 

of our people is vital. Our people are economically insecure when 

they cannot count on their government to insist that the rules are 

played by fairly. 

And make no mistake, I have an enormous amount of confidence 

in America’s industries and America’s workers. I have a very 

strong belief that they can compete with any competitor anywhere 

in the world. But they cannot do so if their hands are unfairly tied 

behind their back. Right now there are numerous economies 

around this world, non-markets, China, Vietnam, some of the old 

Soviet countries, who are using subsidies to provide an unfair leg 

up for their industries. Indeed, that is the very nature of the economy in some of these countries. 

The question is whether we sit idly by or whether we stand up 

to that trend. And the way that we stand up for it is to give us 

the power to do what we do with markets, impose countervailing 

duties. 

Let me make one final point about this bill. It should be understood that this bill does not require the United States to do anything. This bill does not contain a single duty, does not impose a 

6

duty, does not tie the hand of the executive. What it does, though, 

is to free up the hand of the executive in the Commerce Department. What it does is to say in effect that a remedy that has 

worked very well for market economies ought to be applicable to 

deal with the new threats from China. 

In conclusion, I would simply say that this bill does provide a 

chance for this Congress to act as one. There have been precious 

few instances when we have found bipartisan common ground in 

the last 18 months. This is a chance for us to do it. I am proud 

of the support that has formed around this bill from the U.S. 

Chamber of Commerce to the Steelworkers to a number of other 

entities. The reason that they are standing together, I believe, in 

conclusion, is because they want to make a promise to America’s 

workers and businesses that if you do your part, you make yourself 

productive. If you play by the rules, we will make sure those rules 

are respected around the world. 

So with that spirit, I certainly thank you for your incredible leadership on this issue in the state of Illinois and thank all the members of this Committee for their interest in being here today. 

[Congressman Davis’ statement may be found in the appendix.] 

Chairman MANZULLO. Well, sign me up. I think I am already a 

co-sponsor on the bill. Does anybody here have any questions that 

they want to ask of our two colleagues? Okay, if not, thank you 

very much for your testimony, we appreciate it. If the staff could 

bring in the next panel. Thank you, Phil, thanks, Art. 

While that is going on, I will give my opening statement. Again, 

good afternoon and welcome to the hearing on Committee on Small 

Business. A special welcome to those who have come some distance 

to participate and to attend this hearing. I have a more comprehensive opening statement at the table, but for the sake of time, we 

will summarize our remarks. 

Today, the Committee will hold a hearing on trade fairness, in 

order to examine how our trade laws might be improved to help 

our small businesses. There is general consensus that freer trade 

is the best means of achieving greater prosperity and is a win-win 

for all countries involved. However, we realize that many nations 

are not fully transparent and oftentimes do not play by the same 

rules. 

Thus, we need trade remedy rules to enable our producers to 

compete on equal footing with their global competitors both here 

and abroad. 

Small businesses played a vital role in the tremendous growth 

over the last few years of both overall exports and the number of 

export firms. In 2001, almost 97 percent of U.S. exporters were 

small or medium sized businesses. Sixty-three percent of small 

business exporters sell to only one market and why is that? One 

key reason is that U.S. exporters still face substantial tariff and 

non-tariff barriers overseas to create an unequal playing field. 

Today, in fact, we just voted on another market opening agreement 

to further knock down trade barriers. This afternoon, we will vote 

on the trade agreement with Australia, which will bring zero tariffs 

on manufactured goods. 

We are also honored today to hear from Representatives Phil 

English and Artur Davis on legislation to further improve our trade 

7

remedy that would allow countervailing duty trade cases to be filed 

against non-market economies like China and Vietnam. Assistant 

Secretary of Commerce for Import Administration, James Jochum 

had hoped to be here today, but was unable to join us because he 

is preparing to travel to China to chair an important meeting to 

discuss with officials from the Government of China on the need 

for fundamental reforms within their economy. We look forward to 

hearing from him in the future. 

I would urge you to look at the table. There is a list of the Administration’s accomplishments on enforcing our trade laws. Without objection, I will include that material into the record. 

We are now going to hear from the private sector witnesses who 

compete on a global scale. They will discuss their experience with 

trade remedy laws, how they can be further improved and talk 

about their industries and how those industries are important so 

as to come under special cognizance by Congress and the Administration. 

Free and fair trade works for all parties involved, particularly for 

small business exporters. It is the best way to insure future prosperity and wealth creation. I now yield for an opening statement 

by the gentlelady from New York, Mrs. Velazquez. 

[Chairman Manzullo’s statement may be found in the appendix.] 

Mrs. VELAZQUEZ. Thank you, Mr. Chairman. Now more than 

ever, the United States’ ability to remain competitive in today’s 

fast growing global market is critical. The global economy has significantly grown, so much that 80 percent of world economic consumption takes place outside of our country. In order to guarantee 

that our nation remains a world leader and it is able to work efficiently within the world market, we must make sure current trade 

laws are properly examined so all businesses can take advantage 

of the international market. 

Our country’s small firms rely heavily on their ability to produce 

goods to be used worldwide. Ninety-seven percent of exporters are 

small businesses. That is why it is so important to carefully weigh 

the effects trade policies have on our nation’s small enterprises. 

While there is no doubting the ability of our nation’s exporters to 

access international markets, if they have a level playing field, 

which is why all possible solutions should be examined. 

Not only are U.S. exporters facing a struggling economy here at 

home, but they face tough competition abroad. In today’s hearing, 

the bill H.R. 3716 will be looked at. This legislation allows small 

manufacturers to sign CD petitions to be filed against non-market 

economies. While a plausible solution, these trade remedies are 

only one possible solution to the problem. 

It is necessary to explore all existing trade laws to insure they 

protect small exporters in the international arena. In addition, 

trade laws need to be enforced under the Bush Administration. 

This administration has failed to make a habit of taking into account the needs of small businesses, estate, trade agreements and 

set new roles for negotiation objectives. Small firms reap significant benefits from the removal of tariff barriers. However, they 

also have a strong interest in the elimination of the red type, which 

many times hinder their exports. 

8

If the Bush Administration truly cared about small businesses, 

then they will make it a priority to negotiate trade agreements that 

do not place unfair burdens on small firms. Today’s trade laws 

should allow us to intervene with major trading partners and 

should be the most up to date solutions to address small business 

needs within the global market. Just as the case with the FSC-ETI 

regime, some of the U.S. trade laws are in need of a revision and 

do not fully address the needs of small businesses as they stand 

right now. 

The most important factor in all of this is that our nation’s small 

exporters have the tools they need to access foreign markets and 

remain a top competitor. Rather than focusing only on these laws, 

it should also be clear small businesses are able to access the tools 

they need in order to succeed. It is not secret. Our nation’s entrepreneurs have difficulty accessing technical assistance and capital, 

especially when small business programs that provide these services are continuously cut in the Bush Administration’s budget. 

In order for this sector to create the jobs that we need here at 

home while remaining competitive abroad, these needs must be addressed in our trade policies. It is my hope to find a solution that 

not only creates a level playing field for small exporters, but also 

allows them to be as competitive as possible. 

This solution should allow our nation’s 23 million small businesses, the economic engine of our economy, to have free and fair 

access to the global marketplace, no matter what the circumstance 

is. 

I look forward to hearing the testimony of today’s witnesses and 

I thank you, Mr. Chairman. 

[Congresswoman Velazquez’ statement may be found in the appendix.] 

Chairman MANZULLO. Thank you. The testimony will be determined in length—can you get that to work? Thank you. The five 

minute clock that is up there and I would appreciate it if you could 

follow it as closely as possible. 

What I would say to the witnesses, those of you that have the 

small businesses, what is important here is that America hears 

your story. Your entire testimony will be placed into the record, including the recommendations as to what to do. But what we are 

trying to do with this hearing is that there are at least three entities that have been involved in dumping cases. Tell us your experience, tell us the cost. If you could do that within five minutes, I 

would appreciate that. But it is most important to get that out first 

as the first part of your testimony. Suggestions on what to do, if 

you have time, put that into your five minutes, otherwise, we can 

do that in terms of the questions, okay? 

Our first witness will be Frank Vargo, VP, International Economic Affairs, National Association of Manufacturers. And Frank, 

I look forward to your testimony. 

STATEMENT OF FRANK VARGO, NATIONAL ASSOCIATION OF 

MANUFACTURERS 

Mr. VARGO. Mr. Chairman, thank you very much. Congresswoman Velazquez, Congresswoman Kelly, always a pleasure to see 

you. Mr. Chairman, thank you for scheduling this very important 

9

hearing. It is particularly important to the National Association of 

Manufacturers, because 10,000 of our 14,000 members are small 

companies and many of them are affected by trade, both on the export side and on the import side. And we have a huge trade deficit. 

It is something that is of great concern and we need to address. 

A lot of people do not recognize how unlevel the playing field is 

in the world. Perhaps some members of the Committee are not 

aware that, right now, two thirds of all of our imports that come 

into the United States, two thirds, are totally duty free, no duty 

whatsoever. The average U.S. duty on manufactured goods is less 

than two percent. This is not really a trade barrier, you know, it 

is barely a speed bump. 

The answer is not to put barriers around the United States and 

go back do Smoot Hawley all over again, the answer is to get other 

countries to reduce their barriers. I hope everyone is going to vote 

for the Australia agreement today, because it does that. I call it the 

manufacturer’s agreement, because it eliminates 99 percent of Australia’s duties on our exports overnight and we will pick up about 

$2 billion, $2 billion of additional exports. 

But trade also has to be viewed as having a level playing field. 

We have to see that other countries do not manipulate their currencies, because currencies have a huge effect on our trade. And 

also that when there are unfair trade practices, that we have the 

ability to offset these. The subsidies and countervailing measures 

code in the WTO, for example, permits countervailing duties to offset subsidies. And, in fact, that is how we are being hit under the 

European Union under the FSC and ETI. 

The United States, by its own practice, has not applied countervailing duties to exports of non-market economies since 1984. It is 

nothing that is in the U.S. law, nothing in the WTO or the old 

GATT. It is something that we have done to ourselves, because the 

Commerce Department said, well, you know, we cannot measure a 

subsidy in a non-market economy. 

Well, a couple of things have changed. One of them is that in 

1994 and subsequently, the World Trade Organization redefined 

subsidies and made the definition much more precise. And when 

China joined the WTO, it expressly agreed to be bound by the subsidies and countervailing measures code. In fact, it agreed that if 

you can’t really measure the subsidy in China, you can find alternative means. So China fully anticipates that this was part of its 

joining the WTO. And every other WTO member in the world can, 

at present time, apply countervailing duties to exports from China 

and other non-market economies. 

Now, H.R. 3716, the English-Davis Bill, if I can call it that, 

would provide a congressional fix to clarify that Congress intended 

that countervailing duties could be applied, whether or not the export came from a market economy. The NAM, through its policy 

mechanisms, looked at that. A number of members have different 

views, but we all considered it and the National Association of 

Manufacturers decided, yes, we should support this legislation. We 

should support it because if there are subsidies, and a lot of our 

members feel that there are subsidies from non-market economies, 

companies should have their right to this tool. They should not feel 

10

that they have to sit back and say, well, you know, there are subsidies, but there is just nothing I can do about it. That is not right. 

So we do support this legislation. We hope it will pass. Now I 

want to stress, though, we think this is part of a positive relationship with China. There is nothing negative or protectionist to it. In 

fact, to the degree that our companies and the public and the Congress see that China has to follow the rules and the rules are there, 

this is going to increase support for trade. 

We believe that this is very important and we hope that everybody in this Committee will support it and we will see this become 

part of U.S. law. It is the biggest missing component. 

Now, China is very important in our overall trade relationship 

and China has to comply with its WTO obligations and we have 

been pressing hard on a couple. I do want to commend China for 

just announcing that it is going to end the discriminatory value 

added tax that it had that really was preventing American semiconductors from being able to compete in China, and that they 

agreed to do so without going through a two year WTO case. They 

saw they were wrong and they are unilaterally removing it and 

coming into compliance. That is what we need more of and I believe that this law can contribute to that. 

I have other points, Mr. Chairman. I am hitting five minutes. I 

would be happy to take whatever questions the Committee has. 

Thank you. 

[Mr. Vargo’s statement may be found in the appendix.] 

Chairman MANZULLO. Our next witness is John Bassett, III, 

president and CEO of Vaughn-Bassett Furniture. He has already 

been introduced by his congressman and Mr. Bassett, we look forward to your testimony. 

STATEMENT OF JOHN BASSETT, III, VAUGHN-BASSETT 

FURNITURE 

Mr. BASSETT. Thank you, Mr. Chairman. I would like to thank 

Congressman Boucher for that kind introduction. 

Chairman MANZULLO. John, could you pull the mike closer and 

speak directly in it? Thank you. 

Mr. BASSETT. Is this close enough? I would also like to thank the 

entire Committee for inviting me to appear before you today. Also, 

we appreciate the testimony of Congressman English and Davis. 

We support that bill to extend countervailing duties remedies to 

subsidized imports from China and other non-market economies. 

The Committee for Legal Trade is now made up of 31 bedroom 

furniture manufacturers and five labor unions located in 18 states. 

Industry has been devastated by a flood of dumped imports from 

China. In the last three years, China import bedrooms jumped 224 

percent, or about roughly $1 billion. As a result, we have lost over 

35,000 wood furniture jobs. 

We filed our anti-dumping petition on October 31, 2003. It is the 

largest anti-dumping investigation ever conducted against China. 

The ITC made a preliminary determination in January that our industry was materially injured and the Commerce Department 

issued a preliminary ruling last month that China is illegally 

dumping bedroom furniture. Final rulings will be made by December. 

11

Based on our experience, we offer the following recommendations. First, the United States Government should do a better job 

of informing companies of their rights under United States trade 

laws. We only learned of the anti-dumping laws of this country 

after paying $75,000 to a law firm for a study. I have read that the 

government spent millions to promote the new $20 bill. I know how 

to spend a $20 bill, but I wish the government had done more to 

make me and other manufacturers aware of their rights under our 

trade laws. 

Second, the Department of Commerce is doing the best it can 

with the resources it has available. It is obvious to us, however, 

that the Department investigative team is underfunded and understaffed. There are hundreds of Chinese exporters of bedroom furniture who may be violating our trade laws. The Commerce needs 

more resources to handle the investigation of so many exporters. 

Third, there is a wide range of degree of dumping that is occurring among Chinese furniture manufacturers. But the Department 

only selected seven Chinese companies to investigate, a list that excluded some of the worst dumpers. Clearly, the Commerce Department either needs more resources to investigate more foreign exporters, or the petitioners should have a greater say in who is investigated. 

Fourth, a decision on the administrative review of the some of 

the most egregious Chinese dumpers will not occur until the summer of 2007. Some manufacturers, particularly the smaller ones, 

simply will not be able to survive that long while awaiting this decision. And given its limited resources, Congress may never individually investigate some of the most egregious dumpers. Again, petitioners should have more control over which exporters are investigated. 

Fifth, the Commerce Department should also be proactive and 

self-initiate any dumping investigations in appropriate circumstances, especially when small businesses are facing the brunt 

of injurious imports from China. 

Sixth, with very little notice, the Commerce Department held a 

hearing that set up a study to determine whether China should be 

given market economy status. China pegs its currency. It subsidizes, owns or controls many of the furniture factories. It manipulates the system in virtually any way it wants until its companies 

win. 

When China joined the WTO in 2001, China agreed to be designated a non-market economy until 2016. The United States 

should not truncate this 15 year period and undermine the bargain 

struck with Congress. The European Commission has recently confirmed that China remains a non-market economy. It would be a 

travesty for the United States Government to grant China market 

economy status now. 

Mr. Chairman, thank you for this opportunity. I would be glad, 

delighted, to answer any questions. 

[Mr. Bassett’s statement may be found in the appendix.] 

Chairman MANZULLO. Appreciate your testimony. Our next witness is Tom Hopson, president and CEO of Five Rivers Electric Innovations out of Greenville, Tennessee and we look forward to your 

testimony. 

12

STATEMENT OF F. TOM HOPSON, FIVE RIVERS ELECTRIC 

INNOVATIONS 

Mr. HOPSON. Thank you. Good afternoon. My name is Tom 

Hopson and I have been in the television industry for over 25 

years. For the past five years, I have served as president and CEO 

of Five Rivers Electronic Innovations, LLC, a television manufacturing company located in Greenville, Tennessee. Five Rivers purchased the Greenville factory from Philips Consumer Electronics in 

1997 and since that time we have continued on the tradition of 

building Magnavox and Philips color TVs in the United States. 

While there are several multinational companies that manufacture televisions in the United States, such as Sony, Toshiba, Sony 

and Matsushita, Five Rivers is the only remaining U.S. owned company and the only company that has been willing to speak out publicly in opposition to the flood of Chinese imports. We currently employ approximately 400 workers in our television plant. 

The principal topic of my testimony today centers on the serious 

difficulty that we have faced as a result of the flood of Chinese TV 

imports. As you may know, the U.S. television industry has experienced competition from abroad over the past 30 years and has consolidated and changed ownerships. Since taking over the plant 

from Philips, however, Five Rivers has maintained a high level of 

efficiency and based on our extensive experience in this industry, 

we were able to make a satisfactory return until a couple of years 

ago. 

Our situation changed dramatically for the worse in 2002. Our 

newest competitors, television producers in China, were different 

from competitors we had been facing in the past. Between 2001 

and 2003, Chinese imports increased over 3,000 percent. In less 

than two years, imports from China caused our business to change 

from a thriving one to a struggling one. 

The impact of the substantial capacity in China became particularly noticeable in the U.S. marketplace during the first half of 

2001. And by the end of 2002, imports from China had become a 

dominant low-price force in the marketplace, creating a major disruption in the market. 

Five Rivers, along with other U.S. producers, were forced to 

lower their prices on all makes and models of our televisions just 

to stay in business. But lowering our prices was not enough. As we 

reduced our prices, Chinese producers would undercut our prices as 

the volume of imports continued to skyrocket. We experienced massive reductions in sales orders from our customers. These reductions severely impacted the entire television industry, as U.S. television manufacturers and the suppliers lost orders. 

Corning, Thomson, to name a few, have stopped producing television glass and television picture tubes in the United States. Our 

company, as well as many others, was forced to lay off production 

workers and management staff. 

In the end, we were left with two simple options. We go out of 

business or we try to fight the imports through the use of the U.S. 

trade laws. So, in May of 2003, we chose to fight and stay in business. Five Rivers joined with two unions, the IBEW and the IUE/

CWA to file an anti-dumping petition with the U.S. Department of 

Commerce and the International Trade Commission in May of 

13

2003. According to a March 3, 2004 article in the People’s Daily, 

the other multinational producers, such as Sony, Toshiba, Sanyo, 

refused to come forward to support this case because, according to 

the press reports, they had been intimidated into silence by the 

Chinese Government. 

In April of this year, the Commerce Department found that the 

Chinese imports were being dumped and the International Trade 

Commission concluded that the U.S. television industry was being 

injured. This decision, we hope, will once again turn the tide for 

our industry as a whole and for our company in particular. 

Most of you have heard about the potential changes in the television industry, including new technologies and digital broadcasting. In the years ahead, we believe the television industry will 

continue to evolve. We have the capabilities and plans to modernize 

and make direct view, LCD plasma TVs and prediction TVs, such 

as LCOS and DLP. If left unchecked, however, the Chinese imports 

would certainly put an end to the U.S. television industry. 

Effective enforcement of our dumping laws can help insure that 

even small business like ours can compete with the Chinese imports. Thank you. 

[Mr. Hopson’s statement may be found in the appendix.] 

Chairman MANZULLO. Thank you. Our next witness is Wallace 

Wes Smith, who will be introduced by his member of Congress, 

Congressman McCotter. 

Mr. MCCOTTER. Thank you, Mr. Chairman. It is a pleasure to 

have Wes here. We had a nice conversation in my office and he is 

probably the only man grumpier than I am these days and I think 

you are going to get a good earful of it and we need it. Thank you 

for coming all the way, Wes. 

Mr. SMITH. Thank you, Congressman. 

Chairman MANZULLO. Well, that is quite an introduction. We will 

be disappointed if we did not hear something grumpy. So, go to it. 

I know that you are very reticent and that you lack opinions. Just 

feel comfortable. 

Mr. SMITH. Okay. 

Chairman MANZULLO. Thank you. Look forward to your testimony. 

STATEMENT OF WALLACE SMITH, E&E MANUFACTURING CO., 

INC. 

Mr. SMITH. Thank you, Mr. Chairman, and members of the Committee. 

Chairman MANZULLO. If you could pull up your mike a little closer and talk directly into it? Thank you. 

Mr. SMITH. My name is Wes Smith and I am the president of 

E&E Manufacturing in Plymouth, Michigan. I am appearing today 

on behalf of the Consuming Industries Trade Action Coalition Steel 

Task Force, to discuss the ways U.S. trade laws can be made to 

work better for consumers of steel and other types of raw material. 

E&E is located in Plymouth, Michigan and is a world class leader in metal joining technology. It meets the needs of our world 

class automotive customers by manufacturing heavy gauge 

stamped metal fasteners with progressive dies. Also, we do plenty 

of high value added assemblies. E&E was founded in 1963 by my 

14

father and provides meaningful employment to over 280 dedicated 

employees. Steel compromises 50 percent of our total cost of producing these products. 

E&E Manufacturing and our primary trade association, the Precision Metalforming Association, were very active supporters of the 

CITAC Steel Task Force in the recent battle over the Global Safeguard Tariffs on steel, and we are grateful that, with the support 

from many on this Committee, they were lifted in December 2003. 

While I do not intend to rehash that issue today, the tariffs do 

serve as a good example of what we have come to call the collateral 

damage that can occur to the economy when our trade laws get out 

of balance. 

Let me state that from the outset that we fully appreciate the 

need for fair trade remedy laws to protect U.S. businesses from unfair trade practices by foreign countries or producers seeking to 

gain access to lucrative U.S. markets. It is entirely appropriate 

that industries suffering from such conduct and that the recourse 

should be swift and predictable. However, all too often in our judgment, trade remedies intended to provide protection for one industry cause damage to other industries, particularly so-called downstream industries. 

This is because our trade laws do not require, and in some cases 

do not permit, the Department of Commerce and the U.S. International Trade Commission to consider the total effects of trade 

policy decisions on the overall economy. I believe my company can 

compete with anybody in the world, given a level playing field. And 

that term, a level playing field, is like a coin with two sides. It 

means protection from unfair trade policies by offshore competitors, 

but it also means protection from unintended consequences of U.S. 

policy. 

Let us take the case of steel, which is the primary raw material 

input for my company, amounting to about 50 percent of my total 

cost of production on average. What we need and what all U.S. 

steel consuming manufacturers need, is access to an adequate, stable supply of globally priced steel. I do not want to pay any more 

for steel than necessary, but the actual cost is less important than 

whether I can buy steel for the same total cost as my foreign competitors. If I can, then I can use improved productivity, better tooling design and automation to offset other disadvantages, such as 

wage rates. If not, then I am at a fundamental disadvantage and 

because steel is such a big part of my cost, I cannot overcome the 

difference. 

When the Global Safeguard tariffs were put into place in March 

of 2002, the International Trade Commission staff analysis, which 

formed the basis of the recommendations to the President, was that 

40 percent tariffs on imported steel would result in steel price increases of four to eight percent. Mr. Chairman, I am not an economist, but given that the U.S. steel industry produces only about 75 

to 80 percent of the total steel consumed in this country, it is hard 

to imagine how anyone could conclude that imposing a 40 percent 

increase in the price of imported steel would not have a far greater 

impact than four to eight percent. 

In fact, as we now know, prices shot up 40, 50, 60 percent in 

some cases. Steel was hard to get, contracts were broken and the 

15

steel-consuming industries suffered far more negative consequences 

than anyone anticipated. 

In fact, we are still suffering from the effects of the tariffs. Some 

seven months after removal, current prices for steel in the U.S. are 

higher than virtually anywhere in the world, due in part to the disruption caused by the tariffs and delivery schedules are substantially longer than normal. If this situation persists, it will lead to 

increased offshoring of U.S.-based manufacturing. 

So what can we do to avoid these effects? In our view, we must 

find the balance between providing protection for U.S. industries 

facing unfair foreign competition and making sure that protection 

does not create more economic damage than good. 

Specifically, we suggest that U.S. trade laws should require an 

analysis of the total impact of any decision on the overall economy, 

including downstream impact. 

Industrial consumers of a product should have equal standing 

with domestic producers and importers in trade cases. 

Products that are not made in the U.S. or are in short supply 

should not be subject to trade remedies. 

Finally, when trade remedies are implemented, there is virtually 

no opportunity for those remedies to be altered in an expedited 

fashion if a changed circumstance occurs. This means that if there 

are unintended consequences, the industries negatively affected by 

those remedies must suffer far too long before changes can be 

made. For this reason, we believe an expeditious review mechanism for affected industries would provide a timely remedy against 

the unintended consequences of trade remedies. 

I support H.R. 3716, which will allow U.S. companies to seek a 

remedy against illegal subsidies by countries such as China. Passage of this legislation sponsored by Congressman Phil English will 

provide an important tool imposing countervailing duties on nonmarket economies and hold our trading partners accountable for 

their actions. 

Lastly, returning to the price of steel, several countries have 

placed export controls on critical raw materials such as coke and 

scrap. China has controls on coke, while Russia, Venezuela and the 

Ukraine have export controls on scrap. While the E.U. has addressed these issues, the U.S. has been slow to act. Thank you. 

[Mr. Smith’s statement may be found in the appendix.] 

Chairman MANZULLO. Thank you, appreciate that. The next witness is my constituent, Doug Bartlett, the owner, president of Bartlett Manufacturing in Cary. The printed circuit board folks that 

stopped by my office and attempted to explain to me how you go 

from a copper plate to a printed circuit board. I said, you know, I 

appreciate you coming in, but I know of Bartlett Manufacturing in 

my district and within two weeks I was there. Doug took me on a 

tour of his facility as, say with you, Wes, and convinced me of the 

critical importance of the printed circuit board industry, not only 

as to the final product but as to the raw material that makes it. 

Doug is a graduate of the Naval Academy and a former Marine 

officer and, yes, sir, we are looking forward to your testimony. 

Thank you, Doug. 

16

STATEMENT OF DOUGLAS BARTLETT, BARTLETT 

MANUFACTURING CO, INC. 

Mr. BARTLETT. Thank you, Mr. Chairman. 

Chairman MANZULLO. If you could pull the mike up closer and 

speak directly into it? There you are. 

Mr. BARTLETT. I need to get longer arms. Thank you, Mr. Chairman and members of the Committee, for allowing me to speak 

about my industry. I joined my family’s business 20 years ago. My 

father started this industry, in this industry, 52 years ago. It is the 

oldest family owned circuit board business in the United States 

and my father was a pioneer in that industry. 

Our industry is that of the printed circuit board. I have an example of a circuit board here. It is an industry, it is a high tech industry and also an example of what it takes to make up a circuit 

board. Although this is a simple example, there are ten layers of 

electronics in here. Our products are the mounting platforms for 

the electronic devices that run pretty much everything in the industry. It is the heart of the electronics industry, along with the 

semiconductor industry. 

Without our product, electronics is nothing more than a bag of 

components that have no function at all. The circuit board industry 

and the semiconductor industry basically are the blueprints. These 

are the blueprints of how every electronic device works. It gives us 

the key of what happens. 

We are a high tech industry. We are an important industry. We 

provide products for the military, aerospace, homeland security and 

we also provide the products that go basically into every industry. 

It supports the welfare of people in our country. 

I want to go through a couple of charts just to show you what 

has happened to our industry. This happens to be the revenues of 

Bartlett Manufacturing Company. It has dropped dramatically as 

you can see from near $20 million down to $9 million. Employment 

levels have gone from 160 people down to here in 98. It is currently 

87 and continues to deteriorate. If we take a look for high tech, let 

us take a look at California. 

In California there was a peak of $2.7 and $2.8 billion. Look at 

it now, $1.2 billion. This is not a depression, this is not a recession. 

It is a devastation of a critical injury. 

Next chart, please. If California were not enough, let us take a 

look nationwide. One more. Let us go to the volume. This shows 

ten billion. It was called 11 billion at the height of our industry. 

Now we are struggling at five billion of which we guess 10 to 15 

percent is already just brought in from China and resold. 

So what has happened to our industry? We did not forget how 

to build circuit boards in 2000. Thanks, I will skip the last one for 

a minute. We did not forget how to build circuit boards. Low cost 

products have become available from China. They have acceptable 

quality and delivery and we have faced this foreign competition in 

the past. We faced it from Japan in the 80s and we faced it from 

Taiwan in the late 80s, but now we have comparable products at 

half the price. 

In this high tech industry, low labor alone cannot justify what 

is happening. These are not the results of free market forces. These 

are the direct and significant results of various government, ChiVerDate 0ct 09 2002 16:23 Jun 21, 2005 Jkt 000000 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 G:\HEARINGS\96505.TXT MIKE
17

nese Government subsidies, particularly currency manipulation 

and export subsidies. No amount of ingenuity or proximity in the 

market can offset these government practices. 

Rigid laminate, the raw material that we use to build our circuit 

boards, is rigid material. The supply is critical to our industry. Ten 

years ago, U.S. facilities dominated the U.S. market. There were 

over ten people, ten factories that supplied this to the United 

States. At the end of this year, there will be zero manufacturers 

in this country of this product. Zero. We got that information yesterday. The last factory will be shut down. 

Again, these market forces are in play and are driving up our 

prices. U.S. manufacturers will pay a 10 percent increase per 

month for the remainder of this year to get this product for this 

most critical industry. As if Chinese Government subsidies are not 

enough, we are in a squeeze play with our primary supply line. The 

implications are clear. China is using predatory trade practices to 

destroy our PCB market. And because of Washington’s indifference 

and sometimes encouragement, China is succeeding. 

I would like to very rapidly talk about this product. It is a 

sonabouy board. My company makes this. It goes into sonabouys 

that are dropped in the ocean to track and detect foreign submarines. We have had this contract for ten years. We were notified 

that we are not competitive. The buyer gave us offshore pricing. My 

industry experience tells me this is Chinese pricing. 

Please show the next chart. If we take a look at—one more—if 

we take a look at what happens, the offshore pricing has been 

given, adjusted due to unfair currency and manipulation, adjusted 

due to rebates, and you will see that the outcome is that we are 

competitive. If you take away the subsidies, we can compete. 

It should be obvious to the members that it does not make sense 

to have the Chinese build products that go into the products for our 

national defense. I think the implication to our national security 

and homeland defense should be obvious. 

Very briefly, I was asked what U.S. trade laws in action have 

benefitted my industry? There are none to date that have benefitted my industry. I was asked what needs to be strengthened? To 

save our PCB industry, until our government gets serious about 

fighting unfair subsidies, enforce the Buy America provisions for 

printed circuit boards, to save our industry. Give us time. And to 

move from 50 percent to 80 percent in two years and 90 percent 

in three. Spend times and funds to provide awareness of the trade 

options to small and mid-size business, but you must deal with the 

Chinese subsidies. We need a comprehensive approach that eliminates the Chinese subsidies quickly. Small businesses do not have 

the time or the money to ask for help under the current system. 

Your system, as it stands today, cannot work for me. 

My industry is divided into big companies and little companies. 

The big companies have packed up and gone to China. The little 

companies remain here and are waiting to see what our government is going to do to help provide security to our country and protect this most vital industry. Thank you, Mr. Chairman. 

Chairman MANZULLO. When I visited you, there were two U.S. 

manufacturers of that fiber board, now there are none? 

Mr. BARTLETT. Yes, sir. 

18

Chairman MANZULLO. That was just about six weeks ago? 

Mr. BARTLETT. We had a meeting late yesterday afternoon with 

the last major supplier who told us that he will shed his U.S. facility by the end of this year. And the one remaining facility in the 

United Kingdom, I would consider a close ally, will be shed by the 

end of 2005. That leaves all the facilities, major suppliers of this 

product, in the Asian based market. I see concern there. 

Chairman MANZULLO. Thank you. Our next witness is Bill 

Klinefelter. Welcome back, Bill. Good to see you again. 

Mr. KLINEFELTER. Mr. Chairman. 

Chairman MANZULLO. Legislative and Political Director of the 

United Steelworkers of America. And we look forward to your testimony. 

STATEMENT OF WILLIAM J. KLINEFELTER, UNITED STEEL 

WORKERS OF AMERICA 

Mr. KLINEFELTER. Mr. Chairman, I will be very brief, because 

you know the story better than I do. You hear it every single day. 

I will say this, since 1970, someone who has held this position with 

the United Steelworkers of America, has come before this Congress 

year after year after year after year and talked about the predatory 

practices of our trading partners on the American steel industry 

and the need to do something about it, the need to have strong 

trade laws, the need to have those trade laws enforced, the need 

for people to have access to those trade laws. We have done that 

since at least the 1970s. 

And there are several gentlemen at this table today who are now 

beginning to feel the consequences of the fact that we do not have 

strong trade laws in this country, we do not have responsive trade 

laws in this country. I must say, whether you are union or nonunion, I welcome you to the fight. Because it is the fight for the 

future of America and whether we are going to have an industrial 

base in this country, it is as simple as that. 

I believe this Committee has got to make a strong statement to 

this administration about keeping the trade laws in place. I was at 

DOHA when Mr. Zelig put our trade laws on the table. Once they 

are on the table, they are open to negotiation. Once they are open 

to negotiation, there is only one place to go and that is to be weakened. 

We have to find ways so that people can afford to do these cases. 

The union knows this full well. We were involved in the 201. We 

spent the legal costs on that 201 and as these gentlemen know—

I think one gentleman said that they spent $76,000. I wish that 

was all we had to spend when we did the 201, but I tell you that 

these cases are very, very expensive. 

And right now, the Commerce, Justice and State Department Appropriations Bill, we have asked the International Trade Commission begin tracking and reporting on inquiries from small and medium sized businesses for getting help with enforcement of anti 

dumping laws against imports, including those from China and 

India. 

Now, we build a records. Let us see what people need, let us see 

what we can do in order to fulfill the needs of these people. We 

need for the administration to stick with what it does. I have heard 

19

the gentleman talk about 201. Well, 201 is gone, that tune is an 

old tune, and the price of steel is at record highs. So somebody 

should turn their attention to what the culprit is. The culprit is 

China. China is the biggest importer of steel, the biggest producer 

of steel, the biggest importer of iron ore, the biggest importer of 

coke in the world and they continue to grow. They grew at the rate 

of 23 percent a year. 

And look, China is going to make steel. That is their future. That 

is what they are going to do and they are going to control the world 

market and the price of steel is going to go up. And one of the reasons the price of steel is going to go up is because there are only 

90 million tons of capacity in the United States and in the last several years, we retired 17 to 19 million tons of capacity. 

You know, we keep retiring capacity and other people keep adding it. If you want to talk about subsidies in terms of steel, let us 

talk about the subsidy negotiations at the OECD. We just went 

through two years of negotiations on subsidies on steel and not one 

of our trading partners was willing to move one inch on any of 

their subsidiaries. 

The Europeans want their environmental subsidies to meet their 

Kyoto round obligations and so do the Japanese. The Indians say 

that they need subsidies as a developing country. They need special 

subsidies to protect their steel industry. The Brazilians want banking subsidies so that they can invest in steel in the next four years 

in Brazil. 

No one went to the table and said, we want to give up our subsidies, which is what a negotiation for subsidy is all about, to give 

them up, not to cause exemptions for other countries that have 

subsidies. 

And who came to the table with no subsidies? The United States 

of America. But we left those negotiations, those negotiations are 

off now at least until after the election and all those subsidies are 

in place. All our trading partners keep those subsidies and life goes 

on. 

Finally, I guess I would say that there have been a number of 

cases that have involved China. And I think that a number of companies have gone to the administration and let me just say to three 

companies in particular. There was a pedestal actuator company in 

New Jersey who sought 421 relief against the Chinese. This was 

something that was specially negotiated with the Chinese to address surges of exports from China. The ITC found in favor of the 

pedestal company in New Jersey, found in favor of the wire garment hanger industry in Ohio, found in favor of the ductile iron fittings company, also in Ohio. All of these companies, the ITC found 

that there were surges of imports from China. But this remedy is 

in the hands of the president and the president alone and the administration refused to act. 

Someone has got to send a shell across the bow of our trading 

partners. I hold this document—this is gong to sound like the 

1950s. The National Trade Estimate Report on Foreign Trade Barriers. Fifty-six countries are reported on in this report, from big 

countries to little countries. But this is not the full report. I did not 

bring the full report. I did not want to make my assistant carry it. 

20

This report tells you the barriers that are there and page after 

page, it says the United States will continue to negotiate to try to 

lessen these barriers. We are going to negotiate to lessen the subsidies for Aerobus? These European countries and that company is 

not a new company. They need no subsidies—okay, I am sorry, Mr. 

Chairman, I will close. But the fact of the matter is, year after 

year, these things are on the record. We do not take anybody to the 

WTO. They take us at the drop of a hat. 

[Mr. Klinefelter’s statement may be found in the appendix.] 

Chairman MANZULLO. Thank you for your unimpassioned testimony. 

Mr. KLINEFELTER. These guys got me going, you know. 

Chairman MANZULLO. We like to bring in the animated witnesses here who have got a real story to tell. 

I would like to ask one question to John Bassett and Tom 

Hopson. You two guys got involved and hired lawyers. Tell us 

about that, tell us about the cost? Mr. Bassett, you paid another 

price in terms of what has happened in the industry. Tom, want 

to go first? 

Mr. HOPSON. Well, the cost of filing this action exceeded $1 million and now, with an ITC vote of 5 to 0, which one of the members 

recused herself, with a 5 to 0 slam dunk, now we face the Chinese 

appealing. So we are still forced to spend more and more money to 

get what, you know, the Commerce Department and ITC found 

very evidently that there was nothing. 

So in order to keep defending—I feel like I am fighting the Chinese Government, along with the U.S. Government to some degree, 

but exactly the Chinese Government. Not Chinese companies, it is 

the Chinese Government. But it is either that or fold up and we 

send all our people home. 

Chairman MANZULLO. Your company is the only one involved in 

this group, is that correct? 

Mr. HOPSON. Well, we have two labor unions that are involved. 

Chairman MANZULLO. That is still a lot of money for a small 

amount of people. 

Mr. HOPSON. We had some creative solicitation for funding. 

Chairman MANZULLO. Bake sales? 

Mr. HOPSON. It was difficult, let us put it that way. 

Chairman MANZULLO. Mr. Bassett, tell us your experience? 

Mr. BASSETT. Well, Mr. Chairman, our association did not know 

about the trade laws in this country, that is what I was referring 

to. And we spent $75,000 just to find out what the law said. This 

is not what we spent on fighting the petition. We spent $75,000 to 

find out what the law said in this country. 

Our budget, we have hired King & Spalding, which we consider 

the finest law firm to defend us and file the petition. That budget 

was $1.5 million and we are far, far, far beyond budget. We are opposed by 21 different law firms on the other side. There is one on 

our side, there are 21 on their side. 

Let me tell you how we feel and all of our companies feel in the 

furniture industry. First, we know that we have a fiduciary responsibility to our stockholders. Secondly, we know we have a legal responsibility to our country. WE do not intend to be an Enron or 

World Com, Mr. Chairman. WE are going to be responsible corVerDate 0ct 09 2002 16:23 Jun 21, 2005 Jkt 000000 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 G:\HEARINGS\96505.TXT MIKE
21

porate citizens, but we also have a moral responsibility to our employees. Why should our employees lose their job through illegal 

trade? That is why we are filing this petition and we are doing it 

on behalf of the people who work in our companies and it is expensive. 

Chairman MANZULLO. Now, the part of the remedy that you are 

seeking is somehow that the government itself would provide and 

I do not want to use the word law firm, but at least some minimal 

assistance for research, etc., so at least you know you have a case 

before you engage a law firm. 

You have how many companies with you, John? 

Mr. BASSETT. We have 31 companies in our petition. 

Chairman MANZULLO. Okay, and Tom, you just have you and 

your two labor unions? 

Mr. HOPSON. Well, we actually started out with a large group, 

not only television companies, but our first meetings, we had a 

large group of people. Some television companies and supply companies. And very quickly, they started falling out because in our industry, most everyone is owned by multinational companies. All 

the other companies had factories in China and they fell out one 

by one. Then the final one just came and said, we cannot afford to 

stay in this or we could suffer for business in China. So it is too 

huge a market to take a chance. 

Chairman MANZULLO. Then my next question is, with Wes Smith 

and Bill Klinefelter. You are on different sides of this steel tariff 

issue. You both had very compelling testimonies. Both extremely 

factual. One in favor of the tariffs, one opposed to the tariffs. Wes 

and Bill, how do you resolve that difference? Is there anyway in between on this? 

Mr. SMITH. Well, from my standpoint— 

Chairman MANZULLO. Do you want to pull the mike closer to 

you? 

Mr. SMITH. Well, from my standpoint it is either that we do need 

to find a way to resolve this issue or else they better be nice to 

China, because that is going to be the only place they are going to 

be able to sell steel to. The steel consumers will be out of business. 

We have no pricing power, no ability to push these costs upward. 

If you are talking of steel right now, at the end of the 201, we were 

paying roughly 21 cents for just vanilla hot rolled material. We just 

last month paid 38 cents. We cannot absorb that. 

Chairman MANZULLO. So it is yet to peak? 

Mr. SMITH. Exactly. We cannot absorb that, we cannot pass that 

on, because our customers have choices and those choices are to invest in low cost countries, such as China, who manipulate and subsidize their industry. It is really a fire sale for these fellows right 

now. All the foreign direct investment is coming from large multinationals and we need to have those folks here, healthy. I am not 

concerned about metal stampings coming in from China. My major 

concern is having large components in modules that were once 

made in the United States no longer being made, being made offshore and I will not find out until it is time for me to requote a 

replacement business. And I will not even have that opportunity, 

that work will have simply disappeared. 

22

Chairman MANZULLO. China is building 19 fully integrated mills 

as we sit here now. Bill, do you have a response? 

Mr. KLINEFELTER. Yes, I think the 201, as rightly implemented 

by the President of the United States, is a tool to save an industry 

that is under attack by its foreign competitors and the 201 covers 

all steel mill products from all countries and it does it in a comprehensive manner for a period of time. 

Initially, the administration put the 201 in for a three year period, gradually reducing tariffs over that period. But then when 

they examined it in the mid-term review, they looked at the state 

of the industry. We did not think they rightly looked at the state 

of the industry. They looked at the state of the industry and they 

made a decision to pull the 201 and it is gone. 

So, the problem with the price of steel is not the 201 anymore. 

The problems with the price of steel is a demand of steel in the rest 

of the world. And part of the overall solution to this is to have some 

stability in the world steel market. And the only way you are going 

to get that is if you have a subsidy regime for the entire steel industry in 5sssthe world and you have serious capacity talks about 

capacity not inside the United States, but in other places, the 

former Soviet Union and places like that, which is unproductive 

and unenvironment and really should be shut down. 

Steel is a global problem. Right now, it only is going to take a 

solution to stabilize the basic steel industry and the price of steel 

here in the United States and the rest of the world. 

Chairman MANZULLO. Doug, the fiber board, what is the technical name for it again? 

Mr. BARTLETT. Laminate. 

Chairman MANZULLO. Laminate? That is a composite with copper on both sides? 

Mr. BARTLETT. It is a woven cloth that is dipped in resin and 

then pressed with copper on both sides. 

Chairman MANZULLO. So what you are saying is that there 

would no longer be a U.S. manufacturer of this product, is that correct? 

Mr. BARTLETT. More precisely, there will not be a major supply 

facility. There are many manufacturers who are small, creating 

specialty products in the United States. But there will not be any 

significant facility left in the United States that can provide for capacity and volume production. 

Chairman MANZULLO. Well, here comes a dumb question. What 

happens if you cannot get this? What happens if the overseas companies just choke the market and nobody in the United States can 

buy this material? 

Mr. BARTLETT. That is already happening. Du Pont has told the 

U.S. market that they will not accept anymore material for flex 

products—it is a specialty product in the United States—for the 

balance of 2004. We ceased to build flex products and the product 

has to be imported from other countries. 

Chairman MANZULLO. What is flex product? 

Mr. BARTLETT. Flex is a board. This is a rigid board. A flexible 

board is one that can be bent, such as ribbons on a printer. The 

flip phones, there is a connector there that is a flexible board. 

23

We leave ourselves at the mercy of our allies as some people defined them today to provide us that product. It will be the end of 

the electronics industry as you know it today, as far as our ability 

to rely on our own supply lines. It is a bad situation for military 

and homeland security. 

Chairman MANZULLO. Frank, I have a final question. There was 

a decision on a dumping action on windshields made in China, the 

article that appeared in the China Daily News, whatever it is, 

about six weeks ago. And the ITC had ruled in favor of imposing 

what was a modest tariff. Then, obviously, for finding injury, then 

the Court of New—Court of International Trade, which is a District 

Court, ruled that the ITC had made an incorrect decision, lowered 

the tariffs to less than one half of one percent, therefore the companies did not have to put up a bond on it. 

But in the article, it was quoting the Chinese as saying that at 

present, in the automotive industry, they are making for U.S. manufacturers $10 to $20 billion worth of automotive parts, but that 

their goal, by 2010, was to ship to the United States between $70 

and $100 billion worth of U.S. automotive parts to be incorporated 

into our cars. 

That, along with we are seeing the direct orders coming out of 

some of the big three, forcing the original equipment manufacturers to go to China as part of their business plan. Where is this 

going to stop? I mean, how long before guys like Doug and Wes, 

who make automotive parts—is there any relief? You have been 

around this for a long time. 

Mr. VARGO. I have, Mr. Chairman. 

Chairman MANZULLO. Impart your wisdom to us on what trends 

you see and what remedies, if any, are available? 

Mr. VARGO. Well, I have not seen those numbers. I have seen the 

imports of auto parts from China now are about $2 billion and that 

is rising rapidly. But that is still about one percent of the market. 

Not that that is not a reason for concern, because they are growing 

rapidly. 

As we look at our trade position, one of the key things that is 

important here is to see that we are able to compete. You know, 

I hear company after company that is a member of the NAM and 

I have heard it repeatedly at this table saying if the playing field 

is level, we can compete. The first thing we have to do is to see 

that the field is level. And we hear a lot of stories about subsidies 

coming out of China. I do not know if they are true, Mr. Chairman, 

but they need to be investigated. And if there are subsidies, they 

need to be offset. That is the importance of the legislation we have 

been discussing today. And maybe there is a misunderstanding and 

they are not subsidizing. I do not know. 

The currency, the currency we can see from the fact that China 

needs to buy about $10 billion, $12 billion a month of American 

dollars to keep their currency from appreciating, that the currency 

is very undervalued and controlled, and that is not right. There are 

other aspects as well, so we need to put a focus on this. 

Now I think that we have seen in recent months, I mentioned already, the discriminatory 14 percent tax on American semiconductors that has been taken care of. We are seeing more initiative out 

24

of USDR and Commerce. In part, this reflects the funding that 

they received. 

You have been a part of that. Chairman Wolfe for the Appropriations Committee has been an important part of that and we need 

to keep pressing in that direction. 

Chairman MANZULLO. Appreciate that. Mrs. Velazquez? 

Mrs. VELAZQUEZ. Thank you, Mr. Chairman and thank you all 

for being here today. This has been quite an important hearing. 

Mr. Klinefelter, I just would like for you to help me understand 

why is it that if we have our trade laws, we cannot get this administration to enforce some of those trade laws? What would you say 

to this administration to encourage it to fight and to step up to the 

plate and fight for the U.S. industries? 

Mr. KLINEFELTER. Well, Congresswoman, I believe we have to 

ask the administration. I mean, on the 421 cases that I discussed, 

I mean, these companies went through the process that was established when China agreed getting into the WTO. They went to the 

ITC. The ITC ruled in their favor, but the administration just 

would not rule in their favor. 

You know, recently the AFL-CIO, you know, lodged a complaint 

in regards to human and worker rights in China and the administration just refused to play. You know, this idea that we have to 

keep these foreign policy relationships pure and simple with the 

Chinese. But, on the other hand, if there is no industry left here 

in the United States, what are we going to do? 

Mrs. VELAZQUEZ. Mr. Vargo? The U.S. China Economic and Security Review Commission criticized this administration for failing to 

pressure China on a number of issues, including the subsidies and 

tax incentives that benefit Chinese companies at the expense of 

U.S. borders. The Commission has gone as far as to ask Congress 

to approve legislation that will force the administration to take 

some action. 

Why do you believe that the administration is reluctant to take 

action against China? 

Mr. VARGO. Well, candidly, I have a different view. I do not see 

a foreign policy reluctance to take action on China. And at the 

NAM, we pressed very hard on a number of goals that we want to 

achieve. One of them was to stop China from implementing this 

wireless network standard that would have required American 

companies to partner with Chinese companies and transfer their 

technology to China. Now that is patently absurd and the administration worked hard on it and they got it stopped. 

Another one of our key priorities was this discriminatory value 

added tax where the Chinese charged a 17 percent tax on imported 

semiconductors but they give you a 14 percent rebate if you move 

your factory to China. Again, patently absurd under the WTO 

rules. And we pressed the administration and they began a WTO 

case and worked with the Chinese and we do not even have to go 

to the WTO, they rolled it back. So, where they are focusing, I 

think they are doing the job. 

Now one thing, and it came out as I was preparing my testimony 

and talking to some companies and I have heard it at this table, 

as well. Not enough companies know of the existence of the WTO 

25

legal trade remedies that we have. Mr. Bassett said it cost him 

$75,000 to find out that there was such a thing as dumping laws. 

Well, that is not ridiculous at all. There is no reason he should 

be genetically imprinted knowing that we have dumping laws. I 

think we get too carried away inside the Beltway thinking, oh, everybody in the United States knows all about this. 

One further point along these lines. We had a meeting of the 

NAM’s China working group a couple weeks ago and a gentleman 

who is very concerned about trade came to Washington for that 

meeting. As we were talking, he said, you know, what the government needs to do is set up a trade complaint hotline, where small 

companies can take their trade complaints. Great idea. Trouble is, 

it was done six, seven years ago, when I was at the Commerce Department. I started it. Nobody knows about it. The point was made that $20 million or so was spent promoting the new $20 bill. The Commerce Department, as I recall, is not allowed to go out and advertise what it has. Now, maybe that is 

something that Congress ought to look at. 

Now, one outcome of this hearing that I hope you will consider 

significant, is that I have decided that the NAM is going to link 

onto all these hotlines and websites and we are going to go out to 

our 14,000 members and we really are going to promote the existence of these and see if we can generate some more business for 

these. It is not going to solve the problem, but it will help. 

Mrs. VELAZQUEZ. Mr. Vargo, earlier this year, during a Senate 

Finance Committee hearing, our U.S. Trade representative, Zelig, 

stated that he did not support pursuing a World Trade Organization dispute settlement case against China over the country’s currency practices, in part because it could be difficult to prove that 

China is in violation of WTO laws. Do you agree with that assessment? 

Mr. VARGO. I was part of the fair currency alliance that prepared 

that case and I would rather not discuss a view as to whether we 

think this would be difficult to prove or not. In our view, it is a 

violation— 

Mrs. VELAZQUEZ. But you just said before that you do agree that 

there is a manipulation of the currency by China? 

Mr. VARGO. Oh, yes, and the WTO says, you know, you should 

not manipulate your currency. But the point we got from the administration on that case, or at least from the Treasury Department, was that they, as a result of that, the visibility that we have 

given to the Chinese currency, they have begun working with the 

Chinese. They said that they believe they are making progress and 

the filing of this case at that time would move things back. 

So we agreed to work with them and we have been doing that. 

Our goal is still to get that currency revalued significantly just as 

quickly as possible. 

Mrs. VELAZQUEZ. Congressman English’s bill would allow CDV 

cases against non-market economies like China, we agree on that, 

right? And this legislation follows efforts made last year by various 

groups. The last Senator—from Ohio? 

Chairman MANZULLO. Voinovich. 

Mrs. VELAZQUEZ. Thank you, to introduce a resolution saying 

that Congress supports the use of CDV cases against non-market 

26

economies. How would you respond to the Department of Commerce’s arguments that CDV subsidies cannot, in a conceptual 

manner, be identified in a non-market economy? 

Mr. VARGO. Well, I am not a trade lawyer, but from what I have 

seen, I disagree with that view and I think that since the subsidies 

and countervailing measures agreement was modified in 1994, 

Commerce’s old reasoning from 1984 does not hold anymore. 

But in any event, it seems to me that if there are subsidies, that 

they should be countervailable, whether they are in a non-market 

economy or not. I do not dispute they might be more difficult to 

prove, I do not know. But I do know that our members should have 

the right to seek to have those subsidies offset. 

Mrs. VELAZQUEZ. Bill, would you like to comment? 

Mr. KLINEFELTER. I agree with the gentleman from NAM. I think 

he can identify those subsidies and I think those subsidies are 

prevalent and they exist all through the Chinese economy. 

Mrs. VELAZQUEZ. Why do you think that Department of Commerce is taking that position? 

Mr. KLINEFELTER. Because we have a gigantic trade deficit with 

China. China is now a gigantic trading partner. I beg the gentleman’s pardon, but foreign policy is riddled through this. I mean, 

Condoleezza Rice just got her hat handed to her in China for the 

administration’s alleged policy on Taiwan. We are going to walk 

softly with the Chinese over foreign policy issues, because of the 

Taiwan issue and because we want them to intervene in North 

Korea. 

So it is not always about trade. Sometimes the foreign policy 

issues intervene big time. 

Mrs. VELAZQUEZ. Thank you. Thank you, Mr. Chairman. 

Chairman MANZULLO. Just a couple of things. In the reports that 

I have been given by the Department of Commerce, they have 

taken on over 680 market access and compliance cases. Over a 

comparable period, the previous administration conducted about 

half as many cases. In fact, I was with Don Evans just about two 

hours ago and the Department of Commerce is very sensitive to 

what this Committee has been doing. This is our 64th hearing on 

manufacturing. Sixty-four hearings in three years and I am going 

to be on Lou Dobbs tonight. And I said, you know, there is some 

good stuff coming out of Department of Commerce. We are still 

very much concerned, however, that Phil English’s bill needs to get 

out front so we can whack China, to treat them in a fair manner. 

But in terms of the sound dollar coalition, the people that are 

very much interested in the RMB floating to the U.S. dollar, I received a call about two weeks ago from John Snow, the Treasury 

Secretary who was all excited. The word never got out that there 

is an agreement with China in the Chicago Mercantile Exchange 

to exchange derivatives, to trade derivatives. That is the first step 

as far as I can see, and Mrs. Velazquez and I both sit on the Banking Committee, so we have an opportunity to try to pick up a little 

bit more of our knowledge in that area. That is the first attempt 

that I see towards getting the RMB afloat. 

The big problem that I see is in terms of how long can the companies last? I am just, Doug, I just want to tell you, when I was 

with you, what, about a month ago? And you said that only 20 perVerDate 0ct 09 2002 16:23 Jun 21, 2005 Jkt 000000 PO 00000 Frm 00030 Fmt 6633 Sfmt 6633 G:\HEARINGS\96505.TXT MIKE
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cent of the U.S. consumption of this board is manufactured in the 

United States, I thought that was shocking. Now you are telling me 

and, of course, we believe you 100 percent because you know this 

better than we do, that none of this is going to be manufactured 

in the United States. 

There are remedies whereby the Department of Defense can get 

involved to say that this item is absolutely necessary for defense. 

And Doug, if you could write me a letter explaining really in your 

testimony, or does it occur in the addendum to your testimony, 

about when you talk about this going down to zero manufacturers? 

Mr. BARTLETT. Yes, briefly it does. 

Chairman MANZULLO. We will send that over to the Department 

of Defense to say, you know, there is a remedy out there possibly 

under, I think it is Section 7C of the Export Administration Act 

which talks about—of course, that talks about imports coming in. 

When you have no manufacturer left—I am sorry, the Defense Production Act. Whether or not there is a remedy available there. Bill? 

Mr. KLINEFELTER. Mr. Chairman, there is also a methodology in 

the Commerce Department under the Trade Act, where they can 

conduct an investigation on whether a product is critical to the national security— 

Chairman MANZULLO. That is correct. 

Mr. KLINEFELTER. —and then impose a remedy and I am drawing a blank on it. 

Chairman MANZULLO. Well, the Defense Production Act, as opposed to the Export Administration Act, where somebody files a petition with the Ways and Means Committee? 

Mr. KLINEFELTER. Yes, exactly. We took that route in steel— 

Chairman MANZULLO. That is a 331. All right, it is like bingo 

with all these numbers. 

Mr. KLINEFELTER. But that is a route you can take if there is 

something that is critical. 

Chairman MANZULLO. We are definitely going to do that, Doug, 

based on your testimony. Phil, if you could follow up. Talk about 

copper. We had the opportunity to meet with the copper people. In 

fact, we held two hearings on steel and the second hearing on steel 

talked about the shortage of copper and nickel, which are obviously 

both used to make brass and also for this application here. 

On the short supply petition, amazing, amazing, amazing is that 

the day the petition was filed, the Chinese backed off and stopped 

buying copper scrap on the open market, which greatly reduced the 

price of copper, what, Dana, 30 percent? Twenty percent? Twenty 

to 30 percent and so when these remedies are used, what I would 

suggest, Doug, in your profession with the folks that you have left 

is that you ponder the efficacy of getting a top notch law firm. It 

is going to cost a tremendous amount of money. We will be glad 

to work with you on it, on the petitions that are necessary. We will 

forward our concerns immediately to the Department of Defense to 

try to get some type of acknowledgement that this particular item 

is no longer being made in the United States. Go ahead. 

Mr. BARTLETT. Mr. Congressman, as you know, we have an industry association that has large manufacturers and small manufacturers and the small manufacturers have broken away to an 

independent organization because the large manufacturers obviVerDate 0ct 09 2002 16:23 Jun 21, 2005 Jkt 000000 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 G:\HEARINGS\96505.TXT MIKE
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ously moved their factory to low cost producing areas where they 

can sell, they can build low and sell high, without the interest of 

American society or American workers. 

Not all large corporations but certainly in our industry, that has 

happened. We have been very active trying to get this study done. 

We have not been embraced yet by the members of Congress who 

control that, although we are knocking on their doors actively and 

we will continue to do so. I think that is very important. 

You would think the Department of Defense would be very much 

on our side. There are already provisions to buy American. And I 

am amazed that when it comes down to price concerns, the Defense 

Department, like many companies, will prefer to buy offshore than 

to think through the whole process. I am amazed that we do not 

get more support from the Defense Department. And actually, I am 

not so sure that they are our allies in this effort. But we will pursue that. 

Chairman MANZULLO. Well, we will work with you on that. I 

think the first hearing that we had, the very first hearing of which 

I was chairman lasted four and a half hours, when we found out 

that the Army was buying the black berets from the Chinese. And 

I have one of those black berets in my briefcase. In fact, I think 

I showed it to you, Doug, when I was out there. Everybody has 

seen that. I mean, it is worn thin now, because it is Exhibit A. 

There are 614,999 of the Chinese made American berets that are 

sitting in a warehouse in Mechanicsburg, Pennsylvania because 

Mrs. Velazquez and I got very animated that our men and women 

in uniform simply were not going to be wearing those berets. 

Your testimony from all of you has been extremely compelling. 

I do have one question. Tom, I was not even aware that TVs were 

made in America. Tell us about your company and why we do not 

know more about that? What type of TVs do you make? 

Mr. HOPSON. Well, currently we make TVs for companies like 

Samsung, Akai, Philips, Magnavox. We build, over the years, we 

built a lot of different brands. There are actually five, six television 

factories in the United States. 

Chairman MANZULLO. Is this assembly, are you more assembly 

with foreign parts? 

Mr. HOPSON. Some of both. There is some assembly. I used to 

run a plant that also had a PC board plant. We used to make 

boards. We could buy material, our company could buy material 

cheaper, you know, overseas than we could buy the raw material 

in the United States. And that is not just material, finished boards 

were coming out of, I think, Singapore back then. A different type 

of material, but at that time, I worked for Philips and the decision 

was, hey, we can buy the finished printed circuit board cheaper 

than we can buy the raw material in the United States. 

Chairman MANZULLO. You did not have much choice? 

Mr. HOPSON. Yes. But Sony has a huge plant outside of Pittsburgh. There are two plants in Tennessee, actually, ours and Toshiba has a plant. 

Chairman MANZULLO. These are conventional home TVs? 

Mr. HOPSON. Yes, a lot of projection TVs, you know, the higher 

tech TVs now. You know, in the 80s, we went through NAFTA. I 

don’t know if you know, but everybody in the world has factories 

29

in Macillas and they all went to the border zones. And we competed with those people back in the 80s. You can go today and 

most—our dumping case was on 21 inch and above, but you could 

go today and you cannot find a 13 inch or a 19 inch TV that is built 

in the United States, because the tube supply is gone. And that is 

what is happening to the whole industry now. 

Corning shut down glass plants. Those people are losing their 

jobs. Philips is shutting down plants and moving them. You know, 

everyone that had picture tube plants, so you lose that. That is a 

major cost of your set, major cost of transportation. 

But competition, that is not the problem. It is the unfair competition. We competed with Mexico, like I said, and that was not a 

problem. We found our niche. We knew we could not build 13s and 

19s as cheap as you could in Mexico with labor costs as low as they 

were. But we knew the transportation costs for the 25 inch and 

above offset the labor costs. So if we kept working on our efficiency 

and doing the right things, we would not worry about the 13s and 

19s. 

But, you know, from China what we saw is projection TVs that 

were selling at major retailers for less than our material costs. And 

we knew they had to ship it, you know. We know what a container 

costs to ship across the sea, lead times and everything else. A lot 

of people believe it is labor, but it is not. It is not all labor. 

But, yes, I think the television industry, to your first question, 

a lot of people think televisions are made in Japan. You know, Japanese have not made televisions forever. It has been a long time 

since they have. But most of the TVs in the United States either 

were, until the last few years, either made in the Mexican border 

region or the U.S. Then, of course, the surge of imports started 

coming in 2001. 

Chairman MANZULLO. Then I have one last question. The hearing has gone longer than I anticipated. Mr. Bassett, I have been 

reading a lot about you and we have been working a long time to 

make sure that everybody here was free to come on this day. You 

are doing something in your business in terms of extraordinary efficiency that you are bragging about and rightly so, in terms of 

going head to head with the Chinese. Would you share that with 

us? 

Mr. BASSETT. Well, the first thing we do is we invest very heavily 

in our plants. We are not asking for a bail out and we are not asking for a hand out. If we cannot compete fairly, we do not deserve 

to be here. We have to do our part. 

And so first, we invest twice, sometimes three times what all our 

competitors invest, to make sure that we stay efficient. 

Chairman MANZULLO. You invest in new machinery, etc.? 

Mr. BASSETT. All new machinery. We go around the world, looking—we tell our people, we are going to put the finest tools in their 

hands that we can find. 

But my personal opinion, Mr. Chairman, I think the most 

underused asset in America today is people. We communicate with 

our people. We take our products, we take the Chinese products, 

we put them out in front of our people, we explain to them exactly 

what we have to compete with. We then design products that will 

compete with the Chinese and we ask our people, do you want to 

30

join us as partners to compete in this market? And overwhelmingly, our people on their own volition, have become more efficient. 

They want to compete. What they are looking for, in my opinion, 

is leadership and management that is willing to compete. My personal opinion, we, in many ways, have a void of leadership. W$e 

have to get out in front of our people and set the example. Now 

once you tell them that and you set the example, it is amazing 

what American workers can do. It is amazing. 

But now, we cannot overcome an unfair playing field. So everybody in my organization knows I am up here today. They want to 

know, what are you going to say? And another question they asked 

me is, are they going to listen? We are willing to do our part, I will 

promise you that. Just give us a field that we can play on. 

Mr. VARGO. Mr. Chairman? 

Chairman MANZULLO. Yes, Frank? 

Mr. VARGO. If I could build on that for one second, because it is 

a very important point. And Mr. Bassett is to be commended for 

his management, his initiatives. A lot of other companies are doing 

the same thing. 

What I really see coming out of this hearing is nobody here is 

saying protect us. We are saying we need a level playing field and 

we can compete. But they are also saying, to compete, we compete 

on our cleverness, we compete on the skill of our workers, we compete on the basis of our productivity and innovation. 

And Mr. Chairman, one thing we have to do in looking to our future is to protect and promote more rapid growth of innovation. To 

take the best practices that firms have and spread them to more, 

like through innovations such as the MEP program. We need to 

have the R&D tax credit. We need to realize that our future depends on developing more intellectual property, protecting it and 

putting it to use. Mr. Chairman, I hope that you and Congresswoman Velazquez will have some hearings on it. 

Chairman MANZULLO. Well, we have MEP up from 31 to 109? 

Mr. VARGO. 109. 

Chairman MANZULLO. Mrs. Velazquez, did you have— 

Mrs. VELAZQUEZ. I just wanted to share with you, I agree with 

you, we need to level the playing field. There is a void in terms of 

leadership and we need to have leaders who will go there and fight 

to protect our U.S. industry. The books and the laws are there. We 

need to enforce it. And MEP, well, we need to send an important 

message to the administration, that it is not enough to say that we 

support small and medium sized firms. We have to provide some 

assistance, technical assistance and resources, money. And they 

cut, in this budget, they cut that money from MEP. They cut the 

money for access to capital for the 7A loan program that we were 

on the floor just fighting— 

Chairman MANZULLO. We screamed enough and both got restored. Again, thank you very much. This hearing is adjourned. 

[Whereupon, at 4:17 p.m., the Committee was adjourned.]

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Æ


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