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FULL COMMITTEE HEARING ON U.S. TRADE

POLICY AND SMALL BUSINESS

COMMITTEE ON SMALL BUSINESS 

UNITED STATES HOUSE OF 

REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

JUNE 13, 2007

Serial Number 110-29

Printed for the use of the Committee on Small Business

(

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

HOUSE COMMITTEE ON SMALL BUSINESS 

NYDIA M. VELA ́ ZQUEZ, New York, Chairwoman 

WILLIAM JEFFERSON, Louisiana 

HEATH SHULER, North Carolina 

CHARLIE GONZA ́ LEZ, Texas 

RICK LARSEN, Washington 

RAUL GRIJALVA, Arizona 

MICHAEL MICHAUD, Maine 

MELISSA BEAN, Illinois 

HENRY CUELLAR, Texas 

DAN LIPINSKI, Illinois 

GWEN MOORE, Wisconsin 

JASON ALTMIRE, Pennsylvania 

BRUCE BRALEY, Iowa 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JOE SESTAK, Pennsylvania 

STEVE CHABOT, Ohio, Ranking Member 

ROSCOE BARTLETT, Maryland 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

BILL SHUSTER, Pennsylvania 

MARILYN MUSGRAVE, Colorado 

STEVE KING, Iowa 

JEFF FORTENBERRY, Nebraska 

LYNN WESTMORELAND, Georgia 

LOUIE GOHMERT, Texas 

DEAN HELLER, Nevada 

DAVID DAVIS, Tennessee 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

JIM JORDAN, Ohio

MICHAEL DAY, Majority Staff Director 

ADAM MINEHARDT, Deputy Staff Director 

TIM SLATTERY, Chief Counsel 

KEVIN FITZPATRICK, Minority Staff Director

STANDING SUBCOMMITTEES 

Subcommittee on Finance and Tax

MELISSA BEAN, Illinois, Chairwoman 

RAUL GRIJALVA, Arizona 

MICHAEL MICHAUD, Maine 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JOE SESTAK, Pennsylvania 

DEAN HELLER, Nevada, Ranking 

BILL SHUSTER, Pennsylvania 

STEVE KING, Iowa 

VERN BUCHANAN, Florida 

JIM JORDAN, Ohio

Subcommittee on Contracting and Technology

BRUCE BRALEY, IOWA, Chairman 

WILLIAM JEFFERSON, Louisiana 

HENRY CUELLAR, Texas 

GWEN MOORE, Wisconsin 

YVETTE CLARKE, New York 

JOE SESTAK, Pennsylvania 

DAVID DAVIS, Tennessee, Ranking 

ROSCOE BARTLETT, Maryland 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

MARY FALLIN, Oklahoma

(II) 

Subcommittee on Regulations, Health Care and Trade

CHARLES GONZA ́ LEZ, Texas, Chairman 

WILLIAM JEFFERSON, Louisiana 

RICK LARSEN, Washington 

DAN LIPINSKI, Illinois 

MELISSA BEAN, Illinois 

GWEN MOORE, Wisconsin 

JASON ALTMIRE, Pennsylvania 

JOE SESTAK, Pennsylvania 

LYNN WESTMORELAND, Georgia, Ranking 

BILL SHUSTER, Pennsylvania 

STEVE KING, Iowa 

MARILYN MUSGRAVE, Colorado 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

JIM JORDAN, Ohio

Subcommittee on Urban and Rural Entrepreneurship

HEATH SHULER, North Carolina, Chairman 

RICK LARSEN, Washington 

MICHAEL MICHAUD, Maine 

GWEN MOORE, Wisconsin 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JEFF FORTENBERRY, Nebraska, Ranking 

ROSCOE BARTLETT, Maryland 

MARILYN MUSGRAVE, Colorado 

DEAN HELLER, Nevada 

DAVID DAVIS, Tennessee

Subcommittee on Investigations and Oversight

JASON ALTMIRE, PENNSYLVANIA, Chairman 

CHARLIE GONZA ́ LEZ, Texas 

RAUL GRIJALVA, Arizona 

LOUIE GOHMERT, Texas, Ranking 

LYNN WESTMORELAND, Georgia

(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page

Vela ́zquez, Hon. Nydia M. ....................................................................................... 1

Chabot, Hon. Steve .................................................................................................. 2

WITNESSES

PANEL I 

Moore, Tiffany M., Office of the U.S. Trade Representative ................................ 4

Hernandez, Israel, International Trade Administration, U.S. Department of 

Commerce ............................................................................................................. 6

Miller, W. Kirk, Foreign Agricultural Service, U.S. Department of Agriculture ................................................................................................................... 8

Ginsburg, Richard, U.S. Small Business Administration ..................................... 10

PANEL I 

Chandler, Sage, Consumer Electronics Association .............................................. 32

Seilkop, Ken, National Tooling and Machining Association ................................ 35

Caspers, Jon, National Pork Producers Council ................................................... 37

Brainard, Dr. Lael, The Brookings Institution ..................................................... 39

Griswold, Daniel T., Center for Trade Policy Studies, Cato Institute ................. 41

APPENDIX 

Prepared Statements: 

Vela ́zquez, Hon. Nydia M. ....................................................................................... 53

Chabot, Hon. Steve .................................................................................................. 55

Moore, Tiffany M., Office of the U.S. Trade Representative ................................ 56

Hernandez, Israel, International Trade Administration, U.S. Department of 

Commerce ............................................................................................................. 64

Miller, W. Kirk, Foreign Agricultural Service, U.S. Department of Agriculture ................................................................................................................... 71

Ginsburg, Richard, U.S. Small Business Administration ..................................... 77

Chandler, Sage, Consumer Electronics Association .............................................. 82

Seilkop, Ken, National Tooling and Machining Association ................................ 86

Caspers, Jon, National Pork Producers Council (and Attachments) ................... 93

Brainard, Dr. Lael, The Brookings Institution ..................................................... 114

Griswold, Daniel T., Center for Trade Policy Studies, Cato Institute ................. 121

(V) 

(1)

FULL COMITTEE HEARING ON 

U.S. TRADE POLICY AND 

SMALL BUSINESS 

WEDNESDAY, JUNE 13, 2007

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The Committee met, pursuant to call, at 10:00 a.m., in Room 

2360 Rayburn House Office Building, Hon. Nydia Vela ́zquez 

[Chairwoman of the Committee] presiding. 

Present: Representatives Vela ́zquez, Gonza ́lez, Larsen, Michaud, 

Cuellar, Moore, Clarke, Ellsworth, Chabot, Akin, Davis, and Jordan. 

OPENING STATEMENT OF CHAIRWOMAN VELA ́ ZQUEZ 

ChairwomanVELA ́ ZQUEZ. I’m pleased to call the Committee’s first 

hearing this session on U.S. trade policies to order. 

The country is currently facing many decisions concerning how 

we engage in global trade. New international commitments are 

being considered, such as free trade agreements with countries in 

Latin America and Asia, as well as with World Trade Organization 

members. 

Congress is also considering reauthorizing the President’s trade 

promotion authority which expires this month. Further, new resources are being proposed to help Americans adapt to global market integration through the reauthorization of the Trade Adjustment Assistance Act. 

Designing this nation’s trade strategy should incorporate a key 

source of competition and innovation in international markets and 

small businesses. U.S. businesses have experienced mixed results 

as our economy has become integrated with those of foreign countries. Benefits from these changes include increased availability of 

foreign goods and vast new markets for businesses to access. Since 

2002, however, the nation’s annual trade deficit has been rising to 

unprecedented levels, growing over 15 percent per year. This imbalance is largely attributed to a flood of imports which has resulted in many U.S. industries losing their position as global leaders. 

Small businesses can help reverse some of the unfortunate 

trends caused by global integration and increase its benefits. Small 

businesses represent 97 percent of all export enterprises and dominate many industries that sell goods abroad. Entrepreneurs are 

also successful in meeting the challenges of a free market. Highly 

2

innovative, and flexible, they are capable of adjusting to the dynamic needs of consumers. 

However, these firms face barriers in maintaining a significant 

share of domestic and global markets. They are hit with higher 

costs for overseas transactions and domestic production. As a result, small business companies generate less than one third of export revenues and confront stiff competition from low-cost producers. 

Given their contributions, it is critical that small businesses are 

considered in this nation’s trade strategy and that obstacles to 

their competitiveness are removed. The first step is to incorporate 

their interests in the negotiation and implementation of trade policies. It is not enough for trade commitments to open markets. They 

must also be accessible for all U.S. businesses. 

Prioritizing small businesses in regional and world trade agreements requires mandated market access to the sectors in which entrepreneurs participate. It also involves providing trade facilitation 

measures and ensuring information is available to cost effectively 

market and transfer goods abroad. 

As unfair trade practices continue, such as intellectual property 

violations, and import dumping, U.S. enforcement must be 

strengthened, harmonizing rules and fairly enforcing them helps 

level playing fields for small firms. Addressing unfair trade balances such as the U.S.-China deficit which increased by 12 percent 

since March ensures small businesses remain competitive, both 

globally and at home. 

A comprehensive trade strategy must ensure that as we open our 

doors to foreign competition our firms remain strong. U.S. trade 

policies should create a modern framework that ensures businesses 

can access markets freely. Domestic assistance programs such as 

those administered by the federal agencies here today are key components of this framework. Related assistance such as that contained in the National Export Strategy and the Trade Adjustment 

Assistance Program will ensure small businesses can take advantage of new markets. 

Small firms play a crucial role in promoting the global competitiveness of our country’s industry. Including them in the process of 

developing U.S. trade strategy will support the growth of this nation’s economy as well as reduce the trade deficit. Effective policies 

and enforcement will ensure this nation remains the global leader. 

By doing so, we will make sure the benefits of trade are more widely distributed to not only businesses, but also to more of our nation’s communities. 

I now recognize Ranking Member Chabot for his opening remarks. 

OPENING STATEMENT OF MR. CHABOT 

Mr.CHABOT. Thank you, Madam Chairwoman, and thank you for 

holding this important hearing on the impact of United States 

trade practices on small businesses. I’d like to welcome our distinguished panel of witnesses, especially Ken Seilkop, who is a constituent of mine, and a small business owner back in the greater 

Cincinnati area. One of the responsibilities of this Committee is to 

examine efforts to increase small business access to global markets, 

3

including initiatives to reduce excessively burdensome administration and legal requirements, promote free markets, support market-oriented reforms and determine how current programs are 

working or whether change is needed. 

Our economy is robust and the most dynamic in the world, partly 

because we are so engaged in global trading. Exports generate economic activity that boosts our entire domestic economy. And exports create jobs, good paying jobs, and across a very diverse portfolio of sectors which increase prosperity throughout our states and 

communities, supplement the revenue base and fund critical local 

improvements. 

Exporting is big business for small firms. In Ohio, for example, 

trade supports 1.2 million jobs or 18.3 percent of all Ohio jobs, 

many of which are export driven. Trade, particularly, benefits 

Ohio’s small and medium size companies. In 2004, 88 percent of all 

Ohio exporters were small or medium size firms. In addition, U.S. 

small businesses need imports of raw materials, capital goods and 

industrial products used to manufacture goods here in the United 

States to remain competitive. 

This year, Congress may consider four pending free trade agreements or FTAs and we have the opportunity to work in a bipartisan way to accomplish renewed trade promotion authority which 

will be essential to complete Doha Round. These efforts will help 

to reduce trade barriers and to ensure open markets to American 

products for all businesses, but especially for small companies that 

need the stability of negotiated agreements to create new trade in 

agriculture, manufacturing, and services. And I hope that the Office of the United States Trade Representative focus on WTO enforcement cases including on intellectual property and subsidies 

will help large and small businesses here at home to compete fairly. 

The federal government assists small exporters through a number of programs, but studies indicate that few exporting manufacturers rely on government programs for export sales assistance. A 

recent National Federation of Independent Business poll showed 

that just 9 percent relied on the Department of Commerce’s International Trade Administration for help, and only 4 percent contacted the Small Business Administration. Our barriers for small 

and medium size businesses that trade remain. 

The potential for small firms who export and import is almost 

limitless. I strongly support free trade agreements and believe we 

must do all that we can to help America’s small businesses, the 

generators of jobs and the engine of our economy to remain competitive and to grow through trade. However, in our very tight 

budget environment, I’m somewhat skeptical about funding increases for federal programs, so I look forward to hearing from our 

panel of expert witnesses about new and innovative ways we can 

expand trade relations and keep our small businesses competitive. 

Madam Chair, I yield back the balance of my time. 

ChairwomanVELA ́ ZQUEZ. Thank you, Mr. Chabot. And now we 

have our first panel and I welcome you for being here this morning 

and I thank the other witnesses who will participate in the second 

panel, some of them who traveled from long distance to be here 

this morning. 

4

Our witness is Ms. Tiffany Moore. Ms. Moore is the Assistant 

U.S. Trade Representative for Intergovernmental Affairs and Public Liaison at the Office of the U.S. Trade Representative. She leads 

domestic average efforts to state and local governments, the business and agriculture communities, labor, environmental, and consumer goods. 

Ms. Moore, you have five minutes to make your presentation. 

STATEMENT OF TIFFANY M. MOORE, ASSISTANT USTR FOR 

INTERGOVERNMENTAL AFFAIRS AND PUBLIC LIAISON, OFFICE OF THE U.S. TRADE REPRESENTATIVE 

Ms.MOORE. Thank you very much, Madam Chairwoman and I 

appreciate the opportunity to participate in today’s hearing. 

Office of the USTR or the Office of the U.S. Trade Representative 

is responsible for developing and coordinating international—

ChairwomanVELA ́ ZQUEZ. Ms. Moore, can you bring the microphone closer to you? 

Ms.MOORE. Is that better. Thank you. The Office of the U.S. 

Trade Representative is responsible for developing and coordinating U.S. international trade policy. Our work aims at increasing 

exports by expanding market access for American goods and services abroad and securing a level playing field for American workers, farmers, and businesses of all sizes in overseas markets. 

Simply put, USTR negotiates, implements, and enforces trade 

agreements and works with our partner agencies, many at the 

table here today, to help small businesses walk through those markets. Small business is truly the backbone of the U.S. export portfolio. American small businesses benefit when we expand U.S. access to consumers and households abroad who want to buy and 

enjoy U.S. products. In fact, 97 percent of all U.S. exporters are 

small businesses accounting for more than a quarter of U.S. goods 

exports. Even the smallest of U.S. businesses are big players in 

global markets. According to the Department of Commerce, more 

than two thirds of U.S. exporters had fewer than 20 employees. 

Under the leadership of Ambassador Susan C. Schwab, the Office 

of the U.S. Trade Representative is committed to reducing trade 

barriers so that American small businesses can succeed in the 

world market. The Department of Commerce and USDA work to 

make sure that small business is trade ready. 

Our trade agenda is uniquely attune to helping small businesses 

by lowering the cost of selling to customers overseas, minimizing 

risks in foreign markets, insisting on intellectual property rights 

protection and enforcement, and protection for U.S. investors and 

small business owners by promoting the rule of law. 

Small and medium size businesses have great potential for exporting their sales overseas, but the costs of doing business overseas if often too high for small firms. As a 2004 Small Business Administration report found, for those companies who wished to take 

advantage of the international market place, the large, fixed costs 

associated with exporting are so high that they serve as an impediment and in fact, serve as a barrier to exporting. 

Small businesses need markets to be open and easy to navigate 

which is why the U.S. has concluded free and fair trade agreements around the world. Where large companies can take on the 

5

financial burden, manage their risk, and employ the necessary 

human capital to create new export opportunities abroad, small 

business owners frequently do not have these resources. 

The U.S. trade agenda is crafted to meet this challenge by further honing American competitiveness by ensuring access to foreign markets for our goods and services, ensuring our manufacturers have access to the world’s inputs and that our consumers have 

access to the best available products. USTR has pursued this agenda on three mutually conducive tracks including global negotiations 

within the World Trade Organization, regional and bilateral free 

trade negotiations with numerous partners, and stewardship of the 

multi-lateral trading system through establishment and enforcement of an agreed-upon set of rules. 

Impediments to small business are addressed further in my written testimony, however, I would note that our multi-lateral negotiations and free trade agreements address the needs of small business by opening markets, eliminating non-tariff barriers such as licensing and Customs procedures, reducing transaction costs, increasing transparency, and enforcing intellectual property rights. 

To be clear, trade agreements are our single best tool for creating 

a level playing field for U.S. small business by addressing all of 

these barriers. Within the negotiations at the World Trade Organization and the Doha Round, breaking down barriers in a multi-lateral setting among 150 member countries will create the greatest 

benefit in easing the cost of doing businesses for small businesses 

that sell abroad and use inputs from partners around the world. 

Within our bilateral and regional trade agreements, free trade 

agreements concluded by the United States represent the gold 

standard across the globe as our free trade agreements level the 

playing field for American exporters. 

This approach has netted agreements close to home in Latin 

America and Chile and with our six CAFTA DR countries and now 

with Peru, Colombia, and Panama, awaiting congressional approval 

of implementing legislation. 

It has enhanced our trading terms in Asia through agreements 

with Singapore and Australia and prospectively with a recently 

concluded FTA with Korea, our seventh largest goods trading partner. 

Additionally, it’s clear that the export that this market opening 

efforts of FTR are bearing fruit. Exports to our FTA partners are 

growing twice as fast as our exports to non-FTA countries. Additionally, FTA has implemented between 2001 and 2006, negative 

$13 billion U.S. trade surplus with trade agreement partners last 

year; and lastly, jobs that are supported by trade and goods exports 

by 13 to 18 percent higher than those not supported by exports. 

On the issue of enforcement, the U.S. trade agenda recognizes 

the pressure created from a growing and increasingly competitive 

global economy and enforcement has been and continues to be a 

critical piece of the U.S. trade agenda. I know there is a lot of mention and concern about our developing relationship with China. We 

have also devoted considerable attention to enforcement with regard to China and now that China has completed its transition as 

a member of the WTO, we have moved into a mature relationship. 

6

In the last year, we’ve brought several cases against China; last 

year, unfair Chinese charges on U.S. auto parts exports. In February of this year, we brought a case against China subsidy programs. These subsidy programs unfairly impact U.S. manufacturers, especially small businesses and their workers. Most recently, 

USTR requested two sets of dispute settlement consultations with 

China on deficiencies and intellectual property rights and enforcement and market access barriers that trade in books, music, videos, 

and movies. 

I would also note that the United States was the first country 

to initiate a WTO disputes settlement against China and for all of 

these high profile disputes of the WTO against China, there are 

numerous enforcement priorities that are being achieved through 

quiet and on-going bilateral mechanisms such as joint commerce 

and Joint Committee on Commerce and Trade and the Strategic 

Economic Dialogue. 

We have a unique and historic opportunity for the trade agenda 

still ahead and we look forward to working with the Congress in 

that endeavor. With pending FTAs, with Peru, Colombia, Panama, 

and Korea, and also the bipartisan deal which opens the door for 

an extensive trade promotion authority, it’s important that we 

work together with the Congress. 

To conclude, trade is good business for America’s small businesses and producers and we are committed to leveling the playing 

field. Thank you. 

[The prepared statement of Ms. Moore may be found in the Appendix on page 56.]

ChairwomanVELA ́ ZQUEZ. Thank you, Ms. Moore. 

Our next witness is Mr. Israel Hernandez. Mr. Hernandez is the 

Assistant Secretary for Trade Promotion and Director General of 

the U.S. and Foreign Commercial Service in the International 

Trade Administration of the Department of Commerce. He overseas 

the global operation of more than 1,700 employees, both American 

and in countries staffed operating in 47 states and 80 countries. 

Welcome. 

STATEMENT OF ISRAEL HERNANDEZ, ASSISTANT SECRETARY 

FOR TRADE PROMOTION AND DIRECTOR GENERAL OF THE 

U.S. AND FOREIGN COMMERCIAL SERVICE, INTERNATIONAL 

TRADE ADMINISTRATION, DEPARTMENT OF COMMERCE 

Mr.HERNANDEZ. Madam Chairwoman, Members of the Committee, thank you for the opportunity today to discuss International Trade Administration’s efforts to strengthen and support 

American small business and I would ask that my written testimony be submitted for the record. 

American small and medium size companies are at the heart of 

our programs in the International Trade Administration and in the 

U.S. and foreign commercial service, particularly the one which I 

cam privileged to lead. In my 20 months on the job, I have met 

with hundreds, if not thousands, of small companies in our domestic and overseas offices that you just mentioned and our call centers that we have here in Washington, our web reporter which 

reaches thousands and gets over a million hits, our partnerships at 

7

the state and local level and the private partnerships and our 

inter-agency collaboration are all directed to help small and medium size companies succeed in overseas markets, and given the 

competitive pressures in today’s global economy, I believe our mission has never been more important. 

U.S. exports are at an all-time high. We have never exported 

more than we do today. In 2006, exports grew faster than imports 

and accounted for a growing share of the U.S. economy. Export 

growth is most impressive in major emerging markets such as 

China, India, and Brazil, and the markets of our new FTA trading 

partners. 

Small businesses alone account for the 7 percent increase in the 

number of exporters in 2002. We have 14,000 new small and medium size companies that export, that never exported before. A 

major reason for this good news is that there has never been a better time to export. A growing consumer class that is developing 

around the world, new trade agreements, technology, and new business services are making exporting viable for small companies. 

Free trade agreements are particularly important because it democratizes international trade. It allows small companies to now 

enter the playing field like large companies and they benefit from 

reduced tariffs, enhanced rule of law, and transparency to cut regulatory red tape. Technology, and specifically, e-commerce is a powerful factor that helps small companies reach out into the world 

with over one billion potential customers on line today. 

And improvements in the global services from companies like 

FedEx and UPS are also making trade easier. The commercial 

service is doing its part to help American companies take advantage of all these trends and I want to briefly touch on a few highlights. Last year, the U.S. and foreign commercial service helped 

12,000 export successes worth $32 billion. Our export specialists in 

Harlem, in our office in Kenya, were instrumental in helping a 

company, Leviathan, sell four large trucks in Djibouti valued at 

$250,000 and for them, it was a big sale. 

In our fiscal year 2006, our advocacy center successfully completed a record $39 billion of U.S. contents in support of U.S. bids 

on major projects. The first half of this year in fiscal year 2007, the 

United States Department of Commerce has conducted 11 trade 

missions with hundreds of U.S. companies including small and medium size that attended these trade missions. 

In addition, we have supported 15 certified trade missions by cities and mayors, by governors and states, in groups like the National Association of Women Business Owners. But despite the 

good news, tens of thousands of small and medium size companies 

throughout the United States that could potentially export their 

product or services are not. The challenge for everyone in this room 

is to raise the awareness on Main Street USA and how do we convince a company who never before has strategically thought about 

exporting to get into the game and to understand what resources 

are available to them. 

Many companies have never thought about strategically exporting and still many today hold outdated notions that there are risks 

and difficulties to exporting much like years before but the climate 

has changed. Many are also not aware of healthy economic growth 

8

in regions all around the world, and many, simply put, have no 

idea where to start or how to start. 

Our plan for addressing this challenge is outlined in the National 

Export Strategy. The goal is to deepen and to broaden our strategic 

partnerships with state and local governments, US trade associations and corporations that provide export-related services like 

FedEx and UPS and strategic partners like eBay and Google, PNC 

Bank, and Imaging Bank where we’re reaching thousands more 

companies than we would otherwise. 

We also have a plan called a 50-50 plan where we reached out 

to all 50 Mayors, all 50 Governors, the Mayors of the 50 largest cities and over 50 trade associations, encouraging them to work with 

us to lead trade missions or to conduct trade seminars. In May of 

this year, we came here to Capitol Hill and we invited all Members 

of Congress and staff to join us for a forum and to host it so that 

we can have trade seminars in your Districts and we have over 80 

attend this conference here on Capitol Hill. 

We are doing this because we know that small businesses are the 

backbone of our nation’s prosperity and as businesses grow, they 

also create more jobs. We have, and we will continue to work to get 

more companies to enter into the global marketplace and the commercial service is the premiere front-line trade agencies that help 

companies enter foreign markets and understand opportunities 

that are out there for them. We take our mission very seriously. 

We’re very passionate and we have an unwavering commitment in 

fulfilling this challenge. 

Madam Chairwoman, this concludes my prepared statement and 

I’ll be pleased to answer any questions following the testimony of 

my colleagues. 

[The prepared statement of Mr. Hernandez may be found in the 

Appendix on page 64.]

ChairwomanVELA ́ ZQUEZ. Thank you, Mr. Hernandez. 

Our next witness is Mr. Kirk Miller. Mr. Miller, is the General 

Sales Manager in the Foreign Agricultural Service of the U.S. Department of Agriculture. He oversees the Foreign Agriculture Service Export Promotion, Marketing and Trade Analysis, Export Credit Programs and USDA Food Aid activities. 

Welcome, sir. 

STATEMENT OF W. KIRK MILLER, ASSOCIATE ADMINISTRATOR 

AND GENERAL SALES MANAGER, FOREIGN AGRICULTURAL 

SERVICE, U.S. DEPARTMENT OF AGRICULTURE 

Mr.MILLER. Good morning, Madam Chairwoman, and Members 

of the Committee. I appreciate the opportunity to discuss the U.S. 

Department of Agriculture’s export assistance efforts for small 

business. The Department, through the Foreign Agricultural Service, works diligently to help small-scale U.S. producers, processors 

and exporters compete in agricultural trade. 

In addition to our Washington-based staff, the Agency maintains 

a network of more than 70 offices overseas that provide critical 

market and policy intelligence, respond quickly in cases of market 

disruption and represent all of our interests in consultations with 

foreign governments. Trade continues to be critically important to 

9

the long-term economic health and prosperity of the American food 

and agricultural sector. Roughly 20 percent of U.S. agricultural 

production is exported. And with productivity increasing faster 

than domestic demand, 95 percent of the world’s consumers living 

outside the United States, it’s clear that access to export markets 

is essential for the continued vitality of this important sector. The latest USDA export forecast of $77.5 billion for Fiscal Year 

2007 means that the U.S. food and agricultural community is on 

track for its fourth consecutive year of record exports. USDA estimates that U.S. world market share is almost one fifth of world agricultural trade. This is particularly impressive when you consider 

that the size of the world agricultural trade pie has doubled since 

1990. U.S. agricultural trade benefits the entire U.S. economy. In 

2005, which is the last year for which we have official data, each 

farm export dollar stimulated another $1.64 in business activity. So 

the 2005 export figure of $62.9 billion produced an additional 

$103.2 billion in economic activities. 

Agricultural exports also supported 806,000 full-time jobs, including 455,000 in the nonfarm sector. Our core objective in FAS continues to be the expansion and maintenance of overseas opportunities for U.S. agriculture. To do this, FAS focuses its activities in 

three areas. First, we work to expand market access through the 

negotiation of new bilateral, regional, and multi-lateral trade 

agreements that lower tariffs and reduce trade impediments. FAS 

provides the critical analysis, policy advice and a voice at the negotiating table to help ensure U.S. agriculture achieve substantial 

benefits in trade negotiations. 

Our activities to maintain existing market access continue to 

grow in importance. We monitor foreign compliance with trade 

agreements and coordinate with other trade and regulatory agencies to develop strategies to avoid or reverse trade disruptive actions. That may involve using the extensive expertise of other parts 

of the U.S. Department of Agriculture, or other U.S. non-government agencies, many of which are at the table here today, to resolve complex technical issues that restrict trade. It may be something simpler like educating U.S. exporters about a country’s new 

labeling requirements. 

Our third area of emphasis is trade development. The congressionally authorized market access program plays an instrumental 

role in our effort to assist American producers and processors in 

competing internationally. All companies receive funding from FAS 

on a cost-share basis through non-profit trade organizations and 

four state regional trade groups comprised of State Departments of 

Agriculture. 

Each partnerships combine the resources of the private sector 

and the State Departments of Agriculture with program and financial of USDA to expand exports of U.S. agriculture products and to 

educate companies in export marketing. This program has helped 

small businesses succeed in the export arena. Total export sales for 

small companies participating in the map branded program grew 

from $218 million in 2001 to $492 million in 2005. 

The small number or, excuse me, the number of small companies 

reporting that their export sales had grown more than 20 percent 

doubled during the 2001 to 2005 time period, going from 134 to 

10

322. We have first-hand knowledge of how the map program has 

helped small businesses. As a matter of fact, Aladdin Bakers, Inc., 

based in Brooklyn, New York, in the Chairwoman’s District, successfully leveraged support from a state regional trade group and 

the map branded program to develop its export markets. 

Before participating in the program, the company had minimal 

sales in Canada. Now according to Paul Kasdindorf, the firm’s vicepresident of sales and marketing, we estimate in the next year will 

have a million dollars in sales to Quebec alone. The company has 

also started to exporting to other countries, including the Dominican Republic. 

Another way that we help small businesses, including—excuse 

me—another way we help small businesses is by sponsoring their 

participation in trade missions. Since 2003, FAS has sponsored 11 

trade and investment missions. Within the past 12 months, I personally have led two of them; one to Georgia last year, and just last 

month one to Azerbaijan. The mission to Georgia had six companies that were looking at business opportunities, but were concerned about risk, but as a result of the trip, two companies have 

announced business deals. Nine U.S. companies joined me in Azerbaijan last month. They met with the Azeri government officials 

and prospective business partners and exhibited their products at 

a trade show in Baku, Azerbaijan. Madam Chairwoman, in just the next 60 minutes, about $7.8 

million in U.S. agricultural products—grains, oil seeds, cotton, beef, 

poultry, vegetables, snack foods, you name it, will be consigned for 

export to foreign markets. That’s what this nation’s producers and 

processors export on average every hour, 24 hours a day, 365 days 

a year to more than 180 countries around the world. A growing 

proportion of that is coming from our nation’s small businesses. 

As small businesses look to the growing export market in addition to the maturer domestic market, we must make sure that the 

opportunities to take advantage of these markets are there. 

Madam Chairwoman, that concludes my testimony. Thank you. 

[The prepared statement of W. Kirk Miller may be found in the 

Appendix on page 71.]

ChairwomanVELA ́ ZQUEZ. Thank you, Mr. Miller. 

Our next witness, Mr. Richard Ginsburg. Mr. Ginsburg is the 

Acting Assistant Administrator for International Trade of the U.S. 

Small Business Administration. He administers the Agency’s international finance programs and outreach assistance centers across 

the country. 

Mr. Ginsburg, you will have five minutes and without objection, 

your entire testimony will be entered into the record as well as the 

other witnesses. 

STATEMENT OF RICHARD GINSBURG, ACTING ASSISTANT ADMINISTRATOR FOR INTERNATIONAL TRADE, U.S. SMALL 

BUSINESS ADMINISTRATION 

Mr.GINSBURG. Thank you. Chairwoman Vela ́zquez, Ranking 

Member Chabot, and Members of the Committee, thank you for inviting me to testify about SBA’s Office of International Trade and 

the work we are doing to promote, assist, and train small busiVerDate 0ct 09 2002 10:11 Jan 08, 2008 Jkt 033615 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\36104.TXT LEANN
11

nesses as they grow into the international marketplace. It is a 

pleasure to appear before you today to speak about what I believe 

is one of the most exciting programs in SBA, and one of the most 

promising areas for U.S. small businesses, international trade. 

International trade is rapidly increasing in importance for the 

U.S. economy. In 2006, the U.S. experienced a record level of exports—$1.5 trillion. Millions of jobs are associated with international trade. Small business is a big part of this, accounting for 

$375 billion of exports, more than $1 billion a day. 

International trade, exports plus imports, is now so important to 

the U.S. economy that it is equivalent to 28 percent of GDP, the 

highest level in modern history. Last year, exports grew four times 

faster than the economy as a whole, continuing a trend that began 

earlier in the decade. This means that as America’s economy pie 

grows, the international trade share is getting larger. The bottom 

line is this—exporting is the new growth market for small businesses. 

As an international office in a domestic agency, the Office of 

International Trade is able to work with the rapidly growing number of U.S. small business exporters and support the government’s 

international commercial policy objectives. OIT’s policies benefit domestic business concerns, international trade and economic policy 

and even the nation’s diplomatic interests. As the international office of the Government’s Small Business Agency, OIT is often expected to go beyond direct assistance to individual small businesses 

and participate in government-wide activities that contribute to 

U.S. international, commercial trade and economic policies. 

With small business accounting for almost 30 percent of total 

U.S. exports, SBA’s perspective is increasingly recognized as crucial 

to U.S. international trade, economic and diplomatic concerns. In 

addition to providing assistance to small businesses, SBA often 

complements the roles of other agencies, such as the Departments 

of Commerce and State. Ultimately, however, all U.S. international 

affairs efforts, whether carried out on a small scale in OIT or on 

a larger scale in the State Department, serve just one domestic 

beneficiary—the citizens of the United States. 

SBA is also an original member of the Inter-agency Trade Promotion Coordinating Committee, as well as a member of the President’s Export Council. The purpose of the TPCC is to coordinate 

the export promotion and financing activities of the U.S. government and develop a government-wide strategic plan for carrying 

out such programs. Small businesses are typically at a competitive 

disadvantage, with large or multi-national companies when it 

comes to trading internationally. 

They do not have foreign affiliates, dedicated international departments, legal staffs, or economies of scale. Therefore, SBA and 

Commerce’s International Trade Administration both focus on a 

system small and medium-sized businesses to reach export markets. Technical assistance with respect to participating and international market is a key component of our service delivery. This includes one-on-one counseling by U.S. Export Assistance Center personnel, export technical assistance partnership training, as well as 

informational and training material via the web. 

12

Through its trade finance programs, SBA helps exporters carry 

out their export transactions. Under the Export Working Capital 

Program, which finances the short-term export working capital 

needs of small businesses, loans could be made for single transactions or multiple deals under revolving line of credit. SBA can 

guarantee up to 90 percent of an EWCP loan. We also oversee the 

International Trade Loan Program for long-term financing, and export express which reduces paperwork and streamlines the application and review process for EWPC loans of up to $250,000. 

In 2004, SBA and the Export-Import Bank entered into a memorandum of understanding to establish a co-guarantee program for 

export work in capital loans, extended by financial institutions to 

small businesses engaged in exporting. By complementing each 

other, both agencies have achieved improved efficiencies, better 

customer service, and increased productivity benefiting small biosciences. We work closely with the USTR to provide a small business perspective for bilateral and multilateral trade negotiations 

and represent U.S. small business concerns at the Asia-Pacific Economic Cooperations Annual SME Ministers meeting, and its staff 

level SME working group. 

OIT works closely with the State Department and others to advance the summit of the Americas process. OIT is also committed 

to developing relationships that can help promote and facilitate 

small business trade. The goal of these efforts its to bring U.S. 

small businesses together with potential partners in the international marketplace. For example, OIT manages strategic alliances with foreign governments small business agencies, such as 

those of Mexico, Brazil, Chile, China, and Korea. The focus of these 

relationships is creating and facilitating opportunity for small business trade. 

Since I know my time is limited, I would just mention that the 

written statement, which I submitted to the Committee, highlights 

a number of the OIT accomplishments for Fiscal Year 2006. On the 

service delivery side of our operations, we expect to see an increased demand for U.S. exports and for small business demand for 

SBA’s export programs. Our goals are to respond to this trend by 

approving our export finance products. 

We will continue helping represent the United States at multilateral international organizations concerned with small business 

international trade. We also anticipate taking a more prominent 

role in the industry trade advisory committee, including Commerce’s Small Business Advisory Committee. 

Specifically, SBA, through the Office of International Trade will 

continue its mission to encourage, support, and manifest both the 

increasing number of small businesses going global, and their successful export transactions through SBA’s credit and technical assistance programs. Thank you for the opportunity to testify before 

the committee today, and I do look forward to answering any questions that you may have. 

[The prepared statement of Mr. Ginsburg may be found in the 

Appendix on page 77.]

ChairwomanVELA ́ ZQUEZ. Thank you, Mr. Ginsburg. 

13

Ms. Moore, I would like to address my first question to you, not 

my colleague here. In my opening statement, I make reference to 

the fact that 97 percent of all exporters are small businesses. And 

yet, they generate less than one-third of export revenues. I would 

like to ask you, I know there are 22 Assistant U.S. Trade Representatives, but none are dedicated to small business concerns. 

Can you explain that? 

Ms.MOORE. Thank you for the opportunity to answer. I think 

that the issues of small business are very cross-cutting within 

USTR, and so there are several different offices that are able to facilitate in reducing those trade barriers. We have an industry office 

that works on tariff barriers, of course, and then we have intellectual property rights. So while we are able to harness all of their 

expertise to make sure that we are looking out for small business, 

given its cross-cutting nature, we like the opportunity to pull folks 

from all around the building. 

With regard to our negotiations and free trade agreements, I 

think I’ve mentioned—I may have mentioned in my testimony how 

larger companies are able to kind of finagle their way around regulations or have a human capital to try to get into new markets. The 

opportunities in our free trade agreements allow is for us to create 

a level playing field when it comes transparency, opening new markets, which are a specific assistance to small businesses that may 

not have those resources. 

So we believe at USTR that we have the capacity to make sure 

that we addressing small businesses, and we also take every opportunity to talk with small businesses. We work very closely with the 

Department of Commerce, within their International Trade Advisory Committees, specifically ITAC 11, to make sure that we are 

getting input on our trade agreements for small business. 

ChairwomanVELA ́ ZQUEZ. Okay, I hear you. So you don’t feel that 

given the important role that small businesses can play in our 

economy by exporting our goods, you don’t feel that the there 

should be a person, at the USTR official to be the voice of small 

businesses? 

Ms.MOORE. I believe given the importance of small businesses to 

our export portfolio that it should take the resources of everyone 

at USTR to pitch in and support. 

ChairwomanVELA ́ ZQUEZ. Can you explain why USTR previously 

employed a staff member to identify small business trade position. 

Is this position currently filled? 

Ms.MOORE. It’s not currently fulfilled. The person that had that 

position—

ChairwomanVELA ́ ZQUEZ. When will it be? 

Ms.MOORE. Actually, we’re working with our colleagues at the 

Department of Commerce and also SBA to see if we could find 

someone and use the talent within the Foreign Commercial Service 

to see if we can get someone within their core to specifically address the issues since they’ve actually been in country—

ChairwomanVELA ́ ZQUEZ. Are you going to do that before we finalize trade agreements that are pending? 

Ms.MOORE. I’m hoping very much that we can find someone as 

soon as possible. 

14

ChairwomanVELA ́ ZQUEZ. Mr. Ginsburg, the SBA has established 

agreements with small business officials in other countries. In 

what specific ways has the Agency followed up with these agreements? I could give you one example. The agreement with India’s 

Ministry of Small-Scale Industry. 

Mr.GINSBURG. Yes, ma’am. The strategic alliances that SBA engages with foreign countries, small business agencies, is two-fold. 

They first come to us because they want to use our best practices 

to otherwise make attempts to stimulate the development and 

growth of their own SME sector. We agree in principle to that concept because the sooner foreign country’s small businesses become 

acclimated to doing business successfully, the sooner they become 

trading partners of U.S. small companies. 

With respect to India, the agreement that we have done is that 

we are currently collaborating and bringing small business together through the embassy that we work with here, their ministry, and with our agency in bringing some people together to discuss trade opportunities. 

ChairwomanVELA ́ ZQUEZ. Okay, my question is in what specific 

ways has the agency followed up with these agreements? 

Mr.GINSBURG. Well, with all of our agreements we follow up by 

working with the foreign representatives in the commercial service 

offices of the embassies. We have our partners on foreign soil. We 

are developing—we have done video conferencing together. We 

have brought small businesses together in different forums, some 

in concert with the Department of Commerce. 

ChairwomanVELA ́ ZQUEZ. I would ask you to provide the Committee with details of this effort and updates on any new agreements. 

Mr.GINSBURG. We can do that. 

ChairwomanVELA ́ ZQUEZ. Ms. Moore, given the limited resources 

of small businesses, it is clear that they have more difficulties engaging in international transactions than their corporate counterparts. Beyond the general harmonization of Customs requirements, 

what specific provisions are included in trade agreements to ensure 

small businesses can access newly opened markets. 

Ms.MOORE. Thank you for the opportunity to answer. Specifically, first and foremost our free trade agreements and multi-lateral negotiations reduce tariffs, which actually work as an added—

pardon me—as an added tax on small businesses and U.S. products. Again, non-tariff barriers, such as inconsistent Customs procedures, lack of transparency, and burdensome paperwork, we 

work very hard within our free trade agreement to reduce that. 

Also, transaction costs. There are always a number of issues and 

paperwork again that limit the opportunity for small businesses to 

understand all that is involved in getting into an export market. 

Also, we make sure that we create greater transparency, in fact, 

to try to navigate into a new market, a lot of the regulations are 

not accessible through the website. There isn’t a one place to go 

when trying to enter these markets. So what we do within our FTA 

is to make sure that we have greater transparency. 

Another important thing that we do within our free trade agreements is increasing the respect for the rule of law, and making 

sure that U.S. small business owners have investment protection 

15

so that if they choose to take on the risk of investing or exporting 

their products that they have some protections. Also, I think one 

of the most important things for small businesses is making sure 

that their intellectual property rights are enforced and protected 

within these new markets. 

ChairwomanVELA ́ ZQUEZ. A major export barrier for small firms 

is the physical presence requirement, and this is the mandate that 

companies maintain an office within a country in order to sell to 

their market. For example, the pending trade agreement with Malaysia requires engineering service firms to be located for at least 

half of a year in the country in order to be licensed for projects. 

So this is a big burden for small companies. Can you talk to us if 

there is a way to assist these small exposure. Would the USTR 

commit to negotiating these provisions out of future free trade 

agreements? 

Ms.MOORE. Thank you for the opportunity to speak on the negotiations between the U.S. and Malaysia. Unfortunately, given time 

restrictions and the expiration of trade promotion authority, we 

stopped negotiations with Malaysia. Those were on-going and so 

the latest information probably on Malaysia was the negotiations 

that we weren’t able—

ChairwomanVELA ́ ZQUEZ. Ma’am, I used example of the pending 

free trade agreement with Malaysia, but this is true with other 

trade agreements. So my question is a general question regarding 

the negotiation of free trade agreements and a commitment that 

this provision of requiring the small companies to at least have an 

office in those foreign countries for at least six months will be our 

future trade negotiations. 

Ms.MOORE. We look forward to working with the Congress to 

look into that issue with any extension of trade promotion authority to make sure that those issues are addressed. 

ChairwomanVELA ́ ZQUEZ. And let me ask you, don’t you think 

that such a concern like that in terms of the regulatory complexities of these free trade agreements could have been prevented if 

you have a USTR representing small businesses in your shop? 

Ms.MOORE. I think we have the adequate resources to make sure 

that we’re addressing a number of issues. Again, I meet regularly 

with our small business ITAC and they raised important issues 

that we need to incorporate in our negotiations. They have the 

privilege of being able to look at the U.S. text, the actual foreign 

FTA text and give us guidance and advice on changes that are necessary. 

ChairwomanVELA ́ ZQUEZ. Now I thank you. I recognize Ranking 

Member, Mr. Chabot.

Mr.CHABOT. Thank you very much, Madam Chair, and I’ll begin 

with you, Ms. Moore, so if I can. Congress has the opportunity to 

renew trade promotion authority this year. How optimistic are you 

that Congress is going to be able to accomplish that and how important is it that we do that? 

Ms.MOORE. Thank you for the opportunity to answer. Trade promotion authority is something that’s extremely important, especially within our negotiation portfolio. I would note that we have 

been able to negotiate free trade agreements since 2001 and the 

16

FTA partners that we have had since 2001, we actually have a $13 

billion trade surplus, so if we’re looking at opportunities to address 

perhaps trade deficits, our FTAs are one of the ways that we can 

address that. 

Without trade promotion authority we are unable to begin or continue negotiations, an extension of trade promotion authority will 

be extremely important if we find a way for it on Doha. It’s the 

best way to bring benefits to small businesses if we’re able to negotiate tariff reductions with all 150 members of the World Trade Organization. If we sought to start new negotiations with the countries, we would not be able to unless there’s an extension of trade 

promotion authority and I would note that most Presidents have 

had some form of trade promotion authority since 1974 and every 

President and every Administration seeks and wants trade promotion authority. 

Mr.CHABOT. Thank you, and let me follow up with one other 

question with you, if I can. In his testimony, in his written testimony that I’ve already had an opportunity to review, one of the 

witnesses on the next panel who I mentioned before, Mr. Seilkop 

from my area in Cincinnati, Ohio, he addresses the challenges of 

competing against Chinese manufacturers and we’ve had an opportunity to speak, he and I, about this issue, both in my office and 

back at his business back home and about this many times. 

And I think his view is shared by many other small manufacturers and other folks around the country. Could you tell us what 

USTR is doing or will do in the future to vigorously monitor China 

to ensure that it abides by its trade agreements and WTO obligations? 

Ms.MOORE. Yes, thank you for the opportunity to answer. As 

many know, China acceded to the World Trade Organization in 

2001. After five years in the WTO, the United States conducted a 

top to bottom review of China’s commitments that they made during the accession to see where they were. In the areas where there 

were progress, we encouraged more progress. In the areas where 

there weren’t, we were not afraid to use the dispute settlement 

process within the World Trade Organization and I think you’ll 

find in the last year, in the areas where negotiations and bilateral 

discussions were not fruitful, we have been very vigorous in taking 

several cases to the WTO and I would add the United States was 

the first country to actually take a case against China. 

We have several in the area of subsidies, which I think is probably what is of concern to small businesses. We have begun dispute 

settlement consultations with the Chinese, specifically on import 

substitution subsidies and export subsidies. In one case, in one 

facet, just bringing the case against China, have them eliminate 

one of the nine subsidies that we have understood and the WTO 

sees as inconsistent and not WTO compliant. So we will continue 

to go after these subsidies and we will continue to go after China. 

Mr.CHABOT. Thank you. Mr. Hernandez, if I could turn to you in 

the time I have remaining. In your experience, what elements of 

trade policy have the greatest positive impact and what’s the best 

way to eliminate trade barriers? 

17

And secondly, you mention that free trade agreements are particularly important for small businesses. Could you elaborate on 

why they’re so critical to small businesses? 

Mr.HERNANDEZ. Yes, thank you so much for the opportunity to 

speak on that. I think when you speak about an opportunity for a 

small company to enter into a new market, there’s a lot of concerns 

for small companies, first of all, if they do decide to enter into a 

new market, one of the great advantages we in the federal government have provided is with a free trade agreement no longer due 

to rules changed, where they have to figure out year by year what 

is it that they have to try to understand when they enter a new 

market. We democratize international trade. We provide a framework. So that means there is a greater understanding about a rule 

of law, a greater understanding about transparency. A greater understanding about how to enter this market. 

So whether you’re large or small and we see the newest growth 

is with small companies, we see them with a great product going 

to these countries, at least we in the commercial service arm them 

and educate them about these opportunities, but also in many 

ways, what is it that they have to do? How is it that they have to 

manage going into a new market? Because there’s a lot of things 

that they are going to have to worry about, first of all. There is a 

language issue. There are standards issues. There are compliance 

issues that they need to fully understand. And we in the commercial service not only hold trade seminars throughout the United 

States, but if they ever make their way into country and have a 

problem, they can contact us at the embassy about how to enter 

these markets. And if what we’re seeing is that there is a great interest for small companies to enter these, but what they want is 

a level playing field and an understanding, a clarity about how to 

do business. 

And so we in the commercial service are helping them and arming them with this type of information, but we have seen dramatic 

growth in all the free trade agreement countries that we have 

signed thus far. When you look at the free trade agreements that 

have signed thus far, and you look at the 13, they make up 7 percent. These countries make up seven percent of the world’s GDP, 

but it is 40 percent of our exports go to those countries. That 

means that countries, these companies now have a better understanding about how to do business. They’re more secure to enter 

these countries. They have a better understanding about how to do 

business and that is what we’re trying to achieve. How do we find 

a way to educate more companies about these opportunities and 

free trade agreements provide them an opportunity to enter new 

markets like never before. 

Mr.CHABOT. Madam Chair, I yield back the balance of my time. 

ChairwomanVELA ́ ZQUEZ. And now I recognize Mr. Michaud.

Mr.MICHAUD. Thank you very much, Madam Chair. One good 

thing about being in session until about 2 o’clock this morning gave 

me time to read all the testimony for today. And in reading the testimony and hearing the speakers and seeing what’s actually done 

out there, is kind of like an oxymoron as far as enforcing the agreements. They talk about helping small businesses. They talk about 

18

lifting millions of people, when you look at the Doha Round. And 

actually, the U.S. Trade Representative actually mentions the 

State of Maine in the testimony about exporting. 

Yes, it might be true that we do have some who do export, but 

the bottom line is we have lost over 23 percent of our manufacturing base in Maine because of trade policies. They qualified for 

trade adjustment assistance, but also we were able to qualify for 

the national emergency grant, Madam Chairwoman, and the national emergency grant whereas actually the Commissioner of the 

Department of Labor was asked by the U.S. Department of Labor 

to stop applying for national emergency grants because we were receiving too many because of the devastation of what is happening 

with the economy in Maine. 

Madam Chairwoman, you had mentioned about small business 

and it’s very important that we do look at small business. However, 

I can tell you talking with a lot of small businesses, the USTR has 

turned away many small businesses’ complaints because they do 

not have the staff, and there’s been regular complaints with USTR. 

I think we have to staff up the Small Business Division of the 

USTR to devote primarily for small businesses. 

The other issue that I’m concerned about and I’ll get to some of 

my questions, that this issue since they have mentioned Maine so 

much, actually, we had the Maine legislature unanimously, Republicans and Democrats, have been opposed to fast track and other 

issues dealing with what USTR is doing on trade because they 

have seen first hand what’s going on. 

The enforcement agreement, they don’t enforce. We definitely, 

when you look at the Jordan Agreement, that’s not enforceable. 

U.S. Chamber of Commerce came out strongly for the so-called deal 

because they know it’s not going to be enforced. When I look at 

small business, Madam Chairwoman, I hope that we can have another hearing like this with several small businesses and I do not 

look for the U.S. Chamber of Commerce. I was thinking if we could 

have like the United States Business and Industry Council which 

is truly small manufacturing here in this country. 

The United States Chamber of Commerce, there are multi-national corporations on their boards that has operations over India 

and China. They really don’t care about small businesses, so I 

think we’ve got to have a true representation of what’s happening 

out there in the small business—

ChairwomanVELA ́ ZQUEZ. If the gentleman would yield for a second? 

I will invite you, if you can, to stay for the second panel where 

we’re going to have small business representatives here. 

Mr.MICHAUD. Yes, no, I do plan on staying as much as I can for 

the second panel. My question to the U.S. Trade Representative is 

I don’t normally believe in outsourcing, but I have several questions. 

The first one since, there’s a lot of discussion, we’re dealing with 

small businesses, would you mind outsourcing the negotiation of 

trade deals to an organization such as the United States Small 

Business Industry Council and you can look at what they’ve agreed 

to and either agree or disagree. That’s my first question. 

19

My question is what should the trade deficit be as a percentage 

of our GDP? If you look at all the economists and they say that we 

cannot sustain the type of trade deficit that we are currently seeing. 

My third question is you had mentioned the so-called trade deal. 

Mr. Engel, Mr. Levin, said that trade deal applies only to Peru and 

Panama. It does not apply to Korea. It does not apply to Colombia. 

It does not apply to fast track. 

My question is - is that your understanding as well? 

The fourth question is under the Peru and Panama trade deal, 

the labor environmental standards is supposed to be part of the 

core text, so it’s enforceable. So how is USTR coming along as far 

as having that as part of the core text agreement. 

And my last question you had mentioned about the Doha Round, 

that’s it’s very important that we do it because that it potentially 

will help lift millions out of poverty world-wide. We heard that 

same discussion with NAFTA, that we have to pass NAFTA because it will help raise the standard of living for workers in Mexico 

and hence that will help with the illegal immigration problem 

which immigration is going to be a big issue here in this Congress. 

And if we’re not going to take care of the crux of the problem and 

the crux of the problem is workers from Mexico coming over to the 

United States so they can get a job to provide for their family, if 

that problem is not going to take care, be taken care of, then we 

can put up all the walls that want to have all the Border Patrol 

Agents that we want, but people will still try to come to the United 

States because they want to provide a living for their families. 

ChairwomanVELA ́ ZQUEZ. I will call to your attention time has expired. So I will give you another extra one and a half minutes to 

ask your—direct your question to—

Mr.MICHAUD. I’m all done, so I’d like Ms. Moore to respond. If 

not verbally, if in writing. 

Ms.MOORE. Congressman, thanks so much for the opportunity to 

answer your questions. Your fist question was about participation 

of a specific group and the negotiations of our free trade agreements. I would note that we have a very robust advisory committee 

system with over 700 advisors that include industry, labor, environment, small business, and different other sectors that eagerly 

and aggressively participate and are able to review our FTA text. 

So we welcome all the advice. And this is just the formal advice 

and consultations that we do with all stakeholders. 

Mr.MICHAUD. So in other words, you do not want to give up your 

authority to actually negotiate? 

Ms.MOORE. To give up the Executive Branch’s? 

Mr.MICHAUD. Yes. 

Ms.MOORE. I would probably suggest that the system in place, 

working with the Congress—

Mr.MICHAUD. Well, I guess the answer probably is no. And the 

reason why you don’t want to answer no is because my next question is why should Congress give up our authority under fast track? 

Can you answer the next question? 

What is the ideal trade deficit? 

ChairwomanVELA ́ ZQUEZ. Sorry for the gentleman, the time has 

expired. 

20

Mr.MICHAUD. Madam Chairwoman, if she could respond? 

ChairwomanVELA ́ ZQUEZ. In writing? 

Mr.MICHAUD. Yes. 

ChairwomanVELA ́ ZQUEZ. Without objection. 

Mr.MICHAUD. Thank you. 

Ms.MOORE. I look forward to it. Thank you, Congressman. 

ChairwomanVELA ́ ZQUEZ. Now I recognize Mr. Davis. 

Mr.DAVIS. Thank you, Madam Chairman. My first question I’d 

like to ask Mr. Ginsburg, and Mr. Ginsburg, if you could, could you 

tell me about the Office of International Trade and how it relates 

to small business firms? 

Mr.GINSBURG. Well, considering small businesses represent 97 

percent of all exporters in this country, we pay a lot of attention 

through our field network of senior international trade and finance 

specialists. We handle all the policy decisions within the Office of 

Capital Access, which is the finance division of SBA because we 

have both technical assistance as well as financial assistance programs. 

And we’re out there speaking at seminars. We certainly partner 

with our TPCC partners and our stakeholders and our state partners in sharing the information to do trade promotion to get more 

small businesses into the international marketplace. 

Mr.DAVIS. If you were a small business owner, how would you 

recommend them to do business through this agency? 

Mr.GINSBURG. We have representatives around the country. 

We’re a very decentralized agency. We have 70 district offices. We 

have 16 representatives in U.S. export assistance centers around 

the office. We have 1100 small business development centers and 

we have 389 SCORE chapters all very well versed in international 

trade and trade promotion. 

Mr.DAVIS. Are you starting to see an increase in small businesses 

in relation to working overseas? 

Mr.GINSBURG. We do. And we also see a slight increase in small 

businesses that are now doing trade in a second or a third country. 

Seventy-five percent of small businesses are typically just dealing 

in one country, so we need to increase the number of their foreign 

markets. 

Mr.DAVIS. Thank you for your answer. 

Mr. Miller, if you could, could you talk to me a little bit about 

agriculture since agriculture is so important to small business and 

domestic producers and how they remain competitive. Can you talk 

to me about USDA’s rural business opportunity grants and how 

they’re available to small farmers? 

Mr.MILLER. Mr. Davis, I really am not briefed on those rural development grants. We’ll have to provide that for the record. I really 

don’t know the answer to your question. 

Mr.DAVIS. Does anyone else have that information on the panel? 

Okay, that would be—

Mr.MILLER. I have no one with me that has that information. 

Mr.DAVIS. That would be good if you could get that to us, that 

would be good. 

And Ms. Moore, if you could talk a little bit about the U.S. Export-Import Bank and where we’re at percentage-wise right now 

what its mandates are. 

21

Ms.MOORE. Congressman, thanks very much for the question. I 

probably would need to get some information from the Ex-Im Bank 

on their portfolio and what they’re currently doing. I know that the 

head of the Ex-Im Bank had a presentation in Atlanta as part of 

the America’s Competitiveness Forum and he spoke to some of 

those issues and I can definitely follow up with your office to make 

sure that you have more information. 

Mr.DAVIS. Could you just give me a brief overview? Do you know 

enough about the program to just give me a brief overview? 

Ms.MOORE. I would probably defer to the Ex-Im Bank. They’re 

a core business and I’d hate to speak on—

Mr.DAVIS. Thank you. I yield back. 

ChairwomanVELA ́ ZQUEZ. Mr. Gonza ́lez? 

Mr.GONZA ́LEZ. Thank you very much, Madam Chair. I guess a 

couple of observations and I’ll get into a couple of questions in the 

short period of time that we have, but regarding fast track and I 

understand it’s going to be a huge issue. It expires June 30th and 

something, but the benefits of it are truly in the eye of the beholder. What you are appearing before a committee that concerns 

itself with the small business interests of America. It is institutionalized. It is our role to look out for their best interests. 

Some of us believe that fast track will diminish our ability to 

function in that representative capacity in this institution called 

the House of Representatives. That’s the philosophical difference 

that may or may not translate into reality, but it’s ever present for 

some of us on this side of the aisle. 

The other thing is this Committee truly exists because we believe 

that small businesses face unique challenges and that one size does 

not fit all. The big size doesn’t fit small businesses. Again, is this 

philosophical? Does it go into policy? I’d like to think it’s going to 

be reflected in the policies and the bills that will be marked up out 

of this particular Committee that its chief concern is small businesses. 

So I’m going to direct my first two questions to Ms. Moore and 

Mr. Hernandez, because in your testimony, to be quite honest, and 

I think Madam Chairwoman Vela ́zquez touched on it, I believe that 

you have kind of a generic approach, that is, if you help big business, it will benefit small business. If we don’t have tariffs, that 

should help all businesses. And you know, there is some logic to 

all that. If we have transparency, that will help all businesses. 

Big businesses can pretty much fend for themselves. And you can 

make it easier for them as you should. But I don’t think that it 

solves or addresses the unique challenges and problems that are inherent in small business operations. 

Ms. Moore, is there some benefit to have someone that would be 

specifically assigned to address small business consideration in 

your trade negotiations? 

Ms.MOORE. Thank you, Congressman, for the opportunity to answer. I believe the issues of small business are cross-cutting and 

I think it takes the resources of all of those at USTR to make sure 

that we are addressing the needs of small business. As you mentioned, larger companies and multi-nationals, although they benefit 

from FTAs, given the resources they have, the FTAs are, you know, 

22

helpful to them, but they’re even of more importance to small businesses. 

I was looking for some information and I look forward to following up with your office, but if you look at the increase in exports, say from the CAFTA countries where we’ve implementation, 

you see exports rising by small and medium size businesses, so 

those are the types of rewards I think that the FTAs offer with reward to increasing small business exports. 

Mr.GONZA ́LEZ. But I think if you look further, they may be increasing in numbers, but really not the size of the pie. You have 

maybe more small business being involved, but truly as far as the 

financial benefits are still being, I think, more appreciably experienced by the bigger businesses. I think that the facts and the figures will support that particular assertion. 

But getting back to the fundamental question, wouldn’t you be 

best served if you were sincerely concerned about the unique challenges faced by small businesses attempting to export their products to have someone assigned with that particular task within 

your organization, just as Congress has a committee dedicated to 

small business issues? Because we all acknowledge how instrumental they are to our economy. 

Ms.MOORE. Well, I would offer that it takes a lot of resources in 

the federal government to make sure that small businesses have 

access to markets. As I mentioned in my testimony, USTR, we open 

markets and we work with our colleagues at USDA, SBA, and the 

Department of Commerce to make sure that those companies are 

trade ready to go into those new markets. So while we consider it 

something that we do at USTR to make sure that we’re looking at 

the needs of small business, it takes all of us here at this table to 

make sure that they’re trade ready and they have the resources. 

Mr.GONZA ́LEZ. And I understand what you’re saying—and again, 

I think your approach is wrong to be honest with you. I think you 

just figure it’s going to be addressed naturally because you have 

the interest. I believe that when you have a specific assignment, 

and that individual’s whole purpose within your organization is to 

look at the impact of these negotiated treaties, which cause us a 

lot of heartburn many times because we don’t think they work in 

the best interest of small business, are all of American consumers. 

I just think you need to really re-examine that. The other thing 

I want to touch on, and Mr. Hernandez, I was hoping to get to you, 

but I was trying to confirm—because in the back of my mind, we 

always say every President has had fast track authority. Was it renewed or was it lapsed in the Clinton years and was never renewed 

by the Republican majority? 

See, I think that is factual. So we’re going to have this debate, 

but my understanding is that the Republican- controlled Congress 

did not confer fast track authority. that’s what we used to call it, 

to President Clinton, for whatever reasons. Clearly, they didn’t 

need any democratic opposition or help to make it happen. 

My time is up, Madame Chair. Thank you very much. 

ChairwomanVELA ́ ZQUEZ. Time is expired. 

Ms.MOORE. I just want to make one point, Congressman. We look 

forward to as we’ve touched on a little bit earlier, we did have 

someone from SBA within USTR detailed and we’re working with 

23

SBA and the Department of Commerce to see if we could leverage 

the expertise of the foreign commercial service to have someone 

who has actually been in those markets to assist us with the net 

portfolio. So we do look at trying to leverage resources within the 

government to make sure that we are addressing all of those needs. 

Mr.GONZA ́LEZ. Thank you very much. 

ChairwomanVELA ́ ZQUEZ. Before I recognize Mr. Ellsworth, I 

would like to ask Ms. Moore isn’t it true that the Small Business 

Exporters Association has been advocating for USTR Rep. representing small businesses? 

Ms.MOORE. We’ve actually have had a number of proposals from 

small business organizations. 

ChairwomanVELA ́ ZQUEZ. So this is one of the associations that 

represents small business exporters. They know what is needed to 

make sure that we only—that we do not only have open markets, 

but how can they benefit? How can they enter those open markets 

by having someone sitting at the table when you are negotiating 

those trade agreements that truly represent their concerns. Now I 

recognize Mr. Ellsworth. 

Mr.ELLSWORTH. Thank you, Madam Chair. I’m going to start 

with Mr. Hernandez, and if anybody else wants to jump in, feel 

free. Just looking for your opinion on a small business friendly, I 

prefer fair trade to free trade. I’m not sure free is always fair. 

Musts that we must have, if you were designing the program on 

a fair trade program that was small business friendly what would 

be some have-to bullet point things that we would have to in that 

agreement? You get the magic wand and design it. 

Mr.HERNANDEZ. Congressman, first of all, it’s good to see you 

again. Thank you for the question. Is that with respect to a free 

trade agreement? I’m sorry. If you could just clarify further. 

Mr.ELLSWORTH. Yes, free trade. I always use the fair trade because I always want it to be fair. If you were designing that, what’s 

a small business friendly free trade agreement look like? 

Mr.HERNANDEZ. With respect to free trade agreements and with 

respect to my responsibilities within the federal government, my 

real focus is small and medium-sized companies and how is it that 

they enter foreign markets. But how to design a template, I will 

defer to the agency that really focuses on creating and drafting a 

free trade agreement. What I can tell you what we do in the Department of Commerce is that we fundamentally, our whole purpose and our essence is how do we find opportunities for small and 

medium-sized companies. And the fact is that everywhere I go outside of the United States where 95 percent of the people live, where 

70 percent of the consumer purchasing power, it’s outside of the 

United States. 

The question is—the question I get asked is where are the American companies? Because wherever I go whether it is Chile, Panama, whether it’s Vietnam, whether it is China, and you go to the 

smaller cities, you find a lot of competitors from European markets, 

from all over the world. The fact is that strategically, American 

companies, when they think about growing, whether they’re in your 

State of Indiana and they want to grow their company and they 

want to go south, they can all the way down to Florida. If they 

24

want to grow, they can go all the way to California. They have the 

blessing of a domestic market that can provide growth. 

But strategically, moving forward, if you look in the Yellow 

Pages in Canada, if you’re a company in Indiana, you’re competitor 

is already in Canada. So how do we convince small companies that 

there are opportunities. Because if you exist in the most and dynamic market in the world, which is here in the United States, and 

you’re growing, there’s an amazing opportunity for you in some 

other country and we have to educate these companies about what 

they are. We have to find a way to find a new class of exporters 

and tell them look, you’re growing domestically, there’s great opportunities internationally. Reductions have gone down, there is a 

better way of doing business. You can use e-commerce, you can use 

fast delivery express service. Plus, if you ever run into a problem 

or a challenge in country, we in the commercial service are located 

at 80 embassies around the world. 

So the fact is that a small company has more opportunities than 

ever in history today. There is huge growth going on. Outside of 

the Panama Canal that is being built, outside of the free trade 

agreements today, three years with our free trade agreement with 

Chile, we’re going to expert and do more trade with Chile than we 

do with Spain. And look at the size and population—that’s dramatic. 

The provinces in China—they’re going to grow at ten percent a 

year for the next ten years. They are a growing consumer class. 

Somebody is going to service and provide a product that they need. 

Why not America? So the whole point is we need to find ways to 

constantly educate American companies about the opportunities, 

because it is outside the United States and they can grow their 

business and they can add jobs and they can benefit to their community, because there has never been a better time to export than 

today. 

Mr.ELLSWORTH. Thank you, Mr. Hernandez. I appreciate your 

passion, and Mr. Moore I will then turn to you in helping answer 

that. Besides obviously advertising to our American companies the 

opportunities out there, what other bullet point—paint the picture 

of a good free trade agreement that benefits small business here. 

How do we help these small companies? 

Ms.MOORE. Well, I think the elements of a free trade agreement 

that helps small businesses is one that eliminates duties on goods. 

Tariffs work as taxes on small business and their products that 

opens trade to agricultural products. Most companies are closed 

to—not most, but a number, are closed to U.S. agricultural products. Make sure that we could protect investments, protecting intellectual property rights, create a procedure for dispute settlements 

to make sure there is an opportunity to resolve these trade disputes. Also, providing safeguard measures for specific, sensitive, or 

different industries that require it. Also, to make sure that within 

that we’re respecting worker rights and environmental rights. 

Mr.ELLSWORTH. Thank you very much. Thank you, Madam 

Chair. 

ChairwomanVELA ́ ZQUEZ. Thank you. Ms. Clarke? 

Ms.CLARKE. Thank you very much, Madam Chairwoman and 

Ranking Member Chabot. This is a very wonderful hearing today, 

25

because I think we’re getting a true sense of the level of commitment that our federal government has to working with small business. Quite frankly, I think we’re dealing with some really fundamental issues in the American psyche that has to do with can we 

trust our government to do what is in our best interest. 

On the ground, I have to say that we’re failing. While we sit here 

and are very competent and composed about our enthusiasm for 

what the future brings on a global scale, in many communities 

throughout the United States, there is not that enthusiasms. I 

think we have an obligation to transmit that enthusiasm to the 

local communities where our entrepreneurs spring from. But to sit 

here today and say that the free trade agreements that we have 

negotiated have created a competitive edge for small business does 

not transmit to local communities such as mine in Brooklyn and 

many across the nation. 

Let me just say this. I think that we’ve danced around this issue 

about how we can best help small business. It’s very clear that the 

representatives here are giving you a lens to what we know is real. 

What we know is real within our communities, and what is real to 

them is that they don’t feel that their U.S. Trade Office is really 

focused on their needs. When we talk about using a matrix of expertise, when we can simply create a department that specifically 

focuses on those needs, that sends the appropriate signal. 

We can then go back to our communities and say you know 

what? They mean business, because they have dedicated themselves. They have allocated resources. They have more personnel to 

focus on this like a laser. 

So Ms. Moore, I clearly understand where you are coming from 

- an intellectual, academic standpoint. But we’re dealing with 

trustworthiness, and there’s a lack of trust in many of our communities today, and I hope that you will take that into consideration. 

I would like to ask a question, because I hear the enthusiasm 

about trade agreements that we are having around the world and 

the opportunities that they bring for small business. I’m excited 

about it, too. I would be even more excited about it if we could look 

at our own hemisphere and provide the same type of enthusiasm 

for entering markets in our own hemisphere that we do in other 

areas. 

The reason I bring this up is because I’m a Jam-American. My 

parents are from the Caribbean. I noticed that we have not given 

as much emphasis to the opportunities that exist in that region 

that we give to many other areas of the world. When we look at 

homeland security, when we look at some of the issues that are 

now bearing on us in the 21st century, I would like to ask just a 

couple of questions about whether first of all, in this age, Caribbean governments and societies are more conscious of trade and investments that are environmentally and socially responsible. They 

are urging free trade agreements that shift towards sustainable development. You know, the CARICOM Prime Ministers will be meeting with President Bush next week. What approaches do you suggest in order to attract foreign investments and also protect biodiversity, workers, and women’s rights and benefit small businesses and create jobs? 

Ms. Moore, Mr. Hernandez? 

26

Ms.MOORE. Congresswoman, thanks for the opportunity to answer. Actually, Secretary Hernandez and I were just in Atlanta for 

the America’s Competitiveness Forum, and one of the panels that 

I had the pleasure to sit on was on regional business opportunities 

in CARICOM and the Caribbean. One of the things that I think is 

wonderful that the CARICOM countries are doing is moving towards a single-market economy, because in fact the barriers to 

trade—they have more barriers to trade between them than necessarily to the U.S. market. 

So we look forward to the conference on the Caribbean June 

19th. I think that we’re trying to figure out ways to update a trade 

and invest—to strengthen the relationship, the trade relationship. 

We signed a trade and investment framework agreement in 1991. 

But you know, we definitely want to take the opportunity to incorporate some of the advances to increase investment. I had the opportunity to talk with some of the ministers and what they are 

doing to try to revitalize their economies there, you know, as far 

as education opportunities, services. They are really aggressively 

pushing. 

Ms.CLARKE. They are, but let’s be clear that when we don’t have 

a global view to how we actually set up trade agreements, unintended consequences happen. Due to free trade agreements that we 

have done in the past, we shut down part of economies in that region. So, you know, I think that was the opportunity to engage, to 

make sure that U.S. small businesses had an opportunity to go in 

there and to help lift those economies. We shut down many of those 

nations in very simple agreements that we made without even a 

view to our neighbors in the Western hemisphere. So I can appreciate the rhetoric, but I think that it is important that if we’re talking about a global economy, that we really—and I know that these 

nations have been reaching out. They have been crying out for our 

attention—that we really focus ourselves in a way in which we 

make sure that we don’t have these types of adverse impacts. Because you know what? Ultimately, we’re building neighborhoods 

that can be very detrimental to our safety. I think we need to put 

all of that into context. Thank you very much, Madam Chair. My 

name has expired. 

ChairwomanVELA ́ ZQUEZ. Time has expired. I know recognize Ms. 

Moore. 

Ms.MOORE. I really look forward to working with you and the 

Congress in that endeavor. 

Ms.MOORE OF WISCONSIN. Thank you, Madam. This is a very important hearing. I’ve been going nuts listening to people call you 

Ms. Moore. It’s been very, very distracting. When you called on me, 

Madam Chair, I didn’t really know how to respond. 

I want to start out with Mr. Hernandez. In your role with the 

Department of Commerce, I didn’t have the opportunity to read 

your testimony, but I do know that the mission of the Commerce 

Department really is to enforce trade laws. I am curious. When I 

look at the $800 billion trade deficit—this is a little bit beyond my 

public high school math—those zeros are just staggering. When I 

look at the trade deficit and I compare that with your testimony 

about the expanded trade relationship that we have with China 

and other places, when I look at your mission and your responsiVerDate 0ct 09 2002 10:11 Jan 08, 2008 Jkt 033615 PO 00000 Frm 00032 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\36104.TXT LEANN
27

bility to enforce our laws against anti-dumping laws, in particular, 

those laws which would prevent really a lot of imports of very 

cheap material. 

In your testimony, your pride in the expanded trade that we 

have had with China, for example, I am curious as to what the relationship, the nexus might be between a huge trade deficit of $800 

billion, these expanded trade relationships, and the fact that this 

Administration has had very, very few—provided very few complaints to the WTO about unfair trade issues. It seems to me, it 

would appear, and I’m going to allow you to respond to it, that 

there are very few complaints that are tendered against unfair 

trade practices. So is it your opinion that—there were like ten 

trade agreements, the Clinton Administration, ten a year. The 

Bush administration only has about two. So are there fewer trade 

infractions today than there have been in the past? 

Mr.HERNANDEZ. With respect to WTO questions and cases, I’m 

going to defer to USTR. But I will say that there are four units 

within the International Trade Administration. One of them is Import Administration, that they enforce U.S. unfair trade laws. They 

enforce them to make sure that we develop and implement policies 

to counter foreign unfair trade practices. But with respect to the 

United States Foreign Commercial Service, which is the bureau 

that I run, our focus is about making sure that small and mediumsize companies and all American companies have an opportunity to 

enter into these markets. 

So when you say, you know, USTR will create and navigate the 

law—I mean, a bill and the legislation when the President signs it, 

we helped implement it in the Department of Commerce. But we 

in the Commercial Foreign Service, our role is to educate companies. And how do we find a way to reach more American companies 

to export? 

The facts that we can deal with is the fact that more—we have 

more exports than ever before. Exports right now are sizzling, so 

when you talk about growth, the fact is that more American companies are growing. More American companies are exporting, and 

we have to make sure that we have the right structure within the 

commercial service to make sure that we can educate them and 

have resources for not only in the United States—

Ms.MOORE OF WISCONSIN. All right. That didn’t answer my question and my time is waning. As it relates to helping small business, 

I’m very proud of the fact that 97 percent of all exporters here in 

the United States are small businesses. But yet we still see this 

trade deficit of $800 billion because they only generated 30 percent 

of the revenues from these activities. 

Are we still—and so, of course, large corporations still have a significant advantage in the globalized economic environment. And so 

I am wondering, do you think that you have adequate resources 

through maybe Ms. Moore, maybe, you can answer this? Do you 

think that just your one department that is devoted to helping 

small businesses is adequate or do you think that there is not 

enough articulation among the various agencies, which may be indicated by Mr. Hernandez’s previous sort of non-answer to my 

question. 

Mr.HERNANDEZ. I would like to answer your question as well. 

28

Ms.MOORE OF WISCONSIN. Okay. 

Mr.HERNANDEZ. I’ll give time to Ms. Moore. 

Ms.MOORE OF WISCONSIN. All right. I’ve got to hear from Ms. 

Moore. You know that, Ms. Moore to Ms. Moore. 

Ms.MOORE. Yes, Congresswoman Moore. To answer your first 

question on cases brought by the WTO, USTR is very focused on 

results. We only want to bring cases that we can actually win. So 

that’s why we made sure that the cases that we have brought are 

sound and clearly go after WTO and consistent practices. 

With regard, I guess, if you look at the arsenal of tools that we 

have, the last one would be dispute settlement. For instance, with 

the subsidies case, we filed in late April, if we do not settle in the 

consultation phase, it’s going to take at least two to two and a half 

years to get a final ruling. So if we’re looking at helping small businesses and getting something, having them benefit by some of 

these negotiations, we want to do it sooner rather than later instead of waiting, you know, the time it is going to take within the 

WTO. But we will do that. 

I would note that in some cases it is bilateral consultations and 

bilateral discussions that we’ve been able to see some real benefit. 

For example, not in the case of a small business, but through consultations with the Chinese, we were able to create some better enforcement and protection of intellectual property rights and piracy 

through making sure that operating system software was pre-installed in Chinese computers. So that’s just one example of how bilateral conversations netted an immediate results instead of the 

dispute settlement process that takes several years. 

But we will continue to go after those who have unfair trade 

practices, but our first choice is to work through bilateral consultation so that we can get the most expedient result as possible. 

ChairwomanVELA ́ ZQUEZ. Time is expired. 

Mr.HERNANDEZ. Am I allowed to respond or no? 

ChairwomanVELA ́ ZQUEZ. You are allowed to respond. 

Mr.HERNANDEZ. So I don’t want you to think that I am not answering your question. So the first part of your question dealt with 

WTO, which I think Ms. Moore has addressed that issue. The second question you talked about was the trade deficit. Obviously, 

that is a concern for everyone. That is a concern. But what you’re 

also seeing is you have a country in the United States, a growing 

consumer. We are the best consumers in the world. We buy everything. Try to go one weekend without buying something. The fact 

is we are buying the world’s products. 

What we want in turn is for other countries to buy our products, 

and what we’re seeing is that for the first time exports have outpaced imports. Now more people, there is a growing consumer class 

going on around the world. We want them to buy American and we 

want them to buy more. So the point is more Americans can save, 

or more other people around the world can buy. We want more people to buy. 

What you’re seeing is a trend in a right direction which is our 

exports are going up, and the majority of that is also more small 

and medium-sized companies entering into the market. So the 

point is we have a growing economy in the United States. We have 

a consumer that is buying a lot, and what we want is more people 

29

outside of the United States to buy. In many ways, that will help 

address a trade deficit. Because the fact is, and this is where I am 

going to very optimistic about American small business, is we have 

an amazing dynamic small business community that has really created products and high-value products and services that are sought 

after all the world. We just have to make sure that we find a market for them and that’s what we would like to do with a commercial service. That’s my response. Thank you. 

Mr.LARSEN. Thank you, Madam Chair. I just came from a hearing in Armed Services Committee on China, from a little different 

angle than Ms. Moore has covered it, but an important angle nonetheless. And my questions are, in particular, about China. 

And, you know, there are a lot of—you have heard them, a lot 

of concerns here in Congress about the U.S. economic relationship 

with China and China’s economic relationship with the U.S. and 

who has the best advantage in that. And as a result of that, there 

is a lot of discussion in Congress about taking certain actions 

through legislation, which I think from certain perspectives I can 

have a full appreciation of from another perspective, that is a perspective of my district. 

I think it would—some of the actions being discussed would be 

detrimental, frankly, to my district. But there has to be a balanced 

approach to how we deal with this. 

One of the issues that I have been trying to struggle with, 

though, is how to encourage small and medium-sized enterprise 

business export to China. And so a group of us are putting together 

a package of bills, one of which would look at that issue. And we 

are going to be rolling out these bills, and the one I want to talk 

about in particular about is U.S.-China Market Engagement and 

Export Promotion Act, which is specifically designed to try to get 

the executive agencies to do a better job of getting small and medium-sized enterprise products and services into China. 

But as we move through that, we are still crafting the legislation, 

getting some final things in place, and I think for Mr. Hernandez 

I would like to ask you, you know, just from your perspective, with 

regards to China, what do you all think the major challenges are 

for small and medium-sized businesses to get their products and 

services into China? What do they lack, and what do you all lack? 

Mr.HERNANDEZ. Yes, sir. That is actually—thank you for the opportunity to address that. Actually, it is a very great question. I 

think that with media and communications today—

Mr.LARSEN. Most of the questions asked by members of Congress 

are great questions. 

[Laughter.] 

Mr.HERNANDEZ. Okay. Well, this is another good question. 

[Laughter.] 

And I will tell you why it is a really great question for me, because when I visit with small and medium-sized companies, they 

think because they have read all—whether what is on the cover of 

Business Week or Fortune, or they see a story, that they now want 

to export and they want to go to China. 

But, in fact, what we really need to understand, and what we 

have seen from the experience of working with small companies, 

that it really takes 12 to 18 months to educate a company about—

30

we have to work with their line of credit, we have to understand 

what their product is, we have to understand their temperament, 

and we have to understand the workforce. What is it—do they have 

the patience? Are they ready either to begin exporting? 

Our export assistance centers throughout the United States work 

with companies to make sure that we address all of those notes. 

You can’t just say, ‘‘I want to export today,’’ and then go out there. 

The burden with anyone who goes and does that is that they fall 

into a lot of challenges, and they might identify the wrong partner 

to do business with in China, in which case they are now obligated 

and they are stuck. 

They have never properly found a way to—how do they protect 

their property? How do they have a better understanding about a 

culture? Because it is not so much just, you know, an agreement 

or an understanding. It is you are dealing with a completely different culture, a different way of doing things. And so if you are 

not—if you don’t have a full understanding, then you are going to 

put yourself in a very difficult situation. 

Now, for us, we have a strong commitment to help companies 

enter into China. For us, it is the largest office within the commercial service. We have over 120 staff in country in China to help 

American companies. We also have joined in partnership to create 

American trading centers in 14 cities throughout all the provinces. 

So if an American company wants to enter these markets, they 

have someone they can contact, and talk to about what the challenges are, because with great opportunity—and there is great opportunity cost in China, there is also amazing challenges. 

And so China should not be the first country that you look to 

when you export, because you need to go maybe to Canada or Mexico or somewhere where we have a better—we figure out and test 

your product and figure out, can you do business there? China is 

very complicated. It is a little—like a little drop in a huge ocean. 

The fact is, China will always—will be there. You don’t have to 

enter that as your first market. And, in fact, that is the burden and 

challenge that we have is everybody feels with the pace that they 

have to be in China right now, or they have to be in India right 

now. 

Mr.LARSEN. Just quickly, is there a difference in the challenge 

facing a small or medium-sized enterprise getting into, say, China, 

versus a larger business who is not yet exporting there? 

Mr.HERNANDEZ. You have to be in somewhat a developed and 

mature company and have a very good understanding and have the 

flexibility to know that as far as payment, as far as the legal issues 

identifying a partner, a broker, it takes a long time. It could take, 

you know, months. And if they can’t withstand that, we really have 

to make sure they have the right temperament. 

But you are right. I mean, the great thing for a large corporation 

is they have a department to help them with these issues. We are 

the department for small companies. So in many ways what we do 

is we had a trade seminar exclusively on China in Ohio last year. 

We had 1,000 companies registered, because they are hungry for 

information about how is it they do business. 

But we went and we went section by section about how is it that 

you are structured, how are your finances, did you know about how 

31

to protect your property. We have a checklist of top 10 things you 

should do to protect your property before you even call anyone in 

China. It is called Stop Fakes, and it is on our website. And it is 

amazing, because we get more hits on that than anything else. 

The point is: we know that people are hungry for information—

small and medium-sized companies—so we are doing more trade 

seminars. We have reached out to associations, to people here on 

House and Senate, to educate more companies. 

ChairwomanVELA ́ ZQUEZ. Time is expired. 

Mr.LARSEN. Thank you. Thank you. 

ChairwomanVELA ́ ZQUEZ. We finished this round of questions. If 

there is any member who wishes to ask any questions to the witnesses before we excuse this panel? 

[No response.] 

Well, I do have another question. Mr. Hernandez? 

Mr.HERNANDEZ. Yes, ma’am. 

ChairwomanVELA ́ ZQUEZ. I just can’t help myself. 

Mr.HERNANDEZ. Go ahead. 

ChairwomanVELA ́ ZQUEZ. I am stunned—

Mr.HERNANDEZ. Yes, ma’am. 

ChairwomanVELA ́ ZQUEZ. —you know, when I listen to your flowering rhetoric regarding the important role that small business exporters play, and how can we make sure that they take advantage 

of all these open markets? 

Mr.HERNANDEZ. Yes, ma’am. 

ChairwomanVELA ́ ZQUEZ. So let me ask each one of you, you are 

going to leave a staff person here to listen to the second panel witnesses? 

Mr.HERNANDEZ. Yes. 

ChairwomanVELA ́ ZQUEZ. Okay. Because in the second panel we 

are going to have some businesses who are saying that small businesses depend upon access to technology to support innovation and 

maintain their global competitiveness. Mr. Hernandez, do you 

agree with that assessment? 

Mr.HERNANDEZ. I do feel that technology is going to be essential 

for a company to find opportunities, because an online service will 

allow them to reach more people than they would otherwise. 

ChairwomanVELA ́ ZQUEZ. Yes. So is that the reason why the U.S. 

Department of Commerce repeatedly proposed to drastically cut the 

Manufacturing Extension Partnership Program? 

Mr.HERNANDEZ. Ma’am, actually, that does not fall in my purview, but I can find that information and get back to you on that 

particular issue. 

ChairwomanVELA ́ ZQUEZ. But do you think that is reasonable—

Mr.HERNANDEZ. I need to understand—

ChairwomanVELA ́ ZQUEZ. —on the one hand? 

Mr.HERNANDEZ. Yes. I just need to understand what the language is, and why is it that it was presented. And I am more than 

happy to bring that information back. 

ChairwomanVELA ́ ZQUEZ. Well, I can tell you that for the last few 

years the administration proposed to cut a manufacturing extension partnership program, the very program that helped small 

businesses and small business exporters. And then, you make reference to the U.S. export assistance centers. 

32

Mr.HERNANDEZ. Yes. 

ChairwomanVELA ́ ZQUEZ. That is within your purview. 

Mr.HERNANDEZ. Yes. 

ChairwomanVELA ́ ZQUEZ. You know what—

Mr.HERNANDEZ. Yes. 

ChairwomanVELA ́ ZQUEZ. —those centers are. And so those centers are important, because they provide assistance to small business exporters. 

Mr.HERNANDEZ. Yes. 

ChairwomanVELA ́ ZQUEZ. So why is it that they have been flat 

funded for the last few years? 

Mr.HERNANDEZ. Why has the commercial service ben flat funded? I think that we in the commercial service are no different than 

other agencies where we have tried to be very resourceful with a 

budget that we have. I mean, the fact is—

ChairwomanVELA ́ ZQUEZ. This is how you are going to close the 

gap that exists in terms of the trade deficit? 

Mr.HERNANDEZ. Ma’am, I think to close the trade deficit is not 

what I can do, but what American companies have the ability to 

do. 

ChairwomanVELA ́ ZQUEZ. Sure. If services and assistance and 

technical assistance and financing is provided by those very centers 

that are supposed to be here to assist those small business exporters. And also, in terms of the Small Business Administration, only 

16 staff are assigned to those U.S. export assistance centers. Do 

you intend to increase the number of staff? 

Mr.GINSBURG. We are evaluating the human capital resources 

that we have, and the administration will, you know, evaluate just 

exactly where we should put good people to take care of both domestic and international business. 

ChairwomanVELA ́ ZQUEZ. Does any other member wish to make a 

question? 

[No response.] 

With that, I excuse the panel. 

Mr.GINSBURG. Thank you. 

ChairwomanVELA ́ ZQUEZ. I welcome the second panel to take 

their seats. It is almost noon, so good afternoon. I welcome all the 

witnesses, and I hope that you can help us by shedding some light 

into the impact of U.S. trade policies on small businesses. 

Our first witness is Ms. Sage Chandler. Ms. Chandler is the Senior Director of International Trade for the Consumer Electronics 

Association. She is responsible for trade policy legislation and negotiation matters affecting the 2,100 member companies of Consumer 

Electronics Association. 

Ms. Chandler, your entire testimony will be entered into the 

record, as well as the other witnesses. You have five minutes to 

present your testimony.

STATEMENT OF SAGE CHANDLER, SENIOR DIRECTOR OF 

INTERNATIONAL TRADE, CONSUMER ELECTRONICS ASSOCIATION 

Ms.CHANDLER. Thank you, Madam Chair. The Consumer Electronics Association, or CEA, is the principal U.S. trade association 

33

for the consumer electronics industry. Our 2,100 members include 

manufacturers of audio, video, and IT products, which are enjoyed 

in the home and automobile, and oftentimes the office. Our industry drives the American economy and accounts for world leadership 

and innovation. 

Although we represent virtually every large consumer electronics 

manufacturer, 80 percent of our members are small businesses. In 

fact, small companies are located in each state represented on this 

Committee. 

International trade is the life blood of our industry. Last year, U.S. exports of consumer electronics products totaled nearly $4 billion, helping to support nearly two million American jobs. Many of 

our members are competing well abroad, but we need to do better. 

Ninety-five percent of world consumers who could be buying our 

products live outside of our borders. 

To access those opportunities and remain competitive, fair and 

open trade in markets abroad is crucial to our small and mediumsized businesses. Our industry is highly competitive and globally 

integrated. Two-thirds of CEA members conduct international business of some sort, primarily in Asia, Europe, and Latin America. 

However, large investments are needed to manufacture our products. Even then, many of those goods have very narrow margins, 

so companies must feel secure entering new markets protected by 

trade negotiations and trade policies. 

Therefore, we urge Congress and the United States Government 

to make the following actions. First, aggressively pursue bilateral 

free trade agreements. In the absence of an agreement in the 

DOHA round of the World Trade Organization, FTAs offer the 

next-best way to open foreign markets to small companies. They 

create sales opportunities, reduce costs, and diminish uncertainty. 

Through FTAs we can implement intellectual property rights 

standards, establish investment protections, and provide increased 

transparency for U.S. exporters. 

Second, reauthorize trade promotion authority. TPA expires later 

this month, and without it our trading partners will be reluctant 

to negotiate trade agreements with the United States. Our hands 

may be tied, and the U.S. will fall behind the many other countries 

who are currently negotiating free trade agreements at an unprecedented pace. 

Third, work to eliminate non-tariff trade barriers abroad. Examples of NTBs include cumbersome customs regulations, corrupt government practices, and recently divergent or non-harmonized approaches to environmental standards. These non-tariff barriers 

hinder trade and burden small companies with unnecessary compliance costs. 

Fourth, in addition to pursuing new trade agreements, the U.S. 

must maintain and enforce agreements that are already in place. 

For example, we must take an aggressive stance to protect products which are already covered by the World Trade Organization’s 

Information Technology Agreement. The ITA covers and eliminates 

duties on over 97 percent of trade and world information technology products. 

However, the EU is currently claiming that the ITA does not 

cover the next generation of covered products. Therefore, it is cruVerDate 0ct 09 2002 10:11 Jan 08, 2008 Jkt 033615 PO 00000 Frm 00039 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\36104.TXT LEANN
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cial for the U.S. Government to uphold the ITA and make a case 

for its maintenance to allow for future innovation. 

Fifth, promote a swift and effective temporary visa program. 

While safeguarding national security is paramount, many small 

businesses rely on tradeshows like CEA’s annual event, the Consumer Electronics Show. CES is the nation’s largest trade show 

and is an effective way for small companies to contact international 

buyers without breaking the bank on foreign travel. 

To remain successful, we need as many foreign buyers to attend 

CES as possible. This year, we had over 25,000 international 

attendees, but thousands more were discouraged from attending 

due to restrictive U.S. visa policies. This leaves our small entrepreneurs at a disadvantage in their efforts to reach international 

buyers. In fact, CEA recently situated shows in Dubai and in 

China, so that we can help our members reach international markets. 

Finally, it is essential that traffic moves across the borders 

quickly and efficiently. While trade among NAFTA countries has 

increased significantly in the decade since it was signed, the infrastructure and customs facilities have not been able to stay ahead 

of the increased commerce. For instance, during the peak season in 

2006, there were two- to three-mile backups of trucks trying to 

cross into the United States, with some waits of up to 10 hours. 

As long as there is a shortage of trucks and drivers along the 

southern border, there will be congestion. Therefore, we urge swift 

implementation of a Department of Transportation pilot program, 

which will allow a limited number of Mexican motor carriers to operate in the United States beyond commercial zones along the U.S.-

Mexican border. 

In summary, small businesses in the consumer electronics industry benefit whenever the United States implements policies that 

ease the process of getting products from port to shelf to consumer. 

If Congress and the United States Government are successful in 

advancing free trade, then we win, and so does the American economy. 

The Consumer Electronics Association and its members pledge to 

work with the members of Congress to address these concerns to 

ensure that the consumer electronics industry is well situated to 

advance trade in a progressively competitive global environment. 

Thank you again to appear today, and I will be happy to answer 

any questions from the Committee. 

[The prepared statement of Ms. Chandler may be found in the 

Appendix on page 82.]

ChairwomanVELA ́ ZQUEZ. Thank you, Ms. Chandler. 

Our next witness is Mr. Ken Seilkop. He is a constituent of Congressman Chabot, and he is the President and Owner of Seilkop Industries, Inc. Seilkop Industries has been in the Seilkop family 

since 1946. Ken is the second generation owner, and the third generation is in place. 

Welcome, sir. 

35

STATEMENT OF KEN SEILKOP, A.G. TOOL & DIE, MIAMITOWN, 

OHIO, ON BEHALF OF THE NATIONAL TOOLING AND MACHINING ASSOCIATION 

Mr.SEILKOP. Thank you. Chairwoman Vela ́zquez, and members 

of the Committee, thank you for the opportunity to discuss the impact of currency manipulation and its effects on the precision machining industry under current U.S. trade policies. 

My company is comprised of four divisions, including A.G. Tool 

& Die in Miamitown, Ohio. These four facilities have been in the 

Seilkop family since 1946. We employ approximately 95 people in 

the greater Cincinnati area. Both my wife and son work with me. 

A.G. Tool & Die specializes in the design and build of a wide 

range of precision dies, fixtures, and tools for the automotive, appliance, defense, and aerospace industries. I am testifying as a second 

generation small business owner on behalf of the National Tooling 

and Machining Association. NTMA represents nearly 1,700 custom 

precision manufacturers and 55,000 employees across the nation. 

Our members are small to medium-sized shops employing an average of 27 people. Every product that is manufactured is formed 

by a tool, a die, or a mold made by our industry. The future of the 

U.S. machining and tooling industry is being severely threatened 

by low price tools, dies, and precision machine parts imported primarily from China. The effect of China’s economic growth and principally its unfair trade practices has been costly to the manufacturing, and in particular our industry. 

Since 2001, nearly a third of all U.S. tooling and machining companies have been forced to shut their doors due to price constraints 

driven by the large influx of low-priced Asian imports into our markets. Our industry cannot compete when the playing field is rigged, 

and that is what China has been doing—rigging its currency at a 

level that economists agree is about 40 percent. This practice undercuts our numbers by artificially lowering the cost of Chinese 

goods, making it impossible for NTMA member companies to compete against their foreign counterparts. 

This form of protectionism by China is reaping huge rewards. Its 

export-based economy is growing three or four times faster than 

the rest of the world, with factories being built at a record pace. 

It promotes investment in China over capacity and a dangerous accumulation of foreign exchange reserves in China. Furthermore, 

China is violating its International Monetary Fund and World 

Trade Organization obligations. It is time for the administration to 

hold them accountable and move aggressively on currency manipulation. 

Our customers are spending less in the U.S. and continue to look 

to foreign plants and overseas suppliers every day. Every day my 

Chinese competitors beat my best quoted prices by 40 to 60 percent. I would like to share an example from a Dayton, Ohio-based 

manufacturing company that makes plastic injection molds for the 

industrial Fortune 500 customers. 

Last month he quoted his lowest possible cost for a mold at 

$60,000. In the end, the contract was awarded to a Chinese manufacturer for $25,000 including shipping. The estimated cost of the 

materials alone on that mold were $18,000. There are no techVerDate 0ct 09 2002 10:11 Jan 08, 2008 Jkt 033615 PO 00000 Frm 00041 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\36104.TXT LEANN
36

niques or groundbreaking processes that could garner the cost savings needed to overcome such a large price differential. 

While companies like this have a decent chance of competing 

with companies anywhere in the world, we can’t compete with the 

government of China or other countries that manipulate their currency. At A.G. Tool & Die we continue to invest hundreds of thousands of dollars in technology to try and keep up, but this is tough 

to justify when our customers keep demanding lower and lower 

prices. 

American tooling and machining shops must also compete 

against Chinese companies that have cheap labor costs, do not pay 

or pay very little health insurance, legacy costs, and do not have 

to meet our strict environmental and safety standards. 

As I talked to precision tooling and machine shop owners across 

the nation, the plea is, ‘‘Level the playing field. We are not afraid 

of competition, but make it fair competition.’’ I enjoyed the comment by the Congressman of ‘‘fair trade, not free trade.’’

Congress can enact legislation right now that is beneficial to U.S. 

manufacturers that could help to level the playing field. NTMA 

urges this Committee and the entire Congress to pursue every avenue possible to combat the damage of currency manipulation. Prolonged inaction will only lead to more manufacturing job losses and 

further erosion of our domestic manufacturing base. With little to 

show after years of pressure by the administration on China to revalue its currency, the NTMA urges you to pass the Fair Currency 

Act, H.R. 782, introduced by Representatives Tim Ryan of Ohio and 

Duncan Hunter of California. 

This bipartisan legislation with over 100 co-sponsors gives the 

U.S. Government new tools to address currency manipulation and 

would brand such manipulation as an illegal subsidy under WTO 

rules. It would ensure that countervailing duty laws can be applied 

to non-market economies. It applies to any country that is manipulating its currency. Passage of the Fair Currency Act is a crucial 

first step. 

It is obvious that China’s economic strategy over the past decade 

has been to keep the value of its currency low, boost its exports, 

and hold down imports. The U.S. needs a coordinated, comprehensive national policy and strategy for manufacturing. Such a strategy must include addressing currency manipulation, vigorously enforcing our trade laws and agreements, making permanent the 

R&D tax credit, reforming health care to reduce its costs to small 

business, and amending our Tax Code. 

Since China continues to enjoy the benefits of membership in the 

international economic community, it is only fair that it abide by 

the rules. The time for change is now, before our industry and the 

rest of U.S. manufacturing is put at further risk. 

We look forward to working with this Committee and the members of the 110th Congress. Thank you again for giving me the opportunity to present our views on this important matter, and I will 

be pleased to answer questions. 

[The prepared statement of Mr. Seilkop may be found in the Appendix on page 86.]

ChairwomanVELA ́ ZQUEZ. Thank you, Mr. Seilkop. 

37

Our next witness is Jon Caspers. Mr. Caspers is an owner of a 

nursery-to-finish operation that markets 13,000 hogs annually. He 

is also past President of the National Pork Producers Council. 

Welcome, sir. 

STATEMENT OF JON CASPERS, SWALEDALE, IOWA, ON 

BEHALF OF NATIONAL PORK PRODUCERS COUNCIL 

Mr.CASPERS. Thank you, Madam Chairman, and members of the 

Committee. I am Jon Caspers, past President of the National Pork 

Producers Council, and a pork producer from Swaledale, Iowa. I operate a nursery-to-finish operation marketing 13,000 hogs per year, 

and under anyone’s definition I am a small producer. 

I strongly believe that the future of the U.S. pork industry and 

the future livelihood of my family’s operation depend in large part 

on further trade agreements and continued trade expansion under 

TPA. Trade agreements have fueled the export growth in the U.S. 

pork industry. Total U.S. exports of pork and pork products have 

increase by more than 400 percent in volume and value since the 

implementation of the North American Free Trade Agreement in 

’94, and the Uruguay Round agreement in ’95. 

Due to tariff reductions and improved market access under 

NAFTA, Mexico was the number one volume market and number 

two value market for U.S. pork exports in 2006. Thanks to a bilateral agreement with Japan on pork that became part of the Uruguay Round, U.S. pork exports to Japan have soared. In 2006, U.S. 

pork exports to Japan reached just over $1 billion, and Japan remains the top value foreign market for U.S. pork. 

U.S. pork exports to Korea have increased over 2,000 percent as 

a result of concessions made by Korea in the WTO Uruguay Round 

in ’95. More recently, U.S. exports of pork have expanded because 

of bilateral deals with Russia, Taiwan, China, and the U.S.-Australian FTA. 

Increasing U.S. pork exports means increasing U.S. jobs. In 2006, 

the United States exported 15 percent of domestic pork production. 

By percentage, then, international trade attributed approximately 

82,500 U.S. jobs in the pork industry alone. A majority of these 

jobs are located in rural America. In my home State of Iowa, about 

62,500 jobs are involved in various aspects of the pork industry, 

ranging from input suppliers to producers to processors and handlers, as well as main street businesses that benefit from purchases 

by people in these industries. 

According to Iowa State economists Daniel Otto and John Lawrence an estimated $2.2 billion of personal income and $3.8 billion 

of gross state product are supported by the hog industry based on 

2005 levels of production in Iowa. Based on the export share of 15 

percent of U.S. production, a comparable share of economic impacts, or 9,375 jobs, and $333 million of personal income in Iowa, 

result from the exporting of pork products to foreign markets. 

U.S. pork and export growth directly impacts the Iowa pork industry and Iowa’s overall economy. In addition to my home State, 

the Iowa State economists have examined the impact of pork exports on a number of states and congressional districts outside of 

Iowa. In the attached appendix to my written comments, I have inVerDate 0ct 09 2002 10:11 Jan 08, 2008 Jkt 033615 PO 00000 Frm 00043 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\36104.TXT LEANN
38

cluded pork export district information generated by Iowa State for 

eight of the districts represented on the Small Business Committee. 

As the export growth rates generated by the Uruguay Round and 

NAFTA begin to diminish because the agreements are now fully 

phased in, the creation of new export opportunities becomes increasingly important. The United States currently has four pending 

free trade agreements—the U.S.-Korea FTA and the Colombia, 

Peru, and Panama Trade Promotion Agreements. Each of these 

agreements were negotiated under trade promotion authority and 

will significantly benefit U.S. pork producers. 

Pork exports positively impact the price of live hogs for all producers in the United States. Regardless of whether the pork from 

a particular hog is exported, the price impact of exports lifts the 

U.S. price for live hogs, so that all producers benefit. When fully 

implemented, the trade agreements with Korea, Colombia, Peru, 

and Panama, will eliminate tariffs and barriers to trade that currently limit U.S. pork products, contributing to the bottom line of 

producers nationwide. 

According to Iowa State University economist Dermott Hayes, 

these four pending FTAs, when implemented, will bring unprecedented economic benefits. The Korea agreement alone will be the 

single most important trade agreement ever for U.S. pork producers. The U.S. Republic of Korea FTA, when fully implemented, 

will cause U.S. hog prices to be $10 higher than they would—than 

would otherwise have been the case. And, likewise, once fully implemented, the Colombia, Peru, and the Panama FTAs will respectively cause U.S. hog prices to be $1.63, 83 cents, and 20 cents 

higher, respectively, than would otherwise have been the case. 

Any agricultural economist knows that our sector will tell you 

that pork exports have disproportionately contributed to the profitability of U.S. pork producers in recent years, and expanding market access through implementation of these agreements will further 

increase producer profitability and stimulate job growth. 

In addition to the four pending FTAs, a successful WTO DOHA 

development round will increase pork exports and strengthen our 

producers. A large DOHA outcome, particularly with the EU and 

Japan, is needed to make the DOHA successful for producers. Currently, the United States supplies less than 1 percent of EU pork 

consumption. And while Japan is the biggest value market in the 

world for U.S. pork, there is still enormous potential growth. 

In conclusion, trade agreements significantly benefit all U.S. producers. Fifteen percent of all U.S. pork production is exported 

abroad, and the impact of exports on the livelihood of small and 

medium-sized independent producers is substantial. 

Thank you for the opportunity to present. I look forward to your 

questions. 

[The prepared statement of Mr. Caspers may be found in the Appendix on page 93.]

ChairwomanVELA ́ ZQUEZ. Thank you, Mr. Caspers. 

Our next witness is Dr. Lael Brainard. Dr. Brainard is Vice 

President and Founding Director of The Brookings Institution’s 

Global Economy and Development Program. She has served as 

Deputy National Economic Advisor and Chair of the Deputy SecVerDate 0ct 09 2002 10:11 Jan 08, 2008 Jkt 033615 PO 00000 Frm 00044 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\36104.TXT LEANN
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retary’s Committee on International Economics during the Clinton 

administration. 

Dr. Brainard, you are welcome. 

STATEMENT OF DR. LAEL BRAINARD, VICE PRESIDENT AND 

DIRECTOR, GLOBAL ECONOMY AND DEVELOPMENT PROGRAM, THE BROOKINGS INSTITUTION 

Ms.BRAINARD. Madam Chairwoman, Ranking Member Chabot, 

members of the Committee, thank you for the opportunity to testify 

on this important topic. 

I want to make three observations. First, I wanted to talk a little 

bit about what is happening to our economy. My sense is that our 

economy is undergoing a very profound transformation. The individual elements feel somewhat familiar, but together the combined 

contours are unprecedented in scale, speed, and scope. 

China is pursuing a growth strategy that is export led and foreign direct investment fed at a scale we really haven’t seen before. 

Its booming economy is swelling the coiffeurs of some resource producers, but also posing enormous challenges in manufacturing. India’s concurrent economic emergency has also added to the complexity of the challenge. While India’s growth strategy has differed 

in important ways, its success in exporting higher skilled knowledge services, such as software programming, has led to a stunning 

expansion of the scope of globalization. 

Many American businesses, large and small, are thriving on the 

new opportunities created by this breathtaking growth of more 

than 9 percent in two of the world’s most populous markets. But 

other American businesses are confronting foreign competition at 

an intensity and a scale they have never experienced before. Some 

of them are faced with the choice of moving over or moving up the 

value chain, concentrating on highly specialized activities in this 

market, or diversifying their geographic base. 

I think the current episode of global integration dwarfs previous 

episodes. If you look at it just from a pure numbers point of view, 

an economy of—an integrated world economy with a labor force of 

about 1.7 billion is being abruptly confronted with absorbing a 

labor force of 1.2 billion with wages that are up to 90 percent 

lower. It is a 70 percent expansion of the global labor force in a 

very short period of time. It is three times bigger than the 

globalization challenge associated with the sequential advances of 

Japan, South Korea, and the other Asian tigers. 

So what is the role of business? And how is small business being 

affected by this globalization wave? As the most dynamic stratum 

of the economy, small business is on the front lines of this new 

wave. As a microcosm of the overall economy, there is enormous diversity in this group, and I think we see it. It is a very nice crosssection that we have at this table. 

Many small businesses are encountering unprecedented opportunities. Others, frankly, are struggling. I think in the old models, 

product life cycle models, the notion was that many businesses 

would stay here until they saturated their market and then move 

abroad. A lot of small businesses or entrepreneurial people are 

going abroad early in their growth, often following their customers. 

40

Because they are so often on the front lines of globalization, I 

think small businesses have a disproportionate stake in the policies 

shaping globalization. But as this Committee has pointed out 

today, they face much higher transactions costs relative to their 

size, both as they venture into new markets and as they seek to 

influence that policy environment. 

If you think about it, it is true that transparent, predictable customs procedures and trade rules make it a heck of a lot easier for 

small businesses, but only if those policies are, first of all, accessible in the priority-setting stage, in the negotiating stage, and 

then, of course, on enforcement. So those trade rules are necessary 

but by no means sufficient. 

And on the flip side, when an unanticipated surge of foreign competition causes injury, small businesses may have much less internal wherewithal to cushion the blow for their employees. They have 

to rely more on government programs, but it is very costly to access 

those programs. Eligibility criteria are stiff, it is time-consuming, 

and, as we know, the value threshold on safeguards is often hard 

to meet. 

The vibrancy, I think, of our small business sector under any circumstances will remain a very key comparative advantage for the 

United States. This sector is the envy of the world, and so even as 

we think about what policies we can put in place to help them access international markets, I think it is important to make sure 

that the foundations remain strong at home. 

Let me quickly just talk about the three pillars of the national 

competitiveness strategy that are important for business in general, but small business in particular. Those are investments in innovation, in education, in infrastructure, and the Chairwoman 

mentioned earlier before the Manufacturing Extension Program, 

which is one of those programs that is highly valued by small businesses in the realm of innovation policy. 

On international rules, a second area, it is absolutely true that 

small business depends more than any other segment on a level 

playing field. But if you think about the China example that we 

were referencing earlier, it is astonishing to me that USTR waited 

five years before reviewing China’s trade policy. 

Enforcement should have started day one. When China entered 

the WTO, it was a mature exporter, even if it was not a mature 

importer. And Mr. Hernandez talked about democratizing international trade through bilateral trade agreements. That is only 

true if all interests have an equal say at the table. 

And, finally, I think on this issue of bilateral free trade agreements they aren’t the best way of moving forward for small business. It is very difficult for small business to be able to study the 

minutia of each particular trade agreement. Much better to have 

broad-based trade agreements, but this administration has presided over the death of the FTA, the death of the APEC trade agenda where they have ceded the ground to China, and DOHA is on 

life support. So a much more efficient result for small businesses 

would have been a much broader trade agreement. 

Thank you. 

[The prepared statement of Ms. Brainard may be found in the 

Appendix on page 114.]

41

ChairwomanVELA ́ ZQUEZ. Thank you, Dr. Brainard. 

Our next witness is Daniel Griswold. Mr. Griswold is the Director of the Center for Trade Policy Studies at the Cato Institute. 

Since joining Cato in 1997, he has authored or co-authored major 

studies on globalization, the World Trade Organization, the U.S. 

trade deficit, trade and democracy, immigration, and other subjects. 

Welcome. 

STATEMENT OF DANIEL T. GRISWOLD, DIRECTOR, CENTER 

FOR TRADE POLICY STUDIES, CATO INSTITUTE 

Mr.GRISWOLD. Chairwoman Vela ́zquez, and Ranking Member 

Chabot, thank you very much for allowing the Cato Institute to testify at today’s hearing. America’s growing engagement in the global 

economy is not just a Fortune 500 phenomenon. Increasingly, small 

and medium-sized U.S. companies are entering global markets, not 

just to sell but to buy and invest. 

Expanding trade and globalization are not a threat to American 

small companies, but an opportunity. And let me briefly outline 

five ways. 

First, globalization is a reality for American companies of all 

sizes. Americans have never spent or earned a higher share of our 

income in the global economy than we do today. Both exports and 

imports as a share of our GDP have never been higher. Small businesses that shun global markets are missing out on the great 

growth opportunity of our time. 

Second, U.S. small businesses have benefited as exporters into 

growing global markets, including China. Last year, U.S. exports of 

goods to the rest of the world topped $1 trillion for the first time. 

Export of services reached $422 billion, another record. The Internet global logistics and an increasingly complex global supply chain 

have created opportunities for U.S. small businesses that simply 

did not exist before. 

China is no exception. Since 2000, U.S. exports to China have 

grown from $16 billion to $55 billion. That is a 23 percent annual 

compound growth rate, fives times faster than our exports have 

grown to the rest of the world. When you add service exports and 

sales through affiliates, American companies are selling more than 

$100 billion worth of goods to the Chinese market each year. 

And more than one-third of U.S. exports to China are produced 

by small and medium-sized enterprises, and the number of SMEs 

that are selling into China’s market has increased five-fold since 

1992. given China’s spectacular double-digit growth, those opportunities will only continue to grow. 

Third, U.S. small businesses benefit from import competition. 

Trade provides more affordable imported energy, lumber, iron ore, 

steel, rubber, computer chips, bearings, and other components used 

by U.S. companies, small and large, to make their products—their 

final products are more globally competitive prices. 

Imports allow smaller U.S. firms to acquire the capital equipment they need, including computers, to increase their competitiveness. Import competition, thus, promotes innovation, efficiencies, 

and ultimately the productivity gains that mean higher profits and 

higher real wages. 

42

Fourth, U.S. small firms benefit from access to global capital. 

Foreign producers who sell in the U.S. market can use their earnings to invest in our domestic economy. And inflow of foreign capital, which is really the flip side of the trade deficit we have been 

talking about, reduces long-term U.S. interest rates by almost a 

full percentage point. Lower rates mean lower borrowing costs for 

U.S. small businesses, allowing them to expand their productive capacity. 

Fifth, U.S. small manufacturing firms can thrive in a more open 

economy. Tens of thousands of U.S. manufacturing companies are 

producing a higher volume of goods and services today than ever 

before. Since the early 1990s, the total volume of output of U.S. 

manufacturers has risen by 50 percent into record territory. Manufacturing profits last year in the United States reached a collective 

$400 billion. That is an 18 percent return on investment. It is a 

myth that our manufacturing base is shrinking. 

To capitalize on all of these opportunities, America’s small companies need a trade agenda that expands their freedom to sell, invest, and buy, in a growing global economy. That agenda should include bilateral, regional, and multilateral trade agreements that reduce trade barriers with our major trading partners. And those 

agreements—this is especially important to small business—they 

establish predictable and enforceable rules that increase the transparency when smaller U.S. companies venture abroad. 

And absent trade agreements, Congress should enact unilateral 

trade liberalization here in the United States. What U.S. small 

businesses do not need are higher trade barriers to our domestic 

market. Punitive tariffs against a country such as China would 

threaten to drive up costs for U.S. small businesses and jeopardize 

export opportunities in growing markets abroad. 

Anti-dumping orders and other tariffs against such imports as 

steel or agricultural commodities drive up costs for domestic producers, many of them small businesses. Nor do U.S. small businesses need a larger share of federal subsidies for international 

trade. While small and medium-sized companies may qualify for 

such programs as the Export-Import Bank or the Market Access 

Program, they account for a small dollar share of total federal support. 

U.S. companies do not need federal subsidies to compete effectively in foreign markets. Our research at Cato has shown that 

U.S. exporters have outperformed their counterparts in Great Britain, Germany, France, Canada, and Japan, even though the share 

of U.S. exports receiving government support is relatively low. 

Federal export subsidies do not promote more exports overall, 

but only reshuffle the export pie in favor of larger U.S. companies 

at the expense of smaller exporters. 

ChairwomanVELA ́ ZQUEZ. Mr. Griswold, your time expired. Can 

you summarize, please? 

Mr.GRISWOLD. One sentence in conclusion. In conclusion, if Congress and the administration want to increase opportunities for 

U.S. small businesses to compete and thrive in a global economy, 

they should work together to reduce barriers to international trade 

and investment wherever they exist. 

Thank you. 

43

[The prepared statement of Mr. Griswold may be found in the 

Appendix on page 121.]

ChairwomanVELA ́ ZQUEZ. Thank you. 

I would like to address my first question to basically all the 

members of the panel, and this is talk about negotiation and trade 

agreements. We all know that the negotiation process is a critical 

component of the nation’s trade strategy. By setting priorities, implementation procedures, and industry rules, this process determines who benefits from trade agreements. 

So I would like to ask each one of you if you can recommend any 

provision that should be included in negotiation standards that you 

think will increase small business benefits from trade agreements. 

Ms. Chandler? 

Ms.CHANDLER. Thank you. Well, the trade agreements that are 

currently being negotiated and that have been negotiated start to 

address a number of non-tariff trade barriers and tariff barriers 

that are helpful to any company that is looking to get into a foreign 

market. 

Certainly, there are other provisions that could be negotiated and 

could help small and medium-sized companies as well as large companies. Some issues that we have been looking at recently for our 

membership include environmental standard harmonization, looking at the way standards are harmonized, as well as the use of fair 

use provisions in free trade agreements. 

Intellectual property rights is a very, very important component 

to our members, both for copyright piracy, but there is also an IPR 

issue of fair use. A number of our members rely heavily on consumers’ lawful use, sort of Section 107 of U.S. copyright law, to access domestic markets. And now increasingly with innovation and 

export to foreign markets, it is going to be an important component 

of innovation abroad. 

The U.S.-Chile Free Trade Agreement is the only free trade 

agreement that has looked at fair use in some way in free trade 

agreement. It addresses knowingly circumvent language. We would 

advocate that other free trade agreements adopt a template that 

brings that language into future negotiations. That will allow companies like Google who cache images, Tivo, Sling Box, Sling Media, 

who take time and play shift content, to operate overseas. 

Thank you. 

ChairwomanVELA ́ ZQUEZ. Thank you. 

Mr. Seilkop? 

Mr.SEILKOP. I think the biggest thing that I would ask is we just 

enforce the trade agreements that are in place, which I don’t see 

happening. And, again, I embrace the Congressman who talked 

about fair trade. As I said, we are not against—we don’t want tariffs and barriers. We just want to be able to compete on a level 

playing field, so anything that can be put into trade agreements 

that helps us in that area would be appreciated. 

ChairwomanVELA ́ ZQUEZ. thank you. 

Mr. Caspers? 

Mr.CASPERS. Yes, thank you. Regarding the negotiated process, 

I think certainly a number of the agreements we have today, as I 

mentioned in my testimony, have achieved much greater access in 

44

the markets across the world. A lot of the reasons the reduction in 

tariffs in those markets, and under a reasonable timeframe, I think 

a lot of the agreements that are pending achieve that as far as 

pork is concerned. 

One issue that is a primary concern to us is our SPS issues, 

making sure that we have true access. The acceptance of the U.S. 

meat inspection system as an equivalent is certainly important. We 

have seen other agreements where that wasn’t the case, that we, 

in reality, did not have access. But the current agreements that are 

pending in all cases they have agreed to accept the U.S. meat inspection system as equivalent to their own system. So that will 

give us good access. 

Certainly, transparency and how all the rules and regulations of 

trade are applied is an important and consistent application of 

those regulations. And, lastly, I guess I would say that, you know, 

some kind of a timely mechanism for dispute settlement is certainly important. 

ChairwomanVELA ́ ZQUEZ. Thank you. 

Dr. Brainard? 

Ms.BRAINARD. It is an important question. My hunch is that 

there is probably not one particular provision, that there is a diversity of interest among the small business community. But they are 

going to weight priorities quite differently I think than their large 

corporate counterparts, who I believe do tend to get better representation because of their resources in the policymaking process 

and the negotiating formulation process. 

And so rather than focusing on one provision, I think as this 

Committee has done in their earlier questioning is to ask whether 

there are things that Congress could ask for, either in trade promotion authority, in the budget, that would ensure that there is 

special access mandated for a small business to be represented either as a share of each industry represented or as sort of special 

access point within USTR and within Commerce. 

ChairwomanVELA ́ ZQUEZ. Do you think it was a fair question to 

ask to Ms. Moore when I questioned her regarding the lack of out 

of the 22 USTR representatives that none really is there to represent small businesses, or a special one just to represent small 

businesses? 

Ms.BRAINARD. I mean, I think if you look at the kind of increase 

of the ouster positions, over the years they have been put in place 

where an industry segment or a set of concerns have been seen to 

not receive the kind of attention that they deserve in the economy. 

So I think it is one possible answer. 

I think her answer, which is that it is a cross-cutting issue, is 

certainly true. The question is, okay, then, create an institutional 

mechanism to make sure that cross-cut happens for every trade negotiating priority setting. 

ChairwomanVELA ́ ZQUEZ. thank you. 

Mr.GRISWOLD. My answer would be to just echo what—a couple 

of things Mr. Caspers said. One, I think small businesses have the 

same interest as large businesses in market access, not just abroad 

but here at home. So I think speedily implementing commitments 

to market access. What are we at now? Eighteen years for phaseVerDate 0ct 09 2002 10:11 Jan 08, 2008 Jkt 033615 PO 00000 Frm 00050 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\36104.TXT LEANN
45

in on some of these things? I think that is getting—bordering on 

ridiculous, so I would condense the phase-in period. 

Secondly, I think non-tariff trade barriers are important. It is 

one thing to face a tariff. It is another to face these maddening regulatory barriers, which big business can handle more easily. They 

have got lawyers. They have got representatives on the ground. 

You are talking about SPS and other non-tariff barriers, so I think 

negotiating transparency is very important for small business. 

ChairwomanVELA ́ ZQUEZ. Thank you. 

Dr. Brainard, many U.S. companies have established export facilities abroad, particularly in China. U.S. corporations produce 

goods in these factories and many times export them back to the 

U.S. In your opinion, do trade agreements which not only open 

markets but also permit businesses to locate in partnered countries 

encourage the offshoring of U.S. industries? 

Ms.BRAINARD. I don’t think they necessarily encourage the 

offshoring. I think China is a special case, because there have been 

all kinds of provisions that are kind of hidden in all kinds of different ways—tax provisions, special preferences, and then actual 

requirements that multi-nationals who want to locate there and 

sell into the market have been traditionally required to actually export as a share of their production. 

Now, the WTO rules should, to a great degree, level the playing 

field. But as we know on some of the tax incentives, they were violating I think the rules, and so, you know, it took USTR a long 

time to take a case on that. But I think they will prevail on it. So 

I don’t think that they necessarily do, but a lot of countries—and 

China is I think a very striking example—do put in place rules 

that create incentives like that for multi-nationals. 

ChairwomanVELA ́ ZQUEZ. Thank you. 

Mr. Seilkop, during the Clinton administration, they filed over 10 

enforcement cases per year with the WTO to fight unfair trade 

practices, yet the Bush administration has only filed three per 

year. And I know that you talked about the manipulation of the 

currency, the Chinese manipulation of the currency. 

So what we have here is a lack of strong enforcement of international agreed-upon trade regulations. Can you talk to us a little 

bit about what does that mean for businesses like the one that you 

have? 

Mr.SEILKOP. I pretty much I think stated it in my testimony is 

that it just creates a totally unfair, unlevel playing field for small 

manufacturers, particularly in the tooling and machining field. My 

customers, in creating tooling and special machining, things like 

that, we make tooling that is actually used to produce other products, so these products are then possibly exported. 

For me to create tooling to export to the foreign market is not 

a good case in point. There is already an overcapacity of what we 

produce in the Far East. They have created a lot of capacity to 

produce this. That is why they are exporting it back here in this 

country. What I have actually been encouraged to do is shut down 

my operation in the United States, buy a company in China, build 

tooling in China, and export it back to the United States. And 

something seems just really wrong with that for me. 

ChairwomanVELA ́ ZQUEZ. Thank you, Mr. Seilkop. 

46

And now I recognize Mr. Chabot. 

Mr.CHABOT. Thank you very much, Madam Chair. And just one 

comment quickly, and I don’t want to get into too much of a spat 

here of the Clinton versus the Bush administration on this issue, 

or a whole range of issues that we could probably debate until the 

cows come home. 

But it is my understanding, just relative to raw numbers, that 

in the Bush administration that they have been focusing on cases 

that they believe that they can win, and they are exercising their 

discretion to some degree and focusing on—there have been settlements, and they are negotiating cases where they think that they 

can actually get the job done short of going to court. 

It is kind of a quality versus quantity issue. But in any event, 

I am sure the truth is somewhere in between all of that, and I 

would be certainly happy to follow up with you on that particular 

issue. 

But let me go to Mr. Seilkop, if I can. You expressed your support for H.R. 782, legislation that would define currency manipulation as a subsidy under U.S. trade law and make it easier for the 

U.S. to impose new tariffs on Chinese goods under the countervailing duty law. And as you probably know, I am a co-sponsor of 

that legislation. I agree with you on that. 

Could you elaborate on why this is an important step that we 

should take again? 

Mr.SEILKOP. Well, it is our opinion from the National Tooling 

and Machining Association that the Chinese manufacturers, because of the currency 40 percent difference, have a tremendous advantage in exporting tools to the United States, and it is a tremendous barrier on importing product into China. It kind of works both 

ways, and it creates a tremendous amount of cash being transferred to the Chinese economy. 

As I stated in my example, the gentleman in Dayton who happens to be a personal friend of mine, you know, he quoted 60,000. 

The order was let for 25,000; 18,000 of that was material. There 

is just not enough labor content in there. There has to be some subsidies going on somewhere or some inequities, because the technology is the same. 

We in the United States use exactly the same technology to 

produce tooling/precision machining that they do in China. The 

same machine tools are used here that are used there. There is a 

difference in labor, but the labor content, you have to realize, as 

manufacturing has gotten more technical, the labor content continues to shrink. So the labor content of what we do just keeps getting smaller and smaller, which really makes that dynamic get bigger and bigger. It just emphasizes the fact that this currency thing 

is playing a bigger part. 

Mr.CHABOT. Okay. Thank you. And you still have your opening 

statement there, I assume, in front of you there. Could you refer 

to right towards the end of the statement, the very end, you stated 

five recommendations that you would make that you thought would 

be particularly helpful. And I was just wondering if you could go 

over those one more time, if they are easily available. 

Mr.SEILKOP. Yes. The strategy must include addressing currency 

manipulation, enforcing our trade laws, as I already mentioned, 

47

making permanent the R&D tax credit. That is another area that 

U.S. manufacturing, and particularly the Precision Tooling and 

Machining Association, we really need that tax credit to be made 

permanent. I think it expires the end of 2007. Again, it just kind 

of gets moved up year by year, and that is what really helps small 

manufacturers to find newer, faster, better ways to machine products. 

And then, the health insurance—of course, we have been talking 

about this thing—the access of small companies to health insurance, we want to offer our employees good health insurance. But 

access is really tough for small companies, and there is no way for 

us to pool together like the big companies do. 

So there has got to be something done to help us pool together. 

And then, of course, the unfunded mandates that we get, you know, 

OSHA, EPA, and all those things that the offshore competition isn’t 

forced to deal with. 

Mr.CHABOT. Thank you very much. I appreciate that. 

And then, finally, Mr. Griswold, if I could go to you for just one 

more question. As you probably know—well, Mr. Kirk Miller from 

the U.S. Department of Agriculture testified a little bit earlier, and 

one of the things he mentioned—and I agree with much of what he 

said—he did mention one program, however, the Market Access 

Program. 

And as you probably know, you know, there are a number of us 

that have not been fans of the Market Access Program, not because 

we don’t think that what they do ought to be done. And, essentially, what they do is help to pay for advertising for trade associations to advertise their products overseas, which ought to occur. 

That was reformed. Prior to that, companies could get the funding 

to advertise their products overseas, and it was reformed, and then 

it was trade associations now that get the money to advertise overseas. 

And, again, I want to be clear. Trade associations and companies 

should advertise overseas. We want them to sell their products 

overseas. The question is: should it be the taxpayer that pays for 

that advertising? Which is what the Market Access Program does. 

Or should the folks who directly benefit do it themselves? 

I would come down into the category that the taxpayer ought not 

to do that, and I have offered an amendment quite a few times over 

the years. We have never prevailed on that amendment. We usually get about 100 votes out of 435. It is usually split between Republicans and Democrats to some degree, but I was just curious if 

you might want to comment on that from Cato’s point of view. 

Mr.GRISWOLD. Mr. Congressman, I think you are on solid ground 

in your critique of the Market Access Program. We have examined 

that at Cato, along with other export promotion programs, and we 

found that, one, they do not promote overall U.S. exports. They 

tend to just reshuffle the pie and focus U.S. exports in a particular 

area. 

These programs tend to be very much biased towards bigger 

businesses that are doing that kind of advertising abroad. McDonald’s and others have benefited from the Market Access Program. 

I have nothing against McDonald’s, but they shouldn’t be relying 

on the U.S. taxpayer to underwrite their advertising budget. 

48

So I think you are on solid ground. U.S. companies have all the 

resources they need to advertise abroad. As we heard earlier today, 

U.S. exports are sizzling, including manufacturing exports, and 

they don’t need the federal taxpayer to underwrite that success. So 

your amendments are on solid ground. They would not hurt U.S. 

exporters one bit. In fact, I think they would help small U.S. businesses to get a little bigger share of that growing export pie, if Congress wasn’t distorting the overall picture. 

Mr.CHABOT. Thank you very much. And if I could just conclude 

by my—one of the—my recollection of one of the more egregious examples of how the dollars can be sort of wasteful was the infamous 

California grapes situation where you remember the I Heard it 

Through the Grapevine, had the dancing grapes and stuff, and they 

were trying to sell them over in Japan, I believe it was. 

Well, the people over there—they weren’t sure what they were. 

They weren’t familiar with the song, and they thought they were 

prunes or potatoes that were dancing. They couldn’t figure out why 

they were dancing. And, apparently, small children were being 

scared by these commercials, and it was just sort of American tax 

dollars that were wasted. And so it is a great story, and so I 

thought the folks would appreciate that out there. 

So, Madam Chairwoman, I yield back the balance of my time. 

And, unfortunately, I am going to have to head over to the Judiciary Committee to offer that amendment. They just sent me an email. 

I want to thank all the witnesses for coming and their testimony. 

I thought it was very helpful, and especially, obviously, the gentleman from my district, Mr. Seilkop, and his bride, who also happens to be here with him today. 

Thank you. 

ChairwomanVELA ́ ZQUEZ. Thank you, Mr. Chabot. 

Mr. Gonza ́lez. 

Mr.GONZA ́LEZ. Thanks very much, Madam Chairwoman. I guess 

I want to start with some basics, because I don’t even think we 

start with the same basic principles. I am going to assume that the 

following is accurate. 

If the world was just a big store, the United States would comprise 20 percent of the consumers frequenting that store. That is 

our purchasing power. That is our performance in these markets. 

So you would think we, in our country, have the citizens and the 

ability of those citizens to purchase just about everything under the 

sun that we could produce in our own country. But that is not happening. 

And I know, Mr. Griswold, you said that manufacturing is not 

diminishing. It is actually increasing. So this American consumer 

goes to the store and would like to buy an American-made garment. Not going to be there. How about an American-made pair of 

shoes? Not going to be there. How about an electronic device, a television? I can’t remember the last time Zenith or Emerson or whoever it was built something in the United States. That is not going 

to happen either. 

You can buy a car manufactured in the United States, more likely than not by an international owner of that particular manufacturing plant, but that is okay. Tool die and manufacturing, I think 

49

we have a witness here who is telling us that is a real difficult 

thing to do. It is ironic that Mr.—is it Seilkop? 

Mr.SEILKOP. Yes. 

Mr.GONZA ́LEZ. Seilkop. Produces machinery that then produces 

products. But the individual that he is selling to may not even purchase that domestically, but, rather, internationally imported, and 

then whatever they may produce they may not even have a market. 

So, I mean, it is almost ridiculous when you think in terms. 

So why is it that we don’t have that manufacturing capacity? 

And a lot of it, look, we have to just face the reality that sooner 

or later other countries are going to develop and have the ability 

to manufacture certain goods. I mean, I would like to know, Mr. 

Griswold, what is American business’ stock and trade when it 

comes to exports? 

Mr.GRISWOLD. Congressman, thank you for the question. The 

U.S. economy is changing. First, 80 percent of Americans and probably 80 percent of your constituents work in the services sector. 

And you can earn a good middle class job in the service sector—

teachers, accountants, financial analysts—all these other things. 

Your constituents—most of your constituents are middle class service producers. 

When you look at manufacturing, the overall output of U.S. factories, the real value continues to grow. It is up 50 percent from 

the early 1990s, double what it was in the 1980s. We are trading 

up. Yes, we are producing fewer shoes in Maine and other states 

like that, fewer T-shirts. Those tend to be low-tech, labor-intensive 

goods that have been moving offshore for decades. 

What we are producing more of, Mr. Congressman, are things 

like pharmaceuticals, chemicals. We are also exporting a lot of agricultural products, soybeans and that sort of thing, aircraft, sophisticated semi-conductors, sophisticated medical machinery. These 

are things that have a lot of brain power in them, a lot of capital 

machinery behind them. So we are trading up in manufacturing. 

Our manufacturing base is expanding. If you look at value added, 

it is about the same share of the economy that it has been for years 

and years. 

Mr.GONZA ́LEZ. But what you have described is big business. 

Mr.GRISWOLD. That—

Mr.GONZA ́LEZ. And let us find a component there somewhere for 

small business, and that is what we are discussing here. How can 

we fit that small business component in this big picture that you 

just outlined, because if there is increasing manufacturing capacity 

and we are actually increasing rather than decreasing, you have 

just described the arena pretty much occupied by big business. 

What advice would you give Mr. Seilkop regarding his enterprise? Short of moving to China. But if that is your advice, to move 

to China, open your shop up, you ought to be real honest about 

that advice and say, ‘‘Do that.’’

Mr.GRISWOLD. It depends on the business that you are in, and 

maybe ultimately that would be the decision he would have to 

make. I am just saying if you are interested in the U.S. maintaining and expanding a manufacturing base, we are expanding our 

manufacturing base. Yes, perhaps more of it is big business. 

50

They are the ones that have the capital, the R&D departments 

that can move up the value chain, but there are also a lot of small 

Mom & Pop medal fabricating plants and that sort of thing. And 

by the way, they have an interest in being able to buy affordable 

steel and other inputs at global prices, so when we put steel tariffs 

on imports we are jeopardizing jobs and a lot of U.S. manufacturers 

that use steel in their components. So—

Mr.GONZA ́LEZ. Mr. Seilkop had a real good point, though, that we 

impose many more conditions that drive the cost up of manufacturing a product. And rightfully so, I mean, we don’t want Third 

World conditions in our factories and such. I mean, that makes a 

lot of sense. Hopefully, we have progressed it a little bit further 

down the road. 

Does he have a point that maybe we ought to be considering 

some of that? And how do we implement that to protect the small 

business individual and his investment? In other words, if you have 

a cheaply produced product from China that is not subject to the 

same regulatory scheme that we have in the United States, and for 

good purpose and for good reason—that works to the benefit of the 

manufacturer and the consumer—how do we adjust that? 

And the second part of it is Mr. Seilkop has also pointed out the 

disadvantage of the Chinese currency pegged to the—artificially 

pegged to the American dollar. What about those two components? 

Mr.GRISWOLD. Well, first, I would always advocate Congress to 

lower taxes on business and streamline regulations. Let us do it for 

the benefit of U.S. businesses and our economy. U.S. companies can 

compete. Countries will have different regulatory systems based on 

their level of development. China will have one, we will have another one, Europe has got yet another regulatory system. 

We need to find what we can specialize in, just my point being 

the overall U.S. manufacturing sector is doing relatively well—

record profits, 18 percent return on investment. Some manufacturers are losing out, moving offshore, others are expanding. That is 

just my basic point there. 

The currency—I wrote a study last summer. You can find it at 

freetrade.org. But the bottom line is I think China does need to 

move towards a more flexible currency. They are moving in that direction. If the purpose of China’s currency has been to discourage 

U.S. exports to China, it has been a spectacular failure. As I testified earlier, our exports have been going up 23 percent a year. 

Manufacturing exports to China are going up. 

Mr.GONZA ́LEZ. But the converse of that is simply it has made 

Chinese exports much more affordable and attractive, and we are 

a consumer nation, and we can’t—

ChairwomanVELA ́ ZQUEZ. Would you gentleman yield? 

Mr.GONZA ́LEZ. Of course. 

ChairwomanVELA ́ ZQUEZ. If we are doing so well, how can you explain the huge trade deficit? 

Mr.GRISWOLD. I would say two responses, to not be too concerned 

about the trade deficit. One, imports are good. You know, your constituents are buying those Chinese goods every day. They are making the lives of your constituents better every day at home and the 

office, especially low-income constituents who spend a disproportionate amount of goods of their income on the kinds of products 

51

made in China—affordable shoes, affordable shirts. Those are good 

things for your constituents. 

Secondly, the flip side of the trade deficit is capital, an inflow of 

foreign capital. The Chinese are saving a lot. We don’t save very 

much here in the United States, including the Federal Government, which eats into the savings with its deficit. So those Chinese 

savings come here to the United States and help reduce interest 

rates, which is promoting investment, keeping mortgages down. 

I would like to see China’s currency be more flexible. I would like 

to see Americans, starting with the Federal Government, save 

more. But absent that, I think we should appreciate the tremendously mutually beneficial trade relationship we have with China. 

Mr.GONZA ́LEZ. May I reclaim my time? And I will finish up, Mr. 

Griswold, and I really appreciate—I know I am ignoring everybody 

else, but obviously I have some issues regarding Mr. Griswold’s testimony. Would you support the Ryan legislation on Chinese currency? 

Mr.GRISWOLD. I don’t believe so. I think anything that results in 

higher tariffs against Chinese goods may benefit a certain small 

segment of the U.S. economy, but at the overall expense of your 

constituents, American consumers, our overall trade relationship 

with China. I don’t want to jeopardize our tremendously growing 

exports to China, and I don’t want to deprive Americans of access 

to those goods from China that are making our lives better every 

day. 

Mr.GONZA ́LEZ. And you pinpointed something—the increase in 

manufacturing capacity. And I would imagine that maybe chip 

manufacturing and processors and such, like Intel, how would you 

explain Intel setting up shop in China as being beneficial for the 

economic interest of the United States? 

Mr.GRISWOLD. I would defer to my friend down at the other end 

who knows all about this industry. But my understanding is chips 

are not homogenous. We specialize in the higher end specialized 

processing chips here. We tend to offload the lower tech memory 

chips and other things to China. I think U.S. businesses should be 

free to arrange their supply chains in a way that maximizes the 

value for their shareholders, increases opportunities for their workers, but ultimately serves their customers. 

Mr.GONZA ́LEZ. And the Chinese will be quite satisfied for an indefinite period of time producing that particular chip, and maybe 

not benefiting by the technology or maybe higher end chips down 

the line, which would be in direct competition with Intel’s operation 

in the United States. 

I am not saying it is an easy call, but I am talking about Intel. 

And the same considerations they may have, I have got Mr. Seilkop 

here who is telling us, ‘‘I don’t really want to move my operation 

to China.’’

And thank you for that, Mr. Seilkop. And I yield back. 

ChairwomanVELA ́ ZQUEZ. Time is expired. 

Dr. Brainard, I would like to ask you—a trade deficit, as a measurement, does it question the competitiveness of a country? 

Ms.BRAINARD. A trade deficit, sort of at a point in time, doesn’t 

tell you. It is not sort of a sufficient piece of information in the 

sense that if we are growing much faster than our other competiVerDate 0ct 09 2002 10:11 Jan 08, 2008 Jkt 033615 PO 00000 Frm 00057 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\36104.TXT LEANN
52

tors, and our investment opportunities here, the money that we are 

absorbing from abroad is being put in the highest productivity 

uses, it might be okay for a period of time. 

Our trade deficit today is not okay, and it is not okay because 

it has been sustained over a very long period of time, because we 

are borrowing seven percent of our income every year from foreigners, and a disproportionate amount from China. And so I think 

over a very sustained period of time it should lead us to be very 

concerned. 

The other thing that I think you always want to look at is, so 

where is the capital going that is coming into the country? And if 

it is being absorbed by Treasury bills to feed the deficit, because 

we have got unaffordable tax cuts that we are using—that we are 

doing at the same time we are prosecuting a rather expensive war, 

that should trouble us because you are not going to see a turnaround in terms of productive investments that are going to then 

be available to service that debt. 

And, of course, the biggest concern is that the markets get nervous. And at that juncture, you could have a very strong shift in interest rates, which would curtail growth here. So it is just an unnecessary risk that the administration should have taken policy to 

avoid several years ago. 

ChairwomanVELA ́ ZQUEZ. Thank you. 

And with that, I would like to thank all the witnesses for the testimonies today. And members will have five legislative days to submit statements and other materials for the hearing record. 

The hearing is adjourned, and I thank you. 

[Whereupon, at 12:52 p.m., the Committee was adjourned.]

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