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2004

U.S.-CHINA TRADE AND INVESTMENT: IMPACT ON

KEY MANUFACTURING AND INDUSTRIAL SECTORS:

FIELD HEARING IN AKRON, OHIO

HEARING

BEFORE THE

U.S.-CHINA ECONOMIC AND SECURITY 

REVIEW COMMISSION

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

SEPTEMBER 23, 2004

Printed for the use of the 

U.S.-China Economic and Security Review Commission 

Available via the World Wide Web: http://www.uscc.gov

(
U.S.-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION

C. RICHARD D’AMATO, Chairman 

ROGER W. ROBINSON, Jr., Vice Chairman 

CAROLYN BARTHOLOMEW, Commissioner 

GEORGE BECKER, Commissioner 

STEPHEN D. BRYEN, Commissioner 

JUNE TEUFEL DREYER, Commissioner 

ROBERT F. ELLSWORTH, Commissioner 

PATRICK A. MULLOY, Commissioner 

WILLIAM A. REINSCH, Commissioner 

MICHAEL R. WESSEL, Commissioner 

LARRY M. WORTZEL, Commissioner

DAVID J. OHRENSTEIN, Executive Director 

KATHLEEN J. MICHELS, Associate Director

The Commission was created in October 2000 by the Floyd D. Spence National Defense Authorization Act for 2001 sec. 1238, Public Law 106–

398, 114 STAT. 1654A–334 (2000) (codified at 22 U.S.C. sec. 7002 (2001)), 

as amended, and the ‘‘Consolidated Appropriations Resolution of 2003,’’ 

Public Law 108–7, dated February 20, 2003. Public Law 108–7 changed 

the Commission’s title to U.S.-China Economic and Security Review Commission. 

The Commission’s full charter is available via the World Wide Web: http:// 

www.uscc.gov. 

The Commission’s Statutory Mandate begins on page 166. 

(II) 
iii

U.S.-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION

OCTOBER 18, 2004

The Honorable TED STEVENS, 

President Pro Tempore of the U.S. Senate, Washington, D.C. 20510

The Honorable J. DENNIS HASTERT, 

Speaker of the House of Representatives, Washington, D.C. 20515

DEAR SENATOR STEVENS AND SPEAKER HASTERT:

On behalf of the U.S.-China Economic and Security Review Commission, we are 

pleased to transmit the record of our field hearing in Akron, Ohio on September 23, 

2004. The hearing on ‘‘The Impact of U.S.-China Trade and Investment on Key Manufacturing Sectors’’ allowed the Commission to hear important perspectives on the 

pressures faced by manufacturers as a result of imports from China and the offshoring of U.S. production capacity. 

Ohio has lost 114,000 jobs since the start of the last recession in March 2001. 

Over the same time period, Ohio’s economy shed 158,000 manufacturing jobs. That 

loss represents 16 percent of Ohio’s employment in manufacturing. Thus, manufacturing job loss has exceeded net job loss for the state. Moreover, while job loss is 

concentrated in the manufacturing sector, it has been spread broadly across almost 

all manufacturing industries. The goal of our hearing was to identify what role the 

U.S.-China economic relationship plays in these trends, how this relationship affects 

the U.S. manufacturing base and communities dependent on manufacturing industries, and what policy responses the U.S. Government should consider. 

We heard testimony from businesses, labor representatives, and industry experts. 

The hearing began with a discussion of broad economic trends in Ohio and then 

moved on to focus on specific industries including: automobiles and automobile 

parts, steel, glassware and ceramics, printed circuit boards, and machine tools. Witnesses from these diverse industries all identified China as a major challenge for 

U.S. manufacturing. 

Ohio’s Experience with U.S.-China Trade and Investment

Ohio has been systematically impacted by our rapidly growing bilateral economic 

relationship with China. Studies show that Ohio is running a substantial trade deficit with China, with imports from China outpacing exports by nine to one. Nationally, that ratio is six to one. 

Several recurring themes were presented by witnesses. All expressed concern that 

their industries are disadvantaged by the value of China’s currency. An undervalued 

renminbi effectively makes it difficult for U.S. firms to export to China and subsidizes China’s exports to our country. The Commission dealt with this issue in detail at our September 25, 2003 hearing ‘‘China’s Industrial, Investment and Exchange Rate Policies: Impact on the U.S.’’ We stand by our finding from that hearing 

that China is improperly intervening to hold down the value of its currency by as 

much as 40 percent and our recommendation that the U.S. Government press China 

for an immediate revaluation of its currency. 

Witnesses also complained of China’s poor protection of intellectual property 

rights (IPR). Many of the commercial advantages that U.S. producers hold are in 

patented products and brands. Chinese producers continue to copy products and 

steal proprietary information from U.S. manufacturers. U.S. brands must compete 

with thinly veiled counterfeits, often of inferior quality. These undercut the price of 

the brand and damage its brand name as well. These repeated and egregious violations are the result of a lack of IPR enforcement by the Chinese government despite 

repeated assurances by Chinese officials that they are stepping up their efforts in 

this regard. 

China continues to ramp up industrial manufacturing capacity, most notably in 

the steel and automobile industries, with complete disregard for the global demand 

outlook. Chinese industries pay little heed to market forces as a result of the subsidies they receive from their local and national governments. One witness testified 

that Chinese government entities were paying for a portion of his Chinese competitor’s raw material inputs, had built roads to service the manufacturer, and had even 

cleared a large plot of land for use by the manufacturer. 

Many witnesses felt that the U.S. Government has failed to aggressively enforce 

U.S. trade laws intended to mitigate the damage caused by China’s trade practices. 

For example, they looked to safeguard provisions negotiated as part of China’s WTO 

accession as a way of mitigating the damaging effect of import surges from China, 
iv

but were disheartened by the Administration’s categorical rejection of all Section 

421 safeguard cases approved by the International Trade Commission (ITC) to date. 

One witness explained how his company had filed a Section 421 petition and won 

an ITC ruling, but relief was denied by the President, leaving the company to fend 

for itself after it had incurred significant legal expenses. This witness noted that 

the time and expense of bringing such cases are not worth undertaking if there is 

no sense that the government will approve them. Several witnesses testified as to the limited choices they face as a result of the Administration’s failure to aggressively enforce our trade laws. For example, one 

business leader noted that, ‘‘While outsourcing is a choice we prefer not to make, 

given the current Administration’s denial of our petition to keep jobs in the United 

States, it is one we have to consider carefully for the long-term survival of our business.’’ Others talked about the need for continuing wage and benefit cuts for their 

workers. 

Questions were also raised about the U.S. Export-Import Bank. Several witnesses 

said they believe the bank finances exports of manufacturing equipment to China 

in industries where U.S. manufacturers still produce and there is global overcapacity. In so doing, the U.S. Government has effectively paid China to create production capabilities that will compete with U.S. producers. 

Industry Impact

The Commission heard extensive testimony on the challenges facing the auto- motive and auto parts sectors of our economy as a result of China’s accelerating development of its capacity in these sectors. Representatives from business and labor 

addressed the Commission, as well as an analyst from a major investment firm that 

closely follows the sectors. China has aggressively sought to develop the size and scope of its automotive and auto parts sectors. According to one comprehensive study reviewed by the Commission in conjunction with the hearing, China is on pace to producing around 7 million 

units within three years. At the same time, demand is expected to only increase by 

about half that amount, leaving 3 million or more units available for export. Unlike 

the development of the Japanese automotive sector years ago, China has welcomed 

foreign investment and our manufacturers have reached several agreements to develop production there. As well, while Japanese manufacturers were forced to develop their own distribution system here in the United States, Chinese manufacturers, through their U.S. partners, have a readily accessible distribution network that 

could accommodate large volumes of imports from China. It should be noted that the Commission heard testimony about the current sub- standard quality of many Chinese automobiles. However, during questioning, testimony was also elicited that these limitations may be addressed in the near term 

(3–4 years), potentially creating enormous competitive pressures on our domestic 

auto market, as well as our markets in third countries. 

Similar testimony was heard with regard to the auto parts sector where increasing numbers of U.S. suppliers are either sourcing or producing in China. The Commission heard that the ‘‘Big Three’’ auto companies are demanding that U.S. auto 

parts suppliers that wish to sell to domestic assembly plants in the United States 

must price to the Chinese level. And there was further testimony that demands are 

being placed on U.S. auto parts suppliers to actually source minimum specific percentages from Chinese suppliers. 

In addition, testimony was received from a number of machine tool and industrial 

companies regarding the extent of Chinese piracy, unfair trade practices, subsidies 

and other efforts to gain market share and sales at the expense of our domestic 

firms. It is a tribute to those business leaders who appeared before us that are fighting to compete, rather than joining the bandwagon of those abandoning the U.S. 

market. 

Community Impact

The Commission heard poignant testimony on the extent to which trade-related 

economic dislocations have impacted Ohio communities. The Commission was told 

that the significant loss of jobs in Ohio due to import competition and off-shoring 

has resulted in the erosion of the local tax base in many communities and has had 

a debilitating impact on families and the quality of life in these areas. Moreover, 

these effects can be long-lasting. Youngstown, for example, has never recovered from 

its de-industrialization. Several decades later its economic prospects are dim and social problems abound. 

Based on the record of the hearing and the Commission’s other work on these 

issues to date, we present the following recommendations to the Congress for consideration. The Commission will continue to develop these recommendations and provide additional analysis following further Commission work in this area. 
v

Recommendations:

• The U.S. Government should immediately pursue a WTO action against China 

regarding the undervaluation of its currency. Months of bilateral discussions 

have failed thus far to yield positive results. We believe that the Treasury Department and the United States Trade Representative (USTR) should immediately file a WTO complaint, and if such action is not forthcoming, Congress 

should move to enact pending legislative measures to force such action. 

• Many areas of China’s WTO accession agreement impose dramatically unequal 

tariffs on Chinese and U.S. goods. For example, U.S. auto exports to China face 

far higher tariffs than do exports to the United States from China (e.g., Chinese 

tariffs on autos range from 30–50 percent, while U.S. tariffs average around 2.5 

percent). China has developed at a pace far faster than was envisaged at signing of the WTO accession agreement and these unequal tariff settings now 

heavily disadvantage U.S. exporters, risk import markets here and are no 

longer supportable. The U.S. Government should expeditiously examine the potential for rectifying this situation as part of the Doha Round negotiations. 

• China’s restrictions on the export of coke drive up costs for U.S. steel manufacturers while suppressing costs for their Chinese competitors. USTR should 

immediately consult with our trading partners with the goal of filing a WTO 

complaint regarding this violation of China’s WTO commitments on export restraints. 

• The U.S. Government should more fully and effectively make use of all available enforcement tools, especially the Section 421 China-specific safeguards 

negotiated as part of China’s WTO accession. Congress should consider undertaking measures to make the imposition of such safeguards mandatory in circumstances where import growth in particular goods exceeds a threshold level. 

In addition, the Department of Commerce should implement a procedure to 

make financial assistance available to small businesses to pursue safeguard 

cases where prima facie evidence exists of injury or a sufficient surge in imports 

to merit immediate attention. Safeguard cases can be highly costly and out of 

financial reach for many impacted businesses. 

• The Congress should fund information sessions and a public awareness campaign to inform laid-off workers about existing and newly established programs 

such as Trade Adjustment Assistance (TAA). Petitions for TAA eligibility should 

be processed expeditiously. Further, many workers adversely affected by trade 

are still excluded from TAA. Eligibility for TAA should be expanded in a comprehensive manner to cover the broad array of workers adversely affected by 

trade with China, including those in the service sector and others who have not 

traditionally been covered. 

• Congress should reexamine the statutory advisory process by which USTR 

receives input on pending trade negotiations from interested stakeholders to ensure that adequate attention and input is afforded to the representatives of organized labor.

We hope you will find the hearing record and our recommendations helpful as the 

Congress continues its assessment of the implications of China’s growing role in 

global trade and manufacturing. 

Sincerely,

C. Richard D’Amato 

Chairman 

Roger W. Robinson, Jr. 

Vice Chairman

cc: Members of the Ohio Congressional Delegation

Commissioner Stephen D. Bryen dissents in whole or in part from the recommendations contained in this letter. Commissioner William A. Reinsch does not agree 

with the first recommendation.

(VII)

CONTENTS

Page THURSDAY, SEPTEMBER 23, 2004

U.S.-CHINA TRADE AND INVESTMENT:

IMPACT ON KEY MANUFACTURING AND INDUSTRIAL SECTORS 

Opening remarks of Chairman C. Richard D’Amato ............................................ 1

Prepared statement .......................................................................................... 2

Opening remarks of Commissioner Michael R. Wessel, Hearing Co-Chair ........ 3

Prepared statement .......................................................................................... 4

Opening remarks of Commissioner June Teufel Dreyer, Hearing Co-Chair ...... 5

Prepared statement .......................................................................................... 6

PANEL I: OVERALL IMPACT OF CHINA TRADE ON OHIO

Statement of William A. Burga, President, Ohio AFL–CIO, Columbus, Ohio ... 7

Prepared statement .......................................................................................... 8

Statement of Jon Honeck, Ph.D., Research Analyst, Policy Matters Ohio, 

Columbus, Ohio .................................................................................................... 10

Prepared statement .......................................................................................... 12

Statement of David Hansen, Managing Director, Ohio Manufacturers’ Association, Columbus, Ohio ....................................................................................... 14

Prepared statement .......................................................................................... 17

Statement of Jeff Otterstedt, Vice President and General Manager, Clow 

Water Systems, Coshocton, Ohio ........................................................................ 19

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

Panel I Discussion, Questions and Answers .......................................................... 24

PANEL II: AUTOS AND AUTO PARTS

Statement of Ron Gettelfinger, President, International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW), 

Detroit, Michigan ................................................................................................. 35

Prepared statement .......................................................................................... 38

Statement of Stephen Girsky, Managing Director, Morgan Stanley, Purchase, 

New York .............................................................................................................. 43

Statement of James G. Pearl, Senior Vice President of Sales and Marketing, 

accompanied by Scott Tackett, Vice President, Human Resources and Administration, Denman Tire Corporation, Leavittsburg, Ohio ........................... 46

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

Panel II Discussion, Questions and Answers ........................................................ 50

PANEL III: STEEL, GLASSWARE AND CERAMICS

Statement of David McCall, District 1 Director, United Steelworkers of America, Columbus, Ohio ............................................................................................. 65

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

Statement of David W. Johnson, President and CEO, Summitville Tiles, Incorporated, Summitville, Ohio ............................................................................ 75

Prepared statement .......................................................................................... 77

Statement of Jerry Vanden Eynden, President, Lancaster Colony Glassware 

and Candle Group, Cincinnati, Ohio, on behalf of Candle-Lite and National 

Candle Association, accompanied by Brad Root ................................................ 82

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

Statement of Douglas Bartlett, Owner, Bartlett Manufacturing Company, 

and Director, United States Printed Circuit Alliance, Cary, Illinois ............... 89

Prepared statement .......................................................................................... 92
Page

VIII

Panel III Discussion, Questions and Answers ....................................................... 97

PANEL IV: MACHINE TOOLS AND OTHER INDUSTRIES

Statement of Dan Imbrogno, President and CEO, Ohio Screw Products, Incorporated, Elyria, Ohio ........................................................................................... 111

Statement of John Colm, Executive Director, WIRE-Net, Cleveland, Ohio ....... 113

Statement of David Murphy, Director of Personnel, Ferriot, Incorporated, 

Akron, Ohio .......................................................................................................... 115

Statement of Bruce A. Cain, President, Xcel Mold and Machine, Incorporated, 

Canton, Ohio ......................................................................................................... 116

Prepared statement .......................................................................................... 119

Statement of Jim Evans, Purchasing Manager, Gentzler Tool and Die, Green, 

Ohio ....................................................................................................................... 122

Panel IV Discussion, Questions and Answers ....................................................... 124

PANEL V: COMMUNITY IMPACT

Statement of John C. Folk, United Steelworkers of America, District 1, Columbus, Ohio ........................................................................................................ 132

Prepared statement .......................................................................................... 137

Statement of James C. Newport, Organizing Coordinator, United Steelworkers of America, District 1, Columbus, Ohio ............................................... 134

Prepared statement .......................................................................................... 137

Statement of John Russo, Ph.D., Professor, Labor Studies, the Warren P. 

Williamson College of Business Administration, Co-Director, Center for 

Working-Class Studies, Youngstown State University, Youngstown, Ohio .... 141

Prepared statement .......................................................................................... 143

Statement of Reverend Anne Hagler, Akron, Ohio ............................................... 145

Panel V Discussion, Questions and Answers ........................................................ 147

Open Microphone for Public Comment .................................................................. 159
(1)

U.S.-CHINA TRADE AND INVESTMENT: 

IMPACT ON KEY MANUFACTURING 

AND INDUSTRIAL SECTORS

THURSDAY, SEPTEMBER 23, 2004

U.S.-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION, 

Washington, D.C. 

The Commission met in Room 301, Akron City Council Office, 

Akron Municipal Building, Akron, Ohio at 9:00 a.m., Chairman C. 

Richard D’Amato, Commissioner Michael R. Wessel and Commissioner June Teufel Dreyer (Hearing Co-Chairs), presiding. 

OPENING REMARKS OF CHAIRMAN C. RICHARD D’AMATO 

Chairman D’AMATO. Good morning, and welcome to everyone to 

the U.S.-China Commission’s first hearing since issuing our 2004 

annual report. By the way, the 2004 annual report, if anyone would 

like a copy, is on a table outside of the hearing room. It’s an important report containing a 12-page summary of the Commission’s recommendations and findings. 

We begin our new report cycle by holding a hearing in the field, 

a practice that we initiated for our last report and found to be extremely helpful in giving us a practical perspective of what is happening to the manufacturing base of the United States. We’re 

pleased to be here in Akron today, and I want to express my gratitude to the Akron city government for the use of this facility and 

all the other help from the Mayor’s office and others who made this 

hearing possible. 

The Commission was established by the United States Congress 

to investigate the national security implications of our trade and 

economic relationship with China. The Members of the Commission 

were appointed by the Republican and Democratic leaders of both 

the House and the Senate of the United States. It is a bipartisan 

Commission in practice and spirit and in the way we conduct our 

business. The report that we issued this past June was released 

with a unanimous vote of 11 to 0, with one Commissioner position 

currently vacant. Congress has directed us to take a broad view of 

national security, to include an assessment of how our wide-ranging economic relationship with China affects our basic economic 

health and prosperity, and hence our national security. It is this 

central mandate that brought us to Ohio. 

Congress is increasingly interested in determining whether or 

not our country has in place the appropriate policies to enhance 

American well-being through our international trade and investment activities. We’re keenly interested in whether the Administration is implementing those policies on behalf of our businesses, our 
2

workers and ordinary citizens. What’s the track record in Ohio? If 

we need new policies, what should they be? Are U.S. Government 

policies and practices helping people in Ohio; if not, why not? The goal of today’s hearing is to hear practical first-hand per- spectives of how U.S.-China trade and investment patterns are impacting our industrial base. U.S. manufacturers, labor unions, 

economists and others have increasingly identified China’s manufacturing competition as a critical factor in the erosion, and some 

say decimation, of the United States manufacturing capacity. The loss of our manufacturing base also reverberates at the per- sonal and community levels. So we are also here today to understand the human context of manufacturing job losses. We hope this 

hearing will help this Commission and the broader national audience understand what challenges Ohio’s manufacturers and workers face, what hardships they have endured, and responses in 

Washington have worked to help in Ohio, and what responses have 

failed or have yet to be tried. With that I would like to turn over the proceedings to the Co- Chairs of today’s hearing, my colleagues, Commissioner Michael 

Wessel and Commissioner June Teufel Dreyer. [The statement follows:]

Prepared Statement of Chairman C. Richard D’Amato 

Good morning, and welcome to the U.S.-China Commission’s first hearing since issuing our 2004 Annual Report. We begin our new report cycle by holding a hearing in the field—a practice that we initiated for our last report and found to be extremely helpful in giving us a practical perspective of what is happening to the manufacturing base of the United States. We are pleased to be here in Akron today, and 

I want to express my gratitude to the Akron city government for use of this facility 

and all the other help from the Mayor’s office and others that has made this hearing 

possible. 

This Commission was established by the U.S. Congress to investigate the national security implications of our trade and economic relationship with China. The Members of the Commission were appointed by the Republican and Democratic leaders 

of both the U.S. Senate and House of Representatives. Congress directed us to take 

a broad view of national security, to include an assessment of how our wide-ranging 

economic relationship with China affects our basic economic health and prosperity, 

and hence our national security. It is this central mandate that has brought us to 

Ohio. 

Congress is increasingly interested in determining whether our country has in place the appropriate polices to enhance American well being through our international trade and investment activities. We are keenly interested in whether the 

Administration is implementing those policies on behalf of our businesses, our workers and ordinary citizens. What’s our track record in Ohio? And if we need new policies, what should they be? Are U.S. Government policies and practices helping the 

people of Ohio or not? 

The goal of today’s hearing is to hear practical, first-hand perspectives on how U.S.-China trade and investment patterns are impacting our industrial base. U.S. 

manufacturers, labor unions, economists and others have increasingly identified 

China’s manufacturing competition as a critical factor in the erosion, some say the 

decimation, of U.S. manufacturing capacity. The loss of our manufacturing base also reverberates at the personal and community levels. So we are also here today to understand the human context of manufacturing job losses. We hope this hearing will help this Commission and the broader 

national audience understand what challenges Ohio’s manufacturers and workers 

face, what hardships they have endured, what responses from Washington have 

worked to help Ohio, and what responses have failed or have yet to be tried. 

With that I would like to turn over the proceedings to the co-chairs of today’s 

hearing, my colleagues, Commissioner Michael Wessel and Commissioner June 

Dreyer.

Chairman D’AMATO. Co-Chair Wessel. 
3

OPENING REMARKS OF COMMISSIONER MICHAEL R. WESSEL

HEARING CO-CHAIR 

Co-Chair WESSEL. Thank you, Mr. Chairman. 

I’m pleased to Co-Chair today’s hearing with my colleague, June 

Dreyer. I will chair the morning panels, and Co-Chair Dreyer will 

chair this afternoon’s panels. As my esteemed Chairman said, we 

have got a lot of help from the Mayor’s office and others. We would 

like to take this opportunity to recognize the outstanding support 

Mayor Plusquellic and his very capable staff have given us. A special thanks goes to Laraine Duncan, Deputy Mayor for Intergovernmental Relations, who assisted us with the facility and logistical 

arrangements. We want to personally thank you, Laraine—I saw 

her earlier—for all your personal efforts on our behalf. 

We also owe a special thanks and our deep gratitude to Mr. 

Mark Williamson, John Valle, and Laurie Hoffman of the Mayor’s 

office for their support and assistance. They did an outstanding job 

for us and thanks to each of you. 

We also want to thank Congressman Sherrod Brown and his 

staff for their assistance and support. The personal efforts and 

hard work of Brett Gibson, Laura Pechaitis, Mike West and Joanna 

Kuebler were instrumental in our ability to successfully conduct 

this important regional hearing. 

And finally we want to thank Congressman Regula and his office, especially Karen Buttaro, for their help in organizing today’s 

hearing and witnesses. 

As the Chairman said, in June of this year we issued our second 

comprehensive report. We did so with a unanimous vote, Democrats and Republicans, representatives from business and labor, 

Commissioners with varied backgrounds in government and in the 

private sector. While the Commission’s report is comprehensive, its 

conclusion was simple, and I quote, ‘‘A number of the current 

trends in U.S.-China relations have negative implications for our 

long-term economic and national security interests, and therefore 

that U.S. policies in these areas are in need of urgent attention and 

course corrections.’’

Ohio has been called ground zero in this year’s Presidential race. 

That’s not an issue this Commission will address, that’s for the voters to decide. 

But as we see it, Ohio is ground zero in terms of the impact that 

trade has had on our nation. In the past four years Ohio has lost 

almost 19 percent of its manufacturing jobs. That’s over two-thirds 

of the total private sector job loss in Ohio over the same period. 

Ohio maintains a merchandise trade deficit with China that increased by more than eight percent from 2002 to 2003. Ohio is not 

alone: 48 states have merchandise trade deficits with China, and 

all but two of those states saw their deficits increase in 2003. 

The Commission’s focus here today on America’s manufacturing 

base stems not only from the fact that it is explicitly mentioned in 

our Congressional mandate, but also because manufacturing is an 

indispensable part of the U.S. economy. Two-thirds of the money 

that the U.S. spends on research and development is spent by the 

manufacturing sector, and 90 percent of new patents originate in 

manufacturing. Manufacturing is also important for the mainte-
4

nance of a middle class, with its jobs paying 20 percent more than 

the average American jobs, accompanied by better benefits. So I thank all the participants who are here today to aid us in our duty to inform and advise Congress of the implications that the 

U.S.-China American trade and investment relationships hold for 

the American manufacturing base, the American economy, and ultimately the American way of life. I would now like to turn to Co-Chair Dreyer for her opening 

statement. 

[The statement follows:]

Prepared Statement of Commissioner Michael R. Wessel

Hearing Co-Chair 

The Commission is pleased to be meeting today in Akron to continue its com- prehensive investigation of how the U.S.-China trade and investment relationship 

is affecting vital regions and sectors of our economy. This is the third in a series 

of field hearings the Commission has held this year. I am pleased to co-chair today’s hearing with my colleague, Commissioner June Dreyer. I will chair the morning panels and Commissioner Dreyer will chair this 

afternoon’s panels. 

We would like to take this opportunity to recognize the outstanding support and assistance we have received from Mayor Don Plusquellic and his very capable staff. 

A special thanks goes to Laraine Duncan, Deputy Mayor for Intergovernmental Relations, who assisted us with the facility and logistical arrangements. We want to 

personally thank you, Laraine, for all your personal efforts on our behalf. We owe a special thanks and our deep gratitude also to Mark Williamson, John Valle, and Laurie Hoffman of the Mayor’s office for their support and assistance. 

They did an outstanding job for us. Thanks to each of you. We also want to thank Congressman Sherrod Brown and his staff for their assist- ance and support. The personal efforts and hard work of Brett Gibson, Laura 

Pechaitis, Mike West and Joanna Kuebler were instrumental in our ability to successfully conduct this important regional public hearing. Finally, we want to thank Congressman Regula and his office, especially Karen Buttaro, for their help in organizing today’s hearing and witnesses. The U.S.-China Economic and Security Review Commission was created by Con- gress in 2000 to monitor, investigate, and report to Congress on the national security implications of the bilateral trade and economic relationship between the 

United States and the People’s Republic of China. 

In June of this year, we issued our second comprehensive report. We did so with a unanimous vote—Democrats and Republicans, representatives from business and 

labor, Commissioners with varied backgrounds in government and in the private 

sector. While the Commission’s report is comprehensive, it’s conclusion was simple: 

‘‘a number of the current trends in U.S.-China relations have negative implications for our long-term economic and national security interests, and therefore that U.S. policies in these areas are in need of urgent attention and course corrections.’’

Ohio has been called ground zero in this year’s Presidential race. That’s not an issue this Commission will address, that’s for the voters to decide. 

But, Ohio is ground zero in terms of the impact that trade has had on our nation. In the past four years Ohio has lost almost 19% of its manufacturing jobs. That’s 

over two-thirds of the total private job loss in Ohio over the same period. Ohio maintains a merchandise trade deficit with China that increased by more than 8% from 2002 to 2003. Ohio is not alone: Forty-eight states have merchandise 

trade deficits with China, and all but two of those states saw their deficit increase 

in 2003. 

The Commission’s focus here today on America’s manufacturing base stems not 

only from the fact that it is explicitly mentioned in our Congressional mandate, but 

also because manufacturing is an indispensable part of the U.S. economy. Twothirds of the money that the U.S. spends on research and development is spent by 

the manufacturing sector, and 90% of new patents originate in manufacturing. Manufacturing is also important for the maintenance of a middle class, with its jobs paying 20% more than the average American jobs, accompanied by better benefits. 

As we explore the impact of U.S.-China economic relations on Ohio and the neighboring region, we will be focusing on how U.S. trade policies can better respond to 

the challenges posed by China. Certainly more effective and aggressive enforcement 

of our trade agreements is called for. But beyond that there may be policy reforms 
5

that are needed to right the growing trade imbalances we are seeing in so many 

vital manufacturing sectors. So I thank all of the participants who are here to aid us in our duty to inform and advise Congress of the implications that the U.S.-China trade and investment 

relationships hold for the American manufacturing base, the American economy, 

and ultimately the American way of life. Our first panel will help provide an overview of the overall impact of trade with 

China on Ohio. We are pleased to have before us Mr. William A. Burga, President 

of the Ohio AFL–CIO. We also have Dr. Jon Honeck, a research analyst with Policy 

Matters Ohio, an economic policy think tank. Mr. David Hansen, Managing Director 

of the Ohio Manufacturers’ Association will then speak, followed by Mr. Jeff 

Otterstedt, General Manager of CLOW Water Systems Company who has specific 

experience in terms of the impact of trade with China on his company. 

We will hear from the witnesses in the order in which they were introduced. So 

that all of the Commissioners can have adequate time to discuss these important 

issues with the witnesses, we ask that each witness speak for no more than 7 minutes. At the end of the panel’s presentation, each Commissioner will be recognized 

for 5 minutes.

OPENING REMARKS OF COMMISSIONER JUNE TEUFEL DREYER

HEARING CO-CHAIR 

Co-Chair DREYER. I would like to join my hearing Co-Chair, CoChair Wessel, in thanking the Mayor’s office and the Akron community for facilitating our visit here today. This is an area of the 

country that, as we are all aware, is on the very front lines of U.S.-

China trade. I noticed on the television this morning that your 

neighboring city, Cleveland, has undergone further job losses and 

more people have sunk into poverty. The reason is loss of manufacturing jobs. Interestingly the third city on the list was my own city, 

Miami, so this is very close to home in many ways. 

Later today we are going to talk about the steel and glassware 

and ceramic industries and how they’ve been affected by trade and 

investment with China and the likely trends for the future. Finally, 

a panel will address the machine tool industry. As a former resident of the State of Ohio I’m very familiar with Square D and Cincinnati Millicron and so on. 

These industries, as we all know, are vital parts of Ohio’s economy. For example, Ohio employs 16 percent of the nation’s iron and 

steel workforce, which generates one-sixth of America’s raw steel. 

Ohio’s machinery manufacturing accounts for 2.4 percent of its economic activity compared to one percent nationally. The industry is 

characterized by above average wages and significant spending on 

research and development. 

Since I’m in charge of the afternoon, the contrast with the morning session will be that we hope to garner information regarding 

the continued vitality of these industries, the pressure they are 

under from trading with, and investment in, China, and appropriate U.S. Government policy responses to meet the competitive 

challenges posed by China. 

I note from an article in today’s newspaper that the cost of producing a disposable camera for Kodak in Rochester, New York was 

one dollar. The cost for producing it in China is 15 cents. How can 

we compete with something like that? Are there ways? What can 

we do better? 

There are also broader questions that need to be examined. This 

is the Economic and Security Review Commission. We are aware 

that economics is vitally connected to security, and if we lose jobs, 

our security position is eroded as well. Hence, we’re looking for-
6

ward to productive discussions with business and labor representatives from these manufacturing sectors who are going to testify. Our final panel will discuss the effects of a declining manufac- turing base on the local community, and we will close with an open 

microphone session. With these portions of our hearing we hope to 

ground ourselves in the human element of the economic forces that 

we are discussing. They will provide an opportunity for us to assess 

at the most material level which U.S. policies have proved helpful 

and what economic and human needs remain unfilled. 

Again, we are very pleased to be in Akron today, and we’re look- ing forward to this day of testimony. Thank you. [The statement follows:]

Prepared Statement of Commissioner June Teufel Dreyer Hearing Co-Chair 

I would like to join my hearing co-chair, Commissioner Wessel, in thanking the Mayor’s office and the Akron community for facilitating our visit here today, an area 

of the country that is on the front lines of U.S.-China trade. This afternoon we will 

begin with our panel examining how the steel, glassware, and ceramics industries 

have been affected by trade and investment with China and the likely trends for 

the future. The subsequent panel will address the machine tool industry. These industries are vital elements of Ohio’s economy. By way of example, Ohio employs 16% of the nation’s iron and steel workforce, which generates one-sixth of 

America’s raw steel. Ohio’s machinery manufacturing accounts for 2.4% of its economic activity, compared to 1% nationally. The industry is characterized by above 

average wages and significant R&D spending. As during our morning session, we hope to garner information regarding the con- tinued vitality of these industries, the pressures they are under from trade with and 

investment in China, and appropriate U.S. Government policy responses to meet the 

competitive challenges posed by China. These are key questions for exploration 

within the Commission’s broader examination of the economic and security dimensions of the U.S.-China economic relationship. We look forward to a productive discussion with the businesses and labor representatives from these manufacturing 

sectors. 

Our final panel will discuss the effects of a declining manufacturing base on the 

local communities, and we will close with an open microphone session. With these 

portions of our hearing, we hope to ground ourselves in the human element of the 

economic forces that we are discussing. They will provide an opportunity for us to 

assess, at the most material level, which U.S. policies have proved helpful and what 

economic and human needs remain unfilled. 

Again, we are very pleased to be in Akron today and look forward to this afternoon’s testimony.

Co-Chair WESSEL. We’ll begin quickly. Our first panel will help 

provide an overview of the overall impact of trade with China on 

Ohio. We are pleased to have before us Mr. William Burga, President of the Ohio AFL–CIO. We also have Dr. Jon Honeck, a research analyst with Policy Matters Ohio, an economic policy think 

tank. Mr. David Hansen, Managing Director of the Ohio Manufacturers’ Association will then speak, followed by Mr. Jeff Otterstedt, 

General Manager of Clow Water Systems who has specific experience in terms of the impact of trade in China on his company. 

We will hear from the witnesses in the order in which I just introduced them. So that all of the Commissioners will have an adequate chance to question and interact with the witnesses, we have 

a series of lights. We are asking each witness to speak for no more 

than seven minutes. Commissioners, you will be limited to five 

minutes for questions and responses, and we will try not to be 

rude, but we are going to try to stick to our timeframes today. 

With that, Mr. Burga, please commence. 
7

PANEL I: OVERALL IMPACT OF CHINA TRADE ON OHIO 

STATEMENT OF WILLIAM A. BURGA

PRESIDENT, OHIO AFL–CIO, COLUMBUS, OHIO 

Mr. BURGA. Thank you. Mr. Chairman, Members of the U.S.-

China Trade Commission, our organization represents approximately 750,000 members of the AFL–CIO. If this meeting had been 

held one or two years ago, we would have nearly 850,000 members. 

But as you know, Ohio has been hit hard with over 240,000 jobs 

lost since January 1, 2001. 

Many, but not all, of the job losses have been union jobs, highpaying jobs, with the manufacturing sector taking the brunt of the 

hit with 170,000 jobs disappearing. The Ohio AFL–CIO has been 

frustrated with the lack of response to this crisis and set out to find 

the facts to help move public policy. 

The facts are backing up what common sense has told us: That 

unfair trade and outsourcing are major causes for the loss of jobs 

in Ohio. Domestic economic problems associated with unfair trade 

are documented in recent studies conducted by organizations such 

as Policy Matters Ohio and the Economic Policy Institute. These 

findings are highlighted in a May 2004 Ohio AFL–CIO report titled 

Jobs for Us. Additionally, a report released just this week by the 

AFL–CIO Industrial Union Council entitled Ohio Job Exports establishes a relationship between Ohio companies that have had 

massive layoffs since January 2001 and unfair trade. 

Obviously we cannot discuss trade without looking at China. 

China now accounts for over one quarter of our global trade deficit, 

which nears $500 billion. We have come to learn that 98 percent 

of China’s exports are manufactured goods with 40 percent of its 

exports landing in the United States. This information will not 

come as a surprise to any Ohio consumer as made in China is the 

dominant label on goods we find at our local stores. 

At the same time the U.S. trade deficit with the rest of the world 

and China in particular has soared. Ohio’s jobless rate and our economic downturn spiral out of control. Ohio has outreached the rest 

of the nation in job loss with no sign of recovery. In fact, Ohio is 

last in the nation in job growth and wage growth with our leading 

export being our young people as they move out of Ohio looking for 

a brighter future. 

The crisis in Ohio’s manufacturing sector and resulting job losses 

created a state budgetary fiasco which led to draining the state’s 

rainy day fund, raising the sales tax rate and expanding fees on 

goods and services. Yet this was not sufficient, and cuts to state 

services across the board were executed by the governor. It is our 

opinion that the state’s budgetary problems will not get better until 

we straighten out our priorities and policies which favor multinational corporations and leave workers behind. 

From our viewpoint the Bush Administration and our trade representatives have not been standing up for workers. I would like 

to recount something President Bush said Labor Day 2003 while 

here in Ohio. He said, quote, ‘‘We expect there to be a fair playing 

field when it comes to trade. See, we in America believe we can 

compete with anybody just so long as the rules are fair and we intend to keep the rules fair,’’ end quote. 
8

Today the Commission will hear testimony that demonstrates the rules are not fair, especially as it relates to China. And contrary 

to what the President says, he has had ample time to review the 

trading practices of China and has failed to take action when confronted with its trading violations. The light on China exposes a trading relationship that appears less about fair trade and more about providing multinational corporations with a place to find and exploit cheap labor. This leads 

us to the conclusion that our current trade policies place corporate 

interests over national interests. How else can we explain giving 

Permanent Normal Trade Relation status to a totalitarian nation 

that does not live up to its international obligations with respect 

to human rights, labor lights, environmental standards and rules 

governing currency? We are pleased the Commission is allowing for time to hear from some of Ohio’s displaced workers, as it is their stories that matter 

most. Workers such as Frank Rayl, who after 17 years of hard 

work at Eljer saw his company move to China. Workers like David 

McCune who worked 24 years at Massillon Stainless Steel only to 

have the company pick up and move to China. The list of Ohio’s 

working families that have been displaced as companies seek to 

find cheap labor to do business is long and disgraceful. It doesn’t have to be this way, Mr. Chairman. First, let me sug- gest that in order to overcome our shortfall of trade-related data, 

there should be requirements to collect information related to job 

relocation and outsourcing. In Ohio the Ohio AFL–CIO proposes to 

create a new state agency that in part would be responsible for collecting such business-related data and representing Ohio on trade 

matters. 

Second, tax laws should be modified prohibiting rewarding cor- porations that move business or jobs to foreign nations. Third, U.S. trade negotiators should have an understanding of trade problems, which would negatively affect U.S. workers. Fourth, we believe current trade agreements should be vigor- ously enforced and violations appropriately remedied. Finally, the U.S. should not expand existing trade agreements or usher in new deals until the aforementioned problems and controversy surrounding trade and globalization are responsibly addressed. 

In closing I would simply like to thank the Commission for com- ing to Ohio and for providing us this opportunity today. [The statement follows:]

Prepared Statement of William A. Burga

President, Ohio AFL–CIO, Columbus, Ohio 

Mr. Chairman and Members of the U.S.-China Trade Commission our organiza- tion represents approximately 750,000 members of the AFL–CIO. If this meeting 

had been held one or two years ago we would have nearly 850,000 members but 

as you know Ohio has been hit hard with over 240,000 jobs lost since January 1, 

2001. 

Many, but not all, of the job losses have been union, high paying jobs with the manufacturing sector taking the brunt of the hit with 170,000 jobs disappearing. 

The Ohio AFL–CIO has been frustrated with the lack of response to this crisis and 

set out to find the facts to help move public policy. 

The facts are backing up what common sense has told us—that unfair trade and 

outsourcing are major causes for the loss of jobs in Ohio. Domestic economic problems associated with unfair trade are documented in recent studies conducted by 
9

organizations such as Policy Matters Ohio and the Economic Policy Institute. These 

findings are highlighted in a May 2004 Ohio AFL–CIO report titled ‘‘Jobs for Us.’’ 

Additionally, a report released this week by the AFL–CIO Industrial Union Council 

entitled ‘‘Ohio Job Exports’’ establishes a relationship between Ohio companies that 

have had massive layoffs since January 2001 and unfair trade. 

Obviously, we cannot discuss trade without looking at China. China now accounts 

for over one quarter of our global trade deficit which nears $500 billion. We have 

come to learn that 98% of China’s exports are manufactured goods with 40% of its 

exports landing in the United States. This information will not come as a surprise 

to any Ohio consumer as ‘‘Made in China’’ is the dominant label on goods we find 

at our local stores. 

At the same time the U.S. trade deficit with the rest of the world and China in 

particular has soared Ohio’s jobless rate and our economic downturn spiral out of 

control. Ohio has outpaced the rest of the nation in job loss with no sign of recovery. 

In fact, Ohio is last in the nation in job growth and wage growth with our leading 

export being our young people as they move out of Ohio looking for a brighter future. 

The crisis in Ohio’s manufacturing sector and resulting job losses created a state 

budgetary fiasco which led to draining the state’s rainy day fund, raising the sales 

tax rate and expanding fees on goods and services. Yet, this was not sufficient and 

cuts to state services across the board were executed by the Governor. It is our opinion that the state’s budgetary problems will not get better until we straighten out 

our priorities and policies which favor multi-national corporations and leave workers 

behind. 

From our viewpoint, the Bush Administration and our trade representatives have 

not been standing up for workers. I would like to recount something President Bush 

said Labor Day 2003 while in Ohio. He said, ‘‘We expect there to be a fair playing 

field when it comes to trade. See, we in America believe we can compete with anybody, just so long as the rules are fair, and we intend to keep the rules fair.’’ Today 

the Commission will hear testimony that demonstrates the rules are not fair especially as it relates to China. And, contrary to what the President says, he has had 

ample time to review the trading practices of China and has failed to take action 

when confronted with its trading violations. 

The light on China exposes a trading relationship that appears less about fair 

trade and more about providing multi-national corporations with a place to find and 

exploit cheap labor. This leads us to the conclusion that our current trade policies 

place corporate interests over national interests. How else can we explain giving 

Permanent Normal Trade Relation status to a totalitarian nation that does not live 

up to its international obligations with respect to human rights, labor rights, environmental standards and rules governing currency. 

We are pleased the Commission is allowing for time to hear from some of Ohio’s 

displaced workers, as it is their stories that matter most. Workers such as Frank 

Rayl, who after seventeen years of hard work at Eljer saw his company move to 

China. Workers like David McCune who worked 24 years at Massillon Stainless 

Steel only to have the company pick up and move to China. The list of Ohio’s working families that have been displaced as companies seek to find a cheap place to 

do business is long and disgraceful. 

It doesn’t have to be this way Mr. Chairman. First, let me suggest that in order 

to overcome our shortfall of trade related data there should be requirements to collect information related to job relocation and outsourcing. The Ohio AFL–CIO proposes to create a new state agency that in part would be responsible for collecting 

such business related data and representing Ohio on trade matters. 

Second, tax laws should be modified to prohibit rewarding corporations that move 

business or jobs to foreign nations. 

Third, U.S. trade negotiators should have an understanding of trade problems 

which would negatively affect U.S. workers. 

Fourth, we believe current trade agreements should be vigorously enforced and 

violations appropriately remedied. 

Finally, the U.S. should not expand existing trade agreements or usher in new 

deals until the aforementioned problems and controversy surrounding trade and 

globalization are responsibly addressed. 

In closing, I would like to thank the Commission for coming to Ohio and providing 

us this opportunity to testify.

Co-Chair WESSEL. Thank you, I appreciate it. 

Dr. Honeck. 
10

STATEMENT OF JON HONECK, Ph.D.

RESEARCH ANALYST, POLICY MATTERS OHIO, COLUMBUS, OHIO 

Dr. HONECK. Thank you, Mr. Chairman. 

Good morning. My name is Jon Honeck. I am a research analyst 

with Policy Matters Ohio, a nonprofit research institution with an 

interest in employment, taxation, education and economic development policy. I would like to make a few remarks about Ohio’s employment situation in general and then discuss how our economic 

relations with China have affected Ohio’s manufacturing sector. 

Mr. Chairman, Ohio is truly experiencing a ‘‘jobless recovery.’’ 

Total nonagricultural wage and salary employment in July of this 

year is over 207,000 jobs below the level of July of 1999, so five 

years running. This represents a loss of 3.7 percent of our total employment base. Of course, in the previous five years our population 

has continued to grow. If total employment has kept pace with population growth, Ohio would have about 315,000 more jobs than it 

does now. 

The job loss in manufacturing is by far the single greatest cause 

of the unemployment crisis in Ohio and the other Great Lake 

states. A recent U.S. Department of Labor report estimated that 

353,000 workers have been displaced from the manufacturing sector between January 2001 and December of 2003 in Ohio, Michigan, Illinois, Indiana and Wisconsin. As shocking as that figure is, 

it only includes workers with more than three years on the job. 

With these workers the same report estimated that just 60 percent 

of them were able to find another job after they were laid off, and 

those that were reemployed full time, nearly two-thirds reported 

that their earnings at their new jobs were below those of their old 

jobs. 

The economic meltdown was widespread in Ohio’s manufacturing 

sector. We look at Ohio’s manufacturing sectors using four-digit 

North American Industry Classification System codes. There were 

77 industrial sectors that accounted for 99 percent of all wage and 

salary employment. Seventy of them had fewer jobs in December 

of 2003 than they did four years before. The seven industrial sectors that gained employment created a combined total of 1,757 new 

jobs. 

Manufacturing, especially durable goods manufacturing, has always been a very cyclical industry. Some of its problems are due 

to a fall off in demand due to terrorism and the recession between 

March 2001 and November 2001. Yet as recessions go, the contraction in GDP from March to November of 2001 was shallow compared to other recent recessions, particularly the one that occurred 

in the early 1980s. There are two factors at work that economists 

cite. Productivity is a factor in the decline in employment, but 

clearly the other factor is international trade, as evidenced by our 

growing trade deficit. According to the Economic Policy Institute in 

Washington, D.C., almost one-fourth of domestic demand for manufactured products is now met by foreign imports. 

There’s no doubt that international trade has led to substantial 

job losses in Ohio’s manufacturing sector. Earlier this year, Policy 

Matters Ohio released a report that analyzed program data from 

the U.S. Department of Labor’s Trade Adjustment Assistance Program. The report found that nearly 46,000 Ohioans had been dis-
11

placed from their jobs due to international trade between 1995 and 

November of 2003. The highest number of annual certifications 

took place in 2002, when 13,000 workers became eligible to apply 

for trade adjustment assistance. Last year’s total was above 6,000, 

and this year’s certifications are on a similar pace. 

Unfortunately, the TAA program data fails to capture the full extent of job losses due to trade. Program coverage has been expanded recently so that it now covers shift in production facilities 

to countries other than Mexico or Canada. Just in the last year the 

program certified workers at three Ohio companies that outsourced 

production to China: Senco Products in Cincinnati, Irwin Industrial 

Tools in Wilmington, and Ericsson Manufacturing Company in 

Willoughby. 

Despite these restrictions on program coverage, our report found 

that job losses certified under the TAA program accounted for nearly 19 percent of the net decline in manufacturing employment between January of 1999 and October 2003. 

It is well known that the United States runs a substantial and 

growing trade deficit with China. What are the implications of China’s export surge for Ohio’s economy, which is concentrated in more 

capital-intensive sectors? Let’s take a look at the 50 Ohio industrial 

sectors with the highest numbers of job lost between 1999 and 

2003, and the proportion of total imports within each sector that 

came from China. In 1999, the median share of Chinese imports to 

all imports in each sector was six percent. By 2003, the median 

Chinese share had risen to 11.4 percent. China’s share of total imports was 18 percent or over in 20 sectors. Only one of these 50 

sectors did not experience an increase in the Chinese share of total 

imports. Over the 1999 to 2003 period the median increase in the 

value of Chinese imports across all 50 sectors was 106 percent. 

Increased Chinese import competition played an important role 

in creating market conditions that led to severe job losses in certain Ohio sectors. For example, in the communications equipment 

sector, which lost nearly half of its workforce in Ohio, Chinese imports grew in value by 148 percent and accounted for nearly onefifth of the value of all imports by 2003. Chinese import competition played a major role in the recent shutdown of two large plants 

in central Ohio, Techneglas in Columbus and Thomson in 

Circleville. These two plants made glass picture tubes for televisions. These shutdowns combined to cost over 1,000 workers their 

jobs. Although changing technology also played a role in the shutdowns of these two plants, the U.S. International Trade Commission found that certain cathode-ray tube Chinese televisions were 

being dumped on the U.S. market, and an antidumping order has 

been in place since June of this year unfortunately too late to help 

the over 1,000 workers who lost their jobs. 

Co-Chair WESSEL. If you can sum up, please. 

Dr. HONECK. Mr. Chairman, standard economic models of international trade often assume that the economy is functioning at full 

employment. In this situation international trade shifts jobs among 

various sectors of the economy, but does not determine the overall 

level of employment. This may have been the case in Ohio and the 

rest of the United States during the 1990s. However, Ohio’s experience in the last several years is an example of what can happen 
12

when severe manufacturing job loss due to unbalanced trade occurs 

in the context of an economic downturn. The shrinking manufacturing sector becomes a decisive influence on the overall level of 

employment because it sets in motion a vicious circle of falling consumer and business demand. No one can say when this process will 

end, but the latest chapter in the dismantling of Ohio’s industrial 

base will make it even harder for our economy to provide an acceptable standard of living for all of our residents. [The statement follows:]

Prepared Statement of Jon Honeck, Ph.D.

Research Analyst, Policy Matters Ohio, Columbus, Ohio 

Good morning. My name is Jon Honeck. I am a Research Analyst with Policy Mat- ters Ohio, a non-profit research institution with an interest in employment, taxation, education, and economic development policy. I will make a few remarks about 

Ohio’s employment situation in general, and then discuss how our economic relations with China have affected Ohio’s manufacturing sector. Ohio is truly experiencing a ‘‘jobless recovery.’’ Total non-agricultural wage and salary employment in July of this year is over 207,000 jobs below the level of July 

1999. This represents a loss of 3.7 percent of our total employment base. Of course, 

during the previous five years, our population has continued to grow. If total employment had kept pace with population growth, Ohio would have 315,000 more jobs 

than it does now. 

Despite reports about signs of an upturn in national employment, preliminary sta- tistics indicate that Ohio lost 12,000 jobs in August, the worst in the nation. Our 

seasonally adjusted unemployment rate rose from 6 percent in July to 6.3 percent 

in August. Another indicator of economic distress is that statewide unemployment claims for the first half of this year are still 40 percent higher than they were in the first half 

of 1999. Moreover, the rate at which unemployment compensation recipients exhaust their benefits before finding a job is still at a recessionary level. Job loss in manufacturing is by far the single greatest cause of the employment 

crisis in Ohio and the other Great Lakes states. A recent U.S. Department of Labor 

report estimated that 353,000 workers had been displaced from the manufacturing 

sector between January 2001 and December 2003 in Ohio, Michigan, Illinois, Indiana, and Wisconsin. As shocking as this figure is, it only includes displaced workers 

with more than three years at the same job. Nationally, the same report estimated 

that just 60 percent of workers laid off from manufacturing were able to find another job. Of those who were reemployed full-time, nearly two-thirds reported that 

their earnings at their new jobs were below those of their lost jobs. 

Layoffs and attrition combined to cause the loss of 202,143 jobs in Ohio’s manufacturing sector between December 1999 and December 2003, a decline of nearly 20 

percent. The manufacturing sector lost jobs in each year. The worst year was 2001, 

when 91,242 jobs were lost. Current estimates indicate that an additional 11,000 positions have been lost this year through August, leaving about 825,000 manufacturing jobs in our state. 

The economic meltdown was widespread. If we look at Ohio’s manufacturing sectors using four-digit North American Industry Classification System codes, or 

‘‘NAICS’’ codes, as of 1999, there were seventy-seven industrial sectors that accounted for 99 percent of all wage and salary employment. Seventy of them had 

fewer jobs in December of 2003 than they did in four years before. The seven industrial sectors that gained employment created a combined total of 1,757 new jobs. 

During the four years between December 1999 and December 2003, motor vehicle 

parts, which has the largest employment of any industrial sector in Ohio, lost 

19,500 jobs, or 17 percent of its workforce. Plastic products, which has the secondhighest employment level, lost 9,900 jobs, or 16 percent of its workforce. Three other 

sectors—foundries, metalworking machinery, and rubber products—all lost over 

9,800 jobs, eliminating between 28 and 35 percent of their respective workforces. 

Seven other industrial sectors lost over 5,000 jobs. Thirteen industrial sectors lost 

between 3,000 and 5,000 jobs. 

Manufacturing, especially durable goods manufacturing, has always been a very 

cyclical industry. Some of its problems are due to a fall-off in demand due to terrorism and the recession between March 2001 and November 2001. Yet, as recessions go, the contraction in GDP from March to November of 2001 was shallow compared to other recent recessions, particularly the one that occurred in early 1980s. 
13

As employment has failed to recover, it is clear that other factors besides domestic 

demand are at work. Federal Reserve Board Chairman Alan Greenspan and other 

economists often cite rising productivity in manufacturing as a key reason for the 

decline of manufacturing employment, but productivity alone is insufficient to account for the nationwide loss of three million manufacturing jobs between 1998 and 

2003. Clearly, the other factor at work is international trade, as evidenced by our 

growing trade deficit. According to the Economic Policy Institute in Washington, 

D.C., almost one-fourth of domestic demand for manufactured products is now met 

by foreign imports. There is no doubt that international trade has led to substantial job losses in Ohio’s manufacturing sector. Earlier this year, Policy Matters Ohio released a report 

that analyzed program data from the U.S. Department of Labor’s Trade Adjustment 

Assistance (TAA) program. The TAA program offers extended unemployment benefits, relocation and job search allowances, a health care tax credit, and limited wage 

supplements for reemployed older workers. The report found that nearly 46,000 

Ohioans had been displaced from their jobs due to international trade between 1995 

and November 2003. The highest number of annual certifications took place in 2002, 

when 13,000 workers became eligible to apply for trade adjustment assistance. Last 

year’s total was above 6,000, and this year’s certifications are on a similar pace. Unfortunately, TAA program data fails to capture the full extent of job losses due to trade. When a plant closes or reduces production, the effects cascade down the 

supply chain and also are felt by businesses that provide services to the plant. But, 

until November 2002, the TAA program did not cover workers at supplier companies, nor did it cover shifts in production facilities to countries other than Mexico 

or Canada. Just in the last year, the program certified workers at three Ohio companies that outsourced production to China: Senco Products in Cincinnati, Irwin Industrial Tools in Wilmington, and Ericsson Manufacturing Co. in Willoughby. Otherwise, program coverage for establishments that provide services to a manufacturing plant remains extremely limited. Despite these restrictions on program coverage, our report found that job losses certified under the TAA program accounted 

for nearly 19 percent of the net decline in manufacturing employment between January 1999 and October 2003. Finally, there are an unknown number of jobs lost in other sectors of the economy because of the negative multiplier effects of manufacturing job loss on consumer 

spending. I would like to draw the Commission’s attention to the fact that there are 

6.4 percent fewer people employed in Ohio’s retail sector than there were five years 

ago. It is well known that the United States runs a substantial and growing trade def- icit with China. American consumers are already familiar with China’s exporting 

prowess in labor-intensive sectors such as apparel, toys, and footwear. What are the 

implications of China’s export surge for Ohio’s economy, which is concentrated in 

more capital-intensive sectors? Let’s take a look at the fifty Ohio industrial sectors 

with the highest numbers of jobs lost between 1999 and 2003, and the proportion 

of total imports within each sector that come from China. In 1999, the median share 

of Chinese imports to all imports in each sector was 6 percent. By 2003, the median 

Chinese share had risen to 11.4 percent. China’s share of total imports was 18 percent or over in 20 sectors. Only one of these fifty sectors (non-ferrous metals except 

aluminum) did not experience an increase in the Chinese share of total imports. 

Over the 1999 to 2003 period, the median increase in the value of Chinese imports 

across all fifty sectors was 106.2 percent (in nominal terms). 

Increased Chinese import competition played an important role in creating market conditions that led to severe job losses in certain Ohio sectors. In the communications equipment sector, which lost nearly half of its workforce in Ohio, Chinese 

imports grew in value by 148 percent and accounted for nearly one-fifth of the value 

of all imports by 2003. Chinese import competition played a major role in the recent 

shutdown of two large plants in Central Ohio that made glass picture tubes for televisions (Techneglas in Columbus and Thomson in Circleville). These shutdowns 

combined to cost over 1,000 workers their jobs. In 2002, Chinese products accounted 

for one-fourth of the U.S. market in the household audio-visual equipment subsector, which includes television production. Although changing technology also 

played a role in the shutdowns of these two plants, the U.S. International Trade 

Commission found that certain cathode-ray tube Chinese televisions were being 

dumped on the U.S. market, and an antidumping order has been in place since June 

of this year (I.T.C. Case no. A–1034). 

In the plastic products sector, which lost almost 10,000 jobs (16 percent of its 

workforce), Chinese imports grew in value by 75 percent and China increased its 

share of all imports from 19 to 24 percent. Most of Ohio’s job losses occurred in the 

‘‘all other plastics products’’ subsector, in which China is the leading exporter to the 
14

United States, sending $2.8 billion worth of products to the U.S. in 2003, up from 

$1.6 billion in 1999. In contrast, U.S. exports to China were a paltry $124 million. 

Chinese goods in this subsector held a 3.4 percent share of the U.S. market in 2002. 

In the rubber products sector, which lost 30 percent of its Ohio workforce, Chinese 

imports grew in value by 129 percent and China doubled its share of imports in the 

sector to 11.6 percent over the 1999 to 2003 period. Over half of the total job loss 

in rubber products occurred in the tire and tire products subsector. By 2002, China 

had become the third largest exporter of tires and tire products to the United 

States, holding roughly three percent of the U.S. domestic market. If present rates 

of growth continue for four or five years, China may surpass Japan and Canada to 

become the largest exporter of tires and tire products to the United States. 

Those who support normal trade relations with China often point to that country’s 

potential as an export market. Ohio’s exports to China have grown significantly 

since the U.S. and China began normal trading relations in 2000, but from a very 

low level. China became Ohio’s seventh-largest export destination by 2003. Even so, 

China only accounts for slightly over 2 percent of Ohio’s total exports. To put this 

in perspective, Ohio’s exports to China in 2003 were just 3.8 percent of the value 

of goods that Ohio exports to Canada ($16.9 billion), our largest trading partner. Put 

another way, the value of Ohio’s exports to China probably comprise no more than 

one-half of one percent of Ohio’s total industrial output. It should also be mentioned 

that recently there has also been another downside to China’s rapid growth—shortages of scrap metal, certain steel products, and cement. These shortages are beginning to affect the construction industry, which has been one of the few bright spots 

in Ohio’s economy. 

Standard economic models of international trade often assume that the economy 

is functioning at full employment. In this situation, international trade shifts jobs 

among various sectors of the economy but does not determine the overall level of 

employment. This may have been the case in Ohio and the rest of the United States 

during the 1990s, as a brisk rate of economic growth hid the effects of a rising trade 

deficit. However, Ohio’s experience in the last several years is an example of what 

can happen when severe manufacturing job loss due to unbalanced trade occurs in 

the context of an economic downturn. The shrinking manufacturing sector becomes 

a decisive influence on the overall level of employment because it sets in motion a 

vicious circle of falling consumer and business demand. No one can say when this 

process will end, but the latest chapter in the dismantling of Ohio’s industrial base 

will make it even harder for our economy to provide an acceptable standard of living 

for all of our residents.

Co-Chair WESSEL. Thank you. Your full testimony, and all the 

witnesses’ testimony, will be made part of the record. 

Mr. Hansen, welcome. 

STATEMENT OF DAVID HANSEN

MANAGING DIRECTOR, OHIO MANUFACTURERS’ ASSOCIATION

COLUMBUS, OHIO 

Mr. HANSEN. Good morning, Commissioners. My name is David 

Hansen and I am the managing director of public policy for the 

Ohio Manufacturers’ Association. Our association has 2,000 members, and we represent the interests of approximately 20,000 manufacturing establishments in Ohio. 

I want to try to help you today in two ways. One, to give you, 

as previously heard, an overview of the condition of manufacturing 

in our state today. And, finally to share with you at least our association’s views on the biggest issue at stake competing with China. 

You have heard about the manufacturing base here in Ohio. It’s 

exceptionally broad—20,000 manufacturing establishments—a tremendous number of business activity. It’s exceptionally deep. I lack 

hard data, but I can tell you there are hundreds of corporations 

that are into their hundred plus year of operation, and there are 

thousands of family-owned companies well into their third, fourth, 

and even fifth generation of family leadership. 
15

The manufacturing base of Ohio is large and dense. It’s the third 

largest manufacturing state in terms of total dollar value and only 

one other state has a larger share of its citizens directly employed 

in manufacturing. One in six Ohioans work in this sector. 

We produce about a quarter of the state’s economy and about 

half of state and local government receipts and paying premium 

wages and benefits unmatched by other economic sectors, manufacturing is Ohio’s single most important source of growth and prosperity. 

Today, because Ohio manufacturing is challenged, Ohio itself is 

challenged. The latest total of manufacturing employment as measured by the U.S. Department of Labor is 825,000 Ohioans. You 

heard some other comments. Ours is pretty much the same. This 

is 204,000 jobs fewer than the pre-recession employment peak of 

about 1,030,000 people employed in manufacturing, and we count 

back to February 2000 when the recession peaked. 

Some of the direct consequences are, as Mr. Burga mentioned, a 

state budget in disarray, tax rates going up as the tax base fails 

to grow, schools going through spending cutbacks. Here in Ohio, 

property tax, especially Ohio’s antiquated, anti-manufacturing tangible personal property tax, still predominantly pays for schools 

here. Aggregate wages are stagnant as workers move from wellcompensated manufacturing jobs into less compensated service sector jobs or no jobs at all. 

One particularly compelling consequence: Ohio’s population has 

grown by just three-tenths a percent over the period of 2000 to 

2003. I will check with Dr. Honeck about the numbers. We have 

grown in Ohio population while the nation on the whole has grown 

by a full three percent in this same three-year period. Growth and 

prosperity have come to a halt here in Ohio. 

Please note as a visitor to our state that despite the mythic 

image of a tired-out, run-down rust belt, stagnation and decline are 

neither the heritage of manufacturing Ohio, nor its recent history. 

For the 25 years leading up to the recent recession, Ohio manufacturing experienced strong growth. Embracing a vision of manufacturing competitiveness and applying strategies and techniques 

to achieve this, our companies grew the real dollar value of their 

manufacturing output here in the state between the 1991 and 1997 

from $65 billion to $88 billion. From 1975 to 2000, Ohio manufacturing output grew an average of three percent a year. Not a tech 

bubble perhaps, but certainly not the rust belt image many hold of 

manufacturing, including unfortunately many here in Ohio. 

About the current situation. Three factors lie behind the job loss 

in Ohio in our view, gains in labor productivity, a contraction in 

the American economy, and a loss of the domestic market share for 

Ohio manufactured products. 

Our best estimate of the loss of Ohio manufacturing jobs due to 

the loss of domestic market share without taking into account any 

increases in foreign market share is 75,000 jobs of the 203,000 jobs 

lost. Market loss to China is the single largest factor, but accounts 

for only half these job losses. Mexico, Europe, Canada and other 

producers have together made similar inroads all in American markets as does China. Between 35,000 and 40,000 Ohio manufacturing jobs have been lost in economic competition with China over 
16

the past four years. This is not netted against any changes in Ohiosupplied market share in China, but I don’t think that today at 

least this is a very significant factor. 

Thirty-five to 40,000 jobs lost is a real significant number, it’s a 

mind-boggling amount of pain, disappointment and lost dreams 

both for the employees and obviously many of the business owners 

who are in the sights of China competition. But the collapse of capital spending, which is the root of the manufacturing recession in 

the U.S. over the past four years, and the accelerated growth in 

productivity without mitigating economic growth overall, each of 

these are far bigger contributors to Ohio’s manufacturing job loss 

today. 

Much of the blame for loss in domestic market share lies in government action, inaction or just plain mismanagement. Manufacturers have earned the right to point fingers elsewhere. They paid 

a tremendous price to their employees for their uncompetitive practices in the early 1980s and again in the early 1990s. But they 

have remade themselves and their management methods are now 

organizational models for the rest of American private industry and 

certainly for our government. OMA members know they are doing 

all they can do to compete with China and other competitors, but 

the government is failing them in three important ways. 

First, the Federal Government is not doing enough to correct 

China’s manipulation of its currency. When China pegs its currency 

at a lower-than-market rate, it artificially lowers retail prices for 

Chinese products in the U.S. Consumers may benefit temporarily 

from their greater purchasing power in the manipulated market. 

However, you will hear today from Ohio manufacturers about how 

they lost their competitive edge due in large part to this action of 

the Chinese government and due to the unresponsiveness of our 

government to stop it. For every one person you’ll hear from today, 

there are probably a thousand other Ohio manufacturers who will 

have a China pricing story that would make you cringe when you 

consider the stakes for Ohio and our country. 

Second, the Federal Government is woefully mismanaging its 

duty to protect the intellectual property rights of Ohio manufacturers. Product innovation in Northern Ohio is manufacturing’s best 

competitive advantage in the global marketplace. Entrepreneur 

and engineering and marketing talents abound in this state, but it 

doesn’t mean a thing when Chinese economic interests so shamelessly pirate our members’ inventions and innovations. Domestic 

market share is impossible to defend when your competitors do not 

have to face costs for research and development or even brand development and customer service. 

We have a member manufacturing sophisticated pumps for 

water, wastewater, petroleum and agricultural uses. A Chinese 

company has not only copied and exploited the Gorman-Rupp product and its manuals and its performance specifications, but the 

very Gorman-Rupp brand is displayed on the products in the Chinese company’s literature. 

There seems to be plenty of agreements and trade rules that 

would ban piracy, but the state of U.S. Federal enforcement in the 

words of Senator Voinovich’s, ‘‘is nothing short of abysmal.’’
17

On another note about trade enforcement with China: The Byrd Amendment is a meaningful inducement against trade dumping. 

You will hear more about that later. The WTO position that it unfairly double compensates victimized industries doesn’t ring true to 

Ohio manufacturers. What better incentive could there be for a 

trading partner to play fair than to avoid directly compensating 

your competitors with the receipts from tariff price penalties? Co-Chair WESSEL. If you can sum up, please. 

Mr. HANSEN. Yes. Third, manufacturing market share, whether domestic or global, is extremely price sensitive. Yet state and local 

government in particular seem unaware of this. For example, during this recession the State of Ohio has increased direct taxes on 

capital investment at least four times. A recent court decision ruling invalid a state machinery and equipment tax credit will be the 

fifth tax increase if it is upheld. So to sum up, members, global and 

competitiveness of China is everybody’s business. The feds certainly have their share of work to do, but we would also say, and 

please check my own remarks, there’s a lot that can be done by 

state and local government to help our members become more competitive here in the U.S. and globally as well. [The statement follows:]

Prepared Statement of David Hansen

Managing Director, Ohio Manufacturers’ Association, Columbus, Ohio 

Good morning, Commissioners. My name is David Hansen and I am the Managing Director of Public Policy for the Ohio Manufacturers’ Association. Since 1905 our Association has represented the interests of Ohio manufacturing before opinion- and 

policy-making forums. I hope that I can contribute to your work in two ways. First by giving you an overview of Ohio manufacturing to complement the industry-targeted testimony 

you’ll hear today. Then I will try to give our Association’s view on some of the issues 

at stake for all of Ohio’s manufacturers in competing with China in today’s global 

economy. 

The manufacturing base in Ohio is exceptionally broad: there are approximately 

20,000 manufacturing establishments in the state producing products in every category of industry. 

The state’s manufacturing base is also exceptionally deep: I lack hard data, but 

please take my word for it: there are hundreds of corporations well over one hundred years old and probably thousands of family-owned manufacturing businesses 

well into their third, fourth and even fifth generation of family leadership. 

The manufacturing base of Ohio is large and dense. Ohio is the third largest manufacturing state when measured in total dollar value of product. Only one other 

state has a larger share of its citizens directly employed in manufacturing—one-insix Ohioans work in this sector. 

Producing about a quarter of the state’s economy and about half of state and local 

government receipts, and paying premium wages and benefits unmatched by other 

economic sectors, manufacturing is Ohio’s single most important source of growth 

and prosperity. 

Today, because Ohio manufacturing is challenged, Ohio is challenged. The latest 

total of manufacturing employment as measured by the U.S. Department of Labor 

is 825,000 Ohioans. This is 204,000 fewer than the pre-recession employment peak 

of about 1,030,000 employed in manufacturing in February of 2000. 

Some of the direct consequences are: a state budget in disarray; tax rates going 

up as the tax base fails to grow; schools going through spending cutbacks (property 

tax, and especially Ohio’s antiquated, anti-manufacturing tangible personally property tax, still predominately pay for schools here in Ohio); aggregate wages stagnant 

as workers move from well-compensated manufacturing jobs into less compensated 

service sector jobs. 

One particularly compelling consequence: Ohio’s population has grown by just 0.3 

percent over the period of 2000 to 2003, while the nation on the whole has grown 

by a full 3 percent in total population. Growth and prosperity have come to a halt 

here in Ohio. 
18

Please note that despite the myth-image of a tired-out, run-down Rust Belt, stagnation and decline are neither the heritage of manufacturing Ohio, nor its recent 

history. 

For the twenty-five years leading up to the recent recession, Ohio manufacturing 

experienced strong growth. Embracing a vision of manufacturing competitiveness 

and applying strategies and techniques to achieve this, our companies grew the real 

dollar value of their manufacturing output between the 1991 and 1997 from $65 billion to $88 billion. From 1975 through 2000 Ohio manufacturing output grew an average of 3% a year. Not a tech bubble perhaps, but certainly not the Rust Belt 

image many hold of manufacturing, including even many here in Ohio. 

About the current situation . . . 

Three factors lie behind the loss of jobs in Ohio: gains in labor productivity, a contraction in the American economy, and a loss in domestic market share for Ohiomanufactured products. 

Our best estimate of the loss of Ohio manufacturing jobs due to the loss of domestic market share, without taking into account any increases in foreign market share, 

is 75,000 jobs. Market loss to China is the single largest factor, but accounts for only 

half these job losses. Mexico, Europe, Canada and other producers have together 

made similar inroads in American markets. Between 35 and 40 thousand Ohio manufacturing jobs have been lost in economic competition with China over the past 

four years. This is not netted against any changes in Ohio-supplied market share 

in China, but I don’t think that today this is a significant factor. 

Thirty-five to forty-thousand jobs lost is a real, significant number, a mind-boggling amount of pain, disappointment and lost dreams. But the collapse of capital 

spending, the root of the manufacturing recession, and the accelerated growth in 

productivity without mitigating economic growth overall, are each far bigger contributors to Ohio’s manufacturing job crisis today. 

Much of the blame for loss in domestic market share lies in government action, 

inaction or just plain mismanagement. Manufacturers have earned the right to 

point fingers elsewhere. They paid a tremendous price for their uncompetitive practices in the early 80’s and again in the early 90’s. But they have remade themselves 

and their management methods are now organizational models for the rest of American private industry and certainly our government. OMA members know they are 

doing all they can do to compete with China and other competitors, but their government is failing them in three important ways. 

First, the Federal Government is not doing enough to correct China’s manipulation of its currency. When China pegs its currency at a lower-than-market rate, it 

artificially lowers retail prices for Chinese products in the U.S. Consumers may benefit temporarily from their greater purchasing power in a manipulated market. 

However, you will hear today from Ohio manufacturers about how they have lost 

their competitive edge due in large part to this action of the Chinese government. 

And due to the unresponsiveness of our government to stop it. For every one person 

you’ll hear today, there are probably a thousand other Ohio manufacturers who will 

have a China pricing story that would make you cringe when you consider the 

stakes for Ohio and our country. 

Second, the Federal Government is woefully mismanaging its duty to protect the 

intellectual property rights of Ohio manufacturers. Product innovation is one of 

Ohio manufacturing’s best competitive advantages in the global marketplace. Entrepreneur and engineering and marketing talents abound in this state, but it doesn’t 

mean a thing when Chinese economic interests so shamelessly pirate our members’ 

inventions and innovations. Domestic market share is impossible to defend when 

your competitors do not have to face costs for research and development or even 

brand development and customer service. 

We have a member manufacturing sophisticated pumps for water, wastewater, petroleum and agricultural uses. A Chinese company has not only copied and exploited 

the Gorman-Rupp product and its manuals and its performance specifications, but 

the very Gorman-Rupp brand is displayed on the products in the Chinese company’s 

literature. 

There seem to be plenty of agreements and trade rules that would ban piracy, but 

the state of U.S. Federal enforcement of these rules, in the words of Senator 

Voinovich’s, ‘‘is nothing short of abysmal.’’

On another note about trade enforcement with China: the Byrd Amendment is a 

meaningful inducement against trade dumping. You’ll hear more about that later. 

The WTO/EU position that it unfairly double compensates victimized industries 

doesn’t ring true to Ohio manufacturers. What better incentive could there be for 

a trading partner to play fair than to avoid directly compensating your competitors 

with the receipts from tariff price penalties. 
19

This kind of inducement for fair play is a part of our own civil justice system. 

Our courts routinely award treble economic damages in punitive assessments made 

in anti-trust cases, just to name one example. Our manufacturing members would 

clearly support increasing the export of our civil justice system to our competitors 

and we urge that the Byrd Amendment be retained. 

Third, manufacturing market-share, whether domestic or global is extremely price 

sensitive. Yet state and local government, in particular, seem unaware of this. For 

example during this recession, the State of Ohio has increased direct taxes on capital investment at least four times. A recent court decision ruling invalid a state machinery and equipment tax credit will be the fifth tax increase if it is upheld. 

The state has increased its auditing of capital investment taxpayers despite the 

Ohio Department of Taxation admission that these taxpayers are more accurate in 

their filing than before the recession. This is a sixth, hidden tax increase on manufacturing capital investment in our state. 

The economic evidence is clear: we are most losing market share to China in those 

of our many industries which have lower capital needs. The path for competitiveness lies in greater capital investment. Capital flows to where the return on investment is greatest, yet Ohio is taking repeated steps to lower the return on investment here is this state. 

Other costs to manufacturing have been increasing in Ohio: workers’ comp premiums are up, Ohio EPA permitting fees are up, the tort system costs more each 

year the General Assembly fails to reform it, sales taxes paid by manufacturers are 

up—these are just a few of the cost increases imposed on Ohio manufacturers by 

our state government. 

Faced with these cost increases our members cannot raise their product prices in 

today’s global economy. The only option they have is to cut expenses in Ohio or cut 

jobs here, or both. 

Secretary of Commerce Evans was recently at a manufacturing CEO roundtable 

at a plant just a ways to the north and east of here. The manufacturer host has 

a gang-busters business, adding thousands of sorely needed jobs over the past 10 

years. Secretary Evan heard the CEO there relate that further expansion on their 

site was in jeopardy because of the unwillingness of the township to grant a zoning 

exemption to expand the employee parking lot. Several other CEO’s then related 

how state and local rules, regulations and costs were a hindrance to global competitiveness. 

The Secretary was shortly after quoted in a paper in effect saying that Ohio has 

contributed to its own problems in terms of being a less than friendly place to grow 

a manufacturing business. 

I argue that if state and local government costs—NAM documents all of these 

costs paid in the U.S. to be 22% greater than our global competitors and this is exclusive of labor costs—if these costs are such a burden to an Ohio manufacturer 

than that company is now in the sights of a Chinese competitor. And if this Ohio 

company is now a potential loser to a Chinese competitor, for whatever the reason, 

that fact should concern this Commission. 

Global competitiveness—and competitiveness with China especially—is 

everybody’s business. The fed’s certainly have their share of work to do, but so do 

state and local government. 

Thank you for your time and attention.

Co-Chair WESSEL. Thank you. 

Mr. Otterstedt. 

STATEMENT OF JEFF OTTERSTEDT

VICE PRESIDENT AND GENERAL MANAGER, CLOW WATER SYSTEMS

COSHOCTON, OHIO 

Mr. OTTERSTEDT. Good morning. My name is Jeff Otterstedt, and 

I am vice president and general manager of Clow Water Systems 

based in Coshocton, Ohio and a division of McWane, Incorporated, 

located in Birmingham, Alabama. 

Thank you for allowing me to speak today during which time I 

would like to address the impact of Chinese imports on the domestic Ductile Iron Waterworks Fittings Industry. 
20

Ductile iron waterworks fittings are used to connect pipes in municipal water and sewer systems throughout the United States and 

serve a crucial role in our nation’s water infrastructure. 

Over the past four years, Chinese production of ductile iron waterworks fittings has increased dramatically. As a result during the 

same period, and despite increased domestic demand, sales for 

American producers have actually declined. In September 2003 

McWane, Inc., which owns three of the major ductile iron waterworks fittings producers in the United States, petitioned the 

United States International Trade Commission to determine if fittings were being imported into the United States ‘‘in such increased quantities or under such conditions as to cause market disruption to the domestic producers of like or directly competitive 

products.’’ This petition enjoyed wide support, not only from other 

domestic producers such as U.S. Pipe Company and American Cast 

Iron Pipe Company, but also from the United States Steelworkers 

of America. The domestic industry was represented by Paul Rosenthal of the Collier Shannon Scott law firm located in Washington, 

D.C., a firm that has substantial expertise in international trade. 

Mr. Rosenthal expresses his regret that he could not be here to join 

me for the testimony today. 

After conducting hearings and collecting information from both 

domestic and Chinese companies, the Commission made a determination in December 2003. By unanimous vote of 6–0, the Commission found that imports of ductile iron waterworks fittings from 

China are increasing rapidly, both absolutely and relative to consumption. During this time, domestic production declined as did 

prices for final products; and that as a result one American plant 

closed in 2003 and two others shut down production lines. Based 

on these findings the Commission concluded that the domestic industry has been materially injured. 

To help resolve this troubling issue the Commission recommended proposing a tariff rate quota on imports of ductile iron 

waterworks fittings from China over a period of three years. In addition, the Commission recommended that if applications were 

filed, the President should direct the Department of Commerce and 

the Department of Labor to provide expedited consideration of 

trade adjustment for the firms and workers affected by the imports. 

These recommendations were sent to President Bush for his review and decision and in March 2004 the President announced that 

he would not accept the recommendations of the Commission, and 

he would not provide relief for the industry, arguing it was not in 

the national economic interest of the United States and that other 

countries would quickly replace China in exporting these fittings 

into the United States. 

Let me now address the 421 process and what we would do differently. 

China agreed to the Section 421 provision when it joined the 

World Trade Organization in the year 2000. The provision was implemented to provide American businesses and workers with relief 

for injury without placing any blame on the Chinese industry involved. Interestingly despite several affirmative determinations by 

the ITC, the President has never granted relief to a domestic industry under Section 421. 
21

McWane, Incorporated, followed the appropriate procedures in 

seeking relief, and ITC’s investigation confirmed our assertions 

about the damaging effects of Chinese imports on the American 

ductile iron waterworks fittings producers. 

As such it was the hope of McWane and other domestic producers that the Administration would demonstrate its commitment 

to U.S. manufacturing jobs and the and foundry industry by imposing an appropriate remedy under the law to save thousands of 

American jobs that were being lost. 

When President Bush announced his decision, McWane, Incorporated, expressed its disappointment, especially in light of the 

unanimous judgment by the U.S. International Trade Commission 

that relief under Section 421 was needed. 

Our company continues to express the appreciation for the support it received throughout the process from many Members of 

Congress, our industry peers, the United Steelworkers of America, 

and our valued employees. McWane will continue to work with 

these parties to overcome this difficult challenge. 

Aside from addressing the trade issue, the company has taken 

several steps to combat unfair competition. These include asking 

the American Waterworks Association to enforce its own standards, 

working with municipalities to help them understand the dangers 

of using products that do not meet American Waterworks Association specifications, enlisting the support of distributors to maintain 

a domestic supply of fittings, promoting the Buy American campaign, and finally, lowering prices to remain competitive with Chinese producers who manufacture products by paying wages of 83 

cents per hour, adhering to no meaningful labor laws, and taking 

no measure to protect the environment. 

Also, McWane remains supportive of Congressional efforts to address problems such as the Chinese manipulation of its currency 

and the lack of environmental and safety standards and enforcement in foreign countries. 

The case was very expensive to pursue both for the legal and economic fees, and for the burden placed on the officials from the company to compile data and testify at hearings. While we were 

pleased with the ITC’s care in reviewing all of the information presented, we would not enter into this process again given that despite the unanimous judgment of the U.S. International Trade 

Commission that relief under Section 421 was needed, this Administration decided not to provide relief for McWane. 

When you look at the domestic industry today, the picture is 

bleak. Our industry is losing millions of dollars each month in 

large measure due to the price reductions that have resulted from 

the surge in cheap ductile waterworks fittings entering the U.S. 

market. Capacity utilization has decreased, and U.S. producers, in 

the form of plant shutdowns and layoffs, have felt the impact. 

Without significant and prompt relief, the U.S. water infrastructure system will become almost totally dependent on fittings made 

in China and other countries. The simple reality is that capital 

costs are so great that once one of these plants is closed it is not 

feasible to restart it. 

Although our company’s profit margins have been depressed well 

below typical manufacturing margin levels, we have made an effort 
22

to maintain a domestic industry. We’ve acquired facilities that cannot survive independently and made investments in new plants 

and equipment designed to make them run more efficiently. This 

was a bet on economies of scale and a level playing field. The 

economies of scale are there, but unfortunately we are not operating on a level playing field. 

Despite the Administration’s refusal to help, McWane remains 

committed to providing well-paid manufacturing jobs in America as 

far as we can. At the same time McWane will continue to evaluate 

all reasonable options to remain competitive. 

While outsourcing is a choice we prefer not to make, given the 

current Administration’s denial of our petition to keep jobs in the 

United States, it is one we will consider carefully for the long-term 

survival of our business. 

The reality is, that to preserve jobs in the United States, we have 

to remain competitive. Where possible, we will strive to maintain 

production needs in an industry vital to American homes and businesses. Thank you. 

[The statement follows:]

Prepared Statement of Jeff Otterstedt

Vice President and General Manager, Clow Water Systems, Coshocton, Ohio 

Good morning. 

My name is Jeff Otterstedt and I am vice president and general manager of Clow 

Water Systems, based in Coshocton, Ohio, and a division of McWane, Inc. located 

in Birmingham, Alabama. 

Thank you for allowing me to speak today during which time I would like to address the impact of Chinese imports on the domestic Ductile Iron Waterworks Fittings industry. 

Ductile Iron Waterworks Fittings are used to connect pipes in municipal water 

and sewer systems throughout the United States and serve a crucial role in our nation’s water infrastructure. 

Over the past four years, Chinese production of Ductile Iron Waterworks Fittings 

has increased dramatically. As a result, during this same period and despite increased domestic demand, sales for American producers have actually declined. In 

September 2003, McWane, Inc., which owns three of the major Ductile Iron Waterworks Fittings producers in the United States, petitioned the United States International Trade Commission to determine if fittings were being imported into the 

United States ‘‘in such increased quantities or under such conditions as to cause 

market disruption to the domestic producers of like or directly competitive products.’’ This petition enjoyed wide support, not only from other domestic producers 

such as U.S. Pipe Company and American Cast Iron Pipe Company, but also from 

the United Steelworkers of America. The domestic industry was represented by Paul 

Rosenthal of the Collier Shannon Scott law firm in Washington, D.C., a firm that 

has substantial expertise in international trade. Mr. Rosenthal expresses his regret 

that he couldn’t be here to join me for this testimony. 

After conducting hearings and collecting information from both domestic and Chinese companies, the Commission made a determination in December 2003. By a 

unanimous vote of 6–0, the Commission found that imports of Ductile Iron Waterworks Fittings from China are increasing rapidly, both absolutely and relative to 

consumption; that at the same time, domestic production declined, as did prices for 

final products; and that as a result, one American plant closed in 2003, and two 

others shut down production lines. Based on these findings, the Commission concluded that the domestic industry has been materially injured. 

To help resolve this troubling issue, the Commission recommended imposing a 

tariff-rate quota on imports of Ductile Iron Waterworks Fittings from China over 

a period of three years. In addition, the Commission recommended that if applications were filed, the President should direct the Department of Commerce and the 

Department of Labor to provide expedited consideration of trade adjustment assistance for the firms and workers affected by the imports. 

These recommendations were sent to President Bush for his review and decision. 

In March 2004, the President announced that he would not accept the recommenda-
23

tions of the Commission and that he would not provide relief for the industry, argu- ing that it was not in the national economic interest of the United States and that 

other countries would quickly replace China in exporting these fittings into the 

United States. 

Let me now address the 421 process and what we would do differently. 

China agreed to the Section 421 provision when it joined the World Trade Organi- zation in the year 2000. The provision was implemented to provide American businesses and workers with relief for injury without placing any blame on the Chinese 

industry involved. Interestingly, despite several affirmative determinations by the 

ITC, the President has never granted relief to a domestic industry under Section 

421. 

McWane, Inc. followed the appropriate procedures in seeking relief and ITC’s in- vestigation confirmed our assertions about the damaging effects of Chinese imports 

on American Ductile Iron Waterworks Fittings producers. As such, it was the hope of McWane and other domestic producers that the Administration would demonstrate its commitment to U.S. manufacturing jobs and the 

foundry industry by imposing an appropriate remedy under the law to save thousands of American jobs from being lost. When President Bush announced his decision, McWane, Inc. expressed its disappointment, especially in light of the unanimous judgment by the U.S. International Trade Commission that relief under Section 421 was needed. 

Our company continues to express its appreciation for the support it received throughout this process from many Members of Congress, our industry peers, the 

United Steelworkers of America, and our valued employees. McWane will continue 

to work with these parties to overcome this difficult challenge. Aside from addressing the trade issue, the company has taken several steps to combat unfair competition. These include:

(a) asking the American Water Works Association to enforce its own standards; 

(b) working with municipalities to help them understand the dangers of using products that do not meet American Water Works Association specifications; (c) enlisting the support of distributors to maintain a domestic supply of fittings; 

(d) promoting a ‘buy American’ campaign; and 

(e) lowering prices to remain competitive with Chinese producers who manufac- ture products by paying wages of 83 cents per hour, adhering to no meaningful 

labor laws and taking no measures to protect the environment.

Also, McWane remains supportive of Congressional efforts to address problems such as the Chinese manipulation of its currency and the lack of environmental and 

safety standards and enforcement in foreign foundries. The case was very expensive to pursue, both for legal and economic fees, and for the burden placed on the officials from the company to compile data and testify at 

hearings. While we were pleased with the ITC’s care in reviewing all of the information presented, we would not enter into the process again given that, despite the 

unanimous judgment by the U.S. International Trade Commission that relief under 

Section 421 was needed, this Administration decided not to provide relief for the industry. 

When you look at the domestic industry today, the picture is bleak. Our industry 

is losing millions of dollars each month—in large measure due to the price reductions that have resulted from the surge in cheap Ductile Iron Waterworks Fittings 

entering the U.S. market. Capacity utilization has decreased, and U.S. producers, 

in the form of plant shut downs and layoffs, have felt the impact. 

Without significant and prompt relief, the U.S. water infrastructure system will 

become almost totally dependent on fittings made in China and other countries. The 

simple reality is that capital costs are so great that once one of these plants is 

closed, it is not feasible to restart it. 

Although our company’s profit margins have been depressed well below typical 

manufacturing margin levels, we at McWane have made an effort to maintain a domestic industry. We’ve acquired facilities that could not survive independently and 

made investments in new plants and equipment designed to make them run more 

efficiently. This was a bet on economies of scale and a level playing field. The economies of scale are there but, unfortunately, we are not operating on a level playing 

field. 

Despite the Administration’s refusal to help, McWane remains committed to providing well-paid manufacturing jobs in America as far as we can. At the same time, 

McWane will continue to evaluate all reasonable options to remain competitive. 

While outsourcing is a choice we prefer not to make, given the current Administration’s denial of our petition to keep jobs in the United States, it is one we have 

to consider carefully for the long-term survival of our business. 
24

The reality is, that to preserve jobs in the United States, we have to remain competitive. Where possible, we will strive to maintain production needs in an industry 

vital to American homes and businesses. 

Thank you.

Co-Chair WESSEL. Thank you. 

Chairman D’Amato. 

Panel I: Discussion, Questions and Answers 

Chairman D’AMATO. Thank you all for your testimony. It’s interesting to me that you seem to have a consensus here on the part 

of business and labor in Ohio that Ohio is suffering from decimation of its manufacturing base as a result of a two-pronged attack 

on your workforces and on your businesses. One is an unfair system of trading practices that impose on you and second, a lack of 

effective response by the Federal Government to those unfair practices. Tell me if I’m wrong in that assumption. 

Mr. HANSEN. I would agree with that. Again I would just add the 

Republican statement of response to——

Chairman D’AMATO. This past June this Commission recommended a decisive action to two areas—financial reform and 

NIBR. In both cases we were well within our rights to go and initiate the dispute settlement action against the Chinese. Would you 

all think that would certainly be one effective step taken by the 

government? 

Mr. BURGA. I agree those are steps that could be taken. It seems 

as though our government is more interested about intellectual 

property rights than they are about the human side of this about 

the trading. I was informed that Chinese government representative, spoke to some business groups in New York and said come to 

China. You will be the lowest cost producer for at least the next 

20 to 30 years because we will have our people produce it at low 

wages. I just think that too much emphasis sometimes on intellectual property rights and things that businesses want without really 

looking at the impact on workers. 

And if I could just add briefly to that one of the things that I’ve 

kind of noticed, and I don’t know if the others in labor even agree 

with me, I don’t think our trade negotiators really understand 

working people’s plight about losing jobs. Whether it’s the Clinton 

Administration or this one. I just don’t think they have a comprehension of what impact this is going to have on workers, and 

I think it would be good to have somebody at the bargaining table 

for the U.S. workers. 

[Audience applause.] 

Chairman D’AMATO. To offer one point to the currency situation 

issue, the Commission did take a position that if there was not 

going to be a case brought before the WTO, we recommended that 

Congress was within its rights to go forward and engage in legislative action. As you may know, your two senators are both involved 

in legislative vehicles that will do just that. So I commend your delegation for their initiative in this area. Thank you. 

Co-Chair WESSEL. Commissioner Reinsch. 

Commissioner REINSCH. Thank you. I appreciate the very 

thoughtful testimony from all of you. I have a couple questions. 
25

First of all, for Mr. Burga. You had five recommendations in your 

testimony about things that we ought to do, which I think I support. I guess the first question is if the government did all those 

five things tomorrow, would that be sufficient? Would that solve 

the problem? 

Mr. BURGA. Well, it probably wouldn’t, but these are five things 

that we think should be implemented as quickly as you can and 

one of them, of course, is the state problem. But there will still be 

problems, I suppose, in our trade the way our world is constructed 

today. 

When I worked in the steel mill, we were told we had to compete 

by making the best quality, highest quality and most productivity. 

Now, today across the globe we are talking about competing by who 

will receive the least wages or benefits, and if we don’t solve the 

healthcare problem, I don’t know how you can solve a lot of these 

problems. 

The five issues that we proposed I think would help, but it may 

not solve the entire problem because there are other things out 

there such as healthcare that’s a detriment to our whole economy 

structure. 

Commissioner REINSCH. Related to that I think Mr. Hanson had 

some other subjects that ought to be covered and I want to ask 

your opinion, Mr. Burga, on at least two of those. One was he had 

a number of the state and local government tax laws for manufacturers in Ohio. Do you agree with him that the state has made 

some mistakes in the set up of manufacturing tax laws? 

Mr. BURGA. I agree to this extent that we have—the Ohio AFL–

CIO has agreed to sit down with business and government and try 

to work out a fair arrangement on their personal property tax. 

There may be some unfairness in it, but at the same time there’s 

unfairness in the other tax—parts of the tax code for Ohio citizens 

that need to be addressed. And I think it could be worked out if 

everybody would just sit down and discuss it in an intelligent way. 

But our state government right now they don’t want to do that. 

They want to talk to business alone and labor alone, and business 

usually gets something out of it and we don’t. So if we all come to 

the table I don’t disagree there are things that could be done to the 

tax business and we don’t object to that. 

Commissioner REINSCH. Mr. Hansen, do you want to comment on 

that? 

Mr. HANSEN. I think the discussions could be pretty fruitful. The 

point is not to transfer tax burden from business to citizens. We 

don’t want to do that, but there are parts of our economy on the 

business side that aren’t contributing their fair share. I think the 

taxes—it’s not really fit for the 20th century and we are in the 21st 

century. So we would appreciate that opportunity. 

Commissioner REINSCH. Mr. Burga, Mr. Hansen’s testimony also 

made a point about intellectual property rights. I know we’ll have 

some other witnesses later on may be talking about that as well, 

and our own report highlighted serious difficulties we have with 

Chinese intellectual property piracy, for example. You said something in your comments with Commissioner D’Amato that suggested that problem perhaps wasn’t quite as important as some 

other things. Can you clarify that? 
26

Mr. BURGA. Well, my point of it is I don’t object to intellectual 

property rights protection, but I think that seems to be the first 

thing that is looked at by our trade negotiators more than anything 

else, and I’m not sure that that’s—where does that stand in relation to workers and human rights in the trade issues? 

The public probably is as uninformed about how they even do 

their negotiating on trade. I don’t understand how they do it, so I 

don’t object to property rights being protected, especially in China 

obviously. I don’t disagree, but I question where is that in priority 

of the things that affect workers? There’s an appearance of the government helping the corporations more than the people in their negotiating these treaties. That was my point about it. 

Commissioner REINSCH. Let me ask one final question. You made 

reference in your opening statement about the prevalence of ‘‘made 

in China’’ labels on consumer goods here. Have you ever given any 

thought to encouraging members not to buy Chinese? 

Mr. BURGA. Well, boycotting products is a longstanding tactic by 

organized labor for over a hundred years now. Sometimes it works 

and sometimes it does not. But it’s a bigger problem today, I think, 

because so many people are out of work, so many people are looking for a lower-priced product because they don’t make enough 

earnings if they are working so they don’t look at the labels anymore. A lot of people, working people with families, they are struggling every day so they look for price—I admit that—instead of 

looking for the labels. 

So if we could try to boycott it—there are some products that 

don’t even get manufactured in the United States anymore. I can’t 

find the kind of clothes I want anymore. I’m getting fat and I need 

a certain type of clothes. They’re all made somewhere else. What’s 

wrong with this picture? 

If you have a choice, yes, we could try to do that and I think in 

many cases we do. It’s not a concentrated effort to buy goods made 

in China. 

Commissioner REINSCH. Well, your suit looks pretty good to me. 

Thank you, Mr. Burga. 

Co-Chair WESSEL. Co-Chair Dreyer. 

Co-Chair DREYER. As you know, one of our charges, in fact major 

charge, is to suggest to Congress things that could be done better. 

As I listen to your collective testimony I come away with four ideas 

that I have heard here that could be presented. First, that the U.S. 

Government press the Chinese government harder for a currency 

reevaluation. Second, that the United States Government should do 

more to control piracy, counterfeiting, et cetera. Third, the Administration needs to develop a more supportive attitude in general. 

And finally, that a representative of workers should be put on the 

trade negotiation team. Can anyone think of anything I missed 

here, and is there something you would add? 

Mr. HANSEN. Commissioner, this actually goes to Commissioner 

Reinsch’s questions or one of the comments. If Congress does all 

that it can do to straighten out problems in trade rules and compliance, ethics on the part of the Chinese, it still remains this big, 

new player on the block which will be competing here in America 

as much as we want to go competing over there. That is going to 

cause changes in our Ohio economy, in our manufacturing economy 
27

as significantly as the arrival of the Japanese goods did in the end 

of the 1970s, early 1980s. 

So those particular recommendations are the starting point. If 

they can be carried out, maybe other steps will level the playing 

field. 

On that playing field there’s a pretty big team on the other side. 

Instead of trying to stop this rising tide, it’s better to build a better 

boat which begins with some comments that a foreign investor in 

Ohio, the President of Honda American manufacturer, made. He 

said that competitive advantage for manufacturing in Ohio in 

America perhaps lies in workforce development, providing training, 

helping this tremendous workforce and all the talent that we have 

here to be better placed into the 21st century manufacturing jobs. 

That may be a step beyond what you’re hearing, but that may be 

something to be looking at down the road. It’s going to be very 

challenging, very wrenching for this economy. And we are all struggling to be able to adapt to that, master it, which we have done 

before. But we would need a lot of vision from the government. 

Co-Chair DREYER. Let me call what someone had in a hearing we 

had in Columbia, South Carolina last year. Several people in fact 

said it’s all very well and good to propose job retraining, but we 

don’t know what to retrain for, and we are not sure that the jobs 

will be there in any case. Do you have any concerns about that? 

Would you agree with that? Any of you. 

Mr. HANSEN. I would not say that the track record of the Federal, state and local government workforce retraining has really 

been in line with——

Co-Chair DREYER. Reality. 

Mr. HANSEN. —well, with reality and the vision of what we can 

do here in the U.S. So it’s a self-fulfilling prophesy. The Ohio Department of Job and Family Services sees manufacturing jobs go 

down, so they discourage the development of manufacturing training courses at our community colleges. Well, if there are not the 

workers at higher levels—I will attribute it to some of the overall 

company moves that we have seen in the U.S. 

Mr. BURGA. I would just follow up by saying in Ohio I don’t think 

it’s clear where our economy is headed in terms of types of work 

and jobs that will be in Ohio ten, twenty years from now. They 

really haven’t filled it all out. We all agree here manufacturing 

should be considered to retain its basis and stop losing more. 

Our government in Ohio, they don’t know what they’re doing either. They are not sure where it’s all going. 

The government proposed a bond issue last election to promote 

some high-tech, but it got shot down by the voters and I don’t think 

they know and no one knows where it’s all going. 

Mr. HANSEN. We would want those jobs to be manufacturing 

jobs. The average Ohio manufacturing worker adds a hundred 

thousand dollars in value to the product—a hundred thousand dollars—which means that average manufacturing wages in the state 

are on the order of $50,000 plus as workers get that fair share of 

that value add. No other sector in our Ohio economy provides that 

kind of productivity, and wages are less because of that. We would 

want there to be plenty of manufacturing here. There’s no doubt 
28

about it. If somebody says we are lost about what we want down 

the road, I think we would disagree as well. 

Dr. HONECK. I would like to address this point as well. Our organization does study the labor market. Part of the problem is we can 

train people all you want. But if you’re down to 200,000 jobs, it’s 

very difficult with people going back getting associate degrees and 

still it’s difficult for them to find a position. 

Secondly, there’s a deeper issue here. We do all of these four 

things that you pointed out, Commissioner, but Mr. Burga pointed 

that out dealing with labor standards and environmental standards. Those are not addressed. I don’t see how these four things 

necessarily are going to halt the advance of China. I personally regard granting China normal trading status as policy in the state 

but it was done but we need to address the situation as it stands 

by including labor environmental standards in the WTO and other 

trade. 

Co-Chair WESSEL. Commissioner——

Co-Chair DREYER. I know it’s somebody else’s turn, but getting 

China to deal with labor and environmental standards probably 

isn’t within the capacity of any U.S. Administration. 

Dr. HONECK. That could be the case, but we could try. 

Co-Chair WESSEL. Commissioner Becker. 

Commissioner BECKER. Thank you. I enjoyed very much hearing 

your testimony, and in many respects each one complemented the 

other in conclusion, but none of you really addressed U.S. manufacturers who abandon America to relocate in China and then import 

back the products, and the other manufacturers that stayed in the 

United States but outsourced to China and bring it back. That’s a 

problem with a little bit of a different dimension. I was wondering 

collectively or individually if you could speak on what you think 

should be done about that. How should we deal with that? American employers that abandon the workplace, leave the burden to 

fall on taxpayers and loss of jobs, unemployment, insurance, untrained and——

Mr. BURGA. Commissioner Becker, as I understand we have said 

we need to change the laws of awarding companies moving their 

facility offshore in Europe and company flee plants in China and 

then they are going to probably shut down some of their operation 

here. That’s terrible. Now, it’s my understanding that the tax code 

actually rewards them and our proposal said stop that. Don’t allow 

them to help. If you’re going to reward them, give them some tax 

incentives to stay here and keep the jobs here. So currently we 

have those. 

Commissioner BECKER. Any other ideas? 

Mr. HANSEN. The Timken Company is also moving a lot of jobs. 

Actually, I know it’s has many acquisitions in other parts of this 

country, so that gets to actually the part that Ohio is not very competitive for companies that have been here for a very long time. If 

costs are greater here to manufacture, capital needs to flow where 

it can get its best rate of return. If capital goes to China, we have 

to remember it is a tremendously large market. And if people are 

asked to go there by their customers, then I think manufacturers 

who want to stay in business need to do that. 
29

The alternative to turn your back on the rest of the market just 

doesn’t seem to be really the best for the future. And I guess I 

would say that as far as the free flow of capital this state benefits 

from that. Some 20 percent of our manufacturing output is based 

on investments from companies that are outside of the U.S. At 

least 20 percent, because that’s beginning with one company and 

that’s a direct impact and other companies have other impacts as 

well. 

Commissioner BECKER. Should there be penalties to companies 

that relocate to China and import exports back into the United 

States? 

Should we just give them free access to the market after they 

abandon us and then get back the product to be competition to 

their very employees? 

Mr. HANSEN. Commissioner, again we talk about the pain that’s 

felt by lost jobs, but blaming the companies that do that is blaming 

the wrong problem. There are tremendous costs in trying to be 

competitive here in Ohio and the U.S. The National Association of 

Manufacturers has documented that after the cost, there’s a 23 percent price tag over our competitors in doing business here in the 

U.S. Almost certainly that is 23 percent here in Ohio. When manufacturing margins mature in competitive industry, manufacturing 

margins are bouncing around at 23 percent. A 23 percent price tag 

is a tremendous burden, and I would say that the thought of penalties should be applied to what government is doing or not doing 

in helping out manufacturing. Companies need to act on behalf of 

their shareholders, the people who invest in them, who are taking 

the risks in them. And free flow capital is something that we in 

America can win on. But if we start trying to shut down the flow 

of capital, we risk losing manufacturing in Ohio. 

Dr. HONECK. There are many that say that trade deals and the 

WTO are really more about investment than they are about trade. 

They are about making the world safe for multinational investment. You asked about penalties. The tariff rate should be reasonable and compensates for the things the Chinese government does, 

repressed labor rights. 

The other thing that hasn’t been brought up here that will show 

up in a later panel is, I’m not sure that we got the best deal for 

American exports to China. You talk about autos and other products. Chinese tariffs are still higher than ours. There are still a 

number of Chinese government anticompetitive practices that need 

to be addressed as well. 

Commissioner BECKER. Thank you. 

Co-Chair WESSEL. We have several other Commissioners that 

wish to question. 

What I have heard across the board this morning is—I hate to 

say—a crisis of confidence in the future of manufacturing. I heard 

about IPR, I heard about the currency, I heard about your frustration with Section 421 and the fact that you wouldn’t do it again. 

We have a lot of trade agreements on the nation’s books, but as far 

as I can tell we see a rise in the trade deficit with virtually every 

nation we have signed a trade agreement with. We are now on our 

fifth memorandum of understanding of how our intellectual property commitments from other nations are going to be enforced. 
30

You’re not going to use 421 again, and I would say that after the 

third case coming out of the ITC where the President refused to 

provide relief to any of the companies, his refusal last week or the 

week before on the currency petition that was jointly done by labor 

and business, I don’t know how manufacturers this state or elsewhere are going to say well, the government is standing by them. 

I commend you for staying in the state and doing everything you 

can, but is there a crisis of confidence? Do you believe your government is standing by your side? 

Mr. OTTERSTEDT. I’m not a 421 expert. I’m a general manager. 

We observe the proper laws. We have been able to do a very good 

job providing a needed product into the marketplace. In doing so 

investing in Ohio manufacturing jobs here in Ohio. 

Having said that, I will throw out a question, something I don’t 

quite understand on the 421 process. Currently there are basically 

two groups. You have got the experts at the ITC that you satisfy 

their concerns, and we move to the—move to the political reason. 

You have to go over another hurdle there. When an industry has 

satisfied the experts, and this goes back to the following action, so 

I question why the political agreement—sort of a hurdle—would 

need to be there. That’s not my area of expertise, but it’s something 

I don’t know and you guys will need to consider. 

Co-Chair WESSEL. Our laws have always provided some discretion but as far as I can see that discretion was being abused. There 

was a story a couple weeks ago that we no longer have the domestic capability to make ammunition for our troops in Iraq and Afghanistan. That’s because of a loss of manufacturing capability. 

We saw the same thing in the steel industry with the loss—or 

the bankruptcy—of Bethlehem Steel which created the armor 

plates used in tanks, et cetera. For the life of me I share your concern. I don’t know why the politicians, or some politicians, are 

turning their back on manufacturing. That appears to be what’s 

taking place, whether it’s currency, whether it’s your tax issues because you need a hand to stay in the game. If you’re productive and 

you’re profitable you will pay your taxes. But if you’re all the way 

down and taxes are pushing you further down, the workers are ultimately going to be the ones that pay the price. They won’t have 

a job. 

So have you lost confidence now? When other businesses talk to 

you whether it’s about your experience in 421, which is a vital provision of law, whether it’s currency, are you basically saying I have 

got to do this on my own because no one’s standing by my side? 

Mr. OTTERSTEDT. To a large extent, yes. We’re a small industry. 

We are also a vital industry. We look at ourselves. We are privately 

owned. We don’t have a lot of lobbyists. We don’t have a lot of the 

expertise the steel industry would have or something like that, that 

has an exponential number of more jobs than what we do so we 

got to do a lot on our own. 

The 421 process was very expensive to undertake. We hired some 

top-notch people and they provided some top-notch results, and the 

fact that we were able to convince the six panelists at the ITC to 

give us relief. 

Co-Chair WESSEL. I see my time has expired. 

Commissioner Bartholomew. 
31

Commissioner BARTHOLOMEW. Thank you very much. And thank 

you for taking the time out of your busy day to come in here before 

us. More significantly, thank you for the work you continue to do 

on behalf of the working people of Ohio and in effect the working 

people of this country. I spoke to one tragedy I think Ohio is experiencing is being experienced in so many other ways. 

I have a specific question for Mr. Otterstedt and then a broader 

question for all of you. Under Section 421 it’s fairly striking that 

you say—given the way it turned out—you wouldn’t go through the 

whole process again, and I was just wondering if you had any insight into why the Administration decided not to do anything even 

though that was the recommendation? Then, do you think part of 

it is they are trying to discourage other companies from moving forward through that? 

Mr. OTTERSTEDT. I don’t have any specific knowledge. When you 

go across the political hurdle—we can all pick up the paper and 

read what’s going on at that particular time. Then it was the North 

Koreans and hoping to get China to put some pressure on North 

Korea and that was on the front page at that particular time. 

Whether or not that played into that decision at all some speculated I don’t know. As far as other companies what was your question? 

Commissioner BARTHOLOMEW. Are these kinds of decisions serving to dissuade other companies? You have to do a cost benefit 

analysis. Do you engage in the process if the ITC recommendation 

is that action be taken? The Administration decision not to take action repeatedly one would presume it will dissuade people from——

Mr. OTTERSTEDT. I would think that anybody looking at the Section 421 now would have some of this background and they would 

make, it’s not the economic hurdles that you have to cross. It’s the 

political hurdles and it’s significant. But I think that would definitely dissuade them from moving forward. 

Commissioner BARTHOLOMEW. Unfortunately with the Bush Administration, and actually with the Clinton Administration also, 

there always seems to be something that was determined to be 

more of national security concern or of more concern than what 

was happening. That has been a discouraging feature of the U.S.-

China policy for at least the past ten or fifteen years. 

Mr. Burga, I was really struck by your comment that our trade 

negotiators don’t seem to have any understanding of or concern 

about what’s happening with American workers when they’re in 

negotiations. I think that’s an excellent suggestion that somehow 

workers be represented during negotiations. 

I have to say I’m astonished at the ability of trade experts to disconnect the living and working conditions of both the people who 

make the goods and services that are being produced and the consumers of the goods and services. It’s like there’s this movement of 

widgets, movement of goods and services, taking place here, that 

they somehow completely disconnect from the people. I think that’s 

an important point that you make. What I would really ask all of 

you is what does the future hold? 

Several of you mentioned ripple effects. Dr. Honeck in particular, 

you talked about there being 6.4 percent fewer people employed in 

Ohio’s retail sector, and the ripple effects for the economy. Mr. 
32

Burga you mentioned that Ohio fact. What about your young people as they go other places. I’m not sure they can do that, but what 

is the future if these kinds of trends continue? We don’t have any 

reason to believe they won’t. 

Mr. BURGA. Well, that’s another suggestion we made. Let’s stop 

expanding into new territories until we try to correct what’s out 

there now. It seems like everybody keeps wanting to expand like 

NAFTA and all these other new trade agreements and trade areas, 

and I just think they multiply. Unless they put a hold on things 

and straighten out what we have now and see if they can make it 

work better, and then move into other areas. We need to put a 

moratorium on that. I think that will help. 

Commissioner BARTHOLOMEW. Dr. Honeck. 

Dr. HONECK. I think the future is rather bleak unless we turn 

the situation around. This state was built on manufacturing. 

There’s no immediate prospect of another sector for information 

technology or anything else taking its place, so we need to take actions right now. 

Just look at the long-term trends of wages in the state and 

they’re basically stagnant. More and more people without health 

insurance as they lost their job in manufacturing plants and was 

working part-time or working in the service sector. I mean, those 

trends are likely to continue, and so we have to instill a sense of 

urgency in our trade negotiators that this is the reality on the 

ground. You can talk about consumer goods being priced a little bit 

better or something like that, but there’s another side of the equation to consider. 

Co-Chair WESSEL. I have to go to the next Commissioner. 

Commissioner Wortzel. 

Commissioner WORTZEL. Thank you very much. I appreciate all 

your testimony. You really highlight a series of serious problems. 

I have some questions and want the data that you can provide later. 

I think Dr. Honeck might be the one to respond. But I’m interested 

in population; if you factor out birth and deaths, are people leaving 

the state, and if so, do you know where they are going? If there 

is population growth, are people migrating into the state? And if 

so, do we know where they are going and what are they doing? 

Second, it would be useful to complement your very compelling 

testimony if we could get an idea of the unemployment costs and 

welfare costs of this state. How have these costs changed over the 

same period of time that you gave for your job data, which I think 

it was ’99 to 2003? 

And finally it would be useful, and we’ll make sure this gets into 

the record, if there were data available on self-employment or entrepreneurial job creation outside the manufacturing sector in this 

state, particularly in small to medium enterprises. 

So what are people doing? Are people employed in multiple parttime or contract jobs? I am asking for the household employment 

report for the state instead of labor report for the state. 

I just have one comment back to you, Mr. Burga. In 2001 during 

the crisis two weeks when the Chinese fighter aircraft bumped into 

the U.S. reconnaissance aircraft and those Americans were held by 

China, there was an amazing reaction across this country. Companies that stopped stocking their shelves with nothing but Chinese 
33

products got calls from Americans demanding that Chinese products by removed from the shelves. You have some 250,000 odd 

members in your union. That’s 250,000 Americans or Ohioans with 

jobs and middle class incomes that can bring pressure on companies. If they said ‘‘we got to make choices but Mexico is okay, and 

Hungary is okay and Canada is okay, but I’m not buying from 

country X,’’ retailers would change where they purchased. So that 

ties back a little bit what to Commissioner Reinsch talked about 

an education program for the population. 

Mr. BURGA. Let me make a comment to that. His question was 

relating to consumer boycotts. What about supplier boycotting and 

such, putting those products on their shelves to sell to the public? 

We never hear that mentioned because it’s always what the consumer. 

Commissioner WORTZEL. I think shelves are going to be stocked 

with what people buy. 

Mr. BURGA. Not necessarily. I don’t mean to be argumentative. 

Let me give you an example. I went to the store looking for a sport 

coat. They didn’t have anything made in the U.S.A. I said why 

don’t you have something for me to choose from besides foreignmade goods? He said no one will buy it. I said I just told you I 

would buy it from you. Why don’t you stock it? So I think there’s 

a market for different products, but it seems like the buyers from 

the corporation that are selling this stuff, they want to go to a 

country or a specific place—Wal-Mart is now the biggest contractor 

in the world, I guess, buying products. 

Commissioner WORTZEL. It also employs 37,000 people in the 

State of Ohio. 

Mr. BURGA. Well, their employment in the State of Ohio certainly 

doesn’t compensate for what we have to give them to be here. Their 

healthcare is usually paid by the government because they won’t 

provide it. That’s a downward trend that leads us nowhere. 

[Audience applause.] 

I didn’t bring any of these people. 

Commissioner MULLOY. I want to apologize to the group for not 

being here at the beginning of the hearing this morning but I did 

read my briefing book yesterday. I have a clear idea of where we 

are heading. Mr. Burga, in your testimony you state President 

Bush was here on Labor Day and you quote him saying, ‘‘We expect there to be a fair playing field when it comes to trade. See, 

we in America believe we can compete with anybody just so long 

as the rules are fair and we intend to keep the rules fair.’’

Now, Mr. Hanson, in your testimony you tell us one of the rules 

you think is not fair is the fact that China is manipulating its currency to gain a competitive advantage, and our government has not 

dealt with that issue so that’s one rule, that is not fair. I think we 

all agree with that. 

Now, let me go further because you talk about capital flows. Dr. 

Honeck said we have to look at these trade agreements more as investment agreements. I think he’s absolutely right. When the creation of the WTO was being discussed, there were people who said 

this isn’t such a good idea because we, Europe and Canada have 

built societies where people get pensions, people get healthcare. We 

have environmental standards. We have a decent standard of liv-
34

ing. We have labor unions. People have made nice standards of living for themselves and their families. 

If we get into the globalized economy, capital, which has no conscience, will flow to where it can get a higher return and employ 

workers who do not have pensions, healthcare, Social Security, any 

of these costs and ship the goods they make right back here because the WTO agreement has our markets open. 

That was the worry of people who were saying don’t go in that 

direction. But the whole lobbying front by corporations did not discuss that as these companies could make more money by granting 

such a system. That’s my understanding of what happened. 

Do you think there’s any truth to this idea that capital will flow 

where it can get its highest return? That means it will flow out of 

this country, make goods and ship them back here because they 

don’t have all of these costs that we impose on them in this country? Which one is the American way of life? I direct that to Mr. 

Hansen because you talked about capital flows. Then I invite any 

of the others to comment on that worldview of where this is all 

headed. 

Mr. HANSEN. Let me try to answer your question although I’m 

not an economist. 

Commissioner WORTZEL. I’m not either. 

Mr. HANSEN. Let’s take this example of it will flow somewhere 

where there’s no expectation of social infrastructure like we have 

here in the west. It will be a wrenching transition as we have 

talked about, but there will be expectations on the part of over a 

billion people in China for the kind of lifestyles that we have here. 

I think we have seen that time and time again. I can’t say for sure 

because the application of history to this particular country at this 

particular moment in time is not certain. And if that happens, then 

we in the U.S. still have significant competitive advantages that 

will keep capital here so we can continue to make products and sell 

them around the world. That is, if everybody’s income grows, if 

everybody’s wealth grows, we’ll be able to sell more here. 

I want to talk about productivity. People say, well, manufacturing is just going to be like agriculture. You’re only going to need 

one worker per state, the way we only need one farmer to feed a 

hundred families. Well, the fundamental difference is the demand 

for manufacturing products income is income elastic, and that Bill 

Gates has basically the same breakfast each morning that I have, 

but he buys a whole lot of things during the course of a day than 

I do. 

In that particular dynamic, if it’s played out in China, will hold 

tremendous prongs for us here in Ohio. Our manufacturing feature 

will not have plant after plant after plant doing different variations 

on the same product. We will be at the very top of the pyramid in 

terms of there will be one plant here. That’s the only plant in the 

world that does what it does, and we will do it with such quality 

and such reward that can support the kind of social infrastructure 

that we here in Ohio want to have. Does that help to answer? 

Commissioner WORTZEL. Anybody have any other comments on 

the different view? 

Dr. HONECK. I would just like to say we hear two different things 

from large corporations. On the one hand they are instrumental po-
35

litically for the WTO, NAFTA trade agreement, to create a playing 

field that’s to their advantage. But then when it comes time to 

close down specific plants they say, well, market conditions are 

forcing us to do this. We don’t have a choice. Our competitors are 

all doing this so a strange disconnect. We just need to realize that 

the model development that’s going on in Mexico and China is in 

some sense flawed because it puts the workers less, and unlike in 

this country we allow unions and labor standards, we can develop 

our internal market. We can develop a middle class. Until that 

happens in some of these third world countries, trade relations will 

always be one-sided. That’s something to be considered. 

Commissioner WORTZEL. Thank you. 

Mr. BURGA. I would like to if I could make a comment about education and studies. What is a level playing field? Say China, how 

much do they have to raise their wages for their workers to make 

it a level playing field here? They wouldn’t have to come up here 

to our level because then there are transportation costs and other 

costs involved. I don’t have—I haven’t seen any studies on what the 

level playing field really would amount to in terms of competing, 

and we say it all the time, but I would like to know what a level 

playing field is in terms of dollars and cents. Make it so that that 

can be——

Commissioner WORTZEL. Thank you. Co-Chair WESSEL. I want to thank all the panelists. It’s been 

very informative and hopefully over the coming weeks we may be 

able to return to ask you some questions as we think about today’s 

testimony. We are going to have our next panel set up and take 

a minute or two and we look forward to working with you in the 

future. 

PANEL II: AUTOS AND AUTO PARTS 

Co-Chair WESSEL. If the audience can please take their seats. 

We will begin the instructions and start the panel. The other Commissioners are working their way in. The second panel that we appreciate everyone being here for is 

focused on the auto and auto parts sector, a vital area of not only 

Ohio’s economy, but our nation’s economy as a whole. We are 

pleased to have with us Mr. Ron Gettelfinger, President of the 

United Auto Workers of America, Mr. Steve Girsky, Managing Director of Morgan Stanley, Mr. Tackett, of Denman Tire Corporation 

and I apologize. We have one other witness I assume with Mr. 

Tackett. If you could introduce yourself to the Commissioners, we 

would appreciate it. 

Mr. PEARL. I am Mr. Jim Pearl. I am a Senior Vice President of 

Sales and Marketing Department. 

Co-Chair WESSEL. Appreciate you being here. 

Mr. Gettelfinger, if you’d begin, we’d appreciate it. 

STATEMENT OF RON GETTELFINGER, PRESIDENT

INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE

AND AGRICULTURAL IMPLEMENT WORKERS OF AMERICA (UAW)

DETROIT, MICHIGAN 

Mr. GETTELFINGER. Thank you very much. 

Mr. Chairman, Members of the Commission, my name is Ron 

Gettelfinger. As the president of the UAW and speaking on behalf 
36

of our active and retired members, our union certainly appreciates 

the opportunity to present our views on the impact of the U.S. and 

China trade and investment on the automobile and the automotive 

parts industries. 

The UAW first became deeply concerned about automotive trade 

with China in the mid 1990s, when China announced an industrial 

policy for the automotive industry that established it as a pillar industry of the Chinese economy. The announcement in June of this 

year as a new ‘‘development policy’’ that identifies the auto industry as a ‘‘backbone industry’’ has only added to our concerns. 

China is now the world’s third largest market for vehicles and 

the fourth largest producer. The plans for future development of 

the industry by the Chinese government and the world’s automotive companies will have a profound effect on the location of production around the world and the jobs and incomes of UAW members and other American workers in this critically important industry. 

We have seen automotive imports from China and the U.S. deficit in automotive trade with China grow at a rapid pace in the 

past ten years. This deficit reached $2.2 billion in 2003 and is expected to be 2.8 billion this year. We are very deeply concerned 

about the impact on U.S. automotive production and employment 

of the Chinese government’s goals for the continued rapid development of the industry are achieved. The objectives of China’s automotive policy include becoming the world’s largest automobile manufacturer, a producer of its own brands of vehicles and parts for the 

international market, and an importer of between 70 and $100 billion in automotive products by 2010, only five short years away. 

Every objective observed has acknowledged that hundreds of thousands of American jobs will be lost if these goals are met. Although 

U.S. automotive exports to China may increase, this will offset only 

a small fraction of the increase in U.S. automotive imports from 

China. The net result will be a soaring U.S. auto deficit with 

China. 

According to the International Metal Workers Federation automotive production in China will double by 2007, but the demand 

for vehicles will increase far more slowly. The result will be additional excess capacity. But what market will be open to receiving 

the extra vehicles and parts that can be produced in China? Korea, 

which has resisted imports from all over the world for more than 

20 years, will not open up to imports from China. Japan will not 

accept the displacement of the local production, nor will Thailand 

or India. Europe is unlikely to accept large numbers of vehicles 

from China. But the U.S. with its history of running huge automotive trade deficits with all major auto-producing countries seems 

like the obvious dumping grounds for Chinese excess capacity. 

Even today excess capacity in China is visible. According to some 

reports we have read from JP Morgan, excess supply for this year 

will be 11 percent and it will grow to 23 percent next year. And 

that is before much of the new capacity begins to operate. 

The increase in competition from Chinese products, especially 

auto parts, has had a serious negative impact on wages and jobs 

available to workers in Ohio and across the country and to the 

compensation that they can hope to earn. The auto parts industry 
37

accounts for the majority of the jobs in the automotive industry, 

and it is in this area that intense price competition has led to intense false competition between producers and a search for lower 

and lower labor costs. While it is very difficult to pin down the 

compensation of auto industry production workers in China, manufacturing workers in Shanghai, where GM and other auto producers are concentrated, earn about $1.50 per hour in wages and 

benefits. That’s about half of what Mexican autoworkers are paid 

and as little as five percent of the compensation of an American 

autoworker. 

That is one of the reasons why assemblers from around the world 

invested $6.3 billion in Chinese facilities in the past two years and 

have promised to invest another $10 billion in the next three years. 

The losers in the race to China are the American workers who are 

making high-quality products in highly-efficient production systems 

using high-technology equipment. This pressure undermines their 

jobs and their skills. It also eliminates the livelihoods of the workers who make materials and components for those products that 

are now made in China and it impoverishes the community where 

those workers live. 

For American workers the growing international role of the Chinese auto industry is an especially serious problem because of the 

Chinese absolute repression of independent trade unions. The most 

fundamental of workers rights, freedom of association, is brutally 

repressed in China as are the other rights covered by the International Labor Organization Fundamental Principles and Rights at 

Work. 

A petition filed under Section 301 of the U.S. trade law by the 

AFL–CIO on behalf of the UAW and other U.S. unions provided a 

stunning picture of the depths of that repression and its devastating impact on Chinese workers. The large profits reported by 

many automotive joint venture companies in China are the result 

in part of the inability of Chinese workers to form independent 

labor organization that can represent the interests of workers in receiving a fair share of the value of their contribution to the production process. 

Along with other unions we have focused attention on the cases 

of Yao Fuxin and Xiao Yunliang. They were arrested, charged with 

subversion and convicted for leading a peaceful protest against the 

failure of a shuttered Ferro-Alloy factory to pay pensions and other 

benefits legally due to foreign workers. The Chinese government’s 

behavior in these cases, and in countless others, is shameful and 

inexcusable, and as unions we will carry on our efforts on behalf 

of Yao and Xiao and all other workers and their advocates who 

have the courage to stand up for the rights of Chinese workers. 

But the question is now are there effective solutions to the threat 

of sharply higher Chinese auto and auto parts exports to the U.S. 

in the future? And we believe there are at least five ways to address this problem, but they require making up for lost time. 

Co-Chair WESSEL. If you can sum up quickly, please. 

Mr. GETTELFINGER. I will read a little faster. U.S. Government 

should have included these measures in the World Trade Organization’s negotiations with China. 
38

First, the Administration must take action to bring about the up- ward reevaluation of China’s currency. Second, address the routine abuses of workers’ rights in China. And it’s important that we also move beyond that and talk about 

internationally recognized workers’ rights within all trade agreements. 

Third, we should have vigorous enforcement of China’s trade agreements and they must be implemented. Fourth, the Administration must be willing to invoke the special safeguard provisions in China’s World Trade Organization accession agreements and strengthen the U.S. measures that protect domestic industries against injury caused by surges of imports. And fifth, the U.S. Government must penetrate the lack of transparency in China’s industrial policy to identify all government programs at the national, provincial and local levels that promote local 

production, discourage imports and reward exports. Thank you very much. 

[The statement follows:]

Prepared Statement of Ron Gettelfinger, President International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW), Detroit, Michigan 

Mr. Chairman, Members of the Commission, my name is Ron Gettelfinger. I am the president of the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW). I appreciate the opportunity to 

present the UAW’s views on the impact of U.S.-China trade and investment on the 

automobile and automotive parts industries. 

The UAW first became deeply concerned about automotive trade with China in the mid-1990s, when China announced an industrial policy for the automotive industry that established it as a ‘‘pillar industry’’ of the Chinese economy. The announcement in June of this year of a new ‘‘Development Policy’’ that identifies the 

auto industry as a ‘‘backbone industry’’ has only added to our concerns. China is 

now the world’s third largest market for vehicles and the fourth largest producer. 

The plans for future development of the industry by the Chinese government and 

the world’s automotive companies will have a profound effect on the location of production around the world and the jobs and incomes of UAW members and other 

American workers in this critically important industry. We have seen automotive imports from China grow at a rapid pace in the past ten years. We are deeply concerned about the impact on U.S. automotive production 

and employment that will occur if the Chinese government’s goals for the continued 

rapid development of the industry are achieved. The objectives of China’s automotive policy include becoming the world’s largest automobile manufacturer and a 

producer of its own brands of vehicles and parts for international markets by 2010—

that is only five short years away. The size of recent investments in vehicle and 

parts production capacity that have taken place and been announced makes these 

projections quite realistic. If all of the additional vehicles and parts were consumed 

in China, there would be a relatively small impact on workers and producers in 

other countries. The question that must be answered, though, is whether demand 

in China will grow fast enough to consume all that production. We believe that such 

growth is not at all likely. While the new Chinese auto policy has eliminated several of the 1994 policy’s ob- vious violations of international trade rules (for example, local content requirements, quotas on imports, limits on distribution rights, and more), it still shows a 

bias toward local production over imports and forced investment in order to participate in the local market. Those who argue that such provisions cannot be required 

and cannot be enforced are not familiar with the auto industry’s history of development internationally or with China’s governmental and industrial structure. 

China is not the first country to aspire to a major role in the international auto 

industry. Government industrial policies propelled the Japanese companies in the 

1970s and 1980s and Korean companies in the 1990s into successful international 

producers. Brazil’s industrial policies encouraged massive investment there in the 

1990s and now the same strategy is being pursued in China. The result has been 

an accumulation of global excess capacity that allows the shrinking number of major 
39

producers to threaten their workers in every country with the loss of jobs and plant 

closings unless they become ‘‘competitive.’’ With the rise of China as a major auto 

producing country, being ‘‘competitive’’ means compensation of as low as a dollar an 

hour, no independent union rights and broad government intimidation of the pursuit 

of workers’ legal rights. These conditions have become the new standard of competition for companies around the world, to the detriment of workers everywhere. The less restrictive rules in China’s new auto development policy are not com- forting to us because the course of U.S.-China automotive trade has been largely set 

by the decisions already made by the Chinese government and the multinational 

corporations that dominate the global industry. Under the terms of the 1994 Chinese auto industrial policy, companies invested in China, made alliances with Chinese companies, made commitments to high levels of Chinese content in their vehicles and agreed to set up R&D and technical centers to transfer the latest technology. This led to substantial Chinese investment by the global auto parts companies, often in joint ventures with Chinese firms, that mirrors the assemblers’ investments. The elimination of the specific Chinese government requirements in the 

newly adopted industrial policy will not alter this pattern at all. The U.S.-based assemblers and suppliers will only export products from their U.S. and other global 

production facilities to China until their local production and local sourcing arrangements are fully in place. The huge investments in Chinese production ensure that 

the companies will not want to add to competition in the Chinese market by importing any more than they must. We have seen the same pattern develop in Mexico, 

Brazil and other countries that established tight rules for participating in perceived 

high-growth markets and then let those rules fade away as they were no longer 

needed to produce the desired result. 

Since 1993, the U.S.-China automotive trade balance has moved from a surplus 

of more than $500 million to a 2003 deficit of $2.2 billion. Through June 2004, the 

deficit grew by more than 25 percent from last year, indicating a 2004 deficit of $2.8 

billion. That would result in a doubling of the deficit in only three years. Recent 

announcements by the Big 3 auto companies of additional exports of vehicles to 

China over the next couple of years will not be enough to keep the U.S. auto trade 

deficit with China from growing. Past experience with announcements of this sort, 

which are intended to distract attention away from the soaring U.S. trade deficit 

with China rather than to fundamentally change that imbalance, makes us skeptical that the exports will actually be made. Though U.S. exports of automotive products to China have increased significantly in the past two years, they are still no match for the increase in U.S. imports. The 

growth in exports is consistent with a rapid increase in production of new models 

in China. In the past, the local content of Chinese-assembled vehicles has increased 

over time, in line with the commitments of U.S.-based companies that have formed 

joint ventures with state-owned Chinese companies. With more than 30 new model 

launches last year and this year, Chinese imports of auto parts have been substantial. However, most of the imported parts come from other countries, limiting the 

benefit of the joint ventures for U.S. production and employment. 

In 2003, according to Automotive News (‘‘U.S. suppliers miss boat in China,’’ April 

12, 2004), a Chinese auto industry group reported that China’s imports of auto parts 

totaled $9.5 billion, with Germany supplying $3.13 billion, Japan $2.92 billion and 

the U.S. a mere $268 million. GM’s claims that it exported $1.4 billion in parts and 

machinery to China in 1995–2002 and will ship $1.3 billion in 2004–2005 do not 

seem consistent with the official U.S. export numbers. In addition, some of GM’s 

parts imports into China come from its traditional suppliers in Europe, Brazil and 

elsewhere in Asia. 

Using U.S. Department of Commerce trade data, it is clear that modest increases 

in U.S. auto parts exports will not come close to offsetting climbing parts imports 

from China. The U.S. deficit in automotive parts trade with China has grown from 

$121 million in 1993 to $1.4 billion in 2000 and to $2.3 billion in 2003, even though 

U.S. auto parts exports increased from $218 million to $510 million from 1993 to 

2003. Through June 2004, the U.S. parts deficit with China jumped by an additional 

24 percent despite an 87 percent increase in exports—the value of imports grew to 

$1.8 billion from $1.4 billion, while exports were up by only $165 million. Over time, 

we are confident that Chinese-made parts will replace the limited U.S. parts exports. The number of auto parts companies that are establishing new plants in 

China assures that U.S. exports will be displaced and that U.S. imports of auto 

parts from China will continue to grow rapidly. 

The escalating U.S. deficit in automotive trade with China must be viewed in the 

context of the overall U.S. automotive trade picture. The worldwide U.S. vehicle and 

parts trade deficit was $128 billion in 2003; through June 2004, it was up 11 percent and should be above $140 billion for the full year. We now have deficits of more 
40

than $40 billion each with Japan and with our NAFTA partners, Canada and Mexico. If China achieves its ambitions, it will join this club of countries with huge automotive trade surpluses with the U.S. and undermine the jobs of UAW members and 

other American workers in this critical U.S. industry. Looking at what has happened to U.S. automotive sales, production and trade since NAFTA and China’s auto industrial policy went into effect provides a sobering 

picture of the impact of globalization on the U.S. industry and its workers. In 1993, 

when the U.S. economy was slowly coming out of a recession, U.S. vehicle production was nearly 11 million and sales were nearly 14 million. The auto trade deficit 

was $50 billion at a time of depressed sales and a relatively weak dollar. Imports 

from outside North America accounted for 15.5 percent of sales. Ten years later, 

U.S. sales had increased by three million, or more than 20 percent, but U.S. production increased by only 1.1 million—more than 60 percent of the increase in sales 

came from imported vehicles, as the non-North American import share jumped to 

nearly 20 percent. The automotive trade deficit reached $128 billion. Employment 

of American auto workers was left at about the same level as in 1993, despite the 

increase in U.S. production and the larger increase in U.S. sales. NAFTA contributed a significant part of this deterioration in trade—the deficit with Canada and 

Mexico of $13.1 billion in 1993 grew to $41.0 billion in 2003. The deficit with Japan 

grew from $33.4 billion to $43.9 billion. Much of this damage, though, has occurred in the past three years. From 2000 to 2003, when the U.S. economy fell into recession and a barely visible ‘‘recovery,’’ 

U.S. production fell, and imports from Japan, Germany, Korea and other countries 

increased. And, contrary to past experience with recessions, the trade deficit increased despite the decline in U.S. sales. Employment in the industry has fallen by 

more than 100,000 jobs during that time, and the auto trade deficit continued to 

climb. The same pattern has continued this year—during the first half of 2004, employment is down, along with U.S. production, but sales of imports are up and so 

is the trade deficit. Most of those job losses have been in the auto parts industry 

and thousands of workers in Ohio and other states have been the victims. 

While the automotive industry is an important contributor to the nation’s eco- nomic well-being, it is especially important to Ohio’s. The downward pressure on the 

wages and working conditions of American auto workers that results from increasing competition from Chinese products, especially auto parts, has had a serious negative impact on the employment opportunities available to workers in Ohio and to 

the compensation that they can hope to earn. The auto parts industry accounts for 

the majority of the jobs in the automotive industry and it is in this area that intense 

price competition has led to intense cost competition between producers. That competition has led many companies to search for lower and lower labor costs; many 

of those companies have moved their production to China. Pressure from the assemblers has also contributed to some companies deciding to move production to China. 

Just one company, Delphi, which has numerous Ohio production facilities, has invested $500 million in China during the past decade, setting up 14 operations and, 

soon, a research and development center in Shanghai. By 2009, Delphi expects to 

have 1,400 employees at its technical center. They will be added to the 7,000 current Delphi employees in China. And what are the savings to Delphi from setting 

up a local technical facility? A young electrical engineer in China earns less than 

$400 a month, while a new U.S. engineer earns about $4,000 a month. 

While it is very difficult to pin down the compensation of auto industry production 

workers in China, manufacturing workers in Shanghai, where GM and other auto 

producers are concentrated, earn about $1.50 per hour in wages and benefits. That 

is about half of what Mexican auto workers are paid and as little as five percent 

of the compensation of an American auto worker. 

That is one of the reasons why assemblers from around the world invested $6.3 

billion in Chinese facilities in the past two years and have promised to spend another $10 billion in the next three years. And it is why GM expects to purchase $4 

billion a year in parts from China for its operations around the world. 

The announcements by General Motors and Ford that they expect to source $10 

billion annually in parts from China within three to six years sends a compelling 

message to their suppliers that they had better make investments in China in order 

to retain the business of their traditional customers. The losers in that race to 

China are the American workers who are making high-quality products in highly 

efficient production systems, using high-technology equipment. This pressure undermines their jobs and their skills. It also eliminates the livelihoods of the workers 

who make materials and components for those products that are now made in China 

and it impoverishes the communities where those workers live. 

The Chinese government has reinforced this process. A Vice Minister has announced that China expects to export between $70 billion and $100 billion in auto-
41

motive products, 40 percent of total production, by 2010. Last year, China’s exports 

were $4.7 billion and the government’s target for 2005 is $15–20 billion. The growth 

rate of exports that is being pursued is simply staggering. Every objective observer 

has acknowledged that hundreds of thousands of American jobs will be lost if these 

projections are on the mark. According to a recent report by the International Metalworkers’ Federation, auto- motive production in China will double by 2007, but demand for vehicles will increase far more slowly. The result will be excess capacity in China that adds to the 

excess capacity that exists already around the globe. But what market will be open 

to receiving the extra vehicles and parts that can be produced in China? Will Korea, 

which has resisted imports from all over the world for more than 20 years, open 

up to imports from China? Will Japan accept the displacement of local production, 

or Thailand, or India? Even Europe is unlikely to accept large numbers of vehicles 

from China. But the U.S., with its history of running huge automotive trade deficits 

with all major auto producing countries, seems like the obvious dumping ground for 

Chinese excess capacity. Even today, excess capacity in China is visible. With vehicle sales slowing down this year (as pent-up demand is exhausted, banks cut back on loans), JPMorgan reported that excess supply for this year will be 11 percent and it will grow to 23 percent next year. And that is before much of the new capacity begins to operate. The 

finances of the companies could change dramatically as a result. The high prices of 

vehicles that were fed by the scarcity of modern vehicles are disappearing as more 

and more new models hit showrooms and lower tariffs make imports more competitive. High profits will be squeezed and the pressure to keep plants running at capacity will be even stronger. The companies also have memories of Brazil firmly in 

mind. In the late 1990s, multinational auto companies saw rapid sales growth in 

Brazil and responded with massive investments in new capacity. The spillover of the 

Asian financial crisis put a hole in Brazilian sales and Argentina’s economic crisis 

eliminated a major export market. About half of Brazilian capacity has been idle, 

and the auto companies cannot afford for that to happen again in China. They will 

be under intense pressure to keep their Chinese plants profitable. And that will 

mean large Chinese exports of vehicles and parts to the markets that are open to 

them. 

Before starting to examine how the U.S. Government should respond to the cur- rent and future automotive trade problems with China, it is important to identify 

two important factors that intensify the U.S.-China automotive trade imbalance—

the exchange rate and the absence of independent Chinese trade unions. It is accepted by virtually all analysts that China manipulates the yuan-dollar exchange 

rate to keep it fixed at 8.2781 yuan to a dollar. China’s central bank has bought 

billions of dollars of government bonds to maintain the fixed exchange rate as China’s trade surplus with the U.S. has exploded. The undervalued yuan subsidizes 

China’s exports and overprices U.S. exports. While the Chinese government has 

paid lip service to the need to upwardly revalue the yuan, it has taken no action 

to achieve it. The purchases of U.S. assets continue and the trade imbalance continues to expand. This situation sustains China’s exports to the U.S. and Chinese 

economic growth, while it undermines the strength of the U.S. economy and extends 

the adverse impact of the trade imbalance with China into ever more U.S. industries. 

The absence of any action by China to reverse the absolute repression of independent trade unions demonstrates the continuing repressive nature of China’s social and economic system. The most fundamental of worker rights, freedom of association, is brutally repressed in China, as are the other worker rights covered by 

the International Labor Organization’s Fundamental Principles and Rights at Work. 

A petition filed under Section 301 of U.S. trade law by the AFL–CIO on behalf of 

the UAW and other U.S. unions provided a stunning picture of the depths of that 

repression and its devastating impact on Chinese workers. The large profits reported by many of the automotive joint venture companies in China are the result, 

in part, of the inability of Chinese workers to form independent labor organizations 

that can represent the interests of workers in receiving a fair share of the value 

of their contribution to the production process. The widespread evidence of health 

and safety problems is another indicator of the harm done to Chinese workers as 

a result of the repression of independent unions. 

Along with other unions, we have focused attention on the cases of Yao Fuxin and 

Xiao Yunliang as examples of the intensity of the attacks on workers’ rights in 

China. They were arrested, charged with subversion and convicted for leading 

peaceful protests against the failure of a shuttered Ferro-Alloy factory to pay pensions and other benefits legally due to former workers. Yao was sentenced to seven 

years in prison and Xiao to four years for exercising basic rights that are legal in 
42

China. Both men suffer from serious illnesses and should be released from prison 

on medical grounds, but they remain imprisoned despite an appeal by the Freedom 

of Association Committee of the International Labor Organization for their release. 

The Chinese government’s behavior in these cases, and in countless others, is 

shameful and inexcusable. We will carry on our efforts on behalf of Yao and Xiao 

and all other workers and their advocates who have the courage to stand up for the 

rights of Chinese workers. Are there effective solutions to the threat of sharply higher Chinese auto and auto parts exports to the U.S. in the future? We believe there are at least five ways to 

address this problem, but they require making up for lost time. The U.S. Government should have included these measures in the WTO accession negotiations with 

China. 

First, the Administration must also take decisive action to bring about the up- ward revaluation of China’s currency. The current exchange rate does not reflect the 

competitiveness of China’s industries in general, and the automotive industry in 

particular. For international trade to be fair and balanced, the exchange rate must 

adjust; China’s policy of fixing the value of the yuan to the dollar eliminates the 

pressure for that adjustment to take place. The reluctance of the U.S. Treasury Department to tackle this issue, in deference to China’s large purchases and holdings 

of U.S. Government securities, is simply unacceptable. China is preventing an upward revaluation of the yuan in order to ensure that it can continue to increase its 

exports to the U.S. and keep its factories humming. The resulting displacement and 

injury in the U.S. requires action by our government to remedy the situation and 

eliminate the unfair currency advantage that China creates. The currency manipulation that is taking place is actionable under U.S. trade laws and action must be 

taken. 

Second, to address the routine abuses of workers’ rights in China, renegotiation of the WTO accession agreement or a new set of negotiations is required. The Section 301 worker rights petition demonstrated that the effect on the prices of Chinese-made goods of the violation of workers’ rights is substantial. As a start, that 

petition must be accepted for review next year when a new Administration takes 

office. However, it is also necessary to move beyond that case. We cannot achieve 

a level playing field for U.S.-China trade without ensuring that China will implement internationally recognized worker rights or allowing the U.S. to retaliate 

against abuses through a non-discretionary procedure, similar to the handling of 

anti-dumping charges. Just as a special safeguard procedure was recognized as appropriate for trade with China, a special worker rights provision is needed as well. The UAW and other unions must also take advantage of corporations’ commit- ments to comply with fundamental worker rights through the negotiation of International Framework Agreements (IFAs). These agreements apply to a company’s 

own operations and to those of its business partners and suppliers. And they apply 

in countries where those rights are not legally protected as well as in those where 

they are. IFAs have already been negotiated with several automotive firms 

(DaimlerChrysler, Volkswagen, Bosch), opening the possibility of insisting on their 

Chinese workers, and the workers of their joint venture partners and suppliers, 

being able to exercise the right to freedom of association, to form a union of their 

own choosing. We will be looking for opportunities to take advantage of IFAs to improve the lives of Chinese workers, through higher compensation, improved health 

and safety conditions and a voice for workers in the organization of their work. 

Third, vigorous enforcement of China’s trade agreements must be implemented. 

The Bush Administration has failed to pursue clear violations of intellectual property rights protections, including the counterfeiting of auto parts and the illegal appropriation of vehicle designs by Chinese companies. China’s market opening commitments must also be fully enforced so that the inadequate level of U.S. exports 

is not limited even further by discrimination against imports at the border or in distribution channels. While the Bush Administration has created ‘‘offices’’ for monitoring and enforcement of China’s trade commitments, there has been precious little 

action to achieve results. 

We strongly urge the Bush Administration to advise all companies doing business 

in China that they should report any inappropriate or illegal behavior by Chinese 

public officials or corporate officials. This should apply to communications that contradict China’s trade obligations or that promise special treatment in return for certain behavior, such as investing in China rather than supplying the market with 

imports, meeting ‘‘suggested’’ local content levels rather than importing parts. The 

Bush Administration must follow up on any of these activities by insisting on Chinese government action to reverse them. 

Fourth, the Administration must be willing to invoke the special safeguard provisions in China’s WTO accession agreement and strengthen the U.S. measures that 
43

protect domestic industries against injury caused by surges of imports. The potential 

for rapid increases of imports from China, of vehicles and parts, should be clear 

from the rate of expansion of production capacity there. The U.S. Government must 

be ready to respond if the U.S. industry and its workers are threatened with injury 

by such imports. Recent experience with the U.S. import surge protections of Section 

201 of the trade laws has shown that they must be strengthened to be effective. 

Fifth, the U.S. Government must penetrate the lack of transparency in China’s 

industrial policies to identify all government programs, at the national, provincial 

and local levels, that promote local production, discourage imports and reward exports. There are provisions in the new automotive industrial policy that are intended to accomplish this result, but they have not been spelled out clearly. The 

U.S. Government must press the Chinese government to obtain that information. A 

variety of other government policies, such as taxes applied to foreign-owned enterprises that discriminate in favor of those producing for export, must also be examined. Because of the complex set of inter-governmental relationships in China, it is 

critical to have information about the policies in place at each level of government 

and about their interactions in practice. We have not seen any evidence that the 

Bush Administration has spent the necessary effort to investigate these policies. 

Mr. Chairman, Members of the Commission, thank you for coming to Ohio to get 

a firsthand look at the serious economic problems facing workers in America’s heartland and for your interest in the impact of the U.S.-China trade relationship on the 

U.S. auto industry and its workers as well as the denial of workers’ democratic 

rights in China. Your past efforts to bring the challenges created by U.S.-China 

trade to the attention of the public and to policymakers have made a valuable contribution to their understanding of what is at stake in our economic and security 

relationship with China. We urge you to support our proposals for government action. In the weeks and months ahead, we look forward to assisting the Commission’s 

examination of the industry and answering any questions you may have.

Co-Chair WESSEL. Thank you. We’ll have the rest of your statement entered into the record. 

Mr. Girsky. 

STATEMENT OF STEPHEN GIRSKY

MANAGING DIRECTOR, MORGAN STANLEY, PURCHASE, NEW YORK 

Mr. GIRSKY. It’s a pleasure to be here. I want to thank the Commissioners as well. My name is Stephen Girsky. I’m the lead Morgan Stanley Global automotive research effort. My goal here is to 

give you the Wall Street perspective from an outside perspective 

and a bit of financials of what’s going on here. I have a number 

of slides to run through. I will talk quickly. 

Basically I’m going to give you five things. I’m going to tell you 

what China’s significance is in the global auto industry. I’m going 

to talk a little bit about the landscape here. I’m going to talk about 

the company strategies that are being employed, the implementation of recent changes in the economic environment, and I’ll talk 

about export potential here. 

I’ll give you bottom line first, that way if I get cut off you’ll know 

where we are. The Chinese auto industry in our opinion has the 

potential to be a major player long-term in the global auto industry. The Chinese impact on the U.S. vehicle market is likely to be 

very low in the near-term, largely due to cost and quality issues. 

A shake-out in the Chinese car market is likely to be a prelude to 

any significant global expansion here. Component export growth is 

much more likely in the near term for a number of reasons, and 

we’ll go into that. 

So why is China important? It’s the fifth largest car market in 

the world. It’s one of the fastest growing and highly profitable. It’s 

got export potential and component sourcing opportunities. The 

ones that are before are because trucks are included. They are the 
44

fifth largest in the world right behind the UK. They are the fastest 

growing car market in the world. They’re going to grow about 15 

percent this year. 

As I will discuss in a minute, the growth was much greater earlier in the year, but since then the economy has slowed. Long-term 

potential is very high. I have no doubt that China will be one of 

the largest auto manufacturers in the world, whether it’s 2010 or 

2020. That’s because they have a big population to support the vehicles. There is significant potential here. There are eight vehicles 

per thousand people in China compared to almost 900 in the U.S. 

This is a very profitable market. Volkswagen makes about a 

third of their profit in China. GM made 23 percent so far this year. 

They have a billion dollars invested there. Honda makes about six 

percent. 

Labor costs are certainly lower. Ron Gettelfinger threw out some 

numbers. Our best guess is China’s auto industry pays their workers about $3 an hour. The UAW wage in the United States, excluding benefits, is about 25.63 according to the latest facts. 

However, the high profits are not related to low costs. They’re related to high pricing. The prices Chinese consumers pay for cars is 

significantly above similar prices they pay here. That’s because 

there has been a supply demand imbalance up until now and that’s 

starting to change. 

Overall costs in China: this is very different than auto industries. 

China is not a low-cost producer of cars right now. They have absence of scale in manufacturing. They have a very immature supply 

base, they have logistics issues and they have quality issues that 

need to be overcome before there is going to be lower cost. It could 

be two or three years at the earliest before they are cost competitive with the rest of the world. 

The structure is very confusing. You have a number of government entities that have joint ventures with a lot of different multinationals, and the multinationals are global partners at the government level. The government has different partners at the multinational level. 

The market is very fragmented. You have out of 36 basically producers our best count. Putting that on the U.S. scale is like our 

having 240 car companies here. It would be very difficult for anybody to make money with 240 car companies. 

The market is dominated by the multinational. Volkswagen, General Motors, Honda. The local players, the indigenous players, have 

very low share in this market. 

Here are the strategies. I can lump them into three groups. 

These government-sponsored entities want to be self-sufficient in 

cars. They don’t want to have to rely on the outside world, and 

they do have long-term global aspirations. The multinational corporations that are in China are a source of growth and profit, and 

they have been investing a lot of money in China. They would like 

a payback on that investment, and they also view it as an opportunity to low cost source component. 

There are a bunch of indigenous players. Their whole goal here 

is to survive a shake-out that’s likely to come. 

We have a number of announcements supporting this. GM and 

Ford both want to source a lot of parts in China whoever’s going 
45

to export out. There have been a number of capacity announcements, and even at the bottom, one small indigenous player is 

going to seek approval to try to export a small car to the U.S., but 

this will take some time. 

The economic environment has changed a lot recently. Demand 

weakens as capacity growth continues. Profit pressure is likely. In 

changing the tariff structure a little bit, the car tariffs are going 

to continue to fall. Component tariffs are going to go up so you are 

going to see car imports increase at a slow rate. You’re going to see 

parts imports into China probably declining. 

In monthly sales you can see the growth rate in green has slowed 

dramatically from where it was. It’s basically running up 0 to five 

percent. It was up above 40 percent plus. 

Meanwhile capacity growth continues. Excess capacity is significant. We estimate pretty close to the other brokerage firm that Ron 

Gettelfinger cited in his testimony. It’s likely to get worse before 

it gets better. And that’s going to lead to a shake-out. 

Chinese auto stocks haven’t fared that well either. To be certain, 

Wall Street does not like it. The investment community does not 

like what’s happening here and are uncomfortable with it. You can 

see that in the near-term outlook. 

The prospects for vehicle exports are low in the near-term. The 

costs are still high. The quality is not up to global standards. The 

local players have logistics and distribution constraints, and then 

there is the whole question of market acceptance. Fifteen or twenty 

years ago Yugo, a company from Yugoslavia, tried to import into 

this country a low-price car that failed miserably because they 

could not get high quality. 

Hyundai, on the other hand, it’s a Korean company. It stopped, 

it started, it stopped again. They are finally making significant inroads here. If exports are going to be significant, existing multinationals will likely have to facilitate this. 

Many multinational plants are being built along the coast. That 

will provide some long-term flexibility, if that’s the way they decided to go. 

The prospect for component exports is higher. Those components 

within risk of export are high labor portion of the total value, high 

environmental cost or logistic costs. Components that are easy to 

ship, tires and wheels, for example. Seats are not as easy to ship 

because they have a lot of air that they go through. 

Here’s just a cost structure. We estimate the cost of building a 

tire in China is about $7 cheaper than it is to build a tire it here. 

China is not the only low-cost country in the world, there are plenty of others. 

Although chasing low cost labor has never been a successful 

strategy here, these companies stretch their supply line very long 

and it adds a lot of risks. 

Imports from China have been growing. They’ve been growing 

about an 18 percent clip, faster than any other country’s imports 

of auto parts. 

One of the interesting things is we run a trade deficit of parts 

with China. Europe runs a trade surplus of parts with China. This 

estimate was on the multinational sourcing strategies. Europe 
46

seems to import a lot more parts to develop there. I would argue 

that Europe’s surplus with China is going to go down. Risk and opportunities. The opportunities here are multinationals want to participate in one of the potentially largest markets in the world. They have been investing a lot of money. They 

want a return on that. China can easily ten, twenty years from 

now more likely be bigger than the U.S. market. The risks are our intellectual properties. Our multinationals are 

getting a lot of technology to their companies. The risk is are they 

potentially creating a better company to compete with them. This is my last slide. We have had a number of intellectual property lawsuits that have been filed. None have been successful. Toyota and some of the Chinese companies have a brand that looks a 

lot like Toyota. GM has a car that’s been—that Chinese indigenous 

company has a very similar product as well. These have not defending patent intellectual property is one of the big issues on the 

table in our opinion. 

Did I get through it in time? 

Co-Chair WESSEL. Take some oxygen. 

[A copy of Mr. Girsky’s slide presentation is on file in the Commission’s office.] 

Mr. Tackett, please. 

STATEMENT OF JAMES G. PEARL

SENIOR VICE PRESIDENT OF SALES AND MARKETING

ACCOMPANIED BY SCOTT TACKETT

VICE PRESIDENT, HUMAN RESOURCES AND ADMINISTRATION

DENMAN TIRE CORPORATION, LEAVITTSBURG, OHIO 

Mr. PEARL. Good morning. My name is Jim Pearl. I’m the Senior 

Vice President of Sales and Marketing in Denman Tire Corporation. I’m joined at the table today by Mr. Scott Tackett Vice President of Human Resources and Administration. 

First, I would like to thank the Commission for this opportunity 

and this time to present the Denman story to you. We are a very 

small little-known tire company located here in northeastern Ohio. 

Denman Tire is a proud American-owned company that has been 

in business since 1919. We are a single-site specialty tire manufacturing company. We currently employ 311 hourly and salary employees in Leavittsburg, Ohio. Our hourly workforce is represented 

by the United Steelworkers of America Local 98L and is one of the 

oldest rubber unions in the nation. 

Strategically positioned, Denman Tire Corporation is located in 

northeast Ohio with sales offices throughout the United States including Indianapolis, Indiana; Gainesville, Virginia; Wheeling, 

West Virginia; Kansas City, Missouri; and Houston, Texas. 

Denman Tire produces the kinds of specialty tires that are in 

high demand in the replacement tire market and the private brand 

specialty light truck tire market. Denman Tire produces specialty 

tires for many applications including on/off road light trucks, agricultural, construction, special trailer, industrial, classic and vintage 

as well as tires for our military. 

Competing in the tire business this long has not always been a 

paved road. In fact, it’s quite the opposite. Denman Tire was founded by Walter R. Denman who originally built the plant exclusively 

for the manufacture and shipment of the Denman brand passenger 
47

tires. Much has changed since that time both within the industry 

and within the tire. 

One thing that has not changed is Denman Tire Corporation has 

long strived for a history and reputation of serving its customers. 

The cornerstone of our organizational philosophy is making customer service our number one priority. Many of our customers will 

tell you that we have the best customer service department in the 

business, and we are justifiably proud of that compliment. 

In an era of consolidations and mergers, Denman Tire has remained a stand-alone, American-owned company, and we are very 

proud of this fact. We feel this pride reflects upon our attitude in 

both quality workmanship and our approach to this business. 

Every day we strive to produce and ship the best-made tires in the 

world to our many and varied customer base. 

Denman Tire is an ISO9001-certified company, which assures 

our customers that our quality systems meet or exceed worldwide 

standards. We feel strongly that if provided a level playing field, 

Denman Tires produced in Leavittsburg, Ohio can compete with 

any other tires made anywhere in the world. 

The realities of the global marketplace have in the past, and continue today, to cause us great consternation and concern. 

In 1992 the company was faced with significant competitive pressures that required an aggressive and proactive approach to our 

business. Consequently, we explored avenues of enhancing and 

growing our business and in turn providing our customers with the 

products they required. We outsourced to round out several of our 

product lines with tires that we were unable to produce in our Ohio 

facility due to either lack of equipment and physical capabilities. 

After much work and effort it was determined that our best 

course of action was to develop a relationship with another manufacturing organization. Consequently, we determined that our best 

opportunities existed with forging an association with a Chinese 

manufacturer. 

The decision to have product made in China was based on three 

issues: First, cost; secondly, the Chinese manufacturer would build 

and put the Denman name on our product; and the ability to ensure a quality product would be produced. 

If we look at this decision retrospectively, we find that this was, 

in fact, the best business decision that could have been made at the 

time. Cost of Chinese-produced tires remains very competitive in 

this American marketplace. Even considering the freight cost, Chinese-produced tires are sold below what our current factory costs 

are in Leavittsburg, Ohio. 

Concerning the quality of the product, we have found that the 

quality of tires produced in China has greatly improved, and today 

China does, in fact, produce a very high-quality product. 

Over the last few years we have witnessed China becoming extremely aggressive in exporting tires to the U.S. markets. Today 

you not only see Chinese passenger and light truck tires, but you 

see Chinese medium and heavy-duty truck tires, you see specialty 

tires of all kinds including agricultural, industrial and construction. 

Today as we speak here there are construction vehicles working 

on the renovations to our Capitol Building in Washington, D.C., 

with imported tires from China on them. 
48

Obviously this has resulted in lower margins for us as an organi- zation. Based on these factors, Denman Tire Corporation has two 

choices: Compete or close the doors. We have chosen to compete 

and protect as many American jobs as best we can. Another factor that has negatively affected our business is the fact that in China the Chinese have in the last couple years sought 

out and sold significant product to the smaller distributors across 

the United States. Where once they only concentrated on selling to 

large distributors, they are now directly selling tires to the heart 

and soul of our customer base. These are the very customers that 

we used to sell to and now are negatively affecting our profit margins. Market pressures such as this have increased over the last 

years to the point of causing concern for our long-term survival. 

We believe strongly that the Chinese tire manufacturers have a 

significant cost advantage over Denman Tire Corporation for three 

basic reasons. The first is obvious, labor costs. Second, the current 

levels of government subsidies that are provided to the Chinese tire 

manufacturers. And finally, the very modern and efficient plants 

and factories provide considerable cost advantages. 

Conversely, our plant is old and very labor intensive. We have 

significant costs associated with numerous and sometimes very 

burdensome regulations, and we believe that unreasonable tort liability issues threaten all organizations regardless of the products 

they produce. 

Obviously for the reasons just mentioned there does not exist an 

opportunity for Denman Tire to export tires produced at our plant 

in Ohio to China. 

In closing, we are a small American manufacturing company 

competing with the Chinese government. We work daily to make 

the proper business decisions, and we strive not only to keep our 

costs under control, but to reduce costs in our old factory wherever 

possible. 

However, there are numerous issues that are out of our control, 

and simply stated we cannot expect to resolve these issues without 

significant changes and help from others in this battle. 

Thank you for your time and attention to a small American manufacturing company that just wants to provide and protect good 

American paying jobs. 

[The statement follows:]

Prepared Statement of James G. Pearl

Senior Vice President of Sales and Marketing

Accompanied by Scott Tackett

Vice President, Human Resources and Administration

Denman Tire Corporation, Leavittsburg, Ohio 

HISTORY 

Denman Tire Corp. is a proud American owned company that has been in business since 1919. We are a single site specialty tire manufacturing company. We currently employ 311 hourly and salaried employees in Leavittsburg, Ohio. Our hourly 

workforce is represented by the United Steelworkers of America Local #98L and is 

one of the oldest rubber unions in the nation. 

Strategically positioned, Denman Tire Corp. is located in Northeastern Ohio with 

sales offices throughout the United States including Indianapolis, Indiana, Gainesville, Virginia, Wheeling, West Virginia, Kansas City, Missouri, and Houston, Texas. 

Denman Tire Corp. produces the kinds of speciality tires that are in high demand 

in the replacement tire market and the private brand speciality light truck market. 

Denman Tire produces speciality tires for many applications including on/off road 
49

light trucks, agricultural, construction, special trailer, industrial, classic and vintage 

as well as tires for our military. 

Competing in the tire business this long has not always been a paved road. In 

fact, quite the opposite. Denman Tire was founded by Walter R. Denman who originally built the plant exclusively for the manufacture and shipment of the Denman 

brand passenger tires. Much has changed since that time, both in the tire industry 

and within Denman Tire Corporation. 

One thing that has not changed is that Denman Tire Corp. has long strived for 

a history and reputation of serving its customers. The cornerstone of our organizational philosophy is making customer service our number one priority. Many of our 

customers will tell you that we have the best customer service department in that 

business and we are justifiably proud of that complement. 

In an era of consolidations and mergers, Denman has remained a stand-alone, 

American owned company and we too are very proud of this fact. We feel this pride 

reflects upon our attitude in both quality workmanship and the approach to our 

business. Every day we strive to produce and ship the best-made tires in the world 

to our many and varied customer base. 

Denman Tire Corp. is ISO 9001 certified which assures our customers that our 

quality systems meet or exceed worldwide standards. We feel strongly that if provided a level playing field Denman tires produced in Leavittsburg, Ohio can compete 

with any other tires made anywhere in the world. 

CURRENT ISSUES 

The realities of the global marketplace have in the past and continue today to 

cause us great consternation and concern. 

In 1992, the Company was faced with significant competitive pressures that required an aggressive and proactive approach to the business. Consequently, we explored avenues of enhancing and growing our business and in turn providing our 

customers with the products that they required. We outsourced to round out several 

of our product lines with tires that we were unable to produce at the Ohio facility, 

due to the lack of equipment and physical capabilities. After much work and effort 

it was determined that, our best course of action was to develop a relationship with 

another manufacturing organization. Consequently, we determined that the best opportunities existed with forging an association with a Chinese manufacturer. The 

decision to have product made in China was based on three issues; (1) cost, (2) the 

Chinese manufacturer would build the product with the Denman name on the sidewall of the tire, (3) ability to ensure a quality product would be produced. 

If we look at this decision retrospectively, we find that this was in fact the best 

business decision that could have been made at the time. Cost of Chinese produced 

tires remains very competitive in the American marketplace. Even considering the 

freight costs Chinese produced tires are sold at below what our current factory costs 

are in Leavittsburg, Ohio. 

Concerning the quality of the product we have found that the quality of tires produced in China has greatly improved and today, China does in fact produce a very 

high quality product. 

Over the last few years, we have witnessed China becoming extremely aggressive 

in exporting tires to the U.S. markets. Today, you not only see Chinese passenger 

and light truck tires, but you see medium and heavy duty truck tires, you see speciality tires of all kinds including agricultural, industrial and construction. Today, 

as we speak here, there are construction vehicles working on the renovations to our 

Capitol building in Washington, D.C. with imported tires from China on them. 

Obviously, this has resulted in lower margins for us as an organization. Based on 

these factors Denman Tire Corp. has two choices; choose to try to compete or close 

our doors. We have chosen to try to compete and protect as many American jobs 

as best we can. 

Another factor that has negatively affected our business is the fact that the Chinese have for the last couple of years sought out and sold significant product to the 

smaller distributors across the U.S. markets. Where once they only concentrated on 

selling to large distributors they are now directly selling tires to the heart and soul 

of our customer base. These are the very customers that we used to sell to and now 

are negatively affecting our profit margins. Market pressures such as this have increased over the last years to the point of causing great concern for our long-term 

survival. 

LONG TERM CONCERNS 

We believe strongly that the Chinese tire manufacturers have a significant cost 

advantage over Denman Tire Corporation for three basic reasons. The first is obviously labor cost. Second, the current levels of government subsidies that are pro-
50

vided to the Chinese tire manufacturers. Finally, very modern and efficient plants 

and factories provide considerable cost advantages. 

Conversely, our plant is old and is very labor intensive. We have significant costs 

associated with numerous and sometimes very burdensome regulations and we believe that unreasonable tort liability issues threaten all organizations regardless of 

the products produced. 

Obviously, for the reasons mentioned above there does not exist any opportunity 

for Denman Tire to export tires produced at our plant in Ohio to China. 

In closing, we are a small American manufacturing company competing with the 

Chinese government. We work daily to make the proper business decisions and we 

strive not only to keep our costs under control but also to reduce costs wherever 

and whenever possible. However, there are numerous issues that are out of our control and simply stated we cannot expect to resolve those issues without significant 

changes and help from many others in this battle. 

Thank you for your time and attention to a small American manufacturing company that just wants to provide and protect good paying American jobs.

Panel II: Discussion, Questions and Answers 

Co-Chair WESSEL. Thank you and thank you to all the panelists. 

If appropriate, I will begin the line of questioning this round. 

I would like to understand something about the different nature 

of the Chinese auto industry and the relationship of large companies, because quite frankly, I got scared to death both hearing your 

presentation, Mr. Gettelfinger, and reading through your presentation background materials, Mr. Girsky, in terms of the company 

threat. 

The International Metal Workers Federation, I believe, indicated 

that, and I think you said in your testimony, Mr. Gettelfinger, that 

capacity may be 50 percent higher than demand within the next 

three years. I understand some small differences in opinion. China 

is growing at eight, nine percent depending on what numbers, may 

be higher, may be lower. Energy prices and a lot of other things 

will affect that. As you said, Korea and many other countries, 

Japan, have a long history of keeping other countries out of their 

market. Where’s this excess capacity going to go? 

And unlike the challenge of the Japanese auto industry in the 

’80s, we see U.S. multinationals investing there and producing 

there, which as far as I can tell that unlike the Yugo that you referred to and Hyundai that have developed distribution networks, 

with the high profits of U.S. companies on their Chinese production, they have got a ready-made distribution system that this 

stuff’s going to be flowing here quickly if there’s any reduction in 

demand in China. Response? 

Mr. GETTELFINGER. I will let Mr. Girsky take a spin on part of 

that, but let me make a couple suggestions. Number one, and Steve 

knows better than I do, somewhere between 70 and 80 percent of 

the world’s automotive profits come out of the United States. 

Korea, if you look at foreign nameplates in their market, it’s one 

percent. If you look at Japan it’s five percent. If you go to European 

it’s about 22 percent, and if you come to the United States, it’s 40 

percent. It’s very clear and I believe with the production capability 

being similar in the neighborhood of 70 million vehicles and sales 

around 50 million, that there is already excess capacity out there, 

and this is the market where it’s going to come. 

If the American companies want to do business with China, they 

go there. They venture together. They make investments. They are 

required to take over research and development center and on the 
51

end of it we are in a race to the bottom from our standpoint. We 

are losing out every day, and it’s unfortunate that there are no provisions in these trade agreements, or the provisions that are there, 

we are walking away from because through currency manipulation 

China’s out buying out bonds and puts us in a precarious situation 

as a nation so we’ve got to be willing to take them on as a nation. 

Mr. GIRSKY. The only companies that have announced export out 

of China right now, Hyundai has said they are willing and plan to 

export cars probably going to Europe. They said they have no plans 

to export cars from the China to the U.S. Another company I think 

Volkswagen is going to export a small amount of cars to Australia 

just to sort of prime the pump. 

Right now the reason the companies have high profits in China 

is because they pay about 30 percent more per vehicle over there 

than we pay over here. They are not in a position right now to turn 

around and ship that Buick over here, A, because the quality isn’t 

as good, and B, if you sell that Buick for 30 percent like you have 

to sell it here you couldn’t be making any money on it. So yes, I 

think the multinationals ultimately will facilitate this if they are 

going to be exports because they do have distribution there, but 

they are a long way away. And I think that what they would like 

to see happen is demand raise in China again because there’s a lot 

of people who would like to have cars there. In contrast to say 

other countries they’d like to be able to participate in that growth. 

Co-Chair WESSEL. Let me understand if I can. If I remember 

when GM created their joint venture three or four years ago 

through the negotiation there was a, I believe, a billion dollar investment or something along those lines as well as an agreement 

that they would source domestically within a period of years 80 to 

100 percent of the domestic content to that facility. They were buying U.S. auto parts and shipping them there, and the result, and 

I assume this is also the case as it relates to Denman Tire, is that 

you helped your Chinese partner get up to the quality levels that 

your customers here in the U.S. would want. You want to be proud 

of what you’re selling under your name wherever it’s made. 

Aren’t we creating our worst nightmare? Aren’t we teaching 

them to become ISO9001 because that’s what ultimately the Chinese customers would want? 

And as these capacity increases continue, and if the Chinese 

market slows down, we are going to have all this capacity here. 

We’re going to have world-class competitors. Their wage rates, despite all you said, their wage rates are going to be a huge differential. This stuff is going to flood our market. You’re looking—for the 

American worker I think you look beyond the three-year——

Mr. GIRSKY. Also if our prices fall in China demand—there are 

a lot of people—China does not need to export cars to have a successful auto business. They need technology because their consumers demand good product. The consumers, the more cars you 

sell the more people you employ there and the standard of living 

goes up in China. So they don’t necessarily need to export. 

These car companies are global companies. They ship cars two 

places, one place. Honda exports cars from here to Europe. They 

bring cars here from Europe. They bring them from Japan and so 

there are a lot of things that bore out there. But the prospect of 
52

excess capacity is large, that is true, where that ends up. But as 

Ron said we already had excess capacity in this business so it’s already out there. It’s not a new problem. We have excess capacity 

and China hasn’t started yet. 

Co-Chair WESSEL. Understand. I see my time is expired. 

Commissioner Mulloy. 

Commissioner MULLOY. Mr. Gettelfinger, in your testimony on 

page five, you talk about General Motors and Ford expecting to 

source $10 million annually in parts within three to six years. My 

understanding is that the Chinese have identified the automobile 

industry as a pillar industry. This question is for Mr. Girsky. 

Haven’t they already announced as a government target that they 

want to export about a hundred billion dollars worth of auto and 

auto parts by 2010? 

Mr. Girsky, when you say they are a long way away from exporting auto parts, what do you mean by a long way away? What timeframe are you talking about? 

Mr. GIRSKY. For example, one manufacturer told us it would be 

two or three years at the earliest before their cars would be cost 

competitive with cars they produce outside of China. So you get 

that two or three years and listen, these developing markets typically take longer to come to fruition. If you look at Brazil or some 

of these other, Korea, take longer to develop. But ultimately so 

you’re talking some time before we think significant exports can 

ramp up here. 

Now components are a different story. I’m not familiar with the 

numbers thrown out here. There’s no question GM and Ford are 

sourcing more components. That’s a stated fact. 

Commissioner MULLOY. Yes. Now, let me ask you this. 

Mr. GIRSKY. Those are global numbers by the way. They’re not 

all coming here. They’re reporting components from China, Europe 

and all that stuff. 

Commissioner MULLOY. Mr. Stephen Roach, your company’s chief 

economist, was good enough and come to testify in a hearing that 

we had last September 25th. He wrote an article in your firm’s 

publication, Global Investment Research and he talked about the 

global labor market and whether that is why we are having a jobless recovery in the United States. He said we are being influenced 

by the maturization of offshore outsourcing platforms in places 

such as China and India. I think he means that companies go there 

and produce there rather than here. 

Mr. GIRSKY. Yes. 

Commissioner MULLOY. Two, the Internet because now you can 

move not just blue collar jobs out of the country, you can move 

white collar jobs out of the country. Three, the cost-cutting imperatives of the low-price industrial world. He felt we might be having 

a global labor arbitrage. Do you agree that he’s on to something in 

talking about this issue? 

Mr. GIRSKY. One, I don’t want to speak for Dr. Roach. He’s got 

his own opinion. I do want to point out the difference between 

China and other industries right now, like the auto industry and 

other industries, is the high—they are not a low cost country right 

now where they may be low cost in tires or other—computer chips 
53

or what have you, but the auto business right now is different. It’s 

very immature and very fragmented. 

Commissioner MULLOY. But right now there’s ten billion dollars 

in auto parts coming into this country——

Mr. GIRSKY. It’s much smaller than that right now, but ultimately it could be——

Commissioner MULLOY. I understand. You’re right. But do you 

think there’s anything to this? Now, his company, Mr. Tackett told 

us they felt they had to move. They didn’t want to, but they had 

to because of these pressures. And I think some of the pressures 

are environmental standards, labor standards, Social Security, 

other things that build the American style of life. Is that the world 

we are now entering? 

Mr. GIRSKY. In the car business chasing low cost labor around 

the world, the source on the low cost a day, is not a viable longterm strategy. All the Japanese when they built plants here they 

are wanting to source components here. They don’t want to source 

components from Japan and bring them here. They want a balanced trade post. They don’t want to be currency exposed, so ultimately ten years from now, twenty years from now, if that currency does start to flow that as far as change the economic equation. History says you’re going to chase low cost labor around the 

world it’s not a viable long-term strategy. 

Commissioner MULLOY. History is not 1.2 billion new workers. 

Mr. GIRSKY. I agree. There’s a lot of market to be sold in China. 

There’s a lot of money to be made so our multinationals, GM sitting there saying I want to participate in this because I didn’t participate in growth in Japan and I didn’t participate in growth in 

Korea and I want to participate in growth in China so they have 

an opportunity to do that. That’s their perspective. 

Commissioner MULLOY. Thank you. 

Co-Chair WESSEL. Commissioner D’Amato. 

Chairman D’AMATO. Thank you. First of all, I want to commend 

the panel because this is such an important industry. The Commission operates under a mandate to try and connect economic trends 

to China to our basic national security. I can’t think of too many 

industries where the economic impacts are so large. There are so 

many different kinds of companies associated with the building of 

automobiles and the tremendous volume that goes into those components. Clearly what happens to the auto industry if these trends 

continue beyond the next five to ten years certainly would qualify 

as a matter of national security concern. 

I want to thank Mr. Gettelfinger for pointing out not only that 

there’s an unfair playing field, but also there are a number of tools 

that the government could put into place that would help level the 

playing field. You mentioned currency. You mentioned it’s important to create safeguards and going after subsidies are not being 

pursued at this time. I think that’s fair to say. Certainly we would 

like to try to insist that Congress take a look at all these tools and 

make sure they are used to help out the industry. 

I was interested to hear that Chinese considered the automobile 

industry a pillar industry. When I hear pillar I hear the word subsidy. This is a government-promoted industry, and therefore we 
54

have to be concerned about not being able to get to a level playing 

field. 

My question is similar to Mr. Mulloy’s. I’m worried about the 

same timeframes involved here. Two to three years to me is not a 

long-term situation. What if the current trends continue what 

would the state of the automobile industry in the United States 

look like in ten years, particularly in terms of multinational corporations? 

I hope you’re right about history not chasing low-cost labor because that seems to be the story of China today. Maybe history 

won’t show that, but we’ve still got companies chasing low cost 

labor. That seems to be one of the great attractions of that market 

and floating into China. 

What will the impact on our economy be in ten years if current 

trends continue and the United States Government does not take 

the kinds of action you suggest to use the tools available to level 

this playing field? Do you have any kind of estimate that you 

looked at in the UAW or in your firm? We don’t have an automaker 

here on the panel, but do you know what automakers are saying 

about the ten-year prospects? 

Mr. GETTELFINGER. I think one of the things we can do is look 

back to the past ten years and see how the United States is impacted, and if we just go back to 1993 production was nearly 11 

million vehicles with 14 million being sold. In ten years’ time—and 

at that time the auto trade deficit was $50 billion—in ten years’ 

time U.S. sales have increased by an additional 3 million units. 

That took us up to over 17 million units. But production capabilities in the United States had only increased by 1.1 million. 

In other words, the import vehicles that were coming in here 

were taking over that market. If you look at that short period of 

time, the automotive trade deficit reached $128 billion, and that’s 

all in the written testimony. 

So it appears to us with the research and development that is 

being demonstrated for companies that go to China with the fact 

that right now if you’re a corporation there’s nothing to prevent 

anybody in China from counterfeiting your parts. 

I’m not sure the issue of Automotive News, but I can provide it 

for you. A company called Metaldyne that knew that their parts 

were being counterfeited, went over and said we’re going to form 

a joint venture, the company—to use their terms—went underground. In other words, they continued to manufacture their parts, 

put them in the marketplace. 

I think the snowball effect is here. I think that China clearly has 

every intent of increasing that capacity as quickly as they can 

using our research and development, our technology, and then coming into our market where they are going to sell their vehicles. 

Steve and I may have a little difference of opinion on that because 

he’s looking at it strictly from the numbers. 

I’m also looking at it from the standpoint of what we have witnessed happening in the past, and I think it’s a very challenging 

time for us. I think time is of the essence for us as a government 

to stand up to these trade agreements and put workers’ rights 

agreements, enforce the provision in there and stop this currency 
55

manipulation, 8.2781 I believe is what the yuan’s been pegged at 

for a number of years so we should be looking at that. 

Someone mentioned on the earlier panel that they thought workers should be represented on the trade agreements when negotiated. I happened to be in Seattle. George, you might have been 

there when they had the trade meeting. I went there as a member 

of our union but also as an American citizen. We had a peaceful 

demonstration. Were there some fringe groups that created problems? Absolutely, no question about that, and the government dealt 

with it. 

But I have got to tell you that when we went to Miami last November to make an issue over the free trade areas of the Americans I felt like a prisoner in this country. The interstate highways, 

you couldn’t get down. They would lock down the hotels. Helicopters flying overhead, a barrage of police officers. You can’t cross 

this street, you can’t cross that street. I was not hurt nor was a 

lot of people. 

And yes, again there were some fringe people there. It’s my understanding that this country appropriated $87 billion for Iraq. 

Well, there was 12 or 13 million dollars for the trade ministers’ 

meeting in Miami so how can workers ever have a voice? It’s one 

thing to sit here and talk about numbers and talk about statistics. 

It’s another thing to watch plants close down, to watch families destroyed, communities destroyed, to see plants exposed. That’s really 

what we’re talking about here so I think workers must have a voice 

in what is going on in these bargaining tables. Just as we say 

China should be transparent, our trade negotiations should be 

transparent. 

[Audience applause.] 

Commissioner MULLOY. Mr. Girsky, did you want to talk about 

the ten-year timeframe? 

Mr. GIRSKY. Ron used up all the time. 

Commissioner MULLOY. We’ll give you some extra time. 

Mr. GIRSKY. I don’t have a lot to add. The reason companies are 

going there they are pursuing low-cost labor and pursuing big demand opportunities, and they want to participate in this. 

Number two, we are—the auto industry is increasing capacity 

here as well. There’s between 500,000 and a million units going 

into North America over the next 30 years so it’s not just China 

that’s adding capacity. Their capacity is alarming, don’t get me 

wrong. But they’re not the only place that’s increasing pressure. 

We have global excess capacity. Part of the reason is we have a 

bunch of egos in the car companies that think they’re all going to 

gain market share when, in fact, not everybody can continue to 

gain market share. 

Ultimately if you look at Japan they sold—import a lot of cars 

here. They took big share. The currency started to move and they 

realized that continuing import is not a long-term strategy. They 

need to localize. Ultimately if China does end up importing a lot 

of cars here, the currency starts to move. They are not going to be 

able to protect this currency forever. The currency starts to move 

and that will force them to localize here. So there’s no other way 

for this to play out. 

Co-Chair WESSEL. Commissioner Wortzel. 
56

Commissioner WORTZEL. Thank you very much. I have a question actually for Mr. Tackett. You said you can complement Mr. 

Pearl’s testimony. I am very interested in this decision that was 

made. It sounds like a rational decision for survival of the company. What did it do to your labor force? And how did that affect 

employment? Jobs lost? Job gained? How did you sit down and 

work with your union to try to mitigate the problems the decision 

created. 

And then I have a question I think Mr. Gettelfinger, Mr. Girsky, 

or both can respond. I don’t know if you have ever been to Tokyo. 

There’s a wonderful automobile museum underneath this shopping 

center, and in there if you go in there is the history of the Japanese 

car industry post World War II. You can see knockoff copies of 

MGTDs, knockoff copies of Jaguars and rip-off copies of Thunderbirds and Corvettes that were made only for Japan. That brings me 

to this ten-year projection of what China’s going to do. Should we 

think now of the sort of actions that were taken against Japan and 

Japanese auto manufacturers in the Reagan Administration which 

forced them in the intervening years to begin to manufacture here 

and to deserve copyright laws? 

Mr. TACKETT. Thank you, Commissioner. I appreciate your question. We have had a longstanding relationship. As you heard we 

have been in business since 1919. Our union was incorporated in 

1939 so we are truly one of the oldest rubber worker unions in the 

country. Over that period of time we have always worked with the 

union, and our leadership has always been very, very cooperative. 

Now, to explain the product that we are currently buying in 

China is not product that we at the time could make in our facility. 

We did not have the capital expenditure or the equipment. We sat 

down with the union leadership at the time and explained that scenario, and we were all in agreement that that was the best course 

of action for us at that point in time. So the union accepted that, 

acknowledged that. Our level of employment at the time was 

unimpacted by that decision so we didn’t reduce jobs. 

Our whole message was we’re an American manufacturer. We 

want to stay here, but we have to provide other product that we 

can’t make here in this location, and that was accepted, and they’re 

fully aware of that situation. 

Mr. GETTELFINGER. I’m not sure that the quotas as to that were 

put on the voluntary retraining at one point in time. I’m not sure 

how effective they were or they weren’t. And I can remember when 

our international union president Doug Fraser went to Japan and 

said if you’re going to sell vehicles here, then you should build the 

vehicles here. And we’re really proud as a union that the workers 

at those plants that are here even though many of—most of them 

are not unionized, our union helps those workers every day because 

of the contracts that we have in other auto plants. So that’s the difference in what’s happening here and what’s happening in China. 

But if we go back to the basic trade agreements, are we talking 

the currency manipulation with the yen probably twenty percent 

under value. In other areas a closed market. We can’t get into the 

Japanese market so I think if we just look at the trade agreements, 

try to look at it from a worldwide standpoint and what’s going to 

really help our country and we believe that the rate should be fair. 
57

I’m not sure what the term free means, and when you look at our 

deficit at this country, $496 billion trade deficit, and then with a 

huge budget deficit that’s there, something’s going to give somewhere in our country. The tax base will continue to erode as jobs 

go away. 

So I think that the best thing we can do is go back and revisit 

these trade agreements and make sure that they are fair agreements. And we should be just like other countries are: If we set up 

the trade imbalance starts to excess, somebody should step up and 

not let it spiral out of control and that’s what’s happening here. 

Mr. GIRSKY. The only thing I would add is I would agree with 

Ron that the—I’m not sure how much the voluntary retraining 

agreement helped as opposed to the yen moving from 2/40th of a 

dollar to 1/20th of a dollar. I think that may change the economics 

a lot and force them, as he said, to localize here more aggressively. 

Co-Chair WESSEL. Co-Chair Dreyer. 

Co-Chair DREYER. Quick question, first for Mr. Gettelfinger. On 

page three of your testimony you quote Automotive News as saying 

that ‘‘U.S. suppliers have missed the boat to China.’’ China’s import 

of auto parts totaled 9.5 billion, Germany 3.3 billion, Japan 2.92 

billion, and the U.S. a mere 268 million. 

How did this happen and is there a lesson we can learn from it, 

something that we should not do again? 

Mr. GETTELFINGER. Again, I think it’s definitely a lesson we can 

learn as Mr. Girsky pointed out earlier when we’re talking about 

a trade with other countries it’s worldwide. 

Co-Chair DREYER. Were we not watching what was going on 

here? 

Mr. GETTELFINGER. Absolutely not. We were not paying attention. Somebody’s asleep at the switch and it’s going to continue 

going. I would just hope that out of these hearings people could 

just take back the impact on the families. And think about what 

happens when we say job, it may be job, but that’s somebody’s job, 

somebody’s family, somebody’s home, somebody’s future, and we 

see what these other countries are doing. There’s no guarantee regardless of the investment that is made in China that we are going 

to benefit as a nation. And you can see here where we talk about 

investment, the other countries perhaps bring more of the product 

in initially, but in the long run this is where the lost profit center 

is at and this is what we are gunning for, and there is no question 

that article that you referenced appeared in and accuses us really 

of missing the boat. 

Co-Chair DREYER. So there is a lesson. Thank you. 

For Mr. Pearl and for Mr. Tackett, as I understand your testimony you say that the only way Denman Tire can continue to stay 

in business and continue to employ U.S. workers is by outsourcing 

some of this production to China; is that correct? 

Mr. PEARL. Yes, that’s correct. 

Co-Chair DREYER. I happened to sit next to a blanket manufacturer on a recent airline flight. He has one facility left in Maine, 

and he keeps it up as an act of charity to the workers; all his other 

production has been outsourced to China. My question for both of 

you is how long do you expect that this can continue? 
58

Mr. PEARL. Well, when we went to China and set up an alliance 

with the manufacturer over there, our thrust was to purchase tires 

that we were not able to make at our Denman facility. However, 

customers, in this the largest tire market in the country or in the 

world, were buying these tires from China and not only buying that 

line of tires, but then this line of tires and this line of tires and 

this line of tires that were all made in our Ohio facility. So by 

going out and enhancing our product offering and getting our customers more dependant on our small company by providing them 

a larger breadth of product, we secured production in our 

Leavittsburg facility and that’s been going since 1992. 

Co-Chair DREYER. So this is actually a very clever business strategy then? 

Mr. PEARL. I would like to think so. 

Co-Chair DREYER. Finally just a comment from Mr. Gettelfinger. 

I will take your observations on the handling of the demonstrations 

in Miami back to Miami with me and pass them along for what 

they are worth, and I would also add to what you said if workers’ 

voice is excluded from trade negotiations, then you encourage demonstrations and perhaps workers becoming fringe groups. So it’s all 

the more important to include them in this opportunity. 

Co-Chair WESSEL. Commissioner Bartholomew. 

Commissioner BARTHOLOMEW. Thank you very much, and thank 

you to all of our panelists for presenting some very moving testimony. A special thank you to Mr. Gettelfinger of the UAW for his 

leadership on the basic human rights fight going on regarding China’s treatment of its own people. UAW had become engaged in that 

fight very shortly after Tiananman Square in 1989 and was an important player on that particular aspect of U.S.-China relations as 

well as others. It’s noted and appreciated so thank you for that. 

I have a broad question to pose first, but then specific for Mr. 

Girsky particularly so you have time to think about the broad question. The broad question is with China’s development of these pillar 

industries and industrial policies, how can it compete generally in 

the absence of an industrial policy on our own part? 

I would like you to think about that for a few minutes. Mr. 

Girsky, you mentioned a couple of times return on investment. 

Could you give us a some information on how many years you have 

all been investing in China, how much have they invested and 

what kind of return on their investment are they getting to date? 

Mr. GIRSKY. So when GM first invested in China probably six, 

seven years ago I think. The publicly available financial statement 

I have got a billion dollars investment China. They are making—

last year they made—what was the number?—it was in like five 

hundred million or something like that, so the return on that investment has been quite high—so they make quite a bit of a return 

on investment. It was risky at the time but it certainly at least in 

the near term has paid off. 

Commissioner BARTHOLOMEW. As of several years ago according 

to this it was questionable what kind of return they would get. Has 

it been escalating? 

Mr. GIRSKY. It’s been last year was their record. The first six 

months of this year has been a record over last year. 
59

Commissioner BARTHOLOMEW. Under risks and opportunity and 

the risks, you mentioned of course, are both in intellectual property 

and creating vendor/distributor relationships. Could just elaborate 

a bit on that. What is the future of the U.S. auto industry 20 years 

from now? Are they going to compete themselves out of business? 

Mr. GIRSKY. Let’s be clear here. I’m an advocate for shareholders 

so if GM invests a billion dollars in China, the shareholders would 

like to see billion grow to five or ten billion but if that five or ten 

billion in growth means they have to write off five or ten billion 

in facilities in the U.S., then the shareholders are no farther ahead. 

The shareholders only win here, the company only wins if this 

growth supplements what they do here. 

Now, we talked about intellectual property and there have been 

a lot of lawsuits and the companies are concerned about that, but 

GM is providing a lot of that. GM, Honda, the multinationals are 

providing a lot of that in intellectual property over there and they 

do that and cross their fingers. So they are doing that at their own 

risk. 

Ten years from now are we going to have 36 car companies in 

China? Probably not. You probably have a lot less. That number is 

going to have to shrink particularly if any of these are going to be 

global players. 

But some of them will be large. They’re going to make probably 

most of their living supplying the home market, and there will be 

some exports that will have to be facilitated through GM, or what 

have you. GM imports cars over there now from other countries. 

They do that now so that could continue or be supplemented. But 

if they build a lot of capacity in China as a replacement for the capacity here, the shareholders are going to be no farther ahead. 

Commissioner BARTHOLOMEW. Another risk has been alluded to 

here is that the auto industry in this country has been a critical 

provider of R&D spending and what is the ripple effect of R&D 

spending. Is it all going to be shifted over to China? 

Mr. GIRSKY. I don’t know if it’s going to be shifted certainly 

globalizing. They have R&D centers in Western Europe, in Japan, 

North Korea. They have R&D centers all over the world and part 

of the R&D centers are all the markets have different states so 

Chinese cars don’t necessarily sell here or vice versa so they need 

to basically engineer cars for the local markets. 

Commissioner BARTHOLOMEW. One brief question about the issue 

of industrial policy, how does the United States compete against a 

country that has institutionalized policies to support certain industries? 

Mr. GETTELFINGER. Well, what we’re doing right now is we’re not 

competing. As I indicated to you, in 1973 we had a $500 million 

surplus. Last year it was $2.2 million, and Mr. Pearl pointed out 

the article in Newsweek or Automotive News showed exactly what 

was happening where the Chinese auto industry that China’s import of auto parts totaled 9.5 billion, Germany 3.13 billion, Japan 

2.9 billion and the U.S. a mere 268 million. There’s no way that 

we’re going to compete with this kind of a trade strategy with these 

countries. 

And if we look and go back again you have got to have the joint 

venture, you have got to have the research and development and 
60

the incentive to use the workforce there because the labor is so 

cheap they get their foot in the door. 

Now, we are attempted to on occasion to get lulled to sleep when 

we hear companies here say we are going to export to China. Let’s 

not kid ourselves. Time is of the essence and we must address 

these problems. 

Co-Chair WESSEL. Thank you. 

Commissioner Becker. 

Commissioner BECKER. I want to thank all of you for your very 

enlightening and interesting testimony. I want to focus on Mr. 

Gettelfinger first, and then the auto industry. It’s such a big and 

important industry to the United States. It touches so many suppliers, machine toolers and tire builders. There’s a related figure 

how many people in manufacturing are associated with an automobile industry. It’s been disappointing to me that the gains and 

strides that the Chinese auto industry has made has been really 

as a result of the United States auto industry themselves by forming these joint agreements and transferring research and development and high-tech information to China as a condition of working. 

That’s the assumption that I’m going on. This is what I believe. 

This is what I read. I will leave it for you to tell me if I’m wrong 

on that and that is not the case. 

And with the parts industry, Mr. Girsky, you said something like 

two or four years before they would hit their stride. Now, this was 

an act that was initially done by the auto industry here in the 

United States to train and develop the parts industry in China so 

they could in turn import back into the United States cheaper 

products which would in turn cause layoffs and shutdowns of the 

auto part industry. 

The third point I want to lay out of what I believe is that—I’ll 

see if I can frame this right—the auto industry has a proservice 

supplies in many cases to match the China price for their supplies, 

their parts, with the threat of hanging out their head if they can’t 

match or won’t match the China price. Then they are going to suppliers from China, which are internal happenings. It seems like it’s 

a deliberate plan to transfer auto industry technology into China 

that is going to come back and haunt it whether it’s two or four 

years or six or ten years. The handwriting seems to be on the wall. 

My only comment that Denman Tire on this where your actions 

could be and were for all the good reasons of protecting employment, protecting jobs, it has the same effect. We have developed a 

tire industry that at least with those folks that you deal with in 

China. We developed them with the technology, the ability to be 

able to challenge us, and you as we go down the road. I would appreciate any comments any of you would have on that. 

Mr. GETTELFINGER. I would just agree with you on the parts. 

Technically we talk about being in a race to the bottom when it 

comes to the race and benefits, but suppliers also feel that pressure. If you take a large corporation, find a supplier out of this 

country they are reinforcing when they relocate or go to China and 

make the big investments that they make and then the big three 

put pressure on the other suppliers saying we need for you to do 

this in order for you to be competitive. In fact, if you want to compete you basically have to go there. 
61

That’s basically unwritten but that appears what’s happening. 

And there is a tremendous amount of pressure on the suppliers and 

the supply industry, as Steve pointed out, would be easier to move 

and happen quicker get out ahead of the completed vehicle. So I 

think you’re right on the track with everything you said. 

Commissioner BECKER. Is it as blatant as that? You match the 

China price? 

Mr. GETTELFINGER. I don’t think it’s as blatant as that, but I do 

think the auto industry and suppliers are starting to talk more, but 

the impression of large company a large supplier company going 

over to China making huge investments and obviously calls competition is competitive industry. It’s always try to take it out somewhere. 

Now the question becomes you can’t get blood out of a turnip so 

what do you do? We have actually seen plants that are moving now 

from Mexico that are going to China, so that’s another part of the 

problem. 

And let me just step away from the auto industry for a second 

and point out Electrolux in Greenville, Michigan. Swedish-based 

company making a profit, having a good workforce, no labor problems and they moved to Mexico so they could make refrigerators 

cheaper there, but where are they going to sell them? That’s the 

question. 

And the same way here, if we move enough jobs out of this country—we have lost 2.7 million manufacturing jobs in the last three, 

four years—that has a major impact on the tax base. 

Commissioner BECKER. One last point if I could make it very 

quickly. I was in Shanghai four or so years ago with the Commission. We went through the Buick facility in Shanghai and had discussions with the American plant manager. I think it was co-managed. He told me that the profit on a Buick built in China for GM 

was $10,000, and the profit on a Buick built in Detroit for GM was 

1,000. Does that figure pretty well hold true now? 

Mr. GIRSKY. Directionally it’s right. We don’t know the exact 

numbers, but remember the reason—the reason is the consumers 

in China are paying 35,000 per Buick that we’re only paying—the 

consumers in the U.S. are willing to pay only 26,000 for. Longer 

term there is no reason why Chinese consumers should be paying 

higher prices for cars than every other consumer in the world. 

Those prices are going to fall, and that’s going to accelerate a 

shake-out. 

A lot of Chinese car companies are going to go out of business, 

and the ones that are left—the reason people want companies moving to China one is a sourcing issue. The other is there’s 1.4 billion 

people there. The hope is the standard of living grows and those 

people can afford cars so that’s sort of—there’s sort of two reasons 

there. But yes, the issue though on the Buick is a price issue more 

than a cost, especially four years ago there was no way Buicks 

were cost competitive four years ago in this country. 

Co-Chair WESSEL. But just as a point of clarification and then 

Mr. Reinsch, as the consumers demand a lower price, the quality 

is going to increase at the same time. We have seen quality increase in these vehicles, right? 

Mr. GIRSKY. The consumer is sophisticated over in China. 
62

Co-Chair WESSEL. I understand. So Mr. Becker’s point about the 

differentials of the labor differential and quality kick in there will 

be a greater competitive advantage for China two or three years 

from now as the quality increases? 

Mr. GIRSKY. Naturally. 

Co-Chair WESSEL. Commissioner Reinsch. 

Commissioner REINSCH. I want to pick up on something that 

Larry Wortzel started which is the theme of what do we do now 

in dealing with a problem that Mr. Girsky suggested will be much 

larger in the future than it is today. One thought that occurred to 

me, as we were talking about the Japan situation in the late ’80s 

is that—I’m not sure I completely agree with your analysis of what 

happened. I don’t disagree what happened with the yen is a significant factor, but I also think that one of the other factors at that 

time was the change in the political climate here which persuaded 

the Japanese they were going to be in for a long series of difficult 

political steps by the United States unless they addressed this 

problem in some positive way, and they figured out that rather address it by not importing, they addressed it by domestic production 

here. 

But my point though is in the question for you, Mr. Girsky. I 

think that whole thing happened relatively late in the process and 

in an atmosphere of some crisis not only about the auto industry 

then, but also enormous fears about Japanese competition generally. We don’t seem to be quite at that point right now with respect to China and certainly not with the auto industry. Americans 

seem to react to these things mostly when there’s a crisis, and not 

before there’s a crisis so here we are. 

You might also want to comment on the way the Japanese responded. They definitely responded to a whole bunch of trade problems we had with them, and I’m not sure that’s what the Chinese 

response in similar circumstances would be which suggests that it 

wouldn’t work because we are dealing with a different adversary. 

But given those thoughts maybe you can reflect on whether you 

agree with any of that and more importantly what do we do now 

rather than wait four years? Then I have a question for Mr. Pearl 

I want to squeeze in. 

Mr. GIRSKY. So let’s just think back to where they were politically so the end move we have import quotas and a voluntary restraining and the big three filed dumping charges against the Japanese on minivans I think it was in the early ’90s or something 

and all these sort of came together at once that sort of accelerated 

the globalization. The problem we have—is back then was like 

okay. You force Honda or Toyota to build cars here. What are we 

going with related to China? Force GM to build cars or GM’s already building cars here. 

That’s part of the problem. The multinationals are driving this 

decision. Volkswagen is one of the biggest players. GM is one of the 

fasting growing players in China. Ford has got capacity going in 

there. Chrysler’s got plants in China so that’s what makes it sort 

of challenging from the policy perspective is not necessarily the 

government that’s driving this. It’s the multinationals driving this 

so it’s sort of policy issues on a number of levels that have to be 

dealt with. 
63

Commissioner REINSCH. And the answer is? 

Mr. GIRSKY. The answer is—I just present the facts. 

Commissioner REINSCH. Everybody else has an answer. That’s 

why I wanted to hear what you had to say. 

Let me squeeze in my question—not so much a question as a 

comment. I think you have wrestled very creatively with a problem 

many American companies face. I guess I’m not entirely persuaded 

you will succeed. It seems to me what you have done, and I’d just 

like a comment back, is you have traded short-term survivability 

for long-term disaster because what you have done is done the 

things you need to do to make your company viable that any rational, intelligent person would do in the circumstances. At the 

same time you’ve also created a lot of competitiveness that in the 

long term may come back and bite you. You seem not to be worried 

about that. Are my fears misplaced? 

Mr. PEARL. No. Your fears are misplaced. Every day Chinese 

tires come into this market, and we compete with them every day 

on product we make in our Ohio facility. So we had those two options of slowly bleeding to death or getting back in there and doing 

battle. We chose to do battle. 

Yes, it may be a short-term fix for a long-term problem, but our 

industry is huge but also very small dominated by three large manufacturers, Bridgestone-Firestone, Goodyear, Michelin, all who 

today have technology agreements with the Chinese government 

and are manufacturing product with their name on it, and many 

other names, out of China. So our small inplay into China was 

more important for our 300 people working than would disrupt or 

cause any technology change in China. They were getting that 

technology anyway. 

Commissioner REINSCH. Thank you. I didn’t mean to suggest you 

made an unwise decision, but you made a brave decision. We all 

need to be worried about the future. 

Mr. GETTELFINGER. Can I just add though when you think about 

policy we don’t want to do anything that’s going to inhibit their 

growth. We want their economy to grow. And we want them to buy 

more cars. We just want to make sure their growth doesn’t necessarily come at our expense. That’s what it comes down to, and 

part of that is making sure our industry domestically is as competitive as possible, and that brings a whole lot of other issues, 

healthcare being one of the chief among them that sort of has to 

be dealt with here. So our goal is making sure our industry is on 

solid ground here because it makes us more competitive. 

Commissioner REINSCH. That’s a very sophisticated point to 

make. I won’t, but I’m tempted to ask you whether you agree with 

Mr. Gettelfinger’s recommendation that he just described about not 

retarding Chinese growth, but as I said I don’t have time. 

Mr. GETTELFINGER. I understand. 

Co-Chair WESSEL. Commissioner D’Amato. 

Chairman D’AMATO. I think we all agree with what Mr. Reinsch 

just said. One very quick question. IPR piracy now has become a 

very, very serious issue. This Commission recommended that 

United States not waste any more time and take a case to the 

WTO in terms of Chinese violations. The longer this situation continues the more difficult it is going to be to fix. Do you all agree 
64

that this kind of action that should be taken right now by the 

United States Government? Mr. Gettelfinger? 

Mr. GETTELFINGER. Yes. I think that’s the beginning step, and I 

think we have to do something rather quickly to show as a nation 

we are going to do something about these trade imbalances that 

exist. And certainly there are plenty of issues that need to be addressed, and as we pointed out in our testimony there are the five 

things. 

But also I agreed with what Steve said and I think everybody 

here does. We certainly want to see the people in China—we want 

to see them do better; we want to see them move forward in their 

quest. There’s an example the people cannot buy the product. 

There are more people unemployed in China than we got working 

in this country. 

Steve and I may disagree because I’m not sure when you bring 

the peasants into it, we have seen estimates as low as 18 cents an 

hour. We’ve seen wages as high as 1.60, so there’s just a broad, 

broad picture here that we need to try to get our arms around in 

the immediate future with a long-term plan to address the issues 

in our trade agreement that allow this country to be taken advantage of and also not only the workers in other countries being 

taken advantage of. Certainly we want to step up for them as well. 

Chairman D’AMATO. Mr. Girsky, do you agree with——

Mr. GIRSKY. Well, intellectual property is an issue not just in the 

auto industry—I’m not sure how you all handle that kind of thing, 

but they’re the logos when you look close up they look different. 

When you look far away they look pretty similar. There are two 

cars and they look similar to me so whether—I mean, these things 

have not—as far as I know there has not been a successful lawsuit 

here. There have been a number of brought, not just by our companies, but by Japanese companies and other foreign companies 

there. 

Chairman D’AMATO. Thank you. 

Co-Chair WESSEL. Very quick final question by Commissioner 

Mulloy. 

Commissioner MULLOY. Mr. Girsky, first a comment. You said 

that once Europeans got production here they don’t want to move 

it all to China, that the auto manufacturers are pushing their suppliers to do the outsourcing. In other words, maybe they will keep 

their production here, at least a lot of it. But people aren’t stockholders, they’re suppliers and they are getting outsourced. Is that 

correct? 

Mr. GIRSKY. It does seem odd that GM and Ford, some of the Detroit-based manufacturers, are trying to buy more parts from 

emerging markets not in China at a time when some of the foreign 

competitors that produce here are trying to buy more parts here. 

It does seem odd. Long term I’m not sure how that strategy is 

going to play out. 

China’s low cost now, but ten years from now it may not be low 

cost. What are you going to do? Pick up and move to somewhere 

else? It just seems like a strategy that’s very short-sighted, but 

that seems to be at least for some components it works. Some components it doesn’t work. Some components they think it works and 

it doesn’t work and that’s sort of where they’re going to get into 
65

trouble is when all of the sudden you got a bunch of components 

and a boat, and the boat can’t get here and all your plants are shut 

down. 

Commissioner MULLOY. Last question, last point. Mr. Pearl, in 

your testimony you say, ‘‘We feel strongly that if provided a level 

playing field, Denman tires produced in Leavittsburg, Ohio can 

compete with any other tires made anywhere in the world.’’

What do you mean by level playing field? Obviously you’re not 

competing; you’re moving your production to China. What do you 

mean by level playing field? 

President Bush apparently also talks about this level playing 

field. I don’t know what it is. What is it? 

Mr. PEARL. Well, first we haven’t moved any production to 

China. We are sourcing product out of China that we don’t currently manufacture here in the United States. But from a statement of a level playing field, I have been in discussion with the 

people that we purchased tires from in China and the plant is 

owned by the government and there are subsidies there that we 

can’t compete with here. So it’s a small American company going 

up against the government, and there’s not a long-term prospect of 

us winning out. 

Commissioner MULLOY. Thank you. 

Co-Chair WESSEL. Thank you to all the panelists, especially Mr. 

Gettelfinger and Mr. Girsky. I know you traveled a good distance 

to be with us here today. No slight to Mr. Pearl and Mr. Tackett. 

We appreciate you being here as well. 

This closes the morning session. We’ll resume in about twenty 

minutes with Co-Chair Dreyer taking over the chair. 

PANEL III: STEEL, GLASSWARE AND CERAMICS 

Co-Chair DREYER. I’d like to call Panel III to order. This panel 

will examine steel, glassware and the ceramics industries. First, we 

have Mr. David McCall, a District 1 Director of United Steelworkers of America, Columbus, Ohio. 

Mr. McCall, the floor is yours. Seven minutes, please. 

STATEMENT OF DAVID McCALL

DISTRICT 1 DIRECTOR, UNITED STEELWORKERS OF AMERICA

COLUMBUS, OHIO 

Mr. MCCALL. Thank you. 

Good afternoon to the Commission and a very special hello to our 

former international president, Commissioner Becker. My name is 

David McCall. I’m the Director of District 1 of the United Steelworkers of America, and I very much appreciate the opportunity to 

testify before the Commission on behalf of our members. My complete written testimony has been submitted and would have taken 

me about 35 minutes to read where I have discussed in some depth 

the challenges of the titanium, aluminum and other manufacturing 

sectors. In my allotted time I would like to summarize that written 

testimony. 

I would also like to thank the Commission for holding these 

hearings in Ohio. Ohio is an important state for the United Steelworkers of America. In Ohio we represent over 100,000 retired and 

working active members who work in industries ranging from basic 
66

steel to rubber and tire, glassware, aluminum, plastics and many 

others. 

First, I would like to discuss the effect that the phenomenal 

growth the Chinese steel will have and the impact on the American 

steel industry, and secondly, I would like to discuss the catastrophic effects of so-called Chinese trade has had on manufacturing in Ohio in general. 

Most of you know in the past few years the basic steel industry 

in the United States has gone through major restructuring, a process that has been painful to the workers and retirees in our industry. Hundreds of thousands of retirees and their dependents in 

Ohio and other states have lost their retiree healthcare, and even 

seen their pensions reduced because of the necessity of a takeover 

by the Pension Benefit Guaranty Corporation. Yet despite these 

painful experiences we are today in the process of working with 

management to create the most productive steel industry anywhere 

in the world. 

In 1994 there were over 200,000 employees in the basic steel industry; by 2003 that figure dropped to about 160,000. In 1999 in 

the United States we produced over 107 million tons of steel, while 

in 2003 production declined to slightly over a 103 million tons. 

However, as a result of the significant changes that have been 

made in the manning and wages and benefits structures and employment costs in the steel industry have been reduced from slightly over eight billion dollars in 1999 to a total of three and a half 

billion dollars in 2003. Today the production of steel in the United 

States is as efficient as anywhere it is in the industrial world. 

The challenge we face in American steel is the continued growth 

of the Chinese steel industry and the inevitable impact that growth 

will have on the global overcapacity problems. In 1999 global steel 

production was 800 million tons. In 2003 global production increased to over one billion tons. In 1999 China produced 136 million tons and today is producing over 240 million tons. In just four 

short years China’s production capacity has skyrocketed by 77 percent. 

If the Chinese domestic consumption of steel begins to decline it 

is unclear—rather it is clear what will happen is a repeat of 1998 

Asian financial crisis. China may well try to preserve its productive 

capacity by moving its output to an export market. As a matter of 

fact, already this year, the first half of 2004, Chinese exports have 

reached 5.7 million tons, which puts them on target to finish the 

year as one of the world’s leading exporting nations. 

The union believes it is vital to enforce a subsidy agreement to 

be concluded before we face another global steel crisis. It is important for the Commission to understand that while consolidation 

and revitalization have taken place in the U.S. steel industry, any 

situation similar to the one in 1998 would set the stage for another 

unlevel playing field and again severely damage, if not destroy, our 

industry. We have been inundated with dumping from China and 

many other countries. It’s no different—it’s akin to stolen auto 

parts. People sell stolen auto parts. They can sell them much 

cheaper than what it costs to produce. It’s the same sort of theft 

that happens with dumping steel. It’s illegal and it shouldn’t be allowed but it continues in countries that have work over capacity. 
67

Glass and glassware is another industry whose workers are represented by the USWA. Ohio ranks as number one in both employment in terms of the total value of shipments of glassware production. Imports of glassware from China have increased by 84 percent 

since 2000. In 2000 and 2002 we have had a dramatic employment 

loss in this sector and we have roughly lost one-sixth of our jobs. 

In the rubber and tire section we have seen China begin its rise 

as a world producer. They are not quite there yet, but already more 

than 200 rubber tire companies operate in China, and it’s only a 

matter of time before they directly challenge our markets here at 

home. 

They must not weaken our trade law. It’s vital that the United 

States goes forward in the current WTO negotiations, and American trade remedy laws not be weakened in any way. The union believes that any weakening in American trade laws will leave us 

helplessly exposed if we face another surge of imports similar to 

those of 1998. 

China’s clearly a global force in manufacturing and it’s growth 

and economic decisions will be felt throughout the world including 

here in Ohio. One issue that greatly concerns the union is the denial of worker rights in China. In March of this year the AFL–CIO 

filed a Section 301 petition asking the Administration to investigate whether China’s repression of worker rights constitutes an 

unfair labor practice—unfair trade practice. Probably unfair labor 

practice too. 

The Administration rejected that issue. China’s policy not only 

gives China an unfair advantage by suppressing labor costs but it 

is also is a matter of basic human rights. President Gettelfinger 

talked about that earlier. That’s why it’s impossible for the steelworkers to understand why the Administration will not investigate 

labor rights violations in China. 

Co-Chair DREYER. Could you sum up? 

Mr. MCCALL. I would like lastly to talk about issues that affect 

us in terms of national security. The loss of jobs in Ohio whether 

it be Eljer or whether it be World Kitchen or one of the other locations where we have lost, they’re not isolated incidents in terms of 

losing jobs. Job losses like these are happening in Ohio and all 

across America. Plants have been closing to move to China. In 

some cases literally whole plants have been moved to China. There 

are a few cases here in Ohio. At the end of the process the logical 

conclusion is that America will be void of manufacturing capability. 

We must ask ourselves at what point does it threaten national security? 

During the last steel crisis, we raised this issue concerning iron 

ore. We were told not to worry. We can count on Brazil and Australia to always be our friends and always interact with them. The 

world’s changed since that report was made to the steelworkers. 

There is no certainty of our allies in a world where terrorists aggressively try to shape policy as they have in Spain. 

If we now look at the world with a different lens in the areas of 

foreign policy and military preparedness, then why do we continue 

to view economic policy as business as usual? The grand hope of 

the free traders has been that economic policy would make the 

world a safe and secure place. It is not happening. The United 
68

1 Bureau of Labor Standards, NAICS Code 3311 and 3312, National Employment, Hours and 

Earnings. 2 American Iron & Steel Institute (AISI), 2003 Annual Statistical Report, Table 23 (Raw Steel 

Production). 3 American Iron & Steel Institute (AISI), 2003 Annual Statistical Report, Table 6 (Number of 

Employees, Hours Worked & Employment Costs). 4 American Iron & Steel Institute (AISI), 2003 Annual Statistical Report, Table 1B (Raw Steel 

and Employment Data). 5 American Iron & Steel Institute (AISI), 2003 Annual Statistical Report, Table 59 (World Raw 

Steel by Countries). 

States continues to be abandoned by significant and important 

manufacturing industries to trading partners who may or may not 

be our friends in the future. 

I hope that—the United Steelworkers of America hopes that our 

voice will stand out in the national debate about our trading and 

economic policy with not only China but other countries as well. 

[The statement follows:]

Prepared Statement of David McCall

District 1 Director, United Steelworkers of America, Columbus, Ohio 

Thank you very much, Mr. Chairman. My name is Dave McCall. I am the Director 

of District 1 of the United Steelworkers of America and I appreciate the opportunity 

to testify before the Commission on behalf of our members. 

I would like to thank the Commission for holding these hearings in Ohio. Ohio 

is an important state to the United Steelworkers of America. Altogether we represent over 100,000 workers and retirees here in the state in industries ranging 

from basic steel to rubber, glassware, aluminum, plastics and others. These hearings, and your attention to the impact that trade with China has on our members, 

is appreciated. 

I will divide my testimony today into two parts. First, I will discuss the effects 

that the phenomenal growth in Chinese steel will have on the American steel industry unless immediate action is taken by the Administration. Secondly, I will discuss 

the catastrophic effects that so-called ‘‘Chinese trade’’ has had on manufacturing in 

Ohio. 

U.S. Steel Industry—Restructured and Efficient

As most of you know, in the past few years, the basic steel industry in the United 

States has gone through a major restructuring—a process that has been painful to 

the workers and retirees in our industry. Hundreds of thousands of retirees and 

their dependents in Ohio and other states have lost their retiree healthcare and 

have seen their pensions reduced because of the necessity of a takeover by the Pension Benefit Guaranty Corporation (PBGC). Yet, despite these painful experiences, 

we are, today, in the process of working with management to create the most productive steel industry in the world. 

In 1994, there were 222,600 employees in the basic steel industry; by 2003, that 

figure had dropped to 162,300.1 In 1999, the United States produced 107,395,000 

net tons of steel, while in 2003, production declined to 103,261,000 net tons of steel.2

However, as the result of the significant changes that have been made in the wage 

and benefit structure, employment costs in basic steel have been reduced from a little over eight billion dollars in 1999 to a little more than three and a half billion 

dollars in 2003.3 Today, the production of steel in the United States is as efficient 

as anywhere in the industrialized world. 

The Challenge of China Steel

The challenge we face in American steel is the continued growth of the Chinese 

steel industry and the inevitable impact that growth will have on global overcapacity problems. In 1999, global steel production was at 869 million net tons. In 

2003, global production increased to over one billion net tons.4 In 1999, China produced 136 million, 636 thousand net tons (136,636,000); in 2003, China produced 

241 million, 775 thousand (241,775,000) net tons.5 In just four years, China’s production capacity has skyrocketed by 77%! China has been aggressively and constantly growing in its production of steel and it is now both the largest steel producer and largest steel consumer in the world. World Steel Dynamics estimates 
69

6P.F. Marcus, K.M. Kirsis, WORLD STEEL DYNAMICS, Chinese Steel—Facts and Forecasts, 

2002–2010, Core Report IIII (April 2004) at iv. 7Steve Mackrell, China Shifts Focus To Export Markets As Rejuvenated USA Takes Up Slack, 

METAL BULLETIN, August 23, 2004, at 23. 8 U.S. Census Bureau, U.S. Imports For Consumption of Steel Products From Selected Countries and Areas (July 2004), http://www.census.gov/foreign-trade/Press-Release/2004pr/07/steel/ 

steel2f.pdf. 

that, compared to its 2002 capacity, China’s total steel capacity will increase 62% 

by the year 2005 and increase 99% by the year 2010.6

In the future, we will see a dramatic increase in China’s demand for iron ore and 

coke. China is very poor in iron ore reserves and will make ever-increasing demands 

on other iron ore sources. While it is clear that, at its current growth rate, China 

will continue to import steel, coke and iron ore, it is unclear how long this unprecedented growth will continue. It is estimated that China’s overall economic growth has been in the neighborhood of 9% a year. Much of this growth has been targeted at infrastructure creation leading up to the 2008 Olympics. If the Chinese growth rate does not continue at the 

same pace, however, the world may well be plunged into a deep global steel capacity 

crisis. If the domestic consumption of steel begins to decline, it is unclear what will 

happen to all the new capacity that has been added in China in recent years. If 

other countries can be used as a model, then we may have a repeat of the 1998 

Asian financial crisis. China may well try to preserve its productive capacity by 

moving its output to an export market. Indeed, this is already occurring. The Metal 

Bulletin reported in August 2004 that China’s steel imports had fallen significantly 

in recent months and that steel exports were increasing. The report explained: 

‘‘With Beijing introducing measures to slow the Chinese economy, it seems that Chinese producers are turning increasingly to exports. In the first half of 2004, Chinese 

exports reached 5.7 million tonnes, which puts them on target to finish the year as 

one of the world’s leading exporting nations.’’ 7

In global steel production, only the United States, Canada and Western Europe experienced a decline in production between 1999 and 2003. The target of Chinese 

overcapacity may be into these markets. Historically, the Europeans have successfully limited the penetration of steel mill products into Europe during periods of economic downturn. As in 1998, the American market is still today the most open and 

thus the most tempting market for import penetration. Census data for 2004 shows 

that U.S. imports of steel from China have increased substantially. Steel imports 

from China totaled 564,156 metric tons for the period of January–July 2004 compared to 371,398 metric tons for the same January–July period in 2003, an increase 

of 52 percent.8

A New Steel Crisis Can Be Averted

China must adhere to its WTO commitments 

A new steel crisis, however, is not inevitable. It can be averted if attention is 

given to the steel situation that now exists. First, the U.S. Government should not 

enter into discussions to relieve China of the obligations it agreed to as a condition 

to attaining membership in the WTO. One of those commitments was that China 

agreed that members could continue to treat China as a non-market economy for 

15 years (or until China demonstrated that its economy operated upon market principles), meaning that the U.S. could continue to deal with dumped Chinese products 

using a special non-market economy antidumping methodology. Recently, China 

asked the Bush Administration to begin discussions that would relieve China of this 

obligation and to treat it as a market economy for antidumping purposes. Because 

China has not yet attained the status of a market economy, the USWA opposes any 

such relief being granted to China at this time; the conditions agreed to at the time 

of the accession to the WTO should remain in force. 

Another commitment that China made was to allow, for 12 years, other WTO 

members to quickly address, through a special safeguard mechanism, import surges 

from China that cause market disruption to an industry. In the U.S., this safeguard 

is referred to as a ‘‘Section 421’’ safeguard. To date, this safeguard mechanism has 

not been effective. So far, there have been five 421 investigations by the U.S. International Trade Commission. In three of those cases, the ITC found that Chinese imports caused market disruption and recommended relief for the industry concerned 

to the President. However, in each of those cases, the Administration rejected import relief. In those 421 cases, China has actively lobbied the Administration 

against granting relief and shockingly, the Administration has listened to them instead of the workers we represent and American companies like McWane Industries, 

producers of ductile iron waterworks fittings here in Ohio. 
70

9See Comments of American Iron & Steel Institute (AISI) to U.S. Trade Representative Concerning China’s Compliance With WTO Commitments, September 14, 2004, at 3–4, 8–10. 

The problems of global excess capacity and subsidies must be resolved 

Second, a principal goal of the Bush Administration has been to deal with the issue of global overcapacity. Negotiations under the leadership of the OECD took 

place in Paris these past two years. The union and the industry have given active 

counsel to our government negotiators as the process moved forward. The negotiations were divided into two categories: one category being a series of descriptive 

briefings of the capacity issues that face each of the steel-producing countries involved in the negotiations; the other, and more important, category centered around 

the need to address the steel subsidy issue as a means to reducing current capacity 

and preventing future subsidized growth. The OECD parties agreed that subsidies 

utilized to mitigate the social and employment costs associated with plant closure 

are an acceptable form of government subsidy. Unfortunately, it has been impossible to reach agreement on any of the other issues involved in these negotiations. The Europeans continue to demand that the 

environmental subsidy that will be granted to European industry, in order for them 

to comply with their obligations under the Kyoto Treaty, should be excluded from 

any agreement that is reached. After repeated requests by our government, we have 

still not been able to ascertain the exact extent of the EU subsidy. Late in the negotiations, Japan stated that it needed exemption from environmental subsidies as 

well. The developing countries, including India and Brazil, believe that financial 

backing for new development by their governments should be excluded from the 

agreement. These negotiations were suspended in June and will not be revived until 

after the U.S. Presidential election. 

Although the Chinese have been reluctant participants in these negotiations and have stated that they believe that negotiating over subsidies is really an issue for 

the older economies, not one for an economy that is growing as fast as China, it 

provides its steel industry with substantial subsidies. Many of China’s steel companies are government-owned and have benefited from subsidies in such forms as access to special loans by state-owned banks at lower interest rates, loan forgiveness, 

and debt for equity swaps.9 Continued subsidies to China’s steel industry will en- courage massive capacity increases that are not driven by rational market signals. The union believes that it is vital that an enforceable subsidy agreement be con- cluded before we are faced with another global steel crisis. It is important for the 

Commission to understand that while consolidation and revitalization has taken 

place in the U.S. steel industry, any crisis similar to the one in 1998 would severely 

damage, if not destroy, the reconstituted industry. Those are some of the facts regarding the basic steel industry—and the story of what has happened to steel is important, because it is emblematic of what has happened, or what may happen, to many other industries in our economy. Glass and glassware is another industry whose workers are represented by the USWA. Ohio ranks as number one in both employment and in terms of the total 

value of shipments of glassware production. Imports of glassware from China increased by 84% between 2000 and 2003. Between 2000 and 2002, employment suffered dramatically as this sector shed roughly one-sixth of its jobs. In the rubber tire sector, we have seen China begin its rise as a world class com- petitor. They aren’t there yet, but they’re close. Already, more than 200 rubber tire 

companies operate in China and it’s only a matter of time before they directly challenge our markets here at home. 

U.S. Trade Remedy Laws Must Not Be Weakened

It is also vital that, as the United States goes forward in the current Doha Round 

of WTO negotiations, American trade remedy laws are not weakened in any way. 

We believe that there is a real danger that, if agreement is reached on agricultural 

subsidies, the current gridlock may be broken and in a rush to see the successful 

conclusion of this round of negotiations, a condition would be created where destructive compromise would be reached. The union believes that any weakening of American trade remedy laws will leave us helplessly exposed if we face another surge of 

imports similar to those of 1998. 

The Denial of Worker Rights in China Should Be Investigated

China is clearly a global force in steel and its growth and economic decisions will 

be felt throughout the world, including here in Ohio. One issue that greatly concerns 

the union is the denial of worker rights in China. In March of this year, the AFL–

CIO filed a Section 301 petition asking the Administration to investigate whether 

China’s repression of worker rights constitutes an unfair trade practice. The Admin-
71

istration rejected the petition. China’s policy not only gives China an unfair trade 

advantage by suppressing labor costs (which results in the loss of U.S. manufacturing jobs) but it is also a matter of basic human rights. That is why it is impossible for the union to understand why the Bush Administration will not investigate 

labor rights violations in China. As I think all the Members of this Commission 

would agree, the foundation of a truly free market economy is the ability of employees to join together collectively in a union of their own choosing and bargain for 

wages and benefits. The tide of freedom did not wash over Eastern Europe and the 

former Soviet Union until workers demanded the right to form free trade unions. 

Today those conditions are not allowed to exist in China. Any worker advocating or 

trying to promote free trade unions is crushed by the state immediately. The Administration should take up this investigation so the full report can be made to the American people on the conditions of workers in China. It appears that 

we have become so economically dependent upon China trade that we are afraid to 

irritate the Chinese government in any way. We owe it to the 2.3 million Chinese 

steelworkers to let the truth be known. We owe it to the 240,000 Chinese held in 

labor camps. And we owe it to the 60,000 Chinese who are being held for public 

protest. We believe that our government should look with grave concern when Chinese Communist party chief Hu Jintao says that Western style multi-party systems 

are a blind alley for China and that the one-party state will fight power abuse and 

corruption by policing itself. 

China’s Currency Policy Distorts U.S.-China Trade

The U.S. trade deficit with China is severely imbalanced. In 2003, the trade def- icit with China reached a record 124 billion dollars, and it is expected to increase 

in 2004. A significant contributor to the trade imbalance is China’s policy of pegging 

its currency by maintaining a fixed exchange rate between the yuan and the U.S. 

dollar. Many economists believe the yuan is undervalued by about 40%, a situation 

that effectively subsidizes China’s exports and causes loss of U.S. manufacturing 

jobs. The Bush Administration has done nothing to address this problem which is 

robbing our farmers, industrial workers and Ohio businesses of opportunities. China’s policies amount to a virtual tax of 40% on all our exports to China and a subsidy of as much as 40% on the price of their products coming here. That is why the USWA joined with the AFL–CIO, other unions and a number of members of the business community on September 9 in filing a Section 301 trade 

case against China for its currency manipulation policies. Within hours, the Bush 

Administration rejected the petition. No wonder our trade deficit with China 

reached $124 billion last year and is continuing to grow at unprecedented rates. Why does the Administration refuse to act? 

Taxpayer Dollars Used to Subsidize Shipping our Jobs Overseas

It’s also impossible to understand why the Bush Administration is willing to use taxpayer dollars to subsidize shipping our jobs overseas. I’m not talking about the 

tax bill that is currently being debated in Washington in which President Bush 

wants to expand tax breaks for companies that move production offshore. That debate is well underway. I’m talking about the use of taxpayer subsidies through the Export-Import Bank. Earlier this year, the Bush Administration approved the subsidized sale of steel production equipment to China. That’s absurd and an insult to workers here. China 

has been dumping product in our market—why would we provide a subsidy to them 

to further lower their costs of production? The same holds true in the case of global 

over-capacity, which I talked about earlier. Why would we subsidize the increase in 

their capacity? This is not an isolated event. Right now, the Bush Administration is considering subsidizing soda ash production equipment for Turkey. Turkey is a major competitor 

in the glass and glassware sector. There’s a worldwide glut in soda ash and the U.S. 

is the world’s largest producer. Providing this subsidy will directly hurt workers 

here in the U.S.—both in glassware and in the soda ash production sector. A bipartisan group of Members of Congress, led by Republican Senators Enzi and Thomas have spoken out against the Bush Administration’s proposed subsidy. We 

don’t believe that this subsidy should be approved and are working to defeat this 

Bush Administration initiative. We believe there must be a change in the basic law 

so that we can prohibit subsidies from going to our competitors that cost us our jobs. 

The Loss of Manufacturing Jobs in Ohio

While it is true that steel is important to the United Steelworkers of America, 

we also have significant representation in other important sectors of the economy. 

The situation in Ohio is not good. Since President Bush took office, we have lost 

173,000 manufacturing jobs in Ohio. The situation is not getting better: in August 
72

10Steve Greenhouse, It’s Not Just About Jobs, but Where the Jobs Are, NEW YORK TIMES, September 5, 2004, Section 4, page 3. 11 R.J. Villella, World Kitchen plant to be sold, MASSILLON INDEPENDENT, September 18, 2004; 

available at http://www.indeonline.com/left.php?ID=430&r=0. 

2004, Ohio lost 4,100 manufacturing jobs. Since October 2002, the USWA has seen 

more than 52 plant closings in Ohio. The total jobs lost at these USWA-represented 

facilities are about 2,500. These are head-of-household premium jobs that impact 

the future dreams of families, the tax base of communities and school districts. We 

will need to consider a study of these shutdowns to determine how many were offshored to China. I’ll cite a few of these USWA shutdown units in which production 

was relocated to China.

• Eljer Company

Let me give you some examples of what is happening to manufacturing jobs in 

Ohio. In Salem, Ohio, the Eljer Company was represented by USWA Local Union 

3816. The company produced cast-iron sinks and bathtubs. It employed 250 workers 

whose average pay was $16 per hour. In May 2004, the company was closed and 

the patterns used to make the sinks and bathtubs were sent to China. The union 

tried to work with the company to keep the operation open. In the negotiations, the 

company claimed that it had lost 4.8 million dollars the previous year. The union 

devised a program that would have saved the company 9 million dollars a year. This 

was rejected and the production moved to China. Of course, why wouldn’t they? The 

workers in China are on twelve hour shifts, seven days a week, fifty weeks per year; 

the highest paid production worker earns $100 per month and the lowest $50 per 

month. The workers live in barracks and no dissent is tolerated because there are 

hundreds of others ready to take the place of any worker who complains. 

The President of Local Union 3816, Frank Rayl, is now running for the Ohio State 

legislature. He will add his voice to the growing chorus of those who are tired of 

the economic elite who value profit above all else. They are not the ones who lose 

their middle-class standing and see their modest dreams destroyed by the neglect 

of their government when their jobs leave for China.

(Recognize Frank Rayl of the shutdown Eljer plant, who is participating in the hearing.)

• Huffy Bicycle Company

Then there is the case of Huffy Bicycle Company. First, the company left Ohio, 

and then Missouri, and then moved its production to Mexico; but even the low 

wages and benefits in Mexico were not enough for them. The operation left Mexico 

and its workers for the more friendly environment of China where the workers earn 

four percent of what the workers in Ohio made. This reminds me of what the CEO 

of General Electric once said: ‘‘the best factory is the one that you could place on 

a moveable barge, that way you could continually seek the lowest wages in the 

world.’’

(Recognize John Folk of the shutdown Huffy plant, who is participating in the hearing.)

• World Kitchen—Ecko Products

Another recent example of job losses to China is World Kitchen Ecko Products, 

a manufacturer of bake ware and related goods. The USWA represented workers at 

World Kitchen. On Friday, September 10, 2004, after 75 years in Massillon, Ohio, 

World Kitchen Ecko Products closed its bake ware factory. The company decided to 

outsource their production to China. 200 workers lost their jobs.10 Such losses also 

have ripple effects on other companies that do business with the companies that 

shut down. Gentzler Tool & Die, a supplier to World Kitchen, lost two of its 30 employees because of the lost business from World Kitchen. Gentzler’s purchasing 

manager, Jim Evans, commented: ‘‘It’s cheaper to go to China. Everyone is doing 

it.’’ 11

Loss of Manufacturing Jobs and Capacity Threatens National Security

These are not isolated incidents. Job losses like these are happening all the time 

in Ohio and across America. Plants have not only been closed and moved to China, 

but in some cases, literally, the whole plant is moved. Steel mills in Cleveland and 

in Geneva, Utah, are being broken down, packed, and sent to China. 
73

12Ohio Department of Natural Resources, Ohio’s Rubber Industry; available at http:// 

www.dnr.state.oh.us/recycling/awareness/facts/tires/ohiorubber.htm. 13Ohio Department of Natural Resources, Ohio’s Rubber Industry; available at http:// 

www.dnr.state.oh.us/recycling/awareness/facts/tires/ohiorubber.htm. 14 C. McMillion/MBG Information Services; available at http://www.mbginfosvcs.com/pdfs/ 

usjobs.pdf. 15 Jon Honeck, Ph.D., A Report from Policy Matters Ohio: International Trade and Job Loss 

in Ohio (February 2004) at 9, Table 4. 16Steve LaFerre, CHINA: Dealers, Tiremakers Are Capitalizing, But Economic Revolution Has 

Issues, TIRE REVIEW (August 2004); Tire Review Online: http://www.tirereview.com/?type=art&id 

=2084&sid=·1&iid=239

At the end of this process, the logical conclusion is that America will be void of 

manufacturing capability. We must ask ourselves—at what point does this threaten 

our national security? 

During the last steel crisis, we raised this issue concerning iron ore. We were told 

not to worry—we can get it from Brazil and Australia who will always be our 

friends. The world has changed since that report was made to the union. There is 

no certainty of allies in a world where terrorists aggressively try to shape policy as 

they recently did in Spain. Al Qaeda has said repeatedly that its attack on the 

United States was intended to cause economic disruption. A more sophisticated approach would be to cut off America from suppliers that it has become dependent 

upon for resources and finished products. If the economic terrorists succeed, the consequences for our economy would be catastrophic. 

If we now look at the world with a different lens in the areas of foreign policy 

and military preparedness, then why do we continue to view economic policy as 

business as usual? The grand hope of the free traders has been that economic policy 

would make the world a safe and secure place. This has not happened. The United 

States continues to abandon significant and important manufacturing industries to 

trading partners who may not be our friends in the future and, in some cases, may 

be aggressively belligerent to our goals.

(Recognize Michael Sayers of the shutdown World Kitchen plant, who is participating in the hearing.)

Investment in China Will Significantly Affect U.S. Tire Manufacturers

As I noted earlier, the USWA represents workers in the rubber industry. According to 2001 census data, Ohio is the leading state in overall rubber product manufacturing.12 The state of Ohio has noted that ‘‘approximately one of every 10 rubber 

manufacturing concerns in the United States is located in Ohio, and about one of 

every eight workers in rubber manufacturing is employed in Ohio.’’ 13 Generally, 

U.S. employment in the ‘‘plastics and rubber products’’ sector, like other manufacturing sectors, has declined. Over the last three and one-half years, rubber and plastics employment has decreased by 13.3%, going from 933,000 in January 2001 to 

809,000 in August 2004.14 In Ohio, the ‘‘plastics and rubber products’’ sector lost 

18,900 jobs from November 1999 to November 2003, a 20.5% loss over that period.15

Tire manufacturers make up a significant component of the rubber industry. 

Many major tire producers, including Goodyear, Bridgestone-Firestone and Cooper 

Tire & Rubber, have production plants in Ohio. These companies provide good paying manufacturing jobs for U.S. workers. However, the China economic boom has 

been and will continue to affect this industry as, increasingly, China attracts more 

and more investment from U.S. tire producers looking to service both the expanding 

Chinese market and export markets. 

Just last month, the publication Tire Review (located here in Akron, Ohio) examined the effect and impact that China has had, and is likely to have in the future, 

on tire manufacturers. It noted that while low-cost Chinese brand tires have long 

been present in the U.S. market, times have now changed. I quote:

Over the last decade and a half, China has gone from being a bit player 

in the global tire industry to becoming THE player. Thanks to countless 

technology-sharing joint ventures between global majors and local tiremakers, many of China’s hundreds of tire plants now turn out ‘‘global quality’’ passenger, performance, light truck/SUV and medium truck tires for 

domestic consumption and export.16
74

17Steve LaFerre, CHINA: Dealers, Tiremakers Are Capitalizing, But Economic Revolution Has 

Issues, TIRE REVIEW (August 2004); Tire Review Online: http://www.tirereview.com/?type=art&id =2084&sid=·1&iid=239 18Steve LaFerre, CHINA: Dealers, Tiremakers Are Capitalizing, But Economic Revolution Has 

Issues, TIRE REVIEW (August 2004); Tire Review Online: http://www.tirereview.com/?type=art&id =2084&sid=·1&iid=239 19Steve LaFerre, CHINA: Dealers, Tiremakers Are Capitalizing, But Economic Revolution Has 

Issues, TIRE REVIEW (August 2004); Tire Review Online: http://www.tirereview.com/?type=art&id 

=2084&sid=·1&iid=239 20Steve LaFerre, CHINA: Dealers, Tiremakers Are Capitalizing, But Economic Revolution Has 

Issues, TIRE REVIEW (August 2004); Tire Review Online: http://www.tirereview.com/?type=art&id 

=2084&sid=·1&iid=239 21Steve LaFerre, CHINA: Dealers, Tiremakers Are Capitalizing, But Economic Revolution Has 

Issues, TIRE REVIEW (August 2004); Tire Review Online: http://www.tirereview.com/?type=art&id 

=2084&sid=·1&iid=239 22 Cooper Tire to Boost Production in China of Low-Priced U.S. Tires, TOLEDO BLADE, February 25, 2004. 23Global Sourcing Newsletter, December 2003, Vol. 1, No. 11; available at http://

www.xporta.com/press/newsletterl1203.html. 24 Cooper Tire to Boost Production in China of Low-Priced U.S. Tires, TOLEDO BLADE, February 25, 2004. 25 Cooper Tire to Boost Production in China of Low-Priced U.S. Tires, TOLEDO BLADE, February 25, 2004. 26 Area Firms Join Business Rush to China, TOLEDO BLADE, January 1, 2004. 27 Cooper Tire to Sell Auto-Parts Business in $1.17 Billion Deal, TOLEDO BLADE, September 

18, 2004; Cooper Sells Unit for $1.17 Bln, Will Invest in China, Bloomberg.com, September 17, 

2004; available at http://quote.bloomberg.com/apps/news?pid=10000103&sid=aGtwaWLmp7nI& 

refer=us.

Domestic tire demand in China is increasing and it is estimated that it will ex- ceed 100 million tires by 2010.17 There are more than 200 tire producers in China, 

counting both joint ventures and domestic companies.18 Tire Review reported that 

‘‘China exported 8.54 million passenger tires to the U.S. in 2003, up 27% over 2002’’ 

and exported ‘‘2.24 million light truck/SUV tires to the U.S. in 2003, up nearly 59% 

over 2002.’’ 19

Much of the increased tire production in China is the result of investment by major global tire producers, including U.S. tire producers.

• Goodyear was the first major tire manufacturer to set up an operation in China when it formed a joint venture with the Dalian Rubber General Factory 

in 1994. In 2001, Goodyear announced a $120 million expansion at the Dalian 

plant. By 2007, that plant’s capacity will nearly triple from 1.9 million tires to 

more than 5.3 million tires.20

• Bridgestone (Firestone’s parent company) has built three tire factories in China, the latest being a $99 million radial passenger tire plant in Wuxi with 

an initial capacity of 8,000 tires per day for domestic and export sales. 

Bridgestone says this new plant will complement its existing auto tire plant in 

Tianijin and its truck and bus tire plant in Shenyang.21

• Cooper Tire & Rubber also has established a presence in China. Last year, Cooper entered into an agreement with Hangzhou Rubber Co. in which 

Hangzhou agreed to supply Cooper with 250,000 to 350,000 radial medium 

truck tires per year.22 As part of this agreement, Cooper will ship tire making equipment from its factory in Albany, Ga., to Hangzhou.23 In February of 2004, it was announced that Hangzhou would supply Cooper with about 1 million 

entry-level radial tires a year under the Cooper, Mastercraft, Dean, and Starfire 

brands.24 The Toledo Blade reported that ‘‘Hangzhou will make entry-level pas- senger tires in six sizes using Cooper Tire specifications and quality standards 

for the North American market.’’ 25

In January 2004, Cooper announced a joint venture with Kenda Rubber In- dustrial Co. Ltd. of China to build a tire factory in China that will make radial 

tires for cars and trucks for export to North America and Europe. The joint venture will be named Cooper Kenda Tire Manufacturing (Jiangsu) Co. Ltd. and 

initial production is scheduled for late 2005.26

Furthering its investments in China, Cooper announced on September 17, 2004 that it had agreed to sell its auto parts business for 1.17 billion dollars 

and planned to spend part of the proceeds in building a tire factory in China.27

In other words, Cooper Tire is cannibalizing its domestic facilities and the jobs 

of their U.S. workforce in order to finance their investments in China!

While these tire production investments are undoubtedly benefiting the various companies’ profit margins and creating millions of high-paying jobs (by Chinese 
75

standards) in China, they will also inevitably result in the loss of tire manufacturing jobs in Ohio and other U.S. states as these companies increasingly use China 

as a base from which to export their China-produced tires to the U.S. and other 

countries. 

Conclusion

I hope this testimony is helpful to the work of the Commission. The United Steelworkers of America hopes that your voice will stand out in the national debate 

about our trading and economic policy not only with China, but with the rest of the 

world. 

Thank you.

Co-Chair DREYER. Thank you, Mr. McCall. Thank you. The next 

speaker will be Mr. David Johnson, the President and CEO of 

Summitville Tile of Summitville, Ohio. 

STATEMENT OF DAVID W. JOHNSON

PRESIDENT AND CEO, SUMMITVILLE TILES, INCORPORATED

SUMMITVILLE, OHIO 

Mr. JOHNSON. Thank you very much, and it’s a pleasure to be 

here this afternoon. I’m president of Summitville Tile, a third generation family-owned manufacturer of ceramic tile and related 

products in a tiny little village of Summitville, Ohio. 

For three generations we have been converting clay and slab 

products and shipping them throughout the United States and to 

the furthest corners of the globe. However, we are now in a life and 

death struggle for our very survival. With virtually our entire industry wiped out, Summitville Tile is the last remaining charter 

member of its national trade association, The Tile Council of America. Today I hope to give definition to the full extent of this struggle in both financial and human terms. By way of introducing the 

Commission to Summitville I would like to say just a little bit 

about the company, the history, the products we make, the markets 

we serve. 

We began in the year 1912 as Summit Brick Works, a producer 

of highway paving products that paved the first transcontinental 

highway in America which runs right through Ohio. The company 

weathered its ups and downs in the early years. It survived the 

Great Depression, survived the difficult World War II years; it survived two devastating fires that literally just about put us out of 

business. 

My grandfather, dad and uncle kept their nose to the grindstone, 

however, and made a fledgling little brickyard into one of the leading ceramic tile manufacturers in the United States. 

By the 1980s the company had reached the pinnacle of success. 

We were shipping products throughout the United States and 

throughout the world, everywhere from McDonald’s and Burger 

King and Kentucky Fried Chicken worldwide to the roofing tiles on 

the White House. More than 600 employees were working at our 

four factories earning decent incomes with full benefits, healthcare, 

defined benefit pension, 401(k), five weeks’ paid vacation, and I 

could go on. In our four facilities we were manufacturing some ten 

thousand colors, shapes, size and thickness and texture of tile for 

virtually every application you could conceive. 

My brothers and I took over the management of the company in 

the mid 1980s and laid a foundation for a new ultra modern factory 

in Morganton, North Carolina. In a facility that was four football 
76

fields long with totally automated production lines, this was the 

most advance tile making facility its kind in the world. It was designed to be the future of our company, but ended up being an albatross around our neck. Not because the factory wasn’t performing, but because its first years in production coincided with the 

greatest onslaught of cheap, low cost imports from all over the 

world which accelerated throughout the decade of the 1990s. 

Little did we know in the year 1990 when we opened the doors 

to this facility that imports would rise from 40 percent to 80% of 

the U.S. ceramic tile market in one decade. Little did we know that 

the average unit selling price for the products that we were manufacturing would go from 1.25 in 1990 to 60 cents in the year 2000. 

All of this happened in one short decade, a decade during which 

the American currency appreciated by about 30 percent vis a vis 

most of America’s trading partners in the world. 

After having invested $120 million in capital to build our North 

Carolina facility, including the wages and the healthcare and all of 

the benefits to our employees, including the taxes we paid to all of 

the governmental authorities, after all of this, it seemed that everybody had made something out of this investment but the shareholders! And at the end of it all, when we shut the factory down 

in the year 2001, we were left with $25 million in stranded losses. 

The economic downturn that was spawned by 9/11 exacerbated our 

woes and caused us to undertake a restructuring of the entire company. 

We shut down two of our four factories. We shut down eleven distribution centers. We laid off 450 employees. Before we were all 

done with it, we had to file Chapter 11 to reorganize the financial 

structure of the company. We hope to emerge out of Chapter 11 

later this year probably about the third (1/3) of the size the company once was, still laden with ‘‘stranded debt’’ that we will be paying off for the next five and a half years, if my company can make 

it. 

There’s been a major public debate in this country about free 

trade and fair trade. One need only examine the public record 

maintained by the U.S. Department of Commerce, however, to see 

who’s really winning this debate. I doubt over the long haul it will 

be the American people. 

Within the ceramic industry alone imports are at an all-time 

high and prices at an all-time low and most of the industry is just 

about finished. The largest tile factory in America in Landsdale, 

Pennsylvania, owned by American Olean Tile Company, has been 

bulldozed over for a housing development, and I could say a lot 

more. 

Soon China will even be a major force in our market. Yet, in the 

case of China, the tariff that we pay for product we ship to China 

is 69 percent. That includes a so-called value added tax that is over 

and above their tariff schedule. 

We recently secured a large job in China, believe it or not. We’re 

tiling all the Kentucky Fried Chickens in China. It’s a miracle. 

They have already copied our product, and they’re undercutting the 

price, but the corporation that we are selling to in China believes 

in our quality and prefers our product over the copycat. But they’re 
77

paying an effective duty rate between 46 and 69 percent tariff. 

What is fair about that? 

If this were not bad enough, on more than one occasion I have had container loads of product seized by Chinese customs demanding full description of my product and full manufacturing processes 

by which we manufacture the product. One can only draw the inference that their real intent is to copy what we have so they can 

come out and undercut us in price. 

I would conclude by saying that as one of the last remaining tile manufacturers in the United States we are fighting a titanic battle 

for survival. It is a battle that we have paid hugely for both financially and in human costs, especially in terms of all the fine employees in my company that have either lost their job or haven’t 

had a raise in three years, but that stuck by us. I pray that the 

leaders in Washington on both sides of the aisle will recognize the 

reality and sheer scope of the unfair, misguided trade practices 

that are at play today in nations like China and others. If we do 

not do something to wake up soon, we are going to end up with our 

entire industrial base in the country gone and gone for good. 

That’s my story and I’m sticking to it. 

[Audience applause.] 

Co-Chair DREYER. Thank you for finishing exactly in the seven 

minutes. 

Mr. JOHNSON. I timed this all day yesterday. 

[The statement follows:]

Prepared Statement of David W. Johnson

President and CEO, Summitville Tiles, Incorporated, Summitville, Ohio 

I am here today as the President of Summitville Tiles, Inc., a third-generation 

family owned manufacturer of ceramic tile and related products headquartered in 

Summitville, Ohio. I also am speaking as a charter member of the U.S. tile industry 

association, Tile Council of America. I also am the Chairman of the Ohio Manufacturer’s Association, which is an Ohio trade association and public policy lobbying organization representing 1,800 member companies that range in size from small family owned manufacturers like Summitville Tiles to companies like Honda, the single 

largest manufacturer in the state of Ohio. My testimony today, however, shall be 

focused specifically upon Summitville Tiles and the U.S. ceramic tile industry, and 

the devastating effects that one-sided ‘‘globalization’’ of our trade laws and protections has had on us and our industry over the course of the past decade. 

Just by way of introducing the Commission to Summitville Tiles, let me say a few 

words about the company, our history, the products we manufacture and the markets we service. This background is significant if only to establish a context for assessing the value of companies like ours . . . companies that have been providing 

quality livelihoods for hundreds of families for so many years, that have paid millions of dollars in local, state and Federal taxes, and that have contributed to the 

betterment of the communities in which we do business. 

An American Success Story

Summitville Tiles began in the year 1912 as the Summit Brick Works, a producer 

of highway paving block and later on, by the 1920’s, a producer of face brick. The 

company weathered the ups and downs of its early years . . . survived the Great Depression, survived a 19 month strike, and endured the difficult World War II years. 

After World War II, the company’s founder, my grandfather, F.H. Johnson, handed over the reins to a second generation of the family: my uncle and father, Fred 

and Peter Johnson. They soon launched an altogether new company, producing 

quarry tiles and industrial floor brick. Under their leadership, despite two disastrous fires in the 1950’s, the company flourished. 

The post war construction boom of the 1950’s and 1960’s bolstered the company 

sales and led to it becoming a national company. In 1965, a second factory was established, soon doubling the output of the company. During this time frame, new 

distribution centers were added across the nation . . . and by the 1980’s we had loca-
78

tions coast to coast. In 1970, the company expanded its clay mining operations into 

the coal mining business when it acquired the Zoar Mining Company. And in 1980, 

a new division of the company was started to manufacture ceramic tile installation 

materials. 

By virtually every measure, Summitville Tiles had become an American success 

story. We were supplying floors to virtually every McDonald’s, Burger King, and 

Kentucky Fried Chicken restaurant in the U.S. and world-wide (except where overseas high tariff and VAT taxes, and especially hidden non-tariff barriers, have kept 

us out of many countries) . . . and also to the major hotels, shopping malls, and public institutions of all kinds. Our industrial flooring was being specified in Anhueser 

Bush breweries, Carnation Dairies and at Kraft Cheese. We supplied subway tile 

for the Washington, D.C. and New York City transit authorities. We supplied the 

roofing tiles on the White House. 

Employment at Summitville Tiles had grown to over 600 by the 1980’s. And of 

course we offered our employees good health care coverage, a defined benefit retirement plan, a supplemental 401K savings plan, life insurance, perfect attendance 

pay, jury pay, funeral pay, and up to five weeks vacation pay. Working at 

Summitville Tiles was a coveted thing. 

Era of Growth Turns Into Decade of Decline

With the company at an all time high in terms of its growth and earnings, a third 

generation took the helm of the company in the mid-1980’s as my brothers Peter, 

Jr. and Bruce joined together with me in managing the company. To fuel the company’s continued growth, foundations were laid in 1989 to construct a new, ultra 

modern tile manufacturing facility in Morganton, North Carolina. Four football 

fields long with automated production lines, this facility was the most advanced of 

its kind in the world. It was designed to become the future bulwark of the company 

. . . but it would soon become an albatross around our necks. 

Little did we know at that time that imports of ceramic tile into the U.S. would 

go from 40% of the domestic market in 1990 to 80% of the market by the year 2000. 

Who would have thought that the average unit selling price for the products that 

we were making would go from an average unit price of $1.25 in 1990 down to $.60 

in 2000. All of this happened in one short decade . . . a decade during which the 

value of the American dollar appreciated by as much as 30% against most of the 

currencies of the world, which helped fuel the increase in imports into the U.S. But, 

more importantly, this also was the decade during which NAFTA and a whole host 

of other new trade initiatives had been given birth . . . and a time frame during 

which China was just gearing up for the ultimate assault on America’s industrial 

competitiveness, which is unfolding today. China—which has a larger ceramic tile 

production capacity than the rest of the world combined. 

After having invested some $120 Million in capital to build the North Carolina 

factory and to equip it . . . and operate it for a decade . . . the shareholders of the 

company were left with stranded losses to the tune of $25 Million. The economic 

downturn that was spawned by 9/11 exacerbated our woes, causing us to undertake 

a major, life-and-death restructuring and downsizing of our entire company. With 

the banks nipping at our heals, we moved quickly to close down the North Carolina 

plant, to close down eleven distribution centers, to close down a glaze tile operation 

in Ohio, to consolidate two quarry tile facilities in Ohio and to liquidate any and 

every other asset that we could—for $.50 on the dollar, if we were lucky. 

Some 450 employees were impacted by all of this . . . out on the street with no 

health care. Meanwhile, our ultra-modern tile plant lays idle in North Carolina. 

With some $18 Million worth of equipment, we have yet to get a single offer from 

anybody to buy it. And who in the U.S. ceramic tile industry is left to buy it? Just 

in the past five years, four more U.S. tile companies have closed their doors. This 

leaves a few survivors, like Summitville Tiles, and the one giant of our industry . . . 

DAL Tile, which is part of a large conglomerate with most of its sales coming from 

imports. Summitville Tiles, in fact, is the only charter member of the U.S. ceramic 

tile industry’s national trade association to remain in business today. 

With all of our operational restructuring and downsizing in place, one final piece 

of the restructuring remained: one that could only be accomplished through a Chapter 11 filing which we did in December of 2003. Soon we will emerge out of Chapter 

11 as a company that is 1⁄3 the size that we were four years ago, still laden with 

stranded debt from operations that are no longer in operation. And in order to save 

the company, my family has had to put virtually everything that it has on the line, 

personally guaranteeing new loans and locking into a Plan of Reorganization that 

will be ‘‘tight’’ at best. At least for now, though, we have saved the company . . . and 

saved 250 American jobs. 
79

Free Trade vs. Fair Trade 

There has been a major debate going on in the United States for more than a dec- ade . . . a debate between the proponents of unfettered Free Trade and the defenders 

of truly balanced Fair Trade policies. One need only examine the public record 

maintained by the Department of Commerce, however, to see who is really ‘‘winning’’ this debate. The bare bone facts of the matter are as chilling as they are dramatic. 

According to statistics gathered by the Tile Council of America through the De- partment of Commerce, for instance, ceramic tile imports are at an all time high 

in the history of the United States—77.6% import penetration for all tile, and 80% 

for the largest category of glazed tile, at the end of 2003. Not much left for U.S. 

manufacturers to compete for. And prices are at an all time low. This coincides precisely with the passage not only of NAFTA but of all of the rest of the multiple bilateral and regional free trade initiatives of the past decade: the Caribbean Basin initiative, the Andean Trade Preferences Act, and the multiple Latin American and 

world-wide free trade agreements (FTAs), with more already negotiated and awaiting Congressional passage (like CAFTA); others now actively being negotiated (like 

the Free Trade of the Americas or FTAA, and WTO Doha Round, and Thailand—

a huge tile producer and historic cheater as to its ceramic tile exports); and many 

more already announced by the USTR for negotiations. And it is the declared intent 

of the Administration to eliminate all industrial and other tariffs by 2015. The 

GATT treaties merely extend the unfair advantages born out in these bilateral and 

sub-regional treaties to all of our trading partners in the rest of the world. Meanwhile, some of the world’s largest exporters of tile maintain tariffs in their own country that make it absolutely prohibitive for American companies to ship 

product into their country. I know, I have tried for years. Brazil, the second largest 

producer of ceramic tile in the world, maintains not only a 17% tariff on all ceramic 

tile coming into its borders but an additional 29% so called ‘‘value added’’ tax that 

is over and above their tariff rate. China’s glazed tile tariff rate is at 45% with a 

17% ‘‘value added’’ tax compounded on top of that = a 69.65% combined duty and 

tax rate! 

Who really knows all of the additional hidden advantages that nations such as China have, insofar as energy costs and banking practices and government subsidies 

are concerned? We know they do not have the health care costs, the tort litigation costs, or the tax burden calculated into their prices. Certainly, we have long known 

about China’s manipulation of their currency, and we talk and meet about it—but 

nothing is done. All of these factors skew the concept of fair trade and make free 

trade a charade. We have traveled to China to try and serve an international food 

chain customer—we couldn’t get our tile across the dock without prohibitive tariffs, 

VAT taxes, and multiple hidden fees and charges. What has all of this brought the U.S. ceramic tile industry—it has virtually decimated it, and caused it to be sold off to foreign producers who just want access to 

our distribution networks and regional warehouses. Since NAFTA’s inception, imports out of Mexico into the United States have grown by a whopping 260%. China’s 

exports into the U.S., though still relatively small, already have increased by 350% 

just in the past five years. And the prices at which these and other nations are selling their products in the U.S. are at below our manufacturing costs . . . even with 

ultra modern tile manufacturing facilities such as Summitville’s in North Carolina, 

which we closed because countries like Turkey could put ceramic tile on our loading 

dock at less than our costs of manufacture. 

If this were not bad enough, on more than one occasion, Summitville Tiles has 

had its ceramic tile shipments to Shanghai simply seized . . . with Chinese customs 

officials demanding that we supply not only physical descriptions, product formulae, 

and other highly confidential and proprietary information about our products, but 

the manufacturing process by which these products were made. The obvious inference that one draws from this is that they wish to copy the products and replace 

them with their own products. And it is well known that they do exactly that for 

the full range of U.S. products, both in high tech and for basic industrial products 

like ceramic tile, as one of the world’s most blatant intellectual property (IP) violators. Their knock-offs of our proprietary Stratta tile are, I am sure, on the floors 

of our food chain customer’s stores in China. 

Conclusion 

Summitville Tiles is one of the last remaining ceramic tile manufacturers in the 

United States. We are fighting a titanic battle for survival. It’s a battle that we will 

not give up. But I do pray that our leaders in Washington wake up and recognize 

the reality of . . . and the sheer scope of . . . the multiple unfair trade practices that 

are at play today with nations like China. If we do not do something to curb this, 
80

there will be no more ceramic engineers being educated in this country—imagine 

how difficult it is right now to convince an engineering student that there is a future in ceramics? If we do not do something to curb this, we are going to wake up 

one day without our manufacturing base in this country—much of it already is gone 

. . . and, soon thereafter, without our nation’s wealth . . . or our role as a manufacturing leader (not just assembling foreign components—but truly manufacturing), 

and our role as a military leader in a dark and dangerous world. 

Summitville

PRESS STATEMENT

David W. Johnson, President and CEO

December 12, 2003

Summitville Tiles to File Chapter 11—‘‘To Save the Company’’

For more than two years, Summitville Tiles has been engaged in a strategic restructuring of its operations. In the process of this, two of the company’s three tile 

manufacturing facilities have been closed with all remaining tile manufacturing operations consolidated into its Pekin, Ohio plant. Additionally, three of the company’s 

tile distribution centers have been sold with eight more centers liquidated. And, 

company-wide employment has been reduced from 650 to a little more than 250 . . . 

where it is expected to remain. 

With these essential elements of the company’s restructured operations now in 

place, it is being announced today by Summitville President & CEO David W. Johnson that the company intends to file Chapter 11 at the Federal Court House in 

Youngstown, Ohio in order that it may restructure its debt and become fully rehabilitated . . . and save 250+ jobs. The petition is to be filed with the Court Friday 

morning, December 12, 2003. Employees, Customers and Suppliers are being notified today. 

What Are the Root Causes of Summitville Tiles’ Difficulties?

Summitville Tiles, and the entire U.S. ceramic tile industry, have been ravaged 

in recent years by the effects of low-cost foreign imports that are pouring into America’s ports from all over the world at prices that are below U.S. tile manufacturers’ 

costs. Just in the decade of the 1990’s, imports of ceramic tile into America have 

gone from 40% of the market to now 80%. And the average unit selling price has 

been cut in half. 

U.S. trade agreements such as NAFTA, GATT and now the WTO have exacerbated these conditions to such a degree that Summitville Tiles is the last remaining 

charter member of the U.S. tile industry’s national trade association, The Tile Council of America. In addition to Summitville’s plant closings, five other U.S. tile manufacturers have either closed for good or have shut down factories . . . just since September 2001. 

Strategy for Summitville Tiles Overcoming Foreign Tile Import Threat

In conjunction with the company’s operational restructuring efforts of the past two 

years, it has painstakingly peeled away all of its nonperforming entities, getting 

completely out of the business sectors most impacted by imports. As a consequence, 

the company will now be in a position to focus 100% of its resources and energies 

on the core base of product lines for which it is not only best known, but which it 

is best able to produce profitably. These products include its unglazed quarry tiles, 

acid resistant industrial floor brick, precision thin brick . . . and a new product, ceramic roof shingles. Summitville Laboratories will remain in the mix as well, producing a full line of tile installations materials at the company’s Minerva, Ohio facility. 

Capitalizing on the advantages of an almost unlimited supply of high-grade, lowcost raw materials, an experienced and dedicated work force, and facilities that have 

had a proven track record of performance, Johnson views the company’s prospects 

for recovery to be strong. Summitville Tiles currently markets its products through 

more than 150 distributors all across the nation and to a lesser extent to ports overseas. Its top quarry tile customers are fast food giants like McDonald’s, Burger King 

and Kentucky Fried Chicken . . . world-wide. Its industrial flooring accounts are the 

likes of Anheuser Busch Brewery, Coca Cola Bottling and Kraft Cheese to name just 

three. And its thin brick products are used on large commercial projects like Hilton 

Hotels and Home Depot Centers. 
81

How Does Chapter 11 Rehabilitate Summitville Tiles?

Chapter 11 will assist with the company’s rehabilitation in a number of ways, but 

the most significant ways in which it will help are as follows:

• It will allow the company to restructure the payment terms to, both, secured 

and unsecured creditors; 

• It will allow the company to make critical capital investments in its manufacturing operations without subjecting such investments to creditor lien actions; 

• It will enable the company to terminate leases that are no longer needed.

Generally, a Chapter 11 proceeding will afford the company some ‘‘breathing 

room’’ in order that it may put together and implement a business plan that enables 

the company to survive while satisfying its creditors and saving 250+ jobs. 

What about the State of Ohio Loan Package for Summitville Tiles?

The original $3.5 Million State of Ohio loan facility that had been approved for 

Summitville Tiles (to have been facilitated by the Columbiana County Port Authority and Carroll County) has been substituted with a lesser, $1.1 Million facility that 

will be administered directly by the state, through the Ohio Department of Economic Development. This facility shall be fully collateralized by assets provided by 

the Johnson family . . . and further secured by the personal guarantees of 

Summitville Tiles CEO David W. Johnson and his brother, company Executive Vice 

President Bruce F. Johnson. 

This loan facility shall be for the express purpose of a planned $1.2 Million capital 

investment project at Summitville Tiles’ Pekin, Ohio manufacturing facility. This 

project will include: (1) new kiln control equipment that is designed to improve productivity and product recoveries; (2) new clay feeding and blending systems designed to improve shade control and product yields; and (3) an additional production 

line designed to expand production and enhance scheduling flexibility. This capital 

improvements project has been in the planning & design stages for months and 

shall be ready to implement early in the 1st quarter of 2004. 

Key Elements of Summitville Tiles’ Chapter 11 Plan

Additional key elements to the Summitville Tiles Chapter 11 plan are as follows:

• The Johnson family and current management team shall remain in control of 

the company throughout the Chapter 11 time frame . . . and beyond; 

• The Johnson family shall be placing additional equity in the company over and 

above that which is securing the state of Ohio loan facility; 

• Emergence from Chapter 11 is projected to be a relatively quick, six-month time 

frame; 

• There will be no raw material, product shipment or employment interruptions 

to operations expected during the Chapter 11 time frame; 

• Reasonable assurances have been given to the company that key suppliers and 

valued customers remain in full support of the company’s turn-around plans. 

We Will Survive!

Summitville CEO David Johnson concluded his comments with: ‘‘Summitville 

Tiles started in business in 1912. It has survived both World Wars, the Great Depression, a 19-month strike, two devastating fires and a lot more. Three generations 

of my family have worked right alongside of three generations of employees here. 

We have an unusually strong bond with one another. And the same might be said 

of many of our customers and suppliers. The steps that we are taking today are 

meant to solidify these relationships . . . and ultimately to save a company that is 

worth saving if only for the increasing scarcity of companies like ours.’’

‘‘Though we regret having to put everybody through the exercise of a Chapter 11 

proceeding, we feel that this course of action is truly in the best interest of all of 

the stakeholders of the company. And, frankly, we feel grateful for the opportunity 

to restructure the company around its core, profitable business . . . the part of the 

business that is not as heavily impacted by imports. This is a far better prospect 

than just being forced to close our doors, forever.’’

‘‘Finally, we wish to thank everybody that has remained at our side through all 

of this . . . employees, customers, suppliers, the State of Ohio’s Economic Development team and others. This support has bolstered us and kept us mindful that you 

never lose a fight unless you quit. And, we are not quitters!’’
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Summitville Tiles

Economic Impact

Decade 1993–2003

$130 Million Payroll Paid—($90 Million—Ohio) 

$ 14 Million Medical Benefits Paid—($10 Million—Ohio) 

$ 11 Million Pension Assets—(Current) 

$ 10 Million FICA Taxes Paid 

$ 4 Million Property Taxes Paid—($2 Million—Ohio) 

$ 11 Million Sales Taxes Paid—($1 Million—Ohio) 

$210 Million To Vendors Paid—($52 Million—Ohio)

$390 Million Economic Impact—($166 Million—Ohio)

Employee Impact 

• $30,000 AVG Annual Total Compensation (Hourly) • Health Care Coverage—No Top Limit—$1K out-of-pocket • Defined Benefit Retirement Plan • Matching 401k Retirement Plan • Up to Five Weeks Paid Vacation • Jury Pay • Funeral Pay • National Holiday Pay • Perfect Attendance Pay • Life Insurance, Plus Supplemental Life Insurance Plan • Supplemental Disability & Sickness Plan (20 Weeks) • Johnson Scholarship Plan—$50,000 in past 10 years

Co-Chair DREYER. Our next speaker will be Mr. Jerry Vanden Eynden, Lancaster Colony Glassware and Candle Corporation, accompanied by Mr. Brad Root. As I understand it, Mr. Vanden 

Eynden will testify and Mr. Root will be available during a Q&A? 

Mr. ROOT. That’s correct. 

STATEMENT OF JERRY VANDEN EYNDEN, PRESIDENT

LANCASTER COLONY GLASSWARE AND CANDLE GROUP

CINCINNATI, OHIO

ON BEHALF OF CANDLE-LITE AND NATIONAL CANDLE ASSOCIATION

ACCOMPANIED BY BRAD ROOT 

Mr. VANDEN EYNDEN. On behalf of Candle-Lite of Lancaster Colony and the National Candle Association I appreciate the opportunity to appear today. I am Jerry Vanden Eynden, President of 

Candle-Lite. Our headquarters are in Cincinnati, Ohio and our production facilities are located in Leesburg, Ohio. Joining me today 

is Brad Root, Senior Vice President of AI Root Candle Company 

here in Ohio. I know I’m not going to get done in seven minutes 

so I’ll tell you what I’m trying to show where we successfully used 

the unfair trade laws that are in practice today to ensure fair competition. 

Ohio plays a significant part in the candle production. Fifteen 

members of the NCA are located in Ohio. NCA was the petitioner 

in the original antidumping investigation and participated as an 

interested party in four administrative reviews, four new shipment 

reviews, and the first Sunset review of the antidumping order. The 

NCA also participated in approximately 102 investigations regarding the scope of the Order. 

We believe the U.S. manufacturers should not outsource jobs, 

American jobs, or move production to China. There is an alternative. Instead we should fight for our share of the U.S. market by 
83

using the U.S. unfair trade laws to ensure fair competition in the 

U.S. market. The U.S. candle industry has proven the PRC candle 

producers are dumping candle in the U.S. market, and as a result 

of an antidumping order we were able to successfully compete 

against the import candles from China. 

On September 3rd, 1985 the NCA filed an antidumping petition 

with the Department of Commerce against petroleum wax candles 

from the PRC. The U.S. candle market has experienced huge increases in the volume of such candles being unfairly traded from 

the PRC causing domestic candle manufacturers to experience significant loss of customers, loss of sales, erosion of profits, employee 

layoffs, underutilization of capacity, companies going out of business and decline in financial performance. 

For the period of 1979 through 1985, the volume of PRC imports 

of candles into the United States increased by 4,000 plus percent. 

That’s 710,000 pounds in ’79 to 28.7 million pounds in 1985. The 

PRC share of total imports increased from one percent in 1979 to 

46 percent in 1985. Over that same period, the number of producers of candles in the United States declined as 30 companies 

went out of business. 

The price undercutting by PRC producers was so severe that 

PRC candles were being sold in the U.S. market at prices below the 

cost of the raw material, which is petroleum wax, to U.S. producers. U.S. producers were unable even with their advanced technology to produce candles at costs low enough to prevent further 

erosion in the market share to the unfairly traded PRC imports. 

On July 10th, 1986 the department issued its final determination. The department found that the PRC candles were being sold 

in the United States at less than fair value and that the antidumping margin was 54.1 percent. In August 1986 the Commission 

issued its final affirmative determination wherein it found that an 

industry in the United States was materially injured by reason of 

import candles of petroleum wax from the PRC. 

On August 28th, 1986 the department issued the Antidumping 

Duty Order. 

The Order has been remarkably effective over its 18-year history. 

The imposition of the Order in 1986 allowed the domestic industry 

to recover from the material injury that the Commission found in 

its original investigation. This turnaround in industry performance 

was the direct result of a dramatic reduction in imports from the 

PRC in the year the 54.2 percent antidumping duties was imposed. 

From the record level of 28.9 million pounds reached in 1985, the 

last year of the original period of investigation, imports fell by 80 

percent in 1986 to 5.7 million pounds. Imports from the PRC fell 

even further in 1987 and remained below the 1985 level well into 

the ’90s. 

The large decline in the quantity of imports from China was accompanied by a dramatic increase in the price of candle imports 

from China. During the years ’83 through ’85, or the original period 

of investigation, the average unit value of imports from China 

ranged from 44 to 51 cents per pound. These prices were well 

below, or approximately half, the average unit values of imports 

from all other countries. The low prices of imports from China likewise undersold domestic producers. 
84

The Commission stated in its original investigation that pricing data for Chinese candles reflect large margins of underselling for 

all candle varieties examined during that period of investigation. 

The Commission also found that, even in the 1983–1985 period of 

the original investigation, Chinese candles offered a direct substitute for domestic candles across all types and all major market 

segments. The combination of widespread underselling and direct 

substitutability between Chinese candles and domestic candles led 

inevitably to price depression in the U.S. market. As imports from 

China took an increasing share of the U.S. market from domestic 

producers, Chinese candles forced domestic prices downward by 

eight percent over the period of investigation. The imposition of the Order had a major upward influence on Chinese import prices and reversed the price depression evident in 

the U.S. market. In 1986 the average unit value of imports from 

China rose to 71 cents per pound, or 40 percent above the 1985 

level. In 1987 the average unit value again rose to a dollar per 

pound, a level that took the average price of Chinese candles above 

that of imports from nonsubject countries. This strong upward movement in Chinese import prices was due in part to product mix changes, as imports from China included 

more high-priced, novelty-type candles not included within the 

Order. It also reflects the positive impact of the order on prices of 

candles within the order, which represented the vast majority of 

candles consumed in the U.S. market. The average unit value of 

imports from China continues to rise from the late ’80s into the 

mid ’90s. More importantly it remained well above the average unit 

value of candle imports from all other countries. 

Candle producers uniformly reported that candle demand experi- enced strong growth during the early and mid ’90s. Towards the 

late ’90s the quantity of apparent domestic consumption of candles 

had more than tripled from the consumption levels measured by 

the Commission in the original investigation. In its 1999 Sunset Review determination the Commission noted 

the substantial growth in apparent domestic consumption that had 

occurred since the original investigation, and that domestic producers, importers of candles from China, and importers from nonsubject countries have shared in this growth. I’m over. Co-Chair DREYER. Nine seconds. 

Mr. VANDEN EYNDEN. Okay. One thing we did find out just re- cently is we were successful in another Sunset Review of getting 

duty raised to 108. [The statement follows:]

Prepared Statement of Jerry Vanden Eynden, President Lancaster Colony Glassware and Candle Group, Cincinnati, Ohio On Behalf of Candle-Lite and National Candle Association

Accompanied by Brad Root

The Impact of U.S.-China Trade and Investment on Ohio’s Economy

On behalf of Candle-Lite of Lancaster Colony and the National Candle Association (‘‘NCA’’), I appreciate the opportunity to appear before you today. I am Jerry 

Vanden Eynden, President of Candle-Lite. Our headquarters are in Cincinnati, Ohio 

and our production facilities are located in Leesburg, Ohio. Ohio plays a significant 

role in U.S. candle production. Fifteen members of NCA are located in Ohio. NCA 

was the Petitioner in the original antidumping investigation and participated as an 

interested party in four Administrative Reviews, four New Shipper Reviews, and the 
85

first Sunset Review of the Antidumping Duty Order (the ‘‘Order’’). NCA also participated in approximately 102 investigations regarding the scope of the Order. We believe that U.S. manufacturers should not outsource American jobs, or move production to China. There is an alternative. Instead, we should fight for our share 

of the U.S. market by using the U.S. unfair trade laws to ensure fair competition 

in the U.S. market. The U.S. candle industry has proven that PRC candle producers 

are dumping candles in the U.S. market and, as a result of an antidumping Order, 

we are able to successfully compete against candle imports from the People’s Republic of China (‘‘PRC’’ or ‘‘China’’). 

On September 3, 1985, NCA filed an antidumping Petition with the Department of Commerce (the ‘‘Department’’) and the International Trade Commission (the 

‘‘Commission’’) against petroleum wax candles from the PRC. The U.S. candle market had experienced huge increases in the volume of such candles being unfairly 

traded from the PRC, causing domestic candle manufacturers to experience significant loss of customers, loss of sales, erosion of profits, employee layoffs, underutilization of capacity, companies going out of business, and a decline in financial 

performance. For the period of 1979 through 1985, the volume of PRC imports of 

candles into the United States increased by 4,077% (710,000 pounds in 1979 to 28.7 

million pounds in 1985), and the PRC share of total imports increased from 1% in 

1979 to 46% in 1985. Over that same period, the number of producers of candles 

in the United States declined as 30 companies went out of business. The price undercutting by PRC producers was so severe that PRC candles were being sold in the 

U.S. market at prices below the cost of the raw material, petroleum wax, to U.S. 

producers. U.S. producers were unable, even with their advanced technology, to 

produce candles at costs low enough to prevent further erosion of market share to 

the unfairly traded PRC imports. On July 10, 1986, the Department issued its final determination. The Department found that the PRC candles were being sold in the United States at less than fair 

value and that the dumping margin was 54.21%. In August 1986, the Commission 

issued its final affirmative determination wherein it found that an industry in the 

United States was materially injured by reason of imports of candles of petroleum 

wax from the PRC. On August 28, 1986, the Department issued the Antidumping 

Duty Order. The Order has been remarkably effective over its 18-year history. The imposition of the Order in 1986 allowed the domestic industry to recover from the material injury that the Commission found in the original investigation. This turnaround in industry performance was the direct result of a dramatic reduction in imports from 

the PRC in the year the 54.21% antidumping duty was imposed. From the record 

level of 28.9 million pounds reached in 1985 (the last year of the original period of 

investigation), imports fell by 80% in 1986 to 5.7 million pounds. Imports from the 

PRC fell even further in 1987 and remained below the 1985 level well into the 

1990s. 

The large decline in the quantity of imports from China was accompanied by a 

dramatic increase in the price of candle imports from China. During the years 1983–

1985, or the original period of investigation, the average unit value of imports from 

China ranged from $0.44 to $0.51 per pound. These prices were well below, or approximately half, the average unit values of imports from all other countries. The 

low prices of imports from China likewise undersold domestic producers. The Commission stated in the original investigation that ‘‘pricing data for Chinese candles 

reflect large margins of underselling for all candle varieties examined during the period of investigation.’’ The Commission also found that, even in the 1983–1985 period of the original investigation, Chinese candles offered a direct substitute for domestic candles across all candle types and in all major market segments. The combination of widespread underselling and direct substitutability between Chinese 

candles and domestic candles led inevitably to price depression in the U.S. market. 

As imports from China took an increasing share of the U.S. market from domestic 

producers, Chinese candles forced domestic prices downward by 8% over the period 

of investigation. 

The imposition of the Order had a major upward influence on Chinese import 

prices and reversed the price depression evident in the U.S. market. In 1986, the 

average unit value of imports from China rose to $0.71 per pound, or 40% above 

the 1985 level. In 1987, the average unit value rose again to above $1.00 per pound, 

a level that took the average price of Chinese candles above that of imports from 

non-subject countries. This strong upward movement in Chinese import prices was 

due in part to product mix changes, as imports from China included more higherpriced novelty-type candles not included within the Order. It also reflects the positive impact of the Order on prices of candles within the Order, which represented 

the vast majority of candles consumed in the U.S. market. The average unit value 
86

of imports from China continued to rise from the late 1980s into the mid-1990s. 

More importantly, it remained well above the average unit value of candle imports 

from all other countries over that period. 

The pricing environment for U.S. producers was greatly improved as margins of 

underselling were greatly reduced or eliminated and the price depression evident in 

the period of investigation was reversed. 

The continuing impact of the Order on the quantity and price of imports from 

China permitted the domestic industry to thrive during the 1990s, when candle demand increased strongly. The expanded role of candles in household and personal 

use, particularly as a fragrance delivery device, lead to annual demand growth rates 

of up to 20% during this period. There were two components to this increasingly 

popular function. One was the health-oriented practice of aroma therapy, which involves the burning of candles containing essential oils with reputed therapeutic effects. The second was a marked shift in consumer taste generally toward the use 

of scented candles of all kinds. This fragrance delivery function augmented the more 

traditional use of candles for the type of light, ambiance, and decor they can provide. 

Candle producers uniformly reported that candle demand experienced strong 

growth during the early and mid-1990s. Toward the late 1990s, the quantity of apparent domestic consumption of candles had more than tripled from the consumption levels measured by the Commission in the original investigation. This rapid 

growth was a strong contrast to the consumption trend during the original period 

of investigation. Over the three-year period 1983 to 1985, the quantity of apparent 

domestic consumption rose at an annual compound rate of less than 6%, while consumption in terms of value was essentially stable. The stable dollar consumption 

was in large part the result of the price depression caused throughout the U.S. market by sharp rises in imports of dumped candles made in the PRC. 

In its 1999 Sunset Review determination, the Commission noted the substantial 

growth in apparent domestic consumption that had occurred since the original investigation, and that domestic producers, importers of candles from China, and importers of candles from non-subject countries have shared in this growth. 

Since the Commission’s 1999 Sunset Review determination, however, the economic performance and financial condition of the domestic industry has weakened. 

Despite the continuation of the Order at the same antidumping rate of 54.21%, domestic production and shipments have declined, while industry profitability has fallen. The industry is thus particularly vulnerable. The weakened state of the industry 

can be attributed to two factors: (1) low growth in U.S. candle demand, and (2) continued growth in imports from China, despite the Order. 

As the domestic industry predicted in the last Sunset Review, the exceptional 

growth in the popularity and use of candles that occurred during most of the 1990s 

ended as that decade came to a close. The ending of this unusual period of demand 

growth, combined with the recession of 2001, resulted in little growth in U.S. candle 

consumption over the last five years. Based on a survey conducted under the auspices of the NCA, domestic production of candles in 2003 is actually lower than domestic production in 1998. 

Despite the weakening of U.S. demand, candle imports from China nevertheless 

continued to increase. Over the period of 1988 through 2003, imports from China 

more than doubled from 86.6 million pounds to a record 183.6 million pounds. In 

contrast, imports from all other countries actually declined over the same period by 

16%, falling from 214.1 million pounds in 1998 to 179.9 million pounds in 2003. This 

same trend of increasing imports from China and decreasing imports from non-subject countries has continued strongly in 2004. 

Chinese candle exporters responded to the decline in U.S. consumption by simply 

increasing the margin of dumping dramatically. This intensified dumping permitted 

Chinese exporters to undersell both domestic producers and non-subject imports despite the existence of the 54.21% country-wide margin. 

The re-emergence of significant underselling by imports from China, even with 

the Order, can be traced to 1998. There was a notable sharp decline in the average 

unit value of Chinese candle imports from $1.52 per pound in 1997 to $1.00 per 

pound in 1998. This large price decline accompanied the surge in the quantity of 

imports in 1998 and brought the average per-pound price of imports from China to 

a level not seen since 1986. 

This decline brought the unit value of imports from China well below the unit 

value of imports from all other countries. This reversed the pattern of overselling 

by imports from China relative to imports from all other countries that had prevailed since 1987, or for a decade. The unit value of imports from China has remained at or significantly below $1.00 per pound from 1998 to today. 
87

The large decline in the price of imports from China created chronic, significant price pressure throughout the U.S. market over the last five years. Even the beneficial impact of the 54.21% antidumping duty was not sufficient to prevent an intensifying competitive pricing environment from harming domestic producers. The intensification of dumping was confirmed and measured through the adminis- trative review process at the Department of Commerce. Between 1986, when the 

antidumping order was first imposed, and 2000, there was only one administrative 

review of the order. This review in 1988 of one Chinese exporter re-confirmed the 

54.21% rate for all Chinese producers and exporters. However, in response to the 

Customs crackdowns, Chinese producers and exporters dropped their prices sharply, 

and began to request administrative reviews by the Department of Commerce. The first of these reviews to actually calculate an antidumping margin yielded a margin of 95.22% for the exporter that requested the review. The period covered by 

this review was August 2000–January 2001, and the much higher margin found by 

the Commerce Department reflects accurately the impact of the sharp drop in Chinese candle prices that occurred in 1998. Increased dumping was further confirmed 

by an administrative review covering the period August 2000–July 2001. This review yielded a calculated rate of 65.02% for the Chinese producer/exporter. In an effort to make the antidumping order reflect the actual magnitude of inten- sified dumping affecting the U.S. market, the NCA initiated a major initiative in 

August 2002, requesting administrative reviews of 104 Chinese producers and/or exporters. This request covered firms that the NCA believed accounted for the majority of imports of subject merchandise. The administrative review period covered imports during August 2001–July 2002. The result of this major review was a new calculated rate of 108.30%, which was applicable to all Chinese producers and exporters. The NCA believes that this result, effective as of April 19, 2004, brought the 

antidumping order more closely in line with the magnitude of dumping that is actually occurring and that has been ongoing for several years. This result clearly confirms the intensification of price pressure from candle imports from China in the 

U.S. market that has seriously affected U.S. producers over the period since the last 

Sunset Review by the Commission. The 108.30% antidumping brings the Order in 

line with the current PRC dumping practices, levels the playing field in the market, 

and enables U.S. candle companies to again compete effectively with PRC imports. Without the Order, or if it were revoked, the volume of imports of candles from 

China would increase dramatically, both in absolute terms and relative to production and consumption in the United States. The NCA estimates that, at a minimum, 

imports from the PRC would double within a reasonably foreseeable time. How 

quickly this increase in imports would occur is tied to the speed at which the PRC 

would be able to (1) divert current production to the open U.S. market; (2) ramp 

up production with existing facilities to process excess PRC-produced paraffin wax 

into candles for the U.S. market; and (3) ramp up new automated capacity to expand candle production further. 

Diversion of current production and an increase in production at existing facilities 

would occur immediately upon revocation. For more than a decade, the PRC industry has purchased and installed significant new capacity based on state-of-the-art 

automated candle-equipment from Europe. Indeed, as early as the 1980s, a U.S. 

candle producer—San Francisco Candle—moved its advanced candle equipment to 

the PRC. Since the mid-1990s, the PRC is known to have bought significant 

amounts of modern machinery, much of it purchased directly from Germany, the 

primary source of advanced candle making machinery. Fushun, the largest PRC petroleum wax refinery, bought German candle equipment for the candle factory it 

built next to its refinery. 

In addition, a significant PRC production base exists based on more traditional, 

labor-intensive production methods and supported by large amounts of used candle 

production equipment available in China and elsewhere. Finally, many candle producers in China do not produce candles year-round, but rather utilize their facilities 

to supply the market during the heaviest seasonal demand. As a result of all of 

these factors, utilization of existing capacity can be increased rapidly to affect a 

large increase in supply. 

The purchase and ramp-up of new candle production capacity is also likely to 

begin immediately and continue for the foreseeable future. Although its impact 

would not be immediate, the building of new candle production facilities with the 

most sophisticated, automated technologies would also add significantly to Chinese 

candle supply available to the U.S. market within a reasonably foreseeable time. 

The addition of such capacity would be only a continuation of the long-term expansion by Chinese producers of their production capacity through investment in stateof-the-art candle-producing machinery that has been ongoing for more than a decade. 
88

An equally important factor in the likely surge of imports from China upon rev- ocation is the large and growing capacity of China to produce petroleum (paraffin) 

wax. The availability of excess paraffin wax in China would support a massive expansion of Chinese candle production, most of which would be intended for export 

to the United States. 

Consistent with this wax production capability, China has dramatically increased exports of paraffin wax to the U.S. since the mid-1990s. In 1996, U.S. imports of 

paraffin wax were a negligible 10 million pounds, or only 5.4% of total U.S. imports. 

By 1998, the last year of the period reviewed in the prior Sunset Review, paraffin 

wax imports from China had grown to 106.4 million pounds imports, or 37.4% of 

total U.S. paraffin wax imports. 

By 2003, imports from China had tripled to 309 million pounds. In the first half of 2004, imports from China increased to 256 million pounds or 50% more than the 

same period in 2003. In the first half of 2004, imports from China accounted for 

73.3% of total U.S. imports of paraffin wax. 

Absent the Order, candle imports from China would increase dramatically, as much of the Chinese petroleum wax would enter the U.S. in the form of candles, 

rather than as the raw material. Imports of paraffin wax from China in the first 

half of 2004 alone are far above the total pounds of candle imports from China. 

Thus, China could rapidly double their candle exports to the United States. Finally, there is incontrovertible evidence in the track record of Chinese producers that China can rapidly increase the volume of dumped imports of candles over a 

short period of time. This occurred prior to the original investigation, when imports 

from China increased from negligible levels in 1979 to 28,949,000 pounds in 1985, 

capturing 19% of the U.S. market in the process. Over that period, China’s share 

of total imports increased from 1% in 1979 to 46% in 1985. Even with the Order 

in place, imports from China tripled in the space of only three years, rising from 

45.9 million pounds in 1997 to 151.9 million pounds in 1999. 

Revocation of the Order would greatly reduce the prices at which PRC candles are sold in the U.S. market and cause significant depression in domestic producer 

prices. Candles are a widely-consumed, popular consumer product that is sold 

through well-established channels of distribution in large volumes. The candle market is thus very price sensitive. As a result, domestic producers must meet lower 

quotes from sellers of Chinese candles whenever offered. In fact, even with the 

Order in place domestic producers find that Chinese product is offered at low prices 

for virtually every candle type, in all market segments, and through all channels 

of distribution. 

There is considerable product differentiation within the candle market, differen- tiation that involves a combination of the intended end-uses (e.g., light, atmosphere, 

relaxation, decor, fragrance, religious or holiday celebration, etc.), the channel of distribution (e.g., mass merchandisers, specialty/gift shops, department stores, etc.), 

the type of candle (e.g., votive, tapers, columns, wax-filled containers, large pillars, 

etc.), and the particular characteristics of the candles (e.g., scented or unscented, 

decoration, color, etc.). Despite this extensive product differentiation, Chinese candles compete in virtually every market segment with every type of candle. 

Of particular importance to both Chinese and domestic suppliers are the very 

high-volume sales to the mass merchandiser market segment. This segment is traditionally defined as large discount retailers, such as Wal-Mart and Target Stores, 

plus the food store and drug store chains. This market segment is now estimated 

to account for approximately 60% of the total U.S. market. Customers in this segment are extremely price sensitive due to the high volumes involved and competition among retailers. These large discount retailers and chain stores will switch suppliers readily, based on relatively small changes in price. It is in these high-volume 

segments wherein domestic producers have had their greatest success as a direct 

result of the Order. Likewise, it is in this same segment where the most immediate 

and dramatic price depression would re-appear if the Order were revoked. Revocation of the Order would cause a comparable downward spiral on prices throughout 

the market. 

Without the Order, there is a certainty of very significant margins of underselling 

guaranteed to occur. There already is a significant Chinese presence in the market 

with notable instances of underselling by candles from China even with the Order. 

Such underselling contributed, for example, to the doubling in the quantity of imports from China from 1997 to 1999. It has also been a key factor in the continued 

growth in imports from China in the recent period of weakened demand. 

This pricing behavior by Chinese exporters can be properly interpreted as a dramatic escalation of dumping in an aggressive attempt to capture a much larger 

share of the U.S. market, seemingly irrespective of costs. As found by the Commission in the original investigation, the PRC had captured 19% of the U.S. market by 
89

1985, up significantly from the 12% market share held only two years before. During this same period, the Commission also reported significant price declines for domestic producers, despite increasing demand for candles. The average price of domestic shipments fell from $1.59 in 1983 to $1.42 in the first quarter of 1986. Continued price depression and more severe injury to the domestic industry were halted 

by the Order. 

Today, U.S. producers are acutely aware of the PRC’s presence, experience, and 

potential in the candle market. Without the Order, the immediate price decline is 

expected to be much larger than the 8% price decline experienced by domestic producers in the original period of investigation, particularly in view of the recent determination of the Department of Commerce that increased the dumping margin on 

all subject merchandise to 108.30%, or double the 54.21% rate that was found during the original investigation in 1986. Without the Order, price declines will be immediate, with the quantity effects on domestic output, sales, and market share becoming increasingly severe. The NCA estimates that a significant portion of the domestic industry would be forced to close operations and exit the market. Commensurate with the expected large decline in production, employment effects would be severe. Anticipated losses of production and related worker employment directly in the 

industry are in the thousands. 

Without the Order, the combination of the expected declines in prices and sales 

quantities would yield a severe decline in domestic sales revenues and profitability. 

The reduction in cash flow would be enormous, hindering the ability of companies 

that remained in business to invest in plant and equipment and new product development. The ability to raise capital would be severely compromised, not simply because of the downward trend in industry sales and profits, but also because of the 

high risk and reduced prospects of adequate return on any such investment absent 

the Order. This anticipated inability to raise capital would be in sharp contrast to 

the large investments made by the industry since the Order was imposed. Domestic 

companies as a whole raised and invested hundreds of millions in their domestic 

candle operations since the Order was imposed. 

Without the Order, there would be reduced investment by companies in new product development and marketing. With the Order, the industry has witnessed an explosion in new candle product types and uses, reflecting the creativity of U.S. candle 

producers in an environment of expectation of reasonable profits and return on investment. Not only would new product development and marketing slow to virtually 

nothing, the candle market itself would likely stagnate, as company financial support of efforts to increase consumer choice, value, and satisfaction dwindled. 

Without the antidumping Order, the U.S. candle industry would have been destroyed by unfairly traded PRC candle imports. The U.S. unfair trade laws were enacted to ensure fair competition between U.S. produced and imported products. 

These laws are effective. The enforcement of the antidumping law has saved the 

U.S. candle industry as well as other industries. We urge other U.S. producers who 

are being injured by unfairly traded PRC products to fight for their markets and 

rely on U.S. trade laws to offset the PRC unfair trade practices. We also urge the 

U.S.-China Commission to defend these important trade laws against dilution in the 

WTO negotiations and/or negotiations with China.

Co-Chair DREYER. Thank you. Now, Mr. Doug Bartlett, Director 

of the U.S. Printed Circuit Board Alliance of Cary, Illinois. Thank 

you for coming. 

STATEMENT OF DOUGLAS BARTLETT

OWNER, BARTLETT MANUFACTURING COMPANY, AND DIRECTOR

UNITED STATES PRINTED CIRCUIT ALLIANCE, CARY, ILLINOIS 

Mr. BARTLETT. Thank you. 

Thank you, Mr. Chairman, and Members of the Commission for 

allowing me to talk about our industry and the devastating impact 

of U.S. trade policies on our industry. 

I am a graduate of the United States Naval Academy and served 

as a captain in the Marine Corps and for the last 20 years running 

Bartlett Manufacturing. My father started this business 52 years 

ago; one of the oldest family-owned printed circuit board business 

in the industry and my father was a pioneer in this industry. 
90

Our industry is basically that of home electronics. We build the 

circuit board that support and interconnect the components within 

the electronics industry. What’s important about this is that—I will 

pass these around—we are the interconnecting device. 

That board that’s being passed around, this is what’s inside of it. 

This is a high-tech industry. It’s an important industry for our 

country. Without the circuit boards, electronics is nothing more 

than a bag of parts. The blueprint (circuit board) tells everybody 

in the world how it’s built. We provide product for the military, 

aerospace, homeland security and industry in general that provide 

for the welfare of our population. 

In my handout I’ll just refer very briefly, there are a bunch of 

charts to show you what’s going on. Bartlett revenues have gone 

from $22 million in the late 1990s down now to eight million as of 

last count. And remember our trade agreement? We are going to 

lose the low-tech jobs and keep the high-tech jobs. 

Well, let’s take a look at California. In California, the whole California industry went from basically 2.7 billion down to 1.3 billion. 

That’s where the high-tech jobs are in our industry, in California. 

Well, maybe that’s just not bad enough. We went from 19,000 

California jobs down to 9,000. This is not a reduction in industry. 

This is devastation. And to a critical industry. 

Let’s look at the United States overall. The United States Printed Circuit Board Alliance gathered some data. An $11 billion industry that is now down to a $5 billion industry, and included in 

that $5 billion are the boards that we import from China because 

the imports count as revenues for sale so we are probably from 11 

billion down to 4 billion. That’s basically what’s happening, and by 

the way 78,000 jobs down to 41,000 jobs and declining even further. The situation is not a particularly good one. So why is this 

happening? 

We didn’t forget in 2001 how to build printed circuit boards in 

this country. Low-cost products become available in the United 

States from China. They have acceptable quality and delivery. 

That’s what’s dramatically different. We have faced these foreign 

competitors in the past, Japan in the ’80s in our industry, and Taiwan in the late ’80s. What’s dramatically different about China is 

they are half the price. 

In a high-tech industry low labor costs alone cannot create such 

a price advantage. This is not the result of free market forces. 

These are the direct and significant result of various Chinese government subsidies, principally currency manipulation and direct 

subsidies and rebates. No amount of ingenuity or proximity to the 

market is going to be able to offset the unfairness that’s being dealt 

by the Chinese government. 

Let’s talk about our current trade thought. Let’s go ahead and 

lose our low-tech industry because that’s not important, and keep 

the high-tech industry. Here’s the laminate that we make the circuit boards from, it’s about as low tech as low tech can get generally speaking. We used to dominate this industry ten years ago, 

dominate! Now at the end of this year there will be no major—still 

some specialty producers, but no major suppliers to the United 

States. 
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So it’s not bad enough we are getting beat by half the price. 

China, which is now the major producer, can cut off our supply line 

of laminate basically at a moment’s notice. Okay. It’s not much to 

look at, [a piece of laminate passed around] but then again we 

don’t really care about our low-tech industries because we are 

going to keep our high-tech jobs. 

Currently Chinese demand on this material is all but consuming 

all Chinese production so we’re at the mercy of the Chinese to get 

it now, and market conditions are such that prices may be going 

to be going up about ten percent a month for the foreseeable future. May be a little bit aggressive but not much. So we enter a 

double squeeze by Chinese prices and a choke to our supply lines. 

The implications are clear. China’s using predatory trade practices to destroy our printed circuit board market, and because of 

Washington’s indifference, sometimes encouragement, the Chinese 

will win. 

Let me talk about one other board. This is the sonobuoy board. 

A sonobuoy is a device that is dropped in the ocean to detect nuclear power or conventional submarines. We want to know where 

every one of them are, and a whole other issue is that China’s trying to build a whole submarine fleet like that. But at any rate 

Bartlett has been building this product for over ten years. Recently 

we were notified that we are not competitive by the buyer company, and we were given the offshore pricing. And that’s the last 

chart in the handout you have. 

My experience tells me this is a Chinese price. Now, if you take 

away a forty percent currency issue and you take away a 15 percent subsidy you will see in that chart that we are the low price 

producer. So if free market forces are left to control this we have 

a fair chance. But we are going to lose this business because again 

we produce 40 percent higher cost. 

Now, I don’t know about you all, but it seems kind of crazy to 

me that we are going to have the Chinese build the boards for the 

sonobuoy that are going to detect the Chinese submarines. Maybe 

it’s just me. I don’t know. 

So if I was asked what needs to be done for the printed circuit 

board industry our government needs to enforce (the problem is 

with our government—the Chinese government’s doing a great job 

to the Chinese) we need to enforce the Buy American provision for 

the printed circuit board industry with 50 percent domestic purchase. It’s already on the books. Just enforce it. You would think 

the Defense Department would be on our side. They are not. 

Take it to 80 percent in two years and in three years take it to 

90 percent. Spend the U.S. taxpayers’ dollars with U.S. employees, 

please. Spend time and funds that let small business know how 

you’re defending their industry through fair trade practice. 

We have got to deal with the Chinese subsidies. A comprehensive 

approach to look at the Chinese subsidies it needs to be done quickly. If you try to eliminate just one, it’s a game of whack-em-all, 

whack a mule, hit them over here and one pops up over there. You 

must take action that effectively extracts the Chinese subsidy into 

the pocketbook of the American people. That’s what needs to be 

done. Small businesses do not have the time or money to do this 

on their own. 
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So in closing I just want to say our industry is defined by a few 

large manufacturers and many small ones. The large facilities 

packed up and went to China for the most part. They are making 

money for their shareholders. The executives are paid as much as 

they possibly can be at the expense of the U.S. workers and the 

U.S. society. That’s not right. If actions are not taken against unfair trade practices used by the Chinese government, and if our 

government continues to either encourage, be indifferent or ignore 

these practices, our printed circuit board industry (critical to homeland security, I would think nuclear-powered submarines are something I want to know about), is going to be damaged beyond repair. 

It’s like a hundred meter dash. We want the Chinese to be competitive so we took and built them training facilities. We moved our 

factories to China. We gave them the best training people. We sent 

our engineers over there to teach them how to train, and I can understand that and I can deal with that, but then when it comes to 

the race, again, I’m at the starting line. They say the Chinese can 

start on the 50-yard line because of subsidies and rebates and at 

the end of the race the people in Congress in Washington say, gee, 

Mr. Bartlett, try harder next time. No. Some day I won’t be able 

to show up for that race, and some day I won’t care about the race 

anymore. 

Thank you for your time. I appreciate it. 

[The statement follows:]

Prepared Statement of Douglas Bartlett

Owner, Bartlett Manufacturing Company, and Director

United States Printed Circuit Alliance, Cary, Illinois 

Thank you, Commissioner and Members of the Committee for the opportunity to 

speak with you about critical trade policy issues. I am the owner of a small business, Bartlett Manufacturing Company, located in Cary, Illinois, a suburb of Chicago. Our company produces printed circuit boards, which are a key building block 

of the American electronics industry. 

I am a graduate of the United States Naval Academy and served as a Captain 

in the United States Marine Corp during President Reagan’s first term in office. 

Following my military service, I joined the family business that my father started 

in 1952. Our company is the oldest family-held printed circuit board business in the 

country. My 20 years in this industry have enabled me to learn the business from 

shop floor to the president’s office. In addition, I have worked with many of my competitors to strengthen the U.S. PCB industry as a whole. 

In 1987, along with three colleagues, I founded the Chicagoland Circuit Board Association. 

In 2003, I became a founding director and a significant force behind the formation 

of the United States Printed Circuit Alliance. This alliance has a mission of revitalizing the national printed circuit board industry, and has already recruited more 

than 70 members to date. All the members of both organizations are small- to midsize domestic companies. I am here today representing these organizations’ views 

as well as my own. 

The printed circuit board industry, like the semiconductor industry, is the heart 

of the electronics industry. The PCB is the mounting platform and the interconnecting device that literally makes electronic components function. Without the 

PCB, an electronics assembly is just a bag of parts incapable of doing anything. Just 

as important, the PCB, like a semiconductor, is a blueprint for how a device works. 

Everyone understands the importance of electronics in our world today. Still, it 

is vital to emphasize that electronics is critical to the future of U.S. manufacturing. 

Even more important, a vibrant domestic electronics industry is essential for maintaining U.S. security at home. Yet the American electronics industry is also under 

attack from abroad and is being soundly defeated at home. The attached graphs 

show the recent deterioration of my company, companies in California and the domestic PCB industry. 
93

The PCB industry in the United States did not see a minor recession, it went through a very dramatic downsizing over the last three years. 

Bartlett Revenues and Employment 

Revenues for Bartlett declined from approximately $20 million in 2000 to just over $9 million three years later. We cut employment from 140 to 93 over the same 

period. Although electronics is considered a high-tech industry, Bartlett and other 

PCB makers are often criticized as lower-end electronics producers. And we have 

been vulnerable to low-cost offshore manufacturers. 

But a closer look at the industry reveals much more disturbing trends. 

California Revenues and Employment 

California is a center of high-end PCB production. Yet as the data shows, Califor- nia’s PCB production has declined from an annualized rate of $2.7 billion to approximately $1.2 billion. Employment in the state is down by more than 50 percent, to 

just under 9,000. 

National Revenues and Employment 

United States PCB production shows the same alarming pattern. Annualized sales have gone from approximately $10 billion in 2000 to just over $5 billion in 

2003. Many estimates indicate the level is really as low as $4.5 billion, due to U.S. 

manufacturers reselling offshore production and booking it as production revenues 

instead of commissions. It is estimated this reselling amounts to 10–20 percent of 

production revenues. North American employment levels have fallen from 78,000 to 

42,000. 

As is obvious from these figures, the decline of the industry is not limited to one 

company, state, region, or product segment. The industry did not forget how to 

produce a quality product at a realistic price in 2001 nor did it lose just the lowtech sector. So what happened? 

Clearly, the turn of the century witnessed the bursting of a technology bubble. In 

addition, the events of September 11th affected not only the electronics industry but 

also the entire economy. In the PCB industry, however, the greatest damage came 

from low-cost product becoming available in the United States with acceptable quality and delivery. Although the industry has competed with foreign producers in the 

past and prospered, the huge price advantages offered by Chinese fabricators in particular represented a wholly new threat: comparable products at half the price. More 

important, this advantage is not solely or even mainly the result of market forces. 

It stems significantly and directly from various Chinese government subsidies, ranging from currency manipulation to explicit export subsidies. In high-tech industries, 

low-cost labor alone can not create such price advantages. And no amount of ingenuity or proximity to market on the part of domestic PCB companies or their workers can offset these Chinese government practices. 

The implications are clear: China is using predatory trade practices to destroy our 

PCB market. And because of Washington’s indifference—and sometimes encouragement—China is succeeding. 

Example: Sonabuoys 

Bartlett Mfg. has produced PCB’s for the sonabouy market. These devices are 

used by our military to detect and track submarines and are clearly vital for national security. Bartlett has been involved with this contract for approximately 15 

years and has been competitive and effective in the support of this product. Most 

recently, we were informed that our prices had become uncompetitive. We were 

given ‘‘off shore’’ pricing. My long experience in the business tells me that these 

prices could be established only in China or other similar S.E. Asian countries. We 

are also told that the customer who supplies the U.S. military would like to work 

with us but that the contract was won on a very competitive basis and our current 

pricing would not allow us to retain the contract. Enclosed is a comparison of our 

prices against what we believe are Chinese prices. When adjusted for currency manipulation and manufacturing export subsidies, Bartlett is competitive. 

The Concerns for National Security Should Be Obvious 

At a time when the U.S. Government is rapidly and carelessly opening the U.S. 

market to any and all foreign competition, the Chinese government is targeting electronics manufacturing with brazenly protectionist policies and effectively destroying 

the industry in the United States. Thoughtless U.S. trade policies are forcing our 

private sector industry to compete against heavily subsidized competition—i.e., a 

foreign treasury. And let me remind you—Chinese foreign currency reserves have 

risen to nearly $500 billion. How can any U.S. company or industry keep its production in the United States and win? The answer is ‘‘We can’t.’’
94

Companies conduct business based on the rules laid out for them. When trade is 

involved, the effective rules are written by two parties; the export country and the 

import country. Today the rules are such that we encourage our large corporations 

to move off shore to take advantage of low-cost production sites and tax advantages 

while at the same time are allowed to sell in the high-profit market. We encourage 

our larger businesses to move overseas in order to maximize profits. And we pursue 

these policies with complete disregard not only for their long-term economic effects, 

but for their effects on our national security. In many ways our government should be run like a business. We need business leadership. We need to balance our revenues with our expenses and we need to have 

positive cash flows. Congress needs to keep results in mind more than specific procedures. The end results are what is needed. 

When domestic industry and the nation at large was briefed on recent and current trade policy initiatives, we were told that we would give up less valuable jobs but 

wind up creating more valuable jobs—as well as increased exports due to newly 

opened foreign markets. We can spend all day arguing the effectiveness of the process and of specific trade laws, but the results should be clear to all. For many critical domestic industries, for millions of American workers and their families, and 

for our national security, they have been a dismal failure. The results for our national finances have been similarly dreadful. I know that the trade deficit figures often make the eyes of American leaders glaze over. But 

as a businessman, I look at the rapid, unprecedented widening of our trade deficit 

with alarm—and you should, too. This loss of cash flow can not be sustained at its 

current level of acceleration. 

So what can be done? I was informed by the director of the United States Printed Circuit Alliance about the trade law safeguards provisions that can be applied to 

industries that have been dramatically and rapidly affected by surges of imports 

from China. From the data presented earlier it is clear the PCB industry has a 

strong safeguards case. Yet my colleagues and I quickly ran into two big obstacles 

to pursuing a safeguards case.

First, trade actions take a long time to come to a conclusion. 

Second, trade actions take significant sums of money to complete.

Even with better and timelier government information, the time and money need- ed to prosecute trade cases is usually prohibitive not only for single companies like 

ours, but often for entire industries like ours. This is especially true given the oftenlong odds against winning. Public officials and politicians need to remember: Deciding to spend money on a trade case is like making a big investment for a smallto mid-size business. You need a reasonable assurance of a good return. The riskreward ratio has to be right. For companies and industries like ours, too often, this 

ratio is all wrong. This problem is especially important in safeguards cases. After all, safeguard provisions were put into our trade agreements to help companies respond to rapid import damage—to sudden change. But our trade law machinery doesn’t work rapidly 

at all, and the lawyers needed to work it well are very expensive. And then we run 

into a third big problem: In the end the WTO would almost certainly reject the position and in the unlikely event the WTO did support it, China would challenge the 

action, and drag out the time and costs still further. There is very little reason for 

a small company owner to risk his funds and time for such a small chance in taking 

this trade action. 

There are many areas where trade laws need to be strengthened. But let me start 

with one recommendation that could support my industry right now: Congress 

should require that all circuit boards purchased by Federal, state or local entities 

with U.S. taxpayer money be manufactured by facilities in the United States. It’s 

time to start using the Buy American laws already on the books much more effectively, closing most loopholes and waiver options. And it’s time to start increasing 

the required Buy American percentages. 

In addition, safeguard procedures must be greatly simplified and expedited to 

make them more user-friendly for small- and mid-size companies. Such changes 

could allow the printed circuit industry to find a way to survive the current pricing 

attacks that are supported by foreign governments, in particular, China. 

Still, as I suggested above, those pushing stronger trade law remedies or their 

more frequent use need to understand the towering obstacles to these goals that 

have been created by the new governing body for global trade, the World Trade Organization. The WTO has an agenda sharply at odds with U.S. trade policy interests. This organization is not akin to an American court of law. Rather, like all 

international organizations, it is a political organization. And its roughly 150 member countries have an overriding interest in keeping the U.S. market much wider 
95

open to their exports than their markets are to U.S. exports. Worse, thanks to the 

organization’s one-country, one-vote system—which the United States has not 

agreed to in any other significant international organizations—the WTO protectionist majority has a powerful tool for getting its way. 

The bottom line: Our independence as a trading nation is dramatically weakened 

by the WTO. We should either secure fundamental reforms in the organization that 

give America the authority it deserves by virtue of its role and the world’s largest 

and most open economy (as in the U.N. Security Council), or we should withdraw 

and regain our independence as a trading nation. 

But as stated earlier, we must focus our efforts on results and spend less time 

struggling with the methods. The United States has established itself as a free trade 

market. Yet China has used a broad array of subsidies and tariffs to keep our products out of their markets and gain undeserved advantages in U.S. markets. We turn 

cartwheels attacking individual predatory practices and, before we know it, a new 

one is instituted that is as effective or more effective than its predecessor. This is 

a mug’s game and a waste of valuable time and resources. 

We should take actions that we bring trade into much better, more sustainable 

balance. These actions should be taken independent of the WTO, if need be; above 

all, they must be taken soon. Washington must combat subsidies effectively by 

transferring the value of these subsidies from foreign manufacturers to the U.S. 

Treasury. This can be done by requiring our trade with China balance within a 

small percentage between the two countries. Either China buys more or we buy less. 

Rapid action is also needed to protect U.S. intellectual property rights. As a country we can compete against low wages to some degree by using our ingenuity. When 

countries disregard these rights, swift and effective action need to be taken against 

them. We can not stop China from stealing our designs, producing and consuming 

them in their own country. We can however stop them from exporting these products and other products into our country. 

In summary, I am a free market supporter and a free trader, but not a blind free 

trader. I believe in free, fair and balanced trade. I am amazed by how many Americans refuse to even talk about tariffs and subsidies or any types of truly effective 

trade policy tools when many of our trading partners use them routinely. Since the 

1970s, both American political parties have pursued free trade policies that are undermining domestic manufacturing. This has resulted in the ‘‘real wages’’ of our 

workers being only 93% of what they were when we went to a ‘‘free trade’’ policy. 

The trade deficit is worsening rapidly as we rapidly expand our free trade agreements with the rest of the world. This can not be sustained at this accelerating rate 

for more that a few more years. 

As a small businessman I feel like I am in a 100 yard dash with China. My own 

government wants to help China out by building them new training facilities (U.S. 

corporations moving facilities to China) so they can train better. We also provide 

them with the best trainers and training techniques (U.S. corporations moving managers and engineers to China). Although I am not crazy about this idea, as an 

American runner I still have my ingenuity and hard work ethics that will allow me 

to compete (intellectual property rights). But when I get to the race I find the Chinese runners are allowed to start on the 40 yard line (Chinese currency manipulation and other subsidies). 

When I meet you at the finish line, do not expect me to be the winner, do not 

expect me to show up at the next race, and do not tell me how I need to try harder. 

China’s artificial, government-provided advantages can not be overcome with even 

superhuman effort. 

We must shift from a trade policy that looks only at ‘‘free trade’’ with China to 

one that is ‘‘free, fair and balanced.’’ At this time the fix is on and we can not win.
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97

Panel III: Discussion, Questions and Answers 

Co-Chair DREYER. Thank you, Mr. Bartlett. You have all given 

us something to think about, and I’m going to start with questions 

and Commissioner D’Amato. 

Chairman D’AMATO. Thank you. I have the same question to ask 

both Mr. Bartlett and Mr. Johnson, two different situations talking 

about unfair trade practices in terms of subsidies not ending. For 

Mr. Johnson’s case I want to know a bit more about what the Chinese put the high tariff on your product and also demanded manufacturing processes information as a price of getting into the country. What steps did you take to try and get the United States Government’s support and attention and what results did you get? In 

particular, I would be very interested in that. 

Mr. JOHNSON. Well, I can tell you that I have testified on an informal basis before the International Trade Commission, before the 

United States Trade Representative Office, before the United 

States Department of Commerce’s Trade Commission. And I have 

had a private audience with Secretary Evans himself. In each of 

these settings, I have been pleading for help from anybody that 

would listen to what’s happened to our industry. Everyone nods in 

concern; they think this is terrible. But no one really gives a damn. 

The ceramic tile industry is about a two billion dollar industry. It’s 

insignificant in the great grand scheme of things. 

Chairman D’AMATO. Did it further upset you that those individuals are being paid by your tax dollars? 

Mr. JOHNSON. You bet it does. I have presented all of this in my 

briefing book. I can’t go into all the details here, but the facts are 

there. Indeed, there is much more that I could have said today 
98

about the advantages that China and so many of our foreign competitors enjoy in terms of energy costs, litigation costs, and all the 

various costs that we have calculated into our pricing. 

I can tell you in the last decade my little company—we’re a small 

company in the grand scheme of things—but in Columbiana County I paid $390 million in the economy in the last decade in wages, 

in healthcare, in pension, in taxes. It’s all laid out in the briefing 

booklet that I have presented to you. Meanwhile, during this decade in which we pumped $390 million into the economy, the shareholders of my company, my family, took zero. I earned an income, 

a salary. No bonuses. No dividends. 

And this is happening to little companies like mine all across 

this country. Here in Ohio, I’m Chairman of the Ohio Manufacturers Association representing 1800 companies big and small, and 

sitting around the table with 25 members of our board, I can tell 

you that many of them wonder if they will be here in five years. 

Chairman D’AMATO. Did any of these individuals, including the 

Secretary of Commerce, suggest any steps would be taken to help 

you? 

Mr. JOHNSON. Everybody took notes and expressed concern. 

Chairman D’AMATO. But no action? 

Mr. JOHNSON. No action. They suggested I contact the office in 

Cleveland to help with exports. It’s a miracle, frankly, that I’m selling China product right now. It really is. My brother flew to Shanghai recently to consummate the deal, a deal that developed just because we answered some inquiries over the Internet. 

But I’m afraid to say too much about the China situation for fear 

of retribution. We need every order right now. I’m sweating it out 

to try to bring my company out of Chapter 11. We have been 

through tough times. My whole management team has taken a 30 

percent cut in pay. My workers haven’t had a raise in three years. 

But they stuck by me, and I’m sticking by them. 

This is not a Republican or Democrat thing. I think that everybody in Washington is out of touch! I would like them to come to 

my factory and my clay mines and look into the eyes of my employees, three generations of people that have worked in that plant, 

husbands and wives and their kids. It’s their jobs and their livelihoods that are in jeopardy because of this unfair trade situation. 

We have one employee in my company that has cost us over $3 

million in doctor and hospital bills for his daughter. Do you know 

how many million dollars of product you have to sell to come up 

with three million to pay for just the healthcare of one employee? 

And I’m glad I can do it. But my counterparts in Mexico and China 

and in Malaysia and in Turkey aren’t paying that. That’s no level 

playing field. 

Co-Chair DREYER. Just one follow up. You fear retribution and 

I wonder if you could expand on that. The reason I’m asking is that 

during field hearings in South Carolina this Commission was told 

there were actions about to be taken up against the Chinese who 

at that point decided to make minor investment in South Carolina. 

It seemed to have bought off a sufficient number of people. I wonder if that’s the case with you here in Ohio. 

Mr. JOHNSON. My brother didn’t want me to come here and testify because of this big order we got and we are shipping some 
99

other product to China. That’s what I meant. I just don’t want to 

jeopardize our future business, meager as it is, by testifying today. 

But somebody has got to hear this story! 

Co-Chair DREYER. Could it be? 

Mr. JOHNSON. Could what be? 

Co-Chair DREYER. That the reason that you got that order is to 

try to shut you up? 

Mr. JOHNSON. No. I don’t think so. I know the people I’m dealing 

with, and we make a very unusual product that’s used in fast-food 

chains all over the world. They like our floors because they last forever. And they never show the dirt. The Chinese already have a 

knockoff product. My brother was in Shanghai a month ago and 

saw it. But our customers in China have rejected this product and 

are sticking with us, at least for now. 

Co-Chair DREYER. I’m sorry. 

Chairman D’AMATO. I wanted to ask Mr. Bartlett the same question. 

Mr. BARTLETT. It’s an interesting issue we had a group the IPC 

which was the group was actually started by the people in and 

around Chicagoland, and it was as the circuit board issue started 

developing. It was the governing group. But what happens in a lot 

of these groups you get big companies and small companies, so 

what happened was that the large companies look and say I want 

to produce in a low cost country instead of the high cost country 

so I can maximize my profits. 

Those large companies dominate the industry, and so instead of 

helping out the domestic supplier, they hurt it. They remove tariffs, 

make a free world, and I agree with that, but it’s only free when 

both sides are playing by the same set of rules, not this 

cockamamie game we got going now. 

But at any rate so our history is if small guys want to go in there 

and change the tide like we try to do, the big guy, remember the 

big companies have staff that can sit in Washington, sit in the 

headquarters of the industry, donate the time to be able to run the 

staffs, and the guys that are in my league are on the factory floor 

from 6 in the morning to 7:00 at night. I was fortunate enough to 

have good staff that I could say I’m not going in the factory. I’m 

going to head out. 

I have been to both the staff of President Bush and the staff of 

Senator Kerry to listen to their policies and identifying what things 

that we can do. 

We formed an alliance of small companies. The problem is the 

funding. Small companies don’t want to put a lot of money into alliances because they think it’s a waste of time, and when you try to 

get the small guy to go to Washington with you its three days out 

of the factory, three days’ worth of manufacturing facility running 

without it’s best and most knowledgeable person. But even what 

happens beyond that is once you get out there and start to talk 

about these issues, the first thing that’s slapped on you is, well, 

you are just a protectionist. We all know that didn’t work. Well, I 

will tell you what, if not moving my company to China because I 

want to do everything I can to protect my workers, if that makes 

me a protectionist, I’m damn happy to be one. 

[Audience applause.] 
100

That’s what we have been trying to do, just raise the awareness 

of the issue. 

Co-Chair DREYER. Thank you very much. 

Commissioner Wessel. 

Co-Chair WESSEL. Thank you, and Mr. Bartlett, I can’t thank 

you enough for your passion and the amount of time that all of you 

are donating not only to be here today, but on a continuing basis 

because we are all up against a system that is run by those who 

are making profits whichever way the product goes and aren’t necessarily as concerned about where the product comes from. I appreciate your being here. 

I was interested, Mr. McCall, in part of your testimony as well 

because it doesn’t appear that it’s just acts of omission that we 

have to be concerned with but acts of commission in your testimony 

talking about the use of taxpayer dollars to subsidize shipping jobs 

overseas. Can you talk a bit about that in terms of what you—talk 

about bank money going to enhance our competitors. 

Mr. MCCALL. Recently the Export Import Bank has subsidized 

through low interest loans and for grants in some cases for Chinese 

companies to ship former American equipment that’s been shut 

down in some cases and other cases still operating, shut down and 

transferred to those other countries. So not only do we give them 

an advantage in terms of subsidized equipment they can produce 

steel with, we increase the overcapacity that already exists in the 

world so we are really hitting ourselves on both sides of the face 

in terms of government trying to help relations in China or wherever by using Export Import. 

Co-Chair WESSEL. I had done a little more research after seeing 

your testimony and looked at the question of steel. My understanding is the steelworkers actually opposed the sale. They wrote 

to the president. When you raised this issue, they still went 

through with it? 

Mr. MCCALL. Absolutely. We were as many of the other issues 

we have filed on behalf of and with the AFL–CIO in trying to protect what belongs to agriculture and enforce the law we have on 

the books we usually get rejected every two or three days. 

Co-Chair WESSEL. Mr. Bartlett, you talked about the sonobuoys, 

and I am certain we share your belief that that’s an issue of importance to our own national security. Have you talked to the Department of Defense? Are they concerned about outsourcing this? Have 

you gotten response from anybody? 

Mr. BARTLETT. I was contacted by the U.S. manufacture of 

sonobuoys and they gave me tons of information about sonobuoys, 

and I don’t know this for a fact but what was passed on to me was 

the United States Department of Defense has signed a ten-year 

agreement with a British company to basically dominate this market. I don’t know that for a fact. This is hearsay. 

But our concern is we go to the Department of Defense, the 

United States Printed Circuit Alliance, through Congressman Manzullo, his group went and presented our position to the Pentagon 

about what was happening in electronics. But they have limited tax 

dollars they want to spend, and I believe the agenda is not of supporting a strong manufacturing base. It’s more of if you want to be 

an alliance with Germany today, you need to buy more German 
101

products. So a lot of them are pretty smart on how they, you know, 

alliances for sale! 

I don’t think national security obviously is an issue. I don’t think 

they’re looking at the long-term implications of a very weakened 

manufacturing base in the United States. Manufacturing needs to 

be obvious to people in Washington. It doesn’t seem as obvious or 

that’s tomorrow’s problem, not today’s problem. You can’t rebuild 

manufacturing as rapidly. It takes years to do that and not as easy 

as you can in some of the other types of industry. 

Co-Chair WESSEL. Mr. Vanden Eynden, I’m interested also we 

heard from a representative this morning who had a case before 

the Federal Government said he wouldn’t do it again. White House 

rejected the offers of relief. You have been tenacious in the fight 

what 18, 19 years you’ve been at this trying to respond tariff problem? 

Mr. VANDEN EYNDEN. Yes. 

Co-Chair WESSEL. Do you have an estimate of what you had to 

spend over this period in defending your own interests? 

Mr. VANDEN EYNDEN. I think in this year’s budget it was probably at least 300,000 to half a million dollars budgeted just to go 

forward with the review process that happens. There are two reviews that will come up this year, but I could get you that number 

of what the candle association spends every year but it’s close in 

the range. 

Co-Chair WESSEL. So despite the fact that you have a continuing 

fact pattern, if you will, that the ITC, Department of Commerce 

and others have, you’re having to spend hundreds of thousands of 

dollars every year to go through the same fact patterns? 

Mr. VANDEN EYNDEN. You’re trying to protect it. All it takes is 

one of those companies to ask for a review and you go through the 

whole review process. 

Co-Chair WESSEL. The government has decided on the fact pattern, I guess, I’m somewhat at a loss here as to why you have to, 

and maybe we need to change the law that says once you’re successful in this and somebody asks for a review you shouldn’t have 

to foot the bill for it. Maybe the government should step in and 

present the facts; that’s what your tax dollars are going for. Maybe 

the first time you bring a case when you’re looking at competitive 

market, but after that, I don’t know how you do it. So I think it’s 

something we may want to look at. 

Co-Chair DREYER. Commissioner Wortzel. 

Commissioner WORTZEL. Thank you. I would like to concentrate 

a little bit on the national security aspects of this. It could be 

sonobuoys, it could be radar systems in aircraft. It’s something I 

was doing at the Heritage Foundation as well. If you outsource the 

industrial base to Germany, for instance, and the Germans dislike 

American policy in country X, could they cut off that source of supply? So I wonder if you could characterize for us those countries capable of being competitive at manufacturing these printed circuit 

boards, or whether China would end up the sole source in the 

world. Do we really end up in a situation where we can’t make a 

sonobuoy until somebody starts up the line? 

Mr. BARTLETT. Well, the ability to build let’s say mid to high 

level but not extraordinarily space age or the real advanced circuit 
102

boards, the Chinese are currently there, along with putting factories into Vietnam so it’s wide based across the world, but because 

of the advantage that China has in its cost structure, it’s very rapidly coming to dominate the industry. 

But the United States will have the ability, the knowledge, to 

build these components, but what happens over time is the factory 

jobs move. We’ll keep the R&D? The R&D goes with the factory. 

So you’re starting to lose the ability and can you regain it in time 

of national crisis? Well certainly. But you’ll have to rebuild the factories. 

But what will happen in the interim? If it’s not sonobuoys it 

could be a hundred other items. When something from the Defense 

Department, let’s say, it gets purchased from the assembler. It gets 

assembled in North Dakota. Well, items come in from North Dakota factory and get screwed together. Let’s say we bought it from 

a North Dakota manufacturer, but the electronics came from 

China, or maybe it came from Canada, but they bought the circuit 

boards from China. So where is bill of materials? There’s bill of materials and the manufacturer doesn’t tell you where it all comes 

from. 

The automotive industry does that very well. The Defense Department doesn’t seem to look at that. They say, well, it came out 

of North Dakota. I don’t think the danger is that we won’t be able 

to build it at some point. It’s just where’s it being built today and 

how is it functioning? 

Commissioner WORTZEL. And just a follow up—is there anything 

that would require this bill of materials that you described? Is 

there hope for legislation in that regard? Who should we be talking 

to? 

Mr. BARTLETT. When we go to Washington one thing we talked 

about when you’re going to put together these groups, maybe it’s 

a novel idea, but why don’t you get some manufacturers on the 

group instead of lawyers and politicians (we used to call them legislatures and statesmen), but why don’t you get these people off the 

group and get on people who know how to run factories so when 

they say what’s the U.S. content? He’ll say, ‘‘I don’t know. Let me 

see the bill of material.’’ Don’t tell me where it’s shipped from. I’ll 

go down there and I’ll add it up, sir, and I’ll come back and tell 

you exactly what U.S. percent the raw materials are. 

It’s the raw materials you want to know about. If somebody 

screws it together, that’s value added but where did all the components come from? Get the manufacturers on this Commission, get 

the manufacturers and the people who know how to do that and 

get the real answer. That would work. 

Co-Chair DREYER. That’s it? 

Commissioner WORTZEL. Yes. 

Co-Chair DREYER. Commissioner Becker. 

Commissioner BECKER. Thank you. I have a question or two that 

I want to direct to Mr. McCall. First, I want to congratulate you 

and your colleagues for successfully working with that aspect of the 

companies that you could for restructuring the steel industry during this last collapse. In that regard I want to ask you—we are 

going through a period right now of massive profits for the steel industry, and you would think that the steel industry and the ana-
103

lysts would feel more comfortable. But I also notice on the other 

hand that the inventory of steel being built up in China by the end 

of this decade or whatever 500 million tons of capacity that will be 

looking for a home if there’s any kind of downturn, and not just 

the Chinese but the Koreans and Brazilians and other countries. 

Are we in a position to better withstand a flood of import steel 

again? What would happen if we suffered those same imports 

again? Can we go back to the table for another bite? 

Mr. MCCALL. There’s no table to go back to for another bite. We 

are the most efficient most productive steelworkers in the world 

and nobody even tries to debate it. You can’t compete against a 

Chinese government that subsidizes, and not only subsidizes the 

product, but controls the currency as well. 

Steel mills are kind of different. It takes a lot of money to start 

one up, build one, takes a lot of money to keep it going. Once you 

get it up to 50, 60, 65 percent utilization, everything over that is 

sort of gravy so to speak. If the Chinese have a capacity, whatever 

their total capacity is, and their utilization is 50 percent, they simply take that extra utilization that they made in their factories and 

mills and they put it on boats and ship it to the United States and 

they sell it for a penny, it’s a penny’s worth of profit. All the money 

is going in again to utilization. 

So are we set to face another 1998? No. We’ll never be able to 

survive that. Even though we are the most productive, even though 

we provide the best volume, the best on-time shipping. 

We’ve done a lot of things. It’s not just in the last five years that 

we’ve done a lot in the industry. We have been over the series of 

the last decade in changing and talking about working efficiently, 

working smart and doing the right thing and making sure we are 

selling the product the customers need. But to compete against a 

country who’s producing a hundred percent of what they are capable of and dumping the rest of it on the shores of Oakland or Cleveland, or anywhere in the United States, and just practically giving 

it away, not only can’t you compete against that, it lowers the entire market and entire price for everything else. The domestic steel 

suppliers are at that same 50 to 60 percent utilization rate where 

they’ve got to be making something at that rate in order to sell it 

cheaper and cheaper and cheaper. 

Commissioner BECKER. Something has to be done. 

Mr. MCCALL. Something has to be done in terms of fair trading. 

Commissioner BECKER. Mr. Johnson, you’re beginning to come 

out of bankruptcy? 

Mr. JOHNSON. Yes. 

Commissioner BECKER. My question over the years is, it’s a 

struggle to come out of bankruptcy. That’s a hard thing to do 

whether or not it’s a big or small industry. What’s to prevent another charge by the Chinese to push you right back into it? Are you 

more solid now to withstand that? 

Mr. JOHNSON. Well, we have attempted to identify certain core 

products that have been in our line for a lot of years that we enjoy 

a competitive advantage right now, and there are not as many 

products coming in from overseas, the types of products I’m talking 

about, which is basically unglazed flooring tile, acid proof floor 

brick and I now make a precision cut thick brick that’s used in big 
104

precast construction calls, like they’re in all the Home Depots in 

America right now. Nordstrom is a new account of mine and it’s 

specialty product of mine but could someone else overseas make it 

cheaper? Probably. It’s a relatively small niche market right now. 

I’m putting together a bunch of niches that offer some hope of making money so that’s where we are. 

Co-Chair DREYER. Commissioner Mulloy. 

Commissioner MULLOY. Mr. Bartlett, you’re a Naval Academy 

graduate and you were a Marine Corps captain? 

Mr. BARTLETT. Yes. 

Commissioner MULLOY. And you pointed out there is a national 

security implication. This Commission was set up because the Congress wanted us to look at the national security in terms of what’s 

going on with our economy. You noted that people called you a protectionist. I want you to know that in our last report we made some 

strong recommendations regarding exchange rates, and called our 

report protectionist. 

I’m trying to understand and maybe the panel can help me think 

about this: When anybody starts talking about these issues for 

some reason the newspapers want to call them protectionists. Senator Kerry, for example, has talked about China’s exchange rate 

manipulation, and about using our unfair trade laws and using the 

China specific safeguard. The New York Times, normally one 

wouldn’t think of it as being hostile to Democrats. They called him 

a protectionist for talking that way. 

Some people tell me the newspapers are free traders—retailers 

do so much advertising in newspapers. Of course, if you are a retailer and you import something very cheap and sell it at the same 

price as if you had it made here, your profits go up, your boss is 

happy and everybody benefits. I don’t know whether that’s the case 

or not, but it would be helpful if you have any thoughts about this 

when you look at the evidence and it doesn’t support what people 

are saying about the benefits of trade? Now Mr. Johnson and 

maybe Mr. Bartlett. 

Mr. JOHNSON. I think you probably hit on something if you look 

at every little community in the country now has a Wal-Mart. It’s 

putting the local merchants out of business and you’ve got super 

big retail giants that are making lots of money. 

In my industry it’s the Home Depots. You can walk into a Home 

Depot and buy tile for half the price that we sell it for. You can 

buy tile in China right now for 23 cents a square foot, that’s perfectly good product, and believe me the Home Depots don’t sell it 

for 23 cents. They will sell it for over a dollar a square foot, just 

about twenty percent cheaper than where the domestic supplier 

would sell it. So there are a lot of people making a lot of money 

in retail, but the manufacturing base, all these little communities 

like mine, companies that create wealth—we take dirt out of the 

ground and make a product out of it—we are the ones taking it on 

the chin. We used to make ten thousand ceramic tile products, employing about 650 employees with decent wages. We supported the 

communities in which we did business. But at this rate we are 

headed, such companies as these, big and small, are all going to 

be gone so that the consumer will save 50 cents a square foot of 

tile. Big savings in ceramic tiles, but where are we going to earn 
105

our living, what companies will exist to support the communities 

in which we live, where does this take us. 

Commissioner MULLOY. Mr. Bartlett. 

Mr. BARTLETT. We talked about this in some of our groups, and 

I think part of it is you are hard pressed to find protectionists 

economists. An economist that believes in protectionism, free traders, and I, myself, am a free trader. I think free trade is great. I 

also believe in fair trade. Fair trade with two countries making 

rules. We follow them to a large degree and China doesn’t. 

When we try to find an economist that looks at anything other 

than free trade you are hard pressed to find one, and if you do find 

an economist that believes that, he’s probably pretty lonely when 

he gets together with the other economists at their clubs talking 

about economist-type issues. 

One of the things that our group decides to do let’s take the argument to the university. Let’s talk to the students in front of the 

professors. As the students are looking for jobs, professors are talking about free trade. I believe that a lot of it just comes from teaching. 

In school we learn that protectionism is a bad thing, but there’s 

been a paradigm shift with the Internet and the ability of knowledge and to move so rapidly around the world. 

So I think we have to go back and take a look at some of the 

better-run models. My personal belief is that within six years we 

are going to be forced to look for models because the rate of our 

trade deficit are not only huge but their rate of change is so alarming that if one doesn’t figure it out soon, the economy will figure 

it out for itself in a devastating manner. 

Commissioner MULLOY. One last comment. Mr. Vanden Eynden, 

you pointed out the importance of our unfair trade laws and how 

they ship your supplies. You do know that they have been put on 

the negotiating block although a lot of people recommended that 

they not be. Every country wants to weaken our unfair trade laws. 

My recommendation is you guys who have these industry groups 

be very active politically because you have to be active politically 

in this country to make it work. 

Mr. VANDEN EYNDEN. That’s very expensive. We do it as a trade. 

We are in the retail business that you talked about. He said free 

trade is fine but we need fair trade. If it’s fair trade we are competitive. 

Commissioner MULLOY. Thank you. 

Co-Chair DREYER. Commissioner Wortzel. 

Commissioner WORTZEL. Just a quick comment: there’s a little 

light in the tunnel we don’t generally see, but I believe it was Reuters several weeks ago announced that they were offshoring several 

journalists’ jobs so maybe they will start to see some risk to their 

profession as well. 

Co-Chair DREYER. Outsource the economists as well. 

Mr. BARTLETT. We can get the same bad advice for a third of the 

price. 

Co-Chair DREYER. Commissioner Bartholomew. 

Commissioner BARTHOLOMEW. Thank you very much, and thank 

you to our panelists. One of the most important points you made 

through your examples and your statements was laying to rest this 
106

myth that American companies aren’t being innovative and aren’t 

making the changes in productivity in order to compete. You all are 

clearly examples of the kind of capital investments and structural 

changes that should make you in a fairer situation incredibly competitive in the global workforce. That’s an important point because 

there are still people who say that the fault lies with American 

companies and that’s clearly just not true. 

A couple of points as well as questions. Mr. Johnson, I was very 

interested in what you said about the shipment you were trying to 

export into China that was stopped. Essentially they were trying 

to support technology transfer which is a phenomenon we heard a 

lot about for these companies that are trying to set up for production in China. That’s the first time I actually heard it happened at 

the gateway. Do you have any sense if that was systematic or perhaps there was something involved specifically about the shipment 

you were sending? 

Mr. JOHNSON. I think the example I cited was systematic and 

broad ranged. It happened on two different occasions. One case it 

was a shipment of grout. We make mortar and grout and installation materials to install tile, and that was one of the shipments 

that they stopped. And all this was related to me through our 

freight-forwarding people. So it was a couple steps removed from 

the end user, and I got involved because customer service came to 

me and started telling me about this and I had a heightened interest in it. So I was the one that supplied the data, and I didn’t give 

them the correct formulas or the correct manufacturing processes 

but it sounded like I did. 

Commissioner BARTHOLOMEW. They’re still trying to figure out 

why it looks so bad? That’s interesting. Maybe we’ll be able to hear 

from some freight-forwarding companies. 

Again, I recognize that a lot of people take risks in coming forward and talking about their experience. We thank you very much 

for that. It’s some phenomenon I like to call the long arm of Chinese censorship. They have a lot of ways of making sure that people don’t speak up about practices that are taking place. 

Mr. Vanden Eynden, it strikes me in listening and looking at the 

timing, that in some ways it’s been very expensive for you all to 

do this year in and year out. You’re probably fortunate that you 

started the petition process so early. I have a feeling if you would 

have waited another ten years in order to do it the politics of whatever it is that was taking place at the time of the U.S.-China relations very well might have colored the result. So I’m really struck 

by how much force you all had to deal with and you acted early. 

Mr. VANDEN EYNDEN. I think that if we wouldn’t have acted that 

early, we wouldn’t have been here ten years later. 

Commissioner BARTHOLOMEW. I think it’s really important. Mr. 

McCall, I listened to your comment about how the Chinese are buying plants that are closed here. We had an example in northern 

California a couple of years ago, with the workers having the further indignity of not only was the plant closed and then sold, but 

they couldn’t even have the jobs to dismantle the plant. The Chinese company that bought it insisted on bringing Chinese workers 

over to dismantle the plant. I have been told there are so many aspects of that shifting of American production capabilities to China 
107

still going on. I know it would be incredibly difficult for people to 

have to dismantle their own plant and yet lose the income. 

Mr. MCCALL. We have actually had examples where they’ve 

shown up and brought in people and said we should help train 

them so they know how to reassemble when it comes back. 

Commissioner BARTHOLOMEW. Amazing, astonishing. I think you 

have done a very good job of identifying for us steps that need to 

be taken. When we sit here it is very frustrating because there’s 

a clear identification of a problem but what do we do? And I think 

you all have identified that. My question to you would be: Why do 

you think that nothing is being done when you have so clearly 

identified a problem and a solution to the problem? 

Mr. JOHNSON. You couldn’t be more active than I am. Ohio Manufacturers Association. I know the senators of Ohio and that’s probably why I’m here today and my Congressman and a number of 

Congressmen and I have been writing them and screaming about 

this for years. They seemed concerned but the tariff schedule in 

China hasn’t changed. It’s still between 46 and 69 percent if you 

add the value added tax in with it. The effective rate of what my 

products are costing in China compared to America is eight and a 

half to ten percent. I don’t know. I think people seemed concerned 

but——

Commissioner BARTHOLOMEW. Mr. Bartlett. 

Mr. BARTLETT. There are some plans that are politically pretty 

unpopular. I just like to add one more item. We talked about the 

dismantled factories. After we box it up and ship it over there, on 

top of that being not bad enough we count it as an export! But to 

go back to the issue there’s a gentleman of Chicago that has identified a solution, very similar to the Warren Buffett solution that is 

balanced trade. 

It is very simple, you can turn to a given country that’s subsidizing and doing all kinds of unfair things and say well, in five 

years you’re going to be in balance with us and we are going to 

start slapping—I hate to say tariffs—let’s call it reverse subsidy, 

less painful, and you could do that all until the trade balances. You 

say to that country, ship less or buy more. Preferably they will buy 

more. 

What happens then in the interim is it costs more at Wal-Mart 

and politically that’s not going to be very popular. If you take that 

amount of money that would come from those subsidies and you 

take that money and put it right in the coffers of the U.S. Treasury 

and then turn around and reduce the taxes on the lowest income 

brackets first, you have a solution that’s the best one I heard so 

far. Warren Buffett’s solution is okay, but it puts the power in the 

hands of businessmen, which I would rather see it in the benefit 

of the people. 

Commissioner BARTHOLOMEW. We do have one more witness. 

Mr. MCCALL. Call them surcharges. 

Commissioner BARTHOLOMEW. Protectionist is the other thing 

people like to bring up. Please include all of this when you start 

talking about some of these issues. 

Mr. MCCALL. It’s an identifiable problem across lots of industries 

in manufacturing America. The reason why nothing is done about 

it is because everybody’s got a lot of short-term thinking about 
108

some country trying to help out export their unemployment. It’s a 

short-term relationship agenda on foreign policy and the ignoring 

of monetary policy or fiscal policies. It’s a short-term—talk about 

a cheap price at Wal-Mart. It’s not about the long-term impact of 

a strong economy. 

One of our employers recently within the last month here in Ohio 

shut down. They moved the jobs to China. Lost 200 jobs here in 

Ohio. It’s good—in Chinese standard—good paying jobs in China, 

but the new Chinese workers won’t make enough money to buy 

that product, and the old American workers here in Massillon, 

Ohio won’t have any money to buy that product. In the short-term 

everything’s okay because we got unemployment or some retraining, but we need to retain jobs. 

And it’s all about short-term and it’s all about eventually the 

economy is going to get smaller and smaller and we’re not going 

to have a manufacturing base and it’s going to impact our national 

security and it’s going to impact our national security first. 

Co-Chair DREYER. Commissioner Reinsch. 

Commissioner REINSCH. Mr. Vanden Eynden, has your company 

received relief under the Byrd Amendment? 

Mr. VANDEN EYNDEN. We received it for the past few years, yes. 

Commissioner REINSCH. How much? 

Mr. VANDEN EYNDEN. I don’t know the exact total but I can get 

it for you. 

Commissioner REINSCH. I’m just curious to what extent it offset 

the expense of pursuing the case. 

Mr. VANDEN EYNDEN. Again, I would have to get you percentages 

and numbers like that to do for you. 

Commissioner REINSCH. I assume you support retaining the benefits? 

Mr. VANDEN EYNDEN. Yes, we do. 

Commissioner REINSCH. Okay. 

The only other comment I would make is that I was happy in 

your testimony to see your reference to the negotiations on subsidies. I certainly agree with you it was disappointing we failed because I think over the long term the only way you’re going to get 

capacity under control is through some sort of multilateral realignment, and a subsidies agreement would probably be to our benefit 

because we do less than everybody else. 

I have to say in passing I worked on that particular thing for a 

long time. I was disappointed in 1992 when industry management 

passed up the opportunity to get an agreement at that time because I think if they had got it in 1992 some of the problems we 

experienced subsequently wouldn’t have happened, at least not to 

the extent they occurred. I offer that up for comment. 

Mr. MCCALL. With respect to your comment 1992 at least my 

memory certainly a lot of things have occurred since then. A lot of 

the sacrifice being asked at that time was sacrificed based on 

American manufacturing and training. Even in 1992 we were still 

one of the few countries left in the world that had a larger demand 

for steel and steel products than we had capacity and that’s true 

today as well. That’s the real problem with China. That’s the real 

problem with countries like Brazil keep building steel mills because 

the technology is pretty good to build and if you have three times 
109

the capacity and don’t use it in your economy and build your own 

economy and build your infrastructure. You’re not going to build 

the economy unless you stand by good product and service. 

And that’s part of the problem with the negotiations is that other 

countries want to build capacity and want to continue to dump in 

our markets, and we are asked many, many occasions at our 

United States industry steel whether it be rubber, titanium or aluminum, we’re asked to shut down capacity when in fact we have 

more demand than capacity undercut so it really does have an 

issue now and it has an issue over the long-term economic growth 

as opposed to short-term costs and short-term economic advantages. 

Commissioner REINSCH. Well, I wouldn’t argue with you by any 

means. I would just comment that in negotiations it’s give-andtake, and my calculation at the time was our guys would have gotten about five-eighths of the loaf but didn’t regard that as enough. 

I guess we can reflect back on whether that was a wise judgment 

or not but it was better than half. 

Mr. MCCALL. I have got several hundred thousand retirees giving 

all they need to give. 

[Audience applause.] 

Co-Chair DREYER. Gentlemen, do I take it that apart from Mr. 

Bartlett’s suggestion about how free trade could be made into fair 

trade at the end that you agree that if existing legislation were 

simply truly enforced, the situation could be made materially better? Is that fair? (All panelists nodded their heads up and down.) 

And do you sense any particular reasons for the lack of will of 

the Administration to do something about this? I mean, is it simply 

that certain big businesses are making money from outsourcing or 

is it something further? 

Mr. JOHNSON. I’m not an economist, but the word I seem to be 

getting a lot is America is the largest export nation in the world 

and that we have more to lose by engaging in protectionism and 

singling out an industry like the steel industry is we try to help. 

We ended up helping half of the industry and then hurting the 

other half, the half that wasn’t fabricate anymore. The full side of 

it, they were just raging mad about it, and soon there were going 

to be other tariff measures taken against us in Europe and the effect on the economy would have even worsened so it makes some 

sense. 

And I rather—I’m kind of moping about it today, but really what 

we all have to do is refashion our companies in the way I did it 

in our old company. New high-tech equipment on the furnaces improve productivity. I got a million dollar low interest loan from the 

State of Ohio to help me do that. 

Co-Chair DREYER. But how is it that even though the plant in 

North Carolina is fully automated, it could not be competitive 

against the Chinese? 

Mr. JOHNSON. The particular sector of the market that we were 

in down there is glazed floor tile. That’s the biggest sector of our 

market and that factory if you see it, you would cry. It’s four football fields long, not a single human hand touches these tiles. It 

went from raw material at one end to the other end of a long furnace and automatically packaged, boxed tile, placed it on the pallet, 
110

and I have $18 million worth of equipment in a factory that is like 

new and I haven’t had the first bid. 

Co-Chair DREYER. But I don’t understand because usually we are 

told that the reason the Chinese are able to undercut us is lower 

labor costs and obviously that can’t be because there are no human 

labor costs. 

Mr. JOHNSON. Well, we did have humans. We had a hundred employees there. There’s energy cost, there’s healthcare costs. It’s all 

the additives, the alternate minimum tax of the 1990s right at the 

time that hammered me. 

Co-Chair DREYER. Which tax? I’m sorry. 

Mr. JOHNSON. The alternate minimum tax which would have 

benefited if we hadn’t the depreciation we had at that facility so 

it just seemed like everything at once was going against us and at 

the same time that currency issue, the value of the currency without even referring to the European market in the 1990s, 30 percent 

of all this and that was a tremendous advantage for imports. 

Mr. MCCALL. I agree with what you’re saying. If we enforce the 

currency exchange, if we did all the right things, would that be sufficient? I think so. I believe in fair trade as well. I don’t think we 

ought to have quotas and tariffs as protectionist tools. 

I’m not an economist either. Sometimes I think I am. But the 

fact is, we can compete on a level playing field. It needs to be fair 

and it needs to be equitable. And whether it’s in China or other 

emerging economies around the world, they have to trade with us 

on a fair and equal, level playing field. 

They have to break down their tariffs. They have to break down 

their surcharges. You can’t get a pound of steel in China or anywhere else on the globe without paying a tariff first, and the first 

time the American steelworkers get a look at the tariff everybody 

says oh, that’s terrible. 

It goes to the reference I made before. It is illegal to sell stolen 

auto parts in the country. You can buy a stolen fender a lot cheaper than a produced one—a legally sold one. That’s what they are 

doing with steel, this illegally dumped steel. When steelmakers 

complain that the tariff is not fair, the tariffs bring it up to the fair 

market value. The fair market value can be anywhere else in the 

world but I can’t imagine it. The workers that I represent can’t sell 

steel in China without paying a big tariff. Take them all away. 

Co-Chair DREYER. Mr. Root has been awfully quiet. 

Mr. ROOT. It’s also frustrating that after you turn around, you 

got the order in place and you do the administrative reviews and 

yet you still have to go to the Commerce Department and the Customs Bureau to make sure they are enforcing the order which the 

Campbell Association was trying to make sure that keeps getting 

done. From our standpoint as manufacturers and such, we want to 

focus on the production of products we have to also having sure 

that the Commerce Department is collecting the funds. 

Co-Chair DREYER. Thank you all very much. This has been very, 

very helpful. I appreciate your efforts. 
111

PANEL IV: MACHINE TOOLS AND OTHER INDUSTRIES 

Co-Chair DREYER. I would like to call to order Panel IV. This will 

examine machine tools and other industries. Mr.—could you pronounce your name for me, I’m sorry. 

Mr. IMBROGNO. Imbrogno. 

Co-Chair DREYER. Mr. Imbrogno, Mr. Dan Imbrogno, President 

and CEO of Ohio Screw Products, Elyria, Ohio. 

STATEMENT OF DAN IMBROGNO, PRESIDENT AND CEO

OHIO SCREW PRODUCTS, INCORPORATED, ELYRIA, OHIO 

Mr. IMBROGNO. Thank you very much, and I appreciate the Commission giving me this opportunity to speak with them. 

My little story is very specific. It is a case study of a specific incident that has occurred with our company. I’m President of Ohio 

Screw Products, been in business 55 years now located in Elyria, 

Ohio. We are a manufacturer of precision turned parts or precision 

machine parts. 

Our little story starts back in 1999 when we were asked to work 

with our major customer help them reduce costs and to partner 

with them. As part of that process we looked at our systems and 

decided to invest in about a half billion-dollar piece of equipment 

to improve our manufacture of one specific part. We did do that. 

Unfortunately several years later in 2001 we learned that after 

we had cooperated with them, they were now going to outsource 

most of their components they were purchasing to China. Total 

amount was about $200 million. In fact, in December of 2001 we 

learned they had already placed 20 people in China to begin that 

outsourcing process. 

Not willing to give up, we spent considerable time and effort 

working with our employees to try to bring down our costs. The 

cost of the Chinese parts are 28 cents apiece, and we said gee, 

what can we do to get better? Originally when we purchased the 

piece of equipment we were able to reduce their costs by about six 

percent and then use the rest of it to pay off that loan. But now 

we had another 8 cents we had to pull out of the product. 

We got employees together, worked with our vendors on raw materials, worked with our sales reps, and as a result we were able 

to bring the cost down to 29 cents. That was foregoing any recovery 

of the cost of the equipment. It was giving up all profit in order 

to keep the machine and production people employed. 

Guess what? They went back to their Chinese source and came 

back with a price of 21 cents. That price was a penny and a half 

above the cost of our raw material. We just can’t compete with 

that. 

We did what American manufacturers do: We solve problems. We 

got productive. We did what was necessary to compete but yet we 

still couldn’t compete. It’s kind of a distressing story not only for 

myself but for our employees and I have to look them in the eye. 

Now, we replaced that work. We since found work for that particular machine. In following some of the procedures you always 

hear about. What you hear about are plant closings—well, we are 

not closing our plant, and I didn’t lay anybody off as a result of 

that. I lost business, laid people off as a result of recession, but you 

will see in the details a number of parts we’re losing—a million 
112

and a half dollars out of 6 and a half million, 7 million company, 

over a three year period of time, we will have lost a million and 

a half dollars of business that is going directly to China, being 

sourced to China. 

Now we are getting business to replace that so I’m not going to 

be laying anyone off. But that million and a half dollars would 

have been new business added to what we already had, it would 

have increased our employment seven to eight additional people—

direct labor and a couple indirect employees, and we pay our employees 16 and 18 dollars an hour. They are the middleclass of 

America. I’m not going to be adding any people to that middleclass 

now, and we are seeing those jobs disappear. 

My concern is with the next recession we won’t recover. We won’t 

have the base. We will fall below that point where it’s economical 

for us to stay in business. We’re performing now but just barely 

breaking even. We are in the black but barely. 

Besides that one part, three other parts will be lost to China 

from that same customer who’s outsourcing over $200 million, and 

they are moving their manufacturing facility out of the U.S. 

Another customer of ours is a multiple wheelchair manufacturer. 

An article appeared in the paper about their business not being 

able to compete with Chinese imports. Consequently they will be 

shutting their plants. It was one of the most productive in their organization. 

And then we just learned that another customer of ours has been 

ripped off because of intellectual property rights. One of the products which we make some components for has been copied in detail 

down to the part numbers on their pumps, and their manual was 

copied in detail with only the Chinese company’s name placed over 

theirs. They are going to lose business and as a result we are going 

to lose business. We have not detailed the cost to us on that. 

In addition to these individual losses, other things are occurring. 

As China draw—increase their manufacturing and draws on natural resources the cost of steel and brass, two items we use extensively in our manufacturing process, have been increased. When we 

are dealing with major corporations and our customers, we often 

can’t pass those increases on so we end up swallowing it. We have 

lost approximately—the impact on the bottom line about $220,000 

over this past year of non-recoverable costs because we couldn’t 

pass on those costs of the raw materials so we are being impacted 

by scrap going offshore and increase of raw materials. 

What’s important to recognize is that there are more impacts 

than just jobs. We devoted our resource in getting new business instead of improving processes. There’s a loss to manufacturing. We 

are not going to invest in new equipment. After getting burned 

we’re just not going to do it. Besides the balance sheet wouldn’t 

survive it. We can’t afford to put money in new equipment, and 

new pieces of equipment cost half a million dollars. 

We have terminated all training. We just can’t afford to do that 

anymore. Where we should be growing and prospering and helping 

our employees we can’t do it. As quickly as we can get new business, additional business goes overseas. It’s insidious. We are going 

to survive and you don’t see this stuff because it’s not a plant clos-
113

ing, but it is happening. It’s impacting the future and it’s impacting 

growth and jobs in middle class for the United States citizens. 

Thank you very much. 

Co-Chair DREYER. Thank you, Mr. Imbrogno. 

Mr. John Colm, Executive Director of Wire-Net of Cleveland. 

STATEMENT OF JOHN COLM

EXECUTIVE DIRECTOR, WIRE-NET, CLEVELAND, OHIO 

Mr. COLM. Thank you. Nice to see you all here in Ohio. My name 

is John Colm. I am the Executive Director of the West Side Industrial Retention Network, which is a nonprofit economic development organization in Cleveland. I’m here today representing the 

Northeast Ohio Campaign for American Manufacturing, which is a 

coalition that our organization and about 12 others in Northeast 

Ohio has organized over the last year. 

We represent 900 Northeast Ohio manufacturing firms that employ 30,000 people and 60,000 Ohio families of the United Steelworkers of America, and over the last several months we have been 

involved in a very active grass roots educational effort and political 

effort in the sense of raising the issue of the importance of manufacturing in Northeast Ohio and have started to get some real responses. The cities of Cleveland, Akron and Twinsburg, for example, have all passed resolutions in support of the agenda that 

NEOCAM has put forth addressing trade issues and their impact 

on Northeast Ohio. I want to applaud the work of the Commission 

in starting to get a handle on the impact of trade on our communities, particularly China. If there’s one country that has a major 

impact on us due to international trade and the trade agreements 

it’s China. I think the negative impacts of trade are still very poorly understood. 

And the question that was raised earlier about why is there so 

little action I think part of is that we don’t really measure well. We 

can’t measure the kind of impacts that Mr. Imbrogno was just talking about very well. There are many other reasons as well. 

What I’m going to try to do is speak for half a dozen of the member companies of NEOCAM that shared their story with me. I 

think one thing that I would like to do is to say first of all, that 

there’s a real theme in what I was hearing from the firms that we 

work with that the issues that we’re dealing with are not, it’s not 

that China is to blame for this really. They are taking advantage 

of a situation that we have created in this country and we can 

change that. We can’t change the way the Chinese behave. But we 

can change how we approach these issues in terms of the policies 

that we put forth and in the issue of political leadership, which I 

think is really critical. 

The first instance I guess I’d like to talk about is the vacuum 

cleaner industry, which we’ve already heard a little bit about, I 

think. The firm that we have been working with in 2000 they employed nearly 220 people. Didn’t pay as much as Dan’s folks are 

making, but they are making a good wage. They have full benefits, 

retirement program, and many other company-sponsored programs. 

They were a supplier of major components to the OEM, the original 

equipment manufacturing vacuum cleaner industry in northeast 

Ohio, which is the center of the vacuum cleaner industry in this 
114

country, at least what’s left of it. This firm was the largest low-cost 

producer and the technical leader of that particular product line, 

but by June 2001 their employment had been cut by one-half, 50 

percent, because their customers, the OEMs, had moved to China. 

And as the general manager put it, ‘‘we could not stop or delay the 

exodus of customers had we provided our product free of charge. 

Once Wal-Mart enticed a major OEM to produce a low-cost offer 

made in China, the remainder of our customer base soon followed.’’

Many international firms are no longer manufacturers. They are 

integrators. They warehouse, they distribute, they assemble, they 

market, but they don’t manufacture in the old way in the way we 

use to understand that term. 

The major point of this individual is that we are losing our manufacturing infrastructure. So those who are banking on a recovery 

fueled by manufacturing innovation or engineering innovations are 

probably going to be waiting for a long time particularly as this 

trend continues with the erosion of our manufacturing base, not 

just the jobs, but the talent and the ability to bring new young people into the field as well. 

There are also a couple examples having to do with metal forming. A firm in the Canton area, Republic Storage Systems, employed 500 people. This is an employee-owned company. You can’t 

have a company that has more buy-in from their employees than 

an employee-owned firm, but they are facing very tight competition. They are seeing parts from larger manufacturing being 

brought into the United States, made in China, assembled in various customer locations. Their big complaint has to do with the currency issue, which as far as we can tell here in the boondocks is 

illegal, and we are waiting for the political leadership to respond 

to that reality. 

One other example I would raise is the paper tube industry. This 

is not a particularly high-tech industry but still it’s important. 

Tubes are used for shipping product. They are used for paint rollers. This particular example the firm makes impregnated cores 

that are used for—the lambskin paint rollers are assembled with 

that. They’re very high-end market, specialty market for master 

painters, and the Chinese are coming in for much lower cost, 20 

percent of the cost of what this particular firm is able to offer it 

for which is less than his raw material cost. Similar thing Mr. 

Imbrogno talked about. 

The subsidies, there’s a long list of subsidies that the Chinese 

manufacturers are getting from their government, bank loans that 

are written off, raw materials subsidies, energy, transportation, 

currency, et cetera, are all creating this situation that’s basically 

going to push this company to the edge. 

The last thing I wanted to say goes to the issue of why this is 

happening. It’s a leadership question. The International Trade 

Commission as you pointed out in your 2003 report ruled against 

the import of Chinese wire hangers for the cleaning industry. Yet 

in that particular case the President ruled for the company that it 

was pursuing an import strategy. He ruled in favor of the import 

strategy instead of the domestic production strategy and that to me 

is a real problem. 

Co-Chair DREYER. What reason do we give? 
115

Mr. COLM. Grounds of national economic interest. So I guess I 

would just end there. I would be glad to take questions. Thank you. 

Co-Chair DREYER. Okay. Thank you very much, Mr. Colm. Mr. 

David Murphy, Director of Personnel for Ferriot, Incorporated, of 

Akron. 

STATEMENT OF DAVID MURPHY

DIRECTOR OF PERSONNEL, FERRIOT, INCORPORATED, AKRON, OHIO 

Mr. MURPHY. Good afternoon, Members of the Commission. I am 

the Director of Personnel and Labor Relations for Ferriot, Incorporated, and I would like to thank you for the opportunity to speak 

here today. I represent Ferriot, Incorporated, a company that’s 

been in business since 1860. It’s been five generations of the 

Ferriot family, and we’re primarily a custom molder and finisher 

of injected plastic parts. Up until January of this year we were also 

a maker of molds. We manufactured molds. We had to shut that 

division down this past January. Our hourly workforce is represented by the United Steelworkers of America, Local 1045L. 

I’m not an economist by any stretch of the imagination. My training and education is in labor relations; thus I can’t dazzle anyone 

here with statistics and fine detailed analysis. I can only relate 

what’s happening in our industry and what’s happened to our company. 

Back when I started at Ferriot, which was 1980, we were primarily into toy manufacturing, and we made molds and it was 

about $7 million of annual sales. We started seeing the toy business going offshore in the late ’80s. Most of it was being placed in 

Asia at that time although it wasn’t on mainland China at that 

point in time. Most of what we saw was going to Malaysia and 

Korea. During that period of time we had to shift our focus, and 

we started changing our customer base. We got into cut steel molds 

and growing copper molds, and we also got into more business machines products. The last toy manufacturer left us in 1993 and they 

did depart for mainland China. 

During the 1990s we saw a great influx of growth in our injection 

molding and finishing area, and we still struggled to make money 

on our molding manufacturing area. And sales continued to decline, 

but we made enough money in our other divisions that more than 

offset the losses that were occurring in the tooling manufacturing. 

In this decade we have seen China making a growing impact in 

our injection molding area as well, and what—we continue to 

struggle to get sales. And most of what we’re seeing at this point 

in time is work that is short-run type of jobs, quick turnaround, 

low volume of parts. It’s items that we jokingly used to refer to as 

bottom feeding, and the problem with that work is you never get 

very much of a backlog. It doesn’t eat up a lot of labor hours. It 

also ties up your machine time and it’s a lot of overhead cost of 

changing molds, putting molds in and out. 

We saw significant sales decline after 2001, particularly after 9/

11, and it reached the point that the other divisions could not offset 

our mold-making area so when we made the decision to get out of 

the injection business all together in January. And at that time we 

had to inform the employees in that division that they no longer 

had jobs. Although it’s part of my function and my job, we are a 
116

small company, and we know everybody, and we know their families, and it was extremely difficult to tell people that have been 

with us 20 years you no longer have jobs. 

One of the small positive things that came out of that was with 

the United Steelworkers’ help we were able to qualify for trade readjustment, but it’s small solace for people that lost their jobs and 

are having to be trained in doing other things. 

To put things in perspective at one time in the recent past we 

employed 297 people. We now have 175 so we have lost 122 jobs 

from our company alone. And what we have seen here in the last 

couple years we’ll get spikes of work in, and then you get periods 

where you don’t have work. And the trouble with the short-term 

work we have been able to stay afloat with that it makes it difficult 

to invest in capital. It makes it difficult to plan your business because you get periods of time when there’s not enough work and 

you start escalating your overhead costs. 

One of the things when we shut down our tooling business it 

really brought home and shocked quite extensively when auditors 

and accountants told us the people could offer their labor for free 

and we would still be noncompetitive. The price that we were producing our molds was five times less than being offered from 

China. 

So when we went to the union to tell them we had to shut down 

the division there’s essentially nothing they could do to help us out 

on that. Our overhead and fixed costs, power the cost of the building and we had moved into a new building at the end of ’90s. Those 

types of things made us noncompetitive. 

Ferriot’s a longstanding company and it offered several generations of decent living to raise and educate their children and provide economic security, health insurance and retirement. When I 

first started in the company, it prided itself on being a place where 

you can hire in and work your whole career until retirement. This 

is a company that survived the great economic panics of the 1890s, 

two world wars and the Great Depression. 

We choose to approach the future as the glass being half full 

versus half empty. We plan to survive these difficult times. We are 

searching for specialized niches, which we can exist in and offer 

specialized products. However, if things continue under present 

force, injection mold manufacturer and small manufacturers in this 

company will end up in the same boat as mold maintenance. 

I wonder about the future of our children and grandchildren with 

manufacturing shrinking. Can they all work the service industry 

such as banking, healthcare, and government? For their sake we 

better wake up and wake up now. 

Co-Chair DREYER. Thank you very much, Mr. Murphy. And now 

I would like to turn to Mr. Bruce Cain, President of manufacturing 

at Xcel Mold and Machine in Canton. 

STATEMENT OF BRUCE A. CAIN, PRESIDENT

XCEL MOLD AND MACHINE, INCORPORATED, CANTON, OHIO 

Mr. CAIN. Thank you. The first thing I would like to say is I’m 

not a public speaker. I’m a machinist. So if I stumble around here, 

I hope you will sort of hang with me. 
117

Xcel Molds has been in business since 1956. I started working 

there as an apprentice in 1969, and we have 11 employees who 

have been there longer than I have. The average employee tenure 

is over 25 years. We build molds and dies for the lighting, automotive, small appliance and household products. We have 53 employees, with ten laid off at this time and we are hoping to pick 

up. We don’t have any employees we don’t want. We have a great 

group of guys there, and we are hoping to get them back. 

Over the last six years we have spent $1.75 million on new and 

used equipment. Some of the equipment has come at the expense 

of other companies. We bought a new machine that was only three 

years old—we paid $40,000 for it. Three years before that, brand 

new, it was $270,000. I was so excited that I bought that thing. 

Then you look around and you’re standing in a building where one 

hundred people used to work and it’s a spooky feeling. I mean, that 

could be you. Hopefully it won’t be, but it could be. 

In buying equipment it helps us speed up our process. We have 

to be cheaper. I’m sure you’ve heard this all day long, pricing is everything. If you can’t be cheaper, you’re not even in the game. 

It used to be our mold deliveries were 18 weeks. Now we are 

down to 10, some are down to six; some are down to four if they 

are small. Last year in May I was asked by Congressman Regula 

to testify at Commerce, Justice, State and Judiciary Committee on 

May 22nd. So May 1st I started saving auction fliers of companies 

in the metal working industries. On May 22nd I gave them 11 auction fliers. They were pretty impressed with that so I thought I will 

just keep doing this. So in 510 days I saved 180 auction fliers in 

an eight to ten state area in and around Ohio including Ohio. I 

brought 28 with me here today for you. I realize this is a more industrialized area than the whole country, but if you multiply that 

times three that’s probably how many businesses have gone out of 

business in the metal working industry. 

In Stark County alone according to Congressman Regula, we 

have lost 3,500 jobs in the last three years. I brought our local 

paper with me today. There over six pages of sheriff’s sales in there 

which is high. I was watching Lou Dobbs the other night and Senator Edwards was on. He said the average bankruptcy in Ohio is 

every five minutes. 

In 1988 to 1998 Black and Decker was our biggest customer. In 

1997 we did $1.7 million with them. Last year we did 23,000. Almost all their molds are made in China now. One of our customers 

in June sent 40 molds to China that would have kept five shops 

busy for two to three months. We quoted a mold for one of our customers, and I called them a couple days later and asked them how 

our price was. He said, well, your price was great. He said the only 

problem I’m not going to run the mold here. They are going to run 

it in China and to run it in China; China will build it for nothing 

just so they could run the parts. 

Last year we quoted a 24-mold package for one of our customers. 

Our price was 2,068,000, Korea was 1,620,000 and China was 

1,440,000. Now, if their currency is 40 percent undervalue, their 

price would have been $2,016,000, but they lowered their price because there’s a lot of people over there making big money. I think 

we should add tariffs—40 percent until they float their money. 
118

They have to float their money. Our economy is fine. There’s nothing wrong with our economy. We are just running out of Asia. 

There’s money being spent. Large companies are just spending it 

overseas. 

China is without a doubt the worst country as far as the WTO, 

but there are other countries, too that aren’t doing things right. 

When Korea sends 600,000 cars here a year, we are only allowed 

to send 2,800 cars there in a year, there’s something wrong with 

that. That’s not right. Japan essentially has a 400 percent tariff on 

imported rice. I don’t understand these numbers, but if we’re going 

to be a member of this World Trade Organization I think everybody 

should go by the rules. Fifty percent of China’s imports are by foreign-invested companies, like IBM, Black and Decker, Motorola. 

On May 22nd, I testified that I did a survey of 12 area companies, one of which no longer builds molds and another, which is out 

of business at this time. Here are the results: From 1996 to 2002 

employment was down 36 percent. Average hours worked were 

down 18 percent. Average backlog of work was down 8 weeks. Total 

Federal taxes paid including Social Security by employer and employee down 24 percent. Workload projection for 2003 was good. 

Three good, five fair, four poor, no excellent. 

If your business is not doing well, what’s the largest contributor? 

Imports. 

What do you feel the government should do to help the tooling 

industry? Lower interest rates, tax incentives, tariffs on imports, 

and tax incentives for corporations not to go overseas. 

If imported molds are a major threat to your business, what 

countries affected it most? Without a doubt China headed the lead 

and then Canada. 

If you designed and built a mold in 1996 for $50,000, what would 

your quote be today? $44,700. 

And here that states that a lot of the companies have done 

things. They have actually given their employees less benefits to 

try to compete. When I was at the Small Business Forum in Washington in June, Congresswoman Nancy Pelosi said 23 million companies in the United States are small businesses. That represents 

99 percent of the employers. They generate three out of four jobs, 

but still we listen to big business. We are geared that way. 

The only way I see to save manufacturing is abide by World 

Trade Organization rules. I don’t want protection. I just want a 

shot. I want to make a living, have my employees make a living. 

Here I have two e-mails from a couple people in China. Billy 

Chin sent me one. He has 3,800 employees in his mold making facility and wants me to be his partner. I’m so proud of that, but I 

don’t think that’s going to happen. That’s not the direction Xcel 

Mold is going. We like our employees, and we want to keep things 

the way they are, and we think government should listen more to 

small business. Thank you. 

[Audience applause.] 

[The statement follows:]
119

Prepared Statement of Bruce A. Cain, President

Xcel Mold and Machine, Incorporated, Canton, Ohio

U.S.-China Trade and Investment: Impact on Key Manufacturing and 

Industrial Sectors

I would like to thank the Commission for inviting me here to testify on behalf 

of my partners, our company and most importantly our employees. Xcel Mold has 

been in business since 1956 of which I have been involved for 34 years. Xcel builds 

molds and dies for the lighting, automotive, small appliance and household product 

industries. At the present time eleven of our employees have more years of service 

than I do and the average tenure of Xcel employees is over 25 years. On August 

6, 2004 we had to layoff ten of our 53 employees due to lack of work. That kind 

of day is always hard on all the employees because our tenure is so high and you 

see your friends walk out the door. Although we had to layoff, I think our work situation will improve in the last quarter of this year. 

Over the last six years we have spent $1.75 million on machinery. We have purchased some of the machinery at the expense of other shops that have gone out of 

business. We purchased a machine that was three years old at auction for $40,000 

which would have cost $270,000 new. I was so excited that day but then I looked 

around and I was standing in a building where 100 people used to work. In our 

business you have to keep buying machines that can go faster so you can shorten 

your deliveries. A mold that we used to build in 18 weeks now has a delivery of 

10–12 weeks. Along with being quicker on deliveries, we have to be cheaper but we 

can not match China’s prices. We build a good quality mold, better than one from 

China and in the same time frame. The issue comes down to price. China, having 

an unfair advantage because they refuse to float their currency will continue to 

drive companies like ours out of business. 

On May 1, 2003, I was invited by Congressman Ralph Regula to testify before the 

Commerce, Justice, State, and Judiciary Committee in which I testified on May 22, 

2003. The hearing was about trade with China and how it was affecting business. 

I starting saving auction flyers of companies in the metal working industries on 

May 1, 2003 and on May 22, 2003 I gave the Committee 11 flyers. Since then I have 

continued to save auction flyers and on August 1, 2003 I sent 29 to Congressman 

Regula, gave 45 to Grant Aldonas at Congressman Regula’s office on November 12, 

2003, mailed 16 to Senator Voinovich on December 16, 2003, mailed 29 to Congressman Regula on March 30, 2004, gave 22 to Congressman Sherrod Brown at a small 

business forum in Washington on June 17, 2003 and I have brought 28 here with 

me today. The total comes to 180 companies going out of business in the last 510 

days which is one company going out of business every 3 days. Most of the flyers 

we receive are from an 8–10 state area around Ohio. I know this area is more industrialized than other parts of the country but if you multiply 180 by 3 that would 

probably be the amount of companies nationwide that have closed. In Stark County 

alone we have lost 3,500 jobs in the past three years according to Congressman Regula’s office. On Thursdays in our local paper, The Canton Repository, there are 6–

8 pages of sheriff sales of homes in Stark County. 

From 1988 to 1998, 35% of our business was done with Black and Decker. In 1997 

we did 1.7 million with Black and Decker; last year we did $23,000. Almost all their 

molds are being built in China. Another one of our customers sent 40 molds to 

China in June. That amount of work would have kept five shops busy for 2–3 

months. Last year we quoted against China and Korea for a 24 mold package for 

this same customer. Our price was $2,068,000; Korea was $1,620,000 and China 

was $1,440,000. When shipping is added our price and the Korean price end up 

close but China was cheaper. Everything I’ve read says China’s currency is 40% undervalued; therefore if you add 40% to China’s price the cost would have been 

$2,016,000. If our government would put a 50% tariff on all products coming from 

China to force them to float their currency our economy would be fine. When I 

talked to a Representative from the Commerce Department, he said that would ruin 

China’s economy. What is it doing to our economy? 

When products are brought in our country the tariff is 3.31%. To send products 

to China there is a 12% tariff and a value added tax of 17%. I think there should 

be reciprocating tariffs with each country we deal with to ensure there is free and 

fair trade. China is the most flagrant but every country in Asia bends or disregards 

the rules of the WTO. Korea sends over 600,000 cars here a year, we are allowed 

to send 2,800 cars a year to them. Japan has a 400% tariff on imported rice. These 

are just two examples of how our government views free trade. When a country adds 

tariffs or limits the number of products we can export to them, this is against the 

rules of the WTO. 
120

With the monetary issues, the high tariffs and the limiting of our products to 

other countries, I do not see manufacturing returning to the way it once was. We 

need to overhaul our trade policies to bring manufacturing back. Multinational companies enjoy our trade policies as they are but small to medium sized manufacturing 

companies are at a real disadvantage. Fifty percent of all exports in China are made 

by foreign-invested manufacturers, which are our own companies such as IBM, 

Black and Decker, and Motorola. I have read that 60% of all products consumed in 

the world are consumed in the United States, so why do we let these countries and 

our own companies ruin our economy? 

When I testified in Washington on May 22, 2003 I did a survey of area shops to 

get their opinion on our industries changes from 1996–2002 that I would like to 

share with you (see Exhibit 1). Two of these businesses have gone out of business 

because they could not compete. 

In my opinion the only way to save manufacturing is to make everyone abide by 

the WTO rules. This does not mean I think we should be protected, but it should 

be fair. China knows if they can keep their monetary situation the same more and 

more businesses will not be able to survive. Our trade policies must be changed to 

stop the exporting of America and be a Government of the People not the CEO’s. 

There are 23 million small businesses in the country which represents 99% of all 

employers and we still listen to the voices of Big Business. If you have any questions, I would be glad to answer them at this time. Thank You. 

Exhibit 1:

May 8, 2003

Almost two years ago, we conducted a survey of area shops, in which you all participated. Shortly after, a meeting was held at Xcel Mold where the following people 

were present:

Bruce Cain Xcel Mold and Machine Inc. 

Corkey Keeler Ferriot Inc. 

Steve Schler Promold 

Steve Paquette Stark Regional Development Board 

Bob Algera Akron Regional Development Board 

John Appledorn Akron Regional Development Board 

Robert Mullen Representative from Rep. Regula’s Office 

Chris Sinagra Representative from Mike Dewine’s Office 

Bill Richards Formerly of Tenibac-Graphion 

Donald Loepp Plastics News 

Angie DeRosa Plastics News

A month after the meeting, I met with Congressman Regula at his office. I found 

him to be most supportive of our situation. On May 1, I was contacted by his office 

and asked to consider testifying before the Commerce Committee of the House of 

Representatives in regards to the state of our industry. The tentative date is May 

22, 2003. I would like you to fill out the attached survey to supply me with as much 

information as possible. Please return the survey by May 15, 2003. This will allow 

me the time to prepare all the data. 

Obviously, I am not certain of the results, but at least the people in Washington 

are starting to pay attention to our industry’s dilemma. The survey is being sent 

to the same companies as were previously involved and also the members of the 

AMBA-Ohio Chapter. 

I would like to thank you for your help and cooperation. Hopefully, we can make 

a difference.

Sincerely,

Bruce A. Cain 

Vice President, Manufacturing 

Xcel Mold and Machine Inc.
121

COMPANY NAME: llllllllllllllllllllllll

NAME: llllllllllllllllllllllllllllll

The following results are from 12 companies surveyed:

1. Number of Employees.

1996 lllllllll 2000 lllllllll 2002 lllllllll down 36%

2. Average hours worked per week.

1996 lllllllll 2000 lllllllll 2002 lllllllll down 18%

3. Average Backlog of work in weeks.

1996 lllllllll 15 weeks 7 weeks 2000 lllllllll 2002 lllllllll

4. Total Federal taxes paid including Social Security by employer and employee.

1996 lllllllll 2000 lllllllll 2002 lllllllll down 24%

5. Workload projection for 2003.

l0 354 Excellent l Good l Fair l Poor

6. If your business is not doing well, what is the largest contributor.

l4 a. Economy

l2 b. Particular customers are slow

l11c. Imports

l3 d. Other

l1 e. Lack of support by U.S. Government

7. What do you feel the government should do to help the tooling industry.

l3 a. Lower or no interest rate loans for new equipment

l4 b. Tax incentives

l6 c. Tariffs on imports

l10d. Tax incentives for corporations not to go offshore

8. If imported molds are a major threat to your business, what countries are affecting it the most.

l7 3 1 12 a. Canada l b. Portugal l c. Japan l d. China

l5 20 e. S. Korea l f. Taiwan l g. not affected

9. If you designed and built a mold or die in 1996 for $50,000, what would you 

quote today. llllll $44,750.00

10. What has your company done to compete with domestic and imported molds.

1. Automate wherever possible (buy machinery).

2. Cut back labor. Run multiple machines with one operator or run machinery at night with no operator.

3. Lowered benefits to employees.

4. Developed alliance with Asian tool builders.

Please add any additional comments:

1. Allow grants to businesses to upgrade facilities and equipment. It would 

improve companies and stimulate investment now.

2. Made in the USA is becoming a ‘‘thing’’ of the past. We need help from 

our government.

3. U.S. companies have to deal with rising health care costs, OSHA and EPA.

Co-Chair DREYER. Thank you. Thank you, Mr. Cain. I think you 

should consider being a public speaker. 

Next, we have Mr. Jim Evans, a purchasing manager, representing Gentzler Tool and Die in Green, Ohio. 
122

STATEMENT OF JIM EVANS, PURCHASING MANAGER

GENTZLER TOOL AND DIE, GREEN, OHIO 

Mr. EVANS. Good afternoon, Mr. Chairman, Members of the Commission. Thanks for having this hearing and allowing us to let you 

know what’s going on in Ohio. 

My name is Jim Evans. I am the purchasing manager for 

Gentzler Tool and Die. We are a small metal stamping plant just 

south of here in Green, Ohio. We are a woman-owned small business, and we specialize in high-volume stamping for automotive, 

aeronautics, appliance and some electrical industries. 

Gentzler was established in 1953. Currently we employ 28 people. 

I’m here to talk about all of this from a local manufacturing 

standpoint how the U.S. trade relationship with China has affected 

our company and other companies about our same size throughout 

this area. 

As you know, business conditions in the metal stamping tool and 

die industries have been very difficult in the last few years. Manufacturing recession began in 2000 high cost of doing business due 

to high healthcare costs, product liability costs, taxes, steel tariffs 

of 2002, 2003 and most recently more than doubling of what is my 

largest commodity is, steel. There are many reasons for that. And 

one of those is China. It’s very difficult for smaller manufacturers 

in the area. 

Unfortunately as you have seen it’s not an anomaly. It’s indicative of the entire manufacturing base in Ohio and throughout the 

entire nation. 

My comments will focus on what I know, which is what this is 

going to do to the local economy as far as Gentzler Tool and Die 

and some of the smaller people we do business with. I’m testifying 

on behalf of Gentzler and the Precision Metalforming Association, 

which they affirmed in a written document to you. 

In the past two years our company and other local companies 

have lost clients to China. Just last week World Kitchen in 

Massillon, Ohio closed their doors. They manufacture cookware 

under the names of Pyrex, Corning and Ecko, which is nationally 

known. They had 200 manufacturing employees. They announced 

they would be closing down, mid September their doors would 

close. They told us that all of the work we were doing for them was 

going to China. Unfortunately that was 15 percent of our work. 

We’re a $3 million company and that’s $500,000 that was just gone. 

We had to layoff two employees because of it, which took us down 

to the 28 we currently have. 

World Kitchen discarded all of the tooling they have, we made 

in excess of $40,000 because it’s cheaper for them to have Chinese 

people make it again instead of shipping it over to them. With 30 

people that was probably about ten, fifteen percent of our workforce 

as well so the impact on these and the Ohio tax base should be 

pretty clear as well as the local tax base. 

To put it in perspective, we manufactured tin muffin cups in 

three different sizes for World Kitchen. The loss of business will 

cost the city of Green $13,000 in just income tax alone. The closing 

of a plant put 200 people out of work in Massillon and that amount 

to about $125,000 to the city of Massillon in lost tax revenue. I 
123

talked to the Mayor of Massillon numerous times and he has no 

idea what to do to try to keep businesses here. He lost about three 

different businesses to Chinese work in the last year. 

World Kitchen was a long-time customer of ours and our problems aren’t limited to our current customer base. Recently I was 

speaking to a gentleman from Scott’s that manufacture lawn care. 

They have a company out in California and they had asked us to 

do some tooling work for them. I called him. He said that all morning he had been waiting to talk to me, but then his boss talked to 

him just before I called and told him they’re not allowed to get any 

domestic quotes. All their quotes had to be from China. Now they 

have a full injection mold facility out there. They are talking about 

turning down an entire line and sending all of the machinery down 

to China just because of the lower labor costs. 

Gary McAfee, President of McAfee Tool and Die, which is one of 

our dealers and is in the same type of business we are, started his 

company in 1977. He shared with me that in the last two years he 

lost 20 percent of his work to China. That’s resulted in laying off 

25 of 70 employees that he had. He’s now down to 40 employees. 

The loss of this income tax revenue to the city of Green is $30,000. 

That’s just in the income tax from his employees. 

Mr. McAfee supplies the automotive industry, which we do as 

well, and according to the National Machine Association and Market, these are quotes from auto manufacturers in the United 

States. General Motors states that they will—in 2003 they bought 

$3 billion worth of product from China and brought them here. In 

2009 that will be $10 billion. Ford is expected to source $10 billion 

by the year 2010. Chrysler purchases from suppliers in China and 

Korea are expected to top 6 billion by 2010. That’s another $26 billion of American manufacturing dollars that are going overseas to 

China. 

Chinese government provides subsidies to their companies. Mr. 

McAfee had visited China and what the Chinese government is 

doing they are taking 2 to 300 acre parcels of land, leveling them, 

putting in roads and then sending Chinese companies over here for 

American companies to come over there and build. They subsidize 

it with the purchase of the steel in China. Last year Chinese manufacturers were paying 11 cents a pound for products that I was 

paying 35 cents a pound for here in the United States. And we 

produce steel here. We have two of the leading producers of steel 

right here in the United States. 

Chinese manufacturers in Suzhou is where the government 

cleared out those parcels of land three companies from right here 

in this area have taken China up on the offer and built over there. 

Wellman Friction Products from Brookpark, Timken Bearing Company from Canton and Copeland Compressor Company have all 

built facilities over in China. 

In this sense U.S. manufacturers are not only competing with 

their competitors in China but they are competing with the Chinese government. The Chinese government grows stronger every 

day from any action taken by the people they’re hurting most 

which are American companies because we can’t do anything to 

them. 
124

Finally, there’s a distinct shortage of raw materials here over in the United States. We need export controls for countries such as 

China. As long as China continues to harbor coke, coke supplies 

which is approximately 30 percent of the world’s supply, in anticipation of opening five new mills for steel over there the U.S. price 

of steel will continue to rise. U.S. steel manufacturers are also exporting steel and raw material to China leading to a shortage here 

and therefore astronomical steel prices for domestic bought product. 

The price of products that I buy some of them have increased 

over 125 percent in the last year from this time a year ago. To compound this they are also adding $190 to 230 surcharges on top of 

the already increased price. 

Other factors that create an unfair level of market competition 

in China is their lack of EPA regulations, their lack of OSHA requirements, their lack of healthcare costs and their lack of wage 

negotiations. All these factors make the price of doing business a 

lot higher than what it is in China. 

In summary trade with China is having a detrimental effect on 

my small business in the Ohio region and the U.S. economy as a 

whole. It’s time for the U.S. Congress and the Administration to 

take real action so the U.S. economy to be a factor in the global 

marketplace and not be a result of it. 

Thank you for allowing me to testify, and I will answer any questions that you have. 

Panel IV: Discussion, Questions and Answers 

Co-Chair DREYER. Thank you very much. Anybody I missed for 

questions? 

Co-Chair Wessel. 

Co-Chair WESSEL. I expect that several of you have heard some 

of the other panelists here today. Unfortunately, I think we’re 

hearing a continuing message of concern, frustration and Midwestern tempered anger at what—as opposed to New York, yes—

about what your government is not doing for you. You just raised 

the question of China’s limit on coke and I just got from the World 

Trade Organization at the end of August a document the U.S. Government filed on the issue of coke. The United States—this is their 

final point—has previously raised its concern both bilaterally and 

for its counsel that China’s export quotas and license fees on other 

raw materials such parts. What are China’s plans for bringing 

these measures into compliance with WTO rules? 

I don’t know why we continually ask questions, making you wait 

for the answer because as I understand while we wait for answers, 

you have to downsize, you have to lay people off, you lose market 

share. If you were sitting on this side of the table, what would be 

the things that you would like to see done immediately? 

Mr. EVANS. I think the biggest thing that needs to be done immediately that would put some type of damage control on this that if 

American manufacturers choose to purchase overseas, lot of them 

do, tax and tariff their imports. They’re bringing these parts back 

here, assembling them and then expecting us to buy it, but yet 

they’re the same American they expect to buy it and put them out 

of work. So fine. If you want to buy it overseas, buy it overseas, 
125

but you are going to pay for it. You either pay a tariff on it or you 

keep it here. 

Co-Chair WESSEL. Mr. Cain. 

Mr. CAIN. Well, actually I think that maybe getting out of the 

World Trade Organization for a year wouldn’t be a bad idea. Sixty 

percent of the products in the world are consumed here. Don’t you 

think we should have some leverage? At this point, the only people 

that have leverage are the CEOs. 

Co-Chair WESSEL. You raise an interesting point. Our chief economist presented some materials in advance of this hearing. Roughly one-third of all China’s products come to the United States, and 

4 percent of our products go to China. Your point is a good one. 

Mr. CAIN. We have leverage. I don’t understand why we are not 

using it. 

Co-Chair WESSEL. Mr. Murphy. 

Mr. MURPHY. Some incentive for companies to keep work in the 

United States, one of the things that we see generally is, particularly large companies, and I can just relate what one of our largest 

customers who has been our largest customer two years ago that 

we will not be getting any projects of high volume they’re going to 

China. When China’s no longer the cheapest, they will find a new 

place such as India, and we have talked to our Congressman and 

government officials. Feel bit like the gnat on the elephant’s backside particularly when you are talking to them and we have employment (where we’re at now) of 175 people so it isn’t like we have 

clout or the screaming power of some of our larger customers of 

large company seem to. It gets frustrating because we go all 

around our area and it’s happening to everybody’s jobs. 

And I also believe I saw something recently where Ohio was like 

the second and third in people between 18 and 30 years old leaving 

the state, so it’s a big deterrent. 

Co-Chair WESSEL. Mr. Colm. 

Mr. COLM. Well, you’re asking if I were on the Commission what 

would I do? 

Co-Chair WESSEL. If you were in charge what would you do? 

Mr. COLM. I think you guys are doing a pretty good job. 

Co-Chair DREYER. If you were the President, whether it is Bush 

or Kerry, what would you do? 

Mr. COLM. NEOCAM is asking for three things. One is we have 

to increase the pressure on the Chinese to do something about the 

currency, the one company I cited of the tube manufacturer: if the 

currency were allowed to rise in value by 30 percent or something 

in that range over time, that would level the playing field for that 

particular industry. I’m not sure it would solve every problem. We 

would probably see some product move from China to elsewhere. 

But we have to get better at using trade remedies that we are 

given through the agreements that various nations have signed including ourselves. So that would be number one. That also gets at 

the base when we start dealing with the currency issues we start 

getting at the heart of the trade deficit overall which is another 

matter. 

The second issue has to do with the funding for the manufacturing extension program which has been extended and how we 

come to some moderate agreement on the conference committee on 
126

that. But that’s an important program because it offers small firms 

a resource to help them improve their competitiveness in the global 

market, and the third issue is the Foreign Sales Corporation program. 

Oh, this is a program that has to be overturned or ended by 

World Trade Organization rules. Every month that the Congress 

sits on its hands there’s another one percent tariff added to company product exported to European markets. That program should 

be ended and some tax relief should be delivered to domestic producers in proportion to the share of their products that are being 

made here. And I don’t think that’s necessarily a comprehensive solution, but if we don’t practice some of these trade remedies, we are 

never going to get very good at it, and I believe we need a new approach to enforcing trade. 

I watched the whole debate with how Japan was manipulating 

various loopholes year after year after year in negotiating with 

them and no result. And now we are repeating the same thing over 

again with China. 

Co-Chair WESSEL. Let me give you this, it is the President’s economic report from February and ask you a question whether it is 

manufacturing—I don’t know if you read the report yet, but it says 

when a fast-food restaurant sells a hamburger, for example, is it 

providing a service or is it combining input to manufacture a product? And maybe manufacturing——

Mr. COLM. We have just been counting the wrong things. 

Co-Chair DREYER. Commissioner Bartholomew. 

Commissioner BARTHOLOMEW. Thank you, and thanks to our 

panelists. It was very interesting. It’s always difficult for us as we 

come and listen to the problems that you are grappling with on a 

daily basis. It’s kind of overwhelming to hear about. I can’t imagine 

what it’s like on a daily basis as you work to take care of your employees and position your business. 

Mr. Colm, I want to make sure I heard something correctly about 

what you said. I know the pure free market people have a tendency 

to believe that somehow you’ll be able to reinvent our way out of 

the current problems. I thought you said there’s no reengineering 

or redesign that would be able to address these challenges; is that 

correct? 

Mr. COLM. Yes. That was my basic point. I apologize if I didn’t 

make it very clearly. But I think that what we’re seeing in reference to the brain drain occurring in Ohio and other communities 

is part of that challenge in the sense that we’re losing—well, for 

example, one of my member companies was—they do business with 

a lot of companies that are based in China. All of their production 

currently is domestic, but he was meeting with an Intel engineer 

who told him that they are no longer replacing U.S. engineering 

talent. They are hiring purely Chinese engineering talent as Intel’s 

engineers retire. 

So there’s kind of this debate going on about what the U.S. is 

going to do about the engineering crisis. We don’t have enough 

young engineers coming out of college. If we’re not hiring them 

here, why bother training them? 

But I think that is the key issue here about our future ability 

to innovate and to—there’s kind of a line I guess you hear from 
127

people that think we are going to be okay here. We’ll innovate our 

way out of this. If we don’t have the engineering talent, if we don’t 

have the machining talent and the actual production talent, how do 

we do that? How do we do that in the field of nanotechnology? So 

I think that’s a real challenge, and I think we are seeing the end 

game of the 25-year strategy the Chinese pursuing. They have been 

very disciplined and we need something now comparable, which 

is——

Commissioner BARTHOLOMEW. That is an important point as you 

look at Chinese industrial policy if you don’t have anything comparable in the country. I am very impressed with the ingenuity you 

all expressed of how you are meeting the particular challenges. 

Could you share with us a bit how you see the future of your industries, what is going to happen? As we talk about preparing for the 

future, where are you in ten years or in twenty years? 

Mr. IMBROGNO. The Screw Machine Products Association has lost 

approximately 15 to 20 percent of its membership over the last couple years primarily from companies going out of business. We estimate within the next probably seven to ten years, we’ll be down by 

another 40 percent at least, the majority of it being a result of businesses going to China, some of it being a result of new developments in technology. But we see it continually shrinking and 

changing. In all we are a high production type manufacturers. We 

isolated a niche of our own, very short volume, short run, short 

timeframe type jobs with the same number of highly skilled people. 

Unfortunately as some of them have described those people soon 

aren’t going to be available and we find a niche for ourselves that 

we can’t support long term, we can’t attract young people into this 

business, training them, because they hear what’s going on and 

they’re fearful of being in manufacturing. I think long term that all 

gels with what John was saying that the impact is actually spiraling. 

Commissioner BARTHOLOMEW. Mr. Murphy. 

Mr. MURPHY. Well, unfortunately I think the future for mold 

making is pretty bleak in this country because I think the horse 

is already out of the barn, as described by the other panelists here 

there’s nobody going into the machine trades so many out on the 

street and seeing what happens, and I know too what I hear on the 

street. I live in Stark County where Xcel Mold is located. My neighbors work for Hoover and Timken and they are fearing their jobs. 

I can only use my children as a barometer. They don’t want to be 

a part of manufacturing. They want no part of business. 

Commissioner BARTHOLOMEW. Do they want any part of Ohio? 

Mr. MURPHY. Well, my son started his own business but it’s a 

service industry and he’s planning to go to Florida, and my daughter who’s going to graduate and she’s hoping to go work for the 

Center For Disease Control. So I think you’re seeing that commonly with the younger people. 

As far as injection molding we kind of found our niche with short 

run things, but it’s tantamount to hopping lily pads, and we are 

looking into some proprietary products and we have some promising marketing projections but they are just marketing projections. 

We are also doing remanufacturing automation trying to drive 

costs down. 
128

Commissioner BARTHOLOMEW. Mr. Cain. 

Mr. CAIN. In the mold industry, you’re going to have to be 

aligned with somebody where you can do their repair work from 

the molds coming from overseas, and we are sort of like that with 

one of our customers. But you’re hoping you’re not one of the next 

guys closing your doors. 

You guys quit building molds this year, about six of them in the 

Akron area in the last two, three years and you would think when 

that happens well, there’s going to be more work. Well, that’s not 

happening. It’s going out of the states faster than anything. 

And I just laid off one kid at the shop. He is a great kid, and 

he was Mr. Everything at Massillon High School in their machine 

shop. I’ve laid him off twice in the last year and he liked working 

there and he liked everybody there, but he just decided that wasn’t 

going to be for him. And it was sad to lose a kid like that. 

I’m on a board over at Massillon High School, advisory board for 

their work programs, and they asked me what I thought of the machine industry and I told them I would no longer make it a cornerstone for your vocational program. You got to take them somewhere else, whether it’s nursing or something—everyone is going to 

get sick. Not everybody wants a mold and it’s getting worse. I think 

we are a well-run company. I think we have done whatever we had 

to do to get stuff done, but you can only do so much. When the bill 

comes down and your price is hundred thousand dollars and they 

see they can get it made for 40 overseas, friendship only lasts so 

long. 

Commissioner BARTHOLOMEW. Mr. Evans, any? 

Mr. EVANS. Well, since the steel tariffs back in 2002 companies 

lost approximately 60 percent of its manufacturing base. The only 

saving grace for our company is we diversified. We are in many different areas, bake ware, electronics. We lost all the appliance portion of our business. Now, we lost what bake ware we had. 

Ten years from now you ask if it continues this way that’s back 

to this country Gentzler Tool and Die won’t exist. They won’t have 

any work. The country’s slowly progressing towards a service nation, and this country has never been a service nation and it should 

never be. We can’t survive that way. 

Co-Chair DREYER. Commissioner Mulloy. 

Commissioner MULLOY. I wanted to first talk about the WTO, 

Mr. Cain. You talked about if we could all live up to the WTO 

rules. Part of the problem I think is the way the WTO is structured. When we have a 2.5 percent tariff on autos from China coming to the United States, that does not mean they have a 2.5 percent tariff on autos from the United States going to China. Under 

the WTO agreement, which we negotiated and agreed to they could 

keep about a 25 percent tariff on autos going from here to China 

and they get 2.5 percent tariff from us. 

Secondly, on auto parts again we have about a zero to 2.5 percent tariff on their parts coming here. Even when they phase in 

they are going to have a 10 percent tariff on our parts going there. 

Now, this isn’t just China. This is a lot of different countries 

around the world. Our average tariff may be 3 percent. India, it’s 

maybe 14 percent. 
129

When you look at the structure it might have made sense when 

you didn’t have mobile capital and technology. But when you have 

mobile capital and technology and capital has no conscience because it wants the highest return. It will move where it can make 

the most money and if it leaves workers here behind, somebody is 

going to make money off it and it will do that. 

People keep talking about this level playing field. Mr. Johnson 

came in here before and he said his company offered his employees 

good health coverage, a defined benefit retirement plan, a supplemental 401(k) savings plan, life insurance, et cetera. That was the 

package their employees got. How can it be a level playing field 

now when they are competing against somebody in another country 

that offers none of that? People keep saying we need a level playing 

field. How can you get this kind of structure? Do you have any 

comment on that? Am I seeing this wrong? 

Mr. CAIN. I think that you’re right. We pay a lot of expense here 

for our employees. Last year our healthcare was $400,000. I’m willing to not even look at that if you get them to float their money 

and bring our tariffs up the way theirs are. 

Commissioner MULLOY. We can’t bring our tariffs up to what 

theirs are and live up to our WTO commitments. 

Mr. CAIN. That’s what I’m talking about. 

Commissioner MULLOY. Theirs is 25, ours is 2.5. 

Mr. CAIN. Why is that fair? 

Commissioner MULLOY. It’s not fair. That’s the way it’s set up. 

That’s what we agreed to. That’s the legal agreement we are now 

part of. 

Mr. COLM. Oops. 

Mr. CAIN. That’s okay when they are making the little figurines 

that go in the Happy Meals, but it’s way past that now. So we are 

just content that large companies here, they’re loving the way this 

is. Making stuff over there for next to nothing, bringing it over 

here. 

Look at the Wall Street Journal. Almost every week somebody 

else’s profits are up. Record profits and CEOs, nine of the top 

CEOs in the country I think their income went up 30 percent, and 

if you took the top 350 average nine—these are nine CEOs that 

deal with China. 

Geez, I want to make money. I love to make money. Right now 

it’s not working out for us, but if they change the tariffs and everybody floats their money and——

Commissioner MULLOY. President Bush on Labor Day in Ohio 

said, ‘‘We in America believe we can compete with anybody just so 

long as the rules are fair and we intend to keep the rules fair.’’

Now, does the structure I described to you sound like a fair system? I think people don’t understand the structure. Mr. Imbrogno, 

do you have a comment? 

Mr. IMBROGNO. Yes. And you are absolutely right. What you described is a real world that we live in on a daily basis. The situation is that it’s not free trade. I mean, the definition of free trade 

doesn’t envision the mobile capital. It doesn’t and we have that aspect of it now. 

What we are doing is competing against our own multinational 

corporations that are located over there so definition of free trade 
130

is an invalidated one. That puts the whole thing in perspective. We 

won’t ever be on a level playing field because the rules have 

changed. The whole precept and definition of free trade is different 

now. They put an aspect in and the economists aren’t buying it. 

What’s really going to happen in the future? They don’t know. I 

mean, economics is not a precise science. It’s guesswork. It’s precepts. It’s a theory. There’s nothing to support it. There’s not a 

cause and effect other than past history, and the rules have 

changed and they are trying to make these past rules, these past 

events, past consequences in carrying into the future in a different 

environment where capital is now mobile. It doesn’t work. It 

doesn’t work, and we continue to let these economists preach free 

trade, but frankly I don’t think they know what they’re talking 

about and we’re getting shafted in the process. 

Commissioner MULLOY. You mentioned companies that were 

moving their operations to China because of low labor cost. I think 

it’s much more complicated than low labor costs to be honest with 

you. 

Mr. EVANS. I agree. And we’ve been asked, the labor here today, 

what we do to fix that. With all due respect to the Federal Government, Congress makes these deals you just talked about with the 

WTO. They make the deals with all the other countries. 

Commissioner MULLOY. Actually the Administration. 

Mr. EVANS. The Administration, Congress, the Federal Government makes these decisions for us. We elect them to make those 

decisions. We don’t get to go into the negotiations and say this is 

what we want to happen. The final decision is theirs. They broke 

it. They need to fix it. 

Commissioner MULLOY. Well, they won’t unless they hear from 

you. 

Mr. EVANS. That’s why we’re here. 

Co-Chair DREYER. Commissioner D’Amato. 

Chairman D’AMATO. Thank you, and I want to thank you all for 

coming. I personally find this whole set of testimony very disturbing. I have always felt, and I believe I’m correct, the machine 

tool industry is an essential component of our industrial structure, 

and a healthy machine tool industry is vital to our national security. I don’t think there’s any way to get around that. 

What I hear from you is that as far as the Federal Government 

is concerned it hasn’t been any help to you at all. Let me just tell 

you that nobody in Congress negotiated these agreements. Actually 

nobody that you ever elected negotiated these agreements. They’re 

all negotiated by non-elected people who are appointed. Maybe we 

need to change that to being elected. 

My other conclusion is that if something isn’t done differently in 

terms of enforcing the agreements we have or changing the agreements we have, this industry is going to continue to deteriorate 

and eventually it will affect the health of our whole country. So it 

seems to me it’s a national security matter, which is the mandate 

of this Commission. 

I would be interested in following up this hearing with each of 

you to find out what it is you think the government should be 

doing that it’s not doing. And we can follow up on that to see 

whether there are things in place now that are not being done that 
131

could be done to help you. And if not, the things that should be 

done that are on the books now that we need to take action on to 

correct the situation. Thank you. 

Co-Chair DREYER. We have four minutes left and I have Commissioner Wortzel and Commissioner Becker so if you could endeavor 

to ask your questions quickly. 

Commissioner WORTZEL. I will defer to you. 

Co-Chair DREYER. Go for it, George. 

Commissioner BECKER. Thank you. I feel very keen about the 

machine tool industry. I have worked on the periphery most of my 

adult life and I have always felt that a viable machine tool industry is absolutely essential for a strong manufacturing base and 

changes come about to the machine tool industry. We develop our 

high-tech capabilities to the machine tool industry either directly 

or indirectly like in your case, Mr. Imbrogno. I stuttered over that 

a little bit. I suspect that if you would have met the 21 cents or 

what was the——

Mr. IMBROGNO. 21 cents. 

Commissioner BECKER. —they would have undercut that. This 

has been my experience. If they were out to target something they 

would get it. There’s no way you are going to pull back, and what 

I wonder is are they doing this everywhere? Is this a widespread 

activity going on in the machine tool industry? Are they really 

striving to replace and take over this aspect of American business? 

They have in many other industries, but is the machine tool industry targeted. Do you know? 

Mr. IMBROGNO. It would seem definitely the case. One of the 

things we have seen too we had—one of our association had a trip 

organized. Unfortunately I was not able to go to China and they 

visited a number of facilities, guided tour actually. What they 

found was a mix of old equipment and really surprisingly brand 

new equipment, much more sophisticated, much more than anything we have in our factory and that was disturbing. They have 

equipment that is stuff we can only dream about. 

They were getting money from their banks that they’re not going 

to have to pay back that I can only dream about ever being able 

to buy. With them putting limits on the kind of equipment they can 

import into their country, it would seem that their intent to be the 

best in the world at it and take the largest portion of that manufacturing capability, it would seem, yes, you’re right. 

Commissioner BECKER. All of your companies would be small 

players compared to the big players, right? 

Mr. IMBROGNO. Absolutely. 

Commissioner BECKER. That’s my feeling. The big companies, the 

multinationals, are they transferring machine tool technology to 

China themselves? 

Mr. IMBROGNO. Yes. I guess that’s one of the parts we are soon 

to lose. We had spent several years about 15 years ago developing 

a technique to make this particular part for them. They wanted us 

to share that information. In fact, they would send us their prints 

and say okay. Now you put in detail how you do it and they turned 

around and send it to China. We learned very quickly not to give 

them detailed information of how we made the parts. 
132

Unfortunately, one part we’ll lose probably in February. We were 

able to delay it because we wouldn’t share the information. Yes, the 

company—our customer was demanding that we share our information that they were then going to give to the Chinese. 

Commissioner BECKER. I just want to make a comment on how 

you stay competitive, cut employee benefits, and there’s been a reference made to healthcare. As sympathetic as I am for you being 

able to stay competitive and to stay in business, I really suggest 

that that’s the wrong way to do that. We need a national 

healthcare system. Employers from one end of this country to the 

other, large and small combined, find it almost impossible to pay 

healthcare benefits. We need a national healthcare system and I 

would look long and hard at something like that. 

Co-Chair DREYER. Thank you, gentlemen. I declare this session 

at an end. Thank you very much for your testimony and your comments. 

PANEL V: COMMUNITY IMPACT 

Co-Chair DREYER. Okay. I would like to call open Panel V on 

Community Impact. We’ll start with Mr. John Folk representing 

United Steelworkers of America, Columbus, Ohio. 

STATEMENT OF JOHN C. FOLK

UNITED STEELWORKERS OF AMERICA, DISTRICT 1, COLUMBUS, OHIO 

Mr. FOLK. Thank you. 

Thank you for the opportunity to be here to speak and tell my 

story about what I went through dealing with Huffy Bicycle, a 

mass producer of bicycles and watching our plant close down. 

In 1955 Huffy Bicycle Company built a plant in Celina, Ohio, a 

city with a population of approximately 8,500 people. The plant became the finest mass bicycle production facility in the United 

States. 

In 1956 the workers voted to be represented by the United Steelworkers of America, and a collective bargaining agreement was 

successfully negotiated between the parties. I was hired in about 

1978. At that time, John Mariotti, was the president of the plant 

there. During the meetings he would tell us that we have to prepare for a fight and that fight was not with Roadmaster or other 

bikes being manufactured in the United States. It was with China 

and the bicycles that were going to be dumped on this country in 

the future as he saw. 

In 1980, a labor management cooperation program began, and we 

developed a labor management agreement to work towards the continued improvement in that plant and we (labor and management) 

worked together well. 

In June of 1982 Huffy filed for a subzone in Celina. The application was submitted pursuant to the provisions of the Foreign Trade 

Zones Act. The facility produced some 2.5 million children’s and 

lightweight bicycles in the United States. Forty percent of the 

lightweight bicycle components and about 20 percent of the children’s bicycle components were purchased from foreign sources. 

Zoned procedures exempted Huffy from customs duties on parts on 

components used for export. 
133

On its domestic sales the company took advantage of the duty 

rates that applied to the finished bicycles, which accounted for 20 

percent of the United States market. 

The company estimated that duty savings from zoned procedures 

would equal up to two percent of retail price of bicycles. In 1990 

imports from China threatened the jobs of 2,000 workers at the 

Celina facility. The union and company requested relief under the 

antidumping laws. The relief request was denied. 

Right after John Mariotti was fired. At that time the focus 

changed from a labor management cooperation—let’s work towards 

improving cost by improving quality—improving productivity to—

taking the money away from the workers in order to be able to 

compete. At the same time the company was giving themselves bonuses and increases and saying it was all for the good of the shareholders. 

During the 1993 negotiations the company demanded a $4.00 per 

hour reduction in labor costs. The workers were making $13.00 an 

hour plus benefits at that time. A contract settlement was reached 

providing a 25-cent an hour wage increase over three years. 

In 1994, the company demands an early contract opener and 

threatens to build another plant and take jobs out of the Celina 

plant if we did not agree to the concessions. The company made 

what they called their last, best and final offer, which included 33 

percent reduction in wages and benefit but has no job security for 

any workers. That contract was turned down and a plant was built 

in Farmington, Missouri and 1,000 jobs were eliminated in the 

Celina facility. 

In 1995 the workforce in Celina was reduced to 500 employees. 

The company again asked for concessions. This time the company 

said they would close the plant if the workers did not agree to reduce their wages. Workers agreed to this package that was approximately $7 reduction in wages and benefits, but did give us a 

30-month guarantee for 500 employees. The new average hourly 

wage with benefits was $16 an hour including benefits. 

In 1997 the union made yet another attempt to rebuild our relationship between labor and management. And we were denied. 

At that time I had been elected president of the local union, I felt 

we needed to start rebuilding what we had lost during the late ’80s 

or early ’90s to compete but I was turned down. 

In 1998 in what turned out to be our final negotiation, we 

thought things were looking good and we thought we had an opportunity to discuss the possibility of hanging on to our plant in 

Celina. Huffy produced all kinds of records. They showed us 

records comparing us to the Farmington, Missouri plant, and we 

were 82 cents per bicycle cheaper even though our wages were different, we were still more productive than the Farmington, Missouri plant. 

Despite that fact the company came to us with a contract proposal of $6.10 an hour with no benefits. Naturally the employees 

at that point realized there was nothing we could do. No one was 

going to agree to 6.10, no health insurance and no other benefits. 

On July the 31, 1998 all production ended at the Huffy facility 

in Celina and approximately 1,000 employees were left without jobs 

and Celina was left without a part of its soul. Mercer County’s un-
134

employment went from three percent to nine percent in just 24 

hours. By November of that year the unemployment in Mercer 

County was 13.4 percent. The ex-Huffy employees had very little 

to look forward to. One-third of the workers were 55 to 65 years 

of age. With unemployment benefits alone they could not afford to 

pay COBRA benefits that might shut them out. COBRA benefits 

are $400 a month for your family. 

In 1999 Huffy closed its remaining U.S. facility they had in 

Farmington, Missouri. They also had a fabrication plant in Mississippi that they closed at the same time. This brought an end to 

Huffy production in the United States, the last mass producer of 

bicycles in the United States. 

In 2000, Huffy decided to move its primary manufacturing to 

China, importing five to six million bicycles from China into the 

United States each year. 

This is the overall effect of the community after the closing. In 

March of 1998 Mercer County had 4,406 workers employed in manufacturing jobs and a payroll of approximately $124 million dollars. 

By March of 1999, there were 3,449 employees in the manufacturing field in our area. Our annual payroll was $99 million at that 

time. 

In 2000, the number of workers was 2,957 and the payroll was 

$95 million, and in 2001 it went down to 2940 with a payroll of approximately 94 million. 

In addition to this the community lost $191,000 in real property 

tax, and 497,000 in personal property tax that Huffy had been paying. That doesn’t sound like a whole lot of money when you look 

at a rural area like this. For a community the size of Celina, that’s 

a major impact. 

The rest of the story clearly shows corporate greed, lack of concern for U.S. communities, and the quality of life for the workers 

of the United States and China as evidenced by the following report on the production of Huffy bikes in China. 

And at this point I turn it over to my good friend Jimmy Newport. 

Co-Chair DREYER. Mr. Newport. 

STATEMENT OF JAMES C. NEWPORT, ORGANIZING COORDINATOR

UNITED STEELWORKERS OF AMERICA, DISTRICT 1, COLUMBUS, OHIO 

Mr. NEWPORT. Thank you for the privilege to testify here today 

and see my good friend, Commissioner Becker again. I’m going to 

report on the bike manufacturing in China. This information was 

a result of the National Labor Committee for Worker and Human 

Rights in the late 1999 and early 2000. 

Huffy bicycles made in China sold at K-Mart, Wal-Mart and 

Sears. They were made at the Baoan bicycle factory, which consists 

of a factory storehouse near that. The Baoan facilities are owned 

by the Taiwanese Zhenzhen Nan Guan Corporation. That’s the reason I’m here, I can pronounce these. It is a major production for 

Huffy bicycles. Other lesser brand names include Gemini and Tec. 

The bikes are exported to the U.S., Canada and Europe. 

There are 700 to 800 workers, mostly men, but there are also 200 

women and employees ranging in age from 21 to 24 years old, who 

are mostly employed in the packing section. As is typical in the ex-
135

port assembly industry, most workers leave after they reach 25 

years of age since they are worn out from the grueling overtime 

hours. 

The vast majority of the workers in this plant are migrants from 

such rural provinces some as far as a thousand miles away. 

The factory is broken down into several sections—preparing and 

assembling parts, the tire section, welding, final assembly and 

packing. 

They are forced to work overtime 13 and a half to 15-hour shifts, 

seven days a week. The regular daily work shift is 8 a.m. to 11:30 

p.m. with an hour break for lunch and an hour break for supper. 

The workers report they are forced to work overtime nearly every 

day, including Sunday. On average, the workers may receive every 

other Sunday off. During particularly large rush orders some workers said they had to work through to 3:30 in the morning, which 

means they would be at the factory for a shift of 19 and a half 

hours. 

During the regular shift the workers would be at the factory 13 

and a half to 15 hours a day, six and seven days a week, while be 

being paid for 11 to 12 and a half hours. On average, they would 

be at the factory over 93 hours a week while being paid for just 

76 hours. 

Refusal to work mandatory overtime is punished by a fine of 

$6.02 U.S. wages, which amounts to more than two days’ pay. 

Wages range from 25 to 41 cents an hour, which amounts to 

$16.68 for a 66-hour workweek. Workers in the assembly and packing section are paid according to piece rate. They earn between 25 

and 34 cents an hour. 

In the painting and welding departments, the workers are paid 

by the hour and earn approximately 41 cents an hour. For example, someone working a seven-day, 81-hour week would earn 

$33.36. This would include a $7.23 U.S. bonus each month for 

those working in the welding section due to the extremely high 

temperatures. 

No overtime premium is paid to the hourly workers, while those 

on piece rate only receive overtime bonus if they reach their production goal. 

The working conditions are harsh, and there are no rights. Workers complain about the extremely long mandatory overtime hours 

and the lack of even one regular day off each week. They say that 

they hardly rest and at the end of even the standard overtime shift 

they return to their cramped dorm rooms exhausted. Many workers 

have to handle heavy weights all day long while others are on their 

feet constantly for 11 to 12 and a half hours a day. 

Illegally, the workers are not given written work contracts that 

describe factory hours, working conditions and wages or overtime 

rates. 

There’s a strong chemical odor in the spray-painting section, and 

the temperature in the welding area is excessively high. 

Workers also complain about the strict factory rules and harsh 

management style. For example, talking during working hours is 

strictly prohibited. Cutting into a line is punished with a fine up 

to $1.20, nearly five hours’ wages. One worker in the packing section explained that he earned $72.29 a month and was unable to 
136

save or send any money home. Despite all the overtime hours he 

worked, he was just able to survive, never getting ahead. 

There is no medical insurance or Social Security pension. The 

workers have nothing, not even a primitive factory clinic. If they 

are sick, they need to go to the local hospital in town, but it’s very 

difficult to get permission to be absent from work. 

No worker had heard of any so-called U.S. corporate code of conduct. 

The first month’s wages are illegally withheld as a deposit so the 

workers only receive their pay during the second month. More than 

$21.67 is deducted to pay for the workers’ temporary residency permit. Another $1.23 is deducted from each worker for their factory 

ID cards. 

There’s no independent union allowed in China in the Baoan bicycle plant. Any public dissent or raising of a grievance is met with 

firing. 

In 1999 the factory workers went on a wildcat strike and all the 

strikers were fired. 

They are forced to live in dark, crowded dorm rooms, 12 to a 

room, and they are charged $5.42 for food, two meals a day. 

Since 1998, 1,800 Huffy bicycle workers have lost their job as 

Huffy shut down its last three remaining plants, Celina, Ohio, 

Farmington, Missouri and southern Mississippi. The workers in 

Ohio, represented by the United Steelworkers of America, earned 

$17 an hour, $11 in wages and $6 in benefits. Their last job was 

to cover an American flag sticker that was on bikes made in China 

with a new sticker representing the globe. 

In the meantime, Huffy Corporation CEO Don Garber, paid himself $771,091 in 1999. 

Workers are now having to work two or three jobs to try to make 

the mortgage and car payments, school and other expenses for 

their children. 

In closing, Lou Dobbs said it best in his book: ‘‘The thing that 

is not being communicated is that the American multinational companies that are outsourcing and off shoring are also essentially firing their customers. India can provide our software. China can 

produce our toys, Sri Lanka can make our clothes, Japan can make 

our cars. But at some point we have to ask what will we export? 

At what will Americans work? And for what kind of wages? No one 

I have asked in government, business or academia has been able 

to answer those questions.’’

Thank you very much. 

[The statement follows:]
137

The information herein was formulated from news publications, Mercer County records, committees as identified in the document and personal knowledge as a resident and/or work assignments in the Celina area. 

Prepared Statement of James C. Newport, Organizing Coordinator, and

John C. Folk, United Steelworkers of America, District 1, Columbus, Ohio

USA/China

The Huffy Bicycle Story

I. History of the Huffy Plant in Celina, Ohio 

In 1955 Huffy Bicycle Company built a plant in Celina, Ohio, a city with a popu- lation of approximately 8,500 people. The plant became one of the finest bicycle production facilities in the world. 

In 1956 the workers voted to be represented by the United Steelworkers of Amer- ica and a Collective Bargaining Agreement was successfully negotiated between the 

parties. 

In 1980 a Labor/Management Cooperation program was developed at Huffy to im- prove the operation of the plant. 

On July 30, 1982, Huffy filed for a sub-zone in Celina. The application was sub- mitted pursuant to the provisions of the Foreign Trade Zones Act. The facility produced some 2.5 million children’s and lightweight bicycles and a number of bicycle 

parts. Over 40% of the parts for the lightweight bicycles and about 20% of the parts 

for the children’s bicycles were purchased from foreign sources, including brakes, 

chains, wheel-hubs, derailleurs, control levers, tires, rims, seats and pedals. 

Zone procedures exempted Huffy from custom duties on parts and components used for exports. On its domestic sales, the company took advantage of the duty 

rates that applied to finished imported bicycles, which accounted for 20% of the U.S. 

market in 1980. The company estimated that duty savings from zoned procedures 

would equal up to 2% of the retail price of bicycles. In 1990 imports from China threatened the jobs of 2,000 workers at the Celina facility. The Union and the Company requested relief under the anti-dumping laws. 

The relief was denied. 

In 1993 the company leadership changed. The workers saw no new innovative 

product lines to take them to the next level of success. Instead, the new corporate 

bosses were being innovative in a new way. The focus shifted from working together, to taking wages and benefits away from the workforce that made them the 

world’s number one producer in the bicycle industry. At the same time, the Company was giving themselves bonuses and wage increases and saying it’s all for the 

good of the shareholders. 

During the 1993 negotiations, the Company demanded a $4.00 per hour reduction 

in labor costs. The workers were making $13.00 an hour plus benefits and Huffy 

was making record profits. A contract settlement was reached providing a .25 cent 

wage increase over three years. 

In 1994 the Company demands an early contract opener and threatens to build 

another plant and take jobs from Celina if the Union did not submit to its demands. 

The Company made a ‘‘last, best and final’’ offer that contains concessions, but no 

offer of job security. The Company was making good profits and the workers rejected the wage cuts. Huffy then opened a new plant in Farmington, Missouri and 

eliminated 1,000 jobs at the Celina facility. Workers in Farmington are paid $7.00 

an hour. 

The Mayor, Craig Klopfleisch, told reporters that Huffy rebuffed the governments 

14 million incentive package to stay in Celina. The incentive package was only 10 

million at Farmington, Missouri. It was obvious that Huffy no longer wanted to 

manufacture products in Celina, Ohio. 

In 1995 the workforce in Celina was reduced to 500 employees. The Company 

again asked the Union for concessions. This time Huffy said they would close the 

plant if the workers did not agree to reduce their wages. The workers agree to a 

package that provided for a $7.00 per hour reduction in wages and benefits and a 

30-month guarantee of employment for 500 people. The new average hourly wage 

was $16.00 including benefits. 

In 1996 employment levels improve to 900 workers at the plant. The two facilities 

could produce 7 million bikes per year, but only sold 3.7 million. 

In 1997 the Union made an attempt to rebuild the relationship between labor and 

management at the plant. The company rejected the Unions offer. 

In April of 1998 Huffy had shown nine (9) consecutive profitable quarters. Things 

were looking good and negotiations were taking place. In late April the company 

produced records indicating the Celina plant employees were paid more, and the 
138

productivity, quality and safety records were better than the workers at the Farmington, Missouri plant. Per clocked hour, they were able to build a better quality 

product for .82 cents less than the workers in Missouri. In spite of this, the Company still wanted concessions. Their offer was a $6.10 per hour wage and no medical 

insurance. The members could not afford any more concessions and the Company 

then made the announcement to close its Celina, Ohio facility after 43 years in the 

community. The company’s intent was to increase imports from Asia and later open 

a plant in Neuvo Laredo, Mexico, taking advantage of the NAFTA Agreements. During this same time, Huffy was importing bicycles from China. The import numbers 

increased to 2.5 million bicycles for 1998. 

On July 31, 1998 all production ended at Huffy and approximately 1,000 workers 

were without a job and a town was without part of its soul. Mercer County’s unemployment tripled, going from 3% to 9% in just 24 hours. By November the UC rate 

in Mercer county was 13.4%. Larry Steltzer, the County Economic Development Director, said, ‘‘just about everybody had a relative or neighbor or friend that worked 

at Huffy.’’

The ex-Huffy employees had very little to look forward to. One-third of the workers were 55 to 65 years of age. Most of the people couldn’t afford to pay the $400 

per month for medical coverage under COBRA. Most of the other jobs in the area 

only paid between $7.00 and $9.00 per hour and had little or no benefits. In cases 

where the husband and wife both worked at Huffy, they had no income and were 

faced with loosing everything. 

Some workers were driving long distances, up to 100 miles one way, to earn a 

living. Others were driving all the way to Michigan and working all week and returning home on the weekends. Job and Family Services Director, Dale Berger, said 

Mercer County lost 10% of its residents. 

In 1999 Huffy closed its remaining U.S. manufacturing plants, including the nonunion plant in Farmington, Missouri. The era of U.S. made Huffy bicycles was over. 

In 2000 Huffy decided to move its primary manufacturing to China, importing five 

to six million bicycles from China into the United States each year. 

The overall effect to the community, due to the facility closing, was as follows: 

In March of 1998, Mercer County had 4,406 workers employed in manufacturing 

jobs and an annual payroll of $123,806,000. By March of 1999, the manufacturing 

employment was only 3,449 and the annual payroll was $99,543,000. 

In 2000 the number of workers were 2,957 and the payroll was $95,287,000 and 

in 2001, the number of workers were 2,940 and the payroll was $93,673,000. 

In addition to this, the community lost $191,600 in real property tax and $497,000 

in personal property tax that Huffy had been paying. 

The rest of this story clearly shows corporate greed, lack of concern for USA communities, and the quality of life for the workers in the USA and China, as evidenced 

by the following report on the production of Huffy bikes in China. 

II. Report on Bicycle Manufacture in China 

The National Labor Committee for Worker and Human Rights documented the 

following report in late 1999 and early 2000. 

Huffy Bikes Made in China

Sold at Kmart, Sears, Wal-Mart

Huffy bikes are being made at Baoan Bicycle Factory I

Zhen Bei Road

Sha Jiang Town

Bu Gang, Shenzhen

China 

• Forced 131⁄2 to 15-hour shifts, from 7:00 a.m. to 11:00 p.m. seven days a week 

• Workers are at the factory 93 hours a week 

• Wages are between 254 and 414 an hour—$16.68 for a 66-hour work week 

• Failure to work overtime is punished with a fine of two-day’s wages; no overtime premium is paid 

• Strong chemical odors in the painting department, excessively high temperatures in the welding section 

• No health insurance or social security pension 

• Strict factory rules and harsh management; no talking during working hours 

• 12 workers housed in each dark, stark dorm room 

• Two meals a day; poor quality food
139

If workers complain or attempt to raise a grievance about the harsh working con- ditions, excessively long forced overtime hours or low wages, they are immediately 

fired. In late 1999, all the workers in the delivery section who went on strike were 

fired.

(There is a factory, a storehouse and nearby dorms. The Baoan facilities are owned by the Taiwanese Zhenzhen Nan Guan Corporation. Nearby, 

there is a second smaller Baoan Bicycle Factory #2, with 200 workers. The 

Baoan factories assemble bicycles from parts supplied from local materials 

factories or from the Fuda Corporation of Taiwan.) 

Baoan Bicycle Factory #1

The major production in the factory is for Huffy Bicycles (other lesser band 

names include Germini and Tec). The bikes are exported to the U.S., Canada and 

Europe. 

There are 700 to 800 workers, mostly men, but there are 200 women employees ranging in age from 21 to 24 years old, who are mostly employed in the packing 

section. As is typical in the export assembly industry, most workers leave after they 

reach 25 years of age, since they are worn out from the grueling overtime hours. The vast majority of the workers are migrants from rural provinces such as Hanin (over 1,000 miles from Shenzhen), Jiangxi, Hunan and Xianxi. The factory is broken down into several sections: Preparing and assembling parts, the tire section, welding, final assembly and packing. 

Hours: Forced Overtime; 131⁄2 to 15-hour Shifts; Seven Days a Week 

The ‘‘regular’’ daily work shift is:

• 8:00 a.m. to 12 noon • 12:00 noon to 1:30 p.m. (lunch break) • 1:30 p.m. to 5:30 p.m. • 5:30 p.m. to 6:30 p.m. (supper break) • 6:30 p.m. to 9:30 p.m. or 11:30 p.m.

Workers report that they are forced to work overtime nearly every day, including Sunday work. On average, the workers may receive every other Sunday off. During 

particularly large rush orders, some workers said they had to work through to 3:30 

in the morning, which means they would be at the factory for a shift of 191⁄2 hours. 

During the ‘‘regular’’ shift, the workers would be at the factory 131⁄2 to 15 hours 

a day, six and seven days a week, while being paid for 11 to 121⁄2 hours. On average, they would be at the factory over 93 hours a week, while being paid for just 

76 hours. 

Refusal to work mandatory overtime hours is illegally punished by a fine of 50 rmb-U.S. $6.02, which amounts to more than two days’ wages. 

Wages: 25 to 41 Cents an Hour; $16.68 for a 66-hour Workweek 

Workers in the assembly and packing section are paid according to a piece rate. They earn between 25 and 34 cents an hour. 

A worker putting in a 66-hour workweek would earn $16.68—25 cents an hour. 

Other workers working 81 hours a week earned $27.80, or 34 cents an hour. 

In the painting and welding departments, the workers are paid by the hour and 

earn approximately 41 cents an hour. For example, someone working a seven-day, 

81-hour week would earn $33.36, or 41 cents an hour. This would include a $7.23 

U.S. bonus each month for those working in the welding section due to the extremely high temperatures.

Low Wage: High Wage:

.25 cents an hour .41 cents an hour

$1.78 a day (for an 11-hour shift) $4.77 a day (for an 111⁄2-hour shift) 

$16.68 for a 6-day, 66 hour week $33.36 for a 7-day, 81-hour week 

$72.28 a month $144.56 a month 

$867.36 per year $1,734.72 per year

No overtime premium is paid to the hourly workers, while those on piece rate only 

receive an overtime bonus if they reach their production goal. 

Working Conditions: Harsh Treatment; No Rights 

Workers complain about the extremely long mandatory overtime hours and the 

lack of even one regular day off each week. They say they ‘‘hardly can rest’’ and 

at the end of even the standard overtime shift they return to their cramped dorm 

rooms ‘‘exhausted.’’ Many workers have to handle heavy weights all day long, while 
140

others are on their feet constantly for 11 to 121⁄2 hours a day. Asked if they would 

like to take mechanical skills or other learning classes at night, the workers responded saying that because of all the overtime hours, they ‘‘haven’t the time or the 

energy at night to attend classes, even if they existed.’’

Illegally, the workers are not provided written work contracts describing factory 

hours, working conditions and wages, including overtime rates. 

There is a strong chemical odor in the spray painting section, and the temperature in the welding area is excessively high. 

Workers also complain about strict factory rules and harsh management style. For 

example, talking during working hours is strictly prohibited. Cutting into a line is 

punished with a fine of up to $1.20—nearly five hours wages. 

The workers said these wages were too low. One worker in the packing section 

explained that he earned 600 rmb per month, $72.29, and was unable to save or 

send any money home. Despite all the overtime hours he worked, he was just able 

to survive, never getting ahead. 

At the Baoan Bicycle Factory there is no medical insurance or social security pension. The workers have nothing, not even a primitive factory clinic. If they are sick, 

they need to go to the local hospital in town. But the workers said it was then very 

difficult to get permission to be absent from work. 

No worker had ever heard of any so-called U.S. Corporate Code of Conduct, and 

they had no idea what it might be. 

The first month’s wages are illegally withheld as a deposit, so the workers only 

receive their first pay during the second month. 

The amount 180 rmb—$21.67, more than a month’s wages—is deducted to pay for 

the worker’s temporary residency permit. Another 10 rmb ($1.23 U.S.) is deducted 

from each worker for their factory ID cards. 

No Rights: Fired for Raising a Grievance 

As is standard in China, no independent union is allowed at the Baoan Bicycle 

plant. Any public dissent or raising of a grievance is met with firings. 

Toward the end of 1999, delivery workers at the Baoan factory went on a wildcat 

strike to protest the harsh factory treatment, excessively heavy workloads and long 

overtime hours and the low wages. All the strikers were fired. Dissent is not permitted. 

Living Conditions: 12 to a Dark, Crowded Dorm Room 

Twelve workers are crowded into each dorm room, which the workers described 

as stark and dark. There are no entertainment facilities other than a single TV in 

the common area. The workers explained that the only ‘‘entertainment’’ available to 

them was to hang around nearby snack and grocery stores. 

The Baoan workers are charged 45 rmb per month ($5.42) for food—two meals 

a day, which is deducted from their wages along with a small dorm fee of $1.81 U.S. 

The workers report that the quality of the food is very poor. 

Huffy Wages in China are Less than 2 Percent of What They Paid in the U.S.

1,800 U.S. Workers Lose Their Jobs 

III. Closing Observations 

In the last 17 months, 1,800 Huffy Bicycle workers have lost their jobs as Huffy 

shut down its last three remaining U.S. plants to outsource its production to China, 

Mexico and Taiwan. The plants closed were in Celina, Ohio; Farmington, Missouri, 

and southern Mississippi. 

The 850 Huffy workers fired in July 1998 from the Celina, Ohio plant were members of the United Steelworkers of America (USWA), who earned $17 an hour—$11 

in wages and $6 in benefits. Their last job was to cover an American flag sticker 

that was on bikes made in China with a new sticker representing the globe. The 

average wage of the workers in China currently making Huffy bicycles is 33 cents 

an hour, less than two percent of what the USWA members made. 

The Huffy Bicycle Company (which owns the Huffy, Royce Union Bikes and American Sports Design brands as well as producing private brands for other companies) 

controls 80 percent of the U.S. bicycle market. In 1998, the Huffy Corporation had 

sales of $584 million and a gross profit of $97.5 million. 

Huffy Corporation CEO, Don R. Garber, paid himself $771,091 in 1999. 

Many of the fired Huffy workers are now working two, or even three, minimum 

wage jobs to try to make ends meet and not fall behind in mortgage and car payments, school and other expenses for their children. 

NAFTA must be eliminated or changed to address the many problems of the 

workers in foreign countries such as environmental standards, labor laws, working 
141

conditions and low wages. People in the USA can compete with anyone, anywhere, 

if the playing field is leveled. 

Do we want a global economy that feeds the insatiable appetite of Wall Street and 

giant multinational corporations who owe allegiance to no flag, but the almighty dollar; a global economy based on reducing our wages, working conditions and environmental standards down to the lowest level possible? 

Or should we create a global economy that works for working families and communities, raising wages, working conditions and environmental standards for all of 

us? 

In closing, I suggest that Lou Dobbs, in his book Exporting America, said it best: 

‘‘The thing that is not being communicated is that American multinational companies that are outsourcing and off shoring are also essentially firing their customers. 

India can provide our software; China can produce our toys; Sri Lanka can make 

our clothes; Japan can make our cars. But, at some point we have to ask, what will 

we export? At what will Americans work? And for what kind of wages? No one I’ve 

asked in government, business or academia has been able to answer those questions.’’

Co-Chair DREYER. Thank you very much, Mr. Newport. 

I would like to introduce Professor John Russo, who is the coordinator of Youngstown State University’s Labor Studies Program. 

STATEMENT OF JOHN RUSSO, Ph.D.

PROFESSOR, LABOR STUDIES, THE WARREN P. WILLIAMSON

COLLEGE OF BUSINESS ADMINISTRATION

CO-DIRECTOR, CENTER FOR WORKING-CLASS STUDIES

YOUNGSTOWN STATE UNIVERSITY, YOUNGSTOWN, OHIO 

Mr. RUSSO. Thank you. My name is John Russo, and I am Professor of Labor Studies at the Warren P. Williamson College of 

Business Administration at Youngstown State University. I’m also 

the coauthor with Sherry Linkon of the book Steeltown USA, Work 

and Memory in Youngstown, and I want to thank the U.S.-China 

Commission for giving me this opportunity to discuss my research 

on the deindustrialization and its impact on local communities such 

as Youngstown. 

In many ways the story of Youngstown is the story of industrial 

America and its workers in the 20th century. The 25-mile stretch 

along the Mahoning and Shenango Rivers composed what was 

called the Youngstown steelmaking district. This district produced 

much of the steel that helped build the country’s infrastructure and 

armaments that made the U.S. an industrial and military leader. 

The Youngstown steelmaking district was known the Ruhr Valley 

of America, and it was never less than the fifth largest steelmaking 

area in the world throughout much of the 20th century. 

Countless waves of European immigrants and African-American 

migrants from the South were given an economic foothold in the 

mills and factories of this industrial community. Their work gave 

them a high standard of living and for many years a strong sense 

of community and stability. As early as the 1930s, Youngstown had 

the highest per capita home ownership of any American city and 

became know as the city of homes. The people of Youngstown were 

hardworking, industrious, proudly patriotic, and strongly committed to social and economic justice in the workplace. 

Beginning in 1977 the steel mills in Youngstown began to close, 

an economic change that devastated the community. Some have argued that those closings were the result of free trade policies involving Japan, while others argue it was the result of corporate 

mis-investments and the lack of a clear national industrial policy. 
142

I’m not here to discuss why those closed, but instead I can say 

much of what I heard here today is reminiscent of the discussions. 

Between 1977 and 1985, 50,000 steelmaking and steel-related 

jobs were lost in the Youngstown area. That translates to over $1.3 

billion annually in lost manufacturing wages, which has a devastating impact on the local economy. As a result during this period Youngstown often led the nation in unemployment, bankruptcies, foreclosures and arson. 

The social and economic devastation was closely followed by the 

media, and Youngstown quickly became the poster child for 

deindustrialization. Even today, as they have for the last quarter 

century, national and international reporters and academics all 

come to Youngstown to see if it has recovered or to validate conventional wisdom about economic recovery such as the idea of creative 

destruction. Presidential candidates also visit every four years proclaiming that the social and economic devastation would not have 

happened if they had been in office and promising to help rebuild 

Youngstown’s economy if they were elected. Yet relatively little economic support has been forthcoming. 

I should also mention that Chinese scholars have also come to 

visit Youngstown. Just this summer I met with a group of Chinese 

scholars who were intensely interested in deindustrialization. As 

they explained to me China has begun to face similar social and 

economic issues of deindustrialization as it introduces the most 

modern production methods and technology in an attempt to become a world-class producer of goods and services. Some of that can 

be seen recently in the urban goings-on in China. 

So what do they see and others see in Youngstown some 25 years 

after the mill closings? Youngstown continues to suffer the effects 

of the deindustrialization, most notably out-migrations and declining standards of living and public services. Attempts to revitalize 

the area have largely failed; many represent what we might call 

the economics of desperation. For example, between 1992 and 2000, 

about nine percent of the economic growth in the area was a result 

of building the prison. 

In the early 1990s the per capita murder rate in Youngstown 

was among the highest in the nation. Interestingly criminal justice 

experts determined that the murders were being committed by 

young adults that were born between 1977 and 1984. That’s the 

most intense period of the deindustrialization. It’s not the mill closing—it might have been the mill closings would have gone—they 

could have gone to work in the steel industry. Just as the sociologist William Julius Wilson has said in his now classic work, When 

Work Disappears, Youngstown’s stable social networks and ethnic 

and racial communities have been disrupted by unemployment as 

has the capability of working- and middle-class families to reinforce 

conventional patterns of work, family, community and education. 

Let me end this brief presentation by saying that those of us that 

live and study in industrial communities like Youngstown understand that there’s a capacity between traditional economic theory 

about economic development and trade and what happens to the 

real people who are faced with this investment, deindustrialization 

and joblessness. 
143

Dr. Russo is a professor of Labor Studies in the Warren P. Williamson College of Business 

Administration and the co-director of the Center for Working-Class Studies at Youngstown State 

University. He is the co-author of the book, Steeltown U.S.A.: Work and Memory in Youngstown. 

When traditional manufacturing disappears, there’s no easy and quick movement to new jobs or transference of skill, especially not 

in the global economy. Many have dedicated their lives, and sometimes their health, to employers now feel betrayed and economically expendable. As one steelworker suggested to me, ‘‘We are simply too old to work and too young to die.’’ Today in ever increasing numbers working- and middle-class families in communities like Youngstown feel that they are being 

sacrificed at the altar of traditional economic theory. A theory that 

I might add, functions more like a religion based on scripture and 

tradition than on the lived experiences of economic actors. 

Working people do not see themselves suffering at the hands of abstract economic forces. Rather they see themselves as victims of 

conscious decisions by corporate leaders and government officials 

and they are resentful. Nor are they likely in the future to believe 

economic thinkers who argue that the fate is part of the, quote, 

natural economic order, unquote, nor will they be content to view 

themselves as, quote, acceptable losses, unquote, in the transformation of the global economy. As Pulitzer Prize winning journalist Dale Maharidge has chron- icled in his new book, Homeland, there is an undercurrent of rage 

in America’s industrial heartland. Perhaps that rage and anger is 

best summarized by Bruce Springsteen in his song, Youngstown: 

‘‘From the Monogahela Valley to the Mesabi Iron Range, to the coal 

mines of Appalachia, the story’s always the same. Seven hundred 

tons of metal a day, now, sir, you tell me the world’s changed. Once 

I made you rich enough, rich enough to forget my name.’’

Thank you very much. 

[The statement follows:]

Prepared Statement of John Russo, Ph.D.

Professor, Labor Studies, the Warren P. Williamson

College of Business Administration

Co-Director, Center for Working-Class Studies

Youngstown State University, Youngstown, Ohio

Impact of U.S.-China Trade and Investment on Ohio’s Economy

My name is John Russo and I am Professor of Labor Studies at the Warren P. 

Williamson College of Business Administration at Youngstown State University. I 

am also the co-author with Sherry Linkon of the book, Steeltown U.S.A.: Work and 

Memory in Youngstown. I want to thank the U.S.-China Commission for giving me 

this opportunity to discuss my research on deindustrialization and its impact on 

local communities such as Youngstown, Ohio. 

In many ways, the story of Youngstown is the story of industrial America and its 

workers in the 20th Century. The 25-mile stretch along the Mahoning and Shenago 

Rivers composed what was called the Youngstown Steelmaking District. This district produced much of the steel that helped build the country’s infrastructure and 

armaments that made the U.S. an industrial and military leader. The Youngstown 

Steelmaking District was known as the ‘‘Ruhr Valley of America’’ and was never 

less than the fifth largest steelmaking area in the world throughout much of the 

20th Century. 

Countless waves of European immigrants and African-American migrants from 

the South were given an economic foothold in the mills and factories of this industrial community. Their work gave them a high standard of living and, for many 

years, a strong sense of community and stability. As early as the 1930s, Youngstown 

had the highest per capita home ownership of any American city and became known 
144

as ‘‘the city of homes.’’ The people of Youngstown were hardworking and industrious, proudly patriotic, and strongly committed to social and economic justice in 

the workplace. 

Beginning in 1977, steel mills in Youngstown began to close, an economic change 

that devastated the community. Some have argued that those closings were the result of free trade policy involving Japan, while others argue it was the result of corporate disinvestments and the lack of a clear national industrial policy. (I am not 

here to discuss why the mills closed, but instead I want to focus on how those closings affected the community.) Between 1977 and 1985, 50,000 steel making and 

steel related jobs were lost in the Youngstown area. That translates to over $1.3 

billion annually in lost manufacturing wages, which had a devastating impact on 

the local economy. As a result, during this period, Youngstown often led the nation 

in unemployment, bankruptcies, foreclosures and arson. 

The social and economic devastation was followed closely by the media, and 

Youngstown quickly became the ‘‘poster child for deindustrialization.’’ Even today, 

as they have for the last quarter century, national and international reporters and 

academics come to Youngstown to see if it has recovered or to validate conventional 

wisdom about economic recovery such as the idea of ‘‘creative destruction.’’ Presidential candidates visit every four years, proclaiming that the social and economic 

devastation would not have happened if they had been in office and promising to 

help rebuild Youngstown’s economy if they are elected. Yet, relatively little economic 

support has been forthcoming. 

I should also mention that Chinese scholars have also come to visit Youngstown. 

Just this summer, I met with a group of 15 Chinese scholars who were intensely 

interested in deindustrialization. As they explained to me, China has begun to face 

similar social and economic issues of deindustrialization as it introduces the most 

modern production methods and technology in an attempt to become a ‘‘world class’’ 

producer of goods and services. 

So what did they and others see in Youngstown some 25 years after the mill closings? Youngstown continues to suffer the effects of deindustrialization—most notably outmigrations and declining standards of living and public services. Attempts to 

revitalize the area have largely failed; many represent what we might call the economics of desperation. For example, between 1992 and 2000, about 9% of the economic growth in the area was the result of the building of prisons. 

In the early 90s, the per capita murder rate in Youngstown was among the highest in the nation. Interestingly, criminal justice experts determined that the murders were being committed by young adults that were born between 1977 and 

1985—the most intense period of deindustrialization. If not for the mill closings, 

they would probably have gone to work in the steel industry. Just as the sociologist 

William Julius Wilson found in his now classic work, When Work Disappears, 

Youngstown’s stable social networks and ethnic and racial communities have been 

disrupted by unemployment, as has the ability of working-class and middle-class 

families to reinforce conventional patterns of work, family, community and education. 

Let me end this brief presentation by saying that those of us who live and study 

in industrial communities, like Youngstown, understand that there is a chasm between traditional economic theory about economic development and trade and what 

happens to real people when faced with disinvestments, deindustrialization, and joblessness. When traditional manufacturing disappears, there is no easy and quick 

movement to new jobs or transference of skills, especially now in a global economy. 

Many who have dedicated their lives and sometimes their health to an employer feel 

betrayed and economically expendable. As one steelworker suggested to me, ‘‘We are 

simply too old to work and too young to die.’’

Today in ever increasing numbers, working- and middle-class families in communities like Youngstown feel that they are being sacrificed at the altar of traditional 

economic theory. A theory that, I might add, functions more like a religion based 

on scripture and tradition than like social science based on the lived experiences of 

economic actors. Working people do not see themselves suffering at the hands of abstract economic forces. Rather, they see themselves as victims of conscious decisions 

by corporate leaders and government officials, and they are resentful. Nor are they 

likely in the future to believe economic thinkers who argue that their fate is part 

of the ‘‘natural economic order,’’ nor will they be content to view themselves as ‘‘acceptable losses’’ in the transformation to global economy. As Pulitzer Prize winning 

journalist, Dale Maharidge, has chronicled in his new book, Homeland, there is an 

undercurrent of rage in America’s industrial heartland. Perhaps that rage and anger 

is best summarized by Bruce Springsteen in his song, Youngstown: 
145

From the Monogahela Valley

To the Mesabi Iron Range

To the coal mines of Appalachia

The story’s always the same.

Seven hundred tons of metal a day

Now sir, you tell me the world’s changed

Once I made you rich enough

Rich enough to forget my name.

Co-Chair DREYER. Thank you very much, Dr. Russo. 

Next we have Reverend Anne Hagler. I don’t have any bio data 

on you. Perhaps you can tell us. 

STATEMENT OF REVEREND ANNE HAGLER, AKRON, OHIO 

Ms. HAGLER. I would be happy to. I am the minister of a small 

Presbyterian Church here in Akron. I also work on a volunteer 

basis for the American Committee on Economic Justice Empowerment Program. I’m also part of a local grass roots organization 

called the Akron Global Network, which is attempting to find alternatives to globalization on the local level. 

When I think about the people I know whose lives have been 

devastated by job loss, downsizing and outsourcing, the picture 

that comes to my mind is a statue that stands in Rockefeller Center in New York City—Atlas holding up the world. The problem is 

that none of the people I know have the mythological strength of 

Atlas nor do they have the motivation. All they can do is learn to 

cope with reduced income, minimal job satisfaction, loss of community and lowered self-esteem. 

You have heard lots of words and numbers here today, and words 

and numbers tell a story, but they only tell part of the story. The 

rest of the story comes in human form of people like you and me 

whose lives have been thrown into turmoil by job loss, reduced income and lowered vocational satisfaction. The rest of the story is 

told by people who find themselves holding up the world like Atlas. 

The rest of the story bursts forth from middle-class homes on the 

market, apartments abandoned in the middle of the night, and 15-

year-olds working two jobs because daddy can’t support the family 

on a minimum-wage job. 

I know someone who worked for Goodyear in accounts payable 

for 32 years. She was laid off three years ago and is now employed 

caring for her grandchildren at a greatly reduced income. I know 

someone who had a good sales job for a manufacturing company. 

When he was sent home on a Friday afternoon with his last paycheck in his pocket, he ended up going to work for Dial-America, 

sometimes working 80 hours a week in order to hold onto his home 

and keep his wife and three children in clothes and food. 

I know someone who worked in marketing and new product development in a polymer adhesive company. After he was told his 

position was being done away with, he ended up working temporary clerical jobs and moving to a two-room apartment. These 

days, we all have friends and neighbors who have to find a new 

way of making ends meet due to job loss, and some of us have 

friends among the working poor, folks who have jobs but don’t 

make enough to live in decent housing or provide healthcare to 

their children. 
146

Nor is the problem all about money. Loss of a job can mean loss 

of self-esteem, loss of community and the beginning of despair. I 

know of someone in the Columbus area who was laid off by a small 

company that made television tubes. It wasn’t the greatest job in 

the world, but he was able to support his family by supplementing 

his income working the family farm. The company that laid him off 

found him a job in Texas, so now he commutes back and forth between Ohio and Texas because he can’t make ends meet without 

the income from the farm, and he was unable to find a job close 

to the farm. 

He not only lost a job, but he also lost his community, and he 

and his family had to start all over again in a new place without 

sufficient income to make it work. An experience like that sows the 

seeds of despair, depression and demoralization for a whole family. 

I wish I could say that experiences like this one are isolated incidents, but unfortunately they are not. The church I serve only has 

50 active members, but since I became their pastor two and a half 

years ago, five members have lost their jobs, three members live 

below the poverty level, two have retired prematurely and many of 

the rest live in fear of their jobs being lost due to outsourcing and 

downsizing. For some, their only source of support and hope is 

their church family and their faith in God. And even for those with 

a strong faith, there are far too many times when God seems absent. Often, I wish I could do more than pray, listen and bolster 

self-confidence. And that’s part of why I agreed to testify today. 

I want to tell you a story about a man of faith, a man whose belief in God is unshakable, a man who has certainly been tested in 

a variety of ways, but pertinent to this hearing today he was tested 

by the experience of abrupt, unexpected job loss. For the purposes 

of storytelling we’ll call him Adam Thompson. 

Adam is a married man in his 50s with three grown sons, two 

married, one single. He lives outside of Akron in a semi-rural area 

in a three-bedroom ranch house on about half an acre. He moved 

here from Texas several years ago, worked as an estimator in 

Cleveland, and then about five years ago he landed a job he really 

liked with a local company that manufactures and installs steel 

stairs for schools, businesses and office buildings. His title was 

project manager, and it was his job to coordinate and oversee various projects taken on by his company by working with drafts persons, delivery schedules, installation crews and the customers 

themselves, doing what was necessary to get the project completed 

in a timely, efficient manner. 

Adam felt like he made it. Here was a job that made use of his 

many abilities and even included the possibility of moving up. He 

intended to stay with the company until retirement. But that was 

not the way the story played out. 

About two years ago on a January Friday at 3:45 p.m. he was 

called into his boss’s office and informed that the company was 

downsizing and that his position would be eliminated immediately. 

He was instructed to clean out his desk and be gone by 5:00 p.m. 

And then he was told, adding insult to injury, that he could stay 

with the company as an estimator with a 40 percent reduction in 

pay. He was also told that he would have to make up his mind 

then and there because that job would be gone by Monday. 
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Adam finally convinced his boss to give him until Monday morn- ing to decide so he could think about it and discuss the offer with 

his wife. I asked him to describe how he felt that day, and he said, 

‘‘I felt like I had the whole world on my shoulders.’’

Adam accepted his company’s offer even though it was a backward step professionally because he feared being without work and 

perhaps not finding another job. When I asked him how he reacted 

to being an estimator again, he replied, ‘‘I felt like I lost ten years 

of my life.’’

Adam shared with me that his whole lifestyle changed after 

being demoted. He and his wife don’t go out to eat anymore. They 

used to take pride in the fact that they could assist their boys financially. One of them was starting his own business, but now the 

tables were turned and their boys were helping them out with 

painting, house repairs, and yard work. They had to use up their 

savings to pay off credit cards. Adam indicated that the only thing 

that saved them was being able to refinance their home. In addition, his wife went to work part-time at the church and began taking care of babies and preschoolers in their home. 

And now they have been hit with another pay cut. When Adam 

was first demoted he was informed that he could get overtime, 

which amounted to about $500 a month. But now he’s been told 

that there’s going to be no more overtime so he and his wife face 

another loss of income. 

In conclusion, Adam’s story is far too typical of life in America 

today. Adam has the advantage of a strong marriage and sons who 

live close by and are willing to pitch in. Adam also has the advantage of a strong faith in God and a willingness to trust God no matter what. But what about the even more average American who 

doesn’t even own a home to begin with or doesn’t have a savings 

account or doesn’t have family members who are able to help or 

doesn’t have a faith in God or a church community to carry him 

or her through a crisis? What about the vast numbers of Americans 

who start out just barely getting by and then lose their jobs to 

downsizing or outsourcing? And worse yet, what about those who 

have nothing to fall back on and so end up in a homeless shelter 

or on a park bench? Thank you. 

Panel V: Discussion, Questions and Answers 

Co-Chair DREYER. Thank you very much. 

Commissioner Becker first. 

Commissioner BECKER. I wanted to thank all of you for what actually was very, very touching testimony and it gets to what the 

heart of what this panel is supposed to be talking about. I have no 

questions, but I have a few observations that I wanted to mention. 

On the Huffy thing, I just want to compliment you and your union 

and your director for continuing this fight and not letting it die, 

and for keeping it before the public’s eye, not only in Ohio, but 

throughout the United States. Thousands and thousands of people 

know about Huffy now, and it is reaching people in a very positive 

way. Did either one of you go to China to Shanghai to the plant? 

Mr. FOLK. No. 

Commissioner BECKER. Did you try to? 

Mr. NEWPORT. I didn’t. 
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Did you, John? 

Mr. FOLK. I wanted to go along. At the time we were trying to 

research where the bikes were coming from manufacturing. 

Commissioner BECKER. Let me offer a comment to that because 

we tried. We tried and the AFL–CIO tried, and they wouldn’t let 

us in. When this Commission was making the visit, this is one of 

the places we asked to be able to take a look at based on some of 

the information that was coming out. They denied that. We haven’t 

actually been able to go in. 

Are there any American bikes being made at all or were those 

the last ones? 

Mr. FOLK. It was the last mass producer of bikes. Schwinn had 

already left mass producing years before that. There are some specialty bikes being made. Huffy has a plant in Springfield, Ohio that 

just deals——

Commissioner BECKER. You mean like custom bikes? 

Mr. FOLK. They were working with the Olympic team one year 

building those bikes, custom-designed for that person’s body and 

for the enthusiast. 

Commissioner BECKER. In essence we have lost the bicycle industry too. It’s now all Chinese. 

To Mr. Russo, again I lived a lot of that being old enough back 

in Youngstown, Ohio during those years—the ’70s and early ’80s 

and mid ’80s, and I just want to point out a couple of events that 

happened then. The major employer in that area, without identifying who the employer was, had something like 13,000 workers, 

if I recall, maybe more. At that plant they were given four hours’ 

notice on the shutdown to grab their tools and get out. The shifts 

that they were on—I think the notice came down at 1:00 in the 

afternoon. Four hours to get out. No chance to make plans. No 

chance to get your affairs straightened out, nothing to be able to 

talk over with your spouse to plan what we are going to tell the 

children. Just four hours’ notice and it was bam, it was gone. 

Two things happened as a result of that. We didn’t know what 

was going to take place, the union, but the company did. We found 

out those plans are usually made four, five years in advance, even 

on shutdowns of that magnitude. But the workers demanded—and 

it was achieved—that the union would have a member on the 

board of the steel companies at the next round of negotiations. 

That was a breakthrough for the union to have a person out of the 

shop that would sit on the board and not win a vote, but there 

would be no surprises. They would know what the hell was going 

on. 

The other thing I want to mention in my research of this, Mr. 

Russo, is that the steelworkers sent a delegation to Japan because 

of the promise Japan had of lifetime employment, and Japan, 

shortly after this what happened in the United States announced 

the reduction of 25 percent capacity and we didn’t know how they 

were going to handle this situation. The employees’ representatives 

went to Japan to meet with the community, the government, the 

workers, the banks to see how—very interesting story without 

going into it here, but something you may want to take a look at. 

I could point you in the direction. 
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And your story, I’ve heard that so many times. I get a feeling 

that there’s no end to the argument that spills out from these 

things, and I want to compliment you for handling that, for staying 

with that and not letting go because in many cases that’s the only 

help they have. Thank you. 

Co-Chair DREYER. Co-Chair Wessel. 

Co-Chair WESSEL. Thank you, all of you. It’s an important panel 

because it brings back to us why we all are here and why these 

problems and positions are important. I would like to ask a political question without being partisan or anything else. As you relate 

to the people who have gone through all this, we were asked earlier 

on many of the panels about political leaders what do they do to 

exact change. As you deal with people, have they given up hope on 

the political system? How do they view this when somebody loses 

a job how do they vent their anger with themselves? At the system? I sort of think if there’s so much anger out there maybe we 

could bring change but people don’t participate. Have they given up 

hope on the system? 

Mr. RUSSO. I think in Youngstown, and I have written a lot 

about this, the politics of resentment. And that manifests itself in 

many ways. When industry disappears the way it did in Youngstown, there’s an incredible disbelief in all institutions, disbelief in 

unions, disbelief in corporations, there’s disbelief in religious institutions, there’s disbelief in terms of government. 

In thinking about this, we could go back and study post World 

War I Germany and see the same thing and how it breeds a mistrust of outsiders. In Youngstown, this sense of disbelief extends to 

every presidential candidate since 1980 that has come to Youngstown and stood in front of the Youngstown Sheet and Tube complex 

and proclaimed that this wouldn’t happen if they had been in office. Relatively little has been done in terms of economic development-support following the mill closings. 

Youngstowners see very little difference between Democrats and 

Republicans. I have done 25 interviews in the last six months on 

this same issue. And therefore they see very little difference between the Republicans and the Democrats, they will vote for social 

issues. They won’t vote their own economic self-interest. And actually there’s a new book out that talks about the same thing. 

So there’s a great sense of disbelief in terms of traditional economic ideas and a sense government officials aren’t going to do 

very much at all. There’s a great deal of cynicism. At the same 

time there’s that underlying discontent that’s seemingly not apparent to people. 

President Gettelfinger said this morning about what happened in 

Seattle, and I remember giving the speech before the Society of 

Professional Journalists and I asked why are you asking me? I’m 

not a journalist. They said because we missed the story about what 

was happening to working people in Seattle and to a lesser extent 

Miami where we saw tactics that were shocking to say the least, 

and I think there’s a rage among working people. But I overheard 

one of the Commissioners say that today’s testimony was not only 

depressing for us but the community. 

For those of us who study deindustrialization, we get numb to 

the depressing conditions. Yet, today’s discussion is quite amazing 
150

to me because we were very much making these types of discussions in the past in isolation. 

Dave Johnson and I have appeared on a number of panels. He 

was a pioneer. He raises $400,000 a year for Republicans, comes 

in here and tells you I disagree with the trade policy of the Republicans and is on the same panel with me, something has changed. 

When you have that group of people, small business people that are 

being gorged both by a trade policy and multinationals who are 

forcing them to move overseas, something’s going on. Change is in 

the air. 

This Commission, it’s in an incredibly important place in history. 

And there’s a lot that you can have to say in this regard to what’s 

happening to industrial America, and you’re hearing it. 

So I was kind of hopeful today, but at the same time I teach my 

students, my undergraduates, what’s called Russo’s Law. Russo’s 

Law says the law does not set the rules of the game. It’s part of 

the game, and the law at any particular time represents the relative power between conflicting institutions in the society. We can 

talk about trying, but we better be talking about the structural 

problems in the global economy created by unregulated global corporation and their corporate dominating institutions such as the 

WTO. These people are very much responsible for what’s happening in the company in terms of working conditions and workers’ 

rights. That discussion is building. And it represents itself in the 

type of politics of resentment. 

Ms. HAGLER. I have a response to your question about anger. The 

people that I see and that I’m involved with don’t know what to 

do with their anger. They don’t have the time or the energy to do 

anything with it politically because they are working so hard simply to keep their heads above water and that uses it all up. And 

so there’s no energy left over. In the church I serve I’m the biggest 

activist because although I am affected, I’m not as directly affected 

as they are, and I consider it part of my job, part of my calling, 

if you will, to advocate for them. But I think that the anger gets 

turned inward. The anger gets turned towards family, in neighborhoods, because they don’t know what to do with it, and even if they 

did, they wouldn’t necessarily have the time or energy to use it constructively as you suggest, which I think would be wonderful. 

Co-Chair DREYER. Commissioner Mulloy. 

Commissioner MULLOY. Thank you all very much for being here. 

Mr. Russo, There was a book by Bill Wolman called the Judas 

Economy: How Capital Is Betraying Labor. It was written about 

’98. When this Commission was first set up, we brought Bill 

Wolman, who was then the chief economist of Business Week Magazine, in to testify. He said you have to look at China as part of 

a larger picture of globalization and that Europeans had a historic 

advantage because they have had training, technology, more capital, and they’re able to live a higher standard of living. But when 

you globalize, and you move pretty rapidly, you are going to have 

tremendous downward pressure on American wages. You teach a 

business school, don’t you? 

Mr. RUSSO. Yes. 

Commissioner MULLOY. And you tell us that people in Youngstown feel they are sacrificed at the altar of traditional economic 
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theory. You must be dealing with economists who look at the evidence. When you tell them what’s going on, how could they justify 

continuing to think that this is to the advantage of the American 

people? 

Mr. RUSSO. With all due respect to Reverend Hagler, I think of 

economics as a religion. When people like myself are talking about 

outsourcing or this or working people, it’s like we’re none believers. 

But recently Paul Samuelson comes out and says outsourcing isn’t 

so good, this begins to reshape beliefs. I always remember a presentation by John Kenneth Galbraith to graduate class. At the beginning of a presentation he said, I want to tell you guys one thing. 

The beginnings of thing: The beginnings of wisdom are to never 

trust an economist. Economy is theory. I want to stress theory. And 

we are coming into a stage where traditional economic thinking is 

no longer accepted on faith. 

You call it a paradigm shift. Economic theory really only talks 

about the upside. We are going to go forward, ideas of progress are 

very much tied up with that economic theory but that is the theory. 

We assume things will get better over time. But that may not be 

true any longer. 

It was very compelling to me to listen to the Chinese visitors, listen to working people in Youngstown, and hear them ask how are 

we going to deal with this problem of deindustrialization? They 

think we have—by the way the industrial policy in this country is 

a military industrial policy. And there’s a lot of evidence on that 

talk about Boeing. We can talk about all the money that’s going to 

composite wings and shipped and being made overseas and issues 

that was somewhat mentioned here earlier. 

I think we are at a very critical point in terms of American economy. I think that we have to come to grips with dramatic declines 

in our standards of living, but it’s a complicated issue and I will 

give you an example about that. 

The Federal Reserve Board in northeast Ohio is trying to figure 

out ways to develop the economy. They want to see what they can 

do in Ohio and parts of Michigan and Kentucky, a little bit of West 

Virginia that covers this territory, and I asked them a throwaway 

question. I said, around my area I see a lot of low-end stores. Can 

we talk about deflationary economy? Have you made plans about 

that? 

The next thing I know they provide me with a report or I know 

they really thought about it and knew it was going to happen. I 

asked them, ‘‘what do you think about trade and the value of the 

dollar, again and what can you do about it?’’ They said, ‘‘We can’t 

do anything about it.’’ Why? Because if the Chinese stop buying our 

bonds our economy goes down. Basically they’re taking those dollars and purchasing our bonds. So there are a couple levels of economic blackmail that are going on within the economy and international sphere. 

But I want to get back to the role of the Commission. I think it’s 

an incredibly important place and your responsibilities are very important, not only to the political process because, like you said, the 

WTO and these other corporate dominated organizations are not 

elected. You are appointed by elected officials. It’s very important 
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for you to take your job very seriously and give, I think, some direction to economic policy. 

Commissioner MULLOY. Is Congressman Ryan your Congressman 

in Youngstown? 

Mr. RUSSO. Yes. 

Commissioner MULLOY. He’s been very interested in the work of 

this Commission. He wanted to put in a bill today endorsing a recommendation from our 2004 report and asking the President to get 

together a plan specifically addressing the recommendations. 

Mr. RUSSO. That’s correct. 

Commissioner MULLOY. Thank you. 

Co-Chair DREYER. Commissioner D’Amato. 

Chairman D’AMATO. Yes. First of all, I want to also commend 

this whole panel for its riveting testimony. Many of us sat on a previous Commission called the Trade Deficit Review Commission. 

Unlike this Commission, which is pretty much bipartisan, that 

Commission was completely driven by partisan policies, and it was 

a different prospective and we didn’t agree on anything. 

We issued a final report that was basically two reports in one except there was one thing we agreed on, we should have trade assistance, adjustment assistance for people who have jobs. It comes 

to my mind that actually none of us knew what we were talking 

about. The trade adjustment assistance was more than simply another factor in efficiency and probably shouldn’t have been left to 

Congress at all. We should at least be able to put something together. 

It seems to me as a nation we have two failings at this panel. 

The first is that we don’t have any kind of workable concept and 

plan as to what happens when you deindustrialize an area. We just 

don’t and we ought to try to take another look at that. But the second failing of our country here is our lack of ability to hold accountable those multinationals and companies in terms of their behavior. 

When I listen to what the—is the Huffy bicycle company still an 

American-owned company? 

Mr. FOLK. Yes. 

Chairman D’AMATO. I think the behavior of that company is actually obscene. In my opinion, it is an obscenity what that company 

did. It seems to highlight an issue the Commission will look at in 

this session, which is a code of conduct for multinationals. This has 

been talked about for many, many years. I think there’s a need for 

it because companies need to have some kind of accountability to 

the communities. 

Now the economic theory—accountability—isn’t part of this theory. No accountability is necessary. Economic efficiency stands on 

its own merits. Accountability isn’t a part of it. The Huffy Company 

isn’t for the welfare of people in China at all and it’s not accountable to those people who get fired when Huffy leaves the United 

States to go to China. Accountability in terms of corporate America 

is far overdue and I think part of your problem. 

Mr. RUSSO. That’s what happens when you try talking about corporate accountability. 

Chairman D’AMATO. Part of our problem it seems to me in this 

economy is not addressing to this globalization, but the fact that 

we have not really stepped up to the question of corporate account-
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ability. If we do, we may be able to solve a lot of problems at once. 

Thank you for your testimony. 

Mr. NEWPORT. Could I respond? You also asked about the Huffy 

Company. They are still headquartered in Springfield, Ohio. They 

still make some bikes, high-priced bikes mostly. But in 1998 when 

they actually moved, they closed the Celina plant down; they had 

sales that year $584 million and a gross profit of 97.5 million, 

which added insult to injury. 

Co-Chair DREYER. Thank you. 

Commissioner Reinsch. 

Commissioner REINSCH. As I mentioned before, I have a sense of 

deja vu here because I spent the ’70s, ’80s and ’90s on Capitol Hill, 

working for John Heinz and then for Jay Rockefeller—not much 

time in Ohio, but a lot of time around Ohio, and heard the same 

stories. In some ways they were the same and in some ways different. They weren’t about China, but they were about trade and 

mostly they were about change, and how you handle and cope with 

change, and that’s what I want you all to react to for a minute. 

One question is at an individual level people in Pittsburgh or the 

region of small apparel manufacturers in eastern Pennsylvania 

were as devastated as the individuals you were talking about 

today, the stories that you talked about, Reverend, those same stories were told 15 and 20 years ago with other individuals. I guess 

one question to think about is how is now different from then? 

One of the underlying questions that runs through a lot of our 

hearings is whether outsourcing to China is fundamentally different than what we dealt with in the ’80s and ’90s and therefore 

requires different remedies, or alternatively, as I said, deja vu all 

over again. I don’t know the answer, but it may make a difference 

in what kind of policy we pursue. Some things worked and some 

things didn’t. Is it fundamentally a different situation here now? 

But the second thing I would like to reflect on is you’re speaking 

as community leaders, people who are thinking about the community. There are different approaches you can take in the way you 

deal with these problems; there are different approaches you can 

take. One approach is are there things that we can do to slow down 

or stop the changes that are taking place, and I think the answer 

to that may be yes. And some of the previous witnesses made some 

comments about those things. Those are by and large, however, not 

things the community can do by itself. I’m not sure the Akron City 

Council, for example, wants to try to deal with this on its own. 

On the other hand, the other set of things is how does a community cope with change that occurs, no matter how evil this change 

may be. And it may be that while some of us on this Commission 

or others in Washington work on trying to forestall change or make 

sure it is a fair level playing field, at the same time you’re faced 

with the question what are you doing here? What are community 

leaders doing to help citizens experiencing change here cope with 

it in some constructive way and help the community move on? 

Professor Russo, unfortunately this is 25 years later. The community hasn’t recovered is really what you’re saying, but that’s a 

doubly sad commentary. The event is sad, but the fact that 25 

years later things are not better, perhaps worse, is another question. Maybe some of you can reflect on either of those two issues—
154

whether right now things are fundamentally different and we face 

a different challenge than we used to, and second, what can you 

all or what can the people you speak for or with as community 

leaders do to try to help all of your colleagues cope with the change 

that’s occurring whether they want it to or not? 

Mr. RUSSO. Let me talk about coping mechanisms. It’s an interesting psychological term. How do we help people cope with 

change? But I think by starting with that question that you avoid 

systemic questions. Because it once again falls back on the individual that they have to get that extra training although they don’t 

know what they are training for or some are going to need enormous amounts of psychological services to cope. You are asked to 

cope when you devoted your life to a particular job and particularly 

hazardous industry like steelmaking. Working people cope as best 

they can but it’s not a question about coping, per se? 

It’s not a question about the Trade Readjustment Act, either. 

There are a lot of people in Youngstown that got trained in refrigeration. We don’t need refrigeration training in Youngstown. There 

is another part to the coping and readjustment question. It is about 

the people who help others. 

One of the things we talk about in the book after talking to the 

community mental health people who were having labor problems. 

During the 1980’s, I interviewed 40 therapists and found out that 

what they needed was group therapy because their caseload had 

tripled, and the cases were not simply about wife disputes. ‘‘Hello, 

I want to kill myself, I’m beating my kid.’’ The cases involved much 

more serious types of issues—matters of life or death. 

Training and education has been the hope for many. But I in 

good faith cannot tell my students that just because they get a BA 

or an MBA now or a degree in engineering that they are going to 

do better than their parents. And part of it is a sense that there 

is a decline in America. A declining standard of living and that’s 

the only way we are going to compete. 

Somebody asked me when did this all start? We have a columnist 

from the back of the room from Business Week. I’d like him to go 

back and read the report in September of 1974 where during the 

oil embargo Business Week talks about the global economy and the 

future of America and it says the only way we’re going to compete 

is to lower the standard of living in America. Really interesting 

commentary. 

And now here we are a quarter of a century later and we have 

seen that occur over a long period of time. How does a community 

cope with such traumatic declines? You know, you write about selfesteem and what happens when a whole town, a whole community, 

loses its identity and when you lose your identity other people define who you are. And when other people define who you are, they 

start blaming you for your own situation, and therefore the only 

way for you to survive is basically to trust only those closest to you. 

De-industrialized communities have to cope with bootstrap journalism that is reflected on why didn’t they recover? Why can’t the 

community pull itself up by the bootstraps? What is wrong with 

you? Is there something culturally wrong with you? Where’s the 

leadership? Those are good questions. 
155

But the industries that often control those towns left a leadership vacuum. 

I understand your question was about coping. It’s an important 

sensitive question—what are the needs of these particular people, 

but for somebody who’s looked for a long time when I start hearing 

about coping mechanisms I start to shudder a little bit because the 

issues are more systemic. Maybe it’s industrial policy. Maybe it’s 

a national health policy; maybe it’s a national educational policy. 

Commissioner REINSCH. Again, with the premise that’s right, but 

here you are and you’re not going to create a national health policy 

by yourself. Neither are we. So we all work in our own places in 

our own level, and the question was what can you all do at your 

place in your level with respect to this problem? One thing you can 

do is make sure the people that represent you elsewhere, whether 

it’s in Columbus or Washington, are moving on things that you describe. But even when that happens, that’s not going to happen 

next week. Here we are, all these people with problems, and what 

are we going to do about that? 

Co-Chair DREYER. Commissioner Bartholomew. 

Commissioner BARTHOLOMEW. Thank you, this is very thoughtful. I think it’s a good way for us to end the official formal part 

of our session today because it’s dealing again with what’s going on 

in the communities. I was going to start with an amusing observation, which is that you can tell we are not in Washington. There, 

people generally start their comments with ‘‘I’m not a lawyer.’’ 

Today it’s ‘‘I’m not an economist,’’ which is kind of a different orientation. 

Mr. Newport, I want to thank you particularly for documenting 

the exploitative work conditions the Chinese workers are working 

under. That’s a very important piece about what is going on and 

our concerns about what is happening vis a vis China. It’s not an 

attitude of hostility between the American people and the Chinese 

people. Chinese people are being forced to work mandatory overtime 14, 16, 18 hours a day in locked factories and living in dormitories under the worst circumstances. I think it’s important to 

remind people of that because of the importance of continuing to 

push for the rights of the Chinese workers to organize. You have 

a critical piece of the solution. 

Also it’s important to remind people when they purchase products made in China to think about the condition under which they 

were produced so it is not just a competition between American 

workers and Chinese workers. It’s not that the playing field isn’t 

level, but to think about it as people making consumption decisions 

about what are the circumstances under which this product was 

produced, which I might or might not need. I think that’s an important piece of information; I’m very pleased. Thank you. 

Mr. NEWPORT. Thank you. 

Commissioner BARTHOLOMEW. Going back to what is going on in 

the communities here, I have to say that I leave with this real respect and admiration for the strength of all of you and your people 

who are coping with these situations, people who have to get up 

every day and go on with their lives. Some of the difficult circumstances we have heard about what people have had to endure 

is a source of strength for all of us. 
156

I think you mentioned earlier that some of us were in Columbia, 

South Carolina in January and heard similar kinds of stories happening to textile manufacturers primarily. This is a problem that 

is happening in so many American communities. We all have to do 

a better job of making sure not only your voices are heard, but people really believe that they have to do something about it. I can understand the citizens who see politicians coming through every two 

years, every four years, or every six years and saying this won’t 

happen on my watch, and then it happens again and again and 

again, that’s a consequence for the entire country for what it 

means. 

No question on my part. Thank you for the work you’re doing. 

I hope you continue to stay in touch with us as these issues unfold 

and keep us informed about what is happening in the communities. 

Co-Chair DREYER. Thank you. Question for Messrs. Folk and 

Newport. I watched the development of the bicycle industry in Taiwan some years ago with great interest. As you know, Taiwan 

manufacturers were not producing bicycles under their own name. 

Initially, they were manufacturing bikes for Schwinn and others. 

They solved that problem to at least their satisfaction by devising 

their own brand, Giant, and coming up with new technology for bicycles: carbon frames, folding bikes and so on. Could American bicycle manufacturers not compete in that way, or is it just that Taiwan got there first and there’s no more niche for American bicycle 

manufacturers? Or is it just the market is too small because these 

are such specialty bikes? 

Mr. FOLK. I don’t know if I know the whole answer to that question. You know, we went into carbon, not producing it, we imported 

those frames to this country. We painted, assembled the parts to 

them, boxed them, shipped them back out. That was during when 

we asked for subzone relief. It just didn’t pan out. My understanding is we just could not compete with the low wages to what 

they could ship to this country versus what we can bring in——

Co-Chair DREYER. From China or Taiwan or what? 

Mr. FOLK. I’m not sure with reference to the carbon frames——

Co-Chair DREYER. Those must have been Taiwan. 

Mr. FOLK. We buy those frames from them, bring them in here 

and try to make a go and compete. 

Mr. NEWPORT. I have to say that I think that greed has a lot to 

do with it. We were in Celina making bicycles at $17 an hour, including the wages and benefits we had, and that was when they 

opened the nonunion plant in Farmington, Missouri. Top wage in 

that plant was $7. In the Mississippi plant they were probably paying minimum wage, but when they moved they moved them all. 

It still, as I quoted before, had sales of $584 million and profits 

of 97 million that year. It wasn’t that they just picked on the union 

backs, even though as an organizing coordinator and when you see 

what they did to Huffy, but Huffy just wasn’t going to make bicycles in this country. I believe they just decided they were not going 

to do it, and how is anyone in this country going to compete with 

21 to 41 cents an hour and living 12 to a room? Even the coal mine 

towns weren’t that bad. And so I think greed had a lot to do with 

it. Thank you. 
157

Co-Chair DREYER. For Dr. Russo, listening to you and Reverend 

Hagler, I was reminded of just how devastating and worthless one 

feels when one loses a job, and so I can empathize with the despair 

of these people. I was interested though in what Dr. Russo said is 

the recent resentment of labor. It seems to me that ever since I can 

remember labor has been resentful. As a child I read stories about 

the ‘‘dark and satanic mills,’’ and even for gosh sake, the ‘‘patient 

martyrdom’’ of having to take the subway every day. That one I 

couldn’t swallow since I took the subway every day. 

And then in the ’70s workers were upset because of the repetitive 

nature of their work. People used to have to try to alter a car that 

was built on a Tuesday through Thursday, because workers were 

coping with boredom by smoking pot on the lines and putting coke 

bottles in between the door panels to drive the owners crazy. Management responded by introducing robots that don’t smoke pot or 

complain about repetitive labor. So to some extent we have unfortunately sown what we reaped here. Is there any way to recoup 

this? 

There may not be a way to recoup, for example, if you go to 

Maine, you see town after town after town that used to be successful mill towns—Reverend Hagler is nodding—industry never came 

back. Maine is one of the poorest states in the Union. Is there a 

way to reverse this—can we look for new niches in biotechnology 

or something like that to move into or do we simply have to accept 

it? 

Mr. RUSSO. I think that certain politicians these days would prefer to watch Dan Rather than Lou Dobbs because Dobbs is asking 

some really hard questions. For example, he asked Alan Greenspan 

training for what? Greenspan said for whatever. Okay? Jobs will be 

there. And so there really isn’t an easy answer to training for what. 

You heard these different strategies that small business are 

using to improve competitiveness. In many cases, multinational 

corporations are forcing them to engage in certain activities like 

overseas outsourcing. I also resent your characterization of autoworkers. Thirty years ago I was an autoworker. 

Co-Chair DREYER. But you can’t deny that that was the popular 

characterization? 

Mr. RUSSO. It was. I’m writing a new book on Lordstown. The 

Lordstown syndrome is where cars came down with all the parts 

in the front seat. 

For example, what I do in my class is I make my students write 

the first paragraph of their book for 35 seconds and then I say stop. 

And I make them do it again five seconds later because the normal 

job recovery time was five seconds which means the assembly line 

moving a hundred cars an hour. After 40 minutes the students say 

this is not what we paid for. And I say get out of here. You’re fired. 

They begin to leave and within seven minutes there’s rebellion. 

And the point they begin to understand something about the nature of work and how work occurs and part of these struggles in 

an earlier era resulted in the development of quality work life programs, mandatory participation employee involvement. But if you 

talk to the steelworkers about their job, and it was a dirty awful 

job, but there’s nothing like making steel. 
158

We asked an artist why he uses steel elements in terms of his 

work for a book and he looked at us really like you are a dumb academic. He said what is more basic than three types of earth and 

fire? Think about that. Bringing together taconite, coal, and limestone and heating and making something, the pride of making 

something. There are times that I think about the time I spent 

making cars. Often, it is during the times I am grading examinations that I’m missing making something. 

We see now. People are studying the popularity of all these programs on TV on cable channels on making things. People miss 

making things, whether it’s choppers or cars or houses. Something’s going on there, and there’s a sense of community for those 

viewers. Everybody’s feeling isolation as a result of overwork in 

some cases. We still face a lot of problems with overwork, that is, 

people working three jobs, two jobs to just survive. So, people are 

coping—to use the term mentioned earlier. They’re trying every 

way they can to stretch the dollars, but it’s a struggle. But it’s not 

always seen, that underlying resentment and anger and frustration 

about work. 

You can see that in many African-American communities because 

now they openly say there’s an economic draft going on. We have 

a draft in the country that’s economic. If you’re poor, Hispanic, 

black, your way out is the military. And you can just see and listen 

to who’s talking in terms of some of the reports from Iraq. Is that 

the future? And they don’t see any future. Many of these are people 

in my area are former steelworkers. What do they see for their kid? 

I know you didn’t want to talk about that. 

Co-Chair DREYER. Really fast because we are over time. Commissioner Mulloy. 

Commissioner MULLOY. Thank you again for being here. Mr. 

Russo, Sir James Goldsmith was an economist who said there was 

an alternative way of doing this globalization. You would start with 

free trade between the U.S. and Europe, Canada, et cetera, and 

then these other countries like China would be brought in more 

gradually as part of moving their standards of living up. We did 

not choose to go that way because I don’t think people fully understood what we were doing. Have you heard this kind of discussions 

among your economist friends? 

Mr. RUSSO. It’s important for you to understand where you are. 

You’re in Akron, Ohio. Sir James Goldsmith is a name in infamy 

because basically what he did is was borrow a lot of money, bought 

Goodyear stock, pushed the stock price up over one month, and 

made about $400 million and destroyed Goodyear, and here was a 

company that was trying to diversify, move out of the tire business, 

try to move into chemicals and other areas, spent a lot of money 

and getting a smaller return on the investment. 

But by the time Goldsmith was finished with Goodyear, they 

were in recovery. And they had to sell off their assets. So when you 

hear Goldsmith, you must suspend your disbelief. 

But the argument of modeling economic change is very difficult 

as you are obviously finding out, especially in this current sort of 

political climate, and I think as—first of all, we have to bring corporations themselves under control. It’s not going to be done in an 

unregulated type of environment, and yet the trend for the last 
159

couple decades is deregulation. Some have argued that the deregulation is turning back the 20th Century. An at tempt to go back 

to a deregulated economy of the 1920s that some people believe is 

actually on the economic global scale right now? I think it’s going 

to be very difficult, and that to do that without a different critical 

discussion about corporate behavior, about investment behavior. 

We heard today first person from Morgan Stanley I represent my 

shareholders. Okay. That’s going to put enormous constraints on 

corporations. Because their interests are going to be short-termed, 

short-sighted, quick return on the investment. So when we think 

about this, and you think about this developing policy, you have to 

think about not only regulation of manufacturing corporations, but 

also you have to think about in terms of financial communities because the idea of return on investment hamstrings a lot of companies who would like to reinvest and stay here at home but they 

can’t. 

Commissioner MULLOY. Thank you. 

Co-Chair DREYER. Thank you. I would like to declare session five 

closed. 

OPEN MICROPHONE SESSION 

Co-Chair DREYER. Ladies and gentlemen, may I please ask you 

to take your seats. Fellow Commissioners, sit down, please. 

We’re now having an open microphone session. Thanks to all of 

you who sat here so patiently. It’s now your turn. Each individual 

making an oral presentation is going to be limited to three minutes. 

First on my list is Mr. Michael Sayers representing local 2787 

World Kitchen United Steelworkers from Massillon, Ohio. Mr. Sayers. 

Mr. SAYERS. Sorry. I’m not a speaker. 

Co-Chair DREYER. Is your microphone on? Yes, now it is. 

Mr. SAYERS. I’m 75 years old. I’m dying and, in fact, tomorrow 

I get buried. 75 years I put food on the table, paid bills, bought 

homes, helped young and old go to school, go to college and gave 

hope for many of them for retirement. 

I still make money. I was profitable up until tomorrow. I have 

a disease that is fatal. It’s a cancer that was given to me in Washington. The cure is yet to be found. It seems as though you can get 

sick and die before you can get the cure. 

My name is Mike Sayers. I am the president of our local 2887 

World Kitchen, Massillon. We make bake ware. We have been mentioned three or four times today already. And I venture to say that 

each and every one of you in your kitchens at home has our product. I stand here and beg you to walk in my shoes tomorrow and 

October 1st. I get to tell my large family good-bye and good luck. 

People have been there, one in particular for 29 years and 50 

weeks, two weeks shy of his 30 years and he won’t get it. People 

have been there for 25 years looking for that last five. People have 

been there ten years thinking they have something to fall back on 

for retirement, and people who only just started had the goal of a 

steady income, apple pie and retirement. And all I can say to them 

is good luck. I wish you well. 
160

Good luck to the Mr. Evans of Gentzler Tool and Die who spoke 

earlier. They hurt because of us. Good luck to all of our schools and 

all of our local agencies because they are going to have a bigger 

burden on their hands now. Most of all, good luck to our kids. We 

spoke about it, what do they have to look forward to? Nothing. We 

are fighting now for our lives. Can’t imagine what they are going 

to fight for. 

All I really ask you to do is try to help find a cure for this. I don’t 

know what it is. I don’t know if you do. Maybe a combination of 

the group can find it and get somebody that can. I sure don’t know 

what it is and I’m too old to work, too old to start over. I have got 

less than ten years before I can retire. This was my one shot. It’s 

gone. 

I don’t blame the company. The company only did what they 

were supposed to do. This was dealt to them. You want to be profitable. You want to make money. This is what you got to do. It’s 

what they did at Huffy and everybody else that’s done this. 

So I thank you for letting me speak briefly, and as you can tell 

I’m not a speaker, but I’m passionate and I have lost a big family. 

Thank you. 

Co-Chair DREYER. Thank you, Mr. Sayers. 

Next will be Dave McCune from Massillon, Ohio. 

Mr. MCCUNE. Good afternoon. I am David McCune, and I am the 

former USWA Unit Chairman of the facility last known as 

Massillon Stainless, Incorporated. My former facility was the original all-encompassing stainless steel cold rolling facility in the 

United States. Our product contributed in many different ways to 

people’s everyday lives. 

Along with those contributions we also helped arm not only our 

nation’s armed forces, but also the armed forces of many other nations in World War II, Korea and Vietnam. 

Our facility also contributed to such landmarks as the Empire 

State Building, the Chrysler Building and the former World Trade 

Center. If you ever stood in that big, shiny lobby of our former 

Twin Towers, you viewed our work and our facility’s contribution 

to that once proud symbol of American commerce. 

Jindal Strips, Ltd., of India purchased my former facility in 2000 

for $3.5 million from the now former Bethlehem Steel Corporation. 

After being unable to adapt to the American stainless market, 

Jindal made the decision to close the facility in November of 2003. 

After the time of their purchase of our facility, Jindal promised 

the city of Massillon to not only create jobs but to also do further 

investments in the facility. Due to those promises, the city of 

Massillon granted Jindal a ten-year 75 percent tax abatement. 

Jindal’s failure resulted in the loss of our jobs and our ability to 

properly provide for our families, but also the loss of $120,000 per 

year in the years 2001 and 2002 by the local government and the 

Massillon City School System coupled by a loss of $150,000 in personal property taxes for the year 2002 by the city of Massillon itself 

due to a 70 percent property tax abatement the State of Ohio 

awarded Jindal at the time of their purchase of the facility. 

Jindal also defaulted on $300,000 of a $1.2 million loan that was 

a portion of an earmarked $3 million loan of which I, along with 
161

the USWA’s state political director, acquired for them after they 

had been turned down for in an effort to secure our futures. 

Early in 2002, the local Indian management group had decided 

to work with myself and the Ohio Employee Ownership Center on 

identifying a possible strategic partner for the company. But prior 

to investigating that possibility we first had to have a feasibility 

study performed on the facility to determine if, in fact, the facility 

was a viable entity worthy of investment. 

With the aid of the Ohio Employee Ownership Center, the city 

of Massillon and the USWA, we were able to afford to have the 

study done. The study was performed by Locker Associates of New 

York City, a leader in the field of saving distressed facilities by 

identifying purchasers and/or strategic partners. This study found 

that our former facility was, in fact, a very viable and very worthwhile investment. 

But before we could get far along in the process, the owner flew 

in from India and announced his decision to close the facility. It 

was at this time Mr. Jindal had me informed that due to my assistance with acquiring the low interest state loan for the company he 

would set the price for the facility at $8 million, and if Locker Associates could identify a potential purchaser before he could close a 

deal with a Chinese concern, he would permit a domestic sale rather than a Chinese sale. 

He did so knowing all along he was asking an exorbitant price 

for the facility, a price that would most likely prevent a sale to a 

domestic buyer. But we were, in fact, able to identify three potential purchasers. 

Even armed with that knowledge, Jindal refused us the time required to get funding for a purchase and announced the sale of all 

equipment to a Chinese concern, and today, an entire U.S. stainless cold rolling facility has been relocated to China, not only costing myself and my former coworkers our jobs, but also many other 

additional American steelworkers who will be adversely impacted 

by the product that will be produced off of our machinery and 

shipped back into this country stamped ‘‘made in China’’ at prices 

U.S. producers cannot compete against. 

Because of these actions along with the import penetration that 

already existed in the U.S. stainless market, myself and my former 

coworkers of the facility were awarded TRA/TAA. With our facility 

now in China, that import penetration will continue to grow, and 

with that penetration, additional U.S. facilities and the workers 

will most likely face the same fate as my former coworkers and myself, a fate that I must say leaves not only families but entire communities at risk. 

In closing, I want to thank everyone for taking the time to hear 

this short and not so sweet story of my former facility’s demise. 

Please consider doing everything possible to see that our nation’s 

trade policies, especially those policies in regard to China, are investigated and changed so as to prevent others from facing the 

same fate that my former coworkers and I now face which is a 

very, very uncertain future for our families, our communities and 

ourselves. Thank you. 

Co-Chair DREYER. Thank you, Mr. McCune. 
162

Next on my list is Mr. Dennis Black of the Save American Manufacturers of New York, Creative Relations. 

Mr. BLACK. I am Dennis Black. Thank you for the opportunity. 

A little bit of background about myself. I spent a little over 36 

years in the automobile industry before ending up an executive. 

That took me around the world, so I had firsthand experience with 

the setting up of numerous facilities like we have been talking 

about today. That was my job, subsequently I’m retired. 

The bottom line is, I understood this is just not right. I heard all 

the stories today. There are thousands and millions of stories, each 

and every one about much disruption. I’d just like to make a comment or two and observation from my level that comes to my mind 

about what’s really going on here. 

First, I have pulled here from a friend of mine who’s an HR recruiter, Hal Netkin, who’s currently retired himself and a big activist on anti-immigration policy in Los Angeles, quite a name out 

there. But while he was doing his recruiting, he had a conversation 

that I thought recapitulated the name of this game and was certainly consistent with my view of the world very succinctly. 

I once asked a marketing guru that I placed with Carrier in Syracuse who he had a lots of relationships with Carrier—and by the 

way that’s one of the recent major casualties of this Carrier Corporation of United Technologies. I asked him what was involved in 

global marketing. He said, there are just three objectives. One, get 

the component parts from anywhere in the world that manufacture 

them for the least amount of money. Two, assemble the component 

parts from anywhere in the world where labor is cheapest, and 

three, sell the finished product anywhere in the world where the 

market exists. 

Never mind how this affects blue collar or professional workers 

who eventually wouldn’t be able to afford the cheap Chinese or another country’s products. And I would submit to you that this is the 

name of the game that’s been perpetrated upon the American 

worker and small businessman for these last decade and a half. 

My request to the Commission, please, is when you get back and 

you talk to Mr. Zoellick and the congressmen: I think when you are 

sick, the first thing you need to do is get out of denial. 

I’ve heard several times today, and I couldn’t agree more wholeheartedly, that what’s been going on here in the last decade or two 

is a battle between the theorists and realists. What we heard here 

today are a lot of the realists. However, I think the theorists have 

been winning. 

So if you would, please, make a button like this, but when you 

are talking to these folks the first thing is the need for them to get 

out of denial and simply come to the realization that whatever’s 

been going on is not working. It is not working. 

And the second thing would be that if it continues to persist in 

being oblivious to this eventually the American public will wake up 

enough and there will be enough disruption that the people that 

these folks work for will be replaced. And it can’t be soon enough 

for some of them. Please carry that message back. Get out of denial. 
163

Co-Chair DREYER. Thank you. It was, believe it or not, Chairman 

Mao Zedong who said if your theory differs from reality, it’s time 

to rethink the theory. 

And with that as background Frank Rayl, representing Local 

3816 of the Steelworkers of America from Columbiana County, 

Salem, Ohio. 

Mr. RAYL. I was present in the Steelworkers Local 3816. I’m here 

today representing working families of Columbiana County, specifically Salem, Ohio where the plant I worked at, Eljer, closed and 

went to China. 253 jobs were lost May 28th, 2004 and a community 

lost a plant that had been there one hundred years. The company 

at one time was shut down by the government to make bonds for 

World War II. 

On September 28th, 2003 we were told the company lost money 

and it was no longer feasible to continue production at our plant. 

The company stated to us they could get cheap labor in China. 

They didn’t have to worry about EPA, OSHA, workers’ comp, 

health insurance. 

They said they lost 4.8 million, and we immediately went to work 

to try to recoup that 4.8 to keep the plant open. They got a little 

bit worried that we were coming up with numbers that might meet 

what they wanted, and they suddenly raised it to seven million because they could make 2.2 million in China so now the new number 

was seven. 

After some hard negotiations and some serious, serious numbers 

crunching, we ended up passing a proposal that we thought was 

worth $9 million. They took it behind closed doors, hacked it up 

and said it was worth about four, four and half. If they didn’t have 

seven up front, they were just going to go ahead and close the 

doors. So we knew there was no way we could come up with that. 

One of the company officials who had gone over to help set up 

in China told me that the Chinese workers at the plants work 12 

hours a day, seven days a week, 50 weeks a year. They get two 

weeks off for Chinese New Year. The lowest paid worker made $50 

a month; the highest got paid a little over a hundred dollars a 

month. 

Our community is now in trouble financially and has stated that 

the reason is our plant closing. The City Council is trying to find 

ways to cut money there. Now, they are even trying to get rid of 

our full-time, professional, union-operated fire department and go 

to a volunteer fire department in a nearby township. Our plant 

closing will forever have an impact on that community, that in 

1922 when the plant burned down didn’t have enough money to 

build again. The city residents raised $15,000 to rebuild that plant. 

There have been some horror stories about fellow workers in the 

short time the plant been closed. Houses have been lost, families 

moved, bankruptcy, health problems divorce and we have had one 

suicide. I hope the Commission takes a serious look at this trade 

issue and its impact. 

I’m not sitting still. I’m a candidate for state representative in 

Columbiana County where my plant was. And I just hope that we 

can find a solution so these stories end up stopping. So thank you 

for allowing me the time to speak today. 

Co-Chair DREYER. Thank you for speaking to us, Mr. Rayl. 
164

Last, but not least, Mr. Curtis Ellis representing I Squared R 

Element Company from Akron, New York. 

Mr. ELLIS. Akron, New York. 

Co-Chair DREYER. I didn’t realize it existed until this morning. 

Mr. ELLIS. Much smaller than Akron, Ohio. I Squared R Element 

Company, thank you for letting me speak. My name is Curtis Ellis. 

I’m here on behalf of Jack Davis who has asked to have his statement read into the record. 

Jack Davis is an engineer, a former Naval officer, patriot and the 

founder, owner and manager of a successful manufacturing business, the I Squared R Element Company located in Akron, New 

York. I Squared R Element is the nation’s largest manufacturer of 

silicon and carbine heating elements. It is a ceramic product. These 

are used in high temperature electric furnaces. This company 

makes the things which makes the things which makes the things 

which show up in your home. 

Some of his customers include General Motors, Corning Glass, 

numerous foundries, companies like that. Now most of his customers are overseas. 

The workers at this company earn an average of $25 an hour 

with full benefits and a profit sharing plan. The company is still 

profitable. The company is not for sale and it is not sending any 

jobs to China. 

Jack Davis is also a candidate for U.S. Congress in the 26th District of New York in the Buffalo, Rochester area. He is on the 

democratic and working-family party line. Mr. Davis was a life-long 

Republican, voted for Barry Goldwater, gave thousands of dollars 

to Mr. Bush and Mr. Cheney. When they would not listen to him 

on the issues of free trade, he is now a Democrat. Mr. Davis would 

like me to read this statement into the record. 

‘‘The future of our country is at stake. We are at war, an economic war, and we are losing. The shock troops in this war are 100 

million red Chinese willing to work for less than one dollar an 

hour. They are aided and abetted by a fifth column of multinational corporations, American in name only, paid lobbyists, and 

bought and paid for politicians in Washington. 

‘‘Our elected officials are actually encouraging American companies to move offshore. For a nation to be strong it must grow, dig 

or make a product. We are losing that ability as multinational corporations and fellow travelers invest and manufacture in low wage 

countries like China. We cannot maintain our standard of living if 

we send our good paying jobs overseas, period. 

‘‘Let’s face the facts. Our cost of labor, infrastructure, energy, environmental and safety regulations make America the high-cost 

producer in the world today. Our industries and farms simply cannot compete. And that would be true even if every American were 

paid minimum wage, taxes reduced to zero, all health and safety 

regulations removed, and we dumped our waste into the streets. 

But would we want to live in a country like that? That is not the 

America we know and love. 

‘‘As a candidate and as a called out realist, I support tariffs as 

one tool to balance trade and stop the flood of imports that are devastating American farms and industries. I believe in defending 
165

American farmers and workers and the American people against 

the slave labor of Communist China. 

‘‘The stakes could not be higher. Our country is being destroyed. 

White collar, blue collar, management, labor, union, nonunion, academics, intellectuals, farmers. Together we will change how business is done in Washington. Their jobs aren’t safe if our jobs aren’t 

safe. Then together we’ll make three words a reality: Made in 

America.’’

Thank you. 

Co-Chair DREYER. Thank you. Thank you very much, Mr. Ellis. 

Do any Commissioners have any thoughts they would like to share 

with our microphone people? 

Again, I very much want to thank you for coming all this way 

and speaking your very moving words. 

Conducting a regional hearing takes a lot of hard work and personal devotion and long hours of planning and advising and implementing and coordination on your part and some on ours too. We 

are very fortunate as a Commission to have a devoted staff, and 

I would personally like to thank on behalf of all of us Dr. Tom 

Palley, the Commission’s Chief Economist, David Ohrenstein, the 

Commission’s Chief Executive Director, and Tony Sutton, the program analyst who really, really worked hard and was instrumental 

in this hearing. Also to thank a couple people I don’t see here, Justin Rzepka, M.L. Faunce, and Davetta Vaughn for their hard work 

and assistance. 

I consider this regional hearing a great success in providing an 

opportunity for the Commissioners to learn about the economic impact of trade with China on the regional industrial and manufacturing sectors of Ohio and New York. 

We are very appreciative of all the support we have received and 

very grateful to all of you for taking the time to appear before this 

Commission today. We’ll be sending a copy of the transcript for 

each participant to review and would appreciate a quick response 

so we can print and distribute the hearing record to Congress as 

soon as possible. It will also appear on the Commission’s Website, 

www.uscc.gov, so you can recommend it to all your friends. And, 

again, we thank all the participants for their excellent testimony 

and for their support of our—the Commission’s work and activities 

and I hereby——

Commissioner BARTHOLOMEW. Co-Chair Dreyer, I just want to direct a compliment to the work of the Commission staffer Kathy 

Michels who keeps us all going. 

Co-Chair DREYER. Here, here. 

Commissioner BARTHOLOMEW. Thank you. 

Co-Chair DREYER. A special round of thanks for Kathy Michels, 

and now I would like to draw this to a close. Thank you again. 

[Proceedings concluded at 5:35 p.m.] 
(166)

STATUTORY MANDATE OF THE U.S.-CHINA ECONOMIC AND SECURITY 

REVIEW COMMISSION 

Pursuant to Public Law 108–7, Division P, enacted February 20, 

2003

RESPONSIBILITIES OF THE COMMISSION.—The United 

States-China Commission shall focus, in lieu of any other areas of 

work or study, on the following:

PROLIFERATION PRACTICES.—The Commission shall analyze and assess the Chinese role in the proliferation of weapons of 

mass destruction and other weapons (including dual use technologies) to terrorist-sponsoring states, and suggest possible steps 

which the United States might take, including economic sanctions, 

to encourage the Chinese to stop such practices.

ECONOMIC REFORMS AND UNITED STATES ECONOMIC TRANSFERS.—The Commission shall analyze and assess 

the qualitative and quantitative nature of the shift of United 

States production activities to China, including the relocation of 

high-technology, manufacturing, and R&D facilities; the impact of 

these transfers on United States national security, including political influence by the Chinese Government over American firms, dependence of the United States national security industrial base on 

Chinese imports, the adequacy of United States export control 

laws, and the effect of these transfers on United States economic 

security, employment, and the standard of living of the American 

people; analyze China’s national budget and assess China’s fiscal 

strength to address internal instability problems and assess the 

likelihood of externalization of such problems.

ENERGY.—The Commission shall evaluate and assess how China’s large and growing economy will impact upon world energy 

supplies and the role the United States can play, including joint 

R&D efforts and technological assistance, in influencing China’s energy policy.

UNITED STATES CAPITAL MARKETS.—The Commission 

shall evaluate the extent of Chinese access to, and use of United 

States capital markets, and whether the existing disclosure and 

transparency rules are adequate to identify Chinese companies 

which are active in United States markets and are also engaged in 

proliferation activities or other activities harmful to United States 

security interests.

CORPORATE REPORTING.—The Commission shall assess 

United States trade and investment relationship with China, including the need for corporate reporting on United States investments in China and incentives that China may be offering to 

United States corporations to relocate production and R&D to 

China.
167

REGIONAL ECONOMIC AND SECURITY IMPACTS.—The 

Commission shall assess the extent of China’s ‘‘hollowing-out’’ of 

Asian manufacturing economies, and the impact on United States 

economic and security interests in the region; review the triangular 

economic and security relationship among the United States, Taipei and Beijing, including Beijing’s military modernization and 

force deployments aimed at Taipei, and the adequacy of United 

States executive branch coordination and consultation with Congress on United States arms sales and defense relationship with 

Taipei.

UNITED STATES-CHINA BILATERAL PROGRAMS.—The 

Commission shall assess science and technology programs to evaluate if the United States is developing an adequate coordinating 

mechanism with appropriate review by the intelligence community 

with Congress; assess the degree of non-compliance by China and 

[with] United States-China agreements on prison labor imports and 

intellectual property rights; evaluate United States enforcement 

policies; and recommend what new measures the United States 

Government might take to strengthen our laws and enforcement 

activities and to encourage compliance by the Chinese.

WORLD TRADE ORGANIZATION COMPLIANCE.—The 

Commission shall review China’s record of compliance to date with 

its accession agreement to the WTO, and explore what incentives 

and policy initiatives should be pursued to promote further compliance by China.

MEDIA CONTROL.—The Commission shall evaluate Chinese 

government efforts to influence and control perceptions of the 

United States and its policies through the internet, the Chinese 

print and electronic media, and Chinese internal propaganda. 

(I)

LIST OF WITNESSES, COMMUNICATIONS, AND 

PREPARED STATEMENTS 

Page 

Bartlett, Douglas, Owner, Bartlett Manufacturing Company, and Director, 

United States Printed Circuit Alliance, Cary, Illinois ...................................... 89

Prepared statement .......................................................................................... 92

Burga, William A., President, Ohio AFL–CIO, Columbus, Ohio ......................... 7

Prepared statement .......................................................................................... 8

Cain, Bruce A., President, Xcel Mold and Machine, Incorporated, Canton, 

Ohio ....................................................................................................................... 116

Prepared statement .......................................................................................... 119

Colm, John, Executive Director, WIRE-Net, Cleveland, Ohio ...................... 113

D’Amato, Chairman C. Richard 

Opening remarks of .......................................................................................... 1

Prepared statement .......................................................................................... 2

Dreyer, June Teufel, Hearing Co-Chair 

Opening remarks of .......................................................................................... 5

Prepared statement .......................................................................................... 6

Evans, Jim, Purchasing Manager, Gentzler Tool and Die, Green, Ohio ............. 122

Eynden, Jerry Vanden, President, Lancaster Colony Glassware and Candle 

Group, Cincinnati, Ohio, on behalf of Candle-Lite and National Candle 

Association, accompanied by Brad Root ............................................................. 82

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

Folk, John C., United Steelworkers of America, District 1, Columbus, Ohio ..... 132

Prepared statement .......................................................................................... 137

Gettelfinger, Ron, President, International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW), Detroit, 

Michigan ............................................................................................................... 35

Prepared statement .......................................................................................... 38

Girsky, Stephen, Managing Director, Morgan Stanley, Purchase, New York .... 43

Hagler, Reverend Anne, Akron, Ohio .................................................................... 145

Hansen, David, Managing Director, Ohio Manufacturers’ Association, Columbus, Ohio ............................................................................................................... 14

Prepared statement .......................................................................................... 17

Honeck, Jon, Ph.D., Research Analyst, Policy Matters Ohio, Columbus, Ohio .. 10

Prepared statement .......................................................................................... 12

Imbrogno, Dan, President and CEO, Ohio Screw Products, Incorporated, Elyria, Ohio .................................................................................................................. 111

Johnson, David W., President and CEO, Summitville Tiles, Incorporated, 

Summitville, Ohio ................................................................................................ 75

Prepared statement .......................................................................................... 77

McCall, David, District 1 Director, United Steelworkers of America, Columbus, Ohio ............................................................................................................... 65

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

Murphy, David, Director of Personnel, Ferriot, Incorporated, Akron, Ohio ....... 115

Newport, James C., Organizing Coordinator, United Steelworkers of America, 

District 1, Columbus, Ohio .................................................................................. 134

Prepared statement .......................................................................................... 137

Otterstedt, Jeff, Vice President and General Manager, Clow Water Systems, 

Coshocton, Ohio .................................................................................................... 19

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

Pearl, James G., Senior Vice President of Sales and Marketing, Denman 

Tire Corporation, Leavittsburg, Ohio ................................................................. 46

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

Root, Brad, Lancaster Colony Glassware and Candle Group, Cincinnati, Ohio, 

on behalf of Candle-Lite and National Candle Association .............................. 82
Page

II

Root, Brad, Lancaster Colony Glassware and Candle Group, Cincinnati, Ohio, 

on behalf of Candle-Lite and National Candle Association—Continued

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

Russo, John, Ph.D., Professor, Labor Studies, the Warren P. Williamson College of Business Administration, Co-Director, Center for Working-Class 

Studies, Youngstown State University, Youngstown, Ohio .............................. 141

Prepared statement .......................................................................................... 143

Tackett, Scott, Vice President, Human Resources and Administration, 

Denman Tire Corporation, Leavittsburg, Ohio .................................................. 46

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

Wessel, Michael R., Hearing Co-Chair 

Opening remarks of .......................................................................................... 3

Prepared statement .......................................................................................... 4