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81–575 2002

EFFECT OF THE OVERVALUED DOLLAR ON SMALL

EXPORTERS

HEARING

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

WASHINGTON, DC, JUNE 12, 2002

Serial No. 107–61

Printed for the use of the Committee on Small Business

(

(II)

COMMITTEE ON SMALL BUSINESS 

DONALD MANZULLO, Illinois, Chairman

LARRY COMBEST, Texas 

JOEL HEFLEY, Colorado 

ROSCOE G. BARTLETT, Maryland 

FRANK A. LOBIONDO, New Jersey 

SUE W. KELLY, New York 

STEVE CHABOT, Ohio 

PATRICK J. TOOMEY, Pennsylvania 

JIM DEMINT, South Carolina 

JOHN R. THUNE, South Dakota 

MICHAEL PENCE, Indiana 

MIKE FERGUSON, New Jersey 

DARRELL E. ISSA, California 

SAM GRAVES, Missouri 

EDWARD L. SCHROCK, Virginia 

FELIX J. GRUCCI, JR., New York 

TODD W. AKIN, Missouri 

SHELLEY MOORE CAPITO, West Virginia 

BILL SHUSTER, Pennsylvania 

NYDIA M. VELA ́ ZQUEZ, New York 

JUANITA MILLENDER–MCDONALD, 

California 

DANNY K. DAVIS, Illinois 

BILL PASCRELL, JR., New Jersey 

DONNA M. CHRISTENSEN, Virgin Islands 

ROBERT A. BRADY, Pennsylvania 

TOM UDALL, New Mexico 

STEPHANIE TUBBS JONES, Ohio 

CHARLES A. GONZALEZ, Texas 

DAVID D. PHELPS, Illinois 

GRACE F. NAPOLITANO, California 

BRIAN BAIRD, Washington 

MARK UDALL, Colorado 

JAMES R. LANGEVIN, Rhode Island 

MIKE ROSS, Arkansas 

BRAD CARSON, Oklahoma 

ANI ́BAL ACEVEDO–VILA ́ , Puerto Rico 

DOUG THOMAS, Staff Director

PHIL ESKELAND, Deputy Staff Director

MICHAEL DAY, Minority Staff Director

(III)

C O N T E N T S 

Page 

Hearing held on June 12, 2002 ............................................................................... 1

WITNESSES

Chimerine, Dr. Lawrence, Economist .................................................................... 1

Raimondo, Tony, President & CEO, Behlen Manufacturing Company ............... 4

Weskamp, Robert J., President, Wes-Tech, Inc. .................................................... 6

Dollar, Wayne, President, Georgia Farm Bureau ................................................. 8

George, Vargese, President & CEO, Westex International, Inc. ......................... 10

APPENDIX

Opening statements: 

Manzullo, Hon. Donald .................................................................................... 23

Vela ́zquez, Hon. Nydia ..................................................................................... 25

Prepared statements: 

Chimerine, Dr. Lawrence ................................................................................. 27

Raimondo, Tony ................................................................................................ 34

Weskamp, Robert .............................................................................................. 43

Dollar, Wayne ................................................................................................... 52

George, Vargese ................................................................................................ 62

Additional Information: Correspondence sent to committee on the overvalued 

dollar ..................................................................................................................... 68

(1)

EFFECT OF THE OVERVALUED DOLLAR ON 

SMALL EXPORTERS 

WEDNESDAY, JUNE 12, 2002 

HOUSE OF REPRESENTATIVES, COMMITTEE ON SMALL BUSINESS, Washington, DC. 

The Committee met, pursuant to call, at 10:02 a.m. in room 

2360, Rayburn House Office Building, Hon. Donald Manzullo 

(Chairman of the Committee) presiding. 

Chairman MANZULLO. We are going to call the Committee to 

order. We have an eleven o’clock joint session to welcome John 

Howard who is the Prime Minister of Australia, and I really want 

to finish before that happens. 

I am going to waive the opening statement, move immediately 

into testimony on the effect of overvalued dollar. The title is Effect 

of Overvalued Dollar on Small Exporters, but it is really the effect 

of overvalued dollar on small businesspeople because we have people involved in manufacturing and other sales that do not export, 

but who are losing a share to people who do export into this country, to those customers that are normally those of the small manufacturers who have been displaced because of the high dollar. 

Let us move immediately to the testimony of Dr.—you have got 

to help me—Chimerine. 

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

Mr. CHIMERINE. Chimerine. 

Chairman MANZULLO. Chimerine, President of Radnor International Consulting. We are going to put on the five-minute clock, 

so we have plenty of opportunity for interaction afterwards. 

And, Doctor, we look forward to your testimony. 

STATEMENT OF LAWRENCE CHIMERINE, PRESIDENT, RADNOR 

INTERNATIONAL CONSULTING 

Mr. CHIMERINE. Thank you very much, and I will stick within 

the schedule. I am going to talk primarily about the macroeconomic 

impact or the overvalued dollar. 

Chairman MANZULLO. Okay, if you could keep the microphone 

closer to your mouth, it is a lot easier to hear. Thank you. 

Mr. CHIMERINE. I am going to talk mostly about the macroeconomic impacts and the impacts on small businesses of both the 

trade deficit and the dollar. 

It was very fashionable in this country during the 1990s to argue 

that trade deficits do not matter because the economy did so well 

despite the fact that our trade deficit was rising to levels that we 

had never seen before. 

2

In my opinion, that was a temporary phenomenon. Trade deficits 

do matter. They did not in the nineties because domestic demand— consumer spending, housing, business spending for capital goods— rose so rapidly that they offset the increase of the trade deficit on 

the economy. In fact, some of the increase in the trade deficit was 

simply a reflection of how strong the U.S. economy was. It was 

sucking in more imports because demand was so strong. 

Plus, you know, there were some benefits from the overvalued 

dollar. It held inflation down a little bit, and held interest rates 

down which contributed to strong domestic economic growth. 

The situation is very different now. It is highly unlikely we are 

going to see domestic demand rise at the rate it did during the 

1990s at any time in the near future. But the trade deficit continues to rise. This will make already slow economic growth much 

slower. In fact, you can argue that without a decline in the trade 

deficit to offset or negate some of the slower growth in domestic demand, the economy is going to go virtually nowhere for the next 

several years, or at best a slow and uneven recovery. 

So the trade deficit is a serious macroeconomic problem in the 

short term, because if it doesn’t come down it will hold down our 

economic growth. It is also a problem in the long term because we 

are building up so much foreign debt because of these trade deficits. Sooner or later foreigners are going to decide they do not want 

to keep accumulating dollar assets. When that happens you will 

see a huge increase in our interest rates. So longer term it is a big 

threat to prosperity as well. 

We need to bring the trade deficit down, and the dollar is the 

key. There are a number of reasons why we have these large trade 

deficits, particularly the structural portion that does not relate to 

macroeconomic trends. For example, many markets are still closed 

overseas. Foreigners dump many products into the U.S. market. 

But right now the biggest factor is the misalignment of exchange 

rates. Everybody, I think, here knows the dollar is at least 25 to 

30 percent overvalued against most currencies. 

I am not an advocate of a weak dollar, but I think sometimes we 

make the mistake of thinking, well, if you are not for a weak dollar, you are for a strong dollar. And the problem is the law of diminishing returns applies to exchange rates like it does to everything else. If the dollar keeps getting stronger and stronger, at 

some point the negative effect on trade flows, by holding down exports, and leading to increased import penetration displacing domestic production as well, these trade effects, which we have seen 

in large measure over the last couple of years, begin to outweigh 

the positive effect of the dollar on interest rates and inflation. We 

are going to have low inflation anyway. We do not need the dollar 

to keep getting stronger and stronger to hold down U.S. inflation. 

We have competition doing it in this economy. 

There is no doubt in my mind that we are far beyond the point 

where the dollar is a help to the U.S. economy. It has become a 

big negative through these trade effects, not only in the short term 

and through the macro effects, but it is hurting the long-term competitiveness as well. All the industries, particularly manufacturing 

and agriculture, that are being hurt by the strong dollar, do not 

generate the business volumes and the profits to afford to make the 

3

new investments they need to make to remain competitive in the 

long term. So it hurts the economy in the short term through trade 

flows, and hurts long-term competitiveness. 

Small businesses are hurt the worst because they do not get the 

economies of scale, the benefits from having large operations where 

you can hold down average costs through economies of scale, and 

offset some of the disadvantage caused by misaligned exchange 

rates. So it is a problem for the macroeconomy, and an even bigger 

problem for small businesses. 

It is almost the equivalent of legalized dumping. I mean, the exchange rate advantage is so huge for foreign exporters that they 

can sell into the U.S. market at very low prices without even 

dumping, and they make fat profit margins in the process. 

What do we do about it? Very quickly, I think three or four 

things. 

Number one, we need to put more pressure on foreign countries 

to simulate their own economies, to grow out of the current malaise 

we are seeing, particularly in Western Europe, and in Japan, and 

in other parts of the world. Most of those countries are waiting for 

the U.S. economy to go up to lift their exports to bring them out 

of their recessions. We should make it clear to them that is no 

longer acceptable. They have got to stimulate domestic demand by 

cutting interest rates, cutting taxes, raising spending, or whatever 

other measures are appropriate; in Japan, fixing their banking 

problems more rapidly would be a help. 

Secondly, we have got to tell these countries, particularly Japan, 

Taiwan, China and others, that we are no longer going to tolerate 

their manipulation of exchange rates. Those central banks accumulate dollars at a huge rate to prevent them from hitting the exchange markets. It keeps the dollar overvalued, and their currencies undervalued, to help them export. That comes at our expense and we ought to make it clear that that is no longer acceptable. 

And finally, I think it is very, very important that in this country 

we watch our fiscal and monetary policy to make sure they are 

being implemented in a manner that is conducive to a more fair 

dollar, and conducive to a better trade balance than we have had 

in recent years. 

For example, in the next several years, if we keep running larger 

and larger budget deficits, it will increase our dependence on foreign capital, probably push the dollar even higher, and that would 

be counterproductive. 

So I think we need to look at our own policies, and we have got 

to make it clear to our foreign counterparts they have got to—they 

cannot just depend on the U.S. to lift everybody up, and they have 

also got to stop manipulating their exchange rates. 

Thank you, Mr. Chairman. 

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

Chairman MANZULLO. Thank you, Doctor. 

Our next witness is Tony Raimondo; is that right? 

Mr. RAIMONDO. Thank you, Mr. Chairman. 

Chairman MANZULLO. Okay. President and Chief Executive Officer of Behlen Manufacturing of Columbus, Nebraska. Where is Columbus. 

4

Mr. RAIMONDO. Columbus, Nebraska is about 70 miles northwest 

of Omaha. 

Chairman MANZULLO. Okay. Look forward to your testimony. 

Mr. RAIMONDO. Thank you very much, Mr. Chairman. 

Chairman MANZULLO. The complete statements of the witnesses 

and all the members will be made part of the permanent record, 

without objection. 

Go ahead. 

STATEMENT OF TONY RAIMONDO, CHAIRMAN AND CHIEF 

EXECUTIVE OFFICER, BEHLEN MANUFACTURING COMPANY 

Mr. RAIMONDO. Thank you. I will not repeat that then, my little 

overview. 

Yes, I am CEO of Behlen Manufacturing, a very diverse metal 

fabrication company. We are a medium-sized manufacture of preengineered metal building, grain bins, dryers, we call them silos all 

around the world. We have got product in over 50 nations, and I 

am very proud that we were a recipient of the President’s E-Award. 

I wanted to commend you, Mr. Chairman, for holding this hearing on what is one of the most serious problems facing small and 

medium-sized manufacturers. 

As you know, I am also on the NAM board, National Association 

of Manufacturers, and representing, if I say SMM’s, it is small, medium-sized manufacturers. We are among the best in the world. We 

have really done some tremendous things in the nineties as we 

have gotten globally more competitive than ever in America. 

We are innovative, productive and competitive in all respects as 

long as the playing field is level. Exports are important to small 

and medium-sized companies. In fact, we comprise 97 percent of all 

U.S. exporters and account for about one-third of all U.S. merchandise that is exported. 

Unfortunately, there is a major factor beyond our control that 

has tilted the global playing field against us and it is causing extremely serious harm in America’s small and medium-sized factories. The factor, as you know, is the overvalued dollar. 

After more than a decade of relatively stability the dollar started 

shooting up around 1997, and by February this year it has risen 

30 percent. That rise has had a devastating effect on my firm’s exports and on small and medium-sized manufacturers across the 

country. The dollar has since declined slightly against some major 

currencies, but still has a long way to go. 

Let me explain the effect on my company. We built our exports 

to a point at which in 1998 we had reached 15 percent of our volume. We were a little naive at that point in time. We set a goal 

for 20 percent. As the dollar continued to rise, I find my company 

today in the eight percent range, and we continue to be globally 

competitive. As the dollar began to appreciate significantly, we 

began losing out to foreign competitors not because they are more 

productive or began producing a better product, just because of the 

rising value of the dollar. 

Instead of continuing to grow, our exports have fallen. Behlen 

Manufacturing is not alone in this dilemma. Being on the board of 

directors of the NAM, National Association of Manufacturers, I met 

with several, and we have been inundated with letters, as you 

5

know, Mr. Chairman, and I can tell that this story is very, very 

typical. 

In our situation we have lost—we used to like to say that we 

had, at any given time 100 jobs in Columbus, Nebraska working 

on exports. Today we are lucky to have 50, and it is getting more 

difficult.

The U.S. manufactured export goods have fallen at an amazing $140 billion in the last two years, principally because of the dollar’s 

overvaluation. To put this loss in perspective, it is as large as the 

entire gain, that the NAM estimates, will come from the free trade 

area of the Americas when it is fully implemented 14 years down 

the road. So we are talking about big, big impacts. 

The SMM’s share of that 140 billion decline is about 45 billion 

that we have lost in exports. We cannot suffer that kind of huge 

loss without incurring severe setbacks in production and employment. 

In addition to the thousands of SMM’s who are affected by the 

dollar impact on their exports, the are thousands more who are 

also, as you mentioned earlier, affected by unrealistically low import prices in domestic markets stemming from the overvalued dollar. 

Many smaller firms have written to the Committee. America’s 

SMM’s are not seeking an artificially cheap dollar. What we are 

asking for is recognition that the dollar has been allowed to become 

seriously overvalued and the overvaluation is imposing a very high 

cost on SMM’s and on the entire economy as a whole. The dollar 

is distorted and needs to be restored to normal levels. 

Certainly a starting point must be the U.S. government to stop 

advocating a strong dollars when the dollar is already so overvalued, and to begin working actively to restore the dollar to normal levels. Whatever needs to be done should be done. 

The U.S. government should also object when other countries intervene in foreign currency markets to prevent their currency from 

adjusting to market-driven changes. I just spent two weeks in 

China while the dollar was somewhat softening, a very little 

amount, and every other day you would read about Japan taking 

steps to assure that their yen was not strengthening. It is a very, 

very high profile subject there, and we need to not coast, and be 

proud of our strong dollar. We need to get the right balance. 

Mr. Chairman, I hope you will lend your able and active support 

to working with your colleagues to see that the administration begins acting to end the dollar’s overvaluation. I cannot think of anything more important that this Committee could do to assure—the 

future of our small and medium-sized manufacturing companies 

really are at stake. In this last recession many of them have gone 

out of business. It is really time. We have got to save a lot of jobs, 

Mr. Chairman, and we hope and we appreciate your help. 

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

Chairman MANZULLO. Appreciate that. First we have to convince 

the Secretary of the Treasury—— Mr. RAIMONDO. We understand. 

Chairman MANZULLO [continuing]. To talk a little bit differently. 

Sometimes strong is not strong. 

Mr. RAIMONDO. Thank you. 

6

Chairman MANZULLO. Our next witness is Bob Weskamp, President of Wes-Tech, speaking on behalf of his own business and on 

behalf of AMT, the Association for Manufacturing Technology. 

We look forward to your testimony. 

STATEMENT OF ROBERT J. WESKAMP, PRESIDENT, WES-TECH, 

INCORPORATED; ON BEHALF OF THE ASSOCIATION OF MANUFACTURING TECHNOLOGY 

Mr. WESKAMP. Thank you, Mr. Chairman. 

I am the president of Wes-Tech in the Chicago land area, and we 

manufacture products and services in and around the machine tool 

area. I am also a director of Ingersoll International, one of the largest machine tool manufacturers in the world. 

Today, I am testifying on behalf of AMT, which was formerly the 

National Machine Tool Builders Association. It happens to also be, 

commensurate with our 100 year anniversary. I appreciate the opportunity to testify before the Committee on the impact of the overvalued dollar on our industry. 

The strength of the dollar combined with the efforts of other nations to weaken their currencies have had a triple impact on the 

health of U.S. manufacturing technology industry, particularly for 

machine tool builders. 

Firstly, an overly-strong dollar hurts our export competitiveness 

in an economic environment that places more emphasis on the cost 

of the products than on the value of the product. 

Second, the price advantage provided to foreign competitors 

through the exaggerated strength of the dollar has led to increases 

in import penetration in the U.S. machine tool market over the 

past four years. 

Third, and perhaps the most insidious impact of the overly 

strong dollar, however, is the general decline in U.S. parts and 

components as more parts and components for U.S. products originate from offshore. In other words, many of our traditional customers are driven by the high dollar to purchase less expensive 

parts and components offshore instead of manufacturing those components and parts here in the United States. 

Those three factors have left the United States machine tool industry dramatically weakened, and this could have a very significant effect on the possibility of a rapid U.S. economic recovery. 

The impact on U.S. manufacturers has been more devastating at 

home and abroad. For example, exports of U.S. products have declined from the period of 1997 to 2001 by nearly 20 percent. The 

impact of the overly strong dollar has been even more dramatic at 

home. Import penetration of the U.S. machine tool market has 

grown 25 percent in just the last two years from 50 percent in 1999 

to 63 percent in 2001. 

My written testimony cites for examples where the overly-strong 

dollar has hurt my company. In three of the examples, we lost 

large contracts with well established customers based solely on 

price to foreign competition. Our European competitors were able 

to offer products at prices that we simply could not match. 

In the last example, Wes-Tech actually won the contract that we 

were bidding on, but because of the pricing structure from the foreign competition we were forced to sell the project at such a low 

7

profit margin that in order to keep the customer and keep the business and protect our technology the pricing level drove us to a position of zero profit on the project. The bad news is that despite cost 

cutting, we could not turn a profit on the project, and in the long 

run zero profit as the norm is not a sustainable, workable strategy. 

Ingersoll is one of the largest machine tool manufacturers in the 

world. The overly-strong dollar and other problems faced by the 

machine tool industry have changed that. Ingersoll employment 

has continually declined and its employment level of a peak of 2200 

has been reduced to 650. There is a very real possibility that Ingersoll will qualify as a small business by the end of 2002. Most of the 

employment cutbacks in the Rockford area have been through layoffs as a result of this reduced business volume. 

This is not the first time that American manufacturers have 

faced the challenges of a strong dollar and its impact on price competitiveness. In the past, U.S. economic strength relative to our 

trading partners was the primary factor that led to a strong dollar. 

However, this time the dollar’s relative strength is the result of 

poor industrial, fiscal and monetary policies by our largest trading 

partners in conjunction with intervention by them to weaken their 

own currencies. It is unfair to ask our manufacturers to compete 

in a global market that is artificially created by foreign governments. 

Two years ago the AMT issued a report highlighting the dramatic increases in manufacturing productivity accompanied by the 

machine tool industry during the past decade. These productivity 

increases enabled U.S. machine tool builders to keep pace with the 

dramatic decline in foreign machine tool prices created by the overly-strong dollar. 

But by mid–2001, even the most highly productive U.S. builders 

could no longer keep pace with the over-strengthening dollar; and 

companies began to experience the challenge in cash flow. Companies in business for more than a hundred years found themselves 

at the mercy of banks striving to reduce debt. The industry today 

is faced with an ever-increasing frequency of foreclosures. 

The U.S. Treasury must realize that its policy has not worked. 

Treasury claims it has ‘‘sent a message.’’ But our trading partners 

are not listening, and so a more direct warning needs to be sent. 

The official U.S. position ought to be that the dollar should reflect 

the underlying strength of the U.S. economy. That is most decidedly not the case today. 

And overly-strong dollar is ruining the U.S. machine tool industry and America’s industrial base at large. If the American machine tool industry does not exist, where will America’s defense 

companies go for their equipment? Would you dare put your classified projects offshore? 

The U.S. is rapidly losing machine tool capability and this is a 

serious threat to the backbone of our industrial strength. Mr. 

Chairman, we must not allow this to happen, and that is why I am 

pleased that you are holding this hearing to call attention to the 

continuing problems of the overvalued dollar. 

Thank you very much, Mr. Chairman. 

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

Chairman MANZULLO. Thank you. 

8

The next witness is Wayne Dollar. Is that your real name? 

Mr. DOLLAR. Yes, sir. 

Chairman MANZULLO. All right, I just wanted to make sure. 

President of the Georgia—you have had to live with that name ever 

since you were born, have you not? President of the Georgia Farm 

Bureau, statement of the American Farm Bureau Federation. 

And Wayne, I presume that you are speaking on behalf of the 

American Farm Bureau, and you are also a farmer; is that correct? 

Mr. DOLLAR. Correct. 

Chairman MANZULLO. And we look forward to your testimony. 

STATEMENT OF WAYNE DOLLAR, PRESIDENT, GEORGIA FARM 

BUREAU; ON BEHALF OF THE AMERICAN FARM BUREAU 

FEDERATION 

Mr. DOLLAR. Thank you very much for that introduction. I 

wished you had said I am from Ochlocknee, Georgia. 

Chairman MANZULLO. And he is from Ochlocknee, Georgia. 

Mr. DOLLAR. I am testifying on behalf of American Farm Bureau 

which is the nation’s largest agricultural organization and our 

members produce about each and every product and commodities 

you can name. And we certainly appreciate the opportunity of 

being here, and we feel like the exchange rate is the single most 

important of all the things that we are talking about today. 

Our farmers and ranchers are losing export sales for the past 

three years because the dollar is pricing the product out of the 

market both at home and abroad. Agriculture is one of the most 

trade-dependent sectors of our economy. Our sectors maintain a 

trade surplus for over two decades, but that surplus is shrinking. 

One of the primary factors affecting our declining trade balance is 

the strong value of the dollar. 

We are also deeply concerned about countries that engage in currency devaluations in order to gain an export advantage for their 

producers. The real trade-weighted exchange rates for agricultural 

exports from our major competitors have exhibited a long-term 

trend of depreciation against a dollar, contrary to market fundamentals. This trend has persisted over several decades, leaving 

it hard to conclude that this is not a deliberate monetary policy of 

these and other governments. 

The U.S. agriculture relies on exports for one-quarter of its income. In addition, about 25 percent of agriculture production in the 

United States is destined for a foreign market. With a strong dollar, we have the double challenge of our products being less competitive in foreign markets while products from other countries are 

more competitive in the U.S. market. 

There is a strong relationship between the value of the dollar 

and the domestic price of our commodities. As the value of the dollar rises, foreign buyers must spend more of their currency to purchase our exports which causes them to decrease their consumption 

of U.S. commodities or buy from our competitors instead. The resultant drop in consumption drives U.S. commodity prices down 

even further. 

The increase and strength of the dollar and steady depreciation 

of the currencies of our major export competitors have had a profound impact on our ability to export. In fact, the rising depreciaVerDate 0ct 31 2002 21:45 Dec 12, 2002 Jkt 081575 PO 00000 Frm 00012 Fmt 6633 Sfmt 6602 E:\HR\OC\A575.XXX A575
9

tion of the dollar is one of the primary reasons why the agriculture 

economy did not experience economic prosperity that most other 

sectors of the U.S. enjoyed between 1995 and 1999. 

The USDA estimates that 14,000 plus jobs are lost for every one 

billion dollars decline in agriculture exports. As a result, agriculture employment lost 87,000 jobs between 1997 and 2000, a period wherein the real agricultural exchange rate was rising rapidly 

and U.S. agricultural exports were stagnant. 

For some commodities, the rising value of the dollar has directly 

contributed to the export competitiveness of our foreign rivals. The 

strong dollar enables our competitors to expand their production 

and gain market share at our expense. Let me give you a few commodity-specific examples. 

Beef, since 1995, the dollar has appreciated 42 percent against 

the currency of beef-producing countries. 

Fruits, from 1995 to 2000, U.S. import of fruits and nuts jumped 

33 percent largely due to the dollar’s 18 percent gain with respect 

to the currency of foreign suppliers of these commodities to the 

United States. Corn, the U.S. dollar appreciated 39 percent; soybeans, you saw an increase. 

And let me say in conclusions American farmers are the most 

productive in the world. However, the comparative advantages of 

producers generally enjoy are mitigated by the rising appreciation 

of the dollar. Exchange rate issues are certainly increasing in importance for our sector. If these issues are not resolved by microeconomic policies, there will be a continued pressure to find solutions in a traditional foreign policies. 

Effective long-range financial planning at the farm and ranch 

level and the overall economic health of U.S. agriculture depends 

on more stable exchange rates that do not overvalue the U.S. dollar 

against our competitors’ currency. 

Thank you, sir. 

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

Chairman MANZULLO. Well, thank you. 

I was on an airplane, and I asked for some peanuts. And the 

flight attendant brought over some pretzels. And I said I am allergic to pretzels. And she looked at me. It was funny then. 

[Laughter.] 

Mr. DOLLAR. Ninety-eight percent of the people want peanuts, 

but Delta thinks that eight percent is more important than 92. 

Chairman MANZULLO. Is that what it is? It is not just Delta, it 

is United. That is all you get nowadays is peanuts, and you always—you equated airline trips with a bag of peanuts like going 

to the circus, you know. 

Our next witness is—we have been through this before, Mr. 

George, on your first name. It is Vargese. 

Mr. GEORGE. Vargese. 

Chairman MANZULLO. Not even close. Vargese. Oh, Vargese. 

Okay, Vargese George. He is president and CEO of Westex International. I think you have testified before us a couple of different 

times, and I—twice before, and I finally learned how to pronounce 

your last name. 

10

And speaking on behalf of your company and all the Small Business Exporters Association, look forward to your testimony. And 

could you pull that microphone up as close as you can? Thank you. 

STATEMENT OF VARGESE GEORGE, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, WESTEX INTERNATIONAL, INCORPORATED; ON BEHALF OF SMALL BUSINESS EXPORTERS ASSOCIATION 

Mr. GEORGE. Thank you, Chairman Manzullo, Representative 

Vela ́zquez, members of the Committee. Good morning. 

Again, my name is Vargese George. I am the CEO of a Washington, D.C.-based export company, and I employ 18 people. 

We have been supplying products and materials for the United 

States for construction products and also the MRO, which is maintenance, repair and operation supplies, to worldwide clients over 

the last 20 years. 

I had the privilege of testifying before this Committee several 

years ago, and I am happy to be back. Today, I am also representing the Small Business Exporters Association. SBEA is the 

nation’s oldest and largest nonprofit association of small and midsized exporters. SBEA is also the international trade arm of the 

65,000 member National Small Business United. 

As this Committee is surely aware, the number of small business 

exporters have tripled to more than 200,000 in the last 20 years. 

Like the other witnesses in this morning’s hearings, we at Westex 

and at SBEA are deeply concerned about the high valuation of the 

dollar compared to other currencies. 

The high price of dollar has been a significant factor in my company’s loss of over $2 million worth in sales during the last one 

year alone. It has been especially costly to us in the Middle East 

and South Asia. We make our offers all in dollars because, like 

most small exporters, we can not assume—absorb the exchange 

risk and the losses resulting after the deal is made. But with the 

dollar’s high cost, we have seen our overseas customers switching 

their purchases to my competitors from Europe as well as in the 

Far East. 

We also have been hurt when foreign governments step into 

projects when we are bidding to offer extremely generous terms of 

finance, and though the dollar has dropped a bit in recent months, 

especially against the Euro, the government still must do all it can 

to assure that the U.S. products remains competitive in the global 

market. 

At the highest levels our government leaders must work with 

their foreign counterparts to assure that the dollar is not artificially overvalued, and that other currencies are not being pushed 

below their true value. 

But having said that, we should not try to drive the dollar down 

by painting a darker picture of the American economy than the 

facts warrant. That could come back and haunt us. 

Still, we can certainly observe that economic conditions improving in the Euro zone and perhaps even in Japan now, there are 

other steps the government could take to exporters also. We need 

to catch up with the European Union in signing trade agreements 

with the other countries. Tariffs and trade barriers are falling for 

11

European exports, and that is complicating the problem of the high 

dollar. 

In the past eight years, the EU has signed more than 30 trade 

agreements, it has 15 more in process, compared to just two minor 

ones that the U.S. has signed. Now both the EU and Japan are targeting Latin America, one of the largest markets for U.S. goods and 

services. The U.S. needs to respond with more trade agreements of 

its own. 

Now, what can we exporters do about the high dollar? For one 

thing, we can offer packages to offset the losses due to high value 

of dollar; packages that include service agreements, value-added 

services, software training, and follow-up visits. 

America’s foreign competitors are not nearly as good at this as 

we are, but most of all U.S. exporters need to be able to offer foreign buyers better financial terms. Giving buyers more generous 

payment terms is a time-honored way to deal with the price increases. Whether those increases are caused by rising raw material 

costs, currency fluctuations or other factors, but exporters, especially small exporters, cannot offer financing on their own. Yet 

trade financing is hard for us to obtain. 

In contrast to Europe and Japan, and other Far Eastern countries, most American banks are unfamiliar with the trade financing. The relatively few banks that do offer it usually seek only big 

businesses and large export transactions, and no one is aggressively trying to change that. Small businesses—SBA and Ex-Im do 

what they can, but export finance dealers that extend beyond than 

six months are especially hard for small exporters to obtain. 

Chairman MANZULLO. How are you doing on time there? You are 

two minutes over? 

Mr. GEORGE. I am over. I will be done—can I get one more 

minute? Thirty seconds? 

Chairman MANZULLO. Yes, I want to conclude by 11 so do it in 

30 seconds. 

Mr. GEORGE. Ex-Im is supposed to respond to this when it occurs 

and meet those subsidies head on. 

There are some good news, in the horizon. The Bush administration’s recent National Export Strategy Report calls for several important initiatives. Most of all, it would harmonize the government’s many export promotion programs and focus more on customer service for exporters. 

Chairman Manzullo, SME Exporter Working Group has come up 

with some good ideas too like developing partnership between large 

exporter and domestic suppliers, and giving companies a single 

government point of contact for all export-related customs and 

needs. 

So, yes, the high dollar has brought us serious problems, but 

there are also some promising developments in the horizon. 

Thank you for the opportunity. 

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

Ms. VELA ́ ZQUEZ. Thank you, is it Mr. Chimerine? 

Mr. CHIMERINE. Right. 

Ms. VELA ́ ZQUEZ. Okay. The trade deficit is financed by foreign investment. Why are international investors still investing in the 

12

U.S. if the manufacturing sector is having trouble remaining competitive? 

Mr. CHIMERINE. Well, I think there are two reasons. Number 

one, the U.S. economy was outperforming every other economy during the 1990s. Investments made in the U.S. economy were generating a higher rate of return. 

And secondly, interest rates have been higher in the United 

States than in other parts of the world, so they are investing here 

either to earn profits on their investments or interest on their investments. For at least for the last 10 years or so prospects were 

better in the United States in both cases, so I think that’s the biggest reason. 

You know, the dollar has also been looked at as a safe haven. It 

is the most—it is the safest currency, it is the safest economy. But 

let me tell you, if we keep relying more and more on foreign debt, 

you know, at some point they are going to need their savings to invest in their own countries. 

Ms. VELA ́ ZQUEZ. Okay. 

Mr. CHIMERINE. You cannot depend on foreign investment forever to flow into the United States like it did in the nineties. And 

if we have big deficits at the same time, it will create huge pressure on interest rates and hurt the U.S. economy. 

Ms. VELA ́ ZQUEZ. Thank you. 

Mr. George, only one percent of all small businesses export. Besides the overvaluation of the dollar, what else limits United States 

small businesses that have marketable products from becoming exporters? 

Mr. GEORGE. One of the key things that I always thought to be 

the problem is there are not enough American designs overseas. 

The foreign competitors, especially from U.K. and in Europe and 

Japan, they are very active in putting their designs and specifications into these markets. 

So when you have a project or an infrastructure project designed 

around a certain specification, the products follow, and I think that 

is the key drawbacks that I see when I travel. There are not 

enough American designed projects overseas, especially in the infrastructure. 

So what we can do is on a proactive basis we can encourage the 

design, engineering design firms, and the architectural firms to be 

a little more proactive by helping them to participate in international trade shows as well as meeting clients face to face even 

before these projects are on the drawing board. Then the products 

will follow and there will be opportunities for small business exporters. 

Ms. VELA ́ ZQUEZ. Would you like to comment on that? 

Mr. CHIMERINE. Sure. I think there is another factor and I think 

someone on the panel mentioned it earlier, and that is the export 

financing and promotion programs in this country are just a fraction of what most other countries have. It puts us at a tremendous 

disadvantage, particularly for smaller companies who need that 

kind of financing. The Ex-Im Bank is a good example of that. 

The trade deficit is a multi-dimensional problem. One of them, 

in my opinion, is the export financing programs. 

Ms. VELA ́ ZQUEZ. Thank you. 

13

Mr. George, how receptive are commercial banks to small exporters’ needs for access to capital? 

Mr. GEORGE. They are not very receptive, mostly because of 

there are not enough dollars to support their involvement. 

Ms. VELA ́ ZQUEZ. So what are the implications of an exporter having to rely on the Ex-Im Bank and the SBA? 

Mr. GEORGE. A lot of transactions die without seeing the light of 

the day because there is not any banks involved in it. 

Ms. VELA ́ ZQUEZ. In particular, what are the effects of the lack of 

adequate medium-term loans for small business exporters? 

Mr. GEORGE. I did not hear that. 

Ms. VELA ́ ZQUEZ. What are the effects of the lack of adequate medium-term loans for small business exporters? 

Mr. GEORGE. Because of lack of financing, people are reluctant 

to get into exports. You know, we do not have an export environment. We go and talk to the banks, and they will ask you to give 

you three years worth of financial statements, but it has to be 

transaction financing that we are looking for, not the individual’s 

worth or the company’s worth. 

Transaction financing is what we are missing. 

Ms. VELA ́ ZQUEZ. Thank you. 

Mr. Raimondo, do manufacturers experience any benefit at all 

from the high value of the dollar? 

Mr. RAIMONDO. From a manufacturing point of view, I would say 

that all we have done, as I mentioned, we were at 15 percent, we 

thought we were going to go to 20 percent in the 1997 time period. 

All we have done is lost jobs and I cannot think from a manufacturing company any value of a higher dollar. 

Ms. VELA ́ ZQUEZ. What about an increased ability to buy foreign 

materials? 

Mr. RAIMONDO. In our case, we are metal fabricator. We have not 

pursued buying product overseas. 

Ms. VELA ́ ZQUEZ. Any comment on this question? 

Mr. CHIMERINE. Well, I think what happens is that, as you suggest, some individual companies can now purchase materials or 

components less expensively overseas. That may be good for them, 

but it is not good for the country and the economy because ordinarily they would be buying them in the United States. 

Chairman MANZULLO. Okay, let us go to Mr. Akin. 

Ms. VELA ́ ZQUEZ. Thank you. 

Chairman MANZULLO. Thank you. 

Mr. AKIN. Thank you, Mr. Chairman. 

Just a question for anybody, if you had a magic wand, what 

would you change? 

A number of you have used the phrase that we have the dollar 

may be artificially high in terms of foreign currency. What would 

you do to change that? Is that the sort of thing that we should basically put more money into the money supply? Or how would you 

do that? Just one sentence from whoever wants to answer that. 

Mr. CHIMERINE. Well, I do not think you can do it with one policy, but one of the things I think, looking back over the last several 

years, that should have been changed is that we should have been 

putting much more pressure on foreign governments to stimulate 

14

their own economies instead of adopting export-led growth strategies, and usually those exports are targeted to our market. 

I think if we would have had stronger economic growth in foreign 

countries because of policies they implemented, not only would that 

help our exporters sell into stronger markets, but one of the reasons the dollar has been so strong is, you know, is that most investors look at those economies and have very little confidence in 

them. 

So you would have had two things happen: stronger growth in 

those countries, and probably stronger currencies overseas, and our 

exporters would have benefited from both. I think that pressure 

has to be put on foreign countries on a regular basis, make it clear 

to them we are not going to accept, you know, their strategies of 

exporting to the United States as their only economic policy. 

Mr. AKIN. But from a practical point of view, what does that 

mean you are going to do? Put some tariffs when they try to export 

at a low cost, something that they have subsidized we are going to 

put more tariffs on that? Or are you saying we need to really push 

the—we should have been engaging in more treaty negotiation earlier? What are you saying? 

Mr. CHIMERINE. I think it is some of all of those. I am not advocating tariffs, but one thing I believe is telling them, if this keeps 

up, that we are going to intervene more in foreign exchange markets, and we have got more resources than most of them do, and 

if their policies are not aimed at stimulating their own economies, 

but only to export to the United States, keep their currencies undervalued to help them do that, we are going to have to offset that, 

and one way is with foreign exchange market intervention. 

So I am not advocating direct tariffs, but there are things we can 

do to make it more difficult for them, and to put more pressure on 

them to look inside their own economies as a way of bolstering 

those economies. 

Mr. AKIN. Thank you. Thank you, Mr. Chairman. 

Chairman MANZULLO. Mr. Baird. 

Mr. BAIRD. Briefly, our nation is returning to deficit spending. 

How do you anticipate that will impact the value of the dollar and 

interest rates and foreign exchange? 

Mr. CHIMERINE. I will take a crack at that. 

I do not think in the short term it is that big of an issue because 

the economy is very soft, and you would expect to have fiscal deficits in the short term when you have a recession, or just coming 

out of a recession. If anything, it would not have bothered me to 

have some more short-term tax cuts, for example, to stimulate the 

economy. 

The issue is the longer term. Five years from now, if the economy 

has recovered, and we have got big budget deficits again like we 

had in the eighties and early nineties, I think that would be counterproductive. It will put upward pressure on our interest rates, 

which tends to attract more foreign capital, which pushes up the 

value of the dollar. And it is the smaller and middle-sized manufacturers and farmers who take it in the neck when that happens. 

Chairman MANZULLO. Mr. Bartlett. 

Mr. BARTLETT. Thank you very much.

15

Dr. Chimerine, you mentioned that trade deficits do matter. I 

have had a concern for a long while that these big trade deficits, 

over $400 billion last year, that is more than a billion dollars a day 

of trade deficit, at least to some extent, represents wealth moving 

from this country to other countries. Now, if what you are buying 

is a bridge that will be here for a hundred years, and to some lesser extent, a car that may be here 10 or 12 years, you may argue 

that it is not simply a transfer of wealth. But if you look at our 

hundred plus billion dollar trade deficit with China, if you think 

about what you buy that is made in China, a big percent of that 

is on the county landfill by the end of the year, is it not? 

So to the extent that we are buying consumable goods, help me 

understand why this big negative trade deficit is not a problem or 

why I should not be concerned? 

I am really concerned, and it was Mr. Weskamp who mentioned 

the machine tools in defense. We cannot have the world’s best defense and best military without the best scientists, mathematicians, and engineers, and without the best manufacturing. But just 

help me understand from a simple economic viewpoint why I 

should not be concerned about $400 billion trade deficits. 

Mr. CHIMERINE. I cannot because I think you should be very concerned about it since I am, and I think some of the problems have 

been expressed very clearly by the panel this morning. 

I mean, I do not think you can have a healthy economy in the 

long term without a very vibrant manufacturing sector, including 

smaller companies where a lot of the new innovations come from. 

A lot of the increases in R&D, and new product development, 

comes in manufacturing. It is our manufacturing base that is essentially being put out of business. That is essentially what that 

$400 billion trade deficit means. 

It means our internationally-oriented companies—our exporters 

and our companies that are competing with imports—are getting 

hurt very, very badly. Their survival is at stake. I think the U.S. 

economy will be much worse off if we do not have a healthy industrial sector in the future, and that is what we are talking about. 

It is a very serious issue, and I think those economists or others 

who sort of poo-poo it, they may have been right for awhile in the 

1990s, but that was an extraordinary set of circumstances where 

we had huge growth in domestic demand. We are not going to have 

that again. As a result, in both the short and long-term, our big 

trade deficit and the fact that it is continuing to rise is a very serious economic problem. 

Mr. BARTLETT. I have been concerned. I am not an economist, 

but I was a producer of wealth. Is it not true that in our society 

we have those who are consumers and those who are producers of 

wealth? 

I now regrettably am a consumer of wealth. I do not produce 

wealth anymore in this job, but at one time I did do that as a farmer, as a small businessperson building houses and so forth. To me, 

I think that the only two segments of our society that produce 

wealth are manufacturers and farmers. And you know, I do not understand how we can maintain a viable economy if all we are doing 

is providing service. 

16

So if you push this to an absurdity and if all we do is cut each 

other’s hair, clearly that is not a viable economy. Now I know that 

is pushing service-based economy to an absurdity. But you know, 

should we not be concerned about the loss of manufacture? 

Mr. CHIMERINE. Yes, we should be very concerned about it and 

that is my point. Again, you have heard this expression from others, you know, computer chips or potato chips, what is the difference, they are all chips. I think there is a big difference. I do 

not think we can have as healthy an economy only producing potato chips or hair cuts or other services. We need a very balanced 

economy, led by a vibrant, strong manufacturing base, because that 

is where a lot of the wealth is created. That is where your highest 

paying jobs are created. That is where much of our R&D and product innovation and productivity comes from, and that is exactly the 

point. 

And with a trade deficit of $400 billion, and rising, largely because of the overvalued dollar, we are jeopardizing manufacturing. 

We are seeing jobs lost there daily, and it is not healthy for the 

U.S. economy. I agree with you completely. 

Mr. BARTLETT. I know that there are some in our society who 

benefit from an overvalued dollar, but on balance I think that the 

dollar, the value of the dollar, is best determined by market forces, 

not by us or some other country artificially manipulating where it 

is. 

Chairman MANZULLO. Would you yield? 

Mr. BARTLETT. Yes, sir. 

Chairman MANZULLO. What does the United States do when in 

the past two weeks Japan has intervened four times to make sure 

the yen does not get stronger? 

Mr. BARTLETT. What we ought to do, I think, is cry foul, and we 

have not done that. 

Chairman MANZULLO. Besides crying foul? 

Mr. BARTLETT. Well, of course, two-thirds of all the U.S. dollars, 

what are there, about $600 billion in circulation and two-thirds of 

those are circulating outside our country, so obviously the most 

force that can be brought to bear on the value of the dollar is outside this country. We are fairly limited because we have only about 

one-third of all the dollars in circulation. 

Mr. CHIMERINE. I am not sure the numbers are that dramatic, 

but we have the resources to counter——

Mr. BARTLETT. We have some resources and we are not using 

them, that is true. 

Mr. CHIMERINE. The leverage we have is the size of our market, 

and the fact that most of those economies are very dependent on 

the U.S. market. If the situation gets bad enough, quite frankly, 

taking some measures in the short term to limit their access into 

the U.S. economy might be in order, if they continue to manipulate 

to gain advantages in foreign exchange markets. 

The foreign exchange market is simply not free. That is the 

point. These currencies are deliberately being manipulated by foreign governments, either by accumulating lots of dollars in their 

domestic companies when the importers are selling off dollars to 

raise their own currency to pay their workers. If that was hitting 

17

the marketplace, the dollar would be nowhere as strong as it is 

now. 

And then secondly, if for some reason the dollar does weaken, 

they run out there and intervene, and we have allowed this to happen, in my opinion, for too long. 

Mr. BARTLETT. Thank you very much, Mr. Chairman. 

Chairman MANZULLO. Thank you. 

I have several questions. Is there any violation of the WTO or 

perhaps there should be when a country such as Japan intervenes 

to make sure that its dollar does not change? I mean, to me that 

is no different than a subsidy. 

Anybody want to tackle that question? When Japan intervened 

four times in the past couple of weeks. 

Mr. CHIMERINE. I think one of the problems with the WTO, and 

I am a very big supporter of it, and in the next trade round, is that 

a lot of what we would call unfair trade practices, such as currency 

manipulation, keeping markets closed, false inspection requirements as a way of limiting imports, all these things are generally 

not handled that well in the WTO. 

The WTO deals primarily with tariffs, reducing tariffs, but it 

does not deal a lot with the unfair trade practice issues. It is very 

hard, therefore, to take a case like this, where Japan is intervening 

or anybody else is, or manipulating their exchange rates any other 

way, take it to the WTO and expect to get any relief. And part of 

that also is it takes years. The damage is being done in the interim. 

So, you know, I wish the international trade rules dealt specifically with that issue. Right now they really do not, and therefore 

I think we have to address the issue ourselves. 

Chairman MANZULLO. I mean, we could have all the hearings we 

want and write all the books and everything, but when a foreign 

government can simply intervene in order to keep its currency 

weak, you know, that is a subsidy. I mean, you would think that 

there could be an action, a 201 action brought against the country 

as a whole, and as for countervailing duties in that particular situation. 

Mr. RAIMONDO. Mr. Chairman. 

Chairman MANZULLO. Yes. 

Mr. RAIMONDO. I have gotten feedback that it is a violation of the 

IMF, International Monetary Fund agreement, and it would be 

very good to talk to Treasury about that. 

Chairman MANZULLO. Well, that would, but, you know, we are 

not dealing with the IMF money. That is only the countries that 

you dump it into, such as when we dumped money into Russia and 

then Brazil, and in South Korea, with particular nations on that, 

but that is an interesting aspect of it. 

Here we are getting beat up internationally and there is nothing 

we can do about it. So somewhere along the line we have to do 

something. 

Let me ask, Doctor, when was the last time the United States 

intervened in the foreign exchange market? 

Mr. CHIMERINE. Gosh, I would have to look back, Mr. Chairman. 

We did it aggressively with cooperation of other governments, as 

18

you know, in the 1980s when the dollar reached levels similar to 

where it is now. There was the Plaza Accord, you might remember. 

Chairman MANZULLO. That was the rubber room that Reagan 

put people into? 

Mr. CHIMERINE. I think on a selective basis we may have done 

some intervening in the 1990s. I just do not remember. 

Ms. VELA ́ ZUEZ. It was 1985. 

Mr. CHIMERINE. Excuse me? 

Ms. VELA ́ ZUEZ. 1985. 

Mr. CHIMERINE. 1985. 

That was the last time we engaged in really aggressive intervention to bring down—at that time it was an overvalued dollar similar to where it is right now, and it was led by the United States, 

and we sort of forced other countries to go along with us, and that 

kind of approach would be in order right now again, in my judgment. 

Chairman MANZULLO. Well, we would have to convince the Secretary of the Treasury and the president that would be in the best 

interest. 

Mr. CHIMERINE. I think the Secretary of the Treasury, irregardless of what he might say publicly, deep down knows that you cannot put our manufacturers at a 25 and 30 percent disadvantage 

and expect them to do well. 

Chairman MANZULLO. Let me follow up on that. We had a meeting with the Secretary of Commerce yesterday. The area that I represent, Rockford, Illinois, Ingersoll used to have close to 3,000 employees. And it is being hammered by a number of forces. It will 

be under 500 probably within the next year, and that is the high 

price of steel. 

And Mr. Raimondo, you deal obviously in buying steel for your 

products. What are you experiencing in terms of increases in the 

price of steel? 

Mr. RAIMONDO. On a personal basis our company is experiencing 

15 to 30 percent price increases in the last four months. It is an 

absolute nightmare. 

Chairman MANZULLO. And in fact we met with the Secretary of 

Commerce, and small businesses are getting no relief. They are 

getting zero relief based upon what is obviously a political move 

that is hurting immeasurable the small business people. 

I do not know how the small manufacturers in this country can 

hang on with that steel policy. I am going to be doing a series of 

special orders. I am going to be making a lot of noise, a tremendous 

amount of noise about what is going on to the small manufacturing 

companies that are—in fact, the larger ones too. They are getting 

hit big time by these increases, and the steel that you use, is that 

a common steel? It is not a specialty steel? 

Mr. RAIMONDO. Yes, we use a variety of mostly common steel 

both hot-rolled and cold-rolled. And as an independent individual 

of a company, I would sure like to participate because in the environment we have where pricing powers are in the big retails, in the 

small and medium-sized manufacturers are having a really extremely difficult time. When you stack up the dollar and now the 

steel increases in the 20 and 30 percent ranges, it is a tremendous 

squeeze, Mr. Chairman. 

19

Chairman MANZULLO. And the steel that you are buying, do you 

know if it is manufactured domestically or internationally? I presume you buy it from a broker? 

Mr. RAIMONDO. No. Actually, the majority of what we buy is from 

the large mills, the U.S. Steels, the National Steels, the Bethlehem 

Steels, and course we buy a substantial amount from the minimills, Nucor and what have you. 

Chairman MANZULLO. Okay, so you are buying directly, and you 

said 15 to 30 percent? 

Mr. RAIMONDO. Depending on the type of steel, yes, 15 to 30 percent. 

Chairman MANZULLO. Okay. Mr. Weskamp, you are involved in 

manufacturing also? 

Mr. WESKAMP. Yes, Mr. Chairman.

Chairman MANZULLO. Is this affecting you? 

Mr. WESKAMP. To a lesser extent. Really what affects us predominantly is not the cost of raw materials, it is more an issue of 

pricing and business volumes, offshore competition. The difference 

that we find in pricing is such that it is driven not by one component of raw material content in a project. We have been involved 

in on-line bidding with foreign competition, and just to see how far 

it would go we went down to our cost, and we are still underbid 

by over five percent. And a typical margin we work on is 25 to 30 

percent. We dropped 30 percent. That is not the cost of raw material. There is something else going on, and it is more dollar-based. 

Chairman MANZULLO. Mr. Raimondo, you build, is it agricultural 

silos? Is that it? 

Mr. Raimondo. Yes, grain bins that are called silos overseas. We 

also do pre-engineered metal buildings that we export overseas. 

Chairman MANZULLO. Okay. If it cost you a dollar to manufacture, you know, one unit, how much of that dollar is represented 

by the cost of your steel? 

Mr. RAIMONDO. Fifty percent, sir. 

Chairman MANZULLO. Fifty percent. 

Mr. MAIMONDO. In the case of the grain—that is in the buildings. 

The grain bins is 60 percent plus. 

Chairman MANZULLO. So you are being hit really hard on it. 

Mr. MAIMONDO. Very hard. 

Chairman MANZULLO. Now there is something the American government can do about the price of steel. That is not theoretical. I 

am looking at the economist over there and he says theoretical. 

You know, we deal in theories because it is very difficult on the 

issue of the high dollar. 

But would you all agree that the price of steel is something the 

administration can do something about? 

Mr. MAIMONDO. They already have, just the wrong way. 

Chairman MANZULLO. They went the wrong way on it. 

Do you have, Mr. Raimondo, in your business, you stated that 

you did not have a foreign competitor that makes that type of grain 

bin, is that correct? 

Mr. MAIMONDO. No, we do have foreign competitors. 

Chairman MANZULLO. Oh, you do? 

Mr. MAIMONDO. Yes, we do. 

Chairman MANZULLO. Okay. 

20

Mr. MAIMONDO. Yes, we do. We had a project in Algeria that we 

won this last winter before the steel price increases, but we just 

know with the dollar we priced it so it would be at a break even 

winter project, a $2 million project in Algeria. We beat out the 

Italians and the French. 

Chairman MANZULLO. Okay. 

Mr. MAIMONDO. And I suspect next year—we survived the dollar 

by basically not having profit. And with the steel situation, we will 

not even be in that competition next year. 

Chairman MANZULLO. Is there an overseas competitor that actually builds grain bins in the United States? 

Mr. MAIMONDO. No, sir. 

Chairman MANZULLO. Okay. 

Mr. MAIMONDO. They build them in Italy, in Spain and in 

France. 

Chairman MANZULLO. Okay. Mrs. Vela ́zquez, do you have any 

further questions? 

Ms. VELA ́ ZQUEZ. No, I do not. 

Chairman MANZULLO. Okay. I do have another question. 

We have been working on this for some time and the 7(a) loan 

rate that has been fixed, which we believe is too high. One of the 

things that we have noticed and we held an informal round table 

on the high cost of capital, one of the theories that is used to bring 

down a strong dollar is to decrease interest rates. That is—interest 

rates have been decreased as far as you can, but that decrease is 

not being passed on to the American manufacturer. 

Anybody want to comment on that? 

Mr. MAIMONDO. We find that at the NAM to be absolutely true. 

We have plotted that. In fact, this last week it showed the deterioration in the Wall Street Journal of the banking loans to small and 

medium-sized manufacturers and business in total, and if they do, 

they raise the interest rates and put you in a different class, which 

they do a lot, they simply have been rejecting major industry segments like the printing industry or like the building industry 

where the banks just have decided they do not want to participate 

in those industries, in this type of economy. They have really tightened up their portfolios. 

Chairman MANZULLO. Mr. Dollar, I have been talking to my 

farmers back home. We have a very large agricultural community. 

In fact, we have three potato chip factories, and we also have Honeywell that makes micro chips. 

So one, you can work at Honeywell in order to earn enough 

money to buy the potato chips, so it’s chips equals chips. 

But what we have been hearing from the folks at the Farm Bureau, and my wife and I have a small cattle operation ourselves, 

is that the increase in the cost of implements, farming equipment 

as a result of the increase in steel prices. 

Have you been talking to your colleagues? If you are lucky 

enough to be in a position to buy new equipment, have you been 

hearing those rumors coming through about any increases in the 

cost of new farm equipment? 

Mr. DOLLAR. No, we do not think it is rumors. We think it is reality, and everybody is hanging on. 

21

Chairman MANZULLO. Could you bring the microphone closer to 

you? The other microphone, okay. 

Mr. DOLLAR. We do not think it is rumor. We think it is reality. 

Prices are up for everything except what you are getting out of 

your commodity. It cannot continue. The equipment is getting older 

and older, and I do not know whether steel is the total cost or not, 

but it has added cost, and there is nothing. You are just living off 

the past. You are using up all of your surplus, you are using up 

assets, and our farmers are in a lot of trouble, and I really—we 

talk about, you know, a level playing field. We can produce with 

anybody. But when your commodities as of today are depressing 

prices of some 50, 60, 70 years ago, there is just no way you can 

continue going this way. We are in trouble. 

Chairman MANZULLO. I guess this would not apply to you so 

much, Mr. Dollar, but to those who are involved in manufacturing, 

do you know of any company in the United States, because I am 

starting to see this back home, Rockford, Illinois is a city of 

150,000. It has 1,000 factories. It led the nation in unemployment 

in 1981 at 25.9 percent. We have about a 33 percent manufacturing 

base as opposed to about an 18 percent manufacturing base. 

And one of the problems that we encountered when I spoke before the International Trade Commission a few weeks ago on a— what was it—on a 332 petition, section 332 petition, which is to 

measure the impact of Chinese imports on the tool and dye industry and the molding industry, is the fact that the Bureau of Labor 

Statistics, our own Federal Government that keeps track of data 

does not understand manufacturing. They listed Rockford, which is 

the tool and dye center of the world, as having only 570 employees 

directly related to the tool and dye industry, and there are probably 570 factories. They are small factories that are involved in 

that. 

And I think a challenge to NAM, to AMT and the other organization is we have to do a massive education system to the federal 

government. 

We had Dr. Ferguson here a few weeks ago who is just beneath 

Dr. Greenspan, and we queried him about—we had a hearing on 

the rumors out to increase interest rates, which is wonderful. Now 

there is a rumor out to increase minimum wage. It is just wonderful the things that are happening to the small businesspeople in 

this country. And we have a tremendous respect for Dr. Ferguson. 

He is a great American. 

And he said that the manufacturing segment is only one of the 

indicators. And I said, Doctor, have you ever had the feel of machine oil on your hands, or smelt the odor, smelt the odor of machine oil. He said, no, he said, but invite me to your district and 

I will be there. And we are trying to get him to come out because 

we really believe that one of the reasons manufacturing in this 

country has taken such a hit is that the people making the decisions do not understand the nature of manufacturing. 

When your own—when the Federal Government says only 550 

jobs in Rockford, Illinois are related to the tool and dye industry, 

there is a huge disconnect. There is a total lack of information, and 

as a result of that when people say, well, only 550 jobs are affected, 

we estimated somewhere directly between 10,000 and 15,000 jobs. 

22

I know because I hear from those guys almost daily as to what is 

going on. 

Well, this has been a very interesting hearing. Mrs. Vela ́zquez, 

did you have any concluding remarks? 

Ms. VELA ́ ZQUEZ. No, thank you, Mr. Chairman. 

Chairman MANZULLO. Thank you for participating. 

Ms. VELA ́ ZQUEZ. Mr. Chairman, I would ask unanimous consent 

for my opening remarks to be entered into the record. 

[Ms. Vela ́zquez’s statement may be found in appendix.] 

Chairman MANZULLO. Without objection that shall be done. 

We want to thank you for coming. We want to hear from you 

other than at these hearings. If you know of a company that is closing shop because of the high dollar and the high price of steel, let 

us know about it immediately. If you know of a company that is 

doing that and moving its operations to China, let us know about 

that also because that means that the very policies that our government is trying to prevent, they are actually causing because of 

lack of intervention of the dollar and the whole scenario that is 

being painted with regard to the tariffs and steel. 

Thank you for coming. This hearing is adjourned. 

[Whereupon, at 11:10 a.m., the Committee was adjourned.]

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