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93–490 PDF 2004

S. HRG. 108–438

THE U.S. NATIONAL EXPORT STRATEGY

HEARING

BEFORE THE

COMMITTEE ON

BANKING, HOUSING, AND URBAN AFFAIRS

UNITED STATES SENATE

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

ON

THE U.S. NATIONAL EXPORT STRATEGY AND THE ROLE OF THE

TRADE PROMOTION COORDINATING COMMITTEE

MAY 21, 2003

Printed for the use of the Committee on Banking, Housing, and Urban Affairs

(

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

RICHARD C. SHELBY, Alabama, Chairman

ROBERT F. BENNETT, Utah

WAYNE ALLARD, Colorado

MICHAEL B. ENZI, Wyoming

CHUCK HAGEL, Nebraska

RICK SANTORUM, Pennsylvania

JIM BUNNING, Kentucky

MIKE CRAPO, Idaho

JOHN E. SUNUNU, New Hampshire

ELIZABETH DOLE, North Carolina

LINCOLN D. CHAFEE, Rhode Island

PAUL S. SARBANES, Maryland

CHRISTOPHER J. DODD, Connecticut

TIM JOHNSON, South Dakota

JACK REED, Rhode Island

CHARLES E. SCHUMER, New York

EVAN BAYH, Indiana

ZELL MILLER, Georgia

THOMAS R. CARPER, Delaware

DEBBIE STABENOW, Michigan

JON S. CORZINE, New Jersey

KATHLEEN L. CASEY, Staff Director and Counsel

STEVEN B. HARRIS, Democratic Staff Director and Chief Counsel

SKIP FISHER, Professional Staff

MARTIN J. GRUENBERG, Democratic Senior Counsel

JOSEPH R. KOLINSKI, Chief Clerk and Computer Systems Administrator

GEORGE E. WHITTLE, Editor

(II)

CONTENTS

WEDNESDAY, MAY 21, 2003

Page

Opening statement of Chairman Shelby ................................................................ 1

Opening statements, comments, or prepared statements of:

Senator Crapo ................................................................................................... 8

Senator Dole ...................................................................................................... 12

Prepared statement ................................................................................... 32

Senator Sarbanes .............................................................................................. 16

Senator Carper ................................................................................................. 24

WITNESSES

Donald L. Evans, Secretary, U.S. Department of Commerce .............................. 3

Prepared statement .......................................................................................... 32

Philip Merrill, President and Chairman, The Export-Import Bank of the

United States ........................................................................................................ 5

Prepared statement .......................................................................................... 36

Peter S. Watson, President and Chief Executive Officer, Overseas Private

Investment Corporation ....................................................................................... 9

Prepared statement .......................................................................................... 39

Hector V. Barreto, Jr., Administrator, U.S. Small Business Administration ..... 21

Prepared statement .......................................................................................... 41

Response to written question of Senator Miller ............................................. 48

Barbara R. Bradford, Deputy Director, U.S. Trade and Development Agency .. 22

Prepared statement .......................................................................................... 42

ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD

The 2003 National Export Strategy Report ........................................................... 49

(III)

(1)

THE U.S. NATIONAL EXPORT STRATEGY

WEDNESDAY, MAY 21, 2003

U.S. SENATE, COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS, Washington, DC.

The Committee met at 10:15 a.m. in room SD–538 of the Dirksen

Senate Office Building, Senator Richard C. Shelby (Chairman of

the Committee) presiding.

OPENING STATEMENT OF CHAIRMAN RICHARD C. SHELBY

Chairman SHELBY. The hearing will come to order.

I would like to begin this morning’s hearing on the U.S. National

Export Strategy and the role of the Trade Promotion Coordinating

Committee by quoting from Title XII, Section 635(i) of the U.S.

Code, which regulates the U.S. Export-Import Bank:

‘‘The Congress finds that Tied Aid and partially Untied Aid credits offered by other countries are a predatory method of financing

exports because of their market-distorting effects . . .’’

‘‘This and additional like findings are immediately followed by

this mandate:’’

‘‘The Bank shall establish a Tied Aid credit program under which

grants shall be made from funds available in the Tied Aid Credit

Fund established under Subsection (c) of this Section . . .’’

This seems like a contradiction. The seeming incongruity present

in the law illuminates the continuing challenge of achieving the

elimination of trade barriers that has been a fundamental U.S. foreign and economic policy goal since at least the 1934 Trade Act, a

goal that increased in importance in the wake of the devastation

of World War II. Despite our evolution to the age of globalization,

however, the goal remains elusive. I am reminded of the situation

involving the American commercial shipbuilding industry. When

President Reagan unilaterally terminated domestic shipbuilding

subsidies, it was anticipated that the rest of the world would follow

the United States’ lead and would act likewise. The result, we soon

learned, was the exact opposite. Foreign shipbuilding subsidies continued and American commercial shipbuilding industry was seriously and possibly irreparably weakened by its inability to compete

for a diminishing market on a demonstrably uneven playing field.

The lesson is clear. The United States has a vital role to play in

supporting American business by ensuring a level playing field in

international trade. That is the responsibility, as is evident by the

size of today’s panel, of a number of U.S. Government agencies,

chief among them the Office of the U.S. Trade Representative,

2

through his role in the negotiation of agreements, and the Department of Commerce. Our purpose here today, however, is to focus

on the role of the Government in helping American business to export its products, both goods and services, through financial and

technical assistance, through education, and through the provision

of business-essential information on foreign markets.

While we have come a long way under the World Trade Organization and through a growing number of bilateral trade agreements—indeed, the President recently signed the U.S.-Singapore

Free Trade Agreement, and I anticipate similar treatment of the

Chilean agreement—in reducing tariffs and some nontariff barriers

to free trade, the job is far from complete.

The Trade Promotion Coordinating Committee was created—and

codified in law—due in no small part to the efforts of my colleague,

the Ranking Member, Senator Sarbanes—with the seemingly incongruous mission illustrated earlier by my reference to the statutory language establishing the Tied Aid Credit Fund. It exists to

offer export support at the same time we retain as a goal the elimination, on a global basis, of the kinds of export support activities

common among major industrialized countries. Now financial and

technical assistance is only part of what TPCC does. It also plays

a very important role in helping American companies identify opportunities, and helps educate them on how to maneuver the winding roads involved in international commerce. There is no denying,

though, that the export financing mission of some of the agencies

represented here today, exist, at least in part, because of our inability to date to eliminate export subsidies on a global level.

We have had successes, though. The Japanese agreement to end

its policy of tying aid to the initial design and engineering stage

of major capital projects, for example, stands out as significant

progress given that country’s historical use of Tied Aid. But much

more work remains to be done. In fact, in the 12 years since the

OECD agreement restricting Tied Aid, we have seen not only a

continuation of this, but also the emergence of new methods designed to circumvent the intent of negotiations aimed at tradedistorting practices.

By way of example, we have, as the TPCC’s new export strategy

report points out, the task of dealing with the phenomenon of

‘‘market windows,’’ the use of ostensibly private institutions that

are closely linked to the government or are, in fact, little more than

front companies for the government in question to finance deals.

These are all issues to be discussed, and I hope the witnesses

will address them during today’s proceedings. In all, the TPCC has

to be considered a success. As much as some of us would like to

see business free to compete in the international arena without

undue government involvement, the reality remains far different.

The hands of American business cannot be tied while its foreign

competitors exploit the benefits available courtesy of their respective governments. As important, the responsibility of the TPCC to

coordinate the export-related efforts of as many as 20 Government

agencies, so as to be a more efficient tool, should not be overlooked.

It is a daunting task, but one on which the Coordinating Committee has made significant progress. The agencies are working

much more closely together than ever before, and are orienting

3

their efforts toward the needs of business much more efficiently

than ever before.

With us today to discuss the National Export Strategy and the

progress that has been made in the past year are Secretary of

Commerce Donald Evans; Philip Merrill, President of the ExportImport Bank; Hector Barreto, Administrator of the Small Business

Administration; Barbara Bradford, Deputy Director of the Trade

and Development Agency; and Peter Watson, President of the

Oversees Private Investment Corporation.

We welcome all of you to the hearing. Your written testimony

will be made part of the record in its entirety, and we will start

with Secretary Evans. We know you have some time constraints,

and we will go as fast as we can. We appreciate your appearing

here today.

STATEMENT OF DONALD L. EVANS

SECRETARY

U.S. DEPARTMENT OF COMMERCE

Secretary EVANS. Thank you, Mr. Chairman, and it is always a

pleasure to be here with you. I appreciate it very, very much.

As you said, I would like to have my written statement submitted for the record.

Chairman SHELBY. Without objection, all of your written statements will be made part of the hearing record.

Secretary EVANS. Thank you. I appreciate the opportunity to be

here to discuss the National Export Strategy of this country.

One year ago, I came before you to lay out a National Export

Strategy, the Administration’s plan to improve our trade promotion

programs. The 60 recommendations in that report were based on

the express needs of our customers. I also told you I wanted to use

the Trade Promotion Coordinating Committee, the TPCC, as a

management tool to monitor our progress and to spur change and

cooperation. This is an example of what the President’s management agenda is all about.

My message to you today is simple: Thanks in large part to the

support of this Committee and the outstanding leadership of my

colleagues here today, the TPCC is a proactive, goal-oriented vehicle for delivering export services to American companies.

By expanding exports, we promote economic growth, new and

good-paying jobs, and higher standards of living, here and with our

trading partners throughout the world. We are on track with implementing these recommendations. And we are becoming more

forward-thinking when it comes to major project procurement.

We are creating a new culture of customer service among the

agencies, and we are strengthening our training and partnership

efforts. In the process, the TPCC has become an important resource

and advocate for the U.S. business community. For example, our

agencies and embassies were flooded with calls about the Administration’s reconstruction plans in Iraq, so the TPCC hosted several

interagency meetings that culminated in a briefing for United

States trade associations. This was followed by a briefing for Coalition partners at the State Department.

In early June, we plan an event focused on sanctions. We are

working with the TPCC agencies to identify and eliminate obstaVerDate 11-MAY-2000 10:22 Jun 02, 2004 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 93490.TXT SBANK4 PsN: SBANK4
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cles to rebuilding the Iraq economy. We took on similar efforts for

our central and southeast European Coalition partners.

After I traveled there in March, we brought the agencies together

to deliver initiatives to help stimulate U.S. trade and investment

in that region. To monitor new opportunities, the TPCC meets

about every 6 weeks at the Deputies’ level and weekly at the staff

level. We have worked together to discover projects for United

States companies with the prospect of United States financing in

China, Russia, and Mexico. In China, of course, we have had our

eyes on the Olympics, and will do an interagency mission this fall.

In September, I will attend the Energy Summit in Russia, and

Grant Aldonis will go to Moscow on my behalf next month. I led

a trade mission to Mexico for small businesses last year, and in

June, I will be attending the Partnership for Prosperity meeting in

San Francisco.

We are steps away from a new program that would combine the

Commerce Department, Ex-Im Bank, and SBA resources in an

integrated small business trade finance tool, and we have joined

Ex-Im/SBA financing seminars, and the agencies are working on

parallel financing agreements.

We have launched an interagency trade officer training program,

so that our people in the field can help firms navigate the full

array of Government export promotion programs. We have trained

31 officers from nine agencies in January, and are doing additional

training programs next month and in September. We have reached

out to our State partners as their budgets have tightened, collaborating and co-locating where possible.

This year, we have built stronger bridges with many State partners, including Florida, Alabama, Delaware, Maryland, and New

Jersey. We have an agreement with Florida to do a joint training

and trade finance facilitation; an agreement with New Jersey to colocate out staff and work on trade missions and counselling; and

with Alabama, we helped recruit the State’s Trade Mission to Central America this week.

The TPCC is jointly marketing all of our programs, including

sharing space at domestic trade shows, so that exporters can find

out about all agencies’ services in one place.

We have developed joint publications and seminars, and are

sharing client lists, and including data on each other’s programs in

client mailings. As a great example of this cooperation, I am

pleased to announce today that our redesigned export assistance

website is now open for business. The new Export.gov portal is

responsive to the stated needs of our customers, the small- and

medium-sized business community. In addition to links to multiple

agencies, we now have a step-by-step guide through the process for

new exporters.

This was all accomplished with the cooperation of our TPCC

partners. As we look toward next year, we want to continue working to complete our agenda. This includes: Developing a set of priority projects based on input from our overseas posts and interagency business development missions in key markets; completing

the development of integrated small business trade finance, marketed by the Commercial Service; institutionalizing our interagency

trade officer training and expanding it to include Congressional ofVerDate 11-MAY-2000 10:22 Jun 02, 2004 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 93490.TXT SBANK4 PsN: SBANK4
5

fices in States; and leveraging existing agency budgets in Fiscal

2005 on priorities such as training and technology. At the same

time, we will continue our focus on exporter needs. This includes

assisting the business community in its efforts to reenter the market in Iraq, and further coordinating efforts to stimulate private

investment and trade.

Mr. Chairman, I want to thank you and this Committee for your

interest and oversight of the export promotion process, and for your

support for the TPCC.

Thank you, Mr. Chairman.

Chairman SHELBY. Mr. Merrill.

STATEMENT OF PHILIP MERRILL

PRESIDENT AND CHAIRMAN

THE EXPORT–IMPORT BANK OF THE UNITED STATES

Mr. MERRILL. Thank you, Mr. Chairman.

I would like to associate myself completely with the remarks of

Secretary Evans, and I appreciate the opportunity to join you, Mr.

Chairman, this morning, and my colleagues from the Trade Promotion Coordinating Committee to report on the status of the National Export Strategy.

The first Bush Administration National Export Strategy Report

in 2002 has served as a road map for the TPCC efforts over this

past year. The 2003 National Export Strategy Report issued this

April and my testimony today are primarily devoted to reporting on

implementation progress.

As Chairman of Ex-Im Bank and Vice Chairman of the TPCC,

I have a keen interest in working with the members of the TPCC

to support our Nation’s export sector.

The Bank’s mission is to assist in financing the export of U.S.

goods and services, thereby helping to create and maintain U.S.

jobs. It is all about jobs.

Ex-Im Bank does this by providing financing to counter the effect

of export credit financing from other governments, or by taking

reasonable credit risks that the private sector is unwilling or unable to accept. We only go where private capital will not or cannot

go. By cooperating with other agencies, Ex-Im Bank is trying to

achieve a more strategic approach for trade and export promotion.

Our focus is on improving customer service, streamlining case processing, and enhancing risk management.

The Bush Administration recognizes the important role that the

TPCC can play in supporting U.S. exports and U.S. jobs. I am very

committed to this effort. The TPCC strives to make it easier for

U.S. businesses to understand and utilize the U.S. Government’s

export promotion programs. The recommendations put forward in

last year’s TPCC report were developed after in-depth discussions

with our customers and are practical solutions to problems that encumber U.S. export potential.

We have made progress in implementing many of the report’s

key recommendations. I will address the three areas in which the

Ex-Im Bank is most involved: One—Joint Marketing, Training,

and Small Business Initiatives; two—Early Project Development;

and, three—Tied and Untied Aid. We happen to be singing from

the same songbook today, by some strange chance.

6

First, I would like to discuss the Joint Marketing, Training, and

Small Business Initiatives. To support these initiatives, Ex-Im

Bank leads an interagency marketing task force—us, the SBA, the

Department of Commerce, and OPIC.

Our marketing objective is straightforward: To establish a direct

relationship between the U.S. exporter and U.S. Government trade

agencies in a coordinated and cost-effective manner.

The task force planned, funded, and is now executing three primary tactics to reach U.S. exporters, specifically small and new exporters. The big guys know we are here. These tactics are: Direct

mail; participation in major trade shows; and exporter and lender

seminars. We have had a whole bunch of them around the country.

The TPCC partner agencies also collaborate through nationwide

U.S. Export Assistance Centers, which have an unworkable acronym to reflect them, and we are working to link our websites to

the U.S. Government Trade Portal, Export.gov. We actually completed this just last week, so I understand.

By agencies sharing costs, the exporter and the taxpayer are better served. Ex-Im Bank is also continuously looking to leverage the

TPCC agency resources by utilizing the private sector to reach and

provide services to U.S. exporters.

We have also implemented a cross-training program for our staff,

the Department of Commerce, SBA, OPIC, and TDA staff. This

training is designed to enhance our ability to provide full-service

trade finance advisory services to the export community. We want

us all to know what we all do, and what the exporters do.

Finally, Ex-Im Bank is collaborating with the SBA to provide

parallel financing and joint marketing for working capital transactions, thereby providing small business exporters with a seamless approach to access the working capital they need to increase

export sales.

Second, I would like to discuss the Early Project Development

Initiative. Its aim is to coordinate more effectively the efforts of the

U.S. Government trade agencies to secure contracts for U.S. exporters. Ex-Im Bank’s staff actively participates on the early project development country teams that the TPCC established to coordinate

travel and promotion activities.

To aid early promotion efforts, Ex-Im Bank has created an ‘‘early

project letter of interest,’’ intended to signal preliminary interest in

a project before contracts are signed. Currently, the interagency

efforts are focused on three markets: Mexico, China, and Russia,

where we think the most room for opportunity for our exporters

exists. We plan to broaden our focus to other target markets at the

appropriate time.

The largest Ex-Im Bank market is Mexico. We are very active in

Mexico with an exposure of more than $5 billion. We are actively

working to develop new products for this market, and to coordinate

promotional activities with other United States Government agencies and with the Mexican government. Last September, agencies

brought together municipal officials from renewable energy, waste

management, and water treatment agencies, and United States

companies in a conference organized by Ex-Im Bank and the Mexican Development Bank, Banobras. This conference built on the

Partnership for Prosperity Initiative was created by President

7

Bush and Mexican President Fox. I participated with my colleagues

here from the OPIC, SBA, and TDA, in the Arizona-Mexico Trade

and Investment Seminar in Tucson. We are working with our partner agencies to follow up on leads from these and from other similar conferences.

In the second market, China, we also have nearly $5 billion in

exposure and numerous opportunities exist for United States exporters, including projects associated with the Olympics in 2008

and the World’s Fair in 2010, and in key sectors such as environmental protection, energy efficiency, waste water treatment, medical equipment, and electric power.

Let me interject that I had a nice long chat with the Chinese

Ambassador a couple of weeks ago, just four of us, in which he acknowledged on his own that a trade imbalance of $100 billion to

$125 billion was not acceptable, and that they were prepared to

deal actively and creatively with American exporters. I was a little

surprised he brought it up, and we are pursuing it together.

We are working closely with the Commercial Service and TDA to

coordinate efforts to identify opportunities for United States exporters in China and with the Chinese.

In Russia, the Early Project Development Team is pursuing a

number of projects in telecommunications, transportation, and energy sectors, with particular focus on four pipeline projects that are

currently under consideration. These projects can benefit from enhanced interagency cooperation and adequacy resulting from the

Early Project Development Initiative.

Let me say that I spent this last weekend in New York with the

Rand-Russian-American Studies Group, which I sat on for 10 to 12

years, with a whole crowd of Russian oligarchs who were there. We

had, let’s say, a full and free and fruitful discussion. I did not say

‘‘frank,’’ but it was very friendly, and they have been in to see us

and we are working back and forth.

Ex-Im Bank is also working with the Commercial Service to plan

a working trip to Moscow and St. Petersburg in June to follow up

on these projects and to meet with Russian government officials to

identify additional opportunities for United States exporters.

Overall, the TPCC joint promotion and coordination efforts in

Mexico, China, and Russia look promising.

Third, the TPCC, in 2002, launched several initiatives to counter

foreign aid practices that place U.S. exporters at a competitive disadvantage. Ex-Im Bank and USAID are working to ensure that

transactions we both support complement each other in an effective

manner. These joint mixed-credit transactions will leverage the resources of the two agencies to support aid development objectives,

while expanding Ex-Im Bank’s ability to provide business opportunities for U.S. exporters. These are separate. They do the aid, we

do the business.

Ex-Im Bank, in cooperation with the Treasury Department, continues to closely monitor the use of Tied Aid by foreign governments. I note that the bureaucracy agrees that in 2002 the use of

Tied Aid continued to decline dropping to a record low. In fact,

since 2001, the decrease was 40 percent worldwide, so the War

Chest just may be working, just by being there.

8

Further, Ex-Im Bank and Treasury have also agreed to new processes and standards governing the use of the Tied Aid Credit Fund,

commonly known as the War Chest, that will ensure more rapid

case processing and improve U.S. exporter competitiveness. These

are known as the Robson-Taylor Principles and undoubtedly your

staff is totally on top of that, as I am sure you are.

I am asked to say a word with respect to Iraq.

Chairman SHELBY. I am going to have to interrupt you. We have

a vote in 2 minutes on the second vote, and we are going to recess

the Committee hearing until the vote is over, so just suspend.

Mr. MERRILL. Okay, I will suspend on Iraq.

[Recess.]

STATEMENT OF SENATOR MIKE CRAPO

Senator CRAPO [Presiding]. Ladies and gentlemen, we will bring

the hearing to order.

I ran into the Chairman in the hall as I was returning from voting, and he said we should keep going so we do not get people any

further behind on their schedules. So, I am going to reconvene the

hearing. The Chairman is going to run over and vote and be back

as quickly as he can. I appreciate your being understanding and

accommodating for our scheduling difficulties.

Mr. Merrill, I understand you were in the process of completing

your testimony before we were interrupted. You can go ahead and

complete it now.

Mr. MERRILL. Well, actually, when we were interrupted, we were

just about to solve the problem of Iraq.

[Laughter.]

Senator CRAPO. Why don’t you just finish with that then?

[Laughter.]

Mr. MERRILL. Literally, Iraq was the word on the table.

Senator CRAPO. We could have a vote on it, and it might win.

[Laughter.]

Mr. MERRILL. I think an appropriation is more what is necessary.

In any case, with respect to Iraq, Ex-Im Bank has established an

internal task force that is working to address the legal and credit

concerns that currently impede our ability to offer trade finance

programs in Iraq. We are coordinating closely with the other

TPCC’s member agencies, as well as the U.S. exporting community

in this effort.

As you know, we are subject to a number of important programmatic constraints, the principal one being a need to find ‘‘a reasonable assurance of repayment . . .’’ that is the legislative language

for every credit we support. However, we are bringing energy and

creativity to the task of helping United States companies provide

the goods and services that are necessary to the reconstruction of

Iraq. For example, we are actively considering mechanisms that

will allow Ex-Im Bank to support United States exports to Iraq,

sooner rather than later, including taking the credit risk of companies and banks and third countries such as Turkey, Jordan, and

Kuwait, that may be involved in obtaining United States goods and

services for reconstruction efforts.

9

Additionally, I believe that the concept of an Iraqi oil trust fund

for reconstruction has real merit, and I would support efforts to establish such a fund under U.S. auspices, as rapidly as possible.

The CEE, who is represented here today by Ed Rice, and several

of their members, notably Halliburton, Bechtel, Motorola, GE, and

a number of other companies have been in to see us. The general

drift of our ideas and their ideas is that a country with a GDP of

$26 billion, which is what Iraq had, cannot possibly support $120

to $140 billion in existing debt. That debt has to be restructured

in some manner. With the investment of several billions of dollars

into the declining and deferred maintenance problems left by the

previous regime, Iraq can once again use the revenues from increased oil production for its needs. Iraq has the capacity to generate between $10 and $15 billion a

year in oil revenue each year for 10 years. Nobody knows the exact

number. That money can be used for the benefit of the people of

Iraq and to provide the assurance of repayment for foreign direct

investment or Ex-Im Bank guarantees in Iraq.

However, the issue is not only establishing such a trust fund or

reconstruction finance corporation, if I go back to the founding of

Ex-Im Bank, but also the issue is that it has to be on a long-term

basis, because the oil business is a long-term basis. You cannot get

investment on a short-term basis. I should leave the oil business

to Secretary Evans, but suffice it to say that nobody is going to

spend several billions of dollars without a legal and professional assurance of being in business there for a great number of years, so

let me sum that up by saying oil trust fund.

I would like to conclude by thanking this Committee for its support of the TPCC, Secretary Evans for his leadership, and my

TPCC colleagues here today for their commitment to this effort. I

appreciate the opportunity to appear before you, and I would be

happy to respond to any questions you may have at any time.

Senator CRAPO. Thank you, Mr. Merrill.

I understand, Secretary Evans, that you have to leave at 11:00;

is that correct?

Secretary EVANS. Correct.

Senator CRAPO. If we get a couple of our Members back and they

have some questions for you, we may interrupt in order to do those

questions.

Secretary EVANS. Certainly.

Senator CRAPO. But until we get them back here, we will proceed

with the testimony.

Mr. Watson.

STATEMENT OF PETER S. WATSON

PRESIDENT AND CHIEF EXECUTIVE OFFICER

OVERSEAS PRIVATE INVESTMENT CORPORATION

Mr. WATSON. Thank you, Mr. Chairman, and in light of the time

constraints, this will be a very brief oral presentation. I want to

share the thanks of my colleagues to be here today, to articulate

support for the President’s vision on the National Export Strategy,

and, for the leadership of Secretary Evans, whose efforts to bring

together the disparate Executive Branch agencies as key to marVerDate 11-MAY-2000 10:22 Jun 02, 2004 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 93490.TXT SBANK4 PsN: SBANK4
10

shalling our collective resources to implement the TPCC’s worthwhile mandate.

We appreciate the support from Members of the Committee and,

indeed, the Ranking Member, Senator Sarbanes. As you know,

OPIC has a unique role to mobilize U.S. private investment for the

social and economic development of less developed countries. We do

so on a self-sustaining basis, at no cost to the U.S. taxpayer.

In implementing President Bush’s blueprint for OPIC, over the

last 2 years the agency has reformed for success by bringing the

benefits of economic development to the neediest countries, fostering cooperation with the private market to leverage resources,

and focusing on the needs of the smaller U.S. businesses to pursue

opportunities in the developing world. This was in response to the

concerns by many in the past that OPIC was merely dispensing

corporate welfare. Our efforts to create lasting results at OPIC mirrors the efforts of the TPCC over the last year, efforts in which

OPIC has been privileged to play a role.

With our other colleagues, we have conducted a joint investment

mission in Pakistan. OPIC is active in Afghanistan where we are

in the closing stages of executing $40 million in financing and political risk insurance for a much needed business base hotel in Kabul,

the first of its kind. This project will represent the largest United

States private investment in Afghanistan since the fall of the

Taliban. Indeed, it is the largest United States investment in Afghanistan in a generation, if not more.

Suffice it to say that we are also working with the SBA on execution of a cooperation agreement, including employee cross-training.

Last week, OPIC signed an MOU with the Department of Commerce Commercial Service, again committing the agencies to better

information-sharing and lead generation. We are also working with

AID to expand our coordination in our agencies.

I just want to close on Iraq. As Secretary Evans has indicated,

that country will clearly be a priority in the coming year. Once we

have cleared sanctions and the statutory issues that impact our

ability to operate, OPIC is prepared, and very willing and interested to use its programs of finance and political risk insurance to

support private sector development in Iraq.

Mr. Chairman, in closing, Congress this year will have the opportunity to review OPIC and its refocused agenda as it considers

reauthorization of OPIC programs. Although not formally under

the jurisdiction of this Committee, we look forward to working with

you and your staff to secure the approval of our legislation before

September 30 in carrying out the President’s agenda.

In closing, I would like to thank the Committee for its support

of TPCC. OPIC is a partner of the willing with our colleagues here

today to provide the most effective investment program services for

U.S. businesses, American taxpayers, and men and women in the

employment community.

Thank you and I will also be pleased to take your questions.

Senator CRAPO. Thank you, Mr. Watson.

Mr. Barreto and Ms. Bradford, if you would be willing to allow

me—we have 10 minutes before we are going to lose the Secretary,

and I, at least, have one question that I would like to ask him, beVerDate 11-MAY-2000 10:22 Jun 02, 2004 Jkt 000000 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 93490.TXT SBANK4 PsN: SBANK4
11

fore we lose him. And there may be some others who show up by

the time he has finished responding to my question.

This question, by the way, is one I would like the rest of the

panel to respond to also, so you may get a heads-up on what may

be coming. The question relates to the threat that we see overseas

to American interests from terrorism, and especially in the developing countries that are the focus of so many of the TPCC’s efforts,

where we see a greater threat than at any time in recent memory.

And while the agencies represented before us here today have

long had as a part of their mission, providing risk insurance to

American businesses to help them protect against political instability and other potential calamities, there is really no question

that the risk of direct physical attack has grown considerably and

is much higher than we have ever dealt with in the past.

An April 1 notice from the Export-Import Bank advertised the

Short-Term Insurance Pilot Program that is now available in 39

Sub-Saharan African countries, including a number where we have

threats of terrorism.

In addition, Mr. Watson’s testimony before the House Appropriations Committee indicated that despite heightened perceptions of

risk, and in a very real sense because of them, OPIC has committed $1.2 billion in loans, guarantees, or insurance to support 45

developmental projects around the world in some of these kinds of

countries.

My purpose in covering this ground is to try to get a sense from

the panel, and I will ask you to respond now, Mr. Secretary, of how

we are responding to this increased threat of terrorism? And I have

to believe that this threat is taken into account in determining

whether to provide risk insurance in some of these countries, and

would just like to know whether you can provide some sense of the

threshold of where we are, short of a full-scale war in terms of risk

insurance being denied to American companies seeking to operate

in these developing countries?

Secretary EVANS. Well, of course, Mr. Senator, there is a fullscale war against terrorism. That is a full-scale war.

Senator CRAPO. That is right.

Secretary EVANS. That continues, and America is bringing all of

the might and strength to that war that it can, to make sure that

we win that war, along with our friends and our allies all around

the world.

As we know right here in America, you cannot have economic

security or economic growth without national security or homeland

security. The same thing works around the world. You cannot have

global economic growth, businesses being successful and performing around the world, without international security or global

security. They are integrated. They work together. You cannot have

one without the other, and that is why the President has been so

focused on the war on terrorism, because he understands that

clearly, I think.

So, I think my response, Senator, is that we will continue to do

whatever it takes to win the war on terrorism. I mean, we are cutting off their money; we are going after them; we are collecting

them around the world. We are providing for a safe and secure environment for people, not only in this country, but also around the

12

world, and to allow for global economic growth is an essential part

of it, for companies to be able to go abroad and export abroad and

invest abroad, which means jobs right back here in America.

I think it is just our continuing focus on the war against terrorism, so that we can play a role in providing more security

around the world.

Senator CRAPO. Thank you. And as I said to the other members

of the panel, we will ask you to comment on that when we aren’t

under a time pressure.

Senator Dole, we are going to lose Secretary Evans in just a few

minutes, and so if you have any questions for him, this is your

opportunity.

COMMENTS OF SENATOR ELIZABETH DOLE

Senator DOLE. Mr. Secretary, I know you are working hard to

open up foreign markets to U.S. and North Carolina goods and

services, and I have been a strong supporter in that regard, and

I will continue to be.

But I would be remiss this morning if I did not mention one

thing that has caused a great deal of concern in North Carolina,

a very critical situation. And that is the agreement that was signed

recently with Vietnam. This has a lot of our textile manufacturers

and workers very much concerned. They are worried that the

agreement will shift jobs out of North Carolina to Vietnam and ultimately, through transshipments, to China.

I would be interested in what the Administration might be doing

to alleviate this situation. I know there have been commitments to

take the views of our textile industry, our textile workers, into account when these agreements are made, and this is one that is of

great concern to North Carolina.

Secretary EVANS. Indeed, Senator, I understand their concern.

You mentioned transshipments, and that is an area of serious concern on our part.

In the agreement that was signed with Vietnam, for the first

time, we signed an agreement like this that I know about. We had

the opportunity to go in and look at the data in Vietnam and see

that the data does support the level of quotas that was granted.

If the data does not support it, if the data shows that there have

been transshipments coming through Vietnam over the last 18

months, which is when we have seen the growth of imports into the

United States from Vietnam—and it has grown dramatically—if

you take knit shirts for an example: A couple of years ago, the imports were zero; a year ago, the imports were six million dozen.

That was the year 2002. In the year 2003, the imports were coming

in at the rate of 18 million dozen a year.

The quota was set at 14 million dozen. We went to Customs. I

had two conversations with Asa Hutchinson, and told Asa that I

wanted him to commit some additional resources to that specific

issue, and asked him to put a team together that would put more

resources on Vietnam to go look at this data and confirm the data

one way or the other.

If it shows that there have been transshipments, then we have

the ability in the agreement to go reduce the quota. That is something that we are actively working on right now. I have asked them

13

to get back to us as soon as possible. I think we will have an answer on that within the next couple of months.

So since, Senator, as you said, it is this team’s goal and strategy

to open up markets all around the world for American goods and

products and services, but we have to make sure we are maintaining a level playing field around the world as well.

When it comes to transshipments and people—not playing by the

rules—we are going to be plenty tough on them. And so I just

wanted you to know that because of this dramatic increase that we

saw in imports coming in from Vietnam, we felt like it warranted

additional resources to go in there and confirm the data, and make

sure the data was, in fact, correct.

But if it showed to us that this quota was too high, we negotiated

in the agreement that we would have the right to lower the quota.

Senator DOLE. I recall Chuck Hayes, who passed away last year,

Chuck was head of the Textile Manufacturers Institute, and he

made the comment that if the transshipments had been even half

what they have been in the past, our textile industry would be

thriving, and we have lost, of course, tens of thousands of jobs. It

has just decimated our industry in North Carolina.

I appreciated your support earlier on the idea of a textile tracer.

This is something that came up from a citizen in North Carolina.

We were able to find the technology in the Energy Department

to hopefully develop a tracer that could be put on yarn, on fabric,

as it leaves the country to be sewn, and then when it comes back,

you would have something like the watermark on a dollar bill, an

ability to determine, was this made in the USA?

Now the scientists who have been working on that at the Energy

Department have come up with three methods that they want to

test now on the plant floor, and also through Customs. Would you

support spending the $1.2 million to provide the tests to finalize

this idea of a tracer?

Secretary EVANS. Yes, we have supported this effort, Senator. I

think it is a very bright idea, something certainly worth pursuing.

The amount of dollars you just referred to, relative to the cost

to American workers—when you think about the transshipments

around the world—the cost is very minor. So if we can develop

more tools to deal with this critical issue when it comes to trade,

I am certainly supportive of it.

Senator DOLE. Thank you. I believe my time has expired. Thank

you, Mr. Chairman.

Chairman SHELBY. Mr. Secretary, I think you have to go. Do you

have one minute for one question?

Secretary EVANS. Yeah, sure, you bet, Mr. Chairman.

Chairman SHELBY. Thank you. It has been 12 years since the

OECD agreed to restrict the use of Tied Aid. I know that during

2002, there was another push by the U.S. to restrict such aid, as

well as practices like market windows, that are clearly designed to

evade restrictions. Could you just briefly bring us up to date on

these efforts on the use of the War Chest, as we call it, to support

American businesses facing an unlevel playing field?

Secretary EVANS. Well, I know we have made some great success

on that front, Mr. Chairman. As Mr. Merrill just mentioned, we

have seen a reduction of some 40 percent or so of Tied Aid-related

14

exports in the world, and we have been very aggressive in working

through the OECD and we will continue to do so.

I think the War Chest has been an important tool for us to have

in dealing with that issue. We have seen Japan come to the table

and change their practices, as it relates to their Tied Aid practices

of using engineering design and preliminary studies to tie that.

Chairman SHELBY. Any success with the French?

[Laughter.]

Secretary EVANS. I am going over there soon, Senator. I will

work with them.

Chairman SHELBY. I am not speaking of the war; I am talking

about——

Secretary EVANS. Right, I understand. But I think we have made

great progress, but we are not there yet. I do not want to suggest

that we think we have accomplished all that needs to be done on

this front. We need to continue working on it aggressively.

Chairman SHELBY. Mr. Secretary, I know you are under a time

constraint, and we appreciate your appearing before the Committee

today. You have to go to a meeting, and we are sorry we had to

vote, but that is part of the Senate.

Secretary EVANS. I understand.

Chairman SHELBY. We will continue with the other panel.

Secretary EVANS. Thank you, Senator.

Chairman SHELBY. To the rest of the panel, the question was

asked of the Secretary regarding terrorist and risk insurance. Do

you want to comment on that? Do you want to start, Mr. Merrill,

on terrorism and risk insurance?

Mr. MERRILL. Yes, I know. Were you here for the question?

Chairman SHELBY. No, I am familiar with the question, but I did

not know if the four of you had had a chance to answer it and give

your opinions on it.

Mr. MERRILL. First, that is our business. We have a number of

risk policies in place to protect U.S. exporters when the commercial

sectors are not there.

Now, we still charge market rates. What happens here is 13 U.S.

Government agencies, with which we and OMB participate, set the

risk assessment on several different scales, but the easiest way to

think of it is one to 11. The highest number being the greatest risk.

Cuba would be 11. You are not going there. Those numbers reflect

the current assessment of risk the Government is going to have to

take into account.

We have tried to address this in a couple of other ways. The Senator from Idaho referred to an Africa program in his question, and

this is part of a pilot program. This is a pilot program under the

AGOA, Africa Growth and Opportunity Act.

Again, we are trying to open investment in Africa, while still providing for a reasonable assurance of repayment. We note that the

commercial sector is not there, in general, and is certainly not

there without us. So without us, they are not there.

Let me say that around the world, and with respect to Africa, the

risk premium will have to be adjusted to fit whatever the risks

turn out to be.

One other thing we have been doing—you can cook the books in

the short-term but you cannot cook them over 10 years. The risk

15

will turn out to be whatever it is. We are not going to cook the

books. Another thing we have been doing, however, is talking to insurance companies. I have been talking to an American Insurance

Group that is commonly known as H. Greenberg’s operation, Frank

Wizner, Ambassador to India and Egypt.

Chairman SHELBY. We know him.

Mr. MERRILL. What we have been talking about is working out

a deal with AIG and other similar insurance companies where we

overlay one another. In other words, they have certain countries

where they have, let’s say they will reach a cap. We may go above

the cap. Well, we have countries where we go first and they take

the upper end of the cap. What we like to do is cooperate with

American insurance companies to address this very issue.

Chairman SHELBY. Mr. Watson, do you have any comments?

Mr. WATSON. Yes, thank you, Mr. Chairman. Senator Sarbanes,

good to see you, sir.

Our respective agencies are those primarily involved. For OPIC,

in addition to supporting jobs, our mission is, of course, to support

the national security and foreign policy objectives of this country.

But we do so in a way that takes prudent risks in managing our

portfolio, which we do in cooperation with, not competition with the

private sector.

In that context, OPIC continues to work on a self-sustaining

basis at no cost to the U.S. taxpayer. In fact, it returns money to

the 150 Account. But we can support America, and have done that,

in a way that has extraordinary benefit for the national security

goals of the United States.

In relation to terrorism, our mission is precisely to ensure that

the key national security tools of the United States, our foreign policy and our military capability, is supported by our long-term goals

in opening up these economies and these peoples to economic pluralism, open markets, and the private sector. These are the longterm tools of ensuring that we prevent the ability for terrorism to

take root in the future. Open markets, communication, tourism,

freedom of belief, these are all principles upon which this country

has been developed and it is our greatest export.

Our job is to support that, and we can only do that in conjunction

with the private sector. We can do it in a prudent way at no cost

to the taxpayer. That is what we do.

Chairman SHELBY. Mr. Barreto, do you have any observations?

Mr. BARRETO. Thank you, Mr. Chairman.

Just briefly, the place that SBA interfaces mostly with small

businesses is really through export financing, we have a number of

different loan programs. Also, technical assistance, which is so critical to small businesses.

There is no doubt that terrorism plays a major role in a small

business’s interest in exporting and importing and really being involved in the export marketplace. It is one of the reasons that it

is so essential for us as an agency to work very closely with our

TPCC partners.

I would say one other thing. According to our figures 97 percent

of all exporters in the United States classify as small businesses;

over 200,000 firms are small business exporters, but they only represent less than one-third of all the trade that is occurring. So

16

there is a great opportunity to engage those small businesses and

really try to grow the pie of opportunity for them, and really educate them to those opportunities.

Chairman SHELBY. Tell us how they do that?

Mr. BARRETO. We do that through our network of technical assistance providers, and all of the people that we have in our network that deal with trade issues, and export issues. We have a

very large network, as you know. We have SBA personnel in every

State in the union. It is really the place that we can touch the most

small businesses.

One of the things that we want to encourage them to do is oftentimes they are only doing business with one country. So if there is

a part of the world that is particularly dangerous, we want to open

them up to some other opportunity, and we think that is a very

prudent way for us to go.

Chairman SHELBY. And so, it could help our economy immensely,

couldn’t it?

Mr. BARRETO. Absolutely.

Chairman SHELBY. Ms. Bradford.

Ms. BRADFORD. Mr. Chairman, Senators, and the Committee, the

Trade and Development Agency, as part of the Foreign Assistance

Program of the United States, finds that SARS and terrorism are

the greatest impediments to our doing work overseas. Of course, we

are worried about the risk of our own staff who are there and the

contractors for the Agency, but we really see it as a balancing act.

Our job is to keep trade open while still providing some security.

We have focused on transportation security by screening passengers and cargo before they travel. Securing the supply chain as

goods move through Customs and between borders so that you can

lock containers and make sure that the goods that you packed arrive safely where they need to be without having to be opened at

each border crossing along the way, which provides an opportunity

for terrorism to happen.

By using IT expertise so that we can track containers, anyone

who is trading can track containers and the security of those containers. You find that it reduces the chance for corruption. It increases transparency. It facilitates trade. And as we know, the

rapid transit of goods across borders is what makes trade happen

and helps the economies on both sides of the transaction.

Chairman SHELBY. Senator Sarbanes.

STATEMENT OF SENATOR PAUL S. SARBANES

Senator SARBANES. Thank you very much, Mr. Chairman, and I

apologize for being delayed in getting to the hearing. Actually, I

have three hearings going on at the same time——

Chairman SHELBY. Plus two votes.

Senator SARBANES. Yes. When I first looked at it on my schedule,

my first reaction was, I am not going to go to any of them——

[Laughter.]

Senator SARBANES. —it was too much of a conflict to decide, but

I finally resolved it.

First, I want to thank you, Mr. Chairman, for holding this oversight hearing. I think it is extremely important that we keep a

Congressional focus on the TPCC. I think it helps to give it some

17

energy and momentum, and it is important for people downtown to

know that Congress is watching and that we care about this program, and we regard it as important.

The effect on this, of course, on the TPCC depends upon the leadership it receives from the chairman and the other key members.

Let me say it has been my perception that Secretary Evans—and

I know he had to depart—and Under Secretary Aldonas recognized

the importance of the TPCC from the time they took office as a way

of having a greater sense of strategy and focus to U.S. export promotion efforts. They have made energizing it a priority, and they

have gotten the active cooperation and leadership from the other

agencies represented on the panel this morning. I want to express

my appreciation to all of you in that regard.

I understand that a Deputy’s level, meaning Under Secretary

level, of the TPCC takes place every 6 weeks and that lower staff

level meetings take place on a weekly basis. And this is a tremendous advance.

The precipitating event for establishing the Coordinating Committee was the hearing we held in which we had at the table from

a range of agencies, these and others, other departments, involved

in exports and the question was asked: How many people on the

panel knew other people on the panel? Nobody knew anybody else.

They were all just clearly working within their own silo and there

was no interaction.

At the hearing last year on the 2002 Report, Secretary Evans

and the other agency leaders presented findings and recommendations obtained from a benchmarking exercise. This was a series of

surveys and focus groups used to measure customer satisfaction

with the TPCC’s programs and a search for best practices among

the governments of our major competitor countries to see how they

promote exports.

A series of recommendations came out of that, and I am very

pleased to note this in Appendix A that is in this year’s report, in

effect providing a progress report on the 2002 recommendations.

This is, in my judgment, very good follow-up because it sets out the

recommendation, the accomplishments so far, the next steps the

progress measures, and it really gives you a very handy way to see

where we are and some idea of where we are going to go.

Having said that by way of opening, I would like to just ask a

few questions:

First of all, the report mentions that a key area of collaboration

among the TPCC agencies has been the development of an interagency training program designed to impact client management

skills and broader knowledge of the programs and resources that

are available to assist U.S. firms in the international marketplace.

The Pilot Training Course was apparently delivered in January

of this year. Participants from nine different TPCC agencies—the

five that are here at the table, and the Departments of Agriculture,

State, Transportation, and AID. This strikes me as a promising initiative. It is obviously consistent with the statutory mission of the

TPCC. Are there plans to institutionalize and expand the interagency trade officer training program? Who would like to elaborate

on that?

Mr. ALDONAS. I would, Senator Sarbanes.

18

We included in our budget request for this fiscal year and again

for next fiscal year training monies that are designed to encourage

that program to go forward.

We will have sessions in June and September of this year to follow up. From my perspective, these initial stages are a little bit of

training the trainers. What we are going to have to do is, if we are

going to get as much of a multiplier effect, is to make sure that

we have some of these people who have gone through the training

program get out and meet with their Commercial Service overseas,

meet at SCO conferences as we had last week in Reston, so they

can pass on accumulated knowledge.

It is all designed really to create account managers within the

Commercial Service that can serve as marketing reps for all the

agencies. So that, whether it is a Commercial Service office in the

United States where SBA is not co-located, or we do not have an

Ex-Im Bank rep, you still have somebody there you can talk to that

knows enough about the programs so they do not simply refer the

customer on to someone else, but who can actually help tailor the

programs to their needs, give them the advice they need, and make

sure they have the contacts overseas with the FCS that can put

them in touch with their contacts abroad.

Senator SARBANES. Good. I understand the TPCC has been developing a new program that would combine Commerce, Ex-Im Bank,

and SBA resources toward an integrated Small Business Trade Finance tool for working capital loans. However, I understand that

SBA’s participation in the program may be affected by the cut in

last year’s appropriation bill for SBA participation in the U.S. Export Assistance Centers, the so-called One-Stop-Shops. How are we

going to deal with this? I mean it seems to me it is certainly a

worthwhile initiative and I am concerned that it seems to be——

Mr. BARRETO. We have been working very closely with our partner agencies here. One of the things that we have been able to do

is actually formalize a lot of our participation with formal memoranda of understanding.

It is correct that we had asked for $3.1 million in this year’s

budget which was not funded. We have continued working very

closely with the Department of Commerce on this very critical function, and we plan to continue doing that. Obviously, in the 2004

budget, funding has been requested again, and we will do everything that we can to make sure that that funding is there and that

we are able to continue.

But regardless of that, there shouldn’t be a drop off in this collaboration. I mean the things that we are doing already together

in terms of the training and things that we can do going forward

I think have been strengthened and are not going to go away. But

that funding will be critical to us in being able to continue our

USEAC presence.

Mr. ALDONAS. Could I say, Senator Sarbanes, that one of the

things we have talked about with Hector, and I was discussing

with the Secretary yesterday, was could we absorb some of that

expertise into the Commercial Service? What you really have is a

cadre of trade finance professionals that could serve as a resource

for the Commercial Service, particularly in this area of small- and

19

medium-sized enterprises where they need the most help, frankly,

and guidance.

I was in Rockford last week at one of our manufacturing hearings. The President has launched an initiative on manufacturing,

and a fellow by the name of Don Metz described the success he has

had in working with Patrick Hoppen with the Small Business Administration. He used the phrase of, somebody had to persuade him

to get out of the boat and walk on the water, in terms of exporting

and really what he had relied on was precisely the cooperation between the local SBA office and our USEAC in Chicago and the

northern Illinois area.

There is a lot of value to that, particularly on the financing side.

So what we are trying to do with Hector is to see between the two

agencies how we can make sure that we have absorbed that talent

and we continue to provide that service one way or the other.

Senator SARBANES. Well, we want to encourage that initiative.

When we reauthorized the Ex-Im Bank Charter last year, we addressed the problem of market windows. We gave Ex-Im Bank explicit authority to match market window financing, and we directed

the United States to seek negotiations for multilateral disciplines

transparency within the OECD with regard to market windows.

The legislation requires a report in 2 years on the progress of the

negotiations. It also requires Ex-Im Bank to include an assessment

of the use of market windows by other countries.

I note that the National Export Strategy Report mentions that

the Ex-Im Bank and the Commerce Department have commissioned a detailed study of the nature and volume of market window

trade financing, and that the report—at least as listed here—was

expected by the end of April 2003. In other words, last month. I

would be interested to know if the report has been received and,

if so, whether a copy could be shared with the Committee.

Mr. ALDONAS. Yes, sir, we do have the report and we will make

a copy available. We can show it to you in draft.

Senator SARBANES. What?

Mr. ALDONAS. We will show it to you in draft. We have the report

in draft at this point. It hasn’t been finalized. But we are happy

to sit down and discuss it with you.

Senator SARBANES. When do you expect to have the final report?

Mr. ALDONAS. At the end of this month. But I do not see any reason why we shouldn’t draw you into the process of having a discussion about what is coming out in terms of financing.

Senator SARBANES. We are very interested in that, and I know

the Chairman at the outset made a comment about the Tied-Aid

Credit Fund and the need to establish a level playing field, and of

course some of these countries entered into an OECD regime on

the Tied-Aid Credit, and then they went around to the back door

and set up these market windows. So, we need to look at that entire landscape, and we are anxious to work with you on that.

I want to ask Peter Watson a quick question. You will be seeking

a reauthorization, I think—between now and September.

Mr. WATSON. Yes, sir, that is correct.

Senator SARBANES. I understand in the draft legislation you are

seeking a change in the current definition of ‘‘eligible investor.’’

Mr. WATSON. Yes, sir.

20

Senator SARBANES. So according to the letter accompanying the

request, ‘‘It is necessary to update this definition to include enterprises and financial institutions with projects that may not be majority U.S. owned but have significant U.S. connections that provide support to the proposed project in the form of U.S. employees,

facilities, or payment of taxes.’’

I guess the bottom-line question is: Are you now proposing that

OPIC guarantees be provided for investment by foreign-owned companies? Is this what this amounts to?

Mr. WATSON. Senator, what we have—not just ourselves but the

Department of Commerce and Ex-Im—had to try and respond to in

the last several years is that major U.S. industry groups, significant participants in the U.S. economy, Westinghouse, Chrysler,

amongst others, have no longer been eligible to be supported by our

agencies. And our agency, in particular, by reason of the acquisition of significant U.S. companies and U.S. workers, has meant

that we, by reason of an antiquated definition of who we can support, have, in fact, been penalized by the increasing integration of

international investment.

What we are wanting to do is to be able to recapture the ability

to support U.S.-based employment, U.S.-based taxpayers, U.S. content, and U.S. production that is not being able to be supported in

the current economic environment.

We have many instances where there are, indeed, nationally

foreign-owned corporations that have greater assets, a greater

number of employees, and a greater capital base in the United

States than they have elsewhere. Siemens is an example. BP

Amoco is an example.

Senator SARBANES. Let me ask you this question: Have you run

out of U.S.-owned companies to provide the guarantees to and now

you are searching around for foreign-owned companies?

Mr. WATSON. The answer is, obviously, no, Senator.

Senator SARBANES. Why would we shift off some of the resources

in that direction?

Mr. WATSON. Well, the essence of this is we want equality in

being able to avoid penalizing existing U.S. workers and U.S. companies that previously have been able to receive our support. They

now have, in fact, been penalized simply because of being owned

by foreign companies. We want to be able to support those U.S.

workers but we are not now able to do so.

Senator SARBANES. I think this is an issue that is going to have

to be very carefully looked at.

Mr. WATSON. Agreed.

Senator SARBANES. I don’t think it really responds to the concern

to use language that sort of sacks the debate by, for instance, characterizing it as ‘‘antiquated requirements,’’ ‘‘penalizing,’’ and so

forth and so on. I mean there is I think a very legitimate question,

and particularly the question if you start down that slippery slope

where do you end up.

Also you have a lot of people seeking these guarantees, and so

forth, and so the question becomes how do you choose amongst

them. But obviously that is something that will be more carefully

examined when your reauthorization issue comes before us.

Mr. Chairman, I appreciate your indulgence in letting me go on.

21

Chairman SHELBY. Thank you. Senator Sarbanes—I know you

need to get to other committees—I acknowledged your work dealing

with the Trade Promotion Coordinating Committee earlier, and

that was created and it was codified in law due in no small part

to your efforts, and I wanted to acknowledge that in public.

Senator SARBANES. I appreciate that very much.

Chairman SHELBY. You have a great interest in this, and you are

very knowledgeable about it and I think it is an important area.

Senator SARBANES. We think it is doing some good, and it has

certainly gotten a good, strong boost from this Administration. On

occasions I differ with the Administration, but when we are in

agreement I want to make sure I recognize it, and they are doing

a good job on this. Thank you.

Chairman SHELBY. Senator Crapo.

Senator CRAPO. Thank you, Mr. Chairman.

I am going to have to apologize to Mr. Barreto and Ms. Bradford

because they still have not had a chance to make their opening

statements yet.

Chairman SHELBY. Do you want to make your opening statements, or do you want them to be made part of the record?

Mr. BARRETO. It is your call, Mr. Chairman.

Chairman SHELBY. No, it is your call.

Mr. BARRETO. I am happy to read it. If we have time constraints,

we are happy to answer questions, as well.

Chairman SHELBY. Read it? Or paraphrase it?

[Laughter.]

Senator CRAPO. I would give up my time for them to make their

statements, Mr. Chairman.

Chairman SHELBY. You go ahead.

Mr. BARRETO. I will try to paraphrase.

STATEMENT OF HECTOR V. BARRETO, JR.

ADMINISTRATOR

U.S. SMALL BUSINESS ADMINISTRATION

Mr. BARRETO. I will try to paraphrase. I just want to echo many

of the comments that have already been made. I think one of the

things that we can attest to is that we are working closely together.

We do know each other. We are doing many things together which

I really believe are going to further the agenda of TPCC.

I also want to acknowledge the leadership of Secretary Don

Evans. I think he has really been a champion on us working together and really measuring ourselves by the results that we get.

I have had an opportunity to be with him on a number of trade

missions already, working on the Partnership for Prosperity, and

this is definitely a top goal and priority of this Administration.

As has been said many times before, for us this is a critically important initiative because of the fact that these small businesses

play such a large role in exporting, and they also play a huge role

in our economy in the creation of businesses.

One of the things that I was very heartened by was the recent

study by the Commerce Department which showed that 30 percent

of nonexporting small businesses would be interested in exporting

if they had somebody to partner with and to help lead the way.

We think that is a very significant opportunity for all of us.

22

Chairman SHELBY. It would create some more jobs, wouldn’t it?

Mr. BARRETO. Absolutely. Absolutely. We really are the engine

that fuels the economy and we need to find every way we can to

grow that pie of opportunity for them.

I have mentioned some of the things that we have already done

with regards to our partnership agreements, the symposium that

we have all participated in, and the coordination that is currently

going on. And so I just again want to say that we are very excited

about some of the progress. We are not anywhere near done yet.

There is a lot more that can be done. But we are definitely on the

right road and we want to thank this Committee for having this

hearing and the support that they have given all of us in continuing with the mission.

Thank you, very much.

Chairman SHELBY. Ms. Bradford.

STATEMENT OF BARBARA R. BRADFORD

DEPUTY DIRECTOR

U.S. TRADE AND DEVELOPMENT AGENCY

Ms. BRADFORD. Mr. Chairman and Senators, thank you for the

opportunity to appear here today. I would like to read my statement. It is short. But as a niche player that may not be as wellknown as the agencies of my colleagues, I would like for you to

know exactly what we are doing.

I am Deputy Director of the Agency. Director Askey apologizes

and regrets not being able to be here today. I am very pleased to

testify today because I was a staff member on one of the original

interagency committees that worked on the TPCC over 10 years

ago and I can verify how valuable it has been both to me as an individual and to our Agency over the years.

Throughout the year, the USTDA works closely with other TPCC

members to enhance our mutual effectiveness, leverage our resources, and focus our joint efforts on projects and activities that

will garner U.S. export success.

The USTDA’s mission is unique. As a foreign assistance agency,

it is at the nexus of U.S. export promotion and the advancement

of important overseas development objectives. In carrying out our

mission, USTDA works with our TPCC colleagues and with other

agencies to bring their particular expertise to a wide range of development priorities.

At USTDA our strength comes from facilitating U.S. private sector solutions to modern infrastructure needs in developing and

middle-income countries. USTDA also brings U.S. private sector expertise to bear in assisting countries in the development of specific

sectors such as energy and transportation, which can serve as catalysts for economic growth and increased trade.

During the past year, the USTDA has worked with other TPCC

members to implement the National Export Strategy. I would like

to share some examples of USTDA activities in this effort. In particular, USTDA activities are supporting important U.S. trade and

foreign policy objectives. For example, USTDA is active in many

post-crisis regions such as Afghanistan.

Since early 2002, we have committed roughly $2.5 million for

project planning activities in Afghan civil aviation, telecommuniVerDate 11-MAY-2000 10:22 Jun 02, 2004 Jkt 000000 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 93490.TXT SBANK4 PsN: SBANK4
23

cations, oil, and gas and electric power sectors. I know this does not

seem like a large amount of money in the scheme of things, but you

have to understand that the $2.5 million are catalytic funds, putting U.S. firms in on the ground floor of large projects worth hundreds of millions of dollars.

We are currently considering $3 million in additional activities.

Next month, USTDA will co-sponsor an Afghan conference with the

Department of Commerce outlining opportunities that we have

identified as having strong potential for the U.S. private sector involvement while rebuilding that war-torn country.

Along those lines, there is an important role for the USTDA to

play in Iraq in putting the private sector to work in many essential

sectors. These areas include: Transportation, telecommunications,

electric power, and downstream petroleum processing such as refining petrochemicals and fertilizer production. These sectors represent areas in which the need for new investment is great. The

population will receive direct and tangible benefits and the U.S.

private sector has expressed interest in these particular sectors.

Another component of USTDA’s portfolio is our support for U.S.

trade policy initiatives. In Africa, for example the Agency has supported activities under the AGOA framework. USTDA is also working closely with USTR and other agencies by providing support to

a number of trade negotiations, most notably the SACU, South Africa Customs Union Free Trade Agreement, and CAFTA, Central

America Free Trade Agreement.

This year’s National Export Strategy discusses a number of sectors that are priorities for the TPCC and USTDA. For example, we

have taken a leading role in identifying and supporting potential

transportation security projects that I referred to earlier in the ‘‘Secure Trade in the APEC Region’’ or the STAR Initiative. Earlier

this year, we co-sponsored a STAR conference in Thailand with the

State Department.

Turning to specific countries and regions targeted for early

project development, USTDA reopened in China 2 years ago, and

our country portfolio has grown rapidly. In 2002, we were involved

in 46 separate projects there with a focus on aviation safety, again

going back to the terrorism problem, and energy and the environment. Already we have seen some U.S. exports resulting from the

USTDA activities in China.

In Mexico, USTDA funded a variety of activities that support the

Partnership for Prosperity, P for P, including the signing of master

grant agreements with two Mexican development banks. USTDA

has strengthened our cooperation with our TPCC colleagues, particularly SBA, OPIC, and Ex-Im through support of the Partnership for Prosperity. USTDA has implemented a strong program in

Central and Eastern Europe, notably in environmental investments, particularly waste energy and renewable energy projects.

We work closely with our colleagues overseas in several regional

offices, which are like the USEAC’s where we are co-located, particularly in Eastern Europe and Eurasia. In addition to USTDA

personnel, we have representatives from Ex-Im, OPIC, and the

U.S. Commercial Service, and this joint overseas presence enables

us to share information effectively and to better coordinate our activities and services to U.S. firms.

24

USTDA also participates in a number of events throughout the

year designed to inform the private sector about the Agency’s programs. We worked with OPIC in the Andean Regional Trade and

Investment Conference, Ex-Im’s annual meeting, OPIC’s Arizona

Mexico Trade and Investment Conference, and last week we hosted

a seminar for small- and medium-sized businesses at TDA, and we

were happy to have Administrator Hector Barreto participate in

that with us.

We are also very involved in the pilot interagency training

course, and we are looking forward to hosting that training course

at our Business Center in June.

As we look to the future, we anticipate continued high demand

for USTDA programs and we are pleased to work with our other

TPCC members as we move forward.

Chairman SHELBY. Thank you.

Senator Carper.

COMMENTS OF SENATOR THOMAS R. CARPER

Senator CARPER. Just a quick couple of questions then I have to

head back to the floor. How long has the Coordinating Council been

in existence?

Mr. ALDONAS. About 10 years.

Senator CARPER. Ten years?

Mr. ALDONAS. Yes.

Senator CARPER. Any idea what the trade deficit was about 10

years ago?

Mr. ALDONAS. I would say it was probably just shy of 3 percent

of GDP.

Senator CARPER. Which would be about?

Mr. ALDONAS. At the time I would have said maybe like $25 billion, $20 billion, something around those lines.

Senator CARPER. Any idea what it was last year?

Mr. ALDONAS. It is about 5 percent of GDP.

Senator CARPER. And roughly, what would that be?

Mr. ALDONAS. I am sorry. I misspoke myself. It is more on the lines of $200 billion, because right now I think we are perking

along at, gosh, I want to say like $400 billion a year. It has about

doubled over that time, Senator Carper.

Senator CARPER. Does the rest of the panel agree with that? Does

that sound about right? Okay. I see heads nodding. So before the

Coordinating Council was created, our trade deficit was roughly

$200 billion. Today, it is closer to $400, maybe more this year. If

you look at the reason why we created this Council it is to try to

turn things around. And not to take anything away from the efforts

of each of you and the people you work with, why were we headed

in the wrong direction? Not just by a little bit, I mean by a lot.

Mr. ALDONAS. The trade deficit, of course, is driven by an awful

lot of things that relate to the disparity in growth. I will give you

an example. Normally when you see our trade deficit close, it is because we have gone into a recession and other economies are going

stronger. And in fact, one of the reasons 10 years ago—it is interesting. It is really the last time the trade deficit closed. The reason

was, we were in a recession. Japan was still growing, and Europe

was getting strong growth.

25

What happened this time around is we went into the recession,

Japan and Europe trailed us in. We have come out rather slowly.

They have not. In fact, they may be back in recession at this point,

which means that our export has faced an exceedingly challenging

environment. So while exports are up in absolute terms, imports

are up significantly higher, and it is because our economy is growing faster.

Senator CARPER. I am going to ask each of you to think about

something and then I will come back to ask you for your thoughts.

I would like your best single thought on what we can do to turn

this around and get the trade deficit heading in the right direction.

Each of you just one idea, what you think is a very good idea. It

could be something that could be done administratively, legislatively. It could be something we are doing with respect to monetary

policy, the value of the dollar. Just give that some thought.

I am amazed, Mr. Chairman, at how little attention is given to

the magnitude of the trade deficit. To see what it was when you

and I were in the House together and to see what it is today, my

understanding is that in order for us to continue to run these kinds

of trade deficits, somebody has to finance it, and as long as people

from around the world are willing to invest money in this country

to offset the size of our trade deficit. We can get by.

But eventually, I fear we are going to reach a point where the

rest of the world will lose their enthusiasm about continuing to invest in a country that forever is increasingly purchasing goods and

services from abroad. And we are trying to get the economy moving

here. The monetary policy has been most accommodative, and we

have these very low interest rates. But at some point in time, I fear

that in order to be able to continue to induce other countries’ investors to invest in this country, we are going to have to raise interest

rates. When we raise interest rates, that has, as you know, it could

have a potentially adverse, maybe devastating effect on our economy and our ability to recover.

So, I would put that on the table. You have had a minute to

think about your maybe single best idea, and Ms. Bradford if you

want to lead off, I would welcome your recommendation.

Ms. BRADFORD. Thank you, Senator. With due respect, sir, our

Agency is a very practical, project-by-project agency that provides

funding to get U.S. firms on the ground floor of development. So,

I would defer the policy decisions of how to take on the large issue

of handling the trade deficit to those that are more experienced in

those policy issues than we are.

Senator CARPER. All right. Thank you.

Mr. Barreto.

Mr. BARRETO. A number of thoughts on that. I mentioned before

that 97 percent of all exporters are small businesses, but they only

represent less than 30 percent of the trade. So there is a great opportunity to engage that 97 percent.

But what we find, and this is in particular to small business exporters in general, they do not know what they do not know. There

are a lot of programs that are represented at this table that they

are not accessing. We cannot wait for them to come to us, we have

to go to them. And that is why the collaboration that is going on

on this Committee, the streamlining of processes, the simplification

26

so that it is easier for these small businesses to access these programs is so critically important.

I think that we have a significant opportunity. I think also that

one of the things that we are hearing is a lot of excitement with

regards to some of the potential trade agreements that could be in

the offing. The United States has been party to very few trade

agreements. Now that the President has the negotiating authority

to engage the Central American countries and other countries in

the hemisphere, that is a huge opportunity for small business.

Senator CARPER. All right. Thank you.

Mr. Watson.

Mr. WATSON. Senator, I share your concern about the increasing

numbers on trade deficit. What is little appreciated in terms of

these numbers of U.S. exports is that, in fact, over 50 percent of

U.S. exports go to U.S. corporate affiliates abroad, which is to say

the offices of U.S. companies abroad who then in turn integrate

these and export them onward into other economies. I want to say

it is about 56 percent of all U.S. exports now currently go to affiliated U.S. companies and joint ventures abroad.

If you think about it, that being the major platform, the way to

increase our export profile is to ensure that more companies can,

in fact, establish competitive operations outside of the United

States and be able to penetrate those markets. That means that

while their coordination might not have been as effective previously

amongst these agencies, what you do have is the mechanisms to

ensure that U.S. exporters, U.S. manufacturers, U.S. men and

women in the workforce do have the platforms and do have the

vehicles and programs to be able to ensure equitable access to

these countries and these economies and these markets, which are

the vehicles and platforms for driving U.S. jobs.

That 56 percent figure is not well appreciated. And so, we have

to be able to expand the ability for us to use the platforms of foreign access to grow that percentage. You have to do that by competitive means and helping programs such as these.

Senator CARPER. Thank you, sir.

Mr. Merrill.

Mr. MERRILL. Senator, I am not smart enough to have a single

best thought on a subject this complicated, so I will have to give

you three.

Senator CARPER. Okay. We will take them.

Mr. MERRILL. First, $100 billion of the trade deficit is simply

China. It came up earlier before you arrived. I suggested earlier

that I had met with the Chinese Ambassador on this subject and

so forth.

Second, let me say $100 billion plus, is undetermined because of

varying price, is the import of oil. It seems to me the oil issue is

simply a separate issue that is more complex than can be summarized or adequately addressed here. But suffice it to say a very

large portion of the trade deficit is the import of oil and whether

it is to our interest to produce more of our own oil, or to import

more oil, and all the associated questions that go with that, cannot

really be addressed at this point. So let me just say it is oil.

Senator CARPER. Okay.

27

Mr. MERRILL. The third point that I would make is that the central fact of our time is the explosive growth of the U.S. economy.

We have a $10 trillion economy. We went to war with a country

that had a $26 billion economy. Russia’s economy is $346 billion.

Brazil, 60 percent of our size in population, about the same size in

area, has close to a $500 billion economy, 5 percent of ours.

What has shifted is the let’s say former banking advice that

banks would have given their clients, which said invest in the

United States, diversify, some in the United States, some in other

places, because if we are doing well, they are doing badly and vice

versa. What seems to me has changed is that when we do well

now, because of the sheer size of us, other people do well. And

when they do well, we do well. That is, we are now linked together

rather than opposites.

The biggest and the most promising exports are knowledge-based

services. We should be exporting more services, more programs.

Training doctors at Johns Hopkins or Massachusetts Medical is effectively an export for the United States. The exporting industries

that do export tend to have about 20 percent higher paid workers

in the United States than the rest of the working community. So

the short form is that we should promote, I am going to call it

knowledge-based imports, leave that like oil, without going into nuance, and suggest as well to you that the Japanese economy is unable to right itself, because basically they cannot write off their bad

debts, and the European economy, without reflections on our putative friends, have a problem breaking what might be called a social

contract. It takes 2 years to fire somebody or replace somebody and

there is very little mobility of labor, although there is mobility of

management.

Senator CARPER. Mr. Merrill, my time has expired and then

some, so——

Mr. MERRILL. Let me just say, it is hard for me to see an awful

lot of people investing in either one of those great entities as opposed to the United States.

Senator CARPER. Those are great answers. Thank you very much.

Could you just give us a quick benediction here?

Mr. ALDONAS. Sure. Preach what we practice. You know, Phil’s

right. If you look at Asia right now, Japan still represents twothirds of the GDP, if Japan’s flat on its back, we are not going anywhere. I can put it this way, which is that the size of Vietnam’s

economy is smaller than the Japanese annual bar tab. So if Japan

is not doing what it has to do to spur economic growth, you are not

going to see growth throughout Asia even with China rising.

The same thing in Europe. If they are locked into a growth and

stability pact that essentially limits, as you pointed out Senator,

the flexibility that Alan Greenspan has responded to circumstances

in the market, if they do not have those tools available to them and

they aren’t willing to look hard at their own policies to try and give

them a progrowth strategy, particularly on the monetary policy

side, then we have real trouble.

And again, I am as concerned as you about the trade deficit and

whether or not it is sustainable. Because at some point if they are

not growing, this house of cards comes down. Growth is the answer. But they have to be doing the right things domestically.

28

When the President goes to the G–8, he has to make that abundantly clear, as I know he will, that we have to back that up

through institutions like the IMF and the World Bank so that people get the message. Because unless they are doing the right things

at the macro level—cutting taxes, responsive monetary policy—and

at the micro level in the developing world—protection of private

property, all the sorts of things that give you a sound basis for

small businesses to grow and thrive and provide the innovation,

there is not a lot of hope out there for strong growth and a way

of closing that deficit without us taking a hard economic hit.

Senator CARPER. All right. Thanks.

Mr. Chairman, those are good responses, and I want to thank

you for being generous. Let me just say in closing, the comment

you made about the size of the Vietnamese GDP being smaller

than the Japanese bar tab, clearly if we can get the Japanese to

drink more, that will help the people in Vietnam.

[Laughter.]

Senator CARPER. The other thing I would say is that——

Mr. ALDONAS. They have their reasons.

Senator CARPER. The trade deficit with China is now going to

$100 billion, one of my friends says, we should reprint those Little

Red Books, Mao’s Little Red Books, and distribute them broadly

throughout China, and get them back on the right track.

[Laughter.]

Senator CARPER. Thank you.

Chairman SHELBY. I think they are repudiating those books.

[Laughter.]

Chairman SHELBY. Thank you.

TPCC has focused on Russia as one of the three major tests for

the National Export Strategy. These countries were chosen on the

basis of their potential and TPCC resources already dedicated to

them, it is my understanding. Some of us are concerned about the

people in Russia. I am concerned not because I question its potential per se, but because of the pervasive influence there of corruption and organized crime. A recent report by the Moscow-based

Central Economic and Mathematics Institute of the Russian Academy of Sciences and the Foundation for Information on Democracy

states the following: ‘‘Corruption is an integral part of economic activity, with ill-defined boundaries between politics and private businesses. Market competition is also weakened, since the winners

often prove to be not the most competitive agents, but rather those

who gain advantages through bribery and special connections.’’

I appreciate that the goal of capacity-building activities is to assist foreign countries to establish a statutory framework necessary

to draw foreign business.

I would like to hear from you, if you could, your best assessment

of the track record, including the Russian Government’s own efforts, which are spotty, at best, perhaps, to date, in eliminating corruption, so that American companies can do business there without

being unfairly disadvantaged by virtue of their adherence to U.S.

anticorruption laws, specifically the Foreign Corrupt Practices Act.

I should add that this is particularly important, given TPCC’s

emphasis on small- and medium-sized businesses, which may be

more vulnerable to illicit, below-the-screen pressures.

29

Do you want to start, Mr. Barreto?

Mr. BARRETO. Well, as you know, we are very focused on small

businesses based in the United States, but absolutely with regards

to their ability to do business with a country like Russia, this is

a concern. There needs to be more transparency with how you do

business. I will tell you that we have been approached by our Russian counterparts. They have visited us at the SBA. They are very

interested in some of the programs we have, and they are trying

to emulate some of those things themselves, in their own country.

I know that some of my colleagues have had much more experience

dealing with our Russian colleagues, and probably have a better

understanding of what some of the current trends are in that area.

Mr. ALDONAS. Senator, if I may?

Chairman SHELBY. Go ahead.

Mr. ALDONAS. A couple things: First, there is no doubt that we

have to keep after the issue of corruption, both on the demand side

with Russia, continuing to work with the Russian Government, but

also on the supply side.

One of the probably strongest efforts we have had in the Commerce Department’s Annual Report on Corruption is the effort to

ensure that those in the OECD who are the source of a lot of these

funds—you will recall that the French and the Germans used to

offer tax deductions for bribes—live up to their obligations under

the OECD Bribery Convention, so that we are attacking the problem from both sides.

Chairman SHELBY. That is the cost of doing business to them.

Mr. ALDONAS. Exactly. The second thing that I think is important, and one of the reasons that we have focused on Russia in

terms of our development, is that both Russia and United States

companies benefit in the area of corruption from having United

States companies on the ground.

Let me take an example outside of Russia and then come back

to Russia for just a second.

A good example would be U.S. Steel’s acquisition of the steel

works in Slovakia. They issued a policy very publicly in the Maine

Business Daily, a full-page ad that said if any of their suppliers or

their employees were caught involved in any illicit dealings, they

would be fired summarily, or the relationship would be ended. And

their contracts reflect that. The whole supply chain now has to live

up to that standard.

Chairman SHELBY. Is it working?

Mr. ALDONAS. It is, I am happy to say.

Chairman SHELBY. In Slovakia?

Mr. ALDONAS. In Slovakia. So what you have is the same thing

with International Paper in Russia, with McDonald’s in Russia,

with Boeing’s engineered design facility in Moscow. The business

values they bring in are helpful.

You really put your finger on something, though. As long as you

have this in the market, Russia will continue to be a market for

big players in the energy area, aerospace, pulp and paper, commodities, things like that. It is a very tough market for the small business guys, as long as you have these continuing problems in the

Russian market.

30

Mr. WATSON. Mr. Chairman, just following on that, significant

exports come through the major public procurement projects, for

example, the energy areas in which State assets and State-owned

enterprises play a role in issuing these contracts. That is where a

majority of this corruption can play a role. One of the important

provisions that Russia will soon have to comply with when it becomes a member of the World Trade Organization is precisely the

public procurement code of the WTO, which prescribes exactly

what these governments have to do in terms of opening up the

process to transparency. It is not just rhetorical. They are very,

very significant provisions that affect members of the WTO. Working in conjunction with the OECD, and, frankly, just disciplining

our trading partners, is an important part of the process.

Ms. BRADFORD. The Agency is supporting a project that will support Moscow’s efforts to put its government procurement activities

online, and this will certainly help address, specifically, the area of

transparency.

Chairman SHELBY. Put a little sunshine in there?

Ms. BRADFORD. Exactly.

Chairman SHELBY. Mr. Barreto, you know the problem and the

challenge that small- and medium-sized businesses would face in

that kind of an atmosphere, don’t you?

Mr. BARRETO. Absolutely. I concur with the remarks, and that is

why it is so essential that these reforms really get accelerated for

small businesses to truly have an opportunity to do business in

that part of the world.

Mr. MERRILL. Senator, let me just say that I want to associate

myself with the remarks of Mr. Aldonas with regard to the trade

deficit issue, even though the Senator from Delaware is not here.

First, I would like to address this, however, one second by saying

that the issue you raise, by saying that this is a 70-year process

with the Russians, in the last decade, more or less since the Wall

came down, my estimation is that maybe they have done 20 years’

progress in 10 years’ time. We can now make some nonsovereign

loans in Russia, which you cannot do in China, or, for practical

purposes, cannot do in China.

Since we are not under oath, I am still willing to speak the truth,

and what you have is a number of leading Russian economic figures who were thugs a decade ago. We work very closely with our

colleagues in other departments, including the intelligence community, generally to see whether or not they are still thugs.

Chairman SHELBY. Their values will be tested, won’t they?

[Laughter.]

Mr. MERRILL. Their repayment record currently is quite good. If

they were thugs 10 years ago, well, we kind of say maybe they

have learned something. We are not going back 10 years. It was

2 or 3 years ago that we started to worry about it. We worry about

it a lot. The important thing in dealing with the Russians is to do

everything we can to get an effective rule of law, hard currency, the

normal attributes of free enterprise, including the ability to enforce

a contract.

One could look at it as saying it is two steps forward and one

step back, but based on, let’s say, the experience of my long-term

friend, Leonard Louder, who was run right out of Russia—and that

31

is a pretty good sized company—it is pretty difficult for small business to take the risk of doing business there. Some can. They have

to have a special——

Chairman SHELBY. Maybe that will change and maybe you can

help change that.

Mr. MERRILL. We would like to help change it.

Chairman SHELBY. Ms. Bradford, I would like to ask you a question, and then I am going to submit the rest of my questions for

the record, if I could.

As the issue of U.S. exports of genetically-modified agricultural

goods has proven among our most controversial trade issues, our

Trade Representative recently announced his intention to take the

issue before the WTO on account of European Union prohibitions

on imports of such goods from the United States. How do you see

the WTO’s case as influencing TDA’s current efforts in China or

vice versa, and does TDA have similar efforts underway in Europe

that might help diffuse a difficult, very difficult trade dispute? Can

you comment on that?

Ms. BRADFORD. Yes, Senator, I am glad you asked that question.

It is a very difficult area for U.S. exports, if the exporting countries

do not understand or have any appreciation for the biotech advances that have been made, China being a particularly good example. And we were able to, over a period of a year, get them to

consider actually coming to the United States and taking a look at

all of the work that has been done, particularly with regard to safety in the biotech area, and to begin to consider a change in their

position.

We considered this to be quite a breakthrough from them, so by

offering technical assistance to the Chinese to let them come and

take an independent look at what they want to do, we think that

we have accelerated their understanding and acceptance of that.

Now, with regard to Europe, as a development assistance agency,

we can only work in Eastern Europe, and Eastern Europe is looking toward the EU, really, for the standards that they are trying

to meet for accession into the EU. So it is a bit of a problem that

is Europe–EU-based, and our ability to work actually in that is

somewhat limited, since we are only able to do business in Central

and Eastern Europe.

Chairman SHELBY. It is going to take some time, isn’t it?

Ms. BRADFORD. Well, I think actually to get the Chinese to turn

around in a year or less was quite a success, but we are more optimistic than we were a year ago. And we will take a look at the

Europe situation to see what we can do in that area, as well.

Chairman SHELBY. Sure. I appreciate all of your appearances,

your participation today, along with Secretary Evans. I have a

number of questions for the record that I mentioned, and I will

submit them to you. We appreciate you doing what you are doing,

and let’s get this trade moving.

The hearing is adjourned.

[Whereupon, at 12:00 noon, the hearing was adjourned.]

[Prepared statements, response to written question, and additional material supplied for the record follow:]

32

PREPARED STATEMENT OF SENATOR ELIZABETH DOLE

Mr. Chairman, I would like to thank both you and Ranking Member Sarbanes for

agreeing to hold this hearing on the National Export Strategy. As a firm believer

in the benefits of open trade policies, the need to ensure that U.S. goods and services can compete abroad in international markets is one of my highest priorities.

Unfortunately, all too often our goods and services are held at a competitive disadvantage due to both tariff and fundamental nontariff barriers. Meanwhile goods

and services from other nations have no such restrictions in our domestic markets.

Furthermore, many of our trade agreements contain initiatives intended to ensure

against unfair trading practices by our foreign competition. This is an issue of great

importance to North Carolina where our manufacturing base has been hemorrhaging due to foreign competition violating our trade agreements. This issue worries

me a great deal. Let me be clear; I am not advocating any drastic breaks in our

trade relations. I am simply advocating the active use of initiatives that exist in our

current trade laws which were designed to protect industries from illegal practices.

One example of a clear violation is transshipments in which one country will

avoid their import quotas by shipping their product through a different country

which has not yet made its quota. I have seen evidence of this with China sending

their textiles through Vietnam, a country which does not remotely have the capacity

to manufacture the amount of textiles they export.

Enforcement of our existing laws to protect our industries against illegal trade

practices is one of my top priorities in the Senate. I look forward to working with

my colleagues and the Administration on these trade issues. I want to assure you

all that my staff and I are always available to work through these issues.

Thank you.

—————

PREPARED STATEMENT OF DONALD L. EVANS

SECRETARY, U.S. DEPARTMENT OF COMMERCE

MAY 21, 2003

Introduction

Chairman Shelby, Senator Sarbanes, Members of the Committee, it is with great

pride that I present our progress report on the implementation of the National

Export Strategy. Last May, I testified, along with my colleagues on the Trade Promotion Coordinating Committee (TPCC), on the Bush Administration’s road map for

improving the Federal Government’s trade promotion programs. We made a commitment at that time that we would use the TPCC to ensure that the U.S. business

community had world-class products and services by the end of this Administration.

I am here to report to you that we are on track.

Let me say at the outset that we are under no illusion that the challenge we are

trying to meet is easy. As you are aware, our trading partners still dedicate considerable resources and high-level attention to their export promotion programs. The

United States continues to have the lowest staffing and spending as a percentage

of GDP on export promotion among the G–7 countries. In addition, many of the recommendations we set out in last year’s National Export Strategy are tall orders,

and will take more time to accomplish. But as I said last May, we are focused on

results. This year, we have not developed another National Export Strategy with a

new set of recommendations; rather we are keeping our commitment to both you

and our clients to follow through with what we promised last year. We believe we

have made good progress on the most important recommendations contained in the

National Export Strategy. The TPCC agencies have become better strategic partners

of business early in the procurement process. In addition, we have sharpened our

focus on customer service and strengthened our education and partnership efforts.

We know what remains to be done, and we intend to accomplish it.

Mr. Chairman, before I provide an update on our National Export Strategy recommendations, I want to mention some of the contributions the TPCC is making

in other areas. First, the TPCC has become a resource and an advocate for the U.S.

business community in a number of vital areas. This has meant everything from

helping U.S. businesses understand the procurement process in the Iraq Reconstruction effort to getting them the timely information they need to make decisions or

making sure their voice is heard within the Administration on key initiatives.

Second, the active cooperation—indeed, leadership—of my colleagues here with

me today has resulted in a new culture of coordination and client service among the

TPCC agencies which we believe will make a difference in the quality of our programs across the board. We have built a number of bridges across the agencies—

33

whether it be between the Overseas Private Investment Corporation (OPIC) and the

Department of Commerce’s Commercial Service or the Department of Commerce’s

Advocacy Center and the Export-Import Bank (Ex-Im Bank)—to provide our clients

with faster service and more products. When it makes sense, we are integrating our

programs.

Third, the TPCC is playing a role in the Administration’s economic strategy in

crisis regions such as Iraq, and in helping support our coalition partners. Agencies

are thinking of the first steps they will take to help get the Iraqi economy running

once sanctions are lifted, and we have developed initiatives to stimulate trade and

investment in those coalition countries where there is a need.

For example, a number of TPCC agencies are playing or will soon play a significant role in Iraq Reconstruction. We have met several times to discuss our efforts.

The Department of the Treasury has taken the lead in addressing the financial infrastructure in Iraq. The U.S. Agency for International Development (USAID) is, of

course, another key player, providing reconstruction grants and humanitarian and

technical assistance to the people of Iraq. The TPCC is working within the Administration to ascertain the major obstacles preventing the finance agencies from operating in Iraq. Once these obstacles are overcome, agencies are looking at a variety

of steps they could take, including the following:

• U.S. Trade and Development Agency (USTDA)—USTDA will use grant funding for

technical assistance and feasibility studies to support future projects in Iraq, including transportation, telecommunications, and electric power. USTDA believes

this could provide up to $2.5 million in fiscal year 2003 to support reconstruction

efforts in Iraq.

• OPIC—OPIC is considering using its existing finance, insurance, and funds programs to help provide liquidity to the financial sector and provide insurance to

businesses and contractors.

• Ex-Im Bank—Ex-Im Bank also envisions using interim measures, such as looking

to the credit of third-country financial institutions to finance U.S. exports to Iraq,

pending the establishment of a creditworthy banking system, or other means of

finding reasonable assurance of repayment in Iraq.

• Commerce—Commerce is already providing information to the United States and

coalition companies. The TPCC agencies have worked together to produce an Iraq

business guide that provides companies with information on the current commercial environment in Iraq. Agencies and embassies have been flooded with calls

from our allies and U.S. businesses about Administration reconstruction plans. In

order to address these demands for information, the TPCC hosted a number of

interagency meetings that culminated with a joint briefing by the Departments

of Commerce, State, and Defense and USAID for U.S. trade associations at the

Department of Commerce. A second briefing for coalition partners was held at the

Department of State. On June 5, 2003, International Trade Administration Under

Secretary Grant Aldonas will moderate another interagency roundtable at the Department of Commerce which will provide U.S. businesses with an update on procurement opportunities and a status report on the sanctions situation.

We are also participating in efforts to assist our coalition partners. For example,

Administration representatives have traveled to a number of the countries to help

promote closer commercial ties between us. I went to Bulgaria, Romania, and Slovakia in March and plan to travel to Eastern Europe again in the Fall. We are looking into the continuation, and possible expansion, of Commerce’s Central and Eastern Europe Business Information Centers (CEEBIC), currently funded by State and

USAID, to promote investment and trade opportunities in each of the coalition partner countries in that region. The agencies are also planning a trade and investment

conference in the Fall.

Implementing the National Export Strategy

Of the 60 recommendations presented in the May 2002 National Export Strategy,

40 percent have been implemented. Those recommendations that are not completed

are well underway.

STRATEGIC INITIATIVES

Last year, U.S. exporters told us they needed more aggressive U.S. Government

support for major projects early in the bidding process to meet foreign governments’

forceful use of financing. We looked at how other governments advocated on behalf

of their companies, and developed a response: A proactive interagency approach in

key markets and projects and more effective use of our development assistance and

trade financing, when appropriate.

Over the past year, we have achieved measurable success:

34

Early Project Development

This is an ongoing exercise, as many of the projects we want to target will not

come to fruition for several years. However, almost as important as success on a

specific project is the more forward leaning culture throughout the agencies that is

resulting from this initiative. Like other governments, we have recognized the importance of demonstrating the likelihood of financing up front in the procurement

process. The Ex-Im Bank has developed a letter of interest which our Commercial

Service officers can use when they solicit projects on behalf of U.S. exporters. The

Ex-Im Bank and the Advocacy Center have established a Memorandum of Understanding that increases the likelihood and speed of financing for projects the Commerce Department advocates for.

Mexico, China, and Russia were our initial pilot markets; however, we have not

been constrained by those targets. We are applying this proactive approach dynamically to opportunities as they arise. Our Advocacy Center director is working with

USTDA and OPIC representatives to explore early project development possibilities

in Azerbaijan. In China, Ex-Im Bank is pursuing a framework agreement with the

Ministry of Finance, and we have an interagency mission planned, which is currently on hold. In Mexico, agencies brought together hundreds of municipal water

and wastewater officials and U.S. companies under the umbrella of a conference organized by Ex-Im Bank and the Mexican development bank. Commerce and TDA

followed up that conference by bringing officials of some of the most promising

projects to attend a water conference in San Diego in the Spring. In Russia, the

trade financing agencies and Commerce will travel together on missions to scout out

early projects. We also are taking steps to build good-faith relationships with Brazil

as they come out of a difficult economic stretch.

Mixed-Credit Initiative

A pilot initiative combining USAID grants with Ex-Im Bank financing for developmental projects in middle-income countries is one of the best examples of how agencies can do more when they combine their efforts. USAID, Ex-Im Bank, Commerce,

and the Treasury worked during the Summer last year to design and develop procedures to implement a pilot program. After the 2003 budget was passed, USAID sent

out a cable and we are now getting inquiries from a number of overseas posts. We

are currently discussing a pilot project in Peru with the USAID mission. The experience we gain from this pilot holds great promise for better coordination between the

economic development and trade promotion agendas on a variety of fronts.

Front-End Engineering and Design (FEED) Studies

This is technical assistance that sets the specifications for particular projects, and

therefore often creates a competitive advantage for the country sponsoring it to obtain the follow-on project. Immediately after the publication of our report last May,

which included a USTDA pilot FEED study project, the Japanese agreed to a U.S.

proposal in the Organization for Economic Cooperation and Development not to link

these early project studies with larger Untied Aid projects. This eliminates an important advantage Japanese firms had over U.S. companies in winning major

projects. This recommendation stemmed from a complaint from U.S. exporters that

the Japanese had used these studies to lock in the overall project for their firms.

Afghanistan

Since OPIC and USTDA undertook the first joint investment mission to Afghanistan last May, USTDA has followed up with orientation visits and feasibility studies

for a number of Afghan infrastructure ministries. The Commerce Department has

hosted Afghan-American business roundtables and matchmaking events. USTDA

and the Department of Commerce will jointly sponsor a conference in June on

Afghanistan Reconstruction.

CUSTOMER SERVICE

There is a new culture among the agencies of putting the client first. When the

heads of the other agencies and I first came together, we made a commitment to

our customers and to the American taxpayer. Rather than create a new crop of programs, we decided to ask the business community exactly what they wanted from

us. Rather than duplicate each others’ marketing and outreach efforts, we decided

to leverage each others’ strengths and human capital. With the President’s Management Agenda as a backdrop, these commitments have grown into a new culture of

customer service.

Ex-Im Bank Restructuring

The Ex-Im Bank went through one of the largest reorganizations in its history

this past Fall. It has become more market-focused and customer driven, while enVerDate 11-MAY-2000 10:22 Jun 02, 2004 Jkt 000000 PO 00000 Frm 00038 Fmt 6621 Sfmt 6621 93490.TXT SBANK4 PsN: SBANK4
35

hancing its management of risk. The changes are designed to streamline case processing, and standardize customer service and credit evaluation across product lines.

Working Capital

The Small Business Administration (SBA) and Ex-Im Bank have a team developing a parallel financing arrangement to provide the small business exporter with

a seamless approach to access working capital for export sales. Commerce, Ex-Im,

and SBA are also exploring taking this coordination to a new level by further integrating the working capital programs of Ex-Im Bank and SBA and the marketing

efforts of all three agencies. The goal is to have the customer see only one trade

finance tool, but provide the agencies with the flexibility to bring to bear the best

of SBA and Ex-Im Bank programs. All three agencies would be focused directly on

making sure smaller companies are aware of and can easily benefit from the best

financing option available, whether it is provided by SBA, Ex-Im Bank, or, whenever possible, a private sector financial institution.

Streamlining Our Programs and Processes

We have redesigned Export.gov, the Federal Government’s primary trade website,

to make it more useful to small businesses. This redesign was based on feedback

from U.S. businesses. Key aspects of the redesign are:

• Export Basics—We have added an ‘‘Export Basics’’ section designed for new exporters containing ‘‘The Basic Guide to Exporting’’ and a step-by-step guide

through the exporting process.

• NAFTA Certificate of Origin Tool—The new NAFTA Certificate of Origin Tool

guides exporters of products to Mexico or to Canada through the NAFTA form

with easy step-by-step instructions. This greatly reduces the time it takes exporters to fill out the form and will allow more of them to take advantage of the tariff

benefits.

• BuyUSA—The website provides seamless integration with the BuyUSA online

partner and trade lead matching service, allowing visitors to access the services

of multiple agencies, as well as search for partners and trade leads.

• Catalogue of Products and Services—The redesigned website categorizes lists of

products and services for exporters, offered by the Department of Commerce, the

Foreign Agricultural Service, SBA, and Ex-Im Bank.

• Export.gov Community Registration—Community Registration allows site visitors

to provide basic information into a central repository that can be accessed by ITA,

FAS, Ex-Im Bank, and SBA. Registrants are then able to receive targeted export

assistance, market and event information, and automatically fill in online forms

within Export.gov.

Training

We held the first interagency trade officer training session last January. Its focus

was real-world applications of agency programs and instilling an ‘‘account manager’’

approach—proactively addressing the client’s long-term needs, rather than answering one question or helping him with one export action. We had 31 participants from

nine of the TPCC agencies. It was extremely successful, according to our participant

feedback.

Marketing

We have a marketing working group that has developed a number of joint publications, organized an interagency pavilion at eight domestic trade shows, and conducted a dozen interagency trade seminars and symposiums.

STATE PARTNERS

We are working to leverage our State partners. As State budgets have tightened,

we have reached out to our State partners to provide opportunities to leverage Federal trade promotion resources. For example:

• Florida MOU—The U.S. Export Assistance Center agencies (Department of Commerce, Ex-Im Bank, and SBA) signed a Memorandum of Understanding that

expanded an existing trade alliance to include some 15 trade organizations

throughout Florida. The partnership includes a network of Small Business Development Centers, Chambers of Commerce, and Economic Development Centers. We

are collaborating on training, business counseling, and trade finance facilitation.

• Partnership with New Jersey—The Commercial Service and the State of New Jersey signed a partnership agreement. The agreement co-locates the CS and the

New Jersey Commerce and Economic Growth Commission’s Office of International

Trade and Protocol. In addition to combining efforts on a number of the one-stopshopping services, providing access to the Commercial Service’s worldwide dataVerDate 11-MAY-2000 10:22 Jun 02, 2004 Jkt 000000 PO 00000 Frm 00039 Fmt 6621 Sfmt 6621 93490.TXT SBANK4 PsN: SBANK4
36

base and collaborating on a successful trade mission to the Philippines, we have

worked together on substantial outreach to State legislators to educate them

about the resources available.

• Trade Mission to Central America—The State of Alabama is taking a trade mission to Central America (El Salvador and Guatemala) on May 17–23, 2003. The

Birmingham Export Assistance Center is cooperating in the promotion and the

recruitment for the event.

Next Steps

While we have made a good start, the coming year will be critical, as we are in

the midst of following through on the most difficult recommendations. The TPCC

will continue to focus on achieving measurable results to make sure that the way

we implement these recommendations have the kind of impact that exporters expect. We will focus on:

• Iraq—The TPCC will work to address existing obstacles to trade and finance

agency operations and to coordinate efforts to stimulate private investment and

trade.

• Early Project Development—We will develop a set of priority projects based on

interagency business development missions.

• Finance—We will complete the co-guarantee between the Ex-Im Bank and SBA,

integrate the programs to the extent possible, and leverage Commercial Service

resources toward joint marketing.

• Training—The TPCC will institutionalize and possibly certify interagency trade

officer training. June and September sessions will fine tune content. We want to

expand participants to include Congressional offices and States.

• Budget—We intend to leverage existing agency budgets in fiscal year 2005 on priorities such as training and technology.

In sum, we will keep our eye on the ball, and make sure we can show you next

year, just as we have today, that we are close to providing world class programs

and services for our exporters. My colleagues and I promise you that with your support, we will follow through with our original agenda, and add to it as the needs

of the business community, the TPCC agencies, and the Administration evolve.

I thank you very much for inviting me here today. I would be pleased to answer

any questions you may have.

—————

PREPARED STATEMENT OF PHILIP MERRILL

PRESIDENT AND CHAIRMAN

THE EXPORT-IMPORT BANK OF THE UNITED STATES

MAY 21, 2003

Introduction

Chairman Shelby, Ranking Member Sarbanes, and Members of the Committee,

thank you for the opportunity this morning to join with my colleagues from the

Trade Promotion Coordinating Committee to report on the status of the National

Export Strategy.

In May 2002, the Bush Administration issued its first National Export Strategy

Report. This report served as a road map for the TPCC efforts over the past year.

As stated by President Bush, this report ‘‘sets the course for achieving a world-class

system of Federal programs that are coordinated, leveraged, and focused on the

tools small and large U.S. companies need most to take advantage of emerging trade

opportunities.’’ The 2003 National Export Strategy Report that you recently received

and my testimony today are primarily devoted to reporting on our progress in implementing the recommendations made in the 2002 National Export Strategy Report.

As Chairman of the Export-Import Bank and Vice Chairman of the TPCC, I have

a keen interest in working with the members of the TPCC to support our Nation’s

export sector. Last Fall, Ex-Im Bank went through one of the largest reorganizations in its history. The objective was to make Ex-Im Bank even more responsive

to the needs of U.S. exporters who operate in a global environment that demands

the rapid and efficient processing of financial transactions. The reorganization

achieves this objective by improving customer service and streamlining case processing, while at the same time enhancing risk management.

The reorganization has enhanced Ex-Im Bank’s ability to fulfill its mission. That

mission is to assist in the financing of the export of U.S. goods and services thereby

helping to create and maintain U.S. jobs. Ex-Im Bank pursues its mission by proVerDate 11-MAY-2000 10:22 Jun 02, 2004 Jkt 000000 PO 00000 Frm 00040 Fmt 6621 Sfmt 6621 93490.TXT SBANK4 PsN: SBANK4
37

viding financing to counter the effect of export credit financing from other governments or by taking reasonable credit risks that the private sector is unwilling or

unable to accept. The reorganization also supports the recommendations made in

the President’s National Export Strategy for a streamlined and strategic approach

for trade and export promotion.

In nearly 70 years of operation, Ex-Im Bank has supported more than $400 billion

in U.S. exports. In fiscal year 2002, Ex-Im Bank financed 2,516 transactions in

support of $12.9 billion in U.S. exports. We are continually striving to better serve

our customers—U.S. exporters and those businesses and workers who are employed

producing those exports.

Implementation of the National Export Strategy

The TPCC was established by the Export Enhancement Act of 1992 to develop a

coordinated and effective U.S. Government trade strategy to meet the needs of U.S.

exporters. The Bush Administration has recognized the important role that the

TPCC can play in supporting U.S. exports and U.S. jobs. Under the leadership of

Secretary Evans, the TPCC has been reinvigorated as a mechanism for improved

interagency coordination and cooperation, and I am committed to furthering this

effort. In short, the TPCC strives to make it easier for U.S. businesses to understand and utilize the U.S. Government’s export promotion programs. The recommendations put forward in last year’s TPCC report were developed after in-depth

discussions with our customers. The recommendations contained in this report are

practical solutions to problems that encumber U.S. export potential.

We have made progress in implementing many of the report’s key recommendations. I will address three areas: (i) Joint Marketing, Training, and Small Business

Initiatives; (ii) Early Project Development; and (iii) Tied and Untied Aid.

Joint Marketing, Training, and Small Business Initiatives

Ex-Im Bank has led an interagency marketing task force consisting of Ex-Im

Bank, SBA, DOC, and OPIC. The task force was formed to develop and execute joint

marketing strategies to reach U.S. exporters, particularly those small and new exporters that are critical to U.S. job creation.

This group planned, funded, and is now executing three primary tactics: Direct

mail, participation in major trade shows, and exporter and lender seminars. We also

collaborate with our TPCC partner agencies through the United States Export Assistance Centers throughout the United States, and are working with them to link

our new website to the U.S. Government trade portal ‘‘Export.gov.’’

Our marketing objective is straightforward: To establish a direct relationship between the U.S. exporter and U.S. Government trade agencies in a coordinated and

cost-effective manner. Our collective efforts are making a difference. By sharing

costs, we provide better value to the taxpayer, and by providing a complete menu

of our services the exporter is better served. In fact, we estimate approximately

$280,000 in savings from these joint marketing efforts since the summer of 2001.

Ex-Im Bank is also continuously looking at ways, working with our TPCC partners,

to leverage our resources by utilizing the private sector to reach and provide services to U.S. exporters.

We have also implemented a cross-training program for Ex-Im Bank, DOC, SBA,

OPIC, and TDA staff. This training is designed to enhance our ability to provide

full-service trade finance advisory services to the export community.

Finally, Ex-Im Bank is also working on an initiative with the SBA to collaborate

by providing parallel financing and joint marketing for working capital transactions.

This effort is designed to provide the small business exporter with a seamless

approach to access working capital financing they need to increase export sales.

Early Project Development

The aim of the Early Project Development Initiative is to coordinate more effectively the efforts of the U.S. Government trade agencies to secure contracts for U.S.

exporters. To aid early promotion efforts, Ex-Im Bank has created an ‘‘early project

letter of interest’’ intended to signal preliminary interest in a project before contracts are signed. In addition, Ex-Im Bank staff actively participates on the early

project development country teams that the TPCC established to coordinate travel

and promotion activities. Currently the interagency efforts are focused on three

markets: Mexico, China, and Russia. We plan to broaden our focus to other target

markets at the appropriate time.

• MEXICO: This is Ex-Im Bank’s largest market. We are actively working to develop

new products for this market and to coordinate promotional activities with other

U.S. Government agencies and the Mexican government. Last September, the

agencies brought together municipal officials from renewable energy, solid waste

38

management and water treatment agencies, and U.S. companies in a conference

organized by Ex-Im Bank and the Mexican development bank, Banobras. This

conference built on the Partnership for Prosperity Initiative created by President

Bush and Mexican President Fox. Earlier this month, I participated with my colleagues from OPIC, SBA, and TDA in the Arizona Mexico Trade and Investment

seminar in Tucson. We are working with our partner agencies to follow up on

leads from these and other conferences.

• CHINA: Numerous opportunities exist for U.S. exporters, including projects associated with the Olympics in 2008 and the World’s Fair in 2010, and in key sectors

such as: Environmental protection, energy efficiency, wastewater treatment, medical equipment, and electric power. We are working closely with the Commercial

Service and TDA to coordinate efforts to identify opportunities for U.S. exporters.

In support of these efforts, Ex-Im Bank is in the final stages of negotiations with

China’s Ministry of Finance on a new Framework Agreement that will govern the

provision of future sovereign-based transactions.

• RUSSIA: The Russia early project development team is pursing a number of

projects in the telecommunications and transportation sectors. These projects are

directly benefiting from enhanced interagency cooperation and advocacy resulting

from the early project development initiative. Ex-Im Bank is working with the

Commercial Service to plan a working-level trip to Moscow and St. Petersburg in

June to follow up on these projects and to meet with Russian Government officials

to identify additional opportunities for U.S. exporters.

Tied and Untied Aid

In 2002, the TPCC launched several initiatives to counter foreign aid practices

that place U.S. exporters at a competitive disadvantage. I would like to provide a

brief update on our progress.

• MIXED-CREDIT INITIATIVE: Under the auspices of the TPCC, Ex-Im Bank, and

USAID launched a mixed-credit initiative. Transactions supported by this initiative will combine a USAID grant with standard Ex-Im Bank financing to support

developmentally sound, commercially nonviable capital projects in middle-income

developing countries. The aim of the program is to leverage the resources of the

two agencies and expand the scope and magnitude of U.S. Government-supported

capital projects in target countries. Such a partnership would allow the agencies

to support U.S. Government development objectives, while expanding business

opportunities for U.S. exporters.

• AGREEMENT ON FRONT END ENGINEERING AND DESIGN: As a result of an initiative

in the National Export Strategy, the U.S. Government succeeded in securing Japan’s agreement to multilateral rules at the OECD that prevent governments

from using Tied Aid financing for early project studies for projects subsequently

financed with Untied Aid. Ex-Im Bank will help monitor the implementation of

this agreement to ensure that foreign markets are effectively opened up to U.S.

exports of engineering and design services and capital goods.

• TIED AID WAR CHEST: Ex-Im Bank, in cooperation with the Treasury Department,

continues to closely monitor the use of Tied Aid by foreign governments. In 2002,

the use of Tied Aid continued to decline, dropping to $2.5 billion worldwide—a

record low. When compared to Tied Aid use in 2001, this represents nearly a 40

percent decrease in the use of Tied Aid worldwide. Ex-Im Bank and Treasury

have also agreed to new processes and standards governing the use of the Tied

Aid Credit Fund that will insure more rapid case processing and improve U.S. exporter competitiveness.

Ex-Im Bank’s Potential Role in Iraq Reconstruction

I also want to share with you our current plan of action with respect to supporting

U.S. exports to Iraq. Ex-Im Bank has established an internal task force that is

working to address the legal and credit concerns that currently impede our ability

to offer trade finance programs in Iraq. We are coordinating closely with the other

TPCC member agencies—as well as the U.S. exporting community—in this effort.

As you know, we are subject to a number of important programmatic constraints,

including a need to find a ‘‘reasonable assurance of repayment’’ for every credit.

However, we will bring energy and creativity to the task of helping U.S. companies

provide the goods and services that are necessary for the reconstruction of Iraq. For

example, we are actively considering mechanisms that would allow Ex-Im Bank to

support United States exports to Iraq sooner rather than later, including taking the

credit risk of companies and of banks in third countries—such as Turkey, Jordan,

and Kuwait—that may be involved in obtaining U.S. goods and services for reconstruction efforts.

39

Conclusion

In conclusion, I have come before you today to provide an update on the progress

that the TPCC and Ex-Im Bank have made in implementing the recommendations

contained in the National Export Strategy. I am encouraged by the strides we have

made over the past year through the TPCC, which has served as the Bush Administration’s primary vehicle to coordinate, streamline, and improve Federal export

assistance programs. Continued implementation of the recommendations of the

National Export Strategy through the coordinated efforts of the TPCC will help to

insure that U.S. exporters have the tools that they need to remain competitive in

the dynamic global marketplace. I would like to thank this Committee for its support of the TPCC, Secretary Evans for his leadership, and my TPCC colleagues here

today for their commitment to this important effort. I appreciate the opportunity to

appear before you and I would be happy to respond to any questions you may have

at this time.

—————

PREPARED STATEMENT OF PETER S. WATSON

PRESIDENT AND CHIEF EXECUTIVE OFFICER

OVERSEAS PRIVATE INVESTMENT CORPORATION

MAY 21, 2003

Chairman Shelby, Senator Paul Sarbanes, and distinguished Members of the

Committee, it is an honor to appear before you today to discuss our progress in implementing the recommendations of the President’s National Export Strategy. As

President Bush himself said last year, this report ‘‘sets the course for achieving a

world class system of Federal programs that are coordinated, leveraged, and focused

on the tools small and large companies need most to take advantage of emerging

trade opportunities.’’ I believe we have been faithful to the President’s promise.

At the outset, please allow me to express OPIC’s sincere appreciation for the leadership of Secretary of Commerce Don Evans, whose determined efforts and strategic

vision have been key to marshaling the collective resources of our agencies to implement the Trade Promotion Coordinating Committee’s (TPCC) worthy mandate.

Mr. Chairman, when I joined OPIC nearly 2 years ago, we set out to implement

guidance from the President that would enable OPIC to do a better job of bringing

the benefits of economic development to the neediest countries, that would foster

increased cooperation with the private market to enhance investment resources, and

that would focus on the needs of smaller U.S. businesses to pursue opportunities

in the developing world.

Over these past 2 years, we have met this challenge. We have reformed for success, supporting critical developmental investments into chronically underserved

regions. For instance, since October 2001, OPIC has supported nearly $750 million

in new projects in sub-Saharan Africa. We have created a new relationship with the

private market whereby OPIC complements rather than competes with private

financing and insurance, and in so doing, leverages resources that allow OPIC to

cooperatively lead the private market into the least developed countries and underserved sectors.

We have also made a real commitment to small- and medium-sized businesses.

In 2002, 67 percent of approved OPIC projects were for small- and medium-sized

enterprises. Last year, we created the OPIC Small Business Center, specifically to

meet the needs of companies with revenues of less than $35 million. We have also

streamlined our approval process to provide small business users with a 60-day

turnaround. As a result, OPIC is making it easier for small business to access OPIC

programs and we are approving more small business projects.

To measure the developmental impact of these projects, OPIC has developed specific criteria for evaluating the development contribution of each of its projects. This

new tool allows us to judge empirically the value of our commitments, as we make

OPIC more relevant to its original development mission.

In sum, we have seen promises made and promises kept.

Similarly, our testimony here today confirms that during the past year, the TPCC

has also made and kept promises. OPIC has been privileged to play a role in this

process. Allow me to highlight some of these results.

Afghanistan

Over the past year, the TPCC has helped coordinate a comprehensive commercial

strategy for rebuilding and revitalizing Afghanistan by harnessing the U.S. private

sector. For its part, OPIC is pleased to have conducted the first joint investment

40

mission to Afghanistan with our colleagues from the Trade and Development Agency

(TDA) in May 2002.

We initially pledged a $50 million line of credit for Afghanistan, and I am pleased

to report that the agency is fulfilling this pledge. With $35 million in OPIC financing and insurance, a consortium of U.S. sponsors will soon break ground on a five

star international hotel in Kabul, managed by Hyatt International. The project will

represent the largest single United States private investment in Afghanistan since

the fall of the Taliban; indeed, the largest United States investment in a generation

if not more. With additional projects in the pipeline, I was confident in raising our

line of credit from $50 million to $100 million during President Karzai’s recent visit

to the United States.

Pakistan

Additionally, OPIC has been active and successful in promoting private investment in Pakistan. As you will remember from last year, OPIC, the Export-Import

Bank (Ex-Im) and TDA formed the first investment development mission to Pakistan in February 2002, with OPIC pledging a $300 million line of credit. Since then,

OPIC has supported nearly $350 million in projects, including significant investments in financial services, power, and information technology.

Interagency Coordination

These types of initiatives find their genesis in better interagency coordination and

OPIC has been working hard with its TPCC colleagues this past year to find innovative ways to leverage our resources and expertise.

In September 2002, I was privileged to conclude a Small Business Initiative with

the Small Business Administration (SBA) Administrator Hector Barreto, which will

allow for greater cross-training and information sharing for our employees. I am

also pleased that we will soon have an SBA detailee as a full-time staff member

in OPIC’s Small Business Center.

Just last week, I was pleased to join with Maria Cino of the U.S. Department of

Commerce Commercial Service to sign a Memorandum of Understanding (MOU)

that commits our two organizations to greater cross-training and business lead

development.

For the future, OPIC will be working to conclude an MOU with the Agency for

International Development (USAID), which will provide greater coordination between our respective guaranty programs and leverage USAID’s global presence with

OPIC’s 31 years of experience in promoting private sector development. All of these

cooperative efforts make greater use of existing resources for the benefit of U.S.

business and the American taxpayer.

Conferences

Getting the word out to the users of our services is another important part of our

enhanced coordination. To that end, I am pleased to mention several outreach

efforts. In early May, leaders from Ex-Im, SBA, TDA, and OPIC met in Arizona for

a Trade and Investment Forum, targeting smaller businesses.

Last October, OPIC was joined by Ex-Im and TDA for a regional trade and investment conference in Peru that attracted more than 200 companies. In November, 50

companies participated in a U.S. Serbia Business Conference in conjunction with the

Department of Commerce. With our TPCC partners, we are planning joint business

development missions throughout Russia later this year.

The Future

Looking to the future, OPIC is strongly committed to building on the cooperation

and results of the past year. As the Secretary has said, Iraq will clearly be a priority

in the coming year. Once we have cleared sanctions and technical operating issues,

OPIC is prepared to use its finance, political risk insurance, and investment funds

programs to support private sector investment, including liquidity for the financial

sector and political risk insurance for businesses and contractors. We are uniquely

suited as a risk mitigator to support the private sector in this endeavor.

Conclusion

This year, Congress will have the opportunity to review OPIC and its refocused

agenda as it considers reauthorization of OPIC programs. The Administration has

submitted a legislative request to Congress to reauthorize OPIC for 4 years and to

update its statute by modernizing and improving OPIC to expand development and

operate in today’s changing global economy. Although not under the jurisdiction of

this Committee, we look forward to working with many of you here in securing

approval of this legislation before OPIC’s current authority expires later this year.

41

In closing, I would like to thank the Committee for its support of the TPCC. OPIC

will stay true to its promise to promote private investment in underserved countries

and regions, while complementing the private sector to maximize our developmental

impact. With a refocused mission and a track record of results, OPIC is a ‘‘partner

of the willing’’ with our colleagues here today to provide the most effective investment promotion services for U.S. businesses and the American taxpayers.

Thank you, and I would be pleased to answer your questions.

—————

PREPARED STATEMENT OF HECTOR V. BARRETO, JR.

ADMINISTRATOR, U.S. SMALL BUSINESS ADMINISTRATION

MAY 21, 2003

Mr. Chairman, Ranking Member, and distinguished Members of the Committee,

thank you for inviting me to testify on the Trade Promotion Coordinating Committee’s (TPCC) National Export Strategy and the role that the U.S. Small Business

Administration (SBA) plays in the Federal Government’s export promotion strategy.

I would first like to recognize the outstanding leadership of Secretary Evans. The

SBA has been working closely with the Department of Commerce, Export-Import

Bank of the United States (Ex-Im Bank), the Overseas Private Investment Corporation (OPIC), and other TPCC agencies in developing recommendations for the National Export Strategy . . . and we feel that our work, together, will help ensure

that American small businesses will be competitive in a global marketplace.

Small businesses create two-thirds of new U.S. jobs, are responsible for much of

our economy’s innovation, and generate over half of our private gross domestic product. But while approximately two-thirds of U.S. exporters have fewer than 20 employees, fewer than 1 percent of our small businesses are exporting their products.

That percentage is too small, especially when you consider the fact that desire to

engage in trade is strong. A survey done by the Department of Commerce to more

than 2,000 nonexporting firms last year indicated that 30 percent of them would be

interested in exporting if someone pointed the way. In order to meet the needs of

small- and medium-sized firms and create a ‘‘one-stop-shop’’ approach, over the past

year we have enhanced our working relationships with our partners in such a way

that will guide and assist small businesses to have an even greater opportunity to

trade abroad.

Before we began to strengthen our relationship with other TPCC agencies, SBA

reviewed the 2002 National Export Strategy recommendations and looked at the

areas in which change could be made quickly, hopefully having instant results for

our small business export community.

I am pleased to announce that SBA was able to increase the limit of our Export

Express Business development loan guarantee program from $150,000 to $250,000

. . . an enhancement which quickly created a greater amount of capital for small

business to finance their export development costs such as participation in foreign

trade shows or translation of product catalogs, as well as the financing actual export

orders. Over the past year, SBA and Ex-Im have been very active since we entered

into a ‘‘Small Business Initiative’’ Memorandum of Understanding. To leverage marketing resources and raise awareness among lenders and exporters, we have done

a number of things.

First, we held joint export symposia throughout the United States, focusing on

showing a streamlined approach to exporters. We have also been working on a joint

marketing initiative over the past year. Although these are great accomplishments,

we are still not done yet. We have established a task force to look at further integrating SBA/Ex-Im Bank working capital programs. Coordination with other Federal agencies is one of the best ways to achieve an increase in small business trade

participation.

Another example of interagency coordination is our work with the Overseas Private Investment Corporation. Just recently, SBA participated in a Trade Investment

Forum in Arizona that reached out to our small business exporters and introduced

them to all the products and services that are available. We see this as just the

beginning to this very important partnership and only see it getting stronger. For

example, SBA intends to detail one of our employees to OPIC to work with their

new small business center.

The ability to work very closely with the Department of Commerce in reaching

out to the small business community has been very rewarding and has shown results. I have had the opportunity to participate with Secretary Evans on several

42

trade missions abroad which focused on opening new market opportunities for small

business.

One example of a success story is of a business owner from Chicago, Illinois, who

received a significant order for his products as the result of a trade mission that

took place in Mexico last year. SBA helped the business owner attend that mission.

Reaching out domestically to the export community has also been a high priority

between the SBA and Department of Commerce. For instance, we have successfully

participated in major domestic trade shows, trade finance seminars, and direct mail

campaigns.

SBA looks forward to continuing its work with other TPCC agencies to make sure

the coordination of trade promotion and financing programs meet the needs of our

small business exporter’s needs. We are fully committed to supporting the President’s overall trade agenda abroad as it sets up opportunities for small business.

An example of our commitment is the fact that we currently have representatives

from the agency participating within the Central America Free Trade Agreement

and the Southern African Customs Union trade capacity building group to make

sure small business concerns are addressed and implemented with the trade negotiations. Another sign of our commitment to trade has been the recent assignment

of one of my senior staff to work closely with the U.S. Trade Representative office

to represent small business on a daily basis and assure that as U.S. Trade increases

globally that so due the opportunities to small business that wants to trade abroad.

There has never been a better time to make sure U.S. small businesses continue

to be the most competitive companies in the world.

I look forward to SBA’s ongoing contribution to the TPCC and our commitment

to evaluate and better coordinate our programs. I would be happy to answer any

questions you may have. Thank you.

—————

PREPARED STATEMENT OF BARBARA R. BRADFORD

DEPUTY DIRECTOR, U.S. TRADE AND DEVELOPMENT AGENCY

MAY 21, 2003

Thank you, Chairman Shelby, Senator Sarbanes, and Members of the Committee.

It is a pleasure to appear before you to highlight the role that the U.S. Trade and

Development Agency (USTDA) is playing in advancing the U.S. Government’s trade

agenda as a member of the Trade Promotion Coordinating Committee (TPCC). I

want to begin by thanking the Committee for the strong support that it has given

to USTDA in the past as we work to promote commercially viable development

around the world.

USTDA works closely with Secretary Evans and other members of the TPCC to

enhance our mutual effectiveness in promoting U.S. exports. In particular, USTDA

collaborates with our colleagues on the TPCC to bring their particular expertise and

resources to a wide range of development objectives. Among the agencies that

USTDA coordinates with are the U.S. Departments of State, Treasury, Commerce,

Transportation, Energy, Agriculture, and Homeland Security; the Office of the U.S.

Trade Representative (USTR); the Export-Import Bank of the United States (Ex-Im

Bank); and the Overseas Private Investment Corporation (OPIC). USTDA works in

conjunction with other TPCC members, to leverage our resources and focus our joint

efforts on projects and activities that will garner U.S. export success.

In addition to our partnerships with other U.S. Government agencies, USTDA

works closely with overseas foreign project sponsors to help them fulfill important

development objectives. We also receive tremendous support from the U.S. private

sector and the many individual firms around the country that we help to position

to export their goods, services, and expertise to overseas markets.

During the past year, USTDA has taken a number of steps to implement the

action plan laid out in last year’s National Export Strategy. In particular, USTDA

is active in many of the post-crisis regions of the world that are discussed in this

year’s report, such as Afghanistan. I have an attachment to my testimony, Mr.

Chairman, which I would like to submit for the record that highlights a number of

current and recent USTDA activities. As this paper shows, USTDA is targeting and

tailoring its activities to support important U.S. trade and foreign policy initiatives.

USTDA is well-suited to respond rapidly to changing global environments as we

provide effective service to our clients in the U.S. private sector, in Government, and

overseas. Given the flexible nature of the USTDA program, the agency is often one

of the first U.S. Government agencies to deliver trade-related assistance in postcrisis regions and countries. In early 2002, for example, USTDA launched an aggresVerDate 11-MAY-2000 10:22 Jun 02, 2004 Jkt 000000 PO 00000 Frm 00046 Fmt 6621 Sfmt 6621 93490.TXT SBANK4 PsN: SBANK4
43

sive infrastructure and capacity-building program in Afghanistan. Already, we have

committed roughly $2.5 million for project planning activities in the Afghan civil

aviation, telecommunications, oil and gas, and electric power sectors. We are considering approximately $3 million in additional activities.

In delivering this assistance, USTDA works closely with other U.S. Government

agencies, taking advantage of their expertise. These include the Federal Aviation

Administration, the U.S. Geological Survey, the U.S. Agency for International Development (USAID), the Federal Communications Commission, and the U.S. Departments of Energy, Commerce, and State. Our country program in Afghanistan is a

perfect example of the agency’s rapid response to new priorities and to our use of

public-private partnerships to bring U.S. expertise and resources to bear in helping

a country achieve its development goals. Next month, USTDA will cosponsor a

major conference with the U.S. Department of Commerce. This conference will highlight reconstruction opportunities in Afghanistan that were identified during a

series of USTDA-funded definitional missions and orientation visits as having

strong potential for U.S. private sector involvement.

We also have moved quickly to build on our existing programs in other Frontline

States. Overall, USTDA funded 22 activities in Uzbekistan, Kyrgyzstan, and

Kazakhstan in fiscal year 2002. These activities encompass projects in rail, information technology, water, power, and petrochemicals, as well as small- and mediumsized enterprise development. In January 2003, USTDA awarded its first grant

since reopening in Pakistan in support of a proposed desalination plant in Karachi.

Other USTDA activities in Pakistan involve the development of a secondary mortgage market, and a study funded jointly by USTDA and the International Finance

Corporation addressing the identification and elimination of trade and investment

barriers.

USTDA anticipates implementing a program in Iraq modeled on the approach we

are taking in Afghanistan. There is an important role for USTDA to play in Iraq

to put the private sector to work in many sectors essential to development efforts.

These areas include transportation, telecommunications, electric power, and downstream petroleum processing, such as refining, petrochemicals, and fertilizer production. These key infrastructure sectors represent areas in which the need will be

great for new investment and in which the population will receive direct and tangible benefits. Equally important, the United States private sector possesses experience and expertise in these fields that can help to advance modernization and

healthy economic development in Iraq.

Another component of the USTDA portfolio is our support for U.S. trade policy

initiatives. To this end, the USTDA is supplying targeted assistance to facilitate a

number of U.S. trade policy objectives that are discussed in the National Export

Strategy. In Africa, for example, the agency has supported activities pursuant to the

African Growth and Opportunity Act (AGOA) framework, including the establishment last year of a USTDA Africa Regional Trade and Development Office in Johannesburg, South Africa. Other related activities that USTDA has funded include

AGOA training, provided in conjunction with USTR, in Cameroon, Ghana, and

Uganda. In addition, the agency sponsored separate orientation visits to the United

States for African manufacturers to meet potential U.S. suppliers to support qualified industries under AGOA. In March, the agency supported the negotiation of a

U.S.-Southern African Customs Union (SACU) Free Trade Agreement (FTA) by

sponsoring a trade-related study tour for trade negotiators from SACU member

countries.

USTDA also is working closely with the USTR and other agencies by providing

support to a number of on-going trade negotiations. This support includes technical

assistance and capacity-building activities related to the Free Trade Area of the

Americas, the U.S.-SACU FTA, and the U.S.-Morocco FTA, among others. We are

currently exploring possible areas for support related to the U.S.-Chile FTA. Most

recently, USTDA announced trade capacity-building activities in the information

technology sector in Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua

as part of the U.S.-Central American Free Trade Agreement (CAFTA) negotiations.

These are just a few examples of the agency’s trade capacity-building activities.

This year’s National Export Strategy discusses a number of sectors that are priorities for the TPCC. Many of these are high priorities for USTDA, as well. Among

them is transportation security. Overall, transportation was the largest sector in the

USTDA portfolio in fiscal year 2002. At last year’s meeting of the Asia-Pacific Economic Cooperation (APEC) forum, the Secure Trade in the APEC Region (STAR)

Initiative was announced. Since then, USTDA has taken a leading role in identifying and supporting potential transportation security projects. In February, USTDA

cosponsored a STAR conference with the U.S. Department of State in Bangkok,

Thailand, that was attended by delegations from 21 APEC member economies. DisVerDate 11-MAY-2000 10:22 Jun 02, 2004 Jkt 000000 PO 00000 Frm 00047 Fmt 6621 Sfmt 6621 93490.TXT SBANK4 PsN: SBANK4
44

cussions focused on policies and procedures to enhance security and efficiency in the

APEC region’s seaports, airports, and other access points. A key point of agreement

among all participants was the need for new partnerships between the government

and business. USTDA is poised to follow through on this agreement by identifying

and helping to develop specific projects for implementation.

Agricultural biotechnology (ag-biotech) issues are another focus of the USTDA

program and of the National Export Strategy. Specifically, USTDA is sponsoring a

trade capacity-building program for Chinese regulators, government ministries, and

scientists designed to minimize administrative and regulatory impediments to international trade in ag-biotech products. The USTDA also funded an orientation visit

to the United States to support the Chilean government’s efforts to enact new legislation regulating the biotech industry as part of the USTDA’s trade capacitybuilding activities.

The service sector accounted for nearly 10 percent of USTDA activities in fiscal

year 2002. As mentioned in the National Export Strategy, last year the USTDA

sponsored its first conference highlighting tourism as a development sector. The conference focused on tourism projects in Eurasia and brought together over 200

attendees. Among them were representatives of Eurasian companies and governments; United States and other financing institutions; U.S. companies involved in

construction and engineering, hotel supply, transportation, and consulting; and senior U.S. Government officials.

The USTDA combined its focus on services and information technology last fall

by cosponsoring a worldwide conference on implementing e-government programs.

USTDA jointly sponsored this event with the U.S. Department of State and USAID.

This highly successful conference presented a forum for participants to discuss

issues of common concern and to establish peer-to-peer networks for further cooperation. The event also provided opportunities for participants to consult with

U.S. companies whose products and services could contribute to the development of

successful e-government initiatives.

USTDA also maintains active programs in countries targeted in the National Export Strategy for early project development, such as China, Mexico, and Russia.

USTDA reopened in China about 2 years ago and our portfolio there has grown rapidly. In 2002, we were involved in 46 projects in China, with a focus on aviation

safety, energy, and the environment. Based on the strong commitment by China’s

many private and public sector sponsors to work with USTDA in a smooth and efficient manner, China was awarded the agency’s 2002 Country of the Year honor.

Currently, USTDA is considering sponsoring a conference on project financing in

China designed to help project sponsors find the right financing mechanism to

implement important development objectives.

In Mexico, USTDA has funded several activities supporting the Partnership for

Prosperity, which Presidents Bush and Fox initiated 2 years ago. Among them are

master grant agreements that were signed last year with two Mexican development

banks. These master grant agreements provide a framework, which will enable the

banks to contract with U.S. firms to carry out studies related to their respective

technical assistance programs.

USTDA maintains an active program in Russia. Many U.S. firms continue to see

good market opportunities in that country. USTDA is working closely with our

TPCC colleagues to better coordinate our activities and to leverage our resources to

maximize our support for U.S. firms pursuing business opportunities in Russia.

The USTDA also has implemented strong programs in other parts of the world,

including Central and Eastern Europe. USTDA activities in this region focus on environmental investments that can be financed on commercial terms, particularly in

the waste-to-energy and renewable energy sectors. In December 2002, USTDA sponsored a major conference on this subject to highlight projects that represent significant export potential for U.S. firms.

The USTDA portfolio demonstrates that our agency is one that seeks out new

challenges. We are also results oriented. To date, our combined efforts with other

Federal agencies and with the U.S. private sector have produced numerous success

stories around the world. Overall, 30 percent of U.S. exports associated with

USTDA-funded activities have received Ex-Im Bank loans and guarantees.

Some country-specific examples of our work with other agencies include Vietnam,

where our efforts and those of other agencies, led to a large procurement of GE aircraft engines. In Morocco, we coordinated our activities with the U.S. Commercial

Service to support a U.S. firm that successfully competed to construct and operate

the Fes Controlled Landfill. In Brazil, USTDA sponsored an orientation visit to the

United States for private rail concessionaires after the U.S. Commercial Service

identified opportunities for the sale of U.S. rail maintenance equipment. In Georgia,

a USTDA-funded feasibility study led to an Ex-Im Bank loan for an air traffic conVerDate 11-MAY-2000 10:22 Jun 02, 2004 Jkt 000000 PO 00000 Frm 00048 Fmt 6621 Sfmt 6621 93490.TXT SBANK4 PsN: SBANK4
45

trol system supplied by Northrop Grumman. In Russia, USTDA-funded studies on

refinery upgrades have led to hundreds of millions of dollars in United States sales.

USTDA also participates in a number of events throughout the year designed to

inform the private sector about the agency’s program. As mentioned in the National

Export Strategy, USTDA participated in an OPIC conference last year on Andean

Regional Trade and Investment. Earlier this spring, the USTDA participated in the

Ex-Im Bank’s Annual Conference, as well as the Arizona-Mexico Trade and Investment Conference that was sponsored by OPIC.

In addition, USTDA has a strong record of supporting smaller businesses interested in expanding their international portfolio. Building on this record, the USTDA

sponsored a one-day contract opportunities seminar this spring for representatives

of small- and medium-sized businesses interested in exploring opportunities to increase their exports to overseas markets. The program focused on how to take advantage of contracting opportunities with the USTDA and showcased the types of

assistance available through the Federal Government to help U.S. businesses compete successfully in the international arena. The seminar included participation

from the U.S. Small Business Administration, the U.S. Commercial Service, Ex-Im

Bank, and OPIC. The Honorable Hector Barreto, Administrator of the U.S. Small

Business Administration, was the keynote speaker for the day’s events.

USTDA also participated in the pilot interagency training course that is discussed

in the National Export Strategy. This event, which was held in January 2003, was

a good initial exercise in bringing together TPCC member agencies and highlighted

our respective roles in promoting U.S. exports. Based on the success of this event,

USTDA looks forward to hosting the next training session in the Business Center

at our headquarters next month.

As we look to the future, USTDA anticipates continued high demand for its programs. Developing countries are reaching out to learn from the world’s best practices as they seek to implement policies and projects that promote economic growth

and sustainable development. USTDA is responding to this initiative by connecting

overseas project sponsors with U.S. firms that have the commercially tested expertise and technology necessary to achieve important development objectives.

The circumstances of our time require agencies to restructure themselves to respond to new priorities as they emerge. The members of the TPCC are at the forefront of this endeavor. USTDA looks forward to continuing to work with other TPCC

members as we jointly support U.S. companies in their efforts to increase their

involvement in challenging foreign markets.

Thank you again for this opportunity to testify. The USTDA looks forward to continuing to work with the Committee and with our colleagues on the TPCC in advancing our dual trade and development mission. I would be happy to answer any

questions.

***

Activity in Post-Crisis Regions

Afghanistan Reconstruction

• In Afghanistan, USTDA has undertaken a series of activities, primarily targeting

those sectors in which the U.S. private sector can make a significant contribution

to the reconstruction effort. In delivering this assistance, USTDA works closely

with other USG agencies, taking advantage of their expertise. These include the

FAA, U.S. Geological Survey, USAID, FCC, and the U.S. Departments of Energy,

Commerce, and State.

• Since opening USTDA’s program in Afghanistan in early 2002, the agency has

committed roughly $2.5 million for a series of activities in the civil aviation, telecommunications, oil and gas, electric power, and other sectors.

• USTDA is considering roughly $3 million in additional support activities; including a study on the establishment of an American University in Afghanistan, training and studies related to civil aviation, and an oil and gas resource assessment.

• USTDA and the U.S. Department of Commerce are sponsoring a conference in

Chicago in June 2003, to present and discuss the rebuilding of Afghanistan’s infrastructure. The sectors to be presented include: Power and energy; water and

sanitation; transportation; buildings; gas and oil pipelines; construction; health

care; and tourism. Twenty-five Afghan delegates, including senior Ministers and

representatives from international financial institutions, will attend the conference. Many of the infrastructure projects to be discussed are the result of a series of Definitional Missions and Orientation Visits that USTDA has sponsored.

46

Frontline States in Central Asia

• In Pakistan, USTDA provided a grant to the Karachi Port Trust to support a proposed 25 million gallons per day desalination plant project. Karachi is experiencing a dire potable water shortage and this project would result in a significant

increase in the supply of potable water to this rapidly growing city of 12 million

inhabitants.

• In Kyrgyzstan, USTDA supported an e-government project, which will help the

government deliver government services more efficiently and effectively.

• In Kazakhstan, USTDA sponsored both a feasibility study on potential aviation

projects and an orientation visit that brought Kazakh aviation officials to the

United States. The resulting meetings provided follow-on contracts for U.S. companies eager to do business in Kazakhstan, and have laid the foundation for

future projects in this sector.

• USTDA had a substantial program in Uzbekistan in fiscal year 2002, including

projects in rail, information technology, water, power, and petrochemicals, as well

as small- and medium-sized enterprise development.

Transportation Security and Safety Initiatives

• Following the APEC Leaders’ announcement in Los Cabos, Mexico of the Secure

Trade in the APEC Region (STAR) Initiative in 2002, USTDA has taken a leading

role in identifying and supporting potential transportation security projects.

• In February 2003, USTDA sponsored a STAR conference in Bangkok, Thailand.

Twenty-one of the APEC member states sent delegations that included officials

responsible for the security oversight of transportation, trade, customs, and related functions. Private sector representatives attended as well. Discussions focused on policies and procedures to enhance security and efficiency in the APEC

region’s seaports, airports, and other access points. A key point of agreement

among all participants was the need for new partnerships between government

and business to support security initiatives.

• USTDA has been active for many years in supporting the transportation projects,

and has increased its emphasis on transportation security-related activities. For

example, in 2002, USTDA sponsored 114 transportation activities totaling $17.2

million.

• USTDA’s Africa and the Middle East region is spearheading many of the agency’s

regional and interagency transportation security projects previously discussed, including the Middle East Regional GPS/GNSS project, the East Africa Regional

GPS/GNSS project, and the Deepwater Systems for Southern Africa.

• A Definitional Mission will visit Bulgaria and Romania in April 2003, to support

aviation security strategic planning.

Participation in the Administration’s Trade Agenda

• In the area of trade capacity building, USTDA is working closely with the U.S.

Trade Representative (USTR) and other agencies to provide key support for technical assistance activities related to the regional Free Trade Agreement (FTA)

with the Southern Africa Customs Union (SACU), and the negotiation of the U.S.-

Morocco FTA. This included funding for a workshop for SACU lead negotiators.

• USTDA is supporting capacity-building efforts related to the negotiation of a U.S.-

Central American Free Trade Agreement (CAFTA). Most prominently, USTDA is

supporting several trade-related information technology (IT) priority projects in

Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua.

• USTDA has funded several activities in support of the Partnership for Prosperity

with Mexico. In 2002, USTDA signed master grant agreements with two Mexican

development banks, Nacional Financiera (NAFIN) and Banco Nacional de

Servicios y Obras Publicas (BANOBRAS), that will enable the banks to contract

with U.S. firms to carry out studies related to their respective technical assistance

programs.

• USTDA is funding technical assistance for NAFIN to strengthen the venture capital industry in Mexico. The technical assistance will result in recommendations

that will provide the necessary framework for the Mexican government to move

forward with legislative and policy measures.

• USTDA’s Europe region maintains a strong focus on the environment. In December 2002, USTDA sponsored a conference focusing on waste-to-energy and renewable energy projects in Central and Eastern Europe. USTDA has continued to

pursue specific projects in this sector and recently signed grant agreements supporting a wind energy project in Hungary and a biomass to energy co-generation

power plant project in the Czech Republic.

47

• As Romania begins a massive energy privatization and investment program,

USTDA is planning to bring a delegation of Romanian energy officials to the

United States to help ensure the Romanians look to American companies as their

first source of potential partners.

• USTDA is further developing its China program, with emphasis on transportation, particularly aviation safety, clean energy, and environmental sectors.

Training programs for aviation safety, natural gas, and agricultural biotechnology

initiatives are underway. A customs modernization project, that is an expansion

of the Shanghai Model Port Project, is in the immediate pipeline.

• USTDA efforts in Southeast Asia will concentrate on furthering efforts to upgrade

regional transportation security infrastructure, as well as improving environmental conditions and the efficiency of national and regional utilities.

48

RESPONSE TO WRITTEN QUESTION OF SENATOR MILLER

FROM HECTOR V. BARRETO, JR.

Q.1. Mr. Barreto, I understand your budgets of SBA have been cut

by Congress and the Administration. How will these cuts impact

your TPCC work?

A.1. The Administration requested $3.1 million in fiscal years 2003

and 2004 for the U.S. Export Assistance Centers (USEAC’s). The

Fiscal Year 2003 Omnibus Appropriations Act did not provide funding for the USEAC’s.

We have worked very closely with the Department of Commerce

on this very critical function, and we plan to continue to do that.

There should not be any decrease in SBA’s participation with the

TPCC or export assistance in general. The USEAC’s are still operating, with the assistance of our TPCC partners, and small businesses will still receive the assistance and training that they need.

The SBA is working with The Trade Promotion Coordinating

Committee and Ex-Im Bank in not only creating better harmonized

marketing programs while also harmonizing Ex-Im and the SBA’s

Export Working Capital Programs.

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