U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001

93–299PDF 2004

THE STATE OF U.S. INDUSTRY

HEARING

BEFORE THE

COMMITTEE ON ENERGY AND

COMMERCE

HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

MARCH 24, 2004

Serial No. 108–79

Printed for the use of the Committee on Energy and Commerce

(

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

2

COMMITTEE ON ENERGY AND COMMERCE

JOE BARTON, Texas, Chairman

W.J. ‘‘BILLY’’ TAUZIN, Louisiana

RALPH M. HALL, Texas

MICHAEL BILIRAKIS, Florida

FRED UPTON, Michigan

CLIFF STEARNS, Florida

PAUL E. GILLMOR, Ohio

JAMES C. GREENWOOD, Pennsylvania

CHRISTOPHER COX, California

NATHAN DEAL, Georgia

RICHARD BURR, North Carolina

ED WHITFIELD, Kentucky

CHARLIE NORWOOD, Georgia

BARBARA CUBIN, Wyoming

JOHN SHIMKUS, Illinois

HEATHER WILSON, New Mexico

JOHN B. SHADEGG, Arizona

CHARLES W. ‘‘CHIP’’ PICKERING,

Mississippi, Vice Chairman

VITO FOSSELLA, New York

STEVE BUYER, Indiana

GEORGE RADANOVICH, California

CHARLES F. BASS, New Hampshire

JOSEPH R. PITTS, Pennsylvania

MARY BONO, California

GREG WALDEN, Oregon

LEE TERRY, Nebraska

MIKE FERGUSON, New Jersey

MIKE ROGERS, Michigan

DARRELL E. ISSA, California

C.L. ‘‘BUTCH’’ OTTER, Idaho

JOHN SULLIVAN, Oklahoma

JOHN D. DINGELL, Michigan

Ranking Member

HENRY A. WAXMAN, California

EDWARD J. MARKEY, Massachusetts

RICK BOUCHER, Virginia

EDOLPHUS TOWNS, New York

FRANK PALLONE, Jr., New Jersey

SHERROD BROWN, Ohio

BART GORDON, Tennessee

PETER DEUTSCH, Florida

BOBBY L. RUSH, Illinois

ANNA G. ESHOO, California

BART STUPAK, Michigan

ELIOT L. ENGEL, New York

ALBERT R. WYNN, Maryland

GENE GREEN, Texas

KAREN MCCARTHY, Missouri

TED STRICKLAND, Ohio

DIANA DEGETTE, Colorado

LOIS CAPPS, California

MICHAEL F. DOYLE, Pennsylvania

CHRISTOPHER JOHN, Louisiana

TOM ALLEN, Maine

JIM DAVIS, Florida

JANICE D. SCHAKOWSKY, Illinois

HILDA L. SOLIS, California

CHARLES A. GONZALEZ, Texas

BUD ALBRIGHT, Staff Director

JAMES D. BARNETTE, General Counsel

REID P.F. STUNTZ, Minority Staff Director and Chief Counsel

(II)

C O N T E N T S

Page

Testimony of:

Evans, Hon. Donald, Secretary, United States Department of Commerce .. 70

Material submitted for the record:

Evans, Hon. Donald, Secretary, United States Department of Commerce,

response for the record ................................................................................. 103

(III)

(1)

THE STATE OF U.S. INDUSTRY

WEDNESDAY, MARCH 24, 2004

HOUSE OF REPRESENTATIVES,

COMMITTEE ON ENERGY AND COMMERCE,

Washington, DC.

The committee met, pursuant to notice, at 10 a.m., in room 2123,

Rayburn House Office Building, Hon. Joe Barton (chairman) presiding.

Members present: Representatives Barton, Hall, Bilirakis, Upton,

Stearns, Greenwood, Cox, Deal, Whitfield, Norwood, Shimkus, Wilson, Shadegg, Pickering, Buyer, Bass, Pitts, Bono, Walden, Terry,

Ferguson, Rogers, Issa, Otter, Sullivan, Dingell, Markey, Pallone,

Brown, Gordon, Rush, Stupak, Engel, Green, McCarthy, Strickland,

DeGette, Capps, Doyle, Allen, Davis, Schakowsky, and Solis.

Staff present: Bud Albright, staff director; David L. Cavicke, majority counsel; Shannon Jacquot, majority counsel; Andy Black, legislative director and senior policy coordinator; Brian McCullough,

majority professional staff; William Carty, legislative clerk; Jonathan J. Cordone, minority counsel; Ashley Groesbeck, minority staff

assistant; and Jessica McNiece, minority staff assistant.

Chairman BARTON. The committee will come to order.

I have the privilege today of introducing the Honorable Don

Evans. Before I formally introduce him, I have a personal privilege

announcement.

Our former chairman, Chairman Billy Tauzin, did have surgery

last week. He is still in the hospital. The surgery went extremely

well. He is expected home sometime this week. The staff and his

wife have asked that he not have visitors yet, but he is expected

later in the week to be able to have visitors.

I would also like to announce that, because we do have the Secretary of Commerce today, I am going to ask that other than the

chairman and the ranking member of the full committee that we

try to limit our opening statements, so that we can have as much

time as possible for the Secretary to make his statement and to answer questions.

There are 57 members of the committee, and if everyone takes

their full 3 minutes it—we are going to have 2 hours of opening

statements. Those who don’t make an opening statement do get an

additional 3 minutes in the question time. So I wanted to make

that announcement.

Secretary Evans is the cabinet secretary that is charged with

promoting trade and industry for the United States’ companies and

workers. The department that he chairs has the responsibility for

a vast array of Federal programs, including those relating to teleVerDate 11-MAY-2000 13:38 Jun 17, 2004 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 93299.TXT HCOM1 PsN: HCOM1
2

communications technology, economic statistics, trade promotion,

weather, oceanographic services. With the exception of oceanographic services and the weather, this committee has jurisdiction

over all of the programs at the Department of Commerce.

As you all know, I think it is useful for us to bring the cabinet

secretaries of the agencies under our jurisdiction before the full

committee. Last week we had the Secretary of Health and Human

Services, the Honorable Mr. Thompson. In the next 2 weeks, we

are going to have the Secretary of Energy, the Honorable Spence

Abraham. So having the Secretary of Commerce here today is the

second in those cabinet secretaries.

We think that this is the first time the Secretary of Commerce

has appeared before this committee, and maybe any committee in

the House in the last 8 years. We are trying to confirm that, but

Don Evans is not a gentleman who likes the—who seeks the spotlight and the limelight. So we are honored that he agreed to our

invitation today.

We all know that our economy has had some rough spots in the

last several years. The terrorist attacks on September 11, 2001,

sent an economic shock through our Nation that we are still recovering from. Secretary Evans has taken that task as Secretary of

Commerce seriously to try to help the economy rebound, and he is

going to give us some statistics today and some facts and figures

and his opinions as to why we think that we are now rebounding.

The third quarter of 2003 our economy grew at an astonishing

rate of over 8 percent, 8.2 percent. That is the strongest economic

growth rate in over 20 years. That economic growth has shown that

our economy is continuing to grow. In fact, our economic growth

rate has outstripped all of the industrialized countries. We have inflation now at historically low levels, and home ownership in the

United States is at the highest level it has ever been.

Americans are living longer, and they are living healthier. This

committee can take pride in the fact that we have just passed a

component of that—the Medicare Reform Act that we are now in

the process of implementing, and that the Secretary of Health and

Human Services talked about several weeks ago.

Secretary Evans and this committee is committed to a job growth

economy for America. He will report in his testimony that a quarter of a million new jobs have been created in the past 5 months

alone. American employment rates are substantially higher than

our Western trading partners. The February unemployment rate in

this country at 5.6 percent is below its 30-year average, and is still

trending downward.

And, of course, we all hope that it continues to trend downward.

Still, more job growth and more employment is a key goal of the

Congress, this committee, and the administration.

We also have extremely high productivity growth rates. We had

a productivity growth rate I think last year of over 4 percent,

which is simply amazing because the historical average in the post

World War II period has been somewhere between 1 and 2 percent.

The Department of Commerce has recently released a report entitled ‘‘Manufacturing in America.’’ In that report, the Secretary

makes a number of recommendations that would, if implemented,

promote even more growth in employment for the U.S. economy,

3

particularly in the manufacturing sector. The Secretary is going to

talk about that in his prepared remarks.

It also points out that we need to pass the conference report in

the Senate, that this committee did such good work on. It would

be helpful if we would get the Senate to pass the Tort Reform Act,

that, again, has passed the House of Representatives. And it would

be very helpful if we could find a way to control some of our health

costs that have gone up in the last several years.

This committee, Mr. Secretary, is working hard to achieve the

goals that I have just outlined. I know that you share those goals,

because you and I have talked about it, and we look forward to

your testimony.

Finally, I want to inform the committee that Secretary Evans is

here until approximately 12:30, so we want to take every opportunity to give him a chance to have interaction with the committee.

So with that, I would like to recognize the ranking member of

the committee and former chairman of this committee, one of the

most distinguished members of the House of Representatives, the

Honorable John Dingell of Michigan, for an opening statement.

Mr. DINGELL. Mr. Chairman, I thank you, and I thank you for

holding the hearing.

Mr. Secretary, welcome. You are a distinguished public servant

and a friend, and I am delighted to see you here before us. We have

a difficult problem in this country with regard to making the economy go, and I believe the discussion that we will have today will

be helpful in that, and that your comments to the committee will

be of value to us in this matter.

Since January 2001, my State of Michigan has lost over 128,000

manufacturing jobs. That is a staggering number, but it is just a

portion of 2.8 million manufacturing jobs that have been lost across

this country. This is a serious matter, because people are told that

there is a recovery going on, but nobody seems to be going back to

work.

Unfortunately, we are not addressing these matters. We are having a debate about esoteric trade theories from years gone by. And

it is regretful that the statistics that have been coming out of the

administration have not reflected the facts, nor have they been

properly predictive of the events which would follow.

It is also an unfortunate event that the administration has not

really shown that it appears to be concerned with the needs of the

Nation at this particular time. We hear from the chairman of the

Council of Economic Advisors that exporting jobs or outsourcing is

a normal part of the process. We hear that the administration is

proposing to change a situation where manufacturing will now include turning hamburgers in McDonald’s and Wendy’s.

We are talking now ofttimes nationally about outsourcing. That

is one of the first questions, but that is really just exporting jobs.

It used to be only that manufacturing jobs were at risk; now it is

white collar. And we note that accounting and other jobs of this

kind, including government jobs, for example, from the Tennessee

Valley Authority, which is now suggesting that they intend to do

this, is at hand. This is an outrageous situation.

Second, small- and mid-sized manufacturers, who are an essential and integral part of the American economy, need to have the

4

assistance that they have to have to compete on the world stage.

Most of these are businesses that contribute to real job production

and are very important parts of the automobile manufacturing

process.

We should be manufacturing—rather, we should be expanding

programs in the Department of Commerce, such as the Manufacturing Extension Partnership and the Advanced Technology Program, but these programs have been cut continuously in the budget

of this administration—a most regrettable thing.

Third, American businesses and American workers deserve a

government that pursues not just a policy of free trade but one

which involves a policy of fair trade. In other words, our trading

partners must be compelled to play by decent rules. Labor and

working conditions must be brought up to intelligent and reasonable standards.

Environmental practices and laws must be made to work, so that

we do not degrade the environment around the world, but also so

that the United States does not subsidize misbehavior by allowing

other countries to disregard important things which we do to see

to it that the quality of life in the United States is proper and good.

The fourth point is the cost of health care is now out of control— $1,400 it is in the cost of an automobile, more than the value of

steel. Nothing do I hear addressed by the administration in this

matter.

Now, I think, Mr. Secretary, that you are concerned about these

matters. They deserve a frank and an honest discussion. I think

that we have not really begun to focus on that, and I hope that this

meeting this morning will begin to move us in the direction of

achieving that kind of national purpose that meets our needs

through an intelligent discussion, and I look forward to having a

colloquy with you on this, Mr. Secretary. And thank you again for

your presence.

Chairman BARTON. We thank the gentleman from Michigan for

that opening statement. I want to encourage members again, now

that Mr. Dingell and I have given an overview, to not ask—to not

give an opening statement, but the rules do allow for it.

I would ask if anybody on the Republican side at this time wishes to make an opening statement. All right. Does anybody on the

Democrat side wish to make an opening statement? Okay. We will

go to Mr. Pallone. Mr. Pallone is recognized for 3 minutes.

Mr. PALLONE. Thank you. Mr. Chairman, I want to thank the

Commerce Secretary for coming to the Hill today to address the

state of our Nation’s economy, and I am hoping that he will be as

honest with us as he was last month when he refused to support

his own administration’s lofty job creation numbers.

After seeing the job creation numbers for February—an anemic

21,000 jobs—I am hoping that finally today we can discuss economic policies that will finally create American jobs. If we can take

anything from the February job numbers, it is that the economic

policies of President Bush and the Republican Congress still are

not creating jobs.

The President continues to say that the best way to create more

jobs in the upcoming months is for Congress to make permanent

all his tax cuts—tax cuts that overwhelmingly benefit our Nation’s

5

wealthiest Americans. But when is the President going to learn?

Congressional Republicans cut taxes year after year, and the jobs

they predicted would be created have never become a reality.

Last year when the President was touting another round of tax

cuts benefiting our Nation’s wealthiest elite, the White House predicted the cuts would create more than 2.1 million new jobs in the

7 months after its passage. But what actually happened during

that period? Only 296,000 jobs were created—1.8 million short of

the President’s predictions.

Perhaps that is why Secretary Evans refused to endorse President Bush’s own economic report of the President, in which the administration predicted that 2.6 million jobs would be created this

year. And I would be interested to hear from your administrations

the latest estimates.

One of the major reasons for the current jobs recession is the increased exporting of high-paying white and blue collar jobs overseas. Consider several examples from the township of Edison in my

congressional district. Last month, the Ford plant closed, leaving

more than 900 New Jersey employees without jobs. Last year, the

Frigidaire Air Conditioning plant closed its Edison plant and shifted production to Brazil, leaving 1,600 unemployed.

Mr. Secretary, I would think you would be concerned—and I am

sure you are—about shipping these New Jersey jobs overseas. Last

month, however, we learned that the Bush administration views

the movement of American factory jobs and white collar work to

other countries as a positive transformation that will, in the end,

enrich our economy.

No wonder the President thinks our Nation’s economic forecast

is rosy. He isn’t concerned about creating jobs here in the U.S., as

long as the economy continues to grow. And if that can happen best

by sending more jobs overseas, that is fine with him. It is time the

Bush administration realized that shipping jobs overseas and cutting taxes for the wealthiest elite in our country will not create

jobs.

President Bush and congressional Republicans have had 3 years

to turn this jobs recession around. They have completely failed.

And I am just hopeful that today we will finally hear a change of

course from the Bush administration, although I have to say, Mr.

Chairman, I am certainly not holding my breath.

Thank you, Mr. Chairman.

Chairman BARTON. Thank you.

Mr. Strickland, do you wish to make an opening statement?

Mr. STRICKLAND. Yes. Thank you, Mr. Chairman.

Chairman BARTON. Wait a minute. Mr. Brown, too, ahead of you.

He is senior. The gentleman from Ohio is recognized.

Mr. STRICKLAND. I will defer to my Ohio colleague.

Chairman BARTON. Yes, Mr. Brown of Ohio is recognized for 3

minutes.

Mr. BROWN. Mr. Chairman, thank you for having this hearing.

Secretary Evans, thank you for being here. We know the numbers. One in six manufacturing jobs in my State has been lost since

President Bush took office, 168,000 manufacturing jobs in my State

have been lost, 300,000 Ohioans are unemployed today. That is

2,000 people have lost their jobs every week of the Bush adminisVerDate 11-MAY-2000 13:38 Jun 17, 2004 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 93299.TXT HCOM1 PsN: HCOM1
6

tration; 260 people have lost their jobs every day since George

Bush took office in Ohio alone.

What puzzles Ohioans is that the Bush administration actually

seems to be hurting, not helping, American manufacturing and

working Americans, in large part because the President’s answer

to every bad case and bad piece of economic news is the same: more

tax cuts for the wealthiest Americans with the hope that some of

those benefits will trickle down and create jobs and help someone

else, and more trade agreements that hemorrhage jobs that ship

jobs overseas.

I would hope today, Mr. Secretary, that we could hear from you

some words of support for the Crane-Rangel bill legislation that actually rewards American manufacturing for keeping—American

manufacturers for keeping their jobs in this State. So many Republican members have co-sponsored this bill. It is the White House

and Republican leadership that have refused to allow the CraneRangel bill to come to the House floor.

I got a letter yesterday from a man named David Grumbose, who

lost his steel industry job midway through the Bush administration. He has had decades of factory experience, skills that include

a degree in computer management. He has been out of work for 11⁄2

years. He has long since exhausted his unemployment benefits.

He writes, ‘‘It isn’t easy on the unemployment line. Hope is waning, and despair is close to setting in. I have almost given up, but

that is not my nature. I have worked hard all my life. I started at

age 13 delivering newspapers at 4 a.m. I really don’t know what

to do next.’’

Mr. Chairman, I have a stack of letters from others in my district saying essentially the same thing, frustrated that they can’t

find jobs, angry that their unemployment benefits have not been

extended. Some 900,000 Americans are in that position. I would

like to ask unanimous consent, Mr. Chairman, to enter these into

the record if I could.

Chairman BARTON. Excuse me. Could you repeat the question?

Mr. BROWN. I would like to ask unanimous consent to enter

these letters into the record, Mr. Chairman.

Chairman BARTON. Do we know what—have the majority

staff——

Mr. BROWN. I just described what they were.

Chairman BARTON. [continuing] seen the letters?

Mr. BROWN. I don’t know if they are simply——

Chairman BARTON. If you will let us look at them, I am sure that

during the hearing we will——

Mr. BROWN. Okay. I appreciate that.

Chairman BARTON. [continuing] do that.

Mr. BROWN. Mr. Chairman, Mr. Grumbose and the 2.8 million

other Americans like him deserve better from this administration

and from this Congress. But we had better hurry up. During the

time I have been talking, three more American manufacturing jobs

have disappeared.

I yield back my time.

[The letters follow:]

7

8

9

10

11

12

13

14

15

16

17

Mr. PALLONE. I didn’t know that.

Chairman BARTON. The gentleman from Florida, Mr. Stearns,

one of our distinguished subcommittee chairmen, wishes to make

a 3-minute opening statement.

Mr. STEARNS. Thank you, Mr. Chairman. I won’t be long, and I

just obviously ask unanimous consent that my entire statement be

part of the record. But obviously I want to——

Chairman BARTON. Without objection, so ordered.

Mr. STEARNS. [continuing] welcome the Secretary. But I would

like to raise one point with the administration. I am concerned

about the privacy implications of outsourcing. Jobs involving access

to sensitive information are being outsourced, including financial

services, medical examination, and tax preparation, and I am concerned that sensitive financial, medical, and other personal information will not receive the same type of protection that it does

when work with the information is done in the United States.

I understand that companies are subject to the same U.S. privacy

laws, whether they are processing the information in the U.S. or

in India, but I want to know that the administration is doing all

it can to ensure the privacy and security of that information. And

I hope, Mr. Secretary, perhaps that you will address that.

And I thank you, Mr. Chairman.

[The prepared statement of Hon. Cliff Stearns follows:]

PREPARED STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF FLORIDA

The Department of Commerce is often called the voice of business in government

and we have its esteemed Secretary here today to testify about the state of U.S. industry. The Department has vast responsibility for areas as diverse as enforcing

international trade laws to conducting ocean and coastal zone research to developing

telecommunications and technology policy. Today we will use this opportunity to

focus on a main priority of this Administration, as well as this Committee—economic growth and job creation. The Administration, with the assistance of Congress,

has set forth a pro-growth agenda that has been a powerful tool in steering the U.S

economy out of recession. Secretary Evans, as a key member of President Bush’s

economic team, has been a leader in implementing the pro-growth and job-creating

policies of the Administration.

Perhaps the most significant recession fighting tool of the past four years has

been in the form of tax cuts. Individual income tax cuts put more discretionary income in the hands of consumers who continue to fuel the demand for goods and

services. Equally important was the reduction in capital gains taxes that will continue to facilitate capital investment necessary for businesses to grow. Without the

tax cuts, the recession that began in 2000—exacerbated by the horrendous terrorist

attacks of 9/11 and the corporate malfeasance of the late 1990’s—would have had

a much more debilitating affect on the U.S. economy. Instead, our economy has been

growing for the past nine quarters with an impressive 8.2% growth rate in the 3rd

quarter of 2003 and a healthy 4.1% growth rate in the 4th quarter. Economic

growth creates jobs and the unemployment rate is indeed falling.

Despite the falling unemployment rate, there are pockets of workers for which unemployment is still high—namely the manufacturing industry. I applaud the Secretary for his focus on growth in manufacturing. The Department of Commerce recently released a report entitled ‘‘Manufacturing in America: A Comprehensive

Strategy to Address the Challenges to U.S. Manufacturers.’’ In that report, the Secretary outlines a six-point plan for improving the manufacturing sectors’ competitiveness and therefore growing jobs in the years to come. Those six points include

important public policy changes that are within the jurisdiction of this Committee.

I urge my colleagues to recognize our responsibility for implementing these progrowth and job-creating changes. In many of the areas the Committee has already

worked hard, on a bipartisan basis, to promote growth and job creation. Specifically,

the Committee has moved comprehensive energy legislation to promote affordable

18

and reliable supply of energy. The House has acted to enact that legislation and I

urge the Senate to do the same.

Other public policy changes include making health care costs more affordable to

the companies that hire workers by passing medical malpractice liability reform;

passing general tort reform; streamlining regulatory requirements to provide smarter regulation that is less burdensome; reducing dependence on foreign sources of oil

and natural gas; and opening foreign markets for American products. Mr. Secretary,

I hope that you will call on this Committee to help implement the important progrowth agenda you have set forth in your plan. The Committee has worked to

achieve some of the goals you set forth in the report and Chairman Barton has indicated a strong desire to work on the others in a bipartisan fashion.

Before I close, I do have one important issue I would like to raise with the Administration. I am concerned about the privacy implications of outsourcing. Jobs involving access to sensitive information are being outsourced, including financial services,

medical examination, and tax preparation. I am concerned that sensitive financial,

medical, and other personal information will not receive the same type of protection

that it does when work with the information is done in the United States. I understand that companies are subject to the same U.S. privacy laws whether they process the information in the U.S. or in India but I want to know that the Administration is doing all that it can to ensure the privacy and security of that information.

I hope that you will address this issue in your testimony today and that the Administration will work with the Congress to ensure the protection of sensitive consumer

information.

I thank the Chairman for holding this hearing today and I thank the Secretary

for his time with us today. I look forward to a healthy dialogue on the state of U.S.

industry. I yield back the balance of my time.

Chairman BARTON. We thank the gentleman.

We want to point out that members that don’t make opening

statements do get an additional 3 minutes in the questioning. I just

thought I would mention that again.

The gentleman from Michigan Mr. Stupak is recognized I assume

for a 3-minute opening statement.

Mr. STUPAK. No, Mr. Chairman. I will waive my 3. I just want

to make sure that our opening statements will be made part of the

record.

Chairman BARTON. All opening statements will be made part of

the record.

Mr. STUPAK. Then I will waive my 3 minutes.

[The prepared statement of Hon. Bart Stupak follows:]

PREPARED STATEMENT OF HON. BART STUPAK, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF MICHIGAN

Mr. Chairman, thank you for calling this hearing, and Secretary Evans, thank

you for joining us today to discuss one of the most important issues facing our country, the issue of American jobs.

On September 15, 2003, you visited the great state of Michigan and said that your

department is making a series of changes to boost American manufacturing. Now,

six months later, (with you at the helm of the Commerce Department) you were

right, a series of manufacturing changes have occurred, but the changes that we

have seen in Michigan and across America have done nothing to ‘‘boost manufacturing.’’ In fact, in Michigan,128,900 manufacturing jobs have been lost since President Bush took office.

In a speech you gave during that same visit in September you said, and I quote,

‘‘There is no doubt that our manufacturing sector confronts serious challenges.’’

The Administration’s answer: repeatedly slash funding for job growth programs

like the Manufacturing Extension Partnership (MEP) program that has successfully

helped small American manufacturers to modernize and stay competitive in the

global marketplace. I know that MEP has directly helped companies in my district

including Horner Flooring of Dollar Bay and Jacquart Fabric Products with 100

workers in Ironwood, Michigan.

Again, this Administration has been all talk and little action on finding ways to

put people back to work. As you can see, I have with me a copy of the President’s

Economic Report delivered to Congress last month. If you turn to page 98 you find

19

the Administration has projected that their tax cuts will create 2.6 million jobs over

the next year. That would require adding an average of about 216,000 jobs per

month to reach the President’s projection. With a little over 9 months left to go in

2004 its no wonder President Bush has recently distanced himself from his own report.

This wouldn’t be the first job creation claim where the Administration has been

just dead wrong. In fact, they have been wrong every time they have used this rationale as an excuse to cut taxes.

Where it has created jobs is overseas and abroad. In Michigan, Electrolux the refrigerator manufacturer recently announced it was closing shop and moving its

2,700 jobs to Mexico to save labor costs—although they were making a profit.

And just last week, Secretary Powell assured India that the Administration would

not halt the shipping of American jobs overseas.

While I have no doubt that such an assurance helps to ease the minds of workers

abroad, this sends the wrong message to our struggling workers here at home.

The bottom line is this Administration has no credibility on its job creation predictions. Instead of a real job growth plan it wants to cut programs like MEP that

are essential to rural economic growth—it wants to give employers disincentives to

hire new workers by allowing companies to deny workers overtime pay—and it is

telling other countries—don’t worry—we’ve got your back on outsourcing American

jobs. It refuses to acknowledge that Americans can’t find work and continues to

deny them extended unemployment benefits.

Mr. Chairman, I look forward to hearing from Secretary Evans on exactly what

steps the Administration plans to take to create American jobs. Michigan’s 335,868

unemployed residents need to know.

Chairman BARTON. Well, bless you. That is a good example.

Mr. Green, are you going to waive your opening statement?

Mr. GREEN. No, Mr. Chairman. I appreciate our Secretary——

Chairman BARTON. The gentleman is recognized for 3 minutes.

Mr. GREEN. [continuing] being here for 3 hours, or 21⁄2 hours,

but—and, again, I want to thank the chairman and our ranking

member for holding this—I think this is the most important hearing we have had this year on the state of U.S. industry. And, again,

I join my fellow Texan, the chairman, in welcoming a neighbor,

even though he is from Midland and I am from Houston—it is kind

of close in Texas terms—Secretary Evans to testify.

Mr. Secretary, since this administration came to town, our State

of Texas, we have lost 175,000 manufacturing jobs. In fact, in

Texas, we have lost more manufacturing jobs than any other state,

with the exception of California. And since 2000 our country as a

whole—and, again, I see different numbers, but the one I think is

common is that we have lost 2.8 million manufacturing jobs.

During a time of economy recovery, we shouldn’t forget that

manufacturing jobs are traditionally the engines of our economic

growth in our country. Furthermore, these highly skilled, good-paying jobs have been the backbone of a strong middle class that has

been the foundation of opportunity in our country. And to me this

is where the issue of outsourcing comes in.

And the economic term may be outsourcing, and the practice may

be utilized to help a company’s bottom line by decreasing labor

costs, but at the end of the day outsourcing is the wilful exporting

of jobs. And if we continue to export those manufacturing jobs,

there is a very real possibility that our country’s labor market will

be made up of highly paid executives and low wage earners in service sector jobs with no middle class in between.

And if there are doubts about the possibility of that, one need

only flip through the recently released economic report of the President, to which the chief economic advisor suggested that making

hamburgers in a fast food restaurant constituted manufacturing.

20

We have learned the hard way that manufacturing jobs aren’t the

only ones being exported. Many high tech and service sector jobs

are also leaving our country, and I represent a district that has

been losing manufacturing jobs for decades.

Our district in Texas is the third most blue collar district in the

country, and the fifth youngest in the country according to the

2000 Census. And I have long encouraged my younger constituents,

and even my older ones, to retain for the high tech skills, yet now

even the high tech service sector jobs are being exported. In fact,

3.3 million are scheduled to leave the country within the next 15

years.

How do we, as a Nation, keep our high standard of living where

we are not only exporting manufacturing jobs, but now highly

skilled information-related jobs, to the lowest wage countries with

an adequately skilled labor market? Yesterday’s Wall Street Journal highlighted some of the professions that will be exported in

other countries—accountants, tax professionals, technical writers,

architects, legal and investment researchers, and insurance claims

processing.

What are we supposed to tell our constituents who have been retrained for these high tech jobs only to find those jobs, too, are

being exported? We can’t expect them all to go into manufacturing

hamburgers.

Mr. Secretary, the arguments coming from our administration

are troubling. It is unconscionable that the President’s top economic advisors would call exporting American jobs just a new way

of doing international trade, and that it is probably a plus for the

economy in the long run. And, again, being a business school major

from the University of Houston, I understand economics professors.

But often times they don’t——

Chairman BARTON. The gentleman’s time has expired.

Mr. GREEN. [continuing] have the real world—well, thank you,

Mr. Chairman. I would like my full statement to be placed into the

record.

Chairman BARTON. Without objection, so ordered.

Does the gentlelady from Missouri wish to make an opening

statement? Ms. McCarthy?

Ms. MCCARTHY. No, sir.

Chairman BARTON. Okay. The gentleman from Ohio, then, is recognized for 3 minutes.

Mr. STRICKLAND. Thank you, Mr. Chairman, and Mr. Secretary.

Mr. Secretary, I come from Ohio, a State that has lost 168,000

manufacturing jobs in the last 3 years. Mr. Secretary, I have read

your testimony. You say that, clearly, the President is taking the

country in the right direction. However, data from the Bureau of

Labor Statistics show the President is headed toward the worst job

growth in 58 years. In fact, he will be the only President since Herbert Hoover to have a net job loss during his term.

You say in your testimony that our companies and workers see

international trade as a simple question of fairness. When I went

to Mexico recently, Mr. Secretary, and I asked, ‘‘Is it fair to encourage a race to the bottom? Is it fair to exploit foreign workers who

make only $38 a week?’’

21

You say we all know the rising health care costs are eroding competitiveness. But the administration had a chance during the Medicare bill to support the reasonable reimportation of cheaper drugs

from Canada, and to allow the Secretary to negotiate lower prices

for drugs, and they resisted those efforts.

You say that we are preparing—the next generation of America’s

leaders starts with the basis, and that is why the passage of the

No Child Left Behind bill was so important. But, Mr. Secretary, the

Republican Governor in Ohio and the Republican legislature commissioned a study, and that study concluded that the No Child Left

Behind bill is costing Ohio $1.4 billion per year as an unfunded

mandate.

Mr. Secretary, you say the decline of manufacturing employment

and the rise of service employment are manifestations of structural

change. But what do you say to the fact that we are exporting service jobs overseas? We all know that is happening, and I have introduced H.R. 3816, the Call Centers’ Consumers Right to Know Act,

and simply this bill would just simply require call center staff to

disclose their physical location at the beginning of each call, so the

American consumer would be informed.

And while we are talking about service jobs, I would like to share

with you what happened to Mr. Kirk Tremain, who is a constituent

in my district. Mr. Tremain worked in the electrical industry in

Eastern Ohio. GM closed that. He went to Mexico. He was out of

work. He went to work for U.S. Steel. The steel mill shut down.

Then he went back to school and got a bachelor’s degree, got a high

tech job in the computer industry, and National Citibank has taken

that job to India. What do we say to Mr. Tremain and others like

him who are losing these jobs?

And then, I close with this. In the President’s economic report,

these words, ‘‘When a good or service is produced at lower cost in

another country, it makes sense to import it rather than to produce

it domestically.’’ Mr. Secretary, I would like a list that cannot be

produced at lower cost in another country. I think that list would

probably be rather short. And I look forward to your testimony, sir.

Chairman BARTON. The gentleman’s time has expired.

Does the gentlelady from New Mexico wish to make an opening

statement?

Ms. WILSON. Thank you, Mr. Chairman. Yes, I do.

Chairman BARTON. New Mexico.

Ms. WILSON. Thank you, Mr. Chairman. I appreciate your having

this hearing.

Mr. Secretary, thank you for being here. Despite some of the

rhetoric from my colleagues on the other side of the aisle, the reality is that our economy is growing. The interest rates are low, inflation is low, the stock market has recovered. Unemployment is

below the 30-year average for unemployment in this country.

We need to continue with economy policies that include low

taxes, fair regulation, and America is the best in the world at providing a stable environment for companies to be able to invest and

grow and produce wealth.

I think it is important, because we hear a lot about it these days,

to talk a little bit about trade. Ninety-five percent of the people in

this world are not American citizens. If Americans are going to surVerDate 11-MAY-2000 13:38 Jun 17, 2004 Jkt 000000 PO 00000 Frm 00025 Fmt 6633 Sfmt 6602 93299.TXT HCOM1 PsN: HCOM1
22

vive, we need to be able to sell what we produce to those people

who aren’t privileged to have been born in America.

So a return to protectionism can’t be the answer. So what is the

answer? Well, first, we have got to understand the challenge. In

the last 10 years of human history, in the last 10 years, more people have joined the free enterprise system in this world than at any

other point in human history. That has a huge economic impact in

the world that we live in.

Of all the jobs that were lost in the recession of 2000 and 2001,

only 1 out of 100, 1 percent, were outsourced or offshored. And at

the same time, other foreign investors had the opportunity to invest in America. And when you build a Sunnheiser plant in Albuquerque, New Mexico, or Heel, Inc. from Germany comes and sets

up a new operation in Albuquerque, New Mexico, that capital

brings jobs here in America. And 16 million Americans owe their

jobs to international trade.

The real challenge in our economy is actually productivity, which

is a good thing in general, although hard to deal with if you are

one sitting without a job. Productivity growth has moved from

manufacturing to service productivity growth, and anybody who

has checked in at an airport recently, or gone through Home Depot

and checked out their own stuff at the front of the store, knows

what productivity is all about.

UPS used to have 70 service centers, and in those service centers

they had clerks who filled in timesheets every week for every UPS

employee around America. Now that clipboard that a UPS guy carries punches in his time, and when he plugs it into the dashboard

of his truck it automatically reports his time, and all those people

filling out timesheets are now doing another job.

So the real issue in our economy is: how do we take

advantage——

Chairman BARTON. The gentlelady’s time has expired.

Ms. WILSON. Thank you, Mr. Chairman.

Chairman BARTON. Finish the statement, though.

Ms. WILSON. The real challenge for our economy is how we take

the productive American workforce and train them for the next

highly productive, well paid job. And that is the challenge I look

forward to your testimony on, sir.

Chairman BARTON. The gentlelady’s time has expired.

The gentlelady from Colorado?

Ms. DEGETTE. I will submit my statement.

[The prepared statement of Hon. Diana DeGette follows:]

PREPARED STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF COLORADO

‘‘Anemic.’’ ‘‘Unambiguously ugly.’’ ‘‘Terribly disappointing.’’ ‘‘Uncharted territory.’’

So read the comments from financial analysts and chief economists with regard

to February’s lackluster job creation of 21,000 jobs. When one digs deeper, an even

bleaker picture of the current labor market emerges: all 21,000 jobs in February

were created in the public sector with the private sector showing no job gains—an

especially disturbing fact given the enormity of this Administration’s tax cuts in

favor of the private sector. While the Administration will assert that unemployment

levels have held steady at 5.6% and therefore there is nothing to worry about, we

are all painfully aware of the reason for this: hundreds of thousands of workers, discouraged by the current labor prospects in our economy, have dropped out of the

labor force.

23

Unfortunately, the February jobs report is only the most recent evidence that the

economic recovery is not going according to plan. Real wage growth is at its lowest

level since 1987. The average period of unemployment of 20.3 weeks is the longest

it has been since 1984; 23% of the unemployed population have been out of work

for six months or more. The average number of jobs produced in the past three

months was a paltry 42,000, compared to the 150,000 jobs needed just to keep pace

with those entering the labor force. The manufacturing industry has shed 6.2 million jobs since 2001. Consumer confidence in February plunged to its lowest level

in months. Both consumer and federal debt levels have reached record highs, making our country increasingly vulnerable to fiscal crisis if—or more precisely, when—

interest rates increase.

Yet, despite the economy’s anemic job growth, soaring federal deficits and decadelow real wages, the Administration has unwaveringly adhered to its misguided fiscal

policy of tax cuts for the rich, no matter what. A case in point is the recent report

issued by the U.S. Department of Commerce, ‘‘Manufacturing in America,’’ in which

the Department recommends making President Bush’s tax cuts permanent in order

‘‘to address the challenges identified by U.S. manufacturers.’’ Apparently, the Administration is unconcerned with the overwhelming evidence that after three consecutive years of major tax cuts, the economy has failed to produce jobs, especially

in the manufacturing sector, which has lost 2.6 million jobs since the beginning of

2001. Frankly, I do not know how the Administration justifies making at the center

of their proposal to help American manufacturers, a tax cut plan that provides an

average tax cut of $112,925 for the very rich and a paltry $400 average cut for the

majority of Americans.

The impact of making the Bush tax cuts permanent is not theoretical—it means

less money for services and programs that make a real difference in the lives of

Americans, including programs that create jobs. In fact, the Bush Administration,

citing huge deficits that it is primarily responsible for creating, is threatening to

veto the transportation authorization bill, the largest job-creation legislation proposed in the 108th Congress.

Additionally, President Bush, in his recently released budget, proposes the fourth consecutive annual cut of $80MM to the Small Business Administration program,

a program that provides long-term loans to more than 30 percent of all small businesses. This cut to the Small Business Administration program represents one of

the largest agency cuts under the President’s budget and is especially questionable

given that small businesses employ nearly half of all workers and create three out

of four new jobs. I personally cannot reconcile how President Bush claims that he

is doing everything possible to create new jobs, yet he cuts funding for the very loan

program that would ensure that small businesses—a lynchpin to economic recovery—have access to capital they need in order to grow and create new jobs. While

the Administration pays lip-service to creating jobs, it repeatedly cuts programs that

would provide real employment opportunities for the American people, opting instead to push forward its agenda of tax cuts for the rich, no matter what.

Although the Administration will cite Gross Domestic Product growth numbers

and housing starts statistics as proof of an economic recovery, such data is irrelevant when Americans do not have jobs. I am eager to hear from Secretary Evans

what action he plans on taking, other than making the Bush tax cuts permanent,

in order to improve the labor opportunities for Americans and I thank him for his

presence in front of this committee today.

Chairman BARTON. Okay. The distinguished gentleman from

Pennsylvania wishes to make an opening statement.

Ms. DEGETTE. He is distinguished?

Chairman BARTON. I called you—you are gentle. You are gentle

and distinguished. He is just distinguished.

Mr. DOYLE. Mr. Chairman, I ask unanimous consent to submit

my full statement for the record, along with a report on manufacturing in Pennsylvania recently completed and issued by the Pennsylvania Industrial Resource Center and——

Chairman BARTON. Without objection, so ordered.

Mr. DOYLE. [continuing] the Pennsylvania Foundation.

Chairman BARTON. And we will also—we have looked at Mr.

Brown’s documents, and they will also be put in the record.

Mr. DOYLE. Mr. Chairman, my clock is ticking here.

Chairman BARTON. Oh, I will restart it.

24

Mr. DOYLE. Thank you. Mr. Chairman, I want to thank you for

holding——

Chairman BARTON. I am not going to cheat you, Mr. Doyle.

Mr. DOYLE. I want to thank you for holding this hearing today,

because there are few issues of greater importance, not only to my

district but to the country as a whole. And I want to also thank

Secretary Evans for appearing before us today, and I hope, Mr.

Secretary, that you will be able to take the concerns and sentiments that I suspect will be expressed here back to the administration and the White House in the hope that some changes can be

made.

And rest assured, change is what we need because our economy

is floundering, especially when you look at the job losses and lack

of new job creation. I represent Pittsburgh and the surrounding

metro area in the heart of Western Pennsylvania, where manufacturing and hard work have ben the hallmark of generations. And

based on the amount of visits that the President and the Secretary

have made to my district since the administration began, it would

seem as though they were really committed to the residents in the

area I represent.

Yet, since January 2001, when President Bush took office, Pennsylvania has lost 154,700 manufacturing jobs. And I would say to

my friend from New Mexico, that is not rhetoric, that is people that

can’t put bread on their table anymore. An additional 287,600 people are unemployed in my State.

This suggests very strongly to me—and a great many of my constituents—that regardless of what the travel schedule of the Bush

administration has been, this administration has been bad for the

economy and terrible for jobs. And yet I am not sure what the administration plans to do to address these issues. As near as I can

figure, the basis of the entire Bush economic agenda is to make

these excessive tax cuts permanent and expand free trade agreements.

Well, they made a lot of promises about how many jobs would

be created by their tax cuts, and how many more will occur if we

just make these tax cuts permanent. But I want to mention

154,700 manufacturing jobs have been lost in my State since this

tax-cutting frenzy began.

And as far as calling for more in expanded free trade, it may be

free, but it certainly doesn’t seem to be fair, as it is leading to more

and more outsourcing of our jobs in manufacturing and many other

areas. And some people in this administration have actually said

this is a positive development.

Well, when I consider these issues, I also find myself thinking

about what has been a success story? What have we done to improve the climate in manufacturing? And the first thing that comes

to mind is the Manufacturing Extension Partnership. In Pittsburgh, the MEP has been tremendously successful, helped create

164 businesses and generate $90 million in sales alone, and keep

or create 400 jobs in 2001.

Yet the Bush administration in the middle of this massive manufacturing job crisis has proposed a budget that would slash funding

to the MEP to just 33 percent of last year’s level. So for these reasons and others, I find myself wondering, just what does this Bush

25

administration really have in mind when it consider the status of

our manufacturing base?

I am hoping Secretary Evans can shine some light on just what

the agenda is when it comes to creating jobs and restoring a commitment to our manufacturers——

Chairman BARTON. The gentleman’s time has expired.

Mr. DOYLE. [continuing] in this country. As it stands now, Mr.

Chairman, I really have to wonder.

[The prepared statement of Hon. Mike Doyle follows:]

PREPARED STATEMENT OF HON. MIKE DOYLE, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF PENNSYLVANIA

I want to thank Chairman Barton for holding this hearing today as there are few

issues of greater importance to not only my district but the country as a whole. I

also want to thank Secretary Evans for appearing before us today and I hope, Mr.

Secretary, that you will be able to take the concerns and sentiments that I suspect

will be expressed here back to the Administration and the White House in the hopes

that some changes can be made.

And rest assured, change is what we need because our economy is floundering especially when you look at job losses, the lack of new job creation, and the unemployed and underemployed. I represent Pittsburgh and the surrounding metro area

in the heart of western Pennsylvania where manufacturing and hard work have

been the hallmark of generations.

Based on the amount of visits the President and the Secretary have made to my

district since their administration began, it would seem as though they were really

committed to the residents of the area I represent. Yet since January of 2001, when

President Bush took office, Pennsylvania has lost 154,700 manufacturing jobs.

That’s a truly massive number! Additionally, data from the Bureau of Labor Statistics indicates that there are 287,600 unemployed workers in Pennsylvania which includes 54,400 in the Pittsburgh metro area. This suggests very strongly to me and

a great many of my constituents that regardless of their travel schedule, the Bush

administration has been bad for the economy and terrible for jobs.

And yet, I’m not sure what the administration plans to do to address these issues.

As near as I can figure, the basis of the entire Bush economic agenda is to make

their excessive tax cuts permanent and to expand free trade agreements. Well

they’ve made a lot of promises about how many jobs would be created by their tax

cuts and how many more will occur if all the cuts are made permanent, but like

I mentioned 154,700 manufacturing jobs have been lost in Pennsylvania since their

tax cutting frenzy began. And as far as calling for more and expanded free trade,

it may be free but it certainly doesn’t seem to be fair as it’s leading to more and

more outsourcing of our jobs in manufacturing and many other areas and some people in the administration have actually said that is a positive development.

When I consider these troubling issues, I also find myself thinking about steps

that have been taken to improve the climate for manufacturing and some of the successes we have had. Immediately the Manufacturing Extension Partnership comes

to mind. In Pittsburgh, MEP has been terrifically successful over the years. The

Pittsburgh-based MEP-funded center is Catalyst Connection which shares a mission

with MEP centers throughout the nation to help small and medium-sized manufacturers adopt new processes and technology to allow them to be more productive and

create more jobs. Since Catalyst Connection was begun in 1988, they have helped

over 1,000 local manufacturers, and in all of Pennsylvania the MEP helped 164

businesses generate nearly $90 million in sales and keep or create 400 jobs in 2001

alone. Yet, the Bush administration, while in the middle of this massive manufacturing job crisis, has proposed a budget that would slash funding for the MEP to

just 33 percent of last years level. That’s an approach that simply doesn’t make any

sense and will devastate this highly successful and important program.

Then there’s the steel industry which is also very important to my district and

the country. Less then two years ago, this administration took an important step

by enacting temporary steel tariffs to address the illegal dumping of surplus steel

on our domestic markets. These tariffs were scheduled to remain in place for at

least three years to give the steel industry time to consolidate and recover from the

unfair beating they had been taking. Well we did make some progress in that regard and there was reason for optimism about this industry that is so vital to our

economy and national security. But unfortunately, last December, President Bush

buckled under to threats from our European allies and pulled those tariffs away

26

way too soon and long before the initial three year period was over. Right now, the

steel industry is still standing thanks at least in part to a temporary bubble in high

prices. But that bubble will burst, dumping could resume, and without the industry

having had the chance it deserved to fully recover there’s no telling what will happen. You did the right thing by enacting the tariffs but you’ve made a tragic mistake

by pulling them away too soon.

So for these reasons and others I find myself wondering just what this Bush administration really has in mind when it considers the status of our manufacturing

base. I hear far too many people say that before too long we won’t really make anything in this country anymore and believe me that has serious ramifications, not

only for our economy, but for our national security that this Administration purports to be so concerned about. So I’m hoping maybe Secretary Evans can shine

some light on just what the Bush agenda is when it comes to creating jobs and restoring a commitment to our manufacturers in this country. As it stands right now,

I really have to wonder.

Chairman BARTON. We thank the gentleman.

Mr. BUYER. Mr. Chairman?

Chairman BARTON. Does the gentleman from Indiana wish to

make an opening statement?

Mr. BUYER. I have a—I would like to make a unanimous consent

request.

Chairman BARTON. The gentleman is recognized.

Mr. BUYER. I would ask unanimous consent that members of the

committee submit their opening statements for the record. And for

those who do not give a statement, be added their time in accordance to the rules of the committee.

And the reason I ask unanimous consent request is the Secretary

is here on limited time, and we would—it would behoove all of us

to hear the Secretary.

Chairman BARTON. The gentleman——

Mr. BUYER. So I would make this unanimous consent request.

Chairman BARTON. If the gentleman would withdraw that request—would the gentleman withdraw that request?

Mr. DINGELL. I am reserving the right to object.

Chairman BARTON. The gentleman from Michigan is reserving

the right to object. The gentleman is recognized.

Mr. DINGELL. I believe that the gentleman is seeking a unanimous consent that all members will waive their opening statements. And my concern here is that: a) this is a precedent which

troubles me, and b) I am not sure how members on both sides of

the aisle might feel about this matter.

I will be content to let the members comment on this, if they

wish me to yield. And I also would say, as long as this does not

constitute a precedent, I am willing to consider the matter further.

Chairman BARTON. Would the gentleman yield?

Mr. DINGELL. I would yield to my good friend.

Chairman BARTON. If the gentleman from Indiana insists on his

unanimous consent request, I am going to object to it. I have already asked members to defer, but under the rules every member

has a right to give an opening statement. Some have used that

right; some have deferred, which they will get an additional 3 minutes.

So, you know, we are going to have openness and civility and democracy, and we do hope that we do get to the Secretary at some

point in time this morning, so he can make an opening statement

himself and then take some questions. And I am sure in the question period we are going to have a very good debate about many

27

of the things that Mr. Doyle and Mr. Strickland and Mr. Brown

and Mr. Pallone and Ms. Wilson and——

Mr. DINGELL. I think the Chair has made a good point.

Chairman BARTON. All right.

Mr. DINGELL. And with respect for my good friend from Indiana,

I do object to——

Chairman BARTON. Well, let me give the—before the gentleman—would the gentleman withhold his objection just a second?

Or is that parliamentarily possible?

Mr. DINGELL. I didn’t hear that, Mr. Chairman.

Chairman BARTON. I said can you withhold your objection to give

him a chance to withdraw his——

Mr. DINGELL. I will withhold, certainly.

Mr. BUYER. I don’t want to waste any more time even debating

this.

Chairman BARTON. Would the gentleman withdraw his——

Mr. BUYER. Just stop the pontification.

Chairman BARTON. Did the gentleman withdraw——

Mr. BUYER. I withdraw the unanimous consent request.

Chairman BARTON. The gentleman withdraws his unanimous

consent request.

Mr. BUYER. I am anxious to hear from the Secretary.

Chairman BARTON. All right. Let us see. Now, where were we?

Mr. Doyle had given an opening statement. Is there a member of

the majority who wishes to make an opening statement? Seeing

none, the Chair would recognize Mr. Allen for an—for what purpose?

Mr. ALLEN. To make an opening statement.

Chairman BARTON. The gentleman is recognized for 3 minutes.

Mr. ALLEN. I thank the chairman. And I would only comment

when you get down to my level, Mr. Secretary, the possibility exists

we might not be able to speak to you at all, just because of time

constraints. But I thank you for being here.

When the history of the Bush administration is written, I tend

to think it will be characterized as having been motivated by three

grand obsessions—Iraq, missile defense, and tax cuts for the

wealthiest among us. I believe that two qualities of obsessions is

that those who hold them become impervious to evidence that challenges received opinion; and, second, that it prevents us from focusing on emerging challenges.

The loss of manufacturing jobs in this country is a rapidly growing challenge. And in my view, the administration has no plan that

is adequate to the seriousness of the problem. My home State of

Maine has lost more manufacturing jobs per capita, I believe, than

any other State in the country since the President took office. But

as I said, there seems to be no plan of—adequate to the seriousness

of that problem.

In Maine, we live next to Canada. And our small businesses

know all too well that sawmills in Canada, to take one example,

don’t have to pay for their health care, and they don’t have to pay

for their workers comp. And all across this country health care premiums are rising at a rate that is driving our small business men

and women out of business. They simply can’t compete.

28

And yet, once again, this administration has no plan adequate to

the seriousness of this health care problem that will address what

we are looking at. Instead, this administration has proposed a

budget that reduces funds for job training, reduces funds for vocational education, cuts SBA programs, eliminates the microloan program—small program, but it meant a lot to Maine—and, as my

friend from Pennsylvania has said, reduces the Manufacturing Extension Partnership Program from $110 million to $39 million.

Mr. Secretary, unless we get away from this obsession with tax

cuts for the wealthiest Americans, we cannot devote ourselves to

the real business of figuring out how to help this sector of our economy that is bleeding jobs not just overseas but here as well, and

particularly how we deal with those people who no longer have a

job, and, therefore, have lost their health care and lost their other

benefits when their job goes.

The hard, cold truth is losing a job in this country is much harder, has much more severe consequences, than losing a job in the

rest of the developed world. And I believe this administration needs

to deal with that particular problem.

I thank you for being here.

Chairman BARTON. The gentleman yields back the balance of his

time.

Does any other member on the minority side wish to make an

opening statement?

Mr. COX. Mr. Chairman?

Chairman BARTON. Oh, Mr. Cox, do you wish to make an opening

statement?

Mr. COX. I do. Mr. Chairman, I just wanted to welcome——

Chairman BARTON. The gentleman is recognized for 3 minutes.

Mr. COX. [continuing] the Secretary and respond, because the

Secretary isn’t being given the opportunity yet, to respond to some

of what we are listening to. I think it is important to recognize,

first, we have before us the Secretary of Commerce, not the Secretary of Treasury.

But if people want to raise tax policy, then I think we need to

point out that instead of incessantly repeating this mantra about

tax cuts for the wealthiest Americans, we ought to acknowledge

that is intentionally misleading, because the President cut taxes,

and the Congress cut taxes—tax rates, I should say. Revenues to

the government are way up because of the economic growth it

spurred. We cut tax rates for everybody, and we cut them disproportionately for the lowest bracket.

Over half of the tax benefit goes to the bottom 10 percent bracket. There are disproportionate tax cuts for the least wealthy taxpayers in America, and the Tax Code is more progressive. It is less

flat and more progressive than it used to be as a result of those

tax cuts, and it has created economic growth.

People need to be reminded that we had a recession, and that recession is behind us. And we are creating jobs, and the tax rate

changes either caused that improvement in the economy, or they

certainly didn’t stand in the way of it. But there is no reason to

complain about that.

I think it is also important to point out when we are talking

about jobs that our economy is creating jobs. We don’t have the

29

Secretary of Labor before us. We have the Secretary of Commerce.

But if people want to talk about job statistics, we need to focus on

the fact that the unemployment rate, which by any standard is remarkably low in America right now, is lower than it was during

the 1990’s when everybody’s favorite President, Bill Clinton, was in

charge. It is lower now.

The unemployment rate is lower, and more people work in America right now than at any time in our Nation’s history. So add it

up. Do the math. There are more Americans at work today, more

jobs in America today, than at any time in our Nation’s history in

terms of the total number of jobs. And as a percentage of the total

workforce, the unemployment rate is lower right now than it was

during the 1990’s.

So what part of this math don’t people understand? Now, obviously, you look around the country and it is not the same everywhere. And that is why we are working on policies that create

growth, and that is why I want to compliment the Secretary for

some of what I know we are going to hear from him today.

Thank you for your leadership in helping create certainty in our

economy, so that the tax rate changes that we made are permanent

and people can plan and create jobs. Jobs are not created in an environment of uncertainty and raising taxes.

I think this abundant concern that people have for the pocketbook of the government and the lack of concern they have for taxpayers, particularly as we near April 15, is unbecoming.

Thank you for your leadership on regulatory review and the costs

that regulation imposes on job creation. Thanks for your leadership

in helping lower health care costs. Thanks for helping modernize

the U.S. legal system, which is driving jobs overseas.

Chairman BARTON. The gentleman’s time has expired.

Mr. COX. Thank you very much for all of this, and I thank the

chairman for letting me respond to some of what we heard.

Chairman BARTON. We appreciate that.

Mr. Secretary, before I introduce the next person for an opening

statement, you need to know that Mr. Markey is noted for his

opening statements.

He normally gives a very serious, with a real educational message, but he doesn’t consider it a crime that they also be entertaining and amusing. Now, I am going to put him on the spot and

make a prediction that if anything gets on the 6 news tonight in

the opening statements it is going to be from the next opening

statement, Mr. Markey.

So with that, for 3 minutes, the Honorable Ed Markey of Massachusetts.

Mr. MARKEY. Thank you, Mr. Chairman. I could actually sing

you my song that I sang on St. Patrick’s Day in Boston, but I think

at this point I will spare you.

The point—to my friend from Indiana, Mr. Buyer, just so you understand how we view it on this side, this will be the only appearance of the Secretary of Commerce in his 4 years as Secretary of

Commerce before the Commerce Committee. And so since he is

only going to be testifying from 20 past 10 in the morning until

12:30, you can imagine where out of 4 years——

Chairman BARTON. Hopefully he will get to testify.

30

Mr. MARKEY. Yes. Well, I appreciate that. But out of 4 years, to

give us 2 hours and 10 minutes on the committee of jurisdiction

over the Commerce Committee is something that, you know, it does

kind of test the patience of our side, because there are so many

questions that we feel he could be answering to us and through us

for the American people. So that is our perspective on it. Two hours

and 10 minutes out of 4 years just isn’t enough time.

So we are going to be respectful of the Secretary here today, because he says he has more important things to do. But over the

course of 4 years, we do wish that there had been more time given

to us.

Mr. Secretary, my home State of Massachusetts lost 9,500 jobs

last month. Since 2001, we have lost a total of 200,000 jobs, and

unemployed workers in Massachusetts now can expect to be out of

work an average of 5 months—the longest average period of unemployment in 20 years. Nationwide there are 8.2 million jobless

Americans, and 3 million fewer private sector jobs than there were

just 3 years ago.

As many Americans try to make ends meet, the outsourcing of

jobs overseas has received considerable attention. Less notable, but

also troubling, is the growing practice of offshoring American private medical and financial information to less developed countries

such as India and Pakistan, where the information is processed for

U.S.-based firms.

These countries lack the privacy safeguards that are in place

when records are processed in the United States, and U.S. privacy

standards are not enforceable overseas. And offshoring of information, as it increases, Americans are losing their jobs and their privacy in one fell swoop.

When American companies send private information overseas,

they are telling consumers, ‘‘Check your privacy at the shore.’’ Last

year, a worker in Pakistan who was transcribing medical files for

a California hospital threatened to post the confidential records on

the Internet unless she received money that she claimed was owed

her. She backed up the threat by attaching two patient files to an

e-mail warning that she sent to hospital officials.

The San Francisco Chronicle has reported that 2 of the 3 major

credit reporting agencies, each holding detailed files on about 220

million U.S. consumers, are in the process of outsourcing sensitive

operations abroad, and a third may follow suit. So while your credit

cards stay safely in your wallet, your credit reports travel the

world, racking up frequent flyer miles as you sleep.

I have requested from the Bush administration their policy on

how we are going to protect privacy overseas. I have yet to receive

an answer from the Bush administration on this issue. I don’t

think there is a more sensitive issue to all Americans, regardless

of party, than what happens to their financial and medical records

as they are shipped overseas into the hands of people that are not

under U.S. law.

And I think the American people deserve an answer to that question. I thank the chairman very much.

Chairman BARTON. The gentleman’s time has expired.

Any other—the gentlelady from Illinois, Ms. Schakowsky, is recognized for 3 minutes.

31

Ms. SCHAKOWSKY. Thank you, Mr. Chairman. And I thank

you——

Chairman BARTON. Let me say the distinguished and gentlelady.

I have gotten in a bad habit of just saying gentle when I say the

females, and I say distinguished for the males. So the distinguished

and gentle——

Ms. SCHAKOWSKY. You are taking my time, Mr. Chairman.

Please——

Chairman BARTON. I am not going to count this against you.

Ms. SCHAKOWSKY. Thank you very much, Mr. Chairman, my distinguished chairman.

And I thank you, Mr. Secretary, and I appreciate the opportunity

to tell you that something you said yesterday really offended me,

and I wanted to just ask you about it. Economic isolationists—

words that you used to characterize people who are very concerned

about exporting jobs overseas—economic isolationists are waving a

surrender flag rather than an American flag.

And I have been feeling for a long time that those individuals

who disagree with policies of this administration—and you are entitled to your views, and we are entitled to ours—are characterized

often as unpatriotic, as appeasers, and now as waving a flag of surrender.

And I am offended by that on behalf of Jeanette, someone in Illinois who lost her job when McCloud USA Publishing exported 278

of its jobs to India. I don’t think she is an economic isolationist.

Or what do you call hardworking Americans like Ralph, who

worked hard his whole life and lost his job when Premier Auto Finance closed its doors in the Bush economy, whose unemployment

benefits are going to end soon, since the Bush administration has

refused to extend them, and who is faced with the daunting prospect of now losing his health care. I don’t call him an isolationist.

I call him a hardworking patriot.

Or what about the one out of six manufacturing jobs that has

been lost in the State of Illinois during the Bush economy? One

hundred thirty-nine thousand, just manufacturing jobs, a total

number of 258,000 jobs.

In January 2004, Mr. Secretary, there were 25 percent more people unemployed in Illinois than in January 2001. These are hardworking Americans. These are patriots. These are people who are

concerned about exporting our jobs overseas. These are not people

waving a flag of surrender rather than an American flag. These are

people who proudly salute our flag, whose children pledge their—

to their flag every morning in school and whose parents are out of

work right now.

I think it is so wrong to characterize people who accept—who

embrace our country, our great Nation, want full employment, as

somehow less than full Americans, and that we are waving some

sort of flag of surrender. Your administration said that—the President said that in 2001 the tax cuts would create 800,000 more jobs

by the end of 2002.

In February, the claim was that new tax cuts would create

510,000 new jobs in 2003; 891,000 new jobs in 2004. We have lost

2.3 million jobs. I think that our—this administration needs to be

held accountable for the loss of 2.3 million jobs, a net loss rather—

32

in the private sector rather than talking about how the state of

American industry is strong or the resilience of the American economy when so many people are suffering right now, patriotic Americans who are suffering.

Mr. Secretary, I thank you.

Chairman BARTON. The gentlelady’s time has expired.

Is there any other individual who wishes to make an opening

statement? The gentlelady from California, Ms. Solis, is recognized

for 3 minutes.

Ms. SOLIS. Thank you. Thank you, Mr. Chair.

And thank you, Mr. Secretary. I would like to request unanimous

consent to submit my testimony, but I also would just like to make

a few comments.

Chairman BARTON. Without objection.

Ms. SOLIS. And briefly, Mr. Secretary, I know that you are involved in overseeing many aspects of our commerce in our country.

And, yes, with respect to jobs and the economy, in my district alone

in California we have lost over 20,000 jobs. Unemployment rates in

my district are a scathing 9 percent. They have been that way for

the last 3 years.

We have many working families who don’t have insurance. They

don’t have medical insurance. They are very concerned about the

fact that the new prescription drug benefit program that was voted

upon will not allow for us to negotiate lower prices for medicines.

We have people that are telling me, Congresswoman, ‘‘Who is

going to protect us, then? If these pieces of legislation are going

through, who are going to be the valiant folks to stand up for us?’’

I have a problem also with respect to the loss of jobs that are being

outsourced.

One of my small companies in the area of Covina, which was previously represented by another Member of Congress, lost 110 employees. Their jobs are gone out of this country. With NAFTA used

as something to provide an incentive some years ago, that we

would somehow see growth in our country as well as abroad, and

in Mexico in particular, I have yet to see that.

I understand there are over 850,000 jobs that were lost because

of NAFTA. And on a recent trip that I had Ciudad Juarez in Mexico, the maquilas—the U.S. maquilas that went down there to provide opportunities for people there to earn $30, a grandiose number—$30 a week—have now—half of those maquilas have left.

They have gone to China.

What happens to those folks, then, that want to try to find some

meaningful way of having salaries that would provide for them?

They try to cross the border. So what is it that we are doing with

NAFTA that isn’t working? Now we are changing another page and

going into NAFTA plus, which is CAFTA, going to Central America

where, again, we are looking at cheap labor, labor probably only

providing an incentive of maybe less than half of what they earned

in Mexico for jobs in Nicaragua and El Salvador.

Those jobs we are losing because the needle trades, textiles, and

other manufacturers here have lost those jobs to those parts of our

hemisphere. And I worry, because in my district where we have 60

to 70 percent Hispanic population, hardworking folks, that someVerDate 11-MAY-2000 13:38 Jun 17, 2004 Jkt 000000 PO 00000 Frm 00036 Fmt 6633 Sfmt 6602 93299.TXT HCOM1 PsN: HCOM1
33

how the hope and the dream of a recovery here in this country is

not real for them.

Unemployment rates for the Hispanic population across the

country has been a staggering 7.4 for the last 3 years. It has not

changed. It has gotten worse for people of color in my district, and

people who work hard who think that they should be able to have

some dignity in the United States. So I ask you to contemplate

those questions, and I will submit my statement and some other

questions.

[The prepared statement of Hon. Hilda L. Solis follows:]

PREPARED STATEMENT OF HON. HILDA L. SOLIS, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF CALIFORNIA

Thank you Mr. Chairman. I also want to welcome Secretary Evans to the Committee today and to thank him for joining us for this important hearing.

The issue that I hear about most often when I return home to my district every

weekend is the economy. For three years, I have watched as unemployment in every

one of the cities I represent in Los Angeles County has risen steadily. In some areas

of my district, particularly in East Los Angeles, South El Monte, and El Monte,

areas with large Latino populations, the unemployment rate has hovered near or

over 10%, well above the national average. In fact, the unemployment rate among

Latinos nationwide, now at 7.4%, has increased a remarkable 28% since President

Bush took office.

In total, over 20,000 of my constituents are currently looking for work. Many of

them have been unemployed for a long period and have exhausted their jobless benefits. Even those that are fortunate to find work are bringing home paychecks that

are sizably less than what they received at their old jobs.

The trade and tax policies of the Bush Administration are not creating muchneeded jobs.

As our manufacturing industry continue to bleed jobs, President Bush continues

to aggressively pursue free trade agreements that exacerbate our job loss problems.

These agreements fail to include basic labor and environmental standards. Without

such standards, especially in the context of a trade agreement with Central American nations where labor standards are so poor and so rarely enforced, we continue

to provide incentives to companies to move jobs out of the United States.

The North American Free Trade Agreement has been a disaster for our economy,

contributing to the loss of over 850,000 well-paying American jobs. It has also led

to a half a trillion-dollar trade deficit that is spiraling out of control and creating

more job loss. In my own district, the Medsep Corporation in Covina had to layoff

110 employees last year because of competition from imported goods. CAFTA, or as

I call it, NAFTA-plus, would have a similar effect on our economy.

The Bush Administration has called outsourcing ‘‘a positive development.’’ I don’t

see anything positive about putting hard working Americans out of work and onto

unemployment lines. While the Bush Administration may be surprised at our economy’s low job creation level, my constituents are not. For them, the distressed state

of our economy and its devastating impact are a reality.

Each day in this country, 85,440 workers lose their jobs. With a record 8 million

Americans looking for jobs, I’m left to wonder how many workers must lose their

jobs before President Bush begins to seriously evaluate our nation’s economic policies. In this regard, I look forward to hearing from Secretary Evans about any plans

President Bush might have to spur job growth and put Americans back to work.

Thank you.

UNEMPLOYMENT—32nd DISTRICT

As of March 11, 2004

FEBRUARY 2004

CITY UNEMPLOY. RATE # of UNEMPLOYED # of UNEMPLOYED

(Jan. 2001)

Azusa ..................................................................................................... 6.9% 1,540 1,280

Baldwin Park ......................................................................................... 7.0% 2,310 1,920

Covina ................................................................................................... 4.4% 1,100 910

Duarte ................................................................................................... 5.3% 570 480

34

UNEMPLOYMENT—32nd DISTRICT—Continued

As of March 11, 2004

FEBRUARY 2004

CITY UNEMPLOY. RATE # of UNEMPLOYED # of UNEMPLOYED

(Jan. 2001)

East Los Angeles .................................................................................. 9.6% 5,160 4,800

El Monte ................................................................................................ 7.8% 3,900 3,240

Irwindale ............................................................................................... 5.8% 30 20

Rosemead .............................................................................................. 7.0% 1,700 1,410

South El Monte ..................................................................................... 9.6% 950 790

West Covina .......................................................................................... 4.1% 2,180 1,810

NATIONAL UNEMPLOYMENT RATE (FEB. 2004): 5.6%

Source: State of California, Employment Development Department, March 11, 2004

Chairman BARTON. Without objection, so ordered.

Ms. SOLIS. Thank you.

Chairman BARTON. Does the gentleman from Tennessee wish to

make an opening statement?

Mr. GORDON. Yes. Thank you, Mr. Chairman.

Chairman BARTON. The gentleman is recognized for 3 minutes.

Mr. GORDON. Mr. Secretary, thank you for being with us. I know

that it is not particularly pleasant to sit here and be lectured to.

But all of us go home, we see our friends, our neighbors, our constituents that are either out of work, but more likely they are underemployed rather than unemployed. And we see the pain that it

really creates to these families.

And I know that you certainly would like to see a reversal of this

loss of jobs, too. I mean, you do not wish anything bad on anybody.

I know that. And that is why after the President unveiled his manufacturing initiative earlier this year I expected that the budget

would contain some thoughtful new initiatives in this area.

Instead, the administration has proposed yet again to eliminate

the Advanced Technology Program, and to slash the Manufacturing

Extension Partnership—the only Federal programs explicitly designed to help manufacturers. And these are not wise proposals at

a time when U.S. manufacturing is in crisis.

The ATP and MEP programs are effective tools for economic

growth and job creation. They have provided thousands of small

and medium firms across the Nation with technical assistance and

business support services they need to compete globally. The Manufacturing Extension Partnership was selected by Harvard University, Institute of Government Administration, as one of the Nation’s

most creative, forward-thinking, result-driven government programs, yet the administration cut the MEP program by $72 million

this year. And that is a 65 percent cut to a program that has

helped small manufacturers create jobs.

The MEP is one of the few Federal programs that every Federal

dollar leverages $2 additional in State and private sector funding.

This is a unique partnership with local government and the private

sector that works and keeps Americans working.

In FY2002, companies using MEP assistance reported $2.3 billion in sales, $681 million in cost savings, $940 million in investments and plant modernization, and 35,000 jobs as a result of their

MEP projects. The return in the Federal investments of MEP centers is $4 in Federal tax revenues for every $1.

35

At a Science Committee hearing last summer, one small business

manufacturer summed it up in a nutshell. Although tax—he said,

‘‘Although tax policies that encourage investment surely helps, it

does not directly respond to what is happening.’’ His recommendation: substantially expand ATP and MEP program. All of the other

panelists agreed.

And, Mr. Secretary, let me tell you that this is a bipartisan feeling, at least on the Science Committee. We have jurisdiction of this

program. We see that it works. The administration has zeroed it

out the 2 previous years. Congress puts money back in because it

is important. At least you allowed us, I guess, that same level, but

it is a phaseout level.

Make no mistake about it. It is a phaseout level, and what is

going to happen is it is going to undermine this network, and all

50 States that it has been set up. It is going to be like Humpty

Dumpty.

Chairman BARTON. The gentleman’s time has expired.

Mr. GORDON. Once that network has been undermined, you can’t

put it back together. I hope you will reconsider.

Chairman BARTON. Okay. Does any other member that has not

had an opportunity wish to have a 3-minute opening statement?

Seeing none, all members’ opening statements will be made a part

of the record.

[Additional statements submitted for the record follow:]

PREPARED STATEMENT OF HON. MICHAEL BILIRAKIS, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF FLORIDA

Mr. Chairman, thank you for holding this very important hearing on the state of

industry in the United States. I also want to welcome Secretary Evans and to express my appreciation for his willingness to appear before this Committee to talk

about issues impacting American businesses and consumers.

Mr. Chairman, I am pleased to see that the economy is recovering and new jobs

are being created in the United States every week. The outlook today is better than

it was a few years ago, and I want to commend President Bush, Secretary Evans,

and my congressional colleagues for enacting policies which I believe have led to the

growth in job creation and consumer spending and the drop in the rate of unemployment.

However, I am still very much concerned about maintaining the United States’

competitiveness in the global marketplace and ensuring that America’s businesses

continue to grow.

Like many of my colleagues, I have heard from many constituents who have expressed very real concerns about the outsourcing of American jobs to overseas operations. They simply cannot understand—and I tend to agree with them—why companies are choosing to relocate jobs offshore when there are many Americans right

here at home wanting to work and having difficulty finding gainful employment.

Outsourcing doesn’t make sense to them. I look forward to hearing what the Administration is doing and how Congress can act to encourage these companies to keep

manufacturing and information technology jobs here in the United States.

As Chairman of the Health Subcommittee, I also am extremely concerned about

the impact rising health care costs has on manufacturers and small businesses. This

Committee and the House have recognized the importance of controlling rising

health care costs by passing medical liability reform legislation and creating association health plans. Unfortunately, the Senate has not been able to address these

issues.

I appreciate the Administration’s support for reforming our nation’s tort system,

particularly as it relates to capping punitive damages for medical malpractice

awards, and for creating association health plans. I am eager to hear from Secretary

Evans what additional initiatives Congress and the Administration should undertake to further address the skyrocketing costs of health care.

I also have concerns about trade issues affecting the U.S. steel industry. For many

years, I have been working hard with my colleagues in the Congressional Steel CauVerDate 11-MAY-2000 13:38 Jun 17, 2004 Jkt 000000 PO 00000 Frm 00039 Fmt 6633 Sfmt 6621 93299.TXT HCOM1 PsN: HCOM1
36

cus to stem the tide of bankruptcies, layoffs, closures, and illegally imported steel.

In reference to ‘‘The Presidential Determination on Steel’’ issued in December 2003,

I am interested to hear what assurances Secretary Evans can offer regarding the

expansion of the steel import monitoring and licensing system to include steel products that were not subject to 201 tariffs and quotas.

Mr. Chairman, these issues are important to my constituents and to the health

of the American system of enterprise. We have made great strides in the past two

years in growing our economy, but Congress and the Administration should do more

to promote American goods and services and ensure that we maintain our country’s

advantage in worldwide markets. I look forward to hearing Secretary Evans’ perspective on the issues I have raised today.

Thank you, Mr. Chairman.

PREPARED STATEMENT OF HON. CHARLIE NORWOOD, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF GEORGIA

Thank you Mr. Chairman. I want to extend a special welcome to Secretary Evans,

we sure do appreciate you being with us today.

Let me start by saying I appreciate Chairman Barton holding this hearing today

to focus on the state of our country’s manufacturing industry. Many of our great

manufacturers have roots in Georgia and I am proud to represent them. I have

taken the time to sift through the Commerce Department’s strategic plan to promote

U.S. trade and the industry. For the most part I must say I am pleased with your

suggestions, but I have some concerns that I’d like the Secretary to address.

Your report expresses the need to enforce trade agreements and combat unfair

trade practices. I couldn’t agree more, and let me just say that I have been extremely disappointed with the lack of action on a number of these unfair practices.

For starters, there’s the problem of China manipulating their currency. The undervalued yuan has contributed to our trade deficit with China, which has risen

from $30 billion in 1994 to an estimated $126 billion in 2003. It has also hurt U.S.

production and employment in several U.S. manufacturing sectors, especially textiles, because they are forced to compete domestically and internationally against

artificially low cost goods from China. Can we expect you to take action on this in

2004?

Strengthening the U.S. Patent system is also important and holding our trading

partners to the same laws is also vital for our industries to grow. One case where

that is not happening and could prove to be devastating if not fixed is with the rug

and carpet industry. Again, another one of our great industries with strong roots

in Georgia. The U.S. carpet industry produces 45% of the world’s carpet and is a

$12 billion per year presence at the mill level. Mills produce almost 2 billion square

yards of carpet annually in 230 plants located across 21 states with a workforce in

excess of 70,000 employees. In Georgia, 80% of this domestic industry is located

within a 65-mile radius of Dalton.

Despite these robust numbers and significant economic footprint, the carpet and

rug industry faces tremendous challenges from abroad. By far the most immediate

problem facing the carpet and rug industry is the theft of intellectual property

rights, primarily from China and India. Can we expect you to take action on this

in 2004?

Mr. Secretary, you will be receiving a letter shortly signed by many members of

the Georgia delegation asking you, in conjunction with the U.S. Trade Representative, to give a renewed priority to intellectual property theft in the context of the

upcoming DOHA Trade Round and as additional bilateral or regional trade agreements are pursued by the government.

I also have grave concerns about outsourcing. And my concerns came long before

‘‘60 Minutes’’ reported that credit card companies moved their telephone banks to

India. I want to hear from you that we insource more than we outsource.

There is much more I could say about trade, but let me change subjects for just

a moment and make a comment on your health care suggestions. Mr. Secretary, I

know you support AHPs. I could be convinced to support AHPs; all you have to do

is fix them so AHPs can’t discriminate against sick people.

With that Mr. Chairman I thank you for the time and will yield back.

PREPARED STATEMENT OF HON. BARBARA CUBIN, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF WYOMING

I’m pleased that Secretary Evans has joined us today to discuss the state of U.S.

industry. You know as well as I, Mr. Secretary, that there isn’t an area of this counVerDate 11-MAY-2000 13:38 Jun 17, 2004 Jkt 000000 PO 00000 Frm 00040 Fmt 6633 Sfmt 6621 93299.TXT HCOM1 PsN: HCOM1
37

try that doesn’t feel the impact of the Commerce Department. From telecommunications and trade to patents and economic development, the proper stewardship of

this department is crucial to a strong America.

That’s why I appreciate your coming before the Committee today. There are a lot

of allegations swirling about in a presidential election regarding jobs, the economy,

and just who deserves the credit or blame for any—or all—of it. During your testimony I would appreciate your assessment of these allegations, and make certain

that policy debates, especially those surrounding an election, are factually based.

Like my friend from Wyoming, former Senator Al Simpson, says, ‘‘a charge unanswered is a charge believed.’’

I would also appreciate your comments about the Manufacturing Extension Partnership (MEP). I know it was covered in the Manufacturing in America report the

Department of Commerce published in January, but I would like to get a better

handle on what the Administration is proposing absent this important funding.

I can tell you that I was visiting with several small manufacturers from Wyoming

last week, and to a man they explained how the MEP program benefitted their companies and provided jobs and revenue to their communities and the state. After all,

Wyoming isn’t home to manufacturers like Boeing or General Motors, but rather

folks filled with the Wyoming ‘‘can do’’ spirit who find a special niche or have an

innovative idea, but lack the capital to bring it to market, or produce it more efficiently.

I thank you in advance for delving into these matters and look forward to hearing

what you in the Administration and we in Congress can do to keep a steady hand

on the wheel and not pursue disincentives to further economic growth.

I yield back the balance of my time.

PREPARED STATEMENT OF HON. MIKE ROGERS, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF MICHIGAN

Mr. Secretary, thank you for taking the time to meet with us today. I know that

the title of today’s hearing is ‘‘The State of U.S. Industry’’, but I would suggest that

Jobs, Jobs, Jobs would also be an apt title.

In Washington we do a funny thing. We say that jobs are an issue, but then when

it comes time to debate a piece of legislation we rarely talk about jobs. Instead we

say, this is not a jobs bill, this is an energy bill. We say this is not a debate about

jobs, this is a debate about tort reform. Rarely is the question asked, how can we

help someone who wants work find it.

Mr. Secretary, you have asked that question, and you know the answer. You know

that taxation, regulation, litigation, and health care costs are killing American jobs.

You know that these issues are not separate conversations; they are all part of one

debate about the future of a competitive American worker. You know that if American workers and American manufacturing are going to compete in a world market

than we will have to tackle all of these things.

Mr. Secretary, some people will disagree with you. They will say that wages are

the only thing causing us to be uncompetitive. Mr. Secretary, their argument is a

Trojan horse. It allows them to hide from real issues, over which they could really

have an effect.

And so, Mr. Secretary, before my colleagues give up on the American worker, before they embrace protectionism and make-work government jobs, I would ask them,

has Congress done all it can do? Have we lifted the weights being placed on the

backs of American workers? What have we done to tame the gang of regulators trying to shut down factories? What have we done to slow the pack of lawyers milling

around job sites encouraging someone to sue?

Mr. Secretary, you are trying to do something. For that I thank you, and I look

forward to working with you on behalf American Industry, and American jobs.

PREPARED STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF ILLINOIS

Good morning. Thank you Mr. Chairman for holding this hearing regarding the

State of the U.S. Industry with Secretary Evans. I look forward to hearing Secretary

Evans statements on how the U.S Industry is performing.

I would like to start out by thanking Secretary Evans for taking time to come before the committee and I appreciate his leadership. I would also like to extend my

thanks to the Secretary for the creation of a DOT KIDS website through the National Oceanic and Atmospheric Administration or NOAA. I am always happy to see

another Dot kids website created. As many of us know, Dot kids is a wonderful reVerDate 11-MAY-2000 13:38 Jun 17, 2004 Jkt 000000 PO 00000 Frm 00041 Fmt 6633 Sfmt 6621 93299.TXT HCOM1 PsN: HCOM1
38

source for our children to have, so they can safely look on the internet without the

danger of inappropriate sites.

Next I would like to focus on manufacturing. In my District alone there are some

500 manufacturers. Companies like Continental Tires and Hella North America,

who was in the hearing last week, are doing good things and creating and maintaining jobs. A lot of these small to medium sized manufacturers rely on Manufacturing

Extension Partnerships (MEPs). MEPs have helped create many success stories

throughout Illinois and the rest of the country and I appreciate all the help they

give manufacturers.

Even with the guidance of the MEPs there still has been job loss and I look directly at the high energy prices and some of our state tax proposals on trucking and

natural gas to be the reason for this job loss. An estimated 85,000 jobs have been

lost by US chemical makers since natural gas prices began to rise in mid-2000. If

we can’t get natural gas at an affordable price, more and more of our production

facilities will be forced to pack up and leave the country. According to the US Department of Commerce, America loses 12,389 jobs for every billion we spend on imports. At today’s oil prices, that means America is sending more than 1.7 million

jobs overseas every year. In 2003 alone, the US sent more than $100 billion overseas

to import oil from foreign nations. The energy bill will help create or maintain over

156,738 full-time and part-time jobs in Illinois alone. Those are hard numbers to

argue with.

I am very interested to hear the testimony of Secretary Evans and look forward

to working with him in the future. I yield back the remainder of my time.

PREPARED STATEMENT OF HON. MIKE ROGERS, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF MICHIGAN

Mr. Secretary, thank you for taking the time to meet with us today. I know that

the title of today’s hearing is ‘‘The State of U.S. Industry’’, but I would suggest that

Jobs, Jobs, Jobs would also be an apt title.

In Washington we do a funny thing. We say that jobs are an issue, but then when

it comes time to debate a piece of legislation we rarely talk about jobs. Instead we

say, this is not a jobs bill, this is an energy bill. We say this is not a debate about

jobs, this is a debate about tort reform. Rarely is the question asked, how can we

help someone who wants work find it.

Mr. Secretary, you have asked that question, and you know the answer. You know

that taxation, regulation, litigation, and health care costs are killing American jobs.

You know that these issues are not separate conversations; they are all part of one

debate about the future of a competitive American worker. You know that if American workers and American manufacturing are going to compete in a world market

than we will have to tackle all of these things.

Mr. Secretary, some people will disagree with you. They will say that wages are

the only thing causing us to be uncompetitive. Mr. Secretary, their argument is a

Trojan horse. It allows them to hide from real issues, over which they could really

have an effect.

And so, Mr. Secretary, before my colleagues give up on the American worker, before they embrace protectionism and make-work government jobs, I would ask them,

has Congress done all it can do? Have we lifted the weights being placed on the

backs of American workers? What have we done to tame the gang of regulators trying to shut down factories? What have we done to slow the pack of lawyers milling

around job sites encouraging someone to sue?

Mr. Secretary, you are trying to do something. For that I thank you, and I look

forward to working with you on behalf American Industry, and American jobs.

PREPARED STATEMENT OF HON. C.L. ‘‘BUTCH’’ OTTER, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF IDAHO

Thank you, Mr. Chairman, for conducting this hearing on such a timely issue.

As the economy recovers, it’s more important than ever that Congress works to

create a climate for businesses large and small to thrive. Job growth depends on

it. This administration already has made great strides toward improving the business climate here in the United States. The tax relief initiatives of 2001 and 2003

were essential to setting the stage for job creation, and they need to be made permanent.

Over the past year we have watched the robust impact of tax relief on our nation’s

economy. Yet despite the record growth rate of 2003, too many Americans are still

pounding the pavement in search of a job rather than earning an income for their

39

family. We hear a lot these days about how American jobs are being moved overseas. What many people fail to see, however, is the inhospitable business environment here in the United States that’s led to some of those moves.

How can we expect America’s bright and successful entrepreneurs to keep their

enterprises here at home when we burden them with over-regulation and the

world’s only double-taxation on corporate income? The exportation of American jobs

is the fault not of savvy American corporations but of an unfriendly corporate tax

system and overzealous bureaucracy.

We all want a clean environment and a safe work place, but a one-size-fits-all,

top-down regulatory approach isn’t the way to get there. America is a nation with

vast natural resources. But our government-knows-best approach has turned us into

a country importing more and more of its minerals, watching its forests burn while

importing logs to build homes, and losing good, high-paying jobs in rural areas to

foreign countries that recognize the importance of a domestic natural resources industry.

Our failure to enact a national Energy Policy is another reason we’re exporting

American jobs. Rather than drilling for oil and gas on our public lands, we’re becoming more dependent on foreign energy sources. America’s energy production jobs are

being sent oversees, which increases energy prices, reduces the stability of supply

and increases the cost of doing business here at home. At the same time, our failure

to address energy infrastructure concerns inhibits potential growth and threatens

more of the kind of devastating blackouts we experienced last summer, with the attendant economic consequences.

An abundant and reliable energy supply is an absolute necessity for America’s

continued economic recovery. The Energy Policy Act approved by the House last

year would go a long way toward achieving that goal.

I’d like to welcome Secretary Evans to the Committee and I look forward to hearing his views on the state of U.S. Industry. Thank you Mr. Chairman.

PREPARED STATEMENT OF HON. JOHN SULLIVAN, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF OKLAHOMA

Thank you, Chairman. Thank you for calling this most important hearing. Secretary Evans, thank you for coming to share the state of U.S. industry with the

Committee. As we all know, the state of the U.S. manufacturing sector is in a precarious state. In my district alone, we have lost 1,700 manufacturing jobs in the last

year. However, the economy is on the rebound.

A recent survey of U.S. manufacturers found that far more manufacturers are

planning to add jobs, than to cut them. This year is forecast to be the biggest increase in production since 1999, according to the National Association of Manufacturers.

We need to create the conditions for economic growth and manufacturing investment. Nobody knows better than the manufacturers themselves about what needs

to happen to bolster the sector. A recent report sponsored by American manufacturers clarified that many of these proposals were necessary to further economic

growth:

• Making the tax cuts permanent

• Making health care costs more affordable for families and small businesses;

• Reducing frivolous and junk lawsuits;

• Making Federal regulations less burdensome on small businesses;

• Enacting a national energy policy that ensures a more affordable and reliable supply of energy, and makes us less dependent on foreign energy sources; and

• Opening foreign markets to American products and services

I would like to submit this study for the record.

According to the ISM survey released this month, manufacturing purchasing managers reported expanding employment for the fourth consecutive month in February.

We must lower the cost of manufacturing in the United States. Through AHP’s

we can lower health care costs for small manufacturers. I believe we should conduct

a regulatory review. Inventory existing regulations, evaluate and implement reforms, and review the act of new rules. It is also critical that we enact energy legislation. We must increase the reliability and affordability of electricity, facilitate adequate and economical supplies of natural gas, and encourage further research and

development in new energy technology.

I have consistently supported the manufacturing sector and will continue to do

so.

Manufacturing is a cornerstone of the American economy. Approximately one out

of every five factory jobs is due to manufacturing exports. Some today would like

40

to play politics with this issue rather than take a hard look at what we need to accomplish. People’s jobs and livelihoods are at issue; let’s take an honest look at how

we can improve the situation. We have started to give manufacturing the tools it

needs to survive AND thrive, including AHP’s, tax credits, and trying to reduce the

bureaucratic burden on manufacturers. Now we need to finish the job.

I yield back.

41

42

43

44

45

46

47

48

49

50

51

52

53

54

55

56

57

58

59

60

61

62

63

64

65

66

67

68

69

PREPARED STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF ILLINOIS

Thank You Mr. Chairman: I am pleased that we are having this timely hearing

on the State of U.S industry. Although I am not an economist nor a doctor , it does

not take much to see that the U.S. industry is hemorrhaging. More than 146,000

jobs were lost last year. Unemployment rates are on the rise. Manufacturing jobs

have been cut or sent overseas (139,000 jobs to be exact in my state—Illinois). Yet

we are hearing conflicting reports from our President that the economy is rebounding. Last year the White House promised that their tax cuts, favoring the wealthy,

would create 306,000 jobs a month. That did not happen. But what has happened,

the economy produced a job gain of 21,000. 285,000 to be exact—below the projected

monthly increase. What has happened is that there are now more than 8.2 million

Americans unemployed and 34 millions Americans, including 12 million kids that

live below the poverty line.

Again, I am not an economist but we can all see that the U.S. economy is in dire

straits, undergoing a lengthy downturn, high unemployment, a fall in real wages,

declining family incomes, and extensive job losses. What we need is obvious, more

jobs, lower unemployment and more wage growth. How we accomplish this is the

million dollar question. But it is clear that this cannot be accomplished by the U.S.

industry outsourcing good U.S. manufacturing jobs overseas nor by instituting further misguided tax cuts that favors the wealthy.

That said, I look forward to hearing the views of Secretary Donald Evans on how

best we can strengthen the state of U.S. industry.

PREPARED STATEMENT OF HON. ELIOT ENGEL, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF NEW YORK

Thank you Mr. Chairman. Mr. Secretary, welcome and thank you for your time.

As you may know I started out as a school teacher. I believed that setting clear,

but high, standards was important for my students to succeed. I believe most Americans do the same for their Presidents and the Administration.

When I look at the goals that this Administration has set—a stronger economy

and more jobs, I can only come to the conclusion that the policies being pursued

are a failure. As a teacher, I would have to grade these policies as an F. I believe

most Americans would too.

The basic concept has been a return to a failed economic theory of trickle down

economics. I believe the data is clear—tax cuts for the super rich do not result in

more economic activity.

We don’t have a stronger economy.

We don’t have more jobs.

What we do have is an ever growing debt that will be passed onto our children.

The Preamble of the Constitution says ‘‘We the people of the United States, in

order to form a more perfect union, establish justice, insure domestic tranquility,

provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity . . .’’

OUR POSTERITY!

How can we look at our children and grandchildren and say we are promoting

their general welfare? We are leaving them an economic time-bomb!!! Seven trillion

dollars in debt. Every American now carries a burden of $24,326.36. Just this year

alone we will spend $340 billion on interest for this debt.

Job creation remains a problem as well. But instead of pursuing successful strategies, this Administration has ignored them. In fact, it has pursued policies that encourage shipping jobs overseas.

In the case of the Manufacturing Extension Program, funding has fallen from

about $100 million to $39 million. This is a small program—but it has helped create

many jobs.

History tells us of when the Irish would seek a job, they would see a sign in the

window that said ‘‘NINA.’’ It meant ‘‘No Irish Need Apply.’’ I can sum this Administration’s policies up in a similar phrase—NANA—No Americans Need Apply.

I yield back.

Chairman BARTON. And with that, we want to welcome the distinguished Secretary of Commerce, the Honorable Don Evans from

Midland, Texas, my good friend, good friend of the President, and

good friend of the American people, a man who has done an outstanding job as Secretary of Commerce, takes his job seriously, and

70

agreed to come to the committee today knowing that the issues to

discuss are of a very important and sensitive nature, but need to

be debated and need to have a dialog.

Mr. Secretary, your written statement is put into the record in

its entirety, and we recognize you for such time as you may consume to elaborate on that opening statement. Welcome to the Energy and Commerce Committee.

STATEMENT OF HON. DONALD EVANS, SECRETARY, UNITED

STATES DEPARTMENT OF COMMERCE

Mr. EVANS. Thank you so much, Mr. Chairman, and to the dean

of the House. Thank you also, my friend, for the invitation to testify.

I look forward to working with you and this entire committee to

strengthen the environment that will enable U.S. businesses to

continue to succeed in the global economy. And I strongly believe

that businesses are at the strategic center of any civil society.

In America, businesses provide paychecks to 138 million workers,

paychecks that allow people to support their families, educate their

children, and plan for their future. America’s economy is an amazing engine, creating opportunities, jobs, and the most advanced

products in the world.

As a Nation, we are blessed with an abundance that testifies to

the genius of the free enterprise system, the talents and discipline

of our workforce, the vision of our innovators and entrepreneurs,

and the job-creating drive of small business owners all across

America.

With only 5 percent of the world’s population, the U.S. economy

accounts for one-third of the global economy. The United States remains far and away—far and away—the largest producer of manufactured goods in the world. Standing alone, our manufacturing

sector would be the fifth largest economy in the world.

America is the global leader in services, retaining a significant

advantage in banking, insurance, telecommunications, information

technology, and health care. This administration took office on the

bust side of a boom-bust cycle. In fact, 1.78 million jobs were lost

by the end of 2001, our first year.

This was a year that marked a recession that had been brewing

for months, the collapse of the dot-com bubble, the collapse of the

stock market, the collapse of the telecommunication sector of our

economy, the tragedy of September 11, which devastated the travel

and tourism industry, and the discovery of years of corporate malfeasance.

The President’s leadership has seen us through some of the most

difficult times this Nation has ever faced, and it has resulted in remarkable economic resiliency. President Bush took aggressive action by providing tax relief for families and small businesses all

across America. Without this action, real GDP growth by the end

of 2004 would be 3.5 to 4 percent lower, and 3 million more people

would be out of work.

Mr. Chairman, I have traveled around the country, and I know

there is anxiety out there. Far too many workers are hurting. As

a CEO, and as a president of a company in the private sector for

some 25 or 30 years of my life, nothing ever felt better to me than

71

changing somebody’s life and telling them they had a job. Nothing—nothing was more painful than telling somebody in our company they did not have a job.

That is experience that has stayed with me my entire life. When

I look at the economic data, I know behind every number there is

a person, there is a heart, there is a person with hopes and dreams

for their family, and that is why the President and I will not rest,

and we will not tire until this economy is creating a job for every

American who wants a job.

Fortunately, major indicators tell us that the economy is strong

and getting stronger. The economy has shown positive job growth

for 6 straight months. Unemployment is currently at 5.6 percent.

This is below the average of the 1970’s. It is below the average of

the 1980’s. And it is below the average of the 1990’s.

Disposable personal income was up 4.8 percent in 2003. Productivity grew from 2001 to 2003 at the fastest 2-year rate in more

than 40 years, because of an incredible workforce that we have in

this country. Small business confidence is at a 20-year high. The

Purchasing Managers Manufacturing Index has been above 60 for

four straight months, which is a powerful, powerful number. This

is the strongest sustained pickup since 1983.

Mr. Chairman, a Secretary of Commerce last testified before this

committee in 1995. A few months later, President Bill Clinton said

in his State of the Union, and I quote, ‘‘Our economy is the healthiest it has been in three decades, and we have the lowest combined

rates of unemployment and inflation in 27 years.’’

At that time, the number—the combined rate of unemployment

and inflation stood at 8.3 percent. The number now stands at 7.3

percent. In addition, home ownership is at an all-time high. Sixtyeight percent of the people in America; 72 million families now own

homes. And the interest rates remain near record-year lows. The

decrease in mortgage rates since January 1966 saves the average

homeowner more than $2,600 a year.

These indicators are encouraging, but we all know we are in a

rapidly changing economy. This is a crucial time in our economy,

and the decisions we make today will have a profound impact on

the future. This morning I want to talk about four key objectives

that I believe are critical to our future success.

No. 1, ensuring that our economy remains the most competitive

in the world, both here at home and all around the world.

No. 2, promoting America’s immense innovative capacity.

No. 3, preparing our workers for the 21st century economy.

And, four, promoting strong commercial ties with the 95 percent

of the world’s population that does not live in the United States of

America.

These objectives are fundamental. American companies and

workers recognize they are the ingredients for success. These principles are also the foundation of the President’s six-point plan to

promote economic growth and job creation.

As our workers seek to equip themselves for new challenges and

competition, and as American businesses seek to cut costs, manage

smarter, and engage in new markets that they rightly expect a government at all levels to work with them and not against them.

72

As Secretary of Commerce, it is my job to advocate for American

business. In this capacity, I have spent considerable time working

with and listening to manufacturers all across this country. Over

the past year, we have had 20 roundtable discussions with hundreds of manufacturers in 14 States. Based on this effort, we released a major report entitled ‘‘Manufacturing in America’’ this

past January.

Our report contains extensive analysis and more than 50 recommendations. We have already implemented many of these recommendations, and we will be bringing more on line soon.

Manufacturers told us that they want to be able to compete domestically and internationally, but health care, energy cost, tax

compliance, regulatory and other costs beyond their control are seriously damaging their competitive position in the world. For example, in 2002, the lawsuit burden on every single American was

$809. More than $200 billion is spent on our tort system, and only

20 percent of that goes to compensate those injured for economic

damages.

Junk lawsuits drive up health care cost, cut into the bottom line,

and destroy jobs. American businesses expect us to work together

to address these underlying barriers to growth and investment.

The innovative infrastructure of the United States exists no place

else in the world, and has always been one of our greatest advantages. It has been nurtured on the shop floor and in small startups.

American investment in innovation creates breakthrough cures,

new industries and jobs of every type every day.

President Bush has made historic commitments to the innovative

capacity of the United States. We will spend a record $126 billion

on Federal research and development this year, and the President

has proposed $132 billion next year. This is a 42 percent increase,

since President Bush took office.

In addition, the U.S. private sector will spend another $193 billion on research and development this year. Innovation, technology,

and entrepreneurship create jobs and raise our standard of living,

and we must help them flourish.

There are fundamental and structural changes under way in our

economy. It is crucial that students, workers, job seekers, and communities have the tools they need to succeed throughout life. America’s workforce must adapt to meet the needs of the 21st century

economy, and we must be there to support them.

Future U.S. job growth will continue to be in emerging fields, in

emerging industries. This administration is committed to investing

in ongoing retraining programs for our workers that need to develop the skills in order to meet the needs of a transitioning economy. Our budget proposes roughly $23 billion to fund 31 job training and employment programs governmentwide this next year.

In addition, the President has proposed a $250 million community college job training program initiative to give workers immediate and relevant training opportunities. Government can do a

great deal, but it is important to note that the private sector invests even more—about $60 billion a year—to provide training and

education to the American workers. Lifetime learning is essential

to the competitive position of our industry and our workers.

73

I cannot talk about the U.S. economy without talking about the

important role of trade. The combined effects of rapid change in

communications, transportation, technology, the end of the cold

war’s economic divisions, and the lowering of trade barriers have

made the global marketplace a reality.

That translates into expanded markets for U.S. goods and services. Today, the U.S. gross domestic product is five times larger

than it was in 1950, and U.S. exports are 20 times larger. U.S. exports account for nearly 25 percent of U.S. economic growth in the

1990’s and support more than 10 million jobs.

It is our responsibility to deliver a level playing field for U.S.

companies, and we will continue to eliminate tariff and non-tariff

barriers to our exports. Since 2001, the Department of Commerce

has initiated 138 new antidumping and countervailing duty investigations resulting in 57 new orders placed on unfairly traded imports. The goal is simply to ensure that everyone is subject to the

same rules of the game.

Let me briefly address our relationship with China. The stakes

are high. China is growing at an extraordinary rate, and it is a

major player in the global economy. Indeed, China is our third

largest trading partner; also, the fast-growing market for U.S.

goods and services. Our exports to China surged by 29 percent in

2003, while imports were up by 22 percent.

While China’s market is an enormous opportunity, it presents

challenges that we must confront. I can assure you that the Department of Commerce is dedicated to making sure China plays by

the rules. Over 50 percent of the new antidumping cases brought

in 2003 were against China. In previous years, cases against China

only accounted for approximately 10 to 15 percent of the total.

And just last week USTR announced the filing of a case at the

WTO regarding China’s discriminatory tax rebate for integrated

circuits. We are fully committed to ensuring that China complies

with the WTO rules, opens markets, drops barriers, eliminates

State subsidies, and allows market forces to determine economic

decisions.

In June, I will return to China to press their leadership for compliance, enforcement, and openness. The hallmark of our trade relationship will continue to be effective enforcement. We will enforce

our rules and ensure others do the same.

Before I conclude, permit me to address a topic that is getting

a lot of attention—the impact of international competition on

American jobs. There are some American workers who have seen

their jobs offshored, and who are concerned that their jobs could be

going overseas. We all share these same concerns, and we are all

motivated to address them.

However, the United States greatly benefits from doing business

with the world. Right now, foreign companies employ some 6.4 million Americans. Foreign business leaders realize that American

workers are the best workers in the world, and that is why they

are here.

There are hundreds of foreign companies employing thousands of

American workers in each of your States. For example, in my home

State of Texas, Toyota plans to hire 2,000 employees in the next

year in its new $800 million San Antonio truck facility. In addition,

74

an Indiana auto parts manufacturer has just broken ground on a

$13 million plant in Austin that will supply Toyota’s factory.

Economic isolationism would threaten each of these 6.4 million

American jobs. America cannot turn back from a global marketplace of goods and services. Engagement with the world creates

jobs and growth, while a policy of economic isolationism destroys

them.

We will continue to strengthen the programs I have described

earlier to assist individuals and communities throughout our economic—throughout our country and through this economic transition. We will continue to work to ensure American companies remain competitive with anyone in the world, and we will enforce our

trade laws and make sure others play by the rules.

We will promote education. We will support innovation. And we

will not turn away from the global engagement that has been the

most powerful source of economic progress in modern times and

built the global economy.

Mr. Chairman, and members of the committee, it is an honor to

be with you today. I appreciate your time and attention, and I

would be pleased to answer any questions that you may have.

[The prepared statement of Hon. Donald L. Evans follows:]

PREPARED STATEMENT OF HON. DONALD L. EVANS, SECRETARY OF COMMERCE

Mr. Chairman, thank you the invitation to participate in this hearing on the state

of American industry and the United States’ economy. I appreciate your leadership

in raising the concerns of American companies and workers and helping policymakers understand the challenges and opportunities U.S companies and workers

are facing. I would like to also congratulate my friend Chairman Barton on your

new role as Chairman of this Committee. You have served this country well for over

20 years and I am sure your experience and leadership will bring you continued

great success. I look forward to working with you and other members of the Committee as we continue strengthening the environment that will enable American

businesses to continue to succeed in today’s global economy.

I strongly believe that businesses are at the strategic center of any civil society.

There are more than 138 million Americans at work right now realizing their aspirations for their families. Businesses in America—from the smallest shop to the biggest corporations offer opportunity for those with a dream, provide a foundation for

community and ground our democracy

THE STATE OF AMERICAN INDUSTRY IS STRONG

America’s economy is an amazing engine—generating opportunity, jobs, and the

most sophisticated and technologically advanced products in history. It is a testimony to the genius of our system, the talents and discipline of our work force, and

the vision of our entrepreneurial spirit.

With only five percent of the world’s population, the United States produces about

one-third of the global output. Americans have created an $11 trillion economy. The

United States remains far and away the largest producer of manufactured goods in

the world. Standing alone, our manufacturing sector would be the 5th largest in the

world—larger than China’s economy as a whole. America is the global leader in

services, and retains a significant advantage in banking, insurance, telecommunications, information technology and healthcare.

Household wealth has soared from an inflation-adjusted $7.8 trillion in 1950 to

$44 trillion in 2004. We all understand how important it is for people to own a home

and build their own savings. A record 72 million American families own their own

home. More than 52 million, or nearly half of, American households, own equities

according to a recent survey released by the Investment Company Institute and the

Securities Industry Association. That represents a 7 percent gain, or 3.5 million

more households, from January 1999.

75

THE RESILIENCE OF THE AMERICAN ECONOMY

The Bush Administration took office on the bust side of a boom-bust cycle that

led to a recession and significant job losses. In fact, nearly 1.8 million jobs were lost

before the President’s first year in office was complete: a year marked by a recession

that had been brewing for months, the collapse of the dot-com bubble, the tragedy

of September 11, and the discovery of years of corporate malfeasance.

It is difficult to estimate the effects of 9/11 on our psyche or business confidence.

But we now know that in the 5 months following September 11, almost 1.2 million

jobs were lost: 51 percent of all jobs lost in overall payroll employment decline since

January 2001.

The President’s leadership has seen us through some of the most difficult times

in recent memory and resulted in remarkable economic resiliency. Fortunately, the

tax initiatives of 2001, 2002 and 2003 softened the blow from the recent recession

and set the stage for vigorous economic growth going forward. Without the President’s tax relief for families and small business, by the end of this year real GDP

would be 3.5 to 4.0 percent lower and 3 million more people would be out of work,

according to a Treasury Department analysis.

The Joint Economic Committee recently noted that the peak unemployment rate

just after the last recession was far lower than in prior recessions. The 6.3 percent

peak in unemployment during the last recession compares favorably to 7.8 percent

in 1980, 10.8 percent in 1982, and 7.8 percent after the 1990-91 contraction. Indeed,

the current 5.6 percent unemployment rate is below the average rate of the 1970s,

the 1980s, and the 1990s.

A look at the global economy also underlines the positive direction we see at

home.

The latest data shows European unemployment at 8 percent compared to 5.6 percent in the United States. America also has the lowest long-term unemployment

rate in the West.

Over the past three years, the American economy has grown about twice as fast

as the economies of Europe and Japan. In 2003, the U.S. economy expanded at a

pace of 4.3 percent, with the second half of 2003 posting the best growth in 20 years.

You cannot have strong employment without economic growth.

Several other indicators show that the economy is recovering from the shocks this

economy has faced over the past few years. Just look at recent data:

• Jobless claims are at their lowest level since the recession began.

• Nominal after-tax income was up 3.4 percent in 2003.

• Productivity grew from 2001 to 2003 at the fastest 2-year rate in 50 years.

• Small business confidence over the past several months has been at 20-year

highs.

• The equity markets added $4.2 trillion in new wealth from October 2002 to today.

• The economy has created 364,000 jobs in the past six months according to the

payroll survey and nearly one million according to the household survey.

• The purchasing managers index of manufacturing activity recorded its fourth

month over 60 in February, indicating the strongest sustained pickup in activity

since 1983.

• And a recent employment survey shows that manufacturers are optimistic about

hiring.

The last time a Secretary of Commerce testified before this Committee was late

1995. A few months later, President Bill Clinton noted in his State of the Union

that ‘‘Our economy is the healthiest it has been in three decades [and] we have the

lowest combined rates of unemployment and inflation in 27 years.’’ At that time, the

combination of unemployment and inflation, or the ‘‘misery index,’’ stood at 8.3 percent. Today that measure is still lower—at 7.3 percent. In addition, the mortgage

rate was then at 7.8 percent; today it is 5.4 percent. Based on the average price

of a home ($168,700), the average American homeowner is now paying $2,600 less

per year in mortgage payments.

Clearly, the President is taking the country in the right direction.

We do, however, have a lot of work to do, and neither the President nor I will

be satisfied until every American who wants a job can find one. But both of us know

that heaping additional burdens on business and closing markets always kills jobs.

That was the painful lesson of the Depression, when raising barriers to trade compounded and prolonged the misery for working people around the world.

There is more to do. The government must continue to encourage economic growth

through implementing the policies that support the principles I will discuss. The

President has proposed an aggressive plan and I am pleased to be here today to discuss it.

76

Before President Bush asked me to serve in his Administration, I spent almost

30 years in the private sector; I know that our company helped many of our fellow

employees realize the dreams they had for their families. Watching those dreams

become reality was the most rewarding aspect of my tenure as a company president

and chief executive officer.

During those years, I was tested through business cycles. Identifying challenges

and risks, and adapting to opportunities allowed our company to compete and win.

We did not ignore challenges, did not try to stop change, and never gave people

working with us false promises of avoiding change.

Mr. Chairman, I know that there is anxiety out there in America. I know that

far too many of our workers are hurting. As a CEO, nothing gave me greater satisfaction than changing a person’s life by offering them a job. And nothing was more

painful than telling someone at our company that we no longer had a job for them.

That experience stayed with me. When I look at the latest economic data, I see

through the numbers. I always see a person with hopes and dreams and a family.

Fortunately, we are beginning to see favorable momentum.

The President and I are committed to creating the conditions for economic growth

and vitality so every single citizen who wants to work can find work. The President

is defining America’s economic future in the world—not assigning blame, promoting

economic isolationism, or selling Americans short. As Secretary of Commerce, my

job is to advocate for American business. My focus everyday is to help companies,

workers and communities as they work to meet new challenges and seize opportunities.

Mr. Chairman, I believe that we are at a time of transition. Transitions are never

easy and this Administration knows there are workers experiencing pain. We are

directing resources and focusing our efforts on those who are hurting. For example,

our Economic Development Administration at the Department of Commerce has

worked with the Labor Department as they deploy ‘‘rapid response’’ teams to Michigan, North Carolina and Tennessee to assist communities in those states dealing

with economic dislocation.

The challenges of today will require policymakers to be forward-looking and innovative like never before. We have to understand and keep up with the rapid pace

of change, because our businesses must continue to lead the world, enter new markets, control costs, and attract, train and retain the best people.

We are at a crucial time in our economic history and the decisions we make today

will have profound impact. This morning, I want to talk about four key objectives

that I believe are critical to our future success:

Ensuring that our economy remains the most competitive in the world;

Promoting America’s immense innovative capacity;

Preparing our workers for the 21st century economy; and

Promoting strong commercial ties with the 95 percent of the world’s population that

does not have the blessing of living in this country.

These objectives are fundamental. American companies and workers recognize

they are the ingredients for our success. I have been to many states in the three

years that I have had the honor of serving this Administration and people tell me

time and time again—allow us to create, compete and seek new markets and we

will get the job done every time.

These principles are also the foundation of the President’s six-point economic plan

to promote economic growth and provide momentum for job creation.

As clear and intuitive as these principles sound, however, they are not universally

held. Some seek refuge in policies and rhetoric that promise winning without competition, job creation through economic isolationism, and small business fed by additional taxation.

I look forward to our dialogue about the challenges and opportunities facing

American industry and the steps that the Bush Administration is taking to promote

the principles of economic development I just articulated. But before turning to each

of these subjects in more depth, I want to take a moment to provide a framework

for where the economy of the United States currently stands.

KEEPING OUR ECONOMY THE MOST COMPETITIVE IN THE WORLD

As our workers equip themselves for new challenges and competition, and as

American businesses cut costs, manage smarter and engage in new markets they

rightly expect the government at all levels to work with them, not against them.

Rising costs of health care, litigation, energy and unnecessary regulation kill jobs.

It is the steady accumulation of multiple burdens that has had the most severe impact on the competitive environment in which our companies operate.

77

While our businesses have tightened their belts and raised their productivity in

an effort to succeed in the marketplace, they have seen that advantage and their

hard-won productivity gains eroded by higher energy costs, medical and pension

costs, tort liability costs, and excessive taxation and burdensome regulation. According to the National Association of Manufacturers, these overhead costs add approximately 22 percent to American manufacturers’ labor costs (nearly $5 per hour

worked).

As Secretary of Commerce, I have spent considerable time working with and listening to manufacturers all across the United States. Over the past year, we held

20 roundtable discussions with hundreds of manufacturers in the automotive, aerospace, biotechnology, furniture, semiconductor, and textile industries, among others,

in more than fourteen states. And I can tell you that they did not ask us to isolate

them behind walls or to impose new tariff regimes. They told us to get our own

house in order by attacking the burdensome costs that make them less competitive

in a global environment.

Based on this effort, we released Manufacturing in America in January, a comprehensive report with more than 50 recommendations. We have already implemented a number of these recommendations and will be enacting more soon. For

our part, we will be appointing an Assistant Secretary for Manufacturing and Services and establishing an Unfair Trade Practices Task Force to monitor and ensure

our foreign competitors are playing by the rules when importing into the U.S. market. In addition, we will also aggressively pursue trade violations that put U.S. exporters at a disadvantage through a new Office of Investigations and Compliance.

The President’s Manufacturing Council will also be established to provide high-level

guidance on issues impacting manufacturing in the United States.

These steps will help, but it will take a much larger, very sustained effort from

policymakers to get some fundamental costs in line to assist our companies to continue to win in the world economy.

We all know that rising health care costs are eroding competitiveness. In 1980,

health care was 8.8 percent of GDP. In 2000 it was 13.3 percent and in 2002 it was

nearly 15 percent. It will be 16 percent of GDP within five years. Businesses pay

for their employees’ health benefits because of tax incentives and because they see

their own interest served by a healthy and motivated workforce: 97% of the National Association of Manufacturers’ members pay for employee health care benefits.

However, there is a competitive cost of doing so: the United States already spends

more than twice as much on health care per person as other industrialized countries.

Regulatory compliance remains a huge burden in expense and lost time. While the

exact cost of regulation is uncertain, the total cost is comparable to discretionary

spending—about $640 billion in 2001, according to the Office of Management and

Budget (OMB). Regulation can increase the cost of producing goods and services in

the economy, thereby raising prices to the consumer and placing jobs and wages at

risk.

Regulatory compliance costs fall hardest on small and medium-sized businesses.

This is a significant finding since small firms account for the vast majority of new

business growth. Small business ownership is a critical vehicle for all Americans—

and increasingly for women and minorities—to achieve greater economic opportunity.

In 1999, the OECD estimated that the economic deregulation that occurred in the

United States over the last 20 years permanently increased GDP by 2 percent. The

OECD also estimates that further deregulation of the transportation, energy, and

telecommunication sectors would increase U.S. GDP by another 1 percent.

This country must build on a national energy plan that will help us access new

sources of supply and improve energy transmission. Businesses use nearly 40 percent of the natural gas and 30 percent of the electricity consumed in the United

States.

I hear a great deal from businesses of all shapes and sizes about the complexity

of our tax system, and the disincentives that complexity creates for doing business

in the United States. This complexity raises costs but it also raises uncertainty,

which is the enemy of investment and job creation. The tax code also has a profound

effect on the relative attractiveness of investing in and creating jobs in the United

States. The first, and easiest, action to take is to make the President’s tax cuts permanent so businesses can continue to expand and plan for future growth.

One of the most egregious examples of government increasing costs comes out of

the tort system in this country. In 2002, the lawsuit burden was $809 for each

American. More than $200 billion is spent on our tort system, and only 20 percent

of that goes toward economic damages. One issue of particular concern is the ongoing asbestos litigation. The continuing litigation has yet to help many of the individVerDate 11-MAY-2000 13:38 Jun 17, 2004 Jkt 000000 PO 00000 Frm 00081 Fmt 6633 Sfmt 6621 93299.TXT HCOM1 PsN: HCOM1
78

uals who were harmed by prolonged exposure to asbestos. At the same time, the

litigation hangs over our economy, raising all companies’ insurance costs and dampening their ability to hire.

You cannot say you support creating the environment for job creation unless you

grapple with the underlying drivers of costs that discourage hiring and depress investment. That is why President Bush has proposed relief for the engines of our

economy.

ENSURE THE UNITED STATES REMAINS THE MOST INNOVATIVE NATION ON EARTH

The innovative capacity of the United States has always been one of our greatest

strengths. The innovation infrastructure of our country is built on over 200 years

of invention, discovery, development and commercialization. It is an intricate system

that exists no place else on Earth. Our investments in innovation—whether in federal labs, at universities, or in businesses across America—create breakthroughs,

cures, industries and jobs every day.

America’s entrepreneurial spirit will originate from businesses being built in garages and innovations taking place on shop floors. It is America’s inventors and

workers who create new ways of thinking and doing, spawning new industries and

ways of life.

Innovation ensures the jobs created will be good jobs. New products and production methods continue to raise our productivity and competitiveness, and will raise

our standard of living to unprecedented levels. President Bush has made historic

commitments to the innovative capacity of the United States. We will spend a

record $126 billion on federal R&D this year, and the President has proposed $132

billion next year. This is a 42 percent increase since President Bush took office. In

addition, the American private sector will spend another $193 billion on R&D this

year. To help promote this private sector commitment we continue to urge Congress

to make the R&D tax credit permanent.

Business leaders want a continued commitment to R&D and assurance that the

government reinforces, rather than creates obstacles to, the process of generating

new ideas and of bringing innovations to the marketplace. That is why the Administration continues to support the unique capabilities of national labs and universities, including establishing cooperative research programs for the benefit of small

and medium-sized businesses. In addition, this Administration is promoting the

process of manufacturing technology transfer to ensure that the benefits of R&D are

diffused broadly throughout the manufacturing sector, particularly to small and medium-sized enterprises.

Innovation and investment are key drivers of the economy. One reason for the

manufacturing sector’s early entry into recession was a sharp drop in business investment as industry pulled back from a period of heavy investment in technology.

Not surprisingly, the industries with the most significant job losses in manufacturing are precisely those industries—telecommunications equipment and computing—that benefited most from the boom in investment of the late 1990s.

There is recent evidence that innovation will continue to propel the American

economy. According to the Institute for International Economics, our economy shed

71,000 software programmer jobs paying an average of $64,000 between 1999-2002.

But at the same time, 115,000 software engineering jobs paying $75,000 were created, a good sign that higher-paying jobs are replacing those being lost.

Americans should expect great advances in biotechnology, nanotechnology, and in

many other industries across our economy. These advances will improve lives

around the world and create American jobs. That is why the President is taking dramatic steps to promote innovation through R&D, with targeted spending at the

record levels noted above. This money catalyzes the private sector’s ingenuity and

creates the industries and jobs of the future.

Business leaders emphasize the importance of adequately and effectively protecting intellectual property rights, and the corrosive effect of the failure of some

of our trading partners to enforce these rights. Intellectual property protection is essential in ensuring the virtuous cycle of innovation that raises our productivity and

meets the needs of consumers around the world. That is why the Department of

Commerce continues to strengthen the Patent and Trademark Office, enhancing intellectual property protection and increasing the availability of new products and

services.

This Administration is promoting the technological infrastructure of the 21st century. We have taken concrete steps to create an economic and regulatory environment in which broadband can flourish:

• The President’s tax relief has given businesses powerful incentives to invest in

broadband technology.

79

• The President’s economic security package allows companies faster depreciation

for capital-intensive broadband equipment.

• The President has signed a two-year extension of the moratorium on Internet access taxes, and urges the Congress to make the moratorium permanent.

• Under this Administration, the FCC has issued an Order freeing newly deployed

broadband infrastructure from economic regulation designed for a different era.

This decision provides a powerful incentive for incumbents and new entrants

alike to invest in new broadband infrastructure.

• The Administration also supports policies that will ensure that Voice-over-Internet Protocol is also free from unnecessary economic regulation.

• The Administration has doubled the amount of radio spectrum available for unlicensed wireless broadband technologies and cleared the way for additional licensed spectrum as well. And,

• The Administration is working to ensure that Broadband-over-Power Lines can be

beneficially deployed as quickly as possible.

All of these actions have helped to ensure that consumers have a variety of

choices for broadband, particularly in rural communities, and will speed infrastructure investment in the United States. As a result we have seen the number of

broadband subscribers in the United States increase from 10 million in 2001 to over

21 million today.

Other pro-growth policies will help American businesses create new industries,

companies and jobs. When some propose raising tax rates, they are disproportionately taxing the engines of growth—small businesses. Small businesses owners pay

almost 80 percent of the taxes in the top rate through pass-through tax entities.

Small businesses create approximately 70 percent of the new private-sector jobs in

this economy. Small businesses employ half our workforce. If taxes are raised on

these firms, they will have less money to hire and invest.

Innovation, technology and entrepreneurship continue to create jobs and augment

our standard of living and we must be committed to helping them flourish.

PREPARING OUR WORKERS FOR THE 21ST CENTURY ECONOMY

There are fundamental and structural changes under way in our economy.To meet

this challenge and benefit from the opportunities that innovation creates, it is crucial that students, workers, job seekers and communities are provided with the assistance and tools they need to succeed. America’s workforce must adapt to meet the

needs of the 21st Century economy, and we must be there to support them.

Employment in manufacturing has been declining since 1979. The decline of manufacturing employment and the rise of service employment are manifestations of

structural change. What many fail to note is that this phenomenon is global: almost

all major industrialized economies have lost manufacturing jobs. Some have tried

to lay the blame solely on low-cost labor in developing countries, but it is important

to note that China lost 8.6 million manufacturing jobs between 1998 and 2002.

In each one of your districts, new jobs are being created every day. The Business

Employment Dynamics report indicates the American economy creates about

600,000 jobs a week. Amid dynamic job ‘‘churning’’ in this country, 39.2 million jobs

have been created since 1980. According to recent data from the Bureau of Labor

Statistics (BLS), the United States is expected to create 21 million net new jobs by

2012, increasing our workforce to 165.3 million in 2012. And looking deeper into

these numbers reveals that the trend of our economy becoming more deeply based

upon services will continue. In addition these new jobs will be predominantly in

emerging fields and industries—four of the ten fastest growing industries, in terms

of output, from 2002-2012 are expected to be in high tech.

Add to this the fact that BLS also estimates that the average American changes

jobs ten times from ages 18 to 36, and you get more insight into the shifting and

dynamic work environment that Americans face.

We will need to prepare for this ongoing transition. The talent and motivation of

the men and women who work in and manage America’s companies must be

matched by our efforts to promote education and training to compete in a dynamic,

global economy.

Some business leaders I have spoken to express serious concerns about whether

the United States is adequately preparing the next generation for the demands of

a high-tech workplace. Advanced labor skills are one of the decisive factors determining our nation’s ability to compete in the global economy.

Preparing the next generation of America’s leaders starts with the basics. That

is why passage of President Bush’s No Child Left Behind Act of 2001 was so important. The new law reflects the President’s determination to improve the performance

80

of America’s elementary and secondary schools while at the same time ensuring that

no child is trapped in a failing school.

In addition, the President has a $250 million community college job training initiative, to train people for today’s economy and help them find jobs. The President’s

‘‘Jobs for the 21st Century’’ initiative will prepare our economy and workforce for

new challenges by expanding access to post-secondary education and fostering jobtraining partnerships between community colleges and employers in industries with

the most demand for skilled workers.

This Administration is committed to investing in the types of ongoing retraining

programs our workers need to develop the skills in our transitioning economy. The

Administration’s 2005 budget proposes roughly $23 billion to fund 31 job training

and employment programs government-wide. The bulk of this funding, about $19

billion, is administered by the Departments of Labor and Education primarily

through the Workforce Investment Act (WIA), the Carl D. Perkins Vocational and

Technical Education Act (Perkins), Vocational Rehabilitation Services, and Pell

Grants for students enrolled in technical or two-year post-secondary schools.

We will also dedicate over $1.1 billion in fiscal year 2005 for training and cash

benefits for workers dislocated by increased imports or a shift of production to certain foreign countries.

Government can do a great deal, but it is important to note the significant investment that American business is making in the future of the American workforce.

The private sector spends about $60 billion a year to provide training and education

for American workers. This investment is made in major corporations that have extensive programs akin to in-house business schools, and in small businesses that

help with tuition for part-time classes and local seminars.

These public and private investments make a difference in the lives of millions

of Americans and they are essential to the competitive position of our industry and

workers.

PROMOTING STRONG COMMERCIAL TIES WITH THE 95 PERCENT OF THE WORLD THAT

DOESN’T HAVE THE BLESSING OF LIVING IN THIS COUNTRY

I cannot talk about the American economy without talking about the important

role of trade and the role of investment in a global economy.

Expanding trade and investment abroad are, and have been, fundamental pillars

of American economic success in the 20th and 21st centuries. Trade represents an

unprecedented opportunity for our workers and our future. Americans welcome

trade because it expands opportunity and growth. Over 230,000 small and mediumsized enterprises (SMEs) export from the United States, accounting for 97 percent

of all American exporters. Very small companies’ those with fewer than 20 employees—make up more than two-thirds of all American exporting firms. President Bush

supports expanding trade, just as do American businesses, because the benefits are

clear.

Since the creation of GATT in 1948, real GDP has skyrocketed. World exports

have grown from $58 billion to nearly $6 trillion. Expressed in 2000 dollars, U.S.

per capita GDP grew from $12,000 in 1950 to $36,000 in 2002. Today, U.S. GDP

is five times larger than it was in 1950, and American exports are 20 times larger.

American exports accounted for nearly 25 percent of U.S. economic growth in the

1990s and supports more than 10 million jobs.

Fair trade helps to lower prices and raise American living standards. Over the

past decade, NAFTA and the Uruguay Round agreements have raised the income

of the average American family of four by up to $2,000 a year. A University of

Michigan study shows that lowering global trade barriers by one-third could boost

the American economy by $177 billion, and raise living standards for the average

family by $2,500. Trade also drives competition and innovation, both of which are

key to raising productivity and greater prosperity worldwide.

Trade and security go hand in hand. Countries that trade together have more to

lose in the event of conflict; trade becomes part of a virtuous circle reinforcing

peaceful international relations and stronger economic development. We have seen

in the not-too-distant past that, when economies close their doors, it has a ripple

effect. Other nations adopt protectionism and everyone loses. The world experienced

this in the 1930s with the Great Depression and the ensuing conflict of World War

II.

The combined effects of rapid changes in communications, transportation technology, the end of Cold War economic divisions, and the global lowering of trade

barriers have made the global marketplace a reality. That translates into expanded

markets for American goods and services, but also stiffer competition—both in export markets and here at home.

81

However, this is no reason to withdraw from the world economically. Our business

leaders understand that their future growth depends on a global market and that

their access to export markets depends on a willingness to engage foreign competitors here. And they do not shrink from the task.

I do not hear an interest in economic isolationism from the business community,

whether in the form of tariffs or quotas. Rather, our companies and workers see

international trade as a simple question of fairness. If the United States keeps its

markets open to its trading partners’ goods, then they should do the same. But,

where our trading partners do not live up to the terms of our agreements or otherwise heed the rules, those trading partners should face the consequences as laid out

in those agreements.

Trade Enforcement

This Administration will continue our efforts to eliminate tariff and non-tariff barriers to our exports through negotiation with our trading partners. We will also continue to vigorously enforce existing trade rules and American trade laws. Since January 2001, Commerce has initiated and completed 152 new antidumping and countervailing duty investigations resulting in 61 new orders placed on unfairly traded

imports.

We know that we have the best workers in the world, and that we can compete

with anyone. But the competition has to be fair. The security and prosperity of our

nation and the world depend on the rules being perceived as fair.

In order to ensure this end, this Administration is taking new and proactive

measures to strengthen the enforcement and compliance of our trade agreements.

Within the Department of Commerce’s International Trade Administration, we have

created a new Unfair Trade Practices Task Force that will expand and strengthen

our ability to advance American commercial interests by attacking the root causes

of unfair trade. This office analyzes market trends and foreign government and

business practices to identify potential unfair trade problems at the earliest stage

possible. The Task Force is presently analyzing the 30 largest categories of Chinese

imports, including computers, footwear, office machine parts, furniture, and radio/

TV equipment.

We are also creating a new Office of Investigations and Compliance as an enforcement unit within the Commerce Department to make sure our trading partners

abide by their agreements and to combat violators of intellectual property rights

(IPR) around the world. Many of the investigators in the unit will have law degrees.

The unit will have a team of experts in IPR, corporate accounting, investigations,

and intelligence.

In addition, we are building an Office of China Compliance to focus on antidumping cases involving imports from China and to concentrate on and strengthen

our expertise to address the unique problems encountered in China and other nonmarket countries.

Nothing hurts innovation like having your ideas stolen from you. We are working

hard to make sure that does not happen. The World Trade Organization (WTO) has

agreements barring the theft of intellectual property. Piracy by foreign businesses,

particularly in China, for example, is a chronic problem for many American firms.

Last fall, I led a mission to China and highlighted China’s lack of IPR enforcement.

I met with high-ranking Chinese officials and reiterated our continuing concern;

that effective IPR protection requires that criminal penalties for intellectual property theft and fines are large enough to be a deterrent rather than a business expense.

I believe in the strong enforcement of our trade laws, especially intellectual property protection, and we are taking proactive measures to combat piracy. I have

tasked Commerce agencies, such as the Patent and Trademark Office and the new

Office of Investigations and Compliance, to coordinate their efforts to vigorously pursue allegations of IPR violations wherever they occur, especially in China.

The Administration is committed to exercising the legal remedies available under

the WTO and under U.S. law when clear violations occur. As a matter of fact, the

United States Trade Representative announced the filing of a case at the WTO regarding China’s discriminatory tax rebate policy for integrated circuits.

This Administration also is working with industry through the vigorous enforcement of trade laws, and through consultations with the governments involved to address the efforts of other governments to confer an unfair competitive advantage on

their industry. In one such case, after discovering that a Chinese factory counterfeited its medical products, the American company involved contacted the Commerce

Department with the problem. Working with the Chinese government, this Administration ensured that the counterfeiter and distributor were arrested on criminal

charges, resulting in the elimination of the counterfeiting of medical supplies valued

82

at roughly $15 million per year. Virtually all of the businesses I meet indicate that

they are prepared to compete head-on with anyone in the global marketplace; what

they are not prepared to do is compete against foreign governments as well.

While I have mentioned just a few of the steps we are taking to bolster trade enforcement and compliance, I need to address briefly and specifically our trade relationship with China. The stakes involved are high. China is growing at an extraordinary rate and is becoming a major player in the global economy. Indeed, China

now represents the fastest-growing market for American goods and services. Our exports to China surged by 28 percent in 2003, while imports were up by 22 percent

last year. China is our third largest trading partner. Bilateral merchandise trade

reached $181 billion in 2003. China’s development, and the increased standard of

living literally bringing hundreds of millions of people out of poverty—are extremely

positive signs.

One of the basic reasons for negotiating for 15 years with the Chinese over their

accession to the World Trade Organization was to knock down the many barriers

to entering China’s market. The situation facing our businesses from a competitive

perspective was far worse prior to China’s entry into the WTO. Our firms lacked

access to the Chinese market, but their businesses had relatively free access to ours.

While China’s market represents an enormous opportunity, it presents challenges

we must confront: we must be strong on growth and strong on enforcement. There

is still a very long way to go. I can assure you that the Department of Commerce

is dedicated to making sure that China and all nations plays by the rules. In 2003,

over 50 percent of all new antidumping orders put in place by the Department were

against China. Historically that figure has been 18 percent.

This Administration will continue to pursue China’s compliance with its WTO

commitments vigorously and enforce our domestic unfair trade laws rigorously and

fairly. The Commerce Department is fully committed to ensuring that China complies with WTO rules, opens markets, drops barriers, eliminates state subsidies, and

allows market forces to determine economic decisions. In June, I will be going to

China to continue pressing their leadership for compliance, enforcement and openness.

Around the world this Administration will continue to fight so American workers

will continue to succeed in the global economy.

WORKING WITH THE WORLD BENEFITS EVERYONE

Before I conclude, permit me to address a topic that has been much in the news:

the impact of international competition on job creation.

In addition to trading products, American workers now compete in a global labor

market. About 2.4 billion of the world’s 6.3 billion people are currently part of the

global workforce. About 75 percent of these workers live and work in developing

countries and about 25 percent in the industrialized world. These are staggering

numbers and when you consider that, with only 5 percent of the world’s population,

the United States generates approximately 33 percent of global GDP you get a sense

of the true economic leadership position we have.

The United States greatly benefits by doing business with the world. Right now,

foreign companies employ 6.4 million Americans, who, in turn, help employ millions

more. Foreign business leaders realize that American workers are the best in the

world. There are hundreds of foreign companies employing American workers, including Norwegian Cruise Lines, Honda, and UBS Investment Bank.

New foreign investments occur regularly, although they do not seem to attract the

attention devoted to investment offshore. But foreign investments made here are

creating many times more jobs than are being offshored from the United States. For

example, in my home state of Texas, Toyota plans to hire 2,000 employees in the

next year at its new San Antonio facility.

Foreign direct investment in the United States totaled $82 billion in 2003, over

twice the amount from the previous year. In fact, since 1990, foreigners have made

direct investments of $1.5 trillion in U.S. companies and factories. Increased foreign

investment means more factories, more research and development and more jobs for

Americans through companies based abroad. These companies account for hundreds

of thousands of good jobs, including more than 700,000 in California, almost 500,000

in New York, more than 425,000 in Texas, and more than 300,000 each in Illinois

and Florida.

Many of those 6.4 million jobs are at risk if this country begins to engage in the

isolationism that would cause us to close down global labor markets. America cannot turn back from a global marketplace of goods and services. Engagement with

the world adds jobs and growth, while a policy of economic isolation destroys them.

83

Our advanced financial, legal, and educational systems make the United States

a prime location for investment in our businesses and workers. America must continue to strengthen those competitive advantages through the policies I have discussed today. Unfortunately, there are some who do not seem to believe that American workers can compete with workers around the world. I know we can.

It is important to have the facts: according to the Bureau of Labor Statistics, only

one percent of job losses in large layoffs are associated with overseas relocation,

with another two percent due to import competition. Contrast that to the 36 percent

due to seasonal layoffs. Forrester Research projects a worst-case scenario that 3.3

million jobs will be lost over the next decade. Our economy creates nearly 3 million

jobs each month. As the Washington Post noted, the jobs projected to go overseas

represent about one percent of the job ‘‘churning’’ in our labor market.

IBM, for example, recently won a contract from Nokia, the Finnish telecommunications company, worth over $5 billion. Alone, this contract equals almost one-third

of the entire Indian information technology software and services industry in 2003.

Put another way, the Best Buy retailing chain has more revenues than the entire

Indian IT sector.

In 2003, the United States exported $305 billion of Total Services, and we ran a

services surplus of $59 billion. Using a simple share of GDP, U.S. exports of Total

Services support more than 3.9 million jobs in the United States. In 2002 (latest

data available by region), the United States ran a significant trade surplus of Total

Private Services with China and India. Exports to both countries combined were

$9.3 billion while imports were $5.8 billion.

There are, however, some American workers who have seen jobs outsourced or are

concerned about their jobs going overseas. We all share these concerns and we are

all motivated to address them. Globalism and competition are concepts, but a paycheck is a reality, and this Administration is dedicated to providing the opportunity

for every American to find a job and provide for his or her family.

We will continue to strengthen the programs I described earlier to assist individuals and communities in the adjustment to a growing global economy. We will continue to work to ensure that American companies can continue to successfully compete with anyone in the world. We will enforce our trade laws and make sure others

play by the rules. We will promote education and support innovation. And we will

not shrink from these challenges or accept defeat. The worst thing the United States

could do is to pursue isolationist policies that will cost jobs.

America has overcome the challenge of lower global wages in the past, and always

come out better for it. Forty years ago, people worried about low-cost Japanese

labor. Ten years ago, people feared jobs would all migrate to Mexico. Some make

the same mistake when they look to China and India with concern today. The doomsayers will undoubtedly have another target in the future.

To achieve sustained growth for all Americans, the United States must continue

to stay engaged in the world. We must ensure free, fair and open competition. It

makes our industries more productive, while American workers and their families

enjoy higher wages and better products and services at cheaper prices.

AMERICAN INDUSTRY AND WORKERS WILL MEET THE CHALLENGES AND LEAD THE

WORLD

Americans are innovative, pragmatic problem-solvers who thrive on competition.

We have the future in our hands, and we control our own destiny through the

choices we make.

The President understands that economic security and national security are inseparable. In both areas he has laid out a complementary vision of America’s leadership role. He faces these challenges with confidence, understands how to succeed in

this environment, and believes in the American people. Embracing and shaping the

global economy toward American values is the only way to ensure a more stable,

peaceful and secure world for the next generation of Americans.

America cannot follow the path urged by isolationists who are afraid to confront

the challenges we face, who refuse to be honest with the American people about

those challenges, and who deny what it will take to respond. There is no protection

in protectionism, only defeat and defeatism.

The United States needs pro-growth economic programs to create a better American future in a more secure and prosperous world. President Bush is dedicated to

pursuing economic policies that give American companies and American workers the

freedom to succeed. As American companies remake themselves and successfully

meet their customers’ needs, they will create long-term economic growth and new

American jobs. To support this process, we must protect the flexibility and producVerDate 11-MAY-2000 13:38 Jun 17, 2004 Jkt 000000 PO 00000 Frm 00087 Fmt 6633 Sfmt 6621 93299.TXT HCOM1 PsN: HCOM1
84

tivity that have made the American economy the envy of the world and American

workers the most prosperous in history.

Mr. Chairman and Members of the Committee it is an honor to be with you today

and I appreciate your time and attention. I would be pleased to answer any questions that you may have.

Chairman BARTON. We thank you, Mr. Secretary. Before I—I am

trying to reset the clock here.

I want to alert the committee that there are going to be a series

of four votes, beginning in the next 10 to 15 minutes. I have sent

Mr. Shimkus over to vote and rush over here. We are going to keep

this hearing going to maximize time for people to ask questions.

I would ask you, Mr. Secretary, if there is any way possible, to

delay your departure at least a little bit, because—since this is the

first time that you have appeared before this—your office has appeared before this committee, I think it would be very productive

for relationships between the committee and the Department of

Commerce if we could have 15 to 30 extra minutes. And when we

do get——

Mr. EVANS. Granted.

Chairman BARTON. When we do get to the questions, I am going

to try to let the people that deferred opening statements have a

chance. If there is somebody that is way down the list that deferred

their opening statement, I want to give them a chance to ask some

questions. I know we have regular order, but I do think the people

that deferred an opening statement should at least have a shot at

a question or two.

So with that, Mr. Secretary, I am going to recognize myself for

the first 5-minute question period. I want to outline to you my job

history. In 1966, I went to work as a teenager for Ferris Watson

Seed Company. I did a terrible job, and Mr. Watson encouraged me

to seek other employment.

So then I went to work at Sprigville Store and Bait House. It

was owned by my uncle, and he felt an obligation to hire me. I was

not paid much, but I got to eat everything I wanted to. After a year

of that, he encouraged me to seek other employment.

I then went to work for Texas A&M Industrial Engineering Department as a student. I then became a co-op student, co-op engineer at LTV, and later at Texas Power & Light. I also worked for

the city of Bryan Engineering Department. When I graduated from

A&M, I went to Purdue University, was a graduate assistant,

worked there.

Then, when I got out of graduate school, went to work for Innis

Business Forms, later became a White House Fellow at the Department of Energy. When I finished that job, I became an engineer at

Arco Oil and Gas. And finally, in November 1984, the people of the

sixth district elected me to be a U.S. Congressman to represent

them.

About a month ago, I became the chairman of this distinguished

committee. Now, if you count that all up, that is 10 jobs. So one

way to score that is I am a nine-time loser. I have lost nine jobs.

You can also score it that I am now a one-time winner and not only

have a job but have what you would call a good job. At least I consider it to be a good job.

Now, statistically, I have lost more jobs, but in the economy

today hopefully I am listed as a productive, employed person.

85

Would you comment on statistics on this number of jobs lost using

me as an example? Have I lost nine jobs? And am I a drain on the

economy? Or am I employed and working?

Mr. EVANS. Well, you know, let me come at that a couple of

ways, Mr. Chairman. One is we do have an amazing economic engine here in America. We actually have 1 million new hires every

week. Every week there are 1 million new hires in this economy.

There are a similar number of people that leave a job—some not

by choice, others by choice.

So when you think about it, we have an economy, though, that

is creating about 52 million new hires every year. And that will

give you a sense of the size of our economy and how dynamic it is.

More importantly, though, is we have an economy that is creating new industries every year. Yes, are we losing some through

the years? Of course we are. You can take the agriculture sector

of our economy. In 1900, about 40 percent of the workers in America worked on farms across America, worked in the agriculture sector of our economy.

Today, about 2 percent work on farms or in the agriculture sector

of our economy. So our economy, this incredible innovative, entrepreneurship economy is always creating new jobs and new opportunities and has been for years and years. That is why it is the marvel of the world. When people look at the American economy, they

are just amazed at our ability to create new industries and new

jobs over the years.

And so, you know, I would say that you, like many, have moved

through a life of changing jobs. I might say changing careers, too.

And that is one thing that I think does concern people in this day

and time when they talk—when they listen about—hear people

talk about outsourcing, they worry about, you know, am I going to

have to change my career? Well, some might.

But, you know, my attitude about that is in America we don’t

leave anybody behind, and we don’t leave anybody out. And as we

have an economy that continues to go through transition and

change and create new industries, we must have programs that

support people, so that they have the kinds of skills and kind of

tools required as this economy changes, and we have—and we find

new—and new industries are developed.

Chairman BARTON. Right.

Mr. EVANS. And you are—you are a productive member of the

economy, Mr. Chairman, in my view, and——

Chairman BARTON. That is a debatable proposition, but thank

you for telling me that.

Mr. EVANS. But——

Chairman BARTON. Well, the point—my time is about to expire,

Mr. Secretary. I also want to say that in some of those, especially

when I have—after I left the White House fellowship I had interviewed for a number of jobs, but I hadn’t received a firm job offer.

I had several months in the fall of 1982 that I had three children,

one a baby, a wife, and I had no job.

And I was extremely despondent and concerned and about that,

and I have total empathy with everybody in this country who

wants to work, is willing to work, is able to work, and through no

fault of their own we do not yet have a job for them.

86

Now, make no bones about it—on both sides of the aisle we know

that there are many, many willing Americans that for a number

of reasons beyond their control are not employed and they want to

be employed. This committee—and I am sure your department and

the Bush administration is going to do everything possible to give

those willing workers an opportunity to not only have a job but to

have a good job and a job that empowers them.

So I am not belittling that there are people in this country that

want to work and right now are not working. But our economy, and

with all of the statistics that you put up on the board, is doing the

best job in the world today to create jobs that are good jobs.

With that, I am going to recognize the distinguished ranking

member, Mr. Dingell, for 5 minutes.

Mr. DINGELL. Mr. Chairman, thank you.

Mr. Secretary, again, welcome. Mr. Secretary, I note that the administration has recently announced its intention to negotiate free

trade agreements with Thailand. Automobile manufacturers now

use Thailand as the platform to supply pickup trucks for all of

Asia.

I note that the United States currently imposes a 25 percent tariff on pickup trucks imported into this country. Now, if that 25 percent tariff were removed, Thailand would become the platform

through which manufacturers supplied trucks to the entire world.

Now, this leaves the auto workers in States like Michigan, Missouri, Minnesota, Louisiana, and Texas, just to mention a few, significantly at risk. Mr. Ron Gettlefinger, President of the United

Auto Workers, in a letter to the President of the United States, a

copy of which was made available to you, on November 10, 2003,

addressed this matter with President Bush.

And he called on the administration to make a commitment that

any U.S.-Thailand trade agreement will not change the existing 25

percent tariff on imported pickup trucks. What comment do you

have to make on that? The letter has not yet been answered.

Mr. EVANS. Right. Chairman, I—it has not crossed my desk,

but—or, Congressman, it has not crossed my desk yet. But I must

say that in all of these free trade agreements I think one of the

central goals is to bring down tariffs on both sides. And so, I would

say that, one of the principles—I know it is certainly one of the

President’s principles with respect to free trade, is lowering tariffs

to zero.

In fact, that is what we proposed through the WTO last fall. We

proposed taking all industrial tariffs on goods and services to zero

by the year 2015. And so if——

Mr. DINGELL. Will that be tariffs all around the world, or will the

United States be the one that goes to zero? For example, we charge

much larger tariffs on automobiles than do other countries. We

generally charge much lower tariffs on pickup trucks than do most

countries.

Mr. EVANS. Right.

Mr. DINGELL. And I am just curious, if we are going to go to zero

here, and without any—without any changes to see to it that other

countries abate their trade restrictions on U.S. goods, and also that

other countries don’t address the very difficult problem that we

confront with regard to the situation on environment, working conVerDate 11-MAY-2000 13:38 Jun 17, 2004 Jkt 000000 PO 00000 Frm 00090 Fmt 6633 Sfmt 6602 93299.TXT HCOM1 PsN: HCOM1
87

ditions, labor conditions, and so forth, we are going to be in a hell

of a way, Mr. Secretary. What do you have to say about that?

Mr. EVANS. Well, I say that the idea is for everybody to head to

zero. It is not——

Mr. DINGELL. The trouble is, we are the one who gives, and they

are the ones who take. And we are watching jobs constantly flowing overseas because of unfair trade practices. They are going to

Mexico. They are going to other places. And in the case of Mexico—

Mexico is part of NAFTA—it winds up as being the entry point for

a lot of foreign goods into the United States, commitments made

to see to it that—for example, that goods—rather, automobiles imported from Canada would have 65 percent U.S.—or, rather, North

American content, now have about 33 percent U.S. content.

Unfair trading practices are constantly heaped upon the United

States. And I am not criticizing you particularly, Mr. Secretary, but

no administration has addressed these questions. And somebody

has got to do it, and you guys are in the hot seat, and I guess—

I guess the buck stops at your door, Mr. Secretary, or at least at

the President’s desk.

Mr. EVANS. Well, listen, Congressman, all I can do—all I can say

to you is as somebody that was in the private sector for 30 years

of my life, and just saying what I did earlier, there is not anything

more painful than telling somebody they don’t have a job. We also,

it is my belief, have the strong obligation to be able to look the

American workers in the eye and tell them they are on a level playing field.

Mr. DINGELL. Mr. Secretary, I know you believe that.

Mr. EVANS. Right.

Mr. DINGELL. And, Mr. Secretary, I know that generally Americans insist on that. But, Mr. Secretary, it ain’t happening, and that

is the concern we have. We have always folks from the administration coming up—if it is not this administration, it is the previous

administrations, going right back to the day that I first took this

job, and they tell us about how—about free trade. Mr. Secretary,

I don’t see anybody down there insisting on fair trade.

Mr. EVANS. Yes. Well, let me give you an example. I have got an

example right here to use. Out of the manufacturing—because I

heard this comment all across America, Congressman. When you

went and talked to manufacturers across America, they want us to

open up markets around the world. They are not afraid to be with

the rest of the world. They want a level playing field.

Mr. DINGELL. Absolutely, Mr. Secretary. They want us to open,

but they don’t open theirs. Chinese manipulate the dollar——

Mr. EVANS. Right.

Mr. DINGELL. [continuing] and their currency. The Japanese do

the same thing.

My time has expired.

Mr. EVANS. Okay.

Mr. DINGELL. But it just ain’t—we just ain’t getting treated fairly, Mr. Secretary.

Chairman BARTON. The gentleman’s time—do you want to respond to Mr. Dingell before I go to Mr. Hall?

Mr. EVANS. No. We can just go on.

Chairman BARTON. Mr. Hall is recognized for 8 minutes.

88

Mr. HALL. Mr. Chairman, thank you. First, I want to thank my

fellow Texan for the good job he is doing and for the time that he

gives to this President, to this country, and to this committee. My

friend—and Markey really is my friend—we—I criticize him in his

area, and he criticizes me in my area, and we help one another get

elected that way.

He complained about access. I think you are the first Secretary

of Commerce I have seen since I have been here, and I thank you

for it, for the 4 hours you are going to give us today. That is more

time than all the rest of them put together, so far as I know, other

than Bud Brown. I think Bud Brown was here on one occasion.

But thanks for being available, and thanks for when you are

available making something happen. That has been my experience,

and I hope it has been the experience of the others here.

You know, we are an energy state, and we have gone through

some hard times. We have—I represent not only an energy state,

but an energy district. I have Tyler, Kilgore, Gladewater, Longview, and much of the oil patch. And, you know, the independents

find it, and they sell it, then, to the majors.

But the independents—we are talking about jobs. They are out

of jobs, too, and that is a job profession that has atrophied away

in the oil patch and in the Texas and all of the energy States. Ten

of us produce energy and the rest of them use it, and that is how

outnumbered we are on legislation.

But I guess one thing that is very important to me and important to us, and important I know to you as the Secretary, is energy

consumption, increasing on—an increasing ratio of energy consumption as compared to the increasing production of energy, particularly in our area.

I guess your report explains—and I can’t tell you just exactly

where it is, but that energy consumption is expected to rise by 32

percent by 2020. By what percent is energy production expected to

rise? Do you have any figures on that, or something in the back of

your mind, or something at your elbow that you——

Mr. EVANS. Well, you know, Congressman, all I would say, I am

sure that oil production is not going to be rising, and it is very

doubtful domestically that natural gas production will be rising,

unless we begin to open up some of the lands in this country that

are not now open to producers and the industry.

Mr. HALL. How comfortable are you with our source of energy

supply?

Mr. EVANS. Well——

Mr. HALL. And the fact that we—what we bring in may be 60

percent of it almost from countries that I don’t feel comfortable

with.

Mr. EVANS. Right. You know, I am not comfortable that we continue to become more and more dependent on sources of energy

outside of the United States of America. That has been growing

certainly on the oil side for quite some time now, and now it is beginning to grow on the natural gas side.

And, you know, I think you talk about our needs to develop our

energy supplies here in America. I think that is very important,

certainly something that I heard a lot about when I was talking to

89

manufacturers all across America. They were asking—they were

concerned about available and affordable energy.

And as the President laid out when—in the spring of 2001, one

of the—probably one of the second largest oil fields in North America, the strategic petroleum—ANWR is not available to us. And you

talk about exporting jobs and outsourcing jobs——

Mr. HALL. It is not available. It is not politically available to us.

Mr. EVANS. That is correct. And it is—you talk about outsourcing

jobs, we are outsourcing jobs, and that we are not opening up the

lands of America to the industry to go develop the energy supplies

that we have, and in a very environmentally sensitive kind of way

that we still have vast energy supplies in this country that we

could be developing with our workers that would be providing good

jobs for our workers in the manufacturing and mining sector of our

economy that, quite frankly, are just closed because politically, as

you say, ANWR is not available. And there are a lot of lands in the

West that are not available.

Mr. HALL. I don’t really understand why ANWR is not available.

I don’t know what they are hiding up there. It is dark most of the

time. I don’t see how out of 19 million acres we couldn’t, if it would

keep our kids from having to get on a troop ship and go take some

energy away from someone when we run short of it, why we

couldn’t work on at least 1,500 or maybe 2,000 lousy acres up

there.

I don’t think anybody could even find it if they would go searching for it today. So that is one answer, but that is not a political

answer, because we are blocked over on the other side by it. And

we have an energy bill that languishes over there that is two votes

short of solving a lot of the problems that you have outlined here

and answers that you have given. If we could just get that energy

bill kicked loose, I have a part in it, the ultra deep part, that can

solve for a long time in the future the gas needs of this country and

of energy-seekers everywhere.

It has passed the Conference Committee twice. It has passed it

last session. It has passed it this year, but we don’t have a bill. So

we don’t have anything. The fact that we have negotiated that and

worked it to the point to where it is with the help of Republicans

and Democrats who want to solve the energy problem, but it is

being blocked across the aisle from us here.

So I don’t know, I guess I would ask you, what is industry doing

to address this? And what is our government doing to address it?

We have to do our part up here politically to pass the bills to get

them to the President’s desk. We have a President that will sign

a good energy bill, and that is different than what we have had the

last 8 years. We would have to override it, and we don’t have that

problem now. We have a President that will sign it.

We have a Vice President that understands energy. We have a

Secretary of Commerce that is drenched in energy, that knows

about energy. We are in great shape to keep our kids from having

to decide what branch of the service am I going into, rather than

what university can I attend, or what can I do with my life.

That is what is on the line when we don’t solve our energy crisis,

when we don’t deliver to this President a bill that he can sign that

90

is a good energy bill. So what do you see that you can do, or that

we need to do?

Mr. EVANS. Well, I think we need to continue to push very hard

to pass an energy bill, Congressman. And I would say to you that—

just putting it in perspective, when we went through an energy crisis back in the late 1970’s and early 1980’s, we had over 4,000 rigs

running in America, 4,000 drilling rigs to drill for oil and gas in

this country.

Today, we have slightly over 1,000, and the reason we have

slightly over 1,000 to a large degree is because there are many

areas of this country that are just not accessible to the industry of

being denied access because of regulations and restrictions and

rules that are in place that don’t allow easy access—not only the

vast lands in the West, and the Rocky Mountain region of our

country, but, as we have already talked about, ANWR. I mean,

ANWR—that discovery would be the—many people believe it would

be the second largest oil field discovery in America.

Mr. HALL. And add to that the ultra deep thrust——

Chairman BARTON. The gentleman’s time has expired.

Mr. HALL. Thank you. I thank you, Mr. Secretary.

Mr. EVANS. Thank you.

Chairman BARTON. I am going to ask unanimous consent—under

the rules that we operate, we alternate between minority and majority based on order of appearance with the senior committee

member and ranking member going first, and then the subcommittee, if it is a subcommittee. We have several members that

deferred opening statements.

I want to give them an opportunity to ask some questions to the

Secretary, since they didn’t make opening statements. But if we go

strictly by the rules, that requires unanimous consent. So I am

going to ask unanimous consent that Karen McCarthy be recognized for 8 minutes to ask some questions. Is there objection? Hearing none, so——

Mr. MARKEY. May I——

Chairman BARTON. The gentleman from Massachusetts reserves

the right to object.

Mr. MARKEY. I reserve the right to object, Mr. Chairman. And

just to make this point—that if you had made that motion at the

beginning of the hearing—that is, that members who spoke for 3

minutes in an opening statement would then give up their right in

order to ask questions for 8 minutes if they had given up their

right, because that is the way this, in effect, is going to wind up,

then I think most members would have waived their rights to the

opening statement——

Chairman BARTON. Well, I am——

Mr. MARKEY. [continuing] if that was the way in which you

were——

Chairman BARTON. I am learning.

Mr. MARKEY. So the way this is now transpiring—and I will not

object—the way this is going to transpire is that members who

gave 3-minute opening statements will not be asking questions,

and the members who did not will be given 8 minutes to ask questions. And I just think that as a matter of procedure that if every

91

member had known that before the hearing had started, then it

would have been a different result in terms of——

Chairman BARTON. I understand. I am learning, and I am asking

unanimous consent. And I am going to try to work everybody in,

and it is just—we are trying to get this done. But there are going

to be some people on the majority side that didn’t give an opening

statement and are not going to get to ask questions, no matter how

I do it, because the Secretary has to leave to go see the President

around 1.

Mr. MARKEY. I appreciate that.

Chairman BARTON. But I am also going to keep the hearing

going while we are voting.

Mr. MARKEY. And I am not going to——

Chairman BARTON. I am going to miss votes.

Mr. MARKEY. I am not going to object, and I am not—and I am

going to yield back, but only to say that since the Secretary is only

going to be here for 24 more minutes, and if you recognize three

people at 8 minutes apiece, that will be the remainder of the hearing. So everyone else who is sitting here is——

Chairman BARTON. Well, I am going to revise my unanimous

consent request to recognize the gentlelady from Missouri for at

least 3 minutes to ask——

Mr. MARKEY. Well, again, I am not making—I am at this point

just going to yield back my time with no objection to the procedure

which you have now put in place.

Chairman BARTON. All right. The gentlelady is recognized, and

hopefully you will give us back some time. How about that?

Ms. MCCARTHY. I thank you, Mr. Chairman, and Mr. Markey,

and I will definitely try to do that.

Mr. Secretary, thank you for taking time to be with us today,

and I wanted to focus in on your testimony on page 4 when you

talk about four key objectives, and reference an article I read by

Robert Reich, your predecessor in this job of labor and love, to see

if some of the ideas he poses for helping the economy might be ones

you are considering as well.

When you talk about ensuring our economy remains the most

competitive in the world, there is—you know, what is it that you

are planning to do to do that? Is it things like, you know, taking

another look at the businesses that get investment tax credit for

buying technology that substitutes for labor? Are you going to continue that investment tax credit? Or perhaps repeal the tax credit

and instead give businesses a new jobs tax credit?

In other words, you know, help companies that are trying to create new jobs rather than maintain an investment tax credit for

buying technology that takes away jobs?

Your second point is to promote America’s immense innovative

capacity. Well, what are we going to be doing in order to achieve

that? Because businesses who outsource right now, you know, can

deduct from their taxable incomes the full cost of outsourcing. So

that does not create new jobs.

What about limiting production to, say, 50 percent? So there is

still an incentive, but we are not devastating our innovative capacity right here at home. You also mentioned, point three, preparing

our workers for the 21st century economy. If the economy does not

92

improve, the jobs you are preparing them for are as sackers at grocery stores and other menial work. How do you propose to prepare

them for jobs that actually will be good-paying jobs?

And especially buffer workers against income loss—you have got

a lot of folks having a hard time finding work. Unemployment insurance should be extended. And also, are you considering wage insurance, paying, say, half the difference between the old and the

new wages for up to 2 years to help with this transition?

And your fourth point is to promote strong commercial ties with

95 percent of the world’s population. Let us not have that be a oneway connection and one-way tie. Let us be sure that is a double tie,

back and forth, in what you are doing to achieve that fourth goal.

And I will await your response.

Mr. EVANS. Thank you very much, Congresswoman. You will be

glad to know that it is not a one-way street in your State. I know

that in your State of Missouri there are about 114,000 good Missourians that work for foreign-owned companies.

In addition to that, there are certainly plenty of workers in your

State that supply those companies as well. And so the point that

I have tried to make throughout this morning, the chances I have

had to speak, was that trade is a two-way street. It is a bridge

which crosses jobs and products and services, etcetera.

So there are a lot of foreign companies that are here in America

employing some 6.4 million workers. On top of that, trade supports

about 10 million more workers. On top of that, those that work for

companies that export generally have wages that are some 18 percent higher than other wages across the economy.

And so, you know, that is why I think we need to continue to engage the other 95 percent of the people in the world. When you

think about it, only 5 percent of the people live here. I mean, 95

percent of the customers live outside the borders of America. And

so if we are really going to grow this economy and increase the

standard of living here in America, and grow more jobs here in

America, it just seems to me we need to continue to engage the

greater world.

In terms of competition, how are we going to—we ought to always be thinking about, how does it make it easier for our companies to compete domestically and internationally and not harder?

And, of course, the President has laid out a six-point plan. What

he has said is we need to make the tax cuts permanent.

I think one of the important points to make about the tax cuts,

because I heard a lot about it being a tax cut for the rich, I think

one of the very important points that people always need to keep

in mind that seems to get lost is that when you reduce the highest

marginal tax rate——

Ms. MCCARTHY. Mr. Secretary, if I might interrupt, I concur with

where you are going, but are you going to propose like a new jobs

tax credit? Some of the things that I raised in my question? Or, you

know, the deduction for outsourcing, limit the deduction to, say, 50

percent? Could we have——

Mr. EVANS. What we have proposed is—what the President has

proposed is out there, and that is what we are proposing. We will

continue to work with Congress on other kinds of ideas. I am not

here with any specific proposals with other kinds of ideas. What I

93

have said, though, is just my—my belief is the administration’s belief, that, look, we don’t—we don’t leave anybody out in America.

And if there are programs that we need to continue to look at

and strengthen like the Workforce Investment Act, I think it is

very important that that Act be passed. You know, there are some

$23 billion we have out there that can be used to train people to

deliver the kind of skills that they need to meet the demand for

jobs that are in our economy today.

So there are good programs out there that we can continue to

work on, and——

Ms. MCCARTHY. Should we extend our unemployment insurance?

Mr. EVANS. We will continue to work with Congress. We

haven’t—I didn’t come up here with a specific proposal to extend

unemployment insurance. We will work with Congress on all the

kinds of ideas that Congress brings to——

Ms. MCCARTHY. Will that include considering wage insurance for

people whose, you know, old and new wages are very different?

Mr. EVANS. The administration does not have a position on that.

Ms. MCCARTHY. Take a look at it. There is a lot of people out

there that—yes, they are finding another job after they are laid off

from their other one, but it isn’t nearly the wage that they had,

and it is very hard to sustain a family in that new position.

I recommend this article to you. I will get a copy over to your

staff, because I think we need to be looking at new ideas to really

accomplish stability and hopefully then improvement of our economy.

And, Mr. Chairman, out of respect to your request, I would yield

back the rest of my time.

Chairman BARTON. We thank the gentlelady. And we recognize

the gentleman from Michigan, Mr. Upton.

Mr. UPTON. Thank you, Mr. Chairman. I will not use my 8 minutes, I promise you that. I have three brief questions. I am going

to ask if you can answer them all in one quick answer. That would

be terrific, Mr. Secretary.

First of all, I am very anxious to hear about the status of filling

the new Assistant Secretary for Manufacturing, in terms of where

we are in that.

Second, I want to ask about steel. We have had so many concerns, particularly with small tool and die industry, and other manufacturers in southwest Michigan, about the price shocks in steel.

I am just curious to know what the administration is planning to

do.

And, last, if you can just touch on a little bit—as one that supported the entry of China in the WTO, they are going to play by

the rules. I am anxious to hear some concrete examples of where

we are talking to the Chinese about playing by the rules, what do

we see in the next number of weeks ahead. I know you have got

a conference I think with the Chinese as early as next month. If

you can just hit those, I will yield back the balance of my time once

I hear your answers.

Mr. EVANS. Yes. Thank you, Congressman. First of all, on the Assistant Secretary of Manufacturing, we are continuing to work on

that. Let me just say that this is an industry I spent 30 years of

my life in, and so I know the industry very well. I know the chalVerDate 11-MAY-2000 13:38 Jun 17, 2004 Jkt 000000 PO 00000 Frm 00097 Fmt 6633 Sfmt 6602 93299.TXT HCOM1 PsN: HCOM1
94

lenges of the industry. I am responsible for this department. I am

responsible for the results of this department. And I am responsible for the implementation of the recommendations that are in

the manufacturing report.

We will continue to pursue putting in place an Assistant Secretary of Manufacturing. We have only had since late January to

work on that, because it was not authorized until then. And so this

is an effort that we have been engaged in for about 2 months now.

But that is not slowing down the implementation of the recommendations that are in the manufacturing report.

As to steel, it is an area that I am concerned about. I have seen

the spike in scrap steel prices around the world. I know what impact that has on our own small, medium, large manufacturers here

in America. What I think we need to take a very hard look at is

how other countries in the world are responding to that.

Are they starting to shut down their exports of scrap to the

world, which puts more pressure on the American market? If they

are doing that, I think that is something we need to take a hard

look at and just see if there are any steps that we can take.

I am also concerned on that same subject when it comes to

China, and are they slowing down the export to us of coke in an

unreasonable kind of way, because, as you know, coke is a very important raw material in the processing and manufacturing of steel.

And so if they are holding that back from us in some—by putting

some artificial barrier or too high an export tax, or whatever it

might be, we need to take a very aggressive and hard look at that,

and we are.

With respect to China in general, I have been over there twice.

The last time I was over there I was very, very clear about our concerns about their enforcement of intellectual property rights. There

are reports out right now that over the course of a year there are

some $20 to $24 billion of loss to our industry because of theft and

counterfeiting of intellectual property.

For example, I have brought here two disks. One is software that

you can buy in China for $20. You can buy this same one in the

United States for $4,000. That is totally unacceptable. And as you

mentioned, I have got the Joint Commission on Commerce and

Trade coming over here in April. We have had candid discussions

and frank discussions that we expect results.

Ambassador Zoellick, myself, Secretary Veneman, sent a letter to

the Chinese delegation just this last week saying to them that if

you are going to come to the U.S. and have this discussion, we

want results. Bilateral discussions are interesting, but what we are

really interested in are results. And so as was said earlier, I think

what we are focused on is enforcement of our laws on others or enforcing their laws and rules.

Mr. UPTON. Well, thank you. I look forward to working with you

on that issue.

I yield back my time.

Mr. SHIMKUS [presiding]. Thank you. And I would like to recognize Mr. Brown. I think you had an opening statement, so 5 minutes.

Mr. BROWN. Yes, and I will probably go less than that. Thank

you, Mr. Chairman.

95

Mr. Secretary, about 3 weeks ago, I was asked to speak to the

Acron area machine shop owners and operators. About 60 men and

women who own small machine shops showed up. Right before I

spoke, a gentleman walked up and put this on—put this pile of brochures, leaflets, auction notices, on my table. And I would just to

share—I didn’t know what they were at first. I would like to share

them with you.

First one from Chicago, high tech manufacturing plant closing.

This is a newsletter, an auction leaflet, on a fire sale, on a going

out of business sale. From Pittsburgh, a plant closed, everything

sells. From Mansfield, Ohio, two complete stamping and machine

tool shops being dismantled and sold. From Charlotte, North Carolina, plant closing, everything must sell.

From Marion, Ohio, complete shop closeout auction. From Cuyahoga Falls in my district, Ohio, absolute auction. From Scottsboro,

Alabama, precision C&C shop—job shop downsizing because of

outsourcing. This is—he said this is 1 month of these—that these

shops are getting it.

Now, these shop owners, overwhelmingly Republican, overwhelmingly voted for George Bush they told me, they don’t think

you get it. They don’t think you understand that there are tens of

thousands of people who have lost their jobs in these shops alone,

and tens of thousands, maybe hundreds of thousands of people,

that believe that they are going to lose their jobs due to trade policy, due to outsourcing, and due to the fact that we are—that you

can’t appoint or you haven’t appointed a manufacturing job czar,

even though you—the President announced it in my district on

Labor Day in Richfield, Ohio.

Now, my question is: why not support Crane-Rangel? Crane-Rangel has the endorsement of the Manufacturer Association of America—the National Association of Manufacturing, has the endorsement of the AFL-CIO, it has got 170 bipartisan co-sponsors, roughly half and half. Please tell the President to support Crane-Rangel.

Why is he not supporting it?

Mr. EVANS. Well, the President has laid out his economic jobs

and growth agenda, and he has been very clear about what the elements of it are. We believe that if we pursue that agenda it will

continue to create the conditions for a growing and stronger economy.

Mr. BROWN. But the President’s plan, Mr. Secretary, is to give

incentives to all kinds of companies, equally giving those incentives, in fact giving more incentives, to bigger companies and

smaller companies, and not rewarding U.S. production. Crane-Rangel says if you do 70 percent of your production in the U.S., you

get 70 percent of the tax break. If you do 100 percent, you get 100

percent. If you do 10 percent, you only get 10 percent. What is

wrong with that concept to help these job shop owners all over the

country that are seeing their shops close?

Mr. EVANS. Well, let me say, Congressman, that I think, again,

the economy is strong and getting stronger. If you look at the manufacturing indicators over the last four or 5 months, they are powerful numbers. The ISM Index has been up over 60 percent, or over

60 for the last 5 or 6 months, which is a very powerful number.

96

I just got back from a meeting with the National Association of

Manufacturers. They are all telling me that they haven’t seen their

order books so full, so strong, so powerful, and——

Mr. BROWN. These are different manufacturers from the ones

that I have seen. Let me ask one more real brief question. Jordan

Free Trade Agreement had strong environmental and worker protection provisions, supported unanimously by the House. Tom

Donahue, chairman of the Chamber—President of the Chamber of

Commerce, said trade promotion authority should be

unencumbered by requirements to advance labor, environmental,

other social agenda objectives.

Two weeks ago, Ambassador Zoellick said because of Jordan FTA

trade between the U.S. and Jordan has nearly tripled in only 3

years. Who is right, Ambassador Zoellick saying Jordan is working

with environmental and labor standards, or Chamber of Commerce

President Tom Donahue who says they are bad? Who is right?

Mr. EVANS. Well, I didn’t see—I haven’t looked at the context of

what Tom Donahue was saying. I do think the agreement with Jordan is working well. We are continuing to see our trade with them

increase and——

Mr. BROWN. Good.

Mr. EVANS. [continuing] they will——

Mr. BROWN. Well, I hope, then, that you could advocate a similar

kind of agreement with CAFTA and with FTAA with labor and environmental standards as strong as Jordan, so that we really could

see that economic growth coming out of those Latin American countries.

I yield back, and I thank the chairman.

Mr. EVANS. Thank you, Congressman.

Mr. SHIMKUS. Okay. Thank you. The gentleman yields back.

Mr. Secretary, it is—I always try to——

Mr. BROWN. Mr. Chairman, I had 45 seconds. I am sorry. Mr.

Stupak just wanted to make sure that his questions are in the

record, if you could get unanimous consent on that. And I don’t

know if he can come back, but he would like that in the record if

he doesn’t. Okay. Thank you.

Mr. SHIMKUS. Is there objection? Hearing none, so ordered.

Again, it is great to have you here. And I think you brought up

a lot of great points. Obviously, we are at a theatrical point in the

year where we are going to have a lot of accusations flying back

and forth. But you can’t really dispute kind of some real numbers.

The 5.6 unemployment rate is as low as we have seen in years.

When I mentioned the numbers, that we have got more people

employed in this country than in the history of the country, people

really don’t believe me. We do have a perception issue out there.

And when I taught high school psychology, perception turns into

reality for a lot of people.

And it may not be that the individuals’ jobs are lost, but they

fear their neighbors’ jobs, or they fear someone else’s job loss. So

you did, in your testimony, talk about some great—some progress

being made, although it is never enough. When I talk about this—

and we mentioned this yesterday—21,000 new jobs last month,

well, it is not 125,000 new jobs, but it is 21,000 new jobs.

97

And those 21,000 people who have jobs now are better off, because—and that is better than no job increase, and that is better

than job decreases. So we have got to keep this in perspective.

Tell me how the cut—with the focus on small business and reducing the tax rates for individuals, how that helps small businesses.

Mr. EVANS. Well, Congressman, as you know, no doubt, small

businesses create 70 percent, 70 to 75 percent of the new jobs in

America. And when you cut the highest marginal rate, about 80

percent of that savings goes to—70 or 80 percent goes to small

business owners in America, the real job creators of this economy.

And so that is how—by lowering rates, you see, there are some

23 million small businesses all across that America that pay their

taxes through their individual tax return. And so as you lower

those taxes, that means that they have more money to hire people

and grow their businesses.

Mr. SHIMKUS. Isn’t that because they are not incorporated, they

are sole proprietorships or——

Mr. EVANS. Sole proprietorships or subchapter S or, you know,

partnership, that is correct. And that is lost in this debate. It gets

lost in the debate. There is always the discussion of it is a tax cut

for the rich. Well, you know, these people they are talking to are

small business owners that are responsible for hundreds of thousands, millions of workers in our economy, responsible for their

livelihood, for their families, have great responsibilities, that are

paying their taxes through their individual tax return, and not as

a C corporation, as a corporation paying corporate tax rate.

Mr. SHIMKUS. Thank you. And I know that there is a tremendous

focus on manufacturing. I talk about it in my district all the time.

I have a list of, you know, 500 manufacturers in southern Illinois.

People would not believe that we have 500 manufacturing facilities.

It is easy for the public to see when a factory closes, because they

put the chain, they close the gate, and it is empty. I always talk

about if a manufacturing company in my district exports 10 percent

of their product, then you could actually say that 10 percent of the

workforce is attributed to foreign trade. So whether it is a tire company or an oil filter, air filter, they are all in my district, or paper

products that may go overseas. The overseas part of the trade is

a job employment aspect in the manufacturing that is remaining

in this country.

Talk about the importance of the overseas market to our country

today.

Mr. EVANS. Well, the overseas market—the export sector of our

economy was responsible for about 25 percent of the growth in the

1990’s, 25 percent of the economic growth. Those individuals across

America—American workers that work for companies that export—

make—are about 10 million employees directly. But, you know,

there are a lot more that are connected to it.

Take the export of a tractor from the United States to some other

country. I know that when you export a tractor, a Case New Holland tractor, for example, you export a Case New Holland——

Mr. SHIMKUS. We are John Deere folks in Illinois.

Mr. EVANS. John Deere. Why don’t we take John Deere. It is

pretty much about the same. When that tractor leaves America,

98

there are about 250 parts on it that were manufactured and made

someplace else, not inside the plant itself, but suppliers to that

John Deere or Case New Holland or Caterpillar, or whoever it

might be.

And those jobs get lost in some of these analyses and some of the

calculation. And so when I say that there are 10 million jobs directly that you can tie to exports in our economy, I am convinced

there are many, many, many more out there. There is the suppliers

that are supplying these exporters.

So that is—you know, it is a critical part of our growing economy. And as I say, it is the reason that we saw our economy grow.

It was 25 percent of the growth in the 1990’s.

Mr. SHIMKUS. And trade negotiations for me is tariffs, tariffs,

tariffs. And it is an additional cost of doing service. If you want to

get into that company—a tractor is a perfect example of how we—

if we want to sell a John Deere tractor to Chile, we actually sell

it through Canada.

Canada has a free trade agreement with Chile, so these are sold

through a Canadian firm to Chile instead of our ability to have direct access to that market, because we don’t really have a level

playing field on the—or negotiations for a reduction in tariffs.

I also, when I have a chance, I—Grant Adonis, who works for

you, I have had a lot of relationships with the steel issue, on the

trade debate. I just want to give you a lot of kudos. I think he does

a great job, and he has become a good friend, and he is——

Mr. EVANS. Good.

Mr. SHIMKUS. [continuing] working in the trenches. Last question has to deal with productivity. My 500 manufacturing firms,

when they want to stay in this country and they want to compete,

in effect, how they can still produce because of our high taxes, our

highly litigious society, all of the other costs. They automate and

they become more productive.

Can you talk about the productivity debate that has fallen in our

country, whether that is good or that is bad? It is good because it

keeps my companies in southern Illinois if they become more productive.

Mr. EVANS. Well, first of all, I think that productivity growth in

this economy has been remarkable in the last several years. And

those that deserve the credit are the workers on the plant floors

and the factory floors, the people that have their hands on it,

touching it every day, that are coming up with the innovative ideas

to increase the productivity of America.

Over the last 2 years, productivity growth in America has grown

at the fastest pace that it has in 40 years, which is absolutely remarkable. And, you know, that has been a challenge, though, of

course, in the short term as to job creation. But productivity

growth is healthy for this economy. It means higher standard of

living for the American people. It means more capital to invest in

the years ahead, which will in turn mean more jobs in the years

ahead.

But in the short term, in terms of job creation, yes, it does create

a challenge. But as we work through this ongoing recovery and

strengthening recovery, no doubt productivity numbers will begin

99

to come down some, and we will see growth in this economy. But

it is quite remarkable.

I mean, again, we are the envy of the world to have the kind of

productivity numbers that we have.

Chairman BARTON. We are going to recognize the gentleman

from Georgia, Mr. Norwood, for 8 minutes, or such part of that as

he may consume.

Mr. NORWOOD. I will probably need it all. Thank you, Mr. Chairman.

And, Mr. Secretary, I am delighted you are here.

Mr. EVANS. Thank you, sir.

Mr. NORWOOD. I can easily associate myself with the chairman’s

remarks. I think you have a very good Secretary. The biggest problem I see is that you aren’t running USTR also. If we could have

you do both, I think the country would be better off.

I am going to go through a statement here, and there are some

questions built into it, because of our time limitation, but I am very

anxious about all of those questions and I will ask you to verbally

answer as many as you can, and those you can’t in writing.

Mr. Chairman, I am delighted that you are having this hearing

today to focus this committee on the state of our country’s manufacturing industry. Many of our great manufacturers have roots in

Georgia, and I am proud to represent them. I have taken time to

sift through the Commerce Department’s strategic plan to promote

U.S. trade and industry, and I have to tell you for the most part

I am very pleased with your suggestions.

But I also have some concerns that I would like to have us address. Your report expressed the need to enforce trade agreements

and combat unfair trade practices. I believe you mean that. I know

you mean that; I couldn’t agree with you more.

But having said that, I am pretty disappointed with the lack of

action on a number of unfair practices. For starters, there is this

problem with China’s manipulating their currency, and I would

like for you to address that at some point.

The undervalued yuan has contributed to our trade deficit with

China. As you know, that has risen from 30 billion in 1994 to an

estimated 126 million in 2003. It has hurt U.S. production, and employment in several U.S. manufacturing sectors, particularly textiles, because they are forced to compete domestically and internationally against an artificially low cost of goods from China. At

some point, I would like for you to explain to me, or tell me if we

are going to take any action on this issue in 2004.

Now, second, strengthening the U.S. patent system is also important, and holding our trade partners to the same laws is vital for

some of our industries to grow. One case where that is not happening and could prove to be devastating to my home State if it

is not fixed is with the rug and carpet industry. Another—again,

one of our great industries in Georgia with strong roots, the U.S.

carpet industry produces 45 percent of the world’s carpet and has

a $12 billion per year presence at the mill level.

The mills produce in this country about 2 billion square yards of

carpet annually, in 230 plants, Mr. Chairman, located in 21 States,

and a workforce in excess of 70,000 people. In Georgia, 80 percent

100

of the domestic industry is located within 65 miles of one little

town.

Now, despite these robust numbers and significant economic

input, the carpet and rug industry faces tremendous challenges

from abroad, particularly China. By far the most immediate problem facing us across the country is the theft of intellectual property

rights, primarily—well, India, too—China and India.

One of my questions is: can we expect action to be taken on this

in 2004?

Mr. Secretary, all of us in Georgia are sending you a letter very

soon asking you, in conjunction with the U.S. Trade Representative, to give a renewed priority to intellectual property theft in the

context of the upcoming DOHA trade round. And I might mention

at this point, the last time we had a DOHA trade round we wrote

the U.S. Trade Representative a letter, which not only did they not

even consider what we wanted them to do, they did the absolute

opposite thing in non-reciprocal agreements, which is what Mr.

Dingell is talking about.

If we are going to get all tariffs to zero in this country, then let

us have reciprocal agreements with these people around the country. It doesn’t do any good for us to lower—for example, lower tariffs on small trucks to zero when we let other countries keep their

tariffs on them. I don’t understand that. I am not smart enough to.

But I do know that the Trade Representative went right to

DOHA 2 or 3 years ago and signed a non-reciprocal trade agreement, which I just can’t catch on to that. Maybe you will enlighten

me.

I have also great concerns about outsourcing, and I have been

worried about that before 60 Minutes had their little report. I

would like to hear from you a little bit about that, and I would like

to start, then, for your answers with this question. I noticed in The

Wall Street Journal today Walter Riston had an article in there

that said, ‘‘The balance of jobs we import from abroad greatly exceeds the jobs we export from abroad.’’ The balance of jobs we—

okay. True or false?

Mr. EVANS. Well, you know, I don’t think we know the absolute

answer to that, Congressman, and let me—but I want to talk to

that very important point.

Mr. NORWOOD. Good.

Mr. EVANS. First, let me talk about unfair trade practices and

enforcement and getting other people to—because we ought to be

able to look our American workers in the eye and tell them, ‘‘You

are on a level playing field. We are all playing by the same rules.’’

It is not any more complicated to me than that.

And I must admit to you that, having been Secretary of Commerce now, and honored to serve this President and this country

for 3 years or so, I go around the world, and we have nice bilateral

discussions, and they are interesting discussions. But I am more—

I am from the private sector, and I want results. I don’t want to

have a lot of interesting discussions. I want results.

I expect when we go talk to other countries, and we point out deficiencies in their enforcement, point out deficiencies in their practices that are creating this unlevel playing field, there is action,

and there is not just a lot of talk about it.

101

And that is one of the outcomes of the Manufacturing Report. We

are—two areas. One is we have established what we call the Unfair

Trade Practices Task Force, and this task force has the charge to

look at other countries around the world and try and identify the

unfair trade practices and not sit and wait for industry necessarily

to come to us.

For example, we are going to monitor 30 products that are coming in from China to see if there are any signals that those send

to us that are a red flag that we ought to look into further that

identify unfair trade practices.

Mr. NORWOOD. Mr. Secretary, that is why I bragged on you. I

know you are doing that. But the truth is, they are breaking the

rules out there faster than you can catch them.

Mr. EVANS. Well, I know. And let me tell you about the other

unit. The other unit we are putting in place is called the Unit of

Investigation and Compliance. The lacking area, as I have seen it,

has been in investigation.

We go over there, and we can talk about it, but you have got to

go put the case on the table in front of them and show it to them,

and say, ‘‘Look, you know, what we have done before is we will go

to retail outlets’’—and I will find—here is, you know, a CD that

they sell for $20 over there. In America, it is $4,000. Well, what

you have got to do is you have got to go over there and build the

case for them.

Here is where they are being manufactured. Here is the truck

that is carrying them to this store. And so we are in the process

of hiring investigators that will put together the case that you can

put on the table in front of them and tell them, ‘‘You have to fix

this.’’

And so instead of just a lot of, you know, nice conversations

about kind of trade policy, and you need to enforce your laws, we

are going to be much more aggressive in terms of investigation and

showing the facts to them. ‘‘Here is the case; now go take care of

it.’’ So those are two areas that we are going to be pursuing very

hard.

In terms of outsourcing, what I would say to you is one other

area within the Manufacturing Report—is a unit called the Unit of

Industrial Analysis. And the idea is to have a place where you can

go and develop good data, good information, where you know what

the facts are. There is a lot of numbers being tossed around about

outsourcing, and how big is it, how small is it. You know, nobody

knows for sure. There are a lot of forecasts what it might mean.

It is scaring people. It is concerning people.

Here is what I do know. I do know that foreign companies now

in America employ directly about 6.4 million. In your state, they

employ about 244,000. You have got in your State—you have got

Honda, you have got Mitsubishi, you have got Panasonic, you have

got Pirelli Tires. You have got companies like that in your State

that are employing workers in your State directly.

That doesn’t count the number of employees that actually support those companies. There is another however many that support

them. And the other thing I know is that we now have, with the

rest of the world, a trade surplus in services. In other words, we

102

are exporting more services to other countries than we are importing, and that includes India, and it includes China.

And so I don’t know what the exact number is. What I can tell

you is is that our export in services is about $250 billion. You could

equate that to about 1.5 million jobs or so. And so there is a tremendous amount of jobs in the service sector of our economy that

depend on exports. Are others kind of exporting to us? Yes, they

are.

But I am one that thinks that—I don’t know. I don’t want to say

on the record that I know that is true until I know what the facts

are. But that is why we have this new Unit of Industrial Analysis

in place, and industrial analysis, and they are working on that very

question.

They are really trying to get to some good, hard numbers as to

whether or not there are more foreign companies employing workers here in America than we are outsourcing someplace else.

Mr. NORWOOD. Mr. Chairman, since nobody else is here, may I

ask unanimous consent that he answer the other two questions

that I proposed earlier?

Mr. SHIMKUS [presiding]. Just remember that he is supposed to

be gone at 12:45, so we want to be respectful of the Secretary’s

time.

Mr. EVANS. Let me talk about reciprocal trade agreements, because I agree with you. And that is the way we laid out the proposal to take on goods and services, that everybody goes to zero by

the year 2015. We have made the commitment, and I know certainly I made the commitment to the textile sector of our economy,

that when we entered into trade agreements there would be reciprocal market access.

We have one of the lowest tariff levels of any country in the

world. Period. And it is time for the other countries to move toward

us.

Mr. NORWOOD. Well, there is no question in my mind, Mr. Secretary, you are saved. The problem is you are in that CITA group,

and there are folks in there that aren’t saved. They just simply do

not believe—you know, we are so busy trying to make a trade out

there and try to have a trade agreement that sometimes we make

a trade even though it is not in our best interest, just to say we

made a trade. And if you don’t have reciprocal versus non-reciprocal agreements, we don’t win.

Mr. EVANS. Right.

Mr. NORWOOD. We are just—could you comment on the China

manipulation of the yuan——

Mr. EVANS. Well——

Mr. NORWOOD. [continuing] on the patent system?

Mr. EVANS. Yes. Well, let me—two things. I will get to that in

just a second. The other is Grant Aldonas, who we talked about

earlier, he is in China right now. And he is with a group from the

textile sector of our economy. So they are over there, and they are

focused on it.

And they are telling them, ‘‘Look, we are going to have a meeting

in America in April, and it is the JCCT. But don’t—you know, we

are not really interested in meeting unless you are coming over

here with some results.’’ And so we are working on that.

103

Let me tell you that this whole—in terms of currency, I leave

that to the Secretary of Treasury. I mean, that is his area of responsibility, not mine. What I would say to you is this: that we—

when I go over there and talk to the Chinese leadership, we encourage them to work toward the kinds of economic policies, fiscal

policies, monetary policies, regulatory policies, that work here in

America, which are free market kinds of policies, free flow of capital, markets make decisions.

That is what—that is the kind of environment you create for

long-term economic growth in your country. And so certainly when

I go there, I talk very clearly about the importance of free market

forces determining——

Mr. NORWOOD. They are not listening too well, though. They are

still manipulating.

Mr. SHIMKUS. The gentleman’s time has more than expired, and

we do want to be respectful of the Secretary’s time. I don’t want

to run back over to the floor, because I have a big biannual Republican versus Democrat basketball game tonight, and I have to save

my strength to beat the Democrats.

So, Mr. Secretary, thank you for your time. We appreciate your

candor. We look forward to working with you as we move the economy forward.

And with that, I adjourn this hearing.

[Whereupon, at 12:42 p.m., the committee was adjourned.]

[Additional material submitted for the record follows:]

RESPONSES OF HON. DONALD EVANS FOR THE RECORD

QUESTIONS FROM HON. JOE BARTON

Question 1. What structural changes have shaped the competitive environment

over the past decade? How have U.S. manufacturers either initiated or responded

to these changes?

Response: There have been a number of changes, but clearly the information technology revolution and new business models which have led to a much more

globalized manufacturing process—from R&D to marketing—have had profound effects. These changes have increased competitive pressures but have also offered opportunities to expand productivity. Overall, the U.S. manufacturing sector has responded in an exceptional manner to this new environment. Productivity in manufacturing increased by 40 percent between 1995 and 2000. U.S. industries, both

services and manufacturing, have been the benchmarks for the rest of the world in

adopting new technologies and especially new business models.

This positive response by U.S. manufacturers has helped mitigate the recent

downturn in manufacturing employment. While U.S. manufacturing employment

began declining in July of 2000, the majority of our trading partners, including

Japan, China, France, and Germany, saw reductions in their manufacturing employment base greater than that experienced here. Today, the U.S. manufacturing sector

is expanding and adding jobs, with manufacturers creating 91,000 new jobs in the

past four months.

Question 2. Based on Department of Commerce roundtables with manufacturers,

what are the priority issues manufacturers believe need to be addressed to ensure

the competitiveness of U.S. manufacturing?

Response: The manufacturing initiative was developed largely from input we got

from manufacturers during the roundtables. The President has the following sixpoint plan that addresses the priority concerns of U.S. manufacturers. This plan responds to the issues that are of concern to manufacturers:

1. Enhancing government’s focus on manufacturing competitiveness;

2. Creating the conditions for economic growth and manufacturing investment;

3. Lowering the cost of manufacturing in the United States;

4. Investing in innovation;

5. Strengthening education, retraining, and economic diversification; and

6. Promoting open markets and a level playing field.

104

The Bush Administration continues to work with Congress to address many of

these concerns, particularly in areas such as health care costs, eliminating junk and

frivolous lawsuits, and passing a comprehensive, effective energy plan. Significant

action has also been taken within the Department to strengthen U.S. manufacturing. Al Frink, a successful manufacturing CEO, will be nominated to be the first

Assistant Secretary for Manufacturing. I am leading a Manufacturing Council comprised of leaders from the manufacturing sector to ensure that the voice of business

is heard, and that the government is coordinated to respond to it. We have expanded and strengthened our ability to attack the underlying causes of unfair trade.

We are analyzing market trends and foreign practices to identify potential unfair

trade problems at the earliest stage possible, including analyzing the 30 largest categories of Chinese imports.

Question 3. What would have happened to U. S. growth rates had President Bush

and Congress not enacted tax relief for American families in 2001?

Response: According to the Department of the Treasury, without the tax relief enacted by President Bush and the Congress, by the end of last year real GDP would

have been more than 3 percent lower and 2 million fewer Americans would have

been working.

Question 4. What would be the effect of the failure to make permanent the tax

reductions President Bush and the Congress enacted in 2001 and 2002?

Response: Allowing the President’s tax relief to sunset would have two negative

effects on the economy. First, in the short run, the effect of higher tax rates, an increased marriage penalty, and a smaller child credit would result in a significant

increase in the tax burden on the average American family. The Department of the

Treasury estimates that a family of four earning $40,000 would see their taxes increase by $915 in 2005. From the economy’s perspective, this tax increase would

likely reduce aggregate demand, decrease utilization of capital, and reduce employment and overall economic output.

Second, the higher taxes would have long-lasting impacts on capital formation,

labor supply, and, ultimately, income growth. Over time, the level of output is determined by the economy’s capacity to supply goods and services, as reflected in the

Nation’s stock of capital, labor, and technology. Allowing the current lower rates and

capital incentives to sunset would reduce the incentives to save and invest, which

would in turn reduce the amount of capital available to the economy. In addition,

higher taxes on labor income—the reward for working—would reduce incentives to

work. Together, these changes would have long-lasting effects on growth and standards of living.

Question 5. How does the cost of the tort system in the United States compare

to that in England? In the rest of Western Europe? In Japan? In China? How do

these differing litigation costs affect U. S. manufacturer competitiveness?

Response: The most recent survey of comparative tort system costs was done by

Tillinghast-Towers Perrin using 1998 data. The study compared tort costs as a percent of GDP in the United States with those of 11 other countries—8 Western European countries, along with Canada, Japan and Australia—and found that tort costs

as a percent of GDP in the United States were approximately twice as high as in

the other countries. In 1998, U.S. tort costs were 1.9 percent of GDP whereas tort

costs in Denmark, the UK, France, Japan, Canada and Switzerland were all estimated to be less than one percent of GDP. Only Italy, with costs of 1.7 percent of

GDP, rivaled U. S. costs. Data from China are not available.

As noted in an April 2002 Council of Economic Advisers’ report, the United States

bears the burden of an expensive and inefficient liability system through higher

prices, lower wages and decreased returns to investment, as well as lower levels of

innovation. The Manufacturing in America report released by the Commerce Department earlier this year observed that the tort system significantly undermines

the competitiveness of U.S. manufacturers. According to the report, the higher

awards in the United States have driven insurance premiums higher and, when liability premiums proved cost prohibitive, the insurance premiums have driven firms

out of business. And, there is little evidence quantifying the indirect costs of the tort

liability system. Indirect costs include litigation avoidance, unnecessary and duplicative medical tests, and the disappearance of products from the market. As a result,

they understate the impact on manufacturers and the cost to the U.S. economy as

a whole.

Question 6. Please describe what you learned during the roundtables from Manufacturers about how lawsuits affect their business.

Response: During the roundtables, one of the most frequently cited issues was tort

reform. Manufacturing leaders pointed to a system that drives insurance costs higher even for firms that have never had lawsuits filed against them or put hazardous

materials on the market. Manufacturers pay ‘‘tort taxes’’ in several ways. ManufacVerDate 11-MAY-2000 13:38 Jun 17, 2004 Jkt 000000 PO 00000 Frm 00108 Fmt 6633 Sfmt 6621 93299.TXT HCOM1 PsN: HCOM1
105

turers pay as product liability and other tort claims increase the cost of general liability insurance. These premiums alone can run as high as 30% of the coverage

itself. Manufacturers also pay when there is no merit to claims and they ultimately

prevail in litigation. The indirect costs of tort litigation are also significant—particularly time spent by managers and employees. The basic reason for the manufacturers’ concern is the dramatic increase in tort claims and awards. The tort system significantly undermines the competitiveness of U.S. manufacturers. Manufacturers

stated that common sense legal reforms are crucial to bolster manufacturing competitiveness. Tort reform should focus on three areas. First, there is a critical need

to cap medical malpractice awards in ways that ensure that those deserving of compensation get compensated. The second is the need to restore the balance that previously existed in tort law. The third area is the need to resolve litigation over asbestos-related injuries by ensuring that those deserving compensation receive it.

Question 7. What should our long-term strategy be for acquiring additional

sources of natural gas?

Response: The Administration supports enhanced production in our own hemisphere and a reexamination of restrictions on natural gas exploration and production in the United States. The Administration has also encouraged the development

of liquified natural gas (LNG) terminals to increase U.S. capacity for LNG imports,

and supports the building of a new natural gas pipeline from Alaska to the lower

48 states.

Question 8. What is the implication for U.S. business of more stable and reliable

sources of energy? How can Congress help to achieve these goals?

Response: Industry uses more than one-third of all the energy consumed in the

United States Although the Nation’s ‘‘energy intensity,’’ or the amount of energy required to produce a dollar of GDP, has declined and is expected to decline further

over the next decade, energy prices and security of supply still affect U.S. businesses, particularly manufacturers. To aid our businesses, we should take action to

encourage industry to modernize our energy infrastructure, increase energy supplies, and improve energy conservation and efficiency. For the past two years, the

President has called on Congress to pass his National Energy Policy to address

these issues.

Question 9. Your report [Manufacturing in America] explains that energy consumption is expected to rise by 32% by 2020. By what percent is energy production

expected to rise? If there is a disparity, what is industry doing to address it? What

is the government doing to address it?

Response: According to the Department of Energy, primary energy production in

the United States in 2002 was 71.85 quadrillion British thermal units (Btu) and

consumption was 97.72 quadrillion Btu. In 2020, primary energy production is projected to be 84.09 quadrillion Btu, and consumption will be 127.92 quadrillion Btu.

This trend was one of the fundamental motivations behind the President’s National

Energy Policy (NEP).

Setting aside Congressional action on the NEP, to help bridge the projected gap

between domestic production and consumption, we are implementing the National

Energy Policy’s recommendations that we diversify and expand our supply of energy

and develop new technology. We are also building relationships with energy producers around the world. Among other actions, we created the North American Energy Working Group to strengthen cooperation with Mexico and Canada, held an Africa Energy Ministerial in 2002 to promote energy ties with Africa, held two Energy

Summits with Russia to promote Russia’s role as a leading world energy supplier,

and continue to encourage the transportation of Caspian energy resources to world

markets.

Question 10. Please comment on the U.S. lead in R&D in technology and pharmaceuticals? What are the implications for our economy of that lead?

Response: President Bush’s FY2005 Budget request commits 13.5 percent of total

discretionary outlays to R&D—the highest level in thirty-seven years. Both private

sector and Federal R&D have significant effects on the Nation’s economy. While private sector R&D is more focused on and effective at improving products and processes, federally funded activities are best aimed at sustaining basic research and improving the Nation’s innovation infrastructure. For example, the National Science

Foundation sponsors fundamental research and supports scientific and engineering

education, both of which in turn help to underpin advances made in the private sector. The role of the National Institute of Standards Technology (NIST) in developing

measurements and standards is critical to industry. Manufacturers depend on these

services and standards, an important reason why the President’s FY2005 Budget

would increase NIST’s core (laboratory) budget by 20 percent over FY 2004 enacted

levels.

106

The United States continues to be a world leader in pharmaceutical innovation

and in the pharmaceutical industry, and this leadership has broadly increased over

the last decade. Several reasons include: the continuing stream of U.S. scientific

achievements in the life sciences made possible by NIH funding, strong intellectual

property protection, strong interests of U.S. businesses and capital markets in aggressive development and commercialization of new drug possibilities, and the increasing attractiveness of the U.S. marketplace relative to other developed countries’ markets, which tend to be subject to extensive government intervention. The

United States’ competitive strength in this industry is also derived from the specialized and highly capable drug discovery and clinical trial companies that have

emerged domestically to meet the industry’s need for innovation.

Question 11. What is the implication of the declining share of worldwide R&D

spending by the U.S.?

Response: Despite growing global competition, the United States is still the undisputed global leader in science. The U.S. position in the number of patents issued

has remained remarkably stable since 1988 (52-56 percent), with the number of patents surging from 80,000 in 1988 to 166,000 in 2001. The United States has 78 percent more high-tech patents per capita than Europe. Since the early 80s, the United

States has held the largest market share (30-33 percent) of the global high-technology market and leads in four of the five high-tech industry sectors. Pharmaceuticals are the one exception where the EU has held the lead position over the

past two decades. In aerospace the United States accounts for about 50 percent of

the market, high-tech services (33 percent), financial services (40 percent) and communications services (38 percent).

The United States spends one and a half times more in research and development

than all of the EU countries combined and nearly three times more than Japan, the

next highest investor in R&D. Current priorities set by the Administration for research funds clearly identify fields likely to be important for future economic competitiveness. President Bush’s FY 2005 Budget request commits 13.5 percent of total

discretionary outlays to R&D—the highest level in thirty-seven years. The quality

of research produced by our universities, industrial and national laboratories is unsurpassed by any other nation. As other nations develop their research capabilities,

and seek ways to reap economic payoffs from research investments, they emulate

our structures and processes, as best they can. As we act to make our system even

stronger, let us be proud of the strengths of the United States research and development enterprise.

Question 12. Should the R&D tax credit be made permanent?

Response: The President’s FY2005 Budget proposes making the Research and Development (R&D) Tax Credit permanent. The temporary nature of the credit was

originally justified as a way to review and evaluate the measure’s performance.

However, studies by the General Accounting Office and others have now shown that

the credit stimulates substantial amounts of additional R&D. Moreover, making the

credit permanent would address concerns of businesses that contend that the

present short-term approach dampens the credit’s incentive effects, especially in relation to long-term R&D projects.

QUESTIONS FROM HON. CLIFF STEARNS

Question 1. The Department’s report, ‘‘Manufacturing in America,’’ indicates that

manufacturers are frustrated by the costs that are imposed on them by government.

What are some of those costs and what can be done to alleviate them?

Response: At our roundtables, manufacturers frequently mentioned the issue of

regulatory costs and the relative burdens they place on U.S. firms versus their competitors. An Office of Management and Budget (OMB) study found that regulatory

costs were 3.7 percent of GDP in 1997. About half of this goes to compliance with

environmental regulations and the rest is for compliance with workplace safety and

product safety requirements, as well as time spent filling out government paperwork

and keeping records. These costs are expensive to government as well. Government

must manage these regulatory programs, which consequently creates a drain on tax

revenues. The most common compliance costs for manufacturing companies are related to environmental regulation, workplace safety, and tax compliance/employment rules. We also know that these costs fall hardest on small manufacturers with

20 or fewer employees. These costs greatly affect cost competitiveness and can offset

the benefits of productivity gains many times.

The Administration has slowed the increase in regulatory costs produced by new

regulations reviewed by the OMB by 70 percent compared with the previous Administration. Nonetheless, the overall cost of compliance has risen significantly over

time. To combat these rising costs, OMB is leading a process to reduce the burden

107

of regulation on manufacturing enterprises. First, OMB is establishing an inventory

of potential regulatory reforms that would lower the cost of manufacturing. To this

end, OMB put out a Federal Register notice seeking public comment on overly burdensome regulation by May 20. OMB should analyze and prioritize these reforms

based on the comments received. Further, OMB should rigorously apply its recently

developed guidance on regulatory impact analysis to any proposed rules that could

influence the costs imposed on the manufacturing sector.

Question 2. How has the passage of the ‘‘Jobs and Growth Tax Relief Reconciliation Act’’ helped the manufacturing sector, specifically? What further work needs

to be done in the tax area to help the manufacturing sector?

Response: While the Jobs and Growth Act has helped boost economic growth and

job creation in general, its provisions were of particular benefit to America’s manufacturers. Manufacturing requires massive investments in plant and machinery. The

President’s tax relief—including the across-the-board rate relief, lower taxes on investment, and increased expensing and depreciation limits—has reduced the cost of

making capital investments in vehicles, computers, and machines. A lower cost of

capital makes American manufacturers and their workers more competitive.

Specifically, the Jobs and Growth package first reduced tax rates across-theboard. This tax relief was important not only for America’s families, but also for the

90 percent of American businesses organized as S Corporations, partnerships, and

sole proprietorships, including most of America’s manufacturers.

Second, the Jobs and Growth Act reduced the taxes imposed on manufacturers

when they invest in new capital equipment. Smaller businesses now qualify for the

higher, $100,000 expensing limit. For smaller businesses, they can now deduct up

to $100,000 in investments in trucks, computers, and other equipment. Larger businesses are eligible for 50 percent bonus depreciation.

Third, the Jobs and Growth Act reduced the marginal tax rates on investment income to just 15 percent. For American businesses, this reduction means equity capital can be raised less expensively, making our corporations more competitive in the

global marketplace. It also reduces the bias towards debt and away from equity, resulting in better capital allocation and efficiency in the long term.

The net result of these increased deductions and lower marginal rates is a dramatic reduction in the cost of capital for America’s manufacturers. That means

America’s manufacturers can better afford to purchase the equipment they need to

stay competitive and to make their workers more productive. It also means their

American customers can afford more, since they benefit from the tax savings as

well.

In the year since the President signed the Jobs and Growth Act, there have been

numerous signs that these policies are working. Industrial production is up; capacity

utilization is up; exports are up; and durable goods orders are up.

While there are numerous ways to help manufacturers through the tax code, the

most direct means of continuing the success of the President’s Jobs and Growth

package and help America’s manufacturers is to make its provisions permanent.

Question 3. Does our tax policy with regard to income derived from foreign investment inhibit American manufacturers from competing, both domestically and internationally? How so?

Response: While it is clear that manufacturers understand their future success

will increasingly depend on their ability to compete and sell goods in a global marketplace, your question regarding the net impact of our tax treatment of foreign investment on manufacturing would be better directed to the Department of the

Treasury.

Question 4. Are there state or local tax laws that the Department has identified

as particularly problematic for manufacturers? Does the Department have a view

on how they might be changed?

Response: Several manufacturers expressed their concerns regarding state and

local tax issues. They suggested changes to the most prevalent forms of state and

local taxes. Many states and localities rely more heavily than the Federal Government on property and other taxes that are fixed in dollar amounts or in a fixed percentage of asset value. Those taxes become far more burdensome in an economic

downturn, when revenue and income fall, but tax liability does not. The net effect

is an increase in tax on manufacturing firms at a time when the economy is weak,

exactly the opposite of what good tax policy would suggest. Manufacturers’ comments suggested a need to shift from taxes based on fixed values, to those tied to

income, and to rely more heavily on consumption as the basis for defining income

subject to taxation.

Question 5. What is the cost to U. S. manufacturers of frivolous litigation? Can

you quantify the cost in terms of jobs lost?

108

Response: While I am not aware of any estimates of the exact cost of frivolous

litigation to U.S. manufacturers either in terms of dollars or jobs lost, there is no

question but that such litigation exacts a steep price. The Manufacturing in America

report released by the Commerce Department earlier this year noted that manufacturers pay a penalty in the form of legal fees even when there is no merit to claims

and manufacturers ultimately prevail in litigation. The report further observed that

the indirect costs of tort litigation are also significant—particularly the time spent

by managers and employees, who would otherwise focus on improving operations,

raising productivity and expanding sales.

Question 6. What aspects of the U.S. tort system are most damaging to U.S. manufacturing and are therefore, most ripe for reform?

Response: The reforms that would most immediately help U. S. manufacturing

would be passage of an asbestos bill and medical malpractice reform. The continuing

asbestos litigation remains a contingent liability creating a cloud over the entire

manufacturing sector and preventing affected individuals from receiving the assistance they need to cope with their medical bills. Medical malpractice reform would

help stem the significantly higher costs that manufacturers pay for employee health

care benefits as a result of increasing medical liability costs.

Question 7. Have manufacturers been able to recoup the cost of rising healthcare

costs through increases in the prices of the products they sell? If there are disparities between the respective rates of increase, can you quantify them?

Response: Health care costs have risen generally more than other prices. Between

1995 and 2003, the Consumer Price Index (CPI) for medical care increased 35 percent, while the CPI for All Urban Consumers (CPI-U) increased only 21 percent. For

manufacturing, Producer Price Index increases during this period totaled only 10

percent. The increase in prices of manufactured goods certainly did not keep pace

with the rising costs of health care. On the other hand, productivity in manufacturing, as measured by output per hour, has increased 40 percent during this period

and these improved efficiencies have help to offset some of the increases in other

costs. This disparity between producer price increases and health care price increases is another reason the President’s goal of reducing health care costs is of critical importance to America’s manufacturers.

Question 8. A significant amount of money is spent by the manufacturing sector

on complying with the regulatory regimes to which it is subjected. Approximately

how much money do manufacturers spend on regulatory compliance annually?

AND

Question 9. How do regulatory costs imposed on American businesses compare

with regulatory costs imposed on competitors by foreign governments?

Response: We have made reference to the first part of this question in the report, ‘‘Manufacturing in America,’’ using a 1997 report by the Office of Management and

Budget. OMB estimated that regulatory costs amounted to 3.7 percent of GDP in

1997. Of that amount, about half reflected compliance with environmental regulations and the rest for work safety, product safety, and the time filling out government paperwork and keeping records.

According to a 2003 study by the Manufacturers Alliance for the National Association of Manufacturers, inter-country comparisons of regulatory costs are rare. The

study did include some estimates based on earlier OECD work to the effect pollution

abatement costs as a percent of the value of manufacturing output were 3.5 percentage points higher on average in the United States than for our nine largest trading

partners.

QUESTIONS FROM HON. MICHAEL BILIRAKIS

Question 1. Many of my constituents have expressed serious concerns about the

outsourcing of American jobs to overseas operations. They simply do not understand

why companies are relocating jobs offshore during a time when so many Americans

who want a job are out of work. What are the figures for American companies’ jobs

shipped overseas versus jobs kept at home? What are the figures for foreign companies’ jobs created in the United States?

Response: While the loss of a job is always regrettable, the President believes the

most powerful remedy for this problem is a growing economy that can ensure every

American who wants a job is able to find one. On the other hand, putting workers

at a competitive disadvantage through economic isolationism would have a negative

effect on our economy and domestic job creation. I am convinced that the President’s

growth agenda has put the Nation on the path toward that essential goal. His policies to reduce taxes and other costs to America’s job creators are working, as are

efforts to open foreign markets to American goods and services. Tax burdens are

down and exports are up. Since last August, we have seen over 1.4 million jobs creVerDate 11-MAY-2000 13:38 Jun 17, 2004 Jkt 000000 PO 00000 Frm 00112 Fmt 6633 Sfmt 6621 93299.TXT HCOM1 PsN: HCOM1
109

ated. Over the last nine months we’ve seen over 1.4 million jobs created while the

unemployment rate has fallen from 6.3 to 5.6 percent. Meanwhile, over the past half

year, exports have grown at a 23 percent annual rate, the fastest 6-month rate of

growth in almost 10 years. 12 million American workers rely on exports for their

jobs.

As for statistical measurements, the Bureau of Labor Statistics, through the Mass

Layoffs Statistics program, provides a limited measurement of jobs lost to overseas

relocations. I would defer to the Department of Labor on the use and limitations

of this data.

The Bureau of Economic Analysis (BEA) collects annual data on the operations

of U.S. affiliates of foreign-owned companies. In 2001, the latest year for which (preliminary) statistics have been published, employment at such operations was

6,371,900 or 5.6 percent of U.S. private-industry employment. Employment growth

at U.S. affiliates of foreign-owned companies has averaged 5.0 percent per year

since 1977, when employment at these companies was 1,218,700 or 1.7 percent of

U.S. private-industry employment (Zelie, William J., ‘‘U.S. Affiliates of Foreign Companies,’’ Survey of Current Business Vol. 83, No. 8, August 2003, p. 45). Policies to

isolate the United States from the global marketplace could lead to retaliation by

other nations, putting many of these 6 million jobs at risk.

Question 2. What are the primary reasons manufacturing and information technology companies move operations offshore? Which ones are attributable to public

policy that makes it more expensive to do business here at home? Which ones are

attributable to international conditions?

Response: U.S. Government statistical agencies do not survey firms on the reasons they move operations offshore. However, it appears that many U.S. multinational corporations locate operations offshore to be close to their customers in

other countries. In 2001, 65 percent of sales by foreign affiliates of U.S. parent companies were to customers located in the same country as the affiliate, and another

24 percent were to customers in other foreign countries, mainly in the same economic region as the affiliate’s host country. Only 11 percent of such sales were to

customers in the United States (‘‘A Note on Patterns of Production and Employment

by U.S. Multinational Companies,’’ Survey of Current Business, March 2004, pp. 52-

3).

Many press accounts and private sector studies suggest that firms relocate jobs

offshore because they believe they can reap significant cost savings by hiring developing country workers who are paid substantially less than similarly qualified U.S.

workers. It should be noted, however, that in 2001 (the most recent year for which

data are available) 6.4 million U.S. workers were employed at U.S. affiliates of foreign-owned companies. Furthermore, well over half the employment at foreign affiliates of U.S.-based companies is located in high wage countries (i.e., the European

Union, Canada, Japan, and Australia). Both of these facts demonstrate that wage

differentials are not always the motivating factor in job relocations and may be overshadowed by other reasons.

Question 3. What public policy incentives can Congress and President Bush enact

to encourage companies to maintain these jobs in the United States?

Response: The President’s economic policies are designed to reduce costs to America’s job creators while opening foreign markets to their products and services. The

President’s six point plan attacks the rising costs that hurt American job creators.

It would reduce health care costs, make energy more affordable and reliable, eliminate frivolous lawsuits, reduce regulatory burdens, and make the tax relief permanent. All would reduce costs and increase the competitiveness of American businesses and their employees.

Opening markets to U.S. exports is a key part of the President’s six-point plan

for sustaining America’s economic recovery and creating new jobs for American

workers. Open trade in goods and services will help eliminate incentives for firms

to relocate jobs in order to circumvent trade barriers. It will also help encourage

foreign companies to set up and expand operations in the United States.

In addition, the President’s education, job training, and immigration policies are

designed to address companies’ concerns about the availability of skilled workers in

the United States. The President’s FY 2005 Budget commits significant resources

to helping U.S. students and workers obtain job training and attend courses to help

them acquire the skills that firms need to compete in a global marketplace. Moreover, one of the principles of the President’s immigration reform proposal is to serve

America’s economy by matching a willing worker with a willing employer. If no

American worker is able and willing to take a job, then a reformed immigration program should provide labor to fill that job. To the extent that job relocations abroad

are motivated by shortages in certain key skills, the President’s immigration reform

initiative will help keep such jobs in the United States. Finally, the rest of the

110

President’s six-point plan—on health care costs, tort reform, energy supplies, regulatory streamlining, and permanent tax cuts—will foster robust economic growth,

which is the most effective way to keep jobs in the United States.

Question 4. This Committee and the House have recognized the importance of controlling rising health care costs by passing medical liability reform legislation and

creating association health plans. Unfortunately, the Senate has not been able to

address these issues. How have increases in health care costs affected the competitiveness of U.S. firms? What is the effect of medical malpractice awards on medical

costs? How would controlling medical liability costs make us more competitive?

Response: Unfortunately, we do not have the data to answer this question in

greater detail, and it would be best raised with the Department of Health and

Human Services (HHS). We would be glad to work with HHS to find an answer to

this question.

Question 5. How would the implementation of association health plans affect the

manufacturing sector?

Response: Studies show that association health plans (AHPs) could save small employers and their employees as much as 25 percent on health insurance costs. According to an April 2004 Department of Labor press release citing these studies,

AHPs would allow small businesses to join together across state lines through their

trade and professional associations to purchase health benefits, reducing the market

and financial barriers that they face. Small businesses would enjoy greater bargaining power, economies of scale, administrative efficiencies, and more uniform

regulation, giving them greater access to affordable coverage.

Question 6. What has been done to help control the costs of health care for employers and employees? What still needs to be done?

Response: The President has advanced a number of proposals to make health care

more affordable for families and businesses. In December 2003, the President signed

into law the Medicare Modernization Act that is already making prescription medicines more affordable to seniors. In addition, the Act has already made health insurance coverage more affordable to tens of millions of Americans under the age of 65

through a product known as health savings accounts.

Beginning in 2006, prescription drug coverage will be available to 40 million seniors and people with disabilities through the Medicare program. This voluntary drug

benefit will provide the greatest help to those in greatest need, with richer benefits

for beneficiaries with low incomes and for those with high prescription drug costs,

regardless of income. Middle income seniors with moderate drug expenses also will

benefit from the new program. In addition, the program will encourage employers

to continue providing prescription drug coverage to their retirees through a federal

subsidy. This subsidy will make retiree health coverage more affordable for employers and more secure for millions of retirees.

Medicare beneficiaries will not have to wait for the new benefit to save on their

prescriptions. They can now enroll in a Medicare-approved prescription drug discount program that will save them 16 to 30 percent off the retail price of most brand

name medicines and 30 to 60 percent off the price of generic drugs at their neighborhood pharmacies. Deeper discounts are available to those seniors who prefer to

have their prescriptions filled through the mail. In addition to the discounts, lowincome beneficiaries will receive $1200 in subsidies over the next year and a half

to help them pay for their medicines at the discounted prices.

Making prescription drugs more affordable for seniors is only part of the story of

the new Medicare law. It also permits individuals under age 65 to establish health

savings accounts (HSAs), a new product that will allow people to use tax-free dollars

to pay for their ordinary medical expenses and save for future medical needs. These

accounts, coupled with major medical insurance that is much more economical than

standard health insurance coverage, will put health insurance premiums within the

reach of individuals whose employers do not sponsor health coverage.

HSAs also provide a more affordable product for businesses large and small that

are struggling with the cost of providing coverage to their workers. Businesses that

already provide insurance can contribute to both the lower health insurance premium and the tax-advantaged HSA. Businesses that previously could not afford to

offer health insurance can now either pay all or part of a lower-cost high-deductible

policy or make tax-advantaged employer contributions to their employees’ HSAs.

Early reports suggest these accounts are working well, reducing health insurance

premiums, and cutting administrative costs to doctors and hospitals. The Administration is working to make HSAs more widely available next year, including making

them available to federal workers.

Small businesses also would benefit from the President’s proposal to allow them

to form Association Health Plans, joining together to purchase insurance coverage.

Low-income individuals will benefit both from the President’s proposed refundable

111

tax credits to help them pay for insurance coverage and from his expansion of community health centers, which provide free or low-cost medical care in medically underserved areas.

The President also has sought to stem the tide of rising health care costs by rooting out fraud and abuse and by advancing legislation to eliminate ‘‘junk lawsuits’’

that make health care cost more than it should. And he has taken the lead in improving health care quality and efficiency by advancing legislation to reduce medical

errors and by promoting health information technology. Health information technology (IT)—including electronic medical records and electronic prescribing—can

provide the right information to doctor and patient at the time of care to guide

treatment decisions. Health IT has the potential to help reduce health care costs

by assuring that appropriate care is provided, by reducing the amount of inappropriate care, by preventing costly medical errors, and by improving the efficiency of

our health care system. To achieve these goals, the President issued an Executive

Order in May, 2004, creating a health IT coordinator within the Department of

Health and Human Services.

In addition, the Centers for Medicare and Medicaid Services (CMS) is implementing e-prescribing in the new Medicare prescription drug program to reduce

medication errors and cut administrative costs. Finally, CMS is implementing a

major new disease management program within Medicare that will target services

to chronically ill individuals, improving the quality of care that they receive and potentially reducing costs by averting expensive hospitalizations.

Question 7. How can health savings accounts, which were included in the recently

enacted Medicare legislation, help to control health care costs?

Response: HSAs help control health care costs by putting consumers in the driver’s seat. High deductible (at least $1,000 for individuals and $2,000 for families)

major medical insurance that protect families against catastrophic medical costs,

joined with tax-free accounts for ordinary medical expenses, will give consumers

more control over their health care spending. Empowered consumers will be more

cost-conscious, especially since money that they do not spend on health care will remain in their accounts and grow tax-free.

Question 8. The Fact Sheet, ‘‘The Presidential Determination on Steel’’ issued by

the White House Office of Communications on December 4, 2003, stated:

‘‘President Bush is committed to America’s steel workers and to the health of

our steel industry... Steel import licensing, established when the safeguard

measures were imposed, will continue to provide WTO-consistent data collection

and monitoring of steel imports. This will enable the Administration to quickly

respond to future import surges that could unfairly damage the industry.’’

The President’s Proclamation of the same date stated that ‘‘the licensing and monitoring of imports of certain steel products remains in effect and shall not terminate

until the earlier of March 21, 2005, or such time as the Secretary of Commerce establishes a replacement program.’’ You made several comments to the media on December 4, 2003, regarding your commitment to the steel import monitoring and licensing system and indicated that it would be expanded to include steel products

which were not subject to 201 tariffs and quotas. Are you still fully committed to

this effort?

Response: Since the President’s announcement last December, we have continued

to closely monitor the imports of those steel products for which the President implemented import relief pursuant to Section 201, as well as general market conditions.

As a result, accurate information regarding such imports is being made available

to the public on an expedited basis. There have been significant changes in the market in the last six months. Current market conditions are strong—steel prices are

high and steel imports are still at fairly low levels. We understand the need for a

licensing and monitoring system, and appreciate that domestic steel producers as

well as importers continue to feel strongly about this issue. The Administration is

continuing to evaluate the current system and will ensure that it remains an effective monitoring tool.

Question 9. Do you have a plan to expedite the adoption of these expanded regulations? When do you intend to begin the public comment period with regard to the

replacement system?

AND

Question 10. When do you estimate the replacement system will be up and running? Will you be able to meet that date?

Response: As we review the current licensing and monitoring system, Commerce

has been informally gathering information from the domestic steel industry, steel

consumers, registered licensees and other parties that have expressed interest in

112

the current system. We are carefully considering all parties’ comments and will take

them into account before making any decision.

QUESTIONS FROM HON. RICHARD BURR

Question 1. I wrote you this month about the investigation into whether or not

China was transshipping textile and apparel goods through Vietnam, and asked specifically when members of the Congressional Textile Caucus could expect to see the

report—which I understand was submitted to Commerce by Customs last November. Can you provide me with an update on the investigation or report?

Response: As you know, we negotiated a unique provision in the U.S.-Vietnam Bilateral Textile Agreement allowing for consultations to address any discrepancies in

the import figures that constituted the basis for the negotiated limits. In order to

determine whether data discrepancies existed, U.S. Customs and Border Protection

(CBP) sent the largest number of Textile Production and Verification Teams ever

sent at the same time to one country to review this issue. These teams conducted

an extensive review of Vietnamese factories and then dedicated a substantial

amount of time to analyzing the results.

After carefully reviewing CBP’s findings, the United States requested consultations with Vietnam on February 12. Those consultations were held March 17-18,

and Vietnam provided the United States with additional data at that time. Under

the Bilateral Agreement, if no agreement is reached within 90 days of our request

for consultations, the United States may take action to resolve instances where

there is clear evidence of data discrepancies.

The 90-day period expired on May 12, and we have adjusted Vietnam’s 2003 and

2004 quotas to reflect discrepancies in the data upon which the quotas were based.

The Congress has been notified, as well as the Vietnamese Government and the importing public.

Under Secretary Grant Aldonas has briefed members of the House Textile Caucus

on this issue and we have provided to the Caucus a summary of the CBP report.

Question 2. Earlier this month, Representative Frank Wolf introduced legislation

that would shift trade agreement enforcement from the Office of the United States

Trade Representative to the Department of Commerce. Has the Administration

taken a position on the proposal?

Response: Commerce, USTR and other trade-related agencies and departments

work closely to ensure effective enforcement of our trade laws. The Administration

believes that the current statutory allocation of responsibilities provides the best opportunity to leverage the resources and expertise of each agency. The Administration is focused on real results. The recent U.S.-China JCCT (Joint Commission on

Commerce and Trade) is an example of effective inter-agency coordination of trade

enforcement efforts. In these meetings, we were able to resolve a number of critical

issues for America’s farmers, workers and businesses. Specifically, at the JCCT this

year, Vice Premier Wu Yi committed to a detailed action plan to reduce the rampant

piracy now costing U.S. companies billions of dollars in lost sales. China committed

to increased penalties for IPR violations, and a crackdown on violators with tougher

enforcement actions. Concerning standards and industrial policies, China agreed at

the JCCT to postpone implementation indefinitely of a troublesome new mandatory

standard for wireless computing, and instead promote its approach through international standards bodies, and China also agreed to adhere to principles of technology-neutrality with respect to the adoption of 3G standards for telecommunications.

China agreed to establish a working group that will allow the U.S. Government

to review with China non-market-based policies and practices, e.g., subsidies for

state-owned enterprises, etc., that can create an unlevel playing field for U.S. companies. China also agreed to accelerate the steps needed to allow our U.S. companies to import, export, distribute, and sell their products in China. A comprehensive

description of JCCT outcomes can be found at http://www.mac.doc.gov/china/JCCT/

outcomes—Commerce.pdf.

Question 3. What is the Administration prepared to do if China does not come to

the table regarding a comprehensive quota agreement post-2005? It is my understanding that the Chinese are refusing to even discuss the issue.

Response: As you point out, China has not expressed an interest in reaching a

comprehensive arrangement on textile trade post-2005. However, under China’s

WTO Accession Agreement, the United States has the right to impose limits on imports from China on textile and apparel products which are, due to market disruption, threatening to impede the orderly development of trade in these products. (The

United States must first consult with China to attempt to reach a mutually satisfactory solution.) The United States intends to exercise its WTO rights in instances

113

where we believe imports from China are playing a role in disruption of the U.S.

market for specific textile and apparel products. As you know, we chose to exercise

our rights and impose quotas on imports of three such products (brassieres, dressing

gowns, knit fabrics) last December. Those quotas remain in place.

Question 4. Will the Administration self-initiate use of the safeguards on January

1 if China does not cooperate?

Response: Under the Procedural Framework for considering China-specific textile

safeguard actions issued by the Committee for the Implementation of Textile Agreements (CITA) last year, CITA may self-initiate such a safeguard action. Of course,

there must be a body of economic information available to demonstrate China’s role

in the market disruption. In many instances, necessary information is available only

to the U.S. industry manufacturing the product. It will be important to have the

cooperation or support of the affected domestic producers before pursuing a safeguard remedy.

Question 5. Has the Administration considered the implications for the war on terror of the looming phase-out of textile quotas? The phase-out could have severe implications for several ‘‘front line’’ countries, such as the Philippines, Indonesia, Malaysia, and Bangladesh—not to mention roughly 700,000 domestic textile workers.

Response: We have received private expressions of concern from some countries

about the impact of removal of quotas on their domestic textile and apparel industries. However, no country has formally sought to rescind, renegotiate, or delay the

Uruguay Round agreement, binding on all WTO Members, to eliminate quotas on

January 1, 2005. The Uruguay Round Agreements Act implements this WTO obligation to eliminate textile quotas, and we will comply with this legal requirement.

Question 6. What can you tell me about the Administration’s actions in the face

of China’s ongoing efforts to ‘‘corner’’ the global scrap metal market?

Response: The Department of Commerce has been actively working with relevant

agencies to review the controls that some of our trading partners, including China,

have placed on key raw materials. The Administration is reviewing these measures

to assess what effect they are having on domestic and world markets, and to identify any appropriate actions that may be taken.

The Department shares your concern regarding the potential impact of the recent

price increases of key raw material inputs on U.S. industry. In October 2003, spot

prices for a key raw material input—ferrous scrap—began to rise sharply in the

United States, peaking in March. While ferrous scrap prices have dropped since

March, the Administration plans to follow market developments closely in order to

determine what actions may be appropriate.

The Department of Commerce is also reviewing, with the Office of the United

States Trade Representative, the extent to which export controls imposed by our

trading partners may be inconsistent with WTO requirements. The U.S. Government has also been meeting with officials from our trading partners and frequently

raising U.S. concerns about export restraints on key raw material inputs in several

different intergovernmental fora. In addition, on April 27, USTR Zoellick and I sent

a letter to the Russians and the Ukrainians urging them to eliminate export duties

on ferrous scrap.

The Department’s Bureau of Industry and Security is also in the process of reviewing a petition requesting the implementation of monitoring and export controls

on copper and copper-alloy scrap. Procedures for the submission and review of this

petition, as well as any determination whether to impose monitoring or export controls, are provided for in Sections 7 and 3(2)(c), respectively, of the Export Administration Act of 1979, as amended. The findings of the review should be published on

July 21, 2004, as required by law.

Question 7. Has the Administration or Department taken a position on Rep. Phil

English’s H.R. 3716, which would allow countervailing duties to be applied to nonmarket economies [NMEs]?

Response: Commerce does not currently apply countervailing duties (CVD) law to

non-market economies, and this practice has been upheld in the courts in Georgetown Steel Corp. v. United States. In that case, the court affirmed Commerce’s view

of NMEs as devoid of the kinds of market benchmarks necessary to identify a subsidy. The court also relied on Congress’s 1974 effort to address unfairly traded NME

exports through the antidumping (AD) law by enacting the factors-of-production

methodology. Commerce has re-affirmed Georgetown many times, most recently in

the 1997 preamble to the post-Uruguay Round Agreements Act CVD regulations.

Congress enacted substantial amendments to the CVD law in 1988 and 1994 without disturbing Commerce’s practice in this area.

The Department recognizes that the reasoning underlying the Georgetown decision was informed by the nature of certain non-market economies as they existed

20 years ago, and that China’s economy has undergone many reforms over the past

114

two decades. However, any attempt to apply the CVD law to non-market economies

would raise complex issues of policy and methodology, including implications for

antidumping policy and practice that could lead some to fear a weakening of that

important remedy. The Department, therefore, continues to believe that this question should be addressed with care and consideration.

Question 8. The furniture industry in my state is under significant pressure from

low-cost, offshore competition AND high production costs. External overhead costs

are estimated to add at least 22.4% to unit labor costs of US manufacturers—nearly

$5 per hour worked—relative to their major foreign competitors. What is the Administration doing to address some of these costs?

Response: As detailed in the Department of Commerce’s recently released report, ‘‘Manufacturing in America,’’ the Administration has set out a plan to reduce the

cost to employ American workers by decreasing red tape and eliminating unnecessary and costly regulations. Many U.S. Government agencies are involved with this

initiative.

The Office of Management and Budget will review federal regulations to assess

their impact on manufacturing competitiveness. The Administration will study ways

to implement association health plans, promote health savings accounts, and pursue

other opportunities to make health care more affordable and accessible to workers.

The manufacturing report made several recommendations related to improving

manufacturing innovation through R&D. A high level interagency working group on

manufacturing R&D has now been established within the National Science and

Technology Council. Chaired by Commerce, this group is actively engaged, and is

planning a thorough review of federal R&D programs important to manufacturing.

This group will serve as a forum for resolving issues associated with R&D policy

and programs.

In February, 2004, the President issued an Executive Order making manufac- turing-related R&D a high priority for the over $2 billion distributed through the

Small Business Administration’s (SBA’s) Small Business Innovation Research

(SBIR) and Small Business Technology Transfer (STTR) programs. The Executive

Order requires all executive departments and agencies with one or more SBIR or

STTR programs to take action to advance the policy under the Executive Order and

submit reports to the SBA Administrator on their efforts. The SBA Administrator

is required to consult with the Director of the Office of Science and Technology Policy to coordinate submission of the reports by the heads of the departments and

agencies.

These programs, in addition to the new ideas that will come from the Department’s Manufacturing Council, will go a long way towards addressing these costs.

Question 9. Rep. Sam Graves of Missouri has introduced legislation, H.R. 3949,

which would delegate to the Under Secretary for International Trade the functions

relating to Trade Adjustment Assistance for firms. Has the Department taken a position on this legislation?

Response: Yes, the Department has taken a position on this legislation. It is my

firm belief, after looking closely at this issue, that America’s small- and mediumsized businesses are best served with the Trade Adjustment Assistance (TAA) for

Firms program continuing to reside within Commerce’s Economic Development Administration (EDA).

The TAA for Firms program has a natural synergy with the mission of EDA—

to increase prosperity by promoting comprehensive, entrepreneurial, and innovationbased economic development strategies to enhance the competitiveness of regional

business environments resulting in higher skill and higher-wage jobs. EDA offers

an extensive set of programs that assist whole communities and regions negatively

affected by economic conditions, including those affected by import competition.

These programs include planning and technical assistance, public works and development facilities, and economic adjustment assistance. The TAA for Firms program

is just one of the many programs administered by EDA that allow for a comprehensive approach to providing communities, regions, and their businesses the resources

and contacts they need to adjust to challenging economic conditions. Additionally,

EDA has the resources and experience in assessing applications for adjustment assistance. Assisting communities and firms located in affected communities requires

a broad approach, and I believe that this approach is best served with the retention

of TAA for Firms within EDA.

To meet the challenges and needs of our manufacturing base, I have directed our

Commerce Department bureaus, including EDA, International Trade Administration

and its new Assistant Secretary for Manufacturing and Services, the Technology Administration and its National Institute of Standards and Technology, and others to

better coordinate their individual areas of expertise and resources to provide manufacturers the full benefit of varied U.S. Government programs and services. We will

115

also work to coordinate efforts with other federal agencies, as well as state and local

entities, to collaboratively improve the value that we all bring to U.S. manufacturing. To this end, we have created the Manufacturing Council to institutionalize

a channel of communication between manufacturers and the public sector. Our recently released report, Manufacturing in America, also recommends establishment

of an interagency working group to communicate effectively across the Federal Government on issues of concern, and an intergovernmental coordinating committee to

share sound ideas and programs across federal, state, and local governments.

QUESTIONS FROM HON. BARBARA CUBIN

Question 1. Mr. Secretary, can you comment further about what you believe the

future of the Manufacturing Extension Partnership program to be?

Response: The 2005 Budget maintains the 2004 level of funding for the Manufacturing Extension Partnership (MEP). MEP was originally intended to be comprised

of 12 federally supported centers, with federal funding ending after six years. In its

15 years of operation, the program has expanded away from this original design to

include 400 locations, and Congress has removed the sunset provision. Funding for

the MEP centers is a cost-sharing arrangement consisting of support from the federal government, state and local government, and the recovery of fees for services.

Given advances in manufacturing and technology, it is appropriate to evaluate MEP

operations and take steps for continuous improvement. For example, the Department plans to recompete the Centers to ensure that funds are targeted to Centers

that are well qualified and effective. Also, the Administration proposes to coordinate

MEP fully with other Commerce Department programs that are helping manufacturers to be more competitive and expand markets. Through this coordination, the

Commerce Department can more closely link the technical and business staff employed by the MEP centers located around the country with trade promotion specialists in the Commerce Department’s International Trade Administration (ITA). In

addition, ITA has experts with in-depth knowledge of various sectors of industry.

By coordinating MEP field agents and these sector experts, the program can be a

more effective national resource to help small manufacturers.

Question 2. As a Member who’s been working to establish a National Energy policy, I’ve been very frustrated by the lack of progress across the Capitol. How can

the administration help regain some of the momentum we lost after the House last

acted on this bill?

Response: The Administration has completed or is implementing nearly 75 percent of the 106 recommendations contained in the comprehensive National Energy

Policy announced by the President in May of 2001. The President continues to call

upon Congress to pass the legislative aspects of his energy plan. The President has

been very clear, in numerous speeches, that he wants energy legislation enacted.

The President has clearly stated what he supports and how, had Congress acted

years ago, the Nation would be better off today. He put forth a fiscally responsible

package of energy legislative initiatives in June of 2001. Congress worked hard last

year to put together an energy bill, and that effort would have succeeded last fall

but for the filibuster of a minority of Senators.

One of the areas of the National Energy Policy that the Commerce Department

has been most active in implementing is its goal of working with other countries

to increase global energy supply and security. The following are examples of efforts

we have made towards this goal:

• DOC helped create the North American Energy Working Group (NAEWG) with

Canada and Mexico, which has held technical discussions on energy markets,

electricity, energy efficiency, science and technology, and infrastructure security.

• DOC helped initiate a cooperative effort to help improve the regulatory and investment conditions required to increase energy and infrastructure development

in Russia. Participants at two U.S.-Russia Commercial Energy Summits presented joint recommendations on increased energy cooperation to both governments in September 2003.

• DOC participated in the third U.S.-Africa Energy Ministers Conference in Casablanca, Morocco, which brought together 40 Energy Ministers or their representatives to discuss critical energy issues among their governments and with

the private sector.

• DOC, along with the European Union, helped create the International Partnership for the Hydrogen Economy (IPHE), a forum for promoting the development

of hydrogen as a fuel source.

• DOC helped create the U.S.-U.K. Energy Dialogue, to promote the security and

diversity of future international energy supplies; integrate international energy

116

investment with the development and social challenges of host countries; develop clean energy technologies to address security of supply and environmental

challenges; and expand the U.S.-U.K. trade relationship in the energy sector.

Part of this Dialogue is the Commercial Working Group, which gives U.S. and

U.K. energy companies a voice in discussions between the two governments on

bilateral energy cooperation, security, and supply issues.

Question 3. Tort Reform is a concept that is discussed a lot in the halls of Congress. What do you believe is the most pressing need under the umbrella of Tort

Reform?

Response: Legal reform is a high priority for this Administration, considering that

the U.S. tort liability system is the most expensive in the world. Americans spend

more per person on the costs of litigation than any other nation. The staggering

costs of out-of-control lawsuits continue to hurt American businesses and workers.

For this reason, the Administration has pressed for legislation to reform our treatment of class action lawsuits and to rationalize asbestos litigation. In particular,

reining in unlimited and unpredictable medical liability awards is a pressing need.

These lawsuits raise the costs of health care for all Americans through higher premiums for health insurance and divert precious financial resources from small businesses across America. That is why it is important for Congress to pass medical liability reform.

QUESTIONS FROM HON. CHARLIE NORWOOD

Question 1. Mr. Secretary, how many jobs does the United States currently

outsource and how many do we insource? If you could provide numbers from the

most recent calendar year that would be much appreciated.

Response: As for statistical measurements, the Bureau of Labor Statistics,

through the Mass Layoffs Statistics program, provides a limited measurement of

jobs lost to overseas relocations. I would defer to the Department of Labor on the

use and limitations of this data.

The Bureau of Economic Analysis (BEA) collects annual data on the operations

of U.S. affiliates of foreign-owned companies (i.e., establishments in which foreignowned companies held at least a 10% stake.). In 2001, the latest year for which (preliminary) statistics have been published, employment at such operations was

6,371,900 or 5.6 percent of U.S. private-industry employment. Employment growth

at U.S. affiliates of foreign-owned companies has averaged 5.0 percent per year

since 1977, when employment was 1,218,700 or 1.7 percent of U.S. private-industry

employment (Zelie, William J., ‘‘U.S. Affiliates of Foreign Companies,’’ Survey of

Current Business Vol. 83, No. 8, August 2003, p. 45). Policies that seek to limit the

relatively small amount of offshoring of jobs by U.S. firms could lead to retaliation

by other nations, putting many of these 6 million jobs at risk. More recent data are

available on the subset of U.S. affiliates in which foreign investors owned a majority

stake. In 2002, the latest year for which statistics have been published, employment

at such operations was 5,449,000 or 5.0 percent of U.S. private-industry employment, up from 3,119,000 or 3.5 percent of U.S. private-industry employment in

1988.

It should be noted that these data are preliminary. In August, BEA will release

data for the banking industry and for U.S. affiliates that are not majority owned.

These corporations may commonly be considered foreign but the affiliate here in the

states might be domestically owned. When this data is available this summer, we

expect the number of jobs to be well over 6 million and very close to the 6.4 million

number that is our most recent and most complete data on this topic. (‘‘Summary

Estimates for Multinational Companies: Employment, Sales, and Capital Expenditures for 2002,’’ BEA Press Release, April 16, 2004).

Question 2. Could you please provide me with a graphic of our nation’s unemployment rates over the past 25 years.

117

Question 3. During your response to my question about your Department’s plans

to take action against China for manipulating their currency, you mentioned that

this is mostly the concern of the Department of Treasury. I disagree.

As you know, our trade deficit with China has increased from $30 billion in 1994

to an estimated $125 billion in 2003. The undervalued yuan has contributed to this

trade deficit and continues to hurt U.S. manufacturing sectors, especially textiles,

because they are forced to complete [sic] domestically and internationally against artificially low cost goods from China. China’s manipulation of the Yuan is therefore

in my mind—and the minds of manufacturers across the country—a trade issue and

an unfair trade issue at that. Let me ask again, can we expect the Department of

Commerce to take action on China’s currency manipulation in the next year?

Response: The Treasury Department remains the lead agency for issues related

to the Chinese exchange rate. However, the Department of Commerce addressed

this issue indirectly through this year’s special session of the U.S.-China Joint Commission on Commerce and Trade (JCCT).

The United States and China agreed to establish a Structural Working Group to

assess China’s economic reforms, as well as to identify steps China can take to improve its ability to achieve market economy status under U.S. trade laws. Currency

convertibility is one of the criteria contained in U.S. law for determining market

economy status. We will work closely with the Treasury Department as we engage

with China on the issue of market economy status.

QUESTIONS FROM HON. C.L. ‘‘BUTCH’’ OTTER

Question 1. I commend you for your focus on manufacturing issues. Part of that

effort should be about how the U.S. will produce basic raw materials used across

industry sectors. Mining companies are not investing as much in the U.S. and are

focusing their activities overseas because the U.S. ranks among the worst countries

in terms of time and expense required to secure mine permits. This is impacting

our ability to get refined raw materials and semi-fabricated materials such as copper and steel products and castings. How will the Commerce Department address

raw materials issues and work with other departments to develop a national minerals policy?

Response: We recognize the importance of the basic raw materials sector, particularly mining and metals, to our manufacturing base and our overall economy. During our review of the issues affecting manufacturing we held two industry

roundtables to address issues specific to this sector. In addition, we have held numerous meetings and consultations with the steel, copper and foundry industries.

We maintain a close and cooperative relationship with these industries and their

118

associations. ITA will continue to closely monitor this sector, provide data and information and directly assist in resolving issues as they arise. We are committed to

representing this sector’s interest in international fora and directly assist USTR,

State and other agencies in trade negotiations affecting the industry. We head the

U.S. delegation to numerous international organizations dealing with this sector; for

example, we will represent the United States at the APEC Mines Ministers meeting

in June.

We are committed to addressing the issues identified in our comprehensive review

of the manufacturing sector as they relate to metals and mining.

I would also refer you to the U.S. Department of the Interior for a perspective

on the Administration’s efforts to promote effective mining policies.

Question 2. Ten years ago, North American mining companies spent more than

50% of their exploration investments in the U.S. Today that amount is less than

10%. Lack of adequate investment in U.S. projects will continue absent greater regulatory certainty and a more timely permitting process. The mining jobs being taken

overseas are among the highest in the industrial sector for wages and benefits.

Under the Commerce Department reorganization you are working on, how will mining issues be staffed and addressed?

Response: We recognize the problems faced by the mining industry in developing

new mineral properties within North America. Although the regulatory and permitting requirements that have affected investment are not under the Department’s

control, we have and will continue to assist in overcoming barriers to investment

where we can. We are currently considering a Memorandum of Understanding with

the Canadian Ministry of Natural Resources which will enhance our ability to address these issues. Under our reorganization we will ensure that the resources devoted to the mining and raw materials is adequate. In addition, we intend to expand

our coverage of environmental and sustainable development issues affecting this

sector.

Question 3. Since 1976, Treasury, FEMA, and the Defense Department have

eliminated specific coverage of commodities and metals issues. The State Department has moved its metals coverage into its energy program. The Interior Department’s Bureau of Mines was eliminated during the last Administration and some

suggest Commerce seems to be de-emphasizing its metal commodities coverage.

While foreign governments continue to encourage mine exploration and development, U.S. policy for the past decade is discouraging hard rock mining investment,

though this administration has made some helpful policy changes. Mr. Secretary,

shouldn’t the Commerce Department’s manufacturing initiatives include a strong

component in support of responsible development of domestic minerals resources?

Response: The Department recognizes the importance of the minerals and metals

industry to manufacturing and it’s contribution to the overall economy. Under the

ITA reorganization we will eliminate the current Metals Division, replacing it with

a Materials Team. We will continue to support the metals sector as in the past and

intend to increase our coverage of several domestic issues affecting the industries’

ability to increase domestic capacity. We also intend to increase our coverage of the

metal fabrication and casting sectors.

QUESTIONS FROM HON. BART STUPAK

Question 1. Did you review the Economic Report of the President prior to its approval and release? If you did, did you object to the outsourcing provisions included

on Page 25 of the report? If you didn’t object to the inclusion of outsourcing in the

report, why?

Response: I did not personally review the draft of the Economic Report of the

President prior to its release and approval. However, the report was carefully reviewed by an interagency team and I support its analysis.

Question 2. In my state of Michigan, a refrigerator manufacturer, Electrolux, has

just announced they are closing up shop and relocating to Mexico. This is a profitable company and in its statement, it cited labor costs as the reason why they are

moving to save $81 million. This is certainly not an isolated case in Michigan. What

is in the President’s plan to address this?

Response: Nationally, the President’s goal is to ensure that every American who

wants a job can find one. His policies, including last year’s tax relief package, are

designed to increase job opportunities in the United States while making sure workers have the skills necessary to access those jobs.

There are numerous signs that this approach is working. In the past year, the

economy has grown at a 5 percent annual rate, the fastest rate of growth in nearly

20 years. Productivity is up, consumer confidence remains high, and home ownership is at record levels. On the employment front, 1.4 million new jobs have been

119

created since last August, while manufacturing has seen positive job creation for

four straight months.

The President also recognizes that there is more to do. His goal is to boost the

competitiveness of American industry by improving the environment for business in

America. This means reducing costs from unnecessary or excessive regulations,

working to reduce the cost of health care, and reform of the tort system. It also

means enhancing innovation and improving the skills and capabilities of the American labor force as well as eliminating foreign unfair practices. The President’s policies on these issues are outlined in our report, Manufacturing in America.

With respect to the Electrolux facility, I understand the impact this closure will

have on western Michigan and am hopeful that a solution to this situation will be

reached.

In October 2003, prior to Electrolux’s announcement of a possible closure, the Department of Commerce’s Economic Development Administration (EDA) began meeting with Greenville leaders and economic development officials to discuss potential

strategies. EDA shared the city’s goal of retaining the Electrolux facility. This dialogue continues and has included specific discussions on a possible EDA grant application to assist the community.

Following the Electrolux announcement that it was considering the closure of its

Greenville plant, EDA’s representative for Michigan attended a November 2003 public forum held to discuss the impact of the announcement. EDA’s representative subsequently served on a task force comprised of local, state, and federal officials focused on developing a plan that would retain Electrolux in Greenville.

The city recently presented a proposal to Electrolux providing a package of assistance and incentives for the construction of a new facility in Greenville. This package

includes possible EDA grant assistance of $2.5-$3.0 million to assist with infrastructure necessary for a new industrial park to accommodate a possible new Electrolux

plant and key suppliers. Unfortunately, Electrolux rejected this generous package

on Friday, January 16, 2004.

Despite this decision by Electrolux, the Department of Commerce has been actively engaged with Greenville officials, and the Department of Commerce’s commitment to Michigan, in general, and Greenville, specifically, remains strong. EDA staff

attended another task force meeting to discuss the future of Greenville on Monday,

January 19.

EDA’s representative for Michigan has been working with city officials on development of a preapplication for EDA assistance. EDA expects to process the city’s official proposal by the end of July. EDA has invested over $110 million in Michigan

since FY93 creating or saving over 66,000 jobs.

Moreover, EDA has coordinated its efforts with the Department of Labor to ensure that Electrolux’s dedicated workforce will have the resources and services needed as they face this impending closure.

Question 3(a). The United States has a record trade deficit of $535 billion. Do you

think this is a threat to the U.S. economy? What is the Administration’s plan to

reduce it?

Response: The trade deficit is not a threat to the U.S. economy, but it is an issue

that requires attention. The main reason for the U.S. trade deficit is that the U.S.

economy is growing more rapidly than the economies of many of our major trading

partners, resulting in the growth of imports over exports. However, over the past

year, U.S. exports have grown 14.6%—the fastest 12-month growth since 1997. Our

exports in March were $94.7 billion—a record level.

While trade balances are certainly important economic indicators, a trade surplus

is not always a sign of economic strength. The last trade surplus we incurred was

during the 1990 recession. We also saw significant trade surpluses during the Great

Depression. So while the trade deficit certainly requires attention, it should not define our economic policies. Our main goals must be overall economic growth, creation of jobs, productivity and higher wages for Americans.

For that reason, our approach to the trade deficit is to continue to focus on making U.S. workers and businesses the most competitive in the world while opening

foreign markets to U.S. goods and services.

Question 3(b). Do you realize for each free trade agreement the U.S. has entered

into, we have worsened our trade deficit? If yes, how is negotiating more Free Trade

Agreements (FTAs) going to reduce the trade deficit and create new American jobs,

particularly FTAs with no enforceable labor and environmental standards? How are

you going to address that when negotiating future agreements such as Thailand?

Shouldn’t we all be playing by the same rules?

Response: The major reason for the U.S. trade deficit, as indicated above, is that

the U.S. economy is growing more rapidly than many of our major trading partners.

120

The President’s Free Trade Initiative will serve as a catalyst for further growth and

American job creation.

The President’s FTA initiative constitutes an aggressive campaign to open markets to American-made goods and services. In general, our FTA partners begin with

higher barriers than the United States and undertake greater liberalization of their

markets than the United States. Free Trade Agreements also require many of our

trading partners to increase their standards for protecting U.S. intellectual property

rights.

In the Trade Act of 2002, Congress provided guidance on negotiating objectives

and priorities, including labor and environment issues, for trade agreements. The

Administration has met those labor and environmental objectives in each FTA that

it has concluded and will ensure that it meets those objectives in future FTAs submitted for approval under Trade Promotion Authority, including any agreement

with Thailand.

Our FTAs help promote higher environmental and labor standards. Each agreement commits our trading partners to effectively enforce their domestic environmental laws, and this obligation is enforceable through the agreement’s dispute settlement procedures. In addition, our trading partners commit to not weaken or reduce environmental laws to attract trade and investment.

The FTAs also require that our trading partners enforce their labor laws. A sustained or recurring failure of a country to enforce its own labor laws in a manner

affecting trade with the United States is a breach of the agreement. The labor provisions of current FTAs clearly provide the United States with a stronger lever to promote observance of core labor standards by our FTA partners. The United States

seeks to ensure that our FTA partners will effectively enforce their labor laws and

to strengthen their capacity to promote respect for core labor standards, which include the right of association, the right to organize and bargain collectively, prohibiting forced labor, a minimum age for employment of children, and acceptable conditions of work.

Finally, I could not agree with you more that we should all be playing by the

same rules and the Bush Administration has a strong record of trade enforcement.

The Department of Commerce has focused on three key objectives to promote President Bush’s commitment to free and fair trade:

1. To promote free and fair markets for U.S. companies around the world by actively

enforcing our extensive trade agreements.

• Since 2001, we have taken on over 680 market access and compliance cases

on behalf of U.S. business. We have increased our market access and compliance staff by 25% and created a new Investigations and Compliance Unit. • In FY 2003, we saved U.S. companies an estimated $5.6 billion in possible

lost sales and investments due to trade barriers. In FY 2000 this figure was

estimated at less than $160 million.

2. To promote the protection of intellectual property rights (IPR) around the world. • We created an Office of Enforcement within the United States Patent and

Trademark Office (USPTO) to specifically address IPR enforcement policy. • Since 2001, USPTO has conducted over 290 IPR technical-assistance projects

around the world. • We are expanding cooperative efforts with developing countries and our trading partners. In addition, we are placing an IPR attache ́ in China to deal specifically with intellectual property rights abuses in that country.

3. To ensure other countries play by the rules when they import their products to

the United States.

• We have initiated over 195 new dumping and subsidy cases since January

2001, already more than were initiated in either term of the previous Administration. • We have initiated the largest cases against China ever—on illegally imported

TVs, furniture and shrimp—these imports were valued at over $1.5 billion. • We are the first country in the world to take China to the WTO in a case

involving illegally subsidized semiconductors. • We have already put in place nearly as many antidumping orders against

China (17) as the Clinton Administration did in 8 years (21). • We have created two new units specifically devoted to enforcement of our

trade laws and preventing unfair trade practices—an Office of China Compliance and the Unfair Trade Practices Task Force.

Question 4. The Administration says that it supports programs within your department to spur economic growth in our country, meanwhile it wants to significantly cut programs like the Manufacturing Extension Partnership (MEP) which

has directly benefited companies in my district. In fact, in the last year 600 jobs

have been created or retained in Michigan as a result. So, please help me underVerDate 11-MAY-2000 13:38 Jun 17, 2004 Jkt 000000 PO 00000 Frm 00124 Fmt 6633 Sfmt 6621 93299.TXT HCOM1 PsN: HCOM1
121

stand why the Administration wants to continue to cut its funding when it clearly

helps small U.S. manufacturers to remain competitive while creating American jobs.

Response: This Administration is well aware of the pressure on U.S. manufacturing competitiveness. That is why the President has responded with a comprehensive set of policies to reduce the costs that impede American manufacturers’ ability

to compete and create jobs. These proposals include broad-based tax relief that reduced the cost of capital to America’s manufacturers and helped increase manufacturing activity to near 20-year highs.

As the Department of Commerce’s report, Manufacturing in America, makes clear,

other principal concerns for America’s manufacturers are excessive regulations, rising health care costs, unreliable and expensive energy costs, frivolous lawsuits, and

lack of access to foreign markets. The President has put forward aggressive proposals to address each of these concerns.

With regard to the MEP, the Administration has increased its requested level for

the federal contribution to the MEP in FY2005 to a level equivalent to the FY2004

Congressional appropriation of $39.6M. As you know, funding for the MEP centers

is a cost-sharing arrangement consisting of support from the federal government,

state and local governments, and the recovery of fees for services. Given advances

in manufacturing and technology, it is appropriate to evaluate MEP operations and

take steps for continuous improvement.

The Department of Commerce’s report, Manufacturing in America, recommends

greater alignment and coordination of other federal programs and resources that are

similarly directed at the small manufacturing marketplace MEP serves, and which

contribute directly to the health of those businesses. If successful, a closer coordination of these resources could not only effect greater leveraging of federal assets but

could also bring to bear a more comprehensive level of service than MEP has delivered in the past.

The Administration’s FY2005 Budget request reflects that recommendation, by

proposing to coordinate MEP fully with other Commerce Department programs that

are helping manufacturers to be more competitive and expand markets. Through

this coordination, the Commerce Department can more closely link the technical and

business staff employed by the MEP centers located around the country with trade

promotion specialists in the Commerce Department’s International Trade Administration (ITA). In addition, ITA has experts with in-depth knowledge of various sectors of industry. By coordinating MEP field agents and these sector experts, the program can be a more effective national resource to help small manufacturers.

Question 5. The Trade Act of 2002 created a health insurance tax credit for certain trade-displaced workers. Those who qualify (Trade Adjustment Assistance and

PBGC recipients) are eligible for a 65% tax credit toward their health premiums for

certain types of coverage. In Michigan, there’s just one state-qualified provider—

Blue Cross Blue Shield of Michigan.

How many TAA eligibles have actually signed up for the credit and how much

do they have to pay for their coverage, even after the tax credit (i.e., what does their

35% amount to on average)? How much of the average TAA benefit does that premium eat up? How much are we paying to administer this credit? And how many

people are we covering?

So, that’s about $6,500 per person, just in administrative costs? Once you add in

the amount of the tax credit itself, wouldn’t it be a lot cheaper just to buy coverage

for these people?

Response: These are important questions, but the Commerce Department does not

administer the Health Coverage Tax Credit (HCTC) established under the Trade

Act of 2002. The Treasury Department is primarily responsible for administering

the HCTC. The IRS has established a special office to administer the HCTC program, and it may be more appropriate to address your questions concerning the operation of the HCTC program to that agency.

QUESTIONS FROM HON. HILDA SOLIS

Question 1. Does President Bush support trade adjustment assistance (TAA) benefits for dislocated service workers? If so, does the Bush Administration support H.R.

3881, legislation to expand TAA to dislocated service and computer industry workers?

Response: The TAA for Workers Program is administered by the Department of

Labor. I know that my very capable colleague, Secretary Chao, is looking closely at

this issue and I defer to her expertise in determining whether an expansion of this

program is appropriate. In my opinion, the most important thing that Congress can

do for workers, right now, is to pass the Workforce Investment Act to modernize

the way that we train and prepare our workforce for the 21st century economy.

122

Question 2. Despite the overthrow of the Taliban, Afghan women continue to endure dangers and discrimination. How is the Department of Commerce going to ensure that the U.S. takes into account ways in which trade and investment may help

or impede the progress of Afghani women?

AND

Question 3. Will the Department of Commerce be consulting with gender and Afghanistan experts prior to this meeting? Will they be meeting with Afghani women’s

groups?

Response: Afghanistan’s new constitution, signed in January 2004, ensures

women play a leadership role in government and contribute significantly to the

country’s development. In light of the increased emphasis on women’s rights in Afghanistan, I made special note of the role of women during my October 2003 visit

to Afghanistan. During consultations with my counterparts, I also met with the

Commerce Ministry’s Director for Women’s Entrepreneurial Development, Mina

Sherzoy. Ms. Sherzoy is an Afghan-American woman who returned to Afghanistan

in late 2002 to contribute to her homeland’s development efforts. I noted the

progress in women’s rights and encouraged more women to take advantage of the

new era of gender equality by playing an active role in advising the government as

it establishes commercial laws. I also participated in a business roundtable with

local companies that included several women who discussed their reestablished

abilities to participate in Afghanistan’s developing economy.

Assistant Secretary for Market Access and Compliance William Lash will continue

these outreach efforts during his June 2004 visit to Afghanistan. He plans to meet

with Commerce Ministry officials, including Ms. Sherzoy, to gauge progress in women’s entrepreneurial development. He will meet with the growing class of women entrepreneurs to further encourage that they remain active in pressing the government for commercial policies that take into account women’s abilities to serve as

managers and leaders, not just manual laborers.

The Department of State is also active in promoting women’s issues. Under Secretary Paula Dobriansky, with Afghan co-chairs Foreign Minister Abdullah and

Minister for Women’s Affairs Sorabi, conduct the U.S.-Afghan Women’s Council, a

public-private partnership to help Afghan women. The group includes Presidential

Advisor Karen Hughes; Connie Duckworth, Chair of the Committee of 200 (an organization of pre-eminent women business leaders); Assistant Secretary of State for

Educational and Cultural Affairs Patricia de Stacy Harrison; Pat Mitchell, PBS

President and CEO; and Barbara Barrett, Chairman of the Board of Thunderbird

University. The Council meets twice annually in alternating capitals and held its

fourth meeting in February 2004 in Kabul. The Council focuses on issues of access

to education and health care, economic sectors and political participation and

matching private sector donations with stated needs. The Council has sponsored numerous projects, including training for aspiring women journalists, entrepreneurs

and politicians. The Foundation for International Community Assistance (FINCA—

a micro-lending nongovernmental organization) also has given many women the

critical start-up loan they need to launch their small businesses.

Question 4. The Department of Commerce announced a restructuring of the Industry Advisory Sectoral Committees, which advise the United States Trade Representative and the Department of Commerce about the development of trade policies on sectoral industries. The new committees are supposed to be finalized at the

end of March 2004.

Under the new structure for the committees, how will representatives be selected?

How many women are serving on the small and minority business task force?

Response: There will be no change in the process by which members of the committees are selected. Commerce and USTR jointly review all applications to the committees. Members are selected to represent their industry interests on trade matters. Considerations for membership include knowledge and expertise of the industry represented and of trade matters, and diversity among sectors, product lines,

firm size, geographic areas, and demographics. Committee members must be U.S.

citizens and represent a U.S. firm or other entity that is directly engaged in the

export or import of goods or that sells its services abroad, or represent a U.S. entity

that provides services in direct support of the international trading activities of

other U.S. entities. To begin the nomination process, the Office of Advisory Committees requires the following: 1) sponsor letter, which must be on company/organization letterhead (can be self-nominating); 2) resume, with demonstrated knowledge

of international trade as relevant to the work of the committee; and 3) company or

organization information (if consultant, legal advisor, or trade association, a membership list or client list must be included). Commerce and USTR make every effort

123

to maintain balanced industry representation on each Committee and among Committees. Appointments are made without regard to political affiliation.

Currently, the Industry Trade Advisory Committee on Small and Minority Business (ITAC 11) has a total of 27 members; eight are women.

Question 5. Will civil society organizations be represented on the task forces? If

so, which groups on which task forces?

Response: Four environmental representatives currently serve on the new Industry Trade Advisory Committees. Two, representing the Defenders of Wildlife and

The Mercatus Center at George Mason University, serve on the new Industry Trade

Advisory Committee on Chemicals, Pharmaceuticals, Health/Science Products and

Services (ITAC 3); and two, representing Defenders of Wildlife and the Pacific Environment Resources Center at the Center for International and Environmental Law,

serve on the new Industry Trade Advisory Committee on Forest Products (ITAC 7).

Question 6. Will there be women or labor groups on the textile task force given

that women are the majority of textile workers in the U.S. and are the majority of

textile workers in developing countries?

Response: As of May 2004, the Industry Trade Advisory Committee on Textiles

and Clothing (ITAC 13) has 44 members, of which eight are women. Two of the

three Committee’s officers (the two Vice Chairs) are women. The women members

represent the full spectrum of the fiber, textile, apparel, footwear, leather and luggage industries. Labor groups are not represented on the ITACs as they serve on

the USTR-Labor Advisory Committee (LAC), which is included in the trade advisory

committee system. Textile and apparel labor organizations are members of LAC.

Question 7. How is the Department of Commerce going to ensure that U.S. procurement policies can continue to support women and minority-owned small businesses and still be non-discriminatory?

Response: Opportunities for women- and minority-owned small businesses in government procurement are guaranteed through a variety of federally mandated setasides which insure government agencies procure from these businesses whenever

possible. The Department supports and fully complies with all federal procurement

polices and legal requirements regarding small, minority- and women-owned businesses. Our trade agreements do not affect these opportunities, as the United States

negotiates government procurement chapters that open foreign markets to U.S. suppliers but still protect opportunities for women- and minority-owned businesses in

U.S. domestic procurement.

QUESTIONS FROM HON. ELIOT ENGEL

Question 1. The U.S. steel industry has suffered grievous harm. The federal government had instituted a 3-year-program to protect it from unfair foreign competition, yet the Administration pulled the plug early. In the case of Brazil this unfair

competition is very apparent. As you may know, in the U.S. we use coal to make

steel. In Brazil they use charcoal which is made by the Brazilian lumber industry

that has been documented in using slave labor. When a vital component of Brazilian

steel production is made using slave labor, a gross competitive disadvantage for the

U.S. steel industry is created.

Question 1(a). Why did the Administration end the program early?

Response: In March 2002, following an investigation by the International Trade

Commission (ITC) that found that the U.S. steel industry had been injured by a

surge in steel imports, the President imposed temporary safeguard measures on a

number of steel products. The safeguard measures were designed to provide the industry with the temporary breathing space needed to adjust to the increased imports and regain its competitiveness.

On December 4, 2003, the President terminated the steel safeguards as a result

of changed economic circumstances, after determining that the measures had

achieved their purpose. In the 21 months that the safeguards were in place, the industry underwent major restructuring and consolidation, productivity increased

sharply, prices stabilized and profitability returned. Since the safeguard measures

were lifted in December, prices have remained strong and the industry has continued to maintain its profitability.

Question 1(b). What is the Administration doing to address the obvious problem

of slavery in Brazil?

Response: The Administration takes such allegations very seriously. The U.S. Department of Homeland Security’s Customs and Border Protection agency is responsible for investigating allegations of the use of prison or indentured labor in the

manufacture of merchandise imported into the United States. Currently, U.S. Customs and Border Protection has staff operating out of the U.S. Embassy in Brasilia

to specifically address the issue of alleged slavery use in manufacturing.

124

The Government of Brazil has developed its own national programs to combat

slavery, and the Bush Administration supports and encourages these efforts. In addition, the Department of Labor provided $1.7 million in funding for a project led

by the International Labor Organization for combating forced labor in Brazil, which

is scheduled to run through the end of 2007. The project contributes to the prevention and elimination of forced labor in Brazil by strengthening the capacity of governmental and non-governmental institutions to detect and combat forced labor, and

provides rehabilitation and economic alternatives for victims of forced labor. Both

the Department of Labor and Department of State assist in the administration of

the project grant in Brazil.

Question 1(c). What plans does the Administration have to protect the steel industry from unfair competition from Brazil?

Response: As part of the safeguard measures, the Administration established a

steel import licensing and monitoring system to allow the Administration to better

detect and, where appropriate, more quickly respond to future import surges. This

system was kept in place even though the tariffs were lifted. In addition, the Administration continues to vigorously enforce the antidumping and countervailing

duty laws which provide our domestic steel industry with the opportunity to obtain

relief from unfairly traded imports from any country, including Brazil.

Moreover, as part of the Administration’s effort to address challenges facing our

manufacturing sector, the Department of Commerce recently established an Unfair

Trade Practices Task Force to pursue the elimination of foreign unfair trade practices that may harm U.S. commercial interests. The members of the Task Force include trade experts and economists with a broad range of experience in addressing

unfair trade issues involving dumping, subsidies, import surges and customs practices and are well-versed in such sectors as steel, textiles, agriculture and semiconductors.

In addition to meeting with concerned members of industry and conducting its

own internal analysis, the Task Force has issued a notice in the Federal Register

asking the public and representatives of the manufacturing sector to identify those

unfair trade practices of greatest concern, in order to assist the Task Force in determining its initial priorities. The notice seeks comments on all types of foreign unfair

trade practices facing our manufacturers, including those practices which currently

may not be subject to specific or adequate trade disciplines. We will also ask for

comments on the underlying market distortions that may have led to the practice

in question and any suggestions regarding the most effective ways the Task Force

can assist in addressing an identified unfair trade practice.

We look forward to fully employing these resources to get at the underlying

causes of unfair trade problems well ahead of the time that industries must typically seek relief from the government under our trade laws.

Question 2. As you may know, the Terrorism Risk Insurance Act is due to expire

at the end of this year. The Secretary of the Treasury can extend this for another

year, but must do so by September.

What would the impact be on the U. S. economy if shopping center owners and

office building owners could not get terrorism insurance?

Will you pledge to speak to Secretary Snow and urge him to extend TRIA quickly?

Response: The Terrorism Risk Insurance Act (TRIA) requires the Secretary of the

Treasury to determine by September 1, 2004, whether to extend the ‘‘make available’’ provisions of the Act into the third year of the program. These provisions require each insurer to make available, in all of its commercial property and casualty

insurance policies, coverage for insured losses under the Act. TRIA also requires

that this coverage must not differ materially from the terms, amounts and other

coverage limitations applicable to losses from events other than acts of terrorism.

The Secretary’s determination must be based on the ‘‘effectiveness of the program,’’

the ‘‘likely capacity of the property and casualty insurance industry to offer insurance for terrorism risk after the termination of the program,’’ and the ‘‘availability

and affordability of such insurance for various policyholders.’’

To assist the Secretary in making this determination, the Department of the

Treasury on May 5, 2004, published a Request for Comments (RFC) in the Federal

Register. Comments were due by June 4. Among other things, the RFC asks whether policyholders would still be able to obtain terrorism risk insurance and whether

the affordability would be impacted if the provision were not extended; how the

‘‘make available’’ requirement has affected or interacted with the available capacity

of insurers to provide terrorism risk insurance coverage to date; and how a Treasury

decision to extend or not to extend would affect insurers’ decisions to offer insurance

in Program Year 3. Responses to this RFC, along with other surveys Treasury has

commissioned, should provide the Secretary with the information necessary to make

an informed decision, consistent with the terms of the Act. The information gathVerDate 11-MAY-2000 13:38 Jun 17, 2004 Jkt 000000 PO 00000 Frm 00128 Fmt 6633 Sfmt 6621 93299.TXT HCOM1 PsN: HCOM1
125

ered should permit an assessment of the availability and affordability of terrorism

insurance coverage as well as the demand for such coverage.

I am confident that Secretary Snow and his Department are making every effort

to obtain the information needed to make a decision on the extension as quickly as

possible.

QUESTIONS FROM HON. BART GORDON

Question 1. Mr. Secretary, manufacturing jobs have declined for 40 straight

months. Since January 2001, the United States has shed 2.75 million manufacturing jobs; 27,000 manufacturing jobs were lost in January of this year alone. In

Tennessee we have lost more than 60,000 manufacturing jobs since 2001. Our smalland medium-sized manufacturers have been particularly hard-hit. Whenever I meet

with small manufacturers, they tell me about the importance of the Manufacturing

Extension Program [sic] in helping them meet increased international competition

and to keep their doors open. The MEP generates thousands of jobs and billions of

dollars in increased sales and investment. Also, each federal MEP dollar invested

generates $4 in federal tax revenue. And just this month, the President awarded

the Malcolm Baldrige National Quality award to Stoner Inc., a small manufacturer

in Quarryville, Pennsylvania—another satisfied customer of its local MEP Center.

The Administration’s Manufacturing Plan is very short on specific actions, including

a lack of funding estimates, to assist U.S. manufacturers. The MEP is a proven program with a documented successful track record. Mr. Secretary can you explain to

me, and the American small manufacturing community, why the Administration has

targeted the successful MEP for elimination?

Response: The MEP is not being targeted for elimination. The Administration has

increased its requested level for the federal contribution to the MEP in FY2005 to

a level equivalent to the FY2004 Congressional appropriation of $39.6M. As you

know, funding for the MEP centers is a cost-sharing arrangement consisting of support from the federal government, state and local governments, and the recovery of

fees for services. Given advances in manufacturing and technology, it is appropriate

to evaluate MEP operations and take steps for continuous improvement.

The Department of Commerce’s report, Manufacturing in America, recommends

greater alignment and coordination of other federal programs and resources that are

similarly directed at the small manufacturing marketplace MEP serves and which

contribute directly to the health of those businesses. If successful, a closer coordination of these resources could not only effect greater leveraging of federal assets but

could also bring to bear a more comprehensive level of service than MEP has delivered in the past.

The Administration’s FY2005 Budget request reflects that recommendation, by

proposing to coordinate MEP fully with other Commerce Department programs that

are helping manufacturers to be more competitive and expand markets. Through

this coordination, the Commerce Department can more closely link the technical and

business staff employed by the MEP centers located around the country with trade

promotion specialists in the Commerce Department’s International Trade Administration (ITA). In addition, ITA has experts with in-depth knowledge of various sectors of industry. By coordinating MEP field agents and these sector experts, the program can be a more effective national resource to help small manufacturers.

Question 2. Mr. Secretary, the Modernization Forum (the umbrella organization

for the MEP Centers) sent you a letter outlining the impact of the FY04 funding

level of $40 million on the national network of MEP Centers. The Modernization

Forum refutes the Department’s claims that despite a two-thirds cut in funding,

MEP performance can be sustained by introducing cost-savings efficiencies such as

integration with the International Trade Administration and collaboration with universities and community colleges.

After your announcement that EDA funds may be available for MEP, the Modernization Forum again wrote you (1 March 2004) asking to work with you to ensure MEP Centers have access to these funds as soon as possible. In addition, they

requested that you arrange a workshop for MEP Center Directors on 16 or 18 March

while they were in D.C. It is my understanding that you have not responded to either of these letters. Why not? Could you give us an idea of what the Administration

intends to do before 1 June to ensure the MEP network is not destroyed?

(I met with EDA officials last week. At best there is $8 million available for MEP

Centers. However, there seems to be some legal issues about how Center might be

able to apply for EDA grants. Commerce lawyers have not yet begun addressing this

issue and Commerce officials would not say that it would be resolved before 1 June.)

Response: During the past year, the Department took a comprehensive look at the

issues influencing the long-term competitiveness of U.S. manufacturing to identify

126

the challenges our manufacturers face and outline a strategy for ensuring that the

government is doing all it can to create the conditions that will allow U.S. manufacturers to increase their competitiveness and spur economic growth. That review ultimately led to the Department of Commerce’s report, Manufacturing in America. The

report recommended methods to strengthen the MEP program.

In addition to the support for the MEP national manufacturing network provided

by the FY04 appropriation, EDA has made MEP centers eligible for Economic Adjustment Program funding. EDA has been working with MEP on logistics and arrangements for center applications to provide this additional pool of funds as soon

as possible.

MEP intends to hold an interactive dialogue with all stakeholders on the impact,

scope, and effect of the proposed recompetition. The following is the tentative

timeline for the recompetition. This timeline includes a number of opportunities for

discussions and dialogue with all MEP stakeholders, including the ModForum.

• We will hold a recompetition for MEP centers in the fall of 2004. This timing will

allow the Department to solicit and receive input from state co-investors in the

MEP centers. Because MEP is a cost-shared program relying upon the contributions from its State partners (1/3 of the total center funding), it is critical to

get their input in defining the format and structure of the recompetition. This

is essential to assure state support for the recompetition and to encourage

states to support proposals for well-qualified, well-financed centers. • MEP will conduct a series of regional discussions to get state and other investor

inputs in the July/August 2004 time frame. The National Institute of Standards

and Technology (NIST) will release a Federal Register notice requesting proposals on or about September 1, 2004, with proposals due October 31, 2004 (60

days later). Awards are expected to be effective January 1, 2005. • The center competition will use the criteria and protocols as established in the

MEP rule (15 CFR 290). • MEP will implement, as appropriate, proposed program reforms in the upcoming

National Academy of Public Administration (NAPA) analysis of the MEP program. • Per their request, centers and state economic development offices will be given opportunities to provide input on the recompetition.

Question 3. The Administration proposes to eliminate the Advanced Technology

Program (ATP). In our current economic situation and with increased competition

from abroad should we be closing one of the few programs that enable entrepreneurs to bring research ideas to the demonstration phase? When the Science

Committee held a hearing on nanotechnology one of the recommendations we heard

was to continue funding for ATP. They pointed out there is plenty of funding for

basic research but there is no funding to bridge the gap between the lab and the

marketplace. This is exactly the problem that ATP is designed to solve. I understand the need to prioritize during tough budget times. However, the Administration’s own analysis of ATP shows that benefits for just a few ATP projects analyzed

to date are projected to exceed $17 billion on a total of $2.1 billion federal investment since ATP started. It seems that when we are losing so many manufacturing

and high-skill jobs, we should be focusing on the development of next-generation

technologies which will support high-wage jobs. Why does this Administration wish

to eliminate the ATP, rather than making it a part of its manufacturing plan?

Response: Developing new technologies that will create the next generation of

high-wage jobs and enhance U.S. competitiveness depends upon Federal activities

that enable world-class fundamental research, create incentives for increased private sector R&D, and strengthen intellectual property protections. The President’s

FY 2005 Budget provides for an unprecedented $132 billion investment in R&D, devoting 13.5 percent of all discretionary outlays to R&D—the highest share in 37

years. The Administration has also sought to strengthen existing technology transfer mechanisms and develop new ones—such as user centers that enable private sector access to large-scale, cutting-edge research tools and facilities. Examples of user

centers include NIST’s Center for Neutron Research and the various major facilities

located at Department of Energy laboratories. In addition, the Administration seeks

to stimulate private sector innovation by making the R&D tax credit permanent,

and other means, rather than providing direct support to only a handful of the

many qualified businesses.

Consistent with an emphasis on shifting resources to reflect changing needs and

priorities, the Administration proposes to terminate ATP. The Administration believes that other NIST R&D programs are much more effective and necessary in

supporting the fundamental scientific understanding and technological needs of

U.S.-based businesses, American workers and the domestic economy. The decision

will also allow NIST to focus on programs within its Measurement and Standards

127

Laboratories, which have received national and international recognition and are

central to satisfying NIST’s core mission. Further, large shares of ATP funding have

gone to major corporations that do not need subsidies. Finally, ATP-funded projects

often have been similar to those being carried out by firms not receiving such subsidies.

Question 4. Mr. Secretary, on 11 February, Under Secretary Phil Bond appeared

before the Science Committee and had this to say about the National Institute of

Standards and Technology.

‘‘NIST has been often referred to as the ‘crown jewel’ of our Federal laboratory

system. It is a well-deserved title because there is no other Federal lab that industry relies on as much as NIST. Industry needs the critical NIST metrology

research standards for measurement testing, analysis, and protocols that allow

for interoperable products to be created, new products to be developed based on

consensus standards, assurance that products meet conformity assessment requirements, and the ability to effectively bring their innovation from the laboratory to the marketplace.’’

I couldn’t agree more with this assessment. NIST is very important component

in U.S. industrial competitiveness. However, NIST plays only a very small role in

the Administration’s Manufacturing Plan. I am also concerned about the Administration’s FY05 budget request for NIST. The Administration’s budget request shows

an $85 million increase for the NIST labs that includes $58 million for new research

initiatives. However, the budget request does not include close-out costs for the Advanced Technology Program, which the Administration proposes eliminating. These

close-out costs are $35 million according to Dr. Arden Bement (5 Feb. budget briefing)) not does it take into account that in past years up to 15 % of ATP funds were

transferred to the NIST lab account—in FY03 this was $13 million. According to my

accounting, there would only be about $11 million for new initiatives at the NIST

labs. ($85 million minus $26 million for lab equipment minus $35 million ATP closeout minus $13 million ATP transfer funds leaving $11 million.) It seems that either

there will be no new NIST research initiatives or you will have to take MEP funding

to pay for new research at NIST. What is the Administration’s intent?

Response: The FY2005 President’s Budget proposal represents the Administration’s intent to strengthen core NIST lab capabilities through increases for laboratory upgrades, equipment, and ongoing research efforts. As our nation’s oldest federal laboratory, NIST provides critical measurement, standards, and technology that

facilitate commerce and trade. The budget provides support for the President’s research and development (R&D) priorities for combatting terrorism, nanotechnology,

networking and information technology R&D, biosciences, and hydrogen fuel R&D,

among others. Additionally, in order for the NIST world-class scientists to perform

their national mission, the budget requests funds for urgently needed construction

and renovation projects in both Gaithersburg, Maryland and Boulder, Colorado.

If Congress enacts the FY2005 Budget proposal to terminate funding for the Advanced Technology Program (ATP), the Department of Commerce and NIST will

pursue all available means to address the termination cost requirements, consistent

with legal obligations and sound management practices. To the greatest extent possible, NIST will seek opportunities to place ATP staff elsewhere in NIST or at other

agencies, both within and outside the Department. NIST already received Voluntary

Employee Retirement Authority and buy-out authority to reduce the number of its

employees in light of the lower appropriation level for other programs in FY 2004.

The use of funding that may become available through prior year deobligations in

ATP is also a possibility to offset ATP shutdown costs. Prior year deobligations have

averaged $13 million over the last three years, although a lower level is projected

for FY 2005.

QUESTIONS FROM HON. EDWARD J. MARKEY

Question 1. Mr. Secretary, Massachusetts used to be a center for textile manufacturing, but in the last century we lost those jobs as factories moved first to the

Southern states, and then offshore. We adapted by developing new skills and new

industries in high technology and medicine. A very high percentage of our employment and therefore of the economic base is medical and high-technology oriented.

These jobs are now being endangered by offshoring to India, Pakistan, or other

countries, which is threatening the heart of Massachusetts economy. If we lose the

high-tech, information industry jobs, the bio-technology jobs and the outsourceable

medical jobs, what are we going to replace them with? How are we going to retrain

the unemployed and into what will they be retrained?

Response: The President’s economic priority is to increase job opportunities in the

United States while ensuring that Americans have the skills necessary to fill those

128

jobs. As you point out, Massachusetts has demonstrated the ability of the U.S. economy to shift with changing circumstances. At the time Massachusetts started losing

its textile jobs, nobody knew—or could predict—that the state would find its new

specialization in areas such as computers and medical research. But the state’s advantages—especially its tremendous university base and well-trained and qualified

workforce—gave it an advantage in these high-skilled and high-paying areas.

I believe that the lesson of the Massachusetts experience shows that we need to

concentrate on the skills and abilities of our labor force and our ability to succeed

in an innovation economy. While I share your concern any time we lose one good,

American job, I do not believe that we can protect our way to prosperity. Nor can

we predict exactly where new industries and jobs will be created. This is the most

difficult and challenging aspect of a competitive global economy, but I believe the

course we must choose is clear. We must continue to prepare our workforce, build

the technological infrastructure necessary for innovation to flourish and promote the

competitive and entrepreneurial advantages of America. The President has made

commitments to all of these objectives:

• Doubling the number of workers receiving job training through the major Federal

worker training programs under the Workforce Investment Act, ensuring that

those programs work better, and closing the skills gap so we fill every high

growth job with an American worker. • Strengthening and modernizing support for vocational education. • A Presidential Math and Science Scholar’s Fund to ensure that America remains

the world leader in the innovation economy. • Extending the National Assessment of Educational Progress to high schools to ensure that they are producing educated graduates. • Record commitments of Federal R&D—$132 billion this year. • Pro-growth tax policies that support entrepreneurship and the deployment of technology. This includes support for the Internet tax moratorium, achieving accelerated depreciation schedules for small businesses (including immediate expensing for purchased computer software), and support for the making the R&D tax

credit permanent.

In addition, my colleague at the Department of Labor, Secretary Chao, is targeting those markets generating the most rapid job growth or where the greatest

skill shortages exist, and focusing training and education programs that provide the

talent-base to fill those jobs. Secretary Chao is implementing the President’s High

Growth Job Training Initiative. Its premise is simple and straightforward: Successful workforce development happens when training programs are connected to real

employment opportunities. The High Growth Job Training Initiative encourages the

workforce investment system to identify businesses and industries with career opportunities, evaluate their skill needs, and ensure that people are being trained

with the skills these businesses require. As part of this initiative, Secretary Chao

has focused on 12 industries at the national level that are either projecting significant job growth, experiencing transformation in the nature of the job skills required,

or are essential to the national economy. Information technology, health care, biotechnology, and advanced manufacturing are four of those 12 industries.

Question 2. I am also very concerned that the offshoring of many technology jobs

really adds insult to injury—for not only do American workers lose their jobs, but

they also face a very real threat of also losing their privacy. Some of the jobs that

are being sent offshore involve the processing or analysis of the private medical information, personal financial information from banks, brokerages, insurance or credit card companies, income tax return information, and other types of sensitive personal information. Can you tell the Subcommittee what the Department of Commerce has done to ensure that sensitive data about American citizens—their medical records, their tax returns, their financial information, is not sent overseas to

a person or a company that could compromise this information?

Response: I understand your concerns and agree that protecting the privacy and

security of personal information collected by U.S. companies is very important. I understand that Federal Trade Commission Chairman Timothy Muris recently sent

you a letter outlining the FTC’s authority to safeguard consumer privacy both at

home and abroad. As Chairman Muris indicated, under current United States law,

a company must take reasonable steps to ensure that information shared with its

service providers—whether domestic or foreign—is protected in accordance with

those laws. And, with respect to medical information, current United States law—

in particular, the Health Insurance Portability and Accountability Act (HIPSAA)—

provides Americans with strong privacy and security safeguards.

Continued education and outreach to U.S. companies on the importance of developing global privacy policies and practices is essential to promote compliance with

U.S. laws. Recognizing the increasing importance of privacy to consumers and busiVerDate 11-MAY-2000 13:38 Jun 17, 2004 Jkt 000000 PO 00000 Frm 00132 Fmt 6633 Sfmt 6621 93299.TXT HCOM1 PsN: HCOM1
129

nesses alike, the Department of Commerce, in conjunction with the Federal Trade

Commission and other inter-agency partners, has had productive dialogues with

other governments, consumer groups, and businesses to encourage broader adoption

of privacy protections.

Multilateral and private-sector initiatives are important in the development and

use of privacy-enhancing technologies and in promoting business and consumer education and awareness about online privacy issues, including concerns about the offshore transfer of personal information. We have continued our commitment to work

with other countries, businesses, and consumer groups in private sector-led forums

such as the Global Business Dialogue on Electronic Commerce (GBDe), the TransAtlantic Business Dialogue (TABD), and the Trans-Atlantic Consumer Dialogue

(TACD).

We are also working very closely with multilateral organizations such as the Organization for Economic Cooperation and Development (OECD) and the Asia-Pacific

Economic Cooperation forum (APEC) to promote internationally compatible approaches to privacy. As you may know, APEC is in the process of developing the

APEC Privacy Framework, which will build upon the 1980 OECD Privacy Guidelines to create a voluntary system of privacy protection that is appropriate for the

particular conditions in the APEC economies. Additionally, the Framework will

focus on a cooperative approach to information privacy in the Asia Pacific region

that will balance and promote both effective privacy protection and the free flow of

information. The Framework will include an accountability principle that makes

clear that controllers, when transferring personal information, should take reasonable steps to ensure that the recipient will protect the information consistently with

the APEC Principles.

Finally, I am pleased to note that the Department of Commerce has awarded a

Market Development Cooperator Program grant to the Better Business Bureau

(BBB) Online to promote the Global Trustmark Alliance (GTA). As you may know,

BBB Online’s mission is to foster the highest ethical marketplace relationship between consumers and business. Many in the private sector, government, and consumer organizations view it as the leading self-regulation organization in North

America. The GTA is a new membership organization created to improve cross border e-commerce by fostering consumer trust and encouraging good online business

practices. We believe that this program will prove instrumental in enabling businesses to recognize the importance of privacy protection and to implement protocols

for ensuring that personal information is safeguarded even when transferred

abroad.

Question 3. Mr. Secretary, the use of computer technology makes the global market work. This global computer market however also makes it easier to gain access

to the data that is present on this world wide computer network. Are you at all concerned that the offshoring of private data about U.S. citizens and companies will

facilitate identity theft, industrial espionage, data sabotage or data mining that will

allow foreign individuals, companies, or for that fact terrorist groups access to sensitive data that could be used against individuals, or companies in the U.S. or even

the American government?

Response: While the concerns you raise about the misuse of personal information

by bad actors are legitimate, problems such as identity theft, industrial espionage,

data sabotage or data mining are not unique to the outsourcing context. These

issues affect information shared with all service providers, both domestic and international. The Department of Commerce will continue to engage in cooperative dialogues such as the GBDe and continue to work with the OECD and APEC to bolster

on and off-line privacy and to safeguard business and consumer interests domestically and internationally. Moreover, as noted above, FTC Chairman Muris recently

sent you a letter outlining the FTC’s authority to safeguard consumer privacy at

home and abroad and indicated that, under current United States law, companies

must take reasonable steps to ensure that information shared with service providers, both domestic and foreign, is protected in accordance with those laws. The

FTC, charged with enforcing our nation’s consumer protection laws, is actively taking steps to ensure that American consumers and businesses understand their respective privacy rights and legal obligations.

Question 4. Mr. Secretary, do you believe that before the personal medical information of an American citizen, their personal financial information, or their personal tax return information, is sent offshore for processing or analysis, that the

American citizen should be first provided with a NOTICE of where their information

is being sent, and an ‘‘Opt-IN’’ right to say NO to the transfer and block it?

Response: We strongly believe that information controllers should provide individuals with clear and conspicuous, readily available, and affordable mechanisms to

choose how their information is to be used. However, we also believe that the United

130

States and its partners should achieve internationally compatible standards for privacy protection while preventing the interruption of trans-border data flows, the key

to electronic commerce and cross-border trade and services.

To date, most legislative and policy enactments related to privacy, including the

Gramm-Leach-Bliley Act and the Health Insurance Portability and Accountability

Act of 1996 (HIPAA), have required companies to provide individuals with notice of

how their information is being used and disclosed and provide for meaningful opportunities to exercise control.

Question 5. Mr. Secretary, as you know, the European Union has a data protection law that addresses transfers of personal data about EU citizens to third countries, such as the U.S. In light of the growing trend towards offshoring data about

U.S. citizens to other countries, should the U.S. also adopt a Data Protection Law

to ensure that personal data about American citizens is only sent to countries that

provide strong and enforceable privacy protections, and that U.S. citizens get disclosure and a right to say NO to data transfers that they fear might compromise their

personal privacy?

Response: While we strongly believe that individuals should be offered choices

concerning how their personal information is used, we do not believe that the

United States should adopt privacy legislation along the lines of the European

Union (EU) Directive on Data Protection. As you may know, while the United States

and EU generally agree on the need for privacy protections, the United States and

the EU employ very different means to achieve this goal. The EU Directive, which

takes a one-size-fits-all regulatory approach to privacy issues, is extraordinarily

broad in scope and may have the effect of stifling the continued growth of electronic

commerce.

Additionally, the EU Directive includes provisions aimed at ensuring that data

transfers are only permitted to countries whose privacy laws are deemed ‘‘adequate’’

by the European Commission. This requirement has resulted in a good deal of confusion for other countries and the private sector regarding exactly what constitutes

‘‘adequacy’’ under the European regime. To date, only Canada, Argentina, Hungary,

Switzerland, and Guernsey, along with the U.S.-EU Safe Harbor arrangement (see

http://export.gov/safeharbor), have received ‘‘adequacy’’ decisions from the EU, despite the fact that many additional countries have enacted comprehensive privacy

legislation.

Furthermore, the EU Directive applies to all processing of personal data, including on-line, off line, and manually processed data, as well as automatic, by all organizations in all industry sectors. In contrast, the U.S. approach, which relies on sector-specific legislation, private-sector privacy initiatives and the important role of

the Federal Trade Commission to enforce privacy promises, preserves maximum

flexibility for businesses to be responsive to the privacy concerns of individuals. Finally, it is worth noting that certain recent studies, including findings published by

the CATO Institute and the AEI-Brookings Joint Center for Regulatory Studies, indicate that comprehensive regulatory approaches to privacy may be no more effective in protecting personal information than other models, including private sector

developed privacy programs.

131

132

133

134

135

136

137

Æ