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FULL COMMITTEE HEARING ON 

SMALL BUSINESS EXPORTS IN 

THE CURRENT ECONOMIC CLIMATE 

COMMITTEE ON SMALL BUSINESS 

UNITED STATES HOUSE OF 

REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

JUNE 19, 2008 

Serial Number 110-101 

Printed for the use of the Committee on Small Business 

( 

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

HOUSE COMMITTEE ON SMALL BUSINESS 

NYDIA M. VELA ́ ZQUEZ, New York, Chairwoman 

HEATH SHULER, North Carolina 

CHARLIE GONZALEZ, Texas 

RICK LARSEN, Washington 

RAUL GRIJALVA, Arizona 

MICHAEL MICHAUD, Maine 

MELISSA BEAN, Illinois 

HENRY CUELLAR, Texas 

DAN LIPINSKI, Illinois 

GWEN MOORE, Wisconsin 

JASON ALTMIRE, Pennsylvania 

BRUCE BRALEY, Iowa 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JOE SESTAK, Pennsylvania 

BRIAN HIGGINS, New York 

MAZIE HIRONO, Hawaii 

STEVE CHABOT, Ohio, Ranking Member 

ROSCOE BARTLETT, Maryland 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

BILL SHUSTER, Pennsylvania 

MARILYN MUSGRAVE, Colorado 

STEVE KING, Iowa 

JEFF FORTENBERRY, Nebraska 

LYNN WESTMORELAND, Georgia 

LOUIE GOHMERT, Texas 

DAVID DAVIS, Tennessee 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

MICHAEL DAY, Majority Staff Director 

ADAM MINEHARDT, Deputy Staff Director 

TIM SLATTERY, Chief Counsel 

KEVIN FITZPATRICK, Minority Staff Director 

STANDING SUBCOMMITTEES 

Subcommittee on Finance and Tax 

MELISSA BEAN, Illinois, Chairwoman 

RAUL GRIJALVA, Arizona 

MICHAEL MICHAUD, Maine 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JOE SESTAK, Pennsylvania 

VERN BUCHANAN, Florida, Ranking 

BILL SHUSTER, Pennsylvania 

STEVE KING, Iowa 

Subcommittee on Contracting and Technology 

BRUCE BRALEY, IOWA, Chairman 

HENRY CUELLAR, Texas 

GWEN MOORE, Wisconsin 

YVETTE CLARKE, New York 

JOE SESTAK, Pennsylvania 

DAVID DAVIS, Tennessee, Ranking 

ROSCOE BARTLETT, Maryland 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

MARY FALLIN, Oklahoma 

(II) 

Subcommittee on Regulations, Health Care and Trade 

CHARLES GONZALEZ, Texas, Chairman 

RICK LARSEN, Washington 

DAN LIPINSKI, Illinois 

MELISSA BEAN, Illinois 

GWEN MOORE, Wisconsin 

JASON ALTMIRE, Pennsylvania 

JOE SESTAK, Pennsylvania 

LYNN WESTMORELAND, Georgia, Ranking 

BILL SHUSTER, Pennsylvania 

STEVE KING, Iowa 

MARILYN MUSGRAVE, Colorado 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

Subcommittee on Rural and Urban Entrepreneurship 

HEATH SHULER, North Carolina, Chairman 

RICK LARSEN, Washington 

MICHAEL MICHAUD, Maine 

GWEN MOORE, Wisconsin 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JEFF FORTENBERRY, Nebraska, Ranking 

ROSCOE BARTLETT, Maryland 

MARILYN MUSGRAVE, Colorado 

DAVID DAVIS, Tennessee 

Subcommittee on Investigations and Oversight 

JASON ALTMIRE, PENNSYLVANIA, Chairman 

CHARLIE GONZALEZ, Texas 

RAUL GRIJALVA, Arizona 

MARY FALLIN, Oklahoma, Ranking 

LYNN WESTMORELAND, Georgia 

(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

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

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

WITNESSES 

Johnson, Mr. Cass, President, National Council of Textile Organizations ......... 4 

French, Mr. Jameson, President, Northland Forest Products, Kingston, NH, 

On behalf of the Hardwood Federation .............................................................. 6 

Wetherington, Mr. Chuck, President and Owner, BTE Technologies, Hanover, 

MD, On behalf of the National Association of Manufacturers ......................... 8 

Griswold, Mr. Daniel T., Director of the Center for Trade Policy Studies, 

The Cato Institute ................................................................................................ 10 

Chatterji, Dr. Aaron K., Assistant Professor, The Fuqua School of Business, 

Duke University, Durham, NC ........................................................................... 12 

APPENDIX 

Prepared Statements: 

Vela ́zquez, Hon. Nydia M. ....................................................................................... 29 

Chabot, Hon. Steve .................................................................................................. 31 

Johnson, Mr. Cass, President, National Council of Textile Organizations ......... 32 

French, Mr. Jameson, President, Northland Forest Products, Kingston, NH, 

On behalf of the Hardwood Federation .............................................................. 38 

Wetherington, Mr. Chuck, President and Owner, BTE Technologies, Hanover, 

MD, On behalf of the National Association of Manufacturers ......................... 46 

Griswold, Mr. Daniel T., Director of the Center for Trade Policy Studies, 

The Cato Institute ................................................................................................ 56 

Chatterji, Dr. Aaron K., Assistant Professor, The Fuqua School of Business, 

Duke University, Durham, NC ........................................................................... 61 

(V) 

(1) 

FULL COMMITTEE HEARING ON SMALL 

BUSINESS EXPORTS IN THE CURRENT 

ECONOMIC CLIMATE 

Thursday, June 19, 2008 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The Committee met, pursuant to call, at 10:06 a.m., in Room 

1539, Longworth House Office Building, Hon. Nydia M. Vela ́zquez 

[Chair of the Committee] Presiding. 

Present: Representatives Vela ́zquez, Shuler, Larsen, Ellsworth, 

Chabot, Akin and Davis. 

OPENING STATEMENT OF CHAIRWOMAN VELA ́ ZQUEZ 

Chairwoman VELA ́ ZQUEZ. Good morning. I call this hearing of the 

House Small Business Committee to order. 

It is no secret that the Nation’s economy is struggling. Just last 

month, the unemployment rate reached 5.5 percent, hitting its 

highest point in 4 years; and with the rising costs of basic commodities, few Americans remain untouched by the increasingly fragile 

economy. During past downturns, America’s small businesses have 

helped jump-start the economy through trade, but, unfortunately, 

that has not been the case today. In this hearing, we will review 

the current economic climate and explore the barriers hindering 

this vital sector. History has shown trade to be the silver lining in 

a weak economy. 

In the early 1990s, for example, the country was reeling from a 

demoralizing recession. In fact, the situation was not at all that different from the one we face today. But rather than allowing the 

era’s weak economy to hold them back, American businesses looked 

to opportunities abroad. As a result, U.S. trade led the way into the 

booms of the late ’90s, when American exports skyrocketed from 

$535 million to just over $1 billion. 

But today American exports are declining rather than rising, and 

the rate of decline has been extreme. In the 2 months between February and March of this year, U.S. exports dropped $2.5 billion. 

These figures are simply unbelievable. 

To say that export numbers are declining would be an understatement. Export numbers, are not falling, they are plummeting. 

We now know that commerce is falling sharply for businesses in 

the areas of capital goods, industrial supplies, and advanced technology. Last month alone, these industries witnessed a $100 million drop-off in exports. 

2 

And these kind of declines are not industry isolated, either. 

Trade with NAFTA countries, the bread and butter for small business exporters, has also dropped off considerably. In fact, commerce 

has slowed to virtually every foreign port. 

These declines are also manifesting themselves domestically, 

where trade with our major partners in our top 10 ports is down 

$100 million. Still, it seems the worst is yet to come. Export orders, 

a leading indicator of future trade, show no light at the end of the 

tunnel. Instead, recently they have dropped 6.5 percent for the 

service industry and slowed for manufacturers. 

Members of this Committee are well aware of the integral role 

that small exporters can play in reversing these trends. Ninetyseven percent of America’s small firms are exporters; and, in fact, 

one-third of all U.S. exports come from entrepreneurs. That means 

that any dent in American exports become a crater in the small 

business community. 

Why then are exports declining in traditionally entrepreneurdriven industries? A number of factors have come into play, creating what now looks to be a perfect storm. At the heart of that 

storm are shrinking market stakes. On that front, the U.S. now 

stands in third place behind Germany and China. It should also be 

noted that 90 percent of small businesses export to only one country, a fact that has made them far more susceptible to economic 

volatility and market shifts. But perhaps most troubling is the 

damage that we have done to ourselves. Sadly, the current administration has failed its own small exporters by underfunding tradefriendly initiatives. In this morning’s hearing we will further examine these barriers. 

Trade may be on the decline and the economy may be suffering, 

but just as we used trade to turn the economy around in the ’90s, 

it can serve as a catalyst today. And what better place to begin 

than with our entrepreneurs? After all, small firms are the backbone of American business. They have steered us out of past recessions, and they can lead the way again today. 

I want to thank all the witnesses in advance for their testimony. 

The Committee is pleased they could join us this morning and 

looks forward to their insights on these issues. 

With that, I now yield to Ranking Member Chabot for his opening statement. 

OPENING STATEMENT OF MR. CHABOT 

Mr. CHABOT. Thank you, Madam Chairwoman, for holding this 

important hearing on small business exports. 

I would like to welcome our distinguished panel of witnesses and 

thank them for taking time out of their busy schedules to provide 

this Committee with their testimony. And we wish you all a good 

morning and welcome here to the Committee. 

One of the most important functions of this Committee is to look 

for solutions to help entrepreneurs gain access to global markets. 

Not only do we look for new and innovative ways to help small 

businesses conduct international trade, but we must also conduct 

the requisite oversight to ensure our current programs are effectively keeping up with the changing times. 

3 

Last year, this Committee worked in unison in order to put together a piece of legislation, H.R. 2992, the SBA Trade Programs 

Act of 2007, that passed the House with broad bipartisan support. 

This legislation brings changes in the SBA’s operation of its programs to enhance small business participation in the global economy. H.R. 2992 represents the Small Business Committee’s continued commitment to promotion of international trade by America’s 

small businesses. 

The Small Business Administration has a number of general entrepreneurial assistance programs that provide technical advice to 

small business owners. However, international trade is an area 

that is fraught with regulatory hurdles, requiring specialized 

knowledge that may not be available from the SBA’s entrepreneurial partners. 

It is not surprising to find that the SBA created other programs 

to meet the needs of small business exporters that rely on personnel with specialized knowledge about the international trade 

regulatory regime. These programs, as well as the SBA efforts to 

coordinate with other agencies such as the Department of Commerce, have enhanced the worldwide profile of many U.S. exporters. 

There are about a quarter of a million small businesses in the 

United States that export. There is no doubt that small businesses 

are playing a vital role in reducing America’s trade deficit. Continuation of this success, and even greater emphasis on small business exporting, will undoubtedly benefit the American economy. 

Additionally, this Congress has the opportunity to pass legislation enacting free trade agreements with several of our allied nations, including Colombia, Panama, and South Korea. I remain 

hopeful that Congress will work together to pass legislation that 

will implement these pending trade pacts. These agreements 

should be supported by Congress. 

The administration, particularly former U.S. Trade Representative Rob Portman and the current USTR, Susan Schwab, have 

worked hard over the years to make sure the trade pacts addressed 

concerns about labor, environmental violations, and intellectual 

property theft in certain regions of the world. These pacts can also 

be useful in spurring negotiations for larger trade discussions, such 

as the Doha trade negotiations. Non-free trade countries may feel 

compelled to work with other nations to ensure that they are not 

isolated from the rest of the world. 

In the U.S., free trade agreements have enabled local businesses 

to expand their market base, as well as provided consumers with 

greater access to different products at more competitive prices. In 

Ohio, my State, trade has enabled businesses to grow. More than 

11,000 companies export goods from my home State to places all 

across the globe. Eighty-nine percent of those companies can be defined as small- and medium-sized businesses, ones that traditionally and rightly have been called the backbone of the American 

economy. In addition, one-fifth of all manufacturing workers in 

Ohio depend on exports for their jobs. 

It appears clear to me that exporting is a critical part of building 

the American economy, especially for small businesses. We have an 

excellent panel with us today to help us identify some of the obstaVerDate Aug 31 2005 16:35 Aug 08, 2008 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 G:\CLERK SB-LD\HEARINGS\TRANSCRIPTS\40868.TXT RUSS
4 

cles that remain in encouraging trade among small- and mediumsized businesses, and I think that we all look forward to hearing 

their testimony this morning and asking questions. 

So thank you for holding this hearing, Madam Chairwoman. I 

yield back my time. 

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. Chabot. 

Now I have the pleasure of introducing Mr. Cass Johnson. Mr. 

Johnson is the President of the National Council of Textile Organizations. NCTO represents the entire domestic textile industry, including producers, manufacturers, and suppliers of these products. 

You will have 5 minutes to make your presentation. 

STATEMENT OF MR. CASS JOHNSON, PRESIDENT, NATIONAL 

COUNCIL OF TEXTILE ORGANIZATIONS 

Mr. JOHNSON. Thank you very much, Chairwoman Vela ́zquez 

and Ranking Member Chabot and distinguished members of the 

Committee. We look forward to testifying today and outlining the 

U.S. textile’s industry’s perspective on the state of small business 

exports. 

As a sector, the textile industry is one of the Nation’s most successful exporters. At $16 billion last year, we export one out of 

every three products we make. However, almost three-quarters of 

our exports go to the Western Hemisphere. Only one-quarter go to 

the rest of the world; and that includes the rapidly developing, rapidly growing economies in Asia, particularly China and India. In 

fact, we send China, a country with a population of 1.4 billion and 

which consumes more textile apparel products by far than any 

other country in the world, only $500 million a year in exports. 

And China, in fact, looks great compared to India— 1.1 billion 

population, one of the largest textile apparel consumers in the 

world—where we send only $55 million a year in textile exports. 

We send more to the United Arab Emirates each year than we do 

to India. 

Why is this happening? In the macro sense we see, in addition 

to high duties, we see three major barriers. These are the VAT, 

currency manipulation, and government subsidies. Of these three, 

probably the least understood is the VAT, or value-added tax. 

The VAT is a tax that averages 15 percent that is levied on exports from the United States to countries with a VAT system, and 

that is most countries in the world. The problem with the VAT is 

that U.S. exports are essentially taxed twice. They are taxed at 

home, companies pay corporate income taxes, and then they are 

taxed when they go overseas. They get an average 15 percent tax 

in addition to the duty. 

When goods are exported from VAT countries, they get no taxes. 

These countries rebate the 15 percent tax, and then they are not 

charged any U.S. corporate income tax. So you have a situation 

where our goods being exported are taxed twice, and goods coming 

from VAT countries have all taxes rebated from them. So it is a 

basic inequity. 

It has been estimated that the VAT tax costs U.S. manufacturers 

$341 billion every year. That is a huge stealth tax that holds back 

exporting in the United States. 

5 

There is an answer to this. It is the Border Tax Equity Act, H.R. 

2600, by Congressman Michaud, a member of this Committee. We 

request that you look carefully at this Act. It is a three-pronged approach to remove the VAT disadvantage from U.S. exporters. 

The second barrier is currency manipulation, an issue that we 

have all heard about. One thing we haven’t necessarily heard about 

is the tax this puts on exports. We all know that China can—we 

import a lot more from China because of manipulation of currency. 

The flip side of that equation is we can’t export nearly as much to 

China because of the currency manipulation. It places the same 25 

to 40 percent tax on exports as the advantage it gives to imports 

from China. 

There is an answer to this problem. It is H.R. 2942, the Currency 

Reform for Fair Trade Act, co-sponsored by Tim Ryan and which 

has been supported by many members of this Committee. If Congress would pass this Act, it would send a strong signal, the most 

powerful we can imagine, that China needs to float its currency. 

The third major problem are subsidies, particularly in China, 

India, and Vietnam. In a recent textile case, the government found 

that China offered its textile industry 24 different subsidies in 

order to export products cheaper to the United States, and they assigned countervailing duties of 27 to 359 percent. Most mediumsized—small- and medium-sized companies cannot afford to file 

CBD cases. They start at a million dollars apiece. The government 

needs to do more, and we suggest that Congress needs to send a 

strong signal that the government needs to do more. 

NCTO sent to USTR a list of 63 subsidies that China offers it 

its textile industry. We sent that over a year ago. We are still waiting for a response. We know many of these subsidies are WTO illegal and should be the genesis of a case against China, but we have 

been told by USTR that they simply do not have the resources 

right now to go after these 63 subsidies. 

We believe that Congress should change USTR’s focus for the 

next 5 years from negotiating new agreements to reviewing and enforcing existing agreements. USTR’s resources should be reoriented 

towards verifying China and others live up to the agreements they 

have signed; and, if they are not, they should file cases against 

them at the WTO. 

With these steps, we believe we can usher in a new renaissance 

for the U.S. manufacturing sector and its workers, and we thank 

the Committee very much for looking at this very important issue. 

[The prepared statement of Mr. Johnson may be found in the Appendix on page 32.] 

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. Johnson. 

Our next witness is Mr. Jameson French. Mr. French is the 

President of Northland Forest Products, which is a family run business selling hardwood products located in Kingston, New Hampshire. He also serves as Chair of the Board of Directors for the 

Hardwood Federation, which is an industry trade association that 

represents over 14,000 businesses, 30 trade associations, and over 

one million hardwood families. Welcome. 

6 

STATEMENT OF MR. JAMESON FRENCH, PRESIDENT, NORTHLAND FOREST PRODUCTS, KINGSTON, NEW HAMPSHIRE, ON 

BEHALF OF THE HARDWOOD FEDERATION 

Mr. FRENCH. Thank you. Thank you very much, Madam Chairman and the Committee. I appreciate the opportunity to be here 

today. And thanks for the introduction. It saves me a few seconds 

of my time. 

I would note that I am proud to be a fourth-generation member 

of the hardwood lumber industry. And we have a fifth generation 

coming along, but they are wondering whether it is going to be 

worth it because of the difficulties that our industry is facing, particularly—in all parts of the country, but in New England, where 

we saw the demise of the textile and shoe and the computer hardware businesses. And we wonder whether the forest products industry will be the next one to fall. 

As you noted, the Hardwood Federation, 14,000 businesses 

around the country, small family businesses, key strong parts of 

the world’s economy in many of the Eastern States. We actually 

have members in all 50 States, but the bulk of the forest resource, 

of course, is east of the Mississippi. We are a major exporter. About 

almost $3 billion worth of hardwood forest products are sent 

around the world, hardwood lumber, plywood, flooring, pallets, 

kitchen cabinets, all these types of products. 

These are tough times for our industry, as you can imagine, with 

the housing crisis and all of the domestic economy recession. It has 

been a great challenge. And the export side of the business has 

been one of the most important sort of lifelines for people in a very 

difficult domestic economy. 

You will see in my written testimony the key products that we 

export and the countries that we send them around the world. Of 

course, Asia has become very significant. Europe has the highest 

values. 

Our industry represents a lot of very independent people in rural 

parts of this country. And we tend to be libertarian, and we tend 

to be very free trade people. But we are really concerned about the 

lack of a level playing field, and we want fair trade and a chance 

to compete in the global marketplaces. 

There are three specific areas of concern, all of which are in my 

written testimony: the increase in fees from APHIS, the freight and 

shipping charges, and the foreign procurement policies, which particularly in Europe and Japan may require some documentation 

and some issues that involve legality and sustainability that may 

be very difficult for our members to comply with. 

I won’t spend much time at all on the fee issue. It is a relatively 

small thing. It doesn’t sound like a lot, but you can imagine if you 

aren’t making any money, to have a doubling of your export certificate fees could make a big difference. 

The shipping problem is a huge one. The sudden rate increases 

that have occurred, doubling some of our container charges around 

the world in the last 6 months, has killed many of us. It is a huge 

problem if you have advance contracts, say, to China where you 

have sold many loads forward at a fixed price, and suddenly the 

rate goes up by 50 percent or more, and there is no containers. 

7 

And we are very concerned that the business practices of many 

of these foreign-owned shipping lines are dubious; and we would 

urge this Committee to investigate this area. Because we feel we 

have been unfairly penalized as to our low-value products, that 

they have substituted the higher-value products and left us hanging dry. It has been a big problem. 

The procurement issue is quite complicated and hard to explain 

in a short bit of time, but I want you to know that we take this 

issue very, very seriously. 

We have a wonderful, sustainable resource in this country. The 

eastern hardwood forest is the woodbasket of the world, and we are 

very concerned about illegal logging in foreign countries like Indonesia and Russia, and we are very appreciative of the support that 

has happened with this amendment to the Lacey Act, which we 

strongly supported with the environmental organizations. But 

there are some concerns that the European countries and others 

are going to force us to have more documentation about the sustainable or certification of our forest resource. This is very difficult 

for people, with 90 percent of all the land that’s owned in this 

country in the forest is by small private landowners. 

In my little State of New Hampshire, we have 22,000 people that 

own 25 acres or more. So it is very difficult for the chain of custody 

and the procurement policy to certify these kinds of lands, and it 

is a very diverse and fragmented industry. And the paperwork and 

the necessary costs to ensure legality and sustainability would be 

a great challenge. 

We have a great story to tell. The U.S. Forest Service tells us we 

have 50 percent more growing than is being cut in the last 50 

years, that we have independent studies showing our risk assessment is very low and that legality is very high. So we would really 

love to have some support around this issue to make sure that we 

do not face unfair and uncompetitive disadvantages abroad around 

this thing. 

So we thank you for your interest. We want fair, level playing 

field trade. We are very grateful for the support of the American 

Hardwood Export Council funding for the FAS market promotion 

fund. This is an area that has been very well supported and funded, and we are grateful for that. 

We thank you for your time. Thank you. 

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. French. 

[The prepared statement of Mr. French may be found in the Appendix on page 38.] 

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. French. 

Our next witness is Mr. Chuck Wetherington. Mr. Wetherington 

is the President and owner of BTE Technologies, located in Hanover, Maryland, which produces work simulation and physical therapy equipment. He is also a board member of the National Association of Manufacturers, representing small- and medium-sized manufacturers. Welcome. 

8 

STATEMENT OF MR. CHUCK WETHERINGTON, PRESIDENT AND 

OWNER, BTE TECHNOLOGIES, HANOVER, MARYLAND, ON BEHALF OF THE NATIONAL ASSOCIATION OF MANUFACTURERS 

Mr. WETHERINGTON. Thank you. Good morning, Madam Chairman and members of the Committee. 

I am Chuck Wetherington, as you said, President and an owner 

of BTE Technologies, a small company headquartered in Hanover, 

Maryland. We have offices in Denver, Colorado, as well. 

I have prepared a statement for the record and will make my remarks brief at this time. 

At BTE, we have 78 employees and produce a range of medical 

devices focused on physical therapy, industrial rehabilitation, and 

sports medicine. In 2001, we made a decision to place greater focus 

on exports. We have the good fortune of being in a product space 

where U.S.-flagged goods are held in very high esteem in the world 

marketplace. 

I am happy to say that since 2002 our exports have grown tenfold, from 3 percent of our revenues to now 35 percent. We currently export to 28 countries in the world. 

Exports, obviously, have been a key part of our company’s strategy and success. So how important is small business to U.S. exports? Of U.S. companies that export, over 97 percent of them are 

small- and mid-sized businesses. Yet those companies only represent 30 percent of the total dollar value of all U.S. exports. This 

is because two-thirds of all smaller exporters sell to just one country, and two-thirds have fewer than five export sales per year. We 

have a lot of room to grow, and with the right conditions U.S. small 

companies can flourish in the global marketplace. 

Today, I would like to mention four things that are critical for 

U.S. companies, especially small companies, to be able to successfully export. 

First, we need currencies that reflect market values. When the 

dollar is excessively strong against other currencies, U.S. goods become expensive in global markets and exports decline. When the 

dollar has adjusted to a more realistic value, exports grow. Of 

course, this sounds like common sense, but it is a fact that is too 

often overlooked. 

We have just seen this play itself out in the past decade. As the 

dollar came off its 2002 high, our exports have grown dramatically. 

NAM hears every day from companies who say the value of the dollar has allowed them to be internationally competitive again. Many 

companies, particularly small- and mid-size, say the primary reason they are doing well is their export performance, which has offset softening domestic demand. 

Second, we need free trade agreements that open markets for 

U.S. goods. I recognize that there are concerns about our free trade 

agreements, but I must say, from the perspective of a small business trying to export, they have been very important to us. The 

United States is already open to the world. Much of the rest of the 

world has a higher tariff and non-tariff barriers to U.S. exports. We 

need these agreements to open foreign markets for our goods. 

Third, it is very important that we see the removal of standards 

and regulatory barriers, one of those non-tariff barriers I spoke of, 

9 

for the sale of U.S. goods in foreign markets. This is one of the big 

hurdles we face at BTE. 

A good example is the medical device directive in the European 

Union. One would think that the EU would be about the easiest 

place after Canada and Mexico for the U.S. company to export, and 

in many ways it is. But this directive has made it very expensive 

and very difficult and time-consuming for us to be certified. We are 

seeing signs that others are starting to follow the EU’s lead. 

The government could help by working to develop some level of 

standardization. This might include negotiating global standards, 

or at least reaching agreements for reciprocity between certifying 

agencies. Multiple standards greatly increase the costs of production and the costs of bringing new products to market, and this 

would be especially helpful for small companies. 

The fourth priority is the U.S. Government export assistance. At 

BTE, we have found a range of services provided by the U.S. Commercial Service to be instrumental in our success. We worked with 

the Baltimore Export Assistance Center to help us find distributors 

overseas, conduct background checks on potential customers and 

agents and do country analysis, identifying markets for our products. 

I have to add at this point that this has also been a marvelous 

place for us to see State associations working with Federal associations through the Maryland Department of Business and Economic 

Development. Working hand in hand with Commercial Services, we 

have been able to get the best possible solutions for our needs. 

For small companies, these services are essential to success in 

exporting. Most of us don’t have the resources to have large export 

divisions or offices overseas to ferret out new business. One problem is the increasing shifting of costs of these promotion programs 

back to the U.S. businesses. This is in contrast to the support that 

other governments provide to their exporters. 

Some of these countries pay up to 70 percent for their companies 

to attend trade shows. In BTE’s experience, we have spent over 

$100,000 in just the last 4 years just to attend MEDICA, the annual trade show that covers our field. 

The Australian Government, for example, recently announced 

that grants for economic export development would be boosted to 

$200 million. By contrast, the comparable U.S. program is funded 

at $2 million, although we have significantly more small companies 

that could benefit. 

Another important export service is export financing. My company has taken advantage of small business services at EX-IM 

Bank, and it has made a significant difference in the number of our 

recent sales. I strongly encourage you to continue support for these 

import financing opportunities for small companies. 

In conclusion, I would like to thank you and the members of the 

Subcommittee for this opportunity to testify on such an important 

issue. We are in a globalized world, and our small businesses need 

to be in a position to avail ourselves of global opportunities in order 

to improve the standard of living of all Americans. Certainly a determined export promotion effort, focusing on increased participation of America’s small- and mid-sized companies in world markets 

10 

should be an important endeavor. My prepared statement contains 

more specific suggestions. 

Thank you, Madam Chairman. 

[The prepared statement of Mr. Wetherington may be found in 

the Appendix on page 46.] 

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. Wetherington. 

Our next witness is Mr. Daniel T. Griswold. He is the Director 

of the Center for Trade Policy Studies for the Cato Institute. He 

has authored or co-authored studies in globalization, trade, and immigration. 

STATEMENT OF MR. DANIEL T. GRISWOLD, DIRECTOR OF THE 

CENTER FOR TRADE POLICY STUDIES, THE CATO INSTITUTE 

Mr. GRISWOLD. Chairwoman Vela ́zquez, Ranking Member 

Chabot, thank you for inviting to testify here today. 

Globalization is a fact of life in 21st century America, and our 

nation’s small businesses should be allowed to take full advantage 

of the opportunities. Since 1990, exports have grown sharply as a 

share of the U.S. economy. Three-quarters of the world’s spending 

power and 96 percent of the world’s people live outside the United 

States. This represents a huge potential market for American business. 

Our growing engagement in the global economy is one of the 

bright spots of the U.S. economy today, and we definitely need 

bright spots. Exports and earnings on foreign investment are booming. Exports of goods and services jumped by 12.6 percent last year 

from the year before, and earnings on U.S. investment abroad 

jumped 20 percent. That expanding opportunity to serve foreign 

markets has allowed U.S. companies, including small businesses, to 

better weather the current economic slowdown. 

One of the most important and fastest-growing markets for U.S. 

companies, including small businesses, is China. Last year, Americans exported $65 billion worth of goods to China. China is our 

number three export market behind only our NAFTA partners 

Canada and Mexico. Since China’s entry into the WTO in 2001, 

U.S. goods exports to China have grown at a compound rate of 22 

percent. That is three times faster than our exports to the rest of 

the world, despite complaints about their currency. 

Small- and medium-sized U.S. businesses are basking in this export success. Nearly 20,000 small- and medium-sized U.S. companies account for 35 percent of U.S. merchandise exports to China. 

If Congress enacts legislation that ignites a trade war with China, 

small businesses will be among the first casualties. 

Far from a time out, Congress should work with this administration and the next to approve comprehensive trade agreements to 

abolish barriers and promote two-way foreign investment. Such 

agreements benefit U.S. small businesses in three particular ways. 

First, trade agreements help to reduce red tape and increase 

transparency. Small businesses often lack the resources and the 

foreign partners abroad to navigate through the opaque legal systems and customs duties of foreign countries. Numerous fees and 

other non-tariff barriers can be deal-breakers for small companies. 

11 

Trade agreements streamline rules, reduce non-tariff barriers, and 

provide arbitration procedures. 

Second, trade agreements open up opportunities for U.S. small 

businesses to compete for procurement contracts with foreign governments. And this is a huge market. Trade agreements guarantee 

U.S. companies a fair shake at the important government procurement market. They also lower thresholds so businesses, small businesses, can submit bids. 

Third, trade agreements lower tariffs and other barriers to trade 

that are more difficult for small businesses to work around. You 

know, large multinationals can circumvent tariffs by locating production in affiliates abroad. Small U.S. companies don’t have that 

option. Many of them export from a single domestic location here 

in the United States. The reduction and elimination of tariffs allows them to export from their domestic facilities without facing 

barriers that could be discriminatory and prohibitive. 

The 110th Congress has the opportunity right now to enact three 

trade agreements with Colombia, Panama, and South Korea that 

will help small U.S. companies boost their exports. All three of 

these agreements would reduce barriers and eliminate tariffs while 

guaranteeing fair treatment for U.S. companies that invest abroad. 

They would streamline those customs procedures, enhance transparency, and open up government procurement for small U.S. businesses; and these agreements would allow thousands of U.S. small 

companies to export to these markets for the first time. 

For example, nearly 8,000 small- and medium-sized U.S. companies already export to Colombia, accounting for more than onethird of our exports to that country. The Colombia agreement 

would eliminate the large majority of tariffs on those product. 

Their goods already enter the United States duty free because of 

the Andean Trade Preference Act. This would give us the level 

playing field that we all say we want. According to the U.S. International Trade Commission, the agreement would boost U.S. exports to Colombia by more than a billion dollars, with small businesses ready to claim a big slice of that expanding pie. 

U.S. companies do not need Federal subsidies to compete effectively in global markets. We have a lot of advantages in this country. Those markets are currently awash in private capital, ready to 

finance new trade and investment opportunities. Congress and the 

administration, if they want to increase opportunities for U.S. 

small business, they need to work together to reduce barriers to 

international trade and investment, whether abroad or here in the 

United States. 

Thank you very much. 

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

Appendix on page 56.] 

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. Griswold. 

And our next witness is Dr. Aaron K. Chatterji. Dr. Chatterji is 

an Assistant Professor at the Fuqua School of Business at Duke 

University and a Fellow at the Center for American Progress. His 

research focuses on innovation policy, entrepreneurship and small 

business issues, and corporate social responsibility. Welcome. 

12 

STATEMENT OF DR. AARON K. CHATTERJI, ASSISTANT PROFESSOR, THE FUQUA SCHOOL OF BUSINESS, DUKE UNIVERSITY, DURHAM, NORTH CAROLINA 

Dr. CHATTERJI. Thank you very much. 

Madam Chairwoman, members of the Committee, thank you for 

inviting me to testify on this important economic policy issue, one 

that, with the exception of the good work of this Committee, often 

does not receive the attention that it deserves. 

In my view, American small businesses are not just the backbone 

of our economy. They are also the linchpin of our society. In the 

places I have lived across this country—upstate New York, where 

I was born and raised; northern California, where I did my graduate studies; and now the research triangle in North Carolina—I 

have seen that small businesses are one of the most are important 

variables affecting the overall economic health in a region. I have 

also observed that many immigrants to this country, like my parents, have started small businesses as a way to provide for their 

children. Finally, I have studied how global economic forces have 

changed the competitive landscape, yes, providing new threats to 

small businesses but also new opportunities. 

However, in the current policy debates, American small businesses are often an afterthought. Some recommendations seem to 

be driven by the assumption that what is good for the Fortune 100 

is obviously just going to trickle down to small businesses. I think 

the real story is a little bit more complicated than that, frankly. 

I think Federal, State, and local governments have numerous 

tools at their disposal to help small businesses, especially in the 

current economic environment. At the end of the day, it will be the 

widely admired entrepreneurial initiative for the American people 

and their entrepreneurs that drives success, but the government 

can actually help to harness that initiative rather than hinder it. 

I think this is the difficult challenge of public policy that we face 

today. 

In that spirit, let me offer a few thoughts on some of the issues 

being discussed today, in particular the export outlook for American small business. 

While there are many reasons to be concerned about the future 

of the American economy—rising energy costs, the turmoil in the 

mortgage markets, and the increase in the unemployment rates— 

until recently American exports were one bright spot. They increased 16.6 percent from last year, although the chairwoman’s 

new data suggests this year might not look as good. When we look 

beyond the data, we might be concerned that the majority of American businesses, namely small businesses, are not benefiting as 

much as they could be from what was a favorable climate for exports until recently. 

According to the Small Business Export Association, 240,000 of our small businesses are exporting, accounting for $450 billion in 

value. That sounds like a big number, but these businesses only 

represent a small fraction of small businesses, less than 1 percent 

in most cases. Furthermore, over 60 percent, as mentioned in the 

chairwoman’s opening statement, are only exporting to one country, which makes it much more volatile if local conditions in that 

country decline. 

13 

Also, as prefaced by the other remarks, most of these exports are 

also regionalized in the NAFTA countries, particularly Canada and 

Mexico. We have a lot of opportunities in China and India that are 

not being exploited. 

When you had look at the ratio of exports coming from small 

businesses, it amount to about 29 percent of total value. I think 

that is an important number we need to keep in mind. It is not 

necessarily the number of small businesses exporting, it is the percentage of value that matters a lot as well. That percentage of 29 

percent has stayed pretty constant over the last few years. I think 

there is a lot of room for growth. 

On the other hand, during the same time we have seen doubledigit increases in the overall value of exports, 1.4 trillion to 1.6 trillion last year, an increase of 12 percent. That is on top of another 

increase of 12 percent the year before. So as exports have been 

going up, small business’s share has stayed pretty much the same. 

I think that is where the focus of this Committee can lie. So 

while we hear some encouraging statistics here about the percentage of exports for small business, I encourage you to focus on percentage of total value. 

I also think we need to look at those industries which are dominated by small businesses for special study. Ninety-four percent of 

machinery manufacturers are small businesses. Ninety-three percent of computer producers are small businesses. We have some 

disturbing data showing that exports in some of these industries 

are actually going down in 2008, in addition to lumber and textiles. 

These are the industries we need to be focusing on, where the majority are small businesses. 

Now, I should caution you that there are several caveats and exceptions embedded in these data. But taken together with the current economic climate, they indicate, in my view, that we should 

consider policies to aid U.S. small businesses in accessing foreign 

markets. They clearly need the help, and there is potential for 

growth. So let me briefly conclude by describing a few of the challenges faced by small business and where I see some potential policy responses. 

The first challenge is a general lack of awareness on the part of 

small business about the opportunities to do business abroad. You 

think about a multi-tasking entrepreneur who barely has time to 

run their own business and manage family affairs, much less think 

about entering a foreign market. We need more information for 

these small business owners and particularly the information about 

these tremendous opportunities abroad in China and India. 

Large markets here like China and India have increasingly large 

aircraft markets, for example; and the U.S. machine tool industry 

could supply these markets. The fact of the matter is small businesses in developing countries are not technologically sophisticated 

enough to source the large businesses in their domestic regions. 

This is a huge opportunity for U.S. domestic producers if they can 

seize it. 

Trade promotion at all levels of government needs to be consolidated and better coordinated and provide practical and clear information about foreign markets and foreign cultures as well. Let’s 

14 

not make missteps by not understanding foreign cultures when we 

are doing this. 

Many people have said this, but I want to add one more thing. 

Entrepreneurship is a very social process. Most entrepreneurs 

founded firms based upon people they knew, raising money from 

friends and family. We need to leverage their social networks to get 

the word out about how to access foreign markets. Immigrant entrepreneurs have already established strong ties with their home 

countries that we can use to access foreign markets. These things 

need to be considered, the social network aspect of entrepreneurship, when we think about policy. 

Finally, I think, while advances in technology have made communication easier, nothing replaces face-to-face contacts. It is just simply so expensive for small businesses to do the due diligence required to appraise foreign partners. The Gold Key Program by the 

U.S. Export Assistance Program is one good one; and, as the ranking member mentioned, I think it is a good idea to continuously 

evaluate these programs and see whether they continue to improve. 

Finally, I will make a personal appeal, but it actually has broader implications. I think we need better data on small business. So 

much of the data here today that I was looking at in preparing for 

this testimony does not include very critical parts of the story. 

Service exports in particular might be as large as 40 percent of the 

overall picture, and are not included in the data. So I would like 

to see more of that data collected, and maybe this Committee can 

help on that account as well. 

In conclusion, I think we all agree U.S. small businesses are a 

critical part of the economy. The question is how to harness that 

entrepreneurial initiative going forward. I think some of the policies suggested here today are a step in that direction. 

I want to thank you for your time, and I look forward to your 

questions. 

[The prepared statement of Dr. Chatterji may be found in the 

Appendix on page 61.] 

Chairwoman VELA ́ ZQUEZ. Thank you, Dr. Chatterji. 

I would like to address my first question to Mr. Johnson. 

In your testimony, you note that many countries pegged their 

own currency to ours, which effectively neutralizes any price advantage from a devalued dollar. Do you believe the U.S. should 

prompt these countries to cease manipulating their currency, or are 

there other alternatives you would recommend to promote U.S. exports? 

Mr. JOHNSON. Well, I think this is probably the largest export 

barrier to goods coming from Asia. The problem is not just China. 

It is a mercantilist export regime that have been set up for decades 

in the Far East by countries—not only China—Taiwan, Korea, 

Japan, Indonesia, India, Pakistan. Many of the export powerhouses 

have manipulated and controlled their currencies in order to get an 

export advantage; and until we get that under control, we are simply not going to be able to export and take advantage of these rapidly growing markets like we should. 

I think Alan Greenspan and Federal Chairman Bernanke have 

both said this is an export subsidy. H.R. 2442, the Ryan-Hunter 

15 

Act, will allow injured U.S. companies to file countervailing duty 

cases against countries that manipulate their currency. It is an export subsidy. We should have the tools to defend ourselves from it. 

I think if we get those tools it will encourage those countries, because the U.S. market is still the biggest market in the world, to 

allow their currencies to float and to allow free markets to finally 

prevail. 

Chairwoman VELA ́ ZQUEZ. You don’t think we have tools at our 

disposal at this time that the U.S. Government can use to pressure 

those countries in terms of the manipulation of their currency? 

Mr. JOHNSON. Absolutely not. I mean, the U.S. Government can 

and should file a WTO case, because this is an illegal subsidy. The 

Bush administration has refused. 

Chairwoman VELA ́ ZQUEZ. How many has this administration 

filed? 

Mr. JOHNSON. I think it has been filed three times by Members 

of Congress as well. And after the first filing, we would be at the 

decision point at the WTO right now if that case had gone through, 

because I think it has been 3 years. So— 

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. Johnson. 

I am going to recognize Mr. Chabot, and then when we finish 

with our members here, I will come back and make a question to 

the other witnesses. 

Mr. CHABOT. Thank you very much, Madam Chair. 

Just following up on the same general area—and I will begin 

with you also, Mr. Johnson—what can we do, especially with respect to China and India, to help our corporations be more successful in exporting there? And other than the currency manipulation, 

because we have discussed that at some length. 

Mr. JOHNSON. Well, I would add that looking at the VAT issue— 

and that is a very big issue to look at, but it has a very big impact. 

I mean, it is double taxation of U.S. exports. And how we get 

around that, there is one piece of legislation that I think people 

should seriously review, because it proposes some ways to do that. 

The other issue that we point out is this problem of government 

subsidies. And I note with interest that Mr. Griswold in his testimony writes that—I thought I had it right here—writes, says, big 

headline, no export subsidies, no trade barriers. And he is talking 

about should the United States offer subsidies to its companies to 

allow them to export more and should the United States impose 

countervailing duties? 

Well, I think where the argument fails is that he is not saying 

we should go after China. China has more export subsidies than 

any other country in the world. We have identified 63 just for the 

textile industry. And yet there is no suggestion on the other side 

of the table that these are harmful or prevent U.S. exporters from 

participating in these export markets. 

We have a five-to-one trade disadvantage with China. China exports over $300 billion to us; we export 50, $60 billion to them. 

That is the most rapidly growing, largest, fastest-growing economy 

in the world. We should be exporting double or triple that much, 

but we can’t when the Government of China layers subsidy after 

subsidy after subsidy onto its domestic manufacturers and makes 

16 

it almost impossible for us to compete, particularly on the manufactured goods side. 

So I think USTR needs to beef up its resources. The United 

States needs to look into these sector-specific subsidies, file WTO 

cases. Under the WTO, if a sector is benefiting from subsidies and 

damaging another sector overseas, a WTO case can be brought that 

that sector should remove the subsidies. 

Mr. CHABOT. Okay. Let me go to my next question. 

Mr. Griswold, let me go to you. Do you want to respond? 

Mr. GRISWOLD. Yes. I have no doubt that China, as well as a lot 

of other governments around the world, as well as our own government, subsidizes domestic production; and I would like governments everywhere to stop doing that. I think the free enterprise 

system, the free market should determine trade flows. But just because other countries engage in self-damaging practices doesn’t 

mean we should follow suit. 

Let me talk a little bit about the currency. I think this excuse 

is rapidly dissipating. You know, the Chinese currency has appreciated by 20 percent within the last 2 years. That appreciation has 

been accelerating. 

I think the textile industry appears to be an outlier among U.S. 

industry. As I pointed out, U.S. goods exports to China, manufactured goods, agricultural goods have been growing at a compound 

rate of 22 percent since China joined the WTO. That is three times 

faster than our exports to the rest of the world. So, clearly, a lot 

of U.S. companies of all sizes are enjoying a lot of success exporting 

to China. 

I don’t think we should step in and mess up that very beneficial 

relationship. I think legislation like the Ryan-Hunter bill would 

just raise barriers to trade and jeopardize those export gains that 

small businesses have made to China and elsewhere. 

Mr. CHABOT. Okay. Thank you. 

Mr. French, you had mentioned that one of the things that you 

are dealing with that is causing real problems in your industry is 

the high cost of energy, which is obviously affecting people at the 

gas pump, and diesel has gone out of sight, et cetera. And I think 

you mentioned that some of the containers in 6 months it will double. And what does one do about that? Would you talk about that 

briefly, how that does affect your industry? 

Mr. FRENCH. It has been a huge impact. Of course, the lowervalue products are more dramatically impacted by the percentage 

increase. So think of a relatively—and one of the issues with China 

that we have is a lot of the products that are going over there are 

the lower value end of the lumber products, because the Chinese 

want to buy the cheapest wood they possibly can to make into the 

cheapest furniture. That, of course, is putting the American furniture industry out of business. 

But what has happened with these freight increases is that they 

have come very, very rapidly. And, yes, of course we know fuel 

prices have gone up, but they haven’t gone up 100 percent in 6 

months. And the global trade patterns, we have a relatively lowpriced product. The fees have been relatively low over time. And 

several years ago, of course, they loved us. The freight lines wanted 

this bulk cargo because all of the imported goods were coming in 

17 

from Asia, and there were lots of empty containers here, and they 

were delighted to take grain or wastepaper or logs or lumber back 

to Asia. 

Those trade patterns have changed. There is less goods coming 

in because of the recession in the U.S. economy. And the shipping 

companies pretty arbitrarily suddenly decided, well, we don’t want 

any of these low-market products. We have guys that are small 

family businesses, they don’t have the sophistication of negotiating 

big deals with freight companies. They may be only shipping five 

or six or ten loads a month. And suddenly they have contracts that 

are forward at fixed prices, and they have a 500 or a 700 or a thousand dollar increase in a container with a value of only $20,000 on 

the container. That may be their entire profit. So it has been very 

arbitrary and random, and you know, no notice. It has been a huge 

impact on my own business. 

Mr. CHABOT. Let me ask you this. In relation to energy—and I 

would like to ask the whole panel this question—obviously, you 

know, many of us believe that we need a comprehensive energy 

policy that we really follow through on that deals with alternative 

sources of energy and all the rest. But it has been Congress’ policy 

not to allow us to go after the oil that is in ANWR and the Outer 

Continental Shelf for quite a few years now. Many of us have voted 

consistently for it. We haven’t had the opportunity to vote in this 

Congress yet on that issue. I hope we do in the future. But do any 

of you all think that it is a good idea for small businesses or medium or large businesses in this country to keep ANWR and the 

Outer Continental Shelf off limits? 

Chairwoman VELA ́ ZQUEZ. Would the gentleman yield before— 

Mr. CHABOT. Well, let me see if there is a show of hands. 

Mr. FRENCH. I would be happy to respond. I think it is a very 

short-term solution, and it is not necessarily good environmental 

policy. 

Mr. CHABOT. To keep it off limits, you mean? 

Mr. FRENCH. We need to invest in alternative energy. And as 

wood energy looks at cellulosic ethanol, biomass and other types of 

things, it may be a savior for the hardwood lumber industry for 

some serious Federal investment in alternative energy, particularly 

utilization of wood. 

Mr. CHABOT. Again, could I see by a show of hands if anybody 

here thinks that we ought to continue to keep ANWR and the 

Outer Continental Shelf off limits? Does anybody think we should? 

Mr. FRENCH. Okay. I do. 

Mr. CHABOT. You do. Two of you. 

Mr. FRENCH. I think we need to be very guarded, whatever we 

do. And we made a commitment on ANWR. And it is a short-term, 

band-aid solution. It’s not a long-term solution to our energy problems. 

Mr. CHABOT. I can tell you that the two of you are not representative of the business folks, especially small business folks that have 

talked to me. 

Mr. FRENCH. I am not speaking for my industry now. I am speaking as an individual— 

Mr. CHABOT. For yourself. Okay. 

Mr. FRENCH. —from the State of New Hampshire. 

18 

Mr. CHABOT. I would be happy to yield to the gentlelady. 

Chairwoman VELA ́ ZQUEZ. Let me just say I want the record to reflect it seems that ANWR is the answer for everything now, and 

next the gentleman will say that because we have not drilled in 

ANWR is the reason the Mets fired Mr. Willie Randolph. 

Thank you for yielding. 

Mr. CHABOT. One never knows. I haven’t been able to make that 

point in the past, but I appreciate the gentlelady making that. 

Chairwoman VELA ́ ZQUEZ. And I am a Mets fan. 

Mr. CHABOT. I am a Cincinnati Reds fan. I have some more questions, but I will yield back to allow some other panel members to 

ask their questions. 

Chairwoman VELA ́ ZQUEZ. Sure. Mr. Larsen. 

Mr. LARSEN. Thank you, Madam Chair, for calling this hearing; 

and I appreciate the testimony. 

Just a quick commercial for H.R. 3273, which is the Small and 

Medium-Sized Export Act of 2008 that several of us have introduced to increase our government’s capacity to help small- and medium-sized exports to China. As I tell folks, whether you love 

China or hate China, you will love this bill, because this is designed to get our stuff into that market, not the other way around. 

So people can have any view they want on currency or subsidies 

from China and still support H.R. 3273. So I throw that in. 

I am also pleased to hear that this hearing is more than just 

about currency manipulation versus free trade agreements, because 

it is hardly the debate we ought to be having. And but what I 

didn’t hear more of is the idea of a competitiveness policy and what 

elements that would take. And, Dr. Chatterji, I would ask if you 

would have some thoughts on what it would take to maintain a 

foundation of competitiveness in this country. Because I think what 

some folks do in Congress or push in Congress on trade—and I 

generally have been supportive of trade agreements—have been a 

trade policy, but it is nowhere near a policy to keep us competitive. 

Can you chat a little bit about that, Dr. Chatterji? 

Dr. CHATTERJI. Thank you. 

I think it is an excellent question and a point well taken that we 

have these conversations in isolation when we should probably be 

thinking about a competitiveness policy that includes trade, that 

includes workforce development, and also includes immigration, 

quite frankly, one of the most contentious issues, and particularly 

high-skilled immigration. 

Around the world, several countries have programs based on a 

points basis so they can bring in high-skilled immigrants for specific jobs. That has been discussed. Bringing in people with specific 

skills is clearly important. 

Also, the people we have here on H-1B visas. Why shouldn’t we 

be stapling a visa to their diplomas when they do a Ph.D. in an 

advanced engineering subject? 

Currently, more than 50 percent of engineering graduates, Ph.D. 

students, are from foreign countries. And increasingly I have seen 

at Duke University, in contrast in a generation ago, when my parents came here, the Indian students now are saying we are going 

to go back to India. We can have a better life in Bangalore than 

we can here in Durham. To me, that is sort of a tragedy of our imVerDate Aug 31 2005 16:35 Aug 08, 2008 Jkt 000000 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 G:\CLERK SB-LD\HEARINGS\TRANSCRIPTS\40868.TXT RUSS
19 

migration system today. They find it to be better going back to 

India than staying here, when they could be producing and contributing to our economy. 

In addition, we can’t forget about investing in the folks who are 

already here; and science and math education has got to be part 

of that. American students are lagging behind in those areas. 

I think there is a lot of scare tactics talking about engineering 

graduates from China and India. Yeah, there is about a million a 

year in each place, but it is very variable in terms of the skills they 

actually have. 

That being said, it is better to sort of be on our guard, even if 

the threat is not as large. I think we have to take this more seriously, especially among minority students, who are lagging behind 

in these areas. 

Now, what is that going to take? It is going to take a strong commitment not just in sort of secondary education but all the way 

back to primary education. I don’t think American students are 

challenged enough in the math and sciences at an early age, and 

it is going to take sort of a reformulation of the way we think about 

education. That would be the second part of it. So high-skilled immigration is one area, education and workforce development would 

be the other. 

The last one is retraining programs. I think we talk a lot about 

it, but I am not sure if we are evaluating it the way we should. 

When someone loses their job in the textile industry, for example, 

in our State of North Carolina, you know, can they be retrained to 

do something in that industry or in another industry? What kind 

of guidance are they being given? 

You know, we have a good experience in some aspects in North 

Carolina taking low-end textiles and actually moving up to the 

higher end; and we have been quite successful in that. How can we 

retrain folks who used to work at the old textile mill to work in 

the new one? That is a key issue. I don’t think enough attention 

is being put into those. And your point is well taken, if we can 

think about those components along with trade policy we might 

end up with something better. 

Mr. LARSEN. Mr. French, a question for you. Have you approached or talked to anybody at the Federal Maritime Commission regarding the ocean freight charges issue? 

Mr. FRENCH. We haven’t as a federation at the moment. 

Mr. LARSEN. Are you planning on that? 

Mr. FRENCH. I think it is something we need to do. 

Mr. LARSEN. We have them before the Coast Guard Committee 

at 2 o’clock, if you are around this afternoon. I am sure they would 

love to hear from you. I am sure they wouldn’t love to hear from 

you, but we can probably help them hear from you. 

Just a last general question for the members, if anyone else 

wants to weigh in on my first question that Dr. Chatterji responded to. Mr. Griswold? 

Mr. GRISWOLD. Congressman, I do think that is a very good 

point, that free trade, as important as it is, is not a magic bullet 

and it is not the single answer. We need to have as good a domestic 

business climate as possible; and that includes reasonable regulations, reasonable taxation. 

20 

And I just want to echo what my friend to my left here says 

about a skilled workforce, and I do think Congress should reexamine the H-1B program. This is important to small business. It just 

isn’t a Fortune 500 issue. This is important to small business. 

There was a study at Duke University a year or two ago that 

found that a quarter of U.S. high-tech and engineering start-up 

companies had a foreign-born person as a co-founder. If you want 

to encourage not just small business entrepreneurism generally but 

the high-tech, innovative kind, we need to reform our visa programs; and these companies often have connections abroad that encourage some of our highest-value exports to the rest of the world. 

So it is a package. You make a very good point. 

Mr. LARSEN. Thank you. 

Let’s go to Mr. Wetherington and Mr. Johnson. 

Mr. WETHERINGTON. Yes, I am a supporter of assistance to help 

with exports to China. I think it is a marvelous program. I have 

been a beneficiary, as I said, of those programs in a number of 

countries. 

At the risk of throwing another log on the fire, though, the one 

fear that I do have that keeps me up at night, having a high-technology product, is that of intellectual property. Fortunately, my 

sales to China now are below the radar screen. My fear is that, 

with success, I would get to a point where it would become a point 

of interest; and it is very, very difficult for a small company to be 

able to deal with that and stay innovative enough to be ahead of 

the copying. 

Mr. LARSEN. Thanks. 

Mr. Johnson? 

Mr. JOHNSON. Our members, the concerns they most raise are 

the price of energy, health care, and also taxation. If you are going 

to have a competitiveness policy, I suggest looking at those. 

But I don’t think you can ignore in a competitiveness policy the 

fact that the biggest exporters in the world have erected large industrial policies that make their goods—make it difficult for us to 

compete against their goods. And you can either raise barriers to 

those goods, you can subsidize the United States industry, which 

I don’t think our country wants to do, or you can go after those 

subsidies. And until you start going after those subsidies, which 

are very often WTO illegal, and can be gone after, you are going 

to have our companies competing against State governments. And 

we can compete against the Chinese textile mills, but what we cannot compete against is the Government of China, and that is what 

is being set up for us. 

The textile industry in China has now been gifted with its 11th 

5-year plan for the textile industry by the Chinese Government. 

There are no plans for the textile industry in the United States, 

and we don’t want them. But we do want a fair playing field, where 

the U.S. Government starts going after these 63 subsidies the Chinese Government is offering its domestic manufacturers. 

Mr. LARSEN. I am sorry. I am out of time. So out of respect for 

the chairwoman I want to thank the chairwoman. 

Folks, where I come from, Washington State, you know, we actually have a trade surplus with China. So it kind of depends where 

21 

you sit sometimes in this country as well about how you approach 

these things. 

Chairwoman VELA ́ ZQUEZ. Mr. French. 

Mr. LARSEN. Thank you. 

Mr. FRENCH. Thank you. 

I would just like to add a little bit on the complexity of the wood 

industry’s relationship with China. Because, of course, they are a 

very, very important and large customer, but they are also a huge 

competitor, because of all of the products that they are making, 

some from our wood and some from other woods around the world. 

Of course, some of that is illegally felled from places like Papua, 

New Guinea, and Indonesia and the Russian far east; and they 

have all of the subsidies that have been talked about in their factories. They have these products that are coming in from these dubious sources, and then they are selling their manufactured products to our potential customers in other parts of the world. So the 

stair part that might have used to have been made in the U.S. that 

was going to be shipped to Europe at a very high value ends up 

being made in China from perhaps illegally felled Russian logs, you 

know, in a factory of dubious environmental regulations, and 

shipped to Europe. And it puts us out of business in that marketplace. So it is very complicated. 

Thank you, Madam Chairman. 

Mr. LARSEN. Thank you, Madam Chair. 

Chairwoman VELA ́ ZQUEZ. Mr. Shuler. 

Mr. SHULER. Thank you, Madam Chair. 

Dr. Chatterji, you know, what provisions have we—you know, 

looking at future trade policies and agreements, what agreements 

should we be having to ensure that small businesses take advantage of the overseas markets? 

Dr. CHATTERJI. It is a difficult policy question. I think that there 

is two things. 

One is, despite all the fluctuations with currency, I don’t think 

we can ever count on U.S. goods being the low-cost product in the 

market. I think we need to continue to focus on adding value to the 

products we provide. I think that is the only way. 

Even China, if you look at a recent article today in the New York 

Times, it talked about how they are becoming a little too expensive 

for some folks and people are moving to Vietnam. And that process 

will continue to happen over time. U.S. cannot be sort of the lowcost provider. We have to add value. The question is how to do 

that. 

I think you have to have an active Small Business Administration, an active trade procurement policy. You have to promote these 

things, to work with small business to identify new markets. 

I think the gap right now is these industrial behemoths in China 

and India who need to be sourced. They need parts. They need supplies. They need people. American small businesses have an opportunity to source them. 

Investor services is one area I have been reading a lot about. We 

have an opportunity to provide all these new companies with the 

type of value-added services that companies in their countries don’t 

yet provide. 

22 

So I think it is a question of matching what we do well, which 

is going to be the high-value-added services, to what the developing 

country firms need; and I think that is going to take an active partnership between government and business. There really aren’t any 

easy answers, but I don’t think we can rely on currency fluctuations alone to guarantee our competitiveness. 

Mr. SHULER. Thank you. 

Mr. French, what has been your experience with the rates and 

availability of equipment in your dealings related to shipping products and exports? 

Mr. FRENCH. As I mentioned, the rates have been very much increasing rapidly. I think one of the other areas is this lack of availability of equipment; and if you can imagine the sensitivity of some 

of the products we do ship, like logs from your area in North Carolina, it basically killed the business if the freight line said, well, 

sorry, we don’t have any space for 6 weeks or 8 weeks and your 

product can’t make it to the marketplace. So it has been the erratic 

and unstable ability to ship the product. 

And you can imagine using wood. We don’t have any alternatives 

besides the ocean carriers. So it has been an enormous—and, of 

course, the huge increase in diesel prices and the costs of inland 

transportation has clobbered people. It has been, again, the rapidness of it. 

And the fact that we are a relatively low-value product has made 

us less desirable for people. Of course, if they are only going to take 

a certain number of runs in their trucks, they are going to get the 

highest-value cargo. 

So it is a low-margin industry, and we are more dramatically hit 

by all of these costs, whether it be insurance costs, freight costs, 

trucking costs. All of these things have a much higher impact perhaps than on the more value-added manufacturing. And we need 

to continue to promote our value-added manufacturing. It is one of 

the things we have to do to survive. 

Mr. SHULER. Madam Chair, just for the record—I would be 

happy to yield. 

Chairwoman VELA ́ ZQUEZ. If you would yield, Mr. French, I want 

you to know that, last month, the Committee held a hearing on 

freight and railroad costs for small businesses. 

I yield back. Thank you for yielding. 

Mr. SHULER. Thank you, Madam Chair. 

Just for the record, we talk about subsidies that China continues 

to give. I mean, we have seen through this administration and still 

a continuation, the more money we borrow from China, the more 

opportunities they are going to be able to have to subsidize their 

companies. And so we have continued to see that over and over and 

over again. So we certainly have to put a stop to that in the future; 

and I am looking forward to that in the very near future, that we 

put a stop on borrowing the money from China and other countries 

that continue to take our textile businesses and our manufacturing 

businesses out of North Carolina. We lost over 300,000 jobs in 

North Carolina alone in the textile industries—300,000. 

And, last comment, we got 10,000 permits on Federal lands to 

drill. Have at it. We don’t need ANWR. Ten thousand permits. Ten 

thousand permits. 

23 

Mr. CHABOT. Would the gentleman yield? 

Mr. SHULER. Absolutely, since this is an energy hearing. 

Mr. CHABOT. Does the gentleman know on which of those 10,000 

they have actually identified that there is oil there? 

Mr. SHULER. On 250,000 acres. We just had the hearing in Natural Resources: 250,000 acres, 10,000 permits, no encumbrance 

from any type of environmental issues. They have been sitting 

there for 5 years unwilling to—and on top of that, we export our 

own petroleum, some 5.8 billion barrels a day. 

Mr. CHABOT. But what I am saying, I don’t know if the gentleman—maybe I didn’t speak clearly enough, but when you say 

250,000 acres, that is the total of all the permits. That is the acreage that is there. Correct? 

Mr. SHULER. That is the acreage that is there that has been 

identified from the oil industry that there is available. 

Mr. CHABOT. That there might be oil on— 

Mr. SHULER. That there are available oils. 

Mr. CHABOT. But they haven’t determined on which of those 

places there is oil— 

Mr. SHULER. Yes. 

Mr. CHABOT. —until they drill or until they identify it. 

Mr. SHULER. Well, there is geologists that obviously—that is why 

they have deemed it to be oil. Oil in North Carolina— 

Mr. CHABOT. If the gentleman will continue to yield, because I 

have seen this talking point out this past week, and I saw Rahm 

Emanuel talking about 68 million acres or whatever he is talking 

about that they can already drill so they don’t need to go in ANWR. 

But, oftentimes, oil hasn’t been identified. That is just speculative 

as to where it might be. So it doesn’t mean there is oil in all those 

particular locations. So it is somewhat misleading when Rahm 

throws out a number like 68 million and acts like, well, we don’t 

need to go in ANWR or the Outer Continental Shelf because we 

have got all those places they are not drilling now. 

Mr. SHULER. Madam Chair, reclaiming my time, reclaiming my 

time, thank you for holding this Small Business hearing; and we 

will get to energy policy. 

Chairwoman VELA ́ ZQUEZ. If the gentleman would yield for a second? 

Mr. SHULER. I would be happy to. 

Chairwoman VELA ́ ZQUEZ. But I would like to ask a question to 

the ranking member. If we go into ANWR, will that bring us relief, 

immediate relief, that we need? 

Mr. CHABOT. Will the gentlelady yield? 

Chairwoman VELA ́ ZQUEZ. Yes. I am asking you a question. 

Mr. CHABOT. I thank the gentlelady for yielding, because the 

point that I have heard about we don’t—even if we drill in ANWR 

now we won’t see that oil for another 5 years or 10 years, that is 

why we should have done this 5 or 10 years ago; and I voted 11 

times in the last 14 years to do that. Now, so, no, we are not going 

to have that oil for a couple years. However, much of the price, for example, $58 a barrel to $140 

a barrel in the last year or so, is speculation as to what we think 

oil is going to be available in the future. So if we passed—and I 

would urge the Speaker to do that, to allow Congress to have a 

24 

vote and we passed going into ANWR, I think you would see an 

immediate impact in the price out there because it would say that 

we are finally serious. And apparently we weren’t very serious at 

2.30 a gallon. We sure as heck ought to be serious at $4 a gallon. 

Chairwoman VELA ́ ZQUEZ. Reclaiming my time, let me just say 

there has been legislative initiatives that passed through the 

House, are sitting at the President’s desk, and others that have 

been signed into law and have not been implemented. H.R. 6, for 

example. 

Mr. CHABOT. Does that allow us to drill in ANWR? 

Chairwoman VELA ́ ZQUEZ. I am sorry? We are not talking about 

ANWR. We are talking about price gouging. We are talking about 

providing relief to small businesses to be able to purchase technology that will bring their electricity consumption down. That is 

the type of legislation that has been signed into law and that the 

administration refuses. 

Yield back. 

Mr. SHULER. Madam Chair, this is, of course, my first term in 

Congress. Could you just tell me which party was in total control 

of the White House, the Senate, and the House? 

Chairwoman VELA ́ ZQUEZ. I am sorry, I wasn’t listening. 

Mr. SHULER. This is my first term. Can you tell me which party 

was controlling the White House and the Congress for the last 12 

years? 

Chairwoman VELA ́ ZQUEZ. For the last 12 years, the Congress was 

controlled by the Republicans, and for the last 8 years the White 

House. 

Mr. SHULER. I yield back. 

Chairwoman VELA ́ ZQUEZ. Well, I guess that we have to go back 

to trade. 

Mr. CHABOT. It is our side’s turn for questioning, right? 

Chairwoman VELA ́ ZQUEZ. Yes, it is your side for questioning. 

Mr. Akin? 

Mr. AKIN. Are we going to talk about the Small Business hearing 

or you want to talk about energy? I am all ready to go on energy. 

Let’s talk about the fact that the Republicans passed a bill year 

after year to develop American energy, and it was killed by the 

Democrats in the Senate. When you add up all the votes on American energy, you find out the bottom line is that Republicans 90 

percent of the time supported American energy, and Democrats 90 

percent of the time have voted against all different kinds of things, 

from ANWR to nuclear to recycling nuclear to coal shale. 

Chairwoman VELA ́ ZQUEZ. Would the gentleman yield? 

Mr. AKIN. Yes, I will be happy to. We will have a little discussion 

here. 

Chairwoman VELA ́ ZQUEZ. Last thing I know is that the Senate 

was controlled by the Republicans 2 years ago. So how did they the 

Democrats kill the bill? 

Mr. AKIN. Certainly you know, but maybe other people in the 

room don’t, and that is because all you have to have—you have to 

have 60 votes to pass a bill. The Democrats killed that energy bill 

in 2001. The Democrat Senators killed it in 2002. They killed it in 

2003. They killed it in 2004. We aren’t picking winners and losers. 

25 

But it had the whole thing in there. Finally, a watered-down 

version in 2005. 

Chairwoman VELA ́ ZQUEZ. There was a lot of subsidies for oil companies. 

Mr. AKIN. It wasn’t subsidies for oil companies. People jump in 

with this deal about, oh, the obscene profits of the oil companies. 

The only reason they are making obscene profits is because we 

don’t have enough supply. If there is more supply, they couldn’t 

charge those high prices. So what we need to be doing is developing 

American energy in a whole lot of different forms. 

But I didn’t really have a question for our witness, Madam 

Chair. I just thought we could talk about that a little bit if you 

want. 

Chairwoman VELA ́ ZQUEZ. Enough said? 

Okay. Mr. Davis? 

Mr. DAVIS. Thank you, Madam Chairwoman; and I do appreciate 

the panelists being here. 

And, as you can see, energy is on a lot of people’s minds here in 

Congress; and I think it is on a lot of people’s minds across America. It is definitely on people’s minds back in east Tennessee. Just 

a month ago, I met with Earl Humphreys, who owns Lawn Boyz 

Lawn Care Center; and he is talking about having to close his business because of the high cost of energy. 

Since you are here to testify, and could you tell me what energy 

costs actually does to each one of your industries? And what would 

happen if we could actually become an energy policy that would 

bring it down from $4 a gallon maybe to $2 a gallon, where it was 

when the Democrat majority took over last year? 

Mr. JOHNSON. I can just say that energy prices have a huge impact on the textile industry. We are a very large consumer of energy because of the weaving, and particularly the dyeing and printing of textile materials require enormous amounts of energy. 

So when they go up and, you know, they don’t go up overseas, 

and one of the—I don’t want to keep bringing China in, but they 

are our biggest competitor. When China starts increasing its subsidies for energy, as I think has been well documented by the steel 

industry, that China is now subsidizing the electrical costs for its 

manufacturing sector by hundreds of millions of dollars a year, we 

become less competitive. 

But I would like to mention—I don’t know about the bill and 

about the small business energy upgrades—we have a very large 

mill in Trion, Georgia, one of the most impressive mills in the 

United States, one of the largest mills, and it makes apparel yarns 

and fabrics, goods for the U.S. military, and they cannot afford to 

upgrade to get more energy efficiency out of their furnaces. And 

they know how to do it. They know they need to do it. They don’t 

have the money to do it. 

So if there is some assistance that you can give to smaller companies so that they could get the energy efficiencies that are available out there, I think that would be very, very important. They 

mentioned that to me specifically, is if you can find a way to help 

me increase my energy efficiencies, this plant may stand a good 

chance of surviving. 

Mr. DAVIS. That is very good. Thank you. 

26 

Mr. French? 

Mr. FRENCH. Of course, it is a huge, huge problem for industry, 

our industry, loggers, everything else. But we need to recognize 

that the Europeans have paid double the prices we have paid for 

a long time. I think the shock is the rapid increase and the fact 

that, quite honestly, we have been living with very low energy costs 

in this country for a long time. And I would really urge and I think 

a lot of small businesses would benefit from government support in 

grants in terms of conservation, in terms of alternative energy 

issues, investment in alternative energies. 

We have got to solve this. We have got to reduce our dependency 

on the fossil fuel economy, and we need to get other products and 

other energy sources into the marketplace as quickly as we possibly 

can. And I think you have got an industry on the wood industry 

side that is very eager to work with the government in looking at 

these alternative fuels and things like geothermal, solar, wind, all 

these alternative energies, and getting government support for 

small businesses to use those alternatives. 

At the moment, the payback is pretty long. But if we had some 

tax and other incentives to invest in these things in our plants and 

put in wood boilers and put in windmills and other things, and we 

got some support in the short term, in the long-term we would be 

dealing with climate change, we would be dealing with energy efficiency, and we would be making these businesses more profitable. 

So I think there is a lot of positive things that can come out of 

this, and I hope that the Congress will look at these things and 

think about it. 

Mr. DAVIS. I certainly agree with what you just said. I do think 

we have to have all of the above. I think we need green energy. 

I certainly support it as a conservative in Congress. My main question was, gas prices have gone from $2 to $4 a gallon. What has it done? What impact has it had on the Hardwood 

Federation. 

Mr. FRENCH. It has had a huge negative impact, particularly the 

internal costs of fuel and the diesel increase in such a rapid way. 

Mr. DAVIS. Has it cost jobs in your industry? 

Mr. FRENCH. It has cost jobs in our industry, yes. 

Mr. DAVIS. We need an energy policy. That was my point. And 

I yield back. 

Chairwoman VELA ́ ZQUEZ. Okay. Time has expired. 

Mr. Johnson and Mr. French, as part of the H.R. 6 bill that we 

passed, the energy bill, we included in that package legislation that 

we reported out of this Committee, and it was a well-thought-out 

package that includes financial relief for small businesses to purchase technologies that would allow for them to bring those prices 

down. 

And this is the time to implement it. It was signed into law. So 

what we need is to get the Small Business Administration, the 

White House to implement the program. 

Mr. Griswold, you mentioned that currency manipulation is a 

regular practice among countries and, further, that China has increased the value of the yuan over the last couple of years. But 

American manufacturers still contend that the yuan is undervalued 

by as much as 40 percent. Clearly, there is market intervention. 

27 

Our responsibility is to work to help our businesses be competitive. What is your suggestion to upset this disadvantage? 

And, Mr. Johnson, you know, they all mentioned the disadvantage that their industries are facing due to not only currency manipulation but the tax imposed to the products. So what do you 

offer? How can we provide a level playing field? 

Mr. GRISWOLD. Madam Chairwoman, thank you. 

I don’t think I used the phrase ′′currency manipulation.′′ You 

know, half the countries in the world have a fixed currency or some 

kind of a hard peg. So it isn’t that unusual. And the U.S. and the 

other Western countries had fixed currencies for several decades 

after World War II. 

I do think freely floating exchange rates are the ideal. I think 

Milton Friedman was right. They work the best. 

But China is making progress. You know, they are in many ways 

still a developing and underdeveloped economy. They have a poorly 

developed financial system. I don’t think a freely floating exchange 

rate is probably the right idea for them right now. But let’s give 

them credit. They are moving rapidly in the right direction. 

A 20 percent appreciation is significant, this at a time when the 

U.S. dollar has been depreciating. I would say let’s not put too 

much stock in exchange rates. Let’s not worship at the altar of a 

depreciated currency. 

This is where trade and energy come together. One reason why 

the price of oil has gone up so much in the last few years is the 

depreciating dollar. When dollars are worth less, oil producers are 

going to demand more dollars. This feeds through to the costs. 

Over half of what we import to the United States are imported 

by businesses. They are raw materials, wood, energy. They are intermediate products, parts that go into final products. They are 

capital equipment. And small businesses are importing those 

things. 

So a depreciated currency that we have, our U.S. currency has 

depreciated significantly, that is a two-edged sword. It helps us export, but it is also feeding into raising the costs that these gentlemen’s industries are paying. 

So I don’t think that we can wave a billy club over China’s head 

and tell them they need to appreciate their currency another 20 

percent. It is not going to make a dramatic difference. Our exports 

to China are booming despite their currency policies. 

Chairwoman VELA ́ ZQUEZ. Mr. French and Mr. Johnson, you 

know, we have some trade agreements pending: Korea, Panama 

and Colombia. If there is a provision that you feel that should be 

made part of that agreement that will provide a level playing field 

for small businesses, and particularly for the industries that you 

represent, what will that be? 

Mr. JOHNSON. Well, I mean, I will go back to the issue of currency manipulation. Korea was one of the originators of the export 

scheme to devalue your currency so you could export more. And 

USTR had guidance in Trade Promotion Authority saying that it 

needed to address currency manipulation practices. And there was 

nothing in that agreement that says Korea cannot do whatever it 

wants with its currency, regardless of the damage it can do to U.S. 

28 

business. So I think that tends to undermine even the possibility 

of benefits from an agreement. 

Mr. FRENCH. I don’t have anything specific. Korea is the only one 

of those countries that is a reasonably significant market for lumber products, and we haven’t had too many difficulties there. But 

I will ask our people here to see if there is anything specific and 

get back to you. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Well, gentlemen, thank you all for being here today. 

I ask unanimous consent that members will have 5 days to submit a statement and supportive materials for the record. 

Without objection, so ordered. 

This hearing is now adjourned. Thank you. 

[Whereupon, at 11:26 a.m., the Committee was adjourned.] 

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