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[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]

             WHAT HAS EX-IM DONE FOR SMALL BUSINESS LATELY?

=======================================================================

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                               __________

                     WASHINGTON, DC, JUNE 13, 2001

                               __________

                           Serial No. 107-12

                               __________

         Printed for the use of the Committee on Small Business

                    U.S. GOVERNMENT PRINTING OFFICE
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                      COMMITTEE ON SMALL BUSINESS

                  DONALD MANZULLO, Illinois, Chairman
LARRY COMBEST, Texas                 NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado                JUANITA MILLENDER-McDONALD, 
ROSCOE G. BARTLETT, Maryland             California
FRANK A. LoBIONDO, New Jersey        DANNY K. DAVIS, Illinois
SUE W. KELLY, New York               WILLIAM PASCRELL, New Jersey
STEVEN J. CHABOT, Ohio               DONNA M. CHRISTIAN-CHRISTENSEN, 
PATRICK J. TOOMEY, Pennsylvania          Virgin Islands
JIM DeMINT, South Carolina           ROBERT A. BRADY, Pennsylvania
JOHN THUNE, South Dakota             TOM UDALL, New Mexico
MIKE PENCE, Indiana                  STEPHANIE TUBBS JONES, Ohio
MIKE FERGUSON, New Jersey            CHARLES A. GONZALEZ, Texas
DARRELL E. ISSA, California          DAVID D. PHELPS, Illinois
SAM GRAVES, Missouri                 GRACE F. NAPOLITANO, California
EDWARD L. SCHROCK, Virginia          BRIAN BAIRD, Washington
FELIX J. GRUCCI, Jr., New York       MARK UDALL, Colorado
TODD W. AKIN, Missouri               JAMES R. LANGEVIN, Rhode Island
SHELLEY MOORE CAPITO, West Virginia  MIKE ROSS, Arkansas
BILL SHUSTER, Pennsylvania           BRAD CARSON, Oklahoma
                                     ANIBAL ACEVEDO-VILA, Puerto Rico
                      Doug Thomas, Staff Director
                  Phil Eskeland, Deputy Staff Director
                  Michael Day, Minority Staff Director

                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on June 13, 2001....................................     1

                               Witnesses

Weaver, Vanessa, Board Member, Export-Import Bank of the United 
  States.........................................................     4
Watters, Joseph, President, Hoffman International................     6
Barr, George, Founder, Anatech, LTD..............................     8
DeDoncker, Sharon, Vice President/International, Aqua-Aerobic 
  Systems........................................................    10
Petrilla, Kenneth, Senior Vice President, Wells Fargo HSCB Trade 
  Bank...........................................................    12

                                Appendix

Opening statements:
    Manzullo, Hon. Donald........................................    28
    Velazquez, Hon. Nydia........................................    33
    Davis, Hon. Danny............................................    35
    Ferguson, Hon. Mike..........................................    36
    Tubbs Jones, Hon. Stephanie..................................    37
    Udall, Hon. Tom..............................................    39
Prepared statements:
    Weaver, Vanessa..............................................    42
    Watters, Joseph..............................................    53
    Barr, George.................................................    56
    DeDoncker, Sharon............................................    64
    Petrilla, Kenneth............................................    68

 
             WHAT HAS EX-IM DONE FOR SMALL BUSINESS LATELY?

                              ----------                              

                        WEDNESDAY, JUNE 13, 2001

                          House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:05 a.m. in Room 
2360, Rayburn House Office Building, Hon. Donald Manzullo 
(chairman of the Committee) presiding.
    Chairman Manzullo. Good morning. We are going to call this 
committee hearing to order. First of all, I would like to 
welcome to the Small Business Committee Congressman Bill 
Shuster of the great state of Pennsylvania.
    Welcome.
    Mr. Shuster. Thank you very much. I looking forward to 
serving on the committee with the chairman and the other 
members and, as a small business owner myself, I look forward 
to working with the business community across the country and I 
believe that I have a knowledge of the trials and tribulations 
that small business face, so I am looking forward to working 
with you.
    Chairman Manzullo. Well, as the owner of an automobile 
agency, you are having some interesting times, correct?
    Mr. Shuster. Absolutely. Not such good times, but 
interesting.
    Chairman Manzullo. We look forward to the additions that 
you can make to our committee.
    Mr. Shuster. Thank you.
    Chairman Manzullo. This morning, we launch the committee's 
trade agenda with an examination of how the Export-Import Bank 
of the United States helps small businesses. Later this year, 
Congress must decide on Ex-Im's reauthorization. In addition, 
Congress must decide what it wants to do with the president's 
budget request to cut Ex-Im by 25 percent. With these upcoming 
policy debates, it is imperative the members understand Ex-Im's 
programs.
    The bank has been derisively called ``Boeing's Bank'' for 
years. I do not mind that Ex-Im helps large businesses win 
export deals. Last year, Boeing purchased over $231 million 
from 55 companies, mostly small businesses, in the 
congressional district that I am proud to represent. The 16th 
District of Illinois is the largest supplier to Boeing in all 
of Illinois. Much of these products eventually wound up 
overseas.
    However, we must make sure the Ex-Im does not lose sight of 
its mission to also help small business exporters. Nine years 
ago, after much resistance from Ex-Im, this committee played a 
crucial role in moving the bank to help more small business 
exporters. Thanks in part to the leadership of a tremendous 
friend, a great member of Congress, Norm Sisisky of Virginia, 
Congress required that Ex-Im allocate at least 10 percent of 
their resource dollars to help small business exporters.
    Ex-Im will be pleased to tell you today that they have more 
than met this goal. Eighty-six percent of transactions and 18 
percent of the dollar volume is devoted to small business. With 
the change in administration, I want to make sure that we do 
not return to the pre-1992 days when Ex-Im did not realize the 
growing importance of small business exporters. I cannot 
believe I said that, but I did. This is a non-partisan--I think 
we are more non-partisan than bipartisan up here and I guess I 
just chastised the Bush administration if it has any indication 
it wants to go back to where we were before the Clinton 
administration took power on it. Not chastised, encouraged to 
continue to help out small businesses.
    We have to remember that the number of small business 
exporters has more than tripled over the past decade and they 
comprise 97 percent of all U.S. exporters.
    This is only part of the story. Only 12 companies in the 
16th District of Illinois and 285 firms throughout the entire 
state of Illinois directly benefitted from Ex-Im's programs 
since 1995, yet the 13 largest exporting companies in the U.S. 
who use Ex-Im's programs more frequently have 186 suppliers, 
most of them small businesses, from the 16th District alone.
    These include Scott Force in Spring Grove: Prem Magnetics 
and Modine Manufacturing in McHenry; Chemtool of Crystal lake; 
Cherry Valley Tool and Machine Company of Belvedere; Clinton 
Electronics of Loves Park; J. Rubin & Company and Bergstrom 
Manufacturing, and Kysor/Westram, et cetera. There are more 
than 35,000 suppliers to these large companies nationwide. 
Thus, the benefit of Ex-Im goes way beyond big exporting 
companies to workers who may not even know what they product 
eventually makes its way overseas.
    Thus, at a time of zero economic growth and the largest 
trade deficit in U.S. history, it makes no sense to make cuts 
as dramatic as proposed for Ex-Im.
    I hope someone from the administration is here today and I 
am sure you have something to say about that, too.
    Our foreign competitors are not making any cuts to their 
export credit agencies. A 25 percent cut in Ex-Im program, 
budget would be a gift to our foreign competitors. At a time 
when we are trying to encourage more small businesses to get 
into the global marketplace, we should not be cutting trade 
finance for small business exporters.
    I look forward to the testimony of the witnesses before us. 
I want to particularly thank those who have traveled a long 
distance to be with us, especially my constituent, Sharon 
DeDoncker of Aqua-Aerobics in Rockford.
    I now yield for an opening statement from our good friend, 
the ranking minority member from New York, Mrs. Velazquez.
    [Chairman Manzullo's statement may be found in appendix.]
    Ms. Velazquez. Thank you, Mr. Chairman.
    When discussions turn to accessing new markets, it is 
commonly thought that the major forces in trade are large, 
multi-national corporations. Of course, this is a misnomer 
because just as small businesses are setting the pace in the 
domestic economy, they are also trailblazers on the 
international front, leading the way by opening new markets 
every day.
    Today, small businesses make up one-third of our trade and, 
according to the Department of Commerce, 88 percent of all 
small businesses engage in exporting products.
    A key mechanism in ensuring that this country's small 
businesses have the support they need to succeed is the Ex-Im 
Bank. By providing loan guarantees and insurance credits to 
U.S. companies, they promote business growth. This hearing 
comes at a time when both the FinancialServices and the 
International Relations Committee are preparing to move forward with 
the reauthorization of the agency.
    Today, we are going to look specifically at what Ex-Im is 
doing to help our nation's small businesses. Although the vast 
majority of this nation's small businesses export something, 
still relatively little of Ex-Im funding, approximately 18 
percent, go to small businesses. While this is a slight 
increase, clearly with the dominant role that small businesses 
play in the economy, much more needs to be done. This is 
especially true in the areas of women and minority owned 
businesses. The face of business is changing. Currently, 
Latinas represent the fastest growing sector of the business 
community. With this reality, agencies like Ex-Im not only have 
to be sensitive, but their strategic planning must reflect that 
reality.
    This being said, it is unrealistic to expect Ex-Im to do 
the job if they are not given the necessary resources. 
Unfortunately, the president's budget request will leave the 
agency woefully underfunded. Through the cuts to many of the 
critical programs, billions less in loans will be provided this 
year.
    We all know what happens when funding is cut for these 
programs. First, we will withdraw from some of the markets that 
have less than secure economic foundations, like the former 
Soviet Union republics, Africa and the Caribbean. These are 
countries who benefit not only economically from trade, but 
politically as well.
    Also, lending will be denied to those riskier businesses, 
many of which will be small businesses. This is the wrong 
approach and coupled with the 43 percent cut to the SBA small 
businesses will take it on the chin. This is not how we should 
be treating the driving force of this economy.
    We must ensure that small business exporters are given the 
necessary tools to succeed in a competitive marketplace. To do 
this, Ex-Im must remain a viable source of capital and being 
able to provide the necessary protection for these firms, not 
just in an uncertain economy, but in an increasingly uncertain 
world.
    I thank the witnesses for appearing before us today and 
look forward to hearing your suggestions on how this committee 
can help small businesses continue to lead the way in the 
international market.
    Thank you.
    [Ms. Velazquez' statement may be found in appendix.]
    Chairman Manzullo. Thank you very much.
    All the complete statements of members of Congress and 
members of the panel will be introduced and made a part of the 
permanent record without objection.
    Our first witness is Dorian Vanessa Weaver. I had the 
opportunity to talk personally with Vanessa yesterday. She is a 
member of the board of directors of the Ex-Im Bank. There are 
five members of the board of directors. It is a full-time 
position. Her duty there is dedicated to helping out small 
business and she knows something about small businesses.
    You did not tell me this yesterday, but your father was the 
SBA administrator during President Carter's years.
    Ms. Weaver. Yes.
    Chairman Manzullo. From 1983 to 1994, Ms. Weaver developed 
a highly successful high technology, Engineering Research 
Associates, which was named National Small Business of the 
year. She was actively engaged in the key management and 
strategic decisions. She advanced an improved software and 
systems technology, creating highly acclaimed computer systems 
for U.S. and international markets. She is an attorney who 
graduated from Georgetown University. I look forward to your 
testimony, Mrs. Weaver.
    Ms. Weaver. Thank you very much, Congressman.
    Chairman Manzullo. You bet. Go ahead.
    We have these lights up here that--if it gets to yellow, 
you have about a minute; when it gets to red, if you could 
begin to wind up, we would appreciate it.
    Thank you.

 TESTIMONY OF VANESSA WEAVER, BOARD MEMBER, EXPORT-IMPORT BANK 
              OF THE UNITED STATES, WASHINGTON, DC

    Ms. Weaver. Thank you very much. Mr. Chairman, 
Congresswoman Velazquez, members of the committee, I want to 
thank you for giving me this opportunity to testify before you 
today. Your advice and the advice of your staff is enormously 
important to me and to us. I want to thank you for guiding us 
over the years and look forward to working with you in the 
future, particularly to help small business and to keep the 
heat on to provide the kinds of services and products that they 
need.
    We turn to you today to seek your advice and ideas and I 
look forward to working with you throughout the next year and a 
half of my term and certainly the Export-Import Bank will 
continue to do so throughout its history.
    I have a long and special interest in small business. My 
great-grandmother and my grandmother and grandfather both had 
small businesses and, of course, my father had a great interest 
in small business when he was administrator of the Small 
Business Administration. So it is sort of a family tradition 
and it is one that I follow with great pride and vigor.
    During the last decade, we saw a period of great economic 
prosperity and it is my belief that in order for us to sustain 
that long period of economic growth we must provide the 
financial resources to businesses, particularly to small 
businesses, encouraging them to move into emerging markets. 
Those are markets which have greater risk, but I think they 
also will provide much greater opportunity and without us those 
exports would not go forward.
    So, in short, we exist to encourage exports to emerging 
markets and provide financial support in those markets where 
financial and economic information is weak. Frequently, the 
private sector will not fund exports to those regions because 
they do not have enough information to judge whether the credit 
is good. But as a government entity working with other emerging 
market governments, we have the kind of clout to ask for 
financial information, determine whether the credit is good and 
move forward. It is one of our best justifications.
    Last fiscal year, we supported $15.5 billion in exports. 
For every taxpayer dollar invested, we allowed $18 of exports 
to go forward. We supported 2176 small business transactions, 
86 percent of those, of course, of all of our transactions were 
for small business. Eighteen percent of our financing was for 
small business, 377 were first-time users of the bank.
    We saw remarkable increases in our two primary programs, 
the Working Capital Program and the Insurance Program.
    As the congressman mentioned, we saw a 25 percent decrease 
in the amount of requested authorizations from last fiscal year 
to this fiscal year and when I first heard that, I became very 
concerned for the benefits of small business. We did an 
evaluation internally and figured out that the risk premium 
that OPM sets up to measure the risk of a particular country or 
transaction haddecreased, which meant that we could use more of 
our program budget, so when we took into consideration that we would be 
able to use less of the program budget, less per transaction, which 
meant that we could support more transactions, and then we added the 
cancellations in the previous years, sometimes exporters decide not to 
go with something or there are not as many disbursements on a 
particular policy as expected, at any rate, that amount was about $90 
million. So when we added the $633 million and the $90 million, we 
figured out we had about $723 million to work with.
    Insurance programs are zeroed out. They do not count 
against the program budget, but the working capital and loan 
guarantees do count against the program budget. So I asked all 
around the bank about whether or not this decrease in program 
budget would affect small business transactions and I have been 
assured that we expect to be able to finance every single small 
business authorization next year.
    That means that we do not anticipate increasing fees. We do 
not anticipate reducing the amount financed for small business 
or in any way affecting the financial support for small 
business. In short, we expect to be able to fund all the small 
business transactions next year.
    We are continuing to push to let small businesses know more 
about us. We have aggressive marketing campaigns. We have 
direct mail programs. We conduct seminars, conferences, we work 
with established groups, we have city/state partners we turn 
to, the TAP program for working with other organizations and 
associations. We particularly reach out to minority-owned 
businesses and women businesses. We have people dedicated to 
this. In fact, a number of full-time employees dedicated to 
small business in the bank is about 112. The actual resources 
that get dedicated to processing small business applications 
and handling those processes is actually substantially more, 
perhaps 50, 60, even higher percent of our administrative 
budget.
    At any rate, in our efforts to move forward, we rely on an 
administrative budget and we are asking for more of a share in 
an administrative budget to help us retain the high quality 
staff to carry out our goals which are to reach out to more and 
more small businesses. And we would also like to look at 
improving some of our systems so that we can automate a few 
things to take the kind of more routine transactions, automate 
them and spend more time providing the kind of services and 
programs and marketing efforts to reach small businesses.
    So, in short, in conclusion, while the global economy has 
changed substantially since our inception in about 1930, our 
mission, which we are going to stay true to, is to provide and 
sustain U.S. jobs and we are going to do so by helping small 
businesses. I will go anywhere to help a small business, I will 
come to any conference, I will speak to anyone. Please let us 
know how we can help. We really appreciate your support and any 
kind of advice. We are doing a good job, we can always do 
better, so we turn to you for any ways in which we can do 
better.
    Thank you very much. I would be happy to answer questions.
    [Ms. Weaver's statement may be found in appendix.]
    Chairman Manzullo. Thank you very much for your testimony.
    Our next witness will be Joseph Waters. Mr. Watters is the 
president of Hoffman International out of Piscataway, New 
Jersey and he is the immediate past chairman of the Small 
Business Exporters Association.
    Mr. Watters.

TESTIMONY OF JOSEPH WATTERS, PRESIDENT, HOFFMAN INTERNATIONAL, 
                         PISCATAWAY, NJ

    Mr. Watters. Good morning, ladies and gentleman. I 
appreciate the opportunity to appear before this distinguished 
committee.
    May I open by advising and repeating what the chairman just 
told you, that I am appearing here wearing two hats. The first 
involves my position as president of Hoffman International, an 
80-year-old, 50-employee private New Jersey company, and a 
second hat as a director and the immediate past chairman of the 
Small Business Exporters Association.
    I do not want to overstate the case, but I do want to 
assure all the members of this committee that there exists no 
subject that is closer to hearts, the minds and, yes, even the 
pocketbooks of small business exporters than an adequate budget 
for the growing activities of the Ex-Im Bank. All of our 
association members, small businesses such as Air Tractor of 
Olney, Texas; Leawood Export of Kansas; Transcon Trading of 
Irmo, South Carolina; MD International of Miami; Systems 
Integrated of Orange, California; Princeton Medical of 
Marietta, Georgia; OMI of Versailles, Ohio; and, yes, even 
Hoffman International of Piscataway, New Jersey can and do 
become quite passionate about this subject.
    Let me be clear, every one of our members is substantially 
dependent upon a competitive, efficient and viable Ex-Im Bank 
to provide the financing assistance which is so critical for 
all of us to compete and do business in the global marketplace. 
And that marketplace is not the same as it existed some 10, 15, 
or 20 years ago.
    There was a time when the USA mousetrap was far and away 
the best on the market. Today, mousetraps from Japan, China, 
Europe, Canada and elsewhere can compete very well. And while 
we can enjoy enormous pride over the high value of the U.S. 
dollar and it may reduce the cost of our overseas holidays as 
well, it also creates a much more competitive pricing 
environment today.
    Today's marketplace demands turnkey package pricing, 
including competitive financing arrangements, providing a 
customer with payout terms that can match its cash flow 
requirements.
    Frankly speaking, without the Ex-Im source for providing 
this kind of financing, a significant number of our members 
would simply have to fold their tents. It is just not possible 
to sell agricultural planes to Costa Rica, package hospitals to 
Mexico, or, in my case, new and used construction road building 
equipment and spare parts to Ghana without short and long-term 
financing which are either guaranteed or insured by our Ex-Im 
Bank.
    My company has been involved in exporting for the past 30 
years and I have personally observed a continued slippage of 
traditional letter of credit sale terms to that of financed 
sales. For example, at this moment, for Africa, our company is 
working on five to six transactions involving approximately $8 
million worth of forestry, construction and road building 
equipment for clients in Cameroon, Senegal, Mali and Uganda. In 
Latin America, we just completed the sale of a used $270,000 
crane based on a three-year loan for Guatemala and have three 
similar transactions financed in Mexico.
    In Russia, where our company delivered over $10 million of 
road building equipment in 1995 and 1996, we are in the midst 
of finalizing new sales of approximately $3 million and see 
enormous potential in Russia for years and years to come.
    All of these activities are supported by one or more Ex-Im 
Bank finance programs. Emerging markets such as the countries I 
mentioned represent key opportunities for small business sales, 
but financing by our U.S. commercial banks is simply not 
possible in those areas without Ex-Im's support. Absent Ex-Im's 
medium term insurance, the crane built in Shady 
Grove,Pennsylvania does not go to Guatemala. Without Ex-Im's working 
capital medium term bank guarantee, the new Mack Trucks from Allentown, 
Pennsylvania, the kilns from Bartlett, Tennessee and the forestry 
equipment from Franklin, Virginia are not moving to Ghana. And without 
the new Ex-Im program of accepting Russian bank guarantees, machinery 
components from Madison, South Dakota are not moving to Kransogorsk, 
Russia where they are assembled with other Russian made components for 
road patching machines that fix potholes.
    With this new program alone, we can foresee the manufacture 
of 100 to 150 of these machines every year versus the 10 to 15 
we do now. The impact of all these increased sales on the 
economy of Madison, South Dakota as well as the filtered-down 
effect across the national economy is enormous.
    Government statistics indicate an explosive growth in the 
export sector by U.S. small businesses and yet still only 1 
percent of all such small firms are involved. The untapped 
dimension of small businesses exporting is staggering and the 
potential contribution of fuel to our economic engine is quite 
dramatic.
    And with the current economy softening, these exports take 
on an even added importance. And yet despite all this tangible, 
undeniable evidence of a dire need for an Ex-Im Bank that can 
handle greater volume more efficiently and more competitively, 
we are faced with an administration proposal that wants to 
reduce its budget.
    Frankly, all of our association members, whether Democrat, 
Republican or Independent, are quite dismayed when we hear the 
administration tell us how importantly it values the role of 
small business and how vital it is for us to be in the global 
marketplace and, at the same time, proposes to reduce the 
budget of a critical organization that is already severely 
limited and working at full capacity. The contradiction of 
these positions is mind boggling to me and my peers.
    As president of a small exporting business and chairman of 
an association of such firms, I not only encourage this 
committee to overwhelmingly reject the suggestion of reducing 
the Ex-Im budget, but rather find a way to increase it.
    Thank you very much.
    [Mr. Watters' statement may be found in appendix.]
    Chairman Manzullo. Thank you very much. I appreciate the 
way you mentioned the names of those towns. Did you notice how 
members perk up when they hear their states that are mentioned?
    We have a firm, Bergstrom Manufacturing, just bought out 
Kaiser-Westram that provides all the HVAC systems for Mack 
Trucks, so I really appreciate that.
    We have a vote coming up right now. I would suggest that we 
take the vote and then come back. I think it is one vote, it is 
a general vote, so we are going to stand adjourned for a few 
minutes and then we will be right back and start with your 
testimony, Mr. Barr.
    [Recess.]
    Chairman Manzullo. I will call the committee back to order.
    Our next witness is George Barr, who is testifying on 
behalf of the U.S. Chamber of Commerce.
    Mr. Barr, I look forward to your testimony.

TESTIMONY OF GEORGE BARR, FOUNDER, ANATECH, LTD., SPRINGFIELD, 
           VA, REPRESENTING U.S. CHAMBER OF COMMERCE

    Mr. Barr. Thank you. I appreciate the invitation to come 
and testify today. I am a founder and part-owner of Anatech. We 
are a systems manufacturing company. We basically are making 
scientific and production equipment used for modifying surfaces 
at the molecular level. It is a little arcane, but I would also 
say that I agree with both the introductory testimonies of the 
committee and of the prior two speakers.
    We started exporting in 1984. We were open about a month 
and an order came in from Kuwait. We have seen sporadic orders 
over the years that have helped us with revenues from time to 
time, but I do want to touch on the Boeing Bank issue because 
that is something that I have heard many times as well and we 
happen to be a supplier to not only Boeing, but to at least two 
known subcontractors of Boeing and probably several third tier 
subcontractors to Boeing. We have been selling systems for 
about 30 years, we have over 5000 of them in the field. That 
includes domestically and internationally. And these systems 
are in businesses in the U.S. and overseas that are some of the 
largest businesses that you will bump into. They are the Who's 
Who of practically any business that has a product as a part of 
its business, we are there. And so a lot of our domestic 
business does go to support exports.
    The subject today in my mind could just as well be 
expansion of Ex-Im, how it could be made more competitive, 
rather than whether funding should be cut or it should be 
renewed. Ex-Im does a great job in a number of areas. I will 
not go into all of them, but one of them that has been 
particularly useful to Anatech was the city/state program in 
Virginia that helped us get started with exporting. That was 
almost exactly ten years ago.
    The Ex-Im Bank also recognizes the needs of small 
businesses, that they are different than large business. And 
one example of that, for instance, is the contract is a lot 
simpler, but we do not have to get very expensive accounting 
help that would be at an audited level, as opposed to a 
reviewed level.
    A few other things that may be important. My wife happens 
to be Hispanic. She shares in the risk of the business, but she 
shares in the rewards as well as I do believe that since we 
employ people from--we are faceless, colorless, we are looking 
for people who can get the job done and employ people from all 
different areas.
    On a perspective a little broader than Ex-Im Bank, U.S. 
Government interagency coordination is an urgent requirement 
for positive results.
    Congress passed in 1992 the Trade Promotion Coordinating 
Committee, legislation to create that committee. It requires 
the president to submit an annual export development plan to 
serve as a comprehensive blueprint for federal trade 
development activities, including strategy to coordinate 
federal programs and so on. And it has been partially 
successful. I think that there is room for improvement there to 
cross over OPIC, Trade Development Agency and Small Business 
Administration.
    It is impossible for my small business to export more than 
minimally if I must fund exports internally with domestic cash 
flow. I need an Ex-Im Bank or SBA program to turn exports to 
domestic business so that our bank will fund that activity. We 
typically would export between $150,000 and maybe $450,000 
worth of product a year. It may not sound like a lot, but we 
are a $2.5 million a year business, we employ anywhere from 10 
to 15 people and we have somewhere on the order of one to three 
people per year engaged directly in building systems and 
supporting systems for export.
    There literally have been times when we might not have been 
able to survive in a domestic downturn without the ability to 
export. I cannot say that strongly enough, so it is hard for me 
to imagine how Ex-Im can function effectively with a decrease 
in funding. I believe that it would be appropriate to see how 
much more Ex-Im can do and what level of funding it takes to 
support that effort.
    Thank you.
    [Mr. Barr's statement may be found in appendix.]
    Chairman Manzullo. Thank you very much.
    Our next witness is Sharon DeDoncker. Sharon is with Aqua-
Aerobic Systems, Inc., whose home is Rockford, Illinois, in the 
midst of the great 16th Congressional District of Illinois.
    Sharon, I look forward to your testimony.

 TESTIMONY OF SHARON DeDONCKER, VICE PRESIDENT/INTERNATIONAL, 
            AQUA-AEROBIC SYSTEMS, INC., ROCKFORD, IL

    Ms. DeDoncker. Thank you for allowing me to come here 
today. As mentioned, my name is Sharon DeDoncker and I am Vice 
President of Sales for Aqua-Aerobic Systems in Rockford, 
Illinois. Aqua is a small business which manufactures water and 
wastewater treatment equipment used for municipal sewage 
treatment plants and industrial wastewater treatment plants. 
The company employs 140 and has annual sales of about $40 
million.
    To achieve growth in the international market, we have 
participated in local trade shows, conducted regional rep 
training sessions, and held in-country engineering seminars. As 
a result, our company name is now more widely recognized; our 
representatives are trained to respond to the growing number of 
inquiries we are receiving; and the local engineers have 
confidence in our abilities. We feel we are in an excellent 
position for international growth.
    Our primary market is municipal sewage treatment plants in 
developing countries. Developing countries are sorely lacking 
in wastewater treatment and want to improve their quality of 
life and reduce the health risks caused by poor sanitation. 
Most are establishing guidelines and deadlines for the 
treatment of their wastewater and setting up agencies to 
monitor and enforce compliance. For Aqua and the other 
wastewater equipment companies in the U.S., this represents a 
huge, immediate growth market.
    The biggest obstacle being faced by these municipalities is 
funding. They have a pressing need to build sewage treatment 
plants and a desire to do so, but the funds are not there. U.S. 
companies may do an excellent job of selling the municipalities 
on the superiority of our systems and equipment, but if we 
cannot bring the project financing, these municipalities are 
forced to go to companies that can.
    Aqua is still in the learning phase of how to put together 
funding packages for international projects and until we learn 
to do so, we will not be able to expand our international 
sales.
    We have met with our bankers, private financing agencies 
and representatives of Export-Import Bank. We have learned that 
even if we elect to offer financing through our bankers or 
private sources, these organizations want the Export-Import 
Bank to guarantee the loan.
    For example, we have been working on a project in a suburb 
of Shanghai. We began working this project many years ago when 
it was still in the early design stages and we have invested 
considerable time and money in providing design assistance to 
the engineers and the government officials. We have been 
careful to develop and maintain a relationship with all parties 
involved and feel we are in an excellent position to sell our 
system.
    The remaining obstacle we have to overcome on this 
particular sale is offering an attractive funding package. We 
have taken this project to our U.S. bank and a private 
financing agency and both organizations have prepared quotes 
using Export-Import Bank guarantees. Without the Export-Import 
Bank guarantee, neither lender will be willing to take the risk 
and offer a financing package to the buyer. Without this 
financing package, our chances of being successful on this 
project are greatly reduced.
    Other countries have agencies similar to the Export-Import 
Bank, and these agencies are aggressively pursuing projects 
that will benefit companies in their countries. Other countries 
rely more heavily on their export business than the U.S. does. 
As a result, they are more aware of customer needs and more 
aggressive in meeting those needs. The U.S. is frequently seen 
as a latecomer to this market and behind in having the tools 
needed to match our foreign competitors. A key tool U.S. 
companies need is the financing package, and the Ex-Im Bank is 
our primary source for this.
    Ex-Im still has work to do to be as visible and active as 
some of the other foreign export credit agencies. We should be 
increasing, not cutting, their budget. They need additional 
funds in order to be able to expand their offerings to a level 
that gives U.S. companies the same advantage as our foreign 
competitors.
    U.S. funding, requiring Export-Import Bank involvement, of 
overseas projects is not a luxury. It is a necessity if U.S. 
companies want to work abroad. If the U.S. is not funding these 
projects, another country is and companies from the funding 
country will receive the orders and U.S. companies will lose 
out.
    The Export-Import Bank fills a need of U.S. companies, 
large and small, by providing export credit insurance, working 
capital guarantees, and loans and loan guarantees which help 
finance the sale of U.S. goods and services to foreign markets. 
Last year, Export-Import Bank financed nearly $15.5 billion of 
U.S. exports worldwide, which supported more than 1 million 
U.S. jobs. It is a fallacy to think that Ex-Im Bank works only 
with large companies, as nearly 86 percent of Ex-Im Bank's 
transactions in fiscal year 2000 were on behalf of small 
business.
    The Ex-Im Bank offers real needed services to both large 
and small companies. If the proposed budget cuts do go into 
effect, it will be more difficult for Ex-Im to continue to 
support the efforts of companies like Aqua Aerobic Systems.
    The export market cannot be ignored. It represents great 
growth potential and higher returns for U.S. businesses and 
more employment and higher quality, better paying jobs for U.S. 
employees. But without the availability of financing packages, 
which means Ex-Im Bank involvement, the participation of U.S. 
companies in this market will be restricted.
    I urge you to reauthorize the programs of the Ex-Im Bank 
and vote against any proposed budget cuts. Small businesses 
need the support of the Export-Import Bank in order to survive 
in the international marketplace.
    Thank you.
    [Ms. DeDoncker's statement may be found in appendix.]
    Chairman Manzullo. Thank you very much.
    I have just instructed our staff to tell the people in the 
hall they do not have to make so much noise. They think that 
they are not going to get the money. [Laughter.]
    You know, they show up around here and start circling the 
waters and we have to get them to--just tell them to cool it 
out there, that, you know, they will have an opportunity to get 
their money somehow.
    Our next witness is Ken Petrilla, a senior vice president 
at the Wells Fargo Bank and Wells Fargo HSBC Trade Bank.
    You came out from San Francisco?
    Mr. Petrilla. Yes, I did.
    Chairman Manzullo. I appreciate that very much. Welcome to 
Washington and I look forward to your testimony.

TESTIMONY OF KENNETH J. PETRILLA, SENIOR VICE PRESIDENT, WELLS 
           FARGO BANK AND WELLS FARGO HSBC TRADE BANK

    Mr. Petrilla. Thank you very much. Good morning, Mr. 
Chairman and members of the committee. I have bested my panel 
members a bit, two of them said that they were wearing two 
hats, I am actually wearing three hats. I represent Wells Fargo 
Bank, Wells Fargo HSBC Trade Bank, as well as BAFT, the Bankers 
Association for Finance and Trade.
    Wells Fargo, I think, is a reasonably well known name. We 
are headquartered in San Francisco and we are a diversified 
financial services company that since its inception has been 
focused on small to medium sized companies. The Trade Bank is a 
joint venture between Wells Fargo and the HSBC group and is the 
vehicle that Wells Fargo uses to deliver international trade 
finance and trade services. The Trade Bank is the only 
nationally chartered, FDIC insured bank in the U.S. that is 
devoted solely to international trade finance. As part of my 
responsibilities, I manage the Trade Bank's export finance 
activities which are focused on small and medium sized 
businesses in the United States. In addition, as I said, I am 
also representing the views of the Bankers Association for 
Finance and Trade.
    Wells Fargo is one of the leading users of the Ex-Im Bank 
programs and particularly those of the small and medium sized 
businesses, and in particular, the Working Capital Guarantee 
Program.
    Very briefly, the Working Capital Guarantee Program is a 
program that supports small businesses that cannot get enough 
working capital to build the widgets that they sell overseas. 
Ex-Im Bank adds their guarantee which entices us to lend the 
money to the small company to provide the financing to allow 
them to build their product to sell overseas. This is a fully 
collateralized loan, usually supported by foreign receivables 
and exportable inventory, but, again, it is Ex-Im Bank's 
guarantee that entices us to provide the working capital.
    Last year, Wells Fargo Bank made more working capital loans 
guaranteed by Ex-Im Bank under this program than any other 
lender and we are proud of this fact. This accomplishment 
allows small exporters to do business they might not otherwise 
do.
    The Trade Bank, our joint venture, is a little over five 
years old and, in those five years, we have made working 
capital loans supported by Ex-Im Bank totalling about $180 
million. The significance of that number is that these were all 
not only to small and medium sized companies, but they were 
small loans. The typical size of a loan of this nature is 
usually between $500,000 and maybe $2 million, so you can see 
$180 million total supported a lot of small companies.
    In addition, we do other things in the Trade Bank, of 
course. Our total of export loans supported by Ex-Im Bank, in 
addition to the Working Capital Guarantee Program, totaled 
about $500 million in our almost six years of existence. And, I 
can tell you that all of these transactions were on behalf of 
small or medium sized businesses. Not one financing arrangement 
supported a large multi-national corporation.
    I also want to point out that Wells Fargo does not look 
first to Ex-Im Bank, only after we have exhausted our own in-
house capabilities do look to Ex-Im Bank to help us mitigate 
the risk. Therefore, Ex-Im Bank is needed to make transactions 
happen that might not otherwise happen.
    A couple of examples would be appropriate, but because I do 
not want to take too much time, let me just give one really 
good example. There is a San Diego-based company that is called 
Orgil International Greenhouses. It is 30 years old. Its total 
employment is 15 people. They have sales under $5 million. This 
year, we have financed three separate sales of greenhouses to 
Mexico. Each sale was under $1 million, each individual buyer 
in Mexico asked for five-year terms. We provided the financing 
and it was insured by Ex-Im Bank under a medium term insurance 
policy. Again, that is what motivated us to provide the 
financing. Without this coverage and the risk of non-payment, 
the sale would have been lost, most probably to an Israeli 
competitor.
    We at Wells Fargo, HSBC Trade Bank, and BAFT question the 
administration's proposed 25 percent budget cut. We are fearful 
that if this cut goes through it would damage the bank's 
ability to support small business and support the kind of 
transactions that I have just explained. We do not think that 
they will be able to handle all the applications that will come 
in fiscal year 2002. Any reduction in support by Ex-Im 
negatively impacts small and medium sized businesses directly. 
Without the bank's support, they will have no alternative 
financing sources and thus will forfeit opportunities to non-
U.S. companies.
    Wells Fargo, the Wells Fargo HSBC Trade Bank and BAFT 
strongly support the programs of Ex-Im Bank, specifically those 
directed to small business. In order to be certain these 
programs are maintained and expanded, we would urge the 
restoration of the budget cuts to at least the level equal to 
this year. I am happy to hear my panel members ask for even 
more than that. That would be wonderful.
    I am pleased to provide this testimony and I am happy to 
answer any questions. Thank you.
    [Mr. Petrilla's statement may be found in appendix.]
    Chairman Manzullo. Thank you very much for the excellent 
testimony of all the witnesses, especially the anecdotal 
testimony.
    Mr. Shuster will have the first round.
    Go ahead, please.
    Mr. Shuster. Thank you, Mr. Chairman. My first committee 
meeting, the first time I ask questions. This is a big moment 
for me.
    I also want to say the chairman mentioned when you were 
giving testimony when you mention somebody's district or 
something in the district, their ears perked up. Well, mine 
certainly perked up when I heard Shady Grove and those cranes. 
I want them to sell a lot of cranes to Guatemala because Shady 
Grove Manufacturing is based in the 9th Congressional District 
of Pennsylvania, so my ears did perk up.
    My question is to Ms. Weaver.
    When you are talking about small businesses, I guess 
typically it is based of size of employees or a sales figure, 
500 employees or less constitutes a small business? Is that 
what you are talking about, under 500 employees?
    Ms. Weaver. Yes, Congressman. We use SBA's definition of 
small business.
    Mr. Shuster. I would be interested to see under 500 the 
breakdown as to who is receiving what. In our district, 300, 
400 is a large company, so I would like to see if I could under 
500 sort of that breakdown and who is receiving what and how 
they are faring in this program.
    Ms. Weaver. We will get that right to you.
    Mr. Shuster. Okay. A second question I have, if I 
understand your testimony, and I do not know how much you got 
into it, but you supported $15.5 billion in transactions so a 
decrease of 25 percent is going to be pretty much dollar for 
dollar, there will be 25 percent decrease in what you will be 
able to support going forward? I think I read in here 11.5 
billion is what you will be able to support in transactions 
based on this new amount that they are going to budget for you.
    Ms. Weaver. Yes. The latter part definitely is correct. 
Because of the change in the risk premia being decreased, we 
will be able to use more of our program budget and we will be 
able to add to that $633 million requested from OMB, but, 
basically, you are right. Yes.
    Mr. Shuster. And the final question is--and you mentioned 
you would be willing to go anywhere, what programs do you have 
out there that small businesses can tap into to find out about 
your programs? I do not know in my district if there is that 
much knowledge of it.
    Ms. Weaver. We will get you a full list. We have city/state 
partners. We work with the TAP, the Trade Association Partners 
Association. We are happy to come to your district. We have 
regional offices that will serve your area. We look for and 
participate in women-owned, minority owned businesses, rural 
conferences. Any opportunity that we believe will bring 
together anywhere from a handful to even upwards of 10 to 100 
small businesses. We will create a seminar, a program or 
participate in any kind of thing that helps small businesses 
learn about Export-Import Bank.
    Mr. Shuster. Would it be the best way to bring the banks 
together, local banks?
    Ms. Weaver. We also offer seminars and informational 
exchanges for banks and we are happy to work with any bank in 
your area.
    Mr. Shuster. Okay. Thank you very much.
    Ms. Weaver. Thank you.
    Mr. Shuster. I appreciate everybody coming here today to 
testify. It was very enlightening. Thank you.
    Chairman Manzullo. Ms. Velazquez.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Ms. Weaver, it seems based on the testimony presented here 
by yourself and the rest of the witnesses here that it seems to 
me that there is a special disconnect between the White House 
budget and small businesses in America. On the one hand, you 
are saying that you could live with a budget cut of 25 percent 
and we have to also factor in the fact that the Small Business 
Administration is going to be cut by 43 percent and then most 
of the other witnesses are saying that that is not how we 
should proceed. If we are here committed to help small 
businesses, we need to provide every tool that we can to 
strengthen and to help those small businesses flourish in 
America.
    So having said that, let me ask you the first question. The 
administration budget for the Small Business Administration has 
proposed to eliminate all direct funding for the SBA's 7(a) 
loan program, making up the difference through increased fees 
on small businesses. This is of particular concern to me 
because from my understanding the Ex-Im Bank can unilaterally 
raise fees without congressional action. Your written testimony 
is not clear on this subject.
    At one point, you indicate that the president's budget 
suggests raising fees as a possible way to meet a budget 
shortfall, but you go on to say that you do not anticipate 
raising fees on small businesses.
    Ms. Weaver, can you tell this committee definitively that 
the Ex-Im Bank will not raise user fees on small businesses 
next year to offset any budget cuts?
    Ms. Weaver. We will not raise fees on small business 
transactions.
    Ms. Velazquez. You will not raise fees?
    Ms. Weaver. Will not.
    Ms. Velazquez. Well----
    Ms. Weaver. On small business transactions. I think that 
the testimony that you alluded to references any kind of 
difference between the program budget and actual authorizations 
for the next fiscal year.
    On non-small business transactions, if there is not enough 
program budget, our new chairman, Chairman John Robson, is 
considering various kinds of alternatives, but I do not 
anticipate any changes to small business fees. I would object 
to any changes. I do not see any kind of change to increase 
small business fees.
    Ms. Velazquez. I am glad to hear that.
    Ms. Weaver, I am also concerned about the level of 
assistance that the Ex-Im Bank provides to women-owned 
businesses. I understand that in fiscal year 2000 the bank 
provided $24 million in working capital guarantees to women-
owned firms. That is a record high for the bank. However, this 
is significantly less than the $47 million in working capital 
guarantees that went to minority-owned firms in the same year. 
Even more staggering is the fact that in fiscal year 1999 only 
$1 million went to women-owned businesses.
    How can this possibly happen?
    Ms. Weaver. Well, we have aggressive means of reaching out 
to women-owned businesses and whatever we can do to reach out 
more, encourage more women-owned businesses to take advantage 
of the kinds of programs that we have, we will do.
    We have gone to a number of different conferences. For 
example, this year, we are going to go----
    Ms. Velazquez. Ma'am, let me interrupt you for a second. 
There are 9.1 million women-owned businesses in our country, so 
I want to understand how you are reaching out and only $1 
million has been provided to help those women-owned businesses.
    Ms. Weaver. We want as many women as possible to come to 
us, to take advantage of our programs. It is not that this is 
just the amount that we are setting aside, this is the actual 
amount requested by women businesses. I would love to see that 
dollar figure increase substantially. So what we try to do is 
we hold seminars, conferences, we meet with as many people as 
possible to encourage them to take the risk of exporting to 
other countries. We will step in, we will talk to people, we 
will help them understand.
    It is not that we are limiting it. We are trying to 
encourage more women businesses to take insurance policies and 
to apply for working capital guarantees.
    Ms. Velazquez. What type of action plan will you have in 
place in order to reach out to those women? Because I do not 
understand, whatever plan you put in place to reach out to 
women-owned businesses, how could you achieve that when you are 
asking for 13 percent less in funding?
    Ms. Weaver. Well, the amount for reaching out to women-
owned businesses actually comes out of our administrative 
budget and we are going to ask for more money this year. So the 
amount of money that we will spend reaching out to small 
businesses, the kind of resources that we are going to use to 
reach out to women-owned businesses will not decrease, it will 
increase.
    We have regional offices. We try as much as possible to use 
our 225-entry exporter database which has prospective 
businesses who may be interested in exporting. We try to send 
them literature, we try to organize conferences, we call them 
up. Last year, our regional offices reached out to--let me give 
you some interesting figures. We actually called about 30,000 
people. We paid 3000 office visits. We did a lot of direct 
mail.
    Ms. Velazquez. Mr. Chairman, if you will allow me another--
well, I will come back. I have not finished. I will come back 
with you, Ms. Weaver.
    Ms. Weaver. Okay.
    Mr. Shuster [presiding]. Thank you, Ms. Velazquez. We have 
a number of other people lined up here.
    Mr. Davis, I believe, is next.
    Mr. Davis. Thank you very much, Mr. Chairman.
    I see the chairman has left. I wanted to tell him the 
reason that the people were so noisy is they were afraid that 
the money was going to run out before it got to them, but I 
will let him know when he returns.
    Let me also welcome Mr. Shuster to this committee.
    It is a pleasure to see you and to be with you on your 
maiden voyage.
    Let me also appreciate all of the witnesses. I certainly 
listened rather intently to your testimony.
    And I must confess, Ms. Weaver, that I was somewhat trying 
to reconcile your testimony with that of the other witnesses in 
terms of the recognition of need for resources.
    Are you suggesting that the risk of doing business in the 
countries that we are exporting to has decreased and as a 
result of that risk the insurance premiums are not as high and 
therefore we are going to have more money to actually lend to 
businesses?
    Ms. Weaver. Sort of. OMB has determined that for this 
fiscal year the value or the calculation of those risk premia 
will decrease, so that means that our country portfolio, in 
their estimation, will decrease in terms of the value of the 
risk against the program budget. It does mean that we will be 
able to stretch those program budget dollars farther next 
fiscal year than this fiscal year.
    Mr. Davis. I was just in Nigeria the week before last and I 
ran into a young woman from the Export-Import Bank who was 
there. Of course, I did not see how anything was decreasing in 
terms of risk. They were in rather difficult shape, no traffic 
signs, no traffic lights. I mean, how you can do anything in a 
city as big as Lagos and have no traffic signs and all--but 
that is kind of an aside. But, yes, I was pleased to see her 
and she was indeed engaged even with some of the people that we 
visited because we spend a great deal of time with the governor 
of the state and it was just good to see her there.
    Ms. Weaver. Great. Thank you.
    Mr. Davis. The question that I have is really to other 
panel members. It seems to me that each one of you have sort of 
indicated--and I am a strong supporter of the Export-Import 
Bank. I mean, there are some people who suggest that it is a 
subsidy for big businesses and all kinds of other things, but 
it seems to me that in order to penetrate these markets and to 
be able to do business we need the assistance that the bank 
provides relative to absorbing risk that other institutions may 
not want to absorb all of without some guarantees.
    Do you have any ideas of how your thoughts about this seem 
to be so different rather than that of the White House or that 
of the budget preparers or that of those who are recommending 
that we not have as much in the way of money and that is not 
the case with you?
    Mr. Petrilla. I will try to respond to that. In our 
business portfolio, only about one-third of all of our export 
finance business we do is supported by Ex-Im Bank in some way, 
shape or form. So that means two-thirds of our business of 
providing export finance is funded by ourselves with our taking 
the risk or working with private sector underwriters. There is 
a great deal of capacity in the private sector market, so 
therefore I think I am answering your question, I hope I am, 
there are plenty of techniques to provide assistance to support 
exports without Ex-Im Bank, but, indeed, where we need Ex-Im 
Bank it is absolutely essential because the private market is 
closed, or our own internal appetite is such that we will not 
take that risk, and so the transaction will not happen without 
Ex-Im Bank, even though there are a great many transactions 
being done without Ex-Im Bank.
    Mr. Davis. Anyone else?
    Mr. Watters. I would just say this to you, sir, with 
respect to, I guess, the contradiction between Ms. Weaver and 
myself or our testimony, the four of us, relative to the 
reduction and what it means to Ex-Im Bank, to me, I think, and 
maybe perhaps I do not understand all of the nitty grit of the 
Ex-Im Bank budget, which is about a 10-page document with lots 
of different line items, but frankly speaking when I hear any 
organization where it is suggested that their operating budget 
would be reduced 25 percent, it seems to me that that is going 
to hurt the organization in some way, form or fashion. I mean, 
you just cannot work the same way when you are only receiving 
75 percent of what you had the previous year.
    I also think it is a very bad signal to the business 
community of America in terms of trying to encourage exporting, 
which is so important, I think, to today's economy and 
tomorrow's economy as well.
    What does it mean to the future if you reduce the budget 
this year from 100 to 75? What happens next year? Are we going 
to be back at the table looking to increase in case OMB comes 
up with different numbers or different calculations? And is 
that going to be a problem?
    And I guess, finally, I would say if there is some room in 
the Ex-Im budget because of this calculation of risk, how else 
could we use those funds to enhance or increase programs that 
Ex-Im has developed over the years?
    You talked about Africa. I think Ex-Im has been a leader in 
opening sub-Saharan Africa marketplaces like Nigeria and 
Senegal and Gabon and Ghana and those areas that for a company 
like ours are very, very important. Totally new markets for us 
that I never, frankly, never thought that we would involve our 
company in those markets. And now we are there and there is 
enormous potential for us. Similarly in Russia, as I mentioned 
in our comments.
    Chairman Manzullo. Thank you very much.
    Mr. Davis. I know that my time is up.
    Chairman Manzullo. Thank you.
    Mr. Davis. I thank you very much.
    I think you missed my comment while you were gone. I was 
just sharing that perhaps the reason there was so much 
consternation outside is because people were afraid that the 
money would run out before the appropriations got to them.
    Chairman Manzullo. That is a good thought.
    Congressman Christian-Christensen?
    Ms. Christian-Christensen. I did not realize I was going to 
get a chance to ask any questions.
    I thank the panelists for being here.
    Several of you have said in your testimony that the Ex-Im 
Bank is not aggressive enough and that the credit agencies in 
the foreign countries are more aggressive. Can you elaborate on 
that, anyone?
    Ms. DeDoncker. I will make a comment. A lot of the projects 
that we run when we are promoting our systems overseas, we find 
out that there are a lot of commerce department--the equivalent 
commerce departments of other countries that are there and they 
say when they come they bring funding from the French, from the 
Japanese, from the Germans or whatever, and we very rarely hear 
them say that the U.S. has been there offering a promotion with 
special funding. Or you will see that they are offering special 
projects that might have ten-year funding where it is difficult 
for us to get that.
    I would like to see Ex-Im Bank have more programs that 
would be--where they are doing the marketing instead of our 
companies bringing the projects to Ex-Im Bank, you have Ex-Im 
there on site with people that are promoting to the 
municipalities or the industries there, the larger industries, 
saying, hey, the U.S. is also here and we can finance our 
companies. Or there are special projects like the environmental 
projects, special programs for them where they are funding ten 
years on environmental projects. There could be more programs 
like that for other industries.
    Ms. Christian-Christensen. I definitely agree with you. I 
come from the Caribbean. I represent the Virgin Islands. We are 
not really considered a developing country, but we have a lot 
of wastewater treatment needs and I know the rest of the 
Caribbean does as well.
    Ms. Weaver, when I came in, I think you were outlining how 
many staff you had who were dedicated to small businesses. Is 
that an adequate number of staff? And you said you were going 
to increase your administrative budget; would there be any 
increase in staffing to meet the needs of small businesses?
    Ms. Weaver. Well, you know, I would always like to see more 
staff and more resources being applied to small business. We 
have asked for $3 million more in our administrative budget to 
keep hiring the kinds of persons who are very aggressive and 
very interested in bringing women-owned, minority-owned, 
environmentally important small business opportunities to us so 
that we can help finance them.
    A lot of the increase in our program budget this year will 
go to assessing and helping us automate programs to free up 
some time for people to spend more time marketing.
    So, in short, we try to work with what we have. Obviously, 
a lot more would be great also, but I think spending the time 
that we have, again, we have regional offices, we have a staff 
who cares deeply about bringing in small business and making 
sure that we attend to them and that we provide them with the 
kind of financing solutions they need.
    I think a lot of small businesses fear exporting, 
particularly to emerging markets. A lot of them do not know 
about us and we are trying very, very hard to let them know 
that we are here and we want to finance them.
    Ms. Christian-Christensen. How does a business get on your 
database? Is that what you use to share information and do 
outreach? How does a business get on your database?
    Ms. Weaver. In large measure, we turn to a number of 
different sources to find out who is interested in exporting 
and who has been exporting from the Department of Commerce and 
other government agencies to local sort of representatives, we 
call them city/state partners. A lot of them are on the ground 
in local areas so they know the markets, they know the 
businesses, they know how to get in touch with them and they 
let us know sort of who is out there.
    Ms. Christian-Christensen. I think that would----
    Ms. Velazquez. Ms. Christian-Christensen--she has some 
time--would you please yield to me?
    Ms. Christian-Christensen. Certainly.
    Ms. Velazquez. Ms. Weaver, you know, the budget 
negotiations are not over until it is over, right? So are you 
prepared to tell me in front of these small business people 
that a 25 percent cut is fine with you, that we, members of 
Congress and especially members of the Small Business 
Committee, today that we should fight to see that funding 
restored because it is fine?
    Ms. Weaver. Well, I do not see us as on different sides of 
this question. Internally, when I found out that there would be 
a 25 percent reduction, I was very, very concerned and I did 
not think personally that I could support a reduction. In fact, 
I would have preferred more. But, unfortunately, that is not 
what happened. So internally, I had to fight for small business 
to ensure that the program budget that we got would not impair 
in any way small business.
    Ms. Velazquez. Please, Ms. Weaver, answer my questions. 
Tell me today if we, the members of this committee, should not 
fight to restore the 25 percent cut. Yes or no, should we fight 
or not.
    Ms. Weaver. I believe that you should continue to fight for 
small business in any areas----
    Ms. Velazquez. No, I am talking about your budget, ma'am.
    Ms. Weaver. My belief is that our budget will be completely 
sufficient to handle any small business request. I am not 
saying that there are small businesses that will not be taken 
care of, I am saying that any small business that comes to us 
and asks us for money and it is an approved transaction, we 
will do it.
    Ms. Velazquez. You answered my question. Thank you.
    Ms. Weaver. Thank you.
    Chairman Manzullo. Could I answer that?
    Ms. Velazquez. Sure.
    Chairman Manzullo. I will join you in a fight.
    Our next member is Congressman Acevedo-Villa.
    Mr. Acevedo-Villa. Good morning. I am also a little bit 
confused with the numbers. I just want to be clear. You are not 
saying that nobody is going to be hurt. The way I understand 
you, the way you responded to Congresswoman Velazquez's 
question is that the small business sector program is not going 
to be affected. Is that what you are saying?
    Ms. Weaver. That is correct.
    Mr. Acevedo-Villa. And, for example, to another question 
she made, in terms of fees to the small business, you are not 
going to raise fees to the small business.
    Ms. Weaver. That is correct.
    Mr. Acevedo-Villa. But the bank might raise fees to others.
    Ms. Weaver. Yes. My large concern is that in the event that 
we run out of program budget for larger transactions, in the 
event that they turn to other small businesses as sub-
suppliers, my concern is that they may be affected. So 
Congresswoman Velazquez's interest in this may affectan 
indirect kind of application to small businesses but if small 
businesses come to us and ask us for a working capital guarantee or an 
insurance program, we will evaluate that project and move forward with 
it and I anticipate that there will be no problem with approving and 
financing any authorization.
    Mr. Acevedo-Villa. In terms of small business, last year 
they represented 18 percent of your lending levels, way above 
the 10 percent.
    Ms. Weaver. Yes.
    Mr. Acevedo-Villa. What is your estimate based on this 
budget for next year?
    Ms. Weaver. Well, that is a good question. It is very hard 
for us to estimate. I think it is going to be approximately the 
same. Maybe little higher.
    Mr. Acevedo-Villa. Eighteen?
    Ms. Weaver. I hope higher. Yes.
    Mr. Acevedo-Villa. You said that you estimate you can 
support 11.4 billion in export credit authorizations for year 
2002. What is that number for this year and for last year?
    Ms. Weaver. Well, we anticipate that this year the number 
will be--I will get you the exact number. I think it is going 
to be--in fact, I may have it here. Next year we anticipate the 
range will be between 11.9 and 14.4 with the mid range at about 
12.5. So in the event that the projected authorizations, that 
range, meets the actual authorizations, then we may have a 
deficit, a reduction, a differential between the program budget 
and the amount that is actually requested.
    Mr. Acevedo-Villa. No, that was not my question, not what 
actually was requested. You said that the bank estimates based 
on the budget numbers for 2002, I am reading on page 6, that 
you can support about 11.4 billion in export credit 
authorizations.
    Ms. Weaver. Right.
    Mr. Acevedo-Villa. That is for year 2002.
    Ms. Weaver. That is right.
    Mr. Acevedo-Villa. What is the number for year 2001 and for 
year 2000? The actual numbers. So we can compare.
    Ms. Weaver. Let me see. The actual number for fiscal year 
2001 is $10.9 billion in authorizations.
    Mr. Acevedo-Villa. So even with the 25 percent reduction, 
you still are projecting an increase in terms of export credit 
authorizations?
    Ms. Weaver. Right. And that is because of the decrease in 
the risk premia. I may not have explained this very well. OMB 
has decided that the way that we evaluate the use of that----
    Mr. Acevedo-Villa. So I have to conclude that the decrease 
is more in terms of--the risk is more than 25 percent. That is 
the only way it can add up.
    Ms. Weaver. What it means is that the----
    Mr. Acevedo-Villa. That is a number we do not have here. 
Because OMB calculated risk premia for fiscal year have 
substantially decreased.
    Ms. Weaver. Right.
    Mr. Acevedo-Villa. But for me then the only answer is that 
it has decreased for more than 25 percent. That is the only way 
you can----
    Ms. Weaver. In fact, it probably has. It probably means 
that in actual terms that that 25 percent is more in the teens, 
in the 15 or so percent. What it means is that our program 
budget dollars will go farther.
    Mr. Acevedo-Villa. Okay. Do you have any special program in 
terms of exports to the Caribbean?
    Ms. Weaver. We do. We have a special program to focus on 
both sub Saharan Africa and the Caribbean. We are very 
interested in promoting experts from the U.S. and certainly 
Puerto Rico. In fact, I am going to Puerto Rico.
    Mr. Acevedo-Villa. Yes, I know.
    Ms. Weaver. In about a week or so to try to encourage 
Puerto Rican businesses to export. A great market for them, 
obviously, is the Caribbean.
    Mr. Acevedo-Villa. Thank you.
    Chairman Manzullo. Thank you.
    Mr. Pascrell?
    Mr. Pascrell. I have a few questions, Mr. Chairman.
    The appropriations being slashed 25 percent down to $633 
million, that represents the second highest budget cut in the 
entire federal government, only superseded by the 43 percent to 
the entire small business budget. I am sure I am not telling 
you something you do not already know.
    I find that to be unacceptable, right, Mr. Chairman?
    Chairman Manzullo. Yes, I will fight with you. I agree. We 
may have to get in line out there and make noise, Bill.
    Mr. Pascrell. We will. We will.
    The Export-Import Bank will provide $11.4 billion in 
lending for fiscal year 2002 and that represents a $2 billion 
cut in the amount of capital available.
    Are my figures correct?
    Ms. Weaver. $2 billion from--the midpoint of our 
projections for fiscal year 2002?
    Mr. Pascrell. Yes. 2001.
    Ms. Weaver. You mean the amount that we expect to authorize 
in fiscal year 2002?
    Mr. Pascrell. I am talking about what we--yes.
    Ms. Weaver. We anticipate that the amount that we will 
authorize, the projected authorizations will be between 11.9 
and 14.4.
    Mr. Pascrell. We are looking a pretty steep cut even 
though--I think we have been struck by your--I do not mean 
cavalier response, but your ho-hum response. That is a little 
less sharp. I did not mean it to be sharp. Because, you know, 
we are dealing here with people's lives. We are talking about 
jobs here, we are not simply talking about money being 
exchanged. You know, the 7(a) loan program which has been 
eliminated in the small business budget, that is the program 
where all export working capital guarantee programs are 
financed.
    We are talking about a big amount of money here in terms of 
it being very productive within the marketplace, having a lot 
of success, a lot of success. And our concern--and I know that 
you are trying to communicate to us that there are ways to 
compensate for that other than fee increases or new fees, and I 
take you at your word, but nonetheless we are very, very 
concerned and you should know that we feel that this has been a 
very, very productive program, as other small business 
programs, programs affecting small business, and we want--we 
would like to hear, I guess, more of an aggressive approach on 
your part so that no one in the administration minimizes the 
role of the Export-Import Bank.
    This is not corporate welfare, this is helping folks. We 
want to get that 18, 19 percent figure up in terms of how much 
we assist small businesses rather than large corporations which 
have beenmostly the beneficiary of the programs and yet we are 
moving in the right direction along those lines.
    Let me ask you this question. What is the relationship of 
the Export-Import Bank with regard to the trade zones that 
exist in many of our states?
    Mr. Watters.
    Mr. Watters. Actually, sir, you know, there is a trade zone 
in New Jersey, up in Mount Olive, but I think the trade zones, 
frankly, are dealing with imports.
    Mr. Pascrell. Right.
    Mr. Watters. In which products are imported to this country 
and then are able to be frozen in a free trade zone until they 
are either improved or prepared for sale within the United 
States market.
    Mr. Pascrell. Should there not be a connect between what 
you are doing and those zones in terms of a two-way street? 
What do you think?
    Mr. Watters. Well, I suppose what you are suggesting, could 
there be trade zones for our products, U.S. made products, in 
foreign countries? Is that where you are leading with that?
    Mr. Pascrell. That was part B.
    Mr. Watters. Okay. Well, I think that certainly would be an 
advantage for us, to be able to put USA made products in 
various foreign countries, pending sale to another customer. I 
mean, it would avoid the payment of customs and other 
formalities in foreign countries. How that could be affected, I 
am not sure.
    Mr. Pascrell. Should that not be part of our trade policy? 
I mean, you know, manufacturing jobs become less and less in 
America, we have exported those jobs, manufacturing jobs, to 
many countries throughout the world and it would seem to me if 
we lose any more of our manufacturing base we will not be able 
to sustain the present economy. And, therefore, I would think 
that we would look to the benefits and we would look to the 
positive aspects of the Export-Import Bank so that we can 
produce a greater market for our manufactured products. Why one 
hand does not watch what the other is doing is beyond me.
    Mr. Watters. I could see where this, you know, the trade 
zone policy with respect to foreign countries as we have here 
in a limited way would be beneficial in the overall picture to 
U.S. trade. Whether or not it is the role of the Ex-Im Bank to 
involve itself in that issue is another question, sir.
    Mr. Pascrell. Well, I was suggesting a proactive part on 
the Export-Import Bank. I was suggesting that there is a two-
way street here and we are going to be dealing with trade 
issues, we are going to be dealing with trade issues in the 
near future and we want a two-way street. We want reciprocal 
trade agreements that impact positively on the marketplace 
right now. And I would just throw a suggestion, one quick final 
question.
    We have two banks in New Jersey that are delegated as 
authority lenders. They are Summit Bank and First International 
Bank. Are the number of banks in the states that are part of 
the Export-Import Bank process, is that determined by 
population? How is that determined? I mean, why are there two 
banks in New Jersey and five zillion banks in New York?
    Ms. Weaver. I think it is a matter of their interest in 
becoming delegated lending authority lenders. We are happy to 
go there and encourage them to become delegated authority 
lenders. I am happy to reach out to them.
    Mr. Pascrell. So in other words, if there are more banks 
that communicate with you that are interested in becoming part 
of the Export-Import Bank they would be more than welcome.
    Ms. Weaver. We would look forward to it.
    Mr. Pascrell. Thank you, Mr. Chairman.
    Mr. Shuster. Thank you.
    The chair recognizes Ms. Tubbs Jones.
    Ms. Tubbs Jones. Good afternoon. I have submitted a 
statement for the record.
    [Ms. Tubbs Jones' statement may be found in appendix.]
    Ms. Tubbs Jones. I apologize for my delay in getting here 
to all the witnesses. Thank you for hanging around for me to be 
the last--may I am not the last, but next to the last.
    I am concerned. I sit on the Banking Committee as well as 
the Small Business Committee and it is important for small 
business to have access to the programs that are available 
through Ex-Im Bank. I suppose the question I would ask is with 
a 25 percent cut in the budget, how have you prioritized who or 
what will take the hit?
    Ms. Weaver. I am sorry.
    Congresswoman, we do not expect any group to take a hit, 
which is to say that if a small business asks us to finance an 
export, we will evaluate it and if approved we will finance it.
    Ms. Tubbs Jones. Okay. Let me ask my question in a 
different fashion, then. I have $100 to buy groceries last 
week. This week, I only have $75 to buy groceries. I have to 
decide what I am not going to buy in light of the fact that I 
have $25 less. Ex-Im has $100 to buy groceries. Under this 
budget you now have $75. What are you not going to buy?
    Ms. Weaver. For our small business budget, there is not 
that decrease. It is still $100.
    Ms. Tubbs Jones. So you are saying that even though Ex-Im 
experienced a 25 percent budget cut, that the small business 
budget is not going to be cut by 25 percent?
    Ms. Weaver. That is correct.
    Ms. Tubbs Jones. How much is it going to be cut by?
    Ms. Weaver. I am saying that it will not be. I am saying--
--
    Ms. Tubbs Jones. So you are saying for the record that 
there will be no cut in the dollars available to small business 
in this upcoming year.
    Ms. Weaver. That is correct. And----
    Ms. Tubbs Jones. And I can take that to the bank, right?
    Ms. Weaver. Yes. We argued internally that if there was 
going to be a cut to the bank as a whole that small business 
not suffer.
    Ms. Tubbs Jones. Well, that is good to know.
    My colleagues want to follow up. I will yield for a moment.
    Yes, ma'am?
    Ms. Velazquez. No, I just would like to hear their 
interpretation of her statement regarding that.
    Mr. Petrilla. May I respond to that?
    Ms. Tubbs Jones. Yes, you may.
    Mr. Petrilla. From our point of view as a bank that is 
doing this kind of business, we would aggressively fight any 
cut in the existing budget of Ex-Im Bank. How we see it at the 
ground level is not that there is going to be a cut in this 
program or that program, but what happens is we have 
transactions that come in and we cannot get an authorization 
from Ex-Im Bank because they have no authorization left at the 
end of the fiscal year. That transaction is going to go away or 
more practically speaking on the administrative side 
transactions do not gethandled in an efficient and timely 
manner, so they go away. They are lost to competition or the exporter 
gets frustrated and pretty soon he is not selling overseas or she is 
not selling overseas and that business goes away.
    So without pinpointing program by program, we as a bank 
that funds international exports and uses Ex-Im Bank 
extensively, we would be extremely disappointed to see any 
budget cut. Overall, it is going to slow down the process and 
the business.
    Ms. Tubbs Jones. My next question----
    Go right ahead, Mr. Watters.
    Mr. Watters. I will just echo my fellow panelist's 
comments. As I said before, I think it is a very bad signal to 
exporters of this country that you are reducing the Ex-Im 
Bank's budget by 25 percent. That is not a good signal or a 
good sign for us. If these funds could be used in a different 
way, increasing the staff to expedite the processing of export 
transactions through the bank would help enormously. I have a 
saying within my own company, time kills deals. And when you 
make applications in to the Ex-Im Bank, and they are working at 
full capacity now, but it takes a month or six weeks to get 
approvals, to get things done, that can kill a deal, 
particularly for a small business.
    Ms. Tubbs Jones. Well, if I gave you $100 one week and the 
next week I gave you $75 to go to the grocery store, you would 
be in trouble, would you not?
    Mr. Petrilla. Yes, ma'am.
    Ms. Tubbs Jones. Okay. Thanks.
    Let me go ask another question of you, Ms. Weaver. What 
types of technical assistance does Ex-Im offer now will you 
continue to do this in the face of the budget cuts for 
technical assistance, working their way through the process, 
businesses working their way through the process?
    Ms. Weaver. We have actually asked for an increase in our 
administrative budget to ensure that any of the kinds of 
outreach programs and marketing programs are not affected in a 
serious detrimental way.
    Ms. Tubbs Jones. You have asked for an increase in your 
administrative budget to compensate for the decrease in the 
dollars available otherwise?
    Ms. Weaver. Well, no. What we did is we asked for an 
increase in the administrative budget so that our staff could 
continue to reach out to businesses and let them know about Ex-
Im Bank and to process their applications when they came in. We 
think we will have enough--we know we will have enough on the 
program budget side to support small businesses when they ask 
us for financing.
    Ms. Tubbs Jones. I am going to give you my $75 to work with 
since you can work magic like that.
    I yield the balance of my time, Mr. Chairman.
    Mr. Shuster. Thank you, Ms. Velazquez.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Mr. Petrilla, some opponents of the Ex-Im Bank have argued 
that the proposed cuts in the budget will provide an 
opportunity for private insurers to play a larger role in the 
export market and they also argue that because private insurers 
do not have U.S. content requirements their policies are more 
flexible.
    In your opinion, are there private insurers out there who 
are champing at the bit to make these deals for small 
businesses?
    Mr. Petrilla. In other words, that private insurers would 
like to see the 25 percent budget cut?
    Ms. Velazquez. Sure.
    Mr. Petrilla. No, I do not believe that at all. I think 
that private insurers are aggressively underwriting cross-
border risk and they see a significant role for themselves, but 
they also see a significant and important role for Ex-Im Bank. 
When private underwriters will not mitigate the risk because of 
the country, term or other considerations, this is the role of 
Ex-Im Bank. I do not think that they would be licking their 
lips saying, wow, this is going to give us more business. They 
are--there is a lot of capacity in the underwriting market, 
they are writing a lot of business. I think that the overall 
U.S. Exporters need to be supported by a vibrant consistent 
export credit agency and that is to their benefit as well.
    Ms. Velazquez. So who in your opinion will fill the gap 
left by the 25 percent cut and provide the export credit 
insurance that will allow small businesses to compete in the 
international market?
    Mr. Petrilla. I do not know if the gap will be completely 
filled, if that happens, at all. Transactions will go 
unfinished. They will not get done. And more and more 
manufacturers may consider manufacturing overseas where they 
can get other export credit insurance support or they will 
simply lose to competition. I do not think the gap will be 
filled.
    Ms. Velazquez. Mr. Watters, would you like to comment on 
that?
    Mr. Watters. With respect to--I do not have that much 
experience with private insurance, although I have some, they 
generally follow the lead of the Ex-Im Bank. I mean, really, 
they are not participating in some of these, for example, these 
sub-Sahara areas. We would not be able to do the deals that we 
are doing in some of the countries that I mentioned based on 
private insurance companies. So I would have to agree with my 
fellow witness here that the gap would probably not be filled 
and we would not be able to do the deal. The deal would be 
lost.
    Ms. Velazquez. Ms. DeDoncker.
    Ms. Dedoncker. I really cannot comment on the private 
insurers but it seems like we are talking about keeping 
everything even and this is a time when we should be adding new 
programs, becoming more aggressive rather than keeping the 
status quo of what it has been in the past when maybe export 
has not been as important as it is now and will be in the 
future.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Mr. Shuster. Thank you.
    Mr. Davis, do you have any further questions?
    Mr. Davis. For the Export-Import Bank, what is the cap for 
small businesses?
    Ms. Weaver. There is no cap.
    Mr. Davis. So when you say small business, I mean, what is 
a small business? When do you stop being a small business?
    Ms. Weaver. We use the SBA definition.
    Mr. Davis. All right.
    Ms. Weaver. With respect to the insurance programs, we 
expect no decrease or a gap in insurance because our insurance 
programs do not come out of the program budget, so the program 
budget can be cut or increased dramatically and it would not 
affect the insurance program, so we will continue to do the 
full scale insurance programs and provide policies to small 
businesses who request it.
    Mr. Shuster. Thank you.
    Further questions?
    Ms. Velazquez. Seems like there is two different 
interpretations here, one from the small business bank and the 
Export-Import Bank.
    Thank you, Mr. Chairman.
    Mr. Shuster. Thank you.
    I think it is pretty clear from the questioning today that 
many of the members of this committee will fight to see 
increased funding for this program.
    Ms. Velazquez. I am not going to do anything. She is saying 
that it is fine.
    Mr. Shuster. Well, again, we have the ability to weigh in 
on this.
    Again, I want to thank all the witnesses for coming out 
today. We certainly appreciate you taking the time and sitting 
before us and giving us the information you have. Thank you 
very much.
    The committee meeting is adjourned.
    [Whereupon, at 12:00 noon, the committee was adjourned.]
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