U.S. GOVERNMENT PRINTING OFFICE

60–563 WASHINGTON : 1999

MEASURING IMPROVEMENTS IN THE U.S. EXPORT

ASSISTANCE CENTER NETWORK

HEARING

BEFORE THE

SUBCOMMITTEE ON

TAX, FINANCE, AND EXPORTS

OF THE

COMMITTEE ON SMALL BUSINESS

HOUSE OF REPRESENTATIVES

ONE HUNDRED SIXTH CONGRESS

FIRST SESSION

WASHINGTON, DC, SEPTEMBER 9, 1999

Serial No. 106–33

Printed for the use of the Committee on Small Business

(

(II)

COMMITTEE ON SMALL BUSINESS

JAMES M. TALENT, Missouri, Chairman

LARRY COMBEST, Texas

JOEL HEFLEY, Colorado

DONALD A. MANZULLO, Illinois

ROSCOE G. BARTLETT, Maryland

FRANK A. LOBIONDO, New Jersey

SUE W. KELLY, New York

STEVEN J. CHABOT, Ohio

PHIL ENGLISH, Pennsylvania

DAVID M. MCINTOSH, Indiana

RICK HILL, Montana

JOSEPH R. PITTS, Pennsylvania

JOHN E. SWEENEY, New York

PATRICK J. TOOMEY, Pennsylvania

JIM DEMINT, South Carolina

EDWARD PEASE, Indiana

JOHN THUNE, South Dakota

MARY BONO, California

NYDIA M. VELA ́ZQUEZ, New York

JUANITA MILLENDER-MCDONALD,

California

DANNY K. DAVIS, Illinois

CAROLYN MCCARTHY, New York

BILL PASCRELL, New Jersey

RUBEN HINOJOSA, Texas

DONNA M. CHRISTIAN-CHRISTENSEN,

Virgin Islands

ROBERT A. BRADY, Pennsylvania

TOM UDALL, New Mexico

DENNIS MOORE, Kansas

STEPHANIE TUBBS JONES, Ohio

CHARLES A. GONZALEZ, Texas

DAVID D. PHELPS, Illinois

GRACE F. NAPOLITANO, California

BRIAN BAIRD, Washington

MARK UDALL, Colorado

SHELLEY BERKLEY, Nevada

HARRY KATRICHIS, Chief Counsel

MICHAEL DAY, Minority Staff Director

SUBCOMMITTEE ON TAX, FINANCE, AND EXPORTS

DONALD A. MANZULLO, Illinois, Chairman

STEVEN J. CHABOT, Ohio

PHIL ENGLISH, Pennsylvania

PATRICK J. TOOMEY, Pennsylvania

CAROLYN MCCARTHY, New York

RUBEN HINOJOSA, Texas

CHARLES A. GONZALEZ, Texas

GRACE F. NAPOLITANO, California

PHILIP ESKELAND, Senior Professional Staff Member

(III)

C O N T E N T S

Page

Hearing held on September 9, 1999 ....................................................................... 1

WITNESSES

Nelson, Benjamin, Director, U.S. General Accounting Office .............................. 3

Frazier, Johnnie, Inspector General, Department of Commerce ......................... 5

Marquez, Awilda, Assistant Secretary and Director General, Department of

Commerce ............................................................................................................. 7

Sachs, Joseph, Director, U.S. Export Assistance Center ...................................... 10

APPENDIX

Opening statement: Manzullo, Hon. Donald A ..................................................... 26

Prepared statements:

Nelson, Benjamin ............................................................................................. 27

Frazier, Johnnie ................................................................................................ 62

Marquez, Awilda ............................................................................................... 88

Sachs, Joseph .................................................................................................... 107

(1)

MEASURING IMPROVEMENTS IN THE U.S.

EXPORT ASSISTANCE CENTER NETWORK

THURSDAY, SEPTEMBER 9, 1999

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON TAX, FINANCE AND EXPORTS, COMMITTEE ON SMALL BUSINESS, Washington, DC.

The Subcommittee met, pursuant to call, at 2:00 p.m., in room

311, Cannon House Office Building, Hon. Donald A. Manzullo

[chairman of the subcommittee] presiding.

Chairman MANZULLO. Good afternoon.

I was playing musical chairs up here. Obviously, somebody who

occupied this chair before me wasn’t vertically challenged, and I

was sitting closer to the ground than I wanted to.

The Subcommittee will come to order. Today we will continue our

evaluation of the USEAC or U.S. Export Assistance Center network. Steve Chabot, a representative from Ohio and I are the only

members who were part of the Subcommittee in 1996 when we

held our last oversight hearing on the program.

We are here today because USEACs are unique in the Federal

Government. They represent an innovative effort to attempt to consolidate, improve and stretch the various export promotion programs spread throughout 19 Federal agencies. That is not an easy

task. From where the U.S. Government was in the early 1990s, the

auditing reports for us today confirm that there have been significant improvements in the delivery of export promotion programs to

those interested in international trade.

The major problem outlined by GAO appears to be a disunited

effort to help small firms that are not ready to export but show potential. A minority of USEACs have aggressive outreach programs,

while the rest refer these small businesses to other resources mostly in the private sector. But there is little follow-up at the USEACs

to see if these companies have graduated and are now prepared to

export.

As a Member who has held numerous trade forums to encourage

more companies to export, I know the frustration many trade specialists at the USEACs feel about the lack of response to the invitation for help. This is not about outreach or marketing. It is about

small companies that already know about USEACs but do not receive the appropriate help because they are not ‘‘export ready’’.

The GAO reports the SBA’s E–TAP program is one of the tools

that holds promise for assisting firms that are not ready to export.

I am also familiar with several private sector alternatives that may

be of assistance also. Our mutual goal should be that no small

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business that contacts a USEAC for export help is turned away because the company is not export ready. That apparently was the

conclusion of the GAO study.

We have a record trade deficit mainly because of our recent anemic export performance. Small business accounts for nearly 93 percent of exporting manufacturers but accounts for only 30 percent

of the value of U.S. exports. Clearly, we have a lot of work to do.

I look forward to the testimony of our witnesses. I yield for an

opening statement by the ranking minority member, Mrs. McCarthy of New York.

Mrs. MCCARTHY. Thank you, Mr. Chairman.

I would also like to thank our panel of witnesses for taking time

out of their busy schedules to testify before this Subcommittee.

While small businesses are looking to global markets to expand

and remain competitive, export assistance centers have shown they

have a potential to help small business increase their exports. This

hub and spoke network, which is centered around USEACs

throughout the country, is linked with 141 overseas posts in 76

countries.

Exports account for 25 percent of the total U.S. Economy. Fur- thermore, an increase of $1 billion in exports translates to 22,800

new jobs. By creating one export assistance network, U.S. Businesses no longer encounter a fragmented and confusing system

when looking to Federal assistance for counseling. Their ability to

assist small businesses interested in exporting their goods and

services translates into more jobs and a healthier economy.

As you are aware, U.S. Government export programs have come

under close scrutiny of the Congress. In response to questions

raised by Senator Smith regarding this issue, the GAO produced a

report examining the nature of USEACs with federal and nonfederal agencies, as well as marketing initiatives.

Although the report sufficiently answers most of the questions

raised by Senator Smith, it also raises some inconclusive points

that need clarification such as, how agencies are dealing with overlapping of services. Though USEACs have shown the potential to

help small businesses increase their exports, recommendations

made by GAO, as well as continued congressional oversight, is still

needed to improve their services, especially the firms that have

never exported their goods.

I thank the chairman for recognizing the importance of this issue

and look forward to the testimony of our witnesses.

Chairman MANZULLO. Thank you very much.

Our first witness is Ben Nelson. Ben or Benjamin?

Mr. NELSON. Benjamin, but Ben is fine.

Chairman MANZULLO. Okay.

Mr. Nelson joined the GAO’s Detroit regional office in 1974 after

participating in the General Motors management development program. In 1983, he transferred to Washington, joining the newly established Office of Quality Assurance and then to National Security

and International Affairs Division in 1985 to help establish the Division’s quality review operation. You have quite a background. Mr.

Nelson graduated with a BA in Business Administration from Albany State College and his graduate degree is from Johns Hopkins

University, School of Advanced Studies in International Studies.

3

He also completed work on international trade and competitiveness

issues at Georgetown University. Excellent qualifications.

Mr. Nelson, we look forward to your testimony on behalf of the

GAO investigation.

Mr. NELSON. Thank you.

Chairman MANZULLO. I don’t think investigation is a fair term.

Mr. NELSON. I am sorry.

Chairman MANZULLO. I said GAO investigation. I think GAO review or audit is a better term.

Mr. NELSON. Review.

Chairman MANZULLO. Review would be more appropriate.

Mr. NELSON. More appropriate, yes.

Chairman MANZULLO. Thank you.

STATEMENT OF BENJAMIN F. NELSON, DIRECTOR, INTERNATIONAL RELATIONS AND TRADE ISSUES, U.S. GENERAL

ACCOUNTING OFFICE, WASHINGTON, DC

Mr. NELSON. Mr. Chairman and members of the Subcommittee,

I am pleased to be here today to discuss the activities of the U.S.

Export Assistance Centers, so-called USEACs. As you well know,

small businesses offer great potential for export growth. However,

they are also likely to seek export assistance, particularly those

firms that have never exported. Various Federal agencies and public and private organizations provide a range of export assistance

activities, from giving export counseling to supplying export finance.

Research by GAO and others in the late 1980s and early 1990s

found that export assistance at the Federal level was fragmented

among 10 different agencies. In response, USEACs were created to

strengthen the delivery of export promotion programs by serving as

one-stop shops that could provide information on all export promotion activities available to U.S. Firms seeking assistance. Today,

there are 19 USEACs.

We have followed the development of the USEAC concept and

have reported on early implementation issues. My testimony today

will focus on our most recently issued report entitled: Export Promotion: U.S. Export Assistance Centers Seek to Improve Services.

Specifically, I will discuss our findings related to, one, USEAC

agencies’ efforts to improve coordination among Federal agencies

and nonFederal export service providers; and, two, the challenges

the USEAC agencies face in their efforts to better meet the needs

of the business community, particularly firms that export services

and firms that are not yet ready to export.

In conducting this latest review, our work included visits to six

of the 19 USEACs and meetings with members of the export community at each location. These locations include Atlanta, Baltimore, New York, San Jose, Seattle, and Portland.

With respect to coordination, we found that the agencies participating in the USEACs are making joint calls on perspective clients

and sharing information on clients and services where appropriate.

The USEACs have also pursued partnerships with nonFederal export service providers, including State and local government, profit

and nonprofit organizations.

4

In many cases, the USEAC agencies have co-located their staff

in the same office suite of a building as nonFederal providers. In

fact, for fiscal year 1998, nearly 20 percent of the export actions reported by USEAC trade specialists mentioned that at least one

partner had participated in assisting a firm and in exporting a

product or service.

While coordination among the various entities has improved,

USEAC faced significant challenges in helping firms that export

services. At a time when opportunities for service sector exports

are growing, Commerce’s export promotion services are often unavailable or inappropriate for firms that export services, as they

were largely designed for firms that export goods.

Certain USEACs have initiated creative approaches to addressing this issue. For example, one USEAC helped to stage a series

of international video conferences through which U.S. Architects

could gain market intelligence and meet potential clients. USEACs

are also helping design and education sector firms to form consortiums to which they can jointly pursue export business.

Some USEACs have also used a special partnership program developed by the Small Business Administration to assist in projects

that are not yet ready to export. Under this program, USEACs organize Federal and nonFederal export service providers into consortiums that provide firms that are not ready to export with comprehensive export training tailored to the firm’s needs.

USEACs then offer intensive follow-up counseling to those firms

and those firms that successfully complete the SBA program. Some

firms participating in the program have become customers of

USEAC export promotion and finance services and ultimately

exportors.

Mr. Chairman, this concludes my opening remarks. I would be

happy to answer questions you or other members of the Subcommittee may have.

Chairman MANZULLO. Thank you very much.

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

Chairman MANZULLO. You will notice that the chairman removed

his coat. And if any of the witnesses feels more comfortable in

doing so, because of this oppressive humidity, just join in.

Our next witness is Johnnie Frazier——

Mr. FRAZIER. Frazier.

Chairman MANZULLO [continuing]. Frazier, thank you—Inspector

General, U.S. Department of Commerce.

Mr. Frazier was sworn in as the fourth Inspector General of the

U.S. Department of Commerce by Secretary Daley on July 20th,

1999. He had served as the Department’s Acting Inspector General

since January of 1998. As IG, Mr. Frazier manages the Office of

Inspector General, which is charged with conducting and supervising audits, inspections, and investigations of the Department’s

programs and operations. He is the Department’s senior official in

charge of promoting economy, efficiency and effectiveness and preventing and detecting fraud, waste and mismanagement.

Mr. Frazier also served as Assistant Inspector General from 1994

to 1998 and as Deputy Assistant Inspector General from 1984 to

1994 in the Office of Inspections and Program Evaluations.

5

I would state that what Mr. Frazier has done here is not an investigation, but it is an audit for determining efficiency. Is that correct?

Mr. FRAZIER. Yes, audits, inspections, and evaluations, all three

of them.

Chairman MANZULLO. Okay. Please proceed with your testimony,

Mr. Frazier.

STATEMENT OF JOHNNIE E. FRAZIER, INSPECTOR GENERAL,

DEPARTMENT OF COMMERCE, WASHINGTON, DC

Mr. FRAZIER. Thank you. Thank you, Mr. Chairman.

Mr. Chairman and members of the Committee, I am pleased to

appear before you today to discuss some of the Office of Inspector

General’s work and recent observations related to the U.S. Export

Assistance Centers.

I appeared before this Subcommittee just over 3 years ago to discuss the results of our early assessment of the development and

roll-out of the USEACs. I concluded that appearance by stating

that although there were clearly problems and challenges, we were

optimistic about the USEAC’s potential to better address the export

promotion and trade finance needs of U.S. exporters.

If I were to fast forward to the end of my statement here today,

you would see that I essentially have the same conclusion, that

there are indeed problems to be addressed, but I believe that the

USEACs are demonstrating their ability and potential to better

meet the needs of U.S. exporters.

Several key factors cause my optimism, the foremost being that

the USEACs have come a long way in demonstrating how Federal

agencies can and should work together to better provide export assistance to U.S. businesses. And, secondly, the centers, while not

perfect, represent a major improvement over the fragmented export

promotion and finance assistance previously provided to U.S. exporters.

Long before the establishment of USEACs, my office recognized

and highlighted the need for improved coordination of the Federal

Government’s export promotion efforts.

Recognizing the USEAC program’s potential for success or failure

and the resulting impact on small- and medium-sized firms who

look to the Federal Government for export assistance, we completed

an early assessment of the development and roll-out of the

USEACs.

Calling your attention to the map here on my left, I would highlight that since that early assessment, we have monitored the

changing status of the USEAC program through the various audits,

evaluations, inspections, and visits, including several centers that

I personally visited. As you might expect, we have found that most

of the centers have some unique strengths and their own weaknesses. Each center also appears to have its own special opportunities for success, as well as its own special challenges.

Let me quickly share with you in the form of a report card—and

the report card is intended to encourage discussion here—a few of

our general observations about the USEAC program.

Federal Partnerships. Federal partnerships are increasingly

working in a cooperative fashion. This is the good news. This is a

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solid B-plus here. My observations here are more about attitude, of

quality. That is relatively intangible and difficult to quantify, yet

can make a big difference. More often than not, we are finding that

the collocation of export promotion and trade finance partners in

the USEACs does in fact foster closer working ties and strengthen

information exchanges. Clearly, when this happens, the result is

improved export marketing and export finance assistance.

USEAC Staffing. While SBA has at least one representative in

every USEAC, Ex-Im has staff physically located in only four

USEACs. Ex-Im officials emphasized that, although they are not

present in every USEAC, they attempt to visit the remaining

USEAC sites during their routine visits to the major cities in their

region. They also rely with varying degrees of success on the 36

centers that have Ex-Im Bank city-state partners in their vicinities

who serve as their authorized agents. A B grade here.

USEAC Performance Measures. The USEACs clearly need a better system for identifying, measuring and reporting programmatic

accomplishments. In our 1996 review, we recommended that the

USEACs have performance measures and criteria for assessing and

encouraging the success of the USEACs as a single entity and not

only as the sum of the individual parts of the participants. Although some officials are now attempting to address this matter,

there is clearly more work to be done here.

State and Local and Private Partnerships. Again, this is good

news. The USEAC network is fostering stronger partner relationships with State, local and other trade associations. A solid B-plus

here is given to highlight our overwhelmingly positive observation,

that there is increased partnering between Federal and State and

local trade promotion organizations.

Coordination with the U.S. and Foreign Commercial Service’s

Overseas Offices. Coordination between the USEACs and the U.S.

and FCS overseas offices must be better. One of the unique aspects

of the U.S. and Foreign Commercial Service is its worldwide network of domestic and foreign offices. Because cooperation and interaction between them has been spotty, we see the U.S. and FCS’s

efforts in this area as only average, at best.

USEAC Marketing. What is the USEAC program? This is a question that is frequently asked. Our grade here reflects the opinion

of many representatives of some of the Federal, State and private

trade organization that we have spoken with who believe that the

USEACs must be more effective in getting out the message of who

they are, where they are, what they do, and what products and

services they have to offer.

In closing, if I had to give the overall USEAC program a grade

today, it would be a solid B. U.S. exporters are clearly being better

served through the USEAC program with improved coordination

and cooperation between the Federal agencies and the various public and private organizations in the field that are involved in promoting and financing U.S. exports.

Thank you. This completes my statement, and I will be glad to

answer any questions.

Chairman MANZULLO. Thank you.

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

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Chairman MANZULLO. Our next witness is Awilda Marquez, Assistant Secretary and Director General of the U.S. and Foreign

Commercial Service of the Department of Commerce. And we look

forward to your testimony I am not even going to go through the

list of credentials here, because we will take up a lot of time, except to say that our witness has a thorough understanding of international trade and administration.

And with that introduction, Ms. Marquez, please.

STATEMENT OF AWILDA R. MARQUEZ, ASSISTANT SECRETARY

AND DIRECTOR GENERAL, THE U.S. AND FOREIGN COMMERCIAL SERVICE, DEPARTMENT OF COMMERCE, WASHINGTON,

DC

Ms. MARQUEZ. Good afternoon, Mr. Chairman, and thank you

Representatives McCarthy, Gonzalez and Napolitano and members

of the Subcommittee for providing me with the opportunity to

speak to you about one of the true success stories in government

today, the U.S. Export Assistance Centers. I would ask, of course,

that my complete statement be made a part of the official record.

You have asked if there is a measured improvement in the

USEACs since their creation in around 1993. I am pleased to report that the Export Assistance Centers have become a catalyst for

small- and medium-sized companies seeking to expand their markets overseas and an invaluable resource for the tens of thousands

of companies that use the USEACs.

Almost 6 years have passed since we opened four pilot USEACs

in Baltimore, Miami, Chicago and Long Beach. By fostering strong

partnerships with Federal, State and local trade promotion organizations, by incorporating technology and strategically placing our

resources where they could serve our clients most effectively, we

have created an integrated national export assistance delivery network.

And I do want to thank you, Mr. Manzullo, for sponsoring H.R.

1993 ITA’s Reauthorization Act that would support the continuance

of the USEACs.

I have offered here a chart to talk about some of the measured

improvements of the USEACs and have provided copies for you to

look at.

Today, the Export Assistance Network is comprised of over 350

Commercial Service employees at 105 Export Assistance Centers

providing export assistance to American companies nationwide.

Each offers one-on-one counseling to businesses, particularly small

and medium-sized companies with export potential. But with a

growing scarcity of resources and a greater demand on services,

working through partnerships at the point of service delivery is the

most effective way to help the American exporter in today’s climate

of increased global competition.

The trade finance counseling provided by SBA and Ex-Im Bank

professionals at several Export Assistance Centers complements

the export marketing counseling offered by the Commercial Service. The original vision of providing one-stop shop for American exporters has become a reality. Each agency in this one-stop shop offers its own expertise. Of course, this is not a merger of identities

8

but a close coordination of efforts to make it easy for customers to

get to the solution to their export-related problems.

In addition to our Federal partners, the Commercial Service

partners with State and local public/private organizations to again

leverage resources and expand the range and the depth of the services that we can provide.

While the USEACs have matured to deal effectively with clients,

and we are proud of this accomplishment, we do not rest on our

laurels. The operation is not yet perfect, and we are working on improvements.

We are moving toward integrated planning with our USEAC

partners. Every USEAC already engages in joint planning activities among the partners to coordinate specific local trade events,

trade mission recruitment, World Trade Week activities, et cetera.

In addition to this, the Commercial Service would like to see integrated planning so that one partner’s goals are incorporated into

the goals of all partners and that all successes are shared collectively.

In addition, USEAC partners, as has been noted, already actively

engage in joint client calls. Every Commercial Service annual performance plan for our staff has one element that is dedicated to

working with partners. We are working to develop joint performance measures, including joint counseling, good management business processes and customer service within the USEACs.

The Commercial Service has taken the lead within the USEAC

network to provide partners with training on our products and

services. We have provided week-long Trade Specialist training

courses in which our partners have participated. We also arrange

for USEAC training for all USEAC partners, encompassing topics

such as export counseling, Federal resources for international business, using trade finance effectively, et cetera.

In an effort to incorporating partner and client feedback into our

Managers’ and Trade Specialists’ evaluations, the Commercial

Service will soon be adopting a 360-degree review process; that is,

that 360-degree feedback will be incorporated into evaluations

allow superiors, subordinates, peers, clients and partners to provide input to help evaluate our individual Trade Specialists’ performance.

We also use Teams, as you know. Our Teams initiative has

greatly improved the effectiveness of the Commercial Service’s

global network and the USEACs. In 5 years, the Commercial Service Teams have matured to become a solid and effective global virtual structure that coordinates activities across the Commercial

Service units, other ITA units and among USEAC and local partners to bolster Teams’ international and industry expertise.

With the focus on innovation, the Teams have increased outreach

to new clients, developed enhanced matchmaking programs and

used new technology such as web casting and video conferencing to

educate clients and put them in touch virtually with buyers overseas.

The goal and main measure of the Commercial Service is to increase the number of American SME exporters. We are aggressively working to expand and diversify our client base. Our rural

Export Initiative reaches small and medium-sized companies who

9

are export-ready but have not yet had full access to international

trade services because they are located in remote areas or in business centers that are away from major metropolitan areas and lack

international trade infrastructure.

Rural companies are exporting more than ever, but they share

common characteristics. They lack access to trade services, such as

counseling, banking and freight forwarding experts. They are often

not exposed to international cultures and do not often have the

benefit of industry clusters in their areas. We can find and do find

rural companies with the capacities to exceed and help them enter

the international marketplace.

In addition to rural companies, we are also working to help minority-owned businesses export more, and we have launched a

Global Diversity Initiative to help those export-ready minorityowned businesses take advantage of international opportunities.

Working with partners or partners in the USEACs and other partners outside of the USEACs, we provide comprehensive counseling

and training over 6 months with a trade mission opportunity at the

end for minority-owned businesses to expand their international

reach.

We are one of the few agencies that provide direct service to the

business community, and this unique relationship necessitates that

we, the Commercial Service, maintain credible, flexible, businessfriendly and business-relevant services to keep up with the dynamic technological pace of business.

We are also using technology very aggressively to help businesses, especially the rural, the new-to-export and the minorityowned companies, to help them reduce the costs of investigating

markets. We are using video conferencing very aggressively. We

are using push technology to get trade information and research directly to their computers.

We set up a virtual trade show where companies can save on

travel costs and market investigation costs by going to our virtual

trade hall and developing a virtual trade booth in our virtual trade

show.

We are also using web casting very aggressively, developing videos on market opportunities in Europe, in China, NAFTA countries, among others so far. This is available on the web through our

website global speed.com so companies can get information and research directly through our website.

Innovation is also our current priority, modernizing what we do.

We are well deployed. We are well managed. We are well operated.

Now we also need to be modern thinking and fast thinking and

fleet footed. So we are using technology and innovating, developing

new tools and services to help companies export. We will be ending

our pilots next April with our 20th year anniversary. We will be

rolling out a whole new set of products and services for companies

that will meet their needs in the new millennium.

I thank you for the time to talk about what the Commercial

Service, the USEACs have done in partnership to help companies.

We are proud of what we have done. We know we need to continue

to better ourselves. And I am certainly able and willing to answer

any questions you might have. Thank you.

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Chairman MANZULLO. Thank you for your testimony. We will

enter your complete statement and all statements of the other witnesses into the record.

[Ms. Marquez’ statement may be found in the appendix.]

Chairman MANZULLO. Our next witness is Joseph Sachs, who is

the Director of the U.S. Export Assistance Center located in Long

Beach, California. Mr. Sachs has been director there since it

opened in 1993. The Long Beach USEAC is one of the four original

USEACs and brings together staff from the SBA, Department of

Commerce, Ex-Im Bank and the Agency for International Development.

Prior to heading the USEAC in Long Beach, Joe spent over 22

years with the SBA working in both in SBA’s Washington headquarters and the LA district office. He began his career with the

SBA in 1971 as a Federal Management intern.

Joe, we look forward to your testimony.

STATEMENT OF JOSEPH S. SACHS, DIRECTOR, U.S. EXPORT ASSISTANCE CENTER, LONG BEACH, CALIFORNIA, REPRESENTING THE SMALL BUSINESS ADMINISTRATION

Mr. SACHS. Thank you, sir.

Good afternoon, Mr. Chairman. Thank you for inviting me here

today to speak about the U.S. Export Assistance Centers, the recent GAO report on the USEACs and particularly our newest export development program, the Export Trade Assistance Partnership, the E–TAP program. My name is Joseph Sachs, and I have

been the director of USEAC in Long Beach since the USEAC policy

began there in January of 1994.

I would like to extend personal regards to Representative

Napolitano whose office we have worked with on a regular basis for

at least 4 years now.

The General Accounting Office report mentioned E–TAP as a

‘‘promising new program.’’ we certainly agree. That is why we are

attempting to expand the program on a national basis.

The concept is very simple: Target small businesses who are

ready to export but have not done any actual exporting. And, in

specific instances, we might even allow a company that has done

one or two exports to participate, teach them how to do it, hold

their hands while they do, follow up with a trade show or a trade

event overseas, and then support them with the financing that is

necessary when the overseas orders begin to come in. We refer to

this as the SBA export continuum—education, technical assistance,

risk management and financing. But the key to E–TAP’s success is

the commitment of SBA and its partners to continuously monitor

throughout the entire process.

Typically, programs for new-to-export companies offer a series of

seminars to help educate small firms on the various aspects of exporting. Most of these programs either fall short of success or, more

commonly, cannot measure their success due to little, if any, followup after the company completes the seminar. The E–TAP program

is different in that it ensures mentoring of the E–TAP participants

to ensure that as they go through the process they become export

ready.

11

The success of this program is in its simplicity. Resource partners offer information and training to their respective areas of expertise. Another difference E–TAP offers is that, working as a

group, the resource partners are more effective by being able to

offer seamless delivery and mentoring services, something too timeconsuming to offer separately.

We began this program about 5 years ago in Seattle as an SBA

program with the district office in Seattle and a local Small Business Development Company participating. Building on that success, we introduced the program into the USEACs as they were

opened. We found that the USEACs were ideal locations for the

program, because the co-located Federal partners were already on

board and most USEACs are located where there are SBDCs capable of offering high-quality counseling services and new—and specifically, too, new-to-export companies.

Our participation and location in the USEACs also afforded us

regular access to other partners well suited for the program. This

includes SBA’s service core of retired executives, freight forwarders, international attorneys, insurance brokers, the World

Trade Center Association, international trade associations and the

District Export Councils of the Department of Commerce.

Although each of these groups came to the program with their

own distinct goals and agendas, each has found the program beneficial. The success of each E–TAP graduating company is a success

for which each service provider can justifiably claim credit.

Despite limited funding for E–TAP, SBA has been working to expand the program nationwide. This year active E–TAP programs

are operating in almost half of the 19 USEACs, representing over

230 companies, getting export support as participants in the E–

TAP program.

SBA’s participation as a partner at all 19 USEACs has afforded

SBA an improved environment to deliver our trade finance services. Volume and the export working capital program has grown

from 79 loans worth $28 million in 1994 to 412 loans worth $159

million in 1998, a growth in loan portfolios size of over 450 percent.

This represents an estimated $350 million supported by this program in export sales volume.

The export working capital program is also one of the best performing finance programs at SBA. The overall charge-off rate during this period is less than 1 percent. We are continuing to improve

the program and are developing new, more efficient finance products to meet the evolving needs of the small business community.

Because small businesses continue to be the fastest growing sector for U.S. Exports, SBA must and will continue to adapt to meet

small business needs.

Attached to my written testimony is a more detailed description

of the E–TAP program and a success story which I think you would

enjoy reading. A woman-owned business, a graduate of the E–TAP

program in Long Beach, was counseled by the Department of Commerce and by SBA, got an SBA loan, which they completely paid

off, and is back now looking for a second loan.

I thank you for the opportunity to testify here today, and I would

be happy to respond to any questions you may have.

Chairman MANZULLO. Thank you very much.

12

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

Chairman MANZULLO. We welcome Congressman Gonzalez and

Congresswoman Napolitano. Good to have you here this afternoon.

Let me ask a couple of questions. I want to refer first to the GAO

report.

First of all, I want to thank you all for your statements. You will

notice that even though we have two auditing investigative agencies here, the issue is about coordination and outreach. It certainly

doesn’t go beyond that and I don’t want anybody to get the opinion

that because the GAO and the OIG here that it is anything other

than trying to make USEAC more efficient than what it is. That

certainly is our goal with all Federal programs, and I want to

thank you all here for your efforts on it.

In the GAO report, it talks about USEACs struggling with assisting enterprises that are not yet ready to export. It then makes reference to the program developed by the SBA, which is E–TAP. Yet

the E–TAP program mentions that it helps small businesses that

are ready to export. What do we have here? Is E–TAP working

with companies that are ready to export or just inquiring about

whether or not they should even get involved in exports?

Maybe, Mr. Sachs, that would be your question.

Mr. SACHS. Okay. I think that what has happened is the E–TAP

program has evolved over time; and I think because of the mission

of the USEACs to focus our attention on ready-to-export companies,

at least to date, I think that is what has happened with E–TAP.

We have now identified companies who are successful domestically.

We are trying to introduce them into the export marketplace, and

so those are the companies that we actively recruit. But I wouldn’t

say there is any specific prohibition against another company coming into the program.

Chairman MANZULLO. I am not talking about prohibition. I am

talking about outreach. Did you have a response to that, Mr. Nelson?

Mr. NELSON. Go ahead with your question. Maybe——

Chairman MANZULLO. I can appreciate what E–TAP is doing, because that is obviously filling a hole that GAO picked up on and

said that it has fitted in very nicely. But my question here is that

the fifth witness chair, if filled by anybody, would be by a person

who is a small manufacturer that either did not receive assistance

at the USEAC or, two, didn’t know about it, which is the biggest

problem; or, three, went to USEAC and was, according to GAO report, referred to an outside agency, ostensibly a private agency.

Does anybody want to comment on that?

Mr. SACHS. If I may.

Chairman MANZULLO. Sure.

Mr. SACHS. We have agreements with all kinds of different organizations. There are approximately 138 different entities in southern California involved in export counseling. Organizations like

SCORE, the Small Business Development Centers, the Ports of

Long Beach and Los Angeles. Again, I am speaking about my particular USEAC.

Chairman MANZULLO. Sure.

Mr. SACHS. The World Trade Center Associations, and others

mentioned earlier, have been invited and have come into our

13

USEAC to counsel people who are not ‘‘export ready.’’ and, in many

instances, those people have received counseling from those entities—which happen to be in the same building, by the way, that

is a big plus—that has resulted in them becoming export ready.

Chairman MANZULLO. Are those feeder groups, Mr. Sachs?

Mr. SACHS. That is correct. And they are right there in our office

with us. We do not turn anyone away.

Chairman MANZULLO. I wasn’t suggesting that.

I know we have experienced this problem in our own office. We

have a large manufacturing base. We brought in Counsels General

from different countries to talk about exporting possibilities. And

we send out a thousand letters to different businesses and you get

a 1 or 2 percent response. Yet you end up with a C-minus.

Could somebody remove the paper covering the report card chart

so we can see all right at the bottom where it says USEAC marketing?

Would you want to comment on that, Ms. Marquez?

Ms. MARQUEZ. Yes. Let us see. And I guess I will talk about also

what is export ready. Because——

Chairman MANZULLO. If you could move closer to the mike, I

would appreciate it.

Ms. MARQUEZ. Yes. Right.

Export ready we envision is a company that has a CEO that is

committed to wanting to export, that has a viable business, that

has financial statements, viabilities, some couple of years in practice as a business. Those that don’t even reach that level who are

so young that they may not survive exporting are the ones that are

often referred to the SBDCs and others for basic business counseling and basic business strength and development.

At that point when you have a company with a CEO that is committed with a couple of years in business and they are actually a

viable company, that is export ready. Now, most companies we

know may be export ready, but they are not exporting. They don’t

think about it. They don’t know about it. They don’t appreciate the

opportunity.

Chairman MANZULLO. That is a different group, right.

Ms. MARQUEZ. That is most of the companies. That is—our problem is that fewer than 5 percent of U.S. Companies are exporting.

You know, we pull our hair out every day to figure out how can

we get them to think about the incredible opportunities that exist

overseas. Ninety-six percent of the world’s market is overseas. They

are clamoring for our companies in markets overseas. I have been

to Brazil, to Chile, to Africa, to Europe. They are clamoring for U.S.

Companies, but U.S. Companies aren’t there.

Because the American economy is so strong, many companies

don’t feel the need or the desire to venture out overseas. Others

don’t have—others are afraid of or don’t want to deal with other

cultures and other languages. So it is our task to try to promote

the opportunities that are overseas and then to make it clear how

easy it can be to export and that we are available to help them.

That is our basic marketing.

Our offices, of course, conduct hundreds and hundreds of seminars every year across the country on all sorts of products from

14

basic ‘‘do you want to export’’ to ‘‘do you want to export to China,’’

which is for the strong of will and the very strong of spirit.

And we issued press releases. We worked with partners. But we

can’t——

Chairman MANZULLO. Okay. I am going to wind up my questions

here. Where it talks about marketing campaign in the document

that was just removed, it says, in order to produce an effective national marketing strategy campaign, additional resources are needed. That is not going to be forthcoming.

Ms. MARQUEZ. Right.

Chairman MANZULLO. I would like our office to get something

from your office, within 1 or 2 months, just an outline of how you

are going to reach these people without additional resources.

Ms. MARQUEZ. That is our challenge. That is our challenge. We

spend the day providing counseling to businesses, and we offer the

seminars. We issue the press releases. We have performance measures about expanding the client base, so our trade specialists have

the motivation to go out and get new clients.

Chairman MANZULLO. I understand that. I guess the point I am

trying to make is that you may not be able to rise above a C-minus

level. Because when our congressional office tries to reach out to

companies to get them involved in exports, it is very, very difficult

to get a half decent response. Because you get a letter saying I am

from the government, I am here to help you, and most small——

Ms. MARQUEZ. It is true.

Chairman MANZULLO [continuing]. Businesses will run the opposite direction. I am really open for anything innovative, because I

am sure you have the same frustration. We have done press releases. We have sent individual letters. We have done a lot of telephone contact, knowing companies are involved in manufacturing,

knowing that they have a product that they may be able to sell

overseas, and yet we can’t bring them into the fold exporting.

So don’t feel bad about it. We are experiencing the same problem

as you, and we look forward to any type of suggestion to fill that.

Ms. MARQUEZ. We wrack our brains, and we are—we have the

rural export initiative that is targeting—so targeting is one good

way—targeting resources to at least get certain sectors out. Rural

exporters, minority exports are teams that have industry sector

specializations focused on certain industry sectors and use databases of companies in those industries to target mailings for those.

So we are trying that. We are using technology, as I said. When

you use the web, the web casting is a great way to go.

Chairman MANZULLO. Keep it up, somewhere along the line the

hard work will pay off. Thank you.

Mrs. McCarthy.

Mrs. MCCARTHY. Thank you, Mr. Chairman.

It is always interesting to see when a program has started,

which is actually only a few years ago, and then to read the testimony and see how far it has actually gone. As with anything, you

have to improve, always.

My question is to Mr. Sachs. It is my understanding that there

is the potential to compete for capital financing as we always—we

are always competing around here for money, too—between the

SBA and the Ex-Im bank. How is the SBA and the Ex-Im bank

15

working together to avoid the overlapping of services and harmonize their programs?

Mr. SACHS. Harmonization agreement was part of the original

concept of the USEAC, and basically we use the SBA’s legislative

authority for ceilings on its loans, which is $750,000. And what

happens is, if it is $750,000 or less and it is an export-ready company, it comes to SBA; and if it is above that threshold, it goes to

Ex-Im bank. Since we are all in Long Beach together, it is just a

question of walking the client down the hall.

Now in our territory, in southern California, this has worked out

pretty well. But Ex-Im bank has a delegated lender program, and

many of those lenders have been participants in that program long

before the establishment of the USEACs. And so, therefore, Ex-Im

still allows those lenders to make smaller loans.

I don’t see us as competitors. I see us as partners. And because

of that working relationship, I think we have been very successful.

We have done a lot of loans in our USEAC.

Mrs. MCCARTHY. Thank you.

Chairman MANZULLO. Mr. Gonzalez.

Mr. GONZALEZ. The question is to Mr. Sachs, and it is kind of

just a practical one. Let us say that I am a resident of Long Beach

and I want to get into the import business, how would I know

about you?

Mr. SACHS. That is a good question.

Mr. GONZALEZ. In the export business.

Mr. SACHS. I notice the rating we received with respect to marketing our programs—there are approximately 20 of us on a regular basis in our USEAC, and we have a huge territory to cover.

For SBA I cover four States. The Department of Commerce is scattered all throughout that same territory basically, and Ex-Im

bank’s people are responsible for 12 States. So a lot of us are on

the road all the time doing the best we can to promote the programs.

But we don’t have a budget specifically targeted at marketing,

and we rely on each of the agencies providing us with literature

and appropriate information that we can pass out at seminars and

workshops. I have spent a lot of time speaking on the media, radio,

television and even in the papers in the LA area, and every time

I do one of those appearances, we do generate between 10 and 25

calls. And so I think we are doing the best job we can under the

circumstances.

Mr. GONZALEZ. I am from San Antonio, so if I was a small business person, and there is a lot of export business right now developing in San Antonio for all the reasons, the first thing I would do

is—the city would have a department on international trade that

might be able to assist me. There may be the private sector free

trade alliance. We have an organization. We have an international

center, and we even have some development in Kelly Air Force

Base as we redeveloped that.

But we also have all the Chambers of Commerce, all of these

groups that I am just—throwing them out for examples. Do you all

have consistent contact with these individuals so that if I have contacted any of them—and for a lot of them it is just common sense

on where to go would they be able to tell me about your services?

16

Mr. SACHS. Absolutely. I mentioned earlier there are about 138

different entities in southern California. I included in that the

Chambers of Commerce. Even Chambers of Commerce for specific

countries are part of that.

We have made contact with anyone and everyone that we have

felt would be able to help impact what we are trying to do for

American businesses. And many of them may not be regular participants at the USEAC physically, but they are out there promoting our programs. We provide them with the literature, the

forms, the information about who we are and what we do. And we

always appear at seminars and workshops that those organizations

put on. So I do think we have the benefit of those organizations as

partners in what we are trying to accomplish.

Mr. GONZALEZ. Yes, ma’am.

Ms. MARQUEZ. We partner very, very closely with all of those organizations in the Commercial Service as well, our partners in the

USEAC. We have MOUs with them, in order to complement each

others’ services. We try not to duplicate, so often a local Chamber

of Commerce provides one certain kind of service but not the kind

of service that we might provide, and so it is a very complementary

relationship.

We are always trying to fill in the gap with all of those partners,

and this happens across the country. You will often ask those partners do they know about the USEACs being there, and they do.

And as a matter of fact, if you really—the only global network that

exists is the Commercial Services, is 140 offices overseas.

None of those offices are going to have that source of original primary research on market information, potential trade contacts, the

market climate, the investment climate. So having that global network around the world is an added value that no one offers to the

small business exporters at an affordable price.

And in San Antonio we work with the Free Trade Alliance, with

the Chambers and others and, of course, now have recently hired

our new person for our office there, because it had been vacant for

several months.

Mr. SACHS. If I can just mention——

Mr. GONZALEZ. Yes, sir.

Mr. SACHS. All of my comments in answering your question were

as the USEAC director, as opposed to SBA, and it is absolutely correct that all of the participating agencies and many of our partners

are together trying to accomplish the same task.

Mr. GONZALEZ. Because James Harmon was in San Antonio

about 3 weeks ago and speaking to the Chambers and going out to

Kelly Air Force Base and the international center and a big space

out there on the former Air Force base soon to be—is going to be

dedicated to the export business where we are going to have all

sorts of individuals coming in there, and President Harmon at that

point indicated this would be a good place to have some sort of

presence, as far as the Export Import Bank. Of course, I guess I

will be in touch with your new person in exploring all the possibilities.

Thank you very much.

Chairman MANZULLO. Mrs. Napolitano.

Ms. NAPOLITANO. Thank you, Mr. Chairman.

17

I have a lot of questions, but I think I will just direct myself to

Mr. Sachs, if anybody can come on board.

Part of my problem has been, and you well know that in California I had to take my Chambers and business people over to the

one-stop shop and nobody had even heard, and I was only 20 minutes away. And this was several years ago. And that was not to say

that you were doing your job, but it was your personnel at the time

was better used in other areas, I would imagine.

Long Beach is such a big area, and the Port requires so much

assistance. So I have, as you well know, embarked on trade conferences. Well, that is one area where—the possibility of expanding

the different agencies and what they do and how you are working

together to disseminate that information to businesses who are either interested in exporting or who are exporting want to expand

their market.

And that is what we have found out. It isn’t just through the

Chambers but rather going out into the community and asking people—here are people who represent these agencies. Come and talk

to them if you are interested. And certainly you have a lot of loopde-loos, but, in the end, you get a lot of people who are extremely

ready and able, but they don’t know where to go. So those are some

of the things we are doing in our area.

But one of the things that comes to mind as I am hearing you

testify is who your partners are, what is the one-stop shop doing

or any of your agencies doing to communicate with the State Office

of trade and commerce? Lon Hatamiya has long been wanting to

work since he got appointed to be able to assist in being able to

provide information to the businesses that they deal with, whether

it is the trade missions, whether it is information or being partners

in the one-stop, to be able to further—you know.

Mr. SACHS. As I mentioned earlier, we are in the World Trade

Center building, which is a superb location.

Ms. NAPOLITANO. I know where you were.

Mr. SACHS. The State of California’s Export Promotion Office and

the State of California’s Export Finance Office (who we do co-guarantees with to double the size of the loan) are all located in the

same building. And we are constantly interacting with them. In

fact, I don’t think we do——

Ms. NAPOLITANO. Do you have a MOU with the State?

Mr. SACHS. I don’t know if there is a written MOU, but they

have been working very closely with us since the very beginning.

Ms. NAPOLITANO. Okay. One of the things that we found out during the trade hearings that we held was the ability to bring in the

trade representatives from the different countries, where our State

representatives were helping business. When they come to the

State, then we wanted them to do briefings or debriefings, if you

will, workshops, for business.

Mr. SACHS. We have always been there with them.

Ms. NAPOLITANO. But we never hear about them. So how can we

interact if we don’t know what is going on? And, unfortunately,

that marketing—you may have a small budget, but maybe on

your—I am assuming you are on the Internet, on the Net and you

can post that information so we then can tell our Chambers or our

businesses, look there, that is where you will find the info. I have

18

no problem putting it in my mailers to my businesses to say this

is where you should look for that information.

Ms. MARQUEZ. May I add a couple of things?

Ms. NAPOLITANO. Certainly.

Ms. MARQUEZ. We do have a MOU with the State of California.

In fact, we worked with the State of California and Lon Hatamiya’s

organization to start Bay Trade, for example, and LA Trade. So we

are in a very close working relationship with them on a number of

activities. And, of course, the information on whether it be trade

opportunities, whether it is where the office closest to you has information available on the Internet, and, indeed, even direct market research and soon the Commercial Service is developing a new

website that will be transactional, where a business can come on

and order research on-line and pay for it on-line and have it delivered automatically to them to make it as easy as possible for them.

All of that market research will be available, much of it free, and

then when you want to get customized for that company’s product

in a particular market that requires customized research, they will

be paying a small fee for it.

Ms. NAPOLITANO. Is this true for all of the States?

Ms. MARQUEZ. All States. All of our sites are on the Net, and if

you hit our website you can get access to all of our U.S. offices and

all the international offices and all of their staff and all of their

schedules of events. Every office has posted all of the schedules of

the seminars or the special activities with partners or alone that

are scheduled for that office for the year. So all of that is posted

on the website.

Ms. NAPOLITANO. Then the other question would be whether or

not you are working at all with the education institutions to be

able to help those that are working in the area of business and

trade. Sometimes they do it together, sometimes they do international separate, but I know the community colleges have an extensive—they have—I don’t know if it is 12 now centers that deal

strictly with international training for small business.

To me that would be an ideal way to be able to market what you

are doing and be able to disseminate the information through not

only a class but also in their brochures to be able to give information to the general business public.

Ms. MARQUEZ. Yes. And in the various seminars that we have,

in the E–TAP program that is conducted and the Global Diversity

Initiative program that is conducted, we bring in other partners,

including university experts, to talk about significant products.

Ms. NAPOLITANO. Internet and the community colleges, are they

specifically doing that?

Ms. MARQUEZ. Community colleges——

Mr. SACHS. There are three CITDs in our general area.

Ms. NAPOLITANO. CITDs?

Mr. SACHS. Centers for international trade, funded by the community college, chancellor’s office, and they are all an integral part

of everything that we do, so they do know about our organizations;

and on many occasions we have been out speaking jointly with

them through some particular audience.

Ms. NAPOLITANO. Okay. Because we did a conference with Ed

Net at Long Beach State specifically on international trade, and we

19

brought some of the agencies in to talk to them. And their perspective is deal with us so that we can then disseminate the information. We would be glad to help you do that.

But I don’t know whether anybody is doing any outreach to them

to be able to include them, so they can get that information out to

the——

Chairman MANZULLO. Would you yield for a question?

Ms. NAPOLITANO. Certainly.

Chairman MANZULLO. When you had that seminar, did you make

a mailing to area manufacturers and businesses that you thought

would be interested in attending that seminar?

Ms. NAPOLITANO. Our international trade is our fifth one already, so we have established a long line of mailing. Not only that,

but utilities mail for me. The people that they know that are traded individuals, companies as well as the Chambers and utilities, includes gas, water, electric and the Chambers, and then we also

have ties in with international groups that mail to their international groups.

Chairman MANZULLO. What kind of response do you have?

Ms. NAPOLITANO. I was laughing when you said 2 percent. We

must mail out 40,000, and we probably get maybe 300, 400 people.

But those are the ones who are really interested in doing the

trades.

Chairman MANZULLO. But I think that really goes to the problems in marketing. I am sorry, I didn’t mean to interrupt.

Ms. NAPOLITANO. No. But then you keep reaching new folks. New

people come in, and they learn, and the word is starting to get out,

and then they are able to communicate with the people that went

to the conference. And they are able to share information about

whether you can get the financing and all.

Chairman MANZULLO. One of the problems is the number of

pieces of literature a small business person gets in the mail. I was

raised in small business, in the grocery store and the restaurant

business. Even in a nonpolitical year, how many pieces of literature

does a small business person get? How do we actually get the small

business person to open the letter? When I go through my mail, if

it is not first class, I pitch it.

Ms. NAPOLITANO. That is true.

Chairman MANZULLO. Carolyn is nodding her head up here, too.

If it has a first class stamp on it, then I will open it up. They are

all nodding, also. Because I am looking at this C-minus over here,

and that is why I am saying that I don’t know if you can go above

the C minus. Because the big problem that we have in this country

is that there is a need for the small manufacturers to export, but

how do you get them? How do you get them into making that one

phone call to the Chamber in Mr. Sachs’ area so they can make the

link to the USEAC? How do you do that, Grace?

Ms. NAPOLITANO. It takes the word of mouth. It takes the people

who are interested and know who has a product or a service that

is saleable, that is exportable. Then to do the outreach, whether it

is the Chamber member, whether it is a member of the community

or the business community that understands that. And we have

done all of that. What helps the most is the Chamber themselves.

When they send out their notices through their blast fax, they can

20

send out 500 in one whack and be able to attract attention to what

specific program they are offering that they can tap into. There are

many different ways.

But you are right. And I have approached business people, why

don’t you come to a seminar? I am sorry, I have payroll on that

day. I mean, it is just—I am told excuses. But many of them are

kicking themselves, because people they know started working,

have been—gone to branch out and all of a sudden they are saying

I could have been there.

So this is a word of mouth. That we know. But if we refer them,

we want to be sure they are going to get the service and they are

not turned off. That is another problem sometimes. Maybe the end

of year is a little tired or maybe they just do not communicate well

because the person does not express themselves adequately in the

English language so they sometimes have a little language problem.

But those people are just as adequate. In California, we have got

such potential, and we are still trying, pulling them in, trying to

get them to——

Chairman MANZULLO. Would you yield further?

Ms. NAPOLITANO. Please.

Chairman MANZULLO. One of the things that we have done on

our website through the congressional office, we put a link on trade

to the ITA. And, of course, the ITA has more links. That is one of

the things that Members of Congress can do. My office gets about

13,000 hits a month on my Web page. Most of them are for visitors’

information from Washington. And I don’t know if we have been

able to quantify the number of hits where people will actually hit

the trade on it.

Ms. NAPOLITANO. No, we are too busy.

Chairman MANZULLO. That is about it. But there is a need, and

it is something to think about on how to get the initial interest of

the small business person.

I have been looking at some different software, and I think the

SBA uses some software where there is a self-evaluation that the

small businessperson goes through to even determine if they want

to get involved in exporting. Most small businesspeople are terrified because they don’t want to be paid in vodka or diamonds or

something else. They want to be able to get the cash out of it. How

do you overcome the fear factor, which I think is what separates

our small manufacturers from exporting? Anybody?

Ms. NAPOLITANO. Would you yield for a second?

Chairman MANZULLO. I am sorry.

Ms. NAPOLITANO. I just wanted to suggest that maybe all the

agencies that deal in trade produce a video, an educational video,

for business. Very simple, but using businesses that have had success in being able to work with them. It has worked great for some

of my other entities; and I would hope this would address the problem that you are talking about that people could see an individual,

that real person who has succeeded.

Ms. MARQUEZ. It is available, and I would invite you to look on

the Web at globalspeak.com. That is one word, ‘‘globalspeak,’’ and

on there we have a running video: ‘‘talk to the Experts on Exporting.’’ And these are members of the District Export Councils that

21

you may know. These are companies. These are companies, heads

of companies. When you are an exporter, what can I say, you become an expert in the problem. Not academic or government. These

are companies that talk about different aspects of exporting. That

certainly is available on the Internet now as we speak. It is a

stream-lined constantly as part of that webcasting that I was talking to you about that is available.

Ms. NAPOLITANO. Is it possible that this Committee could get

copies of that so that we could get it and have it passed on cable

or public access? It is worth a shot.

Ms. MARQUEZ. Yes, we can certainly get copies of that videotape

to you. And then this issue of reaching companies and how to encourage them to export, that is what our counseling is about. Once

we get someone in who is interested, is trying to allay their fears

or at least to help them think through what are the appropriate

markets for them. You don’t encourage them to go to Brazil right

away. You start with Canada, a nice English-speaking, close-by

market and then you graduate to how to advise them on where to

go, where their product is most appropriately exported.

The easing into exporting is what our Trade Specialists can do

to counseling those companies first. Of course, we have to get them

in the door and through the partnering with the various chambers

of commerce.

I spoke to the Vice President of the U.S. Chamber of Commerce.

He has polled his own organization of thousands—how many do

they have—7, 10, 13,000 company members and even of his own

membership of the U.S. Chamber. He has a minuscule percentage

that was interested in their international trade Subcommittee of

the U.S. Chamber. So we are not alone in our struggle.

But it is a conundrum, and this is why Secretary of Commerce

William Daley had begun his Trade Education Initiative some

months ago to talk about the value and importance of trade to communities across the country, and we will continue this to the Midwest and the Southwest leading up to WTO in Seattle in December.

Chairman MANZULLO. Is there anything afoot on any reorganization in Commerce that would change the hub and spoke system

now of the Export Assistance Centers being the spoke and the

USEACs being the hub? Is there anything in the air on that?

Ms. MARQUEZ. We certainly have looked at the GAO study, and

we are always looking at where the appropriate places are to have

our offices, the USEACs. We are working to strengthen them.

Chairman MANZULLO. Allow them to keep their semiautonomy

from Washington?

Ms. MARQUEZ. The spokes or the hubs?

Chairman MANZULLO. I guess the hub would be the USEACs and

then the spokes would be, for example, the assistance center in

Rockford, Illinois.

Ms. MARQUEZ. Yes.

Chairman MANZULLO. There is no move afoot to change that

strategy?

Ms. MARQUEZ. Well, we are always reviewing the operations of

our offices for their performance and their effectiveness for the investment of the Federal dollars. And those that are producing and

that are working well with the customers and the markets are

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there. They are going to stay as long as we have funding to support

them. We are always looking to become more effective. The

USEACs is a young——

Chairman MANZULLO. You left a huge hole there. I guess what

I am trying to impress upon you is the fact that the regional assistance centers such as the one we have in Rockford, are critical. If

there is any move to centralize everything back in Washington this

Congress is going to raise hell from the rafters.

Ms. MARQUEZ. That is not how we would operate. It would never

occur to us to think about this. In fact, we are always trying to decentralize our services and our support service. Washington is not

the place that people come to do exporting and trade. It is in the

communities. That is where we need to be, is where the businesses

are. This is part of our operation. It is part of our credo, and it is

part of our values. Those offices are going to stay out there or that

is it. Nothing is going to be coming back to Washington. That

wouldn’t make sense for any company, and that is not what we believe in. So certainly not under my watch will we—are we thinking

about that.

Chairman MANZULLO. I ran into a person who is involved in exporting, but it is just a minor element of his business. He is a small

manufacturer. I visited over 200 manufacturers in the 16th District

of Illinois. We have somewhere between 1,500 and 1,700 manufacturers in the 16th District. We are not even sure of the exact number because they spring up overnight, and sometimes they will

grow eight, tenfold within a year because of the ingenuity of small

businesses.

He said, Don, I would like to get involved in more exports. And

I said, well, we have an Export Assistance Center in Rockford. Get

a hold of James Meid, who is one of the finest officers in the country.

And his question was just unbelievable. He said, what does the

Department of Commerce have to do with exporting? I would consider this man to be a sophisticated businessperson. And I gave

him Mied’s number, and I am sure he followed up on it.

But the question was so basic that you have to ask what is it

about our approach corporately to the small businesspeople that

have made them really shy away from getting involved in exports?

We are all in this together. Because I want my constituents, obviously, to experience international growth, and you want the program into which you have all poured your hearts and souls to be

effective.

If you don’t have an answer to that question, don’t feel bad, because I have been groping with that for about 7 years myself. I

guess that is the question we have to answer, isn’t it? And once we

are able to answer that question, then maybe we will be able to do

some other things. But I just want to thank you all.

Mr. Chabot, did you have any questions you wanted to ask?

Mr. CHABOT. Well, if this has been addressed already, I apologize.

Chairman MANZULLO. Go ahead, please.

Mr. CHABOT. You may have already addressed it, but it is my understanding that there are about 19 Federal agencies now that are

involved in delivering export promotion and trade finance assistVerDate 27-JAN-2000 15:11 Feb 07, 2000 Jkt 010199 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 E:\HEARINGS\60563P1.XXX txed02 PsN: txed02
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ance and those types of things. And let me play devil’s advocate

here but not too much the devil’s advocate, because it is pretty

close to what I believe.

One can make a pretty strong argument that the government

should not be involved in this to the degree that we are, that we

ought to have the private sector, that we ought to have chambers

of commerce and trade associations and the businesses that are directly benefiting that should pay for this and should organize it because it is in their best interest to do so.

Whenever the government does anything, we don’t do it nearly

as efficiently as the private sector would because we become too bureaucratic. And it is my belief on a whole lot of levels, not just this.

I don’t think the Federal Government ought to be paying for art,

for example, in the National Endowment for the Arts, National Endowment for the Humanities and all of these things. And so I think

folks should do that privately and that sort of thing. So that is basically my philosophy here.

Convince me otherwise that if you all—no offense or anything,

but if you all didn’t exist or those 19 agencies didn’t exist, that the

private sector would not basically do what you all are doing because it would be in their interest to do so. If you could address

that.

Ms. MARQUEZ. I will give it a small shot.

The private sector is providing a lot of these services to companies now. You will find companies such as Price Waterhouse, Arthur Andersen and other export counseling companies that provide

fabulously good advice to companies on how to export, how to do

it. They often do it for a $25,000 a month retainer fee. And this

is the problem. It is which companies are we trying to reach? The

Commercial Service, the USEACs are focused on the small- and

medium-sized companies of the United States because we believe

they are the engine of growth of the United States. They are the

job creators. That is our future—that is our present, that is our future, and those companies are the ones that we want to get into

exporting more than anything else.

I think that if we look at our trade data we will probably find

that one quarter of it or more is Boeing alone, and maybe half of

it is Boeing and maybe Lockheed and Grumman and the others.

What we need to do is diversify the group of companies that are

exporting from the United States and to make it affordable for

them to do so. They cannot afford—the small companies cannot afford $25,000. They cannot afford $1,000 to pay for information on

exporting.

So there needs to be an affordable, easy-access service to the

small- and medium-sized companies. Because if they don’t have it,

it is not that they are going to go elsewhere. Because there is not

any other that is more affordable. It is just that they are not going

to export because they don’t have to export because the United

States economy is fine, at least it is for now. And the economy

around Rockford, Illinois, they are making a nice living. Why

should they bother going to France and exporting?

That is the issue. We found it in our national interest—Congress

found it in the national interest to encourage small- and mediumsized companies, and there was a gap there. I believe that that is

24

why we exist, to serve that gap, an affordable service to those companies. Because if they don’t access us, they simply will not be exporting.

And we do operate on a fee-paid basis so this is not all free services that are given. So there is a revolving fund that exists where

fees are charged to just cover the costs, cost recovery only for this

kind of service to businesses. That is why I said earlier our mandate is only to increase the number of SMEs that are exporting because there are too few and the base of companies that are exporting is not diverse enough.

The companies that are medium and large, they can afford to pay

the counselors and the private sector consultants that are there,

but others cannot.

The other one is the global network. It is through the U.S. Embassies and Consulates where most of our offices are. Those are

preexisting operations. We have our Commercial Officers at 140

countries around the world that represent 95 percent of the markets for U.S. Businesses. So we are there, on the ground, providing,

as I said, this basic primary research on contacts, on markets, on

environments, et cetera.

You often—in fact, you most often will find that in the private

sector they take that basic research that we generate for often free

for the companies, and they repackage it and then charge many,

many dollars to the companies that can pay for it. Again, we don’t

want to do that. We want to get companies exporting, and so we

provide low-cost, easy-access service but only to the small- and medium-sized exporters.

Mr. CHABOT. Thank you, and I think that is a very good answer.

I would—just to let you know my feelings about not just this program but most of what the government does, other than providing

defense and some other things that I could name. I don’t think anything is free, really. Because, yes, we may not be charging, but

somebody is paying for it, and that is the taxpayers. And if it is

in business’ best interest ultimately as U.S. Business to export,

they will find a way to export. And I don’t think the government

ought to be picking winners and losers.

And I just think because the government has gotten so involved

in so many areas over the years that the level of taxation on individuals and businesses is much higher than it otherwise would be,

and if we got out of their way then they will do what is in their

best interest, for the most part. We do need environmental laws

and certain laws to make sure that they are not harming society,

that they are paying the taxes they owe, et cetera. But this certainly is not as bad or as—well, it is not as bad as many other

things that the government does. And I think certainly your intentions are right, and as long as you are in existence we certainly

want you to do the best job you can, and that is what the purpose

of this hearing is.

Chairman MANZULLO. Will the gentleman yield?

Mr. CHABOT. Certainly, I will yield.

Chairman MANZULLO. I share your same beliefs on keeping government as small as possible. I have been a member for 7 years,

and you and I have served on the same committees since 1995, but

one of the things that I have noticed is that the Department of

25

Commerce really started out as an agency to do a couple of things.

The first was to collect this incredible amount of trade data, because that determined the income that ran the Nation, before the

income tax. So there was this huge amount of trade data that

started to be compiled by the Department of Commerce, and that

is really something that no private sector would even attempt to

gather because it was pretty boring. It is exhaustive. You have to

tie into all these different reporting agencies just to get that material.

And so, as the Department of Commerce evolved, it serves at

finding out things such as import surges to undermine whether any

dumping is occurring. So what has happened during this sometime,

the Europeans began to heavily subsidize their corporations for exporting. So what the United States tried to do was to use the resources that of the Department of Commerce and the SBA to get

out those statistics and the opportunities to export and the tools to

export to the companies so that they would have some basic means

of education within their hands in order to try to educate the rest

of the American public.

Now, I don’t usually make a case for government agencies, but

somebody has to collect the trade data. Somebody has to determine

whether or not dumping had occurred. That is what happened to

one of our companies, Brake Parts of McHenry, whether or not the

Chinese indeed were involved in dumping. As it turned out, they

were, and we got to file an appropriate case on that, but we

couldn’t do that without the tremendous amount of data that Commerce had collected.

So Commerce continues to collect that data. No one put a grade

for effort down there. There should be an A for effort.

What we are all trying to do, Steve, because I know you have

been a part of it, is to expand export opportunities. You have a big

tool and die center in Cincinnati, and we are very much concerned

over the drop in exports on tool and die. What we are all trying

to do is take this massive amount of government data from the national trade database, and convert that so that the companies can

use the information to determine if they can be involved in exports.

Were you done?

Mr. CHABOT. Yes, just reclaiming my time, and I think you make

very good points as well.

Chairman MANZULLO. But it means monitoring. We have the IG

and the GAO. So they are half the team that is up here, so you

can tell that we are trying to place an emphasis on efficiency.

Mr. CHABOT. Thank you for your time, and thank you for what

you do. I think the government is growing too large, and we need

to pare it down, and we haven’t scratched the surface of what we

do.

Chairman MANZULLO. We thank you for spending your afternoon

with us. We thank you for updating us, and we look to another opportunity as the GAO and Inspector General’s Office will continue

to monitor the success that is going on and appreciate your coming

this afternoon. Thank you.

This Subcommittee is adjourned.

[Whereupon, at 3:30 p.m., the Subcommittee was adjourned.]

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