U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

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

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

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

80–952 PDF 2002

S. HRG. 107–586

REPORT OF THE TRADE

PROMOTION COORDINATING COMMITTEE—2001

HEARING

BEFORE THE

COMMITTEE ON

BANKING, HOUSING, AND URBAN AFFAIRS

UNITED STATES SENATE

ONE HUNDRED SEVENTH CONGRESS

FIRST SESSION

ON

THE REPORT ON SECTION 201 OF THE EXPORT PROMOTION ENHANCEMENT ACT OF 1992, TO COORDINATE THE EXPORT PROMOTION AND

FINANCING ACTIVITIES OF THE FEDERAL GOVERNMENT AND TO DEVELOP A GOVERNMENTWIDE STRATEGIC PLAN FOR CARRYING OUT

FEDERAL EXPORT PROMOTION AND FINANCING PROGRAMS

OCTOBER 2, 2001

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

(

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

PAUL S. SARBANES, Maryland, Chairman

CHRISTOPHER J. DODD, Connecticut

TIM JOHNSON, South Dakota

JACK REED, Rhode Island

CHARLES E. SCHUMER, New York

EVAN BAYH, Indiana

ZELL MILLER, Georgia

THOMAS R. CARPER, Delaware

DEBBIE STABENOW, Michigan

JON S. CORZINE, New Jersey

DANIEL K. AKAKA, Hawaii

PHIL GRAMM, Texas

RICHARD C. SHELBY, Alabama

ROBERT F. BENNETT, Utah

WAYNE ALLARD, Colorado

MICHAEL B. ENZI, Wyoming

CHUCK HAGEL, Nebraska

RICK SANTORUM, Pennsylvania

JIM BUNNING, Kentucky

MIKE CRAPO, Idaho

JOHN ENSIGN, Nevada

STEVEN B. HARRIS, Staff Director and Chief Counsel

WAYNE A. ABERNATHY, Republican Staff Director

MARTIN J. GRUENBERG, Senior Counsel

AMY F. DUNATHAN, Republican Senior Professional Staff Member

ADRIENNE B. VANEK, Republican Economist

JOSEPH R. KOLINSKI, Chief Clerk and Computer Systems Administrator

GEORGE E. WHITTLE, Editor

(II)

CONTENTS

TUESDAY, OCTOBER 2, 2001

Page

Opening statement of Chairman Sarbanes ........................................................... 1

Prepared statement .......................................................................................... 23

Opening statements, comments, or prepared statements of:

Senator Miller ................................................................................................... 3

Senator Stabenow ............................................................................................. 18

Senator Enzi ..................................................................................................... 24

WITNESSES

Donald L. Evans, Secretary of Commerce, Chairman, Trade Promotion Coordinating Committee .......................................................................................... 3

Prepared statement .......................................................................................... 24

John E. Robson, Chairman and President, Export-Import Bank of the

United States, Vice Chairman, Trade Promotion Coordinating Committee ... 5

Prepared statement .......................................................................................... 27

Response to written questions of Senator Reed ............................................. 39

Hector V. Barreto, Administrator, U.S. Small Business Administration ........... 7

Prepared statement .......................................................................................... 29

Response to written questions of: ....................................................................

Senator Reed .............................................................................................. 41

Senator Miller ............................................................................................ 42

Peter S. Watson, President and CEO, Overseas Private Investment

Corporation ........................................................................................................... 8

Prepared statement .......................................................................................... 31

Response to written questions of Senator Reed ............................................. 43

Thelma J. Askey, Director, U.S. Trade and Development Agency ...................... 10

Prepared statement .......................................................................................... 35

Response to written questions of Senator Reed ............................................. 45

ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD

An Interim Report to Congress from the Trade Promotion Coordinating Committee on the 2002 National Export Strategy ................................................... 48

(III)

(1)

REPORT OF THE TRADE PROMOTION

COORDINATING COMMITTEE—2001

TUESDAY, OCTOBER 2, 2001

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

The Committee met at 10:25 a.m., in room SD–538 of the Dirksen Senate Office Building, Senator Paul S. Sarbanes (Chairman of

the Committee) presiding.

OPENING STATEMENT OF CHAIRMAN PAUL S. SARBANES

Chairman SARBANES. The Committee will come to order.

As our witnesses I think realize, there is a vote on. It was scheduled for 10 a.m., but it never quite starts on time. And in any

event, I think other Members will be coming in shortly. But I think

we should get underway.

I am very pleased to welcome before the Banking Committee this

morning this panel of distinguished representatives of the Trade

Promotion Coordinating Committee, the TPCC: Don Evans, Secretary of Commerce, who serves as the Chairman of the TPCC;

John Robson, Chairman and President of the Export-Import Bank,

serves as Vice Chairman of the Trade Promotion Coordinating

Committee; Peter Watson, President and CEO, Overseas Private

Investment Corporation, OPIC; Hector Barreto, Administrator of

the SBA, Small Business Administration; and Thelma Askey, Director of the Trade and Development Agency.

The purpose of today’s hearing is to review the preliminary

report of the Trade Promotion Coordinating Committee on its

National Export Strategy and the Coordinating Committee’s plans

for the coming year.

The Trade Promotion Coordinating Committee was established

by the Export Enhancement Act of 1992. As stated in the statute,

its purpose is ‘‘to provide a unifying framework to coordinate the

export promotion and export financing activities of the U.S. Government and to develop a Government-wide strategic plan for

carrying out Federal export promotion and export financing

programs.’’ The statute designates the Secretary of Commerce as

the Chairman of the Coordinating Committee and designated as

members all of the Federal agencies involved in export promotion.

And there is quite a long list of them. We have only some of

them, perhaps the lead, the more relevant ones, at the table.

Well, some of the others are highly relevant, too, so I do not want

to divide us into categories here.

2

The effectiveness of the Trade Promotion Coordinating Committee depends on the leadership it receives from its Chairman and

the other key members. The first Chairman, Secretary of Commerce Ron Brown, working together with Ken Brody, who was then

the Chairman of the Export-Import Bank, provided the initial leadership and energy to get the Coordinating Committee off the

ground and functioning. As a result, the Trade Promotion Coordinating Committee has a significant list of accomplishments it can

point to during its first 8 years. And let me just touch on some of

those very quickly.

First, the establishment of 18 U.S. Export Assistance Centers in

major metropolitan areas around our country, one-stop shops to

provide marketing and trade finance support to local exporters.

Second, improved interagency coordinating of advocacy for U.S.

companies seeking to do business overseas.

Third, a joint Ex-Im Bank–SBA working capital guarantee program for small exporters.

Fourth, a partnership with the National Governors Association to

increase coordination between State and Federal export promotion

efforts.

Fifth, the establishment of offices within the Commerce Department and the U.S. Trade Representative to monitor and enforce

trade agreements.

The legislation which established the Coordinating Committee

required it to propose to the President an annual unified Federal

trade promotion budget that would support its strategic plan. In

1999, the Congress amended the statute to change the delivery

date for the annual National Export Strategy Report to the Congress from September 30 to March 30 in order to allow the TPCC’s

export promotion budget recommendations to be better coordinated

with the development and release of the President’s budget. The report that is being submitted today, in fact, was delayed from earlier this year in order to allow the new Administration time to

focus on the issue.

A report on March 30 with an incoming Administration would

not have given people—in fact, I am not even sure everyone was

in place in their positions, as I look at the witnesses at the table.

Of course, we have a new Administration, a new set of leaders

for the Trade Promotion Coordinating Committee. I simply want to

say that I am very encouraged by the response of Secretary Evans,

the Chairman, and his Under Secretary for International Trade,

Grant Aldonas, by Ex-Im Bank Chairman Robson, the Vice Chairman, and by the other members of the Trade Promotion Coordinating Committee who will testify this morning.

From my initial meetings with each of you earlier this year,

there seems to be an appreciation for the potential of the coordinating committee to bring even greater coherence and a sense of

strategy to the Federal Government’s export promotion effort.

It is my perception that these witnesses and others in the Executive Branch have made this a priority in planning the agenda for

their agencies and I very much look forward to hearing their testimony this morning.

Finally, let me note that the attention of Congress has been

drawn away from its normal agenda because of the tragic events

3

of September 11. It is a measure of the importance that we attach

to the work of the Coordinating Committee that this hearing is

going forward today. In fact, all of the economic reports, it seems

to me, that we are now receiving only emphasize the work of the

Coordinating Committee.

The Los Angeles Times, in an article about 10 days ago, said, and

I quote: ‘‘The world economy is in a fragile state, according to U.S.

trade figures, and is likely to flow further as additional security

measures triggered by last week’s terrorist attacks hinder the flow

of goods and services.’’ The Coordinating Committee may thus have an additional challenge posed to it as it moves ahead with its work. It perhaps may

prove useful in assisting U.S. exporters to cope with the new obstacles to trade that may result from the recent events.

Gentlemen, and lady, we are pleased to have you before the Committee this morning. We look forward to hearing your testimony.

I am going to yield to Senator Miller before we turn to—and then

when we do, I think we will just move right across the panel, from

Secretary Evans, Mr. Robson, Mr. Barreto, Mr. Watson, Ms.

Askey—last, but not least, I hasten to add.

Senator Miller.

COMMENTS OF SENATOR ZELL MILLER

Senator MILLER. Thank you, Mr. Chairman. These witnesses

have waited long enough. I do not have a statement to make at this

time. I may have some questions later on.

As always, I am interested in the level of cooperation between

your agencies and the States as they relate to export promotion.

But I have no statement.

Chairman SARBANES. Thank you very much.

Secretary Evans, we would be happy to hear from you.

STATEMENT OF DONALD L. EVANS

SECRETARY OF COMMERCE

CHAIRMAN, TRADE PROMOTION COORDINATING COMMITTEE

Secretary EVANS. Thank you very much, Mr. Chairman.

Let me begin by saying how much I appreciate our initial meeting some 8 months ago when you called my attention to this very

important responsibility that was one of my important responsibilities, this important initiative.

As I have learned more about it over the past 7 or 8 months, and

worked with my colleagues, I have a great appreciation for your

leadership on the Trade Promotion Coordinating Committee.

Like you said, I think there is great potential here. I think I am

enthusiastic about what this Committee will do in the months and

years ahead. I am delighted to have the chance to be here to report

to you on that.

Chairman Sarbanes—Senator Gramm is not here—but Members

of the Committee, as Chairman of the Trade Promotion Coordinating Committee, TPCC, I am pleased to be here today with my

colleagues to discuss our proposals for increasing exports by providing U.S. companies, especially small- and medium-sized companies, with state-of-the-art export promotion services.

4

My brief remarks will be accompanied by written testimony

which I will submit for the record.

The Trade Promotion Coordinating Committee was created to

help American companies get export information quickly and easily, and we do thank you, Mr. Chairman, and the other Members

of the Committee, for making the TPCC permanent in the Export

Enhancement Act of 1992.

Significant progress has been made. A worldwide export assistance network has been established. A U.S. advocacy center has

been created. And there is extensive trade information available by

the Internet.

We are now in a new century with intense competition. Falling

market shares where commercial opportunities are greatest, and

achieving the unmet export potential of our small firms, compel us

to take a new look at the needs of our customers, as well as at the

best practices of our competitors. Many of these competitors, may

be doing a better job when it comes to getting their small- and medium-sized companies into the markets with greatest potential.

Today, what we are proposing is to use the TPCC as a management tool to reevaluate our export promotion programs from the

ground up through a comprehensive bench-marking exercise. This

study will give us information we need to determine how to ensure

our export promotion services are best in class.

We have a three-part strategy, Mr. Chairman: First, we will assess customer satisfaction. We have commissioned a survey of the

business community, including those who use our export services

and those who do not. And we will meet with ‘‘focus groups’’ to hear

firsthand experiences with our programs.

Second, we will review how the governments of our major competitor countries go about promoting exports. We already know

that many of these governments focus their programs on small

businesses and that they target these initiatives to developing and

emerging countries. The French have a small business initiative

targeted to Eastern Europe. Spain has a plan to get their companies into the Asia-Pacific region. And Canada has targeted South

America for its small business exporters.

A number of countries have closely linked export-and-investment

promotion programs. Additionally, we will look at how the private

sector in the United States and abroad promotes exports.

The final phase of our benchmarking study will be an analysis

and comparison of our programs with other best practices, such as

leveraging the Internet to promote exports. We have a short list

of export promotion processes. Our ultimate goal is to benchmark

each with the best practices we identify so we can target areas for

improvement.

We anticipate providing this Committee with recommendations

next March that can fully be implemented by 2004. We expect

these recommendations will be both strategic and programmatic.

They will address duplications and gaps in our services. And they

will also attempt to leverage services provided by Federal agencies

with the private sector and others.

As this Committee knows, trade is a vital contributor to the economic foundation of our Nation. Exports have fueled our economic

5

growth and support millions of American jobs. Continued expansion of trade is essential to our Nation’s long-term prosperity.

Mr. Chairman, the Trade Promotion Coordinating Committee is

eager to work with you and the other Members to provide worldclass export promotion services so the American business community can take advantage of global opportunities. To do this, we

believe it is critical that our trade promotion agencies know the

needs of our customers, as well as the practices of our competitors,

so we can respond with appropriate programs and initiatives.

We welcome your thoughts and those of your colleagues on the

benchmarking proposals we are presenting today. Thank you, and

I will be happy to answer any questions that you might have.

Thank you, Mr. Chairman.

Chairman SARBANES. Well, thank you very much, Mr. Secretary.

The full statements of all of the witnesses will be included in the

record.

Mr. Robson, we will turn to you.

STATEMENT OF JOHN E. ROBSON

CHAIRMAN AND PRESIDENT

EXPORT–IMPORT BANK OF THE UNITED STATES

VICE CHAIRMAN

TRADE PROMOTION COORDINATING COMMITTEE

Mr. ROBSON. Thank you, Mr. Chairman. It is a pleasure to be

back before you and Senator Miller again.

I too will submit my formal statement for the record and present

orally a brief summary of points that I hope will be relevant to today’s hearing.

First, let me remind everyone, as you have already said, that a

central inspiration for TPCC’s establishment by Congress was the

observation that trade and exports, while growing spectacularly in

importance to the U.S. economy, were not getting cohesive and appropriate export and trade promotion assistance from the Federal

Government.

Under our economic system, of course, the roles of Government

and private-sector business are distinct. But all America has a

stake in seeing our businesses compete effectively against their foreign commercial adversaries. And those adversaries often receive

considerable help from their governments in many forms.

So it is a legitimate function of the U.S. Government to find ways

to keep the playing field level for our businesses and the global

marketplace. That, of course, is what Ex-Im Bank does by providing credit guarantees, credit insurance and loans for exports to

often risky emerging markets in situations where the private banking, insurance and finance firms won’t participate. We do not compete with them.

Ex-Im Bank has been doing this since 1934, and we are good at

it. But, by and large, Ex-Im Bank has done its mission as a solitary

player, with very little collaboration or outreach to other U.S. Government agencies with which we might, with only modest effort,

find common enterprise which would create more diverse and powerful support for American business.

And it is my experience that there has not been a strong practice

or tradition in the many agencies comprising the TPCC to invest

6

a great deal of time, thought, or effort in creating opportunities for

partnering with one or more sister agencies for the purpose of promoting exports and trade for American businesses.

That is why the revitalization of the TPCC and the efforts we

have underway described by Commerce Secretary Donald Evans in

his testimony are timely and important.

The goal, as I see it, is not to establish a seamless phalanx

among the TPCC agencies, with a one-size-fits-all effort in export

and trade promotion. This approach will not work because the programs, constituencies and objectives of the agencies are not identical. But what TPCC can do is help set the stage and infuse some

momentum to create shifting clusters and alliances among its

membership directed at export and trade promotion which might

be broad in scope or more narrowly focused on a region, an industrial sector, or even a specific transaction. The TPCC program now

underway is a great contribution to that outcome.

We should know and be sharing what other agencies in our Government are doing and, more importantly, what the competition is

doing. How can we contend more effectively on behalf of American

business with the competition’s best programs and practices and,

indeed, what of those programs and practices we should adopt?

The TPCC, in my opinion, is an ideal vehicle for gathering and

analyzing a broad base of data from around the world and within

our country as we have set out to do. And the Ex-Im Bank is very

pleased to participate in these efforts and is looking forward to

some concrete data that we will undoubtedly find useful going forward. Let me touch very briefly on the areas that appear to me to

offer the prospect for improving our programs, as well as illuminating opportunities where we might successfully collaborate

with our TPCC colleagues.

One, many other nations have established counterpart agencies

to our Ex-Im Bank. They too have recognized the importance of export and trade to their economies and have stepped up very aggressively. For example, Canada and Germany have created new official entities called ‘‘market windows,’’ which enjoy many benefits of

being a public entity but may operate as and really compete with

private banks. They may be having a competitive impact, and we

are urgently attempting to pull together sufficient data to get an

accurate picture of what they are really doing in the marketplace.

Two, Tied aid use has seen a recent resurgence, particularly by

Japan. The United States has a so-called Tied aid capital projects

war chest, but it has seen relatively sparing use.

Three, the potential for attracting more small- and medium-sized

businesses into the exporter universe appears promising. And

TPCC survey efforts of that market should be very important.

Finally, let me just mention some collaborative efforts we have

recently made that I hope capture the spirit of the TPCC vision.

One, OPIC, TDA and the Ex-Im Bank forged a joint investment,

export and technical assistance venture directed at Indonesia’s energy sector and other industries.

Two, the same three agencies have just established a task force

which will be sending representatives from each agency to find

and help implement opportunities for United States business in

Pakistan.

7

And three, Ex-Im Bank, the Commerce Department and the

State Department have put in motion a program where Ex-Im

Bank will learn in advance about governors trade missions and will

undertake to play a role in such a mission.

Mr. Chairman, Members of the Committee, that concludes my remarks and I too will be happy to answer any questions.

Chairman SARBANES. Thank you very much.

Mr. Barreto.

STATEMENT OF HECTOR V. BARRETO, ADMINISTRATOR

U.S. SMALL BUSINESS ADMINISTRATION

Mr. BARRETO. Mr. Chairman, Senator Miller, and to the other

distinguished Members, thank you for inviting me to testify today

about SBA’s role in the Federal Government’s export promotion

strategy.

The President recognizes the critical link between the U.S.

domestic economy and our foreign trade policy. Trade expands

markets, grows business, and creates jobs. Free and open markets

foster economic and political freedom, strengthen democracy, and

enhance our national security.

We need to do as much as possible to give businesses in America

every opportunity to succeed by enabling them to access all markets. Trade Promotion Authority will remove barriers to allow

these businesses involved in trade to thrive in a global economy

through free, fair and open markets, thus allowing U.S. small businesses to become more competitive in the global marketplace.

Currently, 97 percent of U.S. exporters are small businesses,

numbering a little over 200,000. However, they account for just

under a third of the total value of U.S. export sales. This is where

SBA has a significant role to play.

Small businesses face barriers to exporting. Many simply lack

basic information on how to go about exporting and many currently

lack the financing necessary to sell their products overseas.

Each of SBA’s financial and technical assistance programs can

assist businesses interested in exporting and we have specific programs in place to assist in creating markets outside the United

States. To date, our efforts and results have been sporadic. I intend

to more effectively focus our efforts. Through expanded public/private partnerships we can facilitate access to needed information

and capital with the goal of increasing revenue, employment and

business longevity.

Firms engaged in trade are 20 percent more productive, pay

wages which are 15 percent higher than nontraders, and are 9 percent less likely to go bankrupt, and may experience 20 percent

greater job growth.

SBA has several loan programs tailored to small businesses

in search of capital to either start or expand their business in

exporting.

The International Trade Loan Program provides long-term financing for fixed assets and working capital for companies impacted by foreign competition or expanding exports.

The Export Working Capital Program is a short-term, transaction-backed guaranty program. SBA has worked with Ex-Im

Bank to develop a seamless product to address a wide range of

8

small business financing needs. In fiscal year 2000, the average

SBA export working capital loan was $400,000. The average size of

an Ex-Im Bank loan was $1.6 million.

To help firms with very small export finance needs, the SBA’s

Export Express program provides loan guarantees on export loans up to $150,000. We believe it will provide much-needed financial

assistance to the fastest-growing segment of the small business export community—the service sector. Let me give you two examples

of how this loan program is being used.

One of these loans went to a Jackson, Mississippi firm for $11,000 to export produce to South America. Another loan for

$50,000 allowed a firm located in Los Angeles to obtain orders

worth $4.8 million for piping insulation and industrial chemicals.

SBA also has public/private partnerships to satisfy the needs of

small businesses for information on exporting. SBA is a partner

with the Commerce Department and the Ex-Im Bank in the U.S.

Export Assistance Center, or the USEAC’s, U-S-E-A-C’s, nationwide network.

To help firms become export-ready, SBA took the lead in working

with our public/private partners in creating the Export Trade Assistance Partnership Program, known as E–TAP. E–TAP is a customized process of taking a small group of export-ready companies

through all the stages of becoming an exporter. This program relies

on the support of SBA’s Small Business Development Centers and

their Service Corp of Retired Executives. It also relies on State and

local trade offices, individual freight-forwarders, customs brokers,

insurance brokers, and international attorneys to bring together essential export information at little cost to the small business

owner.

E–TAP recently enabled a Dallas, Texas company to grow their

markets and use SBA’s capital programs. The company produces a

medical product to repair oxygen sensors used by hospitals for

monitoring trauma victims. It now exports to over 30 countries.

I am excited about the prospects for U.S. small business in the

global marketplace. We need to reach more of the 25 million small

businesses in the United States today. We need to do a better job

of outreach and adapt and create products that meet their changing needs. We are committed to expanding our tradition of enrolling our public and private partners in these efforts.

This is an exciting time to be involved in international trade and

we have a President who has made it a priority to assist the American businesses in the global marketplace.

Thank you. I would be happy to answer any questions.

Chairman SARBANES. Thank you very much for your statement.

Mr. Watson.

STATEMENT OF PETER S. WATSON

PRESIDENT AND CHIEF EXECUTIVE OFFICER

OVERSEAS PRIVATE INVESTMENT CORPORATION

Mr. WATSON. Thank you very much, Mr. Chairman, and Senator

Miller, for holding this hearing today. Like my colleagues, I will

just have a few brief comments, so we may have a broader conversation and discussion of my complete written statement.

9

Like the other members of the panel, Mr. Chairman, I also want

to thank you for your strong leadership and the support that you

have given toward establishing a coordinated United States trade

program. It is a privilege for me to join in this panel today with

my distinguished colleagues.

Even before the creation of the TPCC, OPIC and the other trade

agencies have had a long tradition of cooperating with each other.

However, I think it is clear that the mechanism of the TPCC has

allowed us, frankly, to do so in a more systemic and coordinated

way, and we will continue to do so.

As you have heard, the TPCC is reinvigorating a unified trade

program for the U.S. Government and as you stated, Mr. Chairman, this is a particularly important responsibility given the economic disruption and foreign policy challenge we face as a result

of the tragedy on September 11.

As a development agency, OPIC is well positioned to play an important role in the U.S. response to those events and, indeed, we

can assist in helping stabilize financial markets in the developing

world.

We are also keenly aware that OPIC’s mission is in many ways

distinct from that of the more traditional trade agencies. As you

are particularly knowledgeable, Mr. Chairman, OPIC, of course, is

an integral part of the foreign assistance and development program

of the United States, borne out of the Marshall Plan and focused

on the belief that concessional aid alone cannot bring about the

economic development so sorely needed in much of the world.

Today, OPIC is prepared to provide similar U.S. support for

countries who are supporting and assisting broader U.S. interests.

This includes, but is not limited to, moderate Islamic countries in

the Middle East and Central Asia, and others most in need of support and economic development at this time.

In meeting today’s challenges, OPIC will benefit from the cooperation, support, and information flow from all of the trade agencies represented on the TPCC. And as mentioned by Chairman

Robson, we have already seen the benefits of this interagency cooperation.

During the recent visit of Indonesia President Megawati, as

Chairman Robson mentioned, we were pleased to be able to join

with Ex-Im and TDA in a joint trade and finance initiative developed in support of Indonesia, which is not only an important U.S.

ally, but also a country that has a large Muslim population.

Another area of cooperation is promotion of business development in countries of specific U.S. interest. I am pleased to be able

to participate in the business development delegation being led by

Secretary of Commerce Evans to Russia next week. That delegation

will include senior executives from approximately 15 U.S. companies representing a wide variety of sizes and sectors. The mission

will reaffirm United States Government support of Russia’s economic reforms and assess ways to improve access by United States

business to the Russian market.

If I may, in closing, Mr. Chairman, mention briefly one specific

area of renewed focus—it is how OPIC pays attention to the special

needs of American small business.

10

OPIC, I believe, has yet to fulfill its potential in this area and

we are actively examining opportunities in order to be able to assist small business.

One particular avenue that we have already identified and are

exploring is the extent to which OPIC can work with the SBA. I

am pleased to have had the opportunity earlier of meeting with my

colleague, Administrator Barreto, to discuss our mutual interests in

this area.

We have a working group between our two agencies who have already met to pursue arrangements and we are hoping to establish

similar mechanisms that Ex-Im has in place with SBA.

Looking ahead, Mr. Chairman, in cooperation with our TPCC colleagues, OPIC’s activities will focus more closely on development

and on companies and countries that have difficulty accessing private financing and assurance.

Working together, within the Administration and with the Congress, OPIC can make an important difference to people in the developing countries and in America during these challenging times.

I will be happy to answer any questions you may have. Thank

you, Mr. Chairman.

Chairman SARBANES. Thank you very much, Mr. Watson.

Ms. Askey.

STATEMENT OF THELMA J. ASKEY, DIRECTOR

U.S. TRADE AND DEVELOPMENT AGENCY

Ms. ASKEY. Thank you, Mr. Chairman and Senator Miller. I am

pleased to be the clean-up hitter.

A number of you have been friends of the U.S. Trade and Development Agency for many years, and are well acquainted with the

agency. However, I recognize that TDA is a small agency outside

the jurisdiction of the Banking Committee, and I would like to take

this opportunity to outline briefly what TDA does and how it works

with the Trade Promotion Coordinating Committee to promote U.S.

exports and create American jobs.

I have been insistent on being an activist in the TPCC because

I see that our agency, although small, has a strong reputation as

a disciplined and responsive agency that reflects best practices.

TDA promotes American private sector participation in development projects in low- and middle-income countries, with special

emphasis on economic sectors that represent significant U.S. export

potential. This is no easy task in today’s global marketplace. U.S.

firms face aggressive competition from foreign producers who often

receive substantial assistance from their home governments in pursuing projects.

By now, you have already heard which governments are TDA’s

biggest competitors and about their use of Tied Aid. TDA must

work harder and smarter than our competitors to level this uneven

playing field.

TDA’s toolbox for fighting unfair foreign competition contains a

number of instruments. The most common methods are funding

feasibility studies, conducting orientation visits, and hosting trade

conferences. TDA also provides training and technical assistance

grants. TDA’s technical assistance may be project specific, or more

11

broad-based—supporting capacity-building institutions and trade

agreement implementation.

TDA’s goals are two-fold—helping American businesses export

their products and thereby creating jobs, while simultaneously promoting commercially-viable economic growth in developing and

middle-income countries. Since 1981, TDA has been associated with

more than $17 billion in exports—or over $35 in exports for every

dollar invested in its program activities.

TDA typically promotes U.S. exports by providing assistance for

specific infrastructure products around the world. However, TDA is

also effective in promoting U.S. exports at a more fundamental

level—by providing technical assistance to support broader sectoral

efforts and by increasing trade-related capacity.

This strategy entails helping countries develop better legal and

regulatory regimes and promotes exports by creating a more favorable commercial environment for U.S. firms.

Such an improved commercial environment serves the long-term

interests of the United States and its businesses, as well as the foreign partners.

Technical assistance provided by TDA can also be a useful tool

to support trade policy objectives. Upon conclusion of a trade agreement or multilateral or bilateral understanding, TDA can provide

the technical assistance some trading partners need to implement

the provisions. This assistance enhances our trading partners’ ability to meet their trade obligation and ensures that U.S. firms will

be able to fully realize the benefits of these agreements—namely,

a fair and open trade, regulatory and legal environment.

TDA has worked hard to achieve its success, but it has not done

so alone. TDA takes great pride in the close relationships it maintains with other U.S. Government entities in identifying and pursuing U.S. export opportunities. The agency is especially grateful

to Secretary Evans for his leadership of the Trade Promotion

Coordinating Committee. TDA believes that TPCC provides an

excellent framework to coordinate the Government’s trade promotion operations and we actively support TPCC’s efforts to identify and quantify the means that foreign governments use to obtain

advantageous benefits for their national companies at the expense

of U.S. firms.

Overall, the TPCC can be most useful by providing a mechanism

for focusing the resource of various agencies in order to respond to

particular immediate or longer-term priorities, such as supporting

the Administration’s environmental strategy, reinforcing regional

efforts such as in Africa or the Caspian region, supporting the negotiation and implementation of new trade agreements, and coordinating the development of efforts in the wake of September 11.

Additionally, the TPCC can focus efforts to work with foreign

governments, assuring the shift to democracy and market-based

economies.

The best long-term strategy for the United States is to make its

presence felt in such countries and to do so by supporting commercial development. The TPCC is well suited and well positioned for

such a role.

Among TPCC agencies, TDA frequently partners with Ex-Im and

OPIC, to conduct trade promotion activities overseas and identify

12

promising project opportunities. These three agencies also jointly

operate two regional offices—the Caspian Finance Center in Turkey and another jointly-supported office in Croatia.

Maintaining these regional offices allows us to work hand-inglove to develop the regional economies, while promoting U.S. exports. In the near-future, we will look to these field offices to respond more quickly to the commercial and development needs of

countries in strategic locales during difficult, uncertain times.

In the wake of the September 11 attacks, Peter Watson, John

Robson, and I met last week to develop joint strategies for projects

in Eurasia and Asia, as both gentlemen have already mentioned.

We and our staffs are evaluating how we can best respond, both

as individual agencies in complementary ways, and collectively, to

changes in the business climate and increased levels of risk in

those regions and around the world.

We are currently exploring potential future joint activities in

Africa and elsewhere and Peter and John have already mentioned

our efforts in Indonesia.

TDA looks forward to continuing its efforts with these two agencies particularly, as well as with other TPCC members on other important initiatives, such as the U.S.-Jordan Free Trade Agreement,

the focus on Africa through the AGOA conferences, et cetera.

TDA believes that the role of trade promotion is even more important today than it was before September 11. So your decision,

Chairman Sarbanes, to hold this hearing in the wake of the attacks

is particularly appropriate.

Supporting U.S. businesses as they pursue overseas opportunities and connecting them with projects in developing nations is critical to ensuring that the world economy continues to grow and that

the people around the globe enjoy the benefits of economic development and free trade.

Accordingly, TDA will continue to carefully evaluate how it can

best continue to serve U.S. interests in the wake of recent events.

Senator Miller, I would also say that we do look at State-specific

activities. Most recently, we have sent letters to the USTR Zoellick

and to the Finance and Ways and Means Committees outlining environmental projects in each State within those Committees. TDA

is also available to analyze other States in support of trade promotion authority renewal.

In closing, I would like to thank the Chairman and Members of

the Committee for the opportunity to appear today and to discuss

what TDA is doing to increase U.S. exports and create American

jobs, and how TDA works with other members of the TPCC.

I look forward to answering your questions.

Chairman SARBANES. Well, thank you, Ms. Askey, and thank you

all very much. I want to underscore how we appreciate how much

thought and effort went into the statements that have been submitted and have been included in the record.

Mr. Secretary, let me start with you.

I really welcome this benchmarking exercise that you have outlined that you are now going to go through to, one, ascertain the

needs of your customers and, two, the practices of our competitors.

13

I think that is a very important exercise and I think, actually,

the whole process you have outlined in your statement is very positive and ought to provide us with a real base off of which to act.

Now as I understand your timetable, you intend to finish that in

time to encompass the lessons you draw from it in the report that

you will present at the end of March of next year. Is that correct?

Secretary EVANS. That is correct, Mr. Chairman.

Chairman SARBANES. Well, let me just commit the Committee to

that, to the extent that your report contains recommendations for

legislative action, we will certainly schedule hearings and try to

move ahead on that because we are very anxious to give you whatever weapons you judge to be necessary after we have had an opportunity to review them.

Do you expect that you will be able to influence the budget of the

Administration that will be submitted for the next fiscal year—in

other words, the one that is submitted in late January or February—in terms of how it deals with export promotion, both affecting maybe the levels and the coordination and the allocation of

funds within the Executive Branch for that purpose?

Secretary EVANS. Mr. Chairman, certainly we expect we will be

able to influence the coordination; I certainly believe that out of

this, I think, important process and exercise that we are going to

go through with respect to benchmarking our own programs

against the rest of the world and understanding what each of the

respective agencies is engaged in.

It is likely we will find some duplication. And it is likely that we

will, as a result of that, be coming in and recommending some redirection of some of the funding. Now precisely what that is, I certainly do not know yet. I do not want to prejudge the conclusions

of the report.

In terms of amount of funding, again, I guess I would say that

I want to go through this exercise in a very thoughtful, thorough

kind of way, but being comfortable that when we present the report

to you in March, this is a program that we think will get results,

will deliver the kind of results that you should expect, and the

American people should expect.

I certainly call everybody’s attention to the fact that only 1 percent of the small businesses in America are exporting outside the

United States. I look at that and I understand the tremendous economic engine small business is for our economy in the United

States. It ought to be a similar engine for the global economy. And

for only 1 percent of our small businesses to be engaged in exporting around the world—I think that needs our attention.

So, I do not want to prejudge what kind of levels we may request. But I will commit that it is my intention to present to this

Committee, with the work of my colleagues, a report that will be

effective and will deliver results.

As you know, I am from the private sector and am a resultsoriented kind of person. If we have a program in place, I expect

it to work.

Chairman SARBANES. Well, as you go through the benchmarking

exercise, I think you should remain alert to what lessons may leap

out at you that could in fact be implemented within the Executive

Branch with respect to the budget that the President is going to

14

submit. Otherwise, we are going to have to go through another

cycle to get at that budget.

Secretary EVANS. Certainly.

Chairman SARBANES. Although we could try to alter or amend it

as it moves through the Congress.

Ms. Askey, I was very much taken by this exercise you say you

are doing with Ex-Im and Small Business on how to help our

exporters in light of what has happened in terms of the impact of

the events of September 11. It seems to me that that is a project

that the entire coordinating committee could be engaged in, the

problems for U.S. exporters involving delays in growing costs may

result as a consequence, including heightened security or other

measures.

And I would recommend that to the coordinating committee as

an immediate short-term agenda item to try to address. Obviously,

you are going to have some impact.

Have you perceived any impacts up to this point, any of you at

the table?

Ms. ASKEY. It is hard to assess this early. We certainly have gotten some initial nervousness about traveling, et cetera.

All of us, I believe, have been looking at this individually at our

own agencies. John Robson took the initiative to bring the three development agencies together.

On the one hand, it may make it more difficult to operate in

some of these countries because of security issues and more difficulty in moving goods and services.

But on the other hand, perhaps the demand and the pressure for

U.S. presence and activity will be even greater, particularly in

countries that are going to provide some strategic assistance. So,

we continue to work together on this issue. And Secretary Evans

has provided significant leadership in this regard.

Mr. WATSON. Mr. Chairman, of course, part of the fuel for the

economic growth, obviously, is availability and capacity in both finance capital markets and, indeed, political risk insurance. And

what we have seen recently is troubling, frankly.

There has been a very discernible withdrawal of capacity in

international markets and in developing countries, in particular of

availability of finance and capital.

A number of banks and groups that have previously been able to

provide financing, we have heard that they, in fact, are not going

to be able to do so in the same type of coverage or amounts that

have previously existed. And as you know, it is always a challenge

to get those participants to be involved in transitional developing

economies, even in the best of times.

We have had several meetings with clients and we will have another meeting with AIG this week to try and identify ways that we

in fact can step into the breech that will assist in responding to

this effort to stabilize these financial and insurance markets. But

it is a very important role at this time and one that we take very

seriously.

Chairman SARBANES. Senator Miller

Senator MILLER. First, I want to say that you make a very impressive team and I am glad that you are where you are and I

thank you for giving up what you did to work in that arena.

15

Because of my experience in that other life that I once had in

State government, and for a while I was a board member of OPIC,

Mr. Watson, I am very interested in the level of cooperation that

your agencies have with the States as it relates to export promotion. I think that the States have a very important role to play

in improving that 1 percent, Mr. Secretary, and I think that they

are willing to do so. They just need some help.

I know that one of the responsibilities of the Trade Promotion

Coordinating Committee is to review the efforts of the States and

to see how you can work with them to promote exports.

And I think that there is an agreement or some kind of working

relationship with the National Governors Association. I am not

sure, but I believe there was at least plans to.

I hope it will go further than that. Maybe I am making a statement now instead of asking a question, but I would like for you to

respond.

I hope that in your study and in your focus groups that you will

be conducting, that you will ask questions regarding the role of the

States in improving the export promotion process. And I hope that

you will include State trade promotion officials in your focus groups

and your studies.

I do not know of any recent review that has been done of States.

And if there has been one, I would be interested in seeing it. But

I think there is a very important role there for your agencies to

play. And I think that you will find that the States themselves

want to work with you on this, but in the past decade, there has

not been the coordination and cooperation that I would like to have

seen. Anyone that wants to respond to that, fine.

Chairman SARBANES. I think that is a very thoughtful statement.

Actually, I am taken by a sentence at the end of Secretary Evans’

prepared testimony. At the end of it, he said: ‘‘I look forward to

your reactions.’’ So, I would say the same thing now, having heard

Senator Miller’s statement.

Secretary EVANS. Let me take a crack at that and say, Senator,

I think you are right on the mark. I know at the Department of

Commerce, we look at each individual State and break it down by

what exports contribute to the State economy, and we will break

it down by sectors, and we will break it down by regions. We will

break it down, even, I think, by district.

The small business owner is in a little town in south Georgia and

he needs to hear from his State legislator that there is a way for

him to access the international markets. And he needs to hear from

that State legislator that he can get into those international markets and feel comfortable that he has somebody to talk to as to

what the rules are going to be. Because any time that small business owner thinks about going outside the United States, he is

thinking, everybody’s always told me if I leave the United States,

I do not know what the rules are; they change them. And so, it is

that small business owner in south Georgia who needs to be talking to somebody he knows and trusts is going to give him good advice as to how to get into the international markets.

The one thing that I have really been moved by in the last

8 months in this whole area is traveling around the country and

talking to our foreign commercial service officers and offices, and

16

talking to small business owners who have taken advantage of the

foreign commercial service program, which is simply a program, as

part of which we have export assistance centers.

The Chairman mentioned some of them. We have them all across

America. And they are simply centers where a business person can

go and knock on the door and say, I manufacture valves. Is there

some place in the world right now that wants the kind of valve

that I manufacture?

We have a program where we can go and look around the world

and see if there is a market for that kind of valve or not. And so,

the way to get the message to that small business owner is down

through the State governments and down to the local representatives. I have talked to a number of the governors about it. We do

work with governors as they undertake trade missions. We help

them organize their trade missions. I know Governor Taft went to

South America, Governor Ridge is taking some trade missions—all

the good governors take some. So, we will work with them.

But more than that, within the United States, I think you are

right on the mark of finding a way we can coordinate with States

in terms of trade development authorities and trade development

offices so we can educate the small business owners across this

country. So, I will be looking for more ways to do that. And I think

that is a very wise observation.

Mr. ROBSON. If I may, add to your comment, Senator Miller, and

the Secretary’s comment, that the predicate for enlisting small

business in the exporter community is illuminating the opportunity

for them to go abroad.

When a small businessman wakes up in the morning, he is not

thinking about doing business in Central or Eastern Europe. He is

thinking about making a payroll that week.

And Ex-Im Bank and the other agencies have the mechanisms in

place to try to provide the illumination of those opportunities, I am

sure Hector has them, even if they are probably imperfect.

One of the good things that will come out of the surveys that we

are doing here is perhaps some insights into ways in which we can

make those opportunities more effective and find ways to work

with State and local commercial development agencies to enhance

them. We have those relationships, as I said in my testimony. We

are doing something with Commerce and State on State trade missions. But it needs to be much broader. It is heavy-lifting, but doable, I think.

Chairman SARBANES. Does anyone else want to add anything?

Mr. BARRETO. I also want to confirm some of the comments that

have been made.

We work very closely with the State of Georgia in our Atlanta,

Georgia operation that we have with the Department of Commerce.

It is really a model. They have done a lot of outreach. I think it

is a model for other States. Again, some of the comments that are

being made with regards to this leadership really occurring at all

levels.

I am originally from California and I know that oftentimes, we

were a little stymied why we were not doing as well as some of the

other States. And it really had a lot to do with that leadership. It

was not connected. We were doing, for example, 11 percent of exVerDate 11-MAY-2000 09:59 Aug 26, 2002 Jkt 000000 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 80952.TXT SBANK4 PsN: SBANK4
17

ports to Mexico and States like Illinois were doing 22 percent, and

Texas was doing 75 percent of their exports. But this is something

that is on their radar screen. They are working with it all the time.

There are other States—I am originally from Missouri. They do

an incredible job with their program in the State, especially with

regards to their agricultural products and services that they offer.

Florida does an incredible job.

So, I agree. I think there is a lot of opportunity for us to continue

to collaborate, the partners on this Committee. But also to reach

out to our partners in the States. I think we have mechanisms that

we can bring to bear where we can really show some success for

the small business community.

Secretary EVANS. May I make one more comment, Mr. Chairman,

if you do not mind?

Chairman SARBANES. Certainly.

Secretary EVANS. I expect that the report we bring to you in

March is going to have one element that is going to be focused hard

on education—educating small businesses all across the country of

this resource that is available to them.

I was at the Paris Air Show back in June and I talked to some

40 companies that were over there. They were small- and mediumsized businesses.

I heard the question asked—I was listening, I really wasn’t talking to them—do you find this service important to you? And every

one of them said, listen, we wouldn’t be over here but for the Foreign Commercial Service Export Assistance Centers that you have.

We could not have done this without them. I kind of stumbled into

it. And so, our big challenge, I think, in this country is educating

small- and medium-sized businesses all across America about this

very valuable resource that is available to them. Our phones

should be ringing off the wall. Yes, we are busy and we are active.

But we ought to be a lot more active than we are. And I think one

of the keys to that is what Senator Miller suggested, which is

working back down through the States and empowering States to

deliver that message and educate their businesses.

I went to Purefil, which is just outside of Atlanta, which was one

of these small businesses that accessed the world market for their

unique product through using foreign commercial services.

And there are just so many of those stories out there. All we

need to do is just educate small businesses and tell them about this

terrific resource that is available.

Chairman SARBANES. Your benchmark survey might include a

survey of the interaction that the agencies have with the State governments as well, it seems to me.

Secretary EVANS. Good idea.

Chairman SARBANES. And a following up on Senator Miller’s

suggestion.

Secretary EVANS. Good idea.

Chairman SARBANES. Did you want to add anything, Peter?

Mr. WATSON. Just really two sentences. Senator Miller, from

your time serving on the OPIC Board of Directors, you may well

have become aware of some of the outreach that we do have to

State governments. But we are mindful of the fact that OPIC does

18

not have domestic offices outside Washington, DC, clearly, and it

is not part of our charter to have offices in States.

In fact, at the first meeting when Under Secretary Aldonas came

and visited with us to talk about the TPCC, we discussed mechanisms for precisely more systematically working with the domestic

foreign commercial office services in each of the States. And we are

going ahead and doing that.

But I think of equal importance, if not more so, particularly to

small business, is to be able to have a seamless cooperation with

SBA, which does have these offices and representation in each of

these States, or a significant number of them.

What we are developing is an approach whereby there would be

a seamless arrangement where small business, when they come

into SBA, do not get bogged down in bureaucracies. They can effortlessly move from SBA product into OPIC-related programs,

much as with Ex-Im.

So this is one way that we are going to be building up our ability

to support small business in the States.

Senator MILLER. That would be very important if you do that.

Mr. WATSON. Yes, sir.

Ms. ASKEY. I will just add quickly, not to take too much time.

We primarily operate in the States through the Commerce Department and through SBA directly with the State governments.

About 60 percent of our business is with small businesses and we

provide them a practical opportunity to experience international

markets, which can be quite difficult.

We are involved with projects quite early. We do definitional missions and desk studies even before feasibility studies. And those opportunities, desk studies and definitional missions, are always done

by small businesses. And it really gives them the opportunity to

grow into a role that will allow them to see what it takes to operate

in foreign markets.

Then they move on to the feasibility studies and to the exports.

Many of them come to the TDA and say, you saved us. That one

nice contract, even in a difficult market, held us and helped us

grow, too. So, we work quite a bit with small business.

Chairman SARBANES. Senator Stabenow.

STATEMENT OF SENATOR DEBBIE STABENOW

Senator STABENOW. Thank you, Mr. Chairman.

I would echo support for what Senator Miller has spoken about.

And while in Michigan, we had over $51 billion in exports last year

to 200 markets, we have a majority of that coming from our larger

businesses.

And there is a real need and I am approached all the time by

chambers of commerce in small- or medium-sized communities

wanting to know about the Ex-Im Bank or what else can be done

with SBA, or whatever.

I would encourage you to be really strengthening the U.S. Export

Assistance Centers that you have. We have four in Michigan and

I think they are doing an excellent job, in Detroit, in Grand Rapids,

in Pontiac, and in Ipsilanti.

But we need more coordination of what you were talking about.

SBA plays a critical role. Frankly, MEP, and I do not know if you

19

have talked about that today, but the Manufacturing Extension

Program in the Department of Commerce I think is one venue that

has not been fully utilized in terms of education. They were set up

to help provide assistance in education as to new technologies for

small- and medium-sized manufacturing firms.

I do not know to what extent they are also focusing on trade opportunities. But that has been very successful in Michigan, the

MEP. So, I would encourage you look at that as well.

I had a couple of specific questions for Secretary Evans. I want

to first thank you for coming to Michigan a little over a week ago

for a very positive session with Secretary Chou and business and

labor leaders about manufacturing. Obviously, we are very proud

of Michigan. We do all kinds of things. But one of the things we

do is we engineer and make things. And we are very proud of the

manufacturing economy.

I have a specific question just to bring to your attention and we

are talking about trade at this point, and back and forth, with our

immediate neighbor, which is Canada.

In light of the current situation that has happened and the current terrorist attacks, we ask for your vigilance and I would welcome any thoughts or information you have about how Commerce

is focusing on the border. And I have asked the same of Secretary

O’Neill with the Customs divisions. They are focusing I think in an

excellent way to make sure that we have the security in place, but

also understanding that for the manufacturing economy, it is justin-time supply chain and critical that the borders be able to flow

as easily as possible within safety and security measures.

I am very interested in knowing what steps from a Commerce

Department standpoint you have done or would see your Department doing as it relates to trade with our immediate northern

neighbor of Canada, particularly in light of the situation in terms

of the borders and being able to move across the border.

Secretary EVANS. Senator, it is a very important question.

What we could do is call the just-in-time delivery problem to

Customs’ attention, which is what we did. As you mentioned, Customs really controls the border. And in the ensuing days after the

attack, there was the issue of border crossings being delayed because of tighter customs, tighter security, and other related factors.

We called Customs’ attention to the commercial implications of that

situation. They were already aware of it. They took steps to address it.

It is my understanding after talking to Rick Wagner and others,

that goods are moving across the border pretty smoothly right now.

Senator STABENOW. It is much better, yes.

Secretary EVANS. So, I am not hearing the concerns that I was

hearing a couple of weeks ago. Now if that is not right, I would like

to know about it. But, really, what we can do is just call it to the

attention of Customs and say, listen, you may slow down manufacturing operations and slow down commerce if you get too restrictive

here. But I think they took the necessary steps and it is flowing

smoothly now.

Senator STABENOW. It is much better than it was. I think if we

are all vigilant, and that is why I am bringing it to your attention,

we need to keep that in mind.

20

And as we are talking about exports and thinking about trying China or Russia or Europe or long distances, I would just ask

you to always keep focused as well on our immediate neighbors and

the policies that come from other important departments and

areas, and as we are particularly dealing with the current situation

and the challenges on security that we keep in mind that one of

our biggest exporting markets is right over the border in Canada.

In the case of Michigan, it is right across the bridge or the tunnel. And so, we are very conscious of how we balance the competing

and very important needs. I cannot go without, Secretary Evans,

asking you if you might comment on any—and again, we are talking about trade, grave concerns regarding steel that relate to

Michigan.

And while we certainly are talking today about exporting, I want

to thank you again for the efforts of the Administration to focus on

what is happening in terms of a fair trading atmosphere as it relates to steel and our grave concerns about the domestic steel industry. I wondered if you had any update as it relates to the 201

or 232 investigations.

Secretary EVANS. No update other than the ITC is reviewing it

as we speak. And so, that is in process and there will be a decision

in the not too distant future from the ITC.

But I have, I think, a very positive comment to make regarding

our recent meeting at the OECD in Paris. The United States has

taken the lead in bringing all of the respective countries together

and focused on global over-capacity.

We were very pleased with not only the response and the attendance, but also the attitude of, yes, the world is faced with global

over-capacity and we need to sit down and see if we can resolve

that. And countries have agreed to go back and look at their own

plants and try and determine what they can do within their respective countries to help solve this over-capacity problem.

Senator, what I can tell you is we are spending a lot of time on

it. We are very focused on it. We understand the serious nature of

it. The President has talked about it as a national security issue.

We need to have a strong steel industry in this country. And so,

we are with diligence continuing to pursue it and take the steps

that we think could help find a global solution to this problem.

Senator STABENOW. I very much appreciate your efforts and

would just stress, as I always do, the critical nature of this to domestic industry. And in light of what is occurring now, and in

terms of our own national security, I think it would be devastating

to America to lose a domestic steel industry. So, I would just encourage whatever efforts you are to continue to be able to make as

quickly as possible and as effectively as possible.

Secretary EVANS. Thank you, Senator.

Chairman SARBANES. Thank you very much, Senator Stabenow.

I have just two or three questions to ask and then we will draw

it to a conclusion.

Without asking you to point the finger specifically, the Congress

enumerated in the statute the agencies and departments that

should participate in the TPCC. And also provided that, at the discretion of the President, other departments or agencies could be

21

added to the list. Are they all participating or do you have some

recalcitrant actors?

[Laughter.]

Secretary EVANS. They are all participating, Mr. Chairman.

[Laughter.]

Chairman SARBANES. I want to get the question out there so that

they know that we are interested in the subject. I appreciate that.

Second, how are the Export Assistance Centers Working nowadays? See, Commerce establishes them. But then I think Ex-Im

and SBA go at least into some of them. I do not know about all

of them.

Secretary EVANS. Right, not all of them. With some of them, we

have joint offices, so we are there together, fielding questions.

Chairman SARBANES. I think the Department of Agriculture

plays a role in some of them.

Secretary EVANS. I do not know if they are in there or not.

[Pause.]

Yes, they are there as well. But from my perspective, Mr. Chairman, they are working very effectively. As I talk to companies that

have had real-life experience in dealing with them, they have nothing but accolades for them and are very supportive of them.

I just wish we had more people coming through the door. I think

they are all across America. There are a lot of them out there.

Should we have more? Maybe so. We will take a hard look at

that. But, again, I think a lot of our focus, my focus, is going to

be just how do we make more small- and medium-sized businesses

aware that there are Export Assistance Centers available?

If you took a survey of small- and medium-sized businesses

across America and asked them what an Export Assistance Center

was, they wouldn’t have any idea what you were talking about.

That will change. Mr. Chairman, I would say that that probably

is true down through a lot of States. I think Senator Miller had a

very good idea. If I were a State legislator in a district, it is something I would know about and I would want to tell my constituents

about.

And so, I think that that is our big challenge. I really do. Just

educating small- and medium-sized businesses of this very important resource that is available to them.

Chairman SABANES. I know the State of Maryland has offices

overseas, State offices that are designed for export promotion and

work closely with companies in our State in order to try to accomplish that.

They obviously need to be folded in in a coordinated way, they

and comparable offices from other States, into your efforts.

And actually, some of this education that you are talking about,

it could probably be funneled through the State offices and certainly enlist their efforts.

Secretary EVANS. You bet.

Chairman SARBANES. Let me ask one final question. First of all,

let me say, I am very supportive of this benchmark exercise that

you are embarking on. I know some will say, well, it is another

study. Why don’t they actually do something? But you have it compressed, in a pretty tight time period.

Secretary EVANS. Right.

22

Chairman SARBANES. I think you need to get this base. I do not

think it has been done, as best I know. And of course, we have a

new set of actors with a fresh viewpoint. So, I think it could be

enormously helpful.

I think the analytical framework that you have set out in your

statement in terms of how you propose to do it, what you propose

to cover, really could be very helpful.

I just had this sort of question. You are going to look at best

practices of other countries, which I think is a very important thing

to do. Of course, a number of those countries in the past have

taken a page or two from our own playbook, so to speak.

Secretary EVANS. Right.

Chairman SARBANES. In the course of looking at their best practices, if you can find out, it might be helpful to see what strategies

they use in obtaining and implementing information about our own

export promotion efforts.

Some of them have been pretty clever in observing the United

States—this is in earlier times—and what we were doing and how

we were doing it, and have picked up on that.

Now, they have turned around and implemented it and all of a

sudden, we have a fierce competitor on our hands. So in addition

to looking at what their practices are, you might look a little bit

at the process they went through in order to pick up on these best

practices.

I do not know how opaque all of that is going to be. I do not

know how much cooperation you are going to get from counter-part

governments. I guess that is one of the challenges you may confront. One of the things we have always pushed for, of course, on

the finance arrangements is more transparency.

Secretary EVANS. Yes.

Chairman SARBANES. And of course, they are not very anxious to

provide that. So, I wish you good luck in that regard.

Secretary EVANS. Well, thank you, Mr. Chairman. I think we will

find ways to understand their best practices. We will pursue it with

great vigor.

Chairman SARBANES. All right. Well, we look forward to continuing to meet closely with the members of the TPCC. We thank

you very much for this preliminary report. And of course, we all

look forward to the report that is going to come in the first part

of next year. Thank you very much.

Secretary EVANS. Thank you, Mr. Chairman.

Mr. ROBSON. Thank you, Mr. Chairman.

Secretary EVANS. Thank you, Mr. Chairman, for your leadership.

Chairman SARBANES. The hearing is adjourned.

[Whereupon, at 11:40 a.m., the hearing was adjourned.]

[Prepared statements, response to written questions, and additional material supplied for the record follow:]

23

PREPARED STATEMENT OF SENATOR PAUL S. SARBANES

I am pleased to welcome before the Banking Committee this morning this panel

of distinguished representatives of the Trade Promotion Coordinating Committee

(TPCC): Donald Evans, Secretary of Commerce, who serves as the Chairman of the

TPCC; John Robson, Chairman and President, Export-Import Bank, who serves as

the Vice Chairman of the TPCC; Peter Watson, President and CEO, Overseas Private Investment Corporation (OPIC); Thelma Askey, Director, Trade and Development Agency (TDA); and Hector Barreto, Administrator, Small Business Administration. The purpose of today’s hearing is to review the preliminary report of the

TPCC on its National Export Strategy and the TPCC’s plans for the coming year.

The TPCC was established by the Export Enhancement Act of 1992. The purpose

of the TPCC as stated in the statute is ‘‘to provide a unifying framework to coordinate the export promotion and export financing activities of the U.S. Government

and to develop a Governmentwide strategic plan for carrying out Federal export promotion and export financing programs.’’ The statute designates the Secretary of

Commerce as the Chairman of the TPCC and designated as members all of the Federal agencies involved in export promotion.

The effectiveness of the TPCC depends on the leadership it receives from the

Chairman and the other key members. The first Chairman of the TPCC was Secretary of Commerce Ron Brown. Together with Ken Brody, the Chairman of the ExIm Bank who was designated Vice Chairman of the TPCC, they provided the initial

leadership and energy to get the TPCC off the ground and functioning. As a result,

the TPCC has a significant list of accomplishments it can point to during its first

8 years:

• Establishment of 18 U.S. Export Assistance Centers in major metropolitan areas

around the country—one-stop shops to provide marketing and trade finance support to local exporters.

• Improved interagency coordination of advocacy for U.S. companies seeking to do

business overseas.

• A joint Ex-Im Bank-SBA working capital guarantee program for small exporters.

• A partnership with the National Governor’s Association to increase coordination

between State and Federal export promotion efforts.

• The establishment of offices within the Commerce Department and the U.S. Trade

Representative to monitor and enforce trade agreements.

The legislation establishing the TPCC required it to propose to the President an

annual unified Federal trade promotion budget that supports its strategic plan. In

1999, Congress amended the statute to change the delivery date for the TPCC’s annual National Export Strategy Report to Congress from September 30 to March 30

in order to allow the TPCC’s export promotion budget recommendations to be better

coordinated with the development and release of the President’s budget. The report

that is being submitted today, in fact, was delayed from earlier this year in order

to allow the new Administration time to focus on this issue.

We now have a new Administration and a new set of leaders for the TPCC. Let

me say that I am very encouraged by the response of Secretary Evans, the Chairman of the TPCC, and his Under Secretary for International Trade Grant Aldonas;

Ex-Im Bank Chairman Robson, the Vice Chairman of the TPCC; and the other

TPCC leaders who will testify before the Banking Committee this morning.

From my initial meetings with them earlier this year they seemed to grasp the

potential of the TPCC to bring greater coherence and a sense of strategy to the Federal Government’s export promotion efforts. It is my perception that they have made

it a priority in planning the agenda for their agencies and I very much look forward

to hearing their testimony this morning.

I should mention that the attention of Congress has been drawn away from its

normal agenda because of the tragic events of September 11. It is a measure of the

importance in which I hold this issue that this hearing is going forward today. In

addition, as the Los Angeles Times mentioned in an article on September 20:

The world economy is in a fragile state, according to U.S. trade figures,

and is likely to slow further as additional security measures triggered by

last week’s terrorist attacks hinder the flow of goods and services.

The TPCC may thus have an additional challenge posed to it and perhaps may

prove useful in assisting U.S. exporters to cope with the new obstacles to trade that

may result from those events. I look forward to hearing the testimony of our distinguished witnesses this morning.

24

PREPARED STATEMENT OF SENATOR MICHAEL B. ENZI

I would like to thank the witnesses of the panel for coming before the Committee

to discuss the Trade Promotion Coordinating Committee. As a former member of the

President’s Export Council, I strongly support the work of this Committee and

stress its importance as we reevaluate the effectiveness of our current export laws

and look to reauthorize key export control provisions. As you all know, the Banking

Committee has been particularly active in export promotion with the recent passage

by the Senate of the Export Administration Act.

The TPCC plays a critical role in improving and expanding our current trade promotion policy. It is now more important than ever that we approach export

promotion and control from a unified standpoint. As such, we must continue to foster interagency coordination, which I believe is essential in creating effective programs that will improve the competitiveness of American businesses in the global

marketplace.

Continued and improved interagency cooperation will also enable us to develop a

trade promotion policy that will protect our national security, stimulate the economy, and encourage small business growth. Interagency cooperation must mean

more than putting glossy reports together. It must mean implementing integrated

strategies and overlooking the firewalls and turf battles that often are associated

with funding for individual programs. Agencies must remember that they are all

there to serve the American people and promote exports, not to compete to feather

their own nests.

As small business is the backbone of our economy, we must not overlook its importance in our troubled economy. Despite the growing number of small businesses,

less than 1 percent are taking advantage of today’s globalization through international exports. As a Senator from a State whose economy thrives predominantly

on the success of small businesses, this is unacceptable.

In closing, I appreciate the panelists willingness to discuss the future of the TPCC

and encourage the Committee to continue its efforts in promoting access to export

information and financing for businesses of all sizes.

Thank you, Mr. Chairman.

—————

PREPARED STATEMENT OF DONALD L. EVANS

SECRETARY OF COMMERCE

CHAIRMAN, TRADE PROMOTION COORDINATING COMMITTEE

OCTOBER 2, 2001

Mr. Chairman, and other Members of the Committee, my colleagues and I appreciate this opportunity to share with you our vision for the Trade Promotion Coordinating Committee (TPCC) and the work we will be doing over the next several

months.

Let me say at the outset that it is my belief and that of the President that

the events of September 11 make it even more imperative that we move our trade

agenda forward and encourage U.S. firms to enter international markets. We have

seen the impact of recent events on a number of industries—and the truth is that

no one will escape from this tragedy unaffected. Small companies are no exception,

and our trade promotion agencies need a coordinated response to the new environment U.S. exporters now face.

Whether it is a higher perceived risk in international markets, slower growth

abroad or less available financing from the private sector, it is now even more critical that our trade promotion agencies are aware of the needs of our customers and

can quickly respond to them with appropriate programs and initiatives. While all

of us are making adjustments after last month’s events, we cannot let the scourge

of terrorism become an obstacle to America’s and the world’s economic growth and

progress.

The Administration has made Trade Promotion Authority (TPA) a priority for this

legislative session. We believe TPA will speed the negotiation of trade agreements

that are fundamental to our country’s and the world’s economic future.

The agreements that TPA will let us conclude over the next 5 years could contribute as much as $1.9 trillion to world economic growth. The question is, what

slice of this growing pie of commercial opportunities will belong to U.S. companies?

Of course the answer to that question will primarily depend on the innovation and

ingenuity of our companies. But it will also be affected by our ability to deliver necVerDate 11-MAY-2000 09:59 Aug 26, 2002 Jkt 000000 PO 00000 Frm 00028 Fmt 6633 Sfmt 6621 80952.TXT SBANK4 PsN: SBANK4
25

essary state-of-the-art export promotion programs to help our exporters realize the

benefits from the agreements we negotiate.

From the perspective of a small U.S. company wanting to export, negotiating new

trade agreements is really only part of the battle. New agreements are meaningless

to a company if it does not have the information, expertise, and financing it needs

to do the deals.

As a former businessman, I am well aware of two things: that U.S. companies are

the most competitive in the world, and that they have to slug it out everyday in

the global market to keep ahead of the curve. On everything ranging from major

project competitions to small product sales, our exporters are competing not only on

the basis of price and quality of their products, but also against the quality and government support behind their foreign competition.

We know today that our major competitors have made export promotion a priority, both in terms of the resources they put behind it and the strategic approach

they take. Many of their programs are customer-driven and focused on satisfying

their customer’s needs. And we know that despite gains in many markets, we are

losing market share in the world’s fastest-growing markets. Over the last 10 years,

our overall share of total exports to developing countries dropped from about 14 to

12 percent. This is a significant change.

These high-growth markets are also the markets where trade barriers are highest,

especially for small companies. And many of our trading partners have an edge in

these markets, because they have already negotiated trade agreements to help their

companies get in on the ground floor.

But while some of our small exporters have discovered these markets and see

their potential, many more could. We still face an export gap for small- and medium-sized companies. Only 1 percent of U.S. Small and Medium-Sized Business

Enterprises (SME’s) export, compared to 5 percent of French SME’s.

For all of these reasons, the strategic approach of our competitors, falling market

share where our commercial opportunities are greatest, and the unmet export potential of our small firms, I believe our export promotion programs should be reevaluated from the ground up.

I would like your support over the next several months as we undertake a

benchmarking exercise to help us learn more about what our customers really want

from their export promotion programs and to examine best practices of export promotion services. This study will give us more information to answer the question

of why more U.S. companies do not export and how best to take advantage of fast

growing markets.

Our vision, in short, is to use the TPCC as a management tool to improve our

programs so that they respond to customer needs and the competitive environment.

Our goal is to make sure our companies can take full advantage of the new commercial opportunities we expect to see in the next decade resulting from new trade

agreements negotiated with TPA. At the outset, we want to make sure that we have

the right programs, and that these programs are effective, strategically focused and

coordinated. At the end of the day, we want to deliver the world’s best export promotion services.

March 2002 National Export Strategy

Our goal is to deliver to you in March a set of recommendations we believe will

get us to world-class standards in export promotion service by 2004. Between now

and March, we will develop information on three fronts.

First, we will spend the next several weeks assessing customer satisfaction with

our programs. We will do this in two ways.

We have commissioned a survey of the business community—respondents will include exporters, some who use our services and some who do not, and businesses

who are not exporters. The goal is to get a handle on a number of issues related

to the question of why more small businesses do not export. For example, among

other things, the survey will try to discover what else Government programs could

be doing to encourage exporting, and what does Government do best? What is

Government’s comparative advantage vis-a`-vis private sector providers of similar

services?

We will also meet with numerous ‘‘focus groups’’—made up of users of all of our

agencies’ services—to try to understand what aspects of our programs work and

what aspects do not. We will meet with small, medium and large exporters, trade

associations and banks. We plan to talk to companies in Los Angeles, Baltimore,

New York, Atlanta, Chicago, Boston and Philadelphia. We will ask questions that

will help us get to broader issues holding back our export potential, such as finance

risk and underutilization of our trade finance programs. We will ask all of these exVerDate 11-MAY-2000 09:59 Aug 26, 2002 Jkt 000000 PO 00000 Frm 00029 Fmt 6633 Sfmt 6621 80952.TXT SBANK4 PsN: SBANK4
26

porters about the competitive environment they face and what they think the

world’s best export promotion services should look like.

The second part of this exercise will be a search for best practices, looking at how

the governments of our major competitor countries go about promoting exports. We

already know they dedicate more resources—that is not the only issue. We want to

learn more about their most effective programs, and apply any lessons that are appropriate to our own programs. We will be looking for best practices in the private

sector as well, and applying any lessons we learn.

We have already gathered initial data from embassy posts on the export promotion services of our G–7 trading partners, plus South Korea, the Netherlands,

Spain and Sweden. This information will help us send out a more specific request

for State economic officers and our commercial service officers to provide a more detailed analysis of some of the most intriguing best practices.

One of the first things we already know is that many of our competitors have

benchmarked their programs and are copying as best practices some of our own programs. South Korea’s trade promotion agencies have adopted the products and nomenclature of U.S. business matchmaking services such as our Gold Key, International Company Profile, Customized Market Analysis and International Partner

Search services. Italy has established a network of regional ‘‘one stop shops’’ similar

to the U.S. Government’s Export Assistance Center strategy. And nearly all the

competitor governments we are looking at have established centralized call centers

and Internet portals similar to our own.

We have developed some excellent programs, and validation of some of these efforts is important. But the main purpose of looking at programs in other countries

is to learn how we might improve our programs. Governments in these countries

have many of the same goals and face many of the same challenges as the United

States. To the extent they have developed innovative solutions, we should be open

to learning and to change.

We have discovered some interesting themes. A core mission of all of these countries is to promote the exports of small business. For example, despite recent budget

cuts, the French have modernized their export promotion services and focused them

on SME’s. The South Korean government is now committed to moving away from

the dominance of ‘‘chaebols’’ (conglomerates) as its foundation of export strength and

is focusing its programs on small business. They have a number of innovative programs, including a Small Business Corporation—with a budget of $4 billion funded

through lottery tickets—to provide SME’s with financial and technical assistance to

improve their competitiveness.

Not only do these governments focus their programs on small business, but also

in many cases they target these initiatives to developing countries. In 2000, the

French targeted Eastern Europe and other emerging markets for the export of hightech services. Canada has packaged services to help exporters enter emerging markets, and recently focused on South America. Spain has a ‘‘Master Plan’’ for increasing access to the Asia Pacific region, coordinated through a number of ministries.

A second theme is that a number of countries’ export and investment promotion

programs are more integrally linked. For example, Japan’s new ‘‘region to region investment promotion program’’ links complementary regions rather than working

with individual firms. Recently they matched a Japanese region known for making

eyeglasses with an Italian city known for high fashion.

Third, there is an enormous emphasis on leveraging the Internet to promote exports. In Sweden, the Trade Council’s websites have become the most important

source of information to exporters. The free-to-user advice service has become increasingly sophisticated since it was initiated in 1996, with over 80 percent of users

responding that they always find what they are looking for. The British also have

a comprehensive e-business strategy, including e-business services, e-business infrastructure, Market Access Online and Trade Partners UK.

It will be very interesting to see how our recently launched ‘‘Buyusa.com’’ on-line

matchmaking operation stacks up. By applying U.S. leadership in Internet utilization to export promotion, this unique partnership with IBM puts the full network

of the United States and Foreign Commercial Service’s 1,800 experienced professional trade specialists around the world and throughout the United States behind

each business relationship and transaction.

Fourth, a number of competitors place a heavy emphasis on technical assistance

to promote exports. In the United Kingdom, the government helps toward the cost

of bringing decisionmakers in key countries to the United Kingdom for training by

British companies. It is designed to help new business contacts in export markets

familiarize themselves with British technology, production methods and management skills. Japan’s International Cooperation Agency—with a budget of $1.9 bilVerDate 11-MAY-2000 09:59 Aug 26, 2002 Jkt 000000 PO 00000 Frm 00030 Fmt 6633 Sfmt 6621 80952.TXT SBANK4 PsN: SBANK4
27

lion—administers grants that fund technical training of potential foreign buyers in

Japan and dispatches technical experts abroad.

The final phase of our benchmarking study will be our analysis and comparisons

of our programs with other best practices. We have broken down all of our programs

into a short list of export promotion ‘‘processes,’’ such as providing information, marketing, small business trade finance, investment insurance, linking policy and promotion, and evaluation of our services and coordination. Our goal is to benchmark

each of these processes with the best practices we identify, and develop recommendations that will put us on a course toward world class export promotion

services. We expect these recommendations will be both strategic and programmatic

and identify what we do best while responding effectively to our competition. They

will address both duplication and gaps in our services and attempt to leverage opportunities between agencies, the private sector and other export service providers.

We intend for this to be an ongoing program of review that will provide us with

continuous feedback on the scope and quality of our programs, so that they reflect

the changes our exporters face everyday in the global marketplace.

Mr. Chairman, we hope this vision is consistent with what you intended the

TPCC to be when you created it in 1992. I am sure I speak for my colleagues when

I say that we appreciate the fact that there is such a vehicle available to help us

improve and better coordinate our programs at this important juncture.

—————

PREPARED STATEMENT OF JOHN E. ROBSON

CHAIRMAN AND PRESIDENT

EXPORT-IMPORT BANK OF THE UNITED STATES

VICE CHAIRMAN TRADE PROMOTION COORDINATING COMMITTEE

OCTOBER 2, 2001

Thank you for inviting me to testify as the Vice Chairman of the Trade Promotion

Coordinating Committee (TPCC) and as Chairman of the Export-Import Bank of the

United States (Ex-Im Bank). While other agencies unite American exporters and

foreign buyers, the Export-Import Bank provides the financing to generate successful transactions in emerging markets. Other agencies provide aid to needy countries.

We attempt to level the playing field for U.S. businesses by ensuring that buying

decisions are made on the basis of normal market forces and not on the basis of

market imperfections such as financial support from official foreign credit agencies.

We consider this institution a valuable part of the overall U.S. economic arsenal.

As directed by our Charter, Ex-Im Bank only approves transactions for which we

can conclude that there is a ‘‘reasonable assurance of repayment.’’ The word is in

our name, but let me reiterate that we are the Export-Import Bank of the United

States. We work to preserve the competitiveness of U.S. exporters against foreign

competition, but we also watch over the taxpayer dollars. We do not compete with

commercial banks. We help them go where they are unable to go without the backing of the U.S. Government.

Because this Bank works in partnership with business and labor, because it

keeps exporters competitive, and because it helps create good jobs for U.S. workers,

Congress and the Executive Branch have recognized the continuing need for a

vigorous Ex-Im Bank. Ex-Im, and the other agencies represented here today, are

working hard to align institutional goals and processes with the new global economic environment. While the trade promotion coordination effort is not new, it

should be renewed. Thus, Secretary Evans and I, and the other distinguished members of this panel, are committed to a plan of cooperative action that will deliver

tangible results.

Now let me talk about Ex-Im’s role in this new effort. My vision, like all of those

officials represented here, is to use the TPCC as a management vehicle to ensure

that the appropriate resources of the U.S. Government can be in the right place,

at one time, and coordinated to meet the needs of consumers and customers. ExIm Bank is working with all the members of the TPCC on the benchmarking survey

and strongly supports this effort. Secretary Evans explained what we plan to

achieve with the benchmarking survey. Let me outline what Ex-Im Bank, and U.S.

companies, are up against in terms of foreign competition, and why we believe we

need this survey as part of the National Export Strategy.

In general, wages for jobs supported by exports pay 13 to 16 percent more than

the national average. This applies to both skilled and unskilled labor, and to both

small and large firms. Employment in exporting firms grows 15 to 40 percent faster

than in nonexporting firms. And exporting firms are 9 percent less likely to fail in

28

any year than comparable firms that do not export. This is something of the global

reality we are now facing.

Most of our G–7 competitors have fundamentally changed their approach to providing ‘‘a competitive edge’’ and reoriented their organizations to focus on that edge.

While in the 1970’s and 1980’s the key competitive tool was cost—interest rates,

fees, etc.—by the late 1990’s the key was to find that one aspect of financing in

which a country or a company has a comparative advantage and magnify its role— more of a quality differential. A core mission of all our major competitors is to not

just to promote exports, but also to promote exports from small companies.

As Secretary Evans’ mentioned, the TPCC is reaching out to small- and mediumsized companies in the United States through a survey that seeks to identify obstacles to exporting. Ex-Im Bank is an active participant in this survey process. We

have provided specific survey questions related to trade finance issues, and we have

identified survey participants whose experiences will add value to the body of

knowledge in this area. The information gathered by this survey will equip TPCC

agencies to better handle the specific challenges exporting presents to this largely

untapped pool of potential exporters. Our task is to turn that information into

programs and policies that address the needs our customers have identified. This

exercise is a prime example of how a coordinated interagency process can leverage

resources and tackle several issues with a single tool.

That said, I must urge everyone here today not to lose sight of the increasingly

coordinated efforts other countries have made in terms of their trade promotion.

Foreign export credit agencies have been more aggressive in developing programs

to assist their exporters. U.S. trade agencies must be aware of these efforts so that

they do not lag behind others in an increasingly competitive global landscape.

As part of fulfilling a TPCC initiative to identify the ‘‘best practices’’ of trade promotion exhibited by competitor governments and the private sector, Ex-Im Bank has

reviewed the activities of other ECA’s around the world. Of all the countries we face,

Ex-Im Bank’s stiffest competition is from Canada, Germany, Japan and the United

Kingdom.

Canada has become more proactive and aggressive regarding its trade promotion

and exports. They have changed their focus from the creation of domestic jobs

to assisting the exporting company itself. Canada has structured its export credit

agency (EDC) to become an active banker in a transaction, encouraging more

foreign buyers to purchase Canadian products. They have developed an essentially

commercial, market-oriented agency, called a market window, regarding fees and

foreign content in which the Canadian government pushes aside its own banks and

directly competes with our commercial banks, as well as with Ex-Im Bank. But this

is a government agency, and obtains money at sovereign cost and pays no taxes

or dividends.

Germany is another country that has changed its approach to export promotion.

The key to the German approach is their export credit agency Kreditanstalt fur

Wiederaufbau (known as KfW). Up until the mid-1990’s, KfW acted solely as Germany’s aid agency. The German government then decided to assign an export objective to KfW, and to make those export financing activities self-supporting, although

KfW does benefit from tax and cost-of-funds similar to those of the Canadian export

credit agency. In the last 5 years, KfW has become perhaps the largest medium/

long-term export credit provider in the world, with most of this business conducted

outside of OECD controls. Using KfW, Germany can give special support to targeted

sectors such as aircraft, and operate in areas where export agencies are constrained.

Germany’s current strategy is to find ways to expand the utility of KfW while protecting it from OECD control.

In addition to the Market Windows of Canada and Germany, Ex-Im Bank must

face competition from Japan through its tied aid transactions. The Japanese export

credit system is the least like Ex-Im Bank in terms of mission, legislative oversight,

transparency, and sensitivity to external concerns such as the environment, human

rights, and so on. In response to the Japanese recession and the Asian economic crisis, Japan has adopted an aggressive strategy of increasing its disbursement of tied

aid. In 1992, Japan provided $190 million in tied aid support. By the year 2000,

this support had increased to $4 billion. These numbers, and continued concern that

Japan operates its ‘‘untied’’ aid program so that much of it is de facto tied, push

the envelope on international rules governing government aid programs.

Finally, in the United Kingdom, Ex-Im faces competition from the Export Credit

Guarantee Department (ECGD). The ECGD is the export credit agency most like

Ex-Im Bank in terms of its basic mission, legislative oversight, transparency, and

sensitivity to current political events. However, the ECGD has recently remodeled

itself to be a customer-driven ECA, aggressively responding to the changing export

environment by positioning itself to be a ‘‘one stop shop’’ and is entering cofinancing

29

arrangements with other ECA’s. Lately, other credit agencies such as Hermes of

Germany and COFACE of France, have entered into similar reinsurance agreements

based on the ECGD model.

Ex-Im Bank will continue to watch the practices of other ECA’s and the trade promotion activities of other nations. We will continue to engage intermediaries involved in international trade and improve our export promotion programs to better

compete with other exporting nations. In addition, we will continue to think and act

creatively to respond to the rapidly changing patterns of global trade and to provide

U.S. exporters with the support they need to succeed in this dynamic environment.

TPCC coordination will be at the center of these efforts.

Thank you.

—————

PREPARED STATEMENT OF HECTOR V. BARRETO

ADMINISTRATOR, U.S. SMALL BUSINESS ADMINISTRATION

OCTOBER 2, 2001

Mr. Chairman, Ranking Member and distinguished Members, thank you for inviting me to testify today about the Trade Promotion Coordinating Committee’s preliminary report and the role that the U.S. Small Business Administration (SBA)

plays in the Federal Government’s export promotion strategy.

The Bush Administration recognizes the critical link between the U.S. domestic

economy and our foreign trade policy. Expanding trade has shown to have many

benefits in the United States and around the world. Trade expands markets, grows

business and creates jobs. This translates to more choices and better prices for

American consumers.

Free and open markets foster economic and political freedom, strengthen democracy and enhance our national security. The Bush Administration is focused on

achieving these goals, and it is essential for the Congress and the Administration

to work together to increase opportunities for U.S. businesses in international trade.

While the United States is certainly open for business, passage of Trade Promotion Authority will demonstrate to the world that the President and the U.S.

Congress are united in their desire to further open trade globally. We need to do

as much as possible to give businesses in America every opportunity to succeed by

enabling them access to all markets. TPA will remove barriers to allow these businesses involved in international trade to thrive in a global economy through free,

fair and open markets, thus allowing U.S. small businesses to become more competitive in the global marketplace.

Currently 97 percent of U.S. exporters are small businesses, numbering a little

over 200,000. However, they account for just under a third of the total value of U.S.

export sales. This is why SBA’s role in fostering U.S. small businesses is so important. Each of SBA’s financial and technical assistance programs can assist

businesses interested in exporting and we have specific programs in place to assist

in creating markets outside the United States. However, to date, our efforts and

results have been sporadic.

I intend to more effectively focus our efforts. Through expanded public/private

partnerships we can facilitate access to needed information and capital with the

goal of increasing revenue, employment and business longevity. Firms engaged in

trade are 20 percent more productive, pay wages which are 15 percent higher than

nontraders, are 9 percent less likely to go bankrupt and they experience 20 percent

greater job growth. The following represents a discussion of SBA’s programs and

services which we will be examining as part of the TPCC process and as we listen

to our customers.

Access to Capital

SBA has several loan programs tailored to small businesses in search of capital

to either start or expand their business in exporting. They are the International

Trade Loan Program, the Export Working Capital Program, and SBA’s Export Express. For fiscal year 2001, we approved 419 export loans with a value of $167 million. The International Trade Loan Program provides long-term financing for fixed

assets and working capital up to a maximum of $1.25 million for companies impacted by foreign competition or expanding exports.

The Export Working Capital Program is a short-term (less than a year), transaction-backed guaranty program. The program was established by working closely

with the Export-Import Bank of the United States (Ex-Im Bank) to develop a seamless product for all of our customers, including the use of the same application for

both programs. SBA’s program has a maximum of $1 million. The Ex-Im Bank proVerDate 11-MAY-2000 09:59 Aug 26, 2002 Jkt 000000 PO 00000 Frm 00033 Fmt 6633 Sfmt 6621 80952.TXT SBANK4 PsN: SBANK4
30

gram addresses the needs of companies in excess of that amount. In fiscal year

2000, the average SBA EWCP borrower had 9 employees and the average size of

the loan was $400,000. The average size Ex-Im Bank loan was $1.6 million.

One example of a firm that has prospered with SBA’s EWCP assistance is American Microwave Incorporated of Frederick, Maryland. American Microwave manufactures electronic components for defense systems. In the early 1990’s, a cash flow

problem brought them to the SBA’s Export Working Capital Program. The EWCP

program enabled them to expand their export efforts from $40,000 in initial revenues to $2.4 million today.

To help firms with small export finance needs, on October 1, 2000, the Agency

rolled out its pilot export loan guaranty product, called SBA Export Express (Export

Express). Export Express provides loan guarantees on export loans of up to

$150,000. This product can be used to finance export development costs such as participation in a foreign trade show or translation of product catalogs, as well as finance actual orders. We have nearly 300 lenders around the country eligible to participate in Export Express lending. We believe it will provide much-needed financial

assistance to the fastest growing sector of the small business export community—

the service sector.

Let me give you two examples of how this loan program is being used:

• One of the first loans SBA approved under Export Express was to a firm in Jackson, Mississippi for $11,000. This company exports produce to South America.

• In May 2001, SBA provided an Export Express loan guaranty for $50,000 to a Los

Angeles small business distributor of piping insulation and industrial chemicals.

They used the proceeds of the loan to support their participation in a trade show

in Seoul, Korea. The firm returned from the trade show with orders totaling $4.8

million.

Providing Technical Assistance and Access to Information

Technical assistance and access to information are some of the greatest needs of

U.S. small businesses according to the TPCC’s National Export Strategy report. As

with our access to capital programs, SBA has public/private partnerships in this

area to satisfy these needs.

SBA is a partner with the Department of Commerce (DOC) and Ex-Im Bank in

the U.S. Export Assistance Center (USEAC) network, colocated at 19 different sites

nationwide. SBA/USEAC personnel serve as the primary delivery mechanism for the

Agency’s export assistance programs, including marketing, counseling and processing of loan applications. USEAC’s also provide a critical link between small business clients and a vast array of export promotion services offered by the Federal

Government.

To help firms become export-ready, SBA took the lead in working with our public/

private partners in creating the Export Trade Assistance Partnership (E–TAP) initiative. E–TAP is a customized process of taking a small group of export-ready companies through all the stages of becoming an exporter. These stages include market

research, financing, insuring shipments, and dealing with freight forwarders. Many

E–TAP courses incorporate foreign trade events as part of the program. Because

of the scope of customized assistance, this program would not be possible without

the dedicated support of SBA’s private and public sector partners. Partners who provide coordinated assistance include SBA’s Small Business Development Centers

(SBDC’s), particularly their International Trade Centers, Service Corp of Retired

Executives (SCORE), DOC’s Commercial Service, Ex-Im Bank, State and local trade

offices, individual freight forwarders, customs brokers, insurance brokers and international attorneys. All bring together essential export information, at little cost to

the small business.

In fiscal year 2000, SBA delivered E–TAP training to 328 small business participants, resulting in export sales of $138 million. This initiative made it possible for

an E–TAP-trained company in Dallas, Texas to grow their export markets and use

SBA’s capital programs. They produce a niche medical product, which essentially allows for the repair rather than the replacement of oxygen sensors used by hospitals

for monitoring trauma victims. The company now exports to over 30 countries.

Conclusion

I am excited about prospects for U.S. small business in the global marketplace.

We realize the need to reach more of the 25 million small businesses in the United

States today. We need to do a better job of outreach, and listen to them in order

to adapt and create products that meet their changing needs. We are committed to

expanding our tradition of enrolling our public and private partners in these efforts

and will continue to work toward these goals with our TPCC partners.

31

It is an exiting time to be involved in international trade, and we have a President who has made it a priority to assist the American businesses in the global marketplace. I look forward to working with our President, other TPCC members and

the Congress to assist our small business exporters.

Thank you. I would be happy to answer any questions you may have.

—————

PREPARED STATEMENT OF PETER S. WATSON

PRESIDENT AND CHIEF EXECUTIVE OFFICER

OVERSEAS PRIVATE INVESTMENT CORPORATION

OCTOBER 2, 2001

Mr. Chairman and Members of the Committee, thank you for the strong leadership and support you have given toward establishing a coordinated United States

trade program. It is a privilege for me to join in this panel today with my distinguished colleagues from the Commerce Department, Small Business Administration,

Export-Import Bank (Ex-Im Bank) and Trade and Development Agency (TDA).

As you have heard today, the Trade Promotion Coordination Committee (TPCC)

is poised to assess and reinvigorate a unified trade program for the U.S. Government, a particularly important responsibility given the economic disruption which

we have experienced since the tragedy of September 11.

Our success will be driven considerably by the guidance and vision which Secretary of Commerce Don Evans has given the TPCC, in part based on his long years

of private business experience, and by the strong leadership of Under Secretary of

International Trade Grant Aldonas, who has helped develop the blueprint before

you today.

Even before the creation of the TPCC, the Overseas Private Investment Corporation (OPIC) has had a long tradition of cooperation with its sister agencies. Today,

I pledge to build and strengthen that relationship.

OPIC plays a vital role in the economic and social development of less developed

countries and areas, as well as countries in transition from nonmarket economies.

These countries look to U.S. investment to help create jobs, improve infrastructure,

generate goods and services, and thereby contribute to economic growth and the creation of free-market systems. As a developmental agency, OPIC can help stabilize

financial markets in the developing world by facilitating U.S. private investment in

countries most in need of support and economic development.

As the primary U.S. Government agency focused on private sector investment in

exclusively the developing world and emerging economies, OPIC builds on the

premise that trade is the initial step in the international expansion of a company.

Only after a manufacturing company is comfortable with the establishment of export relationships and is confident of an overseas market for its products will it seriously contemplate the next step of making an overseas investment. For this reason,

we have valued and benefited from the cooperation, support and information flow

from all of the trade agencies represented on the TPCC.

At the same time, we are keenly aware that OPIC’s mission is in many ways distinct from that of the more traditional trade agencies. OPIC is an integral part of

the foreign assistance program of the United States, born out of the Marshall Plan,

and focused on the belief that concessional aid alone cannot bring about the economic development so sorely needed in much of the world.

Private investment has been viewed as a highly effective method of achieving the

goal of teaching nations ‘‘how to fish’’ rather than giving them fish. And years of

experience have amply demonstrated that U.S. overseas private investment continues to be a magnet for U.S. exports as overseas affiliates of U.S. companies

source their goods and services from here. And so, OPIC has the enviable job of supporting investments that not only serve our Nation’s foreign/development assistance objectives, but also have beneficial impacts in the U.S. through the creation

of export-related jobs.

Our focus is increasingly on those countries where the needs are greatest and on

the U.S. small and medium businesses that otherwise would hesitate to expand

overseas without OPIC financing or insurance. Fortuitously, these are the same

markets where our Nation’s trade assistance programs as implemented by fellow

members of the TPCC can also have significant impact. It is the developing country

markets that will continue to grow the fastest and it is those same markets where

our exports are in demand.

We have already seen the benefits of interagency cooperation in the recent White

House visit of Indonesia President Megawati. During that visit President Bush anVerDate 11-MAY-2000 09:59 Aug 26, 2002 Jkt 000000 PO 00000 Frm 00035 Fmt 6633 Sfmt 6621 80952.TXT SBANK4 PsN: SBANK4
32

nounced a joint trade and finance initiative developed by OPIC, the Ex-Im Bank and

TDA. This cooperative undertaking will provide up to $400 million in financing to

promote trade and investment opportunities in Indonesia, with OPIC and Ex-Im

Bank focusing on projects in the oil and gas sector. Financing will be subject to the

normal terms and conditions established by each agency’s programs. OPIC is

pleased to join with our sister agencies to support the President’s policy of assisting

economic development in Indonesia, an important U.S. ally and a country with the

world’s second largest Muslim population, and I can report today that discussions

are already underway with private sector companies that could fulfill this important

commitment to Indonesia.

Another area of cooperation is promotion of business development in countries

of specific U.S. interest. I am pleased to be a participant in the business development delegation being led by Secretary of Commerce Evans to Russia on October 14–16, 2001. The mission, undertaken at the direction of President Bush, will

include senior executives from approximately 15 U.S. companies representing a

variety of sizes and sectors. The mission will affirm U.S. Government support of

Russia’s economic reforms and assess ways to improve access by U.S. businesses to

the Russian market.

OPIC continues to play a key role in the TPCC’s interagency Advocacy Network,

which provides systematic U.S. Government advocacy support to small, medium,

and large U.S. exporters to help level the playing field against foreign competition

and win foreign government contracts. Through the Commerce Department’s Advocacy Center, OPIC has worked closely with advocacy counterparts from the trade

agencies, providing financing and insurance support for U.S. exporters involved in

various industry sectors in emerging markets and developing economies worldwide.

The ‘‘team approach’’ employed by OPIC, the Departments of Commerce and State,

and the United States Embassy in Bulgaria in providing continuous and aggressive

advocacy support, including $200 million in political risk insurance, for a $450 million United States power plant project in Bulgaria epitomizes the importance of

TPCC interagency cooperation.

OPIC Will Refocus Its Activities Toward Development

At its core, OPIC remains committed to return to its overarching developmental

mandate. OPIC’s principal mission is ‘‘to mobilize and facilitate the participation of

United States private capital and skills in the economic and social development of

less developed countries and areas, and countries in transition from nonmarket to

market economies, thereby complementing the development assistance objectives of

the United States.’’

Since 1971, OPIC has accomplished this mission by supporting more than 3,000

projects throughout the developing world. Cumulatively, these projects have supported host country jobs and have contributed to the host country tax base and infrastructure. As of March 31, 2001, OPIC is managing a portfolio of 316 active

projects in locations that range from Algeria to Zimbabwe. The activities of these

projects are diverse and include manufacturing plants, communications operations,

gas pipelines, power plants, financial services institutions, mining operations, tourism/hotel projects, and agricultural operations.

Equally true is the proposition that U.S. small and medium businesses are increasingly important drivers for our economy and have the most to gain from increasing their share of the export market. All of this gives me great confidence that

despite differences in our mandates, OPIC and the other members of the TPCC will

continue to have great synergy in our work and in achieving results that are critical

for long-term economic development abroad at the same time that they create jobs

and exports here in the United States.

We at OPIC look forward to the benchmarking exercise that the TPCC has

launched and applaud the outreach to customers of our services. We are committed

to serving them as effectively and efficiently as possible and tailoring our products

and services to meet their changing needs. Indeed the work of the TPCC will complement quite well the work that OPIC itself has embarked upon in assessing its

programs, refocusing our efforts toward the countries in greatest need and streamlining our operations.

OPIC Will Make Small Business A Top Priority

OPIC’s authorizing legislation directs the agency to pay special attention to the

needs of American small businesses. However, OPIC has yet to fulfill its potential

in this area. In the coming months, OPIC will reexamine its opportunities to assist

small business.

One particular avenue that we have already identified and are exploring is the

extent to which OPIC can complement or even leverage the work of other agencies.

33

For example, the U.S. Small Business Administration (SBA) is a great resource for

U.S. small businesses that are seeking to establish themselves or expand in and

from the United States, which may be significantly enhanced with OPIC support.

We are engaging for OPIC to partner with the SBA in a mutually beneficial manner

that would advance the achievement of both agencies’ missions. OPIC is also working closely with the U.S. and Foreign Commercial Service at the Department of

Commerce to provide small companies with the most up-to-date information on

international markets and the appropriate financing tools they need.

Most importantly, such cooperation would greatly assist American small businesses seeking to establish a presence in developing regions. Small businesses often

do not meet the profile that private sector financial institutions and insurers are

looking for in their overseas clients. This is where the development goals of the U.S.

Government, the needs of small business, and OPIC’s programs intersect. With

OPIC’s assistance, the proven dynamism of U.S. small businesses can be leveraged

to produce viable projects in the developing world.

OPIC Will Streamline And Improve Business Procedures

In addition to the TPCC review, OPIC’s management and staff are committed to

increasing responsiveness to stakeholders and streamlining business processes. By

streamlining OPIC’s application process and publicizing OPIC’s political risk insurance and finance products, OPIC will continue to improve its efficiency and effectiveness. Minimizing red tape and providing responsive service to all who have an

interest in the agency’s operations is one of the critical links in OPIC’s efforts to

leverage its funding into viable projects. Toward this end, OPIC will:

• Be Responsive to the Needs of Clients and Stakeholders. Through customer surveys and hosting annual client conferences, OPIC will explore new ways to improve communications with its clients and stakeholders, both in formal and informal contexts.

• Streamline Application Processes. One of the most effective ways that OPIC can

improve its ability to leverage investment is by eliminating bureaucratic procedures. By streamlining its paperwork requirements and adopting electronic processes, OPIC will be better able to serve American businesses—both large and

small—that cannot afford a long and expensive application process that is not

geared to the faster pace of decisionmaking that is required today.

• Delay the Decisionmaking and Approval Process. In keeping with Presidential

guidance to make Government more citizen-centered, OPIC is reducing the distance between the line staff who deal with the public on a day-to-day basis and

program leadership.

OPIC’s Programs And Benefits

For those less familiar with OPIC’s responsibilities of supporting development and

stability in strategic regions around the world, let me describe our programs and

their results.

Because of its core development and foreign policy mission, OPIC operates under

the Foreign Assistance Act, under the direct oversight of the Senate Foreign Relations Committee, and the Subcommittee currently chaired by Chairman Sarbanes,

and formerly chaired by Senator Hagel. Working together, they have given OPIC

a strong vision for promoting international economic development which also provides significant benefits to the United States at no cost to the taxpayers.

OPIC provides financing and political risk insurance to mitigate the risks faced

by U.S. investors in emerging markets and developing economies where private support is generally not available. Insurance is available for up to 20 years for new investments in new projects or expansions of existing projects. OPIC protects against

the risks of inconvertibility, expropriation, and political violence.

OPIC provides financing to U.S. companies, or companies with significant U.S.

management involvement, in the form of direct loans and loan guaranties with

medium- to long-term repayment terms. OPIC also supports the creation and capitalization of long-term, private direct equity funds that invest in new, expanding,

or privatizing companies in emerging and developing market economies.

All OPIC-supported projects must be financially sound, promise significant benefits to the social and economic development of the host country, and cause no harm

to the U.S. economy. Projects must also avoid major or unreasonable environmental,

health and safety impacts, and comply with OPIC’s statutory requirements with respect to internationally recognized worker rights.

I am pleased that OPIC projects are having a positive impact in developing countries. OPIC projects have helped developing countries to generate host-government

revenues and create host-country jobs. At the same time, OPIC-supported investVerDate 11-MAY-2000 09:59 Aug 26, 2002 Jkt 000000 PO 00000 Frm 00037 Fmt 6633 Sfmt 6621 80952.TXT SBANK4 PsN: SBANK4
34

ments are helping create American jobs and U.S. exports. Over the agency’s 30-year

history, OPIC has supported $138 billion worth of investments that will generate

$64 billion in U.S. exports and support nearly 250,000 American jobs.

In fiscal year 2000, OPIC assisted 40 projects in 27 countries or regions, involving

a wide range of industries. These projects will have a significant developmental impact in the host country. Thirty-seven of the 40 OPIC-supported projects in fiscal

year 2000 were located in the low- and middle-income developing countries. The

projects are also expected to generate $2.3 billion in U.S. exports, support over 6,000

U.S. jobs and have a positive impact on the U.S. balance of payments.

Forty percent of all projects OPIC supported in fiscal year 2000 involved U.S.

small businesses. Data on the specific U.S. companies that will provide goods and

services to OPIC-assisted projects for the 7 fiscal years 1994 through 2000 show the

specific U.S. suppliers for $11.4 billion in expected procurement for OPIC-assisted

projects. These U.S. companies are located in 46 States. It is estimated that approximately 62 percent of these identified suppliers to OPIC-backed projects are U.S.

small businesses.

Finally, it is very important to note that at the same time OPIC is reaching out

to serve the needs of small business in challenging regions, OPIC remains financially strong. In fiscal year 2000, OPIC generated net income of $185 million and

received an unqualified audit opinion from the independent accounting firm of

PricewaterhouseCoopers LLP. At the close of fiscal year 2000, OPIC’s combined finance and insurance portfolio maximum exposure was $16.8 billion while accumulated reserves reached a record $4 billion. This balance provides strong financial

protection against future claims or defaults.

OPIC projects are having a broad impact across the globe. In South America,

OPIC is helping build the foundation for economic growth in the region by supporting various infrastructure projects in the telecommunications, energy, and banking sectors. In Trinidad and Tobago, OPIC is providing financial support for the

development of a seawater desalination plant that will help alleviate chronic drinking water shortages in the country.

In Africa, recent projects involve a wide variety of sectors, such as gas field development and production, a tourist hotel, a microlending facility for microenterprises,

and a toothpaste manufacturing facility. In Equatorial Guinea, OPIC provided a

$173 million guaranty for the construction, ownership and operation of a methanol

plant. This is the largest single investment OPIC has ever supported in subSaharan Africa. The project will contribute simultaneously to private sector development in Equatorial Guinea and to the improvement of local air quality by processing

gas that would otherwise be flared.

Elsewhere, OPIC recently approved a $2.5 million direct loan to support home improvements in Mexico—OPIC’s largest project in Mexico since establishing a new

small business initiative there. The OPIC direct loan, to Maryland-based CHF International (Cooperative Housing Foundation), will help establish a new on-lending

facility to provide loans for home improvements in Mexico, including the provision

of safe and adequate housing for workers along the United States-Mexico border.

Proceeds of the loan will go to Mexican nonprofit organizations, which in turn will

lend money to individual Mexicans to finance home improvements. CHF will also

offer educational programs for potential lenders and borrowers.

CHF, which celebrates its 50th anniversary next year, has since 1962 provided

international shelter-related technical and capital assistance and training, and currently supports programs in Mexico, Gaza, Honduras, Jordan, Lebanon, Philippines,

Romania and El Salvador. Adequate housing is the most basic unit of a country’s

infrastructure, and a necessary foundation for its economic development. OPIC is

pleased to work with a respected organization such as CHF to enable Mexico to improve its housing stock, to the economic benefit of both our countries.

In the Philippines, OPIC has supported Counterpart International and its affiliate

EnviroVentures for the first two projects to be financed by a $1 million initiative

to assist environmentally friendly small- and medium-sized enterprises. OPIC released $200,000 in loans for construction of environmentally sustainable low-cost

housing, as well as for a project expanding the marketing program for a seaweedbased fertilizer product. For the housing project, construction materials that require

less energy to produce than do standard materials will be purchased from small

local producers, thereby benefiting both the environment and the small business

community. The seaweed-based fertilizer project, will benefit the environment in

two ways: First, the fertilizer product is manufactured by recycling waste from local

seaweed processing plants. Second, increasing the use of organic versus chemical

fertilizers is environmentally beneficial, particularly in areas of the Philippines

where overuse of chemical fertilizers is a concern.

35

As part of its continuing effort to promote private investment in the Newly Independent States, OPIC supported a project to restore an historic hotel in Armenia,

one of the largest private foreign direct investments of its kind in Armenia. OPIC

is providing an $18 million loan to a small business group comprised largely of

Armenian-Americans to privatize the Hotel Armenia—the agency’s first finance deal

in the Caucasus nation. Opening of the Hotel Armenia project is expected to spur

economic development in Armenia and to foster tourism. The project is expected to

generate $25 million in U.S. exports during the first 5 years of operation. In addition, approximately $14 million will be spent in Armenia on renovating the hotel,

plus annual operating procurement of $6 million from the host country. The project

will also bring much-needed private sector career training in the hospitality sector

to Armenia, as Marriott International, Inc. will manage the hotel and train the staff

in the hospitality practices and procedures developed for its hotels worldwide.

Conclusion

Looking ahead, in cooperation with our TPCC colleagues, OPIC’s activities will

focus closely on development and companies and countries that have difficulty accessing private financing or insurance. OPIC will also increase its efforts to ensure

that its programs complement the private market rather than compete with it.

Working together we can develop OPIC as a foreign policy program focused on development that is making an important difference to people in developing countries

and in America, as well.

I will be pleased to respond to your questions.

—————

PREPARED STATEMENT OF THELMA J. ASKEY

DIRECTOR, U.S. TRADE AND DEVELOPMENT AGENCY

OCTOBER 2, 2001

Introduction

Good morning, Chairman Sarbanes, Senator Gramm and Members of the Committee. A number of you have been friends of the U.S. Trade and Development

Agency (TDA) for many years, and are well acquainted with the agency. However,

I recognize that TDA is a small agency outside the jurisdiction of the Banking Committee, and I would like to take this opportunity to outline briefly what the agency

does and how it works with the Trade Promotion Coordinating Committee (TPCC)

to promote U.S. exports and create American jobs.

What TDA Does

TDA promotes American private sector participation in development projects in

low- and middle-income countries, with special emphasis on economic sectors that

represent significant U.S. export potential. As you all know quite well, this is no

easy task in today’s global marketplace. In addition to the substantial economic

challenges facing U.S. exports in many markets, U.S. firms face aggressive competition from foreign producers for contracts associated with projects in the countries

where TDA operates. TDA’s biggest competitors for overseas projects are Japan,

Canada, and the European Union and its member states.

Overseas competitors often receive substantial assistance from their home governments in pursuing projects. Many, if not most, of the countries I named earlier use

foreign aid programs to secure contracts for their companies. They also concentrate

their foreign aid on influencing spending by the World Bank and other multilateral

development banks (MDB’s) through trust funds. While TDA also maintains trust

funds at these institutions, the contributions made by other countries dwarf TDA’s in size. Because of the manner in which MDB’s look for financing, these larger trust

funds give TDA’s competitors an edge in identifying project opportunities for their

national companies.

TDA works hard to level this uneven playing field. Because foreign governments

provide higher assistance levels to their businesses, TDA must work harder and

smarter to produce results for U.S. firms. In particular, most of TDA’s work focuses

on the initial planning stages of development projects. By supporting U.S. company

involvement at the ground level, TDA enhances the chances that project specifications will be compatible with U.S. standards and that U.S. firms will be well positioned for follow-on project work.

TDA’s ‘‘toolbox’’ for fighting unfair foreign competition contains a number of

instruments. The most common tools are funding feasibility studies, conducting

orientation visits, and hosting trade conferences. TDA also provides training and

technical assistance grants, and performs preliminary internal due diligence efforts

36

to evaluate potential development projects and ensure that potential projects warrant the use of taxpayer funds. TDA’s technical assistance may be project specific,

or more broadbased, supporting capacity building institutions and trade agreement

implementation. These tools assist TDA in building mutually beneficial partnerships

between American companies and overseas project sponsors, which result in increased U.S. exports and jobs and the completion of high quality, successful projects

in host countries. All TDA-provided assistance such as feasibility study grants or

technical assistance must be used to hire U.S. firms to conduct the work.

For funding consideration, all TDA-affiliated projects must meet four criteria. The

project must:

• Be likely to receive implementation financing and have a procurement process

that provides ‘‘equal access’’ to U.S. firms. • Represent an opportunity for sales of U.S. goods and services that is many times

greater than the initial investment of TDA assistance. • Be a development priority of the country where the project is located and have

the endorsement of the U.S. Embassy in that nation. • Face strong competition from foreign companies that may receive subsidies and

other support from their governments.

TDA’s goals are two-fold: helping American businesses export their products,

thereby creating jobs, while simultaneously promoting commercially viable economic

growth in developing and middle-income countries. Since 1981, TDA has been associated with more than $17 billion in exports—or over $35 in exports for every dollar

invested in its program activities.

I mentioned above that TDA provides technical assistance in areas such as telecommunications and the environment. These programs are among the U.S. Government’s tools for supporting capacity building initiatives and the implementation of

trade agreements. TDA can provide funding for technical assistance to countries as

they establish or revise laws and regulations, either in order to comply with existing

or anticipated international agreements, or as a part of an overall strategy to expand trade and economic capacity. TDA aims to provide resources to governments

seeking to create or modify their legal and regulatory structures in particular sectors that are compatible with competitive U.S. exports. Such assistance is intended

to support TDA’s dual trade and development mission by both fostering development

in the host country and assisting U.S. businesses develop relationships, which lead

to an increase of U.S. exports.

TDA has funded such broadbased technical assistance projects around the world.

For example, TDA has placed a technical advisor in the Venezuelan telecommunications agency, advisors in Bosnia and Herzegovina for developing infrastructure

programs related to energy and utilities, and a privatization advisor with the Romanian Ministry of Transportation to provide policy, technical and executive support

to privatization efforts. TDA is currently in the process of placing an advisor in

Azerbaijan to assist with that country’s World Trade Organization accession efforts.

TDA Work With Other Agencies

TDA has worked hard to achieve this level of success, but it has not done it alone.

TDA takes great pride in the close relationships it maintains with other U.S. Government entities in identifying and in pursuing U.S. export opportunities while advancing development priorities in low- and middle-income countries. The agency is

especially grateful to Secretary Evans for his leadership of the Trade Promotion Coordinating Committee. TDA believes that TPCC provides an excellent framework to

coordinate the U.S. Government’s trade promotion operations.

Most prominently, TDA works with TPCC policy agencies, such as the Departments of Commerce and State. Additionally, TDA frequently partners with the U.S.

Export-Import Bank (Ex-Im) and the Overseas Private Investment Corporation

(OPIC) to conduct trade promotion activities overseas and identify promising project

opportunities. Notably, the three agencies work together in joint centers in Croatia

and Turkey. In the near future, we will look to these field offices to respond more

quickly to the commercial and developmental needs of countries in strategic locales

and during difficult, uncertain times. TDA also supports initiatives of the Office of

the U.S. Trade Representative.

TDA is extremely proud of its ability to increase U.S. exports by working with

agencies that do not have a traditional trade promotion focus. For example, both the

Federal Aviation Administration (FAA) and the Federal Emergency Management

Agency (FEMA) have worked with TDA to promote U.S. exports in recent years. In

support of TDA trade promotion efforts, the FAA has trained foreign air traffic controllers in U.S. technology and FEMA has promoted U.S. emergency management

technology by cohosting emergency management conferences with TDA. TDA’s coVerDate 11-MAY-2000 09:59 Aug 26, 2002 Jkt 000000 PO 00000 Frm 00040 Fmt 6633 Sfmt 6621 80952.TXT SBANK4 PsN: SBANK4
37

ordination with these and other agencies allows TDA to promote U.S. exports and

helps project sponsors meet their development objectives by utilizing the specific expertise of a wide range of U.S. Government agencies. Moreover, TDA’s export and

development oriented mission helps other agencies to achieve their own international policy objectives.

FAA Projects

An example of where TDA has coordinated with the FAA is aviation technology

in India. Over the next decade, India’s air passenger traffic is projected to grow at

an annual rate of 12.5 percent for domestic travel and 7 percent for international

travel. TDA and the FAA are working to ensure that India can meet this demand

through the implementation of a modern and efficient integrated communications,

navigation, surveillance, air traffic, and maintenance (CNS/ATM) systems. To help

India develop this system, last year TDA provided a $450,600 grant to Airports

Authority of India (AAI) to hire an American firm to conduct a feasibility study on

implementing such a system. Subsequently, TDA funded a workshop for the FAA

to train AAI and Indian Ministry of Civil Aviation officials on the new technology.

As the leading manufacturer of CNS/ATM systems, TDA expects U.S. companies

to export over $180 million in procurements related to this project when it is

implemented.

FEMA Projects

TDA also has worked with FEMA on several events in recent years. In 2000, TDA

cosponsored an Asian regional conference with FEMA and the Department of Commerce on emergency management in Honolulu, Hawaii. The conference highlighted

40 projects in 10 Asian countries that hold significant United States export potential

in a variety of sectors, including flood plain management, disaster management information and communications systems, and interagency disaster training. The National Oceanic and Atmospheric Administration, the Data and Information Service,

the Centers for Disease Control and Prevention, the Department of Defense’s Center

for Excellence, the U.S. Agency for International Development, and the U.S. ExportImport Bank also participated in the Honolulu conference.

TPCC

As mentioned previously, TDA is an active member of the TPCC in its efforts to

coordinate trade promotion activities and develop trade-related data to evaluate

U.S. export promotion policy. TDA is actively supporting the TPCC’s efforts to identify and quantify the means that foreign governments use to obtain advantageous

benefits for their national companies at the expense of U.S. firms.

TDA and the other members of the TPCC are ready to meet the challenges before

us in preserving and promoting commercial environments around the globe, even in

these difficult times. We are particularly focused on those countries in which the

United States has particular trade, economic or strategic interest.

In fact, this is exactly how the TPCC can be most useful, by providing focus to

the various agencies in order to respond to particular priorities, such as coordinating trade development efforts in the wake of the September 11 attacks, supporting the Administration’s environmental strategy, and supporting the negotiation

and implementation of new trade agreements. Additionally, the TPCC can focus

efforts to work with foreign governments making the shift to democracy and to

market-based economies. The best long-term strategy for the United States to make

its presence felt in such countries is by supporting commercial development, and the

TPCC is well-suited, and well-positioned, for such a role.

TDA Supports U.S. Trade Expansion Efforts

TDA typically promotes U.S. exports by providing assistance for specific infrastructure projects around the world. TDA’s record shows that the agency excels at

using this approach to assist U.S. companies competing for development projects.

However, TDA is also effective in promoting U.S. exports at a more fundamental

level. For example, TDA looks at supporting broader sectoral efforts that can result

in increased U.S. exports and prevent other countries from imposing standards that

exclude U.S. firms. This strategy of helping countries develop better legal and regulatory regimes promotes exports by creating a more favorable commercial environment for U.S. firms. For example, TDA recently provided technical assistance to aid

the Venezuelan government’s deregulation of its telecommunications industry and

to develop new specifications for modernizing that industry. TDA estimates the potential value of exports to Venezuela in the telecommunications sector will top $10

billion over the next few years. Because of TDA’s work with the Venezuelan government, U.S. firms are well positioned to provide the bulk of these goods.

38

TDA-provided technical assistance also can be a useful tool for USTR. Once USTR

negotiates a trade agreement, TDA can provide the technical assistance some trading partners may need to implement their commitments. Most U.S. trading partners

want to comply with the standards in international agreements, but some of them

may not possess the technical expertise to bring their international trade regimes

in line with their obligations. By providing such technical assistance to our trading

partners, TDA enhances their capability to meet their commitments and ensures

that U.S. firms will be able to realize the benefits of these agreements, namely a

fair and open regulatory and legal environment. TDA is committed to working with

USTR in this manner to create favorable export climates for U.S. firms.

TDA also is committed to improving the physical climate and environment of the

nations in which we operate. Water and environment projects constitute TDA’s third

largest economic investment sector and typically involve such projects as clean potable water and wastewater treatment. Additionally, TDA examines environmental

issues in virtually all TDA activities and identifies possible solutions to minimize

or alleviate these concerns. By promoting environmentally friendly projects, TDA is

a valuable part of the U.S. Government’s toolkit for promoting trade.

As an agency dedicated to promoting U.S. exports overseas, TDA supports the

Administration’s efforts to obtain Presidential Trade Promotion Authority (TPA). As

you know, prior to this Administration, every President since President Nixon has

had the authority to negotiate trade agreements with foreign nations. TPA is necessary because other nations are unwilling to negotiate with the United States and

make trade concessions if the U.S. Congress is likely to overturn elements of the

final package. Currently, there are over 150 free trade agreements among world nations. The United States is a party to fewer than half a dozen of these. Every free

trade agreement negotiated without U.S. involvement puts American firms at a further competitive disadvantage in exporting goods to the nations involved in

the agreement.

Currently, free trade agreements give our competitors an advantage and make

U.S. goods comparatively more expensive in the affected markets. These tariff differentials hinder TDA’s ability to do its job because cost considerations make project

sponsors less likely to select U.S. suppliers if American goods are significantly more

expensive. The United States must level the playing field for U.S. firms by securing

equal tariff treatment for them in foreign markets.

Closing

In closing, I would like to the thank the Members of this Committee for the opportunity to appear today and discuss what TDA is doing to increase U.S. exports and

create American jobs and how TDA works with the other members of the TPCC.

I look forward to answering your questions.

39

RESPONSE TO WRITTEN QUESTIONS OF SENATOR REED

FROM JOHN E. ROBSON

Q.1. Can you discuss, in detail, some of the specific programs or

strategies which will reach out to small- or medium-sized businesses in order to encourage greater export promotion?

A.1. Ex-Im Bank’s Small & New Business Group was established

in the early 1990’s to dedicate resources to small businesses and

to develop programs and products that address their exporting

needs. The group works along cross-divisional lines within the

Bank to promote its services to small business. Initiatives geared

toward small business include direct rural campaigns, local seminars, strategic partnerships with both private and Government

agencies, effective website design and selective advertising. Bank

products also provide special enhancements to small business exporters thereby creating a more attractive financial package for the

small business. In addition, an Emerging Exporter Group has been

established to support the Bank’s effort and statutory mandate to

support specific underserved markets such as minority- and

woman-owned businesses.

In fiscal year 2001, Ex-Im Bank authorized more than $1.6 billion in support of U.S. small businesses, which is nearly 18 percent

of total authorizations. The Bank approved 2,124 small business

transactions that represented 90 percent of the total number of

transactions. Fiscal year 2001 was also a record year for Ex-Im

Bank’s working capital guarantee program with $660 million in au- thorizations of which $518 million benefited small businesses.

Q.2. How will these strategies compete with other nations’ programs, especially with the comparatively less funding that we provide to our trade promotion agencies?

A.2. With a limited budget Ex-Im Bank has effectively promoted its

efforts through effective technology innovations and the development of an exporter database, which serves as the cornerstone of

small business product delivery. In fact, Ex-Im Bank’s strategies

have been emulated by other export credit agencies worldwide.

Q.3. How can you work more effectively with organizations, agencies, or the private sector on a regional or local level to carry out

this goal of greater export promotion?

A.3. Ex-Im Bank has joined forces with many entities to create

greater awareness of small business. The establishment of U.S. Export Assistance Centers throughout the country has created a ‘‘one

stop shop’’ that provides valuable information to small business exporters. The Bank also works with city/State partners, commercial

banks, asset-based lenders, brokers and other Government agencies

to provide financial assistance to small business. We are constantly

striving to improve these relationships and our service. In addition,

the Bank has delegated lending authority to some of these delivery

mechanisms to improve the application and decision efficiency.

Q.4. How will you ensure that these programs are effectively reaching and assisting these businesses?

A.4. Ex-Im Bank constantly monitors its outreach efforts and products to insure program effectiveness. Response rates to direct mail

and critiques to regional and local seminars are analyzed to imVerDate 11-MAY-2000 09:59 Aug 26, 2002 Jkt 000000 PO 00000 Frm 00043 Fmt 6633 Sfmt 6601 80952.TXT SBANK4 PsN: SBANK4
40

prove our delivery mechanisms to the marketplace. Our exporter

database now numbering over 200,000 is constantly evaluated and

‘‘scrubbed’’ for completeness and accuracy to insure that we are

reaching the proper clientele.

Q.5. How can you target these programs to emerging markets,

where our country is rapidly losing the most market share?

A.5. Attaining emerging market share becomes a self-policing

mechanism for Ex-Im Bank inasmuch as it is these markets

that demand the Bank’s support more so than developed countries.

Ex-Im Bank accomplishes emerging market objectives through

partnerships with commercial banks and other partners, who entertain this business only with the Bank’s support. Ex-Im Bank is

also marketing its products to all exporters dealing in emerging

markets.

Q.6. How do you envision recent heightened security concerns

to affect exporting industries? What measures are being taken to

both assist current U.S. exporters and ease the concerns of potential exporters?

A.6. The events of September 11 have had a negative impact on

U.S. export industries. Export sales have been hurt by declining

demand in overseas markets that have been affected by the economic downturn in the United States. In addition, terrorist activities in the West and military hostilities in South Asia have raised

concerns about country risk and have made financial institutions

more risk averse, which has reduced the availability of private sector finance for sales to emerging markets.

Ex-Im Bank fills a valuable role by assisting exporters during

these difficult times. One of the Bank’s main missions is to fill financing gaps created by the unwillingness of private lenders to accept certain risks. As a result, while maintaining its mandate for

a reasonable assurance of repayment, the Bank remains open for

business in many emerging markets where private sector financing

is now limited or unavailable. To fill a specific financing gap arising from the September 11 events, Ex-Im Bank, along with many

other governments, agreed to provide for a limited time, ‘‘gap’’ third

party war risk insurance coverage for air carriers that had lost or

could no longer afford the insurance. The Bank continues to monitor developments in the private market to fill other gaps in private

market financing, as appropriate.

Q.7. Can you discuss any ongoing coordination with agencies

such as the Department of State, Department of Defense, and the

Department of Agriculture to address these ongoing security

concerns?

A.7. Ex-Im Bank works closely with the Department of Treasury,

the Department of Commerce and other U.S. Government agencies

as well as the National Security Council to monitor economic and

political developments in emerging markets and to stay abreast of

business opportunities for U.S. exporters. The Bank is also working

closely with its sister agencies, OPIC and the Trade Development

Agency, on a number of projects in emerging markets. Finally, the

Trade Promotion Coordinating Committee continues to be an aveVerDate 11-MAY-2000 09:59 Aug 26, 2002 Jkt 000000 PO 00000 Frm 00044 Fmt 6633 Sfmt 6601 80952.TXT SBANK4 PsN: SBANK4
41

nue of coordination and consultation with individual agencies on

trade issues as they arise.

RESPONSE TO WRITTEN QUESTIONS OF SENATOR REED

FROM HECTOR V. BARRETO

Q.1. Can you discuss, in detail, some of the specific programs or

strategies which will reach out to small- or medium-sized businesses in order to encourage greater export promotion? How will

these strategies compete with other nations’ programs, especially

with the comparatively less funding that we provide to our trade

promotion agencies? How can you work more effectively with organizations, agencies, or the private sector on a regional or local level

to carry out this goal of greater export promotion? How will you ensure that these programs are effectively reaching and assisting

these businesses? How can you target these programs to emerging

markets, where our country is rapidly losing the most market

share?

A.1. Recent trade statistics from the Census Bureau show that twothirds of all U.S. exporters have less than 20 employees and

one-third of these firms had just one employee. To support and encourage the growth of this segment of the exporter population, the

SBA developed a new loan guaranty program called Export Express. Export Express combines lending and technical assistance

to help small businesses that have difficulty in obtaining adequate

export financing. Export Express lenders use streamlined and expedited loan review and approval procedures and receive SBA’s guaranty on loans of up to $150,000. Completed loan applications are

faxed to the Agency’s Sacramento Processing Office for review; the

SBA typically provides lenders with a response within 36 hours.

Technical assistance is provided to borrowers under this program

by the U.S. Export Assistance Center personnel, in cooperation

with the SBA’s network of resource partners. Export Express can

finance the start-up costs associated with developing a new export

market, including translating product brochures into foreign languages and participating in foreign trade shows. In addition, the

program can be used to provide general export lines of credit.

The SBA works extensively with other Federal agencies such as

the Department of Commerce and the Export-Import Bank to coordinate the delivery of services to small firms. To ensure that

these programs are effectively reaching and assisting small businesses, the SBA is actively participating in the Trade Promotion

and Coordinating Committee’s (TPCC) current review of Federal

export assistance programs. The SBA is providing both financial

and technical support of the TPCC/Keenan Institute survey of U.S.

small business exporters that will be completed this coming January and we are providing technical support for TPCC-run focus

groups which are being held around the country to solicit the input

of the small business community.

To facilitate access to emerging markets for small business, SBA

is involved in strategic partnerships with other countries’ small

business support agencies to match business participants. For example, to take advantage of the opportunities we see for U.S. small

businesses in Mexico, the SBA signed an External Cooperative

Agreement with Nacional Financiera (NAFIN), Mexico’s developVerDate 11-MAY-2000 09:59 Aug 26, 2002 Jkt 000000 PO 00000 Frm 00045 Fmt 6633 Sfmt 6601 80952.TXT SBANK4 PsN: SBANK4
42

ment bank, and the Ministry of the Economy in March of 2001. The

agreement allows the SBA to have a working relationship with

Federal agency counterparts in the facilitation of trade promotion

and finance in Mexico. As part of the agreement, the SBA and the

Commercial Service (CS) Mexico City worked with the Mexican

Government in organizing a conference on Business Opportunities

for United States and Mexican small- and medium-size companies,

March 27–28, 2001. Seventy U.S. small businesses participated in

this event which allowed U.S. firms to meet one-on-one with prescreened Mexican businesses.

More recently, SBA led a delegation of United States small companies to Guadalajara attending a conference on ‘‘Doing Business

in Mexico.’’ SBA recruited new-to-export and new-to-market small

businesses to participate in this event. It provided participating

small businesses with a chance to not only attend a unique trade

conference on doing business in Mexico but also with the opportunity to meet with Mexican small and medium firms in selected

industry sectors.

Q.2. How do you envision recent heightened security concerns to

affect exporting industries? What measures are being taken to both

assist current exports and ease the concerns of potential exporters?

Can you discuss any ongoing coordination with agencies such as

the Department of State, Department of Defense, and the Department of Agriculture to address these ongoing security concerns?

A.2. While SBA does not have initiatives underway to address ongoing security concerns that may effect exporting industries as

a result of September 11, we are an active partner in the Trade

Promotion and Coordinating Committee’s (TPCC) network of 19

agencies. The TPCC—which includes the Department of Defense,

Department of State, and Department of Agriculture—meets regularly to discuss challenges, propose program initiatives, work on developing new products, and avoid duplication of efforts in relation

to meeting small business needs. As the TPCC addresses these

issues, SBA expects to play a role in representing the interests of

U.S. small business.

The SBA is working specifically with DOD to develop and expand

contract opportunities available in the areas of international trade

with a special emphasis on Federal procurement.

RESPONSE TO A WRITTEN QUESTION OF SENATOR MILLER

FROM HECTOR V. BARRETO

Q.1. Will the SBA be providing ‘‘Disaster Relief’’ type loans to

those aviation businesses directly affected by the FAA’s ‘‘No Fly

Rule’’ after the WTC Disaster, and if so, in what aspects?

A.1. The U.S. Small Business Administration is currently providing

working capital loans to small businesses, including aviation businesses, that were directly impacted by the destruction of the World

Trade Center or damage to the Pentagon on September 11, 2001,

or Federal actions taken in response to those actions between

September 11 and October 22, 2001. The FAA’s ‘‘No Fly Rule’’ is a

Federal Action. An aviation small business may be eligible for consideration of a loan under SBA’s Economic Injury Disaster Loan

43

program where there is a direct causal relationship between the

business and the Federal Action.

Under the Economic Injury Disaster Loan program, the SBA can

make direct low interest and long-term working capital loans to

help eligible businesses meet their obligations and pay ordinary

and necessary operating expenses that they are now unable to pay

as a direct result of the disaster.

RESPONSE TO WRITTEN QUESTIONS OF SENATOR REED

FROM PETER S. WATSON

Q.1. Can you discuss, in detail, some of the specific programs or

strategies that will reach out to small- or medium-sized businesses

in order to encourage greater export promotion? How will these

strategies compete with other nations’ programs, especially with

the comparatively less funding that we provide to our trade promotion agencies? How can you work more effectively with organizations, agencies, or the private sector on a regional or local level to

carry out this goal of greater export promotion? How will you ensure that these programs are effectively reaching and assisting

these businesses? How can you target these programs to emerging

markets, where our country is rapidly losing the most market

share?

A.1. OPIC is responding in several ways to the needs of U.S. small

businesses seeking to make an investment in a developing country.

We have reduced our loan size from $2 million to $ 100,000 to better address the needs of small business. We have also created new

loan structures that are more useful and friendly to the needs of

small- and medium-sized businesses and streamlined the application process for small businesses and reduced red tape. For example, our insurance application went from 20 pages down to 5 pages

for small businesses, OPIC has a small business hotline and a

small business outreach coordinator to respond to the unique needs

of the small business community.

To be more effective, OPIC is also reaching out to small businesses in two additional ways. OPIC works very closely with the

U.S. Export Assistance Centers (USEAC’s) and their satellite offices, which are coordinated by the U.S. Department of Commerce

and include officials from the Export-Import Bank and the Small

Business Administration. They serve as coordinated centers for

trade information and are listed in most telephone directories

under U.S. Government agencies. The 19 USEAC’s are located in

the major population areas throughout the United States and the

U.S. Commerce Department also operates smaller satellite offices.

They provide walk-in and one stop service for small businesses interested in trade, exports or overseas investment. Frequently, they

are the first and most accessible points of contact for a small

businessperson. OPIC works very closely with USEAC’s officials to

be sure that they have the latest information about OPIC’s services

and can provide referral advice when a small business is interested

in overseas investment. The USEAC’s are also repositories of the

latest OPIC educational and marketing materials and a listing of

OPIC’s small business services. This includes an information booklet targeted for small businesses, the small business hotline that

provides specific small business information, a small business elecVerDate 11-MAY-2000 09:59 Aug 26, 2002 Jkt 000000 PO 00000 Frm 00047 Fmt 6633 Sfmt 6601 80952.TXT SBANK4 PsN: SBANK4
44

tronic mailbox, a public information officer for general information,

and the small business outreach coordinator to provide more detailed information.

OPIC is also utilizing the Internet to reach out to small businesses. This is an efficient and cost-effective means to carry out our

mission and it can be done without matching expenditures by competitor programs. Most small businesspersons interested in trade,

exports or overseas investment are familiar with the web and have

Internet access. The central U.S. Government website includes a

link to the OPIC website. In addition, the SBA, the Ex-Im Bank,

and the DOC websites include links to OPIC’s website. OPIC has

also proactively ensured that search engines using generic key

words—that is small business, loans, investment—will bring the

small business person to OPIC’s website. Once in the website the

small businessperson will find a specially designated small business section. This section includes an interactive small business

training on OPIC’s products to help a small businessperson determine how they can best utilize OPIC’s products and an investor’s

gateway that provides country and sector information and links,

and personnel contact information.

Of the services that OPIC can provide, one serious obstacle for

a small business investing overseas is preparing for the political

uncertainty in the host country and securing adequate financing.

OPIC, through its political risk insurance and financing products,

helps small business to overcome these obstacles. We also solicit

client feedback to make certain we are effectively meeting client

requirements.

For a small business looking for growth opportunities, doing

business in today’s global economy can be challenging. This is particularly true in emerging markets. But OPIC fills an important

role in helping small businesses meet this challenge in these key

markets. OPIC’s political risk insurance can protect small businesses from political uncertainty. As a U.S. Government agency,

OPIC also serves as an effective advocate for its small business clients who are confronted with the arbitrary actions of a host country’s government. Finally, OPIC helps small businesses respond to

the challenges of investing in emerging markets by providing financing when private sector financing is not available.

Q.2. How do you envision recent heightened security concerns

to affect exporting industries? What measures are being taken to

both assist current U.S. exporters and ease the concerns of potential exporters? Can you discuss any ongoing coordination with

agencies such as the Department of State, Department of Defense,

and the Department of Agriculture to address these ongoing security concerns?

A.2. The Department of Commerce is the Agency more directly

involved in remedying security concerns encountered by U.S. exporters. OPIC, as a developmental agency which promotes private

sector investment in third world countries and countries in transition to a free market economy, is prepared to assist projects that

it supports with advocacy as necessary.

45

RESPONSE TO WRITTEN QUESTIONS OF SENATOR REED

FROM THELMA J. ASKEY

Q.1.a. Can you discuss, in detail, some of the specific programs or

strategies that will reach out to small- or medium-sized businesses

in order to encourage greater export promotion? How will these

strategies compete with other nations’ programs, especially with

the comparatively less funding that we provide to our trade promotion agencies?

A.1.a. The majority of companies with which TDA works are small

businesses. Small companies conduct more than one-third of TDAfunded feasibility studies, and over 60 percent of the firms with

which TDA works are small. Absent TDA involvement, many of

these firms would not have the opportunity to become involved in

international development projects.

The small businesses that produce one in three of TDA’s feasibility studies gain valuable experience in analyzing foreign

projects, and then having a foot in the door to obtain even more

of the work associated with those projects. However, the real impact for small business lies in the implementation phase of major

projects, where small companies stand to export millions of dollars

in goods and services as suppliers and subcontractors to major

projects.

Additionally, all of TDA’s due diligence projects—Definitional

Missions and Desk Studies—are undertaken by small businesses.

This provides interested small businesses with an opportunity to

gain experience in working with TDA and in international markets,

and allows them to progress to performing feasibility studies. Feasibility studies are considerably larger and provide an opportunity

to compete to participate in the implementation phase of a development project. Accordingly, TDA provides small businesses with

many opportunities to expand their international work.

TDA actively is participating in the Trade Promotion Coordinating Committee’s current analysis of foreign government programs and looks forward to using that information to establish

benchmarks against which to measure our performance. Because,

as you rightly point out, other governments provide higher levels

of export promotion assistance, TDA must work much harder and

smarter to produce results for U.S. firms.

Q.1.b. How can you work more effectively with organizations, agencies, or the private sector on a regional or local level to carry out

this goal of greater export promotion?

A.1.b. TDA works extensively with members of the Trade Promotion Coordinating Committee, including the Small Business

Administration, the U.S. Export-Import Bank (Ex-Im) and the

Overseas Private Investment Corporation (OPIC). Among TPCC

agencies, TDA most frequently partners with Ex-Im and OPIC to

conduct trade promotion activities overseas and identify promising

project opportunities. The three agencies also jointly operate two

regional offices, one in Turkey and one in Croatia. Maintaining

these overseas regional offices allows the agencies to work hand in

glove to develop the regional economies while promoting U.S. exports. In the near future, we will look to these field offices to reVerDate 11-MAY-2000 09:59 Aug 26, 2002 Jkt 000000 PO 00000 Frm 00049 Fmt 6633 Sfmt 6601 80952.TXT SBANK4 PsN: SBANK4
46

spond more quickly to the commercial and developmental needs of

countries in strategic locales and during difficult, uncertain times.

In addition, TDA works extensively with the Departments of

Commerce and State to promote U.S. exports. The Commerce Department’s U.S. Foreign and Commercial Service (FCS) is a primary intelligence source in identifying many projects that TDA

funds. Because FCS officers are stationed overseas, they have established local business and government contacts that help them

target potential business opportunities for U.S. firms in foreign

markets. TDA’s coordination with FCS allows the agency to use its

own resources more efficiently and to accomplish more than it

could alone by utilizing FCS expertise in identifying projects for

possible TDA support and funding.

TDA also works closely with American Embassies to design and

market the agency’s overseas trade conferences to maximize our

effectiveness. Additionally, State Department staff often provide

another good intelligence source for projects with significant U.S.

export opportunities.

This interaction is a two-way street. By working with TDA to

provide development assistance to host countries, FCS officials gain

access to higher-level foreign officials than those with whom they

typically work. This partnership, in turn, helps FCS to raise its

profile in host countries and enhances its ability to gather information for the benefit of U.S. companies. At the same time, TDA involvement with U.S. Embassies supports U.S. Ambassadors and

their Foreign Service staff as they strive to assist U.S. businesses

competing overseas and to help foreign project sponsors meet important development needs.

Finally, TDA coordinates with the multilateral development

banks and the International Finance Corporation to ensure financing is available for projects to which TDA provides funding.

Q.1.c. How will you ensure that these programs are effectively

reaching and assisting these businesses?

A.1.c. In TDA’s experience, limited resources tops the list of challenges facing small businesses in exporting their goods and services. TDA conducts numerous outreach efforts, including such

activities as business briefings, trade conferences and reverse trade

missions, to directly respond to this challenge. These outreach efforts benefit small businesses in particular because they reduce the

need for such companies to travel the world to identify opportunities, and they provide ready access to key decisionmakers on significant projects.

Q.1.d. How can you target these programs to emerging markets,

where our country is rapidly losing the most market share?

A.1.d. By law, TDA only operates in developing and middle-income

nations, which are the very nations that comprise the so-called

emerging markets. All TDA activities serve the dual purpose of

promoting U.S. exports and fostering development in those markets, thereby creating jobs and developing commercially viable economic growth in the host nation.

Q.2.a. How do you envision recent heightened security concerns

to affect exporting industries? What measures are being taken to

47

both assist current U.S. exporters and ease the concerns of potential exporters?

A.2.a. As we already have seen in news reports, heightened security is slowing the shipment of some goods across borders as customs services become more vigilant. TDA will continue to work

with our contractors and with exporters as they navigate the new

economic and political environment, and will work creatively to resolve difficulties they may encounter. You may be interested to

know that TDA already is active in an area that will provide direct

relief for this problem, namely supporting customs modernization

projects in developing countries. In addition to producing more export opportunities for U.S. firms, these projects help host nations

improve their inspection processes while reducing the time these

processes consume.

Q.2.b. Can you discuss any ongoing coordination with agencies

such as the Department of State, the Department of Defense, and

the Department of Agriculture to address these ongoing security

concerns?

A.2.b. As mentioned above, TDA’s staff regularly works with the

Departments of Commerce and State, as well as other TPCC members to assess conditions affecting U.S. exporters and develop suitable responses to these challenges. In fact, in the wake of the September 11 attacks, Peter Watson, John Robson and I met to develop joint strategies for projects in Eurasia and Asia. We and our

staffs are evaluating how we can best respond, both as individual

agencies and collectively, to changes in the business climate and increased levels of risk in those regions, and around the world. Our

agencies want to be ready to meet the significant challenges ahead.

We will, of course, continue to work together, and with the other

members of the TPCC, to assist U.S. businesses in weathering the

current situation.

48

49

50

51

52

53

54

55

56

57

58

59

60

61

62

63

64

65

66

67

68

69

70

71