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91–046 PDF 2004

S. Hrg. 108–398

FAIR OR FOUL: THE CHALLENGE OF NEGOTIATING, MONITORING AND ENFORCING U.S.

TRADE LAWS

HEARING

BEFORE THE

OVERSIGHT OF GOVERNMENT MANAGEMENT, 

THE FEDERAL WORKFORCE AND THE DISTRICT 

OF COLUMBIA SUBCOMMITTEE

OF THE

COMMITTEE ON 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

DECEMBER 9, 2003

Printed for the use of the Committee on Governmental Affairs

(

(II)

COMMITTEE ON GOVERNMENTAL AFFAIRS 

SUSAN M. COLLINS, Maine, Chairman 

TED STEVENS, Alaska 

GEORGE V. VOINOVICH, Ohio 

NORM COLEMAN, Minnesota 

ARLEN SPECTER, Pennsylvania 

ROBERT F. BENNETT, Utah 

PETER G. FITZGERALD, Illinois 

JOHN E. SUNUNU, New Hampshire 

RICHARD C. SHELBY, Alabama 

JOSEPH I. LIEBERMAN, Connecticut 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

RICHARD J. DURBIN, Illinois 

THOMAS R. CARPER, Delaware 

MARK DAYTON, Minnesota 

FRANK LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas

MICHAEL D. BOPP, Staff Director and Chief Counsel 

JOYCE A. RECHTSCHAFFEN, Minority Staff Director and Counsel 

AMY B. NEWHOUSE, Chief Clerk

OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL 

WORKFORCE AND THE DISTRICT OF COLUMBIA SUBCOMMITTEE 

GEORGE V. VOINOVICH, Ohio, Chairman 

TED STEVENS, Alaska 

NORM COLEMAN, Minnesota 

ROBERT F. BENNETT, Utah 

PETER G. FITZGERALD, Illinois 

JOHN E. SUNUNU, New Hampshire 

RICHARD J. DURBIN, Illinois 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

FRANK LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas

ANDREW RICHARDSON, Staff Director 

MARIANNE CLIFFORD UPTON, Minority Staff Director and Chief Counsel 

CYNTHIA SIMMONS, Chief Clerk 

(III)

C O N T E N T S 

Opening statements: Page 

Senator Voinovich ............................................................................................. 1 

WITNESSES 

TUESDAY, DECEMBER 9, 2003

Loren Yager, Director, International Affairs and Trade, U.S. General Accounting Office ............................................................................................................... 6

James J. Jochum, Assistant Secretary for Import Administration, Department 

of Commerce ......................................................................................................... 7

Charles W. Freeman, III, Deputy Assistant, U.S. Trade Representative ........... 11

Franklin J. Vargo, Vice President, International Economic Affairs, National 

Association of Manufacturers .............................................................................. 26

Thomas J. Duesterberg, President and Chief Executive Office, Manufacturers 

Alliance/MAPI ...................................................................................................... 28

Tim Hawk, Vice President and General Manager, American Trim, L.L.C. ........ 31

ALPHABETICAL LIST OF WITNESSES

Duesterberg, Thomas J.: 

Testimony .......................................................................................................... 28

Prepared statement .......................................................................................... 108

Freeman, Charles W., III: 

Testimony .......................................................................................................... 11

Prepared statement .......................................................................................... 84

Hawk, Tim: 

Testimony .......................................................................................................... 31

Prepared statement .......................................................................................... 130

Jochum, James J.: 

Testimony .......................................................................................................... 7

Prepared statement .......................................................................................... 69

Vargo, Franklin J.: 

Testimony .......................................................................................................... 26

Prepared statement with attachments ........................................................... 92

Yager, Loren 

Testimony .......................................................................................................... 6

Prepared statement .......................................................................................... 39

APPENDIX

Questions and Response for the Record for Charles W. Freeman, III, from 

Senator Lieberman ............................................................................................... 134

(1)

FAIR OR FOUL: THE CHALLENGE OF NEGOTIATING, MONITORING AND ENFORCING U.S. 

TRADE LAWS 

TUESDAY, DECEMBER 9, 2003

U.S. SENATE, 

Oversight of Government Management, the Federal

WORKFORCE AND THE DISTRICT OF COLUMBIA SUBCOMMITTEE,

OF THE COMMITTEE ON GOVERNMENTAL AFFAIRS, Washington, DC. 

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

SD–342, Dirksen Senate Office Building, Hon. George V. Voinovich, 

Chairman of the Subcommittee, presiding. 

Present: Senator Voinovich. 

OPENING STATEMENT OF SENATOR VOINOVICH 

Senator VOINOVICH. I apologize for the fact that there are not 

more Senators sitting in these chairs, but as you know, we are in 

session today. In fact, I am going to have to preside at 12 o’clock 

today, and many of the Senators just frankly are not in town at 

this time. 

I felt it was important to have this hearing now because I am 

hoping that between now and when the Senate comes back on January 20 that some action can be taken on some of the concerns that 

I am going to raise at this hearing today, because there are a lot 

of people in this country that feel that we are running out of time 

on some of these issues, and it is having an enormous impact on 

the economy of my State and on the economy of Pennsylvania, 

Michigan, Indiana, and Illinois. I was just in Illinois yesterday, and 

they have the same concerns that we have in the State of Ohio. 

Today’s hearing will focus on the ability of our trade agencies to 

effectively negotiate, monitor and enforce our complex trade laws 

in a rapidly-shifting global trade environment. As our country 

adapts to the changing trade dynamics, I am interested in learning 

if we have handicapped our economy, especially the manufacturing 

sector. 

On April 23, 2002, nearly 20 months ago, this Subcommittee held 

a hearing to examine the personnel challenges faced by the Securities and Exchange Commission and the Department of Commerce. 

The hearing was held, in part, in response to the General Accounting Office’s 2001 High Risk Series, which stated that, ‘‘A lack of 

sufficient numbers of experienced staff with the right expertise limits the ability of the Department of Commerce, U.S. Trade RepVerDate 0ct 09 2002 08:58 Mar 29, 2004 Jkt 091046 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 C:\DOCS\91046.TXT SAFFAIRS PsN: PHOGAN
2

resentative and the Department of Agriculture to monitor and enforce trade agreements.’’

This remains a concern of mine today. The Department of Commerce maintains a database of nearly 300 international trade 

agreements to which the United States is a participant, and over 

the past several years the roles and responsibilities of our trade 

agencies have increased in scope and technical complexity. Unfortunately, as GAO pointed out during the April 2000 hearing, the 

staffing levels at our trade agencies have not kept pace with this 

increased workload. 

This combination raises doubts about our ability to effectively 

monitor our trade relations, and I am interested in learning how 

the Department of Commerce and the USTR have refined their 

human capital strategies to respond to a complex set of trade-related policies and workload capacity problems. 

The importance of our hearing today is underscored by the fact 

that the United States has lost over 2.7 million manufacturing jobs 

since July 2000. In my State of Ohio we have felt these losses 

acutely, most recently seeing the loss of 6,300 manufacturing jobs 

in just October of this year. In July 2000 there were more than one 

million manufacturing jobs in my State. Today that number has 

fallen to 840,000. This is a loss of 17.6 percent of the State’s manufacturing employment, a loss of more than one out of every six Ohio 

manufacturing jobs. These numbers represent a crisis for Ohio’s 

economy, especially since the manufacturing sector in Ohio accounts for the second highest weekly earnings of any economic sector, and supports local community and schools with more than a 

billion in corporate franchise and personal property taxes. 

I can tell you, our local political subdivisions are getting hammered because of the loss of these jobs and the value of the property. 

In my opinion these numbers are the result of several factors, 

rising healthcare costs, high natural gas prices and other energy 

costs, out-of-control litigation, and our current trade policies, or 

rather, the mismanagement of our trade policies. 

Manufacturing companies are distressed by our current trade 

priorities especially with regard to China. As I meet with business 

leaders throughout the State, their number one concern is the inability to compete on a level playing field with their Chinese competitors. I take these statements very seriously. 

Throughout my years in public service, I have long advocated 

free trade provided it is fair trade. I was a strong supporter of permanent normal trade relations with China when the Senate passed 

the legislation in September 2000. In recent months, however, I 

have begun to question my vote on that issue. Although China’s 

economic reforms and rapid economic growth have expanded U.S.-

Chinese commercial relations in recent years, disputes have arisen 

over a wide variety of issues including China’s currency pick and 

its failure to protect U.S. intellectual property rights. 

While many of these concerns over China’s trade practices were 

addressed in negotiations with China over its accession to the 

World Trade Organization (WTO), China has failed to implement 

many of its WTO obligations. 

3

An issue I consistently hear about from manufacturers is the 

harm that China is doing to our economy by deliberately undervaluing its currency against the U.S. dollar. This makes Chinese 

exports less expensive and puts U.S. workers at a severe disadvantage. This is simply unfair. If the value of China’s currency was 

allowed to float freely as the currencies of other major trading partners do, it would reflect China’s enormous trade surplus and the 

value of China’s currency would increase significantly. 

In addition, I hear that manufacturers continue to experience 

significant intellectual property rights problems in China, and others in addition to manufacturers, especially in terms of illegal reproduction of software, retail piracy and trademark counterfeiting. 

It is estimated that counterfeits account for 15 to 20 percent of all 

products made in China, which totals about 8 percent of China’s 

gross domestic product. It is also estimate that IPR piracy in China 

costs U.S. firms $1.85 billion in lost sales in 2002. 

I am not surprised by these numbers though. I really am not. 

This has been an ongoing problem with China for some time now. 

The USTR cited China’s failure to provide adequate protection of 

patents, copyrights and trade secrets back in 1991 when it threatened to impose a $1.5 billion in trade sanctions. 

When I was in China on a trade mission in 1995—I brought 

about 18 Ohio businessmen to China, visited four cities—that again 

was an issue that we raised with the Chinese Government. At that 

time the International Intellectual Property Alliance, IIPA, an association of major U.S. copyright based industries was estimating 

that IPR piracy by China firms cost U.S. firms $2.3 billion in lost 

trade. The terms of China’s WTO accession require that China immediately bring its intellectual property laws in compliance with 

the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights, but I have not seen any evidence that China’s behavior 

has changed a bit since then. 

We need to stop standing by and watching as year after year 

China continues to counterfeit U.S. products, costing many Americans their jobs. I have not been encouraged, frankly, by statements 

from the administration that are working on these problems, and 

that we in Congress, I have been told, have to be patient. We have 

to be patient. We have to be patient. Manufacturers in the midwest, including Ohio, have run out of patience as they see family 

businesses dwindle to shadows of what they once were and loyal 

employees out on the street without a job. 

As a member of the Senate Task Force on Manufacturing, I am 

working on a number of solutions to address these challenges. In 

June 2003 we introduced legislation to establish the position of Assistant Secretary of Commerce for Manufacturing within the Department of Commerce. This new post would be responsible for representing and advocating the interest of the manufacturing sector 

as well as developing policies to promote the expansion of manufacturing. 

On Labor Day I was pleased to appear with President Bush in 

Richfield, Ohio when he announced his support for the creation of 

this new position, and I recently added language to the Omnibus 

Appropriation bill to fund this new position. It is my hope that this 

position will allow the Department to focus on the impact the slow 

4

economic recovery has had on manufacturing and our Nation’s 

overall competitive position in the global marketplace. 

I was an original cosponsor of a resolution strongly encouraging 

the Chinese Government to keep its commitment to move to a market-based valuation of its currency in accordance with its commitments to the trade rules and principles of the international community. The resolution passed the Senate on September 25, 2003. 

I introduced legislation on October 20, 2003, entitled the Currency Harmonization Initiative Through Neutralizing Action Act of 

2003, what we call the China Act. It will level the playing field on 

Chinese products with new tariffs in the event that the country 

fails to heed calls to let its currency trade freely. Specifically, it 

would require the Secretary of Treasury to analyze and report to 

Congress whether China is manipulating its currency to achieve an 

advantage in trade. If manipulation is found, the Secretary would 

be required to levy tariffs equal to the percentage of manipulation 

found. This would be in addition to tariffs currently in place on 

Chinese imports. Full membership in the community of modern nations requires China to deal fairly with its trading partners, but 

that is not happening, and such behavior has to end. 

On November 25, Senator Snow and I introduced comprehensive 

legislation, the Small Manufacturers Assistance Recovery and 

Trade or SMART Act, to aid the Nation’s troubled manufacturing 

sector and to help manufacturers hard hit by foreign competition 

and trade barriers to get back on their feet. With small business 

manufacturers constituting over 98 percent of our Nation’s manufacturing enterprises and employing 12 million people, it is impossible to overstate the role of small manufacturers within the overall 

manufacturing industry and our Nation’s economy. 

Most recently I have been working on a resolution that would 

urge the USTR to initiate a 301 investigation into Chinese currency manipulation. Unfortunately, the Treasury Department objected to it. This is very frustrating to me that there appears to be 

no coordination between agencies on this issue. On one hand I hear 

Congress talking about how concerned they are with the currency 

manipulation issue. Yet when I talked to Secretary Evans about 

the issue, he tells me that he cannot talk about it because it is 

Treasury’s responsibility. If this issue was such a big deal, if it is 

such a big deal, Commerce and the USTR should be pushing Treasury to get the job done. They ought to be working together. 

I have to tell you if I was Governor of Ohio and I had a problem 

and I sent different people over to China to talk, I would make sure 

that if something was high on my priority list that they would be 

hearing comments from finance or anybody else, OMB, that you 

sent over there, so they get it. So you hit them with a big hammer 

so that they understand that something has got to be done. 

I want to say one other thing. I have concerns about State and 

trade. I have had for a long time, as a governor and mayor. I’m 

concerned, for example, about North Korea and Taiwan getting in 

the way of strategic trade issues that impact on our economy. I 

hope that the President has these issues on his plate today when 

he talks with Wen Jiabao. As a matter of fact, they are talking 

today. I am hoping that he talks about the issue of currency. I hope 

he is talking about intellectual property rights. I hope he is talking 

5

about their compliance with the WTO, that the American people 

are becoming very frustrated, and some of the greatest supporters 

in the U.S. Senate, including this Senator, has almost had it. I am 

going to be watching carefully any new trade initiatives that come 

out of the administration in terms of whether or not they are getting the job done. 

I am looking forward to learning what the U.S. Government is 

doing to help our ailing manufacturing sector and whether key 

trade agencies have the workforce needed to get the job done. For 

example, if we had more staff with the right skills at USTR and 

Commerce, would China continue to violate U.S. intellectual property rights? Is the Federal Government being proactive enough to 

protect American manufacturing jobs? These are important questions. They need answering. I am hopeful that today’s hearing will 

provide some answers as well as some solutions to challenges facing manufacturers in order to help weather this crisis, and it is a 

crisis. 

We have an impressive lineup of witnesses, and I look forward 

to a very informative discussion. 

Our first witness today is Dr. Loren Yager, the Director of International Affairs and Trade at the U.S. General Accounting Office. 

Dr. Yager testified at our hearing in April 2002, and I am really 

looking forward on an update on what has happened. 

Representing the Bush Administration are Hon. James Jochum, 

Assistant Secretary for Import Administration of the Department 

of Commerce, and Hon. Charles Freeman, III, Deputy Assistant 

U.S. Trade Representative. 

Linda Cheatham, Chief Financial Officer and Director of Administration of the International Trade Administration and the Department of Commerce is also available. You are here to answer 

the tough questions. Is that it? [Laughter.] 

Our second panel, we will hear from Frank Vargo, Vice President 

of the National Association of Manufacturers. Joining him is Dr. 

James J. Duesterberg, President and CEO of the Manufacturers Alliance for Productivity and Innovation. And rounding out this panel 

is Tim Hawk, Vice President and General Manager of Superior 

Metal Products and American Trim, L.L.C., a Lima, Ohio based 

company. His father, Leo Hawk, is sitting here in the audience 

with us today, and I want to thank you both for making the trip 

today to Washington. Thank all of you for coming, and we look forward to your testimony. 

It is the custom of this Subcommittee to swear in all of our witnesses, and I would therefore ask all of our witnesses to stand and 

raise your right hand. 

Do you swear the testimony you are about to give before the Subcommittee is the truth, the whole truth, and nothing but the truth? 

Mr. YAGER. I do. 

Mr. JOCHUM. I do. 

Mr. FREEMAN. I do. 

Mr. VARGO. I do, yes. 

Mr. DUESTERBERG. I do. 

Mr. HAWK. I do. 

Senator VOINOVICH. Let the record note that they answered in 

the affirmative. 

6

1The prepared statement of Mr. Yager appears in the Appendix on page 39. 

Please sit down. I would appreciate if you could please make 

your statements in 5 minutes or less, try to keep it at that if you 

can. All of the statements will be entered in the record in their entirety, and Dr. Yager, I would appreciate your starting the testimony today. 

TESTIMONY OF LOREN YAGER,1 DIRECTOR, INTERNATIONAL 

AFFAIRS AND TRADE, U.S. GENERAL ACCOUNTING OFFICE 

Mr. YAGER. Thank you, Mr. Chairman. I am pleased to be here 

today to discuss the human capital challenges faced by trade agencies in the current world environment. Trade has become an increasingly important component of the U.S. economy, and therefore, the institutions and arrangements that regulate this trade 

have also increased in importance. 

At least 17 Federal agencies are involved in developing and implementing U.S. trade policy, with a relatively few agencies, including the U.S. Trade Representative (USTR) and the Department of 

Commerce having lead roles in negotiating new agreements and 

monitoring the compliance of other nations with existing agreements. 

The main point of my testimony today is that U.S. trade agencies 

need to more actively pursue human capital planning to successfully meet the challenges they face. In this statement I will briefly 

summarize some of those challenges, as well as focus on a few of 

the human capital practices that GAO has discussed before this 

Subcommittee on numerous occasions. 

My observations are based on a number of studies that we have 

conducted on important trade developments since the last hearing 

that you mentioned in your opening statement. We have also updated some of these studies with recent interviews with USTR and 

with Department of Commerce officials. In addition, we have incorporated insights from the human capital reports and testimonies, 

where this Subcommittee has taken a leadership role. 

Let me first talk about three key challenges that face trade agencies in the current environment, and I provide more detail on each 

of these challenges in my written statement. 

The first is a substantial increase in importance of security since 

September 11 for many of the personnel who have front line trade 

responsibilities in U.S. border points and in other locations. In addition to their existing functions of ensuring revenue collection and 

compliance with other requirements, these personnel are now required to guarantee the goods destined for the United States are 

free from weapons of mass destruction. 

The second challenge is the ambitious negotiating agenda involving active negotiations in the multilateral WTO, the regional 

FTAA, and numerous subregional bilateral agreements. Ambassador Zoellick has stated on numerous occasions that efforts on all 

three fronts are part of the competitive liberalization strategy of 

the United States. However, participation in these negotiations is 

quite demanding on the staff of USTR as well as the agencies such 

as the Department of Commerce, due to their key role and expertise in various aspects of the negotiations. 

7

The third challenge is the most wide ranging, and that is responding to the inevitable but unpredictable changes brought about 

by globalization. One aspect of this involves ensuring that existing 

agreements and structures are serving U.S. interests. I should note 

in this regard that USTR has just announced significant changes 

to update one of those structures, the 25-year-old Trade Advisory 

System. GAO reported last year that the system no longer reflected 

the current composition of the U.S. economy. It also means responding to major changes in the trade environment, such as the 

challenge brought on by China. Our prior reports and ongoing work 

stress the importance of actively monitoring China’s commitments 

to the WTO, and we note in particular that Commerce’s market access and compliance group has increased its staff to accomplish 

that goal while USTR has reorganized its Asian work to enable this 

function to be performed more effectively. 

Everything I have said up to this point refers to the human capital challenges facing U.S. trade agencies, but of course, that is 

only half the equation. On the other side of the equation are the 

insights on the ability of these agencies to respond to these challenges. Let me make two observations based on the numerous testimonies the GAO has provided before this Subcommittee and outlined in our High Risk Series and other reports. 

First, the approaches have to be tailored to meet the specific 

needs of the organizations. In the case of the trade agencies this 

means there must be close coordination between the agencies on 

the wide range of functions that require that coordination whether 

it is negotiations or monitoring and enforcement. USTR was designed and remains a small organization that relies heavily on the 

expertise supplied by other agencies. 

Second, human capital planning should be used to ensure that 

the agencies are capable of achieving the strategic goals identified 

in their planning cycle. In addition, planning can identify and address areas where human capital practices could be made more 

flexible to accomplish the goals more effectively as well as to respond to the international events that inevitably occur and require 

the agencies to adapt their policies during the course of the year. 

Mr. Chairman, I should also mention that we have just started 

work on two subjects that you mentioned in your opening statement. We have a request from Chairman Manzullo and Chairman 

Snow to look into the currency practices in China and other Asian 

countries, and we also have a request from Chairman Davis of the 

House of Representatives to look into the enforcement of U.S. intellectual property rights regulations around the world. 

This concludes my testimony, Mr. Chairman. I would be happy 

to answer any questions that you have. 

Senator VOINOVICH. Thank you very much, Dr. Yager. Mr. 

Jochum. 

8

1The prepared statement of Mr. Jochum appears in the Appendix on page 69. 

TESTIMONY OF JAMES J. JOCHUM,1 ASSISTANT SECRETARY 

FOR IMPORT ADMINISTRATION, DEPARTMENT OF COMMERCE 

Mr. JOCHUM. Thank you, Mr. Chairman. I know those of us in 

the administration appreciate your dedication to this issue, and I 

appreciate the opportunity to further define the administration’s efforts in this regard. 

For the President and Secretary Evans, the importance of trade 

extends well beyond the economic realm. As the President has stated, open trade is not just an economic opportunity, it is a moral imperative. When we negotiate for open markets, we are providing 

new hope and promoting political freedom. It is because of the economic and social imperative behind trade that the administration 

has moved aggressively in pursuing an ambitious free trade agenda. We will continue to move forward to expand trade and economic opportunities that it creates for all Americans and to eliminate barriers to the free flow of American goods, services, investment, and ideas. 

The administration understands, however, that an aggressive 

trade-liberalizing agenda must be accompanied by the strict enforcement of our trade laws. We understand the value of competition and that it leads to innovation, growth and a higher standard 

of living. But some of our trading partners have failed to fully embrace fair competition. While we continue to encourage the opening 

of new markets like China, we expect our trading partners to compete on a level playing field and reduce practices that distort normal and fair trade relations. 

Today’s hearing offers me the chance to review some of our findings from the more than 20 roundtable discussions that the Commerce Department held with U.S. manufacturers, both large and 

small, across the country as part of our manufacturing initiative. 

In addition, I will briefly discuss the trade relationship with China 

in the context of other issues raised by U.S. manufacturers. 

The administration understands the importance of manufacturing to the success of our overall economy, our workforce and our 

Nation’s future. The manufacturing sector represents 14 percent of 

our GDP and 13 percent of total private sector employment. Manufacturing innovations at home and abroad are also important contributors for success in other sectors such as agriculture and services. Advances in John Deere’s cotton-picking equipment manufactured in Des Moines, Iowa, for example, made cotton producers 

throughout the South and West more efficient and productive, and 

advances in servers produced by Cisco and Sun Micro Systems enable hospitals across the country to offer both high quality and 

lower cost healthcare to millions of Americans. 

Having said that, there is a growing perception in the media that 

American manufacturers are weak, cannot compete, and are being 

hollowed out, and much of that stems from the significant pressure 

that U.S. manufacturers faced in the recent downturn of the economy and from stiff competition abroad. 

It is important to remember then that even in the face of significant challenges, American firms have built the strongest, most dynamic manufacturing sector in the world. The U.S. remains far and 

9

away the largest producer and exporter of manufacturing goods in 

the world, and standing alone, our manufacturing sector would 

rank as the world’s fifth largest economy, larger than the entire 

economy of China. That is why manufacturing not only matters, 

but it is worth fighting for, and fortunately the stimulus of recent 

years has softened the blow from the recent downturn and set the 

stage for vigorous economic growth going forward. 

Just to repeat the numbers we have seen lately, the third quarter of this year experienced an 8.2 percent raise in growth, the best 

in about 20 years, and the manufacturing index, the Institute of 

Supply Management, showed the highest number in 20 years. Even 

on the employment front there are good signs that the economy is 

growing. The most recent figures from the Labor Department reveal that the unemployment rate at 5.9 percent in November has 

trended down and the economy has created 328,000 new jobs in the 

past 4 months. 

This positive news, however, does not negate the fact that you 

mentioned, Mr. Chairman, that the manufacturing sector has lost 

more than 2 million jobs during the recent downturn. In short, our 

manufacturers continue to face a highly global competitive environment and we need to foster an environment in which our firms can 

compete and succeed in manufacturing. 

In March of this year, during Manufacturing Week, Secretary 

Evans announced the President’s Manufacturing Initiative, and 

this announcement was followed up by roundtable discussions in 

more than 20 cities across the United States to gather input for a 

report on the state of manufacturing and recommendations for policy reforms. 

While international competition is what has garnered most of the 

attention in the press, by far the greater weight of the manufacturers’ comments focused on domestic issues. We heard that while 

U.S. manufacturers have tightened their belts and raised their productivity, those productivity gains have been eroded by everything 

from higher energy costs to higher medical and pension costs, to 

higher insurance costs due to a runaway tort system. For example, 

we heard from manufacturers in New Jersey that 30 cents of every 

dollar of revenue went to pay health benefits for their employees, 

which was an increase of well over 100 percent in just a few years. 

We heard about asbestos litigation and other lawsuits that hang 

over the heads of virtually all U.S. manufacturers, raising their insurance costs and dampening their returns. The manufacturers 

also pointed to declining vocational school programs, declining enrollments in engineering and the funding of scientific research, all 

of which are essential to the productivity gains that keep our manufacturing sector competitive. 

In addition to keeping our own side of the street clean, manufacturers demanded a level playing field internationally, and what 

that means in practical terms is three things. The first is exchange 

rates that reflect economic fundamentals of the market and not 

government intervention. The second is an effort to eliminate tariff 

and non-tariff barriers to our exports through negotiations with our 

trading partners. And the third is the vigorous enforcement of both 

the existing international trade rules and U.S. trade law. The goal 

10

is simply to ensure that everyone on the field is subject to the same 

rules of the game. 

What we did not hear from the vast majority of manufacturers 

that we met with was an interest in outright trade protection. 

Rather, our manufacturers see international trade as a simple 

question of fairness. If we keep our markets open to our trading 

partners’ goods, they should do the same for us. 

While we are still in the process of finalizing this report and its 

recommendations, Secretary Evans has taken steps in response to 

the concerns we heard, particularly the need for a stronger focus 

within the U.S. Government on manufacturing. The first initiative, 

announced by the President on Labor Day, is a new Assistant Secretary of Commerce to serve as the point person in the administration for manufacturing. The second is the establishment of an Unfair Trade Practices Team to track, detect and confront unfair competition before it injures an industry here at home. And the third 

calls for the creation of an Assistant Secretary for Trade Promotion, to boost our exports, particularly to those markets that our 

negotiators have recently opened to trade. 

During these roundtable discussions, there was no single topic 

that garnered more attention than our trading relationship with 

China. We all know the stakes are very high. Our bilateral merchandise trade with China reached the level of $147 billion last 

year, and within that year China overtook both Japan and Mexico 

to become our second largest source of imports. Many have noted 

that our imports from China are more than five times greater than 

our exports, and our bilateral trade deficit exceeded $100 billion in 

2002. There is also an obvious upside to China’s growth. The rising 

standard of living in China has created consumer demand for U.S. 

products that did not previously exist. What that means in trade 

terms is that China today represents the fastest-growing market 

for U.S. goods and services. Our exports to China surged by 19 percent in 2001, 15 percent last year, and about 18 percent in the first 

8 months of this year. 

The Commerce Department, in close coordination with the USTR 

and other agencies, had adopted a multi-pronged approach to ensure that China honors its WTO commitments. We will continue to 

target unfair trade practices wherever they occur, but enforcing our 

trade laws is only part of the solution. We must continue to enhance the ability of U.S. businesses to compete in China. For example, we are launching ‘‘Doing Business in China’’ seminars in cities 

across the country to address concerns about the Chinese market 

from small- and medium-size businesses. At the Commerce Department, the International Trade Administration, or ITA, is charged 

with carrying out these activities. ITA’s mission is to create economic opportunity for U.S. workers and firms by promoting international trade. It has been more than 20 years since ITA reorganized itself to ensure that we are fulfilling this mission. 

In 2002, while we were conducting our national export strategy, 

we went out to our customers and surveyed them on our work, and 

as a result we will focus and redeploy our resources where our clients tell us they need it most. 

Although the details of this ITA reorganization are still being finalized, plans include replacing the existing Trade Development 

11

Unit with the Assistant Secretary for Manufacturing, consolidating 

all trade promotion activities within the commercial service, and 

streamlining trade law administration and allocating additional resources to China. 

As I said earlier, the new Assistant Secretary for Manufacturing 

will focus on both domestic and international aspects of U.S. industrial competitiveness, and will work closely with a new interdepartmental committee that will be created to focus and coordinate all 

of our Department’s expertise on the problems of the manufacturing sector. 

The second step in the reorganization will consolidate all trade 

promotion services within the commercial service. This initiative 

will allow us to link our advocacy efforts more directly to the domestic and overseas networks to enable early project support, as 

well as post-transaction assistance. And, as someone who has done 

trade advocacy, this is really what other countries have done for 

many years, and what we have failed to do. 

The third step in the reorganization is streamlining our trade 

law administration and allocating additional resources to investigate unfair trade activities within China, and this function falls 

within my agency, the Import Administration. We are creating a 

new office devoted exclusively to China, which is the object of a disproportionate number of trade complaints. 

And by way of background, during the last 3 years, we have initiated more anti-dumping investigations and placed more anti-dumping orders against China than against any other country, and more 

than twice as many as we have against the next leading country. 

In 2003 alone, more than 50 percent of all of our new anti-dumping 

orders put in place have been against China. Historically that 

number has been about 15 percent. 

As I noted earlier, we are also creating an Unfair Trade Practice 

Team that will try to look at trade coming in before it causes a 

problem. Our goal here is to preempt things and allow us to follow 

up with all the tools we have at our disposal. 

In conclusion, I want to stress that the administration has heard 

the concerns of U.S. manufacturers and certainly the concerns of 

this Subcommittee, and we are committed to ensuring a level playing field when competing in today’s global marketplace. The Commerce Department is developing a strategy to ensure that government is fostering an environment that promotes a dynamic manufacturing sector. Part of that plan is the reorganization of ITA that 

will allow us to better respond to unique problems of U.S. manufacturers. 

Thank you again for inviting me to testify today, and I look forward to your questions. 

Senator VOINOVICH. Thank you very much. I am impressed with 

some of the statistics that you have shared with us. Mr. Freeman. 

12

1The prepared statement of Mr. Freeman appears in the Appendix on page 84. 

TESTIMONY OF CHARLES W. FREEMAN, III,1 DEPUTY 

ASSISTANT U.S. TRADE REPRESENTATIVE 

Mr. FREEMAN. Thank you, Mr. Chairman. It is an honor and a 

privilege for me to testify here today on behalf of USTR. I am specifically here to testify a little bit about some of the human capital 

challenges that we face at USTR with respect to monitoring and 

enforcing China’s WTO commitments in particular. 

As most of you know, Thursday, December 11, is the second anniversary of China’s WTO accession, and in the process of leading 

up to that accession on December 11, 2001, there was 15 years of 

negotiations which structured a very comprehensive, rather unique 

agreement with thousands of requirements for China to implement 

relatively immediately. And the good news is that they implemented quite a few of them on time. The bad news is that they 

have not implemented all of the things that we were hoping they 

would. But let me tell you a little bit about USTR and how we are 

focused on the China issue. 

Initially, USTR is deliberately a small organization. It is small, 

it is nimble, it is designed to be agile, it is the original networked 

organization in government if you will. We work very closely with 

Commerce and with other agencies in the U.S. Government. We 

draw extensively on expertise in other agencies, as well as internally. 

I have to say that the quality of the personnel at USTR is among 

the highest in government, in my view, although my colleagues 

may disagree somewhat, but really the level of skill there is first 

rate, the level of experience is first rate there. USTR is still considered a place that people in government want to go because the 

quality of the work and the quality of the personnel is so high. 

We are very small, even within the China shop, I think there are 

four of us that are dedicated full time to working on China, but 

within the USTR there are 200 employees totally. We work with 

probably 45 additional people, whether it is in the General Counsel’s Office or with respect to the other sectoral offices, industry 

services, intellectual property rights and a variety of issues. 

I have to say that Ambassador Zoellick and his deputies spend 

a disproportionate amount of time on China, especially given the 

high demands places on their time by negotiating the FTAs, negotiating the Doha agenda and living up to a very ambitious trade 

agenda that the President has set. So China gets its fair share of 

our time. 

USTR is the chair of the WTO TPSC Subcommittee on China’s 

WTO compliance. There are 14 different agencies that take part, 14 

different agencies and departments, about 40 professionals, and 

that’s really the primary means that we use to coordinate policy 

with respect to China’s WTO implementation. We meet perhaps 

once a month, but there’s active discussions among the various 

members thereof, and they draw on their own agencies to bring 

them into the process. 

It has been an increasingly successful way to make sure that we 

are hearing the same things from industry, that we are saying the 

13

same things to the Chinese, and that our priorities, with respect 

to China’s WTO compliance issues, are in order. 

Roughly speaking, we have five different areas on which we are 

focused with respect to China. The first is obviously WTO implementation. China has had, as I said, to make thousands of reforms 

as part of its WTO implementation so it has been our job to look 

and make sure that they are in compliance with the nuts and bolts 

of WTO implementation. I will say that nuts and bolts they may 

have been in compliance with, but there are a variety of things 

where we have been relatively disappointed with respect to their 

implementation. 

Closely related to the WTO implementation is ensuring that we 

have fair market access to China. Our primary means of looking 

at issues with respect to the deficits and with respect to making 

sure that the trade balance is fair is making sure that the Chinese 

understand that, unless we have fair access to their markets, we 

cannot maintain the support, as you know, for maintaining open 

markets to China. 

The other issues on which we are working are transparency 

standards and regulations. It is a key WTO implementation commitment, and China was supposed to make sure that not only were 

the processes by which they publish new regulations transparent, 

but also that a variety of public, that the public, in general, including our industry, was given appropriate means to comment on regulations as they came out. 

Other issues on which we are focused are better cooperation with 

China and the WTO, making sure that the Chinese are on the 

same page with us, in terms of overall liberalization efforts, and finally we are very focused, last, but not least, on ensuring China’s 

compliance with our efforts to enforce U.S. trade remedies. 

I am happy to answer any questions with respect to any of these 

issues. 

Senator VOINOVICH. Thanks very much. 

Mr. Yager, in your agency, cooperation is necessary for developing U.S. positions to address trade compliance issues. Mr. Freeman, I think you said you are coordinating, how many, 17? 

Mr. FREEMAN. Fourteen. 

Senator VOINOVICH. Fourteen different agencies in trying to deal 

with all of the various issues that come up with trade. What specifically do you think our trade agencies must do to improve crossagency communication, coordination and cooperation? And the one 

I just mentioned was the whole issue of this issue of currency manipulation. It seems like there is only one agency that can talk 

about it, and the rest of them are prohibited from even mentioning 

the subject, and I would be interested in your observations regarding that policy. 

And the last, of course, is the thing that got me into this in the 

first place: Do you think that our trade agencies have the human 

capital capacity to move forward? In other words, we have heard 

some really wonderful things from Mr. Jochum, for example, about 

what the agency is about to do or is doing, but the real issue is 

do they have the right people, with the right skills and knowledge, 

at the right place, at the right time to get the job done? That is 

the real challenge. 

14

Dr. Yager, I would like to have your candid observation. In your 

testimony, you say ‘‘Our work shows that these forces have 

stretched the human capital resources of the U.S. trade agencies. 

Although the government has taken steps to address some of these 

challenges, these, and other, changes in the global trade environment require that the trade agencies constantly monitor and update their human capital strategies to ensure that they are closely 

linked to the strategic goals of the agencies.’’ That is easier said 

than done. 

‘‘The number of fully authorized full-time staff at USTR, Commerce Import Administration, the Commerce Market Access and 

Compliance Division has increased in recent years. However, actual 

staff levels are still in the process of catching up with authorized 

levels in Commerce and USTR offices, and USTR has requested additional staff resources for 2004.’’ And I am really pleased that you 

are doing that, Mr. Freeman. 

And then you have gone on in your testimony, Mr. Yager, and 

you say, ‘‘In recent years, the U.S. has been pursuing a broad trade 

policy agenda whose cumulative impact has tested the limits of the 

government’s negotiating capacity.’’ I mean, we are just really involved right now in a lot of stuff that perhaps we have not been 

involved with as aggressively in the past and perhaps in other administrations. I am not here saying that we should not be doing it, 

but the agenda includes undertaking negotiating efforts in multilateral regional and bilateral arenas. I am surprised Mr. Zoellick 

gets any sleep. [Laughter.] 

The administration has characterized this effort as the strategy 

of competitive liberalization. The United States was actively involved in the challenging WTO round of negotiations at Doha, 

Qatar, in 2001; 

Second, the United States is also co-chair in ongoing negotiations 

to create the Free Trade Area of the Americas, which was something that people in South America complained about when I visited them in 1998, that we were not moving forward with it; 

And, finally, with the passage of the Trade Promotion Authority 

in 2002, the United States has launched a series of bilateral and 

subregional Free Trade Agreement negotiations. The increase in 

the number of these negotiations at the same time that major global and regional trade initiatives are underway has strained available resources. 

In other words, the question is do we have too much on our plate 

to handle, to do a good job with the job that needs to get done? 

Mr. YAGER. Well, that is a good question, Mr. Chairman. I think 

the one point that you made, which is certainly valid, is that since 

Trade Promotion Authority passed the Congress, there has been a 

very sharp increase in the amount of activity that is going on. Of 

course, we have long been involved in the multilateral negotiations 

as part of the WTO, and the FTAA process has also been ongoing 

for some time. But where there has been a rapid increase in activity is with the bilateral and subregional agreements that are currently being negotiated by USTR with the assistance of Commerce 

and other agencies. 

And so, at the current time, we are negotiating with the Central 

Americans. We are also negotiating with Australia and other counVerDate 0ct 09 2002 08:58 Mar 29, 2004 Jkt 091046 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 C:\DOCS\91046.TXT SAFFAIRS PsN: PHOGAN
15

tries. And as soon as those agreements are completed, there are 

other countries that are waiting to start negotiations. For example, 

we are due to start with the Dominican Republic, to add that to 

the CAFTA, and then there are a number of countries in the Andean region that are also waiting to begin negotiations. 

So there is no question that there is a lot of activity, particularly 

in these bilateral-type agreements, and that is something that has 

certainly increased in importance in the last couple of years. 

One of the things we thought that made it particularly important 

is that USTR, given the fact that it does rely so heavily on expertise from other agencies, such as Commerce, Agriculture and others, needs to look at these kinds of negotiations as part of its planning process and discuss more actively the kinds of personnel they 

will need, the kinds of assistance they will need, and frankly the 

kinds of budgets that those support agencies will also have to put 

in place to enable them to do the travel, to do the negotiations and 

to have the kind of people involved that are required in order to 

make sure that these agreements actually serve the U.S. interests. 

And so we think that, given again the small size of USTR, as Mr. 

Freeman noted, it really makes it imperative that they work this 

into their planning process and coordinate very closely with the 

other agencies because they do depend upon those other agencies 

in order to supply the kinds of expertise that they need. 

Senator VOINOVICH. Yes, but based on the expanded area of responsibility within our trade agencies, do you think they are organized properly? In other words, if they have to rely on several other 

agencies in order to get the job done, those agencies themselves, in 

terms of management, are having difficulty just trying to look at 

whether or not they have got the people that they need to get the 

job done. 

Then, you have to coordinate with another agency to make sure 

that you have the people so they can get their job done. Would it 

be better off if some of these areas were organized differently. For 

example, the USTR relies heavily on the use of detailees, do you 

think this is an effective human capital strategy? 

Mr. YAGER. Let me answer two ways or provide two parts to an 

answer on that one. 

The first is that there is a process by which certain officials from 

Department of State, Agriculture and Commerce are actually 

loaned to USTR at various points in time in the form of detailees. 

When they do need that kind of expertise on a longer term basis, 

there are a number of detailees that are placed in USTR for a period of years. 

Senator VOINOVICH. The question is have you reached the stage 

where the detailees should be permanently located in the USTR 

and be responsible to their chain of command? 

Mr. YAGER. That is a good question, Mr. Chairman. I think what 

is very important though is that it is clear to those people at the 

beginning of their employment at Commerce or other locations that 

they are in, and an important part of their duty is to serve with 

USTR as part of the negotiating team. And I think that is again 

one of the reasons why we think it has to be addressed early. It 

has to be made clear to those people, in their performance requirements, that part of this is to assist in negotiations. 

16

Obviously, these are smart people that are working at Commerce 

and the other agencies, and they are responding to the kind of performance incentives and the end-of-year feedback that they get. It 

needs to be clear that what they are there to do is to help serve 

with USTR and to move forward in those negotiations. 

Senator VOINOVICH. I hate to nitpick with you, but even in performance evaluation, if I am working in one agency and I am on 

loan to another agency, who does my performance evaluation? Is it 

my agency or is it in the other agency? When people are hired, do 

they know at the Department of Commerce that they are going to 

be on loan, for example, to the USTR? 

Mr. YAGER. I think the other part of that answer that I wanted 

to mention was the fact that it is inevitable that USTR, whether 

it becomes larger, will still require the expertise from some of these 

other agencies. There is certainly no way that one agency will ever 

have the expertise on the wide range of topics that are currently 

contained in a trade agreement, whether these are safety or health 

or at certain times the business relationships or expertise that are 

required. So it is inevitable that they will rely on other agencies. 

Now, whether they could have more personnel within USTR to 

handle some of those functions, that is a question, but, inevitably, 

other agencies, as I mentioned in my statement, there are about 17 

agencies that do participate in trade policy, and some of that has 

to do with the complexity of trade policies and the types of agreements that are currently an issue. 

Senator VOINOVICH. Do you think it would be wise if somebody 

examined that situation to make a determination as to whether or 

not perhaps they ought to have more people on board that have the 

expertise that they are now getting from other agencies? Do you 

think it might be worthwhile to look at that with——

Mr. YAGER. That certainly is a question that we could look into, 

Mr. Chairman, if you want to go forward with that. 

Senator VOINOVICH. I think I would. I think it is important that 

we look at that issue. 

First of all, I would like to say, Commissioner Jochum, I was impressed with some of the statistics that you shared with us this 

morning, and I agree with you. I have said in many instances, and 

you have had 20 hearings, and I have had at least four hearings 

in Ohio. In fact, I recently had a hearing in my office with four 

Ohio manufacturers, and Secretary Evans. He was kind enough to 

come and spend over an hour with us. I think it is important that 

we make clear today that even if we solve the issue of the manipulation of currency by the Chinese or their violating intellectual 

property rights or not complying with other requirements of the 

WTO that our manufacturers in this country continue to have some 

significant problems. 

For example, if we could do something about the cost of natural 

gas, it would have enormous impact on manufacturers. In my 

State, mutual gas costs have doubled. Unfortunately, we are not 

producing enough natural gas to keep up with the demand. Furthermore, some environmental concerns are exacerbating the demand for natural gas—which is another reason why we should pass 

the energy bill. 

17

The other issue is litigation. It is not on the table, and it is not 

being talked about, but litigation is a tornado that is ripping 

through the economy of America. And, again, we have legislation 

in Congress to deal with asbestos reform and malpractice lawsuit 

reform. Each impacts the cost of healthcare in this country, and 

costs associated with class action lawsuits. In fact, I asked the 

American Tort Reform Association to do a study to investigate the 

cost of class action lawsuits in Ohio. 

Litigation is costing every Ohioan $650 a year. So it is another 

fact we need to address, instead of just saying, well, if we just take 

care of China everything will be OK. The fact of the matter is we 

could take care of China, and we are still going to have some significant problems. 

And then of course you have to deal with the healthcare issue, 

and that is a tough one. Again, we may be hearing from some of 

the other witnesses, but in our State it costs about $10,000 for a 

business to take care of family healthcare protection for an individual. They are competing in the global marketplace, say, with 

China, where those healthcare costs are not reflected in the cost of 

their product. We are now in a global marketplace, and the real 

issue is are we organized in a way to compete in that global marketplace in terms of the costs that are incurred by our businesses. 

So I think it is important that we make that a point so that people understand that we must have a full-court press on lots of 

issues and not just concentrate on one and think that it is the silver bullet that is going to take care of dealing with all our problems. 

I would like to ask you, Mr. Jochum, what is the status of the 

reorganization that you talked about? Now, I was pleased the 

President announced that Secretary Evans went up to Detroit to 

the Economic Club and explained what he was going to do. I talked 

informally with the Secretary. I wondered whether or not you were 

going to get somebody in-house to do the job. At that time, I suggested maybe it would be good because it takes new people a while 

to learn the organizational structure. However, it seems like you 

moved away from hiring someone from the inside. I understand you 

are now having interviews for someone that would head up the 

new position. 

I just want to tell you that we have to get going. I do not know, 

is this new person going to require confirmations by the Senate, for 

example? I see somebody nodding their head. 

Mr. JOCHUM. I would assume so. 

Senator VOINOVICH. And you know what that is around here. It 

is not easy. 

It seems to me that by the time we come back in January, you 

guys ought to have whoever it is that you want in place and come 

in here and talk about it and let us get going because we are running out of time. 

How are you doing? 

Mr. JOCHUM. As someone who went through confirmations twice 

in the last 3 years in the Senate, I can tell you it is not only an 

enjoyable experience, but you stretch it out over many months so 

you can really enjoy it. [Laughter.] 

18

My understanding on the reorg, Mr. Chairman, is that the parts 

I believe that you have noted today are all within the omnibus appropriations bill, and that if that bill were to pass the Senate this 

week—and I know that is uncertain, although it did pass the 

House yesterday—we would be poised to move forward. 

My understanding is that the personnel decision regarding who 

that individual may be is working its way through White House 

personnel, but they are fairly close and ready to announce someone 

if we had the authority to do so. So that is my understanding of 

the elements that we mentioned today. 

There are other parts of the reorg that I mentioned that we can 

do now. For instance, the Unfair Trade Practices Team within my 

agency is part of the omnibus bill, but I think that is something 

we can do without additional funding, and so we are putting measures in place to get that up and running immediately, and have actually started carrying out some of the functions of that team. But 

passage of the omnibus bill would be a great help in moving our 

reorganization forward. 

Senator VOINOVICH. In the process of putting that whole organization together, is the U.S. Trade Representative aware of what 

you are doing and are they in tune with what you are doing and 

some of the other 14 agencies we discussed. 

Mr. JOCHUM. Yes. 

Senator VOINOVICH [continuing]. So that they have an idea of 

where you are going? 

But the thought that I had which is why I introduced the legislation—would be that you have to have an orchestra leader. You are 

dealing with lots of agencies, and you have got to have somebody 

that gets up early in the morning and goes to bed late at night trying to make sure that they are doing their job, but also making 

sure that they are dealing with other sections of the orchestra that 

may be in other departments. 

Mr. JOCHUM. No, that is exactly right. And I think the way it 

was structured, maybe in the bill and maybe in your bill, was that 

they would report to the President. So they would actually be, technically reporting to the President. So they would have the ability 

to orchestrate, if you will, or deal with other agencies at that level. 

Notwithstanding some of the comments on coordination with USTR 

that we have heard today, I think we have a tremendously high 

level of coordination with USTR, both on a formal basis, through 

interagency committees—Mr. Freeman heads some of those up—

but even all the way up to deputies and principals meetings, but 

also at an informal level, at my level and at the working level—

a tremendous amount of coordination. So they absolutely do know 

all of the initiatives we are putting in place. 

I often bounce ideas off people at USTR to get their thoughs on 

new initiatives such as the Unfair Trade Practice Team. So I think 

it really is a coordinated government effort. It just happens to be 

housed in the Department of Commerce. 

Senator VOINOVICH. We made some government-wide human 

capital modifications in Title 5 U.S.C. with the Homeland Security 

legislation. Has that helped at all in terms of meeting your recruiting and retention challenges? In other words, do we need to do 

more in that area? According to the statistics, you are authorized 

19

for ‘‘X’’ number of people, and you do not have those people on 

board. Where are we with that? Are you having a hard time finding 

people? Is the salary level not competitive? Are you still using the 

rule in three or have you gone to the new flexibility of category 

ranking. 

Mr. JOCHUM. Ms. Cheatham may be able to go into greater detail, but my understanding is that there has always been a gap between authorized FTE levels and the funding needed to hire those 

people. 

To put it in context, I ran a different agency before I came over 

here, at the beginning of the administration, and hiring is one of 

the greatest challenges we face. One perverse effect of the downturn in the economy in 2001–2002 is that, frankly, we did get a lot 

of good people who came into the government, into the Federal 

service, and I was really pleased with some of the quality individuals that we had. 

In my agency particularly, we use a lot of lawyers, economists, 

and accountants—people who really could make more money in the 

private sector, for a number of reasons—but notwithstanding the 

recent growth in the economy, we had a tremendous influx of talent. That is not to say we always have the right mix of people. 

And the point you made about matching our priorities with the 

experience and expertise that we need is really illustrated in this 

China office that is about to be created. This proposal, which is in 

the omnibus bill, would require us to really develop further expertise on China as a market, specifically. Right now we do not do a 

good enough job within the Commerce Department of coordinating 

all of the activities on China in one place. And my hope is that 

with additional funding levels and FTE authorization, we can get 

people into the Department who have a background and expertise 

on China, in particular, people like Charles Freeman and others 

that we already have. We need them in one place to look at this 

issue from a holistic standpoint. 

We do our best to attract these individuals. We use recruitment 

bonuses. We sell the fact that you have flex time and compressed 

time in the Federal Government, all of those sort of lifestyle issues, 

to try to entice people from the private sector to us. 

I was surprised. I looked at my numbers today, and a third of 

my workforce has been at Commerce for more than 10 years, I 

think. That is encouraging. At the lower level of the spectrum, you 

do have a high level of turnover. 

As Charles said, I believe my agency is well staffed with, frankly, 

some of the best trade lawyers I have ever met. We could match 

up with a lot of mid-size law firms in Washington I would think. 

But there is always more we can do to entice people to come into 

the Federal bureaucracy because there are limits in terms of income and other factors. 

Senator VOINOVICH. Well, the administration has given high priority to human capital, and we tried to create an environment in 

Congress to help them. And I think that when you come in with 

the nominee for that new office, we would like to have more information about what is happening in terms of bringing people on 

board and do you have the folks that you need to get the job done, 

and if there are some things that we can do to help you get it done, 

20

we will try and help out. The human capital provisions in homeland security were the most significant Civil Service reforms since 

1978, but there is always more we can do to help. 

And by the way, another issue is what role Congress should be 

playing in all of this? I am meddling in your business right now. 

I was a former governor, a former mayor, and I did not like the 

legislature to be mixing in sometimes on things that I thought 

were in my bailiwick, but as you can tell, I am very concerned 

about what is going on here. And the issue is what role should we 

be playing? How can we help you get the job done? 

And you also have to understand that there is an enormous 

amount of frustration right now among many of us about what is 

going on. It is like we want something done, and the reason is because, when we go back home, our people say we need help now, 

not next year or 2 years from now, we need it now, and what are 

you doing? 

What can we be doing more to help out? 

Mr. JOCHUM. I think on the workforce issues, Mr. Chairman, you 

are one person who is already doing more to help out. From a manager’s standpoint, we need flexibility to respond to new issues, 

emerging issues, and to be able to get the right people with the 

right expertise and experience to respond to those issues quickly. 

I think the Federal workforce moves rather slowly at this point. We 

need tools to recruit people and to retain people. 

We talked a lot about recruiting, but retention is just as significant. We have grade levels that are capped out at mid levels and 

lower levels, so people do not see an opportunity to advance. I am 

no expert on the civil service, but I will take this as an offer to 

come and talk with you when we have these initiatives in place, 

with Ms. Cheatham at my side, and determine what you could best 

do to give us the flexibility to get the right people. 

Senator VOINOVICH. Well, we are trying to deal with the safety 

cap. We have increased the cap. I know, with the Senior Executive 

Service, that we have had 75 percent of them making the same 

amount of money, and it has not helped the agencies because it demoralizes those that are really producers. 

Mr. JOCHUM. That is right. 

Senator VOINOVICH. And we are trying to take care of that problem too. 

What I would really like to know, from somebody on the street, 

is what we have done is helpful, and if it is not, what else can we 

do to help you get the job done? 

Mr. JOCHUM. I appreciate it. 

Senator VOINOVICH. The other thing I would like to find out from 

you is, as a governor, I took 10 trade missions overseas. In some 

countries, the Foreign Commercial Service Office was outstanding. 

We dealt with it. Others, we concluded that it did not get the job 

done and went to the private sector. In some cases, we had ambassadors that really seemed to get it in terms of economic development and trade. Others did not seem to get it. 

When I was in Bratislava, I became impressed with Ambassador 

Weisser, a former resident of Michigan, because he was out 

hustling joint ventures and so forth. 

21

What is the status of our former commercial folks around the 

world? 

Mr. JOCHUM. Maybe Ms. Cheatham can discuss what we have 

been doing in that regard, but one thing the reorg will do is to 

match our trade promotion activities with our Foreign Commercial 

Service officers, because two different entities are doing those activities now, which I think really puts us behind where other countries are. In my latest job in the administration, I did a lot of advocacy on behalf of defense contractors around the world, and I just 

think you need to link those two functions up. 

I do know that we have more than 1,000 people in the Foreign 

Commercial Service, and I have used them when I have traveled, 

both in the private sector and in the administration, and I have 

found them to be extremely helpful. I have also noted, and I met 

with a lot of ambassadors—I was in Brataslava 2 years ago—that 

I believe Secretary Powell has really instilled a culture in the Foreign Service that appreciates the economic aspect of the equation. 

So I think very positive changes have been made in that regard. 

If you want some current sort of details on where the Foreign 

Commercial Service will go in terms of the reorg, maybe Ms. 

Cheatham can speak to some of that. 

Ms. CHEATHAM. One of the things that we are trying to do, Mr. 

Chairman, is to consolidate all of the promotion activities in the 

Foreign Commercial Service so that when companies are doing 

business overseas, there is one point of contact that they have to 

deal with. The advocacy center will also help here. 

As Mr. Jochum said, there are approximately 1,100 people that 

we have stationed overseas in about 85 countries. 

Senator VOINOVICH. It is important to help our businesses do 

business in some of those countries. Your job is vital because without your help, it just doesn’t happen. I had some wonderful experiences and I had some not-so-wonderful experiences. 

Secretary Evans was in Beijing on October 28, and he stated that 

U.S. patience on China’s WTO compliance was, ‘‘wearing thin,’’ and 

warned of, ‘‘growing protectionist sentiments in the United States 

against China.’’ This growing anger towards China’s IPR policy 

coupled with China’s rigid adherence to a pegged currency policy 

has created an environment that is conducive to Congressional 

intervention. 

It gets back to the same question I asked before, which is what 

role should Congress have in regard to fair trade with China and 

our international partners? I have introduced legislation and Congressman Phil English has introduced legislation in the House to 

establish an Assistant Secretary of Manufacturing at Commerce. 

Can you explain who is responsible for the enforcement? Do you 

work with the U.S. Trade Representative? Is that strictly their responsibility, Mr. Freeman? 

Mr. FREEMAN. The enforcement of trade? 

Senator VOINOVICH. Yes. 

Mr. FREEMAN. Generally, we work very closely with Commerce 

on all these issues. It really depends on what the issue is to see 

who has the lead. 

With respect to intellectual property rights issues in China, I 

know we have a very strong team that we have worked together 

22

with in China that deals with it, and also with respect to currency. 

One of the things that, as you mentioned, Secretary Evans when 

he was in China was very strong on the currency issue was focused 

on that. I know Ambassador Zoellick, when he was there earlier in 

the month, had also spoken on it, and Secretary Snow back in September. So there has been a very unified message that the Chinese 

have heard on the currency front. 

The sense of the administration is that they have the message 

and that they are moving forward. It may not be on the timetable 

that a lot of us would like to see, but certainly in terms of making 

progress, they are pushing in the right direction. 

Senator VOINOVICH. When I talked about the reorganization, I 

was talking about having somebody get up early in the morning 

and stay in late at night making sure that we enforced our trade 

laws. Fundamentally, the concern is this, is that if I am dealing 

with the United States and I am getting away with things and I 

can get on the field and run without a flag being thrown and I almost get to the goal line, I am going to run on you and run on you. 

Where are we in terms of that agency, and is it in your shop 

where you have people that get up early and stay late at night and 

get the word out there that as soon as you get on the field and you 

break the law, we are throwing the flag and we are on you? 

Mr. JOCHUM. Yes. I guess I would divide enforcement into two 

areas. One is the trade laws, in terms of imports and their effect 

on U.S. businesses. We enforce the dumping laws, and the countervailing duty laws. The dumping cases against China that I mentioned in my testimony, where we brought the textile safeguards 

that were announced a couple of weeks ago, all of that occurred 

with interagency knowledge and coordination. 

Responsibility for monitoring compliance with a trade agreement 

as opposed to U.S. trade law, however, is really split among the 

agencies. We have a Trade Compliance Center within the Department of Commerce made up of 18 individuals who look at trade 

agreements and whether they are being complied with. We have a 

China office now—a little different than the one that is going to be 

created—which looks just at China’s commitments to the WTO and 

within other trade agreements. That office, again, is a dozen or 16 

people working with U.S. industry to identify where the Chinese 

have failed to meet their commitments, and then working with 

Charles Freeman and USTR and other agencies to develop a coordinated strategy to address those situations. 

This calls to mind a similar line of questioning you had with Dr. 

Yager regarding who looks at these issues. When I was in the private sector doing international business for a consulting firm, we 

were always aware of trade barriers, probably before the government was, because we were there trying to have a transaction take 

place, or trying to enter a certain market. Certainly, we relied on 

the Foreign Commercial Service officers in those countries. 

But I think a large part of monitoring trade agreements is close 

coordination with the private sector and with the government, and 

a lot of that occurs at the Department of Commerce because we 

have those relationships built up over many years—not that USTR 

doesn’t, but we do that on a day-by-day basis. 

23

So if you are talking about trade laws, we certainly enforce them. 

I get up every day worrying about this stuff. If you are talking 

about trade agreements, it is more split and I think USTR probably 

has the lead in going after IPR issues and things like that. 

Senator VOINOVICH. The problem is that it doesn’t seem that we 

are making progress. I have a memorandum, and I am going to ask 

that it be submitted in the record, in terms of the IPR and how 

long we have been working on IPR. Every year, we talk to China. 

Every year, they say it is going to get better. And I have to tell 

you something. You need a sledgehammer to make things better. 

[The information of Senator Voinovich follows:] 

MISSING ? ? ? ? 

I will never forget my 97 trip to South Korea. I am asked by the 

big three auto companies to raise the issue of the export into South 

Korea of non-Korean vehicles, and I spent 3 days talking to everybody and they said, oh, we have done wonderful. They have gone 

from one-tenth of one percent to two-tenths of one percent. They 

gave me a response that if they had given that here in the United 

States, we would have laughed them out of the office. They 

wouldn’t have ever tendered that kind of response to a question 

from me, and they did it with a straight face. 

And today, South Korea exported more vehicles into the United 

States in one day than all of the other countries export into South 

Korea in 1 year. Do you get it? In other words, one day in the 

United States is more than the entire export into South Korea, and 

I am not just talking about the United States, I am talking about 

everybody. 

When people hear things like that, they have to start to ask 

themselves, are we enforcing the trade laws? This is fair trade? 

And I think that some of these issues that are out there, you have 

got to break the logjam. You have to show you have made some 

progress. That is the frustration out there. It seems like we are 

talking a good game, but we are not making progress, and when 

you do score a touchdown, when you do get something done, you 

ought to let us know about it. 

Mr. JOCHUM. I agree, and the last part of what we were discussing—some of the numbers I gave you in my testimony about 

our dumping cases are probably not widely known, although we put 

them on our website and otherewise make the information available. But I think we need to do a better job of communicating with 

Congress on the activities that we do do on a day-to-day basis. 

And Mr. Chairman, getting back to your question about what 

Congress can do, I have negotiated with the Chinese for several 

years now, not on this issue but others, and they really do pay attention to what Congress is doing. It is a significant part of their 

calculation in terms of negotiating with us. So resolutions and bills 

that are introduced, I think, have a tremendous effect and allow us 

to have a stronger hand when we go talk to them about these 

issues. 

Senator VOINOVICH. I sure would have liked the Treasury Department to—I worked with Dick Lugar’s staff to come up with 

what I thought to be a very fair objective, and then we get the 

word Treasury doesn’t want it. Why, I am asked, and that is a 

question I am going to ask Secretary Snow. 

24

The last thing, Assistant Secretary, is that some U.S. companies 

question the Department of Commerce’s ability to deal with fraudulent data, i.e., there is a problem that arises and you start dealing 

with people over there and they provide evidence to you and some 

of our people feel that it is fate. What is your capacity to pierce the 

veil and really find out whether or not they are giving you the 

right information? 

Mr. JOCHUM. This comes up in the context of our undertaking a 

dumping investigation, primarily against Chinese companies, although we face fraud in other parts of the world, as well. Our statutory authority allows us, when we find fraud, to go ahead and 

apply what we call ‘‘adverse facts available,’’ the result being that 

they would get a much higher dumping margin. 

To give you an example, we did a review within the last couple 

of weeks. We found fraud. We gave them the highest duty that we 

could give them within the case, and so it ended up that they had 

a 300 percent tariff coming into the United States. That is the recourse we have under the statute. We don’t have enforcement authority beyond that. 

What we do is work with Customs, because those would be potential infractions of reporting laws to Customs, to give Customs 

the information we have seen, and have Customs undertake their 

enforcement authority to pursue those cases. And we have referred 

about 20 cases to Customs within the last couple of years. So when 

we find fraud, we work within the context of our case and assess 

a penalty, and then we refer it to Customs for them to follow up 

on the matter. 

But this is a situation that is arising more frequently, and there 

are a couple of other options that we are considering right now. I 

would be glad to come back when we are ready to be more public 

about what other avenues we may explore in that regard and discuss these matters further with you. 

Senator VOINOVICH. Thank you. Mr. Freeman, when is the International Trade going to go forward with a 301 on China in terms 

of their currency manipulation? 

Mr. FREEMAN. Well, there are no plans to self-initiate at this 

time. Obviously, if a 301 is brought, we would evaluate it based on 

the legal theory. We haven’t seen a legal theory yet for Section 301 

on the currency. So right now, we remain interested and will look 

for it when it comes. 

Senator VOINOVICH. Well, there are many of us that feel that you 

should move forward with it and that there is enough evidence that 

we should have a 301. I know that the President recently disbanded the 201 on steel and I was very much involved in encouraging him to go forward with that and he made a decision. But I 

have to tell you something. If that 201 had not gone forward, we 

would not have a steel industry today in this country, particularly 

when we are talking about slab steel and so forth. 

President Clinton could have undertaken that at any time and 

chose not to do it, and then as a result of that, Congress introduced 

several quota bills that really violated the WTO straight out. It 

seems to me that Mr. Zoelick ought to be looking at that issue because many of us are very concerned about it. It is one legitimate 

way that you can raise the issue. That is under the 201—wasn’t 

25

something somebody pulled out of a bag. It was available under 

WTO. It was available under NAFTA. It was under GATT. It was 

the surge provisions. You could do it. 

So I strongly urge you to talk to your folks and look at this, because we are concerned about what is going on and we expect these 

people to cease and desist, and if they don’t, then I think we have 

really got to go forward. And if you don’t move forward with it, you 

are going to get some stuff coming out of this place that you may 

not like, that you may not like. 

Last but not least, I want to ask the question about the personnel. You heard the questions with Mr. Yager, the question 

about whether you are organized and do you have to rely too much 

on other agencies to get the expertise that you need. What do you 

think about that? 

Mr. FREEMAN. Well, we obviously feel that we could work within 

the President’s budget that he submitted. We do note that there 

was some additional money set aside in the omnibus and we are 

certainly gratified for that. 

The core of our business really is personnel and travel. Our travel budgets do get crunched now and then, especially given certain 

additional costs that are associated with travel these days, and 

anything helps. I do think that the people that we have are firstrate——

Senator VOINOVICH. But the question is this. Your plate is much 

fuller than it ever has been in this country’s history and you have 

been operating with 200 people and you have been accessing personnel from other agencies. The question is whether or not your 

agency should be expanded and some of the expertise that you are 

relying upon in other agencies should be reorganized into your operation. 

Mr. FREEMAN. Again, we have taken a variety of steps at USTR 

to deal with the expanded agenda. We have reorganized our issues 

and regional offices to deal with the new demands. We have overhauled the financial system that allows us to track travel expenses 

and so forth. We put new accounting codes in. There is a variety 

of other systemic things that we have done. 

At the core of USTR is the notion that smaller is better, that the 

ability to be agile and nimble and to be responsive is really at the 

heart of some of our successes. That said, we do rely very heavily 

on both the detailee program that comes from other agencies and 

we also rely very extensively on our ability to work closely with 

other agencies. 

Again, the bottom line is that it is good to be small, but the job 

is certainly tough and——

Senator VOINOVICH. Do you know if anybody is looking at it? 

Mr. FREEMAN. Looking at the——

Senator VOINOVICH. The issue of whether or not the way you are 

organized makes the most sense. 

Mr. FREEMAN. I know. I am here with the Assistant USTR for 

Administration, who spends his waking and sleeping hours fretting 

about it, so I know he is looking very closely at it. 

Senator VOINOVICH. Well, it is a question that I am going to continue to ask and I am asking Mr. Yager to get involved in it. 

26

1The prepared statement of Mr. Vargo with attachments appears in the Appendix on page 

92. 

I want to thank you very much for being here. Your testimony 

has been encouraging and you certainly have a lot of challenges. 

What you are doing is really important for our country, for our national security, for our economic security, and I just want to say to 

you I appreciate your commitment and your service to the country, 

and let the folks that you work with know that we care about what 

they do. God bless them for what they are doing. 

Our next panel is Franklin Vargo, Vice President of the National 

Association of Manufacturers; Tom Duesterberg, President and 

CEO of Manufacturers Alliance for Productivity and Innovation; 

and Tim Hawk, who is Vice President and General Manager of 

American Trim L.L.C. 

I want to thank you for being here today with us. You all have 

had an opportunity to hear from our previous witnesses and I welcome your observations about some of the things that they have 

said in their testimony. 

We will start out with Mr. Vargo. Mr. Vargo, I understand that 

you have had a lot of contact back and forth with our office and 

I am looking forward to sitting down with you to talk to you about 

some ideas that the National Association of Manufacturers has and 

how we can improve the situation that I consider to be in crisis 

proportions in some parts of this country, particularly in terms of 

our manufacturers, so thank you for being here. 

TESTIMONY OF FRANKLIN VARGO,1 VICE PRESIDENT, INTERNATIONAL ECONOMIC AFFAIRS, NATIONAL ASSOCIATION OF 

MANUFACTURERS (NAM) 

Mr. VARGO. Mr. Chairman, thank you for inviting me. I am really honored to be here because you are one of the NAM’s great heroes. You take backseat to nobody in pressing for the health of 

American manufacturing and for restoring 2.8 million jobs to 

America’s working men and women and we thank you for that. 

Mr. Chairman, the subject of your hearing is a very important 

one. Manufacturing is indeed in need of a lot of redressing of the 

ills that have happened over the years. I want to thank you for introducing, along with Senator Snowe, S. 1977, the SMART Act, and 

we would like to work with you on that. 

As far as trade resources, the NAM pressed very hard for an increase in resources for both USTR and Commerce this year and I 

certainly hope the omnibus appropriations bill is going to pass this 

week because it provides an additional $7 million of resources to 

USTR that is very overdue for many years. For example, USTR is 

leading now in negotiating 16 different free trade agreements that 

are either being negotiated now or they are on the books. 

But the immediate problem is absorbing China into the WTO. 

China is now in the second year of being in the WTO and everybody was willing to cut China slack the first year, and we understand that China has a lot of transition still to do. But there are 

problems that just cannot be allowed to lie around anymore, and 

I want to illustrate some. 

27

Mr. Chairman, I am holding a pair of pliers in my hands. This 

is a pair of pliers made in China. The wholesale price in the United 

States is 49 cents. An NAM member makes a similar pair of pliers. 

The problem is that the steel in these pliers and the rubber is 61 

cents, and steel and rubber is not cheaper in China than it is here. 

How do you take 61 cents of raw materials, manufacture it, package it, ship it across the Pacific Ocean, and sell it for 49 cents? 

Something is going on, and it is not just in pliers. It is in the area 

of fish cookers, plastic molds, and vibration mounting systems. We 

have members that are very concerned that these products are 

being either dumped or subsidized. 

Now, a lot of Chinese companies don’t have to repay their loans. 

Up to half of the loans are non-performing. Well, if I didn’t have 

to repay my loan, I could sell very cheaply at wholesale. 

Assistant Secretary Jochum said they are setting up an unfair 

trade practices team and I suggest they start with that pair of 

pliers right here. 

You mentioned counterfeit goods. My testimony contains some 

pictures of real and fake Toro sprinkler heads here. Toro is a very 

well-known company, makes garden equipment and others. When 

we talk about counterfeiting in China, we are not talking about 

knock-offs of designer bags and perfumes. We are talking about 

pharmaceuticals that are filled with talcum powder. We are talking 

about windshield safety glass that will shatter. We are talking 

about lawn sprinklers that are exported from China around the 

world, and it has got to stop. Getting China into the WTO gave us 

rights we didn’t have before and it is time to exercise them. 

I will say, I really want to compliment the new Deputy U.S. 

Trade Representative, Ambassador Josette Shiner. She has been in 

her office only a couple of months and she has been to China three 

times on this single issue. She has adopted it as her highest priority. The Chinese, in response, have designated a deputy prime 

minister to get onto the subject. 

USTR has agreed that this will be discussed not just in theory, 

Mr. Chairman, but we are going to take specific cases like this, 

identify where the factories are. We want those factories, we want 

the equipment destroyed. We want the people who are manufacturing those counterfeit goods arrested. We want criminal prosecution brought and we want to see decisive action on this. And if we 

don’t get that, then we are going to have to move quickly to the 

WTO. We can’t sit around. 

One additional area that, Mr. Chairman, you did not mention in 

your initial remarks, and that is China is violating its WTO requirements very seriously in the semiconductor area, where imported semiconductors into China, including American-made, pay a 

17 percent value-added tax, and that is fair. But if you design and 

make the chip in China, you get 14 percent rebated back to you, 

and that is not fair. That is totally in opposition to the national 

treatment under the WTO and to specific tax provisions in the 

WTO. 

If we let this continue, our semiconductor industry, the research 

and development, our entire global leadership in micro-electronics 

risks moving over to China. The Semiconductor Association produced a detailed report and I would like to leave that with you, Mr. 

28

1The prepared statement of Mr. Duesterberg appears in the Appendix on page 108. 

Chairman. This is something that USTR needs to stop talking 

about and do something about. 

You mentioned the currency. The Treasury has acknowledged in 

testimony before Congress that the Chinese are intervening. They 

are intervening heavily for the purpose of preventing the exchange 

rate from rising, and by inference, they are saying that if China did 

not intervene, the exchange rate would rise. 

Well, it is time to do something about that. Secretary Snow has 

put this front and center. We are very grateful for that. But we 

need to see action from the Chinese. If they cannot move to a floating currency—they are a huge trading economy. They need to play 

by the rules. And in the meantime, they need to bring their currency up to something that resembles market rate. I will say one 

of the best estimates was done by Dr. Ernie Preeg, who works with 

Dr. Tom Duesterberg in the Manufacturers Alliance. 

One additional point. We need to ensure that the Commerce Department is indeed able to use correct methodologies for dumping 

and for countervailing duties in China. We do have companies that 

say the Commerce Department, in their view, is not going about 

the job as well as it ought to in selecting what are called surrogate 

companies in a market economy, because China is a non-market 

economy. We are very concerned about the cases of fraud. I was 

very pleased to hear what Assistant Secretary Jochum said, but we 

need to pursue that more. 

And we need to look at whether there needs to be some change 

in the law to make it plain that if there are subsidies in China—

and Secretary Evans said that there are—that the countervailing 

duty statutes can be used even though China is a non-market economy. This may need legal clarification, Mr. Chairman. 

In concluding, Mr. Chairman, certainly China trade are not the 

only problems or even the primary problem that American manufacturing faces. You mentioned the cost increases. Dr. Duesterberg’s organization, the Manufacturers Alliance, and the NAM, as 

a matter of fact, this very morning had a press conference releasing 

this report on how structural costs are harming manufacturing in 

the United States. This report quantifies for the first time the magnitude, and by our initial estimates, these costs of additional 

healthcare, of litigation, of energy costs, are adding 22 percent to 

the cost of producing in the United States. Until we deal with that, 

Mr. Chairman, that is just like hanging out a sign saying, ‘‘Manufacturers are not welcome in the United States.’’ Thank you, Mr. 

Chairman. 

Senator VOINOVICH. Thank you, Mr. Vargo. Mr. Duesterberg, 

thank you very much for being here. 

TESTIMONY OF THOMAS J. DUESTERBERG,1 PRESIDENT AND 

CHIEF EXECUTIVE OFFICER, MANUFACTURERS ALLIANCE/

MAPI 

Mr. DUESTERBERG. It is a pleasure to be here. Mr. Chairman, I 

want to join Mr. Vargo in commending you for your leadership on 

this issue and thank you for having me before your Subcommittee. 

29

I am going to try to give a little bit broader overview of the importance of manufacturing with a view to helping you to focus your 

efforts on some of the areas of trade enforcement that are of particular importance to manufacturing. 

I want to begin by giving you a few facts and figures about why 

manufacturing is important to the overall economy. It is not only 

that it produces high-paying jobs, but we think that manufacturing 

is indeed the engine of growth for the American economy and for 

the global economy, and that fact is too often forgotten. 

We recently published a book trying to explain why we think 

U.S. manufacturing is the engine of growth, and I will leave a copy 

with you, Mr. Chairman. Some of the things we looked at though, 

were that manufacturing is the center of productivity and innovation in the modern economy. Over 90 percent of new patent approvals in the United States come from the manufacturing sector. Twothirds of all R&D now comes from the manufacturing sector. 

Furthermore, the high-tech investment that is pioneered by the 

manufacturing sector, as one of the other witnesses indicated, spills 

over into other sectors of the economy, such as agriculture and 

such as the services sector, and allows them to introduce productivity gains, which are the source of increases in our standard of 

living. 

Given this leadership position of manufacturing as a research 

oriented, innovation oriented sector, we think it is vitally important 

to the future of the American economy. Some of the indicators that 

we talk about are not only the excess productivity gain compared 

to the rest of the economy that comes from manufacturing and 

spills over into the services sector, but also the fact that high-technology goods, which on an average pay much higher wages and 

which add much more value than commodity-type consumer goods, 

are increasingly dominant in the American economy. I put some 

charts in my testimony regarding the increase in our high-tech exports in the last two decades. 

That being said, there is starting to be something of an erosion 

in the position of the United States’s ability to do research and development and, in turn, remain competitive in the advanced technology area. Some 35 percent of our exports now are in advanced 

technology products. But whereas in the 1990’s we had a large 

trade surplus, peaking out at $38 billion a year in advanced technology products, we now estimate that this year we will have a 

trade deficit of about $25 billion in advanced technology goods. 

The second part of my testimony looks at some of the other pressures on manufacturing. Mr. Vargo mentioned the study that we 

put out which indicates that the cost pressures that are externally 

imposed on the manufacturing sector add up to at least 22.4 percent of total unit labor costs. Given that labor costs are only about 

11 percent of total costs, overall costs in manufacturing, this shows 

you the magnitude of the problem we are facing with these costs, 

such as litigation, which you mentioned, healthcare costs, natural 

gas costs, and the like. This has wiped out much of the incredible 

productivity gains that we enjoyed in the manufacturing sector 

over the last two decades. 

Senator VOINOVICH. I just wanted to interrupt you on that one, 

just because you talk to a lot of people in this country and they say, 

30

well, we are not productive. We have had the greatest increase in 

productivity that we have ever seen in this Nation’s history, and 

a lot of it is coming out of the manufacturing sector, a big part of 

it, as a matter of fact. 

Mr. DUESTERBERG. It is——

Senator VOINOVICH. So we are not competitive because we aren’t 

productive. Nothing could be further from the truth. Our guys are 

doing terrific jobs in terms of productivity. But it is all the other 

structural costs added onto the back of the manufactoring sector 

that is breaking it and hurting them in the global marketplace. 

And the real question is, how do we level the playing field? 

Mr. DUESTERBERG. Let me say a few other things about that. 

One of the sources of our strength over the course of time is our 

commitment to research and development, and the Federal Government has always played a role in that. I put a lot of charts and 

graphs in my testimony showing that there has been a slow erosion 

in relative terms of our commitment to basic research and to encouraging people, students, to enter into the professions, such as 

engineering, mathematics, and the physical sciences, which are important to manufacturing and which provide the intellectual capital, the human capital, for these incredible productivity gains that 

come out of the manufacturing sector. 

I noted that some of the notable Federal programs of the past, 

such as the Apollo program, which in the 1960’s was supported 

with up to 0.75 percent of total GDP each year, paid immense dividends over the course of time in terms of our technology lead, 

which we still enjoy today. 

Unfortunately, there has been a fall-off in the number of students entering these professions and in the amount of support that 

is going into research and development, both at the Federal level 

and at the industrial level. And as a result, even though we are 

still the technology leader in most of the areas that are important 

to manufacturing, that lead is eroding a slight bit and we need to 

address that. 

Now, third, some of the things we need to be doing, we need to 

address these cost pressures through tax policy. Capital in America 

is taxed higher than anyplace else in the world except Japan. 

Healthcare policy, which you know, legal reform, regulatory reform, 

and in that context I would note that even our environmental costs 

are higher than most places in the world. We don’t do it as efficiently as we should. Energy costs, which used to be a source of 

strength for industries like chemicals, where we had a trade surplus of substantial proportions 10 years ago and now we are in a 

trade deficit. So that needs to be addressed. 

Finally, I would note that there are things in addition to trade 

policy that we need to be looking at, and in terms of trade policy, 

the importance of intellectual property protection and enforcement 

of intellectual property protection, which Mr. Vargo went into great 

detail on, is vitally important. 

But we also need to do things like improve elementary and secondary education, support advanced training in engineering and 

the physical sciences. I think we need to establish clear and inspirational national goals for our space and national health research 

programs, both because they meet national needs and it would be 

31

1The prepared statement of Mr. Hawk appears in the Appendix on page 130. 

a means to attract students to the academic disciplines needed to 

carry out these programs and which are the heart of modern manufacturing. 

We need to support basic research. We need to support programs 

that ensure the development of technologies that meet national security threats. Without a robust and technologically advanced manufacturing sector, our national security would be called into question. 

We need to streamline and accelerate the drug and medical device approval process with the Food and Drug Administration, 

which tends to retard the development of medical products which, 

after all, are manufactured goods. 

We need to make the R&D tax credit a permanent part of the 

IRS code, and the U.S. Patent and Trademark Office needs resources to speed up its activities. 

Mr. Chairman, I thank you for this opportunity to appear before 

you. 

Senator VOINOVICH. Thank you very much. 

Mr. Hawk, it is nice to have you with us today. I appreciate the 

fact that you and your team from Ohio were in Toledo when we 

had our listening session and then were willing to come to Washington and spend over an hour with Secretary Don Evans. I 

thought it would be important that you be here at this hearing so 

that the record will reflect your personal experiences and how 

small businesses are being effected by the global trade environment. I am glad you are here to speak on behalf of an Ohio based 

company to tell your story of how you have encountered some enormous burdens that you haven’t experienced before in the life of 

your company. Thank you for being here. 

TESTIMONY OF TIM HAWK,1 VICE PRESIDENT AND GENERAL 

MANAGER, AMERICAN TRIM L.L.C. 

Mr. HAWK. Thank you. I would like to thank the Subcommittee 

for allowing American Trim the opportunity to present today. 

American Trim is a 50-year-old manufacturing business that supplies component parts and assemblies to the automotive and appliance industry. We stamp, decorate, and finish products that are 

seen and used in many households and vehicle systems. We employ 

over 1,500 families and operate facilities in four States. I am a 

third-generation owner-operator. 

Our company’s tag line is, ‘‘Forming the Future.’’ I hope today 

our small company might have an influence on the formation and 

enforcement of future trade laws, policies, and practices. 

Today, I will provide an overview of why the U.S. manufacturing 

sector is losing jobs at an alarming rate. As you know, two million 

jobs have been lost and we have had 34 straight months of manufacturing job loss. 

You have given me 5 minutes today and I will give you our company’s ‘‘2-cent’’ perspective for why the loss and why the continued 

loss if action is not taken. Simply put, it is all about the other noncontrollable costs that we are saddled with that makes us uncomVerDate 0ct 09 2002 08:58 Mar 29, 2004 Jkt 091046 PO 00000 Frm 00035 Fmt 6633 Sfmt 6633 C:\DOCS\91046.TXT SAFFAIRS PsN: PHOGAN
32

petitive. This includes rising healthcare, environmental, OSHA, 

and basic utility costs. 

The part that I am holding up here has been made for more than 

30 years. We have made over a billion of these. We have invested 

millions of dollars in high-tech automation to eliminate the labor 

cost to the manufacturing. My predecessors had the foresight to 

being and achieving the world’s low-cost producer of this product. 

This product has two cents of labor content in it. Those costs include the labor to convert the metal from a flat piece of metal into 

a finished product and shipped to the customer. 

Competitiveness and the viability of this product in the lives of 

our people and employees is being challenged by the low-cost labor 

countries and their ability to buy and process commodities (steel) 

cheaper than us. We recognize that China, India, and Indonesia 

offer labor rates at 90 percent cheaper to the United States. We 

don’t consider that a factor in competing with them due to the automation and the productivity levels that we currently achieve. 

I recently conducted a competitive bid process for that specific 

product. My goal was to understand the direct material and labor 

content associated with the product. Much to my surprise, material 

was 25 percent cheaper than what we could procure it for. The 

ability to start off with a 25 percent advantage to us is a bit alarming. I researched other materials and have found similar stories in 

different industries. 

The purchasing power parity (PPP) seems to be out of balance. 

I am by no means an expert on currency manipulation and its 

inter-relationship with PPP. All I can surmise is that the playing 

field is tilted away from fair trade. 

Now let us talk about the other costs besides material and labor. 

These costs are almost non-existent to low-cost labor countries. 

These include cost of healthcare, environmental and safety compliance,and utility costs. 

As a percent of revenue, our company operates at a 22 percent 

cost disadvantage due to the unlevel playing field. As you can see, 

it is not necessarily about the two cents of labor in that part that 

is in front of me. It is all about all of the other cost drivers that 

we experience as part of it. 

There appears no end in sight for the ongoing cost escalation in 

healthcare and utility costs. Natural gas, which is used to heat our 

facilities and run our manufacturing processes, have increased 122 

percent since 1998. Healthcare costs have risen 63 percent since 

1999, and is approximately 5 percent of total company revenue. 

The original equipment manufacturers (OEMs) have been developing strategies for sourcing products in China for some time. This 

includes the likes of General Motors, Ford, General Electric, Whirlpool, and Electrolux. They all have very lofty goals for China 

sourcing. Ford has a target of $10 billion within the next 5 years. 

How many businesses do you think will be lost to that? 

They have one simple message for us: Match the China price or 

else. The ‘‘or else’’ is being eliminated as a supplier and the continued creation of more job loss for Ohio. General Electric is in the 

midst of following through on the ‘‘or else’’ for our company, costing 

people their jobs and reducing the amount of taxes paid. 

33

The OEs are strategically organizing their China efforts. They 

are developing in-country beach heads and establishing very elaborate commodity filters for evaluating products. Products are 

screened or plotted on two dimensions. One dimension is of value 

added for labor and relative packaging density. Packaging density 

relates to the ability to ship many parts in a container. If they 

have a high labor content and are likely candidates for importing. 

I think we can all see why China is an attractive area and place 

to manufacture goods and why companies will continue to pursue 

sourcing goods in that region of the world. It is all about year-overyear cost reductions that are needed by large multinational companies. If there is nothing to do to level the playing field, small to 

mid-size manufacturing won’t exist in Ohio. 

I was asked by a government official if we have plans to manufacture products in China. I responded, ‘‘I thought it was about 

keeping and securing jobs in the United States and including the 

flow of taxes to the Government.’’

We are at a real crossroad and a heightened sense of urgency 

needs to take place. I stand here today wondering if anything will 

be done or if we will just watch another industry sector pass. I am 

a hopeful manufacturing romantic, but I realistically can’t tell our 

employees that the future is prosperous and bright. Thank you. 

Senator VOINOVICH. Thank you for being here today. 

A couple of areas. You heard the testimony in response to my 

question about whether our trade agencies have the people to get 

the job done, and I think the National Association of Manufacturers, Mr. Duesterberg, and your organization, supported having an 

Assistant Secretary of Manufacturing. 

The issue is, in your opinion, are they moving fast enough in this 

regard. And from your observations, do they have the people that 

they need to get the job done? Also, do you think that the suggestion of evaluating the way our trade agencies are organized ought 

to be looked at? We can’t even seem to agree on how many agencies 

are involved with trade negotiations and enforcement. And then 

having the Trade Representative reaching into the other departments for the expertise, from my observation, and I have been involved in this a long time as Governor of Ohio and very much involved in trade and export and so on, it just isn’t working. I would 

like to have your opinion on that. 

Mr. VARGO. Mr. Chairman, before coming to the NAM, I had over 

30 years at the Commerce Department in international trade. Several of those years, I worked for Assistant Secretary Duesterberg, 

who was a great boss. 

There is no question that certainly in USTR they haven’t had the 

resources they have needed for years. We pushed very hard, and 

I want to give Representative Frank Wolf, who chairs the Commerce, Justice and State Appropriations Subcommittee, a lot of 

credit for his tenacity to get funding above and beyond what the 

administration asked for for USTR, and that is in the omnibus appropriations bill and I certainly hope that is approved by the Senate this week. That bill also, thanks to your efforts, contains the 

Assistant Secretary of Manufacturing position. 

So I think Commerce is moving in making plans. I know a lot 

of people in Commerce from my years, and they are certainly workVerDate 0ct 09 2002 08:58 Mar 29, 2004 Jkt 091046 PO 00000 Frm 00037 Fmt 6633 Sfmt 6633 C:\DOCS\91046.TXT SAFFAIRS PsN: PHOGAN
34

ing on the plans to implement that, but they need the authorization and the money, which will be coming very shortly. 

So yes, I am satisfied with that. We are looking forward eagerly 

to Commerce’s manufacturing report, which is coming out a little 

bit later than we had expected. What we want is a report with good 

hard-hitting recommendations, so we are looking for that. 

As far as the interagency process, my perspective is a little different because I came from the Commerce Department. I just don’t 

think it is possible to have all the expertise in USTR. For example, 

what you really need in intellectual property, when you have the 

patent lawyers, the trademark lawyers, they are in PTO, the Patent and Trademark Office. I have not seen over the years a reluctance for those people and other experts in Customs and all the different agencies to work with the USTR. 

Sometimes the USTR complains that, oh, we are not getting 

enough support. Other times you hear complaints that, well, USTR 

is just not turning to us. Those are the minority of cases. By and 

large, I think the organization is there. It is the determination to 

move, the determination to act, both in terms of——

Senator VOINOVICH. Do you think that the Assistant Secretary of 

Manufacturing is going to make—as I mentioned, the orchestra 

leader, do you think that is going to give them the zip they need 

to—I mean, you are talking about turnaround on the pliers and 

turnaround on this and turnaround on that. It just seems like it 

takes forever and a day to get anything done around here. 

If you look at some of the things that have been around—intellectual property rights, for years China has violated them and, 

frankly, it seems they aren’t doing anything differently. You just go 

one after another and it just doesn’t seem like it is getting done. 

Mr. VARGO. It is not getting done, but the tools are there. It is 

just a determination to use them. Americans are nice people. We 

want to work on a cooperative basis with others. But now that we 

have rights, we got China into the WTO, we need to enforce those 

rights. 

The Assistant Secretary for Manufacturing, I think is a great 

idea. We support it. But there also needs to be high-level interagency coordination and there needs to be attention of the White 

House to manufacturing. 

Senator VOINOVICH. So your attitude is that even though they 

are up to their ears in rattlesnakes in terms of new trade agreements, that some of the expertise that they are drawing from other 

departments, it is better they just leave them in those agencies and 

not bring them into international trade? 

Mr. VARGO. No, sir. USTR does need to be augmented, but not 

by all these specialists. For full disclosure, I should state that my 

wife is the Assistant U.S. Trade Representative for the Americas 

and she has 11 out of the 16 trade agreements that are going to 

be negotiated, so I never see her. I know they are understaffed. But 

the detailed support in the tariff analysis, in trademarks, etc., we 

would just be creating two people instead of one. 

Senator VOINOVICH. Are they getting the quality of people they 

need right now? 

Mr. VARGO. They are. 

35

Senator VOINOVICH. They are? Are they holding the people they 

have? 

Mr. VARGO. They are, remarkably so, so many dedicated people 

in the career service, in Commerce, in USTR and other agencies. 

I was really proud to have been a part of that. But that is not to 

say they don’t need more resources. They have needed them for 

years. The omnibus bill just kind of makes up for the deficiency of 

the last few years, and that will do for right now, but NAM is going 

to keep pressing for more in the next budget cycle. 

Senator VOINOVICH. We are really trying now with these new 

human capital flexibilities. As you know, I have been working for 

5 years to give these departments more flexibilities in keeping the 

people that they have and dealing with some of the systemic problems that they have and then trying to attract more people into 

them, and I am hoping that is going to help them do a better job 

with shaping their workforce so——

Mr. VARGO. Mr. Chairman, it will. 

Senator VOINOVICH [continuing]. They can get their job done. 

Mr. VARGO. It will, but the main thing is, we have to be willing 

to use the new rights that we have under the WTO and these individual trade agreements. 

Senator VOINOVICH. How long do we give them to find out? 

Mr. VARGO. I think we are there. 

Senator VOINOVICH. What does that mean? A month from now? 

Two months from now? Three months from now? 

Mr. VARGO. I think we are talking——

Senator VOINOVICH. How about the 301? 

Mr. VARGO. Well, the NAM is in with quite a few other associations and the AFL–CIO. We don’t see eye to eye with the AFL–CIO 

on everything, but we do on the currency and it has got to move 

forward. So we are developing a 301 case. I heard Charles Freeman, who is a good friend of mine, say, well, we haven’t seen the 

legal basis, and that is true, but we are developing the legal basis. 

Senator VOINOVICH. I want to help you with that. 

Mr. VARGO. Thank you, sir. 

Senator VOINOVICH. They should move forward and do it, and I 

know that with some of your members, the 201 was a little controversial, but the fact of the matter is that a lot did occur positively as a result of that. Now they have terminated it, but I think 

we were entitled to do that. 

Mr. VARGO. We were. 

Senator VOINOVICH. And if we don’t use what we have, then you 

are going to see a lot of stuff coming out of Congress. 

Mr. VARGO. Well, we owe it to a lot of our members, including 

Mr. Hawk, who is a fine member of the NAM, to get the job done. 

Senator VOINOVICH. Yes. 

Mr. DUESTERBERG. Mr. Chairman, could I comment just briefly? 

I want to reiterate the importance of something Frank Vargo said 

about interagency coordination, especially with regard to the new 

position of Assistant Secretary for Manufacturing. 

That position simply isn’t going to work unless it has the ability 

to command the resources of other agencies through an interagency 

process. That is why I am interested in your suggestion that the 

position report to the President. At a minimum, some interagency 

36

process which gives the Assistant Secretary for Manufacturing 

clear authority to command the resources of other agencies, perhaps in a fashion similar to USTR now is able to coordinate trade 

policy, is, I think, a necessity for that position to work. 

Senator VOINOVICH. Let me tell you something. I think it has 

that priority. It deals with our economic security and it deals with 

our national security. The $64,000 question, Mr. Hawk, is how do 

we deal with this? It is not a level playing field. 

The Chamber of Commerce and Tom Donahue and John Sweeney 

about a year or so ago had a press conference and said the 

healthcare system is broken. I mean, we have got people competing 

in the global marketplace with competitors that don’t have 

healthcare costs. We have it right here in this country. Honda in 

Ohio competes with the Ford Taurus on their Accord. They have 

$1,750 less cost because they don’t have the legacy costs that Ford 

Motor Company has. 

And then the next issue is the subsidy in terms of steel and the 

behind the scenes, the loans that are never—in Korea, the banks, 

the auto companies, and the steel companies are all in bed together. It is just we are dealing with it, and somehow we have to 

figure out how we can level that playing field. 

The environmental costs. As you may know, I have been fighting 

very hard to try and make sure that we don’t go crazy in terms of 

some of the things that we want to do, eliminate coal, for example, 

and force us into natural gas. I keep telling my colleagues, if we 

put manufacturing out of business, and we will do that if we force 

all utilities to go to natural gas, which will exacerbate their heating 

costs, their electric costs—these jobs are going to another country, 

and the countries they are going to don’t have the environmental 

laws that we have. 

It just seems like there is a disconnect in this country about 

what is going on out there. We are still back 50 years ago when 

we were king of the mountain and we didn’t have the competition. 

You can’t answer that question today, but I would like to have 

another hearing on the issue of how do we level the playing field. 

What things do we need to really direct our attention to to see how 

we can compensate for the fact that we are in a different environment than we were many years ago? 

And also we need to look at the other issue of how much capacity 

do we need to have for our national security. I keep going into 

plant after plant. I ask them, where has this equipment been 

made? Italy, here, there, somewhere else. How come it is not being 

manufactured in the United States? It was that way when I was 

governor and today it is even worse. How far do you go? Do you 

just lose your machine tool business? I don’t think we can do that. 

And somehow within the framework of all of this we have to figure 

it out. This is a challenge that we need to deal with. 

Mr. HAWK. Mr. Chairman, when 80 percent of our selling price 

to our customers is wrapped up in material, if the Chinese and the 

other countries have an advantage to either manipulating their 

currency and an ability to purchase material, we are never going 

to be able to compete. The small, the medium-sized manufacturers, 

which we are, will all be gone. It is just a matter of time. And that 

is why the issue of urgency and being able to do something about 

37

currency and about any subsidies that may be happening and enforcing it. It is similar to having speeding laws and having no police officers out on the road to control and to monitor what is going 

on. 

Senator VOINOVICH. And you can see this is a member who——

Mr. VARGO. Absolutely. 

Senator VOINOVICH [continuing]. They want action and I want 

action. 

Mr. VARGO. And they deserve it. 

Senator VOINOVICH. They deserve action. 

Mr. VARGO. We do, too. 

Senator VOINOVICH. There is just too much talk, and they are 

concerned, and——

Mr. VARGO. If I could observe, though, Mr. Chairman, the first 

step in solving a problem is to know you have got a problem, and 

I do want to give Secretary Evans great credit under Secretary 

Aldonas at Commerce. The bus tours they took around Ohio, Michigan, Indiana, other States, they came back and they really understood to a degree they had not before that this is a serious problem 

for the United States. 

So the first steps are being taken, but we can’t let it go at that. 

Everything in this book, healthcare, energy costs, none of these are 

simple problems. That is why they haven’t been dealt with. But I 

hope what we are seeing now is the urgency of understanding, difficult as they are, we have to solve them or, I will go back to what 

I ended my statement with, you can just hang out a sign saying, 

‘‘Manufacturers not wanted.’’

Senator VOINOVICH. I want to thank you for being here. I think 

you played the case out. I think that you ought to know that this 

Senator is going to monitor this issue on a day-by-day basis. I am 

looking forward to your coming in to see me. I am interested in 

thoughts of how we can deal with this problem. 

And last but not least, Mr. Vargo, I would like to talk to you and 

Jerry about the issue of some of your members, with their declarations to people like the folks from Lima, Ohio, about you are going 

to outsource this overseas. They are doing it to compete in the 

international marketplace, but they are destroying American jobs 

and to the extent that they may do well for a period of time. But 

if we lose our infrastructure, then who is going to provide the competition and are they going to end up in a situation that they don’t 

want to be? 

I think that in the manufacturing community, you ought to get 

the manufacturers, you have to get the Chamber, you ought to get 

the Business Roundtable, you ought to get in a room and start batting this back and forth about what are we doing. Do we not care 

anymore about the future of the country? Are we so interested in 

our bonuses in the next 4 years so I can make a big salary and retire and let somebody else worry about it? 

I am really concerned about it. I am concerned about the environment in this country today. I am worried about my kids and 

grandkids. Are they going to have the same standard of living that 

I have been able to have? Is this young man going to go out of business? How many years have you been in business? 

Mr. HAWK. Fifty years. 

38

Senator VOINOVICH. Fifty years. Are they going out of business? 

That is the problem today. And these other guys with the big multinationals ought to be thinking about some of these people. 

Mr. VARGO. Mr. Chairman, if I could comment, multinationals 

get a bum rap with too many people feeling—I am not saying that 

includes you, Senator—that they don’t care about America, they 

don’t care about producing here. It is not so. They are under enormous international pressures because of things like the overvalued 

dollar, the unlevel playing field. We have to address all of those. 

Believe me, American companies want to stay in America. 

Senator VOINOVICH. OK, but the fact of the matter is that the answer to it is to get down and fight here——

Mr. VARGO. It is. 

Senator VOINOVICH [continuing]. Not say, oh, we can’t do anything about it. 

Mr. VARGO. Right. 

Senator VOINOVICH. Let us fly the coop. Let us take care of my 

next 5 years and let somebody else worry about this. Let us get 

them in a room now and say, look, we have got to do something 

about litigation. We have got to do something about healthcare. We 

have got to do something about environmental regulation. We want 

a good environment, but it has got to be balanced. We have to do 

something about the fact that some of these countries are competing with us and they subsidize the dickens out of their products 

so, in effect, we can’t compete with them. Those are the things. 

Mr. VARGO. Mr. Chairman——

Senator VOINOVICH. Get them on a piece of paper and deal with 

them and don’t say, well, I am going to run away and let these poor 

other guys worry about it. I am OK. 

Mr. VARGO. That is exactly right, Mr. Chairman. We look forward to working with you on that. 

Senator VOINOVICH. Well, thanks very much for being here. 

I want to make one point, that the record will stay open because 

some of my colleagues may have questions that they want answered, so I am going to leave it open and you may be getting some 

requests from them to submit answers to their questions. 

Thank you. The meeting is adjourned. 

[Whereupon, at 12:03 p.m., the Subcommittee was adjourned.] 

(39)

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