U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

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

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

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

92–838 PDF 2003

HEARING

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

WASHINGTON, DC, OCTOBER 20, 2003

Serial No. 108–42

Printed for the use of the Committee on Small Business

(

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

COMMITTEE ON SMALL BUSINESS 

DONALD A. MANZULLO, Illinois, Chairman 

ROSCOE BARTLETT, Maryland, Vice 

Chairman 

SUE KELLY, New York 

STEVE CHABOT, Ohio 

PATRICK J. TOOMEY, Pennsylvania 

JIM DEMINT, South Carolina 

SAM GRAVES, Missouri 

EDWARD SCHROCK, Virginia 

TODD AKIN, Missouri 

SHELLEY MOORE CAPITO, West Virginia 

BILL SHUSTER, Pennsylvania 

MARILYN MUSGRAVE, Colorado 

TRENT FRANKS, Arizona 

JIM GERLACH, Pennsylvania 

JEB BRADLEY, New Hampshire 

BOB BEAUPREZ, Colorado 

CHRIS CHOCOLA, Indiana 

STEVE KING, Iowa 

THADDEUS MCCOTTER, Michigan 

NYDIA VELA ́ ZQUEZ, New York 

JUANITA MILLENDER-MCDONALD, 

California 

TOM UDALL, New Mexico 

FRANK BALLANCE, North Carolina 

DONNA CHRISTENSEN, Virgin Islands 

DANNY DAVIS, Illinois 

CHARLES GONZALEZ, Texas 

GRACE NAPOLITANO, California 

ANI ́BAL ACEVEDO-VILA ́ , Puerto Rico 

ED CASE, Hawaii 

MADELEINE BORDALLO, Guam 

DENISE MAJETTE, Georgia 

JIM MARSHALL, Georgia 

MICHAEL MICHAUD, Maine 

LINDA SA ́ NCHEZ, California 

ENI FALEOMAVAEGA, American Samoa 

BRAD MILLER, North Carolina 

J. MATTHEW SZYMANSKI, Chief of Staff and Chief Counsel 

PHIL ESKELAND, Policy Director 

MICHAEL DAY, Minority Staff Director

(II) 

C O N T E N T S 

WITNESSES

Page 

Miller, Harris N., Information Technology Association of America .................... 6

Hira, Ronil, Ph.D., P.E., Institute of Electrical and Electronics Engineers—

United States of America (IEEE–USA) .............................................................. 9

Humphries, Natasha D., TechsUnite.org ............................................................... 11

DuPree, Robert, American Textile Manufacturers Association (ATMI) .............. 14

APPENDIX

Opening statements: 

Manzullo, Hon. Donald A. ................................................................................ 37

Velazquez, Hon. Nydia ..................................................................................... 45

Prepared statements: 

Miller, Harris N. ............................................................................................... 47

Hira, Ronil ......................................................................................................... 58

Humphries, Natasha D. ................................................................................... 65

DuPree, Robert ................................................................................................. 70

(III) 

(1)

THE OFFSHORING OF HIGH-SKILLED JOBS, 

PART II 

MONDAY, OCTOBER 20, 2003

HOUSE OF REPRESENTATIVES, COMMITTEE ON SMALL BUSINESS, Washington, D.C. 

The Committee met, pursuant to call, at 2:05 p.m., in Room 

2360, Rayburn House Office Building, Hon. Donald A. Manzullo 

[chair of the Committee] presiding. 

Present: Representatives Manzullo, Schrock, Velazquez, Udall, 

Davis, Bordallo and Majette. 

Chairman MANZULLO. Good afternoon, and welcome to our second hearing on the offshoring of high-tech, high-paying American 

jobs. A special welcome to those who have come some distance to 

attend this hearing. 

The U.S. economy has recovered from the most recent recession, 

but it has largely been a jobless recovery. In fact, in a recent article 

in the Washington Times yesterday, Paul Craig Roberts states that 

last month the U.S. economy managed to eke out a few new private 

sector jobs for the first time in 2 or 3 years. The jobs are low-paying ones, retail trained temporary help and building construction. 

These jobs do not pay incomes large enough to bear the Federal 

debt burden. 

The latest issue of Business Week says this is due to sharply rising productivity in the offshoring of factories to China. That is, the 

recovery that we are ostensibly experiencing and the increase in 

the stock market is due to sharply rising productivity in the 

offshoring of factories from America. 

Though productivity growth actually accelerated, boosting profits, 

companies sent production offshore even as growth returned, just 

as problematic as the offshoring of high-paying, high-skilled jobs. 

This has serious consequences for the long-term economic viability 

of this country. 

According to a recent report by the Federal Reserve Bank of New 

York, quote, structural changes, permanent shifts in the distribution of workers throughout the economy have contributed significantly to the sluggishness in the job market, end of quote. It left 

out the world ‘‘global’’ in front of economy. What we are really seeing is a permanent shift in the distribution of workers throughout 

the global economy, everywhere but here. 

At the information table in the back of the room, there are three 

articles that you will see dealing with the HSBC Bank in the 

United Kingdom. One article states that the United Kingdom has 

the possibility of losing one-third of its jobs offshore; one-third of 

2

its jobs could go to places with much cheaper labor forces. And so 

what we are facing here in the United States, it is not just us; it 

is a worldwide exodus of high-paying jobs from productive, prosperous countries chasing the cheap dollar of cheap labor. 

And just as the once thriving steel industry is a shadow of its 

former self, the U.S. is in danger of losing its competitive advantage in the technology sector. Andrew Grove, Co-founder and 

Chairman of Intel Corporation, agrees. He says that the U.S. dominance in key technology sectors threatens the country’s economic 

recovery and growth. He says the software and service industries, 

strong drivers of the U.S. economic growth for nearly two decades, 

show signs of emulating the struggles of the U.S. steel and semiconductor industries. 

When asked what he thought Silicon Valley would look like in 

5 years, CEO Larry Ellison of Oracle Corporation replied, quote, 

more like Detroit than Silicon Valley, end of quote. 

The United States has lost 2.8 million jobs in the manufacturing 

sector in the last few years. Most of those jobs have gone overseas 

and will not be returning. At the same time we have lost a half 

million jobs in the tech sector and are hemorrhaging more every 

day. Newspapers across the country run daily stories about the 

offshoring of U.S. jobs. 

What I have in my hand here is a short list of companies that 

have announced in the last 30 days jobs moving overseas. And that 

short list is about 20 companies and, ironically, it includes Intel 

moving 1,000 jobs from the United States to China and India. And 

that is what really provoked its CEO and Chairman Andy Grove 

to pay attention to the fact that he readily admits that his company is part of the problem, but he wants to do something to try 

to solve it. 

And if you look at this list, you will see thousands and thousands 

and thousands of jobs, white-collar jobs going overseas, chasing the 

cheap dollar in India, China, Malaysia, the Philippines. That is the 

reason for this hearing—because of this incontrovertible evidence 

that the United States is on the verge of adopting the economies 

of Third World nations. And this is shocking, but it is exactly what 

the National Association of Manufacturing [NAM] said when it 

talked about the loss of manufacturing jobs. NAM said if the hemorrhaging continues, the United States is going to have to get used 

to a lower standard of living. 

Forrester Research projects that 3.3 million American jobs will 

be shipped overseas by 2015 with an accompanying $136 billion in 

wages in high-tech and service industries. Another consulting firm, 

AT Kearney, estimates that U.S. jobs worth $150 billion will be 

sent offshore in the same year, 2015. Even still Goldman Sachs 

predicts that up to 6 million service jobs could move offshore over 

the next decade. Six million service sector jobs could move offshore 

in the next decade. 

To add insult to injury, even several State governments are sending call center and software design work overseas, and then they 

come to us complaining about the cheap imports. 

All of this has long-term implications for the U.S. economy and 

the future direction of the country. What could be done in the short 

term to help stabilize the bleeding of these jobs? Congress needs to 

3

quickly pass Crane-Rangel-Manzullo-Levin, H.R. 1769, which replaces the current FSC/ETI law with an exclusion from taxation of 

up to 10 percent of income for domestic manufacturers and producers. Once fully phased in, this bill would replace FSC/ETI with 

an effective reduction in the corporate tax rate of up to 3–1/2 percentage points or 10 percent for U.S. manufacturers manufacturing 

in the United States. The legislation gives our manufacturers a 

reason to stay in the United States. 

The bill also applies to the high-tech industry, including software 

companies which would be incentivized to keep the software jobs 

here. 

Let me be very clear on this issue. The House should not pass 

any package with an international tax component. Regardless of 

the merits of Chairman Thomas’s bill, now is not the time to reward overseas manufacturing to the detriment of domestic producers. The Thomas bill simply gives companies more incentive to 

replace American workers with foreign labor. The Thomas bill will 

further encourage cheaper imports. That is not what we need in 

this country at this point. We need a way to encourage domestic 

manufacturing and production. 

Wayne Fortun, president and CEO of Hutchinson Technology, 

has declared that but for the current FSC/ETI benefit or a similar 

benefit, he would have to outsource production to China, and Andy 

Grove again has further observed that the software and technology 

service businesses are under siege by countries taking advantage 

of cheap labor costs and strong incentives for a new financial investments. 

Since 1994, the Chinese Government has kept its currency 

pegged at 8.28 yuan to the dollar. China has experienced economic 

growth, gains in productivity, a large export sector and increased 

foreign investment, all factors that would cause its currency to appreciate if it were allowed to freely move. Some economists estimate that the yuan is undervalued by as much as 40 percent. 

The impact is not being just felt abroad. The overvalued dollar 

has caused the U.S. to be flooded with cheap imports. Import penetration has caused domestic manufacturers to lose market share 

against foreign products that have a government-subsidized price 

advantage. 

I appreciate the tremendous work that Treasury Secretary Snow 

is doing with the Chinese Government to convince them that the 

marketplace needs to determine its current valuation, but more 

needs to be done sooner versus later. That is why I authored Joint 

Resolution 285 expressing the concern of Congress on this issue 

and encouraging the President to review and utilize all tools to 

level the playing field with respect to currency manipulation. 

Lastly, I am concerned that our military has become almost entirely dependent on foreign sources of materials, components and 

production equipment. We have no independent strategic base in 

this country. We have held two hearings at least in this Committee 

to determine that, and another hearing was held just last week to 

try to demonstrate to the American people and to fellow Members 

of Congress the fact that the continuous offshoring puts this Nation 

at peril. It eventually could hinder our Nation’s ability to protect 

4

itself, and measures must be taken to shore up America’s defense 

industrial base. 

The full Committee hearing we held last week where witnesses 

testified that our national security is at risk due to continued and 

increasing reliance on foreign manufacturing for high-tech equipment expresses this, and this is why it is imperative Congress 

strengthen and fight for stronger ‘‘buy American’’ legislation. These 

provisions include increasing from 50 to 65 percent the amount of 

U.S. content required in major DOD purchases for the Buy American Act, and requiring defense contractors if purchasing new 

equipment to buy American-made machine tools, dies and industrial molds for major weapons acquisitions. And the Pentagon continues to fight us on this. 

It was this Committee 21⁄2 years ago that held an extraordinary 

41⁄2-hour hearing where we brought in the Chief of Staff of the 

Army and two other generals to show that the Army’s order of 2.5 

million berets had gone to South Africa, Romania, India, Sri 

Lanka, China, Canada and then the United States for manufacturing. And all the procurement experts said, well, those contracts 

are locked in stone, and we broke four of them because of the public outcry and the disgrace of using U.S. taxpayers’ dollars to destroy U.S. jobs. 

Six hundred and fourteen thousand nine hundred ninety-nine of 

those berets are sitting in a warehouse in Mechanicsburg, Pennsylvania. The other one I carry in my briefcase, which I don’t have 

here now, otherwise I would hold it up as Exhibit A. 

But that is where this inquiry all started. The United States 

Government is doing the same thing that many of the multinational corporations are doing. They not only are chasing low-dollar wage, but not looking at the long-term effect of it. It is hurting 

the domestic workforce and our fighting capabilities at the Pentagon. 

It is crucial that the U.S. stop exporting jobs to other countries. 

Our continued prosperity depends on keeping jobs here. As a person who has supported every free trade agreement in this Congress 

and has been given numerous awards for his continuous efforts on 

free trade, I come from that position. This is not a free trade versus 

protectionist hearing today. It is far from it. It is a hearing on 

where the United States is going to go and whether we are going 

to have a standard of living that we are used to, or whether we are 

going to adopt the standard of living of the countries to whom we 

are exporting our jobs. 

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

Chairman MANZULLO. I now turn to the Ranking Member Congresswoman Velazquez for an opening statement. 

Ms. VELAZQUEZ. Thank you, Mr. Chairman. 

In today’s global economy, the movement of jobs and operations 

abroad has become a major factor affecting the manufacturing and 

technology sectors. Many companies are looking to markets overseas in order to remain competitive while others are driven purely 

by profit. As globalization has made it possible for economic, political and cultural systems to cross national borders freely, it has 

also caused some shift in the economic base of our country. It has 

5

negatively affected U.S. jobs, both high-skill and blue-collar, causing them to move overseas. 

Just look at our manufacturing sector, which has lost 2.4 million 

jobs since 2001. It is also predicted that 3.3 million white-collar 

jobs and $136 billion in wages will be lost to countries overseas by 

2015. A large number of service sector jobs and small firms will 

have to readjust and compensate for these massive losses. 

Many factors are pushing industries overseas. Today’s U.S. Tax 

Code gives away billions of taxpayers’ dollars in subsidies to companies that transplant their factories, outsource production and 

then hide profits in offshore tax shelters. 

The current U.S. patent process is also impacting our ability to 

quickly develop new innovations that could stir economic growth. 

Many U.S. firms are being hindered by the slow process of receiving patents. Their competitiveness is threatened as they fail to see 

rewards for their innovations due to significant lags in processing 

time. 

In addition, cheap labor costs are another incentive that results 

in the outsourcing of domestic industries. High-end service sector 

work is moving abroad into areas with weak labor laws and where 

products can be provided at 50 to 60 percent of the cost associated 

with making them here in the United States. 

The high price of health care is yet another concern for U.S. companies. Rising health care costs have created hardship in the manufacturing sector, which has long been a leader in providing insurance for its workers. As health care costs continue to skyrocket, the 

fact that U.S. companies must compete with industries overseas 

that provide no health care for their workers, leaving them at a 

competitive disadvantage. 

Flawed trade policies have also created challenges. Policies such 

as the GATT and NAFTA have cost domestic producers to lose 

market share to foreign competitors and encourage job dislocation 

and plant closings across the country. 

Finally, a major issue in the decline of certain U.S. industries is 

the monetary policies employed by some of our trading partners. 

The artificially high currency levels of a few nations have forced 

flawed or cheap products into the U.S., further exacerbating our 

Nation’s trade deficit. 

It is quite obvious that the new age of globalization is taking a 

toll on our Nation. Many of these concerns must be closely examined and evaluated. 

While tools like GATT do exist to reverse some of these inequities, the Bush administration to date has failed to bring these policies to bear on China, the worst offender. 

We also must make revisions to the U.S. Tax Code to create incentives for American firms to remain in the U.S. versus the current system that encourages companies to move overseas. 

As globalization becomes the norm of the business world, it is important that we carefully monitor its impact and take proactive 

steps to ensure that the effects on small businesses and our economy are not irreversible. Since small firms are the drivers of our 

economy, we must be sure to take their interests into account when 

reevaluating some of these policies. 

6

We have watched the U.S. manufacturing sector decline, and 

now have new fears of a similar fate permeating the high-tech industry. It becomes clear that we must work to protect these vital 

sectors and our small businesses so that they remain competitive 

and strong. Only then can we look forward to an economic rebound 

in job creation where we need it the most, right here at home. 

Thank you, Mr. Chairman. 

Chairman MANZULLO. Thank you. 

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

Chairman MANZULLO. We are going to set the time clock at 6 

minutes, more or less, and if you hear this [tap from gavel], your 

time is up. We will leave plenty of time for questions, and certainly 

I will leave plenty of time for your testimony. 

Our first witness is Harris Miller. Harris is president of Information Technology Association of America, known as ITAA. He has 

quite a background. He worked on Capitol Hill and had been involved in—I am going to tease you, Harris; you have been involved 

in technology so long that you were here before the word technology was invented? 

Mr. MILLER. Absolutely, Mr. Chairman. I take full credit for the 

creation of the term. 

Chairman MANZULLO. There you are, but tremendous credentials, great background. We look forward to your testimony. Thank 

you. 

STATEMENT OF HARRIS N. MILLER, PRESIDENT, INFORMATION TECHNOLOGY ASSOCIATION OF AMERICA (ITAA) 

Mr. MILLER. Thank you, Mr. Chairman. It is an honor to be here 

before you and this Committee again, and also to testify before 

Congressman Schrock in 2 days. I was with him in another hearing 

on Friday. 

ITAA represents approximately 400 companies in every aspect of 

the IT industry, and I commend you, Chairman Manzullo, for trying to bring some facts and rational analysis to what is understandably a very emotional issue. 

I would like to leave five points with the Committee today. Number one, the global challenge to the U.S. IT software and services 

industry is very real. 

Number two, however, the picture is not as dire as many of the 

inflammatory headlines indicate. 

Number three, the U.S. IT industry currently runs a large trade 

surplus with the rest of the world in IT services, and a trade war 

in this area between the U.S. and the rest of the world would be 

extremely harmful to U.S. IT companies. 

Number four, the way to meet the challenges globally is to run 

faster and jump higher, not to try to throw artificial obstacles in 

the hands of our opponents. 

And number five, we—and by that I mean the IT industry, academia, IT customers, government and IT workers—need to collaborate on what I refer to as a new competitive reality program to 

identify and implement the best programs and policies to meet the 

global challenges to make the U.S. companies and their workers 

more competitive. 

7

The multinational members of my organization know that fair 

competition opens tremendous growth opportunities, many of them 

are in the developing economies to which you referred, but they 

also know what it means to have unfair trade practices thrown in 

their path. To small IT companies, however, and to many IT workers, the meaning of global competition is not so obvious to business 

success and instead is quite alarming. That is why ITAA has been 

an early and often advocate for a better understanding of the offshore outsourcing phenomenon including educational seminars we 

have been conducting across the country, including one we will be 

doing in San Francisco tomorrow. 

ITAA generally believes that outsourcing—— by that we mean 

trying to build and maintain IT work outside the company rather 

than in-house—is generally the most effective strategy for organizations to conduct their IT operations. 

Outsourcing, however, is not necessarily the same as offshoring. 

Rather, offshoring is a subset of outsourcing. It is important to understand that companies may provide outsourced services on-shore, 

offshore or as becoming more frequent in some combination. The 

decision on which way to go is based on a variety of factors, not 

the least of which is the customer preference. 

As you mentioned, Intel board chairman Andy Grove warned in 

a recent speech that without vision and action, large parts of the 

industry could go the way of the steel industry. As a native of western Pennsylvania who worked his way through college in part by 

working in a steel company, I know what economic obsolescence 

can do to a community and ultimately to the working lives of average people. 

Globalization is creating a new competitive reality for employers, 

employees, government agencies and academia just as it has in the 

manufacturing industry for decades. It also is a phenomenon which 

draws together numerous public policy threats which many of you 

have mentioned already, Mr. Chairman and Ms. Velazquez, trade, 

business, immigration, education and training and retraining, protectionism, global tax policy and employment policy. 

As a growing number of countries create the resources to compete for global IT business, particularly the business in this country and other developed economies, the U.S. IT industry finds itself 

in the difficult position of trying to respond to pricing pressure 

from abroad while maintaining a domestic policy tool. 

We cannot legislate or regulate our way out of this perplexing 

situation. On the other hand, however, to do nothing, to do the 

Bobby McFerrin thing, ‘‘Don’t Worry Be Happy’’, is to risk an everincreasing number of knowledge worker jobs disappearing overseas. 

So to remain preeminent in global markets, ITAA is advocating 

this new competitive reality program that will bring together all 

key stakeholders to prepare, number one, a detailed analysis of the 

situation; number two, a thorough examination of various policy 

and programmatic approaches; and number three, a specific plan 

of action to implement critical policies and programs. Such a program, rather than knee-jerk legislative or regulatory solutions, is 

the way to preserve global competitiveness. 

What are the elements of the new competitive reality? First the 

trend toward offshore outsourcing is a cloud on a horizon, not a 

8

hurricane sweeping everything in its midst. We need to keep our 

eye on this weather pattern and how it is changing over time, but 

we don’t need to start boarding up our windows and stashing the 

patio furniture. The IT industry is facing new challenges, but it is 

not disappearing. 

Over 10 million Americans earn their living in the IT workforce; 

9 out of 10 of these workers are employed by businesses outside of 

the IT industry, contrary to common belief. They work for banks, 

for law firms, for factories, for stores and many small businesses. 

Eight out of ten of these jobs are found in small businesses, the 

major focus of this Committee’s work, the firms arguably least likely to seek a global solution or to attract a global solution provider. 

Even the most doom and gloom analysts predict that over 500,000 

computer specific jobs will move offshore in the next 10 years. 

If we have seen any storm at all, it has been the perfect storm 

of the current depression of the demand for U.S. IT workers, the 

dot-com bust, the telecom collapse, the recession and the cutting in 

capital spending. 

I am pleased to note, however, that there are indications by the 

U.S. Government and various analysts that spending on IT is improving. I don’t want to diminish the action felt by IT workers who 

have lost their jobs or are in fear of losing their jobs in this country, but I also believe we cannot overreact to what up until now 

was just a short-term situation. 

Certainly we know that much of this demand—and I know my 

time is about up, so I will try to finish up quickly—are being driven 

by the large corporate customers. They are trying to save costs. 

They are under pressure from their customers to save costs. So 

what we need to do is to focus in several areas: number one, that 

you and Congresswoman Velazquez both mentioned, education, 

training and retooling. 

Number two, promoting free trade. We have the most open markets in the world, but too many other countries in the world do not 

have open markets. But I remind the Committee again we are currently running a $7.9 billion surplus with the rest of the world. 

Number three, as Congresswoman Velazquez mentioned, new 

R&D investments, absolutely critical. We are falling way behind in 

R&D investments. 

Number five, we must keep our own markets open and not get 

into a global trade war. 

And number six, we must fix our global trade policy. There are 

too many factors, too many incentives to keep earnings overseas 

and not bring them back. 

We are going through a difficult time, but it is also important to 

remember that the long-term trend is good for the U.S. IT industry 

and U.S. IT workers. 

Thank you, Mr. Chairman. 

Chairman MANZULLO. Thank you. 

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

Chairman MANZULLO. Our next witness is Ron Hira, Ph.D. He is 

the chair of the R&D policy committee at the Institute of Electrical 

and Electronics Engineers, and we look forward to your testimony. 

This is your second time before our Committee? 

Mr. HIRA. That is correct. 

9

Chairman MANZULLO. That is great. Thank you for coming. 

STATEMENT OF RONIL HIRA, Ph.D., P.E., CHAIR, R&D POLICY 

COMMITTEE, INSTITUTE OF ELECTRICAL & ELECTRONICS 

ENGINEERS (IEEE–USA) 

Mr. HIRA. Thank you very much, Mr. Chairman. Thank you and 

thanks to the——. 

Chairman MANZULLO. You might want to pull that mike a little 

bit closer to you. It would be a little bit easier there. 

Mr. HIRA. That is the second time I had to do that. You would 

have figured I would have learned by now. 

Thanks to you and thanks to the other distinguished members of 

the Committee, I am very pleased to be here representing the 

235,000 U.S. members of the Institute of Electrical, Electronics Engineers USA, IEEE–USA. Our members are electrical engineers, 

electronics engineers, software engineers and so on and so forth. In 

my day job I also teach public policy at Rochester Institute of Technology. 

Seventy percent of IEEE–USA’s members work for private businesses, and 30 percent of those members work for small businesses. 

Let me talk about outsourcing first. Our members are experiencing unprecedented levels of unemployment, and I really want to 

emphasize that this is unprecedented levels of unemployment. We 

have been tracking unemployment figures for our members for over 

30 years with the Bureau of Labor Statistics, and right now computer hardware engineers are at 6.9 percent unemployment. Electronics engineer are at 6.7 percent unemployment. We would generally expect about a 1.5 percent unemployment rate for those occupations, not a 6.9 percent unemployment rate. 

And just to give you some historical perspective, throughout the 

whole 1980s when general unemployment was as high as 9.5 percent, unemployment rates for electrical and electronics engineers 

never rose above 2 percent. So we are in a very different era right 

now. 

And even engineering managers have become hit hard by the unemployment rates. They are now at 8 percent compared to their 

peer group managers and professionals at 3.5 percent. So if you are 

an engineering manager, you are more than twice as likely to be 

unemployed than if you were a manager in another area. 

And let me say that these numbers are sometimes abstract, and 

let me make it a little bit more concrete. I was at the annual conference for the Society of Women Engineers 2 weeks ago in Birmingham, Alabama, speaking, and a number of people I met there 

were very concerned about job security. It was the number one 

issue in their minds, and these are experienced engineers working 

in R&D worried about whether or not they can hang on another 5 

years in their companies so that they can get health benefits. 

Also even at RIT, at my university, we are hearing students talk 

about this. I have a colleague of mine, a political scientist, Rhonda 

Callaway, who I was speaking with just on Friday, and she teaches 

a course in globalization, and it is a university-wide course. So everybody and all majors have to take this class in globalization. And 

she said one of her assignments was how does globalization affect 

you, and many of her students who are majoring in information 

10

technology wrote, well, globalization is basically taking all of our 

jobs away, and they have a pretty pessimistic outlook on what is 

going to happen and what their careers will be like. 

We believe that the trend toward offshoring of engineering jobs 

is a fundamental structural adjustment. This is not just the dotcom bust or the telecom bust. I have talked to enough engineers 

who were gainfully employed way before we had the dot-com bubble who are not employable now. So something is different about 

this, and it is not just attributable to that. 

In fact, what we are seeing is that this offshore outsourcing since 

the last time I came and spoke has become institutionalized in corporations. There is a new job title. It is called global supply coordinator. So companies are figuring out how to manage this process 

of moving as much work offshore as possible. 

Much of the discussion or policy discussion has been about 

whether offshore outsourcing is good or bad—whether you are a 

free trader or a protectionist. I think this is really the wrong way 

of thinking about offshore outsourcing. The real question is how 

are these displaced workers going to become reemployed, and what 

kind of jobs are they going to get. Will an analytical engineer with 

20 years of experience and a master’s degree retrain to become a 

nurse? And if so, how are they going to afford to be able to do that? 

There is a widespread belief, almost a blind faith amongst people, that we will just go on to the next big thing. These are lowlevel jobs that are going offshore and the next big thing—and many 

people call it—will say nanotechnology is the next big thing. American workers are going to do that. There will be great economic 

benefits, lots of jobs created in that area. 

I just want to caution people who think that that is going to happen—and I hope it does happen in nanotechnology—that we are 

not the only ones that are worried and investing on the frontiers 

of nanotechnology. I saw a recent study that showed that the U.S. 

is producing about 5,000 technical papers in nanotechnology every 

year, and the second leading country in terms of scientific and 

technical papers was China at 2,400, and then Japan was just behind that. And, you know, with the cost advantages and those technical advance capabilities in R&D, you know, will it be surprising 

if they don’t capture lots of those jobs that are going to be created? 

Something else that is affecting American engineers is the loss 

of manufacturing. More than 48 percent of engineers work in the 

manufacturing sector, and even though manufacturing is about 15 

percent of GDP, manufacturing sector accounts for about 62 percent of all R&D that is done. As production moves overseas, will 

it be any surprise that that R&D follows that production and that 

R&D goes there instead? 

So let me sum up very quickly with some policy recommendations. First off, we need to start to track what is happening. We 

don’t know what the actual impact of all of this is yet. We need 

companies to give adequate notice when they plan on moving work 

overseas to both their employees and to the government so that we 

can plan for transitions for employees. Right now they are being 

blind-sided. We need real and substantial assistance for those displaced workers. We need to strengthen and enforce American worker protections for the H–1B and L–1 visas. Those are inadequate 

11

right now, and they are accelerating the offshore outsourcing. And 

I will leave it at that. But let me just sum up and say we need a 

national strategy for dealing with this phenomenon. Thank you. 

Chairman MANZULLO. Thank you very much. 

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

Chairman MANZULLO. Our next witness again brings a very interesting personal perspective to what we have been discussing 

here for 3 years. Is that correct? We have been talking about this 

for 3 years, and about the loss of manufacturing jobs and all type 

of jobs, and we are not prophets, are we, Ms. Velazquez, but we 

certainly did see this coming for a long time, especially in my home 

town of Rockford, which has—Rockford, Illinois, which is the state 

of unemployment—state of unemployment of 11.5 percent. It is 

probably closer to 15 percent because the people have just fallen off 

the unemployment rolls. 

We welcome Natasha Humphries, former software QA engineer 

at Palm, Incorporated. And we look forward to your testimony. 

STATEMENT OF NATASHA HUMPHRIES, MEMBER, STEERING 

COMMITTEE, SILICON VALLEY CHAPTER OF 

TECHSUNITE.ORG, SANTA CLARA, CALIFORNIA 

Ms. HUMPHRIES. Thank you, Mr. Chairman and esteemed members of the Committee. Thank you for this opportunity to hear my 

testimony today on behalf of myself as well as many other ex-Silicon Valley technical workers disenfranchised by the use of 

offshoring by Silicon Valley companies. 

My name is Natasha D. Humphries. Immediately following my 

undergraduate studies at Stanford University School of Humanities 

in 1996, I developed an interest in computer software, landing my 

first job at Apple Computer, Inc. 

Over the years I have continued to acquire new skills through 

classes, seminars and self-study in order to adapt to the fast-paced 

technological changes in Silicon Valley. As a senior software quality assurance engineer, I have over 7 years’ experience testing U.S. 

and international software applications, most recently in the handheld device industry. After more than 3 years of service, I was laid 

off from Palm, Inc., at the end of August 2003 due to a workforce 

reduction or realignment. 

Palm, Inc. is the leading global provider of hand-held computing 

devices and operating systems for hand-held devices including both 

Palm-branded and Palm OS-powered devices. According to Palm’s 

Form 10–Q SEC filing, dated October 14, 2003, Palm shipped over 

22.9 million Palm-branded devices, and approximately 30.1 Palmpowered devices had been sold worldwide as of August 31, 2003, resulting in total revenues of $871.9 million in fiscal year 2003. 

Since the dot-com bust a few years ago, Palm—as well as many 

other companies in Silicon Valley—have been struggling to reduce 

R&D and other costs in order to meet Wall Street’s, as well as 

shareholders’, fiscal expectations. Early in 2002, Palm’s software 

testing organization definitively began an aggressive campaign to 

outsource all testing assignments to India and China. After securing bids for pay raises as low as $2 to $5 an hour, or $4,200 to 

$10,400 per year, executive management made the decision to 

outsource all testing assignments to software QA engineers in 

12

India, achieving considerable savings of 50 to 70 percent on salaries alone. Pay rates of U.S. workers range from 30 to $60 an hour, 

or $63,000 to $125,000 per year. 

In my role as senior software QA engineer and lead, it was my 

responsibility to review product specifications, develop product test 

support documents and milestone schedules, set up and manage 

the software defect tracking system, report defect metrics and testing status to QA management and U.S.-based cross-functional 

teams, and to manage the offshore team. 

My software project was one of the first to use the offshore team 

in India. After several weeks of mounting project management difficulties, including but not limited to language and geographical 

barriers, cultural differences, downed e-mail servers, weak network 

and telephone infrastructure, immature software development 

knowledge, lack of familiarity with software and hardware products 

and IT engineering systems, I and a number of my colleagues forecasted protracted development and testing cycles. 

Management quickly identified a solution for the last three problems. In order to build core competency of Palm’s products, software development practices and IT engineering systems, the product software integration and test organization began sending inhouse software QA engineers to train their counterparts in India 

from their Milpitas, California, headquarters. I was one of the designees and trained software QA engineers in Bangalore, India, for 

a period of 2 weeks in December 2002. 

After 6 months the major problems began to subside, and the offshore team were rapidly advancing up their learning curve. Over 

a period of 4 months after returning from India, I met repeatedly 

with my software QA manager and director in order to ascertain 

the new direction of the organization and any new skill sets required to remain competitive in my position as the offshore team 

began performing more of my job functions. 

I sought advice and approval for tuition-reimbursed course work 

in programming languages, for example, Java and C++; and 

scripting languages for automation testing, for example, Silk. At 

each individual organizational meeting, I was unable to learn any 

specific new requirements of my position and was discouraged to 

enhance my professional skill set either through poor direction or 

denied approval of course work. 

The QA director always indicated that his organizational structure was in flux and that his strategy to increase the QA group’s 

technical expertise in alignment with new business objectives 

would be revealed soon. Moreover, he assured the group that no 

one would lose their jobs to offshoring of work, although the majority of current assignments were already being tested in India and 

China. 

In March 2003, however, I learned that new automation testing 

assignments had recently been offshored to a different vendor in 

India. Management quickly dismissed my job security concerns, 

stating that delegating the current job functions to the offshore 

team would provide more freedom to develop new technical skills. 

The veracity of these statements were doubtful, as I suspected I 

would be displaced by the offshore team, particularly after returning from a 10-day vacation in which my lead counterpart in India 

13

directed the test effort in my absence without me having to work 

remotely while on vacation for the first time in 3 years. In preparation for my vacation, I provided detailed instructions to the lead in 

India, defining how to report defect metrics for team status reporting, how to manually correct queries that failed, when to send the 

status report Monday mornings prior to executive program review, 

and to which distribution lists. 

When I returned from vacation in June, I was astounded to learn 

that my plan was flawlessly executed without a glitch. I recognized 

immediately that my time horizon at Palm as a senior software QA 

engineer was shortening, and that I may have engineered my way 

out of a job. My suspicions were confirmed when management 

failed to conduct an annual performance review in July 2003. 

On August——. 

Chairman MANZULLO. You have plenty of time, and you can 

speak slower. Okay. Go ahead. This is very dramatic. I want people 

to hear it. Take your time. 

Ms. HUMPHRIES. On August 20, 2003, I was terminated from my 

position along with approximately 40 percent of my software quality assurance group, which represented 14 people. Although this 

number may not appear statistically significant, it is of import to 

note that we represented the talented few remaining after scores 

of layoffs over a 3-year period following the dot-com bust. 

Most of the terminated QA individuals held senior positions and 

commanded a considerably higher annual salary in comparison to 

our offshore counterparts earning less than $5 an hour. Although 

most of the software QA engineers in India are master degree holders, Palm is only required to pay home country wages commensurate with living standards in India, which is 2 to $4 an hour. 

According to my termination letter, Palm made a determination 

that the software project to which I was assigned had reduced or 

eliminated investment in the company. However, I have knowledge 

that the software project to which I was assigned is indeed in 

alignment with the company’s business objectives and, further, represents a new platform on which development of all future software 

applications will be based. I have also received confirmation from 

anonymous sources within the company that my offshore team in 

India continues to test my software project following my departure 

from Palm. 

Ironically, one of my peers in quality assurance was also separated from Palm in August during the 7th month of her pregnancy. 

She is a U.S. citizen from India, displaced by technical workers in 

her own home country. I learned recently from a former team 

member in the customer support organization that he, too, received 

notice last week that his employment at Palm will terminate at the 

end of this month. Although the notice indicated that the termination was due to the Handspring merger, he suspects the decision 

may be related to the recent outsourcing of customer support to 

India. An anonymous source reports that additional layoffs are expected as Palm increases its multisourcing efforts to companies in 

India. 

Multisourcing is defined as companies increasingly doing business with multiple service providers in the same or different countries, based on the best skills for the best price. 

14

A month following my departure from Palm, I joined 

TechsUnite.org, which is building an alliance of technical workers 

to raise public awareness and to protest offshoring, among other 

workers’ rights issues. During TechsUnite meetings I have met 

many software engineers and IT workers who have been unemployed or underemployed an average of 18 to 24 months. Offshoring 

has created a devastating economic climate not just among Silicon 

Valley technical workers, but throughout the United States. 

Although the public and media have recently faulted H–1B and 

L–1 guest worker visa programs for massive U.S. Job losses, companies have found a new back door and are circumventing H–1B 

and L–1 restrictions by directly offshoring large volumes of work 

directly to companies in India. 

Offshoring will prolong the economic recovery period as the number of U.S. jobs quickly diminish over time. Rising unemployment 

numbers will further exacerbate local, State and Federal budget 

deficits since the taxable income base will be unemployment benefits, that is until the benefit period expires, usually 1 year. 

Congress will need to work quickly to revise current legislation 

and enact new legislation with incentives to maintain high-tech 

jobs in the United States and create disincentives for companies to 

offshore U.S. high-tech jobs. 

Chairman MANZULLO. Thank you very much. 

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

Chairman MANZULLO. Is this the first time you have testified before a congressional Committee? 

Ms. HUMPHRIES. Yes, it is. 

Chairman MANZULLO. You did a great job at it. That is unfortunate it is under these circumstances, but I appreciate your speaking up for the people of America that you represent. 

Ms. HUMPHRIES. Well, I appreciate this opportunity. Sorry my 

voice is a little crackly, I am recovering from illness this weekend. 

Chairman MANZULLO. There is some water there if you would 

like it. 

Our next witness is Robert DuPree. Bob is vice president of government relations with the American Textile Manufacturers Association, ATMI. He has been with that organization prior to when 

I came to Congress in 1992, and it is a national trade association 

of the domestic textile industry representing companies that manufacture textile mill products, including thread, yarn and fabric for 

use in home furnishings, industrial products and other textile 

items in the U.S.. 

Bob, we look forward to your testimony. 

STATEMENT OF ROBERT DUPREE, VICE PRESIDENT OF GOVERNMENT RELATIONS, AMERICAN TEXTILE MANUFACTURERS INSTITUTE (ATMI) 

Mr. DUPREE. Thank you, Mr. Chairman. With your permission, 

I would just submit my written statement for the record and summarize some key points. 

Chairman MANZULLO. The written statements of all the witnesses and all the Members will be made part of the record. Anybody wishing to submit—in the audience here wishing to submit a 

statement can do so within 10 days. It must not exceed 2 pages, 

15

including attachments, and it must be at least 10-point type. Okay? 

Just get that to one of our staff, and we will make that a part of 

the record. 

Chairman MANZULLO. Go ahead. 

Mr. DUPREE. Thank you, Mr. Chairman. I had to check and 

think. I do have 11-point type on mine. 

Mr. Chairman, I am Robert DuPree. I have been with ATMI for 

some 14 years now. I would like to thank the Committee, especially 

you, Chairman Manzullo, for your ongoing interests and your commitment to the manufacturing sector. Also appreciate your comments as well as those of the Ranking Member in your opening 

statements regarding offshoring, which I hope does become part of 

our lexicon in the future. It has become a phenomenon that has serious repercussions. 

ATMI’s members, you just described what we do. We represent 

large manufacturers. We represent small manufacturers. The good 

news from your standpoint, Mr. Chairman, is more and more of our 

members are eligible for your Committee’s jurisdiction. That is the 

bad news, too. They used to be larger than they were. In fact, I was 

before you at the famous beret hearing a few years ago. One of my 

members was testifying. His employer is a small company in South 

Carolina. They just announced some layoffs again last week. So the 

problem still continues. 

In light of your comments also on the FSC/ETI issue, I would 

point out that we only represent textile companies based on their 

domestic operations. If they have plants offshore, we do not work 

for that end of their operations. We do not collect dues from them 

either. 

We employ some 435,000 workers in a variety of jobs. They range 

from highly skilled to unskilled. Let me emphasize the highly 

skilled aspect of our industry. We are not Norma Rae. Those days 

are long gone. We are a highly automated, efficient and modern industry. We employ a great many professionals with bachelor’s degrees, with master’s degrees. They are in such fields as textile 

chemistry, textile or mechanical engineering, polymer science, 

which I had to look up what that is exactly when I first heard of 

it. 

We estimate that as many as 100,000 individuals in our industry, nearly one-quarter of our workforce, have college degrees. 

Many of these come from schools, from States, represented on this 

dais, Georgia Tech, North Carolina State University, the Institute 

of Textile Technology in Charlottesville, Clemson, Philadelphia 

University. These folks, when they lose their jobs, they have a hard 

time with retraining, and they are seeing their jobs go offshore; 

and they have a choice, either learn a new profession, which, if you 

have an advanced degree in some of these fields, is not easy, or go 

offshore. And that is not a fair choice for anybody. 

Last June this Committee held a hearing at which ATMI testified regarding the damage that foreign currency manipulation has 

been causing our industry and the rest of the manufacturing sector. 

At that time we reported that the textile industry has lost over 

200,000 jobs in the United States since 1997 largely as a result of 

Asian currency manipulation. The recovery that you mentioned in 

some sectors in your opening statement, Mr. Chairman, it has not 

16

reached our sector at all, and we have tried to make that very clear 

to the government. 

In fact, we regret to report that in the less than 4 months since 

your June hearing, we have lost over 20,000 additional textile jobs 

here in the United States, many of these, if not most, attributable 

to the same factors. 

Mr. Miller, I believe it was, mentioned the perfect storm. We 

have experienced the perfect storm. Many of the restraints on imports have been lifted in 2002. At the same time, prices have been 

slashed through willful currency manipulation. In some cases 

prices per square meter have been cut in half by Chinese manufacturers. 

We worked hard to remain competitive. In the 14 years I have 

been there, we have invested billions of dollars annually to try to 

retain our competitive advantage. We have tried to meet our customers’ ‘‘just in time’’ demands. We have tried to, as our government has urged, establish trading partnerships with countries like 

Latin America, the Caribbean and Mexico so that we can sell our 

yarn and our fabric in those markets and have them come back 

into the United States under the duty preference programs that we 

have established. 

Unfortunately, all of those have fallen to naught as a result of 

unfair and often illegal trade practices from abroad, particularly 

from China and other Asian producers. As a result, we have seen 

an unending wave of plant closings and job layoffs here in the 

United States. Our jobs are literally being shipped across the 

ocean. 

I would note that when our companies lay off workers, close 

plants, file for Chapter 11 or shut down completely, as the case 

with some of the mills, they don’t cite the various restrictions or 

burdens placed by our government. We understand that we have 

workplace safety and environmental regulations. We can deal with 

those, but the number one reason we are closing down plants is because of unfairly traded imports. 

At the end of my statement, my written statement, is a chart 

showing that fully one-third of all U.S. textile jobs have disappeared since 1997. That is 220,000 textile jobs gone forever. Just 

in this year alone we have seen over 40,000 jobs gone, and where 

are they going? Where are those plants going? Where are those jobs 

going? They are not staying here. They are going to China, India, 

Pakistan, Bangladesh, Vietnam and other countries in Asia. Our 

companies have not pulled up stakes and moved to these countries. 

I want you to understand very clearly. We are still here, those that 

are still in business, but many of our customers have shifted to 

Asia, and they have taken many of our orders and our jobs with 

them. One way we can tell that is, frankly, by looking at not our 

exports of yarn, fabric and cloth, but, frankly, the exports of used 

textile machinery. When a plant shuts down, foreign companies 

have come in and bought used textile machinery and taken it over 

there, the same companies that have driven these companies out 

of business are now buying our used equipment. Therefore, we can 

consume less cotton, less wool, less man-made fiber made from 

plants here in the United States and many of your States as well. 

17

Mr. Chairman, I do have some other comments in my written 

statement regarding currency manipulation. It is a subject you 

know well. 

I also mention very briefly the impact on the defense industrial 

base. We supply some 10,000 different items to the United States 

military, and Federal law notwithstanding, it is inconceivable to us 

that the U.S. Government could stand by and watch this basic 

manufacturing industry erode, this key defense supplier to wither 

on the vine, so to speak, and let this business go offshore. Our military readiness needs a viable defense industrial base. We are part 

of that. 

With that I thank you for this hearing. I thank you for your continued interest in our issues, and I look forward to anything you 

can do to help us get the attention this issue deserves. 

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

Chairman MANZULLO. Mr. Schrock. 

Mr. SCHROCK. Thank you, Mr. Chairman, and thank you all for 

coming here today, especially Ms. Humphries. 

My parents live in San Jose. I know Milpitas. I know Santa 

Clara very, very well. And speaking of that, I was talking to my 

90-year-old father this morning and telling him we were having 

this hearing, and of course he cuts clippings like you can’t believe 

and sends them to me because he thinks the only way I am going 

to succeed is if he does that. And most of the time he is right. 

But he said, as an example, the last two Levi plants in San Francisco closed down, I think he said, last week, gone forever, and we 

are never going to get those things back. And that is very disturbing to him. It is very disturbing to me, because it impacts 

every person I represent and every person every Member of Congress represents. So it is an issue we need to start addressing and 

seriously. 

I know one of you talked about military sources. I can’t remember which one talked about military sources. Oh, Mr. DuPree. I 

was recently in Norway at a factory that is producing the new gun 

for the Striker. They got the contract. We have the best talent in 

the world in this country and the best technology, but they said—

I said, how did you guys get it? And I wrote a list of what they 

told me they don’t have. They don’t have EPA. They don’t have 

OSHA. They don’t have lawsuits. They don’t have labor unions. 

They don’t have outmoded tech structures like we do; yet, it is the 

cleanest, safest place I have ever been, and I think it is our laws 

that we have created here that have caused some of these things 

to happen. 

Trade agreements, yes, there are some real problems with trade 

agreements. I hear people say, well, we have got trade agreements. 

Well, we created the trade agreements. I think in some way we 

ought to be able to change those things so at least there is a level 

playing field. 

When you said buying equipment, they are buying our equipment to take over there, too. They are buying it pennies on the dollar. So it is a lose-lose no matter how we look at it. 

Mr. Miller, you talked about outsourcing versus offshoring, and 

help me understand. I think outsourcing is just the beginning of 

offshoring, unless I don’t understand. 

18

Mr. MILLER. Not necessarily, Mr. Schrock. A bank might decide 

that they are very good at doing money. They are not very good at 

managing their IT system, because it is very complex because it is 

constantly changing. They may choose an IT company across the 

street to come in and manage their IT department for them. That 

is outsourcing. That means they have closed down their internal IT 

department, but all the workers are U.S. workers. They just happen to work for an IT company rather than the bank. So it doesn’t 

necessitate that the work goes to another country. 

Mr. SCHROCK. Did I hear you say, too, you think this is a shortterm situation? I hope you are right, but please help me understand why you think that is the case. 

Mr. MILLER. I think the offshore competition is long-term. I have 

been actually giving speeches about it for 7 or 8 years, but no one 

wanted to listen to me because unemployment in Silicon Valley 

was 0.0 percent and people wanted to talk about H1Bs and L1s. 

I think we have been relatively naive as a country for a long time 

in the IT space, believing that somehow, because we were so smart 

and so talented, that countries like Ireland and Israel and South 

Africa and Argentina and Mexico and Canada and India couldn’t 

be smart, too; and it turns out they can be very smart. They can 

produce very capable IT workers. 

We have been relatively naive the same way that the Detroit 

automobile industry was very naive in the 1960s when they used 

to think, well, no one is going to buy a Japanese car because Japanese cars mean low quality. And they woke up one day and they 

realized, in fact, the American consumers liked Japanese cars and 

they had 23 percent of the market. 

So I don’t think this offshore competition is short term. 

What I believe is short term and I think people are overreacting 

to is we have had in the year 2001 about a 10 percent decrease in 

IT capital expenditure spending in this country; in 2002, another 

6 percent. So spending on IT in this country dropped precipitously 

after the dot-com bubble and telecom bubble in the late 1990s. In 

2003, most people think IT spending will increase by somewhere 

between 3 and 5 percent after those two major declines. I am hoping that, number one, that is true; and, number two, if it is true, 

that should have a positive impact on IT hiring. That is what I am 

saying I am hoping it is short term. 

Mr. SCHROCK. Okay. But we hear a lot of IT stuff now starting 

to go to India, just like manufacturing has; and I am going to ask 

Dr. Hira about the nanotechnology. You know, we talk about the 

next big thing. But the next big thing is just the next big thing 

somebody offshore can come and try to take from us. They will 

send their people here to our universities with these visas you get 

that they are able to get to train them to go back and compete 

against us. And I just have—I just don’t understand why we allow 

that to happen and why that continues. 

Mr. HIRA. Well, I am not sure I have an answer for you. I am 

not sure why we do these and have these policies. 

But we have been hearing about nanotechnology for some time 

as well as biotech and bioinformatics and what the next big thing 

is. Right now, nanotechnology is still in its infancy, but there are 

enough practical commercial applications to indicate that it will be 

19

at least a sizable industry. The question is, are we going to capture 

that, especially if we don’t have the manufacturing capabilities 

here and much of that work is done abroad as well as R&D being 

done abroad? 

Mr. SCHROCK. I know my time is up. May I just make one more 

quick comment? 

I noticed, you know, talking about textiles. When I was a student 

at the senior officer course at the Naval War College in Newport, 

Rhode Island, in 1984 and ’85, we used to go to the clothing places 

in Fall River, Massachusetts, which used to be, they say, the garment production capital of the world; and all it is now is miles and 

miles and miles of empty buildings that are selling clothes that 

come from somewhere else. And it just didn’t happen yesterday. It 

has been going on a long, long time; and if we don’t start addressing it, we are going to lose every single thing we have got here that 

involves manufacturing. 

Chairman MANZULLO. Thank you. 

Ms. Velazquez. 

Ms. VELAZQUEZ. Thank you, Mr. Chairman. 

Mr. Miller, you talk about education, retraining and retooling, 

but how effective is this going to be when we are dealing with such 

an uneven playing field, where companies can lay off a worker 

making $10 an hour, which I might add is not that much more 

than what you would make at a fast food restaurant, and move it 

overseas for a $1.50, a quarter of our current minimum wage. How 

is it that education is going to fix this? 

Mr. MILLER. Congresswoman Velazquez, if the only issue were 

dollars per hour that the people were paid, the whole industry 

would have disappeared already. The fact of the matter is it is 

much more complicated than that. For example, in a recent article 

in CIO magazine, the author pointed out that, because of numerous 

factors involved with sending work offshore such as cultural differences, telecommunications issues and some of the others that 

your other witness referred to, in fact, the differential between the 

U.S. Worker and the IT worker in India may be as little as 20 percent. 

Then the issue becomes one of productivity. Is the U.S. Worker 

more productive? Does the U.S. worker do a better job for the customer, for the client? Then the issues become much more complicated than simply how much per hour. 

The other thing that is important to note is that wages in these 

developing countries are going up fairly rapidly. 

Ms. VELAZQUEZ. Okay. Thank you. 

Ms. Humphries, can you please tell me how much a factor wages 

were when your job and other jobs were sent overseas? 

Ms. HUMPHRIES. Well, I think clearly, in this case, education did 

not inform Palm’s decision. It was pretty much the bottom line. We 

got laid off just before the end of their first quarter for the fiscal 

year 2004. So I think it was pretty clear especially the individuals 

who were targeted for layoff were the more senior members of the 

quality assurance group and so we commanded higher salaries. So, 

clearly, the issue here was the bottom line; and of course we got 

those innuendoes from organizational meetings as well as from the 

20

director and the VP of product software. So they are interested in 

lowering their costs and returning to profitability. 

Ms. VELAZQUEZ. Clearly, you disagree with Mr. Miller’s assessment. 

Ms. HUMPHRIES. I disagree with his assessment that education 

retraining is going to resolve this problem and stem the tide of 

offshoring. 

Ms. VELAZQUEZ. Dr. Hira, do you think an explanation as to why 

these businesses did not fight harder for an extension of the high 

annual limits on H1B visas is that they have seen overseas 

outsourcing and now the H1 visas as the most effective way to circumvent our labor laws? 

Mr. HIRA. I don’t want to speculate on what is in the minds of 

industry lobbyists. To be honest, it is hard enough to figure out 

what I am thinking about first. 

But let me just read you a quote from one of Mr. Miller’s constituent members, TCS, Tata Consultancy Services, Executive VP 

from there. He says, our wage per employee is 20 to 25 percent less 

than U.S. Wages for a similar employee. Typically, for an TCS employee with 5 years experience, the annual cost to the company is 

60 to $70,000 per year, while a local American employee might cost 

80 to $100,000. That is the total cost to the company, and he is 

talking about H1B and L1 visa workers there. He says, this is a 

fact of doing work on site. It is a fact that Indian IT companies 

have an advantage here, and there is nothing wrong in that. He 

goes to say, the issue of that is getting workers in the U.S. on 

wages far lower than the local wage rate. 

So this is one way that one of the leading firms that does offshore outsourcing uses the H1B and L1 visa to get a cost advantage and to ship more work offshore. 

Ms. VELAZQUEZ. Thank you, Dr. Hira. 

Mr. DuPree, in your testimony you mentioned that many of your 

competitors in Asia are utilizing sweatshop practices or even child 

labor. The administration, as you know, recently signed the Chile 

and Singapore FTAs. As stated in the agreements, each country 

commits to enforce their own domestic labor laws, whatever those 

might be. The agreements do not actually commit the countries to 

have labor laws in place or to ensure that their labor laws meet 

any international standards. If we are to pursue trade agreements 

with countries which do not have strong labor laws, don’t you think 

that this approach used by the administration invites U.S. Companies to move offshore? 

Mr. DUPREE. Congresswoman Velazquez, our industry has consistently urged that trade agreements take into account the disparity in labor laws between our country and the other countries. 

Textile companies will not go overseas looking for cheap labor, 

looking for substandard working conditions. Unfortunately, as Congressman Schrock mentioned, some of our customers are going 

overseas and when they go overseas, when they go offshore, they 

look for the cheapest raw inputs nearest to them. If they go to 

China, they will look for Chinese denim. They will not look for U.S. 

Denim. 

But by all means labor standards, environmental standards, they 

are all part of the playing field. But as yourself and the Chairman 

21

have indicated many times, it is kind of tough to compete with a 

35 to 40 percent price break that these manufacturers are getting 

right off the top as a result of currency manipulation. 

Ms. VELAZQUEZ. Thank you. 

Ms. Humphries, as you probably heard in Mr. Miller’s testimony, 

he stated that Congress should not legislate a solution to the 

outsourcing problem that we are facing. However, in the closing 

sentence of your statement you mentioned that Congress needs to 

work quickly to review current legislation and enact legislation 

with incentives, incentives to maintain high-tech jobs in the U.S. 

and create disincentives for companies to offshore U.S. High-tech 

jobs. Do you think that the problem is worse than what Mr. Miller 

is leading this committee to believe? 

Ms. HUMPHRIES. Yes, Congresswoman Velazquez. In short, the 

answer is yes. I do believe that the current Tax Code promotes 

offshoring. 

I had an e-mail forwarded to me recently that indicated that certain IT expenditures are, you know, or companies are giving tax 

credits for expenditures, and it makes no distinction between the 

American or foreign labor. So I think perhaps we could all benefit 

maybe if a think tank such as the Economic Policy Institute would 

create a study so we can find out comprehensively what should be 

the strategy to tackle this issue. 

Ms. VELAZQUEZ. Thank you. 

Thank you, Mr. Chairman. 

Chairman MANZULLO. Thank you. 

We had a remarkable hearing last year on the procurement of 

Army berets, and Congressman Bill Pascrell asked what I think 

was the Lincoln-Douglas question of the hearing, and I turned 

green with envy because I hadn’t thought of it. 

He asked one of the generals if the ostensible purpose of having 

our men and women in uniform wear the black beret was to promote morale, how does that happen when our service people take 

their hat off, turn it upside down and it says ‘‘Made in China’’? 

Now, this really is an emblem of what is wrong. There is nothing 

wrong with buying stuff in China, but with taxpayers’ dollars? It 

wasn’t a bargain to buy it there. But if the Army had been more 

sensitive, had DLA been more sensitive, they could have saved a 

lot of jobs. In fact, we took it upon ourselves to cancel those contracts. 

But this is the name of the game. Get it at the cheapest price 

you can and don’t look at the consequences. 

And, Ms. Velazquez, when you and I got all over DLA and they 

cancelled the contract, we saved hundreds of jobs here in America 

in the fledgling textile industry. In fact, I was talking to one textile 

manufacturer who was in town, and he turned on a replay of that 

hearing. It was played several times. Each time we got more eloquent. 

He turned it on and watched it at 11:00 at night, and this ran 

to 3:15 in the morning, and he said the thing was on all night. He 

said, that is the first time that any committee has ever taken on 

the government for this very thing that the people in the government accuse—if you want to use that word—the private sector of 

doing. 

22

Then we thought that this was resolved. Then we found out that 

the government was going to buy Pakistani goat leather—that is 

right—on the basis that we did not have enough goats here in 

America to provide sufficient leather for the thousands of flight 

jackets that were going to be made. I mean, you go from sheep to 

goats in this Congress. 

We put out a press release and raised Cain. We have found that 

the only way to get something done in this town is you first raise 

hell and then you ask somebody to be accountability for it. So we 

put out a press release about the Pakistani goat leather, and we 

talked to our resident experts on goats. Charlie Stenholm represents the goat capital of America. I raise cattle. I don’t raise 

goats. I don’t know anything about goat leather, but Charlie does. 

Sure enough, as soon as we put out the press release, the communique came from DLA that they had cancelled the request for 

a proposal. They came into the office, and I can’t think of the general’s name at this point, but he produced this list, this old list that 

was included in the Federal regulations that superseded the Buy 

American and Barry amendment. These are regulations that superseded law, and no one had ever called them into accountability for 

that and their list of about 80 different items on there that they 

were automatically buying offshore. The general advised us and 

sent us a letter, and I take his word to be gold on it, that DLA is 

now in the process of taking every item listed on there that could 

have been bought offshore that is now capable or that would now 

be capable of being bought here in America. 

And the abuse continues. We got through the Pakistani goat 

leather and we got through these hats, although maybe the Army 

can sell these to the Chinese when they have the Olympics. It 

would create bad morale. But what are you going to do with these 

hats that are sitting in storage? 

When we encountered what is now an ongoing investigation, the 

GAO is studying the F–35 as to whether or not defense contractors 

are in compliance with the Buy American laws. It is simply for the 

purpose of accountability. We have got a hearing that is pending 

on that, although the date has not been set. 

But the only reason I bring this up is the fact that, if we just 

start with acquisitions from the government—Ed, would you hand 

me the Blackberry and the case down there? Yeah. The Blackberry 

is made in Canada. The case is made in China. This is that leather 

case here that is given to Members of Congress, and this is made 

in China. Now, if the American people see how the U.S. Government is using their taxpayers’ dollars to destroy jobs here at home, 

what type of example does that set for the private sector? 

So that is why we have been having hearing after hearing after 

hearing after hearing as to why we can’t use the procurement process as a means to level the playing field. 

The second comment is this: When you are an American company manufacturing mostly in America and then you outsource, 

bring in parts manufactured overseas to be made part of the final 

American—final assembly or you outsource services, then the rules 

of free trade no longer apply. I want to tell you why. 

If you read—if you read Adam Smith, you will find out—and I 

notice that I think, Mr. Miller, you quoted Adam Smith in there. 

23

Adam Smith assumes this, that country A has the natural resources and the talent wholly within that country to manufacture 

item A as opposed to a second country; and then when you start 

mixing the cheap imports from a second country into what the first 

country is manufacturing, then the rules of free trade don’t apply. 

That way, you can’t—in other words, you can’t have it both ways. 

You can’t have Congress getting upset and becoming protectionist, 

which it is—and I am not on the Phil English bill to slap a 27.5 

percent import duty to Chinese goods because of a manipulation of 

currency. I think there are diplomatic ways to do that. Because I 

have a hard time with tariffs at all. But the industry brings it on 

itself. 

And then you can’t quote Adam Smith. I am just citing you that 

you cannot run a country based upon economic theory, not when 

we are having the tremendous job losses that we have. 

So I have got a couple of questions here. Mr. Miller, it was you 

who made a comment that we will lose 500,000 IT jobs or—have 

we lost that in the past? 

Mr. MILLER. There have been reports that have been somewhat 

hyperbolized in the media by Forrester and Gartner, others, some 

of which have been referred to by some of the witnesses today, 

about 3.3 million jobs being lost. All that I was doing was making 

the point that if you only parse that number, what they are really 

saying is only about 500,000 of those are IT-related jobs. It doesn’t 

mean that is not a significant number, but I am just showing you 

how the hyperbole in this issue tends to outweigh the reality. 

Again, I remind you, Mr. Chairman, that we run a $7.9 billion 

surplus in IT services and software. I can’t speak for the textile industry. I can’t speak for other manufacturers. 

Chairman MANZULLO. Has that surplus being going down or up? 

Mr. MILLER. It has been going up because the rest of the world 

is becoming a bigger consumer. If you travel around the world as 

I do, and I know you do, Mr. Chairman, and others, to countries 

around the world, many of the products you see in companies and 

in government offices have names that you would recognize because they are the same products and services you use here in the 

U.S. Many of the leading IT companies here in the U.S., household 

names like Microsoft and Oracle and Computer Associates and 

IBM and EDS and others, earn 40, 50, 60 percent of their income 

by selling abroad. Many of the largest outsourcing contracts, to go 

back to Mr. Schrock’s question, that have been signed the last few 

years by major banks like Deutsche Bank, a German bank; ABN 

Amro, a Scandinavian manufacturing company, have been signed 

with IT services companies based here in the U.S., which means 

that is revenue coming to the U.S., helping to create jobs here in 

the U.S. 

It is also interesting to note, Mr. Chairman, that the fastestgrowing market in the world for wireless phones is not China. It 

is not the U.S. It is not Germany. It is India. India has suddenly 

become a huge opportunity. That means job opportunities for companies in the wireless industries, many of which are in Scandinavia, as we know, companies like Nokia and Ericsson and others, companies in Asia like Samsung, but also companies here in 

the U.S. like Motorola, and all the people who make components 

24

that go into them. So that is why we see so many great opportunities around the world. 

Now when those opportunities are cut off—for example, China 

currently discriminates against semiconductors that are sent into 

China. They have a different tariff rate than for semiconductors in 

China. That needs to be fought. That is an unfair trading practice. 

We believe it violates the WTO. It violates the spirit, and it hurts 

the ability of U.S. IT companies, U.S. semiconductor companies to 

sell into China. 

But that is a clear problem that needs to be addressed. But 

China is a huge potential market. India is a huge potential market. 

Between the two of them, they are a third of the world’s population. 

Chairman MANZULLO. I think what bothers Members of Congress—in fact, I am the chairman of the American Chinese Interparliamentary Exchange. We go to China once a year, and the Chinese come here, and we have talked to the Ambassador several 

times especially on this currency imbalance. That is the fact that 

China and India should be building their economy based upon sales 

to people within their own country, in addition to, obviously, internationally. China is trying to build its economy based upon sales 

to the United States. 

As the Ambassador said, you need to take a page from Henry 

Ford’s book. I said, what is that? He said, well, the people that 

make the stuff should also be able to afford what they are making; 

and I said that was the secret to our success here. 

That is what is particularly disturbing to us, in fact, as we—this 

committee held a hearing on currency imbalance a year and a half 

ago—in fact, even longer than that. Because we recognized the 

problems that were going on there. We don’t have the solution. I 

wish we did. 

Andy Grove is the first executive of that stature who has had the 

guts to raise the question, and he is not looking to government 

intervention. When he talks about the government has to have a 

policy, I think what he is looking for is the fact that the government needs to sit down—the government, we have to sit down with 

the industry and ask you this one question: At what point will we 

send so many jobs overseas that the American consumer will no 

longer have a job to buy the products regardless of where they are 

manufactured? That is—I don’t expect you to have the answer to 

that, because that is a very difficult question. 

Mr. MILLER. Again, Mr. Chairman, I can’t respond for the textile 

industry; and you have a very knowledgeable witness here. What 

I can tell you is, if you look at the U.S. IT industry, even the most 

pessimistic hyperbolic suggestions that have come out of groups 

like Forrester and Gartner and, frankly, not too many people give 

those credibility because making 15-year predictions in this industry——. 

Chairman MANZULLO. Well, look at this. This is Andy Grove. He 

says 500,000 U.S. jobs. Is this hyperbole? 

Mr. MILLER. Because we have a major recession in the U.S. IT 

industry. 

Chairman MANZULLO. That is not what he is talking about. 

Mr. MILLER. I understand. 

25

Chairman MANZULLO. This is the founder of Intel. I mean, this 

man is the grandfather of technology in America. 

Mr. MILLER. I don’t want to get into a fight with Mr. Grove. Intel 

is a member. What I am saying is, the U.S. Software and services 

industry, according to all the data from the Bureau of Labor Statistics——. 

Chairman MANZULLO. Well, the Bureau of Labor Statistics, if I 

may interject at this point, doesn’t know the difference between hyperbole and a hyperbolic curve. Let me tell you what they did. 

Rockford, Illinois, is the tool and die center of the world; and we 

anticipated a year ago in April that the Fed thought that the recession was over. Somebody woke up in the morning and said, the recession is over. We heard they are going to raise the rates. So we 

got a hold of the Fed. Dr. Roger Ferguson came in, and we asked 

the Bureau of Labor Statistics to tell us how many people in Rockford, Illinois, were involved in the tool and die industry. They said 

570, and we just choked. That is two of the thousand factories that 

are in Rockford, Illinois. 

So all these government statistics, you can quote them on and on 

and on. But when I go home, which is very, very frequently, and 

I am in a parade, people come up to me and they hand me resumes. They are desperate. They are looking for work. They are 

looking for solutions. 

Mr. MILLER. Well, I am just trying to answer your question, 

whether the entire industry is going to move offshore. The point I 

was trying to make, even in the most negative assessments it 

would still only be 3 to 8 percent of the U.S. IT workforce. 

Now, as an association which represents American companies, I 

hope it doesn’t get that high. I hope it stays more. 

Chairman MANZULLO. Look what is going on in industry. The 

factory back home, they used to get a hold of the guys in the shop 

to draw up their engineering plans. Then they would get a hold of 

some local molders. And now this is so-called manufactured in the 

United States. What they do now is they contact their Indian engineer and then the Indian engineer sends the specs to a tool and 

die maker in Poland. The Polish export comes into the United 

States, and it is incorporated into an American product. 

This product here is manufactured in the United States. If it sells for $100,000 and it shows up on the trade merchandise trade 

balance as $100,000, that could have $99,000 worth of imported 

parts in it and you would never know it because there is no government economic indicator that shows the amount of imported parts 

that go into the final manufacturing. 

So we are becoming a nation of assemblers. That is why this 

problem is even deeper and more egregious than we anticipate. But 

I enjoy your spirit and didn’t mean to pick on you. 

Mr. MILLER. Just one other point, Mr. Chairman. You made the 

point about government, and you do have some hard choices in government. 

Let me give you an example of the one case in New Jersey which 

got a lot of visibility when the New Jersey State government 

outsourced a call center and the company that they used in turn 

moved those jobs offshore. Because of public outcry, those jobs were 

bought back to New Jersey. But our understanding is the cost to 

26

the State of New Jersey to bring those jobs back—and it was 9 or 

10 jobs—was approximately a million dollars over 2 years, which 

is good because it saved the jobs. But, unfortunately, with the 

State governments being so tight, it is a zero sum gain, which 

means that that was a million dollars less to go to the child welfare 

recipients in that department. So they had to put money to save 

the jobs, less money to child welfare recipients. 

I am not saying one is right and one is wrong. 

Chairman MANZULLO. That actually would have been many dollars less because there would have been less jobs, and even the 

child welfare wouldn’t have the money. 

Mrs. Velazquez, go ahead. You wanted to interject. 

Ms. VELAZQUEZ. Yes. Mr. Miller, when you spoke about China 

and you said that, in terms of the telephone or the wireless, that 

they were—that we needed to fight some of the inequities——. 

Mr. MILLER. One specific problem we have now, Congresswoman 

Velazquez, they have a value-added tax—we call it a sales tax—on 

goods and services and products. The way they have established 

their value-added tax for semiconductor chips, the brains of computers and telephones and the Palm and all these devices, is that 

they have a differential. 

If a semiconductor is manufactured in China and put into something, they charge a 3 percent value-added tax. However, if a company outside China imports—exports it to China because China 

wants to incorporate it into a product, they charge 14 percent. 

Which means that even though a U.S. company or a German company or a Japanese company might be able to produce the chip at 

the same price as the Chinese company, because the Chinese add 

that 11 percent differential it unfairly discriminates against semiconductors manufactured outside China selling to China. Therefore, 

that is an unfair trade practice and we believe it is in violation of 

all the spirit and the law of the WTO, and we believe that China 

needs to change that practice. 

Another concern we have is——. 

Ms. VELAZQUEZ. But it is up to us in terms of the U.S. Government to use the WTO and fight that inequity. So why do you think 

that we lack the will? 

Mr. MILLER. There are geopolitical issues regarding Korea and 

other things that I wouldn’t want to speculate on right now. 

There is a similar issue, Congresswoman Velazquez, if we are 

going to list problems in China. They are considering as a government imposing a policy by regulation which, Congressman Manzullo, sounds a lot like the Buy America Act, so don’t be offended, 

that basically says China would only buy software made in China; 

and they are trying to use national security reasons for that. They 

are trying to say they are not going to buy software products manufactured here in the U.S. or manufactured by German companies 

or French companies. We think that would be outrageous. That 

would be against the spirit of the WTO. It may not technically be 

against the WTO because governments do have the right, as Congressman Manzullo knows, to make those kind of distinctions. 

Ms. VELAZQUEZ. So would you consider Mr. Manzullo’s Buy 

American outrageous? 

27

Mr. MILLER. We do not support Mr. Manzullo’s provision or 

Chairman Hunter’s provision. We think that the Department of Defense should have the discretion to make those decisions. We don’t 

believe in making stupid decisions; and I agreed with Congressman 

Manzullo in a lot of specifics, that there are bad decisions made. 

But having an across-the-board policy we believe would really hurt 

the fighting man. Not only do we believe it, but the Department 

of Defense believes it, even more importantly. 

Chairman MANZULLO. I want to get to Mrs. Majette, but we just 

found out that our government that is rebuilding Iraq ordered 

37,000 AK–47s from a Jordanian firm. That probably incorporates 

parts made in Russia, I think Poland, the Czech Republic; and this 

at a time when the hundreds of thousands of AK–47s were found 

completely intact in caches. 

We can go on and on about what our government is doing, but 

here is a lady that ran for Congress to do something about it. Mrs. 

Majette. 

Ms. MAJETTE. Thank you, Mr. Chairman. I thank you for holding 

this hearing this afternoon, and I also want to thank the witnesses 

for coming to help inform us and helping to inform the American 

people about this very important issue. 

I just got back into Washington about an hour before the hearing 

started. I represent Georgia’s Fourth Congressional District, which 

is suburban Atlanta; and part of my district includes Stone Mountain, where I live. Mr. Chairman, I have a face to go with the number here, this 10,000 jobs lost to India. One of my neighbors had 

just talked to my husband and me over the weekend, being—having been downsized from GE because of the jobs being sent over to 

India, the call centers and the work that is being done over there. 

So it really does hit home when you have somebody that you know 

talking to you about these various issues. 

But I would like to direct my first question to Ms. Humphries. 

Your testimony was very compelling, and I want to know if you 

have any suggestions or ideas about how we can make a difference. 

What we can do either legislatively or otherwise to keep this from 

happening again and again. 

Ms. HUMPHRIES. Yes. I have been mulling that over and over the 

last couple of months, being unemployed, and trying to decide, you 

know, what possible solution I could suggest. I mean, obviously, we 

could revisit the tax code; and I understand some of the tax code 

changes that I was initially suggesting to some of my friends here 

during informal conversations that they would probably have impact on certain trade agreements. So I think all the parties with 

a vested interest need to come together at a table and discuss these 

issues. 

Once again, I suggest maybe the possibility of a think tank so 

we can come up with a comprehensive strategy. I don’t think it is 

just tax code. I think there is going to be some trade issues as well 

that we need to consider. 

Ms. MAJETTE. With respect to education, you said at one point 

during your testimony that you were seeking additional training 

and that that didn’t materialize. Do you think that that would have 

been something if you had already had that training or if that 

training had been made available to you that that would have 

28

made a difference or do you think it would make a difference if 

here in the United States we are providing that kind of training 

or other kinds of training to help stem the tide? Or is it something 

else altogether? 

Ms. HUMPHRIES. I think it is something else altogether. I don’t 

think the retraining actually influenced Palm’s decision to terminate a number of employees. It was just the latest round of layoffs. 

After all, I mean, per my testimony, we actually flew to India in 

succession, one after the other, to train our Indian counterparts, 

would suggest to me that obviously that they didn’t have the training required to do our functions. But then after, you know, we were 

more or less asked to go over there and build their core competency 

is when they were able to perform our job functions. So I mean I 

am still in the process of retraining, so to speak, and acquiring additional skill sets so that I can market myself in Silicon Valley; and 

so I suspect I will be successful. But I don’t think my job of programming skills would have assisted me at this point. 

Ms. MAJETTE. I see. 

I have a question for Mr. DuPree. What do you think we can do 

in terms of legislation or taking a different approach to this situation? 

Mr. DUPREE. Well, Congresswoman, I think the main thing is to 

change the dynamic in Washington. For too long I think the solution or the answer that has been thrown out there for everything 

is, well, we need to have more free trade; and, as we have found 

in our industry, free trade hasn’t equated to fair trade. We find it 

very disturbing, in a week where four of our companies announced 

layoffs or closures, Ambassador Zoellick is running off to Thailand 

to see about opening up a new round of negotiations with them. 

I think we need to start looking at what can be done to promote 

U.S. Manufacturing. We need a U.S. Trade policy before anything, 

and that is something that we have tried to emphasize. We are not 

opposed to fair trade, but we are not getting it. 

Ms. MAJETTE. I made a note of when you were testifying about 

making the comparison between Chinese denim and United States 

denim. Correct me if I am wrong, but is there a difference in terms 

of quality? If so, then wouldn’t people still look for goods made from 

United States denim versus Chinese denim, regardless of the cost? 

I mean, it is almost like the difference between want to go by a Kia 

versus wanting to buy a Mercedes. The price doesn’t matter if what 

you want is the Mercedes because of what you get for that. 

Mr. DUPREE. Well, first of all, I will say that, without hesitation, 

that U.S. Denim is superior to others, because I work for them. 

And if they are watching I said that very emphatically. Unfortunately, we have seen, despite labeling requirements that are part 

of U.S. law to say where garments are made, whether they are 

made in the U.S., whether they are made abroad of U.S. inputs, 

including yarn and fabric, if you cut prices so much, the consumers, 

frankly, are having a hard time resisting that. When we see Chinese fabric going from $6.40 per square meter to $3.30 per square 

meter—those are rough figures off the top of my head—in 1 year, 

that makes the price of that final product so irresistible. 

29

Of course, you have to have a job to be able to afford blue jeans; 

and that is the point that we have tried to make repeatedly. Not 

everybody can go to work at Wal-Mart to buy Wal-Mart. 

Ms. MAJETTE. Yes, you are right. Thank you. 

Mr. DUPREE. Thank you. 

Ms. MAJETTE. I see my time is up. Thank you, Mr. Chairman. 

Chairman MANZULLO. Mrs. Bordallo. 

Ms. BORDALLO. Thank you very much Mr. Chairman. I would 

like to welcome the witnesses that are here. 

I represent the territory of Guam. If you know where that is, it 

is a small U.S. Territory in the Pacific. I find it very troubling that 

companies are increasingly outsourcing high-skilled jobs overseas, 

particularly where the unemployment level is high. In my territory, 

unemployment is at 20 percent. Think about that. 

Now, the Chairman, he has his black beret; and I like his story. 

I have my Navy MSC ships. The Navy has a policy that ships that 

are home-ported in the United States should be repaired in the 

United States. Well, they found a loophole. When a ship is sailing 

around in the Pacific area, back and forth, it is not home ported. 

So that allows them to do the repair work in foreign countries—

Singapore, Japan—where the labor is so much cheaper. Meanwhile, 

people at the Navy ship repair facility, which has been privately 

outsourced recently, have been laid off in great numbers. I find 

that very troubling. 

I want to ask Mr. Miller a question. That is, how do you feel 

about students who are looking at certain fields, and they are looking forward to getting ahead in this life—and we have certainly 

spent a lot of money in research and development. Our education 

system in math and science is excellent in this country, and we 

have created a culture that through hard work and study you are 

going to amount to something. So tell me, Mr. Miller, how do we 

convince students in the United States to continue to work hard, 

get an education in that particular field, if your field is electronics 

or textiles or whatever—how does our Nation face the future if 

there is no incentive for our citizens and students to advance our 

country’s technological capabilities? Do you have any ideas on that? 

Mr. MILLER. Yes, Congresswoman. It is an excellent issue, and 

it is something we deal with every day. 

ITAA has had a focus on training in the U.S. IT industry for all 

the 9 years that I have been president of ITAA. Even in this downturn in the economy we continue to focus on it, and that is because 

of simple demographics. 

Again, it is very tough when you are unemployed today, as Ms. 

Humphries, to look at longer term demographics, but the numbers 

are there. We are not talking about hypothetical. And, by the way, 

these numbers come from David Elwood, who was in the Clinton 

administration, not exactly a pro-business labor economist. He is 

generally considered a pro-labor labor economist. 

But all of his projections say that the U.S. domestic workforce, 

because of the retirement of the baby boomers, people in their 50s 

and on, over the next 10 years we are actually going to face over 

this decade a massive shortage of IT workers, even if the economy 

continues to grow at a relatively low rate. He did not include in his 

30

projections the fast growth that we are having currently in our 

economy. 

These are based on data that he has put together presented also 

by the Aspen Institute. The Bureau of Labor Statistics, which, 

again, the Chairman obviously has no faith in, but, unfortunately, 

I don’t have independent sources so I have to use the Bureau of 

Labor Statistics. Of the 10 fastest-growing occupations for the year 

2010, the ones that they list, 8 of the 10 are in IT. They are systems analyst, data base administrators, desktop publishers, network systems administrator, systems software engineer and support specialists and software engineer. Those are the projections by 

the experts in the US Department of labor. 

So what I see is these are great opportunities for young people. 

Get your IT education. 

Yes, there are going to be ups and downs in our economy. We are 

going through a down time right now, and I certainly understand 

Ms. Humphries’ discomfort. She has lost her job, and it is very 

frustrating. But these are people who already exist. The numbers 

are there, and I believe there is a great opportunity for IT workers 

in the United States. 

Ms. BORDALLO. Well, I don’t know that I totally agree with you, 

Mr. Miller. I think that there is going to be many more Ms. Humphries as time goes on, and that is sad. 

Thank you, Mr. Chairman. 

Chairman MANZULLO. Mr. Udall. But before—and then Mr. 

Davis. 

Natasha, you have got to respond to that answer. He just said 

that it is a rosy future for people going into IT, and here you are 

imminently qualified and you have been searching for work for how 

long? 

Ms. HUMPHRIES. Two months today. 

Chairman MANZULLO. And how many of your colleagues are looking for work? 

Ms. HUMPHRIES. The majority of them. One person, a networker, 

she did land a job 2 weeks after with Adobe. 

Chairman MANZULLO. And then how many of your friends that 

got laid off are still looking for work? 

Ms. HUMPHRIES. Twelve of them. 

Chairman MANZULLO. I would think that, after that statement 

from those experts, that maybe those experts ought to come up 

with some job openings for these people so they can prove their 

forecast correct. 

Mr. Udall. 

Mr. UDALL. Thank you, Mr. Chairman; and, Mr. Chairman, 

thank you for calling this hearing. I think it is a very important 

one, and I think it highlights some real problems that we have 

going on today. 

Let me say that, as a Member of Congress that has Intel in his 

district, a major Intel plant, my belief is that Andrew Grove is really—it is important what he is saying, and he is speaking the truth 

to all of us, and I think we have to listen. When he emphasizes this 

whole idea of cheap labor costs, I think this is an important part 

of it; and that is what my question to the four of you is. 

31

Recently, I sat in on a briefing or I think it was a hearing with 

Robert Reuben, and he talked about the big challenge being to us 

that we had never faced as a country was the fact that there are 

now in India and in China labor pools about the size of the United 

States labor pool, 200 to 300 million people that have close to the 

same education and skill levels that we have had, and that this is 

an enormous challenge for us as a country. We have never seen it 

before in our history, where we have had those—the countries that 

are in that position to challenge us. 

I would first like to just ask you, do you see it that way? Do you 

see this as a fundamental change in terms of the challenge we 

face? Mr. Miller, you have been talking about this for 7 or 8 years. 

Do you see that, first of all? 

Then I want to ask my follow-up question here, if you could try 

to be quick. 

Mr. MILLER. The answer is, yes, Mr. Udall, but I also see it as 

an opportunity. Just as it is a challenge in terms of less expensive 

labor, it is also a huge potential market. 

Mr. UDALL. Go ahead. 

Mr. HIRA. Well, I have an interesting vantage point since I am 

ethnically Indian and still have many cousins and relatives who 

live in India. I will just say that the IT employment situation there 

is great, so, you know, the employment situation is in a frenzy. It 

is very easy to get a job. People are switching jobs and so on and 

so forth, and lots of colleges are cropping up there. That is not the 

case here in the U.S. 

Secondly, I am also hopeful that there is a potential market in 

places like India and China as they develop and start to consume 

these goods. 

But there are a lot of things that are very high level that are 

moving offshore. Somebody mentioned—I think Mr. Miller mentioned the idea of wireless phones and so on and so forth. 

I talked to an engineer who worked at Researcher Triangle Park 

in the North Carolina area who said that all of their 80211b, that 

is the Wi Fi that you get on your laptops and what not, all of the 

design and development was moved offshore to both Israel and 

India. It was a major U.S. Electronics company moving that kind 

of work. 

So even if those markets develop, the question is, who is going 

to be designing for those markets? Will it stay here or will that 

work be done there? That is, I think, one of the concerns; and I—

you know, the 3.3 million may well be hyperbole, but maybe it is 

not. I mean, we really just don’t have good numbers right now. The 

reality is that stuff is moving offshore. 

Ms. HUMPHRIES. Yes—in response to your question, yes, I think 

there has been a fundamental shift in the labor market, especially 

for high-tech jobs; and now it is a global marketplace. So this does 

present new opportunities for those who are on the offshore side as 

well as I guess new opportunities for those, depending upon your 

response to unemployment, if you decide to adopt a new skill set. 

But, clearly, if you are—if you went to school for engineering or 

computer science and that’s about where you want to pursue your 

career, this is a serious, you know, obstacle to overcome now that 

32

we have this global marketplace where companies are more concerned about the bottom line than preserving U.S. Jobs. 

Mr. UDALL. Mr. DuPree. 

Mr. DUPREE. I would actually have to differ just a little bit on 

comparing the labor pools. China has to find jobs for its workers. 

It is largely a state-subsidized industry. They have roughly 10 million textile workers to our 435,000 right now. They pay an average 

of 40 cents an hour. We pay far more than that, 12, $13 an hour, 

for our hourly workers, more than that for our college graduates 

and skilled workers. We do have a more productive industry, but 

they can throw all these people at us with their state subsidization, 

with their currency manipulation. It makes for a very unequal 

playing field. 

India was another country mentioned. Yes, India has a potential 

market for us. We have talked about this before. There may be a 

lot of poor people in India, but there are about 200 million middleclass consumers that could by U.S. denim, U.S. jeans. 

But we can’t get our product into those countries like India because of their various nontariff barriers and tariff barriers to our 

products. This is something we have been complaining very forcefully about to the government. It is something that we are going 

to continue to point out when we submit our list of trade barriers 

each year. These nontariff barriers were supposed to have been 

eliminated under the Uruguay Round. Now we are seeing in the 

Doha Round proposals that, well, we might get to it later in future 

years and we will phase it in. So it is very frustrating for us. 

Mr. UDALL. Which I—and I see my time’s out, Mr. Chairman. 

Just to sum up, I think that the point you are making is we 

shouldn’t be entering into new trade agreements without doing 

something about the issues that have been demonstrated in this 

panel here today; and to head down that road of just saying new—

the same old trade agreements aren’t going to get us out of this 

hole that we are in. 

Mr. DUPREE. Enforcement of agreements that have already been 

signed is so imperative to our industry. Many Members of Congress, when they considered China PNTR back in 2000, expressed 

concern about what impact will this have on the textile industry. 

They were assured that there is a safeguard mechanism that China 

has agreed we can use if there are surges of imports in decontrolled 

categories they can—the United States governments can do, can 

impose quotas and try to slow those down right away. They gave 

us that right. We just have to use it. 

We have shown in some of the decontrolled categories imports 

have increased 750 percent in 18 months, and that is the wave of 

the future if we don’t utilize the agreements we have now on the 

books. 

Mr. UDALL. Thank you, Mr. DuPree; and thank you, Chairman 

Manzullo. 

Chairman MANZULLO. Mr. Davis. 

Mr. DAVIS. Thank you, Mr. Chairman. I apologize for missing a 

part of the testimony, but I have listened to the dialog as I returned from some responsibilities that I had on the floor. 

I try and remain as optimistic about things as I possibly can, but 

someone just sent me an article out of the Chicago Sun Times that 

33

says half the city’s 20- to 24-year-old black men are jobless. I mean, 

that is—half is 50 percent. Of course, Chicago is a pretty big city, 

and so that is a lot of people. 

I also represent a congressional district that in the last 35, 40 

years has lost more than 140,000 manufacturing jobs. I can almost 

name them without even looking anyplace: Hotpoint, Motorola, GE, 

Sears Roebuck—just right down the line. 

All companies that used to be—there used to be 10,000 people 

who worked in the location of my district office right now. I mean, 

there used to be 10,000 people working right there. There used to 

be another 10,000 people who worked about two blocks from where 

I lived every day. 

I guess my question is—and I understand that there are job 

losses internationally, especially in manufacturing, that the losses 

aren’t only occurring here in this country, but they are occurring 

in many other places, and we are becoming more technologically 

proficient every day. I am saying, whatever it is that you had that 

you could do five things with this month, you can take that same 

instrument next month, you can do 10. I mean, you can take a telephone now; and you don’t have to buy a camera. You can take a 

telephone; you don’t have to get a fax machine. You can take a telephone; you don’t have to have an e-mail set up. I mean, you can 

do almost anything in terms of communication with one device or 

one instrument. 

So I guess my question is, is there any possibility that technological proficiency is going to further reduce opportunities to work 

as opposed to increase opportunities to work? And is that a challenge? Is there any fear—is there any possibility that we may 

reach the point where there just aren’t jobs, Mr. Chairman, to be 

found? 

I mean, I remember the song we used to sing back when I was 

a young fellow about get a job. ‘‘every morning about this time 

she’d bring my breakfast to the bed acrying, get a job. So when I 

read the paper I read it through and through, but there is no work 

for me to do. Get a job.’’ . 

Can we be as optimistic as I would want to be as we try and 

make some projections for the future? I think, for example, that our 

economy is in the worst shape that it has been in since I have been 

observing it. But for the first time in the history of this country I 

am not convinced that we can suggest with any real sense of assurance that the quality of life for our children is going to be better 

than what it is for those of us who exist right now. So, my question, what does the future really kind of look like? 

Mr. MILLER. Well, I at least am an optimist, Congressman Davis, 

in several regards. But, number one, I would make the point again 

going back to education and training that is critical. Let me just 

give you one example. This was pointed out recently in an article 

in Business 2.0. 

Intel had 20,000 U.S. Employees in 1982. They have about 

50,000 now. According to the education manager, however, one of 

the big differences is in 1982 all you needed was a high school degree in order to have some of these lower-levels jobs at Intel. Now, 

entry level applicants need at least a 2-year degree in applied 

science to hold the same job. 

34

So that is why I think education and training continues to be so 

important; and, unfortunately, it does create a bit of a divide, Mr. 

Davis, which I think you are referring to for those who are not able 

to figure out how to get in this education and workforce. 

My second point would be that productivity increases have become a bad word for Members of Congress and other people because what productivity has begun to mean is you can do the same 

with less people. But I think economists will tell you at a certain 

point you can only get so much productivity even out of information 

technology. And, as you can imagine, I am a great believer in information technology. At a certain point, for companies to continue to 

produce the goods and services that the American people want as 

consumers, they are going to have to start hiring again. 

We did have some hiring in September. Whether it is a long-term 

trend or not, we don’t know. I hope it is. 

My third point is, again—I don’t know if you were in the room 

or not at the time I referred to it—but the long-term demographics 

are that, because we have a huge baby boom group retiring over 

the next 5 to 7 years, people in that 50 to 60 age group, there are 

tremendous opportunities for young people coming along because 

we are going to have this massive retirement. 

The most dramatic example, and admittedly it is a bit of an 

outlie, was the U.S. Federal Government where you have 30 to 40 

percent of all U.S. government IT workers are within 3 years of retirement. When they retire, there is going to be huge opportunities 

to fill those positions. Now whether those positions are going to be 

filled by the U.S. Government actually hiring people in to the government or whether they are going to choose an IT company to 

outsource it to remains to be seen. That is a decision that the top 

leaders of the Federal Government are going to have to choose. But 

that is one example where you are going to have this massive retirement that is going to create lot of new opportunities. 

Mr. DUPREE. Congressman Davis, if I could just respond. To answer your first question, I guess the future will be determined for 

our industry at least by how our government looks at future trade 

policy and other policies in the next 5 to 10 years. We have done 

everything we can. We have in fact, as you indicated, increased 

productivity. 

Has that cost jobs? If you look at the long-term job picture within 

the textile industry, it was almost equal to the rate of attrition. Retirements equaled—as you had people retired, some of them were 

not replaced, so there was a very slow decline in job losses. In fact, 

the chart on page 3 of my testimony, that is actually very close to 

what was over the 10 years prior to that we were seeing—700 and 

some odd thousand jobs down to 650,000 jobs. 

Yes, we are three times as productive per loom hour as we were 

in the 1970s. That was intended to try to give us a competitive 

edge over China and Asia and other producers that pay such low 

wages and don’t have the standards we do. But, as we have seen, 

productivity can only do so much when you are undercut by 35 to 

40 percent by price. 

Mr. DUPREE. Just as one measure of the fact that—our employment drop has not been due to productivity. I believe about 6 years 

ago we were consuming approximately 11 million bales of cotton 

35

annually. We are down to about 7 million bales of cotton annually. 

We are just not doing the business. The orders are going offshore. 

Chairman MANZULLO. All right. 

Mr. DAVIS. Well, thank you very much. I used to pick some of 

it when I was a kid. It is not the best job in the world. 

Thank you very much, Mr. Chairman. 

Chairman MANZULLO. Thank you, Congressman Davis. 

I want to thank each of you for—first of all, for being extremely 

well prepared. There wasn’t a question asked that one of you said, 

can I get back to you. It is so refreshing. Even though we may disagree or pick on you on occasions—and, Mr. Miller, we are challenging you, not picking on you, you know that—very good preparation, very good answers. And it just goes to show the complexity 

of the issue. 

At one time knowledge was discovered. Today it is invented. It 

is a different era that we are living in. We have to think differently 

because of the challenges that are presented to us. 

Each of the Members of Congress up here represents his or her 

congressional districts. We are creatures of the districts that we 

represent. That is the constitutional framework. The area that I 

represent obviously is involved in heavy manufacturing. My father 

was a master machinist and then a master chef and a master 

butcher and a master carpenter, and always a master father, and 

we grew up knowing what the sweet smell of machine oil was. We 

just presumed that people—that the rest of us here know what it 

is, but probably only about 40 to 50 congressional districts have an 

intense manufacturing base, and so we have to operate on the basis 

that we need to get people informed as to what is happening. 

When we started holding these hearings on manufacturing almost 3 years ago, there was some interest in what we are saying. 

It really wasn’t until February of this past year when Business 

Week came out with what I consider to be the seminal article, the 

offshoring of our service sector jobs, where other Members of Congress started waking up and saying, hey, just a second, we are losing those industries even though we have no manufacturing in our 

congressional district. 

So we are in a position where we can see the tremendous loss 

that is occurring in the—and how perplexing it is that the stock 

market can be going up when we don’t have any jobs. But the answer to that is easy. The jobs that are being created are overseas. 

The reason that profits are increasing in the stock market is because of cutting jobs here and outsourcing them overseas in order 

to increase the demand of the stock. 

The complexity of the problem that Mr. Grove raises is even 

more significant than we think. There is a book called The Loss of 

Shareholder Value—The End of Shareholder Value by Allan Kennedy, written in 1999. He is going to be a witness here at some 

time. We are trying to figure out his schedule. But in that book he 

talks about the bubble, and he talks about the fact that American 

companies, the longest-range plan that most of them have is 3 

months, and that is the comment on the next quarterly earnings. 

That is as far as it goes, and that the name of the game is to increase the value of the stock to get it to the highest point possible. 

36

And he also talks about the changing definition of the word 

‘‘profits.’’ we are all capitalists. I am to the core on it. But he raises 

something very interesting in that book, and that is the redefinition of the word ‘‘profit.’’ at one time profit meant a reasonable 

profit, a respectable share of the market, a workforce that was 

happy, compatible, but nowadays profit is you have got to make 

more money than the next guy. You have to be number one in 

order to call yourself successful, and in the race to be number one, 

it has created a panic of people moving offshore because no one is 

thinking long range about what is going to happen when there 

aren’t enough people left in the United States that have jobs in 

order to buy the things that are out there being manufactured. 

If the emerging markets are in India and in China, then those 

people there should be paid enough money at their wages to buy 

their own stuff. That is the problem with China. But if they were 

paid enough money, then they wouldn’t be competitive in order to 

undermine the jobs that are in the United States. 

Something has got to balance. Does that bring about a government solution? I doubt it. Who wants to get involved in something 

like that? But there has to be a rethinking. 

Mr. Grove, as far as I am concerned, is leading the charge, because he is asking that question, how much of this stuff do we offshore before the country pays such a horrific price for it that the 

Nation cannot recover from it? 

Again, thank you for your testimony. You have been great witnesses. Appreciate your time, and this hearing is adjourned. 

[Whereupon, at 4:06 p.m., the committee was adjourned.]

37


92838.001
38


92838.002
39


92838.003
40


92838.004
41


92838.005
42


92838.006
43


92838.007
44


92838.008
45


92838.009
46


92838.010
47


92838.011
48


92838.012
49


92838.013
50


92838.014
51


92838.015
52


92838.016
53


92838.017
54


92838.018
55


92838.019
56


92838.020
57


92838.021
58


92838.022
59


92838.023
60


92838.024
61


92838.025
62


92838.026
63


92838.027
64


92838.028
65


92838.029
66


92838.030
67


92838.031
68


92838.032
69


92838.033
70


92838.034
71


92838.035
72


92838.036
73


92838.037
74

Æ


92838.038