Before discussing the specifics of DOE trade missions, I would first like to provide some context by reviewing DOE’s statutory authority for conducting overseas trade missions and its role within the federal export promotion apparatus. According to DOE, the Secretary was given explicit statutory authority to undertake export promotion activities under various legislative enactments, including the Export Enhancement Act of 1992 and the Energy Policy Act of 1992. We have reviewed this legislation and agree that the Secretary has the authority to conduct export promotion activities, including trade mission activities. Regarding its role in the federal export promotion apparatus, DOE is a member of the interagency TPCC, whose role is to increase the effectiveness and coordination of all activities involving government promotion of exports. TPCC is chaired by the Commerce Department and is comprised of 19 federal agencies. According to the TPCC’s latest annual report, DOE funded about $14 million for export promotion in fiscal year 1995, making it one of the smallest TPCC players in terms of funding.Federal export promotion funding totaled about $3.1 billion in fiscal year 1995. Three federal agencies—the U.S. Department of Agriculture, the U.S. Export-Import Bank (Eximbank), and the Department of Commerce—accounted for about 90 percent of all federal export promotion funding for fiscal year 1995. DOE’s high-level advocacy on behalf of U.S. energy companies is conducted in emerging energy markets like China, India, and Pakistan. According to DOE, each of these countries will need new sources of energy in the coming years, representing a huge potential market for U.S. businesses. For example, DOE anticipates that China will need an estimated 100,000 megawatts of new electric power generation over the next 5 years, with each new 1,000-megawatt power plant generally valued at $1 billion. In addition, India is expected to need more than an estimated 140,000 megawatts of new electric power by 2007, requiring an investment of about $200 billion. According to DOE, overall, Asian economies alone are expected to spend as much as $1 trillion on power-related infrastructure over the next 15 years, and U.S. cutting-edge technologies in the electric power, renewable energy, and energy efficiency fields provide important opportunities for the United States to compete for this business. DOE’s high-level advocacy is also a response to similar advocacy efforts that foreign governments conduct in energy markets. TPCC reports that competitor industrialized nations perform similar export promotion activities and that foreign governments are increasingly aggressive in helping their firms compete for major projects in foreign markets. Foreign governments use a variety of tactics, including performing high-level advocacy, providing project financing (including low-interest-rate loans and corporate financial assistance), and making promises of technology transfer and aid funds in order to obtain projects for their own companies. For instance, in January 1996, the Canadian Prime Minister and 7 ministers took 300 business representatives from a variety of industry sectors to India. Advocacy is not just limited to our major industrialized competitors. In August 1995, a Malaysian cross-sectoral trade mission of 250 high-level government officials and business executives visited South Africa at the same time that the U.S. Secretary of Energy’s trade mission was visiting the country. In general, several factors make it difficult to quantify the precise impact of federal advocacy activities: (1) The determination of whether the sales generated through trade missions are additional to what would have been exported in their absence is not always clear. (2) Numerous participants (U.S. government agencies as well as foreign governments) may be involved in a single project. This makes it difficult to identify and isolate the contribution of any one participant. (3) Figures used to quantify the success of trade missions, particularly if they are based on tentative business agreements such as letters of intent or memorandums of understanding, may be speculative. (4) The calculation of the value of follow-on sales agreements and maintenance contracts that can flow from the introduction of U.S. engineering and technological standards is difficult. These sales can be as significant in monetary terms as the original sales contract. TPCC has recognized some of the difficulties in measuring the results of export promotion programs and has tasked a TPCC working group to develop better performance measures for these activities. An update of working group activities will be provided in the next TPCC annual report due for release in September 1996. DOE has also recognized some of the uncertainties associated with this issue and is now reviewing its estimation practices. Despite the difficulties in measuring the impact of federal advocacy activities, DOE has reported the results of its advocacy based on the value of signed business agreements. In a December 28, 1995, letter to the Chairman of this Committee, the Secretary of Energy stated that the Secretary’s four trade missions resulted in $19.7 billion in potential and finalized agreements. These agreements include memorandums of intent or understanding (the first and necessary step to any business deal), fuel supply and power purchase agreements for power plants, oil and gas exploration and production agreements, and other steps necessary to advance business deals. According to DOE, this was the total estimate of deals signed, as reported by the U.S. companies on these missions. As you requested, we reviewed DOE’s estimates of the impact of its advocacy. In response, I would like to clarify what the $19.7 billion is and what it is not. The $19.7 billion is the total potential value of business agreements signed during the four trade missions led by the Secretary, two follow-up trade missions that were led by the Secretary or Deputy Secretary, and several follow-up visits of foreign trade delegations to the United States (see app. I). The $19.7 billion estimate is not the finalized value of deals to the United States or the value of U.S. exports. Moreover, for some of the agreements that have been finalized, the U.S. export value is substantially less than 50 percent of the project’s total exports. DOE has reported that of the $19.7 billion in agreements, about $2.03 billion in business agreements have reached either “financial closure” or “sales agreement,” that is, have been finalized. In an effort to clarify what this number represents, we conducted an independent review of the 14 business deals that DOE used as the basis for the $2.03 billion estimate (see app. II). As part of this process, we reviewed DOE documents and interviewed government officials. We also interviewed business representatives from most of these companies and studied their written responses to questions posed by this Committee. We studied related business filings, annual reports, and business journal articles for these deals as well. Although we are including private-sector estimates of the potential value of U.S. exports associated with these deals, we caution that these projections are inherently uncertain. Our review of the likely composition of the 14 deals makes it clear that the $2.03 billion figure that DOE reported should not be confused with the potential U.S. export value of the deals. For example, the largest single deal reported by DOE is a $660-million power project in Pakistan with an estimated U.S. export value of about $218 million (over 30 percent of the total project value), which represents virtually all of the total exports associated with the project, according to Eximbank officials. The Eximbank provided financing for this project. In some of the cases, the U.S. export value is substantially less than 50 percent of the total exports associated with the agreements. For example, three power plant projects valued at about $950 million comprise about 47 percent of the $2.03 billion: Two power projects in Pakistan, sponsored by the same company, have a total value of $700 million and estimated exports of $400 million. The estimated U.S. export value is about $80 million (20 percent), according to company officials and the financing documents we reviewed. Japan’s Export-Import Bank and Mitsubishi Heavy Industries are major participants in financing and constructing these projects, which suggests that Japanese companies will receive a significant share of the sales. One $250-million power plant in India has estimated exports of about $160 million. The estimated U.S. export value is about $40 million (25 percent), according to a company official. The U.K.’s Export Credit Guarantees Department and the U.K.’s Rolls Royce company are major participants in this project, which suggests that U.K. companies will receive a significant share of the sales. While examining these U.S. export content issues, we noted that DOE does not have or use guidelines that specifically incorporate U.S. content considerations as a basis for selecting businesses on DOE-led trade missions. The Commerce Department has developed advocacy guidelines to assist U.S. government personnel in determining whether and to what extent U.S. government support is appropriate in advocating for individual projects. Given the increasingly complex nature of international transactions, the Commerce Department guidelines were developed in 1993 to assist U.S. government officials in making these determinations. The guidelines place a premium on U.S. content, including employment, in the determination of whether and to what extent a given project is considered to be in the national interest. Company representatives that participated in the missions generally supported the Secretary’s efforts. Although several of the company officials we interviewed said their completed business agreements would have occurred without DOE’s involvement, many also said that their projects were accelerated as a result of the trade missions. Others, including some Commerce Department officers stationed in the four overseas posts that DOE visited, cited such intangible benefits as increased credibility with foreign officials and the opportunity to establish new or high-level contacts with business and government officials. Now let me turn to the administration of DOE’s trade missions.