“Small Business Manufacturing in a Global Market”
Grant D. Aldonas
Under Secretary of Commerce for International Trade Administration
Testimony before the Senate Committee on Small Business and Entrepreneurship
Madame Chairwoman, thank you very much for inviting me to participate in
this hearing to discuss trade issues affecting small business manufacturers and
the Department’s role in implementing the President’s Manufacturing Initiative. This Administration realizes the difficult
obstacles
As you know, the Bush
Administration is deeply aware of the vital role small and medium sized
enterprises (SMEs) play in the world economy today and is committed to working
on their behalf. They are engines of
growth and innovation, foster competition and promote the spirit of
entrepreneurship. The 23 million small
companies in the
Liberalized trade is essential to
the future of small businesses and to all they employ. The numbers tell the story: from 1992 to 2001
small and medium-sized enterprises (SMEs) that export merchandise soared from
108,026 to 230,736. SMEs accounted for
nearly 98 percent of the 1992-2001 growth in the exporter population. By 2001 manufacturing companies made up
approximately 1/3 of SME exports (33 percent in 2001), and generated 40 percent
of total SME merchandise exports.
As trade liberalized, small manufacturers benefit
from a greater supply of inputs at lower prices, enabling them to remain
competitive. Opening trade also helps
small business exporters more than large companies in a fundamental way. While large companies usually have the
resources to access foreign markets in two ways - either by exporting or by
setting up foreign subsidiaries- most SMEs have only one option, and that is to
export. In practical terms, that means
that the more we lower foreign trade barriers, the more SMEs benefit compared
to their larger competitors. In 2001, 90
percent of all SME exporters did business from a single
Additionally, small businesses play
an important economic role as suppliers to exporting companies. Export activity triggers ripple effects in
supporting sectors throughout our economy.
These jobs, which most people do not associate with exports, are found
in firms that furnish exporters with parts, raw materials, and services. Service companies that support exporters
include those in wholesaling, transportation, banking, computer services,
accounting, and insurance.
The
Administration is dedicated to helping small businesses sell their goods and
services in foreign markets, and we are seeking to level the playing field with
our trading partners by taking a tough negotiating stance on trade
agreements. Small and minority owned
company representatives serving on our Industry Sector Advisory Committee for
Small and Minority Businesses (ISAC 14) have outlined issues of particular
concern for small business trying to export their products, including:
· Transparency and streamlining of business rules and regulations, including rules that govern dispute resolution, taxation, finance, and trade.
· Harmonization of standards and elimination of non-tariff barriers; unjustified or unreasonable licensing requirements, inspections or bans can add costly processes and prohibitive steps to the small business transaction.
· Simplification of rules of origin
· Enhancing transparency for customs entry and clearance procedures: For small businesses, paperwork and inconsistency in customs policy and regulations can serve as prohibitive barriers to trade.
This Administration has been actively and aggressively pursuing each of these trade issues on behalf of small business in the WTO and through the negotiation of free trade agreements.
Further,
the Department of Commerce helps
Later today
I will be presenting an Export Achievement Certificate to the Strainrite
Companies of
Our Import Administration's Pre-Petition Counseling staff is available
to provide information to any U.S. businesses with questions about unfair trade
remedies. We listen to companies'
concerns that certain imports are being unfairly traded, explain the unfair
trade laws, and advise the companies of the remedies under the antidumping and
countervailing duty law.
Let me now lay out the economic context for discussing the health of our
manufacturing sector. I want, first, to
underscore the continuing strengths of the sector. We tend to forget that the United States
remains far and away the largest producer and exporter of manufactured goods in
the world. Standing alone, our
manufacturing sector would rank as either the 4th or 5th
largest economy in the world. Far from
being hollowed out, our manufacturing sector is, in fact, larger than the
entire economy of China.
In addition, I think it’s important
to stress that productivity in manufacturing today is higher than it was even
during the late 1990s when everyone was speaking about a “new economy.” Those increases in productivity, and the
policies that we have adopted to reinforce them, have allowed the United States
to reclaim the top spot in the World Economic Forum’s rankings as the most
competitive economy in the world.
The productivity numbers are
important for another reason that reaches beyond the current economic prospects
of our manufacturers. What they
reinforce is the importance of a healthy manufacturing sector at the core of
our economy. According to Paul Krugman,
the noted economist and, I should add, at times a critic of this
Administration, “Productivity isn’t everything, but in the long run it is
almost everything. A country’s ability
to raise its standard of living over time depends almost entirely on its
ability to raise output per worker.”
What both the latest statistics and Krugman’s comment point out is the
contribution that manufacturing makes to innovation – innovation that is key to
raising our productivity and the standard of living enjoyed by all Americans.
Having said that, there is no doubt that our manufacturers face some very
significant economic challenges in today’s business environment. Most importantly, they face continuing
pressure on pricing power and profit margins due to the excess capacity on the
market even as the recovery from the recent recession takes hold. The most recent figures suggest that the
economy grew at a 3.3% rate in the second quarter of this year and the pace of
economic activity appears to have accelerated since then. Timely fiscal stimulus and management of the
money supply appear to have set the foundations for a solid recovery.
It now appears that manufacturing, after many months of very slow growth,
is beginning to participate in that broader economic recovery. Durable goods orders have been up generally,
although down in August. And, the
Purchasing Manager’s Index, a key indicator of future economic growth, is now
consistently above the level that means stronger growth ahead.
Even on the unemployment front, there are signs of job growth consistent
with a stronger economy. It’s probably
worth recalling that unemployment rates have remained just above 6 percent for
four months. Not that long ago, that
would have been perceived as relatively low in terms of unemployment.
Having said that, I want to reiterate, as the President has, that the
Administration is committed to working towards an economic climate where
everyone that wants a job has one. And
there is an important story to tell about the unemployment figures in manufacturing.
The job losses began in 2000 when the manufacturing sector entered into a
recession about 10 months earlier than the economy as a whole. The economy was just beginning to cope with
the effect of a sharp drop in business investment as industry pulled back from
a period of heavy investment in technology.
Not surprisingly, most of the job losses in manufacturing came in
precisely those industries – telecommunications equipment and computing – that
benefited most from the boom in investment related to the “dot.com bubble” of
the late 1990s.
What has surprised most economists has been the fact that manufacturing
continued to shed jobs deep into the recovery of the economy. As recently as this past month, manufacturers
dropped another 93,000 from the employment rolls. Employment in manufacturing has been
declining for decades as productivity gains have significantly reduced the
number of worker-hours needed to produce a given product. Those gains have averaged 3% or more for the
last 15 years. And, employment in
manufacturing has fallen commensurately.
Some share of the recent reduction in manufacturing employment during the
initial stages of the recovery and expansion is directly attributable to the
efforts of manufacturers to cut costs and raise productivity. Under considerable competitive pressure,
American manufacturers are finding ways to do more with less. And, the labor market is responding by
shifting jobs to other industries.
That said, the more important thing to focus on for purposes of our
discussion today is the link between the competitive pressure that has driven
American manufacturing to pursue those productivity gains and what is going on
in the international environment, particularly with respect to our trade with
China and its emergency from a fully state controlled economy to become a major
force in manufacturing.
On the international front, one of the most frequently cited statistics
is our trade deficit, which has been growing overall and particularly with
China. Although the trade deficit is
often thought of as an indicator of our competitiveness, and over long periods
of time it is such an indicator, today it is better understood as a measure of
the relative growth in our economy compared to our trading partners. In past recessions, continuing growth abroad
mitigated the effect of the U.S. recession on our manufacturers. In the most
recent recession, that did not happen.
Japan led and Europe followed us into the recession and neither has yet
to climb out to any significant degree.
The data behind the trade deficit bear out the effects of differences in
economic growth rates between economies.
While the common perspective is that the entire deficit is due to an
increase in imports, the truth is that our exports have fallen off far more
sharply. That points to the fact that
the economies of both Europe and Japan are stagnant. As former Treasury Secretary Lawrence Summers
put it, “The world economy is flying on only one engine.” That engine happens to be the United States. In eleven of the last twelve years, US
economic growth has outpaced that in Japan, Germany, and the European Union.
What’s more, slow growth among our leading trading partners is not
new. Japan’s economy, which still
represents close to 2/3 of the gross domestic product of Asia, has barely grown
for a decade. Germany’s economy has not
grown appreciably in three years. On top
of that, the rest of Asia, with the notable exception of China, has presented a
very mixed picture in terms of economic growth since the onset of the Asian
financial crisis in 1997. While some
economies have recovered, others have not.
And, these are markets that were once among the fastest growing in the
world – markets that had become significant consumers of the sorts of advanced
technology capital goods that our manufacturers sell.
What that should tell us, both in terms of the economy as a whole, and
the manufacturing sector in particular, is that perhaps the most significant
single action we could take is to step up encouragement of our trading
partners, particularly Japan and Germany which together make up 20 percent of
the world economy, to jettison their anti-growth policies and to adopt policies
that are designed to boost economic growth.
We need to preach what we practice because the alternative to growth is
always a zero-sum game of dividing up the existing pie and that leads directly
to the sort of strains we are seeing now in our trade relationships.
Which leads me to China. In the
more than 20 roundtables the Department held with manufacturers across the
country over the past six months, there was no single country that garnered
more attention than our trade with China and its emergence from state-imposed
economic isolation to become a major center of manufacturing. The Chinese have made considerable progress
over the last two decades in lifting more than 200 million people out of
poverty by relying ever more heavily on the market to direct resources within
its economy.
The stakes involved are high. China is our fourth largest trading
partner. Bilateral merchandise trade
reached $147.2 billion in 2002. Last
year, China overtook Japan to become our third largest source of imports. In July of this year, China surpassed Mexico
to become our second largest source of imports.
Our imports from China are more than five times greater than our
exports. The bilateral trade deficit hit
$103 billion in 2002 and reached $65 billion in the first seven months of this
year. In addition, China has provided help on
a number of fronts – from the arms talks with North Korea to the War on
Terrorism. China has helped on the economic front as well. Along with the
United States, China accounts for most of the current growth in the world economy.
The upside is that China’s economic policies have brought about a rising
standard of living in China and considerably higher disposable income. All of that makes China an attractive market
for much of what we produce in the United States.
It is worth noting that since 2001,
China has been our fastest growing export market by far among our top ten
trading partners. Our exports to China
surged 19% in 2001, 15% last year, and more than 22% in January-July even
though our exports to the world declined 7%, 5%, and rose less than 3% during
the same respective time periods.
One of the basic reasons for negotiating for 13 years with the Chinese
over their accession to the World Trade Organization was to ensure that we
would knock down the many barriers to entering China’s market. On paper, the accession agreement represents
a considerable success. Today, the
tariff rates that China imposes are lower on average than much of the rest of
the developing, and in some instances, the developed world. In addition, the WTO agreement obliges China
to protect the intellectual property of U.S. manufacturers and service
suppliers. The agreement also eliminated
many of the barriers to the free distribution of American goods throughout the
Chinese economy, instead of being beholden to trading through a Chinese state
enterprise as in the past.
The situation facing our manufacturers from a competitive perspective was
far worse prior to China’s entry into the WTO.
Our manufacturers lacked access to the Chinese market, but their
manufacturers had relatively free access to ours. In the first year following China’s accession
to the WTO, I think both Congress and the President showed an extraordinary
amount of patience as China worked to pass the literally thousands of new laws
needed to bring the country into compliance with WTO rules.
Now, as we move deeper into the second year of China’s participation in
the WTO, we need to see actual enforcement of those laws and basic compliance
with WTO rules in other areas. I know
that the President, Secretary Evans, Ambassador Zoellick, and most recently
Secretary Snow have all made that point vigorously with their counterparts in
China. And, I can attest that, at a
working level, the rest of us have taken up the cause just as vigorously.
But, there is still a very, very long way to go. We have considerable challenges in terms of WTO compliance, particularly in areas like the protection of intellectual property that represents the key U.S. competitive edge in many manufacturing industries. In fact, no country raised more attention as a source of concern than China during the roundtable discussions. Our manufacturers complained about rampant piracy of intellectual property; forced transfer of technology from firms launching joint ventures in China; a broad range of trade barriers; and capital markets that are largely insulated from free-market pressures. We also heard rising concerns about the timeliness and direction of China’s implementation of its WTO commitments in areas such as transparency, IPR protection, trading rights and distribution services, agriculture, and financial services.
Fundamentally, China’s change from a non-market economy to one that
operates fully on market principles is incomplete. Although the Chinese often make the case that
they are a market economy because they want the benefits that designation would
yield under our antidumping laws, the simple fact is that many of the main
drivers of the Chinese economy remain in state hands. Whereas U.S. companies face continuing
pressure from our capital markets to turn a profit, that pressure simply does
not exist in many cases in China.
In one sense, this problem is not new.
American firms have seen the same pattern in other Asian markets for
years. Even the 1997 financial crisis
has not weaned industries or governments from those unhealthy practices –
witness Korea’s continuing support for the Hynix semiconductor operations, a
company that was otherwise headed for liquidation.
I recognize that many commentators see a demand for a “level playing
field” as a demand for protection, but that is not always, or even usually the
case. Most manufacturers I have spoken
with over the last six months didn’t want protection; they wanted the unfair
trade practices that rigged the game against them eliminated. A good example is the forest products
industry, which has an enormous fight with Canada over subsidies. In the context of our roundtable on forest
products manufacturing their principal request was for the President to
negotiate the elimination of the barriers they faced abroad and the subsidies
they faced in terms of competition from imports.
The same held true for most manufacturers with whom we discussed
China. There was a strong recognition
that we were better off in a world in which the rules were observed and the
competition was fair, than a world segmented by trade barriers which would mean
less trade and slower economic growth for all.
At the same time, I also must stress that there are significant parts of
our manufacturing sector that are under extraordinary pressure to adjust to new
levels of competition from imports, particularly from China. Industries like textiles and apparel in the
south and tool and die in the Northeast and Midwest offer examples of the sorts
of pressures our manufacturers face.
Both the challenges and the pain felt in many communities are very real.
In the case of textiles and apparel, the challenges are particularly
intense because the industry is emerging from a 40-year period when it was
protected by quotas on imports of competing material and clothing. As a consequence, the industry remains highly
fragmented and is being forced to go through, all at one time, the adjustment
and consolidation that most U.S. industries went through in the 1970s and
1980s.
In the last round of world trade negotiations, President Clinton agreed
to phase out the quota system that had protected the textile industry. Most of the truly sensitive items from the
perspective of U.S. industry were given the longest phase-outs. But, the quotas will come to an end on
January 1, 2005, and that will mean still stronger competition from imports.
What is not generally understood is that most of the sharp increase in
Chinese imports has come at the expense of our other trading partners. As new products have come free of quota
arrangements, retailers no longer face the need to source products from
multiple countries. Instead, much of
what was previously shipped to the United States from other Asian countries now
comes to us from China. But, that has
not meant less pressure on U.S. manufacturers in terms of price competition.
While the argument most frequently raised about China by commentators
seems to be the difference in wage rates, most of my conversations with
manufacturers, particularly in textiles, suggested other reasons for increased
Chinese competition. What is not often
understood is that, today, the textile industry is actually very high tech. There is very little labor involved in many
products that come out of the industry and wages are a relatively small portion
of the total cost of production except in the case of products that require
considerable hand stitching.
The truth of that statement was brought home to me in a conversation with
a North Carolina manufacturer of textile products used in the luggage
industry. Most bags today are made with
some form of rip-stop material, none of which is hand sewn. Nor is the frame of most roll-on bags
manufactured by hand. Yet, the North
Carolina manufacturer showed me 5 suitcases, one nesting inside the other, that
sold for a total price – delivered from China – of under $30. In other words, the total cost of the five
bags was below the North Carolina manufacturer’s cost of materials alone.
The point to that story is simply that it is not wages alone that allowed
the Chinese manufacturer to sell the 5 pieces of luggage for a delivered price
of less that $30. The cost of most of
the materials is determined in world markets, so if the Chinese economy were
open to international trade and competition, then the Chinese manufacturer’s
materials costs would be comparable to that of the U.S. costs. This means that to get the delivered price
down to below $30 there must be a very large amount of government subsidy,
express or implied, to the manufacturer – a subsidy that can take the form of
an outright cash grant to the exporter, but more often will take the indirect
form of tariff protection against competition, the forgiveness or rebate of
taxes, or the continuing extension of credit to uncreditworthy enterprises.
In my view, although the textile industry is commonly criticized for
seeking protection based on the past 40 years of quotas, the complaint that has
led the industry to seek safeguards against Chinese imports stems from a
different motive. There is no real
argument that the Chinese market operates fully on a market basis, and the
reasons for the industry’s request for help stems from that simple difference
between the pressures they face in our market on a day-to-day basis and the
pressures that their Chinese competition doesn’t.
What that also points out is the fact that, in addition to pressing the
Chinese at every opportunity on their compliance with their WTO commitments, we
also have to be extraordinarily vigilant regarding the injurious effects of
other forms of government support for Chinese industry that are not covered by
current WTO rules. Those sorts of
practices require a different type of tool – one that requires digging out the
facts regarding the underlying competitive differences that our industry faces
in terms of import competition from China.
As I noted above, the textile industry is not alone in facing Chinese
subsidies and protection. Other
industries like tool and die face similar competitive conditions. That is why one of the most forward-leaning
recommendations we intend to make regarding our trade is the establishment of
an office in the Commerce Department, the sole function of which will be to
investigate these sorts of practices.
When we find these anti-competitive practices, we will vigorously seek
their elimination by the Chinese and by other trading partners.
The one thing I can assure you, is
that the Department of Commerce is dedicated to making sure China does play by
the rules. We will vigorously pursue
China’s compliance with its WTO commitments and we will enforce our domestic
unfair trade laws rigorously and fairly, as both President Bush and Secretary
Evans have made clear.
The Department of Commerce, in close coordination with USTR and other
agencies, has adopted an aggressive and multi-pronged approach to ensure that
China honors its WTO commitments and that U.S. companies benefit from these
opportunities. We will target unfair
trade practices wherever they occur. We
are exploring the use of new tools to expand our trade promotion activities in
China. We are expanding efforts to
engage Chinese officials to make sure they “get the rules right” as they
continue their enormous task of restructuring their economic system.
The Commerce Department has
actively provided WTO-related technical assistance to China since September
2000, well before China’s accession to the WTO. Initial programs focused on
increasing the awareness of general WTO principles among Chinese government
officials. As China developed an increasingly sophisticated understanding of
the WTO system, our programs have been tailored to more specific areas, such as
standards development and intellectual property right (IPR) protection. For
example, in 2003 Commerce sponsored or coordinated programs on fertilizer
standards, antitrust, government procurement, medical device regulatory
training, and information and communication technologies standards and
conformity assessment.
Despite China’s commitments to crack down on rampant piracy, counterfeit CDs, DVDs, and pharmaceuticals continue to flood the market. In addition, piracy and counterfeiting in China has a significant impact on U.S. intellectual property rights holders in China itself. In fact, the International Intellectual Property Alliance estimates that business software, music, movie and entertainment software piracy rates in China exceed 90%, with damages of $1.85 billion in 2002. We have raised specific IPR concerns during our meetings with senior Chinese government officials and have repeatedly demanded that the Chinese government uphold its bilateral and multilateral IPR commitments.
Through the annual Special 301 process, we scrutinize China's IPR conditions in close coordination with our colleagues in other agencies. To make sure that China has the tools to implement its commitments, we have organized a series of seminars with Chinese officials. Programs in development for later this year include a WTO pharmaceutical regulatory seminar and anti-counterfeit training, and IPR criminal & border enforcement seminars. We have worked on these programs on an intra and inter agency basis, using the resources of US Patent and Trademark Office, Department of Justice and other agencies. We think China can and should do better in these areas. We continue to press for progress.
However, keeping our focus on China’s WTO implementation and the
country’s other trade practices is only part of the solution. We must continue
to enhance the ability of U.S. businesses to compete in China. We are increasing our efforts to ensure that
U.S.-developed technical standards are accepted in China just as they are throughout
the world. We are launching “Doing
Business in China” seminars in cities across the country to address concerns
about the Chinese market from small and medium-sized businesses. We are exploring ways to develop more trade
leads in China and to provide even more targeted information on opportunities
in China for companies in the U.S.
Combined with these domestic efforts, we regularly engage Chinese government officials to ensure trade agreement compliance and market access for our products and services. Secretary Evans will visit China in October to advance U.S. interests and advocate for a level playing field in our economic relations with China. We will have another opportunity to raise outstanding issues during the 15th U.S.‑China Joint Commission on Commerce and Trade (JCCT) to be held in Washington in early December.
With that, I would like to turn to
the topic of the President’s Manufacturing Initiative. In March of this
year, during Manufacturing Week, Secretary Evans had the opportunity to speak
before the National Association of Manufacturers in Chicago. At that time, he announced the President’s
Manufacturing Initiative.
As a part
of that initiative, Secretary Evans directed me to lead a comprehensive review
of the issues influencing long-term competitiveness of U.S. manufacturing. The central goal of the review is to develop
a strategy to ensure that government is fostering an environment that promotes
a dynamic manufacturing industry. The
review will conclude with the release of a report later this fall.
The
Commerce Department’s senior management, including Secretary Evans and Deputy
Secretary Bodman, all pitched in. We
held roundtable discussions with manufacturers in the aerospace, auto, semiconductor,
and pharmaceutical sectors, among others, in more than 20 cities across the
United States – from Manchester, New Hampshire to Columbus, Ohio, to Detroit to
Los Angeles – to develop the report and recommendations.
What we heard from manufacturers in terms of the challenges they face was significant. While the international competition is what has garnered most of the attention in the press, by far the greater weight of the manufacturers’ comments focused on domestic issues – what I call “keeping our side of the street clean.” What I mean by that is simply paying attention to the needs of our manufacturers as we develop legislation or implement regulations. It is the steady accumulation of multiple burdens, rather than a single cause, that has had the most severe impact on the competitive environment in which our manufacturers operate.
The list of issues our manufacturers identified should not surprise anyone who has taken a serious interest in manufacturing. While our manufacturers have tightened their belts and raised their productivity in an effort to remain competitive and, in fact, to succeed in the day-to-day competition in the marketplace, they have seen that advantage and the hard-won productivity gains eroded by everything from higher energy costs to higher medical and pension costs to higher insurance costs due to a run-away tort system.
Just a few examples might suggest why manufacturers have seen their costs rise. We heard from manufacturers in New Jersey that 30 cents of every dollar of revenue went to pay health benefits for employees. Manufacturers gladly pay for their employee’s health benefits because they see their own interest served by a healthy and motivated workforce, but if we are serious about manufacturing, we have to be serious about grappling with the underlying drivers that have created 145 percent increases in health care insurance costs that obviously are not sustainable indefinitely.
In Michigan, I met with auto parts suppliers that faced continuing pressure from the auto companies to lower their prices by 20 percent or face the prospect that the auto companies would turn to overseas sources of supply. Much of the concern those parts suppliers reflected the terms on which they compete with those overseas suppliers, particularly in China. But the auto parts suppliers knew that the ultimate source of the problem lay in an auto industry that is grappling with the same sorts of legacy costs that burdened the steel industry. If we are serious about manufacturing, then these industries will have to get those financial obligations under control.
In Columbus, Ohio, Des Moines, Iowa, and in my hometown of Minneapolis, Minnesota, I met with manufacturers in the plastics and adhesives businesses that are heavy users of natural gas. The companies in the plastics businesses in particular risk seeing whole new markets fall to their foreign competitors who see lower natural gas prices. If we are serious about manufacturing, we have to adopt a national energy plan that will help us access new sources of supply and improved transmission to reduce the cost of energy to our manufacturers as well as to consumers.
Another example we heard from virtually every manufacturing trade association we met with was the need to eliminate the complexity and the disincentives our tax system creates for investing in manufacturing in the United States. Any number of issues fall in that category. Take the bias in the current tax code against equity financing, which raises the cost of capital, thereby reducing the investment. This bias also translates into a preference for debt, which yields highly leveraged companies and a highly leveraged country, all the while encouraging the worst sorts of gaming as clever tax lawyers try to find ways to take what is an equity interest and call it debt in order to qualify for an interest deduction. Taken together, even without cutting rates, reforms of the tax code could make a profound difference to the relative attraction of investing in manufacturing in the United States.
But, perhaps the most egregious example comes out of the tort system in this country. One issue, in particular, stood out among the manufacturers’ concerns about the tort system. That was the ongoing asbestos litigation. There, the continuing litigation has yet to help many individuals who were harmed by prolonged exposure to asbestos, while, at the same time, the litigation hangs over virtually all U.S. manufacturing, raising their insurance costs and dampening their returns. Clearly, if we are serious about manufacturing, we have to get serious about reforming the tort system.
Manufacturers also pointed to declining vocational school programs, declining enrollments in engineering and the funding of scientific research, all of which are essential to the productivity gains that keep our manufacturing sector competitive and keep a skilled workforce employed.
Finally, as I noted above, in addition to keeping our own side of the street clean, U.S. manufacturers demanded a level playing field. For most, that translated into a demand that we negotiate down tariff rates that are higher than ours and break open new markets. Or it translated into a demand for the enforcement of rules barring the theft of intellectual property. It translated into a demand for the enforcement of our unfair trade laws or laws against customs fraud.
What I did not see was an interest in outright protection. Rather, most manufacturers saw trade as a simple question of equity. If we keep our markets open to our trading partners goods, they should do the same for us. But, where our trading partners did not live up to the terms of our agreements or otherwise heed the rules, our manufacturers expected that those trading partners should pay a price.
While we
are still in the process of finalizing the report and recommendations across
many fronts, Secretary Evans has
outlined several new initiatives in response to the concerns we heard from
manufacturers, particularly the need for a stronger focus within the U.S.
government on manufacturing and the most immediate cases of unfair trade
affecting our manufacturers. The first
initiative, announced by the President on Labor Day, is a new Assistant
Secretary of Commerce to serve as the point person in the Administration and
within the U.S. government for manufacturers and as an effective advocate for
the manufacturing sector’s competitiveness.
There are many programs within the federal government that bear on
manufacturing, but heretofore there was no one person or one office responsible
for bringing their efforts into a coherent strategy. The second would call for the creation of Assistant Secretary for Trade
Promotion to boost our exports, particularly to those markets that our
negotiators have recently opened to our trade like China. And, the third is the establishment of an
Unfair Trade Practices Team to track, detect, and confront unfair competition
before it injures an industry here at home.
We expect the report and the
remainder of the recommendations to be out soon. In addition to moving on the implementation
of those recommendations, we intend to do two things to follow up. The first is to go back to the manufacturers we
visited earlier this year to get their reaction on what we have suggested and
to help us refine our approach as we move forward. The second is to discuss the next set of
issues we intend to tackle as part of our on-going commitment to support our
manufacturing sector.
That concludes my testimony. I would be pleased to answer any questions
that you may have.