STATEMENT OF AMBASSADOR DAVID AARON
UNDER SECRETARY OF COMMERCE FOR INTERNATIONAL TRADE
BEFORE
THE SUBCOMMITTEE ON INTERNATIONAL ECONOMIC POLICY AND TRADE
OF THE HOUSE COMMITTEE ON INTERNATIONAL RELATIONS
June 9, 1999
Mr. Chairman, and distinguished members of the Committee:
I am pleased to be here today to present the current programs, goals, and challenges of the International Trade Administration (ITA).
I also want to outline the recent activities of the Trade Promotion Coordinating Committee (TPCC), chaired by Secretary Daley, and to underscore the importance of the reauthorization of the trade financing agencies, OPIC and TDA, to our export promotion efforts. Before starting, let me thank the committee for its past and present support for our export promotion programs and activities.
Trade makes a tremendous contribution to the strength of our national economy and to the economic well-being of our citizens. Our standard of living is the envy of much of the world. Exports have accounted for a third of our economic growth and for jobs that pay 13 to 16 percent higher than other sectors. However, over the last year or two, exports have leveled off as a result of the global economic downturn. At the same time, a booming U.S. economy has resulted in steady import growth, contributing to record trade deficits. As global economic conditions improve, it is essential that we continue our work of opening markets and promoting U.S. exports. If we are to maintain the best jobs and best wages, a strong export sector will be key to sustaining economic growth and rising living standards.
We must also remember that all of our exporters, large and small, face fierce foreign competitors who enjoy considerable government support. In fact, the governments of many of our major foreign competitors spend five to 15 times as much on export promotion per dollar of Gross Domestic Product (GDP) than the United States. On a GDP basis, France spends 16 times more than the United States on export promotion, and puts eight time more people in the field to assist their exporters.
The International Trade Administration is ready for these unique challenges and opportunities, and the Commerce Department is providing effective leadership through the TPCC to further the Administration's National Export Strategy. The five fundamental objectives of ITA are: ensuring compliance with our trade agreements, opening new markets, helping exporters take advantage of those openings, enforcing our trade laws, and coordinating our trade promotion efforts throughout the government. Since I came to ITA, each of ITA's units has honed its mission and better defined its role within the agency.
Let me give you a snapshot of the mission, essential services, and new programs each of the units provide to our exporting clientele. I will also highlight FY 2000 budget requests and some serious budget challenges that could stand in the way of fulfilling our mission.
MARKET ACCESS AND COMPLIANCE
Market Access and Compliance (MAC), while our smallest unit with only 149 staff available for market access and compliance work (plus 28 AID-funded staff for special Russia, NIS, and Eastern Europe programs), is vitally important to our Export Strategy. It ensures market access and foreign compliance with our trade agreements. There is little point in negotiating agreements if U.S. exporters don't harvest the benefits. Ensuring access to foreign markets is absolutely essential. The best export promotion in the world won't get the job done if barriers block access by our firms. To do this, we have to monitor agreements and must take action when we are not getting what we bargained for.
In a nutshell, MAC's core mission is to obtain and keep markets open to U.S. products. With its reorganization two years ago, MAC is now focused on working with American companies to see that trade agreements are actually implemented and that compliance problems are promptly and aggressively addressed. As part of the restructuring, we created within MAC the Trade Compliance Center (TCC) to spearhead our compliance activities. The TCC and the Country Desk Market Access Officers work together and with U.S. companies to identify barriers to their exports where agreements are not being honored and to resolve problems in a way that opens opportunities for U.S. exporters. To help us remedy situations immediately, MAC works with trade associations, labor groups, the US&FCS, our embassies, and others so that we quickly learn when exporters feel they are not being treated fairly by foreign governments. MAC also has an Internet "Trade Complaint Hotline" tailored to smaller exporters and an on-line library of over 200 trade agreements. The hotline provides an easy and inexpensive way for small, medium-sized and minority-owned U.S. enterprises experiencing market access problems to reach the entire trade policy and market access resources of the U.S. Government.
The primary goal of MAC's trade compliance activities is to achieve voluntary compliance by foreign governments in a manner that prevents the need for resorting to formal dispute settlement. Where it proves impossible to achieve voluntary compliance, MAC's secondary goal is to work with USTR to seek enforcement action under the dispute settlement proceedings of the
WTO or NAFTA, or to seek the application of other means of enforcement under U.S. trade law. Successful resolution of compliance cases can affect hundreds of millions of dollars of exports.
The new aggressive approach to compliance is working. Despite several years of declining resources, MAC has managed to produce results that removed market access barriers and boosted U.S. exports. Let me briefly give you some examples:
Rieke, a small company in Auburn, Indiana that makes specialized bulk packaging products for the chemical industry, was shut out of the European market. A European competitor to Rieke was able to get product standards changed to exclude Rieke's product design. MAC's European office worked for over a year in getting European governments to remove the discrimination, and saved over 300 Indiana jobs.
In a similar case, MAC moved quickly to get the Mexican government to change a new labeling requirement that halted exports to Mexico by Miller Brewing Co. and Stroh's Brewing Co. The U.S. brewers requested our assistance to combat new and ambiguous Mexican labeling requirements which had blocked sales from the U.S. for over a month. Successful negotiation enabled the U.S. firms to share in the rapid growth of the Mexican market, and generated over $14 million of sales in 1998.
Maytag, a major Iowa manufacturer of home appliances, asked MAC for help in eliminating an unfair barrier that kept its washing machines out of Korea. MAC assembled an intra-ITA task force and developed the case for Secretary Daley to make with the Koreans. Korea changed its practice to conform with global practices, and the market is now open to Maytag.
Finally, illustrating the difference MAC can make for small companies, MAC's work kept INTERDATA, a six-person publisher of international trade directories in Poulsbo, Washington, in business by getting Singapore to crack down on illegal reproduction of the firm's trade directories. The firm said that prior to MAC's involvement, they could not get attention in Singapore because they were too small and had no clout. As a result of MAC's assistance, the firm reports that not only are they still in business, but growing and expanding into new areas.
Dispute Settlement Cases
The ITA Compliance Program has also begun to generate cases for dispute settlement under WTO and NAFTA.
A major example is Korean discrimination in procurement of a new $6 billion airport. Korea is imposing requirements inconsistent with the WTO Government Procurement Agreement (GPA) by denying non-discriminatory treatment to U.S. bidders. ITA's compliance program mounted a determined effort to obtain voluntary Korean action, including personal advocacy by myself and Secretary Daley. When Korea did not respond favorably, the TCC worked with USTR's Enforcement Office to bring the case to the WTO. The United States has now requested formation of a WTO panel.
Another example is Canada's failure to provide a 20 year patent term in all instances as required by the WTO TRIPs agreement. MAC's Western Hemisphere office played the key role in this case, which required immediate and high-level attention. MAC marshaled the Patent and Trademark Office's help to perform a legal analysis, and brought the issue to the Secretary's attention to be raised with Canada. At the same time, MAC worked with the affected companies to develop a credible damage estimate ($200 million) and to identify other affected sectors. When it became evident that Canada would not agree with the compliance arguments, ITA worked with USTR to initiate WTO dispute settlement consultations.
Trade Initiatives
In addition to monitoring and compliance duties, MAC is involved with a number of trade initiatives and commercial diplomacy efforts around the world. Supporting the peace process in Northern Ireland and building markets in Africa, Central America, Haiti, and the former Eastern bloc nations are only a few examples of MAC's efforts to promote fair trade.
Always on the lookout for market access impediments, MAC is heavily involved with the Eastern Europe tariff initiative. Eastern European countries have signed bilateral agreements with the European Union which provide preferential tariff treatment for EU member states. This puts U.S. exporters at a disadvantage by creating tariff differentials. MAC Assistant Secretary Mulloy will lead a team to Eastern Europe in June to pursue a resolution of this unfair barrier.
MAC's Europe office also coordinates the Transatlantic Business Dialogue for the U.S. Government. The TABD is a unique and highly praised public/private partnership that has been at the fore of every major initiative with the EU in international trade since its inception four years ago. The TABD has developed a wide range of trade liberalizing recommendations to create a Transatlantic Marketplace linking the world's two largest economies. It holds considerable promise to better manage trade disputes that have plagued U.S.-EU commercial relations. For instance, the TABD is credited with helping to conclude the historic U.S.-EU Mutual Recognition Agreement that will save U.S. exporters billions of dollars in duplicative testing costs and, more recently, it has been instrumental in making progress on the development of third generation wireless standards. MAC's Europe team also provides invaluable expertise on regulatory issues lacking in other USG trade agencies. U.S. business routinely identifies these regulatory issues as the single biggest obstacle to selling more U.S. products in the European market.
Africa provides an excellent example of how MAC endeavors to ensure that American business has full and fair access to the market opportunities that an improving economic climate generates. Recently, MAC has supported a number of initiatives in Africa, including the Binational Commission with South Africa and advancing regional trade integration within East and West Africa. MAC's efforts in Africa include discussions to help Nigeria develop a fuller commercial relationship with the United States as the country returns to civilian rule. Early signs are promising that the new civilian government will embark on a rigorous and long-term program of economic reform.
MAC has also been intimately involved in the Central American reconstruction efforts in the aftermath of Hurricanes Mitch and Georges. I led 16 U.S. companies on a business development mission, with ITA staffing and support in March. MAC has been at the forefront of follow-up to the mission, including planning and implementing a series of seminars designed to familiarize the U.S. private sector with government programs to support reconstruction, and to highlight commercial opportunities for U.S. firms arising from the international reconstruction effort. In May, Patrick Mulloy, Assistant Secretary for MAC, hosted a business roundtable, with representatives from the private sector and other government agencies; it focused on U.S. goals for the recently completed Central American Donors' Conference, held in Stockholm. ITA specialists are actively working to ensure that U.S. firms are afforded the opportunity to participate fully in the reconstruction process.
Market Access and Compliance FY2000 Budget Request
For FY 2000, the President is asking for $22.5 million for MAC. This includes $2.7 million for a new 12 positions Strike Force Team that would provide a mobile, interdisciplinary economic, legal, and country experts to concentrate on market access barriers in key countries such as Japan and China; it also includes $1.7 million for 15 positions who identify and attack non-tariff trade barriers and other obstacles devised by foreign governments to stymie U.S. exporters.
Budget Challenges
Market Access and Compliance is in a difficult position -- whittled down over several years to only 8 percent of ITA's overall resources. That is barely enough for the unit to do its job. I can assure you that access to foreign markets doesn't just happen. It is important that Congress not overlook the vital function of getting and keeping access to foreign markets and the unique role that MAC plays. In recent years, our Market Access and Compliance unit has received only about 84 percent of the amounts requested in the President's budget. Last year the President requested $20.4 million for the unit, but only $17.8 million was appropriated.
This budget shortfall translates into lost opportunities due to critically low staffing for our key markets. For example, our China office had to decrease staff from 9 to 5, and our Japan office has decreased from 13 to 8. These reductions have severely limited our ability to open markets and strategically position U.S. exporters for the next century.
TRADE DEVELOPMENT
Trade Development -- the second largest unit of ITA -- provides advocacy, export promotion services, industry-specific market analyses, and support for market-opening trade negotiations across the gamut of U.S. industry. This expertise is found nowhere else, inside or outside the federal government.
Advocacy Center
TD is the home of the Advocacy Center, a centerpiece of the President's National Export Strategy. Far more than ever before, the federal government is directly and aggressively advocating for U.S. exports in the face of stiff foreign competition. This Administration realized early on that international business lost to foreign firms who receive strong support from their governments was far too important to write-off, and that our traditional non-interventionist policy was equivalent to unilateral economic disarmament. The job of our Advocacy Center is to deploy the power and prestige of the U.S. Government to fight for multibillion dollar infrastructure development projects, as well as small strategic contracts. The Center works with the private sector and other federal agencies to ensure that American firms have full support for their bids on global competitions.
The experience of Radian International of Bethesda, Maryland is an example. Radian sought Advocacy Center help to win a contract to reclaim an old landfill in Beirut. During a visit to Lebanon last November, Secretary Daley advocated for Radian to senior Lebanese government and Solidere (Lebanese company administering Beirut reconstruction) officials, and later wrote a letter to the Prime Minister. The U.S. Trade and Development Agency and the Overseas Private Investment Corporation provided advocacy assistance and financial support for Radian. In January 1999, Radian International and Solidere signed a $53 million dollar contract at the Department of Commerce in front of Secretary Daley, TDA Director Joseph Grandmaison and OPIC Vice President Kirk Robertson. This project represents $30 million in U.S. exports, and will employ 100 Americans. Radian plans to source equipment from Illinois, New Jersey, Pennsylvania, Kansas, Florida, Iowa, South Dakota, Missouri, Wisconsin and Texas.
In 1999, the Advocacy Center is implementing an initiative to expand U.S. Government advocacy outreach to more small, medium and minority-owned businesses throughout the country, and to increase awareness of the Advocacy Center's services. Over the five years of its existence, the Advocacy Center has assisted U.S. bidders to win contract awards in some 480 competitions. These awards represent $60 billion in U.S. export content over the life of the transaction -- representing hundreds of thousands of jobs.
Trade Negotiations
TD also provides much of the expertise and support for the President and the U.S. Trade Representative (USTR) to conduct international trade negotiations. The USTR-led interagency process relies heavily on TD 's industry experts for studies and background information for negotiations, and to assist in the development of negotiating strategies. TD is also responsible for drawing up retaliation lists which provide the U.S. Government leverage to remove barriers to US exports. Through Industry Sector Advisory Committees (ISACs) and the President's Export Council (PEC), TD seeks advice from the U.S. business community to ensure that companies, large and small, have an equitable voice in the formulation of free and fair trade policy.
In the coming year, TD will be critical to the success of the Administration's trade policy agenda. In this year's State of the Union address, President Clinton called on all nations to embark on a new round of global trade negotiations to expand exports of services, manufactured, and farm products. TD's industry expertise will be pivotal to U.S. success in these negotiations. Our industry specialists will identify competitive U.S. exports by tariff line and assess the impact of foreign barriers on U.S. exports in more than 50 key foreign markets. TD will analyze the impact on U.S. industries of the removal or reduction of U.S. tariffs and other barriers for over 6400 tariff line items. As the new round of global trade negotiations progresses, TD will work closely with USTR to analyze offers and counter offers made by our trading partners.
Information and Analysis
TD is also a major source of one-stop export advice and industry specific analysis.
We encourage small and medium-size businesses to contact TD's award-winning Trade Information Center (TIC), through the 1-800-USA-TRAD(E) toll-free hotline, as the first stop for global export counseling and assistance from the Department of Commerce and other Trade Promotion Coordinating Committee (TPCC) agencies. The TIC is a comprehensive resource for export information and assistance. During FY 1998, the TIC received over 475,000 inquiries. Of these, TIC trade specialists responded personally to approximately 85,000 inquiries, 90% of which were from small and medium-size enterprises. The TIC helped over 2,000 U.S. trade show attendees. Some 25,000 requests came through the TIC's fax-on-demand system. The TIC received about 364,000 hits on its web site.
TD's industry experts produce timely, industry-specific analyses that target trade, finance and investment opportunities and highlight positive and negative factors influencing U.S. competitiveness in foreign markets. TD maintains extensive databases and a comprehensive web site containing historical and current data on most aspects of U.S. foreign trade. TD also produces the U.S. Industry and Trade Outlook, the federal government's most popular trade publication, through a unique public/private partnership with the McGraw-Hill Companies.
Building Public-Private Partnerships
TD manages the Market Development Cooperator Program (MDCP). The MDCP is a competitive matching grants program that builds public-private partnerships by providing federal assistance to nonprofit export multipliers such as states, trade associations, chambers of commerce, world trade centers, etc. These multipliers are particularly effective in reaching and assisting small and medium-size businesses. MDCP awards help to underwrite the start-up costs of exciting new export marketing ventures that could not get off the ground without federal government support.
Our work with China in the publishing sector is a good example. Using funds from their MDCP award, NPES (the association for suppliers of printing and publishing technologies) established the U.S.-Sino Printing Technology Training Center in Shanghai to demonstrate the latest quick print and publishing equipment donated by U.S. manufacturers. Revenues from printing and publishing jobs undertaken by the Center are plowed back into the project. Already this partnership has resulted in U.S. exports. In April 1999, Heidelberg, a U.S. printing press manufacturer, announced a $4 million deal with a Chinese printing company. The deal came about because the Chinese were able to see the Heidelberg press in operation at the Center.
Over its six year history, the MDCP has funded projects associated with nearly $2 billion in U.S. exports, has been the catalyst for over $34 million of matching funds being invested by private sector partners in export marketing, and has helped thousands of U.S. companies to export for the first time.
Trade Promotion Events
TD also conducts a wide variety of promotional activities to help American companies capitalize on foreign market opportunities. In FY 1998, TD marketing specialists organized 61 trade missions, trade shows, product literature centers, seminars, etc., helping nearly 1,400 U.S. companies export American products and services. Over 80 percent of the participants in these events were small companies. These firms reported nearly $431 million in export sales and more than 185 overseas distributor and joint venture agreements that will lead to future sales. Often, these programs lead to new relationships with clients that grow over time.
In 1995, Ms. Dary Rees, Chief Executive of The Dary Rees Co. of North Miami Beach, Florida, participated in TD's highly successful Women In Trade Mission to Amsterdam and London. She signed distributor agreements in both countries for her lines of home and tabletop accessories. Her subsequent sales success convinced her to use ITA's Gold Key program in other European markets and to participate on a TD trade mission to Hong Kong, Singapore, and Taiwan. As a direct result of participation in ITA programs, the Dary Rees Co. has signed 12 distributors and developed overseas business in 25
countries worth approximately $4 million annually. Exports which were once negligible now make up over 20% of The Dary Rees Co.'s total sales.
Trade Development FY2000 Budget Request
For FY 2000, the President is requesting $50.4 million for TD. This includes $2 million and 13 positions for a new Commercial Infrastructure Development initiative which will assist emerging economies to create market-based institutions and a commercial environment conducive to the expansion of U.S. exports; $500,000 and 4 positions for an Automated Tariff Retrieval System; and $500,000 to improve tourism data.
Trade Development Budget Challenges
For the past five years, TD's appropriated budget has not kept pace with annual wage/price increases. Initially, TD managed to absorb what, in effect, were modest budget reductions through belt tightening. Over the past few years, however, TD's continued inability to keep pace with rising costs has begun to take its toll. Industries that were once covered by 2-3 specialists are now part of the portfolio of a single specialist who must split his/her time among several industries. New industries such as biotechnology, advanced materials, and e-commerce must be covered with existing resources. TD's Advocacy Center, a hallmark of the President's National Export Strategy, had its funding reduced and has not been fully staffed for over a year.
Increased demands, such as negotiating new trade agreements, ensuring compliance with existing trade agreements, and Government Performance and Results Act compliance, are continually being made upon our industry experts. TD lacks the funds to provide the travel and training needed to keep our industry specialists current on industry developments. In the Fall, a new round of global trade negotiations under the auspices of the WTO will begin. As described earlier, TD has a significant role to play in supporting the U.S. Trade Representative. This added responsibility will place additional demands on our already overburdened industry experts.
Continuing along this path of recent appropriations could have grave consequences, and we urge full authorization of the President's FY 2000 budget request. TD may be forced to eliminate coverage of a number of important industries; and the support TD industry experts can provide to the U.S. Trade Representative could be greatly diminished.
U.S. AND FOREIGN COMMERCIAL SERVICE (US&FCS)
ITA's largest division and the unit with the most day-to-day contact with the exporting public is the U.S. and Foreign Commercial Service. The US&FCS is the premier U.S. Government agency for helping U.S. companies enter and expand in international markets. It is comprised of a global network of trade professionals stationed in over 100 U.S. cities and more than 80 countries. Overseas US&FCS offices are located in countries that are the destination of more than 95% of U.S. exports. Domestic offices throughout the United States ensure easy access to export counseling and services in local communities. Small and medium-sized enterprises -- ITA's chief constituency -- benefit from the US&FCS's broad menu of information and counseling services, and promotional events. Both large and small companies also count on US&FCS assistance to resolve trade disputes, open doors, and advocate for U.S. business. Overseas and domestic staff work as a world-wide team to provide U.S. companies with market information, trade leads, overseas business contacts, and promotional opportunities, such as trade missions and exhibitions.
U.S. Export Assistance Centers (USEACs) -- our one-stop shops -- provide export counseling and access to trade financing in collaboration with the Small Business Administration and U.S. Export-Import Bank. Trade specialists pinpoint the best markets for U.S. companies, determine the most effective market entry strategy, and develop a concrete set of actions and programs that companies can use to win sales. Domestic trade specialists provided this type of counseling to over 35,000 clients in FY 1998, associated with over 9,000 export sales totaling approximately $2.28 billion.
International staff (stationed at U.S. embassies and consulates in key foreign markets) advocate on behalf of U.S. interests with host country ministries, represent U.S. companies in project bidding and trade disputes, organize trade events and support trade missions, provide up-to-the-minute market research and contacts, and develop innovative programs to 'beat the competition.' from our trading rivals. International staff counseled over 63,000 clients in FY 1998 who have made over 3,600 successful export sales.
US&FCS Priorities
The raison d'etre of the US&FCS is to help small and medium-sized enterprises. Every day the US&FCS assists hundreds of small firms enter overseas markets. Let me give you a couple of examples:
Mr. Daniel Koebel is the President of the Hudson International Trading Company of Hoboken, N.J., a manufacturer of industrial laundry and dry-cleaning supplies. Mr. Koebel successfully used the US&FCS's custom-tailored Gold Key Service to arrange face-to-face meetings with potential business partners in Thailand, the Philippines, and Indonesia. This US&FCS assistance resulted in initial export sales of $45,000 for this company.
Walter Lavigne of Superior Surgical International in Miami, F.L., has extensively utilized the Export Assistance Center in Miami for market research, business counseling, and business facilitation services. Superior Surgical participated in a Gold Key Service to Caracas, Venezuela that resulted in a $5,000 export sale.
With the focus on small business as a starting point, the US&FCS has set a number of specific priorities for better reaching and serving our clientele. These priorities are setting a positive tone for service and excellence in the US&FCS.
First is the Global Diversity and Urban Export Initiative, introduced in FY 1999. It is designed to forge a new synergy between the growing number of minority-owned businesses in the United States and opportunities in the global marketplace. A sampling of statistics helps illustrate the need for this program. The number of African-American-owned firms grew 46% between 1987-1992 (1996 Census data). The number of Hispanic firms grew 76% over a five-year period (Statistical Brief, 1994). The total number of businesses owned by minorities increased 60%, from 1.34 million to 2.2 million over five years. These numbers tell us the US&FCS needs to take steps to reach these traditionally under-represented clients. We are implementing this initiative by partnering with national and local organizations, conducting outreach activities, and integrating minority-owned firms into US&FCS programs. The Global Diversity and Urban Export Initiative is not just about exporting, it is about enhancing the economic development of minority communities through trade.
The US&FCS's second priority program is the Rural Export Initiative (REI). Introduced in FY 1998, the REI is a national program to help companies located in rural areas to enter into export markets via the Internet, satellite communications, and other state-of-the-art technologies. Rural companies often do not enjoy the resource or information benefits available to urban firms. Our domestic network provides these companies with access to export assistance services, global market research, and international trade services such as freight forwarding and banking.
REI has helped firms like Centurion International of Lincoln, Nebraska, export $22 million to East Asia, Europe and Latin America over the past two years. Mike Powell of Centurion credits the support and assistance of the US&FCS with helping his business grow. "Without it," Mr. Powell said, "much of our progress would not have been possible."
The third and newest program I would like to highlight is the Innovation 2003 Initiative. In response to customer needs, the US&FCS has begun shifting its product focus from a standard, off-the-shelf approach towards full customization based on the unique needs of each client. Technology plays a major role in this initiative as well. The US&FCS is actively engaged in developing an array of new E-commerce products that will reduce market entry costs and open up a world of business opportunities. Virtual trade shows showcase U.S. products and services in distant markets at a fraction of the cost of on-site participation. Video conferencing puts American companies in front of prospective foreign business partners without the time and money involved in travel. Electronically delivered market research, trade leads, and
business contacts will enable clients to receive information updates instantaneously.
The US&FCS is already producing successful outcomes from this new initiative.
Mr. Richard Vallie, President of Native American Herbal Tea in Aberdeen, South Dakota, recently used innovative video Gold Key teleconferencing technology to reach an exclusive agreement to market his firm's teas in more than 200 Swiss stores with an initial export sale of $12,000. The technology enabled Native American Herbal Tea to see its Swiss counterparts on a computer screen during the business transaction. Mr. Vallie said, "This technology helps expand our trade by providing a personal approach to doing business while saving us time and money."
FY2000 US&FCS Budget Request
In FY 2000, the US&FCS has requested funding to maintain and expand these and other successful programs in five key areas: the African market, the Asian market, the Latin American market, world-wide standards monitoring, and U.S. manufacturing partnerships.
The US&FCS has developed a comprehensive trade promotion strategy for sub-Saharan Africa, home to more than 12% of the world's population. We must act quickly on opportunities or our commercial competitors will outpace us. In 1996, the U.S. accounted for only 7% of this market, compared to Europe's 30%. We can better serve our exporters, particularly small firms well-suited for many niche markets, by opening more offices in Africa. We have requested an additional $4.2 million and 24 additional positions in the FY 2000 budget to open six new offices in Africa in addition to the five we now have.
We also plan to expand staffing and office locations in Asia in FY 2000. We have requested an increase of $4.6 million and 20 positions for new projects and officers in under-served locations in China and the Asia-Pacific. China will be a big focus as the potentially fastest-growing export market for U.S. goods and services. Vietnam also has considerable potential. These resources would better position us to help our firms deal with sophisticated competitors and complex market conditions.
Given unprecedented political stability and improving economies in Latin America, the US&FCS has requested $2 million and 16 new positions in Latin America in FY 2000. We are particularly interested in the MERCOSUR common market. It has a population of over 200 million people, a combined GDP of nearly $1 trillion, and a per capita income 30% higher than for Latin America as a whole. With the additional resources, we can establish new positions in Porto Allegre, Brazil and Mendoza, Argentina. Another focus is Mexico where we want to develop a stronger presence along the U.S.-Mexican border.
In addition to regional expansion, we have requested increased funding for standards development in emerging markets. The US&FCS's Standards Attaches proposal for FY 2000 is an extension of our successful venture with the National Institute for Standards and Technology (NIST). We have requested $1 million and 6 positions to place standards experts in Russia, China, and South Africa. This will help ensure that governments do not implement regulations or standards that could exclude American products or force expensive retooling. It is of note that our major commercial competitors are spending five to seven times more than the United States to influence standards in both developed and developing markets.
Lastly in FY 2000, the US&FCS is seeking additional funds to expand its new partnership with NIST's Manufacturing Export Partnerships (MEPs). The US&FCS has requested $2 million and 2 positions to develop a joint program between U.S. Export Assistance Centers and MEP experts to work with companies ready to enter export markets. MEPs work with carefully selected small manufacturers to better implement modern technologies. US&FCS domestic export consultants, in 102 locations nationwide, are ideally positioned to help these companies enter international markets.
US&FCS Budget Challenges
The US&FCS is on the right track with its core mission squarely defined, its priorities straight, and a number of innovative proposals for an expanded effort. We are currently working our way through a number of issues related to our FY 1999 budget to ensure we can meet our goals.
These issues include rapid growth in costs of overseas administrative support, use of a one-time source of funds (our Foreign Service Nationals separation fund) to cover current year operating costs, decline fee revenues, and an overestimate of the amount of carryover funds available to fund current year operations.
We plan to work closely with you and our appropriators as we analyze impacts and implications for FY 2000, and develop appropriate responses.
TRADE PROMOTION COORDINATING COMMITTEE
There is no question that exports are a fundamental underpinning of our economy. ITA's exporting mission and unique programs make a major contribution to our national prosperity. But the success of our exporters also depends on the synergies created when ITA programs are coordinated with trade promotion and finance programs of a number of other federal agencies. ITA plays a central role, working closely with these other agencies through the Trade Promotion Coordinating Committee (TPCC). The Commerce Department as chair of the TPCC, and ITA in particular, play an important role in guiding -- and being guided by -- the Administration's National Export Strategy.
The ongoing mission of the TPCC is to develop the National Export Strategy and coordinate the export promotion activities of the 20 agencies that comprise the TPCC. The TPCC is now in its seventh year of operation since it was created by the Export Enhancement Act of 1992 and an Executive Order signed by President Clinton in 1993. During this time, it has evolved considerably, honing its focus each year to respond to the needs of U.S. exporters.
OPIC and TDA
Before describing the TPCC's goals in the coming year, I would like to take a moment to highlight the work of two of the agencies that are part of this reauthorization, OPIC and TDA. Both agencies participated in a streamlining and rationalization of functions in the early years of the TPCC. Today, both agencies serve specialized functions that are both complementary to our own programs and integral to our national export strategy.
TDA's funding of feasibility studies, orientation visits, and specialized training grants helps U.S. companies get in on the early stages of large projects that will eventually generate millions of dollars of U.S. exports. TDA feasibility studies can also promote market liberalization by encouraging privatization. Every dollar TDA spends is associated with $32 dollars in U.S. exports.
OPIC is the key U.S. Government agency encouraging American private business investment in developing countries, newly emerging democracies, and fledgling free market economies. To
date, OPIC-backed projects have supported almost 250,000 U.S. jobs and generated $58.5 billion in U.S. exports.
OPIC and TDA's efforts in Africa are an example of how useful these agencies are in furthering our goals. OPIC is currently providing $890 million in insurance and financing to projects in sub-Saharan African countries; it recently approved a $1.7 million loan to a small Idaho-based company for a project in Ghana that will support the deployment and operation of two mobile agricultural processing units to clean and separate cocoa beans. The project is expected to generate 25 U.S. jobs. TDA's efforts in Africa, which focus on planning assistance and feasibility studies, have resulted in U.S. exports of over $579 million to date with the downstream impacts expected to increase as projects move from planning to implementation.
I would like to emphasize that these two agencies offer services that the private sector cannot. They provide an essential counterpoint to the vast efforts of our competitors abroad, who are not shy about funding their programs. It is imperative to our private sector and our national interest that we do likewise.
TPCC Achievements
Through the close cooperation of TPCC agencies such as OPIC, TDA and ITA, the whole of the TPCC is much greater than its parts. Major achievements in the early years of the TPCC include establishment of the national network of U.S. Export Assistance Centers (USEACs); creation of the Advocacy Center and the TPCC Advocacy Network; establishment of the Tied Aid Capital Projects Fund or "War Chest" at Ex-Im Bank; consolidation of U.S. Government feasibility studies in TDA; and designation of the Trade Information Center (TIC) as the TPCC-wide information office for exporters. We spent two years focusing on foreign competitive practices, including the development of a comprehensive government-wide strategy on bribery abroad. Last year we ensured our trade and finance programs were targeted on the Asian financial crisis. And I can give you a brief preview of where we are headed this year.
Joint Federal/State Initiative
This year our focus is on increasing the coordination of our trade finance and promotion programs with the (50) states. By working more closely with the states, we hope to encourage them to play a bigger role in helping U.S. small businesses to export, to eliminate duplication, and to leverage our resources.
information on our programs, identify areas of overlap, and leverage our resources to fill in the "gaps" between state and federal programs.
Global Financial Crisis
Another focus of the TPCC this year will be helping exporters cope with the continued financial crisis. U.S. exports to the countries hardest hit by the crisis dropped, particularly in Asia and Latin America. As these countries get back on their feet, we are stimulating U.S. exports through new initiatives and new partnerships.
One of the first casualties of the financial crisis was U.S. manufactured goods. In response to the slowing of U.S. manufacturing exports, the TPCC developed the President's Manufacturing Export Initiative, announced by the President in January. FY2000 proposals under this initiative include increased funding for the U.S. Export-Import Bank to meet greater demands for export financing in developing markets; and more funding for the U.S. Trade and Development Agency to help U.S. companies enter the early planning stages of major infrastructure projects. An element of this initiative that I have already mentioned is the expansion of the number of commercial service officers overseas in key markets, including new standards attaches to promote the use of product standards that help expand U.S. exports.
We have been working with USAID and the private sector to develop a program that pools seed money from AID with in-kind contributions from the private sector to implement joint technical assistance projects in Asian countries affected by the economic crisis. This helps the U.S. private sector because it will demonstrate to the region that the U.S. remains a reliable commercial partner. For smaller companies, it offers the opportunity to use technical assistance as a means of creating commercial relationships with counterpart SMEs in the region. This initiative is a great example of assessing the needs of a country and our exporters, combining forces of the agencies to develop a strategy to accomplish our developmental and commercial goals, and leveraging our resources with the private sector to accomplish them.
We see a similar role in helping our exporters participate in the rebuilding of countries hit by natural disasters. As the Latin American countries devastated by Hurricane Mitch transition from emergency measures to long-term reconstruction, the TPCC agencies will work together to ensure that U.S. firms are there . We are formulating a multi-industry approach to infrastructure projects to help U.S. companies compete for projects in Latin America vis-a-vis their major competitors, while providing assistance to the people.
Small Business
Helping small businesses export continues to be a high TPCC priority. The most recent data on small and medium-sized exporters show how important they are. In 1997, almost 97 percent of exporters were small or medium-sized companies (SMEs) accounting for 31 percent of the value of U.S. exports. Between 1992 and 1997 the number of small businesses involved in exporting increased 93 percent. Despite this good news there is substantial evidence that small businesses should be exporting more. Small businesses only accounted for 14 percent of the value of manufacturing exports, In addition, most of small businesses exporters, 63 percent, only export to one market.
A key element of our small business strategy includes the federal/state initiative which I have already discussed. We are also pursuing Internet initiatives with small businesses in mind and individual TPCC agencies are tailoring their services to the special needs of small firms.
Internet - The TPCC agencies are working to make all of our programs and services to help exporters available on the Internet. The Department of Commerce will make the Customized Market Analysis, the Agent/Distributor Service, and even participation in trade events such as Matchmaker Trade Delegations available on the Internet. USAID is providing electronic trade leads to Export Assistance Centers and SBA small business clients.
OPIC has declared this year to be the year of small business. Highlights of this program include reducing the minimum loan size to $250,000, making its contractors and insurance program available for small businesses acting as contractors in international construction contracts, streamlining its insurance application from 20 pages to 5, and instituting a small business insurance program for insurance brokers.
The Ex-Im Bank has developed a new guarantee agreement to its Working Capital
Guarantee Program to make it more responsive to the pre-export financing needs of small businesses. Other changes include working with the US&FCS's Rural Export Initiative to provide 100 percent guarantees for exporters that traditionally have not had adequate access to
the financial marketplace, such as small women- and minority-owned businesses, and companies in rural or economically depressed areas.
TDA is continuing to emphasize assisting small businesses as part of its mission with nearly one-third of its budget going directly to small firms. 60% of the companies working with TDA are small, and TDA has reserved 100% of its contracts for definitional missions and desk studies, which are precursors to feasibility studies, for small business.
CONCLUSION
ITA is at the forefront of our export promotion efforts, working with our sister agencies through the TPCC. Similarly each unit of ITA plays an essential role on the ITA team. The U.S. and Foreign Commercial Service, Trade Development, Market Access and Compliance, and the TPCC are all ahead of the curve with initiatives and complementary programs to strengthen the position of U.S. exporters in the markets of the next century. Each has developed new and innovative ideas that respond both to changes in the global marketplace and to intense foreign competition. These programs and proposals roll into ITA's core objectives: ensuring that our trading partners comply with trade agreements, supporting efforts to open new markets, providing our exporters with the services they need to take advantage of new opportunities, and continually coordinating our efforts throughout the government and with state, local and private sector partners.
But we cannot follow through in these efforts without the critical mass of funding necessary. As we've noted, even some of our essential functions may be threatened.
At a time when a slowing world economy demands that we support U.S. exporters more than ever before, we cannot withdraw from an area so critical to our economic prosperity.
Thank you for your attention, and for the support of this Committee in the reauthorization process.