<DOC>
[108 Senate Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:93490.wais]
THE U.S. NATIONAL EXPORT STRATEGY
=======================================================================
HEARING
before the
COMMITTEE ON
BANKING,HOUSING,AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
ON
THE U.S. NATIONAL EXPORT STRATEGY AND THE ROLE OF THE
TRADE PROMOTION COORDINATING COMMITTEE
__________
MAY 21, 2003
__________
Printed for the use of the Committee on Banking, Housing, and Urban
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COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
RICHARD C. SHELBY, Alabama, Chairman
ROBERT F. BENNETT, Utah PAUL S. SARBANES, Maryland
WAYNE ALLARD, Colorado CHRISTOPHER J. DODD, Connecticut
MICHAEL B. ENZI, Wyoming TIM JOHNSON, South Dakota
CHUCK HAGEL, Nebraska JACK REED, Rhode Island
RICK SANTORUM, Pennsylvania CHARLES E. SCHUMER, New York
JIM BUNNING, Kentucky EVAN BAYH, Indiana
MIKE CRAPO, Idaho ZELL MILLER, Georgia
JOHN E. SUNUNU, New Hampshire THOMAS R. CARPER, Delaware
ELIZABETH DOLE, North Carolina DEBBIE STABENOW, Michigan
LINCOLN D. CHAFEE, Rhode Island JON S. CORZINE, New Jersey
Kathleen L. Casey, Staff Director and Counsel
Steven B. Harris, Democratic Staff Director and Chief Counsel
Skip Fisher, Professional Staff
Martin J. Gruenberg, Democratic Senior Counsel
Joseph R. Kolinski, Chief Clerk and Computer Systems Administrator
George E. Whittle, Editor
(ii)
?
C O N T E N T S
1 ----------
WEDNESDAY, MAY 21, 2003
Page
Opening statement of Chairman Shelby............................. 1
Opening statements, comments, or prepared statements of:
Senator Crapo................................................ 8
Senator Dole................................................. 12
Prepared statement....................................... 32
Senator Sarbanes............................................. 16
Senator Carper............................................... 24
WITNESSES
Donald L. Evans, Secretary, U.S. Department of Commerce.......... 3
Prepared statement........................................... 32
Philip Merrill, President and Chairman, The Export-Import Bank of
the United States.............................................. 5
Prepared statement........................................... 36
Peter S. Watson, President and Chief Executive Officer, Overseas
Private Investment Corporation................................. 9
Prepared statement........................................... 39
Hector V. Barreto, Jr., Administrator, U.S. Small Business
Administration................................................. 21
Prepared statement........................................... 41
Response to written question of Senator Miller............... 48
Barbara R. Bradford, Deputy Director, U.S. Trade and Development
Agency......................................................... 22
Prepared statement........................................... 42
Additional Material Supplied for the Record
The 2003 National Export Strategy Report......................... 49
(iii)
THE U.S. NATIONAL EXPORT STRATEGY
----------
WEDNESDAY, MAY 21, 2003
U.S. Senate,
Committee on Banking, Housing, and Urban Affairs,
Washington, DC.
The Committee met at 10:15 a.m. in room SD-538 of the
Dirksen Senate Office Building, Senator Richard C. Shelby
(Chairman of the Committee) presiding.
OPENING STATEMENT OF CHAIRMAN RICHARD C. SHELBY
Chairman Shelby. The hearing will come to order.
I would like to begin this morning's hearing on the U.S.
National Export Strategy and the role of the Trade Promotion
Coordinating Committee by quoting from Title XII, Section
635(i) of the U.S. Code, which regulates the U.S. Export-Import
Bank:
``The Congress finds that Tied Aid and partially Untied Aid
credits offered by other countries are a predatory method of
financing exports because of their market-distorting effects .
. .''
``This and additional like findings are immediately
followed by this mandate:''
``The Bank shall establish a Tied Aid credit program under
which grants shall be made from funds available in the Tied Aid
Credit Fund established under Subsection (c) of this Section .
. .''
This seems like a contradiction. The seeming incongruity
present in the law illuminates the continuing challenge of
achieving the elimination of trade barriers that has been a
fundamental U.S. foreign and economic policy goal since at
least the 1934 Trade Act, a goal that increased in importance
in the wake of the devastation of World War II. Despite our
evolution to the age of globalization, however, the goal
remains elusive. I am reminded of the situation involving the
American commercial shipbuilding industry. When President
Reagan unilaterally terminated domestic shipbuilding subsidies,
it was anticipated that the rest of the world would follow the
United States' lead and would act likewise. The result, we soon
learned, was the exact opposite. Foreign shipbuilding subsidies
continued and American commercial shipbuilding industry was
seriously and possibly irreparably weakened by its inability to
compete for a diminishing market on a demonstrably uneven
playing field.
The lesson is clear. The United States has a vital role to
play in supporting American business by ensuring a level
playing field in international trade. That is the
responsibility, as is evident by the size of today's panel, of
a number of U.S. Government agencies, chief among them the
Office of the U.S. Trade Representative, through his role in
the negotiation of agreements, and the Department of Commerce.
Our purpose here today, however, is to focus on the role of the
Government in helping American business to export its products,
both goods and services, through financial and technical
assistance, through education, and through the provision of
business-essential information on foreign markets.
While we have come a long way under the World Trade
Organization and through a growing number of bilateral trade
agreements--indeed, the President recently signed the U.S.-
Singapore Free Trade Agreement, and I anticipate similar
treatment of the Chilean agreement--in reducing tariffs and
some nontariff barriers to free trade, the job is far from
complete.
The Trade Promotion Coordinating Committee was created--and
codified in law--due in no small part to the efforts of my
colleague, the Ranking Member, Senator Sarbanes--with the
seemingly incongruous mission illustrated earlier by my
reference to the statutory language establishing the Tied Aid
Credit Fund. It exists to offer export support at the same time
we retain as a goal the elimination, on a global basis, of the
kinds of export support activities common among major
industrialized countries. Now financial and technical
assistance is only part of what TPCC does. It also plays a very
important role in helping American companies identify
opportunities, and helps educate them on how to maneuver the
winding roads involved in international commerce. There is no
denying, though, that the export financing mission of some of
the agencies represented here today, exist, at least in part,
because of our inability to date to eliminate export subsidies
on a global level.
We have had successes, though. The Japanese agreement to
end its policy of tying aid to the initial design and
engineering stage of major capital projects, for example,
stands out as significant progress given that country's
historical use of Tied Aid. But much more work remains to be
done. In fact, in the 12 years since the OECD agreement
restricting Tied Aid, we have seen not only a continuation of
this, but also the emergence of new methods designed to
circumvent the intent of negotiations aimed at trade-
distorting practices.
By way of example, we have, as the TPCC's new export
strategy report points out, the task of dealing with the
phenomenon of ``market windows,'' the use of ostensibly private
institutions that are closely linked to the government or are,
in fact, little more than front companies for the government in
question to finance deals.
These are all issues to be discussed, and I hope the
witnesses will address them during today's proceedings. In all,
the TPCC has to be considered a success. As much as some of us
would like to see business free to compete in the international
arena without undue government involvement, the reality remains
far different. The hands of American business cannot be tied
while its foreign competitors exploit the benefits available
courtesy of their respective governments. As important, the
responsibility of the TPCC to coordinate the export-related
efforts of as many as 20 Government agencies, so as to be a
more efficient tool, should not be overlooked. It is a daunting
task, but one on which the Coordinating Committee has made
significant progress. The agencies are working much more
closely together than ever before, and are orienting their
efforts toward the needs of business much more efficiently than
ever before.
With us today to discuss the National Export Strategy and
the progress that has been made in the past year are Secretary
of Commerce Donald Evans; Philip Merrill, President of the
Export-Import Bank; Hector Barreto, Administrator of the Small
Business Administration; Barbara Bradford, Deputy Director of
the Trade and Development Agency; and Peter Watson, President
of the Oversees Private Investment Corporation.
We welcome all of you to the hearing. Your written
testimony will be made part of the record in its entirety, and
we will start with Secretary Evans. We know you have some time
constraints, and we will go as fast as we can. We appreciate
your appearing here today.
STATEMENT OF DONALD L. EVANS
SECRETARY
U.S. DEPARTMENT OF COMMERCE
Secretary Evans. Thank you, Mr. Chairman, and it is always
a pleasure to be here with you. I appreciate it very, very
much.
As you said, I would like to have my written statement
submitted for the record.
Chairman Shelby. Without objection, all of your written
statements will be made part of the hearing record.
Secretary Evans. Thank you. I appreciate the opportunity to
be here to discuss the National Export Strategy of this
country.
One year ago, I came before you to lay out a National
Export Strategy, the Administration's plan to improve our trade
promotion programs. The 60 recommendations in that report were
based on the express needs of our customers. I also told you I
wanted to use the Trade Promotion Coordinating Committee, the
TPCC, as a management tool to monitor our progress and to spur
change and cooperation. This is an example of what the
President's management agenda is all about.
My message to you today is simple: Thanks in large part to
the support of this Committee and the outstanding leadership of
my colleagues here today, the TPCC is a proactive, goal-
oriented vehicle for delivering export services to American
companies.
By expanding exports, we promote economic growth, new and
good-paying jobs, and higher standards of living, here and with
our trading partners throughout the world. We are on track with
implementing these recommendations. And we are becoming more
forward-thinking when it comes to major project procurement.
We are creating a new culture of customer service among the
agencies, and we are strengthening our training and partnership
efforts. In the process, the TPCC has become an important
resource and advocate for the U.S. business community. For
example, our agencies and embassies were flooded with calls
about the Administration's reconstruction plans in Iraq, so the
TPCC hosted several interagency meetings that culminated in a
briefing for United States trade associations. This was
followed by a briefing for Coalition partners at the State
Department.
In early June, we plan an event focused on sanctions. We
are working with the TPCC agencies to identify and eliminate
obstacles to rebuilding the Iraq economy. We took on similar
efforts for our central and southeast European Coalition
partners.
After I traveled there in March, we brought the agencies
together to deliver initiatives to help stimulate U.S. trade
and investment in that region. To monitor new opportunities,
the TPCC meets about every 6 weeks at the Deputies' level and
weekly at the staff level. We have worked together to discover
projects for United States companies with the prospect of
United States financing in China, Russia, and Mexico. In China,
of course, we have had our eyes on the Olympics, and will do an
interagency mission this fall.
In September, I will attend the Energy Summit in Russia,
and Grant Aldonis will go to Moscow on my behalf next month. I
led a trade mission to Mexico for small businesses last year,
and in June, I will be attending the Partnership for Prosperity
meeting in San Francisco.
We are steps away from a new program that would combine the
Commerce Department, Ex-Im Bank, and SBA resources in an
integrated small business trade finance tool, and we have
joined
Ex-Im/SBA financing seminars, and the agencies are working on
parallel financing agreements.
We have launched an interagency trade officer training
program, so that our people in the field can help firms
navigate the full array of Government export promotion
programs. We have trained 31 officers from nine agencies in
January, and are doing additional training programs next month
and in September. We have reached out to our State partners as
their budgets have tightened, collaborating and co-locating
where possible.
This year, we have built stronger bridges with many State
partners, including Florida, Alabama, Delaware, Maryland, and
New Jersey. We have an agreement with Florida to do a joint
training and trade finance facilitation; an agreement with New
Jersey to co-locate out staff and work on trade missions and
counselling; and with Alabama, we helped recruit the State's
Trade Mission to Central America this week.
The TPCC is jointly marketing all of our programs,
including sharing space at domestic trade shows, so that
exporters can find out about all agencies' services in one
place.
We have developed joint publications and seminars, and are
sharing client lists, and including data on each other's
programs in client mailings. As a great example of this
cooperation, I am pleased to announce today that our redesigned
export assistance website is now open for business. The new
Export.gov portal is
responsive to the stated needs of our customers, the small- and
medium-sized business community. In addition to links to
multiple agencies, we now have a step-by-step guide through the
process for new exporters.
This was all accomplished with the cooperation of our TPCC
partners. As we look toward next year, we want to continue
working to complete our agenda. This includes: Developing a set
of priority projects based on input from our overseas posts and
interagency business development missions in key markets;
completing the development of integrated small business trade
finance, marketed by the Commercial Service; institutionalizing
our interagency trade officer training and expanding it to
include Congressional offices in States; and leveraging
existing agency budgets in Fiscal 2005 on priorities such as
training and technology. At the same time, we will continue our
focus on exporter needs. This includes assisting the business
community in its efforts to reenter the market in Iraq, and
further coordinating efforts to stimulate private
investment and trade.
Mr. Chairman, I want to thank you and this Committee for
your interest and oversight of the export promotion process,
and for your support for the TPCC.
Thank you, Mr. Chairman.
Chairman Shelby. Mr. Merrill.
STATEMENT OF PHILIP MERRILL
PRESIDENT AND CHAIRMAN
THE EXPORT-IMPORT BANK OF THE UNITED STATES
Mr. Merrill. Thank you, Mr. Chairman.
I would like to associate myself completely with the
remarks of Secretary Evans, and I appreciate the opportunity to
join you, Mr. Chairman, this morning, and my colleagues from
the Trade Promotion Coordinating Committee to report on the
status of the National Export Strategy.
The first Bush Administration National Export Strategy
Report in 2002 has served as a road map for the TPCC efforts
over this past year. The 2003 National Export Strategy Report
issued this April and my testimony today are primarily devoted
to reporting on implementation progress.
As Chairman of Ex-Im Bank and Vice Chairman of the TPCC, I
have a keen interest in working with the members of the TPCC to
support our Nation's export sector.
The Bank's mission is to assist in financing the export of
U.S. goods and services, thereby helping to create and maintain
U.S. jobs. It is all about jobs.
Ex-Im Bank does this by providing financing to counter the
effect of export credit financing from other governments, or by
taking reasonable credit risks that the private sector is
unwilling or unable to accept. We only go where private capital
will not or cannot go. By cooperating with other agencies, Ex-
Im Bank is trying to achieve a more strategic approach for
trade and export promotion. Our focus is on improving customer
service, streamlining case processing, and enhancing risk
management.
The Bush Administration recognizes the important role that
the TPCC can play in supporting U.S. exports and U.S. jobs. I
am very committed to this effort. The TPCC strives to make it
easier for U.S. businesses to understand and utilize the U.S.
Government's export promotion programs. The recommendations put
forward in last year's TPCC report were developed after in-
depth discussions with our customers and are practical
solutions to problems that encumber U.S. export potential.
We have made progress in implementing many of the report's
key recommendations. I will address the three areas in which
the Ex-Im Bank is most involved: One -- Joint Marketing,
Training, and Small Business Initiatives; two--Early Project
Development; and, three --Tied and Untied Aid. We happen to be
singing from the same songbook today, by some strange chance.
First, I would like to discuss the Joint Marketing,
Training, and Small Business Initiatives. To support these
initiatives, Ex-Im Bank leads an interagency marketing task
force--us, the SBA, the Department of Commerce, and OPIC.
Our marketing objective is straightforward: To establish a
direct relationship between the U.S. exporter and U.S.
Government trade agencies in a coordinated and cost-effective
manner.
The task force planned, funded, and is now executing three
primary tactics to reach U.S. exporters, specifically small and
new exporters. The big guys know we are here. These tactics
are: Direct mail; participation in major trade shows; and
exporter and lender seminars. We have had a whole bunch of them
around the country.
The TPCC partner agencies also collaborate through
nationwide U.S. Export Assistance Centers, which have an
unworkable acronym to reflect them, and we are working to link
our websites to the U.S. Government Trade Portal, Export.gov.
We actually completed this just last week, so I understand.
By agencies sharing costs, the exporter and the taxpayer
are better served. Ex-Im Bank is also continuously looking to
leverage the TPCC agency resources by utilizing the private
sector to reach and provide services to U.S. exporters.
We have also implemented a cross-training program for our
staff, the Department of Commerce, SBA, OPIC, and TDA staff.
This training is designed to enhance our ability to provide
full-service trade finance advisory services to the export
community. We want us all to know what we all do, and what the
exporters do.
Finally, Ex-Im Bank is collaborating with the SBA to
provide parallel financing and joint marketing for working
capital transactions, thereby providing small business
exporters with a seamless approach to access the working
capital they need to increase export sales.
Second, I would like to discuss the Early Project
Development Initiative. Its aim is to coordinate more
effectively the efforts of the U.S. Government trade agencies
to secure contracts for U.S. exporters. Ex-Im Bank's staff
actively participates on the early project development country
teams that the TPCC established to coordinate travel and
promotion activities.
To aid early promotion efforts, Ex-Im Bank has created an
``early project letter of interest,'' intended to signal
preliminary interest in a project before contracts are signed.
Currently, the interagency
efforts are focused on three markets: Mexico, China, and
Russia, where we think the most room for opportunity for our
exporters
exists. We plan to broaden our focus to other target markets at
the appropriate time.
The largest Ex-Im Bank market is Mexico. We are very active
in Mexico with an exposure of more than $5 billion. We are
actively working to develop new products for this market, and
to coordinate promotional activities with other United States
Government agencies and with the Mexican government. Last
September, agencies brought together municipal officials from
renewable energy, waste management, and water treatment
agencies, and United States companies in a conference organized
by Ex-Im Bank and the Mexican Development Bank, Banobras. This
conference built on the Partnership for Prosperity Initiative
was created by President Bush and Mexican President Fox. I
participated with my colleagues here from the OPIC, SBA, and
TDA, in the Arizona-Mexico Trade and Investment Seminar in
Tucson. We are working with our partner agencies to follow up
on leads from these and from other similar conferences.
In the second market, China, we also have nearly $5 billion
in exposure and numerous opportunities exist for United States
exporters, including projects associated with the Olympics in
2008 and the World's Fair in 2010, and in key sectors such as
environmental protection, energy efficiency, waste water
treatment, medical equipment, and electric power.
Let me interject that I had a nice long chat with the
Chinese Ambassador a couple of weeks ago, just four of us, in
which he acknowledged on his own that a trade imbalance of $100
billion to $125 billion was not acceptable, and that they were
prepared to deal actively and creatively with American
exporters. I was a little surprised he brought it up, and we
are pursuing it together.
We are working closely with the Commercial Service and TDA
to coordinate efforts to identify opportunities for United
States exporters in China and with the Chinese.
In Russia, the Early Project Development Team is pursuing a
number of projects in telecommunications, transportation, and
energy sectors, with particular focus on four pipeline projects
that are currently under consideration. These projects can
benefit from enhanced interagency cooperation and adequacy
resulting from the Early Project Development Initiative.
Let me say that I spent this last weekend in New York with
the Rand-Russian-American Studies Group, which I sat on for 10
to 12 years, with a whole crowd of Russian oligarchs who were
there. We had, let's say, a full and free and fruitful
discussion. I did not say ``frank,'' but it was very friendly,
and they have been in to see us and we are working back and
forth.
Ex-Im Bank is also working with the Commercial Service to
plan a working trip to Moscow and St. Petersburg in June to
follow up on these projects and to meet with Russian government
officials to identify additional opportunities for United
States exporters.
Overall, the TPCC joint promotion and coordination efforts
in Mexico, China, and Russia look promising.
Third, the TPCC, in 2002, launched several initiatives to
counter foreign aid practices that place U.S. exporters at a
competitive disadvantage. Ex-Im Bank and USAID are working to
ensure that transactions we both support complement each other
in an effective manner. These joint mixed-credit transactions
will leverage the resources of the two agencies to support aid
development objectives, while expanding Ex-Im Bank's ability to
provide business opportunities for U.S. exporters. These are
separate. They do the aid, we do the business.
Ex-Im Bank, in cooperation with the Treasury Department,
continues to closely monitor the use of Tied Aid by foreign
governments. I note that the bureaucracy agrees that in 2002
the use of Tied Aid continued to decline dropping to a record
low. In fact, since 2001, the decrease was 40 percent
worldwide, so the War Chest just may be working, just by being
there.
Further, Ex-Im Bank and Treasury have also agreed to new
processes and standards governing the use of the Tied Aid
Credit Fund, commonly known as the War Chest, that will ensure
more rapid case processing and improve U.S. exporter
competitiveness. These are known as the Robson-Taylor
Principles and undoubtedly your staff is totally on top of
that, as I am sure you are.
I am asked to say a word with respect to Iraq.
Chairman Shelby. I am going to have to interrupt you. We
have a vote in 2 minutes on the second vote, and we are going
to recess the Committee hearing until the vote is over, so just
suspend.
Mr. Merrill. Okay, I will suspend on Iraq.
[Recess.]
STATEMENT OF SENATOR MIKE CRAPO
Senator Crapo [Presiding]. Ladies and gentlemen, we will
bring the hearing to order.
I ran into the Chairman in the hall as I was returning from
voting, and he said we should keep going so we do not get
people any further behind on their schedules. So, I am going to
reconvene the hearing. The Chairman is going to run over and
vote and be back as quickly as he can. I appreciate your being
understanding and accommodating for our scheduling
difficulties.
Mr. Merrill, I understand you were in the process of
completing your testimony before we were interrupted. You can
go ahead and complete it now.
Mr. Merrill. Well, actually, when we were interrupted, we
were just about to solve the problem of Iraq.
[Laughter.]
Senator Crapo. Why don't you just finish with that then?
[Laughter.]
Mr. Merrill. Literally, Iraq was the word on the table.
Senator Crapo. We could have a vote on it, and it might
win.
[Laughter.]
Mr. Merrill. I think an appropriation is more what is
necessary. In any case, with respect to Iraq, Ex-Im Bank has
established an internal task force that is working to address
the legal and credit concerns that currently impede our ability
to offer trade finance programs in Iraq. We are coordinating
closely with the other TPCC's member agencies, as well as the
U.S. exporting community in this effort.
As you know, we are subject to a number of important
programmatic constraints, the principal one being a need to
find ``a reasonable assurance of repayment . . .'' that is the
legislative language for every credit we support. However, we
are bringing energy and creativity to the task of helping
United States companies provide the goods and services that are
necessary to the reconstruction of Iraq. For example, we are
actively considering mechanisms that will allow Ex-Im Bank to
support United States exports to Iraq, sooner rather than
later, including taking the credit risk of companies and banks
and third countries such as Turkey, Jordan, and Kuwait, that
may be involved in obtaining United States goods and services
for reconstruction efforts.
Additionally, I believe that the concept of an Iraqi oil
trust fund for reconstruction has real merit, and I would
support efforts to establish such a fund under U.S. auspices,
as rapidly as possible.
The CEE, who is represented here today by Ed Rice, and
several of their members, notably Halliburton, Bechtel,
Motorola, GE, and a number of other companies have been in to
see us. The general drift of our ideas and their ideas is that
a country with a GDP of $26 billion, which is what Iraq had,
cannot possibly support $120 to $140 billion in existing debt.
That debt has to be restructured in some manner. With the
investment of several billions of dollars into the declining
and deferred maintenance problems left by the previous regime,
Iraq can once again use the revenues from increased oil
production for its needs.
Iraq has the capacity to generate between $10 and $15
billion a year in oil revenue each year for 10 years. Nobody
knows the exact number. That money can be used for the benefit
of the people of Iraq and to provide the assurance of repayment
for foreign direct investment or Ex-Im Bank guarantees in Iraq.
However, the issue is not only establishing such a trust
fund or reconstruction finance corporation, if I go back to the
founding of Ex-Im Bank, but also the issue is that it has to be
on a long-term basis, because the oil business is a long-term
basis. You cannot get investment on a short-term basis. I
should leave the oil business to Secretary Evans, but suffice
it to say that nobody is going to spend several billions of
dollars without a legal and professional assurance of being in
business there for a great number of years, so let me sum that
up by saying oil trust fund.
I would like to conclude by thanking this Committee for its
support of the TPCC, Secretary Evans for his leadership, and my
TPCC colleagues here today for their commitment to this effort.
I appreciate the opportunity to appear before you, and I would
be happy to respond to any questions you may have at any time.
Senator Crapo. Thank you, Mr. Merrill.
I understand, Secretary Evans, that you have to leave at
11:00; is that correct?
Secretary Evans. Correct.
Senator Crapo. If we get a couple of our Members back and
they have some questions for you, we may interrupt in order to
do those questions.
Secretary Evans. Certainly.
Senator Crapo. But until we get them back here, we will
proceed with the testimony.
Mr. Watson.
STATEMENT OF PETER S. WATSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
OVERSEAS PRIVATE INVESTMENT CORPORATION
Mr. Watson. Thank you, Mr. Chairman, and in light of the
time constraints, this will be a very brief oral presentation.
I want to share the thanks of my colleagues to be here today,
to articulate support for the President's vision on the
National Export Strategy, and, for the leadership of Secretary
Evans, whose efforts to bring together the disparate Executive
Branch agencies as key to marshalling our collective resources
to implement the TPCC's worthwhile mandate.
We appreciate the support from Members of the Committee
and, indeed, the Ranking Member, Senator Sarbanes. As you know,
OPIC has a unique role to mobilize U.S. private investment for
the social and economic development of less developed
countries. We do so on a self-sustaining basis, at no cost to
the U.S. taxpayer.
In implementing President Bush's blueprint for OPIC, over
the last 2 years the agency has reformed for success by
bringing the benefits of economic development to the neediest
countries, fostering cooperation with the private market to
leverage resources, and focusing on the needs of the smaller
U.S. businesses to pursue opportunities in the developing
world. This was in response to the concerns by many in the past
that OPIC was merely dispensing corporate welfare. Our efforts
to create lasting results at OPIC mirrors the efforts of the
TPCC over the last year, efforts in which OPIC has been
privileged to play a role.
With our other colleagues, we have conducted a joint
investment mission in Pakistan. OPIC is active in Afghanistan
where we are in the closing stages of executing $40 million in
financing and political risk insurance for a much needed
business base hotel in Kabul, the first of its kind. This
project will represent the largest United States private
investment in Afghanistan since the fall of the Taliban.
Indeed, it is the largest United States investment in
Afghanistan in a generation, if not more.
Suffice it to say that we are also working with the SBA on
execution of a cooperation agreement, including employee cross-
training. Last week, OPIC signed an MOU with the Department of
Commerce Commercial Service, again committing the agencies to
better information-sharing and lead generation. We are also
working with AID to expand our coordination in our agencies.
I just want to close on Iraq. As Secretary Evans has
indicated, that country will clearly be a priority in the
coming year. Once we have cleared sanctions and the statutory
issues that impact our ability to operate, OPIC is prepared,
and very willing and interested to use its programs of finance
and political risk insurance to support private sector
development in Iraq.
Mr. Chairman, in closing, Congress this year will have the
opportunity to review OPIC and its refocused agenda as it
considers
reauthorization of OPIC programs. Although not formally under
the jurisdiction of this Committee, we look forward to working
with you and your staff to secure the approval of our
legislation before September 30 in carrying out the President's
agenda.
In closing, I would like to thank the Committee for its
support of TPCC. OPIC is a partner of the willing with our
colleagues here today to provide the most effective investment
program services for U.S. businesses, American taxpayers, and
men and women in the employment community.
Thank you and I will also be pleased to take your
questions.
Senator Crapo. Thank you, Mr. Watson.
Mr. Barreto and Ms. Bradford, if you would be willing to
allow me--we have 10 minutes before we are going to lose the
Secretary, and I, at least, have one question that I would like
to ask him, before we lose him. And there may be some others
who show up by the time he has finished responding to my
question.
This question, by the way, is one I would like the rest of
the panel to respond to also, so you may get a heads-up on what
may be coming. The question relates to the threat that we see
overseas to American interests from terrorism, and especially
in the developing countries that are the focus of so many of
the TPCC's efforts, where we see a greater threat than at any
time in recent memory.
And while the agencies represented before us here today
have long had as a part of their mission, providing risk
insurance to American businesses to help them protect against
political instability and other potential calamities, there is
really no question that the risk of direct physical attack has
grown considerably and is much higher than we have ever dealt
with in the past.
An April 1 notice from the Export-Import Bank advertised
the Short-Term Insurance Pilot Program that is now available in
39 Sub-Saharan African countries, including a number where we
have threats of terrorism.
In addition, Mr. Watson's testimony before the House
Appropriations Committee indicated that despite heightened
perceptions of risk, and in a very real sense because of them,
OPIC has committed $1.2 billion in loans, guarantees, or
insurance to support 45 developmental projects around the world
in some of these kinds of countries.
My purpose in covering this ground is to try to get a sense
from the panel, and I will ask you to respond now, Mr.
Secretary, of how we are responding to this increased threat of
terrorism? And I have to believe that this threat is taken into
account in determining whether to provide risk insurance in
some of these countries, and would just like to know whether
you can provide some sense of the threshold of where we are,
short of a full-scale war in terms of risk insurance being
denied to American companies seeking to operate in these
developing countries?
Secretary Evans. Well, of course, Mr. Senator, there is a
full-scale war against terrorism. That is a full-scale war.
Senator Crapo. That is right.
Secretary Evans. That continues, and America is bringing
all of the might and strength to that war that it can, to make
sure that we win that war, along with our friends and our
allies all around the world.
As we know right here in America, you cannot have economic
security or economic growth without national security or
homeland security. The same thing works around the world. You
cannot have global economic growth, businesses being successful
and performing around the world, without international security
or global security. They are integrated. They work together.
You cannot have one without the other, and that is why the
President has been so focused on the war on terrorism, because
he understands that clearly, I think.
So, I think my response, Senator, is that we will continue
to do whatever it takes to win the war on terrorism. I mean, we
are cutting off their money; we are going after them; we are
collecting them around the world. We are providing for a safe
and secure environment for people, not only in this country,
but also around the world, and to allow for global economic
growth is an essential part of it, for companies to be able to
go abroad and export abroad and invest abroad, which means jobs
right back here in America.
I think it is just our continuing focus on the war against
terrorism, so that we can play a role in providing more
security around the world.
Senator Crapo. Thank you. And as I said to the other
members of the panel, we will ask you to comment on that when
we aren't under a time pressure.
Senator Dole, we are going to lose Secretary Evans in just
a few minutes, and so if you have any questions for him, this
is your
opportunity.
COMMENTS OF SENATOR ELIZABETH DOLE
Senator Dole. Mr. Secretary, I know you are working hard to
open up foreign markets to U.S. and North Carolina goods and
services, and I have been a strong supporter in that regard,
and I will continue to be.
But I would be remiss this morning if I did not mention one
thing that has caused a great deal of concern in North
Carolina, a very critical situation. And that is the agreement
that was signed recently with Vietnam. This has a lot of our
textile manufacturers and workers very much concerned. They are
worried that the agreement will shift jobs out of North
Carolina to Vietnam and ultimately, through transshipments, to
China.
I would be interested in what the Administration might be
doing to alleviate this situation. I know there have been
commitments to take the views of our textile industry, our
textile workers, into account when these agreements are made,
and this is one that is of great concern to North Carolina.
Secretary Evans. Indeed, Senator, I understand their
concern. You mentioned transshipments, and that is an area of
serious concern on our part.
In the agreement that was signed with Vietnam, for the
first time, we signed an agreement like this that I know about.
We had the opportunity to go in and look at the data in Vietnam
and see that the data does support the level of quotas that was
granted.
If the data does not support it, if the data shows that
there have been transshipments coming through Vietnam over the
last 18 months, which is when we have seen the growth of
imports into the United States from Vietnam--and it has grown
dramatically--if you take knit shirts for an example: A couple
of years ago, the imports were zero; a year ago, the imports
were six million dozen. That was the year 2002. In the year
2003, the imports were coming in at the rate of 18 million
dozen a year.
The quota was set at 14 million dozen. We went to Customs.
I had two conversations with Asa Hutchinson, and told Asa that
I wanted him to commit some additional resources to that
specific issue, and asked him to put a team together that would
put more resources on Vietnam to go look at this data and
confirm the data one way or the other.
If it shows that there have been transshipments, then we
have the ability in the agreement to go reduce the quota. That
is something that we are actively working on right now. I have
asked them to get back to us as soon as possible. I think we
will have an answer on that within the next couple of months.
So since, Senator, as you said, it is this team's goal and
strategy to open up markets all around the world for American
goods and products and services, but we have to make sure we
are maintaining a level playing field around the world as well.
When it comes to transshipments and people--not playing by
the rules--we are going to be plenty tough on them. And so I
just wanted you to know that because of this dramatic increase
that we saw in imports coming in from Vietnam, we felt like it
warranted additional resources to go in there and confirm the
data, and make sure the data was, in fact, correct.
But if it showed to us that this quota was too high, we
negotiated in the agreement that we would have the right to
lower the quota.
Senator Dole. I recall Chuck Hayes, who passed away last
year, Chuck was head of the Textile Manufacturers Institute,
and he made the comment that if the transshipments had been
even half what they have been in the past, our textile industry
would be thriving, and we have lost, of course, tens of
thousands of jobs. It has just decimated our industry in North
Carolina.
I appreciated your support earlier on the idea of a textile
tracer. This is something that came up from a citizen in North
Carolina.
We were able to find the technology in the Energy
Department to hopefully develop a tracer that could be put on
yarn, on fabric, as it leaves the country to be sewn, and then
when it comes back, you would have something like the watermark
on a dollar bill, an ability to determine, was this made in the
USA?
Now the scientists who have been working on that at the
Energy Department have come up with three methods that they
want to test now on the plant floor, and also through Customs.
Would you support spending the $1.2 million to provide the
tests to finalize this idea of a tracer?
Secretary Evans. Yes, we have supported this effort,
Senator. I think it is a very bright idea, something certainly
worth pursuing.
The amount of dollars you just referred to, relative to the
cost to American workers--when you think about the
transshipments around the world--the cost is very minor. So if
we can develop more tools to deal with this critical issue when
it comes to trade, I am certainly supportive of it.
Senator Dole. Thank you. I believe my time has expired.
Thank you, Mr. Chairman.
Chairman Shelby. Mr. Secretary, I think you have to go. Do
you have one minute for one question?
Secretary Evans. Yeah, sure, you bet, Mr. Chairman.
Chairman Shelby. Thank you. It has been 12 years since the
OECD agreed to restrict the use of Tied Aid. I know that during
2002, there was another push by the U.S. to restrict such aid,
as well as practices like market windows, that are clearly
designed to evade restrictions. Could you just briefly bring us
up to date on these efforts on the use of the War Chest, as we
call it, to support American businesses facing an unlevel
playing field?
Secretary Evans. Well, I know we have made some great
success on that front, Mr. Chairman. As Mr. Merrill just
mentioned, we have seen a reduction of some 40 percent or so of
Tied Aid-related exports in the world, and we have been very
aggressive in working through the OECD and we will continue to
do so.
I think the War Chest has been an important tool for us to
have in dealing with that issue. We have seen Japan come to the
table and change their practices, as it relates to their Tied
Aid practices of using engineering design and preliminary
studies to tie that.
Chairman Shelby. Any success with the French?
[Laughter.]
Secretary Evans. I am going over there soon, Senator. I
will work with them.
Chairman Shelby. I am not speaking of the war; I am talking
about----
Secretary Evans. Right, I understand. But I think we have
made great progress, but we are not there yet. I do not want to
suggest that we think we have accomplished all that needs to be
done on this front. We need to continue working on it
aggressively.
Chairman Shelby. Mr. Secretary, I know you are under a time
constraint, and we appreciate your appearing before the
Committee today. You have to go to a meeting, and we are sorry
we had to vote, but that is part of the Senate.
Secretary Evans. I understand.
Chairman Shelby. We will continue with the other panel.
Secretary Evans. Thank you, Senator.
Chairman Shelby. To the rest of the panel, the question was
asked of the Secretary regarding terrorist and risk insurance.
Do you want to comment on that? Do you want to start, Mr.
Merrill, on terrorism and risk insurance?
Mr. Merrill. Yes, I know. Were you here for the question?
Chairman Shelby. No, I am familiar with the question, but I
did not know if the four of you had had a chance to answer it
and give your opinions on it.
Mr. Merrill. First, that is our business. We have a number
of risk policies in place to protect U.S. exporters when the
commercial sectors are not there.
Now, we still charge market rates. What happens here is 13
U.S. Government agencies, with which we and OMB participate,
set the risk assessment on several different scales, but the
easiest way to think of it is one to 11. The highest number
being the greatest risk. Cuba would be 11. You are not going
there. Those numbers reflect the current assessment of risk the
Government is going to have to take into account.
We have tried to address this in a couple of other ways.
The Senator from Idaho referred to an Africa program in his
question, and this is part of a pilot program. This is a pilot
program under the AGOA, Africa Growth and Opportunity Act.
Again, we are trying to open investment in Africa, while
still providing for a reasonable assurance of repayment. We
note that the commercial sector is not there, in general, and
is certainly not there without us. So without us, they are not
there.
Let me say that around the world, and with respect to
Africa, the risk premium will have to be adjusted to fit
whatever the risks turn out to be.
One other thing we have been doing--you can cook the books
in the short-term but you cannot cook them over 10 years. The
risk will turn out to be whatever it is. We are not going to
cook the books. Another thing we have been doing, however, is
talking to insurance companies. I have been talking to an
American Insurance Group that is commonly known as H.
Greenberg's operation, Frank Wizner, Ambassador to India and
Egypt.
Chairman Shelby. We know him.
Mr. Merrill. What we have been talking about is working out
a deal with AIG and other similar insurance companies where we
overlay one another. In other words, they have certain
countries where they have, let's say they will reach a cap. We
may go above the cap. Well, we have countries where we go first
and they take the upper end of the cap. What we like to do is
cooperate with American insurance companies to address this
very issue.
Chairman Shelby. Mr. Watson, do you have any comments?
Mr. Watson. Yes, thank you, Mr. Chairman. Senator Sarbanes,
good to see you, sir.
Our respective agencies are those primarily involved. For
OPIC, in addition to supporting jobs, our mission is, of
course, to support the national security and foreign policy
objectives of this country. But we do so in a way that takes
prudent risks in managing our portfolio, which we do in
cooperation with, not competition with the private sector.
In that context, OPIC continues to work on a self-
sustaining basis at no cost to the U.S. taxpayer. In fact, it
returns money to the 150 Account. But we can support America,
and have done that, in a way that has extraordinary benefit for
the national security goals of the United States.
In relation to terrorism, our mission is precisely to
ensure that the key national security tools of the United
States, our foreign policy and our military capability, is
supported by our long-term goals in opening up these economies
and these peoples to economic pluralism, open markets, and the
private sector. These are the long-term tools of ensuring that
we prevent the ability for terrorism to take root in the
future. Open markets, communication, tourism, freedom of
belief, these are all principles upon which this country has
been developed and it is our greatest export.
Our job is to support that, and we can only do that in
conjunction with the private sector. We can do it in a prudent
way at no cost to the taxpayer. That is what we do.
Chairman Shelby. Mr. Barreto, do you have any observations?
Mr. Barreto. Thank you, Mr. Chairman.
Just briefly, the place that SBA interfaces mostly with
small businesses is really through export financing, we have a
number of different loan programs. Also, technical assistance,
which is so critical to small businesses.
There is no doubt that terrorism plays a major role in a
small business's interest in exporting and importing and really
being involved in the export marketplace. It is one of the
reasons that it is so essential for us as an agency to work
very closely with our TPCC partners.
I would say one other thing. According to our figures 97
percent of all exporters in the United States classify as small
businesses; over 200,000 firms are small business exporters,
but they only represent less than one-third of all the trade
that is occurring. So there is a great opportunity to engage
those small businesses and really try to grow the pie of
opportunity for them, and really educate them to those
opportunities.
Chairman Shelby. Tell us how they do that?
Mr. Barreto. We do that through our network of technical
assistance providers, and all of the people that we have in our
network that deal with trade issues, and export issues. We have
a very large network, as you know. We have SBA personnel in
every State in the union. It is really the place that we can
touch the most small businesses.
One of the things that we want to encourage them to do is
oftentimes they are only doing business with one country. So if
there is a part of the world that is particularly dangerous, we
want to open them up to some other opportunity, and we think
that is a very prudent way for us to go.
Chairman Shelby. And so, it could help our economy
immensely, couldn't it?
Mr. Barreto. Absolutely.
Chairman Shelby. Ms. Bradford.
Ms. Bradford. Mr. Chairman, Senators, and the Committee,
the Trade and Development Agency, as part of the Foreign
Assistance Program of the United States, finds that SARS and
terrorism are the greatest impediments to our doing work
overseas. Of course, we are worried about the risk of our own
staff who are there and the contractors for the Agency, but we
really see it as a balancing act. Our job is to keep trade open
while still providing some security.
We have focused on transportation security by screening
passengers and cargo before they travel. Securing the supply
chain as goods move through Customs and between borders so that
you can lock containers and make sure that the goods that you
packed arrive safely where they need to be without having to be
opened at each border crossing along the way, which provides an
opportunity for terrorism to happen.
By using IT expertise so that we can track containers,
anyone who is trading can track containers and the security of
those containers. You find that it reduces the chance for
corruption. It increases transparency. It facilitates trade.
And as we know, the rapid transit of goods across borders is
what makes trade happen and helps the economies on both sides
of the transaction.
Chairman Shelby. Senator Sarbanes.
STATEMENT OF SENATOR PAUL S. SARBANES
Senator Sarbanes. Thank you very much, Mr. Chairman, and I
apologize for being delayed in getting to the hearing.
Actually, I have three hearings going on at the same time----
Chairman Shelby. Plus two votes.
Senator Sarbanes. Yes. When I first looked at it on my
schedule, my first reaction was, I am not going to go to any of
them----
[Laughter.]
Senator Sarbanes. --it was too much of a conflict to
decide, but I finally resolved it.
First, I want to thank you, Mr. Chairman, for holding this
oversight hearing. I think it is extremely important that we
keep a Congressional focus on the TPCC. I think it helps to
give it some energy and momentum, and it is important for
people downtown to know that Congress is watching and that we
care about this program, and we regard it as important.
The effect on this, of course, on the TPCC depends upon the
leadership it receives from the chairman and the other key
members. Let me say it has been my perception that Secretary
Evans--and I know he had to depart--and Under Secretary Aldonas
recognized the importance of the TPCC from the time they took
office as a way of having a greater sense of strategy and focus
to U.S. export promotion efforts. They have made energizing it
a priority, and they have gotten the active cooperation and
leadership from the other agencies represented on the panel
this morning. I want to express my appreciation to all of you
in that regard.
I understand that a Deputy's level, meaning Under Secretary
level, of the TPCC takes place every 6 weeks and that lower
staff level meetings take place on a weekly basis. And this is
a tremendous advance.
The precipitating event for establishing the Coordinating
Committee was the hearing we held in which we had at the table
from a range of agencies, these and others, other departments,
involved in exports and the question was asked: How many people
on the panel knew other people on the panel? Nobody knew
anybody else. They were all just clearly working within their
own silo and there was no interaction.
At the hearing last year on the 2002 Report, Secretary
Evans and the other agency leaders presented findings and
recommendations obtained from a benchmarking exercise. This was
a series of surveys and focus groups used to measure customer
satisfaction with the TPCC's programs and a search for best
practices among the governments of our major competitor
countries to see how they promote exports.
A series of recommendations came out of that, and I am very
pleased to note this in Appendix A that is in this year's
report, in effect providing a progress report on the 2002
recommendations. This is, in my judgment, very good follow-up
because it sets out the recommendation, the accomplishments so
far, the next steps the progress measures, and it really gives
you a very handy way to see where we are and some idea of where
we are going to go.
Having said that by way of opening, I would like to just
ask a few questions:
First of all, the report mentions that a key area of
collaboration among the TPCC agencies has been the development
of an interagency training program designed to impact client
management skills and broader knowledge of the programs and
resources that are available to assist U.S. firms in the
international marketplace.
The Pilot Training Course was apparently delivered in
January of this year. Participants from nine different TPCC
agencies--the five that are here at the table, and the
Departments of Agriculture, State, Transportation, and AID.
This strikes me as a promising initiative. It is obviously
consistent with the statutory mission of the TPCC. Are there
plans to institutionalize and expand the interagency trade
officer training program? Who would like to elaborate on that?
Mr. Aldonas. I would, Senator Sarbanes.
We included in our budget request for this fiscal year and
again for next fiscal year training monies that are designed to
encourage that program to go forward.
We will have sessions in June and September of this year to
follow up. From my perspective, these initial stages are a
little bit of training the trainers. What we are going to have
to do is, if we are going to get as much of a multiplier
effect, is to make sure that we have some of these people who
have gone through the training program get out and meet with
their Commercial Service overseas, meet at SCO conferences as
we had last week in Reston, so they can pass on accumulated
knowledge.
It is all designed really to create account managers within
the Commercial Service that can serve as marketing reps for all
the agencies. So that, whether it is a Commercial Service
office in the United States where SBA is not co-located, or we
do not have an Ex-Im Bank rep, you still have somebody there
you can talk to that knows enough about the programs so they do
not simply refer the customer on to someone else, but who can
actually help tailor the programs to their needs, give them the
advice they need, and make sure they have the contacts overseas
with the FCS that can put them in touch with their contacts
abroad.
Senator Sarbanes. Good. I understand the TPCC has been
developing a new program that would combine Commerce, Ex-Im
Bank, and SBA resources toward an integrated Small Business
Trade Finance tool for working capital loans. However, I
understand that SBA's participation in the program may be
affected by the cut in last year's appropriation bill for SBA
participation in the U.S. Export Assistance Centers, the so-
called One-Stop-Shops. How are we going to deal with this? I
mean it seems to me it is certainly a worthwhile initiative and
I am concerned that it seems to be----
Mr. Barreto. We have been working very closely with our
partner agencies here. One of the things that we have been able
to do is actually formalize a lot of our participation with
formal memoranda of understanding.
It is correct that we had asked for $3.1 million in this
year's budget which was not funded. We have continued working
very closely with the Department of Commerce on this very
critical function, and we plan to continue doing that.
Obviously, in the 2004 budget, funding has been requested
again, and we will do everything that we can to make sure that
that funding is there and that we are able to continue.
But regardless of that, there shouldn't be a drop off in
this collaboration. I mean the things that we are doing already
together in terms of the training and things that we can do
going forward I think have been strengthened and are not going
to go away. But that funding will be critical to us in being
able to continue our USEAC presence.
Mr. Aldonas. Could I say, Senator Sarbanes, that one of the
things we have talked about with Hector, and I was discussing
with the Secretary yesterday, was could we absorb some of that
expertise into the Commercial Service? What you really have is
a cadre of trade finance professionals that could serve as a
resource for the Commercial Service, particularly in this area
of small- and medium-sized enterprises where they need the most
help, frankly, and guidance.
I was in Rockford last week at one of our manufacturing
hearings. The President has launched an initiative on
manufacturing, and a fellow by the name of Don Metz described
the success he has had in working with Patrick Hoppen with the
Small Business Administration. He used the phrase of, somebody
had to persuade him to get out of the boat and walk on the
water, in terms of exporting and really what he had relied on
was precisely the cooperation between the local SBA office and
our USEAC in Chicago and the northern Illinois area.
There is a lot of value to that, particularly on the
financing side. So what we are trying to do with Hector is to
see between the two agencies how we can make sure that we have
absorbed that talent and we continue to provide that service
one way or the other.
Senator Sarbanes. Well, we want to encourage that
initiative.
When we reauthorized the Ex-Im Bank Charter last year, we
addressed the problem of market windows. We gave Ex-Im Bank
explicit authority to match market window financing, and we
directed the United States to seek negotiations for
multilateral disciplines transparency within the OECD with
regard to market windows.
The legislation requires a report in 2 years on the
progress of the negotiations. It also requires Ex-Im Bank to
include an assessment of the use of market windows by other
countries.
I note that the National Export Strategy Report mentions
that the Ex-Im Bank and the Commerce Department have
commissioned a detailed study of the nature and volume of
market window trade financing, and that the report--at least as
listed here--was expected by the end of April 2003. In other
words, last month. I would be interested to know if the report
has been received and, if so, whether a copy could be shared
with the Committee.
Mr. Aldonas. Yes, sir, we do have the report and we will
make a copy available. We can show it to you in draft.
Senator Sarbanes. What?
Mr. Aldonas. We will show it to you in draft. We have the
report in draft at this point. It hasn't been finalized. But we
are happy to sit down and discuss it with you.
Senator Sarbanes. When do you expect to have the final
report?
Mr. Aldonas. At the end of this month. But I do not see any
reason why we shouldn't draw you into the process of having a
discussion about what is coming out in terms of financing.
Senator Sarbanes. We are very interested in that, and I
know the Chairman at the outset made a comment about the Tied-
Aid Credit Fund and the need to establish a level playing
field, and of course some of these countries entered into an
OECD regime on the Tied-Aid Credit, and then they went around
to the back door and set up these market windows. So, we need
to look at that entire landscape, and we are anxious to work
with you on that.
I want to ask Peter Watson a quick question. You will be
seeking a reauthorization, I think--between now and September.
Mr. Watson. Yes, sir, that is correct.
Senator Sarbanes. I understand in the draft legislation you
are seeking a change in the current definition of ``eligible
investor.''
Mr. Watson. Yes, sir.
Senator Sarbanes. So according to the letter accompanying
the request, ``It is necessary to update this definition to
include enterprises and financial institutions with projects
that may not be majority U.S. owned but have significant U.S.
connections that provide support to the proposed project in the
form of U.S. employees, facilities, or payment of taxes.''
I guess the bottom-line question is: Are you now proposing
that OPIC guarantees be provided for investment by foreign-
owned companies? Is this what this amounts to?
Mr. Watson. Senator, what we have--not just ourselves but
the Department of Commerce and Ex-Im--had to try and respond to
in the last several years is that major U.S. industry groups,
significant participants in the U.S. economy, Westinghouse,
Chrysler, amongst others, have no longer been eligible to be
supported by our agencies. And our agency, in particular, by
reason of the acquisition of significant U.S. companies and
U.S. workers, has meant that we, by reason of an antiquated
definition of who we can support, have, in fact, been penalized
by the increasing integration of international investment.
What we are wanting to do is to be able to recapture the
ability to support U.S.-based employment, U.S.-based taxpayers,
U.S. content, and U.S. production that is not being able to be
supported in the current economic environment.
We have many instances where there are, indeed, nationally
foreign-owned corporations that have greater assets, a greater
number of employees, and a greater capital base in the United
States than they have elsewhere. Siemens is an example. BP
Amoco is an example.
Senator Sarbanes. Let me ask you this question: Have you
run out of U.S.-owned companies to provide the guarantees to
and now you are searching around for foreign-owned companies?
Mr. Watson. The answer is, obviously, no, Senator.
Senator Sarbanes. Why would we shift off some of the
resources in that direction?
Mr. Watson. Well, the essence of this is we want equality
in being able to avoid penalizing existing U.S. workers and
U.S. companies that previously have been able to receive our
support. They now have, in fact, been penalized simply because
of being owned by foreign companies. We want to be able to
support those U.S. workers but we are not now able to do so.
Senator Sarbanes. I think this is an issue that is going to
have to be very carefully looked at.
Mr. Watson. Agreed.
Senator Sarbanes. I don't think it really responds to the
concern to use language that sort of sacks the debate by, for
instance, characterizing it as ``antiquated requirements,''
``penalizing,'' and so forth and so on. I mean there is I think
a very legitimate question, and particularly the question if
you start down that slippery slope where do you end up.
Also you have a lot of people seeking these guarantees, and
so forth, and so the question becomes how do you choose amongst
them. But obviously that is something that will be more
carefully examined when your reauthorization issue comes before
us.
Mr. Chairman, I appreciate your indulgence in letting me go
on.
Chairman Shelby. Thank you. Senator Sarbanes--I know you
need to get to other committees--I acknowledged your work
dealing with the Trade Promotion Coordinating Committee
earlier, and that was created and it was codified in law due in
no small part to your efforts, and I wanted to acknowledge that
in public.
Senator Sarbanes. I appreciate that very much.
Chairman Shelby. You have a great interest in this, and you
are very knowledgeable about it and I think it is an important
area.
Senator Sarbanes. We think it is doing some good, and it
has certainly gotten a good, strong boost from this
Administration. On occasions I differ with the Administration,
but when we are in agreement I want to make sure I recognize
it, and they are doing a good job on this. Thank you.
Chairman Shelby. Senator Crapo.
Senator Crapo. Thank you, Mr. Chairman.
I am going to have to apologize to Mr. Barreto and Ms.
Bradford because they still have not had a chance to make their
opening statements yet.
Chairman Shelby. Do you want to make your opening
statements, or do you want them to be made part of the record?
Mr. Barreto. It is your call, Mr. Chairman.
Chairman Shelby. No, it is your call.
Mr. Barreto. I am happy to read it. If we have time
constraints, we are happy to answer questions, as well.
Chairman Shelby. Read it? Or paraphrase it?
[Laughter.]
Senator Crapo. I would give up my time for them to make
their statements, Mr. Chairman.
Chairman Shelby. You go ahead.
Mr. Barreto. I will try to paraphrase.
STATEMENT OF HECTOR V. BARRETO, JR.
ADMINISTRATOR
U.S. SMALL BUSINESS ADMINISTRATION
Mr. Barreto. I will try to paraphrase. I just want to echo
many of the comments that have already been made. I think one
of the things that we can attest to is that we are working
closely together. We do know each other. We are doing many
things together which I really believe are going to further the
agenda of TPCC.
I also want to acknowledge the leadership of Secretary Don
Evans. I think he has really been a champion on us working
together and really measuring ourselves by the results that we
get.
I have had an opportunity to be with him on a number of
trade missions already, working on the Partnership for
Prosperity, and this is definitely a top goal and priority of
this Administration.
As has been said many times before, for us this is a
critically important initiative because of the fact that these
small businesses play such a large role in exporting, and they
also play a huge role in our economy in the creation of
businesses.
One of the things that I was very heartened by was the
recent study by the Commerce Department which showed that 30
percent of nonexporting small businesses would be interested in
exporting if they had somebody to partner with and to help lead
the way.
We think that is a very significant opportunity for all of
us.
Chairman Shelby. It would create some more jobs, wouldn't
it?
Mr. Barreto. Absolutely. Absolutely. We really are the
engine that fuels the economy and we need to find every way we
can to grow that pie of opportunity for them.
I have mentioned some of the things that we have already
done with regards to our partnership agreements, the symposium
that we have all participated in, and the coordination that is
currently going on. And so I just again want to say that we are
very excited about some of the progress. We are not anywhere
near done yet. There is a lot more that can be done. But we are
definitely on the right road and we want to thank this
Committee for having this hearing and the support that they
have given all of us in continuing with the mission.
Thank you, very much.
Chairman Shelby. Ms. Bradford.
STATEMENT OF BARBARA R. BRADFORD
DEPUTY DIRECTOR
U.S. TRADE AND DEVELOPMENT AGENCY
Ms. Bradford. Mr. Chairman and Senators, thank you for the
opportunity to appear here today. I would like to read my
statement. It is short. But as a niche player that may not be
as well-known as the agencies of my colleagues, I would like
for you to know exactly what we are doing.
I am Deputy Director of the Agency. Director Askey
apologizes and regrets not being able to be here today. I am
very pleased to testify today because I was a staff member on
one of the original interagency committees that worked on the
TPCC over 10 years ago and I can verify how valuable it has
been both to me as an individual and to our Agency over the
years.
Throughout the year, the USTDA works closely with other
TPCC members to enhance our mutual effectiveness, leverage our
resources, and focus our joint efforts on projects and
activities that will garner U.S. export success.
The USTDA's mission is unique. As a foreign assistance
agency, it is at the nexus of U.S. export promotion and the
advancement of important overseas development objectives. In
carrying out our mission, USTDA works with our TPCC colleagues
and with other agencies to bring their particular expertise to
a wide range of development priorities.
At USTDA our strength comes from facilitating U.S. private
sector solutions to modern infrastructure needs in developing
and middle-income countries. USTDA also brings U.S. private
sector expertise to bear in assisting countries in the
development of specific sectors such as energy and
transportation, which can serve as catalysts for economic
growth and increased trade.
During the past year, the USTDA has worked with other TPCC
members to implement the National Export Strategy. I would like
to share some examples of USTDA activities in this effort. In
particular, USTDA activities are supporting important U.S.
trade and foreign policy objectives. For example, USTDA is
active in many post-crisis regions such as Afghanistan.
Since early 2002, we have committed roughly $2.5 million
for project planning activities in Afghan civil aviation,
telecommunications, oil, and gas and electric power sectors. I
know this does not seem like a large amount of money in the
scheme of things, but you have to understand that the $2.5
million are catalytic funds, putting U.S. firms in on the
ground floor of large projects worth hundreds of millions of
dollars.
We are currently considering $3 million in additional
activities. Next month, USTDA will co-sponsor an Afghan
conference with the Department of Commerce outlining
opportunities that we have identified as having strong
potential for the U.S. private sector involvement while
rebuilding that war-torn country.
Along those lines, there is an important role for the USTDA
to play in Iraq in putting the private sector to work in many
essential sectors. These areas include: Transportation,
telecommunications, electric power, and downstream petroleum
processing such as refining petrochemicals and fertilizer
production. These sectors represent areas in which the need for
new investment is great. The population will receive direct and
tangible benefits and the U.S. private sector has expressed
interest in these particular sectors.
Another component of USTDA's portfolio is our support for
U.S. trade policy initiatives. In Africa, for example the
Agency has supported activities under the AGOA framework. USTDA
is also working closely with USTR and other agencies by
providing support to a number of trade negotiations, most
notably the SACU, South Africa Customs Union Free Trade
Agreement, and CAFTA, Central America Free Trade Agreement.
This year's National Export Strategy discusses a number of
sectors that are priorities for the TPCC and USTDA. For
example, we have taken a leading role in identifying and
supporting potential transportation security projects that I
referred to earlier in the ``Secure Trade in the APEC Region''
or the STAR Initiative. Earlier this year, we co-sponsored a
STAR conference in Thailand with the State Department.
Turning to specific countries and regions targeted for
early project development, USTDA reopened in China 2 years ago,
and our country portfolio has grown rapidly. In 2002, we were
involved in 46 separate projects there with a focus on aviation
safety, again going back to the terrorism problem, and energy
and the environment. Already we have seen some U.S. exports
resulting from the USTDA activities in China.
In Mexico, USTDA funded a variety of activities that
support the Partnership for Prosperity, P for P, including the
signing of master grant agreements with two Mexican development
banks. USTDA has strengthened our cooperation with our TPCC
colleagues, particularly SBA, OPIC, and Ex-Im through support
of the Partnership for Prosperity. USTDA has implemented a
strong program in Central and Eastern Europe, notably in
environmental investments, particularly waste energy and
renewable energy projects.
We work closely with our colleagues overseas in several
regional offices, which are like the USEAC's where we are co-
located, particularly in Eastern Europe and Eurasia. In
addition to USTDA personnel, we have representatives from Ex-
Im, OPIC, and the U.S. Commercial Service, and this joint
overseas presence enables us to share information effectively
and to better coordinate our activities and services to U.S.
firms.
USTDA also participates in a number of events throughout
the year designed to inform the private sector about the
Agency's programs. We worked with OPIC in the Andean Regional
Trade and Investment Conference, Ex-Im's annual meeting, OPIC's
Arizona Mexico Trade and Investment Conference, and last week
we hosted a seminar for small- and medium-sized businesses at
TDA, and we were happy to have Administrator Hector Barreto
participate in that with us.
We are also very involved in the pilot interagency training
course, and we are looking forward to hosting that training
course at our Business Center in June.
As we look to the future, we anticipate continued high
demand for USTDA programs and we are pleased to work with our
other TPCC members as we move forward.
Chairman Shelby. Thank you.
Senator Carper.
COMMENTS OF SENATOR THOMAS R. CARPER
Senator Carper. Just a quick couple of questions then I
have to head back to the floor. How long has the Coordinating
Council been in existence?
Mr. Aldonas. About 10 years.
Senator Carper. Ten years?
Mr. Aldonas. Yes.
Senator Carper. Any idea what the trade deficit was about
10 years ago?
Mr. Aldonas. I would say it was probably just shy of 3
percent of GDP.
Senator Carper. Which would be about?
Mr. Aldonas. At the time I would have said maybe like $25
billion, $20 billion, something around those lines.
Senator Carper. Any idea what it was last year?
Mr. Aldonas. It is about 5 percent of GDP.
Senator Carper. And roughly, what would that be?
Mr. Aldonas. I am sorry. I misspoke myself. It is more on
the lines of $200 billion, because right now I think we are
perking along at, gosh, I want to say like $400 billion a year.
It has about doubled over that time, Senator Carper.
Senator Carper. Does the rest of the panel agree with that?
Does that sound about right? Okay. I see heads nodding. So
before the Coordinating Council was created, our trade deficit
was roughly $200 billion. Today, it is closer to $400, maybe
more this year. If you look at the reason why we created this
Council it is to try to turn things around. And not to take
anything away from the efforts of each of you and the people
you work with, why were we headed in the wrong direction? Not
just by a little bit, I mean by a lot.
Mr. Aldonas. The trade deficit, of course, is driven by an
awful lot of things that relate to the disparity in growth. I
will give you an example. Normally when you see our trade
deficit close, it is because we have gone into a recession and
other economies are going stronger. And in fact, one of the
reasons 10 years ago--it is interesting. It is really the last
time the trade deficit closed. The reason was, we were in a
recession. Japan was still growing, and Europe was getting
strong growth.
What happened this time around is we went into the
recession, Japan and Europe trailed us in. We have come out
rather slowly. They have not. In fact, they may be back in
recession at this point, which means that our export has faced
an exceedingly challenging environment. So while exports are up
in absolute terms, imports are up significantly higher, and it
is because our economy is growing faster.
Senator Carper. I am going to ask each of you to think
about something and then I will come back to ask you for your
thoughts. I would like your best single thought on what we can
do to turn this around and get the trade deficit heading in the
right direction. Each of you just one idea, what you think is a
very good idea. It could be something that could be done
administratively, legislatively. It could be something we are
doing with respect to monetary policy, the value of the dollar.
Just give that some thought.
I am amazed, Mr. Chairman, at how little attention is given
to the magnitude of the trade deficit. To see what it was when
you and I were in the House together and to see what it is
today, my understanding is that in order for us to continue to
run these kinds of trade deficits, somebody has to finance it,
and as long as people from around the world are willing to
invest money in this country to offset the size of our trade
deficit. We can get by.
But eventually, I fear we are going to reach a point where
the rest of the world will lose their enthusiasm about
continuing to invest in a country that forever is increasingly
purchasing goods and services from abroad. And we are trying to
get the economy moving here. The monetary policy has been most
accommodative, and we have these very low interest rates. But
at some point in time, I fear that in order to be able to
continue to induce other countries' investors to invest in this
country, we are going to have to raise interest rates. When we
raise interest rates, that has, as you know, it could have a
potentially adverse, maybe devastating effect on our economy
and our ability to recover.
So, I would put that on the table. You have had a minute to
think about your maybe single best idea, and Ms. Bradford if
you want to lead off, I would welcome your recommendation.
Ms. Bradford. Thank you, Senator. With due respect, sir,
our Agency is a very practical, project-by-project agency that
provides funding to get U.S. firms on the ground floor of
development. So, I would defer the policy decisions of how to
take on the large issue of handling the trade deficit to those
that are more experienced in those policy issues than we are.
Senator Carper. All right. Thank you.
Mr. Barreto.
Mr. Barreto. A number of thoughts on that. I mentioned
before that 97 percent of all exporters are small businesses,
but they only represent less than 30 percent of the trade. So
there is a great opportunity to engage that 97 percent.
But what we find, and this is in particular to small
business exporters in general, they do not know what they do
not know. There are a lot of programs that are represented at
this table that they are not accessing. We cannot wait for them
to come to us, we have to go to them. And that is why the
collaboration that is going on on this Committee, the
streamlining of processes, the simplification so that it is
easier for these small businesses to access these programs is
so critically important.
I think that we have a significant opportunity. I think
also that one of the things that we are hearing is a lot of
excitement with regards to some of the potential trade
agreements that could be in the offing. The United States has
been party to very few trade agreements. Now that the President
has the negotiating authority to engage the Central American
countries and other countries in the hemisphere, that is a huge
opportunity for small business.
Senator Carper. All right. Thank you.
Mr. Watson.
Mr. Watson. Senator, I share your concern about the
increasing numbers on trade deficit. What is little appreciated
in terms of these numbers of U.S. exports is that, in fact,
over 50 percent of U.S. exports go to U.S. corporate affiliates
abroad, which is to say the offices of U.S. companies abroad
who then in turn integrate these and export them onward into
other economies. I want to say it is about 56 percent of all
U.S. exports now currently go to affiliated U.S. companies and
joint ventures abroad.
If you think about it, that being the major platform, the
way to increase our export profile is to ensure that more
companies can, in fact, establish competitive operations
outside of the United States and be able to penetrate those
markets. That means that while their coordination might not
have been as effective previously amongst these agencies, what
you do have is the mechanisms to ensure that U.S. exporters,
U.S. manufacturers, U.S. men and women in the workforce do have
the platforms and do have the
vehicles and programs to be able to ensure equitable access to
these countries and these economies and these markets, which
are the vehicles and platforms for driving U.S. jobs.
That 56 percent figure is not well appreciated. And so, we
have to be able to expand the ability for us to use the
platforms of foreign access to grow that percentage. You have
to do that by competitive means and helping programs such as
these.
Senator Carper. Thank you, sir.
Mr. Merrill.
Mr. Merrill. Senator, I am not smart enough to have a
single best thought on a subject this complicated, so I will
have to give you three.
Senator Carper. Okay. We will take them.
Mr. Merrill. First, $100 billion of the trade deficit is
simply China. It came up earlier before you arrived. I
suggested earlier that I had met with the Chinese Ambassador on
this subject and so forth.
Second, let me say $100 billion plus, is undetermined
because of varying price, is the import of oil. It seems to me
the oil issue is simply a separate issue that is more complex
than can be summarized or adequately addressed here. But
suffice it to say a very large portion of the trade deficit is
the import of oil and whether it is to our interest to produce
more of our own oil, or to import more oil, and all the
associated questions that go with that, cannot really be
addressed at this point. So let me just say it is oil.
Senator Carper. Okay.
Mr. Merrill. The third point that I would make is that the
central fact of our time is the explosive growth of the U.S.
economy. We have a $10 trillion economy. We went to war with a
country that had a $26 billion economy. Russia's economy is
$346 billion. Brazil, 60 percent of our size in population,
about the same size in area, has close to a $500 billion
economy, 5 percent of ours.
What has shifted is the let's say former banking advice
that banks would have given their clients, which said invest in
the United States, diversify, some in the United States, some
in other places, because if we are doing well, they are doing
badly and vice versa. What seems to me has changed is that when
we do well now, because of the sheer size of us, other people
do well. And when they do well, we do well. That is, we are now
linked together rather than opposites.
The biggest and the most promising exports are knowledge-
based services. We should be exporting more services, more
programs. Training doctors at Johns Hopkins or Massachusetts
Medical is effectively an export for the United States. The
exporting industries that do export tend to have about 20
percent higher paid workers in the United States than the rest
of the working community. So the short form is that we should
promote, I am going to call it knowledge-based imports, leave
that like oil, without going into nuance, and suggest as well
to you that the Japanese economy is unable to right itself,
because basically they cannot write off their bad debts, and
the European economy, without reflections on our putative
friends, have a problem breaking what might be called a social
contract. It takes 2 years to fire somebody or replace somebody
and there is very little mobility of labor, although there is
mobility of management.
Senator Carper. Mr. Merrill, my time has expired and then
some, so----
Mr. Merrill. Let me just say, it is hard for me to see an
awful lot of people investing in either one of those great
entities as opposed to the United States.
Senator Carper. Those are great answers. Thank you very
much. Could you just give us a quick benediction here?
Mr. Aldonas. Sure. Preach what we practice. You know,
Phil's right. If you look at Asia right now, Japan still
represents two-thirds of the GDP, if Japan's flat on its back,
we are not going anywhere. I can put it this way, which is that
the size of Vietnam's economy is smaller than the Japanese
annual bar tab. So if Japan is not doing what it has to do to
spur economic growth, you are not going to see growth
throughout Asia even with China rising.
The same thing in Europe. If they are locked into a growth
and stability pact that essentially limits, as you pointed out
Senator, the flexibility that Alan Greenspan has responded to
circumstances in the market, if they do not have those tools
available to them and they aren't willing to look hard at their
own policies to try and give them a progrowth strategy,
particularly on the monetary policy side, then we have real
trouble.
And again, I am as concerned as you about the trade deficit
and whether or not it is sustainable. Because at some point if
they are not growing, this house of cards comes down. Growth is
the answer. But they have to be doing the right things
domestically.
When the President goes to the G-8, he has to make that
abundantly clear, as I know he will, that we have to back that
up through institutions like the IMF and the World Bank so that
people get the message. Because unless they are doing the right
things at the macro level--cutting taxes, responsive monetary
policy--and at the micro level in the developing world--
protection of private property, all the sorts of things that
give you a sound basis for small businesses to grow and thrive
and provide the innovation, there is not a lot of hope out
there for strong growth and a way of closing that deficit
without us taking a hard economic hit.
Senator Carper. All right. Thanks.
Mr. Chairman, those are good responses, and I want to thank
you for being generous. Let me just say in closing, the comment
you made about the size of the Vietnamese GDP being smaller
than the Japanese bar tab, clearly if we can get the Japanese
to drink more, that will help the people in Vietnam.
[Laughter.]
Senator Carper. The other thing I would say is that----
Mr. Aldonas. They have their reasons.
Senator Carper. The trade deficit with China is now going
to $100 billion, one of my friends says, we should reprint
those Little Red Books, Mao's Little Red Books, and distribute
them broadly throughout China, and get them back on the right
track.
[Laughter.]
Senator Carper. Thank you.
Chairman Shelby. I think they are repudiating those books.
[Laughter.]
Chairman Shelby. Thank you.
TPCC has focused on Russia as one of the three major tests
for the National Export Strategy. These countries were chosen
on the basis of their potential and TPCC resources already
dedicated to them, it is my understanding. Some of us are
concerned about the people in Russia. I am concerned not
because I question its potential per se, but because of the
pervasive influence there of corruption and organized crime. A
recent report by the Moscow-based Central Economic and
Mathematics Institute of the Russian Academy of Sciences and
the Foundation for Information on Democracy states the
following: ``Corruption is an integral part of economic
activity, with ill-defined boundaries between politics and
private businesses. Market competition is also weakened, since
the winners often prove to be not the most competitive agents,
but rather those who gain advantages through bribery and
special connections.''
I appreciate that the goal of capacity-building activities
is to assist foreign countries to establish a statutory
framework necessary to draw foreign business.
I would like to hear from you, if you could, your best
assessment of the track record, including the Russian
Government's own efforts, which are spotty, at best, perhaps,
to date, in eliminating corruption, so that American companies
can do business there without being unfairly disadvantaged by
virtue of their adherence to U.S. anticorruption laws,
specifically the Foreign Corrupt Practices Act.
I should add that this is particularly important, given
TPCC's emphasis on small- and medium-sized businesses, which
may be more vulnerable to illicit, below-the-screen pressures.
Do you want to start, Mr. Barreto?
Mr. Barreto. Well, as you know, we are very focused on
small businesses based in the United States, but absolutely
with regards to their ability to do business with a country
like Russia, this is a concern. There needs to be more
transparency with how you do business. I will tell you that we
have been approached by our Russian counterparts. They have
visited us at the SBA. They are very interested in some of the
programs we have, and they are trying to emulate some of those
things themselves, in their own country. I know that some of my
colleagues have had much more experience dealing with our
Russian colleagues, and probably have a better understanding of
what some of the current trends are in that area.
Mr. Aldonas. Senator, if I may?
Chairman Shelby. Go ahead.
Mr. Aldonas. A couple things: First, there is no doubt that
we have to keep after the issue of corruption, both on the
demand side with Russia, continuing to work with the Russian
Government, but also on the supply side.
One of the probably strongest efforts we have had in the
Commerce Department's Annual Report on Corruption is the effort
to ensure that those in the OECD who are the source of a lot of
these funds--you will recall that the French and the Germans
used to offer tax deductions for bribes--live up to their
obligations under the OECD Bribery Convention, so that we are
attacking the problem from both sides.
Chairman Shelby. That is the cost of doing business to
them.
Mr. Aldonas. Exactly. The second thing that I think is
important, and one of the reasons that we have focused on
Russia in terms of our development, is that both Russia and
United States companies benefit in the area of corruption from
having United States companies on the ground.
Let me take an example outside of Russia and then come back
to Russia for just a second.
A good example would be U.S. Steel's acquisition of the
steel works in Slovakia. They issued a policy very publicly in
the Maine Business Daily, a full-page ad that said if any of
their suppliers or their employees were caught involved in any
illicit dealings, they would be fired summarily, or the
relationship would be ended. And their contracts reflect that.
The whole supply chain now has to live up to that standard.
Chairman Shelby. Is it working?
Mr. Aldonas. It is, I am happy to say.
Chairman Shelby. In Slovakia?
Mr. Aldonas. In Slovakia. So what you have is the same
thing with International Paper in Russia, with McDonald's in
Russia, with Boeing's engineered design facility in Moscow. The
business values they bring in are helpful.
You really put your finger on something, though. As long as
you have this in the market, Russia will continue to be a
market for big players in the energy area, aerospace, pulp and
paper, commodities, things like that. It is a very tough market
for the small business guys, as long as you have these
continuing problems in the Russian market.
Mr. Watson. Mr. Chairman, just following on that,
significant exports come through the major public procurement
projects, for example, the energy areas in which State assets
and State-owned enterprises play a role in issuing these
contracts. That is where a majority of this corruption can play
a role. One of the important provisions that Russia will soon
have to comply with when it becomes a member of the World Trade
Organization is precisely the public procurement code of the
WTO, which prescribes exactly what these governments have to do
in terms of opening up the process to transparency. It is not
just rhetorical. They are very, very significant provisions
that affect members of the WTO. Working in conjunction with the
OECD, and, frankly, just disciplining our trading partners, is
an important part of the process.
Ms. Bradford. The Agency is supporting a project that will
support Moscow's efforts to put its government procurement
activities online, and this will certainly help address,
specifically, the area of transparency.
Chairman Shelby. Put a little sunshine in there?
Ms. Bradford. Exactly.
Chairman Shelby. Mr. Barreto, you know the problem and the
challenge that small- and medium-sized businesses would face in
that kind of an atmosphere, don't you?
Mr. Barreto. Absolutely. I concur with the remarks, and
that is why it is so essential that these reforms really get
accelerated for small businesses to truly have an opportunity
to do business in that part of the world.
Mr. Merrill. Senator, let me just say that I want to
associate myself with the remarks of Mr. Aldonas with regard to
the trade deficit issue, even though the Senator from Delaware
is not here.
First, I would like to address this, however, one second by
saying that the issue you raise, by saying that this is a 70-
year process with the Russians, in the last decade, more or
less since the Wall came down, my estimation is that maybe they
have done 20 years' progress in 10 years' time. We can now make
some nonsovereign loans in Russia, which you cannot do in
China, or, for practical purposes, cannot do in China.
Since we are not under oath, I am still willing to speak
the truth, and what you have is a number of leading Russian
economic figures who were thugs a decade ago. We work very
closely with our colleagues in other departments, including the
intelligence community, generally to see whether or not they
are still thugs.
Chairman Shelby. Their values will be tested, won't they?
[Laughter.]
Mr. Merrill. Their repayment record currently is quite
good. If they were thugs 10 years ago, well, we kind of say
maybe they have learned something. We are not going back 10
years. It was 2 or 3 years ago that we started to worry about
it. We worry about it a lot. The important thing in dealing
with the Russians is to do everything we can to get an
effective rule of law, hard currency, the normal attributes of
free enterprise, including the ability to enforce a contract.
One could look at it as saying it is two steps forward and
one step back, but based on, let's say, the experience of my
long-term friend, Leonard Louder, who was run right out of
Russia--and that is a pretty good sized company--it is pretty
difficult for small business to take the risk of doing business
there. Some can. They have to have a special----
Chairman Shelby. Maybe that will change and maybe you can
help change that.
Mr. Merrill. We would like to help change it.
Chairman Shelby. Ms. Bradford, I would like to ask you a
question, and then I am going to submit the rest of my
questions for the record, if I could.
As the issue of U.S. exports of genetically-modified
agricultural goods has proven among our most controversial
trade issues, our Trade Representative recently announced his
intention to take the issue before the WTO on account of
European Union prohibitions on imports of such goods from the
United States. How do you see the WTO's case as influencing
TDA's current efforts in China or vice versa, and does TDA have
similar efforts underway in Europe that might help diffuse a
difficult, very difficult trade dispute? Can you comment on
that?
Ms. Bradford. Yes, Senator, I am glad you asked that
question. It is a very difficult area for U.S. exports, if the
exporting countries do not understand or have any appreciation
for the biotech advances that have been made, China being a
particularly good example. And we were able to, over a period
of a year, get them to consider actually coming to the United
States and taking a look at all of the work that has been done,
particularly with regard to safety in the biotech area, and to
begin to consider a change in their position.
We considered this to be quite a breakthrough from them, so
by offering technical assistance to the Chinese to let them
come and take an independent look at what they want to do, we
think that we have accelerated their understanding and
acceptance of that.
Now, with regard to Europe, as a development assistance
agency, we can only work in Eastern Europe, and Eastern Europe
is looking toward the EU, really, for the standards that they
are trying to meet for accession into the EU. So it is a bit of
a problem that is Europe-EU-based, and our ability to work
actually in that is somewhat limited, since we are only able to
do business in Central and Eastern Europe.
Chairman Shelby. It is going to take some time, isn't it?
Ms. Bradford. Well, I think actually to get the Chinese to
turn around in a year or less was quite a success, but we are
more optimistic than we were a year ago. And we will take a
look at the
Europe situation to see what we can do in that area, as well.
Chairman Shelby. Sure. I appreciate all of your
appearances, your participation today, along with Secretary
Evans. I have a number of questions for the record that I
mentioned, and I will submit them to you. We appreciate you
doing what you are doing, and let's get this trade moving.
The hearing is adjourned.
[Whereupon, at 12:00 noon, the hearing was adjourned.]
[Prepared statements, response to written question, and
additional material supplied for the record follow:]
PREPARED STATEMENT OF SENATOR ELIZABETH DOLE
Mr. Chairman, I would like to thank both you and Ranking Member
Sarbanes for agreeing to hold this hearing on the National Export
Strategy. As a firm believer in the benefits of open trade policies,
the need to ensure that U.S. goods and services can compete abroad in
international markets is one of my highest priorities. Unfortunately,
all too often our goods and services are held at a competitive
disadvantage due to both tariff and fundamental nontariff barriers.
Meanwhile goods and services from other nations have no such
restrictions in our domestic markets.
Furthermore, many of our trade agreements contain initiatives
intended to ensure against unfair trading practices by our foreign
competition. This is an issue of great importance to North Carolina
where our manufacturing base has been hemorrhaging due to foreign
competition violating our trade agreements. This issue worries me a
great deal. Let me be clear; I am not advocating any drastic breaks in
our trade relations. I am simply advocating the active use of
initiatives that exist in our current trade laws which were designed to
protect industries from illegal practices.
One example of a clear violation is transshipments in which one
country will avoid their import quotas by shipping their product
through a different country which has not yet made its quota. I have
seen evidence of this with China sending their textiles through
Vietnam, a country which does not remotely have the capacity to
manufacture the amount of textiles they export.
Enforcement of our existing laws to protect our industries against
illegal trade practices is one of my top priorities in the Senate. I
look forward to working with my colleagues and the Administration on
these trade issues. I want to assure you all that my staff and I are
always available to work through these issues.
Thank you.
----------
PREPARED STATEMENT OF DONALD L. EVANS
Secretary, U.S. Department of Commerce
May 21, 2003
Introduction
Chairman Shelby, Senator Sarbanes, Members of the Committee, it is
with great pride that I present our progress report on the
implementation of the National
Export Strategy. Last May, I testified, along with my colleagues on the
Trade Promotion Coordinating Committee (TPCC), on the Bush
Administration's road map for improving the Federal Government's trade
promotion programs. We made a commitment at that time that we would use
the TPCC to ensure that the U.S. business community had world-class
products and services by the end of this Administration. I am here to
report to you that we are on track.
Let me say at the outset that we are under no illusion that the
challenge we are trying to meet is easy. As you are aware, our trading
partners still dedicate considerable resources and high-level attention
to their export promotion programs. The United States continues to have
the lowest staffing and spending as a percentage of GDP on export
promotion among the G -7 countries. In addition, many of the
recommendations we set out in last year's National Export Strategy are
tall orders, and will take more time to accomplish. But as I said last
May, we are focused on results. This year, we have not developed
another National Export Strategy with a new set of recommendations;
rather we are keeping our commitment to both you and our clients to
follow through with what we promised last year. We believe we have made
good progress on the most important recommendations contained in the
National Export Strategy. The TPCC agencies have become better
strategic partners of business early in the procurement process. In
addition, we have sharpened our focus on customer service and
strengthened our education and partnership efforts. We know what
remains to be done, and we intend to accomplish it.
Mr. Chairman, before I provide an update on our National Export
Strategy recommendations, I want to mention some of the contributions
the TPCC is making in other areas. First, the TPCC has become a
resource and an advocate for the U.S. business community in a number of
vital areas. This has meant everything from helping U.S. businesses
understand the procurement process in the Iraq Reconstruction effort to
getting them the timely information they need to make decisions or
making sure their voice is heard within the Administration on key
initiatives.
Second, the active cooperation--indeed, leadership--of my
colleagues here with me today has resulted in a new culture of
coordination and client service among the TPCC agencies which we
believe will make a difference in the quality of our programs across
the board. We have built a number of bridges across the agencies--
whether it be between the Overseas Private Investment Corporation
(OPIC) and the Department of Commerce's Commercial Service or the
Department of Commerce's Advocacy Center and the Export-Import Bank
(Ex-Im Bank)--to provide our clients with faster service and more
products. When it makes sense, we are integrating our programs.
Third, the TPCC is playing a role in the Administration's economic
strategy in crisis regions such as Iraq, and in helping support our
coalition partners. Agencies are thinking of the first steps they will
take to help get the Iraqi economy running once sanctions are lifted,
and we have developed initiatives to stimulate trade and investment in
those coalition countries where there is a need.
For example, a number of TPCC agencies are playing or will soon
play a significant role in Iraq Reconstruction. We have met several
times to discuss our efforts. The Department of the Treasury has taken
the lead in addressing the financial infrastructure in Iraq. The U.S.
Agency for International Development (USAID) is, of course, another key
player, providing reconstruction grants and humanitarian and technical
assistance to the people of Iraq. The TPCC is working within the
Administration to ascertain the major obstacles preventing the finance
agencies from operating in Iraq. Once these obstacles are overcome,
agencies are looking at a variety of steps they could take, including
the following:
<bullet> U.S. Trade and Development Agency (USTDA)--USTDA will use
grant funding for technical assistance and feasibility studies to
support future projects in Iraq, including transportation,
telecommunications, and electric power. USTDA believes this could
provide up to $2.5 million in fiscal year 2003 to support
reconstruction efforts in Iraq.
<bullet> OPIC--OPIC is considering using its existing finance,
insurance, and funds programs to help provide liquidity to the
financial sector and provide insurance to businesses and
contractors.
<bullet> Ex-Im Bank--Ex-Im Bank also envisions using interim measures,
such as looking to the credit of third-country financial
institutions to finance U.S. exports to Iraq, pending the
establishment of a creditworthy banking system, or other means of
finding reasonable assurance of repayment in Iraq.
<bullet> Commerce--Commerce is already providing information to the
United States and coalition companies. The TPCC agencies have
worked together to produce an Iraq business guide that provides
companies with information on the current commercial environment in
Iraq. Agencies and embassies have been flooded with calls from our
allies and U.S. businesses about Administration reconstruction
plans. In order to address these demands for information, the TPCC
hosted a number of interagency meetings that culminated with a
joint briefing by the Departments of Commerce, State, and Defense
and USAID for U.S. trade associations at the Department of
Commerce. A second briefing for coalition partners was held at the
Department of State. On June 5, 2003, International Trade
Administration Under Secretary Grant Aldonas will moderate another
interagency roundtable at the Department of Commerce which will
provide U.S. businesses with an update on procurement opportunities
and a status report on the sanctions situation.
We are also participating in efforts to assist our coalition
partners. For example, Administration representatives have traveled to
a number of the countries to help promote closer commercial ties
between us. I went to Bulgaria, Romania, and Slovakia in March and plan
to travel to Eastern Europe again in the Fall. We are looking into the
continuation, and possible expansion, of Commerce's Central and Eastern
Europe Business Information Centers (CEEBIC), currently funded by State
and USAID, to promote investment and trade opportunities in each of the
coalition partner countries in that region. The agencies are also
planning a trade and investment conference in the Fall.
Implementing the National Export Strategy
Of the 60 recommendations presented in the May 2002 National Export
Strategy, 40 percent have been implemented. Those recommendations that
are not completed are well underway.
Strategic Initiatives
Last year, U.S. exporters told us they needed more aggressive U.S.
Government support for major projects early in the bidding process to
meet foreign governments' forceful use of financing. We looked at how
other governments advocated on behalf of their companies, and developed
a response: A proactive interagency approach in key markets and
projects and more effective use of our development assistance and trade
financing, when appropriate.
Over the past year, we have achieved measurable success:
Early Project Development
This is an ongoing exercise, as many of the projects we want to
target will not come to fruition for several years. However, almost as
important as success on a specific project is the more forward leaning
culture throughout the agencies that is resulting from this initiative.
Like other governments, we have recognized the importance of
demonstrating the likelihood of financing up front in the procurement
process. The Ex-Im Bank has developed a letter of interest which our
Commercial Service officers can use when they solicit projects on behalf of U.S. exporters. The Ex-Im Bank and the Advocacy Center have established a
Memorandum of Understanding that increases the likelihood and speed of
financing for projects the Commerce Department advocates for.
Mexico, China, and Russia were our initial pilot markets; however,
we have not been constrained by those targets. We are applying this
proactive approach dynamically to opportunities as they arise. Our
Advocacy Center director is working with USTDA and OPIC representatives
to explore early project development possibilities in Azerbaijan. In
China, Ex-Im Bank is pursuing a framework agreement with the Ministry
of Finance, and we have an interagency mission planned, which is
currently on hold. In Mexico, agencies brought together hundreds of
municipal water and wastewater officials and U.S. companies under the
umbrella of a conference organized by Ex-Im Bank and the Mexican
development bank. Commerce and TDA followed up that conference by
bringing officials of some of the most promising projects to attend a
water conference in San Diego in the Spring. In Russia, the trade
financing agencies and Commerce will travel together on missions to
scout out early projects. We also are taking steps to build good-faith
relationships with Brazil as they come out of a difficult economic
stretch.
Mixed-Credit Initiative
A pilot initiative combining USAID grants with Ex-Im Bank financing
for developmental projects in middle-income countries is one of the
best examples of how agencies can do more when they combine their
efforts. USAID, Ex-Im Bank, Commerce, and the Treasury worked during
the Summer last year to design and develop procedures to implement a
pilot program. After the 2003 budget was passed, USAID sent out a cable
and we are now getting inquiries from a number of overseas posts. We
are currently discussing a pilot project in Peru with the USAID
mission. The experience we gain from this pilot holds great promise for
better coordination between the economic development and trade
promotion agendas on a variety of fronts.
Front-End Engineering and Design (FEED) Studies
This is technical assistance that sets the specifications for
particular projects, and therefore often creates a competitive
advantage for the country sponsoring it to obtain the follow-on
project. Immediately after the publication of our report last May,
which included a USTDA pilot FEED study project, the Japanese agreed to
a U.S. proposal in the Organization for Economic Cooperation and
Development not to link these early project studies with larger Untied
Aid projects. This eliminates an important advantage Japanese firms had
over U.S. companies in winning major projects. This recommendation
stemmed from a complaint from U.S. exporters that the Japanese had used
these studies to lock in the overall project for their firms.
Afghanistan
Since OPIC and USTDA undertook the first joint investment mission
to Afghanistan last May, USTDA has followed up with orientation visits
and feasibility studies for a number of Afghan infrastructure
ministries. The Commerce Department has hosted Afghan-American business
roundtables and matchmaking events. USTDA and the Department of
Commerce will jointly sponsor a conference in June on
Afghanistan Reconstruction.
Customer Service
There is a new culture among the agencies of putting the client
first. When the heads of the other agencies and I first came together,
we made a commitment to our customers and to the American taxpayer.
Rather than create a new crop of programs, we decided to ask the
business community exactly what they wanted from us. Rather than
duplicate each others' marketing and outreach efforts, we decided to
leverage each others' strengths and human capital. With the President's
Management Agenda as a backdrop, these commitments have grown into a
new culture of customer service.
Ex-Im Bank Restructuring
The Ex-Im Bank went through one of the largest reorganizations in
its history this past Fall. It has become more market-focused and
customer driven, while enhancing its management of risk. The changes
are designed to streamline case processing, and standardize customer
service and credit evaluation across product lines.
Working Capital
The Small Business Administration (SBA) and Ex-Im Bank have a team
developing a parallel financing arrangement to provide the small
business exporter with a seamless approach to access working capital
for export sales. Commerce, Ex-Im, and SBA are also exploring taking
this coordination to a new level by further integrating the working
capital programs of Ex-Im Bank and SBA and the marketing efforts of all
three agencies. The goal is to have the customer see only one trade
finance tool, but provide the agencies with the flexibility to bring to
bear the best of SBA and Ex-Im Bank programs. All three agencies would
be focused directly on making sure smaller companies are aware of and
can easily benefit from the best financing option available, whether it
is provided by SBA, Ex-Im Bank, or, whenever possible, a private sector
financial institution.
Streamlining Our Programs and Processes
We have redesigned Export.gov, the Federal Government's primary
trade website, to make it more useful to small businesses. This
redesign was based on feedback from U.S. businesses. Key aspects of the
redesign are:
<bullet> Export Basics--We have added an ``Export Basics'' section
designed for new exporters containing ``The Basic Guide to
Exporting'' and a step-by-step guide through the exporting process.
<bullet> NAFTA Certificate of Origin Tool--The new NAFTA Certificate of
Origin Tool guides exporters of products to Mexico or to Canada
through the NAFTA form with easy step-by-step instructions. This
greatly reduces the time it takes exporters to fill out the form
and will allow more of them to take advantage of the tariff
benefits.
<bullet> BuyUSA--The website provides seamless integration with the
BuyUSA online partner and trade lead matching service, allowing
visitors to access the services of multiple agencies, as well as
search for partners and trade leads.
<bullet> Catalogue of Products and Services--The redesigned website
categorizes lists of products and services for exporters, offered
by the Department of Commerce, the Foreign Agricultural Service,
SBA, and Ex-Im Bank.
<bullet> Export.gov Community Registration--Community Registration
allows site visitors to provide basic information into a central
repository that can be accessed by ITA, FAS, Ex-Im Bank, and SBA.
Registrants are then able to receive targeted export assistance,
market and event information, and automatically fill in online
forms within Export.gov.
Training
We held the first interagency trade officer training session last
January. Its focus was real-world applications of agency programs and
instilling an ``account manager'' approach--proactively addressing the
client's long-term needs, rather than answering one question or helping
him with one export action. We had 31 participants from nine of the
TPCC agencies. It was extremely successful, according to our
participant feedback.
Marketing
We have a marketing working group that has developed a number of
joint publications, organized an interagency pavilion at eight domestic
trade shows, and conducted a dozen interagency trade seminars and
symposiums.
State Partners
We are working to leverage our State partners. As State budgets
have tightened, we have reached out to our State partners to provide
opportunities to leverage Federal trade promotion resources. For
example:
<bullet> Florida MOU--The U.S. Export Assistance Center agencies
(Department of Commerce, Ex-Im Bank, and SBA) signed a Memorandum
of Understanding that expanded an existing trade alliance to
include some 15 trade organizations throughout Florida. The
partnership includes a network of Small Business Development
Centers, Chambers of Commerce, and Economic Development Centers. We
are collaborating on training, business counseling, and trade
finance facilitation.
<bullet> Partnership with New Jersey--The Commercial Service and the
State of New Jersey signed a partnership agreement. The agreement
co-locates the CS and the New Jersey Commerce and Economic Growth
Commission's Office of International Trade and Protocol. In
addition to combining efforts on a number of the one-stop-shopping
services, providing access to the Commercial Service's worldwide
database and collaborating on a successful trade mission to the
Philippines, we have worked together on substantial outreach to
State legislators to educate them about the resources available.
<bullet> Trade Mission to Central America--The State of Alabama is
taking a trade mission to Central America (El Salvador and
Guatemala) on May 17-23, 2003. The Birmingham Export Assistance
Center is cooperating in the promotion and the recruitment for the
event.
Next Steps
While we have made a good start, the coming year will be critical,
as we are in the midst of following through on the most difficult
recommendations. The TPCC will continue to focus on achieving
measurable results to make sure that the way we implement these
recommendations have the kind of impact that exporters expect. We will
focus on:
<bullet> Iraq--The TPCC will work to address existing obstacles to
trade and finance agency operations and to coordinate efforts to
stimulate private investment and trade.
<bullet> Early Project Development--We will develop a set of priority
projects based on interagency business development missions.
<bullet> Finance--We will complete the co-guarantee between the Ex-Im
Bank and SBA, integrate the programs to the extent possible, and
leverage Commercial Service resources toward joint marketing.
<bullet> Training--The TPCC will institutionalize and possibly certify
interagency trade officer training. June and September sessions
will fine tune content. We want to expand participants to include
Congressional offices and States.
<bullet> Budget--We intend to leverage existing agency budgets in
fiscal year 2005 on priorities such as training and technology.
In sum, we will keep our eye on the ball, and make sure we can show
you next year, just as we have today, that we are close to providing
world class programs and services for our exporters. My colleagues and
I promise you that with your support, we will follow through with our
original agenda, and add to it as the needs of the business community,
the TPCC agencies, and the Administration evolve.
I thank you very much for inviting me here today. I would be
pleased to answer any questions you may have.
----------
PREPARED STATEMENT OF PHILIP MERRILL
President and Chairman
The Export-Import Bank of the United States
May 21, 2003
Introduction
Chairman Shelby, Ranking Member Sarbanes, and Members of the
Committee, thank you for the opportunity this morning to join with my
colleagues from the Trade Promotion Coordinating Committee to report on
the status of the National Export Strategy.
In May 2002, the Bush Administration issued its first National
Export Strategy Report. This report served as a road map for the TPCC
efforts over the past year. As stated by President Bush, this report
``sets the course for achieving a world-class system of Federal
programs that are coordinated, leveraged, and focused on the tools
small and large U.S. companies need most to take advantage of emerging
trade opportunities.'' The 2003 National Export Strategy Report that
you recently received and my testimony today are primarily devoted to
reporting on our progress in implementing the recommendations made in
the 2002 National Export Strategy Report.
As Chairman of the Export-Import Bank and Vice Chairman of the
TPCC, I have a keen interest in working with the members of the TPCC to
support our Nation's export sector. Last Fall, Ex-Im Bank went through
one of the largest reorganizations in its history. The objective was to
make Ex-Im Bank even more responsive to the needs of U.S. exporters who
operate in a global environment that demands the rapid and efficient
processing of financial transactions. The reorganization achieves this
objective by improving customer service and streamlining case
processing, while at the same time enhancing risk management.
The reorganization has enhanced Ex-Im Bank's ability to fulfill its
mission. That mission is to assist in the financing of the export of
U.S. goods and services thereby helping to create and maintain U.S.
jobs. Ex-Im Bank pursues its mission by providing financing to counter
the effect of export credit financing from other governments or by
taking reasonable credit risks that the private sector is unwilling or
unable to accept. The reorganization also supports the recommendations
made in the President's National Export Strategy for a streamlined and
strategic approach for trade and export promotion.
In nearly 70 years of operation, Ex-Im Bank has supported more than
$400 billion in U.S. exports. In fiscal year 2002, Ex-Im Bank financed
2,516 transactions in
support of $12.9 billion in U.S. exports. We are continually striving
to better serve our customers--U.S. exporters and those businesses and
workers who are employed producing those exports.
Implementation of the National Export Strategy
The TPCC was established by the Export Enhancement Act of 1992 to
develop a coordinated and effective U.S. Government trade strategy to
meet the needs of U.S. exporters. The Bush Administration has
recognized the important role that the TPCC can play in supporting U.S.
exports and U.S. jobs. Under the leadership of Secretary Evans, the
TPCC has been reinvigorated as a mechanism for improved interagency
coordination and cooperation, and I am committed to furthering this
effort. In short, the TPCC strives to make it easier for U.S.
businesses to understand and utilize the U.S. Government's export
promotion programs. The recommendations put forward in last year's TPCC
report were developed after in-depth discussions with our customers.
The recommendations contained in this report are practical solutions to
problems that encumber U.S. export potential.
We have made progress in implementing many of the report's key
recommendations. I will address three areas: (i) Joint Marketing,
Training, and Small Business Initiatives; (ii) Early Project
Development; and (iii) Tied and Untied Aid.
Joint Marketing, Training, and Small Business Initiatives
Ex-Im Bank has led an interagency marketing task force consisting
of Ex-Im Bank, SBA, DOC, and OPIC. The task force was formed to develop
and execute joint marketing strategies to reach U.S. exporters,
particularly those small and new exporters that are critical to U.S.
job creation.
This group planned, funded, and is now executing three primary
tactics: Direct mail, participation in major trade shows, and exporter
and lender seminars. We also collaborate with our TPCC partner agencies
through the United States Export Assistance Centers throughout the
United States, and are working with them to link our new website to the
U.S. Government trade portal ``Export.gov.''
Our marketing objective is straightforward: To establish a direct
relationship between the U.S. exporter and U.S. Government trade
agencies in a coordinated and cost-effective manner. Our collective
efforts are making a difference. By sharing costs, we provide better
value to the taxpayer, and by providing a complete menu of our services
the exporter is better served. In fact, we estimate approximately
$280,000 in savings from these joint marketing efforts since the summer
of 2001. Ex-Im Bank is also continuously looking at ways, working with
our TPCC partners, to leverage our resources by utilizing the private
sector to reach and provide services to U.S. exporters.
We have also implemented a cross-training program for Ex-Im Bank,
DOC, SBA, OPIC, and TDA staff. This training is designed to enhance our
ability to provide full-service trade finance advisory services to the
export community.
Finally, Ex-Im Bank is also working on an initiative with the SBA
to collaborate by providing parallel financing and joint marketing for
working capital transactions. This effort is designed to provide the
small business exporter with a seamless
approach to access working capital financing they need to increase
export sales.
Early Project Development
The aim of the Early Project Development Initiative is to
coordinate more effectively the efforts of the U.S. Government trade
agencies to secure contracts for U.S. exporters. To aid early promotion
efforts, Ex-Im Bank has created an ``early project letter of interest''
intended to signal preliminary interest in a project before contracts
are signed. In addition, Ex-Im Bank staff actively participates on the
early project development country teams that the TPCC established to
coordinate travel and promotion activities. Currently the interagency
efforts are focused on three markets: Mexico, China, and Russia. We
plan to broaden our focus to other target markets at the appropriate
time.
<bullet> Mexico: This is Ex-Im Bank's largest market. We are actively
working to develop new products for this market and to coordinate
promotional activities with other U.S. Government agencies and the
Mexican government. Last September, the agencies brought together
municipal officials from renewable energy, solid waste management
and water treatment agencies, and U.S. companies in a conference
organized by Ex-Im Bank and the Mexican development bank, Banobras.
This conference built on the Partnership for Prosperity Initiative
created by President Bush and Mexican President Fox. Earlier this
month, I participated with my colleagues from OPIC, SBA, and TDA in
the Arizona Mexico Trade and Investment seminar in Tucson. We are
working with our partner agencies to follow up on leads from these
and other conferences.
<bullet> China: Numerous opportunities exist for U.S. exporters,
including projects associated with the Olympics in 2008 and the
World's Fair in 2010, and in key sectors such as: Environmental
protection, energy efficiency, wastewater treatment, medical
equipment, and electric power. We are working closely with the
Commercial Service and TDA to coordinate efforts to identify
opportunities for U.S. exporters. In support of these efforts, Ex-
Im Bank is in the final stages of negotiations with China's
Ministry of Finance on a new Framework Agreement that will govern
the provision of future sovereign-based transactions.
<bullet> Russia: The Russia early project development team is pursing a
number of projects in the telecommunications and transportation
sectors. These projects are directly benefiting from enhanced
interagency cooperation and advocacy resulting from the early
project development initiative. Ex-Im Bank is working with the
Commercial Service to plan a working-level trip to Moscow and St.
Petersburg in June to follow up on these projects and to meet with
Russian Government officials to identify additional opportunities
for U.S. exporters.
Tied and Untied Aid
In 2002, the TPCC launched several initiatives to counter foreign
aid practices that place U.S. exporters at a competitive disadvantage.
I would like to provide a brief update on our progress.
<bullet> Mixed-Credit Initiative: Under the auspices of the TPCC, Ex-Im
Bank, and USAID launched a mixed-credit initiative. Transactions
supported by this initiative will combine a USAID grant with
standard Ex-Im Bank financing to support developmentally sound,
commercially nonviable capital projects in middle-income developing
countries. The aim of the program is to leverage the resources of
the two agencies and expand the scope and magnitude of U.S.
Government-supported capital projects in target countries. Such a
partnership would allow the agencies to support U.S. Government
development objectives, while expanding business opportunities for
U.S. exporters.
<bullet> Agreement on Front End Engineering and Design: As a result of
an initiative in the National Export Strategy, the U.S. Government
succeeded in securing Japan's agreement to multilateral rules at
the OECD that prevent governments from using Tied Aid financing for
early project studies for projects subsequently financed with
Untied Aid. Ex-Im Bank will help monitor the implementation of this
agreement to ensure that foreign markets are effectively opened up
to U.S. exports of engineering and design services and capital
goods.
<bullet> Tied Aid War Chest: Ex-Im Bank, in cooperation with the
Treasury Department, continues to closely monitor the use of Tied
Aid by foreign governments. In 2002, the use of Tied Aid continued
to decline, dropping to $2.5 billion worldwide--a record low. When
compared to Tied Aid use in 2001, this represents nearly a 40
percent decrease in the use of Tied Aid worldwide. Ex-Im Bank and
Treasury have also agreed to new processes and standards governing
the use of the Tied Aid Credit Fund that will insure more rapid
case processing and improve U.S. exporter competitiveness.
Ex-Im Bank's Potential Role in Iraq Reconstruction
I also want to share with you our current plan of action with
respect to supporting U.S. exports to Iraq. Ex-Im Bank has established
an internal task force that is working to address the legal and credit
concerns that currently impede our ability to offer trade finance
programs in Iraq. We are coordinating closely with the other TPCC
member agencies--as well as the U.S. exporting community--in this
effort.
As you know, we are subject to a number of important programmatic
constraints, including a need to find a ``reasonable assurance of
repayment'' for every credit. However, we will bring energy and
creativity to the task of helping U.S. companies provide the goods and
services that are necessary for the reconstruction of Iraq. For
example, we are actively considering mechanisms that would allow Ex-Im
Bank to support United States exports to Iraq sooner rather than later,
including taking the credit risk of companies and of banks in third
countries--such as Turkey, Jordan, and Kuwait--that may be involved in
obtaining U.S. goods and services for reconstruction efforts.
Conclusion
In conclusion, I have come before you today to provide an update on
the progress that the TPCC and Ex-Im Bank have made in implementing the
recommendations contained in the National Export Strategy. I am
encouraged by the strides we have made over the past year through the
TPCC, which has served as the Bush Administration's primary vehicle to
coordinate, streamline, and improve Federal export
assistance programs. Continued implementation of the recommendations of
the
National Export Strategy through the coordinated efforts of the TPCC
will help to insure that U.S. exporters have the tools that they need
to remain competitive in the dynamic global marketplace. I would like
to thank this Committee for its support of the TPCC, Secretary Evans
for his leadership, and my TPCC colleagues here today for their
commitment to this important effort. I appreciate the opportunity to
appear before you and I would be happy to respond to any questions you
may have at this time.
----------
PREPARED STATEMENT OF PETER S. WATSON
President and Chief Executive Officer
Overseas Private Investment Corporation
May 21, 2003
Chairman Shelby, Senator Paul Sarbanes, and distinguished Members
of the Committee, it is an honor to appear before you today to discuss
our progress in implementing the recommendations of the President's
National Export Strategy. As President Bush himself said last year,
this report ``sets the course for achieving a world class system of
Federal programs that are coordinated, leveraged, and focused on the
tools small and large companies need most to take advantage of emerging
trade opportunities.'' I believe we have been faithful to the
President's promise.
At the outset, please allow me to express OPIC's sincere
appreciation for the leadership of Secretary of Commerce Don Evans,
whose determined efforts and strategic vision have been key to
marshaling the collective resources of our agencies to implement the
Trade Promotion Coordinating Committee's (TPCC) worthy mandate.
Mr. Chairman, when I joined OPIC nearly 2 years ago, we set out to
implement guidance from the President that would enable OPIC to do a
better job of bringing the benefits of economic development to the
neediest countries, that would foster
increased cooperation with the private market to enhance investment
resources, and that would focus on the needs of smaller U.S. businesses
to pursue opportunities in the developing world.
Over these past 2 years, we have met this challenge. We have
reformed for success, supporting critical developmental investments
into chronically underserved regions. For instance, since October 2001,
OPIC has supported nearly $750 million in new projects in sub-Saharan Africa. We have created a new relationship with the private market whereby OPIC complements rather than competes with private financing and insurance, and
in so doing, leverages resources that allow OPIC to cooperatively lead the
private market into the least developed countries and underserved
sectors.
We have also made a real commitment to small- and medium-sized
businesses. In 2002, 67 percent of approved OPIC projects were for
small- and medium-sized enterprises. Last year, we created the OPIC
Small Business Center, specifically to meet the needs of companies with
revenues of less than $35 million. We have also streamlined our
approval process to provide small business users with a 60-day
turnaround. As a result, OPIC is making it easier for small business to
access OPIC programs and we are approving more small business projects.
To measure the developmental impact of these projects, OPIC has
developed specific criteria for evaluating the development contribution
of each of its projects. This new tool allows us to judge empirically
the value of our commitments, as we make OPIC more relevant to its
original development mission.
In sum, we have seen promises made and promises kept.
Similarly, our testimony here today confirms that during the past
year, the TPCC has also made and kept promises. OPIC has been
privileged to play a role in this process. Allow me to highlight some
of these results.
Afghanistan
Over the past year, the TPCC has helped coordinate a comprehensive
commercial strategy for rebuilding and revitalizing Afghanistan by
harnessing the U.S. private sector. For its part, OPIC is pleased to
have conducted the first joint investment mission to Afghanistan with
our colleagues from the Trade and Development Agency (TDA) in May 2002.
We initially pledged a $50 million line of credit for Afghanistan,
and I am pleased to report that the agency is fulfilling this pledge.
With $35 million in OPIC financing and insurance, a consortium of U.S.
sponsors will soon break ground on a five star international hotel in
Kabul, managed by Hyatt International. The project will represent the
largest single United States private investment in Afghanistan since
the fall of the Taliban; indeed, the largest United States investment
in a generation if not more. With additional projects in the pipeline,
I was confident in raising our line of credit from $50 million to $100
million during President Karzai's recent visit to the United States.
Pakistan
Additionally, OPIC has been active and successful in promoting
private investment in Pakistan. As you will remember from last year,
OPIC, the Export-Import Bank (Ex-Im) and TDA formed the first
investment development mission to Pakistan in February 2002, with OPIC
pledging a $300 million line of credit. Since then, OPIC has supported
nearly $350 million in projects, including significant investments in
financial services, power, and information technology.
Interagency Coordination
These types of initiatives find their genesis in better interagency
coordination and OPIC has been working hard with its TPCC colleagues
this past year to find innovative ways to leverage our resources and
expertise.
In September 2002, I was privileged to conclude a Small Business
Initiative with the Small Business Administration (SBA) Administrator
Hector Barreto, which will allow for greater cross-training and
information sharing for our employees. I am also pleased that we will
soon have an SBA detailee as a full-time staff member in OPIC's Small
Business Center.
Just last week, I was pleased to join with Maria Cino of the U.S.
Department of Commerce Commercial Service to sign a Memorandum of
Understanding (MOU) that commits our two organizations to greater
cross-training and business lead
development.
For the future, OPIC will be working to conclude an MOU with the
Agency for International Development (USAID), which will provide
greater coordination between our respective guaranty programs and
leverage USAID's global presence with OPIC's 31 years of experience in
promoting private sector development. All of these cooperative efforts
make greater use of existing resources for the benefit of U.S. business
and the American taxpayer.
Conferences
Getting the word out to the users of our services is another
important part of our enhanced coordination. To that end, I am pleased
to mention several outreach efforts. In early May, leaders from Ex-Im, SBA, TDA, and OPIC met in Arizona for a Trade and Investment Forum, targeting smaller businesses.
Last October, OPIC was joined by Ex-Im and TDA for a regional trade
and investment conference in Peru that attracted more than 200
companies. In November, 50 companies participated in a U.S. Serbia
Business Conference in conjunction with the Department of Commerce.
With our TPCC partners, we are planning joint business development
missions throughout Russia later this year.
The Future
Looking to the future, OPIC is strongly committed to building on
the cooperation and results of the past year. As the Secretary has
said, Iraq will clearly be a priority in the coming year. Once we have
cleared sanctions and technical operating issues, OPIC is prepared to
use its finance, political risk insurance, and investment funds
programs to support private sector investment, including liquidity for
the financial sector and political risk insurance for businesses and
contractors. We are uniquely suited as a risk mitigator to support the
private sector in this endeavor.
Conclusion
This year, Congress will have the opportunity to review OPIC and
its refocused agenda as it considers reauthorization of OPIC programs.
The Administration has submitted a legislative request to Congress to
reauthorize OPIC for 4 years and to update its statute by modernizing
and improving OPIC to expand development and operate in today's
changing global economy. Although not under the jurisdiction of this
Committee, we look forward to working with many of you here in securing
approval of this legislation before OPIC's current authority expires
later this year.
In closing, I would like to thank the Committee for its support of
the TPCC. OPIC will stay true to its promise to promote private
investment in underserved countries and regions, while complementing
the private sector to maximize our developmental impact. With a
refocused mission and a track record of results, OPIC is a ``partner of
the willing'' with our colleagues here today to provide the most
effective investment promotion services for U.S. businesses and the
American taxpayers.
Thank you, and I would be pleased to answer your questions.
----------
PREPARED STATEMENT OF HECTOR V. BARRETO, JR.
Administrator, U.S. Small Business Administration
May 21, 2003
Mr. Chairman, Ranking Member, and distinguished Members of the
Committee, thank you for inviting me to testify on the Trade Promotion
Coordinating Committee's (TPCC) National Export Strategy and the role
that the U.S. Small Business Administration (SBA) plays in the Federal
Government's export promotion strategy.
I would first like to recognize the outstanding leadership of
Secretary Evans. The SBA has been working closely with the Department
of Commerce, Export-Import Bank of the United States (Ex-Im Bank), the
Overseas Private Investment Corporation (OPIC), and other TPCC agencies
in developing recommendations for the National Export Strategy . . .
and we feel that our work, together, will help ensure that American
small businesses will be competitive in a global marketplace.
Small businesses create two-thirds of new U.S. jobs, are
responsible for much of our economy's innovation, and generate over
half of our private gross domestic product. But while approximately
two-thirds of U.S. exporters have fewer than 20 employees, fewer than 1
percent of our small businesses are exporting their products.
That percentage is too small, especially when you consider the fact
that desire to engage in trade is strong. A survey done by the
Department of Commerce to more than 2,000 nonexporting firms last year
indicated that 30 percent of them would be interested in exporting if
someone pointed the way. In order to meet the needs of small- and
medium-sized firms and create a ``one-stop-shop'' approach, over the
past year we have enhanced our working relationships with our partners
in such a way that will guide and assist small businesses to have an
even greater opportunity to trade abroad.
Before we began to strengthen our relationship with other TPCC
agencies, SBA reviewed the 2002 National Export Strategy
recommendations and looked at the areas in which change could be made
quickly, hopefully having instant results for our small business export
community.
I am pleased to announce that SBA was able to increase the limit of
our Export Express Business development loan guarantee program from
$150,000 to $250,000 . . . an enhancement which quickly created a
greater amount of capital for small business to finance their export
development costs such as participation in foreign trade shows or
translation of product catalogs, as well as the financing actual export
orders. Over the past year, SBA and Ex-Im have been very active since
we entered into a ``Small Business Initiative'' Memorandum of
Understanding. To leverage marketing resources and raise awareness
among lenders and exporters, we have done a number of things.
First, we held joint export symposia throughout the United States,
focusing on showing a streamlined approach to exporters. We have also
been working on a joint marketing initiative over the past year.
Although these are great accomplishments, we are still not done yet. We
have established a task force to look at further integrating SBA/Ex-Im
Bank working capital programs. Coordination with other Federal agencies
is one of the best ways to achieve an increase in small business trade
participation.
Another example of interagency coordination is our work with the
Overseas Private Investment Corporation. Just recently, SBA
participated in a Trade Investment Forum in Arizona that reached out to
our small business exporters and introduced them to all the products
and services that are available. We see this as just the
beginning to this very important partnership and only see it getting
stronger. For
example, SBA intends to detail one of our employees to OPIC to work
with their new small business center.
The ability to work very closely with the Department of Commerce in
reaching out to the small business community has been very rewarding
and has shown results. I have had the opportunity to participate with
Secretary Evans on several trade missions abroad which focused on
opening new market opportunities for small business.
One example of a success story is of a business owner from Chicago,
Illinois, who received a significant order for his products as the
result of a trade mission that took place in Mexico last year. SBA
helped the business owner attend that mission.
Reaching out domestically to the export community has also been a
high priority between the SBA and Department of Commerce. For instance,
we have successfully participated in major domestic trade shows, trade
finance seminars, and direct mail campaigns.
SBA looks forward to continuing its work with other TPCC agencies
to make sure the coordination of trade promotion and financing programs
meet the needs of our small business exporter's needs. We are fully
committed to supporting the President's overall trade agenda abroad as
it sets up opportunities for small business.
An example of our commitment is the fact that we currently have
representatives from the agency participating within the Central
America Free Trade Agreement and the Southern African Customs Union
trade capacity building group to make sure small business concerns are
addressed and implemented with the trade negotiations. Another sign of
our commitment to trade has been the recent assignment of one of my
senior staff to work closely with the U.S. Trade Representative office
to represent small business on a daily basis and assure that as U.S.
Trade increases globally that so due the opportunities to small
business that wants to trade abroad.
There has never been a better time to make sure U.S. small
businesses continue to be the most competitive companies in the world.
I look forward to SBA's ongoing contribution to the TPCC and our
commitment to evaluate and better coordinate our programs. I would be
happy to answer any questions you may have. Thank you.
----------
PREPARED STATEMENT OF BARBARA R. BRADFORD
Deputy Director, U.S. Trade and Development Agency
May 21, 2003
Thank you, Chairman Shelby, Senator Sarbanes, and Members of the
Committee. It is a pleasure to appear before you to highlight the role
that the U.S. Trade and Development Agency (USTDA) is playing in
advancing the U.S. Government's trade agenda as a member of the Trade
Promotion Coordinating Committee (TPCC). I want to begin by thanking
the Committee for the strong support that it has given to USTDA in the
past as we work to promote commercially viable development around the
world.
USTDA works closely with Secretary Evans and other members of the
TPCC to enhance our mutual effectiveness in promoting U.S. exports. In
particular, USTDA collaborates with our colleagues on the TPCC to bring
their particular expertise and resources to a wide range of development
objectives. Among the agencies that USTDA coordinates with are the U.S.
Departments of State, Treasury, Commerce, Transportation, Energy,
Agriculture, and Homeland Security; the Office of the U.S. Trade
Representative (USTR); the Export-Import Bank of the United States (Ex-
Im Bank); and the Overseas Private Investment Corporation (OPIC). USTDA
works in conjunction with other TPCC members, to leverage our resources
and focus our joint efforts on projects and activities that will garner
U.S. export success.
In addition to our partnerships with other U.S. Government
agencies, USTDA works closely with overseas foreign project sponsors to
help them fulfill important development objectives. We also receive
tremendous support from the U.S. private sector and the many individual
firms around the country that we help to position to export their
goods, services, and expertise to overseas markets.
During the past year, USTDA has taken a number of steps to
implement the
action plan laid out in last year's National Export Strategy. In
particular, USTDA is active in many of the post-crisis regions of the
world that are discussed in this year's report, such as Afghanistan. I
have an attachment to my testimony, Mr. Chairman, which I would like to
submit for the record that highlights a number of current and recent
USTDA activities. As this paper shows, USTDA is targeting and tailoring
its activities to support important U.S. trade and foreign policy
initiatives.
USTDA is well-suited to respond rapidly to changing global
environments as we provide effective service to our clients in the U.S.
private sector, in Government, and overseas. Given the flexible nature
of the USTDA program, the agency is often one of the first U.S.
Government agencies to deliver trade-related assistance in post-
crisis regions and countries. In early 2002, for example, USTDA
launched an aggressive infrastructure and capacity-building program in
Afghanistan. Already, we have committed roughly $2.5 million for
project planning activities in the Afghan civil aviation,
telecommunications, oil and gas, and electric power sectors. We are
considering approximately $3 million in additional activities.
In delivering this assistance, USTDA works closely with other U.S.
Government agencies, taking advantage of their expertise. These include
the Federal Aviation Administration, the U.S. Geological Survey, the
U.S. Agency for International Development (USAID), the Federal
Communications Commission, and the U.S. Departments of Energy,
Commerce, and State. Our country program in Afghanistan is a perfect
example of the agency's rapid response to new priorities and to our use
of public-private partnerships to bring U.S. expertise and resources to
bear in helping a country achieve its development goals. Next month,
USTDA will cosponsor a major conference with the U.S. Department of
Commerce. This conference will highlight reconstruction opportunities
in Afghanistan that were identified during a
series of USTDA-funded definitional missions and orientation visits as
having strong potential for U.S. private sector involvement.
We also have moved quickly to build on our existing programs in
other Frontline States. Overall, USTDA funded 22 activities in
Uzbekistan, Kyrgyzstan, and Kazakhstan in fiscal year 2002. These
activities encompass projects in rail, information technology, water,
power, and petrochemicals, as well as small- and medium-sized
enterprise development. In January 2003, USTDA awarded its first grant
since reopening in Pakistan in support of a proposed desalination plant
in Karachi. Other USTDA activities in Pakistan involve the development
of a secondary mortgage market, and a study funded jointly by USTDA and
the International Finance Corporation addressing the identification and
elimination of trade and investment barriers.
USTDA anticipates implementing a program in Iraq modeled on the
approach we are taking in Afghanistan. There is an important role for
USTDA to play in Iraq to put the private sector to work in many sectors
essential to development efforts. These areas include transportation,
telecommunications, electric power, and downstream petroleum
processing, such as refining, petrochemicals, and fertilizer
production. These key infrastructure sectors represent areas in which
the need will be great for new investment and in which the population
will receive direct and tangible benefits. Equally important, the
United States private sector possesses experience and expertise in
these fields that can help to advance modernization and healthy
economic development in Iraq.
Another component of the USTDA portfolio is our support for U.S.
trade policy initiatives. To this end, the USTDA is supplying targeted
assistance to facilitate a number of U.S. trade policy objectives that
are discussed in the National Export Strategy. In Africa, for example,
the agency has supported activities pursuant to the African Growth and
Opportunity Act (AGOA) framework, including the establishment last year
of a USTDA Africa Regional Trade and Development Office in
Johannesburg, South Africa. Other related activities that USTDA has
funded include AGOA training, provided in conjunction with USTR, in
Cameroon, Ghana, and Uganda. In addition, the agency sponsored separate
orientation visits to the United States for African manufacturers to
meet potential U.S. suppliers to support qualified industries under
AGOA. In March, the agency supported the negotiation of a U.S.-Southern
African Customs Union (SACU) Free Trade Agreement (FTA) by sponsoring a
trade-related study tour for trade negotiators from SACU member
countries.
USTDA also is working closely with the USTR and other agencies by
providing support to a number of on-going trade negotiations. This
support includes technical assistance and capacity-building activities
related to the Free Trade Area of the Americas, the U.S.-SACU FTA, and
the U.S.-Morocco FTA, among others. We are currently exploring possible
areas for support related to the U.S.-Chile FTA. Most recently, USTDA
announced trade capacity-building activities in the information
technology sector in Costa Rica, El Salvador, Guatemala, Honduras, and
Nicaragua as part of the U.S.-Central American Free Trade Agreement
(CAFTA) negotiations. These are just a few examples of the agency's
trade capacity-building activities.
This year's National Export Strategy discusses a number of sectors
that are priorities for the TPCC. Many of these are high priorities for
USTDA, as well. Among them is transportation security. Overall,
transportation was the largest sector in the USTDA portfolio in fiscal
year 2002. At last year's meeting of the Asia-Pacific Economic
Cooperation (APEC) forum, the Secure Trade in the APEC Region (STAR)
Initiative was announced. Since then, USTDA has taken a leading role in
identifying and supporting potential transportation security projects.
In February, USTDA cosponsored a STAR conference with the U.S.
Department of State in Bangkok, Thailand, that was attended by
delegations from 21 APEC member economies. Discussions focused on
policies and procedures to enhance security and efficiency in the APEC
region's seaports, airports, and other access points. A key point of
agreement among all participants was the need for new partnerships
between the government and business. USTDA is poised to follow through
on this agreement by identifying and helping to develop specific
projects for implementation.
Agricultural biotechnology (ag-biotech) issues are another focus of
the USTDA program and of the National Export Strategy. Specifically,
USTDA is sponsoring a trade capacity-building program for Chinese
regulators, government ministries, and scientists designed to minimize
administrative and regulatory impediments to international trade in ag-
biotech products. The USTDA also funded an orientation visit to the
United States to support the Chilean government's efforts to enact new
legislation regulating the biotech industry as part of the USTDA's trade
capacity-building activities.
The service sector accounted for nearly 10 percent of USTDA
activities in fiscal year 2002. As mentioned in the National Export
Strategy, last year the USTDA sponsored its first conference
highlighting tourism as a development sector. The conference focused on
tourism projects in Eurasia and brought together over 200 attendees.
Among them were representatives of Eurasian companies and governments;
United States and other financing institutions; U.S. companies involved
in construction and engineering, hotel supply, transportation, and
consulting; and senior U.S. Government officials.
The USTDA combined its focus on services and information technology
last fall by cosponsoring a worldwide conference on implementing e-
government programs. USTDA jointly sponsored this event with the U.S.
Department of State and USAID. This highly successful conference
presented a forum for participants to discuss issues of common concern
and to establish peer-to-peer networks for further cooperation. The
event also provided opportunities for participants to consult with U.S.
companies whose products and services could contribute to the
development of successful e-government initiatives.
USTDA also maintains active programs in countries targeted in the
National Export Strategy for early project development, such as China,
Mexico, and Russia. USTDA reopened in China about 2 years ago and our
portfolio there has grown rapidly. In 2002, we were involved in 46
projects in China, with a focus on aviation safety, energy, and the
environment. Based on the strong commitment by China's many private and
public sector sponsors to work with USTDA in a smooth and efficient
manner, China was awarded the agency's 2002 Country of the Year honor.
Currently, USTDA is considering sponsoring a conference on project
financing in China designed to help project sponsors find the right
financing mechanism to implement important development objectives.
In Mexico, USTDA has funded several activities supporting the
Partnership for Prosperity, which Presidents Bush and Fox initiated 2
years ago. Among them are master grant agreements that were signed last
year with two Mexican development banks. These master grant agreements
provide a framework, which will enable the banks to contract with U.S.
firms to carry out studies related to their respective technical
assistance programs.
USTDA maintains an active program in Russia. Many U.S. firms
continue to see good market opportunities in that country. USTDA is
working closely with our TPCC colleagues to better coordinate our
activities and to leverage our resources to maximize our support for
U.S. firms pursuing business opportunities in Russia.
The USTDA also has implemented strong programs in other parts of
the world, including Central and Eastern Europe. USTDA activities in
this region focus on environmental investments that can be financed on
commercial terms, particularly in the waste-to-energy and renewable
energy sectors. In December 2002, USTDA sponsored a major conference on
this subject to highlight projects that represent significant export
potential for U.S. firms.
The USTDA portfolio demonstrates that our agency is one that seeks
out new challenges. We are also results oriented. To date, our combined
efforts with other Federal agencies and with the U.S. private sector
have produced numerous success stories around the world. Overall, 30
percent of U.S. exports associated with USTDA-funded activities have
received Ex-Im Bank loans and guarantees.
Some country-specific examples of our work with other agencies
include Vietnam, where our efforts and those of other agencies, led to
a large procurement of GE aircraft engines. In Morocco, we coordinated
our activities with the U.S. Commercial Service to support a U.S. firm
that successfully competed to construct and operate the Fes Controlled
Landfill. In Brazil, USTDA sponsored an orientation visit to the United
States for private rail concessionaires after the U.S. Commercial
Service identified opportunities for the sale of U.S. rail maintenance
equipment. In Georgia, a USTDA-funded feasibility study led to an Ex-Im
Bank loan for an air traffic control system supplied by Northrop
Grumman. In Russia, USTDA-funded studies on refinery upgrades have led
to hundreds of millions of dollars in United States sales.
USTDA also participates in a number of events throughout the year
designed to inform the private sector about the agency's program. As
mentioned in the National Export Strategy, USTDA participated in an
OPIC conference last year on Andean Regional Trade and Investment.
Earlier this spring, the USTDA participated in the Ex-Im Bank's Annual
Conference, as well as the Arizona-Mexico Trade and Investment
Conference that was sponsored by OPIC.
In addition, USTDA has a strong record of supporting smaller
businesses interested in expanding their international portfolio.
Building on this record, the USTDA sponsored a one-day contract
opportunities seminar this spring for representatives of small- and
medium-sized businesses interested in exploring opportunities to
increase their exports to overseas markets. The program focused on how
to take advantage of contracting opportunities with the USTDA and
showcased the types of assistance available through the Federal
Government to help U.S. businesses compete successfully in the
international arena. The seminar included participation from the U.S.
Small Business Administration, the U.S. Commercial Service, Ex-Im Bank,
and OPIC. The Honorable Hector Barreto, Administrator of the U.S. Small
Business Administration, was the keynote speaker for the day's events.
USTDA also participated in the pilot interagency training course
that is discussed in the National Export Strategy. This event, which
was held in January 2003, was a good initial exercise in bringing
together TPCC member agencies and highlighted our respective roles in
promoting U.S. exports. Based on the success of this event, USTDA looks
forward to hosting the next training session in the Business Center at
our headquarters next month.
As we look to the future, USTDA anticipates continued high demand
for its programs. Developing countries are reaching out to learn from
the world's best practices as they seek to implement policies and
projects that promote economic growth and sustainable development.
USTDA is responding to this initiative by connecting overseas project
sponsors with U.S. firms that have the commercially tested expertise
and technology necessary to achieve important development objectives.
The circumstances of our time require agencies to restructure
themselves to respond to new priorities as they emerge. The members of
the TPCC are at the forefront of this endeavor. USTDA looks forward to
continuing to work with other TPCC members as we jointly support U.S.
companies in their efforts to increase their involvement in challenging
foreign markets.
Thank you again for this opportunity to testify. The USTDA looks
forward to continuing to work with the Committee and with our
colleagues on the TPCC in advancing our dual trade and development
mission. I would be happy to answer any questions.
* * *
Activity in Post-Crisis Regions
Afghanistan Reconstruction
<bullet> In Afghanistan, USTDA has undertaken a series of activities,
primarily targeting those sectors in which the U.S. private sector
can make a significant contribution to the reconstruction effort.
In delivering this assistance, USTDA works closely with other USG
agencies, taking advantage of their expertise. These include the
FAA, U.S. Geological Survey, USAID, FCC, and the U.S. Departments
of Energy, Commerce, and State.
<bullet> Since opening USTDA's program in Afghanistan in early 2002,
the agency has committed roughly $2.5 million for a series of
activities in the civil aviation, telecommunications, oil and gas,
electric power, and other sectors.
<bullet> USTDA is considering roughly $3 million in additional support
activities; including a study on the establishment of an American
University in Afghanistan, training and studies related to civil
aviation, and an oil and gas resource assessment.
<bullet> USTDA and the U.S. Department of Commerce are sponsoring a
conference in Chicago in June 2003, to present and discuss the
rebuilding of Afghanistan's infrastructure. The sectors to be
presented include: Power and energy; water and sanitation;
transportation; buildings; gas and oil pipelines; construction;
health care; and tourism. Twenty-five Afghan delegates, including
senior Ministers and representatives from international financial
institutions, will attend the conference. Many of the
infrastructure projects to be discussed are the result of a series
of Definitional Missions and Orientation Visits that USTDA has
sponsored.
Frontline States in Central Asia
<bullet> In Pakistan, USTDA provided a grant to the Karachi Port Trust
to support a proposed 25 million gallons per day desalination plant
project. Karachi is experiencing a dire potable water shortage and
this project would result in a significant increase in the supply
of potable water to this rapidly growing city of 12 million
inhabitants.
<bullet> In Kyrgyzstan, USTDA supported an e-government project, which
will help the government deliver government services more
efficiently and effectively.
<bullet> In Kazakhstan, USTDA sponsored both a feasibility study on
potential aviation projects and an orientation visit that brought
Kazakh aviation officials to the United States. The resulting
meetings provided follow-on contracts for U.S. companies eager to
do business in Kazakhstan, and have laid the foundation for
future projects in this sector.
<bullet> USTDA had a substantial program in Uzbekistan in fiscal year
2002, including projects in rail, information technology, water,
power, and petrochemicals, as well as small- and medium-sized
enterprise development.
Transportation Security and Safety Initiatives
<bullet> Following the APEC Leaders' announcement in Los Cabos, Mexico
of the Secure Trade in the APEC Region (STAR) Initiative in 2002,
USTDA has taken a leading role in identifying and supporting
potential transportation security projects.
<bullet> In February 2003, USTDA sponsored a STAR conference in
Bangkok, Thailand. Twenty-one of the APEC member states sent
delegations that included officials responsible for the security
oversight of transportation, trade, customs, and related functions.
Private sector representatives attended as well. Discussions
focused on policies and procedures to enhance security and
efficiency in the APEC region's seaports, airports, and other
access points. A key point of agreement among all participants was
the need for new partnerships between government and business to
support security initiatives.
<bullet> USTDA has been active for many years in supporting the
transportation projects, and has increased its emphasis on
transportation security-related activities. For example, in 2002,
USTDA sponsored 114 transportation activities totaling $17.2
million.
<bullet> USTDA's Africa and the Middle East region is spearheading many
of the agency's regional and interagency transportation security
projects previously discussed, including the Middle East Regional
GPS/GNSS project, the East Africa Regional GPS/GNSS project, and
the Deepwater Systems for Southern Africa.
<bullet> A Definitional Mission will visit Bulgaria and Romania in
April 2003, to support aviation security strategic planning.
Participation in the Administration's Trade Agenda
<bullet> In the area of trade capacity building, USTDA is working
closely with the U.S. Trade Representative (USTR) and other
agencies to provide key support for technical assistance activities
related to the regional Free Trade Agreement (FTA) with the
Southern Africa Customs Union (SACU), and the negotiation of the
U.S.-Morocco FTA. This included funding for a workshop for SACU
lead negotiators.
<bullet> USTDA is supporting capacity-building efforts related to the
negotiation of a U.S.-Central American Free Trade Agreement
(CAFTA). Most prominently, USTDA is supporting several trade-
related information technology (IT) priority projects in Costa
Rica, El Salvador, Guatemala, Honduras, and Nicaragua.
<bullet> USTDA has funded several activities in support of the
Partnership for Prosperity with Mexico. In 2002, USTDA signed
master grant agreements with two Mexican development banks,
Nacional Financiera (NAFIN) and Banco Nacional de Servicios y Obras
Publicas (BANOBRAS), that will enable the banks to contract with
U.S. firms to carry out studies related to their respective
technical assistance programs.
<bullet> USTDA is funding technical assistance for NAFIN to strengthen
the venture capital industry in Mexico. The technical assistance
will result in recommendations that will provide the necessary
framework for the Mexican government to move forward with
legislative and policy measures.
<bullet> USTDA's Europe region maintains a strong focus on the
environment. In December 2002, USTDA sponsored a conference
focusing on waste-to-energy and renewable energy projects in
Central and Eastern Europe. USTDA has continued to pursue specific
projects in this sector and recently signed grant agreements
supporting a wind energy project in Hungary and a biomass to energy
co-generation power plant project in the Czech Republic.
<bullet> As Romania begins a massive energy privatization and
investment program, USTDA is planning to bring a delegation of
Romanian energy officials to the United States to help ensure the
Romanians look to American companies as their first source of
potential partners.
<bullet> USTDA is further developing its China program, with emphasis
on transportation, particularly aviation safety, clean energy, and
environmental sectors. Training programs for aviation safety,
natural gas, and agricultural biotechnology initiatives are
underway. A customs modernization project, that is an expansion of
the Shanghai Model Port Project, is in the immediate pipeline.
<bullet> USTDA efforts in Southeast Asia will concentrate on furthering
efforts to upgrade regional transportation security infrastructure,
as well as improving environmental conditions and the efficiency of
national and regional utilities.
RESPONSE TO WRITTEN QUESTION OF SENATOR MILLER FROM HECTOR V.
BARRETO, JR.
Q.1. Mr. Barreto, I understand your budgets of SBA have been
cut by Congress and the Administration. How will these cuts
impact your TPCC work?
A.1. The Administration requested $3.1 million in fiscal years
2003 and 2004 for the U.S. Export Assistance Centers (USEAC's).
The Fiscal Year 2003 Omnibus Appropriations Act did not provide
funding for the USEAC's.
We have worked very closely with the Department of Commerce
on this very critical function, and we plan to continue to do
that. There should not be any decrease in SBA's participation
with the TPCC or export assistance in general. The USEAC's are
still operating, with the assistance of our TPCC partners, and
small businesses will still receive the assistance and training
that they need.
The SBA is working with The Trade Promotion Coordinating
Committee and Ex-Im Bank in not only creating better harmonized
marketing programs while also harmonizing Ex-Im and the SBA's
Export Working Capital Programs.
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